WindarPhotonics AnnualReport 2018 All - Flipbook - Page 19
commentary damaging the
reputation of the Group and require
rectification costs and/or claims
against the Group. Further, all
sales made by the Group are made
with a two year warranty with the
first sale having been made in the
fourth quarter of 2013. No major
claims have been made under
such warranties and the Group
has worked with its cus tomers to
enhance the installations on site
to date but there can be no assurance that the Group will not incur
significant liabilities in satisfying
warranty claims in the future.
The Group has not had to initiate
a product recall. However, it may
be exposed to product recalls if
its products are faulty or if
regulations are breached. If the
Group has to recall products, it
may incur significant and
unexpected costs and damage
to its reputation. The Group has
implemented quality control
procedures to mitigate this risk.
The Group has introduced some
significant improvements to
WindEYE™ during the year, resulting in a more robust product that is
easier to install which will further
mitigate this risk.
Other commercial factors
The Group is still in an early
business cycle stage and now
entering into the next higher
growth cycle means that the
Group will be exposed to a
higher concentration of single
customers and/or contracts.
In 2018 this was illustrated by
the fact that 2 customers
accounted for 90% of the annual
Group revenue (2017: 3 customers,
70%). The Group is aware and is
paying attention to the potential
commercial risk this development
brings. One of the ways to mitigate
this risk going forward is to
continue to focus strongly on both
ongoing but just as important new
OEM projects with the view over
time to developing a broader
customer base. Going into 2019
the Group has a record number of
OEM integration projects ongoing
despite the often minimal short
term financial benefits such
projects bring. The Group has also
mitigated this risk by engaging
with distributors within the IPP
retrofit market and in particular
with its agreement with Vestas.
Being in an early business cycle
the Group has been dependent on
financing the business through
placing of shares in the market
primarily to finance annual losses
generated in the Group. The Group
is aware of the risks associated with
being dependent on such capital
sources. The focus in the Group to
mitigate this risk is to arrive at a
position where potential future share
placings primarily will be needed
for financing of working capital
and not financing of annual losses.
Several activities and programmes
have been initiated by the Group to
support this target of which one was
the operating expense realignment
program with the aim to reduce the
revenue break-even level. Other
measures have been to continue to
optimise our core product costs
enabling the Group to get larger
contract wins in 2019 still with
satisfactory profit margins.
KEY PERFORMANCE
INDICATORS
The Group considers the revenue,
the EBITDA development, cash
balances, levels of debt and invoice
discounting utilisation, and
employee numbers as the current
key performance indicators of the
business as it has been in a start-up
phase.
Revenue for the year was €3.5
million (2017 €2.2 million)
representing a growth of 59% and
with increasing gross profit margins
the overall Gross Profit showed a
growth of 92%. The recognised
revenue growth realised for the
year was below initial targets set
for 2018 due to primarily supply
chain issues during the year.
However, during the latter part of
the year actions to avoid such
limitations have been addressed.
EBITDA loss, representing the loss
from operations and adding back
the depreciation and amortisation
charges of €0.3 million (2017: €0.5
million), reduced from €1.5 million
in 2017 to €0.4 million in 2018
representing an improvement in
performance of 73%.
At 31 December 2018 and excluding
restricted cash balances of €0.5
million (2017: €0.2 million) the
Group had cash balances of €1.7
million (2017: €1.1 million).
During the year the cash flow from
operations before changes in working capital were sharply reduced
to a net negative cash flow of €0.4
million (2017 €1.2 million), whereas
the negative cash flow from
movements in working capital
amounted to €0.5 million against a
positive cash flow from working
capital in 2017 of €0.8 million. The
substantial change in cash flows from
working capital between 2017 and
2018 is primarily due to a reduction
of the unusually high Trade Creditors
at the end of 2017, which in 2018
have been reduced by €0.6 million
to a more normal Trade Creditor
debts level at the end of 2018.
In addition trade receivables have
increased €0.3 million during the
period which reflects the increased
revenue achieved. The Group
continues to use invoice financing
and export credit facilities. The
increase in the restricted cash
balances at the end of the year
compared to 2017 was due to the
increased usage of the EKF credit
facility in 2018.
The Group’s loans at 31 December
amount to €1.1 million (2017: €1
million) of which €5,240 (2017:
€4,579) is classified as current.
The interest charge on the Growth
Fund Loan is rolled up and due on
repayment of the loan in June 2020.
The Group owed €10,735 (2017: €0.1
million) against the multi-currency
invoice discounting facility. Compared
to 2018 the usage of this facility was
reduced due to the strong free cash
holdings at the end of the year.
The order book at 31 December
2018 stood at €0.9 million (2017:
€4 million). The board consider this
along with ongoing trials with OEM
customers and IPPs in reviewing the
performance of the business.
Employee numbers at 31 December
2018 were 26 (2017: 22). The
realignment programme initiated
in 2016 was completed in 2017
bringing down the number of
employees from 31 employees at
the beginning of 2016. Due to the
general growth primarily in Asia the
Company has increased its number
of employees in the Shanghai based
sales and service office.
BY ORDER OF THE BOARD ON 27 JUNE 2019
Jørgen Korsgaard Jensen
Director, June 2019
Windar Photonics - Annual Report and Accounts 2018
17