REG - Quartix Technologies - Trading Statement

Quartix TechnologiesAnnouncement

10/01/2022 07:05

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RNS Number : 8413X  Quartix Technologies PLC  10 January 2022

10 January 2022

Quartix Technologies plc

("Quartix", "the Group" or "the Company")

Trading Statement

 

Quartix Technologies plc, a leading supplier of subscription-based vehicle
tracking systems, software and services, is pleased to provide an update on
trading for the year ended 31 December 2021 (the "Period").

 

Company Results

The Board is pleased to report that it expects revenue and free cash flow to
be in line with consensus market forecasts(1) at £25.6m and £3.8m,
respectively. Adjusted EBITDA is expected to be substantially ahead of those
forecasts,(1) at £5.7m.  The Company will have therefore recorded
accelerated growth in fleet revenue of 8 per cent, and, as anticipated,
reduced overall EBITDA due to increased marketing expenditure. The improvement
in adjusted EBITDA is due to the timing delays in some of the planned
incremental investments in the last quarter of the year, which are now
expected to be made in 2022. Markets for Quartix's services continued to be
disrupted by the pandemic (particularly in the first three months of the
year), and, as expected, insurance revenues reduced once again.

The Company's cash balance at year-end was £5.6m. The above estimates are
subject to possible revision following the finalisation of December's trading
results and audit review.

It is the Board's intention to declare a final dividend for the year in line
with its stated policies on ordinary and supplementary dividends, subject to
economic conditions at the time of declaration.

 

Fleet Results

The Company made excellent progress in its core fleet business during 2021:
the vehicle subscription base increased by 17% (2020 15%) to 202,734 and the
annualised subscription base value increased by £2.0m (2020 £1.6m) on a
constant-currency(2) basis to £23.9m.

New vehicle subscriptions were 18% ahead of the prior year and the fourth
quarter in particular saw strong growth, so that for the first time ever our
installed base now exceeds 200,000 units.

Fleet revenue growth accelerated to 8% year on year (2020 6%); slightly slower
than the growth in the value of the subscription base as the latter grew more
rapidly towards the end of the year.

New unit installations growth was very impressive in France, driven by the
continuing expansion of the direct sales force, whilst Spain and Italy
achieved excellent results, albeit from a much lower base.  In the UK and the
US new unit installations grew at a slower rate than in the newer regions,
partly due to recruitment challenges during the second half.

Despite the pandemic, the attrition rate for the Company decreased in the year
to 11.6% (2020: 12.2%), which Quartix believes to be better than industry
averages, particularly in the current abnormal circumstances.

Each geographical market registered increases in both new subscriptions and in
the subscription base for the year. A summary of performance is shown in the
table below.

 

 Region           New subscriptions  Growth vs  Subscription base  Growth vs

                  (units)            2020       (units)            2020

                  FY 2021                       31/12/2021
 UK and Eire      23,557             6%         125,085            9%
 France           12,054             32%        40,343             29%
 USA              8,991              5%         27,912             19%
 Rest of Europe*  6,163              111%       9,394              141%
 Total            50,765             18%        202,734            17%

 

* Spain, Italy, Germany and Poland

 

Insurance Results

Insurance installations declined even more rapidly than anticipated during the
year, partly due to the continuing impact of Covid resulting in driving test
delays. In terms of installed units, revenues and profits, the insurance
business is now insignificant for the Company.

 

Incremental Fleet Investments

As flagged at this time last year, the Company made increased investments on
sales and marketing initiatives during 2021, to capitalise further on the
profitable subscription platform it has created, by accelerating growth in its
fleet subscription base. It was planned that the majority of this investment
would take place in the second half of the year, but some actions were delayed
due to re-emerging Covid concerns in the 4(th) quarter. In addition, there
were delays in recruiting customer acquisition roles, particularly in European
roles where it has become more challenging to recruit for language-based
positions located in the UK.  Initiatives actioned included, in particular,
an increase in French direct sales staff and additional customer service
resource in the UK.

Quartix intends to make further additional investments in sales channels
during 2022. In the UK the Company plans to implement data-driven optimisation
across the sales and marketing funnel and execute automation and
simplification across business processes.

It will pursue a revised growth agenda in the US, which will be expanded upon
in detail at the time of the results announcement in early March.

Quartix also plans further sales resource increases in France, as well as in
the other European countries where initial sales results have shown the most
promise for the future. For 2022 this will be focused on Spain, Italy and
Germany, where unit sales have been growing rapidly, albeit from a low base.
To further drive European growth, the Company is planning to establish a
small, serviced regional sales office in Southern France by the midpoint of
2022. This will both support the locally based French sales force, and provide
back-office services for direct sales people to be recruited in adjacent
countries.

 

To address product upselling opportunities, Quartix will be launching a number
of incremental added value features to its existing analytical software
offerings, including ones concerning fleet migration to electric vehicles
analysis and vehicle condition monitoring.

The Company anticipates that these investments will enable both new fleet
units installed and the associated value of the annualized subscription base
to increase at a significantly faster rate than was achieved in 2021.

 

US 3G swap out

Quartix made a provision of £1.6m in its 2020 accounts for the replacement of
a large proportion of the US installed base of tracking systems. This was as a
result of the sunsetting of the 3G mobile network in the US, being replaced by
4G networks. In 2020 the board had made 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 transition from 3G has taken longer than expected to be implemented, due
to delays in unit accreditation and approval for the US market, so that at the
end of 2021, Quartix had completed the replacement of approximately one third
of the 15,000 total units involved. The spend in 2021 was approximately
£0.3m, and the company expects the swap out to be completed in 2022,
predominately in the first half, and the cash required to finalise the
transition will be approximately £0.9m.

 

Directorate Changes

The previously announced transitions in the board composition have been
executed seamlessly.

Andy Walters, who co-founded Quartix in 2001, retired as Chief Executive
Officer in October last year, but remains on the board as Founder
Non-Executive Director.

To succeed him, Richard Lilwall was appointed Chief Executive Officer on 13th
October, and joined the Board on that date. Richard has more than 20 years'
executive experience in telematics and vehicle tracking. He founded ACT
Communications UK, a highly successful UK dealership, in 2002, which he sold
to Teletrac Navman in 2011. He remained with Teletrac Navman for a further ten
years, in progressively more senior roles, spending his last three years as
Vice President and European Managing Director. His earlier career included
roles as a recruitment consultant, and consulting engineer. Richard has a
degree in civil engineering from Kingston University.

Emily Rees, who was appointed Group Financial Director on commencing her
employment in April 2021, joined the board in May as Chief Financial Officer
and Company Secretary.

 

Chief Executive Officer comments

Richard Lilwall, Chief Executive Officer of Quartix, commented:

"The business performed very well in the year, notwithstanding the various
Covid induced lockdowns in H1, and we are pleased to be able to report strong
growth in our fleet subscription base. This has further demonstrated our
capability to deal with the ongoing headwinds and uncertainty offered by the
coronavirus pandemic, with our internal processes for remote working being
well established and operating efficiently.

 

The sales and marketing investments made in European markets are broadly
proving successful with encouraging results delivered in France (where we have
been active for many years), Spain, Italy and Germany (new target markets for
Quartix in 2021) in particular. Formulation of our revised US strategy is
nearing completion, and will be presented alongside further details of the
Company's growth strategy and medium term growth ambitions in early March with
Quartix's 2021 results.

Looking forward, with our full focus on expansion of our fleet business, we
see significant opportunities for profitable sales growth in 2022 and beyond."

 

The Company expects to publish its results for the year ended 31 December 2021
on Monday 1 March 2022. The results, together with accompanying presentations,
will be posted that morning on the Company's website at
www.quartix.com/investors.

 

( 1 ) The Board believes that consensus market expectations for 2021, prior
to this announcement, were as follows: revenue: £25.6m; adjusted EBITDA
(which excludes the US 3G provision) £5.0m; free cash flow: £3.5m.

( 2 ) Based on currency rates as at 31 December 2021.

This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 as retained as part of UK law by virtue of
the European Union (Withdrawal) Act 2018 as amended.

 

For further information, please contact:

 Quartix (www.quartix.net)                          01686 806 663

 Richard Lilwall, Chief Executive Officer

 Emily Rees, Chief Financial Officer
 finnCap (Nominated Adviser and Broker)                020 7220 0500

 Matt Goode / Kate Bannatyne (Corporate Finance)

 Alice Lane / Sunila de Silva (Corporate Broking)

 

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