Transformational

ROOF

That’s how Chair Juliet Davenport described  full year: “This has been a transformational year for the Company. We have assembled a highly diversified solar portfolio, offering one of the most secure income profiles in the UK listed renewables sector. We are now the partner of choice for some of the largest blue-chip corporations in the UK to help them deliver on their net zero targets. This has been a driving force behind our significant pipeline. We are delighted that our origination and installation strategy has continued to bear fruit, delivering significant valuation upside for shareholders.” As for the numbers: “…we have committed more than £149 million into clean energy solar assets generating an additional 120MW of solar PV capacity and increasing our GAV today to £215 million…Overall NAV per share declined 0.8 pence, driven by a 7.7 pence per share decrease as result of increasing the valuation discount rate to 7.4% from 6.6% (March 2023: 6.2%) as well as dividends paid of 5.0 pence per share…”

In terms of outlook: “…the renewables sector continues to benefit from strong tailwinds, namely energy security and net zero targets both at the corporate and government levels. The Company is experiencing very strong demand and has a strong potential pipeline of value-accretive opportunities totalling £410m. The Company now has a best-in-class reputation for delivering flexible solar solutions, evidenced both by the increasing number of new customer enquiries and feedback from its existing customers…It is our ambition to grow the Company…and in the short term the Company has access to a £20 million accordion which will be used to fund near-term commitments and pipeline. The Investment Adviser is monitoring opportunities to recycle capital from operational assets into installation assets which provide greater opportunities for capital growth. The Company is also working with its advisers to identify potential strategic investors who could provide capital to the Company through a variety of different structures.”

Winterflood notes: “NAV per share -0.9% to 92.0p. Key drivers were: (i) £15m gain from installation assets signing PPAs or reaching energisation (operational assets increased over the year from 62MW to 147MW) (+10.0p); (ii) adjustments for new contract pricing (+3.0p); (iii) net cash generated minus fund costs (+0.6p); more than offset by (iv) increase in unlevered discount rate from 6.6% to 7.4% (-7.7p); (v) reduction in inflation forecasts (-0.9p); (vi) lower power price forecasts (-0.9p); and (vii) dividend paid (-5.0p)…Electricity generation was 36.3GWh over the year, +0.7% above budget…”

Liberum is a buyer: “ROOF made some good portfolio strides in the FY and post-period, growing to become the UK’s largest commercial and industrial solar platform. The long-duration contracted cash flow model is an ongoing differentiator, with c.80% of revenues contracted over 10-years, which is c.25 percentage points ahead of peers and this effect leads to ROOF’s relatively low sensitivity to power prices (-4.6% NAV impact from a 10% decline in power prices). 92% of income is subject to annual inflation or fixed uplifts, with 47% benefitting from uncapped RPI or CPI uplifts. 79% of the portfolio is fully operational and 21% is in the installation phase, with full energisation expected by Q1 2024. In addition to increasing the distributions received base, this should provide a catalyst for NAV uplifts. We are BUYers with a 100p TP on ROOF’s shares.”