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VivoPower(VVPR) - 2021 Q4 - Annual Report
VVPRVivoPower(VVPR)2021-09-15 10:03
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Financial Performance - Revenue from contracts with customers for the year ended June 30, 2021, was 40,411,000,adecreaseof15.940,411,000, a decrease of 15.9% from 47,986,000 in 2020[26] - Gross profit for the year ended June 30, 2021, was 6,327,000,downfrom6,327,000, down from 7,101,000 in 2020, reflecting a gross margin of 15.6%[26] - The company reported a loss for the period of 7,958,000fortheyearendedJune30,2021,comparedtoalossof7,958,000 for the year ended June 30, 2021, compared to a loss of 5,103,000 in 2020[26] - Total revenue for the year ended June 30, 2021, was 18,409,000,adecreaseof3718,409,000, a decrease of 37% from 29,343,000 in 2020[217] - Generator sales and installation revenue dropped to 11,479,000in2021from11,479,000 in 2021 from 23,579,000 in 2020, reflecting a decline of 51%[217] - The company experienced a loss of 8.0millionfortheyearendedJune30,2021,followingalossof8.0 million for the year ended June 30, 2021, following a loss of 5.1 million for the year ended June 30, 2020[81] Assets and Liabilities - Total assets increased to 76,512,000asofJune30,2021,from76,512,000 as of June 30, 2021, from 62,380,000 in 2020, indicating a growth of 22.6%[28] - As of June 30, 2021, the company had an aggregate of 23.0millionindebtobligations,impactingitsabilitytomakescheduledpayments[85]−Thecompanymaynotbeabletogeneratesufficientcashflowtoserviceallitsindebtedness,whichcouldadverselyaffectitsfinancialcondition[85]StrategicFocusandMarketPosition−Thecompanyhaspivoteditsstrategytofocusondeliveringend−to−endsustainableenergysolutionsfollowingtheTemboacquisition,targetingcorporatecustomersinhard−to−decarbonizesectors[33]−Thecompanyplanstoexpandsignificantlyinthecommercialelectricvehiclemarket,focusingonlightelectricvehiclesforthemining,infrastructure,andutilitiessectors[48]−Thecompanyistargetingsignificantgrowthacrossitsbusinessesoverthenext5years,drivenbyindustrytrendssuchaselectrificationoffleetvehiclesandrenewableenergysectorgrowth[87]−VivoPowerisfocusedondeliveringturnkeydecarbonizationsolutions,targetingharder−to−decarbonizesectorssuchasminingandinfrastructure[190]OperationalRisksandChallenges−SignificantinvestmentswillberequiredtoscaleupthenewSustainableEnergySolutions(SES)strategy,whichmaystrainfinancialandmanagementresources[35]−TheestimatedrevenueandcostsynergiesfromtheTemboacquisitionmaynotberealizedifintegrationchallengesarise[37]−MarketacceptanceofTembo′szero−emissionvehiclesiscriticalandmaybeinfluencedbyperceptionsofquality,safety,andgovernmentregulations[41]−Tembo′soperationalrisksincludepotentialsupplychainshortages,particularlyregardingbatteries,whichmayadverselyaffectoperations,profits,andcashflow[51]−ThecompanyhaslimitedexperienceindevelopingandscalingtheSESbusinesssegment,whichmayleadtooperatinglossesifnotmanagedproperly[65]−Thecompanyfacesforeigncurrencyexchangerisksduetooperationsinmultiplecountries,whichcansignificantlyaffectreportedfinancialresults[74]InnovationandProductDevelopment−ThecompanyisengagedinproductinnovationwithTembo,focusingonintroducingLEVconversionkitswithlongerrangeandgreaterpayloadcapacity[49]−FollowingtheacquisitionofTembo,distributionagreementsweresignedwithpartnersinNorthAmerica,Australia,andEuropetosellTemboLEVconversionkits[50]−Thecompanymustcontinuouslyinnovatetoremaincompetitiveinarapidlyevolvingmarketcharacterizedbychangingtechnologiesandconsumerdemands[53]MarketandEconomicConditions−Generaleconomicconditions,includinginflationandinterestrates,couldnegativelyimpactdemandforthecompany′sproductsandservices[115]−Adeteriorationineconomicconditionscouldsignificantlyimpactthecompany′saccesstothird−partyfinancingonattractiveterms[127]−Seasonalvariationsindemandlinkedtoweatherconditionsmayinfluenceoperationalresults,withextremeweathereventspotentiallyexacerbatingthesefluctuations[121]ComplianceandRegulatoryRisks−CompliancewithGDPRregulationsmayimposesubstantialpenaltiesfornoncompliance,includingfinesupto€20millionor423.0 million in debt obligations, impacting its ability to make scheduled payments[85] - The company may not be able to generate sufficient cash flow to service all its indebtedness, which could adversely affect its financial condition[85] Strategic Focus and Market Position - The company has pivoted its strategy to focus on delivering end-to-end sustainable energy solutions following the Tembo acquisition, targeting corporate customers in hard-to-decarbonize sectors[33] - The company plans to expand significantly in the commercial electric vehicle market, focusing on light electric vehicles for the mining, infrastructure, and utilities sectors[48] - The company is targeting significant growth across its businesses over the next 5 years, driven by industry trends such as electrification of fleet vehicles and renewable energy sector growth[87] - VivoPower is focused on delivering turnkey decarbonization solutions, targeting harder-to-decarbonize sectors such as mining and infrastructure[190] Operational Risks and Challenges - Significant investments will be required to scale up the new Sustainable Energy Solutions (SES) strategy, which may strain financial and management resources[35] - The estimated revenue and cost synergies from the Tembo acquisition may not be realized if integration challenges arise[37] - Market acceptance of Tembo's zero-emission vehicles is critical and may be influenced by perceptions of quality, safety, and government regulations[41] - Tembo's operational risks include potential supply chain shortages, particularly regarding batteries, which may adversely affect operations, profits, and cash flow[51] - The company has limited experience in developing and scaling the SES business segment, which may lead to operating losses if not managed properly[65] - The company faces foreign currency exchange risks due to operations in multiple countries, which can significantly affect reported financial results[74] Innovation and Product Development - The company is engaged in product innovation with Tembo, focusing on introducing LEV conversion kits with longer range and greater payload capacity[49] - Following the acquisition of Tembo, distribution agreements were signed with partners in North America, Australia, and Europe to sell Tembo LEV conversion kits[50] - The company must continuously innovate to remain competitive in a rapidly evolving market characterized by changing technologies and consumer demands[53] Market and Economic Conditions - General economic conditions, including inflation and interest rates, could negatively impact demand for the company's products and services[115] - A deterioration in economic conditions could significantly impact the company's access to third-party financing on attractive terms[127] - Seasonal variations in demand linked to weather conditions may influence operational results, with extreme weather events potentially exacerbating these fluctuations[121] Compliance and Regulatory Risks - Compliance with GDPR regulations may impose substantial penalties for noncompliance, including fines up to €20 million or 4% of annual global revenues[136] - Changes in regulations governing the electric utility industry could materially affect demand for the company's sustainable energy solutions[141] - The financial viability of solar projects is heavily influenced by equipment prices and regulatory changes, which could reduce economic appeal[148] - The company is subject to income taxes in various jurisdictions, and changes in tax laws could negatively impact profitability and cash flow[151] Shareholder and Governance Issues - The largest shareholder owned approximately 44.2% of the outstanding ordinary shares as of June 30, 2021, exerting substantial influence over corporate decisions[107] - The balance of the shareholder loan from the largest shareholder was 21.2 million as of June 30, 2021, which could adversely affect share value if covenants are breached[108] COVID-19 Impact - The company has faced significant adverse impacts from COVID-19, affecting operations in key markets including the U.K., Australia, the Netherlands, and the U.S.[111] - Supply chain disruptions due to COVID-19 have resulted in additional expenses and delays in fulfilling customer orders, adversely affecting revenues[114] - Operational disruptions due to COVID-19 led to delays in project commencement and revenue recognition, impacting profitability margins[217] - The business has adapted to longer lead times from suppliers due to supply chain disruptions caused by the pandemic[217] - The company has implemented health and safety best practices to mitigate pandemic impacts[217] Employee and Workforce Considerations - The critical power services workforce in Australia includes 158 operational personnel, representing 90% of the total workforce as of June 30, 2021[68] - The company is highly dependent on key personnel, including its CEO, and faces challenges in attracting and retaining skilled employees, which could impact business operations[172] Acquisitions and Growth - VivoPower completed the acquisition of 51% of Tembo e-LV B.V. for €4.0 million and the remaining 49% for €1.8 million cash and €0.2 million in shares, focusing on ruggedized electric vehicles for mining and infrastructure sectors[186] - VivoPower acquired the remaining 50% interest in Caret, LLC for 1,whichdevelopsutility−scalesolarfarmsintheU.S.[187]−Thecompanycompletedacquisitionstotaling1, which develops utility-scale solar farms in the U.S.[187] - The company completed acquisitions totaling 10.1 million for VivoPower Australia and Aevitas, enhancing its operational capabilities in the renewable energy sector[183] Subsidiaries and Operations - VivoPower operates 22 subsidiaries and associated entities across multiple countries, including Australia, Canada, the Netherlands, the UK, and the US[188] - J.A. Martin serviced almost 250 customers across various industries, including solar farms and mining, with a fleet of 76 vehicles and 132 employees[200] - Kenshaw, a subsidiary of VivoPower, has over 500 clients and provides critical electrical power services, benefiting from growth in the data center and health sectors[210][214]