Good morning!

Some interesting results & trading updates today, so here goes.


Quartix Holdings (LON:QTX)

Share price: 336.5p (up 3.5% today)
No. shares: 47.3m
Market cap: £159.2m

Final results - for the year ended 31 Dec 2016.

FinnCap says the results today are in line with expectations.

The share price is up 3.5% at the time of writing (9:00am), but on hardly any trades. This is a surprisingly illiquid share, and the quoted spread is often very wide. Mind you, the published prices on lots of small caps are not actually the real prices - there are often hidden buy & sell orders inside the published spread, that our brokers can see, but we can't. This is clearly an extremely unsatisfactory situation. Mind you there is a solution to this - either ask your broker what the real prices are, or put in a dummy trade (i.e get a quote to buy or sell, but then press cancel) on an online dealing platform to ascertain the real price.

Going back to Quartix 2016 results, here are a few key points;

Revenue up 19% to £23.3m (note the high price to sales ratio (PSR) of 6.8 - although this looks justified by a very high profit margin, and good growth).

Operating profit up, but by a lower percentage - only +8% to £6.5m.

Operating profit margin fell from 31% to 28% - although that's still very good.

Lower tax charge - despite higher profit, the corporation tax charge fell from £975k in 2015, to £453k in 2016. This is due to a benefit from the "patent box" scheme.

The lower tax charge flatters EPS (which is always stated after tax), rising 21% to 12.7p.

The (now historic) PER of 26.5 looks high. Although we are in a bull market, where growth companies are generally on high ratings.

Dividends - total of 11.2p for the year includes a special divi of 4.7p.

Balance sheet - strong, and includes net cash of £6.2m (up from £3.0m a year earlier)

Forex - a £255k P&L charge in 2016, worse than £49k charge in 2015.

Development spend - it doesn't seem to capitalise anything, which is the most prudent treatment.

Outlook comments are positive - good start to 2017, and management are confident, given recurring revenues + growth prospects.

US market is the big growth area, but other markets also doing well (e.g. France)

Valuation - as you can see from the usual…

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