REG - Quartix Technologies - Final Results
03/03/2025 07:15
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RNS Number : 9763Y Quartix Technologies PLC 03 March 2025
Quartix Technologies plc
("Quartix", "the Group" or "the Company")
Final Results
Strong growth in Annualised Recurring Revenue in all territories
Quartix Technologies plc (AIM:QTX), one of Europe's leading suppliers of
subscription-based vehicle tracking systems, analytical software and services,
is pleased to announce its audited results for the year ended 31 December
2024.
Financial highlights:
· Group revenue increased by 8% to £32.4m (2023: £29.9m)
· Adjusted EBITDA(1) increased by 21% £6.5m (2023: £5.4m)
· Adjusted profit before tax(2) increased by 25% to £6.3m (2023:
£5.1m)
· Profit for the year was £4.8m (2023: (Statutory Loss) £0.9m)
· Adjusted diluted earnings per share(3) increased to 9.78p (2023:
8.75p)
· Free cash flow(4) increased by 99% to £2.6m (2023: £1.3m).
· Final proposed dividend payment of 3.00p per share (2023: 1.50p) with
no supplementary dividend (2023: none) giving a total dividend for the year,
including the interim dividend, of 4.50p per share (2023: 3.00p)
(1) Earnings before interest, tax, depreciation, amortisation, share based
payments and adjustments (see note 3)
(2) Adjusted measure for the prior year is excluding the impairment of
intangibles and the provision to replace 2G units offset by the fair value
gain of the future earn out payments
(3) Diluted earnings per share before adjustments (see Strategic Report:
Financial Review, Financial Overview)
(4) Cash flow from operations after tax and investing activities
These audited results are consistent with the Trading Statement released on 13
January 2025.
Full Financial Results Report
The Group's Financial Statements and results presentations for the year ended
31 December 2024 are available in the "Investors" section of our website at:
www.quartix.com/investors (http://www.quartix.com/investors)
Principal activities and performance measures
The Group's main strategic objective is to achieve profitable growth in its
fleet subscription base and the associated annualised recurring revenue.
Annualised recurring revenue (for "ARR" see definition in Key Performance
Indicators ("KPI") table below footnote 4), when measured in constant currency
year on year, is the most significant forward-looking key performance measure.
The Group's ARR increased by £3.5m (+12%) during the year to £32.2m,
representing a record year on year increase of 68% over the ARR growth
achieved in 2023.
The KPIs used by the Board to assess the performance of the business are
listed in the table below and discussed in the Chairman's Statement and
Strategic Report.
Key Performance Indicators ("KPIs")
Year ended 31 December 2024 2023 % change
New Fleet subscriptions(1) (new units) 74,673 64,418 16
Fleet subscription base(2) (units) 300,168 266,568 13
Fleet customer base(3) 30,134 27,268 11
Customer acquisition (new customers) 6,863 5,759 19
Annualised recurring revenue(4) (£'000) 32,238 28,758 12
Net Revenue Retention (NRR)(5) 96 93 3
Fleet invoiced recurring revenue(6) (£'000) 30,442 27,764 10
( )
(1) New vehicle tracking unit subscriptions added to the subscription
base before gross attrition
(2 ) The number of vehicle tracking 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 ) 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,
all measured in constant currency
(5 ) NRR is measured on a constant-currency basis and represents
the annualised value of recurring revenues for the customer base at the end of
the year, excluding recurring revenues for customers acquired during the
course of the year, divided by the annualised value at the start of the year,
and expressed as a percentage
(6 ) Invoiced subscription charges before provision for deferred
revenue
Andy Walters, Executive Chairman of Quartix, commented:
"In 2024 the value of our subscription revenues increased by £3.5m, marking a
significant new record for Quartix. Adjusted profit before tax grew by 25% to
£6.3m as we cut administrative overheads whilst steadily increasing sales and
marketing investment. 2024 concluded with the monthly rate of new customer
acquisition exceeding 700 and progress in this key measure has continued into
2025.
An accelerated development programme for a new telematics platform resulted in
a product launch at year end which will reduce manufacturing costs from July
2025 onwards. Overhead costs in 2025 will continue to be subjected to detailed
review with the aim of achieving further improvements in return on sales.
2025 has started on a strong note: new installations reached a significant new
milestone in January and customer acquisition rates have further increased.
This positive momentum, coupled with growth opportunities across all six
territories, underpins our confidence in the outlook for 2025, during which we
believe we will increase our recurring revenues and adjusted profit before tax
by approximately 10%. We will provide a further detailed trading update in
early April."
For further information, please contact:
Quartix (www.quartix.net) 01686 806 663
Andy Walters, Executive Chairman
Cavendish Capital Markets Limited (Nominated Adviser and Broker) 020 7200 0500
Matt Goode / Seamus Fricker / Trisyia Jamaludin (Corporate Finance)
Sunila de Silva (Equity Capital Markets)
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 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
Since my return to the business in late 2023 our entire focus has been on
profitable, organic growth via our core vehicle telematics subscription
service. I am pleased to report that the Group has made very substantial
progress in respect of that, achieving record growth in the value of its
subscription base and a return to significant profitability: adjusted profit
before tax increased by 25% to £6.3m (2023: £5.1m). We have put the issues
of 2023 behind us and have made substantial investments in the future of the
business.
Annualised Recurring Revenue ("ARR")
ARR is the key forward-looking measure of growth for the Group and an
important indicator of shareholder value. ARR reported by the Group relates
solely to committed software subscription revenues and does not include other
service revenues which may recur. The Group's ARR increased by £3.5m (+12%)
during the Period to £32.2m, representing an increase of 68% over the ARR
growth achieved in 2023.
Customer acquisition
New customer acquisition during the Period increased by 19% to 6,863 new
customers and new subscriptions increased by 16% to 74,673. The customer base
increased by 11% to 30,134, and the total subscription base increased by 13%
to 300,168.
These improvements in growth compared with 2023 were driven by renewed focus
on channels to market in the Group's six target territories. New customer
acquisition, in particular, accelerated through the year, reaching a rate of
more than 700 new customers acquired in a rolling 30-day period by December -
an increase of 50% over the rate of acquisition at the end of 2023.
The key metrics shown below include growth expressed as a % for the Period
compared to the same period in 2023.
Country ARR (£m) % Subscription Base (units) % Customer Base % New Subscriptions (units) % New Customers Acquired %
UK/EI 17.7 +7% 156,506 +6% 11,668 +3% 30,481 +15% 1,592 +22%
France 8.3 +16% 80,579 +19% 9,174 +11% 23,032 +4% 2,293 +0%
USA 3.4 +7% 29,879 +2% 3,896 +1% 6,837 +14% 794 +13%
Italy 1.3 +53% 14,612 +52% 2,276 +47% 6,329 +42% 955 +60%
Spain 0.9 +40% 11,429 +43% 2,081 +35% 4,655 +35% 811 +31%
Germany 0.6 +63% 6,620 +57% 955 +43% 3,129 +89% 412 +65%
Other - 543 84 210 6
Total 32.2 +12% 300,168 +13% 30,134 +11% 74,673 +16% 6,863 +19%
Net Revenue Retention ("NRR")
Following the successful implementation of price increases across the Group,
alongside previously reported KPIs, the Group has now chosen to include NRR in
its reported KPIs as an additional important indicator of the quality and
stability of its recurring revenue base. The Board believes that this
additional visibility over revenue quality provides shareholders with a more
comprehensive view of performance than that provided by attrition and price
erosion measures (which are, nonetheless, both determinants of NRR).
NRR is defined as the annualised value of recurring revenues for the customer
base at the end of the year, excluding recurring revenues for customers
acquired during the course of the year, divided by the annualised value at the
start of the year, and expressed as a percentage. This is measured on a
constant-currency basis. Positive factors contributing to this measure are
incremental orders and upgrades from existing customers or price increases
("expansion"). Negative contributors are reductions in fleet sizes and price
erosion ("contraction") and customer losses ("attrition").
For the year as a whole NRR was 95.7% (2023: 93.0%). Price indexation, when
averaged across the base, amounted to approximately 3%; in 2025 it is expected
to be slightly over 5% across the current base. Through this and improved
price control the Group hopes to increase NRR further in 2025, with a
longer-term objective of exceeding 100%.
Regional review
UK/EI
ARR growth of £1.1m was achieved in 2024 (+7% to £17.7m): this was three
times the level of growth achieved in 2023. New customer acquisition increased
by 22% to 1,592 over the year and accelerated during the second half as cost
savings in administrative overheads in the business were used for marketing
investment. New subscriptions increased by 15% and prospects for H1 2025 are
strong.
France
ARR grew by 16% to £8.3m and the high levels of customer acquisition and new
installations achieved in 2023 were maintained. The customer and subscription
bases increased by 11% and 19%, respectively.
USA
The USA had suffered from a series of organisational and strategic changes
made in 2022 and 2023. This has necessitated the rebuilding of sales channels
from scratch. Good progress was achieved in recruitment by the middle of 2024
and a $0.22m fall in ARR in 2023 was reversed in 2024, producing an increase
of $0.26m (+7% ARR growth in sterling terms). Most of the staff recruited are
experienced telematics sales executives, and pricing for new contracts has
been increased by approximately 22% to bring the Group's pricing in the USA
more into line with the competition. New subscriptions increased by 14% and
customer acquisition improved by 13%. Most of these improvements developed in
the final four months of the year, and 2024 ended on a positive note.
Spain, Italy and Germany.
Progress in these exciting new markets for the Group accelerated: ARR grew by
51% to £2.9m; new customer acquisition improved by 49% to 2,178; and new
subscriptions grew by 48% to 14,113. The Group will continue to develop and
invest in its channels to market in each of these countries, with a number of
new recruitments already underway at the end of the year.
Results
Group revenue for the year increased by 8% to £32.4m (2023: £29.9m). It's
noteworthy that 42% of group revenue (45% of Group ARR) now originates from
territories outside the UK, exposing this portion to currency fluctuations
against the GBP. Revenue growth at a constant currency, taking the EUR/USD
revenue for 2023 and 2024 converted at the exchange rate at 31 December 2024
was 9%.
In 2024, the Group delivered Adjusted EBITDA of £6.5m (2023: £5.4m),
slightly ahead of estimates provided in the January 2025 trading statement.
Included in the Adjusted EBITDA this year is a re-estimate on the replacement
of 2G units in France and the USA which has resulted in a reduction of
approximately £0.5m in the provision to replace these units. This reduction
is principally due to cost savings achieved in future manufacturing costs and
the majority of the upgrade programme in the USA having been completed during
the year (see note 19 and commentary concerning new product development).
The Group has opted to voluntarily report its performance in two segments:
Total Fleet and Konetik. 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 revenue associated with the Group's
new customers in the year and the cost of servicing those new customers. The
costs in this sub-category include all of the marketing costs and the majority
of sales staff costs as it would be expected that all channels except for
field sales would work primarily in obtaining new customers, whilst field
sales would be expected to develop business with both new and existing
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 and any associated sales
costs.
These two elements, together with central fleet costs, make up the Total Fleet
segment.
The revenue and costs have been applied to each segment as appropriate in the
analysis below:
Segmental analysis Customer Acquisition Fleet Telematics Services Total Fleet Konetik Total Business
Year ended 31 December 2024
£'000 £'000 £'000 £'000 £'000
Recurring revenue 2,001 28,066 30,067 - 30,067
Other sales 357 1,944 2,301 34 2,335
Total revenue 2,358 30,010 32,368 34 32,402
Segmental costs:
Cost of goods sold (1,976) (7,910) (9,886) - (9,886)
Sales and marketing costs (6,672) (433) (7,105) - (7,105)
Cost of service (768) (4,205) (4,973) - (4,973)
(Loss)/profit before central costs (7,058) 17,462 10,404 34 10,438
Central costs (3,586) (461) (4,047)
Fair value gain - 73 73
Operating profit/(loss) 6,818 (354) 6,464
Free cash flow (cash flow from operations after tax and investing activities)
excluding the effects of the investment in Konetik, was £2.7m (2023: £3.3m),
slightly ahead of previous guidance. Free cash flow in 2024 was adversely
affected by expenditure of £1.3m on the replacement programmes in the USA and
France (2023: £0.1m) Net cash increased to £3.1m at 31 December 2024 (2023:
£2.4m).
By the end of 2024, almost all of the 2G units had been replaced in the USA,
with fewer than 700 units remaining to be replaced. At 31 December 2024 there
remained 33,000 2G units (31 December 2023: 48,000 units) to replace in France
before 31 December 2026 with a total estimated remaining cost of 2.8 million
Euros.
Earnings per share
Basic earnings per share increased to 9.85p per share (2023: loss of 1.88p per
share). Diluted earnings per share increased to 9.78p per share (2023: loss of
1.88p per share). The adjusted diluted earnings per share, which in 2023 was
calculated by deducting the fair value gain on re-estimate of the future
earn-out payments and adding back the 2G provision recognised and the
impairment of goodwill recognised on the acquisition of Konetik, was 8.75p.
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 £2m 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 2024, the Board decided to pay an interim
dividend of 1.50p per ordinary share. This totalled £0.7m and was paid on 30
September 2024 to shareholders on the register as at 30 August 2024.
The Board is recommending a final ordinary dividend of 3.00p per share, with
no supplementary dividend, giving a total dividend for the year of 4.50p per
share, subject to shareholder approval. Whilst this is higher than that which
would be paid under the Company's dividend policy (see above), the reduction
in free cash flow in 2024 was caused principally by the costs of Konetik and
the 4G upgrade programme in France, both of which are temporary in nature, and
hence the Board considers the additional quantum to be appropriate.
The final dividend amounts to approximately £1.5m in aggregate. Subject to
the approval at the forthcoming AGM, this dividend of 3.00p per share will be
paid on 30 April 2025 to shareholders on the register as at 4 April 2025. The
ex-dividend date is therefore 3 April 2025.
Konetik Deutschland GmbH ("Konetik")
Quartix acquired Konetik in September 2023 for a consideration of up to
€3.9m. Konetik was a company specialising in consultancy services for fleets
making the transition to electric vehicles. Konetik had substantial operating
costs but insignificant revenues and the growth anticipated at the time of
acquisition was not delivered.
As noted in the prior year Annual Report, having exhausted all other options
including returning the business to its former owners at nil cost, the Board
decided to liquidate Konetik and its Hungarian branch. Steps were taken in
January 2024 to begin the process of liquidation which included terminating
all customer agreements, employment agreements and third party service
provider contracts.
Operating costs of £0.5m for Konetik were recorded in the year, and a final
payment of approximately £0.2m was paid in September under the terms of the
acquisition agreement. The remaining activity in Konetik is minimal and
consists only of that required during the final stages of liquidation. It is
anticipated that the final closure of Konetik will complete in November 2025.
Outlook
In 2025, we will maintain our rigorous approach to overhead cost analysis.
This ongoing scrutiny aims to further enhance our return on sales, ensuring
optimal operational efficiency. Our accelerated development program will yield
significant results; this new telematics platform resulted in a product launch
at the end of 2024 which from July 2025 will substantially decrease our
manufacturing costs. This demonstrates our commitment to innovation and
cost-effective operations, aligning with our long-term goals for sustainable
growth and improved financial performance
The year has begun on a strong note: new installations reached a significant
new milestone in January and customer acquisition rates have further
increased. This positive momentum, coupled with growth opportunities across
all six territories, underpins our confidence in the outlook for 2025, during
which we believe we will increase our recurring revenues and adjusted profit
before tax by approximately 10%.
The Company believes that market expectations for 2025 are as follows:
revenue: £35.5m; free cash flow: £3.0m; adjusted EBITDA: £6.5m
AGM
The Group's AGM will be held at 10.30 a.m. on 31 March 2025 at the Company's
registered address No.9 Journey Campus, Castle Park, Cambridge, CB3 0AX.
Andy Walters
Executive Chairman
Strategic Report: Operational Review
Strategy and business model
The Group's main strategic objective is to grow its fleet subscription
platform profitably and develop the associated recurring revenue. This
strategy is based on five key elements, which were first highlighted in the
2018 Annual Report. We are pleased to be able to report progress in each area,
as summarised below:
1. Market development: Quartix will continue to focus on fleet markets,
exploring further opportunities within its six existing markets. Investment in
and focus on the core business delivered strong progress in the UK and
Continental Europe, and the customer base in the USA returned to growth during
the year.
2. Cost leadership: We continue to seek improvements in the efficiency
of the sales cycle and to review product and overhead costs in order to
identify further operational efficiencies. The Group recognised at the end of
2023 that, in recent years, its overhead structure had grown at a faster rate
than revenues, and in 2024 significant steps were taken to manage and reduce
costs where possible. This will continue in 2025.
3. Continuous enhancement of the Group's core software and telematics
services: Quartix has an ongoing modernisation program of its core software
and telematics firmware and hardware, both from a technology and user
experience perspective. These enhancements help to improve the customer
experience as well as to increase the efficiency of its support operation.
4. Outstanding service: Quartix maintained its excellent reputation with
fleet customers throughout the year, consistently being rated as "excellent"
by TrustPilot users. Quartix achieved a Gold Award from Investors in Customers
in 2023, which recognises truly excellent service.
5. Standardisation and centralisation: the expansion into European
markets has been achieved by staff operating under the existing operational
structures in place in the UK, with some sales staff being located in France.
Support and service functions continued to be performed from the UK.
Our fleet customers typically use the Group's vehicle telematics services for
many years following an initial contract. Accordingly, the Group focuses its
business model on the development of subscription revenue, with high levels of
revenue retention, 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. As noted in the Principal activities and
performance measures section, the annualised recurring revenue increased by
£3.5m, at a constant currency rate, to £32.2m at 31 December 2024.
People
We take great pride in the service we provide, and it is rewarding to see this
reflected in the feedback we receive. Fleet customers consistently give us
excellent reviews, including over 1,000 Trustpilot reviews with an impressive
average score of 4.9 in 2024.
These achievements highlight the dedication, creativity, and teamwork of our
people and underscore our commitment to delivering an outstanding customer
experience. Quartix was awarded a Gold Award in 2023 following an assessment
by Investors in Customers, a testament to our exceptional customer service.
Additionally, we were honoured with the Fleet News 2024 Reader Recommended
Award, further demonstrating the positive perception and strong awareness of
the Quartix brand.
Financial success in our core business is built on this commitment to service,
supported by our innovative product. The Board extends its sincere thanks to
every employee whose hard work and dedication contributed to our continued
growth in 2024.
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.
Key developments included:
1. Telematics hardware and firmware. Development of the Group's latest
generation of telematics system, the TCSV17, was initiated and released to
production in the period. The development marked the most significant revision
of both hardware and firmware design for at least a decade. The design
objectives were focused principally on cost reduction, but some significant
advances have also been made in performance. The cost saving achieved is
approximately £8 per unit and the TCSV 17 unit will accounts for 7,000 units
per month of usage from in 2025 from July onwards.
2. Application software Initial versions of revised web-based and mobile
tracking applications were developed and released during the year. The new
web-based application was released to new customers in July 2024 and
completion of the application and its introduction to existing customers will
be accelerated in 2025.
All of our investment in research and development was fully expensed in the
year with a total cost of £0.9m in 2024 (2023: £1.1m).
UK 2G Network
The Board continues to monitor the situation concerning the eventual phasing
out of 2G mobile network coverage in the UK. All UK network operators have
agreed to sunset their 2G networks no later than 2033. Since Q4 of 2022, all
new installations of the Group's tracking systems in the UK have either been
of its wired, 4G-compatible units or of plug-in, user-installed trackers
equipped with SIM cards which can roam across any of the available UK 2G
networks. Given the very high level of fixed 2G device installations in the UK
for applications such as smart meters, critical infrastructure and remote
monitoring it is expected that some networks will continue through until the
2033 deadline.
At the end of 2024 the Group had 84,000 UK installations using 2G network
services with its principal network service provider. These will not currently
roam onto other networks. This total is reducing at a rate of approximately
1,400 units per month through natural replacements (service upgrades and
vehicle swaps) as well as some attrition. The Board understands that its
network service provider currently has just under 4 million 2G installations
with other customers in the UK, and that it will enter into further discussion
with all customers regarding the phasing-out process towards the end of 2025,
with a view to completing the transition before the end of the decade. Given
the current rate of reduction in the Group's 2G installed base and the
anticipated cooperation and support of its service provider the Board does not
believe that any material replacement cost will be incurred in the foreseeable
future.
Sustainability and Environmental, Social, and Governance ("ESG") matters
The Board is aware that investors are increasingly applying non-financial
factors, such as ESG matters, as part of their analysis process to identify
material risks and growth opportunities. Being part of an ethical, purpose
driven business increasingly matters more to our people, our shareholders and
our business partners.
Software companies such as Quartix have a central role in the transition to a
low carbon economy and a more sustainable future. The Group is essentially a
non-emitting and limited-consuming business and the Board believes the Group's
limited use of carbon energy is largely offset by the savings that we achieve
for our customers in reduced fuel consumption and other efficiencies in
vehicle fleet management.
In 2022 Quartix was granted the London Stock Exchange's "Green Economy Mark",
which champions pioneering London-listed companies driving growth in the
global green economy. To qualify, companies must generate at least 50% of
their total annual revenue from products and services that significantly
contribute towards the transition to a low carbon economy. The Mark was
received due to analytics from an external consultancy firm and evidence from
our customers, that fleet vehicle tracking and analytics changes driver
behaviour and results in a reduction of between 10-25% in fuel consumption.
Capacity for future growth
Quartix is well-positioned for substantial profitable growth in its fleet
business. The Group plans to
Andy Walters
Executive Chairman
Strategic Report: Financial Review
Financial Overview
Year ended 31 December
£'000 (except where stated) 2024 2023 % change
Revenue 32,402 29,882 8
Gross profit 22,516 16,978 33
Gross margin 69% 57%
Operating profit/(loss) 6,464 (1,056) 712
Operating margin 20% (4%)
Adjusted EBITDA (note3) 6,538 5,397 21
Profit/(Loss) for the year 4,766 (908) 625
Earnings per share 9.85 (1.88)
Diluted earnings per share 9.78 (1.88)
Cash generated from operations 4,097 4,465 (8)
Adjusted operating profit to operating cash flow conversion 63% 88%
Free cash flow (excluding acquisition) 2,745 3,277 (16)
Revenue
Revenue increased by 8% to £32.4m (2023: £29.9m). As stated in the
Chairman Statement it's noteworthy that 42% of group revenue now originates
from territories outside the UK, exposing this portion to currency
fluctuations against the GBP. Revenue growth at a constant currency, taking
the EUR/USD revenue for 2023 and 2024 converted at the exchange rate at 31
December 2024 results in revenue growth in the year of 9%. Price indexation,
which was introduced in 2024 contributed approximately £0.9m to annualised
recurring revenue, with majority of this contributing to the increase in the
invoiced revenue in the year.
Gross margin
Gross margin has increased year-on-year from 57% in 2023 to 69% in 2024.
Almost all of this increase is due to the significant provision raised in the
prior year to upgrade 2G tracking systems in France to 4G. The Group achieved
a slight reduction in the cost to manufacture its 4G-compatible tracking
systems in the second half of 2023, and this was followed by the introduction
of a new 4G-only system at the end of 2024 which has a substantially lower
manufacturing cost than previous products. The effect of these cost savings
will gradually improve gross margin over time as the amortisation of the cost
of earlier versions unwinds.
Overheads
Sales & marketing investment increased by 12% to £7.1m (2023: £6.4m).
Administrative expenses decreased by 3% to £9.0m (2023: £9.3m).
Throughout the year, the Group undertook targeted cost management initiatives,
resulting in a 14% reduction in administrative expenses from the first half to
the second half of the year. As demonstrated in the table below approximately
half of these savings were strategically reinvested during the second half,
primarily in sales and marketing efforts resulting in an 11% increase in sales
& marketing costs in the second half. This included recruiting new sales
agents to support the U.S. market and increasing marketing expenditures to
drive lead generation
Overhead analysis
£'000 (except where stated) 6 months to 30 June 2024 6 months to 31 Dec 2024 % change Full year 2024
Sales and marketing expenses 3,367 3,738 11% 7,105
Administrative expenses 4,654 3,905 (14%) 8,559
Konetik costs 411 50 (88%) 461
Total overheads 8,432 7,693 (9%) 16,125
Adjusted EBITDA
Adjusted EBITDA, increased to £6.5m (2023: £5.4m). In addition to price
indexation which was introduced at the start of the year and the excellent
progress made in the subscription base during the year, profitability improved
as administrative and management overheads were reduced and the Group steadily
improved upon the optimisation of its operational systems. Operational costs
of the Konetik subsidiary were terminated in the first half of the year. Many
of the improvements listed have yet to show a full-year benefit to profit.
Taxation
The UK effective tax rate has increased from 16% in 2023 to 25% in 2024,
following the applicable tax rate increasing from 19% to 25%, a reduction in
the R&D credit available and the loss relief available in the USA.
Statement of financial position
Property, plant and equipment, fell marginally to £0.6m (2023: £0.7m).
Contract cost assets increased to £6.2m (2023: £5.4m). Inventories increased
to £1.7m (2023: £1.4m) due to the increase in stockholding to accommodate
the French replacement programme. Cash at the year-end was £3.1m (2023:
£2.4m). Trade and other receivables decreased to £4.1m (2023: £4.2m), which
correlates with the trade receivables collection period decreasing from 42
days to 38 days. One of the key drivers of this was utilising a debt
collection agency to collect debts in France and other European Territories.
Trade and other payables were £4.0m (2023: £4.0m) largely due to the
discharge of the deferred consideration for the acquisition of Konetik of
£0.3m offset by higher accruals. Provisions decreased from £4.2m to £2.3m
due to progress and re-estimate on anticipated costs per unit on 2G/3G unit
replacement programmes.
Contract liabilities represent customer income invoiced in advance of
satisfying performance obligations, which are expected to be recognised as
revenue in future years. These increased to £3.8m in 2024 (2023: £3.7m)
and are described further in note 20.
Cash flow
Cash generated from operations before tax at £4.1m was 63% of operating
profit (2023: £4.5m, 88% of adjusted operating profit). Tax paid in 2024 was
marginally higher at £1.3m (2023: £1.2m). As a result, cash flow from
operating activities after taxation but before capital expenditure was £2.8m
(2023: £3.3m).
The free cash flow (cash flow from operating activities and after investing
activities) was £2.6m (2023: £1.3m). Included in the cash outflows this year
was the balancing payment to Konetik shareholders under the share purchase
agreement of £0.2m, £0.4m of Konetik operating costs and approximately
£1.3m paid for the replacement programmes. 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 believes that, at some point between 2025 and 2030, most UK and
European network operators will finalise the sunsetting of their 2G networks.
The final networks to withdraw 2G service in France announced their sunsetting
programme in 2023, which is due to complete by the end of 2026. Quartix began
its proactive 2G unit replacement programme in France in January 2024. The
Company continues to monitor the announcements regarding the UK sunsetting of
the 2G network, and 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. Management continue to review the
situation for network migration in the UK. Currently all new systems installed
are either 4G compatible or make use of a roaming sim card which can use a
range of 2G networks, as the Group believe that some 2G networks will be
operational until 2030.
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 to
help mitigate these risks.
The Group acquires, manages and supports its customers in the EU centrally,
from its offices in the UK. The BREXIT trading and data adequacy arrangements
have not made it necessary for a relocation of some of its operations to
within the EU. However, the existing French business is instrumental in the
logistics of moving the goods between France and customers in the EU.
Potential new US tariffs and geopolitical tensions could lead to more volatile
global prices and trade disruptions, which has a potential impact on global
supply chains. The Group's product currently has a duty free tariff and the
risk of component shipment delays as a result of tariffs and geopolitical
tensions is mitigated through stockholding at its third party manufacturing
warehouse in China.
Inflation is expected to remain elevated, higher costs may put pressure on
profit margins and impact cash flows for businesses, particularly if they
struggle to pass on increased expenses to customers. Coupled with higher
borrowing costs these factors could strain companies with significant debt or
those relying on refinancing. The Group does not have any debt, however there
may be an impact on the Group's customer base and therefore the Groups ability
to collect cash from its customers. The Group continues to work with a debt
collector that covers all territories in an effort to increase the probability
of collection of debt following the 45 days overdue period has passed. The
Group continues to review its collection process and credit control efforts to
mitigate the risk.
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.
The Strategic Report, comprising the Operational Review and Financial Review,
was approved by the Board of Directors and signed on behalf of the Board on 28
February 2025.
Andy Walters
Chief Executive Officer
Consolidated Statement of Comprehensive Income
Year ended 31 December 2024 2023 2023 2023
Notes Before Adjustments After Adjustments
Adjustments
£'000 £'000 £'000 £'000
Revenue 2 32,402 29,882 - 29,882
Cost of sales (9,886) (9,145) (3,759) (12,904)
Gross profit 22,516 20,737 (3,759) 16,978
Sales & Marketing expenses (7,105) (6,366) - (6,366)
Administrative expenses (9,020) (9,285) - (9,285)
Impairment - - (2,695) (2,695)
Fair value gain 73 - 312 312
Operating profit / (loss) 6,464 5,086 (6,142) (1,056)
Finance income receivable 2 10 - 10
Finance costs payable (153) (31) - (31)
Profit / (loss) for the year before taxation 6,313 5,065 (6,142) (1,077)
Tax expense (1,547) (771) 940 169
Profit / (loss)for the year 4,766 4,294 (5,202) (908)
Exchange difference on translating foreign operations (14) 43 - 43
Other comprehensive (loss)/income for the year, net of tax (14) 43 - 43
Total comprehensive income/(loss) attributable to the equity shareholders of 4,752 4,337 (5,202) (865)
Quartix Technologies plc
Adjusted EBITDA 3 6,538 5,397
Earnings per ordinary share (pence) 4
Basic 9.85 (1.88)
Diluted 9.78 (1.88)
Consolidated Statement of Financial Position
31 Dec 2024 31 Dec 2023
Notes £'000 £'000
Non-current assets
Goodwill 14,029 14,029
Property, plant and equipment 560 684
Deferred tax assets 737 1,144
Contract cost assets 1,125 894
Total non-current assets 16,451 16,751
Current assets
Inventories 1,732 1,411
Contract cost assets 5,045 4,550
Trade and other receivables 4,115 4,186
Cash and cash equivalents 3,101 2,380
Total current assets 13,993 12,527
Total assets 30,444 29,278
Current liabilities
Trade and other payables 4,029 3,955
Provisions 7 1,203 2,775
Contract liabilities 3,782 3,679
Current tax liabilities 369 557
9,383 10,966
Non-current liabilities
Lease liabilities 411 520
Non-current provisions 1,048 1,443
1,459 1,963
Total liabilities 10,842 12,929
Net assets 19,602 16,349
Equity
Share capital 6 484 484
Share premium account 6 6,332 6,332
Equity reserve 163 392
Capital redemption reserve 4,663 4,663
Translation reserve (309) (295)
Retained earnings 8,269 4,773
Total equity attributable to equity shareholders of Quartix Technologies plc 19,602 16,349
Consolidated Statement of Changes in Equity
Share capital Share premium account Capital redemption reserve Equity reserve Translation reserve Retained earnings Total equity
£'000 £,000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2022 484 6,332 4,663 342 (338) 9,428 20,911
Shares issued - - - - - - -
Increase in equity reserve in relation to options issued - - - 78 - - 78
Recycle of equity reserve to P&L reserve - - - (28) - 28 -
Dividend paid - - - - - (3,775) (3,775)
Transactions with owners - - - 50 - (3,747) (3,697)
Foreign currency translation differences - - - - 43 - 43
Loss for the year - - - - - (908) (908)
Total comprehensive income - - - - 43 (908) (865)
Balance at 31 December 2023 484 6,332 4,663 392 (295) 4,773 16,349
Shares issued - - - - - - -
Increase in equity reserve in relation to options issued and cancelled - - - (113) - 66 (47)
Recycle of equity reserve to P&L reserve - - - (116) - 116 -
Dividend paid - - - - - (1,452) (1,452)
Transactions with owners - - - (229) - (1,270) (1,499)
Foreign currency translation differences - - - - (14) - (14)
Profit for the year - - - - - 4,766 4,766
Total comprehensive income - - - - (14) 4,766 4,752
Balance at 31 December 2023 484 6,332 4,663 163 (309) 8,269 19,602
Consolidated Statement of Cash Flows
Note 2024 2023
£'000 £'000
Cash generated from operations 5 4,097 4,465
Taxes paid (1,326) (1,181)
Cash flow from operating activities 2,771 3,284
Investing activities
Additions to property, plant and equipment (28) (17)
Interest received 2 10
Acquisition of subsidiary, net of cash acquired (176) (1,986)
Cash flow utilised in investing activities (202) (1,993)
Cash flow from operating activities after investing activities 2,569 1,291
(Free cash flow)
Financing activities
Repayment of lease liabilities (166) (172)
Proceeds from share issues - -
Dividend paid (1,452) (3,775)
Cash flow used in financing activities (1,618) (3,947)
Net changes in cash and cash equivalents 951 (2,656)
Cash and cash equivalents, beginning of year 2,380 5,063
Exchange differences on cash and cash equivalents (230) (26)
Cash and cash equivalents, end of year 3,101 2,380
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 2024. 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 UK-adopted International Financial Reporting
Standards ('IFRS') and with the requirements of the Companies Act 2006
applicable to companies reporting under those standards, this announcement
does not of itself contain sufficient information to comply with UK-adopted
IFRS. The Group will publish full financial statements that comply with
UK-adopted IFRS. The audited financial statements incorporate an unqualified
audit report.
Statutory accounts for the year ended 31 December 2023, 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 under S498(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
2023.
The basis of preparation and summary of significant accounting policies
applicable to the consolidated financial statements of Quartix Technologies
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:
2024 2023
£'000 £'000
United Kingdom 18,898 17,997
France 7,972 6,882
New European Territories 2,358 1,674
United States of America 3,174 3,329
32,402 29,882
There are no material non-current assets based outside the UK.
The Group's revenue disaggregated by pattern of revenue recognition is as
follows:
2024 2023
£'000 £'000
Goods and services transferred over time 31,124 28,674
Revenue recognised at a point in time 1,278 1,208
32,402 29,882
Goods and services transferred over time represent 96.1% of total revenue
(2023: 96.0%).
For 2024, revenue includes £3.6m (2023: £3.5m) 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 Adjusted earnings before interest, tax,
depreciation and amortisation (EBITDA)
2024 2023
£'000 £'000
Operating profit 6,464 (1,056)
Depreciation on property, plant and equipment, owned 47 76
Depreciation on property, plant and equipment, right of use 147 157
EBITDA 6,658 (823)
Share-based payment expense (incl. cash-settled) (47) 78
Impairment of intangible asset: goodwill - 2,464
Impairment of intangible asset: software - 231
Fair value gain on re-estimate of future earn out payments (73) (312)
Exceptional 2G replacement provision for France - 3,759
Adjusted EBITDA 6,538 5,397
4 Earnings per share
The calculation of the basic earnings per share is based on the profits
attributable to the shareholders of Quartix Technologies 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.
Earnings per ordinary share Profits attributable to shareholders £'000 Weighted average number of shares Basic earnings per share amount in pence Fully diluted weighted average number of shares Diluted earnings per share amount in pence
Earnings per ordinary share
Year ended 31 December 2024 4,766 48,392,178 9.85 48,708,067 9.78
Year ended 31 December 2023 (908) 48,392,178 (1.88) 49,088,054 (1.88)
Adjusted earnings per ordinary share
Year ended 31 December 2024 4,766 48,392,178 9.85 48,708,067 9.78
Year ended 31 December 2023 4,294 48,392,178 8.87 49,088,054 8.75
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. There was no impact of dilution on earnings per share
in 2023 since a loss was incurred.
To illustrate the underlying earnings for the year, the table above includes
adjusted earnings per ordinary share, which for 2023 excludes the £3.8m
France 2G replacement unit provision recognised in the year with its
associated tax impact and the impairment on the goodwill and other intangibles
recognised on acquisition of Konetik of £2.7m offset by the fair value gain
on the re-estimate of the future earn-out payments due under the share
purchase agreement for the purchase of Konetik.
5 Notes to the cash flow statement
Cash flow adjustments and changes in working capital
2024 2023
£'000 £'000
Profit before tax 6,313 (1,077)
Foreign exchange 304 25
Depreciation 194 233
Interest income (2) (10)
Lease interest expense 26 31
Share based payment expense (47) 78
Impairment (204) 2,695
Operating cash flow before movement in working capital 6,584 1,975
Increase/(decrease) in trade and other receivables 12 (599)
(Increase) in contract cost assets (832) (1,157)
(Increase)/decrease in inventories (320) 579
(Decrease)/Increase in trade and other payables (1,495) 3,504
Increase in contract liabilities 148 163
Cash generated from operations 4,097 4,465
6 Equity
Number of ordinary shares of £0.01 each Share capital £'000 Share premium £'000
Allotted, called up and fully paid
At 1 January 2024 48,392,178 484 6,332
Shares issued - - -
At 31 December 2024 48,392,178 484 6,332
There were no shares issued in the year to 31 December 2024.
7 Provisions
The carrying amounts and the movements in the provision account are as
follows:
Replacement Other Total
£'000 £'000 £'000
Carrying amount at 1 January 2023 449 94 543
Amount utilised (50) (10) (60)
Amount charged 3,759 - 3,759
Foreign exchange (24) - (24)
Carrying amount at 31 December 2023 4,134 84 4,218
Amount utilised (1,337) (55) (1,392)
Decrease in provision on re-estimate (561) - (561)
Unwinding of discount 127 - 127
Foreign exchange (141) - (141)
Carrying amount at 31 December 2024 2,222 29 2,251
1,174 1,203
Current provisions 29
Non-current provisions 1,048 - 1,048
2,222 29 2,251
The Group makes full provision for the future cost of replacements on a
discounted basis at the end of a reporting period following the Groups network
provider announcement of the sunsetting of the network that the tracking units
are compatible with. The provision for the replacement of the units in France,
recognised in 2023, represents the present value of the replacement costs
which are expected to be incurred over the next two to three years, as the
expected shut down communicated by the network provider for units in France is
December 2026. The provisions have been created based on the Company's
internal estimates. Assumptions based on the current economic environment have
been made, which management believe are a reasonable basis upon which to
estimate the future liability. These estimates are reviewed regularly to take
into account any material changes to the assumptions. The discount rate used
to calculate the present value of the provision to replace the 2G units in
France is 4.6% (2023: 3.5%) which was the risk free rate for the Group
equivalent to UK 10 year Government Bond yield at the end of the year. A
deferred tax asset is recognised at 25% of the provision outstanding for the
replacement units in France.
The majority of the other provision relates to standard or extended warranties
for which customers are covered for the cost of repairs or replacement units
as appropriate.
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.
Movements in the number of equity-settled share options outstanding and their
related weighted average exercise prices are as follows:
2024 2023
Weighted average exercise price per share Options Weighted average exercise price per share Options
in pence number in pence number
Outstanding at 1 January 243.0 671,316 212.6 805,063
Granted 1.0 37,218 - -
Cancelled 360.0 (74,965) - -
Lapsed 1.0 (323,627) 59.7 (133,747)
Forfeited 0.9 (106,276) - -
Outstanding at 31 December 239.2 203,666 243.0 671,316
Exercisable at 31 December 292.5 166,448 288.4 565,317
The weighted average fair value of equity settled options granted during the
year ended 31 December 2024 was 135.1p (2023: none granted).
There were no options exercised in the year ended 31 December 2024 (2023: none
exercised).
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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