Vehicle tracking group Quartix Holdings plc (LON:QTX) has told investors that it expects to report better-than-expected revenues when it releases its 2016 full-year results next month.
The Newtown-based company added that profits for the year are on track to meet expectations.
The strong free cash-flow experienced in the first half of 2016 continued into the second, and Quartix said it expects to be in a position to pay a supplementary dividend along with the final dividend.
The upbeat financial outlook came as the firm announced subscriptions in its core fleet operations increased by 14% in the UK to over 71,000 vehicles.
The real growth last year came abroad though, with subscriptions in the US almost doubling to more than 6,000 vehicles and it is targeting further growth across the pond in 2017.
Quartix also saw the number of vehicles fitted with its software in France grow by 26% to just shy of 10,000 vehicles.
New unit installations in the insurance sector grew by 22% to 69,000 vehicles, although installations in the second half were 13% lower than the first six months of 2016, a trend it expects to continue throughout this year.
This is down to the group’s new strategy to focus primarily on the higher margin core fleet market which it announced in its interim results back in July.
“We are delighted with the progress made in 2016, having increased our fleet subscription base by 19% to more than 87,000 vehicles in total,” said managing director Andy Walters.
“We completed some key product initiatives and expanded our footprint in the USA and now believe that it is appropriate to increase investment in the development of this market, which we estimate to be more than 5 times the size of the UK market.”
With the additional investment into the business over the coming year, Quartix said it expects to deliver 2017 results broadly in line with those achieved in 2016.
The results for the year ended 31 December 2016 will be published on Monday 27 February.
Shares were down 3%, or 10p, to 290p.
Brokers: Extra investment will pay off over the longer term
City broker finnCap says the move away from insurance and the extra investment into the business, although likely to slow growth in the near term, will set the group up for stronger growth going forward.
“Given the success achieved in the Fleet business last year, management propose to back this opportunity with increased investment in marketing and product development in 2017, so earnings and cash flow are also likely to be unchanged on 2016,” finnCap analyst Lorne Daniel said in a note.
“The benefits of the increased investment should start to be seen in FY 2018 with rising Fleet sales more than offsetting a continuing reduction in Insurance, and improving margins.”
Despite the slowdown in 2017, Daniel is still bullish on the stock, seeing it as a ‘buy’ with a target price of 375p.
-- Updates for broker comment and share price --