Quartix takes £2.5m impairment on disappointing Evolve performance

The AIM-traded company's chairman Andy Walters, who returned to the board on 26 September, had spearheaded a comprehensive review of the acquisition's impact on Quartix's 'Evolve' product line, designed to aid fleet managers in transitioning to electric vehicles.

Launched in 2022, the Evolve product had seen limited revenue generation as it was offered as an upgrade to a small number of existing customers, primarily in the UK public sector.

Despite positive feedback on the reports provided by Evolve, customer retention rates were disappointingly low, and repeat usage was minimal.

Following the review, the Quartix board identified several challenges, making it significantly more difficult to expand the customer base and scale the business over the next two years than initially anticipated.

Key factors contributing to the challenges included a decrease in demand for Evolve, particularly in the private sector, due to delays in the UK government's decision to postpone the ban on the sale of petrol and diesel vehicles until 2035.

Secondly, there was the necessity for substantial investments in software infrastructure to achieve significant growth in licence sales due to limitations in the current product's scalability, and third, there were higher-than-expected customer acquisition costs and implementation support expenses.

Finally, it noted a significantly shorter expected customer lifetime than initial projections.

Additionally, the Quartix board said it had determined that the Evolve product was not an effective tool for acquiring new vehicle tracking customers.

Given the findings, the expected resource requirements for the development, sale, support, and maintenance of Evolve were not expected to yield a suitable return on investment.

In response to the review, Quartix said it was committed to mitigating the impact of the Konetik acquisition on the company's operational performance as swiftly as possible.

However, one significant review outcome was a one-time non-cash impairment of £2.5m in goodwill associated with the Konetik acquisition, which would be reflected in its 2023 financial statements.

Quartix emphasised its strong recurring revenues and operating cash flows from its subscription base, reaffirming its commitment to focusing on its core business's primary strategic objective: achieving profitable growth.

"Quartix provides subscription-based telematics services to more than 26,000 customers, for more than a quarter of a million commercial vehicles," said executive chairman Andy Walters.

"Over the past five 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."

At 1226 GMT, shares in Quartix Technologies were down 9.6% at 140.12p.

Reporting by Josh White for Sharecast.com.