5 1 0 2 R E B M E C E D 1 3 D E D N E R A E Y E H T R O F S T N U O C C A & T R O P E R L A U N N A Highlights Chairman’s statement 3 4 Chief Executive’s report 6 Financial review Financial statements 12 15 Company information 63 S T N E T N O C F O E L B A T 02 Qplc HIGHLIGHTS • Revenue growth of 31% to $41.8 million (2014: $31.9 million) • Adjusted EBITDA1 increased 28% to $10.1 million (2014: $7.9 million) • Adjusted profit before tax1 increased 28% to $9.2 million (2014: $7.2 million) • Adjusted fully diluted EPS2 of $0.113 per share (2014: $0.0941 per share) • Proposed full year dividend of 1.5p per share (2014: 1.2p) • Net cash from operating activities of $6.3 million (2014: $2.1 million) 1 Adjusted by adding back $0.20 million in respect of share based payments (2014: $0.16 million) and $1.17 million in respect of acquisition costs (2014: $nil). 2 Adjusted by adding back $1.37 million in respect of share based payments and acquisition costs and subtracting the associated tax effect of $0.27 million (2014: $0.16 million adjustment less tax effect of $0.032 million). OPERATIONAL HIGHLIGHTS • Achieved broad based growth in revenue with reduced customer concentration. • Commenced volume shipments of gaming monitors. • Completed the earnings enhancing acquisition of Densitron Technologies plc for £7.66m financed by cash and debt which provides strong sales force with experience selling into markets outside gaming. K U s r e t r a u q d a e H e t a r o p r o C I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 03 Qplc I am pleased to report on another strong year of growth and business success for Quixant in 2015, delivering record results. Through continued execution of our corporate strategy, we have achieved significant growth in both revenue and profits and have also invested to ensure a robust foundation for growth into 2016 and beyond. T N E M E T A T S S ’ N A M R I A H C 04 Qplc We have seen growth across a range of size of customer in 2015 and reduced customer concentration. We also have a healthy pipeline of “design-ins” which we believe sets us in good stead for future growth. The “design-in” step represents a lengthy period of collaboration between the engineering teams of Quixant and the customer in order to develop the customer’s game and integrate Quixant’s products into their machines. As well as continuing to grow our market share in our core business of computer gaming platforms in 2015, we have also started to reap the benefits from our decision to establish a business in gaming monitors. We have the opportunity to sell typically two or more monitors for every one computer board we sell per gaming machine. We have grown our resources to build our gaming monitors business and have already seen further success in securing new business in early 2016 for monitors. In September 2015 we announced an offer to purchase Densitron Technologies plc for £7.66m, financed through a combination of the Company’s cash reserves and new banking facilities. We completed the acquisition on 10 November 2015. Densitron supplies standard and custom electronic display solutions to industrial markets globally and has around 60 staff located in North America, Europe and Asia. We believe there are significant opportunities for Quixant’s products to be sold into other vertical markets outside gaming and have already seen some evidence of this. Densitron has an established and experienced global sales force which has long term trusted relationships with companies in a wide range of industrial markets. Through leveraging these relationships, Quixant has a significant opportunity to sell products into these other markets, as all display solutions require some type of computer or electronics to drive them. We expect the acquisition to be earnings enhancing in the first full year of ownership. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A We paid a full year dividend of 1.2p per share in May 2015 and, aligned to our progressive dividend policy and continued strengthening in the balance sheet, the Board is pleased to propose a 2016 full year dividend of 1.5p per share, a growth of 25% on the prior period. Quixant has significant headroom to grow its market share in the gaming industry and we are confident of our prospects for continued strong growth in this area. The acquisition of Densitron brings further opportunities for diversification into other markets and possible enhancement of this growth. We have had a strong start to 2016 and are well positioned to achieve our growth targets for the year. Michael Peagram Chairman 05 Qplc T I am delighted to report on another year of R O P E R robust growth in 2015. Adjusted pre-tax profits for the year were $9.2 million, growth of 28% on the prior period, on the back of revenues of $41.8 million (2014: $31.9 million). We have achieved this strong growth alongside investment into the business to position us well for continued success in 2016 and beyond. During the year, which marked the tenth anniversary since foundation of the Company, we reached several important milestones in the development of Quixant business. S ’ E V I T U C E X E F E I H C 06 Qplc Broad based revenue growth Our growth in 2015 was broad based. We saw increased sales to Tier 1 customers which was the primary engine to growth. Pleasingly, we also saw strong performance from several Tier 3 customers which we have been working with for several years. They have launched new products which have been well received by the market and as a result their rate of consumption of computer platforms has grown. This underlines the benefits Quixant brings in enabling customers’ R&D teams to focus on game development. We have continued to consolidate our position in several Tier 1 customer projects where we are designed in but have yet to deliver volume. We expect to see continued strengthened sales to Tier 1 customers in 2016. Our customer concentration diminished in 2015, with Ainsworth falling to 43% of total revenue over the year (2014: 58%). In total, we shipped just under 34,000 units in 2015 (2014: 28,500). Based on a 2015 independent industry survey conducted by G3 Magazine, which suggests that the annual new/ replacement cycle for machines is 475,000 per annum, this would imply Quixant occupied a 7% market share in new/replacement machines. New product development We launched QMax-1, a new flagship computer platform, and several new monitor products to the gaming market in 2015. QMax-1 represents a new tier of performance for all-in- one gaming platforms. By utilising an innovative design, we have harnessed the power of games console level graphics into a compact package which combines all of Quixant’s benefits, including optimised gaming features, longevity of supply and high reliability. We had a product ready to demonstrate before AMD had publically announced the chipset on which it was based and formally launched QMax-1 on the same day as AMD’s public announcement. So far I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A reception from customers has been positive towards QMax-1 as a solution for their high end casino products. In February 2016 at the ICE Exhibition in London, we launched the QXi- 6000 as successor to the mid-range QXi-4000. The QXi-6000 is well suited to customers who need a compact, fan-less solution, high performance graphics and the capability to drive up to three screens. Both QMax-1 and the QXi- 6000 are optimised for 4K Ultra HD graphics and video. During the year, we were granted two new patents in the UK and US. The technology described by these patents is incorporated into the majority of Quixant’s current product range and therefore the UK patent helpfully enables us to take advantage of the UK Patent Box regime. 07 Qplc CHIEF EXECUTIVE’S REPORT Based on this earlier success, in 2015 we invested in an expert sales team based in Germany to lead our global gaming monitors business. We believe there are substantial opportunities for growth in this area, both into Quixant’s existing customers and into new customers. We believe there are also opportunities for us to innovate in gaming monitors in conjunction with our computer products. Monitor products Quixant was founded to design, manufacture and supply computer platforms to the manufacturers of electronic gaming machines. In doing so, we created a strong culture of innovation and exceptional engineering design capabilities which, combined with our Taiwanese manufacturing capabilities and understanding of the gaming market, enabled us to create computer products which lead the market. We have become a trusted technology partner with many customers who see us not only as a supplier of computer products but also as an innovative technology solutions provider. Some of these customers have publically communicated this message. As a result, we have identified opportunities to supply our customers with other components which are connected with the computer platform. In particular we have developed our own range of gaming monitors which are also high value components in gaming machines. We developed our monitor products range with the underpinning principle that customers faced the same constraints in terms of regulation, reliability and quality for monitor products as for computer platforms. By moving into this area, Quixant has been able to extend its advantages to customers for another component in their machines and has been able to introduce combined technology benefits. We commenced volume shipments of monitors to our first customer around the middle of the year and have a strong order book into 2016. 08 Qplc QUIXANT GROUP OFFICE LOCATIONS Los Angeles, USA Las Vegas, USA Cambridge, UK London, UK Newcastle, UK Helsinki, Finland Munich, Germany Nantes, France Rome, Italy Taipei, Taiwan Tokyo, Japan I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 09 Qplc CHIEF EXECUTIVE’S REPORT Acquisition of Densitron Over the last few years we have been approached by a number of customers outside gaming who have identified the strengths Quixant can bring to their business in their markets. In the past, we have elected not to pursue these opportunities in order to focus on our core business. However, we have always believed that at the appropriate time we would seek to expand our business into other markets. The acquisition of Densitron brings a global sales team with strong business and a broad base of customers who operate in a range of industrial markets. The team has proven expertise in the sale of complex electronic display solutions to these markets and has built a significant and stable business in doing so. We believe the acquisition provides a strong platform from which to develop our business in industrial markets outside gaming. Prior to the acquisition, Densitron was an AIM listed company with over 40 years’ experience in the electronic technology sector. Densitron provides a range of solutions to its customers, many of which are bespoke comprising a range of complex technologies. We believe the sales team have the skills to consult and identify customer requirements and expertise in the solutions available in the market to guide the customer in making the correct choice, which has earned them the reputation of being a trusted partner. Quixant’s skills and strengths, particularly in its Taiwanese procurement, quality control and manufacturing management capabilities complements Densitron’s strength in sales. We believe this has the potential to enhance profitability, product quality, engineering design capability and purchasing power. Densitron’s business in 2015 saw growth in revenue and operating profit in line with its budgets and following completion made a small positive contribution to Quixant’s 2015 financial performance. We have been working hard since completion of the acquisition to globally harmonise Densitron’s systems and policies. In 2016 we will continue efforts in this area to create an enhanced global infrastructure on which to grow the business. 10 Qplc ICE Totally Gaming ExCeL London February 2016 G2E Las Vegas October 2015 Investing for the future Excluding Densitron, our headcount increased by 13% from 70 to 79 in 2015. 46% of our staff at 31 December 2015 were directly responsible for product development. 32% of our overheads were directly attributable to R&D activities, representing reinvestment of 6% of revenue and 14% of gross profit into R&D. When combined with Densitron, total Group headcount at 31 December 2015 was 139. In a business with operations which span three continents, good communication and collaboration tools are essential to success. Quixant invested in this area in 2015 by rolling out a global video conferencing system and a collaborative digital whiteboard solution. The latter enables participants in two or more locations to engage in a common shared electronic whiteboard space to brainstorm and collaborate on ideas. Users can also present, annotate and modify a range of content interactively which enhances the product development process across the Group by enabling remotely located colleagues to work as if they are in one location. Outlook Quixant’s opportunity in its core gaming platforms business continues to strengthen as the trend for the largest of the gaming machine manufacturers to outsource gathers momentum. Combined with a buoyant start in the gaming monitors business and the potential growth that Densitron brings into other markets, the Group is well aligned to deliver strong growth in line with our expectations for 2016 and beyond. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A Nicholas Jarmany Chief Executive 11 Qplc W E I V E R L A I C N A N I F Revenue Quixant delivered record revenues of $41.8 million, up 31% from 2014 ($31.9 million). The acquisition of Densitron made a contribution of $5.2 million to revenue following completion. Within Quixant’s gaming business, revenue growth was driven by the continuing development of our commercial relationships, particularly in the Tier 1 and Tier 3 space, with Europe proving in aggregate to be a strong region for growth. In addition to our established range of computer platforms, we commenced volume shipments of our gaming monitors in 2015. We have broadened our customer base both in number to 126 (2014: 89) and across geographies. As a supplier of key components in gaming machines which are subject to heavy regulation, we are required by customers to supply a consistent product over a period of several years. As a result, we typically hold multi-year supply contracts with our larger customers. This provides us with a degree of repeatability and security to our revenue stream. Profit Our gross profit for the year was $17.3 million (2014: $14.1 million), representing a gross margin of 41% (2014: 44%). This reduction reflects the lower margins which can be earned on gaming monitors and Densitron’s display solutions. Adjusted EBITDA increased 28% to $10.1 million (2014: $7.9 million). Adjusted profit before tax increased 28% to $9.2 million (2014: $7.2 million). Adjustments to EBITDA and profit before tax are to add back share based payments and acquisition costs of $1.4 million (2014: $0.16 million). 12 Qplc We continue to re-invest in the business to ensure our product offering remains a market leading proposition. Excluding Densitron, gross expenditure on R&D was $2.3 million, (2014: $2.1 million) or 14% of gross profit (2014: 15%). These costs relate to our development activities undertaken in Taiwan and Italy. $1.1 million of these development costs were capitalised (2014: $1.0 million), with amortisation for the year on total capitalised development costs $0.4 million (2014: $0.4 million). Balancing the investment requirements of the business to support future growth with careful management of increases resulted in an overhead spend of $9.5 million, including exceptional costs of $1.4m (2014: $7.0 million). Following completion, Densitron contributed $1.0 million to overheads. Our headcount increase to 79 people (2014: 70) was the biggest contributor to our increased spend. Taxation There is a tax charge for the year of $1.4 million (2014: $0.9 million). This constitutes a corporation tax charge, which includes prior period adjustments, of $0.121 million (2014: $0.271 million) and a deferred tax charge of $0.175 million (2014: $0.044 million). The Group continues to benefit from enhanced tax reliefs available in respect of qualifying R&D expenditure. Foreign Exchange To minimise foreign currency exposure the Group transacts and reports in US Dollars as far as is practicable. With effect from 1 January 2016 Densitron have converted to accounting in US Dollars. Where significant non-US Dollar expenses can be forecast with respect to timing and value, the Board may take the decision to hedge against unfavourable exchange rate movements. Earnings Per Share Basic earnings per share increased 5% to $0.0993 (2014: $0.0946). Fully diluted earnings per share increased 5% to $0.0967 (2014: $0.0922). Adjusted fully diluted earnings per share increased 20% to $0.113 (2014: $0.0941). The calculations of earnings per share are included at Note 10. Balance Sheet The Group maintains a strong balance sheet with net assets of $25.7 million (2014: $20.5 million). Tangible non-current assets have grown primarily because of the acquisition of our new office in Italy and the inclusion of investment land owned by Densitron, which is valued at $0.7 million. Intangible non-current assets increased by $13.2 million to $15.4 million, mainly due to goodwill arising on the acquisition together with the recognition of intangibles acquired with Densitron. Current assets mainly comprise inventory and trade receivables. Excluding the impact of the acquisition, we held inventory of $6.3 million (2014: $5.5 million). This is consistent with our inventory strategy, which is structured such as to hold buffer inventory of key product lines. This is a competitive advantage Quixant can offer over other suppliers. Trade receivables of $16.7 million (2014: $9.2 million) reflect the fact that our revenues are typically weighted towards the second half of the year. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 13 Qplc FINANCIAL REVIEW Outlook The 2016 financial year has started well and we are confident of another year of strong growth in line with our expectations. Cresten Preddy Finance Director Non-current liabilities now include the banking facilities of $7.4 million required to support the Densitron acquisition as well as the long-term borrowings acquired. All liabilities are within the Group’s payment profile. Cash Flow The Group continued to generate high levels of operating cash over the year. The cash generated amounted to $6.3 million (2014: $2.1 million). Investment in our inventory strategy previously mentioned was first implemented in 2014 which is a key reason current period operating cash is significantly higher than that of the prior period. To support our growth aspirations the Group spent $12.8 million (2014: $2.4 million) on investing activities. This is primarily accounted for by $10.6 million (2014: $nil) of costs relating to acquisitions. New financing cash flows for the period under review principally relate to an inflow of $7.4 million in respect of new banking facilities and an outflow in respect of repayments on borrowings. Our overall cash outflow during the period was $0.8 million (2014: $2.3 million) which gave a cash and cash equivalents balance at the year- end of $3.9 million (2014: $4.7 million). We are in the process of reviewing Group treasury strategy following the acquisition. Dividend The Board intends to maintain a progressive dividend policy whilst continuing to invest in and to develop the Group’s businesses. As such the Board proposes a dividend in respect of the year of 1.5p per share (2014: 1.2p per share) payable on 19 May 2016 to all shareholders on the register at the close of business on 13 May 2016. The corresponding ex- dividend date is 12 May 2016. 14 Qplc FINANCIAL STATEMENTS Quixant Gaming Platforms QUIXANT PLC ANNUAL REPORT & ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2015 QMax-1 QX-50 Corporate governance 16 Strategic report 17 QX-40 QXi-6000 Directors’ report 19 Statement of Directors’ responsibilities 22 Independent auditor’s report to the members of Quixant plc 23 Consolidated statement of profit and loss and other comprehensive income 25 Balance sheets 26 QXi-4000 QXi-300 Statement of changes in equity 28 QXi-307 QXi-306 Cash flow statements 31 Notes 32 Quixant Gaming Monitors PCAP Touchscreen Monitors General Monitors Button Decks Curved Screen Monitors I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 15 Qplc CORPORATE GOVERNANCE The Directors recognise the value and importance of high standards of corporate governance. Since admission to AIM in May 2013, the Board has been designed to voluntarily comply, where applicable, with selected key provisions of the UK Corporate Governance Code. The Company does not currently claim full compliance with the requirements of the code. The Company also follows the recommendations on corporate governance from the Quoted Companies Alliance for companies with shares traded on AIM. Given the size of the Company and the constitution of the Board, the following is a brief summary of the main aspects of corporate governance currently in place. With effect from the admission to the AIM market, the Board has established an Audit Committee and a Remuneration Committee with formally delegated responsibilities. The Remuneration Committee is chaired by Michael Peagram. Its other member is Guy van Zwanenberg. This committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The Audit Committee is chaired by Guy van Zwanenberg. Its other member is Michael Peagram. The Committee determines the terms of engagement of the Group’s auditors and, in consultation with them, the scope of the audit. It receives and reviews reports from management and the Group’s auditors relating to the interim and annual financial statements and the accounting and internal control systems in use by the Group. The Audit Committee has unrestricted access to the Group’s auditors. Under its terms of reference, the Audit Committee monitors, amongst other matters, the integrity of the Group’s financial statements. The Committee is responsible for monitoring the effectiveness of the external audit process and making recommendations to the Board in relation to the re-appointment of the external auditors. It is responsible for ensuring that an appropriate business relationship is maintained between the Group and the external auditors, including reviewing non-audit services and fees. The Committee meets with Executive Directors and management as well as meeting privately with the external auditors. As the Board is small, there is not a separate Nominations Committee and the Board as a whole considers recommendations for appointments to the Board. The Directors follow the guidance set out by Rule 21 of the AIM Rules relating to dealings by Directors in the Company’s securities and, to this end, the Company has adopted an appropriate share dealing code. Going concern Under Company Law, the Company’s Directors are required to consider whether it is appropriate to prepare financial statements on the basis that the Group and Company are a going concern. The Directors have prepared trading and cash flow forecasts for the Group covering the period to 31 December 2017. After making enquiries and considering the impact of risks and opportunities on expected cash flows, the Directors have a reasonable expectation that the Group has adequate cash to continue in operational existence for the foreseeable future. For this reason they have adopted the going concern basis in preparing the financial statements. 16 Qplc STRATEGIC REPORT The Directors present their Annual Report and accounts for the year ended 31 December 2015. Principal activities and results The principal activity of the Group is the development and supply of computer systems. During the year, the Group acquired Densitron Technologies plc whose principal business is the design, development and delivery of electronic displays into the industrial marketplace and Alpha Display Europe GmbH whose principal activity is the distribution and delivery of monitors. The profits for the year after taxation amounted to $6,420,000 (2014: $6,116,000) and the Directors continue to be satisfied with the overall performance of the Group. Further comments on the development of the business are included in the Chairman’s Statement, Chief Executive’s Report and Financial Review on pages 4 to 14. Key Performance Indicators The primary financial key performance indicators of the Group are adjusted EDITDA and profit before tax, on which it reports monthly. Adjusted EDITDA (Note 1) for the year was $10,098,000 (2014: $7,894,000) and profit before tax was $7,788,000 (2014: $7,059,000). The Group also monitors its order pipeline and cash balances. Principal risks relating to the business of the Group The Group faces competitive and strategic risks that are inherent in rapidly growing and changing markets. The Board of the Company and its management review future strategy and risks to the business regularly. Where possible, processes are in place to monitor and mitigate the identified risks. Financial and trading risks are discussed in Note 24 of the consolidated financial statements. The key business risks set out below are not an exhaustive list of the risks faced by the Group and are not intended to be presented in any order of priority. RISK DESCRIPTION MITIGATION COMMENT Commercial The marketplace for the Group’s display products is highly competitive. The Group continues to work on identifying areas in which it can add value and differentiate its products. The Group has the capabilities and skills to create highly engineered, optimised products. Gaming customers may decide to design their computer platforms and/or monitors in house or source from another supplier. Quixant works closely with its customers to ensure its product roadmap is robust, technologically advanced and ahead of the competition. Geographical and environmental The Group operates across a range of countries, all of which carry a degree of risk, whether it is political risk or environmental issues. The majority of the Group’s operations are in OECD countries. Despite not being an OECD member, Taiwan has a highly developed legal and political system. The Group continues to operate in those countries that provide the best opportunity for growth whilst avoiding identified country risk. A large proportion of the revenue is generated from customers in OECD countries. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 17 Qplc STRATEGIC REPORT RISK DESCRIPTION MITIGATION COMMENT Regulation risk Technological risk Additional laws and regulations may be enacted covering issues such as law enforcement, pricing, taxation and quality of products and services. The Group’s business is dependent upon technology which could be superseded by superior technology, more competitively priced technology or a shift in working practices, which could affect both potential profitability and saleability of the Group’s products. The Group monitors prospective changes in regulation which may impact its business. The Group is a member of professional bodies where applicable. The Group works closely with its technology partners to provide products which incorporate the most advanced technology available to our market. The Group also develops its own innovations to incorporate into new products. The Group recognises the technology requirements of our customers and works with them to provide the products they need for their business. Key customer dependency. The Group generates a significant but declining portion of its revenue from a key customer. As the Group continues to grow, the portion of revenue from key customers has declined. Key persons The Group is reliant on the experience of the executive officers. The executive officers are subject to long term contracts and the Board is developing a succession plan. The Directors have put in place contractual arrangements designed to develop and incentivise key staff. The Board expects the Group’s organic growth, combined with the acquisitions in 2015 to further reduce the dependency on key customers. Staff turnover of key persons continues to be low. The Group seeks to establish and protect its intellectual property rights by patents and other protection mechanisms. The Group works with professional external patent attorneys. Intellectual property protection The Group may be unable to successfully establish and protect its intellectual property. The intellectual property rights may or may not have priority over other parties’ claims to the same intellectual property. By order of the Board on 22 March 2016 Miss A C Preddy Director Aisle Barn 100 High Street Balsham Cambridge CB21 4EP 18 Qplc DIRECTORS’ REPORT Statutory information Quixant plc (‘The Company’) is a Public Limited Company incorporated in the United Kingdom (Registration number: 04316977). On 15 May 2013, the Company issued an admission document and from 21 May 2013 the Company’s ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange (AIM). The Company has a branch, located in Taiwan, whose operations and results are included in the standalone financial statements of the Company. Details of the share capital of the Company are set out in Note 23 of the consolidated financial statements. Annual General Meeting The date and other details of the next Annual General Meeting of the Company are contained within the notice of this meeting, which accompanies this report. The Directors propose a dividend of 1.5p per share (2014: 1.2p), to be approved at the Annual General Meeting. During the year the Company paid a dividend of 1.2p per share amounting to $1,182,000. Substantial shareholdings On 22 March 2016 the Company had been notified of the following significant interests in its share capital: Shares held Ordinary shares of £0.001 each % of issued share capital N C L Jarmany and his wife 16,752,923 C-T Lin and his wife G P Mullins and his wife Schroders Plc Octopus Investments Nominees Limited Hargreave Hale River and Mercantile Asset Management LLP Alexander Taylor Mark Mullins John Mullins Susan Mullins Amati Global Investors 4,589,842 4,058,641 7,152,211 4,152,059 3,321,160 3,128,000 2,622,767 2,484,981 2,432,707 2,432,707 2,022,219 25.92% 7.10% 6.28% 11.07% 6.42% 5.14% 4.84% 4.06% 3.84% 3.76% 3.76% 3.13% I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 19 Qplc DIRECTORS’ REPORT Directors The Directors who served during the year and their interests in the share capital of the Company were as follows: Shares held Ordinary shares of £0.001 each Options granted £0.001 each Exercise price 2015 and 2014 2015 and 2014 16,752,923 4,589,842 4,058,641 - 152,174 26,087 - - - - - - 79,000 £0.49 - - - - N C L Jarmany C-T Lin G P Mullins A C Preddy M J Peagram G van Zwanenberg There has been no change in the interests set out above between 31st December 2015 and 22nd March 2016. Directors’ indemnity arrangements The Group has made qualifying third party indemnity provisions for the benefit of its Directors which were made during the year and remain in force at the date of this report. The Group has purchased and maintained throughout the year Directors’ and Officers’ liability insurance in respect of itself and its Directors. Research and development (R&D) The Group continues to invest in R&D, spending $2,304,777 in its R&D and customer support programmes in the year, of which $1,071,139 was capitalised. The Group undertakes R&D to develop and enhance its products and the Group will continue to commit a significant level of resource and expenditure as appropriate to R&D. Use of financial instruments Information on both the Group’s financial risk management objectives and the Group’s policies on exposure to relevant risks in respect of financial instruments are set out in Note 24 of the consolidated financial statements. Political contributions Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure during the year. Disclosure of information to auditors The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. 20 Qplc Auditors In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditor of the Company is to be proposed at the forthcoming Annual General Meeting. By order of the Board on 22 March 2016 Miss A C Preddy Director Aisle Barn 100 High Street Balsham Cambridge CB21 4EP I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 21 Qplc STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE DIRECTORS’ REPORT AND THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 22 Qplc KPMG LLP Botanic House 100 Hills Road Cambridge CB2 1AR INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF QUIXANT PLC We have audited the financial statements of Quixant plc for the year ended 31 December 2015 set out on pages 25 to 62. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU, and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 22, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2015 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and applied in accordance with the provisions of the Companies Act 2006; • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 23 Qplc INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF QUIXANT PLC Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Charles le Strange Meakin (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Botanic House 100 Hills Road Cambridge CB2 1AR 22 March 2016 24 Qplc CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 Revenue Cost of sales Gross profit Administrative expenses Other operating expenses Operating profit Financial expenses Profit before tax Taxation Profit for the year Other comprehensive income for the year, net of income tax Foreign currency translation differences Total comprehensive income for the year Note 3,4 5 8 9 2015 $000 2014 $000 41,829 (24,503) 31,919 (17,857) 17,326 (3,995) (5,469) 14,062 (2,351) (4,622) 7,862 7,089 (74) (30) 7,788 (1,368) 7,059 (943) 6,420 6,116 (268) (183) 6,152 5,933 Basic earnings per share Fully diluted earnings per share 10 10 $0.0993 $0.0946 $0.0967 $0.0922 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 25 Qplc BALANCE SHEETS AS AT 31 DECEMBER 2015 Note Group 2015 2014 2015 $000 $000 $000 Company 2014 1 January 2014* $000 $000 Non-current assets Property, plant and equipment Intangible assets Investment property Investments in group companies and associated undertakings Deferred tax assets Current assets Inventories Tax receivable Trade and other receivables Cash and cash equivalents Total assets Current liabilities Other interest-bearing loans and borrowings Trade and other payables Tax payable Non-current liabilities Other interest-bearing loans and borrowings Provisions Deferred tax liabilities Total liabilities Net assets 11 12 13 14 15 16 17 18 19 20 19 22 15 5,996 15,395 740 - 620 5,218 2,231 - - 63 3,580 2,905 - 11,875 70 3,684 2,231 - 196 47 3,582 1,375 - 109 - 22,751 7,512 18,430 6,158 5,066 9,285 - 19,484 3,861 5,505 - 10,049 4,722 5,495 325 10,002 1,401 4,008 322 8,596 1,070 2,041 - 3,422 6,870 32,630 20,276 17,223 13,996 12,333 55,381 27,788 35,653 20,154 17,399 (2,994) (15,274) (301) (100) (5,410) (211) (605) (10,881) - (100) (4,614) - (173) (2,177) - (18,569) (5,721) (11,486) (4,714) (2,350) (8,744) (750) (1,667) (1,200) - (388) (8,448) - (671) (1,200) - (388) (1,986) - (281) (11,161) (1,588) (9,119) (1,588) (2,267) (29,730) (7,309) (20,605) (6,302) (4,617) 25,651 20,479 15,048 13,852 12,782 26 Qplc Note Group 2015 2014 2015 $000 $000 $000 Company 2014 1 January 2014 $000 $000 23 23 104 5,181 470 20,299 (408) 104 5,181 273 15,061 (140) 25,646 5 20,479 - 104 5,181 470 9,613 (320) 104 5,181 273 8,431 (137) 104 5,181 113 7,339 45 15,048 - 13,852 - 12,782 - 25,651 20,479 15,048 13,852 12,782 Equity attributable to equity holders of the parent Share capital Share premium Share based payments reserve Retained earnings Translation reserve Non-controlling interest Total equity * The Company balance sheet at 1 January 2014 has been presented in accordance with IFRS 1, as a result of the parent company’s transition to IFRS. See Note 30. These financial statements were approved and authorised for issue by the Board of Directors on 22 March 2016 and were signed on behalf of the Board by: Miss A C Preddy Director Company registered number: 04316977 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 27 Qplc STATEMENT OF CHANGES IN EQUITY GROUP Share capital premium Share Translation reserve Share Retained based earnings $000 $000 $000 payments $000 $000 Total Non- parent controlling interest equity $000 $000 Total equity $000 104 5,181 43 113 10,035 15,476 - 15,476 - - - - - - - - - - - - - (183) (183) - - - - - - 6,116 - 6,116 (183) 6,116 5,933 160 - - (1,090) 160 (1,090) 160 (1,090) (930) - - - - - - 6,116 (183) 5,933 160 (1,090) (930) 104 5,181 (140) 273 15,061 20,479 - 20,479 Balance at 1 January 2014 Total comprehensive income for the period Profit Other comprehensive loss Total comprehensive income for the period Transactions with owners, recorded directly in equity Share based payments Dividend paid Total transactions with owners Balance at 31 December 2014 28 Qplc Share capital premium Share Translation reserve Share Retained based earnings $000 $000 $000 payments $000 $000 Total Non- parent controlling interest equity $000 $000 Total equity $000 Balance at 1 January 2015 Total comprehensive income for the period Profit Other comprehensive loss Total comprehensive income for the period Transactions with owners, recorded directly in equity Share based payments Dividends paid Total contributions by and distributions to owners Transactions with owners Acquisition of subsidiary with a non-controlling interest Total transactions with owners Balance at 31 December 2015 104 5,181 (140) 273 15,061 20,479 - 20,479 - - - - - - - - - - - - - - - - - (268) (268) - - - 6,420 - 6,420 (268) 6,420 6,152 - - - - - 197 - - (1,182) 197 (1,182) 197 (1,182) (985) - - - - - - - - - - - - 5 5 6,420 (268) 6,152 197 (1,182) (985) 5 5 104 5,181 (408) 470 20,299 25,646 5 25,651 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 29 Qplc STATEMENT OF CHANGES IN EQUITY COMPANY Share capital $000 Share premium $000 Translation Share based Retained earnings $000 payments $000 reserve $000 Total parent equity $000 Balance at 1 January 2014 104 5,181 45 113 7,339 12,782 Total comprehensive income for the period Profit Other comprehensive loss Total comprehensive income for the period Transactions with owners, recorded directly in equity Share based payments Dividends paid Total contributions by and distributions to owners - - - - - - - - - - - - - (182) (182) - - - - - - 2,182 - 2,182 (182) 2,182 2,000 160 - - (1,090) 160 (1,090) 160 (1,090) (930) Balance at 31 December 2014 104 5,181 (137) 273 8,431 13,852 Share capital $000 Share premium $000 Translation Share based Retained earnings $000 payments $000 reserve $000 Total parent equity $000 Balance at 1 January 2015 104 5,181 (137) 273 8,431 13,852 Total comprehensive income for the period Profit Other comprehensive loss Total comprehensive income for the period Transactions with owners, recorded directly in equity Share based payments Dividends paid Total contributions by and distributions to owners - - - - - - - - - - - - - (183) (183) - - - - - - 2,364 - 2,364 (183) 2,364 2,181 197 - - (1,182) 197 (1,182) 197 (1,182) (985) Balance at 31 December 2015 104 5,181 (320) 470 9,613 15,048 30 Qplc CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 Cash flows from operating activities Profit for the year Adjustments for: Depreciation, amortisation and impairment Taxation expense Financial expense Equity settled share based payment expenses (Increase) in trade and other receivables (Increase) in inventories Increase in trade and other payables Interest paid Tax paid Note Group 2015 $000 2014 $000 Company 2015 $000 2014 $000 6,420 6,116 2,363 2,182 871 1,368 74 197 8,930 (2,140) (1,490) 2,166 7,466 (74) (1,112) 645 943 30 160 7,894 (4,110) (2,874) 2,682 3,592 (30) (1,493) 684 412 53 118 3,630 (1,406) (1,487) 6,202 6,939 (53) (155) 609 265 30 73 3,159 (5,174) (1,967) 2,385 (1,597) (30) (527) Net cash from operating activities 6,280 2,069 6,731 (2,154) Cash flows from investing activities Acquisition of subsidiary, net of cash acquired Acquisition of property, plant and equipment Acquisition of intangible assets 2 11 12 (10,593) (1,101) (1,151) - (938) (1,481) (11,600) (230) (1,142) - (407) (1,290) Net cash from investing activities (12,845) (2,419) (12,972) (1,697) Cash flows from financing activities Proceeds from new loan Repayment of borrowings Dividends paid 7,754 (868) (1,182) - (859) (1,090) 7,754 - (1,182) - (859) (1,090) Net cash from financing activities 5,704 (1,949) 6,572 (1,949) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January (861) 4,722 (2,299) 7,021 331 1,070 (5,800) 6,870 Cash and cash equivalents at 31 December 18 3,861 4,722 1,401 1,070 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 31 Qplc NOTES (forming part of the financial statements) 1 Principal accounting policies The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements and in preparing an opening IFRS balance sheet for the Company at 1 January 2014 for the purposes of the transition to Adopted IFRSs. Quixant plc (the “Company”) develops and supplies specialist computer systems. The Company is incorporated and domiciled in the UK. The address of the Company’s registered office is Aisle Barn, 100 High Street, Balsham, Cambridge, CB21 4EP. The Group financial statements consolidate those of the Company, its branch in Taiwan and its subsidiaries (together referred to as the “Group”). The parent Company financial statements present information about the Company as a separate entity and not about its group. Basis of preparation Both the parent Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”). On publishing the parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual profit and loss account and related notes that form a part of these approved financial statements. This financial information has been prepared under the historical cost convention, except that a subsidiary company owns a plot of land in Blackheath, London which is held at a valuation. A subsidiary owns an investment property being a plot of land at Blackheath. The land was valued by a professional firm of property consultants in 2010. Subsequently, the Directors have estimated its value based on current market conditions. The presentation currency adopted by the Quixant Group is US Dollars as this is the trading currency of the Group. The preparation of financial information in conformity with Adopted IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Quixant Group accounting policies. The areas involving a higher degree of judgement and estimation relate to determining the point at which the criteria for development cost capitalisation have been met and inventory and bad debt provisions respectively. In addition, management consider the recoverable amount of goodwill and the assessment of the contingent consideration payable to be judgemental areas. As noted below, goodwill is reviewed for impairment at each reporting date or when indicators of impairment arise. See Note 12 for further consideration. Goodwill has increased significantly in the year due to the acquisitions of Densitron and Quixant Deutschland, as have inventory and trade and other receivables. Contingent consideration, as explained in Note 2, is payable in three years’ time (see Note 2 for explanation of the assumptions considered). Transition to Adopted IFRSs The parent Company is preparing its financial statements in accordance with Adopted IFRSs for the first time and consequently has applied IFRS 1. An explanation of how the transition to Adopted IFRSs has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 30. Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. The Italian subsidiary, Quixant Italia srl, is 99% owned by the Group. The comprehensive income and equity attributable to the non-controlling interests in this subsidiary are not material. Densitron Nordic Oy is 80% owned by the Group. The equity attributable to the non-controlling interest in this subsidiary is accounted for as a minority interest. The income attributable to this subsidiary is immaterial. Separate parent Company financial statements In the parent Company financial statements, all investments in subsidiaries, joint ventures, and associates are carried at cost less impairment. 32 Qplc Going concern The Directors have prepared trading and cash flow forecasts for the Group covering the period to 31 December 2017. After making enquiries and considering the impact of risks and opportunities on expected cash flows, the Directors have a reasonable expectation that the Group has adequate cash to continue in operational existence for the foreseeable future. For this reason they have adopted the going concern basis in preparing the financial statements. Changes in accounting policies: new standards, interpretations and amendments not yet effective The International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have issued the following standards and interpretations with an effective date after the date of these accounts: Adopted for use in the EU: Improvements to IFRS 2010 – 2012 Improvements to IFRS 2011 – 2013 Limited scope amendments to IAS 19 Not currently adopted for use in the EU: IFRS 9 IFRS 15 IFRS 17 Financial Instruments Revenue Recognition Leases The Directors consider that the adoption of these standards and interpretations on the Group’s financial statements will not be material. Revenue recognition Revenue represents amounts chargeable, net of value added tax, in respect of the sale of goods to customers. Revenue is recognised at the point that risk is transferred to the customer as determined by the terms agreed in the contract. Where invoicing takes place in advance of revenue recognition, the amounts invoiced, net of value added tax, are recorded as deferred revenue. Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee. Impairment excluding inventories, investment properties and deferred tax assets Non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories, investment property and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash generating units, or (“CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 33 Qplc NOTES An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Property, plant and equipment Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful economic life, as follows: Freehold buildings Plant and machinery 20 - 50 years between 3 and 6 years No depreciation is provided on freehold land. The carrying value of property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. Investment property Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value and are reviewed on an annual basis with any revision to the valuation taken to the profit and loss account. Intangible assets – customer relationships and order back log In accordance with IFRS 3, on the acquisition of subsidiary companies the Group assess the identification of intangible assets acquired which are either separate or arise from contractual or other legal rights. These assets are recognised as intangible assets and are amortised over the period of future benefit to the Group. Intangible assets – development costs The Quixant Group incurs significant expenditure on the research and development of new computer products and enhancements. The internally generated intangible asset arising from the Company’s development is recognised only if the Company can demonstrate all of the following conditions: • The technical feasibility of completing the intangible asset so that it will be available for use or sale; • The intention to complete the intangible asset and use or sell it; • The ability to use or sell the intangible asset; • The probability that the asset created will generate future economic benefits; • The availability of adequate technical, financial and other resources to complete the development; and • The ability to measure reliably the expenditure attributable to the intangible asset during its development. Development costs not meeting these criteria and all research costs are expensed in the Consolidated Income Statement as incurred. Capitalised development costs are amortised on a straight line basis over their expected useful economic lives of 5 years once the related software product or enhancement is available for use. Intangible assets – computer software Computer software is stated at cost, net of amortisation and any provision for impairment. Amortisation is provided on all computer software at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful economic life, as follows: Computer software between 3 and 5 years The carrying value of computer software is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. Inventories Inventories, which comprise goods held for resale, are stated at the lower of cost and net realisable value. Cost includes all costs in acquiring the inventories and bringing each product to its present location and condition. Net realisable value represents the estimated selling price and costs to be incurred in marketing, selling and distribution. 34 Qplc Foreign currencies Transactions denominated in foreign currencies are translated into the functional currency of the relevant operation at the rates ruling at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated at the rates ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. On consolidation, results of overseas subsidiaries are translated using the average exchange rate for the period, unless exchange rates fluctuate significantly. The Balance Sheets of overseas subsidiaries are translated to the Group’s presentational currency, US Dollars, using the closing period-end rate. Exchange differences arising, if any, are taken to a translation reserve. Such translation differences would be reclassified to profit and loss in the period in which the operation is disposed of. Income tax The charge for current income tax is based on the results for the year as adjusted for items which are not taxed or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income tax is accounted for using the liability method in respect of temporary differences arising from differences between the tax bases of certain assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference is due to goodwill arising on a business combination or from an asset or liability, the initial recognition of which does not affect either taxable or accounting income. Deferred tax is charged or credited in the profit and loss account or in Other Comprehensive Income, except when it relates to items credited or charged directly to Shareholders’ equity, in which case the deferred tax is also dealt with in Shareholders’ equity. Financial assets The Group’s financial assets fall into the categories set out below, with the allocation depending to an extent on the purpose for which the asset was acquired. Unless otherwise indicated, the carrying amounts of the Group’s financial assets are a reasonable approximation of their fair values. • Trade receivables: Trade receivables do not carry interest and are stated at their nominal value as reduced by allowances for estimated irrecoverable amounts. • Cash and cash equivalents: Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand, short-term deposits and other short-term liquid investments. In the Cash Flow Statement, cash and cash equivalents comprise cash and cash equivalents as defined above, net of bank overdrafts. Financial liabilities All of the Group’s financial liabilities are classified as financial liabilities carried at amortised cost. The Group does not use derivative financial instruments or hedge account for any transactions. Unless otherwise indicated, the carrying amounts of the Group’s financial liabilities are a reasonable approximation of their fair values. Financial liabilities include the following items: • Trade payables and other short-term monetary liabilities, which are recognised at their nominal value. • Bank borrowings, which are initially, recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated Statement of Financial Position. Interest expense in this context includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Pension The Group operates a defined contribution scheme to the benefit of its employees. Contributions payable are changed to income in the year they are payable. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 35 Qplc NOTES Determination and presentation of operating segments The Quixant Group determines and presents operating segments based on the information that internally is provided to the executive management team, the body which is considered to be the Quixant Group’s Chief Operating Decision Maker (“CODM”). An operating segment is a component of the Quixant Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Quixant Group’s other components. The operating segment’s operating results are reviewed regularly by the CODM to make decisions about resources to be allocated to the segment to assess its performance, and for which discrete financial information is available. Share based payments The grant date fair value of share based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share based payment awards with non-vesting conditions, the grant date for fair value of the share based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. EBITDA reconciliation EBITDA for the current and prior year has been derived as follows: Profit for the year Adding back: Taxation expense Financial expenses Depreciation Amortisation EBITDA Share based payments expense Costs arising on the acquisition of subsidiaries Adjusted EBITDA 2 Acquisitions of subsidiaries Acquisitions in the current period 2015 $000 2014 $000 6,420 6,116 1,368 74 312 559 8,733 197 1,168 943 30 142 503 7,734 160 - 10,098 7,894 On 10 November 2015, the Company acquired all of the ordinary shares in Densitron Technologies plc for GBP 7,663,601.66 ($11,600,971) being 11p per share, satisfied in cash. Densitron Technologies plc was a UK based AIM quoted company whose primary business is the design, development and supply of electronic displays into the industrial market place. The acquisition provides the Group with the global infrastructure and sales capability to sell Quixant’s computer products into wider industrial markets. The acquisition will complement Quixant’s move into the provision of displays to its gaming customers, alongside the specialised computer systems it currently supplies. In the 6 weeks to 31 December 2015 the subsidiary contributed net profit of $117,000 to the consolidated net profit after tax for the year. If the acquisition had occurred on 1 January 2015, Group revenue would have been an estimated $72,667,000 and net profit after tax would have been an estimated $5,441,000. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on 1 January 2015. On 9 December 2015, the Company acquired all of the ordinary shares in Alpha Display Europe GmbH (subsequently renamed Quixant Deutschland GmbH) for $750,000 and contingent consideration estimated as $750,000 to be satisfied in cash. Alpha Display Europe GmbH was a private company incorporated in Germany whose primary business 36 Qplc is the sale of electronic displays into the industrial market place. The acquisition provides the Group with additional products which complement the current range of Quixant products and customer requirements. The acquisition will assist Quixant’s move into the provision of displays to its gaming customers, alongside the specialised computer systems it currently supplies. As this company was acquired in December 2015, no profit has been included for this period to the consolidated net profit for the year. In January 2016, Alpha Display Europe GmbH was legally registered as Quixant Deutschland GmbH. The accounts of Quixant Deutschland GmbH as at 31 December 2015 have been estimated for the purpose of acquisition accounting because the financial statements have not been completed. The effect of the acquisition on all items will be adjusted in the 2016 financial statements. Effect of acquisitions The acquisitions had the following effect on the Group’s assets and liabilities. Recognised values on acquisition Acquiree’s net assets at the acquisition date: Property, plant and equipment Intangible assets – internally developed Intangible assets – customer relationships and order back log Inventories Trade and other receivables Cash and cash equivalents Interest-bearing loans and borrowings Trade and other payables Net deferred tax liabilities Net identifiable assets and liabilities Consideration paid: Initial cash price paid Less proceeds received in respect of Densitron treasury shares Contingent consideration at fair value Total consideration Goodwill on acquisition Densitron $000 968 225 5,201 2,290 7,367 1,674 (3,552) (7,715) (547) 5,911 11,600 (83) - 11,517 5,606 Quixant Deutschland (formerly Alpha Display Europe) – ESTIMATED $000 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A - - - - 55 - - (28) - 27 750 - 750 1,500 1,473 Goodwill has arisen on the acquisition because the consideration paid is in excess of the net identifiable assets and liabilities. This represents the value of the underlying business including its workforce. Contingent consideration The Group has agreed to pay the Quixant Deutschland GmbH vendors additional consideration based on the profit earned over the three years following acquisition. The range of the additional consideration payment is between $nil and $3,375,000. The Group has included $750,000 as contingent consideration related to the additional consideration, which represents its fair value at the acquisition date. The key assumptions in assessing the fair value are the growth rate and gross profit margin as applied to future profits of Quixant Deutschland GmbH. Acquisition related costs The Group incurred acquisition costs of $1,168,000 relating to professional fees in respect of due diligence and advice. These costs have been included as a cost in administrative expenses in the Group’s consolidated profit and loss account. 37 Qplc NOTES 3 Business and geographical segments The chief operating decision maker in the organisation is an executive management committee comprising the Board of Directors. They have determined the operating segments detailed within this report and, on which, the business is managed. The Group assesses the performance of the segments based on a measure of revenue and EBITDA. The operating segments applicable to the Group are as follows: • Quixant A single customer accounted for 43% of reported revenues for the year ended 31 December 2015 (2014: 58%). • Densitron Europe • Densitron America • Densitron France • Densitron Japan Revenue Profit/(loss) before tax Balance Sheet Assets Liabilities Net assets/(liabilities) Quixant $000 36,650 7,607 42,215 18,642 23,573 Densitron Europe $000 Densitron America $000 Densitron France $000 Densitron Japan $000 Total 2015 $000 1,977 104 5,265 6,835 (1,570) 2,106 189 4,572 2,629 1,943 411 (87) 685 (25) 41,829 7,788 1,676 1,154 522 1,653 470 1,183 55,381 29,730 25,651 The Densitron results are included for the period since acquisition on 10 November 2015 until 31 December 2015. For the year to 31 December 2014, the Group had determined that it had only one operating and reportable segment. All significant assets and liabilities were located within the UK, Taiwan and USA. 4 Analysis of turnover By geographical market Asia Australia Europe North America Other 5 Expenses and auditor’s remuneration Included in profit/loss are the following: Loss/(gain) on foreign exchange transactions Costs arising on the acquisition of subsidiary companies Research and development expenditure Of which capitalised Depreciation of owned assets Amortisation of intangible assets 38 Qplc 2015 $000 2014 $000 3,958 14,479 7,274 15,976 142 1,387 13,252 2,965 14,243 72 41,829 31,919 2015 $000 2014 $000 1 1,168 2,305 (1,071) 312 559 (35) - 2,127 (1,022) 142 503 Auditor’s remuneration: Audit of these financial statements Amounts receivable by the Company’s auditor and its associates in respect of: Audit of financial statements of subsidiaries of the Company Corporate finance services 2015 $000 2014 $000 107 126 87 - 6 Staff numbers and costs The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows: Number of employees Production and manufacturing Research and customer service Sales and marketing Administrative The aggregate payroll costs of these persons was as follows: Wages and salaries Share based payments (See Note 21) Social security costs Contributions to defined contribution plans 2015 2014 25 45 26 42 138 17 33 4 14 68 2015 $000 2014 $000 4,028 197 278 95 3,399 160 350 68 4,598 3,977 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 7 Directors’ remuneration EXECUTIVE DIRECTORS N C L Jarmany G P Mullins C-T Lin A C Preddy NON-EXECUTIVE DIRECTORS M J Peagram G van Zwanenberg Salary/Fee 2015 $000 Share based payments 2015 $000 Total Total 2015 $000 2014 $000 258 258 237 169 922 98 63 161 - - - 7 7 - - - 258 258 237 176 929 98 63 251 251 237 130 869 72 50 161 122 There were no share options exercised during the year by Directors (2014: none). There were no directors’ advances, credits or guarantees outstanding at 31 December 2015 or 2014. 39 Qplc NOTES 8 Finance income and expense Total interest expense on financial liabilities measured at amortised cost Total finance expense 9 Taxation Recognised in the profit and loss account Current tax expense UK corporation tax Foreign tax Adjustments for prior years Current tax expense Deferred tax expense Origination and reversal of temporary differences Deferred tax expense Total tax expense Reconciliation of effective tax rate Profit for the year Total taxation expense Profit excluding taxation Tax using the UK corporation tax rate of 20.25% (2014:21.49%) Non-deductible expenses Enhanced research and development claim Reduction in deferred tax rate to 18% (2014: 20%) Overseas tax in excess of standard UK rate Unrelieved losses Over provided in prior years Enhanced research and development claim Other Total taxation expense 2015 $000 2014 $000 74 74 30 30 2015 $000 2014 $000 764 550 (121) 1,069 101 (271) 1,193 899 175 175 44 44 1,368 943 2015 $000 6,420 1,368 2014 $000 6,116 943 7,788 7,059 1,577 30 (356) (2) 276 (36) (121) - 1,368 1,517 27 (376) (8) 54 - (139) (132) 943 Factors that may affect future tax charges Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015 were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the Company’s future current tax charge accordingly. The deferred tax liability at 31 December 2015 has been calculated based on these rates. 40 Qplc 10 Earnings per ordinary share (EPS) Earnings Earnings for the purposes of basic and diluted EPS being net profit attributable to equity shareholders Year ended 31 December 2015 $000 Year ended 31 December 2014 $000 6,420 6,116 Number of shares Number Number Weighted average number of ordinary shares for the purpose of basic EPS Number of shares 64,634,782 64,634,782 Effect of dilutive potential ordinary shares: Share options Weighted number of ordinary shares for the purpose of diluted EPS Basic earnings per share Fully diluted earnings per share 1,810,578 1,710,200 66,445,360 66,344,982 $0.0993 $0.0967 $0.0946 $0.0922 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 41 Qplc NOTES 11 Property, plant and equipment – Group Cost Balance at 1 January 2014 Additions Effect of movements in foreign exchange Balance at 31 December 2014 Balance at 1 January 2015 Acquisitions through business combinations Other additions Disposals Effect of movements in foreign exchange Balance at 31 December 2015 Depreciation Balance at 1 January 2014 Depreciation charge for the year Effect of movements in foreign exchange Balance at 31 December 2014 Balance at 1 January 2015 Depreciation charge for the year Disposals Effect of movements in foreign exchange Balance at 31 December 2015 Net book value At 1 January 2014 At 31 December 2014 and 1 January 2015 At 31 December 2015 Land and buildings $000 Plant and equipment $000 Total $000 4,179 721 (124) 4,776 4,776 24 690 - (195) 5,295 91 65 (4) 152 152 96 - (4) 244 4,088 4,624 5,051 1,125 217 (21) 5,304 938 (145) 1,321 6,097 1,321 190 411 (10) (81) 6,097 214 1,101 (10) (276) 1,831 7,126 659 77 (9) 727 727 216 (10) (47) 750 142 (13) 879 879 312 (10) (51) 886 1,130 466 594 945 4,554 5,218 5,996 42 Qplc 11 Property, plant and equipment – Company Cost Balance at 1 January 2014 Additions Effect of movements in foreign exchange Balance at 31 December 2014 Balance at 1 January 2015 Additions Effect of movements in foreign exchange Balance at 31 December 2015 Depreciation Balance at 1 January 2014 Depreciation charge for the year Effect of movements in foreign exchange Balance at 31 December 2014 Balance at 1 January 2015 Depreciation charge for the year Effect of movements in foreign exchange Balance at 31 December 2015 Net book value At 1 January 2014 At 31 December 2014 and 1 January 2015 At 31 December 2015 Land and buildings $000 Plant and equipment $000 Total $000 3,425 68 (124) 3,369 3,369 8 (97) 3,280 90 55 (4) 141 141 64 (4) 201 3,335 3,228 3,079 749 339 (9) 4,174 407 (133) 1,079 4,448 1,079 222 (18) 4,448 230 (115) 1,283 4,563 502 124 (3) 623 623 165 (6) 782 247 456 501 592 179 (7) 764 764 229 (10) 983 3,582 3,684 3,580 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 43 Qplc Goodwill Customer Computer software relationships and order back log $000 $000 $000 NOTES 12 Intangible assets – Group Cost Balance at 1 January 2014 Additions – internally developed Additions – externally purchased Balance at 31 December 2014 Balance at 1 January 2015 Additions through business combinations Additions – internally developed Additions – externally purchased Effect of movements in foreign exchange Balance at 31 December 2015 Amortisation and impairment Balance at 1 January 2014 Amortisation for the year Balance at 31 December 2014 Balance at 1 January 2015 Amortisation for the year Effect of movements in foreign exchange Balance at 31 December 2015 Net book value At 1 January 2014 At 31 December 2014 and 1 January 2015 - - - - - - - 7,079 - 7,079 - - - - - - - - - - - - - - - - 5,201 - 5,201 - - - - - - - - - Internally generated capitalised development costs $000 1,395 1,022 - Total $000 1,395 1,022 459 2,417 2,876 2,417 2,876 225 1,071 - 225 1,071 12,360 79 62 3,792 16,594 142 367 509 509 477 - 986 142 503 645 645 559 (5) 1,199 1,253 1,253 1,908 2,231 2,806 15,395 - - 459 459 459 - - 80 (17) 522 - 136 136 136 82 (5) 213 - 323 309 At 31 December 2015 7,079 5,201 44 Qplc Impairment testing Goodwill has been allocated to CGUs as follows: Quixant Densitron Europe Densitron America Densitron France Densitron Japan Goodwill 2015 $000 1,473 2,903 2,076 485 142 7,079 2014 $000 - - - - - - The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from the higher or the fair value less costs to sell and the calculations of value in use. The key assumptions for the value in use calculations are those regarding the discount rate, growth rate and operating profit margins. This policy will be developed to determine appropriate discount and growth rates. The operating profit margins used will be determined each year based on the Group’s results. No impairment was required in the year. The Group prepares cash flow forecasts derived from the most recent financial plan approved by the Board. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 45 Qplc Computer software $000 Internally generated capitalised development costs $000 Total $000 1,593 1,022 268 (7) 1,395 1,022 - - 2,417 2,876 2,417 1,071 - - 2,876 1,071 70 (17) 3,488 4,000 142 367 - 509 509 374 - 883 218 430 (3) 645 645 455 (5) 1,095 1,253 1,375 1,908 2,231 2,605 2,905 198 - 268 (7) 459 459 - 70 (17) 512 76 63 (3) 136 136 81 (5) 212 122 323 300 NOTES 12 Intangible assets – Company Cost Balance at 1 January 2014 Additions – internally developed Additions – externally purchased Effect of movements in foreign exchange Balance at 31 December 2014 Balance at 1 January 2015 Additions – internally developed Additions – externally purchased Effect of movements in foreign exchange Balance at 31 December 2015 Amortisation Balance at 1 January 2014 Amortisation for the year Effect of movements in foreign exchange Balance at 31 December 2014 Balance at 1 January 2015 Amortisation for the year Effect of movements in foreign exchange Balance at 31 December 2015 Net book value At 1 January 2014 At 31 December 2014 and 1 January 2015 At 31 December 2015 46 Qplc 13 Investment property Balance at 1 January 2015 Acquisitions through business combinations Effect of movements in foreign exchange Balance at 31 December 2015 Group 2015 $000 2014 $000 Company 2015 $000 2014 $000 - 754 (14) 740 - - - - - - - - - - - - Investment property relates to an area of land owned by the Group at Blackheath in South East London. The fair value of the investment property was determined by external, independent property valuers, having appropriate professional qualifications and recent experience in the location and category of the property being valued. The last valuation was carried out on 10 May 2013. The Directors have reviewed the valuation put on the land on an annual basis and consider that the fair value of the land does not differ from its current carrying amount and as such they do not consider that a revaluation is required in the current year. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 47 Qplc NOTES 14 Investments in group companies and associated undertakings The Company has the following investments in subsidiaries: Company Quixant USA Inc Quixant UK Limited Quixant Italia srl Acquired in 2015 Densitron Technologies Limited Densitron Europe Limited Densitron Corporation of Japan Densitron Corporation Densitron France* Densitron Nordic Oy* Densitron Deutschland GmbH* Densitron Land Ltd Densitron Display Taiwan Limited Quixant Deutschland GmbH * Subsidiary of Densitron Europe Limited Fixed asset investments Balance at 1 January 2015 Acquisitions – Group settled share based payments Acquisitions – External Balance at 31 December 2015 Principal place of business/ Country of Incorporation Class of shares held Ownership 2015 2014 USA UK Italy UK UK Japan USA France Finland Germany UK Taiwan Germany Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 99% 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 100% 100% 99% -% -% -% -% -% -% -% -% -% -% Company 2015 $000 2014 $000 196 79 11,600 11,875 109 87 - 196 48 Qplc 15 Deferred tax assets and liabilities – Group Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Property, plant and equipment Intangible assets – capitalised development costs Intangible assets – acquired in business combinations Share-based payments Receivables Inventory provisions Tax value of loss carry-forwards Other Net tax (assets)/liabilities Movement in deferred tax during the year Assets 2015 $000 2014 $000 Liabilities 2015 $000 2014 $000 - - - (70) (32) (312) (175) (31) (620) - - - (40) - (23) - - (63) 164 521 936 - - - - 46 1,667 6 382 - - - - - - 388 1 January 2015 Recognised in income $000 $000 Acquired in business combination $000 Property, plant and equipment Intangible assets – capitalised development costs Intangible assets – acquired in business combinations Share based payments Receivables Inventory provisions Tax value of loss carry-forwards Other 6 382 - (40) - (23) - - 325 124 139 - (30) - (82) - 24 175 Movement in deferred tax during the prior year 1 January 2014 Property, plant and equipment Intangible assets – capitalised development costs Share based payments Inventory provisions $000 30 251 - - 281 34 - 936 - (32) (207) (175) (9) 547 Recognised in income $000 (24) 131 (40) (23) 44 31 December 2015 $000 164 521 936 (70) (32) (312) (175) 15 1,047 31 December 2014 $000 6 382 (40) (23) 325 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 49 Qplc NOTES Deferred tax assets and liabilities – Company Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Property, plant and equipment Intangible assets – capitalised development costs Inventories Share based payments Exchange Tax (assets)/liabilities Net of tax liabilities/(assets) Net tax (assets)/liabilities Assets 2015 $000 2014 $000 Liabilities 2015 $000 2014 $000 - - (20) (50) - (70) - (70) - - (21) (26) - (47) - (47) 131 520 - - 20 671 - 671 6 382 - - - 388 - 388 Movement in deferred tax during the year 1 January 2015 Property, plant and equipment Intangible assets – capitalised development costs Share based payments Inventories Exchange $000 6 382 (26) (21) - 341 Movement in deferred tax during the prior year 1 January 2014 Property, plant and equipment Intangible assets – capitalised development costs Share based payments Inventories $000 30 251 - - 281 Recognised in income $000 125 138 (24) 1 20 260 Recognised in income $000 (24) 131 (26) (21) 60 31 December 2015 $000 131 520 (50) (20) 20 601 31 December 2014 $000 6 382 (26) (21) 341 50 Qplc 16 Inventories Raw materials and consumables Work in progress Finished goods Group Company 2015 $000 1,386 1,920 5,979 2014 $000 2,067 555 2,883 2015 $000 1,386 1,920 2,189 2014 $000 2,067 555 1,386 9,285 5,505 5,495 4,008 Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales in the year amounted to $25,991,000 (2014: $20,731,000). 17 Trade and other receivables Trade receivables Amounts receivable from subsidiary undertakings Other receivables Group Company 2015 $000 16,754 - 2,730 2014 $000 9,171 - 878 2015 $000 - 9,408 594 2014 $000 - 8,114 482 19,484 10,049 10,002 8,596 All debtors are receivable within one year and are included as current assets. A provision of $429,086 has been provided in respect of potential doubtful debts as at 31 December 2015 (31 December 2014 $149,067). As at 31 December 2015 the following sets out the trade receivables that were past due but not impaired. These relate to customers where there is no evidence of unwillingness or of an inability to settle the debt. The ageing of these receivables is as follows: 30 – 60 days 61 – 90 days Over 90 days Group 2015 $000 2,747 371 1,805 2014 $000 2,447 1,087 - Company 2015 $000 2014 $000 - - - - - - I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 51 Qplc NOTES 18 Cash and cash equivalents Group 2015 $000 2014 $000 Company 2015 $000 2014 $000 Cash and cash equivalents per balance sheet 3,861 4,722 1,401 1,070 Cash and cash equivalents per cash flow statements 3,861 4,722 1,401 1,070 19 Other interest-bearing loans and borrowings This note provides information about the contractual terms of the Group and Company’s interest-bearing loans and borrowings, which are measured at cost. For more information about the Group and Company’s exposure to interest rate and foreign currency risk, see Note 24. Non-current liabilities Secured bank loans Current liabilities Current portion of secured bank loans Terms and debt repayment schedule Group 2015 $000 2014 $000 Company 2015 $000 2014 $000 8,744 1,200 8,448 1,200 8,744 1,200 8,448 1,200 2,994 2,994 100 100 605 605 100 100 Loan 1 – secured on the Group’s freehold property in Taiwan Loan 2 – secured on the Group assets Loan 3 – secured on UK subsidiary assets Loan 4 – Secured loan on subsidiary assets Letters of credit Letters of credit Invoicing discounting facility Currency Nominal Year of interest maturity rate Face value 2015 $000 Carrying amount 2015 $000 Face value 2014 $000 Carrying amount 2014 $000 NTD 1.80% 2029 1,146 1,146 1,300 1,300 2.75% over LIBOR 5.5% over base 2% over LIBOR 2.6% to 2.68% 2% over LIBOR 2.75% over base USD GBP USD NTD USD GBP USD Euro 2018 7,400 7,400 2017 744 2016 235 2016 507 2016 2016 493 187 1,013 13 744 235 507 493 187 1,013 13 - - - - - - - - - - - - - - - - 11,738 11,738 1,300 1,300 Loan 2 is a new loan taken out in 2015 which is a three year facility. 52 Qplc 20 Trade and other payables Current Trade payables Other tax and social security payables Other payables and accrued expenses Amounts payable to subsidiary undertakings 21 Employee benefits Defined contribution plans Group Company 2015 $000 13,325 82 1,867 - 2014 $000 4,195 92 1,123 - 2015 $000 6,689 - 800 3,392 2014 $000 3,865 16 733 - 15,274 5,410 10,881 4,614 The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the current year was $95,000 (2014: $68,000) Share based payments – Group and Company In 2013 the Company issued share options to employees. To be able to exercise these options, employees are required to be employed by the Company for a period of three years from the grant date. In addition exercise is conditional on the Company achieving a minimum level of EPS growth over the vesting period. Options have been issued over 1,895,370 (2014: 1,710,200) shares, with an exercise price of £0.49. Options issued under the scheme expire 10 years from grant date. The fair value of employee share options is measured using a Black Scholes model. Measurement inputs and assumptions are as follows: Fair value at grant date Weighted average share price Exercise price Expected volatility Option life Risk-free interest rate 2015 Issue 2 2015 Issue 1 2014 Issue 1 £0.61 £0.19 £0.19 £1.365 £1.40 56% 5 years 0.9% £0.46 £0.49 50% 5 years 0.9% £0.46 £0.49 50% 5 years 0.9% The fair values at grant date of £0.61 and £0.19 was converted at the exchange rate on the grant date to give fair values of $0.98 and $0.29 per option. The total expense recognised in the period in respect of share options is $197,000 (2014: $160,000). The number and weighted average exercise prices of share options are as follows: Weighted average exercise price 2015 Number of options 2015 Weighted average exercise price 2014 Number of options 2014 Outstanding at the beginning of the year Granted during the year Lapsed during the year £0.49 £1.40 £0.99 1,710,200 261,400 (76,230) £0.49 - £0.49 1,895,200 - (185,000) Outstanding at the end of the year £0.59 1,895,370 £0.49 1,710,200 I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 53 Qplc NOTES 22 Provisions Group Balance at 1 January 2014 and 1 January 2015 Provisions made during the year Balance at 31 December 2015 Non-current Current Total $000 - 750 750 750 - 750 The provision is in respect of contingent consideration payable on the acquisition of Alpha Display Europe GmbH. The Company has no provisions. 54 Qplc 23 Capital and reserves Share capital On issue at 1 January and 31 December 2015 64,634,782 64,634,782 2015 Shares 2014 Shares Allotted, called up and fully paid ordinary shares of 0.1p Shares classified in shareholders’ funds 2015 $000 2014 $000 104 104 104 104 104 104 104 104 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. Dividends The following dividends were recognised during the period: 1.2p (2014: 1.0p) per qualifying ordinary share 2015 $000 1,182 1,182 2014 $000 1,090 1,090 After the Balance Sheet date dividends of 1.5p per qualifying ordinary share (2014: 1.2p) were proposed by the Directors. This dividend has not been provided for. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 55 Qplc NOTES 24 Financial instruments – Group and Company This note presents information about the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Financial risks The Group’s activities expose it to a number of financial risks including credit risk, cash flow risk and exchange rate risk: Credit risk The Group’s principal financial assets are bank balances and cash, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables, which were concentrated in a small number of high value customer accounts, but following the acquisition of the Densitron Group of companies this risk has been reduced. In addition, operations in emerging or new markets may have a higher than average risk of political or economic instability and may carry increased credit risk. In each case the risk to the Group is the recoverability of the cash flows. Credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The credit risk on trade and other receivables is managed by agreeing appropriate payment terms with customers, obtaining credit agency ratings of all potential customers, by requiring wherever possible payment for goods in advance or upon delivery, and by closely monitoring customers’ balances due, to ensure they do not become overdue. In addition careful consideration is given to operations in emerging or new markets before the Group enters that market. The aging of trade receivables at the Balance Sheet date is set out in Note 17. Cash flow risk Group cash balances and expected cash flow are monitored on a daily basis to ensure the Group has sufficient available funds to meet its needs. Exchange rate risk Group exposure to exchange rate risk includes the measurement of overseas operations at the relevant exchange rate and changes in trade payables and receivables as a result of exchange rate movements. Daily exchange rate movements are monitored and any losses or gains incurred are taken to the profit and loss account and reported in the Group’s internal management information. Before agreeing any overseas transactions consideration is given to utilising financial instruments such as hedging and forward purchase contracts. Liquidity risk Group policy is to maintain a strong capital base so as to enhance investor, creditor and market confidence. Surplus funds are placed on deposits with cash balances available for immediate withdrawal if required. Capital management Group and Company The capital management policy is to maintain a strong capital base so as to enhance investor, creditor and market confidence. The Board’s objective is to safeguard the Group’s ability to continue as a going concern, to sustain the future development of the business and to provide returns for shareholders, whilst controlling the cost of capital. The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the Balance Sheet. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets. 56 Qplc There were no changes in the Group’s approach to capital management during the period. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Total equity Cash and cash equivalents Capital Total equity Other financial liabilities Total financing Group 2015 $000 2014 $000 Company 2015 $000 2014 $000 25,651 (3,861) 20,479 (4,722) 15,048 (1,401) 13,852 (1,070) 21,790 15,757 13,647 12,782 Group 2015 $000 2014 $000 Company 2015 $000 2014 $000 25,651 11,738 20,479 1,300 15,048 9,053 13,852 1,300 37,389 21,779 24,101 15,152 Financial assets and liabilities The Group’s activities are financed by cash at bank and bank borrowings. Credit risk Exposure to credit The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Cash and cash equivalents Trade and other receivables excluding prepayments Group Company 2015 $000 3,861 16,754 2014 $000 4,722 9,171 2015 $000 1,401 9,408 2014 $000 1,070 8,114 20,615 13,893 10,809 9,184 The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: Australia USA Europe Asia Rest of world Group 2015 $000 3,464 7,432 4,789 1,068 1 2014 $000 3,820 4,566 482 299 4 16,754 9,171 Company 2015 $000 2014 $000 - - - - - - - - - - - - I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 57 Qplc NOTES Liquidity risk The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements. Trade and other payables $000 Other financial liabilities $000 Total $000 Group 31 December 2015 Carrying amount Contractual cash flows 6 months or less 6 to 12 months More than 12 months Group 31 December 2014 Carrying amount Contractual cash flows 6 months or less 6 to 12 months More than 12 months Company 31 December 2015 Carrying amount Contractual cash flows 6 months or less 6 to 12 months More than 12 months Company 31 December 2014 Carrying amount Contractual cash flows 6 months or less 6 to 12 months More than 12 months 58 Qplc 15,274 11,738 27,012 15,274 - - 15,274 2,577 453 9,646 17,851 453 9,646 12,676 27,950 $000 $000 $000 5,410 5,328 82 - 5,410 $000 1,300 6,710 61 61 1,321 5,389 143 1,321 1,443 6,853 $000 $000 10,881 9,053 19,934 10,881 - - 10,881 553 47 9,343 11,434 47 9,343 9,943 20,824 $000 $000 $000 4,614 4,614 - - 4,614 1,300 5,914 61 61 1,321 4,675 61 1,321 1,443 6,057 The carrying amounts of the Group’s financial assets and liabilities may also be categorised as follows: Current assets Cash and cash equivalents Trade and other receivables excluding prepayments Group Company 2015 $000 3,861 16,754 2014 $000 4,722 9,171 2015 $000 1,401 9,408 2014 $000 1,070 8,114 20,615 13,893 10,809 9,184 All of the above relate to the IAS 39 category ‘loans and receivables’ and are measured at amortised cost. Current liabilities Trade and other payables Other financial liabilities Non-current liabilities Other financial liabilities (15,274) (2,994) (5,410) (100) (10,881) (605) (4,614) (100) (18,268) (5,510) (11,486) (4,714) (8,744) (1,200) (8,448) (1,200) (27,012) (6,710) (19,934) (5,914) All of the above relate to the IAS 39 category ‘other financial liabilities’ and are measured at amortised cost. Liquidity needs are managed by regular review of the timing of expected receivables and the maintenance of cash on deposit. Currency risk Whilst the Group experiences some revenue, cost of sales and overheads in other currencies, the majority of revenue and cost of sales is denominated in US Dollars which is the Group’s reporting currency and therefore foreign currency risk is considered to be limited. Interest rate and currency profile The Group’s financial assets comprise cash at bank. At 31 December 2015 the average interest rate earned on the temporary closing balances was 0.05% (2014: 0.05%). Sensitivity analysis For the above reasons, the Group’s sensitivity to interest rates and currency exchange rates are considered immaterial. Fair values versus carrying amounts The Directors consider that there is no material difference between fair values and carrying amounts of financial assets and liabilities. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 59 Qplc NOTES 25 Operating leases Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and five years Group Group 2015 $000 2014 $000 291 426 717 - 80 80 Company 2015 $000 2014 $000 154 - 154 - 80 80 During the year $180,000 was recognised as an expense in the profit and loss account in respect of operating leases (2014: $126,000). Company During the year $126,000 was recognised as an expense in the profit and loss account in respect of operating leases (2014: $94,000). 26 Commitments Neither the Group nor Company had any capital commitments entered into at 31 December 2015 (2014: none). 27 Contingencies Neither the Group nor Company had any contingencies existing at 31 December 2015 (2014: none). 28 Related parties Group There were no related party transactions other than transactions with key management personnel, who are the Directors disclosed in Note 7 above. Transactions with key management personnel Directors of the Company and their immediate relatives control 39.58% of the voting shares of the Company. Other related party transactions There are no other transactions and balances with key management not included within the Directors’ remuneration. 29 Subsequent events There have been no significant events affecting the Company or Group since the end of the year. 60 Qplc 30 Explanation of transition to Adopted IFRSs – Company As stated in Note 1, these are the Company’s first financial statements prepared in accordance with Adopted IFRSs. The accounting policies set out in Note 1 have been applied in preparing the financial statements for the year ended 31 December 2015, the comparative information presented in these financial statements for the year ended 31 December 2014 and in the preparation of an opening IFRS Balance Sheet at 1 January 2014 (the Company’s date of transition). In preparing its opening IFRS Balance Sheet, the Group has adjusted amounts reported previously in financial statements prepared in accordance with its old basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to Adopted IFRSs has affected the Group’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables. Reconciliation of equity UK GAAP $000 - 3,704 - 109 3,813 12,333 16,146 Non-current assets Intangible assets Property, plant and equipment Deferred tax assets Other Current assets Total assets 1 January 2014 Effect of transition to Adopted IFRSs $000 Adopted IFRSs UK GAAP $000 $000 1,375 (122) - - 1,253 1,375 3,582 - 109 5,066 - 4,007 20 196 4,223 31 December 2014 Effect of Adopted IFRSs transition to Adopted IFRSs $000 $000 2,231 3,684 47 196 2,231 (323) 27 - 1,935 6,158 - 12,333 13,996 - 13,996 1,253 17,399 18,219 1,935 20,154 Current liabilities (2,350) - (2,350) (4,714) - (4,714) Non-current liabilities Deferred tax liabilities Other (30) (1,986) (2,016) (251) - (251) (281) (1,986) (2,267) - (1,200) (1,200) (388) - (388) (388) (1,200) (1,588) Total liabilities (4,366) (251) (4,617) (5,914) (388) (6,302) Net assets 11,780 1,002 12,782 12,305 1,547 13,852 Equity attributable to equity holders of the parent Retained earnings Other Total equity 6,337 5,443 11,780 Notes to the reconciliation of equity 1,002 - 7,339 5,443 6,884 5,421 1,547 - 8,431 5,421 1,002 12,782 12,305 1,547 13,852 The above adjustments relate to the capitalisation of qualifying expenditure on research and development and the reclassification of computer software. The research and development expenditure has now been recognised as an intangible asset in the accounts of the Company; under UK GAAP all research and development costs were written off to profit and loss account. I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 61 Qplc NOTES Intangible assets Capitalisation of research and development Reclassification of computer software Property, plant and equipment Reclassification of computer software Non-current assets Deferred tax Non-current liabilities Deferred tax liability on capitalisation of R&D Total 1 January 2014 $000 31 December 2014 $000 1,253 122 1,375 (122) - (251) 1,002 1,908 323 2,231 (323) 27 (388) 1,547 There are no significant differences between the cash flow statement presented under Adopted IFRSs and the cash flow statement presented under UK GAAP. 62 Qplc COMPANY INFORMATION Directors N C L Jarmany G P Mullins C-T Lin Miss A C Preddy FCA M J Peagram G van Zwanenberg FCA Company secretary A R Milne FCIS Registered office Auditor Aisle Barn 100 High Street Balsham Cambridge CB21 4EP KPMG LLP Botanic House 100 Hills Road Cambridge CB2 1AR Nominated advisor and Broker finnCap 60 New Broad Street London EC2M 1JJ Financial PR Alma PR We Work 1 Fore Street London EC2Y 5EJ Principal Bankers Barclays Bank PLC Legal advisors Freeths LLP Jones Day Registered number 04316977 Website www.quixant.com Ticker London: QXT I T N A X U Q 5 1 0 2 S T N U O C C A D N A T R O P E R L A U N N A 63 Qplc CORPORATE HEADQUARTERS Quixant plc Aisle Barn 100 High Street Balsham Cambridge CB21 4EP UK T +44 (0)1223 892696 F +44 (0)1223 892401 www.quixant.com
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