Konetik update

Quartix Technologies PLC

11 December 2023

 

Quartix Technologies plc

("Quartix", "the Group" or "the Company")

Konetik update.

The Company announced the acquisition of Konetik on 15 September 2023.  As noted in the trading update of 6 October 2023, a detailed review of the acquisition of Konetik Deutschland GmbH ("Konetik") and the potential for the Company's Evolve product line, a tool that assists fleet managers with planning their migration to electric vehicles, has now been completed. Following his return to the Company and appointment to the Board as Chairman on 26 September 2023, Andy Walters, major shareholder and founder of the Company, led this review.

Launched in 2022, the Evolve product has been sold as an upgrade to a small number of existing customers, principally in the UK public sector, and revenue generated to date has been very limited. Whilst users are pleased with reports provided by Evolve, repeat usage by most has been very low and renewal rates for early adopters has been disappointing. Following the review, the board considers that the ability to increase the customer base and scale the business in the next two years will be substantially more challenging than had been envisaged at the time of making the acquisition.  This is due to:

1.    demand for Evolve, particularly in the private sector, has been adversely impacted by delays to EV transition deadlines with the UK government's decision to postpone the ban on the sale of petrol and diesel vehicles to 2035.

2.    the ability to generate substantial increases in the volume of license sales is now expected to  require much higher investment in the software infrastructure due to limitations in the scalability of the current product

3.  the customer acquisition cost and implementation support are now expected to be much higher than previously anticipated

4.    the customer lifetime is now expected to be significantly shorter than previously anticipated

In addition, the Board considers that the Evolve product is not an effective tool for the acquisition of new vehicle tracking customers. Finally, the anticipated resource requirements for the development, sale, support and maintenance of Evolve means that such investment is not anticipated to achieve an appropriate return.

Following this review the Board is committed to reducing the impact of this acquisition on the operating performance of the Company as soon as possible.  However, a further consequence of the conclusion of the review is, regrettably, that a substantial, one time, non-cash impairment in the goodwill arising from the Konetik acquisition (£2.5 million) will need to be made in the Company's 2023 financial statements. 

Quartix generates strong recurring revenues and operational cashflows from its subscription base and the Company will refocus its efforts on its primary strategic objective of delivering profitable growth in this core business.

Andy Walters, Executive Chairman, commented:

"Quartix provides subscription-based telematics services to more than 26,000 customers, for more than a quarter of a million commercial vehicles. Over the past 5 years Quartix has added new territories and developed additional channels to market which offer exciting growth potential for the future.

Since my return to the Company at the end of September I have been very grateful for the support of the executive management team in conducting this review and am delighted that I have their full commitment to returning the Company's focus to its core business."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 as retained as part of UK law by virtue of the European Union (Withdrawal) Act 2018 as amended.

For further information, please contact:

Quartix (www.quartix.net) Andy Walters, Executive Chairman Emily Rees, Chief Financial Officer	01686 806 663
Cavendish Capital Markets Limited (Nominated Adviser and Broker) Matt Goode / Seamus Fricker (Corporate Finance) Tim Redfern / Sunila de Silva (Corporate Broking)	020 7220 0500

 

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