Microlise listing on stock market will fund new products to improve operator efficiency

Telematics market leader Microlise became a PLC when it listed on the Alternative Investment Market (AIM) of the London Stock Exchange on 22 July. CEO Nadeem Raza tells MT why.

The decision to list shares on the stock market is intended to support Microlise's next stage of development, including broadening its product offering and targeting smaller operators.

Microlise was founded in 1982 and was bought by a management team led by CEO Nadeem Raza, pictured, in 2008.

“We have a large R&D team and part of the funding is going towards increasing the pace at which we can develop products,” Raza tells MT. “We have recently launched a planning and optimisation product and a trailer brake performance system and there are more products coming designed to help operators with their day-to-day operations and make them more efficient so they can do more work with their very limited resources.”

Many operators running mixed fleets would like a single telematics system that enables them to look at the performance of every vehicles on a single screen, and this integration is already happening, says Raza.

“That is something we do now,” he says. “We support a number of manufacturers’ proprietary systems in terms of collecting data from them and feeding that into our other systems. We support Volvo and Scania and we provide the systems for MAN anyway. There is more on that coming and over the next couple of months there will be an announcement about some work we are doing with a couple of new manufacturers.”

The government announcement that fossil-fuelled HGVs can be no longer be sold after 2040 means there is an urgent need to increase the pace of adoption of electric trucks, which have very different characteristics from diesel vehicles.

“We already provide telematics on a number of electric vehicles and we work with some of the new players producing EVs in the 3.5 tonne space,” says Raza. “Electric isn’t the only game in town and we do a lot of work with companies offering LNG and CNG solutions. We are talking to another company looking at hydrogen vehicles as well.”

With the proliferation of technology in truck cabs from sat nav to telematics and 4G mobile phones to remote tachograph downloads, a single box able to handle all communication would be a God-send to many operators.

“We are launching a gateway device later this year that is an extension of what we have today,” says Raza. “It has an awful lot of capability in that it can pull data from a lot of different systems. It already connects to the vehicle Canbus and tacho and it has wifi and Bluetooth so it can connect to handheld devices. It can also connect to a DVR [digital video recorder] for cameras and to other sensors such as tyre pressure monitoring or door opening.

“It is essentially one box that can go on a truck or trailer and is 4G capable which is good news now that 3G will be turned off in 2023.”

Microlise is strongest in fleets of 500-plus where 58% of these large operators and 88% of grocery retailers use its technology, and growing its business in smaller fleets is now on the agenda.

“We do already have lots of customers with smaller fleets of 10 to 20 vehicles but we don’t dominate that sector in the same way we do with the larger fleets,” says Raza. “We have some products more geared to smaller fleets because their needs are quite different. They don’t need the level of sophistication as the large fleets so they want a product that is simpler and easier to use.

“We have a product called Focus that is geared towards fleets of 10 to 100 and that has been selling really well. A lot of customers appreciate having a high level of functionality that they can only use a small part of initially and then turn on and use other things as their business grows.”

The first focus for these fleets when looking at telematics is often how it can save fuel by helping drivers use the vehicle more efficiently. But with the worsening driver shortage optimising vehicle utilisation is now another priority.

“Quite a few people with 10 to 100 vehicles are very interested in this because they recognise that by optimising orders, vehicles and routes they can either carry more goods with the same fleet or reduce their fleet size,” says Raza. “That is key for everybody whether they are running 10 or 1,000 vehicles.

“It takes in planning, routeing, scheduling and optimisation and links in to everything else we do including transport management, execution, proof of delivery and compliance so operators can buy one package that does it all. We have a suite of products that covers everything an operator needs to do.”

Microlise estimates that 35% of smaller fleets do not currently monitor their vehicles at all, or at least have very rudimentary standalone systems.

“They might have basic tracking, do their planning on a spreadsheet and use someone else to monitor their drivers’ compliance,” he says. “What we can do is give them all of those things whether they want to buy everything on day one or buy them over a period of time. It will be an integrated real-time system that means they don’t have to feed the same data into three different systems.”

Another barrier to adopting telematics is the lack of knowledge or management skill to use the mass of data on driver performance it produces.

“What we provide is just a tool and if operators don’t use it correctly or implement all the changes needed in the operation they won’t get the benefits,” says Raza. “That’s why we have a team of people to help our customers drive that value and return on investment. We can provide that consultancy not just at the beginning of the project but throughout the life of the contract.”

While Microlise has its own team of 160 software developers it has been willing to buy other companies that offer ready-made products in other related areas. It acquired tachograph analysis specialist TruTac in 2020 and took a 20% stake in Trakm8 in 2018.

“With everything we do, we always look at whether something is already out there we can acquire and integrate into the rest of our portfolio or is it something we have to develop ourselves,” says Raza. “It is far quicker to acquire something than build it from the ground up.”

Microlise now offers its own integrated camera systems that support the Direct Vision Standard as well as record what is happening on the road. “That is part of our health and safety module and enables the operator to see everything that happened leading up to an incident,” says Raza. “It combines Canbus and camera data with information on what the driver was doing to produce a holistic view of what was going on.”

Driver-facing cameras remain controversial and opposed by unions but some Microlise customers are now starting to fit them.

“Some operators have been reluctant to install them but we do have some customers where we have implemented driver-facing cameras,” Raza says. “Some drivers are concerned about that from a privacy perspective though they can be turned off so they are not recording all the time.

“We see the future for driver-facing cameras in fatigue management where it is more about providing a level of safety for the driver by monitoring when they are getting tired and should pull over.”

Another area of interest to Microlise is integrating data flows between clients and contractors to improve the efficiency of the supply chain. This is of course nothing new and supermarkets have tried to encourage more collaboration between their transport contractors to reduce empty running for many years.

“That is everyone from the bigger companies like Tesco and DHL and how they integrate with their contractors like Maritime and Stobart to how they interact with smaller hauliers,” says Raza. “There is a requirement for people to be able to work together and that needs them to share information and execute the work quickly and efficiently.

“That needs to be done digitally for all those organisations to work together effectively. We already do that with a lot of our customers and I see that happening more and more because no one company can do everything.

“Even Amazon subcontract lots of work to other people and there needs to be that secure and efficient way of information flowing between all those partners.”

Listing on AIM raises cash for company and shareholders

Microlise is selling £61.2m of shares to investors at 135p per share, valuing the company at £156.5m. That means around 40% of shares will be sold to investors and traded on AIM, leaving the remaining 60% in the hands of management and previous shareholders.

Of the £61.2m around £41m is being used to purchase shares from existing shareholders so £20m will be available to the company to wipe out the small amount of debt and fund development.

None of the existing management are however taking the opportunity to exit the business entirely. Bob Harbey, who joined the business in 1988, remains a shareholder even though he no longer has an active role in the business, focusing instead on his charitable work including running Microlise subsidiary Road to Logistics.

In the year to 30 June 2020, the company made a pre-tax profit of £1.7m – down from £2.6m the previous year - on turnover of £48.5m.