There is much to admire in today's year-end update from telematics kit maker Trakm8 (TRAK:AIM). There's more super-charged revenue growth, up 44% at the headline level, with recurring income jumping around 50% to more than £8 million. The acquisitions of DCS and a unit from Route Monkey added an extra £2.6 million to the top line, which means that the underlying revenue growth measure is up 29%.

OK, the implied £25.8 million total is a modest miss on the £26.5 million the City had been expecting but to have 151,000 'black boxes' connected to its network (up from 102k) is no mean feat.

The market thinks so, the share price has leapt more than 8% to 295p, a scorching performance since SHARES wrote on the company almost exactly a year ago, at 118p.

TRAK

That's still way down on the 385p record hit in mid-December, just before that critical report popped out from some of the more mischievous among the investment community. The central claim was that Trakm8 was ploughing most of its cash back into R&D and acquisitions. It is certainly true that the company has kept a well-funded new products pipeline, and why would it not in this nascent and fast-changing technology niche.

It is also true that the company tapped shareholders for an extra £6 million of cash to buy the route scheduling business of Route Monkey, paying £6.5 million in an all-cash deal.

'We note increased sales and marketing spend being flagged, but the board expects another year of strong trading performance,' points out FinnCap analyst Lorne Daniel.

The business appears to have turned a cash-consuming corner, throwing off £1.7 million of free cash flow (FCF) and allowing the company to slash net debt by £1.2 million (more than half) to £1 million. Management are also going out of a modest limb to demonstrate their confidence in their new FCF future by committing to a first ever dividend.

Yes, the payout is a fairly shrug-worthy 2p per share, or 0.68% yield, but that's not unreasonable given its rapid growth ambitions, and few (if any) shareholders are likely to feel short-changed.

Fleet and map

The challenge for Trakm8 now is to continue its progress across the busy lines of growth, FCF and dividends in the face of still competition in the fleet tracking space. 'Whilst growth has been strong, cash conversion has been weak relative to peers, such as Quartix (QTX:AIM),' says Lee Prout, analyst at IT analysis boutique Megabuyte. If it can do that then the current year to 31 March 2017 price to earnings (PE) multiple of 17.4 will look attractive, and maybe the shares will be able to reach out to their previous record, or beyond.

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Issue Date: 26 Apr 2016