Wellington Drive Technologies Annual Meeting Address

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Wellington Drive Technologies
Annual Shareholder Meeting
May 26, 2021

Meeting Address


Good afternoon, I am Gottfried Pausch, currently the Executive Chairman
of Wellington Drive Technologies. It’s my pleasure to welcome you all to
this years annual shareholders’ meeting.

Can I firstly introduce your directors and senior management. Here in the
room we have

• John McMahon, Keith Oliver
• Greg Allen is online from Vancouver and
we have John Scott as an apology.
• We also have here Paul Seller from Deloitte, our auditor
• and our CFO Howard Milliner who is also the Company secretary
• as well as our our new CEO – Greg Balla

Greg, may I ask you to say a few words.

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I am pleased to confirm that we have a quorum and therefore declare the
2021 Annual Shareholders’ Meeting of Wellington Drive Technologies
open.

The items of business for this meeting and the resolutions to be considered
by shareholders are contained in the Notice of Meeting which was sent to
shareholders on 11
th
May 2021.




Our agenda today will take us through a commentary on the 2020
performance and our expectations for 2021.

We will then take your questions.

After questions we will proceed with the formal business of the meeting.




ec tive h ir comment r

estions

orm l siness of the meeting

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2020 was a challenging year which the Company navigated well.
Late in the first quarter of 2020, Wellington began to see the initial impact
from COVID-19. This began as supply chain disruption in China and
subsequently developed into a significant fall in customer demand as many
customers temporarily stopped manufacturing.
The Company maintained its core operational capabilities, supply chain
capacity and new product pipeline, to be ready to resume performance as
customers progressively recommenced operations and ordering.
Wellington managed its costs and cash well, raised additional capital and
hunkered down.
Demand started to progressively return during the third and fourth quarter.
This was a sound strategy looking back, as demand has returned strongly
in 2021. I will comment on this later.
Please allow me to acknowledge every team member at Wellington for their
contribution during those difficult times.
I want to use this opportunity to thank each and every one for their salary
sacrifice which greatly helped the Company to get through this crisis
situation.
I also want to extend this thank you to our shareholders who contributed
$5.3m to ensure the Company maintained its operations.

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Key financial metrics and achievements


This slide looks at Wellington’s 2020 financial metrics.

Total revenue in 2020 decreased by 40.2% to $36.9m, entirely the result of
demand reductions caused by COVID-19.

Food and beverage brands significantly reduced their capital spending on
coolers for the e r which imp cted Wellington’s O M c stomers in t rn
resulting in lower demand.

M ch of the omp n ’s siness in the Americ ’s nd Asi w s closed for
a time.

Europe was the only region that demonstrated year over year growth in
2020 due to demand for our latest fan-pack design from supermarket
customers.

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On this slide you can see the revenue distribution. Latin America still clearly
being our largest region with 57% of total revenue.



On the next slide we see the trend in gross profit dollars and gross margin
%.

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e

F
Y
2
0
2
0

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The reduction in gross profit dollars was solely driven by revenues.

Gross margin improved to 28.6% from 27.0%, reflecting the impact of:
• higher margin Connect SCS and data service revenue recognition,
• reduced lower priced motor volumes,
• lower customer rebates due to lower volumes and
• unit cost reductions.


IoT solutions contributed 51% of gross profit and ECR 2 motors 35%.


Wellington Drive FY2020
Financial metrics review
Metric (NZ$ million)FY 2020FY 2019Change Y/Y
Revenue36.961.7-40.2%
Wellington Connect
™
IoT revenue12.524.0-48.1%
ECR
®
2 motor revenue16.622.5-26.4%
ECR legacy motor revenue6.713.4-49.7%
Gross profit10.516.6-36.6%
Gross margin %28.6%27.0%+1.6%
EBITDA1.194.22-71.8%
EBIT(1.59)1.51-205.4%
Profit/(Loss) for the year(2.15)0.45-2.60
Operating cashflow0.342.99-88.6%

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Operating costs decreased to $11.5m from $12.9m in 2019, a $1.4m
reduction, demonstrating how the business effectively flexed its cost base
to enable it to manage through COVID-19. Net operating costs after
deducting government wage support was $10.4m compared to $12.9m for
2019.

EBITDA was a surplus of $1.2m although this included a $1.0m gain from
fair value changes. Excluding this EBITDA was $0.2m compared to $3.8m
on the same basis in 2019.

EBIT and the bottom-line result for the year were correspondingly lower
than the previous year due to the impacts of lower revenues.

We ended the year with cash of $4.6m and bank debt of $0.6m. Our
investment in trade receivables and inventory had been reduced from
$19.6m to $12.0m, an excellent result in the circumstances. Wellington is
well positioned for the 2021 year.

In summary, a poor trading result caused by external factors and the
Company responded and acted appropriately.

Now, I would like to outline the strategic focus as we progress through
2021.

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We have set strategic priorities for 2021.
Our primary goal is to return to the revenue and profit growth that the
Company was achieving pre COVID-19.
I would like to comment on a few of these priorities.

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In October we announced the signing of a strategic partnership agreement
with Imbera Cooling for the exclusive supply of connected hardware, apps
and data services. We have supplied the initial order of units and are now
receiving regular orders and anticipate annual volumes of around 100,000
IoT units over coming years from just this one customer. A significant
growth opportunity.




We completed the development of the 400 series controller, which initially
is for the Imbera Cooling partnership. During the COVID-19 enforced
shutdown we substantially progressed the development of our Connect
Monitor, a battery retrofit connected device. The potential market for this
solution is large. These products have been launched already. We expect
to l nch onnect Network, n “ lw s on” device nd new higher
powered ECR2 motor later in 2021.


I will close with a few comments on our first quarter performance and our
outlook for the 2021 year.

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Noting that the first quarter in 2020 was largely unaffected by COVID,
Wellington’s US Dollar revenue in 2021 increased 6.9% largely due to an
increase in ECR2 motor sales.

As the NZ$ has strengthened relative to the US$, this resulted in the 4.8%
decline in reported NZ$ revenue.

Gross margin was maintained at around 29% and EBITDA was $1.0m,
consistent with Q1 2020.

Customer demand continues to be strong and well above last year’s level.

Wellington is maintaining its existing guidance for 2021 as previously
announced on 28
th
April with:

• Sales in the range of US$41m to US$46m
• EBITDA in the range of NZ$2.5 to NZ$3m
• and a pre-tax profit of around breakeven.



























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This seemingly wide range for revenue and earnings reflects uncertainty
around the supply of components due to well documented supply chain
constraints and significant product cost and freight cost increases.






We will now pause to take questions on the business update.

[Chair and former CEO take questions]

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We will now move to the business of the meeting.

Voting will be by way of poll and through proxy submission.

Once all the votes have been cast, they will be counted by the omp n ’s
share registrar, Computershare.

The res lts of tod ’s meeting will e rele sed on the NZX on the
completion of verification of voting.

All the resolutions being considered today are ordinary resolutions and are
required to be passed by a simple majority of votes.

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Resolution 1 – Election of Director


NZX Listing Rule 2.7.1 requires that a director appointed by the Board must
not hold office without election past the Annual Meeting of shareholders
following their appointment.

Greg Allen will retire from office t this e r’s Ann l Meeting. Being
eligible, he offers himself for election as a Director of the Company. His
biography was in the Notice of Meeting.

All shareholders should already know Greg and of his achievements with
Wellington. Greg, would you like to say a few words.

[Greg to speak]

Thanks Greg. Are there any questions?

[answer any questions]

I move, as an ordinary resolution, “To elect Greg Allen as a director of the
omp n .”

If o h ven’t already completed the voting form, please do so now.

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Resolution 2 – Re-Election of Director


N X Listing R le . . req ires th t the omp n ’s Directors m st not hold
office without re-election past the third Annual Meeting of shareholders
following their appointment or three years, whichever is longer.

John McMahon will retire from office t this e r’s Ann l Meeting. Being
eligible, he offers himself for election as a Director of the Company. His
biography was in the Notice of Meeting.

John, would you like to say a few words.

[John to speak]

Thanks John. Are there any questions?

[answer any questions]

I move, s n ordin r resol tion, “To re-elect John McMahon as a director
of the omp n .”

If o h ven’t already completed the voting form, please do so now.

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Resolution 3 – Auditor’s fees



Deloitte is the existing auditor of the Company and is automatically re-
appointed by virtue of section 207T of the New Zealand Companies Act
1993.

The proposed ordinary resolution is required to authorise the Directors of
the omp n to fi the ditor’s rem ner tion for the p rposes of section
207S of the New Zealand Companies Act 1993.

[answer any questions]

I now move, as an ordinary resolution “To thorise the directors of the
omp n to fi the rem ner tion of the ditor for the ens ing e r”.

If o h ven’t already completed the voting form, please do so now.

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If there are any other questions on the matters discussed today this is your
final opportunity to ask questions in the meeting.

[Answer any questions]

The res lts of tod ’s meetings will e p lished on the N X once
Computershare have collated the voting.

Please hand your voting form to the Computershare representative as you
leave the room.

Thank you for your questions, your votes and for attending our meeting
today. We are looking forward to seeing you next year.

I now declare the meeting closed.