(NZX:FMS) Annual Result for the year ended 31 March 2019

NZX:FMS Annual Result for the year ended 31 March 2019 The Directors of Future Mobility Solutions (NZX:FMS) hereby report the unaudited financial result for the twelve- months ending 31st March 2019. o Revenue of $52m, an increase of $22m over the prior corresponding period ("PCP") o EBITDA of $84k compared to $287k in the PCP o A net loss after tax of $6.5m, up from a loss of $2.9m in the PCP The financial year saw the group continue its evolution to a business primarily focused on the military and commercial market globally. Whilst the directors continue to believe this will produce appropriate shareholder returns in the medium to long term, in the short term this has proven challenging. In particular, with increased reliance on government contracts, the business has inevitably become one where larger contracts dominate the earnings and cash flow of the group. Whilst this has the benefit of scale, so it also means the earnings are less predictable than historically. This pattern is likely to continue. In the year under review, the group's cash flow was severely adversely impacted, in both Asia and North America, from its government contracts which led to significant working capital constraints on the business. The directors expect this to improve in the current financial year but it will continue to be challenging. With this in mind, the Directors have also reviewed the goodwill of the company's subsidiaries and made prudent revisions where it is felt appropriate. The result includes a full twelve months result for all FMS investments as opposed to the previous financial report which recorded only a part year consolidation due to the timing of the acquisition. The results include the adoption of IFRS 15 which affected the revenue recognition of Willard contracts with customers. The net impact of this new accounting standard was made effective 1 April 2018 resulting in an adjustment to opening retained earnings of $453k. Revenue for each segment was as follows: Sealegs International Group ("Sealegs"): $23,060k Willard Marine Incorporated ("Willard"): $16,940k Sillinger (S.A.S): $12,134k TOTAL $52,134k Note: The Sealegs International Group consists of Sealegs International Ltd, Sealegs (US), Sealegs Europe S.A.S and Lancer Industries Ltd. Gross margin on sales revenue was reported at $14.5m up $6.0m from the PCP. The increase primarily due to reporting the full 12 months of the financial year for all investments. 12 months of operating expenses (OPEX) for the group were as follows: Administrative: FYE 2019 $11,080k (FYE 2018 $5,590k) Sales and Marketing: FYE 2019 $3,480k (FYE 2018 $2,654k) Development: FYE 2019 $453k (FYE 2018 $144k) Other: FYE 2019 -$545k (FYE 2018 -$166k) Total FYE 2019 $14,467k (FYE 2018 $8,222k) Note: Prior year reported 6 months OPEX for Sillinger and 1-month OPEX for Willard Earnings before interest, tax, depreciation, amortisation and other items ("EBITDA") of $84k down from $434k in the PCP. Below EBITDA, the comprehensive loss of $6.3m included the following: Depreciation, amortisation and impairment: $4,898k Foreign Exchange (unrealised on acquisition funding): $398k Litigation fees and acquisition costs: $451k Net finance cost: $741k TOTAL $6,488k Depreciation, amortisation and impairment The total of $4,898k was made up of the following: o Depreciation $1,285k o Amortisation $613k and o Impairment $3,000k The Depreciation and amortisation of assets have been reported consistent with group accounting policies. The intangible assets of the company were either amortized in line with company policy or tested for impairment on an annual basis. Upon reviewing the recoverable amount of Willard, the board decided to impair the asset by $3m due to: 1. Working capital requirements post acquisition 2. Missed revenue targets. The board remains positive about the future of Willard and its ability to provide a return to shareholders however an impairment of $3m against the goodwill on acquisition was considered appropriate. Litigation and Legal Fees Costs of $451k were booked for Sealegs litigation and legal fees relating to prior period acquisitions. Shareholder Loans New shareholder loans were applied to working capital and deferred acquisition settlements. After accounting for loan repayments after the September rights issue balances at 31st March 2019 were as follows: Capital Key Holdings: Loan $661K, Accrued Interest $12k Avenport Investment Corp: Loan $294k, Accrued Interest $9k Total: Loan $995k, Accrued Interest $21K Willard Deferred Settlement Extension In March 2019 the Group renegotiated the terms of the Willard Marine settlement to reflect the following dates: oOn completion US$1.65 million in cash (Paid); o31st March, 2019, a further US$1.25m in cash; o31st March, 2020, a further US$1.5m in cash. o31st March, 2021, a further US$2.45m in cash. The change to the net present value of future cash flows used in accounting for the Willard acquisition resulted in a gain of $354k being recognised in the income statement. Prior Period Adjustments Revenue and costs recognised in relation to contracts in Willard using stage of completion were not accounted for appropriately prior to acquisition. Management have recalculated revenue and costs in line with current group policies and have restated the prior year results. The impact of the adjustment increased the 31 March 2018 loss by $151k. Looking Forward The directors remain confident about the future prospects of the group as demonstrated by their on-going support in providing capital to the group through the shareholder loan facilities. The board would like to take this opportunity to thank employees, customers, shareholders and commercial partners for their continued support and commitment to the success of the company. For further information contact: David McKee Wright Chief Financial Officer Future Mobility Solutions Limited +64 09 414 5542 End CA:00335314 For:FMS Type:FLLYR Time:2019-05-30 15:52:45