Telematics has been a black spot for investors. Vehicle tracking systems may help the police recover your stolen Jaguar or a fleet owner locate its vehicles, but it has also been a great way of losing money for backers.

On the retail side, Trafficmaster is now profitable, having secured a number of contracts with car manufacturers to install its traffic information product in their models. And CybIT, which serves the corporate market and has a deal with Trafficmaster to provide its information and services to operators of UK vehicle fleets, is flirting with profitability too.

CybIT seems to be picking up business via a series of innovative partnerships. For instance, after a year of trials it has signed a three-year deal with Norwich Union, the UK's largest insurer of fleet vehicles.

By taking up CybIT's bespoke package for Norwich Union, operators of fleets will gain fixed price insurance cover for two or three years as well as a premium rebate if certain conditions are met. This could prove lucrative for CybIT over the next few years.

Chief executive Richard Horsman says CybIT aims to be 'the Vodafone of the telematics world'. As well as providing the hardware necessary to enable each vehicle in a fleet to be registered and tracked by a central controller, the company can offer a whole range of services and particular solutions and systems to users. It also allows certain partners to 'white-label' its products.

A year ago, CybIT asked investors for more money, raising £4.9 million at 3.5p. Its shares have since halved, though that is in line with the sector.

However, the placing has put the business on a surer financial footing, encouraging more partners to sign agreements. It also means CybIT no longer has to use expensive factoring facilities.

In the year to end-March, turnover rose 60 per cent to £8.1 million, enabling the group to turn the previous year's £787,000 loss into a £291,000 pre-tax profit. This happened as CybIT signed deals with numerous large fleet operators, including Lex Vehicle Leasing, and contractors Marshall's and Alfred McAlpine. The latter now uses CybIT's technology on 650 of its vehicles.

Up until the current financial year, Cybit recognised all of the revenue from a contract as soon as it was taken. That was just about logical since the contract was sold on to factoring companies. This year, the company plans to be far more prudent with its accounting in this area.

While the cost of a contract will be incurred up front, the revenues will only be recognised as the contract progresses. As a result, turnover will rise only slightly this year and CybIT will move back into loss.

Now those left standing in this area could be set to clean up. However, the debtor book, indicating revenues to come, should build up significantly as the Norwich Union and similar partnership arrangements start to pay off. Alex Jarvis of house broker KBC Peel Hunt predicts a return to profits in 2006 when these sales start to flow through the profit and loss account.

This summer, small cap manager Artemis built a ten per cent stake in CybIT. With a market capitalisation that is just twice historic sales and a growing band of customers that seem happy to renew their contracts, private investors could do worse than follow the investment manager's lead.

Cybit Holdings	AIM	£2.42m	32.50p	0.00p
Click here for interactive charting
Other company articles:
Profits grow at Cybit			03/07/2008
Contracts boost for Cybit			26/03/2008
Contract cheers Cybit			09/01/2008
CybIT tracking fast growth			02/11/2004
CybIT			14/11/2003