AMBERTECH LIMITED — Investor Presentation 2019

Nov 12, 2019

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Acquisition of HAV and Equity Raising Investor Presentation – November 2019

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Introduction

• Ambertech is an leading distributor of innovative audio and video brands and professional services to industry and government customers across the Australia and New Zealand

• Headquartered in Sydney, with offices and representatives in Perth, Brisbane, Melbourne and Auckland, and supported by a national network of more than 500 authorised dealers and service agents

• Ambertech is acquiring Hills Audio Visual ( HAV ), a division of Hills Limited (ASX:HIL), for an enterprise value of A$4.5m reflecting an acquisition multiple of approximately 2.5x FY19[1] EBIT

• HAV is a leading distributor of technology products and services in the commercial AV vertical with distribution agreement with 25 agencies across Australia and New Zealand

• Ambertech is undertaking a placement and underwritten SPP to raise approximately A$5.0m to fund 100% of the acquisition of HAV and provide working capital to assist with the integration

• The combined group of Ambertech and HAV is forecasting revenue and EBIT of approximately A$71.6m and A$2.8m respectively for FY20[1] (which includes 7 months contribution from HAV)

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Capital Structure

Capital Structure
ASX Ticker	ASX: AMO
Listing on ASX	8 December 2004
Shares on Issue	30.6 million
Share Price1	A$0.110 per share
Market Capitalisation	A$3.4 million
Note: 1. Last close as at 5 November 2019.

1. All references to “FY19” and “FY20” refer to the financial years ending 30 June 2019 and 30 June 2020 respectively.

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Ambertech Overview

Customers

• More than 800 customers across Australia and New Zealand

• Approximately 520 shop fronts

• Leading customers across key verticals

Partners

• Over 200 dealers in custom audio video install/ integration

• 105 dealers in commercial AV and 210 dealers in professional products

• Currently 68 distribution agreements with over 45% for 8 years or more

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Market Traction

• Multi award winner

• Leading supplier of AV technology support

• Leading products for technology bundling of products and services for audio and visual media

• Nine Network, Seven Network

• RutledgeAV

• Foxtel, TVNZ

• JB HIFI, Harvey Norman

• NSW Police

• Leonardo

• Programmed

• Fredon

• AV Australia

• GM Multimedia

• Pro AV

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Ambertech Strategic Pillars

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Leading Australian distributor of technology equipment solutions operating through six key strategic pillars

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Commercial Audio Visual

Custom Installation Products

Professional Products

A range of exclusive brands focusing on commercial and educational clients .

A range of exclusive brands complementary to the residential installation space.

Products for professional users spanning music, studios, broadcasters and post production.

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Media Systems

Supply, installation and support of major systems for the Broadcasters, and production industry.

Defence Law Enforcement Security

Specific products focussed on defence and law enforcement.

Major Retail

A focus on exclusive product representation in areas where product differentiation is clear in capability and value.

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FY19 Results Summary

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FY19 Results Summary

Summary Income Statement

A$’000	FY19	FY18
Total Revenue	57,178	51,839
Cost of Sales	(41,618)	(35,735)
Gross Profit	15,560	16,104
SG&A Expense	(15,818)	(15,309)
EBITDA	(258)	795
Depreciation & Amortisation	(447)	(312)
EBIT	(705)	(483)
Interest	(592)	(670)
Tax	(35)	44
NPAT	(1,332)	(143)

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Commentary

• Significant revenue growth of 35.9% in the Professional segment

• Growth in recurring revenues of 14.5% from maintenance contracts

• Expansion in the dealer-based business as the Company expands its product offering across its various channels

• Improved performance of the New Zealand operation as the Company continues to streamline costs and develop customer base

• Weaker than expected profit mainly attributable to:

• Decline in sales of AV receivers/amplifiers via the consumer electronics (CE) retail market

• Increase in outbound freight costs, primarily attributed to the buying patters of CE retailers for lower cost products

• Higher costs associated with services the CE retail market, including returns, rebates and managing inventory risks

• Inconsistency of timing of product supply from one of our major music industry suppliers

• Market disruption from the State and Federal Election during the second half of the financial year

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Acquisition of HAV

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HAV Overview

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HAV is a leading Australian distributor of technology products and services in the commercial AV market

• Hills Limited (ASX: HIL) is a value-added distributor of products and services to the Security & Surveillance and Audio-Visual markets, and supplier of technology solutions in the Health market

• Based in Sydney, HAV is a market leading distributor of AV technology products and services across Australia and New Zealand and has exclusive distribution agreements with 25 agencies

• Solution offerings includes unified communication, professional displays, projectors, Australian Monitor (HAV owned and designed) and professional audio solutions for indoor and outdoor applications

Product Offering

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Hearing Installation
Control Systems
Augmentation Hardware
Conference & Display
Headphones
Education Technology Technology
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Brands

• Ambertech expects to retain approximately 25 full-time employees that will be integral to the future growth of the combined business

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Combined Business
Strategic Rationale Combined Brands
• Acquiring a leading provider of commercial AV brands and services to
1
customers across Australia and New Zealand
• Complements Ambertech’s existing AV offering and adds core
2
technology for commercial solutions
• Strong active customer base representing an opportunity to deliver value
3
uplift to customers of both HAV and Ambertech when combined
• Key staff identified with extensive experience in the commercial AV
4
vertical
5 • Positions Ambertech for future growth with existing and new customers
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Equity Raising

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Equity Raising

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Acquisition and equity raising terms

Acquisition Price	• Ambertech will acquire HAV for A$4.5m reflecting an acquisition multiple of approximately 2.5x FY19 EBIT
Funding	• Ambertech is seeking to raise a total of approximately A$5.0m through: • Two tranche Placement to raise approximately A$3.2m via the issue of 29.0m shares to: • Investors exempt from disclosure under Section 708 of the Corporations Act 2001 • Directors (subject to shareholder approval at an Extraordinary General Meeting (EGM)) • Share Purchase Plan (SPP) to eligible Australian and New Zealand shareholders to subscribe for shares up to a value of $30,000 at the same price of the Placement. The SPP is underwritten by the Lead Manager to $1.8m, with the ability to accept more than this amount at the discretion of the Board of Ambertech. The Company reserves the right to scale back applications under the SPP
Offer Price	• Offer price of A$0.110 per new share represents a 0.0% discount to the last close ($0.110 per share)
Ranking	• New shares issued under the Offer will rank equally with existing shares
Lead Manager & SPP Partial Underwriter	• E.L. & C. Baillieu Limited (EL&C Baillieu)

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Equity Raising

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Transaction sources and uses of funds

• Post completion of the acquisition, Ambertech expects to have Net Debt of approximately A$3.9

• Any additional funds raised will be applied to working capital

	Sources of funds (A$m)			Uses of funds (A$m)
	Equity Raising	5.0		Acquisition of HAV	4.5
				Working Capital and Transaction Costs	0.5
	Total	5.0		Total	5.0
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Pro Forma Balance Sheet

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Simplified pro-forma balance sheet as at 30 September 2019 (for illustrative purposes)

				Acquisition
A$m	Ambertech	Capital Raising	Acquisition of HAV	Consideration and Transaction	Pro Forma
				Costs
Cash and cash equivalents	1.5	5.0		-4.8	1.7
Trade and other receivables	11.2				11.2
Inventories	13.6		4.7		18.3
Property,plant and equipment	0.9		0.3		1.2
Other assets	1.3		0.1		1.4
Total Assets	28.5	5.0	5.1	-4.8	33.8
Borrowings	5.6				5.6
Trade and otherpayables	12.0		0.5		12.5
Deferred consideration	0.0		0.1		0.1
Other liabilities	1.8				1.8
Total Liabilities	19.4	0.0	0.6	0.0	20.0
Net Assets	9.1	5.0	4.5	-4.8	13.8
Net Debt	4.1				3.9

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Indicative Timetable

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Milestone	Date
Trading halt lifted	Friday, 8 November 2019
Settlement of new shares issued under tranche 1	Wednesday, 13 November 2019
Allotment and normal trading of new shares issued under tranche 1	Thursday, 14 November 2019
Extraordinary Shareholder Meeting (EGM) to approve tranche 2	On or about Monday, 16 December 2019
Settlement of new shares issued under tranche 2	Tuesday, 17 December 2019
Allotment and normal trading of new shares issued under tranche 2	Wednesday, 18 December 2019
SPP	TBA

Note: Timetable is indicative only and subject to change. All dates and time refer to Australian Easter Standard Time (AEST).

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Outlook & Guidance

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Guidance & Outlook

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The acquisition of HAV provides Ambertech with the right people, products and customer partnerships to drive growth into FY20 and beyond

• Ambertech expects revenue and EBIT of approximately A$71.6m and A$2.8m respectively in FY20, which includes 7 months contribution from HAV to the combined group

• Ambertech also expects revenue and EBIT of A$43.2m and A$2.4m respectively in 1H FY21, including cost synergies

• The Board of Directors have agreed to pay a final dividend going forward, targeting a pay-out ratio of between 45 – 55% which equates to a dividend of 1.2 cents per share in year 1 and 2.5 cents per share in year 2

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Roadmap for FY20

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Key pillars of future growth:

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1
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Sustain strong momentum into FY20

• Focus on opportunities from within existing agencies, as well as the potential for new agency or business acquisition

• Pipeline for project business with our media systems partners is substantial, we anticipate continued success in the area for the FY20

• Increase commitment to customer retention and customer acquisition programs through increased resourcing, and focused go to market programs

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2 Expand distributor, partner and channel development
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• Deepen distributor, partner and channel development activities to support growing market development and expansion

• Expand development of AV partner network with HAV product penetration into existing Ambertech customer base

• Continue strong software release cadence across all platforms

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3
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Pursue accretive corporate opportunities

• Continue to review market for accretive M&A opportunities to accelerate AV technology to market roadmap and enhance go to market opportunity

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Appendix

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Professional AV Market Size & Growth

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• The worldwide professional AV industry is forecast to grow from US$186bn in 2018 to US$230bn by 2023 ( 4.3% CAGR ) with the top five technology drivers being audio advances, future displays, IoT for smart buildings, IT and the cloud, and artificial intelligence

• In 2018, the Australian market for AV solutions and services represented over 2% of the worldwide market (US$3.7bn) and is forecast to grow at a 5.3% CAGR from 2019 to 2023, outpacing North America (3.8% CAGR) and Europe (2.6% CAGR)

Source: AVIXA / IHS Markit 2018 Global AV Industry Outlook and Trends Analysis (IOTA).

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Important Notice and Disclaimer

Overview

This investor presentation (“Presentation”) has been prepared by Ambertech Limited (ACN 079 080 158 ) (“Ambertech” or “Company”) and is dated 6 November 2019. This Presentation has been prepared in relation to a placement of new Ambertech ordinary shares (“New Shares”) to ‘sophisticated’ and ‘professional’ investors (as defined in the Corporations Act (Cth)) (“Offer”).

Summary Information

This Presentation contains summary information about the current activities of Ambertech and its subsidiaries and certain acquisitions as at the date of this Presentation. The information in this Presentation is of a general nature and does not purport to be complete. This Presentation does not purport to contain all the information that an investor should consider when making an investment decision nor does it contain all the information which would be required in a disclosure document or prospectus prepared in accordance with the requirements of the Corporations Act. It should be read in conjunction with Ambertech‘s other periodic and continuous disclosure announcements lodged with the ASX, which are available at www.asx.com.au. Neither Ambertech nor its directors, employees or advisers give any warranties in relation to the statements and information in this Presentation.

Not an offer

This Presentation is for information purposes only and is not a prospectus, disclosure document, product disclosure statement or other offering document under Australian law or any other law (and will not be lodged with ASIC or any other regulator and is not approved by or registered with any regulator). The Presentation is not and should not be considered an offer or an invitation to acquire New Shares or any other financial products. This Presentation may not be released or distributed in the United States. This Presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or in any other jurisdiction in which such an offer would be illegal. The New Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the New Shares may not be offered or sold, directly or indirectly, in the United States unless such New Shares have been registered under the U.S. Securities Act, or are offered and sold in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and applicable U.S. state securities laws. The distribution of this Presentation in other jurisdictions outside Australia may also be restricted by law and any such restrictions should be observed. Any failure to comply with such restrictions may constitute a violation of applicable securities laws (see “International Offering Restrictions”).

Not financial product advice

This Presentation does not constitute financial product or investment advice (nor tax, accounting or legal advice) nor is it a recommendation to acquire New Shares and does not and will not form any part of any contract for the acquisition of New Shares. This Presentation has been prepared without taking into account the objectives, financial situation or needs of any particular investor. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek appropriate advice, including financial, legal and taxation advice appropriate to their jurisdiction. Ambertech is not licensed to provide financial product advice in respect of Ambertech shares or any other investment. Cooling off rights do not apply to the acquisition of New Shares.

Financial data

All dollar values are in Australian dollars (“A$”). Investors should note that this Presentation contains pro forma financial information. The pro forma financial information provided in this Presentation is for illustrative purposes only and is not represented as being indicative of Ambertech‘s views on its future financial condition and/ or performance. The pro forma financial information has been prepared by Ambertech and may not have been prepared in accordance with the measurement and recognition requirements or the disclosure requirements, of applicable accounting standards and other mandatory requirements in Australia.

Important Notice and Disclaimer

Future performance

This Presentation contains certain “forward looking statements”. Forward looking statements can generally be identified by the use of forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” “outlook”, “guidance” and other similar expressions within the meaning of securities laws of applicable jurisdictions and include, but are not limited to, indications of, or guidance or outlook on, future earnings or financial position or performance of Ambertech, the outcome and effects of the Offer and the use of proceeds, including the impact of the acquisition. The forward looking statements contained in this Presentation are not guarantees or predictions of future performance and involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of Ambertech, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. Refer to the risks section of this Presentation for a summary of certain general and Ambertech specific risk factors that may affect Ambertech. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. A number of important factors could cause actual results or performance to differ materially from the forward looking statements, including the risk factors set out in this Presentation. Investors should consider the forward looking statements contained in this Presentation in light of those disclosures. The forward looking statements are based on information available to Ambertech as at the date of this Presentation. Except as required by law or regulation (including the ASX Listing Rules), Ambertech undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward looking statements.

Effect of rounding

A number of figures, amounts, percentages, estimates, calculations of value and fractions in this Presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this Presentation.

Investment risk

An investment in New Shares is subject to investment and other known and unknown risks, some of which are beyond the control of Ambertech including possible loss of income and principal invested. Ambertech does not guarantee any particular rate of return or the performance of Ambertech, nor does it guarantee the repayment of capital from Ambertech or any particular tax treatment. In considering an investment in Ambertech shares, investors should have regard to (amongst other things) the risks outlined in this Presentation.

Disclaimer

To the maximum extent permitted by law, no representation or warranty, express or implied, is made as to the currency, accuracy, reliability or completeness of information in this Presentation and each of Ambertech, E.L. & C Baillieu Limited and their respective advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents excludes and disclaims all liability, including without limitation for negligence or for any expenses, losses, damages or costs incurred by you as a result of your participation in the Offer and the information in this Presentation being inaccurate or incomplete in any way for any reason, whether by negligence or otherwise. Ambertech, the lead manager and their advisors make no recommendations as to whether investors or their related parties should participate in the Offer. Statements made in this Presentation are made only as at the date of this Presentation. The information in this Presentation remains subject to change without notice. Ambertech reserves the right to withdraw the Offer or vary the timetable for the Offer without notice.