TIDMNXQ
RNS Number : 4790L
Nexteq PLC
06 September 2023
The information contained within this announcement is deemed by
the Company to constitute inside information pursuant to Article 7
of EU Regulation 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 as amended.
6 September 2023
Nexteq plc
("Nexteq" or the "Group")
Interim Results
Materially improved profit and cash generation
Nexteq (AIM: NXQ), a leading technology solutions provider to
customers in selected industrial markets, is pleased to announce
its unaudited interim results for the six months ended 30 June
2023.
Six months Six months Change
to 30 June to 30 June
2023 2022
Group revenue $56.3m $53.3m 6%
Quixant revenue $34.3m $31.4m 9%
Densitron revenue $22.0m $21.9m 0%
Group gross margin 34.2% 31.6% 260bps
Adjusted Group profit before
tax(1) $5.9m $3.5m 70%
Group profit before tax $5.1m $2.8m 81%
Adjusted diluted earnings per
share(1) 7.18c 4.05c 77%
Diluted earnings per share 6.31c 3.31c 91%
Net cash from / (used in) operating
activities $6.2m ($3.6m) nm
Net cash (1) $18.5m $12.9m (2) 43%
(1) For details on adjusted measures refer to note 1 and note 4
of the condensed consolidated financial statements.
(2) Balance as at 31 December 2022.
FINANCIAL HIGHLIGHTS:
-- Group revenues
up 6%:
o Quixant revenues in the first half grew 9% driven by
higher
volumes.
o Densitron revenues in line with H1 2022, with the
Broadcast
Technology sector growing 10%, tempered by softer demand
in other industrial sectors.
-- Gross margin improved by 260bps to 34.2%, benefitting from
a focus on higher quality Densitron revenues and partial
easing of supply chains.
-- Adjusted profit before tax grew 70% to $5.9m, a margin of
10.5% (H1 2022: 6.6%), ahead of both H1 and H2 2022. Reported
profit before tax grew 81% to $5.1m (H1 2022: $2.8m).
-- Net cash increased 43% to $18.5m, reflecting improved cash
generation from trading and effective management of working
capital.
OPERATIONAL HIGHLIGHTS:
-- Rebrand to Nexteq plc completed, reflecting evolution to
a diversified business platform supplying multiple products
into a range of industries.
-- First deliveries of Quixant turnkey cabinet solutions completed
in first half.
-- Active stock management leading to improved working capital
position.
-- Broadcast delivering to plan with continued progression of
pipeline of sales opportunities.
-- Continued investment in teams across engineering, dedicated
sales and product leadership roles.
CURRENT TRADING AND OUTLOOK:
-- Profit expected to be in line with market expectations for
full year on revenues broadly in line with prior year.
-- Order book normalising from the high levels seen in 2021
and 2022, as customers seek to reduce their inventory levels.
-- Strong balance sheet with net cash position and good operational
liquidity; supported by good cash generation, positioning
the Group for future organic and acquisitive growth.
Jon Jayal, CEO of Nexteq commented:
"The Group has delivered a solid first half performance with
increased revenues across our strategic sectors together with
materially improved profitability. Alongside this, we have seen
evidence of our strategy to diversify across our customers, product
offerings and markets paying off, with the first deliveries of our
turnkey gaming cabinet solution during the period and a
strengthening of our presence in the Broadcast market.
Through close cooperation and planning with our customers, we
have helped them navigate through the supply chain challenges,
cementing our position as a trusted technology outsource partner.
Our value proposition continues to grow in reputation across our
target verticals and we see a healthy pipeline of opportunities
ahead.
Reflecting our ambitions to expand our solutions across new
technology markets, we have completed our repositioning under the
Nexteq brand during the period. Looking ahead, whilst we are
cognisant of short-term market conditions, the strength of our
customer relationships, healthy pipeline and product roadmap leaves
us well placed to grow over the medium term in both new and
existing markets. "
Investor Presentation
Nexteq is hosting an online presentation open to all investors
on 8 September, at 1.00pm BST. Anyone wishing to connect should
register here:
https://www.investormeetcompany.com/nexteq-plc/register-investor.
(1) The current range of forecasts for the year ended 31
December 2023 is revenue of between $119.0m and $120.1m with a
consensus of $119.6m and adjusted profit before tax of $12.4m.
Nexteq plc Tel: +44 (0)1223 892 696
Jon Jayal, Chief Executive Officer
Johan Olivier, Chief Financial Officer
Nominated Adviser and Broker: Tel: +44 (0)20 7220 0500
finnCap Ltd
Matt Goode / Simon Hicks (Corporate
Finance)
Charlotte Sutcliffe (ECM)
Joint Broker: Tel: +44 (0)20 7523 8000
Canaccord Genuity Ltd
Simon Bridges / Andrew Potts
Financial PR: Tel: +44 (0)20 3405 0205
Alma PR Ltd
Hilary Buchanan / Kieran Breheny
/ Will Ellis Hancock
About Nexteq
Nexteq (AIM: NXQ) is a strategic technology solutions provider
to customers in selected industrial markets. Its innovative
technology enables the manufacturers of global electronic equipment
to outsource the design, development and supply of non-core aspects
of their product offering. By outsourcing elements of their
technology stack to Nexteq, customers can focus their product
development effort on the most critical drivers of their business'
success.
Our solutions are delivered through a global sales team and
leverage the Group's electronic hardware, software, display and
mechanical engineering expertise. Our operations in Taiwan are at
the heart of Far Eastern supply networks and facilitates cost
effective manufacturing and strategic supply chain management.
The Group operates in 7 countries and services over 500
customers across 50 countries.
Nexteq operates two distinct brands: Quixant, a specialised
computer platforms provider, and Densitron, leaders in human
machine interface technology, each with dedicated sales, account
management and product innovation teams. Founded in 2005, and later
floating on the London Stock Exchange's AIM stock market as Quixant
plc, the Group rebranded to Nexteq in 2023.
Further information on Nexteq and its brands can be found at
www.nexteqplc.com.
Chief Executive's Report
Nexteq overview - Empowering Technology
The Group delivered a strong performance in the first half of
the year, posting revenue growth of 6%, improved gross margins and
materially improved profitability. This reflects our strategic
focus on a higher quality revenue mix and stabilisation of the
prices of some components, which overall have driven a return of
gross margins towards historic levels. As a result, adjusted profit
before tax increased 70% to $5.9m (H1 2022: $3.5m) and reported
profit before tax increased 81% to $5.1m (H1 2022: $2.8m).
During the first half of 2023, we saw the normalisation of our
order book towards historically more typical levels of visibility.
The extended component lead times and supply shortages seen in 2021
and 2022 drove exceptional order intake for our products to
mitigate widespread electronic component market shortages. Whilst
our end customers navigate evolving economic conditions and adopt a
more cautionary stance to holding inventory, the value attributed
to our technology and customer service is reflected in the
consistently high customer satisfaction and retention rates.
Our core proposition, which centres on providing specialised
outsourced solutions to enable customers to concentrate efforts on
aspects of their business that deliver value, continues to resonate
within our chosen markets resulting in a number of successful new
customer acquisitions and a healthy pipeline of opportunities. To
support our multi-vertical growth strategy and better reflect our
value proposition and vision for the Group, whilst maintaining our
strong brand recognition within our chosen markets, the Group
rebranded from Quixant plc to Nexteq plc in May 2023.
The recovery in gross margin performance was a strong positive
in the first half of the year. The last two years have seen an
unprecedented level of supply disruption and price volatility in
electronic components. We acted during this period to mitigate the
effects by making forward strategic stock purchases and working
with customers to pass on price inflation in the cost to
manufacture our products. In the second half of 2022, these actions
resulted in the recovery of some of our gross margin weakness and
this improvement has continued into the first half of this year.
Densitron's gross margins were boosted by the focus on high quality
revenue and mix of business shifting towards the specialist
broadcast product offerings. We expect continued gross margin
progress as we execute in accordance with our strategy.
Improving cash generation remains a priority for the Group, so
it is pleasing that we generated healthy operating cash of $6.2m in
the first half of the year, boosting our net cash position to
$18.5m at the period end ($12.9m at 31 December 2022). This
contrasts with a $3.6m operating cash outflow during the first half
of 2022, driven by increased working capital tied up in inventory
used to mitigate long component lead times and supply
shortages.
Whilst economic conditions remain challenging in the short-term,
we remain focused on our vision and long-term growth strategy. We
have progressed a number of our strategic priorities, including
continued progression toward higher value products. Our strategic
investment into the Broadcast sector continues to deliver results
with double-digit growth and a building pipeline, and we remain
well placed to deliver long-term sustainable growth through our
portfolio of specialist outsource technology solutions focused on
certain sectors.
Quixant overview
Gaming technology
We entered 2023 with a strong order book across our gaming
customers which gave us excellent visibility of the first half.
Despite some lingering supply disruption, the strategic stock
purchases made in 2021 and 2022 enabled us to deliver against this
order book, driving gaming sector revenue up by 9% to $34.3m (H1
2022: $31.4m). The majority of the growth in the first half of 2023
has been volume driven, complemented by modest price inflation. The
number of computer boards shipped in the period increased by 13% to
25,900 (H1 2022: 21,800), comprising a greater proportion of entry
level IQ and mid-range IQON products, with volumes increasing by
29% and 38% respectively.
Our growth continues to be underpinned by our programme of
innovation and development. Accordingly, we are due to launch
next-generation Intel variants of IQ and IQON over the next 12
months which will position us well for conversion of new business
opportunities in the Amusement With Prize ("AWP"), Video Lottery
Terminal ("VLT"), and route markets. These new products are
embedded with our proven Quixant Software solutions and services
which enable customers' engineering teams to place an even greater
emphasis on creating the best player experience possible. Alongside
this, and completing the gaming computer range, the latest
generation of our flagship QMAX product will enter mass production
in the second half of 2023.
We received the first mass production order for our turnkey
gaming cabinet products from Pilot Games in 2022 and made the first
deliveries in the first half of 2023. We expect further deliveries
through the rest of the year and are working with several
prospective customers on opportunities to provide them with
outsourced turnkey cabinet solutions.
Commercial casinos in the US continue to see resilient gross
gaming revenues from their land-based operations, which have been
broadly at a consistent level since Q2 2021[1]. European markets
finally recovered after COVID in 2022, showing a marked increase in
land-based gross gaming revenues. The prediction going forward is
for a low single digit revenue growth over the next five years[2].
Asia, despite being heavily affected by the pandemic, remains a
longer-term growth prospect, with the gaming equipment market
forecast to grow by 5% annually out to 2029[3]. A push towards
regulation and the wider spread adoption of online gaming is
forecast to drive Latin America gross gaming revenues to nearly
triple from 2022 to 2025 [4] .
Against this market backdrop, we expect to see continued demand
for capital investment into new machines, which in turn drives
demand for our products. However, we anticipate that customers'
increased financing costs and elevated stock levels entering the
year in anticipation of more buoyant economic conditions may lead
to some short-term softness in demand.
Despite challenges in the broader economy, with a healthy new
business pipeline combined with a refreshed Intel-based gaming
computer product portfolio and turnkey gaming cabinet solutions, we
continue to believe that the gaming sector presents a compelling
growth opportunity.
Densitron overview
Broadcast technology
Our emerging broadcast technology offerings, which enable
customers to outsource and enhance the human machine interface of
equipment installed in production control rooms, have delivered
another period of growth, with revenue increasing 10% to $3.4m (H1
2022: $3.1m) in the first half.
The growth in broadcast sector demand was driven by the ramp up
of new customers which we have won over the last few years. After
working with several broadcast customers for many years supplying
them with Densitron industrial display components, we started
targeting the sector as a focus market for the Group with an
optimised range of human machine interface and control system
solutions. These were developed to address the evolving adoption of
touch screen technology in professional broadcast equipment.
Adoption of touch technology, which has proliferated as the
favoured human machine interface input technology in most
applications elsewhere, was challenging for the broadcast sector
because it lacked the tactile feedback and precision offered by
mechanical buttons. The electronics and software required to drive
graphical touch screen-based interfaces were also unfamiliar.
Densitron is well positioned to address these problems.
We have spent the last few years developing and integrating a
range of hardware technologies which include:
- High-resolution colour TFT displays;
- High-precision touch screens with software integration
support;
- Tactile objects which are installed inside the active
display area to allow the ultimate in visual and tactile
feedback upon interacting with the device;
- Patent pending haptic solutions; and
- Easy integration of tactile objects installed outside
the active display area.
Alongside these, we also offer a full control system ("IDS")
which enables customers to drive this hardware and control a wide
range of third-party devices from it with tried-and-tested
software, which is used in some of the largest broadcast
corporations globally.
Our Broadcast customer base has a conservative approach to
innovation, mainly because of the mission-criticality of the
equipment that is used. As such, adoption of our technology has
been gradual, but we have seen a continued ramp up in integration
of our solutions. This ramp up of existing and new customers is the
driver behind the consistent double-digit growth seen for several
reporting periods.
We have also made significant investments into the Broadcast
team over the last twelve months to support the business. These
include specialist engineering, dedicated sales and product
leadership resources. We believe these actions support a continued
growth of Broadcast sector revenues for the full year and
beyond.
Industrial Display Components
Revenue from Densitron display components supplied into other
industrial sectors was marginally down year on year with $18.6m,
compared to $18.8m in H1 2022.
Our industrial display components are supplied to a wide range
of markets, which in aggregate have seen weaker demand because of
the wider challenging macroeconomic environment. Many customers
forecasted higher demand for their products in 2023 and entered the
year well-stocked to take advantage of this demand and had placed
orders for further deliveries in the year. As we entered the second
quarter, persistently weak macro-economic conditions drove softer
demand for their products, and we have started to see requests for
deliveries to be pushed out.
Whilst we have seen weaker demand, we maintained a strong focus
on higher quality revenue to support Group margin performance which
has pleasingly led to significant structural margin enhancement to
record levels in the Densitron display component customer book.
Growth strategy
Nexteq delivers growth through identifying and investing in
vertical markets which are undergoing a technology change bringing
about a requirement for new, optimised solutions which are not met
by standard technology. Having identified these markets our global
engineering teams develop bespoke products, providing customers an
opportunity to outsource their product development. We continually
enhance this offering to increase the value proposition and become
increasingly integrated into the value-chain.
When the company was founded in 2005, the management team
identified the increasing use of personal computer (PC) technology
to drive the new breed of video slot machines, however off
the-shelf computer solutions failed to meet the regulatory
requirements of most established gaming jurisdictions. Our computer
boards enable manufacturers to outsource the computer platform to
us, leaving our customers who design the gaming machines to focus
on developing vibrant, captivating game content, and to deliver the
ultimate customer experience. We have expanded on our computer
board range by now offering a turnkey cabinet solution which
provides a route for customers to fully outsource their land-based
slot machine hardware to us.
A key focus for the Board is the diversification of the Group's
revenue, both within the gaming sector across a larger number of
customers and gaming markets, but also into new sectors where our
value proposition and capabilities are valuable. Densitron was
acquired in 2015 with a view to provide a platform for the Group to
identify new non-gaming focus markets through the broad sector base
into which display components are supplied. Within these sectors we
seek to develop specialist technology offerings to support existing
market participants as an outsource partner. The first of these
focus markets identified beyond gaming is the broadcast sector. We
also generate significant revenue from the medical sector mainly,
comprising our industrial display component range.
Examples of progress against the Group's four pillar growth
strategy are as follows:
-- Identify target verticals: The first focus market identified
beyond gaming is the broadcast sector, which grew double-digit
in the period and has a pipeline of new customer opportunities.
-- Acquire customers: The Group's value proposition continues
to drive new interest with several new projects commencing
production, such as Pilot Games.
-- Innovation and R&D: In Gaming, the Group's recently launched
turnkey cabinet solution provides a route for customers
to fully outsource their land-based slot machine hardware
to Quixant.
-- Penetrate up the value-chain: Our higher value gaming
support services and IDS broadcast control software solution
are enabling us to be further integrated into the technology
stack in our end markets.
When appropriate, the Board may complement its organic growth
strategy with strategic acquisitions that enhance the Group's
technical capabilities and market reach. The Group's return to
healthy operating cash generation and net cash position puts it in
a strong position to take advantage of such acquisitive growth
opportunities.
Current Trading and Outlook
The business delivered revenue growth and a recovery in gross
margin performance during the first six months, with strategic
initiatives in recent years, such as new product innovation, and
focus on high quality revenue, paying off.
The easing in lead times combined with customers who are seeking
to reduce stock levels as a result of improvements in the supply
chain has resulted in the normalisation of our order book, a trend
we expect to continue in the short term. As we enter the fourth
quarter we continue to monitor and navigate the shifting patterns
and normalising of client orders but our focus on higher quality
revenue supports our gross margin outlook in the short and medium
term. We expect to deliver full year profit before tax in line with
market expectations with revenues broadly in line with prior year.
The Group continues to benefit from high customer retention and a
healthy new business pipeline.
Longer-term, the Board believes Nexteq's growth strategy
positions the business well for organic growth in its target
sectors and its robust financial position supports acceleration of
this strategy through acquisition.
Group Financial Review
Group revenues were up 6% year on year to $56.3m (H1 2022:
$53.3m), with Quixant growing 9% to $34.3m (H1 2022: $31.4m) and
Densitron in line with the prior year at $22.0m (H1 2022: $21.9m).
The top 10 customers represented 52% of revenue in the first half
of 2023, broadly in line with the prior year (H1 2022: 54%).
The increase in Quixant revenues was due to the elevated demand
from our customer base, with 25,900 Quixant platforms shipped in
the first half, an increase of 13% on H1 2022. Demand was strong
across the entire Quixant range, and in particular the
cost-effective range. Due to the greater proportion of
cost-effective products sold in the first half, the average sales
price was slightly lower compared with the prior year.
Densitron saw softer demand for some of its products as many
customers look to reduce their inventory levels and faced slowdowns
due to wider economic weakness. The Broadcast sector continued its
impressive performance, with revenues up 10% compared to 2022, at
elevated margins compared to the rest of the Densitron business,
reflecting our focus and investment in that sector.
Gross margin in H1 2023 was 34.2%, up from the 31.6% achieved in
H1 2022. The increase was mainly driven by improved Densitron
margins, due to the focus on higher quality revenues. The first
half of 2023 also saw further easing of supply chains and
moderating component price inflation, further supporting gross
margins.
Adjusted operating expenses increased by $0.1m to $13.4m (H1
2022: $13.3m). The Group recognised translational foreign exchange
rate gains of $0.5m in H1 2023, compared with losses of $1.1m in
the prior year, a year-on-year positive impact of $1.6m. This gain
was offset by investments in headcount, increased travel and
marketing expense and the impact of inflation. In the first half of
2023 the Group also recorded an impairment charge of $0.5m related
to in progress development projects (H1 2022: $0.3m), where it was
determined that the projects did not meet the criteria to
capitalise product development cost as set out in IAS38.
Adjusted Profit before tax in the first half was $5.9m, compared
to the $3.5m reported in H1 2022. Statutory profit before tax was
$5.1m (H1 2022: $2.8m). The adjustments to statutory profit before
tax of $0.8m (H1 2022: $0.7m) comprised a share-based payments
expense of $0.5m (H1 2022: $0.2m) and amortisation of acquired
intangibles of $0.3m (H1 2022: $0.5m).
Interest rate rises and increased cash balances contributed to
finance income of $0.1m (H1 2022: nil), whilst finance expense were
in line with the prior year at $0.1m (H1 2022: $0.1m).
The tax charge on adjusted profit before tax was $1.0m (H1 2022:
$0.8m), an effective tax rate of 17.2% (H1 2022: 22.6%), driven by
the mix of profit across our regions in the first half. We expect
the full year tax rate to be within a range of 16-19% (2022:
-24.8%). The tax charge on reported profit was $0.8m (H1 2022:
$0.6m).
Adjusted diluted earnings per share was 7.18c, an increase of
77% on H1 2022 (4.05c per share). Diluted earnings per share was
6.31c, an increase of 91% on H1 2022 (3.31c per share).
Valuation of Aruze debtors and inventory
As disclosed in its 2022 annual report, the Group, through its
Quixant brand, has active contracts in place with Aruze Philippines
Manufacturing Inc. ("APMI"), for the supply of display products and
gaming boards. On 1 February 2023 Aruze Gaming America, Inc
("AGA"), a US based affiliate of APMI, filed a voluntary petition
under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the State of Nevada.
As at the date of this interim report the Chapter 11 proceedings
are still ongoing. AGA's operations and assets have been sold as
part of the proceedings and AGA also closed it Las Vegas
operations. APMI filed for voluntary liquidation on 22 August 2023
and a liquidation order was issued by the Philippine courts. As at
the date of this interim report the liquidation proceedings were
still ongoing.
Due to these recent developments, there remains uncertainty over
the recoverability of balances related to APMI and Nexteq
management evaluated their carrying value as at the balance sheet
date.
As at 30 June 2023, APMI owed $1.0m to the Group from the sale
of goods. The amounts were impaired in full as at 30 December 2022
and due to the uncertainty referenced above remain fully impaired
at 30 June 2023. We are continuing to take steps to recover these
balances.
Inventory, consisting of raw materials with a book value of
$2.1m and finished goods with a book value of $0.8m originally
earmarked for use by APMI was included in the Nexteq Group's
balance sheet as at 30 June 2023. The inventory can be used to
manufacture products that can be sold to the Group's existing or
new customers or for use in the Group's turnkey cabinet offering.
Management expects to fully recover the net book value of $2.9m and
considers that no provision against it was required as at 30 June
2023.
The Group balance sheet also includes capitalised development
cost with a book value of $0.4m related to the development of
products for APMI's future use. Once development is completed, the
product can be sold to the Group's existing or new customers. Based
on their assessment of the future use of the product management
expects to recover the book value of the capitalised development in
full and no impairment was required at the balance sheet date.
Cash flow
Net cash was $18.5m on 30 June 2023, compared with $12.9m on 31
December 2022. The increase in net cash is largely due to improved
profits and improved working capital levels leading to cash inflow
from operating activities of $6.2m, compared with a cash outflow of
$3.6m in H1 2022. Net working capital led to a cash outflow of
$1.5m, largely due to an expected decrease in trade and other
payables as accruals held at December 2022 were settled in the
first half. This cash outflow was partially offset by continued
good cash collections reducing trade receivables. Inventory
balances reduced by $0.5m due to lower raw material and work in
progress balances, partially offset by higher finished goods which
are due for delivery in H2 2023.
Foreign exchange
The Group reports its results in US Dollars as this is the
principal currency in which it trades with customers, with
approximately 91% (H1 2022: 90%) of its revenues denominated in US
Dollars.
The Group's reported results are impacted by US Dollar movements
against currencies in the territories it operates, principally
Pound Sterling, Euro and Taiwan Dollar. The average Pound Sterling
to US Dollar exchange rate in H1 2023 was 1.23, a 5% appreciation
against the H1 2022 average of 1.30. The average Euro to US Dollar
exchange rate in H1 2023 was 1.08, a 1% appreciation against the H1
2022 average of 1.09. The average Taiwan Dollar to US Dollar
exchange rate in H1 2023 was 0.033, a 6% appreciation against the
H1 2022 average of 0.035.
The appreciation of the US Dollar against currencies in the
territories the Group operates resulted in a $0.6m favourable
impact on adjusted operating expenses, when compared to H1 2022
average rates. The Group recognised translational foreign exchange
rate gains of $0.5m in H1 2023, compared with losses of $1.1m in
the prior year. This resulted in a net positive foreign exchange
rate impact of $2.2m on adjusted profit before tax for H1 2023 when
compared to H1 2022.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2023 AND 30 JUNE 2022
Unaudited 30 June 2023 Unaudited 30 June 2022
Note
$000 $000
Revenue 3 56,291 53,288
Cost of sales (37,025) (36,446)
--------------------------------------------- ------- ----------------------- -----------------------
Gross profit 19,266 16,842
Operating expenses (14,215) (13,940)
--------------------------------------------- ------- ----------------------- -----------------------
Operating profit 5,051 2,902
Finance income 139 -
Finance expense (52) (61)
--------------------------------------------- ------- ----------------------- -----------------------
Profit before tax 1 5,138 2,841
Taxation (802) (625)
--------------------------------------------- ------- ----------------------- -----------------------
Profit for the period 4,336 2,216
--------------------------------------------- ------- ----------------------- -----------------------
Other comprehensive expense for the period
Foreign currency translation differences (189) (1,860)
--------------------------------------------- ------- ----------------------- -----------------------
Total comprehensive income for the period 4,147 356
--------------------------------------------- ------- ----------------------- -----------------------
Basic earnings per share 4 $0.0652 $0.0334
Diluted earnings per share 4 $0.0631 $0.0331
The above condensed consolidated statement of profit and loss
and other comprehensive income should be read in conjunction with
the accompanying notes.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2023 AND AT 31 DECEMBER 2022
Unaudited 30 June 2023 31 December 2022
$000 $000
Non-current assets
Property, plant and equipment 5,511 5,668
Intangible assets 14,680 15,533
Right-of-use assets 1,626 1,694
Investment property - -
Deferred tax assets 2,729 2,636
Trade and other receivables 379 712
-------------------------------------------------------- ----------------------- -----------------
24,925 26,243
----------------------------------------------------- ----------------------- -----------------
Current assets
Inventories 31,588 32,169
Trade and other receivables 21,260 24,047
Cash and cash equivalents 18,991 13,508
-------------------------------------------------------- ----------------------- -----------------
71,839 69,724
----------------------------------------------------- ----------------------- -----------------
Total assets 96,764 95,967
-------------------------------------------------------- ----------------------- -----------------
Current liabilities
Loans and borrowings (89) (90)
Trade and other payables (16,311) (20,437)
Tax payable (925) (530)
Lease liabilities (517) (562)
-------------------------------------------------------- ----------------------- -----------------
(17,842) (21,619)
----------------------------------------------------- ----------------------- -----------------
Non-current liabilities
Loans and borrowings (423) (473)
Provisions (366) (350)
Deferred tax liabilities (40) (40)
Lease liabilities (1,184) (1,271)
-------------------------------------------------------- ----------------------- -----------------
(2,013) (2,134)
----------------------------------------------------- ----------------------- -----------------
Total liabilities (19,855) (23,753)
-------------------------------------------------------- ----------------------- -----------------
Net assets 76,909 72,214
-------------------------------------------------------- ----------------------- -----------------
Equity attributable to equity holders of the parent
Share capital 106 106
Share premium 6,747 6,708
Share based payments reserve 1,404 895
Retained earnings 70,374 66,038
Translation reserve (1,722) (1,533)
-------------------------------------------------------- ----------------------- -----------------
Total equity 76,909 72,214
-------------------------------------------------------- ----------------------- -----------------
The above condensed consolidated balance sheet should be read in
conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE SIX MONTHSED 30 JUNE 2023, 31 DECEMBER 2022 AND 30 JUNE
2022
Share capital Share premium Translation Share based Retained Total equity
reserve payments earnings
$000 $000 $000 $000 $000 $000
Balance at 1
January 2022 106 6,708 111 212 56,940 64,077
Total
comprehensive
income for the
period
Profit for the
period - - - - 2,216 2,216
Other
comprehensive
expense - - (1,860) - - (1,860)
-------------- --------------
Total
comprehensive
income for the
period - - (1,860) - 2,216 356
-------------- -------------- ---------------- ---------------- ---------------- -------------
Transactions
with owners,
recorded
directly in
equity
Share based
payments - - - 202 - 202
Total
contributions
by and
distributions
to owners - - - 202 - 202
-------------- -------------- ---------------- ---------------- ---------------- -------------
Unaudited
balance at 30
June 2022 106 6,708 (1,749) 414 59,156 64,635
-------------- -------------- ---------------- ---------------- ---------------- -------------
Unaudited
balance at 1
July 2022 106 6,708 (1,749) 414 59,156 64,635
Total
comprehensive
income for the
period
Profit for the
period - - - - 8,770 8,770
Other
comprehensive
income - - 216 - - 216
-------------- -------------- ---------------- ---------------- ---------------- -------------
Total
comprehensive
income for the
period - - 216 - 8,770 8,986
-------------- -------------- ---------------- ---------------- ---------------- -------------
Transactions
with owners,
recorded
directly in
equity
Share based
payments - - - 416 - 416
Tax on
share-based
payment expense - - - 65 - 65
Dividend paid - - - - (1,888) (1,888)
Total
contributions
by and
distributions
to owners - - - 481 (1,888) (1,407)
-------------- -------------- ---------------- ---------------- ---------------- -------------
Balance at 31
December 2022 106 6,708 (1,533) 895 66,038 72,214
-------------- -------------- ---------------- ---------------- ---------------- -------------
Balance at 1
January 2023 106 6,708 (1,533) 895 66,038 72,214
Total
comprehensive
income for the
period
Profit for the
period - - - - 4,336 4,336
Other
comprehensive
expense - - (189) - - (189)
-------------- -------------- ---------------- ---------------- ---------------- -------------
Total
comprehensive
income for the
period - - (189) - 4,336 4,147
-------------- -------------- ---------------- ---------------- ---------------- -------------
Transactions
with owners,
recorded
directly in
equity
Share based
payments - - - 509 - 509
Exercise of
share options - 39 - - - 39
Total
contributions
by and
distributions
to owners - 39 - 509 - 548
-------------- -------------- ---------------- ---------------- ---------------- -------------
Unaudited
balance at 30
June 2023 106 6,747 (1,722) 1,404 70,374 76,909
-------------- -------------- ---------------- ---------------- ---------------- -------------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2023 AND 30 JUNE 2022
Unaudited 30 June 2023 Unaudited 30 June 2022
$000 $000
Cash flows from operating activities
Profit for the period 4,336 2,216
Adjustments for:
Depreciation and amortisation 1,348 1,322
Loss on disposal of property, plant and equipment 6 -
Impairment losses on intangible assets 506 267
Depreciation of leased assets 314 318
Movement in provisions 48 28
Taxation charge 802 625
Finance income (139) -
Finance expense 52 61
Unrealised exchange rate losses 496 700
Share-based payment expense 509 202
8,278 5,739
Decrease/(Increase) in trade and other receivables 2,921 (1,716)
Decrease/(Increase) in inventories 486 (6,806)
(Decrease)/Increase in trade and other payables (4,967) 408
----------------------- -----------------------
6,718 (2,375)
Interest paid (1) (7)
Lease liability interest paid (45) (46)
Income tax paid (496) (1,167)
----------------------- -----------------------
Net cash from/(used in) operating activities 6,176 (3,595)
----------------------- -----------------------
Cash flows from investing activities
Addition of development costs (683) (1,246)
Purchase of property, plant and equipment (91) (236)
Addition of externally purchased intangible assets (86) (89)
Interest received 139 -
Net cash used in investing activities (721) (1,571)
----------------------- -----------------------
Cash flows from financing activities
Repayment of borrowings (45) (1,667)
Proceeds from loans - 1,619
Mortgage interest paid (6) (8)
Payment of lease liabilities (302) (349)
Exercise of share options 39 -
Net cash used in financing activities (314) (405)
----------------------- -----------------------
Net increase/(decrease) in cash and cash equivalents 5,141 (5,571)
Cash and cash equivalents at 1 January 13,508 18,347
Foreign exchange rate movements 342 (169)
----------------------- -----------------------
Cash and cash equivalents at period end 18,991 12,607
----------------------- -----------------------
The above condensed consolidated cash flow statement should be
read in conjunction with the accompanying notes.
1. Basis of preparation and accounting policies
As is permitted by the AIM rules for Companies, the Directors
have not adopted the requirements of IAS34 'Interim Financial
Reporting' in preparing the interim financial statements. The
financial information shown for the year ended 31 December 2022 in
the interim financial information does not constitute full
statutory financial statements as defined in Section 434 of the
Companies Act 2006 and has been extracted from the Company's annual
report and accounts. Accordingly, this report is to be read in
conjunction with the annual report for the year ended 31 December
2022 and any public announcements made by Nexteq Plc during the
interim reporting period. The annual financial statements of the
Group were prepared in accordance with UK adopted international
accounting standards and the Auditor's Report on the annual report
and accounts was unqualified.
The accounting policies applied by the Group in this condensed
consolidated interim financial report are the same as those applied
by the Group in its consolidated financial statements as at and for
the year ended 31 December 2022. The reporting currency adopted by
the Group is the US Dollar as this is the trading currency of the
Group.
The condensed consolidated interim financial information is
neither audited nor reviewed and the results of operations for the
six months ended 30 June 2023 are not necessarily indicative of the
operating results for future operating periods.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated interim financial report.
This condensed consolidated interim financial report was
approved by the Board of Directors on 5 September 2023.
Reconciliation of adjusted measures
The Group uses certain alternative performance measures to
evaluate performance and as a method to provide Shareholders with
clear and consistent reporting. The Directors consider that these
represent a more consistent measure of performance by removing
items of income or expense which are considered significant by
virtue of their size, nature or incidence or which have a
distortive effect on current period earnings and are relevant to an
understanding of the Group's financial performance. These measures
include Adjusted Profit before tax, Adjusted Profit after tax,
Adjusted Operating expenses, Adjusted Operating cash flow and Net
cash. See below for analysis of the adjusting items in reaching
adjusted performance measures.
Adjusted Profit before tax
Six months Six months
ended 30 ended 30
June 2023 June 2022
$000 $000
--------------------------------------------------- ----------- ----------
Profit before tax 5,138 2,841
--------------------------------------------------- ----------- ----------
Adjustments:
Amortisation of customer relationships, technology
and order backlog(1) 291 460
Share-based payments expense(2) 509 202
Adjusted Profit before tax 5,938 3,503
--------------------------------------------------- ----------- ----------
(1) The amortisation of customer relationships, technology and
order backlog has been excluded as it is not a cash expense to the
Group.
(2) Share-based payments expense has been excluded as it is not
a cash-based expense.
Adjusted Profit after tax
Profit after tax 4,336 2,216
--------------------------------------------------- ----- -----
Adjustments:
Amortisation of customer relationships, technology
and order backlog 291 460
Share-based payments expense 509 202
Non-recurring tax expense(1) (200) (166)
--------------------------------------------------- ----- -----
Adjusted Profit after tax 4,936 2,712
--------------------------------------------------- ----- -----
(1) Tax on adjusted items relating to amortisation of customer
relationships, technology and order backlog of $0.3m (H1 2023:
$0.5m) and share-based payments expense of $0.5m (H1 2023:
$0.2m).
Adjusted Operating expenses
Operating expenses (14,215) (13,940)
--------------------------------------------------- -------- --------
Adjustments:
Amortisation of customer relationships, technology
and order backlog 291 460
Share-based payments expense 509 202
Adjusted Operating expenses (13,415) (13,278)
--------------------------------------------------- -------- --------
Adjusted Operating cash flow
Net cash from/(used in) operating activities 6,176 (3,595)
--------------------------------------------------------- ----- -------
Add back:
Tax paid(1) 496 1,167
Adjusted Operating cash flow 6,672 (2,428)
--------------------------------------------------------- ----- -------
Adjusted Operating Cash conversion % (Adjusted operating
cash flow/Adjusted profit before tax) 112% (69%)
--------------------------------------------------------- ----- -------
(1) Tax paid is excluded from Adjusted Operating cash flow as
cash conversion is calculated on a pre-tax basis.
Net cash
Cash and cash equivalents 18,991 13,508
Loans and borrowings (512) (563)
Net cash 18,479 12,945
-------------------------- ------ ------
2. Business and geographical segments
The Chief Operating Decision Maker (CODM) in the organisation is
an executive management committee comprising the Board of
Directors. The segmental information is presented in a consistent
format with management information. The Group assesses the
performance of the segments based on a measure of revenue and
profit before tax. The segmental split of the balance sheet is not
reviewed by the CODM, and they do not look at assets/liabilities of
each division separately but combined as a group. Therefore, this
split for assets has not been included.
The operating segments applicable to the Group are as
follows:
-- Quixant - Design, development and manufacturing of gaming
platforms, cabinets, and display solutions for the casino gaming
and slot machine industry.
-- Densitron - Sale of electronic display components to global
industrial markets and custom Human Machine Interface (HMI)
products to the Broadcast market. IDS is included in the Densitron
reporting segment, due to the nature of IDS business, the products
that are sold and the market that the business operates in are all
consistent with that segment.
Reconciliation of segment results to profit after tax:
Six months Six months
ended ended
30 June 30 June 2022
2023
------------------- ----------- --------------
$000 $000
------------------- ----------- --------------
Quixant 8,242 7,673
Densitron 2,096 2,030
------------------- ----------- --------------
Segment results 10,338 9,703
Corporate cost (5,287) (6,801)
------------------- ----------- --------------
Operating profit 5,051 2,902
Finance income 139 -
Finance expense (52) (61)
-------------------
Profit before tax 5,138 2,841
Taxation (802) (625)
------------------- ----------- --------------
Profit after tax 4,336 2,216
------------------- ----------- --------------
Six months ended 30 June 2023 Six months ended 30 June 2022
$000 $000 $000 $000 $000 $000
---------------------------------- ---------- ------------- ------ ---------- ------------- ------
Quixant Densitron Total Quixant Densitron Total
---------------------------------- ---------- ------------- ------ ---------- ------------- ------
Other information
Depreciation of owned assets 62 3 65 48 3 51
Amortisation of intangible assets 468 159 627 382 145 527
Impairment of intangible assets 28 478 506 3 264 267
558 640 1,198 433 412 845
---------------------------------- ---------- ------------- ------ ---------- ------------- ------
3. Analysis of turnover
Six months ended 30 June 2023 Six months ended 30 June 2022
$000 $000 $000 $000 $000 $000
------------------------------- --------- -------------- ------ ---------- ------------ -------
Quixant Densitron(1) Total Quixant Densitron Total
------------------------------- --------- -------------- ------ ---------- ------------ -------
By primary geographical market
Asia 1,115 5,327 6,442 1,772 4,667 6,439
Australia 3,637 36 3,673 2,003 34 2,037
UK 2,757 1,879 4,636 1,797 1,443 3,240
Europe excl. UK 5,637 8,590 14,227 6,464 6,182 12,646
North America 21,097 5,678 26,775 19,186 7,269 26,818
Rest of World 48 491 539 159 1,949 2,108
34,290 22,001 56,291 31,381 21,907 53,288
------------------------------- --------- -------------- ------ ---------- ------------ -------
(1) Densitron Revenue from products splits into Densitron $21.3m
(H1 2022: $21.4m) and IDS $0.7m (H1 2022: $0.5m). IDS Revenue of
$0.2m (H1 2022: $0.2m) recognised throughout the performance
period.
The above analysis includes sales to individual countries in
excess of 10% of total turnover of:
Six months Six months
ended ended
30 June 30 June 2022
2023
----- ----------- --------------
$000 $000
----- ----------- --------------
USA 26,111 24,824
----- ----------- --------------
Revenues of $16.0m (H1 2022: $15.6m) are derived from two
customers (H1 2022: two customers) who individually accounted for
more than 10% of Group revenues in H1 2023. These revenues are
attributed to the Quixant segment.
4. Earnings per share
Six months ended Six months ended
30 June 2023 30 June 2022
$000 $000
Earnings
Earnings for the purposes of basic and diluted EPS being net profit
attributable to equity
shareholders 4,336 2,216
----------------- -----------------
Number of shares
Weighted average number of ordinary shares for the purpose of basic EPS 66,488,872 66,450,060
Effect of dilutive potential ordinary shares:
Share options 2,237,164 487,898
----------------- -----------------
Weighted number of ordinary shares for the purpose of diluted EPS 68,726,036 66,937,958
----------------- -----------------
Basic earnings per share $0.0652 $0.0334
----------------- -----------------
Diluted earnings per share $0.0631 $0.0331
----------------- -----------------
Six months ended Six months ended
30 June 2023 30 June 2022
Calculation of adjusted diluted earnings per share: $000 $000
Earnings
Earnings for the purposes of basic and diluted EPS being net profit
attributable to equity
shareholders 4,336 2,216
----------------- -----------------
Adjustments:
Amortisation of customer relationships, technology and order backlog 291 460
Share-based payments expense 509 202
Tax effect of adjustments (200) (166)
----------------- -----------------
Adjusted earnings 4,936 2,712
----------------- -----------------
Adjusted diluted earnings per share $0.0718 $0.0405
----------------- -----------------
5. Related party transactions
During the period, the Group paid EUR15,600 (H1 2022: EUR15,600)
for administrative services to Francesca Marzilli, the wife of
Nicholas Jarmany. There were no other related party transactions,
other than transactions with key management personnel, who are the
Directors of the Company.
[1] Source: American Gaming Association Commercial Gaming
Revenue Tracker
[2] Source: European Gaming and Betting Association Key Figures
2022 Edition
[3] Source: Stellar Market Research
[4] Source: Statista Research
This information is provided by RNS, the news service of the
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END
IR DELFBXKLZBBQ
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