TIDMQTX
RNS Number : 6046Q
Quartix Holdings PLC
01 March 2021
Quartix Holdings plc
("Quartix" or "the Group")
Final Results
Strong growth in fleet customer and subscription base
Quartix Holdings plc (AIM:QTX), a leading supplier of vehicle
telematics services to the fleet and insurance sectors, is pleased
to announce its audited results for the year ended 31 December
2020.
Financial highlights:
-- Group revenue increased by 0.8% to GBP25.8m (2019: GBP25.6m)
o Fleet revenue(1) grew by 6.0% to GBP22.0m (2019: GBP20.8m)
o Fleet revenue represented 85.4% of total revenue (2019: 81.2%)
o Insurance revenue(2) decreased by 21.5% to GBP3.8m (2019: GBP4.8m)
-- Adjusted EBITDA(3) increased by 11.5% to GBP7.9m (2019: GBP7.1m)
o Fleet telematics services profits(4) increased by 6.0% to
GBP17.5m (2019: GBP16.5m) (note 3)
o Fleet customer acquisition investment(5) increased by 14.1% to
GBP6.9m (2019: GBP6.1m)
o Insurance segment profit(6) increased by 32.5% to GBP2.1m (2019: GBP1.6m)
-- A provision of GBP1.6m in respect of the swap out of 3G fleet
units in the US (see Strategic Report: Financial Review)
-- Operating profit therefore decreased by 11.8% to GBP5.7m (2019: GBP6.4m)
-- Profit before tax decreased by 12.3% to GBP5.7m (2019: GBP6.5m)
-- Adjusted diluted earnings per share(7) of 13.16p, diluted
earnings per share of 9.82p (2019: 11.25p)
-- Free cash flow(8) decreased by 11.1% to GBP5.5m (2019: GBP6.2m)
-- Final dividend payment of 17.7p per share proposed (2019:
10.0p) including 15.30p for supplementary dividend (2019: 5.8p)
giving a total dividend for the year of 21.07p per share.
(1) Total Fleet segmental revenue (see note 3)
(2) Insurance segmental revenue (see note 3)
(3) Earnings before interest, tax, depreciation, amortisation,
share based payments and the 3G replacement provision (see
Strategic Report: Financial Review)
(4) Profit for the Fleet segment before customer acquisition
costs and central fleet costs (see note 3)
(5) Sales, marketing, net equipment, net installation and
carriage cost for new fleet customers (see note 3 for full
explanation)
(6) Insurance segmental profit increased as a result of a
reduction in equipment and installation costs (see note 3)
(7) Diluted earnings per share before the 3G replacement
provision (see Strategic Report: Financial Review)
(8) Cash flow from operations after tax and investing
activities
Principal activities and performance measures
The Group's main strategic objective is to grow its fleet
subscription base and develop the associated annualised recurring
revenue. The Key Performance Indicators used by the Board to assess
the performance of the business are listed below and discussed in
the Chairman's Statement and Strategic Report.
Key Performance Indicators ("KPIs")
Year ended 31 December 2020 2019 % change
-------- -------- ---------
Fleet subscriptions(1) (new units) 42,898 43,837 (2.1)
Fleet subscription base(2) (units) 173,793 150,640 15.4
Fleet customer base(3) 19,039 16,394 16.1
Fleet attrition (annualised) (4) (%) 12.2 11.9
Annualised recurring revenue(5) (GBP'000) 22,245 20,534 8.3
Fleet invoiced recurring revenue(6) (GBP'000) 20,801 19,297 7.8
Fleet revenue(7) (GBP'000) 22,059 20,808 6.0
Price erosion(8) (%) 6.6 9.4
Insurance installations(9) (new units) 17,074 36,386 (53.1)
Insurance revenue(10) (GBP'000) 3,776 4,813 (21.5)
-------- -------- ---------
(1) New vehicle tracking unit subscriptions added to the subscription base before any attrition
(2) The number of vehicle tracing units subscribed to the
Group's fleet tracking services, including units waiting to be
installed for which subscription payments have started or are
committed.
(3) The number of customers associated with the fleet
subscription base
(4) The number of new vehicle tracking unit subscriptions, less
the increase in subscription base, expressed as a percentage of the
mean subscription base
(5) Annualised data services revenue for the subscription base
at the year end, before deferred revenue, including revenue for
units waiting to be installed for which subscription payments have
started or are committed
(6) Invoiced subscription charges before provision for deferred
revenue
(7) Total fleet segment revenue (see note 3)
(8) The annual decrease in average subscription price of the
base expressed as a percentage of the average subscription price at
the start of the year, all measured in constant currency
(9) The number of new vehicle tracking unit installation in the
insurance segment
(10) Insurance segment revenue (see note 3)
Andy Walters, Chief Executive Officer of Quartix, commented:
"It is very pleasing to report strong growth in our fleet
customer and subscription bases during 2020, despite the
difficulties encountered through the coronavirus pandemic,
particularly in the first half. The fleet customer base increased
by 16% to 19,000 and the subscription base increased by over 15% to
174,000 vehicles. The strength of the business in the second half,
despite restraints imposed by the pandemic, was very encouraging,
and we continued to invest in the development of our sales teams
and channels. New vehicle subscriptions in the second half were 10%
ahead of those in the first half, and we have entered 2021 with
strong levels of new customer acquisition.
Growth in our international markets was extremely encouraging:
the subscription base in France expanded by 22% to 31,345 vehicles;
in the USA it increased by 30% to 23,479; and in our new
territories (Spain, Italy, Germany and Poland) the base trebled in
size to 3,904. In the UK the subscription base increased by 9% to
115,065 vehicles. I am confident that, given recent recruitment in
our sales teams and our investments in marketing, we can accelerate
the rate of customer acquisition further as the economy opens up
again.
Although the latest lockdown in the UK has had an adverse impact
on customer activity in the first two months of 2021, we expect new
fleet subscriptions to be close to the levels achieved in the same
period last year, but with much stronger prospects for March. The
high levels of recurring revenues and opportunities to grow the
fleet business in the UK, USA, France and each of our new
territories underpin our confidence for the current financial
period and beyond."
For further information, please contact:
Quartix (www.quartix.net)
Andy Walters, Chief Executive Officer
Daniel Mendis, Chief Operating and
Financial Officer 01686 806 663
finnCap (Nominated Adviser and Broker)
Matt Goode / Kate Bannatyne (Corporate
Finance)
Alice Lane (Equity Capital Markets) 020 7200 0500
Full Financial Results Report
The Group's Financial Statements and results presentations for
the year ended 31 December 2020 are available in the "Investors"
section of our website at: www.quartix.com/investors
About Quartix
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 and is listed on the AIM market of
the London Stock Exchange (AIM:QTX).
Chairman's statement
Introduction
Our key focus for the past year was investing in the growth of
our core Fleet operations, both in the UK and overseas to drive an
increase in recurring revenues. This was achieved with the Group
experiencing strong growth in its Fleet tracking subscription
platform. Performance in the second half of the year was
particularly encouraging; new subscriptions were 9.9% ahead of the
prior year and roughly 60% of the year's growth in the size and
value of the base were achieved in that period. Fleet revenue grew
by 6.0% during the year; this lagged growth in the value of the
subscription base as the latter grew more rapidly towards the end
of the year.
This improved performance in the second half has brought new
subscriptions for the year to within 2.1% of those for 2019 (which
in turn was 39% ahead of 2018), notwithstanding the 13.6% decrease
in new subscriptions experienced in the first half of the year as a
result of the coronavirus pandemic. It was also pleasing to see
Group attrition remain steady at 12.2% (2019: 11.9%) and price
erosion reduced to 6.6% (2019: 9.4%) in the midst of a coronavirus
pandemic.
Each geographical market, except the UK, registered increases in
new subscriptions for the year as a whole. In the UK, the sales
team held fewer face-to-face sales meetings (due to the pandemic),
which impacted its field sales and distribution channels; however,
the second half of the year saw a return to the new subscription
levels achieved in the second half of 2019, despite these
limitations. Sales in the UK fleet operations grew by 0.8%,
reaching GBP15.6m (2019: GBP15.5m) whilst UK insurance revenues
decreased to GBP3.8m (2019: GBP4.8m), due to availability of
driving tests and installation capacity during the year.
The Group made excellent progress in France, where revenue
increased by 16.7% to EUR4.3m (2019: EUR3.7m), ending the year with
31,345 vehicles under subscription (2019: 25,643) across 4,299
fleet customers (2019: 3,528).
2020 was the Group's sixth full year of operations in the USA.
We are pleased with progress and completed the year with 23,479
vehicles under subscription (2019: 18,050) across 3,247 fleet
customers (2019: 2,621). Revenue increased by 20.2% to $3.1m in
2020 (2019: $2.5m) and the prospects for future business
development remain encouraging.
The Group continued to make progress in its new European
territories, ending the period with a subscription base of 3,904
vehicles (2019: 1,316) across 920 fleet customers (2019: 337).
Results
Group revenue for the year increased marginally to GBP25.8m
(2019: GBP25.6m); the Group continues to replace insurance revenue
with higher quality fleet revenue. Total fleet revenue increased by
GBP1.2m and now represents 85.4% of total revenue (2019: 81.2%).
Insurance revenue decreased by GBP1.0m.
Operating profit for the year decreased by 11.8% to GBP5.7m
(2019: GBP6.4m) and profit before tax was GBP5.7m (2019: GBP6.5m).
This reduction was after charging GBP1.6m for the swap out of 3G
units in the USA. Management expect the sunsetting of the 3G mobile
network in the US to be finalised in 2022. This necessitates the
replacement of a large proportion of the US installed base of
tracking systems during 2021 and the Board has taken the decision
to provide this service free of charge to customers in order to
minimise the chances of incremental attrition and to further
enhance the Group's reputation in the US market. This exceptional
charge was partially offset by the improvement in the Insurance
segment, whose 2020 segmental profit was GBP2.1m (2019: GBP1.6m),
as a result of a reduction in equipment and installation costs.
Total Fleet Segment profit, before central overheads, remained
comparable to the prior year, at GBP9.7m (2019: GBP9.7m). The
profitability of the Group's fleet telematics services, which
represents the core part of the business associated with recurring
revenues, grew by GBP1.0m to GBP17.5m (2019: GBP16.5m). This gain
was then invested in acquiring additional fleet customers for the
future.
Further details for segmental profit are given in the Financial
Review and note 3.
Cash conversion remained strong, resulting in free cash flow,
cash flow from operations after tax and investing activities, of
GBP5.5m (2019: GBP6.2m). Net cash increased to GBP10.6m at 31
December 2020 (2019: GBP6.8m), following the cancellation of the
final and supplementary dividend for 2019, but after an interim
dividend payment for 2020 of GBP1.6m.
Earnings per share
Basic earnings per share decreased by 12.7% to 9.86p (2019:
11.29p). Diluted earnings per share decreased to 9.82p (2019:
11.25p). The adjusted diluted earnings per share, which is
calculated by adding back to the cost of the replacement of 3G
units is 13.16p.
Dividend policy
Our ordinary dividend policy is to pay a dividend set at
approximately 50% of cash flow from operating activities, which is
calculated after taxation paid but before capital expenditure.
In addition to this the Board will distribute the excess of
gross cash balances over GBP2m on an annual basis by way of
supplementary dividends, subject to a 2p per share de minimis
level.
The surplus cash is calculated using the year end gross cash
balance and after deduction of the proposed ordinary dividend, and
is intended to be paid at the same time as the final dividend. The
policy will be subject to periodic review.
Dividend
In the year ended 31 December 2020, the Board decided to pay an
interim dividend of 2.5p per ordinary share plus a supplementary
dividend of 0.87p per share. This totalled GBP1.6m and was paid on
11 September 2020 to shareholders on the register as at 14 August
2020.
The Board is recommending a final ordinary dividend of 2.40p per
share, together with a supplementary dividend of 15.30p per share,
giving a final pay out of 17.70p per share and a total dividend for
the year of 21.07p per share.
The final and supplementary dividend amounts to approximately
GBP8.6m in aggregate. Subject to the approval at the forthcoming
AGM, this aggregate dividend of 17.7p per share will be paid on 30
April 2021 to shareholders on the register as at 1 April 2021.
Outlook
The Group has made a strong start to the year, in line with our
expectations. Given the success that Quartix has achieved in its
core fleet markets, and considering the broader market opportunity
available to it, the Group intends to invest a larger proportion of
its profits on sales and marketing during 2021 to capitalise
further on the profitable subscription platform it has created by
accelerating growth in its fleet subscription base. Whilst the
majority of this investment will take place in the second half of
the year, some additional investment is already underway with the
recruitment of additional telephone sales staff, a substantial
increase in UK field sales capacity and the Group's first field
sales agent to be based in France.
AGM
The Group's AGM will be a closed meeting held at 11.00 a.m. on
23 March 2021 at the Group's registered office at 9 Dukes Court,
5462 Newmarket Rd, Cambridge CB5 8DZ.
Paul Boughton
Chairman
Strategic Report: Operational Review
Principal activities
Quartix is one of Europe's leading suppliers of vehicle
telematics services. We made excellent progress in the core fleet
sector in 2020, which now has a subscription platform connecting
more than 170,000 fleet vehicles. Whilst the origins of the Group's
business are in the UK, it has developed a significant market
presence in the fleet sector in France and the USA. It built on
this success and experience with continued expansion in Spain,
Italy and Germany during the course of 2020.
Strategy and business model
The Group's main strategic objective is to grow its fleet
subscription platform and develop the associated recurring revenue.
This strategy is based on 5 key elements, which were first
highlighted in the 2018 annual report. We are pleased to be able to
report significant progress in each area, as summarised below:
1. Market development: despite new fleet subscriptions
decreasing by 2.1%, the second half of the year saw an increase in
new fleet subscriptions of 9.9% against the equivalent period in
2019. The subscription base increased by 15.4% and strong growth
was achieved in each of our existing territories.
2. Cost leadership: we have recently signed a long-term supply
agreement with a telematics device manufacturer, which we expect to
result in cost and simplicity improvements. Improvements in the
efficiency of the sales cycle are also being rolled out. We
continue to review product and overhead costs in order to identify
further operational efficiencies.
3. Continuous enhancement of the Group's core software and
telematics services: further improvements have been made to the
Group's software platform, which have increased its functionality
and ease of use, as well as allowing the integration of camera
systems. A new self-install fleet unit has been launched for the UK
and Europe, a 4G unit has been developed for the US and a new
self-install insurance product has been launched.
4. Outstanding service: Quartix maintained its excellent
reputation with its fleet customers throughout the year,
consistently being rated as "excellent" by TrustPilot users.
Changes to the support and service processes during the year have
realised benefits that have kept attrition at a steady level in the
midst of the global coronavirus pandemic.
5. Standardisation and centralisation: the expansion into
European markets has thus far been achieved entirely from the
Group's principal operational office in Newtown. This structure is
being reviewed following the expiry of the Brexit transition
agreement, though material changes are not expected. The office in
Chicago is now exclusively a sales office, with US support and
service functions being performed from the UK.
Our fleet customers typically use the Group's vehicle telematics
services for many years, resulting in low rates of attrition.
Accordingly, the Group focuses its business model on the
development of subscription revenue based on minimal initial
commitment from the customer, providing the best return to the
Group over the long term.
The number of vehicles connected to our subscription platform
and the value of recurring subscription revenue derived from it are
the key measures of our performance in the fleet sector.
We also provide our telematics technology and services to
insurers, who use the Group's technology to monitor the driving
style and habits of higher-risk drivers, normally for a policy with
a term of just 12 months. The level of attrition, in this industry
for young driver policies, is relatively high.
The Group has focused over the past four years on growth in its
fleet operations. In 2020 85.4% of Group revenue (GBP22.0m of
GBP25.8m) derived from fleet applications, which compares with
63.9% in 2016 (GBP14.9m of GBP23.3m).
People
We take pride in the level of service we provide, and it is
gratifying to see that fleet customers consistently provide us with
excellent reviews - both in person and on third-party sites such as
TrustPilot. The changes in support and service processes which we
have made during 2020 have kept attrition levels stable during the
year and we are delighted to have been able to support our
customers during this extremely difficult period for them.
These service achievements are a reflection of the teamwork,
creativity and dedication of our people and a testament to how
seriously we take our commitment to providing the best experience
for our customers. Our financial performance derives from the
customer service we deliver, backed by the technology we develop.
We would like to register our personal thanks to every one of our
employees who made 2020 another great year for Quartix.
We are pleased to have been able to provide our employees with
the ability to participate in the equity of the Company under our
EMI share option scheme for the eighth year in a row. Under this
scheme each UK employee (barring Directors) receives shares in the
company at an exercisable price of 1 penny per share, which are
exercisable approximately 18 months from grant. Employees with 5
years' service at the first grant in 2013 would now hold 4,260
shares in the company, less any disposals. During the year several
staff members were issued share options to thank them for their
personal contribution to the progress of Quartix throughout the
coronavirus pandemic. In addition, Laura Seffino, a Director of
Quartix Holdings plc, received share option grants in 2020, as
disclosed in the remuneration report.
Operational performance
All of our business operations continued to perform at a high
level in 2020. Gross margin increased to 66.0% (2019: 64.9%),
mainly due to the increase in deferred revenue release in
insurance, with the reduction in new policies, particularly from
the coronavirus impact. With additional investment in fleet,
administrative expenses increased by 11.6%. Cash conversion
remained strong with cash flow from operations after tax and
investing activities (free cash flow) representing 117.0% of profit
for the year (2019: 115.0%). We expense all research and
development investment, tracking system and installation costs as
they are incurred unless development spend meets the criteria for
capitalisation.
Our accounts and operations teams continued to manage working
capital well: trade debtors at the year-end were 31 days (2019: 34)
days of sales, and inventory levels decreased by 20.9% compared to
prior year levels.
Fleet
Our core fleet business, which accounted for 85.4% of Group
revenue (2019: 81.2%), delivered excellent progress in a further
year of investment. Strong subscription base growth in each of the
UK, France and the USA, coupled with our second year in four new
European markets, took the total subscription base to more than
170,000 vehicles.
During the course of the year we won 4,844 new fleet customers
(2019: 4,471). Sales leads continued to be generated through a
broad range of media and channels and investments have been made in
marketing, technology, processes and training, adding automation
wherever possible.
Total investment in fleet customer acquisition increased by
GBP0.8m to GBP6.9m in 2020 (2019: GBP6.1m). This investment will
increase further in 2021 as we continue to develop our business
across each of our markets, thereby increasing recurring
revenues.
Fleet UK
New subscriptions to our fleet tracking services decreased by
13.2% to 22,294, though the second half of the year (12,300 new
subscriptions) showed recovery in the market against the first half
of the year (9,994 new subscriptions). We increased our vehicle
subscription base by 8.9% to 115,065 as a consequence, and our
fleet customer base rose to 10,573 (2019: 9,908). In total we won
1,801 new customers in the UK (2019: 2,033) and we increased the
number of fleet clients with 50 vehicles or more. UK fleet revenue
was GBP15.6m (2019: GBP15.5m). The strength of our brand, service
capability and reputation in the UK is leading to higher levels of
enquiries from larger fleet prospects.
Our UK website continued to perform well in terms of enquiries,
and we continued to add new content to it.
We will continue to focus on telephone sales staff and we have
increased UK field sales capacity, to support our fleet marketing
initiatives; we will look to find additional channels and partners
to help us develop the market.
Fleet France
The number of new subscriptions in the French market was 0.9%
higher than the previous year (9,135 versus 9,054), and there was a
22.2% increase in the unit base, ending the year with 31,345
vehicles (2019: 25,643) under subscription across 4,299 fleet
customers (2019: 3,528). French fleet revenue increased by 16.7% to
EUR4.3m (2019: EUR3.7m), making a profitable contribution to the
Group. We saw continued growth in new customer acquisition
throughout the year, and this was broadly spread across each of our
channels. The Group has recruited its first French field sales
agent to help facilitate growth with customers who have larger
fleets, with 50 or more vehicles.
New European territories
Having launched in various European markets during 2019, the
Group has developed its operations successfully and achieved a
total of 2,922 new subscriptions (2019: 1,353), taking its
subscription base to 3,904 vehicles (2019: 1,316). Revenue
increased to GBP0.2m (2019: GBP0.1m). Sales results in the Spanish,
Italian and German markets have been very encouraging so far and
the Company will increase investment in these.
Fleet USA
Our sixth full year of trading in the USA showed good progress:
we concluded 2020 with 3,247 fleet customers (2019: 2,621)
achieving growth of 30.1% in vehicles under subscription to a total
of 23,479 (2019: 18,050). USA fleet revenue increased by 20.2% to
$3.1m (2019: $2.5m). Losses incurred in the USA remained similar at
GBP0.4m (2019: GBP0.4m).
We see significant potential for growth in the USA in the next
five years.
Combined fleet revenues in non-UK territories, were GBP6.4m,
representing 29.1% of total fleet revenue.
In the four years since this decision to focus on our fleet
operations they have grown to represent 85.4% of Group revenues
(GBP22.1m) in 2020 from 63.9% (GBP14.9m) in 2016. This trend is
expected to continue as the Company invests in the development of
each of its fleet markets.
Insurance
Reductions in the availability of driving tests and installation
capacity during the year contributed to the 53.1% decrease in
insurance installations to 17,074 units. This trend was in keeping
with the decision announced in July 2016 to focus on the core fleet
market and on only those insurance opportunities which are closely
aligned to the fleet business. The profitability of this segment
increased from GBP1.6m in 2019 to GBP2.1m, with a GBP1.0m reduction
in revenue more than compensated by a GBP1.5m reduction in
equipment and installation costs from the decline in volume. - see
segmental note 3.
Research and development
The Group is committed to the continuous enhancement of its core
software and telematics services, and we aim to offer a
market-leading platform which addresses the most common needs of
SME customers in the service sector of each of our target markets.
We achieved some notable successes in 2020:
1. Towards the end of the year, we completed trials of a new
self-install product for the UK and Europe, having applied
additional functionality to the unit. We subsequently signed a
long-term supply agreement with the manufacturer. We have also
developed a new 4G unit for the US, which is expected to be in
production in 2021.
2. Throughout the year, new software releases for all
territories and languages were issued for our customer base
regularly throughout the year. These updates provided enhancements
to usability and self-service, and were focused on features which
we felt would be of benefit to the large majority of our client
base.
3. We launched a new insurance self-install unit, which has
successfully been rolled out with one insurance customer and we
believe has the potential to be rolled out more widely.
All of our investment in research was fully expensed in the
year. The total cost amounted to GBP0.8m, which represents an
increase of 13.2% compared to the prior year (2019: GBP0.7m).
Capacity for future growth
We believe that the Company has significant opportunity for
growth in its fleet business in both new and existing markets. We
achieved excellent growth in our subscription platform in 2020 and
established encouraging positions in a range of new markets.
Given the success that Quartix has achieved in its core fleet
markets, and considering the broader market opportunity available
to it, the Company intends to invest a larger proportion of its
profits on sales and marketing during 2021 to capitalise further on
the profitable subscription platform it has created by accelerating
growth in its fleet subscription base. Whilst the majority of this
investment will take place in the second half of the year, some
additional investment is already underway with the recruitment of
additional telephone sales staff, a substantial increase in UK
field sales capacity and the Company's first field sales agent to
be based in France.
The Board estimates that total incremental investment in 2021,
including the incremental costs of manufacture and installation,
will be up to GBP1m, with the majority taking place in the second
half of the year. The Board will monitor this investment to measure
its success and will invest in such a way as to be able to moderate
it if it is deemed to be generating an unsatisfactory return.
Andrew Walters Daniel Mendis
Chief Executive Officer Chief Financial & Operating
Officer
Strategic Report: Financial Review
Key performance indicators ("KPIs")
Year ended 31 December 2020 2019 % change
-------- ---------------------- ---------
Fleet subscriptions(1) (new units) 42,898 43,837 (2.1)
Fleet subscription base (units)(2) 173,793 150,640 15.4
Fleet customer base(3) 19,039 16,394 16.1
Fleet attrition (annualised) (4) (%) 12.2 11.9 -
Annualised recurring revenue (GBP'000)(5) 22,245 20,534 8.3
Fleet invoiced recurring revenue(6) (GBP'000) 20,801 19,297 7.8
Fleet revenue(7) (GBP'000) 22,059 20,808 6.0
Price erosion(8) 6.6 9.4
Insurance installations(9) (new units) 17,074 36,386 (53.1)
Insurance revenue(10) (GBP'000) 3,776 4,813 (21.5)
(1) New vehicle tracking unit subscriptions added to the subscription base before any attrition
(2) The number of vehicle tracing units subscribed to the
Group's fleet tracking services, including units waiting to be
installed for which subscription payments have started or are
committed.
(3) The number of customers associated with the fleet
subscription base
(4) The number of new vehicle tracking unit subscriptions, less
the increase in subscription base, expressed as a percentage of the
mean subscription base
(5) Annualised data services revenue for the subscription base
at the year end, before deferred revenue, including revenue for
units waiting to be installed for which subscription payments have
started or are committed
(6) Invoiced subscription charges before provision for deferred
revenue
(7) Total fleet segment revenue (see note 3)
(8) The annual decrease in average subscription price of the
base expressed as a percentage of the average subscription price at
the start of the year, all measured in constant currency
(9) The number of new vehicle tracking unit installation in the
insurance segment
(10) Insurance segment revenue (see note 3)
The Group made excellent progress in its core fleet business
during 2020 in its primary strategic objective of building our
fleet subscription base.
We achieved 42,898 new fleet subscriptions (2019: 43,837), a
decrease of 2.1% however this represents significant recovery from
the half-year position with new fleet subscriptions in the second
half of the year increasing by 9.9% against the equivalent period
in 2019.
During the year, our fleet subscription base grew by 15.4% to
173,793 units (2019: 150,640) with growth in all of our
geographical markets.
Attrition during the period increased marginally to 12.2% (2019:
11.9%). The Group made various changes to its support and service
processes during 2020 and it is pleasing to see attrition remaining
stable amongst the global pandemic.
Annualised recurring revenue increased by 8.3% to GBP22.2m
(2019: GBP20.5m) and fleet invoiced recurring revenue grew by 7.8%
to GBP20.8m (2019: GBP19.3m). The growth in fleet revenue of 6.0%
was similar to the growth of our recurring revenue, as our primary
focus is on growing subscription revenue.
Insurance unit installations decreased by 53.1% to 17,074 (2019:
36,386); these were adversely impacted by the coronavirus pandemic,
with reductions in the availability of driving tests and
installation capacity hindering demand and supply respectively.
Financial Overview
Year ended 31 December
GBP'000 (except where stated) 2020 2019 % change
------- ------- ---------
Revenue
Fleet 22,059 20,808 6.0
Insurance 3,776 4,813 (21.5)
------- ------- ---------
Total 25,835 25,621 0.8
------- ------- ---------
Gross profit before 3G swap out provision 18,657 16,626 12.2
Gross margin before 3G swap out provision 72.2% 64.9%
Gross profit 17,047 16,626 2.5
Gross margin 66.0% 64.9%
Operating profit 5,680 6,438 (11.8)
Operating margin 22.0% 25.1%
Adjusted EBITDA (see note 4) 7,871 7,062 11.5
Profit for the year 4,728 5,410 (12.6)
------- ------- ---------
Earnings per share 9.86 11.29 (12.7)
Adjusted diluted earnings per share 13.16 11.25 17.0
Cash generated from operations 6,698 7,263 (7.8)
Operating profit to operating cash conversion 117.9% 112.8%
Free cash flow 5,534 6,223 (11.1)
----------------------------------------------- ------- ------- ---------
Revenue
Revenue increased marginally to GBP25.8m (2019: GBP25.6m); the
Group continues to replace insurance with higher quality fleet
revenue. Insurance revenue represented 14.6% (2019: 18.8%) and is
expected to represent approximately 10.0% of revenue in 2021. Fleet
revenue, benefitting from past investment and expansion into new
European territories, increased by GBP1.2m to GBP22.1m (2019:
GBP20.8m). Sales to insurance customers decreased by GBP1.0m to
GBP3.8m (2019: GBP4.8m).
Gross margin
Gross margin increased marginally to 66.0% in the year (2019:
64.9%). The primary cost saving was achieved through the reduction
in equipment, installation and carriage costs, partly due to the
large reduction in insurance installations and partly due to a
higher proportion of self-install fleet units. This cost saving was
somewhat offset by a GBP1.6m provision relating to the swap out of
3G units in the US. Management expect the sunsetting of the 3G
mobile network in the US to be finalised in 2022 and this
necessitates the replacement of a large proportion of the US
installed base of tracking systems during 2021. The Board has taken
the decision to provide this service free of charge to customers in
order to minimise the chances of any incremental attrition.
Adjusted EBITDA and Segmental Analysis
Adjusted EBITDA, which excludes the GBP1.6m provision for the
replacement of the 3G units, increased to GBP7.9m (2019: GBP7.1m),
driven by the increase in insurance profitability, which increased
to GBP2.1m (2019: GBP1.6m).
A summary of the Group's segmental analysis is set out below
(see note 3 for an explanation of categorisations and
assumptions).
Total Fleet Segment profit remained similar to the prior year,
at GBP9.7m (2019: GBP9.7m), following targeted investment in
growing the subscription base. The profitability of the Group's
fleet telematics services, which represents the core part of the
business associated with recurring revenues, grew by GBP1.0m to
GBP17.5m (2019: GBP16.5m). This growth was then reinvested, with an
additional GBP0.9m being invested in acquiring additional fleet
customers for the future.
Segmental analysis
2020
Fleet
Customer Telematics
Acquisition Services Total Fleet Insurance Total Business
GBP'000 GBP'000 GBP'000 GBP'000 GBP,000
------------- ------------ ------------ ---------- ---------------
Revenue 223 21,836 22,059 3,776 25,835
Segmental Costs (7,138) (4,352) (11,490) (1,655) (13,145)
Profit before central
fleet costs (6,915) 17,484 10,569 2,121 12,690
Central fleet costs (829) - (829)
------------ ---------- ---------------
Segmental profit 9,740 2,121 11,861
Central Costs (3,990)
Adjusted EBITDA (see note
4) 7,871
Segmental analysis
2019
Fleet
Customer Telematics
Acquisition Services Total Fleet Insurance Total Business
GBP'000 GBP'000 GBP'000 GBP'000 GBP,000
------------- ------------ ------------ ---------- ---------------
Revenue 338 20,470 20,808 4,813 25,621
Segmental Costs (6,398) (3,973) (10,371) (3,212) (13,583)
Profit before central
fleet costs (6,060) 16,497 10,437 1,601 12,038
Central fleet costs (747) - (747)
------------ ---------- ---------------
Segmental profit 9,690 1,601 11,291
Central Costs (4,229)
Adjusted EBITDA (see note
4) 7,062
Overheads
We continued to invest in our product offering, in our sales
structure and in marketing, which led to an increase in overheads
of 11.6%.
Part of the aforementioned investment was in the USA where our
subscription unit base has increased by 30.1% to 23,479 (2019:
18,050) and revenue, as disclosed in note 2, increased to GBP2.4m
($3.1m) (2019: GBP2.0m ($2.5m)). Additionally, the expansion into
the new European territories contributed GBP0.2m toward revenue in
the year (2019: GBP0.1m), with a fleet base at the year end of
3,904 units (2019: 1,316).
Taxation
Our effective tax rate benefits from the Group's investment in
research and patents in the UK business. The effective rate
increased from 16.1% in 2019 to 16.4% in 2020, due to the increased
profitability of the French branch, which is subject to a higher
rate of tax offset by a higher R&D tax credit.
Earnings per share
Earnings per share decreased to 9.86p (2019: 11.29p), diluted
earnings per share decreased to 9.82p (2019: 11.25p) due to the US
3G swap out provision. As a result, adjusted diluted earnings per
share, which excludes the GBP1.6m 3G units replacement provision,
was 13.16p.
Statement of financial position
Property, plant and equipment, at GBP1.3m (2019: GBP0.8m),
increased by GBP0.5m largely due to the right of use leasehold
property in Newtown, Powys. These are the main operational
premises, which were redeveloped for Quartix and were completed in
March 2020.
Inventories decreased to GBP0.7m (2019: GBP0.9m). Cash at the
year-end was GBP10.6m (2019: GBP6.8m), since the final and
supplementary dividends which would ordinarily have been paid
during the year, were held back, as a precautionary measure as a
result of the uncertainty surrounding the coronavirus pandemic.
Trade and other receivables decreased slightly to GBP3.8m in the
year (2019: GBP3.9m). Trade and other payables decreased to GBP2.8m
(2019: GBP3.1m), whilst provisions increased from GBP0.2m to
GBP1.8m due to the US 3G swap out provision of GBP1.6m.
Contract liabilities represent customer payments received in
advance of satisfying performance obligations, which are expected
to be recognised as revenue in future years (both fleet and
insurance). These unwound to GBP3.7m in 2020 (2019: GBP4.8m).
Cash flow
Cash generated from operations before tax at GBP6.7m was 117.9%
of operating profit (2019: GBP7.3m, 112.8% of operating
profit).
Tax paid in 2020 was GBP1.1m (2019: GBP0.9m), so cash flow from
operating activities after taxation but before capital expenditure
was GBP5.6m (2019: GBP6.4m).
Free cash flow, after GBP0.1m of capital expenditure and
interest received, was GBP5.5m, a decrease of 11.1% (2019:
GBP6.2m).
The translation of cash flow into dividends is covered in the
Chairman's Statement.
Risk Management policies
The principal risks and uncertainties of the Group are as
follows:
Attracting and retaining the right number of good quality
staff
The Group believes that in order to safeguard the future of the
business it needs to recruit, develop and retain the next
generation of staff. The impact of not mitigating this risk is that
the Group ceases to be innovative and provide customers with the
vehicle telematics services they require. Considerable focus has
been given to recruitment, development and retention. The Group has
a range of tailored incentive schemes to help recruit, motivate and
retain top quality staff, which include the use of share
options.
Reliance on Mobile To Mobile ("M2M") network
The Group's service delivery is dependent on a functioning M2M
network covering both the internet and mobile data. The impact of
not mitigating this risk is that the Group is exposed to an M2M
outage. Quartix has dual site redundancy to cover a localised
internet problem and we are constantly working on improving the
reliability of our systems architecture.
Management believe that, at some point between 2025 and 2030,
most UK and European network operators will finalise the sunsetting
of their 2G networks. Depending on the actual timetable and the
commercial climate, there may be a cost at that time associated
with the upgrading of customers' technology, which the Group is
seeking to minimise through various technological and commercial
means.
As described in the 2019 Financial Statements, Management expect
the sunsetting of the 3G mobile network in the US to be finalised
in 2022. This necessitates the replacement of a large proportion of
the US installed base of tracking systems during 2021 and the Board
has taken the decision to provide this service free of charge to
customers in order to minimise the chances of incremental attrition
and to further enhance the Company's reputation in the US market.
The estimated cost of this replacement programme is approximately
GBP1.7m, of which the Company has provided for GBP1.6m in its 2020
accounts.
Business disruption
Like any business the Group is subject to the risk of business
disruption. This includes communications, physical disruption to
our sites and problems with our key suppliers. The impact of not
mitigating this risk is that the Group may not be able to service
its customers. Quartix has a Business Continuity plan and Business
Interruption Insurance to cover certain events in order to help
mitigate these risks.
The full extent of the impact to the Group's business as a
result of the UK leaving the EU remains uncertain. The Group
acquires, manages and supports its customers in the EU centrally,
from its offices in the UK. The resulting trading and data adequacy
arrangements has not made it necessary for a relocation of some of
its operations to within the EU. The existing French branch is
instrumental in the logistics of moving the goods between the
France and the customers in the EU territories. Quartix is
currently facing, some limited delays at the border between France
and the UK, though it expects this to ease in the coming months. In
addition, any impact on the wider economic landscape could impact
the Group's trading indirectly through the demand for its
services.
There is also a risk that the coronavirus pandemic will further
impact the growth of the global economy and therefore the Group's
subscription base and its ability to collect cash from its'
customers. The rollout of the vaccination programme currently
appears to be mitigating this risk. As with other industries, there
is also a risk of some short-term disruption to component supply as
the global economy recovers and suppliers increase production to
meet demand. The Group is actively working with suppliers to manage
this and has signed a supply agreement with a device manufacturer,
which further helps to mitigate this risk.
Dependence on a key customer
During 2020 insurance revenue of GBP3.4m (2019: GBP4.2m) was
derived via one insurance customer, a specialist reseller for the
insurance industry. Losing this key contract could have an impact
on cash flow in the short term. Total insurance revenue, including
that generated from other customers, was GBP3.8m (2019: 4.8m) and
total insurance segment profit was GBP2.1m (2019: GBP1.6m).
Cyber security
The Group needs to make sure its data is kept safe and that
there is security of supply of data services to customers. The
reputational and commercial impact of a security breach would be
significant. To combat this, the Group has a security policy and
prepares a security report which is reviewed by members of the
Operations Board. This process includes the use of outside
consultants for penetration testing and security review.
Technology
Technology risks are perceived to arise from possible
substitutes for the current Quartix product. Risks cited include
everything from smart mobile phones and their applications to
driverless cars. The Group strategy is to review all new technical
developments with the aim of adopting any which will provide a
better channel for the information services which Quartix
provides.
We believe we have the right strategy and service in place to
deliver strong growth in sales over the medium to long term and to
deliver sustainable shareholder value.
Daniel Mendis
Chief Operating and Financial Officer
Consolidated Statement of Comprehensive Income
Year ended 31 December 2020 2020 2020 2019
Before Provision Provision Total Total
================= ========== ========= =========
Notes GBP'000 GBP'000 GBP'000 GBP'000
================= ========== ========= =========
Revenue 2, 3 25,835 - 25,835 25,621
Cost of sales (7,178) (1,610) (8,788) (8,995)
Gross profit 18,657 (1,610) 17,047 16,626
Administrative expenses (11,367) - (11,367) (10,188)
Operating profit 7,290 (1,610) 5,680 6,438
Finance income receivable 19 - 19 34
Finance costs payable (40) - (40) (21)
Profit for the year before taxation 7,269 (1,610) 5,659 6,451
Tax expense (931) - (931) (1,041)
----------------- ---------- --------- ---------
Profit for the year 6,338 (1,610) 4,728 5,410
Other Comprehensive income:
Items that may be reclassified subsequently to profit or
loss:
Exchange difference on translating foreign operations 99 - 99 93
Other comprehensive (expense)/income for the year, net
of tax 99 - 99 93
----------------- ---------- --------- ---------
Total comprehensive income attributable to the equity
shareholders of Quartix Holdings plc 6,437 (1,610) 4,827 5,503
================= ========== ========= =========
Adjusted EBITDA 4 7 ,871 7,062
Earnings per ordinary share (pence) 5
================= ========== ========= =========
Basic 9.86 11.29
Diluted 9.82 11.25
================= ========== ========= =========
Consolidated Statement of Financial Position
31 Dec 2020 31 Dec 2019
Notes GBP'000 GBP'000
------------- -------------
Assets
Non-current assets
Goodwill 14,029 14,029
Property, plant and equipment 1,278 845
Deferred tax assets 135 2
Contract cost assets 297 304
------------- -------------
Total non-current assets 15,739 15,180
Current assets
Inventories 694 877
Trade and other receivables 3,811 3,907
Cash and cash equivalents 10,570 6,789
------------- -------------
Total current assets 15,075 11,573
------------- -------------
Total assets 30,814 26,753
------------- -------------
Current liabilities
Trade and other payables 2,823 3,064
Provisions 1,785 247
Contract liabilities 3,650 4,843
Current tax liabilities 301 377
------------- -------------
8,559 8,531
Non-current liabilities
Lease liabilities 822 241
822 241
------------- -------------
Total liabilities 9,381 8,772
------------- -------------
Net assets 21,433 17,981
------------- -------------
Equity
Called up share capital 7 479 479
Share premium account 7 5,252 5,230
Equity reserve 792 616
Capital redemption reserve 4,663 4,663
Translation reserve (69) (168)
Retained earnings 10,316 7,161
------------- -------------
Total equity attributable to equity shareholders of Quartix Holdings plc 21,433 17,981
------------- -------------
Consolidated Statement of Changes in Equity
Share Capital
Share premium redemption Equity Translation Retained
capital account reserve reserve reserve earnings Total equity
GBP'000 GBP,000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------ ------------ ------------- ------------- ------------- -------------
Balance at 31
December 2018 478 5,196 4,663 390 (261) 7,637 18,103
============= ============ ============ ============= ============= ============= =============
Shares issued 1 34 - - - - 35
Increase in
equity
reserve in
relation to
options
issued - - - 249 - - 249
Adjustment for
exercised
options - - - (58) - 58 -
Deferred tax
on share
Options - - - 35 - - 35
Dividend paid - - - - - (5,944) (5,944)
============= ============ ============ ============= ============= ============= =============
Transactions
with owners 1 34 - 226 - (5,886) (5,625)
------------- ------------ ------------ ------------- ------------- ------------- -------------
Foreign
currency
translation
differences - - - - 93 - 93
Profit for the
year - - - - - 5,410 5,410
============= ============ ============ ============= ============= ============= =============
Total
comprehensive
income - - - - 93 5,410 5,503
Balance at 31
December 2019 479 5,230 4,663 616 (168) 7,161 17,981
============= ============ ============ ============= ============= ============= =============
Shares issued - 22 - - - - 22
Increase in
equity
reserve in
relation to
options
issued - - - 189 - - 189
Adjustment for
exercised
options - - - (43) - 43 -
Deferred tax
on share
Options - - - 30 - - 30
Dividend paid - - - - - (1,616) (1,616)
============= ============ ============ ============= ============= ============= =============
Transactions
with owners 0 22 - 176 - (1,573) (1,375)
------------- ------------ ------------ ------------- ------------- ------------- -------------
Foreign
currency
translation
differences - - - - 99 - 99
Profit for the
year - - - - - 4,728 4,728
============= ============ ============ ============= ============= ============= =============
Total
comprehensive
income - - - - 99 4,728 4,827
============= ============ ============ ============= ============= ============= =============
Balance at 31
December 2020 479 5,252 4,663 792 (69) 10,316 21,433
============= ============ ============ ============= ============= ============= =============
Consolidated Statement of Cash Flows
Note 2020 2019
GBP'000 GBP'000
======== ========
Cash generated from operations 6 6,698 7,263
Taxes paid (1,106) (880)
======== ========
Cash flow from operating activities 5,592 6,383
Investing activities
Additions to property, plant and equipment (72) (194)
Interest received 14 34
======== ========
Cash flow utilised in investing activities (58) (160)
-------- --------
Cash flow from operating activities after investing activities
(Free cash flow) 5,534 6,223
Financing activities
Repayment of lease liabilities (185) (257)
Proceeds from share issues 22 35
Dividend paid (1,616) (5,944)
======== ========
Cash flow used in financing activities (1,779) (6,166)
Net changes in cash and cash equivalents 3,755 57
Cash and cash equivalents, beginning of year 6,789 6,779
Exchange differences on cash and cash equivalents 26 (47)
======== ========
Cash and cash equivalents, end of year 10,570 6,789
======== ========
Notes to the Accounts
1 Basis of preparation
The results have been extracted from the audited financial
statements of the Group for the year ended 31 December 2020. The
results do not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006. Whilst the financial
information included in this announcement has been computed in
accordance with the principles of international accounting
standards in conformity with the requirements of the Companies Act
2006 ('IFRS'), IFRIC interpretations and Companies Act 2006 that
applies to companies reporting under IFRS, this announcement does
not of itself contain sufficient information to comply with IFRS.
The Group will publish full financial statements that comply with
IFRS. The audited financial statements incorporate an unqualified
audit report.
Statutory accounts for the year ended 31 December 2019, which
incorporated an unqualified auditor's report, have been filed with
the Registrar of Companies. The Auditor's report on these accounts
did not draw attention to any matters by way of emphasis and did
not contain statements underS498(2) or (3) Companies Act 2006. The
accounting policies applied are consistent with those described in
the Annual Report & Accounts for the year ended 31 December
2019.
The basis of preparation and summary of significant accounting
policies applicable to the consolidated financial statements of
Quartix Holdings plc can be found in note 1 of the Annual Report
and Financial Statements, available from the Group's website.
2 Revenue
The Group's revenue disaggregated by primary geographical market
is as follows:
Fleet Insurance
For the period ended 31 December 2020 GBP'000 GBP'000
======= =========
United Kingdom 15,633 3,776
France 3,826 -
New European Territories 202 -
United States of America 2,398 -
======= =========
22,059 3,776
======= =========
Fleet Insurance
GBP'000 GBP'000
======= =========
For the period ended 31 December 2019
United Kingdom 15,504 4,813
France 3,236 -
Other European territories 53 -
United States of America 2,015 -
======= =========
20,808 4,813
======= =========
During 2020 revenue of GBP3.4m (2019: GBP4.2m) was derived from
one insurance customer, as a proportion of total revenue this one
customer makes up 13.2% of the Group's revenue (2019: 16.4%).
There are no material non-current assets based outside the
UK.
The Group's revenue disaggregated by pattern of revenue
recognition is as follows:
2020 2019
GBP'000 GBP'000
======= =======
Goods and services transferred over time 24,955 24,461
Revenue recognised at a point in time 880 1,160
======= =======
25,835 25,621
======= =======
Goods and services transferred over time represent 96.6% of
total revenue (2019: 95.5%).
For 2020, revenue includes GBP4.8m (2019: GBP4.6m) included in
the contract liability balance at the beginning of the period.
Changes to the Group's contract liabilities (i.e. deferred revenue)
are attributable solely to the satisfaction of performance
obligations.
3 Segmental analysis
The Group has identified two operating segments (see below)
which are now monitored by the Group's chief operating decision
maker and strategic decisions are made on the basis of adjusted
segment operating results. The main sources of revenue for all
segments is from the provision of vehicle telematics services.
The information used by the Group's chief operating decision
maker with regard to the Group's assets and liabilities is
presented on a consolidated Group basis and accordingly no
segmental analysis is presented for these.
The Group has two reportable segments: Total Fleet and
Insurance. The Total Fleet segment has been sub-divided into two
further categories. This has been done to give clarity as to the
level of upfront investment the Group is making in acquiring new
customers, as well as the associated impact on recurring revenue.
The two sub-categories are:
-- Customer Acquisition: This is the sales and marketing cost of
acquiring new fleet customers and the cost associated with units
installed for those customers. Recurring subscription revenue is
not recognised in this sub-category, only equipment and
installation income attributed to new fleet customers.
-- Fleet Telematics Services: This is the recurring revenue
associated with the Group's active subscription base and the cost
of servicing that subscription base. The costs in this sub-category
include the cost of installing additional units for existing
customers, as well as the associated marketing costs.
These two elements, together with central fleet costs, make up
the Total Fleet segment.
Estimated allocations of cost have been made between the
segments and within the Total Fleet segment, particularly in
relation to equipment and installations. These allocations have
been performed by reviewing the products sold to each segment,
their associated cost of manufacture or installation and whether
those products were installed by the customer. These costs are then
applied to each segment as appropriate.
Segmental analysis Customer Fleet Telematics Total Insurance Total
Acquisition Services Fleet Business
------------- ----------------- -------- ---------- ----------
Year ended 31 December
2020
------------- ----------------- -------- ---------- ----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP,000
------------- ----------------- -------- ---------- ----------
Recurring revenue - 20,801 20,801 - 20,801
Other sales 223 1,035 1,258 3,776 5,034
Total Revenue 223 21,836 22,059 3,776 25,835
Sales and Marketing
Costs (5,546) (941) (6,487) - (6,487)
Equipment, Installation,
Carriage (1,592) **(1,158) (2,750) (1,365) (4,115)
Cost of service - (2,253) (2,253) (290) (2,543)
------------- ----------------- -------- ---------- ----------
Profit before central
fleet costs (6,915) 17,484 10,569 2,121 12,690
Central fleet costs (829) - (829)
-------- ---------- ----------
Segmental profit 9,740 2,121 11,861
Central Costs (3,990)
Adjusted EBITDA (see
note 4) 7,871
** The figures above do not include the GBP1.6m provision for
replacing the 3G units in the US market. As the replacement units
relate to existing customers, the total cost would be allocated to
the Fleet Telematics Services sub-segment costs.
Reconciliation of the total Segmental costs to the cost of sales
on the income statement is as below:
2020 2019
GBP'000 GBP'000
------- --------
Total Segmental costs 13,145 13,583
Less elements included in administrative expenses:
Cost of service: employees (657) (600)
Selling and marketing costs (excluding direct commissions) (4,967) (3,839)
Bad Debts (343) (149)
Add:
3G replacement provision not included in Segmental costs 1,610 -
------- --------
Cost of sales 8,788 8,995
------- --------
Segmental analysis Customer Fleet Total Insurance Total Business
Acquisition Telematics Fleet
Services
Year ended 31 December
2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP,000
------------- ------------ -------- ---------- ---------------
Recurring revenue - 19,297 19,297 - 19,297
Other sales 338 1,173 1,511 4,813 6,324
Total Revenue 338 20,470 20,808 4,813 25,621
Sales and Marketing
Costs (4,429) (740) (5,169) - (5,169)
Equipment, Installation,
Carriage (1,969) (1,194) (3,163) (2,837) (6,000)
Cost of service - (2,039) (2,039) (375) (2,414)
------------- ------------ -------- ---------- ---------------
Profit before central
fleet costs (6,060) 16,497 10,437 1,601 12,038
------------- ------------ -------- ---------- ---------------
Central fleet costs (747) - (747)
Segmental profit 9,690 1,601 11,291
Central Costs (4,229)
Adjusted EBITDA (see
note 4) 7,062
Revenue note 2 discloses the geographical analysis by
destination and revenue generated from our major customer.
4 Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)
2020 2019
GBP'000 GBP'000
======= =======
Operating profit 5,680 6,438
Depreciation on property, plant and equipment, owned 175 171
Depreciation on property, plant and equipment, right of use 182 199
======= =======
EBITDA 6,037 6,808
Share-based payment expense (incl. cash-settled) 224 254
Provision for replacement of 3G units 1,610 -
------- -------
Adjusted EBITDA 7,871 7,062
======= =======
5 Earnings per share
The calculation of the basic earnings per share is based on the
profits attributable to the shareholders of Quartix Holdings plc
divided by the weighted average number of shares in issue during
the year. All earnings per share calculations relate to continuing
operations of the Group.
Fully Diluted
Basic diluted profit
Profits profit weighted per
attributable per share average share
Earnings per ordinary to shareholders Weighted average amount number amount
share GBP'000 number of shares in pence of shares in pence
Year ended 31 December
2020 4,728 47,953,023 9.86 48,170,860 9.82
Year ended 31 December
2019 5,410 47,916,951 11.29 48,095,333 11.25
Adjusted earnings
per share
Year ended 31 December
2020 6,338 47,953,023 13.22 48,170,860 13.16
For diluted earnings per share, the weighted average number of
ordinary shares is adjusted to assume the conversion of all
dilutive potential ordinary shares. Dilutive potential ordinary
shares are those share options where the exercise price is less
than the average market price of the Company's ordinary shares
during that year.
Adjusted earnings per ordinary share excludes the exceptional 3G
replacement unit provision of GBP1.6m, in order to illustrate the
underlying earnings for the year.
6 Notes to the cash flow statement
Cash flow adjustments and changes in working capital
2020 2019
GBP'000 GBP'000
======= =======
Profit before tax 5,659 6,451
Foreign exchange 183 156
Depreciation 357 370
Loss on disposal of fixed asset 3 -
Interest income (19) (34)
Lease interest expense 40 21
Share based payment expense 224 250
------- -------
Operating cash flow before movement in working capital 6,447 7,214
Decrease/(increase) in trade and other receivables 69 (453)
(Increase) in inventories 181 (106)
(Decrease) in trade and other payables 1,189 410
(Decrease)/increase in contract liabilities (1,188) 198
------- -------
Cash generated from operations 6,698 7,263
======= =======
7 Equity
Number of ordinary shares of
GBP0.01 each Share capital GBP'000 Share premium GBP'000
=============================== ===================== =====================
Allotted, called up and fully
paid
At 1 January 2020 47,938,320 479 5,230
Shares issued 24,196 - 22
At 31 December 2020 47,962,516 479 5,252
=============================== ===================== =====================
All the shares issued in the year to 31 December 2020 related to
the exercise of share options.
8 Share based payments
The Company has share option schemes for certain employees.
Share options are exercisable at prices determined at the date of
grant. The vesting periods for the share options range between 12
and 63 months. Options are forfeited if the employee leaves the
Company before the options vest.
In June 2020 cash-settled options were issued to Laura Seffino,
an incentive programme linked to the share price, to facilitate the
exercise of existing equity-settled share options. These
cash-settled share options are linked to both service and market
performance conditions. The options have a contractual term
commencing on the grant date 1 June 2020 and maturing on 6 April
2025, there are four vesting dates commencing on 6 April 2021,
where a number of shares depending on the performance of the share
price will be eligible for exercise at the share price less the
exercise price of 320 pence. The net cash value after tax must be
used to exercise Laura's existing share options, and the resulting
shares must subsequently be held for a minimum of 12 months.
The fair value at grant date of the cash-settled options has
been calculated using a binomial option pricing model. The average
share price of 326 pence, exercise price of 320 pence, a risk free
rate of minus 0.04%, a volatility rate of 49% and a time to
maturity of 4 years has generated a fair value of 419 pence per
share option with the estimated number of shares to ultimately vest
being 68,000 cash-settled share options. The volatility of the
share price over the previous 12 months from the grant date and the
risk-free rate on the market were used to build in probabilities of
the share price performance over the duration of the vesting
period.
Movements in the number of equity-settled share options
outstanding and their related weighted average exercise prices are
as follows:
2020 2019
Weighted average exercise price Weighted average exercise price
per share Options per share Options
in pence number in pence number
================================ ========= ================================ =========
Outstanding at 1 January 276.9 1,193,469 267.6 1,365,554
Granted 255.2 167,700 180.2 46,600
Lapsed 257.4 (104,905) 313.8 (126,925)
Exercised 89.0 (24,196) 38.5 (91,760)
================================ ========= ================================ =========
Outstanding at 31 December 279.3 1,232,068 276.9 1,193,469
================================ ========= ================================ =========
Exercisable at 31 December 290.5 356,974 360.0 37,482
================================ ========= ================================ =========
The weighted average fair value of equity-settled options issued
during the year ended 31 December 2020 was 118.37p (2019: 175.49p).
Included in the equity-settled options granted in 2020 none (2019:
none) were granted to staff with performance conditions.
The weighted average share price at the date of exercise of
options during the year ended 31 December 2020 was 265.75p (2019:
265.0p).
Movements in the number of cash-settled share options and their
related weighted average exercise prices are as follows:
2020 2019
Weighted average exercise price Weighted average exercise price
per share Options per share Options
in pence number in pence number
================================== ======= ================================== =======
Outstanding at 1 January 322.0 170,000 - -
Granted 320.0 68,000 322.0 170,000
Outstanding at 31 December 321.4 238,000 322.0 170,000
================================== ======= ================================== =======
Exercisable at 31 December n/a n/a n/a n/a
================================== ======= ================================== =======
Further details of share-based payments are given in the Group's
audited accounts, which are available at
www.quartix.net/investors/
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END
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