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Are we getting things out of proportion here?
i) A contract signing slipped into the next financial year - they did not say it was dead in the water.
ii) A couple of bad months in insurance - it isn't the only thing they do AND they have approximately the same amount of cash as forecast by Allenby 6 months earlier.
The swing from profit to loss is large, implies the contract is very significant.
Obviously if the contract does not get signed and the insurance side does not recover then we are in trouble.
Surely the swing is more of a reflection of the untapped value of the software contract and then the rest is made up from losses incurred in recent months. As KBYK points out the real problem is the £1.4m loss itself - how did that just suddenly happen when they were £0.4m in profit 6 months prior. Some must be attributable to the software contract itself but that is quite a difference.
That software contract raises a lot of questions (which we have gone over before but I like to vocalise):
i) How much is it worth
ii) Why is it front loaded to signing (or why is does it have such a large sign up value) - although, there may be a simple answer here i.e that they are not doing a SaaS but selling it as a stand-alone product so no on-going revenue.
iii) Why would anyone be so confident of signing it that they would announce it in the way they have done. i.e. 6 months early
iv) Like iii) above - why would Allenby buy into this.
v) I thought the client may be Microlise - this would explain iii) and iv) above BUT if ii) is correct about it being a one off purchase then it is unlikely to be ML as they would be paying circa (made up figure coming) £2m - they would be better taking the company.
vi) What work has been done - at what cost and has the client paid towards it - if so, why is this not under a contract.
vii) Why did Trak decide not to sign it this FY if they are signing their own death warrant by not doing so - even getting 25% of the contract value is worth it if you need the cash. Perhaps the contract is linked to renewed bank terms and this is the real issue (that the terms will not be strong enough to persuade the banks). If the software is done, the ongoing costs won't be much, so take as much cash as you can (if you are sinking)
viii). Will the contract ever be signed. Perhaps the client won't meet the demands of Trak.
This contract, or the announcement of it, has been the most perplexing thing I have read in a while. It just makes no sense. They obviously know something critical that we don't know (yeah doh!). What will Allenby say (they too look like ars*s at the moment for buying into this garbage).
As per usual, we are kept in the dark, left fearing for the worst (which is the very definition of Trakm8). The glimmer of hope for me is that they have enough cash to survive the next 6 months - enough time to get this contract over the line.
Finally, QTX pulled out of the insurance game a long time ago - looks like they called it right. If I am honest, Trak always appear to be behind the curve - take the RH800 - now multi camera DVR - whilst not a complete package, mDVRs have been out for donkey's years.
Waffle over.....
I know I have Stockholm syndrome when it comes to this share....On reflection of today's announcement, was it really that bad - I mean, is this really the last nail in the coffin - I am not so sure?
1) From their H1 update they had £0.87m in cash with net outgoings of £0.25m. They now have approximately £0.4m (and this was expected by Allenby due to capital investment). If they maintain the same burn as H1 going forward then 6 months are assured. They should even do better if these data centres do provide immediate ROI. Obviously there are bank loans to pay back soon.
2) This is the big one for me. If JW is being honest (no clue) about the motive for not signing the contract (not the best commercial outcome) then it implies a deal was on the table. If Trakm8 are in such a desperate state you would expect them to sign whatever i.e. something is better than nothing going into the abyss. Obviously, if the talks broke down then they should not be saying there is a deal is still to be had. Main point it why sign your own death warrant.
Don't get me wrong - the RNS does not read well and JW and the team excel in disappointment. I sometimes wonder if they just hate the share holders and long for the share price to be so low that they can take it private.
Unless I a missing something (and that is quite possible given the poorly detailed TU), the only thing that should happen is that JW falls on his sword and resigns. The fact that none of them seem to take responsibility for this monumental fail is either down to arrogance or something we don't know. I still cannot understand the contract. Why is it necessary to delay the signing for the best commercial outcome? What does that even look like - any ideas?
Allenby suggested cash would be around this much (based on a re-calculation because they purchased a couple of inhouse data centres). There are many questions outstanding around how their income has been affected by the insurance devices. I suspect they will draw on their over-draft relying upon the contract signing (and hoping to clear the insurance storm).
Reckon this may be the time Microlise take the company....
How did they get this so wrong - 6 months ago, it was not that bad and even assuming the delay in contract you would have not foreseen this. I'm not understanding the maths here. Forecast of £21m now down to £16.4 on the basis of a couple of bad insurance months (Feb/March) and the failure to sign a contract. The contract can't be worth that much i.e. it should be a value added to the revenue not underpinning it.
Not good....
https://www.lse.co.uk/rns/TRAK/trading-update-0oolo79vcq2sm2y.html
As NoSugar reminds us, we are nearing the end of the FY - 7 business days in fact. So the RNS options I see are:
1) Contract signed, but no need to announce as nothing material has changed.
2) Contract to be signed, RNS to state in the next few days.
3) Contract not going to be signed this side of the FY, RNS to profit warn. I suspect this would be known already, so an announcement would have already been made.
In the past they have announced contract renewals which they had previously highlighted as essential. I guess the main thing is we will find out soon enough.
I think my greviance is in the fact that they don't seem to RNS the good stuff (like the Direct Line renewal) whilst simultaneously trying to court investor's attentions with their capital market days (although, none this year)
Is this on us? Hope not....but this update could be related to the contract signing stuff. To be fair, this appears more far reaching than just route optimisation and extends to problems in-store (I noticed this afternoon that the store was off-line) and Argos.
"Sainsbury’s said it was unable to fulfil the “vast majority” of its online orders because of a technical glitch. The supermarket chain said an overnight software update had led to the problems affecting some stores, grocery online services and its ability to contact customers."
https://www.theguardian.com/business/2024/mar/16/sainsburys-grocery-deliveries-hit-by-technical-issue
Some good news, and ties to the DLG thread earlier
"Thanks to Insurance Business UK for covering the news that our contract with Direct Line Group has been extended for a further 2 years. "
https://www.insurancebusinessmag.com/uk/news/auto-motor/direct-line-group-trakm8-extend-partnership-480694.aspx
I emailed JW one year and it is not a given that they will announce anything prior to April.
On the one hand, if the contract gets signed you would hope they announce it - on the other, if this does not change anything materially then, perhaps, they do not need to tell us.
I'd also add that all the loans have to be repaid/renegotiated before Sept - so they should announce something in that respect (although not necessarily now) - this is why I think the CLN will be converted - too many pay up days coming at once.
Interesting point, although I reckon JW will want quite a premium for his shares and I am not sure the market agrees and I wonder if Microlise may have a say in any sale - e.g. not in their interest.
Did someone say that the conversion of the CLN for Microlise may trigger an event? i.e. over 30% holding.
I'm not sure whether it is a good thing or a bad thing - a take over of a client may result in more work or a loss of client. If Trakm8 are truly in a good position re insurance companies then hopefully this will be a good thing.
Nonetheless, always good to see a jump up in price, although I think it is the nature of an illiquid share (that 11,000 transaction this morning appears to be the trigger)
As an after thought - I suppose the most likely client, the one where you have the most confidence, would by Microlise. Just not sure if they need what Trak is offering. It would certainly make me wonder about a share purchase from ML.
You make a really good point there - it obviously sits ok with Allenby, implying huge confidence in it happening. I do not know any other case where a contract signing, some distance away, would yield such a positive response (although, the general market doesn't seem convinced, if the share price is anything to go by). Certainly implies very good relationship between Trak and the client, and given JW was personally tagged in the last Iceland post, that is where I reckon it comes from - possibly golf course contracts lol. I once thought it was Sainsbury's but I seem to recall they signed their last contract prior to development. I guess we will find out soon enough.