Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
To provide a sustainable and attractive long-term dividend by investing in a diversified portfolio of utility scale energy storage projects located in the UK, North America and Western Europe.
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Toneman, You say "... their revenue is still using a high portion of acrual ...". I'm not sure that I follow your drift. The accruals at the end of FY23 and H1 FY24 don't appear excessive (trade creditors have fallen from c£3m at the end of FY23 to c£1.8m at the end of H1 FY24; they were high at the end of FY23 because of the timing of fund raising in H2 FY23). Obviously there may be some deferred cash flow impact if your creditors are higher than your debtors but I wouldn't say that GSF's is abnormally high. Also, accruals are irrelevant to operational cash flow (they are adjusted out).
I take your point about the dividends although I'd be surprised if they quoted their dividend cover based on the dividend actually paid in the quarter. I think it's more likely that they'd quote their dividend cover based on their EPS for H1 FY24 divided by half of their expected DPS for FY24 to smooth out any peaks and troughs in the frequency and quantum of their dividend payments. I think this would be the approach adopted by most companies that paid their dividends less regularly and I don't think that investment trusts would adopt a different approach simply because they pay their dividends at least quarterly but I stand to be corrected.
As with most everything else in life the proof of the pudding is in the eating and it will be interesting to see the FY24 figures. I'd currently expect investment income to be in the region of £25-£30m (I don't think we'll start to see the full benefit of the 27% increase in operating capacity in Q3 FY24 until FY25) and admin expenses of c£10m or less i.e. revenue PBT should be in the region of £15-£20m for FY24 (as opposed to c£2.6m in FY23). The PBT in H2 might be less than H1 because some fees don't appear to be accrued evenly through the year (see below).
Having looked at the admin expenses again, I can now see that the main contributory costs are the investment advisory and performance fees. The latter fees, at least, don't appear to be evenly accrued through the year. Instead, they are computed based on performance against a Benchmark after the year end and would appear to be wholly charged in H2 (and capped at no more than 50% of the advisory fees). Given that there hasn't been any major change to the disclosed NAV since the end of FY23, I'd currently expect the investment advisory and performance fees, subject to any cash adjustments, to be broadly in line with FY23 but it would seem probable that the expected performance fees (c£2.5m) would be wholly charged in H2.
Trotsky I agree with your overview and your company sentiment. The only two caveats I'd throw in are that their statement in the last half year report about covering the dividend in the September quarter was a little disingenuous as it was based on the 1.5p dividend rather than the other quarters 2p. Recalculating for 2p it was only about 0.84 covered. And secondly their revenue is still using a high portion of acrual (for reasons you already covered) and relies heavily on them getting their acrual figures right. If we're unlucky and they've screwed those up in some way the accounts would likely have to be restated which is upsetting for stock prices. Either way as long as their revenue trend is still on the up then those two points become mostly irrelevant.
Morning
Rns 19 December it looks like Gsf received over £15,000,000 from Nidec for 14m shares
Rns March Gsf issued 9.7m shares for which they will start to receive revenue from the assets purchased.
So apart from Gsf having to pay a dividend on the new shares we have a big injection of cash and immediate additional revenue from the Irish assets.
Time will tell but apart from the book value of my holding surely the dividend is covered
Nidec will be subscribing for 14,000,000 new ordinary shares in the capital of the Company (the "Ordinary Shares") at 112.9 pence per Ordinary Share, being the 30 September 2023 NAV announced on 14 December 2023, resulting in gross proceeds of £15,806,000 to the Company
SEDI, You're mixing your apples and oranges. Operational cash flow is income less operating expenses (not just revenue); try looking at a cash flow statement.
As I said in my previous post it's not uncommon for Investment Trusts investing in infrastructure projects to pay dividends out of capital raised until the projects are up and running (and that's recognised in the business plan from the outset).
GSF generated almost as much investment income in H1 FY23 (c£12.4m) as it did for the whole of FY22 (c£12.5m) whilst its admin expenses (c£3.8m) were on a par with its admin expenses in H1 FY22 (c£3.8m). I'd currently expect its investment income for H2 FY23 to be ahead of H1 FY23 because of the 27% increase in operating capacity in Q3 FY23. However, I would not be too surprised if its H2 FY23 admin expenses were on a par with H2 FY22 (c£6.1m) due to the Nidec fundraise in mid- December.
All of the current indicators are that GSF has covered its dividend payments from net operating revenues for FY23 and with the operational fleet now set to more than double by the end of FY24 plus the non-UK diversification, all of the inidcators are that GSF's dividend cover will only continue to improve from here on out.
Furthermore, the UK is set to account for less than 30% of operating capacity by the end of FY24 which, given the current disparity between UK and non-UK income per MW/hr, would suggest that the UK might only account for 10-15% of GSF's revenues for FY25 and beyond but with scope to improve if UK rates continue to rise as they have done since the recent re-jigging of the BESS market.
GSF, unlike GRID, is a lot a less reliant on the UK market.
Topped up again this afternoon. Excellent potential for capital gains and income here over the next year or two along with most trusts in the renewable space....exciting times!!
I'm planning to add another 4,000 at these levels once I've freed up some funds, paying a very nice dividend and sure to come closer to the 109p NAV reported on 31st December soon.
Thanks Krusty mate, I am doing fine. Hope that you are doing good as well. I know GSF is not so good at the moment, but I hope you got other more successful investments to cover the losses here. 😂😂😂
Ha ha, don't worry sidi, I've been called worse!! Hope things are going well for you & your investments. K
There are some solid. looking buys today- several around. 35k. We can agonise and analyse as much as we. wish but basically it is still growing the business, itis geographically. diversified and the. dividend. is. covered. Ithinknthe last. trading anioucement was very positive considering the. headwinds faced by. all the"green". stocks. I am not. expecting miracles but my. advise is. to hang in there and collect the. dividends.Time. will improve the. situation especially when interest rates start. to . come down
Renewables pretty much track Natural Gas prices .... that are moving up from 30 year lows in real terms.
That's profit per share, i.e. after the payment of dividends. I don't see how that changes anything? The dividend is still covered, and as more battery storage comes online, the income from capital will be replaced (increased) by operational revenue?
Sorry Krusty, it's the auto correct that changed my typing of your name, lol.
Morning Kristy mate, you can check the fundamentals on this page. EPS for 2023 was 0.55p.
Oh Trotsky my friend, again, cash flow is not all profit. They are only temporary cash in hand. Still have to pay all the expenses first and what is left that is profit. If the company uses the cash flow to pay the dividend, then they must find the money from somewhere else to cover the expenses. That means there maybe more fund raisings to come and more dilution, and will cost more to pay the dividend with more shares issued. And it will go on and on.
Krusty, Look at the FY23 income statement. It splits out the income into revenue (operational) and capital.
You're looking backwards rather than forwards. It's not uncommon for investment trusts investing in structural assets to pay dividends out of capital whilst the assets are under construction. In their recent NAV updates GSF have indicated that dividends are now being covered by operational cash flows. 12 months on from the FY23 results they are now benefitting from a full year's production from the assets brought on line during FY23, plus the production assets brought on line since, and the (marginally) rising BESS prices in the UK. Furthermore, operational cash flow should continue to improve as more of the assets currently under construction are brought on line.
Where does the 0.55p EPS figure come from sidi? That's not right. GSF is covering it's dividend and will more than cover it as additional sites are powered up. There's no point trying to compare GRID, which is entirely UK focussed and subject to the ridiculous lack of green ambition shown by this government, with GSF which is diversified into Ireland, the States & Europe where green power income has been significantly greater.
Operational income is not all profit. Last year's EPS was only 0.55p per share, and the dividend is now 7.5p. How can it be covered by only 0.55p of net profit then?
GSF has an operational dividend cover of 1.15x and that's likely to start increasing as more assets come on line and a low debt burden. Also, 55% of its operational income is being generated in the US; so it's not been as exposed to the UK BESS market as the likes of GRID.
I think GSF has to do the same as GRID. Must postpone the dividend, which is not sustainable. GRID has rebound 50% from 38p to now now 57p since the announcement.
Or is it still just general market and/or sector sentiment?