Investors seem to think there is a very real chance that telematics technology business Trakm8 (TRAK:AIM) will struggle to survive.
Today’s 63.5% share price slump to 23.5p has slashed its market value to sub-£10m, or penny stock levels. That’s a long way from the 375p, £136m business it was three years ago.
Sparking this bombshell reaction are half year results that are dismal even by Trakm8’s patchy standards. Revenue is down 38% to £8.8m and last year’s pre-tax profit of £120,000 (modest to say the least) is now a whopping £2.9m loss.
BIGGEST BLOW
Arguably worst of all is news on the near-term future, where an improved pipeline conversion rate in the second half of last year has ‘turned out to be simply a pipedream’, as one analyst puts it today.
Trakm8 has had to warn that full year revenue is now expected to be 20% to 25% below those of fiscal 2018, when it reported £30.1m.
The market had expected a 9%-odd increase in revenue to £32.9m.
HARDWARE IS HARD
Trakm8 supplies telematics tracking kit, analytics and dashboard cameras for vehicle fleet managers and insurance firms.
Its big problem is trying to extricate itself from low margin hardware to become a pure telematics software-driven business.
Growth will always be a battle in this competitive environment yet IT analysis consultancy Megabuyte believes a good operator ‘should be able to deliver high levels of recurring revenues, decent margins and very strong cash conversation’.
Trakm8 fails on all of these measures badly, and this looks like a business ready for a distressed sale. Megabuyte points to UK-listed peer Quartix (QTX:AIM) as a good example of what can be achieved, a pair of companies Shares has compared and contrasted before.
