TIDMQTX
RNS Number : 4803G
Quartix Holdings PLC
24 July 2019
24 July 2019
Quartix Holdings plc
("Quartix", "the Group" or "the Company")
Interim Results
Quartix Holdings plc (AIM:QTX), a leading supplier of vehicle
tracking systems and services to the fleet and insurance sectors,
is pleased to announce its unaudited results for the half year
ended 30 June 2019.
Financial highlights:
-- Group revenue decreased by 3% to GBP12.5m (2018: GBP12.9m)
o Fleet revenue grew by 11% to GBP10.1m (2018: GBP9.1m)
o Insurance revenue declined by 35% to GBP2.5m (2018:
GBP3.8m)
-- Operating profit of GBP3.2m (2018: GBP3.8m)
-- Adjusted EBITDA(1) of GBP3.5m (2018: GBP4.1m)
-- Profit before tax of GBP3.2m (2018: GBP3.9m)
-- Diluted earnings per share of 5.67p (2018: 6.86p)
-- Free cash flow(2) increased by 12% to GBP3.2m (2018: GBP2.8m)
-- Cash generated from operations increased by 5% to GBP3.5m (2018: GBP3.3m)
-- Net cash increased to GBP5.1m (2018: GBP4.9m)
-- Operating cash conversion(3) of 109% (2018: 86%)
-- Interim dividend of 2.4p per share proposed
(1) Earnings before interest, tax, depreciation, amortisation
and share based payment expense (see note 3)
(2) Cash flow from operations after tax and investing
activities
(3) Cash generated from operations of GBP3.5m divided by
operating profit of GBP3.2m
Operational highlights
Fleet
Excellent progress in the main fleet business
-- Subscription base grew by 12% to 138,081 vehicles (31(st) December 2018: 123,157)
-- Annual value of subscription base increased by GBP1.2m to
GBP20.0m on a constant-currency basis (6 months 30 June 2018:
GBP0.7m to GBP17.7m)
-- Fleet installations grew by 48% to 22,505 (6ms 30 June 2018: 15,220)
-- Customer base increased by 13% to 14,851 (31(st) December 2018: 13,176)
-- Fleet invoiced recurring revenue increased by 12% to GBP9.4m (6ms 30 June 2018: GBP8.4m)
-- Attrition(1) on a rolling 12-month basis was 10.5% (12 months 30 June 2018: 12.0%)
-- Significant increase in marketing, sales resource,
distribution, tracking systems and installation spend to drive
subscription growth.
(1) Attrition is calculated as the difference between the number
of new unit installations and the increase in active subscriptions
between 1 July 2018 and 30 June 2019, expressed as a percentage of
the mean subscription base between those two points in time:
(38,740-25,551)/125,305 = 10.5%
UK
-- New fleet installations increased by 49% to 13,360 units (6 months June 2018: 8,990)
-- 99,055 active vehicle subscriptions, up 9% (31 December 2018: 91,137)
-- 9,431 customers, up 9% (31 December 2018: 8,675)
France
-- New fleet installations increased by 58% to 4,465 (6 months June 2018: 2,820)
-- 22,440 active vehicle subscriptions, up 19% (31 December 2018: 18,803)
-- 2,967 customers, up 20% (31 December 2018: 2,474)
Other European (Ireland, Poland, Spain)
-- 482 active vehicle subscriptions
-- 121 customers
USA
-- New fleet installations increased by 28% to 4,365 units (6 months June 2018: 3,400)
-- 16,104 active vehicle subscriptions, up 23% (31 December 2018: 13,133)
-- 2,332 customers, up 16% (31 December 2018: 2,007)
Insurance
-- Insurance installations declined by 29% at 17,069 (6 months June 2018: 23,969).
-- Insurance revenue declined by GBP1.3m (35%) to GBP2.5m (6 months June 2018: GBP3.8m).
Andy Walters, Chief Executive Officer of Quartix, commented:
"We are delighted with the expansion of our fleet subscription
base in the First Half, which resulted from an increased level of
investment in customer acquisition. New fleet installations grew by
48% compared with the same period last year. We also invested in
R&D, business systems and new market development, having
successfully launched our telematics services in Poland and
Spain.
We are well positioned for future growth in our fleet business
and continue to review the opportunities to invest in this further.
We remain confident of at least meeting expectations for revenue,
profit and cashflow for the year."
For further information, please contact:
Quartix (www.quartix.net) 01686 806 663
Andrew Walters, Chief Executive Officer
Daniel Mendis, Chief Financial Officer
finnCap (Nominated Adviser and Broker) 020 7200 0500
Matt Goode /Scott Mathieson (Corporate Finance)
Alice Lane (Corporate Broking)
Cantor Fitzgerald Europe (Joint Broker) 020 7894 7000
Phil Davies & Richard Salmond (Corporate Finance)
Caspar Shand-Kydd & Arthur Gordon (Sales)
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
Interim Financial Results Report
The Group's Interim Financial Statements for the 6 months ended
30 June 2019 are available in the "Investors" section of our
website at: www.quartix.net/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 motor
insurance providers which improves productivity and safety and
which lowers 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
Summary
Increased investment in our fleet tracking business has driven
strong growth in the subscription base
It is pleasing to report very strong growth in new fleet
installations, which increased by 48% to 22,505 units in the first
half year (6 months 30 June 2018: 15,220 units). We ended the
period with a committed subscription base of 138,081 vehicles
having an annualised value of GBP20.0m (30 June 2018: 112,530, with
value of GBP17.7m on a constant currency basis), and we added 1,675
customers to the client base, reaching 14,851 in total.
In the 5 years since 30 June 2014 (the Company's year of
admission to AIM), Quartix has maintained a CAGR of 21.0% in its
subscription base (from 53,197 to 138,081 vehicles), of which the
annualised value has almost doubled from GBP10.2m to its current
level of GBP20.0m.
We significantly increased investment in marketing, sales
resource, distribution, tracking systems and installation costs for
our fleet operations. In line with the Company's accounting
policies these costs were all expensed as incurred, amounting to an
increase of GBP1.0m compared to the same period in 2018. This
investment will generate strong recurring revenues for the future
and it is pleasing to be able to report a strong set of financial
results even with this investment in the future. A more detailed
breakdown of investments in customer acquisition is shown in the
segmental analysis (note 2). This analysis demonstrates the
increased profitability attributable to our fleet customer base and
the growth in investment made to accelerate our customer
acquisition activities, as detailed above.
The following paragraphs provide a summary of activity and
results in each market
UK
Total sales in the UK were GBP10.1m (2018: GBP11.1m). Sales to
fleet customers in this market increased by 5% to GBP7.7m (2018:
GBP7.3m) and the subscription base grew to 99,055 vehicles,
representing an increase of 15% over the past 12 months (30 June
2018: 86,217). This rate of growth compared to last year resulted
from new installations which were 49% higher, at 13,360 vehicles,
than in the prior year (2018: 8,990). This success was driven by
improvements in the management of each of our channels: field
sales, direct telesales, price comparison sites and distribution.
We have identified further opportunities for improvement and will
continue to invest in each channel.
France
The Group made excellent progress in France, where the
subscription base rose by 46% over the past year to 22,440 vehicles
(30 June 2018: 15,390). Development of each channel to market is
ongoing and revenue in France in the first half increased by 33% in
local currency to EUR1.7m (2018: EUR1.3m). Our distribution network
provided the strongest contribution to growth, but we also achieved
impressive sales performance through our direct telesales and price
comparison channels. All three channels will receive further
investment in the second half.
USA
The Group continued to develop its operations successfully in
the USA, taking its subscription base to 16,104 vehicles. This is
49% higher than it was 12 months ago (30 June 2018: 10,840).
Revenue increased by 30% to $1.2m (2018: $0.9m). Growth was equally
split between our direct telesales and price comparison channels.
We significantly increased the size of the sales team for the
latter during the period and, now that training has been completed,
we intend to increase our marketing budgets for both channels. A
significant amount of resource and time was dedicated to creating a
distribution support team for the USA, and initial results were
being seen by the end of the period. We believe that this offers an
additional growth opportunity.
Poland, Spain, Ireland and Hispanic market of the USA
Initial results from the Company's marketing initiatives in
Poland and Spain have been encouraging, with approximately 50 new
clients won in each market so far. A Spanish-language version of
the US website went live in May, as the Company believes that SME
businesses in the Hispanic community represent a significant market
opportunity. A dedicated website for Ireland was also launched.
Italy and further regional developments
The Company launched a marketing website for the Italian market
earlier this month (www.quartix.it) and this is expected to be
followed by an equivalent for Germany together with full
application support in Italian and German. In each case these
developments will be backed by sales recruitment in the UK and
initial marketing investments.
R&D and systems developments
The Company's "new-look" browser-based and mobile applications,
which were launched in October 2018, have been well received by
clients and prospects alike. They have also formed the basis of
each of the launches in new territories listed above. New
telematics system designs, particularly those offering easy
self-installation options, have also contributed strongly to the
Company's growth in the period. Quartix received carrier-level and
PTCRB certification of its new 4G telematics system for the USA,
and the core of this design (hardware and firmware) will eventually
provide the basis for both its European and American product
offerings.
A dedicated team of systems and software developers is focused
exclusively on the enhancement of the Company's internal processes,
and a significant number of improvements in process efficiency were
achieved in the first half, and more are planned for the rest of
the year.
Insurance
The Company's strategy of focusing on fleet operations, and of
reducing its commitment to the insurance telematics market has
started to show strong results, as highlighted above. Technology
and services developed for the insurance sector have been a
contributory factor in many of the new fleet contracts won in the
first half.
It has become clear that some telematics companies which have
focused on the insurance sector are showing some signs of weakness
in terms of service levels or financial performance. Quartix will
therefore continue to consider insurance business which is cash
generative and which properly values the technology and service
quality it provides. Revenue in this sector declined by 35% to
GBP2.5m, which now represents 20% of turnover. New installations
for our insurance clients decreased by 29% to 17,069.
Further information on the contribution from this business can
be seen in the segmental analysis (note 2).
Results
Group revenue for the half year was GBP12.5m (2018: GBP12.9m).
Fleet revenue grew by 11% to GBP10.1m (2018: GBP9.1m) and insurance
revenue declined to GBP2.5m (2018: GBP3.8m). Sales to the insurance
sector as a percentage of overall revenue reduced to 20% (2018:
29%). Increased focus on our core fleet business led to the
recurring element of subscriptions growing to represent 75% of
Group turnover (2018: 65%) and the fleet business representing 83%
of segmental profit before central costs (see note 2) (2018: 74%).
Although the higher level of this subscription revenue helps to
improve the margin mix, we also funded growth of 48% in new fleet
installations for the period (2019: 22,505 units installed; 2018:
15,220 units installed). The cost of all new fleet tracking systems
and installations is absorbed in cost of sales. Consequently, gross
profit decreased by 6% to GBP8.0m and gross margin to 63% (2018:
65%). With the impact of investment in marketing activities,
operating profit for the half year decreased by 17% to GBP3.2m
(2018: GBP3.8m). Profit before tax for the half year also therefore
decreased by 17% to GBP3.2m (2018: GBP3.9m).
Operating cash conversion was 109% (2018: 86%), resulting in
pre-tax cash generated from operations of GBP3.5m (2018: GBP3.3m).
Free cash flow conversion, being free cash flow as a proportion of
profit for the period, was 117%, resulting in free cash flow from
operations after tax and investing activities of GBP3.2m (2018:
GBP2.8m). The Group had net cash of GBP5.1m as at 30 June 2019
(GBP4.9m at 30 June 2018), having paid a dividend of GBP4.8m in
May.
Earnings per share
Basic earnings per share were 5.67p (2018: 6.89p). On a diluted
basis earnings per share were 5.67p (2018: 6.86p).
Dividend
The Board has recommended an interim dividend of 2.4p (2018:
2.4p) per share, amounting to GBP1,150,520 in aggregate. This was
approved by the Board on 23 July 2019. The interim dividend will be
paid on 13 September 2019 to shareholders on the register as at 16
August 2019.
Dividend Policy
The Board will consider a final dividend for the year with the
aggregate of the interim and final dividend set at approximately
50% of cash flow from operating activities, which is calculated
after taxation paid but before capital expenditure. The Board will
also consider distributing the excess of cash balances over GBP2m
by way of supplementary dividends. The surplus cash would be
calculated by taking the year end cash balance and deducting the
proposed regular dividend. The policy will be subject to
review.
Governance and the Board
The Board is comprised of two Non-Executive Directors: myself
and Jim Warwick, and two Executive Directors: Andrew Walters and
Daniel Mendis.
For further details regarding Corporate Governance and the
Board, please see the "Investors" section of our website
(www.quartix.net/investors).
Outlook
The Group has made a good start to the second half, in line with
management's expectations. The high levels of recurring revenue and
opportunities to grow in the UK, USA, France, the rest of Europe in
fleet underpin our confidence for the rest of the year and beyond.
We will continue to use the financial strength of the business to
invest in our core fleet operations.
Paul Boughton
Chairman
Consolidated Statement of Comprehensive Income
31 December
30 June 2019 30 June 2018 2018
Half year ended 30 June 2019 Unaudited Unaudited Unaudited
Notes GBP'000 GBP'000 GBP'000
============= ============= =============
Revenue 2 12,552 12,913 25,706
Cost of sales (4,596) (4,457) (8,543)
------------- ------------- -------------
Gross profit 7,956 8,456 17,163
Administrative expenses (4,773) (4,612) (9,122)
------------- ------------- -------------
Operating profit 3,183 3,844 8,041
Finance income receivable 19 14 29
Finance costs payable (11) - -
Profit for the period before taxation 3,191 3,858 8,070
Tax expense (473) (576) (1,210)
Profit for the period 2,718 3,282 6,860
Other Comprehensive income:
Items that may be reclassified subsequently to profit or
loss:
Exchange difference on translating foreign operations (20) (66) (158)
Other comprehensive income for the year, net of tax (20) (66) (158)
============= ============= =============
Total comprehensive income attributable to the equity
shareholders of Quartix Holdings plc 2,698 3,216 6,702
============= ============= =============
Adjusted EBITDA 3 3,508 4,061 8,334
----------------------------------------------------------- ------ ------------- ------------- -------------
Earnings per ordinary share (pence) 4
Basic 5.67 6.89 14.38
Diluted 5.67 6.86 14.19
============= ============= =============
Consolidated Statement of Financial Position
Company registration number: 06395159
30 June 2019 30 June 2018 31 December 2018
Unaudited Unaudited Unaudited
Assets Notes GBP'000 GBP'000 GBP'000
============= =============== ===================
Non-current assets
Goodwill 14,029 14,029 14,029
Property, plant and equipment 360 221 433
Right-of-use asset 407 - -
Deferred tax assets - 577 9
============= =============== ===================
Total non-current assets 14,796 14,827 14,471
Current assets
Inventories 923 813 771
Trade and other receivables 2,970 3,009 2,937
Cash and cash equivalents 5,077 4,886 6,779
------------- --------------- -------------------
Total current assets 8,970 8,708 10,487
Total assets 23,766 23,535 24,958
Current liabilities
Trade and other payables 2,917 2,771 2,814
Finance lease liabilities 7 169 - --
Contract liabilities 4,662 5,460 4,655
Current tax liabilities 285 429 99
============= =============== ===================
8,033 8,660 7,568
Non-current liabilities
Finance lease liabilities 7 282 - -
Deferred tax liabilities 42 - -
324 - -
Total liabilities 8,357 8,660 7,568
Net assets 15,409 14,875 17,390
============= =============== ===================
Equity
Called up share capital 6 480 477 478
Share premium account 6 5,230 4,925 5,196
Equity reserve 410 555 390
Capital redemption reserve 4,663 4,663 4,663
Translation reserve (281) (169) (261)
Retained earnings 4,907 4,424 6,924
============= =============== ===================
Total equity attributable to equity shareholders of
Quartix Holdings plc 15,409 14,875 17,390
============= =============== ===================
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 2017 476 4,869 4,663 529 (103) 9,018 19,452
IFRS 15
adjustment - - - - - (2,645) (2,645)
Restated 31
December 2016 476 4,869 4,663 529 (103) 6,373 16,807
Shares issued 1 56 - - - - 57
Increase in
equity
reserve in
relation to
options
issued - - - 140 - - 140
Adjustment for
exercised
options - - - (64) - 64 -
Deferred tax
on share
options (50) (50)
Dividend paid - - - - - (5,295) (5,295)
------------- ------------ ------------ ------------- ------------- ------------- -------------
Transactions
with owners 1 56 - 26 - (5,231) (5,148)
------------- ------------ ------------ ------------- ------------- ------------- -------------
Foreign
currency
translation
differences - - - - (66) - (66)
Profit for the
period
restated - - - - - 3,282 3,282
------------- ------------ ------------ ------------- ------------- ------------- -------------
Total
comprehensive
income - - - - (66) 3,282 3,216
------------- ------------ ------------ ------------- ------------- ------------- -------------
Balance at 30
June 2018 477 4,925 4,663 555 (169) 4,424 14,875
============= ============ ============ ============= ============= ============= =============
Shares issued 1 271 - - - - 272
Increase in
equity
reserve in
relation to
options
issued - - - (32) - - (32)
Adjustment for
exercised
options - - - (69) - 69 -
Deferred tax
on share
options - - - (64) - - (64)
Dividend paid (1,147) (1,147)
Transactions
with owners 1 271 - (165) - (1,078) (971)
============= ============ ============ ============= ============= ============= =============
Foreign
currency
translation
differences - - - - (92) - (92)
Profit for the
period
restated - - - - - 3,578 3,578
============= ============ ============ ============= ============= ============= =============
Total
comprehensive
income - - - - (92) 3,578 3,486
------------- ------------ ------------ ------------- ------------- ------------- -------------
Balance at 31
December 2018 478 5,196 4,663 390 (261) 6,924 17,390
------------- ------------ ------------ ------------- ------------- ------------- -------------
Shares issued 2 34 - - - - 36
Increase in
equity
reserve in
relation to
options
issued - - - 134 - - 134
Adjustment for
exercised
options - - - (59) - 59 -
Deferred tax
on share
options - - - (55) - - (55)
Dividend paid - - - - - (4,794) (4,794)
============= ============ ============ ============= ============= ============= =============
Transactions
with owners 2 34 - 20 - (4,735) (4,679)
============= ============ ============ ============= ============= ============= =============
Foreign
currency
translation
differences - - - - (20) - (20)
Profit for the
period - - - - - 2,718 2,718
============= ============ ============ ============= ============= ============= =============
Total
comprehensive
income - - - - (20) 2,718 2,698
============= ============ ============ ============= ============= ============= =============
Balance at 30
June 2019 480 5,230 4,663 410 (281) 4,907 15,409
============= ============ ============ ============= ============= ============= =============
Consolidated Statement of Cash Flows
30 June 2019 30 June 2018 31 December 2018
Unaudited Unaudited Unaudited
Notes GBP'000 GBP'000 GBP'000
============= ============= ====================
Cash generated from operations 5 3,482 3,318 6,825
Taxes paid (291) (430) (889)
============= ============= ====================
Cash flow from operating activities 3,191 2,888 5,936
Investing activities
Additions to property, plant and equipment (21) (63) (382)
Interest received 19 14 29
============= ============= ====================
Cash flow from investing activities (2) (49) (353)
Cash flow from operating activities after investing
activities (free cash flow) 3,189 2,839 5,583
Financing activities
Interest paid (10) - -
Repayment of lease liabilities (124) - -
Proceeds from share issues 6 36 57 329
Dividend paid (4,794) (5,295) (6,442)
============= ============= ====================
Cash flow from financing activities (4,892) (5,238) (6,113)
Net changes in cash and cash equivalents (1,703) (2,399) (530)
Cash and cash equivalents, beginning of period 6,779 7,312 7,312
Exchange differences on cash & cash equivalents 1 (27) (3)
============= ============= ====================
Cash and cash equivalents, end of period 5,077 4,886 6,779
============= ============= ====================
Notes to the Financial Statements (unaudited)
1 Significant accounting policies
Basis of preparation
The financial information has been prepared in accordance with
recognition and measurement principles of International Financial
Reporting Standards ("IFRS") and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations that had been
published by 30 June 2019 as endorsed by the European Union ("EU").
With the exception of IFRS 16: Leases (see Leases policy below),
the accounting policies adopted are consistent with those of the
financial statements for the year ended 31 December 2018, as
described in those financial statements. In preparing these interim
financial statements, the Board has not sought to adopt IAS 34
"Interim financial reporting".
The figures for the six-month periods ended 30 June 2019 and 30
June 2018 have not been audited. The figures for the year ended 31
December 2018 have been extracted from, but do not constitute, the
consolidated financial statements of Quartix Holdings plc for that
year. The original financial statements for the year ended 31
December 2018 have been delivered to the Registrar of Companies and
included an Auditors' Report, which was unqualified and did not
contain a statement under section 498(2) or section 498(3) of the
Companies Act 2006.
Going concern
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, show that the
Group is able to generate sufficient liquidity.
The Group enjoys a strong income stream from its fleet
subscription base while current liabilities include a substantial
provision for deferred revenue which is a non-cash item.
After assessing the forecasts and liquidity of the business to
the end of the following calendar year and the longer term
strategic plans, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group therefore continues
to adopt the going concern basis in preparing the interim
results.
Segmental reporting
The Group has adopted segmental reporting for the first time in
these interim accounts. Historically, the information used by the
Group's chief operating decision maker was presented on a
consolidated Group basis. All revenue, costs, assets and
liabilities related to a single activity, being the design,
development and marketing of vehicle tracking devices and the
provision of related data services, and it concluded that it
operated only one operating segment as defined by IFRS 8.
Whilst information is still largely presented on a consolidated
basis, and the telematic services are very similar, the Group's
chief operating decision maker has been provided with additional
information to make decisions about the allocation of resources and
assessing performance. The main drivers for this have been the
impact assessment of the Group's strategy to reduce its involvement
in lower-margin insurance tracking operations in order to focus on
growth in its fleet telematics business and the Group's commitment
to providing investors with clear and timely information regarding
its performance against both financial and strategic
objectives.
The Group will therefore include segmental financial information
for its insurance and fleet operations in future. These two
segments have been identified as they are managed separately, with
different marketing approaches for the discrete market sectors and
for which the Group has different strategies. Their reported
revenue each meet the quantitative thresholds of IFRS 8.
The Group has aggregated fleet operations for all geographical
markets with fleet operations. However, to increase transparency,
the Group has decided to include an additional voluntary disclosure
analysing the fleet segment by two sub-categories in order to
highlight the different costs structures within the business:
-- Customer acquisition, for new customer contracts; and
-- Fleet telematics services for repeat contracts with existing customers.
There are no inter segment transfers between the insurance and
fleet segments. The Group uses the same measurement policies as
those used in its financial statements, except for certain items
not included in determining the segmental profit of the operating
segments, since these relate to both the fleet and insurance
segments. These include Central overhead costs such as Director
salaries, development, audit and legal fees, property costs and
infrastructure costs. Detailed segmental information, including a
reconciliation to the financial statements, are included in note
2.
The Group's chief operating decision maker has been provided
with only consolidated information on the Group's financial
position as it is not possible to provide segmentation of total
assets or total liabilities. With the exception of insurance trade
receivables and contract obligations, where the customer base is
clearly identifiable, it is not possible to segregate the other
assets or liabilities. For example, tangible assets for IT servers
and cash can't be allocated since they are shared between the
segments.
Incremental costs of obtaining a contract
The large majority of contracts which the Group enters into with
customers are 12 months in length and the Group therefore chooses
to use the practical expedient under IFRS15 to expense these
commissions as incurred. As highlighted in the 2018 Financial
Statements, this policy is being kept under review; to this end,
the Group is continuing to assess the structure and materiality of
the commissions it pays.
Leases
The Group has adopted IFRS 16 'Leases' (hereinafter referred to
as 'IFRS 16') with effect from 1 January 2019 under which leases
will be recorded in the statement of financial position in the form
of a right-of-use asset and a lease lability.
The Group has adopted IFRS 16 retrospectively from 1 January
2019, but has not restated comparatives for the 2018 reporting
period, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
Further information on the impact of the new policy is disclosed
in note 7.
For any new contracts entered into on or after 1 January 2019,
the Group considers whether a contract is, or contains a lease. A
lease is defined as 'a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration'.
At lease commencement date, the Group recognises a right-of-use
asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs
incurred by the Group, an estimate of any costs to dismantle and
remove the asset, or restore a property, at the end of the lease,
and any lease payments made in advance of the lease commencement
date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group's incremental borrowing
rate.
Lease payments included in the measurement of the lease
liability are made up of fixed payments (including in substance
fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments.
When the lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
In the statement of financial position, for these interim
accounts, the right-of-use assets and lease liabilities have been
included separately in the statement.
2 Segmental analysis
As highlighted in note 1, Significant accounting policies
(Segmental reporting), the Group has adopted segmental analysis for
the first time. 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 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 segment, although upfront receipts are
recognised (for example where the Group makes a sale of a unit to a
new customer for an upfront fee).
-- 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 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
6ms to 30 June 2019 Customer Acquisition Fleet Telematics Services Total Fleet Insurance Total Business
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------------------- ----------- --------- --------------
Recurring revenue - 9,389 9,389 - 9,389
Other sales 175 527 702 2,461 3,163
-------------------- ------------------------- ----------- --------- --------------
Total revenue 175 9,916 10,091 2,461 12,552
Sales & marketing (2,084) (385) (2,469) - (2,469)
Equipment, installations,
carriage (1,029) (613) (1,642) (1,343) (2,985)
Costs of Service - (995) (995) (201) (1,196)
-------------------- -------------------------
Profit before central fleet
costs (2,938) 7,923 4,985 917 5,902
-------------------- ------------------------- ----------- --------- --------------
Central fleet costs (359) - (359)
----------- --------- --------------
Segmental profit 4,626 917 5,543
----------- --------- --------------
Central costs (2,035)
--------------
Adjusted EBITDA 3,508
Share based payments (134)
Depreciation (191)
--------------
Operating profit 3,183
Finance income receivable 19
Finance costs payable (11)
--------------
Profit before taxation 3,191
--------------
Segmental analysis
6ms to 30 June 2018 Customer Acquisition Fleet Telematics Services Total Fleet Insurance Total Business
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------------------- ----------- --------- --------------
Recurring revenue - 8,407 8,407 - 8,407
Other sales 171 553 724 3,782 4,506
-------------------- ------------------------- ----------- --------- --------------
Total revenue 171 8,960 9,131 3,782 12,913
Sales & marketing (1,578) (356) (1,934) - (1,934)
Equipment, installations,
carriage (643) (515) (1,158) (1,790) (2,948)
Costs of Service - (1,073) (1,073) (356) (1,429)
-------------------- -------------------------
Profit before central fleet
costs (2,050) 7,016 4,966 1,636 6,602
-------------------- ------------------------- ----------- --------- --------------
Central fleet costs (276) - (276)
----------- --------- --------------
Segmental profit 4,690 1,636 6,326
----------- --------- --------------
Central costs (2,265)
--------------
Adjusted EBITDA 4,061
Share based payments (140)
Depreciation (77)
--------------
Operating profit 3,844
Finance income receivable 14
Finance costs payable -
--------------
Profit before taxation 3,858
--------------
Segmental analysis
12ms to 31 December 2018 Customer Acquisition Fleet Telematics Services Total Fleet Insurance Total Business
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------------------- ----------- --------- --------------
Recurring revenue - 17,246 17,246 - 17,246
Other sales 335 1,170 1,505 6,955 8,460
-------------------- ------------------------- ----------- --------- --------------
Total revenue 335 18,416 18,751 6,955 25,706
Sales & marketing (3,396) (712) (4,108) - (4,108)
Equipment, installations,
carriage (1,374) (1,093) (2,467) (3,153) (5,620)
Costs of Service - (1,983) (1,983) (568) (2,551)
-------------------- -------------------------
Profit before central fleet
costs (4,435) 14,628 10,193 3,234 13,427
-------------------- ------------------------- ----------- --------- --------------
Central fleet costs (575) - (575)
----------- --------- --------------
Segmental profit 9,618 3,234 12,852
----------- --------- --------------
Central costs (4,518)
--------------
Adjusted EBITDA 8,334
Share based payments (108)
Depreciation (185)
--------------
Operating profit 8,041
Finance income receivable 29
Finance costs payable -
--------------
Profit before taxation 8,070
--------------
During the 6 month period to 30 June 2019, GBP2,008,000 or 16%
(2018: GBP2,839,000 or 22%) of the Group's revenues depended on a
single customer in the insurance segment.
Revenues from external customers in the Group's major markets
have been identified on the basis of the customer's geographical
location and are disclosed below.
30 June 2019 30 June 2018 31 December 2018
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
============ ============ ================
Geographical analysis by destination
United Kingdom 10,117 11,092 21,709
France 1,494 1,137 2,471
Rest of Europe 8 7 13
United States of America 933 677 1,513
============ ============ ================
12,552 12,913 25,706
============ ============ ================
3 Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)
30 June 2019 30 June 2018 31 December 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
============ ============ ================
Operating profit 3,183 3,844 8,041
Depreciation 191 77 185
------------ ------------ ----------------
EBITDA 3,374 3,921 8,226
Share-based payment expense 134 140 108
------------ ------------ ----------------
Adjusted EBITDA 3,508 4,061 8,334
============ ============ ================
4 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 period. The earnings per share calculation relates to
continuing operations of the Group.
Fully
diluted Fully
Weighted Basic weighted diluted
Profits average profit average profit
attributable number per share number per share
to shareholders of shares amount of shares amount
GBP'000 in pence in pence
----------------- ----------- ----------- ----------- ------------
Earnings per ordinary
share
Period ended 30 June
2019 2,718 47,894,961 5.67 47,904,443 5.67
Period ended 30 June
2018 3,282 47,641,307 6.89 47,856,077 6.86
Year ended 31 December
2018 6,860 47,713,566 14.38 48,354,756 14.19
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 the period.
5 Note to the cash flow statement
Cash flow adjustments and changes in working capital:
30 June 2019 30 June 2018 31 December 2018
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
============ ============ ================
Profit before tax 3,191 3,858 8,070
Foreign exchange (17) (39) (153)
Depreciation 191 77 185
Interest income (19) (14) (29)
Interest expense 11 - -
Share based payment expense 134 140 108
Operating cash flow before movement in working capital 3,491 4,022 8,181
(Increase)/decrease in trade and other receivables (35) (1) 83
Decrease/(increase) in inventories (151) (109) (67)
(Decrease)/increase in trade and other payables 77 (594) (42)
(Decrease)/increase in contract liabilities 100 (517) (1,330)
============ ============ ================
Cash generated from operations 3,482 3,318 6,825
============ ============ ================
6 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 2018 47,568,354 476 4,869
Shares issued 141,250 1 56
At 30 June 2018 47,709,604 477 4,925
Shares issued 136,956 1 271
At 31 December 2018 47,846,560 478 5,196
Shares issued 91,760 2 34
================================== ===================== =====================
At 30 June 2019 47,709,604 480 5,230
================================== ===================== =====================
All shares issued in the period to 30 June 2019 relate to the
exercise of share options.
7 Explanation of transition to IFRS 16: Leases
As highlighted in note 1, Significant accounting policies under
"Leases", the Group has adopted IFRS 16 with effect from 1 January
2019 under which leases will be recorded in the statement of
financial position in the form of a right-of-use asset and a lease
lability. As permitted, it has applied IFRS 16 retrospectively with
the cumulative effect of initially applying the Standard recognised
at the date of initial application and has not, therefore, restated
comparative information. Instead, the Group has recognised the
cumulative effect as an adjustment to the opening net assets at 1
January 2019.
The Group has historically purchased plant and equipment, the
exception being a small number of leased vehicles for the UK field
sales team. However, it has lease contracts for office
accommodation in the UK and USA. The financial impact of the
adoption of IFRS 16, will result in a reduction in the Group's
annual operating expenses of GBP0.2m and additional depreciation
costs of GBP0.2m and finance costs payable of GBP0.02m. Details of
lease obligations and right of use assets are provided below.
On adoption of IFRS 16, the Group recognised a lease liability
at the date of initial application, for leases previously
classified as an operating lease under IAS17, at the present value
of the remaining lease payments, discounted using the Group's
estimated incremental borrowing rate as of 1 January 2019. The
weighted average lessee's incremental borrowing rate applied to the
lease liabilities on 1 January 2019 was 4.3%.
As permitted under the Standard, the Group has adopted the
practical expedients of applying a single discount rate to its
property leases and elected not to apply the requirements of IFRS
16 to leases for which the lease term ends within 12 months. The
Group will recognise the lease payments associated with those
leases as an expense on a straight-line basis.
The following is a reconciliation of total operating lease
commitments at 31 December 2018 to the lease liabilities recognised
at 1 January 2019:
GBP'000 GBP'000
Total operating lease commitments disclosed at 31 December 2018 518
Recognition exemptions:
Leases with remaining lease term of less than 12 months (29)
Variance lease payments not recognised 93
Other minor adjustments relating to commitment disclosures 39
-------
103
-------
Operating lease liabilities before discounting 621
Discounting using incremental borrowing rate (48)
-------
Total lease liabilities recognised under IFRS 16 at 1 January 2019 573
-------
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 1
January 2019. At this date, the Group has also elected to measure
the right of use asset, for leases previously classified as an
operating lease under IAS17, at an amount equal to the lease
liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognised in the statement of
financial position immediately before the date of initial
application.
There were no onerous lease contracts that would have required
an adjustment to the right-of-use assets at the date of initial
application.
The recognised right-of-use assets relate to the following types
of assets:
30 June 2019 1 January 2019
GBP'000 GBP'000
Properties 401 490
Motor vehicles 6 12
------------ --------------
Total right-of-use assets 407 502
------------ --------------
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
GBP'000
Right-of use assets - increase 502
Prepayments - decrease (23)
Accruals - decrease 94
Lease liability - increase (573)
There was no impact on retained earnings on 1 January 2019.
Minimum lease payments due:
Within one year One to five years After five years Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------------- ---------------- -------
Lease payments 185 302 - 487
Finance charge (16) (20) - (36)
--------------- ----------------- ---------------- -------
Net present value 169 282 - 451
--------------- ----------------- ---------------- -------
The Group has elected not to recognise a lease liability for
short term leases (leases with an expected term of 12 months or
less). Payments made under such leases are expensed on a
straight-line basis.
The expense relating to payments not included in the measurement
of a lease liability for the 6 months to 30 June 2019 was
GBP35,000.
In June 2019 the Group entered into a number of agreements
concerning properties in Powys, with the intention of entering into
a new ten-year lease for new premises, subject to completion of a
refurbishment project, and to surrender and assign two existing
leases. The anticipated date for completion is June 2020. At that
date there would be a reduction in the existing lease liabilities
and corresponding reduction in the right of use asset of around
GBP90,000 and additional lease liabilities and right-of use asset
of around GBP800,000.
In addition, a new lease to replace the existing Chicago office
lease, which expires in November 2019, was also signed in June 2019
for commencement on 31 August 2019. At that date, there will be
additional lease liabilities and right-of use asset of around
GBP70,000.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR QXLFLKDFBBBQ
(END) Dow Jones Newswires
July 24, 2019 02:00 ET (06:00 GMT)
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