ANNUAL REPORT & ACCOUNTS
For The Year Ended 31 December 2017
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Welcome to the Quixant
Annual Report 2017
Quixant plc is a public company listed on the Alternative
Investment Market (AIM) in London. Established in 2005
and headquartered in Cambridgeshire the core business
is the design, development and manufacture of gaming
platforms and display solutions for the gaming and slot
machine industry.
Through it’s Densitron Division, Quixant also supplies electronic display solutions
to a wide range of global industrial markets.
Table of Contents
Highlights
Chairman’s Statement
Chief Executive’s Report
Financial Review
Financial Statements
Company Information
1
2
3
7
8
Visit us online: www.quixant.com
www.quixant.com
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25978 26 March 2018 5:04 PM Proof 6Financial HighlightsOperational HighlightsAdjusted PBT ($m)1$9.20m2015$7.20m2014$6.00m20132017$17.70m2016$13.81mPBT ($m)$7.79m$7.06m$5.97m$11.66m20152014201320172016$15.000mAdjusted fully diluted EPS ($)2$0.113$0.094$0.076$0.16620152014201320172016$0.229Fully diluted EPS ($)$0.097$0.092$0.076$0.14020152014201320172016$0.2001. Adjusted by adding back items included in the adjusted PBT reconciliation in Note 1 to the financial statements totalling $2.7m (2016: $2.2m)2. Adjusted by adding back the items included in note 1 above and subtracting the associated tax effect as set out in note 10 to the financial statements. In 2017 these amounted to $2.1m (2016: $1.7m)Three patents applied for during the year and four granted52,000 gaming platforms shipped during the year, up from 41,000 in 2016Strong performance from Quixant’s established customer base, contribution to revenue from new customers and cultivation of long term opportunities Quixant Gaming Ecosystem® recognised by customers as a key differentiator and a key marketing messageShipments to new major Japanese customer commenced in early 2018Densitron division performed in line with management expectationsIn March 2018, announced a strengthened Board with Executive promotions and a new CFO joining in October 2018First volume shipments commenced to Novomatic for a new projectStock Code: QXT1Quixant AR2017-proof6.indd 126/03/2018 17:04:23 25978 26 March 2018 5:04 PM Proof 6CHAIRMAN’S STATEMENTI am delighted to report another very successful year for the Group with excellent growth in both revenue and profits, whilst continuing to strengthen our organisation to support continued progress.The organisation has evolved smoothly through several phases in the last five years. We have moved from a small, entrepreneurial, private company, to now being listed on the AIM public market. We continue to branch out into new product areas in gaming and, through the acquisition of Densitron, added a portfolio of products targeted at non-gaming markets. Throughout these phases, the Group has remained flexible and focused enabling it to thrive with the new challenges each has presented to us. We are justifiably proud of our outstanding record over these five years. We continue our planning to meet the future demands of the Group and execution of our corporate strategy. It is therefore right that we continue to evolve the management in the organisation. On 1 March 2018, we announced some major changes to our Board. Our current Chief Executive and founder Nick Jarmany was appointed Executive Vice-Chairman while retaining executive responsibilities for technology leadership and product innovation. This has always been a particular strength and passion for Nick and his new position enables him to focus on it.I would personally like to both thank and congratulate Nick for his vision and ambition in developing the Group since he co-founded it in 2005 and building it up to the first-rate business it is today. It is a huge asset for us to be able to be able to continue to utilise his experience and skill set as he concentrates his efforts on technology leadership and product innovation.Nick had delegated many of his responsibilities to Jon Jayal, Chief Operating Officer, in March 2017 while he undertook medical treatment. It was therefore with confidence that Jon was promoted to take over as Chief Executive Officer from 1 March 2018. Jon has a long background with Quixant, commencing at inception of the Group when, as an electronic engineer, he was a key member of the design team for the first product. This grass roots appreciation for Quixant’s culture, combined with expertise working in the City for several large blue chip financial institutions and a detailed understanding of the technology underpinning our products makes him ideally qualified to lead the Group and continue our outstanding track record of growth.In addition, current CFO Cresten Preddy informed the Board last year of her desire to step back from full time employment. After an exhaustive process we are delighted that Guy Millward has agreed to join us as CFO with effect from 1 October 2018. Guy has vast experience working in senior management positions of public technology companies. Cresten will continue working for the Group, both to ensure a smooth handover but also to operate certain specific initiatives which are currently underway, including the Global SAP system implementation project.Gaye Hudson also joined the Board as a Non-Executive Director in March 2017. Gaye’s 19 years at Oracle Corporation introduced a strong skillset in HR and Communications to the Board.The changes that have been made to the Board and a number of other senior appointments positions us well to retain the entrepreneurial style and company culture which has made the Group so successful, while introducing new management skills and resources to take the Group forward. I firmly believe that we have the quality of people and systems to continue to thrive.A dividend of 2.0p per share was paid in May 2017 representing a growth of 33% on the prior period. The Board is pleased to propose a 2018 full year dividend of 2.6p per share, representing an increase of 30% over the previous year. This remains consistent with our progressive dividend policy and demonstrates the continued strength of the Company’s balance sheet and financial performance.Michael Peagram, CHAIRMANMichael Peagram,CHAIRMAN1201008060402002015105020152014201320172016Revenue Adjusted PBT ($m)PBT ($m)Revenue, PBT and adjusted PBT ($m)Quixant Annual Report and Accounts 2017www.quixant.com2Quixant AR2017-proof6.indd 226/03/2018 17:04:23 CHIEF EXECUTIVE’S REPORT
Jon Jayal,
CHIEF EXECUTIVE OFFICER
Sales by product group
80
70
60
50
m
$
40
30
20
10
0
16.3
54.8
9.3
43.7
2016
2017
Gaming Pla�orms Gaming Monitors
It is my privilege to be writing my first report to
you as Chief Executive Officer of Quixant. I am
very pleased that the Group has continued to
deliver outstanding financial and operational
performance during the year. Group revenue
increased 21% to a record $109.2m and adjusted
profit before tax increased 28% to $17.7m
(statutory profit before tax increased by 29% to
$15.0m).
Gaming Division
Our core business continues to be focused
around the global gaming industry. When we
launched Quixant in 2005, we focussed on the
design and manufacture of highly optimised
computing solutions for gaming which
incorporate purpose-built computer hardware
and a rich software infrastructure. Our unique
value-added proposition rapidly gained traction
and we earned a position as a key supplier
to many major electronic gaming machine
manufacturers.
In 2015 we began developing gaming monitors
which, whilst operating on a structurally lower
margin, present an excellent opportunity to
expand our revenue share in each machine.
We have also continued to evolve our monitor
product portfolio to embed Quixant’s ethos
of innovation.The chart shows the sales of our
gaming product lines for the last two years
during which margins have been maintained.
In the last two years, the Gaming Division has
grown 94%.
Since it was launched in 2015 our gaming
monitor business has grown rapidly and is now
an integral part of the Group. While we expect
to see the rate of growth normalise in 2018, we
continue to see considerable opportunities for
growth in this part of the business.
Gaming Ecosystem®
The foundation of Quixant’s value proposition
in gaming is our Gaming Ecosystem®, which has
been developed over the last 12 years. There
are multiple facets to the Gaming Ecosystem®
which extend far beyond the physical computer
hardware, including:
• a comprehensive layer of software which
sits alongside and underpins our customers’
games enabling connectivity with third party
peripheral devices and casino systems outside
the machine;
• gaming features which meet strict global
gaming regulatory requirements;
• support tools which enable customers to
improve their game efficiency and debug
issues during development;
• a technical support model which provides
customers direct access to our engineers;
• cross-Quixant platform compatibility to
enable easy game migration across different
geographic markets and different product
price points.
Once a customer selects Quixant and integrates
their game around our Gaming Ecosystem®, they
unlock all these benefits for developing their
games and machines. Previously, many of the
requirements which the Gaming Ecosystem®
meets had to be catered for by customers’
in-house R&D teams and often solutions were
developed for specific markets or product
categories which both increased development
cost and time-to-market and also reduced
flexibility to enter new markets.
Increasingly, even the largest customers in the
gaming industry recognise and embrace the
value of Quixant’s Gaming Ecosystem® and as the
gaming market becomes ever more competitive
and fast moving they are adapting their games
to be compatible with our products. Those
that have adopted it have a more streamlined
development process and are able to respond
more quickly to new market openings and
opportunities for growth in markets they had
previously never serviced.
Whilst the core of our Gaming Ecosystem® is
well-established, we have developed several
exciting tools and features to add to it over the
last two years which we believe significantly
strengthen the value proposition.
QxVDR is a video decoding and rendering
software infrastructure which enables customers
to playback videos on Quixant gaming platforms
which combine transparent text and graphic
overlays whilst making highly efficient use
of the hardware. Pre-rendered videos are
commonplace in most electronic games and
there are often multiple videos playing at once,
so reducing the performance impact on the
system during playback is critical.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
CHIEF EXECUTIVE’S REPORT CONTINUED
Market share
e
l
c
y
c
t
n
e
m
e
c
a
p
e
r
/
w
e
n
l
l
a
u
n
n
a
f
o
%
12%
10%
8%
6%
4%
2%
0
2013
2014
2015
2016
2017
Sales by customer unit
purchase quantity
60,000
50,000
40,000
s
t
i
n
U
30,000
20,000
10,000
0
2016
2017
<1k pcs 1k - 5k pcs >5k pcs
Sales by product family
60,000
50,000
40,000
s
t
i
n
U
30,000
20,000
10,000
0
2016
2017
Cost effec�ve Mid-range High-end Ul�mate
We have also created a tool, QxATS, which
provides real-time debugging information to
aid game authors during the development
process. They can “see” the flow of data into
and out of the Quixant platform and also
within it and isolate issues which arise during
creation of their software which cause it to
behave unexpectedly. QxATS also provides
real time monitoring information with near
zero performance impact on the Quixant
gaming platform. QxATS combines software
and hardware elements.
Gaming Platforms
We shipped over 52,000 gaming platforms
in 2017, up from 41,000 shipped in 2016,
making Quixant, we believe, to be the
highest volume manufacturer of computer
platforms for gaming. We estimate our
market share is a little over 10% of the
estimated 475,000 unit annual new/
replacement machines deployed globally
(source: G3 Magazine). Our growth
has been driven by continued gains in
market share as manufacturers continue
to outsource development of their
computer platforms and focus on their core
competencies. We are confident that this
trend remains buoyant and that we have the
ability to further increase our market share.
Our growth in the gaming platforms business
has been seen across all sizes of customer,
but with particularly strong performance
from our mid-size (1,000 – 5,000 pcs per
year volume) accounts, which represented
22% of unit sales in 2017 compared to 10%
in 2016.
Alongside strong performance from well-
established customers, it was pleasing to
see commencement of volume shipments to
Novomatic.
We have continued to see our high-end
products dominating our sales both in
revenue and quantity terms. These products
tend to be more aligned with casino
market applications and many of our major
customers have adopted products from
the High-End family, including the QX-40,
QX-50 and recently launched QX-60. In
2015 we launched a new “Ultimate” family
of products, the first generation of which
was called QMax-1. The Ultimate family of
products represent the highest performance
variants in Quixant’s portfolio and promise
graphics performance similar to consumer
video games consoles. This opens a new
segment of the machines for Quixant to
drive.
We have also continued to be successful
in winning business in casino “systems-
type” product. These products sit alongside
the machines which the players enjoy in
the venues and provide infrastructure to
facilitate things such as progressive jackpots.
The computer platform requirements are
very similar in nature to those for installation
in the electronic gaming machines, but there
are subtle differences which Quixant has
experience of catering for. Whilst a lower
volume market, we remain successful in
growing our sales volume in this area. We
won a new customer in 2017 for a jackpot
controller which falls into this category.
During 2017 Quixant experienced an issue
related to an externally sourced component
which was integrated into many of our
products. This component, a DRAM module,
had been used for several years, but due
to a change made by the manufacturer, we
were forced to change to a replacement
version which subsequently demonstrated
incompatibilities with the rest of Quixant’s
computer platform once installed in gaming
machines. We therefore took an immediate,
proactive response to swap the incompatible
DRAM modules for an alternative. Whilst
our prompt response mitigated damage to
our brand and reputation, we spent around
$1.6m to rectify the problem.
We have since undertaken an extensive
review of our validation procedures and,
along with conducting more extensive
testing over a longer period, we have also
started developing a more relevant real-
world test suite which more accurately
replicates the behaviour of a real game. We
believe this serves to mitigate the potential
of such unidentified component issues
affecting future sales. Product quality and
reliability has been and will continue to be a
major focus for management.
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There continue to be potential new markets
for our customers. However, there are
always considerable uncertainties as to
when these new markets may open most
recently evidenced by the Brazilian senate
rejecting one of the gaming bills in motion.
Whilst we adopt a cautious stance to the
timing and potential value of such market
openings, we believe there continue to be
significant opportunities. Japan is the most
recent new market opportunities. Through
Densitron’s office in Tokyo, Quixant has
been able to leverage the knowledge and
experience of its personnel and cultivate
exciting new opportunities with major
manufacturers headquartered in Japan. We
have won business with a major Japanese
manufacturer, to which we have commenced
shipments in early 2018.
Gaming Monitors
The growth of our Gaming Monitors
business continues to be exceptional.
We shipped over 31,000 gaming monitor
products during the year, up from around
25,000 shipped during 2016. We have
brought on both new customers as well
as converted existing gaming platform
customers with monitor products during the
year. It is pleasing to see that customers view
our product offering in monitors is attractive
on a standalone basis.
Whilst much of our business in gaming
monitors to date has been supplying a
product which is very similar to others in
the industry we have generated several
ideas during the year for higher value
products which offer tangible benefits to
customers and differentiate them from
the competition. We are working hard on
developing these ideas in 2018 and bringing
new monitor innovations to the market
during the year.
We have enjoyed phenomenal growth
in the Gaming Monitors business and as
the business matures we expect the rate
of growth will normalise. There remain
considerable opportunities and while
margins are lower than platforms the design-
in period and research and development
spend is lower.
Densitron Division
During 2017 we progressed our business
strategy to target specific vertical markets.
The broadcast industry has been identified
as the first of these markets and during the
year we exhibited at two major Broadcast
trade shows: BVE in February at the ExCel
exhibition centre in London and IBC at RAI
conference centre in Amsterdam. These
shows not only enabled us to meet and
explore our product ideas with several
new and existing customers, but crucially
they also provided a clear insight into the
broadcast industry trends and where the
Densitron Division can support them.
Our initiatives in the Broadcast sector have
been well received and we remain confident
in the opportunities in this sector. The
success of this realignment of the business
to a specific vertical has encouraged us
to seek to develop dedicated product
groupings for other markets which will begin
to be rolled out during 2018.
Densitron performed in line with
management expectations during the
year. We have invested significantly in the
development of the Densitron Division
principally to enable the business to be more
market focussed and to differentiate it from
its competitors.
Our dedicated embedded board design and
development facility located in Slovenia is
critical to the creation of more value rich
embedded solutions. In concert with our
operations in Taiwan they are launching
a single board computer and a range of
adaptor boards in the first quarter of 2018
that, when bundled with our range of
displays enables Densitron to offer higher
added value products to the market. This
is being reinforced by a strengthened
approach to marketing. Further hardware
and software solutions are in development.
We see a continued need to invest in the
Densitron division in 2018 to realign the
business to deliver long term revenue
growth and enhance profitability over the
longer term.
Product Innovation and
development
Innovation is key to the success of Quixant
and our library of intellectual property is,
I believe, second to none in our market.
An indication of our continuing innovation
is the number of patents we apply for
and the number granted each year. At the
end of 2016, we had seven patents under
application and had been granted a further
three. At the end of 2017, we had seven
patents under application and had been
granted a total of seven patents. During the
year three new filings were made.
Quixant has been working on QMax-2, an
exciting new product which builds on the
design of QMax-1 in the Ultimate range
of gaming platforms. With a considerably
enhanced cooling solution, QMax-2 is
designed to cater for the next generation
of microprocessors and GPUs to power the
highest performance gaming machines in
the market. One of the patents granted
during 2017 related to the thermal solution
designed for QMax-2.
During the year, Quixant had been
evaluating AMD’s new RyzenTM Embedded
processors which were launched in February
2018 publicly at a press event in which we
participated as a launch partner. On the day
of AMD’s launch, Quixant had three new
products based on the RyzenTM Embedded
V1000 processor: Quixant X, QMax-2 and
the QXi-7000. The products leverage all the
benefits of the Quixant Gaming Ecosystem®
and give gaming customers the quickest
route to embrace AMD’s highly anticipated,
cutting-edge new processor technology. This
is a key launch for Quixant and demonstrates
not only our innovation skills but also our
strong partnership with AMD.
Personnel and infrastructure
Alongside the changes to the Board, our
programme of continuous enhancement
and investment in the organisation has been
evident during the year.
We continued to attract high-quality talent
to Quixant which we believe will bolster
our expertise and enhance our sales and
product development efforts going forward.
In November 2017, we recruited Eric Walla
to our Las Vegas office as Vice President of
Business Development. Eric has a respected
career in the gaming industry spanning over
17 years and has worked with several key
technology suppliers. We also recruited
Martin Salter in early 2018 as Business
Development Manager located in the UK.
Martin has extensive experience in the
monitors business most recently in his role
in Zytronic Displays.
On the product side we have been fortunate
to recruit Chris Caress as a leader in our
gaming monitor development team in
Taiwan. Chris’ previous role was in Scientific
Games where he was heavily involved
in their technology development, most
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
CHIEF EXECUTIVE’S REPORT CONTINUED
recently in monitor products. Chris brings to
Quixant a wealth of real customer technical
expertise and we are excited at leveraging
his knowledge to enhance our product
offerings.
During 2018 we will continue to invest in
the business to ensure that it is positioned
to enable future growth. We shall be
introducing a common enterprise resource
planning system, which has been developed
during 2017, enabling the Group to have
a harmonised accounting, reporting and
procurement platform that may be scaled as
the business continues to grow in the future.
Outlook
2017 was another very successful year
for the Group, with record profits being
delivered alongside structural investment
in the business. Whilst Densitron remains
a business in a state of change, with
short term investment we continue to be
optimistic that long term revenue growth
and margin expansion is achievable. In the
gaming business, the outsourcing trend for
manufacturers remains buoyant and we
have several exciting opportunities which
position us well for continued excellent
growth.
The 2018 financial year has started well,
giving us confidence that the year will
continue to be one of strong growth and
now we anticipate delivering growth ahead
of our previous expectations.
Jon Jayal
CHIEF EXECUTIVE OFFICER
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FINANCIAL REVIEW
Revenue
The Quixant Group achieved revenues
of $109.2 million in the year, an increase
of 21% on 2016 ($90.4 million). Gaming
division revenues were $71.1 million, an
increase of 34% on 2016 ($53.0 million). This
was split between Gaming platform revenue
of $54.8 million a 28% increase on 2016
(2016: $42.8 million) and Gaming monitor
revenue of $16.3 million a 75% increase on
2016 (2016: $9.3 million). Densitron division
revenues were $38.1 million, an increase of
2% on 2016 ($37.4 million).
The growth in the Gaming division has largely
been driven by the continuing development
of existing customer relationships and the
broadening of the customer base. In 2017
the Gaming division increased its number of
customers to 218 compared with 180 in 2016.
Gross profit and gross profit
margin
Our gross profit for the year was $37.0
million representing a gross margin of 34%.
This compares with a gross profit achieved in
2016 of $32.1 million and a gross margin of
36%. The underlying gross margin for each
part of the business has been maintained in
the year with the reduction being caused by
the cost incurred resolving the DRAM issue
and the lower functional margin achieved on
the growth in Gaming monitors.
Earnings, before interest tax,
depreciation and amortisation
(EBITDA) and profit before tax
(PBT)
Adjusted EBITDA increased 26% to $19.6
million (2016: $15.6 million) and adjusted
PBT increased 28% to $17.7 million (2016:
$13.8 million). EBITDA increased 21% to
$17.8 million (2016: $14.7 million) and PBT
increased by 29% to $15.0 million (2016:
$11.7 million). Adjustments to EBITDA are
to add back the items set out in note 1 to
the financial statements. In 2017 these
totalled $1.8 million (2016: $0.9 million).
Adjustments to profit before tax amounted
to $2.7 million in 2017 (2016: $2.1 million).
As outlined in the Chief Executive’s Report
the Group experienced a significant issue
relating to a DRAM module. The resulting
cost to the Group in the year has been $1.6
million. The situation has been carefully
managed in the year ensuring that there will
be no additional future costs.
The share based payment charge has
been added back since it is not a cash
expense to the Company. It is a benefit to
our employees which we are required to
expense through the income statement in
accordance with IFRS2.
Stock Code: QXT
Expenses
In order to maintain our market leading
position, it is imperative that the business
continues to invest in developing new
products. During the year the Group
expenditure on research and development
increased by 51% to $5.3 million (2016:
$3.5 million) representing 14% of gross
profit (2016: 11%). These costs relate to
investment activities principally undertaken
in Taiwan, Italy and Slovenia. $1.6 million
of these costs were capitalised (2016: $0.7
million) with amortisation for the year on
total capitalised development costs of $1.0
million (2016: $0.9 million).
The management of overheads while
ensuring that sufficient investment continues
to be made to support the business is
key. We have continued to strengthen
the business across all areas in the year,
including increasing our headcount to 176
people (2016: 160 people). Staff costs,
being the largest contributor to overheads,
increased by 13% in the year to $12.8 million
(2016: $11.3 million).
Taxation
The tax charge for the year decreased to
$1.9 million (2016: $2.4 million) representing
a corporation tax charge of 12.6% on pre-tax
profits (2016: 20.3%). The Group continues
to benefit from enhanced tax reliefs
available in respect of qualifying research
and development expenditure and has also
benefited from patent box relief and tax
relief on the exercise of employee share
options.
Earnings per share
Basic earnings per share increased by 40% to
$0.200 per share (2016: $0.143 per share).
Fully diluted earnings per share increased
41% to $0.197 per share (2016: $0.140 per
share). Adjusted fully diluted earnings per
share as set out in note 10 to the financial
statements increased by 38% to $0.229 per
share (2016: $0.166 per share).
Balance Sheet
The Group continues to maintain a strong
Balance Sheet with net assets totalling $47.3
million (2016: $34.3 million).
Non-current assets have increased in the
year to $21.3 million (2016: $20.9 million).
The overall increase in the year is not
significant but included within the total
non-current asset balance is an additional
investment in intangibles of $1.9 million
and an amortisation of existing intangibles
of $1.9 million (including amortisation
of intangible assets relating to customer
relationships and order backlog following the
acquisition of Densitron of $0.8 million).
Current assets principally comprise
inventory, trade receivables and cash.
Inventory has increased to $21.2 million
(2016: $12.9 million). While the level of
inventory includes significant levels of last
time buy items and items on long lead
times, a buffer stock of key product lines and
sufficient levels to ensure that near term
production is met we still consider that it
is too high. Consequently, tighter policies
surrounding inventory purchasing have been
introduced. Trade and other receivables
have reduced in the year reflecting the
reduction in the time taken to collect cash
from customers.
Current liabilities are principally made up of
trade and other payables. In the year trade
payables reduced to $12.3 million (2016:
$13.0 million). During the year the Group
has taken advantage of the opportunity to
secure better pricing from certain suppliers
by settling invoices earlier. This has resulted
in a reduction in the level of trade creditors
despite the increase in the level of business
in the year.
Cash Flow
The cash generated from operating activities
in the year amounted to $8.1 million
(2016: $10.1 million). The reduction in cash
generated is largely due to the movements
in working capital in the year which have
been explained above.
The Group has continued to invest in the
business, spending $2.3 million (2016: $1.4
million) on investing activities including $1.6
million (2016: $0.7 million) on capitalised
product development.
In the year $2.2 million has been used to
repay borrowings (2016: $2.8 million). We
continue to review banking arrangement and
treasury arrangements around the Group to
ensure that the level and cost of financing
arrangements are appropriate to the Group.
Dividend
The Board intends to maintain its progressive
dividend policy while continuing to invest in
the business. As such, the Board proposes a
dividend in respect of the year of 2.60p per
share, an increase of 30% on the previous
year (2016: 2.00p per share) payable on 18
May 2018 to all shareholders on the register
on 11 May 2018. The corresponding ex-
dividend date is 10 May 2018.
Cresten Preddy
CHIEF FINANCIAL OFFICER
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Quixant Annual Report and Accounts 2017
Financial
Statements
Quixant plc Annual Report & Accounts
for the year ended December 2017
Table of Contents
Corporate Governance
Strategic Report
Directors’ Report
Statement Of Directors’ Responsibilities
Auditor’s Report
Consolidated Statement of Profit And Loss
And Other Comprehensive Income
Balance Sheets
Statement Of Changes In Equity
Cash Flow Statements
Notes
10
11
15
17
18
22
23
24
26
27
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25978 26 March 2018 5:04 PM Proof 6Quixant Gaming PlatformsQMax-2QXi-7000Quixant Gaming MonitorUltra High Definition MonitorCurved MonitorButton Deck Monitor Standard Gaming Monitor25430.02 26 March 2018 5:04 PM Proof 4Densitron products3.5 inch TFT5.5 inch OLEDTFT 10.1 inchAuroraQXi-6000QXi-300QX-40QXi-307QXi-4000QXi-3069Stock Code: QXTQuixant AR2017-proof6.indd 926/03/2018 17:04:47 Quixant Annual Report and Accounts 2017
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. 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’ service contracts incorporate notice periods of not less than six months’
notice from the executive to the company and not less than 12 months’ notice from the company to the executive.
The Audit Committee is comprised of Guy van Zwanenberg (Chairman) and 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. 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.
The Remuneration Committee is comprised of Michael Peagram (Chairman) and 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 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.
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STRATEGIC REPORT
The Directors present their Annual Report and accounts for the year
ended 31 December 2017.
Principal activities and results
The principal activities of the Group are:
• the design, development and manufacture of gaming platforms
and display solutions for the gaming and slot machine industry;
and
• the design, development and delivery of electronic displays into
the industrial marketplace.
The profits for the year after taxation amounted to $13.1 million
(2016: $9.3 million) 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 2-7.
Key Performance Indicators
The Group sets an annual budget detailing the revenues and
expenses, balance sheet and cash flows that it expects to achieve
each month during the ensuing year. This budget is approved by the
Board and reviewed against the actual results achieved each month
with explanations of significant variances provided. A forecast of
expected results for the remainder of the year is also provided as
part of the management accounts pack to demonstrate that the
Group remains on track to meet market expectations.
The Directors also review the ongoing trend of several indicators that
they consider are key to the performance of the Group and to assist
them in their strategic decision making.
Operational
KPI
Sales revenues
Procedure
Comment
Sales revenues are reviewed to ensure that
the Group’s business continues to grow in
line with expectations
The Board reviews sales revenues against
budget as part of its management reporting
review each month.
The Board is satisfied that revenues have
continued to grow ahead of budget and
market expectations.
Gross profit margin
To ensure that the Group maintains
appropriate returns for the products that it
is selling.
Inventory levels and inventory days
The objective in monitoring inventory is:
• to ensure that working capital is not
unduly tied up;
• to guard against inventory obsolescence
leading to potential write offs; and
• to ensure sufficient inventory levels are
maintained to meet near term demand
A report of the margin achieved in each
part of the business is included as part
of the management accounts pack and
reviewed by the Board.
With the exception of the issue with the
DRAM which is discussed in the CEO report
on page 4 the Board is happy that the
margins are being maintained in all areas of
the Group.
The Board monitors the number of days
held in stock at the end of each month
and is provided with a trend graph plotted
against budget during the year.
Additionally, it is provided with a monthly
manufacturing report detailing the current
inventory levels and the future product
requirement.
For the year ended 31 December 2017 the
Board is satisfied that the level of inventory
obsolescence is being controlled but
considers that the levels of inventory that
were maintained were conservative and
have tightened up the controls surrounding
inventory purchasing.
Stock Code: QXT
11
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Quixant Annual Report and Accounts 2017
STRATEGIC REPORT CONTINUED
Financial
KPI
Procedure
Comment
Earnings before interest, tax, depreciation and amortisation (EBITDA) and adjusted EBITDA (Note 1)
To ensure that the Group’s profit is growing
in line with market expectations
The Board reviews EBITDA and adjusted
EBITDA monthly as part of its review of
management information
The Board is satisfied with the growth in
EBITDA and adjusted EBITDA in the year.
Profit before tax (PBT)
To ensure that the Group is providing a
sufficient return to its shareholders
Debtor days
The Board reviews PBT and adjusted
PBT monthly as part of its review of
management information.
The level of PBT and adjusted PBT have
increased in line with expectations.
To ensure that customers settle debts in an
orderly fashion in line with agreed terms
and that the Group is not exposed to bad
debts
The Board monitors the average number
of days customers take to pay each month
together with a trend graph plotted against
budget
Cash and borrowings balances
To ensure that the business has sufficient
headroom to meet its future obligations
Additionally, it is provided with a monthly
analysis of the profile of aged debts for
each part of the business
The Board is provided with a report
showing cash generated in the year, the
cash conversion rate and the current level
of cash balances within the Group along
with the current level of borrowings and
available facilities
The Board is satisfied with the procedures
that are in place to qualify customers to
mitigate the Group’s exposure to bad debts.
In both the current year and pervious year
the Group has incurred minimal levels of
bad debts
At 31 December 2017 the Group had net
cash of $4.5m compared with $(0.1)m at 31
December 2016. The cash conversion rate
in the year was 53% compared with 84%
for 2016.
The Board recognises that a strategic
decision to settle some supplier invoices
early has impacted on the level of cash
conversion but this enabled the business to
achieve better pricing on its purchases.
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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.
Gaming customers may decide to
design their computer platforms
and/or monitors in house or source
from another supplier.
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 Group has identified certain
areas of the displays business where
it considers that it can develop
a competitive advantage and is
investing in these areas.
Quixant works closely with its
customers to ensure its product
roadmap is robust, technologically
advanced and ahead of the
competition.
The majority of the Group’s
operations are in OECD countries
and the majority of revenue is
generated from customers operating
in OECD countries. Despite not being
an OECD member, Taiwan has a
highly developed legal and political
system.
The Group has the capabilities and
skills to create highly engineered,
optimised products targeted at
specific markets.
Quixant maintains an ongoing
dialogue with its customers to
maintain the relationships that it has
developed and foster new ones.
The Group will continue to focus its
operations in those countries that
provide the best opportunity for
growth and avoid those countries
that pose significant country risk.
Regulation
Additional laws and regulations may
be enacted covering issues such as
law enforcement, pricing, taxation
and quality of products and services.
The Group monitors prospective
changes in local laws and regulations
which may impact its business.
Technological
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 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 is a member of
professional bodies, where
applicable, in the regions in which
it operates to ensure that it stays
informed of any legal or regulatory
changes.
The Group recognises the
technology requirements of its
customers and works with them to
provide the products that they need
in their business.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
STRATEGIC REPORT CONTINUED
Risk
Description
Mitigation
Comment
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.
The Board expects the Group’s
continued organic growth to further
reduce the dependency on key
customers.
Staff turnover of key personnel
continues to be low.
The executive officers are subject to
long term contracts and the Board
has in place a succession plan.
Key staff have contractual
arrangements designed to develop
and incentivise.
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 to protect
its intellectual property rights.
Key persons
Intellectual
property
protection
The Group recognises the
importance of its personnel. Its
executive officers have been
fundamental in the creation and
development of the organisation. In
addition the Board recognises the
importance of its key employees and
the risk of losing the expertise and
knowledge that they possess.
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.
Brexit
The Board has spent time considering the potential impact on the business, its customers, suppliers and employees following the UK’s
decision to leave the European Union. It recognises that there remains considerable uncertainty surrounding the timing of and the manner
in which the UK will operate with the EU following its exit. As such the Board continues to monitor the progress of the negotiations but
consider that the likely impact on the Group will be mitigated due to the highly global nature of the business combined with the majority of
transactions being conducted in US dollars.
By order of the Board on 21 March 2018.
Miss A C Preddy
DIRECTOR
Aisle Barn 100 High Street Balsham Cambridge CB21 4EP
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DIRECTORS’ REPORT
Statutory information
Quixant plc (‘The Company’) is a Public Limited Company
incorporated in the United Kingdom (Registration number:
04316977). 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.
The Directors propose a dividend of 2.60p per share (2016: 2.00p),
to be approved at the Annual General Meeting. During the year
the Company paid a dividend of 2.00p per share amounting to
$1,691,194.
Substantial shareholdings
On 21 March 2018 the Company had been notified of the following
significant interests in its share capital:
N C L Jarmany and his wife
Schroders Plc
Hargreave Hale
Mr J and Mrs S Mullins
Octopus Investments Nominees
Limited
Liontrust Asset Management
C-T Lin and his wife
G P Mullins and his wife
Alexander Taylor
Amati Global Investors
Shares held
Ordinary
shares of
£0.001 each
12,179,970
6,637,368
6,821,160
3,858,920
3,947,143
3,995,697
3,446,559
2,829,243
2,058,958
2,345,020
% of issued
share capital
18.44%
10.07%
10.35%
5.85%
5.99%
6.06%
5.27%
4.33%
3.12%
3.56%
Directors
The Directors who served during the year and their interests in the share capital of the Company were as follows:
G A Y Hudson (appointed 22 March 2017)
N C L Jarmany
J F Jayal
C-T Lin
G P Mullins
A C Preddy
M J Peagram
G van Zwanenberg
Shares held
Ordinary shares of £0.001
each
2017
2,350
12,179,970
460,200
2016
–*
12,579,970
–
3,446,559
2,829,243
40,000
227,174
26,087
3,446,559
2,829,243
10,000
202,174
26,087
Options granted
£0.001 each
2017
–
–
–
–
–
–
39,000
–
–
2016
–*
–
110,200
400,000**
–
–
69,000
–
–
Exercise
price
–
£0.49
£nil
–
–
£0.49
–
–
* date of appointment
** A £nil cost option granted by NCL Jarmany to JF Jayal over 400,000 ordinary shares owned by him (as outlined in the admission document). Mr. Jayal exercised the option during 2017.
There has been no change in the interests set out above between 31 December 2017 and 21 March 2018.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
DIRECTORS’ REPORT CONTINUED
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 $ 5.3 million (2016:
$3.6 million) in its R&D and customer support programmes in the
year, of which $1.6 million (2016: $0.7 million) 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
(2016: nil).
Disclosure of information to the auditor
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 auditor is
aware of that information.
Auditor
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 21 March 2018.
Miss A C Preddy
DIRECTOR
Aisle Barn 100 High Street Balsham Cambridge CB21 4EP
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In Respect of the Directors’ Report and the Financial Statements
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 are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
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.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors’ Report
that complies with that law and those regulations.
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.
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 as adopted by the EU
(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, relevant
and reliable;
• state whether they have been prepared in accordance with IFRSs
as adopted by the EU;
• assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
INDEPENDENT AUDITOR’S REPORT
To the Members of Quixant Plc
1 Our opinion is unmodified
We have audited the financial statements of Quixant Plc (“the Company”) for the year ended 31 December 2017 which comprise the
Consolidated Statement of Profit and Loss and Other Comprehensive Income, Group and Company Balance Sheets, Group and Company
Statement of Changes in Equity, Group and Company Cash flow Statements and the related notes, including the accounting policies in note 1.
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 2017
and of the Group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by
the European Union (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 as applied in
accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows:
The risk
Our response
Recoverability of group goodwill
Forecast based valuation
Our procedures included:
Goodwill: $6.9m (2016: $6.9m)
Refer to page 29 (accounting policy) and
pages 41 to 42 (financial disclosure).
The estimated recoverable amount of these
balances is subjective due to the inherent
uncertainty involved in forecasting and
discounting future cash flows.
Benchmarking assumptions: We assessed
the key assumptions such as projected long
term growth rate and discount rates with
reference to externally derived data.
Whilst the risk of misstatement is relatively
low in this case, the size of the balance, and
the requirement to test for impairment on
an annual basis, makes this a core area on
which our audit focused.
Historical comparisons: We assessed
the reasonableness of the forecasts used
by considering the historical accuracy of
previous budgets.
Sensitivity analysis: We performed
breakeven analysis on the assumptions
noted above.
Re-performance: We independently re-
performed the value in use calculations and
compared these to the actual models used.
Assessing transparency: We assessed the
adequacy of the Group’s disclosures (see
Note 12) in respect of impairment testing
and considered whether the disclosures
reflected the risks inherent in the valuation
of goodwill.
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Recoverability of parent company’s
investment in subsidiaries
Investment: $12.0m (2016: $11.9m)
Refer to page 29 (accounting policy) and
pages 44 to 45 (financial disclosure).
The risk
Low risk, high value
Our response
Our procedures included:
The carrying amount of the parent
company’s investments in subsidiaries
represents 27% (2016: 31%) of the
company’s total assets. Their recoverability
is not at a high risk of significant
misstatement or subject to significant
judgement. However, due to their
materiality in the context of the parent
company financial statements, this is
considered to be the area that had the
greatest effect on our overall parent
company audit.
Tests of detail: Tests of detail: Comparing
the carrying amount of 100% of
investments with the relevant subsidiaries’
draft Balance Sheet at 31 December
2017 to identify whether their net assets,
being an approximation of their minimum
recoverable amount, were in excess of their
carrying amount and assessing whether
those subsidiaries have historically been
profit-making.
Subsidiary audits: We considered the
results of our audit work over those
subsidiaries’ profits and net assets.
3 Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was set at $760k (2016: $592k) and determined with reference to a benchmark of
group profit before tax as disclosed on the face of the Consolidated Statement of Profit and Loss and Other Comprehensive Income, of which
it represents 5% (2016: 5%).
Materiality for the parent company financial statements as a whole was set at $152k (2016: $165k), determined with reference to a
benchmark of profit before tax (normalized to take into account Group transfer pricing adjustments), of which it represents 3% (2016: 5%).
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding $38k (2016: $30k), in addition to
other identified misstatements that we believe warranted reporting on qualitative grounds.
Of the group’s 16 components (2016: 15 components), we subjected 9 (2016: 10) to audits for group reporting purposes and 0 (2016: 2) to
specific risk-focused audit procedures. The latter were not individually financially significant enough to require a full scope audit for group
purposes, but did present specific individual risks that needed to be addressed. The coverage of revenues, total profits and losses that made
up Group profit before tax, and Group assets achieved can be seen in the table below.
Audits for group reporting purposes
Specific risk-focused audit procedures
Total
Number of
components
2017 (2016)
9 (10)
- (2)
9 (12)
Group
revenue
2017 (2016)
95% (84%)
- (5%)
95% (89%)
Group profit
before tax
2017 (2016)
95% (95%)
- (3%)
95% (98%)
Group total
assets
2017 (2016)
94% (87%)
- (4%)
94% (91%)
The remaining 5% of total group revenue, 5% of total profits and losses that made up group profit before tax and 6% of total group assets is
represented by 7 reporting components, none of which individually represented more than 5% of any of total group revenue, group profit
before tax or total group assets. For these residual components, we performed analysis at an aggregated group level to re-examine our
assessment that there were no significant risks of material misstatement with these.
The group audit team instructed the component auditors as to the significant areas to be covered, including the relevant risks detailed above
and the information to be reported back. The Group team approved the component materialities, which ranged from $152k to $611k (2016:
$165k to $592k), having regard to the mix of size and risk profile of the Group across the components. The work on 3 of the 9 components
(2016: 3 of the 10 components) was performed by component auditors and the rest, including the audit of the parent company, was
performed by the Group audit team.
The Group team visited 2 (2016: 5) components in 2 locations (2016: 3 locations). Telephone conference meetings were held with the
component auditors. At meetings, the audit approach, findings and observations reported to the Group audit team were discussed in more
detail, and any further work required by the Group audit team was then performed by the component auditor. The Group team also reviewed
the audit work papers for significant areas prepared by the component auditor.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
4 We have nothing to report on going concern
We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an
undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the
date of approval of the financial statements. We have nothing to report in these respects.
5 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the directors’ report;
•
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
•
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required 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.
We have nothing to report in these respects.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 17, the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but
to do so.
20
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Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of our audit work and to whom we owe our responsibilities
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.
Kelly Dunn (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Botanic House
100 Hills Road
Cambridge
CB2 1AR
21 March 2018
Stock Code: QXT
21
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Quixant Annual Report and Accounts 2017
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
For the years ended 31 December 2017 and 2016
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 attributable to the parent
Minority interests
Total comprehensive income for the year
Basic earnings per share
Fully diluted earnings per share
Notes on pages 27 to 55 form part of the financial statements.
Note
3,4
5
5
8
9
2017
Total
$000
109,238
(72,269)
36,969
(7,785)
(13,837)
15,347
(302)
15,045
(1,899)
13,146
869
14,015
(6)
14,009
2016
Total
$000
90,365
(58,267)
32,098
(6,853)
(13,211)
12,034
(371)
11,663
(2,370)
9,293
(47)
9,246
1
9,247
10
10
$0.1999
$0.1972
$0.1430
$0.1395
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BALANCE SHEETS
As at 31 December 2017
Non-current assets
Property, plant and equipment
Intangible assets
Investment property
Investments in group companies and associated undertakings
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Provisions
Tax payable
Non-current liabilities
Other interest-bearing loans and borrowings
Provisions
Deferred tax liabilities
Total liabilities
Net assets
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
Note
11
12
13
14
15
16
17
18
19
20
22
19
22
15
23
23
23
Group
Company
2017
$000
6,153
14,278
674
–
195
21,300
21,246
20,095
11,194
52,535
73,835
(5,811)
(16,854)
(750)
(931)
(24,346)
(924)
–
(1,305)
(2,229)
(26,575)
47,260
106
6,102
991
39,647
414
47,260
–
47,260
2016
$000
5,977
14,045
617
–
257
20,896
12,900
21,003
8,853
42,756
63,652
(2,774)
(17,199)
–
(1,033)
(21,006)
(6,148)
(750)
(1,442)
(8,340)
(29,346)
34,306
105
5,676
782
28,192
(455)
34,300
6
34,306
2017
$000
3,699
2,059
–
11,982
91
17,831
13,924
10,398
2,205
26,527
44,358
(5,479)
(15,238)
–
(1,114)
(21,831)
(924)
–
(399)
(1,323)
(23,154)
21,204
106
6,102
991
13,752
253
21,204
–
21,204
2016
$000
3,570
2,383
11,948
100
18,001
7,455
12,034
1,375
20,864
38,865
(911)
(13,190)
–
(794)
(14,895)
(6,251)
–
(450)
(6,701)
(21,596)
17,269
105
5,676
782
10,893
(187)
17,269
–
17,269
These financial statements were approved and authorised for issue by the Board of Directors on 21 March 2018 and were signed on behalf of
the Board by:
Miss A C Preddy
DIRECTOR
Company registered number: 04316977
Notes on pages 27 to 55 form part of the financial statements.
Stock Code: QXT
23
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Quixant Annual Report and Accounts 2017
STATEMENT OF CHANGES IN EQUITY
GROUP
Balance at 1 January 2016
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
Exercise of share options
Total contributions by and
distributions to owners
Share
Capital
$000
104
Share
Premium
$000
5,181
Translation
Reserve
$000
(408)
Share
Based
Payments
$000
470
Retained
Earnings
$000
20,299
Total
Equity
$000
25,646
Non-
controlling
Interest
$000
5
–
–
–
–
–
1
1
–
–
–
–
–
495
495
–
(47)
(47)
–
–
–
–
–
–
–
312
–
–
312
9,293
–
9,293
(47)
9,293
9,246
–
(1,400)
–
312
(1,400)
496
(1,400)
(592)
1
–
1
–
–
–
–
6
Balance at 31 December 2016
105
5,676
(455)
782
28,192
34,300
Share
Capital
$000
105
Share
Premium
$000
5,676
Translation
Reserve
$000
(455)
Share
Based
Payments
$000
782
Retained
Earnings
$000
28,192
Total
Equity
$000
34,300
Non-
controlling
Interest
$000
6
–
–
–
–
–
1
1
106
–
–
–
–
–
426
426
6,102
–
869
869
–
–
–
–
414
–
–
–
209
–
–
209
991
13,146
–
13,146
869
13,146
14,015
–
(1,691)
–
209
(1,691)
427
(1,691)
39,647
(1,055)
47,260
–
(6)
(6)
–
–
–
–
–
Balance at 1 January 2017
Total comprehensive income for
the period
Profit
Other comprehensive profit
Total comprehensive income for
the period
Transactions with owners,
recorded directly in equity
Share based payments
Dividend paid
Exercise of options
Total contributions by and
distributions to owners
Balance at 31 December 2017
Notes on pages 27 to 55 form part of the financial statements.
Total
Equity
$000
25,651
9,294
(47)
9,247
312
(1,400)
496
(592)
34,306
Total
Equity
$000
34,306
13,146
863
14,009
209
(1,691)
427
(1,055)
47,260
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STATEMENT OF CHANGES IN EQUITY
COMPANY
Balance at 1 January 2016
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
Exercise of share options
Total contributions by and distributions to owners
Share
Capital
$000
104
Share
Premium
$000
5,181
Translation
Reserve
$000
(320)
Share
Based
Payments
$000
470
Retained
Earnings
$000
9,613
Total Parent
Equity
$000
15,048
–
–
–
–
–
1
1
–
–
–
–
–
495
495
–
133
133
–
–
–
–
–
–
–
312
–
–
312
782
2,680
–
2,680
–
(1,400)
–
(1,400)
2,680
133
2,813
312
(1,400)
496
(592)
10,893
17,269
Balance at 31 December 2016
105
5,676
(187)
Balance at 1 January 2017
Total comprehensive income for the period
Profit
Other comprehensive profit
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Share based payments
Dividend paid
Exercise of share options
Total contributions by and distributions to owners
Share
Capital
$000
105
Share
Premium
$000
Translation
Reserve
$000
Share
Based
Payments
$000
Retained
Earnings
$000
Total Parent
Equity
$000
5,676
(187)
782
10,893
17,269
–
–
–
–
–
1
1
–
–
–
–
–
426
426
–
440
440
–
–
–
–
–
–
–
209
–
–
4,550
–
4,550
4,550
440
4,990
–
209
(1,691)
(1,691)
–
427
209
(1,691)
(1,055)
Balance at 31 December 2017
106
6,102
253
991
13,752
21,204
Notes on pages 27 to 55 form part of the financial statements.
Stock Code: QXT
25
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Quixant Annual Report and Accounts 2017
CASH FLOW STATEMENTS
For the years ended 31 December 2017 and 2016
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
Decrease/(increase) in trade and other receivables
(Increase) in inventories
(Decrease)/increase in trade and other payables
Interest paid
Tax (paid)/received
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash from investing activities
Cash flows from financing activities
Repayment of borrowings
Dividends paid
Proceeds from issue of shares
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Notes on pages 27 to 55 form part of the financial statements.
Group
Company
2017
$000
13,146
2,422
1,899
302
209
17,978
908
(8,346)
(100)
10,440
(302)
(2,076)
8,062
–
(409)
(1,861)
(2,270)
(2,187)
(1,691)
427
(3,451)
2,341
8,853
11,194
2016
$000
9,293
2,694
2,370
371
312
15,040
(1,292)
(3,436)
1,644
11,956
(371)
(1,489)
10,096
58
(425)
(1,017)
(1,384)
(2,816)
(1,400)
496
(3,720)
4,992
3,861
8,853
2017
$000
4,550
1,064
781
270
175
6,840
1,636
(6,469)
2,326
4,333
(270)
(503)
3,560
–
(252)
(455)
(707)
(759)
(1,691)
427
(2,023)
830
1,375
2,205
2016
$000
2,680
1,107
454
276
239
4,756
(2,032)
(1,960)
2,373
3,137
(276)
414
3,275
–
(185)
(321)
(506)
(1,891)
(1,400)
496
(2,795)
(26)
1,401
1,375
Note
11
12
18
26
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NOTES TO 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.
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 fair value. The land was valued by a professional firm of property consultants in 2017.
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 the recoverable amount of goodwill and the determination of the
point at which the criteria for development cost capitalisation have been met.
The recoverable amounts of cash generating units and individual assets have been determined based on the higher of the value-
in-use calculations and fair value less costs to sell. These calculations require the use of estimates and assumptions. Although their
recoverability is not subject to significant estimation uncertainty in the current year, changes to the cash flow assumptions in the future
may lead to material adjustments to the carrying value of intangible and tangible assets.
The impact on the financial statements of a change in judgement with respect the development cost criteria could affect the value
capitalised in respect of intangible assets and the corresponding profit and loss effect. If the criteria hadn’t been met in the current
year, the impact would have been to expense $1.6m of development costs.
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.
Going concern
The Directors have prepared trading and cash flow forecasts for the Group covering the period to 31 December 2019. 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.
Stock Code: QXT
27
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1. Principal accounting policies continued
Effective for the Group and Company in these financial statements:
The Group has considered the following amendments to published standards that are effective for the Group for the financial year
beginning 1 January 2017 and concluded that they are either not relevant to the Group or that they do not have a significant impact on
the Group’s financial statements. These standards and interpretations have been endorsed by the European Union.
• Annual Improvements to IFRSs 2014–2016 Cycle
• Amendments to IFRS 12 Disclosure of Interests in Other Entities to specify that the requirement to disclose interests in other
entities also apply to interests that are classified as held for sale or distribution.
• Amendments to IAS 7 require disclosures that enable evaluation of changes in liabilities arising from financing activities, including
both changes arising from cash flow and non-cash changes.
• Amendments to IAS 12 clarify how to account for deferred tax assets related to debt instruments measured at fair value and should
resolve the significant diversity in practice.
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:
IFRS 9 Financial instruments
IFRS 15 Revenue from contracts with customers
IFRS 16 Leases
The Directors intend to adopt these standards in the first accounting period after their effective date but, with the exception of IFRS 16,
do not anticipate that they will have a material effect on the consolidated financial statements in the period of their initial application.
IFRS 15 provides for a single principle based model to be applied to all sales contracts based on the transfer of control of goods and
services to customers. The Directors have considered the standard and having reviewed the types of revenues within the business do
not anticipate that the application of this standard will have a material effect on the amounts reported and the disclosures made in the
consolidated financial statements.
IFRS 16 will change the way in which operating leases are treated within the financial statements. However, the Group has not yet
performed a detailed impact assessment of this standard so it is not practicable to provide an estimate of the financial impact.
Not currently adopted for use in the EU:
Amendments to IFRS 1
Amendments to IFRS 2
Amendments to IFRS 9 Prepayment features with negative consideration
Amendments to IAS 28 Long-term interests in associates and joint ventures
Amendments to IAS 40
IFRIC 22 Foreign currency transactions and advance consideration
IFRIC 23 Uncertainty over income tax treatments
IFRS 17 Insurance contracts
The Directors consider that the adoption of these standards and interpretations on the Group’s financial statements will not be
material.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and
services provided in the normal course of business by subsidiary companies to external customers, net of discounts, Value Added Tax
(VAT) and other sales-related taxes. Revenue is reduced for customer returns, rebates and other similar allowances. Revenue from the
sale of goods, which represent the significant majority of the Group revenue, is recognised in the income statement when:
• The significant risks and rewards of ownership have been transferred to the buyer in accordance with the contracted terms of sale;
• The amount of the revenue and costs can be measured reliably;
• The Group retains neither continuing managerial involvement nor effective control over the goods; and
•
It is probable that the economic benefits associated with the transaction will flow to the Group. This is typically on delivery or
despatch of the products.
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Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the
identifiable assets and liabilities of the subsidiary or associated undertaking at the date of acquisition. Goodwill is recognised as an
asset and is reviewed for impairment at least annually. Any impairment is recognised immediately through the income statement and
is not subsequently reversed. Impairment losses recognised are allocated first to reduce the carrying value of the goodwill the business
relates to, and then to reduce the carrying value of the other assets of that business on a pro rata basis.
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 (“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.
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.
Contingent consideration
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration that is deemed to be an asset or liability are recognised in accordance with IAS 39, either
in profit and loss or as a change in other comprehensive income.
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 Between 3 and 6 years
20 – 50 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 or land 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.
Stock Code: QXT
29
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1. Principal accounting policies continued
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. The estimated useful economic lives of these assets from the date of
acquisition are:
Customer relationships
Order backlog
Between 4 and 10 years
Between 1 and 4 years
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 five 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. Inventory provisions are made where there is doubt as to
the recoverability of the value of specific stock items.
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.
Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of past events, for which it is probable
that an outflow of economic benefit will be required to settle the obligation, and where the amount of the obligation can be reliably
measured. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market
assessment of the time value of money and the risks specific to the liability.
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Leased assets
Assets leased under operating leases are not recorded in the statement of financial position. Rental payments are charged directly to
the income statement in the period in which they are incurred. Lease incentives, primarily up-front cash payments or rent free periods,
are spread over the period of the lease term. Payments made to acquire operating leases are treated as prepaid lease expenses and
amortised over the life of the lease.
The land and buildings element of property leases are considered separately for the purposes of the lease classification.
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. Research and Development
Expenditure Credit (RDEC) and Patent Box claims have been available to UK companies on qualifying expenditure incurred since 2013
(RDEC) and 2016 (Patent Box). Where UK companies expect to elect for RDEC or qualify for Patent Box relief, the amount receivable
reduces the tax payable and is credited to the tax charge in profit and loss.
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.
Stock Code: QXT
31
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1. Principal accounting policies continued
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.
Alternative performance measures
The Directors consider that disclosing alternative performance measures enhances shareholders’ ability to evaluate and analyse the
underlying financial performance of the Group. They have identified adjusted earnings before interest, depreciation and amortisation
(adjusted EBITDA) and adjusted profit before tax (adjusted PBT) as measures that enable the assessment of the operational
performance of the Group and assist in financial, operational and commercial decision-making. In adjusting for these measures the
directors have sought to eliminate those items of income and expenditure that do not specifically relate to the normal operational
performance of the Group in a specific year. The table below reconciles EBITDA to adjusted EBITDA and PBT to adjusted PBT identifying
those reconciling items of income and expense.
EBITDA and PBT reconciliation
EBITDA, adjusted EBITDA, PBT and adjusted PBT for the current and prior year have been derived as follows:
Profit for the year
Adding back:
Taxation expense
Financial expenses
Depreciation
Amortisation of intangible assets
Amortisation of customer relationships and order backlog
EBITDA/PBT
Adjustments
Amortisation of customer relationships and order backlog1
Share based payments expense2
Costs arising on the replacement of faulty DRAM component (note 5)3
Settlement of claim (note 5)3
Termination payment and discontinued products (note 5) 3
Adjusted EBITDA/PBT
EBITDA
PBT
2017
$000
13,146
1,899
302
512
1,088
822
17,769
–
209
1,633
–
–
19,611
2016
$000
9,293
2,370
371
465
1,001
1,228
14,728
–
312
–
(377)
987
15,650
2017
$000
13,146
1,899
15,045
822
209
1,633
–
–
17,709
2016
$000
9,293
2,370
–
–
–
–
11,663
1,228
312
–
(377)
987
13,813
1. The amortisation of customer relationships and order backlog has been excluded as it is not a cash expense to the Group.
2. Share based payments expense has been excluded as they are not a cash based expense.
3. Other items of income and expense – where other items of income and expense occur in a particular year and their inclusion in PBT and EBITDA means that a year on year
comparison of operational results is not on a consistent basis the directors will exclude them from the adjusted numbers. During the years under review the directors have
excluded the costs arising from the replacement of faulty DRAM component due to its exceptional size and incomparability with the previous year. The adjustments to 2016
relate to non-operational events, specifically the costs in discontinuing a product line and associated termination payments.
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2. Acquisitions of subsidiaries
Contingent consideration
The Group has agreed to pay additional consideration to the vendors of Quixant Deutschland GmbH 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 represented its fair value at the
acquisition date. The calculation of the deferred consideration has been reassessed at 31 December 2017 and it is considered that this
remains the fair value of the deferred consideration. At 31 December 2017 the level of profit earned has not exceeded the minimum
level to achieve any deferred consideration but based on the budgeted result for 2018 it is expected that the profit achieved for the
three years will fall within the range to require a deferred consideration payment of $750,000. 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.
3. Business and geographical segments
The chief operating decision maker in the organisation is an executive management committee comprising the Board of Directors. The
segmental information is presented in a consistent format with management information. The Group assesses the performance of the
segments based on a measure of revenue and PBT. The operating segments applicable to the Group are as follows:
• Quixant
• A single customer accounted for 25.1% of reported revenues for the year ended 31 December 2017 (2016: 21.9%).
• Densitron Europe
• Densitron America
• Densitron France
• Densitron Japan
Together, Densitron Europe, Densitron America, Densitron France, and Densitron Japan comprise the Densitron division.
2017
Revenue
Profit/(loss) before tax
Balance Sheet
Assets
Liabilities
Net assets/(liabilities)
EBITDA
Capital Expenditure
Depreciation/amortisation
Quixant
$000
Densitron
Europe
$000
Densitron
America
$000
Densitron
France
$000
Densitron
Japan
$000
71,132
12,941
58,545
16,236
42,309
15,366
1,854
2,248
11,034
(637)
5,494
6,724
(1,230)
(436)
395
96
15,595
1,759
4,935
2,155
2,780
1,813
6
50
6,083
497
2,493
1,028
1,465
531
14
20
5,394
485
2,368
432
1,936
495
1
8
Total
$000
109,238
15,045
73,835
26,575
47,260
17,769
2,270
2,422
Stock Code: QXT
33
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Business and geographical segments continued
Quixant
$000
Densitron
Europe
$000
Densitron
America
$000
Densitron
France
$000
Densitron
Japan
$000
53,003
9,594
49,692
18,655
31,037
12,353
1,344
2,485
11,174
(601)
4,576
6,252
(1,676)
(393)
62
133
15,212
1,272
4,419
2,014
2,405
1,312
16
33
5,429
984
2,944
1,853
1,091
1,019
11
24
2016
Revenue
Profit/(loss) before tax
Balance Sheet
Assets
Liabilities
Net assets/(liabilities)
EBITDA
Capital Expenditure
Depreciation/amortisation
4. Analysis of turnover
By geographical market
Asia
Australia
Europe
North America
Other
The above analysis includes sales to individual countries in excess of 10% of total turnover of:
Australia
USA
5,547
414
2,021
572
1,449
437
9
19
2017
$000
15,126
12,447
28,987
51,356
1,322
109,238
2017
$000
12,447
51,292
Total
$000
90,365
11,663
63,652
29,346
34,306
14,728
1,442
2,694
2016
$000
12,719
11,400
27,536
37,581
1,129
90,365
2016
$000
11,400
36,453
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5. Expenses and auditor’s remuneration
Included in profit/loss are the following:
Included in gross profit:
Costs arising on replacement of faulty DRAM component
As explained in the Chief Executive’s report, during 2017 cost was incurred in the replacement of faulty
DRAM components.
Settlement of a claim
Included in operating profit:
Costs associated with discontinued product lines and payments in respect of termination of
employment contracts
Gain/(loss) on foreign exchange transactions
Research and development expenditure
Of which capitalised
Depreciation of owned assets
Amortisation of intangible assets
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
Taxation and other services
Other services
2017
$000
1,633
2016
$000
–
–
(377)
–
38
5,328
(1,638)
512
1,910
2017
$000
212
144
36
987
(59)
3,557
(742)
465
2,229
2016
$000
177
350
–
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:
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
Stock Code: QXT
2017
Number
31
68
29
48
176
2017
$000
11,046
209
1,140
409
12,804
2016
Number
35
53
29
43
160
2016
$000
9,690
312
934
374
11,310
35
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7. Directors’ remuneration
EXECUTIVE DIRECTORS
N C L Jarmany
G P Mullins
C-T Lin
A C Preddy
J F Jayal
NON-EXECUTIVE DIRECTORS
M J Peagram
G van Zwanenberg
G A Y Hudson
Share
Based
Payments
2017
$000
Pension
Contributions
2017
$000
Salary/Fee
2017
$000
210
210
251
156
194
1,021
93
59
35
1,208
–
–
–
–
471
471
–
–
–
471
–
4
–
3
4
11
–
1
–
12
Total
2017
$000
210
214
251
159
669
1,503
93
60
35
1,691
Total
2016
$000
280
282
315
193
131
1,201
94
60
–
1,355
During the year, A C Preddy exercised options over 30,000 shares (2016: 10,000 shares) and J F Jayal exercised options over 110,200
shares of which he sold 60,200 shares (2016: 21,800) and 400,000 non approved share options granted prior to his appointment.
There were no directors’ advances, credits or guarantees outstanding at 31 December 2017 or 2016.
8. Finance expense
Total interest expense on financial liabilities measured at amortised cost
Total finance expense
2017
$000
302
302
2016
$000
371
371
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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 (credit)/expense
Origination and reversal of temporary differences
Deferred tax (credit)/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 19.25% (2016: 20%)
Non-deductible expenses
Enhanced research and development claim
Patent box tax relief
Change in deferred tax rate to 18% (2016: 18%)
Overseas tax in excess of standard UK rate
Exercise of share options
Unrelieved losses
Adjustments for previous years
Total taxation expense
2017
$000
780
1,498
(296)
1,982
(83)
(83)
1,899
2017
$000
13,146
1,899
15,045
2,896
153
(722)
(273)
62
704
(530)
(95)
(296)
1,899
2016
$000
1,401
1,012
(175)
2,238
132
132
2,370
2016
$000
9,293
2,370
11,663
2,333
78
(436)
(104)
(28)
715
–
(13)
(175)
2,370
Factors that may affect future tax charges
A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was 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, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the
company’s future current tax charge accordingly. The deferred tax liability at 31 December 2017 has been calculated based on these
rates.
The Group has tax losses carried forward in certain UK Companies of £4,300,000. The tax effect of these losses has not been included
as an asset in the group accounts because their recovery is uncertain. The losses are being used to offset against future UK tax arising.
Stock Code: QXT
37
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. Earnings per ordinary share (EPS)
Earnings
Earnings for the purposes of basic and diluted EPS being
net profit attributable to equity shareholders
Number of shares
Weighted average number of ordinary shares
for the purpose of basic EPS
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
Calculation of adjusted fully diluted earnings per share:
Earnings
Earnings for the purposes of basic and diluted EPS being
net profit attributable to equity shareholders
Adjustments
Costs arising on the replacement of faulty DRAM component
Share based payment expense
Amortisation of customer relationships and order backlog
Termination payment and discontinued products
Settlement of claim
Tax effect of adjustments
Adjusted earnings
2017
$000
2016
$000
13,146
9,293
Number
Number
65,756,667
65,004,414
909,513
66,666,180
1,614,766
66,619,180
$0.1999
$0.1972
$0.1430
$0.1395
$000
$000
13,146
9,293
1,633
209
822
–
–
15,810
(516)
15,294
–
312
1,228
987
(377)
11,443
(405)
11,038
Adjusted fully diluted earnings per share
$0.2294
$0.1657
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11. Property, plant and equipment – Group
Cost
Balance at 1 January 2016
Additions
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Depreciation
Balance at 1 January 2016
Depreciation charge for the year
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016 and 1 January 2017
At 31 December 2017
Land and
Buildings
$000
Plant and
Equipment
$000
5,295
93
(1)
5,387
5,387
33
(59)
267
5,628
244
107
2
353
353
115
(59)
15
424
5,051
5,034
5,204
1,831
332
14
2,177
2,177
376
–
55
2,608
886
358
(10)
1,234
1,234
397
–
28
1,659
945
943
949
Total
$000
7,126
425
13
7,564
7,564
409
(59)
322
8,236
1,130
465
(8)
1,587
1,587
512
(59)
43
2,083
5,996
5,977
6,153
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. Property, plant and equipment – Company
Cost
Balance at 1 January 2016
Additions
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Depreciation
Balance at 1 January 2016
Depreciation charge for the year
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016 and 1 January 2017
At 31 December 2017
Land and
Buildings
$000
Plant and
Equipment
$000
3,280
85
57
3,422
3,422
27
(59)
140
3,530
201
65
4
270
270
70
(59)
12
293
3,079
3,152
3,237
1,283
100
12
1,395
1,395
225
–
33
1,653
782
191
4
977
977
196
–
18
1,191
501
418
462
Total
$000
4,563
185
69
4,817
4,817
252
(59)
173
5,183
983
256
8
1,247
1,247
266
(59)
30
1,484
3,580
3,570
3,699
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12. Intangible assets – Group
Cost
Balance at 1 January 2016
Additions – internally developed
Additions – externally purchased
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Additions – internally developed
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Amortisation and impairment
Balance at 1 January 2016
Amortisation for the year
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016 and 1 January 2017
At 31 December 2017
Customer
Relationships
and
Order
Backlog
$000
Internally
Generated
Capitalised
Development
costs
$000
Computer
Software
$000
Goodwill
$000
7,079
–
(110)
(35)
6,934
6,934
–
–
–
16
6,950
–
–
–
–
–
–
–
–
–
7,079
6,934
6,950
5,201
–
–
–
5,201
5,201
–
–
–
–
5,201
–
1,228
–
1,228
1,228
822
–
–
2,050
5,201
3,973
3,151
522
–
275
12
809
809
–
229
–
34
1,072
213
103
4
320
320
94
–
15
429
309
489
643
3,792
742
–
–
4,534
4,534
1,638
–
(113)
–
6,059
986
898
1
1,885
1,885
994
(107)
(247)
2,525
2,806
2,649
3,534
Total
$000
16,594
742
165
(23)
17,478
17,478
1,638
229
(113)
50
19,282
1,199
2,229
5
3,433
3,433
1,910
(107)
(232)
5,004
15,395
14,045
14,278
Impairment testing
Goodwill has been allocated to Cash Generating Units (CGU’s) as follows:
Quixant
Densitron Europe
Densitron America
Densitron France
Densitron Japan
Goodwill
2017
$000
1,379
2,868
2,076
485
142
6,950
2016
$000
1,363
2,868
2,076
485
142
6,934
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 annual impairment review indicated that no impairment of goodwill is necessary at 31 December 2017 or 31 December 2016.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. Intangible assets – Group continued
Quixant CGU
The recoverable amounts of the Quixant cash generating unit has been determined from value in use calculations based on cash flow
projections from formally approved budgets covering the year to 31 December 2018. The following assumptions have been adopted:
• Cash flows were based on the internal budgets for 2018 together with a further four year forecast to 2022;
• The revenue growth rates and increase in operating costs adopted for the years 2019, 2020, 2021 and 2022 were 20% based on
previous years actual growth and managements expectation for future years;
• The terminal growth rate was estimated to be 1%. This was based on a management estimate of long term compound annual EBIT
growth rate;
• The forecasts were put together taking into account the planned roadmaps for the business and any specific market condition in
which the cash generating unit operates; and
• The estimated pre-tax market participant weighted average cost of capital of the cash generating unit was calculated with reference
to its risk profile and calculated to be 9.45%. This is the discount rate that has been applied in determining the value in use.
Densitron CGU’s
The recoverable amounts of the Densitron cash generating units listed above have been determined from value in use calculations
based on cash flow projections from formally approved budgets covering the year to 31 December 2018. The following assumptions
have been adopted:
• Cash flows were based on the internal budgets for 2018 together with a further four year forecast to 2022;
• The revenue growth rates adopted for the years 2019, 2020, 2021 and 2022 were 5%, 7.5%, 10% and 10%. The increase in operating
costs for the years 2019, 2020, 2021 and 2022 have been estimated to be 10%, 7.9%, 8% and 11%. These increases reflect the level
of investment in new products, people and marketing that has already started and is forecast to continue into the future;
• The terminal growth rate was estimated to be 1%. This was based on a management estimate of long term compound annual EBIT
growth rate;
• The forecasts were put together taking into account the planned roadmaps for the business and any specific market condition in
which each cash generating unit operates; and
• The estimated pre-tax market participant weighted average cost of capital of the cash generating units was calculated with
reference to each specific cash generating unit and its specific risk profile. This is the discount rate that has been applied in
determining the value in use and the table below details the discount rate for each CGU:
Densitron Europe
Densitron France
Densitron America
Densitron Japan
Discount rate
9.24%
8.38%
10.24%
9.13%
A sensitivity analysis was carried out for each of the cash generating units. The anticipated growth rates for each CGU were reduced
and the discount rate for each cash generating unit was increased. In all cases, the value in use exceeded the carrying value. Following
the sensitivity analysis that has been carried out there were no areas that were identified as being particularly sensitive for either 2017
or 2016.
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12. Intangible assets – Company
Cost
Balance at 1 January 2016
Additions – internally developed
Additions– externally purchased
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Additions – internally developed
Additions– externally purchased
Effect of movements in foreign exchange
Balance at 31 December 2017
Amortisation
Balance at 1 January 2016
Amortisation for the year
Effect of movements in foreign exchange
Balance at 31 December 2016
Balance at 1 January 2017
Amortisation for the year
Effect of movements in foreign exchange
Balance at 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016 and 1 January 2017
At 31 December 2017
Internally
Generated
Capitalised
Development
costs
$000
Computer
Software
$000
512
–
282
12
806
806
–
219
35
1,060
212
103
4
319
319
91
16
426
300
487
634
3,488
39
–
–
3,527
3,527
236
–
–
3,763
883
748
–
1,631
1,631
707
–
2,338
2,605
1,896
1,425
Total
$000
4,000
39
282
12
4,333
4,333
236
219
35
4,823
1,095
851
4
1,950
1,950
798
16
2,764
2,905
2,383
2,059
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. Investment property
Balance at 1 January 2017
Effect of movements in foreign exchange
Balance at 31 December 2017
Group
Company
2017
$000
617
57
674
2016
$000
740
(123)
617
2017
$000
–
–
–
2016
$000
–
–
–
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 15 December 2017
and the increase of $226,000 will be incorporated in 2018. The current carrying value is based on a valuation carried out on 10 May
2013.
14. Investments in group companies and associated undertakings
The principal subsidiary undertakings in which the Company had an interest in the year were:
Company name
Quixant USA Inc
Quixant UK Limited
Quixant Italia srl
Densitron Technologies Limited
Densitron UK 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
Densitron Embedded D.O.O.*
Registered
office of
business
1
2
3
2
2
4
5
6
7
8
2
9
10
11
Principal
activities
Distribution company
Sales of specialist computer systems
Software development
Holding company
Sales of electronic display products and
parent company of European subsidiary
undertakings
Sales of electronic displays products
Sales of electronic display products
Sales of electronic display products
Sales of electronic display products
Sales of electronic display products
Property development
Procurement and sale of electronic
displays products
Sales of electronic displays products
Design of electronic displays
Class Of
Shares Held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ownership
2017 and 2016
100%
100%
99%
100%
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
80%
100%
100%
100%
100%
100%
Densitron Display Taiwan Limited has been liquidated following the transfer of its business to Quixant plcs’ Taiwan branch.
* Subsidiary of Densitron Technologies Limited
** Subsidiary of Densitron UK Limited
1. 2147 Pama Lane Bldg 6 Las Vegas NV 89119 USA
2. Aisle Barn, 100 High Street, Balsham, Cambridge CB21 4EP
3. Contrada Case Bruciate, 1, Torrita Tiberina (RM), 00060, Italy
4. Aichiya Building 2F, 1-26-2 Omorikita, Ota-ku, Tokyo
5. 2330 Pomona Rincon Road, Corona, CA 92880
6. 3 Rue de Tasmanie, 441115, Basse-Goulaine
7. FMyllypuronitie 1, 00920, Helsinki
8. Airport Business Centre, AM Solnermoos 17, Halbergmoos, 85399, Germany
9. 12F., No. 150, Jianyi Road, Zhonghe Dist., New Taipei City 23511, Taiwan
10. Römerstraße 7, D-85661 Forstinning, Germany
11. Brnčičeva ulica 13, 1231 Ljubljana-Črnuče, Slovenia
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Fixed asset investments
Balance at 1 January 2017
Acquisitions – Group settled share based payments
Balance at 31 December 2017
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
Other
Net tax (assets) / liabilities
Movement in deferred tax during the year
Property, plant and equipment
Intangible assets – capitalised development costs
Intangible assets – acquired in business combinations
Share based payments
Receivables
Inventory provisions
Other
Movement in deferred tax during the prior year
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
Company
2017
$000
11,948
34
11,982
2016
$000
11,875
73
11,948
2017
$000
–
–
–
(84)
(18)
(25)
(68)
(195)
1 January
2017
$000
115
463
715
(109)
(32)
(25)
58
1,185
1 January
2016
$000
164
521
936
(70)
(32)
(312)
(175)
15
1,047
Assets
Liabilities
2016
$000
–
–
–
(109)
(32)
(25)
(91)
(257)
2017
$000
158
582
565
–
–
–
–
1,305
2016
$000
115
463
715
–
–
–
149
1,442
Recognised
In Income
$000
43
119
(150)
25
14
–
(134)
(83)
Movements
In Exchange
$000
–
–
–
–
–
–
8
8
31 December
2017
$000
158
582
565
(84)
(18)
(25)
(68)
1,110
Recognised
In Income
$000
(49)
(58)
(221)
(39)
–
287
175
37
132
Movements
In Exchange
$000
–
–
–
–
–
–
–
6
6
31 December
2016
$000
115
463
715
(109)
(32)
(25)
–
58
1,185
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. 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
Movement in deferred tax during the year
Property, plant and equipment
Intangible assets - capitalised development costs
Share based payments
Inventories
Exchange
Movement in deferred tax during the prior year
Property, plant and equipment
Intangible assets - capitalised development costs
Share based payments
Inventories
Exchange
16. Inventories
Raw materials and consumables
Work in progress
Finished goods
Assets
Liabilities
2017
$000
–
–
(12)
(79)
–
(91)
2016
$000
–
–
(12)
(88)
–
(100)
1 January
2017
$000
97
340
(88)
(12)
13
350
1 January
2016
$000
131
520
(50)
(20)
20
601
2017
$000
131
255
–
–
13
399
2016
$000
97
340
–
–
13
450
Recognised
In Income
$000
34
(85)
9
–
–
(42)
31 December
2017
$000
131
255
(79)
(12)
13
308
Recognised
In Income
$000
(34)
(180)
(38)
8
(7)
(251)
31 December
2016
$000
97
340
(88)
(12)
13
350
Group
Company
2017
$000
7,532
2,731
10,983
21,246
2016
$000
3,307
2,638
6,955
12,900
2017
$000
7,532
2,731
3,661
13,924
2016
$000
3,307
2,638
1,510
7,455
Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales in the year amounted to
$80,615,000 (2016: $61,882,000).
The cost of inventories recognised as an expense includes $43,000 (2016: $196,000) in respect of write downs of inventory to net
realisable value.
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17. Trade and other receivables
Trade receivables
Amounts receivable from subsidiary undertakings
Other receivables
Group
Company
2017
$000
16,967
–
3,128
20,095
2016
$000
18,328
–
2,675
21,003
2017
$000
–
8,722
1,676
10,398
2016
$000
–
11,007
1,027
12,034
All trade and other receivables are receivable within one year and are included as current assets.
A provision of $219,706 has been provided in respect of potential doubtful debts as at 31 December 2017 (31 December 2016:
$226,156).
As at 31 December 2017 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
18. Cash and cash equivalents/ bank overdrafts
Cash and cash equivalents per balance sheet
Cash and cash equivalents per cash flow statements
Group
Company
2017
$000
2,384
159
85
2,628
2016
$000
2,648
578
63
3,289
2017
$000
–
–
–
–
2016
$000
–
–
–
–
Group
Company
2017
$000
11,194
11,194
2016
$000
8,853
8,853
2017
$000
2,205
2,205
2016
$000
1,375
1,375
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
Currency
Nominal
Interest Rate
Year of
Maturity
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
Invoicing discounting facility
Factoring
NTD
1.80%
USD 2.75% over LIBOR
GBP
3.5% over base
2% over LIBOR
2.6% to 2.68%
2.75% over base
USD
NTD
GBP
USD
Euro
Euro 1.3% over Euribor
2026
2018
2017
2017
2018
2017
2018
Reconciliation of liabilities arising from financing activities
Group
Company
2017
$000
924
924
5,811
5,811
2016
$000
6,148
6,148
2,774
2,774
2017
$000
924
924
5,479
5,479
2016
$000
6,251
6,251
911
911
Face
Value
2017
$000
Carrying
Amount
2017
$000
Face
Value
2016
$000
Carrying
Amount
2016
$000
1,036
1,036
1,076
1,076
4,175
4,175
5,175
5,175
–
–
247
247
–
1,192
–
–
–
332
6,735
–
1,192
–
–
–
332
6,735
–
911
241
594
56
622
8,922
Non-current liabilities
Current liabilities
Non-current liabilities
Current liabilities
2016
$000
6,148
2,774
8,922
2015
$000
8,842
2,896
11,738
Cash flows
$000
(49)
(2,138)
(2,187)
Reclassification
$000
(5,175)
5,175
–
$000
(2,694)
(122)
(2,816)
$000
–
–
–
–
911
241
594
56
622
8,922
2017
$000
924
5,811
6,735
2016
$000
6,148
2,774
8,922
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20. Trade and other payables
Current
Trade payables
Other tax and social security payables
Other payables and accrued expenses
Amounts payable to subsidiary undertakings
Group
Company
2017
$000
12,272
272
4,310
–
16,854
2016
$000
13,029
367
3,803
–
17,199
2017
$000
9,360
5
1,257
4,616
15,238
2016
$000
8,202
–
1,512
3,476
13,190
21. Employee benefits
Defined contribution plans
The Group operates a number of defined contribution pension plans.
The total expense relating to these plans in the current year was $409,000 (2016: $374,000).
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 2,099,064 (2016: 2,052,064) shares. Exercise prices are set out below. 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
Issue 5
£1.51
£3.90
£3.90
44%
5 years
0.9%
Issue 4
£2.09
£2.09
£2.09
44%
5 years
0.9%
Issue 3
£1.63
£1.63
£1.63
44%
5 years
0.9%
Issue 2
£0.61
£1.37
£1.40
50%
5 years
0.9%
Issue 1
£0.19
£0.46
£0.49
50%
5 years
0.9%
The fair values at grant date were converted at the exchange rate on the grant date to give fair values of $1.96, $2.93, $2.43, $0.98 and
$0.29 per option. The total expense recognised in the period in respect of share options is $209,000 (2016: $312,000).
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at the end of the year
Weighted
Average
Exercise Price
2017
£0.78
£3.90
–
£0.49
£1.31
Number
of Options
2017
1,254,398
47,000
–
(670,200)
631,198
Weighted
Average
Exercise Price
2016
£0.59
£2.09
£1.60
£0.49
£0.78
Number
of Options
2016
1,895,370
156,694
(67,666)
(730,000)
1,254,398
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. Provisions
Group
Balance at 1 January
Provisions made during the year
Balance at 31 December 2017
Non-current
Current
2017
$000
750
–
750
–
750
750
2016
$000
750
–
750
750
–
750
The provision is in respect of contingent consideration payable on the acquisition of Alpha Display Europe GmbH (since renamed
Quixant Deutschland GmbH).
The Company has no other provisions.
23. Capital and reserves
Share capital
Fully paid ordinary shares of 0.1p per share
Balance at 1 January 2017
Issued for cash
Exercise of share options (see note 21)
Balance at 31 December 2017
Balance at 1 January 2016
Issued for cash
Exercise of share options (see note 21)
Balance at 31 December 2016
Ordinary
shares
Number
65,364,782
–
670,200
66,034,982
64,634,782
–
730,000
65,364,782
Share
Capital
$000
105
–
1
106
104
–
1
105
Share
premium
$000
5,676
–
426
6,102
5,181
–
495
5,676
The holders of fully paid 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.
670,200 ordinary shares were issued following the exercise of vested options arising from issue 1 in 2013 (2016: 730,000) (see note
21). Options were exercised at an average price of £0.49 per share.
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:
2.0p (2016: 1.5p) per qualifying ordinary share
Total dividends recognised in the year
2017
$000
1,691
1,691
2016
$000
1,400
1,400
After the Balance Sheet date dividends of 2.6p per qualifying ordinary share (2016: 2.0p) were proposed by the Directors. This dividend
has not been provided for.
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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.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Financial instruments – Group and Company continued
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
Company
2017
$000
47,260
(11,194)
36,066
2016
$000
34,306
(8,853)
25,453
2017
$000
21,204
(2,205)
18,999
2016
$000
17,269
(1,375)
15,894
Group
Company
2017
$000
47,260
6,735
53,995
2016
$000
34,306
8,922
43,228
2017
$000
21,204
6,403
27,607
2016
$000
17,269
7,162
24,431
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
2017
$000
11,194
16,967
28,161
2016
$000
8,853
18,328
27,181
2017
$000
2,205
8,722
10,927
2016
$000
1,375
11,007
12,382
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
Company
2017
$000
2,547
7,649
5,942
652
177
16,967
2016
$000
2,279
9,982
5,235
828
4
18,328
2017
$000
–
–
–
–
–
–
2016
$000
–
–
–
–
–
–
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Liquidity risk
The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting
agreements.
Group
31 December 2017
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Group
31 December 2016
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Company
31 December 2017
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Company
31 December 2016
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Trade and
Other
Payables
$000
Other
Financial
Liabilities
$000
Total
$000
16,854
6,735
23,589
16,272
582
–
16,854
$000
1,588
4,239
1,123
6,950
$000
17,860
4,821
1,123
23,804
$000
17,199
8,922
26,121
17,199
–
–
17,199
2,731
60
6,230
9,021
19,930
60
6,230
26,220
Trade and
Other
Payables
$000
Other
Financial
Liabilities
$000
Total
$000
15,238
6,403
21,641
15,238
–
–
15,238
$000
1,256
4,239
1,123
6,618
$000
16,494
4,239
1,123
21,856
$000
13,190
7,162
20,352
13,190
–
–
13,190
972
60
6,230
7,262
14,162
60
6,230
20,452
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Financial instruments – Group and Company continued
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
2017
$000
11,194
16,967
28,161
2016
$000
8,853
18,328
27,181
2017
$000
2,205
8,722
10,927
2016
$000
1,375
11,007
12,382
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
(16,854)
(5,811)
(22,665)
(17,199)
(2,774)
(19,973)
(15,238)
(5,479)
(20,717)
(13,190)
(911)
(14,101)
(924)
(23,589)
(6,148)
(26,121)
(924)
(21,641)
(6,251)
(20,352)
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 trade and other receivables and cash at bank. At 31 December 2017 the average interest rates
earned on the temporary closing balances were 1.3% and 1.25% (2016: 0.54%).
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.
25. Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
Group
Company
2017
$000
438
686
1,124
2016
$000
311
202
513
2017
$000
198
199
397
2016
$000
154
–
154
Group
During the year $495,000 was recognised as an expense in the Profit and Loss Account in respect of operating leases (2016: $378,000).
Company
During the year $175,000 was recognised as an expense in the Profit and Loss Account in respect of operating leases (2016: $182,000).
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26. Commitments
The Group and Company were committed to the implementation of a group accounting system which was in progress at 31 December
2017. The amount committed, not spent, at that date was $434,000 (2016: none).
27. Contingencies
Neither the Group nor Company had any contingencies existing at 31 December 2017 (2016: none).
28. Related parties
Group
In June 2016 two Directors entered into a related party transaction. The wife of G P Mullins rented a house to a subsidiary company at
a rent of £2,500 per calendar month. The rent payable is determined on an arm’s length basis. The subsidiary company provides the
house rent free to J F Jayal. It was agreed between Mrs Mullins and Mr Jayal to terminate the agreement in March 2018.
During the year the Group paid €31,200 (2016: €31,200) for administration services to Francesca Marzilli, the wife of Nick Jarmany. In
addition the Group paid £3,976 (2016: £1,032) to Ruth Jayal for administrative services, the wife of Jon Jayal.
There were no other related party transactions other than transactions with Key Management Personnel, who are the Directors
disclosed in Note 7 above.
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.
Stock Code: QXT
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Quixant Annual Report and Accounts 2017
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COMPANY INFORMATION
Directors
N C L Jarmany
G P Mullins
C-T Lin
A C Preddy FCA
J F Jayal
M J Peagram
G van Zwanenberg FCA
G A Y Hudson
Company secretary
L E Park
Registered office
Auditor
Nominated advisor
and Broker
Financial PR
Aisle Barn
100 High Street
Balsham
Cambridge
CB21 4EP
KPMG LLP
Botanic House
100 Hills Road
Cambridge
CB2 1AR
finnCap
60 New Broad Street
London
EC2M 1JJ
Alma PR
71–91 Aldwych
London
WC2B 4HN
Principal Bankers
Barclays Bank PLC
Legal advisors
Freeths LLP
Eversheds Sutherland (International) LLP
Registered number
04316977
Website
Ticker
www.quixant.com
London: QXT
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25978 27 March 2018 11:42 AM Proof 6
Quixant plc
Aisle Barn
100 High Street
Balsham
Cambridge
CB21 4EP UK
T: +44 (0)1223 892696
F: +44 (0)1223 892401
E: info@quixant.com
Registered Number: 04316977
Registered in England and Wales
25978 27 March 2018 11:42 AM Proof 6
25978 27 March 2018 11:42 AM Proof 6