TRAK Trakm8 Holdings Plc

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK Market Abuse Regulation

5 December 2024

TRAKM8 HOLDINGS PLC

("Trakm8" or the "Group")

Half Year Results

Trakm8 Holdings plc (AIM: TRAK), the global telematics and data insight provider, announces its unaudited results for the six months ended 30 September 2024:

Financial Highlights

1 Recurring revenues are generated from service and maintenance fees

2 Before exceptional costs and share based payments

3. Total borrowings less cash excluding IFRS 16 adjustment for leased property and motor vehicles

4. See note 12 for details

Highlights

·      H1 2024 results:

o  Revenues modestly lower, with reduction in Insurance and Automotive offset partially by Fleet and Optimisation

o  Lack of Insurance capacity coupled with customers running down their existing stocks has heavily impacted new device sales

o  Reduction in Insurance connections has negatively impacted recurring revenues

o  Gross margins improved, with strong software sales after expanded agreement with Iceland and J Sainsbury's Information Systems Ltd ("Sainsbury's") extending its existing contract, due to expire on 31 December 2024, for two years to 31 December 2026

o  New convertible loan note issued to fund investment in Driver Risk solution and boost working capital position

·      H2 2024/25 and FY2026 outlook:

o  Insurance device sales forecast to continue to be adversely impacted through Q3 of FY2025, with expectations of volumes increasing in Q4 of FY2025 from both existing and new customers

o  Strong pipeline of Fleet & Optimisation opportunities in H2 2024/25 for devices, service and support and software including significant Optimisation contract which has been previously highlighted

o  Expectation for Insurance and Automotive volumes in FY2026 remains uncertain, but nonetheless should improve on FY2025 performance

Outlook

The Insurance and Automotive markets continue to provide challenging forecasting conditions. The prospect of volumes of new device sales from both existing and new customers not increasing until Q4 of FY2025 means that our expectations are lower than that we had previously forecast for the Insurance and Automotive business. However, our Fleet and Optimisation business is forecast to trade well with a strong pipeline of opportunities across all our solutions, including the previously highlighted Optimisation contract which remains in our sales process.  We hope that this pipeline will offset the challenges within the Insurance market.

The outcome for the full year therefore remains uncertain with the strength of recovery in Insurance unknown. However, the Board remains confident of improving revenues compared to the prior financial year.

- Ends -

For further information:

About Trakm8

Trakm8 is a UK based technology leader in fleet management, insurance telematics, connected car, and optimisation. Through IP owned technology, the Group uses AI data analytics collected from 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 243,000 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, Stark, EON, Iceland Foods, Sainsbury's, GSF, Direct Line Group, Ticker and Freedom Group.

Trakm8 has been listed on the AIM market of the London Stock Exchange since 2005. Trakm8 is also recognised with the LSE Green Economy Mark.

www.trakm8.com / @Trakm8

Executive Chairman's Statement

Introduction

I present the report of Trakm8's unaudited results for the six months ended 30 September 2024 ("H1 2024").

As noted in the results for the financial year ended 31 March 2024, announced by the Company on 29 July 2024, the Insurance market continues to provide a challenging backdrop. This has contributed to another difficult period for the Group. Despite this, through strong relationships with our customers and our market-leading products, our Fleet and Optimisation vertical continues to show progress. This has helped to ensure that the Group's overall H1 2024 results were broadly in line with the corresponding period for the previous financial year.

I would like to thank the Trakm8 team which continues to ensure that our customers' needs are met resulting in positive outcomes across their businesses.

Markets

We continue to focus on two key markets: Insurance & Automotive as well as Fleet & Optimisation.

Our Insurance customers continue to see a slower recovery in policy sales than they had anticipated. The availability of capacity, whilst improving, is slow to be released for policy sales which, coupled with higher levels of customers' existing stock holdings being used, has meant that our new device sales have been heavily impacted for a further reporting period. In addition, several Insurers have also seen price pressure from competitors again resulting in lower policy sales and renewals. Insurance telematics continues to be a necessity for some younger drivers where insurance premiums continue to rise whilst other markets are now being explored by our customer base including older drivers and those higher risk drivers who struggle to get policies from traditional routes.

Automotive saw the launch of the AA Vixa product during the period and volumes have increased as they roll out advertising and incentives to existing policy holders. Our Automotive expertise has meant that through our solution we have helped deliver real time vehicle health information to both the end user and the AA, ensuring that vehicles are maintained effectively.

Fleet and Optimisation has produced a strong result for the period. Our solutions for fleets of vehicles continue to deliver cost and risk improvements with our Optimisation algorithms in particular delivering vast benefits. With cost increases set to continue for businesses, we believe that our solutions are well placed to deliver strong returns on investment on fleet sizes ranging from less than ten to large fleets of thousands. We believe that most fleets will need to adopt camera technology over the coming years and our range of cameras caters for most needs which, when coupled with one of our Insight packages, is expected to deliver the outcomes that our customers require. We are seeing more prospects and existing customers interested in the integrated Telematics and Optimisation offering available within the Insight platform.

Strategy

The Group continues to follow the previously outlined strategy of:

·      Increasing our market share

·      Delivering a cutting-edge solutions portfolio

·      Streamlining our internal operations

Our primary focus is to increase our market share through more device sales, more connections and higher service fees. The challenging conditions of the Insurance market were entirely responsible for connections dropping to 243,000 as at 30^th September 2024 (FY2024: 275,000). With Insurance and Automotive volumes expected to increase during H2 2024/25, we expect to see this stabilise and begin to improve as FY2025 comes to an end.

With the introduction of our Fleet Customer Success team, we are ensuring that our customer base benefits from our latest solutions and can explore opportunities for expansion of services being delivered, further improving results in both cost saving and safety. Our strong relationship management with enterprise customers resulted in further renewals and expansions from Iceland and Sainsburys which extended for one and two years respectively during the calendar year.

Our second strategic aim is to continue to build and provide exceptional solutions. Our focus is to concentrate on fewer significant projects.  Whilst the main development of Insight was completed during previous financial years, we continue to add functionality to the platform, focusing on our core competencies of Optimisation, Risk Management and Vehicle Health. Following the acquisition of a Driver Risk solution early in this financial year, we are integrating this alongside our existing solution to deliver a market-leading scoring solution to our entire customer base. Our customers also trust our solutions in mission critical processes, so we continue to invest in and improve our security to mitigate external risks wherever possible.

Our third strategic aim has been to improve the efficiencies of our business in every possible way. Following the implementation of a new data centre, we continue to look for further savings in this area along with reductions in other third-party costs to the business. Where possible, we are looking at automating processes with a particular focus on customer experience to support our increased market share aspirations.

Financial Results

Revenues for H1 2024 were modestly lower in comparison to the corresponding period of the previous financial year at £8.31m (H1 2023: £8.54m).

In H1 2024, there was a 25% increase in Fleet & Optimisation revenues to £6.16m (H1 2023: £4.91m). Fleet telematics was largely consistent with last year, but Optimisation revenues were much better, with strong software revenues of £1.84m (H1 2023: £0.19m) following the renewals with both Iceland and Sainsburys as previously discussed. Connections as at 30^th September 2024 remained static at 63,000 (FY2024: 63,000).  Insurance & Automotive saw a reduction in revenues to £2.15m (H1 2023: £3.63m). The lack of new device sales, coupled with the reduction in Insurance and Automotive connections as at 30^th September 2024 to 179,000 (FY2024: 212,000), has resulted in an estimated loss of £2m of revenue compared to our expectations in early 2024.

Recurring revenues continue to be the bedrock of the Group and were £4.51m in H1 2024 (H1 2023: £5.23m) representing 54% of the Group's overall revenue. Insurance and Automotive's drop in connections during the period accounts for £0.5m of this reduction, with Fleet continuing to see some attrition in smaller fleets with new connections only starting to benefit towards the end of the period.

Overheads in the period increased by 18%. This increase is inclusive of a 18% increase in amortisation following extensive investment in technology in earlier years. Increased costs were experienced in staff salaries, an area where we seek to ensure that we maintain market rates wherever possible, and we also increased our marketing spend by 75% as we look to deliver our increased market share strategy.

Due to the improved gross margin from increased software revenues, the continued benefit of recurring revenues and controlled costs, the Group produced a small Adjusted profit of £0.02m (H1 2023: £0.12m). Profit after tax for the period was £0.14m compared to £0.11m for H1 2023.

Financial position

Cash generation from operations was £0.35m (H1 2023: £2.35m) and as at 30 September 2024, the Group's net bank debt, excluding the impact of the IFRS16 lease liability, was £6.66m (H1 2023 £5.57m), representing an increase of £1.81m compared to the end of the previous financial year as cash balances decreased and a new convertible loan note was issued for £0.99m to fund the acquisition of a complementary driver risk solution as reported in the Group's FY2024 results.

The reduced cash generation from operations was again down to Insurance device sales being lower than expected, which compared to Fleet contract wins, turn to positive cashflow in shorter timeframes.  We continue to hold more inventory than desired due to Insurance sales volumes and committed material purchases during 2023 when lead times were in excess of twelve months - this represents an opportunity to improve the working capital position as device sales return.

During the period, we agreed revised agreements with both HSBC and Maven and the Group continues to closely monitor its working capital position.

The overall cash outflow for the financial period was £1.04m (H1 2023: £0.25m).  Cash on hand was £0.35m (H1 2023: £0.87m) with £0.5m in unused overdraft facility at the period end.

Outlook

The Insurance and Automotive markets continue to provide challenging forecasting conditions. The prospect of volumes of new device sales from both existing and new customers not increasing until Q4 of FY2025 means that our expectations are lower than that we had previously forecast for the Insurance and Automotive business. However, our Fleet and Optimisation business is forecast to trade well with a strong pipeline of opportunities across all our solutions, including the previously highlighted Optimisation contract which remains in our sales process.  We hope that this pipeline will offset the challenges within the Insurance market.

The outcome for the full year therefore remains uncertain with the strength of recovery in Insurance unknown. However, the Board remains confident of improving revenues compared to the prior financial year.

JOHN WATKINS

Executive Chairman

Unaudited Consolidated Statement of Comprehensive Income for the six months to 30 September 2024