recs, page-21

As promised, afd, I’ve had a look at the ABD accounts to December – not a pretty site. A few comments are:

Balance sheet ratios are not too healthy, though not disastrous. Borrowing in increasing (as we know) with no increase in assets - a big fall in fact..

Headline loss is awfull (as you know). Even if the Euro7M (Aust$8.66M) were received before Dec , there would still have been a loss of $6.6M for the period (1.2 cps). Some of the “one off” factors mentioned are regulars (loss on sale of RECS, currency losses), so could hardly be called ‘one offs’ To their credit, they do include these in normal income, but then why state in the directors’ report that they are one offs. They either are, or they are not.

What there are plenty of promises. (More details on the 2,000MW of projects in the pipeline would be appreciated.)

Operating Cash loss was $11.7M for the half, yet cash on hand is just $1.74M – only enough for just under a month! Presuming the $8.6M is not received from Italy. Sailing close to the wind indeed. The high cash burn was consistent with the 2010/11 cash burn. It would seem that another capital raising will be needed soon, and what will that do for the SP?

Also note the huge dilution in the number of shares recorded in the accounts. This means that directors and staff are entitled to 22% of the future income of the company, mostly through future directors and staff share entitlements (and you can bet that the bloke installing rooftop panels won’t get much of it). This is huge drag on OUR future profits.

Net Tangible Assets are down from 5.23 cps to 4.44 cps over twelve months in the Report.. I would make the Dec NTA at 3.6 cps, but I take the dilution into account.

A big negative is the lack of timely information to shareholders, especially the news that the Taralga venture with Aus-China is off. The world know about it before the company mntioned it, hidden in the accounts. For me, this was the staw that broke the camel’s back – a month ago I sold half my holding.

I still believe in the potential of the business, but now is not the time to be taking big risks, such as buying a loss making US company. No way. Do I hold the remaining shares? It will depend on the PR ratio: Promises:Results. This ratio is not travelling well at the moment.

Finally, the Auditor's qualifications. They all have the form of "If A as promised does not happen, B will happen". He is saying, be very carefull to see what does actually happen.