VivoPower International PLC — Form 20-F Transition Report
Period: Three months ended June 30, 2019. This is a transition-period report following the change in fiscal year-end from March 31 to June 30; it is not a report for 2018 Q4. Financial statements are prepared under IFRS in U.S. dollars. The comparative three months ended June 30, 2018 are unaudited.
Business context and performance
VivoPower operates Australian critical power services businesses, develops and sells solar projects in Australia and the U.S., and maintains corporate functions in the U.K. In the period, growth was led by Australian critical power contracts, particularly generator sales and new data-center and hospital work. U.S. solar activity was focused on monetizing the ISS Joint Venture portfolio.
| Metric | Three months ended June 30, 2019 | Prior comparable period |
|---|---|---|
| Revenue | $13.617 million | $9.111 million |
| Gross profit | $1.657 million | $1.665 million |
| Operating loss | $0.033 million | $0.829 million |
| Net loss | $1.446 million | $1.699 million |
| Adjusted EBITDA, non-IFRS | Profit of $0.4 million | Loss of $0.4 million |
| Operating cash flow | +$2.188 million | -$0.075 million |
Revenue increased about 49%, primarily as Critical Power Services revenue rose to $13.484 million from $8.416 million. Solar Development revenue was $0.133 million, versus $0.695 million, as prior-period results included distributions from the NC solar projects. Gross profit was broadly flat despite higher sales. Critical Power Services gross margin declined to 12.0% from 13.1%, reflecting a mix shift toward lower-margin materials and higher generator sales.
Financial position and liquidity
- At June 30, 2019, cash and cash equivalents were $7.129 million, including $0.632 million of restricted cash; current assets were $36.283 million and current liabilities were $29.133 million. The current ratio was 1.25.
- Total borrowings were $21.686 million, up from $19.267 million at March 31, 2019; reported net debt was $14.6 million. The increase in borrowings included approximately $1.6 million from adopting IFRS 16 lease accounting.
- Cash increased by $2.616 million during the quarter. Operating activities provided $2.188 million; investing activities used $0.316 million; and financing activities provided $0.744 million.
- Total assets were $73.109 million and shareholders’ equity was $22.516 million. Assets held for sale included $13.530 million related to the ISS Joint Venture portfolio.
- The $18.243 million unsecured Arowana shareholder loan bears 8.5% interest, with principal repayment commencing in July 2020; a further $0.766 million short-term Arowana loan bears 10% interest. The critical power debtor-finance facility had $0.901 million drawn.
Changes, outlook and material items
- General and administrative expenses fell to $1.291 million from $2.079 million, following cost reductions in the Solar and Corporate segments. Restructuring costs rose to $0.525 million, mainly legal and professional fees associated with former-employee disputes.
- The company reported a $45.1 million critical-power forward order book at June 30, equal to 83% of annualized quarterly critical-power revenue. One customer contributed $6.0 million, or approximately 44% of quarterly revenue; Kenshaw disclosed that one customer represented 76% of its quarterly revenue.
- Management intended to monetize the U.S. solar portfolio and redeploy proceeds strategically. The portfolio was being marketed for sale, with full realization expected within 12 months; the filing cautions that timing and proceeds are uncertain.
- Management stated that cash, operating cash flows, expected ISS Joint Venture sale proceeds and planned refinancing were expected to meet requirements for at least the next 12 months, and that resources were adequate through August 2020. The filing nevertheless identifies continued losses, financing needs and delayed asset sales as risks to liquidity and going concern.
- On July 2, 2019, VivoPower sold VivoRex, LLC for $1. The disposal produced a reported accounting gain of $2.276 million, principally from derecognition of onerous-contract obligations and other liabilities; this was a subsequent event, not quarter revenue.
- The former CEO’s claim remained unresolved. The company denied the claims; its counterclaims had been settled for an undisclosed amount. No provision was recorded because the outcome and any liability could not be reliably measured.
- IFRS 16 was adopted from April 1, 2019, recognizing right-of-use assets and lease liabilities. Management said disclosure controls and internal control over financial reporting were effective. The auditor issued an unqualified opinion on the IFRS financial statements.
Key investor verification points
- Confirm the status, timing, expected proceeds and sale conditions for the $13.530 million ISS Joint Venture asset held for sale, and whether proceeds support the liquidity plan.
- Assess cash conversion and working-capital dependence: quarterly operating cash generation included a $6.7 million increase in payables, partly offset by a $4.6 million increase in receivables.
- Review the concentration and sustainability of critical-power revenue, including the major customer exposure and forward-order-book conversion.
- Verify debt service capacity, related-party loan terms, the planned refinancing and the effect of the 2020 Arowana principal repayment schedule.
- Track the unresolved former-CEO litigation, the VivoRex disposal accounting and the expected reversal of onerous-contract provisions.
- Check the filing’s governance disclosure: it states that the Audit and Risk Committee had two independent members and that an additional independent director was required to meet Nasdaq’s three-member requirement.