Trakm8 released a very encouraging trading update this week indicating that profit for the year ended 31 March was ahead of management expectations. Reassuringly the acquisition, and subsequent integration of BOX telematics into the group, appears to have gone well, and net cash at the end of the year at £0.6m was higher than anticipated.
Most encouragingly, on a like for like basis, Trakm8 orders are up 46% year on year, and the outlook statement indicates that they are now in a strong position to grow faster, and consider further value enhancing acquisitions.
A further caveat to the statement explains that exceeding management expectations this year was "primarily due to elevated levels of increased margin Engineering Services revenues in the final quarter of the financial year. These were very much associated with new projects that although beneficial for the results to 31 March 2014, will be predominantly delivered in the current financial year."
The trading statement also says that "the outlook for the current financial year is more positive than at any time in recent years."
Trakm8 is still a small company, and of course there are inherent risks and potential banana skins as it strives for rapid growth. However, I am very encouraged by their progress to date, and so far the management team have put in an impressive performance. Growth is being achieved through a measured approach without stretching the balance sheet. Comfortingly this is a high margin business with a high percentage of recurring revenues and strong cash flow. Interestingly, although the new financial year has just begun, I noted that future visibility means that management already expects the Group to achieve an improved trading performance in the new financial year, in line with their existing expectations.
On Friday the share price reached a new 52-week high.
The Director's hold sizeable stakes, and I noticed that at the end of the week an employee bought £21,000 worth out of treasury at a price of 60.25p per share.
Current broker forecasts are for 4.3p to end March 2015 putting the shares on a forward P/E of around 14. Given their impressive growth, and the potential for further value enhancing acquisitions, the share price looks good value to me.
I remain highly optimistic about Trakm8's future and shall continue to hold for the foreseeable future.
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