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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Quartix Technologies Plc | LSE:QTX | London | Ordinary Share | GB00BLZH2C83 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 155.00 | 150.00 | 160.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Cmp Processing,data Prep Svc | 27.52M | 5.04M | 0.1042 | 14.88 | 75.01M |
From Apr 2019 to Apr 2024
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")
Hot Features
Premium
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) Dow Jones Newswires
March 01, 2021 02:00 ET (07:00 GMT)
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