VivoPower International PLC (VVPR) 2021 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the VivoPower International PLC half-year results conference call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Kevin Chin, Chairman and CEO. Thank you. Please go ahead, sir.

Welcome to the VivoPower International half-year results presentation for the six months ended December 31, 2020. I'm going to kick off with a strategic and operational review and then I'll also cover the financial review for the period.

So just going straight to the executive summary, which is set out on page 3. The headline is our results for the half year were affected by strict COVID lockdowns, but our growth outlook is very strong as a result of the Tembo acquisition.

Our revenues declined 28% year on year to $22.7 million primarily as a result of strict COVID-19 lockdowns in Australia, causing delays to scheduled works for our Aevitas business units. As a consequence, gross profit decreased 18% year on year to $4.6 million. And notwithstanding that, our GP margin did improve to 20% versus 18% in the previous corresponding year, and that was the result of strong focus on project execution and labor efficiency.

Our EBITDA declined to $1.2 million for the half-year period from $4.2 million (sic - see slide 3 "$4.3 million") in the previous corresponding period. Again, the primary drivers were the COVID lockdown-related revenue drop. But in addition, we did increase our headcount to support the hyper-scaling of the Tembo business.

Our balance sheet has been, however, fortified with the capital raising that was consummated in October 2020, raising gross figure of $28.75 million. Our cash balance, as a result, has increased from $2.8 million as at the end of June 2020 to $17.4 million as at December 31 of the same year. We also refinanced our parent company shareholder loan that was consummated in January with a longer maturity date and lower interest rates, which reflects the improved credit profile of the company.

As I mentioned at the outset, the Tembo acquisition has really transformed the growth trajectory of VivoPower. We completed the 51% acquisition of Tembo in November 2020. And subsequent to this pointing periods, we move to 100% ownership in February 2021. We also signed a major partnership deal with GB Auto to distribute our Tembo electric vehicles in Australia, and that deal is worth up to USD250 million in revenue over four years.

Last but not least, I'm also pleased to announce and report that we have secured our first sustainable energy solution deal with Tottenham Hotspur football club in the UK, one of the world's leading football clubs. And we've become that global battery partner as part of the transaction as well. This is our first SES holistic deal and also our first in relation to infrastructure assets being the stadium, Tottenham Hotspur in the UK, as well as their training facilities. We expect further orders in the second half of FY21 from our mining sector customers, in particular, across the globe.

Jumping to page 4 just to review where we are at in terms of our FY21 key objectives, which we shared with the market back in August at the time of our full-year results. We're ahead of schedule at the moment. And in a nutshell, we are tracking at 55% completion in terms of the objectives that we've set out. And we're on track to deliver on the risks before the end of June 2021.

Moving on to the specific business units, firstly, I'll touch on Aevitas, which is our critical power and site-specific electrical infrastructure business in Australia. Revenues, GP, and EBITDA declined across the board, again due to the strict COVID lockdowns that were experienced in Australia. The business delivered $22.3 million (sic - see slide 5 "$22.2 million") in revenues, which is down 29% year on year.

Gross profit was $4.6 million compared to $5.6 million in the prior period. Gross margins did, however, improve as a result of efficiency gains. The underlying EBITDA for the business was $3.3 million. That is down 18%, reflecting the lower gross profits, although that was partially offset by further overhead cost savings.

Notwithstanding these results, we continue to win work and deliver on it. We are seeing conditions improve since the start of calendar 2021, and the outlook remains very buoyant for the Aevitas business. We've also completed the refinancing of funding facilities, which have resulted in a 38% reduction in financing costs as well as the retirement of some redundant working capital lines that we no longer need.

Moving on to our solar development business, which is called Vivo Solar. So we have both US portfolio as well as an Australian portfolio. Starting off with the US portfolio first, as mentioned, during the full-year results back in August, we have taken over management control of the joint venture from our joint venture partner. We've been focused on maximizing value across the portfolio.

We are, however, still hamstrung by negotiations that continue with our joint venture partner in relation to settlement of the joint venture arrangements, where we are seeking as a minimum, and they have offered as a minimum their 50% of the portfolio for nominal consideration. We are still live in terms of negotiations on that. We do expect to complete that before the end of the fiscal year.

As far as the portfolio is concerned, the net megawatts is 882, which -- that's in total. And that is slightly down on the original economic share that we had at the outset, which was 922 megawatts. That said, we have made progress in terms of the development path for a number of these projects. The outlook also has improved, obviously, with the Biden presidency being far more accommodating to renewable as an industry in the US. So that's been real positive for that portfolio.

On the Australian front, we have been seeking to monetize our smaller solar projects in that market. And during the post-balance date periods, we have successfully managed to sell Daisy Hill, and we're closing in on a sale of Yoogali solar as well. Both are expected to be profitable overall.

Additionally, J.A. Martin, which is one of our Aevitas business units, has successfully completed over 150 megawatts of solar projects now, and they have another 300 megawatts in their pipeline. So the solar development activities in Australia have fed the J.A. Martin business in terms of electrical on-site installations for solar farms.

Moving on, I'm going to talk about Tembo now. So Tembo obviously is the electrical vehicle business that we acquired back in November last year and moved to 100% ownership up in February this year. So just to recap, it focuses on customized and ruggedized applications, including for the mining sector globally, and that's very much been our focus of attention as far as securing orders. Other sectors that we are prioritizing are infrastructure, which is where the Tottenham deal fits in, as well as utilities and government services.

We signed a landmark deal with GB Auto Group in January 2021 as well. And that agreement sees GB Auto, who are very well-regarded in the Australian marketplace, particularly amongst the mining companies. They are committing to purchase at least 2,000 Tembo EV kits in the first four years of a seven-year agreement with a minimum of 500 kits in the first year. This deal, as I mentioned before, is worth up to USD250 million, and VivoPower and GB Auto are working very closely on a number of opportunities that we're seeking to close before the end of the financial year.

In terms of results, the revenues contribution from Tembo was pretty small for the half-year periods. Consolidated revenues of $0.4 million reflect only two months of contribution post the acquisition in October, and that was primarily from delivery of existing orders to key long-term customers. Revenues were, excuse me, lower year on year due to operational disruption and delays in production and delivery as a result of COVID-19 lockdowns in the Netherlands and the customer markets as well.

Net loss for the period was $0.5 million, driven by a number of nonrecurring items. Work, importantly, has commenced on the next generation 72-kilowatt-per-hour battery platform. And so the VivoPower onboarding and some integration program commenced and is near completion at the time of this update. We are also live a recruitment campaign to beef up the team in terms of engineering capabilities in particular.

So moving along, as again, we've flagged previously at the full-year results presentation, Tembo really enables VivoPower to provide a holistic decarbonization solution, which helps our customers to move towards achieving net-zero status. And the key elements of that SES solution, as we call it, firstly, the electic vehicle; secondly, sites electrification, including microgrids and charging stations; and last but not least, a battery life cycle management program.

SES is fundamentally an enterprise solution. So it comprises a full suite of hardware, software, and services that encompass battery management systems, telematics in vehicle monitoring systems, the hardware in the form of vehicles, the hardware in the form of microgrids and charging stations and batteries. And so this is ultimately where we are going to see the business of VivoPower move towards as far as providing this holistic solution to our customers.

On that note, I'm going to talk a bit more about the battery partnership with Tottenham Hotspur which was announced today. So this is a platform for our first full suite SES deal. So Tottenham have engaged us to help them achieve net-zero carbon status.

It's a first-of-its-kind deal with them, and it's part of the drive to become a net-zero carbon business and decarbonize both of their key infrastructure assets being the stadium in North London as well as the state-of-the-art training center not too far from the stadium. And so we're targeting actionable outcomes by the end of June.

Tottenham was recently named the Premier League's greenest club following a study carried out by BBC sports and the UN-backed Sport Positive Summit. It's also a signatory of the UN sports for climate action framework.

So what will VivoPower be doing for Tottenham? We'll start off by evaluating with a view to supplying, installing, and maintaining a large, solid-state battery likely to be more than 3 megawatts at the stadium. This will be the largest of any stadium or arena in Europe. And the purpose is to balance and guarantee the venue's power supply.

In addition to that, we are evaluating the potential to install a full-suite sustainable energy solution at their training grounds. So that will include rooftop solar panels, battery storage, custom microgrid capacity as well as electrical infrastructure to enable EV usage. So that will run in parallel to the process with respect to the stadium.

Also as the club's official battery technology partner, VivoPower will benefit from visibility on digital signage at Tottenham Hotspur matches, be featured in content on the club's popular social media channels, which last year had an audience reach of over 433 million football fans. So we're very excited by this deal. It also is our first deal in the UK market for SES. UK is arguably the most attractive market for battery storage in the world at the moment, so we are confident that this deal will catalyze further interest in what VivoPower can offer to other corporates in the UK.

Just to wrap up on the strategic and operational review, just some other corporate developments that were completed in the last six months. So we established an advisory council with world-class experience and relevant skills. And they are adding significant value in terms of our growth plan particularly for Tembo.

We've also added to the Board. So Gemma Godfrey, who's based in London has joined us. So she has extensive entrepreneurial experience in financial services, technology, media, public policy, and sustainability.

On the executive front, so we hired Matthew Nestor, who's our Sales Director for North America, which is a key market focus for us going forward. Gary Challinor has joined us as Director of sustainable energy solutions for Australia and New Zealand. And we've just recently hired a General Counsel. That announcement will be formally made shortly. So team has been beefed up, and we expect to add further hires in the near term.

We're very pleased also to have been awarded the Real Leaders' top 50 Impact Award. And we ranked 47th globally out of almost 150 leading companies that are making a positive social or environmental impacts on the world. So other Real Leader Impact Award winners include Tesla, Patagonia, as well as parent entity, Arowana.

By virtue of the Tembo acquisition, we now have a presence in the EU, with the Netherlands obviously being the base of Tembo's activities at present. We've also opened new offices in Virginia in the US as well as Toronto in Canada, both homes to some of the world's largest mining infrastructure and utility companies. And we continue to maintain a strong presence in the Australian market.

So jumping to the financial review, I'll cover that as well. So just to recap, revenues were down. And for the half, we're $22.2 million versus $31.3 million previous corresponding period. As for the last period, there was very little by way of solid development revenues. And Tembo's contribution to the half-year results was really just two months, and $0.4 million is the revenue contribution there.

Gross profit wise, this comes primarily from the critical power services business in Australia. As mentioned before, GP margin improved, but it's still down overall versus the prior period. Our adjusted EBITDA is -- or ended at $1.3 million (sic - see slide 13 "$1.2 million") versus $5.4 million (sic - see slide 13 "$5.5 million") in the previous corresponding period.

There are a number of nonrecurring costs that were incurred principally relating to litigation expenses involving the former CEO. I'm pleased to say that that chapter has been concluded, and we have cleared all those expenses relating to that matter. Group basic EPS was negative $0.03 versus positive $0.08 in the previous period. On an underlying basis, it's $0.10 versus $0.14 for the same periods in question.

I'll jump straight to the balance sheet summary. So in terms of the balance sheet, the key item to note here is obviously the increase in unrestricted cash from $2.8 million at the end of June to $17.4 million as at the end of December.

In addition to that, there's been a decrease in current liabilities as well as a decrease in long-term liabilities, and net assets have improved and increased significantly, principally as a result of the equity capital raising that we completed in October last year. Net debt has, as a result, declined from $23.1 million to $8.3 million. So that's significantly improved the credit profile of the company.

Thank you for listening into today's update. If you have any questions, please feel free to e-mail shareholders@vivopower.com.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.