Quartix’s (LON:QTX) progress since it listed on AIM in November of last year has been something to behold.
The vehicle tracking and fleet management specialist’s sales have risen markedly and so has the share price.
The only blot on the landscape has been a slight lag in the corresponding rise in operating profits.
But that, as Quartix’s chief executive Andy Walters explains, is all in the normal course of business, as customer acquisition costs are booked up front and listing costs now have to be factored in.
Overall, the picture is very satisfying.
In the six months to June the company boosted revenues by 24% to £9.2mln and operating profit by 8% to £2.7 mln.
Net debt of £200,000 was converted to net cash of £800,000, and an aggressive dividend policy instituted, whereby the company proposes to pay out half of free cash flow to shareholders.
Since Andy Walters himself accounts for around 38 per cent of the shares and finance director David Bridge has nearly 6%, it’s abundantly clear that management and shareholder interests are well aligned.
But can the growth continue?
Walters is confident that the company’s recent foray into the United States represents the beginning of something big.
“I want to see us making a dent in the American market,” he says. “The opportunity’s there. It’s up to us to get our arms around it.”
The US has 28mln commercial vehicles, as against 3mln in the UK, and so far Quartix’s attempts to address that market have been impressive.
From a near standing start back in June 2014 Quartix has now installed over 1,400 units on fleets in the USA.
The number of fleets it has sold into has gone up over the last six months from 125 to 478, an increase of 290%.
“We’ve quadrupled our customer base,” says Walters.
And because Quartix is a new entrant to the US it’s able to be pretty fleet of foot, so there should be plenty more growth to come.
“We use email marketing, pay-per-click, price comparisons and search engine optimisation techniques,” he says.
It’s a new age of electronic communication, and Quartix is right at the forefront of it.
And in the US, that has certain advantages over Quartix’s other key markets, France and the UK.
In the US, he says, the distances are so vast that it’s customary for deals to get done without any face-to-face meetings taking place.
Indeed, of all its American customers Quartix managers have only ever had a meeting with one.
But that doesn’t stop them coming back for more.
Rather, that’s actually the established pattern. It’s quite normal, says Walters, for customers to order one or two units to try the system out, and then to come back down the line with a bulk order.
He speaks of one example where a US customer already known to Quartix increased the number of telematics units he was using from two to fifty, a 25-fold increase.
“Repeat orders should come automatically,” says Walters.
But what exactly is it that the customers like about Quartix’s offering?
There are two aspects to that. The first is the functionality – Quartix units can offer insights into potential efficiencies in payroll, fuel consumption, time management and routing.
The second is the customer experience.
And it’s here that Quartix really scores.
“The majority of our R&D investment is in software,” says Walters. “It’s how quickly customers can get hold of the information they want. Our USP is our ease of use. We marry up the functionality to the business needs.”
The success of that approach has not been lost on the market.
Since November, when Quartix listed at 116p, the shares have been bid up to their current 219p in fairly short order, mainly, says broker Finncap, because “investors appreciate the strong growth and security of the recurring revenue”.
Accordingly, Finncap sets a target price of 240p on the basis of forecast sales of £17.8 mln for this year and £19.7mln for next year.