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Quartix Holdings plc
Quartix Holdings plc
Quartix Holdings plc
Annual Report 2015
Annual Report 2015
Annual Report 2015
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
Contents
Company information
Highlights
Chairman’s Statement
Strategic Report: Operational Review
Strategic Report: Financial Review
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
Independent Auditor's Report to the Members of Quartix Holdings plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Independent Auditor's Report – Parent Company
Parent Company Statement of Financial Position
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
Notice of Annual General Meeting
Notes to the Notice of Annual General Meeting
1
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Quartix Holdings plc
Financial statements for the year ended 31 December 2015
2
Company Information
Company registration number:
06395159
Registered office:
Directors:
Wellington House
East Road
Cambridge
Cambridgeshire
CB1 1BH
Paul Boughton
Andrew Walters
David Bridge
Jim Warwick
Company secretary:
David Bridge
Bankers:
Solicitors:
Auditors:
Nominated advisor and broker:
Barclays Bank PLC
PO Box 299
Birmingham
B1 3PF
Hewitsons LLP
Shakespeare House
42 Newmarket Road
Cambridge
CB5 8EP
Grant Thornton UK LLP
101 Cambridge Science Park
Milton Road
Cambridge
CB4 0FY
finnCap
60 New Broad Street
London
EC2M 1 JJ
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
3
Highlights
Financial highlights
• Group revenues increased by 28% to £19.7m (2014: £15.3m)
o Fleet revenues grew by 17% to £13.0m (2014: £11.0m)
o
Insurance revenues increased by 56% to £6.7m (2014: £4.3m)
• Operating profit increased by 24% to £6.0m (2014: £4.9m)
• Profit before tax increased by 19% to £6.0m (2014: £5.0m)
• Adjusted1 profit before tax increased by 25% to £6.0m (2014: £4.8m)
• Diluted earnings per share of 10.53p (2014: 8.55p)
• Adjusted1 diluted earnings per share of 10.53p (2014: 8.39p)
• Adjusted2 free cash flow increased by 20% to £5.4m (2014: £4.5m)
• Adjusted2 cash inflow before tax increased by 23% to £6.8m (2014: £5.5m)
• Net cash increased to £3.0m (2014 net debt: £0.2m)
• Final dividend of 4.0p per share proposed
• Commitment to distribute excess cash by way of supplementary dividends
1 Adjusted to exclude exceptional gain of nil for the year ended 31 December 2015 (2014: £248,000))
2 Adjusted to exclude exceptional cash inflow before tax of nil for the year ended 31 December 2015 (2014: £0.3m)
Operational highlights
• Strong progress in the main fleet business:
o 23% increase in subscription base to 73,744 units (2014: 59,765)
o 23% increase in customer base to 7,849 (2014: 6,342)
o Unit attrition rose to 11.3% (2014: 9.4%), but still compares favourably with our estimate
of the industry average of around 14-15 per cent
o 32% growth in new fleet installations
o Strong growth in France, ending the year with 1,196 customers (2014: 890) and 7,910
vehicles under subscription (2014: 5,218), an increase of 34% and 52% respectively
o During its first full year of trading the USA grew its customer base to 693 (2014: 120),
with 3,179 vehicles under subscription (2014: 498).
• Excellent growth in the insurance telematics business:
o 74% growth in insurance installations to 57,024 (2014: 32,842)
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
4
Chairman's Statement
Introduction
The past year has shown continued growth in demand for the Group’s vehicle tracking systems, software
and services in both the fleet and insurance sectors.
Sales in the UK grew by 27%, reaching £18.4m (2014: £14.5m). The Group made excellent progress in
France, where revenues increased by 48% to €1.4m (2014: €956,000).
2015 was our first full year of operations in the USA, having launched our product and opened an office
there in 2014. We are very pleased with progress, having completed the year with 3,179 vehicles under
subscription (2014: 498) across 693 fleet customers (2014: 120). Revenues increased from $37,000 in 2014
to $392,000 in 2015 and the prospects for future business development remain very encouraging.
Results
Group revenues for the year increased by 28% to £19.7m (2014: £15.3m).
Operating profit for the year increased by 24% to £6.0m (2014: £4.9m), at the same time as the Group
continued to make significant investments in product and market development.
There were no exceptional items in the year (2014: gain of £248,000, comprising a settlement reached for
a mis-sold hedging product, less the Group’s professional costs in relation to its admission to AIM in
November 2014).
Profit before tax increased by 19% to £6.0m (2014: £5.0m). Adjusted profit before tax and exceptional
gains increased by 25% to £6.0m (2014: £4.8m).
Cash conversion was exceptionally good, resulting in free cash flow from operations after tax and investing
activities of £5.4m (2014 adjusted for exceptional items: £4.5m), enabling the Group to eliminate the net
debt of £0.2m as at 31 December 2014 and resulting in net cash of £3.0m at 31 December 2015, following
the payment of £2.3m in dividends.
Earnings per share
Adjusted basic earnings per share rose by 26% to 10.69p (2014: 8.52p). Basic earnings per share rose by
23% to 10.69p (2014: 8.68p). Adjusted diluted earnings per share increased to 10.53p (2014: 8.39p).
Dividend policy
Our ordinary dividend policy remains unchanged with the dividend set at approximately 50% of cash flow
from operating activities, which is calculated after taxation paid but before capital expenditure.
However, this policy is leading to an accumulation of cash and so in the future the Board will look to
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 will be 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 earliest
potential payment to be made will therefore be alongside the 2016 final ordinary dividend payment in 2017.
The policy will be subject to periodic review.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
5
Dividend
In the year ended 31 December 2015, the Board decided to pay an interim dividend of 2p per ordinary
share. This totalled £0.9m and was paid on 24 September 2015 to shareholders on the register as at 21
August 2015.
The Board is recommending a final dividend of 4p per share, giving a total dividend for the year of 6p per
share. The final dividend amounts to approximately £1.9m in aggregate. Subject to the approval at the
forthcoming AGM, the final dividend will be paid on 4 April 2016 to shareholders on the register as at 11
March 2016.
Governance and the Board
The Board is comprised of two Non-Executive Directors, myself included, and two Executive Directors,
Andrew Walters and David Bridge.
I have over 25 years of experience in identifying, negotiating and completing acquisitions in the USA and
Europe. Having spent 13 years as Business Development Director for Spectris plc, I am currently Head of
Business Development at Brammer plc, leading its European acquisition programme. I also held senior
positions at both Consort Medical plc and IMI plc and I am a Chartered Accountant (FCA).
Jim Warwick is Chief Operating Officer at Abcam plc, a global leader in the supply of innovative protein
research tools, having originally joined as Technical Director in 2001. Prior to that, he worked on IT,
software and web development initiatives for the telecommunications consultancy group Analysys Limited.
In April 2015, Avril Palmer-Baunack reluctantly decided not to seek re-election as a Director at the
Company’s AGM. This was in light of the required time commitment of her new role as Executive
Chairman of BCA Marketplace plc. The Board thanks Avril for her significant contribution to and support
for the Company.
For further details regarding Corporate Governance and the Board, please see the “Investors” section of
our website (www.quartix.net/investors.php).
Outlook
The Group has made a strong start to the year, in line with our expectations. The high levels of recurring
revenues and opportunities to grow in the UK, France and the USA in fleet combined with continued
progress in our insurance business underpin our confidence for the rest of the year and beyond.
AGM
The Group’s AGM will be held on 29 March 2016 at the Group’s registered office at Wellington House,
East Road, Cambridge CB1 1BH.
Paul Boughton
Chairman
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
6
Strategic Report: Operational Review
Principal activities
Since 2001 Quartix has become one of Europe’s leading suppliers of vehicle tracking systems and services.
Whilst the origins of the Group’s business are in the tracking of commercial vehicles in the UK, it has
developed a significant market presence in the rapidly-growing insurance telematics market. It set up a
French branch in 2011 and in 2014 expanded its operations into the USA. The operations in both the USA
and France are focused entirely on the fleet sector.
Strategy and business model
The Group’s main strategic objective is to grow its fleet business and develop the associated recurring
revenues by increasing the number of vehicles under subscription. The related insurance business provides
economies of scale in product development, supply chain, production and system installation.
Whilst the same technology is used for both commercial fleet tracking and insurance telematics, these
markets exhibit different characteristics and the Group has established proven business models for each of
them.
Fleet customers typically use the Group’s services for many years, resulting in low rates of attrition.
Accordingly, the Group focuses its business model on the development of subscription revenues based on
system rental, providing the best return to the Group over the long term.
The value of recurring subscription and rental revenues is the key measure of our performance in the fleet sector
Insurance telematics customers use the Group’s technology to monitor the driving style and habits of higher-risk
drivers, normally for a policy with a term of just 12 months. Quartix therefore treats this as an equipment
sale, with the tracking system being sold, at policy inception, together with 12 months service and data
usage included. This is standard practice in the industry, as the level of attrition is relatively high.
The value of revenues is the key measurement of our performance in the insurance sector, as the market does not offer a recurring
revenue or system rental opportunity.
People
Our business performance was recognised by several independent bodies in 2015: Megabuyte, the
independent technology financial analysts, placed us second in the UK of all public and private tech
companies; the London Stock Exchange Group named us as one of “1000 companies to inspire Britain”;
and we were selected as Business of the Year in the Cambridge Business Excellence Awards.
Each of these awards and nominations is a reflection of the commitment, teamwork, creativity and
dedication of our people. Our financial performance derives from the customer service we deliver, backed
by the technology we develop. I would like to register my personal thanks to every one of our employees
who made 2015 another great year for Quartix.
We are delighted to have been able to provide our employees with the ability to participate in the equity of
the Company under our EMI share option scheme for the third year in a row. The Directors of Quartix
Holdings plc are not included in these grants, which are intended for employees.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
7
Operational performance
All of our business operations continued to perform at a high level in 2015. Although gross margins fell by
3.1 percentage points to 61.8%, this was largely due to the high level of growth in insurance sales, with a
consequential adverse effect on the margin mix. Gross margin from fleet subscriptions remained strong.
Return on sales was 31%, which was 1 percentage point down on the prior year as a consequence. Cash
conversion was extremely strong with cash flow from operating activities after investing activities (free cash
flow) representing 90% of operating profit. We expense all R&D investment and tracking system
installation costs as they are incurred.
Capex investments totalled £262,000, as we invested in new IP-based phone systems, systems and servers
to support our growth. In the case of the phone system we expect to see a payback in under 12 months.
Our accounts and operations teams continued to manage working capital well: trade debtors at the year end
represented just 35 days of sales, and inventories increased by just £0.2m despite sales growth of £4.3m in
the year.
During the course of the year we made significant investments in technology and training to improve the
efficiency of our sales and marketing campaigns. Initial results from this appear encouraging, in that our
overall marketing cost per new fleet customer was reduced.
Fleet
Our core fleet business, which accounted for 66% of Group revenue, delivered considerable progress in a
further year of investment. Continued growth in the UK was combined with excellent progress in France,
where our business made a positive contribution to the Group’s results, and in the USA, where our first
full year of trading saw us reach an installed base of 3,179 vehicles under subscription.
During the course of the year we won 2,184 new fleet customers (2014: 1,680). Sales leads continued to be
generated through a broad range of media and channels. The efficiency improvements resulted largely from
investments made in technology, processes and training, adding automation wherever possible and
providing our sales and marketing teams with better information on the performance of each campaign.
This investment will continue in 2016, and the knowledge and experience gained will be used across each
of our three target markets.
Fleet UK
Demand for fleet tracking systems in the UK continues to grow rapidly. We are well-placed to expand our
business, given the strengths of our product, systems and support capabilities. The economies of scale
derived from the size of our combined fleet and insurance business also give us a considerable competitive
advantage.
Vehicles under subscription increased by 16% to 62,655 during the year, and our fleet customer base
reached 5,960. We won 1,195 new customers in 2015, and the gains in customer and vehicle base were
broadly spread between the channels we use. UK fleet revenues were £11.7m (2014: £10.2m). We added a
number of new key accounts during the year and have increased the number of fleet clients with 50 vehicles
or more.
Our UK website continued to perform well in terms of search engine placement and enquiries, and we
added significant new content to it, including many video tutorials. We also made very good use of webinars
as an aid to training and supporting existing customers, and this will be developed further in 2016.
We will continue to increase telephone based sales capacity to support our fleet marketing initiatives, and
will look to find additional channels and partners to help us develop the market. Sales conversion
percentages from enquiries received during the year from our own marketing initiatives were 39%,
underpinning the confidence we have in the competitiveness of our offering.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
8
Fleet (continued)
Fleet France
We made excellent progress in the French market, increasing new installations by 51%, and ending the year
with 7,910 vehicles (2014: 5,218) under subscription across 1,196 fleet customers (2014: 890). French fleet
revenues increased by 48% to €1.4m (2014: €956,000), making a profitable contribution to the Group. We
strengthened our French sales and support teams and will continue to do so. Our distributors also
contributed strongly to growth during the year and we intend placing even greater emphasis on this channel
in the future.
During 2016 we intend using many of the initiatives, media and channels which have proven to be so
successful in the UK.
Fleet USA
Our first full year of trading in the USA was very successful: we concluded 2015 with 693 fleet customers
(2014: 120) having a total of 3,179 vehicles under subscription (2014: 498). As in the UK and France, our
fleet revenues derive from subscription income, which build over time. Nonetheless USA fleet revenues
increased to $0.4m from just $0.04m in 2014, and our subscription base value continues to increase each
month.
We see significant potential for growth in the USA in the next five years, and will continue to invest in
digital marketing together with sales and support resources to back this up.
At the end of the year we had a total of 6 employees in our Chicago office, which falls under the
responsibility of our US business director, who joined the company in October and is based in Cambridge.
A specialist digital marketing and market research team will be recruited in Cambridge in order to increase
the scale of our current digital marketing programmes for the US.
Insurance
Volume growth in insurance at 74% was higher than that experienced in 2014. We installed a total of 57,024
tracking systems. Revenue growth of 56% lagged volume growth, as previously agreed price reductions
took effect from the start of the year. Although there continues to be some price pressure in this market,
we continue to focus on the delivery of a very high level of data and service quality, and we believe that the
growth achieved during the year reflects this.
The outlook for our insurance business is good, and our strategic partnership with Wunelli Limited remains
of key importance to us in its development. We will continue to explore potential in the commercial vehicle
insurance market, using a combination of the technology, knowledge and processes we have put in place
for both parts of our business.
Research and development
The Group is committed to continued investment in research. During 2015 we continued to invest in
ensuring that the functionality of our fleet tracking units is maintained in the light of market developments
in user interface data and mobile apps. Developments arising from research work undertaken have included:
mobile tracking apps for both the French and US markets and modifications to the Group’s suite of web
services for 3rd party integrators and customers. Other projects continuing into 2016, include:
miniaturisation of the TCSV11 tracking system, the performance dashboards for our fleet customers and
the SafeSpeed database, which compiles road speed distributions for more than 1million UK roads in real
time and provides a very powerful tool for driver risk assessment.
The costs relating to these developments and other research, all of which were fully expensed in the year
amounted to £1.1m (2014: £1.0m).
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
9
Strategic priorities
We are encouraged by the potential we see to accelerate the growth of our fleet business in each of the
three geographic markets we address and we have already identified a number of initiatives to position us
to deliver on that potential. In particular, during 2015 we achieved greater efficiencies in sales and marketing
and we are now in a position to increase investment further. This additional investment will include both
external marketing spend and additional in-house capacity.
We will continue to enhance our e-commerce platform, and to evaluate the feasibility of self-installed
versions of our products, particularly in France and the USA.
By carefully coordinated management of our future growth we will strive to maintain the very high levels
of customer satisfaction and financial performance for which Quartix is known.
Within the insurance sector we are pleased with the breadth of the range of companies for which we supply
telematics technology through our strategic partner, Wunelli Limited. We will continue to pursue our goal
of diversifying our customer base.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
10
Strategic Report: Financial Review
Strategy
Quartix’s primary strategic focus is on building up a long term relationship with our fleet customers in a
way that gives rise to recurring subscription revenues for our telematics services.
We have a policy of continuous improvement in our telematics services and this is funded by these revenues
which also fund our overheads and infrastructure; moreover these revenues provide a return to
shareholders for past investment in our telematics service.
One way in which we improve our fleet service is by providing units for the insurance telematics which can
lead to innovations which are then offered to our commercial vehicle customers.
Key performance indicators (“KPIs”)
Year ended 31 December
Fleet installations (units)
Fleet subscription base (units)
Fleet customer base
Fleet attrition (annualised) (%) 1
Fleet invoiced recurring revenue2 (£’000)
Fleet revenues (£’000)
Insurance installations (units)
Insurance revenues (£’000)
2015
21,518
73,744
7,879
11.3
11,828
12,957
57,024
6,718
2014
16,355
59,765
6,342
9.4
9,816
11,038
32,842
4,293
% change
31.6
23.4
22.6
-
20.5
17.4
73.6
56.5
1 Attrition in the year is the number of units installed (excluding upgrades), less the increase in subscription base, expressed as a
percentage of the mean subscription base.
2 Invoiced rental and communications charges before provision for deferred revenue
In 2015 we achieve a 31.6% increase in fleet installations compared to 12.5% in 2014 as we
expanded our sales operations in Europe and invested in our US operations. This was achieved
while putting through a midyear price increase in the UK.
Our installed base grew by 23.4% to 73,744 units.
Attrition rose during the period to 11.3% but the rate of attrition still compares favourably with
our estimate of the industry average of around 14-15 per cent.
Sales in France and USA where monthly rentals are lower grew at a higher percentage rate so our
Group invoiced recurring revenues (before adjusting for deferred revenue) grew at a lower rate
than our unit base by 20.5% to £11.8m (2014: £9.8m).
The growth in fleet revenues at 17.4% was less than the growth of our recurring revenues as a
higher proportion of our customers chose to rent rather than buy.
Insurance unit installations were up 73.6% at 57,024 units compared to 32,842 in 2014. This led
to a rise in insurance sales from £4.3m to £6.7m. The percentage rise in value being less than the
rise in units as insurance income per unit installed dropped.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
11
Financial Overview
Year ended 31 December
£’000 (except where stated)
Revenues
Fleet
Insurance
Total
Gross profit
Gross margin
Operating profit
Operating margin
Net profit for the year
Earnings per share
Adjusted Earnings per share 1
Cash generated from operations before
exceptional gains 1
Operating profit to operating cash conversion
2015
12,957
6,718
19,675
12,150
62%
6,045
31%
5,014
10.69
10.69
6,781
112%
2014
% change
11,038
4,293
15,331
9,943
65%
4,885
32%
4,032
8.68
8.52
5,523
113%
17.4
56.5
28.3
22.2
23.7
24.4
23.2
25.5
22.8
1 Exceptional gains after tax of £nil (2014: £76,000) and exceptional cash flow of £nil (2014: £322,000) were recorded in the year
and are excluded from these figures
Revenue
Revenue increased by 28.3% to £19.7m (2014: £15.3m). Fleet revenue benefitting from past
investment was 17.4% up at £13.0m (2014: £11.0m). Sales to insurance based customers increased
by 56.5% to £6.7m (2014: £4.3m).
Gross margin
We do not capitalise our installed units or our marketing costs and we generally provide free
installation so a surge in installations can have an immediate cost impact but is an investment in
the future.
Thus the increase in units installed and the increase in the insurance proportion of the sales mix
together with a drop in insurance prices, compared to last year, meant that the percentage gross
margin dropped from 65% to 62%, restricting the increase in gross profit to 22.2%.
Operating profit
We continued to invest in our product offering, in our sales structure and in marketing but limited
this increase in overheads to 20.7% so operating profit grew at a slightly higher rate than gross
profit at 23.7%.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
12
Financial Overview (continued)
Net profit for the year
There were no exceptional items in the year whereas in 2014 there was a gain of £0.2m, comprising
a settlement reached for a mis-sold hedging product, less the Group’s professional costs in relation
to its admission to AIM in November 2014.
Interest charges were lower in 2015 and the effective tax rate fell to 16% (2014: 20%) as a result
of IPO costs in 2014 that were not deductible against UK corporation tax. Our low effective tax
reflects a benefit from research and development tax allowances.
The overall impact of the above was that profit for the year rose by 24.4% to £5m (2014 £4.0m).
Earnings per share
Earnings per share increased by 23.2%. Excluding the 2014 exceptional item meant that adjusted
earnings per share grew at a higher rate of 25.5%.
Statement of financial position
Cash at the year-end was £4.0m and bank debt in cash terms was £1.0m, resulting in net cash of £3.0m
(2014: net debt £0.2m).
Inventories increased towards the end of the year as we were building our strategic reserves and developing
new unit models.
Cash flow
Cash flow from operating items before tax and exceptional items was £6.8m (an increase relative to
operating profit largely due to £0.5m increase in provision for deferred revenue and £0.1m of share based
payments). The comparable figure for 2014 is £5.5m (Exceptional items in 2014 added £0.3m net to cash
flow, giving operating cash flow before tax of £5.8m.)
Tax paid in 2015 was £1.1m, so cash flow from operating activity after taxation but before capital
expenditure was £5.7m (2014: £4.6m before exceptional cash flow).
Dividend
The Board is recommending a final dividend of 4.0p per share, amounting to approximately £1.9m in
aggregate. Subject to approval at the forthcoming AGM, the final dividend will be paid on 4 April 2016 to
shareholders on the register as at 11 March 2016.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
13
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 management. The impact of not mitigating this risk is that the Group ceases
to be innovative and provide customers with the products and services they require. Considerable focus
has been given to good communication with employees and on providing opportunities for promotion.
Reliance on M2M network
The Group’s service delivery is dependent on a functioning M2M network covering both the internet and
mobile phones. 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.
Business disruption
Like any business the Group is subject to 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 which is
frequently updated and reviewed.
Retaining a key customer
As disclosed in note 3 during 2015 revenues of £6.7m were derived from one insurance customer. Losing
this key contract could have a significant negative impact on cash flow in the short term as we have a high
level of fixed overheads. Considerable resources are devoted to maintaining our relationship with this
customer while at the same time the Group continues to build a reputation for excellent service with
insurance customers.
Cyber Attack
The Group needs to make sure its data is kept safe and that there is security of supply. The reputational
and commercial impact of a security breach would be immense. To combat this, the Group has a security
policy and prepares a monthly security report which is reviewed by 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 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.
David Bridge
Finance Director
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 26 February 2016.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
14
Corporate Governance Report
Introduction
As the Company is listed on AIM, it is not required to, and does not, comply with the UK Corporate
Governance Code (the “Code”).
The Directors are committed to maintaining a high standard of corporate governance and the Directors
refer to the 2013 Quoted Companies Alliance Governance Guidelines for Smaller Quoted Companies
(“QCA Guidelines”) to establish policies and procedures appropriate for a group of its size and nature.
Directors and the Board
Position
Chairman from 16 April
Chairman until 16 April
Executive Directors
Non-Executive Directors
Director
Paul Boughton
Avril Palmer-Baunack
Andrew Walters
David Bridge
Jim Warwick
Date of
resignation
16 April 2015
Date of
appointment
1 May 2014
1 March 2014
1 May 2002
25 February 2008
1 May 2014
Board committees
There are three Board committees: Audit, Nominations, and Remuneration. Each Committee is comprised
of Non-Executive Directors.
The attendance of each Director to Board meetings is outlined below and can be compared with the number
of meetings they were invited to attend. The invitations are fewer for Avril Palmer-Baunack as in the light
of the required time commitment of her new role as Executive Chairman of BCA Marketplace plc, she
reluctantly decided not to seek re-election as a Director at the Company's AGM on 16th April 2015.
Position
Executive Directors
Non-Executive Directors
Director
Andrew Walters
David Bridge
Paul Boughton
Jim Warwick
Avril Palmer-Baunack
Board meeting
attendance (invitations)
10 (10)
10 (10)
10 (10)
10 (10)
2 (2)
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
15
Board committees (continued)
Audit Committee
Paul Boughton is Chairman of the Audit Committee which normally meets three times a year. The
Committee exists to scrutinise and clarify any qualifications, recommendations and observations within the
audited accounts and report of the Company’s auditor. When satisfied, the Committee presents the audited
accounts and report to the Company’s Board and reviews the effectiveness of resultant corrective and
preventative measures.
In performing this function, the key duties of the Committee are to:
• Monitor the integrity of the financial statements of the Group and any formal announcement
relating to its financial performance
• With regards to financial reporting, review and challenge the consistency of accounting policies,
the use of accounting methods over alternatives, whether the Group has followed appropriate
accounting standards, the clarity of disclosure, and all material information relating to the audit and
risk management
• Monitor the adequacy and effectiveness of the Group’s internal financial controls, including the
internal control and risk management systems
• Ensure that the Group’s arrangements for its employees and contractors to confidentially raise
concerns about possible wrongdoing allow proportionate and independent investigation and
appropriate follow up action
• Consider the need to implement an internal audit function
• Make recommendations to the Board and the Company’s shareholders regarding the appointment,
re-appointment, and removal of the Company’s external auditor. It ensures that at least once every
ten years the audit services contract is put out to tender to enable the Committee to compare the
quality and effectiveness of the services provided by the incumbent auditor
• Oversee the Company’s relationship with the external auditor
Nominations Committee
The Nominations Committee is chaired by Paul Boughton. The Committee reviews the structure, size and
composition of the Board to ensure the leadership of the Group is the most proficient to facilitate the
Group’s ability to effectively compete in the marketplace. It makes recommendations to the Board
regarding the continued suitability of any Director, the re-election by shareholders of any Director under
the ‘retirement by rotation’ provisions in the Company’s Articles of Association, and succession planning
for Directors and other Senior Executives. If necessary, the Committee will identify and nominate
candidates they believe suitable to fill Board vacancies.
Remuneration Committee
Jim Warwick chairs the Remuneration Committee. It acts to ensure sound Corporate Governance and
meets at least twice a year. The Committee functions with the objective of attracting, retaining and
motivating the executive management of the Company and ensuring they are rewarded in a fair and
responsible manner for their contribution to the success of the Group.
The role of the Committee is to determine and agree with the Board the framework or broad policy for the
remuneration of the Company’s Chairman and Executive Directors, including pension rights and
compensation payments. It also recommends and monitors the level and structure of remuneration for
senior management. When setting the remuneration policy, the Committee reviews and considers the pay
and employment conditions across the Group, especially when determining salary increases.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
16
Relations with shareholders
The Group maintains regular dialogue with institutional investors who, along with City analysts, are invited
to presentations immediately after the announcement of the Group’s interim and full year results.
Shareholders have the opportunity to meet and question the Board and its Committees at the AGM. A
detailed explanation of each item of special business to be considered at the AGM is included with the
Notice of Annual General Meeting which is usually sent to shareholders at least 20 working days before the
meeting.
Internal financial control
The key three controls are:
• Segregation of duties
• Good and reliable information
• A high level of integrity among key employees
The Board recognises the importance of robust and reliable financial reporting procedures and will review
the procedures it operates on a regular basis.
Going concern
The Board takes all reasonable steps to review and consider any factors that may affect the ability of the
Group to continue as a going concern.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading
performance, show that the Group is able to generate sufficient liquidity.
The Group enjoys a strong income stream from its fleet subscription base while current liabilities include
a substantial provision for deferred revenue which is a non cash item.
After assessing the forecasts and liquidity of the business for the next two calendar years and the longer
term strategic plans, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. The Group therefore continues to adopt the
going concern basis in preparing consolidated financial statements.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
17
Directors’ Remuneration Report
Introduction
The Remuneration Committee is chaired by Jim Warwick and also comprises Paul Boughton. Its creation
was confirmed by the Board of Directors on 3 October 2014 in accordance with the Company’s Articles
of Association. The Committee’s fundamental purpose is to ensure sound Corporate Governance. In the
year 2016 it will meet at least twice a year to ensure this is achieved.
Remuneration Committee
The Committee functions with the objective of attracting, retaining and motivating the executive
management of the Company and ensuring they are rewarded in a fair and responsible manner for their
contribution to the success of the Group. Their key duties are:
• Agree a remuneration framework for the Chairman and Executive Directors and agree this with
the Board of Directors
• Determine the total individual remuneration package of the Chairman, Executive Directors,
Company Secretary and other Senior Executives. This may include bonuses, incentive payments,
and share options
• Recommend and monitor the level and structure of remuneration for senior management
• Oversee any major changes in employee benefits structures throughout the Group
• Assess and submit the design of all share incentive plans for approval by the Board and
shareholders. This will comprise whether any awards will be made, if so how much, the individual
awards to Executive Directors, Company Secretary & other Senior Executives, and the
performance targets to be used
• Establish a policy for authorising expenses claims from the Directors
• Review the ongoing appropriateness and relevance of the remuneration policy
The Remuneration Committee may, in the course of its duties, obtain reliable, up-to-date information
regarding remuneration in other companies of comparable scale, and appoint remuneration consultants to
advise them if this is deemed necessary.
Remuneration of Executive Directors
The Directors’ remuneration packages are comprised of a salary and the opportunity to enrol in the
Governments’ auto-enrolment pension scheme. At present the Remuneration Committee have concluded
that no bonus, other benefits, nor compensation for loss of office will be paid. See below for a breakdown
of the Directors’ remuneration packages.
Non-Executive Directors
A non-executive director is typically expected to serve two three-year terms but may be invited by the Board
to serve for an additional period. Any term renewal is subject to Board review and AGM re-election.
Paul Boughton
Jim Warwick
Chairman
Date of contract Unexpired period
at date of report
14 months
14 months
1 May 2014
1 May 2014
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
18
Directors’ detailed emoluments and compensation (audited)
Executive Directors
Andrew Walters
Andrew Kirk1
William Hibbert1
Kenneth Giles1
David Bridge2
Non-Executive
Directors
Avril Palmer-Baunack3
Paul Boughton4
Jim Warwick4
2015 (£)
Salary Pension
-
80,961
-
-
-
-
-
-
337
80,961
337
161,922
14,583
46,667
35,000
96,250
-
-
-
-
Total
80,961
-
-
-
81,298
162,259
14,583
46,667
35,000
96,250
2014 (£)
Total
78,603
53,903
52,402
31,442
78,603
294,953
41,667
26,667
23,333
91,667
1 Salary paid up to the date of resignation on 1 September 2014
2 Highest paid director in 2015
3 Salary paid from date of appointment on 1 March 2014 to resignation on 16 April 2015.
4 Salary paid from date of appointment on 1 May 2014
Directors and their interests in shares
Year ended 31 December
Executive Directors
Andrew Walters1
David Bridge
Non-Executive Directors
Paul Boughton
Jim Warwick
Ordinary shares £0.01 each
2015
17,855,986
2,663,000
20,518,986
40,000
40,000
20,598,986
2014
17,855,986
2,663,000
20,518,986
40,000
40,000
20,598,986
1 Includes shares held as family interests or by virtue of position as beneficiary or potential beneficiary of certain trusts
The Directors received no options over ordinary shares in the year ending 31 December 2015 and the year
ending 31 December 2014.
Jim Warwick
Chairman, Remuneration Committee
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
19
Directors' Report
The Directors present their annual report and the financial statements of the Company for the year ended
31 December 2015.
Principal activity
The principal activity of the Group during the year was the design, development and marketing of vehicle
tracking devices and the provision of related data services. The Group has an overseas branch in France
and an overseas subsidiary in the USA. The Parent Company is incorporated and domiciled in the UK. The
registered office is Wellington House, East Road, Cambridge, CB1 1BH.
Research and development
Please see the Strategic Report on page 9 for further information about the Group’s approach to research
and development.
Future developments
The Company’s intentions regarding investment and business development can be found under Strategic
priorities on page 9.
Proposed dividend
In the year ending 31 December 2015, the Board decided to pay an interim dividend of 2p per ordinary
share. This totalled £0.9m and was paid on 24 September 2015 to shareholders on the register as at 21
August 2015. The Board is recommending a final dividend of 4p per share amounting to approximately
£1.9m in aggregate and giving a total dividend for the year equivalent to 6p per share. If this is approved at
the forthcoming AGM on 29 March 2016, the final dividend will be paid on 4 April 2016 to shareholders
on the register as at 11 March 2016.
Substantial shareholdings
On 24 February 2016, the Company had been notified that seven parties had holdings of 3% or more in
the ordinary share capital of the Company. The number of ordinary shares and the percentage of the total
shares held by each party is outlined below.
Andrew John Walters1
Andrew Martin Kirk
BlackRock Inc
Miton Group plc
David Shaw Bridge
William Arthur Hibbert
Kenneth Vincent Giles
Number of £0.01 shares
17,855,986
5,489,925
3,727,390
3,331,345
2,663,000
2,663,000
2,586,800
% of total
37.8
11.6
7.9
7.1
5.6
5.6
5.5
1 Includes shares held as family interests or by virtue of position as beneficiary or potential beneficiary of certain trusts
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
20
Directors
The Non-Executive Directors who held office during the year are listed below:
• Paul Boughton (Chairman from 16 April 2015)
•
• Avril Palmer-Baunack (Chairman until her resignation on 16 April 2015)
Jim Warwick
The Executive Directors who held office during the year are listed below:
• Andrew Walters
• David Bridge
All Executive Directors have service agreements with the Company terminable by either party upon the
minimum notice period being met. The minimum notice period is 12 months for Andrew Walters and
David Bridge.
The Company’s Articles of Association require all Directors to stand for re-election each year at the AGM.
The next AGM will take place on 29 March 2016.
Directors' responsibilities statements
The Directors are responsible for preparing the Strategic Report, Remuneration Report, Directors’ Report
and the financial statements in accordance with applicable law and regulations.
Company Law requires the Directors to prepare financial statements for each financial year. Under that law
the Directors have elected to prepare the consolidated financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and have elected to prepare the
Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable laws including FRS 101 Reduced
Disclosure Framework). Under Company Law the Directors must not approve the financial statements
unless they give a true and fair view of the state of affairs and profit or loss of the Company and Group for
that period. In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and apply them consistently
• Make judgements and estimates that are reasonable and prudent
• State whether applicable IFRSs have been followed, subject to any material departures disclosed
and explained in the consolidated financial statements
• State whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Company financial statements
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Group will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of
the Group and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
21
Directors' responsibilities statements (continued)
The directors confirm that:
•
so far as each director is aware, there is no relevant audit information of which the company’s auditor
is unaware; and
•
the directors have taken all the steps that they ought to have taken as directors in order to make
themselves aware of any relevant audit information and to establish that the company’s auditor is
aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the company’s website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Financial risk management policies and objectives
The Group manages its key financial risks as follows. Further details are provided in note 28.
Interest rate risk
The Group is exposed to fluctuations in interest rates but this is not a significant risk, due to the low level
of debt in the Group. Historically, the risk has been managed by ensuring that the Group always has at
least two times interest rate cover.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable
needs. Cash flow is forecast and monitored as are working capital requirements.
Credit risk
The principle credit risk relates to trade receivables and is mitigated by third party credit clearance for those
customers benefitting from free installation and, for most contracts, collection by direct debit. The Group
seeks to manage credit risk associated with cash deposits by using banks with high credit ratings assigned
by international credit rating agencies.
Currency risk
This is managed by seeking to match currency inflows and outflows.
Directors' and officers' liability insurance
The Company maintains insurance cover for the Directors and key personnel against liabilities which may
be incurred by them while carrying out their duties.
Auditors
The Directors have individually pursued all steps that they ought to have taken in their roles as Directors
to ensure they are aware of any relevant audit information and that such information has been relayed to
the Company’s auditors. The Directors each confirm that there is no relevant information of which the
Company’s Auditors are unaware.
The Auditor, Grant Thornton UK LLP, will be proposed for reappointment in accordance with section
485 of the Companies Act 2006.
Approved by the Board of Directors and signed on behalf of the Board on 26 February 2016.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
22
Independent Auditor's Report to the Members of Quartix
Holdings plc - Company number 06395159
We have audited the group financial statements of Quartix Holdings plc for the year ended 31 December
2015 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of
Cash Flows and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 20, the directors are
responsible for the preparation of the group financial statements and for being satisfied that they give a
true and fair view. Our responsibility is to audit and express an opinion on the group financial statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Council's website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the group financial statements:
•
give a true and fair view of the state of the group's affairs as at 31 December 2015 and of its profit for
the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
•
•
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors' Report for the financial year
for which the group financial statements are prepared is consistent with the group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
certain disclosures of directors’ remuneration specified by law are not made; or
•
• we have not received all the information and explanations we require for our audit.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
23
Independent Auditor's Report to the Members of Quartix
Holdings plc (continued) - Company number 06395159
Other matter
We have reported separately on the parent company financial statements of Quartix Holdings plc for the
year ended 31 December 2015.
Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
26 February 2016
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
24
Consolidated Statement of Comprehensive Income
Year ended 31 December
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Exceptional items
Finance income receivable
Finance costs payable
Profit for the year before taxation
Tax expense
Profit for the year
Notes
3
4
8
9
5
2015
£’000
2014
£’000
19,675
(7,525)
15,331
(5,388)
12,150
9,943
(6,105)
(5,058)
6,045
4,885
-
13
(69)
248
14
(104)
5,989
5,043
10
(975)
(1,011)
Other Comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange difference on translating foreign operations
Tax benefit(expense)
Other comprehensive income for the year, net of tax
Total comprehensive income attributable to the equity
shareholders of Quartix Holdings plc
Earnings per ordinary share (pence)
Basic
Diluted
Adjusted earnings per ordinary share (pence)
Basic
Diluted
11
11
5,014
4,032
(49)
-
(49)
-
-
-
4,965
4,032
10.69
10.53
10.69
10.53
8.68
8.55
8.52
8.39
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
25
Consolidated Statement of Financial Position
Company registration number: 06395159
Notes
2015
£'000
2014
£'000
Assets
Non-current assets
Goodwill
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Deferred revenue
Current tax liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Equity reserve
Capital redemption reserve
Translation reserve
Retained earnings
Total equity attributable to equity shareholders of Quartix
Holdings plc
12
13
20
14
15
16
17
18
19
20
21
21
22
14,029
317
77
14,423
638
2,586
4,040
7,264
14,029
187
-
14,216
436
1,933
1,812
4,181
21,687
18,397
2,842
997
2,244
407
6,490
-
-
-
2,008
993
1,704
541
5,246
993
4
997
6,490
6,243
15,197
12,154
472
4,631
177
4,663
(49)
5,303
467
4,379
151
4,664
-
2,493
30
15,197
12,154
Approved by the Board of Directors, authorised for issue and signed on behalf of the Board on 26
February 2016.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
26
Consolidated Statement of Changes in Equity
Share
capital
£’000
Share
premium
account
£,000
Capital
redemption
reserve
Equity
reserve
£’000 £’000
Translation
reserve
£’000
Retained
earnings
Total
equity
£’000 £’000
Balance at 31
December 2013
Shares issued
Bonus shares issued
Redemption of
preference shares
Increase in equity
reserve in relation to
options issued
Adjustment for
exercised options
Warrants issued
Dividend paid
Transactions with
owners
Profit for the year
and total
comprehensive
income
Balance at 31
December 2014
Shares issued
Increase in equity
reserve in relation to
options issued
Adjustment for
exercised options
(see note 22)
Deferred tax on share
Options
Dividend paid
Transactions with
owners
Foreign currency
translation differences
Profit for the year
Total
comprehensive
income
Balance at 31
December 2015
46
6
420
(5)
-
-
-
-
4,296
83
-
5,079
-
(420)
-
-
-
-
-
5
-
-
-
-
6
-
-
-
83
(12)
74
-
421
83
(415)
145
-
467
5
-
4,379
252
-
4,664
-
-
151
-
-
-
-
-
5
-
-
-
-
-
-
-
252
-
-
-
-
71
(1)
(144)
-
-
(1)
-
-
-
99
-
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,233
-
-
10,660
89
-
(5)
(5)
-
83
12
-
-
74
(2,779) (2,779)
(2,772) (2,538)
4,032
4,032
2,493
-
12,154
257
-
71
144
(1)
-
99
(2,348) (2,348)
(2,204) (1,922)
(49)
-
-
5,014
(49)
5,014
(49)
5,014
4,965
472
4,631
4,663
177
(49)
5,303 15,197
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
Consolidated Statement of Cash Flows
Cash generated from operations
Taxes paid
Cash flow from operating activities
Investing activities
Additions to property, plant and equipment
Interest received
Cash flow from investing activities
Cash flow from operating activities
after investing activities (free cash flow)
Financing activities
Repayment of long term borrowings
Interest paid
Redemption of preference shares
Proceeds from share issues
Dividend paid
Cash flow from financing activities
Net changes in cash and cash equivalents
Cash and cash equivalents, beginning of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents, end of year
27
2014
£'000
5,845
(930)
4,915
(82)
14
(68)
2015
£'000
6,781
(1,092)
5,689
(262)
13
(249)
5,440
4,847
(1,000)
(75)
-
257
(2,348)
(3,166)
2,274
1,812
(46)
4,040
(1,000)
(119)
(5)
89
(2,779)
(3,814)
1,033
779
-
1,812
Notes
23
13
8
21
16
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
28
Notes to the Consolidated Financial Statements
1
Summary of significant accounting policies
Basis of accounting
These financial statements are consolidated financial statements for the Group consisting of Quartix
Holdings plc, a company registered in the UK, and all its subsidiaries. These consolidated financial
statements are for the year ended 31 December 2015 and are prepared in Sterling and are rounded to the
nearest thousand pounds (£’000). They have been prepared in accordance with IFRS as adopted by the
European Union (EU) (‘IFRS’) and in accordance with those parts of the Companies Act 2006 that are
relevant to companies which report under IFRS.
These financial statements have been prepared under the historical cost convention.
The standards and interpretations in issue but not effective for accounting periods commencing on 1
January 2015 that may impact on Quartix Holdings plc going forward are listed below. Quartix Holdings
plc has not adopted these early.
Outlook for adoptions of future standards (new and amended)
At the date of authorisation of the consolidated financial information, the following standards and
interpretations which have not yet been applied in the consolidated financial information were in issue but
not yet effective (and in some cases had not yet been adopted by the EU):
Number
IFRS 9
IFRS 15
IFRS 16
Title
Financial instruments
Revenue from contracts with customers
Leases
Effective
1 January 2018
1 January 2018
1 January 2019
Number
Title
Annual Improvements
Annual Improvements
(2010-2012 Cycle)
(2012-2014 Cycle)
Effective
1 February 2015
1 January 2016
The Directors do not expect that the adoption of the standards listed above will have a material impact on
the consolidated financial information of the Group in future periods, with the exception of IFRS 16 which
will require the operating leases held by the Group to be reflected within the Statement of Financial
Position.
Basis of consolidation
The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. Control is achieved where the Company has
the power to govern the financial and operating policies of an investee entity so as to obtain benefits from
its activities. The results of subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the effective date of acquisition or up to the effective date of disposal,
as appropriate. Intra-group balances and any unrealised gains and losses or income and expenses arising
from intra-group transactions are eliminated in preparing the consolidated financial statements. A list of
subsidiaries is included note 31.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
29
1
Summary of significant accounting policies (continued)
Going concern
The Group’s forecasts and projections, taking account of reasonably possible changes in trading
performance, show that the Group is able to generate sufficient liquidity.
The Group enjoys a strong income stream from its fleet subscription base while current liabilities include
a substantial provision for deferred revenue which is a non cash item.
After assessing the forecasts and liquidity of the business for the next two calendar years and the longer
term strategic plans, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. The Group therefore continues to adopt the
going concern basis in preparing consolidated financial statements.
Segmental reporting
The Group has concluded that it operates only one segment as defined by IFRS 8. The information used
by the Group’s chief operating decision makers, who are considered to be the Operations Board, to make
decisions about the allocation of resources and assessing performance is presented in a format consistent
with that repeated in the financial statements. Assets are not directly attributable to any separate activity.
Revenue
Revenue is the amount receivable for goods and services, excluding VAT. It is measured at the fair value
of consideration received or receivable, excluding sales taxes, rebates, and trade discounts. Revenue
comprises the provision of telematics-based fleet and vehicle management solutions
•
•
the provision and installation of hardware, and
the maintenance of software and provision of communications
Amounts received in advance of the provision of services are included within deferred income.
Revenue from hardware sales, including insurance telematics contracts, is recognised upon transfer of
economic benefit which is normally upon installation of the unit or despatch of the unit if the customer
does their own installation. Revenue from installation is recognised upon installation.
Revenue from other services, including the provision of communications, are recognised over the period
in which services are provided.
Revenue from a fixed term contract is spread on a straight line basis over the life of the contract. The
associated cost including installation of hardware is recognised as incurred and not spread over the life of
the contract: likewise distributors’ commissions are accounted for when incurred and not spread over the
life of the contract.
Intangible assets
Goodwill arising on consolidation represents the excess of the consideration transferred and the amount
of any non-controlling interest in the acquiree over the fair value of the identifiable assets and liabilities
(including intangible assets) of the acquired entity at the date of the acquisition. Goodwill is recognised as
an asset and assessed for impairment annually or as triggering events occur. Any impairment is recognised
immediately in profit or loss.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
30
1
Summary of significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment.
Depreciation
Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the
straight-line method, on the following bases:
• Tools and equipment
• Office equipment
• Leasehold improvements The life of the lease
25% straight line
25% straight line
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred. In the
event that an internally generated intangible asset arises from the Group’s development activities then it
will be recognised only if all of the following conditions are met:
• Technical feasibility of completing the intangible asset
• The ability to use the asset.
• An asset is created that can be identified (such as software and new processes)
•
It is probable that the asset created will generate future economic benefits
• The development cost of the asset can be measured reliably
Where no internally-generated intangible asset can be recognised, development expenditure is recognised
as an expense in the period in which it is incurred.
Impairment testing of intangible assets and property, plant and equipment
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine
the value-in-use, management estimates expected future cash flows and determines a suitable interest rate
in order to calculate the present value of those cash flows. The data used for impairment testing procedures
are directly linked to the Group’s latest approved budget. Discount factors are determined individually for
each cash-generating unit and reflect management’s assessment of respective risk profiles, such as market
and asset-specific risks factors. The cash-generating units are the separate legal entities within the group as
there is no segmentation in the subsidiaries.
Property, plant and equipment are tested for impairment if events or changes in circumstances (assessed at
each reporting date) indicate that the carrying amount may not be recoverable.
If a cash-generating unit is impaired, provision is made to reduce the carrying amount of the related assets
to their estimated recoverable amount. Impairment losses are allocated firstly against goodwill, and secondly
on a pro rata basis against intangible and other assets.
Operating lease agreements
Payments made under operating leases are charged to profit or loss on a straight line basis over the lease
term. Lease incentives are spread over the term of the lease.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
31
1
Summary of significant accounting policies (continued)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on
a first in first out basis. Net realisable value is based on estimated selling price less additional cost to
completion or disposal. Provision is made for obsolete, slow moving or defective items where appropriate
and recognised as an expense in the period in which the write-down or loss occurs.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have
been enacted or substantively enacted at the Statement of Financial Position date.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is
generally provided on the difference between the carrying amounts of assets and liabilities and their tax
bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a business combination or affects tax or
accounting profit. Tax losses available to be carried forward as well as other income tax credits to the Group
are assessed for recognition as deferred tax assets and are recognised to the extent that it is regarded as
more likely than not that they will be recovered from future trading profits.
Deferred tax liabilities are provided in full, with no discounting. Current and deferred tax assets and
liabilities are calculated at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the Statement of Financial Position date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss,
other comprehensive income or equity as appropriate.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term,
highly liquid investments that are readily convertible into known amounts of cash, maturities of three
months or less from inception, and which are subject to an insignificant risk of changes in value.
Financial assets
Trade and other receivables are classified as loans and receivables, and are initially recognised at fair value.
Subsequently, loans and receivables are measured at amortised cost using the effective interest method, less
provision for impairment. Any change in their value through impairment or reversal of impairment is
recognised in profit and loss.
Provision against trade receivables is made when there is objective evidence that the Group will not be able
to collect all amounts due to it in accordance with the original terms of those receivables. The amount of
the write-down is determined as the difference between the asset's carrying amount and the present value
of estimated future cash flows, discounted using the original effective interest rate.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group
becomes a party to the contractual provisions of the instrument.
Financial liabilities are recorded initially at fair value and subsequently at amortised cost using the effective
interest method, with interest-related charges recognised as an expense in finance cost in the profit and
loss.
A financial liability is derecognised when the obligation is extinguished.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
32
1
Summary of significant accounting policies (continued)
Equity
Equity comprises the following:
•
•
•
•
•
•
"Called Up Share capital" represents the nominal value of equity shares
"Share premium account" represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue
“Capital redemption reserve” represents the amount by which the Company's issued share capital
is diminished when shares are redeemed or purchased wholly out of the Company's profits
“Equity reserve” is used to reflect the expenses associated with granting share options to employees
and the issue of warrants
“Translation reserve” represents the exchange difference arising on the consolidation of foreign
operations.
"Retained earnings" represents retained profits
Foreign currencies
The Parent Company's functional currency is Sterling. Whilst, the French branch invoices in Euros, it also
has a functional currency of Sterling, since its results are included in Quartix Ltd’s sterling accounts. Quartix
Inc has a functional currency of US Dollars.
The consolidated financial statements are presented in sterling, which is the Group’s presentation currency.
Transactions in foreign currencies are translated into the respective currencies of Group companies at the
exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are
translated at the rates of exchange ruling at the Statement of Financial Position date. Foreign exchange
differences arising on translation of monetary assets and liabilities are recognised in the Consolidated
Statement of Comprehensive Income. Non-monetary assets and liabilities that are measured at historical
costs in a foreign currency are translated using the exchange rates at the dates for the transactions.
Income and expenses for all the Group entities that have a functional currency other than sterling are
translated at the average rate prevailing in the month of the transaction. The assets and liabilities are
retranslated at the closing exchange rate at the reporting date.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities
are recognised in the translation reserve, as a separate component of equity.
Exceptional items
Exceptional items are material items of income and expense which by virtue of their size and nature are
separately disclosed to assist in the better understanding of the Group’s performance.
Employee benefits
The only pension provision and Employee benefit is participation in the UK Government’s NEST pension
scheme, which is a defined contribution scheme. Contributions to defined contribution pension schemes
are recognised as an employee benefit expense within personnel expenses in the income statement, as
incurred.
Dividends
Dividends attributable to the equity holders of the Company approved for payment during the year are
recognised directly in equity.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
33
1
Summary of significant accounting policies (continued)
Employee benefits: share based payments
The Group operates a number of employee share schemes under which it makes equity-settled share-based
payments to certain employees.
Where employees are rewarded using share-based payments, the fair values of employees' services are
determined indirectly by reference to the fair value of the instrument granted to the employee. This fair
value is assessed at the grant date, using the Black-Scholes method, and excludes the impact of non-market
vesting conditions.
The expense is allocated over the vesting period, based on the best available estimate of the number of
share options expected to vest. Estimates are subsequently revised if there is any indication that the number
of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to
vesting is recognised in the current period. No adjustment is made to any expense recognised in prior
periods if share options ultimately exercised are different to that estimated on vesting.
Warrants
The Group issued warrants to its Nomad (finnCap) as part of the IPO placing agreement. Each warrant
comprised the right to subscribe for one ordinary share at the placing price.
IFRS 2 ‘Share-based Payments’ is applied to the issue of warrants. The fair values of services received in
exchange for the warrants was determined indirectly by reference to the fair value of the instrument granted.
This fair value was assessed at the grant date, using the Black-Scholes method, and excluded the impact of
non-market vesting conditions.
The expense was recognised when granted, as there were no vesting conditions. No adjustment was made
to the expense recognised in subsequent periods up to the date exercised in December 2015.
2
Key judgements and estimates
The Group make estimates and assumptions regarding the future. Actual results may differ from these
estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amount of assets and liabilities within the next financial year are addressed below.
Key judgement: capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependant on
management’s judgment of the probability and measurability of future economic benefits. No development
expenditure was capitalised in the year ended 31 December 2015. The research and development
expenditure primarily related to the on-going research work on the Group’s existing fleet tracking unit to
ensure that the functionality of the unit is maintained. The research work undertaken may successfully come
to fruition in the development of a marketable product or technology but this development work cannot
be identified or separated from the research work and therefore the entire expenditure has been expensed
in the year.
Key estimate: impairment testing of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation
of the value in use of the cash-generating units to which the goodwill is allocated (Quartix Limited).
Estimating the value in use requires the Group to make an estimate of the expected future cash flows from
the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value
of those cash flows. Further details are given in note 12.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
34
3
Segmental analysis
The Group has concluded that it operates only one operating segment as defined by IFRS 8, being the
design, development and marketing of vehicle tracking devices and the provision of related data services.
The information used by the Group’s chief operating decision makers to make decisions about the
allocation of resources and assessing performance is presented on a consolidated Group basis. All revenues,
costs, assets and liabilities relate to the single activity; and accordingly no segmental analysis is presented.
An analysis of turnover by type of customer and geography is stated below:
By customer base
Fleet
Insurance
Geographical analysis by destination
United Kingdom
France
Republic of Ireland
United States of America
2015
£’000
12,957
6,718
19,675
2015
£’000
18,390
1,025
4
256
19,675
2014
£’000
11,038
4,293
15,331
2014
£’000
14,534
771
3
23
15,331
During 2015 revenues of £6.7m (2014: £4.3m) derived from one insurance customer.
There are no material non-current assets based outside the UK.
4
Exceptional items
Compensation for mis-sold hedging contracts
Professional fees relating to the IPO
Exceptional items before taxation
Taxation on the above
Exceptional items after taxation
Exceptional items before tax as above
Add back warrants issued
Net exceptional operating cash flow
2015
£’000
-
-
-
-
-
-
-
-
2014
£’000
(763)
515
(248)
172
(76)
(248)
(74)
(322)
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
5
Profit for the year before taxation
The profit for the year for the Group is stated after charging:
Research and development expenses
Rentals under operating leases:
Other operating leases
Land and buildings
Depreciation on Property, plant and equipment, owned
Share-based payment expense
Warrants issued
Foreign exchange (gains)/losses
Audit services:
Fees paid to Company auditor for the audit of the Company and
consolidated financial statements
Other services
The audit of the Company’s subsidiary pursuant to legislation
Other services
Transaction services
Earnings before interest, tax, depreciation and amortisation (EBITDA):
Operating profit
Depreciation
EBITDA
6
Employee remuneration
Expenses recognised for employee benefits is analysed below for the Group.
Staff costs, including Directors, during the year were as follows:
35
2014
£’000
993
6
46
83
83
74
25
14
16
9
69
2015
£’000
1,097
12
53
132
71
-
(18)
14
16
3
-
2015
£’000
6,045
132
6,177
2014
£’000
4,885
83
4,968
Wages and salaries
Social security costs
Contributions to defined contribution pension plan
Share-based payment
2015
£’000
3,123
302
8
71
3,504
There were no pension costs for the Group until 2015.
The average number of employees, including all Directors, during the year was as follows:
Administration
Operations
Sales
Customer service
Research and development
2015
13
21
35
11
21
101
2014
£’000
2,599
255
-
83
2,937
2014
10
21
27
9
19
86
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
36
7
Key management remuneration and directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing,
and controlling the activities of the entity, directly or indirectly, including any Directors (whether Executive
or otherwise) of the entity. The Group identified thirteen such individuals: two Executive Directors, three
Non-Executive Directors, and eight members of Senior Management.
Wages and salaries
Social security costs
Contributions to defined contribution pension plan
Share-based payment
Other benefits
Total employee benefits
2015
£’000
730
88
1
29
-
848
2014
£’000
686
80
-
30
2
798
Key management had 670,900 share options outstanding at 31 December 2015 (2014: 573,000). Key
management held 32,342,711 shares at 31 December 2015 (2014: 33, 342,711) on which dividends were
paid in the year.
Details of Directors’ remuneration and the highest paid director is disclosed on page 18.
The Group introduced the NEST pension arrangements in 2015 for all employees. Two directors joined
the scheme. No Director was a member of any other pension scheme or other post-employment benefit
to which the Group contributed in either the current or the prior years. There were no termination
payments and no bonuses for Directors. At 31 December 2015 the directors held no share options (2014:
nil) and no share options were exercised in the year.
8
Finance income receivable
Bank interest
Loan settlement discount
9
Finance costs payable
Interest on bank loans and overdrafts
2015
£’000
13
-
13
2014
£’000
11
3
14
2015
£’000
69
2014
£’000
104
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
10
Tax expense
Analysis of tax charge in the year
Current tax
UK corporation tax charge on profit for the year
Adjustments in respect of prior periods
Total corporation tax
Deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Total deferred tax
Tax on profit of ordinary activities
37
2014
£’000
1,033
(2)
1,031
(20)
-
(20)
1,011
2015
£’000
957
-
957
23
(5)
18
975
The relationship between the expected tax expense based on the effective tax rate of the Group at 20.25%
(2014: 21.50%) being the UK rate of corporation tax for the year and the tax expense actually recognised
in profit or loss can be reconciled as follows:
Result for the year before taxation
Tax rate (%)
Expected tax expense
Adjustments to tax charge in respect of prior periods
Expenses not deductible for tax purposes
Losses in the USA not provided
Research and development tax credit
Remeasurement of deferred tax
Tax adjustment on exercise of options
Tax on profit on ordinary activities
2015
£’000
5,989
2014
£’000
5,043
20.25
21.50
1,213
(5)
3
116
(262)
(4)
(86)
975
1,084
(2)
104
102
(237)
2
(42)
1,011
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
38
11
Earnings per share
The calculation of the basic earnings per share is based on the profits attributable to the shareholders of
Quartix Holdings plc divided by the weighted average number of shares in issue during the year. The
calculation of the adjusted earnings per share is the same as that for the basic earnings per share, except for
the subtraction of exceptional items from the profits attributable to the shareholders (see note 4). All
earnings per share calculations relate to continuing operations of the Group.
Profits
attributable
to
shareholders
£’000
Weighted
average
number
of shares
Basic
profit per
share
amount
in pence
Fully
diluted
weighted
average
number of
shares
Diluted
profit
per share
amount
in pence
5,014 46,912,132
4,032 46,459,018
10.69
8.68
47,595,383
47,171,899
10.53
8.55
5,014 46,912,132
3,956 46,459,018
10.69
8.52
47,595,383
47,171,899
10.53
8.39
Earnings per ordinary share
Year ended 31 December 2015
Year ended 31 December 2014
Adjusted earnings per ordinary
share
Year ended 31 December 2015
Year ended 31 December 2014
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 and warrants where the exercise price is less than the average market price of the Company’s
ordinary shares during that year.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
39
12
Goodwill and other intangible assets
Goodwill
Cost and net book value
At 1 January and 31 December 2014 and 2015
Goodwill on consolidation
£’000
14,029
Goodwill arose on the consolidation of the Group following the acquisition of Quartix Limited in 2008.
Goodwill is recognised as an asset and assessed for impairment annually or where there is indication of
impairment. Any impairment is recognised immediately in profit or loss (see note 2).
The Group considers its subsidiary Quartix Limited to be the sole cash-generating unit (CGU) for the
assessment of goodwill and as such, it is reviewed annually for impairment. The Group has determined its
recoverable amount based on value in use calculations. The value in use was derived from discounted
management cash flow forecasts for the business, using the budgets and strategic plans based on past
performance and expectations for the market development of the CGU, incorporating an appropriate
business risk. The key assumptions for the value in use calculations are those regarding the discount rates,
growth rates and expected changes to selling prices and direct costs during the period based on industry
sector forecasts.
These budgets and strategic plans cover a four year period. The growth rate in years one and two were
based on detailed management expectations. The growth rate used for the third and fourth year is 2% which
is in line with the long-term GDP forecasts. The discount rate used is 6.5% based on the Group’s weighted
average cost of capital. Sensitivity analysis is carried out on all budgets, strategic plans and discount rates
used in the calculations.
Management’s key assumptions are based on past experience and the current trading performance of
Quartix Limited. These value in use calculations have not identified any requirement for impairment of the
Goodwill stated above. Management is not aware of any probable changes that would necessitate changes
in key estimates that indicate any impairment sensitivity.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
40
13
Property, plant and equipment
Leasehold
improvements
£’000
Tools and
equipment
£’000
Office
equipment
£’000
Total
£’000
Cost:
At 1 January 2014
Additions
At 31 December 2014
Additions
At 31 December 2015
Depreciation:
At 1 January 2014
Provided in the year
At 31 December 2014
Provided in the year
At 31 December 2015
Net book amount:
At 31 December 2015
At 31 December 2014
At 1 January 2014
14
Inventories
Raw materials
Work in progress
Finished goods and goods for resale
-
12
12
5
17
-
-
-
3
3
14
12
-
12
-
12
-
12
12
-
12
-
12
-
-
-
331
70
401
257
658
143
83
226
129
355
303
175
188
343
82
425
262
687
155
83
238
132
370
317
187
188
2015
£’000
335
161
142
638
2014
£’000
163
142
131
436
Included in the analysis above are impairment provisions against inventory amounting to £80,000 (2014:
£80,000). The cost of inventories recognised as an expense and included in “cost of sales” amounted to
£2.4m (2014: £1.6m).
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
41
15
Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2015
£’000
2,313
126
147
2,586
2014
£,000
1,793
6
134
1,933
All the amounts are short term. The carrying value of trade receivables is considered a reasonable
approximation of fair value. All of the receivables have been reviewed for indicators of impairment. Certain
trade receivables were found to be impaired, due to the age of the debt, and a provision for doubtful debts
has been recorded as follows.
Provision at 1 January
Additional provision/(release of provision)
Provision at 31 December
2015
£’000
15
33
48
2014
£’000
15
-
15
In addition, some of the unimpaired trade receivables are past due as at the reporting date. The age of
financial assets past due but not impaired is as follows:
Not more than 1 month
More than one month but not more than 3 months
More than 3 months but not more than 6 months
16
Cash and cash equivalents
Cash and cash equivalents include the following components:
Cash at bank and in hand
2015
£’000
156
64
-
220
2014
£’000
118
21
-
139
2015
£'000
4,040
2014
£’000
1,812
Quartix Limited uses Barclay’s Money Transmission Plus to aggregate sterling instant access balances and
earn interest, which is currently 0.5% on balances up to £3.0m.
17
Trade and other payables
Amounts falling due within one year:
Trade payables
Social security and other taxes
Other payables
Accruals
2015
£'000
1,632
783
152
275
2,842
2014
£’000
1,093
600
101
214
2,008
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
42
18
Borrowings: amounts falling due within one year
Bank loan
19
Borrowings: amounts falling due after more than one year
Bank loan
2015
£’000
997
2014
£’000
993
2015
£’000
-
2014
£’000
993
The Group bank loan at December 2015 consisted of a £1.0m standard term loan with an effective interest
rate of 3.88% over LIBOR secured by way of a debenture. For this repayments of £0.25m a quarter start
in February 2016. At December 2014, the Group had further borrowings of a £1.0m standard term loan
borrowed at an effective interest rate of 3.56% over LIBOR and repayable at a rate of £0.25m a quarter
until November 2015.
20
Deferred tax
Deferred tax liabilities recognised by the Group at 31 December 2015 and 31 December 2014 are as follows:
Provision for deferred tax
Accelerated Capital Allowances
Short term temporary differences
Equity settled share options
Charge to profit and loss
Accelerated Capital Allowances
Short term temporary differences
Equity settled share options
2015
£’000
47
(7)
(117)
(77)
21
(3)
-
18
2014
£’000
25
(3)
(18)
4
-
(2)
(18)
(20)
There are unprovided tax losses related to the USA business of $459,000 (2014: $262,000). In 2014 there
was additional unprovided tax regarding equity settled share options of £206,000.
21
Equity
Allotted, called up and fully paid
At 1 January 2015
Shares issued
At 31 December 2015
Number of
ordinary
shares of
£0.01 each
46,692,000
483,704
47,175,704
Share
capital
£’000
Share
premium
£’000
467
5
472
4,379
252
4,631
All the shares issued in the year to 31 December 2015 related to the exercise of share options.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
43
22
Share-based payment
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 vesting on issue
and starting to vest after 14 months. Options are forfeited if the employee leaves the Company before the
options vest.
In consideration for the performance by finnCap of its obligations under the IPO placing agreement the
Company issued 153,904 warrants to finnCap, on 6 November 2014 each warrant comprising the right to
subscribe for one ordinary share at the Placing Price (£1.16). The warrants were exercisable at any point up
to the date that was 36 months after the date of Admission (6 November 2014) save that they were not
exercisable before the date that was 12 months after the date of Admission except pursuant to certain
acceleration rights. The warrants were exercised in December 2015.
Movements in the number of share options and warrants outstanding and their related weighted average
exercise prices are as follows:
2015
2014
Weighted
average
exercise price
per share
in pence
47.1
192.9
0.7
53.1
76.5
Weighted
average
exercise price
per share
in pence
26.6
75.6
0.1
8.2
47.1
Options
number
1,076,954
170,400
(5,750)
(483,704)
757,900
Options
number
1,089,800
323,654
(12,000)
(324,500)
1,076,954
Outstanding at 1 January
Granted
Lapsed
Exercised
Outstanding at 31 December
Exercisable at 31 December
43.5
131,500
44.0
75,500
The weighted average fair value of options and warrants issued during the year ended 31 December 2015
was 87.73p (2014: 41.26p).
The weighted average share price at the date of exercise of options and warrants issued during the year
ended 31 December 2015 was 197.6p (2014: 47.8p).
On 30 September 2014, the Company reorganised its share capital. For options already granted at that date,
each option holder is required to pay at least the new nominal value, of 1p per share. In order for each
option holders’ total exercise value to remain unchanged, the Board sought authority from its shareholders
to capitalise reserves. That authority was granted in a shareholder resolution passed to effect the
reorganisation on 30 September 2014.
Included in the share options exercised during the year, were 70,500 of options issued in December 2013,
with an exercise price of £0.001 per share. These options are covered by the authority outlined above and
the difference between the original exercise price and the nominal value of £634 has been charged to the
capital redemption reserve to reflect the capitalisation.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
44
22
Share based payments (continued)
At 31 December 2015 Quartix Holdings plc had the following outstanding options, warrants and exercise
prices:
Expiry dates
Period when exercisable
Starting from November 2014 1 November 2019
19 December 2018
March 2015
3 January 2020
Starting from March 2015
16 December 2019
March 2016
29 July 2021
Starting from July 2018
16 December 2020
March 2017
Expiry dates
Period when exercisable
25 June 2016
Starting from June 2011
6 November 2017
From November 2014
Starting from November 2014 1 November 2019
19 December 2018
March 2015
3 January 2020
Starting from March 2015
16 December 2019
March 2016
2015
Options
number
520,000
1,500
50,000
16,000
150,000
20,400
757,900
2014
Options
number
83,800
153,904
595,500
74,000
150,000
19,750
1,076,954
Weighted
average
remaining
contractual
life
in months
47
36
49
36
67
48
51
Weighted
average
remaining
contractual
life
in months
18
35
59
48
61
48
52
Average
exercise price
per share
in pence
44.0
0.1
44.0
0.1
219.0
1.0
76.5
Average
exercise price
per share
in pence
1.0
116.0
44.0
0.1
44.0
0.1
47.1
The fair value of share based payments have been calculated using the Black-Scholes option pricing model.
Expected volatility was determined based on the historic volatility of comparable companies. The expected
life is the expected period from grant to exercise based on management’s best estimate. The risk free return
is the rate offered for building society deposits at the time of the grant.
The following assumptions were used in the model for options and warrants granted during the year
ended 31 December 2015:
Number granted
Grant date
Share price at grant date
(pence)
Exercise price (pence)
Fair value per option (pence)
Expected life in years
Expected volatility (%)
Risk-free interest rate (%)
Dividend yield (%)
2015
150,000
29 Jul
20,400
16 Dec
19,750
16 Dec
219.0
219.0
72.0
3
55.5
0.5
2.3
241.0
1.0
203.4
3
52.2
0.5
2.3
142.5
1.0
142.0
3
38.0
0.5
3.0
2014
153,904
6 Nov
116.0
116.0
47.1
3
62.0
0.5
-
150,000
1 Jan
44.0
44.0
22.0
5
62.0
0.5
-
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
23
Notes to the cash flow statement
Cash flow adjustments and changes in working capital
Profit before tax
Depreciation
Interest income
Interest expense
Warrants issued
Share based payment expense
Operating cash flow before movement in working capital
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in trade and other payables
Cash generated from operations
Notes
13
8
9
5
5
2015
£’000
5,989
132
(13)
69
-
71
6,248
(650)
(201)
1,384
6,781
45
2014
£’000
5,043
83
(14)
104
74
83
5,373
(144)
(216)
832
5,845
24
Leases
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as
follows:
No later than one year
Later than one year and no later than four years
Later than five years
Land & buildings
2014
£’000
50
30
-
80
2015
£’000
58
4
-
62
Other
2015
£’000
10
3
-
13
2014
£’000
12
13
-
25
Lease payments recognised as an expense during the year amount to £65,000 (2014: £52,000).
25
26
27
Related party transactions and controlling related party
The Group’s related parties comprise its Board of Directors and its key management (see note 7). There
were no related party transactions with Directors to disclose other than dividends received based on
shareholdings disclosed in the Directors’ Remuneration Report on page 18 and note 7.
The Directors consider the Board and shareholding structure to mean there is no directly identifiable
controlling party.
Purchase commitments
Quartix Limited has signed agreements with suppliers which commits the Group to purchase inventory to
the value of £186,000 (2014: £154,000). There were no other contingent liabilities as at 31 December 2015
or 31 December 2014.
Capital commitments
The Group had no capital commitments at 31 December 2015 (2014: £39,000). The 2014 commitment was
for the installation of telephonic equipment during 2015.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
46
28
Risk management objectives and policies
Financial instruments
The Group uses various financial instruments; these include cash deposits and bank loans and various items
such as trade receivables and trade payables that arise directly from its operations. The main purpose of
these financial instruments is to raise finance for the Group's operations and manage working capital.
The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk, credit risk
and currency risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below.
Interest rate risk
The Group's exposure to market risk for the changes in interest rates, which is not significant, relates
primarily to the Group's bank loans. The exposure to interest rate fluctuations on its loans has been
managed by past loan repayments which mean that these loans are now low relative to the Group's cash
flow. As at the 31 December 2015 each 1% increase in interest rates would add £10,000 to interest charges
on an annual basis (2014: £20,000).
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable
needs. The Group maintains cash to meet its liquidity most of which earn interest via Barclay’s Money
Transmission Plus. Liquidity needs are monitored on a weekly and monthly basis. The Group has no un-
drawn committed overdraft facilities. Trade and other payables of £2.9m at 31 December 2015 will be
settled through cash generated by the Group in its normal course of business, both through the collection
of receivables and from cash generated from post year-end sales.
As at 31 December the Group's financial liabilities have contractual maturities as summarised below:
Trade and other payables
Within six months
Bank loans
Within six months
Six to twelve months
One to five years
2015
£’000
2014
£’000
1,906
1,306
521
509
-
1,030
543
531
1,028
2,102
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
47
28
Risk management objectives and policies (continued)
Credit risk
The Group's exposure to credit risk is limited to the carrying amount of financial assets recognised at
the Statement of Financial Position date, as summarised below:
Loans and receivables
Cash and cash equivalents
Trade and other receivables
2015
£’000
4,040
2,439
6,479
2014
£’000
1,812
1,799
3,611
The Group’s management considers that all the above financial assets that are not impaired for each of the
Statement of Financial Position dates under review are of good credit quality, including those that are past
due. See note 15 for additional information on trade receivables that are past due.
The Group's principal financial assets are cash deposits and trade receivables. Risks associated with cash
deposits are limited as the banks used have high credit ratings assigned by international credit rating
agencies.
The principal credit risk relates to trade receivables and is mitigated by third party credit clearance for those
customers benefitting from free installation and, for most contracts, collection by direct debit. The Group
has one large customer whose debts have been as much as £0.9m and the credit risk on this balance is
carefully monitored.
Currency risk
The Group is exposed to transaction foreign exchange risk. The risk with the Euro has been mitigated by
trading in France which generates marginally more Euros than the Group currently need. The Group has
adopted a similar solution to the US Dollar by trading in the USA. Currently it purchases about $3.0m a
year, to purchase components for the fleet tracking unit as well as the investment in Quartix Inc (2014:
$2.0m).
Transaction exposures, including those associated with forecast transactions, are managed through the use
of bank accounts held in foreign currencies.
The Group’s financial instruments dominated in currencies were:
Cash and cash equivalents
Trade receivables
Trade payables
2015
2014
£’000
US$
418
32
(483)
(33)
£’000
€
109
140
(126)
123
£’000
US$
184
3
(302)
(115)
£’000
€
28
109
(77)
60
It is estimated that a 5% strengthening of Pound Sterling to the US dollar would have increased net profit
by £100,000 and vice versa (2014: £50,000). (This is assuming that Dollar denominated prices do not adjust
for currency movements.)
It is estimated that a 5% strengthening of Pound Sterling to the Euro would have reduced net profit by
£23,000 and vice versa (2014: £38,000).
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
48
29
Summary of financial assets and liabilities by category
The carrying amounts of the assets and liabilities as recognised at the Statement of Financial Position date
of the years under review may also be categorised as follows:
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at amortised cost
Trade and other payables
Bank borrowings
2015
£’000
2,439
4,040
6,479
1,906
997
2,903
2014
£’000
1,799
1,812
3,611
1,306
1,986
3,292
30
Capital management policies and procedures
The Group's capital management objectives are to ensure the Group's ability to continue as a going concern
and to provide an adequate return to shareholders, by balancing its trading performance with continuing
investment in research and development.
The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as
presented on the face of the Statement of Financial Position.
The Group makes adjustments to its capital in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell
assets. Capital for the reporting years under review is summarised as follows:
Capital
Total equity
Less cash and cash equivalents
Overall financing
Total equity
Plus borrowings
2015
£’000
15,197
(4,040)
11,157
15,197
997
16,194
2014
£’000
12,154
(1,812)
10,342
12,154
1,986
14,140
Capital-to-overall financing ratio (%)
69
73
31
Subsidiaries
As at the 31 December 2015 the subsidiaries of the Group were:
Subsidiary
Quartix Limited
Quartix Inc
Country of
registration
England & Wales Ordinary shares
Common shares
USA
Class of share
capital held
Proportion held
by the Company
100%
100%
Nature of
business
Vehicle Tracking
Vehicle Tracking
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
49
Independent Auditor's Report to the Members of Quartix
Holdings plc
We have audited the financial statements of Quartix Holdings plc for the year ended 31 December 2015
which comprise the Parent Company Statement of Financial Position, Statement of Changes in Equity and
the related notes. The financial reporting framework that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice) including FRS 101 ‘Reduce Disclosure Framework’.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 20, the directors are
responsible for the preparation of the parent company financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and express an opinion on the parent company
financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for
Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Council's website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the parent company financial statements:
•
•
give a true and fair view of the state of the company's affairs as at 31 December 2015;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
•
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors' Report for the financial year
for which the financial statements are prepared is consistent with the parent company financial statements.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
50
Independent Auditor's Report to the Members of Quartix
Holdings plc (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
•
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the group financial statements of Quartix Holdings plc for the year ended
31 December 2015.
Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
26 February 2016
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
51
Parent Company Statement of Financial Position
Company registration number 06395159
Fixed Assets
Investments
Current assets
Debtors
Current tax asset
Cash at bank and in hand
Total current assets
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Net assets
Capital and Reserves
Called up share capital
Share premium account
Equity reserve
Capital redemption reserve
Retained earnings
Total equity attributable to equity shareholders of Quartix
Holdings plc
Notes
2015
£’000
2014
£'000
3
4
5
6
7
18,622
18,551
529
55
213
797
245
-
44
289
(1,422)
(4,684)
(625)
(4,395)
17,997
14,156
-
(993)
17,997
13,163
472
4,631
78
4,663
8,153
467
4,379
151
4,664
3,502
17,997
13,163
Approved by the Board of Directors, authorised for issue and signed on behalf of the Board on 26 February
2016.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
52
Parent Company Statement of Changes in Equity
Balance at 31 December 2013
Shares issued
Bonus shares issued
Redemption of preference shares
Increase in equity reserve in
relation to options issued
Adjustment for exercised options
Warrants issued
Dividend paid
Transactions with owners
Profit for the year and total
comprehensive income
Balance at 31 December 2014
Shares issued
Increase in equity reserve in
relation to options issued
Adjustment for exercised options
(see note 22 of Group accounts)
Dividend paid
Transactions with owners
Profit for the year and total
comprehensive income
Balance at 31 December 2015
Share
capital
£’000
46
6
420
(5)
Share
premium
account
£,000
4,296
83
-
-
Capital
redemption
reserve
Equity
reserve
£’000 £’000
6
5,079
-
-
-
(420)
-
5
Retained
earnings
Total
equity
£’000 £’000
9,747
89
-
(5)
320
-
-
(5)
-
-
-
-
421
-
467
5
-
-
-
5
-
-
-
-
83
-
4,379
252
-
-
-
252
-
-
-
-
(415)
-
4,664
-
-
(1)
-
(1)
83
(12)
74
-
145
-
151
-
71
-
12
-
83
-
74
(2,779) (2,779)
(2,772) (2,538)
5,954
3,502
-
5,954
13,163
257
-
71
(144)
-
(73)
144
(1)
(2,348) (2,348)
(2,204) (2,021)
-
472
-
4,631
-
4,663
-
78
6,855
8,153
6,855
17,997
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
53
Notes to the Parent Company Financial Statements
1
Summary of significant accounting policies
Accounting convention
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101). The financial statements are prepared under the historical cost
convention.
No profit and loss account is presented by the Company as permitted by Section 408 of the Companies
Act 2006.
The financial statements are prepared in Sterling and are rounded to the nearest thousand pounds
(£000).
Basis of preparation
The Company has transitioned to FRS 101 from previously extant UK Generally Accepted Accounting
Practice for all periods presented. There are no adjustments to the comparative figures for the year
ended 31 December 2014 or 31 December 2013 arising from the change in financial reporting
framework. The accounting policies which follow set out those policies which apply in preparing the
financial statements for the year ended 31 December 2015. The Company has taken advantage of the
following disclosure exemptions under FRS 101:
a) Share-based Payment disclosure, as Quartix Holdings plc is the ultimate parent, the share-based
payment arrangement concerns its own equity instruments and its separate financial statements
are presented alongside the consolidated financial statements of the Group.
b) Financial Instruments disclosures, given that equivalent disclosures are included in the
consolidated financial statements of the Group in which the entity is consolidated.
c) Fair Value Measurement disclosures.
d) Certain disclosures required by IAS 1 Presentation of Financial Statements, including certain
comparative information in respect of share capital movements.
e) Statement of Cash Flows and related notes.
f) Related Party Disclosures relating to key management personnel compensation.
g) Disclosure of related party transactions entered into between two or more members of a group,
given that any subsidiary which is a party to the transaction is wholly owned by such a member.
h) Capital management disclosures.
Going concern
As a holding company, its main source of income is dividends receivable from its trading subsidiaries
and in particular Quartix Limited. After assessing the forecasts and liquidity of the Group for the next
two calendar years and the longer term strategic plans, the Directors have a reasonable expectation that
the Company will continue to receive dividends for the foreseeable further. The Company therefore
continues to adopt the going concern basis in preparing its individual entity accounts.
Investment in subsidiaries
The Company’s interests in investments presently comprise only interest in wholly owned subsidiary
undertakings. Investments are recognised initially at cost. Subsequent to initial recognition the financial
statements include the adjustments in respect of Share Based Payments or provision for impairment.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
54
1
Summary of significant accounting policies (continued)
Impairment of assets
The Company assesses at each reporting date whether there is any indication that an asset may be
impaired. If any such indication exists, the Company estimates the recoverable amount of the asset,
being the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use. To
determine the value-in-use, management estimates expected future cash flows and determines a suitable
interest rate in order to calculate the present value of those cash flows. The data used for impairment
testing procedures are directly linked to the Group’s latest approved budget. Discount factors are
determined individually for each cash-generating unit and reflect management’s assessment of respective
risk profiles, such as market and asset-specific risks factors.
A reversal of an impairment loss for an asset shall be recognised immediately in profit or loss, unless
the asset is carried at revalued amount. Any reversal of an impairment loss of a revalued asset shall be
treated as a revaluation increase.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have
been enacted or substantively enacted by the Statement of Financial Position date.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is
generally provided on the difference between the carrying amounts of assets and liabilities and their tax
bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a business combination or affects tax or
accounting profit. Tax losses available to be carried forward as well as other income tax credits to the Group
are assessed for recognition as deferred tax assets and are recognised to the extent that it is regarded as
more likely than not that they will be recovered from future trading profits.
Deferred tax liabilities are provided in full, with no discounting. Current and deferred tax assets and
liabilities are calculated at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the Statement of Financial Position date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss,
other comprehensive income or equity as appropriate.
Dividends
Dividends attributable to the equity holders of the Company approved for payment during the year are
recognised directly in equity.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term,
highly liquid investments that are readily convertible into known amounts of cash and which are subject to
an insignificant risk of changes in value.
Financial assets
Trade and other receivables are classified as loans and receivables, these are initially recognised at fair value.
Loans and receivables are subsequently measured at amortised cost using the effective interest method, less
provision for impairment. Any change in their value through impairment or reversal of impairment is
recognised in the profit and loss.
Provision against trade receivables is made when there is objective evidence that the Company will not be
able to collect all amounts due to it in accordance with the original terms of those receivables. The amount
of the write-down is determined as the difference between the asset's carrying amount and the present value
of estimated future cash flows, discounted using the original effective interest rate.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
55
1
Summary of significant accounting policies (continued)
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the
Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are recorded initially at fair value and subsequently at amortised cost using the effective
interest method, with interest-related charges recognised as an expense in finance cost in the profit and
loss.
A financial liability is derecognised only when the obligation is extinguished. The Company does not enter
into derivative contracts for hedging or speculative purposes.
Foreign currencies
Transactions in foreign currencies are translated into sterling at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling
at the Statement of Financial Position date.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at
rates different from those at which they were initially recorded are recognised in profit or loss in the period
in which they arise.
Employee benefits: Share-based payments
The Company operates a number of employee share schemes under which it makes equity-settled share
based payments to employees of its trading subsidiary. The fair value of the employee services received
in exchange for the grant of the options is recognised as an increase in the investment in the subsidiary,
with a corresponding increase in equity, over the period that the employees unconditionally become
entitled to the awards.
The fair values of employees' services are determined indirectly by reference to the fair value of the
instrument granted to the employee. This fair value is assessed at the grant date, using the Black-Scholes
method, and excludes the impact of non-market vesting conditions.
The expense is allocated over the vesting period, based on the best available estimate of the number of
share options expected to vest. Estimates are subsequently revised if there is any indication that the number
of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to
vesting is recognised in the current period. No adjustment is made to any expense recognised in prior
periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of the share options the proceeds received are allocated to share capital and share premium.
Share capital and reserves
Share capital and reserves comprises the following:
•
•
•
•
•
"Called up share capital" represents the nominal value of equity shares
"Share premium account" represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue
“Capital redemption reserve” represents the amount by which the Company's issued share capital
is diminished when shares are redeemed or purchased wholly out of the Company's profits
“Equity reserve” is used to reflect the expenses associated with granting share options to employees
and the issue of warrants
"Retained earnings" represents retained profits
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
56
2
Profit and loss account
No Statement of profit and loss is presented for Quartix Holdings plc as provided by section 408 of the
Companies Act 2006. The Company’s profit for the financial year was £6.86m (2014: £5.95m).
Auditors' remuneration attributable to the Company is as follows:
Audit fees – statutory audit
Other services
2015
£’000
14
1
15
2014
£’000
9
81
90
Details of Directors’ emoluments are set out on page 18.
3
Investments – non current
The amounts recognised in the Company’s Statement of Financial Position relate to the following:
Cost:
At 1 January 2014
Increase due to granting of share options to subsidiary employees:
New investments
At 1 January 2015
Increase due to granting of share options to subsidiary employees:
New investments
Net book amount at 31 December 2015
There is no provision for impairment for the investment in subsidiaries.
Subsidiary
undertakings
£’000
18,468
83
18,551
71
18,622
Subsidiary
Quartix Limited
Quartix Inc
Country of
registration
England & Wales Ordinary shares
Common shares
USA
Class of share
capital held
Proportion held
by the Company
100%
100%
Nature of
business
Vehicle Tracking
Vehicle Tracking
4
Debtors
Social security and other taxes
Prepayments
Amounts owed by subsidiary undertakings
2015
£’000
5
5
519
529
2014
£’000
24
6
215
245
All receivables fall due within one year of the Statement of Financial Position date.
The amount owed by subsidiary undertakings is a US dollar loan to Quartix Inc which is repayable on
or before 31 December 2016 but can be extended by mutual agreement. Interest is charge quarterly at
1% per quarter on the quarter end balance.
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
5
Creditors: amounts falling due within one year
Amounts owed to subsidiary undertakings
Bank loan (see note 6 below)
Current tax liabilities
Social security and other taxes
Accruals and deferred income
6
Creditors: amounts falling due after more than one year
Bank loans
Included within the above are amounts falling due as follows:
Between one and two years
Bank loans
57
2014
£’000
3,540
993
102
-
49
4,684
2015
£’000
388
997
-
4
33
1,422
2015
£’000
-
2014
£’000
993
2015
£’000
2014
£’000
-
993
The Company’s bank loans at December 2015 consisted of a £1.0m standard term loan with an effective
interest rate of 3.88% over LIBOR secured by way of a debenture. For this repayments of £0.25m a
quarter start in February 2016. At December 2014, the Company had further borrowings of a £1.0m
standard term loan borrowed at an effective interest rate of 3.56% over LIBOR and repayable at a rate of
£0.25m a quarter until November 2015.
7
Called up share capital
Allotted, called up and fully paid
47,175,704 (2014: 46,692,000) ordinary shares of £0.01 each
2015
£’000
2014
£’000
472
467
Details of movements in share options and warrants and those outstanding at 31 December 2015 are
disclosed in note 22 of the Group accounts.
Related party transactions and ultimate controlling party
The Company has taken advantage of the exemption not to disclose transactions with wholly owned
subsidiaries. Details of Directors’ remuneration and interests in shares are disclosed in the Directors’
Remuneration Report (see page 18) and key management remuneration in note 7 of the Group accounts.
Contingent liabilities
There are no material contingent liabilities subsisting at 31 December 2015 or 31 December 2014.
8
9
10
Financial commitments
The Company had no financial commitments at 31 December 2015 or 31 December 2014
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
58
11
Risk management objectives and policies
Financial Instruments
The Company uses various financial instruments; these include cash deposits and bank loans and various
items such as group receivables and group payables that arise directly from its operations. The main purpose
of these financial instruments is to manage working capital.
The main risks arising from the Company’s financial instruments are interest rate risk, liquidity risk, credit
risk and currency risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below.
Interest rate risk
The Company’s exposure to market risk for the changes in interest rates, which is not significant, relates
primarily to the Company’s bank loans. The exposure to interest rate fluctuations on its loans has been
managed by past loan repayments which mean that these loans are now low relative to the Company’s cash
flow. As at the 31 December 2015 each 1% increase in interest rates would add £10,000 to interest charges
on an annual basis (2014: £20,000).
Liquidity risk
The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable
needs of the Group. It maintains cash to meet the Group liquidity, most of which earn interest via Barclay’s
Money Transmission Plus. Liquidity needs of the Group are monitored on a weekly and monthly basis. The
Company has no un-drawn committed overdraft facilities. As at 31 December the Company’s financial
liabilities have contractual maturities as summarised below:
Bank loans
Within six months
Six to twelve months
One to five years
2015
£’000
521
509
-
1,030
2014
£’000
543
531
1,028
2,102
Credit risk
The Company’s exposure to credit risk is limited to the carrying amount of financial assets recognised
at the Statement of Financial Position date, as summarised below:
Loans and receivables
Cash and cash equivalents
Amounts owed by subsidiary undertakings
2015
£’000
2014
£’000
213
519
732
44
215
259
Risks associated with cash deposits are limited as the banks used have high credit ratings assigned by
international credit rating agencies. The amount owed by subsidiary undertakings relates to advances made
to Quartix Inc, in US Dollars (see below and note 4).
Quartix Holdings plc
Financial statements for the year ended 31 December 2015
59
11
Risk management objectives and policies (continued)
Currency risk
The Company is exposed to transaction foreign exchange risk. The Group mitigates its risk to the US Dollar
by trading in the USA; however the Company is exposed to exchange movements on its US Dollar loan to
Quartix Inc to fund its start-up losses and working capital requirements.
The Company’s financial assets denominated in currencies (all US dollars) were:
Loan and receivables
Cash at bank
Amounts owed by subsidiary undertakings
2015
£’000
2014
£’000
1
519
520
-
215
215
The Company’s net profit would not be materially impacted by 5% strengthening of Pound Sterling to the
US dollar or Euro.
60
Notice of Annual General Meeting
Notice is hereby given that the third Annual General Meeting (the “Meeting”) of Quartix Holdings plc will
be held at Wellington House, East Road, Cambridge CB1 1BH on Tuesday 29 March 2016 at 11.00
am for the following purposes:
To consider, and if deemed fit, to pass the following as ordinary resolutions:
1.
2.
3.
4.
5.
6.
7.
8.
9.
To receive and adopt the audited annual accounts for the year ended 31 December 2015.
To approve and declare a final dividend for the year ended 31 December 2015 of 4.0p per ordinary
share. This will be paid on 4 April 2016 to shareholders on the register as at 11 March 2016.
To re-elect Andrew Walters as a Director who, in accordance with the Company’s Articles of
Association, retires as a Director and is eligible for re-election.
To re-elect David Bridge as a Director who, in accordance with the Company’s Articles of
Association, retires as a Director and is eligible for re-election.
To re-elect Paul Boughton as a Director who, in accordance with the Company’s Articles of
Association, retires as a Director and is eligible for re-election.
To re-elect Jim Warwick as a Director who, in accordance with the Company’s Articles of
Association, retires as a Director and is eligible for re-election.
To re-appoint Grant Thornton UK LLP as the auditors of the Company until the end of the next
Annual General Meeting.
To authorise the Directors to determine the remuneration of the auditors.
To give the Directors general and unconditional authorisation for the purposes of section 551 of
the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot shares in the
Company or to grant rights to subscribe for or to convert any security into shares in the Company
up to a maximum nominal value of £157,250 (representing approximately 33% of the issued share
capital of the Company as at 26 February 2016) to such persons at such times and on such terms
they deem proper provided that this authority shall expire at the conclusion of the next Annual
General Meeting of the Company or 30 June 2017, whichever is earlier, save that the Company
may, before such expiry, make an offer or agreement which would or might require equity securities
(as defined in section 560 of the Act) to be allotted after such expiry and the Directors may allot
such securities in pursuance of such offer or agreement as if the authority conferred hereby had
not expired; and all prior authorities to allot securities (to the extent unutilised) be revoked, but
without prejudice to the allotment of any shares or securities already made or to be made pursuant
to such prior authorisation.
To consider, and if deemed fit, to pass the following as special resolutions:
10.
That the Directors be and are empowered, pursuant to section 570 of the Companies Act 2006
(the “Act”), to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the
authority conferred upon them by resolution 9 above and to allot equity securities (as defined in
section 560(3) of the Act (sale of treasury shares)) for cash in each case as if section 561 of the Act did
not apply to any such allotment provided, however, that the power conferred by this resolution
shall be limited to:
a.
The allotment of equity securities in connection with a rights issue, open offer or any other
offer of, or invitation to apply for, equity securities in favour of holders of ordinary shares
in the Company on the register of members at such record dates as the Directors may
determine and other persons entitled to participate therein where the equity securities
respectively attributable to the interests of the ordinary shareholders are proportionate (as
nearly as may be) to the respective number of ordinary shares in the Company held or
deemed to be held by them on any such record dates, subject to such exclusions or other
arrangements as the Directors may consider necessary or expedient to deal with fractional
entitlements, treasury shares, record dates, or legal or practical problems arising or
61
b.
resulting from the application of the laws of any overseas territory or the requirements of
any other recognised regulatory body or stock exchange in any territory or by virtue of
shares being represented by depository receipts or any other matter whatever; and
The allotment, other than pursuant to sub-paragraph ‘a’ above, to any person or persons
of equity securities up to an aggregate nominal value not exceeding £23,590, representing
approximately 5% of the ordinary share capital in issue as at 26 February 2016.
This power shall expire at the conclusion of the next Annual General Meeting of the Company or
30 June 2017, whichever is the earlier, unless previously varied, revoked or renewed by the
Company in general meeting provided that the Company may, before such expiry, make any offer
or agreement which would or might require securities to be allotted, or treasury shares sold, after
such expiry and the Directors may allot securities or sell treasury shares pursuant to any such offer
or agreement as if the power conferred had not expired; and all prior powers granted under section
570 of the Act shall be revoked provided that such revocation shall not have retrospective effect.
11.
That the Directors be generally and unconditionally authorised, for the purposes of section 701 of
the Companies Act 2006 (the “Act”), to make market purchases, as defined in section 693(4) of
the Act, of ordinary shares of £0.01 each in the Company on such terms and in such manner as
the Directors shall determine, provided that:
a.
b.
c.
d.
The maximum aggregate number of ordinary shares which may be purchased is 2,359,000
(representing approximately 5% of the ordinary share capital in issue as at 26 February
2016);
The minimum price that may be paid for an ordinary share is its nominal value (£0.01);
The maximum price that may be paid for an ordinary share shall be an amount equal to
105% of the average middle market quotations for the ordinary shares of the Company as
derived from the AIM appendix to the London Stock Exchange Daily Official List for the
five business days immediately preceding the day on which the ordinary share is purchased;
and
This authority shall expire, unless previously renewed, revoked or varied, on the date of
the next Annual General Meeting or 30 June 2017, whichever is earlier, save that the
Company may enter into a contract for the purchase of ordinary shares under this
authority which would or might be completed, wholly or partly, after this authority expires.
By order of the Board on 26 February 2016.
David Bridge
Company Secretary
62
Notes to the Notice of Annual General Meeting
Entitlement to attend and vote
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that in
order to have the right to attend and vote at the meeting (and also for the purpose of calculating how many
votes a person entitled to attend and vote may cast), a person must be entered on the register of members
of the Company by no later than 6.00 pm on 23 March 2016, or, in the event that the meeting is adjourned,
at 6.00 pm on the date which is two days prior to the date of any such adjourned meeting.. Changes to
entries on the register after this time shall be disregarded in determining the rights of any person to attend
or vote at the meeting.
Information regarding the meeting
A copy of this Notice of Annual General Meeting and other information required by section 311A of the
Companies Act 2006 is available online at www.quartix.net.
Appointment of proxy
Members of the Company are entitled to appoint one or more proxies to exercise all or any of their rights
to attend, speak and vote at the Meeting instead of him or her. The person appointed does not need to be
a member of the Company but they must attend the Meeting to represent the member. If you wish your
proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the
Chairman) and give your instructions directly to your appointee.
If you appoint more than one proxy, each proxy must only be appointed to exercise the rights attaching to
different shares.
A proxy can be appointed using the form accompanying this Notice. Instructions for use are shown on the
form. Please complete and return this form to the Company's registrars, Capita Asset Services, PXS 1, 34
Beckenham Road, Beckenham, Kent BR3 4ZF not later than 11.00 am on Wednesday 23 March 2016.
You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
The notes to the proxy form give details of how to appoint a proxy via the CREST system.
Changing appointment of proxy
A member may change the person they have appointed as proxy using the same process as outlined above.
The appointment received last before the latest time for receipt of proxies will take precedence over any
previous appointments (see note 3). Any amended proxy appointments received after the relevant cut-off
time will be disregarded.
Revoking proxy appointment
A member may revoke the appointment of a proxy by sending a signed note to the Company’s registrars,
Capita Asset Services, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF. If the member is a
company, such a note must be executed under common seal or signed on the company’s behalf by an
officer of the company or an attorney for the company. Any power of attorney or other authority under
which the proxy form is signed must be included with the proxy form. If a revocation is received after the
specified time (see note 3), the proxy appointment will remain valid. Alternatively, if a member appoints a
proxy but attends the Meeting in person, the proxy appointment will be automatically terminated.
Issued shares and total voting rights
At close of business on 26 February 2016 the Company’s issued share capital comprised 47,175,704
ordinary shares of £0.01 each. Each ordinary share entitles the holder to one vote at a general meeting of
the Company. Consequently, the aggregate number of voting rights in the Company at that time was
47,175,704.
1
2
3
4
5
6
63
7
8
Documents on display
Copies of the Directors’ service contracts with the Company will be available for inspection at the registered
office of the Company at least 15 minutes prior to and until the termination of the Annual General Meeting.
Communication
Any general queries by members about the Annual General Meeting should be addressed to the Company
Secretary by letter or email at Quartix Holdings plc, Wellington House, East Road, Cambridge CB1 1BH
or david.bridge@quartix.net.
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