Microlise Group Holdings will invest in fellow telematics company Trakm8 to help strengthen the company's balance sheet after a bad set of results sent shares tumbling.
The deal, announced by Trakm8 Holdings to the financial markets today, comes weeks after Trakm8 revealed a “disappointing” set of half-year results, with revenues down by 38% to £8.8 million.
It showed that last year’s pre-tax profit of £120,000 is now reported as a £2.9m loss.
It had also warned that full year revenue is now expected to be 20-25% below that reported during the last financial year, when it was £30.1m. The market had expected a 9% increase in revenue to £32.9m.
On publication of the results, its share price slumped to 63.5% to 23.5p, giving it a market value of below £10m – three years ago it had a share price of 375p, putting the company value at £136m.
Trakm8 has today announced its intention to issue almost 14 million new shares, which at 22p per share will raise some £3m helping to strengthen the beleaguered company’s balance sheet.
Directors are contributing £0.7 million to the share offer.
Microlise, having taken up part of the new shares offering, says the partnership will lead to stronger growth and increased opportunities for the Group both immediately and in the mid-term.
As a result of the deal, Nadeem Raza, chief executive officer of Microlise, will join Trakm8’s Board in a non-executive director capacity.
The share subscription offer is subject to approval at a General Meeting of Trakm8 shareholders on December 24. Subsequent to the approval by shareholders, the Trakm8 directors will hold approximately 27.4% of the issued share capital of Trakm8 and Microlise will hold 20%.
A statement from Trakm8 said the two companies will continue to operate independently, but will explore options for future collaboration.
It added, that there is very little overlap, as Trakm8 and Microlise largely serve separate markets. Trakm8 has a strong presence in the car and light commercial sectors, primarily in the UK but with a growing international presence. Microlise is focused on the heavy goods vehicle and plant equipment sectors, and already has a significant overseas footprint, including offices in India, Australia, France, and the UAE.
John Watkins, Trakm8's executive chairman, said: “The investment by the directors demonstrates our ongoing confidence in Trakm8. It will further strengthen the company’s balance sheet and support our plans for future growth.
“A closer working relationship with Microlise will create a raft of opportunities for us to collaborate, while also enabling each company to retain its independence.
“There are minimal areas in which the two companies compete. Both companies are highly-regarded telematics service providers focused on providing customers with market-leading solutions, and serving distinct markets.”
Microlise said it was "delighted" to be able to announce its investment in Trakm8 and was looking forward to exploring the "exciting opportunities" it offered to collaborate.
Raza explained: “Whilst we both provide telematics services, we believe there are synergies between our two businesses; both of which are committed to providing best-in-class products and services, and innovating through product research and development.”