Delorean’s 2025 Revenue Drops $0.31M; Tax Expense Jumps $2.16M
Delorean Corporation has released its audited 2025 Annual Report, revealing key adjustments from its preliminary results including lower revenue, increased tax expenses, and a significant reclassification of borrowings.
- Revenue decreased by $0.31 million due to higher project costs
- Income tax expense rose by $2.16 million following deferred tax asset reversal
- Borrowings of $29.16 million reclassified from non-current to current
- Depreciation and amortisation increased due to lease accounting correction
- Contract liabilities and reserves adjusted reflecting accounting standard compliance
Context of the Adjustments
Delorean Corporation Limited (ASX, DEL), a key player in Australia's bioenergy sector, has published its audited 2025 Annual Report, providing clarity on material differences from its earlier unaudited preliminary financial statements. These adjustments, while technical in nature, offer important insights into the company's financial health and accounting practices.
Revenue and Project Cost Revisions
The company reported a $0.31 million decrease in revenue, from $19.83 million to $19.52 million. This adjustment stems from higher construction costs identified on the Yarra Valley Water project. Under the accounting standard governing revenue recognition, these increased costs lowered the percentage of project completion at the reporting date, thereby reducing recognised revenue. This highlights the sensitivity of project-based revenue to cost fluctuations in Delorean's operations.
Tax Expense and Deferred Tax Asset Reversal
A notable increase in income tax expense by $2.16 million was recorded, shifting from a tax benefit to a significant tax charge. This change results from the reversal of deferred tax assets related to carried forward tax losses, reflecting the stringent evidence requirements under Australian accounting standards. The reversal signals a more conservative stance on the recoverability of tax losses, which could have implications for future profitability and cash flow.
Borrowings Reclassification and Lease Accounting Correction
Delorean also reclassified $29.16 million of borrowings from non-current to current liabilities. This reclassification was driven by a covenant breach waiver that was obtained after the reporting date but required classification based on conditions at the balance sheet date. Such a shift can affect perceptions of the company's short-term liquidity and financial stability. Additionally, an increase in depreciation and amortisation expenses was recorded due to a correction in the discounting methodology applied to the VIC1 project land lease, underscoring the importance of precise accounting treatments in asset valuation.
Other Adjustments and Compliance
Further adjustments included a $0.31 million increase in contract liabilities and a $0.29 million decrease in reserves due to corrected valuation inputs for options issued to Tanarra. These changes reflect Delorean's commitment to compliance with accounting standards and transparent financial reporting.
Looking Ahead
While these adjustments do not alter the company's operational trajectory, they provide a clearer picture of Delorean's financial position and accounting rigor. Investors and analysts will be watching closely for how these changes influence future earnings and covenant compliance.
Bottom Line?
Delorean’s financial restatements underscore the complexities of project accounting and tax asset recognition, setting the stage for scrutiny on future financial discipline and covenant management.
Questions in the middle?
- How will the reversal of deferred tax assets affect Delorean’s future tax planning and profitability?
- What are the implications of the borrowings reclassification on the company’s liquidity and covenant compliance going forward?
- Could further project cost overruns impact revenue recognition and margins in upcoming reporting periods?
