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Quartix Holdings plc
Quartix Holdings plc
Annual Report 2016
Annual Report 2016
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Quartix Holdings plc
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tix Holdings plc
Wellington House
W
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East Road
East R
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Cambridge
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idge
CB1 1BH
CB1 1BH
tix.net
www.quartix.net
www
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tix.net
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www.quartix.fr
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Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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
Page
2
3
4
6
10
14
17
19
22
24
25
26
27
28
48
50
51
52
59
61
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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 1JJ
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
3
Highlights
Financial highlights
• Group revenue increased by 19% to £23.3m (2015: £19.7m)
o Fleet revenue grew by 15% to £14.9m (2015: £13.0m)
o
Insurance revenue increased by 25% to £8.4m (2015: £6.7m)
• Operating profit increased by 8% to £6.5m (2015: £6.0m)
• Earnings before interest, tax, depreciation, amortisation and share based payment expense
(Adjusted EBITDA) increased by 9% to £6.8m (2015: £6.2m)
• Profit before tax increased by 9% to £6.5m (2015: £6.0m)
• Diluted earnings per share increased by 21% to 12.70p (2015: 10.53p)
• Free cash flow increased by 10% to £6.0m (2015: £5.4m)
• Cash inflow before tax remained at £6.8m (2015: £6.8m)
• Net cash increased to £6.2m (2015 net cash: £3.0m)
• Final dividend payment of 9.0p per share proposed (2015: 4.0p) including 4.7p for supplementary
dividend (2015: nil) giving a total dividend for the year of 11.2p per share
Operational highlights
• Strong progress in the main fleet business:
o 19% increase in subscription base to 87,889 units (2015: 73,744)
o 16% increase in customer base to 9,105 (2015: 7,849)
o Unit attrition fell to 10.0% (2015: 11.3%) and compares favourably with our estimate of
the industry average of around 14-15 per cent
o 3% growth in new fleet installations
o Strong growth in France, ending the year with 1,428 customers (2015: 1,196) and 9,986
vehicles under subscription (2015: 7,910), an increase of 19% and 26% respectively
o During its second full year of trading the USA grew its customer base to 1,075 (2015: 693),
with 6,191 vehicles under subscription (2015: 3,179).
• Continued growth in the insurance telematics business:
o 22% growth in insurance installations to 69,300 (2015: 57,024)
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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 and Ireland grew by 15%, reaching £21.3m (2015: £18.4m). The Group made good
progress in France, where revenue increased by 25% to €1.8m (2015: €1.4m).
2016 was our second full year of operations in the USA, having launched our product and opened an office
there in 2014. We are pleased with progress and completed the year with 6,191 vehicles under subscription
(2015: 3,179) across 1,075 fleet customers (2015: 693). Revenue increased from $392,000 in 2015 to
$907,000 in 2016 and the prospects for future business development remain encouraging.
Results
Group revenue for the year increased by 19% to £23.3m (2015: £19.7m).
Operating profit for the year increased by 8% to £6.5m (2015: £6.0m), at the same time as the Group made
increased investments in product and market development.
Profit before tax increased by 9% to £6.5m (2015: £6.0m).
Cash conversion was good, resulting in free cash flow from operations after tax and investing activities of
£6.0m (2015: £5.4m), enabling the Group to increase its net cash by £3.2m to £6.2m at 31 December 2016,
following the payment of £2.9m in dividends.
Earnings per share
Basic earnings per share rose by 20% to 12.87p (2015: 10.69p). Diluted earnings per share increased to
12.70p (2015: 10.53p).
Dividend policy
Our ordinary dividend policy is to pay a dividend set at approximately 50% of cash flow from operating
activities, which is calculated after taxation paid but before capital expenditure.
In addition to this the Board will distribute the excess of gross cash balances over £2m on an annual basis
by way of supplementary dividends, subject to a 2p per share de minimis level.
The surplus cash is calculated using the year end gross cash balance and after deduction of the proposed
ordinary dividend, and is intended to be paid at the same time as the final dividend. The policy will be
subject to periodic review.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
5
Dividend
In the year ended 31 December 2016, the Board decided to pay an interim dividend of 2.2p per ordinary
share. This totalled £1.04m and was paid on 15 September 2016 to shareholders on the register as at 19
August 2016.
The Board is recommending a final ordinary dividend of 4.3p per share, together with a supplementary
dividend of 4.7p per share, giving a final pay out of 9.0p per share and a total dividend for the year of 11.2p
per share.
The final and supplementary dividend amounts to approximately £4.3m in aggregate. Subject to the
approval at the forthcoming AGM, this dividend will be paid on 5 May 2017 to shareholders on the register
as at 7 April 2017.
Governance and the Board
The Board is comprised of two Non-Executive Directors, myself included, and two Executive Directors,
Andrew Walters and David Bridge. Andrew Walters was a co-founder of the main trading entity, Quartix
Limited, and has been one of its directors since 5 July 2001.
I have over 29 years of experience in identifying, negotiating and completing acquisitions in the USA and
Europe. I spent 13 years as Business Development Director for Spectris plc. From 2014 to early 2016 I was
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 was Chief Operating Officer at Abcam plc until 31 December 2016, having originally joined
as Technical Director in 2001. Abcam is a global leader in the supply of innovative protein research tools.
Prior to that, he worked on IT, software and web development initiatives for the telecommunications
consultancy group Analysys Limited.
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 good start to the year, in line with our expectations. The high levels of recurring
revenue, a focus on growth in the core fleet markets in UK, France and the USA and targeting only those
insurance opportunities which offer satisfactory margins, underpin our confidence for the rest of the year
and beyond.
AGM
The Group’s AGM will be held on 28 March 2017 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 2016
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 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
revenue by increasing the number of vehicles under subscription. The related insurance business helps to
provide 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 revenue based on
system rental, providing the best return to the Group over the long term.
The value of recurring subscription and rental revenue 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 month’s service and data
usage included. This is standard practice in the industry, as the level of attrition is relatively high.
Whilst the value of revenue has been the key measurement of our performance in the insurance sector, we will restrict our
operations to those opportunities in this sector which provide an adequate return.
People
Our business performance was recognised by several independent bodies in 2016: Megabuyte, the
independent technology financial analysts, placed us first amongst all UK public technology companies; the
London Stock Exchange Group named us as one of “1000 companies to inspire Britain”; and we were also
shortlisted in the Grant Thornton Quoted Company Awards, technology category.
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 2016 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 fourth 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 2016
7
Operational performance
All of our business operations continued to perform at a high level in 2016. Although gross margins fell by
1.5 percentage points to 60.3%, this was due to an increase in unit costs with the devaluation of Sterling,
an increase in the proportion of US units installed and higher distributor commissions. As a consequence,
return on sales decreased by 2.7 percentage points compared to the prior year (31%). Cash conversion was
strong with cash flow from operating activities after investing activities and tax (free cash flow) representing
92% of operating profit. We expense all R&D investment and tracking system and installation costs as they
are incurred.
Capex investments totalled £189,000, as we invested in systems and servers, including a data centre for
France, and relocation to larger USA offices in Chicago to support our growth.
Our accounts and operations teams continued to manage working capital well: trade debtors at the year-
end represented just 30 days of sales, and inventory levels remained comparable despite sales growth of
£3.7m in the year.
During the course of the year we increased the level of investment in key product and market developments.
We believe that the Company has significant opportunity for growth in its fleet business, particularly in the
USA. We ended the year with good growth in fleet installations in the USA and have taken the decision to
make additional investment in business development in 2017.
Fleet
Our core fleet business, which accounted for 64% 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 second
full year of trading saw us reach an installed base of 6,191 (2015: 3,179) vehicles under subscription.
During the course of the year we won 2,336 new fleet customers (2015: 2,184). 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 2017, 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 15% to 71,712 during the year, and our fleet customer base
reached 6,602. We won 1,345 new customers in 2016, and the gains in customer and vehicle base were
broadly spread between the channels we use. UK fleet revenue was £12.8m (2015: £11.7m). We added a
number of new key accounts during the year and 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
continued to add new content to it.
We will continue to focus on 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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
8
Fleet (continued)
Fleet France
The number of new installations in the French market was 7% below the previous year, but there was a
26% increase in the unit base, ending the year with 9,986 vehicles (2015: 7,910) under subscription across
1,428 fleet customers (2015: 1,196). French fleet revenue increased by 25% to €1.8m (2015: €1.4m), making
a profitable contribution to the Group. We made a senior management appointment to head up the French
operations in the second half of 2016, and his focus will be on delivering strong sales growth in 2017 in
both our direct and distributor channels.
Fleet USA
Our second full year of trading in the USA showed good progress: we concluded 2016 with 1,075 fleet
customers (2015: 693) having a total of 6,191 vehicles under subscription (2015: 3,179). As in the UK and
France, our fleet revenue derives from subscription income, which builds over time. Nonetheless USA fleet
revenue increased to $0.9m from just $0.4m in 2015, 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 9 employees in our Chicago office.
Insurance
We installed 69,300 new insurance tracking systems in 2016, an increase of 22%. Despite this growth,
installations in the second half were 13% lower than in the first half. This trend was in keeping with the
decision announced at the time of the Company’s interim results in July 2016 to focus on its core fleet
market and on only those insurance opportunities which offer satisfactory margins and which are closely
aligned to its fleet business, a trend we see increasing in 2017.
In line with this strategy, the Group developed and launched an insurance platform which it believes will
appeal to a range of specialist insurance brokers. The development for this ran in tandem with the new fleet
capabilities on which it is based, namely the TCSV11 telematics system, the SafeSpeed Database and the
display dashboards provided for fleet managers. By the end of the year this proposition had been adopted
and used by one new insurance broker client, with a further client having chosen it for launch during the
first half of 2017. These initial projects are relatively small in volume, but offer an opportunity for Quartix
to deliver greater value to both insurer and broker, and to establish the benefits of the SafeSpeed database.
We continue to take steps to manage our cost base in line with the strategies outlined above, particularly
given continued price pressure in the insurance market.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
9
Research and development
The Group is committed to continued investment in research in order to ensure that the functionality of
its fleet tracking systems and software remains competitive across each of our three fleet markets as well as
in the insurance sector. The principal areas of development focus in 2016 were:
1. An enhanced version of the TCSV11 product. This product is now equipped with backup battery
and fast GPS and accelerometer capabilities.
2. The TCSV12 tracking system. This product is believed to be one of the most compact on the
market, allowing ease of user installation in approximately 90% of European vehicles. The initial
target for this is the fleet sector in Europe, but it has also been launched in the insurance sector
and will be launched in the US following product approvals.
3. Electronic logging of driver hours for the US market. This application, which involves a direct
connection to the vehicle’s own bus and the use of an Android tablet device by the driver, was
delivered in beta version to customers during the second half of the year, and has so far received
good reviews.
4. The “powered by Quartix” insurance platform. This software platform includes software tools for
both insurers and brokers and allows driver scoring based on a range of factors, but most
significantly it makes use of our “SafeSpeed Database”, which we believe offers a significant
improvement in risk assessment of young drivers.
5. Configurable real-time dashboard for fleet managers. These were fully released at the mid-year
point.
6. Enhancements to our API (QWS 2.0). These were completed towards the end of the year, and
were also used as the basis of further developments to our mobile apps (point 7 below).
7. Enhance mobile apps including driving style monitoring. These apps, which are available for both
iOS and Android operating systems, have been adapted to make use of our own API, and to include
driving style monitoring as part of the functionality available in this environment.
All of our investment in research and development was fully expensed in the year. The total cost amounted
to£1.4m, which represents an increase of 31% compared to the prior year (2015: £1.1m).
Strategic priorities
We believe that the Company has significant opportunity for growth in its fleet business, particularly in the
USA. We ended the year with good growth in fleet installations and have taken the decision to make
additional investment in business development in 2017.
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, following the strategic decision to move away from low margin insurance sales,
we will seek to target those opportunities which allow us to demonstrate and deliver the levels of service
quality and value for which we have become known.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
10
Strategic Report: Financial Review
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 revenue (£’000)
Insurance installations (units)
Insurance revenue (£’000)
2016
22,224
87,889
9,105
10.0
13,646
14,909
69,300
8,430
2015
21,518
73,744
7,849
11.3
11,828
12,957
57,024
6,718
% change
3.3
19.2
16.0
-
15.4
15.1
21.5
25.5
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
2016 was a year of good progress in our primary strategic objective of building our fleet subscription base.
We achieved over 22,000 fleet installations, an increase of 3.3% compared to 2015, helped particularly by
growth in our US operations.
Our installed base grew by 19.2% to 87,889 units.
Attrition during the period fell to 10.0%.
Group invoiced recurring revenue (before adjusting for deferred revenue) grew at 15.4% to £13.6m (2015:
£11.8m).
The growth in fleet revenue at 15.1% was less than the growth of our recurring revenue as our primary
focus is on growing subscription revenue.
Insurance unit installations were up 21.5% at 69,300; but the second half was 13.1% lower than the first
half, in keeping with the decision announced in July, to focus more on our fleet market.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
11
Financial Overview
Year ended 31 December
£’000 (except where stated)
Revenue
Fleet
Insurance
Total
Gross profit
Gross margin
Operating profit
Operating margin
Adjusted EBITDA
Net profit for the year
Earnings per share
Cash generated from operations
Operating profit to operating cash conversion
Free cash flow
2016
14,909
8,430
23,339
14,063
60%
6,543
28%
6,808
6,087
12.87
6,812
104%
6,005
2015
% change
12,957
6,718
19,675
12,150
62%
6,045
31%
6,248
5,014
10.69
6,781
112%
5,440
15.1
25.5
18.6
15.7
8.2
9.0
21.4
20.4
0.5
10.4
Revenue
Revenue increased by 18.6% to £23.3m (2015: £19.7m). Fleet revenue benefitting from past investment
was 15.1% up at £14.9m (2015: £13.0m). Sales to insurance customers increased by 25.5% to £8.4m (2015:
£6.7m).
Gross margin
The fall in Sterling led to an increase in unit costs and there was also an increase in overseas installation
costs, both of which contributed to the percentage gross margin falling from 62% to 60%, restricting the
increase in gross profit to 15.7%.
Operating profit and Adjusted EBITDA
We continued to invest in our product offering, in our sales structure and in marketing which led to an
increase in overheads of 23.2%. As a result, operating profit grew at a lower rate than gross profit at 8.2%
to £6.5m, adding back depreciation and share-based payment expense gives £6.8m of adjusted EBITDA.
Part of this investment was in the USA where our customer base almost doubled and revenue, as disclosed
in note 3, more-than doubled to £677,000 ($0.9m) in 2016. As disclosed in note 9, losses in the USA were
around £830,000 ($1.1m).
Net profit for the year
Our low effective tax rate reflects a benefit from research and development tax allowances. It fell to 7% in
2016 (2015: 16%) due to the impact of claiming patent box relief for the first time. The rate of tax for the
current year is 12% but the overall charged fell due to a corporation tax refund of £0.3m for patent box
claims made in 2016 in respect of prior periods.
The overall impact of the above was that profit for the year rose by 21.4% to £6.1m (2015 £5.0m).
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
12
Financial Overview (continued)
Earnings per share
Earnings per share increased by 20.4%, helped by a reduced tax charge.
Statement of financial position
Cash at the year-end was £6.2m and bank debt was nil, having repaid the bank loan in full during the year,
(2015: net cash £3.0m).
Cash flow
Operating cash flow is impacted by the fall in Sterling as it is calculated after foreign exchange losses but
ignores exchange gains on cash balances. Additionally, the Group qualified for VAT payments on account
for the first time which resulted in £0.2m of additional VAT payments in 2016.
Despite the above, cash generated from operations before tax at £6.8m was 104% of operating profit.
Tax paid in 2016 was £0.6m, net of the £0.3m refund for patent box claims in respect of prior periods, so
cash flow from operating activity after taxation but before capital expenditure was £6.2m (2015: £5.7m).
Free cash flow, after £0.2m of capital expenditure, was £6.0m, a 10.4% increase. (2015: £5.4m)
The translation of cash flow into dividends is covered in the Chairman’s Statement.
Risk management policies
The principal risks and uncertainties of the Group are as follows:
Attracting and retaining the right number of good quality staff
The Group believes that in order to safeguard the future of the business it needs to recruit, develop and
retain the next generation of 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 recruitment, development and retention.
Particular attention has been given to the composition of the Operations Board. On 1 July 2016 Quartix
Limited appointed Donato Quagliariello as a Director of the company responsible for operations in France.
Following the year end, on 1 February 2017, Ed Ralph was appointed a Chief Operating Officer of Quartix
Limited and Lynne Austin was appointed as Director of Quartix Limited with responsibility for the
company’s UK fleet operations.
The Group has a range of tailored incentive schemes which include the uses of share options.
Reliance on M2M network
The Group’s service delivery is dependent on a functioning M2M network covering both the internet and
mobile data. The impact of not mitigating this risk is that the Group is exposed to an M2M outage. Quartix
has dual site redundancy to cover a localised internet problem and we are constantly working on improving
the reliability of our systems architecture.
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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
13
Financial Overview (continued)
Dependence on a key customer
As disclosed in note 3, during 2016 revenue of £8.4m was derived from one insurance customer, a specialist
reseller for the insurance industry. 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. The Group has taken the strategic decision
to move away from low margin insurance sales and widen its insurance customer base.
Cyber security
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 24 February 2017.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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
Executive Directors
Non-Executive Director
Director
Paul Boughton
Andrew Walters
David Bridge
Jim Warwick
Date of
appointment
1 May 2014
29 January 2008
26 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.
Position
Executive Directors
Non-Executive Directors
Director
Andrew Walters
David Bridge
Paul Boughton
Jim Warwick
Board meeting
attendance (invitations)
10 (10)
10 (10)
10 (10)
10 (10)
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
15
Board committees (continued)
Audit Committee
Paul Boughton is Chairman of the Audit Committee which normally meets two 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. The Group’s Risk Register is reviewed at least twice
a year by the main board. A list of Matters Reserved for the Board was adopted in January 2016
including ensuring a sound system of internal control and risk management. All systems issues or
unexpected outcomes are brought to the attention of the board.
• 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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
16
Board committees (continued)
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.
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
• Monitoring and reporting
• Requiring a high level of integrity for key roles
The Board recognises the importance of robust and reliable financial reporting procedures and reviews the
procedures it operates on a regular basis.
There are Group wide minimum control standards for such issues as Health and Safety which are listed in
around 30 policy documents. In addition, an extensive range of accounting systems and procedures are
documented and maintained.
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 2016
17
Directors’ Remuneration Report
Introduction
The Remuneration Committee is chaired by Jim Warwick and also includes Paul Boughton. Its creation
was confirmed by the Board of Directors on 3 October 2015 in accordance with the Company’s Articles
of Association. The Committee’s fundamental purpose is to ensure sound Corporate Governance. In the
year 2017 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 at the executive
directors’ request 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
2 months
2 months
1 May 2014
1 May 2014
Subject to re-election at the forthcoming AGM, it is the Board’s intention to renew the Non-Executive
Directors’ contracts for another three years from 1 May 2017.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
Directors’ detailed emoluments and compensation (audited)
Executive Directors
Andrew Walters1
David Bridge
Non-Executive
Directors
Paul Boughton
Jim Warwick
Avril Palmer-Baunack2
2016 (£)
Salary Pension
-
83,388
834
82,105
834
165,493
50,000
35,000
85,000
-
-
-
Total
83,388
82,939
166,327
50,000
35,000
85,000
18
2015 (£)
Total
80,961
81,298
162,259
46,667
35,000
14,583
96,250
1 Highest paid director in 2016
2 Salary paid up to the date of resignation on 16 April 2015
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
2016
17,855,986
2,663,000
20,518,986
40,000
40,000
20,598,986
2015
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 2016 and the year
ending 31 December 2015.
Jim Warwick
Chairman, Remuneration Committee
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
19
Directors' Report
The Directors present their annual report and the financial statements of the Company for the year ended
31 December 2016.
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 2016, the Board decided to pay an interim dividend of 2.2p per ordinary
share. This totalled £1.0m and was paid on 15 September 2016 to shareholders on the register as at 19
August 2016.
The Board is recommending a final dividend of 4.3p per share, together with a supplementary dividend of
4.7p per share, giving a final payment of 9.0p a share amounting to approximately £4.3m in aggregate and
giving a total dividend for the year equivalent to 11.2p per share. If this is approved at the forthcoming
AGM on 28 March 2017, the final dividend will be paid on 5 May 2017 to shareholders on the register as
at 7 April 2017.
Substantial shareholdings
On 23 February 2017, 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 Walters1
Andrew Kirk
BlackRock Inc
David Bridge
William Hibbert
Kenneth Giles
Miton Group plc
Number of £0.01 shares
17,855,986
5,009,853
4,718,025
2,663,000
2,663,000
2,371,800
2,236,345
% of total
37.7
10.6
10.0
5.6
5.6
5.0
4.7
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 2016
20
Directors
The Non-Executive Directors who held office during the year are listed below:
• Paul Boughton (Chairman)
•
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 28 March 2017.
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
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Group will continue in business
• State whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Company financial statements
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 2016
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 26.
Interest rate risk
The Group has no debt so it is not exposed to fluctuations in interest rates.
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 24 February 2017.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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
2016 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 2016 and of its profit for
the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union;
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, based on the work undertaken in the course of the audit:
•
•
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.
the Strategic Report and Directors' Report have been prepared in accordance with applicable legal
requirements
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and its environment obtained in the course
of the audit, we have not identified any material misstatements in the Strategic Report and Directors'
Report.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
23
Independent Auditor's Report to the Members of Quartix
Holdings plc (continued) - Company number 06395159
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.
Other matter
We have reported separately on the parent company financial statements of Quartix Holdings plc for the
year ended 31 December 2016.
Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
24 February 2017
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
24
Consolidated Statement of Comprehensive Income
Year ended 31 December
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income receivable
Finance costs payable
Profit for the year before taxation
Tax expense
Profit for the year
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
Notes
3
7
8
4
9
10
2016
£’000
2015
£’000
23,339
(9,276)
19,675
(7,525)
14,063
12,150
(7,520)
(6,105)
6,543
6,045
21
(24)
13
(69)
6,540
5,989
(453)
(975)
6,087
5,014
(255)
-
(255)
(49)
-
(49)
5,832
4,965
12.87
12.70
10.69
10.53
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
25
Consolidated Statement of Financial Position
Company registration number: 06395159
Notes
2016
£'000
2015
£'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
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
11
12
18
13
14
15
16
17
19
19
20
14,029
360
141
14,530
680
2,591
6,249
9,520
14,029
317
77
14,423
638
2,586
4,040
7,264
24,050
21,687
2,892
-
2,591
238
5,721
2,842
997
2,244
407
6,490
5,721
6,490
18,329
15,197
474
4,702
281
4,663
(304)
8,513
472
4,631
177
4,663
(49)
5,303
28
18,329
15,197
Approved by the Board of Directors, authorised for issue and signed on behalf of the Board on 24 February
2017.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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
467
5
4,379
252
4,664
-
151
-
Balance at 31
December 2014
Shares issued
Increase in equity
reserve in relation to
options issued
Adjustment for
exercised options
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
Shares issued
Increase in equity
reserve in relation to
options issued
Adjustment for
exercised options
(note 20)
Deferred tax on share
Options
Dividend paid
Transactions with
owners
Foreign currency
translation differences
(note 26)
Profit for the year
Total
comprehensive
income
Balance at 31
December 2016
-
-
-
-
5
-
-
-
-
-
-
-
252
-
-
-
472
2
4,631
71
4,663
-
-
-
-
-
2
-
-
-
-
-
-
-
71
-
-
-
-
-
-
-
-
-
-
-
-
71
(1)
(144)
-
-
(1)
-
-
-
99
-
26
-
-
-
177
-
113
(56)
47
-
104
-
-
-
-
-
-
-
-
-
-
2,493
-
12,154
257
-
144
71
(1)
-
99
(2,348) (2,348)
(2,204) (1,922)
(49)
-
-
5,014
(49)
5,014
(49)
5,014
4,965
(49)
-
5,303
-
15,197
73
-
-
-
-
-
-
113
56
-
-
47
(2,933) (2,933)
(2,877) (2,700)
(255)
-
-
6,087
(255)
6,087
(255)
6,087
5,832
474
4,702
4,663
281
(304)
8,513
18,329
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
27
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 used in investing activities
Cash flow used in operating activities
after investing activities (free cash flow)
Financing activities
Repayment of long term borrowings
Interest paid
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
26
15
Notes
21
12
7
2016
£'000
6,812
(639)
6,173
(189)
21
(168)
2015
£'000
6,781
(1,092)
5,689
(262)
13
(249)
6,005
5,440
(1,000)
(29)
73
(2,933)
(3,889)
2,116
4,040
93
6,249
(1,000)
(75)
257
(2,348)
(3,166)
2,274
1,812
(46)
4,040
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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 2016 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 Group has not adopted any new standards or amendments that have a significant impact on the
Group’s results or financial position. The standards and interpretations in issue but not effective for
accounting periods commencing on 1 January 2016 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
Annual Improvements
Title
(2014-2016 Cycle)
Effective
Not yet endorsed
The Directors have not yet assessed the impact of the adoption of the standards listed above on the
consolidated financial information of the Group in future periods. IFRS 15 may change the timing of
recognition of revenue for units purchased by customers, although the majority of contracts are rental
agreements, and IFRS 16 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 29.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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 2016
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 2016
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 95 days 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 2016
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 Limited’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.
Employee benefits
The only pension provision 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. Other employee
benefits including holiday pay, company sick pay and a range of tailored incentive schemes, some of which
include the grant of share options, are recognised in the period that related employee services are received.
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 2016
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.
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 dependent on
management’s judgment of the probability and measurability of future economic benefits. No development
expenditure was capitalised in the year ended 31 December 2016. 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 11.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
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 revenue,
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
2016
£’000
14,909
8,430
23,339
2016
£’000
21,249
1,408
5
677
23,339
2015
£’000
12,957
6,718
19,675
2015
£’000
18,390
1,025
4
256
19,675
During 2016 revenue of £8.4m (2015: £6.7m) was derived from one insurance customer.
There are no material non-current assets based outside the UK.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
35
4
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
Foreign exchange gains
Audit services:
Fees paid to Company auditor for the audit of the Company and
consolidated financial statements
The audit of the Company’s subsidiary pursuant to legislation
Other services
Earnings before interest, tax, depreciation and amortisation (EBITDA):
Operating profit
Depreciation
EBITDA
Share-based payment expense
Adjusted EBITDA
5
Employee remuneration
Expenses recognised for employee benefits is analysed below for the Group.
Staff costs, including Directors, during the year were as follows:
Wages and salaries
Social security costs
Contributions to defined contribution pension plan
Share-based payment
2016
£’000
1,442
14
150
152
113
(265)
15
18
3
2016
£’000
6,543
152
6,695
113
6,808
2016
£’000
3,889
366
26
113
4,394
The average number of employees, including all Directors, during the year was as follows:
Administration
Operations
Sales
Customer service
Research and development
2016
21
31
43
15
25
135
2015
£’000
1,097
12
53
132
71
(18)
14
16
3
2015
£’000
6,045
132
6,177
71
6,248
2015
£’000
3,123
302
8
71
3,504
2015
13
21
35
11
21
101
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
36
6
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. For 2016, the Group identified 9 such individuals: two Executive Directors, two
Non-Executive Directors, and five members of Senior Management, a reduction on 2015 to include only
those Managers on the Operations Board of Quartix Limited. In 2015, 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
Total employee benefits
2016
£’000
653
76
2
51
782
2015
£’000
730
88
1
29
848
Key management had 402,662 share options outstanding at 31 December 2016 (2015: 670,900). Key
management held 28,349,839 shares at 31 December 2016 (2015: 32,342,711) 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. One director 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 2016 the directors held no share options (2015:
nil) and no share options were exercised in the year.
7
Finance income receivable
Bank interest
8
Finance costs payable
Interest on bank loans and overdrafts
2016
£’000
21
2015
£’000
13
2016
£’000
24
2015
£’000
69
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
9
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
2015
£’000
957
-
957
23
(5)
18
975
2016
£’000
818
(348)
470
(17)
-
(17)
453
The current tax credit in respect of prior periods relates to patent box claims submitted during 2016 in
respect of the two years ended 31 December 2014 and 31 December 2015. The current tax charge for the
year to 31 December 2016 also includes the benefit of a Patent box credit of £244,000 as highlighted below.
The impact of the patent box claim for the year ended 31 December 2016, ignoring the adjustments in
respect of prior periods, is to reduce the effective rate of tax from 16.0%, broadly in line with the year
ended 31 December 2015, to 12.3%. The impact of the prior year adjustments is to reduce the effective
rate of tax from 12.3% to 6.9%.
The relationship between the expected tax expense based on the effective tax rate of the Group at 20.00%
(2015: 20.25%) 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
Patent box credit
Remeasurement of deferred tax
Tax adjustment on exercise of options
Tax on profit on ordinary activities
2016
£’000
6,540
2015
£’000
5,989
20.00
20.25
1,308
(348)
1
166
(332)
(244)
(9)
(89)
453
1,213
(5)
3
116
(262)
-
(4)
(86)
975
Effective rate of tax
Effective rate of tax ignoring adjustments in respect of prior years’
6.9%
12.3%
16.3%
16.4%
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
38
10
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. 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
Earnings per ordinary share
Year ended 31 December 2016
Year ended 31 December 2015
6,087 47,292,755
5,014 46,912,132
12.87
10.69
47,929,813
47,595,383
12.70
10.53
For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume the
conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares are those share
options where the exercise price is less than the average market price of the Company’s ordinary shares
during that year.
11
Goodwill and other intangible assets
Goodwill
Cost and net book value
At 1 January and 31 December 2015 and 2016
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 4.12% 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 2016
39
12
Property, plant and equipment
Leasehold
improvements
£’000
Tools and
equipment
£’000
Office
equipment
£’000
Total
£’000
Cost:
At 1 January 2015
Additions
At 31 December 2015
Additions
Foreign exchange
At 31 December 2016
Depreciation:
At 1 January 2015
Provided in the year
At 31 December 2015
Provided in the year
Foreign exchange
At 31 December 2016
Net book amount:
At 31 December 2016
At 31 December 2015
At 1 January 2015
13
Inventories
Raw materials
Work in progress
Finished goods and goods for resale
12
5
17
-
-
17
-
3
3
3
-
6
11
14
12
12
-
12
-
-
12
12
-
12
-
12
-
-
-
401
257
658
189
10
857
226
129
355
149
4
508
349
303
175
425
262
687
189
10
886
238
132
370
152
4
526
360
317
187
2016
£’000
334
109
237
680
2015
£’000
335
161
142
638
Included in the analysis above are impairment provisions against inventory amounting to £80,000 (2015:
£80,000). The cost of inventories recognised as an expense and included in “cost of sales” amounted to
£2.9m (2015: £2.4m).
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
40
14
Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2016
£’000
2,318
12
261
2,591
2015
£,000
2,313
126
147
2,586
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
(Release of provision)/additional provision
Foreign exchange
Provision at 31 December
2016
£’000
48
(3)
2
47
2015
£’000
15
33
-
48
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
15
Cash and cash equivalents
Cash and cash equivalents include the following components:
Cash at bank and in hand
2016
£’000
122
19
-
141
2015
£’000
156
64
-
220
2016
£'000
6,249
2015
£’000
4,040
Quartix Limited uses Barclay’s Business Premium account to aggregate Sterling instant access balances and
earn interest, which is -0.15% below the Base Rate. Since September 2016, the Group has placed deposits
with Investec Bank plc on 95 day notices with interest currently at 0.7%. At 31 December 2016, Investec
deposit were £2.0m.
16
Trade and other payables
Amounts falling due within one year:
Trade payables
Social security and other taxes
Other payables
Accruals
2016
£'000
1,572
626
222
472
2,892
2015
£’000
1,632
783
152
275
2,842
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
41
17
Borrowings: amounts falling due within one year
Bank loan
2016
£’000
-
2015
£’000
997
The Group repaid its bank loans during the year ended December 2016. The loan had been subject to an
effective interest rate of 3.88% over LIBOR secured by way of a debenture.
18
Deferred tax
Deferred tax asset recognised by the Group at 31 December 2016 and 31 December 2015 are as follows:
Provision for deferred tax
Accelerated Capital Allowances
Short term temporary differences
Equity settled share options
(Credit)/charge to profit and loss
Accelerated Capital Allowances
Short term temporary differences
Equity settled share options
2016
£’000
42
(7)
(176)
(141)
(5)
(1)
(11)
(17)
2015
£’000
47
(7)
(117)
(77)
21
(3)
-
18
There are unprovided tax losses related to the USA business of $946,000 (2015: $568,000).
19
Equity
Allotted, called up and fully paid
At 1 January 2016
Shares issued
At 31 December 2016
Number of
ordinary
shares of
£0.01 each
47,175,704
170,250
47,345,954
Share
capital
£’000
Share
premium
£’000
472
2
474
4,631
71
4,702
All the shares issued in the year to 31 December 2016 related to the exercise of share options.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
42
20
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.
Movements in the number of share options and warrants outstanding and their related weighted average
exercise prices are as follows:
2016
2015
Weighted
average
exercise price
per share
in pence
76.5
316.6
1.0
42.7
55.3
Weighted
average
exercise price
per share
in pence
47.1
192.9
0.7
53.1
76.5
Options
number
757,900
332,612
(3,450)
(170,250)
916,812
Options
number
1,076,954
170,400
(5,750)
(483,704)
757,900
Outstanding at 1 January
Granted
Lapsed
Exercised
Outstanding at 31 December
Exercisable at 31 December
110.6
207,000
43.5
131,500
The weighted average fair value of options issued during the year ended 31 December 2016 was 78.73p
(2015: 87.73p). Included in the options granted in 2016, 3,662, were granted to a senior manager with
performance conditions relating to the Group for the year ended 31 December 2016 and subsequent service
conditions. The remaining options granted during the year have only service conditions.
The weighted average share price at the date of exercise of options during the year ended 31 December
2016 was 371.84p (2015: 197.6p).
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 1,500 (2015: 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 £13.50
(2015: £634) has been charged to the capital redemption reserve to reflect the capitalisation.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
43
20
Share based payments (continued)
At 31 December 2016 Quartix Holdings plc had the following outstanding options, warrants and exercise
prices:
Expiry dates
Period when exercisable
Starting from November 2014 1 November 2019
Starting from July 2016
March 2017
January 2019
Starting from October 2017
March 2018
29 July 2021
16 December 2020
01 January 2019
28 October 2023
06 December 2021
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 2016
16 December 2020
March 2017
2016
Options
number
420,000
147,000
17,200
3,662
312,000
16,950
916,812
2015
Options
number
520,000
1,500
50,000
16,000
150,000
20,400
757,900
Weighted
average
remaining
contractual
life
in months
35
55
48
24
82
59
55
Weighted
average
remaining
contractual
life
in months
47
36
49
36
67
60
51
Average
exercise price
per share
in pence
44.0
219.0
1.0
1.0
337.5
1.0
55.3
Average
exercise price
per share
in pence
44.0
0.1
44.0
0.1
219.0
1.0
76.5
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 the Group’s share price. 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 granted during the year ended 31 December
2016:
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 (%)
3,662
1 Jan
252.5
1.0
230.5
3
49.4
0.87
2.9
2016
312,000
28 Oct
337.5
337.5
64.9
3
35.1
0.25
2.9
2015
16,950
6 Dec
150,000
29 Jul
20,400
16 Dec
330.0
1.0
301.5
1.25
36.0
0.25
2.9
219.0
219.0
72.0
3
55.5
0.5
2.3
241.0
1.0
203.4
1.25
52.2
0.5
2.3
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
21
Notes to the cash flow statement
Cash flow adjustments and changes in working capital
Profit before tax
Foreign exchange
Depreciation
Interest income
Interest expense
Share based payment expense
Operating cash flow before movement in working capital
Decrease/(increase) in trade and other receivables
(Increase) in inventories
Increase in trade and other payables
Cash generated from operations
Notes
12
7
8
4
2016
£’000
6,540
(326)
152
(21)
24
113
6,482
5
(39)
364
6,812
44
2015
£’000
5,989
-
132
(13)
69
71
6,248
(650)
(201)
1,384
6,781
22
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
2015
£’000
58
4
-
62
2016
£’000
156
218
12
386
Other
2016
£’000
10
11
-
21
2015
£’000
10
3
-
13
Lease payments recognised as an expense during the year amount to £164,000 (2015: £65,000).
23
24
Related party transactions and controlling related party
The Group’s related parties comprise its Board of Directors and its key management (see note 6). 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 6.
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 commit the Group to purchase inventory to
the value of £324,000 (2015: £186,000). In December 2016, the Group entered into an agreement for the
provision of data services which included a contractual obligation to pay a minimum of £40,000 per month,
over a two-year term. There were no other financial commitments or contingent liabilities as at 31
December 2016 or 31 December 2015.
25
Capital commitments
The Group had no capital commitments at 31 December 2016 (2015: £nil).
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
45
26
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 credit risk and currency risk. The Board
reviews and agrees policies for managing each of these risks and they are summarised below.
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
2016
£’000
6,249
2,330
8,579
2015
£’000
4,040
2,439
6,479
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 14 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 $3.7m a
year, to purchase components for the fleet tracking unit as well as the investment in Quartix Inc (2015:
$3.0m).
Transaction exposures, including those associated with forecast transactions, are managed through the use
of bank accounts held in foreign currencies.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
46
26
Risk management objectives and policies (continued)
Currency risk (continued)
It is estimated that a 5% strengthening of Pound Sterling to the US dollar would have reduced purchase
costs £140,000 and vice versa (2015: £100,000). (This is assuming that Dollar denominated prices do not
adjust for currency movements.)
It is estimated that a 5% strengthening of Pound Sterling to the Euro would have reduced net profit by
£34,000 and vice versa (2015: £23,000).
The Group’s financial instruments dominated in currencies were:
Cash and cash equivalents
Trade receivables
Trade payables
2016
2015
£’000
US$
279
-
(459)
(180)
£’000
€
172
166
(181)
157
£’000
US$
418
32
(483)
(33)
£’000
€
109
140
(126)
123
As set out in the accounting policies (note 1), the assets and liabilities of Group entities that have a
functional currency other than Sterling are translated at the closing exchange rate at the reporting date. The
US dollar exchange rate fell by 16% from 31 December 2015 to 31 December 2016. The impact of this
movement on the retranslation of Quartix Inc’s net liabilities at 31 December 2015 is a translation reserve
loss of £(212,000). The total translation reserve movement during the year, including movements in the
net liability, reported in the Consolidated Statement of Changes in Equity was £(255,000).
Quartix Inc’s net liabilities mainly relate to amounts owed to other Group entities. The foreign exchange
differences arising on translation of these monetary liabilities are recognised in the Consolidated Income
Statement and was the main reason for the increase in the foreign exchange gain in 2016 (see note 4). The
retranslation of the amounts owed to Group entities by Quartix Inc at 31 December 2015 amounted to
£(198,000).
It is estimated that a 5% weakening of Pound Sterling to the US dollar would give an exchange gain of
around £115,000 from the retranslation of amounts owed by Quartix Inc and vice versa.
27
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
2016
£’000
2,330
6,249
8,579
2,044
-
2,044
2015
£’000
2,439
4,040
6,479
1,907
997
2,904
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
47
28
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
2016
£’000
18,329
(6,249)
12,080
18,329
-
18,329
2015
£’000
15,197
(4,040)
11,157
15,197
997
16,194
Capital-to-overall financing ratio (%)
66
69
29
Subsidiaries
As at the 31 December 2016 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 2016
48
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 2016
which comprise the Parent Company Statement of Financial Position, the Parent Company 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 2016 and of its profit
for the year then ended;
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, based on the work undertaken in the course of the audit:
•
•
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 financial statements.
the Strategic Report and Directors' Report have been prepared in accordance with applicable legal
requirements.
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
49
Independent Auditor's Report to the Members of Quartix
Holdings plc (continued)
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the parent company and its environment obtained in
the course of the audit, we have not identified any material misstatements in the Strategic Report and
Directors' Report.
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 2016.
Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
24 February 2017
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
50
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/(liabilities)
Total assets less current liabilities
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
2016
£’000
2015
£'000
3
4
5
6
18,735
18,622
3,428
11
37
3,476
529
55
213
797
(35)
(1,422)
3,441
(625)
22,176
17,997
22,176
17,997
474
4,702
135
4,663
12,202
472
4,631
78
4,663
8,153
22,176
17,997
Profit for the year and total comprehensive income attributable to the equity shareholders of Quartix
Holdings plc was £6,926,000 (2015: £6,855,000)
Approved by the Board of Directors, authorised for issue and signed on behalf of the Board on 24 February
2017.
Andrew Walters
Managing Director
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
51
Parent Company Statement of Changes in Equity
Balance at 31 December 2014
Shares issued
Increase in equity reserve in
relation to options issued
Adjustment for exercised options
Dividend paid
Transactions with owners
Profit for the year and total
comprehensive income
Balance at 31 December 2015
Shares issued
Increase in equity reserve in
relation to options issued
Adjustment for exercised options
(see note 20 of Group accounts)
Dividend paid
Transactions with owners
Profit for the year and total
comprehensive income
Balance at 31 December 2016
Share
capital
£’000
467
5
Share
premium
account
£,000
4,379
252
Capital
redemption
reserve
Equity
reserve
£’000 £’000
151
4,664
-
-
Retained
earnings
Total
equity
£’000 £’000
13,163
3,502
257
-
-
-
-
5
-
472
2
-
-
-
2
-
-
-
252
-
4,631
71
-
-
-
71
-
(1)
-
(1)
71
(144)
-
(73)
-
144
71
(1)
(2,348) (2,348)
(2,204) (2,021)
-
4,663
-
-
-
-
-
-
78
-
113
(56)
-
57
-
135
6,855
8,153
-
6,855
17,997
73
-
113
56
-
(2,933) (2,933)
(2,877) (2,747)
6,926
6,926
12,202 22,176
-
474
-
4,702
-
4,663
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
52
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 transitioned to FRS 101 in 2015 having previously adopted extant UK Generally Accepted
Accounting Practice for all periods presented. There were no adjustments to the comparative figures for
the year ended 31 December 2015 arising from the change in financial reporting framework. The accounting
policies which follow were those applied in preparing the financial statements for the year ended 31
December 2016 and 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 2016
53
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 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 2016
54
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 UK 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 2016
55
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 £6.93m (2015: £6.86m).
Auditors' remuneration attributable to the Company is as follows:
Audit fees – statutory audit
Other services
2016
£’000
15
1
16
2015
£’000
14
1
15
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 2015
Increase due to granting of share options to subsidiary employees:
New investments
At 1 January 2016
Increase due to granting of share options to subsidiary employees:
New investments
Net book amount at 31 December 2016
There is no provision for impairment for the investment in subsidiaries.
Subsidiary
undertakings
£’000
18,551
71
18,622
113
18,735
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 2016
56
4
Debtors
Social security and other taxes
Prepayments
Amounts owed by subsidiary undertakings
2016
£’000
6
5
3,417
3,428
2015
£’000
5
5
519
529
All receivables fall due within one year of the Statement of Financial Position date.
The amount owed by subsidiary undertakings includes a US dollar loan to Quartix Inc of £1.2m (2015:
£0.5m) which is repayable on or before 31 December 2017 but can be extended by mutual agreement.
Interest is charge quarterly at 1% per quarter on the quarter end balance. The remainder relates to a
current account to Quartix Limited
5
Creditors: amounts falling due within one year
Amounts owed to subsidiary undertakings
Bank loan
Social security and other taxes
Accruals and deferred income
2016
£’000
-
-
4
31
35
2015
£’000
388
997
4
33
1,422
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 started in February 2016.
6
Called up share capital
Allotted, called up and fully paid
47,345,954 (2015: 47,175,704) ordinary shares of £0.01 each
2016
£’000
2015
£’000
474
472
Details of movements in share options and warrants and those outstanding at 31 December 2016 are
disclosed in note 20 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 6 of the Group accounts.
Contingent liabilities
There are no material contingent liabilities subsisting at 31 December 2016 or 31 December 2015.
Financial commitments
The Company had no financial commitments at 31 December 2016 or 31 December 2015.
7
8
9
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
57
10
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, which were repaid by 31 December 2016. The exposure to interest
rate fluctuations on its loans has been managed historically by loan repayments to reduce the level of debt
and related interest. As at the 31 December 2016, there was no interest payable risk. At the 31 December
2015 each 1% increase in interest rates would have added £10,000 to interest charges on an annual basis.
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’s working capital requirements, most of which
earn interest via Barclay’s Money Transmission Plus, Barclays Business Premium account and Investec 95-
day notice account. 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
2016
£’000
-
-
-
-
2015
£’000
521
509
-
1,030
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
2016
£’000
37
3,417
3,454
2015
£’000
213
519
732
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 includes a US dollar loan
to Quartix Inc of £1.2m (2015: £0.5m) which is repayable on or before 31 December 2017 but can be
extended by mutual agreement. Interest is charge quarterly at 1% per quarter on the quarter end balance.
The remainder relates to a current account to Quartix Limited. (see below and note 4).
Quartix Holdings plc
Financial statements for the year ended 31 December 2016
58
10
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
2016
£’000
1
1,215
1,216
2015
£’000
1
519
520
The Company’s net profit would not be materially impacted by 5% strengthening of Pound Sterling to the
US dollar or Euro.
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 28 March 2017 at 11.00
am for the following purposes:
To consider, and if deemed fit, to pass the following as ordinary resolutions:
59
1.
2.
3.
4.
5.
6.
7.
8.
9.
To receive and adopt the audited annual accounts for the year ended 31 December 2016.
To approve and declare a final dividend for the year ended 31 December 2016 of 4.3p per ordinary
share and supplementary dividend of 4.7p per ordinary share, a total of 9.0p per share. This will be
paid on 5 May 2017 to shareholders on the register as at the close of business on 7 April 2017.
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 £157,820 (representing approximately 33% of the issued share
capital of the Company as at 24 February 2017) 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 2018, 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
60
entitlements, treasury shares, record dates, or legal or practical problems arising or
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 £23,680, representing
approximately 5% of the ordinary share capital in issue as at 24 February 2017.
b.
This power shall expire at the conclusion of the next Annual General Meeting of the Company or
30 June 2018, 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 2,368,000
(representing approximately 5% of the ordinary share capital in issue as at 24 February
2017);
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 2018, 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 24 February 2017.
David Bridge
Company Secretary
61
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 close of business on 24 March 2017, or, in the event that the meeting is
adjourned, at close of business 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 Friday 24 March 2017.
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 24 February 2017 the Company’s issued share capital comprised 47,345,954
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
47,345,954.
1
2
3
4
5
6
62
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.
Perivan Financial Print 244069
244069 Quartix Holdings Cover Spread 21/02/2017 15:07 Page 1
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