VivoPower International PLC

Good day and thank you for standing by. Welcome to the VIVO Power International PLC Fiscal Year 2023 Half-Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Chin.

Good morning, ladies and gentlemen. Welcome to the VIVO Power Half-Year Results presentation The period ended 31st of December, 2022. I'll take you firstly to page three of our presentation, the executive summary. So at a headline level, we made very good strategic progress during the half year. However, our results were affected by unseasonal weather and foreign exchange. Our revenue declined due to project timing. and a decline in the Australian dollar versus the US dollar foreign exchange rates. So our half year revenue decreased 23% year on year to 8.7 million. This is primarily attributable to timing of project execution with one major solar project, Edenvale, undertaken in Australia versus two in the prior period. Skills shortages have had an impact on our ability to take on new projects. However, on a constant Australian dollar, US dollar exchange rate basis, our revenue decrease was reduced 17%. Our gross profit and GP margin also declined. This was due to the decrease in revenue, as well as one-off Edenvale project losses. So half-year gross profit decreased by 3.1 million year-on-year to negative 3.6 million. This does include $3.6 million of specific one-off weather-driven cost overruns on the Edenvale solar project. This was due to climate change-related higher-than-forecast rainfall, leading to damage of project works and delays in execution. Edenvale is in the regional part of Australia, which normally doesn't encounter the extent of rainfall that was experienced, unfortunately, during the project. GP margin as a result declined to negative 42% versus the prior year of minus 4%. However, adjusted for Edenvale cost overruns, this was minus 1% for the half year. We also incurred EBITDA operating losses due to principally the one-off Edenvale project loss. So for the half year, our adjusted EBITDA loss, excluding Eden Bell, actually improved to negative 3.9 million versus 4.5 million negative in the prior corresponding period. Operating losses did increase to negative 8.2 million versus 7.7 million for the first half of this fiscal year. Losses were also driven by foreign exchange not moving favorably and reduced revenues in Australia, as previously mentioned. With respect to our balance sheets, our cash position actually increased at 31st of December 2022 from the $1.3 million as at June 30th, 2022. It increased to $3.2 million as at half-year ends Our cash was principally invested for Tembo scale-up and product development. The one-off Edenvale solar loss was obviously unplanned. We did partially de-risk our balance sheet through the extension of the repayment terms and duration with our major shareholder, AWN, which extended the loan by 18 months to the 1st of April 2025. Strategically, we made good progress, as I mentioned beforehand. So our distribution partner network for Tembo, we've been able to further expand that globally and also have entered into the much larger secondhand addressable market. And our EV kit commitments and order book has now increased to over 10,000 kits worldwide. Importantly, the development of our next generation electric utility vehicle, which we've called EUV23, is on target with positive feedback from key customers who have visited and test-driven the vehicle. We also completed the divestiture of our non-core business, J.A. Martin Electrical, as well as completed further financing and strategic investment initiatives to fund growth. Last but not least, in terms of the summary, we were named one of the best B Corps in the world for governance with a verified score in the top 10% of all certified B Corps in the world. And we were again recognized as a top 300 global impact company for the third year in a row by the Real Leaders Impact Awards. Moving on to page four. So this covers some of the key items and key developments since the half year ended, 31st December, 2022. So firstly, we've commenced shipping our vehicles to partners, and we've also received our first orders for the next generation EUV23. So we're thankful to our key partner in Canada, AXA, for our first material order of the EUV23 conversion kits. and we are in the midst of prioritizing ramping up production over the coming months to fulfill this order as well as others that we already have. Customer deliveries have been scheduled and agreed for GHH in South Africa, as well as Diankel in the UK over the course of February and March 2023. The first version of the EUV23 is on track with regards to testing. We've already covered more than 400 kilometers trouble-free with the vehicle in difficult terrain. And now we're focused on extensive pre-production testing to define final third-party component suppliers for the production ramp-up. We've also completed supplier audits for major component suppliers. So very much focused on the next stage with respect to Tembo, which is a production and delivery wrap up. We've also executed on financing and strategic transactions post the half year balance date. So we've secured further bridge financing from our major shareholder, AWN. And that's been followed by private investment out of the Emirates committed to Tembo directly for an initial $2 million, noting that Viva Power still maintains majority control of Tembo. These funds will be used for Tembo's growth, including engineering, assembly, and delivery of conversion kits. We've also been taking advantage of the EV winter, if you will, that's occurred over the last six months and accelerated in the past three months to recruit on a selective basis great talent from other EV companies who are either downsizing or ceasing business. So Vivo Power and Tembo remain one of the very few EV companies in the world that are in hiring mode at the moment. We are being very selective about it, and we're seeing that there is an abundance of talent now available in the market. That wasn't the case a year ago. Last but not least, and very importantly, we are concluding on the Edenvale project, which has been clearly very disappointing and has hurt us financially over the last six months. given the climate change-related weather patterns that we've had to deal with there. So at this stage, we expect to conclude that project at the end of February 2023, in a few days' time. Weather appears to be positive at the moment, so that should be on track. In addition to that, we're seeing our Kenshore electrical business, which is part of Avetis as well, start to really build up its order book and pipeline. And recently, in the past few weeks, it's executed a three-year umbrella agreement with Glencore for reactive and scheduled maintenance, repair and overhaul, as well as the sale of critical electric motors in New South Wales, Australia. So we expect to see further momentum from Kenshur over the next six months. Moving on to slide five, this is the objectives and key results that we set for ourselves at the start of this fiscal year back in July 2022. We have completed eight out of the 18 that we set for ourselves to achieve. As I mentioned before, we're very much focused now on ramping up assembly and production as well as deliveries over the next six to 12 months. And we'll be looking to build up our teams and capabilities in order to do that. Jumping ahead to page seven, I will talk a little bit more about Tembo. So in terms of the results for Tembo for the half year, revenues of 0.9 mil were achieved. Underlying EBITDA loss was negative 0.5 mil, reflecting growth in OPEX investment, especially engineering talent. As mentioned, the first version of our next generation EUV23 platform became available on time in December, which is a material upgrade on the previous generation 28-kilowatt-hour battery system. Our distribution partner network expanded with over 5,000 additional kits in the commitment and audiobook pipeline. and we've entered into the second-hand electrification and repowering markets through our deal with ETC in Kenya, as well as our deal with Evolution in Australia and New Zealand. This is a very significant move for us, and it materially expands our addressable market considerably. We've also beefed up the talent pools. and hired, amongst others, a new head of engineering, Phil Barker, since December. So there's been a lot of progress on the Tembo front, both commercially, operationally, and with respect to SAL's pipeline and commitments globally. Turning to page eight. ABFS, as I mentioned before, the big disappointment here has been the unplanned and uncontrollable weather dynamic, which has turned what was supposed to be a very profitable project for us at Edenvale into a loss-making one. And this obviously hurts coming off the coattails of bluegrass, which affected our results in the previous six months. So we are very mindful now and very cautious about weather patterns. But notwithstanding that, we still see a lot of potential for growth in the space given the build-out of solar across Australia. As I mentioned before, the Kensal business is starting to see a pick-up and a rebound in terms of its pipeline and order book. And we're confident that that business will continue to grow and resume its growth over the second half of this year and beyond. Turning to page nine, sustainable energy solutions. We have pivoted our focus in that respect to mining and other industries to augment customers and the partners requirements for the Tembo vehicles and in that regards we have secured some capabilities through experienced advisors and partners and for example we have identified an EV charging partner with Hardaway already being tested in collaboration with Tembo EUV this is this is a global company distribution contract negotiations are ongoing at this stage, but we're confident that we will secure that and be able to offer a more holistic solution to our customers. Moving on to page 10, Carat Solar, as foreshadowed, A year ago, we were pivoting strategy for this to PowerTech applications, including looking at Bitcoin miners. Obviously, there's been a correction in the Bitcoin market, which has slowed things down with respect to our strategy in relation to this portfolio. However, in recent weeks, we've seen a re-emergence of interest following the rebounds in the Bitcoin price. In addition to that, we've seen interest reemerge again in terms of solar developers seeking to buy into or partner with us on these projects. And this is in response to the Inflation Reduction Act, which has seen the income tax credit incentive being restored in the United States. So that's a wrap-up for me in terms of the half-year results. Disappointing financial results due to weather and climate change. However, that's now been stemmed. And off the back of very strong strategic and operational progress in the first half, we're confident on executing on our objectives for the second half of the year. Thank you, everyone, for joining, and that wraps up the half-year presentation for VivoPAL. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.