MIXT MiX Telematics Limited

An explanation of non-IFRS measures used in this press release is set out in the Non-IFRS financial measures section of this press release. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is provided in the financial tables that accompany this release.

References in this announcement to “R” are to South African Rand and references to “U.S. Dollars” and “$” are to United States Dollars. Unless otherwise stated MiX Telematics has translated U.S. Dollar amounts from South African Rand at the exchange rate of R13.5618 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at September 30, 2017.

Highlights:

Second quarter fiscal 2018:

• Subscription revenue of R349 million ($25.8 million), up over 18% year over year on a constant currency basis
• Net subscriber additions of 14,500 bringing the total base to over 640,000, up 9% year over year
• Operating profit of R45 million ($3.3 million), up 73% year over year
• Adjusted EBITDA of R103 million ($7.6 million), up 56% year over year
• Adjusted EBITDA margin of 25.1% continues the quarterly improvement trend since the start of fiscal 2017. Reported Adjusted EBITDA margins were as follows: Q1 2017 15.9%, Q2 2017 18.0%, Q3 2017 21.9%, Q4 2017 22.3%, Q1 2018 23.1%, Q2 2018 25.1%
• Company raises full-year guidance for both revenue and profit

First half fiscal 2018:

• Subscription revenue of R685 million ($50.5 million), up over 17% year over year on a constant currency basis
• Operating profit of R88 million ($6.5 million), up 80% year over year
• Adjusted EBITDA of R197 million ($14.5 million), up 56% year over year
• Adjusted EBITDA margin of 24.1% up from 17.0% during the same period last year

MiX Telematics Limited (NYSE:MIXT, JSE:MIX), a leading global provider of fleet and mobile asset management solutions delivered as Software-as-a-Service (SaaS), today announced financial results for its second quarter and first half of fiscal 2018, which ended on September 30, 2017.

“MiX reported a very strong second quarter, highlighted by our ability to exceed expectations across all key operating metrics,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. “Our 18% year over year subscription revenue growth on a constant currency basis was broad-based, driven by uptake from our premium fleet customers globally. Additionally, this is the fifth consecutive quarter of adjusted EBITDA margin improvement. We are confident in our ability to maintain the momentum as we continue to execute our strategic initiatives and remain committed to achieving our longer-term adjusted EBITDA margin target of 30% plus.”

Financial performance for the three months ended September 30, 2017

Subscription revenue: Subscription revenue was R349.3 million ($25.8 million), an increase of 15.9% compared to R301.3 million ($22.2 million) for the second quarter of fiscal 2017. Subscription revenue increased more than 18% on a constant currency basis. Subscription revenue benefited from an increase of over 55,000 subscribers, representing an increase in the subscriber base of 9.4% from September 2016 to September 2017. Subscription revenue has also benefited from an expansion in the average revenue per user.

Total revenue: Total revenue was R411.2 million ($30.3 million), an increase of 11.7% compared to R368.2 million ($27.1 million) for the second quarter of fiscal 2017. Hardware and other revenue was R61.9 million ($4.6 million), a decrease of 7.3% compared to R66.8 million ($4.9 million) for the second quarter of fiscal 2017.

Gross Margin: Gross profit was R269.4 million ($19.9 million), compared to R253.1 million ($18.7 million) for the second quarter of fiscal 2017. Gross profit margin was 65.5%, compared to 68.8% for the second quarter of fiscal 2017.

Operating Margin: Operating profit was R45.3 million ($3.3 million), compared to R26.2 million ($1.9 million) for the second quarter of fiscal 2017. Operating margin was 11.0%, compared to 7.1% for the second quarter of fiscal 2017. The margin expansion was attributable primarily to the revenue growth leveraging our fixed overhead, and to ongoing cost management initiatives. Operating expenses of R224.1 million ($16.5 million) have declined by R2.8 million ($0.2 million), or 1.3%, since the second quarter of fiscal 2017.

Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R103.3 million ($7.6 million), compared to R66.2 million ($4.9 million) for the second quarter of fiscal 2017. Adjusted EBITDA margin, a non-IFRS measure, for the second quarter of fiscal 2018 was 25.1%, compared to 18.0% for the second quarter of fiscal 2017.

Profit for the period and earnings per share: Profit for the period was R24.2 million ($1.8 million), compared to R23.2 million ($1.7 million) in the second quarter of fiscal 2017. Profit for the period includes a net foreign exchange gain of R3.2 million ($0.2 million) before tax. During the second quarter of fiscal 2017, profit for the period included a net foreign exchange loss of R8.4 million ($0.6 million), primarily relating to U.S. Dollar cash reserves, which are sensitive to R:$ exchange rate movements.

Earnings per diluted ordinary share were 4 South African cents, consistent with the second quarter of fiscal 2017. For the second quarter of fiscal 2018, the calculation was based on diluted weighted average ordinary shares in issue of 566.0 million compared to 633.4 million diluted weighted average ordinary shares in issue during the second quarter of fiscal 2017. The diluted weighted average ordinary shares in issue during the second quarter of fiscal 2018 were lower than in the second quarter of fiscal 2017, due to the weighted average impact of the share repurchases fully described in note 7 to the unaudited Group interim financial results for the six months ended September 30, 2017.

The Company's effective tax rate for the quarter was 50.2% compared to (15.4%) for the second quarter of fiscal year 2017. Ignoring the impact of net foreign exchange gains and losses, and related tax consequences, the tax rate which is used in determining adjusted earnings below, was 32.0% compared to 30.0% in the second quarter of fiscal 2017.

On a U.S. Dollar basis, and using the September 30, 2017 exchange rate of R13.5618 per U.S. Dollar, and at a ratio of 25 ordinary shares to one American Depositary Share ("ADS"), profit for the period was $1.8 million, or 8 U.S. cents per diluted ADS.

Adjusted earnings for the period and adjusted earnings per share: Adjusted earnings for the period, a non-IFRS measure, was R30.9 million ($2.3 million) compared to R20.0 million ($1.5 million) for the second quarter of fiscal 2017 and excludes the net foreign exchange gain of R3.2 million ($0.2 million) referred to above. Adjusted earnings for the second quarter of fiscal 2017 excluded the net foreign exchange loss of R8.4 million ($0.6 million) referred to above. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 5 South African cents, compared to 3 South African cents in the second quarter of fiscal 2017.

On a U.S. Dollar basis, using the September 30, 2017 exchange rate of R13.5618 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the period were $2.3 million, or 10 U.S. cents per diluted ADS.

Statement of Financial Position and Cash Flow: At September 30, 2017, the Company had R256.9 million ($18.9 million) of net cash and cash equivalents, compared to R311.3 million ($23.0 million) at March 31, 2017. The Company generated R104.0 million ($7.7 million) in net cash from operating activities for the three months ended September 30, 2017 and invested R100.2 million ($7.4 million) in capital expenditures during the quarter (including investments in in-vehicle devices of R71.8 million or $5.3 million), leading to free cash flow, a non-IFRS measure, of R3.8 million ($0.3 million) for the second quarter of fiscal 2018, compared with negative free cash flow of R15.8 million ($1.2 million) for the second quarter of fiscal 2017. The Company utilized R12.6 million ($0.9 million) in financing activities, compared to R488.8 million ($36.0 million) utilized during the second quarter of fiscal 2017. The cash utilized in financing activities during the second quarter of fiscal 2018 mainly consists of dividends paid. The cash utilized in financing activities during the second quarter of fiscal 2017 included share repurchases of R473.6 million ($34.9 million) and dividends paid of R15.3 million ($1.1 million).

Financial performance for the first half of fiscal 2018

Subscription revenue: Subscription revenue increased to R684.6 million ($50.5 million), an increase of 12.7% compared to R607.5 million ($44.8 million) for the first half of fiscal 2017. On a constant currency basis, subscription revenue increased by more than 17.0%. Subscription revenue benefited from an increase of over 55,000 subscribers, representing an increase in subscribers of 9.4% from September 2016 to September 2017. Subscription revenue has also benefited from an expansion in the average revenue per user.

Total revenue: Total revenue for the first half of fiscal 2018 was R816.8 million ($60.2 million), an increase of 9.3% compared to R747.3 million ($55.1 million) for the first half of fiscal 2017. Hardware and other revenue was R132.2 million ($9.7 million), compared to R139.7 million ($10.3 million) for the first half of fiscal 2017.

Gross margin: Gross profit for the first half of fiscal 2018 was R541.0 million ($39.9 million), an increase of 6.3% compared to R508.9 million ($37.5 million) for the first half of fiscal 2017. Gross profit margin was 66.2%, compared to 68.1% for the first half of fiscal 2017.

Operating margin: Operating profit for the first half of fiscal 2018 was R88.2 million ($6.5 million), compared to R49.1 million ($3.6 million) posted in the first half of fiscal 2017. The operating margin for the first half of fiscal 2018 was 10.8%, compared to the 6.6% posted in the first half of fiscal 2017. The margin expansion was attributable primarily to the revenue growth leveraging our fixed overhead, and to ongoing cost management initiatives.

Adjusted EBITDA: Adjusted EBITDA was R197.2 million ($14.5 million) compared to R126.7 million ($9.3 million) for the first half of fiscal 2017. The Adjusted EBITDA margin for the first half of fiscal 2018 was 24.1%, compared to 17.0% in the first half of fiscal 2017.

Profit for the period and earnings per share: Profit for the first half of fiscal 2018 was R58.1 million ($4.3 million), compared to R55.1 million ($4.1 million) in the first half of fiscal 2017. Profit for the period includes a net foreign exchange loss of R1.8 million ($0.1 million) before tax. During the first half of fiscal 2017, a net foreign exchange gain of R11.5 million ($0.8 million) was recorded, primarily relating to U.S. Dollar cash reserves which are sensitive to R:$ exchange rate movements.

Earnings per diluted ordinary share were 10 South African cents, compared to 8 South African cents in the first half of fiscal 2017. For the first half of fiscal 2018, the calculation was based on diluted weighted average ordinary shares in issue of 566.7 million compared to 697.9 million diluted weighted average ordinary shares in issue during the first half of fiscal 2017. The diluted weighted average ordinary shares in issue during the first half of fiscal 2018 were lower than in the first half of fiscal 2017 due to the weighted average impact of the share repurchases fully described in note 7 to the unaudited Group interim financial results for the six months ended September 30, 2017.

The Company's effective tax rate for the first half of fiscal 2018 was 34.0% compared to 19.1% for the first half of fiscal 2017.

Adjusted earnings for the period and adjusted earnings per share: Adjusted earnings for the first half of fiscal 2018, a non-IFRS measure, was R61.6 million ($4.5 million), compared to R37.3 million ($2.7 million) in the first half of fiscal 2017 and excludes the net foreign exchange loss of R1.8 million ($0.1 million) referred to above. Adjusted earnings for the first half of fiscal 2017, excludes the net foreign exchange gain of R11.5 million ($0.8 million). Adjusted earnings per diluted ordinary share was 11 South African cents, compared to 5 South African cents for the first half of fiscal 2017.

Ignoring the impact of net foreign exchange gains and losses, and related tax consequences, the effective tax rate, which is used in calculating adjusted earnings, was 31.4% compared to 34.2% in the first half of fiscal 2017.

On a U.S. Dollar basis, and using the September 30, 2017 exchange rate of R13.5618 per U.S. Dollar, and at a ratio of 25 ordinary shares to one ADS, adjusted earnings for the first half of fiscal 2018 were $4.5 million, or 20 U.S. cents per diluted ADS, compared to $2.7 million, or 10 U.S. cents per diluted ADS in the first half of fiscal 2017.

Cash Flow: The Company generated R122.3 million ($9.0 million) in net cash from operating activities for the first half of fiscal 2018 and invested R182.5 million ($13.5 million) in capital expenditures during the period (including investments in in-vehicle devices of R124.5 million or $9.2 million), leading to negative free cash flow of R60.2 million ($4.4 million), compared with negative free cash flow of R50.0 million ($3.7 million) for the first half of fiscal 2017. Capital expenditure was R35.3 million ($2.6 million) higher than in the first half of fiscal 2017 primarily as a result of increased investments in in-vehicle devices due to the continued increase in the number of bundled subscription contracts.

Segment commentary for the first half of fiscal 2018

The segment results below are presented on an integral margin basis. In respect of revenue, this method of measurement entails reviewing the segmental results based on external revenue only. In respect of Adjusted EBITDA (the profit measure identified by the Company), the margin generated by our Central Services Organization ("CSO"), net of any unrealized intercompany profit, is allocated to the geographic region where the external revenue is recorded by our Regional Sales Offices ("RSOs").

CSO continues as a central service organization that wholesales our products and services to our RSOs who, in turn, interface with our end-customers and distributors. CSO is also responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments. CSO's operating expenses are not allocated to each RSO.

Each RSO's results reflect the external revenue earned, as well as the Adjusted EBITDA earned (or loss incurred) by each operating segment before the CSO and corporate cost allocations.

For further information in this regard, please refer to note 3 of the unaudited Group interim financial results for the six months ended September 30, 2017.

          Segment  

SubscriptionRevenueHalf-year2018R'000

 

Total RevenueHalf-year2018R'000

 

Adjusted EBITDAHalf-year2018R'000

 

% change on prior year

 

Adjusted EBITDAMarginHalf-year2018

Africa 423,157 469,549 209,392 33.0% 44.6%  

The subscriber base grew 8.7% year over year. This growth and an increase in the number of bundled subscriptions resulted in subscription revenue growth of 13.0% in the segment. Total revenue increased by 11.8%. Enhanced scale and stringent cost control drove an expansion in the Adjusted EBITDA margin to 44.6% (up from the 37.5% Adjusted EBITDA margin reported in the first half of fiscal 2017).

Europe 55,923 89,405 29,443 39.0% 32.9%   The region's subscriber base grew by 5.2% year over year and in constant currency, subscription revenue growth was 7.0%. Total revenue increased on a constant currency basis by 28.7% due to higher hardware revenues compared to the first half of fiscal 2017. The region reported an Adjusted EBITDA margin of 32.9% (up from the 27.0% Adjusted EBITDA margin reported in the first half of fiscal 2017). Americas 83,012 95,880 24,958 82.0% 26.0%   The Americas segment subscriber base grew by 22.5% year over year. In addition, subscription revenue was assisted by the market’s preference for bundled deals across new and existing customers. Subscription revenue growth on a constant currency basis was 60.7%. Total revenue improved by 34.9% on a constant currency basis as hardware sales were lower. The region reported an Adjusted EBITDA margin of 26.0% (up from the 17.5% Adjusted EBITDA margin reported in the first half of fiscal 2017).

Middle East and Australasia

98,900 135,996 49,570 22.7% 36.4%  

Subscribers increased by 5.3% year over year while subscription revenue increased by 5.4% on a constant currency basis. Total revenue in constant currency declined by 3.2% as hardware and other revenues were lower than in the first half of fiscal 2017. The region reported an Adjusted EBITDA margin of 36.4% (up from the 26.4% Adjusted EBITDA margin reported in the first half of fiscal 2017). The improvement in Adjusted EBITDA margin was as a result of the restructuring plans implemented during the fourth quarter of fiscal 2017.

Brazil 23,120 25,447 8,752 101.1% 34.4%   Subscribers increased by 44.6% year over year and subscription revenue, also aided by the market’s preference for bundled deals, increased by 67.6% on a constant currency basis. On a constant currency basis, total revenue increased by 54.5%. The segment reported Adjusted EBITDA of R8.8 million in the first half of fiscal 2018, at an Adjusted EBITDA margin of 34.4% (up from the 25.4% Adjusted EBITDA margin reported in the first half of fiscal 2017). Central Services Organization ("CSO") 515 553 (68,849) (7.0%) —  

CSO is responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments. The negative Adjusted EBITDA reported arises as a result of operating expenses carried by the segment.

 

Business Outlook

MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at the exchange rate of R14.0838 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at October 30, 2017.

Based on information as of today, November 2, 2017, the Company is issuing the following financial guidance for the full 2018 fiscal year:

• Subscription revenue - R1,420 million to R1,432 million ($100.8 million to $101.7 million), which would represent subscription revenue growth of 14.5% to 15.5% compared to fiscal 2017.
• Total revenue - R1,661 million to R1,687 million ($117.9 million to $119.8 million), which would represent revenue growth of 7.8% to 9.5% compared to fiscal 2017.
• Adjusted EBITDA - R403 million to R421 million ($28.6 million to $29.9 million), which would represent Adjusted EBITDA growth of 33.6% to 39.7% compared to fiscal 2017.
• Adjusted earnings per diluted ordinary share of 22.0 to 23.5 South African cents based on 568 million diluted ordinary shares in issue, and based on an effective tax rate of 28.0% to 31.0%. At a ratio of 25 ordinary shares to one ADS, this equates to adjusted earnings per diluted ADS of 39.1 to 41.7 U.S. cents.

For the third quarter of fiscal 2018, the Company expects subscription revenue to be in the range of R362 million to R367 million ($25.7 million to $26.1 million) which would represent subscription revenue growth of 16.5% to 18.1% compared to the third quarter of fiscal 2017.

The key assumptions used in deriving the forecast are as follows:

• Growth in subscription revenue and vehicles under subscription are based on expected growth rates related to market conditions and takes into account growth rates achieved previously.
• Achieving hardware sales according to expectations. Hardware sales are dependent on the volumes of bundled solutions selected by customers.
• An average forecast exchange rate for the 2018 fiscal year of R13.5000 per $1.00.

The forecast is the responsibility of the board of directors and has not been reviewed or reported on by the Company’s external auditors. The Company’s policy is to give guidance on a quarterly basis, if necessary, and does not update guidance between quarters.

The Company provides earnings guidance only on a non-IFRS basis and does not provide a reconciliation of forward-looking Adjusted EBITDA and Adjusted Earnings per Diluted Ordinary Share guidance to the most directly comparable IFRS financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for foreign exchange gains/(losses) and related tax consequences, restructuring costs, share-based compensation costs, and other charges reflected in the Company’s reconciliation of historic non-IFRS financial measures, the amounts of which, based on past experience, could be material.

The information disclosed in this “Business Outlook” paragraph complies with the disclosure requirements in terms of paragraph 8.38 of the JSE Listings Requirements which deals with profit forecasts.

Quarterly Reporting Policy in respect of JSE Listings Requirements

Following the listing of the Company’s ADSs on the New York Stock Exchange, the Company has adopted a quarterly reporting policy. As a result of such quarterly reporting the Company is, in terms of paragraph 3.4(b)(ix) of the JSE Listings Requirements, not required to publish trading statements in terms of paragraph 3.4(b)(i) to (viii) of the JSE Listings Requirements.

Conference Call Information

MiX Telematics management will also host a conference call and audio webcast at 8:00 a.m. (Eastern Daylight Time) and 2:00 p.m. (South African Time) on November 2, 2017 to discuss the Company's financial results and current business outlook:

• The live webcast of the call will be available at the “Investor Information” page of the Company’s website, http://investor.mixtelematics.com.

• To access the call, dial +1-888-695-0609 (within the United States) or 0 800 982 089 (within South Africa) or +1-719-457-2641 (outside of the United States). The conference ID is 9357437.
• A replay of this conference call will be available for a limited time at +1-844-512-2921 (within the United States) or +1-412-317-6671 (within South Africa or outside of the United States). The replay conference ID is 9357437.
• A replay of the webcast will also be available for a limited time at http://investor.mixtelematics.com.

About MiX Telematics Limited

MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to customers managing over 640,000 assets in approximately 120 countries. The Company’s products and services provide enterprise fleets, small fleets and consumers with solutions for safety, efficiency, risk and security. MiX Telematics was founded in 1996 and has offices in South Africa, the United Kingdom, the United States, Uganda, Brazil, Australia, Romania, Thailand and the United Arab Emirates as well as a network of more than 130 fleet partners worldwide. MiX Telematics shares are publicly traded on the Johannesburg Stock Exchange (JSE: MIX) and MiX Telematics ADSs are listed on the New York Stock Exchange (NYSE: MIXT). For more information visit www.mixtelematics.com.

Forward-Looking Statements

This press release includes certain “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements concerning our financial guidance for the third quarter and full year of fiscal 2018, our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, those described under the caption “Risk Factors” in the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the "SEC") for the fiscal year ended March 31, 2017, as updated by other reports that the Company files with or furnishes to the SEC. The Company assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

Non-IFRS financial measures

Adjusted EBITDA

To provide investors with additional information regarding its financial results, the Company has disclosed within this press release, Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA is a non-IFRS financial measure; it does not represent cash flows from operations for the periods indicated and should not be considered an alternative to net income as an indicator of the Company's results of operations or as an alternative to cash flows from operations as an indicator of liquidity. Adjusted EBITDA is defined as the profit for the period before income taxes, net finance income/(costs) including foreign exchange gains/(losses), depreciation of property, plant and equipment including capitalized customer in-vehicle devices, amortization of intangible assets including capitalized in-house development costs and intangible assets identified as part of a business combination, share-based compensation costs, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, insurance reimbursements relating to impaired assets and certain litigation costs.

The Company has included Adjusted EBITDA and Adjusted EBITDA margin in this press release because they are key measures that the Company's management and Board of Directors use to understand and evaluate its core operating performance and trends; to prepare and approve its annual budget; and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA margin can provide a useful measure for period-to-period comparisons of the Company's core business. Accordingly, the Company believes that Adjusted EBITDA and Adjusted EBITDA margin provides useful information to investors and others in understanding and evaluating its operating results.

The Company's use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
• Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to the Company; and
• other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including operating profit, profit for the period and our other results.

Headline Earnings

Headline earnings is a profit measure required for JSE-listed companies and is calculated in accordance with circular 2/2015 issued by the South African Institute of Chartered Accountants. The profit measure is determined by taking the profit for the period prior to certain separately identifiable re-measurements of the carrying amount of an asset or liability that arose after the initial recognition of such asset or liability net of related tax (both current and deferred) and related non-controlling interest.

Adjusted Earnings and Adjusted Earnings Per Share

Adjusted earnings per share is defined as profit attributable to owners of the parent, MiX Telematics Limited, excluding net foreign exchange gains/(losses) net of tax, divided by the weighted average number of ordinary shares in issue during the period.

We have included Adjusted earnings per share in this press release because it provides a useful measure for period-to-period comparisons of the Company's core business by excluding net foreign exchange gains/(losses) from earnings. Accordingly, we believe that Adjusted earnings per share provides useful information to investors and others in understanding and evaluating the Company's operating results.

Free cash flow

Free cash flow is determined as net cash generated from operating activities less capital expenditure for investing activities. We believe that free cash flow provides useful information to investors and others in understanding and evaluating the Company’s cash flows as it provides detail of the amount of cash the Company generates or utilizes after accounting for all capital expenditures including investments in in-vehicle devices and development expenditure.

Constant currency and U.S. Dollar financial information

Financial information presented in United States Dollars ("U.S. Dollars" and "$") and constant currency financial information presented as part of the segment commentary constitute pro forma financial information under the JSE Listings Requirements. Unless otherwise stated, MiX Telematics has translated U.S. Dollar amounts from South African Rand ("R") at the exchange rate of R13.5618 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at September 30, 2017.

Constant currency information has been presented to illustrate the impact of changes in currency rates on the Group’s results. The constant currency information has been determined by adjusting the current financial reporting period results to the prior period average exchange rates, determined as the average of the monthly exchange rates applicable to the period. The measurement has been performed for each of the Group’s currencies, including the U.S. Dollar and British Pound. The constant currency growth percentage has been calculated by utilizing the constant currency results compared to the prior period results.

This pro forma financial information is the responsibility of the Group’s board of directors and is presented for illustrative purposes. Because of its nature, the pro forma financial information may not fairly present MiX Telematics’ financial position, changes in equity, results of operations or cash flows. The pro forma financial information does not constitute pro forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa. The information contained in this report has not been reviewed or audited by the Group's auditors.

 

JSE Sponsor:

Java Capital Trustees and Sponsors Proprietary Limited    

Unaudited interim financial resultsfor the six months ended September 30, 2017

  CONDENSED CONSOLIDATED INCOME STATEMENTS South African Rand  

Six monthsended

 

Six monthsended

 

Three months ended

 

Three monthsended

Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited                   Revenue 816,830 747,256 411,167 368,160 Cost of sales   (275,864 )   (238,369 )   (141,732 )   (115,050 ) Gross profit 540,966 508,887 269,435 253,110 Other income/(expenses) - net 2,879 530 (64 ) 71 Operating expenses   (455,676 )   (460,321 )   (224,116 )   (226,955 ) -Sales and marketing (98,238 ) (97,652 ) (49,259 ) (49,122 ) -Administration and other charges   (357,438 )   (362,669 )   (174,857 )   (177,833 ) Operating profit 88,169 49,096 45,255 26,226 Finance (costs)/income - net   (84 )   18,995     3,402     (6,120 ) -Finance income 3,900 23,082 5,108 6,102 -Finance costs   (3,984 )   (4,087 )   (1,706 )   (12,222 ) Profit before taxation 88,085 68,091 48,657 20,106 Taxation   (29,941 )   (12,973 )   (24,417 )   3,092   Profit for the period   58,144     55,118     24,240     23,198     Attributable to: Owners of the parent 58,084 55,130 24,248 23,205 Non-controlling interests   60     (12 )   (8 )   (7 )     58,144     55,118     24,240     23,198     Earnings per share -basic (R) 0.10 0.08 0.04 0.04 -diluted (R) 0.10 0.08 0.04 0.04   Earnings per American Depositary Share -basic (R) 2.59 1.98 1.08 0.92 -diluted (R) 2.56 1.97 1.07 0.92   Ordinary shares ('000)1 -in issue at September 30 559,381 562,259 559,381 562,259 -weighted average 560,677 695,746 558,824 632,113 -diluted weighted average 566,715 697,920 566,008 633,413   Weighted average American Depositary Shares ('000)1 -in issue at September 30 22,375 22,490 22,375 22,490 -weighted average 22,427 27,830 22,353 25,285 -diluted weighted average   22,669     27,917     22,640     25,337    

1

 

September 30, 2017 figure excludes 40,000,000 (September 30, 2016: 40,000,000) treasury shares held by MiX Telematics Investments Proprietary Limited ("MiX Investments"), a wholly owned subsidiary of the Group.

    CONDENSED CONSOLIDATED INCOME STATEMENTS United States Dollar   Six months ended   Six monthsended   Three months ended  

Three monthsended

Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited Revenue 60,230 55,100 30,318 27,147 Cost of sales   (20,341 )   (17,577 )   (10,451 )   (8,483 ) Gross profit 39,889 37,523 19,867 18,664 Other income/(expenses) - net 212 39 (5 ) 5 Operating expenses   (33,600 )   (33,943 )   (16,525 )   (16,735 ) -Sales and marketing (7,244 ) (7,201 ) (3,632 ) (3,622 ) -Administration and other charges   (26,356 )   (26,742 )   (12,893 )   (13,113 ) Operating profit 6,501 3,619 3,337 1,934 Finance (costs)/income - net   (6 )   1,401     251     (451 ) -Finance income 288 1,702 377 450 -Finance costs   (294 )   (301 )   (126 )   (901 ) Profit before taxation 6,495 5,020 3,588 1,483 Taxation   (2,208 )   (957 )   (1,800 )   228   Profit for the period   4,287     4,063     1,788     1,711     Attributable to: Owners of the parent 4,283 4,064 1,789 1,712 Non-controlling interests   4     (1 )   (1 )   (1 )     4,287     4,063     1,788     1,711     Earnings per share -basic ($) 0.01 0.01

#     

#     

-diluted ($) 0.01 0.01

#     

#     

  Earnings per American Depositary Share -basic ($) 0.19 0.15 0.08 0.07 -diluted ($) 0.19 0.15 0.08 0.07   Ordinary shares ('000)1 -in issue at September 30 559,381 562,259 559,381 562,259 -weighted average 560,677 695,746 558,824 632,113 -diluted weighted average 566,715 697,920 566,008 633,413   Weighted average American Depositary Shares ('000)1 -in issue at September 30 22,375 22,490 22,375 22,490 -weighted average 22,427 27,830 22,353 25,285 -diluted weighted average   22,669     27,917     22,640     25,337    

# Amounts less than $0.01

1

 

September 30, 2017 figure excludes 40,000,000 (September 30, 2016: 40,000,000) treasury shares held by MiX Telematics Investments Proprietary Limited ("MiX Investments"), a wholly owned subsidiary of the Group.

    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   South African Rand   United States Dollar Six months ended   Six monthsended Six months ended   Six monthsended Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited Profit for the period 58,144 55,118 4,287 4,063 Other comprehensive income: Items that may be subsequently reclassified to profit or loss Exchange differences on translating foreign operations   18,796     (58,619 )   1,386     (4,323 ) - Attributable to owners of the parent 18,785 (58,571 ) 1,385 (4,319 ) - Attributable to non-controlling interests   11     (48 )   1     (4 ) Taxation relating to components of other comprehensive income   —     478     —     35   Other comprehensive income/(loss) for the period, net of tax   18,796     (58,141 )   1,386     (4,288 ) Total comprehensive income/(loss) for the period   76,940     (3,023 )   5,673     (225 )   Attributable to: Owners of the parent 76,869 (2,963 ) 5,668 (221 ) Non-controlling interests   71     (60 )   5     (4 ) Total comprehensive income/(loss) for the period   76,940     (3,023 )   5,673     (225 )     HEADLINE EARNINGS Reconciliation of headline earnings         South African Rand United States Dollar

Six months ended

Six monthsended

Six months ended

Six monthsended

Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited Profit for the period attributable to owners of the parent 58,084 55,130 4,283 4,064 Adjusted for: (Profit)/loss on disposal of property, plant and equipment and intangible assets (313 ) 17 (23 ) 1 Impairment of product development costs capitalized 127 144 9 11 Income tax effect on the above components   —     (23 )   —     (2 ) Headline earnings attributable to owners of the parent   57,898     55,268     4,269     4,074   Headline earnings Headline earnings per share -basic (R/$) 0.10 0.08 0.01 0.01 -diluted (R/$) 0.10 0.08 0.01 0.01   Headline earnings per American Depositary Share -basic (R/$) 2.58 1.99 0.19 0.15 -diluted (R/$)   2.56     1.98     0.19     0.15       ADJUSTED EARNINGS Reconciliation of adjusted earnings South African Rand   Six months ended   Six monthsended   Three months ended  

Three monthsended

Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited   Profit for the period attributable to owners of the parent 58,084 55,130 24,248 23,205 Net foreign exchange losses/(gains) 1,784 (11,496 ) (3,209 ) 8,421 Income tax effect on the above component   1,692     (6,381 )   9,853     (11,637 ) Adjusted earnings attributable to owners of the parent   61,560     37,253     30,892     19,989       Adjusted earnings Adjusted earnings per share -basic (R) 0.11 0.05 0.06 0.03 -diluted (R) 0.11 0.05 0.05 0.03   Adjusted earnings per American Depositary Share -basic (R) 2.74 1.34 1.38 0.79 -diluted (R) 2.72 1.33 1.36 0.79   United States Dollar Figures are in thousands unless otherwise stated                 Profit for the period attributable to owners of the parent 4,283 4,064 1,789 1,712 Net foreign exchange losses/(gains) 132 (848 ) (237 ) 621 Income tax effect on the above component   125     (471 )   726     (858 ) Adjusted earnings attributable to owners of the parent   4,540     2,745     2,278     1,475     Adjusted earnings per share -basic ($) 0.01

#     

#     

#     

-diluted ($) 0.01

#     

#     

#     

  Adjusted earnings per American Depositary Share -basic ($) 0.20 0.10 0.10 0.06 -diluted ($)   0.20     0.10     0.10     0.06    

# Amounts less than $0.01

  CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION   South African Rand   United States Dollar Figures are in thousands unless otherwise stated September 30,   March 31, September 30,   March 31, 2017 2017 2017 2017     Unaudited   Audited   Unaudited   Unaudited   ASSETS Non-current assets Property, plant and equipment 352,503 294,120 25,992 21,687 Intangible assets 909,920 881,900 67,094 65,028 Finance lease receivable — 22 — 2 Deferred tax assets   33,124     28,130     2,442     2,074   Total non-current assets   1,295,547     1,204,172     95,528     88,791   Current assets Inventory 53,738 26,449 3,962 1,950 Trade and other receivables 299,984 260,576 22,120 19,214 Finance lease receivable 62 140 5 10 Taxation 26,689 26,302 1,968 1,939 Restricted cash 14,151 13,268 1,043 978 Cash and cash equivalents   283,526     375,782     20,906     27,709   Total current assets   678,150     702,517     50,004     51,800   Total assets   1,973,697     1,906,689     145,532     140,591   EQUITY Stated capital (note 7) 837,004 854,345 61,719 62,997 Other reserves 17,788 (4,370 ) 1,311 (322 ) Retained earnings   627,371     594,514     46,260     43,837   Equity attributable to owners of the parent 1,482,163 1,444,489 109,290 106,512 Non-controlling interest   14     (1,558 )   1     (115 ) Total equity   1,482,177     1,442,931     109,291     106,397   LIABILITIES Non-current liabilities Deferred tax liabilities 111,743 100,067 8,240 7,379 Provisions   1,981     1,833     146     135   Total non-current liabilities   113,724     101,900     8,386     7,514   Current liabilities Trade and other payables 321,783 309,110 23,724 22,791 Taxation 6,872 4,521 507 333 Provisions 21,126 28,778 1,558 2,122 Share-based payment liability 1,353 — 100 — Bank overdraft   26,662     19,449     1,966     1,434   Total current liabilities   377,796     361,858     27,855     26,680   Total liabilities   491,520     463,758     36,241     34,194   Total equity and liabilities   1,973,697     1,906,689     145,532     140,591   Net cash (note 6)   256,864     356,333     18,940     26,275   Net asset value per share (R/$) 2.65 2.56 0.20 0.19 Net tangible asset value per share (R/$) 1.02 1.00 0.08 0.07 Capital expenditure -incurred 177,127 289,418 13,061 21,341 -authorized but not spent   50,448     132,836     3,720     9,795       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   South African Rand   United States Dollar Six months ended   Six monthsended Six months ended   Six monthsended September 30, September 30, September 30, September 30, Figures are in thousands unless otherwise stated 2017 2016 2017 2016   Unaudited   Unaudited   Unaudited   Unaudited Operating activities Cash generated from operations 141,163 124,340 10,409 9,168 Net financing income 1,703 7,666 126 565 Taxation paid   (20,582 )   (34,792 )   (1,518 )   (2,565 ) Net cash generated from operating activities   122,284     97,214     9,017     7,168   Cash flows from investing activities Capital expenditure payments (182,516 ) (147,187 ) (13,458 ) (10,853 ) Deferred consideration paid — (735 ) — (54 ) Proceeds on sale of property, plant and equipment and intangible assets 1,218 198 90 15 Decrease in restricted cash 22 3,765 2 278 Increase in restricted cash   (689 )   (566 )   (51 )   (42 ) Net cash used in investing activities   (181,965 )   (144,525 )   (13,417 )   (10,656 ) Cash flows from financing activities Proceeds from issuance of ordinary shares 1,325 4,529 98 334 Share repurchase (18,666 ) (473,601 ) (1,376 ) (34,922 ) Dividends paid to Company's owners   (25,200 )   (30,458 )   (1,858 )   (2,246 ) Net cash used in financing activities   (42,541 )   (499,530 )   (3,136 )   (36,834 ) Net decrease in cash and cash equivalents   (102,222 )   (546,841 )   (7,536 )   (40,322 ) Net cash and cash equivalents at the beginning of the period 356,333 860,762 26,275 63,470 Exchange gains/(losses) on cash and cash equivalents   2,753     (2,593 )   201     (191 ) Net cash and cash equivalents at the end of the period   256,864     311,328     18,940     22,957       FREE CASH FLOW Reconciliation of free cash flow to net cash generated from operating activities   Six months ended   Six monthsended   Three months ended  

Three monthsended

South African Rand September 30, September 30, September 30, September 30, Figures are in thousands unless otherwise stated 2017 2016 2017 2016   Unaudited   Unaudited   Unaudited   Unaudited   Net cash generated from operating activities 122,284 97,214 103,960 69,113 Capital expenditure payments   (182,516 )   (147,187 )   (100,172 )   (84,960 ) Free cash flow   (60,232 )   (49,973 )   3,788     (15,847 ) United States Dollar Figures are in thousands unless otherwise stated                   Net cash generated from operating activities 9,017 7,168 7,666 5,096 Capital expenditure payments   (13,458 )   (10,853 )   (7,386 )   (6,265 ) Free cash flow   (4,441 )   (3,685 )   280     (1,169 )     CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY   Attributable to owners of the parent     South African Rand

Figures are in thousands unless otherwise stated

  Statedcapital   Otherreserves   Retainedearnings   Total   Non-controlling interest   Totalequity Balance at April 1, 2016 (Audited)   1,320,955   74,262   526,082   1,921,299   (1,491 ) 1,919,808   Total comprehensive income —     (58,093 )   55,130     (2,963 )   (60 )   (3,023 ) Profit for the period — — 55,130 55,130 (12 ) 55,118 Other comprehensive loss —     (58,093 )   —     (58,093 )   (48 )   (58,141 )   Transactions with owners (469,153 )   5,435     (30,489 )   (494,207 )   —     (494,207 ) Shares issued in relation to share options exercised 4,529 — — 4,529 — 4,529 Share-based payment — 5,435 — 5,435 — 5,435 Dividends declared — — (30,489 ) (30,489 ) — (30,489 ) Share repurchase (note 7)   (473,682 )   —     —     (473,682 )   —     (473,682 ) Balance at September 30, 2016 (Unaudited)   851,802     21,604     550,723     1,424,129     (1,551 )   1,422,578     Total comprehensive income —     (22,786 )   66,328     43,542     (7 )   43,535   Profit for the period — — 66,328 66,328 (5 ) 66,323 Other comprehensive income —     (22,786 )   —     (22,786 )   (2 )   (22,788 )   Transactions with owners 2,543     (3,188 )   (22,537 )   (23,182 )   —     (23,182 ) Shares issued in relation to share options exercised 2,543 — — 2,543 — 2,543 Share-based payment — (3,188 ) — (3,188 ) — (3,188 )

Dividends declared

  —     —     (22,537 )   (22,537 )   —     (22,537 )                           Balance at March 31, 2017 (Audited)   854,345     (4,370 )   594,514     1,444,489     (1,558 )   1,442,931     Total comprehensive income —     18,785     58,084     76,869     71     76,940   Profit for the period — — 58,084 58,084 60 58,144 Other comprehensive income —     18,785     —     18,785     11     18,796     Transactions with owners (17,341 )   3,373     (25,227 )   (39,195 )   1,501     (37,694 ) Shares issued in relation to share options exercised 1,325 — — 1,325 — 1,325 Share-based payment — 4,874 — 4,874 — 4,874 Dividends declared (note 8) — — (25,227 ) (25,227 ) — (25,227 ) Share repurchase (note 7) (18,666 ) — — (18,666 ) — (18,666 ) Transactions with non-controlling interests (note 9)   —     (1,501 )   —     (1,501 )   1,501     —   Balance at September 30, 2017 (Unaudited)   837,004     17,788     627,371     1,482,163     14     1,482,177    

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY     Attributable to owners of the parent  

United States DollarFigures are in thousands unless otherwise stated

  Statedcapital   Otherreserves   Retainedearnings   Total   Non-controlling interest   Totalequity Balance at April 1, 2016 (Unaudited)   97,403   5,476   38,791   141,670 (110 ) 141,560   Total comprehensive income —     (4,284 )   4,065     (219 )   (5 )   (224 ) Profit for the period — — 4,065 4,065 (1 ) 4,064 Other comprehensive loss —     (4,284 )   —     (4,284 )   (4 )   (4,288 )   Transactions with owners (34,594 )   401     (2,248 )   (36,441 )   —     (36,441 ) Shares issued in relation to share options exercised 334 — — 334 — 334 Share-based payment — 401 — 401 — 401 Dividends declared — — (2,248 ) (2,248 ) — (2,248 ) Share repurchase (note 7)   (34,928 )   —     —     (34,928 )   —     (34,928 ) Balance at September 30, 2016 (Unaudited)   62,809     1,593     40,608     105,010     (115 )   104,895     Total comprehensive income —     (1,680 )   4,891     3,211    

*     

  3,211   Profit for the period — — 4,891 4,891

*     

4,891 Other comprehensive income —     (1,680 )   —     (1,680 )  

*     

  (1,680 )   Transactions with owners 188     (235 )   (1,662 )   (1,709 )   —     (1,709 ) Shares issued in relation to share options exercised 188 — — 188 — 188 Share-based payment — (235 ) — (235 ) — (235 )

Dividends declared

  —     —     (1,662 )   (1,662 )   —     (1,662 ) Balance at March 31, 2017 (Unaudited)   62,997     (322 )   43,837     106,512     (115 )   106,397     Total comprehensive income —     1,385     4,283     5,668     5     5,673   Profit for the period — — 4,283 4,283 4 4,287 Other comprehensive income —     1,385     —     1,385     1     1,386     Transactions with owners (1,278 )   248     (1,860 )   (2,890 )   111     (2,779 ) Shares issued in relation to share options exercised 98 — — 98 — 98 Share-based payment — 359 — 359 — 359 Dividends declared (note 8) — — (1,860 ) (1,860 ) — (1,860 ) Share repurchase (note 7) (1,376 ) — — (1,376 ) — (1,376 ) Transactions with non-controlling interests (note 9)   —     (111 )   —     (111 )   111     —   Balance at September 30, 2017 (Unaudited)   61,719     1,311     46,260     109,290     1     109,291    

* Amount less than $1000.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL RESULTS

1. Basis of preparation and accounting policies

Condensed unaudited Group interim financial results for the half year ended September 30, 2017

These condensed unaudited Group interim financial results for the half year ended September 30, 2017 have been prepared in accordance with International Financial Reporting Standard ("IFRS"), IAS 34: Interim financial reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council ("FRSC"), the JSE Listings Requirements and the requirements of the South African Companies Act, No. 71 of 2008. The interim financial results have not been audited or reviewed by the Group’s external auditors.

The condensed unaudited Group interim financial results do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual financial statements for the year ended March 31, 2017, which have been prepared in accordance with IFRS.

The preparation of interim financial results requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these condensed interim financial results, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation and uncertainty were the same as those applied to the consolidated financial statements for the year ended March 31, 2017.

The condensed unaudited Group interim financial results were prepared under the supervision of the Interim Group Chief Financial Officer, PM Dell, CA (SA). The results were made available on November 2, 2017.

The Group has adopted all the new, revised or amended accounting pronouncements as issued by the International Accounting Standards Board (IASB) which were effective for the Group from April 1, 2017, none of which had a material impact on the Group.

Financial results for the second quarter of fiscal 2018

In addition to the condensed unaudited Group interim financial results for the half year ended September 30, 2017, additional financial information in respect of the second quarter of fiscal 2018 has been presented together with the relevant comparative information. The quarterly information comprises a condensed consolidated income statement, a reconciliation of adjusted earnings to profit for the period, a reconciliation of Adjusted EBITDA to profit for the period (note 4) and other financial and operating data (note 11).

The quarterly financial results have not been audited or reviewed by the Group’s external auditors.

Presentation currency and convenience translation

The Group’s presentation currency is South African Rand. In addition to presenting these interim financial results in South African Rand, supplementary information in U.S. Dollars has been prepared for the convenience of users of the Group interim financial results. Unless otherwise stated, the Group has translated U.S. Dollar amounts from South African Rand at the exchange rate of R13.5618 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at September 30, 2017. The U.S. Dollar figures may not compute as they are rounded independently.

The supplementary information prepared in U.S. Dollars constitutes pro forma financial information under the JSE Listings Requirements. This pro forma financial information is the responsibility of the Group’s Board of Directors and is presented for illustrative purposes. Because of its nature, the pro forma financial information may not fairly present MiX Telematics’ financial position, changes in equity, results of operations or cash flows. The pro forma financial information does not constitute pro forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa.

2. Accounting policies

The accounting policies used in preparing these financial results are in terms of IFRS and are consistent in all material respects with those applied in the preparation of the Group’s annual financial statements for the year ended March 31, 2017.

3. Segment information

Our operating segments are based on the geographical location of our Regional Sales Offices (“RSOs”) and also include our Central Services Organization (“CSO”). CSO is our central services organization that wholesales our products and services to our RSOs who, in turn, interface with our end-customers, distributors and dealers. CSO is also responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments.

The chief operating decision maker ("CODM") reviews the segment results on an integral margin basis as defined by management. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified collectively as the executive committee and the Chief Executive Officer who make strategic decisions. In respect of revenue, this method of measurement entails reviewing the segmental results based on external revenue only. In respect of Adjusted EBITDA (the profit measure identified by the CODM), the margin generated by CSO, net of any unrealized intercompany profit, is allocated to the geographic region where the external revenue is recorded by our RSOs. The costs remaining in CSO relate mainly to research and development of hardware and software platforms, common marketing, product management and technical and distribution support to each of the RSOs. CSO is a reportable segment of the Group because it produces discrete financial information which is reviewed by the CODM and has the ability to generate external revenues.

Each RSO's results therefore reflect the external revenue earned, as well as the Adjusted EBITDA earned (or loss incurred) by each operating segment before the remaining CSO and corporate costs allocations. Segment assets are not disclosed as segment information is not reviewed on such a basis by the CODM.

3. Segment information (continued)

       

South African Rand Figures are in thousands unless otherwise stated

 

Subscriptionrevenue

 

Hardware andother revenue

 

Totalrevenue

 

Adjusted EBITDA

  Six months ended September 30, 2017 (unaudited) Africa 423,157 46,392 469,549 209,392 Europe 55,923 33,482 89,405 29,443 Americas 83,012 12,868 95,880 24,958 Middle East and Australasia 98,900 37,096 135,996 49,570 Brazil   23,120     2,327     25,447     8,752   Total Regional Sales Offices 684,112 132,165 816,277 322,115 Central Services Organization   515     38     553     (68,849 ) Total Segment Results 684,627 132,203 816,830 253,266 Corporate and consolidation entries   —     —     —     (56,070 ) Total   684,627     132,203     816,830     197,196     Six months ended September 30, 2016 (unaudited)  

Subscriptionrevenue

 

Hardware andother revenue

 

Totalrevenue

 

AdjustedEBITDA

Africa 374,377 45,520 419,897 157,386 Europe 59,097 19,256 78,353 21,185 Americas 56,958 21,403 78,361 13,713 Middle East and Australasia 102,271 50,774 153,045 40,412 Brazil   14,365     2,792     17,157     4,351   Total Regional Sales Offices 607,068 139,745 746,813 237,047 Central Services Organization   443     —     443     (64,354 ) Total Segment Results 607,511 139,745 747,256 172,693 Corporate and consolidation entries   —     —     —     (46,014 ) Total   607,511     139,745     747,256     126,679    

3. Segment information (continued)

United States Dollar Figures are in thousands unless otherwise stated  

Subscriptionrevenue

 

Hardware andother revenue

 

Totalrevenue

   

Adjusted EBITDA

          Six months ended September 30, 2017 (unaudited) Africa 31,202 3,421 34,623 15,440 Europe 4,124 2,468 6,592 2,171 Americas 6,121 949 7,070 1,840 Middle East and Australasia 7,292 2,736 10,028 3,655 Brazil   1,705     171     1,876       645   Total Regional Sales Offices 50,444 9,745 60,189 23,751 Central Services Organization   38     3     41       (5,077 ) Total Segment Results 50,482 9,748 60,230 18,674 Corporate and consolidation entries   —     —     —       (4,134 ) Total   50,482     9,748     60,230       14,540     Six months ended September 30, 2016 (unaudited)  

Subscriptionrevenue

 

Hardware andother revenue

 

Totalrevenue

   

AdjustedEBITDA

Africa 27,605 3,357 30,962 11,605 Europe 4,358 1,419 5,777 1,562 Americas 4,200 1,578 5,778 1,011 Middle East and Australasia 7,541 3,744 11,285 2,980 Brazil   1,059     206     1,265       321   Total Regional Sales Offices 44,763 10,304 55,067 17,479 Central Services Organization   33     —     33       (4,745 ) Total Segment Results 44,796 10,304 55,100 12,734 Corporate and consolidation entries   —     —     —       (3,393 ) Total   44,796     10,304     55,100       9,341       4. Reconciliation of Adjusted EBITDA to Profit for the Period South African Rand   Six months ended   Six monthsended   Three months ended  

Three monthsended

Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited   Adjusted EBITDA 197,196 126,679 103,313 66,230 Add: Decrease in restructuring cost provision — 431 — — Net profit on sale of property, plant and equipment and intangible assets 313 — — 43   Less: Depreciation (1) (71,576 ) (45,525 ) (37,096 ) (24,586 ) Amortization (2) (31,387 ) (25,829 ) (16,823 ) (12,297 ) Impairment of product development costs capitalized (127 ) (144 ) (35 ) (144 ) Share-based compensation costs   (6,226 )   (6,499 )   (4,079 )   (3,020 ) Equity-settled share-based compensation costs (4,874 ) (5,435 ) (2,727 ) (3,020 ) Cash-settled share-based compensation costs   (1,352 )   (1,064 )   (1,352 )   —   Net loss on sale of property, plant and equipment and intangible assets — (17 ) (19 ) — Increase in restructuring cost provision   (24 )   —     (6 )   —   Operating profit 88,169 49,096 45,255 26,226 Add: Finance (costs)/income - net (84 ) 18,995 3,402 (6,120 ) Less: Taxation   (29,941 )   (12,973 )   (24,417 )   3,092   Profit for the period   58,144     55,118     24,240     23,198     (1)   Includes depreciation of property, plant and equipment (including in-vehicle devices). (2) Includes amortization of intangible assets (including product development costs and intangible assets identified as part of a business combination).     4. Reconciliation of Adjusted EBITDA to Profit for the Period (continued) United States Dollar   Six months ended   Six monthsended   Three months ended   Three monthsended Figures are in thousands unless otherwise stated September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited   Adjusted EBITDA 14,540 9,341 7,618 4,884 Add: Decrease in restructuring cost provision — 32 — — Net profit on sale of property, plant and equipment and intangible assets 23 — — 3   Less: Depreciation (1) (5,278 ) (3,357 ) (2,735 ) (1,813 ) Amortization (2) (2,314 ) (1,905 ) (1,240 ) (907 ) Impairment of product development costs capitalized (9 ) (11 ) (4 ) (10 ) Share-based compensation costs   (459 )   (479 )   (301 )   (223 ) Equity-settled share-based compensation costs (359 ) (401 ) (201 ) (223 ) Cash-settled share-based compensation costs   (100 )   (78 )   (100 )   —   Net loss on sale of property, plant and equipment and intangible assets — (1 ) (1 ) — Increase in restructuring cost provision   (2 )   —    

*    

  —   Operating profit 6,501 3,619 3,337 1,934 Add: Finance (costs)/income - net (6 ) 1,401 251 (451 ) Less: Taxation   (2,208 )   (957 )   (1,800 )   228   Profit for the period   4,287     4,063     1,788     1,711     (1)   Includes depreciation of property, plant and equipment (including in-vehicle devices). (2) Includes amortization of intangible assets (including product development costs and intangible assets identified as part of a business combination).  

* Amount less than $1000.

  5. Reconciliation of Adjusted EBITDA margin to Profit for the Period margin   Six months ended   Six monthsended   Three months ended   Three monthsended September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited   Adjusted EBITDA margin 24.1 % 17.0 % 25.1 % 18.0 % Add: Decrease in restructuring cost provision — 0.1 % — — Net profit on sale of property, plant and equipment and intangible assets 0.0 % — — 0.0 % Less: Depreciation (8.7 %) (6.1 %) (9.0 %) (6.8 %) Amortization (3.8 %) (3.5 %) (4.1 %) (3.3 %) Impairment of product development costs capitalized (0.0 %)

(0.0

%)

(0.0 %)

(0.0

%)

Share-based compensation costs   (0.8 %)   (0.9 %)   (1.0 %)   (0.8 %) Equity-settled share-based compensation costs (0.6 %) (0.7 %) (0.7 %) (0.8 %) Cash-settled share-based compensation costs   (0.2 %)   (0.2 %)   (0.3 %)   —   Net loss on sale of property, plant and equipment and intangible assets — (0.0 %) (0.0 %) — Increase in restructuring cost provision   (0.0 %)   —     (0.0 %)   —   Operating profit margin 10.8 % 6.6 % 11.0 % 7.1 %

Add: Finance (costs)/income - net

(0.0 %) 2.5 % 0.8 % (1.6 %) Less: Taxation   (3.7 %)   (1.7 %)   (5.9 %)   0.8 % Profit for the period margin   7.1 %   7.4 %   5.9 %   6.3 %  

6. Net Cash

Net cash is calculated as being net cash and cash equivalents, excluding restricted cash less interest bearing borrowings.

7. Share Repurchase

Fiscal 2018

On May 23, 2017, the MiX Telematics Board approved a share repurchase program of up to R270 million ($19.9 million) under which the Company may repurchase its ordinary shares, including American Depositary Shares ("ADSs"). The Company may repurchase its shares from time to time at its discretion through open market transactions and block trades, based on ongoing assessments of the capital needs of the Company, the market price of its securities and general market conditions. This share repurchase program may be discontinued at any time by the Board of Directors, and the Company has no obligation to repurchase any amount of its securities under the program. The repurchase program will be funded out of existing cash resources.

At September 30, 2017, the following purchases had been made under the share repurchase program:

                   

South African RandFigures are in thousands unless otherwise stated

 

 

Total number ofsharesrepurchased

 

Averageprice paidper share (1)

 

Sharescanceled

under the sharerepurchaseprogram

 

Total value ofsharespurchased as partofpubliclyannouncedprogram

 

Maximum value ofshares that may yetbe purchased underthe program

        June 2017 5,015,660     3.72   5,015,660     18,666     251,334     5,015,660         5,015,660     18,666     251,334                       United States Dollar

Figures are in thousands unless otherwise stated

 

Total number ofshares repurchased

 

Averageprice paidper share (1)

 

Shares canceledunder the share repurchase program

 

Total value of sharespurchased as part of publicly announced program

 

Maximum value ofshares that may yet be purchased under the program

        June 2017 5,015,660     0.27     5,015,660     1,376     18,532     5,015,660         5,015,660     1,376     18,532   (1)   Including transaction costs.  

Subsequent to the repurchase, the shares were de-listed and now form part of the authorized unissued share capital of the Company. At September 30, 2017, the Company had 559,380,738 ordinary shares of no par value in issue (excluding 40,000,000 treasury shares held by MiX Investments).

Fiscal 2017

On April 29, 2016, the Company entered into an agreement (the “share repurchase agreement”) with Imperial Holdings Limited ("Imperial Holdings") and Imperial Corporate Services Proprietary Limited ("Imperial Corporate Services"), a wholly owned subsidiary of Imperial Holdings, to repurchase all 200,828,260 of the Company’s shares held by Imperial Corporate Services (the “repurchase shares”) at R2.36 ($0.17) per repurchase share, for an aggregate repurchase consideration of R474.0 million or $34.9 million (the “repurchase”). At the general meeting held on August 1, 2016, shareholders of the Company approved the repurchase in terms of the JSE Listings Requirements and the South African Companies Act, No. 71 of 2008, at which point the transaction was accounted for in terms of IFRS. The repurchase was implemented on August 29, 2016. Subsequent to the repurchase, the shares were delisted and now form part of the authorized unissued share capital of the Company.

The financial effect of the transaction was as follows:

    Figures are in thousands unless otherwise stated   South African Rand   United States Dollar   Aggregate repurchase consideration 473,955 34,948 Impact of discounting related to fiscal 2017 share repurchase transaction (3,222 ) (238 ) Transaction costs capitalized   2,949     218   Total share repurchase cost   473,682     34,928    

8. Dividends Paid

The following dividends were declared by the Company during the six months ended September 30, 2017 (excluding dividends paid on treasury shares):

• In respect of the fourth quarter of fiscal year 2017, a dividend of R11.3 million ($0.8 million) was declared on May 23, 2017 and paid on June 19, 2017. Using shares in issue of 563,514,561 (excluding 40,000,000 treasury shares), this equated to a dividend of 2 South African cents or 0.1 U.S. cents per ordinary share; and
• In respect of the first quarter of fiscal 2018, a dividend of R14.0 million ($1.0 million) was declared on August 1, 2017 and paid on August 28, 2017. Using shares in issue of 558,498,901 (excluding 40,000,000 treasury shares), this equated to a dividend of 2.5 South African cents or 1.8 U.S. cents per share.

9. Acquisition of non-controlling interest

In June 2014, the Group entered into an agreement with Edge Gestão Empresarial LTDA (“Edge”), whereby Edge was granted a 5% holding in the equity interest of MiX Brazil. Prior to this agreement Edge held a non-controlling interest in MiX Brazil of 0.0025%. Edge is a Brazilian-based investment company controlled by Luiz Munhoz, the Managing Director of MiX Brazil. The increase in the equity interests granted to Edge was in respect of services provided by Luiz Munhoz to MiX Brazil, in his role as Managing Director of MiX Brazil. In terms of the quotaholders agreement Edge had an option to transfer its interest in MiX Brazil back to the Group at fair value. The agreement with Edge represented a cash-settled share-based payment.

In September 2017 Edge exercised the put option in the quotaholders agreement. In terms of the sale agreement MiX Investments acquired Edge’s 5% equity interest in MiX Brazil for R1.4 million ($0.1 million) which increased the Group's interest in MiX Brazil to 100%. As a result, the Group recognised a cash-settled share-based payment expense and liability of R1.4 million ($0.1 million). The non-controlling interest related to MiX Brazil of R1.5 million ($0.1 million) was also transferred to other reserves within equity.

10. Contingent Liabilities

Service agreement

In terms of an amended network services agreement with Mobile Telephone Networks Proprietary Limited (“MTN”), MTN is entitled to claw back payments from MiX Telematics Africa Proprietary Limited in the event of early cancellation of the agreement or certain base connections not being maintained over the term of the agreement. No connection incentives will be received in terms of the amended network services agreement. The maximum potential liability under the arrangement is R46.1 million or $3.4 million. No loss is considered probable under this arrangement.

11. Other Operating and Financial Data South African Rand   Six months ended   Six monthsended   Three months ended  

Three monthsended

Figures are in thousands except for subscribers September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited   Subscription revenue 684,627 607,511 349,262 301,337 Adjusted EBITDA 197,196 126,679 103,313 66,230 Cash and cash equivalents 283,526 346,873 283,526 346,873 Net cash 256,864 310,960 256,864 310,960 Capital expenditure incurred   177,127     146,638     98,003     83,808 Property, plant and equipment expenditure 127,452 95,852 72,846 56,560 Intangible asset expenditure   49,675     50,786     25,157     27,248 Total development cost incurred   67,342     73,264     34,167     36,034 Development cost capitalized 32,804 40,337 16,148 21,028 Development cost expensed within administration and other charges   34,538     32,927     18,019     15,006 Subscribers   640,158     584,994     640,158     584,994           United States Dollar Six months ended Six monthsended Three months ended

Three monthsended

Figures are in thousands except for subscribers September 30, September 30, September 30, September 30, 2017 2016 2017 2016     Unaudited   Unaudited   Unaudited   Unaudited   Subscription revenue 50,482 44,796 25,753 22,219 Adjusted EBITDA 14,540 9,341 7,618 4,884 Cash and cash equivalents 20,906 25,577 20,906 25,577 Net cash 18,940 22,929 18,940 22,929 Capital expenditure incurred   13,061     10,813     7,226     6,180 Property, plant and equipment expenditure 9,398 7,068 5,371 4,171 Intangible asset expenditure   3,663     3,745     1,855     2,009 Total development cost incurred   4,966     5,402     2,520     2,657 Development cost capitalized 2,419 2,974 1,191 1,551 Development cost expensed within administration and other charges   2,547     2,428     1,329     1,106 Subscribers   640,158     584,994     640,158     584,994                          

Exchange Rates

The following major rates of exchange were used:

South African Rand: United States Dollar

 -closing

13.56

13.86

13.56

13.86

 -average

13.18

14.53

13.17

14.06

South African Rand: British Pound

 -closing

18.13

17.98

18.13

17.98

 -average

 

17.05

   

19.99

   

17.23

   

18.46

 

12. Fair Value of Financial Assets and Liabilities Measured at Amortized Cost

The fair values of trade and other receivables, restricted cash, cash and cash equivalents, trade payables, accruals, bank overdraft and other payables approximate their book values as the impact of discounting is not considered material due to the short-term nature of both the receivables and payables.

13. Subsequent Events

The directors are not aware of any matter material or otherwise arising since September 30, 2017 and up to the date of this report, not otherwise dealt with herein.

14. Dividend Declared

On October 31, 2017 the Board declared in respect of the second quarter of fiscal year 2018, which ended on September 30, 2017, a dividend of 2.5 South African cents (0.2 U.S. cents) per ordinary share to be paid on Monday, November 27, 2017.

The details with respect to the dividends declared for ordinary shareholders are as follows:

Last day to trade cum dividend

        Tuesday, November 21, 2017

Securities trade ex dividend

Wednesday, November 22, 2017 Record date Friday, November 24, 2017 Payment date Monday, November 27, 2017  

Share certificates may not be dematerialized or rematerialized between Wednesday, November 22, 2017 and Friday, November 24, 2017, both days inclusive.

Shareholders are advised of the following additional information:

• the dividend has been declared out of income reserves;
• the local dividends tax rate is 20%;
• the gross local dividend amounts to 2.5 South African cents per ordinary share;
• the net local dividend amount is 2.0 South African cents per ordinary share for shareholders liable to pay dividends tax;
• the issued ordinary share capital of MiX Telematics is 599,380,738 ordinary shares of no par value; and
• the Company’s tax reference number is 9155/661/84/7.

The details with respect to the dividends declared for holders of our ADSs are as follows:

Ex dividend on New York Stock Exchange (NYSE)

          Wednesday, November 22, 2017 Record date Friday, November 24, 2017 Approximate date of currency conversion Monday, November 27, 2017 Approximate dividend payment date Tuesday, December 12, 2017  

15. Changes to the Board

With effect from October 3, 2017, Fundiswa Roji-Maplanka, was appointed as an independent non-executive director to the Board of Directors, and a member of the Audit and Risk Committee, as well as the Social and Ethics Committee. Fundiswa was previously a non-executive director of MiX Telematics from August 2007 to November 2014.

16. Development costs historical data

The table below sets out development costs incurred and capitalized for each of the last eight quarters including the period ended September 30, 2017.

              South African Rand Figures are in thousands (Unaudited) Three months ended                               September 30, June 30, March 31, December 31,  

September 30,

June 30, March 31, December 31,     2017   2017   2017   2016   2016   2016   2016   2015   Total development costs incurred   34,167   33,175   32,152   36,696   36,034   37,230   28,693   28,016 Development costs capitalized 16,148 16,656 17,268 20,415 21,028 19,309 12,136 16,308 Development costs expensed within administration and other charges   18,019   16,519   14,884   16,281   15,006   17,921   16,557   11,708                             United States Dollar Figures are in thousands (Unaudited) Three months ended                               September 30, June 30, March 31, December 31,  

September 30,

June 30, March 31, December 31,     2017   2017   2017   2016   2016   2016   2016   2015   Total development costs incurred   2,520   2,446   2,370   2,706   2,657   2,745   2,116   2,065 Development costs capitalized 1,191 1,228 1,273 1,505 1,551 1,424 895 1,202 Development costs expensed within administration and other charges   1,329   1,218   1,097   1,201   1,106   1,321   1,221   863              

17. Taxation

Section 11D Allowances relating to tax assets recognized

MiX Telematics International Proprietary Limited (“MiX International”), a subsidiary of the Group, historically claimed a 150% allowance for research and development spend in terms of section 11D (“S11D”) of the South African Income Tax Act No. 58 of 1962 (“the Act”). As of October 1, 2012, the legislation relating to the allowance was amended. The amendment requires pre-approval of development project expenditure on a project specific basis by the South African Department of Science and Technology (“DST”) in order to claim a deduction of the additional 50% over and above the expenditure incurred (150% allowance). Since the amendments to S11D of the Act, MiX International had been claiming the 150% deduction resulting in a recognized tax benefit. MiX International has complied with the amended legislation by submitting all required documentation to the DST in a timely manner, commencing in October 2012.

In June 2014, correspondence was received from the DST indicating that the research and development expenditure on certain projects for which the 150% allowance was claimed in the 2013 and 2014 fiscal years did not, in the DST’s opinion, constitute qualifying expenditure in terms of the Act. MiX International, through due legal process, had formally requested a review of the DST’s decision not to approve this expenditure. While approvals were obtained for a portion of this project expenditure as a result of a further review performed by the DST in February 2017, we continue to seek approval for the remaining projects and as such the legal process is ongoing. In addition to the approvals that were subject to the legal process, further approvals have been obtained for certain project expenditure, relating to both current and prior financial years. However, at period end, an uncertain tax position remains in relation to S11D deductions in respect of which approvals remain pending.

Since the introduction of the DST pre-approval process, the Group has recognized in the income statement cumulative tax incentives in addition to the incurred cost of R19.6 million ($1.4 million) in respect of S11D deductions, of which R1.4 million ($0.1 million) was recognized during the six months ended September 30, 2017. R16.8 million ($1.2 million) relates to deductions in respect of development project expenditure which has been approved by the DST. R2.8 million ($0.2 million) relates to an uncertain tax position in respect of projects where approvals have not yet been received from the DST. If the Group is unsuccessful in this regard, the Group will not recover the R2.8 million ($0.2 million) raised at September 30, 2017.

Impact of foreign exchange movements

The impact of foreign exchange movements and the related tax effects on the Group's effective tax rate is shown below:

    South African Rand Six months ended September 2017 Six months ended September 2016 Unaudited Unaudited    

Profit forthe period

 

Foreignexchangelosses

 

Adjustedearnings

 

Profit for theperiod

 

Foreignexchangegains

 

Adjustedearnings

        Profit before tax 88,085 1,784 89,869 68,091 (11,496 ) 56,595 Taxation   (29,941 )   1,692     (28,249 )   (12,973 )   (6,381 )   (19,354 ) Profit after tax   58,144     3,476     61,620     55,118     (17,877 )   37,241   Attributable to: Owners of the parent 58,084 3,476 61,560 55,130 (17,877 ) 37,253

Non-controlling interests

  60     —     60     (12 )   —     (12 )     58,144     3,476     61,620     55,118     (17,877 )   37,241     Effective tax rate   34.0 %   —    

31.4

%

 

19.1

%

  —     34.2 %     United States Dollar Six months ended September 2017 Six months ended September 2016 Unaudited Unaudited    

Profit forthe period

 

Foreignexchangelosses

 

Adjustedearnings

 

Profit for theperiod

 

Foreignexchangegains

 

Adjustedearnings

        Profit before tax 6,495 132 6,627 5,020 (848 ) 4,172 Taxation   (2,208 )   125     (2,083 )   (957 )   (471 )   (1,428 ) Profit after tax   4,287     257     4,544     4,063     (1,319 )   2,744   Attributable to: Owners of the parent 4,283 257 4,540 4,064 (1,319 ) 2,745

Non-controlling interests

  4     —     4     (1 )   —     (1 )     4,287     257     4,544     4,063     (1,319 )   2,744   Effective tax rate   34.0 %   —    

31.4

%

 

19.1 %   —     34.2 %  

Excluding the impact of foreign exchange gains and losses and its related tax consequences, the effective tax rate is 2.8% lower than the first six months of fiscal 2017.

        For and on behalf of the Board:   RA Frew SB Joselowitz Midrand October 31, 2017  

For more information please visit our website at: www.mixtelematics.com

 

MiX Telematics Limited

(Incorporated in the Republic of South Africa) (Registration number: 1995/013858/06) JSE share code: MIX NYSE code: MIXT ISIN: ZAE000125316 (“MiX Telematics” or “the Company” or “the Group”)  

Registered office

Matrix Corner, Howick Close, Waterfall Park, Midrand   Directors RA Frew* (Chairman), SB Joselowitz (CEO), EN Banda*, SR Bruyns* (Lead Independent Director), PM Dell, CH Ewing*, IV Jacobs*, F Roji-Maplanka*, CWR Tasker, AR Welton* * Non-executive  

Company secretary

Java Capital Trustees and Sponsors Proprietary Limited  

Auditors

Deloitte & Touche  

Sponsor

Java Capital Trustees and Sponsors Proprietary Limited  

November 2, 2017

View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005127/en/

Investors:ICR for MiX TelematicsSeth Potter, +1-855-564-9835ir@mixtelematics.com