Company Announcements

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK Market Abuse Regulation

24 November 2023

TRAKM8 HOLDINGS PLC

("Trakm8" or the "Group")

Half Year Results

Trakm8 Holdings plc (AIM: TRAK), the global telematics and data insight provider, announces its unaudited results for the six months ended 30 September 2023:

Financial Highlights

1 Recurring revenues are generated from service and maintenance fees

2 Before exceptional costs and share based payments

3. Total borrowings less cash excluding IFRS 16 adjustment for leased property and motor vehicles

Operational Overview

·      H1 2023 results:

o  Revenues modestly lower due to significant insurance capacity driven reduction in demand

o  Gross margins significantly improved

o  Overheads significantly reduced

o  Losses eliminated with a shift towards profitability

o  Improved cash generation from operations - c. 63 per cent increase on the comparable period

·      H2 2023/24 and FY2025 outlook:

o  Insurance capacity not expected to return significantly this year; however new customers improving demand for H2 2023/24 and capacity is expected to recover for FY25

o  Major automotive customer demand expected to positively impact FY25

o  Substantial investment in second Data Centre to reduce operation costs by £0.6m per annum

o  Large Optimisation software contract sale still expected to conclude in FY24

Outlook

The Board expects to meet market expectations, provided a significant software sale is secured late in FY24. In this respect, discussions are ongoing to secure a large optimisation software sales contract, and while there can be no certainty, the Board remains confident of the prospects of concluding such discussions in FY24.

- Ends -

For further information:

About Trakm8

Trakm8 is a UK based technology leader in fleet management, insurance telematics, connected car, and optimisation. Through IP owned technology, the Group uses AI data analytics collected from its installed base of telematics units to fine tune the algorithms that are used to produce its' solutions; these monitor driver behaviour, identify crash events and monitor vehicle health to provide actionable insights to continuously improve the security and operational efficiency of both company fleets and private drivers.

The Group's product portfolio includes the latest data analytics and reporting portal (Trakm8 Insight), integrated telematics/cameras/optimisation, self-installed telematics units and one of the widest ranges of installed telematics devices. Trakm8 has over 324,000 connections.

Headquartered in Coleshill near Birmingham alongside its manufacturing facility, the Group supplies to the Fleet, Optimisation, Insurance and Automotive sectors to many well-known customers in the UK and internationally including the AA, Stark Building Materials, EON, Iceland Foods, GSF Car Parts, Direct Line Group, and Freedom Group.

Trakm8 has been listed on the AIM market of the London Stock Exchange since 2005. Trakm8 is also recognised with the LSE Green Economy Mark.

www.trakm8.com / @Trakm8

Executive Chairman's Statement

Results

I am pleased to report Trakm8's unaudited results for the six months ended 30 September 2023 ("H1 2023").

The first half of the financial year was in line with recent Company guidance. Revenues for the unaudited six-month period ended 30 September 2023 were modestly lower in comparison to the corresponding period of the previous financial year at £8.54m (H1 2022: £9.01m).

In H1 2023, there was a 2% increase in Fleet & Optimisation revenues to £4.90m and a reduction of 13% in Insurance revenues to £3.63m. We have reported previously on the dreadful current state of the UK motor insurance market, and this has had a significant impact on us. We estimate that the loss of insurance capacity has reduced revenues in the financial period concerned by £1.6m with overall connections reducing by 7% to 324,000 (FY ending 31.3.2023: 348,000). Notwithstanding this deterioration, there are some positives with a 14% uplift in our Automotive revenues during the financial period as a result of the success of our customers' service, maintenance and repair activities.

The Group is pleased to report a significant improvement in the profitability of the Group with an Adjusted Profit of £0.10m (H1 2022: loss £1.08m), Profit before Tax of £13k (H1 2022: loss £2.41m) and Profit after Tax of £0.10m (H1 2022: loss £1.78m).

During the period, material increases in motor insurance premiums and capacity constraints caused Insurance unit sales to reduce by 31% to 66,000 and Insurance & Automotive connections to decrease by 7% to 259,000 (FY ending 31.3.23: 279,000). Notwithstanding this, we do believe that new policies written will exceed cancelled policies going forward.  

In Fleet & Optimisation, our focus on Enterprise and higher margin business has resulted in connections decreasing by 6% to 65,000 (FY Ending 31.3.23: 69,000), with higher attrition in the small fleet sector, but revenues continuing to grow as previously reported. Fleet unit sales also decreased by 38% to 5,000 but with corresponding device revenues up 20% as more complex solutions continued to be delivered to new and existing customers.

Pleasingly, Recurring Revenues in the period increased over the previous year by 3% to £5.23m and represent 61% of the Group's overall revenues. In addition, the Group generated £0.20m of software revenues (H1 2022: £0.12m), which represent 2% of the Group's overall revenues. Software contract revenues are again weighted to the second half of the financial year, as was the case in previous financial years, from both new and existing customers who rely on our solutions for their fleet operations.

The supply chain challenges of the previous year are largely behind us. We have designed all new hardware products with the latest components that are more expensive than those they replaced, but we expect that these new components will start to reduce in cost next year. Despite this material cost impact, gross profit margin has improved to 67% (H1 2022: 58%). This is due in part to improved factory efficiencies but also the higher recurring revenues as a percentage of sales. Despite the insurance demand reduction, commitments to suppliers for components have not commensurately been deferred and inventory has accordingly continued to increase. It is expected that this increase in inventory will be reduced somewhat this financial year, with further reductions taking place in the next financial year.

In 2018, we launched the RH600, the first 4G live streaming integrated telematics camera, which has since received multiple industry awards. This year we have launched the RH800, which has core technology based on the RH600 but is capable of being used in the five camera solutions which are increasingly common. We expect that the RH800 will be the same leap forward in technology for the market that the RH600 was.

At the end of H1 2022, the Company embarked on a refocus of business activities and as a result was able to significantly reduce overheads. Overall, overheads have reduced by £913k compared to the previous financial period.

Financial position

Cash generation from operations was £2.35m (H1 2022: £1.44m) and as at 30 September 2023, the Group's net bank debt, excluding the impact of the IFRS16 lease liability, was £5.57m (H1 2022 £6.24m), representing a reduction of £0.05m compared to the end the previous financial year. The capital investment project for our second data centre of £0.5m increased debt by £0.2m in the financial period concerned.  Further capital investment is anticipated to be committed in early H2 2023. The Board believes that this capital investment should generate significant return on investment over the coming months and will ensure that we continue to deliver cutting edge solutions to our customers. As at 30 September 2023, the Group had £0.87m of cash on hand and a further £0.50m of available funds under an existing overdraft facility.

The overall cash outflow for the financial period was £0.25m (H1 2022: inflow of £0.29m). 

Strategy

The Group has been following the strategy outlined in its final results for the year ended 31 March 2023, which was announced on 4 July 2023. Our focus is to provide ever more meaningful insights to our customers using the data generated by our installed devices and other connections so that they can run their operations more efficiently and safely.

Our primary strategy going forward is continuing to grow the business through more connections, increased device sales and higher service fees. However, there have been serious headwinds in the motor insurance market with material policy price increases and a reduction in capacity. Although we have secured a number of additional customers, there has been a reduction in total connections. Despite this, we believe that the point has come that growth in connections will now restart. We are also expecting our Optimisation business to expand further into the home delivery space.

Trakm8 has focused on delivering market leading technology and ensures that the solutions are generating the best possible returns for our customers. We have reduced the levels of expenditure in R&D as we now have the latest technology in all our devices and our Insight platform is mostly feature complete. The launch of the RH800 for multicamera applications is a significant step forward in the Fleet market. We continue to own the majority of intellectual property in our value chain. We have been building out greater functionality of existing solutions. As a result, going forward we will meet our objectives of remaining a leading-edge technology company but at a lower investment cost.

Our third strategy has been to improve the efficiencies of our business in every possible way. We have been successful in significantly reducing our future overhead costs by £2.1m per annum and have implemented the investment in a second data centre, which will reduce our hosting costs by £0.6m per annum. We will continue to seek out further external cost reductions.

JOHN WATKINS

Executive Chairman

Unaudited Consolidated Statement of Comprehensive Income for the six months to 30 September 2023                                                 

 Unaudited Consolidated Statement of Changes in Equity for the six months to 30 September 2023