Datatrak restructuring complete - new business units set up
Datatrak Holdings plc held a stockbrokers' meeting on August 6 during which details on the strategic restructuring of the group's business activities were provided. This restructuring exercise was approved by shareholders during the extraordinary...
Datatrak Holdings plc held a stockbrokers' meeting on August 6 during which details on the strategic restructuring of the group's business activities were provided.
This restructuring exercise was approved by shareholders during the extraordinary general meeting held earlier this year.
Shareholders voted in favour of the acquisition of the remaining 50 per cent shareholding in Datatrak Solutions Ltd and Datatrak IT Services Ltd in exchange for an issue of 15,949,500 shares to JFC Holdings Ltd, wholly-owned by Group CEO Joe Fenech Conti.
Following this transaction, JFC Holdings Ltd became the largest shareholder of Datatrak Holdings plc, holding 50 per cent of the company's equity. As a result, all other shareholders were diluted by half.
Also as part of the restructuring, during the annual general meeting held last Thursday, shareholders approved that all accumulated losses in the balance sheet of Datatrak Holdings plc are completely wiped out. This will enable the directors to reach their primary objective of commencing dividend payments to shareholders once the group starts to generate sufficient profits.
The Datatrak Group was previously mainly focused on the sale of the Datatrak network primarily in Nigeria and had 50 per cent shareholdings in Datatrak Solutions Ltd and Datatrak IT Services Ltd. While these two equity participations were performing positively and generating encouraging profits, at the group level, these were being eliminated from the losses incurred in the pursuit of concluding the sale of the network in Nigeria together with the substantial depreciation charge on this ageing network.
Following the acquisition of the remaining 50 per cent equity stakes in the two profitable companies, the effect of the business restructuring exercise was to discontinue the business of the network sales and to focus on the provision of geographical information systems services, mainly in the area of mapping.
This area of the group's business has been successful over the past few years and the directors believe it presents strong growth opportunities for the future. Ultimately Datatrak's main aim is to become an end-to-end ICT company and in this respect, Mr Fenech Conti explained that three new business units have been set up focusing on ICT management, international projects and business consultancy.
During the stockbrokers' meeting, the group CEO also provided an update on the current business being undertaken by Datatrak Solutions Ltd and Datatrak IT Services Ltd. Mr Fenech Conti explained that the international dimension of the provision of fleet management services is the main area of focus for these companies following the successful penetration in the UK market.
In the fleet management sector, Datatrak's products focus on the basic tracking concept through TrakIT and Datatrak Online in the UK; the dynamic workflow management system branded DispatchIT and the more advanced route optimisation software named RouteIT.
The tracking product is sold both directly via Datatrak and also through the group's strategic partner and shareholder MIX Telematics (previously CI Omnibridge who had acquired a 4 per cent shareholding in Datatrak Holdings plc after it had agreed to purchase the fleet telematics business from Siemens VDO Automotive's UK trading subsidiary) mainly in the UK. The CEO confirmed that Datatrak recently concluded a new three-year contract with MIX for Datatrak Online which is currently installed in over 9,500 vehicles.
This new contract is made-up entirely of annual recurrent revenues with over 50 per cent of total revenues now as annual fees. Moreover, also in the UK, Datatrak managed to conclude further installations of Datatrak Online directly through Euro Car Parts Ltd (one of the largest distributors of car parts in the UK) who signed a multi-year contract.
MIX Telematics also recently signed a distribution agreement with Datatrak to sell its DispatchIT workflow management system in the UK. The focus has now turned to the Italian market following the establishment of Datatrak Italia Srl in December 2007. Datatrak recently attracted an Italian company, Teleclient System Integrator Spa, as a 45 per cent shareholder in this joint venture.
Datatrak's products have already attracted interest from some of Italy's most important blue-chip companies. The CEO explained that Datatrak Italia already registered its first major contract through the sale of distribution rights of TrakIT, DispatchIt and RouteIT while a number of other proposals are in the pipeline. Mr Fenech Conti stated that two Dutch clients are currently performing DispatchIT trials and the plan is to launch this product on the Dutch market later this year. The sale of DispatchIT involves an up-front licence fee on conclusion of the sale and a small percentage of the contract as annual recurrent revenue.
Apart from Italy, Datatrak is now turning its focus on the Spanish market and is seeking to set up a similar joint-venture company in Spain together with a Spanish partner.
Following the conclusion of the sale of the route optimistation system, RouteIT, to GeoPost of the UK which is wholly owned by La Poste (the second largest postal operator in Europe), other RouteIT trials are currently ongoing with other companies.
Another very important recent development for Datatrak was the successful renewal of the local enforcement system contract for a further five years.
In the shareholders' circular distributed in anticipation of the April EGM, the directors had estimated that group revenues are anticipated to amount to _4 million this year, with a pre-tax profit of _0.61 million.
During the stockbrokers' meeting, the CEO was not in a position to confirm whether these estimates are achievable since the restructuring process took much longer to finalise than anticipated. Moreover, approximately 33 per cent of the group's business is generated in sterling and the decline in the value of the sterling against the euro so far this year also negatively impacted the group's financial results.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
¸ 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
This restructuring exercise was approved by shareholders during the extraordinary general meeting held earlier this year.
Shareholders voted in favour of the acquisition of the remaining 50 per cent shareholding in Datatrak Solutions Ltd and Datatrak IT Services Ltd in exchange for an issue of 15,949,500 shares to JFC Holdings Ltd, wholly-owned by Group CEO Joe Fenech Conti.
Following this transaction, JFC Holdings Ltd became the largest shareholder of Datatrak Holdings plc, holding 50 per cent of the company's equity. As a result, all other shareholders were diluted by half.
Also as part of the restructuring, during the annual general meeting held last Thursday, shareholders approved that all accumulated losses in the balance sheet of Datatrak Holdings plc are completely wiped out. This will enable the directors to reach their primary objective of commencing dividend payments to shareholders once the group starts to generate sufficient profits.
The Datatrak Group was previously mainly focused on the sale of the Datatrak network primarily in Nigeria and had 50 per cent shareholdings in Datatrak Solutions Ltd and Datatrak IT Services Ltd. While these two equity participations were performing positively and generating encouraging profits, at the group level, these were being eliminated from the losses incurred in the pursuit of concluding the sale of the network in Nigeria together with the substantial depreciation charge on this ageing network.
Following the acquisition of the remaining 50 per cent equity stakes in the two profitable companies, the effect of the business restructuring exercise was to discontinue the business of the network sales and to focus on the provision of geographical information systems services, mainly in the area of mapping.
This area of the group's business has been successful over the past few years and the directors believe it presents strong growth opportunities for the future. Ultimately Datatrak's main aim is to become an end-to-end ICT company and in this respect, Mr Fenech Conti explained that three new business units have been set up focusing on ICT management, international projects and business consultancy.
During the stockbrokers' meeting, the group CEO also provided an update on the current business being undertaken by Datatrak Solutions Ltd and Datatrak IT Services Ltd. Mr Fenech Conti explained that the international dimension of the provision of fleet management services is the main area of focus for these companies following the successful penetration in the UK market.
In the fleet management sector, Datatrak's products focus on the basic tracking concept through TrakIT and Datatrak Online in the UK; the dynamic workflow management system branded DispatchIT and the more advanced route optimisation software named RouteIT.
The tracking product is sold both directly via Datatrak and also through the group's strategic partner and shareholder MIX Telematics (previously CI Omnibridge who had acquired a 4 per cent shareholding in Datatrak Holdings plc after it had agreed to purchase the fleet telematics business from Siemens VDO Automotive's UK trading subsidiary) mainly in the UK. The CEO confirmed that Datatrak recently concluded a new three-year contract with MIX for Datatrak Online which is currently installed in over 9,500 vehicles.
This new contract is made-up entirely of annual recurrent revenues with over 50 per cent of total revenues now as annual fees. Moreover, also in the UK, Datatrak managed to conclude further installations of Datatrak Online directly through Euro Car Parts Ltd (one of the largest distributors of car parts in the UK) who signed a multi-year contract.
MIX Telematics also recently signed a distribution agreement with Datatrak to sell its DispatchIT workflow management system in the UK. The focus has now turned to the Italian market following the establishment of Datatrak Italia Srl in December 2007. Datatrak recently attracted an Italian company, Teleclient System Integrator Spa, as a 45 per cent shareholder in this joint venture.
Datatrak's products have already attracted interest from some of Italy's most important blue-chip companies. The CEO explained that Datatrak Italia already registered its first major contract through the sale of distribution rights of TrakIT, DispatchIt and RouteIT while a number of other proposals are in the pipeline. Mr Fenech Conti stated that two Dutch clients are currently performing DispatchIT trials and the plan is to launch this product on the Dutch market later this year. The sale of DispatchIT involves an up-front licence fee on conclusion of the sale and a small percentage of the contract as annual recurrent revenue.
Apart from Italy, Datatrak is now turning its focus on the Spanish market and is seeking to set up a similar joint-venture company in Spain together with a Spanish partner.
Following the conclusion of the sale of the route optimistation system, RouteIT, to GeoPost of the UK which is wholly owned by La Poste (the second largest postal operator in Europe), other RouteIT trials are currently ongoing with other companies.
Another very important recent development for Datatrak was the successful renewal of the local enforcement system contract for a further five years.
In the shareholders' circular distributed in anticipation of the April EGM, the directors had estimated that group revenues are anticipated to amount to _4 million this year, with a pre-tax profit of _0.61 million.
During the stockbrokers' meeting, the CEO was not in a position to confirm whether these estimates are achievable since the restructuring process took much longer to finalise than anticipated. Moreover, approximately 33 per cent of the group's business is generated in sterling and the decline in the value of the sterling against the euro so far this year also negatively impacted the group's financial results.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
¸ 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved