Threat Protect Australia : Appendix 4C & Quarterly Market and FY16 Guidance Update

Microsoft Word - 1603 - Appendix 4C V4 FINAL 29 April 2016 ASX Announcement Appendix 4C & Quarterly Market and FY16 Guidance Update

Threat Protect Australia Limited (ASX:TPS) ("Threat Protect") is pleased to provide the following quarterly market and FY 16 guidance update.

Activity Highlights

During the quarter Threat Protect recently acquired Sydney-based Integral Risk Group ("IRG") and Perth-based Australian Event Protection ("AEP") from a privately-owned UK-based vendor for a total consideration of $750,000 comprising $500,000 in shares and $250,000 in cash, plus a performance fee payable after 12 months.

The acquisitions of IRG and AEP, which had combined annual revenue of $7 million in the year to 30 June 2015, were immediately earnings per share-accretive to Threat Protect.

The AEP business has now been fully integrated into Threat Protect and it is expected that IRG will be fully integrated prior to 31 May 2016.

Revenue

Revenue (unaudited) for the quarter ended 31 March 2016 of $2.01M with March contributing $0.875M following completion of the AEP / IRG business acquisitions effective 1 March 2016.

FY 16 Earnings Guidance

The Company provides NPAT earnings guidance to the market of an unaudited NPAT figure in the range of $4.8M loss to $5.1M loss for the Financial Year ending 30 June 2016. Commentary on this revised guidance as compared to the prospectus forecasts (dated 29 July 2015) of NPAT $0.837M is is set out below.

Commentary on Earnings Guidance

As outlined and foreshadowed in the HY16 investor presentation and half yearly financial report, the NPAT results have been impacted by the accounting standard impact of various corporate transactions, business acquisition and integration costs associated with the reverse takeover, acquisition of monitored lines businesses and the more recent acquisition of the IRG and AEP businesses.

THREAT PROTECT AUSTRALIA LIMITED

ACN 060 774 227 | ABN 36 060 774 227

Unit 1/8 Fisher Street, Belmont WA 6104 | PO Box 561, Belmont WA 6984 Tel: 1300 847 328 | Fax: +61 8 9322 9711 | Email: info@threatprotect.com.au Website: www.threatprotect.com.au

The following table summarises the major non-operational expense items impacting earnings for the year ending 30 June 2016.

Item	Amount	Comment
Corporate transaction expenses	$2.4M	Accounting treatment of the difference between the fair value of consideration paid for Threat Protect business at the date of the RTO and represents a one off, non cash cost to the entity.
Business integration & acquisition expenses	$0.8M	Costs associated with the acquisition of the Threat Protect. business and integrating this new business into the Company.
Share based payments expense	$0.98M	Non cash expense incurred by the Company in relation the provision of option incentive packages for the board of the Company at the November 2015 annual general meeting.
Other non recurring expenses in the period	$0.30M	Additional costs incurred by the Company of a one off or extraordinary nature associated with the integration of the new security businesses, organisational change and the listing process.

The Company also notes that the prospectus forecast contained a number of key timing assumptions in relation to the completion of the acquisition of the Threat Protect business and the subsequent completion of the acquisition and integration of the Hillstone and Monitoring Excellence businesses. Delays in the completion and integration of these businesses substantially impacted both revenue and earnings.

While the Company continues to grow its operations on a national basis, trading conditions in the Perth guarding and installation security industry markets have been tighter to date in FY16 than assumed in the Prospectus forecast. The Company has seen a reduction in anticipated income from its traditional guarding business in Perth of approximately 10% as well as competitive pricing pressure in both guarding and security installations in the Perth market impacting on margins.

The full integration of the new IRG and AEP business is expected to provide enhanced opportunity to leverage management overhead across a larger guarding business unit providing increased overall margins in this business unit. Importantly, the acquisition of IRG provides the company with exposure to the more buoyant security market in Sydney.

The Company continues to actively expand its Monitoring business with revenue generated from the acquisition of the monitored business being at or above that assumed in the Prospectus. Costs associated with the operations of the East Perth control room have increased compared to those anticipated in the Prospectus due to the additional (labour) costs associated with integration and maintaining additional operational capacity to enable acquisition and integration of new monitored client bases.

Q4 FY 16 and FY 17 Outlook

The Company expects improved trading conditions and financial performance from existing operations during Q4 and into FY17 resulting from:

1. Operational merger integration efficiencies and organic growth arising from the integration of the Threat Protect, Hillstone, Monitoring Excellence, IRG and AEP businesses positively impacting the Company on a more consistent basis;

2. A continued focus on cost management initiatives at both business line and overall corporate level.

As the Company looks towards FY17 it expects to make a number of earnings accretive acquisitions, many of which will leverage existing capacity in the Perth control room. These acquisitions are currently the subject of due diligence and commercial negotiation.

The Company has received a positive response from a range of private public sector organisations about its recently announced Safe Haven app and associated personal security services. Ongoing commercial negotiations are expected to generate additional revenue, further leveraging existing control room capacity.

For further information, contact: Demetrios Pynes Managing Director Threat Protect Australia Limited + 61 414 984 806 Appendix 4C Quarterly report for entities admitted on the basis of commitments Appendix 4C Quarterly report for entities admitted on the basis of commitments

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10

Name of entity

Rule 4.7B

THREAT PROTECT AUSTRALIA LIMITED (TPS)

ABN Quarter ended ("current quarter")

ABN 36 060 774 227

31 March 2016

Consolidated statement of cash flows

Cash flows related to operating activities Receipts from customers Payments for: (a) staff costs advertising and marketing research and development leased assets other working capital Dividends received Interest and other items of a similar nature received Interest and other costs of finance paid Income taxes paid Other (provide details if material) Historical liabilities repaid Payments for non-recurring business integration costs Net operating cash flows	Current quarter $A'000	Year to date (9 Months) $A'000
	1,866 (1,083) (33) - (9) (928) - 2 (58) - - (970) (539)	4,625 (2,511) (103) (31) (33) (2,805) - 5 (139) - - (1,614) (539)
	(1,752)	(3,145)
Cash flows related to investing activities Payments for: (a) businesses (item 5): net cash acquired through 1.9(a) cost incurred in respect to 1.9(a) equity investments intellectual property physical non-current assets other assets Proceeds from: (a) businesses (item 5) equity investments intellectual property physical non-current assets other non-current assets Loans to other entities Loans repaid by other entities Other (provide details if material) Net investing cash flows 1.14 Total operating and investing cash flows	- - (250) - - - (14) - - - - - - - -	- 5,210 (3,862) - - - (14) - - - 41 - - - -
	(264)	1,375
	(2,016)	(1,770)

+ See chapter 19 for defined terms.

17/12/2010 Appendix 4C Page 1