Trakm8 Holdings PLC 15 December 2006 Embargoed until 7am 15 December 2006 TRAKM8 HOLDINGS PLC ("Trakm8" or "the Group") Interim Results For the 6 Months to 30 September 2006 Trakm8, the leading technology provider, designer and developer of GPRS based hardware and software to the vehicle tracking and security market, is pleased to announce its Interim Results for the six months to 30 September 2006. Highlights • 30% increase in turnover • 49% increase in gross profit • Increase in gross profit percentage from 32.2% to 36.7% • 207% increase in net assets • Completion of acquisition of Interactive Projects Ltd Unaudited Results for the six months to 30 September 2006 Six months Six months ended ended 30 Sept 2006 30 Sept 2005 Unaudited Unaudited £000's £000's Turnover 3,206 2,460 Gross Profit 1,177 792 Gross Profit % 36.7% 32.2% Operating Profit 141 153 Profit on ordinary activities before taxation 131 129 Cash at bank and in hand 257 112 Net Assets 1,445 470 Commenting on the results, Cary Knapton, CEO of Trakm8 said: "The first half of our financial year has been a very successful one for the Company. We have secured our Intellectual property, delivered a profitable set of results and begun the transition to the next phase of our business model. The launch of Trakm8 SWIFT has the potential to revolutionise the smaller fleet management market. I look forward to reporting further progress in due course for Trakm8 SWIFT." Chairman's Statement It is with pleasure that I report the unaudited Trakm8 Holdings PLC interim results for the six months ended 30th September 2006. I am pleased to report that turnover in the period increased 30% to £3.206 million (2005: £2.460 million) generating a profit before tax of £0.13 million (2005: profit £0.13 million). This year the Company has embarked on a strategy to strengthen and grow shareholder value. The strategy commenced with the acquisition of Interactive Projects Limited (IPL) on 26th May 2006, an acquisition designed to secure a significant proportion of the Group's core Intellectual Property Rights ("IPR"); and continued with the recently announced launch of Trakm8 SWIFT (TM). The Group designs and develops GPS (Global Positioning System) based hardware and software for the vehicle telematics market. During the period our hardware sales volumes grew significantly and we continued to supply our products to partners around the globe. In addition the Group recently launched Trakm8 SWIFT (TM); our first ASP (Application Service Provider) based service offering and a major expansion to our product portfolio. The Directors firmly believe that our innovative business model of focusing solely on the primary activity areas within our industry can be successfully evolved to support service offerings and that this will allow us to maintain our differentiation successfully in the market. Trakm8 SWIFT (TM) Trakm8 SWIFT (TM) enjoyed a soft launch late October and initiates a strategy of taking our products direct to market. With an intuitive web-based front end supported by our STREAM server architecture this product is priced competitively. Initial customer feedback has been excellent and we expect this revenue stream to grow in importance for the Group. Acquisition of Interactive Projects Limited On 26th May 2006 the Group completed the acquisition of Interactive Projects Limited (IPL) thereby securing protection for the core intellectual property used by the Group. Due to the existing close working relationship between Trakm8 and IPL no integration issues were expected and indeed none have materialised. I am pleased therefore to note that the integration of the two companies is now complete and the expanded organisation is now working to full effect. In accordance with the Terms of Sale the Group applied for the admission to the Alternative Investment Market (AIM) of the remaining 446,423 Consideration Shares effective from 29th November 2006. Outlook The Trakm8 Group has had a successful past 6 months and the Board believes that the outlook is promising. We consider that our differentiated offerings combined with the launch of Trakm8 SWIFT (TM) offer our clients the functionality and flexibility they require. The roll-out of further services and product solutions remain on track. The launch of Trakm8 SWIFT (TM) has been a major milestone for the Group and the project team are to be congratulated. This project demonstrates that revenue growth, achieving greater profitability and delivering increased shareholder value remain the core tenets of the Group strategy. I would like to thank the Executive team and staff for their continuing hard work, dedication to the Group and the continuing success this is creating. DAWSON BUCK CHAIRMAN Chief Executive Officer's Review Financial Review Turnover for the six months ended 30th September 2006 was £3.206m (2005: £2.460m), an increase of 30%. Gross profit increased to £1.18m (2005: £0.79m). Gross margins improved to 36.7% (2005: 32.2%), a 4.5% improvement. Despite increased administrative expenses of £1.03m (2005: £0.64m) the Group is pleased to announce a profit on ordinary activities before taxation for the period of £0.13 (2005: £0.13). Project costs to enable the delivery of Trakm8 SWIFT (TM) totalled £0.19m. In accordance with our accounting policy these amounts have been capitalised and will be amortised over the life expectancy of the product. Net cash decreased in the period by £0.08m (2005: £0.16m) but this includes £0.19m acquisition costs associated with the purchase of Interactive Projects Limited. Operational Review The Group has seen revenue grow further in this half year. A continued increase in recognition of the business benefits of vehicle tracking technology in general and our innovative products in particular accounts for this growth. These, together with a general increase in both public awareness and acceptance of telematics technologies, give the Group reason for optimism for the future. Organisations are now not just realising the benefits of telematics technology to their operations but increasingly seeking out the most capable and cost effective platforms. The Board strongly believe that our competitive products which combine technical innovation and high capability are well placed to benefit from this increasing market awareness. Trakm8's products continue to be used around the globe. Distributors in the Americas, Asia Pacific and Africa are showing increasing growth. In our core market of the UK, where the Group operates through both distributors and other partnerships, there has been significant growth in the period. In Europe the Co-operation Agreement with Punch Telematix is now starting to bear fruit. In the UK, the Groups relationships with the two major vehicle tracking subsidiaries of FTSE 100 companies have continued to mature. Nevertheless the Group has recognised for some time that this business model needed overhaul. Whilst initially very successful, saving the Group unnecessary set up costs and marketing expenses, continued price pressure has constrained the Group's scope to significantly increase margins. Trakm8's route to market is therefore set to change, commencing with Trakm8 SWIFT (TM), which will see the Group deliver a targeted proposition direct to market for the first time. Although not entirely risk free initial indications are that the proposition is being well received by customers with a growing order book emerging. Whilst Trakm8's hardware sales currently provide the majority of the Group's revenue the Board believes that its higher margin software offerings will account for a significantly increased proportion of future revenues. Spearheaded by Trakm8 SWIFT (TM) and building on enhancements to STREAM (the Group's scaleable software architecture) the Group expects to transition a growing portion of revenues to ASP based solutions delivering higher margins in the coming years. Outlook Building on the launch of Trakm8 SWIFT (TM), the acquisition of IPL and the increased volume of sales the Board took the decision in October to internally restructure the organisation. This will allow the Board to focus more clearly on the strategic opportunities available whilst day-to-day direction now rests with operational management. The board believes that this change will considerably enhance the ability of the Group to strengthen its position globally through in-country SWIFT launches and joint ventures. The Group has continued to carefully observe developments in government legislation and other regulatory initiatives; where road tolling, congestion charging, energy efficiency and Health & Safety responsibility are all rapidly becoming key factors in the expansion of the telematics market. In addition, a heightened UK corporate governance regime is leading to a requirement emerging with business leaders to successfully manage and mitigate in-vehicle employee related risk. The telematics industry is seeing exciting developments and businesses are reaping the benefits of this efficiency driven technology. I am delighted to report that Trakm8 has a strong order book moving into the second half of the financial year and with the addition of Trakm8 SWIFT (TM) remains well placed to capitalise on the opportunities presenting themselves in the market place. The Group looks forward to the immediate future with enthusiasm and I am confident we will continue to successfully deliver our innovative products to the market. CARY KNAPTON CHIEF EXECUTIVE OFFICER (TM) Trade Mark Profit & loss account of Trakm8 Holdings PLC For the six months ended 30 September 2006 Note Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited restated*) £000's £000's £000's TURNOVER Continuing operations 3,205 2,460 5,213 Acquisition 1 - - -------- -------- -------- 3,206 2,460 5,213 Cost of Sales (2,029) (1,668) (3,349) -------- -------- -------- Gross Profit 1,177 792 1,864 Operating Expenses (1,036) (639) (1,645) -------- -------- -------- OPERATING PROFIT Continuing operations 179 153 219 Acquisition (38) - - -------- -------- -------- 141 153 219 Interest receivable 7 0 5 -------- -------- -------- 148 153 224 Interest payable (17) (24) (25) -------- -------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 131 129 199 Taxation 3 (25) (25) (44) -------- -------- -------- PROFIT FOR THE PERIOD 106 104 155 ======== ======== ======== Basic earnings per share(pence) 4 1.0 - 1.4 Diluted earnings per share (pence) 0.9 - 1.4 ======== ======== ======== * The restatement of comparatives applies solely to the charge for share based payments that is required by FRS 20 (see note 2). Balance Sheet of Trakm8 Holdings PLC As at 30 September 2006 As at As at As at 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited restated*) £000's £000's £000's FIXED ASSETS Intangible Assets 875 - - Tangible Assets 471 389 393 --------- -------- -------- 1,346 389 393 CURRENT ASSETS Stocks 472 339 398 Debtors 1,300 1,062 1,071 Cash at bank and in hand 257 112 403 --------- -------- -------- 2,029 1,513 1,872 CREDITORS: Amounts falling due within one year (1,558) (991) (1,027) --------- -------- -------- NET CURRENT ASSETS 471 522 845 --------- -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,817 911 1,238 CREDITORS:Amounts falling due after more than one year (372) (441) (253) --------- -------- -------- NET ASSETS 1,445 470 985 ========= ======== ======== CAPITAL & RESERVES Called up Share Capital 110 101 110 Share Premium Account 435 - 435 Shares to be issued 324 - - Share based payment Reserve 50 - 20 Merger Reserve 510 510 510 Profit & Loss account 16 (141) (90) --------- -------- -------- SHAREHOLDERS' FUNDS 1,445 470 985 ========= ======== ======== * The restatement of comparatives applies solely to the charge for share based payments that is required by FRS 20 (see note 2). Cash flow statement of Trakm8 Holdings PLC For the six months ended 30 September 2006 Note Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £000's £000's £000's Cash flow from operating activities 5 201 (124) (265) Returns on investments and servicing of finance Interest received 7 - 5 Interest paid (17) (24) (25) -------- -------- -------- -------- -------- -------- Net cash (outflow)from returns on investments and servicing of finance (10) (24) (20) Capital expenditure & financial investment Purchase of tangible fixed assets (68) (9) (32) -------- -------- -------- -------- -------- -------- Cash inflow/(outflow) before acquisitions 123 (157) (317) Purchase of IPL (189) - - -------- -------- -------- Net Cash outflow before financing (66) (157) (317) Proceeds from the issue of New Ordinary Shares - - 914 Expenses paid in connection with share issue - - (470) Repayment of Bank Loans (18) (5) (8) -------- -------- -------- (Decrease)/Increase in cash in period (84) (162) 119 ======== ======== ======== Cash flow statement of Trakm8 Holdings PLC For the six months ended 30 September 2006 Continued Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £000's £000's £000's Reconciliation of net cash flow to movement in net debt (Decrease)/Increase in cash in period (84) (162) 119 Cash outflow from loan repayments 18 5 8 -------- -------- -------- (66) (157) 127 Loans and finance leases acquired with subsidiary (193) - - -------- -------- -------- Movement in net debt in the period (259) (157) 127 Opening net funds (212) (339) (339) -------- -------- -------- Closing net funds (471) (496) (212) -------- -------- -------- Notes to the financial information 1. Basis of Preparation This report was approved and authorised for issue by the Directors on 12 December 2006. The interim financial information comprise the unaudited results for the six months to 30 September 2006 and the six months to 30 September 2005; and the audited financial statements for the year to 31 March 2006. The interim financial statements have been prepared on a consistent basis and using the accounting policies set out in the accounts for the year ended 31 March 2006 with the exception of the application of FRS 20 (see note 2). Interactive Projects Limited ("IPL") was acquired on 26 May 2006. The financial statements include the profit & loss results for the four months to 30 September 2006. The financial information contained in this interim statement has not been audited or reviewed by the Group's auditors and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory financial statements for the Company for the year to 31 March 2006, prepared on the basis of the accounting policies set out in those accounts, were reported on by the auditors without qualification or statement under section 237 (2) or (3) of the Companies Act 1985 and have been delivered to the Registrar of Companies. Comparative information for the year ended 31 March 2006 shown in this report has been extracted from those accounts but they have been restated for the impact of FRS 20. 2. Adoption of new accounting policy The adoption of FRS 20 (Share based payments), which is effective for accounting periods beginning on or after 1 January 2006, requires a prior period adjustment to be made. The Group issues share based payments to certain employees. Share based payments are measured at fair value (excluding the effect of non market based vesting conditions) at the date of grant. The fair value determined at the grant date of the share based payments is expensed on a straight line basis for the effect of non market based vesting conditions. Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £000's £000's £000's Profit /(loss) for the financial period under 2005 accounting policies 136 104 175 FRS 20 Share based payments (30) - (20) -------- -------- ------- Profit for the financial period under 2006 accounting policies 106 104 155 ======== ======== ======= There is no impact on the balance sheet at any of the period ends covered by this review. 3. Taxation Taxation charged for the six months to September 2006 is calculated by applying the directors' best estimate of the annual tax rate to the profit for the period. 4. Basic and diluted earnings per share The basic profit per share has been calculated based on the profit on ordinary activities after taxation and the weighted average number of ordinary 1p each in issue for the period of six months to 30 September 2006 of 11,026,000. The earnings per share for the year ended 31 March 2006 has been restated to take account of the adoption of FRS 20. In 2005 the Group did not exist as a quoted entity and hence earnings per share data has not been calculated. 5. Reconciliation of operating profit to net cash flow from operating activities Six months to Six months to Year ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £000's £000's £000's Operating profit 141 153 219 Depreciation 28 7 26 Development Costs capitalised (220) - - Share Options expense 30 - 20 (Increase) in stocks (32) (196) (256) (Increase) in debtors (185) (221) (249) Increase/(decrease) in creditors 439 133 (25) -------- -------- ------- Net cash flow from operating activities 201 (124) (265) ======== ======== ======= 6. Net Debt as at 30 September 2006 At Cash flow IPL Acquisition Other At 1 April 2006 non - cash 30 September Changes 2006 (£000's) (£000's) (£000's) (£000's) (£000's) Cash at bank 402 (145) - - 257 Overdrafts and (164) 61 - - (103) loans 238 (84) - - 154 Debts falling due after 1 yr (253) - (132) 13 (372) ------- ------- ------- ------- ------- Debts falling due within 1 yr (197) 13 (36) (13) (233) Hire purchase - 5 (25) - (20) ------- ------- ------- ------- ------- (212) (66) (193) - (471) ======= ======= ======= ======= ======= 7. Acquisition of Interactive Projects Limited On 26 May 2006 the Company acquired the entire issued share capital of Interactive Projects Limited. The consideration was £100,000 in cash paid to the vendors on 26 May 2006 and 446,423 Ordinary shares were allotted and issued to the vendors on 29 November 2006 at a market price of 72.5 pence per share. The transaction has been accounted for by the acquisition method of accounting as detailed in FRS 6 (Acquistions and Mergers). The following assets and liabilities were acquired at the date of acquisition: Book Value as Fair Value as at May 2006 at May 2006 (unaudited) (unaudited) £000's £000's Intangible Assets 200 600 Tangible Assets 38 38 Stocks 42 42 Debtors 43 43 Bank overdraft (19) (19) Loan & trading balance with Trakm8 (48) - Trade Creditors (47) (47) Other Creditors (24) (24) Finance Leases (25) (25) DTi Loans (168) (168) -------- -------- (8) 440 -------- Goodwill 54 -------- Total Consideration 494 ======== Satisfied by: Cash 100 Costs of acquisition 70 Fair value of shares issued 324 -------- 494 ======== The results of IPL have been consolidated in the Profit & Loss account for the Group for the four months from the date of acquisition to 30th September 2006. 8. Interim Report The report containing the interim financial information is to be sent direct to shareholders. Copies of the report are available to the public from the registered office of Trakm8 Holdings plc. The address of the registered office is Lydden House, Wincombe Business Park, Shaftesbury, Dorset, SP7 9QJ. Contacts: Trakm8 Holdings PLC Lydden House, Wincombe Business Park, Shaftesbury, Dorset SP7 9QJ Tel: +44 (0)1747 858444 Nominated Advisor and Broker Arbuthnot Securities Limited Arbuthnot House, 20 Ropemaker Street, London, EC2Y 9AR Tel: +44 (0)20 7012 2000 Accountants Baker Tilly 1 Georges Square, Bath Street, Bristol, BS1 6BP Tel: +44 (0)117 945 2000 Financial Public Relations Tavistock Communications 131 Finsbury Pavement, London, EC2A 1NT Tel: +44 (0)20 7920 3150 This information is provided by RNS The company news service from the London Stock Exchange