258119 Quartix Report and Accounts COVER.qxp 20/02/2020 11:40 Page 1
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Quartix Holdings plc
9 Dukes Court
54-62 Newmarket Road
Cambridge
CB5 8DZ
www.quartix.net
www.quartix.fr
www.quartix.com
Quartix Holdings plc
Annual Report 2019
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
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
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
5
7
11
16
28
30
34
41
42
43
44
45
76
77
78
85
87
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
2
Company Information
Company registration number:
06395159
Registered office:
Directors:
9 Dukes Court,
54~62 Newmarket Rd,
Cambridge
CB5 8DZ
Paul Boughton
Andrew Walters
Daniel Mendis
Jim Warwick
Laura Seffino (appointed 22 October 2019)
Company secretary:
Daniel Mendis
Bankers:
Solicitors:
Auditor:
Nominated advisor and broker:
Barclays Bank PLC
Mortlock house,
Station Road,
Histon,
Cambridgeshire
CB24 9DE
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 2019
3
Highlights
Restatement of comparatives
All comparative monetary amounts for 2018 have been restated in line with a change in policy in the
recognition of commission costs associated with contracts with customers under IFRS 15: ‘Revenue from
Contracts with Customers’ (See note 1: Summary of significant accounting policies). There has been no
restatement related to IFRS 16 ‘Leases’.
Financial highlights
Group revenue decreased by 0.3% to £25.6m (2018: £25.7m)
o Fleet revenue grew by 11.0% to £20.8m (2018: £18.8m)
o Fleet revenue represented 81% of total revenue (2018: 73%)
o
Insurance revenue decreased by 30.8% to £4.8m (2018: £7.0m)
Adjusted EBITDA1 decreased by 17.1% to £7.1m (2018: £8.5m)
o Fleet telematics services profits2 increased by 12.8% to £16.5m (2018: £14.6m) (note 4)
o Fleet customer acquisition investment increased by 42.5% to £6.1m (2018: £4.3m)
o
Insurance segment profit decreased by 50.5% to £1.6m (2018: £3.2m)
Operating profit decreased by 21.7% to £6.4m (2018: £8.2m)
Profit before tax decreased by 21.8% to £6.5m (2018: £8.3m)
Diluted earnings per share decreased by 22.4% to 11.25p (2018: 14.50p)
Free cash flow3 increased by 11.5% to £6.2m (2018: £5.6m)
Cash generated from operations4 increased by 6.4% at £7.3m (2018: £6.8m)
Net cash remained constant at £6.8m (2018: £6.8m)
Final dividend payment of 10.0p per share proposed (2018: 10.0p) including 5.8p for
supplementary dividend (2018: 6.2p) giving a total dividend for the year of 12.4p per share
1 Earnings before interest, tax, depreciation, amortisation and share based payment expense
2 Profit for the Fleet segment before customer acquisition costs and central fleet costs (see note 4).
3 Cash flow from operations after tax and investing activities
4 Cash inflow before tax
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
4
Operational highlights
Strong progress in the core fleet business:
o 22.3% increase in subscription base to 150,640 units (2018: 123,157)
o Annualised recurring revenue1 increased to £20.5m (2018: £18.8m)
o Growth in annualised recurring revenue (on a constant currency basis) of £2.0m (2018:
£1.7m)
o 24.4% increase in customer base to 16,394 (2018: 13,176)
o Unit attrition has remained constant at 11.9% (2018: 11.9%)
o 39.4% growth in new fleet subscriptions
o Strong growth in France, ending the year with 3,528 customers (2018: 2,474) and 25,643
vehicles under subscription (2018: 18,803), an increase of 42.6% and 36.4% respectively.
o During its fifth full year of trading the USA grew its customer base to 2,621 (2018: 2,007),
with 18,050 vehicles under subscription (2018: 13,133) an increase of 30.6% and 37.4%
respectively
o The European expansion in 2019 has seen the customer base grow to 337 with 1,316
vehicles under subscription at the year end.
As anticipated further decline in the lower margin insurance telematics business:
o 11.8% decline in insurance installations to 36,386 (2018: 41,255)
1 Annualised data services revenue for the subscription base at the year end, before deferred revenue, including revenue for units
waiting to be installed for which subscription payments have started or are committed.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
5
Chairman's Statement
Introduction
Our key focus for the past year was investing in the growth of our core Fleet operations, both in the UK
and overseas to drive an increase in recurring revenues. This was achieved with the Group experiencing
strong growth in its Fleet tracking subscription platform.
Sales in the Group’s core fleet operations in the UK grew by 5.0%, reaching £15.5m (2018: £14.8m). This
growth partially compensated for the planned decline in UK insurance revenues, which decreased to £4.8m
(2018: £7.0m).
The Group made excellent progress in France, where revenue increased by 32.4% to €3.7m (2018: €2.8m),
ending the year with 25,643 vehicles under subscription (2018: 18,803) across 3,528 fleet customers (2018:
2,474).
2019 was the Group’s fifth full year of operations in the USA, having launched its service and opened an
office there during 2014. We are pleased with progress and completed the year with 18,050 vehicles under
subscription (2018: 13,133) across 2,621 fleet customers (2018: 2,007). Revenue increased by 27.9% to
$2.6m in 2019 (2018: $2.0m) and the prospects for future business development remain encouraging.
The Group made a very good start in a number of new markets in Europe during the course of the year,
ending the period with a subscription base of 1,316 vehicles across 337 fleet customers.
Results
Group revenue for the year decreased marginally to £25.6m (2018: £25.7m); however, the Group continues
to replace insurance revenue with higher quality fleet revenue. Total fleet revenue increased by £2.0m and
now represents 81% of total revenue (2018: 73%). Insurance revenue decreased by £2.1m.
Operating profit for the year decreased by 21.7% to £6.4m (2018: £8.2m) and profit before tax was £6.5m
(2018: £8.3m). This reduction was almost entirely due to the £1.6m decrease in profits from the Insurance
segment, whose 2019 segmental profit was £1.6m (2018: £3.2m).
Total Fleet Segment profit remained deliberately similar to the prior year, at £9.7m (2018: £9.8m). The
profitability of the Group’s fleet telematics services, which represents the core part of the business
associated with recurring revenues, grew by £1.9m to £16.5m (2018: £14.6m). This growth was then
entirely reinvested, with an additional £2.0m being invested in acquiring additional fleet customers for the
future.
Further details for segmental profit are given in the Financial Review and note 4.
Cash conversion increased, resulting in free cash flow, cash flow from operations after tax and investing
activities, of £6.2m (2018: £5.6m). Net cash remained constant at £6.8m at 31 December 2019, following
the payment of £5.9m in dividends.
Earnings per share
Basic earnings per share decreased by 23.2% to 11.29p (2018: 14.69p). Diluted earnings per share decreased
to 11.25p (2018: 14.50p).
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
6
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.
Dividend
In the year ended 31 December 2019, the Board decided to pay an interim dividend of 2.4p per ordinary
share. This totalled £1.15m and was paid on 14 September 2019 to shareholders on the register as at 16
August 2019.
The Board is recommending a final ordinary dividend of 4.2p per share, together with a supplementary
dividend of 5.8p per share, giving a final pay out of 10.0p per share and a total dividend for the year of
12.4p per share.
The final and supplementary dividend amounts to approximately £4.8m in aggregate. Subject to the
approval at the forthcoming AGM, this aggregate dividend of 10.0p per share will be paid on 1 May 2020
to shareholders on the register as at 3 April 2020.
Outlook
The Group has made a strong 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, the USA and the new European
territories 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 at 11.00 a.m. on 24 March 2020 at the Group’s registered office at 9 Dukes
Court, 54~62 Newmarket Rd, Cambridge CB5 8DZ.
Paul Boughton
Chairman
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
7
Strategic Report: Operational Review
Principal activities
Quartix is one of Europe’s leading suppliers of vehicle telematics services. We achieved extremely strong
growth in the fleet sector in 2019, which now has a subscription platform connecting more than 150,000
fleet vehicles. Whilst the origins of the Group’s business are in the UK, it has developed a significant market
presence in the fleet sector in France and the USA. The Company built on this success and experience in
establishing new business in Poland, Spain, Italy and Germany during the course of 2019.
Strategy and business model
The Group’s main strategic objective is to grow its fleet subscription platform and develop the associated
recurring revenue. This strategy is based on 5 key elements, which were first highlighted in last year’s annual
report. We are pleased to be able to report significant progress in each area, as summarised below:
1. Market development: new fleet subscriptions increased by 39% and the subscription base by 22%,
strong growth was achieved in each of our existing territories as well as a presence in four new
European markets
2. Cost leadership: improvements in back office efficiency have been achieved and we have recently
introduced improved sales processes, training and measurement. We continue to review product
and overhead costs in order to identify further operational efficiencies.
3. Continuous enhancement of the Group’s core software and telematics services: new versions of the Group’s
telematics subscription platform were released in Polish, Spanish, Italian and German. Dedicated
versions of the application were also released for Eire and the Hispanic market of the USA. New
variants of the Group’s telematics systems were launched during the year
4. Outstanding service: Quartix maintained its excellent reputation with its fleet customers throughout
the year, consistently being rated as “excellent” by TrustPilot users. We were also delighted to
achieve Gold Status in our latest “Investors in Customers” audit.
5. Standardisation and centralisation: over the past 18 months we have reduced management costs by
more than £0.5m on an annualised basis. These savings have been reinvested in additional direct
sales resource backed by standardised marketing strategies delivered from a single, centralised team.
Our fleet customers typically use the Group’s vehicle telematics 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 minimal initial commitment from the customer, providing the best return to the Group
over the long term.
The number of vehicles connected to our subscription platform and the value of recurring subscription
revenue derived from it are the key measures of our performance in the fleet sector.
We also provide our telematics technology and services to insurers, who 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. The level of attrition, in this industry for young driver policies, is relatively high.
Whilst the value of revenue has been the key measurement of our performance in the insurance sector, we
restrict our operations to those opportunities which provide an adequate return.
The Group has focused over the past three years on growth in its fleet operations and on restricting the
amount of insurance revenue derived from lower-margin applications. In 2019 81% of Group revenue
(£20.8m of £25.6m) derived from fleet applications, which compares with 64% in 2016 (£14.9m of
£23.3m).
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
8
People
We take pride in the level of service we provide, and it is gratifying to see that fleet customers consistently
provide us with excellent reviews – both in person and on third-party sites such as TrustPilot. We were also
delighted in 2019 to have achieved the Gold Award from Investors in Customers, an independent
accreditation body for customer service and satisfaction levels.
These service achievements are a reflection of the teamwork, creativity and dedication of our people and a
testament to how seriously we take our commitment to providing the best experience for our customers.
Our financial performance derives from the customer service we deliver, backed by the technology we
develop. We would like to register our personal thanks to every one of our employees who made 2019
another great year for Quartix.
We are pleased 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 seventh year in a row. Under this scheme each
UK employee (barring Directors) receives shares in the company at zero cost, which are exercisable
approximately 18 months from grant. Employees with 5 years’ service at the first grant in 2013 would now
hold 4,075 shares in the company, less any disposals. Daniel Mendis, a Director of Quartix Holdings plc,
received share option grants in 2019, as disclosed in the remuneration report.
Operational performance
All of our business operations continued to perform at a high level in 2019. Gross margin decreased
marginally to 65% (2018: 67%), mainly due to the increase in new fleet units (resulting in higher equipment,
installation and carriage costs) and a reduction in deferred revenue in insurance as existing policies reduce.
With investment in fleet increasing, overheads increased by 12% and the return on sales before tax
decreased by 7 percentage points to 25% (2018: 32%). Cash conversion was very strong with cash flow
from operations after tax and investing activities (free cash flow) representing 115% of profit for the year
(2018: 80%). The increase is due to a lower level of released deferred insurance revenue in the current year
(which is not cash generative) and the impact that IFRS 16 ‘Leases’ has on the cashflow in increasing the
operating cash flows by £0.3m in 2019 with a corresponding decrease in financing activities. We expense
all research and development investment, tracking system and installation costs as they are incurred unless
development spend meets the criteria for capitalisation.
Our accounts and operations teams continued to manage working capital well: trade debtors at the year-
end were 34 days of sales, and inventory levels increased by 14% compared to prior year levels which is as
a result of preparations to accommodate for a no deal Brexit and an increase in the tracker unit model
options available.
Fleet
Our core fleet business, which accounted for 81% of Group revenue (2018: 73%), delivered excellent
progress in a further year of investment. Strong subscription base growth in each of the UK, France and
the USA, coupled with our entry into four new European markets, took the total subscription base to more
than 150,000 vehicles.
During the course of the year we won 4,471 new fleet customers (2018: 3,532). Sales leads continued to be
generated through a broad range of media and channels and investments have been made in marketing,
technology, processes and training, adding automation wherever possible.
Total investment in fleet customer acquisition increased by £1.8m to £6.1m in 2019 (2018: £4.3m). This
investment will increase further in 2020 as we continue to develop our business across each of our markets,
thereby increasing recurring revenues.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
9
Fleet UK
Demand for vehicle telematics services in the UK continues to grow. New subscriptions to our fleet
tracking services increased by 38% to 25,687. We believe this to be significantly faster than the general
growth in the market. We increased our vehicle subscription base by 15.8% to 105,631 as a consequence,
and our fleet customer base rose to 9,908. In total we won 2,033 new customers in the UK (2018: 1,654)
and we increased the number of fleet clients with 50 vehicles or more. UK fleet revenue was £15.5m (2018:
£14.8m). The strength of our brand, service capability and reputation in the UK is leading to higher levels
of enquiries from larger fleet prospects.
Our UK website continued to perform well in terms of 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.
Fleet France
The number of new subscriptions in the French market was 35% higher than the previous year (9,054
versus 6,725), and there was a 36% increase in the unit base, ending the year with 25,643 vehicles (2018:
18,803) under subscription across 3,528 fleet customers (2018: 2,474). French fleet revenue increased by
32% to €3.7m (2018: €2.8m), making a profitable contribution to the Group. We saw continued growth in
new customer acquisition throughout the year, and this was broadly spread across each of our channels.
Towards the end of the year we significantly increased the size of our French telephone sales team; this
investment has been offset by reduced management costs, referred to earlier. Initial performance of the
expanded team has been encouraging.
New European territories
We are delighted to report that our Polish website, application and payment systems went live at the start
of February 2019 and that these were followed by launches in the Spanish, Italian and German markets. A
dedicated, Euro-based English-language version of the platform was also released for the Republic of
Ireland.
We achieved a total of 1,353 new subscriptions in the new territories in 2019 and ended the year with 1,316
vehicles under subscription. The revenue generated from the new European territories was £0.05m, with
the majority of these revenues falling into the second half of the year.
Fleet USA
Our fifth full year of trading in the USA showed good progress: we concluded 2019 with 2,621 fleet
customers (2018: 2,007) having a total of 18,050 vehicles under subscription (2018: 13,133). USA fleet
revenue increased by 28% to $2.5m (2018: $2.0m). Losses incurred in the USA decreased by £0.2m to
£0.4m (2018: £0.6m) due to a reduction in management and administrative costs in our Chicago office.
We see significant potential for growth in the USA in the next five years and recruited additional sales staff
in 2019 to accommodate this growth. The largest part of this growth came from our direct telephone sales
channel. This channel has significant potential for future growth but we also intend to invest more in our
price comparison and distribution teams.
Combined fleet revenues in non-UK territories, were £5.3m, representing 25% of total fleet revenue.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
10
Insurance
We installed 36,386 new insurance tracking systems in 2019, a decrease of 11.8% on the prior period. This
trend, which we expect to continue, was in keeping with the decision announced in July 2016 to focus on
the core fleet market and on only those insurance opportunities which offer satisfactory margins and which
are closely aligned to the fleet business. The profitability of this segment therefore fell from £3.2m in 2018
to £1.6m as a consequence of this trend - see segmental note 4.
In the three years since this decision to focus on our fleet operations they have grown to represent 81% of
Group revenues (£20.8m) in 2019 from 64% (£14.9m) in 2016. This trend is expected to continue as the
Company invests in the development of each of its fleet markets.
Research and development
The Group is committed to the continuous enhancement of its core software and telematics services, and
we aim to offer a market-leading platform which addresses the most common needs of SME customers in
the service sector of each of our target markets. We achieved some notable successes in 2019:
1. In February we launched the first of 4 new language versions of our application platform. This
followed on from the significant update of our user application in October the prior year. This first
launch, for Poland, was followed by Spain, Italy and Germany. We also launched an optional
Spanish-language site for our Hispanic customers in the USA and a Euro-based English-language
site for the Republic of Ireland.
2. New software releases for all territories and languages were issued for our customer base regularly
throughout the year. These updates provided enhancements to usability and self-service, and were
focused on features which we felt would be of benefit to the large majority of our client base.
3. Further development of our telematics hardware and firmware platforms was carried out during
the year, with new user-install options released for all markets. A particular success was the
introduction of a battery-mounted tracking system which can be installed by the customer directly
on top of the vehicle battery. By the end of the year self-install options were accounting for
approximately 40% of new subscriptions; we expect this trend to continue, particularly as a result
of the new market initiatives described earlier.
All of our investment in research was fully expensed in the year. The total cost amounted to £0.7m,
which represents a decrease of 37% compared to the prior year (2018: £1.1m).
Capacity for future growth
We believe that the Company has significant opportunity for growth in its fleet business in both new and
existing markets. We achieved excellent growth in our subscription platform in 2019 and established
encouraging positions in a range of new markets. Our future growth will be based on our strategy of
investing in direct sales and marketing initiatives whilst restricting the need to increase central overheads
through improved efficiency in all of our back-office and other operations. This strategy served the
Company well in 2019.
Newtown remains the focus of our business operations and we are delighted to have plans in place to
occupy larger leased, open-plan single-storey premises in the centre of the town, adjacent to our existing
offices, with capacity for expansion of the workforce by a further 30%, with minimal additional cost to the
business. All employees will move into the office in early March 2020.
We will make additional investments in the development of our fleet business and in market expansion in
2020.
Andrew Walters
Chief Executive Officer
Daniel Mendis
Chief Operating and Financial Officer
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
11
Strategic Report: Financial Review
Key Performance Indicators (“KPIs”)
Year ended 31 December
Fleet subscriptions (units)
Fleet subscription base (units) 1
Fleet customer base
Fleet attrition (annualised) (%) 2
Annualised recurring revenue3 (£’000)
Fleet invoiced recurring revenue4 (£’000)
Fleet revenue (£’000)
Insurance installations (units)
Insurance revenue (£’000)
2019
43,837
150,640
16,394
11.9
20,534
19,297
20,808
36,386
4,813
2018
31,456
123,157
13,176
11.9
18,795
17,246
18,751
41,255
6,955
% change
39.4
22.3
24.4
-
9.3
11.9
11.0
(11.8)
(30.8)
1 Includes units waiting to be installed, for which subscription payments have started or are committed
2 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
3 Annualised data services revenue for the subscription base at the year end, before deferred revenue, including revenue for units
waiting to be installed for which subscription payments have started or are committed
4 Invoiced subscription charges before provision for deferred revenue
2019 was a year of good progress in our primary strategic objective of building our fleet subscription base.
We achieved over 43,000 new fleet subscriptions, an increase of 39.4% compared to 2018, and our fleet
subscription base grew by 22.3% to 150,640 units, with growth in all four of our geographical markets.
Attrition during the period remained at 11.9%.
Annualised recurring revenue increased by 9.3% to £20.5m. Group invoiced recurring revenue (before
adjusting for deferred revenue) grew by 11.9% to £19.3m (2018: £17.2m). The growth in fleet revenue at
11.0% was similar to the growth of our recurring revenue as our primary focus is on growing subscription
revenue.
Insurance unit installations were down 11.8% at 36,386, in keeping with the decision announced in July
2016 to focus on only those insurance opportunities which offer satisfactory margins and which are aligned
to our core fleet business.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
Financial Overview
Year ended 31 December
£’000 (except where stated)
Revenue
Fleet
Insurance
Total
Gross profit
Gross margin
Operating profit
Operating margin
Adjusted EBITDA (note 5)
Profit for the year
Earnings per share
Cash generated from operations
Operating profit to operating cash flow conversion
Free cash flow
2019
20,808
4,813
25,621
16,626
65%
6,438
25%
7,062
5,410
11.29
7,263
113%
6,223
Restated
2018
18,751
6,955
25,706
17,312
67%
8,223
32%
8,516
7,010
14.69
6,825
83%
5,583
12
% change
11.0
(30.8)
(0.3)
(4.0)
(21.7)
(17.1)
(22.8)
(23.1)
6.4
11.5
Revenue
Revenue decreased marginally to £25.6m (2018: £25.7m); however, the Group continues to replace
insurance with higher quality fleet revenue. Fleet revenue, benefitting from past investment and expansion
into new European territories, increased by £2.0m to £20.8m (2018: £18.8m). Sales to insurance customers
decreased by £2.1m and now represents less than 20% of Group revenue (2018: 27%). This is in-keeping
with the Group’s stated strategy of focussing on those areas of the market which adequately reward the
technology and service which it provides.
Gross margin
Gross margin decreased marginally to 65% in the year (2018: 67%), primarily as a result of the increase in
new fleet units (resulting in higher equipment, installation and carriage costs) and a reduction in releases of
insurance deferred revenue as existing policies reduce.
Adjusted EBITDA and Segmental Analysis
Adjusted EBITDA has reduced in the year to £7.1m (2018: £8.5m), entirely due to the reduction in
insurance profitability, which has decreased to £1.6m (2018: £3.2m). The £1.4m reduction is net of £0.2m
right of use asset depreciation arising from the adoption of IFRS 16 ‘Leases’ (see note 5).
A summary of the Group’s segmental analysis is set out below (see note 4 for an explanation of
categorisations and assumptions).
Total Fleet Segment profit remained deliberately similar to the prior year, at £9.7m (2018: £9.8m). The
profitability of the Group’s fleet telematics services, which represents the core part of the business
associated with recurring revenues, grew by £1.9m to £16.5m (2018: £14.6m). This growth was then
entirely reinvested, with an additional £2.0m being invested in acquiring additional fleet customers for the
future.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
13
Financial Overview (continued)
Segmental analysis 2019
Revenue
Segmental Costs
Profit before central fleet
costs
Central fleet costs
Segmental profit
Central Costs
Adjusted EBITDA (see note 5)
Segmental analysis 2018
Revenue
Segmental Costs
Profit before central fleet
costs
Central fleet costs
Segmental profit
Central Costs
Adjusted EBITDA (see note 5)
Customer
Acquisition
£’000
Fleet
Telematics
Services Total Fleet
£’000
£’000
Insurance
£’000
Total
Business
£,000
338
20,470
20,808
4,813
25,621
(6,398)
(3,973)
(10,371)
(3,212)
(13,583)
(6,060)
16,497
10,437
1,601
12,038
(747)
9,690
-
1,601
Customer
Acquisition
£’000
Fleet
Telematics
Services
£’000
Total Fleet
£’000
Insurance
£’000
335
(4,587)
18,416
(3,786)
18,751
6,955
(8,373)
(3,722)
(4,252)
14,630
10,378
3,233
(575)
-
9,803
3,233
(747)
11,291
(4,229)
7,062
Total
Business
£,000
25,706
(12,095)
13,611
(575)
13,036
(4,520)
8,516
Overheads
We continued to invest in our product offering, in our sales structure and in marketing, which led to an
increase in overheads of 12%.
Part of the aforementioned investment was in the USA where our subscription unit base has increased by
37.4% and revenue, as disclosed in note 3, increased to £2.0m ($2.6m) (2018: £1.5m). Losses in the USA
were around £0.4m ($0.5m) (2018: losses of £0.6m). Additionally, the expansion into the new European
territories contributed £0.05m toward revenue in the year, with a fleet base at the year end of 1,316 units.
Taxation
Our effective tax rate benefits from the Group’s investment in research and patents in the UK business.
The effective rate increased from 15.1% in 2018 to 16.1% in 2019, as a result of prior year adjustments and
lower research and development tax credits.
Earnings per share
Earnings per share decreased to 11.29p (2018: 14.69p) and diluted earnings per share decreased to 11.25p
(2018: 14.50p).
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
14
Financial Overview (continued)
Statement of financial position
Property, plant and equipment, at £0.8m (2018: £0.4m), increased by £0.4m due to the adoption of IFRS
16 retrospectively from 1 January 2019, but the Group has not restated comparatives for the 2018 reporting
period, as permitted under the specific transitional provisions in the standard. The reclassification and the
adjustments introducing a ‘right of use’ asset on the balance sheet is therefore recognised in the opening
balance sheet at 1 January 2019 (see note 32). There is a corresponding lease liability equivalent to £0.4m
at 31 December 2019, of which £0.2m is falling due within one year (see note 19).
Inventories increased to £0.9m (2018: £0.8m). Cash at the year-end was £6.8m (2018: £6.8m). Trade and
other receivables increased to £3.9m in the year (2018: £3.6m). This includes £0.8m (2018: £0.6m) of
commissions incurred in winning contracts with customers, which the Group now capitalises and amortises
under IFRS 15 ‘Revenue from Contracts with Customers’, following previously cited reviews of its
accounting policy and commission structures (see notes 2 and 31 for further details, and note 15 for the
split between non-current and current assets). The impact on profits in the year was a credit of £0.3m
(2018: £0.2m). Trade and other payables increased to £3.3m (2018: £2.8m).
Contract liabilities represent customer payments received in advance of satisfying performance obligations,
which are expected to be recognised as revenue in 2020 (both fleet and insurance). These unwound to
£4.8m in 2019 (2018: £4.7m) and are described further in note 18.
Cash flow
Cash generated from operations before tax at £7.3m was 113% of operating profit (2018: £6.8m, 83% of
operating profit). As previously stated, the year on year improvement in cash conversion is due to a lower
level of released insurance revenue in the current year, which is not cash generative, in addition to the
impact of IFRS 16 ‘Leases’, which increased the operating cash flows by £0.3m in 2019 with a
corresponding decrease in financing activities.
Tax paid in 2019 was £0.9m (2018: £0.9m), so cash flow from operating activities after taxation but before
capital expenditure was £6.4m (2018: £5.9m).
Free cash flow, after £0.2m of capital expenditure and interest received, was £6.2m, an increase of 11.5%
(2018: £5.6m).
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 staff. The impact of not mitigating this risk is that the Group ceases to be
innovative and provide customers with the vehicle telematics services they require. Considerable focus has
been given to recruitment, development and retention. The Group has a range of tailored incentive schemes
to help recruit, motivate and retain top quality staff, which include the use of share options.
Reliance on Mobile To Mobile (“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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
15
Financial Overview (continued)
Reliance on Mobile To Mobile (“M2M”) network (continued)
Management believe that, at some point between 2025 and 2030, most UK and European network
operators will finalise the sunsetting of their 2G networks. Depending on the actual timetable and the
commercial climate, there may be a cost at that time associated with the upgrading of customers’
technology, which the Group is seeking to minimise through various technological and commercial means.
A similar sunsetting process will occur for the 3G network in the US and management believe this will
likely be finalised in 2022.
Business disruption
Like any business the Group is subject to the risk of 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 and
Business Interruption Insurance to cover certain events in order to help mitigate these risks.
The potential damage to the Group’s business as a result of the UK leaving the EU is uncertain. The Group
acquires, manages and supports its customers in the EU centrally, from its offices in the UK. Depending
on the resulting trading and data adequacy arrangements, it is possible that the Group would need to
relocate some of its operations to within the EU. In addition, any impact on the wider economic landscape
would impact the Group’s trading indirectly through the demand for its services.
Our manufacturing partner in China has resumed limited operations following the New Year celebrations
due to the difficulties caused by the Coronavirus outbreak. At the time of writing, management does not
expect any material disruption to supply, but it is monitoring the situation closely.
Dependence on a key customer
During 2019 insurance revenue of £4.2m (2018: £5.5m) was derived via one insurance customer, a specialist
reseller for the insurance industry. Losing this key contract could have an impact on cash flow in the short
term. Total insurance revenue, including that generated from other customers, was £4.8m (2018: 7.0m) and
total insurance segment profit was £1.6m (2018: £3.2m).
Cyber security
The Group needs to make sure its data is kept safe and that there is security of supply of data services to
customers. The reputational and commercial impact of a security breach would be significant. To combat
this, the Group has a security policy and prepares a security report which is reviewed by members of 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 and their applications 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.
We believe we have the right strategy and service in place to deliver strong growth in sales over the medium
to long term and to deliver sustainable shareholder value.
Daniel Mendis
Chief Operating and Financial Officer
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 21 February 2020.
Andrew Walters
Chief Executive Officer
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
16
Corporate Governance Report
Chairman’s Corporate Governance Statement
All members of the Board believe strongly in the value and importance of good corporate governance and
in our accountability to all of Quartix’s stakeholders, including shareholders, staff, customers and suppliers.
In the statement below, we explain our approach to governance, and how the Board and its committees
operate.
The corporate governance framework which the Group operates, including board leadership and
effectiveness, board remuneration, and internal control is based upon practices which the Board believes
are appropriate for the size, risks, complexity and operations of the business and is reflective of the Group’s
values. Of the two widely recognised formal codes, we have therefore decided to adhere to the Quoted
Companies Alliance’s (QCA) Corporate Governance Code for small and mid-size quoted companies
(revised in April 2018 to meet the new requirements of AIM Rule 26).
The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated
what it considers to be appropriate arrangements for growing companies and asks companies to provide
an explanation about how they are meeting the principles through the prescribed disclosures. We have
considered how we apply each principle to the extent that the Board judges these to be appropriate in the
circumstances, and below we provide an explanation of the approach taken in relation to each. The Board
considers that it has complied with the principles of the QCA Code.
Roles and responsibilities of Chairman
Paul Boughton, the Non-Executive Chairman since November 2014, is responsible for running the Board
and ultimately for all corporate governance matters affecting the Group. He is a chartered accountant and
also chairs the Audit Committee. He is an experienced Executive and Non-Executive Director, having been
on the Boards of 5 public listed companies, including Quartix.
The Chairman is responsible for leadership of the Board, setting its agenda and monitoring its effectiveness.
He ensures effective communication with shareholders and that the Board is aware of the views of major
shareholders. He ensures that the Executive Directors develop a strategy which is supported by the Board
as a whole. The Executive Directors, through the Chief Executive Officer, are responsible for executing
the strategy once agreed by the Board.
Board composition and compliance
The QCA Code requires that the boards of AIM companies have an appropriate balance between Executive
and Non-Executive Directors of which at least two should be independent. During 2019 we satisfied this
requirement.
The Non-Executive Chairman and Independent Non-Executive Director bring wide and varied
commercial experience to the Board and Committee deliberations. They are appointed for an initial three-
year term, subject to election by shareholders at the first AGM after their appointment, after which their
appointment may be extended subject to mutual agreement and shareholder approval. 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. The Company
remains committed to a Board which has a balanced representation of Executives and Non-Executives.
Board evaluation
We support the QCA Code’s principle to review regularly the effectiveness of the Board’s performance as
a unit, as well as that of its committees and individual Directors, and completed the first review during
2019. We may consider the use of external facilitators in future board evaluations.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
17
Shareholder engagement
We have made significant efforts to ensure effective engagement with both institutional and private
shareholders. In addition to the usual roadshows following the release of full year and interim results, we
have opened our AGM as a forum to present to and meet with shareholders.
The Board is aware that following the introduction of the Markets in Financial Instruments Directive II
(MiFID II) regulations at the start of 2018, private investor access to research on public companies has
been restricted. We have not yet commissioned any “paid for” research from third party analysts and have
no current intention of doing so.
The Board has ultimate responsibility for reviewing and approving the Annual Report and Accounts and it
has considered and endorsed the arrangements for their preparation, under the guidance of its audit
committee. The Directors confirm that the Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to assess the Group’s position
and performance, business model and strategy.
10 Principles of the QCA Code
Establish a strategy and business model which promote long-term value for
1
shareholders
Since 2001 Quartix has become one of Europe’s leading suppliers of vehicle telematics services operating
in the UK, Europe and the USA. 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 areas related to the provision of data
services, including development of both hardware and software, supply chain, production and 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 vehicle telematics 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 minimal initial commitment from the customer, providing the best return to the Group over the
long term.
The value of recurring subscription 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 receives the cash in advance
from insurance customers. This is standard practice in the industry, as the level of attrition is relatively high.
Insurance revenue is recognised on a straight-line basis over the contract term, since the customer benefits
from the Group’s services evenly throughout the contract term and receives the benefit of the services as
they are made available.
Whilst the value of revenue has been the key measurement of our performance in the insurance sector, we restrict our operations
to those opportunities which provide an adequate return.
The key risks and uncertainties we face are included under the Strategic Report: Financial Review.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
18
2
Seek to understand and meet shareholder needs and expectations
Responsibility for investor relations rests with the CEO, supported by the COFO. During 2019 the
following activities were pursued to develop a good understanding of the needs and expectations of all
constituents of the Group’s shareholder base:
Date
Feb 19
Description
Preliminary results meeting
Feb 19
Feb 19
Presentations to institutional
investors and analysts
Annual results video
Participants Comments
CEO
The CEO and COFO prepare and review
with the board detailed presentations
covering the Group’s activities over the
relevant period and takes guidance from
each of the joint brokers.
CEO,
COFO
CEO,
COFO
Board
CEO,
COFO
Presentations disseminated via website at
7.00 a.m. on morning of results release so
all information available publicly available
to all shareholders and potential investors.
These have been accredited as rating
highly for openness and transparency.
All shareholders invited to attend
Mar 19
Jul 19
AGM
Interim results presentations
to institutional investors and
analysts
Interim results video
Jul 19
various
CEO,
COFO
CEO,
COFO
Key: CEO: Chief Executive officer Andy Walters, COFO: Chief Operating & Financial Officer Dan
Mendis
Presentations disseminated via website
(see above)
Presentation to potential investors
Potential investor meetings
The Group is committed to communicating openly with its shareholders to ensure that its strategy and
performance are clearly understood. We communicate with shareholders through the Annual Report and
Accounts, full-year and half-year announcements, trading updates and the annual general meeting (AGM),
and we encourage shareholders’ participation in face-to-face meetings. A range of corporate information
(including all Quartix announcements) is also available to shareholders, investors and the public on our
website.
Private shareholders: The AGM is the principal forum for dialogue with private shareholders, and we
invite all shareholders to attend and participate. The Notice of Meeting is sent to shareholders at least 21
days before the meeting. The chairs of the Board and all committees, together with all other Directors,
attend the AGM and are available to answer questions raised by shareholders. Shareholders vote on each
resolution and subsequently publish the outcomes on our website.
Institutional shareholders: The Directors actively seek to build a mutual understanding of objectives with
institutional shareholders. Our CEO and COFO make presentations to institutional shareholders and
analysts immediately following the release of the full-year and half-year results. We communicate with
institutional investors frequently through formal meetings. The majority of meetings with shareholders and
potential investors are arranged by the broking team within the Group’s nominated advisor. Following
meetings, the broker provides anonymised feedback to the Board from all fund managers met, from which
sentiments, expectations and intentions may be gleaned.
In addition, we review analysts’ notes to achieve a wide understanding of investors’ views. This information
is considered by the Board.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
19
Take into account wider stakeholder and social responsibilities and their
3
implications for long-term success
Staff – our ability to fulfil customer requirements and execute our strategy relies on having talented and
motivated staff.
Reason for engagement: Good two-way communication with staff is a key requirement for high levels of
engagement.
How we engage:
Weekly update communication.
Annual staff briefings, with opportunity for staff to ask questions.
Annual engagement survey.
These have provided insights that have led to enhancement of management practices and staff incentives.
Customers – our success and competitive advantage are dependent upon fulfilling customer requirements,
particularly in relation to quality of service and report reliability.
Reason for engagement: Longevity of customer relationships is a key part of our strategy.
Understanding current and emerging requirements of customers enables us to develop new and enhanced
services, together with software to support the fulfilment of those services.
How we engage:
Seek feedback on services and software systems.
Develop tools and reports to enable our customers to analyse driver behaviour.
Obtain feedback to use in the development of future service.
Suppliers – We have a range of suppliers including those who provide us with hardware, communication
services, installation services and marketing support.
Reason for engagement: Good services from our suppliers are critical to us delivering the data services to
our customers.
How we engage:
Co-ordinate and manage our network of installers to ensure on-time activation of tracking devices.
Operate systems to ensure that supplier invoices are processed and paid on time.
Shareholders – as a public company we must provide transparent, easy-to-understand and balanced
information to ensure support and confidence.
Reason for engagement: Meeting regulatory requirements and understanding shareholder sentiments on the
business, its prospects and performance of management.
How we engage:
Regulatory news releases.
Keeping the investor relations section of the website up to date.
Publish videos of investor presentations and interviews.
Annual and half-year reports and presentations.
AGM.
We believe we successfully engaged with our shareholders over the past 12 months.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
20
Embed effective risk management, considering both opportunities and threats,
4
throughout the organisation
The Group has a risk register that identifies key risks and all members of the Board are provided with a
copy of the register. The register, including control mechanisms to mitigate risks, is reviewed bi-annually
by the Board and is updated following each such review.
The key risks and uncertainties are included in the Strategic Report: Financial Review.
Staff are reminded on appointment and bi-annual basis that they should seek approval from the COFO if
they, or their families, plan to trade in the Group’s equities.
The key risks and uncertainties are included in the Strategic Report: Financial Review.
5
Maintain the Board as a well-functioning, balanced team led by the chair
The members of the Board have a collective responsibility and legal obligation to promote the interests of
the Group and are collectively responsible for defining corporate governance arrangements. Ultimate
responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.
The Board consists of five directors of which three are executive and two are independent non-executives.
The Board is supported by three committees: audit, remuneration and nominations. The Board will
consider appointing additional non-executive directors as its business expands.
Non-Executive Directors are required to attend 10-12 Board meetings per year (in Cambridge, Newtown
and London) and to be available at other times as required for face-to-face and telephone meetings with
the executive team and investors. In addition they attend Board committee meetings as required.
Meetings held during 2019 and the attendance of Directors is summarised below:
Board meetings
Audit Committee
Possible Attended
Possible Attended
Remuneration
Committee
Possible Attended
Executive Directors
Andy Walters
Dan Mendis
Laura Seffino (appointed 22
October 2019)
Non-Executive Directors
Paul Boughton
Jim Warwick
11
11
3
11
11
11
11
3
11
11
0
1
0
1
0
0
1
0
1
0
2
0
0
2
2
2
0
0
2
2
The Nominations Committee meets when required in relation to Board appointments.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
21
Maintain the Board as a well-functioning, balanced team led by the chair
5
(continued)
The Board has a schedule of regular business, financial and operational matters, and each Board committee
has compiled a schedule of work to ensure that all areas for which the Board has responsibility are addressed
and reviewed during the course of the year. The Chairman is responsible for ensuring that, to inform
decision-making, Directors receive accurate, sufficient and timely information. The Company Secretary,
who is also the COFO, compiles the Board and committee papers which are circulated to Directors prior
to meetings. The Company Secretary provides minutes of each meeting and every Director is aware of the
right to have any concerns minuted and to seek independent advice at the Group’s expense where
appropriate.
Ensure that between them the Directors have the necessary up-to-date
6
experience, skills and capabilities
All five members of the Board bring relevant sector experience in software and business services. They
have an aggregate 51 years of public company directorship experience, and two members are chartered
accountants. The Board believes that its blend of relevant experience, skills and personal qualities and
capabilities is sufficient to enable it to successfully execute its strategy. Where relevant, Directors research
relevant information, including on line material, and occasionally attend seminars and trade events, to
ensure that their knowledge remains current.
Key to committees/roles: E: Executive, N: Nomination, A: Audit, R: Remuneration, C Chair
Paul Boughton, Independent Chairman (CN, CA, R)
Background:
Paul is a chartered accountant who has worked at senior level in industry since 1981. His work was primarily
in business development and acquisitions, and involved extensive projects in the USA and mainland
Europe, which are the primary growth territories for Quartix. Sectors he was involved in were industrial
controls, instrumentation and analysers, mainly using a combination of hardware and software. As an
executive he served on the Boards of two fully listed companies.
With his only financial or commercial involvement with Quartix being his annual salary as Chairman, and
his publicly disclosed shareholding, he is considered independent and with no conflicts of interest with
Quartix employees or shareholders.
Current external appointments:
He is a Trustee and Treasurer of two charities, and for each he chairs their Finance and Resources
Committee. For one of the charities he also chairs three of their commercial subsidiaries
Skills and experience:
In previous Non-Executive roles he was a Board member of a fintech software and a navigation electronics
public company. For both entities he also served as chair of the audit committee, and for one he was also
the Senior Independent Director. He therefore brings a wide range of relevant skills, commercial
experience and governance knowledge to Quartix. He has a BSc degree in Business Economics and is a
Chartered Accountant
Time commitment: 1-3 days per month.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
22
Ensure that between them the Directors have the necessary up-to-date
6
experience, skills and capabilities (continued)
Jim Warwick, Independent Director (N, CR)
Background:
Jim was Technical Director of Analysys Ltd – a telecoms consultancy, involved primarily in financial
modelling of telecoms operators. In 2000 he joined Abcam plc as an Executive Director when it had around
7 staff, eventually becoming its COO during his 16 years there. At Abcam he initially headed the
development of its online ecommerce systems, and then oversaw its overall operations including
international expansion to be a world-wide leader in life-science reagents employing over 1000 staff.
Through this he was involved in Abcam’s IPO in 2005, as well as several acquisitions.
His only financial involvement with Quartix is his annual non-exec salary and his publicly declared
shareholding. He is considered independent with no conflicts of interest with Quartix employees or
shareholders.
Current external appointments:
He is currently a non-exec Director of two start-up companies around the Cambridge area, as well as
chairing an educational trust.
Skills and experience:
Jim has a MA in Computer Science from the University of Cambridge and has worked in hi-tech industries
since graduation in 1986. Jim brings considerable skills relating to IT and e-commerce systems as well as
overall experience with international expansion and organisational growth issues very relevant to Quartix.
Time commitment: 1-2 days a month
Andy Walters, Chief Executive Officer (E, N)
Background:
Andy Walters founded Quartix in 2001 with three colleagues. Prior to that he was Managing Director of a
subsidiary of Spectris plc for 6 years and had spent 15 years with Schlumberger in the UK and France,
where he was Marketing Director of the payphones and smart cards division.
Current external appointments:
Some voluntary business mentoring for The Prince’s Trust.
Skills and experience:
Andy holds an MA in electrical sciences from the University of Cambridge and developed the Company’s
UK patent, granted under the Patents Act 1977. He has many years’ experience of the vehicle tracking
market, having started the company in 2001 with three colleagues, and has been fully engaged in all aspects
of the business throughout this time.
Time commitment: 3 days a week
Dan Mendis, Chief Operating and Financial Officer (E, A)
Background:
Dan Mendis joined Quartix in 2017. He was previously Head of Finance (Ruminant) at AB Agri Ltd, a
subsidiary of Associated British Foods plc, before which he spent four years with Domino Printing Sciences
plc in two different Group roles. He has several years’ experience of senior management positions and has
worked in financial and business roles for fourteen years. He holds an MEng in Engineering Science from
the University of Oxford and is a member of the Institute of Chartered Accountants.
Current external appointments:
None
Skills and experience:
Dan has a broad range of financial and business experience, covering areas such as corporate finance,
treasury, tax, process review and strategy development.
Time commitment: Full time
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
23
Ensure that between them the Directors have the necessary up-to-date
6
experience, skills and capabilities (continued)
Laura Seffino, Chief Technical Officer (E)
Background:
Laura Seffino joined Quartix in June 2018 as Head of Software, and was promoted to Chief Technical
Officer in October 2019. In her new role Laura now holds responsibility for Group technology, strategy,
development and implementation. Prior to joining Quartix Laura spent 17 years in software development,
project management and delivery roles at 1Spatial plc, Cambridge.
Current external appointments:
None
Skills and experience:
Laura has a Bachelor’s and Master’s degrees in Computer Science from the Universidad Nacional del Sur
in Argentina the State University of Campinas in Brazil, respectively.
Time commitment: Full time
Evaluate board performance based on clear and relevant objectives, seeking
7
continuous improvement
A board evaluation process led by the Chairman was completed in 2019. Directors completed
questionnaires about the effectiveness of the Board and a self-assessment of their own contributions. The
Chairman reviewed this information, undertook individual discussions with each Director, followed by a
collective discussion with the Board.
The review considered the effectiveness in a number of areas including general supervision and oversight,
business risks and trends, succession and related matters, communications, ethics and compliance,
corporate governance and individual contribution.
We will consider the use of external facilitators in future board evaluations.
As noted in the 2018 Corporate Governance report, the Executive Directors were challenged to identify
potential internal candidates who could potentially occupy Board positions and set out development plans
for these individuals. This has resulted in the appointment of Laura Seffino to the Board as Chief Technical
Officer in October 2019.
8
Promote a corporate culture that is based on ethical values and behaviours
At Quartix we believe the prosperity of our business and of the communities within which we operate
requires a commitment to ethical values and behaviours. We have therefore developed policies that enhance
all areas of our business in this regard.
Quartix cares about providing a customer experience that is remarkable. We want to keep our customers
happy, impressed and reassured. We want to create the positivity that leads to great reviews, repeat
purchases and customer referrals. To achieve that, our employees strive to make every interaction a great
one. We follow these principles:
Build meaningful connections.
Whilst dealing with any of our stakeholders, be they customers, partners, investors or employees, foremost
in our minds is building great, meaningful relationships. We are not a provider of arms-length transactional
services; we are here to listen, understand, support and deliver tangible benefits as best we can.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
24
Promote a corporate culture that is based on ethical values and behaviours
8
(continued)
Keep things simple.
Whether it is our processes, communication, hardware or software, we strive to keep things simple. Fewer
moving parts make for clearer, more efficient and reliable operations. We don’t make our customers jump
through hoops to speak to us, nor do we make them study an article to understand its meaning. We get
straight to the incoming call, to the email in our inbox, to the point, and provide a fast, helpful and clear
response.
Treat everybody the same.
Whoever you talk to, whether internally or externally, their impression of the Quartix service should be the
same. We treat everyone equally, with respect, and remain transparent as a business.
Do the right thing
Quartix cares about doing what’s best for our customers and for each other. We own problems and solve
them, regardless of whether it’s our designated responsibility. With or without a corporate process, we will
strive to provide a satisfactory solution in every case.
Share your knowledge
Knowledge is valuable. Our customers, prospects and colleagues can all benefit from the knowledge that
we have to offer. Quartix and its staff have a whole host of skills, expertise and experience to share with
others and we are proud to do so.
The culture of the Group is characterised by these values which are communicated to staff through a
number of mechanisms.
The Board believes that a culture that is based on the five core values is a competitive advantage and
consistent with fulfilment of the Group’s execution of its strategy.
The culture is monitored through the use of a widely-used satisfaction and engagement survey that is
operated on an annual basis and to which all permanent staff are invited to contribute. The Operations
Board reviews the findings of the survey and determines whether any action is required.
Maintain governance structures and processes that are fit for purpose and
9
support good decision-making by the Board
The Board provides strategic leadership for the Group and operates within the scope of a robust corporate
governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves
setting the culture, values and practices that operate throughout the business, and defining the strategic
goals that the Group implements in its business plans. The Board defines a series of matters reserved for
its decision and has delegated some of its responsibilities to Audit, Remuneration and Nominations
Committees. The chair of each committee reports to the Board on the activities of that committee.
The Audit Committee monitors the integrity of financial statements, oversees risk management and
control, monitors the effectiveness of internal controls and reviews external auditor independence.
Paul Boughton is Chairman of the Audit Committee which meets once or twice a year, as appropriate. 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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
25
Maintain governance structures and processes that are fit for purpose and
9
support good decision-making by the Board (continued)
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
The Remuneration Committee sets and reviews the compensation of Executive Directors including the
setting of targets and performance frameworks for cash and share-based awards.
Jim Warwick chairs the Remuneration Committee. It acts to ensure sound Corporate Governance with
respect to Director and senior management remuneration and meets once or twice in the year, as
appropriate. 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
The 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 2019
26
Maintain governance structures and processes that are fit for purpose and
9
support good decision-making by the Board (continued)
The Chairman has overall responsibility for corporate governance and in promoting high standards
throughout the Group. He leads and chairs the Board, ensuring that committees are properly structured
and operate with appropriate terms of reference, ensures that performance of individual Directors, the
Board and its committees are reviewed on a regular basis, leads in the development of strategy and setting
objectives, and oversees communication between the Group and its shareholders.
The CEO provides coherent leadership and management of the Group and leads the development of
objectives, strategies and performance standards as agreed by the Board. He also monitors, reviews and
manages key risks and strategies with the Board, ensures that the assets of the Group are maintained and
safeguarded, leads on investor relations activities to ensure communications and the Group’s standing with
shareholders and financial institutions is maintained, and ensures that the Board is aware of the views and
opinions of employees on relevant matters.
The Executive Directors are responsible for implementing and delivering the strategy and operational
decisions agreed by the Board, making operational and financial decisions required in the day-to-day
operation of the Group, providing executive leadership to managers, championing the Group’s core values
and promoting talent management.
The Independent Non-Executive Directors contribute independent thinking and judgement through
the application of their external experience and knowledge, scrutinise the performance of management,
provide constructive challenge to the Executive Directors and ensure that the Group is operating within
the governance and risk framework approved by the Board.
The Company Secretary is responsible for providing clear and timely information flow to the Board and
its committees and supports the Board on matters of corporate governance and risk.
The key matters reserved for the Board are:
Setting long-term objectives and commercial strategy.
Approving annual budgets.
Changing the share capital or corporate structure of the Group.
Approving half-year and full-year results and reports.
Approving dividend policy and the declaration of dividends.
Ensuring a satisfactory dialogue with shareholders
Approving major investments, disposals, capital projects or contracts.
Approving resolutions to be put to general meetings of shareholders and the associated documents
or circulars.
Approving changes to the Board structure.
The Board has approved the adoption of the QCA Code as its governance framework against which this
statement has been prepared and will monitor the suitability of this code on an annual basis and revise its
governance framework as appropriate as the Group evolves.
The Board will continue to monitor its governance structures as the Group grows and will take action as
appropriate to develop and enhance its governance functions.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
27
Communicate how the Company is governed and is performing by maintaining a
10
dialogue with shareholders and other relevant stakeholders
In addition to the investor relations activities described previously, the following audit, remuneration and
nominations committee reports were provided during 2019:
Audit Committee Report
During 2019, the Audit Committee continued to focus on the effectiveness of the controls throughout the
Group. The Audit Committee is chaired by Paul Boughton. The committee met formally once, and had
other discussions (including with the auditors) as required, and the external auditor and COFO were invited
to attend the formal meeting.
Consideration was given to the auditor’s pre- and post-audit reports and these provide opportunities to
review the accounting policies, internal control and the financial information contained in the annual report.
Remuneration Committee Report
The remit of the Remuneration Committee is to determine the framework, policy and level of remuneration,
and to make recommendations to the Board on the remuneration of Executive Directors. In addition, the
committee oversees the creation and implementation of all-employee share plans. The Remuneration
Committee consists of Paul Boughton and Jim Warwick. The committee met once.
In setting remuneration packages the committee ensured that individual compensation levels, and total
board compensation, were comparable with those of other AIM-listed companies.
During 2019 the Remuneration Committee granted options over ordinary shares in the Company to
employees of the Company and cash settled share options to an Executive Director.
In granting these options, the Remuneration Committee’s objective was to attract, motivate and retain key
staff over the long term, designed to incentivise delivery of the Company's growth objectives.
Nomination Committee Report
The remit of the Nomination committee is to evaluate potential Board appointments against the skills and
experience which the Board requires. It meets as required for this purpose.
The Nomination committee is chaired by Paul Boughton and also includes Jim Warwick and Andy Walters.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
28
Directors’ Remuneration Report
During the year ended 31 December 2019 the Remuneration Committee consisted of both Non-Executive
Directors and CEO and was chaired by Jim Warwick.
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.
Remuneration of Executive Directors
In 2019, the Directors’ remuneration packages comprised of a salary and the opportunity to enrol in the
Governments’ auto-enrolment pension scheme. The Remuneration Committee awarded the COFO a
performance bonus in respect of the 2019 financial year, up to a maximum equivalent to 20% of his gross
pay. This scheme was replaced from November 2019 with a cash settled share option agreement, as
outlined below. Otherwise, and at the Executive Directors’ request, no other benefits, with the exception
of share option grants, would be paid in 2019. See below for a breakdown of the Directors’ remuneration
packages during the year.
Directors’ detailed emoluments and compensation (audited)
Executive
Directors
Andrew Walters
Edward Ralph1
Daniel Mendis2
David Bridge3
Laura Seffino4
Non-
Executive
Directors
Paul Boughton
Jim Warwick
Salary
91,080
-
102,695
-
20,686
231,155
50,000
40,000
90,000
Bonus
-
-
16,694
-
-
16,694
-
-
-
2019 (£)
Pension
-
-
2,819
-
563
3,895
Total
91,080
-
122,207
-
21,249
234,536
2018 (£)
Total
87,182
156,009
99,442
5,995
-
348,628
-
-
-
50,000
50,000
40,000
90,000
40,000
90,000
1 Resigned on 31 October 2018
2 Appointed on 1 January 2018, and highest paid Director in 2019
3 Resigned on 22 February 2018
4 Appointed on 22 October 2019
Directors share options
Equity-settled
Daniel Mendis1
Laura Seffino2
Cash-settled
Daniel Mendis
2019
280,000
92,592
170,000
2018
280,000
-
-
See below for details for the new awards issued in the year to Directors and note 22 for further details on
share options.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
29
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 2017
1 May 2017
Subject to re-election at the forthcoming AGM, it is the Board’s intention to renew the Non-Executive
Directors’ contracts for another three year from 1 May 2020.
Directors and their interests in shares
Year ended 31 December
Executive Directors
Andrew Walters3
Daniel Mendis
Laura Seffino
Non-Executive Directors
Paul Boughton
Jim Warwick
Ordinary shares £0.01 each
2019
17,855,986
-
-
17,855,986
53,889
73,333
17,983,208
2018
17,855,986
-
-
17,855,986
53,889
73,333
17,983,208
1 Appointed on 1 January 2018, and highest paid Director in 2019
2 Appointed on 22 October 2019
3 Includes shares held as family interests or by virtue of position as beneficiary or potential beneficiary of certain trusts
Directors and employees share options
During the period under review the Remuneration Committee granted options over ordinary shares in the
company to employees of the company. In granting these options, the Remuneration Committee’s objective
was to attract, motivate and retain key staff over the long term, designed to incentivise delivery of the
company’s growth objectives.
Following the management changes announced by the Company on 23 October 2019, Daniel Mendis,
Chief Operating and Financial Officer, assumed additional responsibilities and in lieu of receiving a bonus,
to reflect these additional responsibilities, the Remuneration Committee agreed to an award of cash settled
share options, with the aim to reward and promote the creation of sustainable growth in shareholder value
by allowing Daniel to exercise some or all of his existing share options without any cash outlay on his part.
The scheme allows Daniel to draw cash to the value of a maximum of 260,000 options by 5 April 2024
equal to the gain in the share price above £3.22. These new options are exercisable in four annual tranches,
the first of which will follow the announcement of the Company’s 2020 interim results (expected to be in
late July 2020), and are subject to share price targets on the market, with a minimum required to exercise
of £3.35.
Jim Warwick
Chairman, Remuneration Committee
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
30
Directors' Report
The Directors present their annual report and the financial statements of the Company for the year ended
31 December 2019.
Principal activity
The principal activity of the Group during the year was the design, development, marketing and delivery of
vehicle telematics 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 9 Dukes
Court, 54~62 Newmarket Rd, Cambridge CB5 8DZ.
Research and development
Please see the Strategic Report on page 10 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 10.
Proposed dividend
In the year ending 31 December 2019, the Board decided to pay an interim dividend of 2.4p per ordinary
share. This totalled £1.15m and was paid on 13 September 2019 to shareholders on the register as at 16
August 2019.
The Board is recommending a final dividend of 4.2p per share, together with a supplementary dividend of
5.8p per share, giving a final payment of 10.0p per share, amounting to approximately £4.8m in aggregate
and giving a total dividend for the year equivalent to 12.4p per share. If this is approved at the forthcoming
AGM on 24 March 2020, the final dividend will be paid on 1 May 2020 to shareholders on the register as
at 3 April 2020.
Major interest in shares
On 21 February 2020, the Company had been notified that six 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
Liontrust Investment Partners LLP
Andrew Kirk
William Hibbert
BlackRock, Inc.
Kenneth Giles
Number of £0.01 shares
17,855,986
5,534,178
4,009,853
2,663,000
2,513,357
1,871,800
% of total
37.3
11.5
8.4
5.6
5.2
3.9
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 2019
31
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
Daniel Mendis
Laura Seffino
(appointed 22 October 2019)
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, 6 months
for Daniel Mendis and 6 months for Laure Seffino.
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 24 March 2020.
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.
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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
32
Directors' responsibilities statements (continued)
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.
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 27.
Credit risk
The principal credit risk relates to trade receivables and is mitigated, where possible, by third party credit
clearance for new customers and collection by direct debit, or similar. 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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
33
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 21 February 2020.
Andrew Walters
Chief Executive Officer
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
34
Independent Auditor's Report to the Members of Quartix
Holdings plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Quartix Holdings plc (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2019, 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, the Parent
Company Statement of Financial Position, the Parent Company Statement of Changes in Equity and
notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the group financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 ‘Reduced Disclosures Framework’ (United Kingdom Generally
Accepted Accounting Practice).
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 31 December 2019 and of the Group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s
responsibilities for the audit of the financial statements’ section of our report. We are independent of the
group and the parent company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Group’s or the parent company’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the date when
the financial statements are authorised for issue.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
35
Overview of our audit approach
Overall Group materiality: £322,000, which represents 5% of the
Group’s pre-audit profit before taxation
Key audit matters were identified as revenue recognition and deferred
revenue
We performed full scope audit procedures on the financial statements
of Quartix Holdings Plc and on the financial information of Quartix
Limited. We performed targeted audit procedures on the financial
information of Quartix Inc. There were no changes in scope from the
prior year.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included those that
had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key Audit Matter – Group
Revenue recognition
Under International Standard on Auditing
(ISA 240) ‘The Auditor’s Responsibilities
Relating to Fraud in an Audit of Financial
Statements’, there is a rebuttable presumed
risk that revenue may be misstated due to the
improper recognition of revenue.
The Group’s principal revenue stream
relates to the provision of telematics vehicle
tracking services, including data services, to
customers.
The Group’s activities of
supplying telematics units and providing
telematics services are considered to be a
is
single performance obligation which
satisfied over a period of time. The Group
has two types of customers, Fleet and
Insurance and revenue is recognised over
the period that services are provided.
of
£25,620,630
Revenue
(2018:
£25,705,678) was recorded in the period.
Fleet customers account for 81% (2018:
73%) of revenue and Insurance 19% (2018:
27%) of revenue.
Given the nature of the Group’s revenue
being a relatively high volume of low value
transactions we identified that the risk of
fraud in revenue recognition was in the
How the matter was addressed in
the audit – Group
Our audit work on revenue separately
addresses the two types of customers, Fleet
and Insurance.
A combination of analytical procedures and
substantive testing was performed on each
class of customers revenue documented
below:
•
revenue
journals
then
Identifying
classifying them by type and testing them
as appropriate depending on their nature
and associated risk;
• Performing analytical review looking at
in revenue
year-on-year movements
streams; and
• Assessing whether revenue recorded in
the period was consistent with the
Group’s accounting policy and whether
that was compliant with IFRS 15.
Fleet customer revenue
We performed the following tests on fleet
customer revenues:
• For a sample of sale invoices raised we
checked subsequent receipts of cash to
ensure that customers continued to pay
their subscription (typically via direct
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
36
Key Audit Matter – Group
occurrence assertion for example through
the posting of a fraudulent journal. This
significant risk was one of the most
significant assessed
risks of material
misstatement.
The Group also changed its accounting
policy in relation to distributor commissions
and disapplied the practical expedient to
expense
to
contracts of less than 12 months duration.
commissions
relation
in
The group's accounting policy on revenue
recognition is set out in note 1 to the
financial statements and related disclosures
are included in note 3 and 4.
Deferred revenue
The Group raises invoices in advance and
classifies deferred revenue as contract
liabilities
2018
£4,654,833).
£4,843,253;
(2019
Under IFRS 15, the Group’s activities of
supplying telematics units and providing
telematics services are considered to be a
is
single performance obligation which
satisfied over a period of time. The deferred
revenue balance is driven by the contract
terms and number of units, and as a
significant balance presents a risk of material
misstatement.
Given the magnitude of the deferred
for
the
revenue balance
management calculations and potential for
manipulation we identified deferred revenue
as a significant risk.
requirement
How the matter was addressed in
the audit – Group
debit) thus evidencing occurrence of
revenue; and
• We reviewed credit notes raised post
year-end to ensure revenue recognised
then
during
subsequently being reversed.
year was not
the
Insurance customer revenue
• We performed a substantive analytic on
insurance revenue by multiplying the
number of units by contract price to give
an expected sales value which we
compared to actual sales. We verified the
including
inputs to our calculation
obtaining
third party confirmations
directly from insurance customers to
confirm the number of units installed.
Change in accounting policy
• We assessed management’s change in
accounting policy
distributor
commissions including recalculating the
prior year adjustment and auditing the
inputs to management’s calculations.
for
Key observations
We found no errors or indications of fraud
in our work on revenue recognised in the
period.
Our audit work on deferred revenue
addressed
types of
two
customers, Fleet and Insurance.
the Group’s
Our audit work included, but was not
restricted to:
Fleet deferred revenue
For a sample of paid sales invoices,
recalculated the appropriate portion of
revenue
the
contractual billing terms agreed with the
customer and compared this to the
actual amount deferred; and
to defer based on
We recalculated the year end deferred
revenue balance based on invoicing in
the final quarter.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
37
Key Audit Matter – Group
The group's accounting policy on revenue
recognition is set out in note 1 to the
financial statements.
How the matter was addressed in
the audit – Group
Insurance deferred revenue
As insurance revenue is deferred over
the length of the insurance policies (a
year), we have recalculated the deferred
revenue balance in aggregate based on
audited monthly sales figures for the
year.
Key observations
We found no errors or other deviations in
our work on deferred revenue.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We
use materiality in determining the nature, timing and extent of our audit work and in evaluating the results
of that work.
Materiality was determined as follows:
Materiality measure Group
Financial statements
as a whole
£322,000, which represents 5%
of the Group’s expected profit
before
This
taxation.
benchmark is considered the
most appropriate because the
commercially
a
Group
focused organisation and profit
before taxation is a key financial
measure for the directors and
the shareholders.
is
Materiality for the current year is
lower than the level that we
determined for the year ended
31 December 2018 to reflect the
decline in the Group’s profit
before taxation.
Parent
£210,000, which is 1% of the
parent company’s total assets.
This benchmark is considered
the most appropriate because
the entity
is a non-trading
holding company.
Materiality for the current year is
higher than the level that we
determined for the year ended
31 December 2018 reflecting
the increase in the company’s
total assets.
Performance
materiality used
to
drive the extent of our
testing
Communication
of
misstatements to the
audit committee
75% of
materiality.
financial statement
75% of
materiality.
financial statement
£16,100
and misstatements
below that threshold that, in our
view, warrant
reporting on
qualitative grounds.
£10,500
and misstatements
below that threshold that, in our
view, warrant
reporting on
qualitative grounds.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
38
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group's
business, its environment and risk profile. We considered the size and risk profile of each entity, any
changes in the business and other factors when determining the level of work to be performed on the
financial information of each entity, which, in particular included:
Assessing the risk of material misstatement to the Group financial statements. We considered the
transactions undertaken by each entity and therefore where the focus of our work was required.
Full scope audit procedures were completed for the main trading subsidiary, Quartix Limited, which
provides services to customers based in the UK, France and other European territories. Full scope
audit procedures were performed for the parent, Quartix Holdings Plc, which is a non-trading holding
company. Targeted audit procedures were performed for Quartix Inc which provides services to US
based customers.
The total percentage coverage of full scope procedures over the Group’s total revenues was 100% and
total assets was 99%.
All accounting is centralised, and we completed our onsite audit work at the Group’s main operating
location in Newtown, Wales. Group level work is performed at the Cambridge head office. All audit
work is undertaken by the Cambridge based group audit team.
The audit risks identified for each trading component are the same audit risks identified for the Group
as a whole.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
39
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 31, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the Group
or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
40
Use of our report
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
Adrian Bennett
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
21 February 2020
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
41
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
2019
£’000
Restated
2018
£’000
25,621
(8,995)
25,706
(8,394)
16,626
17,312
(10,188)
(9,089)
6,438
8,223
34
(21)
29
-
6,451
8,252
Notes
3,4
8
9
5
10
(1,041)
(1,242)
5,410
7,010
Other Comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange difference on translating foreign operations
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income attributable to the equity
shareholders of Quartix Holdings plc
93
93
(158)
(158)
5,503
6,852
Earnings per ordinary share (pence)
Basic
Diluted
11
11.29
11.25
14.69
14.50
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
42
Consolidated Statement of Financial Position
Company registration number: 06395159
31 December
2019
Notes
£'000
31 December
2018
Restated
£'000
1 January
2018
Restated
£'000
Assets
Non-current assets
Goodwill
Property, plant and equipment
Deferred tax assets
Contract cost 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
Contract liabilities
Current tax liabilities
Non-current liabilities
Lease liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Equity reserve
Capital redemption reserve
Translation reserve
Retained earnings
Total equity attributable to equity
shareholders of Quartix Holdings plc
12
13
20
15
14
15
16
17
18
19
21
21
14,029
845
2
304
15,180
877
3,907
6,789
11,573
14,029
433
-
228
14,690
771
3,581
6,779
11,131
14,029
234
641
186
15,090
703
3,513
7,312
11,528
26,753
25,821
26,618
3,311
4,843
377
8,531
241
-
241
8,772
17,981
479
5,230
616
4,663
(168)
7,161
2,814
4,655
99
7,568
-
150
150
2,853
5,972
423
9,248
-
-
-
7,718
9,248
18,103
17,370
478
5,196
390
4,663
(261)
7,637
476
4,869
529
4,663
(103)
6,936
29
17,981
18,103
17,370
Approved by the Board of Directors, authorised for issue and signed on behalf of the Board on 21 February
2020.
Andrew Walters
Chief Executive Officer
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
43
Consolidated Statement of Changes in Equity
Share
premium
account
£,000
Capital
redemption
reserve
£’000
Share
capital
£’000
Equity
reserve
£’000
Translation
reserve
£’000
Retained
earnings
Total
equity
£’000 £’000
476
4,869
4,663
529
(103)
6,373
16,807
-
476
2
-
4,869
327
-
-
-
563
563
4,663
-
529
-
(103)
-
6,936
-
17,370
329
-
-
-
-
2
-
-
-
-
-
-
-
327
-
-
-
-
-
-
-
-
-
-
-
478
1
5,196
34
4,663
-
-
-
-
-
1
-
-
-
-
-
-
-
34
-
-
-
-
-
-
-
-
-
-
-
108
(133)
(114)
-
(139)
-
-
-
390
-
249
(58)
35
-
226
-
-
-
-
-
-
-
-
-
108
133
-
-
(114)
(6,442) (6,442)
(6,309) (6,119)
(158)
-
(158)
-
7,010
7,010
(158)
7,010
6,852
(261)
-
7,637
-
18,103
35
-
-
-
-
-
-
249
58
-
-
35
(5,944) (5,944)
(5,886) (5,625)
93
-
-
5,410
93
5,410
93
5,410
5,503
479
5,230
4,663
616
(168)
7,161
17,981
Balance at 31
December 2017
Change in accounting
policy (note 31)
Restated balance at
31 December 2017
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
Restated profit for the
year
Total
comprehensive
income
Restated balance at
31 December 2018
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
(note 27)
Profit for the year
Total
comprehensive
income
Balance at 31
December 2019
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
44
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 from operating activities
after investing activities (free cash flow)
Financing activities
Lease interest paid
Repayment of lease liabilities
Proceeds from share issues
Dividend paid
Cash flow used in 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
2019
£'000
7,263
(880)
6,383
(194)
34
(160)
Restated
2018
£'000
6,825
(889)
5,936
(382)
29
(353)
6,223
5,583
(21)
(236)
35
(5,944)
(6,166)
57
6,779
(47)
6,789
-
-
329
(6,442)
(6,113)
(530)
7,312
(3)
6,779
Notes
23
8
9
16
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
45
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 2019 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 adopted IFRS 16 ‘Leases’ (hereinafter referred to as ‘IFRS 16’) with effect from 1 January
2019, the adoption of this new Standard has resulted in the Group recognising a right of use asset and
related lease liability in connection with all former operating leases except for those identified as low-value
or having a short life of less than 12 months from the date of initial application.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect
of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings
for the current period. Prior periods are not required to be restated. Further information on the impact of
the new policy is disclosed in note 32.
The Group has also decided to change its accounting policy in relation to costs in obtaining customer
contracts. Previously under IFRS 15 the Group adopted the practical expedient option to expense
incremental costs in obtaining customer contracts for contracts with a duration of 12 months or less. The
Group will no longer apply this expedient. As a consequence of this policy change, the financial statements
have been restated to 1 January 2018. Further information on the impact of the change in policy is disclosed
in note 31.
At the date of authorisation of these financial statements, several amendments to existing Standards and
interpretations have been published by the IASB, but are not effective until financial periods commencing
1 January 2020. None of these Standards or amendments to existing Standards have been adopted early by
the Group.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on
the effective date of the pronouncement. New Standards, Amendments and Interpretations not adopted in
the current year have not been disclosed as they are not expected to have a material impact on the Group’s
financial statements.
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 over an investee entity, currently obtained through ownership of the share capital, 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 30.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
46
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.
Revenue recognition
Revenue is the amount receivable for goods and services, excluding sales taxes, rebates, and trade discounts.
Revenue comprises the provision of telematics-based fleet and vehicle management solutions. Revenue is
recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations
by transferring the promised goods or services to its customers.
Under IFRS 15, the Group must evaluate the separability of the promised goods or services based on
whether they are ‘distinct’. A promised good or service is ‘distinct’ if both:
the customer benefits from the item either on its own or together with other readily available
resources; and
it is ‘separately’ identifiable (i.e. the Group does not provide a significant service integrating,
modifying or customising it).
For the adoption of IFRS 15 the Group completed a detailed assessment of its sources of revenue and,
assessed whether the components of hardware, installation and set-up of units and data services are distinct
under the definitions of IFRS 15.
The Group concluded that the Group’s activities of supplying telematics units and installing telematics units
are not distinct and are activities the Group undertakes to provide its telematics services and are supplied
as part of a contract with the customer. This means that the Group considers these goods and services as
one single performance obligation. Consequently, the Group does not recognise revenue separately for
these goods and services; rather, it recognises this revenue together as the provision of vehicle telematics
services.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance
obligations and reports these amounts as contract liabilities in the statement of financial position (see note
18).
If the Group satisfies a performance obligation before it received the consideration, the Group recognises
a receivable in its statement of financial position.
In relation to costs, the hard-wired unit and associated installation costs are recognised when the Group
relinquishes control of the unit since, once installed, the unit relates to both unsatisfied performance
obligations and to satisfied performance obligations (or partially satisfied performance obligations). The
Group outsources the installation of hard-wired units to its large base of skilled engineers. In the case of
‘self-install’ units, which customers are able to physically install into their vehicles themselves, the Group’s
judgement is that it still has obligations in relation to the technical set-up of these units (including
connectivity); however, the Group will keep this judgement under review.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
47
1
Summary of significant accounting policies (continued)
Revenue recognition (continued)
For the adoption of IFRS 15 in 2018, the Group chose to use the practical expedient under IFRS 15 to
expense these commissions as an expense when incurred and to keep the policy under review. Following
a more detailed analysis of customer contracts, particularly those won through distributors, the Group has
chosen to change its accounting policy for the treatment of incremental costs of obtaining a contract with
a duration of 12 months or less, by disapplying the practical expedient in IFRS 15 ‘Revenue from Contracts
with Customers’. Commissions incurred in winning customer contracts are therefore now capitalised and
amortised through profit and loss, with an amortisation period of the contract length. The impact of the
change in policy is included in note 31.
Insurance telematic services
For insurance telematic services, the customer commits to purchase data services for 12 months. Quartix
raises a single invoice upon installation of the unit, payable in the following month, with revenue recognised
over the 12 month period on a straight line basis, since the customer benefits from the Group’s services
evenly throughout the contract term and receives the benefit of the services as they are made available. The
contract price, which is subject to periodic review, is set for each insurance customer, depending on the
level of services provided.
If the driver’s policy is extended, then Quartix will raise further charges, these are invoiced either as a one-
off annual fee or as monthly fees, depending upon the contractual arrangements, which are payable within
30 days.
Fleet telematic services
Fleet customers enter into contracts typically with a commitment to purchase data services for 12 months.
The price is fixed for the contract term. Generally invoices are raised quarterly in advance, with payment
due within 30 days. Quartix satisfies its performance obligations over time as services are rendered.
If promotional offers include any free months, then total revenue is allocated on a straight line basis over
the whole period of data services in accordance with the performance obligations, since the customer
benefits from the Group’s services evenly throughout the contract term and receives the benefit of the
services as they are made available.
Support Services
Quartix performs additional services, such as removing, upgrading or transferring units to alternative
vehicles, and theft tracking. These are considered to be separate performance obligations for which a
separate charge and invoice is raised. Revenue is recognised once the additional service obligation has been
delivered to the customer.
Segmental reporting
Following a change in the way the Group monitors and assesses the business it has adopted, segmental
reporting in these financial statements. Historically, the information used by the Group’s chief operating
decision maker was presented on a consolidated Group basis. All revenue, costs, assets and liabilities
related to a single activity, being the design, development and marketing of vehicle tracking devices and
the provision of related data services, and the Group concluded that it operated only one operating
segment as defined by IFRS 8.
Whilst information is still largely presented on a consolidated basis, and the telematics services are very
similar, the Group’s chief operating decision maker has been provided with additional information to
make decisions about the allocation of resources and assessing performance. The main drivers for this
have been the impact assessment of the Group’s strategy to reduce its involvement in lower-margin
insurance tracking operations in order to focus on growth in its fleet telematics business and the Group’s
commitment to providing investors with clear and timely information regarding its performance against
both financial and strategic objectives.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
48
1
Summary of significant accounting policies (continued)
Segmental reporting (continued)
The Group has therefore included segmental financial information for its insurance and fleet operations.
These two segments have been identified as they are managed separately, with different marketing
approaches for the discrete market sectors, for which the Group has different strategies. Their reported
revenue each meet the quantitative thresholds of IFRS 8.
The Group has aggregated fleet operations for all geographical markets. However, to increase transparency,
the Group has decided to include an additional voluntary disclosure, separating the fleet segment into two
sub-categories in order to highlight the different costs structures within the business:
Customer acquisition, for new customer contracts; and
Fleet telematics services for recurring revenue and repeat contracts with existing customers.
There are no inter segment transfers between the insurance and fleet segments. The Group uses the same
measurement policies as those used in its financial statements, except for certain items not included in
determining the segmental profit of the operating segments, since these relate to both the fleet and
insurance segments. These include Central overhead costs such as Director salaries, development, audit and
legal fees, property costs and infrastructure costs. Detailed segmental information, including a
reconciliation to the financial statements, are included in note 4.
The Group’s chief operating decision maker has been provided with only consolidated information on the
Group’s financial position as it is not possible to provide segmentation of total assets or total liabilities.
With the exception of insurance trade receivables and contract obligations, where the customer base is
clearly identifiable, it is not possible to segregate the other assets or liabilities. For example, tangible assets
for IT servers and cash can’t be allocated since they are shared between the segments.
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. The goodwill arose from a
business combination in 2008, at which time the trading subsidiary only had commercial fleet operations,
therefore the entirety of the goodwill has been allocated to the fleet segment for the impairment review.
Any impairment is recognised immediately in profit or loss.
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:
Leasehold properties
Tools and equipment
Office equipment
Motor Vehicles
The life of the lease
25% straight line
25% straight line
The life of the lease
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
49
1
Summary of significant accounting policies (continued)
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 unit used for the impairment test of goodwill is the
fleet segment as explained in the Intangible Assets policy above.
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.
Leases
The Group has adopted IFRS 16 ‘Leases’ (hereinafter referred to as ‘IFRS 16’) with effect from 1 January
2019. The adoption of this new Standard has resulted in the Group recognising a right of use asset and
related lease liability in connection with all former operating leases except for those identified as low-value
or having a short life of less than 12 months from the date of initial application.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect
of adopting IFRS 16 being recognised as an adjustment to the opening balance of property, plant and
equipment and lease liabilities for the current period. Prior periods are not required to be restated.
Further information on the impact of the new policy is disclosed in note 32.
For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is,
or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an
asset (the underlying asset) for a period of time in exchange for consideration’.
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the
balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of
the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and
remove the asset, or restore a property, at the end of the lease, and any lease payments made in advance
of the lease commencement date (net of any incentives received).
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
50
1
Summary of significant accounting policies (continued)
Leases (continued)
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date
to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group
also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments
unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or
the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including
in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a
residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for
interest. It will also be remeasured to reflect any reassessment or modification, or if there are changes in
the in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset,
or profit and loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical
expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these
are recognised as an expense in profit or loss on a straight-line basis over the lease term.
Inventories
Components held for manufacture of vehicle tracking units and units not yet deployed to customers are
classified as inventory. Inventories are stated at cost less provision for obsolete, slow moving or defective
items. Cost is based on the cost of purchase on a first in first out basis. Provision against inventories is
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 and which are subject to
an insignificant risk of changes in value.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
51
1
Summary of significant accounting policies (continued)
Financial assets
The Group has reviewed its business model for its financial assets, which comprise only basic loans and
receivables, and concluded that they are held for collecting contractual associated cash flows. Under IFRS
9 loans and receivables, are initially recognised at fair value and will subsequently be measured at amortised
cost.
As required by IFRS 9, the Group will apply the impairment requirements and recognise a loss allowance
for expected credit losses on its financial assets. At each reporting date, it will always measure the loss
allowance at an amount equal to the lifetime expected credit losses.
The Group will recognise in profit or loss, as an impairment gain or loss, the amount of expected credit
losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is
required to be recognised in accordance with IFRS 9.
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.
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; the French branch’s is Euros, with its results
translated for inclusion 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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
52
1
Summary of significant accounting policies (continued)
Foreign currencies (continued)
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.
Employee benefits: share based payments
The Group operates several employee share schemes for employees of its UK trading subsidiary under
which it makes equity-settled and cash-settled share-based payments.
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, for the schemes where there are no market performance conditions using
the Black-Scholes model, which excludes the impact of non-market vesting conditions. Under a share
scheme where there are market performance conditions, the binomial option pricing model has been used
which includes the impact of market vesting conditions (such as the growth in the share price).
All equity-settled share-based remuneration is ultimately recognised as an expense in profit or loss with a
corresponding credit to retained earnings. If vesting periods or other vesting conditions apply, 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.
All cash-settled share-based remuneration is ultimately recognised as an expense in profit or loss with a
corresponding credit to a share-based payment liability. The fair value is re-measured at each reporting date
and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
53
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 point at which development projects become technically and commercially
feasible. No development expenditure was capitalised in the year ended 31 December 2019. The research
and development expenditure primarily related to the on-going research work on the Group’s existing
vehicle telematics services to ensure that the functionality is maintained. The research work undertaken
may successfully come to fruition in the development of a marketable service 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. See the Strategic Report on page 10 for further information
about the Group’s approach to research and development
Key judgement: timing of revenue and cost recognition
The adoption of IFRS 15, see note 1, required the Group to identify its performance obligations, determine
the transaction price and allocate this to the performance obligations and to recognise revenue when/as
performance obligations are satisfied, which are the subject of key judgements. The Group’s judgement is
that supplying telematics units, installing telematics units and the provision of data services are a single
performance obligation, under contracts with customers.
The performance obligation is satisfied over time, since the Group has the obligation to deliver the data
services for the contract term. Customers simultaneously receive and consume the benefits of the tracking
services as Quartix delivers its performance obligation.
Where customer contracts are structured so that tracking units and installations are separately identified,
the Group recognises this revenue as part of the single performance obligation of delivering tracking
services.
As described in note 1, it is the Group’s judgement that, once installed, the hard-wired units relate to both
unsatisfied performance obligations and to satisfied performance obligations (or partially satisfied
performance obligations). In the case of ‘self-install’ units, which customers can physically install into their
vehicles themselves, the Group’s judgement is that it still has obligations in relation to the technical set-up
of these units (including connectivity); however, the Group will keep this judgement under review.
Following a detailed review of customer contract, particularly relating to those won through distributors,
the Group has chosen to change its accounting policy by disapplying the practical expedient to expense the
distributor commissions. Regardless of the length of the contract term, these costs are now capitalised and
amortised over the contract term. Note 31 sets out the impact of this change on the financial statements.
Key estimate: impairment testing of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation
of the value in use of the cash-generating units to which the goodwill is allocated (Quartix Limited).
Estimating the value in use requires the Group to make an estimate of the expected future cash flows from
the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value
of those cash flows. Further details are given in note 12.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
54
3
Revenue
The Group’s revenue disaggregated by customer base is as follows:
By customer base
Fleet
Insurance
2019
£’000
20,808
4,813
25,621
2018
£’000
18,751
6,955
25,706
During 2019 revenue of £4.2m (2018: £5.5m) was derived from one insurance customer.
The Group’s revenue disaggregated by primary geographical markets is as follows:
Geographical analysis by destination
United Kingdom
France
Other European territories
United States of America
2019
£’000
20,317
3,236
53
2,015
25,621
2018
£’000
21,709
2,471
13
1,513
25,706
Other European territories revenue for the year ended 31 December 2018 related entirely to Ireland to
which the new territories Poland, Spain, Italy and Germany have been added for the year ended 31
December 2019.
There are no material non-current assets based outside the UK.
The Group’s revenue disaggregated by pattern of revenue recognition is as follows:
Goods and services transferred over time
One off revenue
2019
£’000
24,461
1,160
25,621
Restated
2018
£’000
24,630
1,076
25,706
Goods and services transferred over time represent 95% of total revenue (2018: 96%).
For 2019, revenue includes £4,578,000 (2018: £5,871,000) included in the contract liability balance at the
beginning of the period (see note 18). Changes to the Group’s contract liabilities (i.e. deferred revenue)
are attributable solely to the satisfaction of performance obligations.
4
Segmental analysis
As highlighted in note 1, Significant accounting policies (Segmental reporting), the Group has adopted
segmental analysis. The Group has identified two operating segments (see below) which are now monitored
by the Group’s chief operating decision maker and strategic decisions are made on the basis of adjusted
segment operating results. The main sources of revenue for all segments is from the provision of vehicle
telematics services.
The information used by the Group’s chief operating decision maker with regard to the Group’s assets and
liabilities is presented on a consolidated Group basis and accordingly no segmental analysis is presented for
these.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
55
4
Segmental analysis (continued)
The Group has two reportable segments: Total Fleet and Insurance. The Total Fleet segment has been
sub-divided into two further categories. This has been done to give clarity as to the level of upfront
investment the Group is making in acquiring new customers, as well as the associated impact on recurring
revenue. The two sub-categories are:
Customer Acquisition: This is the sales and marketing cost of acquiring new fleet customers and
the cost associated with units installed for those customers. Recurring subscription revenue is not
recognised in this sub-category, only equipment and installation income attributed to new fleet
customers.
Fleet Telematics Services: This is the recurring revenue associated with the Group’s active
subscription base and the cost of servicing that subscription base. The costs in this sub-category
include the cost of installing additional units for existing customers, as well as the associated
marketing costs.
These two elements, together with central fleet costs, make up the Total Fleet segment.
Estimated allocations of cost have been made between the segments and within the Total Fleet segment,
particularly in relation to equipment and installations. These allocations have been performed by reviewing
the products sold to each segment, their associated cost of manufacture or installation and whether those
products were installed by the customer. These costs are then applied to each segment as appropriate.
Segmental analysis
Year ended 31 December
2019
Recurring revenue
Other sales
Total Revenue
Sales and Marketing Costs
Equipment, Installation,
Carriage
Cost of service
Customer
Acquisition
£’000
Fleet
Telematics
Services Total Fleet
£’000
£’000
Insurance
£’000
-
338
338
(4,429)
(1,969)
-
19,297
1,173
20,470
19,297
1,511
20,808
-
4,813
4,813
(740)
(5,169)
-
(1,194)
(2,039)
(3,163)
(2,837)
(2,039)
(375)
Total
Business
£,000
19,297
6,324
25,621
(5,169)
(6,000)
(2,414)
Profit before central fleet costs
(6,060)
16,497
10,437
1,601
12,038
Central fleet costs
Segmental profit
Central Costs
Adjusted EBITDA (see note 5)
(747)
-
(747)
9,690
1,601
11,291
(4,229)
7,062
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
56
4
Segmental analysis (continued)
Segmental analysis
Year ended 31 December
2018 restated
Recurring revenue
Other sales
Total Revenue
Customer
Acquisition
£’000
-
335
335
Fleet
Telematics
Services
£’000
17,246
1,170
18,416
Total
Fleet
£’000
17,246
1,505
18,751
Insurance
£’000
-
6,955
6,955
Sales and Marketing Costs
Equipment, Installation,
Carriage
Cost of service
(3,214)
(711)
(3,925)
-
(1,373)
(1,092)
(2,465)
(3,154)
-
(1,983)
(1,983)
(568)
Total
Business
£,000
17,246
8,460
25,706
(3,925)
(5,619)
(2,551)
Profit before central fleet costs
(4,252)
14,630
10,378
3,233
13,611
Central fleet costs
Segmental profit
Central Costs
Adjusted EBITDA (see note 5)
(575)
-
(575)
9,803
3,233
13,036
(4,520)
8,516
Revenue note 3 discloses the geographical analysis by destination and revenue generated from our major
customer.
5
Profit for the year before taxation
The profit for the year for the Group is stated after charging:
Research and development expenses
Rentals under operating leases:
Other operating leases
Land and buildings
Depreciation on property, plant and equipment, owned
Depreciation on property, plant and equipment, right of use
Share-based payment expense
Foreign exchange (gains)/losses
Expected credit loss charge
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
2019
£’000
712
Restated
2018
£’000
1,131
-
62
171
199
254
108
19
30
35
3
12
266
185
-
108
(121)
28
22
24
3
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
57
5
Profit for the year before taxation (continued)
Earnings before interest, tax, depreciation and amortisation (EBITDA):
Operating profit
Depreciation on property, plant and equipment, owned
Depreciation on property, plant and equipment, right of use
EBITDA
Share-based payment expense (incl. cash-settled)
Adjusted EBITDA
6
Employee remuneration
Expenses recognised for employee benefits is analysed below for the Group.
Staff costs, including Directors, during the year were as follows:
Wages and salaries
Social security costs
Contributions to defined contribution pension plan
Share-based payment
2019
£’000
6,438
171
199
6,808
254
7,062
Restated
2018
£’000
8,223
185
-
8,408
108
8,516
2019
£’000
4,754
453
94
254
5,555
Restated
2018
£’000
4,370
454
57
108
4,989
The average number of employees, including all Directors, during the year was as follows:
Administration
Operations
Sales
Customer service
Research and development
2019
20
25
57
20
25
147
2018
19
30
38
18
31
136
7
Key management remuneration and directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing,
and controlling the activities of the entity, directly or indirectly, including any Directors (whether Executive
or otherwise) of the entity. For 2019, the Group identified eight such individuals: three Executive Directors,
two Non-Executive Directors, and three members of Senior Management, being managers on the
Operations Board of Quartix Limited. In 2018, the Group identified ten such individuals: three Executive
Directors, two Non-Executive Directors, and five members of Senior Management.
Wages and salaries
Social security costs
Contributions to defined contribution pension plan
Share-based payment
Total employee benefits
2019
£’000
639
81
10
100
830
2018
£’000
811
100
9
(13)
907
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
58
7
Key management remuneration and directors’ remuneration (continued)
In the year there were termination payments of £60,000 paid to a Director of Quartix Limited (2018: nil).
Details of Directors’ remuneration and the highest paid Director is disclosed on page 28 and included a
performance related bonus of £17,000.
The Group introduced the NEST pension arrangements in 2015 for all employees. During 2019, four
members of the key management personnel team were members of the NEST 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.
Included in the share based payment expense above was £60,700 (2018: credit of £31,000) for the Directors
of Quartix Holdings plc.
Key management, including Directors, had 465,184 share options outstanding at 31 December 2019
(2018: 576,184) and 18,199,642 shares in issue at 31 December 2019 (2018: 20,861,208) on which
dividends were paid in the year. At 31 December 2019 the Directors held 372,592 equity-settled share
options (2018: 280,000) and 170,000 cash-settled share options (2018: nil); no share options were
exercised in the year. See page 29 for analysis by Director.
8
Finance income receivable
Bank interest
9
Finance costs payable
Lease interest expense
10
Tax expense
Analysis of tax charge in the year
Current tax
UK corporation tax charge on profit for the year
Adjustments in respect of prior periods
Total corporation tax
Deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Total deferred tax
Tax on profit of ordinary activities
2019
£’000
34
2019
£’000
21
2019
£’000
1,098
60
1,158
(115)
(2)
(117)
1,041
2018
£’000
29
2018
£’000
-
Restated
2018
£’000
556
9
565
684
(7)
677
1,242
The relationship between the expected tax expense based on an effective tax rate of the Group of 19.00%
(2018: 19.00%), 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:
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
59
10
Tax expense (continued)
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
2019
£’000
6,451
19.00
1,226
58
9
70
(123)
(205)
(5)
11
1,041
Restated
2018
£’000
8,252
19.00
1,568
2
5
105
(225)
(173)
56
(96)
1,242
Effective rate of tax
*Effective rate of tax ignoring adjustments in respect of prior years’
16.1%
15.2%
15.1%
15.0%
11
Earnings per share and dividends
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 2019
Year ended 31 December 2018
restated
5,410
47,916,951
11.29
48,095,333
7,010 47,713,566
14.69
48,354,756
11.25
14.50
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.
Dividends
During the year ended 31 December 2019, the Group paid interim dividends of £1.1m (2018: £1.1m),
equivalent to 2.4p per ordinary share (2018: 2.4p).
The Board is recommending dividends of £4.8m (2018: £4.8m) comprising a final ordinary dividend of
4.2p per share, together with a supplementary dividend of 5.8p per share, giving a final pay out of 10.0p
per share and a total dividend for the year of 12.4p per share. As the distribution of dividends required
approval at the Annual General Meeting, no liability in this respect is recognised in the 2019 Group
consolidated financial statements.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
60
12
Goodwill and other intangible assets
Goodwill
Cost and net book value
At 1 January and 31 December 2018 and 2019
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 the fleet segment of Quartix Limited to be the sole cash-generating unit (CGU) for
the assessment of goodwill (see Intangible Assets policy included in note 1) 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 7.15% 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, including sensitivity analysis, 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.
13
Property, plant and equipment
Leasehold
properties
£’000
Tools and
equipment
£’000
Office
equipment
£’000
Motor
vehicles
£’000
Cost:
At 1 January 2018
Additions
Foreign exchange
At 31 December 2018
Adjustments on transition
to IFRS 16
Additions
Disposals
Foreign exchange
At 31 December 2019
17
24
-
41
490
72
(60)
(1)
542
12
-
-
12
-
-
(12)
-
-
912
358
8
1,278
-
191
(55)
(2)
1,412
-
-
-
-
12
18
(5)
-
25
Total
£’000
941
382
8
1,331
502
281
(132)
(3)
1,979
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
13
Property, plant and equipment (continued)
Leasehold
properties
£’000
Tools and
equipment
£’000
Office
equipment
£’000
Motor
vehicles
£’000
Depreciation:
At 1 January 2018
Provided in the year
Foreign exchange
At 31 December 2018
Provided in the year
Disposals
Foreign exchange
At 31 December 2019
Net book amount:
At 31 December 2019
At 31 December 2018
At 1 January 2018
9
3
1
13
194
(60)
-
147
395
28
8
12
-
-
12
-
(12)
-
-
-
-
-
686
182
5
873
165
(55)
(2)
981
431
405
226
61
Total
£’000
707
185
6
898
370
(132)
(2)
-
-
-
-
11
(5)
6
1,134
19
-
-
845
433
234
Included in the net carrying amount and depreciation provided for in the year of property, plant and
equipment are right-of-use assets as follows:
Property
Equipment
Total right-of-use assets
Carrying
amount
373
18
391
Depreciation
charge 2019
188
11
199
14
Inventories
Components held for manufacture of vehicle tracking units and units not yet deployed to customers:
Raw materials
Work in progress
Finished goods and goods for resale
2019
£’000
346
350
181
877
2018
£’000
476
103
192
771
Included in the analysis above are impairment provisions against inventory amounting to £194,500 (2018:
£61,000). The cost of vehicle tracking units are recognised as an expense and included in “cost of sales”
amounted to £3.0m (2018: £3.0m).
15
Trade and other receivables
Trade receivables
Contract cost assets
Other receivables
Prepayments and accrued income
2019
£’000
2,784
832
13
278
3,907
Restated
2018
£,000
2,583
644
38
316
3,581
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
62
15
Trade and other receivables (continued)
All the amounts are due within in year. Trade receivables are measured initially at fair value and subsequently
at amortised cost. At each period end, there is an assessment of the expected credit loss in accordance with
IFRS 9 with any increase or reduction in the credit loss provision charged or released to administration
costs in the statement of comprehensive income.
The loss allowance for expected credit losses has been recorded as follows.
Loss allowance at 1 January
Increase in loss allowance
Foreign exchange
Loss allowance at 31 December
2019
£’000
118
19
(3)
134
2018
£’000
88
28
2
118
As explained in note 27, the Group’s trade receivables arise from transactions that do not contain a
significant financing component, therefore the loss allowance is always measured at an amount equal to
lifetime expected credit losses.
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
2019
£’000
313
100
-
413
2018
£’000
300
28
-
328
Contract cost assets have arisen as a result of a change in policy (refer to note 31 for more details), the
assets are analysed as follows:
Not more than 12 months
More than 12 months
16
Cash and cash equivalents
Cash and cash equivalents include the following components:
Cash at bank and in hand
2019
£’000
832
304
1,136
Restated
2018
£’000
644
228
872
2019
£'000
6,789
2018
£’000
6,779
Quartix Limited uses Barclay’s Business Premium account to aggregate Sterling instant access balances and
earn interest, which is currently at 0.65%. Since September 2016, the Group has placed deposits with
Investec Bank plc on 95 day or 32-day notices with interest currently at 0.85% and 0.55% respectively. At
31 December 2019, Investec deposits were £1.5m.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
17
Trade and other payables
Amounts falling due within one year:
Trade payables
Social security and other taxes
Other payables
Accruals
Lease liabilities
18
Contract liabilities
Deferred insurance tracking data services income
Deferred fleet tracking data services income
63
2018
£’000
1,252
594
101
867
-
2,814
2018
£’000
2,038
2,617
4,655
2019
£'000
1,750
619
85
701
156
3,311
2019
£'000
2,108
2,735
4,843
Deferred tracking data services income represents customer payments received in advance of
performance (contract liabilities) that are expected to be recognised as revenue in 2019, as described in
note 1
Under insurance contracts, the customer commits to purchase data services for 12 months.
Quartix raises a single invoice upon installation and recognises revenue over 12 months on a
straight-line basis, since the customer benefits from the Group’s services evenly throughout the
contract term and receives the benefit of the services as they are made available.
Fleet customers enter into contracts typically with a commitment to purchase data services for
12 months and are generally invoiced quarterly in advance and recognises revenue over the
period covered by the invoice, as the performance obligations are satisfied.
The amounts recognised as a contract liability will generally be utilised within the next reporting period.
Changes to the Group’s contract liabilities (i.e. deferred revenue) are attributable solely to the satisfaction
of performance obligations. The reduction in contract liabilities was due to the release of deferred
contract revenue in the year arising from the reduction in the number of new insurance installations.
Contract liabilities at 1 January
Contract liabilities released to revenue in the period
Contract revenue deferred in the period, net of releases in the period
Contract liabilities at 31 December
19
Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
Current lease liability
Non-current lease liability
Total lease liability
2019
£'000
4,655
(4,578)
4,766
4,843
2018
£’000
5,972
(5,871)
4,554
4,655
31 Dec 2019
156
241
397
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
64
19
Lease liabilities (continued)
The Group has leases for the property it occupies and motor vehicles. With the exception of short-term
leases, each lease is reflected on the balance sheet as a right of use asset and a lease liability. The Group
classifies its right-of-use assets in a consistent manner to its property, plant and equipment for
presentation purposes (see note 13).
Each lease imposes a restriction that the right-of-use asset can only be used by the Group. Some leases
have a break clause; however, the majority are either non-cancellable or may only be cancelled by
incurring a substantial termination fee. The Group is prohibited from selling or pledging the underlying
leased assets as security. For the property leases, the Group must keep the property in a good state of
repair and return the properties in their original state at the end of the lease. Furthermore, the Group
must insure items of property, plant and equipment and incur maintenance fees on such items in
accordance with the lease contracts.
Future minimum lease payments at 31 December 2019 were as follows:
31 December 2019
Lease payments
Finance charges
Net present value
Minimum lease payments due
Within 1
year
£000
170
(14)
156
1 to 5
years
£000
255
(14)
241
After 5
years Total
£000
£000
425
-
(28)
-
397
-
Lease payments not recognised as a liability:
The group has elected not to recognise a lease liability for short term leases (leases with an expected
term of 12 months or less). Payments made under such leases are expensed on a straight-line basis.
The expense relating to payments not included in the measurement of the lease liability at 31 December
2019 was £62,000. At the year end the Group was committed to short-term leases and the total
commitment at that date was £18,000.
In June 2019 the Group entered into a number of agreements concerning properties in Powys, with the
intention of entering into a new ten-year lease for new premises, subject to completion of a
refurbishment project, and to surrender and assign two existing leases. On completion and execution
of the lease, there will be a reduction in the existing lease liabilities and corresponding reduction in the
right of use asset of around £115,000 and additional lease liabilities and right-of use asset of around
£827,000.
20
Deferred tax
Deferred tax assets/(liabilities) recognised by the Group at 31 December 2019 and 31 December 2018 are
as follows:
Deferred tax asset/(liability)
Accelerated Capital Allowances
Short term temporary differences
Equity settled share options
Restated
2018
£’000
(38)
(138)
26
(150)
2019
£’000
(52)
55
(1)
2
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
65
20
Deferred tax (continued)
(Credit)/charge to profit and loss
Accelerated Capital Allowances
Short term temporary differences
Equity settled share options
2019
£’000
2018
£’000
(14)
133
(2)
117
13
637
27
677
There are unprovided tax losses related to the USA business of $973,000 (2018: $917,000).
21
Equity
Allotted, called up and fully paid
At 1 January 2019
Shares issued
At 31 December 2019
Number of
ordinary
shares of
£0.01 each
47,846,560
91,760
47,938,320
Share
capital
£’000
Share
premium
£’000
478
1
479
5,196
34
5,230
All the shares issued in the year to 31 December 2019 related to the exercise of share options.
22
Share-based payment
The Company has share option schemes for certain employees. Share options are exercisable at prices
determined at the date of grant. The vesting periods for the share options range between 12 and 63 months.
Options are forfeited if the employee leaves the Company before the options vest.
In December 2019 cash-settled options were issued to Daniel Mendis to facilitate the exercise of existing
equity-settled share options. These cash-settled share options are linked to both service and market
performance conditions. The options have a contractual term commencing on the grant date 10 December
2019 and maturing on 5 April 2024, there are four vesting dates commencing on 1 August 2020, where a
number of shares depending on the performance of the share price will be eligible for exercise at the share
price less the exercise price of 322 pence.
The fair value at grant date of the cash-settled options has been calculated using a binomial option pricing
model. The average share price of 326 pence, exercise price of 322 pence, a risk free rate of 0.49%, a
volatility rate of 27% and a time to maturity of 4 years has generated a fair value of 71 pence per share
option with the estimated number of shares to ultimately vest being 170,000 cash-settled share options.
The volatility of the share price over the previous 12 months from the grant date and the risk-free rate on
the market were used to build in probabilities of the share price performance over the contractual term.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
66
22
Share based payments (continued)
Movements in the number of share options outstanding and their related weighted average exercise prices
are as follows:
Weighted
average exercise
price per share
in pence
267.6
180.2
0.0
313.8
38.5
276.9
2019
2018
Weighted
average exercise
Options
number
1,365,554
46,600
0
(126,925)
(91,760)
1,193,469
price per share Options
number
1,607,651
1,270,534
(620,000)
(614,425)
(278,206)
1,365,554
in pence
269.3
287.6
355.6
292.2
118.4
267.6
Outstanding at 1 January
Granted
Cancelled
Lapsed
Exercised
Outstanding at 31 December
Exercisable at 31 December
360
37,482
178.9
148,000
The weighted average fair value of options issued during the year ended 31 December 2019 was 175.49p
(2018: 38.25p). Included in the equity-settled options granted in 2019 none (2018: 1,062,776) were granted
to staff with performance conditions.
The weighted average share price at the date of exercise of options during the year ended 31 December
2019 was 265.00p (2018: 338.16p).
At 31 December 2019 Quartix Holdings plc had the following outstanding equity-settled options and
exercise prices:
2019
Period when exercisable
Starting from March 2019
Starting from March 2020
Starting from March 2020
March 2020
Starting October 2020
March 2021
Expiry dates
31 March 2025
31 March 2024
31 March 2026
06 December 2023
30 September 2025
2 December 2024
Average
exercise price
per share
in pence
360.0
270.0
270.0
1.0
335.0
1.0
276.9
Weighted
average
remaining
contractual
life
in months
63
51
75
47
69
59
55
Options
number
187,408
850,184
92,592
16,835
25,000
21,450
1,193,469
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
67
22
Share based payments (continued)
2018
Expiry dates
Period when exercisable
Starting from November 2014 1 November 2019
28 October 2023
Starting from October 2017
06 December 2022
March 2019
31 March 2025
Starting from March 2019
31 March 2024
Starting from March 2020
31 March 2026
Starting from March 2020
06 December 2023
March 2020
Average
exercise price
per share
in pence
44.0
337.5
1.0
360.0
270.0
270.0
1.0
267.6
Weighted
average
remaining
contractual
life
in months
11
58
47
75
63
87
59
58
Options
number
80,000
102,000
13,020
187,408
870,184
92,592
20,350
1,365,554
The fair value of equity-settled 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 based on UK Government gilt yields at the time of the grant.
The following assumptions were used in the model for equity-settled options granted during the year ended
31 December
2019:
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
(%)
2019
25,000
21,450
26 Sep 2 Dec
335.0
334.0
335.0
1.0
55.1
314.8
3.00
1.33
33.6
31.7
0.37
0.63
4.2
4.2
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
68
22
Share based payments (continued)
2018:
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
(%)
100,000
22-Jun
187,408
05-Dec
2018
277,776
05-Dec
280,000
06-Dec
405,000
07-Dec
20,350
06-Dec
380.0
360.0
270.0
270.0
270.0
270.0
380.0
360.0
270.0
270.0
270.0
1.0
34.4
61.0
29.7
29.7
29.7
250.1
3.00
5.25
3.25
3.25
3.25
1.25
18.0
28.5
27.1
27.1
27.1
27.1
0.76
0.70
0.77
0.77
0.77
0.74
2.8
3.5
5.8
5.8
5.8
5.8
23
Notes to the cash flow statement
Cash flow adjustments and changes in working capital
Profit before tax
Foreign exchange
Depreciation
Interest income
Lease interest expense
Share based payment expense (excl. cash-settled)
Operating cash flow before movement in working
capital
(Increase) in trade and other receivables
(Increase) in inventories
Increase/(decrease) in trade and other payables
Increase/(decrease) in contract liabilities
Cash generated from operations
Notes
13
8
9
2019
£’000
6,451
156
370
(34)
21
250
7,214
(453)
(106)
410
198
7,263
Restated 2018
£’000
8,252
(153)
185
(29)
-
108
8,363
(99)
(67)
(42)
(1,330)
6,825
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
69
24
Related party transactions and controlling related party
The Group’s related parties comprise its Board of Directors and its key management (see note 7). There
were no related party transactions with Directors to disclose other than dividends received based on
shareholdings disclosed in the Directors’ Remuneration Report on page 29 and note 7.
The Directors consider the Board and shareholding structure to mean there is no directly identifiable
controlling party.
25
Purchase commitments and contingent liabilities
Quartix Limited has signed agreements with suppliers which commit the Group to purchase inventory to
the value of £407,000 (2018: £521,000).
As disclosed in note 19 Lease liabilities, the Company has entered into a number of agreements regarding
leasehold properties in Newtown, Powys. The impact on completion, anticipated to be March 2020, will be
to increase lease liabilities by a net £712,000.
Management believe that, at some point between 2025 and 2030, most UK and European network
operators will finalise the sunsetting of their 2G networks. Depending on the actual timetable and the
commercial climate, there may be a cost at that time associated with the upgrading of customers’
technology, which the Group is seeking to minimise through various technological and commercial means.
A similar sunsetting process will occur for the 3G network in the US and management believe this will
likely be finalised in 2022. In each case, a present obligation does not exist at 31 December 2019 and
therefore the Group has not recognised a provision in its financial statements.
There were no other financial commitments or contingent liabilities as at 31 December 2019 or 31
December 2018.
26
27
Capital commitments
The Group had capital commitments of £57,000 at 31 December 2019 (2018: nil).
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
Trade receivables and other receivables
Cash and cash equivalents
2019
£’000
2,797
6,789
9,586
Restated
2018
£’000
2,621
6,779
9,400
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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
70
27
Risk management objectives and policies (continued)
Credit risk (continued)
The principal credit risk relates to trade receivables and is mitigated, where possible, by third party credit
clearance for new customers and collection by direct debit, or similar. The Group has one large customer
whose debts have been as much as £0.8m and the credit risk on this balance is carefully monitored. The
Group has established credit control procedures to undertake various tasks at different stages as invoices
move further from their issue date. At 45 days past due date, the credit risk is believed to have increased
substantially and customers are included in the loss allowance assessment.
The Group uses the practical expedient in the calculation of the expected credit losses on all its trade
receivables using a provision matrix, to estimate the lifetime expected credit losses, with fixed provision
rates, based on its historical credit loss experience adjusted where possible for current observable data. The
Group uses such data to make reasonable forward-looking estimates of recoverability.
The Group continues to work with customers to recover trade receivables and may take legal action or use
third-party collection specialists where necessary. Only after these steps have been completed and there is
no reasonable expectation of recovery, would the receivable be written off.
Currency risk
The Group is exposed to transaction foreign exchange risk as a consequence of procuring tracking unit
components in both euros and dollars. The risk with the Euro has been mitigated by trading in France
which generates enough Euros to cover the Group’s needs. Whilst the Group also trades in the US, in 2019,
the Group purchased about $2.4m, primarily to purchase components for the vehicle tracking units (2018:
$2.8m).
Transaction exposures, including those associated with forecast transactions, are managed through the use
of bank accounts held in foreign currencies.
It is estimated that a 5% strengthening of Pound Sterling to the US dollar would have reduced purchase
costs by £90,000 and vice versa (2018: £100,000). (This is assuming that Dollar denominated prices do not
adjust for currency movements.)
It is estimated that a 5% strengthening of Pound Sterling to the Euro would have reduced net profit by
£55,000 and vice versa (2018: £58,000).
The Group’s financial instruments dominated in currencies were:
Cash and cash equivalents
Trade receivables
Trade payables
2019
£’000
US$
87
-
(407)
(320)
£’000 £’000
zl
0
2
0
2
€
792
385
(303)
874
2018
£’000
US$
291
-
(207)
84
£’000
€
314
314
(216)
412
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 increased by 3.5% from 31 December 2018 to 31 December 2019 (2018: fell by
5.5%). The total translation reserve movement for the year reported in the Consolidated Statement of
Changes in Equity was a credit of £93,000 (2018: charge £158,000). The majority of this movement related
to the retranslation of Quartix Inc’s opening net liabilities as at 1 January 2019.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
71
27
Risk management objectives and policies (continued)
Currency risk (continued)
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 foreign exchange gain in 2019 (see note 5). The retranslation of
the amounts owed at 1 January 2019 to Group entities by Quartix Inc at the exchange rate on 31 December
2019 amounts to £101,000 (2018: £136,000).
It is estimated that a 5% weakening of Pound Sterling to the US dollar would give an exchange gain of
around £172,000 from the retranslation of amounts owed by Quartix Inc and vice versa (2018: £160,000).
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. The Group generates funds
from operational activities in excess of its operational requirements and has substantial cash balances
available for its current investment activities. Consequently, liquidity is not seen as a key risk.
28
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
28
Summary of financial assets and liabilities by category (continued)
Financial liabilities measured at amortised cost
Trade and other payables
Lease liabilities
2019
£’000
2,797
6,789
9,586
2019
£’000
2,451
397
2,848
Restated
2018
£’000
2,621
6,779
9,400
2018
£’000
2,119
-
2,119
29
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.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
72
29
Capital management policies and procedures (continued)
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
Capital-to-overall financing ratio (%)
2019
£’000
17,981
(6,789)
11,192
Restated
2018
£’000
18,103
(6,779)
11,324
17,981
18,103
62
63
30
Subsidiaries
As at the 31 December 2019 the subsidiaries of the Group were:
Subsidiary
Country of registration
Registered office
Quartix Ltd
England & Wales
Quartix Inc
USA
Chapel Offices, Park
Street, Newtown Powys
SY16 1EE
901 2nd Street,
Springfield, Sangamon IL
62704-7909
Class of share capital held
Ordinary shares
Common shares
Proportion held by the Company
100%
100%
Nature of the business
Vehicle Tracking
Vehicle Tracking
31
Explanation of change in accounting policy relating to IFRS 15
As highlighted in note 1, significant accounting policies under revenue, the Group has chosen to change
its accounting policy for the treatment of incremental costs of obtaining a contract with a duration of
12 months or less, by disapplying the practical expedient in IFRS 15 ‘Revenue from Contracts with
Customers’. The Group now capitalises and amortises incremental commission costs of obtaining a
contract regardless of length.
The principal impact of this change relates to the timing of commissions incurred being released into
the income statement, with the total commissions incurred at the inception of the customer contract
being capitalised and only being recognised in the income statement over the contractual period.
As at 1 January 2018, the restatement of the Group’s net assets was an increase of £563,000 to
£17,370,000 from the inclusion of a contract cost asset of £690,000 under IFRS 15, being previously
recognised as commissions incurred at the inception of the customer contract and now being recognised
over the contractual period, net of a deferred tax liability of £127,000.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
73
31
Explanation of change in accounting policy relating to IFRS 15 (continued)
The impact of capitalising incremental costs as per IFRS 15 on the financial statements:
A
Consolidated Statement of Financial Position
1 January 2018
Deferred tax assets
Contract cost assets
Other
Total assets
Total liabilities
Retained earnings
Other
Total Equity
31 December 2018
Deferred tax assets
Contract cost assets
Other
Total assets
Deferred tax liabilities
Other
Total liabilities
Retained earnings
Other
Total Equity
As
previously
reported Adjustments As Restated
£’000
£000
641
(127)
690
690
25,287
-
26,618
563
£’000
768
-
25,287
26,055
-
563
-
563
(9,248)
6,936
10,434
17,370
(9,248)
6,373
10,434
16,807
As
previously
reported Adjustments As Restated
£’000
£000
(9)
-
872
872
24,949
-
25,821
863
(150)
(150)
(7,568)
-
(7,718)
(150)
7,637
713
10,466
-
18,103
713
£’000
9
-
24,949
24,958
-
(7,568)
(7,568)
6,924
10,466
17,390
The split of the contract cost assets between current assets and non-current assets has been disclosed in
note 15.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
74
31
Explanation of change in accounting policy relating to IFRS 15 (continued)
The impact of capitalising incremental costs as per IFRS 15 on the financial statements
(continued):
B
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
Revenue
Cost of sales
Administrative expenses
Other
Income tax expense
Net profit
Total Comprehensive income
Earnings per ordinary share (pence)
Diluted earnings per ordinary share (pence)
C
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
Profit
Adjusted for:
- Tax expense
Profit before tax
Changes in trade and other receivables
Other
Cash generated from operations
As
previously
reported Adjustments
£000
£’000
As
Restated
£’000
25,706
(8,543)
(9,122)
29
(1,210)
6,860
6,702
14.38
14.19
-
149
33
-
(32)
150
150
0.31
0.31
25,706
(8,394)
(9,089)
29
(1,242)
7,010
6,852
14.69
14.50
As
previously
reported Adjustments
£000
£’000
As
Restated
£’000
6,860
150
7,010
1,210
8,070
83
(1,328)
6,825
32
182
(182)
-
-
1,242
8,252
(99)
(1,328)
6,825
32
Impact of adopting IFRS 16 “Leases”
On adoption of IFRS 16, the Group recognised a lease liability at the date of initial application, for leases
previously classified as an operating lease under IAS17, at the present value of the remaining lease
payments, discounted using the Group’s estimated incremental borrowing rate as of 1 January 2019.
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January
2019 was 4.3%.
As permitted under the Standard, the Group has adopted the practical expedients of applying a single
discount rate to its property leases and elected not to apply the requirements of IFRS 16 to leases for
which the lease term ends within 12 months. The Group will recognise the lease payments associated
with those leases as an expense on a straight-line basis.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
75
32
Impact of adopting IFRS 16 “Leases” (continued)
The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease
liabilities recognised at 1 January 2019:
Total operating lease commitments disclosed at 31 December 2018
Recognition exemptions:
Leases with remaining lease term of less than 12 months
Variance lease payments not recognised
Other minor adjustments relating to commitment disclosures
Operating lease liabilities before discounting
Discounting using incremental borrowing rate
Total lease liabilities recognised under IFRS 16 at 1 January 2019
£’000
(29)
93
39
£’000
518
103
621
(48)
573
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset
for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At
this date, the Group has also elected to measure the right of use asset, for leases previously classified as
an operating lease under IAS17, at an amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in the statement of financial position
immediately before the date of initial application.
There were no onerous lease contracts that would have required an adjustment to the right-of-use assets
at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
Properties
Motor vehicles
Total right-of-use assets
1 January
2019
£’000
490
12
502
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
Right-of use assets – increase
Prepayments – decrease
Accruals – decrease
Lease liability - increase
There was no impact on retained earnings on 1 January 2019.
£’000
502
(23)
94
(573)
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
76
Parent Company Statement of Financial Position
Company registration number 06395159
Fixed assets
Investments
Current assets
Debtors
Current tax asset
Cash at bank and in hand
Total current assets
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
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
2019
£’000
2018
£'000
4
5
6
7
19,518
19,263
1,460
53
55
1,568
1,450
26
165
1,641
(3,447)
(3,437)
(1,879)
(1,796)
17,639
17,467
17,639
17,467
479
5,230
617
4,663
6,650
478
5,196
426
4,663
6,704
17,639
17,467
Profit for the year and total comprehensive income attributable to the equity shareholders of Quartix
Holdings plc was £5,832,000 (2018: loss of £110,000)
Approved by the Board of Directors, authorised for issue and signed on behalf of the Board on 21 February
2020.
Andrew Walters
Chief Executive Officer
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
77
Parent Company Statement of Changes in Equity
Balance at 31 December 2017
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 2018
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 2019
Share
capital
£’000
476
2
Share
premium
account
£,000
4,869
327
Capital
redemption
reserve
Equity
reserve
£’000 £’000
451
4,663
-
-
Retained
earnings
Total
equity
£’000 £’000
13,123 23,582
329
-
-
-
-
2
-
478
1
-
-
-
1
-
-
-
327
-
5,196
34
-
-
-
34
-
-
-
-
108
(133)
-
(25)
-
133
108
-
(6,442) (6,442)
(6,309) (6,005)
-
4,663
-
-
-
-
-
-
426
-
249
(58)
-
191
-
617
(110)
6,704
-
(110)
17,467
35
-
58
249
-
(5,944) (5,944)
(5,886) (5,660)
5,832
6,650
5,832
17,639
-
479
-
5,230
-
4,663
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
78
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 2016. The accounting policies which follow were those applied
in preparing the financial statements for the year ended 31 December 2019 and the year ended 31 December
2018. 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.
i) The requirement to produce a balance sheet at the beginning of the earliest comparative period.
The Company is not impacted by IFRS 16: Leases since it does not have any leasing commitments.
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 2019
79
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
As required by IFRS 9, the Company will apply the impairment requirements and recognise a loss allowance
for expected credit losses on its financial assets. At each reporting date, it will measure the loss allowance
at an amount equal to the lifetime expected credit losses, if the credit risk on financial instruments has
increased significantly since initial recognition.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
80
1
Summary of significant accounting policies (continued)
Financial assets (continued)
The Company will recognise in profit or loss, as an impairment gain or loss, the amount of expected credit
losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is
required to be recognised in accordance with IFRS 9.
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 Group operates several employee share schemes for employees of its UK trading subsidiary under
which it makes equity-settled and cash-settled share-based payments. 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.
All cash-settled share-based remuneration is ultimately recognised as an expense in profit or loss with a
corresponding credit to a share-based payment liability. The fair value is re-measured at each reporting date
and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.
Upon exercise of the equity-settled share options the proceeds received are allocated to share capital and
share premium.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
81
1
Summary of significant accounting policies (continued)
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
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 £5.8m (2018: £0.10m).
Auditors' remuneration attributable to the Company is as follows:
Audit fees – statutory audit
Other services
Details of Directors’ emoluments are set out on page 28.
3
Directors and employees
Staff costs, including Directors, comprised the following:
Wages and salaries
Social security costs
2019
£’000
30
1
31
2018
£’000
22
1
23
2019
£’000
90
10
100
2018
£’000
90
10
100
The average number of employees for the company, being the Non-Executive Directors only, during
the year was 2 (2018: 2).
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
82
4
Investments – non current
The amounts recognised in the Company’s Statement of Financial Position relate to the following:
Cost:
At 1 January 2018
Increase due to granting of share options to subsidiary employees:
New investments
At 1 January 2019
Increase due to granting of share options to subsidiary employees:
New investments
Net book amount at 31 December 2019
There is no provision for impairment for the investment in subsidiaries.
Subsidiary
undertakings
£’000
19,155
108
19,263
255
19,518
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
5
Debtors
Social security and other taxes
Prepayments
Amounts owed by subsidiary undertakings
2019
£’000
7
7
1,446
1,460
2018
£’000
6
6
1,438
1,450
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 £1.4m (2018:
£1.4m) which is repayable on or before 31 December 2020 but can be extended by mutual agreement.
Interest is charged quarterly at 1% per quarter on the quarter end balance.
6
Creditors: amounts falling due within one year
Social security and other taxes
Accruals and deferred income
Amounts owed to subsidiary undertakings
2019
£’000
4
55
3,388
3,447
2018
£’000
4
38
3,395
3,437
The amount owed to subsidiary undertakings relates to the current account with Quartix Limited. It is a
current account that will be cleared by dividends payable in 2020.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
83
7
Called up share capital
Allotted, called up and fully paid
47,938,320 (2018: 47,846,560) ordinary shares of £0.01 each
2019
£’000
2018
£’000
479
478
Details of movements in share options and those outstanding at 31 December 2019 are disclosed in note
22 of the Group accounts.
Related party transactions and ultimate controlling party
The Company has taken advantage of the exemption not to disclose transactions with wholly owned
subsidiaries. Details of Directors’ remuneration and interests in shares are disclosed in the Directors’
Remuneration Report (see page 28) and key management remuneration in note 7 of the Group accounts.
Contingent liabilities
There are no material contingent liabilities subsisting at 31 December 2019 or 31 December 2018.
Financial commitments
The Company had no financial commitments at 31 December 2019 or 31 December 2018.
Risk management objectives and policies
8
9
10
11
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 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 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
2019
£’000
55
1,446
1,501
2018
£’000
165
1,438
1,603
Credit risk
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 £1.4m (2018: £1.4m) which is repayable on or before 31 December 2020 but can be
extended by mutual agreement. Interest is charged quarterly at 1% per quarter on the quarter end balance.
Quartix Holdings plc
Financial statements for the year ended 31 December 2019
84
11
Risk management objectives and policies (continued)
Currency risk
The Company is exposed to transaction foreign exchange risk. The Group mitigates its risk to the US Dollar
by trading in the USA; however, the Company is exposed to exchange movements on its US Dollar loan
to Quartix Inc to fund its start-up losses and working capital requirements.
The Company’s financial assets denominated in currencies (all US dollars) were:
Loan and receivables
Cash at bank
Amounts owed by subsidiary undertakings
2019
£’000
8
1,446
1,454
2018
£’000
40
1,438
1,478
The Company’s net profit would not be materially impacted by 5% strengthening of Pound Sterling to the
US dollar or Euro.
85
Notice of Annual General Meeting
Notice is hereby given that the sixth Annual General Meeting (the “Meeting”) of Quartix Holdings plc will
be held at 9 Dukes Court, 54~62 Newmarket Rd, Cambridge CB5 8DZ on Tuesday 24 March 2020
at 11.00 am for the following purposes:
To consider, and if deemed fit, to pass the following as ordinary resolutions:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
To receive and adopt the audited annual accounts for the year ended 31 December 2019.
To approve and declare a final dividend for the year ended 31 December 2019 of 4.2p per ordinary
share and supplementary dividend of 5.8p per ordinary share, a total final dividend of 10.0p per
share. This will be paid on 1 May 2020 to shareholders on the register as at the close of business
on 3 April 2020.
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 Daniel Mendis 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 Laura Seffino 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 £159,794 (representing approximately 33% of the issued share
capital of the Company as at 21 February 2020) 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 2021, 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:
11.
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 10 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
86
nearly as may be) to the respective number of ordinary shares in the Company held or
deemed to be held by them on any such record dates, subject to such exclusions or other
arrangements as the Directors may consider necessary or expedient to deal with fractional
entitlements, treasury shares, record dates, or legal or practical problems arising or
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 £23,969, representing
approximately 5% of the ordinary share capital in issue as at 21 February 2020.
b.
This power shall expire at the conclusion of the next Annual General Meeting of the Company or
30 June 2021, 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.
12.
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 2,397,000
(representing approximately 5% of the ordinary share capital in issue as at 21 February
2020);
The minimum price that may be paid for an ordinary share is its nominal value (£0.01);
The maximum price, exclusive of any expenses, which may be paid for an ordinary share
shall be the higher of:
i. 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
ii. an amount equal to the higher of the price quoted for the last independent trade
of an ordinary share and the highest current independent bid for an ordinary share
on the trading venue where the purchase is carried out.
This authority shall expire, unless previously renewed, revoked or varied, on the date of
the next Annual General Meeting or 30 June 2021, 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 21 February 2020.
Daniel Mendis
Company Secretary
87
Notes to the Notice of Annual General Meeting
The following notes explain your general rights as a shareholder and your right to attend and vote at this
Meeting or to appoint someone else to vote on your behalf.
To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company
of the number of votes they may cast), shareholders must be registered in the Register of Members of the
Company at close of trading on 20 March 2020. Changes to the Register of Members after the relevant
deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting.
Shareholders, or their proxies, intending to attend the Meeting in person are requested, if possible, to arrive
at the Meeting venue at least 20 minutes prior to the commencement of the Meeting at 11.00 am (UK time)
on 24 March 2020 so that their shareholding may be checked against the Company’s Register of Members
and attendances recorded.
Shareholders are entitled to appoint another person as a proxy to exercise all or part of their rights to attend
and to speak and vote on their behalf at the Meeting. A shareholder may appoint more than one proxy in
relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different
ordinary share or ordinary shares held by that shareholder. A proxy need not be a shareholder of the
Company.
In the case of joint holders, where more than one of the joint holders’ purports to appoint a proxy, only
the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order
in which the names of the joint holders appear in the Company’s Register of Members in respect of the
joint holding (the first named being the most senior).
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of
votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from
voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in
relation to any other matter which is put before the Meeting.
In order for a proxy appointment to be valid, a form of proxy must be completed. You can appoint a proxy
and indicate how you would like your proxy to vote at the Meeting or any adjournment by using any of the
following methods:
by logging on to www.signalshares.com and following the instructions, ensuring that your
submission is completed before 11.00 am on 20 March 2020;
by completing and returning a hard copy proxy form to Link Asset Services at 34 Beckenham
Road, Beckenham, Kent, BR3 4ZF to be received by 11.00 am on 20 March 2020; or
in the case of CREST members, by utilising the CREST electronic proxy appointment service in
accordance with the procedures set out below, transmitting the instructions so as to be received by
11.00 am on 20 March 2020.
You may request a hard copy form of proxy directly from the registrars, Link Asset Services (previously
called Capita), on Tel: 0371 664 0391. Calls cost 12p per minute plus your phone company’s access charge.
Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open
between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales.
If you return more than one proxy appointment, either by paper or electronic communication, the
appointment received last by the Registrar before the latest time for the receipt of proxies will take
precedence. You are advised to read the terms and conditions of use carefully. Electronic communication
facilities are open to all shareholders and those who use them will not be disadvantaged.
1
2
3
4
5
6
7
88
8
9
10
11
12
13
14
15
The return of a completed form of proxy, electronic filing or any CREST Proxy Instruction (as described
in note 10 below) will not prevent a shareholder from attending the Meeting and voting in person if he/she
wishes to do so.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy
appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the
procedures described in the CREST Manual (available from www.euroclear.com/site/public/EUI).
CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate
CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with
Euroclear UK & Ireland Limited’s specifications and must contain the information required for such
instructions, as described in the CREST Manual. The message must be transmitted so as to be received by
the issuer’s agent (ID RA10) by 11.00 am on 20 March 2020. For this purpose, the time of receipt will be
taken to mean the time (as determined by the timestamp applied to the message by the CREST application
host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note
that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any
particular message. Normal system timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member, or sponsored member, or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall
be necessary to ensure that a message is transmitted by means of the CREST system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting system
providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations
of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Any corporation which is a shareholder can appoint one or more corporate representatives who may
exercise on its behalf all of its powers as a shareholder provided that no more than one corporate
representative exercises powers in relation to the same shares.
As at 21 February 2020 (being the latest practicable business day prior to the publication of this Notice),
the Company’s ordinary issued share capital consists of 47,938,320 ordinary shares, carrying one vote each.
Therefore, the total voting rights in the Company as at 21 February 2020 are 47,938,320.
Any shareholder attending the Meeting has the right to ask questions. The Company must cause to be
answered any such question relating to the business being dealt with at the Meeting but no such answer
need be given if: (a) to do so would interfere unduly with the preparation for the Meeting or involve the
disclosure of confidential information; (b) the answer has already been given on a website in the form of
an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the
Meeting that the question be answered.
The following documents are available for inspection during normal business hours at the registered
office of the Company on any business day from the date of this Notice until the time of the Meeting and
may also be inspected at the Meeting venue, as specified in this Notice, from 10.45 am on the day of the
Meeting until the conclusion of the Meeting:
copies of the Directors’ letters of appointment or service contracts.
89
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You may not use any electronic address (within the meaning of Section 333(4) of the Companies Act
2006) which is provided in either this Notice or any related documents (including the form of proxy) to
communicate with the Company for any purposes other than those expressly stated.
A copy of this Notice, and other information required by Section 311A of the Companies Act 2006, can
be found on the Company’s website at www.quartix.net
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, 9 Dukes Court, 54~62 Newmarket Rd, Cambridge
CB5 8DZ or dan.mendis@quartix.net
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Quartix Holdings plc
9 Dukes Court
54-62 Newmarket Road
Cambridge
CB5 8DZ
www.quartix.net
www.quartix.fr
www.quartix.com
Quartix Holdings plc
Annual Report 2019