VivoPower PLC 20-F/A, filed Mar 20, 2024
VivoPower PLC (VIVO)
20-F/A
2024-03-20
For: 2023-06-30
View Original
Added on
August 22, 2026
About this 20-F/A
VivoPower PLC filed this 20-F/A on March 20, 2024, covering the fiscal year ended June 30, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F/A
(Amendment No. 3)
|
☐
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
OR
|
☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended June 30, 2023
OR
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
OR
|
☐
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Date of event requiring this shell company report
For the fiscal year ended June 30, 2023
Commission file number 1-37974
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Kevin Chin, Chief Executive Officer
Tel: +44-203-667-5158
The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF, United Kingdom
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading
Symbol
|
Name of each exchange on which registered
|
|
|
|
The
|
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
|
Indicate the number of outstanding shares of each of the issuer’s classes of capital or Ordinary Shares as of the close of the period covered by the annual report.
|
|
Ordinary Shares, nominal value $0.012 per share
|
25,788,260
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
U.S. GAAP ☐
|
International Financial Reporting Standards as issued
|
Other
|
| by the International Accounting Standards Board ☒ | ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
EXPLANATORY NOTE
VivoPower International PLC (the “Company” or “our”) is filing this Amendment No. 3 on Form 20-F/A (this “Amendment”) to its Annual Report on Form 20-F for the year ended June 30, 2023, which was initially filed with the Securities and Exchange Commission on October 2, 2023 and amended by Amendment No. 1 on Form 20-F/A on October 6, 2023 and Amendment No. 2 on Form 20-F/A on February 21, 2024 (as so amended, the “Original Filing”), in response to comments received from the U.S. Securities and Exchange Commission (the “SEC”).
As required by Rule 12b-15 of the Securities and Exchange Act of 1934, as amended, the Company is also filing or furnishing the certifications required under Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 as exhibits to this Amendment.
Except for the matters described above, this Amendment does not modify or update disclosures in, or exhibits to, the Original Filing.
TABLE OF CONTENTS
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of numerous factors, including, but not limited to, the risks discussed in this Annual Report in “Item 3. Key Information - D. Risk Factors” or in other parts of this Annual Report. Our audited consolidated financial statements included elsewhere in this Annual Report are prepared in accordance with IFRS, as issued by the International Accounting Standards Board and are presented in U.S. dollars.
Note, results reported in years ended June 30, 2022 and 2021 have been adjusted to exclude the results of the ex-solar operations of Aevitas Solar and shown as a single line item in the income statement after profit after tax. Details of results for discontinued operations are included in Note 22 to the financial statements.
A. Operating Results
Overview
|
Year Ended June 30
|
||||||||||||||||||||||||||||||||||||
|
2023
|
2022 (restated)
|
2021
|
||||||||||||||||||||||||||||||||||
|
(US dollars in thousands)
|
Continuing
|
Discontinued
|
Total
|
Continuing
|
Discontinued
|
Total
|
Continuing
|
Discontinued
|
Total
|
|||||||||||||||||||||||||||
|
Revenue from contracts with customers
|
15,060 | - | 15,060 | 22,448 | 15,168 | 37,616 | 23,975 | 16,436 | 40,411 | |||||||||||||||||||||||||||
|
Cost of sales
|
(13,472 | ) | - | (13,472 | ) | (20,308 | ) | (13,842 | ) | (34,150 | ) | (19,614 | ) | (14,470 | ) | (34,084 | ) | |||||||||||||||||||
|
Cost of sales - non-recurring events
|
(3,850 | ) | - | (3,850 | ) | (1,881 | ) | - | (1,881 | ) | - | - | - | |||||||||||||||||||||||
|
Gross profit
|
(2,262 | ) | - | (2,262 | ) | 259 | 1,326 | 1,585 | 4,361 | 1,966 | 6,327 | |||||||||||||||||||||||||
|
General and administrative expenses
|
(7,620 | ) | - | (7,620 | ) | (13,811 | ) | (1,485 | ) | (15,296 | ) | (9,651 | ) | (1,482 | ) | (11,133 | ) | |||||||||||||||||||
|
Other gains/(losses)
|
30 | (4,207 | ) | (4,177 | ) | (13 | ) | - | (13 | ) | 769 | - | 769 | |||||||||||||||||||||||
|
Other income
|
119 | - | 119 | 662 | 324 | 986 | 960 | 552 | 1,512 | |||||||||||||||||||||||||||
|
Depreciation of property and equipment
|
(750 | ) | - | (750 | ) | (770 | ) | (445 | ) | (1,215 | ) | (638 | ) | (451 | ) | (1,089 | ) | |||||||||||||||||||
|
Amortization of intangible assets
|
(831 | ) | (831 | ) | (850 | ) | (322 | ) | (1,172 | ) | (815 | ) | (352 | ) | (1,167 | ) | ||||||||||||||||||||
|
Operating (loss)/profit
|
(11,314 | ) | (4,207 | ) | (15,521 | ) | (14,523 | ) | (602 | ) | (15,125 | ) | (5,014 | ) | 233 | (4,781 | ) | |||||||||||||||||||
|
Restructuring and other non-recurring costs
|
(2,084 | ) | - | (2,084 | ) | (443 | ) | - | (443 | ) | (2,877 | ) | (3 | ) | (2,880 | ) | ||||||||||||||||||||
|
Finance income
|
1,156 | - | 1,156 | 173 | 2 | 175 | 2,176 | 3 | 2,179 | |||||||||||||||||||||||||||
|
Finance expense
|
(7,366 | ) | - | (7,366 | ) | (8,604 | ) | (174 | ) | (8,778 | ) | (2,450 | ) | (140 | ) | (2,590 | ) | |||||||||||||||||||
|
Loss before income tax
|
(19,608 | ) | (4,207 | ) | (23,815 | ) | (23,397 | ) | (774 | ) | (24,171 | ) | (8,165 | ) | 93 | (8,072 | ) | |||||||||||||||||||
|
Income tax
|
(540 | ) | - | (540 | ) | 1,968 | 149 | 2,117 | 138 | (24 | ) | 114 | ||||||||||||||||||||||||
|
Loss for the period
|
(20,148 | ) | (4,207 | ) | (24,355 | ) | (21,429 | ) | (625 | ) | (22,054 | ) | (8,027 | ) | 69 | (7,958 | ) | |||||||||||||||||||
|
Adjusted EBITDA(1)
|
(5,735 | ) | (4,207 | ) | (9,942 | ) | (9,122 | ) | 166 | (8,956 | ) | (2,483 | ) | 1,035 | (1,448 | ) | ||||||||||||||||||||
(1) Adjusted EBITDA is a non-IFRS financial measure. See “Non-IFRS Financial Information” below for additional information about this measure and a reconciliation of this measure to the most directly comparable financial measure calculated in accordance with IFRS.
Management analyzes our business in five reportable segments: Critical Power Services, Electric Vehicles, Sustainable Energy Solutions, Solar Development, and Corporate Office.
During the year ended June 30, 2023, the Group (including discontinued operations) generated total revenue of $15.1 million, gross loss of $2.3 million, operating loss of $15.3 million and a net loss of $22.4 million. Of these amounts, continuing operations of the Group generated revenue of $15.1 million, gross loss of $2.3 million, operating loss of $11.1 million and a net loss of $18.1 million. For the year ended June 30, 2022, the Group (including discontinued operations) generated total revenue of $37.6 million, gross profit of $1.6 million, operating loss of $15.1 million and a net loss of $22.1 million. Of these amounts, continuing operations of the Group generated revenue of $22.4 million, gross profit of $0.3 million, operating loss of $14.5 million and a net loss of $21.4 million, including $0.5 million prior year adjustments relating to timing on the recognition of general and administration expenses from 2023 to 2022.
Adjusted EBITDA (including discontinued operations) for the year ended June 30, 2023 was a loss of $9.9 million, compared to a loss of $9.0 million for the previous year. Adjusted EBITDA for continuing operations was a loss of $5.7 million, compared to a loss of $9.1 million for the previous year, restated for $0.5 million of general and administration expenses from 2023 to 2022.
The results for the year ended June 30, 2023 reflect a reduction in the number of Aevitas Solar projects completed in the year and the impact of severe one-off weather events on the Edenvale project, which incurred a $3.9 million loss.
Revenue in Critical Power Services (excluding discontinued operations) declined by $7.4 million to $13.6 million in the year, impacted by $6 million from a reduction in the number of solar projects undertaken by Aevitas Solar. Kenshaw, which expanded into an additional facility in Newcastle, New South Wales due to increasing demand, saw revenues flat compared to the previous year on a constant AUD to USD exchange rate, with an increase in higher margin sales in generator service and motor sales and overhaul, offset by a reduction in generator sales and installation due to competitive market conditions and constrained supply chain. Electric Vehicles contributed $1.5 million revenue in the year, predominantly from non-EV ruggedization conversions, whilst EV activity is focused entirely on product development. There was no revenue contribution from Solar Development or Sustainable Energy Solutions in the year ended June 30, 2023 (year ended June 30, 2022: nil).
Gross profit (including discontinued operations) decreased by $3.8 million to a loss of $2.3 million, although on a continuing basis excluding J.A. Martin ex-Solar operations, gross profit decreased by $2.5 million to a loss of $2.3 million. In percentage terms, gross margin from continuing operations fell from 1% to (14%), largely driven by one-off extreme weather events impact on Aevitas Solar projects in FY2023, having a more significant impact than COVID-19 lockdowns and impact on supply chain in the prior year. Gross loss in FY2023 includes $3.9 million specific costs of non-recurring extreme weather events on Edenvale project for Aevitas Solar. In the prior year, $1.9 million of non-recurring costs on the Blue Grass project were also incurred in Aevitas Solar, due to state border closures during the project execution phase. Excluding these non-recurring costs, gross margin for continuing operations increased from 9.2% in the prior year, to 10.5% in FY2023, reflecting increased focus on high margin service revenues in Kenshaw. Electric Vehicles contributed nil gross profit (prior year: nil) while Solar Development contributed nil (prior year: nil).
The gain on Solar Development projects from continuing operations was net nil for the year ended June 30, 2023 . Included within discontinued operations was a $4.2 million loss on disposal of J.A. Martin ex-solar operations in July 2022. Compared to the book value of assets less liabilities held for sale as at June 30, 2023, the loss results primarily from a reduction in the contingent consideration payable based on the earn out fee calculated as a multiple of the post disposal earnings of J.A. Martin ex-solar in FY2023. The gain on Solar Development projects from continuing operations was net nil for the year ended June 30, 2022, comprising a $0.1 million write off of costs incurred on uneconomic projects in Caret, offset by a $0.1 million gain on sale of tangible assets in Critical Power Systems.
The results for the year ended June 30, 2023 also reflect a restated $6.2 million decrease in general and administrative costs related to continuing operations to $7.6 million. The decrease includes a $1.1 million decrease in marketing expenses, a $1.7 million decrease in non-cash equity remuneration, and a $3.6 million decrease in salaries and other overheads from reduction in Tembo and Aevitas executive management and administrative team.
The results of operations for the year ended June 30, 2023 include $2.1 million restructuring and other non-recurring costs primarily due a provision in respect of fiscal refunds on prior receivables, which the Company is defending.
Net finance costs from continuing operations of $6.2 million for the year ended June 30, 2023 include $3.8 million interest on related party loans, $1.6 million net foreign exchange losses and $0.8 million combined from dividends from Aevitas Preference Shares, interest on leases and interest on other debt.
As at June 30, 2023, the Group’s current assets were $10.3 million (as at June 30, 2022: $21.7 million restated; June 30, 2021: $24.5 million restated), representing a decrease from June 30, 2022, mostly due to the disposal of assets held for sale relating to the J.A. Martin ex-solar segment (as at June 30, 2022: $8.2 million) upon the sale of the business to ARA in July 2022. Current assets were comprised of $0.6 million of cash and cash equivalents (as at June 30, 2022: $1.3 million; June 30, 2021: $8.6 million), $0.6 million of restricted cash (as at June 30, 2022: $1.2 million; June 30, 2021: $1.1 million;), and $7.0 million of trade and other receivables (as at June 30, 2022: $9.1 million; June 30, 2021: $12.8 million), and $2.1m of inventory (as at June 30, 2022: $1.9 million; June 30, 2021: $2.0 million). 30 June 2022 and 30 June 2021 current assets were restated for a $0.5m reclassification from Intangible Assets to Deposits.
Current liabilities were $18.9 million as at June 30, 2023 (as at June 30, 2022, $23.3 million restated; June 30, 2021: $13.4 million). The decrease from prior year reflects negotiation of shareholder loans and accrued interest to non-current terms, and disposal of liabilities held for sale (as at June 30, 2022, $1.5 million) following sale of J.A. Martin ex-solar to ARA in July 2022. 30 June 2022 current liabilities were restated for an accrual of $0.5m expenses relating to 2022 but incurred in 2023.
Current asset-to-liability ratio as at June 30, 2023 was 0.54:1 (as at June 30, 2022 restated: 0.93:1; June 30, 2021 restated: 1.82:1).
As at June 30, 2023, the Company had net assets of $3.7 million (as at June 30, 2022 restated, $21.6 million; June 30, 2021: $40.4 million), including intangible assets of $42.2 million (as at June 30, 2022 restated: $39.6 million; June 30, 2021 restated: $46 million). Property, plant and equipment remained at $3.7 million as at June 30, 2023 (as at June 30, 2022, $3.7 million), mainly reflecting $0.6 million capital expenditure on plant and equipment, an additional leased property in Kenshaw, offset by depreciation charges. 30 June 2022 and 30 June 2021 were restated for a $0.5m reclassification from Intangible Assets to Deposits.
Cash outflow for the year ended June 30, 2023, was $0.7 million, arising from cash outflows from operating activities of $8.6 million and from cash used in investing activities of $1.9 million partially offset by cash inflow from financing activities of $9.8 million. At June 30, 2023, the Company had cash reserves of $0.6 million (June 30, 2022: $1.3 million) and debt of $32.4 million (June 30, 2022: $28.6 million), giving a net debt position of $31.8 million (June 30, 2022: $27.3 million).
Net cash outflows from investing activities of $1.9 million in the current year comprised $1.0 million net purchases of property, plant and equipment and $3.9 million investment in additional intangible assets pertaining to the EUV23 development project in Tembo, offset by the $2.9 million proceeds from the J.A Martin sale.
Cash inflows from financing activities of $9.8 million in the year ended June 30, 2023 comprises $5.1 million net proceeds from the Nasdaq shelf raise in July 2022 and $3.6 million bridging loans from related party AWN, $1.3 million additional debtor financing, less $0.9 million repayments of related party and other borrowings paid.
Non-IFRS Financial Information
Adjusted EBITDA is a non-IFRS financial measure that we calculate as earnings before interest, taxes, depreciation and amortization, impairment of assets, impairment of goodwill, other finance income and expenses, one-off non-recurring costs including restructuring expenses and non-cash equity remuneration. Adjusted EBITDA is disclosed here and elsewhere in this Annual Report to provide investors with additional information regarding our results of operations. We have presented Adjusted EBITDA for continuing operations, discontinued operations and the total Group for comparative purposes (see Note 22 to the financial statements for additional information on the results for discontinued operations).
We have included Adjusted EBITDA in this Annual Report because it is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses, non-operating income/(expense), and material non-recurring items. Accordingly, we believe that Adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results in the same manner as our management and board of directors.
We believe it is useful to exclude non-cash charges, such as depreciation and amortization and share-based compensation expense, from our Adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax benefit/(expense) and net finance expenses as these items are not components of our core business operations. We believe it is useful to exclude material non-recurring items, which is not indicative of our performance in the future. Adjusted EBITDA has limitations as a financial measure, and you should not consider it in isolation or as a substitute for profit/loss for the period as a profit measure or other analysis of our results as reported under IFRS. Some of these limitations are:
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditures;
• Adjusted EBITDA does not reflect share-based compensation, which has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy;
• Although share-based compensation expenses are non-cash charges, we cannot assure that we will not perform a buy-back or other similar transaction which leads to a cash outflow;
• While losses are resulted from material non-recurring events, there is no assurance that such or similar losses will not recur in the future; and
• Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, operating profit/loss, profit/loss for the period and our other IFRS results.
The following table presents a reconciliation of loss for the period to Adjusted EBITDA for each of the periods indicated above:
|
Year Ended June 30
|
||||||||||||||||||||||||||||||||||||
|
2023
|
2022 (restated)
|
2021
|
||||||||||||||||||||||||||||||||||
|
(US dollars in thousands)
|
Continuing
|
Discontinued
|
Total
|
Continuing
|
Discontinued
|
Total
|
Continuing
|
Discontinued
|
Total
|
|||||||||||||||||||||||||||
|
Loss for the period
|
(20,148 | ) | (4,207 | ) | (24,355 | ) | (21,429 | ) | (625 | ) | (22,054 | ) | (8,027 | ) | 69 | (7,958 | ) | |||||||||||||||||||
|
Income tax expense/(credit)
|
540 | - | 540 | (1,968 | ) | (149 | ) | (2,117 | ) | (138 | ) | 24 | (114 | ) | ||||||||||||||||||||||
|
Net finance expense
|
6,210 | - | 6,210 | 8,431 | 172 | 8,603 | 274 | 137 | 411 | |||||||||||||||||||||||||||
|
Depreciation and amortization
|
1,581 | - | 1,581 | 1,620 | 767 | 2,387 | 1,453 | 803 | 2,256 | |||||||||||||||||||||||||||
|
Share-based compensation expense
|
148 | - | 148 | 1,900 | - | 1,900 | 1,078 | - | 1,078 | |||||||||||||||||||||||||||
| Cost of sales - non-recurring events(1) | 3,850 | - | 3,850 | 1,881 | - | 1,881 | - | - | - | |||||||||||||||||||||||||||
|
Restructuring and other non-recurring costs(2)
|
2,084 | - | 2,084 | 443 | - | 443 | 2,877 | 3 | 2,880 | |||||||||||||||||||||||||||
|
Adjusted EBITDA
|
(5,735 | ) | (4,207 | ) | (9,942 | ) | (9,122 | ) | 166 | (8,956 | ) | (2,483 | ) | 1,035 | (1,448 | ) | ||||||||||||||||||||
(1) 2023 amounts include $3.9 million in non-recurring costs resulting from increased costs and delays on Aevitas Solar’s Edenvale project due to unprecedented high levels of rainfall (both in terms of frequency and amount versus historical averages) across Western Australia in FY2023. The rainfall damaged many of the trenches dug across the 6km interconnection works, which led to significant delays in completion of the project and required additional labour and material costs to fix and then complete the project within the project deadline.
2022 amounts include $1.9 million relating to non-recurring costs incurred during the execution phase of Aevitas Solar’s Blue Grass project, due to Australian state border closures during the COVID-19 pandemic which resulted in the leadership and project management teams not being able to travel to and manage the project for three months. During those three months the Company was not able to find a suitable, local project management team which led to the project not being managed to the Company’s satisfaction. As a result, the Company had to incur significant additional costs for labour and materials to correct the existing work and recover the delays in completion of the project once the borders were reopened.
(2) 2023 amounts include $2.1 million of non-recurring, non-operational costs, consisting of a $1.8 million one-time provision for UK tax refunds on prior year receivables that were either received or due to be received by the Company for recoverable UK taxes paid between 2020 and 2022 but which have since been disputed and are being reclaimed by the UK fiscal department and $0.2 million of restructuring activities.
2022 amounts include $0.4 million of non-recurring, non-operational costs relating to one-time remediation work required within the electric vehicles business segment comprising remediation, testing or conversion of drivetrains to 72kwH following the discontinuation of this platform following acquisition.
2021 amounts include $2.2 million related to legal costs and settlement monies paid pertaining to the Comberg Claims and $0.6 million of costs incurred from the acquisition of Tembo e-LV in November 2020.
For further information on these non-recurring, non-operational costs, please refer to the section entitled “Restructuring and Other Non-Recurring Costs” below.
Year Ended June 30, 2023, Compared to YearsEnded June 30, 2022and June 30, 2021
|
Continuing operations
|
Discontinued
operations
|
Total
|
||||||||||||||||||||||||||||||
|
Year Ended June 30, 2023
|
Critical
Power
|
Solar
|
Electric
|
Sustainable
Energy
|
Corporate
|
Total
|
Critical
Power
|
|||||||||||||||||||||||||
|
(US dollars in thousands)
|
Services
|
Development
|
Vehicles
|
Solutions
|
Office
|
Continuing
|
Services
|
|||||||||||||||||||||||||
|
Revenue from contracts with customers
|
13,596 | - | 1,464 | - | - | 15,060 | - | 15,060 | ||||||||||||||||||||||||
|
Costs of sales - other
|
(11,900 | ) | - | (1,572 | ) | - | - | (13,472 | ) | - | (13,472 | ) | ||||||||||||||||||||
|
Cost of sales - non-recurring events
|
(3,850 | ) | - | - | - | - | (3,850 | ) | - | (3,850 | ) | |||||||||||||||||||||
|
Gross profit
|
(2,154 | ) | - | (108 | ) | - | - | (2,262 | ) | - | (2,262 | ) | ||||||||||||||||||||
|
General and administrative expenses
|
(1,390 | ) | (297 | ) | (1,005 | ) | (367 | ) | (4,561 | ) | (7,620 | ) | - | (7,620 | ) | |||||||||||||||||
|
Other gains/(losses)
|
- | - | - | 30 | - | 30 | (4,207 | ) | (4,177 | ) | ||||||||||||||||||||||
|
Other income
|
50 | 69 | - | - | - | 119 | - | 119 | ||||||||||||||||||||||||
|
Depreciation and amortization
|
(895 | ) | - | (673 | ) | (3 | ) | (10 | ) | (1,581 | ) | - | (1,581 | ) | ||||||||||||||||||
|
Operating loss
|
(4,389 | ) | (228 | ) | (1,786 | ) | (340 | ) | (4,571 | ) | (11,314 | ) | (4,207 | ) | (15,521 | ) | ||||||||||||||||
|
Restructuring and other non-recurring costs
|
(1 | ) | - | (214 | ) | - | (1,869 | ) | (2,084 | ) | - | (2,084 | ) | |||||||||||||||||||
|
Finance expense - net
|
(6,841 | ) | (34 | ) | 936 | (50 | ) | (221 | ) | (6,210 | ) | - | (6,210 | ) | ||||||||||||||||||
|
Profit/(loss) before income tax
|
(11,231 | ) | (262 | ) | (1,064 | ) | (390 | ) | (6,661 | ) | (19,608 | ) | (4,207 | ) | (23,815 | ) | ||||||||||||||||
|
Income tax
|
(619 | ) | - | (40 | ) | 119 | - | (540 | ) | - | (540 | ) | ||||||||||||||||||||
|
Loss for the year
|
(11,850 | ) | (262 | ) | (1,104 | ) | (271 | ) | (6,661 | ) | (20,148 | ) | (4,207 | ) | (24,355 | ) | ||||||||||||||||
|
Continuing operations
|
Discontinued
operations
|
Total
|
||||||||||||||||||||||||||||||
|
Year Ended June 30, 2022 (restated)
|
Critical
Power
|
Solar
|
Electric
|
Sustainable
Energy
|
Corporate
|
Total
|
Critical
Power
|
|||||||||||||||||||||||||
|
(US dollars in thousands)
|
Services
|
Development
|
Vehicles
|
Solutions
|
Office
|
Continuing
|
Services
|
|||||||||||||||||||||||||
|
Revenue from contracts with customers
|
20,958 | - | 1,490 | - | - | 22,448 | 15,168 | 37,616 | ||||||||||||||||||||||||
|
Costs of sales - other
|
(18,804 | ) | - | (1,504 | ) | - | - | (20,308 | ) | (13,842 | ) | (34,150 | ) | |||||||||||||||||||
|
Cost of sales - non-recurring events
|
(1,881 | ) | - | - | - | - | (1,881 | ) | - | (1,881 | ) | |||||||||||||||||||||
|
Gross profit
|
273 | - | (14 | ) | - | - | 259 | 1,326 | 1,585 | |||||||||||||||||||||||
|
General and administrative expenses
|
(1,568 | ) | (80 | ) | (2,901 | ) | (1,660 | ) | (7,602 | ) | (13,811 | ) | (1,485 | ) | (15,296 | ) | ||||||||||||||||
|
Gain/(loss) on solar development
|
103 | (139 | ) | - | 23 | - | (13 | ) | - | (13 | ) | |||||||||||||||||||||
|
Other income
|
662 | - | - | - | - | 662 | 324 | 986 | ||||||||||||||||||||||||
|
Depreciation and amortization
|
(1,165 | ) | - | (443 | ) | (3 | ) | (9 | ) | (1,620 | ) | (767 | ) | (2,387 | ) | |||||||||||||||||
|
Operating loss
|
(1,695 | ) | (219 | ) | (3,358 | ) | (1,640 | ) | (7,611 | ) | (14,523 | ) | (602 | ) | (15,125 | ) | ||||||||||||||||
|
Restructuring and other non-recurring costs
|
45 | - | (429 | ) | - | (59 | ) | (443 | ) | - | (443 | ) | ||||||||||||||||||||
|
Finance expense - net
|
(7,470 | ) | - | (974 | ) | 23 | (10 | ) | (8,431 | ) | (172 | ) | (8,603 | ) | ||||||||||||||||||
|
Profit/(loss) before income tax
|
(9,120 | ) | (219 | ) | (4,761 | ) | (1,617 | ) | (7,680 | ) | (23,397 | ) | (774 | ) | (24,171 | ) | ||||||||||||||||
|
Income tax
|
1,349 | - | 575 | 192 | (148 | ) | 1,968 | 149 | 2,117 | |||||||||||||||||||||||
|
Loss for the year
|
(7,771 | ) | (219 | ) | (4,186 | ) | (1,425 | ) | (7,828 | ) | (21,429 | ) | (625 | ) | (22,054 | ) | ||||||||||||||||
|
Continuing operations
|
Discontinued
operations
|
Total
|
||||||||||||||||||||||||||||||
|
Year Ended June 30, 2021
|
Critical
Power
|
Solar
|
Electric
|
Sustainable
Energy
|
Corporate
|
Total
|
Critical
Power
|
|||||||||||||||||||||||||
|
(US dollars in thousands)
|
Services
|
Development
|
Vehicles
|
Solutions
|
Office
|
Continuing
|
Services
|
|||||||||||||||||||||||||
|
Revenue
|
22,396 | 185 | 1,394 | - | - | 23,975 | 16,436 | 40,411 | ||||||||||||||||||||||||
|
Costs of sales - other
|
(18,322 | ) | - | (1,292 | ) | - | - | (19,614 | ) | (14,470 | ) | (34,084 | ) | |||||||||||||||||||
|
Cost of sales - non-recurring events
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
|
Gross profit
|
4,074 | 185 | 102 | - | - | 4,361 | 1,966 | 6,327 | ||||||||||||||||||||||||
|
General and administrative expenses
|
(1,522 | ) | (1,309 | ) | (1,923 | ) | - | (4,897 | ) | (9,651 | ) | (1,482 | ) | (11,133 | ) | |||||||||||||||||
|
Other gains/(losses)
|
36 | 733 | - | - | - | 769 | - | 769 | ||||||||||||||||||||||||
|
Other income
|
960 | - | - | - | - | 960 | 552 | 1,512 | ||||||||||||||||||||||||
|
Depreciation and amortization
|
(1,099 | ) | (4 | ) | (346 | ) | - | (4 | ) | (1,453 | ) | (803 | ) | (2,256 | ) | |||||||||||||||||
|
Operating profit/(loss)
|
2,449 | (395 | ) | (2,167 | ) | - | (4,901 | ) | (5,014 | ) | 233 | (4,781 | ) | |||||||||||||||||||
|
Restructuring and other non-recurring costs
|
(24 | ) | - | (631 | ) | - | (2,222 | ) | (2,877 | ) | (3 | ) | (2,880 | ) | ||||||||||||||||||
|
Finance expense - net
|
1,824 | (24 | ) | (1 | ) | - | (2,073 | ) | (274 | ) | (137 | ) | (411 | ) | ||||||||||||||||||
|
Profit/(loss) before income tax
|
4,249 | (419 | ) | (2,799 | ) | - | (9,196 | ) | (8,165 | ) | 93 | (8,072 | ) | |||||||||||||||||||
|
Income tax
|
(691 | ) | 96 | 733 | - | - | 138 | (24 | ) | 114 | ||||||||||||||||||||||
|
Loss for the year
|
3,558 | (323 | ) | (2,066 | ) | - | (9,196 | ) | (8,027 | ) | 69 | (7,958 | ) | |||||||||||||||||||
Income Statement from continuing operations
Revenue
Revenue from continuing operations for the year ended June 30, 2023 decreased $7.4 million or 33% to $15.1 million, from $22.4 million in the year ended June 30, 2022. Revenue from continuing operations for the year ended June 30, 2022 decreased $1.5 million or 6% to $22.4 million, from $24.0 million in the year ended June 30, 2021.
Revenue from continuing operations by product and service is follows:
|
Year Ended June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Electrical products and related services
|
$ | 13,596 | $ | 20,958 | $ | 22,581 | ||||||
|
Electric vehicles & related products & services
|
1,464 | 1,490 | 1,394 | |||||||||
|
Total revenue
|
$ | 15,060 | $ | 22,448 | $ | 23,975 | ||||||
The sale of electrical products, related services and solutions is generated from our Australian-based Critical Power Services businesses and is focused on the design, supply, installation and maintenance of power and control systems. Revenue generated in these operations is recognized in two ways. On smaller projects, revenue is recognized when the project is completed and is invoiced at that time. On larger projects, revenue is recognized on the achievement of specific milestones defined in each individual project. When the milestones and performance obligations are reached, the customer is invoiced, and the revenue is then recognized.
Revenue from continuing operations from electrical products, related services and solutions for the year ended June 30, 2023, of $13.6 million decreased $7.4 million compared to the $21.0 million earned for the year ended June 30, 2022. This is primarily a result of a $6.0 million reduction in solar project revenue in Aevitas Solar, as a result of (i) Edenvale Solar Project being the only major active project during the current period, compared to having two major active projects, Hillston and Bluegrass, in the prior period, and (ii) ongoing skills shortages in the electrical and building & construction industry causing difficulties in resourcing projects to meet demand. Revenue was also impacted by a net $0.9 million reduction in Kenshaw revenues, although on a constant AUD to USD exchange rate basis, revenues in Kenshaw were flat on the prior year. This comprises a $3.0 million reduction in generator sales and installation, offset by a $2.2 million increase in higher margin sales in generator service and motor sales and overhaul.
Revenue from electric vehicles, related products, services and solutions is generated from our Electric Vehicles businesses in the Netherlands: Tembo 4x4 and FD 4x4 Centre and is focused on electric vehicle conversion kits, and vehicle ruggedization products. Revenue generated in these operations is recognized when the products are delivered to customers. Revenue from electric vehicles and related products and services amounted to $1.5 million for the year ended June 30, 2023 compared to $1.5 million for the year ended June 30, 2022. No significant revenue was recognised on EUV conversion kit development whilst the EUV23 development project advanced towards production. Vehicle conversion revenues for ruggedization of non-EV vehicles benefitted from a significant ruggedization contract for 15 vehicles with Boliden mine in Ireland in FY2023. It should be noted that orders for the EUV23 conversion kits received in FY2023 were accounted for in Deferred Revenues on the Balance Sheet.
Revenue from continuing operations by geographic location is follows:
|
Year Ended June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Australia
|
$ | 13,596 | $ | 20,958 | $ | 22,581 | ||||||
|
Netherlands
|
1,464 | 1,490 | 1,394 | |||||||||
|
United States
|
- | - | - | |||||||||
|
Total revenue
|
$ | 15,060 | $ | 22,448 | $ | 23,975 | ||||||
Australian revenue of $13.6 million for the year ended June 30, 2023 was comprised solely of $13.6 million revenue from Critical Power Services provided by Kenshaw and Aevitas Solar. This compares to $21.0 million in the year ended June 30, 2022 and $22.6 million for the year ended June 30, 2021. The decrease in Australian revenue in the year ended June 30, 2023, compared to the prior year, is primarily driven by (i) Edenvale Solar Project being the only major active project during the current period, compared to having two major active projects, Hillston and Bluegrass, in the prior period, and (ii) ongoing skills shortages in the electrical and building & construction industry causing difficulties in resourcing projects to meet demand.
Netherlands revenue was $1.5 million for the year ended June 30, 2023 and $1.5 million for the year ended June 30, 2022, representing contribution from the Electric Vehicle business unit, in particular driven by Boliden ruggedization contracts in FY2023. The business remains primarily focused on development of its core EUV23 conversion kit solution for which it has already received orders. It should be noted that the cash down-payment on orders for the EUV23 conversion kits received in FY2023 were accounted for in Deferred Revenues on the Balance Sheet.
The Group had one customer representing more than 10% of revenue for the year ended June 30, 2023 (year ended June 30, 2022: one). This customer represented approximately $2.6 million of the Company’s total revenues and is reported within the Critical Power Services segment for the year ended June 30, 2023.
Cost of Sales
Cost of sales from continuing operations by product or service is as follows:
|
Year Ended June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Electrical products and related services - other
|
$ | 11,900 | $ | 18,804 | $ | 18,322 | ||||||
|
Electrical products and related services - extreme weather and COVID 19 disruption
|
3,850 | 1,881 | - | |||||||||
|
Electric vehicles & related products & services
|
1,572 | 1,504 | 1,292 | |||||||||
|
Other revenue
|
- | - | ||||||||||
|
Total cost of sales
|
$ | 17,322 | $ | 22,189 | $ | 19,614 | ||||||
Total cost of sales from continuing operations were $17.3 million for the year ended June 30, 2023, as compared to $22.2 million for the year ended June 30, 2022, and $19.6 million for the year ended June 30, 2021.
Cost of sales related to electrical products and related services consists of material purchases and direct labor costs, motor vehicle expenses and any directly related costs attributable to manufacturing, service, or other cost of sales. Cost of sales for electrical products and related services for the year ended June 30, 2023 included $3.9 million of non-recurring costs resulting from increased costs and delays on Aevitas Solar’s Edenvale project due to unprecedented high levels of rainfall (both in terms of frequency and amount versus historical averages) across Western Australia in FY2023. The rainfall damaged many of the trenches dug across the 6km interconnection works, which led to significant delays in completion of the project and required additional labour and material costs to fix and then complete the project within the project deadline. The prior year included $1.9 million of non-recurring costs during the execution phase of the Aevitas Solar’s Blue Grass project, due to Australian state border closures during the COVID-19 pandemic which resulted in the leadership and project management teams not being able to travel to and manage the project for three months. During those three months, the Company was not able to find a suitable local project management team which led to the project not being managed to the Company’s satisfaction. As a result, the Company had to incur significant additional costs for labour and materials to correct the existing work and recover the delays in completion of the project once the borders were reopened. Neither of the foregoing events are expected to repeat due to their unprecedented nature and so the Company has categorized such related costs as non-recurring. Other cost of sales related to electrical products and related services was $11.9 million for the year ended June 30, 2023, as compared to $18.8 million for the year ended June 30, 2022 and $18.3 million for the year ended June 30, 2021. The decrease in cost of sales was primarily driven by the impact of reduction in solar projects in Aevitas Solar, and generator installations in Kenshaw.
Cost of sales related to electric vehicles and related products consists of material purchases and direct labor costs and any other costs directly attributable to assembly. Cost of sales related to electric vehicles and related products were $1.6 million for the year ended June 30, 2023 and $1.5 million for the year ended June 30, 2022.
Gross Profit
Gross profit from continuing operations by product and service is as follows:
Gross profit/(loss) by product or service is as follows:
|
Year Ended June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Electrical products and related services
|
$ | (2,154 | ) | $ | 273 | $ | 4,259 | |||||
|
Electric vehicles & related products & services
|
(108 | ) | (14 | ) | 102 | |||||||
|
Other revenue
|
- | - | - | |||||||||
|
Total gross (loss)/profit
|
$ | (2,262 | ) | $ | 259 | $ | 4,361 | |||||
The Company’s gross (loss)/ profit from continuing operations is equal to revenue less cost of sales and totaled a loss of $(2.3) million for the year ended June 30, 2023, a profit of $0.3 million for the year ended June 30, 2022, and a profit of $4.4 million for the year ended June 30, 2021. Excluding one-off extreme COVID-19 disruption costs of $3.9 million on Edenvale project in FY2023 and $1.9 million on the Blue Grass project in the prior year, gross profits decreased from $2.2 million in the prior year to $1.7 million in FY2023. In percentage terms, gross margins decreased from 1.2% in the prior year, to (15.9%) in FY2023, but excluding one-off extreme weather and COVID-19 disruption costs, increased from 9.5% in the prior year to 11.2% in FY2023.
The gross (loss) / profit from electrical products and related services (the Critical Power Services business) was a loss of $(2.2) million for the year ended June 30, 2023, compared to a profit of $0.3 million in the prior year. Excluding one-off extreme COVID-19 disruption costs of $3.9 million on Edenvale project in FY2023 and $1.9 million on Blue Grass project in the prior year, gross profits decreased from $2.2 million to $1.7 million in FY2023. In percentage terms, gross margins decreased from 1.2% in the prior year, to (15.9%) in FY2023, but excluding one-off extreme weather and COVID-19 disruption costs, increased from 10.3% to 12.5% in FY2023.
The Electric Vehicle business generated a gross loss of $(0.1) million in the year ended June 30, 2023, (June 30, 2022, £nil), reflecting customized test kit componentry and assembly during low volume product development phase.
General and Administrative Expenses
|
Year Ended June 30
|
||||||||
|
(US dollars in thousands)
|
2023
|
2022 (restated)
|
||||||
|
Salaries and benefits
|
$ | 3,333 | $ | 8,670 | ||||
|
Professional fees
|
2,325 | 2,198 | ||||||
|
Insurance
|
570 | 474 | ||||||
|
Travel
|
187 | 141 | ||||||
|
IT licensing and support
|
694 | 482 | ||||||
|
Marketing and public relations
|
199 | 1,279 | ||||||
|
Office and other expenses
|
312 | 567 | ||||||
|
Total general and administrative expenses
|
$ | 7,620 | $ | 13,811 | ||||
General and administrative expenses from continuing operations decreased by $6.2 million to $7.6 million for the year ended June 30, 2023, compared to $13.8 million for the year ended June 30, 2022 restated. These expenses consist primarily of operational expenses, such as those related to employee salaries and benefits, professional fees, insurance, travel, IT, marketing, office and other expenses, as well as vesting at grant date share price of non-cash equity incentive costs of share awards previously granted under the Company’s Omnibus Incentive Plan, in accordance with IFRS 2 Share-based Payments.
Salaries and benefits were $3.3 million for the year ended June 30, 2023, (year ended June 30, 2022 restated, $8.7 million), accounting for 44% of total general and administrative expenses, (year ended June 30, 2022, 63%). Non-cash equity incentive costs contributed $0.1 million (year ended June 30, 2022: $1.9 million) to the salaries and benefits expense. Underlying cash salaries and benefits of $3.2 million decreased by $3.6 million or 53% in the year, reflecting a realignment of the team onto product development project activity and a commensurate increase in capitalized intangible costs, and reduction in Aevitas personnel following the sale of the J.A. Martin ex-solar business. 30 June 2022 was restated for $0.1 million payroll costs paid in the period 30 June 2023 but relating to services provided in the period to 30 June 2022.
Professional fees of $2.3 million for the year ended June 30, 2023 or 31% of total general and administrative expenses (year ended June 30, 2022 restated, $2.2 million), were comprised of audit and accounting fees, consulting fees to support business development and legal fees. 30 June 2022 was restated for $0.3m legal expenses originally capitalised in the period to 30 June 2023 in Caret but should be expensed in the period to 30 June 2022.
Insurance expense of $0.6 million for the year ended June 30, 2023 was marginally higher than the $0.5 million for the year ended June 30, 2022 reflecting improved coverage.
IT licensing and support expenses represent the costs of accounting, operations, email and office, file storage, and security software products and licenses. IT expenses increased by $0.2 million to $0.7 million for the year ended June 30, 2023, comprising $0.2 million in the Corporate Office segment due to increased activity to support growth activities and automate processes with scalable software.
Marketing expenses include promotional advertisements and trade shows. Marketing costs of $0.2 million for the year ended June 30, 2023 reduced significantly compared to the prior year, relying more efficiently on sales team-driven partnerships and customer presentations, than paid marketing arrangements.
Office and other expenses include office and meeting space rental, communication, bank fees and general office administrative costs. Office and other expenses of $0.3 million for the year ended June 30, 2023 decreased by $0.3 million in the year due to savings in Aevitas following sale of J.A. Martin ex-solar.
Gain/(loss) on Solar Development
Gain on Solar Development projects from continuing operations was nil for the year ended June 30, 2023. This compares to a nil gain in the year ended June 30, 2022, comprising a $0.1 million write-off of costs incurred on uneconomic projects in Caret, offset by $0.1 million gain on sale of tangible assets in Critical Power Systems. In the year ended June 30, 2021 a gain of $0.8 million arose comprising a $0.9 million bargain purchase gain on acquisition of the remaining 50% interest in Caret offset by a $0.2 million loss on solar development projects in VivoPower Pty Ltd in Australia.
Other Income
Other income of $0.1 million for the year ended June 30, 2023 compares to $0.7 million for the year ended June 30, 2022, mainly relating to COVID-19 grants and subsidies in Critical Power Services in Australia.
Depreciation and amortization
Depreciation is charged on property, plant and equipment on a straight-line basis and is charged in the month of addition. We depreciate the following class of assets at differing rates dependent on their estimated useful lives. The net book value of assets held as of June 30, 2023, was $3.7 million (June 30, 2022: $3.7 million).
|
Tangible asset
|
Estimated useful life (in years)
|
||||
|
Computer equipment
|
3 | ||||
|
Fixtures and fittings
|
3 | to | 20 | ||
|
Motor vehicles
|
5 | ||||
|
Plant and equipment
|
3.5 | to | 10 | ||
|
Right-of-use assets
|
Remaining useful life
|
||||
Amortization costs relate to the amortization of intangible assets generated on the acquisition of:
|
●
|
VivoPower Australia and Aevitas - customer relationships and trade names
|
|
●
|
Caret - solar project development expenditure
|
|
●
|
Tembo - customer relationships and trade names
|
The intangible assets identified above, and their estimated useful life is provided in the table below:
|
Identifiable intangible asset
|
Estimated useful life (in years)
|
||||
|
Development expenditure
|
5 | to | 10 | ||
|
Customer relationships
|
10 | ||||
|
Trade names
|
15 | to | 25 | ||
|
Favorable supply contracts
|
15 | ||||
|
Other
|
5 | ||||
Under IFRS, intangible assets and goodwill are subject to an annual impairment review. No impairment charge was recorded for the year, following the impairment review as of June 30, 2023.
An impairment review tests the recoverable amount of the cash-generating unit which gave rise to the intangible asset or goodwill in order to determine the existence or extent of any impairment loss. The recoverable amount is the higher of fair value less costs to sell and the value in use to the Group. An impairment loss is recognized to the extent that the carrying value exceeds the recoverable amount. In determining a cash-generating unit’s or asset’s value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and risks specific to the cash-generating unit or asset that have not already been included in the estimate of future cash flows. All impairment losses are recognized in the Statement of Comprehensive Income.
The Group conducts impairment tests on the carrying value of goodwill annually, or more frequently if there are any indications that goodwill might be impaired. The recoverable amount of the Cash Generating Unit (“CGU”) to which goodwill has been allocated are determined from value in use calculations. The key assumptions in the calculations are the discount rates applied, expected operating margin levels and long-term growth rates. Management estimates discount rates that reflect the current market assessments while margins and growth rates are based upon approved budgets and related projections.
The Group prepares cash flow forecasts using the approved budgets for the coming fiscal year and management projections for the following two years. Cash flows are also projected for subsequent years as management believe that the investment is held for the long term. These budgets and projections reflect management’s view of the expected market conditions and the position of the CGU’s products and services within those markets.
The CGU represented by Aevitas O Holdings Limited (being Critical Power Services) was assessed to have a value in excess of its carrying value and hence no additional adjustments to goodwill were considered necessary. Key assumptions used in the assessment of impairment were discount rate based on the weighted average cost of capital of 12% (June 30, 2022: 11%; June 30, 2021: 10%) and annual growth rate of 3% per annum.
The solar element of the CGU represented by VivoPower Pty Ltd goodwill was assessed to have a value in excess of its carrying value and hence no additional adjustments to goodwill were considered necessary. Key assumptions used in the assessment of impairment were weighted average cost of capital of 11.3% (June 30, 2022: 11.3%; June 30, 2021: 10.7%), an average annual growth rate in years 2-5 of 60% during the rapid growth phase of the business, with an average of 50% of electric light vehicles sold by the Company in fleet sizes over 50 vehicles will be sold with an additional sustainable energy solution.
The CGU represented by Tembo e-LV and subsidiaries was assessed to have a value in excess of its carrying value. Key assumptions used in the assessment of impairment were discount rate based on the weighted average cost of capital of 12% and average annual growth rate of 33% per annum in years 2-5. Growth rates reflect commencement of planned series production at volume during the 5 year period, as the product development project is completed for the current variant, to meet customer demand per sales agreements of over 15,000 units with international distribution partners, including Acces, Bodiz, GHH, ETC, Ulti-Mech, Petrosea and Fourche Maline. No sensitivity analysis is provided as the Company expects no foreseeable changes in the assumptions that would result in impairment of the goodwill.
The CGU represented by Caret solar projects was assessed to have a value in excess of its carrying value and hence no adjustments to capitalized development costs were considered necessary. Key assumptions used in the assessment of impairment were weighted average cost of capital of 12.9%, $4 million free cash flow from project sales in years 1-4, $14.4 million development fees from power-to-x partnerships.
Restructuring and Other Non-Recurring Costs
Restructuring costs by nature are one-time incurrences, and therefore, we believe have no bearing on the financial performance of our business. To enable comparability in future periods, the costs are disclosed separately on the face of our Statement of Comprehensive Income.
|
(US dollars in thousands)
|
Year Ended June 30
|
|||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Corporate restructuring - legal and other fees
|
$ | 200 | $ | 189 | $ | 179 | ||||||
|
Corporate restructuring - litigation provision
|
- | (128 | ) | 2,042 | ||||||||
|
Fiscal refunds provision
|
1,768 | - | - | |||||||||
|
Impairment and write-off
|
422 | - | - | |||||||||
|
Relocation
|
- | - | 27 | |||||||||
|
Remediation costs
|
(361 | ) | 382 | - | ||||||||
|
Acquisition related costs
|
55 | 631 | ||||||||||
|
Total restructuring costs
|
$ | 2,084 | $ | 443 | $ | 2,880 | ||||||
For the year ended June 30, 2023, the Company incurred non-recurring costs primarily related to a one-time provision in respect of UK tax refunds on prior year receivables that were either received or due to be received by the Company for recoverable UK taxes paid between 2020 and 2022 but which have since been disputed and are being reclaimed by the UK fiscal department and hence are not reflective of the 2023 Operational results, nor will they repeat once settled and have therefore been categorised as non-recurring. In addition, this also includes restructuring activities of $0.2 million and provision for inventory obsolescence and write-off of bad debts of $0.4 million, offset by a $0.4 million release of remediation provision. For the year ended June 30, 2022, the Company incurred non-recurring costs related to restructuring activities of $0.2 million and one-off remediation expenses of $0.4 million, offset by $0.1 million release of unutilized provision related to the Comberg Claims. For the year ended June 30, 2021, the Company incurred non-recurring costs for legal fees as well as a litigation provision relating to legal costs and settlement monies pertaining to the Comberg Claims of $0.2 million and $2.0 million respectively (see "Item 8. Financial Information – A. Consolidated Statements and Other Financial Information – Legal Proceedings”).
Finance Income and Expense
Finance income of $1.2 million, $0.2 million and $2.2 million for the years ended June 30, 2023 and 2022and 2021 respectively comprise foreign exchange gains for the year.
Finance expense of $7.4 million for the year ended June 30, 2023 consists primarily of interest expense associated with the interest payable on outstanding related party loans with AWN of $3.8 million and foreign exchange losses of $2.7 million. In the year ended June 30, 2022, the Company incurred finance costs of $8.6 million comprising $3.4m interest on AWN loans, interest on Aevitas Preference Shares of $0.2 million, interest on lease liabilities of $0.1 million and net foreign exchange losses of $4.7 million. In the year ended June 30, 2021, the Company incurred finance costs of $2.5m consisting of $2.0 million on the parent company loan, interest on the Aevitas convertible preference share, loan notes and non-convertible preference shares of $1.2 million, interest and fees on debtor invoice financing in Critical Power Services of $0.1 million, and interest on lease liabilities of $0.1 million offset by $1.0 million of waived dividends and interest on convertible preference shared and loan notes.
The components of net finance expense from continuing operations are as follows:
|
Year Ended June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Shareholder loan
|
$ | 3,801 | $ | 3,351 | $ | 1,986 | ||||||
|
Convertible preference shares and loan notes
|
254 | 217 | 1,228 | |||||||||
|
Debtor invoice financing
|
100 | 24 | 96 | |||||||||
|
Interest on leases
|
171 | 133 | 91 | |||||||||
|
Other finance costs
|
330 | 167 | 90 | |||||||||
|
Foreign exchange
|
1,554 | 4,540 | (2,222 | ) | ||||||||
|
Waived dividends and interest on convertible preference shares and loan notes
|
- | - | (995 | ) | ||||||||
|
Total net finance expenses
|
$ | 6,210 | $ | 8,431 | $ | 274 | ||||||
Foreign exchange gain/losses consists primarily of foreign exchange fluctuations related to short-term intercompany accounts and foreign currency exchange gains and losses related to transactions denominated in currencies other than the functional currency for each of our subsidiaries. We expect our foreign currency exchange gains and losses to continue to fluctuate in the future as foreign currency exchange rates change. The Group’s investments in overseas subsidiaries are not hedged as those currency positions are either USD denominated and/or considered to be long-term in nature. AWN loans of $32.4 million are mostly denominated in USD, upon which there is minimal foreign currency risk.
Income Tax
We are subject to income tax for the year ended June 30, 2023 at rates of 19% to 25%, 21%, 26% to 30%, 9% and 15% to 25.8% in the U.K., the U.S., Australia, United Arab Emirates and the Netherlands respectively. We use estimates in determining our provision for income taxes. We account for income taxes in accordance with IFRS Standard IAS 12 Income Taxes, using an asset and liability approach that requires recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax basis, and for net operating loss and tax credits.
Key Factors Affecting Our Performance
We believe that the growth of our business and our future success are dependent upon a number of key factors, including the following:
Market demand for our products and services. Our business and revenues depend on the demand for our products and services. The market demand for electric vehicles, critical power services, sustainable energy solutions and solar development projects is heavily influenced by a range of factors that include the governmental economic, fiscal, and political polices at both the national and state levels in the U.S., Australia, Europe, the United Kingdom and the rest of the world, as well as global economic and political factors affecting the cost, availability, and desirability of renewable energy, other energy sources. Other external factors such as the COVID-19 pandemic and geopolitical tension in Ukraine may also affect demand for our products and services.
Competitiveness of our products and services. Our products and services need to be competitive in terms of price and quality with competition in each of our markets. Tembo in particular operates in a market that is relatively new, rapidly evolving, characterized by rapidly changing technologies, new competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. In order to stay competitive and relevant, it needs to continuously innovate and invest in product development and new technologies. Our critical power services businesses face pricing pressure in a competitive market and must continually improve cost efficiencies.
Operational scale up of electric vehicle assembly and delivery capabilities. Tembo faces operational risks as a maker of battery-electric ruggedized and off-road vehicles embarking on an exponential scale up of its assembly and delivery capabilities. Growth is dependent on securing appropriate premises and equipment, achieving design and manufacturing process goals, achieving compliance with safety regulations and standards, recruiting and retaining suitably qualified personnel, overcoming any delays and, resolving any supply chain shortages, to be able to deliver the volume and quality of products required to meet customer commitments.
Delivering electric vehicle products and services to customers’ requirements and regulatory standards. Following the acquisition of Tembo, we signed distribution agreements with a number of partners globally, to sell Tembo EUV conversion kits. Meeting the technical specifications, quality and safety standards of our customers and partners is a key driver of ensuring Tembo’s brand, reputation, revenue and future prospects. Product failures in service could leave us exposed to future warranty claims. Failure to meet the required regulations and standards in the markets we serve could require product recalls and fines and penalties.
Development and scale up of the SES solutions business. Whilst we have experience in developing, financing, building and operating solar power systems and distributed generation solar systems, we have limited experience and track record in combining this experience to then develop and offer a complete SES solution with microgrids, battery recycling and reuse and are still in the process of building the capabilities in the team. Developing and/or acquiring these capabilities is a key factor in expanding our SES solutions business.
Supply chain execution. Materials deliveries from suppliers are at risk of disruption due to external events and factors such as COVID-19, semiconductor shortages and conflict in Ukraine. Overcoming challenging supply chain issues is a key factor in our businesses being able to deliver goods and services to our customers in line with their requirements and meet our revenue growth targets.
Inflation. The economic volatility attributable initially to COVID-19 and then to Russia’s invasion of Ukraine is part of and contributing to a larger trend of rising inflation around the globe, which may have a significant adverse effect on economic activity and our business.
Ability to secure capital at attractive rates and terms. Our businesses are capital intensive requiring significant investment in operational expenditure and capital expenditure to realize the growth potential of our electric vehicle, critical power services, sustainable energy solutions and solar development businesses. In addition, we are subject to significant and ongoing administrative and related expenses required to operate and grow a public company. Together these items impose substantial legal and financial compliance costs. As a result, we expect to require some combination of additional financing options in order to execute our strategy and meet the operating cash flow requirements necessary to operate and grow our business.
Currency fluctuations. We conduct business in the U.S., Australia, United Arab Emirates, the Netherlands and the U.K. As a result, we are exposed to risks associated with fluctuations in currency exchange rates, particularly between the U.S. dollar, the British Pound, the Euro and the Australian dollar.
Ability to attract and retain talent. We are looking to rapidly hyperscale our business in the face of fierce competition for talent and short timeframes. To achieve our operational goals, we need to attract high caliber talent quickly.
B. Liquidity and Capital Resources
Our principal sources of liquidity in the year ended June 30, 2023 were $3.6 million from AWN loans, $5.1 million net proceeds from capital raises, $2.9m of proceeds on sale of J.A. Martin and $1.3m from debtor financing. Our principal uses of cash have been $8.6 million outflow from operating activities, including $17.2 million growth focused operating costs in the Electric Vehicles, Solar Development, Sustainable Energy Solutions and Corporate segments less a $8.6 million decrease in working capital comprising movements in trade and other receivables and payables, $1.0 million purchase of property, plant and equipment including capitalized lease facilities in Tembo and Kenshaw, $3.9 million development capital expenditure in Tembo and Caret.
Our principal sources of liquidity in the year ended June 30, 2022 were $4.2 million from AWN short-term loans and $0.3 million net proceeds from capital raises. Our principal uses of cash have been $5.1 million outflow from operating activities, including $14.7 million growth focused operating costs in the Electric Vehicles, Solar Development, Sustainable Energy Solutions and Corporate segments less a $9.6 million decrease in working capital comprising movements in trade and other receivables and payables, $0.6 million payment of interest on AWN loans, $1.2 million purchase of property, plant and equipment including capitalized lease facilities in Tembo and Kenshaw, $4.3 million development capital expenditure in Tembo and Caret.
Our principal sources of liquidity in the year ended June 30, 2021, were $32.0 million net proceeds from capital raises and $0.4 million proceeds from sale of solar projects. Our principal uses of cash have been $5.0 million outflow from operating activities, including net inflows in Critical Power Services offset by growth operating costs in the Electric Vehicles, Solar Development, Sustainable Energy Solutions and Corporate segments, a $10.4 million increase in working capital primarily comprising a decrease in trade and other payables, $2.1 million net cash outflow on the acquisition of Tembo e-LV, comprising $7.1 million consideration less $4.9 million acquired cash, $2.2 million repayment of AWN related party loan principal, $5.3 million payment of interest on the AWN loan, Aevitas hybrids and other borrowings, including catch up of related party arrears, $0.9 million purchase of property, plant and equipment and $0.5 million net repayment of variable short term debtor finance facilities for J.A. Martin and Kenshaw.
The following table shows net cash provided by (used in) operating activities, net cash used in investing activities, and net cash provided by (used in) financing activities for the year ended June 30, 2023, 2022 and 2021:
|
Year Ended June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Net cash used in operating activities
|
(8,552 | ) | (5,130 | ) | (15,377 | ) | ||||||
|
Net cash used in investing activities
|
(1,921 | ) | (5,343 | ) | (2,682 | ) | ||||||
|
Net cash provided by financing activities
|
9,804 | 3,555 | 23,537 | |||||||||
|
Total cash flow
|
(669 | ) | (6,918 | ) | 5,478 | |||||||
If we continue to experience losses and we are not able to raise additional financing to provide the funding to grow the revenue streams of the Company to become profit making, or generate cash through sales of assets, we may not have sufficient liquidity to sustain our operations and to continue as a going concern, accordingly there is a material uncertainty that may cause significant doubt about the going concern nature of the Group. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. See section 2.1 on “Basis of Preparation”.
Operating Activities
Our net cash outflow from operating activities in the year ended June 30, 2023, was $8.6 million. This was attributable to a net inflow from working capital movements of $8.6 million and a net cash outflow after tax from operations of $17.2 million. The working capital movements of $8.6 million comprise of increase in trade and other payables of $2.3 million, decrease in trade and other receivables of $5.9 million, an increase in inventory of $0.2 million and increase in provisions of $0.7 million. The $17.2 million outflow after tax from operations consists of the $24.4 million loss, other non-cash and non-operating components of earnings including $4.9 million of net finance expense, $1.6 million depreciation and amortization, $0.1 million share-based payments, and $0.6 million tax.
Our net cash outflow from operating activities in the year ended June 30, 2022, was $5.1 million. This was attributable to a net inflow from working capital movements of $9.6 million and a net cash outflow after tax from operations of $14.7 million. The working capital movements of $9.6 million comprise of increase in trade and other payables of $6.6 million, decrease in trade and other receivables of $3.4 million, decrease in inventory of $0.1 million and a decrease in provisions of $0.6 million. The $14.7 million outflow after tax from operations consists of the $22.1 million loss, other non-cash and non-operating components of earnings including $5.3 million of net finance expense, $1.9 million depreciation and amortization, $2.0 million share-based payments, less $1.9 million tax credits.
Our net cash outflow from operating activities in the year ended June 30, 2021, was $15.4 million. This was attributable to a net outflow from working capital movements of $10.4 million and a net cash outflow after tax from operations of $6.1 million. The working capital movements of $10.3 million comprise a decrease in trade and other payables of $9.5 million, an increase in inventory of $0.8 million and a decrease in provisions of $0.1 million. The $6.1 million outflow after tax from operations consists of the $8.0 million loss, other non-cash and non-operating components of earnings including $1.1 million share-based payments, $0.4 million of net finance expense, $0.8 million gain on solar development and $2.3 million depreciation and amortization.
Investing Activities
Net cash outflow from investing activities of $1.9 million in the year ended June 30, 2023 comprised of $1.0 million investment in property, plant and equipment in particular new leased properties for Tembo and Kenshaw, and a net $3.9 million net cash outflow attributable to additional investment in capital projects in Tembo and Caret. This is offset by $2.9 million proceeds from the sale of J.A Martin operations.
Net cash outflow from investing activities of $5.3 million in the year ended June 30, 2022comprised of $1.1 million investment in property, plant and equipment in particular new leased properties for Tembo and Kenshaw, and a net $4.3 million cash outflow attributable to additional investment in capital projects in Tembo and Caret.
Net cash outflows from investing activities of $2.7 million in the year ended June 30, 2021 comprised $0.4 million proceeds from sale of solar project assets in Australia, offset by $0.9 million investment in property, plant and equipment, and a net $2.1 million cash outflow attributable to the acquisition of Tembo e-LV. The net acquisition outflow comprised $7.1 million cash consideration, less $4.9 million cash acquired.
No companies were acquired by the Group in the years ended June 30, 2023 and June 30, 2022. In the year ended June 30, 2021, two acquisitions were consummated. These comprised Tembo e-LV B.V. and subsidiaries, for cash consideration of $7.1 million, or $2.2 million net of cash acquired, and Caret for cash consideration of $1, also $l net of cash acquired.
Financing Activities
Cash generated from financing activities for the year ended June 30, 2023, was $9.8 million. This comprised $3.6 million AWN loans, $1.3 million debtor financing and $5.1 million capital raises net of capital raise costs, partly offset by $0.9 million repayment of other financing costs.
Cash generated from financing activities for the year ended June 30, 2022, was $3.6 million. This comprised $4.2 million AWN short term loans and $0.2 million capital raises net of capital raise costs. This is partly offset by $0.6 million interest paid to AWN on shareholder loans, and other financing costs.
Cash generated from financing activities for the year ended June 30, 2021, was $23.5 million. This comprised $32.6 million capital raise proceeds net of $2.8 million capital raise costs, less $0.4 million lease repayments in Critical Power Services businesses, $2.2 million repayment of AWN related party loan principal, $0.5 million net repayments against the debtor finance facility in Critical Power Services businesses and $5.3 million AWN loan and Aevitas hybrid interest, including catch up on amounts accrued from prior periods.
Borrowing obligations outstanding at the end of the period were as follows:
|
As at June 30
|
||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Current liabilities:
|
||||||||||||
|
Debtor financing
|
1,329 | - | - | |||||||||
|
Lease liabilities
|
462 | 505 | 669 | |||||||||
|
Project financing agreement
|
- | - | 59 | |||||||||
|
Short-term shareholder loan
|
497 | 4,285 | - | |||||||||
|
Bank loan
|
7 | 145 | 152 | |||||||||
|
Chattel mortgage
|
89 | 142 | 88 | |||||||||
|
Other borrowings
|
- | 32 | 36 | |||||||||
| 2,384 | 5,109 | 1,004 | ||||||||||
|
Non-current liabilities:
|
||||||||||||
|
Shareholder loan – payments due beyond 12 months
|
28,111 | 21,121 | 21,175 | |||||||||
|
Lease liabilities
|
1,843 | 1,959 | 326 | |||||||||
|
Financing agreement
|
- | 108 | 183 | |||||||||
|
Bank loan
|
- | - | 159 | |||||||||
|
Chattel mortgage
|
50 | 264 | 244 | |||||||||
| 30,004 | 23,452 | 22,087 | ||||||||||
|
Total borrowings
|
32,388 | 28,561 | 23,091 | |||||||||
Tembo, Aevitas Solar and Kenshaw have lease arrangements in place to finance business properties and motor vehicle fleets. During the year ended June 30, 2023, lease liabilities have decreased by $0.2 million to $2.3 million mainly due to amortization during the year. The obligation for future minimum lease payments under the facilities are as follows:
|
Minimum lease payments
|
Present value of minimum lease
payments
|
|||||||||||||||||||||||
|
As at June 30
|
As at June 30
|
|||||||||||||||||||||||
|
(US dollars in thousands)
|
2023
|
2022
|
2021
|
2023
|
2022
|
2021
|
||||||||||||||||||
|
Amounts payable under finance leases:
|
||||||||||||||||||||||||
|
Less than one year
|
576 | 546 | 683 | 462 | 444 | 669 | ||||||||||||||||||
|
Later than one year but not more than five
|
2,223 | 2,545 | 379 | 1,843 | 2,020 | 326 | ||||||||||||||||||
| 2,799 | 3,091 | 1,062 | 2,305 | 2,464 | 995 | |||||||||||||||||||
|
Future finance charges
|
(494 | ) | (627 | ) | (67 | ) | - | - | - | |||||||||||||||
|
Total obligations under finance lease
|
2,305 | 2,464 | 995 | 2,305 | 2,464 | 995 | ||||||||||||||||||
On June 30, 2021, the Company agreed a refinancing of its existing $21.1 million shareholder loan with AWN, with repayment of principal from January 1, 2023 in sixty monthly instalments of $0.35 million to loan maturity on December 31, 2027. The interest rate and line fee was agreed at 8% and 0.8% respectively, but no interest or line fee settlements were required until after a corporate liquidity event had occurred. In addition, the Company agreed to a refinancing fee of $0.34 million in two tranches on June 30, 2022 and December 31, 2022. Security granted to AWN comprised of a specific security deed over the assets of Aevitas (the "Specific Security Deed") and a general security over the assets of the Company (the "General Security").
On June 30, 2022 further amendments to the loan were agreed with AWN:
|
(i)
|
to defer repayment of principal to commence on October 1, 2023, with repayments over 60 months to September 30, 2028,
|
|
(ii)
|
to defer interest payments from October 1, 2021, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2023.
|
|
(iii)
|
to increase the interest rate and line fee to 10.00% and 2.00% per annum respectively during the period from October 1, 2021 to the earlier of a) September 30, 2023 or b) the date a minimum prepayment of $1,000,000 is made.
|
|
(iv)
|
the initial refinancing fee of $0.34 million is to be amended to accrue incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) October 1, 2023.
|
|
(v)
|
a new fixed facility extension fee of $0.355 million is payable in return for this amendment, to accrue immediately but becoming payable on October 1, 2023.
|
On January 11, 2023, further amendments to the loan were agreed with AWN:
|
(i)
|
to defer repayment of principal to commence on April 1, 2025, with repayments over 60 months to March 31, 2030.
|
|
(ii)
|
to defer interest payments from October 1, 2023, becoming due and payable on the earlier of a) completion by VivoPower of a debt or equity raise of at least $25 million, and b) October 1, 2024.
|
|
(iii)
|
to extend the increased interest rate and line fee of 10.00% and 2.00% per annum respectively commenced on October 1, 2021 to the earlier of a) March 31, 2025 or b) the date a minimum prepayment of $1,000,000 is made.
|
|
(iv)
|
to extend the initial refinancing fee accruing incrementally at 1.6% per annum from July 1, 2021 and become payable at the earlier of a) $1.0 million prepayment being made or b) April 1, 2025.
|
|
(v)
|
to defer the repayment date of the previous fixed facility extension fee of $0.355 million, becoming payable on April 1, 2025.
|
|
(vi)
|
In addition to previously agreed refinancing fees, an additional $0.855 million fixed refinancing fee will accrue immediately and become payable on April 1, 2025.
|
On June 30, 2023, further amendments to the loan were agreed with AWN:
(i) to defer interest payments from October 1, 2024 to April 1, 2025, and to replace the conditional requirement to repay accrued interest upon completion by VivoPower of a debt or equity raise of at least $25 million, with the conditional requirement to make repayments of interest and/or principal to meet the mandatory repayment schedule described in sections (ii) and (iii) below following a qualifying liquidity event.
(ii) upon completion by VivoPower International PLC of a qualifying liquidity event of at least $5.0 million, Aevitas O Holdings Pty Limited are required to make mandatory prepayment of principal and interest to AWN in accordance with the following schedule:
a) proceeds $5 million to $7.5 million - pay 25% of amounts raised;
b) proceeds $7.5 million to $12.5 million - pay $1.875 million plus 45% of amounts raised;
c) proceeds $12.5 million and above - pay $4.125 million plus 50% of amounts raised.
(iii) for the purposes of the mandatory prepayment requirement, a ‘qualifying liquidity event’ excludes direct investments into VivoPower’s subsidiary, Tembo, and debt raised in respect of working capital finance facilities, but includes:
a) equity or debt raise;
b) trade sale of underlying subsidiary or business unit (including, for example, Aevitas and Caret); and
c) loan repayment from Tembo to VivoPower.
(iv) as consideration for the concessions agreed with AWN, VivoPower International PLC committed to issue AWN with 500,000 warrants, with a duration of 12 months, at an exercise price of $0.90 per share.
In December 2021, a short term loan of $1.1 million (A$1.5 million) was provided from AWN to Aevitas O Holdings Pty Limited at an interest rate of 10.0%, increasing to 12.5% from January 1, 2022. The loan is set to expire on April 1, 2025 (initially set as April 30, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower International PLC of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $29,000 (A$40,000) and $43,500 (A$60,000) are payable upon maturity, relating to the two extensions respectively.
On February 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas O Holdings Pty Limited, with interest rate of 10.00% per annum payable on the principal sum upon maturity. The loan is set to expire on April 1, 2025 (initially set as May 13, 2022, then extended on June 30, 2022, to October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was dropped on June 30, 2023. Facility extension fees of $85,000 and $110,000 are payable upon maturity, relating to the two extensions respectively.
On December 22, 2022, a short term $3.0 million loan was provided from AWN to Aevitas O Holdings Pty Limited, with interest rate of BBSY bid floating rate (on average 3.60% for the period from inception to June 30, 2023) plus fixed margin of 15.0% per annum payable on the principal sum upon maturity. A 1% facility establishment fee of $30,000 was deducted upon initial loan drawdown, and a further 3% exit fee of $90,000 is payable on expiry. The loan is set to expire on April 1, 2025 (initially set as October 1, 2023, then extended on January 11, 2023 to April 1, 2025). The requirement for the loan to expire upon completion by VivoPower of a debt or equity raise of at least $25 million was agreed on January 11, 2023, then dropped on June 30, 2023. A facility extension fee of $115,000 is payable upon maturity.
In February and March 2023, further short term loans of A$0.5 million and A$0.25 million were established between AWN and Aevitas O Holdings Pty Limited, drawn down between February and May 2023. The loans have interest rate of BBSY bid floating rate plus fixed margin of 15.0% per annum payable on the principal sum upon maturity, with expiry dates of June 30, 2023. 1% facility establishment fees of total A$7,500 were deducted upon loan drawdowns, and further 3% exit fees of total A$22,500 are payable on expiry. On June 30, 2023, the expiry of the loans was amended to August 31, 2023.
Following the sale of ex-solar J.A. Martin operations on July 1, 2022, the J.A. Martin debtor finance facility was cancelled, but a new facility with a limit of A$2.5 million and variable interest rate (initial rate 7.75%) was opened by Kenshaw, as well as a trade finance facility of $0.5 million. The debtor finance facility was partially drawn down at June 30, 2023, with an outstanding balance of $1.3 million (A$2.0 million), due to timing of operating activities (June 30, 2022: nil).
Cash Reserves and Liquidity
Cash reserves at June 30, 2023, of $0.6 million are unrestricted and are domiciled as follows:
|
Local
currency
|
Amount in
USD
|
|||||||
|
AUD
|
800,542 | 543,044 | ||||||
|
EUR
|
15,184 | 19,547 | ||||||
|
USD
|
18,364 | 18,364 | ||||||
|
GBP
|
(21,983 | ) | (27,741 | ) | ||||
|
Total cash reserve
|
553,214 | |||||||
Our treasury policy is to maintain sufficient cash reserves denominated in the currencies required for near term working capital to minimize the risk of currency fluctuation. Cash reserves are monitored on a daily basis to maximize capital efficiency. Our cash position is reviewed weekly by senior management to ensure the allocation best meets the coming needs of the business.
The SES business is reliant for liquidity on the completion of and, or sale of specific projects. As the projects are dependent on negotiations with external parties, delays in the sale process could adversely affect our liquidity.
The Electric Vehicles business is reliant for liquidity on financing from asset and working capital financing, equity capital raises, and a growing revenue stream as the business scales.
We review our forecasted cash flows on an on-going basis to ensure that we will have sufficient capital from a combination of internally generated cash flows and proceeds from financing activities, if required, in order to fund our working capital and capital expenditure requirements and to meet our short-term debt obligations and other liabilities and commitments as they become due.
If we continue to experience losses and we are not able to raise additional financing to provide the funding to grow the revenue streams of the Company to become profit making, or generate cash through sales of assets, we may not have sufficient liquidity to sustain our operations and to continue as a going concern, accordingly there is a material uncertainty that may cause significant doubt about the going concern nature of the Group. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. See section 2.1 on “Basis of Preparation”.
C. Research and Development, Patents and Licenses, etc.
Research and development expenditure includes the product development project for Tembo’s ruggedized electric vehicles, comprising pre-series-production expenditure on developing vehicle specifications and production processes that are fit for purpose for rugged off road environments including mining sites. Capitalized costs include primarily internal payroll costs, external expert consultants, equipment and technology hardware and software. In addition, there is additional research and development being conducted into other elements of vehicle electrification for off-road and rugged environments, including specialized batteries, charging devices, electric wire harnesses, telemetry, data capture and analytics and software tools.
Development expenditure on U.S. solar projects includes securing land rights, completing feasibility studies, negotiating power purchase agreements, and other costs incurred to prepare project sales for Notice to Proceed with construction and hence sale to a partner as a shovel ready project.
The Company expects to obtain adequate technical, financial and other resources to complete the projects, and management consider that it is probable for the future economic benefits attributable to the development expenditure to flow to the entity; and that the cost of the asset can be measured reliably. Accordingly, the development expenditure is recognized under IAS 38 – Intangible Assets as an intangible asset.
D. Trend Information
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources.
E. Critical Accounting Estimates
In preparing the consolidated financial statements, the directors are required to make judgements in applying the Group’s accounting policies and in making estimates and making assumptions about the future. These estimates could have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the future financial periods. The critical judgements that have been made in arriving at the amounts recognized in the consolidated financial statements are discussed below.
Revenue from contracts with customers – determining the timing of satisfaction of services
As disclosed in Note 2.15 to the Financial Statements, the Group concluded that Solar Development revenue and revenue from other long-term projects is recognized over time as the customer simultaneously receives and consumes the benefits provided. The Group determined that the percentage completion basis is the best method in measuring progress because there is a direct relationship between the Group’s effort and the transfer of services to the customer. The judgement used in applying the percentage completion basis affects the amount and timing of revenue from contracts.
Impairment of non-financial assets
The carrying values of property, plant and equipment, investments and intangible assets other than goodwill are reviewed for impairment only when events indicate the carrying value may be impaired. Goodwill is tested annually for impairment or when events or changes to circumstances indicate that it might be impaired.
Impairment assessments require the use of estimates and assumptions. To assess impairment, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and risks specific to the related cash-generating unit. Judgement was applied in making estimates and assumptions about the future cash flows, including the appropriateness of discounts rates applied and operating performance (which includes production and sales volumes), as further disclosed in Note 14. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs.
Operating profit/(loss)
In preparing the consolidated financial statements of the Group, judgement was applied with respect to those items which are presented in the Consolidated Statement of Comprehensive Income as included within operating profit/(loss). Those revenues and expenses which are determined to be specifically related to the on-going operating activities of the business are included within operating profit/(loss). Expenses or charges to earnings which are not related to operating activities, are one-time costs determined to be not representative of the normal trading activities of the business, or that arise from revaluation of assets, are reported below operating profit/(loss).
Litigation provision
No litigation provision was recorded at June 30, 2023. The provision of $0.5 million for disputed legal success fees related to the Mr. Comberg litigation recorded at June 30, 2021 was estimated by management, making a judgement in conjunction with advice from legal counsel, on the likely outcome of the claim. $0.4 million of this provision was utilized in the year ended June 30, 2022, and the remainder released.
Capitalization of product development costs
The Group capitalizes costs for product development projects in the EV segment. The capitalization of costs is based on management’s judgement that technological and economic feasibility is confirmed, and all other recognition criteria within IAS 38 can be demonstrated. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation, discount rates to be applied and the expected period of benefits. As of June 30, 2023, the carrying amount of capitalized development costs were $7.9 million (June 30, 2022: $3.8 million).
Contingent consideration on disposals
Included within the assessment of recoverable value for impairment purposes of assets held for sale related to the sale of the J.A. Martin ex-solar business, as at June 30, 2023, were estimates of the contingent consideration included within the sale agreement. The contingent consideration receivable 12 months following sale, is based on a multiple of earnings before interest, tax, depreciation and amortization of the business. The fair value of contingent consideration of $0.6 million applied a contracted 4.5x multiple to year 1 forecast EBITDA of $0.8 million, less purchase price paid. Final settlement of the contingent consideration was paid in August 2023, and the receivable amount and loss on disposal adjusted accordingly.
Income taxes
In recognizing income tax assets and liabilities, management makes estimates of the likely outcome of decisions by tax authorities on transactions and events whose treatment for tax purposes is uncertain. Where the outcome of such matters is different, or expected to be different, from previous assessments made by management, a change to the carrying value of the income tax assets and liabilities will be recorded in the period in which such determination is made. The carrying values of income tax assets and liabilities are disclosed separately in the Consolidated Statement of Financial Position.
Deferred tax assets
Deferred tax assets for unused tax losses amounting to $4.3 million at June 30, 2023 (June 30, 2022: $4.1 million; June 30, 2021: $1.9 million) are recognized to the extent that it is probable that sufficient taxable profit will be available against which the losses can be utilized. Management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the deferred tax assets recorded at the reporting date could be impacted.
Exchangeable preference Shares, exchangeable notes and Aevitas Preference Shares
As part of the IPO listing process VivoPower acquired Aevitas. The instruments previously issued by Aevitas were restructured to become exchangeable into Ordinary Shares of the Company. The Company considered IAS 32 paragraph 16 in determining the accounting treatment of the exchangeable instruments. The Company has determined the instruments to be treated as equity under the “fixed-for-fixed” rule meaning that both the amount of consideration received/receivable and the number of equity instruments to be issued must be fixed for the instrument to be classified as equity. Both elements are satisfied within the instruments.
Whilst the majority of the Aevitas Preference Shares and exchangeable notes were converted into Ordinary Shares in VivoPower in July 2021 a minority of investors in the instruments elected to accept new Aevitas Preference Shares. The Company considered IAS 32 paragraph 16 in determining the accounting treatment, and has determined the new Aevitas Preference Shares instruments should be treated as equity.
Fair value measurement
The fair values of financial assets and liabilities recorded in the statement of financial position are measured using valuation techniques including discounted cash flow ("DCF") models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Changes in assumptions about these factors could affect the reported fair value. When the fair values of non-financial assets/CGUs need to be determined, for example in business combinations and for impairment testing purposes, they are measured using valuation techniques including the DCF model.
PART III
ITEM 19. EXHIBITS
|
Exhibit
Number
|
Description
|
|
|
1.1
|
||
|
4.1
|
||
|
4.2
|
||
|
4.3
|
||
|
4.4
|
||
|
4.5
|
||
|
4.6
|
||
|
4.7
|
||
|
4.8
|
||
|
4.9*
|
||
|
4.10*
|
||
|
4.11
|
||
|
4.12
|
||
|
8*
|
||
|
11.1
|
||
|
11.2*
|
||
|
12.1+
|
ITEM 19. EXHIBITS CONTINUED
|
Exhibit
Number
|
Description
|
|
|
12.2+
|
||
|
13.1+
|
||
|
13.2+
|
||
|
15.1*
|
||
|
97.1*
|
||
|
101.INS*
|
Inline XBRL Instance Document
|
|
|
101.SCH*
|
Inline XBRL Taxonomy Extension Schema
|
|
|
101.CAL*
|
Inline XBRL Taxonomy Extension Calculation Linkbase
|
|
|
101.DEF*
|
Inline XBRL Taxonomy Extension Definition Linkbase
|
|
|
101.LAB*
|
Inline XBRL Taxonomy Extension Label Linkbase
|
|
|
101.PRE*
|
Inline XBRL Taxonomy Extension Presentation Linkbase
|
|
|
104+
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
* Previously filed with the Original Filing.
+ Filed or furnished, as applicable, herewith.
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
|
VIVOPOWER INTERNATIONAL PLC
|
|||
|
By:
|
/s/ Kevin Chin
|
||
|
Name:
|
Kevin Chin
|
||
|
Title:
|
Chief Executive Officer
|
||
Date: March 20, 2024
Exhibit 12.1
CERTIFICATION
I, Kevin Chin, certify that:
1. I have reviewed this Amendment No. 3 to the Annual Report on Form 20-F/A of VivoPower International PLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
Date: March 20, 2024
|
By: |
/s/ Kevin Chin |
||
|
Kevin Chin |
|||
|
Chief Executive Officer |
|||
|
(Principal Executive Officer) |
Exhibit 12.2
CERTIFICATION
I, Philip Wray, certify that:
1. I have reviewed this Amendment No. 3 to the Annual Report on Form 20-F/A of VivoPower International PLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
Date: March 20, 2024
|
By: |
/s/ Philip Wray |
||
|
Philip Wray |
|||
|
Group Finance Director |
|||
|
(Principal Financial and Accounting Officer) |
Exhibit 13.1
SECTION 1350 CERTIFICATION (CEO)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Amendment No. 3 to the Annual Report on Form 20-F/A of VivoPower International PLC (the “Company”) for the year ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Chin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 20, 2024
|
By: |
/s/ Kevin Chin |
||
|
Kevin Chin |
|||
|
Chief Executive Officer |
|||
|
(Principal Executive Officer) |
Exhibit 13.2
SECTION 1350 CERTIFICATION (CFO)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Amendment No. 3 to the Annual Report on Form 20-F/A of VivoPower International PLC (the “Company”) for the year ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip Wray, Group Finance Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 20, 2024
|
By: |
/s/ Philip Wray |
||
|
Philip Wray |
|||
|
Group Finance Director |
|||
|
(Principal Financial and Accounting Officer) |