Quartix (QTX) – timely, clear reporting from this cracking AIM company

In a recent podcast with our associates Investor’s Champion, Chris Boxall of Fundamental Asset Management discussed some of the problems with company reporting, notably with reference to UK banks, and and why clear, easy-to-read financial statements, with a minimum of adjustments, can be good for your investment portfolio. In this regard, full year results from AIM quoted Quartix (AIM:QTX) yet again set the benchmark for other AIM companies to follow.

The first thing one notices with the results announcement from Quartix is that these represent final ‘audited’ numbers and not the usual ‘preliminary’ accounts many listed companies tend to issue. With a financial year end of 31 December 2018, it’s highly commendable that Quartix can issue these prior to the end of February.

Founded in 2001, Quartix is a leading supplier of subscription-based vehicle tracking systems, software and services. The Group provides an integrated tracking and telematics data analysis solution for fleets of commercial vehicles and “pay as you drive” motor insurance providers that is designed to improve productivity and lower costs by capturing, analysing and reporting vehicle and driver data. Quartix is based in the UK but growing strongly in overseas markets, particularly in France and the United States.

While the financial highlights do mention ‘adjusted EBITDA’ the results are mercifully free of too many references to adjusted numbers and thankfully there is no mention of the dreaded ‘underlying’ anywhere. This is in stark contrast to the banks discussed in the podcast, who clearly have plenty of adjustments to make excuses for!

For a business of Quartix’ small size, which is making meaningful investments in research and development expenditure and supporting overseas growth, the absence of adjustments is all the more refreshing. Many small listed companies relish the opportunity to adjust or exclude certain costs from the ‘underlying’ result. Quartix financial results happily state that they ‘expense all research and development investment, tracking system and installation costs as they are incurred unless development spend meets the criteria for capitalisation.’

Operating margins of 31% and a return on equity touching 40%, reflected in excellent cash flow, highlights the quality of this small business.  While a single customer dominates its insurance related activities, this part of the business is in planned decline as it focuses on growing its fleet operations, where no single customer dominates.

Our associates Investor’s Champion also interviewed Quartix founder and Chief Executive Andy Walters in a podcast here; it’s worth listening to.


AIM’s old guard continues to shine

With January 2019 being the first month we can remember no newcomers joining AIM, it’s reassuring to note that many of AIM’s longer established businesses appear to be in fine form. Our Blog here comments on two of our more mature favourites.

Flooring manufacturer James Halstead (AIM:JHD) celebrated 70 years as a listed company in 2018. The Group was established even earlier in 1914 and continues to operate out of the original premises in Bury. In its factories in Bury and Teesside, it manufactures resilient flooring for distribution in the UK and worldwide employing around 830 people, the majority of whom are in the UK.

While not the sort of high growth business many investors are drawn to, the £970m market cap AIM favourite has been a consistent performer over many years delivering high operating margins and returns on equity. Furthermore, unlike many AIM quoted peers, its financial results are mercifully free of accounting adjustments.

For the last full year ending June 2018 revenue rose 3.6% to £249.5m and profit before tax was flat at £46.7m (2017: £46.6m). The final dividend was lifted 4.3% to 9.65p and, with just over £50m of cash on the balance sheet, another special dividend might be on the cards.

The launch of their new Palettone range, a premium homogenous sheet vinyl collection with a collection of 50 colours, offers plenty of encouragement for the future.

James Halstead exports to far more countries outside the EU than are members of the EU. In addition they have attained full Authorised Economic Operator (AEO) status with HMRC. AEO status is an internationally recognised quality mark indicating that their role in the international supply chain is secure and that customs controls and procedures are efficient and compliant. This will minimise the risk of any post Brexit border delays.

The end of January trading update reassured that trading in January 2019 was ahead of the comparative period and profit for the half year will be at record levels. Group cash balances had also increased even after material outlays for dividend and tax payments

James Halstead is a terrific business which is prudently overseen by the Halstead family but one that is still making material investments to support growth.

While the valuation looks quite demanding in the light of short term Brexit concerns, there appears to be a higher degree of certainty that JHD will deliver, when others may not!

Our associates Investor’s Champion have published in-depth research on James Halstead here 


Nichols (AIM:NICL), owner of the Vimto brand, has lost its crown as the beverage darling of AIM to the high flying Fevertree Drinks. However, there are signs that this highly profitable soft drinks business might be springing back into growth mode.

Nichols’ Vimto drink was created over 100 years ago as a herbal tonic to give drinkers ‘Vim and Vigour’ and is now available across the world.

The Group’s brand portfolio now includes Levi Roots, Feel Good, Starslush, Panda and Sunkist, which are all sold in the UK. The brands span the still, carbonated, post-mix and frozen drinks categories.

Nichols acquired the Feel Good brand in July 2015 which extended their portfolio into the adult premium and health soft drink categories. Following the acquisition of Noisy Drinks in 2016 the Group also now supplies an extensive range of frozen drinks to the UK consumer.

The £540m market cap business operates an outsourced production model with manufacturing undertaken by well established, trusted, long-term partners.

It has been growing organically by developing the portfolio of brands and distribution channels and has also made targeted acquisitions. Revenue growth over the past few years has been steady, if unspectacular, growing from £106m in 2013 to £142m for the year ending December 2018.

Earnings per share growth has been somewhat more impressive rising from 38p in 2013 to 63p for the year ending 31 Dec 2017, with the dividend also being raised each year to last year’s 34p (+15%), representing an historic yield of 2.3% at the current share price (1475p).

The latest trading update covering the year ending 31 December 2018 offered some encouragement.

Group sales rose 6.9%, ahead of forecasts, to £142.0m boosted by an excellent performance in the UK business where sales grew 12.6% to £114.6m.

In its 110th year Vimto significantly outperformed the UK soft drinks category with sales increasing 12.9% during the year compared to the total UK soft drinks market growth of 7.4% (Nielsen MAT year to 1 December 2018).

In its international business, a strong sales performance in Africa during the second half of the year delivered full year growth of 6.5% in this region.

The one disappointment was the reduction in sales to the Middle East from £13.0m in 2017 to £9.6m in 2018, due to the ongoing conflict in Yemen and the timing of shipments to Saudi Arabia. A turnaround in this region could see a material boost to group sales.

The shares trade at 20x forecast earnings for 2019 which looks fair for a high-quality, cash rich business with well-established distribution.

Our associates Investor’s Champion have published in-depth research on Nichols here


These AIM old-timers have seen it all before over their long existence and should continue to deliver for many years to come, Brexit notwithstanding!



Fundamental AIM for IHT portfolios hold shares in the companies featured in his Blog