Last checked at 30 Jun 2020 07:00
30 June 2020
TRAKM8 HOLDINGS PLC
('Trakm8' or 'the Group' or 'the Company')
Final Results
Trakm8 Holdings plc (AIM: TRAK), the global telematics and data insight provider, announces its final results for the year ended 31 March 2020 (FY-2020).
FINANCIAL SUMMARY:
| FY-2020 | FY-2019 | Change |
Group revenue | £19.6m | £19.1m | 2% |
of which, Recurring revenue1 | £9.8m | £10.1m | -3% |
Loss before tax | (£1.7m) | (£3.6m) | 52% |
Adjusted loss before tax2 | (£0.2m) | (£1.5m) | 85% |
Loss after tax | (£1.1m) | (£2.5m) | 56% |
Net cash inflow/(outflow) generated from operations | £4.1m | (£1.8m) | n/a |
Net debt3 | £5.6m | £5.6m | 0% |
Basic loss per share | 2.19p | 6.20p | n/a |
Adjusted basic earnings/(loss) per share2 | 0.28p | (1.89p) | n/a |
1 Recurring revenues are generated from ongoing service and maintenance fees
2 Before exceptional costs and share based payments
3 Total borrowings less cash and cash equivalents. FY-2020 net debt excludes £2.3m IFRS 16 lease liability.
OPERATIONAL OVERVIEW
· Modest return to growth (+2%) despite Covid-19 impact late March.
· Significant improvement in financial performance to close to breakeven adjusted profit.
· Strong continued reduction in direct and indirect costs.
· Strengthened Group with appointment of Group Sales and Marketing Director
· Production launch of new insurance self-fit hardware products.
· Over 245,000 connected units in operation (FY-2019: 243,000).
· New contract wins with two new significant Insurance companies.
· Contract renewals with two large long term customers (E.ON and Bibby) and a significant enhancement to the solution for Iceland Foods
· R&D spend down 7%, however still £4.1m invested.
OUTLOOK
· Momentum established in last year disrupted by Covid-19.
· The new financial year has begun with new contract awards from two further insurance companies, with revenues already commenced.
· Revenues from new insurance contract wins now compensating for the impact of Covid-19 on the overall market with recent device shipments ahead of last year.
· The AA Smart Breakdown sales now underway albeit impacted by Covid-19.
· Fleet sales negatively impacted by Covid-19 but recent weeks show progress.
· Early months in current financial year benefitting from the various Government initiatives.
· Given the uncertainty of the impact and timing due to the Covid-19 pandemic the Group is not providing any guidance to the results for the current financial year.
- Ends -
For further information:
Trakm8 Holdings plc |
|
John Watkins, Executive Chairman | Tel: +44 (0) 1675 434 200 |
Jon Furber, Finance Director | www.trakm8.com |
|
|
Arden Partners plc (Nominated Adviser & Broker) | Tel: +44 (0) 20 7614 5900 |
Paul Shackleton
| www.arden-partners.com |
Notes to Editors
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/optimisation, self-installed telematics units and one of the widest ranges of installed telematics devices. Trakm8 has over 245,000 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, Scottish Power, Direct Line Group, LexisNexis and Ingenie.
Trakm8 has been listed on the AIM market of the London Stock Exchange since 2005.
www.trakm8.com / @Trakm8
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
EXECUTIVE CHAIRMAN'S STATEMENT
Results
FY-2020 was a productive year in terms of financial results. We delivered on our promise to return to growth and but for a Covid-19 induced disruption in the final two weeks of the financial year, we would have achieved our plan to deliver a modest adjusted profit. Notwithstanding that, we did achieve a significant improvement with a small adjusted loss.
Revenue grew by 2% and the Group posted an adjusted loss before tax of £0.2m. Connections grew by 1% to 245,000. The total fleet management connections increased by 1% over the year to 77,000 (FY-2019: 76,000). Telematics for insurance/automotive connections also increased by 1%. At the year-end we had 168,000 insurance/automotive connections (FY-2019: 167,000). Recurring service revenues reduced by 3.3% to £9.8m (FY-2019: £10.1 m).
It was pleasing to improve cash generation significantly with cash flow from operations of £4.1m (FY-2019: -£1.8m). In achieving this, the Group only deferred £0.2m under the Government tax deferral support schemes. This resulted in a free cash flow of £0.8m (FY-2019 -£4.9m) and net debt unchanged at £5.6m (pre-IFRS 16). The Group had £1.7m cash on hand and an undrawn RCF of £0.5m.
FY-2020 was another year of excellent progress in many internally focussed activities. The Group continued to focus on improving efficiency of our operations and engineering activities. Significant reductions in direct and indirect costs were delivered during the year. During the year restructuring of the engineering department led to the COO taking direct responsibility for the engineering teams. Improved testing and software coding standards have been implemented to address some of the technical challenges we have experienced. The investment in engineering resources, whilst some £0.3m less than last year, has continued to deliver market-leading software and hardware solutions. Trakm8's Insight platform provides superb customer experience and data, enabling vehicle operators both to improve operational efficiencies and reduce risk significantly.
We have continued to invest in our software solutions, algorithms and devices, ensuring that Trakm8 retains market-leading solutions with the widest and deepest offer in the market today.
Post-year end, we have concluded contracts with two additional insurance companies.
Research and development ('R&D')
Trakm8 has maintained a significant level of investment in R&D although for a second year below the level of the previous year. The Board believes that this level of investment is necessary to retain a portfolio of market-leading technology. Trakm8 continues to focus on owning the intellectual property ('IP') we use in our solutions, and we see this as one of our key competitive advantages. Telematics systems are complex; but because we own all the elements that encompass a solution (with the exception of the mobile networks) we have the ability to understand and more easily resolve problems.
The R&D investment has concentrated on building out a range of self-fit devices, improved cameras, development of the feature set in Insight, including a SaaS optimisation product. As identified in previous years, the requirement to do more at a lower cost remains a key strategy as this widens the opportunity to expand the rate of growth as the ROI for our customers improves.
Trakm8 was pleased to be granted two patents in the year, a patent for the ADAS algorithm it developed for detection of tailgating situations and a patent for monitoring the health of a vehicle battery for its Connectedcare solution.
Governance
In the prior financial year we adopted the Quoted Companies Alliance's (QCA) Corporate Governance Code for small and mid-size quoted companies, which the Board considers the most appropriate for the size and structure of the Group. The Board annually reviews its Corporate Governance policies and procedures, these were last reviewed on 18 June 2020. More information can be found in the Governance Report section of this report and our website.
Post year end the Group appointed a third Non-Executive Director, Penny Searles who brings greater diversity to the Board and increases the Group's compliance with the code.
Please see https://www.trakm8.com/investor-relations/corporate-governance for our full compliance statement.
Dividend
The Group does not propose to recommend a dividend for the year at the forthcoming AGM. However, the Board will continue to review its dividend policy in light of future results and investment requirements.
People
The number of people Trakm8 employs has reduced further during FY-2020 with reductions in operational and engineering headcount. In total our actual staff numbers have reduced by 15% over the year.
The turnaround in performance has taken extraordinary efforts. We have an exceptional team and I would like to thank everyone for their hard work, dedication and contribution to the ongoing success of the business.
Outlook
The momentum established in the business last year has been disrupted by the Covid-19 epidemic. We had returned to growth in our Fleet business and had finally launched with three new Insurance customers. The AA had launched Smart Breakdown. Two more insurance customers have been secured since year end. Prior to the current lock down, this year was expected to be one of very significant growth.
Our new year started in the early stage of the lockdown and unsurprisingly April saw very significant reductions in new business. May saw slight improvements and June has improved further still.
The total value of new Fleet contracts signed in April was 83% down on the prior year, 50% lower in May compared to the prior year and is expected to be 22% lower in June compared to the prior year.
Insurance shipments in April at 3,867 devices were 39% below last year, May shipments at 5,447 devices were in line with the prior year. Currently June shipments are expected to be 26% higher than last year.
With a significant proportion of revenues derived from the service fees of the installed base, the first two months of the year revenues were 27% lower than the previous year but resulted in a significantly reduced loss because of lower direct and indirect costs.
We are confident that the growth potential in our chosen markets is good and that we have the solutions and sales teams to deliver on this opportunity. It is simply a matter of timing and landscape as the crisis subsides. The solutions we provide significantly improve the customer's efficiencies and so that market driver remains. We cannot predict how many of our existing and potential customers will no longer be at the scale they were.
We have continued to drive operational efficiency savings in direct and indirect costs, both those made last year that will benefit the full year and some made this year.
Trakm8 has availed itself of various support measures from the government including the cash deferment of VAT and PAYE/NI and is benefitting from the payroll support through the furlough scheme.
Trakm8 has agreed capital repayment holidays with our debt providers and agreed covenants that we are confident are achievable. Based on current forecasts and scenario planning that Trakm8 has undertaken, along with the agreed capital repayment holidays we believe this provides appropriate cash headroom, therefore the Group are not currently progressing with a CBILS loan.
Despite the positive trends of the year to date, the uncertainty due to Covid-19 is such that the Group is not able to provide forward guidance at this time but will do so as soon as there is more certainty in the market.
John Watkins
EXECUTIVE CHAIRMAN
29 June 2020
FINANCIAL REVIEW
TRADING RESULTS
| 2020 | 2019 | Change |
Group Revenue (£'000) | 19,550 | 19,145 | 2% |
of which, Recurring Revenue (£'000) | 9,753 | 10,087 | -3% |
Loss before tax (£'000) | 1,705 | 3,563 | n/a |
Adjusted Loss before tax1 (£'000) | 224 | 1,452 | n/a |
Basic loss per share (p) | 2.19 | 6.20 | n/a |
Adjusted basic earnings/(loss) per share (p) | 0.28 | (1.89) | n/a |
1 Before exceptional costs and share based payments
Revenue
Group revenue increased by 2% to £19.6m (FY-2019: £19.1m). Fleet revenues increased by 11% to £12.0m, primarily due to additional Optimisation revenues, this was offset by a 9% reduction in Insurance and Automotive revenues to £7.5m. The recently launched Insurance and Automotive customers resulted in the second half revenue being 19% higher than the first half reversing some of the full year decline. Recurring revenue generated from service and maintenance fees decreased by 3% to £9.8m (FY-2019: £10.1m) due to the reduction in Connections from Insurance customers earlier in the year, which were not offset by the growth from the newly launched customers towards the end of the financial year.
Loss before tax
The Group reported a loss before tax of £1.7m (FY-2019: £3.6m). This significant reduction in losses was primarily due to the significant efficiencies the Group realised through both cost of sales and administrative costs. Gross margin improved by 5% points to 59% primarily due to a change in mix in revenue, but also due to lower cost hardware products and improved efficiency on communication and installation costs. Total administrative costs reduced by £0.8m of which £0.6m was a reduction in non-recurring exceptional costs (detailed below). Other administrative costs (excluding exceptional costs and depreciation and amortisation) reduced by £0.9m due to headcount reductions as a result of the cost saving initiatives implemented, offset by a £0.7m increase in depreciation and amortisation, £0.3m from capitalised development costs, reflecting the significant investment undertaken by the group in earlier years and £0.4m due to the adoption of IFRS16.
Adjusted Loss before tax
The improved trading performance and significantly reduced cost base resulted in adjusted loss before tax decreasing to a loss of £0.2m (FY-2019: £1.5m). The £1.3m improvement in gross profit as detailed above fully converted into a significant reduction in Adjusted Loss before tax. Administrative costs (excluding exceptional costs and depreciation and amortisation) were £0.9m lower than the previous year, offset by a £0.7m increase in amortisation and depreciation as detailed above, and a £0.2m increase in finance costs.
Exceptional Costs
Exceptional costs totaling £1.3m (FY-2019: £1.9m) include integration and restructuring costs relating to initiatives to streamline and rationalize the operations of the business and additional costs relating to the acquisition of Roadsense Technology Limited. Additionally, significant product component refit costs relating to ongoing re-visit and material costs were incurred to remedy significant component and software issues relating to the prior year, these issues have been fixed by year end. The Group also incurred a number of one-off costs as a result of the Covid-19 pandemic, these relate to employee costs, cancelled marketing events and bad debts.
Balance Sheet
| 2020 | 2019 |
| £'000 | £'000 |
Non-Current Assets | 25,759 | 22,736 |
Net Current Assets | 4,437 | 5,765 |
Non-Current Liabilities | 9,017 | 6,407 |
Net Assets | 21,179 | 22,094 |
Net Assets decreased by £0.9m to £21.2m (FY-2019: £22.1m) reflecting the loss for the year, after adding back the IFRS2 Share based payments charge.
Non-current assets increased by £3.0m to £25.8m (FY-2019: £22.7m). This is due to the adoption of IFRS 16 in the current year, with no adjustment to the prior year which resulted in £2.8m of leased assets being capitalised, offset by depreciation charge in the year of £0.6m. Continued investment in development in both software and hardware with capitalised development costs in the year totaling £3.2m (FY-2014: £3.4m), offset by a £0.3m increase in amortisation to £1.8m (FY-2019: £1.5m).
Cash Flow
| 2020 | 2019 |
| £'000 | £'000 |
Net Cash generated from operations | 4,115 | (1,752) |
Investing activities | (3,199) | (3,179) |
Free Cash Flow1 | 916 | (4,931) |
Financing activities | (456) | 2,664 |
Change in Cash in Year | 460 | (2,267) |
Net Debt2 | 5,643 | 5,629 |
1 Cash generated from operating activities less cash used in investing activities (excluding cash flows related to acquisitions)
2 Total borrowings less cash and cash equivalents. FY-2020 net debt excludes £2.3m IFRS 16 lease liability.
Cash from operating activities significantly improved by £5.9m during this year to an inflow of £4.1m (FY-2019: £1.8m outflow), which included R&D tax credit cash receipts of £1.0m (FY-2019: £1.0m). The R&D tax credit cash receipt reflects the Group's investment in development. The operational cash flow improvement is due to the significantly reduced operating loss increasing operating cash flows (£2.9m) and £3.0m improvement year on year from enhanced working capital management.
Free cash inflow of £0.9m (FY-2019: outflow £4.9m) is due to the £4.1m Net Cash generated from operating activities as detailed above offset by cash outflows from investing activities which remained flat at £3.2m (FY-2019: £3.2m). The ongoing investing activities outflow has decreased by £0.5m to £3.2m, with the prior year investment of £3.7m offset by the one-off £0.5m from the proceeds of the property disposal.
Financing activities was an outflow of £0.5m (FY-2019: Inflow £2.7m). This outflow is net of £2.0m new loans which includes the £1.5m growth capital loan from MEIF WM Debt LP. The decrease from prior year was due to the subscription in December 2018 which raised approximately £3.1m (net of expenses) to fund general working capital requirements and further strengthen the Group's balance sheet.
Net Debt
Net debt excluding IFRS 16 lease liability of £2.3m remained flat at £5.6m (FY-2019: £5.6m). Cash balances total £1.7m (FY-2019: £1.2m) and total borrowings including IFRS16 lease liability of £2.3m totals £9.6m (FY-2019: £6.8m) of which £0.9m (FY-2019: £1.8m) was a term loan with HSBC, £1.5m (FY-2019: nil) was a term loan with MEIF WM Debt LP, £4.5m (FY-2019: £4.4m) were amounts drawn under our £5m revolving credit facility with HSBC and £2.8m (FY-2019: £0.6m) were obligations under Right of use lease liabilities, which includes finance lease liabilities from the prior year.
Consolidated Statement of Comprehensive Income For The Year Ended 31 March 2020 | |||
| Note | Year ended 31 March 2020 | Year ended 31 March 2019 |
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| £'000 | £'000 |
REVENUE | 4 | 19,550 | 19,145 |
Cost of sales |
| (7,991) | (8,890) |
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Gross profit | 11,559 | 10,255 | |
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Other income | 5 | 364 | 436 |
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Administrative expenses excluding exceptional costs |
| (11,926) | (12,101) |
Exceptional administrative costs | 7 | (1,296) | (1,930) |
Total administrative costs |
| (13,222) | (14,031) |
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OPERATING LOSS | 6 | (1,299) | (3,340) |
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Finance income |
| 12 | 10 |
Finance costs | 8 | (418) | (233) |
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LOSS BEFORE TAXATION |
| (1,705) | (3,563) |
Income tax |
| 612 | 1,057 |
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LOSS FOR THE YEAR |
| (1,093) | (2,506) |
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OTHER COMPREHENSIVE INCOME |
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Items that may be subsequently reclassified to profit or loss: |
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Exchange differences on translation of foreign operations |
| (7) | (5) |
TOTAL OTHER COMPREHENSIVE INCOME |
| (7) | (5) |
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TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT |
| (1,100) | (2,511) |
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LOSS BEFORE TAXATION |
| (1,705) | (3,563) |
Exceptional administrative costs |
| 1,296 | 1,930 |
IFRS2 Share based payments charge |
| 185 | 181 |
ADJUSTED LOSS BEFORE TAX |
| (224) | (1,452) |
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LOSS PER ORDINARY SHARE (PENCE) ATTRIBUTABLE TO OWNERS OF THE PARENT |
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Basic | 9 | (2.19p) | (6.20p) |
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Diluted | 9 | (2.19p) | (6.20p) |
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The results relate to continuing operations. | |||
Consolidated Statement of Changes in Equity For The Year Ended 31 March 2020 | ||||||||
| Note | Share capital | Share premium | Merger reserve | Translation reserve | Treasury reserve | Retained earnings | Total equity |
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| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance as at 1 April 2018 |
| 359 | 11,750 | 1,138 | 208 | (4) | 7,929 | 21,380 |
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Comprehensive loss |
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Loss for the year |
| - | - | - | - | - | (2,506) | (2,506) |
Other comprehensive loss |
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Exchange differences on translation of overseas operations | - | - | - | (5) | - | - | (5) | |
Total comprehensive income | - | - | - | (5) | - | (2,506) | (2,511) | |
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Transactions with owners |
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Shares issued |
| 141 | 2,941 | - | - | - | - | 3,082 |
IFRS2 Share-based payments charge | - | - | - | - | - | 181 | 181 | |
Tax recognised directly in equity (Note 11) | - | - | - | - | - | (38) | (38) | |
Transactions with owners |
| 141 | 2,941 | - | - | - | 143 | 3,225 |
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Balance as at 1 April 2019 |
| 500 | 14,691 | 1,138 | 203 | (4) | 5,566 | 22,094 |
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Comprehensive loss |
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Loss for the year |
| - | - | - | - | - | (1,093) | (1,093) |
Other comprehensive loss |
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Exchange differences on translation of overseas operations | - | - | - | (7) | - | - | (7) | |
Total comprehensive loss |
| - | - | - | (7) | - | (1,093) | (1,100) |
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Transactions with owners |
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IFRS2 Share based payments charge | - | - | - | - | - | 185 | 185 | |
Transactions with owners |
| - | - | - | - | - | 185 | 185 |
Balance as at 31 March 2020 | 500 | 14,691 | 1,138 | 196 | (4) | 4,658 | 21,179 | |
Consolidated Statement of Financial Position As At 31 March 2020
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| Note | As at 31 March 2020 | As at 31 March 2019 | ||||||||
ASSETS |
| £'000 | £'000 | ||||||||
NON CURRENT ASSETS |
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Intangible assets | 10 | 21,997 | 21,165 | ||||||||
Property, plant and equipment |
| 717 | 1,432 | ||||||||
Right of use assets | 13 | 3,004 | - | ||||||||
Amounts receivable under finance leases |
| 41 | 139 | ||||||||
| 25,759 | 22,736 | |||||||||
CURRENT ASSETS |
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Inventories |
| 2,043 | 2,736 | ||||||||
Trade and other receivables |
| 7,854 | 8,345 | ||||||||
Corporation tax receivable |
| 863 | 1,050 | ||||||||
Cash and cash equivalents |
| 1,665 | 1,205 | ||||||||
| 12,425 | 13,336 | |||||||||
LIABILITIES |
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CURRENT LIABILITIES |
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Trade and other payables |
| (6,180) | (6,307) | ||||||||
Borrowings |
| (1,125) | (1,237) | ||||||||
Right of use liability | 13 | (656) | - | ||||||||
Provisions |
| (27) | (27) | ||||||||
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| (7,988) | (7,571) | ||||||||
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CURRENT ASSETS LESS CURRENT LIABILITIES | 4,437 | 5,765 | |||||||||
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TOTAL ASSETS LESS CURRENT LIABILITIES | 30,196 | 28,501 | |||||||||
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NON CURRENT LIABILITIES |
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Trade and other payables |
| (713) | (607) | ||||||||
Borrowings |
| (5,675) | (5,597) | ||||||||
Right of use liability | 13 | (2,162) | - | ||||||||
Provisions |
| (157) | (115) | ||||||||
Deferred income tax liability |
| (310) | (88) | ||||||||
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| (9,017) | (6,407) | ||||||||
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NET ASSETS | 21,179 | 22,094 | |||||||||
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EQUITY |
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Share capital | 11 | 500 | 500 | ||||||||
Share premium |
| 14,691 | 14,691 | ||||||||
Merger reserve |
| 1,138 | 1,138 | ||||||||
Translation reserve |
| 196 | 203 | ||||||||
Treasury reserve |
| (4) | (4) | ||||||||
Retained earnings |
| 4,658 | 5,566 | ||||||||
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TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT |
| 21,179 | 22,094 | ||||||||
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The loss for the Company for the year determined in accordance with the Companies Act 2006 was £236,000 (2019: loss £242,000) | |||||||||||
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The notes on pages 45 to 81 are an integral part of these consolidated financial statements. These financial statements on pages 41 to 81 were approved by the Board of directors and authorised for issue on 29 June 2020 and are signed on its behalf by: | |||||||||||
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John Watkins - Director |
| Jon Furber - Director |
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Consolidated Statement of Cash-Flows For The Year Ended 31 March 2020 | |||||||||||
| Note | Year ended 31 March 2020 | Year ended 31 March 2019 | ||||||||
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| £'000 | £'000 | ||||||||
NET CASH GENERATED FROM OPERATING ACTIVITIES | 12 | 4,115 | (1,752) | ||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of property, plant and equipment |
| (20) | (103) | ||||||||
Purchases of software |
| (23) | (158) | ||||||||
Proceeds from sale of property |
| - | 495 | ||||||||
Capitalised development costs |
| (3,156) | (3,413) | ||||||||
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NET CASH USED IN INVESTING ACTIVITIES |
| (3,199) | (3,179) | ||||||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Issue of new shares |
| - | 3,082 | ||||||||
Increase in loans |
| 2,000 | 2,000 | ||||||||
Repayment of loans |
| (1,440) | (2,026) | ||||||||
Repayment of obligations under lease agreements |
| (630) | (187) | ||||||||
Interest paid |
| (386) | (205) | ||||||||
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NET CASH GENERATED FROM FINANCING ACTIVITIES |
| (456) | 2,664 | ||||||||
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NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS |
| 460 | (2,267) | ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
| 1,205 | 3,472 | ||||||||
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CASH AND CASH EQUIVALENTS AT END OF YEAR |
| 1,665 | 1,205 | ||||||||
Notes To The Consolidated Financial Statements |
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1 | GENERAL INFORMATION |
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| Trakm8 Holdings PLC ("Company") and its subsidiaries (together the "Group") develop, manufacture, distribute and sell telematics devices and services and optimisation solutions. | ||||||||
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| Trakm8 Holdings PLC 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 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG. The Company's Ordinary shares are traded on the AIM market of the London Stock Exchange. The Company is registered in England and is limited by shares. | ||||||||
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| The Group's principal activity is the development, manufacture, marketing and distribution of vehicle telematics equipment and services and optimisation solutions. The Company's principal activity is to act as a holding company for its subsidiaries. | ||||||||
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| The condensed consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand (£'000) except where otherwise indicated. | ||||||||
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2 | AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS | ||||||||
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| The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretations Committee ("IFRS IC") interpretations as endorsed by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. | ||||||||
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3 | BASIS OF PREPARATION |
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| The audited financial information included in this preliminary results announcement for the year ended 31 March 2020 and audited information for the year ended 31 March 2019 does not comprise statutory accounts within the meaning of section 434 Companies Act 2006. The information has been extracted from the audited statutory financial statements for the year ended 31 March 2020 which will be delivered to the Registrar of Companies in due course. Statutory financial statements for the year ended 31 March 2019 were approved by the Board of directors and have been delivered to the Registrar of Companies. The report of the independent auditors for the year ended 31 March 2020 and 2019 respectively on these financial statements were unqualified and did not include a statement under section 498 of the Companies Act 2006. | ||||||||
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| These financial statements are prepared on a going concern basis after assessing the principal risks and having considered the impact of Covid-19. To monitor the future cash position the Group produces projections of its working capital and long term funding requirements covering three months in detail and 1 and 2 year future projections. These projections are updated on a regular basis and have been re-assessed in light of the Covid-19 pandemic through which the Group has continued trading albeit at reduced volume. The Group has a substantial recurring revenue base that accounted for 50% of revenues in the FY-2020 and has taken advantage of some of the various government support schemes to protect the business. Whilst the impact of Covid-19 and the speed at which trading returns to normal levels continues to evolve, the Group has revised its forecasts for plausible downside scenarios. Further consideration to the risks associated with Covid-19 and other significant risks and the mitigations the Group has developed are detailed on page 20 of the FY-2020 Annual report and accounts. In addition the Group recently entered into Amendment and Restatement Agreements with HSBC that extended the term of all facilities to 30 September 2021, deferred all scheduled capital repayments from June 2020, with these recommencing in April 2021 and amended the covenants. The recently agreed covenants relate to cash flow cover, next tested on 31 March 2021 and leverage next tested on 30 September 2020. The Group also recently entered into an Amendment and Restatement Agreement with MEIF EM Debt LP that deferred the commencement date of capital repayments to 30 June 2021 and amended the covenants in line with the agreement with HSBC. At the year end the Group had cash balances of £1,665,000 and undrawn revolving credit facilities of £500,000 at 31 March 20. These revised projections for twelve months from date of signing the financial statements show that the Group has sufficient cash resources and will meet its covenants with ample headroom for the foreseeable future. The Group has undertaken a number of adverse sensitivities against its projections, these show that the Group would still have cash reserves in all these scenarios and would meet the agreed covenants. This sensitivity analysis showed that if either a 50% reduction in Adjusted EBITDA, or a 50% reduction in free cash flow materialised that covenants would still be met. On this basis the Directors have a reasonable expectation that the Group will have adequate financial resources to continue in operation for the foreseeable future and therefore it appropriate to adopt the going concern basis of accounting in preparing the financial statements. | ||||||||
4 | SEGMENTAL ANALYSIS |
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| The chief operating decision maker ("CODM") is identified as the Board. It continues to define all the Group's trading under the single Integrated Telematics Technology segment and therefore review the results of the group as a whole. Consequently all of the Group's revenue, expenses, assets and liabilities are in respect of one Integrated Telematics Technology segment. | ||||||||
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| The Board as the CODM review the revenue streams of Integrated Fleet, Optimisation, Insurance and Automotive Solutions (Solutions) as part of their internal reporting. Solutions represents the sale of the Group's full vehicle telematics and optimisation services, engineering services, professional services and mapping solutions to customers. | ||||||||
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| A breakdown of revenues within these streams are as follows: |
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| Year ended 31 March 2020 | Year ended 31 March 2019 | |
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| £'000 | £'000 | |
| Solutions: |
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| 19,550 | 19,145 | |
| Fleet and optimisation |
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| 12,034 | 10,845 | |
| Insurance and automotive |
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| 7,516 | 8,300 | |
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| A geographical analysis of revenue by destination is as follows: |
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| Year ended 31 March 2020 | Year ended 31 March 2019 | |
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| £'000 | £'000 | |
| United Kingdom |
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| 19,181 | 18,910 | |
| North America |
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| 7 | 12 | |
| Norway |
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| - | 4 | |
| Rest of Europe |
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| 67 | 111 | |
| Rest of World |
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| 295 | 108 | |
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| 19,550 | 19,145 | |
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5 | OTHER INCOME |
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| Year ended 31 March 2020 | Year ended 31 March 2019 | |
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| £'000 | £'000 | |
| Grant income |
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| 361 | 449 | |
| R&D tax credit |
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| 4 | 5 | |
| R&D tax credit adjustment in respect of prior periods |
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| (1) | (18) | |||
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| 364 | 436 | |
6 | OPERATING LOSS |
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| The following items have been included in arriving at operating loss: | ||||||||||
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| Year ended 31 March 2020 | Year ended 31 March 2019 | ||||||
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| £'000 | £'000 | ||||||
| Depreciation |
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| - owned assets (see note 15) |
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| 149 | 242 | ||||||
| - right of use assets (see note 31) |
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| 550 | 71 | ||||||
| Amortisation of intangible assets |
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| - owned assets (see note 14) |
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| 2,194 | 1,866 | ||||||
| Operating lease rentals |
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| - Land and buildings |
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| - | 208 | ||||||
| - Other |
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| 80 | 183 | ||||||
| Research and development expenditure |
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| 896 | 933 | ||||||
| Loss /(Gain) on foreign exchange transactions |
| 2 | (3) | |||||||
| Staff costs (note 12) |
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| 6,730 | 7,126 | ||||||
| Profit on disposal of property plant & equipment |
| - | (106) | |||||||
| Exceptional administrative costs |
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| 1,296 | 1,930 | ||||||
| Auditors' remuneration |
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| - Fees payable to the Company's auditors for the audit of the parent |
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| company and consolidated financial statements |
| 73 | 93 | |||||||
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| Adjusted loss before tax is monitored by the Board and measured as follows: |
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| Year ended 31 March 2020 | Year ended 31 March 2019 | ||||||
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| £'000 | £'000 | ||||||
| Loss before tax |
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| (1,705) | (3,563) | ||||||
| Exceptional administrative costs (note 9) |
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| 1,296 | 1,930 | ||||||
| Share based payments |
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| 185 | 181 | ||||||
| Adjusted loss profit before tax |
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| (224) | (1,452) | ||||||
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7 | EXCEPTIONAL ADMINISTRATIVE COSTS |
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| Year ended 31 March 2020 | Year ended 31 March 2019 | ||||||
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| £'000 | £'000 | ||||||
| Acquisition costs |
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| 52 | 102 | ||||||
| Integration & restructuring costs |
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| 602 | 707 | ||||||
| New product component refit costs |
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| 442 | 453 | ||||||
| Covid-19 costs |
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| 200 | - | ||||||
| Product enhancement costs |
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| - | 375 | ||||||
| Iranian bad debt |
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| - | 293 | ||||||
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| 1,296 | 1,930 | ||||||
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| The acquisition costs incurred in 2020 and 2019 relate to non-underlying charges under two separate agreements linked to the acquisition in 2017. The costs incurred are directly linked to the acquisition and not as part of the underlying business. One agreement terminated on 31 July 2019, and the second agreement terminated on 31 March 2019.The Group has incurred significant costs relating to its ongoing project to streamline and rationalise the operations of the business. This has resulted in the following non-underlying, one-off costs: - In the current and prior year, integration and restructuring costs incurred relate to integrating theactivities of Route Monkey Limited and Roadsense Limited that were acquired in previous financial years and include costs associated with office closures and costs and profits incurred as part of its long-term real estate plan. - Restructuring costs incurred as a result of a headcount reduction activity undertaken during the current financial yearThe Product component refit costs incurred in the current and prior year relate to significant component and software issues that arose during the financial year on a recently launched product. These issues were fixed by the end of the previous financial year. However significant re-visit and material costs have been incurred in both the current and financial year as a result of the project to remedy these issues. No customers have been lost as a result of these issues.In the prior year product enhancement costs incurred relate to product upgrade costs incurred as a result of a decision to roll out an enhanced hardware product with increased functionality to just two existing customers to enable much greater roaming capability across Europe and increase the range of services that can therefore be provided.In the prior year, it was considered inappropriate to proceed with a contract to supply insurance solutions into Iran due to the impact of US sanctions, therefore the cost of the work and solutions supplied in the previously have been provided for.The Group has also incurred exceptional costs in the current financial year relating to the Covid-19 pandemic. These costs relate to a variety of overheads including employee costs, cancelled marketing events and bad debts resulting from Covid-19. | ||||||||||
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8 | FINANCE COSTS |
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| Year ended 31 March 2020 | Year ended 31 March 2019 | |||||||
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| £'000 | £'000 | |||||||
| Interest on bank loans |
| 284 | 172 | |||||||
| Amortisation of debt issue costs | 32 | 28 | ||||||||
| Interest on right of use assets |
| 102 | 33 | |||||||
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| 418 | 233 | |||||||
9 | EARNINGS PER ORDINARY SHARE | ||||
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| The earnings per Ordinary share have been calculated in accordance with IAS 33 using the profit for the year and the weighted average number of Ordinary shares in issue during the year as follows: | ||||
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| Year ended 31 March 2020 | Year ended 31 March 2019 | |
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| £'000 | £'000 | |
| Loss for the year after taxation |
| (1,093) | (2,506) | |
| Exceptional administrative costs |
| 1,296 | 1,930 | |
| Share based payments |
| 185 | 181 | |
| Tax effect of adjustments |
| (246) | (367) | |
| Adjusted profit/(loss) for the year after taxation |
| 142 | (762) | |
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| No. | No. | |
| Number of Ordinary shares of 1p each at 31 March |
| 50,004,002 | 50,004,002 | |
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| Basic weighted average number of Ordinary shares of 1p each | 50,004,002 | 40,397,188 | ||
| Diluted weighted average number of Ordinary shares of 1p each | 50,004,002 | 40,397,188 | ||
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| Basic loss per share |
| (2.19p) | (6.20p) | |
| Diluted loss per share |
| (2.19p) | (6.20p) | |
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| Adjust for effects of: |
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| Exceptional costs |
| 2.10p | 3.87p | |
| Share based payments |
| 0.37p | 0.45p | |
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| Adjusted basic earnings/(loss) per share |
| 0.28p | (1.89p) | |
| Adjusted diluted earnings/(loss) per share |
| 0.28p | (1.89p) | |
10 | INTANGIBLE ASSETS |
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| Goodwill | Intellectual property | Customer relationships | Development costs | Software | Total | ||||
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| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||
| COST |
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| As at 1 April 2018 | 10,417 | 1,920 | 100 | 10,621 | 1,875 | 24,933 | |||||
| Additions - Internal developments | - | - | - | 2,844 | 144 | 2,988 | |||||
| Additions - External purchases | - | - | - | 569 | 14 | 583 | |||||
| As at 31 March 2019 | 10,417 | 1,920 | 100 | 14,034 | 2,033 | 28,504 | |||||
| Reclassification of right of use assets1 | - | - | - | - | (153) | (153) | |||||
| Additions - Internal developments | - | - | - | 2,763 | - | 2,763 | |||||
| Additions - External purchases | - | - | - | 393 | 23 | 416 | |||||
| As at 31 March 2020 | 10,417 | 1,920 | 100 | 17,190 | 1,903 | 31,530 | |||||
| AMORTISATION |
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| As at 1 April 2018 | - | 1,788 | 56 | 3,101 | 528 | 5,473 | |||||
| Charge for year |
| - | 61 | 33 | 1,531 | 241 | 1,866 | ||||
| As at 31 March 2019 | - | 1,849 | 89 | 4,632 | 769 | 7,339 | |||||
| Charge for year |
| - | 61 | 11 | 1,847 | 275 | 2,194 | ||||
| As at 31 March 2020 | - | 1,910 | 100 | 6,479 | 1,044 | 9,533 | |||||
| NET BOOK AMOUNT |
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| As at 31 March 2020 | 10,417 | 10 | - | 10,711 | 859 | 21,997 | |||||
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| As at 31 March 2019 | 10,417 | 71 | 11 | 9,402 | 1,264 | 21,165 | |||||
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| As at 1 April 2018 | 10,417 | 132 | 44 | 7,520 | 1,347 | 19,460 | |||||
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Goodwill arose in relation to the Group's acquisition of 100% of the share capital of Roadsense Technology Limited (Roadsense), Route Monkey Limited (Route Monkey), Box Telematics Limited (Box) and DCS Systems Limited (DCS). | |||||||||||
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| Since the acquisition Roadsense, Box, Route Monkey and DCS have been incorporated into the Trakm8 business. These businesses have therefore been assessed as one cash generating unit for an impairment test on Goodwill. The impairment review has been performed using a value in use calculation. | |||||||||||
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| The impairment review has been based on the Group's budgets revised for the impact of Covid-19 for FY-2021 which have been reviewed and approved by the Board and projections for FY-2022. Forecasts for the subsequent 3 years have been produced based on 7% (a prudent growth rate for telematics market) growth rates in revenue and EBITDA in each year. A net present value has been calculated using a pre-tax discount rate of 10% (Group's weighted average cost of capital) which is deemed to be a reasonable rate taking account of the Group's cost of funds and an extra element for risk. A terminal value has been calculated and included in the discounted cash flow forecasts used within the model to fully support the goodwill value. A growth rate of 2% was used to determine the terminal value. | |||||||||||
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| In addition sensitivity analysis has been undertaken and indicates that an impairment will be triggered by: | |||||||||||
| 1. Decrease in annual growth rates from 7% to 5.7% (terminal growth rate of 2%) | |||||||||||
| Or triggered by: |
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| 1. Decrease in net cash generated from operating activities for FY-2021 and FY-2022 of 24% | |||||||||||
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| Amortisation expenses of £2,194,000 (2019: £1,866,000) have been charged to Administrative expenses in the Consolidated Statement of Comprehensive Income. | |||||||||||
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| 1 Amounts previously recognised as finance lease assets have been reclassified to right of use assets upon transition to IFRS 16 on 1 April 2019. Refer to note 31 - Leases for further details. | |||||||||||
11 | SHARE CAPITAL |
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| As at 31 March 2020 | As at 31 March 2019 | ||
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| No's | £'000 | No's | £'000 |
| Authorised: | '000's |
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| Ordinary shares of 1p each | 200,000 | 2,000 | 200,000 | 2,000 | |
| Allotted, issued and fully paid: |
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| Ordinary shares of 1p each | 50,004 | 500 | 50,004 | 500 | |
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| Movement in share capital: |
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| As at 31 March 2019 | As at 31 March 2018 |
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| £'000 | £'000 |
| As at 1 April 2019 |
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| 500 | 500 | |
| New shares issued |
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| - | - | |
| As at 31 March 2020 |
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| 500 | 500 | |
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The Company currently holds 29,000 Ordinary shares in treasury representing 0.06% (2019: 0.06%) of the Company's issued share capital. The number of 1 penny Ordinary shares that the Company has in issue less the total number of Treasury shares is 49,975,002. | |||||
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12 | CASH GENERATED FROM OPERATIONS |
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| As at 31 March 2020 | As at 31 March 2019 |
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| £'000 | £'000 |
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| Loss before tax |
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| (1,705) | (3,563) | |
| Depreciation |
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| 699 | 313 | |
| Profit on disposal of fixed assets |
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| - | (106) | |||
| Net bank and other interest |
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| 406 | 223 | ||
| Amortisation of intangible assets |
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| 2,194 | 1,866 | |||
| Exchange movement |
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| (7) | - | ||
| Share based payments |
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| 185 | 181 | ||
| Operating cash flows before movement in working capital |
| 1,772 | (1,086) | ||||
| Movement in inventories |
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| 693 | (180) | ||
| Movement in trade and other receivables |
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| 589 | 1,732 | |||
| Movement in trade and other payables |
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| (21) | (3,214) | |||
| Movement in provisions |
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| 42 | 1 | ||
| Cash generated from operations |
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| 3,075 | (2,747) | ||
| Interest received |
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| 12 | 10 | |
| Income taxes received |
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| 1,028 | 985 | ||
| Net cash inflow/ (outflow) from operating activities |
| 4,115 | (1,752) | ||||
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13 | CHANGES IN ACCOUNTING POLICIES |
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| The following tables set out the reconciliation from operating lease commitments disclosed in the 2019 Consolidated Financial Statements and the financial impact of adopting IFRS 16 for the year ended 31 March 2020: | ||||||||
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| Reconciliation of lease liabilities |
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| £'000 |
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| 2,510 | ||||
| Add: finance leases recognised in borrowings as at 31 March 2019 |
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| 626 | |||||
| Lease liabilities as at 1 April 2019 |
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| 3,136 | ||
| Lease additions |
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| 342 | |
| Payments of lease liabilities |
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| (630) | ||
| Lease terminated |
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| (30) | |
| Interest expense on lease liabilities |
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| 59 | ||
| Interest paid on lease liabilities |
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| (59) | ||
| Lease liabilities as at 31 March 2020 |
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| 2,818 | ||
| Of which: |
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| Current lease liabilities |
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| 656 | ||
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| Non-current lease liabilities |
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| 2,162 | ||
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| 2,818 |
| Reconciliation of right of use assets |
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| Right of use assets recognised on adoption of IFRS 16 |
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| 2,510 | ||||
| Add: net book value of assets relating to finance leases recognised in PP&E and Intangible assets as at 31 March 2019 | 739 | |||||||
| Right of use assets as at 1 April 2019 |
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| 3,249 | ||
| Lease additions |
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| 342 | |
| Leases terminated |
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| (37) | ||
| Depreciation of right of use assets |
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| (550) | ||
| Foreign exchange |
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| - | ||
| Right of use assets as at 31 March 2020 |
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| 3,004 | |||
| Of which: |
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| Real estate and other |
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| 2,560 | ||
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| Motor Vehicles |
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| 444 | ||
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| 3,004 |
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| Upon adoption of IFRS 16 at 1 April 2019, there was an increase in both deferred tax assets and deferred tax liabilities of £477,000. | ||||||||
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| For the year ended 31 March 2020, expenses related to short-term leases and low-value leases of £80,000 were recognised in the Consolidated Statement of Comprehensive Income. | ||||||||
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| The Group's Consolidated Statement of Comprehensive Income for the year ended 31 March 2020 includes a net expense of £33,000 as a result of adopting IFRS 16. Total cash outflow of IFRS 16 lease liabilities including interest for the year ended 31 March 2020 was £689,000. | ||||||||
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14 POST BALANCE SHEET EVENTS |
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The Group recently entered into Amendment and Restatement Agreements with HSBC that extended the term of the facilities to 30 September 2021, deferred all scheduled capital repayments from June 2020, with these recommencing in April 2021 and amended the covenants.
The Group also recently entered into an Amendment and Restatement Agreement with MEIF EM Debt LP that deferred the commencement date of capital repayments to 30 June 2021 and amended the covenants in line with the agreement with HSBC.
All other terms of the facilities remained unchanged. | |||||