Trading Update and Notice of Results
24/07/2024 07:00
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RNS Number : 5459X Nexteq PLC 24 July 2024
24 July 2024
Nexteq plc
("Nexteq" or the "Group")
Trading Update and Notice of Results
Nexteq (AIM: NXQ), a leading technology solutions provider to customers in
selected industrial markets, today provides an update on trading for the six
months ending 30 June 2024 and outlook for the remainder of 2024 and into
2025.
Trading
The business has continued to see persistent softer customer demand across
both divisions through the first half of the year, in line with wider industry
de-stocking, as initially highlighted at the time of the FY23 results release
in March 2024. Furthermore, some specific larger key Quixant customers have
recently indicated lower demand, partly reflecting the timing of new product
releases and challenges in specific regional markets.
As a result, we expect to report Group Revenue for the six-month period down
15% to $48.2m (H1 2023: $56.3m). Within the Group's brands, we expect to
report that Quixant revenue is down 10% to $30.9m (H1 2023: $34.3m) and
Densitron revenue down 22% to $17.3m (H1 2023: $22.0m).
Pleasingly, the robust gross margin performance seen in 2023 has continued
into 2024 at record levels, ahead of that achieved in FY 2023, benefitting
from customer and product mix and the ongoing focus on higher quality
revenues. This increased gross margin coupled with effective cost management
ensured that the Group continues to operate at double-digit adjusted profit
before tax margins.
The Group generated healthy cash flows in the first half with net cash at 30
June 2024 of $36.9m (31 December 2023: $27.9m), with positive working capital
movements as stock levels reduced and strong cash collections continued.
Outlook
Our strategy to diversify our customer and sector base is resulting in
encouraging new business pipeline momentum from new customers in the Gaming
and Broadcast sectors. We had forecast an anticipated improvement in order
intake in the second half of the year, however we have not seen this to date,
which we believe to be in part related to de-stocking. The Board therefore
considers it prudent to expect this period of de-stocking to persist through
to the end of this calendar year.
As a result, H2 2024 revenues are expected to be broadly in line with H1,
which would result in FY24 revenues 15%-20% below market expectations(1). The
higher gross margin throughout the year continues to somewhat mitigate the
impact of the expected softer revenues and the Board continues to keep a
strong focus on cost, cash management and cash generation. However, despite
this strong focus on costs, the Board does not believe it will be sufficient
to offset the impact of the lower H2 2024 expected revenues, and as a result,
expects adjusted profit before tax to be 30%-40% below market expectations(1),
primarily driven by the lower revenues.
The Board expects to see an improvement to order intake in 2025 as key
customers' buying patterns normalise and the Group benefits from the healthy
pipeline of new customers across both Quixant and Densitron. The Group
benefits from a robust operating platform and diversified product portfolio,
and the Board continues to have confidence in the Group's organic growth
opportunities in the medium term.
The Board also continues to evaluate a number of acquisition opportunities to
leverage its strong balance sheet and is committed to identifying appropriate
targets to deliver on the Group's growth strategy and diversify the revenue
base, however, is cognisant of the likely impact of the Board transition as
set out below.
Board transition
As noted in a separate announcement today, Francis Small (Non-Executive
Chair), Jon Jayal (Chief Executive Officer) and Johan Olivier (Chief Financial
Officer) have informed the Board of their desire to step down from the Board
over the coming months. Each Director intends to continue in their roles until
such time as appropriate successors are appointed and to then facilitate an
orderly handover.
Notice of Results
The Board expects to announce its results for the six months ended 30 June
2024 on 10 September 2024.
Jon Jayal, CEO of Nexteq, commented:
"Whilst it is disappointing to be reducing our guidance for the full year we
remain encouraged by the opportunities across an increasingly diversified
range of products, customers and sectors. We believe these structural
drivers will benefit the Group as markets and orderbooks recover while the
strong cash position provides the optionality to invest organically and review
wider acquisition opportunities. The business remains well-placed to
capitalise on the long-term opportunity as a high-value technology partner
across select industrial markets."
(1) The current range of forecasts for the year ended 31 December 2024 is
revenue of between $114.8m and $115.9m with a consensus of $115.4m and
adjusted profit before tax of $14.9m.
Nexteq plc Tel: +44 (0)1223 892 696
Jon Jayal, Chief Executive Officer
Johan Olivier, Chief Financial Officer
Nick Jarmany, Deputy Chair
Nominated Adviser and Broker: Tel: +44 (0)20 7220 0500
Cavendish Capital Markets Ltd
Matt Goode / Teddy Whiley (Corporate Finance)
Tim Redfern / Harriet Ward (ECM)
Joint Broker: Tel: +44 (0)20 7523 8000
Canaccord Genuity Limited
Simon Bridges / Andrew Potts
Financial PR: Tel: +44 (0)20 3405 0205
Alma Strategic Communications
Hilary Buchanan / Kieran Breheny
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 Taiwan operation is at the heart of Asian supply networks and
facilitates cost effective manufacturing and strategic supply chain
management.
The Group operates in six countries and services over 500 customers across 47
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 divisions can be found at
www.nexteqplc.com (http://www.nexteqplc.com) .
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
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