DTI GROUP LTD — Investor Presentation 2018

Aug 29, 2018

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DTI GROUP LTD

2018 Full Year Results Presentation 30 August 2018

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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 – FY18

Financial

• Revenue of $19.1 million, 20% increase on FY17; in line with guidance

• EBITDA adversely impacted by impairment costs, but positive in 2H (pre-impairment)

• Working capital reduced by $2.8 million, despite increased revenue

• $0.3 million negative cash flow from Operations compared with $3.6 million negative cash flow pcp

• New major contracts awarded including Metro Trains Melbourne,

• Operating Oman Bus Project and exercise of Dallas Transit options

• Operating cost base restructured

Outlook

• Contracted order book[1] of $45.2 million at 30 June 2018 (51% growth since FY17 and 26% since previous HY)

• Opportunity Pipeline of $405 million with potential for >$28 million to be awarded within six months

• Contracted revenue of $19.5 million – expected in FY19

• Ongoing interest in DTI Passenger Information Systems

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• 1 Includes LoI/LoA and contracts under advanced negotiations

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Highlights

• Record revenue of $19.1 million; achieving 20% growth

• Continued growth (25%) in contracted Order Book[1 ] to $45.2 million including Preferred Tenderer status

• Major new contract with Metro Trains Melbourne

• Maintaining scheduled deliveries to critical projects (Sydney Metro, Oman Bus, SFMTA)

• Strong positive market reaction to DTI Passenger Information Systems

• Strong tendering pipeline with rail OEMs - $165 million (Alstom, Siemens, CAF and Bombardier)

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1 Includes LoI/LoA and contracts under advanced negotiations
3
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FY18 FINANCIAL RESULTS

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Key Financial Metrics

	FY18 FY17 19.1 15.9 (10.1) (3.0) (2.7) 0.5 (11.4) (5.8) (4.30) (5.20) Nil Nil 0.1 0.5 5.0 2.7 8.4 11.3 (0.3) (3.6) 54 89 37.4 29.9 • Revenue increased 20.4% pcp • Significant impairment charges recorded • Positive 2H EBITDA (pre-impairment) • Nil term debt • Net trade working capital reduced • Headcount reduced • Growing 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 FTE Contracted Order Book $m

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Revenue

Revenue Split

Revenue Growth

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$m $m
20 10
15 8
10 5
5 3
0 -
FY15 FY16 FY17 FY18 Maintenance Secondary Sales Project
FY 2017 FY 2018
H1 H2
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• Strong revenue increase from pcp

• Ongoing weighting to H2

• Strong increase in maintenance revenue and secondary product sales

• Strong increase in recurring revenue driven by US bus sales

• Project revenue continues to be largest revenue contributor

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Revenue

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$m Revenue Categories
10
8
6
4
2
0
Maintenance Secondary Sales Project
FY15 FY16 FY17 FY18
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FY 2017
16.5%
22.2%
61.3%
Maintenance Secondary Sales Project
FY 2018
17.9%
48.4%
33.7%
Maintenance Secondary Sales Project
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• Strong increase in maintenance revenue and secondary sales driven by US bus sales and Australian maintenance contracts

• Project revenue provides platform for overall growth

• Contracted revenue of $19.5 million – expected in FY19, exceeding total FY18 revenue

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Technology and R&D Spend

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R&D spend
8
7
6
5
4
3
2
1
0
2013 2014 2015 2016 2017 2018
Millions
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• DTI has invested in R&D to create industry-leading product solutions for the global mass transit market

• R&D cycle peaked in FY17 with the development of new products to meet the standards of the rail sector

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Recurring
R&D Marketing Prospects Contracts
Revenue
Year 0–1 Year 0–1 Years 0–2 Years 1–3 Years 5+
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DTI is focused on building recurring revenue from contracted work and on-ground positioning with clients

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Balance sheet

$m	FY18 FY17
Cash Trade receivables Other receivables Inventory	5.1 3.2
	6.0 9.0
	1.4 3.1
	8.0 8.0
Property, plant & equip Intangible assets Other assets	1.1 1.0
	0.3 5.6
	0.1 0.2
Total Assets	22.0 30.1
Trade payables Financial liabilities Provisions Tax liability	5.5 5.8
	0.1 0.5
	1.2 1.1
	0.1 1.8
Total Liabilities	6.9 9.2
Total Equity	15.1 20.9
Net cash/(debt) Net trade working capital	5.0 2.7
	8.4 11.2

• Rail projects continue to be working capital intensive – but net working capital reduced • Negligible bank debt

• Capitalised development impaired

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Cash flow from Operations

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$000s
4,000
1,888
2,000
(307)
(11,384) (10,128)
0
(2,000)
(4,000)
(6,000)
(8,000)
(10,000)
(12,000)
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BUSINESS OVERVIEW

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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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Company Snapshot

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Share Price
$0.25 6000
5000
$0.20
4000
$0.15
3000
$0.10
2000
$0.05
1000
$0.00 0
Share Price
Volume (000s)
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Major Shareholders

Chris Morris (& Associates) 29.9% UIL Limited (& Associates) 25.3% Board & Management 6.4% Other Institutional 15.3%

Corporate Details

ASX Code DTI Closing Share Price (27 August 2018) $0. 079 Market Capitalisation $17 million Issued Shares 215,341,850

Board and Management

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

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DTI’s Business Model

Opportunity for exponential growth driven by on-ground contracted positioning and recurring revenue

Solution Business Recurring Development Development Prospects Contracts Revenue (R&D) & Marketing Maintain marketProduct Grow prospects Prospects converted Ongoing orders from leading position by development by investing in to contracts by customers for new continued supported by business offering customised vehicle investment in committed development advanced procurements; product investment in and marketing surveillance maintenance development and business solutions agreements; product expansion, development DTI solutions eg passenger and marketing specified in communication long-term solutions, procurements; pantograph with framework leading software agreements with solutions major suppliers

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Key Drivers

R&D Investment

Relationship with OEMs

Public Safety

Operator Efficiencies

Maintenance & Support

Growing Global Demand

R&D investment has allowed DTI to grow its contracted order book[1] by 160% from $17.4 million to $45.2 million over the past 18 months

Strengthen relationships with OEMs to allow DTI to participate in the design and implementation phase of project tenders

Increased awareness of public safety by all stakeholders as terrorism remains a critical global threat

Mass transit operators seeking efficiencies from operations to drive bottom line profitability and improvements in passenger experience

Build on ground strategic relationships with global integrators to allow DTI to develop and service maintenance and recurring revenue streams

Expand revenue streams from existing customers by leveraging DTI’s technology and support from existing contracted transit locations

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Key Milestones Achieved

• Strategic focus on major rail projects has resulted in continued revenue growth and major project awards (Sydney Metro, MTM, Northern Line)

• Significant R&D investment of $21 million over past five years has created industry leading product solutions for the global mass transit market

• Future monetisation of the R&D investment to be derived from executing DTI’s contracted order book[1] of $45.2 million

• Increased maintenance revenue and secondary sales by 62% in FY18 to $9.9 million (from $6.1 million in FY17)

• Strong validation of product suite through increased level of contracts awarded

• Unique product offering covering:

• complete mass transit solutions combining hardware and software

• tailored product offerings for customers delivering full turn key solutions

• Operating cost base restructured

• Focus on project execution and margin management

1 Includes LOA or LOI and contracts at advanced negotiation

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Global Project Execution

Map Key

Complete In Progress Key Prospect

• DTI has a successfully demonstrated its ability to secure and execute projects globally

• Strong validation of world-class product suite by spread of global project success

• Ability to roll-out product on a global scale

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Operational Update

Americas		EMEA		Australasia	Australasia
• Sales of $5.8 million, up 14.8% from $5.0 million in prior period • Key transit operators, including SEPTA, SFMTA, SamTrans, Long Beach Transit and Broward County • New contract for 115 LRVs for Dallas Area Rapid Transit (options 1–4) • Pipeline of $105 million, weighted 95% to rail • Opportunities in new markets identified in Argentina		• Sales of $3.6 million, up 25.4% from $2.9 million in prior period • Strong interest in DTI solutions from UK rail • Continued revenue growth from bus and tram market in Poland and France • Completed 68 vehicles for Mwasalat • Pipeline of $220 million identified, weighted 74% to rail • Opportunities in new countries identified in Oman, Tanzania, Norway, Bulgaria and Belgium		• Sales of $9.7 million, up 17.2% from $8.3 million in prior period • Strong market position across bus and rail markets • Ongoing deliveries to Sydney Metro project which are on schedule • Awarded major rail refurbishment for Metro Trains Melbourne • Pipeline of $81 million identified, weighted 95% to rail • Opportunities in new markets identified in Singapore and India

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Key Customers

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OEMs
Municipal
Authorities
Transit
Operators
Integrators
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ORDER BOOK OPPORTUNITY PIPELINE

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Order Book

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50
$m
40
30
20
10
0
Bus Rail Preferred
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• Order book continues to grow in line with marketing effort

• Strong growth in rail sector with strong interest in DTI Passenger Information Systems (63% weighting for opportunities identified)

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

• Pipeline includes open tenders, including $28 million which are expected to be awarded over the next six months

• Order book includes uncontracted work where DTI has received an LOI/LOA or is in advanced contract negotiations.

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Opportunity Pipeline

Opportunity Pipeline - Region

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19.9%
25.8%
54.4%
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Australasia EMEA Americas

• Significant identified long term pipeline in excess of $405 million

• EMEA presenting strongest opportunities for new growth

• Americas includes significant Latin American opportunities for expansion

• Australia provides DTI with the ability to leverage its local technical knowledge and on-ground maintenance support networks

Opportunity Pipeline - Sector

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2.3%
14.2%
83.6%
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Bus Rail Taxi Law Enforcement

• Opportunity Pipeline continues to be dominated by rail which generally has higher specifications, engineering effort and capital intensity

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

• Operators investing in improved passenger journey experiences

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Opportunity Pipeline

Mobile Surveillance

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

• DTI is a significant player in mass transit sector (trains, trams and transit buses) which constitutes 56.6% of the market

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$m Mobile Video Surveillance Equipment – Region
800
600
400
200
0
EMEA Asia Americas
2016 2021
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Source: IHS Research – 24 Feb 2017

Passenger Information Systems

• Market forecast for Passenger Information Systems (excluding CCTV) to be US$21.4 billion by 2022, growing at CAGR of 23%

• These products comprise approximately 63% of the current $45.2 million order book

Global Passenger Information System Market

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7.5
5.0
2.5
0.0
Others Emergency Pass Mobile Infotainment Info Display Systems
Comms Apps Announcement
2016 2017 2022
US$ billion
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Market Research Future – July 2017

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STRATEGY AND OUTLOOK

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Strategies Short-term

Grow Revenue Base	Production Cost Efficiencies	Cost Down Strategy	Overhead Reduction
• Increased order book1by 51% in past 12 months • Conversion of opportunity pipeline • R&D cycle complete providing new leading edge product solutions	• Product design finished leading to stable production runs • Migrate production to lower cost manufacturer	• Review supply chain to reduce component costs • Implement design efficiencies • Target margin improvements via competitive product sourcing	• Tight control of costs and working capital • Improved inventory management processes established • Focus on project execution and margin management

1 Includes LoI/LoA and contracts under advanced negotiations

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Strategies Medium and Long-term

• Medium-term Long-term

• • • Demonstrate continued profitability Continue to leverage R&D investment in new market-leading

• • Ongoing monetisation of past R&D technology platform

• investment

• Target continued increased in maintenance and recurring revenue to underpin revenue growth

• Staging of contracted revenue provides support for future revenue growth

• Product suite developed drives leading turnkey solutions

• Develop DTI hardware as platform for multiple technology applications

• Expand strong OEM relationships to create stronger maintenance and recurring revenue and position DTI as preferred technology provider

• Build contracted footprint globally to position DTI in all major markets

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Outlook

• Continued growth in contracted order book[1] to $45.2 million

• Identified Opportunity Pipeline of $405 million with $28 million to be awarded within six months

• Global demand for mobile surveillance and passenger information system equipment continues to be strong

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

• Operating cost base restructured

• Focus on project execution and margin management

• 1 Includes LoI/LoA and advanced contract negotiations

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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 2018 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 forwardlooking 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 DTI Group Ltd

T: +61 8 9479 1195 E: peter.tazewell@dti.com.au

WEBSITE

www.dti.com.au

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