Trafficmaster PLC
21 March 2006
21st March 2006
Trafficmaster plc
Preliminary Results Show Strong Improvement in Second Half Trading
Trafficmaster, a leading supplier of intelligent vehicle tracking and navigation
solutions, announces its preliminary results for the year ended 31st December
2005.
Financial Highlights:
• Revenues up 16% to £42.3m (2004 £36.6m)
o Teletrac revenues increased by 23% to £20.6m (2004: £16.8m)
o UK revenues increased by 10% to £21.7m (2004: £19.8m)
• Operating profit, before non-recurring items, £1.8m (2004: £2.4m)
o Strong improvement in operating profit in H2 over H1 - £1.8m
vs £0.028m
Operational Highlights
• Strategic review led to reduced cost base and improved service margins
• New business structure leading to improved future performance
• Standard fit programmes signed with six motor manufacturers including
Ford, Peugeot, Isuzu, Subaru, Mitsubishi and Daimler Chrysler
• RDS-TMC traffic information contracts signed with Audi, Honda, Alpine,
Garmin, Destinator and Navigon
Tony Eales, Chief Executive of Trafficmaster Plc, commented:
'The strategic steps taken to reposition the UK business in the latter half of
2005 have lowered the cost base, improved service margins and built solid
foundations based upon improved business fundamentals. In the UK we are now
fully focused upon delivering our strategy through the three new business units
and have experienced growing interest in our value proposition. In recent
months Ford, Peugeot, Mitsubishi, Isuzu and Daimler Chrysler have launched high
profile marketing campaigns associating Smartnav with their brands. We believe
this demonstrates their faith in the unique features and quality of service we
can deliver.
'In the US, Teletrac continues to perform well and we expect continued growth in
this market as we expand operations and benefit from added value services.
'Overall, we are confident that the progress made in the second half of 2005
will continue into 2006 and beyond.'
For further information please contact:
Trafficmaster Tel: 01234 759 300
Tony Eales, Chief Executive
Nigel Bond, Finance Director
Financial Dynamics Tel: 020 7831 3113
Ben Atwell / John Gilbert
A presentation for analysts will take place at 9.30am this morning at the
offices of Financial Dynamics. For details, please call Claire Rowell on 0207
831 3113
Chairman's Statement
Your Board is pleased to report significantly improved performance for
Trafficmaster during the year following a re-organisation of our UK operations
and continued strong growth of our business in the US.
Teletrac has continued the expansion of its fleet management business. The
growing recognition of the quality of our offering by major account customers
has been particularly noteworthy; we have been focusing on this segment and are
hopeful of further success in the coming year.
The re-organisation of our UK activities and the focus on business partnerships,
described in more detail in the Chief Executive's Statement, has had a
successful start. We are particularly pleased with the manufacturer take up of
our revised proposition. In recent months Ford, Peugeot, Mitsubishi, Isuzu and
Daimler Chrysler have launched standard fit offers backed by high profile
marketing campaigns associating Smartnav with their brands. We believe this
demonstrates their faith in the unique features and quality of service we can
deliver.
Much of the progress in the past year has come from exploiting the depth of
Trafficmaster's technology and market know-how by more effectively leveraging
the talented management team employed within the group. Under the leadership of
Tony Eales, our new streamlined flatter management structure has deployed our
most experienced executives running clearly defined elements of the business
that also have a clear fit with their respective personal strengths.
Having such 'square pegs in square holes', combined with a reduced cost base has
repositioned the Group to take strong advantage of the opportunities now before
us. We expect the year ahead to build on the progress already achieved and your
Board looks forward to reporting tangible evidence of our continued progress
during the year ahead.
Chief Executive's Statement
Financial Results
Trading improved significantly during the course of the year. After a profit of
just £0.028m in the first half, Trafficmaster recorded full year operating
profits before exceptional items of £1.8m (2004: £2.4m).
Revenues for the full year increased 16% to £42.3m compared to £36.6m in 2004
driven by a 23% revenue increase in Teletrac and a 10% increase in UK revenues.
Net borrowings at year end were £4.7 million compared with £3.8 million at 30
June 2005. Cash balances were £1.4 million at 31 December 2004.
Operational Results
US OPERATIONS
Teletrac
Teletrac continued to increase revenues during the year, recording a 23% rise in
2005 to £20.6 million (2004: £16.8 million) and increased operating profits 17%
from £2.9 million to £3.4 million. Teletrac is the second largest provider of
local fleet tracking and management services, through its Fleet Director
product, in the United States and contributes approximately half of
Trafficmaster's sales. At the end of 2005 over 50,000 vehicles were being
monitored each day, across the USA and Teletrac's data centres handled over 11
million transactions per day.
Teletrac continued to grow its sales and service presence during the year with
120 direct Sales and Service personnel in the US serving over 25 cities.
Tim Van Cleve, Chief Operating Officer Teletrac, leads our efforts in this area.
Tim has worked in the Fleet Tracking Business for over 10 years and has operated
at all levels in the Sales and Operations of the business.
As Teletrac develops, we are increasing our focus on securing larger accounts
with major vehicle fleets. The Major Accounts team continues to make good
progress with significant wins in 2005, including GCS, a division of Ecolab a
Fortune 500 company and Builders First Source, a $2bn US building products
company. We have a strong pipeline of potential new business for 2006.
Teletrac continues to enhance its product offerings to improve its position at
the high-value high-feature end of the growing fleet tracking market. In line
with this strategy, we will be launching Smartnav, fully integrated with Fleet
Director, in the US fleet market in the first half of this year.
STRATEGIC REVIEW OF UK OPERATIONS
Following my appointment in July 2005, we undertook a strategic review of the
business to improve Trafficmaster's UK performance.
The key actions from the review are:
• to increase our emphasis on business partnerships and move away from
consumer marketing;
• to focus on the delivery of a profitable subscription services
business and;
• to integrate the development of our market-leading in-vehicle products
and off-board services technologies.
As a result, three new business units have been created in the UK: Trafficmaster
In-vehicle Products, Trafficmaster Services and Trafficmaster Technologies.
The new strategy has already delivered improvements in our product positioning
by focusing on our most effective channels including OEM (Original Equipment
Manufacturer) standard fit sales.
We have improved productivity, improved supplier terms and eliminated costs that
do not support the revised strategy. As a result, we have improved service
margins and generated cost savings.
We continue to make good progress in our technology partnership opportunities.
Trafficmaster In-vehicle Products
Trafficmaster In-vehicle Products concentrates on the sale of Smartnav, our
award winning satellite navigation and integrated traffic information system,
and Trackstar hardware, our stolen vehicle tracking system. Revenues increased
by 8% in 2005 to £11.7 million (2004: £10.8 million). The operating profit for
this division reduced to £1.3 million from £2.2 million, due to increased
marketing costs in the first half of 2005.
Pat Gallagher, who is leading this, has been in the in-vehicle products industry
for over 20 years having worked at a senior level in Cobra and Renault before
joining Trafficmaster in 1999.
In-vehicle products strategy is to concentrate our efforts on 'business to
business' relationships and create a simplified product proposition to our OEM
partners. This is proving productive. In the last six months, we have
significantly enhanced our relationships with our OEM partners and have
generated standard fit programmes with Ford, Peugeot, Isuzu, Subaru and Daimler
Chrysler. Mitsubishi, one of our largest OEM customers in 2005, has extended
their contract throughout 2006 to fit Smartnav as standard on a number of models
in its range including the new L200.
Each of these OEM partners has supported brand-building campaigns for Smartnav.
We have therefore seen the highest level of marketing effort in Trafficmaster's
history - including significant campaigns featuring a mix of TV, radio and press
by Peugeot, Ford, Isuzu, Mitsubishi and Daimler Chrysler.
Smartnav is currently primarily sold with new car purchases - a market of some
2.4 million cars per annum in the UK, and is showing good penetration in this
market. As a result we expect Smartnav to increase its penetration in the
wider car market, which currently totals around 26 million in the UK, in future
years.
Trackstar, our market leading GPS stolen vehicle tracking system, continues to
grow in a stable market.
One of our key strengths in the market is flexibility. Our in-vehicle platform
can deliver class leading services for navigation, stolen vehicle tracking,
safety camera warning, emergency/breakdown call, usage based insurance and
traffic information services. This allows Trafficmaster In-vehicle products to
tailor unique propositions for the OEM.
Trafficmaster Services
Trafficmaster Services is focused on generating enhanced recurring revenue from
each user of Trafficmaster's products. During the year, revenues increased by
12% to £10.1 million (2004: £9.0 million). The division reported an operating
profit of £0.2 million (2004: £0.5 million) with increased marketing costs in
the first half and reductions in legacy traffic revenues offset by increases in
Smartnav and Trackstar service revenues.
Craig Blount, Director of Trafficmaster Services, has 20 years experience in
subscription services and marketing having worked in various General Manager
positions at The AA before joining Trafficmaster in 2000.
Trafficmaster Services provides the widest range of traffic and vehicle related
services available from one source in the market today. We are seeing strong
uptake in our Safe Speed and Trackstar value added services on the Smartnav
platform with over 40% of our customers signing up for these options. We are in
a strong position to drive this penetration through our constant contact with
customers and our ability to provide trial services to users.
In the second half of the year we have made significant progress on service
operating margins, reducing our average cost per customer going forward by over
20%. We continue to maintain excellent levels of customer satisfaction,
underpinning our belief that Trafficmaster's range of services meets customer
needs.
Trafficmaster Services is also responsible for our traffic information business.
The launch of our RDS-TMC services at the start of 2005 has been extremely
successful in both the Automotive and Portable markets. In its first year of
service contracts have been put in place with Audi, Honda, Alpine, Garmin,
Destinator, Wayfinder and Navigon.
A significant proportion of revenues both in the UK and US now come from
recurring subscriptions and sale of information.
Trafficmaster Technologies
Trafficmaster Technologies is responsible for developing new markets and new
applications for our technologies such as Usage Based Insurance and vehicle
diagnostics.
Stuart Berman, Director Trafficmaster Technologies, is leading our efforts in
this area. Stuart has been involved in advanced technology businesses, at
director level, for 10 years having previously worked at Demon Internet.
Our relationships with our partners in these areas are progressing well. The
Transport for London initiative is now providing live traffic information based
on every vehicle entering and leaving the Congestion Zone - we believe providing
motorists in London with the best traffic information available in the world
today. All of our products will benefit from this including Smartnav and
RDS-TMC traffic services.
Trafficmaster is ideally placed to provide strategic technology to a wide range
of organizations based on its pioneering technology developments in in-vehicle
products, traffic information and off-board services for vehicle tracking,
navigation and mobile resource management. These technologies and capabilities
are finding new markets, partners and opportunities.
Outlook
The strategic steps taken to reposition the UK business in the latter half of
2005 have lowered the cost base, improved service margins and built solid
foundations based upon improved business fundamentals. Actions already taken
will result in annualised cost savings in excess of £2 million in 2006. We are
now fully focused upon delivering our strategy through the three new business
units in the UK and already have experienced growing interest in our value
proposition.
In recent months Ford, Peugeot, Mitsubishi, Isuzu and Daimler Chrysler have
launched high profile marketing campaigns associating Smartnav with their
brands. We believe this demonstrates their faith in the unique features and
quality of service we can deliver.
In the US, Teletrac continues to perform well and we expect continued growth in
this market as we expand operations and benefit from added value services.
Overall, we are confident that the progress made in the second half of 2005 will
continue into 2006 and beyond.
Trafficmaster Plc
Unaudited Consolidated Income Statement
for the year ended 31 December 2005
2005 2004
Notes £000 £000
Revenue 3 42,323 36,613
______ ______
Cost of sales excluding write down of inventory (18,748) (15,819)
Write-down of inventory (863) -
______ ______
Cost of sales (19,611) (15,819)
______ ______
Gross profit 22,712 20,794
Selling and distribution costs (7,216) (5,593)
______ ______
Administrative expenses - recurring (14,591) (12,718)
Non-recurring administrative income and expenses 2 90 -
______ ______
Administrative expenses (14,501) (12,718)
______ ______
Operating profit excluding write-down of inventory and non-recurring 1,768 2,483
administrative income and expenses
Write-down of inventory and non-recurring administrative income and (773) -
expenses
______ ______
Operating profit 3 995 2,483
Net gain on redemption of secured senior notes - 2,057
Financial income 276 332
Financial expenses (336) (19)
______ ______
Profit before tax 935 4,853
Taxation (70) 1,148
______ ______
Profit for the year 865 6,001
______ ______
Attributable to:
Equity holders of the parent 865 6,001
Minority interest - -
______ ______
865 6,001
______ ______
Earnings per ordinary share
- basic 4 0.64p 4.49p
- diluted 4 0.64p 4.37p
All the results relate to continuing operations.
Unaudited Consolidated Statement of Recognised Income and Expense
for the year ended 31 December 2005
2005 2004
£000 £000
Foreign exchange translation differences 876 (376)
Change in fair value of financial asset 350 -
______ ______
Income and expenses recognised directly in equity 1,226 (376)
Profit for the year 865 6,001
______ ______
Total recognised income and expense for the year 2,091 5,625
______ ______
Attributable to:
Equity holders of the parent 2,091 5,625
Minority interest - -
______ ______
2,091 5,625
______ ______
Unaudited Consolidated Balance Sheet
as at 31 December 2005
2005 2004
£000 £000
Non-current assets
Property, plant and equipment 14,251 12,307
Intangible assets 7,232 6,918
Investments in associates 116 116
Other financial assets 350 -
Lease prepayments 1,461 1,469
Deferred tax asset 1,078 1,148
______ ______
24,488 21,958
______ ______
Current assets
Inventories 6,028 6,908
Trade and other receivables 17,348 10,553
Cash and cash equivalents - 1,443
______ ______
23,376 18,904
______ ______
Total assets 47,864 40,862
______ ______
Current liabilities
Bank overdraft 4,670 -
Trade and other payables 9,336 9,747
______ ______
14,006 9,747
______ ______
Non-current liabilities
Deferred income 1,518 1,078
Provisions 1,435 1,400
______ ______
2,953 2,478
______ ______
Total liabilities 16,959 12,225
______ ______
Net assets 30,905 28,637
______ ______
Equity
Share capital 6,743 6,743
Share premium - 94,274
Other reserve 1,973 1,973
Foreign exchange translation reserves 500 (376)
Fair value reserve 350 -
Retained earnings 21,377 (73,939)
______ ______
Total equity attributable to equity holders of the parent 30,943 28,675
Minority interest (38) (38)
______ ______
Total equity 30,905 28,637
______ ______
Unaudited Consolidated Cash Flow Statement
for the year ended 31 December 2005
2005 2004
£000 £000
Cash flows from operating activities
Profit for the year 865 6,001
Adjustments for:
Depreciation, amortisation and impairment 1,855 2,363
Foreign exchange gains (258) (238)
Financial income (18) (74)
Financial expense 336 19
Taxation 70 (1,148)
Net gain on repayment of borrowings including interest waiver - (2,290)
Loss/(gain) on sale of property, plant and equipment 33 (24)
Equity settled share-based payment expenses 177 89
______ ______
Operating profit before changes in working capital and provisions 3,060 4,698
Increase in trade and other receivables (6,320) (4,105)
Decrease/(increase) in inventories 1,189 (2,593)
Increase in trade and other payables 14 1,845
______ ______
Cash flows from operations (2,057) (155)
Interest paid (281) (19)
______ ______
Net cash flows from operating activities (2,338) (174)
______ ______
Cash flows from investing activities
Proceeds from sale of plant and equipment 167 240
Interest received 18 74
Acquisition of property, plant and equipment (2,963) (1,732)
Acquisition of subsidiary, net of cash acquired - 125
Development expenditure acquisition of intangible fixed assets (1,002) (1,784)
______ ______
Net cash flows from investing activities (3,780) (3,077)
______ ______
Cash flows from financing activities
Proceeds from the issue of share capital - 3,830
Repayment of borrowings - (6,680)
Net cash flows from financing activities - (2,850)
Net decrease in cash and cash equivalents (6,118) (6,101)
Cash and cash equivalents at 1 January 1,443 7,331
Effect of exchange rate fluctuations on cash held 5 213
______ ______
Cash and cash equivalents at 31 December (4,670) 1,443
______ ______
Notes to the Preliminary Financial Results
1. Basis of preparation
The financial information set out in this preliminary announcement does not
constitute the group's statutory accounts for the years ended 31 December 2004
or 2005.
European law (IAS Regulation EC 1606/2002) requires that the annual consolidated
financial statements of the company for the year ending 31 December 2005, be
prepared in accordance with International Financial Reporting Standards (IFRS)
adopted for use in the EU ('adopted IFRS').
This preliminary financial information has been prepared on the basis of the
recognition and measurement requirements of IFRS in issue that either are
endorsed by the EU and effective (or available for early adoption) at 31
December 2005, the group's first annual reporting date at which it is required
to use adopted IFRS.
Section 240 Statement
The comparative figures for the financial year ended 31 December 2004 are not
the company's statutory accounts for that financial year. Those accounts, which
were prepared under UK Generally Accepted Accounting Practices, have been
reported on by the company's auditors and delivered to the registrar of
companies. The report of the auditors was unqualified and did not contain
statements under section 237(2) or (3) of the Companies Act 1985.
First-time adoption
On 15 September 2005, the group published an explanatory report entitled '
Transition to International Financial Reporting Standards' available at the
group's website, www.Trafficmaster.co.uk. This document sets out the key
differences between IFRS and UK GAAP for the group, reconciliations of its
income statements for the year ended 31 December 2004 and its balance sheets as
at 1 January 2004. The accounting policies on which the group's results have
been prepared are also set out in this document. These accounting policies have
also been consistently applied for the year ended 31 December 2005.
The general principle that should be applied on first-time adoption of IFRS is
that standards are applied with full retrospective effect. In accordance with
IFRS 1 First-time Adoption of International Financial Reporting Standards, the
group is entitled to a number of voluntary and mandatory exemptions from full
restatement. The group has elected:
(i) not to restate business combinations made prior to 1 January 2004 to comply
with IFRS 3 Business Combinations
(ii) to apply IFRS 2 Share-based Payments only to awards granted after 7
November 2002 and not vested by 1 January 2005
(iii) to deem cumulative translation differences for all foreign operations to
be nil at 1 January 2004
(iv) not to present comparative information in accordance with IAS 32 Financial
Instruments: Disclosure and presentation and IAS 39 Financial Instruments:
Recognition and Measurement.
The effect of adopting IAS 32 and IAS 39 at 1 January 2005 has had no material
impact upon the financial statements.
The statutory accounts for 2005 will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement and will
be delivered to the Registrar of Companies following the group's annual general
meeting. This will be held on 20 June 2006 at Cranfield starting at 12:00 noon.
2. Non-recurring administrative income and expenses
2005 2004
£000 £000
Included within non-recurring administrative income and expenses are the
following:
MG Rover bad debt written off (563) -
Restructuring costs (238) -
Partial reversal of impairment of tangible fixed asset 956 -
Effects of disposal of interest in jointly controlled operation (65) -
______ ______
90 -
______ ______
3. Segment reporting
Business segments
In-vehicle Products Services
2005 2004 2005 2004
£000 £000 £000 £000
Revenue from external customers 11,651 10,785 10,070 9,019
______ ______ ______ ______
Segment results before non-recurring items 1,309 2,189 186 536
Non-recurring items (1,116) - 408 -
______ ______ ______ ______
Segment results 193 2,189 594 536
Unallocated expenses
Operating profit
Net financing costs
Taxation
Profit for the year
Segment assets 11,212 11,933 11,738 10,287
Investment in associates
Unallocated assets
Total assets
Segment liabilities 1,411 1,912 3,742 3,928
Unallocated liabilities
Total liabilities
Capital expenditure 553 744 1,347 1,508
Unallocated capital expenditure
Total capital expenditure
Depreciation and amortisation 501 387 1,279 1,047
Unallocated depreciation and amortisation
Impairment losses reversed - - 956 -
Business segments (continued from table above)
USA Fleet Consolidated
Management
2005 2004 2005 2004
£000 £000 £000 £000
Revenue from external customers 20,602 16,809 42,323 36,613
Segment results before non-recurring items 3,388 2,902 4,883 5,627
Non-recurring items - - (708) -
______ ______ ______ ______
Segment results 3,388 2,902 4,175 5,627
Unallocated expenses (3,180) (3,144)
______ ______
Operating profit 995 2,483
Net financing costs (60) 2,370
Taxation (70) 1,148
______ ______
Profit for the year 865 6,001
______ ______
Segment assets 20,685 12,903 43,635 35,123
Investment in associates 116 116
Unallocated assets 4,113 5,623
______ ______
Total assets 47,864 40,862
______ ______
Segment liabilities 4,289 3,320 9,442 9,160
Unallocated liabilities 7,517 3,065
______ ______
Total liabilities 16,959 12,225
______ ______
Capital expenditure 1,943 1,118 3,843 3,370
Unallocated capital expenditure 122 146
______ ______
Total capital expenditure 3,965 3,516
______ ______
Depreciation and amortisation 893 741 2,673 2,175
Unallocated depreciation and amortisation 138 167
______ ______
2,811 2,342
______ ______
Impairment losses reversed - - 956 -
All segments are continuing operations.
Geographical segments
United Kingdom North America
2005 2004 2005 2004
£000 £000 £000 £000
Revenue from external customers 21,577 18,759 20,602 16,809
Segment assets 27,774 27,694 20,090 12,903
Capital expenditure 2,022 2,398 1,943 1,118
______ ______ ______ ______
Geographical segments (continued from table above)
Mainland Europe Consolidated
2005 2004 2005 2004
£000 £000 £000 £000
Revenue from external customers 144 1,045 42,323 36,613
Segment assets - 265 47,864 40,862
Capital expenditure - - 3,965 3,516
______ ______ ______ ______
4. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 December 2005 was based on the
profit attributable to ordinary shareholders of Trafficmaster Plc of £865,000
(2004: £6,001,000) and on the weighted average number of ordinary shares in
issue during the year of 134,860,371 (2004: 133,664,735).
Weighted average number of ordinary shares
2005 2004
'000 '000
Issued ordinary shares at 1 January 134,860 125,883
Effect of shares issued in January 2004 - 5,768
Effect of shares issued in April 2004 2,014
Weighted average number of ordinary shares at 31 December 134,860 133,665
______ ______
Diluted earnings per share
The calculation of diluted earnings per share at 31 December 2005 was based on
profit attributable to ordinary shareholders of £865,000 (2004: £6,001,000) and
weighted average number of ordinary shares (diluted) outstanding during the year
of 135,545,026 (2004: 137,399,083) calculated as follows:
Weighted average number of ordinary shares (diluted)
2005 2004
'000 '000
Weighted average number of ordinary shares at 31 December 134,860 133,665
Effect of share options in issue 685 3,734
Weighted average number of ordinary shares (diluted) at 31 December 135,545 137,399
______ ______
The calculation of diluted earnings per share assumes that all associated
performance criteria are achieved in full.
This information is provided by RNS
The company news service from the London Stock Exchange BTBBF
