Interim report July - September 2016

COMMENTS FROM THE CEO
The uncertain macroeconomic and geopolitical environment continues to affect our result, where the outcome of the US elections and the war in Syria have had a major impact on our business in the Middle East. In addition, the uncertainty regarding Brexit, the future for EU as well as the perceived threat from Russia affect the willingness from our customers to place orders. However, this situation might turn around rapidly, and we still see that the underlying performance is stable and we remain optimistic about our long-term prospects.

During the third quarter, net sales amounted to SEK 68.4 million (100.3). EBITDA was SEK 9.7 million (2.7) and operating profit came in at SEK -1.4 million (-7.4).

Order intake amounted to SEK 44.8 million (39.7), which is lower than the previous quarter mainly due to delays caused by the geopolitical situation, but also related to the volatility in the System Sales business. In the quarter we have received two larger orders from the UAE worth SEK 14.3 million, and from MENA worth SEK 9.5 million. After the end of the quarter, we have also received an order from Sweden worth SEK 28.0 million covering systems and cabinets for traffic safety cameras. In addition, installation and commissioning of the cameras will be ordered separately in 2017 as the roll-out plan progresses.

Sales in our two business segments amounted to SEK 52.2 million for System Sales and SEK 16.2 million for Managed Services. In System Sales, we continued to roll out the orders from Sweden, Latvia and the Middle East. In Managed Services, we have continued to roll out the order from Southern California covering an upgrade of the red light camera received in October 2015. The contract runs for five years. We are also expanding the installed base in other US cities.

We have continued to execute on the transformation program, resulting in a reduction of net working capital and cost savings. Even though we already see a lower net working capital and cost savings, the program will reach full effect in the first quarter 2017. We also see potential for further improvements ahead. Thanks to these efforts we have seen a strong cash flow performance throughout the year, resulting in a positive cash flow from operating activities to the amount of SEK 39.2 million, of which SEK 24.6 million in the third quarter. The positive cash flow is mainly due to reduction of our net working capital and focus on our operational expenses. We have used our positive cash flow to reduce our long-term and short-term loans by SEK 60.4 million, of which SEK 35.3 million in the third quarter, creating flexibility for financing future opportunities. By expanding our short-term credit facilities with SEK 9.5 million, the company has created more flexibility in the financing structure necessary in a volatile business.

During the quarter, the 12 months remeasurement period for the fair values of the acquisition of Gatso Beheer ended, resulting in changes to the PPA. A deferred tax asset of SEK 28.1 million has been identified and recorded. At the same time, the value of customer contracts has been lowered by SEK 22.2 million.

Albeit the macro-related challenges, we maintain our optimistic view of our future prospects. We will continue to focus on streamlining the business as well as increasing the proportion of recurring revenues.

Supporting our long-term potential, we also see an increasing interest in our services across our regions and believe that our extended scale and reach will benefit the business on a long-term and sustainable basis.

Invitation to a presentation for press and analysts
On 24 November at 09:30, CEO Torbjörn Sandberg and CFO Niki Gatsonides will present the report and answer questions in an audiocast. The presentation can be followed online via the link on Sensys’ website: www.sensysgatso.com

It is also possible to listen to the presentation and ask questions by phone; you can register via the two following options:

Pre-registration via web link
To take part in the telephone conference, we would ask you to pre-register in good time ahead of the event via the following web link:
http://emea.directeventreg.com/registration/96571922
Open the link and follow the instructions. When registration has been completed, a confirmation email will be sent to the email address specified during registration. This email will contain phones number and a code (Direct Event Passcode). Select the appropriate number to call.
To take part in the conference, when prompted, enter the code followed by “#”.

Directly by phone:
As an alternative to online registration to take part in the event via the telephone conference function, the following phone numbers may be called:
Sweden: +46 (0)8 56619425
USA: +1 8 66 90 49 624
UK: +44 (0) 844 571 89 31

You will be prompted to enter an event code; ignore this, and wait instead (1–2 min) until the operator speaks, and then state your: Conference ID: 96571922 or “Sensys” to register.

Please call ten minutes before the time specified.

This is information that Sensys Gatso Group AB (publ) must make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08:30 on 24 November 2016.

For more information:
Torbjörn Sandberg
CEO, Sensys Gatso Group

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