TIDMQTX
RNS Number : 8900O
Quartix Technologies PLC
06 October 2023
Quartix Technologies plc
("Quartix", "the Group" or "the Company")
Trading update
As announced on 26 September 2023, Andy Walters, founder and
former CEO of Quartix, returned to the Company last week as
Chairman. Since then he las led, on behalf of the Board, a
preliminary review of the business which is summarised in the
following update. It provides further information on: progress in
Quartix's telematics subscription base; the acquisition of Konetik
Deutschland GmbH ("Konetik") and EVolve; the impact of 4G network
migration in Europe; and the financial outlook for this year and
next.
Subscription base growth
The annualised recurring revenue of the fleet subscription base
was GBP28.7m on 1 October, representing an increase, in constant
currency terms, of GBP2.1m year on year, based on exchange rates as
at 1 October 2023.
The Company's subscription base has grown by 13.0% year on year,
to just under 259,000 vehicles. New units installed in the first 9
months of the year have increased by 4.3% compared with the same
period in 2022. Growth in new subscriptions for the first 9 months
of 2023 is shown in the table below.
Region % of total New subscriptions New subscriptions % Difference
subscription (units) (units)
base first 9 first 9
months 2023 months 2022
-------------
UK 56% 20,029 20,714 -3.3%
------------- ------------------- ------------------- ------------
France 25% 16,621 12,523 32.7%
------------- ------------------- ------------------- ------------
USA 11% 4,913 7,269 -32.4%
------------- ------------------- ------------------- ------------
Spain, Italy,
Germany 8% 6,998 6,060 15.5%
------------- ------------------- ------------------- ------------
Total 100% 48,561 46,566 4.3%
------------- ------------------- ------------------- ------------
Growth in France over the past year has been very pleasing, but
progress in the UK and USA has been disappointing. Growth in the
customer base will be the subject of renewed focus in the coming
months and into 2024 with the results from this renewed focus
expected in 2024 and beyond.
Acquisition of Konetik and EVolve
The Company also provides the following further information
concerning the acquisition of Konetik, which provides the core
technology used within the Company's EVolve product. The EVolve
product is a tool that assists fleet managers with planning their
migration to electric vehicles, which includes an evaluation of
their costs, potential savings and environmental benefits.
Incorporated in 2014, Konetik has 4 permanent employees and is
based in Berlin, Germany. In its accounting period for the 12
months to 31 December 2022 it recorded revenues of EUR0.12m (2021:
EUR0.14m). The Company's current estimate of incremental revenue
for Quartix from the date of acquisition of 14 September 2023 to
year end is GBP0.04m, with an anticipated loss of GBP0.5m. Just
over half of this amount relates to one-off sign-on payments to key
employees and hence is non-recurring.
Fixed consideration for the acquisition is EUR2.5m, of which
EUR2.25m was payable on completion; the remaining EUR0.25m is to be
paid in 12 months' time. An additional deferred consideration of up
to EUR1.4m is payable over two years, depending on the sale of
EVolve licences.
A total of 1,269 upgrade vehicle licences for EVolve have been
sold to existing UK customers since product launch in 2022, of
which 105 were sold in Q3 2023.
The Company will conduct a review of the EVolve product line in
order to assess its potential to support growth in the Company's
core subscription base.
4G network migration in Europe
During the course of the past few months the Company has become
aware that two major network providers in France have brought
forwards their plans to switch off 2G networks, supporting only 4G
for the future. We believe that 2G networks in France will
therefore be obsoleted at the end of 2026, and that approximately
50,000 Quartix tracking systems will need to be replaced within the
Company's customer base over the course of the next three
years.
It is our intention to assist our customers in this transition,
as we did for the USA. The cost of doing this could amount to
approximately GBP4.1m over the three-year period but we will
continue to review the best way to achieve the transition whilst
reducing these potential costs, which we were successful in doing
in the USA.
We 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 we believe that some of these will continue to be
operational beyond 2028.
In the Company's Interim Report it noted that there had been an
increase in manufacturing cost associated with the first production
version of its 4G tracking system for Europe. Under the Company's
revised accounting policy this resulted in a significant increase
in the value of contract cost assets capitalised on the balance
sheet. Although the Company can now report that these costs have
been substantially reduced in the latest product version,
amortisation of this asset in H2 2023 and throughout 2024 will lead
to slightly lower gross margins than previously anticipated.
Financial outlook for the remainder of 2023 and 2024 .
Although the Company has made good progress in annualised
recurring revenues, the Board does not now believe that the rate of
growth has been sufficient to achieve current market expectations
for revenue in 2023 or 2024, and it has now reduced its own
expectations by approximately GBP0.9m and GBP2.6m,
respectively.
The combination of reduced expectations for revenue, together
with the additional operational costs of the Konetik acquisition, a
reduction in gross margins as a consequence of the introduction of
new 4G variants and some inflationary pressures on marketing costs
have led the Board to anticipate that Adjusted EBITDA for 2023 and
2024 may differ from current market expectations by approximately
GBP1.1m and GBP2.4m, respectively. Free cashflow before the
acquisition costs for Konetik are expected to reduce by GBP1.0m in
2023 and GBP1.2m in 2024.
The Company will consider the payment of a reduced ordinary
dividend at year end, but there will not be a supplementary
dividend payable for the year ending December 2023.
Underlying cash generation within the Company's core business
remains strong, and the Board will strive to mitigate the effects
of the factors mentioned above.
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)
Richard Lilwall, Chief Executive Officer
Emily Rees, Chief Financial Officer 01686 806 663
Cavendish Capital Markets Limited (Nominated
Adviser and Broker)
Matt Goode / Seamus Fricker (Corporate
Finance)
Tim Redfern / Sunila de Silva (Corporate
Broking) 020 7220 0500
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END
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October 06, 2023 02:00 ET (06:00 GMT)
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