DTI GROUP LTD — Investor Presentation 2017

Aug 28, 2017

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DTI GROUP LTD

2017 Full Year Results Presentation 29 August 2017

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

Chief Executive Officer

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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

• New product range available

• Initiatives to reduce operating cost base

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1 Includes LoI/LoA

2

Highlights

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

• Launched new products – MDR6, TDR6 train recorder, Commuter Communications System and 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
				•	Revenue	in line with
Revenue	$m	15.9	16.2		guidance
EBITDA	$m	(3.0)	3.6	•	Recognition of non-
Underlying EBITDA	$m	0.5	2.8		recurring charges against inventory
Net profit/(loss) after tax	$m	(5.8)	0.03		and capitalized R&D
Earnings per share	¢	(5.20)	0.03	•	Gross margins
Dividends per share	¢	nil	nil		adversely impacted
Gross debt	$m	0.5	0.5		by higher pre- production costs
Net cash/(debt)	$m	2.7	0.1	•	Nil term debt
Net working capital	$m	11.3	8.2	•	Increase in net
Operating cash flow	$m	(3.6)	0.2		working capital
					associated with rail
Employees		89	81		projects
Contracted Order Book	$m	31.6	13.5	•	Strong Order Book
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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
			processes

1 Underlying EBITDA excludes foreign exchange losses and non-recurring costs

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6

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)

• Working with bankers for an acceptable facility to cure technical breach

• Strong support from major suppliers with extended payments terms

8

Cash flow from Operations

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$'000s
5,000
2,519
3,000
1,000
(5,948) (2,772) (3,623)
(1,000)
(3,000)
(5,000)
(7,000)
(9,000)
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STRATEGIES

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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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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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• Order Book growing in line with increased marketing effort

• 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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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 ]

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1. IHS Research – 24 Feb 2017

2. Market Research Future – July 2017

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Mobile Video Surveillance Market

• Global market for mobile video surveillance equipment forecast to grow at CAGR of 12.1 per cent to 2021

• DTI is a significant player in mass transit sector (trains, trams and transit buses) which constitutes 46.1 per cent of the market

• The Americas is the largest market for mobile video surveillance equipment while EMEA is the fastest growing market

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Source: IHS Research – 24 Feb 2017

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Passenger Information Systems

• Market forecast to be US$37 billion by 2022, growing at CAGR of 26 per cent[1 ]

• These products comprise approximately 70 per cent of the current contracted order book of $31.6 million

• Market Research Future – July 2017

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Opportunity Pipeline

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• Substantial Opportunity Pipeline in excess of $450 million

• Pipeline unwinds over next four years based on expected contract award dates

Significant proportion in tender phase Contracted work supports revenue throughout FY18 and into FY19

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Opportunity Pipeline

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• Significant identified long term pipeline in excess of $450 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

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COMPANY PROFILE

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Company Snapshot

SHARE PRICE

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$0.60 1,800
1,600
$0.50
1,400
$0.40 1,200
1,000
$0.30
800
$0.20 600
400
$0.10
200
$0.00 0
Share Price
Volume (000s)
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MAJOR SHAREHOLDERS

Chris Morris (& Associates) 19.6% Board & Management 10.2% UIL Limited 9.8% Adam Smith 5.1% Other Institutional 5.3%

CORPORATE DETAILS

ASX Code DTI Issued Shares 126,671,579 Share Price (18 Aug 2017) $0.165 Market Capitalisation $20.9 million

BOARD AND MANAGEMENT

Neil Goodey Chairperson Peter Tazewell Managing Director Richard Johnson Executive Director Glyn Denison Non-executive Jeremy King Non-executive Chris Morris Non-executive

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What we do . . .

• DTI designs, develops and installs world-leading surveillance, video analytics, and passenger information systems technology and services to the global mass transit industry

• • Utilising proprietary software with leading edge hardware (hybrid-recorders, commuter communications systems and back office management solutions), DTI provides data solutions to transit operators

• DTI seeks to leverage its engineering capabilities to provide transit operators with increased functionality, products and services

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DTI Key Customers[1 ]

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1. Includes End Customers

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OUTLOOK

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Outlook

• Contracted order book[1] in excess of $30 million

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

• Identified Opportunity Pipeline of $450 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, DTI has undergone restructure of its operating cost base

24 1 Includes LoI/LoA

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

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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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Contact Details

PETER TAZEWELL Chief Executive Officer T: +61 8 9373 2905 E: peter.tazewell@dti.com.au

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