Wellington 2019 Annual Result
®
is a registered Trade Mark of Wellington Drive Technologies WT 9345
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
28 February 2020
Market Announcement
For immediate release
Wellington achieves highest ever revenue and maiden profit
Wellington Drive Technologies (Wellington) has today released its fully audited financial statements for the
year ended 31 December 2019. Wellington is a leading provider of Internet of Things (IoT) solutions and
energy efficient motors for the retail food & beverage industry.
Continued growth in Wellington Connect IoT hardware and data products and continued growth of the ECR2
motor resulted in 2019 being the highest revenue and the best profit performance in the company’s history.
The company achieved revenue of $61.7m, up 5% from $58.8m in 2018. EBITDA was a surplus of $4.22m,
up from $2.46m in 2018. The company achieved a maiden net profit of $0.45m, up from a loss of $0.71m in
2018.
Metric (NZD) 2019 2018 Change
Revenue $61.7m $58.8m +5.0%
Wellington Connect IoT revenue $24.0m $18.2m +31.6%
ECR Motor revenue $35.9m $38.4m -6.7%
ECR2 motor $22.5m $17.8m +26.3%
ECR legacy motors $13.4m $20.6m -35.2%
Gross profit $16.6m $14.3m +16.7%
Gross margin % 27.0% 24.3% +2.7%
EBITDA $4.22m $2.46m +71.2%
EBIT $1.51m $0.45m +233.6%
Profit (loss) for the year $0.45m ($0.71m) +$1.16m
Operating cash flows $2.99m $1.85m +61.5%
Greg Allen, CEO commented “2019 was a great year for Wellington with revenue growth, margin expansion
and the company’s first ever net profit. ECR2 motor revenues continued to grow and further growth in the IoT
business demonstrated how our products are well received by our customers. We were pleased to receive
the support of our shareholders in 2019, with $5.8m of new investment in the company. The company is part
WT 9345
2
of a food & beverage industry technology trend, where coolers and other point of sale equipment are being
connected to the Cloud to improve equipment performance and enable retail experiences to be monitored
and managed. We expect to be at the forefront of products needed to connect equipment to the Cloud and
provide the software tools to help our customers grow product sales.”
Main highlights:
•
Maiden net profit
: The company recorded a first ever net profit for the year of $0.45m, a $1.16m
improvement on the prior year. EBITDA improved to $4.22m, compared to $2.46m in 2018. This
performance was at the upper end of EBITDA guidance. The profit result includes a $467,000 gain
arising from a change in fair value of the contingent consideration payable for the acquisition of
iProximity. It also includes a $290,000 impairment of previously capitalised cost for the development
of a new motor product for East West Manufacturing.
•
Revenue:
Revenue was $61.7m, compared to $58.8m in 2018, a 5% increase. The composition of
Wellington’s revenue has changed over the last four years as the focus has moved towards IoT
products and the ECR2 motor. The company has become less dependent on its legacy motors.
Strong revenue growth from Connect SCS and ECR2 has been somewhat masked by the decline in
legacy motor sales.
•
Product sales growth
: Connect SCS product sales grew by 31.6% to $24.0m. ECR2 motor sales
grew by 26.3% to $22.5m. Sales growth was driven by increased demand from existing customers
and the addition of new customers in the Americas.
•
Gross margin improvement:
Gross margin for 2019 was 27.0% compared to 24.3% in 2018. Gross
profit dollars improved by $2.3m reflecting increasing sales of higher margin IoT products and data
services and lower hardware costs.
•
Operating costs
: Operating costs were $12.4m, or 20% of revenue, compared to $11.9m, also 20%
of revenue in 2018. Revenue per employee decreased slightly from $744,000 to $709,000 due to
additional sales, customer programme management and development staff and a modest increase
in revenue.
•
Growth Funding:
The company completed a 1:5 rights issue, raising $5.2m to pay back high
interest debt and support new product introductions. The issue was well supported by shareholders
and was oversubscribed. This new funding alongside the exercise of staff stock options contributed
to a net cash position of $2.0m, compared to a net debt position of $3.0m in 2018 (net cash is
defined as cash balances net of bank and other loans).
•
Investment:
The company invested $3.2m in new product development compared to $2.1m in 2018.
This investment related to the new ECR2+ motor and Connect IoT and data services products due
for launch in 2020. The increase in investment reflects the lower than expected 2018 investment due
to the industry wide component supply issues and the hiring of additional development staff.
•
New Products and Innovation
: In 2020 the company expects to launch new motor and connected
hardware products and a range of new customer mobile apps and data services; its first major
product launches since 2016. New products include its new ECR2+ motor for supermarket display
WT 9345
3
cases, the Connect Monitor for retrofit applications, a new version of Connect SCS refrigeration
controller and the Connect Q-Tag proximity marketing solution.
2020 outlook
Wellington’s initial forecasts for 2020 show the potential for revenue growth of around 15% and EBITDA of
around $4.5m.
The company is monitoring supply chain delays as a result of the Coronavirus situation. While these delays
are not expected to materially impact the full year outlook, the company does anticipate lower than forecast
first quarter revenue with some revenue catch up during the second quarter. Consistent with the 2020
trading update issued on the 13
th
February, supply chain forecasts indicate a potential risk to revenue of
approximately US$3.6m (around NZ$6m) from February to April. The company does not expect all of this
delayed supply will be perishable. Scenarios show that if it was perishable, the full loss of this revenue would
take 2020 forecast sales to around NZD$65m, higher than 2019 but below guided revenue growth of around
15%.
In addition to the impacts of the Coronavirus, the forecasts are dependent on several new product and new
customer introductions planned during 2020, a NZD/USD exchange rate of 0.65c and broader global trade
and macroeconomic conditions. For the new product launches, there are risks around ensuring completion
of product development on schedule, dependencies on spend decisions that the Board may make around
outsourcing of IoT product development to accelerate revenue, and the timing of customer onboarding and
product adoption meeting Wellington’s expectations.
The Board and management team would like to thank staff, shareholders, customers and suppliers for their
support. We look forward to a successful 2020 and continued growth for the company over the next several
years.
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 its customers product 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
Contact:
Greg Allen Howard Milliner
Chief Executive Officer Chief Financial Officer
Phone +64 27 777 9025 +64 27 587 0455
---
Wellington
Annual Report
2019
Contents
Overview
Our Company
1
2
The numbers
2019 Business highlights
Report of Chairman and CEO
Wellington’s people
Innovation
Directors
Executive Management
1
2
3
10
11
13
15
Annual report 2019 Wellington Drive Technologies Ltd
Financial Statements
3
Consolidated Statement of Comprehensive Income
Consolidated Statement of Movements in Equity
Consolidated Statement of Financial Position
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Independent Auditor’s Report
Statutory information
Shareholder information
Corporate governance
Directory
18
19
20
21
22
52
56
58
60
69
® is a registered Trade Mark of Wellington Drive Technologies Ltd
There are statements in this document that are “forward-looking statements”. As these forward-looking statements are predictive in nature,
they are subject to a number of risks and uncertainties relating to Wellington, its operations, the markets in which it competes and other
factors (some of which are beyond the control of Wellington).
All references in this document to $ or “dollars” are references to New Zealand dollars unless otherwise stated.
Wellington’s financial year is 31 December.
Annual report 2019
Wellington Drive Technologies Ltd
1
The numbers
2019
Annual report 2019 Wellington Drive Technologies Ltd
87
2,611
104
$61.7m
4
staff
shareholders
customers
revenue
offices with a globally
dispersed team
NZ, Turkey, Italy, Brazil, Spain, Mexico, USA, Canada, Argentina, Chile,
Colombia, Singapore, China
at 10 February 2020
2
Business highlights
2019
Annual report 2019 Wellington Drive Technologies Ltd
3
Annual report 2019 Wellington Drive Technologies Ltd
Report of the Chairman and Chief
Executive Officer
Wellington’s strategy is focused on growing its IoT business with large food and beverage customers, accessing new
markets with IoT and proximity marketing solutions and expanding the customer base for its ECR
®
2 motor platform. This
strategy is delivering year on year revenue growth and improved profitability.
Metric (NZD)20192018Change
Revenue$61.7m$58.8m+5.0%
Wellington Connect IoT revenue$24.0m
$18.2m+31.6%
ECR2 motor revenue$22.5m
$17.8m+26.3%
ECR legacy motor revenue$13.4m
$20.6m-35.2%
Gross profit$16.6m
$14.3m+16.7%
Gross margin %27.0%24.3%+2.7%
EBITDA$4.22m$2.46m+71.2%
EBIT$1.51m$0.45m+233.6%
Profit (loss) for the year$0.45m($0.71m)+$1.16m
Operating cash flows$2.99m$1.85m+61.5%
Revenue grew 5% in 2019, to $61.7m. Revenue from new products improved 27%, with IoT products up 32% and the
ECR2 motor platform up 26%. Consistent with earlier guidance revenue from legacy motors declined 35%. The company
sees continued sales opportunities for its legacy motors albeit at a lower volume level.
Gross margin improved from 24.3% to 27.0% reflecting lower unit costs for Wellington products and improved product mix.
IoT hardware and data services contributed a growing
share of Wellington’s revenue and margin contribution.
Earnings before interest, tax, depreciation, amortisation
and impairment (EBITDA) was $4.2m compared to $2.5m
in 2018. The current year includes a $0.5m gain arising
from a change in fair value of the contingent consideration
payable for the acquisition of iProximity Pty Limited (fair
value change). EBITDA excluding this fair value change
was $3.8m, towards the higher end of guidance and a 52%
improvement over 2018.
The company achieved earnings before interest and
taxation (EBIT) of $1.5m compared to $0.5m in 2018.
Excluding the fair value change, EBIT was $1.0m, a $0.6m
improvement over 2018.
The company recorded a first ever full year bottom line profit of $0.4m, a $1.2m improvement on the prior year.
In November 2019, the company completed a 1:5 rights issue raising $5.2m. The issue was oversubscribed. The capital
is being used to fund the launch of its new ECR2+ motor, develop and launch new IoT products, and support customer
acquisition in the new food service market. It enabled the company to repay its remaining high interest debt. $1.5m had
been paid to Onimeg Investments in September 2019 and in March 2019 $0.5m was paid to Smartshares. In December
2019, the company repaid Onimeg Investments and Meta Capital $1.0m and US$0.6m respectively. The only loan
4
Annual report 2019 Wellington Drive Technologies Ltd
outstanding at balance date was to BNZ, with $1.4m drawn under a $2.0m trade finance facility.
Wellington continues to look for technology partners and customer partnerships where it can access new IoT technologies
or gain access to new sales channels in the food and beverage market. In October 2019, the company announced a
strategic partnership with a large North American refrigeration manufacturer, supplying specially designed Connect SCS
hardware and data services. Product development is expected to occur in the first nine months of 2020 with revenues likely
to commence in fourth quarter 2020.
Revenue
New Zealand dollar revenue for the year ended 31
December 2019 was $61.7m, compared to $58.8m in
2018, a 5% increase.
The composition of Wellington’s revenue has changed
over the last four years as the focus has moved towards
IoT products. The company has become less dependent
on its legacy motors. Revenue growth from IoT and new
motor products has been masked by the decline in legacy
motor sales and this factor is likely to recur in 2020.
$0.0
$5.0
201420152016201720182019
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
EC motors - legacy
Non EC motors & accessories IoTEC motors - ECR2
US$ revenue by product group
Wellington Connect IoT
Revenue billings from Connect IoT products and services, including Connect SCS hardware, data services, and iProximity
software was $24.0m, a $5.8m increase over 2018. Invoicing of IoT data services increased 32% from $2.1m to $2.7m.
$0.9m of data billings were recognised for the year compared to $0.6m in 2018. Data services are multi-year contracts
and revenue is recognised progressively over the term of the contract, typically from five to ten years. The amount of
unrecognised IoT data services revenue held on the balance sheet at December 2019 was $4.3m, to be recognised over
5
Annual report 2019 Wellington Drive Technologies Ltd
the duration of data contracts. Connect SCS hardware volumes increased 17%, with revenue 28% higher than for 2018.
The company continued to work with a number of customers on iProximity marketing services trials, with a focus on food
and beverage.
Wellington ECR motors
ECR2 motor unit sales were 20% higher than for 2018 with revenue at $22.5m compared to $17.9m in 2018. This was
primarily due to increasing demand for its ECR2 product in the USA market.
The legacy ECR82 and ECR1 motor business declined 35% in the year to 582,000 units compared to 945,000 units in
2018. This was mainly due to a sourcing change by a major beverage brand. The company is seeing a shift in the bottle
cooler market towards very low-priced EC motors from new Chinese-based manufacturers, although the recent Coronavirus
emergency may result in some of Wellington’s customers wanting to diversify away from sole reliance on Chinese supply
chains. Given this change in market pricing, the company is choosing to compete selectively.
While the legacy motor business is declining, growth in the ECR2 motor business, predominantly sold into food service and
non-bottle cooler refrigeration, remains robust at a 3-year CAGR of 100%. Overall, the growth in revenue from ECR2 and
IoT products continues to exceed the decline in legacy motor products.
Sales regions
Latin American revenue increased 5% to $42.1m from $40.2m, with growth delivered from new Connect IoT customers in
Central and South America, offset somewhat by the decline in legacy motor business.
Wellington’s revenue from the USA and Canada increased 12% to $11.3m compared to $10.1m last year. ECR2 sales
were particularly strong in the USA especially with the company’s largest refrigeration customer, and through the East West
sales distribution channel. While Connect SCS sales are not yet significant in the USA and Canada, installation and training
activities continued with several beverage bottlers in the region.
Revenue from the Asia-Pacific (APAC) increased 5% this year to $4.5m from $4.3m in 2018. The increase in APAC revenue
was the result of increased Connect SCS volumes for the Australian market. Motor volumes declined in 2019 as most
refrigeration manufacturers in the Asia region continued to prioritise cost over energy efficiency and use non-energy efficient
shaded pole motors. This dynamic is expected to continue.
Europe, Middle East and Africa (EMEA) revenue declined 10% to $3.8m. Several new supermarket display case customers
have recently been won for the ECR2 fan pack product, so an improved revenue performance is expected in 2020.
The EMEA region has different requirements for IoT solutions, with a primary focus on ‘always on’ cellular connectivity
solutions. The company expects its new Connect Network product, due for launch in 2021, will enable to develop customer
opportunities in this region. EMEA remains a target for future IoT and ECR2 motor growth and will require further in-region
investment in products tailored for that region, plus sales and technical marketing skills.
Gross margin
Gross margin for 2019 was 27.0% compared to 24.3% in 2018. Gross profit dollars improved by $2.3m reflecting increasing
sales of higher margin IoT products and services and lower hardware costs. New products slated for launch in 2020 include
a new connected controller, a retrofittable IoT solution, and the higher powered ECR2+ motor. These products are intended
to ensure the company can continue to grow without impacting gross margin %.
6
Annual report 2019 Wellington Drive Technologies Ltd
0.0
0%
2.5
10%
5%
201420152016201720182019
5.0
7.5
20%
15%
10.0
12.5
25%
15.0
17.5
20.0
30%
$m
Gross profitGross margin%
3.2
5.3
8.5
10.3
14.3
16.6
18%
21%
24%24%24%
27%
Gross profit performance
Operating costs
Operating spending increased as the company continued to invest in the skills and infrastructure required to support a
broader product range and expanding customer base. New skills were added in areas such as customer management,
iProximity marketing services and IoT software development. Wellington expects to increase investment in IoT software
development and customer-facing skills to facilitate the ongoing expansion of its software services and hardware product
offerings. Part of this investment is for new product and service development, and will therefore be capitalised, but
nevertheless the broadening of Wellington’s product range and sales and marketing efforts will see operating costs continue
to grow in 2020.
Operating costs for the period amounted to $12.4m, or 20% of revenue, compared to $11.9m and 20% of revenue in 2018.
Revenue per employee decreased slightly from $744,000 to $709,000 due to additional headcount in 2019 and modest
increase in revenue.
Revenue per employee
$0
201420152016201720182019
200
400
$324
$447
$560
$646
$744
$709
600
800
$000’s
7
Annual report 2019 Wellington Drive Technologies Ltd
Product development
The company invested $3.2m (2018 - $2.2m, including $0.5m from the iProximity acquisition) in new product development,
most of which related to the new ECR2+ motor, Connect Monitor (a battery-powered retrofit product), Connect Network (an
‘always on’ IoT network hub) and various apps and software tools (to provide digital services). 2018 development activity
was adversely impacted by time spent on industry wide component supply issues. The increased investment in 2019 also
reflects additional development resources that have been employed.
The result for the year includes $290,000 for the impairment of previously capitalised cost for development of a new motor
product for East West Manufacturing. The motor was developed pursuant to an agreement with East West who contributed
to the cost of the development. The product is complete and is being offered to potential customers, but Wellington has not
been provided with sales forecasts that would support the carrying value. The capitalised cost has been fully impaired.
Cash and working capital performance
Cash at 31 December 2019 was $3.5m compared to $0.9m at 31 December 2018. Net cash (defined as cash balances net
of bank and other loans) at 31 December 2019 was $2.0m versus net debt of $3.0m at 31 December 2018. The significant
improvement in Wellington’s net cash position is due to the exercise of share options by employees and the recently
completed 1:5 rights issue.
Operating cash flows for 2019 amounted to $3.0m, up from $1.8m for 2018. Net operating and investing cash flows
amounted to a $0.8m outflow.
Inventory management continued to be an area of operational focus in 2019, with 8 inventory turns achieved in 2019 down
from 11 turns the prior year. The company increased its inventory position to ensure it maintained competitive lead-times
with customers and partly as a result of declining legacy motor demand. The company is working with its manufacturing
partners and customers to reduce levels of inventory held for its legacy products.
The average number of days sales in trade receivables during 2019 was generally in the 70-80 days range, with some
customers requiring up to 120 days terms. Extended payment cycles, above 100 days, are expected to continue with some
customers for the foreseeable future.
The company secured a $1.5m trade finance facility from the BNZ in 2018 which was undrawn until early 2019. The facility
was increased to $2.0m in May 2019. This has strengthened the company’s cash position and liquidity.
In November, the company successfully completed a 1:5 rights issue raising $5.2m. $0.6m was also raised through
employees taking up their entitlements under the company’s employee share option schemes. Funds were used in part to
repay high interest rate loans from Smartshares Limited, Onimeg Investments and Meta Capital.
2019 strategic priorities
The company’s Vision 2023 objective is to grow revenues to $100m. This is expected to be achieved by developing new IoT
and EC motor products, developing new customers in existing food and beverage markets, and accessing adjacent markets
such as food service. Growth is assisted by leveraging the technology acquired through iProximity to develop digital
marketing services for food and beverage customers.
The priorities for 2019 were:
1. Successful execution of several new customer IoT adoption programs, including an expansion of the successful OEM
program launched with SKOPE Industries;
• The company announced a new IoT program with a large North American refrigeration manufacturer. This
program includes development of a new Connect SCS hardware solution to support the customer’s business
services strategy.
8
Annual report 2019 Wellington Drive Technologies Ltd
2. Expansion of engineering resources to ensure the development of new IoT hardware and software and EC motor
products necessary to fuel top line growth;
• The company added IoT software developers, data analysts and electronic design engineers to work on new IoT
hardware and software solutions. It is anticipated these new solutions will launch in 2020 and early 2021.
3. Add expertise that enables the company to deploy and support digital marketing within the food and beverage market and
enter new adjacent markets;
• The company added new proximity marketing business development capability in Mexico, a region that continues
to show promise for the adoption of marketing solutions.
4. Develop new markets and customers for the Wellington iProximity Smart Cities platform;
• The funnel of potential business for the iProximity platform increased significantly, mainly in the food and beverage
market. Several advanced discussions continued in areas such as sports stadiums and non-cooler point of sale.
5. Plan and commence implementation of a new company-wide ERP system.
• The transition to a new ERP system was pushed back by a year to 2020 in order to conserve capital. A mapping of
the business system has been completed and the project will restart in early 2020.
New priority areas for 2020
1. Successful launch of new products; Connect Monitor retrofit solution, cost optimised Connect SCS controller and
ECR2+ motor.
2. Start the new IoT partnership with North American cooler manufacturer, including development of special Connect SCS
solution and customised apps.
3. Launch new Connect SCS software products; including enhanced Connect Retailer app and Connect Report for
cooler fleet management.
4. Develop new markets and customers for the Wellington iProximity marketing platform.
5. Develop software design and support capability closer to customers.
Corporate Social Responsibility
In 2019 the company successfully completed an internal audit of its corporate
social responsibility (CSR) processes and procedures. The audit was facilitated by
EcoVadis, a well-recognised global provider of CSR ratings and scorecards. The
methodology used by EcoVadis is built on international CSR standards including
the Global Reporting Initiative, the United Nations Global Compact, and ISO 26000,
covering 198 spend categories and 155 countries.
Wellington was awarded a Silver Medal by EcoVadis in recognition of its CSR
performance, which puts the company in the top 19% of companies assessed by
EcoVadis in this industry sector. Having a robust CSR program is a key requirement
of our large food and beverage brand customers in order to be integrated into
their business and supply chain. Some of the company’s largest beverage brand
customers use and recommend EcoVadis as the external CSR audit provider.
The audit covered areas of the business such as product environmental and regulatory compliance, sustainable
procurement practices, environment, labour & human rights practices including those of the company’s suppliers, employee
reward and recognition practices and the company’s business ethics and governance processes.
The Board and management believe that having a strong CSR program with associated policies and practices is not
9
Annual report 2019 Wellington Drive Technologies Ltd
only essential to doing business with large global customers but is also the right way to run the company. Wellington will
continue to subscribe to the EcoVadis audit program and has plans in place to continue to achieve strong results in
this area.
Governance
Dr Lisbeth Jacobs has announced her intention to retire as a director at the end of February 2020. The Board and
Wellington team would like to recognise and thank Lisbeth for her contribution to the Board over the last 8 years and her
roles as Chair of the company’s Innovation and Technology, and Audit & Risk committees.
In February and March 2019, the company appointed John Scott and Keith Oliver to the Board as non-executive directors.
Both bring considerable operational, strategic and financial experience managing companies in New Zealand and
international IoT and communications technology markets, including big data and cloud.
Tony Nowell, Chairman of Wellington Drive Technologies for 10 years, retired as a director in March 2019.
2020 outlook
The Wellington team is working on new IoT products and the ECR2+ motor which are expected to continue to fuel the
growth of its food and beverage solutions business. These new products are planned for launch by fourth quarter 2020.
Major new customer programs include the previously announced IoT partnership with a large North American cooler
manufacturer. Hardware sales to this new customer are expected to start in fourth quarter. To support these new product
and customer launches the company will continue to invest in software and hardware development, along with customer
project skills.
Wellington’s initial forecasts for 2020 show the potential for revenue growth of around 15% and EBITDA around $4.5m.
The company is monitoring supply chain delays as a result of the Coronavirus situation. All Chinese manufacturers
experienced a two-week mandatory delay before restarting operations following Chinese New Year, including Wellington’s
Chinese manufacturing partner, Match-Well. The company’s main manufacturing facility, the East West factory in Vietnam
is not directly impacted however is seeing delays in certain components sourced from China. While these delays are not
expected to materially impact the full year outlook, the company does anticipate lower than forecast first quarter revenue
with some revenue catch up during the second quarter.
In addition to the impacts of the Coronavirus, the forecasts are dependent on several new product and new customer
introductions planned during 2020, a NZD/USD exchange rate of 0.65c and broader global trade and macroeconomic
conditions. For the new product launches specifically, there are risks around ensuring completion of product development
on schedule, dependencies on spend decisions that the Board may make around outsourcing of IoT product development
to accelerate revenue, and the timing of customer onboarding and product adoption meeting Wellington’s expectations.
The Board and management team would like to thank staff, shareholders, customers and suppliers for their support. We
look forward to a successful 2020 and continued growth for the company over the next several years.
..................................... .....................................
John McMahon Greg Allen
Chairman Chief Executive Officer
Note 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. The company considers that it is a useful financial indicator because it avoids the distortions caused
by the differences in amortisation and impairment policies.
10
Annual report 2019 Wellington Drive Technologies Ltd
Wellington’s People
Ali Karahasanoglu
Sales Director, Europe/Eurasia
I am based in the Istanbul office and lead the sales activities of the Europe, Middle East and Africa
regions. My key responsibilities include customer relationship management, business development,
commercial, logistics and financial activities within the region.
In recent years we have successfully entered the European market with display cases for commercial
refrigeration and supermarkets, with the help of our new series of fan motor solutions. Our aim is to
continue progressing in this area, with focus on the IoT segment and proximity marketing solutions.
I am one of the longest serving members of the team and have witnessed the journey from the early
technology concept days to now leading our industry with commercial products and servicing the
world’s biggest brands and manufacturers. As part of the sales operations of the company, I am
enjoying the success we have achieved and look forward to expanding into new markets in the future.
Anna Clevenger
Global Customer Operations Manager
I am based in the United States and manage the operational aspects of the deployment and
implementation of Connect SCS for North American beverage brands. I work closely with customers
in the training and utilisation of Wellington’s Connect IoT system, which helps customers generate
insights into their cooler fleet and deliver value to their organisations. I also work with our regional
teams to ensure global best practices and help standardise IoT product deployment processes.
With the team in New Zealand, I assist in creating global training materials, provide feedback on all
aspects of the IoT deployment process, and support the regional engineering staff.
Our Connect IoT ecosystem is a global success and we continue to see our business grow in new
areas throughout the USA and Canada.
Cheryl Camargo
Commercial Manager, Brazil
I am based in Brazil, where I am part of a team of four people responsible for developing the South
American market. My role gives me the chance to experience new challenges every day, from helping
to solve customers’ problems to ensuring the company delivers for its customers.
Being part of the Wellington team means actively participating in building the company, contributing
to strategy development and managing operations. I really enjoy the diversity of our people, different
cultures, strategic ideas and products. We have been able to build a cohesive, skilled and bold team
with successful results and a promising future.
11
Annual report 2019 Wellington Drive Technologies Ltd
Innovation
As Wellington enters 2020, it has established itself
as a global leader in IoT for commercial beverage
refrigeration equipment, with a market-leading,
advanced IoT solution that has sold over 1 million
units in the first three years since introduction.
The company’s motor business continues to grow,
with the ECR2 motor notching up sales in excess of 2
million units. Wellington will launch the ECR2+ in 2020
- a new variant of the ECR2 that will take this product
into a range of new applications.
One of the most exciting aspects of Wellington’s IoT
business is that the products deployed to date are the
first stage of a range of solutions. Over the course
of the next twelve to eighteen months new products
will be launched which we expect will capture more
market share and help win new customers.
Wellington’s products start life with customer discussions and the understanding of a customer’s business problem. This
is an iterative process of research and development to deliver a solution that solves the customer’s needs. As a result of
these customer discussions, Wellington is researching new areas such as machine learning and cellular communications
technologies to broaden its IoT product offering, increase the value customers derive from its solutions and extend its
offerings into new food and beverage markets.
New products
In 2020 the company expects to launch four new hardware products, its first major product launches since the 2016 launch
of ECR2 and Connect SCS.
ECR2+: This is a more powerful version of the class leading ECR2 refrigeration fan motor. Both
ECR2 and ECR2+ motors have advanced electronic controls resulting in very low noise and high
efficiency. Wellington’s unique control system allows motor programming, variable speed operation
and programmable features such as reversible three-speed operation.
Connect Monitor: A battery-powered retrofit product that provides data collection and proximity
marketing capabilities in a device easily retrofittable to any existing “non-connected” fridge or freezer.
This provides customers a way of connecting their installed fleet to the same Connect IoT Cloud as
their new coolers which are fitted with Connect SCS.
Connect SCS (lower functionality version): This new version of Connect SCS is a simpler, refrigeration controller
that extends the benefits of connectivity to a wider range of end markets. This product will have data collection and fleet
management features tailored to markets where cost has been a barrier to connectivity solutions.
Connect Monitor
12
Annual report 2019 Wellington Drive Technologies Ltd
Connect Q-Tag: Wellington has started trials with its Connect Q-Tag. The Connect Q-Tag provides consumer and retailer
engagement at a point of sale location without the need for a mobile app. The Connect Q-Tag combines QR code and
NFC tag technologies, integrated with Connect Cloud and iProximity Marketing Cloud. Using ‘tap or scan’ interaction with
a consumer or retailer, Q-Tag allows tracking of an unpowered point of sale location (such as a shelf or a poster), providing
location and marketing information to improve point of sale productivity. A ‘tap or scan’ action from a consumer will result in
location based promotional offers or product information as part of a direct-to-consumer campaign or program.
Beyond 2020
Connect Network: Targeted for launch in 2021, Connect Network is an ‘always on’ IoT network hub, utilising cellular
technology. It allows data captured by the Connect product range to be transmitted in real time to the Connect Cloud for
analysis and reporting. Connect Network will provide real-time monitoring, alarms and alerts for management of critical food
temperatures and equipment uptime.
The company is part of a food and beverage IoT growth trend; where coolers and other point of sale equipment are
increasingly being connected to the Cloud to enable retail experiences to be monitored and managed. Across many market
verticals, customers are rapidly connecting their equipment and seeking more data on equipment operation and sales
productivity. Customers are increasingly making the business process changes needed to act on this new data although the
complexity of legacy ERP and sales management systems for many corporations means this has been a slower process
than Wellington initially expected.
Wellington expects to be at the forefront of the products needed to connect customers’ retail equipment to the Cloud and
provide the software tools to monitor and manage the retail experience.
Wellington’s rebranding project
Over the last four years Wellington has successfully changed its business strategy to become an innovator in food and
beverage IoT, alongside its new ECR2 motor offering. This change in business strategy is not reflected in the historic
Wellington Drive Technologies brand name which primarily relates to the company’s origins as a pure-play motor company.
In order to support the changing business focus, 2020 will see the company work on a refreshed brand. This will involve a
new company name, with updated brand values and purpose to better reflect the direction of the company as a leader in
solutions to the food and beverage industry.
13
Annual report 2019 Wellington Drive Technologies Ltd
Mr John McMahon
Chairman
Non-Independent Director
Mr McMahon has over 25 years’ experience in the Australasian equity markets, predominantly as an
equity analyst covering the telecommunications, media, gaming, transport and industrials sectors.
Previous roles include Head of Research and Head of Equities for ABN AMRO NZ and Managing
Director of ASB Securities. Mr McMahon is based in Sydney and manages his own investment
portfolio. He is a director of two other NZX-listed companies: Solution Dynamics Ltd (SDL), and NZX
Ltd (NZX), and holds a Bachelor of Commerce (Honours), an MBA and is a CFA (Chartered Financial
Analyst) charter holder.
Non-executive
Appointed October 2014
Dr Lisbeth Jacobs
Independent Director
Dr Jacobs, a native of Belgium, holds a PhD in Materials Engineering from the University of Auckland
and a Master of Science in Materials Engineering from the Katholieke Universiteit Leuven (Belgium),
where she also completed a post-graduate degree in business studies. Dr Jacobs has completed the
Executive General Management programme at CEDEP-INSEAD (France).
Dr Jacobs is currently General Manager Innovation at Fletcher Building. Group Innovation is a team
within Fletcher Building that delivers innovation across all aspects of the business, including product,
process, digital, customer engagement and business model innovation. Prior to joining Fletcher
Building in July 2019, Lisbeth was Executive Director International at UniServices, the wholly owned
commercialisation company of the University of Auckland, where she was responsible for the portfolio
of activities of UniServices serving multinational clients, government agencies and companies around
the world. While at UniServices, Lisbeth established and was Chairperson of The University of
Auckland Innovation Institute China in Hangzhou, a Wholly Foreign Owned Entity (WFOE). In that role
she was a member of the Board of Energia Potior, a joint venture between UniServices and Yunca,
which delivers technology solutions to the global aluminium industry. Before joining UniServices, Dr
Jacobs was Director of Strategy and Development at The Icehouse, following a 13-year career with
global corporate Bekaert, a world market and technology leader in steel wire and steel cord products
and applications. Dr Jacobs held a range of positions at Bekaert including business development,
strategy, mergers and acquisitions and research and development leadership, both in Belgium and
China. Dr Jacobs has also been Honorary Consul of Belgium since August 2013.
Non-executive
Appointed May 2013, Resigned 28 February 2020
Directors
14
Annual report 2019 Wellington Drive Technologies Ltd
Mr Gottfried Pausch
Non-executive
Appointed December 2013
Independent Director
Mr Pausch is an Independent Director of McKay Ltd (Whangarei) and Blackhawk Tracking Systems Ltd
(Auckland) and was until the end of December 2019 the Executive Chairman at AuCom Electronics Ltd
(Christchurch). Mr Pausch holds an electrical engineering degree from Austria and a master’s degree in
business administration from Duke University in the USA. He is a director for one of the National Science
Challenges, an initiative of the Ministry of Business, Innovation and Employment (MBIE). The Science
for Technological Innovation National Science Challenge aims to tackle New Zealand’s big high-tech
challenges and to grow the economy. The research areas include materials, manufacturing and design,
sensors, robotics and automation, plus IT data analytics and modelling.
Mr Pausch was the former CEO at Actronic Technologies and an executive in residence at The Icehouse.
This follows a 22-year career with German engineering and electronics conglomerate Siemens, one of
the world’s leading suppliers of products, solutions and services in the field of technology. During this
period, he held the positions of CEO Siemens Energy Services Ltd and managing director of Siemens
New Zealand.
Mr John Scott
Non-executive
Appointed February 2019
Independent Director
Mr Scott is CEO for Invenco, a world leader in payments & forecourt solutions in the petroleum space. He
is also a non-executive director for Navico, a marine electronics specialist company. He has previously
had a range of c-suite roles across sales, marketing, operations and product management with Navico,
Brunswick and Navman. Mr Scott also had business development engineering and project engineering
roles with Ericsson/Volex (communications). He graduated from the University of Auckland in 1997 with a
Bachelor of Engineering (BE Mech). Mr Scott has 20 years of global experience in managing large multi-
location go to market, operations & design teams – with deep pricing experience across all channels &
markets. He has been actively involved in multiple acquisition events and fundraising activities. Mr Scott
has an in-depth knowledge of the rapidly developing dynamics of global electronics supply, big data
and IoT growth opportunities, and has operating experience in the Asia, European and North American
markets.
Mr Keith Oliver
Non-executive
Appointed March 2019
Independent Director
Mr Oliver was appointed Director at Wellington in March 2019. He is also an Independent Director at
Rakon Limited and Chairman of Blackhawk Tracking Limited. Mr Oliver has over 20 years’ experience
in CEO, director and chairman roles, and has extensive experience expanding technology businesses
in USA, South America, Europe, Asia and Australia. Mr Oliver was Chairman of Actronic Technologies
for 10 years, and Chairman of Compac Sorting Equipment Limited, where he also held leadership and
board director roles. Mr Oliver has crown company governance experience in science and health, having
worked as a Director of New Zealand’s Institute of Environmental Science and Research Limited (ESR).
Prior to his governance roles, Mr Oliver had a 20-year career in telecommunications, broadcasting,
strategic planning and private equity investment in New Zealand, Australia and Europe.
15
Annual report 2019 Wellington Drive Technologies Ltd
Executive Management
Greg Allen
Chief Executive Officer
Mr Allen was appointed CEO of Wellington in November 2011. For 30 years Mr Allen has worked
internationally leading business development, supply chain and manufacturing organisations in
Europe, North America and Asia. He is an experienced business leader, having previously been
responsible for the industrial and green technology business unit for Celestica, a highly regarded
multinational supply chain services provider. Prior to this, Mr Allen led a Canadian public company
focused on digital communications products and held senior roles with global contract manufacturing
and engineering services companies. Mr Allen brings broad market experience covering many
industrial segments such as telecommunications, aerospace, capital equipment, consumer products
and enterprise computing.
Steve Hodgson
Senior Vice President Commercial
Mr Hodgson joined Wellington in 2008 as Head of Strategy and following that as the Company’s Chief
Financial Officer. Mr Hodgson was appointed Senior Vice President Commercial in 2014. He leads
the company’s global sales and customer teams and is responsible for Wellington’s commercial,
product strategy and corporate development activities. Prior to joining Wellington, Mr Hodgson
worked in equities research for 20 years, where his expertise included the telecommunications and
primary sectors.
David Howell
Chief Technical Officer
Mr Howell is currently Chief Technical Officer and is responsible for the company’s future technology
roadmap as well as managing the product engineering and software development teams. Mr Howell
joined Wellington as Engineering Manager in 1999. He has previously worked in new product
development roles for Rover Group (UK), Fisher and Paykel Healthcare Corporation Ltd and Tru-Test
Ltd. He holds a BE (Hons) and Dip Bus from the University of Auckland and an MSc from Cranfield
(UK). He is listed as inventor on 14 families of international patent applications, including several of
Wellington’s core motor patents.
16
Annual report 2019 Wellington Drive Technologies Ltd
Howard Milliner
Chief Financial Officer
Mr Milliner was appointed as CFO in November 2012, he oversees all financial and administrative
operations and helps to shape the overall strategy and direction for the company. He holds a BCom
from the University of Auckland and is a chartered accountant, with accounting experience gained
working for Ernst & Young London. For 14 years he held both CFO and CEO roles for NZ-listed
engineering business, Mercer Group. Mr Milliner has extensive experience in managing financial
operations and business acquisitions and divestments.
Marc Tinsel
Vice President, Supply Chain and Operations
Mr Tinsel is Vice President, Supply Chain and Operations, responsible for Wellington’s manufacturing
operations including production engineering, supply chain, logistics and revenue planning. Mr Tinsel
joined Wellington in 2013 as Programme Manager for sustaining engineering, was promoted to Head of
Manufacturing in 2015 and Vice President in January 2019. Prior to Wellington, he worked as a Project
Manager for Electrix, managing multiple projects, budgets and multidisciplinary teams. Mr Tinsel has also
worked for International Safety Testing Laboratories and was based in Auckland and London as a Senior
Manager and regulatory approvals report signatory for 15 years.
Peter Barnes
Global Quality Leader
Mr Barnes is currently Global Quality Leader, responsible for product quality, quality improvement and
all company processes and procedures. Mr Barnes joined Wellington in 2003 as a Senior Electronic
Design Engineer. He held many positions within the engineering team before changing his career
direction and moving into quality management. Prior to starting at Wellington, Mr Barnes worked at
a start-up company as a Design Engineer, developing various water temperature control valves for
domestic and industrial applications.
David Burden
Vice President, Group Marketing & IoT Products
Mr Burden joined Wellington in 2018 as part of the iProximity acquisition. He is an Australian
entrepreneur with 30 years of experience leading start-ups and successful technology businesses. He
founded and led what became Australia’s largest and best-recognised interactive and mobile services
company, Legion Interactive. In 2008, he joined the ASX-listed digital media company Webfirm Group
(now Adslot) as group CEO. Within three years he took it from a valuation of A$2m to a peak of A$120m.
In December 2013, Mr Burden and Rohan Lean established an exciting new IoT company, iProximity,
with a focus on proximity marketing and digital information services. iProximity was acquired by
Wellington in July 2018.
17
Annual report 2019 Wellington Drive Technologies Ltd
In Memoriam
Erick Layseca-Flores: Vice President and
General Manager, Latin America
In December 2019 our dear friend and
colleague Erick Layseca-Flores passed away
after a short illness. Erick was a long serving
team member, working for Wellington for
18 years, most recently as Vice President,
Latin America. Erick personally built the
company’s Latin American business from its
early beginnings to close to $20m of sales.
His passion for customers, loyalty to his
friends and colleagues and eternal optimism
about the business was a hallmark of Erick’s
character. The customer relationships Erick
built in the region are part of the foundation for
Wellington’s future success as is the strong
team he developed over the years.
The team at Wellington deeply appreciate
Erick’s contribution to the success of the
company and misses him dearly. The company
offers its deepest condolences to Erick’s wife
Zaniah, his mother Celia and his brothers and
extended family.
Rest in Peace Erick.
18
Annual report 2019 Wellington Drive Technologies Ltd
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Note
2019
$000s
2018
$000s
Revenue2.261,71958,761
Cost of sales(45,085)(44,505)
Gross profit16,63414,256
Other income2.318151
Operating expenses2.4(12,433)(11,943)
Earnings before interest, taxation, depreciation, amortisation & impairment4,2192,464
Depreciation3.2(585)(536)
Amortisation & impairment3.3(2,123)(1,475)
Profit before interest & taxation1,511453
Finance income4.2197
Finance expenses4.2(890)(912)
Profit / (loss) before income tax640(452)
Income tax expense2.5a(192)(261)
Profit / (loss) for the year448(713)
Other comprehensive income:
Items that may be reclassified subsequently to the profit or loss:
Exchange differences on translation of foreign operations4.5b(322)306
Cash flow hedge, net of tax-(18)
Other comprehensive (loss) / income for the year(322)288
Total comprehensive income / (loss) for the year$126($425)
Profit / (loss) for the year attributable to the Owners of the company448(713)
Total comprehensive income / (loss) attributable to the Owners of the company126(425)
Basic earnings per share – cents2.60.17(0.28)
Diluted earnings per share – cents2.60.16(0.28)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
19
Annual report 2019 Wellington Drive Technologies Ltd
Consolidated Statement of Movements in Equity
for the year ended 31 December 2019
2019
NoteContributed
equity
$000s
Accumulated
losses
$000s
Other
reserves
$000s
Total
equity
$000s
Balance at 1 January 2019123,627(115,186)(2,067)6,374
Comprehensive income
Profit for year-448-448
Other comprehensive income
Exchange differences on translation of
foreign operations
4.5b--(322)(322)
Income tax relating to other comprehensive
income
----
Total comprehensive income-448(322)126
Share option compensation expensed4.5a--66
Contributions of equity, net of costs4.3
6,601--6,601
Balance at 31 December 2019
$130,228($114,738)($2,383)$13,107
2018
NoteContributed
equity
$000s
Accumulated
losses
$000s
Other
reserves
$000s
Total
equity
$000s
Balance at 1 January 2018123,608(114,106)(2,367)7,135
Adjustment on adoption of NZ IFRS 9, NZ
IFRS 15 and NZ IFRS 16 (net of tax)
-(367)-(367)
Restated total equity at 1 January 2018123,608(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--306306
Cash flow hedge--(18)(18)
Income tax relating to other comprehensive
income
----
Total comprehensive income-(713)288(425)
Share option compensation expensed4.5a--1212
Contributions of equity, net of costs4.319--19
Balance at 31 December 2018$123,627($115,186)($2,067)$6,374
The above Consolidated Statement of Movements in Equity should be read in conjunction with the accompanying notes.
20
Annual report 2019 Wellington Drive Technologies Ltd
Consolidated Statement of Financial Position
as at 31 December 2019
Note
2019
$000s
Restated
2018
$000s
Current Assets
Cash and cash equivalents3.1a3,459933
Trade and other receivables3.1b14,79117,978
Derivative financial instruments6.456-
Inventories3.1c4,7974,890
Total current assets23,10323,801
Non-Current Assets
Property, plant and equipment3.22,6582,854
Intangible assets3.312,14711,297
Total non-current assets14,80514,151
Total assets37,90837,952
Current Liabilities
Trade and other payables3.1d15,83820,212
Contract liability2.21,044620
Provisions3.1e468415
Derivative financial instruments6.4-10
Borrowings4.11,6974,148
Total current liabilities19,04725,405
Non-Current Liabilities
Borrowings4.11,3641,494
Contract liability2.23,3742,352
Contingent consideration6.1b1,0162,327
Total non-current liabilities5,7546,173
Total liabilities24,80131,578
Net assets$13,107$6,374
Equity
Contributed equity4.3130,228123,627
Accumulated losses4.4(114,738)(115,186)
Other reserves4.5(2,383)(2,067)
Total equity$13,107$6,374
For and on behalf of the Board
..................................... .....................................
Director Director
28 February 2020 28 February 2020
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
21
Annual report 2019 Wellington Drive Technologies Ltd
Consolidated Cash Flow Statement
for the year ended 31 December 2019
Note
2019
$000s
2018
$000s
Cash flows from operating activities
Receipts from customers exclusive of GST/VAT66,56354,973
Payments to suppliers and employees exclusive of GST/VAT(63,432)(52,058)
Interest paid4.2(872)(912)
Interest received4.2197
Taxation paid
(601)(274)
Net GST/VAT received1,310113
Net cash inflow from operating activities2,9871,849
Cash flows from investing activities
Payments for property, plant and equipment3.2
(411)(836)
Proceeds from disposals of property, plant and equipment3.2
12-
Payments for intangible assets3.3(3,347)(1,690)
Payment on acquisition of iProximity Pty Limited6.1b-(1,367)
Net cash outflow from investing activities(3,746)(3,893)
Cash flows from financing activities
Cash proceeds from ordinary shares4.35,75719
New loans4.18,3283,643
Loan repayments4.1
(10,844)(2,348)
Finance lease borrowing
175251
Lease repayments6.5(282)(247)
Net cash inflow from financing activities3,1341,318
Net increase / (decrease) in cash and cash equivalents2,375(726)
Cash and cash equivalents at the beginning of the financial period9331,563
Effect of exchange rate movements on cash15196
Cash and cash equivalents at end of year3.1a$3,459$933
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
22
Annual report 2019 Wellington Drive Technologies Ltd
1. Basis of preparation
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.
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 28 February 2020.
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. Comparative amounts for
2018 were required to be restated to account for the acquisition of iProximity Pty Limited. See notes 3.3 and 6.1 for
details of the adjustments made to the 2018 comparatives.
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 and contingent consideration which is measured at fair value.
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.
Notes to the Consolidated Financial
Statements
23
Annual report 2019 Wellington Drive Technologies Ltd
Going concern assumption
In the year ended 31 December 2019 the group significantly improved its net cash position due to the exercise of share
options by employees and to a fully subscribed 1:5 rights issue raising $5.2m. Cash at 31 December 2019 was $3.5m
(2018 - $0.9m) and net cash (defined as cash balances net of bank and other loans) was $2.0m (2018 – net debt of
$3.0m).
The group reported a profit for the 2019 year of $448,000 (2018 - loss of $713,000) and the operating cash inflow for
the 2019 year was $2,987,000 (2018 – cash inflow $1,849,000).
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 2021. In preparing the forecast,
management also considered known events and conditions beyond 31 March 2021.
The group is forecasting for 2020 to be a year of further profit expansion with EBITDA higher than for 2019 and cash
flows from operations that will support investing activities. 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. Management have considered several risk scenarios, including the potential impact of Novel Coranavirus (see
note 6.8) and mitigating actions that would be undertaken in the event actual cash flows vary adversely from forecast.
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 acquisition 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 transferred 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.
(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
24
Annual report 2019 Wellington Drive Technologies Ltd
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 – forecasts – note 1.2a and note 6.8
• Deferred tax asset – recognition – note 2.5b
• Development costs – capitalisation of expenses and impairment testing – note 3.3
• Probability of contingent consideration targets being achieved – note 6.1b
25
Annual report 2019 Wellington Drive Technologies Ltd
2. Results for the year
This section focuses on the results and performance for the group and how those numbers are calculated.
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 now organised on a global basis into two operating divisions – Motors and IoT. These divisions offer
different products and services and are managed separately because they require different technology and marketing
strategies. The group’s chief executive officer reviews the financial performance of each division at least monthly.
Each division is a reportable segment.
There are varying levels of integration between the segments. There are engineering and sales staff that support both
segments as well as shared logistical and quality management services.
Information related to each reportable segment is set out below:
2019
Motors
$000s
IoT
$000s
Unallocated
$000s
Total
$000s
Revenue37,70424,015-61,719
Cost of goods sold(30,870)(14,215)-(45,085)
Gross profit6,8349,800-16,634
Gross margin %18.2%40.8%27.3%
Other income--1818
Operating expenses(2,252)(3,564)(6,617)(12,433)
EBITDA
4,5826,236(6,599)4,219
Depreciation(199)(47)(339)(585)
Amortisation & impairment(789)(1,334)-(2,123)
Profit before interest & taxation$3,594$4,855($6,938)$1,511
Non-current assets
Property, plant & equipment7032151,7402,658
Goodwill-3,223-3,223
Other intangible assets4,0594,7371288,924
Total$4,762$8,175$1,868$14,805
26
Annual report 2019 Wellington Drive Technologies Ltd
2018
Motors
$000s
IoT
$000s
Unallocated
$000s
Total
$000s
Revenue40,51818,243-58,761
Cost of goods sold(32,660)(11,845)-(44,505)
Gross profit7,8586,398-14,256
Gross margin %19.4%35.1%24.3%
Other income--151151
Operating expenses(3,444)(2,895)(5,604)(11,943)
EBITDA4,4143,503(5,453)2,464
Depreciation(200)(36)(300)(536)
Amortisation & impairment(383)(1,074)(18)(1,475)
Profit before interest & taxation$3,831$2,393($5,771)$453
Non-current assets (restated)
Property, plant & equipment6761542,0242,854
Goodwill-3,223-3,223
Other intangible assets3,9094,0421238,074
Total$4,585$7,419$2,147$14,151
(b) Geographical segments
The group operates in three main geographical areas, although it is managed on a global basis.
Revenue from external customers by geographic areas
2019
$000s
2018
$000s
Americas53,45750,282
Asia / Pacific (APAC)4,4854,286
Europe / Middle East / Africa (EMEA)3,7774,193
Total$61,719$58,761
Revenue is allocated above based on the country in which the customer is located.
APAC revenue includes $223,000 (2018 – $143,000) 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 $30,285,000 (2018: four customers accounting for invoiced revenues of $31,395,000), all within
the Americas geographic segment.
Total non-current assets
2019
$000s
Restated
2018
$000s
Americas3434
Asia / Pacific – mainly in New Zealand14,68714,019
Europe / Middle East / Africa8498
Total$14,805$14,151
Total non-current assets are allocated based on where the assets are located.
27
Annual report 2019 Wellington Drive Technologies Ltd
2.2 Revenue
2019
$000s
2018
$000s
Sales of goods revenue – recognised at a point in time60,78058,171
Services revenue – recognised over time939590
$61,719$58,761
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 is fulfilled, 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 and performance
obligations under the contract with the customer have been satisfied.
Some of the sale of goods are subject to CIF (Cost, Insurance and Freight) Incoterms. The group considers these
freight and insurance 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.
Products 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 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
28
Annual report 2019 Wellington Drive Technologies Ltd
because the customer receives and uses the benefits simultaneously.
The group received revenue in previous years amounting to $US212,000 in connection with the development of a
new motor product. This revenue was deferred as a contract liability. During 2019, the company reached agreement
with its development “partner” that the amount received be regarded as a contribution to the company’s capitalised
development cost. Accordingly $331,000 has been reclassified to intangible assets as a reduction of the asset
book amount.
Contract liabilities
2019
$000s
2018
$000s
Carrying amount at start of year2,9721,350
On acquisition of iProximity Pty Limited (note 6.1b)-18
Invoiced in the year2,7232,063
Recognised in revenue
(939)(590)
Reclassified to intangible assets
(331)-
Exchange adjustment(7)131
Carrying amount at end of year$4,418$2,972
Current portion1,044620
Non-current portion3,4042,352
$4,418$2,972
2.3 Other Income
2019
$000s
2018
$000s
Net foreign exchange gains-144
Other income187
$18$151
2.4 Operating expenses include
2019
$000s
2018
$000s
Wages and salaries and other short-term benefits10,4318,986
Employee share options expense612
Total employee benefits$10,437$8,998
Gain on remeasurement of contingent consideration($467)-
Capitalisation of labour and expenses to intangible assets($3,191)($1,622)
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.
29
Annual report 2019 Wellington Drive Technologies Ltd
2.5 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.
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 $192,000 (2018: $261,000) is payable in respect of some overseas subsidiaries.
(b) Unrecognised tax losses
2019
$000s
2018
$000s
Reported profit / (loss) for period before tax640(453)
Non-deductible / non-assessable items(234)99
Unrecognised timing differences
2,7582,361
Net taxable income for tax purposes3,1642,007
Losses carried forward from prior years(101,593)(101,788)
Adjustment of prior periods48(1,353)
Overseas taxable income(364)(676)
Exchange adjustments(663)217
Losses available to carry forward to future years($99,408)($101,593)
Of the total consolidated losses available to carry forward to future years, $1,498,000 (2018 - $1,272,000) 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 2019 year no USA Federal tax losses expired (2018 - None).
30
Annual report 2019 Wellington Drive Technologies Ltd
(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:
2019
$000s
2018
$000s
Doubtful debts3936
Inventory provisions and eliminations 242121
Employee benefits332293
Internally generated development1,362880
Warranty provision131116
Rebates140-
Fixed assets(228)(290)
Right of use lease liability(378)(425)
Other timing differences(11)27
Tax losses to carry forward26,37328,450
Unrecognised net deferred tax asset$28,002$29,198
(d) Imputation credits
The group has no imputation credits available (2018 – $nil) and no movements occurred in the Imputation Credit
Account (2018 – $nil).
2.6 Earnings per share
Earnings per share (‘EPS’) is the amount of post-tax profit attributable to each share.
Basic EPS of 0.17 cents (2018 – loss of 0.28 cents) is calculated by dividing the surplus attributable to equity holders
of the company of $448,000 (2018 – loss of $713,000) by the weighted average number of ordinary shares in issue
during the year of 266,455,298 (2018 – 257,235,719).
Diluted EPS of 0.16 cents (2018 - loss of 0.28 cents) is calculated by dividing the surplus attributable to equity holders
of the company of $448,000 (2018: - loss of $713,000) by the weighted average number of shares in issue adjusted
to reflect any commitments the group have 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 and achievement of performance targets in connection with contingent consideration. At 31 December
2018, the following instruments existed that 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
Part paid shares12,460,638
US employee share options1,818,385
31
Annual report 2019 Wellington Drive Technologies Ltd
3. Operating assets and liabilities
This section focuses on the assets used to generate the group’s trading performance and the liabilities incurred as a result.
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, trade and other payables
and provisions.
(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.
2019
$000s
2018
$000s
Cash on hand and at bank819372
Call deposits2,564485
Short term bank deposit7676
$3,459$933
The carrying amount of the group’s cash and cash equivalents is denominated in the following currencies:
NZD2,026147
USD1,090614
Other343172
$3,459$933
(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 $941,000 (2018: $1,970,000) receivable which is subject to a factoring arrangement without recourse.
Under this arrangement the group holds the trade receivable with the objective 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.
The group applies 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 2019 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 expected credit loss at balance date has been
calculated at 0.1% (2018: 0.1%).
32
Annual report 2019 Wellington Drive Technologies Ltd
2019
$000s
2018
$000s
Trade receivables13,84816,900
Provision for loss allowance(150)(130)
Net trade receivables13,69816,770
Prepayments544475
VAT/GST refunds due56617
Income tax refund due44535
Other receivables4881
$14,791$17,978
The carrying amount of the group’s trade and other receivables is denominated in the following currencies:
NZD12317
USD14,07016,407
EUR11770
MXP392574
Other200610
$14,791$17,978
Provision for loss allowance
Carrying amount at start of year130107
Adjustment on adoption of NZ IFRS 9-10
Increase in loss allowance207
Exchange adjustment-6
Carrying amount at end of year$150$130
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.
2019
$000s
2018
$000s
Finished goods – at cost4,2883,449
Work in progress – at cost7261,244
Raw materials – at cost319342
Less inventory provisions(536)(145)
Total inventories$4,797$4,890
All inventories are subject to a security interest.
33
Annual report 2019 Wellington Drive Technologies Ltd
Cost of inventories recognised as an expense and included in cost of sales $42,934,000 (2018: $42,670,000).
(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.
2019
$000s
2018
$000s
Trade payables13,40218,138
Employee entitlements 1,5561,337
Accrued expenses 880737
$15,838$20,212
The carrying amount of the group’s trade and other payables is denominated in the following currencies:
NZD2,0691,849
USD13,382 17,896
Other387467
$15,838$20,212
(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.
Warranty provision
2019
$000s
2018
$000s
Carrying amount at start of year415377
Additional provisions recognised224137
Amounts used(170)(124)
Exchange adjustment(1)25
Carrying amount at end of year$468$415
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.
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:
34
Annual report 2019 Wellington Drive Technologies Ltd
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
$000s
Office
equipment,
furniture &
fittings
$000s
Properties
$000s
Total
$000s
Year ended 31 December 2018
Opening net book amount771177-948
Adjustment on adoption of
NZ IFRS 16 (note 6.5)
2481,4291,461
Additions74690-836
Depreciation(250)(107)(179)(536)
Exchange adjustment525241145
Closing net book amount$1,343$220$1,291$2,854
At 31 December 2018
Cost
6,2161,928
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
Year ended 31 December 2019
Opening net book amount1,3432201,2912,854
Reclassification-(37)37-
Additions290121-411
Depreciation
(273)(125)(187)(585)
Disposals(10)(3)-(13)
Exchange adjustment(15)6-(9)
Closing net book amount$1,335$182$1,141$2,658
At 31 December 2019
Cost6,4811,9722,11510,568
Accumulated depreciation and impairment
(5,137)(1,731)(1,015)(7,883)
Exchange adjustment(9)(59)41(27)
Net book amount$1,335$182$1,141$2,658
Refer to note 6.5 for further consideration for right-of-use assets.
Capital commitments
Capital commitments contracted for at 31 December 2019 amounted to $127,000 (2018 - $361,000).
35
Annual report 2019 Wellington Drive Technologies Ltd
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.
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
36
Annual report 2019 Wellington Drive Technologies Ltd
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash
generating units).
Goodwill is tested annually for impairment, or immediately if events or changes in circumstances indicate that it might
be impaired and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Internally
Generated
Development
$000s
Patents
$000s
Goodwill
$000s
Other
$000s
Total
$000s
Year ended 31 December 2018
Opening net book amount
6,392386-1536,931
Additions2,149733,22345,449
Amortisation and impairment(1,368)(98)-(9)(1,475)
Exchange adjustment36222-8392
Closing net book amount$7,535$383$3,223$156$11,297
At 31 December 2018
Cost14,7031,4793,22368120,086
Accumulated amortisation (7,650)(1,122)-(509)(9,281)
Exchange adjustment48226-(16)492
Net book amount$7,535$383$3,223$156$11,297
Year ended 31 December 2019
Opening net book amount7,5353838961568,970
Restatement for acquisition accounting
--2,327-2,327
Opening net book amount - restated7,5353833,22315611,297
Reclassification from contract liability(331)---(331)
Additions3,24647-543,347
Amortisation and impairment(1,877)(123)-(123)(2,123)
Exchange adjustment(45)2--(43)
Closing net book amount$8,528$309$3,223$87$12,147
At 31 December 2019
Cost17,6181,5263,22373523,102
Accumulated amortisation(9,527)(1,245)-(632)(11,404)
Exchange adjustment43728-(16)449
Net book amount$8,528$309$3,223$87$12,147
Goodwill relates to the iProximity Pty Limited acquisition (note 6.1(b)). Comparatives for 2018 have been restated to
reflect finalisation of the accounting for the acquisition.
Internally generated development costs includes $3,153,000 (2018: $2,329,000) 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 2019 considering costs to complete the developments, costs to set up the manufacturing capability,
estimates of market volume and price and estimated manufacturing unit costs.
37
Annual report 2019 Wellington Drive Technologies Ltd
Amortisation and impairment
2019
$000s
2018
$000s
Amortisation of intangible assets1,8001,475
Impairment of intangible assets323-
$2,123$1,475
Impairment losses have been recognised as follows:
• Patent costs - $33,000. The carrying values of patents for products discontinued in the period.
• Internally generated development costs - $290,000. The company incurred costs for the development of a new
motor product. The development has been completed by a third party and it has been agreed with that party that
in return for the company giving up its rights to future margin share, the company would be reimbursed in
full for the development costs it has incurred. The company has received no sales forecasts and is unable to
determine therefore when the company can expect to receive its margin share. Accordingly, the carrying value of
the development asset, net of the third party’s contribution to the development cost, has been written off in full.
Goodwill and intangible assets with indefinite lives
Goodwill acquired through business combinations with indefinite lives has been allocated to the IoT Cash Generating
Unit (CGU) which is also an operating and reportable segment for impairment testing. The group performed its
impairment test at 31 December 2019.
The recoverable amount of the IoT CGU at 31 December 2019 has been determined based on a value in use
calculation using cash flow projections from the annual operating plan approved by senior management for 2020
together with forecasts for 2021. The pre-tax discount rate applied to cash flow projections is 14% and cash flows
beyond 2021 using a 5.0% growth rate. This rate is significantly below the company’s 28.5% revenue growth in 2019.
The calculation of value in use is most sensitive to the following assumptions:
• Gross margins.
• Completion and launch of new IoT products under development and retaining volumes to current customers.
• Growth rates used to extrapolate cash flows beyond the forecast period.
• Operating expense increases.
Gross margins are based on current pricing and product costs. The gross margin in 2019 was 40.8% and is forecast
in the range of 42.4% to 43.6% for the four years. The forecasts include revenues on products currently under
development that are expected to launch in 2020 and 2021. The amount of revenue in respect of these new products
in 2020 is US$0.8m and US$3.1m. The forecast assumes that volumes to current customers are maintained. The
assumption is that operating expenses comprising mainly employee costs are maintained at the same ratio to sales. In
2019, the ratio of operating expenses to revenue was 14.8%.
As a result of this analysis, management did not identify an impairment for this CGU.
38
Annual report 2019 Wellington Drive Technologies Ltd
4. Capital and financing costs
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.
4.1 Borrowings
2019
$000s
2018
$000s
Current portion
Bank trade finance facility1,420-
Loan facility – Smartshares Limited-500
Loan facility – Meta Capital Limited-894
Loan facility – Onimeg Investments Limited
-2,500
Liabilities in respect of right-of-use assets
198187
Other liabilities7967
Liability at end of year$1,697$4,148
Non-Current portion
Liabilities in respect of right-of-use assets1,1801,345
Other borrowings184149
Liability at end of year$1,364$1,494
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.
Bank trade finance facility
In December 2018 the company was offered and accepted a $1.5m trade finance facility. The bank holds a security
interest over financed trade receivables. The facility was increased to $2.0m in May 2019. The facility has no term and
is repayable on demand. The company can finance invoices to certain customers over a maximum 120 days term.
Interest is payable at a 3% margin above bank base lending rate.
Loan facility – Smartshares Limited
The company owed $500,000 at 31 December 2018 under a $2 million unsecured loan facility from Smartshares
Limited, a shareholder. This was repaid in March 2019. Interest was payable quarterly at 15.75% pa and $20,000
annual revolver fee was payable.
Loan facility – Meta Capital Limited
The loan outstanding at 31 December 2018 was US$ 600,000. This was repaid in December 2019. Interest was
payable at 12.5%.
Loan facility – Onimeg Investments Limited
The loan outstanding at 31 December 2018 was $2,500,000. $1,500,000 was repaid in September 2019 and
$1,000,000 was repaid in December 2019. Interest was payable at 16% pa on a quarterly basis in arrears.
39
Annual report 2019 Wellington Drive Technologies Ltd
Other borrowings
Comprises lease liabilities in respect of finance leases.
4.2 Finance
2019
$000s
2018
$000s
Finance income
Other interest income197
$19$7
Finance expenses
Interest expense – Bank trade finance facility
85-
Interest expense – Smartshares Limited30248
Interest expense – Meta Capital Limited128108
Interest expense – Onimeg Investments Limited284119
Other interest expense363437
$890 $912
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.
2019
Shares
2018
Shares
2019
$000s
2018
$000s
Ordinary shares – fully paid322,707,005257,436,000130,202123,590
Ordinary shares – partly paid5,810,74212,460,6382637
US employee share options1,058,3721,818,385--
Total shares and options on issue329,576,119271,715,023$130,228$123,627
(a) Ordinary shares – fully paid
Opening balance of ordinary shares on issue257,436,000257,097,352123,590123,571
Issue of ordinary shares during the year:
• Rights issue53,232,829-5,323-
• Issue pursuant to iProximity acquisition4,724,482-844-
• Exercise of part paid shares7,313,694338,64859719
• Share issue costs--(152)-
Ordinary fully paid shares on issue at year end
322,707,005257,436,000$130,202$123,590
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 year12,460,63812,703,0703737
Issue of partly paid shares during the year:(6,553,681)(242,432)(11)-
Surrendered or lapsed(96,215)---
Ordinary part paid shares on issue at year end
5,810,74212,460,638$26$37
For further details of part paid shares see 6.2c.
40
Annual report 2019 Wellington Drive Technologies Ltd
4.3 Contributed equity
(c) US employees share options (numbers)
2019
Share Options
2018
Share Options
Options outstanding at start of year1,818,3851,914,601
Issue of U.S. employee options during the year:(760,013)(96,216)
Outstanding at end of year1,058,3721,818,385
4.4 Accumulated losses
2019
$000s
2018
$000s
Opening balance(115,186)(114,106)
Adjustment on adoption of NZ IFRS 9, NZ IFRS 15 and NZ IFRS 16 (net of tax)-(367)
Profit / (loss) for the year448(713)
Accumulated losses at end of year($114,738)($115,186)
4.5 Other reserves
2019
$000s
2018
$000s
Share option compensation reserve322316
Currency translation reserve(2,705)(2,383)
($2,383)($2,067)
(a) Share Option Compensation Reserve
2019
$000s
2018
$000s
Share based compensation recognised at start of year316304
Net compensation expensed612
$322$316
(b) Currency Translation Reserve
2019
$000s
2018
$000s
Opening balance(2,383)(2,689)
Exchange gains / (losses) on translation of foreign operations(322)306
($2,705)($2,383)
41
Annual report 2019 Wellington Drive Technologies Ltd
5. Risk
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.
5.1 Key financial risks
The group’s principal financial instruments comprise receivables, payables, cash and cash equivalents, borrowings,
derivatives and contingent consideration.
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:
20192018
Carrying
amount
$000s
Currencies
other than
US$
$000s
Carrying
amount
$000s
Currencies
other than
US$
$000s
Cash3,4592,369933319
Trade and other receivables14,7911,00617,9781,501
Trade and other payables
(15,838)(2,456)(20,212)(2,316)
Borrowings(3,061)(1,641)(5,642)(4,748)
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:
2019
$000s
2018
$000s
US$ exchange rate increase 10% relative to other currencies52378
US$ exchange rate decrease 10% relative to other currencies(52)(378)
The impact on other components of equity is not material because of minimal foreign forward exchange contracts
designated as cash flow hedges.
42
Annual report 2019 Wellington Drive Technologies Ltd
The impact of a change in NZD exchange rates on the reported NZD result (excluding any gains / losses arising on
financial assets and liabilities summarised above) is demonstrated in the table below.
Reported
in NZ$
$000s
If NZ$ /
US$ rate
had been
0.60
$000s
If NZ$ /
US$ rate
had been 0.80
$000s
Revenue61,71968,23551,891
Gross profit16,63418,39013,985
Operating income181818
Operating expenses(12,433)(12,409)(11,250)
EBITDA4,2195,9992,753
Depreciation & amortisation(2,708)(2,708)(2,708)
EBIT1,5113,29145
Interest (net)(871)(871)(871)
Profit$640$2,420($826)
Interest Rate Risk
The interest rate on the bank trade finance facility is at variable rates. All other debt is fixed interest.
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 $1,285,000 were past due but not considered impaired (2018 - $565,000).
Of this amount $587,000 (2018 - $120,000) was 3 months or more overdue.
The group enters into forward foreign exchange contracts within specified policy limits and only with counterparties
approved by directors.
Cash and cash equivalents are deposited with several financial institutions in New Zealand and overseas. $2,031,000
is deposited with a major NZ trading bank with a Standard and Poors rating of AA- (2018: $371,000 AA-) and $486,000
(2018: $176,000) with Western Union. The remaining balance of $942,000 (2018: $386,000) 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.
43
Annual report 2019 Wellington Drive Technologies Ltd
(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.
20192018
$000's
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 payables15,729--20,108--
Borrowings1,420--1,3942,500-
Lease liabilities1431341,3641311231,494
$17,292$134$1,364$21,633$2,623$1,494
Trade and other payables above exclude any liabilities for tax (including payroll taxes), statutory liabilities and contract
liabilities.
(d) Capital risk management
The company closely monitors its cash requirements.
During the year the company borrowed against the bank trade finance facility and used the proceeds, in part, to
repay the remaining amount due to Smartshares Limited. During the year the company raised $5.2 million from a
1:5 renounceable rights issue and $1.4 million from the issue of shares to employees pursuant to employee share
schemes. The proceeds of these issues were also applied, in part, to the repayment of outstanding loans.
The group has complied with financial covenants under the bank trade finance facility.
44
Annual report 2019 Wellington Drive Technologies Ltd
6. Other information
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.
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
20192018
Wellington Drive Sales LtdNew ZealandOrdinary100%100%
Wellington Drive Technologies US, IncUSAOrdinary100%100%
Wellington Motor Teknolojileri San Tic Ltd StiTurkeyOrdinary100%100%
Wellington Italia SrlItalyOrdinary100%100%
Wellington Drive Technologies Pte LtdSingaporeOrdinary100%100%
Wellington Refrigeration Singapore Pte LtdSingaporeOrdinary100%100%
Wellington Latin America Services SA de CVMexicoOrdinary100%100%
Wellington Mexico Tecnologia SA de CVMexicoOrdinary100%100%
iProximity Pty LimitedAustraliaOrdinary100%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 cash and share-based earn out targets as follows:
• A$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 was:
$000s
Cash paid1,367
Contingent consideration2,327
Total purchase consideration$3,694
As detailed above, additional consideration may be payable in cash on 31 March 2020. The maximum potential
undiscounted amount payable is A$500,000. In addition, up to 18,897,928 ordinary shares in Wellington may
be issued.
The acquisition date fair value of the contingent consideration arrangement of $2,327,000 was estimated by
considering the likelihood that the cash and share based targets would be achieved. The cash-based targets were
considered unlikely to be achieved and the fair value of the contingent cash consideration was estimated to be nil. The
likelihood of achieving the share-based targets was assessed and the probability adjusted number of ordinary shares
to be issued was calculated. The fair value of the share-based contingent consideration was determined by multiplying
45
Annual report 2019 Wellington Drive Technologies Ltd
the estimated number of shares (13,949,034 shares) by $0.15 being the price of the company’s shares on NZX at the
acquisition date.
Acquisition related costs of $16,000 were included in operating expenses in the Consolidated Statement of
Comprehensive Income and in operating cash flows in the Consolidated Cash Flow Statement for the year ended 31
December 2018. There were no further costs incurred in 2019.
The fair values of the assets and liabilities at the date of acquisition were as follows:
$000s
Intangible assets - platform536
Trade and other receivables18
Trade and other payables(65)
Contract liabilities(18)
Net identifiable assets acquired471
Goodwill3,223
Net assets acquired$3,694
Comparative figures for 2018 have been restated. Amounts for goodwill and contingent consideration were increased
by $2,327,000. There was no change in fair value required to be recognised in the Consolidated Statement of
Comprehensive Income for the year ended 31 December 2018. The probability adjusted number of shares at
31 December 2018 was calculated to be 12,842,717 shares. The comparative balances in the Interim Financial
Statements at 30 June 2019 will also need to be restated.
The goodwill is attributable to the synergies that arise from the company being able to include iProximity’s marketing
solutions as part of the group’s IoT product offering. The company expects to be able to sell more of its IoT solutions
(including SCS Connect hardware) as a result of the wider services offering.
As at 31 December 2019, there was a decrease on contingent consideration of $467,000 which resulted in a fair value
gain being recognised in operating expenses for the contingent consideration arrangement, to reflect an updated view
on the likelihood of share-based targets being achieved offset by an increase in the company’s share price to $0.172 at
31 December 2019 (increasing the value of any shares to be issued). The probability adjusted number of shares was
calculated to be 10,630,085 shares.
Contingent consideration
2019
$000s
Restated
2018
$000s
Fair value at start of year2,327-
Fair value at date of acquisition-2,327
Part settlement during the year(844)-
Remeasurement recognised in income statement(467)-
Total$1,016$2,327
The acquired business contributed revenues of $92,000 and a loss of $446,000 for the 2019 year ($37,000 revenue
and a loss of $187,000 to the group from 2 July 2018 to 31 December 2018). In addition, the proximity marketing
solutions offered by the business are integrated into Wellington’s IoT product offering and are assisting the group to
generate IoT revenue outside of the acquired business. 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.
46
Annual report 2019 Wellington Drive Technologies Ltd
6.2 Related party transactions
(a) Directors
The names of persons who are directors of the company are on page 13.
(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.
2019
$000s
2018
$000s
Salaries, fees and other short-term benefits1,9341,873
Share based remuneration26
Directors’ remuneration226141
Total$2,162$2,020
(c) Employee share based remuneration
Equity settled, share based compensation is provided to employees via the Wellington Partly Paid Share Scheme and
the US 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.
Ordinary shares – partly paid
Issue dateEarliest date
to exercise
Expiry
exercise date
Share
hurdle price
(cents)
Partly paid
share price
(cents)
Balance
payable on
exercise
(cents)
Outstanding at
2019
(numbers)
Outstanding at
2018
(numbers)
24 Jun 201324 Jun 201730 Apr 202016.2916.2915.791,443,2351,635,665
18 Jun 201418 Jun 201728 Feb 202014.2214.2213.721,260,5871,260,587
23 Jul 201423 Jul 201730 Apr 202014.7314.7314.231,744,0001,890,216
1 Jul 20151 Jul 20171 Jul 20195.215.215.11-2,316,840
1 Jul 20151 Jul 20181 Jul 20205.655.655.53940,9401,647,784
20 Apr 201631 Mar 201731 Mar 20199.439.439.23-3,287,566
30 Sep 201630 Sep 201930 Sep 202118.1718.1717.81421,980421,980
5,810,74212,460,638
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.
47
Annual report 2019 Wellington Drive Technologies Ltd
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 dateExpiry dateExercise price (cents)
Outstanding at 2019
(numbers)
Outstanding at 2018
(numbers)
24 Jun 201330 Apr 202016.9288,647288,647
23 Jul 201430 Apr 202014.3288,647288,647
21 Aug 201430 Apr 202012.296,21696,216
1 Jul 201530 Apr 20205.59288,647288,647
20 Apr 201631 Mar 201911.7-760,013
30 Sep 201630 Sep 202018.296,21596,215
1,058,3721,818,385
(d) Meta Capital Limited loan
Meta Capital Limited is a company associated with a director, Mr J McMahon (see note 4.1).
(e) Smartshares Limited loan
Smartshares Limited is a substantial security holder (see note 4.1). Mr J McMahon is a director of NZX Limited which
wholly owns Smartshares Limited.
(f) East West Manufacturing LLC
East West Manufacturing LLC (East West), a substantial security holder in the company, supplies goods and services
to the company from its manufacturing facility in Vietnam and purchases product for distribution in the USA. All pricing
is on an arms-length basis.
2019
$000s
2018
$000s
Purchases from East West36,99034,272
Sales to East West1,580646
Cash payments to East West38,51827,244
Cash receipts from East West1,169638
Trade receivable from East West at 31 December (secured)46654
Trade payable to East West at 31 December10,63612,164
The company had developed a new motor product pursuant to an agreement with East West. The company is to
receive a share of the sales margin from sales of the product in the USA. The agreement was varied during the year so
that East West now retain this margin until additional development costs they incurred are recouped. This variation was
negotiated in the best interests of the company.
48
Annual report 2019 Wellington Drive Technologies Ltd
(g) Loan to employee by Mr J McMahon
In April 2019, Mr J McMahon, a director of the company, in his private capacity, provided a $14,516.05 interest-free
bridging loan to an employee to enable the employee to exercise his entitlement under the US Employees Option Plan.
6.3 Contingencies
There are no material contingent liabilities or assets (2018 - $nil).
6.4 Financial instruments by category
2019
$000s
2018
$000s
Assets per Statements of Financial Position
Loans and Receivables
Trade and other receivables13,74616,851
Cash and cash equivalents3,459933
Derivatives used for hedging at fair value through Statement of
Comprehensive income
Derivative financial instruments56-
$17,261$17,784
Liabilities per Statements of Financial Position at amortised cost
Trade and other payables15,83820,212
Borrowings3,0615,642
Liabilities per Statement of Financial Position at fair value through
Statement of Comprehensive Income
Contingent consideration1,0162,327
Derivative financial instruments-10
$19,915$28,191
Fair value estimation
The only financial instruments carried at fair value are derivatives comprising forward foreign exchange contracts and
contingent consideration.
The forward exchange contract has been classified as Level 2.
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. The fair value of contingent consideration in respect
of the acquisition of iProximity Pty Limited is determined using the estimated number of shares that are to be issued
to the vendors pursuant to the purchase agreement and the company’s share price at balance date. The probability
adjusted number of shares and the company share price at the acquisition date, 31 December 2018 and 31 December
2019 are set out in note 6.1b.
49
Annual report 2019 Wellington Drive Technologies Ltd
6.5 Leases
The Statement of Financial Position shows the following amounts related to leases of right-of-use assets:
Right-of-use assets
2019
$000s
2018
$000s
Properties1,1411,291
Plant & equipment2345
Office equipment and furniture & fittings125
Total$1,176$1,341
Additions to right-of-use assets in the year
2019
$000s
2018
$000s
Properties-1,429
Plant & equipment2524
Office equipment and furniture & fittings138
Total$38$1,461
The Consolidated Statement of Comprehensive Income shows the following amounts related to right-of-use leases:
Depreciation charge for right-of-use assets
2019
$000s
2018
$000s
Properties182179
Plant & equipment715
Office equipment and furniture & fittings13
Total$190$197
Interest expense on lease liabilities$95$106
Expense relating to short-term leases (included in operating expenses)$51$51
The Consolidated Cash Flow Statement shows the following amounts related to right-of-use leases:
Total principal payments for right-of-use assets$189$178
Lease repayments for leases previously classified as finance leases under
NZ IAS 17
$93$69
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
50
Annual report 2019 Wellington Drive Technologies Ltd
• 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
2019
$000s
2018
$000s
Deloitte appointed from October 2019
- Audit of financial statements of the group119-
- Non audit services*
1
31-
PricewaterhouseCoopers resigned October 2019
- Audit of financial statements of the group46155
- Procedures over interim financial statements of the group67
Audit of subsidiaries by other auditors – Thong & Lim17
$203$169
*1 Non audit services relate to tax compliance and payroll services.
51
Annual report 2019 Wellington Drive Technologies Ltd
6.7 Cash flow information
(a) Reconciliation of profit / (loss) for the year to net cash inflow from operating activities
2019
$000s
2018
$000s
Profit / (loss) for the year448(713)
Adjustments for:
Depreciation, amortisation & impairment2,7082,011
Share based payments612
Inventory provision movement39183
Loss allowance provision movement2013
Provision for warranty movement5338
Change in fair value of contingent consideration(467)-
Net foreign exchange differences(113)(402)
Increase / (decrease) in trade and other receivables3,167(6,293)
Increase in contract liabilities1,4461,604
Increase in inventories(298)(1,948)
(Decrease) / increase in trade and other payables(4,374)7,444
Net cash inflow from operating activities$2,987$1,849
(b) Net cash / (debt) reconciliation
2019
$000s
2018
$000s
Cash and cash equivalents3,459933
Borrowings – repayable within one year(1,697)(4,148)
Borrowings – repayable after one year(1,364)(1,494)
Net debt$398($4,709)
The bank trade finance facility is at variable interest rates. All other borrowings are at fixed interest rates, with
borrowings movements disclosed in note 4.1. The increase in cash during the year of $2,527,000 (2018: $630,000
decrease) included an $151,000 increase (2018: $96,000 increase) caused by exchange rate movements.
6.8 Events after reporting date
Dr Lisbeth Jacobs has previously announced her intention to retire as a director and this will be effective 28 February
2020.
On 13 February 2020, the company provided an announcement via NZX of the potential impact from the 2019 Novel
Coranavirus (nCov) on its supply chain operations. The risk remains. The company’s supply chain is global in nature
and components that suppliers need for production are sourced globally, and from across Asia, including China, which
is the predominant or sole source of certain componentry. As a result of the nCov emergency and measures put in
place in China by local and central government, the company is expecting an impact on product supply.
There are some indications from authorities that factory production in China will restart towards the end of February
and into March. Initial forecast scenarios assume the company is only able to supply product from existing inventory
until such time as the China component supply chain situation is resolved. The company is currently assuming
resumption of normal production and shipping around the end of April 2020. Initial forecasts indicate a potential risk to
revenue of approximately US$3.6m from February to April 2020. The company does not expect that all this delayed
supply will be perishable, so some catch up later in Q2 2020 currently appears likely. If necessary, the company
can defer planned incremental expansion spending, which would somewhat mitigate the flow through impact on the
forecast 2020 profit.
52
Annual report 2019 Wellington Drive Technologies Ltd
To the Shareholders of Wellington Drive Technologies Limited
Independent Auditor’s Report
Opinion
Basis for opinion
Audit materiality
Key audit matters
We have audited the consolidated financial statements of Wellington Drive Technologies Limited
and its subsidiaries (the ‘Group’), which comprise the consolidated statement of financial position
as at 31 December 2019, and the consolidated statement of comprehensive income, statement
of movements in equity and statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 18 to 51, present
fairly, in all material respects, the consolidated financial position of the Group as at 31 December
2019, and its consolidated financial performance and cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ
IFRS’) and International Financial Reporting Standards (‘IFRS’).
We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and
International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Other than in our capacity as auditor and the provision of payroll preparation services as
described in the Other matter – independence section of our report and taxation compliance, we
have no relationship with or interests in the Company or any of its subsidiaries. These services
have not impaired our independence as auditor of the Company and Group.
We consider materiality primarily in terms of the magnitude of misstatement in the financial
statements of the Group that in our judgement would make it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced (the
‘quantitative’ materiality). In addition, we also assess whether other matters that come to our
attention during the audit would in our judgement change or influence the decisions of such a
person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
We determined materiality for the Group financial statements as a whole to be $610,000.
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
53
Annual report 2019 Wellington Drive Technologies Ltd
Evaluation of cash flow forecasts supporting the use of
the going concern assumption
The financial statements have been prepared on a going
concern basis as discussed in note 1.2(a).
Historically, the Group has been incurring losses. The
accumulated losses shown in the Consolidated Statement of
Financial Position totalled $114.7 million as at 31 December
2019 (2018: $115.2 million). Cash shortages encountered
throughout the growth phase have been mitigated by capital
raises and draw downs on borrowings.
In determining that the use of the going concern assumption
is appropriate, the Board of Directors prepared cash flow
forecasts to assess the Group’s ability to generate sufficient
cash flows to pay its debts as they fall due for a period of at
least 12 months from the date of approval of these financial
statements. Cash flow forecasts were prepared using key
inputs and assumptions including:
- revenue and gross margin growth over the forecast
period;
- operating, financing and capital expenditure over the
forecast period; and
- the impact of macroenonomic factors on the group’s
supply chain, specifically the coronavirus.
The cash flow forecasts used in the going concern
assessment are considered to be a key audit matter due
to the high level of judgement and estimation uncertainty,
extent of auditor attention and the importance to the
financial statements as a whole.
In assessing the appropriateness of the cash flow forecasts
used in the going concern assessment, our procedures
included, amongst others:
• Obtaining an understanding of the Group’s strategy,
business plan and the controls and processes in place for
preparing and approving the cash flow forecast to support
the going concern assumption.
• Assessing the Group cashflow forecast prepared for
a period of at least 12 months from the date of approval
of the financial statements. This involved obtaining an
understanding of the inputs to the model and challenging
key judgements and assumptions, as follows:
- Assess the reasonableness of forecast sales based on
our understanding of historical sales trends
- Assessing the operating, financing and capital cash flow
requirements of the Group over the forecast period
- Peforming sensitivity analysis over key assumptions in
the model such as forecast revenue and gross margin and
- Performing a retrospective analysis between the current
year’s budgeted results and the actual results to assess the
forecasting accuracy of the Group.
• Checking the mechanical accuracy of the cash flow
forecast
• Reviewing the bank facility terms; including the Group’s
ability to meet repayment terms and comply with covenant
restrictions.
Capitalisation of internal development costs
The Group capitalised $3.2 million of internal development
costs (2018: $2.1 million), as set out in note 3.3 ‘Intangible
assets’. This includes capitalised employee and contractor
time.
Judgement is required to determine if the recognition
criteria to captialise costs of development under NZ IAS 38
Intangible Assets have been met. Key areas of judgement
include assessments of technical feasibility, likelihood of
generating future economic benefits and the availability of
funding necessary for completing the products.
We have included capitalisation of internal development
costs as a key audit matter due to the level of judgement
required to determine whether the costs meet the criteria for
capitalisation, the manual nature of the calculation and the
growing importance of development of IoT and new motor
products.
We have evaluated the appropriateness of internal
development costs capitalised by:
• Challenging the Group’s determination of which
development costs meet the criteria to be capitalised under
NZ IAS 38. We obtained an understanding of the nature
of the projects from management, including how they are
used in the business, the stage of development, and the
likelihood of the development being successfully completed
and used to generate revenue
• Checking capitalisation of cost calculations for
mathematical accuracy
• Testing the amounts capitalised on a sample basis
and agreeing this to underlying evidence, including, for
employee and contractor costs allocated to development
projects, testing a sample of hours worked on each project
and the relevant wage rates.
Key audit matterHow our audit addressed the key audit matter
54
Annual report 2019 Wellington Drive Technologies Ltd
Measurement of iProximity contingent consideration
On 2 July 2018 the group acquired iProximity Pty Limited,
paying $1.3 million of cash to acquire net assets of $0.4
million and resulting goodwill of $0.9 million.
The amounts reported in the 31 December 2018 financial
accounts were termed provisional as the share-settled
contingent consideration was yet to be determined. As
disclosed in note 6.1(b), these balances have been restated
in the December 2018 comparatives, with the contingent
consideration being valued at $2.3 million as at the date of
acquisition.
During the period $0.8 million of the contingent
consideration was paid in the form of shares. Further,
the revised probability of achieving SCS volumes and
performance targets as at 31 December 2019 has resulted
in a fair value measurement gain of $0.5 million.
We have included the measurement of iProximity contingent
consideration as a key audit matter due to:
- The size of contingent consideration and the impact of
the fair value measurement
- the level of management judgement required to estimate
the probability of share sale agreement targets being
met.
• We read the share sale agreement and management’s
supporting documents in order to understand the SCS
volumes and performance targets to be met
• We worked with our internal valuation specialists to
challenge the fair value measurement of contingent
consideration and the appropriateness of the valuation
method
• We challenged key assumptions used by management
in the estimation of contingent consideration, including the
probability of achieving SCS volumes and performance
targets
• We recalculated the fair value of the contingent
consideration at 31 December 2018, 30 June 2019 and 31
December 2019 to validate measurement gains or losses
through the profit and loss statement.
Other matter -
independence
Other information
Until 30 November 2019, a Deloitte member firm in an overseas jurisdiction provided payroll
preparation services to an overseas subsidiary within the Group. When Deloitte was appointed
auditor of the Group in October 2019, the provision of these services resulted in a breach of
Professional Ethical Standard 1 regarding auditor independence. In order to mitigate this breach,
Deloitte engaged an independent firm to audit the payroll expense and balance of the subsidiary,
and ceased provision of the payroll preparation service. There were no matters arising from the
procedures performed by the engaged firm and as such no impacts on the 2019 consolidated
financial statements were identified arising from the breach.
The directors are responsible on behalf of the Group for the other information. The other
information comprises the information in the Annual Report that accompanies the consolidated
financial statements and the audit report.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and consider whether it is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If so, we are required to report that fact. We have
nothing to report in this regard.
Key audit matterHow our audit addressed the key audit matter
55
Annual report 2019 Wellington Drive Technologies Ltd
Auditor’s
responsibilities
for the audit of
the consolidated
financial
statements
Restriction on use
Melissa Collier, Partner for
Deloitte Limited
Auckland, New Zealand
28 February 2020
The directors are responsible on behalf of the Group for the preparation and fair presentation
of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such
internal control as the directors determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and
ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements
is located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1
This description forms part of our auditor’s report.
This report is made solely to the Company’s shareholders, as a body. Our audit has been
undertaken so that we might state to the Company’s shareholders those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company’s
shareholders as a body, for our audit work, for this report, or for the opinions we have formed.
This audit report relates to the consolidated financial statements of Wellington Drive Technologies Limited (the ‘Company’) for the year ended 31 December
2019 included on the Company’s website. The Directors are responsible for the maintenance and integrity of the Company’s website. We have not been
engaged to report on the integrity of the Company’s website. We accept no responsibility for any changes that may have occurred to the consolidated financial
statements since they were initially presented on the website. The audit report refers only to the consolidated financial statements named above. It does not
provide an opinion on any other information which may have been hyperlinked to/from these consolidated financial statements. If readers of this report are
concerned with the inherent risks arising from electronic data communication they should refer to the published hard copy of the audited consolidated financial
statements and related audit report dated 28 February 2020 to confirm the information included in the audited consolidated financial statements presented on
this website.
Directors’
responsibilities for
the consolidated
financial statements
56
Annual report 2019 Wellington Drive Technologies Ltd
Introduction
Directors have resolved that no dividend be declared payable.
The company does not have a credit rating.
Remuneration of Directors
During the year the following remuneration was paid or payable to directors:
20192018
Mr T. Nowell
1
$12,115$50,000
Dr L. Jacobs$44,583$30,000
Mr G. Pausch
2
$41,667$30,000
Mr J. McMahon
3
$56,667$30,000
Mr J. Scott
5
$35,032 -
Mr K Oliver
4 & 5
$33,750 -
Note
1. Mr Nowell resigned in March 2019.
2. Fees for Mr G. Pausch are paid to Board Advisory Services Ltd.
3. Fees for Mr J. McMahon are paid to Meta Capital Ltd.
4. Fees for Mr K Oliver are paid to Alto Capital Ltd.
5. Mr Scott and Mr Oliver were both appointed as directors in 2019.
Interested transactions
The Directors have disclosed the following transactions with the company:
• Interested transactions: In June 2019 the company exercised its option to extend the repayment date of the US$600,000
unsecured loan from Meta Capital Limited to 31 March 2020. Meta Capital Limited is a company related to John
McMahon, a director. By agreement, the loan was repaid in full in December 2019. Further details of the loan are in note
4.1. There have been no other transactions during the year with interested or related parties of the directors.
• Directors’ remuneration: remuneration details of directors are provided above.
• Indemnification and insurance of officers and directors: The company indemnifies directors and executive officers of
the group against all liabilities which arise out of the performance of their normal duties as director or executive officer,
unless the liability relates to conduct involving lack of good faith. To manage this risk, the group has indemnity insurance.
The total cost of this insurance expensed during the year ended 31 December 2019 was $67,763 (2018 - $49,033).
• Directors’ share transactions: On 29 November 2019, pursuant to a pro-rata renounceable rights issue, Meta Capital
Limited and Auro Investment Management Pty Limited, companies related to John McMahon, were issued 2,431,316
ordinary shares. 177,080 ordinary shares were issued to Gottfried Pausch at the same time. There were no other
changes in directors’ shareholdings during the 2019 year. Details of numbers of shares held by directors are shown
below.
• Directors’ loans: There were no loans by the company to directors.
• The Board received no notices during the year from directors requesting to use company information received in their
capacity as directors which would not otherwise have been available to them.
• Loan to employee by Mr J McMahon - In April 2019, Mr J McMahon, a director of the company, in his private capacity,
provided a $14,516.05 interest-free bridging loan to an employee to enable the employee to exercise his entitlement
under the US Employees Option Plan.
Statutory information
57
Annual report 2019 Wellington Drive Technologies Ltd
Directors’ Shareholding
31 December 201931 December 2018
Ordinary sharesTotal Relevant InterestDirectTotal Relevant InterestDirect
Mr J. McMahon12,471,769-10,040,453-
Mr G. Pausch-1,062,480-885,400
Mr T Nowell had a relevant interest in 280,458 shares at 31 December 2018. He was not a director at 31 December 2019.
Employees
The number of employees, other than directors, within the group receiving remuneration and benefits above $100,000, as is
required to be disclosed in accordance with section 211(1) (g) of the Companies Act 1993, is indicated in the following table.
GROUPGROUP
2019201820192018
$100,000 - $109,999
36
$220,000 - $229,9992 1
$110,000 - $119,999
32
$230,000 - $239,999
-2
$120,000 - $129,999
25
$240,000 - $249,999
-1
$130,000 - $139,999
-2
$250,000 - $259,999
2-
$140,000 - $149,999
53
$260,000 - $269,999
2 1
$150,000 - $159,999
6-
$270,000 - $279,9991-
$160,000 - $169,999
-1
$300,000 - $309,999-1
$170,000 - $179,999
11
$340,000 - $349,999 1-
$180,000 - $189,999
-1
$390,000 - $399,99911
$190,000 - $199,999
11
$640,000 - $649,99911
$210,000 - $219,999
2-
NZX waivers
There were no waivers granted by the NZ Exchange during the year ended 31 December 2019 (as defined in the
accordance with NZ Stock Exchange Listing Rule 10.5.3(f)).
Auditors
Deloitte was appointed auditors by the directors in October 2019 following the resignation of PricewaterhouseCoopers. In
accordance with Section 200 of the Companies’ Act 1993, the auditor, Deloitte, continues in office.
For and on behalf of the Board
.....................................
J McMahon
Chairman
28 February 2020
58
Annual report 2019 Wellington Drive Technologies Ltd
Shareholders
As at 31 December 2019 there were 2,597 shareholders holding 322,707,005 fully paid ordinary shares.
Share issues
There were issues of shares in July 2019 and December 2019 totalling 4,724,482 shares in partial settlement of the
purchase price for the acquisition of iProximity Pty Limited.
During the year there were issues of shares to employees on the exercise of rights to part paid shares and US employee
share options (exercised in accordance the company’s long-term incentive scheme as outlined in notes 4.3 and 6.2). The
amount received by the company on exercise was $597,000.
In November 2019, the company issued 53,232,829 shares pursuant to a 1:5 rights issue at $0.10 per ordinary share. The
company received $5,171,000 net of issue expenses.
There were no other issues of shares in 2019.
Shareholder details
The ordinary shares of Wellington Drive Technologies Limited are listed on the New Zealand Stock Exchange. The
information in the disclosures below has been taken from the company’s share register at 10 February 2020:
20 largest shareholders
Ordinary Shares
1.N.Z. Central Securities Depository Ltd
1.
53,535,217
2.N.Z Depository Nominee Ltd31,413,941
3.East West Manufacturing LLC25,218,701
4.M.W Daniel & N.G. Burton (Wairahi)16,100,000
5.Ballynagarrick Investments Ltd15,635,103
6.ASB Nominees Ltd (Meta Capital Ltd)12,381,899
7.Investment Custodial Services Ltd12,146,962
8.Graham Trustees Ltd11,600,808
9.EWNZ Ltd8,646,336
10.Leveraged Equities Finance Ltd6,813,292
11.Jarden Securities Ltd6,566,847
12.Flynn No 2 Trustees Ltd6,423,569
13.Greg Allen5,888,049
14.FNZ Custodians Ltd4,967,668
15.Howard Duncan Milliner2,652,421
16.D.J Howell & H.J.A Howell (Rivendale)2,586,922
17.Sujin Boonchuay2,503,975
18.Lean Holdings Pty Ltd2,503,725
19.S.C Montgomery2,500,000
20.Circada Ltd2,400,000
1
N.Z. Central Deposit Securities Depository Limited holds shares on trust for 10 different shareholders. The largest of these are: TEA Custodians Ltd
Client Property Trust -15,930,802 shares; HSBC Nominees (NZ) Ltd – 12,294,603 shares; BNP Paribas Nominees (N.Z.) Ltd - 5,583,800 shares; Accident
Compensation Corporation - 4,899,994 shares, BNP Paribas Nominees (N.Z.) Ltd – 4,524,987 shares, JP Morgan Chase Bank NA NZ Branch – 4,464,396
shares, NZ Permanent Trustees Ltd – 3,141,322 shares, Public Trust RIF Nominees – 1,685,032 shares.
Shareholder information
59
Annual report 2019 Wellington Drive Technologies Ltd
Distribution of equity securities
Ordinary SharesShareholdersFully Paid Ordinary Shares
Size of holdings (at 10 February 2020)
Number %Number %
1-99989334.20293,2640.09
1,000-1,9992278.69304,4340.09
2,000-4,99935613.641,105,3850.34
5,000-9,99930511.682,078,8030.64
10,000-49,99950919.4911,567,5383.58
50,000-99,9991184.527,728,6242.40
100,000-499,9991405.3627,161,5388.42
500,000-999,999261.0016,417,1295.09
over1,000,000371.42256,050,29079.35
2,611100.00322,707,005100.00
2,474 (or 94.75%) shareholders, holding 286,853,711 shares (or 88.89%) reside in New Zealand.
Substantial product holders
Pursuant to section 26 of the Securities Markets Act 1988, details of substantial product holders and their total relevant
interests as per their most recent notices are:
NameNumber of shares
2
Date of Notice
Jarden Securities Ltd & Harbour Asset Management Ltd49,615,04820 December 2019
Smartshares Limited (Custodian – BNP Paribas Nominees (NZ) Ltd)31,024,81919 December 2019
East West Manufacturing, LLC26,433,3335 June 2018
2
Number of shares is taken from notices received. No adjustments have been made for changes that may have subsequently occurred from the dates of
notices stated. The definition of “relevant interest” in the Securities Markets Act 1988 provides that more than one relevant interest can exist in respect of the
same securities.
Shareholder enquiries
Shareholders should send changes of address to Computershare Investor Services Limited at the address noted in the
directory on page 69. Notification must be in writing. Questions relating to shareholdings should also be addressed to
Computershare Investor Services Limited. For information about the group please contact the company at the registered
office by sending an email to info@wdtl.com or visit our website http:/www.wdtl.com.
Announcements to shareholders
The company has established an email list of shareholders that want to receive announcements made by Wellington Drive
to the New Zealand Stock Exchange. Announcements are emailed to shareholders who wish to receive them shortly after
they are released. This will include the annual meeting addresses. If you want to be added to this listing, please email info@
wdtl.com and advise us of your email address. Your email details will be kept confidential.
Announcements are also posted on our website www.wdtl.com normally the day after they are released.
60
Annual report 2019 Wellington Drive Technologies Ltd
Corporate governance
The Board and Management of Wellington Drive Technologies Limited are committed to acting with integrity and expect
high standards of behaviour and accountability from all the company’s officers and staff.
Role of the Board
The Board’s primary objective is the enhancement of shareholder value by following a set of core principles, appropriate
governance and ethical strategies and ensuring effective and innovative use of company resources. The Board is
responsible for the management oversight, supervision and direction of the group. Day-to-day management of the group is
delegated to the Chief Executive Officer.
Compliance
The governance principles adopted by the Board are designed to meet best practice recommendations for listed companies
to the extent that they are appropriate to the size and nature of Wellington’s operations. The Board endorses the overall
principles embodied in the NZX Corporate Governance Code 2019 (the NZX Code) and believes the company’s corporate
governance principles, policies and practices are appropriately aligned with the NZX Code.
The company is reporting against the recommendations in the NZX Code, by describing below the corporate governance
policies and practices Wellington has in place and highlighting the small number of areas of the NZX Code where we have
not fully followed the Code’s recommendations.
Wellington takes a “continuous-improvement” approach to corporate governance. Our governance programme over the last
year included the review of policies and committee charters.
This statement is current to 28 February 2020 and has been approved by the Wellington Board of Directors.
Board and committee charters, codes and policies referred to in this section are available to view at
www.wdtl.com/governance.
NZX Code
Principle 1 – Code of ethical behaviour
The company is committed to transparency and fairness in dealing with all its
stakeholders and to ensuring adherence to all applicable laws and regulations.
The company expects its directors, officers, and employees to maintain high
standards of ethical conduct and expects employees to act legally, ethically and
with integrity in a manner consistent with the policies and guiding principles that
are in place. These include the following:
• Code of Business Conduct and Ethics for Wellington team members and directors: Wellington team members
are committed to being ethically and socially responsible and our business decisions should reflect our values, acting
within the laws of the countries in which it operates. The code, which can be found at http://www.wdtl.com/governance,
provides a guide to these general principles of conduct and ethics. It brings together all our policy principles and
provides a working guide for directors and employees to do the right thing when making decisions in our daily activities,
and to:
P Act safely, ethically and responsibly;
P Act in Wellington’s best interests always;
P Protect the confidentiality of Wellington’s business information;
P Always comply with the principles in the Code, the legal and regulatory obligations in their country and the spirit of
the law;
P Hold their colleagues accountable for behaving ethically and following the Code;
Directors should set high standards
of ethical behaviour, model this behaviour
and hold management accountable for
these standards being followed throughout
the organisation.
61
Annual report 2019 Wellington Drive Technologies Ltd
P Not engage in any activity whether within or outside of the workplace that is likely to bring Wellington into disrepute;
P Deal honestly with Wellington's people, customers, shareholders, suppliers and other stakeholders;
P Ensure that they do not knowingly enter into transactions or make commitments on behalf of Wellington that the
company cannot or does not intend to fully honour;
P Undertake their duties with care and diligence;
P Ensure that any personal opinions Wellington people express are clearly identified as their own and are not
represented to be the views of the company;
P Value individuals' differences and treat people with respect;
P To the best of their ability, ensure that Wellington's records and documents, including financial reports, are true,
correct and conform to Wellington's reporting standards and internal controls;
P Not accept or offer bribes or improper inducements; and
P Speak up about unsafe or unethical behaviours.
The Code includes a policy regarding a respectful workplace and diversity, requiring equal opportunity for all.
Wellington is committed to attracting, developing and advancing the best person for the role. Selection processes
for recruitment and employee development are unbiased and based on merit. Wellington values diversity and has a
workforce consisting of individuals with diverse skills, values, backgrounds, gender, ethnicity and experience. Any form of
discrimination, bullying or harassment is not tolerated.
Wellington takes the Code seriously. It is the responsibility of all Wellington people globally to promptly bring suspected
violations to the attention of the company, for the benefit of all.
• Rules for Trading in Wellington Securities: The Rules for Trading in Wellington Securities, which can be found at
http://www.wdtl.com/governance, require all staff and directors to seek approval in accordance with the rules before
buying or selling any Wellington securities. The policy details “blackout periods” where trading is forbidden, as well as a
process for authorisation at all other times.
The company has an ongoing programme to maintain employee awareness and understanding of these ethical standards
and policies.
Principle 2 – Board composition and performance
The Wellington Board comprises directors with an appropriate range and mix of skills
and experience; who have a proper understanding of, and competence to deal with,
current and emerging issues of the business; and who can effectively review and
challenge the performance of management and exercise judgment independent of management. The Board’s structure
and governance arrangements are set out in the Wellington Board Charter which can be found at http://www.wdtl.com/
governance.
The Wellington Constitution provides that there will be not less than three and not more than eight directors. NZ Stock
Exchange requirements are that at least two directors or one-third, are independent directors. The Board Charter requires
that a majority of directors are independent and sets out circumstances in which a director will not be regarded as
independent. We assess director independence as a Board against the criteria in the NZX Listing Rules and in the Board
Charter. The Board currently has five directors, all of whom are considered independent except for John McMahon who is
non-independent.
Profiles of all directors and their dates of appointment are set out in the Directors section of this Annual Report on page 13
and are available on the company’s website. The company does not comply with Recommendation 2.9 of the NZX Code
because Chairman John McMahon is a director of NZX Limited, the parent company of Smartshares Limited, which is a
substantial product holder of the company with approximately 9.6% of the issued ordinary shares of the company. Given
this, the Board does not regard Mr McMahon to be an independent director of the company.
As the Board is small, the company has not established a separate nomination committee, believing these matters are best
dealt with by the full Board of Directors. Periodically the Board evaluates its performance, composition, size, diversity and
mix of skills. The method of review is determined by the chairperson annually and may include interviews, questionnaires
and/or external review. The Board is satisfied that it is operating well and that the performance processes we have used are
both effective and suited to the company.
To ensure an effective
board, there should be a balance
of independence, skills, knowledge,
experience and perspectives.
62
Annual report 2019 Wellington Drive Technologies Ltd
When a decision is made to recruit a new director, the Board identifies candidates with a mix of capabilities and
perspectives considered necessary for the Board to carry out its responsibilities effectively. The Board also considers the
skills of the existing directors to ensure that the skills of the new director will complement and add to the effectiveness of
decision making. We make appropriate pre-appointment checks on the background and suitability of all directors. New
Board members enter into a written agreement establishing the terms of their appointment. A director appointed by the
Board must stand for election at the next annual meeting. Listing Rule 2.7.1 requires directors to stand for re-election on
the later of three years and the third annual shareholders’ meeting after their appointment. Retiring directors are eligible for
re-election.
Directors undertake appropriate education to remain current in how to best perform their duties as directors. Directors are
encouraged to attend courses and maintain membership of relevant bodies, such as the Institute of Directors.
Directors receive information independently from management in relation to specific issues relevant to Wellington, the
markets in which the company operates and to NZX listed companies generally. All directors have access to management
for any additional information they consider necessary for informed decision making.
The company recognises our people are critical to our business. Wellington has a very small number of employees, a
significant number of which are based outside of New Zealand, which makes it challenging for the company to adopt any
formal targets in relation to diversity as is recommended by the NZX Code. While we do not have any such formal targets,
Wellington values and respects the contributions, ideas and experiences of people from all backgrounds and is proud to
have a diverse company with staff from around the world and from many cultures. As stated, the company has a diversity
policy included in its Code of Business Conduct and Ethics, and is committed to attracting, developing and advancing the
best person for the role. Attracting the best person for a role may involve a global search for a suitable candidate and
that selection may add to our diversity. Wellington recognises diversity brings a range of ideas, skills and innovation to the
company, which is important to the achievement of our objectives.
During 2020, the company will continue to strive to ensure the best person for the role is identified in the recruitment
process for all positions becoming available and will strive to ensure it continues to improve diversity in its workforce. It
will ensure gender, race, sexual orientation, disability, age, religious or other bias are not present in hiring decisions. The
company aims to encourage development of its existing staff through global re-deployment and training.
Diversity by gender statistics
In accordance with NZX Listing Rule 3.8.1 the company makes the following diversity disclosures:
31 December 2019
MaleFemale
Total#%#%
Board480%120%5
Senior management team* 6100% - - 6
Other staff 5876% 1824% 76
Total company 6878% 1922% 87
31 December 2018
MaleFemale
Total#%#%
Board375%125%4
Senior management team* 6 100% -- 6
Other staff 5677% 17 23% 73
Total company 65 78% 1822% 83
*The senior management team comprises of the Chief Executive Officer (CEO) and all the senior executives who report directly to the CEO. The senior
management team are “officers” for the purpose of the NZX Listing Rules.
63
Annual report 2019 Wellington Drive Technologies Ltd
Principle 3 – Board committees
The Board has established a number of committees to guide and assist them
with overseeing certain aspects of corporate governance. These committees are
the Audit and Risk Committee, the Technology and Innovation Committee and
the Executive Appointment and Remuneration Committee. Each committee is
empowered to seek any information it requires from employees in pursuing its
duties and to obtain independent legal or other professional advice.
Audit and Risk Committee
The Audit and Risk Committee operates under a charter approved by the Board and assists the Board in: taking reasonable
steps to acquire and maintain up-to-date knowledge of enterprise risk management; overseeing the quality and integrity of
external financial reporting including the accuracy, completeness and timeliness of financial statements; the appropriateness
of accounting policies, areas of judgement, compliance with accounting standards, stock exchange and legal requirements;
and the business’s relationship with, and the independence of, the external auditor.
The committee also approves any non-audit work carried out by the company’s auditor and ensures that the lead partner in
the audit firm is rotated every five years.
The committee is composed of three non-executive directors, two of whom are independent.
The current members are Lisbeth Jacobs (Chairwoman), Keith Oliver and John McMahon (non-independent).
The Audit and Risk Committee charter can be found at http://www.wdtl.com/governance.
Executive Appointment and Remuneration Committee
The Executive Appointment and Remuneration Committee operates under a charter approved by the Board and assists the
Board in: the remuneration and appointment of the senior executive team; management succession planning; reviewing and
approving compensation arrangements; establishing employee incentive schemes and the remuneration of the Board. The
committee also advises on proposals for significant company-wide remuneration policies and programmes. In carrying out
this role, the sub-committee operates independently of senior management of the company and, where appropriate, obtains
independent advice on remuneration policy and packages.
The current members are Gottfried Pausch (Chairman) and John McMahon.
The Executive Appointment and Remuneration Committee charter can be found at http://www.wdtl.com/governance.
Technology and Innovation Committee
The Technology and Innovation Committee operates under a charter approved by the Board and assists the Board in
overseeing and providing counsel on overall strategy, direction and effectiveness of technology and innovation activities.
The current members are Lisbeth Jacobs (Chairwoman) and Gottfried Pausch.
The Technology and Innovation Committee charter can be found at http://www.wdtl.com/governance.
Other committees
From time-to-time the Board may establish a committee to assist in the management of a matter or project. In 2019 a
Capital Planning Committee operated to oversee the strategic investment and funding requirements for the company.
The company has established protocols for dealing with a takeover should an offer be received.
Health and safety
Whilst not a committee of Board members, Wellington has a Health and Safety Committee that meets monthly and reports
to the Board. The company is strongly committed to maintaining a safe and healthy workplace and believes all accidents
are preventable. The committee is made up of a mix of senior management and staff from key operational areas. The
committee strives to: maintain and continually improve our health and safety systems; proactively identify hazards and take
The board should use committees
where this will enhance its effectiveness
in key areas, while still retaining board
responsibility.
64
Annual report 2019 Wellington Drive Technologies Ltd
all steps to eliminate or mitigate these; consult and actively promote participation in health and safety matters throughout
the company.
The health and safety policy can be found at http://www.wdtl.com/governance.
Principle 4 – Reporting and disclosure
The company is committed to ensuring integrity and timeliness of its financial
reporting and in providing information to the market and shareholders.
Financial reporting
The Board has overall responsibility for ensuring the integrity of the company’s reporting to shareholders, including for
financial statements that comply with generally accepted accounting practice. The Audit and Risk Committee assists the
Board to fulfil its responsibilities in this area. The committee makes enquiries of management and the external auditors
(including requiring management representations) so that the company can be satisfied as to the validity and accuracy of all
aspects of Wellington’s financial reporting.
The CEO and CFO certify to the Board that: the annual report is true, and the statements therein are not materially
misleading; and no matters in the annual report (as a result of subsequent events) would make any of the statements untrue
or materially misleading.
Wellington strives to improve the clarity and readability of its financial statements, while continuing to comply with all the
requirements of the financial reporting standards including the Companies Act 1993, the Financial Markets Conduct Act
2013, and the Listing Rules.
Continuous disclosure
The company has a formal Group Market Disclosure Policy that can be found at http://www.wdtl.com/governance.
The policy seeks to promote investor confidence by ensuring that dealing in its securities takes place in an efficient,
competitive and informed market. The company strives to ensure that all investors have equal and timely access to market
sensitive information. That disclosure be evenly balanced (during good times and bad) and this is fundamental to building
shareholder value and earning the trust of staff, customers, suppliers, communities and shareholders.
The Board reviews and approves material announcements and specifically considers with management at each Board
meeting whether there are any issues which might require disclosure to the market under the NZX continuous disclosure
requirements.
Trading in shares
Wellington is committed to transparency and fairness in dealing with all its stakeholders and to ensuring adherence to all
applicable laws and regulations.
Wellington has a detailed share trading policy, the Rules for Trading in Wellington Securities that can be found at http://
www.wdtl.com/governance, which applies to all directors and employees. No director or employee may use confidential
non-public price sensitive information in his or her position to engage in securities trading for personal benefit or to provide
benefit to any third party. Short-term trading in Wellington shares and buying or selling (while in possession of non-public
price-sensitive information) is strictly prohibited.
All directors and employees must obtain consent to trade in securities prior to trading. A majority of members of the Board
need to consent to the application. Once these consents have been received the Chair of the Wellington Board or (where
the Chair is unavailable) the Chair of the Board’s Audit and Risk Committee, will approve or decline the application. The
company monitors trading and reports share movements to the Board at every meeting.
Information for investors
Wellington’s investor website http://www.wdtl.com/news-and-information includes the company’s reports, investor
communications, audio and video releases and the Policies and Charters referred to in this section. The Annual and Interim
Report is available in electronic and hard copy format.
The annual meeting is planned to be held on 27 May 2020. All shareholders are welcome to attend and ask questions.
The external auditor, Deloitte will be in attendance to answer questions about the audit and their audit report. A notice of
meeting will be sent to shareholders in April 2020.
The Board should demand
integrity in financial and non-financial
reporting, and in the timeliness and
balance of corporate disclosures.
65
Annual report 2019 Wellington Drive Technologies Ltd
Principle 5 – Remuneration
The Executive Appointment and Remuneration Committee is responsible for
ensuring directors and executives receive the appropriate rewards to support
Wellington in achieving its commercial and stakeholder goals. The Executive
Appointment and Remuneration Committee has a formal charter. Its membership
and role are set out under Principle 3 above.
Director remuneration
Directors’ fees are currently set at a maximum of $400,000 per annum. This was approved by shareholders at the 2019
Annual Meeting. Directors’ fees paid in the 2019 financial year amounted to $223,814, due to the small size of the Board.
Full disclosure of director remuneration is set out on page 56. Other than from directors’ fees, no director is entitled to any
other remuneration or retirement benefits from Wellington. Directors are entitled to be reimbursed for reasonable travel,
accommodation and other expenses incurred by them in connection with their attendance at Board or shareholder meetings
or otherwise in connection with Wellington business.
The Executive Appointment and Remuneration Committee conducts an annual review of directors’ fees, to determine
whether the level of fees paid to the company’s chairperson and other non-executive directors is aligned with other
organisations of similar scale and scope. Any increases in fees paid to directors must be authorised by the Board and be
within the above cap approved by shareholders.
Remuneration
Wellington’s approach is to pay a base salary and a performance-based bonus that includes a short-term and a long-term
incentive component. This ensures executive motivation is aligned with the goals of the company in the short and long term.
Base salary
As stated, the company recognises our people are critical to our business and its growth strategies. Wellington’s
remuneration strategy is to pay executives a remuneration that is fair and reasonable in a competitive market for the skills,
knowledge and experience required by the company. Salaries are determined for their current position in the market using
relevant and up to date market benchmark data and an individual’s performance and are reviewed annually. Many of our
employees are based outside of New Zealand and remuneration varies by location in accordance with the local market.
Short-Term Incentive
Our Short-Term Incentive (STI) model is focused on delivering financial and business improvement performance goals,
predicated on measurable outcomes, differentiating high performance, and rewarding delivery. The STI programme applies
only to key management and other selected staff members. STI values are calculated as a percentage of base salary,
ranging between 10% to 33% for eligible employees. Executive team STI payments are determined following a Board level
review of the company’s and the individual’s performance and may be paid out at between zero to 100% of an individual’s
STI target. It is possible for an executive to achieve 200% on financial metrics if targets are substantially overachieved.
Employee share purchase plans
Wellington has two Long Term Incentive (LTI) share purchase plans, a partly paid share scheme which has been operating
since 2008 and the United States employee share option plan which has operated since 2010. Details of both plans and
the partly paid share issues or options currently outstanding are on page 46 and 47. Both schemes involve the issue, once
all LTI plan requirements have been met, of shares in Wellington to employees at a price of 20% to 30% premium to the
market price of Wellington shares at the time of their initial issue to the Share Trustee (in the case of partly paid shares)
or time of grant (in the case of options). This is also the market share price hurdle that must be met before the employees
can take up their shares. Selected employees are offered shares or options, although options are not available to New
Zealand based employees. The shares or options vest in either two or three years following their grant (unless extended by
the Board) if the share price hurdle price has been met and must be exercised within a specified period after that date by
paying the balance due for the part paid shares or options. Any rights to acquire shares that are not taken up lapse.
During FY2019, 6,649,896 rights to acquire shares were exercised under the Partly Paid Share Scheme and 760,013
options were exercised under the United States employee share option plan.
In 2020 the company is reviewing the structure of its long-term incentive plans to ensure that they continue to be fit for
purpose to retain and attract the right talent for the business.
The remuneration of directors and
executives should be transparent, fair
and reasonable.
66
Annual report 2019 Wellington Drive Technologies Ltd
CEO remuneration
The following table sets out the payments made to the CEO during FY2019.
Fixed remuneration$492,000
Short term incentive (for FY2018)$150,388
Total remuneration$642,388
Break down of CEO pay for performance (FY2018):
• Short Term Incentive: The CEO is eligible for an annual STI target payment of 30% of base salary based on
a combination of Board-approved financial and business improvement objectives being achieved, with 60%
of that target from agreed economic objectives and 40% of that target from agreed management objectives.
Overachievement on financial targets is possible up to a maximum of 200% if financial objectives are substantially
overachieved.
• The Board of Directors must approve any STI payment and such payment will only be made if a minimum EBITDA
threshold level is achieved.
The table below shows the structure of the CEO’s STI for FY2019:
Measurable OutcomeWeightingTotal if achievedOverachieve %
(if achieved)
Percentage
achieved in 2018
Revenue35%60%35% x 60% x 2200%
Gross Margin25%25% x 60% x 26.25%
ECR Unit Sales15%40%Nil100%
SCS Unit Sales15%Nil100%
SCS Click Unit Sales10%Nil5%
Note: Partial achievement of objectives and thus partial payment is possible under the STI programme.
• Long term incentive: The company’s long-term incentive plan does not involve the payment of cash to the CEO.
1,260,587 part paid shares have been issued to date to the share trustee on behalf of the CEO under the partly paid
share scheme and which are still outstanding. These were issued on 18 June 2014 - 1,260,587 shares with a hurdle
price of 14.22 cents. Further details of these part paid shares can be found on page 46.
Principle 6 – Risk management
The identification and effective management of the company’s risks are a priority
of the Board.
As discussed previously, the Board has established an Audit and Risk Committee
to assist the Board in oversight, monitoring and review of risk. Bi-annually there
is a review of the entire risk landscape to establish a forward-looking perspective
on business risks, both financial and non-financial, in both the internal and
external environment. The committee provides a forum for discussion of risk,
including the Board’s appetite for risk, with the CEO and management. The CEO and senior management team are required
to regularly identify the major risks affecting the business and to develop strategies to mitigate these risks. Significant risks
are discussed at each Board meeting, or
as required.
The company maintains insurance policies that it considers adequate to meet the insurable risks of the group. Exposure to
any foreign exchange risk is managed in accordance with policies laid down by the directors.
The Health and Safety Committee meets monthly and reports to the Board on health, safety and wellbeing matters.
Minutes of the Health and Safety Committee are a priority agenda item at all Board meetings and specific reviews are
sought as required. The committee continuously reviews health and safety risks and systems used to identify and manage
those risks, ensuring they are fit for purpose, are being effectively implemented, regularly reviewed and improved. The
frequency of incidents has been low and no Accident Compensation claims involving the company have been recorded
Directors should have a sound
understanding of the material risks faced
by the issuer and how to manage them.
The Board should regularly verify that
the issuer has appropriate processes
that identify and manage potential and
material risks.
67
Annual report 2019 Wellington Drive Technologies Ltd
for several years. The Board undertakes ongoing health and safety education and visits key operational sites on a regular
schedule.
Principle 7 – Auditors
Oversight of Wellington’s external audit arrangements is the responsibility of the
Audit and Risk Committee.
The company has adopted a policy to ensure that audit independence is maintained, both in fact and appearance, such that
Wellington’s external financial reporting is viewed as being reliable and credible. The policy covers the following areas:
• The external auditor must always remain independent of the company and comply with the New Zealand Institute of
Chartered Accountants’ (NZICA) Code of Ethics;
• The external auditor must monitor its independence and report to the Board that it has remained independent;
• Guidelines in relation to the provision of non-audit services by the external auditor in order that the provision of such
services does not impair the external auditor’s independence or objectivity;
• The audit firm may be permitted to provide non-audit services that are not considered to conflict with the preservation of
the independence of the auditor subject to the approval of the Audit and Risk Committee; and
• The Audit and Risk Committee must approve significant permissible non-audit work assignments that are awarded to an
external auditor.
Deloitte was appointed the external auditor of Wellington during 2019 replacing PricewaterhouseCoopers. This followed a
review by our Audit and Risk Committee of proposals from three audit firms. The Committee recommended the appointment
of Deloitte due to their experience with other listed entities at a similar stage to Wellington. Melissa Collier of Deloitte is the
engagement partner for the company.
During 2019 other services provided by Deloitte amounted to $31,000 relating to tax compliance and payroll services.
To ensure full and frank dialogue between the Audit and Risk Committee and the auditors, the auditor’s senior
representatives meet separately with the committee (without management present) at least twice a year, including
immediately before finalisation and release of the company’s half-year and full-year financial results to the market.
Due to its size, the company does not have an internal audit function as is recommended by the NZX Code. As discussed
above, the CEO is accountable for all operational and compliance risks across the company’s operations and businesses.
The CFO has management accountability for the effective implementation and improvement of internal systems and
controls.
Representatives of the company’s external auditor, Deloitte are invited to attend the annual shareholders meeting where
they are available to answer shareholders’ questions relevant to the audit.
Principle 8 – Shareholder rights and relations
The Board’s policy is to ensure (in an open and transparent manner) that
shareholders are informed of all major and strategic developments affecting
the company.
We provide information about who we are, including our governance policies, on
our website for investors to access at any time.
The company releases all material information via the NZX in accordance with its continuous disclosure requirements.
All major disclosures are also posted on the company’s website (http://www.wdtl.com/news-and-information) on a timely
basis. Audio files of investor conference calls held with institutional and large investors are also available on the company’s
website.
Shareholders can directly communicate with the company via http://www.wdtl.com/contact-investors. Our CEO and CFO
The Board should respect the rights
of shareholders and foster constructive
relationships with shareholders that
encourage them to engage with the
issuer.
The Board should ensure the
quality and independence of the external
audit process.
68
Annual report 2019 Wellington Drive Technologies Ltd
also respond directly to shareholder phone calls and emails.
Shareholders are encouraged to receive all shareholder communications by email. The company provides a printed copy
of its Interim and annual reports to shareholders who have elected to receive printed copies. Interim and annual reports are
available on the company's website in accordance with the requirements of the NZ Companies Act 1993.
The company’s share register is managed and maintained by Computershare. Shareholders can access their shareholding
details or make enquiries about their current shareholding interests electronically.
Notices of annual meetings are made available as soon as possible and posted on the website of the company usually
more than one month prior to the meeting.
Shareholders are encouraged to attend, participate and vote at meetings or appoint a proxy on their behalf, or submit a
postal vote, if they are unable to attend. Results of proxies and postal votes are summarised and disclosed at the meeting.
Results of meetings are announced as soon as possible following the closure of the shareholder meeting.
69
Annual report 2019 Wellington Drive Technologies Ltd
Directory
Directors
John McMahon, Chairman
Dr Lisbeth Jacobs
Mr Gottfried Pausch
Mr John Scott
Mr Keith Oliver
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 Group Marketing & IoT Products
Ali Karahasanoğlu, Sales Director, Europe/Eurasia
Jorge Civeira, Business Development & Commercial,
Americas
Gerardo Gonzalez, VP Global Business Development
Clayton Thomas, Sales & Marketing Director, Asia / Pacific
Phone/Fax
Ph: 64-9-477 4500
Fax: 64-9-479 5540
Internet
Website: www.wdtl.com
Email: info@wdtl.com
Address and Registered Office
21 Arrenway Drive
Rosedale, Auckland 0632, New Zealand
PO Box 302-533, North Harbour,
Auckland 0751, New Zealand
Auditor
Deloitte Limited
80 Queen Street, Auckland CBD, Auckland 1010
Banker
Bank of New Zealand
Share Registry
Computershare Investor Services Ltd,
Private Bag 92119, Auckland 1142,
New Zealand
70
Annual report 2019 Wellington Drive Technologies Ltd
Annual report
2019
71
Annual Report 2019
www.wdtl.com
WT9292
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.
Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- AFT — AFT Pharmaceuticals Limited: AFT FY2020 Results annoucement2020-05-19
“Results for announcement to the market AFT Pharmaceuticals Limited Reporting Period 12 months to 31 March 2020 Previous Reporting Period 12 months to 31 March 2019 Currency NZ$ Amount (000s) Percentage change Revenue from continuing operations $105,597 Up 24%…”
- WHS — The Warehouse Group Limited: The Warehouse Group 2020 Interim Results Presentation2020-03-16
“Performance •The Group has continued to deliver on the momentum of H2 FY19, achieving both sales and profitability growth for the first half of FY20 •Sales growth of 2.6% for the half relative to last year and Gross Profit margin improvement from transformation initiatives offs…”
- CHI — Channel Infrastructure NZ Limited: 2019 Results Announcement2020-02-26
“REFINING NZ FULL YEAR ANNOUNCEMENT 2019 1 FULL YEAR ANNOUNCEMENT HIGHLIGHTS – Net profit after tax of $4.2 million achieved in a challenging, low margin environment in the second half of 2019. – G ross refining margin (GRM) averaged USD 5.34 per barrel (2018: USD 6.31 per barr…”