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MiX Telematics Announces Financial Results for Fourth Quarter and Full Fiscal Year 2017MiX Telematics Limited (NYSE:MIXT, JSE:MIX), a leading global provider of fleet and mobile asset management solutions delivered as Software-as-a-Service (SaaS), today announced financial results for its fourth quarter and for its full fiscal year 2017, which ended March 31, 2017. "Our fourth quarter marked a strong end to the year. MiX's ability to exceed expectations was driven by ongoing strength across the portfolio globally which resulted in a return to double digit subscription revenue growth on a constant currency basis," said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. "During fiscal 2017, the company reached an inflection point in regards to margin accretion, particularly as MiX is moving out of a heavy investment cycle into a phase where we are starting to enjoy the returns on these investments. We are scaling the overall operations and have entered fiscal 2018 with very good momentum. We expect a year of strong subscription revenue growth and margin expansion, and looking forward we are confident in our ability to execute our strategic initiatives to achieve our targeted adjusted EBITDA margin of 30% over the long term." Financial performance for the three months ended March 31, 2017 Subscription revenue: Subscription revenue was R321.7 million ($24.0 million), an increase of 4.8% compared with R307.1 million ($22.9 million) for the fourth quarter of fiscal 2016. Double digit subscription revenue was achieved on a constant currency basis. Subscription revenue benefited from an increase of over 55,800 subscribers, which resulted in an increase in subscribers of 9.9% from March 2016 to March 2017. Total revenue: Total revenue was R391.4 million ($29.2 million), an increase of 1.9% compared to R384.0 million ($28.6 million) for the fourth quarter of fiscal 2016. Hardware and other revenue was R69.7 million ($5.2 million), a decrease of 9.4% compared to R76.9 million ($5.7 million) for the fourth quarter of fiscal 2016. Gross margin: Gross profit was R265.0 million ($19.8 million), as compared to R285.0 million ($21.3 million) for the fourth quarter of fiscal 2016. Gross profit margin was 67.7%, compared to 74.2% for the fourth quarter of fiscal 2016. As reported in our previous results announcements for the first three quarters of fiscal 2017, infrastructure costs have increased due to the Company commencing its transition from legacy data centers, where we owned certain equipment, towards cloud-based infrastructure and services. This transition also supports the roll out of our new back-end platform, MiX Lightning, and new products such as Journey Management, Hours of Service and MiX Go, which we expect to drive increased ARPU as well as accelerated subscriber growth. In the fourth quarter of fiscal 2016 hardware margins were higher than those achieved in the fourth quarter of fiscal 2017. These margins vary according to the geographic origin of the sale and the distribution channels through which the hardware revenue was generated. Operating margin: Operating profit was R40.9 million ($3.1 million), compared to R45.7 million ($3.4 million) for the fourth quarter of fiscal 2016. Operating profit margin was 10.5%, compared to 11.9% for the fourth quarter of fiscal 2016. Despite the 6.5% decline in the gross profit margin described above the operating profit margin only declined by 1.4% as a result of strict cost management which has been implemented as management progress towards achieving accelerated growth in Adjusted EBITDA margins. In the fourth quarter of fiscal 2017 administration and other costs included restructuring costs of R15.0 million ($1.1 million) as a result of restructuring plans implemented in both the Europe and the Middle East and Australasia segments. The Company expects the related cost savings and resultant operating profit margin improvement to take effect in the first quarter of fiscal 2018. Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R87.1 million ($6.5 million) compared to R77.6 million ($5.8 million) for the fourth quarter of fiscal 2016. Adjusted EBITDA margin, a non-IFRS measure, for the fourth quarter of fiscal 2017 was 22.3%, compared to 20.2% for the fourth quarter of fiscal 2016. Profit for the period and earnings per share: Profit for the period was R31.2 million ($2.3 million), compared to R13.8 million ($1.0 million) in the fourth quarter of fiscal 2016. Profit for the period includes a net foreign exchange loss of R5.1 million ($0.4 million) before tax, primarily relating to U.S. Dollar cash reserves which are sensitive to R:$ exchange rate movements. A net foreign exchange loss of R27.9 million ($2.1 million), also primarily relating to U.S. Dollar cash reserves was incurred in the fourth quarter of fiscal 2016. Earnings per diluted ordinary share were 5 South African cents, compared to 2 South African cents in the fourth quarter of fiscal 2016. For the fourth quarter of fiscal 2017, the calculation was based on diluted weighted average ordinary shares in issue of 568.2 million compared to 760.6 million diluted weighted average ordinary shares in issue during the fourth quarter of fiscal 2016. The diluted weighted average ordinary shares in issue during the fourth quarter of fiscal 2017 were lower than in the fourth quarter of fiscal 2016 primarily as a result of the repurchase of 200.8 million ordinary shares during the second quarter of fiscal 2017. The Company's effective tax rate for the quarter was 15.0% in comparison to 29.6% in the fourth quarter of fiscal 2016. During the fourth quarter of fiscal 2017 the Group recognized a deferred tax asset of R5.3 million ($0.4 million) in respect of a portion of the available tax losses in the Europe segment. These tax losses were incurred in prior years. An ongoing improvement in the region's results has resulted in this deferred tax asset being recognized in respect of the future utilization of the historical tax loss considered probable at period end. The recognition of this deferred tax asset reduced the Company's effective tax rate in the quarter by 14.5%. On a U.S. Dollar basis, and using the March 31, 2017 exchange rate of R13.4124 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share ("ADS"), profit for the period was $2.3 million, or 10 U.S. cents per diluted ADS. Adjusted earnings for the period and adjusted earnings per share: Adjusted earnings for the period, a non-IFRS measure, was R30.0 million ($2.2 million), compared to R28.8 million ($2.1 million) in the fourth quarter of the 2016 fiscal year. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 5 South African cents, compared to 4 South African cents in the fourth quarter of fiscal 2016. On a U.S. Dollar basis, and using the March 31, 2017 exchange rate of R13.4124 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted profit for the period was $2.2 million, or 10 U.S. cents per diluted ADS, compared to $2.1 million, or 7 U.S. cents per diluted ADS in the fourth quarter of fiscal 2016. Statement of financial position and cash flow: At March 31, 2017, the Company had R375.8 million ($28.0 million) of cash and cash equivalents, compared to R877.1 million ($65.4 million) at March 31, 2016. The decline in cash and cash equivalents is mainly attributable to the repurchase of 200.8 million ordinary shares which resulted in a cash outflow of R473.7 million ($35.3 million) during the second quarter of fiscal 2017. The Company generated R129.0 million ($9.6 million) in net cash from operating activities for the three months ended March 31, 2017 and invested R75.0 million ($5.6 million) in capital expenditures during the quarter, including investments in in-vehicle devices, leading to free cash flow of R54.0 million ($4.0 million) for the fourth quarter of fiscal 2017, compared with free cash flow of R31.0 million ($2.3 million) for the fourth quarter of fiscal 2016. Financial performance for the fiscal year ended March 31, 2017 Subscription revenue: Subscription revenue increased to R1,239.9 million ($92.4 million), up 7.1% from R1,158.2 million ($86.4 million) for fiscal 2016. Subscription revenue benefited from an increase of over 55,800 subscribers since the end of fiscal 2016, which resulted in an increase in subscribers of 9.9% from March 2016 to March 2017. Total revenue: Total revenue for fiscal 2017 was R1,540.1 million ($114.8 million), an increase of 5.1% compared to R1,465.0 million ($109.2 million) for fiscal 2016. Hardware and other revenue was R300.1 million ($22.4 million), compared to R306.8 million ($22.9 million) for fiscal 2016, constituting a decrease of 2.2% year on year. Gross margin: Gross profit for fiscal 2017 was R1,041.3 million ($77.6 million), an increase compared to R1,025.7 million ($76.5 million) for fiscal 2016. Gross profit margin was 67.6%, down from 70.0% for fiscal 2016. As reported above, increased infrastructure costs due to the Company commencing its transition from legacy data centers, where we owned equipment, towards cloud-based infrastructure and services have been the most significant contributor to the lower gross margin in fiscal 2017. Operating margin: Operating profit for fiscal 2017 was R137.9 million ($10.3 million), compared to R139.1 million ($10.4 million) posted in fiscal 2016. The operating profit margin for fiscal 2017 was 9.0%, compared to the 9.5% posted in fiscal 2016. The decline in the gross profit margin of 2.4% described above was offset by strict cost management which has resulted in the operating profit margin decline being limited to 0.5%. Fiscal 2017 sales and marketing costs represented 11.8% of revenue compared to 13.9% of revenue in fiscal 2016, which are aligned with our estimates contained in our Form 20-F for the fiscal year ended March 31, 2016, where we advised that in future periods we expected these costs to remain relatively constant as a percentage of revenue i.e.11% to 12% of revenue. Adjusted EBITDA: Adjusted EBITDA was R301.6 million ($22.5 million) compared to R277.2 million ($20.7 million) for fiscal 2016. The Adjusted EBITDA margin for fiscal 2017 was 19.6%, compared with the 18.9% in fiscal 2016. Profit for the year and earnings per share: Profit for fiscal 2017 was R121.4 million ($9.1 million), compared to R182.5 million ($13.6 million) in fiscal 2016. Profit for the year includes a net foreign exchange gain of R1.5 million ($0.1 million) before tax. During the fiscal 2016 year, a net foreign exchange gain of R144.0 million ($10.7 million) was recorded which included R143.6 million ($10.7 million) relating to a foreign exchange gain on U.S. Dollar cash reserves. Earnings per diluted ordinary share were 19 South African cents, compared to 23 South African cents in fiscal 2016. For fiscal 2017, the calculation was based on diluted weighted average ordinary shares in issue of 631.8 million, compared to 783.4 million diluted weighted average ordinary shares in issue during fiscal 2016. The diluted weighted average ordinary shares in issue during fiscal 2017 were lower than in fiscal 2016 due to the weighted average impact of both the repurchase of 40.0 million ordinary shares in fiscal 2016 and the repurchase of 200.8 million ordinary shares during the second quarter of fiscal 2017. The Company's effective tax rate for fiscal 2017 was 18.1% in comparison to 36.9% in fiscal 2016. Adjusted earnings for the year and adjusted earnings per share: Adjusted earnings for fiscal 2017, a non-IFRS measure, was R104.7 million ($7.8 million), compared to R87.6 million ($6.5 million) in fiscal 2016. Adjusted earnings per diluted ordinary share were 17 South African cents, compared to 11 South African cents in fiscal 2016. On a U.S. Dollar basis, and using the March 31, 2017 exchange rate of R13.4124 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted profit for fiscal 2017 was $7.8 million, or 31 U.S. cents per diluted ADS, compared to $6.5 million, or 21 U.S. cents per diluted ADS in fiscal 2016. Ignoring the impact of net foreign exchange gains and losses, and related tax consequences, the effective tax rate, which is used in calculating adjusted earnings, was 28.7% compared to 40.1% in fiscal 2016. The recognition of the deferred tax asset in respect of historical tax losses in the Europe segment of R5.3 million ($0.4 million) and a R9.7 million ($0.7 million) benefit from Section 11D research and development allowances, as described in the financial tables, reduced the effective tax rate by 10.2%. Cash flow: The Company generated R323.6 million ($24.1 million) in net cash from operating activities for fiscal 2017 and invested R295.5 million ($22.0 million) in capital expenditures during the period, leading to free cash flow of R28.0 million ($2.1 million) for fiscal 2017, compared with negative free cash flow of R1.4 million ($0.1 million) for fiscal 2016. Capital expenditure payments increased by R53.7 million ($4.0 million) in fiscal 2017 compared to fiscal 2016 due to increased investments in both development costs and in-vehicle devices. The Company utilized R519.6 million ($38.7 million) in financing activities, compared to R223.2 million ($16.6 million) utilized during fiscal 2016. The cash utilized in financing activities in fiscal 2017 includes the repurchase of 200.8 million ordinary shares which resulted in a cash outflow of R473.7 million ($35.3 million) and dividends paid of R53.0 million ($3.9 million). In fiscal 2016, the cash utilized in financing activities included share repurchases of R123.8 million ($9.2 million) and dividends paid of R107.2 million ($8.0 million). An explanation of non-IFRS measures used in this press release is set out in the Non-IFRS financial measures section of this press release. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is provided in the financial tables that accompany this release. Segment commentary for the fiscal year ended March 31, 2017 The segment results below are presented on an integral margin basis. In respect of revenue, this method of measurement entails reviewing the segmental results based on external revenue only. In respect of Adjusted EBITDA (the profit measure identified by the Group), the margin generated by our Central Services Organization ("CSO"), net of any unrealized inter-company profit, is allocated to the geographic region where the external revenue is recorded by our Regional Sales Offices ("RSOs"). CSO continues as a central services organization that wholesales our products and services to our RSOs who, in turn, interface with our end-customers and distributors. CSO is also responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments. CSO's operating expenses are not allocated to each RSO. Each RSO's results reflect the external revenue earned, as well as the Adjusted EBITDA earned (or loss incurred) by each operating segment before the CSO and corporate costs allocations. For further information in this regard please refer to note 3 of the Group financial results for the fiscal year ended March 31, 2017.
Business Outlook MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at the exchange rate of R13.2154 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at May 22, 2017. Based on information as of today, May 25, 2017, the Company is issuing the following financial guidance for the full 2018 fiscal year:
For the first quarter of fiscal 2018 the Company expects subscription revenue to be in the range of R331 million to R336 million ($25.0 million to $25.4 million) which would represent subscription revenue growth of 8.2% to 9.8% compared to the first quarter of fiscal 2017. The key assumptions used in deriving the forecast are as follows:
The forecast is the responsibility of the board of directors and has not been reviewed or reported on by the Company's external auditors. The Company's policy is to give guidance on a quarterly basis, if necessary, and does not update guidance between quarters. The information disclosed in this "Business Outlook" paragraph complies with the disclosure requirements in terms of paragraph 8.38 of the JSE Listings Requirements which deals with profit forecasts. Quarterly Reporting Policy in respect of JSE Listings Requirements Following the listing of the Company's ADSs on the New York Stock Exchange, the Company has adopted a quarterly reporting policy. As a result of such quarterly reporting the Company is, in terms of paragraph 3.4(b)(ix) of the JSE Listings Requirements, not required to publish trading statements in terms of paragraph 3.4(b)(i) to (viii) of the JSE Listings Requirements. Conference Call Information MiX Telematics management will also host a conference call and audio webcast at 8:00 a.m. (Eastern Daylight Time) and 2:00 p.m. (South African Time) on May 25, 2017 to discuss the Company's financial results and current business outlook:
About MiX Telematics Limited MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to customers managing over 622,000 assets in approximately 120 countries. The Company's products and services provide enterprise fleets, small fleets and consumers with solutions for safety, efficiency, risk and security. MiX Telematics was founded in 1996 and has offices in South Africa, the United Kingdom, the United States, Uganda, Brazil, Australia, Romania, Thailand and the United Arab Emirates as well as a network of more than 130 fleet partners worldwide. MiX Telematics shares are publicly traded on the Johannesburg Stock Exchange (JSE: MIX) and MiX Telematics American depositary shares are listed on the New York Stock Exchange (NYSE: MIXT). For more information visit www.mixtelematics.com. Forward-Looking Statements This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements concerning our financial guidance for the first quarter and full year of fiscal 2018, our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, those described under the caption "Risk Factors" in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission (the "SEC") for the fiscal year ended March 31, 2016, as updated by other reports that the Company files with or furnishes to the SEC. The Company assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise. Non-IFRS financial measures Adjusted EBITDA To provide investors with additional information regarding its financial results, the Company has disclosed within this press release, Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA is a non-IFRS financial measure, it does not represent cash flows from operations for the periods indicated and should not be considered an alternative to net income as an indicator of the Company's results of operations or as an alternative to cash flows from operations as an indicator of liquidity. Adjusted EBITDA is defined as the profit for the period before income taxes, net finance income/(costs) including foreign exchange gains/(losses), depreciation of property, plant and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized in-house development costs and intangible assets identified as part of a business combination, share-based compensation costs, transaction costs arising from the acquisition of a business or investigating strategic alternatives, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, insurance reimbursements relating to impaired assets and certain litigation costs. The Company has included Adjusted EBITDA and Adjusted EBITDA margin in this press release because they are key measures that the Company's management and Board of Directors use to understand and evaluate its core operating performance and trends; to prepare and approve its annual budget; and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA margin can provide a useful measure for period-to-period comparisons of the Company's core business. Accordingly, the Company believes that Adjusted EBITDA and Adjusted EBITDA margin provides useful information to investors and others in understanding and evaluating its operating results. The Company's use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of the Company's results as reported under IFRS. Some of these limitations are:
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including operating profit, profit for the year and the Company's other results. Headline Earnings Headline earnings per share is a profit measure required for JSE-listed companies and is calculated in accordance with circular 2/2015 issued by the South African Institute of Chartered Accountants. The profit measure is determined by taking the profit for the year prior to certain separately identifiable re-measurements of the carrying amount of an asset or liability that arose after the initial recognition of such asset or liability net of related tax (both current and deferred) and related non-controlling interest. Adjusted Profit and Adjusted Earnings Per Share Adjusted earnings per share is defined as profit attributable to owners of the parent, MiX Telematics Limited, excluding net foreign exchange gains/(losses) net of tax, divided by the weighted average number of ordinary shares in issue during the period. We have included Adjusted earnings per share in this press release because it provides a useful measure for period-to-period comparisons of the Company's core business by excluding net foreign exchange gains/(losses) from earnings. Accordingly, we believe that Adjusted earnings per share provides useful information to investors and others in understanding and evaluating the Company's operating results. Free cash flow Free cash flow is determined as net cash generated from operating activities less capital expenditure per investing activities. Constant currency and US Dollar financial information Financial information presented in United States Dollars ("U.S. Dollars" and "$") and constant currency financial information presented as part of the segment commentary constitute pro forma financial information under the JSE Listings Requirements. Unless otherwise stated, MiX Telematics has translated U.S. Dollar amounts from South African Rand ("R") at the exchange rate of R13.4124 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at March 31, 2017. Constant currency information has been presented to illustrate the impact of changes in currency rates on the Group's results. The constant currency information has been determined by adjusting the current financial reporting year's results to the prior year's average exchange rates, determined as the average of the monthly exchange rates applicable to the year. The measurement has been performed for each of the Group's currencies, including the U.S. Dollar and British Pound. The constant currency growth percentage has been calculated by utilizing the constant currency results compared to the prior year results. This pro forma financial information is the responsibility of the Group's board of directors and is presented for illustrative purposes. Because of its nature, the pro forma financial information may not fairly present MiX Telematics's financial position, changes in equity, results of operations or cash flows. The pro forma financial information does not constitute pro forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa. An assurance report has been prepared and issued by our auditors, PricewaterhouseCoopers Inc., in respect of the pro forma financial information included in this announcement that is available at the registered office of the Company. The reporting on the pro forma financial information by PricewaterhouseCoopers Inc. has not been carried out in accordance with the auditing standards generally accepted in the United States ("U.S.") and accordingly should not be relied upon by U.S. Investors as if it had been carried out in accordance with those standards or any other standards besides the South African requirements mentioned above. Sponsor Java Capital
(1) Excludes 40,000,000 treasury shares held by MiX Telematics Investments Proprietary Limited ("MiX Investments"), a wholly owned subsidiary of the Group (March 2016: 40,000,000).
NOTES TO SUMMARY CONSOLIDATED FINANCIAL RESULTS 1. Basis of preparation and accounting policies The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated financial statements were derived are in terms of International Financial Reporting Standards and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements, unless otherwise stated. The summary consolidated financial statements do not include all the information and disclosures required in the financial statements and should be read in conjunction with the Group's financial statements for the year ended March 31, 2017, which have been prepared in accordance with IFRS. The Group has adopted all the new, revised or amended accounting pronouncements as issued by the International Accounting Standards Board (IASB) which were effective for the Group from April 1, 2016, none of which had a material impact on the Group. Presentation currency and convenience translation The Group's presentation currency is South African Rand. In addition to presenting these summary consolidated financial results in South African Rand, supplementary information in U.S. Dollars has been prepared for the convenience of users of the Group financial results. Unless otherwise stated, the Group has translated U.S. Dollar amounts from South African Rand at the exchange rate of R13.4124 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at March 31, 2017. The U.S. Dollar figures may not compute as they are rounded independently. The supplementary information prepared in U.S. Dollars constitutes pro forma financial information under the JSE Listings Requirements. This pro forma financial information is the responsibility of the Group's board of directors and is presented for illustrative purposes. Because of its nature, the pro forma financial information may not fairly present MiX Telematics's financial position, changes in equity, results of operations or cash flows. The pro forma financial information does not constitute pro forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa. An assurance report has been prepared and issued by our auditors, PricewaterhouseCoopers Inc., in respect of the pro forma financial information included in this announcement that is available at the registered office of the Company. The reporting on the pro forma financial information by PricewaterhouseCoopers Inc. has not been carried out in accordance with the auditing standards generally accepted in the U.S. and accordingly should not be relied upon by U.S. investors as if it had been carried out in accordance with those standards or any other standards besides the South African requirements mentioned above. The Group's summary consolidated financial statements were prepared under the supervision of the Interim Group Chief Financial Officer, P Dell CA(SA). The results were made available on May 25, 2017. 2. Independent audit The summary consolidated financial statements (excluding the commentary, pro forma financial information presented in U.S. Dollars, basic and diluted earnings and basic and diluted headline earnings information relating to American Depository Shares, the free cash flow reconciliation to net cash generated from operating activities and the disclosure included in notes 5 and 15 (relating to subscriber numbers) and the Unaudited Group financial results for the quarter ended March 31, 2017 hereinafter defined as audited summary consolidated financial statements, for the year ended March 31, 2017 have been derived from the audited consolidated financial statements. The directors of MiX Telematics Limited take full responsibility for the preparation of the summary consolidated financial statements and that the financial information has been correctly derived from the underlying audited consolidated financial statements. These audited summary consolidated financial statements for the year ended March 31, 2017 have been audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the financial statements from which these audited summary consolidated financial statements were derived. A copy of the auditor's report on the audited summary consolidated financial statements and of the auditor's report on the consolidated financial statements are available for inspection at MiX Telematics Limited's registered office, together with the financial statements identified in the respective auditor's reports. The auditor's report does not necessarily report on all of the information contained in these financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together with the accompanying financial information from MiX Telematics Limited's registered office. 3. Segment information Our operating segments are based on the geographical location of our Regional Sales Offices ("RSOs") and also include our Central Services Organization ("CSO"). CSO is our central services organization that wholesales our products and services to our RSOs who, in turn, interface with our end-customers, distributors and dealers. CSO is also responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments. The chief operating decision maker ("CODM") reviews the segment results on an integral margin basis as defined by management. In respect of revenue, this method of measurement entails reviewing the segmental results based on external revenue only. In respect of Adjusted EBITDA (the profit measure identified by the CODM), the margin generated by CSO, net of any unrealized intercompany profit, is allocated to the geographic region where the external revenue is recorded by our RSOs. The costs remaining in CSO relate mainly to research and development of hardware and software platforms, common marketing, product management and technical and distribution support to each of the RSOs. CSO is a reportable segment of the Group because it produces discrete financial information which is reviewed by the CODM and has the ability to generate external revenues. Each RSO's results therefore reflect the external revenue earned, as well as the Adjusted EBITDA earned (or loss incurred) by each operating segment before the remaining CSO and corporate costs allocations. Segment assets are not disclosed as segment information is not reviewed on such a basis by the CODM.
6. Inventory The decline in the inventory balance is primarily attributable to a shift towards bundled deals, in terms of which the related hardware and accessories are accounted for as uninstalled in-vehicle devices under property, plant and equipment. 7. Net Cash Net cash is calculated as being net cash and cash equivalents, excluding restricted cash less interest bearing borrowings. 8. Specific Share Repurchase from related party On April 29, 2016, the Company entered into an agreement (the "share repurchase agreement") with Imperial Holdings Limited ("Imperial Holdings") and Imperial Corporate Services Proprietary Limited ("Imperial Corporate Services"), a wholly owned subsidiary of Imperial Holdings, to repurchase all 200,828,260 of the Company's shares held by Imperial Corporate Services (the "repurchase shares") at R2.36 ($0.18) per repurchase share, for an aggregate repurchase consideration of R474.0 million or $35.3 million (the "repurchase"). At the general meeting held on August 1, 2016, shareholders of the Company approved the repurchase in terms of the JSE Listings Requirements and the South African Companies Act, No. 71 of 2008, at which point the transaction was accounted for in terms of IFRS. The repurchase was implemented on August 29, 2016. Subsequent to the repurchase, the shares were delisted and now form part of the authorized unissued share capital of the Company. The financial effect of the transaction is as follows:
9. Dividends During fiscal 2016 the Board decided to reintroduce the Company's policy of paying regular dividends. Dividend payments are currently considered on a quarter-by-quarter basis. The following dividends were declared by the Company in fiscal 2017 (excluding dividends paid on treasury shares):
The following dividends were declared by the Company in fiscal 2016:
10. Fair values of financial assets and liabilities measured at amortized cost The fair values of trade and other receivables, restricted cash, cash and cash equivalents, trade payables, accruals, bank overdrafts and other payables approximate their book values as the impact of discounting is not considered material due to the short-term nature of both the receivables and payables. 11. Contingencies Service agreement In terms of an amended network services agreement with Mobile Telephone Networks Proprietary Limited ("MTN"), MTN is entitled to claw back payments from MiX Telematics Africa Proprietary Limited in the event of early cancellation of the agreement or certain base connections not being maintained over the term of the agreement. No connection incentives will be received in terms of the amended network services agreement. The maximum potential liability under the arrangement is R48.4 million ($3.6 million). No loss is considered probable under this arrangement. 12. Provisions and trade and other payables Provisions During March 2017, restructuring plans were implemented by the Europe and Middle East and Australasia segments. The total cost of the restructuring plans is expected to approximate R15.0 million ($1.1 million). These costs consist of estimated staff costs in respect of affected employees. By March 31, 2017, R2.7 million ($0.2 million) of the expected restructuring costs had been incurred and the remaining provision of R11.5 million ($0.9 million) is expected to be fully utilized over the next 12 months. Trade and other payables The increase in trade and other payables is primarily attributable to an increase in accruals of R20.8 million ($1.6 million) relating to employee and third party costs. 13. Change in estimate of useful lives of product development costs capitalized During fiscal 2017 the CSO segment extended the useful lives of certain projects where on average the useful lives were increased from 4.9 years to 7.5 years. The extension of the useful lives resulted in a R9.0 million ($0.7 million) reduction in the product development amortization expense relative to what it would have been in fiscal 2017 had the change not occurred. R2.0 million ($0.1 million), R1.4 million ($0.1 million), R1.6 million ($0.1 million), R1.2 million ($0.1 million), R0.9 million ($0.1 million), R0.9 million ($0.1 million), R0.8 million ($0.1 million) and R0.2 million ($0.01 million) of this amortization reduction is expected to be charged to the income statement in the 2018, 2019, 2020, 2021, 2022, 2023, 2024 and 2025 fiscal years, respectively. 14. Taxation Section 11D Allowances relating to tax assets recognized MiX Telematics International Proprietary Limited ("MiX International"), a subsidiary of the Group, historically claimed a 150% allowance for research and development spend in terms of section 11D ("S11D") of the South African Income Tax Act No. 58 of 1962 ("the Act"). As of October 1, 2012, the legislation relating to the allowance was amended. The amendment requires pre-approval of development project expenditure on a project specific basis by the South African Department of Science and Technology ("DST") in order to claim a deduction of the additional 50% over and above the expenditure incurred (150% allowance). Since the amendments to S11D of the Act, MiX International had been claiming the 150% deduction resulting in a recognized tax benefit. MiX International has complied with the amended legislation by submitting all required documentation to the DST in a timely manner, commencing in October 2012. In June 2014, correspondence was received from the DST indicating that the research and development expenditure on certain projects for which the 150% allowance was claimed in the 2013 and 2014 fiscal years did not, in the DST's opinion, constitute qualifying expenditure in terms of the Act. MiX International, through due legal process, had formally requested a review of the DST's decision not to approve this expenditure. While approvals were obtained for a portion of this project expenditure as a result of a further review performed by the DST in February 2017, we continue to seek approval for the remaining projects and as such the legal process is ongoing. In addition to the approvals that were subject to the legal process, further approvals have been obtained for certain project expenditure, relating to both current and prior financial years. However, at period end, an uncertain tax position remains in relation to S11D deductions in respect of which approvals remain pending. Since the introduction of the DST pre-approval process, the Group has recognized in the income statement cumulative tax incentives in addition to the incurred cost of R18.2 million ($1.4 million) in respect of S11D deductions, of which R9.7 million ($0.7 million) was recognized in the current financial year. R15.4 million ($1.1 million) relates to deductions in respect of development project expenditure which has been approved by the DST. R2.8 million ($0.2 million) relates to an uncertain tax position in respect of projects where approvals have not yet been received from the DST. If the Group is unsuccessful in this regard, the Group will not recover the R2.8 million ($0.2 million) raised at March 31, 2017. Deferred tax asset on assessed loss During fiscal 2017 the Group raised a deferred tax asset of R5.3 million ($0.4 million) in respect of a portion of the tax losses available in the Europe segment. These tax losses were incurred in prior years. Since fiscal 2015, the entity started returning to profitability resulting in a re-assessment of its ability to utilize the tax losses and the recognition of a deferred tax asset for a portion thereof. Taxation receivable The taxation receivable includes amounts due of R14.9 million ($1.1 million) in respect of S11D tax incentives at March 31, 2017. Deferred tax liability The decline in the deferred tax liability is primarily as a result of the effect of exchange rate movements.
The Group's functional and presentation currency is South African Rand. The strengthening of the closing rate of the South African Rand against the functional currencies of the Group's foreign operations contributed significantly to the decrease in assets and liabilities and the resulting foreign currency translation reserve reduction of R80.9 million ($6.0 million) since March 31, 2016. 16. Changes to the Board With effect from June 1, 2016, Ian Jacobs was appointed as an independent non-executive director to the Board of Directors. With effect from August 18, 2016, Mark Lamberti and George Nakos (non-executive alternate director to Mark Lamberti) resigned from the Board of Directors in accordance with the terms of the specific repurchase of shares from Imperial Corporate Services (note 8). With effect from October 3, 2016, Robin Frew was appointed Chairman of the Board of Directors. Richard Bruyns, the outgoing Chairman, remained on the Board and was appointed to the new role of Lead Independent non-executive Director. Richard Bruyns has also taken on the role of Chairman of the Remuneration and Nomination Committee. With effect from February 9, 2017, Paul Dell was appointed to the Board of Directors as Interim Group Chief Financial Officer of the Company. Paul Dell replaced Megan Pydigadu who tendered her resignation as Group Chief Financial Officer and member of the Board on November 15, 2016 to pursue a new career opportunity in a non-competitive industry. 17. Changes to the Company Secretary With effect from January 3, 2017, Java Capital Trustees and Sponsors Proprietary Limited resigned as company secretary to the Company and Jennifer de Vos was appointed as the new company secretary. With effect from May 17, 2017, Jennifer de Vos resigned as company secretary to the Company and Java Capital Trustees and Sponsors Proprietary Limited was appointed as the new company secretary on an interim basis with immediate effect, until a new company secretary is appointed. 18. Events after the reporting period Other than the items below, the directors are not aware of any matter material or otherwise arising since March 31, 2017 and up to the date of this report, not otherwise dealt with herein. Share Buy Back Shareholders are advised that the MiX Telematics Board has approved, on May 23, 2017, a share repurchase programme of up to R270 million ($20.1 million) under which the Company may repurchase its ordinary shares, including American Depositary Shares ("ADSs"). The Company may repurchase its shares from time to time in its discretion through open market transactions and block trades, based on ongoing assessments of the capital needs of the Company, the market price of its securities and general market conditions. This share repurchase programme may be discontinued at any time by the Board of Directors, and the Company has no obligation to repurchase any amount of its securities under the programme. The repurchase programme will be funded out of existing cash resources. The repurchase programme will extend from May 29, 2017 unless and until discontinued by the Directors or the date when the R270 million ($20.1 million) limit is exhausted. Any repurchases effected under the share repurchase programme will be in accordance with the general authority granted by special resolution of the Company's shareholders passed at the Company's annual general meeting held on September 14, 2016. Subject to the passing of a special resolution at the Company's annual general meeting to be held on September 20, 2017, the repurchase programme will continue to be effected under the general authority granted by shareholders at that meeting. Should the special resolution, granting the general authority to repurchase shares, not be passed at the Company's annual general meeting to be held on September 20, 2017, the repurchase programme will end on September 20, 2017. Share repurchases may be made by the Company from time to time in open market transactions at prevailing market prices and in accordance with the Company's insider trading policy. With respect to repurchases of ADSs on the New York Stock Exchange, the Company will effect such transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. In accordance with JSE listing rules, repurchases effected on the JSE will be at a price not greater than 10% above the volume weighted average trading price of the Company's shares on the JSE over the five business days immediately preceding any particular repurchase. Any repurchases made are subject to the Company performing the solvency and liquidity tests required by the Companies Act in South Africa. Dividend declared On May 23, 2017 the board declared in respect of the fourth quarter of fiscal 2017 which ended on March 31, 2017, a dividend of 2 South African cents (0.1 U.S. cents) per ordinary share to be paid on June 19, 2017.
Share certificates may not be dematerialized or rematerialized between Tuesday, June 13, 2017 and Thursday, June 15, 2017, both days inclusive. Shareholders are advised of the following additional information:
Annual general meeting The annual general meeting of shareholders of MiX Telematics Limited will be held at Matrix Corner, Howick Close, Waterfall Park, Midrand, Johannesburg on Wednesday, September 20, 2017 at 11:30 a.m. (South African time). For South African shareholders, the last day to trade in order to be eligible to participate in and vote at the annual general meeting is Tuesday, September 12, 2017 and the record date for voting purposes is Friday, September 15, 2017. Taxation As advised in our March 2016 Annual Report on Form 20-F as filed with the SEC, the Group's effective tax rate may be impacted by certain non-deductible/(non-taxable) foreign exchange movements. This has had a significant impact on our tax rate in fiscal 2017. The impact of these foreign exchange movements and related tax effects is shown below:
Excluding the impact of foreign exchange gains and losses and its related tax consequences, the effective tax rate is 11.4% lower than fiscal 2016.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL RESULTS 1. Basis of preparation and accounting policies Financial results for the fourth quarter of fiscal year 2017 Further to the Group's financial results for the year ended March 31, 2017, additional financial information in respect of the fourth quarter of fiscal year 2017 has been presented together with the relevant comparative information. The quarterly information comprises a condensed consolidated income statement, a reconciliation of adjusted earnings to profit for the period attributable to owners of the parent (note 3), a reconciliation of Adjusted EBITDA to profit for the period (note 4) and a reconciliation of Adjusted EBITDA margin to profit for the period margin (note 5) and other financial and operating data (note 6). The accounting policies used in preparing the financial results for the fourth quarter of fiscal year 2017 are consistent in all material respects with those applied in the preparation of the Group's annual financial statements for the year ended March 31, 2016. The quarterly financial results have not been audited or reviewed by the Group's external auditors. The condensed unaudited Group quarterly financial results do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended March 31, 2017, which have been prepared in accordance with IFRS. 2. Presentation currency and convenience translation The Group's presentation currency is South African Rand. In addition to presenting these condensed consolidated financial results for the quarter ended March 31, 2017 in South African Rand, supplementary information in U.S. Dollars has been prepared for the convenience of users of this report. Unless otherwise stated, the Group has translated U.S. Dollar amounts from South African Rand at the exchange rate of R13.4124 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at March 31, 2017. The U.S. Dollar figures may not compute as they are rounded independently.
7. Development costs historical data The table below sets out development costs incurred and capitalized for each of the last eight quarters including the period ended March 31, 2017.
For more information please visit our website at: www.mixtelematics.com MiX Telematics Limited (Incorporated in the Republic of South Africa) (Registration number: 1995/013858/06) JSE share code: MIX NYSE code: MIXT ISIN: ZAE000125316 ("MiX Telematics" or "the Company" or "the Group") Registered office Matrix Corner, Howick Close, Waterfall Park, Midrand Directors RA Frew* (Chairman), SB Joselowitz (CEO), EN Banda*, CH Ewing*, SR Bruyns* (Lead Independent Director), P Dell, I Jacobs*, CWR Tasker, AR Welton* * Non-executive Company secretary Java Capital Trustees and Sponsors Proprietary Limited Auditors PricewaterhouseCoopers Inc. Sponsor Java Capital May 25, 2017 View source version on businesswire.com: http://www.businesswire.com/news/home/20170525005120/en/ |