IPD GROUP LTD — Interim / Quarterly Report 2022

Feb 27, 2022

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Leading national distributor and service provider to the Australian electrical market H1 FY22 results presentation

28 February 2022

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IMPORTANT NOTICE AND DISCLAIMER

NO RELIANCE

The information contained in this document is not investment or financial product advice and is not intended to be relied upon as the basis for an investment decision, and is not, and should not be assumed to be, complete. The information provided in this presentation may not be suitable for your specific needs and should not be relied upon by you in substitution for obtaining independent advice.

To the maximum extent permitted by law, neither the Company nor any other party guarantees or makes any representations or warranties, express or implied, as to, or takes responsibility for, the accuracy or reliability of the information contained in this document or as to any other matter, or takes any responsibility for any loss or damage suffered as a result of any inadequacy, incompleteness or inaccuracy in any statement or information in this document including, without limitation, any financial information, any estimate or projections or any other financial information.

Past performance information provided in this document may not be a reliable indication of future performance. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. Statements contained in this document that are not historical facts are based on current expectations, estimates, projections, opinions, and beliefs of the Company. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.

FORWARD LOOKING STATEMENTS

This document contains certain forward-looking statements and comments about future events. Forward-looking statements involve known and unknown risks, significant uncertainties, assumptions, contingencies, and other factors, many of which are outside the control of the Company, are subject to change without notice, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct, and which may cause the actual results or performance of the Company to be materially different from any results or performance expressed or implied by such forward-looking statements. Such forward-looking statements speak only as of the date of this document. Forward looking statements should not be relied on as an indication or guarantee of future performance. No representation, warranty or undertaking is made that any projection, forecast, assumption or estimate contained in this document should or will be achieved. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements in this document to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any such statement is based.

MISCELLANEOUS

No person, especially those who do not have professional experience in matters relating to investments, may rely on the contents of this document. If you are in any doubt as to the matters contained in this document you should seek independent advice and/or consult your stockbroker, bank manager, solicitor, accountant, or other financial adviser.

A number of figures and calculations in this presentation are subject to the effects of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this presentation.

All dollar figures within this document represent Australian Dollars unless otherwise specifically stated.

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H1 FY22 HIGHLIGHTS

Financial performance

• Strong organic and inorganic growth for the Group

• Statutory revenue of $81.7m, up 54% on pcp

• Underlying:

• EBITDA of $10.4 million, up 55% on pcp

Statutory revenue Underlying EBITDA[1] Underlying EBIT[1] $81.7m $10.4m $8.6m Up 54% Up 55% Up 83% (PCP $53.1m) (PCP $6.7m) (PCP $4.7m)

• EBIT of $8.6 million, up 83% on pcp

• NPAT of $6.0 million, up 94% on pcp

Extension of distribution agreement with ABB

• Successful transition of additional products and customers from ABB

• First orders for electric vehicle chargers

Underlying NPAT[1] Net assets Net cash $6.0m $57.2m $19.8m

Up 94% (PCP $3.1m)

($39.2m as at 30 June 2021)

($12.6m as at 30 June 2021)

HTC acquisition complete

• Integration into IPD head office

• System integrations due to complete by end of FY22

Successful listing on ASX (December 2021) raising $20m of new capital for growth initiatives

Positive outlook for continued growth; earnings guidance upgraded against FY22 prospectus forecast

$20.0m

New capital raised for growth initiatives

4.3

LTIFR[2]

89%/11%

Products / services revenue split

Notes: (1) The underlying results are a non-IFRS measure reported to provide a greater understanding of business performance. EBITDA and EBIT have been calculated by adding back IPO related costs totalling $1.6 million to the statutory numbers. NPAT has been calculated by adding back IPO related costs after tax totalling $1.2 million. Refer to page 17 for a reconciliation; (2) Lost time injury frequency rate at 31 December 2021. LTIFR = Average number of lost time injuries over the past 12 months for every 1,000,000 hours worked

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BUSINESS SUMMARY

IPD’s business is split between the sale of infrastructure products and the provision of services to businesses across Australia

	Products	Services
H1 FY22 pro forma revenue split1	89%	11%
Description	Sale and distribution of a range of electrical infrastructure products and solutions	Specialist provider of low and high voltage electrical services
Brands
Customer types	Switchboard manufacturers, OEMs and system integrators, electrical wholesalers, electrical contractors and power utilities	Data centers, healthcare, power generation, power utilities, industrial, mining, roads and rail infrastructure
End users / industries	Commercial construction, residential construction, infrastructure, mining, power utilities, healthcare and education
Locations	Sydney, Brisbane, Melbourne, Adelaide, Perth	Sydney, Melbourne, Bendigo, Burnie (Tasmania)
Revenue model	Sale of products and solutions	Project management, labour and materials

Notes: 1. Revenue split based on gross revenue including rebates

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IPD’S HISTORY OF GROWTH

Reliably serving Australia for over 65 years

					Evolution	of IPD									Key	acquisitions	acquisitions
		1950s 1968			1989		1998 2005				2014			2017	2018		2019	2020		2021
	1950s 1968				1979	1989	2005	2008		2010		2014		2017	2018		2019	2020			2021
•		English Electric		•	GEC Industrial	•	Management team		•	Sri Lankan		•	Acquired		•	Acquisition of Addelec			•	Acquired
		Company of			Products division		buy the business			operations			Hivotech HV			and	formation of			HTC
		Australia Pty Ltd			formed		from ALSTOM			commenced			Testing &			services division
		Incorporated					through an MBO						Equipment
•		Regents Park factory opened												•	Trio Test & Measurement		• and	Acquired Control Logic		•	Successful initial public
		• GEC merged with English Electric					•	Acquired PJ White Specialist Lighting company						•	Zinfra’s HV Testing business IPD Services created						offering on the ASX
					•	GEC Power systems							•	Acquired Central	Test
						group	merged with CGE							Calibration & Testing
						subsidiary Alsthom to
						create GEC Alsthom

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Record HY performance [2]

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PROFIT AND LOSS

Underlying profit and loss (before IPO costs)[1]

Record half year performance

• The Group continues to perform very strongly, recording record half year revenues and profits

• Strong performance across all product and customer segments during H1 FY22

• Revenue growth of 54% on pcp including 23% organic growth

• Gross profit margins reduced in line with the forecast, reflecting the lower margins on the additional products and customers transitioned from ABB

• The underlying EBIT margin (excluding IPO costs) has increased from 8.8% to 10.5%, as the Group benefits from the operational leverage of recent acquisitions

• the Group expects further benefits to be realised in FY23

	$m	H1 FY22	H1 FY21	% change
	Revenue	81.7	53.1	54%
	Gross profit	31.3	21.0	49%
	Other income	0.5	0.1	400%
	Operating expenses	(21.4)	(14.4)	49%
	EBITDA	10.4	6.7	55%
	Depreciation and amortisation	(1.8)	(2.0)	(10%)
	EBIT	8.6	4.7	83%
	Net interest expense	(0.2)	(0.3)	(33%)
	PBT	8.4	4.4	91%
	Income tax expense	(2.4)	(1.3)	85%
	NPAT	6.0	3.1	94%
	Gross profit margin	38.3%	39.6%	(1.3%)
	EBITDA margin	12.7%	12.6%	0.1%
	EBIT margin	10.5%	8.8%	1.7%

Notes: (1) The underlying results are a non-IFRS measure reported to provide a greater understanding of business performance. EBITDA and EBIT have been calculated by adding back IPO related costs totaling $1.6 million. NPAT has been calculated by adding back IPO related costs after tax totalling $1.2 million. Refer to page 17 for a reconciliation

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SALES GROWTH AND MARGINS

Record half year results achieved

• Statutory revenue of $81.7m, up 54% on pcp

• strong revenue growth has been achieved despite the effect of lockdown in some states as well as global supply chain issues

• products revenue of $72.8m, up 58% on pcp

• services revenue of $8.9m, up 25% on pcp

• 0.5% decline in gross profit margins on pcp as expected, due to new transitional business from ABB

• Proforma revenue of $85.7m, up 23% on pcp, showing the strong organic growth the Group has achieved

Statutory revenue and gross profit margins

Gross profit margin (%) Statutory revenue ($m)

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81.7
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65.0
53.1
39.6%
38.8% 38.3%
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1H FY21 2H FY21 1H FY22
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Sales growth highlights

• Successful execution of the expanded distribution agreement with ABB (effective 1 September 2021)

• Significant growth in the automation and control products by Control Logic

• Elsteel Techno revenue continues to grow due to changes in compliance standards resulting in an uplift in demand from switchboard builders

• On 1 October 2021, IPD Group Ltd acquired 100% interest of High Technology Control Pty Ltd (HTC)

Proforma revenue[1]

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Proforma revenue ($m) 85.7
73.0
69.7
1H FY21 2H FY21 1H FY22
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Notes: (1) Includes the revenue contribution of all acquisitions which have occurred over the period. Refer to page 17 for a reconciliation

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CAPITAL MANAGEMENT

Balance sheet

Strong balance sheet

• Strong balance sheet with $57.2m net assets, no debt and a closing cash balance of $19.8m

• $31.3m of inventory on balance sheet, reducing the risks associated with supply chain issues

• Trade receivables have increased inline with sales growth

• Consolidation of office and warehouse locations with Control logic and HTC

Cash flow

• IPD Group’s business model is highly capital efficient

• Operating cashflows of $5.5m for H1 FY22

• Operating cashflow and cash conversion have reduced to 63% from 100% on pcp as expected, due to:

• additional working capital requirements required to service revenue growth (up 54% on pcp)

• continued investment in inventory, reducing the risks associated with supply chain issues

		31 Dec 21	30 Jun 2021	30 Jun 2021
	$m	Statutory	Proforma1	Statutory
	Cash	19.8	17.6	12.6
	Trade and other receivables	35.2	27.1	27.0
	Inventories	31.3	23.2	23.2
	Other current assets	1.2	3.9	0.7
	Total current assets	87.5	71.8	63.6
	Right-of-use assets	12.5	13.2	13.2
	PP&E	2.9	2.7	2.7
	Intangibles	10.1	5.2	5.2
	Deferred tax assets	3.0	1.9	1.9
	Other non-current assets	-	2.6	-
	Total non-current assets	28.6	25.6	23.0
	Total assets	116.1	97.4	86.5
	Trade and otherpayables	37.9	28.3	28.0
	Current tax liabilities	2.0	1.0	1.0
	Lease liabilities	2.4	2.5	2.5
	Provisions	4.8	3.1	3.3
	Total current liabilities	47.1	34.9	34.8
	Lease liabilities	11.4	12.1	12.1
	Provisions	0.4	0.4	0.4
	Total non-current liabilities	11.8	12.5	12.5
	Total liabilities	58.9	47.4	47.3
	Net assets / equity	57.2	50.0	39.2

Note: 1: 30 June 2021 Proforma balance sheet is as per prospectus

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Strategic initiatives and outlook [2]

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STRATEGIC INITIATIVES

Integration of IPD, Control Logic and HTC

• Integration of product businesses will allow:

  • one invoice, one statement – key customer offering

• Removing current duplication in sales process by creating a uniform sales structure

  • aimed to increase the ability for the sales team to promote IPD’s complete offer to customers

• Common shared services for the Group

• Consolidating geographical locations for both sales and warehousing in every state. All entities are now collocated in every state

• Digital transformation and cloud migration facilitating a more robust cyber security posture as well as business continuity plan

Electric vehicles (EV) market

• IPD is well placed to capitalise on EV infrastructure stimulus and the growing consumer demand

• Wholesalers have begun holding stock

• Sold 65 units of EV charges

• Addelec is well placed to install and maintain EV infrastructure

• Large pipeline of enquiries in excess of $750k

• We have dedicated a business development resource in Queensland with further expansion into Western Australia and Victoria being considered

• Currently exploring suitable EV software platforms to support our offer in fleet / private networks

• Single centralised ERP, CRM and communication systems

Acquisitions

New products

• The Group has a proven track record of successful acquisitions

• IPD continues to assess potential complementary acquisitions that add to its customer offering

• Potential targets have been identified and preliminary discussions are taking place

• IPD continues to explore extensions to its product range with existing partners as well as new manufacturers

• A number of new portfolio opportunities are currently under evaluation to determine market size, opportunity and appropriate supply chain partners

Strategic sales focus

• Investment in resources over and above the current pool to create pull-through demand by driving specification of IPD solutions through key influencers and identify significant opportunities early in the project life cycle

• Promote “packaged” solutions covering all products, create and deliver an education program for consultants, become a trusted advisor for relevant solutions to end users in key targeted vertical markets

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TRADING UPDATE AND OUTLOOK

Proforma EBITDA ($m)

First month of H2 FY22

• Continued strong trading in the first month of H2 FY22

FY22 forecast upgrade

• Positive outlook for continued growth; earnings guidance upgraded against FY22 prospectus forecast

• FY22 statutory EBITDA forecast range between $17.6m and $18.4m, up from $16.0m per prospectus forecast

• the statutory forecast includes the impact of $1.6m of IPO costs

• Equates to a FY22 proforma EBITDA forecast range between $19.7m and $20.5m, up from $18.1m per prospectus forecast

• The Group has intentionally built higher than usual inventory levels as it seeks to mitigate the global supply chain related risks, while maintaining the high standards of customer service

• Increased inventory levels provides protection against significant cost increases by suppliers

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20.5
19.7
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18.1
10.9
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H1 FY22 Prospectus FY22 Upgraded FY22
forecast forecast
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Statutory EBITDA ($m)

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18.4
17.6
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17.6
16.0
8.8
H1 FY22 Prospectus FY22 Upgraded FY22
forecast forecast
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IPD ARE EXPOSED TO A NUMBER OF HIGH GROWTH AREAS

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Electric vehicles

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Public and private sector commitments to transition vehicle fleets to EVs and expand EV charging infrastructure

Renewable energy

Industrial control systems

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Increased focus on High profile cyber attacks compliance measures on companies resulting on regarding ‘green increased demand and buildings’, including investment in cybersecurity NABERS and Greenstar protection ratings

Modular switchboard systems

Data centres

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Rising demand for Changes in the newly components and introduced low voltage systems for data switchgear & control centres gear assemblies standard

IPD sells EV IPD’s power monitoring IPD sell hardware and IPD sell various critical Both Elsteel and IPD infrastructure on behalf products enable software solutions products to data centres have invested heavily of ABB and provides commercial buildings which protect and offer installation, in design and testing related services and utilities to monitor enterprise’s electrical test and commission, to be able to provide a (installation, energy usage at a infrastructure maintenance and ad hoc comprehensive commissioning, granular level engineering services modular electrical maintenance, etc) switchboard solution

Key areas of growth

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GROWTH STRATEGY

• Increase spend from IPD have invested and continue to invest to drive organic growth in areas including branding and promotion, innovation existing customers and new product introduction, sales and distribution and operations. • Proven track record of successful acquisitions, having executed eight acquisitions since the MBO in 2005, all of which have been financed with no debt from internally generated funds and the issue of shares

• Growth by acquisition

• Proven track record of successful acquisitions, having executed eight acquisitions since the MBO in 2005, all of which have been financed with no debt from internally generated funds and the issue of shares

• The Australian electrical market remains relatively fragmented and there is an opportunity for IPD to drive industry consolidation through a program of targeted strategic acquisitions

• • IPD is committed to looking after its customers for the complete product lifecycle and beyond

• Growth in the services division • One of IPD’s core focuses is to improve awareness of its service offering to existing customers and grow this division organically and inorganically

• • IPD will seek to offer more products to its customers through entering into supply agreements with new

• Increase product manufacturers and extending agreements with existing suppliers to sell new product ranges offerings • IPD has identified several product ranges which it currently does not distribute including power quality products, emergency lighting and high efficiency motors

• • IPD sells products and provides services to a wide range of growing industries

• Targeting key growth sectors • There are five particular product areas where IPD believes it is well positioned to benefit from growth , being electric vehicle charging systems, renewable energy, industrial control systems, data centres and modular switchboard systems

• Realising efficiencies in • IPD has a proven track record of integrating newly acquired businesses current business • There are a range of efficiencies and synergies available to the Company , including near-term opportunities from structure the acquisition of HTC and integration of Control Logic

• There are five particular product areas where IPD believes it is well positioned to benefit from growth , being electric vehicle charging systems, renewable energy, industrial control systems, data centres and modular switchboard systems

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KEY BUSINESS HIGHLIGHTS

1 2 3 4 5 6 7	Strong market fundamentals supporting long-term growth and consistent demand
	Broad suite of infrastructure products and services offered nationwide
	Long-standing partnerships with global supply partners
	Diverse, long tenured and loyal customer base supporting a quality revenue base
	Efficient and timely national logistics operation with a portfolio of accreditations and a strong health and safety record
	Competitive strengths and proven strategies to drive growth
	High quality and experienced board and management team

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Questions [2]

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Appendices [2]

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P&L RECONCILIATION

$m	H1 FY22	H1 FY21
Statutory revenue	81.7	53.1
Impact of HTC acquisition	4.0	-
Proforma revenue	85.7	53.1

$m	H1 FY22	H1 FY21
Statutory NPAT	4.8	3.1
Offer costs	1.6	-
Tax impact	(0.4)	-
Underlying NPAT	6.0	3.1

$m	H1 FY22	H1 FY21
Statutory EBITDA	8.8	6.7
Offer costs	1.6	-
Underlying EBITDA	10.4	6.7
Public companycosts	(0.1)	-
Impact of HTC acquisition	0.5	-
Proforma EBITDA	10.9	6.7

$m	H1 FY22	H1 FY21
Statutory EBIT	7.0	4.7
Offer costs	1.6	-
Underlying EBIT	8.6	4.7

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