Trakm8 Hldgs Regulatory News (TRAK)

TRAKM8 HOLDINGS PLC

('Trakm8' or 'the Group' or 'the Company')

Final Results

for year ended 31 March 2014

Trakm8, the AIM-listed designer, developer and manufacturer of GPRS based hardware and software for the vehicle placement and security market, is pleased to announce its results for the year ended 31 March 2014.

Financial highlights

· Revenue up 94% at £9.19m (2013: £4.75m)

· Recurring revenues up by 111% to an annualised £4.5m

· Like for like orders received up 46%

· EBITDA pre-exceptional costs £1.18m (2013: £0.31m)

· Profit before tax pre-exceptional costs £0.83m (2013: £0.04m)

· Adjusted earnings per share 3.48p (2013: 0.79p)

· Strong Operating Cash Flow £1.32m: Net positive cash £0.62m

· Net assets increased to £5.13m (2013: £2.52m)

· Completed £2.07m fundraising; securing first Institutional Investors on share register

Operating highlights

· Acquisition of BOX Telematics successfully completed and integrated

· Successful growth of recurring revenue business model

· Major contract secured with Direct Line Group

· Strong year for new product and service launches, including:

o T10 hardware family

o Swift 6 Fleet Management solution

· Encouraging order pipeline and sales opportunities

· Strengthened Board with appointment of Keith Evans as Independent Non-Executive Director

Current trading

· Full year of BOX Telematics Limited and new contract awards secure strong growth in revenues and profitability

· Successful migration of new product and solutions manufacturing from Trakm8 into BOX Telematics

· Year to date revenues are well ahead of last year and trading is in line with expectations

· Continue to identify and evaluate further acquisition opportunities

John Watkins, CEO of Trakm8, commented on the results:

"The year has been one of significant growth, both organically with new product launches, in addition to client wins and through our investment in earnings enhancing acquisitions.

"We are confident that our investments in acquisitions, new products and additional sales resources will benefit the new financial year and beyond. The full year impact of BOX, recent contracts secured, along with the new products and solutions we have announced earlier this year will provide significant growth in revenues in the current financial year. After the first two months of trading our revenues are ahead of last year."

A presentation for analysts is being hosted today (7 July 2014) at 9.15am for 9.30am at MHP Communications' offices. For further information, please contact MHP Communications on trakm8@mhpc.com.

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For further information please contact:

Notes to Editors

Trakm8

Trakm8, the M2M telematics company using Big Data analytics to improve driver behaviour is a leading technology designer, developer and manufacturer of telematics products and solutions.

The Group, based in Shaftesbury, Dorset, distributes its hardware and software through a network of distributors worldwide. In addition the Group provides vehicle monitoring and tracking services direct to the B2B market. Trakm8's IP owned products and services allow vehicles and drivers to be monitored, allowing organisations to manage deliveries and services, or track stolen vehicles down to five metres.

Recently Trakm8 have developed the T10 product range, which includes a self-installed telematics device. The Group's services also include driver behaviour management solutions that can reduce fuel consumption by 10% or more, reduce risk of accidents, logistics routing & scheduling packages, and tachograph data reporting. The Group's customers include Direct Line Group, Eon, St Gobain, the AA, Fujitsu and Kubota.

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

www.trakm8.com 

Trakm8 Holdings PLC

EXECUTIVE CHAIRMAN'S STATEMENT

Introduction

I am pleased to report that Trakm8's strategy of driving organic growth through investments in engineering and sales resource, along with judicious acquisitions, is proving successful. The year has been one of significant growth, both organically with new product launches, in addition to client wins and through our investment in earnings enhancing acquisitions.

As part of the strategy to develop the Group organically, Trakm8 has successfully introduced a number of new products and software solutions that have been well received by the market. These products are being integrated into the BOX products and solutions channels.

The acquisition of BOX Telematics Limited (BOX) in October 2013 was a significant milestone in the development of the Group. Due to the size of the target it necessitated a reverse takeover under the AIM rules, a complex and lengthy process. We successfully raised £2.07m new equity from existing shareholders and new institutional investors, who represented the first such investors on our shareholder register. This equity was raised at a premium to the then prevailing share price, which was a testament to the value seen in the combined Group.

All the costs associated with the transaction amounting to £0.43m have been treated as exceptional when analysing the results.

The positive cash generation shows the strength of the Trakm8 financial model. Year-end cash was £2.91m producing a net positive cash balance of £0.6m, despite drawing down a £2.5m debt facility to fund the acquisition of BOX Telematics.

Like for like sales overall were 14% higher and were supplemented by five months of trading from BOX Telematics.

Trakm8 Limited has continued to enjoy a significant improvement in sales of complete solutions and engineering services during the period. This has resulted in strong growth in recurring revenues and higher margins on a like for like basis.

Overall, the very strong levels of engineering service work in the final months of the year resulted in a net profit before exceptional costs of £0.83m. This was better than the level expected at the time of the acquisition and compares favourably to last year's result of £0.04m.

Board Changes

During the year, we were also delighted to welcome Keith Evans as the new Independent Non-Executive Director. He has brought a wealth of business experience and expertise to the Board. At the same time, in July 2013, Dawson Buck stepped down as Non-Executive Chairman and a Director of the Company and the Board thanks him for his contribution.

Operational Review

The Group revenues are accounted for in four segments:

1. Products 

This is the segment where Trakm8 supplies other Telematics Service Providers with hardware devices.

The development of the T10 family of products is a significant step forward for the Group. It is manufactured in our own facilities at much lower costs than its predecessors. The range has been expanded to include self-fit devices and simple security vehicle tracking units.

Product sales were 94% higher with a contribution from BOX broadening the customer base and increasing the total sales in the segment. The largest revenue generator in this segment is the JCB Live Link telematics device.

2. Solutions

This segment is where Trakm8 supplies customers with a fully integrated service provision. Customers include the AA, Eon and Jewson. These solutions are also provided through a partner in South Africa.

The acquisition of BOX Telematics broadened the range of customers and units reporting to our servers. BOX's major route to market is via a dealer network. Trakm8 mostly sells directly to fleets. As a result, the combined business has approximately 60,000 units reporting to the servers. The recurring revenues now amount to an annualised £4.55m. This represents an increase of 111% over the previous year-end.

During the year the Company enhanced the engineering investments in new solutions and launched updated versions of Swift and ecoN. We created comparable solutions for BOX to roll out to their client base.

We also launched a sales and applications engineering team out of our office in Prague. This operation has secured several customers and we expect it to be self-funding by the end of the next financial year, following initial start-up costs.

The major new development for the Group were the contracts awarded by Direct Line Group and these were notified to the market on 13 January 2014 and on 2 May 2014. This customer is taking a number of services and products from Trakm8 which will provide a solid recurring revenue stream. Trakm8 is supplying Direct Line Group hardware based on their next generation telematics device and the first of a new family of products called T10. The T10 Micro is a fully functional telematics tracking device with CANbus communications. The self-install device will be fitted by Direct Line Group customers to the vehicle diagnostic socket and is probably the smallest such unit available today. In addition, the technology developed for this contract will have a wide range of applications with other customers and new markets.

We have established a wide number of new customer opportunities with trials taking place. We expect that these will be earnings enhancing for the Group in 2014/15.

The Solutions segment is the core value enhancing activity of the Group and its revenues increased by 60% to a total of £4.85m. This now represents 53% of Group revenues.

3. Engineering Services

In this segment Trakm8 undertakes bespoke software development for customers. The customer specific application engineering has been a major feature of the product development team as the larger customers have demanded their particular requirements. These in turn help to improve our core products.

The major projects this year were associated with Direct Line Group. Significant projects were also undertaken for St Gobain, the AA and several others.

These engineering projects are profitable consultancy activities in themselves, help to integrate customers to Trakm8 solutions, and provide on-going support and maintenance revenues. As such this segment remains a core competence and key business strategy.

Engineering Services increased revenues by 130% over the previous year to £0.93m (2013: £0.41m.)

4. Manufacturing Services

This segment is where Trakm8 undertakes design and manufacturing of electronic assemblies for third party customers in the BOX Telematics facilities acquired during the year. This segment adds value by fully utilising the manufacturing investments and assists in securing the best possible supply chain for the Trakm8 products. Revenues in this segment amounted to £0.87m representing 9% of Group sales.

The fire monitoring product contract announced on 20 March 2013 was the highlight of the year, although it will not benefit revenues until 2014/15.

Outlook

The Board is confident that our investments in acquisitions, new products and additional sales resources will benefit the new financial year and beyond.

The full year impact of BOX, recent contracts secured, along with the new products and solutions we have announced earlier this year will provide significant growth in revenues in the current financial year. After the first two months of trading our revenues are ahead of last year.

We continue to maintain a strong Statement of Financial Position, good cash generation and robust business model which allows the Group to assess opportunities which augment growth through selective acquisitions alongside our current organic growth strategy. Any acquisition being considered will need to meet our clearly defined market segment objectives and financial criteria.

Lastly, I would like to thank all the Trakm8 staff for their exceptional commitment and hard work in order to accomplish the significant progress made over the past twelve months.

John Watkins

EXECUTIVE CHAIRMAN

Trakm8 Holdings PLC

STRATEGIC REPORT

Business Review and Principal Activities

Trakm8 Holdings PLC and its subsidiaries ("the Group") design, manufacture and sell fleet management solutions and associated hardware components. These solutions are used in a wide variety of applications from heavy duty commercial vehicles to light CVs, cars, earth moving equipment and a number of niche applications such a golf carts and industrial cleaning machines.

The solutions provide data for customers to more effectively use their vehicles by reducing journey times, reducing fuel consumption and accidents, improving utilisation and serviceability, expense tracking, and integration into customers ERP systems.

The market for these solutions is growing as the cost of providing these solutions reduces and the benefit of the data is becoming more valuable.

The competition is also growing and there remains pricing pressure being mitigated by the increased functionality of the solutions. The market remains largely fragmented although consolidation is occurring, particularly driven by interest in the space from VCs.

The Group is playing its part of this consolidation as demonstrated by the acquisition of BOX Telematics Limited in 2013.

Strong organic growth and the supplemented BOX installed base has grown the installed base of units reporting to our servers with recurring revenues now accounting for 37% of our total turnover.

Strategy

The Group strategy is to continue to provide M2M products and services that grow the installed base of connections with service revenues, thus ensuring predictable revenues and cash flows.

We will continue to increase our focus on utilisation of the accumulating server data to create the algorithms that will improve the fuel economy scoring and the driver insurance risk calculations. Trakm8 installed vehicles cover over a billion miles each year. This data along with the statistical analysis now available with latest computing techniques will drive the next stages of improved returns on investment in the technology.

Trakm8 will also utilise its extensive vehicle electrical knowledge to drive vehicle service algorithms to reduce breakdowns, improve serviceability and reduce cost of ownership.

Trakm8 will provide hardware, software solutions and manufacturing services on a stand-alone basis to third parties so long as they are part of Trakm8's core offerings.

Organic Growth

The Group will continue to drive organic growth through widening the customer base, increasing the range of solutions offered and broadening the geographic coverage. With every size of the vehicle park now addressed from the smallest fleets to the largest, from passenger cars to heavy duty trucks and industrial equipment, Trakm8 has a sales channel and product suitable for all.

Trakm8 will continue to invest heavily in engineering new products and solutions to ensure that these are market leading.

Increased international business development activities will expand the geographic footprint. 

Acquisitions

The Group will continue to seek acquisitions that will complement the organic growth strategies we have. These will be businesses in the M2M and Big Data space, where we can drive value for the shareholders and enhance the range of markets and services we address.

Environmental

The Group provides products and services that are targeted at reducing the consumption of the world's natural resources. As a Group we also strive to ensure that we minimise the use of these resources ourselves.

Trakm8 has secured accreditation to ISO 14001 as part of its commitment to best practice on Environmental matters.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Group are set out in the Directors' Report. The key risk is that the Group operates in the technological industry which has a history of continuous technological enhancements and unforeseen advances may lead to a lack of competitiveness.

Key Performance Indicators

The key performance indicators used to assess the performance and financial status of the Group are as follows:-

1. Operating profit. The Group produced an operating profit of £429,219 compared to last year's operating profit of £39,577. The improvement stemmed from increased profitability at Trakm8 and the five months results at Box Telematics Limited.

2. Borrowings. The Group monitors its cash and borrowings position and updates cash flow forecasts for the following twelve months on a daily basis. Total cash resources at the year end were £2,910,786. During the year total borrowings increased from £163,083 to £2,291,667 at the year end. The increased borrowings were as a result of financing the acquisition of Box Telematics Limited.

3. Customer services. The Group continues to analyse its customer support to ensure a high quality of service is maintained.

Employee Matters

The Group recognises that the employees are the key asset of the business. The Board of Directors has employee satisfaction monitoring processes and has succession planning in place. There are company-wide communication activities both in person and via the Group intranet. The Company provides competitive compensation plans and has a scheme whereby the staff share in the success of the Group.

Trakm8 secured accreditation to ISO 18001 as part of its commitment to best practice on the management of Health and Safety.

Employment Policy

During the year, the Group has consulted with employees in matters likely to affect their interests and is committed to involving them in the performance and development of the Group.

Disabled Employees

The Group gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by a disabled person.

Should existing employees become disabled, it is the Group's policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training, career development and promotion to such employees as appropriate.

John Watkins

Executive Chairman

Trakm8 Holdings PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

There were no discontinued operations in 2014 or 2013. Accordingly the results relate to continuing operations.

These financial statements were approved by the Board of Directors and authorised for issue on 7th July 2014 and are signed on their behalf by:

J Watkins J Hedges

Director Director

Trakm8 Holdings PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

Trakm8 Holdings PLC

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2014

1. GENERAL INFORMATION

Trakm8 Holdings PLC ("Company") is a public limited company incorporated in the United Kingdom (registration number 05452547). The Company is domiciled in the United Kingdom and its registered office address is Lydden House, Wincombe Business Park, Shaftesbury, Dorset, SP7 9QJ. The Company's Ordinary shares are traded on the AIM market of the London Stock Exchange.

The Group's principal activity is the manufacture, marketing and distribution of vehicle telematics equipment and services. The Company's principal activity is to act as a holding company for its subsidiaries.

2. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations as endorsed by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

3. BASIS OF PREPARATION

The accounting policies set out in note 4 have been applied consistently to all periods presented in these consolidated financial statements.

These financial statements are presented in sterling as that is considered to be the currency of the primary economic environment in which the Group operates. This decision was based on the Group's workforce being based in the UK and that sterling is the currency in which management reporting and decision making is based.

4. SEGMENTAL ANALYSIS

The format of segmental reporting is based on the Group's management and internal reporting of the segments below which carry different risks and rewards and are used to make strategic decisions. Products is the sale of hardware through the Group's distributors. Solutions represents the sale of the Group's full vehicle telematics service direct to customers. Engineering services comprises bespoke engineering, professional services and mapping solutions.

The Board review the revenue results and gross margin by segment. Cost of sales comprise hardware costs and have been allocated to the segments based on the number of units sold. Administration costs and assets and liabilities are not separated out by segment.

The Group's operations are located in the UK and the Czech Republic. The following table provides an analysis of the Group's revenue by geography based upon location of the Group's customers.

The Group had one customer who accounted for more than 10% of the Group revenue (2013: one). Total revenue was £1,550,132 and has been included in the products segment.

5. PROFIT FROM OPERATIONS

6. EXCEPTIONAL COSTS

The amount of £365,512 is in respect of costs incurred in the year as a result of the acquisition of Box Telematics Limited.

The integration costs related to the reorganisation of management following the acquisition of Box Telematics Limited.

7. FINANCE COSTS

8. EARNINGS PER ORDINARY SHARE

The earnings per Ordinary share have been calculated using the profit for the year and the weighted average number of Ordinary shares in issue during the year as follows:

9. ACQUISITION

On 25 October 2013 the Company acquired the entire share capital of Box Telematics Limited for a total consideration of £4,220,000. Box is a vehicle telematics business providing fleet management systems and in-house telematics design services. In addition it has a contract electronic manufacturing facility. The business was acquired to provide an enlarged installed base of solution services and for Trakm8 to benefit from the use of Box's manufacturing and assembly facilities.

The assets and liabilities as at 25 October 2013 arising from the acquisition were as follows:-

From the date of acquisition to 31 March 2014 Box Telematics Limited contributed revenue of £3,815,129 and profit of £571,639. If the acquisition had occurred on 1 April 2013 Box Telematics Limited would have contributed a further £4,763,958 to revenue and £332,771 to profit before exceptional costs for the period to 24 October 2013.

10. SHARE CAPITAL

Movement in share capital:

The Company currently holds 150,000 Ordinary shares in treasury representing 0.5% of the Company's issued share capital. The number of 1 pence Ordinary shares that the Company has in issue less the total number of Treasury shares is 28,723,821.

11. SHARE-BASED PAYMENTS

Trakm8 Holdings PLC has issued options (under the Trakm8 Approved Option Scheme) to subscribe for Ordinary shares of 1p in the Company. The purpose of the Option Scheme is to retain and motivate eligible employees.

The exercise of all share options is the closing market price on the day of grant. A vesting period of 1 to 3 years is applicable according to the terms of each scheme.

The fair value of the equity settled share options granted is estimated as at the date of grant using the Black Scholes option pricing model taking into account the terms and conditions upon which the options were granted. No performance conditions were included in the fair value calculations.

The risk free rate of return is the yield on government gilt market price. The volatility has been based on historic share prices and the dividend yield has been assumed to be £nil for all schemes.

A reconciliation of option movements over the year to 31 March 2014 is shown below;

The share price was 35.50p (2013: 13.50p) on 11 December 2013 being the date of exercise of the above 50,000 options. The weighted average option price at 31 March 2014 was 23.31p (2013: 13.43p). The weighted average contract life of the options outstanding at 31 March 2014 was 104 months (2013: 86 months).

The Group charged £53,989 to the Statement of Comprehensive Income in respect of Share-Based Payments for the financial year ended 31 March 2014 (2013: £19,659).

Share options exercisable at the 31 March 2014 were 100,000 (2013: 400,000).

12. CASH FLOWS

Cash and cash equivalents comprise cash at bank, other short-term highly liquid investments with a maturity of three months or less (together presented as 'Cash and cash equivalents' on the face of the Statement of Financial Position).