23 November 2020

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 2020:

Financial Highlights

1 Recurring revenues are generated from ongoing 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 2020 results:

o  Significant reduction in losses despite revenue decline as a result of Covid-19

o  Improving revenues later in the period, following significant drop in April and May upon Covid-19 lockdown

o  Significantly improved gross margins due to lower hardware, labour, communications and installation costs

o  Reduced overheads as a result of efficiency improvements implemented in FY2020, which includes lower payroll costs

o  Improved cash generation from operations due to significant reduction in losses, PAYE & VAT deferments and strong working capital actions

o  Launch of extended range of self-fit telematics devices

·   Continuation of new contract wins and renewals:

o  Optimisation contract awarded by major UK food retailer

o  Strong period of contract renewals in the Fleet business, despite Covid-19 all significant contracts due for renewal in the period have been renewed

o  Installed base increases in Insurance from existing and new customers offset in part by Fleet reductions

o  Approximately 253,000 connections (March 2020: 245,000 connections), an increase of 8,000 connections, a 3% increase in the six month period since last year end

·   Stronger H2 and FY2021 outlook:

o  Major automotive customer committed to a further 24,000 units over next 12 months following their European launch

o  Strong level of orders, post period, from existing and new Fleet customers

o  Additional  efficiency savings implemented

o  Investment in engineering to deliver additional gross margin improvements over the next 6 months

Outlook

Revenues picked up during the first half with revenues in the second quarter 23% higher than in the first quarter.  This improvement continued into October in both Insurance and Fleet, resulting in this being the highest revenue month to date this financial year.  The Insurance business benefitted from increasing device shipments to both existing and recently won customers resulting in both September and October 2020 shipments being 50% higher than March 2020.  Fleet sales team performance has returned to pre Covid-19 levels, with the total value of orders in the first half 16% up on the first half of the prior year.  Orders in October 2020 were 12% up on October 2019.  

However due to the second lockdown there is a softening in the market and increased uncertainty that means the Group is still not able to provide guidance for the full financial year at this time.  However the Group expects revenue in the second half to be significantly higher than the first half given current orders, even with a reasonable downside scenario taken into account for the ongoing impact of Covid-19.

- 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 analyses data collected by 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, self-installed telematics units and one of the widest ranges of installed telematics devices. Trakm8 has over 253,000 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, Saint Gobain, EON, Iceland Foods, Direct Line Group and Ingenie.

Trakm8 has been listed on the AIM market of the London Stock Exchange since 2005.

www.trakm8.com / @Trakm8

Executive Chairman's Statement

Results

I am pleased to report Trakm8's results for the six months ended 30 September 2020.

The first half of the financial year was significantly impacted by the Covid-19 pandemic.  In the early months of the period Fleet activity reduced very significantly.  Sales of insurance policies reduced dramatically as vehicles were "sorned", driving lessons and tests cancelled.  Gradually over the period both Fleet and Insurance demand levels improved.  I am pleased that overall we secured new orders some 10% higher than the same six months of last year.

However, overall revenues reduced by 17% in the period to £7.32m (H1 2019: £8.87m). There was a reduction of £0.53m in Insurance and Automotive revenues and a reduction in Fleet and Optimisation revenues of £1.02m.

Total recurring revenues decreased by 5% during the period to £4.63m (H1 2019: £4.89m), as a result of the decline in the connected base in the Fleet market. The reduction in service fees year on year took place in the early months of the period and have since recovered. Recurring revenues represent 63% of Group revenues (H1 2019: 55%). Covid-19 materially increased Fleet attrition during the period and the slow start for new orders meant new deployments were substantially lower than normal, overall reducing connections by 7,000 units since March 2020 to 70,000 (9%). 

Despite the large reduction in telematics insurance policies being written across the market, our success in rolling out solutions to a number of additional clients has resulted in device shipments 14% ahead of the same period last year with the month of September being 177% greater than April.  As a result, Insurance & Automotive connections increased by 15,000 since March 2020, to 183,000 (9%).  We estimate that the impact of Covid-19 has resulted in circa 33,000 connections less than it would have been.

Gross profit margin has increased to 62% (H1 2019: 53%).  This is due in part to the higher recurring revenues as a percentage of sales but also due to the vigorous actions taken over the past 24 months to introduce hardware with lower costs, reduce the direct labour costs and to reduce the cost of communications and installations.  This trend is expected to continue as further cost improvements are delivered.

Total overhead costs, excluding exceptional costs and share based payments reduced by £1.61m to £4.71m (H1 2019: £6.32m).  This is the result of the cost actions taken over the last 12 months along with £0.77m of furloughed staff costs which have been charged to exceptional costs, which have been offset by £0.55m of furlough grant received.  In addition to this £1.61m reduction in overheads the level of R&D expenditure capitalised has reduced by £0.27m.   Exceptional costs in the period of £0.44m include headcount reduction activity undertaken during the period and costs associated with the impact of Covid-19.

Despite the challenges of Covid-19, I am pleased to report that the Group adjusted loss reduced by 80% to £0.31m (H1 2019: £1.58m).  Loss before Tax reduced by 62% to £0.85m (H1 2019: £2.20m).  We estimated if it had not been for the significant impact of Covid-19 that we would have been profitable under both profit measures.

Financial position

Net cash inflow from operating activities was £2.06m (H1 2019: £1.43m).  During the period the R&D tax claim of £0.86m was offset against agreed PAYE/NI deferments.  At the 30 September £1.10m of VAT and PAYE/NI deferments have been agreed, with a repayment schedule that runs into next financial year.  The improvement in cash inflow from operating activities is a good result, reflective of the significant reduction in losses and continued strong working capital management, which includes a £0.34m reduction in inventory since last financial year end. 

The overall cash outflow for the period was £0.12m, which was an improvement of £0.39m from the prior period.  This resulted from the improvement in the cash inflow from operating activities detailed above, and £0.27m reduction in capitalised development costs.

Net debt as at 30 September 2020 excluding the impact of the IFRS16 lease recognition was lower than both September last year and the end of the last financial year at £5.57m (H1 2019: £6.10m) (31 March 2020: £5.64m) including £1.54m of cash (H1 2019: £0.69m). In addition, the Group at 30 September 2020 held an undrawn credit facility of £0.50m at HSBC. Net Debt including IFRS 16 reduced to £7.27m (H1 2019: £8.42m), (31 March 2020: £7.95m).

The revolving credit facility with HSBC of which £4.50m was drawn at 30 September 2020 is due for renewal on 30 September 2021, therefore still had 12 months to run from 30 September 2020.  As a result this is now reported within current liabilities on the balance sheet and the reason why they increased from £7.43m to £11.70m.  The Group expects to extend this facility before year end.

Strategy

The Group has been following the strategy outlined in the 2020 Annual Report. 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 to return to growth of our business through more connections, increased device sales and higher service fees. Due to the high level of new contract wins in the Insurance space the number of connections have increased overall by 5% in the past 12 months and by 3% in past 6 months. The number of devices sold has increased by 11% to 49,000 (H1 2019: 44,000). Increased market share is anticipated following the introduction of additional self-fit devices.

Trakm8 has focused on delivering market leading technology and ensuring that the solutions are generating the best possible ROI's for our customers. We have, for another year, further reduced the levels of expenditure in R&D but believe we have appropriate levels of resource to continue to invest heavily to meet the demands of the market and customers. We will continue to own the majority of IP in our value chain. The technical challenges of the RH600 product experienced in previous years have been resolved and new generations of the product will have significant additional features.

Our third strategy has been to improve the efficiencies of our business in every possible way. We have been extremely successful in delivering the £1.5m reduction on all costs year-on-year promised last year (on top of the £2.0m savings delivered in the previous year).  We have continued to focus on this and have implemented a further £0.6m of annualised cost reductions by the end of the period.   We will continue to seek efficiencies as we go forward.

JOHN WATKINS

Executive Chairman

               
          Unaudited Consolidated Statement of Comprehensive Income for the six months to 30 September 2020