REG - Quartix Technologies - Trading Statement

Quartix TechnologiesAnnouncement

09/01/2024 08:15

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240109:nRSI0126Za&default-theme=true

RNS Number : 0126Z  Quartix Technologies PLC  09 January 2024

 

 

 

9 January 2024

 

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.

 

 

 

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 2023 (the "Period").

 

Management estimates provided in this update may be subject to revision
following the finalisation of December's trading results and audit.

 

Additionally, the Company announces that its registered office has changed
from Sheraton House, Castle Park, Cambridge, CB3 0AX to 9 Journey Campus,
Castle Park, Cambridge, CB3 0AX.

 

 Financial Results

The Board estimates that revenue, profit (adjusted EBITDA) and free cash
flow for the Period will have been £29.8m, £4.9m and £3.1m respectively.
The Company's cash balance at year-end was £2.3m.

Free cash flow for the period excludes the capital investment made in the
purchase of Konetik Deutschland GmbH ("Konetik"), but includes the effects of
operational losses from the Konetik acquisition post-completion during the
Period. The net cash expenditure attributable to these were £1.95m and
£0.7m, respectively. In addition to this the Company incurred incremental
corporation tax charges of £0.7m associated with changes it made to its
accounting policies in 2022.

Given the closing cash balance at the end of the Period the Board will
consider whether to recommend a lower ordinary dividend than that implied by
its current dividend policy at the time of publication of its audited results.

 Fleet Subscription Base

The Company made good progress in its core fleet business during 2023: the
vehicle subscription base increased by 13% to 266,568 and total fleet revenue
grew by 10% in the Period, to £29.5m.  Attrition has marginally increased to
13.3% (2022: 12.8%) driven by increased attrition in the US market. Following
the planned discontinuance of the insurance business, insurance revenue
reduced further to £0.4m, representing less than 2% of Group revenue.

Excellent growth was achieved in both France and the Company's new European
territories, with performance in the UK and the USA being subject to renewed
focus in 2024.

 

                                      ARR          Growth vs. 2022 (constant currency1)  New subscriptions (units)  Subscription base (units)   Growth in subscription base vs 2022   Customer base

                                      31/12/2023                                         FY 2023                    31/12/2023                                                        31/12/2023

 Region                               (£m)
 UK                                   16.5         2.1%                                    26,411                   146,679                         7.4%                              11,305
 France                               7.4          22.2%                                  22,151                    67,895                        29.1%                               8,230
 USA                                  3.1          (5.4%)                                  5,994                    29,235                         (5.1%)                             3,849
 Spain, Italy, Germany & Ireland      2.1          45.3%                                 9,862                      22,759                           46.0%                            3,884
 Total                                29.1         8.0%                                  64,418                     266,568                    13.2%                                  27,268

 

 
Annualised Recurring Revenue ("ARR")
ARR is the annualised value of the Group's recurring fleet subscription base. ARR increased by £2.2m during the period, on a constant currency basis1, ending the year at £29.1m. Price erosion measured at a constant currency has remained stable with the prior year at 4.6%.
Given the inflationary pressures of the past two years the Company has introduced a change to its terms allowing a price adjustment to be made to certain contracts following expiry of the initial term. Customers were notified of this change at the end of the Period and it will come into effect from 1 February 2024 for approximately 80% of the subscription base. This is expected to have a positive impact on ARR from February onwards and the Company will be in a better position to report on the improvement after the first quarterly billing cycle has been completed.
 
EVolve and Konetik
Revenues from Evolve during the Period and independent revenues from Konetik post-acquisition during the Period amounted to less than £0.1m combined. For this reason, and those outlined in the RNS of 11 December 2023, sales, development and marketing resources for the UK and USA will be entirely refocused on the core business, and reduction of the financial impact of this acquisition on the operating performance of the Company is now a matter of utmost priority.
It is expected that actions taken to reduce resource commitment in this area will help in accelerating growth of the core business in the UK.
 
4G network migration in Europe

As described in the Company's RNS of 6 October 2023, the Company expects the
'sunsetting' of the 2G mobile network in France to be finalized by the end of
2026. This necessitates the replacement of a large proportion of the French
installed base of tracking systems during 2024 and 2025 and the Company has
taken the decision, as it did for the US, to provide this service free of
charge to customers in order to minimize the chances of incremental attrition
and to further enhance the Company's reputation in the French market. The
estimated cost of this replacement programme is approximately £4.1m which the
Company (subject to final audit) expects to take as a provision in its 2023
accounts, although this is excluded from adjusted EBITDA above.

The Company continues 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 it is believed that
some of these will continue to be operational beyond 2028.

 

Operational efficiency

As noted in the RNS of 6 October, cost reductions in manufacturing were
achieved during the second half of the year. The Company has now also
initiated a more significant revision and update to its 4G telematics hardware
to achieve further significant reductions in manufacturing cost. This is
targeted for release in the second half of 2024 and this project is
progressing well.

The Company will continue to review overhead expenditure to ensure that
effective investment is being made in the acquisition and support of customers
in its core fleet business.

 

Notice of Results

 

The Company expects to publish its results for the year ended 31 December 2023
on Monday 4 March 2024. The results, together with accompanying presentations,
will be posted that morning on the Company's website at
www.quartix.com/investors. (http://www.quartix.com/investors)

 

Andy Walters and Emily Rees will also give a presentation of the Company at
the ShareSoc Growth Company Live Seminar on 28(th) February in London.

 

Andy Walters, Executive Chairman of Quartix, commented:

"We finished 2023 with 266,000 vehicles under subscription, having grown the
base by 13% during the year. Over the past 5 years it has more than doubled,
from 123,000 at the start of 2019. Much of the growth in 2023 was driven by
France and our new European territories, which advanced by c.30%. Success in
France was particularly notable, with all channels to market performing
strongly.

Annualised recurring revenues ("ARR") increased by 8% during the year and we
expect ARR growth in the first half of 2024 to be supplemented by an inflation
adjustment to pricing on existing contracts.

We have significant opportunities for business development across all our
markets as we refocus all marketing and channel activity on our core business.

We look forward to achieving further growth in 2024 and are confident of
achieving market expectations(2) for the new financial year."

 

 

 1            Based on currency rates as at 31 December 2023.

 2            The Company believes that market expectations for 2024
are as follows: revenue: £32.1m ; free cash flow*: £3.4m ; adjusted EBITDA:
£5.4m

                * Note excludes expected cash expenditure of
£2.5m on 4G upgrade programme during the year.

 

For further information, please contact:

 Quartix (www.quartix.net)                                         01686 806 663

 Andy Walters, Executive Chairman

 Emily Rees, Chief Financial Officer
 Cavendish Capital Markets Limited (Nominated Adviser and Broker)  020 7220 0500

 Matt Goode / Seamus Fricker (Corporate Finance)

 Tim Redfern / Sunila de Silva (Corporate Broking)

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTZZGGMRRMGDZM