There's some good news in the trading update, though I didn't see anything about profits. 13% year-on-year revenue growth includes the effect of exiting from contract manufacturing, with 26% growth in the core "Solutions" business. I think this is quite minor, compared to the good stuff - "Although revenues from existing customer contracts were lower than anticipated,".
Apparently a dividend was paid which was technically illegal. There has to be enough distributable reserves for a distribution. There was enough, in the 2016 interim accounts, but "due to an administrative oversight" the accounts hadn't been filed with Companies House. It looks like it can be sorted out with some legal rigmarole involving a circular, a Deed of Release and a General Meeting. While not filing is a bit lax, it's historic and seems minor and correctable without much cost, though I'm no expert on this kind of thing.
The way I see it, minor negatives don't spoil bigger positives for a stock the way bits of excrement would spoil a bun, but you'd think they did, looking at how the market values the stock. I could be wrong, as nearly all my info is via management.
Vehicle diagnostic tool promises demand boost for telematics supplier
If there was a bright spot in AAs (AA.) painful profit warning and slashed dividend it comes in the shape of Car Genie. This is the self-installed plug-in road vehicle diagnostics box that the road-side recovery business has been testing. You may have seen the ads on TV.
AA reckons Car Genie is capable of predicting a third of breakdowns before they happen. Powering the solution is the fleet telematics network and analytics of AIM-listed Trakm8 (TRAK:AIM). The company saw its share price jump nearly 5% to 89.5p on the same day of AAs update.
Analysts at broker FinnCap have crunched the numbers on the AAs approximate 3.3m members and 1.9m insurance policies, and reckon there could be a £100m future revenue opportunity over the long-term for Trakm8 from this one contract alone."
Last year we had a trading update on 22 February, which was a profit warning. I suspect we won't get an trading update this year if trading is in line with market/management expectations. So excitement will have to come from the future prospects for Car Genie (see previous post) which does look a unique product. Anyone know of competitors? Even if there are, TRAK seem to have the AA sewn up.
I hadn't made the connection with the AA announcement until I saw this research note issued by Finncap on Thursday - possibly the reason for the rise yesterday. They see significant upside for TRAK:
"The AA strategy update has set out an ambitious plan for the business to move into the future; taking it from a company helping when you break down to one actually predicting when you might break down in the first place, flagging game-changing growth drivers in the areas of Connected Car and insurance. The key element enabling this refocused strategy will be its Car Genie product (provided by Trakm8) and it is set to see an extended rollout to tens of thousands of existing clients. We thus see significant upside in Trakm8 forecasts from FY 2019 for additional AA orders."
"The AA has over 3.3m members (and 1.9m insurance policies). A full rollout with the AA alone might represent £100m in revenue over the long term for Trakm8. In the nearer term, the news suggests a big push ahead on Car Genie, which should help underpin our forecasts [for TRAK] for the next financial year (FY 2019E) and beyond. "
If this catches the imagination it could well push the share price back up to 150p and beyond. Finncap have a target price of 180p (but I think they are the house broker)
Noticed this has just bounced off the bottom trend line of the lows in March and October 2017. Heres hoping it can now recover some ground in the next few months.
If the sp does follow another uptrend, I'm hoping it should reach £1.40 - £1.50, which would be very nice!!
As always, DYOR. TT
I agree that the ii share prices are very confusing e.g TITON has shown minus 5p on each of the last four days and yet the share price has not changed during that period. Does not give much confidence.
Yes, trading statement confirmed they are back on trak. 24% growth in core revenues means they are still good value at this level. (p.e. ratio of 12.8 and PEG ratio of 0.43 according to stockopedia). I don't think we'll see 400p again anytime soon, but the price should increase from here as confidence rebuilds. 200p this time next year looks very achievable.
Not sure what to make of the boardroom changes at Trak. James Hedges, the outgoing FD, is the second biggest individual shareholder after John Watkins, the chairman. Was he pushed or did he walk? What will happen to his 6.3% stake?
My biggest concern about Trak is the lack of Institutional investors. Quartix, its smaller but much more highly rated competitor, has three sizeable institutions on its share register - Blackrock (9.9%), Liontrust (5.4%) and Miton (4.7%) - and a chief executive and finance director who together own over 40% of the business. By contrast, Trak's website discloses just one reasonably well known institution on its register - Hargreave Hale (3.0%). If Trak has such potential why has it not attracted the interest of more professional investors as opposed to retail investors?.
In addition, I would be happier if Trak followed Quartix's example and recruited an outside non-exec chairman. The fact that John Watkins, who owns 17.3% of the equity, is executive chairman and Mark Watkins, his son, is chief operating officer is far too cosy. Admittedly, David Bridge, Quartix's FD who owns 5.5% of the company, has announced he is leaving next year but the transition has been flagged up a long time in advance rather than the rather abrupt way that Trak has announced the change of its FD.
Trak may turn out to be a great company but it could do with the appointment of a strong outside chairman not afraid to ask a few pointed questions of Trak's executive team of which the most pressing is why its main quoted competitor (Quartix), which operates in similar markets, is so much more profitable.
"Keeping the faith is sometimes difficult to do, and LSE:TRAK:Trakm8 will have been a frustrating holding for some investors. It's long been an Interactive Investor and City favourite, but has been a source of frustration in recent months.Having ..."
"Is LSE:TRAK:Trakm8 (TRAK) re-asserting growth credentials after a brief but messy period of warnings?Â Does its stock also reflect trend-following on the less-liquid AIM market?This telematics and data supplier (e.g. for lorry fleets) soared from ..."
The boardroom setup at Trak has always looked a bit odd. Instead of a non-executive chairman and a separate chief executive, we have had the company's biggest shareholder, John Watkins, holding the title of executive chairman and his son, Mark Watkins, as chief operating officer. The appointment of Keith Evans as deputy chairman makes some sense. But the fact that it takes place "with immediate effect" at the exact end of the company's financial year, rather than be announced at the time of the company's AGM makes me a tad nervous that everything is not running smoothly under Trak's bonnet. Perhaps the appointment just reflects normal growing pains of a relatively small high tech company. Evans is an ex-PwC partner and has a CV packed with advisory work. Not clear whether he has ever had any chairman's experience. That said he did invest £100,000 in the recent share placing.
Had a chat with someone. The indication was that there needs to be more hands-on management un building the business commerciallyand profitably rather than just the focus on the technology. I guess the geeks can take over the train and forget that the rest of the business has to make money from the technology.
Weak buy at the moment.
Now just what change is implied following the appointment of a non-exec director to the postt of nn-exec Deputy Chairman? It would help if the Exec Chairman could indicate whatj is the signficance of this move.
The management are very much involved in both the company and in the recent capital raising. It gives me some confidence tthat the 'jam tomorrow' forecast wil come to pass. I would have to give thwm a weak buy at least on this basis.
I have put the figures below, but the format is not friendly. You can see them better in the RNS section today in News.
The following Directors participated in the Capital Raising:
I may be being a bit naieve but I can see another side to it. They see the need to borrow a bit in the market. It reduces their debt to a position they are comfortable with the. The sneior management are all to a man buying into the placing at 65p - recently you would have been lucky to have got 61p in the market for a sale. They are effectively coughing up 50% of the total. It could be argued that this process is buying just the amount of time/finance the senior management team believe they need to get the new products to market and plug the gap left by the profit loss from freeing up manufacturing space too soon formerly used for third party products. So the portential take-out form this move is that the management have confidence that their issue is one of timing and this is what they need.
Just another point of view IMHO. DYOR of course but would be interested in the thoughts of others on the BB.
Agree. It all seems a bit nebulous, not on offer to private investors and doesn't pay off all the debt by a long shot so a bit half baked.
The market's not impressed either.
TBH I'm not too bothered as I, fortuitously, top sliced a while back and so my modest holding is all profit anyway.
I'll hold on for further developments in the future. (Hopefully)
"LSE:TRAK:Trakm8 has been one of AIM's star performers. It supplies telematics and data for vehicle fleets, monitoring driver behaviour and tracking stolen cars. From just 4p in 2009 and 10p in 2012, the share price peaked at 409p eleven months ..."
"The AGM trading update has revealed exceptional order growth in H1; 27% YoY organic growth and including acquisitions a remarkable 37% YoY overall growth in the order book, continuing a trend for rapid growth over recent years and leaving the group on track to meet revenue growth forecasts. The frustrating delay between orders received and revenue booked (on full deployment of the telematics with customers fleets) will lead to the traditional H2 weighting. In fact H1 PBT will be lower YoY as unit costs are upfront and become more profitable the longer they are deployed. There has is also an inevitable Brexit impact from the sharp fall in GBP v USD, adding an estimated £0.5m to the component cost of the devices in FY 2017. Management hopes to mitigate the impact, but we are adjusting our CoS and earnings forecasts for the full amount to be prudent. Such factors are outside the companys control and, that aside, this is a good first five months, with a further 18,000 units deployed (a 12% increase); 7,000 in the Fleet business and 11,000 in Insurance, growing to 169,000 now reporting to its servers overall."
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