Trakm8 Hldgs Regulatory News (TRAK)

TRAKM8 HOLDINGS PLC

("Trakm8" or the "Group")

Trading Update

Trakm8, the AIM-listed telematics and data insight provider, today provides a trading update for its current financial year ending 31 March 2017.

Overview

· installed base of units reporting to our servers has grown to 190,000 units but lower than originally anticipated

· reduction in our FY2017 expectations due to:

o new revenues being booked later in the current financial year than expected or delayed into FY2018

o shift in revenue model (towards more SaaS and rental revenue) continues to result in short term revenues, cash generation and profitability being suppressed to the benefit of the longer term

o continuing, deliberate reduction in contract manufacturing for third parties, to provide capacity for solutions demand, leading to a reduction of £2.5m in revenues this year

· revenues are now expected to be only modestly ahead of FY2016 with adjusted operating profit significantly below FY2016, with a consequent impact on cash flow and indebtedness

· the Board has taken steps to reduce annualised overheads by c.£1.5m and will ensure that any increases are held in line with revenues

Order book

· new orders booked for current and future financial years valued in total at £24.2m in the 10 months to 31 January 2017 (up 24% compared to the same period last year)

· adjusting for the elimination of contract manufacturing, this equates to an increase of over 33%

· increase in pipeline of new potential orders following increased investment in sales and marketing, with confidence that these will be signed in due course

· orders being won in all of our chosen core markets (fleet management, telematics insurance, optimisation and automotive)

Costs

The Group has invested heavily in R&D to support the sales team meeting a number of customer opportunities and in the development of several core new products and solutions. This investment of c.£4m (expensed and capitalised combined) is considerably above the 10% of revenues that is our disclosed long-term objective (and compares to £2.8m incurred last year).

The new products have taken longer to bring to market, as previously stated, but the early customer reaction to these has been excellent. For example:

· we have produced our first production batch of integrated 4G cameras and these are being field-tested

· our latest generation micro telematics device has completed customer approval testing

· our next generation server architecture with fully integrated optimisation is in beta test

Evolving business model

The Group's annual results are now more dependent on the mix of orders secured than in the past. The Board reiterates (as stated at the half year results in November 2016) that the Group's business model continues to evolve in line with industry trends which have resulted in a short term impact to financial performance; the two principal changes are:

· the Group's optimisation business (Route Monkey) is in a trend to move from project revenues to SaaS revenues. This reduces short-term revenues, profitability and cash generation to the benefit of future years

· the Group's fleet telematics customers are increasingly purchasing telematics hardware over the lifetime of the contract or renting the hardware. This does not affect the reported profitability but reduces the short-term cash generation to the benefit of future years

We are pleased to confirm that the Group has completed the integration of all our acquisitions into the Trakm8 Group, operating under the Trakm8 brand.

John Watkins, Executive Chairman of Trakm8 commented: 

"We continue to be frustrated by the timing of new order wins and it is very disappointing that we have to substantially reduce expectations for this financial year despite having a very strong pipeline.

"We are also on a journey of rapid expansion that has required significant additional investment at the same time as our business model has been evolving. We believe this investment is the correct strategy to follow given the expected significant growth of the fleet management, insurance and vehicle leasing telematics markets.

"Over the last four years we have grown our installed base of units reporting to Trakm8 servers from 20,000 to over 190,000 today. The future remains very positive and we believe that this year, whilst very disappointing, should prove to have been a hiatus in our continuing long term growth."

-ends-

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About Trakm8

Trakm8 is a UK based Big Data company utilising telematics as its primary enabler. Through IP owned technology, over three billion miles worth of data is collected annually through its fleet management solutions to create and fine tune algorithms used to score driver behaviour, monitor vehicle health and continuously improve the security and operational efficiencies of customers' vehicles.

With its headquarters in Dorset and a manufacturing facility in the West Midlands, the Group supplies a number of well-known customers in the fleet management and insurance sectors across the UK and further afield including customers such as the AA, Saint Gobain, EON, Direct Line Group and Young Marmalade.

The Group's portfolio offers complete telematics solutions including dashboard cameras that enable customers to record driving incidents and mitigate the risk from "crash to cash" accidents. This is complemented through a comprehensive hardware range, which includes a self-install unit that is one of the smallest available on the global market.

The Group has recently acquired both Route Monkey and Roadsense Technologies Ltd. Route Monkey has enhanced Trakm8's logistics solution offering route scheduling and optimisation, including routing for electric vehicles. Roadsense has been acquired to strengthen the Group's presence in the SME fleet management market.

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 contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.