DTI GROUP LTD — AGM Information 2017

Nov 20, 2017

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DTI GROUP LTD 2017 Annual General Meeting

DTI GROUP LTD 2017 Interim Results Presentation [_] February 2017

21 November 2017

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AGENDA

• Introduction

• Notice of Meeting

• Meeting Procedure

• Chairperson’s Address

• Resolutions

• CEO Presentation

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FINANCIAL STATEMENTS

To receive and consider the Financial Statements of the Company for the year ended 30 June 2017, consisting of the Income Statements, Statement of Financial Position, Statement of Changes in Equity, Statements of Cash Flows, the Directors’ Report, the Directors’ Declaration and the Auditor’s Report.

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RESOLUTION 1

As an ordinary resolution

 That Mr Christopher John Morris, being a Director of the Company, retiring by rotation in accordance with Clause 13.2(a) of the Company’s constitution, and being eligible, is re-elected as a Director of the Company.

For	Against	Open	Abstain
50,450,908	327,859	568,516	720,365

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RESOLUTION 2

As an ordinary resolution

 That Mr Glyn Denison, being a Director of the Company, retiring by rotation in accordance with Clause 13.2(a) of the Company’s constitution, and being eligible, is re-elected as a Director of the Company.

For	Against	Open	Abstain
51,201,482	277,285	568,516	20,365

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RESOLUTION 3

As an ordinary resolution

 That Mr Richard Andrew Johnson, being a Director of the Company, retiring by rotation in accordance with Clause 13.2(a) of the Company’s constitution, and being eligible, is re-elected as a Director of the Company.

For	Against	Open	Abstain
51,199,225	277,859	570,199	20,365

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RESOLUTION 4

As an ordinary resolution

 That the Remuneration Report, as set out in the Company’s 2017 Annual Report, is adopted.

For	Against	Open	Abstain
25,201,974	464,710	75,291	921,259

• The vote on this resolution is advisory only and does not bind the Directors’ or the Company.

• Votes cast by shareholders that are identified as key management personnel or a closely related party are excluded.

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RESOLUTION 5

As a special resolution

 That the issue of equity securities up to 10 per cent of the issued capital of DTI Group Limited (at the time of the issue) calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 is approved

For Against Open Abstain 49,907,862 357,635 1,785,112 17,039

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CLOSURE

Any other business which may be brought forward in accordance with the Company’s Constitution and the Corporations Act 2001

Close of meeting – Mr Neil Goodey, Chairperson

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CEO PRESENTATION

Mr Peter Tazewell

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Overview – FY17

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Financial
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• Revenue of $15.9 million in line with guidance

• Underlying EBITDA adversely impacted by revenue lag and costs associated with new product launch, R&D treatment

• Balance sheet strengthened by $11.5 million capital raising

• $3.6 million negative cash flow from Operations offset by increase in net working capital by $3.0 million

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Operating
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• Major new rail contracts with Alstom, Delatim, and ESG

• Direct entry to US bus market rewarded with new contracts with Gillig and New Flyer

• New Products launched – Train recorder, Commuter Comms

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Outlook
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• Contracted order book[1] of $31.6 million at 30 June 2017 (81.9 per cent growth since HY)

• Growing Opportunity Pipeline – $450 million (at 30 June)

• New product range available

• Initiatives to reduce operating cost base

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1 Includes LoI/LoA

Highlights

• Substantial growth (81.9 per cent) in contracted Order Book[1 ]

• Launched new products – MDR6, TDR6 train recorder, Commuter Communications System including Passenger Information Displays

• Formalised framework Agreement with Alstom

• Commenced deliveries to critical projects (Sydney Metro, DART)

• Completed Capital raising of $11.5 million

• Strong R&D spend in FY17 ($7 million)

1 Includes LoI/LoA

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FY17 FINANCIAL RESULTS

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Key Financial Metrics

	FY17 FY16 15.9 16.2 (3.0) 3.6 0.5 2.8 (5.8) 0.03 (5.20) 0.03 nil nil 0.5 0.5 2.7 0.1 11.3 8.2 (3.6) 0.2 89 81 31.6 13.5 • Revenue in line with guidance • Recognition of non- recurring charges against inventory and capitalized R&D • Gross margins adversely impacted by higher pre- production costs • Nil term debt • Increase in net working capital associated with rail projects • Strong Order Book
Revenue $m EBITDA $m Underlying EBITDA $m Net profit/(loss) after tax $m Earnings per share ¢ Dividends per share ¢
Gross debt $m Net cash/(debt) $m Net working capital $m Operating cash flow $m
Employees Contracted Order Book $m

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Underlying EBITDA

			• Initial warranty	• Initial warranty
$	FY17	FY16	provision relates to prior periods
Statutory EBIT	(4,827,070)	2,585,368	• Business
Depreciation / Amortization	1,802,083	1,060,299	development costs
Reported EBITDA	(3,024,987)	3,645,667	supporting market entry to Poland have
Foreign Exchange losses	165,680	294,814	completed
Net R&D income / (expense)	1,550,854	(1,107,742)	• NRV inventory
Impairment	519,584		adjustments relate to prior periods
Initial Warranty Provision	146,051		• Lower product margin
Business development costs	491,301		achieved	where
Product margin	614,117		delivery of new products while
**Underlying EBITDA1 **	462,600	2,832,739	commissioning
			manufacturing
1Underlying EBITDA excludes foreign exchange losses and		non-recurring costs	processes
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Balance sheet

$m	FY17 FY16	• • • • • •
Cash Trade receivables Other receivables Inventory	3.2 0.6
	9.0 6.4
	3.1 2.7
	8.0 5.8
Property, plant & equip Intangible assets Other assets	1.0 1.1
	5.6 4.4
	0.2 0.1
Total Assets	30.1 21.1
Trade payables Financial liabilities Provisions Deferred Tax	5.8 4.0
	0.5 0.5
	1.1 0.9
	1.8 1.0
Total Liabilities	9.2 6.4
Total Equity	20.9 14.7
Net cash/(debt) Net working capital	2.7 0.1
	11.2 8.2

Significant ongoing commitment to research and development

Rail Projects working capital intensive Negligible bank debt

Impairment adjustments recorded Improved cash position from capital raising Technical Covenant breach – No action from bank

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Liquidity

Working Capital

• Net working capital increased by $3.0 million

• Trade receivables and inventory both increased to meet ramp up in project requirements

Cash and Bank

• Cash resources applied to net working capital ($3.0 million) and R&D ($7.1 million)

• Strong support from major suppliers with extended payments terms

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FY18 TRADING UPDATE

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TRADING UPDATE

• 1H FY18 Revenue expected to exceed 1H FY17

• Contracted revenue forecast to be invoiced in FY18 of $15.7 million (50 per cent rail, 35 per cent bus and 15 per cent maintenance)

• Operating Cash flow continues to be challenged by:

• Closing out legacy projects

• Extended payment terms associated with rail projects

• Net Working Capital has reduced since 30 June 2017 from $11.2 million to $9.1 million at 30 September

• Cost base reduced by approx. $1.0 during FY18

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BALANCE SHEET REVIEW

• Comprehensive review of Balance Sheet undertaken resulting in impairment of $3.1 million

• Review has highlighted process improvements in relation to:

• Obsolescence management

• Repairs and maintenance

• Stock-take and cut-off procedures

• Intangible assets reviewed for ongoing obsolescence

• Provision raised for delinquent debtors

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COMMERCIAL ACTIVITIES

• Product deliveries for Sydney Metro ahead of schedule and supply chain regularised

• Continued in-field support required for new products

• Northern Line (London Underground) delays continue due to regulatory compliance procedures

• Strong growth from US bus market ($1.0 million v $320k in Q1 FY17). New and existing customers

• DART Phase 1 due to complete in February 2018. Options worth (US$7 million) due to be awarded in December 2017

• FY18 Maintenance and Recurring revenue comparable with FY17 at ~ 40 per cent

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PRODUCT DEVELOPMENT

• TDR6 and MDR6 final design changes implemented

• New PIS designed for Oman bus project, leveraging off products developed for Sydney Metro

• New 18” Panel PC display designed and produced for Oman project in record time

• Preliminary design for new compact recorder (CDR6) underway pending Board approval

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ORDER BOOK AND PIPELINE

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ORDER BOOK

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$m
32
28
24
20
16
12
8
4
0
Bus Rail
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• Sustained strong Contracted Order Book

• Strong growth in rail sector with global infrastructure spend

• Order book does not include anticipated recurring work until PO is issued

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OPPORTUNITY PIPELINE

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18.3%
22.9%
58.7%
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EMEA Australasia Americas

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2.3%
12.7%
85.0%
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• Significant identified long term pipeline of approx. $390 million

• Geographic segmentation remains similar with EMEA and Americas strongest opportunities

• Market continues to be dominated by rail which generally has higher specifications and engineering effort

• Growth drivers include legislation/evidence standards, public infrastructure spending and potential to reduce insurance and maintenance costs

Bus Rail Taxi Law Enforcement

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STRATEGIES AND PRIORITIES

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STRATEGIES

• Key focus to return to profitability

	Grow Revenue		Stabilise		Cost Down		Overhead
	Base		Production Costs		Strategy		Reduction
•	Increased Order	•	Product design	•	Review supply	•	Tight control of
	Book		finished leading		chain to reduce		costs and
			to stable		component		working capital
			production runs		costs
•	Conversion of	•	Migrate	•	Implement
	Opportunity		production to		design
	Pipeline		lower cost		efficiencies
			manufacturer
•	New Products
	available

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PRIORITIES

• Reduction in operating cost base

• Working Capital Management

• Conversion of Opportunity Pipeline

• Product Development of CDR6

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PRODUCT RANGE

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MOBILE SURVEILLANCE

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DVD Burner
DTI Central MyDTI Video Manager
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PASSENGER INFORMATION SYSTEMS

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Driver
Display
Units
7 inch 10.4 inch 18.5 inch
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Passenger Emergency Intercom (PEI)

Digital Signage

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NEW PRODUCTS

Pantograph - video

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CDR-6

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People-counting

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OUTLOOK

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OUTLOOK

• Contracted order book[1] of approx. $30 million

• Gibela/PRASA contract provides strong market entry opportunity for South Africa

• Identified Opportunity Pipeline of $380 million over the next four years

• Global market for mobile surveillance equipment forecast to grow from US$950 million to US$1.7 billion over next five years (12.1 per cent CAGR)

• DTI specialises in mass transit vehicle sector (trains, trams and busses) which is growing at 8.9 per cent CAGR

• DTI has developed a strong technical reputation for developing leading edge products and solutions

• Following the end of product development cycle, focus is to increase revenue from new product suite

1 Includes LoI/LoA

ADDRESSABLE MARKET

• DTI’s addressable market comprises:

• Mobile surveillance systems, consisting of recorders, cameras and ancillary equipment; and

• Passenger Information Systems, consisting of displays, audio communications and entertainment systems

• FY17 revenue and order book weighted towards PIS

• Mobile Surveillance market is forecast to grow by 12.1 per cent to over US$1.6 billion by 2021[1 ]

• Passenger Information Systems forecast to exceed US$37 billion by 2022[2 ]

• IHS Research – 24 Feb 2017

• Market Research Future – July 2017

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SUMMARY

• Transitional year which has adversely impacted earnings

• Recapitalisation of Company completed

• Completed introduction of range of innovative new products

• Company maturing and implementing internal improvements to support future growth

• Cost base restructured to support current activities

• Strong market demand for DTI solutions

• Continued strong investment in global transit sector

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DISCLAIMER

Reliance on third party information

The information and views expressed in this presentation were prepared by DTI Group Ltd (the Company) and may contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. No responsibility or liability is accepted by the Company, its officers, employees, agents or contractors for any errors, misstatements in or omissions from this presentation. Presentation is a summary only

This presentation is information in a summary form only and does not purport to be complete. It should be read in conjunction with the Company’s 2017 Annual Report. Any information or opinions expressed in this presentation are subject to change without notice and the Company is not under any obligation to update or keep current the information contained within this presentation.

Not investment advice

This presentation is not intended and should not be considered to be the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. The information provided in this presentation has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs. Each party to whom this presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary.

No offer of securities

Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell Company securities in any jurisdiction.

Forward looking statements

This presentation may include forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, these statements are not guarantees or predictions of future performance, and involve both known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control. As a result, actual results or developments may differ materially from those expressed in the statements contained in this presentation. Investors are cautioned that statements contained in the presentation are not guarantees or projections of future performance and actual results or developments may differ materially from those projected in forward-looking statements.

No liability

To the maximum extent permitted by law, neither the Company nor its related bodies corporate, directors, employees or agents, nor any other person, accepts any liability, including without limitation any liability arising from fault or negligence, for any direct, indirect or consequential loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

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