Market Overview

MiX Telematics Announces Financial Results for First Quarter of Fiscal Year 2019

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An explanation of non-IFRS measures used in this press release is set
out in the Non-IFRS financial measures section. A reconciliation
of these non-IFRS measures to the most directly comparable IFRS measures
is provided in the financial tables below, which accompany this press
release.

References in this announcement to "R" are to South African
Rand and references to "U.S. Dollars" and "$" are to
United States Dollars. Unless otherwise stated, MiX Telematics has
translated U.S. Dollar amounts from South African Rand at the exchange
rate of R13.7255 per $1.00, which was the R/$ exchange rate reported by
Oanda.com as of June 30, 2018.

First Quarter Highlights:

  • Subscription revenue of R390 million ($28.4 million), an increase
    of 18.4% year over year, on a constant currency basis
  • Net subscriber additions of over 15,000 bringing the total base to
    691,922 subscribers, up 11% year over year
  • Operating profit of R68 million ($4.9 million), up 58% year over
    year
  • Adjusted EBITDA of R126 million ($9.2 million), up 35% year over
    year
  • Adjusted EBITDA margin of 27.7%, up 460 basis points compared to
    the prior year quarter

MiX 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 first quarter of fiscal year 2019, which ended June 30, 2018.

"The first quarter marked a very strong start to the fiscal year.
Subscription revenue grew more than 18% on a constant currency basis and
adjusted EBITDA margin of close to 28% expanded over 450 basis points
year-over-year," said Stefan Joselowitz, Chief Executive Officer of MiX
Telematics. "Our results were driven by ongoing robust demand globally
from our premium fleet customers, across all verticals. MiX is well
positioned to deliver against our long-term goals given our
differentiated portfolio of products, a growing pipeline of global
opportunities, and multiple levers to generate further margin accretion."

Financial performance for the three months
ended June 30, 2018

Subscription revenue: Subscription revenue was R390.4 million
($28.4 million), an increase of 16.4% compared with R335.4 million
($24.4 million) for the first quarter of fiscal year 2018. Subscription
revenue increased by 18.4% year over year on a constant currency basis.
Subscription revenue benefited from an increase of over 66,000
subscribers, representing an increase in subscribers of 10.6% from July
2017 to June 2018. Subscription revenue also benefited from an increase
in average revenue per user.

Total revenue: Total revenue was R456.8 million ($33.3 million),
an increase of 12.6% compared to R405.7 million ($29.6 million) for the
first quarter of fiscal year 2018. Total revenue increased by 14.4% year
over year on a constant currency basis. Hardware and other revenue was
R66.4 million ($4.8 million), a decrease of 5.5% compared to
R70.3 million ($5.1 million) for the first quarter of fiscal year 2018.

Gross margin: Gross profit was R305.8 million ($22.3 million), as
compared to R271.5 million ($19.8 million) for the first quarter of
fiscal year 2018. Gross profit margin was 66.9%, consistent with the
prior year's first quarter.

Operating margin: Operating profit was R67.7 million ($4.9
million), compared to R42.9 million ($3.1 million) for the first quarter
of fiscal year 2018. Operating profit margin was 14.8%, compared to
10.6% for the prior year's first quarter. The margin expansion was
attributable primarily to revenue growth leveraging our fixed overhead
and ongoing cost management initiatives. Operating expenses of
R238.0 million ($17.3 million) have increased by R6.5 million ($0.5
million) since the first quarter of fiscal 2018. Despite the 12.6%
revenue increase described above, the increase in operating costs was
limited to 2.8%.

Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R126.4
million ($9.2 million) compared to R93.9 million ($6.8 million) for the
first quarter of fiscal year 2018. Adjusted EBITDA margin, a non-IFRS
measure, for the first quarter of fiscal year 2019 was 27.7%, compared
to 23.1% for the comparative prior year period. The company reported a
28.7% Adjusted EBITDA margin in the fourth quarter of fiscal 2018,
including a 1.3% uplift related to hardware sales not repeated in the
current quarter.

Profit for the period and earnings per share: Profit for the
period was R14.4 million ($1.1 million), compared to R33.9 million
($2.5 million) for the first quarter of fiscal year 2018. Earnings per
diluted ordinary share were 2 South African cents, compared to 6 South
African cents in the first quarter of fiscal year 2018. For the first
quarter of fiscal year 2019, the calculation was based on diluted
weighted average ordinary shares in issue of 586.6 million compared to
567.0 million diluted weighted average ordinary shares in issue during
the first quarter of fiscal year 2018.

Profit for the period includes a net foreign exchange loss of R0.2
million ($0.02 million) before tax. A net foreign exchange loss of R5.0
million ($0.4 million) was recorded in the first quarter of fiscal year
2018. The Company's effective tax rate for the quarter was 78.7%,
compared to 14.0% for the first quarter of fiscal year 2018. Ignoring
the impact of net foreign exchange gains and losses, and related tax
consequences, the tax rate which is used in determining adjusted
earnings below, was 28.4% compared to 30.8% in the first quarter of
fiscal year 2018. The tax impact in respect of foreign exchange
movements is set out in the reconciliation of adjusted earnings in the
financial tables which accompany this press release.

On a U.S. Dollar basis, and using the June 30, 2018 exchange rate of
R13.7255 per U.S. Dollar, and at a ratio of 25 ordinary shares to one
American Depositary Share ("ADS"), profit for the period was $1.1
million, or 4 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 R48.7 million
($3.6 million), compared to R30.7 million ($2.2 million) for the first
quarter of fiscal year 2018 and excludes a net foreign exchange loss of
R0.2 million ($0.02 million). During the first quarter of fiscal year
2018, a net foreign exchange loss of R5.0 million ($0.4 million) was
recorded. Adjusted earnings per diluted ordinary share, also a non-IFRS
measure, were 8 South African cents, compared to 5 South African cents
in the prior year comparative period.

On a U.S. Dollar basis, and using the June 30, 2018 exchange rate of
R13.7255 per U.S. Dollar, and at a ratio of 25 ordinary shares to one
ADS, adjusted earnings for the period was $3.6 million, or 15 U.S. cents
per diluted ADS.

Statement of financial position and cash flow: At June 30, 2018,
the Company had R225.6 million ($16.4 million) of net cash and cash
equivalents, compared to R290.5 million ($21.2 million) at March 31,
2018. The Company generated R22.8 million ($1.7 million) in net cash
from operating activities for the three months ended June 30, 2018 and
invested R78.3 million ($5.7 million) in capital expenditures during the
quarter, including investments in in-vehicle devices of R57.3 million
($4.2 million), leading to negative free cash flow, a non-IFRS measure,
of R55.5 million ($4.0 million) for the first quarter of fiscal year
2019, compared with negative free cash flow of R64.0 million ($4.7
million) for the first quarter of fiscal year 2018. The Company utilized
R19.1 million ($1.4 million) in financing activities in the first
quarter of fiscal 2019, which included dividends paid of R16.9 million
($1.2 million). The Company utilized R30.0 million ($2.2 million) in
financing activities in the first quarter of fiscal 2018. The cash
utilized in financing activities in the first quarter of fiscal 2018
included the repurchase of 5.0 million ordinary shares, which resulted
in a cash outflow of R18.7 million ($1.4 million) and dividends paid of
R11.3 million ($0.8 million).

Business Outlook

MiX Telematics has translated U.S. Dollar amounts in this Business
Outlook paragraph from South African Rand at the exchange rate of
R13.1760 per $1.00, which was the R/$ exchange rate reported by
Oanda.com as of July 30, 2018.

Based on information as of today, August 2, 2018, the Company is issuing
the following financial guidance for the full 2019 fiscal year:

  • Subscription revenue - R1,624 million to R1,645 million ($123.3
    million to $124.8 million), which would represent subscription revenue
    growth of 13.2% to 14.7% compared to fiscal year 2018. On a constant
    currency basis, this would represent subscription revenue growth of
    13.5% to 15.0%. This constant currency growth is unchanged from our
    previous guidance.
  • Total revenue - R1,864 million to R1,895 million ($141.5 million to
    $143.8 million), which would represent revenue growth of 8.8% to 10.7%
    compared to fiscal year 2018. On a constant currency basis, this would
    represent revenue growth of 9.1% to 10.9%. This constant currency
    growth is unchanged from our previous guidance.
  • Adjusted EBITDA - R526 million to R545 million ($39.9 million to $41.4
    million), which would represent an increase in Adjusted EBITDA of
    19.0% to 23.3% compared to fiscal year 2018.
  • Adjusted earnings per diluted ordinary share of 31.2 to 33.2 South
    African cents based on 587 million diluted ordinary shares in issue,
    and based on an effective tax rate of 28% to 31%. At a ratio of 25
    ordinary shares to one ADS, this equates to adjusted earnings per
    diluted ADS of 59 to 63 U.S. cents.

For the second quarter of fiscal year 2019 the Company expects
subscription revenue to be in the range of R401 million to R406 million
($30.4 million to $30.8 million) which would represent subscription
revenue growth of 14.8% to 16.2% compared to the second quarter of
fiscal year 2018. On a constant currency basis, this would represent
subscription revenue growth of 15.1% to 16.6%.

The key assumptions used in deriving the forecast are as follows:

  • Growth in subscription revenue and subscribers are based on expected
    growth rates related to market conditions and takes into account
    growth rates achieved previously.
  • Achieving hardware sales according to expectations. Hardware sales are
    dependent on the volumes of bundled solutions selected by customers.
  • An average forecast exchange rate for the 2019 fiscal year of R13.0900
    per $1.00.

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" section
complies with the disclosure requirements of paragraph 8.38 of the JSE
Listings Requirements, which addresses profit forecasts.

Quarterly Reporting Policy in respect of JSE
Listings Requirements

As a NYSE listed company, we have 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 August 2, 2018 to discuss the Company's financial
results and current business outlook:

  • The live webcast of the call will be available at the "Investor
    Information" page of the Company's website, http://investor.mixtelematics.com.
  • To access the call, dial +1-888-394-8218 (within the United States) or
    0-800-980-520 (within South Africa) or +1-323-701-0225 (outside of the
    United States). The conference ID is 7581568.
  • A replay of this conference call will be available for a limited time
    at +1-844-512-2921 (within the United States) or +1-412-317-6671
    (within South Africa or outside of the United States). The replay
    conference ID is 7581568.
  • A replay of the webcast will also be available for a limited time at http://investor.mixtelematics.com.

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
691,000 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 second quarter and full year of fiscal 2019, 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, 2018, 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 and Adjusted EBITDA
margin are non-IFRS financial measures, and they do 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 and right-of-use assets, amortization of intangible
assets including capitalized in-house development costs and intangible
assets identified as part of a business combination, share-based
compensation costs, 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 our results as reported under
IFRS. Some of these limitations are:

  • although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized may have to be replaced in the
    future, and Adjusted EBITDA does not reflect cash capital expenditure
    requirements for such replacements or for new capital expenditure
    requirements;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for,
    the Company's working capital needs;
  • Adjusted EBITDA does not consider the potentially dilutive impact of
    equity-based compensation;
  • Adjusted EBITDA does not reflect tax payments or the payment of lease
    liabilities that may represent a reduction in cash available to the
    Company; and
  • other companies, including companies in our industry, may calculate
    Adjusted EBITDA differently, which reduces its usefulness as a
    comparative measure.

Because of these limitations, you should consider Adjusted EBITDA
alongside other financial performance measures, including operating
profit, profit for the period and the Company's other results.

Adjusted Earnings 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.

The Company has 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, the Company believes
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 expenditures for investing activities. The
Company believes that free cash flow provides useful information to
investors and others in understanding and evaluating the Company's cash
flows as it provides detail of the amount of cash the Company generates
or utilizes after accounting for all capital expenditures including
investments in in-vehicle devices and development expenditure.

August 2, 2018

JSE sponsor
Java Capital Trustees and Sponsors Proprietary
Limited

MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
Figures are in thousands unless otherwise stated 2018 2017 2018 2017
Unaudited   Unaudited Unaudited   Unaudited
Revenue 456,822 405,662 33,283 29,555
Cost of sales (151,062 ) (134,132 ) (11,006 ) (9,772 )
Gross profit 305,760 271,530 22,277 19,783
Other (expenses)/income - net (12 ) 2,943 (1 ) 214
Operating expenses (238,024 ) (231,559 ) (17,342 ) (16,870 )
-Sales and marketing (46,856 ) (48,979 ) (3,414 ) (3,568 )
-Administration and other charges (191,168 ) (182,580 ) (13,928 ) (13,302 )
Operating profit 67,724 42,914 4,934 3,127
Finance income/(costs) - net 155   (3,485 ) 11   (254 )
-Finance income 2,678 2,001 195 146
-Finance costs (2,523 ) (5,486 ) (184 ) (400 )
Profit before taxation 67,879 39,429 4,945 2,873
Taxation (53,445 ) (5,523 ) (3,894 ) (402 )
Profit for the period 14,434   33,906   1,051   2,471  
 
Attributable to:
Owners of the parent 14,434 33,837 1,051 2,466
Non-controlling interests *   69   *   5  
14,434   33,906   1,051   2,471  
 

* Amounts less than R1,000/$1,000

 

MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
  South African Rand   United States Dollar
June 30,   March 31, June 30,   March 31,
Figures are in thousands unless otherwise stated 2018 2018 2018 2018
Unaudited Audited Unaudited Unaudited
ASSETS
Non-current assets
Property, plant and equipment 433,474 334,038 31,582 24,337
Intangible assets 924,645 898,527 67,367 65,464
Deferred tax assets 38,867 40,717 2,832 2,967
Capitalized commission assets 48,951     3,566    
Total non-current assets 1,445,937   1,273,282   105,347   92,768  
 
Current assets
Assets classified as held for sale (Note 7) 17,058 17,058 1,243 1,243
Inventory 67,603 57,013 4,925 4,154
Trade and other receivables 379,577 286,406 27,655 20,867
Taxation 21,906 30,373 1,596 2,213
Restricted cash 22,178 20,935 1,616 1,525
Cash and cash equivalents 256,374   308,258   18,679   22,459  
Total current assets 764,696   720,043   55,714   52,461  
       
Total assets 2,210,633   1,993,325   161,061   145,229  
 
EQUITY
Stated capital 846,405 846,405 61,667 61,667
Other reserves 35,916 (51,614 ) 2,617 (3,760 )
Retained earnings 744,538   722,380   54,245   52,631  
Equity attributable to owners of the parent 1,626,859 1,517,171 118,529 110,538
Non-controlling interest 12   10   1   1  
Total equity 1,626,871   1,517,181   118,530   110,539  
 
LIABILITIES
Non-current liabilities
Deferred tax liabilities 123,649 82,658 9,009 6,022
Provisions 2,322 2,132 169 155
Recurring commission liability 4,045 295
Capitalized lease liability 31,154     2,270    
Total non-current liabilities 161,170   84,790   11,743   6,177  
 
Current liabilities
Trade and other payables 351,075 350,519 25,576 25,538
Capitalized lease liability 10,867 792
Taxation 5,154 2,832 376 206
Provisions 24,715 20,283 1,801 1,478
Bank overdraft 30,781   17,720   2,243   1,291  
Total current liabilities 422,592   391,354   30,788   28,513  
       
Total liabilities 583,762   476,144   42,531   34,690  
       
Total equity and liabilities 2,210,633   1,993,325   161,061   145,229  
 

MIX TELEMATICS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
Figures are in thousands unless otherwise stated 2018 2017 2018 2017
Unaudited Unaudited Unaudited Unaudited
Cash flows from operating activities
Cash generated from operations 22,027 20,562 1,605 1,498
Net financing income 1,569 1,511 114 110
Taxation paid (838 ) (3,749 ) (61 ) (273 )
Net cash generated from operating activities 22,758   18,324   1,658   1,335  
 
Cash flows from investing activities
Capital expenditure (78,306 ) (82,344 ) (5,705 ) (5,999 )
Proceeds on sale of property, plant and equipment 41 581 3 42
Decrease in restricted cash 305 35 22 3
Increase in restricted cash (728 ) (603 ) (53 ) (44 )
Net cash used in investing activities (78,688 ) (82,331 ) (5,733 ) (5,998 )
 
Cash flows from financing activities
Share repurchase (Note 9) (18,666 ) (1,360 )
Dividends paid to Company's shareholders (Note 10) (16,906 ) (11,292 ) (1,232 ) (823 )
Payment of lease liability (2,194 )   (160 )  
Net cash used in financing activities (19,100 ) (29,958 ) (1,392 ) (2,183 )
Net decrease in cash and cash equivalents (75,030 ) (93,965 ) (5,467 ) (6,846 )
Net cash and cash equivalents at the beginning of the period 290,538 356,333 21,168 25,961
Exchange gains/(losses) on cash and cash equivalents 10,085   (5,209 ) 735   (379 )
Net cash and cash equivalents at the end of the period 225,593   257,159   16,436   18,736  
 

MIX TELEMATICS LIMITED
OTHER FINANCIAL AND OPERATING DATA
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
Figures are in thousands except for subscribers 2018 2017 2018 2017
Unaudited Unaudited Unaudited Unaudited
Total revenue 456,822   405,662   33,283   29,555
Subscription revenue 390,389 335,367 28,443 24,434
Hardware revenue 56,531 56,972 4,119 4,151
Driver training, installation and other revenue 9,902   13,323   721   970
Adjusted EBITDA 126,442 93,880 9,211 6,840
Cash and cash equivalents 256,374 290,161 18,679 21,140
Net cash (1) 225,593 257,159 16,436 18,736
Capital expenditure incurred 82,744   79,124   6,029   5,764
Property, plant and equipment expenditure 64,123 54,606 4,672 3,978
Intangible asset expenditure 18,621   24,518   1,357   1,786
Total development costs incurred 34,108   33,175   2,485   2,418
Development costs capitalized 17,245 16,656 1,256 1,214
Development costs expensed within administration and other charges 16,863   16,519   1,229   1,204
Subscribers (number) 691,922 625,602 691,922 625,602
 

(1) Net cash is calculated as being net cash
and cash equivalents, excluding restricted cash.

 

Notes to condensed consolidated income statement, statement of
financial position, statement of cash flows and other financial and
operating data

1. Accounting policies
The condensed consolidated statement
of financial position, income statement and statement of cash flows
included in these financial results have been prepared in accordance
with International Financial Reporting Standards ("IFRS") accounting
policies. The accounting policies are consistent in all material
respects with those applied in the preparation of the consolidated
financial statements for the year ended March 31, 2018 except for the
adoption of IFRS 9 Financial Instruments ("IFRS 9"), IFRS 15 Revenue
from Contracts with Customers
("IFRS 15") and IFRS 16 Leases ("IFRS
16") during the quarter under review.

Adoption IFRS 9, IFRS 15 and IFRS 16:
IFRS 9 is effective
for the Group from April 1, 2018.

IFRS 15 permits a modified retrospective cumulative catch-up approach
for the adoption, which the Group has decided to apply. Under this
approach, the Group has recognized transitional adjustments in retained
earnings on the date of initial application (i.e. April 1, 2018),
without restating the comparative period. Under the practical expedient,
the new requirements were only applied to contracts that were not
completed as of April 1, 2018.

IFRS 16 applies to annual reporting periods beginning on or after
January 1, 2019, but can be early adopted. Given that the Group applied
IFRS 15 from April 1, 2018, the Group decided to early adopt IFRS 16
from this date.

The Group has chosen to apply the ‘simplified approach' on adoption of
IFRS 16 that includes certain relief related to the measurement of the
right-of-use asset and the lease liability at April 1, 2018, rather than
full retrospective application. Furthermore, the ‘simplified approach'
does not require a restatement of comparatives.

Refer to Note 2.1.1.2 of our consolidated financial statements for the
year ended March 31, 2018 for further details on the adoption of the
above mentioned standards.

Summary of the impact at April 1, 2018 of adopting IFRS 9, IFRS 15
and IFRS 16:

        South African Rand     United States Dollar
IFRS 9 Assets       (R3.2 million)     ($0.2 million)
Trade and other receivables (R3.2 million)     ($0.2 million)
   
IFRS 15 Assets R46.5 million     $3.4 million
Capitalized commission assets R45.3 million $3.3 million
Trade and other receivables (1) R1.2 million     $0.1 million
 
IFRS 16 Assets R29.9 million     $2.1 million
Property, plant and equipment R30.6 million $2.2 million
Trade and other receivables (2) (R0.7 million)     ($0.1 million)
       
Total Assets R73.2 million     $5.3 million
 
IFRS 15 Liabilities R8.7 million     $0.6 million
Recurring commission liability (non-current) R4.0 million $0.3 million
Trade and other payables (3) R4.7 million     $0.3 million
 
IFRS 16 Liabilities R31.9 million     $2.3 million
Capitalized lease liability (non-current) R23.3 million $1.7 million
Capitalized lease liability (current) R8.8 million $0.6 million
Trade and other payables (2) (R0.2 million)     ($0.01 million)
 
Deferred tax liabilities R7.9 million     $0.6 million
Total liabilities R48.5 million     $3.5 million
       
Net increase in equity R24.7 million     $1.8 million

(1)

 

Contract assets related to fixed escalations.

(2)

Reversal of lease prepayment and lease accruals under IAS 17
Leases. These have been reflected in the measurement of the lease

liability under IFRS 16.

(3)

Includes the current portion of additional recurring commission
liability of R2.9 million ($0.2 million) and increase in
liabilities related to contracts with customers due to significant
financing adjustments of R1.8 million ($0.1 million).

 

Summary of the impact on the first quarter of fiscal 2019 of adopting
IFRS 9, IFRS 15 and IFRS 16:

Other than a R1.8 million ($0.1
million) increase in finance costs primarily as a result of IFRS 15
significant financing activity interest expense and IFRS 16 capitalized
lease liability interest, the impact on each line item in the condensed
consolidated income statement for the first quarter of fiscal 2019 was
not material.

The only adjustment to the statement of cash flows was an outflow of
R2.2 million ($0.2 million) in respect of lease liability payments being
recorded in cash flows from financing activities as a result of the
adoption of IFRS 16. This outflow was previously accounted for as an
operating lease expense and included under cash generated from
operations.

The results have not been audited or reviewed by the Group's external
auditors.

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 June 30, 2018 in South African Rand, supplementary
information in U.S. Dollars has been prepared for the convenience of
users of these financial results. Unless otherwise stated, the Group has
translated U.S. Dollar amounts from South African Rand at the exchange
rate of R13.7255 per $1.00, which was the R/$ exchange rate reported by
Oanda.com as of June 30, 2018. The U.S. Dollar figures may not compute
as they are rounded independently.

3. Earnings per share/ADS data
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
2018 2017 2018 2017
  Unaudited Unaudited Unaudited Unaudited
Earnings per share
Basic (R/$) 0.03 0.06 # #
Diluted (R/$) 0.02 0.06 # #
Earnings per American Depositary Share
Basic (R/$) 0.64 1.50 0.05

0.11

 

Diluted (R/$) 0.62 1.49 0.04 0.11
Adjusted earnings per share
Basic (R/$) 0.09 0.05 0.01 #
Diluted (R/$) 0.08 0.05 0.01 #
Adjusted earnings per American Depositary Share
Basic (R/$) 2.16 1.36 0.16 0.10
Diluted (R/$) 2.08 1.35 0.15 0.10
Ordinary shares ('000)(1)
In issue at June 30 564,625 558,499 564,625 558,499
Weighted average 564,465 562,552 564,465 562,552
Diluted weighted average 586,627 567,033 586,627 567,033
American Depositary Shares ('000)(1)
In issue at June 30 22,585 22,340 22,585 22,340
Weighted average 22,579 22,502 22,579 22,502
Diluted weighted average 23,465 22,681 23,465 22,681
#   Amounts less than $0.01
(1) June 30, 2018 figure excludes 40,000,000 treasury shares held by
MiX Telematics Investments Proprietary Limited ("MiX Investments"),
a wholly owned subsidiary of the Group. June 30, 2017 excluded
40,000,000 treasury shares held by MiX Investments and 5,015,660
shares repurchased by the Company under the share repurchase program
(Note 9).
 

4. Reconciliation of Adjusted Earnings
Reconciliation of Adjusted Earnings to Profit for the Period
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
Figures are in thousands unless otherwise stated 2018 2017 2018 2017
  Unaudited Unaudited Unaudited Unaudited
Profit for the period attributable to owners of the parent 14,434 33,837 1,051 2,466
Net foreign exchange losses 231 4,992 17 364
Income tax effect on the above component 34,082   (8,161 ) 2,484   (595 )
Adjusted earnings attributable to owners of the parent 48,747   30,668   3,552   2,235  
 
Reconciliation of earnings per share to adjusted earnings per
share
Basic earnings per share (R/$) 0.03 0.06 # #
Net foreign exchange losses # 0.01 # #
Income tax effect on the above component 0.06   (0.02 ) #   #  
Basic adjusted earnings per share (R/$) 0.09   0.05   0.01   #  
 

# Amount less than R0.01/$0.01

 

5. Reconciliation of Adjusted EBITDA to Profit for the Period
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
Figures are in thousands unless otherwise stated 2018 2017 2018 2017
  Unaudited Unaudited Unaudited Unaudited
Adjusted EBITDA 126,442 93,880 9,211 6,840
Add:
Net profit on sale of property, plant and equipment and intangible
assets
22 333 2 24
Decrease in restructuring costs provision 22 2
Less:
Depreciation (1) (40,659 ) (34,476 ) (2,962 ) (2,512 )
Amortization (2) (16,095 ) (14,564 ) (1,173 ) (1,061 )
Impairment of product development costs capitalized (95 ) (7 )
Equity-settled share-based compensation costs (2,008 ) (2,146 ) (146 ) (156 )
Increase in restructuring costs provision   (18 )   (1 )
Operating profit 67,724 42,914 4,934 3,127

Add: Finance income/(costs) - net

155 (3,485 ) 11 (254 )
Less: Taxation (53,445 ) (5,523 ) (3,894 ) (402 )
Profit for the period 14,434   33,906   1,051   2,471  
(1)   Includes depreciation of property, plant and equipment (including
in-vehicle devices and right-of-use assets). The adoption of IFRS 16
during the period resulted in depreciation of right-of-use assets of
R2.3 million ($0.2 million) being recorded in the three months ended
June 30, 2018.
(2) Includes amortization of intangible assets (including product
development costs and intangible assets identified as part of a
business combination).
 

6. Reconciliation of Adjusted EBITDA Margin to Profit for the
Period Margin
 

Three months

 

Three months

ended

ended

June 30, June 30,
2018 2017
  Unaudited Unaudited
Adjusted EBITDA margin 27.7 % 23.1 %
Add:
Net profit on sale of property, plant and equipment and intangible
assets
0.0 % 0.1 %
Decrease in restructuring costs provision 0.0 %
Less:
Depreciation (9.0 %) (8.4 %)
Amortization (3.5 %) (3.7 %)
Impairment of product development costs capitalized (0.0 %)
Equity-settled share-based compensation costs (0.4 %) (0.5 %)

Increase in restructuring costs provision

  (0.0 %)
Operating profit margin 14.8 % 10.6 %
Add: Finance income/(costs) - net 0.0 % (0.8 %)
Less: Taxation (11.6 %) (1.4 %)
Profit for the period margin 3.2 % 8.4 %
 

7. Assets Classified as Held for Sale
The assets classified
as held for sale relate to the property owned by the Central Services
Organization, a division of MiX Telematics International Proprietary
Limited. No impairment loss was recognized on reclassification of the
property as held for sale as the fair value (estimated based on the
recent market prices of similar properties in similar locations) less
costs to sell is higher than the carrying amount. Management anticipate
that the sale will be completed by the end of fiscal 2019.

 
8. Reconciliation of Free Cash Flow to Net Cash Generated from
Operating Activities
  South African Rand   United States Dollar

Three months

 

Three months

Three months

 

Three months

ended

ended

ended

ended

June 30, June 30, June 30, June 30,
Figures are in thousands unless otherwise stated 2018 2017 2018 2017
  Unaudited Unaudited Unaudited Unaudited
Net cash generated from operating activities 22,758 18,324 1,658 1,335
Capital expenditure (78,306 ) (82,344 ) (5,705 ) (5,999 )
Free cash flow (55,548 ) (64,020 ) (4,047 ) (4,664 )
 

9. Share Repurchase
As of May 23, 2017, the MiX Telematics
Board approved a share repurchase program of up to R270 million ($19.7
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 program 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
program. The repurchase program will be funded out of existing cash
resources.

No purchases were made under the share repurchase program during the
first quarter of fiscal year 2019.

At June 30, 2018, the following purchases had been made under the share
repurchase program:

Figures are in thousands unless otherwise stated   South African Rand
 

Total number of

 

Average

 

Shares canceled

Total value of shares

 

Maximum value of

shares

price paid

under the share

purchased as part of

shares that may yet

repurchased

per share (1)

repurchase

publicly announced

be purchased under

Period

 

 

 

 

program

 

program

 

the program

Month
June 2017 5,015,660   3.72 5,015,660   18,666  

251,334

 

5,015,660   5,015,660   18,666   251,334  
 
 
Figures are in thousands unless otherwise stated United States Dollar

Total number of

Average

Shares canceled

Total value of shares

Maximum value of

shares

price paid

under the share

purchased as part of

shares that may yet

 

repurchased

per share (1)

repurchase

publicly announced

be purchased under

Period

 

 

 

 

program

 

program

 

the program

Month
June 2017 5,015,660   0.27 5,015,660   1,360   18,311  
5,015,660   5,015,660   1,360   18,311  
 

(1) Including transaction costs.

 

Subsequent to the repurchase, the shares were delisted and now form part
of the authorized unissued share capital of the Company.

10. Dividend Paid
In respect of the fourth quarter of fiscal
year 2018 which ended on March 31, 2018, a dividend of 3 South African
cents (0.2 U.S. cents) per ordinary share was declared during the period
and paid on June 4, 2018. In respect of the fourth quarter of fiscal
year 2017, a dividend of 2 South African cents or 0.1 U.S. cents per
share was paid on June 19, 2017.

11. Contingent Liabilities
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
R42.6 million or $3.1 million. No loss is considered probable under this
arrangement.

12. 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 R21.3 million ($1.6 million) in respect of S11D
deductions, of which R0.8 million ($0.1 million) was recognized in the
quarter ended June 30, 2018. R18.5 million ($1.3 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 June
30, 2018.

13. Dividend Declared
On July 31, 2018, the Board declared
in respect of the first quarter of fiscal year 2019, which ended on June
30, 2018, a dividend of 3 South African cents (0.2 U.S. cents) per
ordinary share to be paid on Monday, August 27, 2018.

The details with respect to the dividends declared for ordinary
shareholders are as follows:
Last day to trade cum dividend       Tuesday, August 21, 2018
Securities trade ex dividend Wednesday, August 22, 2018
Record date Friday, August 24, 2018
Payment date Monday, August 27, 2018
 

Share certificates may not be dematerialized or rematerialized between
Wednesday, August 22, 2018 and Friday, August 24, 2018, both days
inclusive.

Shareholders are advised of the following additional information:

  • the dividend has been declared out of income reserves;
  • the local dividends tax rate is 20%;
  • the gross local dividend amounts to 3 South African cents per ordinary
    share;
  • the net local dividend amount is 2.4 South African cents per ordinary
    share for shareholders liable to pay dividends tax;
  • the issued ordinary share capital of MiX Telematics is 604,625,369
    ordinary shares of no par value; and
  • the Company's tax reference number is 9155/661/84/7.
The details with respect to the dividends declared for holders of
our ADSs are as follows:
Ex dividend on New York Stock Exchange (NYSE)       Thursday, August 23, 2018
Record date Friday, August 24, 2018
Approximate date of currency conversion Monday, August 27, 2018
Approximate dividend payment date Tuesday, September 11, 2018
 

14. Development costs historical data
The table below sets
out development costs incurred and capitalized for each of the last
eight quarters including the period ending June 30, 2018.

  South African Rand
Three months ended
Figures are in thousands (Unaudited)
June 30,   March 31,   December 31,   September 30,   June 30,   March 31,   December 31,   September 30,

2018

2018

2017

2017

2017

2017

2016

2016

Total development costs incurred

 

34,108

 

 

30,488

 

 

32,336

 

 

34,167

 

 

33,175

 

 

32,152

 

 

36,696

 

 

36,034

 
Development costs capitalized 17,245 16,543 15,996 16,148 16,656 17,268 20,415 21,028
Development costs expensed within administration and other charges   16,863     13,945     16,340     18,019     16,519     14,884     16,281     15,006  
 
 
United States Dollar
Three months ended
Figures are in thousands (Unaudited)
June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30,
2018 2018 2017 2017 2017 2017 2016 2016
Total development costs incurred   2,485     2,221     2,355   2,489     2,418     2,342     2,673     2,625  
Development costs capitalized 1,256 1,205 1,165 1,176 1,214 1,258 1,487 1,532
Development costs expensed within administration and other charges   1,229     1,016     1,190   1,313     1,204     1,084     1,186     1,093  

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), SR
Bruyns* (Lead Independent Director), PM Dell, F Futwa*, IV Jacobs*,
F
Roji-Maplanka*, CWR Tasker, AR Welton*
* Non-executive

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