2018/9: a year of massive growth in the cards

Trakm8 Holdings (LON:TRAK) reported its full year results today and as expected it was a year of medium progress as they rebuilt the business into one consolidated unit, invested heavily in new Sales & Marketing resources as well as R&D..both of which they have plenty to show for.

Oh and SaaS impact is finally over, 2018/2019 will enjoy the cash benefits of all the contracts they converted since, so expect a much better FCF going forward.

Free cash flow improved to an inflow of GBP1.0m (2017: outflow GBP3.0m). This represents a 90% conversion of profit before tax to cash.

Migration to a Telematics Service Provider now complete with progress in core telematics division driving higher recurring revenues

Achieved planned reduction of annual operating costs by GBP1.5m with savings reinvested into sales and marketing - particularly in Fleet Management

-Core telematics business revenue (Solutions Revenue) grew by 26% and Group adjusted profit before tax grew by 142%.

Net debt decreased by GBP0.6m to GBP3.3m (2017: GBP3.9m)

We have continued to develop market leading software and hardware solutions and during the year launched the new Insight software platform and the RoadHawk 600, which have provided the Group with a strong pipeline of opportunities. During the year, we announced new contracts with Intelematics, Calor Gas UK and Mecalac, and a number of contract extensions with Marmalade, Iceland Foods, and Direct Line Group.

All in all progress across all fronts, with improvements in profits, net debt, revenue, contracts and consolidating costs.

What about Outlook?

We alreaady knew that they need to exit another £2m of CEM contracts so it waas always known that H1 will take a hit because of that, which is reflected in the first thing they mentioned on the outlook message.

But what what about the upcoming Solutions plans?

Since year end, the Group is also pleased to announce a contract award from Intelematics Australia, and a contract extension from FMG

In addition to continuing to grow our UK operations, we are focused on expanding our international business in Europe and Asia

Trakm8 has decided to expand its existing facilities in Coleshill to meet demand for both product and people resources

Their plans are evident. There is substantial demand in the cards to grow their manufacturing capabilities and people to meet that demand. When factories grow and companies spend cash in widening their production output they have contracts in place for massive upscale. This line makes this more evident that even before:

The latest self-fit telematics devices, both in 2G and 4G, have best-in-class functionality and fit rates; they are being deployed in volume across Europe and Asia by major customers.

During the year, Trakm8 will expect to invest over GBP1.5m to create state-of-the-art facilities, to increase capacity to circa 1m devices per annum - and do so with high levels of automation in assembly and test.

Trakm8 Holdings (LON:TRAK) always had a plan for 1 million devices by 2020. They now upgrade their manufacturing capabilities to match 1m devices built per annum. Connecting the dots here reveals the case behind the story, the demand for their new products is like nothing before and they are gearing up for it for this year.

As always, this is an illiquid share and AIM so treat with caution and invest sensibly. But at these depressed, out-of-market's-radar price I think Trakm8 Holdings (LON:TRAK) is in the beginning of a massive turnaround and ripe to aim much higher in the next 12 months.

Disclosure: this is my biggest holding for the past 3 years and plan to continue to accumulate until it eventually gets bought out by competition.