AVA RISK GROUP LIMITED — Annual Report 2017

Sep 19, 2017

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2017 Financial Results Year ended 30 June 2017

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www.fftsecurity.com

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Forward Looking Statements

This presentation is given on behalf of Future Fibre Technologies Limited (FFT).

Information in this presentation is for general information purposes only, and is not an offer or invitation for subscription, purchase, or recommendation of securities in FFT. Certain statements in this document regarding the Company’s financial position, business strategy and objectives may contain forward-looking statements (rather than being based on historical of current facts).

Any forward-looking statements are based on the current beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements are inherently uncertain and must be read accordingly. There can be no assurance that the underlying assumptions will prove to be valid.

All data presented in this document reflects the current views of the Company with respect to future events. Forward-looking statements are subject to risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. To the maximum extent permitted by law, the Company, its officers, employees and agents do not assume any obligation to release any updates or revisions to the information (including any forward looking statements) in this presentation to reflect any change to expectations or assumptions, and disclaim all responsibility and liability for any loss arising from reliance on this presentation or its content.

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Financial Performance

			•	Operating cash flow positive in Q4 FY2017.
AUD$M	FY2017	FY2016	•	Gross Margin was impacted by lower margin
Total Revenue	13.7	15.5		pricing on a few large scale projects. Expected
				to improve in FY2018 with new Aura Ai sales.
Gross Margin (% of Sales Revenue)	53%	60%	•	Operating expenses included $2.2 million in
				FX losses and one-time impairment charges.
Operating Expenses	14.6	15.0		Cost reductions previously announced are
				being achieved as planned.
EBITDA	(7.5)	(5.6)
			•	With Aura Ai development now complete,
Loss after tax	(7.8)	(5.8)		FY2018 has a lower planned R&D spend.
Cash receipts from	12.8	15.4	•	Customer cash collection at 99% of sales
customers				revenues.

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Balance Sheet

AUD$M	30 Jun 2017	30 Jun 2016	•	No external debt or borrowings.
Cash and cash equivalents	6.9	12.1	•	Cash balance of $6.9 million at
Receivables	5.0	8.7		30 June 2017 and operating cash
				flow positive in Q4 FY2017.
Inventories	4.2	4.0
Other assets	4.1	3.3	•	Inventories on hand to fulfil
Total assets	20.2	28.1		existing sales and orders for Q1 FY2018.
Payables	2.2	2.8
Provisions	1.1	1.1	•	Current growth strategy is fully
				funded from existing balance
Borrowings	-	-		sheet.
Total liabilities	3.3	3.9
Total equity	16.9	24.2

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FY2017 Highlights

• Commercial release of Aura Ai featuring extended detection range, enhanced intrusion location accuracy and cut resilient capabilities.

• Global sales team realigned, with broader geographic coverage and improved sales management processes, resulting in a well qualified pipeline of sales opportunities.

• Expanded global distribution network and strategic partnerships.

• Progressed access to adjacent markets for FFT fibre optic sensing technology.

• Established position in Borders and strengthened position in Pipeline security applications, with break through orders received.

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FY2018 Progress

• FY2018 revenues/orders received as at 14 September total $5.9 million. Includes 33% of the $5.5 million delayed from FY2017.

• Reduction in operating expenses underway. To be fully realised by end Q1 FY2018.

• Total operating expenses expected to be reduced by at least $3 million and currently capitalised investments will reduce by a minimum of $1.5 million in comparison to FY2017.

• FFT expects FY2018 revenues of between $18 million and $21 million, and with reduced operating expenses, operating cash flow and EBITDA positive.

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Recent Major Contract Announcements

Since market guidance was released in May, FFT has announced the following material contracts valued at over $4.9 million:

• 24 May - Orders received for new Aura Ai to protect high security government sites in North America ($300K).

• 1 June – Critical petroleum pipeline in India ($360K).

• 13 June – Multiple small critical telecommunication sites in SE Asia ($426K). • 15 June – International Seaport located in the Middle East ($1.6M). • 22 June – International Airport in the northern hemisphere ($427K) • 22 June - Oil and Gas Facility in the Middle East ($310K).

• 25 July - Multiple site security upgrade for government facilities in the northern hemisphere ($900K).

• 10 August - Security site upgrade for LNG facilities in Northern Australia ($369K). • 11 August - Asian border pilot for covert buried technology ($230K).

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Growth Strategy | Horizons

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LEAD (FY19+) GROW (FY18) ESTABLISH (FY17) Lead in Perimeter, Pipeline and Network (Lead across verticals and geographies Grow recurring % of total revenues with next generation product (Annual Maintenance Contracts, Strengthen and enter new regions range and capabilities) application and software licensing) (Grow sales & support in SEA, Turkey, Increase sales focus on new applications Brazil/LA, Eastern Europe and Africa) Expand sales from new applications (Add sales capacity and reach (Monitoring and incident detection) Invest in Distribution and - direct and via partnerships) Network Security markets Increase competitive advantage in Broaden range of solutions (Add distribution partnerships, Distribution, Network Security (Add and integrate complementary grow sales and support teams) and Pipeline markets technologies and services) (Extend technology capabilities and Consolidate Perimeter market use of artificial intelligence) competitive advantage (Introduce artificial intelligence and next generation platforms)

TIME

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Growth Strategy |FY2017 Scorecard

FY17 Goals		Progress	Progress
Strengthen and enter new regions		•	Improved capabilities of global sales team and
	✔		sales processes.
(Grow sales & support in SEA, Turkey,		•	Appointed additional sales resources in high
Brazil/LA, Eastern Europe and Africa)			growth potential MENA and Eastern Europe.
		•	Distribution agreements signed with Minipa and
Invest in Distribution and Network			Wesco International.
Security markets	✔	•	Continue to pursue agreements with additional distribution partners in the US and other key
(Add distribution partnerships, grow			territories.
sales and support teams)		•	Appointed dedicated global network security
			salesleader.
		•	Ongoing investment in development of
Consolidate Perimeter market competitive advantage	✔	•	innovative software IP (Fence and Buried). Next generation product platform Aura Ai released.
(Introduce artificial intelligence and next generation platforms)		•	Advanced covert buried solutions for detecting walking intruders at border outperforming competitors in recent overseas trials. Patents
			pending.

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Growth Strategy | FY2018 Progress

FY18 Goals		Progress	Progress
Grow recurring % of total revenues (Annual Maintenance Contracts, application and software licensing)	→	• •	Services revenue as a % of product sales up 23%. Exploring potential for SW sales to be an annual license fee, combined with enhanced cyber security update service.
		•	Successful technical validation of mining
Expand sales from new applications	→		applications now progressing to early commercialisation phase.
(Monitoring and incident detection)		•	Technical evaluation for utility monitoring
			underway with positive results to date.
Increase competitive advantage in		•	Released Fibre Optic Sensing System (FOSS)
Distribution, Network Security and			software Version 4, with improved nuisance
Pipeline markets	→		alarm mitigation.
		•	Enhanced FOSS applications in development.
(Extend technology capabilities and		•	New techniques (patents pending) to increase
use of artificial intelligence)			sensing cable sensitivity for buried applications.

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Growth Strategy | FY2019 Progress

FY19 Goals		Progress	Progress
Lead in Perimeter, Pipeline and Network (Lead across verticals and geographies with next generation product range and capabilities)	→	• •	Planning enhancements to further improve Aura Ai signal to noise for higher sensitivity, and incorporation of additional artificial intelligence capabilities. Exploring capability for tracking events in two dimensions (i.e. distance from buried fibre).
Increase sales focus on new
applications	→	•	Early stage of partnerships for mining and utility
(Add sales capacity and reach –			monitoring already underway.
direct and via partnerships)
Broaden range of solutions		•	Initiated merger proposal for access control,
	→		locking solutions and expanded global reach
(Add and integrate complimentary			with high value secure logistics companies BQT
technologies and services)			and AVA Global.

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Product Update

• Commercial release of next generation Aura Ai platform featuring extended detection range, enhanced intrusion location accuracy and cut resilient capabilities.

• Significant investment in new laser optics, electronics and software platform to deliver future benefits.

• Initial Aura Ai orders received, and first system successfully commissioned at a high security government facility.

• Aura Ai currently quoted for more than 23 separate security projects valued at over $17 million, with another 27 projects in early business (or sales) development stages with an estimated value of $26 million.

• Aura Ai also attracting interest from adjacent markets for sensing and control.

• FFT Solutions now integrate with over 60 leading Security Management, Physical Security Information Management, Video Management and Access Control Management Systems.

Sales & Distribution

• Realigned sales team delivering well qualified pipeline of sales opportunities.

• Partnerships secured with three security distributors.

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• Working closely with distributors on product training initiatives.

• Orders received via distributors for multiple utility substations – expected to extent to a further 56 sites across the United States.

• Utility and data centre projects offering significant long-term potential with in excess of 100 sites in specification stage.

• Global sales coverage supports FY2018 growth of current fibre optic security solutions, and future potential product extensions in security and adjacent applications.

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Outlook

• Leverage competitive advantage of Aura Ai and FFT’s broad range of fibre optic security products to grow sales in existing and adjacent markets.

• Promote benefits of hardware/software upgrades to large global install base.

• Ensure sales resources remain focussed on the strongest market verticals in key geographies.

• Continue to grow distribution network and embed FFT technology within partner security offerings.

• Expected FY2018 revenues between $18 million and $21 million, positive operating cash flow and positive EBITDA contribution.

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Substantial Shareholders 124,028,440 fully paid ordinary shares on issue as at 18 September 2017. 8,810,000 options on issue with a weighted average exercise price of $0.51.

			% issued
Rank	Name of Shareholder	No. Shares	capital
1	RSA Associates Limited	27,000,000	21.8%
2	Pierce Group Asia Pte Limited	19,229,940	15.5%
3	Plexis Holdings Limited	12,978,420	10.5%
4	Seafirst Australia Pty Ltd; Seafirst Nominees Pty Ltd	12,151,580	9.8%
	TOTAL SUBSTANTIAL SHAREHOLDERS HOLDING	71,359,940	57.6%

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