FINANCIAL RESULTS AGENDA. 12 month period ending 30 June Summary. 2. Segment performance. 3. Financial results. 4. Focus areas for the group

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1 FINANCIAL RESULTS 12 month period ending 30 June 2018 AGENDA 1. Summary 2. Segment performance 3. Financial results 4. Focus areas for the group 2 1

2 SUMMARY Revenue increased by 2% and gross profit by 4% PBIT and net profit decreased by 36% and 55% respectively Continued economic uncertainty led to a decline in spend from existing clients Indirect costs up 19% influenced by once-off impacts including R1.5m provision for doubtful debt HEPS down 51% to 20c (helped slightly by lower weighted average shares in issue) Gross DPS down 36% to 4.5c Cashflow was good with the cash balance increasing to R13.5m Secured five new clients New product completed and launched to a new market segment in July 2018 Cloud based hosting and outsourcing showing positive growth Client solutions are stable and relationships remain healthy 3 WHAT WE DO We build our own software that enables financial services and rent it out on a usage basis We implement and support our software We host and manage the environments on which our software is installed We digitalise processes on behalf of our clients We assist clients in getting value out of their data We execute business processes on behalf of our clients 4 2

3 SOME OF OUR CUSTOMERS 5 SEGMENT PERFORMANCE 6 3

4 OPERATIONAL MODEL Deploy software Pay for usage Keep the software running Running the business Support Business process outsourcing Implementation Software rental Data analytics Hosting and technical outsourcing Business process digitalisation Create, enhance and maintain assets R&D Reference keys: Annuity based Project based Cost based 7 IMPLEMENTATION Implementation revenue growth 2% (10%) Gross profit margin 44% 49% Allocated indirect costs (4 748) (4 156) Provision for doubtful debt (1 520) - Segment result (1 787) 691 margin (18%) 7% Decrease in gross margin from a project sold at a lower margin to open up future opportunity A provision for doubtful debt decreased the profitability of the segment We remain happy with our implementation delivery model, which unlocks annuity revenue streams Continue to secure new contracts in the small to medium sized market in South Africa and the rest of Africa 8 4

5 SOFTWARE RENTAL AND MAINTENANCE Software rental revenue growth 2% 14% Gross profit margin 85% 92% Allocated indirect costs (5 624) (4 923) Segment result margin 72% 81% Revenue was up 2% impacted by the loss of rental from the last client on the older SDT Life platform The Exergy portion of our software rental grew by 9% with new clients added Drop in margin from a planned increased spend on maintenance and higher overall indirect costs Our software and the growth of our annuity rental stream remain a core focus 9 SUPPORT Support revenue growth (4%) 4% Gross profit margin 36% 36% Allocated indirect costs (15 369) (13 453) Segment result (2 140) 269 margin (6%) 1% Revenue decreased from lower demand for additional support and a slowdown in spend from customers The result was further impacted by higher indirect costs We continue to focus on additional higher value-added offerings in this segment Despite the tough economic climate we are seeing a pickup in demand for these offerings 10 5

6 HOSTING AND OUTSOURCING Hosting and outsourcing revenue growth 62% 45% Gross profit (905) margin 34% (29%) Allocated indirect costs (1 467) (1 284) Segment result 259 (2 189) Revenue up 62% from new deals concluded Secured first outsourced South African client under our Financial Sector Conduct Authority (FSCA) license Satisfied with progress so far with good opportunities ahead 11 RESEARCH & DEVELOPMENT (R&D) R&D direct cost (11 083) (12 216) growth (9%) 85% % of software rental revenue 26% 29% Capitalised Allocated indirect costs (13 598) (11 902) Segment result (19 177) (19 937) Invested into both the development of new software and Insurtech focused research Total direct costs were R11.1 million, of which R5.5 million was capitalised These investments aim to generate new annuity revenue in the future 12 6

7 SEGMENT SUMMARY Revenue growth 2% 8% Direct costs (49 864) (48 703) growth 2% 14% Capitalised Gross profit margin 53% 52% Indirect costs (40 806) (35 718) growth 14% 6% Provision for doubtful debt (1 520) - Operating profit margin 9% 14% Revenue up 2% Direct costs up 2% Gross profit up 4% Indirect costs increased by 14%, influenced by: increased costs in our marketing and technology support divisions reversal of the provision for leave pay in the first half of F FINANCIAL RESULTS 14 7

8 STATEMENT OF COMPREHENSIVE INCOME Revenue growth 2% 8% Total costs (incl. other income) (85 166) (80 240) growth 6% 8% Provision for doubtful debts (1 520) - Operating profit margin 9% 14% Net profit margin 6% 14% HEPS (cents) growth (51%) 43% DPS (cents) Revenue growth was below expectation Decrease in profitability mainly from an increase in indirect costs and provision for doubtful debt 15 STATEMENT OF FINANCIAL POSITION Non-current assets Current assets Trade & other receivables Revenue recognised not yet invoiced Withholding tax rebates receivable Income tax receivable Cash and cash equivalents Total assets Cash balance up to R13.5m 16 8

9 STATEMENT OF FINANCIAL POSITION Equity Non-current liabilities Current liabilities Trade & other payables Income tax payable 18 - Deferred revenue Total equity & liabilities NAV per share (cents) No debt 17 SUMMARISED CASH FLOW STATEMENT Generated from operations Net interest Taxation paid (350) (4 445) Net from operating activities Cash from investing activities (6 105) (6 643) Cash from financing activities (1 318) (13 251) Net cash movement (15 409) Cash at beginning Cash at end of period Increase in cash generated from operations assisted by tight working capital management Cash outflow from investing activities mainly from capitalised R&D on new product Cash outflow from financing activities from dividend payment. F2017 includes R11.2m purchase of shares 18 9

10 FOCUS AREAS FOR THE GROUP 19 THE FUTURE The group will focus on the following areas in the future: Continue to grow our core business by provisioning technology solutions for financial services through an on-site implementation model Drive new areas of growth by provisioning technology solutions for financial services through cloud based services models Research and development within the area of Insurtech 20 10

11 Strengths Financial services expertise and experience Assets more than just software Our software caters for both small and large insurers Brand awareness Experience and footprint in Africa Opportunities Large unaddressed market Disruption in financial services from digitalisation Financial services growth in the rest of Africa Shift to cloud-based solutions Expanding offering to existing clients Challenges Modifying operational model for new offerings Identifying relevant digital technology trends Adapting to new technologies and ways of working Shifting our mindset to partner where better suited Pressures Ongoing pressure on pricing and margins from clients Obtaining and retaining key skills in the market Growth and uncertainty in the economy New disruptive competition 21 IN CONCLUSION Despite disappointing progress in the period, revenue growth remains a focus We expect margins to recover in the absence of once-off impacts We have expanded our offering within our own market and into new verticals and expect them to assist in achieving our growth objectives We have invested into modifying our operational model to support our new offerings Our cloud hosting and outsourcing services gained traction and we are busy with new projects while continuing to support existing clients Despite generally tough economic conditions we are positive about the opportunities in our existing and new markets 22 11

12 THANK YOU Recorded online broadcast presentation of the Group s financial results Tuesday 11 09:00 Conference call for Q & A from 15:30 to 16:30 Conference call details: Johannesburg (Telkom) Other Countries (Neotel) Participants should ask to be joined into the SilverBridge call 23 12