Trakm8 Share Discussion Threads

[ggbarabajagal] 12/9/2016 15:55

was that a profit warning las week?

[tomps2] 12/9/2016 15:48

Video of Capital Markets Day presentation following the AGM, 7.9.16



Length: 1hr20mins

What's covered?

John Watkins Executive Chairman, and James Hedges’ FD run through last year’s financial and operating highlights, recent contract wins and acquisitions.

John Watkins then goes on to outline the opportunities, where R&D is being spent; the competitive landscape; and the benefits Trakm8 offer to the insurance and fleet management market.

Matt Monnington, CTO demonstrates Trakm8’s integrated camera telematics solution currently being road tested, which shows the scope of features offered.

Colin Ferguson, CEO, Route Monkey demonstrates Trakm8’s integrated fleet optimisation solution, to show how it optimises time and resources.

John Watkins finishes by discussing the strategy and outlook.

Followed by Q&A from the audience.

[40toolong] 08/9/2016 19:08

Can anyone see if the large orders today were Buys or Sells?

[blondeamon] 08/9/2016 18:26

"We are delighted to announce that we are the official technology partner of this year’s Green Fleet Arrive ‘n’ Drive.

Delegates will have the opportunity to put their Eco driving skills to the test in the Beat The Sprig Challenge. Drivers will compete against The Sprig, GreenFleet’s eco driving expert, in order to be crowned the most fuel efficient driver and win two hospitality tickets to the final weekend of the British Touring Car Championship at Brand’s Hatch.

The competition cars will be fitted with Trakm8’s T10 Micro device which will accurately record each competitors driving style around the designated eight mile route around Rockingham and be transmitted back to see how they compare with The Sprig.

After your first drive, entrants will receive 10 minutes tuition from a professional driving instructor, and then be asked to drive the same route again, but putting your new-found eco-driving skills to the test. Once entrants return, a Trakm8 will give you your readings, and that’s when you will see if you make the Leaderboard!

Our revolutionary T10 Micro devices will be fitted to the fleet of brand new Mini One D Clubmans which boast an impressive 74mpg. The T10 will collect data surrounding speed, braking, acceleration, cornering and over revving to test if drivers can beat the Sprig’s driver score.

Have a go if you think you’re green enough!

Register here or on the Beat the Sprig stand!"

[blondeamon] 08/9/2016 12:56

I think Simon covered the weighting of the H2 perfectly above :)

He basically repeated Finncapp's note word for word as I read it yesterday.

[vsp2] 08/9/2016 12:44

OOps...By Simon Thompson,
08 September 2016

[vsp2] 08/9/2016 12:42

Dorset-based telematics and data provider Trakm8 (TRAK:215p) has reported eye-catching new order intake in a trading update at yesterday's annual meeting.

Adjusting for last December's acquisition of Route Monkey, like-for-like orders have increased by 27 per cent in the first five months of the new financial year, buoyed by an initial four-year contract with Scottish Power to supply fleet tracking and driver behaviour solutions for 1,608 vehicles, and an initial contract with German insurer Allianz for 5,000 devices.

And this strong order intake has boosted the number of telematics units reporting to the company's servers by 12 per cent to 169,000 since the March year-end. This reflects a 7,000 increase in fleet telematics units used by Trakm8's 2,300 commercial customers, a part of the business that accounts for 66,000 units, and an 11,000 increase in insurance telematics devices to take the total there to 103,000. Around half the additions to the fleet business came from Trakm8's acquisition of Roadsense last month, so the current run rate is actually around 4,200 units for the full year.

There were more additions to the fleet side of the business than analyst Lorne Daniel at brokerage finnCap had predicted, but fewer insurance units. That's actually positive as fleet business is higher margin, albeit new orders incur higher upfront costs and are often sold on a discount (with initial monthly discounted rates or free periods) before building up higher monthly recurring revenue. By contrast, insurance orders are lumpy by their nature, and produce little in the way of recurring revenue, but bring immediate revenue and profits to be booked.

The point being that having incurred the hardware and installation costs on the raft of new orders won in the first five months of this year, one would expect Trakm8's margins in the second half to reflect the build of recurring monthly revenues. I would point out that there is a delay between orders being received and revenue being booked on full deployment of the telematics with customers' fleets, so there is a heavy second-half weighting to the numbers especially as units build over the course of the year. This was the case last year, too. As a result, first-half profit is likely to be less than in the same period last year when Trakm8 reported adjusted pre-tax profit of £1.45m, but with orders already booked then expect the profits from these sales to be reflected in a very strong second half.



Impact on forecasts

In terms of forecasts, the fall in sterling against the euro and US dollar since the EU referendum has had an impact, adding £500,000, or around 3 per cent to Trakm8's cost of sales of £17m for the current financial year to the end of March 2017. The company sources electrical components from global manufacturers, mostly in the Far East, and is unable to pass this added cost onto clients given the competitive nature of the industry. The flip-side is that if sterling continues to recover its losses on much better than expected economic data, then there is scope for this cost pressure to ease.

Mr Daniel is sensibly taking the view that the full £500,000 extra cost will be incurred and has reduced his gross profit forecast from £17.1m to £16.6m on revenue estimates of £34m, albeit increasing overseas sales would partially mitigate component cost pressure, something that Trakm8's management is optimistic of achieving. But ignoring that possibility, there is an identical cut to both finnCap's operating profit and pre-tax profit estimates of £6.4m.

Still, if Trakm8 delivers full-year pre-tax profit of £5.9m, up from £3.8m in the prior year, that equates to a 25 per cent rise in full-year EPS to 15.7p, and means the shares are only being rated on 13 times current-year earnings estimates. That's hardly a punchy valuation for a tech company that more than doubled earnings last year, and continues to post solid underlying growth.

True, embedded in finnCap's forecasts is a second-half profit of at least £4.45m. That's three times higher than the first-half outcome and more than 50 per cent higher than the £2.35m reported in the second half to the end of March 2016. Given this hefty bias to the numbers, it's important that the company maintains a healthy run rate of new orders as has been the case in the financial year to date. It's reassuring to note that guidance from Trakm8's management team is that there has been "no impact on customer confidence in terms of our sales activity and order pipeline" following the EU referendum.

Moreover, the company continues to build its recurring revenues on its installed base of customers, a highly profitable part of the business. In fact, I understand from analysts that if telematics companies stopped selling and relied on their installed base, then their gross margins would be approaching around 90 per cent given the minimal costs incurred in servicing the needs of these clients.



Valuation

Trakm8's shares had a volatile ride yesterday, initially falling from the 225p level at which I last recommended buying ('Business as usual', 13 Jul 2016) to test the key 180p support that has held all this year, before rallying strongly back to around opening price of 215p by the close.

True, a higher second-half weighting to profits adds risk, but equally if the company achieves the revised forecasts - and remember they have only been revised down due to sterling weakness rather than a shortfall in orders - then a forward PE ratio little over half forecast earnings growth is an attractive rating to me. There is a small dividend yield of 1 per cent, too.

So, having initiated coverage at 92p just over 18 months ago ('Zoning in on a profitable price move', 16 Feb 2015), I feel comfortable maintaining my buy recommendation ahead of the next trading update in late November when the company reports its half-year numbers. Buy.

[runwaypaul] 08/9/2016 12:33

added a few gla

[knowbodyyouno] 08/9/2016 12:33

Agreed blondeamon.

My eyes are also on the potential development of the Allianz deal "an initial 5,000 devices" - for a company that big, and a market the size of china's, it's almost like flicking a penny into a huge pond; but if (and obviously, it's a big 'if')it takes off, the potential is massive.

[blondeamon] 08/9/2016 12:19

TRAKM8 tipped by Simon Thompson in IC just now.

Anyone can paste part or whole article as my sub expired?

[blondeamon] 08/9/2016 10:56

DLG already has 92,000 devices with us. Marmalade must have another 9-10k and Allianz just booked the first 5,000 from a long line of orders that are expected there. Manufacturing in China for these is also planned so lower costs and rise of International Sales at the same time will be a huge benefit. But probably not this financial year for that.

Income per device is around the 10£ mark according to FinnCapp so 169,000 devices * 10 = 1,690,000 per month or 20.28m£ a year just from recurring revenues.

Fleet has slightly better margins than insurance on these devices.

The real game change this year will be AA and BT Fleet B2B clients, if we book a deal there it will be a huge success.

Also, trakm8Prime our SME tool seems to be selling a lot to small fleets as it's so easy to buy and install the units without strings attached. Minimum duration is 12 months.



Growth will be coming from all angles this year. By March we'll have a very different discussion in this board. Market is insane to ignore the potential here.

[sheep_herder] 08/9/2016 10:44

OK, great. Understood.

I'd still like to hear more about the insurance deals that are ongoing. That's where it might get exciting.

[blondeamon] 08/9/2016 10:21

It has to do with order timing, many companies will do that immediately after the summer as well. Or at least before Christmas where budgets are still generous. They tend to cut costs near the year end so less new expenses tend to kick in in the final quarters of a business year.

Whatever the reason, historically it has always been that H2 was more heavily weighted and Brexit this year didn't help at all, postponing many decision until after the referendum so that's another potential reason.

Just to remind everyone, gross margins went up from 45% to 48% this year. So all these orders that are coming in will more heavily affect the bottom line per unit, it's not just the numbers that grow but how much we make from every device as well.

[sheep_herder] 08/9/2016 10:13

OK, thanks all. I realise there is a period of setup and up front costs for each fleet before profits come online, but I thought that there would be a constant stream of these orders coming in over a year. I didn't expect *every* customer to take up new contracts at the start of the year thereby front loading H1 with costs.

[40toolong] 08/9/2016 09:58

Basically the Sales cycle for fleets is up to 12 months.

They trial a few technologies. Find the one they want (Trakm8 hopefully). Get board sign off. This part of the process can take up to 6 months. They then plan a deployment strategy across the fleet. From order to deployment can take up to 6 months. How do I know. I phoned a friend!

[blondeamon] 08/9/2016 09:57

It's very easy to understand really, without the FX hit we would be above 2m£ pbt for H1 but that took a hit. Massive order intake made things worse.

The day we stop getting new orders we will make massive cash but no growth. This is a blessing, people should realise how these orders make the recurring revenues increase after a few months and realise what this means long-term.

Other companies struggle with 6% growth (QTX for example) and we experience amazing growth rates year after year and new brand names added all the time. The transformation here takes a while to be noticed but think 1-2 years down the line and TRAK could be a major European player at a fraction of the price of its competitors.

@tamzin looking forward to it mate, really appreciated what you do

[tomps2] 08/9/2016 09:37

Yes as Bondeamon says, video of yesterday's Capital Market's Day presentation to go live in the next few days, editing now. Will post a link here when complete, or tweet @tamzinpiworld

It's a comprehensive overview of where things are at (although long - over 1 hour!)

The presentation begins with John Watkins CEO, then James Hedges FD talks through the figures. Matt Cowley CTO talks through the scope of TRAK products, then Colin Ferguson, MD Route Monkey introduces us to what RM offers.


SH 721 - H2 weighting? Although there is order growth of 37%, there's a delay between orders received and rev booked - so H2 weighting. There was a H2 weighting last year, too. With new orders, there are unit costs upfront, with the contract becoming more and more profitable the longer the contract. And, this year, the costs up front are higher cos of fx - so £0.5m impact on profit (but perhaps fx may make breaking into export markets easier - although no promises.)

Tamzin

[the_hitman] 08/9/2016 08:43

Traditionally Fleets were renewed in September when the new registrations come into effect.

[sheep_herder] 08/9/2016 08:28

Thanks for the AGM update Graham.

Can anyone answer why TRAK have this H2 weighting? I don't understand it. They're not a cyclical business and they should be growing fleet numbers on an exponential curve for a number of years. Do they only market in H1 and concentrate on installations in H2? There shouldn't be a regular half year lumpiness.

[blondeamon] 08/9/2016 08:02

Last year we had added 24,000 devices on the first 5 months but had 32,000 by September 30 with the interims, same the year before.

So September is traditionally a very strong month and we could potentially see more added by then. The initial cost of all these plus the FX hit might explain the disappointing H1 profit but shouldn't affect full year that on the contrary with +37% orders looks on track to be a great year.

I still stand for my 175,000 number for H1 as Allianz is not installed yet and that's 5000 devices. Could be more on a strong September.

Of course, who knows how the climate will be with Brexit negotiations by then.

[gorilla36] 08/9/2016 07:47

Graham - Thanks for the update on the AGM. Appreciated.

[blondeamon] 08/9/2016 07:46

The video from the AGM, provided by piworld.co.uk, will be available on their website later this week. You can watch it all live.

Very few companies are so engaged with their shareholders, hosting and taping such events on AGM day, allowing questions from anyone.

Edit :thanks Graham

[graham1ty] 08/9/2016 07:42

I went to the AGM. I thought it was very impressive. There were about 40-50'present including about ten from the Company. The formal AGM business went through fairly quickly. There was then about 90 mins of presentations and another 30 mins of Q&A. The presentations were led by Watkins obviously, but he introduced two engineers to talk through the whole new camera box thing and show, live on screen its functionality. Very impressive if you want to keep an eagle eye on yr fleet and video them at will. The system for example alerts to major braking events. It can be set up instantly to watch why a van has braked: bad driving, a crash, etc. And instantly means the feed can watch the event within 2 seconds.

The second presentation was from one of the founders of Route Monkey and again equally impressive. Both presentations ran through the functionality etc real time on a screen in front of us.

Overall, on the technical functionality, very impressive. They answer questions openly and frankly and I am always impressed by a Company that makes itself available to anyone, for as long as they want.

I would guess the presentation is online somewhere, with additional answers on profits, cashflow, capitalised development costs etc, many of the things they get attacked on. While the 1H reduced profit is disappointing, IMHO this remains a class act, with some great solutions. For the record I am a holder and bought more at 194p yesterday

[melody9999] 08/9/2016 06:44

did anyone go to the agm and can they offer any insights?

[pj0077] 07/9/2016 23:20

This message board is amazing

"averaging down" vs "topping up" : genius

Also good to get an insight into what "the institutions" are up to

I must re-watch "One Flew Over the Cuckoos Nest" ;)