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2018-06-27 Etion financial results 1 For the period ended 31 March 2018 Annual Financial Results TEDDY DAKA / CHIEF EXECUTIVE OFFICER ELVIN DE KOCK / CHIEF FINANCIAL OFFICER
2018-06-27
Etion financial results
1
For the period ended
31 March 2018
Annual Financial ResultsTEDDY DAKA / CHIEF EXECUTIVE OFFICER
ELVIN DE KOCK / CHIEF FINANCIAL OFFICER
2018-06-27
Etion Presentation 2
Agenda Group Overview and Key
Features
Strategy Update
Operating Context
Financial Performance
01
02
03
04
Strategy and Outlook
Questions
05
06
3
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Etion Presentation
Group Overview & Key Features
3
3
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Etion Presentation
Group Overview & Key Features
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Etion Presentation 4
Revenue
Gross Margin
Headline earnings
EBITDA
Tangible Net asset value
Liquidity ratio
Revenue decreased (down 29%) to
R572.6 million (2017: R806.0 million).
The revenue performance continues
to reflect a positive trend of a
compound annual growth rate
(CAGR) of 31% over three years.
Gross Margin improved to 28,3%
(2017: 26,3%)
Headline Earnings Per Share halved
(50% down) to 7.29 cents (2017:
14.72). Earnings continue to reflect an
upward trend with a positive CAGR of
18% over three years.
EBITDA reduced (down 46%) to R60.7
million (2017: R113.1million). The EBITDA
result demonstrates an encouraging trend
with a CAGR OF 46% over three years
Tangible Net Asset Value increased to
39.9 cents from 32.6 cents (up 22%)
Liquidity ratio improved from
1.7 to 2.1
Group profile Ansys Limited is now Etion Limited.
The world is changing, we are changing with it.
We are driven by technology innovation, digitalisation, technology convergence, product-agnostic and
disruptive technologies opportunities.
We are drawing on our proud 31 years of engineering heritage and extensive original design and
manufacturing capabilities.
We have consolidated, rationalised and repositioned to change the DNA of our organisation and to
create an integrated business.
Rebranded in order to reflect our new positioning as a diversified digital technology group.
Etion is a name that communicates our core ethos of innovation energy and action.
The new name will be used to brand both the group itself and all of its business units.
Our value chain can be summarised in four words: Create. Digitise. Connect. Secure.
We create, digitise, connect and secure both generic and bespoke digital technology solutions to
improve the safety, productivity, connectivity and cybersecurity of our customers.
We create, digitise, connect and secure with one purpose, to advance humanity forward.
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Etion Presentation 5
Advancing Humanity
through technology
6
Strategy Update• During the period under review, the Group continued to invest and leverage off its core competencies in innovation and
design to support its growth strategy.
• Investments included key appointments, changes in organisational structure and the Group rebrand initiative.
• These investments have had an impact on profits and cash resources in the short-term but are key to our objective of
creating a more sustainable business that can exploit additional market segments in the medium to long term.
2012
Restructure,
with a
focus on
creating a
sustainable
and
competitive
business
2013
Acquires
Tedaka
Network
Solutions to
establish
telecoms
business
2014
Acquires
Parsec to
become IP
led provider
of technology
solutions
2015 –
2016
Integration
of Tedaka
and Parsec
2017
Redefine
operating
segments to
become a
digital
solutions
provider
2018
Repositions
and rebrands
to offer
integrated
solutions
offering
6
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2018-06-27
Etion Presentation7
Strategy Update
We have successfully executed the following goals
set out over the last two reporting periods: Focus for next 18 months
Achieved level 1 BBEEE
Transform ODM to offer services to internal and external customers
Transform Ansys Rail to become Safety and Productivity Solutions Provider
Transform TNS into a Digital Networks Solutions Provider
Establish cyber security as a distinct business
Build leadership capacity
Embed a new organisational structure and design
Rebrand in order to allow alignment in our go to market strategy.
Focus on integration
Enhance digital capability
Entrench new brand
Improve client care
Organisational development and build employer brand
Establish high performance culture
Improve on diversity
Strategic Acquisitions
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Etion Presentation 8
How we have
reorganised
Designs, develops and manufactures a wide range of advanced electronic and digital technologies for internal and external customers
Creates confidence in business transactions by providing trusted identity, digital signatures, authentication and encryption, biometrics solutions to secure countries, citizens and transactions
Offers connectivity and communications products, solutions and services and that include fibre wireless deployment, data and digital radio communications networks and network monitoring as well as power related infrastructure solutions
Provides digital safety and environmental management systems that range from sensors, asset management, telematics, IoT, robotics, mechatronics and maintenance
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Etion Presentation 9
Value Chain
Etion Group aimed at
advancing humanity
through technology
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Etion Presentation 10
• Part of our growth strategy is to
strengthen and increase leadership
capacity
• This is part of us refining a well
defined structure and part of our
movement to centralise group
functions
• We have Introduced a Long Term
Share Incentive Scheme to attract
and keep talent (subject to
shareholder approval at AGM)
Group executive
committee
Koketso SeripeChief Executive:
Etion Digitise
Lebo
MadibaChief
Marketing
Officer
Mile SofijanicGroup Executive
Strategy Support,
People &
Organisational
Development
Teddy DakaChief Executive Officer
Elvin de
KockChief
Financial
Officer
Teddy DakaActing: Managing Director:
Etion Connect
Petrus PelserManaging Director:
Etion Create
Christi MaherryCEO:
Etion Secure
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OPERATING CONTEXT
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Etion Presentation 12
Operating context
• Local trading conditions remained challenging and certain
customers either reassessed or rescheduled their orders.
• Internationally, demand for the supply of defence-related
products as well as cyber security solutions remained strong.
• A slowdown was experienced in comparison to the previous
period due to delivery rates exceeding customer demand.
Therefore export revenue decreased from R158 million to R96.4
million a decline of 39%.
External
Original Design Manufacturing (ODM)
• Supressed economic activity and flat commodity prices
continued to impact on transport volumes at major clients.
• The segment’s performance was negatively impacted by a
product defect at one of the rail clients. The process of replacing
the affected units resulted in R4.2 million net loss.
Safety and productivity solutions
• The telecommunications segment experienced a significant
slowdown in the roll-out of FTTH (Fibre-to-the-home) by some
of the network operators.
• Despite poor profit performance the telecommunication
business improved efficiencies, with inventory levels going
down by 28%, and overall liquidity improving from 1,4 to 2,5.
Digital network solutions
Revenue split
82%
18%
Local International
80%
20%
Local International
International vs. Local
2018 2017
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Etion Presentation 13
Revenue split
90%
10%
Private Public
88%
12%
Private Public
20172018
Public vs Private Sector
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Etion Presentation 14
Revenue growth per year
-
100 000 000
200 000 000
300 000 000
400 000 000
500 000 000
600 000 000
700 000 000
800 000 000
900 000 000
2015 2016 2017 2018
Revenue NPAT
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Etion Presentation 15
Top 10 clients
Telkom / Openserve
Schauenburg
Vumatel
Tawazun Dynamics
Transnet Freight Rail
Dark Fibre Africa
Military IndustriesCorporation (MIC)
MCT Telecommunications
Huawei
Hensoldt Optronics SA
Full year ended March 2018 Full year ended March 2017
Telkom / Openserve
Tawazun Dynamics
Huawei Technologies
Transnet Freight Rail
Schauenburg
Vumatel
Alcatel-Lucent SA
KACST
Dark Fibre Africa
Hensoldt Optronics
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Etion Presentation 16
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Etion Presentation 17
FinancialPerformance
Results Evolution
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Etion Presentation 18
89% 70% - 29%
CAGR = 31,6%CAGR = 49,4%
5,8%
8,4%
4,2%4%
CAGR = 46%
7,8%9%
14%
10,6%
CAGR = 18%
For the year ended 31 March 2018Year Year
ended ended
31 March 2018 31 March 2017
Note (Reviewed) (Audited)
R’000 R’000
Revenue 572 562 806 019
Cost of sales (410 379) (593 887)
Gross profit 162 183 212 132
Other income 2 276 969
Operating costs (125 787) (130 304)
Other gains/(losses) 7 849 17 409
Operating profit 46 521 100 206
Finance income1 975 3 106
Finance costs(6 143) (9 132)
Profit before taxation42 353 94 180
Taxation(8 929) (26 429)
Net profit for the period33 424 67 751
Total comprehensive income for the period33 424 67 751
Attributable to:
Equity holders of the company33 473 67 876
Non-controlling interest(49) (125)
33 424 67 751
Basic earnings per share (cents) 1 7.26 14.72
Diluted earnings per share (cents)
7.26 14.72
Condensed Consolidated Statement of Comprehensive Income
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Etion Presentation 19
As at 31 March 2018 31 March 2018 31 March 2017
Notes (Reviewed) (Audited)
R’000 R’000
Assets
Non-current assets 184 569 179 010
Property, plant and equipment50 294 53 158
Intangible assets 118 543 118 692
Deferred tax asset 14 722 6 150
Other financial asset 1 010 1 010
Current assets 285 379 304 794
Inventories 3 88 276 101 099
Trade and other receivables 4 140 790 124 404
Current tax receivables 5 513 79 291
Cash and cash equivalents 50 800 -
Total assets 469 948 483 804
Equity and liabilities
Equity 302 446 269 022
Share capital212 141 212 141
Accumulated profit 90 305 56 652
Minority interest - 229
Non-current liabilities 32 952 38 060
Interest bearing borrowings 27 788 36 602
Other financial liabilities - -
Deferred tax liability 5 164 1 458
Current liabilities 134 550 176 722
Provisions 5 388 1 186
Interest bearing borrowings 9 461 5 211
Trade and other payables 110 158 166 467
Current tax payable - 3 802
Bank overdrafts 9 546 56
Total equity and liabilities 469 948 483 804
Condensed Consolidated Statement of Financial Position
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Etion Presentation 20
For the year ended 31 March 2018Year Year
ended ended
31 March 2018 31 March 2017
(Reviewed) (Audited)
R’000 R’000
Cash flows from operating activities
Cash receipts from customers 556 150 787 654
Cash paid to suppliers and employees
(550 935) (679 864)
Cash generated from operations 5 215 107 790
Interest paid (6 143) (9 132)
Interest received 1 974 3 106
Taxation paid (23 112) (26 765)
Net cash flow (utilised in)/generated from operating activities(22 065) 74 999
Cash flows from investing activities
Purchase of property, plant and equipment(4 942) (15 371)
Proceeds from disposal of property, plant and equipment1 169 612
Investment in intangible assets (7 578) (6 482)
Increase in other financial assets - (335)
Net cash flow utilised in investing activities
(11 351) (21 576)
Cash flows from financing activities
Decrease in other financial liabilities - (8 442)
Increase in interest bearing borrowings (4 564) 6 601
Net cash flow utilised in financing activities
(4 564) (1 841)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (37 981) 51 582
Cash, cash equivalents and bank overdrafts at beginning of year 79 235 27 653
Cash, cash equivalents and bank overdrafts at year end 41 254 79 235
Condensed Consolidated Statement of Cash Flows
2018-06-27
Etion Presentation 21
In the current reporting period, the operating segments have been reclassified
to align with the Group’s stated digital strategy. Consequently, the prior year reporting
has been restated. As in the past, the allocation of
assets and liabilities is based on the principle of being directly related
to the segment.
Changes to Segment Profile
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Etion Presentation 22
ODM yielded positive results
The segment’s profit increased from R22.5 million to
R31.6 million, up by 40.5%
R’ 000
Revenue in this segment
declined to R229.1 million from
276.9 million
Export revenue decreased from
R158 million in 2017 to R96.4 million in 2018,
a decline of 39%.
R 31,60
R 229,10
R 22,50
R 276,90
R-
R 50,00
R 100,00
R 150,00
R 200,00
R 250,00
R 300,00
Profit Revenue
2018 2017
Etion Create
A state of the art ODM facility
Segment Performance – Original Design Manufacturing
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Etion Presentation 23
Revenue declined by 23% to R77
million from R100.2 million
Profit decreased to 1.1 million from R5.5 million
The segment’s performance was impacted by a
product defects at rail clients resulted in Net loss of R
4.2 million
R’ 000
Segment Performance – Safety and Productivity
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Etion Presentation 24
-R4,20
R77,00
R5,50
R100,20
-R20,00
R-
R20,00
R40,00
R60,00
R80,00
R100,00
R120,00
Loss Revenue
2018 2017
Revenue declined by 38% to R266.4
million from R428.8 million
Profit decreased from R82.2million to
R27.6 million
R’ 000
R 27,60
R 266,40
R 82,20
R 428,80
R-
R 50,00
R 100,00
R 150,00
R 200,00
R 250,00
R 300,00
R 350,00
R 400,00
R 450,00
R 500,00
Profit Revenue
2018 2017
Segment Performance – Digital Networks
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Etion Presentation 25
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Outlook &Strategy
27
• Etion has acquired 100% of the shares of LawTrust, for R108.5 million funded from a combination of cash
and Etion shares.
• Effective date of acquisition: 1 June 2018.
• Areas of specialisation:
• Authentication products and services.
• Encryption of data sent and received over secure online environments with secure socket layer (SSL)
certificates, as well as the encryption of information sent via email.
• Digital signatures to enable the sending and receiving of sensitive documents.
• Biometrics solutions that utilise a variety of technologies for identity management. These include
fingerprint and facial recognition technologies.
• Enhance Etion’s existing cyber security business by introducing:
• Strategically aligned products .
• Access to new markets which, in turn, will provide increased annuity revenue.
The incorporation of LawTrust’s technical team into the Etion team will allow the company to develop and
provide an expanded range of solutions to a combined client base.
Outlook
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Etion Presentation 27
• We anticipate intensifying disruptions caused by the digital revolution.
• Opportunities to leverage our solutions in the rest of Africa and the Middle East, with cyber security growth prospects in Australasia .
• We see market growth and demand for our design, development and manufacturing services with the continued evolution of digital technology, especially the developments in IoT ( Internet of Things).
• Digital solutions are driving the enhancement of safety and productivity in enterprise operations in mining and rail.
• Connectivity is at the core of these technologies and is driving the demand for digital networks, driven by exponential growth of data across industries.
• The cyber security market is growing at a rapid rate due to an unprecedented increase in criminal activity.
• The extensive use of authentication, encryption, and biometrics in enterprise applications and on the internet, to protect enterprises, governments, and individuals makes this a high-growth segment, into the future.
Outlook
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Questions?
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Etion Presentation 30
ThankYou
Lebo Madiba
CMO
+27 82 392 5339
