Trakm8 Holdings PLC
Annual Report 2023

Plain-text annual report

(cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 2023 Annual report and accounts 2023 Trakm8 Holdings PLC Company Number 05452547 1 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Driving a greener, safer, connected tomorrow by providing actionable insights to customers through innovative products and solutions. STRATEGIC REPORT Overview At a Glance Cutting-Edge Innovation Executive Chairman’s Statement Our Strategy Chief Financial Officer’s Report Key Performance Indicators Risk Management Framework Principal Risks and Uncertainties Driving our Greener Tomorrow GOVERNANCE REPORT Chairman’s Introduction The Board of Directors Governance Principles 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 8 11 13 16 18 20 23 24 24 26 32 38 45 46 47 48 49 88 89 90 97 Company Number 05452547 2 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report OVERVIEW Financial Group Revenue Adjusted Profit before tax (Loss) before tax (Loss)/Profit after tax Net cash generated from operations Adjusted basic earnings per share Basic (Loss)/earnings per share Operational FY-2023 £20.2m £0.3m (£1.2m) (£0.8m) £4.3m 0.95p (1.57p) FY-2022 £18.1m £0.0m (£0.1m) £0.2m £3.8m 0.41p 0.37p (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) 12% increase in revenues 32% increase to over 348,000 connected devices in operation (FY-2022: 264,000) 7% increase in recurring revenues to £10.5m (FY-2022: £9.8m) 54% increase in software revenues to £2.1m (FY-2022: £1.4m) Substantial contract extensions with Iceland Foods and Sainsburys Significant reduction in indirect costs following strategic review Successfully navigated a large number of supply chain challenges but at an increased cost Continued inflationary costs pressures across all areas of operations Outlook (cid:120) Insurance expected to be impacted by reinsurance cost and capacity issues in H1 (cid:120) H1 revenues expected to be in line with prior year but with lower operating costs (cid:120) The Board expects full year to continue trend of improved performance with strong second half revenues, including from a significant software contract Company Number 05452547 3 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) AT A GLANCE Connected Business Trakm8 is a UK-based AI 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 uses AI based 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 OBD devices to 4G integrated telematics cameras. We currently have over a third of a million devices in operation. Number of connected devices 348,000 (FY-2022: 264,000) Fleet Management & Optimisation Fleet Management Trakm8 has market leading software solutions for the entire fleet management sector built out in our evergreen 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. AI 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 FY-2023 revenue of £11.4m (FY-2022: £11.3m) of which £7.0m is recurring revenue (FY-2022: £6.9m) and £1.9m is software sales (FY-2022: £1.2m) Number of connected devices 69,000 (FY-2022: 71,000) Company Number 05452547 4 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 AI algorithms allow insurance companies to speed up and better control the First Notification of Loss (FNOL) claims process, including crash reconstruction. 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 vehicle 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 tailored solutions to the vehicle leasing companies to reduce costs in the management of service, repair and maintenance outcomes. Market leading EV applications have been created. Revenue FY-2023 revenue of £8.7m (FY-2022: £6.9m) of which £3.4m is recurring revenue (FY-2022: £2.9m) and £0.2m is software sales (FY-2022: £0.2m) Number of connected devices 279,000 (FY-2022: 193,000) Clients The Group is focusing on client relationships with large corporates. These relationships often enable us to cross-sell solutions and facilitate a high rate of contract renewals and extensions. Company Number 05452547 5 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) CUTTING-EDGE INNOVATION During a year of supply chain challenges and a revised and refocussed strategy, our core line of products has been refreshed and package protected for a number of years to come through the use of the latest generation components with options for evergreen communication technologies. Streamlined Product Offerings Connect 200 - 12V Self Install Device Compact and cost-effective self-fit device delivering driver location and behaviour analysis, business-private recording and crash detection to both our Fleet and Insurance customers helping manage risk and cost Connect 330 - OBD Self-Install Device Our market leading Connect 330 is one of the smallest self fit OBD devices on the market delivering driver behaviour analysis, crash detection and vehicle diagnostics including true odometer and vehicle fault codes. This provides a data rich, lower overall cost solution to Fleet and Insurance customers alike Connect 430 - Wired Device Providing the same data rich insights, the C430 provides insurers and fleets an alternative wired solution ensuring complete vehicle park coverage. Available as engineer fitted for covert applications as well as a lower cost self-fit option. The C430 can be paired with in cab driver feedback to help drive driver engagement to increase fleet efficiencies Connect 500 - Ruggedised Wired Device The rugged, waterproof, IP69K rated device has been designed to provide detailed driver and vehicle information along with the option of tachograph integration. Aimed at our Fleet customers this device can be used across multiple platforms including HGV, trailers and non-road assets driving efficiency savings through improved utilisation and behaviour RH600 - Integrated Telematics 4G Camera Our flagship connected 4G camera builds on our marketing leading telematics adding event driven and on demand video and image capture helping manage drivers and reduce insurance costs. The optional driver facing or remote camera helps detect high risk behaviours and allow delivery of valuable driver coaching. Insight Built on our evergreen microservice platform, Insight is our highly flexible portal for delivering valuable actionable data from vehicles and devices. Available in packages ranging from basic Fleet telematics to our fully integrated telematics and Optimisation to our insurance risk management solution, Insight uses our AI algorithms to increase productivity by up to 33% and cut fuel bills and accident rates by up to 20%. Company Number 05452547 6 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) Future Product Development RH800 –Integrated Telematics 4G Multi-cam Device The RH800 will provide driving behaviour data via an on-board accelerometer which allows for a camera to be activated on parameters set by the customer via our Insight platform inclusive of FNOL. Integrating HD camera functionality with our market leading telematics means that users can benefit from a wealth of features, including driving behaviour scoring, vehicle health alerts, driver ID support, remote tachograph downloads, livestreaming and in-cab driver feedback via our accessory range. Trakm8’s RH800 connected camera solution will provide up to 4 channels of HD video and image uploads. We also have an extensive range of camera lenses and accessories that allows for bespoke camera fitment requirements. This is the perfect solution to help fleets become DVS compliant. Insight Incident Workbench Trakm8’s Incident Workbench tool helps customers investigate incidents, including the context around the event, the build-up to the incident and the activity directly afterwards. This is so you can gain a comprehensive understanding of an incident by utilising telematics and optionally, camera data. Main features: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) Incident investigation and reconstruction workbench Driving behaviour visibility Connected camera integration Driver incident report data Area of impact visualiser Vehicle health data Local weather Company Number 05452547 7 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) EXECUTIVE CHAIRMAN’S STATEMENT The revenues of the business increased by 12% and posted an adjusted profit before tax of £0.3m (FY-2022: £0.0m). Loss before tax was £1.2m (FY-2022: £0.1m) and Loss after Tax was £0.8m (FY-2022: profit £0.2m). In September last year, the Company announced a restructuring to focus on those market and products where we have been most successful. This was largely completed during the year and once complete will reduce our annual cash outflow by over £2.5m, helping to mitigate the effect of inflationary pressures on remaining costs. We reduced our headcount down to 121 which did not impact our rate of order entry overall and resulted in a profitable second half to the year. Connections grew by 32% to 348,000 (FY-2022: 264,000). Telematics for insurance/automotive connections increased by 45%. At the year-end, we had 279,000 insurance/automotive connections (FY-2022: 193,000). The total number of fleet management connections decreased by 3% over the year to 69,000 (FY-2022: 71,000). Recurring service revenues increased by 7% to £10.5m (FY-2022: £9.8m). The impact of the war in Ukraine on inflation and COVID induced component shortages have been widely reported. Trakm8 navigated through these, avoiding any missed customer deliveries and managed to develop revised devices to ensure continued supply where necessary. This did however negatively impact direct costs. It was pleasing to maintain strong cash generation in the business with a cash flow from operations of £4.3m (FY-2022: £3.8m). The Company paid down the final £0.9m of HMRC deferred payments on VAT/PAYE/NI. This resulted in a free cash flow of £0.9m (FY-2022: £0.6m) and net debt, excluding IFRS16 lease liabilities, increased by £0.3m to £5.6m. The Group had £1.1m cash on hand and an undrawn overdraft facility of £0.5m. The Group issued unsecured convertible loan notes amounting to £1.58m with a repayment or conversion in September 2025. The Group also extended its loan facilities with HSBC to 31 July 2024 maintaining existing terms. Overheads excluding exceptional costs increased by 16% to £11.9m with the restructuring and cost saving completed mid way through the year. Headcount reduced by 24% during the year with underlying overall payroll costs 16% lower than at the end of the previous year despite significant salary inflation. Trakm8 has also made good progress with the process of Science Based Targets with the goal of achieving net zero emissions by 2050. A good number of contract wins and renewals were secured with both fleet and insurance clients showing our commitment to long term customer relationships. Research and development (‘R&D’) Trakm8 has maintained a significant level of investment in R&D for another year but following a period of significant investment has been able to reduce the amount invested going forward. The Board believes that this new lower level of investment is necessary and sufficient to retain a portfolio of market-leading technology. Over time as revenues grow, we expect that this investment as a proportion of revenues will further decline. 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 update of all our devices to the most modern and most available components, finalisation of a multi-camera solution, development of the feature set in Insight particularly for our two major optimisation clients, 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. Company Number 05452547 8 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED) ESG The Group provides solutions that significantly improve the carbon footprint of clients’ operations through improved efficiencies and reduced risk costs. Trakm8 also provides device exchange programmes to recycle hardware thereby reducing the need to make new ones and reducing the cost of telematics to our clients. We also provide business optimisation consultancy for clients to assess opportunities for further reducing their carbon footprint. Trakm8 is also committed to Science Based Target initiative (SBTi) with the objective to reduce our Scope 1 and Scope 2 emissions and reach Net Zero by 2025. All our company cars are now fully electric and we are analysing all our uses of energy to minimise our impact on the environment through further internal projects. We will also work with our supply chain to try to minimise our sourcing from suppliers not committed to reducing their carbon impact. 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-2023 with reductions across the business. In total, our staff numbers have reduced by 24% over the year. Trakm8 has an exceptionally talented 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 9 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED) Outlook In the trading update in April this year, we advised the market that there had been a significant impact on the insurance market with increased re-insurance costs and some insurance capacity being removed from the market. We expected that this would impact revenues for the first quarter. This has turned out to be correct and we now expect that this will continue to significantly impact the second quarter of the financial year. We expect that Group revenues in the first half of the year will be broadly in line with last year but with much lower operating costs. We secured several new Insurance contracts this year and last. The capacity constraints are expected to diminish in the last calendar quarter of 2023 and therefore the Insurance activity is expected to be strong in the second half of the year. As with last year, we expect that trading will be significantly loaded on the second half of the financial year when we also expect to secure a significant software contract. The Board expects that FY2024 will continue the trend of recent years with improving operational and financial results. John Watkins EXECUTIVE CHAIRMAN 3 July 2023 Company Number 05452547 10 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 uses AI based evergreen solutions 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. Progress in 2023 The total number of devices in operation increased by 32% in FY-2023. Strong device sales from our Insurance customers resulted in a 45% increase in connections, net of cancellations. Fleet installed base decreased by 3%. Focus for 2024 We aim to grow the number of installed devices and connections with more focused marketing spend and concentrating on growing revenues with new and existing corporate clients rather than focusing on the SME space. 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 provide wider and more analytics to increase the “share of wallet” in this space. We are increasing our sales headcount in the insurance area. 2) Delivering a cutting-edge solutions portfolio We plan to maintain the revised level of investment in research and development, following our change of strategy during the year, to maintain our market-leading solution portfolio and to meet the demands of our customers. Progress in 2023 The Group focused on improving the entire range of devices to update to the most modern, available components and finalised a multi-camera solution. The Insight Optimisation solution has been expanded to meet the requirements of our key corporate clients. The insight platform has progressed so well that we deem it is now in the maintenance phase of life having complete its core development. Improved AI algorithms for crash detection, crash reconstruction, driver scoring and ADAS continued to be developed. Company Number 05452547 11 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) The Group reduced the annual expenditure on R&D now that the core products and solutions have generated such good customer satisfaction. Focus for 2024 We will operate with our reduced but still substantial expenditure in R&D this year focusing on our core areas of expertise. We will continue developing products and solutions to meet the demands of our customers and market trends based on our existing platform. 3) Streamlining our internal operations The Group will continue to focus on improving operational efficiencies and its costs as a percentage of revenues. Progress in 2023 The Group identified another £2.1m of annualised operational cost savings in both direct and indirect costs, despite revenues increasing. The strategy announced last September to focus on the activities we have been most successful at has shown good success with higher revenues since then and lower operational costs. Focus in 2024 In the face of continued inflationary pressures, we will continue to seek cost reduction activities particularly in respect of hosting, communications, rent, labour efficiency and energy. These are likely to involve some capital expenditure but with rapid pay back. Company Number 05452547 12 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) CHIEF FINANCIAL OFFICER’S REPORT Group Revenue (£’000) of which, Recurring Revenue (£’000) (Loss) before tax (£’000) (Loss)/Profit after tax (£’000) Adjusted Profit before tax1 (£’000) Basic (Loss)/earnings per share (p) Adjusted basic earnings per share (p) 1 Before exceptional costs and share based payments Revenue 2023 20,197 10,466 (1,243) (783) 306 (1.57) 0.95 2022 18,111 9,806 (122) 187 3 0.37 0.41 Change +12% +7% -919% -512% +10,100% -516% +137% Group revenue increased by 12% to £20.2m (FY-2022: £18.1m) with strong second half revenues of £11.2m versus first half revenues of £9.0m. Insurance and Automotive revenues grew by 26% to £8.7m (FY-2022: £6.9m) and benefitted from a full year of shipments to new customers launched late last year, driving both increased device sales and associated service and maintenance fees. The latter part of the period saw further contract wins and extensions adding additional customers to increase the diversity and size of our Insurance client base. Fleet and Optimisation revenues increased to £11.4m (FY-2022: £11.3m) inclusive of £1.9m of software sales (FY-2022: £1.2m) following strong contract extensions in the second half of the period with both Iceland and Sainsburys. This resulted in second half revenues increasing to £6.57m versus £4.83m for the first six months. Recurring revenues remained strong at £7.0m (FY-2022: £6.9m) with slightly higher attrition in device connections being offset by increased service fees per device as we continue to add features and benefits to our solutions to both new and existing customers alike. Loss before tax The Group reported a loss before tax of £1.2m (FY2022: £0.1m). Gross margin value for the year, inclusive of exceptional cost of sales, increased to £12.5m (FY-2022: £11.1m) and percentages were slightly increased to 61.8% (FY-2022: 61.3%). The ongoing impact of COVID continued to drive significant cost pressures in material procurement during the first half of the year, including £0.2m of exceptional costs as we maintained continuity of supply to our customers. This was offset in the second half with significant high margin software sales and the supply of materials returning to a less distressed state and therefore lower exceptional costs of just £0.05m. Whilst total administration costs increased during the year, we did complete a change in strategy as announced in September 2022 which significantly reduced operational costs ensuring a reduced cost base for future periods. This coupled with improved, higher margin trading resulted in a profit before tax of £1.2m in the second half of the year as expected, compared to a first half loss before tax of £2.4m. This was despite inflationary pressures in our remaining costs. Company Number 05452547 13 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) Adjusted Profit before tax The Group maintained the progress of the prior year with an adjusted profit of £0.3m (FY-2022: £0.0m). Improved gross margins were offset by inflationary pressures and increased costs with the most significant increases being Real Estate costs, Interest and Amortisation of £0.2m, £0.1m and £0.2m respectively. The reduction in headcount did result in monthly payroll spend reducing by 28% helping reduce second half expensed staff costs by £0.6m. Exceptional Costs Exceptional costs totalled £1.5m (FY-2022: £0.5m) and were dominated by the costs of our restructuring efforts as previously discussed. These costs include staff costs as our head count reduced from the beginning of the period by 24% to 121 along with associated professional fees incurred in executing our plan. £0.3m of premium material costs were incurred to ensure delivery of products to our customers. Other COVID costs include a contract write down as termination for a Fleet customer’s contracts was agreed due to their trading performance during and since the pandemic. Balance Sheet Non-Current Assets Net Current Assets Non-Current Liabilities Net Assets 2023 £’000 26,200 1,582 8,653 19,129 2022 £’000 25,874 1,704 7,702 19,876 Net Assets decreased by £0.7m to £19.1m (FY-2022: £19.9m) reflecting the loss for the year, after deducting the IFRS2 Share based payments charges. Non-current assets increased by £0.3m to £26.2m (FY-2022: £25.9m). This is due to a £0.3m reduction in right of use assets due to depreciation offset by a £0.3m increase in Intangible assets and £0.3m increase in Property, plant and equipment. Intangible assets increased due to the continued, albeit reduced, investment in development in both software and hardware with capitalised development costs in the year totaling £2.7m (FY-2022: £2.9m), offset by amortisation of £2.3m (FY-2022: £2.1m). Non-Current Liabilities increased during the year with the issue of a new £1.58m convertible loan note which helped finance our change of strategy and restructure. This was offset by a full year of capital repayments to both HSBC and Maven following their recommencement in the second half of FY-2022. Company Number 05452547 14 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) Cash Flow Net Cash generated from operations Investing activities Free Cash Flow1 Financing activities Increase/(Decrease) in Cash in Year Net Debt2 2023 £’000 4,314 (3,419) 895 (780) 115 5,618 2022 £’000 3,810 (3,254) 556 (1,992) (1,366) 5,395 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-2023 net debt excludes £1.3m IFRS 16 lease liability. Cash from operating activities increased by £0.5m to £4.3m (FY-2022: £3.8m) with improved working capital management. This was despite the final repayment of £0.9m to HMRC under the time to pay agreement negotiated at the end of FY-2021. Cash from operating activities also included R&D tax credit cash receipts of £0.7m (FY-2022: £0.7m) which reflects the Group’s continued investment in cutting edge development. Free cash inflow of £0.9m (FY-2022: £0.6m) is due to the Net Cash generated from operating activities as detailed above, offset by cash outflows from investing activities which increased by £0.2m to £3.4m (FY-2022: £3.2m). Financing activities was an outflow of £0.8m (FY-2022: £2.0m). A full year of repayments in relation to our agreements with HSBC and Maven drove outflows of £1.1m (FY2022: £0.7m) but new unsecured convertible loan notes were issued totaling £1.58m which assisted the financing of our restructuring activities. Net Debt Net debt excluding IFRS 16 lease liability of £1.3m (FY-2022 £1.6m) increased by £0.3m to £5.6m (FY-2022: £5.4m). Cash balances total £1.1m (FY-2022: £1.0m) and total borrowings including IFRS16 lease liability of £1.3m totals £6.9m (FY-2022: £6.9m). Borrowing comprised £4.1m (FY-2022: £4.9m) term loan with HSBC, a £0.8m (FY-2022: £1.2m) term loan with MEIF WM Debt LP, Unsecured Convertible Loan Notes of £1.6m (FY- 2022: £nil) and £1.6m (FY-2022: £2.0m) of obligations under Right-to-use lease liabilities. In addition, at the year end, the Group had a £0.5m unused overdraft facility with HSBC. Company Number 05452547 15 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) KEY PERFORMANCE INDICATORS Achieving our objectives The Board monitors the following key performance indicators to ensure the objectives of the Group are being achieved. Solutions Revenue £20.2m: 2023 £18.2m: 2022 £16.0m: 2021 Recurring Service Revenue £10.5m 2023 £9.8m: 2022 £9.4m: 2021 Connected devices - Insurance/Automotive 279,000: 2023 193,000: 2022 184,000: 2021 Connected devices – Fleet Management 69,000: 2023 71,000:2022 70,000: 2021 Performance in 2023 New contract wins in Insurance drove strong growth in Insurance revenues. Contract extensions and upgrades in Fleet increased software revenues. Higher fees per device also increased Fleet revenues. Focus for 2024 Sales and marketing spend will focus on core corporate opportunities both with existing and new clients. Additional sales resource will be added to focus on broadening our Insurance customer base. Performance in 2023 Total recurring revenues earned during the year increased by 7% to £10.5m due to the increased number of connections and higher per device service fees on Fleet. Focus for 2024 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 by increasing our data analytics services. Performance in 2023 This refers to the amount of telematics devices reporting in operation from our insurance & automotive customers. Connected devices in this market increased by 45% due to growth from newly launched customers. Focus for 2024 Continue to expand the number of Insurance clients and benefit from growth at existing customers. Benefit from the expansion of the connected car services. Performance in 2023 This refers to the amount of telematics devices in operation from our fleet customers. The total number of devices from our Fleet business decreased by 3% due to slightly increased levels of attrition. Focus for 2024 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. Company Number 05452547 16 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) KEY PERFORMANCE INDICATORS (CONTINUED) Adjusted profit/ loss before tax Gross Margin £0.3m Profit: 2023 £0.0m Profit: 2022 £0.3m Loss: 2021 61.8%: 2023 61.3%: 2022 58.4%: 2021 Net cash generated from Operating Activities £4.3m: 2023 £3.8m: 2022 £4.7m: 2021 Performance in 2023 Adjusted profit before Tax (before exceptional costs and share based payments) was £0.3m higher than the prior year as a result of higher revenues. Performance in 2023 Gross margin percentage slightly increased to 61.8%. This small increase was due to higher levels of software sales offset by increased direct material costs. Performance in 2023 Cash generation from operating activities improved on the prior year despite a HMRC debt repayment of £0.9m through improved working capital management. Focus for 2024 The Group aims to achieve improvement of revenues combined with a lower cost base as a result of the significant cost savings realised over the last few years. Focus for 2024 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. Focus for 2024 Increase levels of cash generation from Operating Activities through higher profitability. Further focus on working capital improvements having fully repaid HMRC in 2023. Company Number 05452547 17 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 18 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 in conjunction with the Board, 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 19 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid: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 Deteriorating economic climate 1, 2 Increase in operational costs Reduction in revenues Adverse working capital movements Cyber-attack and data security 2 Reputational impact Deterioration in customer relations Liability claims The Group like many other businesses and individuals across the UK and Europe has experienced increases in costs through the last 12 months. We continue to strive for reductions in these through regular review and projects to gain efficiency savings wherever possible. Our Insurance revenues are linked to the sale and renewal of Insurance policies which can be affected by Insurance Premium capacity and cost along with the availability of practical driving tests. In recent years, we have increased the diversity and quantity of Insurance customers making the business more resilient to any deteriorating economic conditions or temporary market changes. In challenging times, Fleet customers can reduce or delay investment decisions but our products and services are well placed to help customers achieve efficiency improvements and cost reductions which continues to make it a compelling solution even in challenging market conditions. Our recurring service revenue model also ensures revenues from the existing customer base. We regularly monitor our sales order book and pipeline to review our performance, make decisions on discretionary costs including sales and marketing investments and review our commitments with supply chain to mitigate challenges wherever possible. We have maintained our ISO 27001 accreditation. We continue to make considerable investments in security and systems for both our internal data and customer data, including a review by an independent CISO. We review next generation hardware and software solutions coming to market to ensure we make use of these and reduce the risk of a cyber event. We operate a secure development lifecycle and undertake regular independent penetration testing of our devices and hosting environments from CREST certified testers. The Group also ensures adequate insurance is in place in the event of a Cyber event. Company Number 05452547 20 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) PRINCIPAL RISKS AND UNCERTAINTIES (continued) Principal Risk Attracting and maintaining high quality employees 1,2,3 Operating in a fast moving technology industry where we will always be at risk from new products being launched 1,2 Significant operational failure 2 Potential Impact Mitigation Loss of key personnel We provide interesting work within a growing sector where we have significant opportunity and maintaining this is key to employee retention. To complement this, regular reviews of market rates ensure competitive renumeration packages. Potential business disruption Breakdown of communication and misalignment Decelerating sales growth and affecting profit Loss of significant customer Delay in achieving projected revenues OEM fit telematics to all strategy Autonomous cars Reputational impact Deterioration in customer relations Reduction in revenues, profitability and cash generation Contractual penalties and litigation Company-wide 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 and provide flexibility to the team wherever possible. We heavily invest in research and development to ensure we are at the forefront of telematics technology. We are device agnostic and will interface into OEMs and autonomous vehicles as a central data hub. Expansion of number of significant customers reduces the risk of an individual loss. Our recent refresh of all our products means customers are able to select 4G enabled devices across our product range meaning a future proof field population for their assets. We undertake rigorous testing using our in-house testing team, synthetic testing has been enhanced by retrofitting 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. 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. 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. As we continue to add large clients to our customer base, in some instances the contractual arrangement includes SLA penalties. We mitigate this issue through continual monitoring of our platforms and ongoing investment in our evergreen platform to ensure operational capacity at all times. 21 Company Number 05452547 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) PRINCIPAL RISKS AND UNCERTAINTIES (continued) Potential Impact Mitigation Reputational Impact 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. Principal Risk Adverse mobile network changes 2 Access to long term and working capital 1,2 Electronics supply chain under constraint 1,2 Deterioration in customer relations Reduction in revenues, profitability and cash generation Ability to deliver business plans Long lead-times Cost Pressure Customer deliveries delayed Business disruption from Communicable Diseases 1,2,3 Supply chain disruption due to Communicable diseases such as COVID-19 Potential outbreak of infection in members of staff Reduced trading We rely on mobile network suppliers to provide a quality of service and investment in suitable reliable infrastructure. The same is true for the GPS network and the Internet. We maintain relationships for the supply of mobile network services to provide mitigation for any supply or service-related issues. We maintain regular discussions with banks and other financial institutions. We regularly review medium term capital requirements. The past 18 months have been challenging and significant costs and delays were encountered - there are now signs that this constraint has significantly reduced. Whilst the ongoing war in Ukraine has yet to effect our supply chain, it remains a risk should this escalate or widen in scale. As a fully vertically integrated business our design engineers work alongside supply chain to mitigate these issues with huge success to date and the ability to respond to future challenges should they arise. We continue to have the support of our valued world class distributors and manufacturers in this activity. As an additional mitigation, commitments to supply chain have been extended to try and ensure continuity of supply for future months. We monitor our supply chain closely and working with our distributors and manufacturers maintain order coverage to ensure enough inventory to mitigate short term disruptions. Many of our teams continue to employ a hybrid approach to office and home working with the ability to switch to fully remote should it be required. Our recurring revenue model ensures revenues and cash are generated from the existing customer base mitigating any short term reductions in trading. Company Number 05452547 22 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Strategic Report (Continued) DRIVING OUR GREENER TOMORROW For many years, Trakm8’s market leading solutions have helped customers reduce their impact on the environment around them and we are passionate about continuing this with both new and existing customers. We estimate that our current Fleet business alone saves in excess of 50,000 tonnes of CO2 per year through improved behaviours and optimised use of assets, far outweighing our own emissions through trading. Through reduced fuel consumption, reduction in mileage using optimisation and reduced accident incident rates, we drive real change for our customers and partners. This is supported by our inclusion in the London Stock Exchange Green Economy Mark which recognises organisations contributing to wider environmental objectivew. We take our own responsibilities towards sustainability seriously and have worked hard to minimise our impact supported by our ISO 14001 certification which has been held for many years. In addition, we have now applied to join the Science Based Targets Initiative (SBTi – www.sciencebasedtargets.org). Our Greenhouse gas (GHG) emissions are as follows: Emissions from combustion of fuel in tCO2e (Scope 1) Emissions from purchased electricity in tCO2e (Scope 2) Emissions from other purchasing activities in tCO2e (Scope 3) Total Emissions tCO2e Grams of CO2e per £ revenue FY-2023 FY-2022 35.70 166.24 73.83 144.29 FY-2018 (Comparison Year) 112.71 160.28 3,688.01 3,294.84 3,854.12 3,889.95 192.60 3,512.96 193.97 4,127.11 215.57 We continue to strive for improvements and initiatives planned for the coming period are as follows: - - - Source Green supply of gas and electricity for all UK sites as soon as possible Implement salary sacrifice scheme allowing our colleagues to transition to low emission vehicles and reduce impact of commuting Continue to support customers in increasing their rate of device recycling By order of the Board Jon Edwards COMPANY SECRETARY 3 July 2023 Company Number 05452547 23 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) CHAIRMAN’S INTRODUCTION The Board and its Committees are responsible for corporate governance and determining, implementing and reviewing the strategy, budgeting and corporate actions of the Group. The Board is always looking to deliver high standards of Corporate Governance using its knowledge and the framework put in place to help achieve this. This ensures that the duties to shareholders, employees and other stakeholders are understood and delivered as expected. The Chairman has ultimate responsibility for corporate governance matters. No key corporate governance matters have occurred during the year. The remainder of this report outlines the members of the Board and the Group’s governance principles. THE BOARD OF DIRECTORS A summary of the career history of each of the Directors is given below providing an overview of their vast knowledge and experience in senior roles across multiple positions and industries. John Watkins Executive Chairman John Watkins has a Masters’ 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 three 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. Company Number 05452547 24 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) BOARD OF DIRECTORS (continued) Jon Edwards Chief Financial Officer Jon joined Trakm8 in 2007 as part of the Finance department. He held the position of Group Financial Controller for six years and in that time was responsible for the integration of acquisitions into the Group’s finance functions & also gained his Association of Accounting Technicians qualification. In 2016 Jon moved into the Operations team where he held several positions, most recently Operations Director before being appointed as CFO in October 2021. Mark Watkins Chief Operating Officer Mark has a Masters’ 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. 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 Madeline Cowley, he founded Trakm8 in 2002 and is now responsible for the Group Product Strategy and the Advanced Engineering function. Madeline Cowley AI Director One of the founders of Trakm8 along with Tim Cowley, Maddie 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, Maddie now leads the in-house AI team and is passionate about algorithms, machine learning, computer vision and data science. Company Number 05452547 25 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) GOVERNANCE PRINCIPLES The Directors recognise the importance of sound corporate governance and have therefore adopted the Quoted Companies Alliance (QCA) code, which is reviewed annually. The Directors have developed procedures to ensure that the Group complies with the QCA code, in line with its size and stage of corporate evolution. These procedures are set out below. Where the Group does not fully comply, the reasons for the non- compliance are explained and the alternative procedures put in place are also set out. The QCA is constructed around ten broad principles and a set of related disclosures. Principle 1. Establish a strategy and business model which promote long-term value for shareholders Trakm8 Holdings PLC is a leading supplier of fleet, insurance and automotive solutions that helps drive the reduction of risk, fuel consumption and insurance premiums, while improving productivity, safety and compliance. The principal aim of the Group is to increase use of its IP owned hardware and AI based algorithms driving continual growth in its connections and therefore its SaaS recurring revenues. Despite the recent short-term impact of COVID-19, in the long term our target is still to achieve 1 million connections to our systems. We currently have over 348,000. This substantial increase will provide the level of profitable growth and cash generation that should increase the Group’s share price substantially. The Group has specific growth plans in place across its two business units: Insurance and Automotive and Fleet and Optimisation. Progress against these plans is monitored by the Board. Principle 2. Seek to understand and meet shareholder needs and expectations John Watkins, as Executive Chairman, has long been the key link with shareholders. We believe this dual Chairman/CEO role is acceptable for a company of our size. John has been CEO for thirteen years and Executive Chairman for eight years. This extended timescale brings wide experience and is not unreasonable for a company of our size. However, we also recognised the need to supplement his position by appointing senior independent director Keith Evans as Deputy Chairman in 2017 to provide an independent focal point for shareholders. We believe this appointment goes some way to balancing John Watkins’ dual role of Chairman and CEO. Both John and Keith, individually, hold meetings with major shareholders throughout the year, to understand their views on, and expectations of, the Group’s performance. John provides ad hoc updates to other shareholders as required. Principle 3. Take into account wider stakeholder and social responsibilities and their implications for long- term success The Board has established a system to obtain regular feedback from both internal (our workforce) and external (shareholders, customers, suppliers, regulators and others) stakeholders. Internally Regular meetings are held with the employees who are also kept up to date with the Group’s performance through monthly bulletins and quarterly ‘town hall’ meetings. Individual feedback is also gathered by the Group’s HR function, which reports directly to the monthly Management team and Board meetings. We also have a Works Council which the senior executive team meet with periodically to gain additional feedback. Company Number 05452547 26 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) Externally As noted above, regular feedback is obtained from shareholders. There is in place a system of monitoring customer comments to assess our daily performance in satisfying their requirements. A Net Promoter Score (NPS) system is in place to monitor and record customer feedback. This information is considered by the Board at its monthly meetings. In addition, we regularly meet our key customers to identify their future requirements and to put to them our ideas on future products that would provide them with improved Returns on Investment (ROI). This has enabled us to develop the world-leading engineering products we now have, and to put in place longer-term engineering plans. Given the nature of our supply chain, we have to keep in regular contact with key suppliers to ensure continued component delivery to our high standards of quality. On the regulatory side we ensure that we meet all relevant regulatory requirements. The Board receives monthly updates on our compliance against a range of measures, including relevant ISO standards, Health and Safety standards, carbon dioxide and other emission standards. Principle 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The Board has ensured effective risk management is fully embedded throughout the organisation, as detailed in the risk management framework section of our annual report. The Board receives a monthly assessment of performance against selected risks. This assessment is regularly discussed at Board meetings and improvements are monitored. In addition, the audit committee also considers the quality and effectiveness of the Group’s risk management procedures. Principle 5. Maintain the Board as a well-functioning, balanced team led by the Chair John Watkins is Chairman and CEO. We believe this is not inappropriate for a Group of our size. However, to balance this, Keith Evans has been appointed Deputy Chairman. As required by the QCA code, the Board has independent non-executives, Keith Evans and Penny Searles. This is complemented with the non-executive directorship of Nadeem Raza, who cannot be considered to be independent due to him being the CEO and principal shareholder in Microlise, which is a substantial shareholder in the Company. However, the Board still does not currently meet the requirements for a balance between executive and non- executive Board members. On the Board are the two founding directors, who still are key members of the Management Team. We believe they contribute substantially, given their long association with the Company and, with over 8% of the shares in issue combined, they represent significant shareholders. Jon Edwards, CFO and Mark Watkins as COO are key directors of the Group and so are rightly on the Board. Details of attendance at the Board and the various committees by directors can be found later in this report. In addition, the independent directors also attend the monthly detailed management team meetings. This provides them with a greater understanding of the issues the Group faces, so they are in a better position to provide advice and challenge. Company Number 05452547 27 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) Principle 6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities The Board contains an appropriate mix of engineering, operational, selling and financial expertise. Part of the process of assessing performance is to ensure time is available for each board member to keep up to date in their specialisms. Part of the assessment of the performance of each director is a review of the training they undertake. Principle 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement There is a continuous formal process of individual director objective setting and regular assessment of progress against those objectives for each member of both the Group Board and the Senior Management Team. The process is overseen by John Watkins. In addition, the financial remuneration and bonuses of the Board and Management Team are directly linked to achieving pre-set objectives. Keith Evans has the responsibility to evaluate John Watkins’s performance. To do this he takes soundings, particularly from fellow directors, senior management and major shareholders. In evaluating the general performance of the Board, a number of factors are reviewed including the attendance, involvement and challenge raised at meetings as well as attendance at Board and Committee meetings where applicable. In addition, where matters arise from each meeting these actions are followed up effectively with updates reported back to the relevant forum. In considering succession planning for the Board, the Company nurture the best talent through coaching and training ensuring that where available internal promotion is encouraged across the Group. This includes appointment to the Board should the opportunity arise and should they be required the Group’s recruitment and appointment processes are used. Principle 8. Promote a corporate culture that is based on ethical values and behaviours Our corporate culture is driven and underpinned by our company values: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) Integrity, Quality and Pride in our thoughts and our actions Innovation in our design, manufacture and delivery of remarkable solutions Commitment in our support of customers, partners, colleagues and shareholders Teamwork in our mentoring, ownership and passion to win Fun and celebration in our work and in our success All employees have these values explained to them when joining and continually reinforced by their colleagues, mentors and management whenever possible. All members of the Group are encouraged to raise and suggest new ideas that help deliver these values either through their line management or via our regular management meetings. The Group’s mission continues to benefit the environment and our commitment to this is also shown through our continued efforts in maintaining our ISO14001 certification. Company Number 05452547 28 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) Principle 9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board We have a governance structure that is appropriate for a company of our size and corporate evolution. Our governance structures are explained below. As we grow, we recognise that the structure will need to evolve. John Watkins, as Chairman and CEO, supported by Jon Edwards CFO, is responsible for relations with shareholders and the City, and takes overall responsibility for the Group’s strategy and operations. In summary, the other directors are: Keith Evans is the senior independent non-executive director and Deputy Chairman. (cid:120) (cid:120) Nadeem Raza is a non-executive director. (cid:120) Penny Searles is an independent non-executive director. (cid:120) Jon Edwards, as CFO, is responsible for all the financial aspects of the company. (cid:120) Mark Watkins is COO and responsible for all aspects of Operations and Engineering. (cid:120) (cid:120) Madeline Cowley is responsible for AI Tim Cowley is responsible for Product strategy and development. Our processes are continually being improved. For example, our investment in new plant and equipment for our factory has enhanced our product testing, so providing better quality and lower costs. Principle 10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The list of directors and their expertise and responsibilities are included in this Governance report, and on our website (www.trakm8.com). The Board of Directors meets monthly. For this meeting reports are produced on Risks, Finance, Sales and Marketing, Engineering and Operations. The Legal Counsel also attends, and full minutes are taken. The Board maintains dialogue with its shareholders through the annual report and accounts, interim report, other regulatory announcements, the AGM and one-to-one meetings with both existing and potential shareholders. Interaction, views and feedback is also sought through discussions at the end of the AGM directly from shareholders and also from our corporate brokers. Company Number 05452547 29 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate Governance Report (Continued) BOARD OF DIRECTORS AND COMMITTEES 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 2023 the Directors’ attendance at Board and Committee meetings has been as follows: Type Board Audit Nomination Remuneration Total Held in period John Watkins Keith Evans Nadeem Raza Penny Searles Jon Edwards Mark Watkins Madeline Cowley Tim Cowley Nominations committee 12 12 11 10 11 12 12 12 10 2 2 2 2 - - - - - 1 1 1 1 1 - - - - 1 1 1 1 1 - - - - John Watkins chairs the committee with Keith Evans, Nadeem Raza and Penny Searles as members. 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. Keith Evans chairs the committee with John Watkins, Nadeem Raza and Penny Searles as members. The CFO 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 30 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Corporate 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 market abuse regulation. John Watkins chairs the committee with Keith Evans, Nadeem Raza and Penny Searles as members. By order of the Board Jon Edwards COMPANY SECRETARY 3 July 2023 Company Number 05452547 31 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023. 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, some of 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 2023 are shown in the Consolidated Statement of Comprehensive Income on page 45. The Directors do not recommend the payment of a dividend (2022: £nil). Company Number 05452547 32 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 £2.7m and £0.4m was expensed. 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 Group’s projections for the next 12 months, and downside sensitivity analysis against its projections along with closing cash balances of £1,119,000 and undrawn overdraft facility of £500,000 at 31 March 2023 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 62. FUTURE DEVELOPMENTS Consideration of the impact of the supply chain challenges and the condition of wider economy, particularly the Insurance market, 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 customers’ efficiencies so this market driver is as relevant now as ever and therefore we expect this part of the business to continue to grow as the impact of the pandemic subsides. Revenues are also expected to increase during the financial year from existing and recently acquired insurance customers. The Group will continue to invest in its 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 33 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 Nadeem Raza Penny Searles Jon Edwards Mark Watkins Madeline Cowley Tim Cowley DIRECTORS AND THEIR INTERESTS At 31 March 2023, the Directors’ interests in the shares of the Company are detailed below: 1p Ordinary shares at 31 March 2023 7,768,768 381,119 600,926 - 4,418 318,310 1,994,203 2,268,127 % of issued Ordinary share capital (50,004,002 Ordinary shares) 15.55% 0.76% 1.20% - 0.01% 0.64% 3.99% 4.54% 1p Ordinary shares at 31 March 2022 7,768,768 381,119 600,926 - 4,418 318,310 1,994,203 2,268,127 % of issued Ordinary share capital (50,004,002 Ordinary shares) 15.55% 0.76% 1.20% - 0.01% 0.64% 3.99% 4.54% John Watkins Keith Evans Nadeem Raza* Penny Searles Jon Edwards Mark Watkins Madeline Cowley Tim Cowley *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 2023 or on the date on which these financial statements were approved. Company Number 05452547 34 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Directors’ Report (Continued) DIRECTORS’ REMUNERATION The Directors’ remuneration for the year ended 31 March 2023 was: £’000 Salaries & benefits Fees Total remuneration to year ended 31 March 2023 Pension contribution Total aggregate emoluments to year ended 31 March 2023 Total aggregate emoluments to year ended 31 March 2022 John Watkins Keith Evans Nadeem Raza Penny Searles Jon Edwards Mark Watkins Madeline Cowley Tim Cowley Total 339 38 38 38 122 177 112 116 980 - 9 - - - - - - 9 339 47 38 38 122 177 112 116 989 - - 1 1 4 16 3 3 28 339 47 39 39 126 193 115 119 1,017 289 36 37 37 56 160 121 112 848 Company Number 05452547 35 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Directors’ Report (Continued) DIRECTORS’ SHARE OPTIONS At 31 March 2023 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 2022 250,000 125,000 300,000 100,000 Granted during year - - - - Exercised during year - - - - Expired/ forfeited during year - - - - Balance as at 31 March 2023 250,000 125,000 300,000 100,000 John Watkins Keith Evans Madeline Cowley Tim Cowley Mark Watkins Jon Edwards Nadeem Raza Penny Searles £0.34 £0.34 £0.33 £0.45 £0.34 £0.33 £0.27 £0.45 £0.34 £0.33 £0.27 £0.58 £0.34 £0.34 £0.33 £0.33 £0.16 £0.82 £0.34 £0.20 £0.27 £0.33 £0.33 75,000 50,000 25,000 125,000 25,000 100,000 75,000 125,000 50,000 100,000 50,000 200,000 125,000 250,000 100,000 25,000 300,000 25,000 50,000 25,000 300,000 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 16/11/2031 21/01/2024 04/03/2029 26/11/2030 16/11/2031 06/04/2024 04/03/2029 04/03/2029 23/07/2030 26/11/2030 11/07/2031 30/07/2024 04/03/2029 23/07/2030 16/11/2031 75,000 50,000 25,000 125,000 25,000 100,000 75,000 125,000 50,000 100,000 50,000 200,000 125,000 250,000 100,000 25,000 300,000 25,000 50,000 25,000 300,000 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 2022 and 31 March 2023 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 36 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 United Kingdom 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: (cid:120) (cid:120) select suitable accounting policies and then apply them consistently; state whether applicable IFRSs as adopted by the United Kingdom 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; (cid:120) make judgements and accounting estimates that are reasonable and prudent; and (cid:120) 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 reappoint Cooper Parry Group Limited, as auditors, will be put to the members at the Annual General Meeting. By approval of the Board on 3 July 2023. Jon Edwards Company Secretary Company Number 05452547 37 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC 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 2023 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 UK-adopted international accounting standards. 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: (cid:120) (cid:120) (cid:120) (cid:120) 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 2023 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; 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: (cid:120) (cid:120) (cid:120) Challenging management on key assumptions included in their forecast scenarios; considering the potential impact of forecast scenarios on the balance sheet and banking covenants, specifically around trade and other receivables, inventory, intangible assets and right of use assets; and evaluating disclosures in the financial statements. Company Number 05452547 38 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC The key observations arising with respect to our evaluation included: (cid:120) Disclosures made in the notes to the financial statements appear appropriate 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: (cid:120) 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; (cid:120) Determining the allocation of consideration on a fair value basis between components of multi-element contracts; and (cid:120) 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: (cid:120) 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; (cid:120) 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 (cid:120) 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. Company Number 05452547 39 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC 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 £2.7m 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: (cid:120) whether it is probable that the expected future economic benefits attributable to the asset will flow to the (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) 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 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. Company Number 05452547 40 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC Response We have performed audit procedures over management's impairment assessment, including the following procedures: (cid:120) Testing of the integrity of the cash flow model and the methodology applied; (cid:120) Assessing key assumptions including future cash flows, discount rates and growth rates, including sensitivity of these assumptions. (cid:120) 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. (cid:120) Considering 2 year extended forecasts approved by the board. (cid:120) Assessing the terminal growth rate against long-term GDP growth in the UK and testing the calculation of the discount rate. (cid:120) 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 Matter Management (including the Board and Audit Committee) invested a significant amount of time to fully consider the implications of general economic conditions on the going concern position of 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 the impact of general economic conditions on future sales and other inputs. 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 going concern and found them to be consistent with the forecast scenarios performed. 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 £192,000. 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 approximately 1% of group revenue. Company Number 05452547 41 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC The materiality for the parent company financial statements as a whole was set at £153,000. 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 1% 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 £172,000, equating to approximately 90% 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 principal trading subsidiaries 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 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: (cid:120) (cid:120) 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. Company Number 05452547 42 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC 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: (cid:120) (cid:120) (cid:120) 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 (cid:120) 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 34, 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. 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, UK-adopted international accounting standards and relevant tax legislation. We are not responsible for preventing irregularities. Our approach to detecting irregularities included, but was not limited to, the following: (cid:120) (cid:120) (cid:120) (cid:120) 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 Company Number 05452547 43 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC (cid:120) 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. Whilst considering how our audit work addressed the detection of irregularities, we also consider the likelihood of detection based on our approach. Irregularities from fraud are inherently more difficult to detect than those arising from error. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. 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 Statutory Auditor Sky View, Argosy Road East Midlands Airport Derby DE74 2SA 3 July 2023 Company Number 05452547 44 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Consolidated Statement of Comprehensive Income For The Year Ended 31 March 2023 REVENUE Cost of sales Exceptional cost of sales Total cost of sales Gross profit Other income Administrative expenses excluding exceptional costs Exceptional administrative costs Total administrative costs OPERATING (LOSS)/PROFIT Finance income Finance costs LOSS BEFORE TAXATION Corporation tax Note 6 9 7 9 8 10 11 Year ended 31 March 2023 £'000 20,197 Year ended 31 March 2022 £'000 18,111 (7,445) (261) (7,706) (7,004) - (7,004) 12,491 11,107 16 13 (11,860) (1,272) (13,132) (10,193) (568) (10,761) (625) 359 50 (668) 67 (548) (1,243) 460 (122) 309 (LOSS)/PROFIT FOR THE YEAR (783) 187 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)/INCOME FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT 9 9 10 10 (774) 197 LOSS BEFORE TAXATION Exceptional Cost of Sales Exceptional administrative costs IFRS2 Share based payments charge/(release) ADJUSTED PROFIT BEFORE TAX (1,243) 261 1,272 16 306 (122) - 568 (443) 3 8 (LOSS)/PROFIT PER ORDINARY SHARE (PENCE) ATTRIBUTABLE TO OWNERS OF THE PARENT Basic Diluted The results relate to continuing operations. 13 13 (1.57p) (1.57p) 0.37p 0.37p Company Number 05452547 45 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Consolidated Statement of Changes in Equity For The Year Ended 31 March 2023 Balance as at 1 April 2021 Comprehensive income Income for the year Other comprehensive income Exchange differences on translation of overseas operations Total comprehensive income Transactions with owners IFRS2 Share-based payments release Transactions with owners Balance as at 1 April 2022 Comprehensive income Loss for the year Other comprehensive income Exchange differences on translation of overseas operations Total comprehensive loss Transactions with owners IFRS2 Share based payments charge Convertible Loan Transactions with owners Balance as at 31 March 2023 Share capital Share premium Merger reserve Translation reserve Treasury reserve £'000 £'000 £'000 £'000 £'000 Convertible loan reserve £'000 Retained earnings Total equity £'000 £'000 500 14,691 1,138 193 (4) - 3,604 20,122 - - - - - - - - 187 187 - 10 - - - 10 - - - 10 - - - - - - - - - - - - - - 187 197 (443) (443) (443) (443) 500 14,691 1,138 203 (4) - 3,348 19,876 - - - - (783) (783) - - - - - - - 9 - - 9 - - - - 9 (783) (774) - - - - - - 16 16 - - - - - 11 - 11 - - - - - 11 16 27 500 14,691 1,138 212 (4) 11 2,581 19,129 Company Number 05452547 46 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Consolidated Statement of Financial Position As At 31 March 2023 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 Convertible loan reserve Retained earnings Note As at 31 March 2023 £'000 As at 31 March 2022 £'000 14 15 16 18 17 18 20 21 21 22 20 21 21 22 19 23 23,382 1,103 1,711 4 26,200 23,012 803 2,032 27 25,874 2,426 7,948 856 1,119 12,349 1,322 7,944 709 1,004 10,979 (9,196) (1,031) (466) (74) (10,767) (7,521) (1,115) (612) (27) (9,275) 1,582 1,704 27,782 27,578 (828) (5,435) (1,113) (166) (1,111) (8,653) (626) (4,855) (1,367) (112) (742) (7,702) 19,129 19,876 500 14,691 1,138 212 (4) 11 2,581 500 14,691 1,138 203 (4) - 3,348 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 19,129 19,876 The notes on pages 49 to 87 are an integral part of these consolidated financial statements. These financial statements were approved by the Board of directors and authorised for issue on 3 July 2023 and are signed on its behalf by: John Watkins - Director Jon Edwards - Director 47 Company Number 05452547 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Consolidated Statement of Cash Flows For The Year Ended 31 March 2023 Notes Year ended 31 March 2023 Year ended 31 March 2022 NET CASH GENERATED FROM OPERATING ACTIVITIES 25 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Purchases of software Capitalised development costs £'000 4,314 £'000 3,810 (749) - (12) (2,658) (420) 125 (48) (2,911) NET CASH USED IN INVESTING ACTIVITIES (3,419) (3,254) CASH FLOWS FROM FINANCING ACTIVITIES New convertible loan note Loan arrangement fees Repayment of loans Repayment of obligations under lease agreements Interest paid 1,580 (36) (1,095) (619) (610) - (5) (743) (674) (500) NET CASH USED IN FINANCING ACTIVITIES (780) (1,922) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 115 (1,366) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,004 2,370 CASH AND CASH EQUIVALENTS AT END OF YEAR 1,119 1,004 Company Number 05452547 48 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 UK-adopted International Financial Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRS IC”) interpretations 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 2023. 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 49 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment and financial instruments, as described in the accounting policies set out below. 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 profit or loss 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 50 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 51 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 4 ACCOUNTING POLICIES (continued) REVENUE RECOGNITION (continued) Certain 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 52 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 53 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 54 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 55 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 model, whilst schemes which include an exercise restriction are measured using the Monte Carlo option pricing model. The expected life used in the models has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations. Company Number 05452547 56 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 - 100% 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 57 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 58 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 59 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 a 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. Convertible loan reserve represents the value which gives the holder the right to convert into shares. 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 60 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 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 61 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 52% of revenues that provide a strong underlying base. Further consideration of other significant risks and the mitigations the Group has developed are detailed in page 20. The Group extended its debt facilities with HSBC in March 2023 in line with the existing arrangement inclusive of quarterly covenant tests of both Leverage and Debt Service. In addition the HMRC arrangement to repay £1.7m of VAT and PAYE accrued during the COVID-19 pandemic was settled during the year. During the year a new Convertible Loan note with existing shareholders was secured totalling £1.58m, helping to finance a significant restructure following a review of the company strategy. At the year end the Group has cash balances of £1,119,000 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 headroom for the foreseeable future. The Group has completed adverse sensitivities against its current projections to reflect potential external risks where the wider economic climate reduces demand, across both Insurance and Automotive device sales and Fleet new business contracts, as well as potential increases in material costs incurred. To assess the potential impact of these, a 10% reduction in Fleet new business contract value and Insurance shipments and a 10% increase in material costs were modelled against the Groups current forecast. Despite the cumulative impact of these changes the Group still maintains compliance with the covenants for the coming twelve months without the inclusion of any mitigations that could and would be implemented such as price increases and savings in both direct and indirect costs. 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 62 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 63 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 64 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 Year ended 31 March 2023 Year ended 31 March 2022 £'000 20,197 11,475 8,722 £'000 18,111 11,217 6,894 Year ended 31 March 2023 Year ended 31 March 2022 £'000 19,769 - - 397 31 20,197 £'000 17,784 - - 272 55 18,111 Year ended 31 March 2023 £'000 16 16 Year ended 31 March 2022 £'000 13 13 Company Number 05452547 65 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 8 OPERATING (LOSS)/PROFIT The following items have been included in arriving at operating (loss)/profit: 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 cost of sales (see note 9) Exceptional administrative costs (see note 9) Auditors’ remuneration Year ended 31 March 2023 Year ended 31 March 2022 £'000 £'000 227 540 176 630 2,300 96 395 222 32 5,693 261 1,272 2,134 34 669 263 22 5,187 - 568 - Fees payable to the Company’s auditors for the audit of the parent company and consolidated financial statements 100 77 Adjusted profit before tax is monitored by the Board and measured as follows: Loss before tax Exceptional costs (note 9) Share based payments Adjusted profit before tax 9 EXCEPTIONAL COSTS Exceptional costs of sales Covid-19 - component acquisition Exceptional administrative costs Covid-19 - other costs Integration & restructuring costs Furlough grant income Total exceptional administrative costs Total exceptional costs Company Number 05452547 Year ended 31 March 2023 £'000 (1,243) 1,533 16 306 Year ended 31 March 2022 £'000 (122) 568 (443) 3 Year ended 31 March 2023 £'000 Year ended 31 March 2022 £'000 261 - 261 - 234 1,038 - 646 107 (185) 1,272 568 1,533 568 66 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 9 EXCEPTIONAL COSTS (continued) During the year the Group completed a review of its strategy and significantly reduced its sales and marketing resources, engineering investment and associated support functions. In addition, the Group completed a refresh of it’s hardware platforms and narrowed its product range accordingly. Costs were incurred during the period through a reduction in headcount, inventory write down, non-refundable marketing event deposits and associated professional service costs. In the prior year, restructuring costs were also incurred as a result of headcount reduction. The Group incurred exceptional costs in the current and prior financial year relating to the COVID-19 pandemic. These costs include the increased cost of temporarily buying inventory from auxiliary markets to ensure continuity of supply of key components which were in constraint due to supply chain issues caused by the pandemic. In addition, the group terminated a contract with a customer affected by ongoing issues following the pandemic. In the prior year, the Group received furlough grant income that relates to income received from the Coronavirus Job Retention Scheme for employees furloughed as a result of Covid-19. 10 FINANCE COSTS Interest on loans Amortisation of debt issue costs Interest on lease liabilities 11 INCOME TAX Tax credit for the year Year ended 31 March 2023 £'000 510 58 100 668 Year ended 31 March 2022 £'000 388 48 112 548 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 tax rate change prior year adjustment sub total Year ended 31 March 2023 £'000 (856) 27 (829) Year ended 31 March 2022 £'000 (708) 26 (682) 369 - - 369 257 117 (1) 373 Income tax credit Total (460) (309) Company Number 05452547 67 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 (2022: lower) than the applicable rate of corporation tax in the UK. The difference is explained below: Loss before tax Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19% (2022: 19%) 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 Year ended 31 March 2023 £'000 (1,243) Year ended 31 March 2022 £'000 (122) (236) (21) (368) 28 27 91 19 (460) (23) (94) (432) 37 26 174 3 (309) The tax effect of exceptional items is to increase the tax credit by £291,000 (2022: £108,000). 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% (2022: 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 25%. Company Number 05452547 68 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 12 EMPLOYEES Year ended 31 March 2023 Year ended 31 March 2022 No. No. The average monthly number of persons (including Directors) employed by the Group was: Engineering Sales, Marketing & Customer Services Manufacturing and Logistics Administration 57 51 25 18 151 56 58 29 22 165 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 2023 Year ended 31 March 2022 £'000 4,935 637 16 105 5,693 £'000 4,937 584 (443) 109 5,187 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 2023 Year ended 31 March 2022 £'000 £'000 1,279 38 10 1,327 1,099 35 (471) 663 The key management personnel are the Directors and three (2022:1) senior managers who have been identified as key management personnel. The key management personnel made gains of £nil (2022: £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 32. Company Number 05452547 69 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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)/profit for the year and the weighted average number of Ordinary shares in issue during the year as follows: (Loss)/Profit 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)/profit per share Diluted (loss)/profit 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 2023 £'000 (783) 1,533 16 (291) 475 Year ended 31 March 2022 £'000 187 568 (443) (108) 204 No. 50,004,002 50,004,002 50,004,002 (1.57p) (1.57p) 2.48p 0.03p 0.95p 0.95p No. 50,004,002 50,004,002 50,056,538 0.37p 0.37p 0.92p (0.89p) 0.41p 0.41p Company Number 05452547 70 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 19,242 1,759 33,438 - - - 2,521 46 2,567 - - - 390 2 392 10,417 1,920 100 22,153 1,807 36,397 - - - 2,320 - 2,320 - - - 338 12 350 10,417 1,920 100 24,811 1,819 39,067 - - - - - 1,920 - 1,920 - 1,920 100 - 100 - 100 7,974 1,943 9,917 2,125 12,042 1,257 191 1,448 175 1,623 11,251 2,134 13,385 2,300 15,685 10,417 - - 12,769 196 23,382 10,417 - - 12,236 359 23,012 10,417 - - 11,268 502 22,187 COST As at 1 April 2021 Additions - Internal developments Additions - External purchases As at 31 March 2022 Additions - Internal developments Additions - External purchases As at 31 March 2023 AMORTISATION As at 1 April 2021 Charge for year As at 31 March 2022 Charge for year As at 31 March 2023 NET BOOK AMOUNT As at 31 March 2023 As at 31 March 2022 As at 1 April 2021 Company Number 05452547 71 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 14 INTANGIBLE ASSETS (continued) 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. The impairment review has been based on the Group’s budgets for FY-2024 which have been reviewed and approved by the Board and projections for FY-2025. Forecasts for the subsequent 3 years have been produced based on 7% (a prudent growth rate for the 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 9% (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 forecast show sufficient headroom of cash flow above the net assets value when we have performed sensitivity analysis. 1. An increase in the discount rate to 13% shows headroom of £8m. 2. A decrease in the growth rate to 3% shows headroom of £15m. 3. A decrease in the terminal growth rate to 1% shows headroom of £20m. 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 3% and decrease in terminal growth rate from 2% to 1% and increase the discount rate from 10% to 14%. Or triggered by: 1. Decrease in net cash generated from operating activities for FY-2024 and FY-2025 of 14%. Amortisation expenses of £2,300,000 (2022: £2,134,000) have been charged to Administrative expenses in the Consolidated Statement of Comprehensive Income. Company Number 05452547 72 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 £'000 154 - (86) 68 - - - 68 1,441 461 (351) 1,551 - 732 (254) 2,029 356 15 - 371 - 17 (7) 381 7 - - 7 - - - 7 1,958 476 (437) 1,997 - 749 (261) 2,485 18 7 - 25 - 7 - 32 701 155 (49) 807 - 207 (32) 982 341 14 - 355 - 13 (7) 361 7 - - 7 - - - 7 1,067 176 (49) 1,194 - 227 (39) 1,382 36 1,047 20 - 1,103 43 744 16 - 803 136 740 15 - 891 COST As at 1 April 2021 Additions Disposals As at 31 March 2022 Reclassification Additions Disposals As at 31 March 2023 DEPRECIATION As at 1 April 2021 Charge for year Disposals As at 31 March 2022 Reclassification Charge for year Disposals As at 31 March 2023 NET BOOK AMOUNT As at 31 March 2023 As at 31 March 2022 As at 1 April 2021 Total depreciation expenses of £227,000 (2022: £176,000) have been charged to administrative expenses in the Consolidated Statement of Comprehensive Income. Company Number 05452547 73 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 16 RIGHT OF USE ASSETS Freehold property Furniture, fixtures and equipment Computer equipment Motor vehicles Software Total £'000 £'000 £'000 £'000 £'000 £'000 2,098 - - - 2,098 - - 2,098 551 - - - 551 32 - 583 350 56 - - 406 96 - 502 615 94 (97) - 612 91 (96) 607 - - - - - - - 3,614 150 (97) - 3,667 219 (96) 3,790 529 265 - 794 265 - 1,059 124 70 - 194 70 - 264 120 114 - 234 73 - 307 329 181 (97) 413 132 (96) 449 - - - - - - - 1,102 630 (97) 1,635 540 (96) 2,079 1,039 319 195 158 - 1,711 COST As at 1 April 2021 Additions Impairments Disposals As at 31 March 2022 Additions Disposals As at 31 March 2023 AMORTISATION As at 1 April 2021 Charge for year Disposals As at 31 March 2022 Charge for year Disposals As at 31 March 2023 NET BOOK AMOUNT As at 31 March 2023 As at 31 March 2022 1,304 357 172 199 - 2,032 As at 31 March 2021 1,569 427 230 286 - 2,512 Total depreciation expenses of £540,000 (2022: £630,000) have been charged to administrative expenses in the Consolidated Statement of Comprehensive Income. 17 INVENTORIES Raw materials Work in progress Finished goods and goods for resale As at 31 March 2023 £'000 1,010 373 1,043 2,426 As at 31 March 2022 £'000 370 502 450 1,322 The cost of inventories recognised as an expense and included in cost of sales amounted to £3,869,000 (2022: £3,509,000). During the year, inventories of £543,000 (2022: £171,000) were written down including manufacturing attrition and repair costs. These were charged to cost of sales in the Consolidated Statement of Comprehensive Income. Company Number 05452547 74 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023 £'000 - - 4 - As at 31 March 2022 £'000 - - 27 - As at 31 March 2023 £'000 3,916 233 23 364 As at 31 March 2022 £'000 3,831 110 23 351 - 4 - 27 3,412 7,948 3,629 7,944 The analysis of trade receivables by currency is as follows: Pound Sterling Euro As at 31 March 2023 £'000 3,915 1 3,916 As at 31 March 2022 £'000 3,827 4 3,831 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 £405,000 (2022: £130,000 ). 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 2023 £'000 130 As at 31 March 2022 £'000 197 351 (76) - 275 72 (139) - (67) Closing provision for impairment of trade receivables 405 130 As at 31 March 2023 trade receivables of £1,168,000 (2023: £819,000) 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 2023 £'000 945 223 1,168 As at 31 March 2022 £'000 532 287 819 75 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023 £'000 23 4 - 27 2022 £'000 24 28 - 52 Present value of minimum lease payments 2022 £'000 23 27 - 50 2023 £'000 23 4 - 27 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% (2022: 2.45%) per annum. Company Number 05452547 76 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 19 DEFERRED TAX The analysis of deferred tax liability calculated using a tax rate of 25% 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 2023 £'000 As at 31 March 2022 £'000 - - (742) (742) (1,111) (1,111) As at 31 March 2023 £'000 2,134 (9) (3,236) (1,111) As at 31 March 2022 £'000 2,266 - (3,008) (742) 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 asset during the year is as follows: At 31 March 2022 Credited / (debited) to the Statement of Comprehensive Income Credited / (debited) to the Statement of Changes in Equity Trading losses Accelerated tax depreciation £'000 2,266 (132) £'000 (3,008) (228) Short term timing differences £'000 - (9) TOTAL £'000 (742) (369) - - - - At 31 March 2023 2,134 (3,236) (9) (1,111) Company Number 05452547 77 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 Current liabilities As at 31 March 2023 As at 31 March 2022 As at 31 March 2023 As at 31 March 2022 £'000 - - - - £'000 - - - - £'000 5,183 739 103 959 £'000 2,956 1,747 56 897 828 626 2,212 1,865 828 626 9,196 7,521 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 £3.0m (2022: £1.9m). 21 BORROWINGS As at 31 March 2023 As at 31 March 2022 Loans Obligations under lease liabilities Total Loans Obligations under lease liabilities Total Arrangement fee Net Gross £'000 £'000 £'000 £'000 £'000 Arrangement fee £'000 Net £'000 £'000 £'000 (48) 1,031 466 1,497 1,165 (50) 1,115 612 1,727 (3) 5,435 1,113 6,548 4,892 (37) 4,855 1,367 6,222 (51) 6,466 1,579 8,045 6,057 (87) 5,970 1,979 7,949 Gross £'000 1,079 5,438 6,517 Current Non Current All borrowings are held in sterling and the Directors consider their carrying amount approximates to their fair values. 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 17 monthly instalments from 30 March 2023 of £86,000 and a final repayment of the outstanding balance on 31 July 2024 and bears interest at a floating rate of 5.1% over base rate. As at 31 March 2023 the Group owed £4.1m (2022: £4.9m). 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 2023 the Group was not using the facility. A £1.6m convertible unsecured loan note. The loan note bears a fixed interest rate of 12% per annum, with a two-year term from its issue on 14 September 2022. The interest is payable quarterly from issue date until repayment on 13 September 2024. The Loan Note is convertible at a conversion price of 17.10p, a ten percent discount on the closing mid-market price of a Trakm8 ordinary share on 13 September 2022, the last practicable date prior to its completion. 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. As at 31 March 2023 the Group owed £0.8m (2022: £1.2m). The Group’s obligations under lease liabilities are secured by the lessors’ title to the leased assets (see note 21). Company Number 05452547 78 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 21 BORROWINGS (continued) Obligations under lease liabilities by category at 31 March 2023 were as follows: Furniture, fixtures and equipment Computer equipment Freehold property Motor vehicles Software Current Non-current Total £'000 234 912 1,146 £'000 38 7 45 £'000 117 95 212 £'000 66 97 163 £'000 11 2 13 The maturity of obligations under lease liabilities at 31 March 2023 were as follows: Furniture, fixtures and equipment Freehold property Computer equipment Motor vehicles Software Total £'000 466 1,113 1,579 Total £'000 £'000 £'000 £'000 £'000 £'000 Within 1 year 1 to 2 years 2 to 5 years More than 5 years Total 234 242 670 - 1,146 38 7 0 - 45 117 72 23 - 212 66 56 41 - 163 11 2 0 - 13 466 379 734 - 1,579 22 PROVISIONS As at 1 April 2021 Arising during the year Released during the year As at 1 April 2022 Arising during the year Released during the year At 31 March 2023 Dilapidations £'000 161 - (61) 100 Warranty £'000 56 - (17) 39 Total £'000 217 - (78) 139 92 - 192 9 - 48 101 - 240 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 2023 £'000 74 166 240 As at 31 March 2022 £'000 27 112 139 Company Number 05452547 79 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023 As at 31 March 2022 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% (2022: 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 80 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 12 December 2022 which were issued at the closing market price on the 9 December 2022. 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. In the prior year Monte Carlo option pricing was used to value grants which contained exercise restrictions. During the year 1 tranche of options were awarded, tranche AJ. The inputs to our Black Scholes pricing model were: Grant date Weighted average FV (pence) Weighted average exercise price (pence) Expected volatility (%) Expected life of option Dividend yield (%) Risk free (%) Tranche AJ 12-Dec-22 5.50 13.50 56.8% 3.0 0.0% 3.3% The risk free rate of return is the yield on government gilt market price and the volatility has been based on historic share prices. Options granted during the year were: Grant date 12-Dec-22 No of shares Option Exercise Price Date of expiry 775,000 13.5p 12/12/2032 A reconciliation of option movements over the year to 31 March 2023 is shown below; Outstanding at beginning of the year Granted during the period Forfeited during the period Outstanding at the end of the year As at 31 March 2023 As at 31 March 2022 Share options No 4,400,000 775,000 (425,000) 4,750,000 Weighted average Exercise Price (p) 30 14 19 28 Share options No 4,350,000 1,325,000 (1,275,000) 4,400,000 Weighted average Exercise Price (p) 33 20 31 30 The range of exercise prices of the outstanding options is 13.5 pence to 192.5 pence (2022: 16.0 pence to 192.5pence) and the weighted average remaining contractual life is 6.4 years (2022: 6.9 years). The Group charged £16,000 to the Statement of Comprehensive Income in respect of Share-Based Payments for the financial year ended 31 March 2023 (2022: £443,000 release). Share options exercisable at 31 March 2023 were 1,175,000 (2022: 1,650,000). Company Number 05452547 81 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 25 CASH GENERATED FROM OPERATIONS Loss before tax Depreciation (Profit)/Loss on disposal of fixed assets Net bank and other interest Exceptional costs 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 before exceptional costs Cash outflow from exceptional costs Cash generated from operations Interest received Income taxes received Net cash inflow from operating activities 26 FINANCIAL COMMITMENTS As at 31 March 2023 £'000 As at 31 March 2022 £'000 (1,243) 767 222 618 1,533 2,300 9 16 4,222 (1,104) 19 1,877 101 5,115 (1,533) 3,582 50 682 4,314 (122) 806 263 481 568 2,134 10 (443) 3,697 87 (1,242) 1,184 (78) 3,648 (568) 3,080 67 663 3,810 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 As at 31 March 2023 As at 31 March 2022 £'000 £'000 - - - 1 - 1 Company Number 05452547 82 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Consolidated Financial Statements (Continued) 27 RELATED PARTY TRANSACTIONS A total of 200,000 (2022: 875,000) share options were granted during the year to one member of key management personnel (2022: five). The Non-Executive Director Nadeem Raza is a Director of Microlise Limited, a customer of the Group. Sales to Microlise Limited in the current year were £1,000 (2022: £5,000). All sales were based on prices and terms that would be available to third parties. At 31 March 2023 Microlise Limited owed the Group £171 (2022: £nil). The Non-Executive Director Penny Searles is a Director of Howden Driving Data Limited, a customer of the Group. Sales to Howden Driving Data Limited in the current year were £193,000. All sales were based on prices and terms that would be available to third parties. At 31 March 2023 Howden Driving Data Limited owed the Group £6,000 (2022: £162,000). During the year new Convertible Unsecured Loan Notes were raised totalling £1.58m. These were issued to existing shareholders including £1,000,000 with Microlise Group plc where Non-Executive Director Nadeem Raza is a Director, along with Directors of the Company John Watkins (£400,000), Tim Cowley (£60,000) and Madeline Cowley (£60,000). Company Number 05452547 83 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 base rate, the following table details the Group's sensitivity to an increase of 2% and 5% in this rate. Base rate Base rate 2% As at 31 March 2023 As at 31 March 2022 Profit £'000 (83) 5% Profit £'000 (207) Profit £'000 (121) Profit £'000 (303) 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 it's 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. 10% decrease 10 % increase US Dollar Euro US Dollar Euro Year ended 31 March 2023 Year ended 31 March 2022 Profit & equity Profit & equity £'000 (189) (16) £'000 (125) (16) Year ended 31 March 2023 Profit & equity £'000 155 13 Year ended 31 March 2022 Profit & equity £'000 102 13 20% decrease 20 % increase Profit & equity Profit & equity £'000 (425) (36) £'000 (282) (36) Profit & equity £'000 283 24 Profit & equity £'000 188 24 84 Company Number 05452547 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023 Year ended 31 March 2023 Year ended 31 March 2022 Year ended 31 March 2022 Monetary Assets £'000 - 1 1 8,702 8,703 Monetary Liabilities £'000 216 46 262 17,449 17,711 Monetary Assets £'000 Monetary Liabilities £'000 - 80 43 4 123 4 15,910 8,593 16,033 8,597 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 2023 £'000 1,119 1,119 As at 31 March 2022 £'000 1,004 1,004 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 85 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 broadly maintain gearing. This was achieved (removing IFRS 16 impact) through improved trading and 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 2023 As at 31 March 2022 £'000 8,045 6,736 19,129 £'000 7,949 6,345 19,630 27,174 25,865 27,579 25,975 30% 26% 29% 24% At the year end the Group had total net borrowings of £6,926,000 (2022: £6,945,000). This includes IFRS16 impact of £1,306,000 (2022: £1,606,000). Assets as per Statement of Financial Position Trade and other receivables excluding prepayments Cash and cash equivalents Borrowings Trade and other payables excluding statutory liabilities and deferred revenue Company Number 05452547 Receivables and Cash As at 31 March 2023 £'000 7,584 1,119 8,703 As at 31 March 2022 £'000 7,593 1,004 8,597 Financial liabilities at amortised cost As at 31 March 2023 As at 31 March 2022 £'000 8,045 9,666 17,711 £'000 7,949 8,084 16,033 86 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023 £'000 10,334 6,643 734 - 17,711 As at 31 March 2022 £'000 9,121 5,525 1,387 - 16,033 Cash and cash equivalents comprise solely of cash in hand held by the Group. 29 DIVIDENDS The Company is not proposing a final dividend for the year (2022: £nil). No Dividend was paid during the year (2022: £nil). 30 OPERATING LEASES AS LESSOR The Group rents out equipment under operating leases. Equipment rental income earned during the year was £nil (2022 £nil). 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 2023 £'000 - - As at 31 March 2022 £'000 - - Company Number 05452547 87 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Parent Company Statement of Financial Position As At 31 March 2023 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 Convertible loan reserve Retained earnings Note As at 31 March 2023 £'000 As at 31 March 2022 £'000 4 5 6 7 7 8 11,002 54 11,056 10,986 306 11,292 10,840 7 10,847 10,579 19 10,598 (456) (1,031) (1,487) (437) (1,115) (1,552) 9,360 9,046 20,416 20,338 (5,435) (4,855) 14,981 15,483 500 14,691 627 (4) 11 (844) 500 14,691 627 (4) - (331) TOTAL SHAREHOLDERS’ FUNDS 14,981 15,483 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 £258,000 (2022: loss £176,000). These financial statements on pages 88 to 96 were approved by the Board of Directors and authorised for issue on 3 July 2023 and are signed on their behalf by: John Watkins - Director Jon Edwards - Director Company Number 05452547 88 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Parent Company Statement of Changes in Equity For The Year Ended 31 March 2023 Called up share capital Share premium account Merger reserve Treasury reserve Convertible Loan reserve Retained earnings TOTAL SHAREHOLDERS' FUNDS £'000 500 £'000 14,691 £'000 627 £'000 (4) £’000 - £'000 287 £'000 16,101 - - - - - - 500 14,691 627 - - (4) - - - (443) (175) (443) (175) (331) 15,483 - - - - - 16 16 - - - - - - - - 500 14,691 627 (4) 11 - 11 - (529) 11 (529) (844) 14,981 Balance as at 1 April 2021 IFRS2 Share-Based payment charge Loss for the year Balance as at 31 March 2022 IFRS2 Share based payments credit Convertible Loan Note Loss for the year Balance as at 31 March 2023 Company Number 05452547 89 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 2023. 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’: (cid:1086)(cid:3)(cid:1005)(cid:1004)(cid:894)(cid:282)(cid:895)(cid:3)(cid:894)(cid:400)(cid:410)(cid:258)(cid:410)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:381)(cid:296)(cid:3)(cid:272)(cid:258)(cid:400)(cid:346)(cid:3)(cid:296)(cid:367)(cid:381)(cid:449)(cid:400)(cid:895) (cid:1086)(cid:3)(cid:1005)(cid:1010)(cid:3)(cid:894)(cid:400)(cid:410)(cid:258)(cid:410)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:381)(cid:296)(cid:3)(cid:272)(cid:381)(cid:373)(cid:393)(cid:367)(cid:349)(cid:258)(cid:374)(cid:272)(cid:286)(cid:3)(cid:449)(cid:349)(cid:410)(cid:346)(cid:3)(cid:258)(cid:367)(cid:367)(cid:3)(cid:47)(cid:38)(cid:90)(cid:94)(cid:895) (cid:1086)(cid:3)(cid:1007)(cid:1012)(cid:4)(cid:3)(cid:894)(cid:396)(cid:286)(cid:395)(cid:437)(cid:349)(cid:396)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:296)(cid:381)(cid:396)(cid:3)(cid:373)(cid:349)(cid:374)(cid:349)(cid:373)(cid:437)(cid:373)(cid:3)(cid:381)(cid:296)(cid:3)(cid:410)(cid:449)(cid:381)(cid:3)(cid:393)(cid:396)(cid:349)(cid:373)(cid:258)(cid:396)(cid:455)(cid:3)(cid:400)(cid:410)(cid:258)(cid:410)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:400)(cid:853)(cid:3)(cid:349)(cid:374)(cid:272)(cid:367)(cid:437)(cid:282)(cid:349)(cid:374)(cid:336)(cid:3)(cid:272)(cid:258)(cid:400)(cid:346)(cid:3)(cid:296)(cid:367)(cid:381)(cid:449)(cid:3)(cid:400)(cid:410)(cid:258)(cid:410)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:400)(cid:895) (cid:1086)(cid:3)38B-D (additional comparative information) (cid:1086)(cid:3)(cid:1005)(cid:1005)(cid:1005)(cid:3)(cid:894)(cid:272)(cid:258)(cid:400)(cid:346)(cid:3)(cid:296)(cid:367)(cid:381)(cid:449)(cid:3)(cid:400)(cid:410)(cid:258)(cid:410)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:3)(cid:349)(cid:374)(cid:296)(cid:381)(cid:396)(cid:373)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:895) (cid:1086)(cid:3)(cid:1005)(cid:1007)(cid:1008)-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 90 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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. Company Number 05452547 91 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 model, whilst schemes which include an exercise restriction are measured using the Monte Carlo option pricing model. The expected life used in the models has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations. 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 92 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 £258,000 (2022: loss £176,000). Audit fees for the Company for the year were £3,300 (2022: £3,000). 4 INVESTMENTS Cost At 31 March 2022 Capital contribution in respect of share based payments At 31 March 2023 Subsidiaries £'000 10,986 16 11,002 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 Class of holding Proportion held and voting rights 100% Ordinary 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 Non-trading BOX Telematics Limited England and Wales 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 Ordinary 100% Ordinary 100% Ordinary 100% Company Number 05452547 93 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) 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 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 Class of holding Proportion held and voting rights 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 2023 (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 2022. 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 94 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 5 TRADE AND OTHER RECEIVABLES Amounts due from subsidiary undertakings Social security and other taxes Prepayments and other receivables As at 31 March 2023 £'000 10,813 12 15 As at 31 March 2022 £'000 10,552 8 19 10,840 10,579 Amounts due from subsidiary undertakings is unsecured, interest free and repayable on demand. 6 TRADE AND OTHER PAYABLES Trade creditors Amounts due to subsidiary undertakings Accruals and other creditors Amounts due to subsidiary undertakings is unsecured, interest free and repayable on demand. As at 31 March 2023 £'000 68 311 77 456 As at 31 March 2022 £'000 49 311 77 437 7 BORROWINGS Current Non current As at 31 March 2023 Loans Arrangement fee £'000 (48) (3) (51) Gross £'000 1,079 5,438 6,517 Bank loan The Bank loan is repayable as follows: Within one year After one and within two years After two and within five years As at 31 March 2022 Loans Arrangement fee £'000 (50) (37) (87) Gross £'000 1,165 4,892 6,057 Net £'000 1,115 4,855 5,970 5,970 £'000 1,115 4,458 397 5,970 Net £'000 1,031 5,435 6,466 6,466 £'000 1,031 5,435 - 6,466 Company Number 05452547 95 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Notes To The Parent Company Financial Statements (Continued) 7 BORROWINGS (continued) 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 17 monthly instalments from 30 March 2023 of £86,000 and a final repayment of the outstanding balance on 31 July 2024 and bears interest at a floating rate of 5.1% over base rate. As at 31 March 2023 the Group owed £4.1m (2022: £4.9m). 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 2023 the Group was not using the facility. A £1.6m convertible unsecured loan note. The loan note bears a fixed interest rate of 12% per annum, with a two-year term from its issue on 14 September 2022. The interest is payable quarterly from issue date until repayment on 13 September 2024. The Loan Note is convertible at a conversion price of 17.10p, a ten percent discount on the closing mid-market price of a Trakm8 ordinary share on 13 September 2022, the last practicable date prior to its completion. 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. As at 31 March 2023 the Group owed £0.8m (2022: £1.2m). 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. 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 200,000 (2022: 875,000) share options were granted during the year to one member of key management personnel (2022: five). During the year new Convertible Unsecured Loan Notes were raised totalling £1.58m. These were issued to existing shareholders including £1,000,000 with Microlise Group plc where Non-Executive Director Nadeem Raza is a Director, along with Directors of the Company John Watkins (£400,000), Tim Cowley (£60,000) and Madeline Cowley (£60,000). 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 (2022: £nil) during the year (other than the Directors). See remuneration report on page 36 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 35. 12 DIVIDENDS The Company is not proposing a final dividend for the year (2022: £nil). No Dividend was paid during the year (2022: £nil). Company Number 05452547 96 (cid:17)(cid:28)(cid:22)(cid:30)(cid:21)(cid:25)(cid:24)(cid:27)(cid:1)(cid:18)(cid:27)(cid:31)(cid:23)(cid:26)(cid:28)(cid:29)(cid:23)(cid:1)(cid:20)(cid:17)(cid:13)(cid:1)(cid:3)(cid:5)(cid:8)(cid:5)(cid:17)(cid:17)(cid:4)(cid:18)(cid:2)(cid:14)(cid:9)(cid:5)(cid:3)(cid:2)(cid:7)(cid:14)(cid:16)(cid:19)(cid:2)(cid:15)(cid:8)(cid:18)(cid:7)(cid:2)(cid:12)(cid:7)(cid:17)(cid:6)(cid:18)(cid:10)(cid:11)(cid:5)(cid:11)(cid:14)(cid:19)(cid:17) Trakm8 Holdings PLC Officers and Advisors for Trakm8 Holdings PLC Directors Madeline Cowley Tim Cowley Keith Evans John Watkins Mark Watkins Nadeem Raza Penny Searles Jon Edwards Company Secretary Jon Edwards 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, Sky View, Argosy Road, East Midlands Airport, Castle Donington, Derby, DE74 2SA Nominated Adviser and Broker Allenby Capital Limited Address: 5th Floor, 5 St Helen’s Place, London, EC3A 6AB Significant Shareholders Significant Shareholder Number of shares Percentage Holding Microlise Group Holdings Limited John Watkins Edric Property & Investment Company James Hedges Tim Cowley Madeline Cowley 10,000,000 7,768,768 3,836,000 2,313,712 2,268,127 1,994,203 Company Number 05452547 20.0% 15.6% 7.7% 4.6% 4.5% 4.0% 97 

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