Trakm8 Holdings PLC
Annual Report 2021

Plain-text annual report

2021 Annual report and accounts 2021 Trakm8 Holdings PLC Company Number 05452547 1 Trakm8 Holdings PLC Through innovative products, Trakm8 collects billions of miles worth of data annually. Trakm8 analyses data and provides actionable insights to customers so that they improve efficiency and reduce risk. STRATEGIC REPORT Highlights At a Glance Executive Chairman’s Statement Our Strategy Finance Director’s Report Key Performance Indicators Risk Management Framework Principle Risks and Uncertainties GOVERNANCE REPORT Board of Directors DIRECTORS’ REPORT Directors’ Report FINANCIAL STATEMENTS Independent Auditors’ Report to the members of Trakm8 Holdings Plc Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Financial Position Consolidated Statement of Cash-Flows Notes to the Consolidated Financial Statements Parent Company Statement of Financial Position Parent Company Statement of Changes in Equity Notes to the Parent Company Financial Statements Officers and Advisors Visit us online at trakm8.com 3 4 6 9 11 14 16 18 21 25 31 38 39 40 41 42 80 81 82 89 Company Number 05452547 2 Trakm8 Holdings PLC Strategic Report OVERVIEW Financial Revenue £16.0m FY-2020: £19.6m Loss before tax £1.9m FY-2020: £1.7m Adjusted loss before tax £0.3m FY-2020: £0.2m Net cash generated from operations £4.7m FY-2020: £4.1m Adjusted basic earnings per share 0.07p FY-2020: 0.28p Basic loss per share 2.47p FY-2020: 2.19p Operational 3 periods of lockdown impacted revenues significantly by an estimated £4m. Strong continued reduction in direct and indirect costs. 4% increase to over 254,000 connected units in operation (FY-2020: 245,000).     New contract wins with four new Insurance companies.   A second significant European road side assistance company launched in volume during the year.  R&D spend down 28%, however still £2.9m invested.   Renewed Banking facilities for 2 years through to 31 October 2023, including delayed capital Successfully navigated a large number of supply chain challenges. Contract awards with the Parts Alliance and a major UK retailer. repayments.  Recurring revenues continue to be significant although slightly down from £9.8m to £9.4m. Outlook  Revenues in the current financial year from insurance clients increasing following the resumption of driving tests with recent device shipments 16% ahead of last year resulting in revenues to end of May being 28% ahead of last year. However the recovery from lockdown is slower than the corresponding period last year. Fleet sales showing good progress with revenues in the current financial year to end of May 24% ahead of last year.   Group revenues in current financial year to end of May 26% ahead of last year.  Assuming no further lockdowns or unmanageable supply chain issues the Company expects to return to pre Covid-19 revenues and deliver a profit. Company Number 05452547 3 Trakm8 Holdings PLC Strategic Report (Continued) AT A GLANCE Connected Business Trakm8 is a UK-based data analytics company that develops its own intellectual property to drive a greener, safer, connected tomorrow. As leaders in the fleet management, insurance and automotive sectors, we enable businesses to enhance their operations through a wide-range of telematics, camera and optimisation solutions. Collecting data through intellectual property (‘IP’)-owned hardware, Trakm8 fine-tunes algorithms and creates solutions that assist private drivers and commercial fleets with the reduction of risk, fuel consumption and insurance premiums, while improving productivity, safety and compliance. As a fully integrated business designing, manufacturing and supporting our own solutions we provide the best customer service possible by not having to rely on third parties (apart from the cellular network). Pioneering solutions The Group’s product portfolio includes a range of telematics devices, from self-install dongles to 4G integrated telematics cameras. We currently have a quarter of a million devices in operation. Number of connected units 254,000 (FY-2020: 245,000) Fleet Management & Optimisation Fleet Management Trakm8 has market leading software solutions for the entire fleet management activities built out in the Insight platform. A combination of telematics, cameras, tachograph data retrieval, Electronic Proof of Delivery (EPOD) and route optimisation and scheduling software empowers businesses to make informed decisions about fleet operations - and to tackle a diverse range of obstacles. Benefits to fleets include the introduction of safer driving practices, reductions in fuel, obtaining lower insurance premiums, having a smaller carbon footprint and automating administrative tasks. Advanced algorithms are deployed to measure risk and efficiency driving behaviours, feeding back to the driver on apps and in cab displays. Advanced Driver Assistance Systems feature on the cameras to warn the driver, reducing the cost of accidents. Optimisation Through the development and application of pioneering algorithms, we are able to improve the operational efficiency and productivity of our customers, and for our last mile delivery customers deliver a solution that improves their customer experience by combining with our EPOD solution and customer communications product. Our optimisation algorithms can be administered to a number of sectors including transport and logistics, energy management, mobility and electric vehicles (EVs). Trakm8 has a fully integrated optimisation solution built into the core Insight platform and provides customer specific bespoke solutions when this is required. Revenue £9.5m (FY-2020: £12.0m) of which £6.5m is recurring revenue (FY-2020: £6.8m) Number of connected units 70,000 (FY-2020: 77,000) Company Number 05452547 4 Trakm8 Holdings PLC Strategic Report (Continued) AT A GLANCE (CONTINUED) Insurance & Automotive Insurance Insurers and brokers use our telematics hardware and data to better calculate risk among policyholders. Our self-install and fitted to vehicle devices monitor high-risk driving styles and enable businesses to calculate relative premiums based on real-world driving data. In addition, our leading algorithms allow insurance companies to speed up and better control the First Notification of Loss (FNOL) claims process. Our end to end Broker package allows Brokers to manage the full telematics policy journey. Automotive Our automotive team works with businesses to supply aftermarket connected vehicle technologies to its end users to predict and report vehicles faults. Automotive solutions include the remote identification of vehicle sensor and fault data, breakdown assistance apps, and reminders for MOT dates, servicing and tax renewals. Specialist applications include electric vehicle system monitoring and tailored solutions to the vehicle leasing companies to reduce costs in the management of service, repair and maintenance outcomes. Revenue £6.4m (FY-2020: £7.5m) of which £2.9m is recurring revenue (FY-2020: £2.9m) Number of connected units 184,000 (FY-2020: 168,000) Clients The Group has built client relationships with large corporates, SMEs, down to sole traders either directly or via partners who provide intermediary marketing support. These relationships often enable us to cross-sell solutions and facilitate a high rate of contract renewals and extensions. Company Number 05452547 5 Trakm8 Holdings PLC Strategic Report (Continued) EXECUTIVE CHAIRMAN’S STATEMENT FY 2021 was a year like no other in our memories. The impact of Covid-19 on our personal and business lives has been huge. Trakm8 has been affected like so many others from its exposure to the motor insurance industry; almost 6 months of no driving tests and higher levels of vehicles registered off the road (SORN) resulted in a much reduced pool of drivers buying new policies. However the high level of recurring revenue (over 50% in FY-2021) mitigated the impact of Covid-19 on the financial performance of the Group. The first quarter of the year saw a significant reduction in Fleet connections with high levels of attrition from small customers and reductions in fleet size from some larger customers. Thereafter, the level of Fleet connections stabilised with new sales matching a return to a more normal level of losses from the existing base. The problems with the supply chain of electronic components have been widely reported. The major IT suppliers had first grab of chip manufacturing capacity and the car companies have had a battle to get their demand met. As a result we, too, have had to fight our corner. The benefit of a vertically integrated business is that our engineers and purchasing teams can solve these challenges quickly. As a result, the year’s revenues were not impacted by these issues. The revenues of the business fell by 18% but the Group, with lower direct and indirect costs posted a broadly similar adjusted loss before tax of £0.3m (FY-2020: £0.2m). Connections grew by 4% to 254,000. The total number of fleet management connections decreased by 9% over the year to 70,000 (FY-2020: 77,000). Telematics for insurance/automotive connections increased by 10%. At the year-end we had 184,000 insurance/automotive connections (FY-2020: 168,000). Recurring service revenues reduced by 3.8% to £9.4m (FY-2020: £9.8m). It was pleasing to maintain the strong cash generation of the business with a cash flow from operations of £4.7m (FY-2020: £4.1m). This resulted in a free cash flow of £2.1m (FY-2020: £0.9m) and net debt reduced by £0.7m at £4.9m (pre-IFRS 16). The Group had £2.4m cash on hand and an undrawn overdraft facility of £0.5m. It was satisfying to see the vigorous actions taken reduced the inventory in the business by £0.6m. The Company also benefitted from £1.8m of HMRC deferred payments on VAT/PAYE/NI, which is scheduled for repayment over the next two financial years almost equally. A broadly similar adjusted loss to the previous year on revenues 18% lower was achieved through the Group’s continued focus on improving efficiency of our operations and engineering activities. Significant reductions in direct and indirect costs were delivered during the year. The Company benefitted from the Job Retention Support Scheme with £0.9m in cash received from the government. The investment in engineering resources, whilst some £1.2m less (£0.8m less if the cost of engineering resources on furlough are included) than the previous year, has continued to deliver market-leading software and hardware solutions. Trakm8’s Insight platform provides superb customer experience and data, enabling vehicle operators to make significant improvements to operational efficiencies and to reduce risk. Renewed Banking facilities were agreed with HSBC for over two years. The new agreements comprise a Term Loan of £5.3m and a £0.5m overdraft facility. Capital repayments commence in September 2021, with appropriate ‘carve out’ in covenants to cover the Covid-19 impacted financial year. These facilities are in place until October 2023. In addition, the capital repayment holiday of our loan with Maven (£1.4m outstanding) has been extended, such that repayments will now re-commence in September 2021. Interest on the loans continues to be paid monthly. Company Number 05452547 6 Trakm8 Holdings PLC Strategic Report (Continued) EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED) Research and development (‘R&D’) Trakm8 has maintained a significant level of investment in R&D for another year although below the level of the previous year. The Board believes that this level of investment is necessary to retain a portfolio of market- leading technology. Trakm8 continues to focus on owning the intellectual property (‘IP’) we use in our solutions, and we see this as one of our key competitive advantages. Telematics systems are complex; but because we own all the elements that encompass a solution (with the exception of the mobile networks) we have the ability to understand and resolve problems more easily than our competitors. The R&D investment has concentrated on the development of self-fit devices, additional improvements to camera solutions, development of the feature set in Insight, and further development of our Insurance Broker platform. As identified in previous years, the requirement to do more for less cost remains a key strategy as this widens the opportunity to expand the rate of growth as the return on their investment for our customers improves. Trakm8 was pleased to be granted another patent in the year, bringing the total number of patents to four that Trakm8 holds to protect its market leading IP in its software and hardware solutions. Governance The Group has adopted the Quoted Companies Alliance’s (QCA) Corporate Governance Code for small and mid-size quoted companies, which the Board considers the most appropriate for the size and structure of the Group. More information can be found in the Governance Report section of this report and our website. Please see https://www.trakm8.com/investor-relations/corporate-governance statement. for our full compliance Dividend The Group does not propose to recommend a dividend for the year at the forthcoming AGM. However, the Board will continue to review its dividend policy in light of future results and investment requirements. People The number of people Trakm8 employs has reduced further during FY-2021 with reductions across the business. In total our staff numbers have reduced by 10% over the year. Working successfully in the Covid-19 remote working world has been a credit to our colleagues. We have an exceptional team and I would like to thank everyone for their hard work, dedication and contribution to the ongoing success of the business. Company Number 05452547 7 Trakm8 Holdings PLC Strategic Report (Continued) EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED) Outlook We start the new financial year assuming that the worst of the impact of Covid-19 is behind us. With April still in lockdown our Insurance deliveries continued to be 55% lower than the peak of September/October 2020, however May and June have started a growth phase, but at a slower rate than the corresponding period last year. Currently Insurance devices supplied amount to 16% more than the corresponding period last year. Fleet deliveries have been reasonably good with new unit shipments 116% greater than the corresponding period last year. More importantly the attrition during the period has been more normal. April and May revenues were 26% higher than the corresponding period of the previous year. We expect that this year will benefit from improved direct and indirect costs as a result of actions taken last year. We do not envisage utilising the Job Retention Scheme as much this year. Based on no more lockdowns or unsurmountable supply chains challenges we expect the revenues to return to pre-Covid-19 levels and as a result return the group to profitability. John Watkins EXECUTIVE CHAIRMAN 28 June 2021 Company Number 05452547 8 Trakm8 Holdings PLC Strategic Report (Continued) OUR STRATEGY OUR VISION Driving our greener, safer, connected tomorrow. OUR MISSION Trakm8 is an innovative and diverse UK-based technology company, focused on fleet management, insurance and automotive telematics, and optimisation. Trakm8 strives to proactively provide actionable insights which reduce risk and improve efficiency for its customers. From a firm foundation of integrity and family values, Trakm8 encourages and develops its talented people to create world-leading solutions that are ethically sourced, proudly manufactured, and professionally sold. By upholding these ideals, Trakm8 aims to deliver growth in long-term value to shareholders. OUR STRATEGY 1) Increasing our market share The Group will continue to expand the number of connections in operation, with a particular focus on expanding outside of the UK. Progress in 2021 The total number of units in operation increased by 4% in FY-2021. Covid-19 in the first quarter of the year impacted attrition significantly and reduced the Fleet installed base by 9%. Despite almost 6 months of lockdown during the year the increased number of Insurance customers net increased our installed devices and resulted in a 10% increase in connections. The launch of the Automotive connected car solution into Holland has started successfully. Trakm8 invested in the sales teams with the recently appointed Group Sales and Marketing Director. Improved training and marketing has built a significantly improved sales engine. Focus for 2022 We aim to grow the number of installed devices and connections with increased marketing spend, improved lead generation engine and the improved functionality of our solutions. We will continue to seek international distribution partners to expand our non-UK revenues. We expect that our success in winning new insurance clients will lead to higher market share and higher levels of installed devices. This should lead to more connections and higher levels of recurring revenues. We aim to continue to widen the insurance telematics market with leading new commercial propositions. Company Number 05452547 9 Trakm8 Holdings PLC Strategic Report (Continued) OUR STRATEGY (CONTINUED) 2) Delivering a cutting-edge solutions portfolio We plan to maintain the level of investment in research and development to maintain our market-leading solution portfolio and to meet the demands of our customers. Progress in 2021 The Group focused on expanding and improving the range of devices, including an improved camera and an expanded line of self-fit devices. The Insight Optimisation solution has been expanded to meet the requirements of food retailers and as a result for all our customers. Improved algorithms for crash detection, driver scoring and ADAS continued to be developed. Focus for 2022 We will maintain our expenditure in R&D this year by being more focused on our core areas of expertise. We will continue developing products and solutions to meet the demands of our customers and market trends. We expect during the year to improve our fleet solutions particularly in the HGV space, the integrated optimisation package to include customer communications and ease of on-boarding, and an ongoing development of our automotive capability particularly in EV. 3) Streamlining our internal operations The Group will continue to focus on improving operational efficiencies and its cost as a percentage of revenues. Progress in 2021 The Group identified another £0.8m of annualised operational cost savings in both direct and indirect costs. Focus in 2022 We will continue to drive out costs through better utilisation of hosting and technology, reduced device costs and reduced communication/hosting costs. We will also invest in internal systems to improve the operational efficiency of some of our internal support activities. Company Number 05452547 10 Trakm8 Holdings PLC Strategic Report (Continued) FINANCE DIRECTOR’S REPORT Group Revenue (£’000) of which, Recurring Revenue (£’000) Loss before tax (£’000) Adjusted Loss before tax1 (£’000) Basic loss per share (p) Adjusted basic earnings per share (p) 1 Before exceptional costs and share based payments Revenue 2021 15,961 9,379 1,867 342 2.47 0.07 2020 19,550 9,753 1,705 224 2.19 0.28 Change -18% -4% +10% +53% +13% -75% Group revenue decreased by 18% to £16.0m (FY-2020: £19.6m) due to the impact of Covid-19. Fleet revenues decreased by 21% to £9.5m and Insurance and Automotive revenues decreased by 14% to £6.4m. Despite the last lockdown, revenues in H2 were 18% higher than H1 due to recovery in trading after the first lock down. The last lock down did impact trading, but not to the same extent as the first lock down. The growth in H2 was driven by more normal level of new business sales in Fleet and Optimisation, and by the onboarding of new insurance customers and launch of the Automotive connected car solution. Recurring revenue generated from service and maintenance fees decreased by 4% to £9.4m (FY-2020: £9.8m) due to the reduction in Fleet connections in H1 as a result of Covid-19. This resulted in higher than normal levels of attrition from small customers and some reduction in fleets in larger customers. Loss before tax The Group reported a loss before tax of £1.9m (FY-2020: £1.7m). The loss remained broadly similar to the prior year despite the reduction in revenue resulting in £2.2m less Gross Margin. This was achieved by a £2.3m reduction in total administrative costs offset by £0.2m reduction in Grant Income. Total administrative costs reduced by £2.3m of which £0.9m was due to income received under the Coronavirus Job Retention Scheme, £0.9m reduction in one off exceptional integration and restructuring and new product component refit costs, £0.3m due to lower headcount and £0.1m reduction in depreciation and amortisation. Adjusted Loss before tax Despite the £3.6m reduction in revenue, the Group reported an adjusted loss of £0.3m, only £0.1m higher than the prior year. The £2.2m of reduction in Gross margin that resulted from the revenue reduction was offset by £1.3m lower headcount costs, of which £1.0m were reclassified to exceptional costs as they related to the cost of employees whilst on furlough, and £0.3m due to lower headcount. In addition other overheads (excluding exceptional items and depreciation and amortisation) reduced by £0.9m from lower marketing spend and other costs due to Covid-19, grant income was £0.2m lower and depreciation and amortisation was £0.1m lower. Exceptional Costs Exceptional costs total £1.3m (FY-2020: £1.3m) and primarily include £2.1m of one-off costs relating to Covid- 19. These include costs of employees whilst on furlough of £1.6m, costs relating to the cancellation of internal and external projects totaling £0.5m and some costs relating to cancelled marketing events and bad debts. These costs were offset by £0.9m received under the Coronavirus Job Retention Scheme. Additionally £0.2m of restructuring costs relating to initiatives to streamline and rationalise the operations of the business were incurred. Company Number 05452547 11 Trakm8 Holdings PLC Strategic Report (Continued) FINANCE DIRECTOR’S REPORT (CONTINUED) Balance Sheet Non-Current Assets Net Current Assets Non-Current Liabilities Net Assets 2021 £’000 25,640 4,169 9,687 20,122 2020 £’000 25,759 4,437 9,017 21,179 Net Assets decreased by £1.1m to £20.1m (FY-2020: £21.2m) reflecting the loss for the year, after adding back the IFRS2 Share based payments charge. Non-current assets decreased by £0.2m to £25.6m (FY-2020: £25.8m). This is due to £0.5m reduction in right of use assets due to depreciation offset by a £0.2m increase in Intangible assets and £0.2m increase in Property, plant and equipment. Intangible assets increased due to the continued investment in development in both software and hardware with capitalised development costs in the year totaling £2.3m (FY-2020: £3.2m), offset by amortisation of £1.7m (FY-2020: £1.8m). Additionally £0.2m was written off to exceptional costs relating to capitalised software costs, due to Covid-19 resulting in an internal software project being cancelled. Cash Flow Net Cash generated from operations Investing activities Free Cash Flow1 Financing activities Increase in Cash in Year Net Debt2 1 Cash generated from operating activities less cash used in investing activities (excluding cash flows related to acquisitions) 2 Total borrowings less cash and cash equivalents. FY-2021 net debt excludes £1.9m IFRS 16 lease liability. 2021 £’000 4,737 (2,667) 2,070 (1,365) 705 4,887 2020 £’000 4,115 (3,199) 916 (456) 460 5,643 Cash from operating activities improved by £0.6m during this year to £4.7m (FY-2020: £4.1m), which included R&D tax credit cash receipts of £0.9m (FY-2020: £1.0m). The R&D tax credit cash receipt reflects the Group’s investment in development. The operational cash flow improvement is due to £0.6m improvement year on year from improved working capital management. This improvement in working capital includes £1.8m of HMRC deferred payments for VAT, PAYE & NI. The Group has a Time to Pay agreement with HMRC to repay this almost equally over the next two financial years. Free cash inflow of £2.1m (FY-2020: £0.9m) is due to the Net Cash generated from operating activities as detailed above offset by cash outflows from investing activities which decreased by £0.5m to £2.7m (FY-2020: £3.2m). Financing activities was an outflow of £1.4m (FY-2020: £0.5m). The increased cash outflow is due to the previous year including the receipt of the new £1.5m growth capital loan from MEIF WM Debt LP, and lower loan capital repayments in the current year due to deferment of capital repayments from 30 June 2020. The current year also includes the refinance of the HSBC facilities that resulted in a new £5.3m term loan repaying £4.5m outstanding under the old HSBC credit facility and £0.7m under the old term loan. Company Number 05452547 12 Trakm8 Holdings PLC Strategic Report (Continued) Net Debt Net debt excluding IFRS 16 lease liability of £1.9m (FY-2020 £2.3m) reduced by £0.7m to £4.9m (FY-2020: £5.6m). Cash balances total £2.4m (FY-2020: £1.7m) and total borrowings including IFRS16 lease liability of £1.9m totals £9.1m (FY-2020: £9.6m). Borrowing comprise £5.3m (FY-2020: £0.9m) term loan with HSBC, £1.4m (FY-2020: £1.5m) term loan with MEIF WM Debt LP, nil (FY-2020: £4.5m) amounts drawn under the old £5m revolving credit facility with HSBC and £2.4m (FY-2020: £2.8m) of obligations under Right-to-use lease liabilities. In addition at the year end the Group has a £0.5m unused overdraft facility with HSBC. Company Number 05452547 13 Trakm8 Holdings PLC Strategic Report (Continued) KEY PERFORMANCE INDICATORS Achieving our objectives The Board monitors the following key performance indicators to ensure the objective of the Group are being achieved. Solutions Revenue £16.0m: 2021 £19.6m: 2020 £19.1m: 2019 Recurring Service Revenue £9.4m: 2021 £9.8m: 2020 £10.1m: 2019 Connected units - Insurance/Automotive 184,000: 2021 168,000: 2020 167,000: 2019 Connected units – Fleet Management 70,000: 2021 77,000: 2020 76,000: 2019 Performance in 2021 This refers to the amount of telematics devices reporting in operation from our insurance & automotive customers. Connected Units in this market increased by 10% due to growth from newly launched customers. Focus for 2022 Continue to expand the number of Insurance clients with focus on the Broker space and to deliver growth on the back of a return to driving tests and increased pay as you drive insurance. Benefit from the expansion of the connected car services. Performance in 2021 This refers to the amount of telematics devices in operation from our fleet customers. The total number of units from our Fleet business reduced by 9% due to the high attrition in quarter 1 due to the first Covid-19 lockdown. Focus for 2022 Maximise the improved sales and marketing engine to grow fleet new business sales. Use the further developed Insight solution for fleet, optimisation and cameras to promote greater efficiency and reduced risk for our clients. Performance in 2021 If it were not for Covid-19 the Group would have continued to grow as an estimated £4m was lost in revenues. Good growth in Insurance clients and the start of Automotive connected car sales in Holland were the highlights. Focus for 2022 Maximise the improved sales and marketing engine to grow fleet new business sales. Use the further developed Insight solution for fleet, optimisation and cameras to promote greater efficiency and reduced risk for our clients. Continue to expand the number of Insurance clients with focus on the Broker space and to deliver growth on the back of a return to driving tests and increased pay as you drive insurance. Benefit from the expansion of the connected car services. Performance in 2021 Total recurring revenues earned during the year reduced by 4% to £9.4m due to the reduction in connections during the year from our fleet customers due to high attrition in the 1st quarter, which were not offset by growth from newly launched Insurance customers. Focus for 2022 The growth of insurance connections with new customers that will have lower attrition in their first year should positively impact the level of recurring revenues. Despite the market trend for richer data for lower costs, continued growth will be achieved by increasing the number of devices in operation and driving higher service fees either from our integrated cameras or by increasing our data analytics services. Company Number 05452547 14 Trakm8 Holdings PLC Strategic Report (Continued) KEY PERFORMANCE INDICATORS (CONTINUED) Adjusted profit/ loss before tax Gross Margin £0.3m Loss: 2021 £0.2m Loss: 2020 £1.5m Loss: 2019 58.4%: 2021 59.1%: 2020 53.6%: 2019 Performance in 2021 Adjusted Loss before Tax (before exceptional costs and share based payments) was only £0.1m higher than the prior year despite the £3.6m reduction in revenue. The £2.2m reduction in gross margin resulting from the revenue decline was offset by £1.3m lower headcount costs (£1.0m being reclassed to exceptional costs as they related to the costs of employees whilst on furlough), £0.9m reduction in other overheads (excluding exceptional costs and depreciation and amortisation), £0.2m lower grant income and £0.1m lower depreciation and amortisation. Focus for 2022 The Group plans to return to profitability due to a return to pre Covid-19 levels of revenue combined with the lower cost base as a result of the significant cost savings realised over the last few years. Net cash generated from Operating Activities £4.7m: 2021 £4.1m:2020 (£1.8m): 2019 Performance in 2021 Cash generation from operating activities improved on the prior year due to improved working capital management. Performance in 2021 Gross margin percentage slightly reduced to 58%. This small reduction was due to the change in revenue mix. However direct costs significantly reduced from lower hardware costs and improved communication costs. Focus for 2022 Strategy is to maintain our gross margin percentage by continuing to drive growth in our recurring service revenues through enhanced data analytic services and optimisation benefits. We expect to continue to deliver ongoing direct cost reductions. Focus for 2022 Maintain similar levels of cash generation from Operating Activities, having repaid HRMC in line with the time to pay agreement reached. Company Number 05452547 15 Trakm8 Holdings PLC Strategic Report (Continued) RISK MANAGEMENT FRAMEWORK Our risk management process is designed to improve the likelihood of delivering our business objectives, to protect the interests of our key stakeholders, to enhance the quality of our decision making, and to assist in the safeguarding of our assets. This includes people, finances, property and our reputation. The Board takes overall responsibility for risk management, evaluating our exposure to individual strategic risks, overseeing our risk governance structure and internal control framework. Strategic decisions are evaluated against our tolerance levels to the risks identified and the Board continues to monitor these trends in order to implement mitigation activities in line with our long-term strategy. Approach to Risk Management Each year the Board carries out a robust assessment of the principal risks facing the Group, including those that would threaten our business model, future performance, solvency or liquidity. The report overleaf summarises these possible risks and how they are being managed or mitigated. The Executive Chairman and the senior management team take responsibility for reviewing the effectiveness of the risk management process and the risk register is subjected to detailed review and discussion. This group identifies all the key risks to the business and ensures our elimination and mitigation processes are robust and up to date to minimise any possible impact. Risk identification is embedded in other processes, including product development, contract approvals and other operational activities. Trakm8’s corporate strategy is designed to optimise our business model and accept risk, with the required controls on an informed basis. To create value for our shareholders, we set varying risk tolerances and associated criteria. We continue to accept risk and manage our risk environment on the following basis: • Strategic – medium to low tolerance for risks arising from poor business decisions or substandard execution of business objectives. • Operational – low to near-zero tolerance for risks arising from business processes including the technical, quality, and project management or organisational risk associated with programmes and products. During the year we enhanced our testing procedures for new product launches following the issues experienced in the previous financial year. • Corporate –zero tolerance for compliance and reputational risks including those related to the law, health, safety and the environment. • Financial – zero tolerance for financial risks including failure to provide adequate liquidity to meet our obligations and manage currency, interest rate and credit risks. Company Number 05452547 16 Trakm8 Holdings PLC Strategic Report (Continued) RISK MANAGEMENT FRAMEWORK (CONTINUED) RISK MANAGEMENT PROCESS Risk management is a key element of the Group’s decision making process as there is a risk element in all areas of its activities and these risks need to be managed appropriately. Alongside the strong governance structure and effective internal controls, the risk management process gives the Board assurance that risks are being appropriately identified and managed. The Risk Management Process is set up in the following way: • An annual business review to set strategies, objectives and agreed initiatives to achieve its goals, taking account of the risk appetite set by the Board. • Day-to-day operations are supported by a clear schedule of authority limits that define processes and procedures for approving material decisions. This ensures that projects are approved at the appropriate level of management, with the largest and most complex projects being approved by the Board. • The Group’s Executive Directors also compile their own risk assessment, ensuring that a top-down approach is undertaken when considering the Group-wide environment. • The Group’s Audit and Risk Committee assists the Board in assessing and monitoring risk management across the Group. The role of the Committee is to ensure the timely identification and robust management of inherent and emerging risks. The Committee reviews the risk register as it develops, to ensure net risk and proposed further actions are together consistent with the risk appetite set by the Board. Company Number 05452547 17 Trakm8 Holdings PLC Strategic Report (Continued) PRINCIPAL RISKS AND UNCERTAINTIES Link to strategic priorities 1 Increasing our market share 2 Delivering cutting edge solutions 3 Streamlining our internal operations Principal Risk Potential Impact Mitigation Significant operational system failure Reputational impact Deterioration in customer relations Our systems are both within the Cloud and within a traditional data centre environment. We provide no single point of failure as there is diversity of datacentres from separate suppliers and replication of data between data centres. 2 Reduction in revenues, profitability and cash generation Daily point-in-time backups are also taken offsite. Insurances are maintained to financially mitigate any risk relating to an event that causes significant interruption at our single site manufacturing facility. Cyber-attack and data security 2 Reputational Impact We have maintained our ISO 27001 accreditation. Deterioration in customer relations Liability claims We continue to make considerable investments in security and systems for both our internal and customer data, including a review by an independent CISO. We operate a secure development lifecycle and undertake regular independent penetration testing of our devices and hosting environments from CREST certified testers. Operating in a fast moving technology industry where we will always be at risk from new products being launched 1, 2 Decelerating sales growth affecting profit We heavily invest in research and development to ensure we are at the forefront of telematics technology. Loss of significant customer or market We are device agnostic and will interface into OEMs and autonomous vehicles as a central data hub. Delay in achieving projected revenues Expansion of number of significant customers reduces the risk of an individual customer loss. OEM fit telematics to all strategy Autonomous cars Product failure We undertake rigorous testing using our in-house testing team, synthetic testing has been enhanced by retrofitting greatly enhanced automated test suites for unit and integration testing, an additional set of test resource focussed on trials of real world test cases, edge cases and specific customer solutions to test the broadest possible functionality has been introduced into the release process. Release retrospectives complement this activity to drive kaizen improvements into our software test & release process. Company Number 05452547 18 Trakm8 Holdings PLC Strategic Report (Continued) PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) Principal Risk Adverse mobile network changes 2 Potential Impact Reputational Impact Deterioration in customer relations Attracting and maintaining high quality employees 1, 2, 3 Reduction in revenues, profitability and cash generation Loss of key personnel Potential business disruption Breakdown of communication and misalignment Mitigation We provide a configuration manager which allows remote upgrade of the installed base and this can be used to address system wide issues as long as basic GPRS communications exist. We rely on mobile phone suppliers to provide a quality of service and investment in suitable reliable infrastructure. The same is true for the GPS network and the Internet. In the process of implementing fully roaming SIM solutions. We provide interesting work within a growing sector where we have significant opportunity and maintaining this is key to employee retention. Companywide program of training and personal development including promotion from within. Knowledge of our bespoke systems is spread across a larger pool of individuals to mitigate the risk of a key individual leaving the business. We are a sponsor on the government highly skilled migrant program. We have adopted more flexible working practices to widen the talent pool. Access to long term and working capital 1, 2 Electronics supply chain materially impacted by Covid-19 1, 2, 3 Ability to deliver business plans We maintain regular discussions with banks and other financial institutions. We regularly review medium term capital requirements. Long lead-times and cost pressure We have strong, long-term relationships with world class distributors and manufacturers to mitigate the supply chain risk. In addition we have relationships with alternative suppliers. Single source suppliers Reduction in revenues, profitability and cash generation As a fully vertically integrated business our design engineers work alongside supply chain to mitigate changes in component availability and lead time. We have recently proved the success of these mitigating factors as we have managed to secure appropriate supplies of components for the foreseeable future and are in the process of designing in alternative components into our core products to reduce this risk. Company Number 05452547 19 Trakm8 Holdings PLC Strategic Report (Continued) PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) Principal Risk Rate of economic recovery post Covid-19 Potential Impact Reduction in revenues, profitability and cash generation 1, 2, 3 Mitigation As an agile business the Executive team is reviewing the situation daily and making continuous adjustments to the operations of the business. We are utilising the various government support schemes to protect the business, alongside a substantial recurring revenue base Trakm8will manage the cash position carefully into the medium term. Established working practices that are flexible and agile can quickly respond to any potential changes in Covid-19 infection rates. By order of the Board Jon Furber COMPANY SECRETARY 28 June 2021 Company Number 05452547 20 Trakm8 Holdings PLC Governance Report BOARD OF DIRECTORS John Watkins Executive Chairman John Watkins has a Master’s Degree in Engineering Science from the University of Oxford. Through his extensive career he has acquired considerable M&A and sales experience. He has been a Director of several Public companies, Managing Director of a wide range of private and subsidiaries/divisions of public companies and Chairman of two very successful private equity companies that exited with significantly better than average IRRs. Keith Evans Senior Independent Non- Executive Deputy Chairman Keith graduated from the University of Cambridge with a degree in Economics. Keith is a former partner for over 25 years at PricewaterhouseCoopers LLP with very extensive experience of commercial and financial roles having worked with companies operating in the financial services, automotive and information technology sectors. Nadeem Raza Non-Executive Director Nadeem Raza joined the Board in January 2019 following the strategic investment by Microlise Group Holdings Limited. As CEO of Microlise, Nadeem has complete responsibility for the operational management and control of all Microlise business activities. During his 20 year career with Microlise, Nadeem has fulfilled various responsibilities and gained experience across all elements of the business, including sales, system integration, marketing, operations and business computing. Penny Searles Non-Executive Director Penny Searles joined as Non-Executive Director in June 2020 and has worked in Financial Services for over 25 years, latterly as a CEO and founder of two successful FinTech Companies: Wunelli Ltd which was purchased by LexisNexis in 2014 and SmartDriverClub purchased by Calamp in 2020. Penny brings her impressive operational experience in both Motor Insurance and Telematics to the Group. Jon Furber Group Finance Director Jon joined Trakm8 as Finance Director to the Group in September 2017. Jon has previously held senior finance roles at technology growth businesses; he was CFO at AppSense and at Vistorm/HP Information Security (UK), and most recently interim CFO at Intrinsic Technology. Jon is a chartered accountant having trained and qualified at KPMG. Matt Cowley Big Data Director One of the founders of Trakm8 along with his brother Tim Cowley, Matt is a highly experienced software Engineering Director with over 25 years’ experience within the Telematics and Telecommunications industry. Awarded an MSc Software Engineering with distinction from University of Oxford in 1998, Matt now leads the in-house Big Data team and is passionate about algorithms, machine learning, computer vision and data science. Company Number 05452547 21 Trakm8 Holdings PLC Governance Report (Continued) BOARD OF DIRECTORS (CONTINUED) Tim Cowley Group Strategy Director Tim Cowley has 30 years’ experience in the Engineering & Technology sector. After graduating with a degree in Electronics Engineering in 1988 from Brunel University, Tim was awarded a prestigious Michael Cobham scholarship, and stayed with the Cobham Group for eleven years. Alongside his brother Matt, he founded Trakm8 in 2002 and is now responsible for the Group Product Strategy and the Advanced Engineering function. Peter Mansfield Group Sales and Marketing Director Peter joined the Board in March 2020 following his appointment as the Group Sales and Marketing Director. Previously Peter has held senior roles in technology and data businesses including CEO of Deko, a fintech business and as Managing Director of the Credit Solutions Division of Callcredit. Peter’s early career was as an officer in the British Army and started his commercial career in financial services. He has a Master’s Degree from Northumbria Business School. Mark Watkins Chief Operating Officer Mark has a Master’s Engineering degree and worked for Ford Motor Co in the group IT team. He has previously held positions in IT and Operations having been Head of Manufacturing Operations at Continental UK for several years. In 2014 he joined Trakm8 Holdings as Managing Director of BOX Telematics following its acquisition and is now responsible for all operational and engineering matters for the Group. Company Number 05452547 22 Trakm8 Holdings PLC Governance Report (Continued) BOARD OF DIRECTORS AND COMMITTEES The Board of Trakm8 Holdings PLC is responsible for the strategic direction of the Group’s businesses. The Board’s specific roles include corporate governance policy and direction; as well as strategy formation and monitoring the achievement of the Group against the business plan. The day-to-day management of the Group is the responsibility of the team of executive Directors and the executive Chairman. The Board meetings of Trakm8 Holdings PLC cover matters required to be covered by the Boards of the Group’s subsidiary entities. The Board has operated Audit and Risk, Remuneration and Nomination Committees throughout the period. These bodies operate under formally delegated duties and responsibilities and seek advice from independent third parties as the need arises. The committees during the year have comprised of the three non-executive Directors and the Executive Chairman. For the financial year ended 31 March 2021 the Directors’ attendance at Board and Committee meetings has been as follows: Type Total Held in period Board Audit Nomination Remuneration 1 12 2 5 John Watkins Keith Evans Matt Cowley Tim Cowley Jon Furber Mark Watkins Nadeem Raza Peter Mansfield Penny Searles1 1 Attended 8 out of 9 Board meetings, 1 out of 1 Audit Committee meetings, 5 out of 5 Remuneration Committee meetings and 0 out of 0 Nomination Committee meetings whilst in office 12 12 12 11 12 11 11 12 8 1 1 - - - - 1 - - 5 5 - - - - 5 - 5 2 2 - - - - 1 - 1 Nominations committee The committee met once during the year and appointed Penny Searles as Non-Executive Director. Audit and Risk Committee The Audit and Risk Committee is responsible for ensuring that the Group’s financial performance is properly monitored, controlled and reported. The Finance Director and other Directors attend as required. The committee and the external auditor have safeguards to avoid a potential compromise of auditor’s objectivity and independence. These include the adoption of a policy that segregates the supply of audit and non-audit services and requires committee approval for the supply of services such as tax services and acquisition related due diligence. The key issues considered by the Audit and Risk Committee included revenue recognition, capitalisation of development costs, valuation of accrued income and impairment review of Goodwill. The Audit and Risk Committee also reviewed in detail financial projections in concluding on its’ Going Concern assertion. Company Number 05452547 23 Trakm8 Holdings PLC Governance Report (Continued) Remuneration committee The Remuneration Committee’s terms of reference include making recommendations on Directors’ compensation packages to ensure that the Group enjoys and retains an appropriate level of motivated resources. The Committee engages with external consultants as and where it is deemed beneficial. The Group has adopted and operates a share dealing code for Directors and employees in accordance with the requirements of the Combined Code. Relations with shareholders The Board values and attaches the utmost importance to the maintenance of good relationships with shareholders. The Executive Chairman and the Finance Director meet investors immediately after publication of the annual and interim results, at the Annual General Meeting and on an ongoing basis as required throughout the year. In addition we provided a number of shareholders update presentations and the intention is to continue this programme during the new financial year. By order of the Board Jon Furber COMPANY SECRETARY 28 June 2021 Company Number 05452547 24 Trakm8 Holdings PLC Directors’ Report DIRECTORS’ REPORT The Directors submit their Directors’ Report and the audited financial statements of the Group for the year ended 31 March 2021. Trakm8 Holdings PLC is a public listed company incorporated and domiciled in England (Company Number 05452547) whose shares are quoted on AIM, a market operated by the London Stock Exchange plc. PRINCIPAL ACTIVITIES The principal activities of the Trakm8 Group are the development, manufacture, marketing and distribution of telematics equipment and services and fleet optimisation solutions. Trakm8 Holdings PLC is the holding company for the Trakm8 Group. FINANCIAL RISK MANAGEMENT The Group manages its key financial risks as follows. Further details can be found in note 28. Liquidity risk The Group’s objective is to maintain a balance between continuity and flexibility of funding through the use of borrowings and financial assets with a range of maturities. It is also the Group’s policy to mitigate the risk of borrowings by maintaining cash reserves. The Group currently has an unused overdraft facility of £0.5m. Currency risk The Group endeavours to minimise its foreign currency exposure by trading in Sterling wherever possible. The two principal foreign currencies used are the US Dollar and the Euro and where possible we endeavour to match inflows and outflows. Interest rate risk The Group regularly monitors the risk of increasing interest rate and the effect this would have on our total interest charges. Currently our bank borrowings are linked to variable interest rates and the Group would move to fixed if it was deemed appropriate to minimise the effects of further interest rate rises. Credit risk The Group’s credit risk is primarily attributable to its trade receivables and the Group attaches considerable importance to the collection and management of trade receivables. The Group minimises its credit risk through the application of appropriate credit limits. RESULTS AND DIVIDENDS The Group results for the year ended 31 March 2021 are shown in the Consolidated Statement of Comprehensive Income on page 38. The Directors do not recommend the payment of a dividend (2020: £nil). Company Number 05452547 25 Trakm8 Holdings PLC Directors’ Report (Continued) RESEARCH AND DEVELOPMENT The Group has continued to invest in research and development to ensure the future success of the business. During the year the Group capitalised development costs of £2.3m, £0.6m was expensed and a further £0.4m was categorised as exceptional costs relating to research and development employees furloughed during the year. Further details about the Group’s approach to R&D can be found in the Strategic Report. GOING CONCERN These financial statements are presented on a going concern basis. The Groups projections for the next 12 months, and downside sensitivity analysis against its projections along with closing cash balances of £2,370,000 and undrawn overdraft facility of £500,000 at 31 March 2021 provide the Directors a reasonable expectation that the Group will have adequate financial resources to continue in operation for the foreseeable future. Detailed considerations by the Directors are detailed in note 4 on page 55. FUTURE DEVELOPMENTS Consideration on the impact of the Covid-19 pandemic and supply chain challenges has been made in the Executive Chairman’s Statement in the Strategic Report. Despite the impact of these issues the Group is still confident of the growth potential in its chosen markets and that we have the solutions and sales teams to deliver on this opportunity. The Group’s Fleet solutions significantly improve customer’s efficiencies so this market driver is as relevant now as ever and therefore we expect this part of the business to return to growth as the impact of the pandemic subsides. Revenues are also expected to increase during the financial year from existing and recently launched insurance customers. The Group will continue to invest in our software solutions, algorithms and devices to ensure that the Group retains the market-leading solutions with the widest and deepest offer in the market today. Further acquisitions will be assessed and only if our strict criteria are met will be progressed. EMPLOYEES The Group’s employment policies are designed to ensure that they meet the statutory, social and market practices where the Group operates. The Group regularly provides employees with information about the progress of the Group, wider economic factors and also matters likely to be of concern to them. The Group recognises the importance of its employees and their training and conducts annual appraisals with each member of staff. The Group is committed to employment policies, which follow best practices and are based on equal opportunities for all employees regardless of sex, race, colour, disability or marital status. The Group gives full and fair consideration to applications for employment for disabled persons, having regard to their particular aptitudes and abilities. If members of staff become disabled the Group will continue their employment either in the same or an alternative position, with appropriate retraining being given if necessary. Company Number 05452547 26 Trakm8 Holdings PLC Directors’ Report (Continued) DIRECTORS The Directors of the company who were in office during the year and up to the date of signing the financial statements were: John Watkins Keith Evans Matt Cowley Tim Cowley Mark Watkins Jon Furber Nadeem Raza Peter Mansfield Penny Searles (appointed 18 June 2020) DIRECTORS AND THEIR INTERESTS At 31 March 2021 the Directors’ interests in the shares of the Company are detailed below: 1p Ordinary shares at 31 March 2021 % of issued Ordinary share capital (50,004,002 Ordinary shares) 1p Ordinary shares at 31 March 2020 % of issued Ordinary share capital (50,004,002 Ordinary shares) John Watkins Keith Evans Matt Cowley Tim Cowley Jon Furber Mark Watkins Nadeem Raza* Peter Mansfield Penny Searles 7,768,768 381,119 1,994,203 2,268,127 596,503 318,310 600,926 - - 15.55% 0.76% 3.99% 4.54% 1.19% 0.64% 1.20% - - 7,768,768 381,119 1,994,203 2,268,127 596,503 318,310 278,622 - - 15.55% 0.76% 3.99% 4.54% 1.19% 0.64% 0.56% - - *Nadeem Raza is the CEO and principle shareholder in Microlise which holds 10,000,000 ordinary shares in the Company. The Directors had no interest in the share capital of the Company’s subsidiary undertakings at 31 March 2021 or on the date on which these financial statements were approved. Company Number 05452547 27 Trakm8 Holdings PLC Directors’ Report (Continued) DIRECTORS’ REMUNERATION The Directors’ remuneration for the year ended 31 March 2021 was: £’000 Salaries & benefits Fees Total remuneration to year ended 31 March 2021 Pension contribution Total aggregate emoluments to year ended 31 March 2021 Total aggregate emoluments to year ended 31 March 2020 John Watkins Keith Evans Matt Cowley Tim Cowley Jon Furber Mark Watkins Nadeem Raza Peter Mansfield Penny Searles Bill Duffy Sean Morris Total 289 36 100 113 145 145 36 160 36 - - 1,060 - - - - - - - - - - - - 289 36 100 113 145 145 36 160 36 - - 1,060 - 1 3 3 14 14 1 4 1 - - 41 289 37 103 116 159 159 37 164 37 - - 1,101 289 37 107 123 179 173 46 9 - 27 183 1,173 Company Number 05452547 28 Trakm8 Holdings PLC Directors’ Report (Continued) DIRECTORS’ SHARE OPTIONS At 31 March 2021 the following options had been granted to the Company's Directors and remain current and unexercised: Option exercise price £0.45 £0.34 £0.34 £0.33 Balance as at 1 April 2020 250,000 125,000 300,000 - Granted during year - - - 100,000 Exercised during year - - - - Expired/ forfeited during year - - - - Balance as at 31 March 2021 250,000 125,000 300,000 100,000 John Watkins Keith Evans Matt Cowley Tim Cowley Sean Morris Mark Watkins Jon Furber Peter Mansfield £0.33 Nadeem Raza Penny Searles £0.33 £0.33 £0.34 £0.34 £0.33 £0.45 £0.34 £0.33 £0.45 £0.34 £0.33 £0.34 £0.58 £0.34 £0.34 £0.33 £0.33 £0.34 £0.34 £0.33 75,000 50,000 - - - 25,000 125,000 25,000 - - - 100,000 125,000 50,000 - - - 100,000 350,000 - 200,000 125,000 250,000 - - - - - 100,000 25,000 125,000 475,000 - - - 100,000 - - - 400,000 25,000 25,000 - - - - - - - - - - - - - - - - - - - - - Expiry date 21/01/2024 04/03/2029 04/03/2029 23/07/2030 27/05/2029 27/05/2029 26/11/2030 21/01/2024 04/03/2029 26/11/2030 21/01/2024 04/03/2029 26/11/2030 - - - - - - - - - 75,000 50,000 25,000 125,000 25,000 100,000 125,000 50,000 100,000 350,000 - 04/03/2029 - - - - - - - - - - - 200,000 125,000 250,000 100,000 25,000 125,000 475,000 100,000 06/04/2024 04/03/2029 04/03/2029 23/07/2030 26/11/2030 04/03/2029 04/03/2029 23/07/2030 400,000 23/07/2030 25,000 23/07/2030 25,000 23/07/2030 All share options were issued at a premium to the mid-market closing share price on the day prior to the issue, except for the options issued on the 22 January 2014 and 6 April 2014 which were issued at the open market price on the day the options were granted. The Group provides qualifying third party indemnity provisions for the Directors which was in place throughout the year and has remained in place since the year end. TREASURY SHARES At 1 April 2020 and 31 March 2021 the Company held 29,000 of its own 1p Ordinary shares representing 0.06% (2020: 0.06%) of the called up share capital. There were no purchases or sales by the Company during the year. Company Number 05452547 29 Trakm8 Holdings PLC Directors’ Report (Continued) STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITORS Each Director who was in office on the date of approval of these financial statements has confirmed, as far as they are aware, that there is no relevant audit information of which the auditors are unaware. Each of the Directors has confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor. STATEMENT OF DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of the profit or loss of the group and parent company for that period. In preparing the financial statements, the directors are required to:   select suitable accounting policies and then apply them consistently; state whether applicable IFRSs as adopted by the European Union have been followed for the group financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the company financial statements, subject to any material departures disclosed and explained in the financial statements;  make judgements and accounting estimates that are reasonable and prudent; and  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business. The directors are also responsible for safeguarding the assets of the group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group and parent company's transactions and disclose with reasonable accuracy at any time the financial position of the group and parent company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. The directors are responsible for the maintenance and integrity of the parent company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. INDEPENDENT AUDITORS A resolution to appoint Cooper Parry Group Limited, as auditors, will be put to the members at the Annual General Meeting. By approval of the Board on 28 June 2021 Jon Furber Company Secretary Company Number 05452547 30 Trakm8 Holdings PLC Independent Auditors Report Independent auditors’ report to the members of Trakm8 Holdings Plc Opinion We have audited the financial statements of Trakm8 Holdings plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 March 2021 which comprise the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of financial position, the consolidated statement of cash flows, the company statement of financial position, the company statement of changes in equity and the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice). In our opinion:     the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2021 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included:   Challenging management on key assumptions included in their forecast scenarios. Considering the potential impact of forecast scenarios on the balance sheet, specifically around trade and other receivables, inventory, intangible assets and right of use assets.  Reviewing management’s disclosures in relation to the potential impact of Coronavirus. Company Number 05452547 31 Trakm8 Holdings PLC Independent Auditors Report The key observations arising with respect to our evaluation included:  Management’s mitigating actions to minimise the impact of Coronavirus are within their control.  There do not appear to be any indicators of material impairment as at the balance sheet date.  Management’s disclosures in relation to the potential impact of Coronavirus are consistent with their forecast scenarios. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Risk of error in revenue recognition for multi-element arrangements Matter The Group enters into contracts where there are multiple deliverables to be provided to the customer. These typically include the provision of hardware, software and services, or software and services. The accounting for these contracts involves a higher degree of judgement, including:  Determining whether the contract contains performance obligations which should be separated for revenue recognition purposes and whether each of those elements should be recognised at a point in time or over time;  Determining the allocation of consideration on a fair value basis between components of multi-element contracts; and  Determining the point at which it is appropriate to recognise revenues where revenues are recognised in advance of billings. Given the above, there is a risk that revenue is not accounted for appropriately. Response We have tested the accounting for multi-element contracts and the associated revenues recognised in the year. Our procedures included:  Review of a sample of contracts with customers to ensure that separate deliverables within contracts have been identified in line with contractual terms. Where separate deliverables have been identified we have checked that the revenue recognition methodology applied appropriately separates out each deliverable; Company Number 05452547 32 Trakm8 Holdings PLC Independent Auditors Report  Testing of the fair values of revenues attributed to different deliverables within the contract by reference to appropriate supporting evidence, including standalone selling prices for different elements of revenue or, where these do not exist, similar objective evidence derived from contract pricing over a number of years; and  Review of contractual terms to check that where revenues are recognised in advance of billings, the Group has an enforceable right to receive consideration in the future. Based on the work performed we found that contracts containing more than one deliverable had been appropriately identified, and revenues had been separately identified and allocated between different deliverables on a reasonable basis. Where revenues had been recognised in advance of billings we found that the Group had an enforceable right to receive consideration in the future. Capitalisation of internally generated intangible assets Matter The Group continues to incur material expenditure on development activities (including software). This expenditure is capitalised when the development project meets the criteria of International Accounting Standard 38 'Intangible Assets' (IAS 38). During the year the Group capitalised £2.3m of development and software expenditure on internally generated intangible assets. The capitalised costs consist of internal labour and external bought in costs. IAS 38 sets out specific criteria that must be met for an asset to be capitalised. These include:  whether it is probable that the expected future economic benefits attributable to the asset will flow to the      Group; that the cost of the asset can be measured reliably; that the technical feasibility of completing the asset can be demonstrated such that it will be available for use or sale; there is an intention to complete the asset and use or sell it; the Group has the ability to use or sell the asset; and the Group has adequate technical, financial and other resources to complete the development and to use or sell the asset. Management apply judgement in determining whether or not these criteria are met and there is therefore a risk that expenditure may be incorrectly capitalised. Response We tested a sample of projects against which costs had been capitalised during the year to validate that the projects met each of the relevant criteria within IAS 38 to support the capitalisation of costs. We also tested a sample of costs capitalised during the year to confirm that the cost of the asset could be reliably measured and had been accurately recorded by agreeing the capitalised costs back to appropriate audit evidence, for example timesheet records, invoices or similar supporting documentation. Based on our work performed we found that management’s assessment of projects against the capitalisation criteria within IAS 38 was reasonable, and that costs capitalised within projects were recorded on an appropriate basis. Goodwill impairment assessment Matter The Group has a material goodwill balance which is required to be tested for impairment on an annual basis in accordance with International Accounting Standard 36 'Impairment of Assets' (IAS 36). Total goodwill at year 33 Company Number 05452547 Trakm8 Holdings PLC Independent Auditors Report end was £10.4m. Goodwill has been tested by reference to its value in use. Valuations of this nature are inherently subjective and involve a high degree of estimation, for example over future cash flows of the group, discount rates applied to those cash flows and terminal growth rates. This gives rise to an increased risk of error in the calculation of value in use and therefore in the overall impairment assessment. Response We have performed audit procedures over management's impairment assessment, including the following procedures:  Testing of the integrity of the cash flow model and the methodology applied;  Assessing key assumptions including future cash flows, discount rates and growth rates, including sensitivity of these assumptions.  Agreeing future cash flows to Board approved budgets and considered the appropriateness of these budgets by reference to historical performance of the Group, including understanding revenue split between recurring and non-recurring, as well as sales orders and pipeline.  Considering 3 year extended forecasts approved by the board.  Assessing the terminal growth rate against long-term GDP growth in the UK and testing the calculation of the discount rate.  Performing sensitivity analysis over key assumptions, in particular testing what level of sensitivity in the assumptions would cause impairment. Based on our audit procedures performed we found the model itself, the methodology, the forecasts and the assumptions used in the calculation were appropriate and we concluded that there was no impairment of goodwill. We also found that the related sensitivity disclosures in the financial statements were appropriate. Going concern and impairment consideration relating to Coronavirus Matter During March 2020, the potential impact of Coronavirus became significant. As a result, management (including the Board and Audit Committee) invested a significant amount of time to fully consider the implications on the Group. Management considered implications for the Group’s going concern assessment, impairment of certain assets and appropriate disclosure in the Annual Report and accounts, by developing forecasts based on various scenarios to model potential impacts. Response We reviewed management’s forecast scenarios including levers available to management to mitigate the impacts. Based on the information available at the time of the directors’ approval of the financial statements and our signing of our audit opinion, we consider the scenarios to be reasonable whilst noting that the impact of Coronavirus on future sales and other inputs is currently difficult to quantify. We challenged management on the key assumptions included in the scenarios and confirmed that management’s mitigating actions are within their control. We considered the potential impact on the balance sheet, specifically around trade and other receivables, inventory, intangible assets and right of use assets and do not consider there to be any indicators of material impairment as at the balance sheet date or subsequently (for disclosure only). We reviewed management’s disclosures in relation to the Coronavirus potential impact and found them to be consistent with the forecast scenarios performed. Company Number 05452547 34 Trakm8 Holdings PLC Independent Auditors Report Our application of materiality We apply the concept of materiality in planning and performing our audit, in determining the nature, timing and extent of our audit procedures, in evaluating the effect of any identified misstatements, and in forming our audit opinion. The materiality for the group financial statements as a whole was set at £160,000. This has been determined with reference to the benchmark of the group’s revenue which we consider to be an appropriate measure for a group of companies such as these. Materiality represents 1% of group revenue. The materiality for the parent company financial statements as a whole was set at £128,000. This has been determined with reference to the benchmark of the parent company’s net assets which we consider to be an appropriate measure for a parent company such as this. Materiality represents 0.9% of the parent company net assets, as a result of us restricting parent company materiality to 80% of the materiality used for the group financial statements. An overview of the scope of our audit We adopted a risk based audit approach. We gained a detailed understanding of the group’s business, the environment it operates in and the risks it faces. The key elements of our audit approach were as follows: Our Group audit scope focused on the Group’s principal trading subsidiaries, Trakm8 Limited and Route Monkey Limited which were subject to a full scope audit. Together with the parent company and its group consolidation, which was also subject to a full scope audit, these entities represent the principal business units of the Group and account for 99% of the Group’s revenue, 99% of the Group’s loss before tax and 100% of the Group’s net assets. In performing our testing we utilised performance materiality of £136,000, equating to 85% of materiality. In order to address the matters described in the Key audit matters section we performed focused audit procedures over these areas, including reference to external market data and publicly available market information in relation to assumptions used. The accounting for all significant components in the group is located in the UK, with all audit work over these components performed by the group audit team. Therefore, there is no requirement to utilise separate component auditors. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other Company Number 05452547 35 Trakm8 Holdings PLC Independent Auditors Report information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:   the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:    adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or  we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 30, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Company Number 05452547 36 Trakm8 Holdings PLC Independent Auditors Report Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: Our assessment focused on key laws and regulations the company has to comply with and areas of the financial statements we assessed as being more susceptible to misstatement. These key laws and regulations included but were not limited to compliance with the Companies Act 2006, International Financial Reporting Standards (IFRSs) as adopted by the European Union, and relevant tax legislation. We are not responsible for preventing irregularities. Our approach to detecting irregularities included, but was not limited to, the following:      obtaining an understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework; obtaining an understanding of the entity’s policies and procedures and how the entity has complied with these, through discussions and sample testing; obtaining an understanding of the entity’s risk assessment process, including the risk of fraud; designing our audit procedures to respond to our risk assessment; and performing audit testing over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Katharine Warrington (Senior Statutory Auditor) For and on behalf of Cooper Parry Group Limited Chartered Accountants and Statutory Auditor One Central Boulevard Blythe Valley Business Park Solihull West Midlands B90 8BG Date: 28 June 2021 Company Number 05452547 37 Trakm8 Holdings PLC Consolidated Statement of Comprehensive Income For The Year Ended 31 March 2021 REVENUE Cost of sales Gross profit Other income Administrative expenses excluding exceptional costs Exceptional administrative costs Total administrative costs OPERATING LOSS Finance income Finance costs LOSS BEFORE TAXATION Income tax LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME Items that may be subsequently reclassified to profit or loss: Exchange differences on translation of foreign operations TOTAL OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT LOSS BEFORE TAXATION Exceptional administrative costs IFRS2 Share based payments charge ADJUSTED LOSS BEFORE TAX LOSS PER ORDINARY SHARE (PENCE) ATTRIBUTABLE TO OWNERS OF THE PARENT Basic Diluted The results relate to continuing operations. Year ended 31 March 2021 £'000 15,961 (6,643) Year ended 31 March 2020 £'000 19,550 (7,991) 9,318 11,559 194 364 (9,585) (1,342) (10,927) (11,926) (1,296) (13,222) (1,415) (1,299) 78 (530) 12 (418) (1,867) 630 (1,705) 612 (1,237) (1,093) (3) (3) (7) (7) (1,240) (1,100) (1,867) 1,342 183 (342) (1,705) 1,296 185 (224) (2.47p) (2.19p) (2.47p) (2.19p) Note 6 7 9 8 10 11 8 13 13 Company Number 05452547 38 Trakm8 Holdings PLC Consolidated Statement of Changes in Equity For The Year Ended 31 March 2021 Note Share capital Share premium Merger reserve Translation reserve Treasury reserve Retained earnings Total equity Balance as at 1 April 2019 500 14,691 1,138 203 (4) 5,566 22,094 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Comprehensive loss Loss for the year Other comprehensive loss Exchange differences on translation of overseas operations - - - - - (1,093) (1,093) - - - (7) - - (7) Total comprehensive income - - - (7) - (1,093) (1,100) Transactions with owners IFRS2 Share-based payments charge - - - - - 185 185 Transactions with owners - - - - - 185 185 Balance as at 1 April 2020 500 14,691 1,138 196 (4) 4,658 21,179 Comprehensive loss Loss for the year Other comprehensive loss Exchange differences on translation of overseas operations - - - - - - - - (1,237) (1,237) (3) - - (3) Total comprehensive loss - - - (3) - (1,237) (1,240) Transactions with owners IFRS2 Share based payments charge Transactions with owners Balance as at 31 March 2021 - - - - - 183 183 - 500 - 14,691 - 1,138 - 193 - (4) 183 3,604 183 20,122 Company Number 05452547 39 Trakm8 Holdings PLC Consolidated Statement of Financial Position As At 31 March 2021 (Continued) ASSETS NON CURRENT ASSETS Intangible assets Property, plant and equipment Right of use assets Amounts receivable under finance leases CURRENT ASSETS Inventories Trade and other receivables Corporation tax receivable Cash and cash equivalents LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Right of use liability Provisions CURRENT ASSETS LESS CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON CURRENT LIABILITIES Trade and other payables Borrowings Right of use liability Provisions Deferred income tax liability NET ASSETS EQUITY Share capital Share premium Merger reserve Translation reserve Treasury reserve Retained earnings Note As at 31 March 2021 £'000 As at 31 March 2020 £'000 14 15 16 18 17 18 20 21 21 22 20 21 21 22 19 23 22,187 891 2,512 50 25,640 1,409 6,679 690 2,370 11,148 21,997 717 3,004 41 25,759 2,043 7,854 863 1,665 12,425 (5,417) (855) (680) (27) (6,979) (6,180) (1,125) (656) (27) (7,988) 4,169 4,437 29,809 30,196 (1,546) (5,815) (1,767) (190) (369) (9,687) (713) (5,675) (2,162) (157) (310) (9,017) 20,122 21,179 500 14,691 1,138 193 (4) 3,604 500 14,691 1,138 196 (4) 4,658 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 20,122 21,179 The loss for the Company for the year determined in accordance with the Companies Act 2006 was £257,000 (2020: loss £236,000) The notes on pages 42 to 79 are an integral part of these consolidated financial statements. These financial statements on pages 38 to 79 were approved by the Board of directors and authorised for issue on 28 June 2021 and are signed on its behalf by: John Watkins - Director Jon Furber - Director Company Number 05452547 40 Trakm8 Holdings PLC Consolidated Statement of Cash Flows For The Year Ended 31 March 2021 Notes Year ended 31 March 2021 Year ended 31 March 2020 NET CASH GENERATED FROM OPERATING ACTIVITIES 25 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment Purchases of software Capitalised development costs £'000 4,737 £'000 4,115 (330) (47) (2,290) (20) (23) (3,156) NET CASH USED IN INVESTING ACTIVITIES (2,667) (3,199) CASH FLOWS FROM FINANCING ACTIVITIES Increase in loans Loan arrangement fees Repayment of loans Repayment of obligations under lease agreements Interest paid 5,300 (86) (5,379) (670) (530) 2,000 - (1,440) (630) (386) NET CASH GENERATED FROM FINANCING ACTIVITIES (1,365) (456) NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR 705 1,665 2,370 460 1,205 1,665 Company Number 05452547 41 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements 1 GENERAL INFORMATION Trakm8 Holdings PLC (“Company”) and its subsidiaries (together the “Group”) develop, manufacture, distribute and sell telematics devices and services and optimisation solutions. Trakm8 Holdings PLC is a public limited company incorporated in the United Kingdom (registration number 05452547). The Company is domiciled in the United Kingdom and its registered office address is 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG. The Company’s Ordinary shares are traded on the AIM market of the London Stock Exchange. The Company is registered in England and is limited by shares. The Group’s principal activity is the development, manufacture, marketing and distribution of vehicle telematics equipment and services and optimisation solutions. The Company’s principal activity is to act as a holding company for its subsidiaries. The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand (£'000) except where otherwise indicated. 2 PREPARATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRS IC”) interpretations as endorsed by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. 3 BASIS OF PREPARATION The accounting policies set out in note 4 have been applied consistently to all periods presented in these consolidated financial statements made up to 31 March 2021. The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates and management to exercise its judgement in the process of applying the Group’s accounting policies as disclosed within note 4 and 5. Company Number 05452547 42 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared on the going concern basis under the historical cost convention in accordance with the applicable accounting standards. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions which are based on management’s best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March each year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The trading results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenditure are eliminated on consolidation. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date irrespective of the extent of any minority interest. The excess of cost of acquisition over the fair values of the Group’s share of identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the Statement of Comprehensive Income. All acquisition expenses have been reported within the consolidated Statement of Comprehensive Income immediately. Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 3 either in statement of comprehensive income or as a change to other comprehensive income. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the Group. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual Statements of Comprehensive Income and related notes. Company Number 05452547 43 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) REVENUE RECOGNITION Revenue represents the total of amounts receivable for goods and services provided excluding value added tax. The Group enters into sale of multi-element contracts, which contain a combination of separate performance obligations which can include hardware, software and different services, including telematics services, software maintenance, installation and configuration consulting contracts. Each performance obligation is allocated a transaction price based on the stand-alone selling prices. Where stand-alone prices are not directly observable, they are estimated based on expected cost plus margin. Revenue on the sale of telematics devices and other hardware is recognised when control transfers to a customer, or where bill and hold arrangements exist, when the products are identified separately as belonging to the customer and currently ready for physical transfer to the customer. If the contracts include the installation of hardware, revenue for the hardware is recognised at a point in time when the hardware is delivered, the legal title passed and the customer has accepted the hardware. Revenue for telematics services, being the provision of data and data analytics to customers, is recognised in the accounting period in which the services are rendered. The appropriate portion of service revenue invoiced in advance covering future periods is shown as deferred income within current and non-current liabilities. Revenue for installation services is recognised when the performance obligation per the contract is complete. Revenue from the sale of perpetual software license is recognised when the software is made available for use by the customers. Revenue from the development of software and the integration of software with customers’ existing systems is recognised over the life of the development project by reference to percentage of completion. Revenue for engineering services is recognised as the services are provided. Revenue from software maintenance contracts is based on the allocated transaction price based on the stand- alone selling prices, recognised over the support term. Where the stand-alone price is not directly observable, they are estimated based on expected cost plus margin. Revenue from SaaS (software as a service) contracts is based on the allocated transaction price based on the stand-alone selling prices, recognised over the contract term. Where the stand-alone price is not directly observable, they are estimated based on expected cost plus margin. Revenue from configuration consulting contracts is based on the allocated transaction price based on the stand-alone selling prices, recognised as related services are performed. Where the stand-alone price is not directly observable, they are estimated based on expected cost plus margin. Rental income from operating leases and rental of equipment is recognised on a straight-line basis over the term of the lease or rental period. Company Number 05452547 44 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) REVENUE RECOGNITION (continued) Assets sold by the Group where substantially all the risk and rewards of ownership of the assets have been transferred to the customer, of which the customer is paying over a number of future periods are classified as finance leases. Revenue is recognised at the present value of the minimum lease payments at the inception of the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases. Invoicing for all revenue streams is undertaken in accordance with the terms of the agreement with the customer. Where this is different to revenue recognition either accrued or deferred income is recognised on the statement of financial position as appropriate. In cases where customers pay for the goods and services over an agreed period, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognised as investment income over the payment period. GRANT INCOME Government grants for revenue expenditure are recognised in the Statement of Comprehensive Income on a systematic basis over the periods in which the entity recognises expenses for the related costs for which the grants are intended to compensate. For grants relating to assets the grant is deducted from the carrying amount of the asset. Company Number 05452547 45 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) LEASES The Group has adopted IFRS 16 Leases with effect from 1 April 2019 using the modified retrospective approach. At inception of a contract, the Group assesses whether a contract is, or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: - The contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified. - The Group has the right to obtain substantially all of the economic benefits from use of the asset through the period of use; and - The Group has the right to direct the use of the asset. The Group has this right when it has the decision- making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either: o The Group has the right to operate the asset; or o The Group designed the asset in a way that predetermines how and for what purpose it will be used. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected to separate non- lease components and therefore accounts for the lease and non-lease components as separate lease components. Group as lessee At inception of a contract the Group assesses whether the contract is or contains a lease as detailed above. Where a lease is identified the Group recognises a right of use asset and a corresponding lease liability, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. Company Number 05452547 46 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) LEASES (Continued) Lease liability – initial recognition The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted at the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: • fixed lease payments (including in-substance fixed payments), less any lease incentives; • variable lease payments such as those that depend on an index or rate (such as RPI), initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options where the Group is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is presented as a separate line in the Consolidated Statement of Financial Position, split between current and non-current liabilities. Lease liability – subsequent measurement The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. Lease liability – re-measurement The lease liability is re-measured where: • there is a change in the assessment of exercise of a purchase option, in which case the lease liability is re- measured by discounting the revised lease payments using a revised discount rate or; • the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is re-measured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used) or; • the lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount rate. When the lease liability is re-measured, an equivalent adjustment is made to the right of use asset unless its carrying amount is reduced to zero, in which case any remaining amount is recognised in the Statement of Comprehensive Income. Where the lease liability is denominated in a foreign currency it is retranslated at the Statement of Financial Position date with foreign exchange gains and losses recognised in the Statements of Comprehensive Income. Company Number 05452547 47 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) LEASES (Continued) Right of use asset – initial recognition The right of use asset comprises the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Where the Group has an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right of use asset, unless those costs are incurred to produce inventories. The right of use asset is presented as a separate line in the Statement of Financial Position. Right of use asset – subsequent measurement Right of use assets are depreciated over the shorter of the lease term and useful life of the underlying asset. Impairment The Group applies IAS 36 to determine whether a right of use asset is impaired and accounts for any identified impairment loss as described in the ‘Impairment – non-financial assets’ policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right of use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. Short term leases and low value assets For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. EXCEPTIONAL ITEMS Exceptional items are those items that, in the Directors’ view, are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group’s financial performance. See note 9 for further details. Company Number 05452547 48 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) TAXATION The tax expense represents the sum of the current tax expense and deferred tax expense. Current tax is based on taxable profits for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date. Research and Development tax credits (SME R&D tax relief) are shown as part of the current tax charge for the year in the Statement of Comprehensive Income. Research and Development Expenditure Credit ('RDEC') in relation to research and development costs not claimed under SME R&D tax relief are shown as part of other income in the Statement of Comprehensive Income. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Statement of Financial Position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised in the foreseeable future. Deferred tax on share based payments is recognised in the Statement of Comprehensive Income to the extent that the future tax deduction does not exceed the charge in the Statement of Comprehensive Income. Deferred tax for the excess is recognised directly in Statement of Changes in Equity. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based upon tax rates that have been enacted or substantively enacted at the year end. SHARE-BASED PAYMENTS The Group issues equity-settled share-based payments to certain employees. The Group has applied the requirements of IFRS 2 Share-based payment, the corresponding entry to the expense in the Statement of Comprehensive Income is recognised in equity within the Statement of Changes in Equity. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. The fair value is measured by use of the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations. Company Number 05452547 49 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) GOODWILL Goodwill arising on consolidation is recorded as an intangible asset and is the surplus of the fair value of the consideration over the Group’s interest in the fair value of identifiable net assets (including intangible assets) acquired. Goodwill is tested for impairment annually as at 31 March and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Any impairment identified as a result of the review is charged in the Statement of Comprehensive Income. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. INTANGIBLE ASSETS OTHER THAN GOODWILL An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. Such intangible assets are carried at cost less amortisation. Amortisation is charged to ‘Administrative expenses’ in the Statement of Comprehensive Income on a straight-line basis over the intangible assets’ useful economic life. The nature of intangible assets recognised and their amortisation rates for each category are: Software Development cost 20 - 100% Straight line 10 - 40% Straight line Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development expenditure is capitalised as an intangible asset only if the following conditions are met: · an asset is created that can be identified; · it is probable that the asset created will generate future economic benefit; · the development cost of the asset can be measured reliably; · it meets the Group’s criteria for technical and commercial feasibility; and · sufficient resources are available to meet the development costs to either sell or use as an asset. INTANGIBLE ASSETS ACQUIRED AS PART OF A BUSINESS COMBINATION For acquisitions, the Group recognises intangible assets separately from goodwill provided they are separable or arise from contractual or other legal rights and their fair value can be measured reliably. Intangible assets are initially recognised at fair value, which is regarded as their cost. Intangible assets are subsequently held at cost less accumulated amortisation and impairment losses. Where intangible assets have finite lives, their cost is amortised on a straight-line basis over those lives. The nature of intangible assets recognised and their amortisation rates for each category are: Software Websites Intellectual property Customer relationships 10 - 20% Straight line 33 - 50% Straight line 20% Straight line 33% Straight line The assets’ residual values and useful lives are reviewed at each Statement of Financial Position date and adjusted if appropriate. The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Company Number 05452547 50 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less any subsequent accumulated depreciation or impairment losses. With the exception of freehold buildings held at 31 March 2006 (the date of transition to IFRS), cost represents purchase price together with any incidental costs to acquisition. As permitted by IFRS 1, the cost of freehold buildings at 31 March 2006 represents deemed cost, being the market value of the property for existing use at that date. Depreciation is provided on all property, plant and equipment, other than freehold land, at rates calculated to write each asset down to its estimated residual value over its expected useful life. In summary the depreciation rates used for each category is as follows: Freehold property Furniture, fixtures and equipment Computer equipment Motor vehicles 2% Straight line 5% - 10% Straight line 20% Straight line 25% Straight line PROPERTY, PLANT AND EQUIPMENT IMPAIRMENT The assets’ residual values and useful lives are reviewed at each Statement of Financial Position date and adjusted if appropriate. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. INVENTORIES Inventories are valued at the lower of cost and net realisable value. In general cost is determined on weighted average cost basis and includes all direct expenditure and production overheads based on a normal level of activity. Net realisable value is the price at which the stocks can be sold in the normal course of business after allowing for the costs of realisation and where appropriate for the costs of conversion from its existing state to a finished condition. Provision is made for obsolete, slow moving and defective stocks. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. Company Number 05452547 51 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) TRADE RECEIVABLES Trade receivables are initially recognised at fair value and subsequently measured at their amortised cost using the effective interest method less any provision for impairment. The IAS 39 category, Loans and Receivables, required assets to be measured at amortised cost and therefore the change in category in the adoption of IFRS 9 does not in fact result in a change in measurement of trade receivables. The Group recognises an allowance for Expected Credit Losses (ECLs) for trade receivables. IFRS 9 requires an impairment provision to be recognised on origination of a trade receivable, based on its ECL. The directors have taken the simplification available under IFRS 9.5.5.15 which allows the loss amount in relation to a trade receivable to be measured at initial recognition and throughout its life at an amount equal to lifetime ECL. This simplification is permitted where there is either no significant financial component (such as customer receivables where the customer is expected to repay the balance in full prior to interest accruing) or where there is a significant financial component (such as where the customer expects to repay only the minimum amount each month), but the directors make an accounting policy choice to adopt the simplification. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the Statement of Comprehensive Income. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents includes bank overdrafts where applicable. FINANCIAL LIABILITIES AND EQUITY Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities and equity instruments are initially recognised at fair value and subsequently at amortised cost using the effective interest method. BANK BORROWINGS Borrowings are initially recognised at fair value, being proceeds received less directly attributable transaction costs incurred. Borrowings are subsequently measured at amortised cost with any transaction costs amortised to the Statement of Comprehensive Income over the period of the borrowings using the effective interest method. TRADE PAYABLES Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method. Company Number 05452547 52 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) PROVISIONS Provisions are recognised when the Group has a present obligation as a result of past event and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the net expenditure required to settle the obligation at the year-end date and are discounted to present value where the effect is material. EQUITY Equity comprises the following: Share capital represents the nominal value of equity shares. Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. Merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued on reverse acquisition of subsidiaries, net of expenses of the share issue prior to the date of transition to IFRS. Translation reserve represents cumulative foreign exchange gains and losses on retranslation of overseas operations. Treasury reserve represents the cost of shares held in Treasury. Where any group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company’s equity holders. Retained earnings represents retained profits and the share based payment reserve. Company Number 05452547 53 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) FOREIGN CURRENCIES Sterling is the presentational currency of the Group. The functional currency of the companies within the Group is sterling. This is based on the Group’s workforce being based in the UK and that sterling is the currency in which management reporting and decision making is based. Foreign currency monetary assets and liabilities are converted to sterling at the rates of exchange ruling at the end of the financial year. Transactions in foreign currencies are converted to sterling at the rates of exchange ruling at the transaction date. All of the resulting exchange differences are recognised in the Statement of Comprehensive Income as they arise. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the Statement of Financial Position date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are classified as equity and transferred to the Group’s reserves. Such translation differences are recognised as income or expense in the period in which the operation is disposed of. SEGMENTAL REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. The Board have assessed that there continues to be just one segment following the integration of the Trakm8 and Route Monkey businesses. This segment has one separate revenue stream of Integrated Telematics Technology. Company Number 05452547 54 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) GOING CONCERN These financial statements are prepared on a going concern basis after assessing the principal risks. To monitor the future cash position the Group produces projections of its working capital and long term funding requirements covering 3 months in detail and 1 and 2 year projections. These projections are updated on a regular basis to reflect current trading and latest information on future trading. The Group does have a substantial recurring revenue base that accounts for 50% of revenues that provide a strong underlying base, and the Group is still taking advantage of the Job Retention scheme as trading recovers following relaxation of lock down rules. Further consideration of other significant risks and the mitigations the Group has developed are detailed in page 18. The Group renewed its debt facilities with HSBC in March 2021. The new agreement comprises a Term Loan of £5,300,000 and a £500,000 overdraft facility. Capital repayments commence in September 2021 at £86,000 per month with a final payment of the outstanding balance on 31 October 2023, which is when these facilities are in place until. In addition, the capital repayment holiday of our loan with Maven (£1,400,000 outstanding) has been extended, such that repayments will now recommence in September 2021. In addition the company has reached an agreement with HMRC on a time to pay agreement to spread £1,759,000 of VAT, PAYE & NI payment deferments that resulted from the Covid-19 lockdowns almost equally over the next two financial years. Covenants agreed with both HSBC and Maven reflect the impact of trading due to Covid-19 over the preceding twelve months, as such the main covenant test over the next financial year relates to an absolute EBITDA tested quarterly through to end of the financial year, with a cash flow cover and leverage covenant only started to be tested in June 2022. At the year end the Group has cash balances of £2,370,000 and an unused overdraft facility of £500,000. The Groups latest projections for twelve months from the date of signing the financial statements show that the Group has sufficient cash resources and will meet its covenants with ample headroom for the foreseeable future. The Group has undertaken a number of adverse sensitivities against its projections to reflect much slower recovery post the lock down at the end of the last financial year. The Groups base line projection has a 10% headroom against its EBITDA covenant, its downside sensitivity analysis shows that a £2.4m reduction in revenue only reduces EBITDA by 3%, with minimal impact on cash. This downside scenario still passes all covenants with the Group having additional mitigating actions not included in the projections. One of the current risks is cost pressure and long lead times due to the electronics supply chain being materially impacted by Covid-19. The Group is in a strong position to mitigate that risk due to the strong long-term relationships with its suppliers, and due to it being a fully vertically integrated business which means the design engineers working closed with supply chain. However, the Group’s sensitivity analysis demonstrated headroom in its latest projection of a 15% increase in component prices. On this basis the Directors have a reasonable expectation that the Group will have adequate financial resources to continue in operation for the foreseeable future and therefore it is appropriate to adopt the going concern basis of accounting in preparing the financial statements. Company Number 05452547 55 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (Continued) CHANGES IN ACCOUNTING STANDARDS AND DISCLOSURES The Group did not adopt any new standards, or new provisions of amended standards during the current financial year. OUTLOOK FOR ADOPTIONS OF FUTURE STANDARDS (new and amended) At the date of authorisation of these Consolidated Financial Statements, there were no new or revised IFRSs, amendments or interpretations in issue but not yet effective that are potentially relevant for the Group and which have not yet been applied. 5 CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE GROUP’S ACCOUNTING POLICIES In the process of applying the Group’s accounting policies, which are described in note 4, management has made the following judgements that have a significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below). REVENUE RECOGNITION Revenue is recognised with reference to the fair value of contracts. Based on revenue recognition criteria in note 4 above, the allocation of transaction price to different performance obligations was identified as the only part of the criteria that is a significant judgement. Management applies judgement on contracts which involve more than one deliverable. Each deliverable is assigned to one or more separate element of revenue and the contract consideration is allocated to each element based on its relative fair value. Determining the fair value of each element can require complex estimates due to the nature of goods and services provided. A fair value is estimated for each element based on equivalent sales prices where it is sold on a standalone basis after considering volume discounts when applicable. The split between initial recognition for products supplied and subsequent recognition for service revenue over the contract period and allocating the fair value between these elements is another key judgement made by management in ensuring appropriate revenue recognition. Management also assesses the state of completion of engineering services, software development and integration projects by reference to work done, elements delivered and services provided to the customer. CAPITALISED DEVELOPMENT COSTS At the start of a project, management assesses whether or not the project meets the criteria for capitalisation under the requirements of IAS 38. Subsequently, the recoverability of capitalised development costs is dependent on assessments of the future commercial viability of the relevant products and processes. Management assess this viability based on market knowledge and demand from customers for improvements to existing product, service and software capabilities. Company Number 05452547 56 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 5 CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE GROUP’S ACCOUNTING POLICIES (continued) KEY SOURCES OF ESTIMATION UNCERTAINTY The key assumptions concerning the future and other key estimations at the Statement of Financial Position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. RECOVERABILITY OF TRADE RECEIVABLES AND ACCRUED INCOME Management are particularly conscious of the financial weakness of some companies and closely monitors its outstanding debtor book in order to minimise the risk associated with future bad debts. Active credit control management is undertaken with a credit approval process in place and active monitoring of accounts resulting in future supplies being stopped if debts remain overdue. An increasing number of customers taking the Group’s services pay by direct debit and this is reducing the Group’s exposure to the non- recoverability of trade receivables in the future. The Group recognises an allowance for Expected Credit Losses (ECLs) for trade receivables. IFRS 9 requires an impairment provision to be recognised on origination of a trade receivable, based on its ECL. The directors have taken the simplification available under IFRS 9.5.5.15 which allows the loss amount in relation to a trade receivable to be measured at initial recognition and throughout its life at an amount equal to lifetime ECL. This simplification is permitted where there is either no significant financial component (such as customer receivables where the customer is expected to repay the balance in full prior to interest accruing) or where there is a significant financial component (such as where the customer expects to repay only the minimum amount each month), but the directors make an accounting policy choice to adopt the simplification. IMPAIRMENT OF GOODWILL The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Further details are given in note 14. Company Number 05452547 57 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 6 SEGMENTAL ANALYSIS The chief operating decision maker (“CODM”) is identified as the Board. It continues to define all the Group's trading under the single Integrated Telematics Technology segment and therefore review the results of the group as a whole. Consequently all of the Group’s revenue, expenses, assets and liabilities are in respect of one Integrated Telematics Technology segment. The Board as the CODM review the revenue streams of Integrated Fleet, Optimisation, Insurance and Automotive Solutions (“Solutions”) as part of their internal reporting. Solutions represents the sale of the Group’s full vehicle telematics and optimisation services, engineering services, professional services and mapping solutions to customers. A breakdown of revenues within these streams are as follows: Solutions: Fleet and optimisation Insurance and automotive A geographical analysis of revenue by destination is as follows: United Kingdom North America Norway Rest of Europe Rest of World 7 OTHER INCOME Grant income R&D tax credit R&D tax credit adjustment in respect of prior periods Year ended 31 March 2021 £'000 15,961 9,520 6,441 Year ended 31 March 2020 £'000 19,550 12,034 7,516 Year ended 31 March 2021 £'000 15,647 4 2 293 15 15,961 Year ended 31 March 2020 £'000 19,181 7 - 67 295 19,550 Year ended 31 March 2021 £'000 194 - - 194 Year ended 31 March 2020 £'000 361 4 (1) 364 Company Number 05452547 58 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 8 OPERATING LOSS The following items have been included in arriving at operating loss: Depreciation - owned assets (see note 15) - right of use assets (see note 16) Amortisation of intangible assets - owned assets (see note 14) Other operating lease rentals Research and development expenditure Loss on disposal of property plant and equipment Loss on foreign exchange transactions Staff costs (note 12) Exceptional administrative costs (note 9) Auditors’ remuneration - Fees payable to the Company’s auditors for the audit of the parent company and consolidated financial statements Adjusted loss before tax is monitored by the Board and measured as follows: Loss before tax Exceptional administrative costs (note 9) Share based payments Adjusted loss before tax 9 EXCEPTIONAL ADMINISTRATIVE COSTS Acquisition costs Integration & restructuring costs New product component refit costs Covid-19 costs Furlough grant income Year ended 31 March 2021 Year ended 31 March 2020 £'000 £'000 156 625 149 550 1,992 13 637 318 1 6,465 1,342 2,194 80 896 - 2 6,730 1,296 73 73 Year ended 31 March 2021 £'000 (1,867) 1,342 183 (342) Year ended 31 March 2020 £'000 (1,705) 1,296 185 (224) Year ended 31 March 2021 £'000 - 168 - 2,109 (935) 1,342 Year ended 31 March 2020 £'000 52 602 442 200 - 1,296 Company Number 05452547 59 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 9 EXCEPTIONAL ADMINISTRATIVE COSTS (continued) The acquisition costs incurred in 2020 relate to non-underlying charges under a separate agreement linked to the acquisition in 2017. The costs incurred are directly linked to the acquisition and not as part of the underlying business. This agreement terminated on 31 July 2019. The Group has incurred significant costs relating to its ongoing project to streamline and rationalise the operations of the business. This has resulted in the following non-underlying, one-off costs: - In the current and prior year, integration and restructuring costs incurred relate to integrating the activities of Route Monkey Limited and Roadsense Limited that were acquired in previous financial years and include costs associated with office closures and costs and profits incurred as part of its long-term real estate plan. - Restructuring costs incurred as a result of a headcount reduction activity undertaken during the current financial year The Product component refit costs incurred in the prior year relate to significant component and software issues that arose in 2019 on a new product. These issues were fixed by the end of 2019. However significant re-visit and material costs were incurred in previous financial year as a result of the project to remedy these issues. No customers have been lost as a result of these issues. The Group also incurred exceptional costs in the current financial year relating to the Covid-19 pandemic. These costs mainly relate to the cost of employees whilst on furlough (£1,607,000) and the cancellation of internal and external projects (£476,000), and some costs relating to cancelled marketing events and bad debts (£26,000). Furlough grant income relates to other income received from the Coronavirus Job Retention Scheme for employees furloughed as a result of Covid-19. 10 FINANCE COSTS Interest on bank loans Amortisation of debt issue costs Interest on right of use assets Year ended 31 March 2021 £'000 373 37 120 530 Year ended 31 March 2020 £'000 284 32 102 418 Company Number 05452547 60 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 11 INCOME TAX Tax credit for the year The tax credit for the year is shown below. Tax is made up of current and deferred tax. Current tax is the amount payable/(receivable) on the taxable income in the year and any adjustments to the tax payable/(receivable) in the previous years. Deferred tax is explained in note 19. Current tax Deferred tax current year credit prior year adjustment sub total current year charge prior year adjustment sub total Year ended 31 March 2021 £'000 (687) (2) (689) Year ended 31 March 2020 £'000 (855) 21 (834) 89 (30) 59 169 53 222 Income tax credit Total (630) (612) Company Number 05452547 61 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 11 INCOME TAX (continued) Factors affecting the tax charge The tax assessed for the year is lower (2020: lower) than the applicable rate of corporation tax in the UK. The difference is explained below: Loss before tax Year ended 31 March 2021 £'000 (1,867) Year ended 31 March 2020 £'000 (1,705) Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%) (355) (324) Effects of: Expenses not deductible/income not taxable R&D relief enhanced deduction Adjustments in respect of prior periods: Opening and closing deferred tax rate adjustment Other movements Total tax credit Tax on exceptional items Deferred tax Current tax 39 (338) 8 (2) 31 (13) (630) 41 (376) 53 21 - (27) (612) The tax effect of exceptional items is to increase the tax credit by £255,000 (2020: £246,000). R&D relief enhanced deduction This deduction is available on research and development work done by the Group to develop and enhance its data analytics functionality and telematics hardware. Prior year adjustment The prior year adjustment mainly relates to the R&D tax credits and capital allowances claim that were finalised during the year. Factors affecting future tax changes The standard rate of corporation tax in the UK for the year was 19% (2020: 19%). On the 3 March 2021 it was announced that the corporation tax rate would increase to 25% from 1 April 2023. This was substantively enacted on 24 May 2021. As a result current year deferred tax is calculated at 19%, however the new rate of 25% that was enacted post year end would have resulted in a £108,000 increase in the deferred tax liability if this had applied at the year end. Company Number 05452547 62 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 12 EMPLOYEES Year ended 31 March 2021 Year ended 31 March 2020 No. No. The average monthly number of persons (including Directors) employed by the Group was: Engineering Sales & marketing Production Administration 63 65 34 21 183 66 82 39 21 208 Staff costs for the employees and Directors (included under Administrative expenses and Cost of sales): Wages and Salaries Social security costs Share based payments Other pension costs Year ended 31 March 2021 Year ended 31 March 2020 £'000 5,532 629 183 121 6,465 £'000 5,740 675 185 130 6,730 The compensation for key management personnel was as follows (included under Administrative expenses and Cost of sales): Salaries and other short-term employee benefits Post-employment benefits Share based payments Year ended 31 March 2021 Year ended 31 March 2020 £'000 1,131 41 171 1,343 £'000 1,295 58 148 1,501 The key management personnel are the Directors and one senior manager who have previously been identified as key management personnel. The key management personnel made gains of £nil (2020: £nil) on the exercise of share options during the year. Details of Directors’ fees and salaries, bonuses and pensions (including that of the highest paid Director) and are given in the Directors’ Report on page 28. Company Number 05452547 63 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 13 EARNINGS PER ORDINARY SHARE The earnings per Ordinary share have been calculated in accordance with IAS 33 using the loss for the year and the weighted average number of Ordinary shares in issue during the year as follows: Loss for the year after taxation Exceptional administrative costs Share based payments Tax effect of adjustments Adjusted profit for the year after taxation Number of Ordinary shares of 1p each at 31 March Basic weighted average number of Ordinary shares of 1p each Diluted weighted average number of Ordinary shares of 1p each Basic loss per share Diluted loss per share Adjust for effects of: Exceptional costs Share based payments Adjusted basic earnings per share Adjusted diluted earnings per share Year ended 31 March 2021 £'000 (1,237) 1,342 183 (255) 33 Year ended 31 March 2020 £'000 (1,093) 1,296 185 (246) 142 No. 50,004,002 50,004,002 50,004,002 (2.47p) (2.47p) 2.17p 0.37p 0.07p 0.07p No. 50,004,002 50,004,002 50,004,002 (2.19p) (2.19p) 2.10p 0.37p 0.28p 0.28p Company Number 05452547 64 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 14 INTANGIBLE ASSETS Goodwill Intellectual property Customer relationships Development costs Software Total £'000 £'000 £'000 £'000 £'000 £'000 10,417 1,920 100 14,034 2,033 28,504 - - - - (153) (153) - - - 2,763 - 2,763 - - - 393 23 416 10,417 1,920 100 17,190 1,903 31,530 - - - 2,119 - 2,119 - - - 171 47 218 - - 10,417 - - 1,920 - - 100 - (238) 19,242 (155) (36) 1,759 (155) (274) 33,438 - - - - - - 1,849 61 1,910 10 - 1,920 89 11 100 4,632 1,847 6,479 - 1,733 (238) - 7,974 100 769 275 1,044 249 (36) 1,257 7,339 2,194 9,533 1,992 (274) 11,251 10,417 - - 11,268 502 22,187 COST As at 1 April 2019 Reclassification of right of use assets(a) Additions - Internal developments Additions - External purchases As at 31 March 2020 Additions - Internal developments Additions – External purchases Impairments Disposals As at 31 March 2021 AMORTISATION As at 1 April 2019 Charge for year As at 31 March 2020 Charge for year Disposals As at 31 March 2021 NET BOOK AMOUNT As at 31 March 2021 As at 31 March 2020 10,417 10 - 10,711 859 21,997 As at 1 April 2019 10,417 71 11 9,402 1,264 21,165 Goodwill arose in relation to the Group’s acquisition of 100% of the share capital of Roadsense Technology Limited (Roadsense), Route Monkey Limited (Route Monkey), Box Telematics Limited (Box) and DCS Systems Limited (DCS). Since the acquisition Roadsense, Box, Route Monkey and DCS have been incorporated into the Trakm8 business. These businesses have therefore been assessed as one cash generating unit for an impairment test on Goodwill. The impairment review has been performed using a value in use calculation. Company Number 05452547 65 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 14 INTANGIBLE ASSETS (continued) The impairment review has been based on the Group’s budgets for FY-2022 which have been reviewed and approved by the Board and projections for FY-2023. Forecasts for the subsequent 3 years have been produced based on 7% (a prudent growth rate for telematics market) growth rates in revenue and EBITDA in each year. A net present value has been calculated using a pre-tax discount rate of 10% (Group's weighted average cost of capital) which is deemed to be a reasonable rate taking account of the Group’s cost of funds and an extra element for risk. A terminal value has been calculated and included in the discounted cash flow forecasts used within the model to fully support the goodwill value. A growth rate of 2% was used to determine the terminal value. The forecasts show sufficient headroom of cash flow above the net assets value when we performed sensitivity analysis: 1. An increase in the discount rate to 12% shows headroom of £4m. 2. A decrease in the growth rate to 5% shows headroom of £10m. 3. A decrease in the terminal growth rate to 1% shows headroom of £10m. In addition, sensitivity analysis has been undertaken and indicates that an impairment will be triggered by: 1. Decrease in annual growth rates from 7% to 2% and decrease in terminal growth rate from 2% to 1% and increase the discount rate from 10% to 11%. Or triggered by: 1. Decrease in net cash generated from operating activities for FY-2022 and FY-2023 of 22%. Amortisation expenses of £1,992,000 (2020: £2,194,000) have been charged to Administrative expenses in the Consolidated Statement of Comprehensive Income. (a) Amounts previously recognised as finance lease assets have been reclassified to right of use assets upon transition to IFRS 16 on 1 April 2019. Refer to Note 16 – Right of Use Assets for further details. Company Number 05452547 66 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 15 PROPERTY, PLANT AND EQUIPMENT Freehold property £'000 Furniture, fixtures and equipment £'000 Computer equipment £'000 Motor vehicles £'000 Total £'000 147 1,573 771 7 2,498 - (526) (230) - (756) - 147 - 7 - 154 18 1,065 76 303 (3) 1,441 2 543 (76) 20 (131) 356 - 7 - - - 7 20 1,762 - 330 (134) 1,958 5 541 513 7 1,066 - (80) (90) - (170) 6 11 - 7 - 18 107 568 (2) 138 (3) 701 36 459 2 11 (131) 341 - 7 - - - 7 149 1,045 - 156 (134) 1,067 136 740 15 - 891 COST As at 1 April 2019 Reclassification of right of use assets(a) Additions As at 31 March 2020 Reclassification Additions Disposals As at 31 March 2021 DEPRECIATION As at 1 April 2019 Reclassification of right of use assets(a) Charge for year As at 31 March 2020 Reclassification Charge for year Disposals As at 31 March 2021 NET BOOK AMOUNT As at 31 March 2021 As at 31 March 2020 136 497 84 - 717 As at 1 April 2019 142 1,032 258 - 1,432 Included within freehold property is £85,000 (2020: £85,000) relating to land which is not depreciated. Total depreciation expenses of £156,000 (2020: £149,000) have been charged to administrative expenses in the Consolidated Statement of Comprehensive Income. (a) Amounts previously recognised as finance lease assets have been reclassified to right of use assets upon transition to IFRS 16 on 1 April 2019. Refer to Note 16 – Right of Use Assets for further details. Company Number 05452547 67 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 16 RIGHT OF USE ASSETS Leased property £'000 Furniture, fixtures and equipment £'000 Computer equipment Motor vehicles Software Total £'000 £'000 £'000 £'000 2,098 - - 412 - 2,510 - 446 140 - 153 739 - - 2,098 - - - 2,098 63 - 509 42 - - 551 35 - 175 175 - - 350 244 (37) 619 79 - (83) 615 - - 153 - (153) - - 342 (37) 3,554 296 (153) (83) 3,614 - 264 264 265 - 529 - 49 49 75 - 124 - 62 62 58 - 120 - 175 175 227 (73) 329 - - - - - - - 550 550 625 (73) 1,102 1,569 427 230 286 - 2,512 COST As at 1 April 2019 Reclassification of right of use assets(a) Additions Disposals As at 31 March 2020 Additions Impairments Disposals As at 31 March 2021 AMORTISATION As at 1 April 2019 Charge for year As at 31 March 2020 Charge for year Disposals As at 31 March 2021 NET BOOK AMOUNT As at 31 March 2021 As at 31 March 2020 1,834 460 113 444 153 3,004 As at 1 April 2019 2,098 - - 412 - 2,510 Total depreciation expenses of £625,000 (2020: £550,000) have been charged to administrative expenses in the Consolidated Statement of Comprehensive Income. (a) Amounts previously recognised as finance lease assets have been reclassified to right of use assets upon transition to IFRS 16 on 1 April 2019. Refer to Note 14 - Intangible assets and Note 15 – Property, plant and equipment for further details. 17 INVENTORIES Raw materials Work in progress Finished goods and goods for resale As at 31 March 2021 174 584 651 1,409 As at 31 March 2020 £'000 621 715 707 2,043 The cost of inventories recognised as an expense and included in cost of sales amounted to £3,308,000 (2020: £3,746,000). During the year old inventory lines totalling £270,000 (2020: £111,000) were written down and charged to cost of sales in the Consolidated Statement of Comprehensive Income. Company Number 05452547 68 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 18 TRADE AND OTHER RECEIVABLES Trade receivables Other receivables Amounts receivable under finance leases Prepayments Assets recognised for goods and services delivered but not billed (contract asset) Non-current assets Current assets As at 31 March 2021 £'000 - - 50 - As at 31 March 2020 £'000 - - 41 - As at 31 March 2021 £'000 2,555 166 63 371 As at 31 March 2020 £'000 3,294 73 98 344 - - 3,524 4,045 50 41 6,679 7,854 The analysis of trade receivables by currency is as follows: Pound Sterling Euro As at 31 March 2021 £'000 2,554 1 2,555 As at 31 March 2020 £'000 3,271 23 3,294 An allowance is made for Expected Credit Losses (ECLs) for trade receivables. IFRS 9 requires an impairment provision to be recognised on origination of a trade receivable, based on its ECL. The allowance that has been made for ECL for trade receivables is £197,000 (2020: £415,000 ). Movement in provision for impairment of trade receivables: Opening provision for impairment of trade receivables Arising during the year Utilised during the year Released during the year Impairment loss during the year As at 31 March 2021 £'000 415 As at 31 March 2020 £'000 720 38 (177) (79) (218) 208 (409) (104) (305) Closing provision for impairment of trade receivables 197 415 As at 31 March 2021 trade receivables of £868,000 (2020: £1,675,000) were past due but not impaired. The ageing analysis of these trade receivables is as follows: Up to 3 months past due 3 to 6 months past due Company Number 05452547 As at 31 March 2021 £'000 626 242 868 As at 31 March 2020 £'000 1,438 237 1,675 69 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 18 TRADE AND OTHER RECEIVABLES (continued) The Directors consider that the carrying amount of trade and other receivables approximates to their fair values. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The analysis of amounts receivable under finance leases is as follows: Within one year After one and within two years After two and within five years Minimum lease payments Present value of minimum lease payments As at 31 March 2021 £'000 65 52 - As at 31 March 2020 £'000 100 41 - As at 31 March 2021 £'000 63 50 - As at 31 March 2020 £'000 98 41 - 117 141 113 139 The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The average effective interest contract is approximately 2.45% (2020: 2.45%) per annum. 19 DEFERRED TAX The analysis of deferred tax liability calculated using a tax rate of 19% is as follows: Deferred tax liability Deferred tax liability to be released within 12 months Deferred tax liability to be released after more than 12 months The deferred tax liability consists of the following: Trading losses Short term timing differences Accelerated tax depreciation As at 31 March 2021 As at 31 March 2020 £'000 - (369) (369) £'000 (165) (145) (310) As at 31 March 2021 As at 31 March 2020 £'000 1,673 (9) (2,033) (369) £'000 1,525 (29) (1,806) (310) Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The movement in the deferred income tax liability during the year is as follows: At 31 March 2020 Credited / (debited) to the Statement of Comprehensive Income Credited / (debited) to the Statement of Changes in Equity Trading losses £'000 1,525 Accelerated tax depreciation £'000 (1,806) 148 (227) Short term timing differences £'000 (29) 20 TOTAL £'000 (310) (59) - - - - At 31 March 2021 1,673 (2,033) (9) (369) Company Number 05452547 70 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 20 TRADE AND OTHER PAYABLES Trade payables Social security and other taxes Other payables Accruals and deferred income Payments received in advance of service delivery (contract liability) Non-current liabilities As at 31 March 2020 £'000 As at 31 March 2021 £'000 - 799 - - 747 1,546 Current liabilities As at 31 March 2021 £'000 - 1,996 1,744 - - - 773 - 904 713 5,417 713 As at 31 March 2020 £'000 2,950 1,257 - 859 1,114 6,180 The Directors consider that the carrying amount of trade payables approximates to their fair value. Revenue recognised in the current reporting period relating to carried-forward contract liabilities was £1.4m (2020: £1.0m). 21 BORROWINGS As at 31 March 2021 As at 31 March 2020 Loans Obligations under right of use assets Total Loans Obligations under right of use assets Total Gross £'000 Arrangement fee Net Gross Arrangement fee Net £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Current 902 (47) 855 680 1,535 Non-Current 5,898 (83) 5,815 1,767 7,582 1,160 5,719 (35) 1,125 656 1,781 (44) 5,675 2,162 7,837 6,800 (130) 6,670 2,447 9,117 6,879 (79) 6,800 2,818 9,618 All borrowings are held in sterling and the Directors consider their carrying amount approximates to their fair values. Loans comprise the following: A £5.3m term loan with HSBC. The loan is secured by a fixed and floating charge on all the assets of the Group. It is repayable by 22 monthly instalments from 30 September 2021 of £86,000 and a final repayment of the outstanding balance on 31 October 2023 and bears interest at a floating rate of 5.1% over base rate. As at 31 March 2021 the Group owed £5.3m (2020: £0.9m). On 31 March 2021, the Group used this term loan to pay off £4.5m (2020:£4.5m) that was due on a credit facility and £0.7m (2020: £0.9m) that was due on a term loan, both from HSBC. A £0.5m overdraft facility with HSBC. The overdraft facility bears an interest rate of 5.3% over LIBOR on the drawn amount. As at 31 March 2021 the Group had not used this overdraft facility. A £1.5m growth capital loan with MEIF WM Debt LP. The loan bears a fixed interest rate of 8% per annum and is repayable in 15 quarterly instalments commencing on 30 September 2021. The loan is secured by a secondary fixed and floating charge on all the assets of the Group. During the current year, it was agreed with both HSBC and MEIF WM Debt LP to defer the capital repayment instalments from 30 June 2020 to 30 September 2021. The Group’s obligations under right of use assets are secured by the lessors’ title to the leased assets. Company Number 05452547 71 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 21 BORROWINGS (continued) Obligations under right of use assets by category at 31 March 2021 were as follows: Leased property Furniture, fixtures and equipment Computer equipment Motor vehicles Software Total £'000 251 1,404 1,655 £'000 106 108 214 £'000 74 121 195 £'000 178 112 290 £'000 71 22 93 £'000 680 1,767 2,447 Current Non-current Total The maturity of obligations under right of use assets at 31 March 2021 were as follows: Leased property Furniture, fixtures and equipment Computer equipment Motor vehicles Software Total £'000 £'000 £'000 £'000 £'000 £'000 251 259 726 419 1,655 106 87 21 - 214 74 84 37 - 195 178 101 71 19 11 3 - 290 - 93 680 550 798 419 2,447 Dilapidations Warranty £'000 65 - - 65 £'000 77 42 - 119 Total £'000 142 42 - 184 42 - 161 - (9) 56 42 (9) 217 Within 1 year 1 to 2 years 2 to 5 years More than 5 years Total 22 PROVISIONS As at 1 April 2019 Arising during the year Released during the year As at 1 April 2020 Arising during the year Utilised during the year At 31 March 2021 The warranty provision relates to the potential warranty claims that may come to fruition in the near future. The dilapidation provision relates to the cost for restoring leased buildings to the original state at inception of the lease agreement. These provisions are expected to be utilised as follows: Current Non-Current As at 31 March 2021 £'000 27 190 217 As at 31 March 2020 £'000 27 157 184 Company Number 05452547 72 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 23 SHARE CAPITAL Authorised: Ordinary shares of 1p each Allotted, issued and fully paid: Ordinary shares of 1p each As at 31 March 2021 As at 31 March 2020 No’s ‘000’s 200,000 £'000 2,000 No’s ‘000’s 200,000 £'000 2,000 50,004 500 50,004 500 The Company currently holds 29,000 Ordinary shares in treasury representing 0.06% (2020: 0.06%) of the Company’s issued share capital. The number of 1 pence Ordinary shares that the Company has in issue less the total number of Treasury shares is 49,975,002. Company Number 05452547 73 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 24 SHARE-BASED PAYMENTS Trakm8 Holdings PLC has issued options (under the Trakm8 2017 Unapproved Share Option Plan) to subscribe for Ordinary shares of 1p in the Company. The purpose of the Option Scheme is to retain and motivate eligible employees. The exercise price of all share options are at a premium to the mid-market closing share price for the day before the grant date except for options issued on the 25 November 2020 which were issued at the closing market price on the 24 November 2020. A vesting period of 3 years is applicable according to the terms of each scheme which specify the options will vest providing employees remain in service for 3 years from the date of grant. The maximum term of options granted is 10 years from grant date. All share options are equity settled. The fair value of the equity settled share options granted is estimated as at the date of grant using the Black Scholes option pricing model taking into account the terms and conditions upon which the options were granted. No performance conditions were included in the fair value calculations. During the year one tranche of options was awarded, tranche AC. The inputs to our Black Scholes pricing model were: 24-Jul-20 Grant date 13.06 Weighted average FV (pence) 32.50 Weighted average exercise price (pence) 99.3% Expected volatility (%) 5.0 Expected life of option 0.0% Dividend yield (%) Risk free (%) 0.8% The risk free rate of return is the yield on government gilt market price and the volatility has been based on historic share prices. Tranche AD Tranche ADE Tranche AE Tranche AF Tranche AG 24-Jul-20 27-Nov-20 12.13 14.38 20.00 20.00 18.50 32.50 99.4% 5.0 5.0 5.0 5.0 0.0% 0.1% 05-Aug-20 13.72 25-Nov-20 13.61 0.0% 0.8% 0.0% 0.8% 0.0% 0.1% 99.5% 99.2% 99.3% Options granted during the year were: Grant date 24-Jul-20 24-Jul-20 05-Aug-20 25-Nov-20 27-Nov-20 No of shares Option Exercise Price Date of expiry 750,000 350,000 25,000 100,000 250,000 33p 20p 20p 19p 33p 24/07/2030 24/07/2030 05/08/2030 25/11/2030 27/11/2030 A reconciliation of option movements over the year to 31 March 2021 is shown below; As at 31 March 2021 As at 31 March 2020 Share options Weighted average Exercise Share options Weighted average Exercise No 3,425,000 1,475,000 (550,000) 4,350,000 Price (p) 35 28 31 33 No 3,950,000 125,000 (650,000) 3,425,000 Price (p) 38 34 53 35 Outstanding at beginning of the year Granted during the period Forfeited during the period Outstanding at the end of the year Company Number 05452547 74 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 24 SHARE-BASED PAYMENTS (continued) The range of exercise prices of the outstanding options is 18.5 pence to 192.5 pence (2020: 19.5 pence to 192.5pence) and the weighted average remaining contractual life is 7.7 years (2020: 6.4 years). The Group charged £183,000 to the Statement of Comprehensive Income in respect of Share-Based Payments for the financial year ended 31 March 2021 (2020: £185,000). Share options exercisable at 31 March 2021 were 900,000 (2020: 675,000). 25 CASH GENERATED FROM OPERATIONS Loss before tax Depreciation (Profit)/Loss on disposal of fixed assets Net bank and other interest Amortisation of intangible assets Exchange movement Share based payments Operating cash flows before movement in working capital Movement in inventories Movement in trade and other receivables Movement in trade and other payables Movement in provisions Cash generated from operations Interest received Income taxes received Net cash inflow from operating activities 26 FINANCIAL COMMITMENTS As at 31 March 2021 As at 31 March 2020 £'000 £'000 (1,867) 781 318 487 1,992 (3) 183 1,891 634 1,166 70 33 3,794 78 865 4,737 (1,705) 699 - 406 2,194 (7) 185 1,772 693 589 (21) 42 3,075 12 1,028 4,115 At the Statement of Financial Position date, the Group had outstanding commitments for future minimum operating lease payments under non-cancellable operating leases, which fall due as follows: Operating Leases Other: Within one year In the second to fifth years inclusive 27 RELATED PARTY TRANSACTIONS As at 31 March 2021 As at 31 March 2020 £'000 £'000 11 1 12 15 27 42 A total of 1,000,000 (2020: 125,000) share options were granted during the year to nine key management personnel (2020: one). Company Number 05452547 75 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 28 FINANCIAL INSTRUMENTS Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Where appropriate, the Group seeks to mitigate potential adverse effects on its financial performance. Liquidity risk The Group’s objective is to maintain a balance between continuity and flexibility of funding through the use of borrowings and financial assets with a range of maturities. Borrowing facilities are monitored against the Group’s forecast requirements and it is the Group’s policy to mitigate the risk by maintaining cash reserves. Interest rate risk The Group's borrowings are linked to the Bank of England base rate (2020: LIBOR and base rate), the following table details the Group's sensitivity to an increase of 2% and 5% in these two rates. LIBOR Base rate LIBOR Base rate 2% As at 31 March 2021 Profit £'000 - (136) As at 31 March 2020 Profit £'000 (90) (48) 5% Profit £'000 - (340) Profit £'000 (225) (119) Currency risk The Group operates internationally although the majority of its sales are in sterling. Purchases of components are also made in US Dollars and Euros. The Group endeavours to minimise its foreign currency exposure by trading in Sterling wherever possible, or otherwise match inflows and outflows in its principal trading currencies. The following table details the Group’s sensitivity to a 10% and a 20% decrease and increase in the value of Sterling against the US Dollar and the Euro and the resulting effect on profit. The sensitivity analysis of the Group’s exposure to foreign currency risk at the year-end has been determined based upon the assumption that the increase in US Dollar and Euro exchange rates is effective throughout the financial year and all other variables remain constant. US Dollar Euro US Dollar Euro 10% decrease 10 % increase Year ended 31 March 2021 Profit & equity £'000 (127) (96) Year ended 31 March 2020 Profit & equity £'000 (97) (107) Year ended 31 March 2021 Profit & equity £'000 104 78 Year ended 31 March 2020 Profit & equity £'000 79 88 20% decrease 20 % increase Profit & equity £'000 (286) (215) Profit & equity £'000 (219) (241) Profit & equity £'000 191 144 Profit & equity £'000 146 161 76 Company Number 05452547 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 28 FINANCIAL INSTRUMENTS (continued) The Group has the following exposure to foreign currency denominated monetary assets and monetary liabilities in the Balance Sheet, translated into the sterling at the relevant year-end exchange rates: Financial assets / liabilities US Dollar Euro Sterling Total Credit risk Year ended 31 March 2021 Year ended 31 March 2021 Year ended 31 March 2020 Year ended 31 March 2020 Monetary Assets £'000 3 1 4 8,674 8,678 Monetary Liabilities £'000 57 199 256 15,825 16,081 Monetary Assets £'000 3 22 25 9,150 9,175 Monetary Liabilities £'000 69 240 309 13,166 13,475 The Group’s principal financial assets are bank balances, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables and the Group attaches considerable importance to the collection and management of trade receivables. The Group minimises its credit risk through the application of appropriate credit limits to customers based on an assessment of net worth and trading history with the Group. Standard credit terms are net 30 days from the date of invoice. Overdue trade receivables are managed through a phased escalation culminating in legal action. The credit quality of cash balances that are neither past due nor impaired can be ascertained with reference to the banks external credit ratings. All remaining financial assets are unrated. Credit rating (Fitch) AA- As at 31 March 2021 £'000 2,370 2,370 As at 31 March 2020 £'000 1,665 1,665 Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expense are recognised, in respect of each class of financial asset, liability and equity instrument are disclosed in note 4 to the financial statements. The directors do not consider that any of the cash balances are impaired. Company Number 05452547 77 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 28 FINANCIAL INSTRUMENTS (continued) Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The group's external borrowings are subject to covenants which are assessed periodically throughout the year. The covenants for the next financial year relate to an absolute EBITDA target and cash availability. In future years the covenants relate to cash flow and leverage requirements. The covenants were reset during the current year and the company complied with all covenant requirements during the period. The Group expects to meet the covenant requirements in the future periods. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total borrowings divided by total capital. Total borrowings include “current and non- current borrowings” as shown in the Consolidated Statement of Financial Position. Total capital is calculated as “capital and reserves” as shown in the Consolidated Statement of Financial Position plus total borrowings. The Group’s strategy has been to maintain gearing. This was achieved (removing IFRS 16 impact) through improved working capital management. Total borrowings (note 21) Total borrowings (excluding IFRS 16 impact) Total capital and reserves Total capital Total capital (excluding IFRS 16 impact) Gearing ratio Gearing ratio (excluding IFRS 16 impact) As at 31 March 2021 As at 31 March 2020 £'000 9,117 7,172 20,122 £'000 9,618 7,308 21,179 29,239 27,294 30,797 28,487 31% 26% 31% 26% At the year end the Group had total net borrowings of £6,747,000 (2020 : £7,953,000). This includes IFRS16 impact of £1,945,000. Assets as per Statement of Financial Position Receivables and Cash Trade and other receivables excluding prepayments Cash and cash equivalents Borrowings Trade and other payables excluding statutory liabilities and deferred revenue Company Number 05452547 As at 31 March 2021 £'000 6,308 2,370 8,678 As at 31 March 2020 £'000 7,510 1,665 9,175 Financial liabilities at amortised cost As at 31 March 2021 As at 31 March 2020 £'000 9,117 6,964 16,081 £'000 9,618 3,857 13,475 78 Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 28 FINANCIAL INSTRUMENTS (continued) Payable as follows On demand or within one year After one and within two years After two and within five years After five years Cash and cash equivalents As at 31 March 2021 £'000 7,137 3,296 5,228 420 16,081 As at 31 March 2020 £'000 4,462 5,699 2,655 659 13,475 Cash and cash equivalents comprise solely of cash in hand held by the Group. 29 BUSINESS COMBINATIONS Roadsense Technology Limited In 2017 financial year, the Group purchased 100% of the share capital of Roadsense Technology Limited. No acquisition costs were incurred in 2021 (2020: £52,000) relating to non-underlying charges under two separate agreements linked to the acquisition in the prior year. The costs incurred are directly linked to the acquisition and not as part of the ongoing underlying business. One agreement terminated on 31 July 2019, and the second agreement terminated on 31 March 2019. These costs has been recognised as an exceptional administrative expense in the consolidated statement of comprehensive income. Exceptional administrative expenses have been analysed in Note 9. 30 DIVIDENDS The Company is not proposing a final dividend for the year (2020: £nil). No Dividend was paid during the year (2020: £nil). 31 OPERATING LEASES AS LESSOR The Group rents out equipment under operating leases. Equipment rental income earned during the year was £43,000 (2020: £104,000). At the year end the Group had contracted with lessees of the Group for the following future minimum lease payments under non-cancellable operating leases. Within 1 year As at 31 March 2021 £'000 - As at 31 March 2020 £'000 43 - 43 Company Number 05452547 79 Trakm8 Holdings PLC Parent Company Statement of Financial Position As At 31 March 2021 ASSETS NON CURRENT ASSETS Investments Deferred tax asset CURRENT ASSETS Trade and other receivables Cash and cash equivalents LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings CURRENT ASSETS LESS CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON CURRENT LIABILITIES Borrowings NET ASSETS CAPITAL AND RESERVES Called up share capital Share premium account Merger reserve Treasury reserve Retained earnings Note As at 31 March 2021 £'000 As at 31 March 2020 £'000 4 5 6 7 7 8 11,429 218 11,647 11,246 127 11,373 11,342 403 11,745 11,197 1,009 12,206 (621) (855) (1,476) (604) (1,125) (1,729) 10,269 10,477 21,916 21,850 (5,815) (5,675) 16,101 16,175 500 14,691 627 (4) 287 500 14,691 627 (4) 361 TOTAL SHAREHOLDERS’ FUNDS 16,101 16,175 The parent company has taken the exemption conferred by s.408 Companies Act 2006 not to publish the statement of Comprehensive Income of the parent company with these accounts. The loss dealt with for the year in the parent company's financial statements was £257,000 (2020: loss £236,000). These financial statements on pages 80 to 88 were approved by the Board of Directors and authorised for issue on 28 June 2021 and are signed on their behalf by: John Watkins - Director Jon Furber - Director Company Number 05452547 80 Trakm8 Holdings PLC Parent Company Statement of Changes in Equity For The Year Ended 31 March 2021 Called up share capital £'000 500 - Share premium account £'000 14,691 - Merger reserve Treasury reserve Retained earnings £'000 627 - £'000 (4) - £'000 412 - TOTAL SHAREHOLDERS' FUNDS £'000 16,226 - - - - - - - - 185 185 - (236) (236) 500 14,691 627 (4) 361 16,175 - - - - - - - 183 183 - (257) (257) 500 14,691 627 (4) 287 16,101 Balance as at 1 April 2019 Shares issued IFRS2 Share-Based payment charge Loss for the year Balance as at 31 March 2020 IFRS2 Share-Based payment charge Loss for the year Balance as at 31 March 2021 Company Number 05452547 81 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements 1 ACCOUNTING POLICIES BASIS OF PREPARATION The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements made up to 31 March 2021. The financial statements of the parent company have been prepared in accordance with United Kingdom Accounting Standards - Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (“FRS 101”). The financial statements have been prepared on the going concern basis, under the historical cost convention and in accordance with the Companies Act 2006 as applicable to companies using FRS 101. The Company has taken advantage of the legal dispensation contained in Section 408 of the Companies Act 2006 allowing it not to publish a separate income statement and related notes. The Company has also taken advantage of the legal dispensation contained in Section 408 of the Companies Act 2006 allowing it not to publish a separate statement of other comprehensive income. The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101: • Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share—based payment’ (details of the number and weighted— average exercise prices of share options, and how the fair value of goods or services received was determined) • IFRS 7, ‘Financial Instruments: Disclosures’ • Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of assets and liabilities) • Paragraph 38 of ‘International Accounting Standard 1, Presentation of financial statements’ (IAS1) comparative information requirements in respect of paragraph 79(a)(iv) of IAS1 • The following paragraphs of IAS1, ‘Presentation of financial statements’: − 10(d) (statement of cash flows) − 16 (statement of compliance with all IFRS) − 38A (requirement for minimum of two primary statements, including cash flow statements) − 38B-D (additional comparative information) − 111 (cash flow statement informa(cid:415)on) − 134-136 (capital management disclosures) • IAS 7, ‘Statement of cash flows’ • Paragraphs 30 and 31 of IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective) • Paragraph 17 and 18A of IAS 24, ‘Related party disclosures (key management compensation) • The requirements of IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or more members of a group INVESTMENTS Fixed asset investments are stated at cost less impairment against the cost of investments. The carrying values of investments in subsidiaries are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. Cost includes directly attributable acquisition expenses. Company Number 05452547 82 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 1 ACCOUNTING POLICIES (continued) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents includes bank overdrafts where applicable. TRADE PAYABLES Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method. BANK BORROWINGS Borrowings are initially recognised at fair value, being proceeds received less directly attributable transaction costs incurred. Borrowings are subsequently measured at amortised cost with any transaction costs amortised to the statement of comprehensive income over the period of the borrowings using the effective interest method. TAXATION The tax expense represents the sum of the current tax expense and deferred tax expense. Current tax is based on taxable profits for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Statement of Financial Position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based upon tax rates that have been enacted or substantively enacted at the year end. Company Number 05452547 83 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 1 ACCOUNTING POLICIES (continued) EQUITY Equity comprises the following: Share capital represents the nominal value of equity shares. Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. Merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued on reverse acquisition of subsidiaries, net of expenses of the share issue prior to the date of transition to IFRS. Treasury reserve represents the cost of shares held in Treasury. Where any Group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company’s equity holders. Retained earnings represents retained profits and the share based payment reserve. SHARE-BASED PAYMENTS The Company has applied the requirements of IFRS 2 Share-based payments. The grant by the Company of options over its equity instruments to the employees of a subsidiary undertaking in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value of the equity instrument, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. At each balance sheet date, the Company revises its estimates of the number of options or shares that are expected to vest. The impact of any revision, if any, is recognised as a capital contribution with a corresponding adjustment to reserves. The fair value is measured by use of the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations. No expense is recognised for awards that do not ultimately vest. 2 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CRITICAL JUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES In the process of applying the Group’s accounting policies, which are described in note 1, management has made the following judgements that have a significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below). Company Number 05452547 84 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 2 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) CRITICAL JUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES (continued) INVESTMENTS CARRYING VALUE A full impairment review has been performed on a “value in use” basis, which requires estimation of future net operating cash flows, the time period over which they will occur, an appropriate discount rate and an appropriate growth rate. 3 PROFIT AND LOSS ACCOUNT As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the Company is not presented as part of these financial statements. The loss after tax for the year in the Company is £257,000 (2020: loss £236,000). Audit fees for the Company for the year were £3,000 (2020: £3,000). 4 INVESTMENTS Cost At 31 March 2020 Capital contribution in respect of share based payments At 31 March 2021 Subsidiaries £'000 11,246 183 11,429 The Directors believe that the carrying value of the investments is supported by their underlying net assets. Name of subsidiary Country of incorporation Nature of business Registered Office Trakm8 Limited England and Wales Development, manufacture, marketing and distribution of vehicle telematics Trakm8 s.r.o. Czech Republic Mapping services and distribution of vehicle telematics BOX Telematics Limited England and Wales Non-trading Route Monkey Limited Scotland Route optimisation 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG A7 Office Centre Praha 7 U Pruhonu 1588/11a 170 00 Czech Republic 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG Class of holding Ordinary Proportion held and voting rights 100% Ordinary 100% Ordinary 100% Ordinary 100% 85 Company Number 05452547 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 4 INVESTMENTS (continued) Name of subsidiary Country of incorporation Nature of business Registered Office Class of holding Proportion held and voting rights Interactive Projects Limited England and Wales Dormant Data Driven Telematics Limited England and Wales Dormant DCS Systems Limited England and Wales Dormant Roadsense Technology Limited England and Wales Dormant Trakm8 HK Limited Hong Kong Dormant 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG 4 Roman Park, Roman Way, Coleshill, West Midlands, B46 1HG Prosperity Centre, 25 Chong Yip Street, Kwun Tong, Hong Kong Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% The following dormant companies within the Group will take the exemption from preparing and filing financial statements for the year ended 31 March 2021 (by virtue of s394A and 448A of Companies Act 2006 respectively). As the ultimate parent company, Trakm8 Holdings PLC has guaranteed the debts and liabilities held within these companies as required under section 394C of the Companies Act 2006. Company Interactive Projects Limited Data Driven Telematics Limited DCS Systems Limited BOX Telematics Limited Roadsense Technology Limited Company registration number 4327499 5785552 9641691 3947199 8300339 The following companies within the Group will adopt the Department for Business, Innovation and skills audit exemption for the year ended 31 March 2020. As the ultimate parent company, Trakm8 Holdings PLC has guaranteed the debts and liabilities held within these companies as required under section 479A of the Companies Act 2006. Company Trakm8 Limited Route Monkey Limited Company Number 05452547 Company registration number 4415597 SC353016 86 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 5 TRADE AND OTHER RECEIVABLES As at 31 March 2021 £'000 11,318 6 18 11,342 Amounts due from subsidiary undertakings is unsecured, interest free and repayable on demand. Amounts due from subsidiary undertakings Social security and other taxes Prepayments and other receivables As at 31 March 2020 £'000 11,175 6 16 11,197 6 TRADE AND OTHER PAYABLES Trade creditors Amounts due to subsidiary undertakings Accruals and other creditors As at 31 March 2021 £'000 - 456 165 621 As at 31 March 2020 £'000 24 471 109 604 Amounts due to subsidiary undertakings is unsecured, interest free and repayable on demand. 7 BORROWINGS As at 31 March 2021 Loans As at 31 March 2020 Loans Current Non-current Gross £'000 902 5,898 6,800 Arrangement fee £'000 (47) (83) (130) Net £'000 855 5,815 6,670 Gross £'000 1,160 5,719 6,879 Arrangement fee £'000 (35) (44) (79) The loans are repayable as follows: Within one year After one and within two years After two and within five years £'000 855 1,385 4,430 6,670 Net £'000 1,125 5,675 6,800 £'000 1,125 4,862 813 6,800 Bank loans comprise the following: A £5.3m term loan with HSBC. The loan is secured by a fixed and floating charge on all the assets of the Group. It is repayable by 22 monthly instalments from 30 September 2021 of £86,000 and a final repayment of the outstanding balance on 31 October 2023 and bears interest at a floating rate of 5.1% over base rate. As at 31 March 2021 the Group owed £5.3m (2020: £0.9m). On 31 March 2021, the Group used this term loan to pay off £4.5m (2020:£4.5m) that was due on a credit facility and £0.7m (2020: £0.9m) that was due on a term loan, both from HSBC. A £0.5m overdraft facility with HSBC. The overdraft facility bears an interest rate of 5.3% over LIBOR on the drawn amount. As at 31 March 2021 the Group had not used this overdraft facility. A £1.5m growth capital loan with MEIF WM Debt LP. The loan bears a fixed interest rate of 8% per annum and is repayable in 15 quarterly instalments commencing on 30 September 2021. The loan is secured by a secondary fixed and floating charge on all the assets of the Group. During the current year, it was agreed with both HSBC and MEIF WM Debt LP to defer the capital repayment instalments from 30 June 2020 to 30 September 2021. Company Number 05452547 87 Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 8 CALLED UP SHARE CAPITAL AND RESERVES Details of share capital and share options are shown in notes 23 and 24 to the consolidated financial statements above. Details of the Company's other reserves are shown in note 4 to the consolidated financial statements. 9 GUARANTEE The borrowings of the company is guaranteed by the assets of subsidiary company, Trakm8 Limited and Route Monkey Limited. 10 RELATED PARTIES The company has taken advantage of the exemptions conferred by IAS 24 from the requirement to disclose transactions between wholly owned subsidiary undertakings. A total of 1,000,000 (2020: 125,000) share options were granted during the year to nine key management personnel (2020: one). 11 EMPLOYEES AND DIRECTORS The Directors of the Company were paid by Trakm8 Ltd for their services to the Group. The Company had no employees (2020: £nil) during the year (other than the Directors). See remuneration report on page 28 for further details. Details of Group Directors’ fees and salaries, bonuses and pensions (including that of the highest paid Director) have been audited and are given in the Directors’ Report on page 28. 12 DIVIDENDS The Company is not proposing a final dividend for the year (2020: £nil). No Dividend was paid during the year (2020: £nil). Company Number 05452547 88 Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC Statements Officers and Advisors for Trakm8 Holdings PLC Directors Matthew Cowley Tim Cowley Keith Evans Jon Furber John Watkins Mark Watkins Peter Mansfield Nadeem Raza Penny Searles (appointed 18 June 2020) Company Secretary Jon Furber Registered Office 4 Roman Park, Roman Way, Coleshill, Birmingham, West Midlands, United Kingdom, B46 1HG Principal Bankers HSBC Bank plc, 6 Broad Street, Worcester, WR1 2EJ Independent Auditors Cooper Parry Group Limited, Park View, One Central Boulevard, Blythe Valley Park, Solihull, B90 8BG Nominated Adviser and Broker Arden Partners Address: 125 Old Broad Street, London, EC2N 1AR Significant Shareholders Significant Shareholder Number of shares Percentage Holding Microlise Group Holdings Limited John Watkins Edric Property & Investment Company Hargreaves Lansdown James Hedges Tim Cowley HSDL Nominees Matt Cowley 10,000,000 7,768,768 3,815,000 3,457,406 2,438,766 2,268,127 2,341,367 1,994,203 Company Number 05452547 20.0% 15.6% 7.6% 6.9% 4.9% 4.5% 4.7% 4.0% 89 

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