Trakm8 warns on profits but outlook 'remains very positive'

Trakm8 has warned annual operating profits will be "significantly" below the prior year, as it endures delays to new revenues coming on stream as its shifting revenue model towards more software-as-a-service and rental revenue continues to weigh on finances in the short term.

The telematics-focused big data company said revenues are now expected to be "only modestly ahead" of the last year as the installed base of units reporting to its servers has grown to 190,000 units, which was lower than it originally anticipated.

Management have begun to reduce annualised overheads by around £1.5m and said they will ensure that "any increases are held in line with revenues".

On the upside, new orders booked for current and future financial years has grown in value to £24.2m in the 10 months to 31 January.

However, the £4m investment in R&D on existing and several core new products and solutions was up from £2.8m last year and is considerably more than the ratio of 10% of revenues that is management's long-term objective.

While new products have taken longer to bring to market, Trakm8 said the early customer reaction to these has been excellent.

"We continue to be frustrated by the timing of new order wins and it is very disappointing that we have to substantially reduce expectations for this financial year despite having a very strong pipeline," said executive chairman John Watkins.

He said he was confident the significant additional investment and evolving business model remained the correct strategy to follow given the expected significant growth of the fleet management, insurance and vehicle leasing telematics markets.

"Over the last four years we have grown our installed base of units reporting to Trakm8 servers from 20,000 to over 190,000 today. The future remains very positive and we believe that this year, whilst very disappointing, should prove to have been a hiatus in our continuing long term growth."

Shares in Trakm8 plunged 34% to 72.55p by 1000 GMT on Tuesday.