ANNUAL REPORT
For the year ended 31 March 2019
VivoPower International PLC
VivoPower International PLC is an international solar and critical power
services company, providing critical energy infrastructure generation
and distribution solutions to a diverse range of commercial and
industrial customers, including the development, construction, and
sale of photovoltaic solar projects.
Nasdaq: VVPR
Contents
The Reports
Highlights
Chairman’s Statement
Interim Chief Executive’s Review
Strategic Report
Directors’ Report
Corporate Governance
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 Cash Flow
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Other Information
Company Information
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Highlights
Accomplishments for Three Months Ended 30 June 2019
✓ 49% growth in revenue over same period in prior year (unaudited)
✓ Forward order book in Critical Power Services increased by $19.9
million in the period, a 58% increase from 31 March 2019
✓ Positive underlying EBITDA of $0.4 million for the period
✓ Further 40% ($2.0 million annualised) reduction in Corporate and
Solar Development overheads
✓ Unrestricted cash resources increased to $7.1 million from $4.5
million at 31 March 2019
✓ Net debt reduced by a further $1.7 million to $13.0 million (1)
(US dollars in thousands, except per share data)
Revenue
Gross profit
Operating loss
Adjusted EBITDA (2)
Three Months
Ended
30 June 2019
13,617
Year Ended 31 March
2019 2018
39,036 33,647
1,657
6,310 5,123
(33)
(5,410) (7,595)
404
(1,176) (3,201)
Basic earnings per share (dollars)
(0.11)
(0.83) (2.06)
Diluted earnings per share (dollars)
(0.11)
(0.83) (2.06)
1. Excluding the effect of a change in accounting policy for operating leases as further described in Note 2.16 to the consolidated financial
statements.
2. Adjusted EBITDA is a non-IFRS financial measure. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and
amortisation, impairment of assets, impairment of goodwill, and one-off non-recurring costs, including restructuring expenses, non-recurring
remuneration and consulting fees. 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 Statement
VivoPower International PLC (“VivoPower” or the “Company”) is changing its financial year end to 30 June, with
effect from 30 June 2019, This is being done to deliver on further productivity and cost savings by harmonising
with the financial year end of its ultimate parent entity, Arowana International Limited, This Chairman’s
Statement is accordingly for the three month period ended 30 June 2019. The key developments during this
period were as follows:
•
•
•
•
Year on year revenue growth of 49% with a positive underlying EBITDA result of $0.4 million for the quarter;
Further growth in operating cashflow, resulting in unrestricted net cash balance increasing from $4.5 million
to $7.1 million;
Continued balance sheet improvement, with a further reduction in net debt from $14.7 million to $13
million (excluding the effect of the change in accounting policy with respect to leases);
Further 58% increase in Australian Critical Power Services forward order book to another all-time record of
$54.2 million; and,
•
Additional value adding progress made in both the Australian as well as US solar development businesses.
As mentioned in the Chairman’s Letter for the fiscal year ended 31 March 2019, VivoPower’s primary objective
is to return to profitability this coming fiscal year. Given the results achieved for the quarter ended 30 June 2019,
the board and leadership team remain confident that this objective can be delivered,
From a corporate governance standpoint, the Board expects to appoint another UK based non-executive director
before the Company’s Annual General Meeting (AGM). The AGM is to be held on 23rd September 2019.
On behalf of the rest of the Board, I would like to take this opportunity to thank all of our stakeholders for their
support and engagement during the period. Rest assured, the VivoPower team and the Board remains
steadfastly committed to overcoming challenges and maximising value across its business units.
Kevin Chin, Chairman
21 August 2019
Page | 2
Chief Executive’s Review
This Annual Report is for the three months ended 30 June 2019. Following an internal review for further cost
savings and efficiencies across the Group, the Company decided to change its fiscal year end to 30 June,
effective with 30 June 2019. Moving forward, this allows the Company to align reporting periods with its
Australian operations and majority shareholder, Arowana International Limited. This will eliminate duplication
and overlap in budgeting, reporting, and audit requirements and facilitate further reduction in corporate
overhead costs.
We are pleased with the results for this three-month period as it confirms the change in trajectory for the
Company, the culmination of the effort of our entire team to strategically expand the business into sectors with
strong tailwinds, improve and optimize our operations, reduce costs, and focus on profitability. Returning to
sustained profitability is one of our primary objectives and we can begin to see the green shoots of progress in
this area as we report a 49% growth in revenue over the same period last year and positive EBTIDA for the first
time in over two years.
The backbone of our performance for the quarter continues to be Critical Power Services, where revenue grew
60% over the same period last year and produced a profit right to the bottom-line. The forward order book for
Critical Power Services grew by $19.9 million in the three months ended 30 June 2019, on top of the $34.3
million reported at 31 March 2019. These orders have come largely from new industry sectors which have been
targeted for growth, including solar, data centres, and health care. This confirmed growth is further supported
by a strong business development pipeline of additional opportunities totalling $36.1 million across all these
sectors as well the traditional business base in utilities, industrial, and mining.
Australian solar development continued strongly through the quarter, with approval of a new 5 MW project to
be developed in conjunction with our partners, ITP Renewables, for completion by June 2020. The first 15 MW
project developed with ITP is nearing completion and is expected to be ready for construction in October 2019.
We believe that continued focus and investment in Australian solar development is strategic, not only for the
returns which it can provide directly, but also for the pipeline of potential EPC work it can provide to J.A. Martin.
A primary focus continues to be maximising the value and monetise our U.S. portfolio of solar projects held in
the ISS Joint Venture. After having remediated development process issues such as improper project
documentation management and lack of proactive engagement with potential customers to secure power
purchase agreements (“PPAs”) in the last six months, a dedicated inhouse sales advisor is now fully focused on
securing value accretive corporate PPAs for all projects, extending the life and viability of projects, and actively
marketing the portfolio to a range of targeted domestic and international investors, developers, and large
corporates. We remain optimistic that our current strategy and focussed activity will produce meaningful value
accretive progress on crystallisation of these assets in the next 12 months.
We will continue to be diligent in managing the overhead costs to ensure as much revenue as possible reaches
the bottom-line and profitability can not only be restored but build a sustainable and resilient cash generative
business that will result in maximum value for our shareholders.
I appreciate the ongoing support of our shareholders, suppliers, customers, employees, and other stakeholders
in our effort to restore profitability and build the value and enhance the saleability of our assets. While we are
not where we want to be yet, I am confident that we are on the right path and the promising signs we see in this
report will mature more significantly over the next 12 months to produce meaningful transformation of the
business in due course.
Art Russell
Interim Chief Executive Officer
21 August 2019
Page | 3
Strategic Report
Principal Activities
VivoPower is an international solar and critical power services company that focuses on small and medium scale
solar development, engineering, procurement and construction (“EPC”) and selected solar asset ownership and
maintenance. Headquartered in London, VivoPower has operations in the United States, Australia and the United
Kingdom.
Management analyses our business in three reportable segments: Critical Power Services, Solar Development,
and Corporate Office. Critical Power Services is represented by J.A. Martin Electrical Pty Limited (“J.A. Martin”)
and Kenshaw Electrical Pty Limited (“Kenshaw”) operating in Australia with a focus on the design, supply,
installation and maintenance of power and control systems, including for solar farms. Solar Development is the
development and sale of commercial and utility scale PV solar power projects in the U.S. and Australia. Corporate
Office is the Company’s corporate functions, including costs to maintain the Nasdaq public company listing,
comply with applicable SEC reporting requirements, and related investor relations and is located in the United
Kingdom. See Note 4.2 to our consolidated financial statements included herein for a breakdown of our financial
results by reportable segment.
Critical Power Services
VivoPower, through its wholly-owned Australian subsidiaries, J.A. Martin and Kenshaw, provide critical energy
infrastructure generation and distribution solutions including the design, supply, installation and maintenance
of power and control systems to a customer base in excess of 750 active commercial and industrial customers
and is considered a trusted power adviser. J.A. Martin and Kenshaw are headquartered in the Hunter Valley and
Newcastle region, which is the most densely populated industrial belt in Australia. Structural and cyclical factors
have created a strong operating environment for our Critical Power Services businesses, particularly the strong
growth in infrastructure investment, recovery in the mining sector, and increasing demand for data centres and
solar farms.
J.A. Martin and Kenshaw are owned by VivoPower through a holding company called Aevitas, which was formed
in 2013 and acquired by VivoPower in December 2016.
The Critical Power Services businesses have several core competencies, encompassing a range of electrical,
mechanical and non-destructive testing services.
J.A. Martin Electrical Pty Limited
Founded in 1968, J.A. Martin is a specialised industrial electrical engineering and power services company that
has been servicing the largest commercial and industrial belt in Australia, the Newcastle and Hunter Valley region
in NSW, for more than 50 years.
J.A. Martin operates from three premises in New South Wales, including a factory in Newcastle which
manufactures, and services customised industrial switchboards and motor control centres. It has two office and
workshop facilities, in the Hunter Valley for servicing the infrastructure, mining and industrial sectors, and in the
Liverpool Plains for servicing customers in the infrastructure and mining sectors.
J.A. Martin’s core competencies include: customised industrial switchboard and motor control centre design,
manufacture and maintenance; industrial electrical engineering, project management for mining, infrastructure
and industrial applications; solar farm electrical contracting and EPC; electrical maintenance and servicing; and,
industrial, mining and infrastructure CCTV and data cabling. With 117 employees and a fleet of 66 service
vehicles J.A. Martin has built a strong reputation throughout eastern Australian for exceptional engineering and
design, delivered on time and budget, supported by a high-level of quality and service.
J.A. Martin serviced over 250 customers in the past year across a diverse range of industries, including solar
farms, grain handling and agriculture, water and gas utilities, cotton gins, commercial buildings, mining, marine
and rail infrastructure. J.A. Martin’s commitment to health & safety and quality, as recognised by their AS 4801
and ISO 9001 certifications, has positioned them to service some of the largest and most respected firms in the
world.
Page | 4
Strategic Report (continued)
With their history and core business centred in the industrial and mining sector of New South Wales, J.A. Martin
has recently taken a firm foothold in the Australian solar electrical and EPC market, focusing on the small and
medium sized solar projects segment of the market. The Australian solar generation market has a strong long-
term growth outlook. Bloomberg New Energy Finance energy outlook forecasts renewable power investment in
Australia will reach more than $138 billion by 2050. In addition, there is significant growth of behind the meter
ground mount and roof-top solar installations as commercial, industrial and government entities respond to
concerns about energy security and costs by embracing cheaper solar power solutions. J.A. Martin has recently
completed the provision of electrical installation and services for its third solar farm. J.A. Martin has now also
been approved by the Clean Energy Council of Australia allowing them to complete the entire EPC process, not
just the electrical component, and as a result is very well positioned competitively to leverage the strong growth
outlook for Australian solar.
Revenue is earned entirely within Australia and is comprised of the following activities:
(US dollars in thousands)
Electrical installation projects
Electrical service contracts
Electrical switchboard manufacturing
Total revenue
Three Months Ended 30 June
Year Ended 31 March
2019
774
2,986
1,813
5,573
2018
(unaudited)
1,030
2,244
2,466
5,740
2019
2018
8,375
7,361
4,949
20,685
6,165
9,425
4,372
19,962
Revenue reported for the three months ended 30 June 2019 is materially impacted by the decrease in the
exchange rate of the Australian dollar to the U.S. dollar. If the same exchange rate applicable to the three months
ended 30 June 2018 was applied, revenue for the three months ended 30 June 2019 would be reported at $6.0
million instead of $5.6 million.
J.A. Martin is a business-to-business enterprise and obtains most of its business through tender processes or
from extension of services to existing or previous customers.
There is no material seasonality which impacts this business.
With over 50 years of history, J.A. Martin sources its supplies from a large number of domestic suppliers based
on competitive pricing, reliable delivery, product performance, and past business relationships. These
relationships are integral to the realisation of its commercial goals and ability to meet the demands of customers
in a competitive marketplace.
With over 250 active customers for the year ended 30 June 2019, the business is not reliant upon any one
customer, nor is the business dependent on any one patent, license, material contract, or process. Further, there
are no government regulations which are material to the business, beyond those generally applicable to all
businesses within the same statutory regime.
Kenshaw Electrical Pty Limited
Founded in 1981, Kenshaw has a unique mix of electrical, mechanical and non-destructive testing capabilities
for customers across a broad range of industries, operating from its facilities in Newcastle, New South Wales,
and Canberra, Australian Capital Territory. Kenshaw’s success has been built on the capability of its highly skilled
personnel to be able to provide a wide range of power generation solutions, products and services across the
entire life-cycle for electric motors, power generation, mechanical equipment and non-destructive testing. From
the head office in Newcastle, Kenshaw’s engineers provide regular and responsive service to long-standing
clients ranging from data centres, hospitals, mining and agriculture to aged care, transport and utility services.
Kenshaw’s core competencies include: generator design, turn-key sales and installation; generator servicing and
emergency breakdown services; customised motor modifications; non-destructive testing services including
crack testing; diagnostic testing such as motor testing, oil analysis, thermal imaging and vibration analysis; and,
industrial electrical services.
Page | 5
Strategic Report (continued)
A growing market for Kenshaw is the data centre sector and it is benefiting from this growth through Kenshaw’s
long-term relationship with one of Australia’s leading data centre companies,
A second key growth market for Kenshaw is hospitals and aged care facilities. According to a 2015
Intergenerational Report by the Australian Treasury Department, this is expected to require the development of
approximately 76,000 new locations by 2024 in order to meet demand, as the number of Australians aged 65
years and over is forecast to more than double over the next 40 years. Kenshaw has built up significant
experience through servicing longstanding customers such as Hunter New England Health, Anglican Care, and
BUPA for which it delivers customised critical back up power solutions and services as well as generator and
thermal imaging services.
Recent contract wins in the active treatment hospital sector, has also placed critical care power infrastructure
as a priority for growth over the coming years. The Australian Government is providing record investment in health
care across hospital funding. Nationwide, the Australian Government’s hospital funding contribution to states
and territories is projected to grow from $21.2 billion in 2018/19 to an estimated $29.1 billion in 2024/25.
Revenue is earned entirely within Australia and is comprised of the following activities:
(US dollars in thousands)
Generator sales and installation
Generator service and non-destructive
testing
Motor sales and overhaul
Total revenue
Three Months Ended 30 June
Year Ended 31 March
2019
6,381
2018
(unaudited)
1,120
2019
2018
11,095
5,919
1,178
377
7,936
1,091
470
2,681
1,744
4,276
17,115
1,786
3,965
11,670
Kenshaw has a regional based marketing strategy, utilising sales staff on the road and internally, open and
private tenders, targeted billboard advertising, and web-based advertising. New business is developed through
a number of channels including: targeted cold calling, leveraging of existing relationships, breakdown services,
and formal tendering process. Kenshaw also maintains strong relationships with key suppliers and consultants
who will refer new and potential clients to us for projects and other works.
There is no material seasonality which impacts this business.
Kenshaw’s relationship with its primary suppliers enables it to sell and service their equipment as dealers or
agents. It is a primary supplier and service agent for Cummins generators and WEG electric motors. Kenshaw
also maintains long term relationships with other equipment manufacturers such as Toshiba and FG Wilson. This
allows it to offer a complete solution to its clients with flexibility of product choice. While equipment
manufacturers are vital to success, it is the working relationships with all its suppliers that allows Kenshaw to
maintain our competitive advantage in delivering orders and projects.
For the three months ended 30 June 2019, 76% (year ended 31 March 2019: 32%) of Kenshaw’s revenue was
earned from one customer and this customer is expected to continue to provide significant revenue in future
years. However, with almost 500 active customers for the year ended 30 June 2019, the business is not solely
reliant upon this customer, nor is the business reliant on any one patent, license, material contract, or process.
Further, there are no government regulations which are material to the business, beyond those generally
applicable to all businesses within the same statutory regime.
Solar Development
VivoPower continues to prioritise the development, construction, and sale of solar projects in Australia,
leveraging the customer relationships of J.A. Martin and Kenshaw and providing a pipeline of development of
EPC opportunities to J.A. Martin. With respect to the U.S., the Company’s focus remains on the monetisation of
our portfolio of solar projects, with a view to then using the proceeds to execute a strategic redeployment.
Page | 6
Strategic Report (continued)
Successful solar development requires an experienced team that can manage many work streams on a parallel
path, from initially identifying attractive locations, to land control, permitting, interconnection, power marketing,
and project sale to investors. Rather than build a substantial team internally to accomplish all of these activities,
our business model is to joint venture on a non-exclusive basis with existing experienced project development
teams so that multiple projects can be advanced simultaneously and allow us to focus on provision of capital,
project management, and marketing and sale of projects. In Australia we have partnered with ITP Renewables
(“ITP”), a global leader in renewable energy engineering, strategy and construction, and energy sector analytics.
In the U.S., we have partnered with Innovative Solar Systems, LLC (“Innovative Solar”), one of the top solar
developers in the U.S., having delivered 2.4 GW of projects to date, with another 13 GW in their current project
pipeline.
Since long-term investors typically value projects on the basis of long-term rates of return (IRR), the development
profit that may be created by a developer is the difference between the cost to develop projects and the fair
market value of such projects. We believe that successful project development results in a significantly lower
cost basis than buying projects that are already developed. With this approach, we believe that we can achieve
attractive risk-adjusted returns in the current market. To achieve these returns, we focus on managing capital in
a disciplined manner during the early development stages and seeking strategic investors with a low cost of
capital once projects achieve an advanced stage.
The stages of solar development can be broadly characterised as: (i) early stage; (ii) mid-stage; (iii) advanced
stage; (iv) construction; and, (v) operation. Our business model is to work through the development process from
early stage through to advanced stage, and then sell those projects that have completed the advanced stage of
development, also known as “shovel-ready” projects, to investors who will finance construction and ultimately
own and operate the project.
Early stage development is primarily focused on securing site control, data collection, community engagement,
preliminary permitting, and offtake analysis. We consider site control to be achieved once we have obtained
purchase or lease options, easements or other written rights of access to the land necessary for the construction
and operation of the solar project.
Mid-stage development is focused on:
•
Transmission Interconnection Queue and Study - identification of a point of interconnection to the
transmission or distribution system, obtaining a queue position with the relevant electric system
operator, and completing at least one feasibility, screening, or system impact study (or equivalent). An
interconnection study and its approval by the relevant transmission or distribution system operator is a
prerequisite to the design and construction of the facilities that will interconnect the solar project with
the transmission or distribution system.
• Environmental Impact Study and Permitting. Completion of an environmental impact study (or
equivalent) is often a prerequisite to obtaining zoning/use permits. Depending on the size and location
of the project, we generally initiate the studies needed for an environmental impact study approximately
18 months prior to the anticipated construction start date and receive the material permits before an
interconnection is agreed with the relevant utility. To consider this milestone completed, we will have
either finished an environmental impact study or received the material permits for the construction and
operation of our solar project.
The most important goal of the advanced stage is to obtain an interconnection agreement with the relevant
electric system operator and a revenue contract to sell power, usually through a Power Purchase Agreement
(“PPA”). Long-term PPAs range from 5 to 15 years with creditworthy off takers, typically obtained by responding
to requests for proposals or conducting bilateral negotiations with utility, commercial, industrial, municipal, or
financial enterprises. In certain markets with liquid electricity trading, it is possible to enter into financial hedges
to support a minimum price of power sold into such markets.
Page | 7
Strategic Report (continued)
A project in the advanced stage indicates a higher degree of confidence for successful completion. However, a
project may become unachievable during any stage of development for a variety of reasons including, loss of
land control, unsuitable studies, uneconomic interconnection or increased construction costs. Should a project
be deemed not to be viable at any stage of development, the project will be discontinued. Accordingly, our focus
is to continuously and rigorously evaluate project viability through the earlier development stages and identify
projects which will not be viable as early as possible.
Once completing the advanced stage of development, a project is considered to be shovel-ready. Prior to
construction, VivoPower seeks qualified investors to purchase projects in order to maximise the return on our
capital and opportunities from capital recycling. Potential purchases are identified and engaged from those
parties known to VivoPower, its development partners, previous investors, and generally within the renewable
energy industry.
Depending on the purchasing party and their particular investment objectives and capabilities, VivoPower may
enter into a development agreement with them to manage construction on their behalf. During the construction
stage, key contracts such as the PPA and interconnection agreements are finalised and executed. Estimated
costs to build and operate the project are determined with selected contractors, internal technical resources and
engineers. All the definitive contracts between the projects, financing parties and the EPC firm who will build the
project will be executed, the construction is completed, and project is commissioned and interconnected to the
grid, achieving its commercial operations date (“COD”) under the PPA.
Once achieving COD, the operational stage begins, and the project generates electricity and sells power. During
this phase, VivoPower may provide ongoing services encompassing operations, maintenance and optimisation
of these solar plants pursuant to long-term contracts. In addition, if a minority equity stake is retained, VivoPower
may realise revenues from the sale of power.
The solar energy development industry is competitive. Competition within the industry is strong and can be
expected to continue to increase. Some of our competitors have substantially more operating experience, access
to financial, engineering, construction, business development or other resources important for solar energy
development, larger footprints or brand recognition. We compete with energy and infrastructure funds and
renewable energy companies and developers, as well as conventional power companies, to acquire, invest in
and develop energy projects. Competition in the solar energy sector can be significantly affected by legal,
regulatory and tax changes, as well as environmental and energy incentives provided by governmental
authorities.
Our business is affected by various regulatory frameworks, particularly ones relating to energy and the
environment. These include the rules and regulations of the Federal Energy Regulatory Commission, the U.S.
Environmental Protection Agency, regional organisations that regulate wholesale electrical markets, state
agencies that regulate energy development and generation and environmental matters, and foreign
governmental bodies that occupy roles similar to the foregoing.
Our business is also affected by various policy mechanisms that have been used by governments to accelerate
the adoption of solar power or renewable energy technologies generally. Examples of such policy mechanisms
include rebates, performance-based incentives, feed-in tariffs, tax credits, accelerated depreciation schedules
and net metering policies. In some cases, such mechanisms are scheduled to be reduced or to expire or could
be eliminated altogether. Rebates are provided to purchasers of solar systems based on the cost and size of the
purchaser’s solar power system. Performance-based incentives provide payments to a solar system purchaser
based on the energy produced by their solar power system. Feed In Tariffs (“FITs”) pay solar system purchasers
for solar power system generation based on energy produced at a rate that is generally guaranteed for a period
of time. Tax credits and accelerated depreciation schedules permit an owner of a solar project to claim applicable
credits and deduct depreciation from income on an accelerated basis on their tax returns. Net metering policies
allow customers to deliver to the electric grid any excess electricity produced by their on-site solar power systems,
and to be credited for that excess electricity at a rate that is often at or near the full retail price of electricity.
Page | 8
Strategic Report (continued)
In addition, many states in the U.S. and Australia have adopted renewable portfolio standards or similar
mechanisms which mandate that a certain portion of electricity delivered by utilities to their customers come
from eligible renewable energy resources. Some states significantly expanded their renewable portfolio
standards in recent years.
Our business is also affected by trade policy and regulations. Examples include tariffs on solar modules and solar
cells. Such tariffs can have a significant impact on the pricing and supply of solar cells and solar modules, and
as a result impact the sale value and/or economic viability of projects.
Australia
VivoPower had previously developed and acquired a diverse portfolio of operating solar projects in Australia,
totalling 2.7 MW across 81 sites in every Australian state and the Australian Capital Territory. VivoPower’s
Australia projects are fully-contracted with commercial, municipal and non-profit customers under long-term
power purchase agreements. Pursuant to the Company’s strategy to recycle development capital, we have
partially monetised these projects, having completed the sale of the Amaroo Solar Project (0.6 MW) in February
2018, the Express Power Portfolio of solar projects (0.2 MW) in September 2018, and the Juice Capital Portfolio
of solar projects (0.3 MW) in November 2018.
The Company’s remaining operating portfolio of solar projects consists primarily of the Sun Connect portfolio, a
portfolio originally of 68 commercial and industrial sites totalling 1.6 GW acquired in December 2015, spread
across five Australian states, with power purchase agreement end dates between 2033 and 2035. The Company
has invested considerable time and effort to improve the portfolio including site performance evaluation,
warranty replacements of faulty components, and customer communication. To date, a total of 15 sites have
been disposed for gross proceeds of $228,000. Moving forward, as individual sites continue to reach the
conclusion of the finance leases by which they were initially funded, VivoPower will collect an increasing stream
of monthly revenue from retained projects. Revenue from remaining owned projects is currently $10,000 per
month, and that figure will increase to as much as $26,000 per month by June 2022, subject to the number of
sites sold in the interim. The Company will continue its focus on sale of the individual sites, while continuing to
pursue portfolio-wide sale opportunities if available.
In addition to the Sun Connect Portfolio, VivoPower is continuing to develop and finance new small to medium
sized solar projects throughout Australia, both individually and with experienced partners. Following a term sheet
signed in February 2018, VivoPower entered into a definitive investment agreement with ITP in July 2018, for
the development of a portfolio of utility-scale solar projects in New South Wales to an aggregate minimum target
of 50 MW. ITP is a global leader in renewable energy engineering, strategy and construction, and in energy sector
analytics. Under the terms of the investment agreement, VivoPower funds up to 1.4 cents per watt (AC) of
development costs per project in exchange for a 60% equity stake in each project, with an opportunity to achieve
a sale and transfer at multiple stages, as early as shovel-ready. The projects will be developed on a merchant
basis, with corporate offsite PPAs sought on an opportunistic basis during the development period.
The Company commenced development of the first project under the ITP investment agreement, Yoogali Solar
Farm, in July 2018. Yoogali Solar Farm is a 15 MW project that is expected to be shovel-ready in October 2019.
Discussions are already underway with various investors seeking to acquire the project and, depending on the
investor, VivoPower may remain involved to construct the project for a development fee to be agreed. A second
solar project under the ITP agreement has recently been approved and is expected to complete development by
June 2020.
VivoPower believes its continued focus and investment in the Australian solar market is strategic, not only for
the returns which it can provide but also for the pipeline of potential EPC work it can provide to J.A. Martin. While
this business has been slow to develop momentum, which we believe is largely a result of limited investment
capital and historic projects which required significant attention but produced minimal income, we believe that
with capital being recycled from both the Australian historic projects and sale of the U.S. portfolio, this business
has the capacity to grow exponentially over the next two to five years and contribute significant development
profits to VivoPower and EPC opportunities to J.A. Martin.
Page | 9
Strategic Report (continued)
The Australian renewable energy market is expected to experience very strong growth over the coming years.
According to Bloomberg, new renewable and flexible generators are expected to make up 78% of Australia’s
energy capacity by 2050, up from just 33% in 2017. Over the same period, fossil fuels will decline from 67% to
17% of Australia’s capacity mix, driven by the increasing affordability of renewables along with retirements of
coal and other traditional sources of generation. Over US$138 billion is forecast to be invested in new
renewables and battery storage in Australia over that period, compared to less than US$25 billion in other
sources.
Already the world leader in residential solar penetration, Australia will continue to add home rooftop solar, while
at the same time seeing a boom in larger-scale commercial, industrial and utility-scale installations over the
coming decade. With new solar already far less expensive than building or extending the lives of existing coal
and gas generators, and nearly cheaper than running existing coal, Australia’s solar boom is expected to continue
even in the absence of any additional incentives or other legislation.
The Company believes that the combined project development, financing and construction expertise of
VivoPower and J.A. Martin uniquely positions us as a broad-spectrum service provider to the burgeoning
Australian solar market.
United States
The Company’s key objective in the United States is to enhance the value and then monetise its portfolio of U.S.
solar projects, with a view to using the proceeds to execute a strategic pivot for the Company in the next twelve
months.
VivoPower’s portfolio of U.S. solar projects is held by Innovative Solar Ventures I, LLC (“ISS Joint Venture”), a joint
venture with an affiliate of Innovative Solar. The ISS Joint Venture provides a 50% ownership in a diversified
portfolio of 38 solar projects in 9 states across the United States, with a combined potential electrical generating
capacity of 1.8 GW.
Under the terms of the ISS Joint Venture, the Company has committed to invest $14.2 million in the ISS Joint
Venture for its 50% equity interest, after reducing the commitment by $0.8 million in potential brokerage
commissions that have not been required and which have been credited towards the Company’s commitment.
The $14.2 million commitment is allocated to each of the 38 projects based on monthly capital contributions
determined with reference to completion of specific project development milestones under an approved
development budget for the ISS Joint Venture. To 30 June 2019, the Company contributed $13.1 million of the
$14.2 million commitment to the ISS Joint Venture, leaving a remaining capital commitment at 30 June 2019,
of $1.1 million, which is recorded in trade and other payables.
With respect to any sale, 2/3 of the first $15 million of cumulative gross proceeds of project sales are distributed
to VivoPower, 1/3 of the following $15 million, and 50% thereafter.
Of the original 38 projects, three have been discontinued as we considered them less economically attractive
versus other projects and did not want to invest further capital in them. The remainder of the projects are in
various stages of development as summarised below and are all being actively marketed for sale with an
expectation of full realisation within the next twelve months. The reflection of projects in fiscal years is based on
the expected date the project will complete the advanced stage of development and be ‘shovel-ready’ and is for
indicative purposes only as projects may be sold at any stage of development. None of these projects have been
written up in value and continue to be carried at cost.
Page | 10
Strategic Report (continued)
Project is eligible for a PPA under PURPA, a U.S. federal law that requires utilities in regulated areas to offer PPAs to renewable
energy providers with Qualifying Facilities.
Financial Results
Three Months Ended 30 June 2019
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Gain/(loss) on sale of assets
Depreciation and amortisation
Operating loss
Restructuring costs
Finance expense – net
Loss before taxation
Income tax
Loss for the period
Three Months Ended 30 June
2019
13,617
(11,960 )
1,657
(1,291 )
38
(437 )
(33 )
(525 )
(796 )
(1,354 )
(92 )
(1,446 )
2018
(unaudited )
9,111
(7,446 )
1,665
(2,079 )
(4 )
(411 )
(829 )
(40 )
(842 )
(1,711 )
12
(1,699 )
During the three months ended 30 June 2019, the Company and its subsidiaries (the “Group”) generated
revenue of $13.6 million, gross profit of $1.7 million, operating loss of $0.03 million and a net loss of $1.4
million. For the three months ended 30 June 2018, the Group generated revenue of $9.1 million, gross profit of
$1.7 million, operating loss of $0.8 million, and a net loss of $1.7 million.
Page | 11
ProjectStateCapacity(MW)Development StageLand ControlInterconnection QueueEnvironmental StudiesZoning / Use PermitInterconnection StudyInterconnection AgreementPower Purchase AgreementFY2020 Solar ProjectsIS 177TX34Advanced✓✓✓✓✓✓✓IS 341TX27Advanced✓✓✓✓✓✓IS 195TX41Advanced✓✓✓✓✓✓IS 78FL75Advanced✓✓✓✓IS 330FL41Advanced✓✓✓IS 145TX62Advanced✓✓✓✓✓IS 165TX62Advanced✓✓✓✓✓IS 144TX82Advanced✓✓✓✓✓IS 75TX55Advanced✓✓✓✓✓IS 207TX83Advanced✓✓✓✓✓IS 137TX27Advanced✓✓✓✓✓IS 305TX41Advanced✓✓✓✓✓IS 320CO41Advanced✓✓✓✓✓✓✓IS 371CO86Advanced✓✓✓✓IS 269CO55Advanced✓✓✓✓✓IS 168FL43Advanced✓✓✓✓✓IS 239CO55Mid✓✓✓✓IS 229KS69Mid✓✓✓IS 267OK41Mid✓✓IS 291KS34Mid✓✓✓✓IS 339OK69Mid✓✓✓IS 244KS34Mid✓✓✓✓IS 76SC21Mid✓✓✓✓IS 129SC26Mid✓✓✓✓✓IS 132SC26Mid✓✓✓✓✓Subtotal 25 Projects1,232FY2021 Solar ProjectsIS 107TX87Mid✓✓✓✓IS 88NM87Mid✓✓✓✓IS 276TX50Mid✓✓✓✓IS 307TX50Mid✓✓✓✓IS 111GA27Early✓✓✓✓IS 90GA27Early✓✓✓✓IS 83GA27Early✓✓✓✓IS 86GA27Early✓✓✓✓IS 370WA74Early✓✓✓IS 211WA56Early✓✓✓✓Subtotal 10 Projects513Projects DiscontinuedIS 97SC28DiscontinuedIS 84SC30DiscontinuedIS 112GA20DiscontinuedSubtotal 3 Projects77Total US Projects38 Projects1,823Advanced StageEarly StageMid Stage
Strategic Report (continued)
Adjusted EBITDA for the three months ended 30 June 2019 was a profit of $0.4 million, compared to a loss of
$0.4 million for the same period in the previous year. Adjusted EBITDA is a non-IFRS financial measure. We
define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortisation, impairment of assets,
impairment of goodwill, and one-off non-recurring costs, including restructuring expenses, non-recurring
remuneration and consulting fees.
The results of operations for the three months ended 30 June 2019 reflect a period of significant growth for the
Critical Power Services business segment. Kenshaw in particular has won a number of new contracts with data
centre and hospital sector customers. These have contributed to a $5.1 million growth in Critical Power Services
revenues, to $13.5 million, compared to $8.4 million in the three months ended 30 June 2018. Solar revenues
of $0.1 million result from sale of Solar Renewable Energy Certificates (“SREC’s”). By contrast Solar revenues
were $0.6 million higher in the three months ended 30 June 2018, resulting from distributions from the Group’s
investments in NC-31 and NC-47 solar projects in North Carolina, United States (together, the “NC Projects”)
prior to their sale in July 2018.
The results of operations for the three months ended 30 June 2019, also reflect savings of $0.8 million in general
and administrative costs compared to the three months ended 30 June 2018. There was significant effort to
rationalise the cost base of the Solar Development business in the year. Headcount reduction and bringing in-
house previously outsourced business activities has generated savings of $0.8 million in labour, legal and
professional fees, and travel expenses.
The results of operations for the three months ended 30 June 2019 further reflect restructuring costs of $0.5
million for legal and professional fees related to disputes with former employees, as further described in Note 7
to the consolidated financial statements.
Management analyses our business in three reportable segments: Critical Power Services, Solar Development,
and Corporate Office. Critical Power Services is represented by J.A. Martin and Kenshaw operating in Australia
with a focus on the design, supply, installation and maintenance of power and control systems. Solar
Development is the development and sale of commercial and utility scale PV solar power projects in U.S. and
Australia. Corporate Office is all United Kingdom based corporate functions. The following are the results of
operations for the three months ended 30 June by reportable segment:
Critical Power
Services
13,484
(11,864 )
1,620
(567 )
5
(422 )
636
(15 )
(358 )
263
(92 )
171
Solar
Development
Corporate
Office
-
-
-
(518 )
(8 )
(1 )
(527 )
(471 )
(389 )
(1,387 )
-
(1,387 )
Total
13,617
(11,960 )
1,657
(1,291 )
38
(437 )
(33 )
(525 )
(796 )
(1,354 )
(92 )
(1,446 )
133
(96 )
37
(206 )
41
(14 )
(142 )
(39 )
(49 )
(230 )
-
(230 )
Three Months Ended 30 June 2019
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Gain/(loss) on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Finance expense – net
Profit/(loss) before taxation
Income tax
Profit/(loss) for the period
Page | 12
Strategic Report (continued)
Three Months Ended 30 June 2018 (unaudited)
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Loss on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Finance expense – net
Loss before taxation
Income tax
Loss for the period
Critical Power
Services
Solar
Development
Corporate
Office
8,416
(7,294 )
1,122
(662 )
(4 )
(375 )
82
-
(256 )
(174 )
8
(166 )
695
(152 )
543
(721 )
-
(34 )
(212 )
-
(164 )
(377 )
4
(373 )
-
-
-
(696 )
-
(2 )
(698 )
(40 )
(422 )
(1,160 )
-
(1,160 )
Total
9,111
(7,446 )
1,665
(2,079 )
(4 )
(411 )
(828 )
(40 )
(842 )
(1,711 )
12
(1,699 )
Finance expense for the three months ended 30 June 2019 remained at $0.8 million, with interest on convertible
loan notes and preferred share financing in Critical Power Services and the $19.0 million Arowana shareholder
loan in line with prior year at $0.4 million. An increase in interest payable of $0.1 million in Critical Power Services
arose due from interest on debtor finance borrowings introduced in August 2018. This increase was offset by
non-recurrence of interest on the $2.0 million short-term loan from SolarTide, LLC outstanding in the
comparative period.
As of 30 June 2019, the Group’s current assets were $36.3 million (31 March 2019: $29.8 million), which was
comprised of $7.1 million (31 March 2019: $4.5 million) of cash and cash equivalents, $0.6 million restricted
cash (31 March 2019: $1.3 million), $15.0 million (31 March 2019: $10.4 million) of trade and other
receivables, and $13.5 million (31 March 2019: $13.5 million) of assets held for sale related to the ISS Joint
Venture portfolio.
Current liabilities were $29.1 million (31 March 2019: $20.8 million), primarily due to a $5.1 million increase in
contract liabilities related to critical power contracts in process at 30 June 2019, $0.6 million due the change in
accounting policy related to operating leases as further described in Note 2.16 to the consolidated financial
statements, and a $0.8 million short-term shareholder loan advanced in the three months ended 30 June 2019.
Current asset-to-liability ratio at 30 June 2019 was 1.25:1 (31 March 2019: 1.43:1).
As of 30 June 2019, the Group had net assets of $22.5 million (31 March 2019: $24.0 million), including
intangible assets of $31.8 million (31 March 2019: $32.3 million). Property, plant and equipment increased
from $1.2 million at 31 March 2019 to $3.0 million at 30 June 2019, principally due the $1.6 million impact of
the change in accounting policy related to operating leases as referenced above.
Cash generated for the three months ended 30 June 2019 was $2.6 million (year-ended 31 March 2019: $2.7
million), arising from cash generated by operating activities of $2.2 million (year-ended 31 March 2019: cash
used $1.6 million), cash used in investing activities of $0.4 million (year-ended 31 March 2019: cash generated
$11.9 million), and cash generated by financing activities of $0.7 million (year-ended 31 March 2019: cash used
$7.6 million). At 30 June 2019, the Group had cash reserves of $7.1 million (31 March 2019: $4.5 million) and
debt of $21.4 million (31 March 2019: $19.3 million), giving a net debt position of $14.3 million (31 March
2019: $14.7 million). The impact of the change in accounting policy with respect to operation leases as
referenced above is an increase in debt of $1.3 million during the period.
Cash flows from investing activities in the current period comprised $0.1 million proceeds from sale of other
project assets in Australia, offset by purchase of $0.4 million of operating assets in Critical Power Services
businesses.
Page | 13
Strategic Report (continued)
Cash flows from financing activities totalled $0.7 million in the three months ended 30 June 2019. Inflows
comprised an $0.8 million short-term shareholder loan, $0.2 million of additional debtor finance borrowings in
Critical Power Services and $0.7 million transfer from restricted cash, principally due to settlement of the $0.5
million preferred supplier escrow. Partly offsetting these inflows were lease repayments of $0.1 million for right-
of-use assets in Critical Power Services businesses and $0.8 million finance expenses.
Year Ended 31 March 2019
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Gain/(loss) on sale of assets
Depreciation and amortisation
Operating loss
Restructuring costs
Impairment of assets
Impairment of goodwill
Finance expense – net
Loss before taxation
Income tax
Loss for the year
Year Ended 31 March
2019
39,036
(32,726 )
6,310
(7,685 )
(2,615 )
(1,420 )
(5,410 )
(2,017 )
-
-
(3,239 )
(10,666 )
(557 )
(11,223 )
2018
33,647
(28,524 )
5,123
(12,814 )
1,356
(1,260 )
(7,595 )
(1,873 )
(10,191 )
(11,092 )
(3,386 )
(34,137 )
6,258
(27,879 )
During the year ended 31 March 2019, the Company and its subsidiaries (the “Group”) generated statutory
revenue of $39.0 million, gross profit of $6.3 million, operating loss of $5.4 million and a net loss of $11.2
million. For the year ended 31 March 2018, the Group generated revenue of $33.6 million, gross profit of $5.1
million, operating loss of $7.6 million, and a net loss of $27.9 million.
Adjusted EBITDA for the year ended 31 March 2019 was a loss of $1.2 million, compared to a loss of $3.2 million
in the previous year. Adjusted EBITDA is a non-IFRS financial measure. We define Adjusted EBITDA as earnings
before interest, taxes, depreciation and amortisation, impairment of assets, impairment of goodwill, and one-off
non-recurring costs, including restructuring expenses, non-recurring remuneration and consulting fees.
The results of operations for the year ended 31 March 2019 reflect a year of significant growth for the Critical
Power Services business segment. Kenshaw in particular has won a number of new contracts with data centre
and hospital sector customers. These have contributed to a $6.0 million growth in Critical Power Services
revenues, to $37.8 million, compared to $31.8 million in the year ended 31 March 2018. Solar revenues of $1.2
million comprise $0.4 million from sale of Solar Renewable Energy Certificates (“SREC’s”) and $0.8 million
distributions from the Group’s investments in NC-31 and NC-47 solar projects in North Carolina, United States
(together, the “NC Projects”) prior to their sale in July 2018. By contrast Solar revenues were $0.6 million higher
in the year ended 31 March 2018, due principally to non-recurrence of development fee revenue recognised on
the NC-47 project which was completed in April 2017.
None of the 38 solar projects in the ISS Joint Venture achieved a shovel-ready stage of development during the
year and accordingly did not contribute to profitability in the year ended 31 March 2019.
The results of operations for the year ended 31 March 2019, reflect savings of $5.1 million in general and
administrative costs. There was significant effort to rationalise the cost base of the Solar Development business
in the year. Headcount reduction and bringing in-house previously outsourced business activities has generated
savings of $4.1 million in labour, legal and professional fees, and travel expenses. Partly offsetting these savings
were $0.6 million increase in labour and other overhead costs in Critical Power Services, required to support
their growth in operations. Furthermore, there was a saving in one-time costs of $1.6 million for third party
consulting fees incurred in the year ended 31 March 2018 on international solar procurement consulting, project
evaluations, engineering review and technical validation related to the EPC contract for NC-31.
Page | 14
Strategic Report (continued)
The results of operations for the year ended 31 March 2019 also reflects restructuring costs of $2.0 million
comprised of $1.8 million of legal and professional fees related to disputes with former employees, as further
described in Note 7 to the financial statements, and $0.2 million of further workforce reduction actions were
also incurred in the year.
Management analyses our business in three reportable segments: Critical Power Services, Solar Development,
and Corporate Office. Critical Power Services is represented by J.A. Martin and Kenshaw operating in Australia
with a focus on the design, supply, installation and maintenance of power and control systems. Solar
Development is the development and sale of commercial and utility scale PV solar power projects in U.S. and
Australia. Corporate Office is all United Kingdom based corporate functions. The following are the results of
operations for the years ended 31 March by reportable segment:
Year Ended 31 March 2019
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Loss on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Impairment of assets
Impairment of goodwill
Finance expense – net
Loss before taxation
Income tax
Loss for the year
Year Ended 31 March 2018
(US dollars in thousands)
Revenue
Costs of sales
Gross profit
General and administrative expenses
Gain on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Impairment of assets
Impairment of goodwill
Finance expense – net
Loss before taxation
Income tax
Loss for the year
Critical Power
Services
37,800
(32,317 )
5,483
(2,823 )
(30 )
(1,272 )
1,358
(8 )
-
-
(1,354 )
(4 )
(572 )
(576 )
Solar
Development
Corporate
Office
1,236
(409 )
827
(2,148 )
(2,585 )
(140 )
(4,046 )
7
-
-
(221 )
(4,260 )
15
(4,245 )
-
-
-
(2,714 )
-
(8 )
(2,722 )
(2,016 )
-
-
(1,664 )
(6,402 )
-
(6,402 )
Critical
Power
Services
31,807
(27,482 )
4,325
(2,173 )
213
(1,233 )
1,132
(335 )
-
-
(1,283 )
(486 )
(85 )
(571 )
Solar
Development
Corporate
Office
1,840
(1,042 )
798
(6,468 )
1,143
(19 )
(4,546 )
(964 )
(10,191 )
(11,092 )
(400 )
(27,193 )
6,291
(20,902 )
-
-
-
(4,173 )
-
(8 )
(4,181 )
(574 )
-
-
(1,703 )
(6,458 )
52
(6,406 )
Total
39,036
(32,726 )
6,310
(7,685 )
(2,615 )
(1,420 )
(5,410 )
(2,017 )
-
-
(3,239 )
(10,666 )
(557 )
(11,223 )
Total
33,647
(28,524 )
5,123
(12,814 )
1,356
(1,260 )
(7,595 )
(1,873 )
(10,191 )
(11,092 )
(3,386 )
(34,137 )
6,258
(27,879 )
The $2.6 million loss on sale of assets in the Solar Development segment in the current year is comprised of a
$1.9 million provision for onerous contracts related to future obligations to purchase SRECs from the NC
Projects, discontinued solar development projects in the ISS Joint Venture ($0.8 million), and a correction to the
gain on the sale of Amaroo solar project reported in the prior year ($0.3 million), offset by a gain on sale of the
NC Projects ($0.4 million).
Page | 15
Strategic Report (continued)
As a result of the sale of VivoRex, LLC, on 2 July 2019 as disclosed in Note 29 to the financial statements, total
onerous contract provisions of $2.3 million, including the $1.9 million referenced above, were reversed and
taken into income as a gain on sale of assets subsequent to year-end.
Financing costs decreased by $0.2 million year-over-year. Interest on convertible loan notes and preferred share
financing in Critical Power Services and the $19.0 million Arowana shareholder loan remained in line with prior
year. $0.2 million of borrowing costs was incurred in the year related to a $2.0 million short-term loan (“DEPCOM
Loan”) provided by SolarTide, LLC, an affiliate of DEPCOM Power, an engineering, procurement, and construction
firm that was involved in the development of the NC Projects. Foreign exchange movements were also reduced
in the current year. Partly offsetting these reductions, an additional $0.2 million interest on debtor finance
borrowings were incurred in the year.
As of 31 March 2019, the Group had net assets of $24.0 million (2018: $37.0 million), including intangible
assets of $32.3 million (2017: $36.4 million) and non-current investments of nil (2018: $14.1 million).
As of 31 March 2019, the Group’s current assets were $29.8 million (2018: $21.3 million), which was comprised
of $4.5 million (2018: $1.9 million) of cash and cash equivalents, $1.3 million restricted cash (2018: nil), $10.4
million (2018: $7.9 million) of trade and other receivables, and $13.5 million (2018: $11.4 million) of assets
held for sale related to the ISS Joint Venture portfolio (2018: NC Projects). Current liabilities were $20.8 million
(2018: $20.6 million), which resulted in a current asset-to-liability ratio of 1.43:1 (2018: 1.03:1) at year-end.
Cash generated for the year was $2.7 million (2018: cash used $9.0 million), arising from cash used by operating
activities of $1.6 million (2018: cash generated $8.9 million), cash generated by investing activities of $11.9
million (2018: used $16.6 million), and cash used in financing activities of $7.6 million (2018: $1.3 million). At
31 March 2019, the Group had cash reserves of $4.5 million (2018: $1.9 million), restricted cash of $1.3 million
(2018: nil) and debt of $19.3 million (2018: $22.3 million), giving a net debt position of $13.4 million (2018:
$20.4 million).
Cash flows from investing activities in the current year comprised $11.8 million proceeds from the sale of NC
Projects and $0.5 million proceeds from sale of other project assets in Australia. These were offset by purchase
of $0.2 million of operating assets in Critical Power Services businesses and $0.3 million investment in solar
projects in Australia.
Cash flows from financing activities included $2.0 million repayment of the DEPCOM Loan, a $4.0 million
advance from NES on the sale proceeds of NC Projects, that was repaid on completion in July 2018. Also, the
Group repaid the $0.8 million short-term loan from Arowana and $0.8 million of the parent company loan from
Arowana. Finance lease repayments were $0.3 million, net of repayments, for motor vehicle assets in Critical
Power Services businesses. $1.3 million transfers to restricted cash were made for security on debtor finance
arrangements in Critical Power Services and cash held in escrow to fund a $0.5 million liability to DEPCOM. Also
finance expense outflows of $3.2 million were incurred. Offsetting these, the Group received $0.8 million funding
from debtor finance arrangements established in Critical Power Services.
Principal Risks and Uncertainties
VivoPower 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.
Page | 16
Strategic Report (continued)
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 internationally 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 of 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. 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 gender employed at
the Company and their level of seniority.
Directors
Senior Manager
Employees
Total
Page | 17
Female
1
7
8
16
Male
2
17
149
168
Total
3
24
157
184
Strategic Report (continued)
Health and Safety
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.
The Environment
The Group recognizes 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. In addition,
lightly damaged solar panels, that would have otherwise been bound for landfill, are donated to charity.
Communities
VivoPower has maintained an active program of community involvement in the locations we operate, including
support for local children’s sport teams and engagement with other worthwhile causes supported by our
employees. In addition, as noted above, the Company donates lightly damaged solar panels to a charity that
provides aid to the impoverished, supports local education initiatives, and assists with charitable renewable
energy projects.
B Corp Certification
VivoPower became certified as a B Corp in April 2018. Consistent with this certification, the shareholders
approved changes to the Articles of Association of the Company at the last annual general meeting on 20 August
2018, to include:
(i)
(ii)
the purposes of the Company are to promote the success of the Company for the benefit of its members
as a whole and, through its business and operations, to have a material positive impact on society and
the environment, taken as a whole;
in exercising the powers of the Company, a Director shall have regard to, among other matters,
stakeholder interests such as:
a. the likely consequences of any decision in the long term;
b. the interests of the Company's employees;
c. the need to foster the Company's business relationships with suppliers, customers and others;
d. the impact of the Company's operations on the community and the environment;
e. the desirability of the Company maintaining a reputation for high standards of business conduct; and,
f. the need to act fairly as between members of the Company.
As a B Corp, the Company is committed to continuously improve its B Corp score and deliver on the B Corp triple
bottom line of Planet, People and Profit.
The Directors consider the Company’s ongoing commitment to B Corp certification and continual improvement
thereunder as the primary means by which the Directors have had regard to the matters set out in section 172(1)
of the Companies Act 2006 when performing their duty to act in the way most likely to promote the success of
the Company for the benefit of its members as a whole.
The Strategic Report comprising pages 4 to 18 was approved by the Board and signed on its behalf by:
Kevin Chin
Chairman
21 August 2019
Page | 18
Directors’ Report
The Directors are pleased to present their report and the audited financial statements of VivoPower International
PLC (“the Company”) and its subsidiary undertakings (together “the Group”) for the three months ended 30 June
2019. Subsidiary and associated undertakings are listed in Note 13 to the financial statements.
Directors
The Directors who held office during the period and up until the date of this report:
Appointed
Resigned
Non-executive Directors
Kevin Chin
Peter Sermol
Shimi Shah
27 April 2016
21 December 2016
28 December 2017
Pursuant to Articles of the Company, the Directors are divided into three classes, as nearly equal in number as
possible and designated as Class A, Class B and Class C. The initial term of Class A Directors expired at the
Company’s first annual general meeting in September 2017, Class B Directors at the 2018 annual general
meeting, and for Class C Directors will expire at the 2019 annual general meeting. At each annual general
meeting, successors to the class of Directors whose term expired at that annual general meeting are elected for
a term to expire at the third annual meeting following such election.
There are currently no Class A Directors. Peter Sermol is a Class B Director and was re-elected at the 2018
annual general meeting for a three-year term. Kevin Chin and Shimi Shah are Class C Directors and their term
will expire at the 2019 annual general meeting.
Kevin Chin and Shimi Shah have both offered themselves for re-election to a further three-year term. Kevin and
Shimi’s biographies are set out below. They both have a Non-Executive Directors Appointment Letter as
described in the Director’s Remuneration Report on page 28. A resolution to reappoint Kevin Chin and Shimi
Shah will be proposed at the forthcoming Annual General Meeting.
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 28.
Details of the current Board of Directors and their relevant experience is provided below.
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 operating companies
across the U.K., U.S., Asia, Australia and New Zealand. 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.
Over his twenty-five year career, Kevin has held a number of strategic and operational leadership roles and was
also previously with LFG, 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 curriculum writer and lecturer in the Master of Applied Finance programme.
Page | 19
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 U.K. 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,
U.S. viatical life insurance policies, U.S. 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.
Shimi Shah
Shimi has been actively involved in investing and venture capital for over 20 years. Shimi is the Chairperson of
Carousel Solutions, a technology and business advisory group, focusing on assisting companies navigate
expansion into and out of the Middle East and Europe, build diversified businesses, appoint boards, and provide
efficient technology solutions to mitigate security risk and increase productivity.
Shimi is also an active independent director and advisory board member. She is a board director of Bboxx, a $25
million revenue distributed energy business, chairs the leading kid’s club design company called Worldwide Kids
Club, is part of the advisory committee for the Green Gateway Fund, a $250 million clean technology and
sustainability fund and is on the advisory board of the North East Fund, a $200 million regional development
fund. She also sits on the board of the Pay It Forward Foundation based in the U.S.
Prior to this, she was CEO at FORSA LLC, Managing Partner at Partnerships UK (PUK), Chief Investment Officer
at Hanson Capital, and has worked at 3i and Citigroup. Shimi holds Masters in Management from Queens’
College, Cambridge, and Bachelor of Science degree from King’s College, London, in Management and
Economics. She is an active member of the Young President’s Organization (YPO) in Europe and Africa.
Statement of Directors Responsibilities
The directors are responsible for preparing the Annual Report and Accounts for the Group and 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;
•
•
state whether applicable IFRSs have been followed, subject to any material departures disclosed and
explained in the financial statements; and,
prepare the financial on the going concern basis unless it is inappropriate to presume that the Group and
parent company will continue in business.
Page | 20
Directors’ Report (continued)
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group’s and parent company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Group and 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 parent company 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.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from the legislation in other jurisdictions in which the
Company operates, including the U.S. and Australia.
The Directors consider the Company’s ongoing commitment to B Corp certification and continual improvement
thereunder, as discussed on page 18 of the Strategic Report, as the primary means by which the Directors have
had regard to the matters set out in section 172(1) of the Companies Act 2006 when performing their duty to
act in the way most likely to promote the success of the Company for the benefit of its members as a whole.
Directors’ Insurance and Indemnities
The Directors have the benefit of the indemnity provisions contained in the Company’s Articles of Association
and the Company has maintained throughout the year directors’ and officers’ liability insurance for the benefit
of the Company, the Directors and its officers.
The Company has entered into qualifying third-party indemnity arrangements for the benefit of all its Directors
in a form and scope which comply with the requirements of the Companies Act 2006 and which were in force
throughout the year and remain in force.
Future Developments
A detailed description of the Group’s business operations, results for the three months ended 30 June 2019,
and likely future developments are presented in detail in the Strategic Report.
Financial Instruments
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 Board has overall responsibility for the establishment and oversight of the Group’s risk management
framework. Policy for managing risks is set by the Chief Executive Officer and is implemented by the Group’s
finance department. All risks are managed centrally with a tight control of all financial matters. For additional
information on the composition of financial instruments, management objectives and policies, risk exposure and
mitigation refer to Note 27 of the financial statements.
Going Concern
The financial statements have been prepared on a going concern basis, as Directors believe the Company will
be able to meet its liabilities as they fall due.
As at 30 June 2019, the Company had unrestricted cash totalling $7.1 million, compared to $4.5 million at 31
March 2019.
Page | 21
Directors’ Report (continued)
During the period ended 30 June 2019, the Company reduced general and administrative expenses within the
Solar Development and Corporate segments by a further $2.0 million on an annualised basis, in comparison to
the year ended 31 March 2019, and has plans to implement further reductions going forward. The Company’s
Critical Power Services segment represented by J.A. Martin Electrical Pty Limited and Kenshaw Electrical Pty
Limited produced $1.1 million EBITDA for the three months ended 30 June 2019 and is expected to continue to
perform at or above this level going forward.
The Company is also engaged in a financing initiative with respect to these businesses which is expected to
release the restricted cash of $0.6 million and provide up to $1.0 million of additional working capital. Lastly,
the Company is actively engaged in a process to enhance value with a view to selling its investment in the ISS
Joint Venture, with $13.5 million classified as assets held for sale; this investment is expected to be realised in
cash over the next 12 months. The Directors believe these actions provide sufficient cash to support business
operations and meet obligations as they become due through August 2020.
To ensure success of the business, the Directors have prepared and reviewed additional plans to mitigate any
cash flow risk that may arise during the next twelve months. These actions include the implementation of further
operational cost reductions and a further sale of assets as required.
The Directors have examined going concern against a detailed profit, working capital, and cash flow forecast to
August 2020, which reflects the matters discussed in the foregoing paragraphs but does not reflect any
additional share issuance, new debt facilities other than disclosed above, nor sale of assets other than in the
ordinary course of business. 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.
Legal Proceedings
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business.
Although we believe that the outcome of any such matters will not have a material adverse effect on our business,
such outcomes are not ascertainable in advance and litigation can have an adverse impact on us because of
defence and settlement costs, diversion of management resources, damages or penalties and other factors.
On 26 February 2018, Philip Comberg, formerly Chief Executive Officer and formerly a member of the Board of
Directors of VivoPower, filed a claim in the High Court of Justice Queen’s Bench Division in the United Kingdom
against VivoPower and a subsidiary, VivoPower International Services Limited (“VISL”). The claim is in respect of
payments alleged to be due to Mr. Comberg, damages, and restitution in relation to services allegedly rendered
by Mr. Comberg, interest and costs. In particular, Mr. Comberg claims VISL committed a repudiatory breach of
Mr. Comberg’s service agreement with VISL in connection with the termination of Mr. Comberg’s employment in
October 2017, and claims as damages amounts including £615,600 in unpaid amounts allegedly relating to the
notice period under the service agreement, £540,000 relating to shares of stock in PLC that Mr. Comberg alleges
were not delivered to him but were due, and, inter alia, amounts relating to bonuses alleged to be due, fees
relating to services Mr. Comberg claims he provided, as well as interest and costs (collectively, the “Comberg
Claims”).
On 9 April 2018, VivoPower and VISL filed a defence and counterclaims against Mr. Comberg. In the defence,
VivoPower and VISL denied that a repudiatory breach was committed by VISL and denied the other Comberg
Claims and asserted that Mr. Comberg was terminated for cause and/or by the acceptance on the part of VISL
of Mr. Comberg’s own repudiatory breach of Mr. Comberg’s service agreement. VivoPower and VISL also filed
counterclaims against Mr. Comberg alleging that Mr. Comberg had mismanaged the Company, misrepresented
information to the VivoPower Board, and failed to report his own wrongdoing in breach of his services agreement
and fiduciary duties to VivoPower and VISL.
On 26 November 2018, VivoPower and VISL agreed to a settlement of the counterclaims for an undisclosed
amount. No settlement has been reached with respect to Mr. Comberg’s claim. VivoPower and VISL continue to
strongly deny and defend the Comberg Claims.
Page | 22
Directors’ Report (continued)
Donations
During the year ended 31 March 2019, the Group made no political donations nor other political expenditures.
Greenhouse Gas Emissions
Due to resource constraints, it is not practical for the Company to obtain information on greenhouse gas
emissions resulting from our activities or operations or from use of purchased energy. Accordingly, no disclosure
is made in this regard.
Share Capital
As at 30 June 2019, there are 13,557,376 ordinary shares in issue. There were no new shares issued or
repurchased during the year. At the Company’s Annual General Meeting in 2017, the Directors were given
authority to allot shares up to an aggregate nominal amount of $1,560.00.
On 30 March 2017, the Company repurchased 129,805 shares at a price of $4.50 per share for a total of
$591,911, including commission and held them as treasury shares. During the three months ended 30 June
2019, 51,000 shares (year ended 31 March 2019: 75,805 shares) were awarded to employees under the
Company’s 2017 Omnibus Incentive Plan. Based on the closing market value of these shares on the day of
award, $61,560 (year ended 31 March 2019: $85,660) was expensed as employee compensation during the
three months ended 30 June 2019 and the remaining cost of $171,000 was charged against retained earnings.
The remaining 3,000 shares are being held as treasury shares and are included in the total number of shares
outstanding at 30 June 2019.
There are no specific restrictions on the transfer of shares in the Company, which is governed by the Articles of
Association and prevailing legislation, nor is the Company aware of any agreements between holders of securities
that may result in restrictions on the transfer of shares or that may result in restrictions on voting rights.
There are no persons holding securities carrying special rights regarding control of the Company, no special
rights attaching to shares under employee share schemes, no restrictions on voting rights, nor any significant
agreements that take effect, alter or terminate on change of control of the Company following a takeover, with
the exception of the conversion rights attached to the convertible preference shares and convertible loan notes
in Aevitas Group Limited as described in Note 23 to the consolidated financial statements.
Substantial Interests
As at 16 August 2019, the last practicable date before publication of this report, the Company has been notified
of the following interests of 3% or more of its issued capital of 13,557,376 ordinary shares.
Arowana International Limited (1)
The Panaga Group Trust
Number of Shares
Percentage of Issued Capital
8,176,804
1,241,531
60.30%
9.2%
(1) Includes Arowana International Limited and its controlled entities including, Arowana Australasian Special Situations Fund 1 Pty Limited,
Arowana Australasian VCMP 2, LP, Arowana Australasian Special Situations Partnership 1, LP, Arowana Energy Holdings Pty Ltd.
Dividends
The Company has never declared or paid any dividends on our ordinary shares, and we currently do not plan to
declare dividends on our ordinary shares in the foreseeable future. Any determination to pay dividends to holders
of our ordinary shares will be at the discretion of our board of directors and will depend upon many factors,
including our financial condition, results of operations, projections, liquidity, earnings, legal requirements,
restrictions in our debt arrangements and other factors that our board of directors deem relevant.
Page | 23
Directors’ Report (continued)
Articles of Association
The Company’s Articles of Association may only be amended by special resolution at a general meeting of
shareholders.
Auditors
PKF Littlejohn LLP has indicated its willingness to continue as auditor. 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.
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.
The Directors' Report comprising pages 19 to 24 was approved by the Board and signed on its behalf by:
Kevin Chin
Chairman
21 August 2019
Page | 24
Corporate Governance
The Company’s shares have been listed on NASDAQ since 29 December 2016. The Board is accountable to the
Company’s shareholders for good governance and this statement describes principles of corporate governance
that have been applied by the Company.
The Directors believe that good corporate governance, involving risk appraisal and management, prudent
decision-making, open communication and business efficiency, is important for the long-term benefit of the
stakeholders in the Group.
Board of Directors
The Board is collectively responsible for providing leadership of the Group within a framework of prudent and
effective controls and constructively challenges and helps to develop and communicate the Group’s strategic
aims.
The Board is currently comprised of three non-executive directors. The Board has determined that Peter Sermol,
and Shimi Shah are independent in accordance with the listing rules of NASDAQ. All directors are given regular
access to the Company’s operations and personnel as and when required. Their biographies on pages 19 and
20 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.
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 but not limited to 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 Board is scheduled to meet normally no less than six times per year to enable the Board to discharge its
duties effectively and to consider those matters which specifically require Board review and decision. 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 year three months ended 30 June 2019 and the attendance of the members at those meetings
(attended/eligible to attend):
Board
2 / 2
2 / 2
2 / 2
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
1 / 1
1 / 1
1 / 1
0 /0
0 /0
0 / 0
0 /0
0 /0
0 / 0
Kevin Chin
Peter Sermol
Shimi Shah
Audit and Risk Committee
The Audit and Risk Committee is comprised of three Board members, the majority of whom the Board has
determined are independent, with Shimi Shah serving as Chair and meets at least three times a year. The Interim
Chief Executive Officer is generally in attendance in a non-voting capacity to provide detailed reports and deal
with any queries which arise.
An invitation is also extended to the auditors to attend meetings of the Audit and Risk 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 and Risk Committee. The Audit and Risk 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.
Page | 25
Corporate Governance (continued)
The Audit and Risk 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
Remuneration Committee
The Remuneration Committee comprises three directors, the majority of whom the Board has determined are
independent, with Shimi Shah serving as Chair. 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 comprises three directors, the majority of whom the Board has determined are
independent, with Peter Sermol serving as Chair. 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 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. The Company’s Investment Committee
process contains five stages to ensure the Company has an explicit understanding of a portfolio’s purpose,
objective and a clear definition of success in determining whether the portfolio achieves that purpose and meets
that objective. The five stages include:
(i)
(ii)
(iii)
Completion of a Lead Qualification Form to provide a project overview, indicative returns, capital
required, risks, timeline and areas to consider in future diligence;
First Investment Committee Meeting (‘IC1’) to provide a comprehensive summary of the project
including detailed legal, technical, financial information and risks;
Second Investment Committee Meeting (‘IC2’) which includes everything in IC1 plus summary of
transaction documentation and update on diligence;
Page | 26
Corporate Governance (continued)
(iv)
Board approval to fund the project, and formally recommend that project executes transaction
documentation; and,
(v)
Board approval to execute the transaction documentation.
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 23 September 2019 at the offices of DAC Beachcroft,
LLP, 25 Walbrook, London, United Kingdom EC4N 8AF. The notice of the meeting is sent to shareholders at least
21 days before the meeting.
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 | 27
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).
Statement by the Chairman of the Remuneration Committee
On behalf of the Remuneration Committee (the "Committee"), I am pleased to present the Remuneration Report
for the three months ended 30 June 2019.
The Committee is comprised of Shimi Shah, Peter Sermol, and Kevin Chin, the majority of whom the Board has
determined are independent.
The Committee has a written charter, a form of which is available free of charge on VivoPower’s website at
www.vivopower.com. The remuneration committee’s duties, which are specified in our Remuneration Committee
Charter, include, but are not limited to:
•
Setting the remuneration policy for all executive directors and executive officers, including pension rights
and any compensation payments;
• Reviewing the appropriateness and relevance of the remuneration policy;
• Determining total individual compensation packages;
• Reviewing and designing share incentive and share option plans, determining awards thereunder and
administering such plans;
• Approving design of and targets for performance-related pay schemes;
• Determining pension arrangements;
• Appointing compensation consultants;
• Approving contractual appointment terms for directors and senior executives; and,
• Related duties.
The Company’s objective with respect to remuneration of directors is to attract and retain high-calibre individuals
who are able to bring an appropriately senior level of experience and judgement to bear on issues of strategy,
performance, resources and standard of conduct.
No changes are proposed to the Directors Remuneration Policy for Executive and Non-Executive Directors as
approved by shareholders on 5 September 2017.
The Company's Annual Report on Remuneration, disclosing the compensation paid to directors in respect of the
three months ended 30 June 2019 is provided below.
Annual Report on Remuneration (audited)
Executive Directors
The Company has had no Executive Directors since Carl Weatherley-White, former Chief Executive Officer,
resigned as a Director on 28 December 2017.
Page | 28
Directors’ Remuneration Report (continued)
Non-Executive Directors
The amount earned by each Director for the three months ended 30 June 2019 and the years ended 31 March
2019 and 2018 is set out in the table below:
Three months ended 30 June 2019
Year ended 31 March
Salary and
fees
£48,750
£15,000
£15,000
-
-
Bonus and
LTIP
Pension and
Other
Benefits
-
-
-
-
-
-
-
-
-
-
Total
2019
Total
2018
Total
£48,750
£195,000
£195,000
£15,000
£81,063
£15,000
£15,000
£61,750
£113,000
-
£33,326
£53,000
-
£110,837
£126,636
Kevin Chin
Shimi Shah
Peter Sermol
Edward Hyams
Gary Hui
Kevin Chin receives £165,000 per annum for being Chairman of the Board plus a further £30,000 for being a
member of the Audit, Nomination and Remuneration Committees. Kevin Chin was officially appointed as a Non-
Executive Director on 1 August 2016, and 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).
Shimi Shah was appointed as a Non-Executive Director on 28 December 2017 and commenced that role on the
same date. Shimi Shah receives £48,000 per annum for being a Non-Executive Director and an additional
£12,000 per annum for being a member of the Nomination, Audit and Risk, and Remuneration Committees. In
accordance with the Directors’ Remuneration Policy, Shimi Shah was also paid a one-time fee of £20,690 in the
year ended 31 March 2019 as additional compensation for additional work undertaken on behalf of the
Company.
Peter Sermol was appointed as a Non-Executive Director on 1 August 2016 and commenced that role from 21
December 2016. Peter Sermol receives £48,000 per annum for being a Non-Executive Director and an additional
£12,000 per annum for being a member of the Nomination, Audit and Risk, and Remuneration Committees. In
accordance with the Directors Remuneration Policy, Peter Sermol was also paid a one-time fee of £60,000 in
the year ended 31 March 2018 as additional compensation for foregone opportunities at the time he joined the
Board.
There are no pension benefits available to Directors nor any additional benefit if a Director were to retire early.
No discretion was exercised in the award of Directors' remuneration.
No payments were made to any past Director during the period nor in connection with a Director's loss of office
during the period.
There are no agreements with the Company and its Directors or employees for compensation for loss of office
or employment that occurs because of a takeover bid.
Page | 29
Directors’ Remuneration Report (continued)
Director’s Interests
The Directors beneficial interest in the 13,557,376 issued ordinary shares of the Company as at 30 June 2019
are detailed below.
Outstanding scheme interests at 30 June 2019
Unvested
scheme
interests (not
subject to
performance
measures)
-
-
-
Number of
Shares
Beneficially
Owned
1,266,531
-
-
Vested but
unexercised
scheme
interests
-
-
-
Total shares
subject to
outstanding
scheme
interests
-
-
-
Total of all share
interests and
outstanding
scheme
interests, at 30
June 2019
1,266,531
-
-
Percentage of
Outstanding
Shares
9.3%
-
-
Kevin Chin (1) (2) (3)
Shimi Shah
Peter Sermol
(1)
Represents shares held by Borneo Capital Pty Limited and The Panaga Group Trust, of which Mr. Chin is a beneficiary and one of the
directors of the corporate trustee of such fund.
(2) Does not include shares held by Arowana International Limited, of which Mr. Chin is a director.
(3)
In 2015, Arowana Partners Group, a private Australian company of which Kevin Chin is a shareholder and director lent $607,470 to
Gary Hui’s private vehicle, Beira Corp, a British Virgin Islands entity, pursuant to a loan agreement. Beira Corp has not paid back the
loan together with accumulated interest upon its maturity and has been attempting to settle the loan in full by transferring 325,046
VivoPower International PLC shares to Arowana Partners Group. This has been rejected by Arowana Partners Group on the basis that
the value of these shares is significantly below the outstanding loan and accumulated interest and that the transfer of such shares
could be in contravention of securities law if any transfer happened during blackout periods. This matter is now the subject of a legal
dispute and therefore the shareholding balances above do not reflect the VivoPower shares that Beira Corp currently holds.
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.
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 30 June 2019, relative to the Nasdaq Composite Index. The Nasdaq Composite Index is
considered an appropriate comparator for VivoPower:
VivoPower and Nasdaq TSR
160
140
120
100
80
60
40
20
0
Page | 30
29-Dec-16
31-Mar-17
31-Mar-18
31-Mar-19
30-Jun-19
NASDAQ
VVPR
Directors’ Remuneration Report (continued)
The following table shows details of the compensation paid to the individual(s) in the role of CEO:
Single figure of remuneration
Three
Months
Ended
30 June
2019
Year Ended
31 March
2019
2018
Three
Months
Ended
30 June
2019
Bonus as % of maximum
Year Ended
31 March
LTIP as % of maximum
Year Ended
31 March
Three
Months
Ended
30 June
2019
0%
2018
N/A
2019
0%
0%
0%
N/A
2019
0%
15%
2018
N/A
0%
Art Russell
Carl Weatherley-
White
£66,094
£25,336
N/A
0%
N/A
£321,019
£146,904
N/A
Art Russell was appointed Interim Chief Executive Officer on 26 February 2019. The information presented for
2019 reflects his compensation for the period of his tenure as CEO, from 26 February 2019 to 30 June 2019.
Carl Weatherley-White was appointed as Chief Executive Officer and a Director on 4 October 2017 and resigned
as a Director on 28 December 2017, remaining as Chief Executive Officer until his resignation on 12 February
2019. The information presented for 2018 reflects his compensation for the period of his tenure as CEO, from
4 October 2017 to 31 March 2018. The information presented for the year ended 31 March 2019 reflects his
compensation for the period of his tenure as CEO from 1 April 2018 to 12 February 2019 and excludes £85,332
of separation compensation due pursuant to his employment agreement.
There was no change in the compensation of the Interim Chief Executive Officer during the three months ended
30 June 2019 in comparison to the previous year.
Relative importance of pay
The table below shows the total pay for all of the Group's employees compared to other key financial indicators.
(US dollars)
Three Months Ended
30 June 2019
Employee remuneration
Distributions to shareholders
4,114,000
NIL
Implementation of Remuneration Policy
Executive Directors
Year Ended 31 March
2019
2018
17,413,000
16,977,000
NIL
NIL
The Company has had no Executive Directors since Carl Weatherley-White, former Chief Executive Officer,
resigned as a Director on 28 December 2017.
Non-Executive Directors
Cash Compensation
The Committee will pay annual retainers to non-executive directors in line with the remuneration policy approved
by shareholders on 5 September 2017. The Committee intends to keep the value of annual retainers under
review and will consider from time to time 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 and will be disclosed in the Remuneration Report for the relevant
financial year.
Page | 31
Directors’ Remuneration Report (continued)
Directors receive an annual retainer for service on the Board, with supplementary retainers payable for additional
Board responsibilities, as follows:
Annual retainer for Board membership
Annual retainer for the Chairman of the Board
£ 48,000
£165,000
Additional annual retainer for the committee members
Agreed Individually
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.
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, which plan would be subject to any applicable approval
requirements. 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 approved by
shareholders on 5 September 2017. 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 three months ended 30 June 2019 and their attendance at
meetings of the Committee, are set out below:
Shimi Shah
Peter Sermol
Kevin Chin
Attendance
0/0
0/0
0/0
No Non-Executive Directors are involved in deciding their own remuneration.
The Committee retained 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.
DAC Beachcroft LLP and Winston & Strawn LLP provide the Company with legal advice. Advice from DAC
Beachcroft LLP and Winston & Strawn LLP is made available to the Remuneration Committee, where it relates
to matters within its remit.
Page | 32
Directors’ Remuneration Report (continued)
Statement of voting at general meeting
The Directors' Remuneration Policy for the year ended 31 March 2017 was approved by shareholders at the
Annual General Meeting held on 5 September 2017. The resolution to approve the remuneration policy was
approved by 99.0% of voting shareholders.
The Annual Report on Remuneration for the year ended 31 March 2018 was approved by shareholders at the
Annual General Meeting held on 20 August 2018. The resolution to approve the report was approved by 99.7%
of voting shareholders.
The Remuneration Report was approved by a duly authorised Committee of the Board and signed on its behalf
by:
Shimi Shah
Chair of the Remuneration Committee
21 August 2019
Page | 33
Independent Auditor’s Report to the Members of
VivoPower International PLC
Opinion
We have audited the financial statements of VivoPower International PLC (the parent company) and its
subsidiaries (the group) for the three months ended 30 June 2019 which comprise the Consolidated Statement
of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Cash Flow, the Consolidated and Parent Company Statements
of Changes in Equity, and notes to the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the
Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
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 30 June 2019 and of the group’s and the parent company’s loss for the three months then
ended;
the group’s and parent company’s financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union and, for the parent company, as applied in accordance with the
provisions of the Companies Act 2006; and,
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the group and parent company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions related to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or,
the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as
a whole.
Based on our professional judgement, we determined materiality for the group financial statements as a whole
to be $1 million. This was calculated by applying a percentage to revenue (2%) and net assets (5%). The parent
company materiality was $100,000 based upon applying a percentage of the loss before tax (5%). Performance
materiality for the group and parent company was set at 70% of overall materiality.
Page | 34
Independent Auditor’s Report to the Members of
VivoPower International PLC
Component materiality for significant and/or material subsidiary undertakings ranged from $375,000 to
$55,000.
On overview of the scope of our audit
In designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in
the financial statements. In particular, we looked at where the directors made subjective judgements, for
example in respect of significant accounting estimates. We also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
The accounting records of all significant and/or material Australian undertakings were audited by Component
auditors, under the oversight of us as Parent Company auditors in accordance with International Standard on
Auditing 600, based upon Component materiality and risk to the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit responded to the key audit matter
Revenue recognition
Our testing in this area included the following:
There is a risk of material misstatement of
revenue from contracts with customers to
include:
• Reviewing the work undertaken by component auditors to
ensure
issued component
instructions, including regular contact throughout the
audit;
in accordance with the
•
•
identification of performance obligations
in customer contracts;
judging the timing of satisfaction of
performance obligations;
• allocation of transaction price;
• measuring the stage of completion for
long term contracts (outputs versus inputs
method) and
• determining the costs incurred to obtain or
fulfil contracts with customers.
• Updating and checking our understanding of the internal
control environment for the significant income streams;
• Substantive testing on a sample of contracts concluded
and in progress at the period end, including contract
assets and liabilities and deferred and accrued income;
•
Testing the project stage of completion having reference,
where applicable, to independent survey reports;
• Review of post period end cash receipts and documents
to test the completeness, cut-off and accuracy of revenue
around the period end.
Page | 35
Independent Auditor’s Report to the Members of
VivoPower International PLC
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion
on the group and parent company financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In
connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in
accordance with 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 year 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
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following matters in relation to which 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 and the part of the directors’ remuneration report to be audited
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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the
preparation of the group and parent company financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the
group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Page | 36
Independent Auditor’s Report to the Members of
VivoPower International PLC
Auditors responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
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.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory auditor
21 August 2019
1 Westferry Circus
Canary Wharf
London, UK, E14 4HD
Page | 37
Consolidated Statement of Comprehensive Income
for the three months ended 30 June 2019
(US dollars in thousands, except per share amounts)
Revenue from contracts with customers
Cost of sales
Note
4
5
11
12
6
7
9
9
10
Three
Months
Ended
30 June
2019
13,617
(11,960 )
1,657
(1,291 )
38
(214 )
(223 )
(33 )
(525 )
-
-
-
(796 )
(1,354 )
(92 )
Year Ended 31 March
2019
39,036
(32,726 )
6,310
(7,685 )
(2,615 )
(430 )
(990 )
(5,410 )
(2,017 )
-
-
4
(3,243 )
(10,666 )
(557 )
2018
33,647
(28,524 )
5,123
(12,814 )
1,356
(420 )
(840 )
(7,595 )
(1,873 )
(10,191 )
(11,092 )
9
(3,395 )
(34,137 )
6,258
(1,446 )
(11,223 )
(27,879 )
(102 )
(2,998 )
222
(1,548 )
(14,221 )
(27,657 )
24
24
(0.11 )
(0.11 )
(0.83 )
(0.83 )
(2.06 )
(2.06 )
Gross profit
General and administrative expenses
(Loss)/gain on sale of assets
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating loss
Restructuring costs
Impairment of assets
Impairment of goodwill
Finance income
Finance expense
Loss before income tax
Income tax
Loss for the period attributable to owners of the
company
Other comprehensive income
Items that may be reclassified subsequently to profit or
loss:
Currency translation differences recognised directly in
equity
Total comprehensive loss for the period attributable to
owners of the company
Earnings per share attributable to owners of the
company (dollars)
Basic
Diluted
Page | 38
Consolidated Statement of Financial Position
as at 30 June 2019
(US dollars in thousands)
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments
Total non-current assets
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Assets classified as held for sale
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables
Income tax liability
Provisions
Loans and borrowings
Total current liabilities
Non-current liabilities
Loans and borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total Liabilities
Equity
Share capital
Share premium
Cumulative translation reserve
Other reserves
Accumulated deficit
Total Equity
TOTAL EQUITY AND LIABILITIES
30 June
2019
Note
31 March
2019
2018
11
12
10
14
15
16
17
18
19
20
21
21
20
10
22
23
2,951
31,762
2,113
-
36,826
7,129
632
14,992
13,530
36,283
73,109
24,639
449
1,718
2,327
29,133
19,359
2,100
1
21,460
50,593
1,205
32,366
2,054
-
35,625
4,522
1,319
10,399
13,530
29,770
65,395
17,923
287
1,710
887
20,807
18,380
2,222
1
20,603
41,410
1,915
36,402
2,570
14,147
55,034
1,939
-
7,903
11,436
21,278
76,312
14,082
103
2,470
3,955
20,610
18,385
288
26
18,699
39,309
163
40,215
(2,279 )
20,076
(35,659 )
22,516
73,109
163
40,215
(2,177 )
19,846
(34,062 )
23,985
65,395
163
40,215
821
18,383
(22,579 )
37,003
76,312
These financial statements were approved by the Board of Directors on 21 August 2019 and were signed on its
behalf by:
Kevin Chin, Chairman
Page | 39
Consolidated Statement of Cash Flow
for the three months ended 30 June 2019
(US dollars in thousands)
Cash flows from operating activities
Loss for the period
Income tax
Finance income
Finance expense
Impairment of goodwill
Impairment of assets
Depreciation of property, plant and equipment
Amortisation of intangible assets
Loss/(gain) on sale of assets
Disposal of treasury shares
Increase in equity instruments
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
(Decrease)/increase in provisions
Net cash from/(used in) operating activities
23
5
9
5
11
Cash flows from investing activities
Interest received
Proceeds on sale of property plant and equipment
Purchase of property plant and equipment
Investment in capital projects
Proceeds on sale of capital projects
Net cash from/(used in) investing activities
Cash flows from financing activities
Finance lease borrowings
Finance lease repayments
Financing agreements proceeds
Financing agreements repayments
Debtor finance borrowings
Loans from related parties
Repayment of loans from related parties
Repayment of bank loan
Finance expense
Transfers from/(to) restricted cash
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period 15
Effect of exchange rate movements on cash held
Cash and cash equivalents at the end of the period
21
21
21
21
21
21
21
21
9
16
15
Page | 40
Three
Months
Ended
30 June
2019
Note
Year Ended 31 March
2019
2018
(1,446 )
-
-
796
-
-
214
223
(38 )
62
368
(4,593 )
6,716
(114 )
2,188
-
-
(400 )
-
84
(316 )
-
(63 )
-
-
150
766
-
-
(796 )
687
744
2,616
4,522
(9 )
7,129
(11,223 )
913
(4 )
3,243
-
-
430
990
2,615
86
815
(2,543 )
3,841
(728 )
(1,565 )
4
464
(348 )
(245 )
11,981
11,856
-
(304 )
4,000
(6,000 )
751
-
(1,520 )
-
(3,243 )
(1,319 )
(7,635 )
2,656
1,939
(73 )
4,522
(27,879 )
(6,258 )
(9 )
3,395
11,092
10,191
420
840
(1,356 )
-
-
11,457
5,822
1,182
8,897
9
2,297
(1,101 )
(17,823 )
-
(16,618 )
519
(181 )
2,000
-
-
770
-
(1,023 )
(3,395 )
-
(1,310 )
(9,031 )
10,970
-
1,939
Consolidated Statement of Changes in Equity
for the three months ended 30 June 2019
Other
Reserves
18,329
Retained
Earnings
(Accumulated
Deficit)
5,300
- (27,879)
(US dollars in thousands)
At 1 April 2017
Total comprehensive loss for the year
Other reserves
At 31 March 2018
Total comprehensive loss for the year
Equity instruments
Disposal of treasury shares
Other reserves
Share
Share
Premium
Capital
Total
40,215
163
64,606
- -
(27,657)
- -
- 54
-
-
(27,879) (27,603)
40,215
163
37,003
(22,579)
- -
(14,221)
- (11,223)
- -
1,018
-
- -
86
(260)
-
- 99
- -
(11,483) (13,017)
At 31 March 2019
40,215
163
(34,062) 23,985
Change in accounting policy (see Note 2.16) -
-
20 20
Restated at 1 April 2019
163
40,215
(34,042) 24,005
Total comprehensive loss for the period
- -
(1,446) (1,548)
Equity instruments
- -
- (3)
Disposal of treasury shares
(171) 62
- -
- - (102) 230 (1,617) (1,489)
22,516
163
Cumulative
Translation
Reserve
599
222
-
222
821
(2,998)
-
-
-
(2,998)
(2,177)
-
(2,177)
(102)
-
-
1,018
346
99
1,463
19,846
-
19,846
-
(3)
233
54
54
18,383
At 30 June 2019
(35,659)
40,215
20,076
(2,279)
For further information on “Other Reserves” please see Note 23.
Page | 41
Notes to the Financial Statements
for the three months ended 30 June 2019
1.
Reporting entity
VivoPower International PLC (“VivoPower” or the “Company”) is a public company limited by shares and
incorporated under the laws of England and Wales and domiciled in the United Kingdom. The address
of the Company’s registered office is 7th Floor, 9 Berkeley Street, London, United Kingdom W1J 8DW.
In July 2019, the Board of Directors of the Company adopted a resolution to change the Company’s
fiscal year end from 31 March to 30 June, commencing 30 June 2019. Moving forward, this allows the
Company to align reporting periods with all of its Australian operations and majority shareholder,
Arowana International Limited. Accordingly, these consolidated financial statements contain three-
month transitional financial statements as at and for the three months ended 30 June 2019. Any
amounts shown as at and for the three months ended 30 June 2018 are unaudited.
These consolidated financial statements 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.
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 years 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), as adopted by the European Union, 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 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 financial statements have been prepared on a going concern basis, as the directors believe the
Company will be able to meet its liabilities as they fall due.
As at 30 June 2019, the Company had unrestricted cash totalling $7.1 million, compared to $4.5 million
as at 31 March 2019 and $1.9 million as at 31 March 2018.
During the period ended 30 June 2019, the Company reduced general and administrative expenses
within the Solar Development and Corporate segments by a further $2.0 million on an annualised basis,
in comparison to the year ended 31 March 2019, and has plans to implement further reductions going
forward. The Company’s Critical Power Services segment represented by J.A. Martin Electrical Pty
Limited and Kenshaw Electrical Pty Limited produced $1.1 million EBITDA for the three months ended
30 June 2019 and is expected to continue to perform at or above this level going forward.
The Company is also engaged in a financing initiative with respect to these businesses which is expected
to release the restricted cash of $0.6 million and provide up to $1.0 million of additional working capital.
Lastly, the Company is actively engaged in a process to enhance value with a view to selling its
investment in the ISS Joint Venture, with $13.5 million classified as assets held for sale; this investment
is expected to be realised in cash over the next 12 months. The Directors believe these actions provide
sufficient cash to support business operations and meet obligations as they become due through August
2020.
Page | 42
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
To ensure success of the business, the directors have prepared and reviewed additional plans to
mitigate any cash flow risk that may arise during the next twelve months. These actions include the
implementation of further operational cost reductions and a further sale of assets as required.
Based on the foregoing, 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.
2.2
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 Company
controls an investee when it is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. 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. 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 consideration arrangement. Acquisition-related costs are
recognised in the income statement as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair value at the
acquisition date.
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.
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.
Joint arrangements
The Company applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint
arrangements are classified as either joint operations or joint ventures, depending on the contractual
rights and obligations of each investor. VivoPower has assessed the nature of its joint arrangement and
determined it to be a joint venture, which is accounted for using the equity method.
2.3
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 Limited
(“Aevitas”). Goodwill is reviewed annually to test for impairment.
Page | 43
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Other intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and then
amortised over their useful economic lives.
Amortisation is calculated on a straight-line basis to write down the assets over their useful economic
lives at the following rates:
Customer relationships – 10 years
Trade names – 15 - 25 years
Favourable supply contracts – 15 years
Databases – 5 years
2.4
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 to 20 years
Motor vehicles – 5 years
Plant & equipment – 3.5 to 10 years
Right-of-use assets – remaining term of lease: 2 months to 6 years
2.5
Assets classified as held for sale
Assets are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. They are
measured at the lower of their carrying value and fair value less costs to sell. An impairment loss is
recognised for any subsequent write-down of the asset to fair value less costs to sell.
2.6
Leases
The Group leases offices, workshops, motor vehicles, and equipment for fixed periods of 2 months to 6
years, but may have extension options. Extension options are not recognised by the Group in the
determination of lease liabilities unless renewals are reasonably certain.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in
the contract to the lease and non-lease components based on their relative stand-alone prices.
However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease
and non-lease components and instead accounts for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants other than the security interests in the
leased assets that are held by the lessor. Leased assets may not be used as security for borrowing
purposes.
Page | 44
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Until 31 March 2019, leases of property, plant and equipment were classified as either finance leases
or operating leases, as further described below. From 1 April 2019, leases are recognised as a right-of-
use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group. The Group has applied IFRS 16 using the modified retrospective approach.
Assets and liabilities arising from a lease are initially measured on a present value basis, with lease
payments discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, the Group’s incremental borrowing rate is used. The Group presents lease liabilities in loans
and borrowings in the statement of financial position.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the
Statement of Comprehensive Income over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
Right-of-use assets are presented in property, plant and equipment and depreciated over the shorter of
the asset's useful life and the lease term on a straight-line basis.
Prior to 1 April 2019, leases were classified as finance leases whenever the terms of the lease
transferred substantially all the risks and rewards of ownership to the lessee. All other leases were
classified as operating leases. Assets held under finance leases were 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 were apportioned between the repayment of capital and
interest. The capital element of future lease payments was included in the Statement of Financial
Position as a liability. Interest was 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 were charged to the Statement of Comprehensive Income on a straight-line basis over the lease
term. Operating lease incentives were recognised as a reduction in the rental expense over the lease
term.
2.7
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.
Page | 45
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
2.8
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.
From 1 April 2018, the Company classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value through profit or loss; and,
those to be measured at amortised cost.
The classification depends on the business model for managing the financial assets and the contractual
terms of the cash flows. Financial assets are classified as at amortised cost only if both of the following
criteria are met:
•
•
the asset is held within a business model whose objective is to collect contractual cash flows; and,
the contractual terms give rise to cash flows that are solely payments of principal and interest.
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
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.
Restricted cash
Restricted cash are cash and cash equivalents whose availability for use within the Group is subject to
certain restrictions by third parties.
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.
Page | 46
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less any allowance for the expected future issue of
credit notes and for non-recoverability due to credit risk. The Group applies the IFRS 9 simplified
approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables and contract assets. To measure expected credit losses, trade receivables and
contract assets have been grouped based on shared risk characteristics. In the year ended 31 March
2018, the impairment was based on the incurred loss model.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at amortised cost using the effective
interest method.
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.
2.9
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 dealt with directly in equity.
2.10
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.
Page | 47
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Where the time value of money is material, provisions are measured at the present value of expenditures
expected to be paid in settlement.
2.11
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.
2.12
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 Income and Statement of Financial
Position of 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.
2.13
Revenue from contracts with customers
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 development revenues, electrical
installations, electrical servicing and
maintenance and generator sales. Revenue is recognised upon satisfaction of contractual performance
obligations.
The Company adopted IFRS 15 “Revenue from Contracts with Customers” with effect from the date of
incorporation.
The Group has a number of different revenue streams and the key components in determining the
correct recognition are as follows:
Development 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.
On longer-term power services projects such as large-scale equipment provision and installation, the
performance obligation of completing the installation is satisfied over time, and revenue is recognised
on a percentage completion basis using an input method. Revenue for stand-alone equipment sales is
recognised at the point of passing control of the asset to the customer. Other revenue for small jobs and
those completed in a limited timeframe are recognised when the job is complete.
Page | 48
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Warranties are of short duration and only cover defective workmanship and defective materials. No
additional services are committed to which generate a performance obligation.
No adjustment is made for the effects of financing, as the Group expects, at contract inception, that the
period between when the goods and services are transferred to the customer and when the customer
pays, will be one year or less.
If the revenue recognised for goods and services rendered by the Company exceeds amounts that the
Company is entitled to bill the customer, a contract asset is recognised. If amounts billed exceed the
revenue recognised for goods and services rendered, a contract liability is recognised.
Incremental costs of obtaining a contract are expensed as incurred.
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.
2.15
Restructuring costs
Restructuring costs are by nature one-time incurrences and do not represent the normal trading
activities of the business and accordingly are disclosed separately on the consolidated statement of
comprehensive income in accordance with IAS 1 in order to draw them to the attention of the reader of
the financial statements. Restructuring costs are defined in accordance with IAS 37 as being related to
sale or termination of a line of business, closure of business locations, changes in management
structure, or fundamental reorganisations.
2.16
New standards, amendments and interpretations
During the current period, the Group adopted all of the new and revised Standards and Interpretations
that are relevant to its operations and effective for accounting periods beginning on 1 April 2019. Their
adoption did not have a material impact on the financial position of the Group, with the exception of
IFRS 16 – Leases.
Effective 1 April 2019, the Group adopted the provisions of IFRS 16 – Leases on a modified
retrospective basis, recognising the cumulative effect of initial application to opening retained earnings
for the period.
Page | 49
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at
the present value of the remaining lease payments, discounted at the Group’s incremental borrowing
rate. The Group used the following practical expedients when applying IFRS 16:
• Applied the exemption not to recognise right of use assets and liabilities for leases with less than
12 months of lease term;
• Excluded initial direct costs from measuring the right of use asset at the date of initial application;
and
• Apply a single discount rate to a portfolio of leases with similar characteristics.
The change in accounting policy affected the following items in the statement of financial position on 1
April 2019:
(US dollars in thousands)
Property, plant and equipment
Lease liability - current
Lease liability – non-current
Adjustment to opening retained earnings as at 1 April 2019
1,586
(587 )
(979 )
20
The adoption of IFRS 16 did not have a material impact on leases previously recorded as finance leases.
There are no other IASB and IFRIC standards that have been issued with an effective date after the date
of the financial statements.
3.
Significant 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.
3.1
Revenue from contracts with customers – determining the timing of satisfaction of services
As disclosed in Note 2.13 the Group concluded that solar development revenue and revenue from other
long-term projects is recognised over time as the customer simultaneously receives and consumes the
benefits provided. The Group determined that the percentage completion basis is the best method in
measuring progress because there is a direct relationship between the Group’s effort and the transfer
of services to the customer. The judgement used in applying the percentage completion basis affects
the amount and timing of revenue from contracts.
3.2
Impairment of non-financial assets
The carrying values of property, plant and equipment, investments and intangible assets other than
goodwill are reviewed for impairment only when events indicate the carrying value may be impaired.
Goodwill is tested annually for impairment or when events or changes to circumstances indicate that it
might be impaired.
To assess impairment, estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time-value of money and risks specific
to the related cash-generating unit. Judgement was applied in making estimates and assumptions
about the future cash flows, including the appropriateness of discounts rates applied, as further
disclosed in Note 12.
Page | 50
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
3.3
Operating profit/(loss)
In preparing the consolidated financial statements of the Group, judgement was applied with respect to
those items which are presented in the consolidated statement of comprehensive income as included
within operating profit/(loss). Those revenues and expenses which are determined to be specifically
related to the on-going operating activities of the business are included within operating profit/(loss).
Expenses or charges to earnings which are not related to operating activities, are one-time costs
determined to be not representative of the normal trading activities of the business, or that arise from
revaluation of assets, are reported below operating profit/(loss).
3.4
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.
3.5
Deferred tax assets
Deferred tax assets for unused tax losses amounting to $1.005 million at 30 June 2019 (31 March
2019: $1.005 million; 2018: $1.585 million) are recognised to the extent that it is probable that
sufficient taxable profit will be available against which the losses can be utilised. Management
judgement is required to determine the amount of deferred tax assets that can be recognised, based
upon the likely timing and level of future taxable profits.
3.6
Share option reserve
As part of the Initial Public Offering Listing, VivoPower 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 recognised 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 was determined at the grant date, using the Black Scholes Model, and not remeasured
subsequently. As the options have no vesting conditions the related expense was recognised
immediately.
3.7
Convertible preference shares and loan notes
As part of the IPO listing process VivoPower International PLC acquired Aevitas. 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 | 51
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
4
Revenue and segmental information
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: Critical Power Services, Solar Development,
and Corporate Office. Critical Power Services is represented by J.A. Martin Electrical Pty Limited (“J.A.
Martin”) and Kenshaw Electrical Pty Limited (“Kenshaw”) operating in Australia with a focus on the
design, supply, installation and maintenance of power and control systems. Solar Development is the
development and sale of commercial and utility scale PV solar power projects in Australia and the U.S.
Corporate Office is all United Kingdom based corporate functions.
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.
4.1
Revenue
Revenue by geographic location is as follows:
(US dollars in thousands)
Australia
United States
Total revenue
Revenue by product and service is as follows:
(US dollars in thousands)
Electrical products and related services
Development fees
Other revenue
Total revenue
Three Months
Ended
30 June
2019
13,507
110
13,617
Three Months
Ended
30 June
2019
13,484
-
133
13,617
Year Ended 31 March
2019
37,889
1,147
39,036
2018
31,985
1,662
33,647
Year Ended 31 March
2019
37,799
90
1,147
39,036
2018
31,631
828
1,188
33,647
The Group had one customer representing more than 10% of revenue for the three months ended 30
June 2019 (year ended 31 March 2019: one; 2018: none). Revenue recognised for this customer
amounted to $6.0 million in the Critical Power Services segment.
4.2
Operating segments
a) Segment results of operations
Results of operations by reportable segment are as follows:
Page | 52
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Three Months Ended 30 June 2019
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Gain/(loss) on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Finance expense – net
Profit/(loss) before income tax
Income tax
Profit/(loss) for the period
Year Ended 31 March 2019
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Loss on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Finance expense – net
Loss before income tax
Income tax
Loss for the year
Year Ended 31 March 2018
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Gain on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Impairment of assets
Impairment of goodwill
Finance expense – net
Loss before income tax
Income tax
Loss for the year
Page | 53
Solar
Corporate
Critical
Power
Services
13,484
(11,864 )
1,620
(567 )
5
(422 )
636
(15 )
(358 )
263
(92 )
171
Development
133
(96 )
37
(206 )
41
(14 )
(142 )
(39 )
(49 )
(230 )
-
(230 )
Critical
Power
Services
37,800
(32,317 )
5,483
(2,823 )
(30 )
(1,272 )
1,358
(8 )
(1,354 )
(4 )
(572 )
(576 )
Development
1,236
(409 )
827
(2,148 )
(2,585 )
(140 )
(4,046 )
7
(221 )
(4,260 )
15
(4,245 )
Office
Total
- 13,617
- (11,960 )
1,657
-
(1,291 )
(518 )
38
(8 )
(437 )
(1 )
(33 )
(527 )
(525 )
(471 )
(796 )
(389 )
(1,354 )
(1,387 )
(92 )
-
(1,446 )
(1,387 )
Office
Total
- 39,036
- (32,726 )
6,310
-
(7,685 )
(2,714 )
(2,615 )
-
(1,420 )
(8 )
(5,410 )
(2,722 )
(2,016 )
(2,017 )
(3,239 )
(1,664 )
(6,402 ) (10,666 )
(557 )
(6,402 ) (11,223 )
-
Solar
Corporate
Critical
Power
Services
31,807
(27,482 )
4,325
(2,173 )
213
(1,233 )
1,132
(335 )
-
-
(1,283 )
(486 )
(85 )
(571 )
Solar
Corporate
Office
Development
1,840
(1,042 )
798
(6,468 )
1,143
(19 )
(4,546 )
(964 )
(10,191 )
(11,092 )
(400 )
Total
- 33,647
- (28,524 )
5,123
-
(4,173 ) (12,814 )
1,356
(1,260 )
(7,595 )
(1,873 )
- (10,191 )
- (11,092 )
(3,386 )
(27,193 ) (6,458 ) (34,137 )
6,258
(6,406 ) (27,879 )
-
(8 )
(4,181 )
(574 )
6,291
(20,902 )
(1,703 )
52
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
b) Segment net assets
Net assets by reportable segment are as follows:
As at 30 June 2019
(US dollars in thousands)
Assets
Liabilities
Net assets
As at 31 March 2019
(US dollars in thousands)
Assets
Liabilities
Net assets
As at 31 March 2018
(US dollars in thousands)
Assets
Liabilities
Net assets
5. Gain/(loss) on sale of assets
Critical
Power
Services
45,881
(21,171 )
Solar
Corporate
Development
26,534
(5,766 )
Office
Total
694 73,109
(23,656 ) (50,593 )
24,710
20,768
(22,962 ) 22,516
Critical
Power
Services
35,472
(13,603 )
Solar
Corporate
Development
29,538
(6,085 )
Office
Total
385 65,395
(21,722 ) (41,410 )
21,869
23,453
(21,337 ) 23,985
Critical
Power
Services
34,421
(6,473 )
27,948
Solar
Corporate
Development
41,270
(11,101 )
30,169
Office
Total
621 76,312
(21,735 ) (39,309 )
(21,114 ) 37,003
The gain on sale of assets for the three months ended 30 June 2019, arose principally on the sale of
Australian solar assets.
The loss on sale of assets for the year-ended March 31, 2019, totalling $2.6 million, is comprised of a
$1.9 million provision for onerous contracts related to future obligations to purchase Solar Renewable
Energy Certificates (“SRECs”) from the NC Projects, discontinued solar development projects in the ISS
Joint Venture ($0.8 million), and a correction to the gain on the sale of Amaroo solar project reported in
the year ended 31 March 2018 ($0.3 million), offset by a gain on sale of the NC Projects ($0.4 million).
On 25 May 2018, the Company sold its 14.5% and 10.0% equity interests in the NC-31 and NC-47
projects, respectively, to the majority investor at the fair market value of these projects. The proceeds
of sale, net of transaction costs, were $11.4 million. A gain on sale of $0.4 million was realized after
the impairment recognized in the year ended 31 March 2018.
Page | 54
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
6. Operating loss
Operating loss is stated after charging/(crediting):
(US dollars in thousands)
Amortisation of intangible assets
Depreciation of property, plant and equipment
Operating lease costs – land and buildings
Operating lease costs –motor vehicles
Operating lease costs –other equipment
Gain/(loss) on foreign exchange
Auditors’ remuneration – audit fees
Auditors’ remuneration – audit related
services
Auditors’ remuneration – tax services
Directors emoluments
Gain/(loss) on sale of assets
Three Months
Ended
30 June
2019
223
214
-
-
-
-
97
-
-
104
38
Year Ended 31 March
2019
990
430
548
65
33
-
253
26
28
611
(2,615 )
2018
840
420
304
-
-
59
414
-
13
1,131
1,356
7. Restructuring costs
(US dollars in thousands)
Corporate restructuring – workforce reduction
Corporate restructuring – professional fees
Corporate restructuring – terminated projects
Total
Three Months
Ended
30 June
2019
-
518
7
525
Year Ended 31 March
2019
102
1,776
139
2,017
2018
734
566
573
1,873
Restructuring costs by nature are one-time incurrences, and therefore, do not represent normal trading
activities of the business. These costs are disclosed separately in order to draw them to the attention
of the reader of the financial information and enable comparability in future periods.
During a prior fiscal period, the Board undertook a strategic restructuring of our business to align
operations, personnel, and business development activities to focus on a fewer number of areas of
activity. Associated with this restructuring was the departure of a number of employees and contractors
from the business. The workforce reduction cost represents the total salary, benefit, severance, and
contract costs paid in the period or accruing to these individuals in the future for which no services will
be rendered to the Company. Professional fees represent legal fees incurred to resolve certain disputes
related to some of these separations in both the current and prior periods. Terminated projects are the
costs incurred related to solar business development in Asia for which the decision was made not to
proceed for economic reasons.
Page | 55
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
8. Staff numbers and costs
The average number of employees (including directors) during the period was:
(US dollars in thousands)
Sales and Business Development
Central Services & Management
Production
Total
Their aggregate remuneration costs comprised:
(US dollars in thousands)
Salaries, wages and incentives
Social security costs
Pension contributions
Short-term compensated absences
Total
Three Months
Ended
30 June
2019
Year Ended 31 March
2019
2018
9
31
139
179
9
32
138
179
9
37
148
194
Three Months
Ended
30 June
2019
3,310
213
185
406
4,114
Year Ended 31 March
2019
2018
14,327
1,044
788
1,254
17,413
14,299
834
848
996
16,977
Directors’ emoluments for the three months ended 30 June 2019 were $103,925 (year ended 31
March 2019: $611,450; 2018: $1,130,570) of which the highest paid director received $62,136 (year
ended 31 March 2019: $254,084; 2018: $407,682). Director emoluments include employer social
security costs.
Key Management Personnel:
(US dollars in thousands)
Salaries, wages and incentives
Social security costs
Pension contributions
Equity incentives
Short-term compensated absences
Total
Three Months
Ended
30 June
2019
388
28
13
27
-
456
Year Ended 31 March
2019
2,354
176
45
130
-
2,705
2018
2,281
217
64
-
13
2,575
Key management personnel are those below the Board level that have a significant impact on the
operations of the business. The number of key management personnel, including directors for the three
months ended 30 June 2019 was 10 (31 March 2019: 10; 2018: 11).
Page | 56
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
9. Finance income and expense
(US dollars in thousands)
Finance income
Interest received
Finance expense
Related party loan interest payable
Convertible loan notes and preference shares
interest payable
Financing agreement finance cost payable
Debtor invoice financing cost payable
Lease interest payable
Bank interest payable
Provisions – unwinding of discount
Foreign exchange (gain)/losses
Other finance costs
Total
Three Months
Ended
30 June
2019
Year Ended 31 March
2019
2018
-
4
9
387
1,588
307
-
51
22
6
42
(19 )
-
796
1,284
206
164
1
-
-
-
-
3,243
1,636
1,220
217
-
55
17
-
93
157
3,395
10. Income tax expenses
(a) Tax charge
(US dollars in thousands)
Current tax
UK corporation tax
Foreign tax
Total current tax
Deferred tax
Current period
UK corporation tax
Foreign tax
Total deferred tax
Three Months
Ended
30 June
2019
-
(162 )
(162 )
-
70
70
Year Ended 31 March
2019
2018
29
(217 )
(188 )
267
(636 )
(369 )
(29 )
2,279
2,250
(370 )
4,378
4,008
Total income tax
(92 )
(557 )
6,258
The difference between the total tax charge and the amount calculated by applying the weighted
average corporation tax rate applicable to each of the tax jurisdictions in which the Group operates to
the profit before tax is shown below.
Page | 57
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
(US dollars in thousands)
Loss before income tax
Three Months
Ended
30 June
2019
(1,353 )
Year Ended 31 March
2019
(10,666 )
2018
(34,137 )
Group weighted average corporation tax rate
22.0%
21.8%
22.8%
Tax at standard rate
Effects of:
Expenses that are not deductible for tax
purposes
Adjustment to prior period tax provisions
Deferred tax assets not recognised on tax
losses
Total income tax for the period recognised in
the Consolidated Statement of Comprehensive
Income
(b) Deferred tax
297
2,325
7,772
(49 )
-
41
(64 )
(3,872 )
2,358
(340 )
(2,859 )
-
(92 )
(557 )
6,258
(US dollars in thousands)
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset/(liability)
As at 30 June
2019
2,113
(1 )
2,112
As at 31 March
2019
2,054
(1 )
2,053
2018
2,570
(26 )
2,544
These assets and liabilities are analysed as follows:
Deferred tax assets
1 April 2017
Credit/(charged) to comprehensive income
31 March 2018
Credit/(charged) to comprehensive income
31 March 2019
Credit/(charged) to comprehensive income
30 June 2019
Deferred tax liabilities
1 April 2017
Credit/(charged) to comprehensive income
31 March 2018
Credit/(charged) to comprehensive income
31 March 2019
Credit/(charged) to comprehensive income
30 June 2019
Other
timing
differences
-
985
985
64
1,049
59
1,108
Tax losses
2,312
(727 )
1,585
(580 )
1,005
-
1,005
Accelerated
allowances
Other
timing
differences
(13 )
5
(8 )
7
(1 )
-
(1 )
(3,763 )
3,745
(18 )
18
-
-
-
Total
2,312
258
2,570
(516 )
2,054
59
2,113
Total
(3,776 )
3,750
(26 )
25
(1 )
-
(1 )
Deferred tax has been recognised in the current period using the tax rates applicable to each of the tax
jurisdictions in which the Group 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 | 58
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
11. Property, plant and equipment
Computer
Equipment
Motor
Vehicles
Plant &
Equipment
Fittings &
Equipment
Right of
Use Assets
Total
(US dollars in
thousands)
Cost
At 1 April 2017
Foreign exchange
Additions
Disposals
At 31 March 2018
Foreign exchange
Additions
Disposals
At 31 March 2019
Change in accounting
policy (Note 2.16)
Restated at 1 April
2019
Foreign exchange
Additions
Disposals
At 30 June 2019
Depreciation
At 1 April 2017
Foreign exchange
Charge for the year
Disposals
At 31 March 2018
Foreign exchange
Charge for the year
Disposals
At 31 March 2019
Change in accounting
policy (Note 2.16)
Restated at 1 April
2019
Foreign exchange
Charge for the period
Disposals
At 30 June 2019
Net book value
At 1 April 2017
At 31 March 2018
At 31 March 2019
At 30 June 2019
Page | 59
525
3
121
(7 )
642
(46 )
73
(126 )
543
1,632
10
437
(82 )
1,997
(148 )
55
(275 )
1,629
1,892
12
537
(921 )
1,520
(112 )
205
(584 )
1,029
167
1
6
-
174
(13 )
15
-
176
-
-
-
-
-
-
-
-
-
4,216
26
1,101
(1,010 )
4,333
(319 )
348
(985 )
3,377
-
(371 )
-
-
2,152
1,781
543
(5 )
7
-
545
1,258
(13 )
45
(8 )
1,282
327
2
97
(4 )
422
(34 )
89
(97 )
380
1,027
6
203
(63 )
1,173
(93 )
222
(223 )
1,079
1,029
(11 )
222
-
1,240
650
4
107
-
761
(59 )
106
(165 )
645
176
(2 )
16
-
190
2,152
(20 )
110
-
2,242
49
-
13
-
62
(5 )
12
-
68
-
-
-
-
-
-
-
-
-
5,158
(51 )
400
(8 )
5,499
2,053
12
420
(67 )
2,418
(191 )
430
(486)
2,172
-
(123 )
-
-
318
195
380
(3 )
27
-
404
956
(12 )
1
(8 )
937
645
(7 )
17
-
655
68
-
6
-
74
318
(3 )
163
-
478
2,367
(25 )
214
(8 )
2,548
198
220
163
141
605
824
550
344
1,242
759
385
585
118
112
108
116
-
-
-
1,746
2,163
1,915
1,205
2,951
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
12. Intangible assets
(US dollars in thousands)
Goodwill
Other intangible assets
Total
(a) Goodwill
As at 30 June
2019
22,387
9,375
31,762
As at 31 March
2019
22,622
9,744
32,366
2018
24,482
11,920
36,402
Goodwill arose on the purchase of Aevitas O Holdings Limited and VivoPower Pty Limited on 29
December 2016.
(US dollars in thousands)
As at beginning of period
Revaluations
Goodwill previously not recognised
Impairment
Reclassifications
Additions
Foreign exchange
Carrying value at end of period
As at 30 June
2019
22,622
-
-
-
-
-
(235 )
22,387
As at 31 March
2019
24,482
-
-
-
-
-
(1,860 )
22,622
2018
30,393
3,597
627
(11,092 )
138
-
819
24,482
The carrying amounts of goodwill by Cash Generating Unit (“CGU”) are as follows:
(US dollars in thousands)
Aevitas O Holdings Limited (allocated to
Critical Power Services segment)
VivoPower Pty Limited (allocated to Solar
Development segment)
Total
As at 30 June
2019
As at 31 March
2019
2018
12,751
12,884
13,949
9,636
22,387
9,738
22,622
10,533
24,482
The Group conducts impairment tests on the carrying value of goodwill annually, or more frequently if
there are any indications that goodwill might be impaired. The recoverable amount of the Cash
Generating Unit (“CGU”) to which goodwill has been allocated are determined from value in use
calculations. The key assumptions in the calculations are the discount rates applied, expected operating
margin levels and long-term growth rates. Management estimates discount rates that reflect the current
market assessments while margins and growth rates are based upon approved budgets and related
projections.
The Group prepares cash flow forecasts using the approved budgets for the coming financial year and
management projections for the following two years. Cash flows are also projected for subsequent years
as management believe that the investment is held for the long term. These budgets and projections
reflect management’s view of the expected market conditions and the position of the CGU’s products
and services within those markets.
The CGU represented by Aevitas 0 Holdings Limited and VivoPower PTY Limited were assessed to have
a value in excess of its respective carrying value and hence no additional adjustments to goodwill were
considered necessary. Key assumptions used in the assessment of the CGU’s were:
Page | 60
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
● Aevitas O Holdings Limited: discount rate was based on the weighted average cost of capital of 8.8%
(31 March 2019: 8.8%; 2018: 9.2%); and,
● VivoPower PTY Limited: discount rate was based on the weighted average cost of capital of 11.0%
(31 March 2019: 11.0%; 2018: 12.1%), increased by a further 3% after the first year.
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
(US dollars in
thousands)
Cost
At 1 April 2017
Foreign exchange
Revaluation
Additions
At 31 March 2018
Foreign exchange
Disposals
At 31 March 2019
Foreign exchange
Additions
Disposals
At 30 June 2019
Amortisation
At 1 April 2017
Amortisation
At 31 March 2018
Foreign exchange
Amortisation
Disposals
At 31 March 2019
Foreign exchange
Amortisation
At 30 June 2019
Net book value
At 1 April 2017
At 31 March 2018
At 31 March 2019
At 30 June 2019
Customer
Relationships
Trade
Names
Favourable
Supply Contracts Databases
Other
Total
9,953 2,488
63
129
-
2,680
(204 )
-
2,476
(26 )
-
-
2,450
139
(4,293 )
-
5,799
(439 )
(263 )
5,097
(55 )
-
(50 )
4,992
347
330
677
(75 )
483
(21 )
1,064
(6 )
100
1,158
43
194
237
(22 )
169
-
384
(4 )
41
421
2,488
126
1,963
-
4,577
(348 )
-
4,229
(44 )
-
-
4,185
122
284
406
(38 )
289
-
657
(7 )
70
720
9,606 2,445
2,443
5,122
2,092
4,033
2,029
3,834
2,366
4,171
3,572
3,465
734
4
(584 )
-
154
(12 )
-
142
(1 )
-
-
141
36
32
68
(6 )
49
-
111
(1 )
12
122
698
86
31
19
812 16,475
332
-
(3,597 )
(812 )
98
98
98 13,308
(1,013 )
(11 )
(72 )
(335 )
16 11,960
(126 )
12
(50 )
28 11,796
-
12
-
-
-
-
-
-
-
-
-
-
-
548
840
1,388
(141 )
990
(21 )
2,216
(18 )
223
2,421
812 15,927
98 11,920
9,744
16
9,375
28
Customer relationships, trade names and favourable supply contracts have an average remaining
period of amortisation of 10 years, 13 years and 13 years respectively.
Page | 61
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
13. Investment in subsidiaries
The principal operating undertakings in which the Group’s interest at 30 June 2019 is 20% or more are
as follows:
Subsidiary undertakings
VivoPower International Services Limited
VivoPower USA LLC
VivoRex LLC
VivoPower US-NC-31, LLC
VivoPower US-NC-47, LLC
VivoPower (USA) Development, LLC
Innovative Solar Ventures I, LLC
VivoPower Pty Limited
VivoPower WA Pty Limited
VVP Project 1 Pty Limited
Amaroo Solar Pty Limited
SC Tco Pty Limited
SC Hco Pty Limited
SC Fco Pty Limited
SC Oco Pty Limited
VVPR-ITP TopCo Pty Limited
VVPR-ITP ProjectCo 1 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 Singapore Pte Limited
VivoPower Philippines Inc.
VivoPower RE Solutions Inc.
V.V.P. Holdings Inc. *
Registered address
28 Esplanade, St Helier, Jersey, JE2 3QA
251 Little Falls Drive, Wilmington, DE, USA
19808
153 Walker St, North Sydney NSW, Australia
2060
Percentage of
ordinary
shares held
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
50%
20%
100%
99.9%
100%
100%
100%
100%
100%
64%
64%
40%
36, UOB Plaza 1, 80 Raffles Place, Singapore
048624
Unit 10A, Net Lima Building, 5th Avenue cor.
26th Street, E-Square Zone, Crescent Park
West, Bonifacio Global City, Taguig, Metro
Manila
* V.V.P. Holdings Inc. is controlled of VivoPower Singapore Pte Limited notwithstanding only owning 40%
of the ordinary share capital.
14. Investments
(US dollars in thousands)
Innovative Solar Ventures I, LLC
% Owned
50%
As at 30 June
2019
-
As at 31 March
2019
-
2018
14,147
In April 2017, the Company entered into a 50% joint venture with an early-stage solar development
company, Innovative Solar Systems, LLC, to develop a diversified portfolio of originally 38 utility-scale
solar projects in 9 different states, representing a total electricity generating capacity of approximately
1.8 GW, through an investment entity called Innovative Solar Ventures I, LLC (the “ISS Joint Venture”).
The joint venture was accounted for as an investment under the equity method at 31 March 2018.
Page | 62
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Under the terms of the ISS Joint Venture, the Company committed to invest $14.2 million in the ISS
Joint Venture for its 50% equity interest, after reducing the commitment by $0.8 million in potential
brokerage commissions that have not been required and which have been credited towards the
Company’s commitment. The $14.2 million commitment is allocated to each of the projects based on
monthly capital contributions determined with reference to completion of specific project development
milestones under an approved development budget for the ISS Joint Venture. To 30 June 2019, the
Company contributed $13.1 million of the $14.2 million commitment to the ISS Joint Venture, leaving a
remaining capital commitment at 31 March 2019, of $1.1 million, which is recorded in trade and other
payables.
During the year ended 31 March 2019, the Company made the decision to sell its portfolio of solar
projects held within the ISS Joint Venture. Accordingly, the investment has been reclassified to current
assets as asset held for sale, as more fully disclosed in Note 18.
15. Cash and cash equivalents
(US dollars in thousands)
Cash at bank and in hand
As at 30 June
2019
7,129
As at 31 March
2019
4,522
2018
1,939
The credit ratings of the counterparties with which cash was held are detailed in the table below.
(US dollars in thousands)
A+
A
AA-
Total
16. Restricted cash
(US dollars in thousands)
Bank guarantee security
Preferred supplier escrow
Total
As at 30 June
2019
252
233
6,644
7,129
As at 31 March
2019
17
14
4,491
4,522
2018
891
69
979
1,939
As at 30 June
2019
632
-
632
As at 31 March
2019
816
503
1,319
2018
-
-
-
At 30 June 2019, there is a total of $0.6 million (31 March 2019: $0.8 million) of cash which is subject
to restriction as security for bank guarantees provided to customers in support of performance
obligations under power services contracts.
In 2017, a third-party U.S.-based solar EPC firm contributed $0.5 million to the Company’s initial
investment in the ISS Joint Venture, in consideration for a right to provide certain engineering services
to the project. As the expected services were not awarded on a timely basis, it was agreed that the
deposit would be paid into escrow and subsequently returned to the EPC firm.
Page | 63
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
17. Trade and other receivables
(US dollars in thousands)
Current receivables
Trade receivables
Contract assets
Prepayments
Other receivables
Total
As at 30 June
2019
As at 31 March
2019
6,193
3,929
2,919
1,951
14,992
5,899
1,800
628
2,072
10,399
2018
5,333
120
391
2,059
7,903
In accordance with IFRS 15, contract assets are presented as a separate line item. The Company has
not recognised any loss allowance for contract assets.
Analysis of trade receivables:
(US dollars in thousands)
Trade and other receivables
Less: credit note provision
Total
As at 30 June
2019
6,195
(2 )
6,193
As at 31 March
2019
5,929
(30 )
5,899
2018
5,335
(2 )
5,333
The maximum exposure to credit risk for trade receivables by geographic region was:
(US dollars in thousands)
USA
United Kingdom
Australia
Total
As at 30 June
2019
108
-
6,085
6,193
As at 31 March
2019
78
-
5,821
5,899
2018
129
12
5,192
5,333
The aging of the trade receivables, net of provisions is:
(US dollars in thousands)
0-90 days
Greater than 90 days
Total
18. Assets classified as held for sale
As at 30 June
2019
6,093
100
6,193
As at 31 March
2019
5,765
134
5,899
2018
5,326
7
5,333
(US dollars in thousands)
Innovative Solar Ventures I, LLC
US-NC-31 Sponsor Partner, LLC
US-NC-47 Sponsor Partner, LLC
Total
% Owned
50%
14.45%
10%
As at 30 June
2019
13,530
-
-
13,530
As at 31 March
2019
13,530
-
-
13,530
2018
-
6,595
4,841
11,436
As more fully disclosed in Note 14, the Company’s portfolio of U.S. solar projects is held through 50%
ownership in Innovative Solar Ventures I, LLC (the “ISS Joint Venture”). During the year ended 31 March
2019, the Company made the decision to sell its portfolio of U.S. solar projects and accordingly, the
investment has been reclassified to current assets as assets held for sale. Assets classified as held for
sale are included within the Solar Development segment in Note 4.2.
Page | 64
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
Reconciliation of the ISS Joint Venture investment is as follows (31 March 2018 comparative amount
is disclosed within Investments, see Note 14):
(US dollars in thousands)
Capital commitment
Commission credit
Discontinued projects
Acquisition costs
Net assets
As at 30 June
2019
15,044
(770 )
(848 )
104
13,530
As at 31 March
2019
15,044
(770 )
(848 )
104
2018
14,904
(757 )
-
-
14,147
13,530
The table below provides summarised financial information for the ISS Joint Venture. The information
disclosed reflects the amounts presented in the financial statements of ISS Joint Venture, amended to
reflect adjustments made by the Company when using the equity method, including fair value
adjustments and modifications for differences in accounting policy. The summarised financial
information for the ISS Joint Venture does not represent the Company’s share of those amounts.
(US dollars in thousands)
Current assets
Non-current assets
Net assets
As at 30 June
2019
1,187
27,107
28,294
As at 31 March
2019
1,187
27,107
28,294
2018
1,373
26,921
28,294
No summarised statement of comprehensive income has been presented as there were no movements
in comprehensive income in the period (31 March 2019: nil; 2018: nil).
Reconciliation to carrying amounts of the ISS Joint Venture (2018 comparative amount is disclosed
within Investments, see Note 14):
(US dollars in thousands)
Opening net assets
Initial investment
Commission credit
Net assets
VivoPower share in %
VivoPower share in $
Commission credit
Acquisition costs
Net Assets
19. Trade and other payables
(US dollars in thousands)
Trade payables
Accruals
Related party payable
Payroll liabilities
Sales tax payable
Contract liabilities
Other creditors
Total
Page | 65
As at 31 March
2019
As at 30 June
2019
28,294
-
-
28,294
28,294
-
-
28,294
50% 50%
14,148
(721 )
103
13,530
14,148
(721 )
103
13,530
2018
-
29,808
(1,514 )
28,294
50%
14,147
-
-
14,147
As at 30 June
2019
5,554
2,247
1,527
1,209
1,054
10,095
2,953
24,639
As at 31 March
2019
5,675
1,952
1,378
1,165
764
4,978
2,011
17,923
2018
3,806
3,008
1,838
504
310
1,544
3,072
14,082
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
In accordance with IFRS 15 contract liabilities are presented as a separate line item. Contract liabilities
relate to the Company’s obligation to transfer goods or services to customers for which the Company
has received consideration (or the amount is due) from customers. Contract liabilities are recorded as
revenue when the Company fulfils its performance obligations under the contract.
All contract liabilities balances at 31 March 2019, except for $2.4 million, were recognised as revenue
in the three months ended 30 June 2019. All contract liabilities balances at 31 March 2018 and 2017
were recognised as revenue in the year ended 31 March 2018 and 2018, respectively.
20. Provisions
(US dollars in thousands)
Current provisions
Employee entitlements
Employee terminations
Onerous contracts
Non-current provisions
Employee entitlements
Onerous contracts
As at 30 June
2019
As at 31 March
2019
1,510
112
96
1,718
1,459
157
94
1,710
148
1,952
2,100
227
1,995
2,222
2018
1,474
616
380
2,470
288
-
288
Total
3,818
3,932
2,758
Employee entitlements include long term leave and vacation provisions.
The employee terminations provision represents severance and contract termination costs associated
with employees and contractors who departed the business as a result of the restructuring more fully
disclosed in Note 7.
The onerous contracts provision recognises the forecast losses associated with contracts to purchase
Solar Renewable Energy Certificates from the NC-31 and NC-47 projects until 2027. The expected
losses have been discounted at the Company’s borrowing rate on long-term debt of 8.5%.
(US dollars in thousands)
At 1 April 2017
Charged/(credited) to profit or loss:
Additional provisions recognised
At 31 March 2018
Foreign exchange
Charged/(credited) to profit or loss:
Additional provisions
Reverse unused provisions
Provisions utilised
At 31 March 2019
Foreign exchange
Charged/(credited) to profit or loss:
Additional provisions
Reverse unused provisions
Unwinding of discount
Provisions utilised
At 30 June 2019
Page | 66
Employee
Entitlements
1,576
-
186
1,762
(140 )
Employee
Terminations
-
-
616
616
-
Onerous
Contract
-
-
380
380
-
510
(26 )
(420 )
1,686
(18 )
146
(41 )
-
(116 )
1,657
243
(87 )
(614 )
158
-
-
-
-
(45 )
113
1,804
-
(96 )
2,088
-
-
-
42
(82 )
2,048
Total
1,576
-
1,182
2,758
(140 )
2,557
(113 )
(1,130 )
3,932
(18 )
146
(41 )
42
(243 )
3,818
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
21. Loans and borrowings
(US dollars in thousands)
Current liabilities
Debtor invoice financing
Lease liabilities
Shareholder loan
Financing agreement
Non-current liabilities
Lease liabilities
Shareholder loan
As at 30 June
2019
As at 31 March
2019
901
660
766
-
2,327
751
136
-
-
887
2018
-
285
1,670
2,000
3,955
1,117
18,242
19,359
138
18,242
18,380
293
18,092
18,385
Total
21,686
19,267
22,340
In August 2018, the Company secured a $3.6 million (AU$5 million) debtor finance facility to support
the growing working capital requirements of its critical power services businesses. The facility is secured
by a fixed charge over the debtors’ book and floating charge over all other assets of J.A. Martin Electrical
Pty Limited and Kenshaw Electrical Pty Limited.
The current shareholder loan is due to Arowana International Limited (“Arowana”), the Company’s
majority shareholder, bears interest at 10.0% per annum paid monthly in arrears, and is unsecured.
Repayment is due as restricted cash held for bank guarantee security is released, as disclosed in Note
16.
The non-current shareholder loan is also due to Arowana, bears interest at 8.5% per annum paid monthly
in advance, and is unsecured. No repayment of principal is required until July 2020, and then is
repayable in 21 equal monthly instalments. Terms of the loan require that 50% of the net proceeds from
sale of more than $10 million of the ISS Joint Venture or any critical power services business also be
directed to loan repayment.
The obligations under lease liabilities are as follows:
(US dollars in thousands)
Minimum lease payments:
Present value of minimum lease
payments:
As at 30
June
2019
As at 31 March
2019
2018
As at
30 June
2019
As at 31 March
2019
2018
Amounts payable under
leases:
Less than one year
Later than one year but
not more than five
Future finance charges
Total obligations under
finance lease
692
147
291
660
136
1,299
1,991
(214 )
143
290
(16 )
327
618
(40 )
1,117
1,777
-
138
274
-
1,777
274
578
1,777
274
285
293
578
-
578
Page | 67
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
22. Called up share capital
(US dollars)
Allotted, called up and fully paid
Ordinary shares of $0.012 each
Number allotted
Ordinary shares of $0.012 each
As at 30 June
2019
As at 31 March
2019
2018
$
162,689 $
162,689
$
162,689
13,557,376 13,557,376
13,557,376
At 1 April 2017
Issue of new shares
At 31 March 2018
Issue of new shares
At 31 March 2019
Issue of new shares
At 30 June 2019
23. Other reserves
(US dollars in thousands)
Equity instruments
Share option reserve
Capital raising costs
Treasury shares
Foreign exchange
Total
No. of
shares
13,557,376
-
13,557,376
-
13,557,376
-
13,557,376
As at 30 June
2019
26,087
3,713
(9,722 )
(13 )
11
20,076
As at 31 March
2019
26,090
3,713
(9,722 )
(246 )
11
19,846
2018
25,072
3,713
(9,722 )
(592 )
(88 )
18,383
Equity instruments are convertible preference shares and convertible loan notes in Aevitas Group
Limited (“Aevitas Group”) which must convert to shares of VivoPower at $10.20 per share no later than
30 June 2021. The Company has classified these instruments 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 is fixed.
There are 2,473,367 convertible preference shares outstanding with a face value of AU$3.00 per share
and mature on June 30, 2021. The value held in reserves of AU$10,623,326 represents their face value
plus dividends accrued to 30 June 2019. Convertible preference shares are subordinated to all creditors
of Aevitas Group, rank equally amongst themselves, and rank in priority to ordinary shares of Aevitas
Group.
There are 2,473,367 convertible loan notes outstanding with a face value of AU$7.00 per share and
mature on June 30, 2021. The value held in reserves of AU$24,057,818 represents their face value
plus interest accrued to 30 June 2019. The convertible loan notes rank equally with the unsecured
creditors of Aevitas Group.
Dividends or interest is payable quarterly in arrears at a rate of 7% on the capitalised value to 29
December 2016, the date at which they became convertible to VivoPower shares. At maturity, or if a
trigger event such as a change of control of Aevitas Group or VivoPower, a listing event, or a disposal of
substantially all of the assets of Aevitas Group has occurred, the convertible preference shares and
convertible loan notes in Aevitas Group convert to VivoPower ordinary shares at a price of US$10.20
per share.
Page | 68
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
In connection with the acquisition of Aevitas Group, the Company entered into a guarantee of the
obligations of Aevitas Group under the terms of the preference shares and loan notes.
The share option reserve represents 828,000 share options granted to Early Bird Capital as part of the
initial public share offering. The options entitle the holder to buy VivoPower ordinary shares at US$8.70
at any time before 30 April 2020. The options were accounted for as a share-based award and
accordingly, the cost of the award was recognised directly in equity and was applied against capital
raising costs. The fair value of the options was determined at the grant date, using the Black Scholes
Model, and not remeasured subsequently.
On 30 March 2017, the Company repurchased 129,805 shares at a price of $4.50 for a total sum of
$591,916, including commission, and held them as treasury shares. During the three months ended
30 June 2019, 51,000 shares (year ended 31 March 2019: 75,805 shares) were awarded to employees
under the Company’s 2017 Omnibus Incentive Plan. Based on the closing market value of these shares
on the day of award, $61,560 (year ended 31 March 2019: $85,660) was expensed as employee
compensation during the three months ended 30 June 2019 and the remaining cost of $171,000 (year
ended 31 March 2019: $260,011) was charged against retained earnings. The remaining 3,000 shares
are being held as treasury shares and are included in the total number of shares outstanding at 30 June
2019.
24. Earnings per share
The earnings and weighted average numbers of ordinary shares used in the calculation of earnings per
share are as follows:
(US dollars in thousands)
Loss for the period
Three Months
Ended
30 June
2019
(1,446)
Year Ended 31 March
2019
(11,223 )
2018
(27,879 )
Weighted average number of shares in issue
(‘000s)
13,557
13,557
13,557
Basic earnings/(loss) per share (dollars)
Diluted earnings/(loss) per share (dollars)
(0.11)
(0.11)
(0.83 )
(0.83 )
(2.06 )
(2.06 )
25. Contingencies
On 26 February 2018, the Company’s former Chief Executive Officer, Phillip Comberg, filed a legal claim
alleging the Company committed a repudiatory breach of his service agreement in connection with the
termination of his employment on 4 October 2017. Mr. Comberg is claiming damages of £615,600
related to the notice period in his service agreement, £540,000 related to shares in the Company he
alleges were due to him, and other unquantified amounts related to bonuses and past services fees
alleged to be due. On 9 April 2018, the Company filed a defence and counterclaim, denying that a
repudiatory breach was committed by the Company and denying the other claims asserted by Mr.
Comberg, claiming that Mr. Comberg was terminated for cause.
On 26 November 2018, the Company agreed to a settlement of the counterclaims against Mr. Comberg
for an undisclosed amount. No settlement has been reached with respect to Mr. Comberg’s claim. The
Company continues to strongly deny and defend the claim.
As the outcome of the litigation is uncertain, very much dependent upon uncertain future determinations
by third parties, and the amount of any liability cannot be reliably measured, no provision has been
made in these financial statements in respect of this matter.
Page | 69
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
26. Pensions
The Group’s principal pension plans comprise the compulsory Superannuation scheme in Australia,
where the Group contributes 9.5% and a pension scheme for UK employees to which the Group
contributes 3%. The pension charge for the period represents contributions payable by the Group which
amounted to $270,035 (year ended 31 March 2019: $756,614; 2018: $900,483).
27. Financial instruments
(US dollars in thousands)
Financial assets at amortised cost
Trade and other receivables
Cash and cash equivalents
Restricted cash
Total
Financial Liabilities at amortised cost
Loans and borrowings
Trade and other payables
Total
As at 30 June
2019
As at 31 March
2019
2018
8,144
7,129
632
15,905
21,686
12,281
33,967
7,971
4,522
1,319
13,812
19,267
11,016
30,283
7,392
1,939
-
9,331
22,340
11,724
34,064
The amounts disclosed in the above table for trade and other receivables and payables do not agree to
the amount reported in the Company’s consolidated statement of financial position as they exclude
prepaid expenses, payroll and sale tax payables and contract assets and liabilities which do not meet
the definition of financial assets or liabilities.
(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 Executive Officer and is
implemented by the Group’s finance department. All risks are managed centrally with a tight control of
all financial matters.
Page | 70
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
(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 unrestricted cash resources
of $7.1 million at 30 June 2019 (31 March 2019: $4.5 million; 2018: $1.9 million). The ratio of current
assets to current liabilities is 1.25 (31 March 2019: 1.43; 2018: 1.03). During the year ended 31 March
2019, the Group established a $3.6 million debtor finance facility to support its working capital
requirements, of which only $0.9 million was drawn at 30 June 2019 (31 March 2019: $0.8 million). In
addition, the Group maintains near-term cash flow forecasts that enable it to identify its borrowings
requirement so that remedial action can be taken if necessary.
Contractual maturities of financial liabilities, including interest payments, are as follows:
As at 30 June 2019
(US dollars in thousands)
Contractual maturity of financial liabilities
Trade and other payables (financial liabilities)
Borrowings
Lease liabilities
Total
As at 31 March 2019
(US dollars in thousands)
Contractual maturity of financial liabilities
Trade and other payables (financial liabilities)
Borrowings
Finance leases
Total
As at 31 March 2018
(US dollars in thousands)
Contractual maturity of financial liabilities
Trade and other payables (financial liabilities)
Borrowings
Finance leases
Total
(c) Credit risk
Less
than
Total
1 year 1-3 years 3-5 years
12,281 12,281
23,397
1,991
-
3,859 19,538
1,077
37,669 16,832 20,615
692
-
-
222
222
Less
than
Total
1 year 1-3 years 3-5 years
More
than
5 years
-
-
-
More
than
5 years
11,016 11,016
22,480
290
-
2,556 19,924
143
33,786 13,719 20,067
147
-
-
-
-
-
-
-
-
Less
than
Total
1 year 1-3 years 3-5 years
More
than
5 years
11,724 11,724
25,896
619
-
5,498 14,111
328
38,239 17,513 14,439
291
-
6,287
-
6,287
-
-
-
-
The primary risk arises from the Group’s receivables from customers and contract assets. The majority
of the Group’s customers are long standing and have been a customer of the Group 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 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 17 for further analysis
on trade receivables.
Page | 71
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
(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.
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 Group is exposed to foreign exchange risk on $14.0 million of trade and other receivables
denominated in AUD and $0.2 million denominated in GBP. In addition, the Group is exposed to foreign
exchange risk on $18.7 million of trade and other payables, of which $16.4 million is denominated in
AUD and $2.3 million in GBP. In addition, the Group is exposed to foreign exchange risk on $3.2 million
of borrowing denominated in AUD.
The non-current shareholder loan of $18.2 million is 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.
28. Related party transactions
Arowana International Limited is the ultimate controlling party by virtue of its 60.3% shareholding in
VivoPower. Kevin Chin, Chairman of VivoPower, is also Chief Executive of Arowana International Limited.
During the period, a number of services were provided to the Group from Arowana and its subsidiaries
(“Arowana”); the extent of the transactions between the two groups is listed below.
VivoPower is indebted to Arowana via a shareholder loan on normal commercial terms with interest at
8.5% per annum payable monthly in advance and is unsecured. No repayment of principal is required
until July 2020, and then is repayable in 21 equal monthly instalments. Terms of the loan require that
50% of the net proceeds from sale of more than $10 million of the ISS Joint Venture or any critical power
services business also be directed to loan repayment. At 30 June 2019 the principal balance due to
Arowana by VivoPower under this loan was $18,242,636 (31 March 2019: $18,242,636; 2018:
$18,992,636).
VivoPower is indebted to Arowana via a shareholder loan on normal commercial terms with interest at
10.0% per annum payable monthly in arrears and principal repayable upon release of restricted cash
held as bank guarantee security as disclosed in Note 16. At 30 June 2019 the principal balance due to
Arowana by VivoPower under this loan was $765,681 (31 March 2019: nil; 2018: nil).
Directors fees for Kevin Chin in the amount of $62,136 were charged to the Company by Arowana
Partners Group Pty Limited, a company of which Mr. Chin is a shareholder and director, during the three
months ended 30 June 2019. At 30 June 2019 the Company had an account payable to Arowana
Partners Group Pty Limited of $88,516 (31 March 2019: $47,990; 2018: $42,188) in respect of these
services.
Art Russell, Interim Chief Executive Officer, is employed by Arowana International UK Limited, a
subsidiary of Arowana, and seconded to VivoPower; $84,266 was charged to the Company during the
three months ended 30 June 2019. At 30 June 2019 the Company had an account payable of $116,923
(31 March 2019: $32,657; 2018: $80,026) in respect of these services.
Page | 72
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
From time to time, costs incurred by Arowana on behalf of VivoPower are recharged to the Company.
During the three months ended 30 June 2019, $nil was recharged to the Company. At 30 June 2019,
the Company has a payable to Arowana in respect of recharges of $1,268,670 (31 March 2019:
$1,268,670; 2018: $1,802,003).
Aevitas is indebted to the following subsidiaries of Arowana via their holdings in Aevitas convertible loan
notes, which are accounted for as equity instruments within other reserves, as more fully described in
Note 23, and for which they earned $170,924 of interest during the three months ended 30 June 2019.
The outstanding amount represents the face value plus interest accrued to 30 June 2019:
● Arowana Australasian Special Situations 1A Pty Ltd: 666,666 Aevitas convertible loan notes with an
outstanding amount of $4,599,630;
● Arowana Australasian Special Situations 1B Pty Ltd: 666,667 Aevitas convertible loan notes with an
outstanding amount of $4,599,636; and,
● Arowana Australasian Special Situations 1C Pty Ltd: 666,667 Aevitas convertible loan notes with an
outstanding amount of $4,599,636.
Subsidiaries of Arowana hold the following convertible preferred shares of Aevitas, which are accounted
for as equity instruments within other reserves, and for which they earned $73,253 of dividends during
the three months ended 30 June 2019. The outstanding amount represents the face value plus
dividends accrued to 30 June 2019:
● Arowana Australasian Special Situations 1A Pty Ltd: 388,889 Aevitas convertible preferred shares
with an outstanding amount of $1,185,012;
● Arowana Australasian Special Situations 1B Pty Ltd: 388,889 Aevitas convertible preferred shares
with an outstanding amount of $1,185,012;
● Arowana Australasian Special Situations 1C Pty Ltd: 388,889 Aevitas convertible preferred shares
with an outstanding amount of $1,185,012; and,
● Arowana Australasian Special Situations Fund 1 Pty Limited: 833,333 Aevitas convertible preferred
shares held with an outstanding amount of $2,539,310.
Aevitas is indebted to The Panaga Group Trust, of which Mr. Kevin Chin is a beneficiary and one of the
directors of the corporate trustee of such trust, who holds 4,500 Aevitas convertible loan notes with an
outstanding amount of $29,117 representing face value plus interest accrued to 30 June 2019 and
earned interest of $385 for the three months ended 30 June 2019.
Aevitas is also indebted to The Panaga Group Trust, who also holds 4,500 Aevitas convertible preferred
shares with an outstanding amount of $12,885 representing face value plus dividends accrued to 30
June 2019 and earned dividends of $165 for the year ended 30 June 2019.
29. Subsequent event
On 2 July 2019, the Company sold its 100% interest in VivoRex, LLC, for $1 and recorded a gain for
accounting purposes of $2.276 million as a result of the disposal of onerous contract obligations of
$2.047 million and other liabilities of $0.302 million, net of cash and other current assets of $0.073
million. Results of operations for VivoRex, LLC, are reported within the Solar Development operating
segment, as disclosed in Note 4.2, and for the three months ended 30 June 2019 accounted for $0.1
million (year ended 31 March 2019: $1.959 million; 2018: $0.645 million) of the operating loss
reported for this segment.
Page | 73
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
30. Key management personnel compensation
Key management personnel, which are those roles that have a group management aspect to them are
included in Note 8 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, a company registered in Australia.
32. Transition period comparative information (unaudited)
The condensed consolidated statement of operations for the three months ended 30 June 2018 is as
follows:
(US dollars in thousands)
Revenue from contracts with customers
Costs of sales
Gross profit
General and administrative expenses
Loss on sale of assets
Depreciation and amortisation
Operating profit/(loss)
Restructuring costs
Finance expense – net
Loss before income tax
Income tax
Loss for the period
Three Months
Ended
30 June
2018
(unaudited
)
9,111
(7,446 )
1,665
(2,079 )
(4 )
(411 )
(829 )
(40 )
(842 )
(1,711 )
12
(1,699 )
Page | 74
Notes to the Financial Statements (continued)
for the three months ended 30 June 2019
The condensed consolidated statement of cash flow for the three months ended 30 June 2018 is as
follows:
(US dollars in thousands)
Cash flows from operating activities
Loss for the period
Income tax
Finance expense - net
Depreciation and amortization
Loss on sale of assets
Increase in non-cash working capital
Net cash used in operating activities
Net cash from/(used in) investing activities
Cash flows from financing activities
Repayment of related party loans
Finance lease repayments
Finance agreements proceeds
Finance agreements repayments
Finance expense – net
Cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Three Months
Ended
30 June
2018
)
(unaudited
(1,699 )
(12 )
842
411
4
379
(75 )
-
(770 )
(113 )
3,761
(2,000 )
(842 )
36
(39 )
1,939
1,900
Page | 75
Company Statement of Financial Position
as at 30 June 2019
(US dollars in thousands)
ASSETS
Non-current assets
Deferred tax 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 payables
30 June
2019
Note
31 March
2019
2018
3
4
349
7,388
24,353
32,090
349
7,388
24,356
32,093
1
18,577
18,578
50,668
4
18,238
18,242
50,335
-
7,388
25,258
32,646
20
17,257
17,277
49,923
Accrued expenses and other payables
5
Total current liabilities
Equity
Share capital
Share premium
Other reserves
Retained deficit
Total Equity
TOTAL EQUITY AND LIABILITIES
Registered number 09978410
6
7
2,348
2,999
5,347
1,652
3,018
4,670
630
600
1,230
163
40,215
18,330
(13,387 )
45,321
50,668
163
40,215
18,101
(12,814 )
45,665
50,335
163
40,215
18,657
(10,342 )
48,693
49,923
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 $402,031 (year ended 31 March 2019: $2,212,235; 2018:
$9,260,663 loss).
These financials were approved by the Board of Directors on 21 August 2019 and signed on its behalf by:
Kevin Chin
Chairman
Page | 76
Three
Months
Ended
30 June
2019
Note
Year Ended 31 March
2019
2018
(2,212)
(378 )
-
36
-
(27 )
805
(1,776 )
-
1,796
1,796
-
(36 )
(36 )
(16 )
20
4
(9,261 )
29
(2 )
33
10,465
277
86
1,627
2
(2,008 )
(2,006 )
(7 )
(33 )
(40 )
(419 )
439
20
(402)
-
(2 )
-
-
(11 )
709
294
-
(299 )
(299 )
-
2
2
(3 )
4
1
3
4
Company Cash Flow Statement
for the three months ended 30 June 2019
(US dollars in thousands, except per share amounts)
Cash flows from operating activities
Loss for the period
Income tax
Finance income
Finance expense
Impairment of investment
Increase in trade and other receivables
Increase in trade and other payables
Net cash from/(used in) operating activities
Cash flows from investing activities
Interest received
Intercompany loan funding
Net cash (used in)/from investing activities
Cash flows from financing activities
Other reserves
Finance expense
Net cash from/(used in) 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
Page | 77
Company Statement of Changes in Equity
for the three months ended 30 June 2019
(US dollars in thousands)
At 1 April 2017
Share Capital
163
Share Premium
40,215
Other Reserves
Total
18,471 (1,074) 57,775
Retained Deficit
Total comprehensive income for the year
Foreign exchange
-
-
-
- 1 186
- (9,261) (9,261)
179
(7)
At 31 March 2018
Total comprehensive income for the year
Equity instruments
Treasury shares granted to employees
At 31 March 2019
Total comprehensive income for the period
Equity instruments
Treasury shares granted to employees
-
- 1 186
(9,268)
(9,082)
163
40,215
18,657 (10,342) 48,693
-
-
-
-
-
-
(1,920) (2,212) (4,132)
- 1,018
1,018
(260) 86
346
-
-
(556) (2,472) (3,028)
163
40,215
18,101 (12,814) 45,665
-
-
-
-
-
-
- - (402) (402)
(3)
233 (171) 62
(3) -
-
-
230 (573) (343)
At 30 June 2019
163
40,215
18,330 (13,387) 45,321
For further information on “Other Reserves” please see Note 7 to the Company Financial Statements.
Page | 78
Notes to the Company Financial Statements
for the three months ended 30 June 2019
1.
Basis of preparation
VivoPower International PLC company financial statements were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union, 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 28 within the consolidated financial
statements.
3.
Investments
(US dollars in thousands)
Shares in group undertakings
Investment in VivoPower International Services
Limited
Total
As at 30 June
2019
As at 31 March
2019
2018
7,388
7,388
7,388
7,388
7,388
7,388
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.
As at 31 March 2018, VivoPower International Services Limited (“VISL”) recorded an impairment charge
of $10.5 million against goodwill that arose on the acquisition of VivoPower Pty Limited in the year ended
31 March 2018, as disclosed in Note 12 in the consolidated financial statements. Accordingly, this
impairment has been reflected in the Company’s investment in VISL.
Page | 79
Notes to the Company Financial Statements (continued)
for the three months ended 30 June 2019
4.
Other receivables
(US dollars in thousands)
Amounts owed by group undertakings
Prepaid expenses
Total
As at 30 June
2019
18,427
150
18,577
As at 31 March
2019
18,099
139
18,238
2018
17,145
112
17,257
5.
Accrued expenses and other payable
(US dollars in thousands)
Accrued expenses
Payroll tax liabilities
Amounts owed to group undertakings
Other creditors
Total
As at 30 June
2019
1,158
25
1,816
-
2,999
As at 31 March
2019
1,161
9
1,848
-
3,018
2018
565
6
-
29
600
6.
Share capital
(US dollars)
Allotted, called up and fully paid
Ordinary shares of $0.012 each
Number allotted
Ordinary shares of $0.012 each
As at 30 June
2019
As at 31 March
2019
2018
$
162,689
$
162,689 $
162,689
13,557,376
13,557,376 13,557,376
At 1 April 2017
Issue of new shares
At 31 March 2018
Issue of new shares
At 31 March 2019
Issue of new shares
At 30 June 2019
No. of shares
13,557,376
-
13,557,376
-
13,557,376
-
13,557,376
The Company issued 13,557,376 ordinary shares at a nominal value of $0.012 during the period ended
31 March 2017.
On 30 March 2017, the Company repurchased 129,805 shares at a price of $4.50 for a total sum of
$591,916, including commission. The shares are being held as treasury shares. During the three
months ended 30 June 2019, 51,000 shares (year ended 31 March 2019: 75,805 shares) were
awarded to employees under the Company’s 2017 Omnibus Incentive Plan. Based on the closing market
value of these shares on the day of award, $61,560 (year ended 31 March 2019: $85,660) was
expensed as employee compensation during the three months ended 30 June 2019 and the remaining
cost of $171,000 (year ended 31 March 2019: $260,011) was charged against retained earnings. The
remaining 3,000 shares are being held as treasury shares and are included in the total number of shares
outstanding at 30 June 2019.
Page | 80
Notes to the Company Financial Statements (continued)
for the three months ended 30 June 2019
7.
Other reserves
(US dollars in thousands)
Equity instruments
Capital raising costs
Share option reserve
Treasury shares (see Note 6)
Foreign exchange
Total
As at 30 June
2019
26,108
(9,722 )
3,713
(14 )
(1,755 )
18,330
As at 31 March
2019
26,090
(9,722 )
3,713
(246 )
(1,734 )
18,101
2018
25,072
(9,722 )
3,713
(592 )
186
18,657
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 30 June 2019. 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 2019, 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 five 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
DAC Beachcroft LLP
25 Walbrook
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
JTC (UK) Limited
7th Floor
9 Berkeley Street
London, UK W1J 8DW
SHAREHOLDER INFORMATION
Country of Incorporation and Main
Countries of Operation
Number of Securities in Issue
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 3,000 treasury shares.
As of 5 July 2019, the Company’s VivoPower
issued share capital consists of
13,557,376 ordinary shares
Company Registration
Registered office: 7th Floor, 9 Berkeley Street, London, UK W1J 8DW
Registered in England & Wales
Company number: 09978410
FINANCIAL CALENDAR
Annual General Meeting (“AGM”)
The Company’s AGM will be held on 23 September 2019 at the offices of DAC Beachcroft, LLP, 25 Walbrook,
London, United Kingdom EC4N 8AF. The notice of the meeting will be sent to shareholders at least 21 days
before the meeting.
Page | 82
www.vivopower.com
Page | 83