TIDMQXT
RNS Number : 3648V
Quixant PLC
14 April 2021
14 April 2021
Quixant plc
("Quixant" or "the Group")
Final Results
Quixant (AIM:QXT), a leading provider of innovative, highly
engineered technology products principally for the global gaming
and broadcast industries, announces its final results for the year
ended 31 December 2020.
FINANCIAL HIGHLIGHTS
-- Group revenue of $63.8m (FY 2019: $92.3m)
-- Quixant Gaming division revenue of $30.3m (FY 2019: $56.2m)
o Gaming platforms revenue of $27.5m (FY 2019: $46.6m)
o Gaming monitors revenue of $2.8m (FY 2019: $9.6m)
-- Densitron division revenue of $33.5m (FY 2019: $36.2m)
-- Group adjusted pre-tax profit of $1.3m (FY 2019: $10.7m
profit)(1)
-- Group reported pre-tax loss of $2.0m (FY 2019: $9.4m
profit)
-- Adjusted fully diluted EPS of ($0.0040)/share (FY 2019:
$0.1396/share)(2)
-- Fully diluted EPS of ($0.0445)/share (FY 2019: $0.1243/share)
-- Net cash from operating activities of $4.0m (FY 2019:
$14.9m)
-- Net cash at 31 December 2020 $17.4m (FY 2019: $16.1m)
-- Dividend of 2.0p per share recommended (2019: Nil)
1. Adjusted by adding back items included in the adjusted PBT
reconciliation in note 1 to the financial statements totalling
$3.3m (2019: $1.3m).
2. Adjusted by adding back the items included in note 1 above
and subtracting the associated tax effect as set out in note 9 to
the financial statements. In 2020 these amounted to $2.7m (2019: $
1.0m).
OPERATIONAL HIGHLIGHTS
-- Return to profitability in H2 2020 driven by improved
performance in Gaming business and continued resilient
Densitron trading.
-- Close customer engagement through the crisis leading
to positive net cash generation through the year, improved
relationships and increased new business potential.
-- New gaming business models arising from market disruption
due to COVID-19 bringing about opportunities, with a
pilot customer due to commence a lease programme of Quixant
technology in H2 2021.
-- New gaming business wins in 2020 expected to contribute
in excess of $5m of revenue in 2021.
-- Densitron sales supported by conversion of pipeline in
broadcast and medical sectors which both showed year-on
year growth to partially offset declines in other sectors.
-- 106% order coverage of Group internal budget for first
six months of the year.
Jon Jayal, Chief Executive Officer of Quixant, commented:
"Considering that our key global gaming market was so materially
impacted in 2020 due to the pandemic, I believe that to report an
adjusted profit before tax and an improvement in our net cash
position from FY 2019 is a remarkable achievement. It reflects the
resilience in our Densitron business, the strength of the
relationship we have with our customers and a robust balance sheet
entering the year."
"2021 has started strongly with healthy order intake such that
we now have 106% coverage of internal budget for the first half of
the year. As the gaming industry evolves out the crisis, we are
bringing pioneering new offerings to market which we believe will
support customers in their recovery. It is also pleasing to see
double digit growth in our Densitron broadcast business despite the
headwinds caused by the pandemic. The electronic component
shortages present us with short-term supply chain risks, but we
continue to utilise our strong cash position to mitigate the impact
of these on 2021 trading."
"The Board is confident in the future prospects of the Group
which is reflected in our decision to recommend payment of a
dividend."
Presentation and overview video
Quixant is hosting an online presentation open to all investors
today at 4.45pm BST. Anyone wishing to connect should register
here:
https://www.investormeetcompany.com/quixant-plc/register-investor
A video overview of the results featuring CEO Jon Jayal and
Interim CFO Andrew Jarvis is available to view here:
http://bit.ly/QXT_FY20_results_overview
Enquiries:
Quixant plc Tel: +44 (0)1223 892 696
Jon Jayal, Chief Executive Officer
Andrew Jarvis, Interim Chief Financial
Officer
Nominated Adviser and Broker: Tel: +44 (0) 20 7220 0500
finnCap Ltd
Matt Goode / Simon Hicks (Corporate
Finance)
Alice Lane (ECM)
Joint Broker: Tel: +44 (0) 20 7523 8000
Canaccord Genuity Limited
Simon Bridges / Andrew Potts
Financial PR: Tel: +44 (0)20 3405 0205
Alma PR
John Coles / David Ison / Kieran Breheny
About Quixant
Quixant, founded in 2005, designs and manufactures highly
optimised computing solutions and monitors principally for the
global gaming and broadcast industries. The Company is
headquartered in Cambridge in the UK, with offices throughout
Europe, North America and Asia. Quixant has its own manufacturing
and engineering operation based in Taiwan and software engineering
and customer support teams based in Italy and Slovenia. All the
specialised products software and manufacturing are produced
in-house and Quixant owns all its own IP some of which is protected
by patents and design rights.
In November 2015 Quixant acquired Densitron Technologies plc.
Densitron has a strong heritage in the sale of electronic display
solutions to global industrial markets. Through Densitron's
experienced sales team, Quixant has a robust platform to build its
business into wider industrial markets. In-depth information on the
Company's products, markets, activities and history can be found on
the corporate website at www.quixant.com.
CHAIRMAN'S STATEMENT
Resilient trading through unprecedented gaming market
disruption
When we reported on our 2019 annual results, many of the
countries in which the Group operates had moved into government
mandated lockdown measures and we were entering into a second
quarter in which we saw an unprecedented closure of almost all
global land-based gaming markets. This had a profound impact on our
gaming business, which saw an 87% year on year decline in revenues
in the second quarter of 2020. During this time Densitron continued
to trade resiliently, supported by its highly diversified
industrial sector exposure.
Thanks to our preceding years of strong profitability, we
entered this period of uncertainty with a healthy cash balance.
This allowed us to make a measured and creative response during the
tumultuous period that followed, as well as positioning us strongly
for expected future growth as normal trading resumes.
We provided extraordinary support to our gaming customers who
faced significant financial and operational challenges, some of
which continue today. These times of crisis have confirmed our
position as a close outsource technology partner for them which in
the long run positions us well for new business. It has also
provided us with the opportunity to re-evaluate and refresh our
gaming market propositions and align them with the challenges the
market is facing in the recovery.
We undertook some streamlining of our overheads during the year,
but importantly avoiding cost reductions which would inhibit our
ability to take advantage of the re-emergence of normal demand
across our end markets.
We made progress in strengthening the senior management team,
executing our succession plan for the business founders and
implementing a new corporate governance framework. Having
successfully hired senior management in the Gaming and Densitron
businesses over the last 18 months, we have established an
Executive Committee. As part of this transition, two of the
founders, Nick Jarmany and Gary Mullins, moved to non-executive
roles on the board in May 2020 and JJ (C-T) Lin stepped down from
the board.
In January 2021 we welcomed Francis Small to the board as senior
independent non-executive director. He has had a distinguished
business and professional career and I am delighted with the
contribution he has already made.
I believe the business is in a good position with high quality
leadership, a robust balance sheet and strong growth
opportunities.
I joined Quixant some months before the AIM flotation in 2013
and after nine years of service, now is an appropriate time for me
to retire. I shall therefore step down from the Board at the AGM
and I am delighted that Francis Small will take over as
Chairman.
While we remain necessarily cautious about the outlook, we are
confident in the resilience of our business and its continued cash
generation. We are therefore recommending payment of a dividend of
2.0p per share for 2020 (2019: no dividend paid).
Michael Peagram
Chairman
CHIEF EXECUTIVE'S REPORT
Profitable second half and growth in net cash balance
I am pleased to report that a return to profitable trading
during the second half of the year enabled the Group to post an
adjusted profit before tax for the year ending 31 December 2020 of
$1.3m (2019: $10.7m) corresponding to a full year reported pre-tax
loss of $2.0m (2019: profit of $9.4m). Full year Group revenue of
$63.8m was down 31% on prior (2019: $92.3m) due to the impact of
COVID-19 weighing heavily on demand in the gaming business, which
ended the year with revenue of $30.3m (2019: $56.2m). Densitron
traded resiliently through the period and, despite supply chain
challenges and weak demand across certain sectors, posted revenue
of $33.5m (2019: $36.2m).
Careful cash management, recovery in the gaming business and
stable Densitron trading enabled us to grow our net cash position
from $16.1m at the start of the year to $17.4m by December
2020.
Gaming Business Review
After a strong first quarter in which revenue was up 54%
year-on-year, the gaming business experienced a sharp decline in
demand in the second quarter (down 87% on prior year) as almost all
global gaming venues closed their doors due to the pandemic.
We shipped 22,000 gaming platforms during 2020 compared to just
over 40,000 in 2019, with a higher concentration of revenue from
mid-range product than in the previous year. This was driven by
sustained demand through the year from European customers for our
QXi-6000 and new business wins in the year using its successor -
the QXi-7000. Conversely high-end product sales from the casino
markets were down year-on-year due to COVID-19 related weakness in
customer demand.
Gaming platform sales (quantity) by product family
2020 2019
---------------------------- ------------ ------------
High-End 7,099 20,310
---------------------------- ------------ ------------
Mid-Range 10,630 10,027
---------------------------- ------------ ------------
Cost Effective 4,296 9,102
---------------------------- ------------ ------------
Total 22,025 39,439
Despite having retained all our customers through the year,
gaming monitor shipments were weak due to the pandemic and
contributed $2.8m of revenue (2019: $9.6m). We nonetheless continue
to see opportunities ahead for our monitor propositions and, in
particular, our more niche button deck products.
Careful management through second quarter shutdown
Our gaming customers saw an immediate cessation of both machine
sales and revenue share income in March 2020 which put many under
significant financial pressure. During this extremely challenging
period, our primary objectives were to:
1. Maintain close dialogue with the senior management of our
customers to understand their position, evaluate market sentiment
and plan for the recovery;
2. Establish payment schemes to ensure outstanding debts owed to
us were settled while being sympathetic to customers' cashflow
challenges; and
3. Protect our cashflow through working with our suppliers to
defer our orders with them where possible.
I am proud of the team's performance through this period. Our
customers faced difficult business decisions in some cases in order
to survive the second quarter with the sharp decline in revenue
driving widespread salary cuts, furloughs and redundancies, payment
deferrals and debt raises to supplement liquidity.
The result of the actions by our team has been to secure
settlement of outstanding debts and demonstrate our commitment and
partnership to our customers, all of whom we continue to supply. I
believe this has significantly strengthened customer relationships
and led to new business opportunities as the recovery
continues.
Improvement in second half and strong business potential
generated
The third quarter saw a significant improvement in business
activity with a recommencement of order intake and even new
business wins with a number of European customers, including one
which entered mass production during the fourth quarter. This
improvement in activity was such that second half gaming revenues
were 55% higher than first half revenues. The gaming business has a
strong order book in 2021 with coverage of 105% of budget to
June.
The pandemic has certainly provided a catalyst for change in the
gaming market. While gaming revenues continue to build, the
replacement market remains muted as working capital challenges face
both the casinos and the game manufacturers. In September, we
announced our intention to investigate new business models with our
customers including lease programs for our computer boards and
monitors and fully populated turnkey hardware cabinet solutions. I
am pleased to report that substantial progress was made during the
second half of 2020 with our first pilot customer for a lease model
which we expect to commence shipments in H2 2021. These new
business models set a precedent for a new way of manufacturers
bringing their gaming offerings to market and increase their
ability to focus resources on game design.
While new business generation was challenging in a year when
game manufacturers were mainly concerned with survival, nonetheless
we converted new business during the second half which we expect to
deliver in excess of $5m of revenue in 2021.
Supply chain challenges persist
The disruption to the gaming business in 2020 was not isolated
to customer demand - throughout the year we saw volatile input
stocks due to the lockdown and subsequent reduced production
capacity across mainland China and Taiwan. Our strategic inventory
holding through the year enabled us to meet our delivery
commitments to customers.
In December 2020, we started to see more acute shortages in the
semiconductor market impacting our supply chain and took action to
bolster our strategic inventory. Since the start of 2021, the
semiconductor shortages have worsened as booming demand for
electronic products has outstripped semiconductor component
production capacity. We are experiencing manufacturers'
unexpectedly issuing end-of-life notices on parts, more than a
doubling of their normal lead times and serving price increases on
the components. We are utilising our strategic inventory holdings
to enable uninterrupted customer deliveries through Q1 but expect
to see some impact from Q2. In mid-January the Board took decisive
action to allocate up to a further $5m of our cash reserves towards
further strategic stock purchases to support anticipated demand
over the next 6-9 months of the year and mitigate the short-term
supply chain risks.
Sports betting progress delayed
We demonstrated our QSBT-1000 sports betting terminal at the ICE
Show at ExCel in February 2020. With the expectation of an
explosion in sports betting around the industry, this was well
positioned for new business.
Unfortunately, the second quarter shutdown in most retail sports
betting outlets delayed sports betting progress through 2020. We
remain optimistic about the opportunities in the market and have
live prospects with several vendors as part of our full cabinet
offering.
Product Development
We launched a new gaming platform at the low end of the range in
March 2021 - IQ-1. This is the first of our revised, streamlined
roadmap of products. During the second quarter, we learned of a
major change in strategy from one of our key suppliers, AMD, who
supply microprocessors and graphics accelerators which are used in
all our products. AMD, despite being very popular in the gaming
industry because of their attractive pricing and high-performance
graphics processors, have decided to defocus on the casino gaming
market, as well as several other industrial sectors. Instead, their
future strategy is to focus on data centre and networking devices
alongside their client business.
We have therefore committed to a roadmap using Intel processors
with some of our higher end products using NVIDIA graphics
accelerators. We already have QMax-2i which uses Intel technology
but will gradually be rolling out further gaming platforms using
Intel, the first of which will be sampled during May 2021.
While we do not expect to undertake any new product designs
using AMD, we expect to offer gaming platforms already in
production until the end of the decade.
The consequence of this one-off repositioning of our product
portfolio was a derecognition of $1.5m of capitalised R&D in
the year.
Densitron Business Review
The Densitron business celebrated its 50(th) anniversary in
2020, with the origins of the firm tracing back to 1970 in Japan.
There have been countless economic and financial shocks during this
period which the business has weathered, and it is therefore
unsurprising that, through the pandemic in 2020, Densitron
continued to trade resiliently. Revenues in 2020 were $33.5m, down
7% on prior year primarily due to a weak first quarter (2019:
$36.2m). While the Gaming business suffered more critically from
demand weakness, Densitron was immediately affected by the Chinese
manufacturing shutdown in February which caused delays to
shipments. Consequentially the first quarter was down 31% year on
year, with the second and third quarters up 7% and 8%
respectively.
From a Group perspective, the resilience of the Densitron
business was essential in the maintenance of our strong cash
position and ability to take a more measured approach to
streamlining cost. During the gaming shutdown in the second quarter
of 2020, we redeployed some of the Group's product development and
operational resource to Densitron which enabled accelerated
progress on development of the new Densitron 2.0 and 3.0 product
lines.
Double digit broadcast business growth
Our strategy of market focus and elevation of the value
proposition from pure display products towards integrated Human
Machine Interface (HMI) solutions is showing early signs of success
despite the headwinds caused by the pandemic. Excluding IDS, our
broadcast sector revenue grew 13% to $3.8m. Many of the pipeline
opportunities due to enter mass production during 2020 were delayed
but we expect these to contribute to Densitron revenue in 2021.
IDS, the broadcast hardware and software solution which we
acquired in 2019, had a difficult year because the current revenue
generation model relies on our field technicians installing
equipment into broadcast venues which was generally prohibited
during the year due to the pandemic. The future release of the IDS
software allows for virtualised deployments on a licensed basis,
and we are starting to introduce this service to potential
customers.
Double digit medical sector growth
Densitron medical exposure, the single largest sector exposure
in the business, grew 17% in 2020 to $8.2m. We agreed a corporate
policy to support medical market customers over other business to
help with their rollout of solutions to tackle the pressure being
created by the pandemic. We were involved in several high-profile
projects including supplying displays to manufacturers of COVID-19
test equipment and ventilators.
We believe there are long term opportunities to build on our
status as a trusted supplier of displays into medical equipment.
Many of the innovative HMI and control solutions we have developed
for broadcast can be applied to the medical sector and we are
starting to explore their usage for a range of medical equipment,
leveraging the strong customer relationships already
established.
One example of such an application is use of our IDS technology
to enable simple control of cameras used in operating theatres to
record surgical procedures. Beyond this, there is scope for greater
integration into, for example, other non-life-critical operating
theatre systems such as those used for lighting and
entertainment.
Component shortages and price inflation
Densitron has seen evidence of material future price inflation
from many of our Chinese display suppliers. Combined with the US
trade tariffs on goods imported from China, this will put pressure
on our gross margin. We have engaged with our customers to pass on
the tariffs, enforce price increases across many of our product
lines and also extend customer order visibility to enable us to
increase our purchasing power. In aggregate these initiatives have
so far proven positive with no degradation to gross margin
experienced and no net loss of business and have also led to us
having 107% order coverage of the revenue budget in the first half
of this year.
Management Team Changes
Over the last two years, we have welcomed several leaders to the
business in key roles. After Simon Jones joined in April 2019 to
lead the Densitron business, Abhinay Bhagavatula joined in
September 2019 as Gaming CTO and Duncan Faithfull joined in January
2020 as Gaming CCO. We have since promoted them to the Executive
Committee.
After Guy Millward, CFO, left the business in August 2020, we
brought Andrew Jarvis in as interim CFO. Andrew has since made
considerable improvements in our management information and
reporting, leveraging the benefits of our global SAP system. We
will be evaluating our options for installing a permanent CFO in
the second quarter.
As he retires from the board, I would like to thank Michael
Peagram for his nine years of service to the business. His
commitment, experience and professionalism have been invaluable to
the business. We are delighted to have Francis Small onboard and I
am looking forward to working closely with him as he assumes his
role as Chairman.
Outlook
With a 55% improvement in second half trading compared to the
first half, we enter 2021 with positive momentum towards full year
growth. Trading during the first three months of this year has been
strong and ahead of last year and our Group order coverage for the
first half of 2021 is already 106% of internal budgets. In the
context of the supply chain issues previously flagged, importantly
we have secured sufficient parts to fulfil most of the orders. With
95% of US casinos currently open and with positive sentiment they
will remain open, the signs for the gaming market are positive.
We are crucially aware that the future remains uncertain and any
exponential spread of the pandemic in the US could materially
impact the gaming industry although we believe the experience since
the second quarter of 2020 puts a lower probability on that
scenario. We are working through the unprecedented electronic
component shortages and recognise the risk of delays to shipments
and inflation in prices over the coming months. We are working
through contingency plans with customers and suppliers to mitigate
this risk.
Our strong balance sheet and strengthened customer
relationships, combined with the new business propositions targeted
towards changes in our end markets give the Board confidence in
tremendous opportunities for the Group ahead.
Jon Jayal
Chief Executive Officer
Financial Review
The Quixant Group achieved revenues of $63.8m in the year, down
by 31% on 2019 revenues of $92.3m due to the significant impact of
COVID-19.
Revenue
Gaming business revenues were $30.3m, a decrease of 46% on prior
year (2019: $56.2m). This was split between Gaming platform revenue
of $27.5m, a 41% decrease on prior year (2019: $46.6m), and Gaming
monitor revenue of $2.8m, a 71% decrease on prior year (2019:
$9.6m). Densitron division, which includes IDS, revenues were
$33.5m, a decrease of 7% on prior year (2019: $36.2m).
The decline in Gaming revenues was due to the closures across
the gaming market caused by government response to the COVID-19
pandemic negatively impacting demand for our products. This
resulted in very weak second quarter trading in the Gaming
business, with some recovery in demand seen during the second half
of the year. Densitron, which has sector exposure across a broad
range of industrial markets, was less heavily impacted by the
pandemic and despite some delays due to supply chain challenges,
continued to trade profitably through the year.
Gross profit and gross profit margin
We generated gross profit during the year of $20.1m (2019
restated: $32.1m) representing a gross margin of 31% (2019
restated: 35%). The decline in margin is due to an increased
proportion of our Group revenue being generated by Densitron, which
operates at lower gross margin than Gaming. Underlying Gaming and
Densitron gross margins were consistent with previous years. We
have seen price inflation in our supply chain since the second half
of 2020 primarily due to component shortages and the imposition of
import tariffs for Densitron goods entering the US from mainland
China. We have acted to increase our prices to customers to protect
our gross margin from this price inflation.
Profit Before Tax (PBT)
Adjusted pre-tax profit decreased by 88% to $1.3m (2019:
$10.7m). Adjustments to pre-tax profit were $3.3m in 2020 (2019:
$1.3m) and comprise share-based payments of $0.2m, the write off of
$1.5m of capitalised research and development expenditure due to
unexpected early end-of-life of certain third party components,
restructuring costs of $0.7m and an amortisation charge of acquired
intangibles of $0.9m. Reported pre-tax profit declined to a loss of
$2.0m (2019: Profit before tax of $9.4m).
Expenses
During the year the Group expenditure on research and
development reduced to $4.3m (2019: $6.6m). These costs relate to
investment activities principally undertaken in Taiwan, Italy, UK
and Slovenia. $1.7m of these costs were capitalised (2019: $2.2m)
with amortisation for the year on total capitalised development
costs of $2.4m (2019: $1.4m).
To mitigate the effect of the decline in revenue on
profitability, we took action to streamline full year operating
costs by 3% to $21.9m (2019 restated: $22.5m) - which includes
$3.3m of adjustments to the reported PBT. This Group has seen a
reduction in headcount from an average of 223 people in 2019 to 209
in 2020.
Taxation
The tax charge for the year was $1.0m (2019: $1.1m). There has
been limited reduction in the tax charge when compared to 2019, as
a result of taxable positions in overseas entities.
The Group continues to benefit from enhanced tax reliefs
available in respect of qualifying research and development
expenditure and has also benefited from patent box relief.
Earnings per share
Basic earnings per share decreased by 136% to -$0.0445 per share
(2019: $0.1252 per share). Adjusted fully diluted earnings per
share as set out in note 9 to the financial statements decreased by
103% to -$0.0040 per share (2019: $0.1396 per share).
Balance Sheet and Cash Flow
Non-current assets decreased in the year to $24.7m (2019:
$25.6m) mainly due to the derecognition of R&D discussed above.
Inventory has increased to $21.6m (2019: $20.2m). Raw material
inventory has remained in line with 2019, and work-in-progress and
finished goods have increased as we await to ship committed
products to customers who have requested later delivery dates.
The cash generated from operating activities in the year
amounted to $4.0m (2019: $14.9m). The reduction in cash generated
is largely due to the losses incurred in the year due to the
pandemic. The Group has reduced its investments in the business,
spending $2.2m (2019: $5.3m) on investing activities, in line with
trading conditions.
Government COVID-19 support
The Group has received government grants to support payroll
costs during the COVID-19 pandemic. This includes $217k for Quixant
Taiwan and $32k for Quixant Italia. These grants and helped the
business to maintain employment during the pandemic. A
government-backed, revolving credit facility of GBP7.5m granted in
the UK - however, this has substantively not been used in 2020,
with only GBP25k drawn down to maintain the facility. The business
seeks to close this facility before the 2021 AGM. In the year, we
have also received cash from COVID-19 support loans in France and
the USA, totaling $0.9m, of which $0.3m has been forgiven in the
USA. $0.5m in France will be repaid in 2021, and we expect the
other $0.1m loan in the USA to also be forgiven in 2021.
Dividend
While we suspended payment of a dividend in 2020 due to the
risks facing the business in relation to COVID-19, we maintained a
strong cash position through the year and saw profitable trading in
the second half of the year. The Board therefore proposes
reinstatement of a dividend for the year ended 31 December 2020 of
2.0p per share (2019: nil) payable on 14 May 2021 to all
shareholders on the register on 23 April 2021. The corresponding
ex-dividend date is 22 April 2021.
Andrew Jarvis
Interim Chief Financial Officer
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
For the years ended 31 December 2020 and 2019
2020 2019
Total Total
$000 (Restated*) $000
---------------------------------------------------------------------- ---------- ----------------
Revenue 63,794 92,320
Cost of sales (43,742) (60,259)
----------------------------------------------------------------------- ---------- ----------------
Gross profit 20,052 32,061
Operating expenses (21,904) (22,507)
----------------------------------------------------------------------- ---------- ----------------
Operating (loss) / profit (1,852) 9,554
Financial expenses (151) (136)
----------------------------------------------------------------------- ---------- ----------------
(Loss) / Profit before tax (2,003) 9,418
Taxation (955) (1,102)
----------------------------------------------------------------------- ---------- ----------------
(Loss) / Profit for the year (2,958) 8,316
----------------------------------------------------------------------- ---------- ----------------
Other comprehensive income for the year, net of income tax
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences 788 (144)
----------------------------------------------------------------------- ---------- ----------------
Total comprehensive (expense) / income for the year (2,170) 8,172
----------------------------------------------------------------------- ---------- ----------------
Basic earnings per share ($ 0.0445) $ 0.1252
----------------------------------------------------------------------- ---------- ----------------
Diluted earnings per share ($ 0.0445) $ 0.1243
----------------------------------------------------------------------- ---------- ----------------
The Italian subsidiary, Quixant Italia srl, is 99% owned by the
Group. The comprehensive income and equity attributable to the
non-controlling interests in this subsidiary are not material.
The consolidated statement of profit and loss and other
comprehensive income has been prepared on the basis that all
operations are continuing operations.
* See prior year adjustment note (note 5).
CONSOLIDATED AND COMPANY BALANCE SHEETS
As at 31 December 2020 and 2019
Group Company
------------------ ------------------
2020 2019 2020 2019
$000 $000 $000 $000
----------------------------------------------------------- --- -------- -------- -------- --------
Non-current assets
Property, plant and equipment 6,004 5,926 3,975 3,695
Intangible assets 16,189 18,449 1,280 1,888
Right-of-use assets 1,276 894 200 252
Investment property - - - -
Investments in group companies and associated undertakings - - 9,376 9,346
Deferred tax assets 1,267 340 314 44
Trade and other receivables - - 25,393 -
24,736 25,609 40,538 15,225
--------------------------------------------------------------- -------- -------- -------- --------
Current assets
Inventories 21,601 20,180 13,779 13,735
Trade and other receivables 16,517 23,902 6,282 37,535
Cash and cash equivalents 18,804 16,954 3,080 1,219
---------------------------------------------------------------- -------- -------- -------- --------
56,922 61,036 23,141 52,489
--------------------------------------------------------------- -------- -------- -------- --------
Total assets 81,658 86,645 63,679 67,714
---------------------------------------------------------------- -------- -------- -------- --------
Current liabilities
Other interest-bearing loans and borrowings (695) (82) (96) (81)
Trade and other payables (12,913) (17,756) (10,723) (12,184)
Tax payable (1,022) - (83) (51)
Lease liabilities (386) (406) (200) (252)
---------------------------------------------------------------- -------- -------- -------- --------
(15,016) (18,244) (11,102) (12,568)
--------------------------------------------------------------- -------- -------- -------- --------
Non-current liabilities
Other interest-bearing loans and borrowings (712) (738) (712) (738)
Provisions (354) (343) - -
Deferred tax liabilities (1,322) (1,469) (76) -
Lease liabilities (901) (564) - -
---------------------------------------------------------------- -------- -------- -------- --------
(3,289) (3,114) (788) (738)
--------------------------------------------------------------- -------- -------- -------- --------
Total liabilities (18,305) (21,358) (11,890) (13,306)
---------------------------------------------------------------- -------- -------- -------- --------
Net assets 63,353 65,287 51,789 54,408
---------------------------------------------------------------- -------- -------- -------- --------
Equity attributable to equity holders of the parent
Share capital 106 106 106 106
Share premium 6,708 6,698 6,708 6,698
Share-based payments reserve 1,571 1,345 1,571 1,345
Retained earnings 54,086 57,044 42,040 45,915
Translation reserve 882 94 1,364 344
---------------------------------------------------------------- -------- -------- -------- --------
Total equity 63,353 65,287 51,789 54,408
---------------------------------------------------------------- -------- -------- -------- --------
These financial statements were approved and authorised for
issue by the Board of Directors on 14 April 2021 and were signed on
behalf of the Board by:
Jon Jayal
Director
Company registered number: 04316977
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARSED 31 DECEMBER 2020 and 2019
GROUP
Share Share Translation Share-Based Retained
Capital Premium Reserve Payments Earnings Total Equity
$000 $000 $000 $000 $000 $000
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 1 January 2019 106 6,499 238 1,102 51,488 59,433
Total comprehensive income for the period
Profit for the year - - - - 8,316 8,316
Other comprehensive loss - - (144) - - (144)
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total comprehensive (expense) / income for the
period - - (144) - 8,316 8,172
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Transactions with owners, recorded directly in
equity
Share-based payments - - - 243 - 243
Dividend paid - - - - (2,760) (2,760)
Exercise of share options - 199 - - - 199
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total contributions by and distributions to owners - 199 - 243 (2,760) (2,318)
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 31 December 2019 106 6,698 94 1,345 57,044 65,287
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Share Share Translation Share-Based Retained
Capital Premium Reserve Payments Earnings Total Equity
$000 $000 $000 $000 $000 $000
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 1 January 2020 106 6,698 94 1,345 57,044 65,287
Total comprehensive income for the period
Loss for the year - - - - (2,958) (2,958)
Other comprehensive income - - 788 - - 788
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total comprehensive income / (expense) for the
period - - 788 - (2,958) (2,170)
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Transactions with owners, recorded directly in
equity
Share-based payments - - - 226 - 226
Dividend paid - - - - - -
Exercise of share options - 10 - - - 10
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total contributions by and distributions to owners - 10 - 226 - 236
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 31 December 2020 106 6,708 882 1,571 54,086 63,353
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
COMPANY
Share Share Translation Share-Based Retained Total Parent
Capital Premium Reserve Payments Earnings Equity
$000 $000 $000 $000 $000 $000
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 1 January 2019 106 6,499 (23) 1,102 15,364 23,048
Total comprehensive income for the period
Profit for the year - - - - 33,311 33,311
Other comprehensive income - - 367 - - 367
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total comprehensive income for the period - - 367 - 33,311 33,678
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Transactions with owners, recorded directly in
equity
Share-based payments - - - 243 - 243
Dividend paid - - - - (2,760) (2,760)
Exercise of share options - 199 - - - 199
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total contributions by and distributions to owners - 199 - 243 (2,760) (2,318)
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 31 December 2019 106 6,698 344 1,345 45,915 54,408
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Share Share Translation Share-based Retained Total Parent
Capital Premium Reserve Payments Earnings Equity
$000 $000 $000 $000 $000 $000
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 1 January 2020 106 6,698 344 1,345 45,915 54,408
Total comprehensive income for the period
Loss for the year - - - - (3,875) (3,875 )
Other comprehensive income - - 1,020 - - 1,020
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total comprehensive income / (expense for the
period - - 1,020 - (3,875) (2,855 )
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Transactions with owners, recorded directly in
equity
Share-based payments - - - 226 - 226
Dividend paid - - - - - -
Exercise of share options - 10 - - - 10
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Total contributions by and distributions to owners - 10 - 226 - 236
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
Balance at 31 December 2020 106 6,708 1,364 1,571 42,040 51,789
-------------------------------------------------- ------- ------- ----------- ----------- -------- ------------
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE YEARSED 31 DECEMBER 2020 and 2019
Group Company
---------------------- -----------------
2020 2019 2020 2019
$000 $000 $000 $000
-------------------------------------------------------------- ------- ------------- ------- --------
Cash flows from operating activities
(Loss) / Profit for the year (2,958) 8,316 (3,875) 33,311
Adjustments for:
Depreciation, amortisation and impairment 3,084 2,853 970 3,562
Impairment losses on intangible assets 1,503 - - -
Depreciation of leased assets 473 680 230 402
Change in fair value of investment property - 631 - -
Movement in provisions (1,061) 36 (194) -
Taxation expense 955 1,102 105 266
Dividends received - - (391) -
Financial expense 96 16 12 13
Lease liability interest expense 55 120 13 52
Equity-settled share-based payment expenses 226 243 166 243
--------------------------------------------------------------- ------- ------------- ------- --------
2,373 13,997 (2,964) 37,849
Decrease/(increase) in trade and other receivables 7,026 7,459 5,734 (27,600)
Decrease / (increase) in inventories 14 (488) 923 496
(Decrease) in trade and other payables (4,625) (3,636) (1,523) (7,140)
--------------------------------------------------------------- ------- ------------- ------- --------
4,788 17,332 2,170 3,605
Interest paid (96) (16) (12) (13)
Lease liability interest paid (55) (120) (13) (52)
Tax paid (663) (2,282) (73) (971)
--------------------------------------------------------------- ------- ------------- ------- --------
Net cash from operating activities 3,974 14,914 2,072 2,569
--------------------------------------------------------------- ------- ------------- ------- --------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired - (2,392) - -
Capitalised development expenditure (1,738) (2,165) - -
Acquisition of property, plant and equipment (431) (316) (383) (165)
Acquisition of intangible assets (71) (433) (71) (432)
Dividends received - - 391 -
Net cash from investing activities (2,240) (5,306) (63) (597)
--------------------------------------------------------------- ------- ------------- ------- --------
Cash flows from financing activities
Reduction/repayment of borrowings (19) (534) (11) (267)
Proceeds from new government loans (net of waiver of $297k) 606 - - -
Payment of lease liabilities (526) (674) (191) (402)
Dividends paid - (2,760) - (2,760)
Proceeds from issue of shares 10 200 10 200
--------------------------------------------------------------- ------- ------------- ------- --------
Net cash from financing activities 71 (3,768) (192) (3,229)
--------------------------------------------------------------- ------- ------------- ------- --------
Net increase/(decrease) in cash and cash equivalents 1,805 5,840 1,817 (1,257)
Cash and cash equivalents at 1 January 16,954 11,082 1,219 2,456
Foreign exchange rate movements 45 32 44 20
--------------------------------------------------------------- ------- ------------- ------- --------
Cash and cash equivalents at 31 December 18,804 16,954 3,080 1,219
--------------------------------------------------------------- ------- ------------- ------- --------
NOTES TO THE FINANCIAL STATEMENTS
1. General information
Whilst the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement criteria of international accounting standards in
conformity with the requirements of the Companies Act 2006
("Adopted IFRSs"), this announcement does not itself contain
sufficient information to comply with Adopted IFRSs. The accounting
policies adopted in this preliminary announcement are consistent
with the Annual Report for the year ended 31 December 2020.
The financial information set out in this document, which was
approved by the Board on 14 April 2021, is derived from the full
Group accounts for the year ended 31 December 2020 and does not
constitute the statutory accounts within the meaning of section 434
of the Companies Act 2006. The Group accounts on which the auditors
have given an unqualified report, which does not contain a
statement under section 498(2) or (3) of the Companies Act 2006 in
respect of the accounts for 2020, will be delivered to the
Registrar of Companies in due course. The Board of Quixant plc
approved the release of this preliminary announcement on 14 April
2021.
Pursuant to AIM Rule 20, the Annual Report and Accounts for the
financial year ended 31 December 2020 ("Annual Report") is
available to view on the Group's website: www.quixant.com . Quixant
will hold its AGM on 6 May 2021.
Going concern
In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group and Company will have sufficient funds to
continue to meet its liabilities as they fall due for at least 12
months from the date of approval of these financial statements.
Following the global pandemic in 2020, the world continues to
recover as economies begin to re-open following the rollout of
COVID-19 vaccines. Governments around the world continue to impose
various restrictions on economic activity, the movement of people,
and various other initiatives to minimise the opportunity for the
disease to spread.
The Directors have prepared cash flow forecasts for a period of
at least 12 months from the date of signing the financial
statements. Ongoing effects of the pandemic on the forecasts
include delays in recovering debts from customers who may be facing
financial difficulties, further drops in customer demand in the
coming months despite the recovery seen in H2 2020, and the
uncertain timing of sales recovering to levels prior to the
pandemic.
The Board considered their reasonably plausible but severe
downside scenario where 2021 reported revenues were halved compared
to forecast, and the performance expected in the 2021 Budget being
achieved in 2022 instead. The total revenues modelled in 2021 were
lower than the extrapolated annual revenue based on Q2 2020
performance, when the impact of COVID-19 was most significant. In
this scenario, the Group will have sufficient cash reserves and
working capital to continue operating as a going concern beyond the
12-month period analysed.
The Board's other reasonably plausible but severe downside
scenario can be viewed as similar to trading conditions that were
experienced in 2020. In Q2 2020, due to the global pandemic and a
significant lockdown in the USA, Gaming revenues dropped off in Q2
2020, and but then recovered through H2 2020. However, rather than
the ongoing trading conditions due to the pandemic, the challenge
in 2021 might be related to stock and component availability.
Therefore, the Board has considered a scenario where orders are not
completed, and revenues are not received, in Q3 2021, and resume in
Q4 2021. This situation would also not cause the Group any
difficulty with cashflow as per the analysis.
While the Directors' have no reason to believe that customer
revenues and receipts will decline to the point that the Group no
longer has sufficient resources to fund its operations, should this
occur, the group would look to take out additional funding
facilities, as well as making reductions in controllable costs.
There would also be an opportunity to sell certain property and
inventory assets to accelerate cash generation and/or mitigate
risk.
Consequently, the directors are confident that the Group and
Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of these financial statements and therefore have
prepared these financial statements on a going concern basis.
2. Profit Before Tax reconciliation
Profit Before Tax and adjusted PBT for the current and prior
year have been derived as follows:
PBT
---------------
2020 2019
$000 $000
------------------------------------------------------------ ------- ------
(Loss) / Profit for the year (2,958) 8,316
Adding back:
-------
Taxation expense 955 1,102
------------------------------------------------------------ ------- ------
(Loss) / profit before tax (2,003) 9,418
------------------------------------------------------------ ------- ------
Adjustments:
Research & development derecognised(1) 1,503 -
Amortisation of customer relationships and order backlog(2) 920 663
Share-based payments expense(3) 226 243
Loss on disposal of subsidiary - 124
IDS acquisition costs - 63
Restructuring cost(4) 674 169
------------------------------------------------------------ ------- ------
Adjusted PBT 1,320 10,680
------------------------------------------------------------ ------- ------
1. To derecognise capitalised research & development due to
one-off notifications by key suppliers to end-of-life key
components utilised in our gaming products; citing changing market
demands and supply chain issues brought about by the COVID-19
pandemic.
2. The amortisation of customer relationships and order backlog
has been excluded as it is not a cash expense to the Group.
3. Share-based payments expense has been excluded as they are not a cash-based expense.
4. Other items of income and expense - where other items of
income and expense occur in a particular year and their inclusion
in PBT means that a year on year comparison of year on year results
is not on a consistent basis the directors will exclude them from
the adjusted numbers. During the year under review the directors
have excluded restructuring costs in respect of employee
departures.
3. Earnings per ordinary share (EPS)
2020 2019
$000 $000
------------------------------------------------------------------------------------------ ------- -----
Earnings
Earnings for the purposes of basic and diluted EPS being net (loss) / profit attributable
to equity shareholders (2,958) 8,316
------------------------------------------------------------------------------------------ ------- -----
Number of shares Number Number
------------------------------------------------------------------------ ---------- ----------
Weighted average number of ordinary shares for the purpose of basic EPS 66,437,683 66,404,468
Effect of dilutive potential ordinary shares:
----------
Share options 154,375 499,053
------------------------------------------------------------------------ ---------- ----------
Weighted number of ordinary shares for the purpose of diluted EPS 66,592,058 66,903,521
------------------------------------------------------------------------ ---------- ----------
Basic earnings per share ($0.0445) $0.1252
------------------------------------------------------------------------ ---------- ----------
Diluted earnings per share ($0.0445) $0.1243
------------------------------------------------------------------------ ---------- ----------
Calculation of adjusted diluted earnings per share: $000 $000
------------------------------------------------------------------------------------------- --------- --------
Earnings
Earnings for the purposes of basic and diluted EPS being net (loss) profit attributable to
equity shareholders (2,958) 8,316
Adjustments
Research & development derecognised 1,503 -
Amortisation of customer relationships and order backlog 920 663
Share-based payments expense 226 243
Loss on disposal of subsidiary - 124
IDS acquisition costs - 63
Restructuring cost 674 169
------------------------------------------------------------------------------------------- --------- --------
365 9,578
Tax effect of adjustments (631) (239)
------------------------------------------------------------------------------------------- --------- --------
Adjusted earnings (266) 9,339
------------------------------------------------------------------------------------------- --------- --------
Adjusted diluted earnings per share ($0.0040) $ 0.1396
------------------------------------------------------------------------------------------- --------- --------
4. Subsequent events
The Group continues to monitor and assess the impact of COVID-19
on the performance of the business in 2021. The Directors are
confident in the Group's ability to react to any further economic
uncertainties that may occur in 2021 and will continue to utilise
its experiences from 2020. The global component shortage is likely
to have an impact on procurement. The Board has approved a plan to
purchase additional buffer stock to support the 2021 order book and
protect the business from ongoing global shortages, which will be
managed within our current working capital structure.
5. Prior year adjustment
During the year, Quixant plc identified that a consolidation
journal between operating expenses and cost of sales in respect of
overheads absorbed in the production of finished goods, was omitted
in the prior year.
As a result, the cost of sales previously recognised in 2019 of
$58.0m has now increased by $2.2m whilst the operating expenses
recognised in 2019 of $24.7m has now decreased by $2.2m. This
adjustment has no effect on the profit before tax and profit for
the year for 2019.
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END
FR FLFEDSAIVLIL
(END) Dow Jones Newswires
April 14, 2021 02:00 ET (06:00 GMT)
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