Contents
The Reports
Highlights
Chairman’s Letter to Shareholders
CEO’s Letter to Shareholders
Strategic Report
Directors’ Report
Statement of Directors’ Responsibilities
Corporate Governance Statement
Directors’ Remuneration Report
Independent Auditor’s Report to the Members of VivoPower International PLC
Group Financial Statements and Notes
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flow
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Parent Company Financial Statements and Notes
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Other Information
Company Information
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82
Highlights
Total revenue was $32.3 million for period ended 31 March 2017
Statutory Net Income was $5.3 million for period ended 31 March 2017 and Adjusted
Net Income* was $12.3 million
Adjusted EBITDA* was $18.9 million for year ended 31 March 2017, exceeding
previously upgraded forecast of $18.8 million and initial forecast of $18.0 million
Adjusted earnings per share* was $0.92 for period ended 31 March 2017
•
Total assets as at 31 March 2017 were $100.8 million and total equity was $64.6 million
(in thousands, except per share data)
Revenue
Gross profit
Operating expenses
EBITDA
Adjusted EBITDA*
Adjusted earnings per share *
Basic earnings per share
Diluted earnings per share
2017
32,250
27,273
9,595
17,678
18,923
0.92
0.81
0.81
* Adjusted EBITDA and Adjusted earnings per share are non ‐ IFRS financial measures. We define Adjusted EBITDA as net income, adjusted
to exclude: depreciation and amortization, initial incorporation expenses, interest income and interest expense, the provision for income
taxes and foreign currency exchange income (expense). We believe that Adjusted EBITDA and Adjusted earnings per share provides investors
and other users of our financial information consistency and comparability with our past financial performance, facilitates period‐to‐period
comparisons of operations and facilitates comparisons with our peer companies, many of which use a similar non‐IFRS or generally accepted
accounting principles in the United States (“GAAP”) financial measure to supplement their IFRS or GAAP results, as applicable.
Page | 1
Chairman’s Letter to Shareholders
Dear Shareholders,
It has been a momentous period for VivoPower with much achieved against the odds.
Significant challenges manifested at the most inopportune times included the demise of SunEdison in April 2016
(which turned solar from a hot sector on NASDAQ into an unpopular sector making capital raising difficult), Brexit
in June 2016 (which created significant foreign currency market volatility), Hurricane Matthew in October 2016
(which impacted the program for financial close and build of the NC‐47 solar plant) and the election of Donald
Trump in November 2016 (which made investors nervous about renewable companies and adversely impacted
capital raising efforts in the lead up to the IPO of VivoPower).
However, the VivoPower team with help from executives of its major shareholder, Arowana International was
able to overcome these challenges and deliver on some non‐trivial achievements in FY17 including as follows:
Assembled a highly experience global team across 4 continents (USA, UK/Europe, Asia, Australia);
Redomiciled headquarters from Australia to London to reflect the strategic shift of VivoPower’s operations
globally;
Consummated 91MW of cross border solar project BTO (build, transfer, operate) transactions involving US
projects and Australian owners;
Exceeded profit guidance and delivered a strong adjusted Adjusted EBITDA result of US$18.9 million for the
period ended 31 March 2017;
Built a scalable enterprise platform (across Human Resources, IT&C, Accounting, Finance and Governance);
and
Listed on the NASDAQ stock market.
All this however is history and will amount to nothing if we do not keep executing with precision and pace. In
this regard, the VivoPower team has not rested on its laurels since the end of the 2017 financial period and has
started FY18 with several significant achievements:
Consummated a joint venture with Innovative Solar Systems (ISS), a US developer, for a qualified pipeline
of over 1.8GW of solar projects across the United States, which is expected to generate BTO revenues (build,
transfer, operate) for several years; and
Consummated an Alliance Agreement with an Australian Stock Exchange listed company, ReNu Energy
Limited for BTO transactions for solar assets below 5MW in size (including behind the meter systems) in
Australia. The sale of the first asset in this regard, the 0.6MW Amaroo School in Canberra, Australia has
already been announced.
While the road ahead will undoubtedly come with its set of challenges, the team at VivoPower and I firmly
believe that solar power will play a pivotal role in enabling the world to meet its ever‐growing energy needs in
both an economical and environmentally conscious way. We are in the early stages of a fundamental shift in
power generation away from the centralized grid and towards a more distributed model and VivoPower is well
positioned to exploit the varied opportunities that this disruption brings. Disruptive environments bring
challenges like the Suniva tariff case in the United States where we and most industry participants trust that
commercial sanity will prevail. However, they also bring opportunities like the one in Australia today, where
escalating grid power prices for commercial and industrial customers are causing concern about power costs
and even the very security of the power supply itself. At VivoPower we have assembled an experienced team
with expertise in engineering, finance, project management and technology that is uniquely positioned to
navigate these challenges and convert opportunities into value for our stakeholders.
Page | 2
Chairman’s Letter to Shareholders
With the achievements over the last 14 months, VivoPower has laid the foundation for future multi‐year revenue
and profit growth. It will however be important to stay resilient, agile and focused on execution.
On behalf of the rest of the board, I would like to take this opportunity to thank all of the VivoPower team, our
partners, financiers, customers, suppliers and shareholders for their support and engagement during the period.
Sincerely,
Kevin Chin
Chairman
28 July 2017
Page | 3
CEO’s Letter to Shareholders
Dear Shareholders,
The global power industry is rapidly moving into a new paradigm, led by the accelerating adoption of solar
photovoltaic (PV) power, with a high growth trajectory.
Several clear and disruptive trends are driving growth and opportunity in the sector. First, the cost of electricity
generated by solar power is continuing to decline rapidly, such that solar is about to produce the lowest cost of
electricity in the world. Second, attracted by stable, long term returns, capital availability for new solar
generation is robust. Finally, spurred by the strategic and economic benefits of shifting to low carbon activities
and the acceleration of technological advances, corporate and industrial users of electricity are increasingly
procuring and managing their power load directly.
At the same time, the investment track record in this sector is decidedly mixed. Returns have been volatile, and
from an investor perspective, too many players in the sector are vertically integrated or have multiple lines of
business, where solar profitability is hidden in manufacturing margins and large balance sheets. There are few
companies which offer investors the opportunity to participate directly in the value creation of solar power
adoption.
Against this background, VivoPower International has been created specifically to provide investors with direct
exposure to these global trends with a focused, high growth business model. We have an extremely capable
management team with deep experience in the entire value chain of the industry, including manufacturing,
development, engineering, operations, acquisitions and financing. Our team has a clear vision and a disciplined
approach to the allocation of capital, and we are committed to creating sustainable shareholder value.
Less than two years ago, we launched an international expansion from our Australian roots, and have
accomplished some remarkable achievements:
We recruited an outstanding team with global capabilities;
We created a platform that exceeded our revenues and EBITDA expectations;
We developed a meaningful pipeline for future growth and profitability; and
We successfully listed VivoPower on the NASDAQ stock market.
To address the opportunities in the sector, we have developed a strategy that we call build, transfer, operate
(“BTO”), which is rooted in our deep understanding of the solar industry. It is a low risk, asset light approach to
the market, with a high return, capital efficient profile. As we recycle our profits and grow a base of recurring
revenues, we aspire to provide data driven energy services to our clients in the commercial, industrial and
government sectors.
Fundamentally, the opportunity for BTO is driven by a supply/demand imbalance in the solar development
space. On the project supply side, the development market for utility scale solar is highly fragmented with
upwards of half of the market dominated by smaller, local developers or “wildcatters” that have excellent local
or regional capabilities but often lack access to capital providers and the internal capabilities to design, structure
and execute solar projects that would appeal to institutional investors. Even the most successful developers can
fail to complete projects due to limited relationships with global engineering and equipment suppliers and
providers of finance. This is the market from which we identify projects to acquire and build at a significantly
lower cost than buying operating projects. We target the acquisition of projects at a very specific stage; after
they have been developed, and are thus significantly de‐risked, but before they are built. We have the ability to
create value by building projects efficiently and profitably by controlling design, engineering and procurement
with low risk.
On the demand side of the equation, based on our industry expertise and relationships we have established over
the years as well as inbound inquiries we have been receiving, we see a large and steadily growing appetite from
institutional investors globally for quality solar operating projects. These investors often lack the internal
resources to effectively screen the vast array of projects to find the most rewarding ones, let alone build and
Page | 4
CEO’s Letter to Shareholders
operate the projects themselves. Based on our relationships and expertise, we have the credibility to secure
capital commitments prior to building and then to transfer projects to these investors once built. This approach
allows us to lock in our BTO profit before we risk capital, as well as to generate stable recurring revenues from
long term asset management agreements and residual equity interests in the projects.
Another revenue opportunity comes from the consumers of the electric power produced from the projects that
we operate. We intend to capture valuable data related to power generation and consumption from our growing
base of solar projects in order to provide energy management services and to optimize our energy clients’ needs.
We will use operational information to improve the profitability of our projects and to take advantage of
technological improvements to create additional revenues.
We clearly demonstrated the viability of our model last year, by competing BTO transactions for 91 megawatts
of solar projects and delivering Adjusted EBITDA of US$18.9 million for the period ended 31 March 2017,
significantly above our initial goals. We are pleased with our strong forward growth outlook, and are providing
guidance for next year of 20‐25% growth in our EBITDA results. This outlook is supported by two strategic
initiatives that we believe have laid the foundation for revenues and profits for several years; a joint venture for
over 1.8 gigawatts in the United States and an alliance agreement with ReNu Energy in Australia.
The joint venture in the US is at the core of our business model, as it represents a long term partnership with an
excellent development company, where we have secured exclusive rights to acquire and build over 1.8 gigawatts
of solar projects in a diversified portfolio of 37 projects in 12 states. We have a demonstrated track record with
the developer, who was the original developer for our 91 megawatts completed last year. We have
complementary skill sets and both believe that we are mutually aligned to ensure the successful execution of
the joint venture.
The alliance agreement with ReNu Energy significantly strengthens our strategic acquisition of Aevitas which
was completed in December 2016. The historical revenue profile of Aevitas has been extremely steady,
representing energy services for over 300 commercial and industrial customers in Australia. Our goal with
Aevitas is to maintain and grow their core business, and also leverage their customer base to generate new solar
projects. The agreement with ReNu Energy provides a commitment from an investor to whom we can transfer
projects that we build. This relationship should provide a highly efficient means to create BTO revenues for
smaller projects originated in Australia with the Aevitas client base.
We see a bright future for our activities and we are focused on execution. Overall, we are committed to capturing
the exciting trends in our industry and to delivering value for our shareholders. The entire industry is evolving
rapidly, and we have conviction that VivoPower and our shareholders will benefit from these trends.
Thank you for your support and confidence in our team.
Sincerely,
Dr. Philip Comberg
CEO
28 July 2017
Page | 5
Strategic Report
Principal Activities
VivoPower International PLC (“VivoPower” or the “Company”) operates a global solar power platform, with an
experienced and motivated team, who deploys a build, transfer, and operate (BTO) model to establish an
installed solar power asset base in a capital efficient manner. Pursuant to the BTO model, VivoPower builds solar
projects which are supported by long‐term power purchase contracts with creditworthy customers, transfers
ownership of the projects to investors, (importantly, securing equity capital from investors prior to building),
and operates the projects to enhance value over their useful life. By capturing the value of engineering,
procurement and financing during the building phase, and by obtaining project capital from investors so that
VivoPower’s capital outlay is modest, VivoPower has created a low‐risk, capital efficient business model.
VivoPower then provides ongoing power services encompassing operations, maintenance and optimization of
these solar plants pursuant to long term contracts.
The chart below summarizes our business model and strategy:
VivoPower aims to capitalize on its relationships within a highly fragmented developer market to acquire
projects at a lower cost than buying operating assets. VivoPower’s team screens a vast number of opportunities
to identify the most rewarding projects, which provide the opportunity to capture the value of identifying the
optimal engineering, procurement and financing strategies. VivoPower’s engineering team actively manages all
stages of design and construction to ensure that projects are not only built on time and on budget, but are also
able to generate superior returns. At the same time, we have strong relationships and credibility with
institutional investors to secure project capital prior to building projects, which allows us to lock‐in profits by
transferring ownership to these investors. VivoPower will operate projects over their useful life, generating long‐
term stable revenues, and intends to identify opportunities to create value through a technology, data oriented
asset management approach. In addition to its BTO strategy, VivoPower will invest in financial and technology
assets in a strategically coordinated way, leading to an increasingly optimized energy service experience for its
customers.
Page | 6
Strategic Report (continued)
The chart below summarizes our BTO model:
BUILD, TRANSFER, OPERATE (BTO) BUSINESS MODEL
BUILD
PROJECTS
• Acquire projects from developers at a
significantly lower cost than buying
operating assets
Differentiation:
• Deep relationships in fragmented
global developer market
• Ability to screen vast opportunities for
most rewarding projects
• Ability to complete projects, creating
value by controlling design,
engineering and procurement with low
risk
OPERATE
FOR POWER CUSTOMERS
TRANSFER
TO INVESTORS
• Sell to investors prior to building
Differentiation:
• Deep relationships and credibility with
institutional investors
• Complementary capabilities to offer and
maintain quality investments
POWER CLIENTS
• Operate projects under PPA with corporate, industrial, and government customers
• Generate long term recurring revenues from asset management and residual equity interests
Differentiation:
• Opportunity for a data intensive approach to asset management
• Opportunity to optimize performance by introducing emerging technology (eg storage)
In addition to the global BTO business model, VivoPower, through its wholly‐owned Australian subsidiary Aevitas
Group Limited (“Aevitas”), provides energy and power generation solutions including design, supply, installation
and maintenance of power and control systems, with an increasing focus on solar, renewable energy, and energy
efficiency. Aevitas has a large and diverse base of longstanding commercial and industrial customers, and is
considered a trusted power adviser. Aevitas is located in the Hunter Valley and Newcastle region, which is the
most densely populated industrial belt in Australia, and which has amongst the most expensive power prices in
the country. Since acquiring Aevitas in December 2016, VivoPower has introduced an origination strategy to
identify attractive solar projects within Aevitas’ existing customer base. To further support this initiative,
VivoPower entered into an Alliance Agreement with ReNu Energy Ltd., with whom VivoPower intends to execute
BTO transactions for solar projects originated by Aevitas.
Industry Overview
Solar power is the world’s largest potential energy source and is the fastest‐growing form of renewable energy.
Between 2003 and 2014, cumulative installed solar capacity increased at an average annual growth rate of 49%,
according to the International Energy Agency (“IEA”). Yet, solar energy’s contribution to global energy
generation is insignificant, contributing less than 1% globally; even as panel costs have dropped more than 75%
over the same time period.
As a result, this is a pivotal moment in the acceleration of massive energy industry change. Corporate and
industrial companies worldwide have recognized the economic and strategic benefits of shifting their source of
electricity to low carbon, distributed generation. At the same time, strategic and institutional investors
increasingly view investments in solar power projects as providing attractive long term returns, which has
increased the availability of capital for the deployment of solar power generating capacity. Enabled by strong
capital availability and “smart” technology penetration, the solar industry is growing at exponential levels with
VivoPower’s platform sitting at what we perceive is the sweet spot of the industry’s value chain.
Page | 7
Strategic Report (continued)
Long Term Outlook
The global energy architecture is increasingly becoming decentralized and digitized as today’s internet
connected devices are able to measure, monitor and analyze energy supply and demand in real time. In the
future, VivoPower will build out its capabilities in data analytics and emerging technologies that will enable it to
capitalize on these trends and become a leader in energy efficiency, storage, demand management, remote
energy and distributed energy grid design.
Key Performance Indicators (KPIs)
The KPIs for the business are budgeted for and progress against such budgets is measured on a regular basis.
The main measures are revenue, Adjusted EBITDA, investments, project pipeline and earnings per share.
Adjusted EBITDA
Adjusted EBITDA is a non‐IFRS financial measure. We define Adjusted EBITDA as net income, adjusted to exclude:
depreciation and amortization, initial incorporation expenses, interest income and interest expense, the
provision for income taxes and foreign currency exchange income (expense).
We believe that Adjusted EBITDA provides investors and other users of our financial information consistency
and comparability with our past financial performance and facilitates period‐to‐period comparisons of
operations and comparisons with our peer companies, many of which use a similar non‐IFRS or generally
accepted accounting principles in the United States (“GAAP”) financial measure to supplement their IFRS or
GAAP results, as applicable.
Investments
An integral part of the BTO model requires initial investment in projects. As VivoPower retains an interest in
projects that it builds, the level of investment is a good barometer for the level of BTO revenue and the recurring
revenue post project transfer.
MW completed
The number of megawatts (MW) built and transferred provides a progress update on VivoPower’s current
activity. The number of MW built and transferred drives the BTO developer fee revenue and the subsequent
level of recurring revenue.
MW pipeline
The pipeline of projects in MW is a good indicator of the near term financial prospects of VivoPower. The
pipeline is a qualified pipeline, meaning that the projects are at an advanced stage of the diligence and
acquisition process.
Earnings per share
VivoPower presents basic and diluted earnings per share data for ordinary shares, excluding treasury shares.
Earnings per share (“EPS”) provides an accurate measure of the profitability of the Company. As at 31 March
2017, the Company has provided an Adjusted EPS number, that, whilst a non‐IFRS measure, provides, we believe,
investors and other users of our financial information consistency and comparability.
Page | 8
Strategic Report (continued)
Operating Performance During Period ended 31 March 2017
During the period ended 31 March 2017, the group generated revenue of $32.3 million and Adjusted EBITDA of
$18.9 million and Adjusted Net Income of $12.3 million. The Company at the end of the period had net assets
of $64.6 million, with intangible assets, including goodwill, of $46.3 million and investments of $18.1 million.
The group’s current assets were $30.8 million of which $11.0 million is cash and cash equivalents. Current
liabilities were $12.2 million, giving a current ratio of 2.5:1.
Revenue growth was supported by the completion of the group’s first solar project and the near completion of
a second project, both in North Carolina, United States. Combined revenue for both projects was $24.6 million
with further revenue of $0.4 million due to the power generation of the first project. Further BTO revenue in
Australia from projects acquired in December 2016 generated $0.1 million. Aevitas generated revenue of $5.6
million for the 3 months to March 2017.
The group generated strong cash flows from operating activities of $6.3 million. At the end of the period the
group had cash reserves of $11.0 million and debt of $20.0 million, giving a net debt position of $9.0 million.
The group financed activities until the Company became public through a related party loan from Arowana
International Limited, (“Arowana”), a publicly traded company in Australia of which VivoPower was, prior to
December 28, 2016, a wholly owned subsidiary. At the end of the financial period, the amounts owing to
Arowana were $20.5 million, of which $19.0 million was a non‐current related party loan with an initial
repayment date of 1 April 2018. The remaining balance of $1.5 million was a current liability which was repaid
in June 2017.
VivoPower’s ordinary shares commenced trading on The Nasdaq Capital Market on 29 December 2016 under
the symbol VVPR. The transaction generated proceeds of $22.5 million with transaction costs of $11.5 million.
Contemporaneously with the transaction, the group completed two acquisitions, VivoPower Pty Limited and
Aevitas Group of Companies at a total cash consideration cost of $10.1 million.
The group during the period invested $18.0 million in two solar energy projects in the US. The group, as part of
its long‐term strategy, has retained a 14.5% and 10% equity interest in the projects which will generate recurring
revenue in the future. In addition to the US solar assets, VivoPower has aggregated a 2.6MW portfolio of behind
the meter Commercial, Industrial and Government (“CIG”) solar assets in Australia that are in the process of
being structured for BTO transactions.
During the period, VivoPower has assembled a high‐quality management team, with a wide breadth of
experience within the solar industry, representing a complementary range of skills that will enable VivoPower
to develop and expand its BTO model.
Directors
During the period, the board of directors of the Company (the “Board”) had one female director. Following the
resignation of Victoria Guy in August 2016, the Board is composed of one male executive director and four male
non‐executive directors. Please see the Company’s policy on recruitment in the Corporate Responsibility section
on page 19.
Share Buy‐Backs
On 27 March 2017, the Company purchased 129,805 ordinary shares with a nominal value of $0.012 for a cost
of $0.6 million. The Company has not purchased any additional shares since the period end. The shares are
treated as treasury shares and are excluded from the calculation of EPS.
Page | 9
Strategic Report (continued)
Results and Transfers to Equity
The audited financial statements and the related notes for the period ended 31 March 2017 are set out on pages
44 to 81. The profit for the period after taxation, was $5.3 million, with the directors proposing a nil dividend,
the full amount of the profit was retained.
Principal Risks and Uncertainties
VivoPower operates a Build, Transfer and Operate (BTO) business model within the renewable energy sector
and, in common with similar businesses, is exposed to a number of risks and uncertainties which could have a
material impact on the group’s long‐term performance and could cause actual results to differ materially from
historical and expected results.
Market risk
The group’s financial performance is tied very closely to the business activity within both the renewable energy
and the investment management sectors. Capital and project availability are identified as being key market
risks.
Operational risk
VivoPower operates within local, and national, laws and regulations which from time to time may change.
Competitive risk
Having the ability to pay developers down‐payments to secure pipeline is advantageous, but there is competition
from parties pursuing similar transactions. VivoPower expects greater competition from other parties entering
the sector with this capability.
People risk
Attraction and retention of key staff is essential to the continued success of the business. The Board recognises
that the future success of the group will depend to a substantial extent not only on the ability and experience of
its senior management, but also on individuals and teams that support the projects. Staff are remunerated
appropriately and employees are encouraged to develop their skills.
International risk
As the group operates internationally, it is subject to the tax laws and regulations of several countries. In
addition, conducting business on different continents presents logistical and management challenges whether
related to local standards, business cultures or compliance. The group takes careful steps to comply with all
applicable tax and other laws, rules and regulations.
Financial risk
It is the group’s policy to manage identifiable financial risks. The group operates globally and so has exposure
to movements in exchange rates, in particular between the US Dollar, GB Pound and Australian Dollar. The
group ensures that it holds sufficient cash amounts to meet all working capital requirements.
For further discussion on financial risk refer to note 28 to the financial statements.
Employees
People are central to our business and the contribution of talented and motivated employees is vital to the
continued success of the group.
Page | 10
Strategic Report (continued)
The group has a policy of keeping employees informed of, and engaged in, its business strategy through regular
briefings and team meetings. Employee involvement at all levels is encouraged.
It is a policy of the group to recruit, develop and promote people on merit and to treat everyone equally
regardless of their race, ethnic origin or nationality, age, gender, sexual orientation, disability, religion or belief.
The group gives every consideration to applications for employment from disabled persons where the
requirements of the position may be adequately covered by the abilities of the applicant concerned. In the
event of members of staff becoming disabled, ways are examined to ensure that their employment with the
group continues and that the appropriate training is arranged. It is the policy of the group to ensure that the
training, career development and promotion of disabled employees should, as far as possible, be the same as
that of other employees.
The table shows, as per required quoted company regulations, the number of staff of each sex employed at the
Company and their level of seniority.
Management
Staff
Total
Health and Safety
Female
Male
Total
4
15
19
25
105
130
29
120
149
The health and safety of the group’s employees, customers and visitors is of primary importance. The group is
committed to creating and maintaining a safe and healthy working environment. Health and safety audits and
risk assessments, including fire risk assessments, are carried out regularly.
Clients
The group values each and every client and prides itself on developing long standing relationships. Being highly
connected with our clients, learning from them, and working in partnership with them is fundamental to the
continued success of the business.
The Environment
The group recognises the importance of environmental responsibility and believes that its direct activities have
a positive impact on the environment as the Company facilitates greater use of renewable energy. Surplus
equipment and lightly damaged solar panels used in projects, that would otherwise be bound for landfill, are
being used to complete smaller projects to offset 100% of the electricity costs for 100 low‐income homeowners
in South Carolina, USA.
Details of greenhouse gas emissions are unavailable due to the fact the facilities that VivoPower uses are
managed office facilities and the usage data is not provided by the lessor.
The Company strives to minimise its emissions on a continual basis.
Communities
VivoPower has maintained an active program of community involvement and philanthropy, including programs
with low income homeowners, military veterans, church organizations and schools. During the building of the
91 MW in North Carolina, VivoPower contributed funds to rebuild a local church and towards relief related to a
major hurricane. Approximately 50% of our construction workers were military veterans, and we worked with
the University of North Carolina (Pembroke) to assist job training and student tours.
Page | 11
Strategic Report (continued)
In addition, we created an initiative for a low income community solar farm, comprising 2 MW located on 10
acres of distressed urban brown field in Spartanburg, South Carolina. The project will use slightly damaged
modules from our projects, along with donations from other solar projects in the region. These modules
otherwise would have been sent to local landfills, but instead will produce solar power to feed into the utility
grid. Electricity revenues will be used to make the project self‐sustaining on an ongoing basis, and to offset 100%
of the electricity needs for 100 very low income homeowners through our partnership with Habitat for
Humanity. This program was accepted into the 18‐month US Department of Energy Sunshot program for low
income solar.
By order of the Board.
Dr. Philip Comberg
Director
28 July 2017
Page | 12
Directors’ Report
The members of the board of directors present their annual report on the affairs of the group and the audited
financial statements for the period ended 31 March 2017.
Subsidiaries
The subsidiary and associated undertakings principally affecting the profits and net assets of the group in the 14
months ended 31 March 2017 are listed in note 13 to the financial statements.
Business Review
A review of the Group’s business during the financial period ended 31 March 2017, and the position of the
group at the end of the financial period are contained in the Strategic Report.
As of 31 March 2017, the group includes subsidiaries in Australia, Jersey, Singapore, United Kingdom and the
United States.
Future Developments
VivoPower is well positioned to profitably grow its BTO business model on a global basis following some
significant post balance sheet date events.
In the United States, VivoPower completed a joint venture in April 2017 with an early‐stage solar development
company for a portfolio of 37 solar projects in 12 different states, representing a total electricity generating
capacity of approximately 1.8 gigawatts. VivoPower anticipates that this joint venture will provide the
opportunity to generate BTO revenues and profits for several years as the individual projects in the portfolio
mature. Furthermore, VivoPower believes that the value of the projects in the portfolio will increase given the
Company’s expectation that equipment and installation costs will continue to fall at a rapid rate, hence
increasing the return profile of the projects.
The portfolio provides VivoPower with significant flexibility as it also presents the opportunity to realise profits
on the sale of solar systems at advanced stages of development. The map below summarises the project
portfolio in the joint venture from which VivoPower expects to generate BTO revenues in the future.
Washington
52
Oregon
52
Colorado
254
New Mexico
267
Kansas
130
Oklahoma
104
Missouri
33
Arkansas
130
Texas
364
Total MWdc*
1,794
124
South Carolina
130
Georgia
156
Florida
* Note: Exact MWdc subject to change through engineering process. Totals may not sum due to rounding.
Total MWdc By
State
Page | 13
Directors’ Report (continued)
In Australia, VivoPower is seeing the benefits of the acquisition of Aevitas in terms of leveraging its longstanding
relationships with an extensive base of commercial and industrial customers and originating behind the meter
solar projects that VivoPower can then seek to convert into BTO revenues. To enhance our ability to transfer
projects for which we can provide ongoing power services, VivoPower recently consummated an Alliance
Agreement with ReNu Energy in Australia. Under this agreement, ReNu Energy has agreed to pay an annual
alliance fee for the right to make a first offer to acquire projects originated by VivoPower that are smaller than
5 MW. This alliance agreement will enable VivoPower to generate BTO revenues in addition to the alliance fee.
We anticipate that this relationship will grow profitably over many years.
In addition to our joint venture in the United States and the Alliance Agreement with ReNu Energy, VivoPower
is exploring attractive projects that fit our BTO business strategy in Europe, Asia and Latin America.
We continue to pursue appropriate transactions and have established a strong global pipeline, as summarised
below. If we are able to replicate the same level of BTO revenues per MW for 2018 as we achieved in 2017, we
believe that we can achieve our EBITDA guidance for the year ended 30 March 2018 by converting only 125 MW,
or approximately 5.4% of our qualified pipeline.
The table below shows the extent of the qualified pipeline:
QUALIFIED PROJECT PIPELINE
Near- term Focus on US Market
Qualified Projects by Geography(1)
(2.3 GW)
Vast Opportunities Remain Untapped
38000.00%
36000.00%
34000.00%
32000.00%
30000.00%
28000.00%
26000.00%
Estimated Pipeline Conversion
Estimated pipeline conversion rate required to achieve forecast (2)
REGION
USA
Europe
LatAm
Australasia
Total
USA Europe
LatAm Australasia
MW
% OF TOTAL
1,796
279
155
72
78%
12%
7%
3%
2,30 3
10 0 %
24000.00%
22000.00%
20000.00%
18000.00%
16000.00%
14000.00%
12000.00%
10000.00%
8000.00%
6000.00%
4000.00%
2000.00%
0.00%
91 MW
4%
FY17
125 MW
5.4%
FY18
(2) Represents pipeline conversion run- rate, defined as the proportion
of converted projects to the total active pipeline at year end
VivoPower needs to convert less than 10 % of its qualified pipeline to achieve its revenue & EBITDA goals
(1) Qualified project pipeline refers to the total number of projects (measured by MW) which are subject to term sheet or letter of intent, pending diligence and financing or similar stage of
discussion for potential acquisition. Qualified project pipeline as of 31 March 2017.
Page | 14
Directors’ Report (continued)
Dividends
The directors propose a nil dividend per ordinary share. There was no interim dividend declared during the
financial period.
Capital Structure
Details of the issued share capital together with the details of the movements in the Company’s issued share
capital, including treasury shares are shown in note 22 to the financial statements. Details of the share
repurchase during the financial period are given in the Strategic Report on page 9 under “Share Buy‐Backs”.
Going Concern
Having reviewed the future plans and projections for the Company’s business and its current financial position,
the directors are satisfied that the Company has adequate financial resources to continue to manage the
business risks successfully and to remain in operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the report and accounts.
Suppliers
The group’s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction,
ensure that suppliers are made aware of the terms of payment and abide by the terms of payment. Trade
creditors of the group at 31 March 2017 were equivalent to 45 days’ purchases, based upon the average daily
amount invoiced by suppliers during the last quarter.
Donations
During the period, the group made no political contributions. Certain donations were made as described under
“Communities” above.
Financial Management
The financial control of the Company is managed centrally. VivoPower aims to keep cash balances in each of its
subsidiaries at a minimum and to fund the working capital requirements in time for each subsidiary to meet
their financial obligations. A consolidated cash flow forecast is maintained on a weekly basis and is at the centre
of our cash management strategy. The Company operates mainly in US Dollar and Australian Dollar and keeps
sufficient balances in each currency to meet its working capital requirements, and does not currently see the
need for any hedging arrangements. Further explanation of financial risk is contained in the Strategic Report on
page 10.
Corporate Governance
While not a requirement under Nasdaq listing rules, the group has voluntarily disclosed the Company’s
Corporate Governance Statement on pages 20 to 22 of the financial statements.
Page | 15
Directors’ Report (continued)
Directors
The directors who held office during the period and up until the date of this report:
Non‐executive
KTF Chin (appointed 27 April 2016)
G Hui (appointed 21 December 2016)
EB Hyams (appointed 2 November 2016)
P Sermol (appointed 21 December 2016)
Executive
P Comberg (appointed 1 May 2016)
PM Broomhead (resigned 2 Nov 2016)
P Emery (resigned 31 July 2016)
VC Guy (resigned 8 August 2016)
DT Kenny (resigned 2 November 2016)
LF Moore (resigned 1 April 2016)
JA Reader (resigned 1 April 2016)
Details of the current Board of Directors and their relevant experience is provided below.
Philip Comberg
Philip brings over twenty years of experience as CEO, board member, investor, investment banker and attorney
in Europe, the US and Asia.
In the past ten years, he has taken different roles in the solar industry which most recently include non‐executive
Chairman of Solarcentury Holdings in the UK. From 2011 to 2014 he was Chairman and CEO of Germany’s
foremost solar company, Conergy, leading its restructuring and sale to Kawa Capital. Prior to that, he served on
the board of the Chinese solar manufacturer Solarfun Power Holdings (now Hanwha QCells, HQCL).
Previously, Philip co‐founded Alcosa Capital, a Frankfurt based special situation investment and advisory firm, in
2004 focusing on investments in the German SME sector, advising companies on M&A, debt and equity
transactions as well as operational issues and serving as their board member. Prior to Alcosa Capital, Philip
worked as an investment banker at Deutsche Bank and as an M&A lawyer with Freshfield Bruckhaus Deringer in
Germany and China.
Philip studied law and Chinese at the University of Heidelberg and Zhong Shan University in China, subsequently
completing his Master’s degree at New York University and a Doctor of Law at the University of Düsseldorf. Philip
speaks English, French, Chinese and German.
Kevin Chin
Kevin has extensive experience in “hands on” strategic and operational management having served as CEO, CFO
and COO of various companies across a range of industries, including solar energy, software, traffic
management, education, funds management and vocational education.
He also has significant international experience in private equity, buyouts of public companies, mergers and
acquisitions and capital raisings as well as funds management, accounting, litigation support and valuations.
Kevin is the founder of Arowana & Co. (Arowana), a diversified investment group with operations across
Australia, New Zealand and Southeast Asia. Arowana has listed companies on the Australian Stock Exchange and
NASDAQ as well as unlisted companies. Arowana International Limited, listed on the Australian Stock Exchange
is the largest shareholder in VivoPower. Kevin is primarily responsible for delivering annualised returns in excess
of 30% to investors across Arowana’s investments since its formation in 2007.
Over his twenty‐year career, Kevin has held a number of strategic and operational leadership roles and was also
previously with Lowy Family Group, J.P. Morgan, Ord Minnett, PwC and Deloitte.
Kevin holds a Bachelor of Commerce degree from the University of New South Wales where he was one of the
inaugural University Co‐Op Scholars with the School of Banking and Finance. He is also a qualified Chartered
Accountant and a Fellow of FINSIA, where he was a lecturer in the Masters of Applied Finance programme.
Page | 16
Directors’ Report (continued)
Peter Sermol
Peter has over thirty years of experience in institutional finance.
Peter is the co‐founder of North Star Solar Ltd, a company focused on installing UK rooftop solar PV and battery
storage which developed a model to install renewable technologies with energy savings repaying capex.
Prior to this, with his proven track record in trading distressed debt, Peter ran the Toronto office of Amstel
Securities, a Dutch regulated brokerage firm for eight years. During this period Peter expanded the office to
focus on uncovering and seeding uncorrelated investment opportunities. Taking a sector agnostic view,
investments ranged from Latin American NPL’s, financing Canadian property developers, Australian non‐
conforming loans, US viatical life insurance policies, US non‐prime auto loans. During this period he also served
as CEO of an online media distribution company.
Previously, Peter worked with specialist brokerage and advisory firms including Anca Capital Partners and Amstel
as well as co‐founding his own brokerage firm, Global Markets Ltd trading Asian Convertible Bonds and GDRs.
Peter studied marine electronics at the Merchant Naval College, Greenhithe.
Edward Hyams
Edward has over forty years of experience in Power Engineering, Renewables and in Energy Efficiency as an
Executive, Private Equity Partner and as a Non‐Executive Director.
As a Partner at Englefield Capital, he co‐led the Renewable Energy Fund, investing in Solar, Wind and Biomass
developments in Europe. He joined Englefield having led the management team which Englefield and another
PE firm backed to invest in Zephyr, the first structured financing of a portfolio of renewables assets in the UK.
Prior to Englefield, Edward held senior executive roles as CEO of BizzEnergy, Managing Director of Eastern Group
PLC and Director of Engineering at Southern Electric Plc. Edward was a non‐executive Director of the UK Energy
Saving Trust following the electricity and gas privatisations in the early 1990’s. He re‐joined the Trust as Non‐
Executive Chairman in 2005.
Edward is a Chartered Engineer, graduating with a degree in Electrical Engineering from Imperial College, London
and holds a Diploma in Accounting and Finance from the Association of Certified Chartered Accountants. He has
completed executive programs in finance at Harvard Business School and in strategy and organisation at
Stanford.
Gary Hui
Gary has over twenty years of investment experience in the Asia Pacific region.
for Arowana International Limited and the
He currently serves as
Arowana Australasian Value Opportunities Fund Limited, a listed investment company that has significantly
outperformed its benchmarks since inception.
Investment Officer
the Chief
Prior to this, he was with Indus Capital, a hedge fund founded by former Soros Fund Management Partners,
where he was Managing Director and Chief Representative of Indus’ Singapore office. Prior to becoming a
principal investor, Gary was an investment banker at J.P. Morgan in Australia and Hong Kong, where he advised
clients across a broad range of industries.
Gary qualified as a Chartered Accountant and completed the Securities Institute of Australia (now FINSIA)
program where he placed first nationally in Mergers & Acquisitions. He holds a Bachelor of Commerce degree
from the University of New South Wales.
Page | 17
Directors’ Report (continued)
The Company is governed by its Articles of Association (the “Articles”) the Companies Act 2006 and related
legislation with regard to the appointment and replacement of directors. The Articles themselves may be
amended by special resolution of the shareholders.
In accordance with the Articles of Association of the Company, directors are required to retire by rotation at the
next Annual General Meeting and, if eligible, may offer themselves for re‐election.
The Company maintains insurance cover for all directors and officers of group companies against liabilities which
may be incurred by them while acting as directors or officers of group companies.
Details of directors’ total remuneration are contained in the Directors’ Remuneration Report on page 23.
Disclosure of Information to Auditors
The directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are
each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each
director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information. This confirmation
is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Auditors
PKF‐Littlejohn LLP were appointed auditors during the course of the period. In accordance with s489 of the
Companies Act 2006, a resolution to re‐appoint them as auditors for the ensuing year will be put to the members
at the forthcoming Annual General Meeting.
By order of the Board.
Dr. Philip Comberg
Director
28 July 2017
Page | 18
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Annual Report and the group with parent company financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for the financial
period. Under that law they have elected to prepare the group financial statements in accordance with
International Financial Reporting Standards and applicable law and have elected to prepare the financial
statements for Company under the same methodology.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for
that period. In preparing each of the group and parent company financial statements, the directors are required
to:
Select suitable accounting policies and then apply them consistently;
Make judgements and estimates that are reasonable and prudent;
For the group financial statements, state whether they have been prepared in accordance with IFRS; and
For the parent company financial statements, state whether applicable UK Accounting Standards have
been followed, subject to any material departures disclosed and explained in the financial statements.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of
the parent company and enable them to ensure that its financial statements comply with the Companies Act
2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the
assets of the group and to prevent and detect fraud and other irregularities.
This annual report and financial statements together with the Notice of Annual General Meeting and other
information regarding the group may be viewed on the Company’s website at www.vivopower.com.
Page | 19
Corporate Governance Statement
VivoPower is committed to maintaining a high standard of corporate governance.
Board of Directors
The Company is committed to maintaining a balance of executive and non‐executive directors. The Board is
scheduled to meet normally no less than six times per year. In addition, meetings are also convened on an adhoc
basis when there is urgent or delegated business which cannot wait until the next scheduled meeting. The
following table sets out the number of meetings of the Board, excluding ad hoc meetings, and its committees
during the period and the attendance of the members at those meetings:
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Number of
meetings held
during the period
Kevin Chin
Philip Comberg
Edward Hyams
Peter Sermol
Gary Hui
7
7/7
7/7
4/4
3/3
3/3
1
1
1
1
2
2/2
2/2
2/2
1
1
1
1
The Board considers the overall strategic direction, development and control of the group and reviews trading
performance, investment opportunities and other matters of significance to the group. Various decisions
require Board approval, including the approval of the annual budget, larger capital expenditure proposals,
acquisitions and disposals. Board papers, which are distributed to all directors in advance of each meeting,
follow a set agenda although further subjects are added for discussion as the need arises.
The non‐executive directors are members of the Audit, Remuneration and Nominations Committees. Their
biographies on pages 16 to 17 illustrate their relevant corporate and industry experience to bring judgement on
issues of strategy, performance, resources and standards of conduct which are vital to the success of the group.
Kevin Chin acts as Chairman of all three committees.
The Articles require directors to submit themselves for re‐election at the first Annual General Meeting following
appointment and every three years thereafter.
Audit Committee
The Audit Committee, comprising of three non‐executive directors, with Kevin Chin serving as Chairman, meets
at least three times a year. The Chief Financial Officer is generally in attendance in a non‐voting capacity to
provide detailed reports and deal with any queries which arise. The remaining Board members are also invited
but are not entitled to vote.
An invitation is also extended to the auditors to attend meetings of the Audit Committee in order to discuss
issues relating to the audit and financial control of the group. The auditors also have direct access, should they
so require, to the Audit Committee. The Audit Committee has responsibility within the terms of reference for,
among other things, the planning and review of the group’s annual and interim financial statements, the
supervision of its auditors in the review of such financial statements and the review and monitoring of their
independence.
The Audit Committee focuses particularly on the group’s compliance with legal requirements and accounting
standards, and on ensuring that effective systems for internal financial control are maintained. The ultimate
responsibility for reviewing and approving the report and interim statements remains with the Board.
Page | 20
Corporate Governance Statement
(continued)
Remuneration Committee
The Remuneration Committee comprises three non‐executive directors, with Kevin Chin serving as Chairman.
Board members are invited to join but only Remuneration Committee members may vote. The Remuneration
Committee meets at least twice a year and has the responsibility for determining, within the agreed terms of
reference, the group’s policy on the remuneration of senior executives.
Nominations Committee
The Nominations Committee consists of three non‐executive board members with Kevin Chin serving as
Chairman. The Nominations Committee identifies, evaluates and selects candidates for Board positions, ensures
appropriate succession planning and reviews annually the composition and the size of the Board. In considering
the appointment of a new director, the Nominations Committee considers and defines the characteristics,
qualities, skills and experience that it considers would complement the overall balance and composition of the
Board.
Internal Control
The Board oversees management’s activities in relation to the systems of internal control. Management has
responsibility for maintaining the group’s system of internal control and for reviewing its effectiveness. The
system of internal control is designed to manage rather than eliminate the risk of failure to achieve the group’s
strategic business objectives and can only provide reasonable assurance against material misstatement or loss.
The key elements of the system of internal control are:
Control environment
There is sufficient segregation of duties and authorisation controls on approval of customer and supplier
contracts, recruitment of staff, approval of purchases and payment of suppliers.
Financial reporting
The Senior management has regular meetings to discuss all aspects of the business and review financial
performance against budget and provides a monthly summary report to the Chairman of the Board. The group
has a sustainable system of financial reporting and forecasting covering profits, assets, liabilities, cash flow and
capital expenditure. The systems include regular monitoring of cash, monthly reporting of financial results.
Budgets and business plans are prepared annually and reviewed by the Board.
Capital investment
For any significant investment, a detailed proposal is first approved by the Company’s Investment Committee
then by the board of directors of VivoPower International Services Limited (“Services Board”). Any major
investment is always approved by the Board or the Services Board.
Going Concern
The directors have reviewed the latest budget and cash flow projections. The directors are satisfied that the
group has adequate resources to continue in operation for the foreseeable future. The financial statements
have therefore been prepared on a going concern basis. This is supported based upon current cash balances,
historical profits and positive cash flows.
Page | 21
Corporate Governance Statement
(continued)
Communications with Shareholders
The Company encourages two‐way communications with shareholders. The Board endeavours to maintain good
relationships with its institutional shareholders by holding regular meetings after results are published with
further dialogue as requested.
The Company’s Annual General Meeting will be held on 5 September 2017 at the Company’s registered office.
The notice of the meeting is sent to shareholders at least 21 days before the Annual General Meeting. The
directors are available for questions both formally during the meeting and informally afterwards.
This annual report and financial statements together with the Notice of Annual General Meeting and other
information regarding the group may be viewed on the Company’s website at www.vivopower.com.
Approved by the Board and signed on behalf of the Board on 28 July 2017.
Dr. Philip Comberg
Director
28 July 2017
Page | 22
Directors’ Remuneration Report
This report has been prepared in accordance with the provisions of the United Kingdom Companies Act 2006
and Schedule 8 of The Large and Medium‐sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended in 2013).
Annual Statement by the Chairman of the Remuneration Committee
Dear Shareholders,
On behalf of the Remuneration Committee (the "Committee"), I am pleased to present the Remuneration
Report for the 14 months ended 31 March 2017.
This is the Company's first Remuneration Report since its listing on the NASDAQ stock exchange on 29 December
2016.
This report sets out the Directors' Remuneration Policy for Executive and Non‐Executive Directors (on pages 24
to 34) for which, in accordance with United Kingdom law requirements (which apply by virtue of the Company
being incorporated in the United Kingdom), the Company is required to seek approval from shareholders at its
meeting of Shareholders, to be held on 5 September 2017.
In accordance with United Kingdom law, the Company is required to seek approval for its Remuneration Policy
at least every three years. This means that the Remuneration Policy set out below needs to cover all the possible
scenarios which the Company may face in the future. In particular, therefore, the Remuneration Policy needs to
explain what the Company's approach to compensation would be in the event that new directors, including a
new CEO, were to be appointed, even though this may not occur during the life of the Remuneration Policy. In
particular, therefore, the Remuneration Policy may address elements of compensation which are not currently
paid by the Company to our current Executive Director.
After the Remuneration Policy section, pages 35 to 41 set out the Company's Annual Report on Remuneration,
disclosing the compensation paid to directors in respect of the 14 months ended 31 March 2017. Again, the
format of this Annual Report on Remuneration is specified in accordance with United Kingdom law. This Annual
Report on Remuneration will be subject to a separate advisory vote at the Company's annual meeting of
shareholders.
Kevin Chin
Chair of the Remuneration Committee
28 July 2017
Page | 23
Directors’ Remuneration Report (continued)
This Remuneration Policy will apply with effect from the date on which shareholders approve the policy at the
Company’s Annual General Meeting.
Executive Directors’ remuneration policy table
The Company currently has one Executive Director, Philip Comberg (our CEO). The following sets out the policy
in respect of the components of compensation which the CEO currently receives. Any newly appointed Executive
Director would also be eligible to receive these components of compensation.
Element
Purpose and
link to strategy
Salary
To provide the
base level of
compensation
for the role.
Retire‐
ment
Benefits
To provide a
market
competitive
level of
retirement
provision.
Operation (including maximum levels)
Recovery of
sums
(Clawback)
Salaries for Executive Directors are set by the Board taking
into account such factors as it determines to be necessary.
Not
applicable.
Salaries for existing Executive Directors shall be reviewed
for increase, or decrease, annually. Annual salary increases
will generally not be expected to exceed 2% per annum,
although the Committee may award bigger increases if it
determines that the circumstances warrant. This limit is not
included as a target or an indication of the salary increases
that the Committee may expect or be prepared to award.
Any mandatory retirement provision required by law (or
similar) in the jurisdiction in which the Executive Director is
resident will be provided.
Not
applicable.
In addition, the Company's policy is that it will provide
retirement‐related benefits in excess of mandatory
benefits, including by provision of additional benefit
contributions or a cash payment in lieu of such
contributions, up to a maximum of 15% of the Executive
Director’s base salary.
The Company may elect to provide a lump sum amount in
lieu of retirement‐related benefits to the extent permitted
by applicable law and agreed upon by the Executive
Director.
Page | 24
Directors’ Remuneration Report (continued)
To provide a
market
competitive
level of benefits.
Benefits to be provided to Executive Directors will be
determined by the Remuneration Committee taking into
account such factors as it determines to be necessary, with
the aim of creating a competitive overall package. The
provision of benefits would not be expected to be
performance related.
Not
applicable.
Not
applicable.
Benefits include, but are not limited to, participation in a
life assurance scheme and participation in a medical
insurance scheme.
Benefits may also be provided to reflect the jurisdiction in
which an Executive Director is recruited or to which an
Executive Director is relocated for business reasons,
including relocation costs, tax equalisation arrangements
and arrangements to take into account exchange rates.
Benefits may also include participation in any broad‐based
equity plan operated by the Company from time to time, up
to the relevant limit for participation as applies to such
arrangement.
Benefits also include a directors’ and officers’
indemnification insurance policy.
The Company may elect to pay contributions to existing
Executive Director private medical insurance arrangements.
Annual bonuses will be determined by reference to
performance, in the normal course measured over one
financial period. The performance measures, weightings
and targets for the annual bonus will be set by the
Remuneration Committee on an annual basis.
Performance measures will normally include tests of both
business and individual performance and may include
measures or a combination of measures relating to:
pipeline, profit measures (including but not limited to pre‐
tax profit budget, ROIC and margin), strategy concern and
people targets.
The Remuneration Committee shall have discretion to
determine the terms and level at which annual bonuses
may be granted, including the minimum performance
required for an annual bonus to be payable. The maximum
annual bonus that may be awarded shall be determined by
the Remuneration Committee in its absolute discretion. The
maximum annual bonus that may be granted to executive
directors other than the CEO is not currently expected to
exceed 100% of salary. The CEO has a contractual
entitlement to participate in an annual bonus arrangement
paying up to 150% of base salary.
In respect of an Executive Directors' participation in annual
bonus arrangements in any year, the Remuneration
Committee will have power to amend performance
measures and targets after they have been set if events
happen that mean they are no longer a fair test of
performance.
Annual
bonus
To provide an
incentive for
superior work
and to motivate
executives
toward even
higher
achievement
and business
results, to tie
their goals and
interests to
those of the
Company and its
stockholders
and to enable
the Company to
attract and
retain highly
qualified
executives.
Page | 25
Directors’ Remuneration Report (continued)
Equity
incentive
plans
To encourage
and enable
executives to
obtain an equity
stake in the
Company, which
will assure a
closer
identification of
their interests
with those of
the Company
and its
stockholders,
thereby
stimulating their
efforts on the
Company’s
behalf and
strengthening
their desire to
remain with the
Company.
To incentivise
key individuals
to achieve key
long term
objectives.
To retain key
individuals.
The
Committee
may clawback
awards
granted under
the Plan if
such
payments are
made: (i) on
account of
fraud or
misconduct by
the
Participant; (ii)
following an
accounting
restatement;
or (iii) as may
be required by
any other
general
clawback
policy of the
Company
which may
now exist or
hereafter be
adopted
regarding
repayment of
incentive‐
based
compensation.
Executive Directors are eligible to participate in the
Company’s Omnibus Equity Incentive Plan (the “Plan”).
Under the Plan, the Company has the authority to issue
stock options, stock units, stock appreciation rights or other
equity incentives to Executive Directors. Awards are
considered by the Remuneration Committee. Such awards
may require the participant to pay a price for shares
acquired or enable the participant to receive the shares for
nil cost.
The Remuneration Committee may determine that awards
should be subject to performance measures, including any
of the following or a combination thereof: (i) net earnings
or net income; (ii) basic or diluted earnings per share; (iii)
net revenue or revenue growth; (iv) gross profit or gross
profit growth; (v) operating profit; (vi) return measures; (vii)
cash flow; (viii) earnings before or after taxes, interest,
depreciation and/or amortization; (ix) gross or operating
margins; (x) productivity ratios; (xi) share price; (xii)
expense targets; (xiii) margins; (xiv) operating efficiency;
(xv) objective measures of customer satisfaction; (xvi)
working capital targets; (xvii) measures of economic value
added; (xviii) inventory control; (xix) enterprise value; (xx)
sales; (xxi) debt levels and net debt; (xxii) timely launch of
new facilities; (xxiii) client retention; (xxiv) employee
retention; (xxv) timely completion of new product rollouts;
and (xxvi) objective measures of personal targets, goals,
reviews or completion of projects. The Remuneration
Committee considers that this choice of performance
measures provides it with the flexibility to set performance
targets that are relevant to the individual and take into
account the position of the Company at the time of grant.
Any one or more of these performance measures may be
used on an absolute or relative basis, as the Remuneration
Committee may deem appropriate, and may be compared
to the performance of a selected group of comparison
companies, or an index that the Remuneration Committee
deems appropriate. The Remuneration Committee may
determine the minimum performance required for an
award to vest.
The Remuneration Committee shall have discretion to
determine the length of the performance period that shall
apply to any performance conditions.
The Remuneration Committee shall have discretion to
determine the maximum value of an award that may be
made under the Plan. It is currently expected that the
maximum value that may be awarded under the Plan will
be 100% of salary.
In the event that the Company adopts new equity incentive
plans, Executive Directors would be eligible to participate in
such plans, subject to the terms of, and the maximum levels
of participation provided in, the rules of such plans.
Page | 26
Directors’ Remuneration Report (continued)
In respect of any performance‐related equity awards grant
to Executive Directors, performance measures, weightings
and targets will be set by the Remuneration Committee.
Following grant of an award, the Remuneration Committee
will have power to amend performance measures and
targets if events happen that mean they are no longer a fair
test of performance.
Notes to the Executive Directors' Remuneration Policy Table
In considering the appropriate measures to apply to performance‐based awards, the Remuneration Committee
will seek to incentivise and reinforce delivery of the Company's strategic objectives of achieving a balance
between delivering annual returns to shareholders and ensuring long term profitability and growth.
The performance targets set will be stretching and achievable, taking into account the Company's strategic
priorities and the economic environment in which the Company operates.
Other matters
In addition to the above, the Company is entitled to honour any contractual entitlement to compensation or
benefits, and any cash or equity incentive awards, which is held by: (i) any current or former Executive Director
on the effective date of this policy; or (ii) an employee or officer of the Group on the date they are promoted to
the role of Executive Director. Appropriate disclosure will be made of any compensation paid (or similar) to an
Executive Director pursuant to any such arrangements.
The Company may reimburse all reasonable expenses incurred by an Executive Director in connection with their
role. This will include expenses in attending Board or Board‐committee meetings, or the Company may
alternatively provide a travel allowance for such purpose. This may also include items which, for tax purposes,
are treated as a taxable benefit, and in which case the Company may also pay any such tax on behalf of the
Executive Director.
External non‐executive appointments
Executive Directors are able to accept up to three non‐executive appointments outside of the Group (as long as
this does not lead to a conflict of interest or competitive issue), as such appointments can enhance their
experience and add value to the Company. Any fees received are retained by the Executive Director.
Service contracts
Service Agreement contract of the CEO
On 4 August 2016, VivoPower International Services Ltd and Philip Comberg entered into a Service Agreement
under which Philip Comberg (the “CEO”) is employed as Chief Executive Officer of the Company. Philip was
appointed as a statutory director of the Company and VivoPower International Services Ltd on 1 May 2016. The
employment under such Service Agreement commenced on 1 September 2016 and is to continue, subject to the
terms of the Service Agreement, until determined by either party giving to the other not less than 12 months’
written notice.
The Service Agreement provides that the CEO is entitled to a salary at the rate of £540,000 per annum; the
Service Agreement provides that the CEO’s salary shall be reviewed by the Remuneration Committee at least
once each twelve months save after notice of termination of the Service Agreement has been served, and the
Company shall not be obligated to make any increase in salary but shall not make any decrease in salary. In
addition to his salary, the CEO is provided with:
a)
the entitlement to participate in such discretionary bonus scheme and other incentive arrangements,
as may be operated by the Company, on such terms and at such level as the Remuneration Committee
may from time to time determine, subject to the CEO's right always to participate in an annual bonus
arrangement paying up to 150% of base salary for attainment of pre‐agreed key performance
indicators;
Page | 27
Directors’ Remuneration Report (continued)
b) participation opportunity in a separate carried interest arrangement. At present the Remuneration
Committee has not implemented a carried interest arrangement; if such an arrangement is
implemented, this will be disclosed in the relevant Annual Report on Remuneration;
c) an annual payment of 10% of base salary in lieu of pension contributions;
d) participation in the Company's (i) life assurance scheme (with coverage at four times the CEO’s salary);
(ii) personal accident insurance (iii) permanent health insurance and (iv) private medical (or payment
to the CEO's existing scheme to a maximum of £1,800 per month); and
e) directors and officers’ liability insurance including coverage of legal expenses, for a period extending
through six years after the termination date under the Service Agreement.
The Service Agreement additionally provides for reimbursement of expenses (including reasonable expenses in
respect of personal mobile phone and computer use by the CEO in respect of his role). The Service Agreement
also provides for 30 days of holiday (plus English public holidays) each fiscal year of the Company. The CEO shall
also be entitled to receive his full salary and contractual benefits during any period of sickness of up to 90 days
(increasing to 120 days in the Company's discretion) in any rolling period of 12 months.
The Company may terminate the CEO's employment summarily for gross misconduct or similar grounds or by
serving twelve months' written notice on the CEO. The CEO may terminate his employment by serving 12
months' written notice on the Company.
In circumstances where the employment is terminated on notice, the Company may elect to put in place any of
the following arrangements:
a) The CEO may be required to actively work throughout the entirety of his notice period;
b) The CEO may be required to spend some or all of his notice period on garden leave (during which time
the CEO would remain entitled to receive his full salary and contractual benefits as referred to above
at (c) and (d) in the service agreement section); or
c) The Company may elect to make a payment in lieu of notice in respect of the whole or any unexpired
proportion of the CEO's notice period. In these circumstances, the payment in lieu of notice would be
calculated based on the CEO's annual base salary plus the cost to the Company of the contractual
benefits described above at (c) and (d) in the service agreement section. Any such payment due shall
be in two equal instalments, the first within seven days after the termination of the CEO's employment
and the second no later than the date which is six months thereafter. The second instalment shall be
reduced by an amount equal to any payment or benefits received by the CEO from any new alternative
employment or engagement after the termination date in respect of such six‐month period.
If the CEO is terminated (otherwise than for cause) the CEO shall also be entitled to reimbursement for his costs
of relocation back to Germany on a grossed up for tax basis and shall remain eligible to receive a pro‐rata
proportion of any bonus calculated up to the termination date.
The Service Agreement contains certain non‐competition and other restrictive covenant provisions that may
apply for six months less any time spent on garden leave after the end of the CEO’s services with the Company.
The non‐competition restrictive covenant shall only apply if the CEO receives a remuneration payment (including
base salary, the cost to the Company of the contractual benefits referred to at (c) and (d) above, in the service
agreement section, bonus in respect of the relevant period of restriction (provided always that the CEO shall be
deemed to have received a remuneration payment if the period of restriction encompasses a period in respect
of which he has received a payment in lieu of notice).
The CEO's Service Agreement is available for inspection at the Company’s registered office during normal hours
of business, and will also be available at the Company’s Annual General Meeting until the close of the meeting.
Internal promotions
In the event that an employee, or officer, of the Group is promoted to the role of Executive Director, the
Company will be permitted to honour the terms of the employee's existing employment agreement.
Page | 28
Directors’ Remuneration Report (continued)
External recruitment
The Company's policy is that any new agreement with a newly appointed Executive Director would comply
with the following principles:
Notice Period
The notice period will be 12 months (in the case of notice being given by both the
Company and the Executive Director) and will include a garden leave provision.
Payment in lieu of
notice ("PILON")
The contract will include provision for the contract to be terminated summarily by
paying a PILON comprising basic salary and pension/pension allowance for the
remainder of the notice period. The Company will have discretion to pay on a phased
basis, which will normally be subject to mitigation.
Retirement
benefits
Benefits
The service contract may include entitlement to retirements benefits, subject to the
provisions and limits set out in this Policy. The entitlement to retirement benefits may
continue during any notice period.
The service contract may include entitlement to other benefits, subject to the
provisions and limits set out in this Policy. The entitlement to benefits may continue
during any notice period.
Cash and Equity
Incentive Plans
The Executive Director will be eligible to be considered (at the Committee's discretion)
to participate in the Company's annual bonus arrangements and long‐term incentive
arrangements (whether cash or equity based). Participation in such arrangements will
be subject to the provisions and limits set out in this Policy.
New service contracts will also take account of any local law requirements.
Approach to recruitment remuneration
In recruiting an Executive Director, including on promotion of an employee or officer from within the Group to
the role of Executive Director, the Remuneration Committee will offer the recruit a remuneration package that
it believes is appropriate, taking into account the skills and experience of the individual and the need to recruit,
retain and motivate individuals of the appropriate calibre.
The remuneration package offered may include the components of remuneration described above in the
Executive Directors' Remuneration Policy Table.
For external hires, the Remuneration Committee may determine that it would be appropriate to buy‐out any
existing incentive awards held by the individual that are forfeited as a result of the individual leaving their former
employer. The Remuneration Committee may also determine that it would be appropriate to grant recruitment‐
related awards. In the case of any buy‐out of an equity based award, or the grant of any recruitment‐related
award, the award would normally be granted as an equity based award, subject to such vesting and/or
performance conditions as the Remuneration Committee determines to be appropriate, either under a one‐off
arrangement or under the terms of the Company’s incentive arrangements. In determining the terms of such
awards, the Remuneration Committee will take account of the vesting schedule and conditions attached to the
forfeited awards (in the case of buy‐out awards), but also other factors that it determines to be relevant,
including the need to suitably incentivise and retain the individual during the initial years of their office.
The maximum level of variable remuneration (excluding any buy‐out awards) that may be granted to any new
Executive Director is 200% of their salary.
Loss of office payments
Contractual entitlements
A departing Executive Director’s rights in respect of salary, retirement benefits and contractual benefits will be
determined in accordance with the policy above for service contracts for newly appointed Executive Directors.
The current CEO's rights will be determined in accordance with his Service Contract (as described above).
Page | 29
Directors’ Remuneration Report (continued)
Incentive plans
The terms of a departing Executive Director’s participation in any annual bonus or long term incentive plans will
be governed by the terms of such arrangements. The terms regarding participation in the annual bonus plan
are disclosed in the Service Agreement of the CEO summarised above.
Equity Incentive Plan
Unless otherwise provided by the Remuneration Committee in an award agreement for awards granted under
the Equity Incentive Plan, the unvested portion of an award shall expire upon termination of employment or
service of the participant granted the award, and the vested portion of such award shall (if relevant) remain
exercisable for:
one year following termination of employment or service by reason of such participant’s death or disability
(as determined by the Remuneration Committee), but not later than the expiration of the standard exercise
period; or
90 days following termination of employment or service for any reason other than such participant’s death
or disability, and other than such participant’s termination of employment or service for cause, but not
later than the expiration of the standard exercise period.
Both the unvested and the vested portion of an award shall expire upon the termination of the participant’s
employment or service by the Company for cause.
In respect of any awards made to an Executive Director under any broad‐based equity plans, the same leaver
conditions will apply as apply in respect of employees generally.
Other
The Company may enter into new contractual arrangements with a departing Executive Director in connection
with the cessation of office or employment, including (but not limited to) in respect of settlement of claims,
confidentiality, restrictive covenants and/or consultancy arrangements, where the Committee determines it
necessary or appropriate to do so. The Company may pay reasonable legal fees on behalf of an Executive
Director in connection with their cessation of office and employment. The Company may agree to provide other
ancillary or non‐material benefits, payments or similar to a departing Executive Director.
Corporate actions
The treatment of incentive awards in the event of a corporate action affecting the Company will be determined
in accordance with the terms of such awards.
In the event of a corporate action, unless otherwise determined by the Remuneration Committee, any annual
bonus granted to an Executive Director shall continue on the same terms. The Remuneration Committee
maintains the discretion to adjust an annual bonus to account for the occurrence of a corporate action in any
manner, including but not limited to amending performance measures and targets after they have been set if
the occurrence of the corporate action means that they are no longer a fair test of performance.
Under the terms of the Equity Incentive Plan, upon a change of control the Remuneration Committee may make
such adjustments to awards as it, in its discretion, determines are necessary or appropriate, provided that the
Remuneration Committee determines that such adjustments do not have an adverse economic impact on the
participant. The Remuneration Committee may, but shall not be limited to, determine that (i) all or a portion of
any outstanding options and stock appreciation rights shall become fully exercisable, (ii) all or a portion of any
other outstanding awards shall become vested and transferable, and all or a portion of any outstanding
performance‐based awards will be earned, or (iii) all or a portion of any outstanding awards may be cancelled
in exchange for a payment of cash, or (iv) all or a portion of any outstanding awards may be substituted for
awards that will substantially preserve the otherwise applicable terms of any affected awards.
The Company may agree to pay reasonable legal fees on behalf of an Executive Director in respect of the effect
of any corporate action on their personal position.
Page | 30
Directors’ Remuneration Report (continued)
Non‐Executive Directors’ Remuneration Policy Table
Element
Fees
Purpose and
link to
strategy
To attract and
retain high‐
calibre Non‐
Executive
Directors.
Operation (including maximum levels)
Recovery of
Sums
(Clawback)
The Non‐Executive Directors receive an annual retainer for
service on the Board, with supplementary retainers payable for
additional Board responsibilities.
Not
applicable.
Annual retainer for Board membership
Retainer for the Chairman of the Board
Additional retainers for the committee
members
Additional retainer for Chairman of Audit,
Remuneration and Nominations Committees
£48,000
£165,000
£5,000
£30,000
The fee levels are reviewed on an annual basis, and may be
increased by the Company taking into account factors such as
the time commitment of the role and market levels in
companies of comparable size and complexity. Fees may be
amended before any annual review to reflect any changes to
the Director’s role or Board committee memberships which
occur during the period or when making a new appointment.
New Directors may also be eligible for a one‐time fee of £6,000
or such higher amounts as the Company determines, based on
market conditions, the proposed New Directors skills and
experience and the Company's circumstances.
In addition, if a Director is required to spend substantially
longer than the likely time commitment set out in their
agreement, the Company may at its sole and absolute
discretion make one or more specific payments to the Director
to reflect this additional commitment. There is no prescribed
maximum for the additional specific payments that may be
made to Directors in these circumstances, however, the
payments that would be offered would be in line with the
practice of other companies in our peer group with similar
global operations, and would be market competitive.
Benefits
To attract and
retain high‐
calibre Non‐
Executive
Directors.
Benefits to be provided to Non‐executive Directors will be
determined by the Committee taking into account such factors
as it determines to be necessary, with the aim of creating a
competitive overall package. The provision of benefits would
not be expected to be performance related.
Not
applicable.
Benefits include, but are not limited to, reimbursement of
expenses (including for professional advice), provision of
indemnification in respect of liabilities arising out of claims in
respect of acts or omissions whilst in the course of acting as a
Director, and provision of directors’ and officers’ liability
insurance. Directors are also entitled to enter into separate
indemnification agreements with the Company.
Page | 31
Directors’ Remuneration Report (continued)
There is currently no equity plan in place for Non‐Executive
Directors. The Committee may determine to implement a plan
for Non‐Executive Directors. Details of such a plan would be
disclosed in the relevant Annual Report on Remuneration.
Not
applicable
Equity
awards
To attract and
retain high‐
calibre Non‐
Executive
Directors.
Other matters
In addition to the above, the Company is entitled to honour any contractual entitlement to compensation or
benefits, and any cash or equity incentive awards, which are held by any current or former Non‐Executive
Director on the effective date of this policy. Appropriate disclosure will be made of any compensation paid (or
similar) to a Non‐Executive Director pursuant to any such arrangements.
The Company may reimburse all reasonable expenses incurred by a Non‐Executive Director in connection with
their role. This will include expenses in attending Board or Board‐committee meetings, or the Company may
alternatively provide a travel allowance for such purpose. This may also include items which, for tax purposes,
are treated as a taxable benefit, and in which case the Company may also pay any such tax on behalf of the Non‐
Executive Director.
Terms of appointment and terms of termination of office
Current Non‐Executive Directors
Subject to the provisions of the Company’s Articles of Association and to the terms relating to election, vacancy
and removal in the Non‐Executive Director’s Appointment Letter, and subject to continued satisfactory
performance by the Non‐Executive Director, the appointment is anticipated to be for an initial term of 3 years,
unless otherwise terminated by and at the discretion of the Non‐Executive Director or the Board upon one
month’s written notice.
Details of the director agreements currently in place for the Non‐Executive Directors are as follows:
Date of director agreement
Unexpired term at 5 September 2017
Kevin Chin
Gary Hui
Edward Hyams
Peter Sermol
1 August 2016
1 August 2016
29 July 2016
1 August 2016
Through 27 April 2019
Through 21 December 2019
Through 2 November 2019
Through 21 December 2019
None of the Non‐Executive Director agreements contain a notice period or any provision for benefits upon a
termination of service save as provided above.
All Non‐Executive Director agreements are available for inspection at the Company’s registered office during
normal hours of business, and will also be available at the Company’s Annual General Meeting until the close of
the meeting.
New Non‐Executive Directors
The Company's policy is that any director agreement for any newly elected Non‐Executive Director will be in line
with the policy above. Any such agreement may contain a one month notice period.
Page | 32
Directors’ Remuneration Report (continued)
Approach to recruitment remuneration
When recruiting Non‐Executive Directors, the remuneration arrangements offered will be in line with those set
out in the policy above.
CEO Remuneration Annualised
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Equity
Benefits
Pension
Bonus
Basic
Minimum remuneration
In line with expectations
Maximum
Application of this policy for Executive Directors in the year ending 31 March 2018
(1) Minimum remuneration represents basic salary, payments in lieu of pension, benefits and the face
value of awards granted under the Equity Incentive Plan that are not subject to performance. Share
price appreciation has not been factored into the amount shown.
(2) In line with expectations represents the same elements included in the "minimum" calculation shown
above plus: annual bonus at target level and the face value of the proportion of awards granted under
the Equity Incentive Plan that are subject to performance based vesting which would be delivered if the
target level of performance is met. Share price appreciation has not been factored into the
amount shown.
(3) Maximum represents the same elements included in the "minimum" calculation shown above plus:
annual bonus at maximum level and the face value of awards granted under the Equity Incentive Plan
that are subject to performance based vesting which would be delivered if the maximum level of
performance is met. Share price appreciation has not been factored into the amount shown.
Under the terms of the Service Agreement entered into with Philip Comberg, in lieu of pension contributions,
the Company pays to Philip Comberg an amount equal to 10% of his annual salary in monthly instalments. This
amount is then paid by Philip Comberg into his personal pension.
Page | 33
Directors’ Remuneration Report (continued)
The table below shows the value in numerical and percentage terms of each component of remuneration
including in the chart above:
Component
Minimum
remuneration
In line with
expectations
Maximum
Salary
Pension
Benefits
Value
£540,000
£540,000
£540,000
£54,000
£21,600
£54,000
£21,600
£54,000
£21,600
Total (fixed)
£615,600
£615,600
£615,600
Bonus
Equity
N/A
£540,000
£810,000
£135,000
£459,000
£540,000
Total (fixed and variable)
£750,600
£1,614,600
£1,965,600
Salary
Pension
Benefits
Total (fixed)
Bonus
Equity
Total (fixed and variable)
Percentage
71.9%
7.2%
2.9%
82.0%
N/A
18.0%
100%
33.4%
3.3%
1.3%
38.1%
33.4%
28.4%
100%
27.5%
2.8%
1.1%
31.3%
41.2%
27.5%
100%
Statement of consideration of employment conditions elsewhere in the Company
The Remuneration Committee considers pay and employment conditions elsewhere in the Group when
determining remuneration for Executive Directors. However, the Remuneration Committee does not currently
consult specifically with employees on the Executive Director Remuneration Policy. Comparison measurements
measuring the remuneration of the CEO as against the remuneration of the wider employee group are not used
in setting remuneration policy.
Statement of consideration of shareholder views
Given the recent listing of the Company, the Remuneration Committee has not consulted with shareholders on
the development of this Remuneration Policy but is open to feedback from shareholders on the Remuneration
Policy.
Page | 34
Directors’ Remuneration Report (continued)
Annual Report on Remuneration
Single total figure of remuneration for each Executive Director
The amount earned by each of the Executive Directors for the period ended 31 March 2017 is set out in the
table below:
Salary
£315,000
Benefits
£12,600
Annual Bonus
£630,000
LTIP
NIL
Retirement
benefits
£31,500
Total
£989,100
Philip Comberg*
* Philip Comberg was appointed CEO effective 1 September 2016 and was appointed as a statutory director on
1 May 2016.
In connection with his appointment as CEO, his base salary was set at £540,000 and his target annual cash
incentive bonus amount was set at 150% of his base salary. The amount presented reflects the amount earned
for services as CEO over the period reported on.
The Company was incorporated on 1 February 2016, and in accordance with section 392 of the Companies Act
2006 extended its accounting reference date to 31 March 2017. The Company therefore does not have a prior
financial period for which records for remuneration can be disclosed. In future years this table will be updated
to show remuneration paid in the relevant years.
Details of amounts included in the single total figure for the 14 months ended 31 March 2017
Benefits:
The following benefits were available to the CEO during the 14 months ended 31 March 2017:
Private Medical
Participation in a directors' and officers' indemnification insurance policy
In addition to the ongoing benefits referred to above, the CEO was also paid a one‐off benefit payment in the
14 months ended 31 March 2017, for relocation expenses in accordance with the terms of his Service
Agreement, in reimbursement for the expenses (on a grossed up for tax basis) of moving to London to take up
the role of CEO.
Annual Bonus
Philip Comberg was appointed CEO effective 1 September 2016 and was also appointed as a director on 1 May
2016. In connection with his appointment as CEO, his target annual cash incentive bonus amount was set at
150% of his base salary. The value of the annual bonus awarded to the CEO, in accordance with his performance
against performance targets was £630,000.
Long Term Incentive awards
No long‐term incentive awards vested during the 14 months ending 31 March 2017.
Page | 35
Directors’ Remuneration Report (continued)
Retirement benefits
As more fully described below, during the 14 months ending 31 March 2017 in lieu of retirement benefits the
Company paid £31,500 to Philip Comberg, for payment into his personal pension plan.
Total pension entitlements
Under the terms of the Service Agreement entered into with Philip Comberg, in lieu of pension contributions,
the Company pays to Philip Comberg an amount equal to 10% of his annual salary in monthly instalments. This
amount is then paid by Philip Comberg into his personal pension.
Scheme interests awarded in the 14 months ended 31 March 2017
No equity interests were granted to the CEO in the 14 months ended 31 March 2017.
Non‐Executive Directors
Single total figure of remuneration for each Non‐Executive Director
The amount earned by each of the Non‐Executive Directors for the 14 months ended 31 March 2017 is set out
in the table below:
Kevin Chin
Edward Hyams
Peter Sermol
Gary Hui
Base fees
£200,000
£21,667
£13,477
£36,000
Other fees
Equity awards
Total
NIL
£6,000
£6,000
£36,992
NIL
NIL
NIL
NIL
£200,000
£27,667
£19,477
£72,992
The Company was incorporated 1 February 2016, and in accordance with section 392 of the Companies Act
2006 extended its accounting reference date to 31 March 2017. The Company therefore does not have a prior
financial period for which records for remuneration can be disclosed.
In future years this table will be updated to show remuneration paid in the relevant years.
Details of amounts included in the single total figure for the 14 months ended 31 March 2017
Kevin Chin receives £165,000 per annum for being Chairman of the Board plus a further £30,000 for being
Chairman of each of the Audit, Nomination and Remuneration Committees.
Kevin Chin was officially appointed as a Non‐Executive Director on 1 August 2016. Prior to this date he acted for
the benefit of the Company through his role as the Executive Chairman and CEO of Arowana International from
the date of incorporation (i.e. 1 February 2016). The amount presented in the table above reflects the amount
earned by Kevin Chin over the period 1 February 2016 to 31 March 2017.
Edward Hyams was appointed as a Non‐Executive Director on 29 July 2016 and commenced that role from 2
November 2016. Edward Hyams receives £48,000 per annum for being a Non‐Executive Director. Edward Hyams
receives an additional £5,000 per annum for being a member of the Nomination, Audit and Remuneration
Committees.
Peter Sermol was appointed as a Non‐Executive Director on 1 August 2016 and commenced that role from 21
December 2016. Edward Hyams receives £48,000 per annum for being a Non‐Executive Director. Peter Sermol
receives an additional £5,000 per annum for being a member of the Nomination, Audit and Remuneration
Committees.
Gary Hui was officially appointed as a Non‐Executive Director on 1 August 2016. Prior to this date he acted for
the benefit of the Company through his role as the CIO of Arowana International from the 1 July 2016. The
amount presented in the table above reflects the amount earned by Gary Hui over the period 1 July 2016 to 31
March 2017. Gary Hui is also paid an annual salary of $360,000 through US payroll, in compensation for
additional work undertaken for the benefit of the Company, including his role on the investment committee.
Page | 36
Directors’ Remuneration Report (continued)
A portion of this salary is recharged to Arowana International Limited; the amount presented in the table above
reflects the amount that is not recharged to Arowana International Limited.
No equity interests were awarded to Non‐Executive Directors in the 14 months ending 31 March 2017.
Other payments to directors in the 14 months ended 31 March 2017
Payments to past Directors or for loss of office
No payments were made to any past director during the period or in connection with a director's loss of office
during the period.
Statement of Directors’ Shareholdings and Interests
The CEO and his connected persons had no interests in the shares, options, and listed securities of the Company
as at 31 March 2017.
The interests of other Directors and their connected persons (if any), in the shares, options, and listed securities
of the Company as at 31 March 2017, are set out in the table below.
Interests in shares
held at 31 March 2017,
excluding outstanding
scheme interests
Outstanding scheme interests, at 31 March 2017
Unvested scheme
interests (not subject
to performance
measures)
Vested but
unexercised
scheme
interests
Total shares
subject to
outstanding
scheme interests
Total of all share
interests and
outstanding scheme
interests, at 31 March
2017
Kevin Chin*
Gary Hui**
Philip
Comberg***
1,266,531
325,045
0
0
0
0
0
0
0
0
0
0
1,266,531
325,045
0
* Kevin Chin holds interests in VivoPower shares as the beneficiary of the Panaga Group Trust, which, as at 31
March 2017 held 1,241,531 VivoPower shares, equivalent to 9.2% of the issued share capital. Kevin Chin also
holds interests in VivoPower shares through Borneo Capital, which as at 31 March 2017 held 25,000 VivoPower
shares, equivalent to 0.2% of the issued share capital.
** Gary Hui holds interests in VivoPower shares through Beira Corp.
*** Philip Comberg and Kevin Chin intend to enter into a transaction whereby Philip Comberg acquires 416,100
founder and insider shares from Kevin Chin.
It is expected that Philip Comberg and Carl Weatherley‐White (CFO) will purchase VivoPower shares at a level
equivalent to 50% of the after tax proceeds from their bonuses paid in connection with the 14 months ended 31
March 2017.
Minimum shareholding requirements
The Company currently does not have any applicable shareholding guidelines. The Remuneration Committee
reserves the right to implement shareholding guidelines. If shareholding guidelines are implemented, these will
be disclosed in the relevant Annual Report on Remuneration.
Page | 37
Directors’ Remuneration Report (continued)
Comparison to Company Performance
Performance graph and table and comparison to CEO pay
The following graph shows total shareholder return for the Company for the period from its listing on 29
December 2016 to 31 March 2017, relative to the Nasdaq Composite Index. The Nasdaq Composite Index is
considered an appropriate comparator for VivoPower:
VivoPower and Nasdaq TSR
120.00
100.00
80.00
60.00
40.00
20.00
0.00
29 Dec 2016
01‐Dec‐16
Nasdaq
VVPR
31 Mar 2017
01‐Mar‐17
In future annual reports, the graph above will show the TSR performance of the Company over a period of up to
ten years. However as the Company only became listed during the 14 months ended 31 March 2017 it is not
currently possible to include information beyond that presented.
The following table shows details of the compensation paid to the individual(s) in the role of CEO:
The following table shows details of the compensation paid to the
individual(s) in the role of CEO:
CEO single figure of remuneration
Annual Bonus as a % of maximum opportunity (%)
LTIP award as a % of maximum opportunity (%)*
2017
£989,100
64%
0%
*No LTIP award was granted to the CEO for the 14 months ending 31 March 2017
In future annual reports, the table above will show details of the compensation paid to the individual(s) in the
role of CEO over a period of up to ten years. However, as Philip Comberg was appointed CEO effective 1
September 2016 and the Company did not have a CEO prior to his appointment, it is currently not possible to
include information beyond that presented.
In connection with his appointment as CEO, Philip Comberg's base salary was set at £540,000 and his target
annual cash incentive bonus amount was set at 150% of his base salary. The amount presented reflects the
amount earned for services as CEO over the period reported on.
Percentage change in remuneration of director undertaking the role of CEO
In future annual reports, the Company will include a table showing the percentage change in remuneration of
the CEO relative to the percentage change in remuneration of other employees (but as the Company is reporting
on its first financial period since incorporation it is not currently possible to include that information).
Page | 38
Directors’ Remuneration Report (continued)
Relative importance of pay
The table below shows the total pay for all of the Group's global employees compared to other key financial
indicators.
Employee remuneration (USD)
Distributions to shareholders (USD)
Current Period
7,072,309
NIL
Statement of implementation of remuneration policy for the year to 31 March 2018
Executive Directors
Base Salary
The Committee will pay the CEO's base salary in line with the remuneration policy outlined above in the year
ending 31 March 2018. The Committee intends to keep the CEO's base salary under review and will consider
whether the amount and terms on which his base salary are payable are appropriate given the Company's
economic position and wider market conditions. Any changes to the CEO's base salary will be compliant with the
remuneration policy outlined above and will be disclosed in the Remuneration Report for the relevant financial
year.
The CEO's base salary has been set at £540,000 for the year ending 31 March 2018.
Benefits
The Committee will provide the CEO with benefits in line with the remuneration policy outlined above in the
year ending 31 March 2018. The Committee intends to keep benefits under review and will consider whether
the amount and terms on which benefits are payable are appropriate given the Company's economic position
and wider market conditions. Any changes to benefits will be compliant with the remuneration policy outlined
above and will be disclosed in the Remuneration Report for the relevant financial year.
Annual bonus
The annual bonus for the CEO will include a mixture of financial and personal metrics. The performance criteria
attaching to bonuses will be disclosed retrospectively provided that commercial sensitivity is no longer an issue.
It is expected that retrospective disclosure will be made in the notes to the single total figure table of the 2018
Annual Report on Remuneration. The maximum level of award that may be received by the CEO under his annual
bonus for the year ending 31 March 2018 has been set at 150% of his base salary.
Equity incentive plan
The performance‐based elements of the equity incentive plan award made to the CEO will include a mixture of
financial metrics. The performance criteria attaching to the award will be disclosed retrospectively provided that
commercial sensitivity is no longer an issue. It is expected that retrospective disclosure will be made in the notes
to the single total figure table of the 2020 Annual Report on Remuneration.
The maximum level of award that may be received by the CEO under the Equity Incentive Plan for the award
granted to him for the year ending 31 March 2018 has been set at 100% of his base salary.
Retirement benefits
The Committee will provide the CEO with a cash sum in lieu of retirement benefits in line with the remuneration
policy outlined above in the year ending 31 March 2018. The Committee intends to keep the value of the cash
sum paid in lieu of retirement benefits under review and will consider whether the amount and terms on which
the cash sum is payable are payable are appropriate given the Company's economic position and wider market
conditions. Any changes to the cash sum will be compliant with the remuneration policy outlined above and will
be disclosed in the Remuneration Report for the relevant financial year.
The CEO will receive cash payments equivalent to 10% of his annual base salary in lieu of retirement benefits in
the year ending 31 March 2018.
Page | 39
Directors’ Remuneration Report (continued)
Non‐Executive Directors
Cash compensation
The Committee will pay annual retainers to non‐executive directors in line with the remuneration policy outlined
above in the year ending 31 March 2018. The Committee intends to keep the value of annual retainers under
review and will consider in March of 2018 whether the amount and terms on which retainers are payable are
appropriate given the Company's economic position and wider market conditions. Any changes to retainers will
be compliant with the remuneration policy outlined above and will be disclosed in the Remuneration Report for
the relevant financial year.
Annual retainers for the year ending 31 March 2018 have been set as follows:
Annual retainer for Board membership
Retainer for the Chairman of the Board
Additional retainers for the committee members
£48,000
£165,000
£5,000
Additional retainer for Chairman of Audit, Remuneration and Nominations Committees
£30,000
Equity compensation
There is currently no equity plan in place for Non‐Executive Directors. The Committee may determine to
implement a plan for Non‐Executive Directors. Details of such a plan would be disclosed in the Remuneration
Report for the relevant financial year.
Benefits
The Committee will provide benefits to Non‐Executive directors in line with the remuneration policy outlined
above in the year ending 31 March 2018. The Committee intends to keep the value of benefits under review and
will consider whether the amount and terms on which benefits are provided are appropriate given the
Company's economic position and wider market conditions. Any changes to benefits will be compliant with the
remuneration policy outlined above and will be disclosed in the Remuneration Report for the relevant financial
year.
Consideration of matters relating to Directors’ remuneration
Remuneration Committee
The members of the Committee during the period and their attendance at meetings of the Committee, are set
out below:
Kevin Chin
Edward Hyams
Peter Sermol
Attendance
2/2
2/2
2/2
No Non‐Executive Directors are involved in deciding their own remuneration.
The Committee did not retain a remuneration consultant during the period under review but has subsequently
appointed Pearl Meyer to advise the Committee on various matters, including the Equity Incentive Plan. Pearl
Meyer is a signatory to the Remuneration Consultants' Code of Conduct. The Committee has reviewed the
operating processes in place at Pearl Meyer and is satisfied that the advice it receives is independent and
objective.
Page | 40
Directors’ Remuneration Report (continued)
Herbert Smith Freehills LLP and Winston & Strawn LLP provide the Company with legal advice. Advice from
Herbert Smith Freehills LLP and Winston & Strawn LLP is made available to the Remuneration Committee, where
it relates to matters within its remit.
Statement of voting at general meeting
This is the first financial period in respect of which the Company is required to produce a Remuneration Policy,
and therefore no shareholder vote has previously been held on the Remuneration Policy. The Company will
report on the votes cast by shareholders on the Company's Remuneration Policy and Annual Report on
Remuneration in future annual reports.
The Remuneration Report was approved by a duly authorised Committee of the Board of Directors on 28 July
2017 and signed on its behalf by:
Kevin Chin
Chair of the Remuneration Committee
28 July 2017
Page | 41
Independent Auditor’s Report to the
Members of VivoPower International PLC
We have audited the financial statements of VivoPower International PLC for the 14 months ended 31 March
2017 which comprise the Group and Parent Company Statements of Financial Position, the Group Statements
of Comprehensive Income, the Group Statements of Cash Flows, the Group and Parent Company Statements of
Changes in Equity and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the
company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements are free from material misstatement, whether caused
by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s
and parent company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by Directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non‐financial information in the Annual Report to
identify material inconsistencies with the audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Opinion on financial statements
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 March 2017 and of the group’s and the parent company’s profit for the period then ended;
the financial statements have been properly prepared in accordance with IFRS; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial period for which
the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Page | 42
Independent Auditor’s Report to the
Members of VivoPower International PLC
Matters on which we are required to report by exception
In light of the knowledge and understanding of the company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report and the Directors’ Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Alistair Roberts
For and on behalf of PKF Littlejohn LLP
Senior statutory auditor
28 July 2017
1 Westferry Circus,
Canary Wharf,
London, UK, E14 4HD
Page | 43
Consolidated Statement of Comprehensive Income
for the period ended 31 March 2017
(USD in thousands, except per share amounts)
Note
For the 14 months
ended 31 March 2017
Revenue
Cost of sales
Gross profit
General and administrative expenses
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating profit
Transaction related costs
Finance income
Finance expenses
Profit before income tax
Income tax expenses
Profit for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences recognised directly in equity
Total comprehensive income for the period
Earnings per share
Basic
Diluted
All results are generated from continued operations.
11
12
3
8
9
10
24
24
32,250
(4,977)
27,273
(9,595)
(103)
(548)
17,027
(5,800)
13
(602)
10,638
(5,338)
5,300
599
5,899
dollars
0.81
0.81
Page | 44
Consolidated Statement of Financial Position
as at 31 March 2017
(USD in thousands)
ASSETS
Non‐current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other receivables
Investments
Total non‐current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables
Finance lease payable
Provision for income tax
Provisions
Loans and borrowings
Total current liabilities
Non‐current liabilities
Loans and borrowings
Provisions
Deferred tax liabilities
Finance lease payable
Total non‐current labilities
Total liabilities
Equity
Share capital
Share premium
Cumulative translation reserve
Other reserves
Retained earnings
Total Equity
TOTAL EQUITY AND LIABILITIES
Note
As at 31 March 2017
11
12
10
15
14
16
15
17
21
10
19
18
18
19
10
21
22
23
2,163
46,320
2,312
1,167
18,060
70,022
10,970
19,844
30,814
100,836
8,262
145
2,361
1,339
90
12,197
19,925
237
3,776
95
24,033
36,230
163
40,215
599
18,329
5,300
64,606
100,836
These financial statements were approved by the Board of Directors on 28 July 2017 and were signed on its
behalf by Philip Comberg.
28 July 2017
Page | 45
Consolidated Statement of Cash Flow
for the period ended 31 March 2017
(USD in thousands)
Cash generated from operating activities
Net cash generated from operating activities
Cash flows from investing activities
Interest received
Purchase of property plant and equipment
Investment in capital projects
Cash received from acquisitions
Acquisitions
Net cash used in investing activities
Cash flows from financing activities
Financing agreements
Loans from related parties
Funds received from issuing shares
Costs from listing
Funds received from listing
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Note
For the 14 months
ended 31 March 2017
16
8
11
14
20
6,281
6,281
13
(97)
(18,060)
1,485
(10,080)
(26,739)
330
19,944
167
(11,469)
22,456
31,428
10,970
‐
10,970
Page | 46
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Notes to the Financial Statements
for the period ended 31 March 2017
1.
Reporting entity
VivoPower International PLC (“VivoPower” or the “Company”) is a company domiciled in the United
Kingdom. The address of the Company’s registered office is 91 Wimpole Street, Marylebone, London,
W1G 0EF. The consolidated financial statements of the Company as at and for the period ended 31
March 2017 comprise the financial statements of the Company and its subsidiaries (together referred
to as the ‘group’ and individually as ‘group entities’. The ultimate parent company into which these
results are consolidated is Arowana International Limited.
2.
Accounting policies
Summary of significant accounting policies:
The principal accounting policies applied in the preparation of these financial statements are set out
below. These policies have been consistently applied to all periods presented, unless otherwise stated.
2.1 Basis of preparation
VivoPower International PLC consolidated financial statements were prepared in accordance with
International Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated financial statements have been
prepared under the historical cost convention. The financial statements are the first to be prepared for
VivoPower International PLC and are for the 14 months from the date of formation to 31 March 2017.
The Company has elected to prepare its parent company financial statements in accordance with IFRS.
These are presented on page 77.
The preparation of financial statements with adopted IFRS requires the use of critical accounting
estimates. It also requires the management to exercise judgement in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where the assumptions and estimates are significant to the consolidated financial statements are
disclosed in note 3.
The directors believe that the Company is well placed to manage its business risk successfully, despite
some current economic and political uncertainty. The directors therefore have a reasonable
expectation that the Company has adequate resources to continue in operational existence for the
foreseeable future. Thus, they have continued to adopt the going concern basis in preparing these
financial statements.
All financial information presented in US Dollars has been rounded to the nearest thousand.
Significant accounting policies
2.1.1 Basis of consolidation
The consolidated financial statements include those of VivoPower International PLC and all of its
subsidiary undertakings.
Subsidiary undertakings are those entities controlled directly or indirectly by the Company. The results
of the subsidiaries acquired are included in the consolidated Statement of Comprehensive Income from
the date of acquisition using the same accounting policies of those of the group. All business
combinations are accounted for using the purchase method.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with those used by other members of the group.All intra‐group balances and
transactions, including any unrealised income and expense arising from intra‐group transactions, are
eliminated in full in preparing the consolidated financial statements.
Page | 48
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
Unrealised gains arising from transactions with equity invested investees are eliminated against the
investment to the extent of the group’s interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is no evidence of impairment.
2.2.2
Intangible assets
All intangible assets, except goodwill, are stated at fair value less accumulated amortisation and any
accumulated impairment losses. Goodwill is not amortised and is stated at cost less any accumulated
impairment losses.
Goodwill
Goodwill arose on the effective acquisition of VivoPower Pty Limited and the Aevitas Group of
companies. Goodwill is reviewed annually to test for impairment.
Other intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and then
amortised over their useful economic lives.
The Group has taken advantage of the provisions of IFRS 3 in accounting for the business combinations
arising from the acquisitions of Aevitas O Holdings Pty Ltd and VivoPower Pty Ltd. Accordingly, the
financial statements currently recognise the Directors' best estimate of the individual allocation of
goodwill and other separately identifiable assets acquired. The completion of the purchase price
allocation exercise will be finalised within 12 months following the date of acquisition.
Amortisation is calculated on a straight‐line basis to write down the assets over their useful economic
lives at the following rates:
Customer relationships – 7 years
Trade names – 14 years
Favourable supply contracts – 5 years
Databases – 5 years
2.2.3 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses. The cost of an item of property, plant and equipment comprises its purchase price
and the costs directly attributable to bringing the asset into use.
When parts of an item of property, plant and equipment have different useful lives, they are accounted
as separate items (major components) of property, plant and equipment.
Depreciation is calculated on a straight‐line basis so as to write down the assets to their estimated
residual value over their useful economic lives at the following rates:
Computer equipment – 3 years
Fixtures and fittings – 3 years
Motor vehicles – 5 years
2.2.4 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is the fair value at the acquisition date of the assets
transferred and the liabilities incurred by the Group and includes the fair value of any contingent
Page | 49
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
consideration arrangement. Acquisition‐related costs are recognised in the income statement as
incurred.
2.2.5 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised as property, plant and equipment at an amount
equal to the fair value of the leased assets or, if lower, the present value of the minimum lease
payments at the inception of the lease, and then depreciated over their useful economic lives.
Lease payments are apportioned between the repayment of capital and interest. The capital element
of future lease payments is included in the Statement of Financial Position as a liability. Interest is
charged to the Statement of Comprehensive Income so as to achieve a constant rate of interest on the
remaining balance of the liability.
Rentals payable under operating leases are charged to the Statement of Comprehensive Income on a
straight‐line basis over the lease term. Operating leases incentives are recognised as a reduction in the
rental expense over the lease term.
2.2.6 Impairment of non‐financial assets
Goodwill is allocated to cash‐generating units for the purposes of impairment testing. The recoverable
amount of the cash‐generating unit (‘CGU’) to which the goodwill relates is tested annually for
impairment or when events or changes to circumstances indicate that it might be impaired.
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.
In an impairment test the recoverable amount of the cash‐generating unit or asset is estimated 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 recognised 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 recognised in the Statement of Comprehensive Income.
An impairment loss in respect of goodwill is not reversed. In the case of other assets, impairment losses
recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. These impairment losses are reversed if there has been any change in
the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent so that the asset’s carrying amount does not exceed the carrying value that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2.2.7 Financial instruments
Financial assets and liabilities are recognised in the group’s Statement of Financial Position when the
group becomes a party to the contracted provision of the instrument. The following policies for
financial instruments have been applied in the preparation of the consolidated financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
Page | 50
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:
in the principal market for the asset or liability; or
in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the group. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
Level 1 — quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 — valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable; and
Level 3 — valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
Cash and cash equivalents
For the purpose of preparation of the Statement of Cash Flow, cash and cash equivalents includes cash
at bank and in hand.
Bank borrowings
Interest‐bearing bank loans are recorded at the proceeds received. Direct issue costs paid on the
establishment of loan facilities are recognised over the term of the loan on a straight‐line basis. The
initial payment is taken to the Statement of Financial Position and then amortised over the full‐length
of the facility.
Trade and other receivables
Trade and other receivables are stated at amounts receivable less any allowance for the expected
future issue of credit notes and for non‐recoverability due to credit risk.
Trade payables
Trade payables are non‐interest bearing and are stated at their amortised cost.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased as equity by the Company the amount of the
consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a
deduction from equity, and excluded from the number of shares in issue when calculating earnings per
share.
Page | 51
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
2.2.8 Taxation
Income tax expense comprises current and deferred tax.
Current tax is recognised based on the amounts expected to be paid or recovered under the tax rates
and laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is provided on temporary timing differences that arise between the carrying amounts of
assets and liabilities for financial reporting purposes and their corresponding tax values. Liabilities are
recorded on all temporary differences except in respect of initial recognition of goodwill and in respect
of investments in subsidiaries where the timing of the reversal of the temporary difference is controlled
by the group and it is probable that it will not reverse in the foreseeable future. Deferred tax assets
are recognised to the extent that it is probable that future taxable profits will be available against which
the asset can be offset. Deferred tax is measured on an undiscounted basis using the tax rates and laws
that have been enacted or substantively enacted by the end of the accounting period.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
assets and liabilities, they relate to income taxes levied by the same tax authority and the group intends
to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised
simultaneously.
Current and deferred tax are recognised in the Statement of Comprehensive Income, except when the
tax relates to items charged or credited directly to equity, in which case it is also dealt with directly in
equity.
2.2.9 Provisions
Provisions are recognised when the group has a present obligation because of a past event, it is
probable that the group will be required to settle that obligation, and it can be measured reliably.
Provisions are measured at the directors’ best estimate of the expenditure required to settle the
obligation at the date of Statement of Financial Position.
Where the time value of money is material, provisions are measured at the present value of
expenditures expected to be paid in settlement.
2.2.10 Earnings per share
The group presents basic and diluted earnings per share (EPS) data for ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares, excluding the shares held as treasury shares. Currently
there are no diluting effects on EPS for ordinary shares, therefore, diluted EPS is the same as basic EPS.
2.2.11 Foreign currencies
The Company’s functional and presentational currency is the US Dollar. Items included in the separate
financial statements of each group entity are measured in the functional currency of that entity.
Transactions denominated in foreign currencies are translated into the functional currency of the entity
at the rates of exchange prevailing at the dates of the individual transactions. Foreign currency
monetary assets and liabilities are translated at the rates of exchange prevailing at the end of the
reporting period.
Exchange gains and losses arising are charged to the Statement of Comprehensive Income within
finance income or expenses. The Statement of Comprehensive and Statement of Financial Position of
Page | 52
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
foreign entities are translated into US dollars on consolidation at the average rates for the period and
the rates prevailing at the end of the reporting period respectively. Exchange gains and losses arising
on the translation of the group’s net investment foreign entities are recognised as a separate
component of shareholders’ equity.
Foreign currency denominated share capital and related share premium and reserve accounts are
recorded at the historical exchange rate at the time the shares were issued or the equity created.
2.2.12 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of services in
the ordinary course of the group’s activities. Revenue is shown net of discounts, value‐added tax, other
sales related taxes, and after the elimination of sales within the group.
Revenue comprises project developer fees, electrical manufacturing and installations, electrical
servicing and maintenance and generator sales.
Revenue associated with longer term projects is recognised on a percentage completion basis. Revenue
for smaller jobs and projects is recognised upon completion.
IFRS 15 is mandatory for adoption from accounting periods beginning on or after 1 January 2017.
However, the group has elected to adopt the standard early, with effect from date of incorporation.
The group has a number of different revenue streams and the key components in determining the
correct recognition are as follows:
BTO revenue, which is revenue generated from development services relating to the building and
construction of solar projects, is recognised on a percentage completion basis as the value is accrued
by the end user over the life of the contract. The periodic recognition is calculated through weekly
project progress reports.
Aevitas revenue is recognised when jobs are completed. On longer term projects revenue is recognised
on a percentage completion basis. The projects have defined milestones which determines the timing
of the billing to the customers. The achievement of the milestones then also provides an accurate
indication of how much of the project is complete.
2.2.13 Segment reporting
The group determines and presents operating segments based on the information that is provided
internally to the Board of Directors, which is the group’s chief operating decision maker.
The group considers that it has three reportable segments, USA, UK and Australasia. The secondary
segment is based upon product groups and the split is between Aevitas and the core VivoPower
business.
An operating segment is a component of the group that engages in business activities from which it
may earn revenues and incur expenses, including any revenues and expenses that relate to the
transactions with any of the group’s other components. Operating segments results are reviewed
regularly by the Board of Directors to assess its performance and make decisions about resources to be
allocated to the segment, and for which discrete financial information is available.
Segment results that are reported to the Board of Directors include items directly attributable to a
segment as well as those that can be allocated to a segment on a reasonable basis.
Page | 53
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
2.2.14 Employee benefits
Pension
The employer pension contributions are associated with defined contribution schemes. The costs are
therefore recognised in the month in which the contribution is incurred, which is consistent with
recognition of payroll expenses.
Short‐term benefits
Short‐term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided.
A liability is recognised for the amount expected to be paid under short‐term cash bonus or profit‐
sharing plans if the group has a present legal or constructive obligation to pay this amount because of
past service provided by the employee and the obligation can be reliably measured.
Short‐term compensated absences
A liability for short‐term compensated absences, such as holiday, is recognised for the amount the
group may be required to pay because of the unused entitlement that has accumulated at the end of
the reporting period.
2.2.15 New standards, amendments and interpretations not yet adopted
The IASB and IFRIC have issued the following standards and with an effective date after the date of the
financial statements and have not been applied in preparing these consolidated financial statements.
IFRS 15 – “Revenue from Contracts with Customers” ‐ early adoption
As this is the first period of financial reporting for the group, management took the decision to adopt
IFRS 15 early as it represented a major development in the recognition of revenue under International
Financial Reporting Standards.
Compared to IAS 18, Revenue and IAS 11, Construction Contracts and related interpretations, there
was no material difference adopting IFRS 15 early.
The standard is effective for annual periods beginning on or after 1 January 2017, however, the group
took advantage of early application.
IFRS 16 Leases
IFRS 16 specifies how a company will recognise, measure, present and disclose leases. The standard
provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all
leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors
continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting
substantially unchanged from its predecessor, IAS 17. IFRS 16 will be applicable to annual reporting
periods beginning on or after 1 January 2019.
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
Amends IAS 12 Income Taxes, which is effective for annual periods beginning on or after 1 January 2017
to clarify the following aspects:
Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes
give rise to a deductible temporary difference regardless of whether the debt instrument's holder
expects to recover the carrying amount of the debt instrument by sale or by use.
The carrying amount of an asset does not limit the estimation of probable future taxable profits.
Page | 54
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible
temporary differences.
An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law
restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with
other deferred tax assets of the same type.
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to
have a material impact on the Group.
3. Critical accounting judgements and 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 recognised in the consolidated financial statements are discussed
below.
Critical accounting judgements:
3.1
IFRS 10 – Consolidated Financial Statements
The objective of the standard is to establish principles for the presentation and preparation of
consolidated financial statements when an entity controls one or more other entities. The group has
assessed whether it controls project companies in which the group has an interest.
The group assessed control by reviewing, first, whether the group had power over the entity, secondly,
had exposure, or rights, to variable returns from its involvement with the project, and finally, whether
it had the ability to use its power over the investee to affect the amount of the project’s returns.
On assessing the three criteria, all of which must exist, the group concluded that it did not in fact have
control and elected not to consolidate the project companies into the consolidated financial statements
of the group.
3.2
Transaction related costs
The transaction related costs were incurred by the business in preparation for the entry onto Nasdaq.
The costs incurred were recharged costs from Arowana International Limited including legal,
accounting and professional fees in relation to our operations in the United States. The costs by nature
are one‐off, and therefore, have no bearing on the financial performance of the business. To enable
comparability in future periods the costs are disclosed separately on the face on the Statement of
Comprehensive Income.
Critical estimates:
3.3
Income taxes
In recognising 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.
Page | 55
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
3.4
Share option reserve
As part of the Initial Public Offering Listing, VivoPower International issued an amended and restated
unit purchase option (UPO) replacing the options issued by Arowana Inc. The options are viewed as a
share‐based award granted to Early Bird Capital. The cost of the award is recognized directly in equity
and is applied against capital raising costs. As the option holder has the right to receive shares in
VivoPower international PLC the share‐based payment transaction would be equity settled. The fair
value of the options were determined at the grant date, using the Black Scholes Model, and not
remeasured subsequently. As the options have no vesting conditions the related expense are
recognized immediately.
3.5
Convertible preference shares and loan notes
As part of the IPO listing process VivoPower International PLC acquired the Aevitas Group. The
instruments previously issued by Aevitas were restructured to become convertible into VivoPower
International PLC shares. The company considered IAS 32 paragraph 16 in determining the accounting
treatment. 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.
Page | 56
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
4. Segmental information
The business operates in three principal countries or regions; United Kingdom, United States and
Australasia.
a) Primary segment analysis – by geography
From continuing operations
United
States
US$’000s
Australasia
US$’000s
United
Kingdom
US$’000s
Total
US$’000s
Revenue
Costs of sales
Gross profit
Administrative expenses
Depreciation and amortisation
Operating Profit
Transaction related costs
Finance income
Finance expense
Profit before taxation
Income tax expense
Profit for the period
24,945
‐
24,945
(4,264)
(3)
20,678
(5,800)
1
(172)
14,707
(6,116)
8,591
5,705
(4,977)
728
(878)
(647)
(797)
‐
7
(373)
(1,163)
332
(831)
1,600
‐
1,600
(4,453)
(1)
(2,854)
‐
5
(57)
(2,906)
446
(2,460)
b) Secondary segment analysis – by product group
BTO revenue
Other revenue
Total
More than 10% of the revenue relates to one customer.
c) Segment Net Assets
32,250
(4,977)
27,273
(9,595)
(651)
17,027
(5,800)
13
(602)
10,638
(5,338)
5,300
2017
US$’000s
25,036
7,214
32,250
Tangible assets
Goodwill
Other intangible assets
United States
Australia
US$’000s
US$’000s
United
Kingdom
US$’000s
Total
US$’000s
53
‐
‐
2,097
30,393
15,927
13
‐
‐
2,163
30,393
15,927
Goodwill and intangible assets are categorised dependent where the assets reside. The value of
goodwill was generated on the acquisition of VivoPower Pty Limited and Aevitas Group Limited, two
Australian entities.
Page | 57
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
5.
Operating Profit
Operating profit is stated after charging:
Amortisation of intangible assets
Depreciation of property, plant and equipment
Operating lease costs – land and buildings
6.
Auditor’s remuneration
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Other services relating to taxation
All other services
Total
7.
Staff numbers and costs
The average number of employees (including directors) during the period was:
Sales and Business Development
Central Services & Management
Production
Total
Their aggregate remuneration costs comprised:
Salaries, wages and incentives
Social security costs
Pension contributions
Short‐term compensated absences
Total
2017
US$’000s
548
103
174
2017
US$’000s
175
‐
‐
‐
‐
175
4
11
23
38
2017
2017
US$’000s
5,707
398
196
403
6,704
Directors’ emoluments were US$1,704,809 of which the highest paid director received US$1,297,504.
Director emoluments include employer social security costs.
Page | 58
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
Key Management Personnel:
Salaries, wages and incentives
Social security costs
Pension contributions
Short‐term compensated absences
Total
2017
US$’000s
3,014
194
39
101
3,348
Key management personnel are those below the Board level that have a significant impact on the global
operations of the business. The number of key management personnel, including directors for the
period ended 31 March 2017 was 11.
2017
US$’000s
13
2017
US$’000s
10
‐
571
21
602
8.
Finance income
Interest received
9.
Finance expense
Bank interest payable
Finance lease interest payable
Related party interest payable
Foreign exchange losses
Total
Page | 59
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
10.
Income tax expenses
The tax charge comprises:
Current tax
UK Corporation tax
Foreign tax
Total current tax
Deferred tax
Origination and reversal of timing differences
Current period
UK tax
Foreign tax
Total deferred tax
Total tax on profit on ordinary activities
2017
US$’000s
‐
2,361
2,361
2,977
(451)
3,428
2,977
5,338
The difference between the total tax charge and the amount calculated by applying the standard rate
of UK corporation tax to the profit before tax is shown below.
Group profit on ordinary activities before tax
Tax on group profit on ordinary activities at the standard corporation
tax rate of 20%
Effects of:
Expenses that are not deductible in determining taxable profits
Tax rates of subsidiaries operating in other jurisdictions
Change in tax rates
Total tax charge for the period recognised in the Consolidated statement of
Comprehensive Income
2017
US$’000s
10,638
(2,131)
(73)
(3,108)
(26)
(5,338)
The UK standard corporation tax rate for the 14 months to 31 March 2017 was 20%. The rate of
corporation tax will reduce to 19% with effect from 1 April 2017. A further reduction to 17% will take
effect from 1 April 2020. This was substantively enacted on 6 September 2016, and therefore, all UK
deferred tax assets are recognised at a rate of 17%.
Page | 60
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
10.1 Deferred tax
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
These assets and liabilities are analysed as follows:
Deferred tax assets
1 February 2016
Credit/(charged) to statement of comprehensive income
Acquisition
Credited to equity
2017
US$’000s
2,312
(3,776)
(1,464)
Tax losses
US$’000s
Total
US$’000s
‐
739
1,573
‐
2,312
‐
739
1,573
‐
2,312
31 March 2017
Deferred tax liabilities
1 February 2016
Credit/(charged) to statement of
comprehensive income
Credited to equity
31 March 2017
Accelerated
allowances
Other timing
differences
Total
US$’000s
‐
(13)
‐
(13)
‐
‐
(3,763)
‐
(3,763)
(3,776)
‐
(3,776)
Deferred tax has been recognised in the current period using the tax rates applicable to each of the tax
jurisdictions in which the Company operates. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets against current tax liabilities.
Page | 61
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
11.
Property, plant and equipment
Computer
Equipment
Motor
Vehicles
Plant &
Equipment
Leasehold
improvement
Fixtures
and
Fittings
Total
US$’000s US$’000s
US$’000s US$’000s US$’000s US$’000s
‐
37
488
525
‐
24
303
327
‐
198
‐
44
1,588
1,632
‐
45
982
1,027
‐
16
1,876
1,892
‐
31
619
650
‐
605
‐
1,242
‐
‐
156
156
‐
3
38
41
‐
115
‐
‐
11
11
‐
‐
8
8
‐
3
‐
97
4,119
4,216
‐
103
1,950
2,053
‐
2,163
Cost
At 1 February 2016
Additions
Acquisition
At 31 March 2017
Depreciation
At 1 February 2016
Depreciation
Acquisition
At 31 March 2017
Net book value
At 1 February 2016
At 31 March 2017
The group has $239,938 of assets held under finance lease. Details of the liabilities are shown in note
21.
Held within Plant & Equipment are $0.9 million of Solar Panel systems relating to our Australian Amaroo
Project.
Page | 62
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
12.
Intangible Assets
Goodwill
Other intangible assets
Carrying value at 31 March
(a) Goodwill
2017
US$’000s
30,393
15,927
46,320
Goodwill arose on the purchase of Aevitas O Holdings Limited and VivoPower Pty Limited on 29
December 2016.
As at 1 April
Additions
Foreign exchange on translation
Carrying value at 31 March
The carrying amounts of goodwill by CGU are as follows:
Aevitas O Holdings Limited
VivoPower Pty Limited
Foreign exchange on translation
Total
Goodwill impairment tests
2017
US$’000s
‐
30,024
369
30,393
2017
US$’000s
9,781
20,243
369
30,393
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 Units (CGUs) 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 financial period 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 CGUs
products and services within those markets
Page | 63
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
Each CGU was assessed to have a value in excess of its respective carrying value and hence no
adjustments to goodwill were considered necessary.
Key assumptions:
the discount rate was based on the weighted average cost of capital of 8.33% and 10.58%
no sensitivity analysis is provided as the Company expects no foreseeable changes in the
assumptions that would result in impairment of the goodwill.
(b) Other intangible assets
Customer
Relationships
Trade names
US$’000s US$’000s
Favourable
supply
contracts
US$’000s
Data bases
Other
Total
US$’000s US$’000s
US$’000s
‐
9,953
9,953
‐
347
347
‐
2,488
2,488
‐
43
43
‐
2,488
2,488
‐
122
122
‐
9,606
‐
2,445
‐
2,366
‐
734
734
‐
36
36
‐
698
‐
812
812
‐
‐
‐
‐
16,475
16,475
‐
548
548
‐
812
‐
15,927
Cost
At 1 February 2016
Additions
At 31 March 2017
At 1 February 2016
Amortisation
At 31 March 2017
Net book value
At 1 February 2016
At 31 March 2017
Page | 64
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
13.
Investment in subsidiaries
The principal operating undertakings in which the group’s interest at the period‐end is more than
20%.
Subsidiary undertakings
VivoPower International Services
Limited
VivoPower International Holdings
Limited
VivoPower Pty Limited
Aevitas O Holdings Pty Limited
Aevitas Group Limited
Aevitas Holdings Pty Limited
Electrical Engineering Group Pty Limited
JA Martin Electrical Limited
Kenshaw Electrical Pty Limited
VivoPower WA Pty Limited
VVP Project 1 Pty Limited
VVP Project 2 Pty Limited
Amaroo Solar Tco Pty Limited
Amaroo Solar Hco Pty Limited
Amaroo Solar Fco Pty Limited
Amaroo Solar Pty Limited
SC Tco Pty Limited
SC Hco Pty Limited
SC Fco Pty Limited
SC Oco Pty Limited
ACN 613885224 Pty Limited
VivoPower USA LLC
VivoRex LLC
VivoPower Singapore Pte Limited
Percentage of
ordinary
shares held
Registered address
100%
100%
100%
100%
99.9%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
3rd Floor 37 Esplanade, St Helier, Jersey,
JE2 3QA
91 Wimpole Street, London, England,
United Kingdom W1G 0EF
153 Walker St, North Sydney NSW,
Australia 2060
251 Little Falls Drive, Wilmington, New
Castle, DE, USA 19808
Level 36, UOB Plaza 1, 80 Raffles Place,
Singapore 048624
Associate undertakings
Associate undertakings
V.V.P. Holdings Inc.
VivoPower Philippines Inc.
VivoPower RE Solutions Inc.
Percentage of
ordinary
shares held
Registered address
40%
64%
64%
Unit 10A, Net Lima Building, 5th Avenue
cor. 26th Street, E‐Square Zone,
Crescent Park West, Bonifacio Global
City, Taguig, Metro Manila
Page | 65
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
The Philippine entities above, listed as Associates, are under the control of VivoPower Singapore Pte
Limited, and therefore are consolidated into the consolidated financials of VivoPower International PLC.
This is in line with IFRS 10 [7] where it satisfies all three criteria to determine whether control exists.
The Philippine entities are closely managed by the Director of VivoPower Singapore Pte Limited, all
controls are carefully monitored to minimize risk.
14.
Investments
Project investments
Total
2017
US$’000s
18,060
18,060
The value of the investments carried as at 31 March 2017 represents the fair value of project
investment. The investments relate to the two North Carolina projects, one of which was fully
operational as at 31 March 2017. The group will monitor the carrying value of these investments to
assess for impairment on a quarterly basis.
15.
Trade and other receivables
Current receivables
Trade receivables
Accrued income
Prepayments
Other receivables
Related party receivable
Total
Non‐current receivables
Loan due from Associate
Other receivables
Total
Analysis of trade receivables:
Trade and other receivables
Less: credit note provision
Total
Page | 66
2017
US$’000s
5,248
13,183
563
722
128
19,844
549
618
1,167
2017
US$’000s
5,250
(2)
5,248
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
The maximum exposure to credit risk for trade receivables by geographic region was:
United Kingdom
Australia
Total
The aging of the trade receivables, net of provisions was:
0‐90 days
Greater than 90 days
Total
16.
Cash and cash equivalents
Cash at bank and in hand
2017
US$’000s
1,600
3,648
5,248
2017
US$’000s
5,092
156
5,248
2017
US$’000s
10,970
The credit ratings of the counterparties with which cash was held are detailed in the table below.
2017
US$’000s
2,341
8,161
468
10,970
A‐1+
A‐1
A‐2
Total
Page | 67
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
Cash flow from operating activities:
Profit for the period
Adjustments for:
Income tax expense
Transaction related costs
Finance expenses
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating cash flows before movements in working capital and provisions
Increase in trade and other receivables
Increase in trade and other payables
Increase in provisions
Cash generated from operating activities
17.
Trade and other payables
Trade payables
Accruals
Related party payable
Treasury shares
Payroll liabilities
Sales tax payable
Deferred income
Other creditors
Total
18.
Loans and borrowings
Current liabilities
Bank loan
Non‐current liabilities
Bank loan
Related party loan
Total
Page | 68
2017
US$’000s
5,300
5,338
5,800
600
103
548
17,689
(21,007)
8,260
1,339
6,281
2017
US$’000s
2,158
1,297
1,445
592
1,972
412
305
81
8,262
2017
US$’000s
90
933
18,992
20,015
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
The bank loan with ANZ Bank is repayable over a 11.5 year period at a monthly repayment amount of
AUD 9,783 for 138 months. The related party loan is with Arowana International Limited. Repayments
of the loan will commence from April 2018 and is therefore non‐current in nature.
19.
Provisions
Current provisions
Employee entitlements
Non‐current provisions
Employee entitlements
Total
2017
US$’000s
1,339
237
1,576
Employee entitlements include long term leave and vacation provisions.
20.
Business combinations
Aevitas Group of Companies
On 29 December 2016, VivoPower acquired 99.9% of Aevitas Group Limited for a consideration of $9.5
million.
Aevitas provides energy and power generation solutions including design, supply, installation and
maintenance of power systems, control systems, with an increasing focus on solar and renewable
energy and energy efficiency. Since acquiring Aevitas in December 2016, VivoPower has introduced a
focused origination strategy to identify attractive solar projects across Aevitas’ existing customer base.
Aevitas operates via J.A. Martin Electrical Pty Limited (“JA Martin”) and Electrical Engineering Group
Pty Limited, encompassing the operations of Kenshaw Electrical Pty Limited (“Kenshaw”).
JA Martin is based in Tomago (Newcastle, New South Wales), Mount Thorley (Hunter Valley, New South
Wales) and Gunnedah (Liverpool Plains, New South Wales) and has been operating primarily in the
Newcastle region, Hunter Valley and western New South Wales for over 40 years. JA Martin primarily
provides products and services through its switchboards control rooms, electrical maintenance and
service and electrical contracting projects divisions.
Kenshaw has been operating from its base in Cardiff (Newcastle, New South Wales) for over 20 years.
Kenshaw provides power generator sales & service, electrical motors installation and service, and
motor management services and non‐destructive preventative maintenance testing. Customers include
hospitals, data centres, and a range of government departments and industrial businesses.
Aevitas’ mission is to be its customers’ trusted integrated power expert. Aevitas has long standing client
relationships and operates in a region that has amongst the highest cost of power across Australia and
has been demonstrating increasing appetite for solar power solutions. This client base provides a
natural pipeline of new solar projects which will help accelerate the growth of VivoPower’s BTO
business model in Australia.
Page | 69
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
The following table provides the book values of the identifiable assets and liabilities acquired and their
fair value to the group.
Cash and cash equivalents
Current assets
Non‐current assets
Investment in VivoPower Pty Limited
Current liabilities
Intangible assets
Goodwill
Non‐current liabilities
Borrowings (1)
Total net assets
Goodwill (see note 12)
Total consideration
Satisfied by:
Cash consideration
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Less: Cash and cash equivalent balances acquired
Total net consideration transferred
US$’000s
1,292
4,587
8,034
4,569
(3,427)
604
8,702
(295)
(24,329)
(263)
9,781
9,518
9,518
9,518
9,518
(1,292)
8,226
(1)Borrowings relate to convertible preference shares and loan notes that are categorised as equity
within the financials of VivoPower International PLC.
The revenue and operating loss since the acquisition date to 31 March 2017 was $5.6 million and $0.5
million respectively.
Page | 70
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
VivoPower Pty Limited
On 29 December 2016, VivoPower acquired 100% of VivoPower Pty Limited for a consideration of $23.1
million.
VivoPower Australia is a next generation renewable energy company that is involved in the origination,
financing, construction, transfer, operation and optimisation of solar electricity generation facilities
globally. VivoPower Australia operates a BTO model involving the design, installation, transfer and
maintenance of solar power plants through on site generation facilities and large scale grid feed
projects. As of 31 March 2017, VivoPower Australia had 2 employees located at 2 offices.
The business is organized primarily into a single pillar, being the provision of solar services. Within this,
there are two key target submarkets, the Commercial, Industrial and Government (CIG) sectors and
Utility Scale projects.
The CIG sub market focuses on solar facilities which are situated behind‐the‐meter for CIG clients.
VivoPower Australia constructs solar generation facilities on customer’s sites and feed energy directly
to the client. In this fashion, VivoPower Australia disintermediates the wholesale electricity market, the
electricity grid and the electricity retailer sharing in the savings with the client.
The Utility Scale sub market focuses on wholesale electricity generation through large or Utility Scale
sized installations. These are generally situated on large tracts of land and are directly connected to the
distribution (low voltage) or transmission (high voltage) grids. These large projects sell electricity
directly to the spot market or to electricity retailers/traders.
The revenue and operating loss since the acquisition date to 31 March 2017 was $0.1 million and ($0.2
million) respectively.
Page | 71
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
The following table provides the book values of the identifiable assets and liabilities acquired and their
fair value to the group:
US$’000s
193
127
541
920
610
1,545
31
(107)
(1,013)
‐
2,847
20,243
23,090
17,853
4,674
563
23,090
563
(193)
370
Cash and cash equivalents
Trade and other receivables
Other assets
Property plant and equipment
Deferred tax assets
Intangible assets
Goodwill
Trade and other payables
Borrowings
Deferred tax liabilities
Total net assets
Goodwill (see note 12)
Total consideration
Satisfied by:
Issue of shares in VivoPower International PLC
19.88% shareholding by Aevitas
Cash consideration
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Less: Cash and cash equivalent balances acquired
Total net consideration transferred
Page | 72
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
21.
Obligations under finance leases
Amounts payable under finance leases:
Less than one year
Later than one year but not more than five
Total
Future finance charges
Total obligations under financial lease
22.
Called up share capital
Allotted, called up and fully paid
Ordinary shares of $0.012 each as at 31 March
Number allotted
Ordinary shares of $0.012 each
At 1 February 2016
Issue of new shares
At 31 March 2017
23.
Other reserves
Equity instruments
Capital raising costs
Share option reserve
Treasury shares (see note 25)
Other reserves
Total
Minimum lease
payments
2017
US$’000s
Present value
of minimum
lease
payments
2017
US$’000s
‐
165
107
272
(32)
240
‐
145
95
240
‐
‐
2017
$162,689
13,557,376
No. of shares
‐
13,557,376
13,557,376
2017
US$’000s
25,072
(9,722)
3,713
(592)
(142)
18,329
Equity instruments relate to convertible preference shares and convertible loan notes that are
exchangeable for shares in VivoPower International PLC. There are 2,473,367 convertible preference
shares at an issue price of $3.00 per share. There are 2,473,367 convertible loan notes at an issue price
of $7.00 per share. The value held in reserves represents their face value plus the accrued interest to
31 December 2016. Interest is payable quarterly in arrears at a rate of 7% on both instruments.
Page | 73
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
Share option reserve relates to share options whereby the holder can buy VivoPower International PLC
shares at US$8.70 at any time before 30 April 2020. As at 31 March 2017 there were 828,000 options
outstanding.
24.
Earnings per share
The earnings and weighted average numbers of ordinary shares used in the calculation of earnings
per share are as follows:
Profit for the period
Weighted average number of shares in issue (‘000s)
Basic earnings per share (dollars)
Diluted earnings per share (dollars)
25.
Treasury shares
2017
US$’000s
5,300
6,548
0.81
0.81
On 30 March 2017, the Company repurchased 129,805 shares at a price of $4.50 for a total sum of
$591,915.80, including commission. The shares are being held as treasury shares.
26.
Operating lease commitments
Commitments under non‐cancellable operating leases expiring:
Within one year
Later than one year and less than five years
2017
Property
US$’000s
15
159
The group leases several buildings and office facilities. The terms of the leases vary from location to
location. The main leases are in New South Wales, Australia and run for a period for a period of 5 years
and 1 year. The leases are due to expire in 2019 and 2017 respectively.
27.
Pensions
The group’s principal pension plan comprises the compulsory Superannuation scheme in Australia,
where the company contributes 9.5%. The pension charge for the period represents contributions
payable by the group which amounted to US$196,005 in respect of the Australian scheme. New
schemes will be completed for the UK and US during the forthcoming year.
There were no outstanding or prepaid contributions at either the beginning or end of the financial
period.
Page | 74
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
28.
Financial instruments
(a) Financial risk management
The group’s principal financial instruments are bank balances, cash and medium term loans. The main
purpose of these financial instruments is to manage the group’s funding and liquidity requirements.
The group also has other financial instruments such as trade receivables and trade payables which arise
directly from its operations.
The group is exposed through its operations to the following financial risks:
Liquidity risk
Credit risk
Interest rate risk
Foreign currency risk
The Board of Directors has overall responsibility for the establishment and oversight of the group’s risk
management framework. Policy for managing risks is set by the Chief Financial Officer and is
implemented by the group’s finance department. All risks are managed centrally with a tight control
of all financial matters.
(b) Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The group considers that it has no significant liquidity risk. The group held cash resources of $10.9
million with related party loan of $19.0 million. The ratio of current assets to current liabilities is 2.5:1.
The group manages its liquidity as a whole and ensures that there are sufficient available cash resources
for each group company to operate effectively.
(c) Credit risk
The primary risk arises from the group’s receivables from customers. The majority of the group’s
customers are long standing and have been with the subsidiary companies for many years. Losses have
occurred infrequently. The group is mainly exposed to credit risks from credit sales but the group has
no significant concentrations of credit risk and keeps the credit status of customers under review.
Credit risks of customers of new customers are reviewed before entering into contracts. The debtor
exposure is monitored by group finance and the local entities review and report their exposure on a
monthly basis.
The group does not consider the exposure to the above risks to be significant and has therefore not
presented a sensitivity analysis on the identified risks.
The credit quality of debtors neither past due nor impaired is good. Refer to note 15 for further analysis
on trade receivables.
(d) Foreign currency risk
The group operates internationally and is exposed to foreign exchange risk on sales and purchases that
are denominated in currencies other than the respective functional currencies of the group entities to
which they relate, primarily with respect to GBP and USD, but also between USD and AUD.
Page | 75
Notes to the Financial Statements (continued)
for the period ended 31 March 2017
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.
The related party loans are denominated in USD, and therefore, foreign currency risk is eliminated.
(e) Interest rate risk
As a result of the related party loan agreement the group is exposed to interest rate volatility. However,
the interest rate is fixed for the medium term, therefore, the risk is largely mitigated for the near future.
The group will continue to monitor the movements in the wider global economy.
29.
Related party transactions
Kevin Chin is also Chief Executive of Arowana International Limited, an Australian registered company,
listed on the Australian Stock Exchange (ASX). During the course of the period, a number of services
were provided to VivoPower International PLC and its subsidiaries from a number of Arowana
companies.
Arowana International Limited is a majority shareholder of VivoPower International PLC and the extent
of the transactions between the two groups is listed below.
Arowana International Limited during the course of the period Arowana has helped fund investments
in renewable energy projects. Additionally, prior to VivoPower’s Nasdaq listing it was a source of
working capital funding. As at 31 March 2017, there was in place a related party loan of $18,992,263.
The loan interest is payable monthly in arrears and the first capital repayment on the loan is due on 1
April 2018.
There were additional short term balances outstanding at the period‐end $1,404,919.23 which were
due for repayment at the end of May 2017.
Arowana Group (Asia) Pte Ltd – provided specialist consultancy advice relating to Singapore for
$97,745. The amount paid during the period was $97,745. The balance outstanding at the end of
the financial period was nil.
Arowana Partners Group Pty Limited ‐ Kevin Chin, receives a Non‐Executive Director’s fee per
month of £16,250. The total costs charged to VivoPower during the course of the financial period
were £200,000. The balance outstanding at the end of the financial period was £200,000.
Payments were made during April 2017 to clear the balance.
30.
Key management personnel compensation
Key management personnel, which have a group management role, are included in note 7 to the
consolidated financial statements.
31. Ultimate controlling party
The ultimate controlling party and the results into which these financials are consolidated is Arowana
International Limited.
Page | 76
Company Statement of Financial Position
as at 31 March 2017
(USD in thousands)
Note
2017
US$000
ASSETS
Non‐current assets
Investments
Intercompany loan receivable
Total non‐current assets
Current assets
Cash and cash equivalents
Other receivables
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables
Accrued expenses and other payables
Total current liabilities
Equity
Share capital
Share premium
Other reserves
Retained deficit
TOTAL EQUITY AND LIABILITIES
Registered number 09978410
3
4
5
6
7
17,853
25,072
42,925
439
15,526
15,965
58,890
245
870
1,115
163
40,215
18,471
(1,074)
58,890
As allowed by S408 Companies Act 2006, no profit and loss account is presented in respect of the parent
company. The loss for Company after taxation was $1,074,396.
These financials were approved by the Board on 28 July 2017 and signed on its behalf by:
Dr. Philip Comberg
Director
28 July 2017
Page | 77
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Notes to the Company Financial Statements
for the period ended 31 March 2017
1. Basis of preparation
VivoPower International PLC company financial statements were prepared in accordance with International
Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS. The financial statements have been prepared under the historical cost
convention.
As allowed by S408 Companies Act 2006, no profit and loss account is presented in respect of the parent
company.
2. Accounting policies
(a) Foreign exchange
The Company’s functional and presentational currency is the US Dollar. Transactions denominated in
foreign currencies are translated into the functional currency of the entity at the rates prevailing at the
dates of the individual transactions. Foreign currency monetary assets and liabilities are translated at the
rates prevailing at the balance sheet date. Exchange gains and losses arising are charged or credited to the
profit and loss account.
(b) Taxation
Deferred taxation is provided in full for material timing differences except where recoverability of a deferred
tax is considered to be remote in the foreseeable future. Deferred tax balances are not discounted unless
the effects are considered to be material the Company’s results.
(c) Investments
Investments held as non‐current assets are shown at cost less provision for impairment.
(d) Related party transactions
Details of the related party transactions can be found in note 29 within the consolidated financial
statements.
3. Investments
Shares in group undertakings
Investment in VivoPower International Services Limited
As at 31 March 2017
2017
US$’000s
17,853
17,853
The details of the principal undertakings in which the group’s interest at the period‐end was more than 20%,
all of which are referred to in note 13 in the consolidated financial statements.
Page | 79
Notes to the Company Financial Statements
for the period ended 31 March 2017
4. Other receivables
Amounts owed by group undertakings
Prepaid expenses
Total
5. Accrued expenses and other payables
Accrued expenses
Treasury shares
Payroll tax liabilities
Other creditors
Total
2017
US$’000s
15,127
399
15,526
2017
US$’000s
267
592
4
7
870
On 30 March 2017, the Company entered into a transaction to repurchase 129,805 shares at $4.50 per
share. The shares are to be held as treasury shares.
6. Share capital
Allotted, called up and fully paid
Ordinary shares of $0.012 each as at 31 March
Number allotted
Ordinary shares of $0.012 each
Issue of new shares
At 31 March 2017
2017
$162,689
13,557,376
No. of shares
13,557,376
13,557,376
The Company issued 13,557,376 ordinary shares at a nominal value of $0.012 during the period.
During the period the Company purchased 129,805 of its own ordinary shares at a total cost of US$591,000.
Page | 80
Notes to the Company Financial Statements
for the period ended 31 March 2017
7. Other reserves
Equity instruments
Capital raising costs
Share option reserve
Treasury shares (see note 25)
Total
2017
US$’000s
25,072
(9,722)
3,713
(592)
18,471
Equity instruments relate to convertible preference shares and convertible loan notes that are
exchangeable for shares in VivoPower International PLC. There are 2,473,367 convertible preference shares
at an issue price of $3.00 per share. There are 2,473,367 convertible loan notes at an issue price of $7.00
per share. The value held in reserves represents their face value plus the accrued interest to 31 December
2016. Interest is payable quarterly in arrears at a rate of 7% on both instruments.
Share option reserve relates to share options whereby the holder can buy VivoPower International PLC
shares at US$8.70 at any time before 30 April 2020. As at 31 March 2017 there were 828,000 options
outstanding.
8. Employees and directors
The company employed no members of staff during the course of the period. Contractual agreements are
in place for four non‐executive directors to serve on the board of VivoPower International PLC.
See the Directors’ Report in the consolidated financial statements for full details of the directors.
Page | 81
Company Information
ADVISORS
Company registrars
Computershare Inc.,
250 Royall Street,
Canton, MA, USA 02021
Correspondence address:
Computershare Inc.,
P.O. Box 505000,
Louisville, KY, USA 40233
Legal Advisers
Herbert Smith Freehills LLP,
Exchange House,
Primrose Street,
London, UK EC2A 2EG
Principal Bankers
Barclays Bank PLC,
Level 16, 1 Churchill Place,
Canary Wharf,
London, UK E14 5HP
Independent auditors
Company Secretary
PKF Littlejohn LLP,
1 Westferry Circus,
Canary Wharf,
London, UK E14 4HD
SHAREHOLDER INFORMATION
First Names Global Limited,
4th Floor, 45 Monmouth Street,
London, UK WC2H 9DG
Country of Incorporation and main
countries of operation
International PLC is incorporated in
England & Wales. The Company operates in the
United Kingdom, United States with a nominal value of $0.012 each.
and Australia The Company has 129,805 treasury shares.
Number of securities in issue
As of 26 July 2017, the Company’s VivoPower
issued share capital consists of
13,557,376 ordinary shares
Company registration
Registered office: 91 Wimpole Street, London, UK W1G 0EF
Registered in England & Wales
Company number: 09978410
FINANCIAL CALENDAR
Annual General Meeting (“AGM”)
The Company’s AGM will be held at 09:30 am on 5 September 2017, at the Company’s headquarters, located
at 91 Wimpole Street, Marylebone, London, United Kingdom W1G 0EF.
Page | 82