WDT achieves earnings guidance, with 36% revenue growth
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
®
is a registered Trade Mark of Wellington Drive Technologies WT 9144
Wellington Drive Technologies Ltd
P: +64 9 477 4500 E: info@wdtl.com
21 Arrenway Drive, Rosedale, Auckland 0632
PO Box 302-533 North Harbour, Auckland 0751, New Zealand
www.wdtl.com
1 March 2019
Market Release
For immediate release
Wellington achieves earnings guidance, with 36% revenue growth rate
Wellington Drive Technologies (Wellington), a leading provider of Internet of Things (IoT) solutions and
energy efficient motors to the retail food and beverage industry, today released its fully audited financial
statements for the year ended 31 December 2018.
The increasing momentum of new Wellington Connect IoT products, including hardware solutions data
and digital marketing services, and the continued growth of ECR2 motor sales, resulted in the fourth
quarter of 2018 being the highest revenue quarter in the company’s history. The company achieved a full
year EBITDA
1
surplus of $2.5m, achieving its EBITDA
1
earnings guidance in the range of $2m to $3m,
and a positive operating cash flow of $1.8m. This EBITDA
1
result includes a $0.3 million gain due to the
adoption of NZ IFRS 16 accounting requirements for leases.
Wellington’s strategy is focused on investing in and growing its IoT business with large food and beverage
brands and developing customers for its ECR2 motor. Its sales initiatives, developed to find adjacent
markets for its IoT and EC Motor products, have resulted in new customer wins in the dairy, beer and
food markets. This success is amplified by the rapid global adoption of IoT solutions.
CEO Greg Allen commented “Over the last year Wellington has increased its ECR2 motor revenues,
won considerable new IoT business and established a leading position in commercial refrigeration IoT.
We regard IoT adoption in 2018 and 2019 as the early stages of an ongoing global mega-trend. There are
many opportunities for growth in adjacent segments as well as offering new services to existing
customers. IoT market trends coupled with our customers’ demand has given us the confidence to
accelerate investment, with a view to strengthening our current market leadership and positioning
ourselves for strong medium-term growth in revenues and profits. Whilst this level of investment will limit
earnings growth in the near term, we believe that it will be positive for medium-term shareholder value
creation.”
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
2
Key Highlights
• Strong revenue growth: Revenue increased 36% to $58.8m, consistent with revenue growing at
a compound annual growth rate (CAGR) of 35% for the last five years.
• New product growth: Wellington Connect SCS volume grew 62% and EC motor volume grew
24%, with ECR2 growing 75%.
• Gross margin improvement: Margins increased slightly to 24.3% from 23.9% in 2017. Further
improvement was hindered by additional costs caused by global supply constraints for electronic
components.
• Data and software services growth: Services billings for the year increased to US$1.3m, from
US$0.7m in 2017. The company received its first purchase orders for its digital marketing
services from a large beverage brand.
• Profit Improvement: Increasing financial predictability demonstrated by EBITDA
1
of $2.5m,
compared to $0.5m in FY17, meeting EBITDA
1
guidance of $2 to $3m.
• Successful acquisition: The successful acquisition and integration of iProximity Pty Limited
(iProximity), an Australian based digital marketing solutions and consumer intelligence company.
This acquisition contributed to the winning of new customers for the Wellington Connect IoT
platform.
NZD (unless otherwise stated)
31 December
2018
2017 Change
Revenue $58.8m $43.3m +36%
Wellington Connect IoT Revenue
$17.2m $10.3m +67%
ECR Motor Revenue
$38.6m $30.3m +27%
Gross profit $14.3m $10.3m +38%
Gross margin % 24.3% 23.9% +1.6%
EBITDA
1
$2.464m $0.538m +358%
Loss for the year ($0.713m) ($1.98m) 64%
Operating cash flows $1.849m $1.257m +$0.6m
Revenue
New Zealand dollar revenue for the year ended 31 December 2018 was $58.8m compared to $43.3m in
2017, a 36% increase compared to the same period last year. Wellington’s earnings guidance for the
2018 year was for H2 revenue to be consistent with the first half. Actual H2 revenue was $30.7 million, a
9% improvement compared to H1 revenue of $28.1 million.
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
3
Revenue in the fourth quarter was $18.0 million, compared to $11.8 million for the same quarter in 2017,
a 53% increase. Fourth quarter revenue was the largest single quarter revenue in the company’s history,
and December the company’s highest-ever month.
Business performance
Wellington IoT
US Dollar revenue billings from IoT products, comprising Connect SCS hardware, data and reporting
services, and iProximity software was US$13.0m. This was a US$5.1m increase over 2017. Invoicing of
IoT data services revenue increased 78% from US$0.7m to US$1.3m. Wellington Connect SCS hardware
revenue was 63% higher than for the comparable period in 2017. The amount of SCS data revenue held
on balance sheet is US$1.7m, to be recognised over the period of customers data contracts, which vary
from one to ten years in duration.
Wellington ECR motors
ECR2 motor unit sales were 75% higher and they now surpass ECR1 motor volumes, which while lower
than ECR2 did increase by 5%. Sales to the company’s two largest supermarket and food service
refrigeration customers continued to grow, together contributing 42% of total ECR2 motor sales. ECR
growth rates in 2018 were positively impacted by exceptionally high demand with one of its bottle cooler
customers in its Brazilian business which is believed to be one-off in nature.
Sales regions
Latin American revenue increased 34%, with the business benefiting from new Wellington Connect IoT
customers in Central and South America. Brazil sales in particular increased as a key motor customer
experienced higher than normal demand. Wellington’s revenue for the US and Canada increased 61% to
US$6.9m compared to US$4.3m last year. This significant growth was driven by the continued success of
ECR2 motors with a major cooling equipment customer. Asia-Pacific and EMEA region revenue also grew
year-on-year at 16% and 8% respectively, albeit from a lower base.
Gross margin
Gross margin for 2018 was 24.3% compared to 23.9% in 2017. The company came under price pressure
in its EC motor business towards the end of 2017 and through 2018 and responded accordingly to remain
competitive. Additional one-time costs of NZD$0.5m were incurred to successfully manage supply
constraints in the global electronic components market. The component shortage situation also had the
effect of diverting development resources from new product development to product redesign for new
components. This reduction in available time for development activities contributed to a reduction in
capitalised time from $2.2m in 2017 to $1.6m in 2018. The incremental spot-buying costs and product re-
design efforts ensured alternative components were secured, new components were integrated and all
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
4
customer demand in the period was met. Component shortages are easing somewhat but are expected to
continue well into 2019.
Innovation
The company’s innovation, customer and supply chains team continued to grow with an additional 12 new
members in 2018, taking the total Wellington team to 79. This strategic investment has added skills and
expertise focussed on software development, software testing, electronics engineering, marketing and
customer programme management.
The company’s product development roadmap focused on several key areas:
IoT
• New Wellington Connect hardware devices to broaden the IoT platform
• New software functionality to support customers cooler fleet management needs
• New map-based location and digital marketing software development
• Smart Cities upgrades to support new projects in Australia
EC motors
• Expansion of the successful ECR2 platform
• Development of a low-cost motor platform specifically designed for smaller coolers and freezers
Wellington’s leadership in IoT is evidenced by its rapidly growing installed base of Connect SCS
TM
, with
over 500,000 connected coolers installed, and growth expected to exceed the 1m mark in 2020. The
company is focusing beyond its hardware business, developing data and software services that it expects
will further enhance its IoT Business strategy.
Operating costs
Operating costs for the period amounted to $11.9m, or 20% of revenue, compared to $10.1m and 23% of
revenue last year. Operating spending increased as the company continued to invest in the skills and
infrastructure required to support a broadening product range and diversifying customer base. This has
required additional personnel in areas such as customer management, marketing and software
development. Wellington expects to continue investing in IoT software engineering and customer facing
skills to facilitate the ongoing expansion of its software services and hardware product offerings.
Profit
Earnings before interest, tax, depreciation and amortisation (EBITDA
1
) was a profit of $2.5m. This result
was in line with previous EBITDA
1
guidance of between $2m to $3m, issued by the company in August
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
5
2018. This EBITDA result includes a $0.3 million gain due to the adoption of NZ IFRS 16 accounting
requirements for leases. The company delivered its first ever EBIT profit of $0.5m compared to a loss of
$1m in 2017. Net loss for the year was $0.7m, versus $2.0m in 2017.
Working Capital
Cash at 31 December 2018 was $0.9m compared to $1.6m at 31 December 2017. Extended payment
terms for key customers in third and fourth quarter was the main reason for this unusually low cash
balance, a situation which is improving in the early part of 2019. Net debt (being borrowings excluding
lease liabilities less cash) at 31 December 2018 was $3.0m versus net debt of $1.0m at December 2017.
Adoption of the new leases accounting standard resulted in a $1.7m increase in borrowings in 2018 for
leases previously treated as operating expenses.
Operating cash flows for the twelve months amounted to $1.9m, up from $1.3m for the corresponding
period in 2017. Net operating and investing cash flows amounted to a $2.0m outflow for the twelve
months, including $1.4m paid on acquisition of iProximity.
Inventory management continued to be a highlight in 2018 with 11 inventory turns achieved in the year to
31 December, compared to 10 turns for the same period last year. The average number of days sales in
trade receivables during 2018 was generally in the 70-80 days range, with some customers requiring up
to 120 days terms. This extended payment cycle is expected to continue for the foreseeable future with
some customers.
Debt
In October 2017 the company secured a loan from Meta Capital Limited, a company owned and
controlled by a director of Wellington, John McMahon. The US$0.6m loan was repaid on 31 May 2018, as
per the loan agreement. A new loan for US$0.6m from Meta Capital was advanced on 29 June 2018 to
partially fund settlement of the iProximity acquisition and to support extended terms with selected
customers.
In September 2018, to support short-term working capital requirements for expected growth in fourth
quarter 2018 and first quarter 2019, the company secured a $2.5 million loan from Onimeg Investments
Limited, a company owned and controlled by the family interests of Michael Chamberlain. The loan has a
12-month term and is to be repaid on 17 September 2019. This is an unsecured loan, with interest
payable at 16% per annum, on a quarterly basis in arrears.
The company has previously announced that it has secured a $1,500,000 trade finance facility from the
BNZ which was undrawn at 31 December 2018. With respect to short-term debt due to mature, the
company expects to be able to meet its repayment obligations in 2019.
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
6
Acquisitions
The acquisition of iProximity was completed on 2 July 2018. The company paid a total cash amount of
AU$1.3m. In addition, the consideration for the purchase of the iProximity shares included the future issue
of fully paid ordinary shares in the capital of Wellington in tranches based upon meeting specified EBIT
targets and SCS
TM
controller sales performance targets for the period to 31December 2020.
This was the company’s first acquisition and was completed to enhance the Wellington Connect IoT
platform with proximity-based digital marketing tools. The combination of Wellington and iProximity allows
Wellington’s customers to directly engage with consumers “at the point of purchasing decision”, in front of
the cooler or food dispenser. The integration of iProximity’s software was completed in fourth quarter
2018 and was in part responsible for securing a large new win with a global beer brand.
iProximity’s software platform also supports an existing Smart Cities business in Australia. The iProximity
solution enables city councils to engage with their citizens by providing proximity-based information directly
to mobile devices using each city’s tourist or resident mobile apps. Since the acquisition, Wellington’s
iProximity business has been accepted as the proximity service provider for the Great Ocean Road tourist
destination, and in the fourth quarter of 2018 began a beacon and tourist mobile app rollout with Narrabri
City, New South Wales.
The impact on earnings from iProximity was not significant for the 2018 year. However, in 2019,
Wellington will start to earn revenue from food and beverage customers starting to use its marketing
solutions.
Governance
At the 2018 Annual Shareholder Meeting, Chairman Tony Nowell announced his decision to retire at the
completion of the 2018 financial year. Wellington subsequently embarked on a review of its board
structure to both find a replacement Chairperson and to bring in additional new skills to support its new
markets and products. The recent appointment of John Scott to the board of directors is a result of this
review and further director appointments are expected to assist in achieving the company’s growth
strategy.
Business Risks and Opportunities
The company views the uncertain global macroeconomic back-drop, highlighted by continued global trade
challenges, and recent downgrades by large global tech companies as reasons to be prudent about its
2019 outlook. With this as a backdrop, initial demand forecasts for EC motors from some major customers
have been muted and are showing signs of being lower than 2018. Accordingly, the company is forecasting
lower volumes and revenue for motors in 2019. Margin pressure is also likely to continue in the EC motor
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
7
market as a result of competitive pricing, partly offset by some easing of component supply constraints that
affected production costs in 2018.
The Wellington team is working on various strategies to continue to grow its bottle cooler EC motor
business, including new cost optimised EC motor products and new supply chain strategies. However, in
the short-to-medium term, pricing in the lower margin end of the bottle cooler EC motor market could cause
the company to proactively reduce its market share.
Conversely, Wellington’s IoT business is expected to continue its strong growth in 2019 with several new
programmes underway with new customers and new IoT products being developed. The company will
ensure it continues to invest in the software and hardware engineering and customer project skills to
support these new products and customers. While the overall demand picture for IoT remains healthy, this
is an evolving area for many businesses and the company is therefore subject to timing risks as individual
customers adapt their IoT roll-out plans.
As a result of the initial forecast weakness in EC motor demand and planned competitive strategies in the
lower end of the bottle cooler market, countered somewhat by expected growth in IoT, the company’s total
revenue in 2019 is expected to be flat to slightly up when compared to 2018.
2019 outlook
The first quarter of 2019 is looking relatively strong and Wellington anticipates revenues higher than the
same period in 2018, coupled with improved EBITDA
1
performance.
IoT demand forecasts continue to look robust, with this part of the business expecting continued full year
revenue growth of around 30%. IoT is anticipated to contribute close to 41% of total revenues. Gross
margin for the IoT business is expected to increase due to an improved product mix, and in part due to
the expanding nature of higher margin data and software revenue.
During 2019 Wellington will continue to focus on investment in new software development, customer-
facing skills, new customer IoT programmes and expanding its ECR2 motor platform. Wellington will
continue its revenue diversification strategy by broadening IoT growth beyond its historical carbonated
soft drink beverage market focus and obtaining new customers for its ECR2 motor range.
The company’s business mix is changing and is increasingly targeted to its higher margin IoT products.
Accordingly, EBITDA
1
, Net Profit and operating cashflow are expected to be higher in 2019 when
compared to 2018.
Wellington Drive Technologies
Management’s Discussion and Analysis
For the 12 months ended December 31 2018
WT 9144
8
About Wellington Drive Technologies:
Wellington is a leading provider of IoT solutions, cloud-based fleet management platforms, energy-
efficient electronic motors and connected refrigeration control solutions. It serves some of the world’s
leading food and beverage brands and refrigerator manufacturers and offers proximity-based marketing
for Smart Cities to the Australian market. Wellington’s services and products improve sales, decrease
costs and reduce energy consumption. Headquartered in Auckland with a global reach, Wellington is
listed on the New Zealand stock exchange under the ticker symbol NZ:WDT
For further information visit www.wdtl.com
1
EBITDA (i.e. Earnings before interest, taxation, depreciation, amortisation and impairment) is a non- GAAP earnings figure that equity
analysts tend to focus on for comparable company performance analysis. Wellington considers that it is a useful financial indicator
because it avoids the distortions caused by differences in amortisation and impairment policies.
Contact:
Greg Allen Howard Milliner
Chief Executive Officer Chief Financial Officer
Phone +1-778-238-6494 +64 27 587-0455
---
Annual Financial Statements
2018
______________________________________________
Our Mission
Wellington’s purpose is to deliver actionable insights and solutions that assist our customers’
to improve their business performance. We achieve this with the development of Internet of
Things (IOT) solutions and energy efficient motors for leading food and beverage brands as
well as refrigeration manufacturers. Our personal service, reliable products, smart solutions and
relentless pursuit of excellence drives us and continues to lead in the market.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 1
Contents
.
Consolidated Financial Statements Page
• Consolidated Statement of Comprehensive Income 2.
• Consolidated Statement of Movements in Equity 3.
• Consolidated Statement of Financial Position 4.
• Consolidated Cash Flow Statement 5.
Notes to the Consolidated Financial Statements
1. Basis of preparation 6.
2. Results for the year 12.
3. Operating assets and liabilities 17.
4. Capital and financing costs 23.
5. Risk 27.
6. Other information 30.
Independent Auditor’s Report 37.
Directory 42.
______________________________________________
® is a registered Trade Mark of Wellington Drive Technologies Ltd
These consolidated financial statements have been presented in a style which
endeavours to make them less complex. The purpose of the information in text boxes
is to give a commentary on each section with the aim of providing readers with a
clearer understanding of the group and its operations.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 2
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2018
2018 2017
Note $000s $000s
Revenue
2.2
58,761 43,308
Cost of sales
(44,505) (32,967)
Gross profit
14,256 10,341
Other income
2.3
151 251
Operating expenses
2.4
(11,943) (10,054)
Earnings before interest, taxation, depreciation, amortisation &
impairment
2,464 538
Depreciation
3.2
(536) (301)
Amortisation & impairment
3.3
(1,475) (1,245)
Profit / (loss) before interest & taxation
453 (1,008)
Finance income
4.2
7 45
Finance expenses
4.2
(912) (934)
Loss before income tax
(452) (1,897)
Income tax expense
2.5a
(261) (83)
Loss for the year (713) (1,980)
Other comprehensive income:
Items that may be reclassified subsequently to the profit
or loss:
Exchange differences on translation of foreign
operations
4.5b
306 (121)
Cash flow hedge, net of tax
4.5c
(18) 15
Other comprehensive income / (loss) for the year 288 (106)
Total comprehensive loss for the year
($425) ($2,086)
Loss for the year attributable to the Owners of the
company
($713) ($1,980)
Total comprehensive loss attributable to the Owners
of the company
($425) ($2,086)
Basic earnings per share – cents
2.6
(0.28) (0.77)
Diluted earnings per share – cents
2.6
(0.28) (0.77)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 3
Consolidated Statement of Movements in Equity
for the year ended 31 December 2018
2018
Note
Share
capital
Accumulated
losses Other reserves Total equity
$000s $000s $000s $000s
Balance at 1 January 2018 123,608 (114,106) (2,367) 7,135
Adjustment on adoption of NZ
IFRS 9, NZ IFRS 15 and NZ
IFRS 16 (net of tax)
1.2e
- (367) - (367)
Restated total equity at 1
January 2018
123,608 (114,473) (2,367) 6,768
Comprehensive income
Loss for year - (713) - (713)
Other comprehensive income
Exchange differences on
translation of foreign operations
4.5b
- - 306 306
Cash flow hedge
4.5c
- - (18) (18)
Income tax relating to other
comprehensive income
- - - -
Total comprehensive income - (713) 288 (425)
Share option compensation
expensed
4.5a
- - 12 12
Contributions of equity, net of
costs
4.3
19 - - 19
Balance at 31 December 2018 $123,627 ($115,186) ($2,067) $6,374
2017
Note
Share
capital
Accumulated
losses Other reserves Total equity
$000s $000s $000s $000s
Balance at 1 January 2017 117,192 (112,126) (2,317) 2,749
Comprehensive Income
Loss for year - (1,980) - (1,980)
Other comprehensive income
Exchange differences on
translation of foreign operations
4.5b
- - (121) (121)
Cash flow hedge
4.5c
- - 15 15
Income tax relating to other
comprehensive income
- - - -
Total comprehensive income - (1,980) (106) (2,086)
Share option compensation
expensed
4.5a
- - 56 56
Contributions of equity, net of
costs
4.3
6,416 - - 6,416
Balance at 31 December 2017 $123,608 ($114,106) ($2,367) $7,135
The above Consolidated Statement of Movements in Equity should be read in conjunction with the accompanying notes.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 4
Consolidated Statement of Financial Position
as at 31 December 2018
2018 2017
Note $000s $000s
Current Assets
Cash and cash equivalents
3.1a
933 1,563
Trade and other receivables
3.1b
17,978 11,690
Derivative financial instruments
6.4
- 6
Inventories
3.1c
4,890 3,025
Total current assets 23,801 16,284
Non-Current Assets
Property, plant and equipment
3.2
2,854 948
Intangible assets
3.3
8,970 6,931
Total non-current assets 11,824 7,879
Total assets 35,625 24,163
Current Liabilities
Trade and other payables
3.1d
20,212 12,703
Contract liability
2.2
620 526
Provisions
3.1e
415 377
Derivative financial instruments
6.4
10 -
Borrowings
4.1
4,148 591
Total current liabilities 25,405 14,197
Non-Current Liabilities
Borrowings
4.1
1,494 2,007
Contract liability
2.2
2,352 824
Total non-current liabilities 3,846 2,831
Total liabilities 29,251 17,028
Net assets
$6,374 $7,135
Equity
Contributed equity
4.3
123,627 123,608
Accumulated losses
4.4
(115,186) (114,106)
Other reserves
4.5
(2,067) (2,367)
Total equity
$6,374 $7,135
For and on behalf of the Board
............................ ..............................
Director Director
1 March 2019 1 March 2019
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 5
Consolidated Cash Flow Statement
for the year ended 31 December 2018
2018 2017
Note $000s $000s
Cash flows from operating activities
Receipts from customers exclusive of GST/VAT 54,973 41,406
Payments to suppliers and employees exclusive of
GST/VAT
(52,058) (40,605)
Interest paid (912) (522)
Interest received 7 45
Taxation paid (274) (24)
Net GST/VAT received 113 957
Net cash inflow from operating activities
1,849 1,257
Cash flows from investing activities
Payments for property, plant and equipment
3.2
(836) (260)
Payments for intangible assets
3.3
(1,690) (2,358)
Payment on acquisition of iProximity Pty Limited
6.1b
(1,367) -
Net cash outflow from investing activities (3,893) (2,618)
Cash flows from financing activities
Cash proceeds / (costs) from ordinary shares
4.3
19 (13)
New loans 4.1 3,643 1,083
Loan repayments 4.1 (2,348) -
Finance lease borrowing 251 -
Lease repayments (247) (25)
Net cash inflow from financing activities 1,318 1,045
Net decrease in cash and cash equivalents (726) (316)
Cash and cash equivalents at the beginning of the financial
period
1,563 2,099
Effect of exchange rate movements on cash 96 (220)
Cash and cash equivalents at end of year
3.1a
$933 $1,563
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 6
1. Basis of preparation
1.1 General Information
Wellington Drive Technologies Limited (the “company”) and its subsidiaries (together the “group”) develop
Internet of Things (IoT) solutions and manufacture, market and sell energy saving, electronically commutated
(EC) motors, connected controllers and fans for worldwide use.
The company is a limited liability incorporated and domiciled in New Zealand. The address of its registered office
is 21 Arrenway Drive, Rosedale, Auckland 0632 New Zealand. The company is registered under the Companies
Act 1993 and is an FMC reporting entity under Part 7 of the Financial Markets Conduct Act 2013. The financial
statements have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct
Act 2013 and the NZX Main Board Listing Rules.
These consolidated financial statements have been approved for issue by the Board of Directors on 1 March
2019.
1.2 Summary of Significant Accounting Policies
(a) Basis of preparation
These consolidated financial statements of the group have been prepared in accordance with generally accepted
accounting practice in New Zealand. The group is a for-profit entity for the purposes of financial reporting. The
consolidated financial statements comply with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS), other New Zealand accounting standards and authoritative notices that are applicable to
entities that apply NZ IFRS. The consolidated financial statements also comply with International Financial
Reporting Standards (IFRS).
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
Entities reporting
The financial statements are for the consolidated group which is the economic entity comprising of Wellington
Drive Technologies Limited and its subsidiaries.
Historical cost convention
These financial statements have been prepared under the historical cost convention except for derivative
financial information which is measured at fair value.
New and amended standards adopted by the group
The group has applied the following standards and amendments for the first time for the reporting period
commencing 1 January 2018:
• NZ IFRS 9 Financial Instruments
• NZ IFRS 15 Revenue from Contracts with Customers
• NZ IFRS 16 Leases (early adopted)
The group had to change its accounting policies and make certain retrospective adjustments following the
adoption of these standards. This is disclosed in note 1.2(e).
New standards, amendments and interpretations not yet adopted
There are no new accounting standards, amendments and interpretations issued that are mandatory for future
periods that are likely to have a material impact on the financial statements prepared by the company.
This section sets out the group’s significant accounting policies that relate to the
financial statements as a whole. Where an accounting policy is specific to a note,
that policy is stated in the note to which it relates.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 7
Going concern assumption
The group reported a loss after tax of $713,000 (2017: $1,980,000) and cash inflows from operating activities of
$1,849,000 (2017: $1,257,000) for the year ended 31 December 2018. As at 31 December 2018, the group
had cash of $933,000 (2017: $1,563,000), borrowings falling due for repayment in the next 12 months of
$4,148,000 (2017: $591,000) and net current liabilities of $1,604,000 (2017: net current assets of $2,087,000).
The company closely monitors its cash requirements as described in note 5.1(d). In December 2018, the group
secured a $1,500,000 trade finance facility from a bank which was undrawn at balance date. After balance date,
the company secured an option to extend the repayment date of the US$600,000 loan from Meta Capital Limited,
from June 2019 to March 2020.
In assessing the adoption of the going concern principle in the preparation of the financial statements, the
directors have reviewed and adopted the group future cash flow forecast (forecast) to 31 March 2020. In
preparing the forecast, management also considered known events and conditions beyond 31 March 2020. The
group is forecasting for 2019 to be a year of further profit expansion with EBITDA higher than for 2018 and to
generate cash flows from operations that will support investing activities and repayment of borrowings on their
due date. This forecast includes judgments and estimates over key assumptions relating to future revenue,
gross margins, operating costs and capital expenditure and the ability to manage those costs to respond to
changes that might arise between actual and forecast cash flows over the forecast period. The forecast also
includes future cash inflows of $1,325,000 from employees for the exercise of partly paid ordinary shares and
US employee options, the exercise of which depends on circumstances at the time.
Management have considered several risk scenarios, including mitigating actions that would be undertaken in
the event actual cash flows vary adversely from forecast. These actions include deferring planned increases in
headcount and delaying capital expenditure, if required, where this expenditure does not adversely impact sale
growth and margins. The group can also take extended payment terms from its major supplier. It should be
noted that by their very nature, forecasts include inherent uncertainty and actual results may vary.
Given the nature of the judgments and estimates noted above and the management’s ability to take mitigating
actions, it is the considered view of the Directors that the group will have access to adequate resources to meet
its ongoing obligations for at least a period of 12 months from the date of signing these consolidated financial
statements.
On this basis, the Directors have assessed it is appropriate to adopt the going concern basis in preparing its
financial statements.
(b) Principles of consolidation
Subsidiaries are all entities over which the group has control. The group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with the entity and can affect these returns
through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are
deconsolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost
of an acquisition is measured as the fair value of the assets given and equity instruments issued, and liabilities
incurred or assumed at the date of exchange. Identifiable assets acquired, and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective
of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s
share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is recognised directly in the Statement of
Comprehensive Income.
Intercompany transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency
with the policies of the group.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 8
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the group’s entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’). The company’s functional
currency is US Dollars because its purchase and sale of product is mainly denominated in US Dollars.
Subsidiaries and operations in the USA, China, Brazil, Turkey, Mexico, Italy, Australia and Singapore use their
local currency as the functional currency.
The consolidated financial statements are presented in New Zealand dollars, rounded to the nearest thousand,
which is the group’s presentation currency. The presentation currency remains New Zealand dollars due to the
company’s shareholder base being concentrated in New Zealand.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the Statement of Comprehensive Income.
(iii) Foreign operations
The results and balance sheets of all foreign operations that have a functional currency different from New
Zealand dollars are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the
Statement of Financial Position;
• income and expenses for each Statement of Comprehensive Income are translated at average exchange
rates, unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions; and
• all resulting exchange differences are recognised in other comprehensive income as a separate component
of equity.
(d) Critical accounting estimates
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are detailed in the following notes to the financial statements:
Area of estimation
• Going concern assumption – note 1.2a
• Development costs – capitalisation of expenses and impairment testing – note 3.3
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 9
(e) Changes in accounting policies
This note explains the impact of the adoption of NZ IFRS 9 Financial Instruments, NZ IFRS 15 Revenue from
Contracts with Customers and NZ IFRS 16 Leases on the group’s financial statements.
The new accounting policy for each standard adopted are detailed in:
NZ IFRS 9 - note 3.1(b)
NZ IFRS 15 - note 2.2
NZ IFRS 16 - note 6.5
The adjustments arising from NZ IFRS 15, NZ IFRS 9 and NZ IFRS 16 are recognised in the opening balance
sheet on 1 January 2018. The following table shows the adjustments recognised for each individual line item
as recognised in the opening balance sheet without restating comparative information. The adjustments are
explained in more detail by accounting standard below.
2017 as
originally
presented
NZ IFRS 15 NZ IFRS 9 NZ IFRS 16 1 January
2018
Restated
Consolidated Statement of
Financial Position
$000s $000s $000s $000s $000s
Current assets
Cash and cash equivalents
1,563 - - - 1,563
Trade and other receivables 11,690 (175) (10) - 11,505
Derivative financial instruments 6 - - - 6
Inventories 3,025 66 - - 3,091
Total current assets
16,284
(109)
(10)
- 16,165
Non-Current Assets
Plant and equipment 948 - - 1,461 2,409
Intangible assets 6,931 - - - 6,931
Total non-current assets 7,879 - - 1,461 9,340
Total assets 24,163 (109) (10) 1,461 25,505
Current Liabilities
Trade and other payables
12,703 - - - 12,703
Contract liabilities 526 - - - 526
Provisions 377 - - - 377
Borrowings 591 - - 178 769
Total current liabilities
14,197 - - 178 14,375
Non-Current Liabilities
Borrowings 2,007 - - 1,531 3,538
Contract liabilities 824 - - - 824
Total non-current liabilities 2,831 - - 1,531 4,362
Total liabilities 17,028 - - 1,709 18,737
Net assets $7,135 ($109) (10) ($248) $6,768
Equity
Contributed equity
123,608 - - - 123,608
Accumulated losses
(114,106) (109) (10) (248) (114,473)
Other reserves
(2,367) - - - (2,367)
Total equity
$7,135 ($109) (10) ($248) $6,768
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 10
NZ IFRS 9 Financial instruments
NZ IFRS 9 replaces the provisions of NZ IAS 39 that relate to the recognition, classification and measurement
of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets
and hedge accounting. Financial assets are assets that are cash, equity instruments and / or a contractual right
to receive cash or another financial asset. The group’s financial assets include cash, accounts receivable and
forward foreign exchange contracts. Financial liabilities are contractual obligations to deliver cash or another
financial asset or a contract that will or may be settled by delivering equity. The group’s financial liabilities
include trade payables, borrowings and forward foreign exchange contracts.
The adoption of NZ IFRS 9 resulted in changes in accounting policies and adjustments recognised in the
financial statements, disclosed in note 3.1(b). Financial assets are measured at fair value upon initial recognition
and subsequently at amortised cost or fair value through other comprehensive income. As a result of the
transition to NZ IFRS 9, the group reclassified a portion of trade receivables from amortised cost to fair value
through other comprehensive income because the group's business model is to hold these receivables to collect
and sell (note 3.1(b)). All other financial assets continue to be measured at amortised cost. The group’s financial
liabilities are measured initially at fair value and subsequently at amortised cost. The group has no material
hedging arrangements.
In relation to the change in impairment methodology, the group applies the NZ IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. This
resulted in an increase in the loss allowance on 1 January 2018 of $10,000 for all trade receivables with an
equivalent increase in accumulated losses at that date. The loss allowance increased by a further $6,000 for
trade receivables during the current reporting period. In accordance with the transitional provisions in NZ IFRS
9, comparative figures have not been restated.
There was no other impact on financial assets and financial liabilities.
NZ IFRS 15 Revenue from Contracts with Customers
The group has adopted NZ IFRS 15 from 1 January 2018 which resulted in changes in accounting policies and
adjustments to the amounts recognised in the opening balance sheet. The group applied NZ IFRS 15 with the
cumulative effect of applying the accounting standard for the first time recognised at the date of initial application
of 1 January 2018.
The adoption of NZ IFRS 15 resulted in a contract with an overseas distributor being treated as an agency service
contract instead of principal goods purchase and sale contract. The company has an agreement with a distributor
in Brazil whereby that distributor transacts on behalf of the company. Previously the group recognised revenue
on delivery of product to that distributor. Under NZ IFRS 15, revenue is only recognised upon delivery of that
product by the distributor to the ultimate customer. The distributor does not have an unconditional obligation to
pay for the product until it receives payment from the end customer.
The impact of adopting NZ IFRS 15 on the results for 2018 was to reduce reported revenue by $88,000, reduce
reported gross profit by $165,000 and reduce reported EBITDA by $182,000. Inventory increased by $486,000
and trade receivables decreased by $864,000.
If comparative amounts for the 2017 year had been restated, revenue for the 2017 financial year would have
increased by $157,000, gross profit increased by $7,000 and operating expenses increased by $36,000.
Accumulated losses at 31 December 2017 would have increased by $29,000. Amounts disclosed at 31
December 2017 for trade and other receivables would have decreased by $175,000 and inventory increased by
$66,000.
NZ IFRS 16 Leases
The group has adopted NZ IFRS 16 retrospectively from 1 January 2018 but has not restated comparatives for
the 2017 reporting period as permitted under the specific transition provisions in the standard.
On adoption of NZ IFRS 16, the group recognised lease liabilities in relation to leases which had previously been
classified as operating leases under the principles of NZ IAS 17 Leases. These liabilities were measured at the
present value of the remaining lease payments, discounted using the incremental borrowing rate as of 1 January
2018. The weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2018 was
6.6%.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 11
2018
$000s
Operating lease commitments disclosed as at 31 December 2017 652
Add adjustment for different treatment of property lease renewal option 1,581
Less short-term leases recognised on a straight-line basis as an expense (50)
Discounted using the group’s incremental borrowing rate of 6.6% (474)
Add finance lease liabilities recognised as at 31 December 2017 34
Lease liability recognised as at 1 January 2018 $1,743
The associated right-of-use assets were measured on a retrospective basis as if the new rules had always been
applied. Property, plant and equipment increased by $1,461,000 on 1 January 2018. The net impact on
accumulated losses on 1 January 2018 was $248,000.
In applying NZ IFRS 16 for the first time, the group has used the following practical expedients permitted by the
standard:
• The use of a single discount rate to leases with reasonably similar characteristics; and
• Short term leases of less than 12 months and low-value assets (US$5,000 or less) are recognised as
an operating expense in the Statement of Comprehensive Income.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 12
2. Results for the year
2.1 Segment information
An operating segment is a component of an entity that engages in business activities from which it earns
revenues and incurs expenses, whose operating results are regularly reviewed by the chief operating decision
maker and for which discrete financial information is available.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Chief Executive Officer supported by the Management Team
who report directly to the CEO.
(a) Reportable segments
The group is organised on a global basis into one operating segment - marketing, sale, manufacture and
development of IoT solutions, electric motors and associated electronics. The financial statements therefore
reflect the results and financial position of the segment.
(b) Geographical segments
The group operates in three main geographical areas, although it is managed on a global basis.
2018 2017
Revenue from external customers by geographic areas
$000s $000s
Americas
50,282 35,939
Asia / Pacific (APAC)
4,286 3,562
Europe / Middle East / Africa (EMEA) 4,193 3,807
Total $58,761 $43,308
Revenue is allocated above based on the country in which the customer is located.
APAC revenue includes $143,000 (2017 – $7,000) from New Zealand customers.
Major Customers
The group has four major customers (defined as customers representing 10% or more of revenues) accounting
for invoiced revenues of $31,395,000 (2017: two customers accounting for invoiced revenues of $22,457,000),
all within the Americas geographic segment.
2018 2017
Total non-current assets
$000s $000s
Americas
34 20
Asia / Pacific (APAC) – mainly in New Zealand
11,692 7,853
Europe / Middle East / Africa
98 6
Total $11,824 $7,879
Total non-current assets are allocated based on where the assets are located.
This section focuses on the results and performance for the group and how those
numbers are calculated.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 13
2.2 Revenue
2018 2017
$000s $000s
Sales of goods revenue – recognised at a point in time 58,171 43,081
Services revenue – recognised over time 590 227
$58,761 $43,308
Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and
services, excluding GST / VAT, rebates and discounts and after eliminating sales within the group. The group
disaggregates revenue from contracts with customers by geographical regions, which is detailed in note 2.1(b).
(a) Sale of Goods
The group manufactures and sells a range of energy efficient motors and IoT hardware to the food and beverage
market. Sales are recognised when control has transferred to the buyer which is usually when delivery of the
goods to the buyer pursuant to the Incoterms that apply, and there is no unfulfilled obligation that could affect
the customer’s acceptance of the products. Delivery occurs when the products have been delivered in
accordance with the pre-agreed Incoterms between the group and the buyer, the risks of obsolescence and loss
have been transferred to the buyer, and either the buyer has accepted the products in accordance with the sales
arrangement, the acceptance provisions have lapsed, or the group has objective evidence that all criteria for
acceptance have been satisfied.
Some of the sale of goods are subject to CIF (Cost, Insurance and Freight) Incoterms. The group considers
these freight services to be a distinct service. For these sales, the total sales price is allocated to the separate
performance obligations, being the product and the insurance and freight costs. Further, the group considers
itself an agent only in the provision of the freight services. Revenue for the CIF element is recognised only to
the extent of the margin for providing the agent services. However, there are limited sales under CIF terms and
the impact on revenue is estimated to be minor.
The group has in-market distributors in China and Brazil to supply goods to buyers in those markets who require
local delivery. These distributors transact as agents. The group is the principal in these transactions. Sales of
product are recognised when these distributors deliver the product to buyers at which point control has passed
to the buyer.
Product may be sold with retrospective volume rebates based on aggregate sales over a 12 months period.
Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume
rebates. Accumulated experience and customer knowledge are used to determine the rebate amounts using
the expected value method and revenue is only recognised to the extended that it is highly probable significant
reversals will not occur. The liability to pay volume rebates is recognised (included in trade and other payables)
in respect of sales made until the end of the reporting period.
No element of financing is deemed present as the sales are made with a credit term of 30 - 120 days which is
consistent with market practice. A receivable is recognised when the goods are delivered as this is the point of
time that the consideration is unconditional because only the passage of time is required before the payment is
due.
(b) Sale of services
Associated with the supply of IoT hardware, the group supplies a range of data, SAS and reporting services, all
installed on every SCS Connect and SCS Click sold and are distinct services from the sale of goods. Revenue
from the provision of such services is recognised when services are rendered to the buyer. Contracts typically
cover a period from hardware supply of anywhere from 1 to 10 years, dependent on customer requirements.
Contracts specify the price for the provision of the services. Revenue from such contracts is recognised on a
straight-line basis over the contract term because the customer receives and uses the benefits simultaneously.
The group has received revenue in previous years amounting to $US212,000 in connection with the development
of a new motor product. This revenue has been deferred as a contract liability and will be recognised in the
income statement when the motor development is complete, and products are sold pursuant to a licence
agreement.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 14
Contract liabilities
2018 2017
$000s $000s
Carrying amount at start of year 1,350 591
On acquisition of iProximity Pty Limited (note 6.1b) 18 -
Invoiced in the year
2,063 1,004
Recognised
(590) (227)
Exchange adjustment
131 (18)
Carrying amount at end of year $2,972 $1,350
2.2 Other income
2018 2017
$000s $000s
Net foreign exchange gains
144 215
Other income
7 36
$151 $251
2.3 Operating expenses
(a) Employee benefits
2018 2017
$000s $000s
Wages and salaries and other short-term benefits
8,986 7,754
Employee share options expense
12 56
Employee benefits
$8,998 $7,810
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the reporting date are recognised in other payables in respect of
employees’ services up to the reporting date and are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and
measured at the rates paid or payable.
The group recognises a liability and an expense for bonuses and creates a provision where contractually obliged
or where there is a past practice that has created a constructive obligation.
2.4 Income tax expense
Current and deferred income tax
The income tax expense or revenue for the year is the tax payable on the current period’s taxable income (based
on the national income tax rate for each jurisdiction) adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts
in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply
when the assets are recovered, or liabilities are settled, based on those tax rates which are enacted or
substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made
for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax
asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than
a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit
or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 15
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal
of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Goods and Services Tax (GST) and Value Added Tax (VAT)
The Statement of Comprehensive Income has been prepared so that all components are stated exclusive of
GST and VAT. All items in the Statement of Financial Position are stated net of GST and VAT, except for
receivables and payables, which include GST and VAT invoiced.
(a) Income tax expense
The company and group have unrecognised tax losses available to carry forward and offset against current year
taxable income. Taxation of $261,000 (2017: $83,000) is payable in respect of some overseas subsidiaries.
(b) Unrecognised tax losses
2018 2017
$000s $000s
Reported loss for period before tax
(452) (1,897)
Non-deductible / non-assessable items
98 355
Less unrecognised timing differences
2,361 1,185
Net loss for tax purposes
2,007 (357)
Losses carried forward from prior years
(101,788) (100,474)
Adjustment of prior periods
(1,353) 71
Overseas taxable income
(676) (401)
Exchange adjustments
217 (627)
Losses available to carry forward to future years
($101,593) ($101,788)
Of the total consolidated losses available to carry forward to future years, $903,000 (2017 - $1,968,000) arises
in the USA and is subject to their continuity requirements. USA Federal tax losses expire after 15 to 20 years,
depending on when those losses were incurred. During the 2018 year no USA Federal tax losses expired (2017
- None).
(c) Unrecognised deferred tax balances
The group has not recognised income tax losses and temporary differences as a future income tax benefit due
to the uncertainty of their recoverability in the immediate future. Losses available to be carried forward are
subject to the shareholder continuity requirements of the New Zealand Income Tax Act 1994 and the countries
in which the losses have arisen. Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset and they relate to the same tax authority. The New Zealand corporate tax rate of 28%
has been used to determine the below unrecognised deferred tax assets:
2018 2017
$000s $000s
Doubtful debts
36 30
Inventory provisions and eliminations
121 45
Employee benefits
293 269
Other timing differences
1,098 699
Tax losses to carry forward 28,450 28,501
Unrecognised net deferred tax asset
$29,998 $29,544
(d) Imputation credits
The group has no imputation credits available (2017 – $nil) and no movements occurred in the Imputation Credit
Account (2017 – $nil).
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 16
2.5 Earnings per share
Earnings per share (‘EPS’) is the amount of post-tax profit attributable to each share.
Basic EPS of a loss of 0.28 cents (2017 – loss of 0.77 cents) is calculated by dividing the loss attributable to
equity holders of the company of $713,000 (2017 – ($1,980,000)) by the weighted average number of ordinary
shares in issue during the year of 257,235,719 (2017 – 257,041,576).
Diluted EPS of a loss of 0.28 cents (2017 - loss of 0.77 cents) reflects any commitments the group has to issue
shares in future that would decrease EPS. The weighted average number of ordinary shares is compared with
the number of shares that would have been issued assuming the exercise of share options. As at 31 December,
the following instruments existed that are, or were, potentially dilutive of future earnings per share, but were not
included in the calculation of diluted EPS for that year because the effect in that year would have been anti-
dilutive:
Number of shares
2018 2017
Part paid shares 12,460,638 12,703,070
US employee share options 1,818,385 1,914,601
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 17
3. Operating assets and liabilities
3.1 Working capital
Working capital represents the assets and liabilities the group generates through its trading activities. The group
therefore defines working capital as cash, trade and other receivables, inventory and trade and other payables.
(a) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short
term and highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
2018 2017
$000s $000s
Cash on hand and at bank
372 835
Call deposits
485 652
Short term bank deposit
76 76
$933 $1,563
The carrying amount of the group’s cash and cash equivalents is denominated in the following currencies:
NZD
147 151
USD
614 1,370
Other
172 42
$933 $1,563
(b) Trade and other receivables
Trade receivables are recognised initially at the value of the invoice sent to the customer. The group generally
holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest rate method. The carrying amounts of the trade
receivables also includes a $1,970,000 receivable which is subject to a factoring arrangement without recourse.
Under this arrangement the group holds the trade receivable with the object to collect and sell the contractual
cash flows and therefore measures them subsequently at fair value through other comprehensive income. The
receivables are de-recognised from the balance sheet when the cash is received through the factoring
arrangement. Any fair value adjustments accumulated within other comprehensive income are recycled through
the profit and loss account upon de-recognition of the receivable. As at the year end, no impact was recorded
within other comprehensive income as a result of this arrangement. Trade receivables are generally due for
settlement no more than 120 days from the date of recognition.
From 1 January 2018, the group applied the simplified approach permitted by NZ IFRS 9 which requires expected
lifetime credit losses to be recognised from initial recognition of the trade receivable. Trade receivables are
written off when there is no reasonable expectation of recovery.
NZ IFRS 9 requires the group to calculate expected credit losses on trade receivables using a provision matrix.
The group has reviewed its credit loss experience over the period from 2013 to 2017 and has determined that
the credit loss experience over that period was 0.1% of revenue. Consideration has been given to market
environmental factors to determine whether future conditions will impact. The provision for credit loss at balance
date has been calculated at 0.1% (2017: 0.1%).
This section focuses on the assets used to generate the group’s trading performance
and the liabilities incurred as a result.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 18
2018 2017
$000s $000s
Trade receivables
16,900 11,146
Provision for loss allowance
(130) (107)
Net trade receivables 16,770 11,039
Prepayments
475 325
VAT/GST refunds due
617 259
Income tax refund due
35 22
Other receivables
81 45
$17,978 $11,690
The carrying amount of the group’s trade and other receivables is denominated in the following currencies:
NZD
317 49
USD
16,407 10,706
EUR
70 112
Other 1,184 823
$17,978 $11,690
Provision for loss allowance
Carrying amount at start of year 107 148
Adjustment on adoption of NZ IFRS 9 10 -
Increase / (decrease) in loss allowance 7 (39)
Exchange adjustment 6 (2)
Carrying amount at end of year $130 $107
The increase in provision is recognised within ‘Operating expenses’ in the Statement of Comprehensive Income.
(c) Inventories
Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of
inventory based on first in first out. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs necessary to make the sale.
Management reviews inventory on a line by line basis. Judgments are made about expected selling prices and
obsolescence based on forecast sales. A provision is recognised for inventory which is expected to sell for less
than cost.
2018 2017
$000s $000s
Finished goods – at cost 3,449 2,271
Work in progress – at cost
1,244 549
Raw materials – at cost
342 267
Less inventory provisions
(145) (62)
Total inventories
$4,890 $3,025
All inventories are subject to a security interest.
Cost of inventories recognised as an expense and included in cost of sales $42,670,000 (2017: $31,434,000).
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 19
(d) Trade and other payables
Trade payables are recognised at the value of the invoice received from a supplier. These amounts represent
liabilities for goods and services provided to the group prior to balance date. The amounts are unsecured and
are usually paid within 90 days of recognition.
2018 2017
$000s $000s
Trade payables
18,138 11,233
Employee entitlements
1,337 1,179
Income tax payable
- 49
Accrued expenses
737 242
$20,212 $12,703
The carrying amount of the group’s trade and other payables is denominated in the following currencies:
NZD
1,849 1,625
USD
17,896 10,468
Other
467 610
$20,212 $12,703
(e) Provisions
Provisions are recognised when the group has a present legal or constructive obligation because of past events,
is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has
been reliably estimated. Provisions are not recognised for future operating losses.
The group sells goods with warranty periods of up to five years. The terms of the warranty provide that the group
will repair or replace items that fail to perform satisfactorily. A provision has been recognised based on historical
data and average levels of repairs and warranty claims experienced by the group. It is expected that the
provision will be utilised within one year as any product failures are typically exhibited within one year of sale.
2018 2017
Warranty provision
$000s $000s
Carrying amount at start of year 377 253
Additional provisions recognised 137 300
Amounts used (124) (175)
Exchange adjustment 25 (1)
Carrying amount at end of year $415 $377
3.2 Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation and impairments. Historical cost
includes expenditure that is directly attributable to the acquisition of the items and the costs of bringing the asset
to the location and condition for it to be capable of operating in the manner intended.
Costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item
can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive
Income during the financial year in which they are incurred.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 20
Depreciation of plant and equipment is calculated using the straight-line method to allocate their cost net of their
residual values, over their estimated useful lives, as follows:
Useful Life
Plant and equipment 3 – 15 years
Property 12 years
Office equipment, furniture and fittings 3 – 15 years
The assets’ residual values and useful lives are reviewed and adjusted as appropriate at each balance date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
Plant and equipment can be analysed as follows:
Plant & equipment Office equipment,
furniture & fittings
Property Total
$000s $000s
$000s
$000s
At 31 December 2016
Cost
5,196 1,796 - 6,992
Accumulated depreciation and
impairment
(4,380) (1,460) - (5,840)
Exchange adjustment (35) (118) - (153)
Net book amount
$781 $218
-
$999
Year ended 31 December 2017
Opening net book amount 781 218 - 999
Additions 230 30 - 260
Depreciation (229) (72) - (301)
Exchange adjustment (11) 1 - (10)
Closing net book amount $771 $177 - $948
At 31 December 2017
Cost
5,426 1,826 - 7,252
Accumulated depreciation and
impairment
(4,609) (1,532) - (6,141)
Exchange adjustment (46) (117) - (163)
Net book amount
$771 $177 - $948
Year ended 31 December 2018
Opening net book amount 771 177 - 948
Adjustment on adoption of
NZ IFRS 16 (note 6.5)
24 8 1,429 1,461
Additions 746 90 - 836
Depreciation (250) (107) (179) (536)
Exchange adjustment 52 52 41 145
Closing net book amount $1,343 $220 $1,291 $2,854
At 31 December 2018
Cost
6,216 1,928 2,078 10,222
Accumulated depreciation and
impairment
(4,879) (1,643) (828) (7,350)
Exchange adjustment
6 (65) 41 (18)
Net book amount
$1,343 $220 $1,291 $2,854
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 21
Depreciation
2018 2017
$000s $000s
Plant and equipment 250 229
Office equipment, furniture & fittings, and property 286 72
$536 $301
Capital commitments
Capital commitments contracted for at 31 December 2018 amounted to $361,000 (2017 - $41,000).
3.3 Intangible assets
Research, development and patent costs
Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical
knowledge and understanding, is recognised in the Statement of Comprehensive Income as an expense when
it is incurred.
Expenditure on development activities, being the application of research findings or other knowledge to a plan
or design to produce new or substantially improved products or services before the start of commercial
production or use, is capitalised if the product or service is technically and commercially feasible and adequate
resources are available to complete development. This involves the use of judgement. Development costs are
capitalised once it can be demonstrated that the asset is supported by future economic benefits. Management
considers the following criteria when making its judgment as to when it is appropriate to commence capitalisation
of development costs:
• technical feasibility of completing the development so that it will be available for use or sale;
• intention to complete the development;
• ability to use the developed asset or sell it;
• existence of a market;
• availability of adequate technical, financial and other resources to complete and commercialise the
development; and
• ability to measure reliably the expenditure attributable to the development.
All capitalised development costs met the criteria as outlined above.
The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct
labour and an appropriate proportion of overheads.
Development expenditure which does not meet the criteria for capitalisation is recognised in the Statement of
Comprehensive Income as an expense as incurred. Capitalised development expenditure is stated at cost less
accumulated amortisation and any impairment losses.
Amortisation is calculated using the straight-line method to allocate the cost over the period of the expected
benefit, up to a maximum of 10 years for motors and up to a maximum of 5 years for SCS Controllers. Judgment
is involved in determining this period of benefit. For motors, the group considered the earlier versions of motors
and the length of time from completion to continued sales contribution; whereas for SCS controllers, the group
considered that 5 years is an appropriate life given the inherent risk of rapid technological change.
Patents
Capitalised patent costs are amortised on a straight-line basis over the period of expected benefit no longer than
the life of the patent, up to a maximum of 20 years.
Computer software
Acquired computer software licences are capitalised based on the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their estimated useful lives (3 to 5 years).
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 22
Impairment testing of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready for use are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating units).
Intangible assets can be analysed as follows:
Internally
Generated
Development
costs
Patents Goodwill Other Total
$000s $000s $000s $000s $000s
At 31 December 2016
Cost 10,243 1,361 - 675 12,279
Accumulated amortisation (5,152) (922) - (487) (6,561)
Exchange adjustment 206 13 - (23) 196
Net book amount $5,297 $452 $- $165 $5,914
Year ended 31 December 2017
Opening net book amount 5,297 452 - 165 5,914
Additions 2,311 45 - 2 2,358
Amortisation and impairment (1,130) (102) - (13) (1,245)
Exchange adjustment (86) (9) - (1) (96)
Closing net book amount $6,392 $386 $- $153 $6,931
At 31 December 2017
Cost 12,554 1,406 - 677 14,637
Accumulated amortisation (6,282) (1,024) - (500) (7,806)
Exchange adjustment 120 4 - (24) 100
Net book amount $6,392 $386 $- $153 $6,931
Year ended 31 December 2018
Opening net book amount 6,392 386 - 153 6,931
Additions 2,149 73 896 4 3,122
Amortisation and impairment (1,368) (98) - (9) (1,475)
Exchange adjustment 362 22 - 8 392
Closing net book amount $7,535 $383 $896 $156 $8,970
At 31 December 2018
Cost 14,703 1,479 896 681 17,759
Accumulated amortisation (7,650) (1,122) - (509) (9,281)
Exchange adjustment 482 26 - (16) 492
Net book amount $7,535 $383 $896 $156 $8,970
The goodwill relates to the provisional goodwill from the iProximity Pty Limited acquisition (note 6.1(b)).
Included within internally generated development costs is $2,329,000 (2017: $2,237,000) for projects
underway and not complete at balance date. This cost is not yet being amortised. An impairment assessment
has been performed at 31 December 2018 considering costs to complete the developments, costs to set up
the manufacturing capability, estimates of market volume and price and estimated manufacturing unit costs.
Amortisation and impairment
2018 2017
$000s $000s
Amortisation of intangible assets 1,475 1,221
Impairment of intangible assets - 24
$1,475 $1,245
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 23
4. Capital and financing costs
4.1 Borrowings
2018 2017
$000s $000s
Current portion
Loan facility – Smartshares Limited
500 -
Loan facility – Meta Capital Limited
894 564
Loan facility – Onimeg Investments Limited
2,500 -
Other borrowings
254 27
Liability at end of year
$4,148 $591
Non-Current portion
Loan facility – Smartshares Limited
- 2,000
Other borrowings
1,494 7
Liability at end of year
$1,494 $2,007
Borrowings are initially recognised at fair value, net of transaction costs incurred, and are subsequently
measured at amortised cost. Any difference between the proceeds and the redemption amount is recognised in
the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of
the liability for at least 12 months after balance date. Borrowing costs are expensed when incurred.
Loan facility – Smartshares Limited
The company has a $2 million unsecured loan facility from Smartshares Limited, a shareholder. The facility
expires on 22 March 2019. $1,500,000 was repaid in September 2018 and $500,000 remains owing as at 31
December 2018. Interest is payable quarterly at 15.75% pa. A $20,000 annual revolver fee is payable.
Loan facility – Meta Capital Limited
The loan outstanding at 31 December 2017 and an additional US$200,000 during the year from Meta Capital
Limited, a company related to a director, was repaid in May 2018. In June 2018 the company borrowed a further
US$ 600,000 which is due for repayment on 28 June 2019. Interest is payable at 12.5% on repayment (16.5%
from October 2018 on extension of the repayment date).
Loan facility – Onimeg Investments Limited
In September 2018 the company borrowed $2,500,000 from Onimeg Investments Limited. The loan is due for
repayment on 17 September 2019 and is unsecured. Interest is payable at 16% pa on a quarterly basis in
arrears.
This section sets out the group’s capital structure and shows how it finances its
operations and growth.
To finance the group’s activities (now and in the future) the Board monitors and
determines the appropriate capital structure for Wellington to execute strategy and to
deliver its business plan.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 24
Other borrowings
Comprises lease liabilities in respect of “right of use” assets accounted for in 2018 under NZ IFRS 16 Leases (see
note 6.5).
4.2 Finance
2018 2017
$000s $000s
Finance income
Other interest income
7 45
$7 $45
Finance expenses
Mandatory convertible preference shares
- 537
Interest paid / payable – Smartshares Limited
248 244
Interest paid / payable – Meta Capital Limited
108 8
Interest paid / payable – Onimeg Investments Limited
119 -
Other interest expense 437 145
$912 $934
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 25
4.3 Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
2018 2017 2018 2017
Shares Shares $000s $000s
Ordinary shares – fully paid 257,436,000 257,097,352 123,590 123,571
Ordinary shares – partly paid 12,460,638 12,703,070 37 37
US employee share options 1,818,385 1,914,601 - -
Total shares and options on issue 271,715,023 271,715,023 $123,627 $123,608
(a) Ordinary shares – fully paid
Opening balance of ordinary shares on issue
257,097,352 231,684,047 123,571 117,155
Issue of ordinary shares during the year:
• Conversion of Preference Shares
- 25,211,740 - 6,429
• Exercise of part paid shares
338,648 201,565 19 19
• Share issue costs
- - - (32)
Ordinary fully paid shares on issue at year end
257,436,000 257,097,352 $123,590 $123,571
All ordinary shares are authorised and have no par value. Ordinary shares entitle the holder to participate in
dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on
shares held.
(b) Ordinary shares – partly paid
Partly paid shares outstanding at start of year 12,703,070 12,904,635 37 37
Issue of partly paid shares during the year: - - - -
Exercise of part paid shares during the year (242,432) (201,565) - -
Ordinary part paid shares on issue at year end 12,460,638 12,703,070 $37 $37
For further details of part paid shares see 6.2c
(c) US employees share options (numbers)
2018
Share Options
2017
Share Options
Options outstanding at start of year 1,914,601 1,914,601
Issue of U.S. employee options during the year: (96,216) -
Outstanding at end of year 1,818,385 1,914,601
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 26
4.4 Accumulated losses
2018 2017
$000s $000s
Opening balance (114,106) (112,126)
Adjustment on adoption of NZ IFRS 9, NZ IFRS15 and NZ
IFRS 16 (net of tax)
(367) -
Loss for the year
(713) (1,980)
Surrendered & lapsed employee share option scheme benefits - -
Accumulated losses at end of year
($115,186) ($114,106)
4.5 Other reserves
2018 2017
$000s $000s
Share option compensation reserve 316 304
Currency translation reserve
(2,383) (2,689)
Hedging reserve
- 18
($2,067) ($2,367)
(a) Share Option Compensation Reserve
2018 2017
$000s $000s
Share based compensation recognised at start of year
304 248
Net compensation expensed
12 56
Surrendered & lapsed share option scheme transferred to
accumulated losses
- -
$316 $304
(b) Currency Translation Reserve
2018 2017
$000s $000s
Opening balance
(2,689) (2,568)
Movements for the year 306 (121)
($2,383) ($2,689)
(c) Hedging reserve
2018 2017
$000s $000s
Opening balance
18 3
Cash flow hedge fair value (losses) / gains for the year
(18) 15
Tax on fair value (losses) / gains - -
$- $18
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 27
5. Risk
5.1 Key financial risks
The group’s principal financial instruments comprise receivables, payables, cash and cash equivalents,
borrowings and derivatives.
The group manages its exposure to the key financial risks – market risk (including foreign currency risk and
interest rate risk), credit risk, liquidity risk and capital risk. The group enters into derivative transactions
(principally forward currency contracts) to manage currency risks.
(a) Financial market risk
Foreign currency risk
The group operates internationally and is exposed to foreign currency risk arising from various currency
exposures. Presently the group's revenue is based on USD pricing and invoicing is almost entirely USD
denominated. The company’s functional currency is USD. The majority of the group's product, manufacturing
and logistics cost is invoiced and settled in USD. This provides a strong natural hedge position between
revenues and costs. USD funds are converted to NZD to meet New Zealand operational costs as required.
The group is primarily exposed to changes in other currencies against the USD exchange rate. The group’s
exposure to foreign currency risk at the end of the reporting period, expressed in NZD was:
2018 2017
Carrying
amount
$000
Currencies
other than
USD
$000
Carrying
amount
$000
Currencies
other than
USD
$000
Cash 933 319 1,563 193
- Trade and other receivables 17,503 1,096 11,365 984
- Trade and other payables (20,212) (2,316) (12,703) (2,235)
- Borrowings (5,642) (4,748) (2,598) (2,034)
The sensitivity of profit or loss to changes in the exchange rates arises mainly from changes in other currencies
against the USD exchange rate. The impact on post tax profit holding all other variables constant at 10%
sensitivity movement is as follows:
2018 2017
$000s $000s
USD exchange rate increase 10% relative to other currencies 407 1,767
USD exchange rate decrease 10% relative to other currencies
(407) 139
The impact on other components of equity is not material because of minimal foreign forward exchange contracts
designated as cash flow hedges.
This section presents information about the group’s exposure to financial and
commercial risks; the group’s objectives, policies and processes for managing
those risks.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 28
The impact of a change in NZD exchange rates on the reported NZD EBITDA result (excluding any gains / losses
arising on financial assets and liabilities summarised above) is demonstrated in the table below.
Reported
in NZD
$000
If NZD /
USD rate
had been
0.60
$000
If NZD /
USD rate
had been
0.80
$000
Revenue 58,761 68,017 51,112
- Gross profit 14,256 16,502 12,400
- Operating income 151 153 150
Operating expenses (excluding depreciation &
amortisation) (11,943) (12,480) (11,470)
- EBITDA $2,464 $4,175 $1,080
Interest Rate Risk
The interest rate on all borrowings is fixed. There is no other interest-bearing debt.
The group has cash deposits in various currencies to facilitate trading in the countries in which it has a presence.
Most of the cash deposits are held in either NZD or USD.
The impact of a 1% increase / decrease in interest rates over a one-year period on the closing cash balance is
not significant.
(b) Credit risk
The group generally trades with customers and banking counterparties who are well established. While there
are individually significant customers, the group takes out trade credit insurance to provide better security.
Receivables balances are managed by and reported regularly to senior management according to credit
management policies and procedures. The amount outstanding at balance date represents the maximum
exposure to credit risk.
At balance sheet date, trade receivables of $565,000 were past due but not considered impaired (2017 -
$187,000). Of this amount $120,000 (2017 - $120,000) was 3 months or more overdue.
The group enters into forward foreign exchange contracts within specified policy limits and only with counter-
parties approved by directors.
Cash and cash equivalents are deposited with several financial institutions in New Zealand and overseas.
$371,000 is deposited with a major NZ trading bank with a Standard and Poors rating of AA- (2017: $637,000
AA-) and $176,000 (2017: $656,000) with Western Union. The remaining balance of $386,000 (2017: $270,000)
is held across several territories and non-performance of obligations by the relevant banks is not expected due
to the credit rating of the counter parties considered.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 29
(c) Liquidity risk
The group maintains regular forecasts of liquidity based on expected cash flows. The table below analyses the
group’s financial liabilities into relevant groups based on the remaining period at the reporting date to the end of
the contractual date.
The amounts disclosed are the contractual undiscounted cash flows.
2018 2017
$000s
Less than
6 months
7 to 12
months
More than
12 months
Less than
6 months
7 to 12
months
More than
12 months
Trade and other payables 20,108 - - 12,577 - -
Borrowings 1,394 2,500 - 754 158 2,079
Lease liabilities 131 123 1,494 13 14 7
$21,633 $2,623 $1,494 $13,344 $172 $2,086
Trade and other payables above exclude any liabilities for tax (including payroll taxes), statutory liabilities and
deferred income.
(d) Capital risk management
The company closely monitors its cash requirements. During the year the company secured a short-term loan
from Onimeg Investments Limited, a $1,500,000 trade finance facility from BNZ, a short-term loan from Meta
Capital Limited and negotiated flexibility in its payment terms with major suppliers. It has also deferred some
capital expenditure investment to 2019.
The company has not been subject to any externally imposed capital requirements during the period.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 30
6. Other information
6.1 Subsidiaries
(a) The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in Note 1.2b.
Country of
incorporation
Class of
shares
2018 2017
Wellington Drive Sales Ltd New Zealand Ordinary 100% 100%
Wellington Drive Technologies US, Inc USA Ordinary 100% 100%
Wellington Motor Teknolojileri San Tic Ltd Sti Turkey Ordinary 100% 100%
Wellington Italia Srl Italy Ordinary 100% 100%
Wellington Drive Technologies Pte Ltd Singapore Ordinary 100% 100%
Wellington Refrigeration Singapore Pte Ltd Singapore Ordinary 100% 100%
Wellington Latin America Services SA de CV Mexico Ordinary 100% 100%
Wellington Mexico Tecnologia SA de CV Mexico Ordinary 100% 100%
iProximity Pty Limited Australia Ordinary 100% -
All subsidiaries have a common balance date of 31 December.
(b) Summary of acquisition
On 2 July 2018 the company acquired 100% of the issued share capital of iProximity Pty Limited, an Australian
based innovative proximity marketing solutions and consumer intelligence company. The consideration for the
acquisition comprises up-front payments of AU$1,250,000 and three-year cash and share-based earn out targets
as follows:
• AU$500,000 based on meeting specified EBIT targets (for iProximity’s existing business) for the 2018 and
2019 financial years;
• The issue of fully paid ordinary shares in the company in tranches based on meeting specified EBIT targets
for the period ending 31 December 2020 (9,448,964 shares) and based on Wellington’s SCS Connect
System controller unit sales for the same period (9,448,964 shares).
The purchase consideration is:
$000s
Cash paid 1,367
Contingent consideration -
Total purchase consideration
$1,367
As detailed above, additional consideration may be payable in cash on 31 March 2020. The potential undiscounted
amount payable is A$500,000. In addition, up to 18,897,928 ordinary shares in Wellington may be issued.
The liability for contingent consideration has not yet been determined and will be finalised for inclusion in the interim
financial statements for the six months ended 30 June 2019.
Acquisition related costs of $16,000 are included in operating expenses in the Consolidated Statement of
Comprehensive Income and in operating cash flows in the consolidated cash flow statement.
This section includes other information that must be disclosed to comply with
accounting standards and other pronouncements, but that is not immediately related
to individual line items in the financial statements.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 31
Provisionally determined fair value of the assets and liabilities at the date of acquisition are as follows:
$000s
Intangible assets - platform 536
Trade and other receivables 18
Trade and other payables (65)
Contract liabilities (18)
Net identifiable assets acquired 471
Provisional goodwill 896
Net assets acquired $1,367
The goodwill is attributable to the profit impact that the acquired business is expected to have on the group’s
business.
The acquired business contributed revenues of $37,000 and a loss of $187,000 to the group from 2 July 2018 to 31
December 2018. It is not practical to determine the impact on revenue and profitability of the group if the business
had been acquired on 1 January 2018 because different accounting policies were adopted by the acquired business
and salaries for employees were not market related.
The initial accounting for the acquisition is incomplete due to the absence of reliable forecast information to enable
the assessment of contingent consideration.
(c) Summary of acquisition
The acquired business contributed revenues of $37,000 and a net loss of $187,000 for the period from 2 July
2018 to 31 December 2018.
6.2 Related party transactions
(a) Directors
The names of persons who are directors of the company are on page 42.
(b) Key management personnel and compensation
Key management personnel compensation is set out below. Key management personnel comprise the Directors
including the Chief Executive Officer (CEO) and all the senior executives who report directly to the CEO.
2018 2017
$000s $000s
Salaries, fees and other short-term benefits
1,873 1,767
Share based remuneration
6 40
Directors’ remuneration
141 139
Total
$2,020 $1,946
(c) Employee share-based remuneration
Equity settled, share based compensation is provided to employees via the Wellington Partly Paid Share Scheme
and Wellington Employees Share Option Plan. The fair value of the employee services received in exchange
for the grant of part paid shares or options are recognised as an expense over the vesting period. The proceeds
received net of any directly attributable transaction costs are credited to share capital when the partly paid share
proceeds are received, or options are exercised.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 32
Ordinary shares – partly paid
Issue date
Earliest date
to exercise
Expiry
exercise
date
Share
hurdle
price
(cents)
Partly
paid
share
price
(cents)
Balance
payable
on
exercise
(cents)
Outstanding
at 2018
(numbers)
Outstanding
at 2017
(numbers)
24 Jun 2013 24 Jun 2017 24 Jun 2019 16.29 16.29 15.79 1,635,665 1,635,665
18 Jun 2014 18 Jun 2017 18 Jun 2019 14.22 14.22 13.72 1,260,587 1,260,587
23 Jul 2014 23 Jul 2017 23 Jul 2019 14.73 14.73 14.23 1,890,216 1,890,216
1 Jul 2015 1 Jul 2017 1 Jul 2019 5.21 5.21 5.11 2,316,840 2,316,840
1 Jul 2015 1 Jul 2018 1 Jul 2020 5.65 5.65 5.53 1,647,784 1,890,216
20 Apr 2016 31 Mar 2017 31 Mar 2019 9.43 9.43 9.23 3,287,566 3,287,566
30 Sep 2016 30 Sep 2019 30 Sep 2021 18.17 18.17 17.81 421,980 421,980
12,460,638 12,703,070
A Partly Paid Share Scheme was established in June 2008, to enable certain employees to acquire shares in
the company. After the earliest date to exercise, provided the market price for the company’s shares is, at that
date, equal to or greater than the hurdle price stated above (and on or before 2 years after the earliest exercise
date), employees can settle the unpaid balance of their part-paid shares and transfer the shares to their name
or the name of their nominated trustee.
The April 2016 issue of part paid shares is subject to the company achieving specific financial performance
targets in the 2016 financial year or at the discretion of the directors pursuant to the rules of the Scheme.
Wellington Drive Technologies Share Scheme Trustee Limited (WSST) acts as trustee holding the part-paid
shares on behalf of employees. These partly paid shares are not quoted on the NZX and are not tradable.
Mr Greg Allen, the company’s Chief Executive, was issued 1,260,587 partly paid shares in June 2014, 2,316,840
shares in 2015 and a further 1,218,073 in April 2016 subject to terms outlined above.
Fair value is assessed at the date that the partly paid shares or share options are granted using a binomial option
pricing model that takes into account the exercise price, the three year term of the partly paid shares or options,
the exercise criteria, the likelihood of staff turnover, the non-tradable nature of the partly paid share or option,
the share price at the issue or grant date, the volatility of the returns on the underlying share and the risk-free
interest rate for the term of the partly paid share or option.
U.S. employee share options
In June 2010 the Company established the United States Employees Share Option Plan under which the
Company can issue up to 3,000,000 options. The price at which options can be exercised under the United
States Share Option Plan is the closing sales price on the date of the grant plus a 30% premium. Further details
of share options granted are summarised below:
Grant date Expiry date
Exercise
price
(cents)
Outstanding at
2018
(numbers)
Outstanding at
2017
(numbers)
24 Jun 2013 24 Jun 2019 16.9 288,647 288,647
23 Jul 2014 23 Jul 2019 14.3 288,647 288,647
21 Aug 2014 21 Aug 2019 12.2 96,216 96,216
1 Jul 2015 1 Jul 2019 5.59 288,647 384,863
20 Apr 2016 31 Mar 2019 11.7 760,013 760,013
30 Sep 2016 30 Sep 2020 18.2 96,215 96,215
1,818,385 1,914,601
(d) Meta Capital Limited loan
Meta Capital Limited is a company associated with a director, Mr J McMahon (see note 4.1).
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 33
(d) Smartshares Limited loan
Smartshares Limited is a substantial security holder (see note 4.1).
6.3 Contingencies
There are no material contingent liabilities or assets (2017 - $nil).
6.4 Financial instruments by category
2018 2017
$000s $000s
Assets per Statements of Financial Position
Loans and Receivables
Trade and other receivables
16,851
11,084
Cash and cash equivalents 933 1,563
Derivatives used for hedging (at fair value)
Derivative financial instruments - 6
$17,784 $12,653
Liabilities per Statements of Financial Position at amortised cost
Trade and other payables
20,212 12,577
Borrowings
5,642 2,598
Derivatives used for hedging (at fair value)
Derivative financial instruments 10 -
$25,864 $15,175
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 34
Fair value estimation
The only financial instruments carried at fair value are derivatives comprising forward foreign exchange contracts
and the embedded option in the preference shares.
The forward exchange contract has been classified as Level 2 and the embedded option as Level 3.
The different levels have been defined as follows:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)
• Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2)
• Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs)
(Level 3)
The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance
sheet date, with the resulting value discounted back to present value.
6.5 Leases
The Statement of Financial Position shows the following amounts related to leases of right-of-use assets:
Right-of-use assets
2018 2017
$000s $000s
Properties 1,291 -
Plant & equipment
45 -
Office equipment and furniture & fittings 5 -
Total
$1,341 $-
Lease liabilities in respect of right-of-use assets*
Current
187 -
Non-current
1,345 -
Total
$1,532 $-
* included within borrowings. In the previous year, the group only recognised lease liabilities in relation to leases
that were classified as “finance leases” under NZ IAS 17 Leases.
Additions to the right-of-use assets during the 2018 financial year is disclosed at note 3.2.
The Consolidated Statement of Comprehensive Income shows the following amounts related to right-of-use
leases:
Depreciation charge for right-of-use assets
2018 2017
$000s $000s
Properties
179 -
Plant & equipment 15 -
Office equipment and furniture & fittings 3 -
Total $197 $-
Interest expense on lease liabilities
$106 $-
Expense relating to short-term leases (included in operating
expenses)
$51 $-
The total cash outflow for right-of-use leases during the 2018 financial year was $178,000. Lease repayments
in the Consolidated Cash Flow Statement includes $69,000 (2017: $25,000) for leases previously classified as
finance leases under NZ IAS 17.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 35
The group’s leasing activities and how these are accounted for
The group leases property, equipment and cars. Rental contracts are typically made for fixed periods but may
have extension options as described below. Lease terms for equipment and cars tend to be industry standard.
Other leases are negotiated on an individual basis.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the group. Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to Statement of Comprehensive Income over the lease period to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable
• Variable lease payments based on an index or rate
• Amounts expected to be payable by the lessee under residual value guarantees
• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
• Payments or penalties for terminating the lease, if the lease term reflects the lessee exercising that
option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or
the group’s incremental borrowing rate.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease liability
• Any lease payments made at or before the commencement date less any lease incentives received
• Any initial direct costs, and
• Restoration costs
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line
basis as an expense in the Statement of Comprehensive Income. Short-term leases are leases with a lease
term of 12 months or less. Low-value assets are assets of a value of US$5,000 or less.
Lease renewal options are included in the property lease. In determining the lease term, management considers
all facts and circumstances that create an economic incentive to exercise the renewal option. Renewal options
are only included in the lease term if the lease is reasonably certain to be extended. The assessment is reviewed
if a significant event or a significant change in circumstances occurs which affects this assessment and that is
within the control of the lessee.
6.6 Other disclosures
Auditors remuneration
2018 2017
$000s $000s
PricewaterhouseCoopers (PwC):
- Audit of financial statements of the group 155 104
- Procedures over interim financial statements of the group
7 7
Audit of subsidiaries by other auditors – Thong & Lim
7 11
Total remuneration for audit and non-audit services
$169 $122
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 36
6.7 Cash flow information
(a) Reconciliation of loss for the year to net cash inflow from operating activities
2018 2017
$000s $000s
Loss for the year (713) (1,980)
Adjustments for:
Depreciation, amortisation & impairment 2,011 1,546
Share based payments 12 56
Amortisation of borrowing - 329
Change in fair value of embedded option - 126
Inventory provision movement 83 (9)
Loss allowance provision movement 13 (41)
Provision for warranty movement 38 124
Net foreign exchange differences (402) 181
Increase in trade and other receivables (6,293) (2,634)
Increase in contract liabilities 1,604 759
Increase/(decrease) in inventories (1,948) 445
Increase in trade and other payables 7,444 2,355
Net cash inflow from operating activities $1,849 $1,257
(b) Net debt reconciliation
2018 2017
$000s $000s
Cash and cash equivalents 933 1,563
Borrowings – repayable within one year (4,148) (591)
Borrowings – repayable after one year (1,494) (2,007)
Net debt ($4,709) ($1,035)
All borrowings are at fixed interest rates, with borrowings movements disclosed in note 4.1. Increase in cash
during the year of $630,000 (2017: $1,879,000 increase) included $96,000 increase (2017: $220,000 decrease)
of exchange rate movements.
______________________________________________________________________________________________________________________
FINANCIAL STATEMENTS 2018 42
Directory
Directors
Tony Nowell, Chairman
Dr Lisbeth Jacobs
John McMahon
Gottfried Pausch
John Scott
Senior Staff
Greg Allen, Chief Executive Officer
Steven Hodgson, Senior Vice President Commercial
David Howell, Chief Technical Officer
Howard Milliner, Chief Financial Officer
Marc Tinsel, Head of Manufacturing
Peter Barnes, Global Quality Leader
David Burden, VP IoT Products and Marketing
Solutions
Ali Karahasanoğlu, Sales Director, Europe/Eurasia
Erick Layseca-Flores, Business Development
Manager, Americas
Clayton Thomas, Sales & Marketing Director, Asia /
Pacific
Gerardo Gonzalez, VP Intelligent Systems Business Unit
Paul Gillard, General Counsel
Ron Jackson, Secretary
Phone/Fax
Ph: 64-9-477 4500
Fax: 64-9-479 5540
Internet
Website: www.wdtl.com
Email: info@wdtl.com
Address
21 Arrenway Drive
Rosedale, Auckland 0632, New Zealand
PO Box 302-533, North Harbour,
Auckland 0751, New Zealand
Registered Office
21 Arrenway Drive
Rosedale, Auckland 0632, New Zealand
Auditor
PricewaterhouseCoopers
188 Quay Street, Auckland 1142, New Zealand
Banker
Bank of New Zealand
Share Registry
Computershare Investor Services Ltd,
Private Bag 92119, Auckland 1142,
New Zealand
______________________________________________
Annual Financial Statements 2018
www.wdtl.com
WT9145
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.