Interim Results
06/09/2023 07:00
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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 to 30 June 2023 Six months to 30 June 2022 Change
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
(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 MONTHS ENDED 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 MONTHS ENDED 30 JUNE 2023, 31 DECEMBER 2022 AND 30 JUNE 2022
Share capital Share premium Translation reserve Share based payments Retained earnings Total equity
$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 MONTHS ENDED 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 ended 30 June 2023 Six months ended 30 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 112% (69%)
profit before tax)
(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 ended Six months ended
30 June 2023 30 June 2022
$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 ended Six months ended
30 June 2023 30 June 2022
$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 €15,600 (H1 2022: €15,600) 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
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