The chart for this stock says it all.

The company is quickly becoming a real gem in the telematics field, over the last month the co. has announced re-seller contracts which will bring in min. 2m or >30% of last years T/O alone.

The company is already experiencing massive organic growth so the co. should be profitable now following last years 500k loss.

The co. has approx. 6m cash and is in one of the hottest growth areas at the moment.

With a market cap. of 25m this will be re-rated x2/3 minimum within the next 6-12 months IMHO.

MM buys went through on Friday with T/O continuing to build, one to put on your monitor...

My apologies Eric for not taking enough trouble to understand the basics of this business. Couldn't wait to look at the numbers, which is what I enjoy! If they are dealing with relatively small number of good quality corporate customers then chances of success would imo be much better than retail. Internal leasing always makes me nervous - if they have lots of sales success then short term cash need is high and business can become at the mercy of its lenders, whose appetite can change quickly. Actually find it encouraging that they say markets are challenging, which smacks of honesty in their approach - if I recall correctly Versailles Group appeared to be doing lots of new business (invoice discounting, but still some parallels) until it was discovered many of their "customers" were non existent.This is too risky for me, but could be multibagger and wish holders well.

partridge

On my reading the internal leasing is somewhat different. They fund the asset acquisition themselves. Rather than take credit for it immediately, they assign it to an internal leasing book and then take credit for it over 36 months. That explains the negative cashflow in the last period and provides a positive basis for future results. Do others concur with that reading?

Eric

That seems correct to me I think it is meant to spread revenues rather than produce lumpy figures which would mislead shareholders. Here's hoping for a steady growth and rising sp from now on. Patience will be required as the city boys are slow to pick up on these hidden gems-not the brighter fund managers though. I hope to accumulate while they ignore the potential! Thanks for all the work you put in Eric on ASC and CFP as well very interested in your findings
good luck to all!

Eric

Getting quite interested in this now, not least for my own education. How do they fund the asset acquisition themselves? If the assets leased out are merely own produced software, then perhaps they could be moved from Stock to the Internal Leasing book (within Fixed Assets?). If that is the case, there should not be cash implication, but a profit one depending on value of transfer. If they have to buy some or all of the assets subsequently leased, then my previous argument looks to hold up and the faster they sell the higher the negative cash until the book gets large enough to fund growth from monthly income. All conjecture - can the F/D not be asked to explain in layman terms?

Partridge

Eric - depends how they are providing their radio/cellular/data infrastructure - access masts, networks, data collection, etc. and how they pay, time, data, or hardware. Either they have built parts of their their own network (unlikely) or would guess they are piggy backing off a tier 1 provider. If I read this comment correctly (and they wont say exactly for commercial sensitivity reasons)it looks like they have firmed up some sort of wholesale agreement with a carrier(s), and thus have reduced their own personnel, operating, technical support costs. Would make sense. Its less risky, has smaller margins, but then pure profit for every customer spread over the 3 yr period. Various resellers also sell their tps services as well. Typical business model. The market is "challenging" least they are honest!- so looks like they are reducing their risk, and some profit to remain competitive. Boom and bust! or steady as it goes? - the latter it seems..

Partridge, m100

Feel dangerously close to being out of my depth. Suspect its partly due to the technical terminology and partly due to a less than lucid explanation of their finances. This post comes with a health warning to all who buy on technical analysis rather than fundamentals!

Taking the internal leasing first. They do show finance costs of assigning debts to finance companies of 374K (down from 517K) but don't say what this is for. The internal leasing book appears to be linked to the new recognition policy relating to fixed and mobile assets. The impact of 950K on the top line implies that the assets installed on client fixed and mobile sites under the previous system would have brought in 1140K of revenue. This is reduced to 190K by taking credit for the first of six periods only (may be handled monthly but I am assuming 6-monthly periods to coincide with 6-month accounts). The cost equates to half the revenue and is handled similarly. Partridge mentions software, but the mobile asset is presumably the gizmo in the cab, a mix of hardware and software. The former system took the revenue and costs up front even though the client probably pays periodically under a 36-month contract (there may be an up-front fee). Why the complication of the internal leasing concept? Presumably the package paid for by the client is effectively a turnkey operation: fixed and mobile assets, cellular services, central control operation, Fleetstar-Online software, installation and maintenance services. It presumably makes sense to separate out the charges relating to the fixed and mobile assets and cellular services.

Similarly, for cellular services, it appears that they used to take full credit up-front. Now they are spreading that over the 36-month contract. It could well, as M100 suggests, cover a move to buying out services which would then explain the 600,000 savings over a 36-month period. If they are paying as they go they could hardly have taken credit up-front.

The "Group Financial Performance" appears, by just giving selected facts, to be intended to confuse (or intentionally confuse, which may be worse!) Once I have one or two reactions to my working papers, I agree the step of writing to the F/D to seek clarification. In the end of the day, it is important: the sp could be much lower than it should be because noone can interpret the finances. Hardly in the company's interest as they may well need to raise finance to fund expansion. As investors, we want the sp gain now rather than waiting for the entanglement to unravel!

Eric

Hi Eric,

I've just had a quick scan of the full year report and interims. I'm not holding any CYH so wasn't wearing my "rose tinted" glasses :-) However, I once had a stake in "Eagle Eye Telematics" (don't know if they're still going, but market competion looked rife even in those early days and customers were quick to chop and change when they found a better deal).

You've made a lot of valid points and I still need to do more research to get up to speed totally with all your comments.

Looking at the interims RNS from the Stock Exchange site - the first thing that stuck out was the missing brackets around the 2,251,560 admin. expenses (intentional slip of the pen? lol!).

Turnover has stagnated in reality which could have made things look worse without the "smoke and mirrors". I take it that turnover growth is down because of the "challenging market conditions" (never a popular phrase with investors).

Accounting for revenue and costs upfront suggests an aggressive company confident of improving their client base year on year. However, It appears that CYH have gone for the "softer" option, which means posting lower turnover in each period but giving the impression of solid growth (when you quite rightly point out that in year 3 they could simply be reaping the gains made in year 1 !). All this means is that the directors bonuses can be "enhanced" due to perceived year on year solid growth when all goes well and if market conditions continue to be "challenging" then at least the losses in future won't appear quite as hefty.

I think I would be worried more about why CYH are finding trading conditions difficult than the accounting tricks....

Has the market reached a saturation point at this stage ?

Is there a competitor undercutting CYH and other Telematics providers with low price quality kit ?

Cheers

OG

Anyone seen any evidence of mapAmobile being promoted?..thought this would be a moneymaker

Douggie,

I haven't seen any major promotion. And I personally don't think it will bring in much bacon, afterall who (apart from Parents with 'mobile chrildren') needs to track a mobile phone? Its very Big Brother and I can't see huge volumes - IMO. I've got no doubt it is profitable though - I just doubt it'll set the balance sheet alight!

skids

I have to add as well, that I think that is CYH's problem - everything seems to be small potatoes. They need some big money deals. Until then I'm watching and waiting from a distance (no longer a holder after much waiting).

skids

overgrowth

Thanks for the analysis. Points which would give a more bullish view: (a) Sainsbury to You contract taking effect in second half; (b) expectations from Norwich Union relationship; (c) "substantial improvement during the third quarter in both corporate and general business sectors". Your point re reaping benefit from Year 1: the point is that they are not doing so because they took all the credit in year 1; the new and more sensible recognition policy delays 5/6ths of credit from current 6-month period to next 5 periods. My reworking of the last 3 years on basis that current policy applied indicates they would now be in reasonable profit.

The aspect which seems to be well accepted in the market are their information systems based on Fleetstar-Online. It would be helpful to know, however, who are now their main competitors in the core area of fleet control.

Eric

Just watched an item on Working Lunch which says Norwich U is launching a box at 200 for young drivers to buy and install in their cars to track their mileage and areas they drive in also whether they are driving late at night which is when most drink related accidents occur. If they buy this and prove to be driving responsibly they qualify for much reduced insurance premiums. If this takes on and sells well I would guess that CYH is the main supplier.

Also could have the knock-on effect insure whilst you drive?

Yes probably, as a low mileage driver that would suit me.

More info on the NU black box for young drivers at http://www.money.telegraph.co.uk/money/main.jhtml?xml=/money/2005/01/12/cnnorw12.xml&menuId=242&sSheet=/money/2005/01/12/ixfrontcity.html

Presumably this is Cybit technology. I note that it is being offered to only 1500 drivers, so it's still in the pilot study stage, but would be great news for Cybit if it took off.

After a little more digging I don't think the Norwich Union scheme does have anything to do with Cybit after all: according to the Financial Times 'Norwich Union has formed a partnership with Ohio-based Progressive, the US's fourth-largest insurance group; IBM and mobile phone group Orange to operate the scheme.'

RD

Didn't seem to tie in with CybIT focus on lorry fleets. So a complementary product; positive is evidence that Norwich Union mean business and will "encourage" clients to utilise the CYH facilities.

Eric

I've always thought this to be Cybit contribution to Norwich Union link up...similar kit to mapAmobile keep track of mobile phones, also similar to unit in cars small vans keep track of individual remote staff.. duty of care etc. also similar unit used in DriveIT to assist car share schemes all sound much the same sort kit to me ...hope I'm not wrong..............

RD... Is it possible to post the link to the ft article. Thankyou.