Annual Report and Accounts
For the year ended 31 December 2018
A PLATFORM FOR SUCCESS
QUIXANT
Quixant designs, develops and manufactures gaming
platforms and display solutions for the gaming and slot
machine industry. Through its Densitron division, Quixant
also supplies electronic display solutions to a wide range of
global industrial markets.
Strategic Report
Highlights
At a glance
Chairman’s Statement
Investment Case
Chief Executive’s Report
Financial Review
Business Model and Strategy
Key Performance Indicators
Principal Risks
Board of Directors
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2
4
5
6
10
11
12
14
16
Governance
Chairman’s Introduction to Governance 18
19
Governance Report
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Directors’ Report
Statement of Directors’ Responsibilities
in respect of the annual report and the
financial statements
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Financial Statements
Independent Auditor’s Report
Consolidated Statement of Profit and Loss
and other Comprehensive Income
Consolidated and Company
Balance Sheets
Consolidated and Company
Statement of Changes in Equity
Consolidated and Company
Cash Flow Statements
Notes
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29
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31
33
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Strategic Report
Highlights
FINANCIAL HIGHLIGHTS
• Revenue growth of 5% to $115.2 million (2017: $109.2 million)
» Quixant Gaming division revenue $77.6m (2017: $71.1m)
– Gaming Platforms revenue $62.5m (2017: $54.8m)
– Gaming Monitors revenue $15.1m (2017: $16.3m)
» Densitron division revenue of $37.5m (2017: $38.1m)
• Adjusted1 pre-tax profit up 3% to $18.2m (2017: $17.7m)
• Pre-tax profit down 5% to $14.3m (2017: $15.0m)
including $3.0m restructuring costs
• Adjusted2 diluted EPS up 14% to $0.260/share
(2017: $0.229/share)
• Diluted EPS up 8% to $0.213/share (2017: $0.197/share)
• Net cash from operating activities up 40% to $11.3m (2017: $8.1m)
• Net cash at period end of $9.7m (2017: $4.5m)
• Proposed full year dividend of 3.1p per share (2017: 2.6p),
an increase of 19%
1. Adjusted by adding back items included in the adjusted PBT reconciliation in note 1 to the financial
statements totalling $3.9m (2017: $2.7m).
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 2018 these amounted to $3.1m (2017: $2.1m).
OPERATIONAL HIGHLIGHTS
• Increased market share in the core Gaming Division to
13%, supplying 61,000 platforms (2017: 11% and 52,000)*
• Enhanced features added to the Gaming Ecosystem®,
expanding Quixant’s routes to market
• New products launched by Densitron to target the
broadcast market
• Enhanced Group structure to create more scalable operations
• Appointment of key senior management, including Guy
Millward as Chief Financial Officer and Andrew Miller as Head
of Corporate Operations
• Significant long-term growth opportunities, including
opening of the market in Japan
* Source: G3 Global Gaming Market report 2018 – 475,000 annual replacement cycle
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Company Overview
AT A GLANCE
Quixant technology enables manufacturers of gaming machines
to design and ship world-beating products in record time.
What we do
Founded in the UK in 2005 by current senior
management, Quixant designs, develops and
manufactures gaming platforms and display
solutions for manufacturers of pay-to-play
gaming machines.
With an extensive library of IP, Quixant
uniquely combines computer and electronic
hardware and software expertise with a deep
understanding of the requirements and
regulations of the gaming and slot machine
industry. In 2015 the company added a sec-
ond division with the acquisition of Densitron
Technologies plc, an established and respect-
ed supplier of electronic display solutions to
global industrial markets.
Where we operate
Quixant is headquartered in
Cambridgeshire, UK, has a
manufacturing facility in Taiwan
and offices in North America,
Europe and Japan.
Employees
203
Countries we supply
66
Quixant plc
(Taiwan Branch)
• Hardware design
and manufacturing
management
• Parts procurement and
lifetime management
• Quality management
(ISO9001:2015
certified)
• Product returns
and repair
Quixant UK
• Sales (outside
Americas)
• Marketing
Quixant Sales
Quixant USA
• Sales to the Americas
• Local customer
technical support
• Local warehousing
and logistics
Quixant Italia
• Software development
• Specialist gaming
technology design
and development
• Customer technical
and application
support centre
• ISO 9001:2008 certified
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“
Our business is built around the development
and supply of innovative gaming platform
and monitor solutions exclusively to the
global gaming industry.”
Revenue
($million)
Densitron Sales
Europe
• Non-gaming
electronic display
solutions
North America
• Non-gaming
electronic display
solutions
Japan
• Non-gaming
electronic display
solutions
Gaming Monitors
Densitron
Gaming Platforms
Densitron
Technologies
• Hardware design
and manufacturing
management
• Parts procurement and
lifetime management
• Quality management
(ISO9001:2015 certified)
• Product returns
and repair
Quixant Annual Report and Accounts 2018
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Chairman’s Statement
CHAIRMAN’S STATEMENT
Quixant has continued to deliver
healthy year on year growth in 2018
I am delighted to report on a
successful year of record financial
performance combined with
undertaking significant
enhancements to the fabric of
the organisation as we become a
larger and more complex
enterprise.
Our core gaming platforms business has
experienced another year of strong double-
digit growth. Our share of the global
market for gaming platforms has grown to
around 13% (2017: 11%), giving us plenty
of scope to continue our record of revenue
growth. Despite some softness in 2018
impacting gaming in the short term, the
outlook for the industry remains buoyant
with significant long-term opportunities,
not least the opening of the market in
Japan.
During the course of the year we
restructured the business to create a more
scalable operation and also made several
significant hires to the senior management
team. Guy Millward was appointed as Chief
Financial Officer in October 2018, taking
over from Cresten Preddy who retired
after many dedicated years of service to
the company. I would like to personally
thank her for her invaluable contribution
and wish her well in her retirement. We
also appointed Andrew Miller as Head
of Corporate Operations with a remit
to maintain an effective organisational
infrastructure to support our ambitious
growth trajectory. In early 2019 we also
have made exciting appointments to
bolster the management of our Densitron
division.
Our business operations continue to
generate healthy cash balances despite
the demands on working capital over the
last few years. Our confidence in the future
growth of the business and cash generation
leads the Board to recommend an increase
in the dividend by 19% to 3.1p per share
(2017: 2.6p per share).
Michael Peagram,
Chairman
Michael Peagram,
Chairman
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Investment case
INVESTMENT CASE
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The only specialist
outsourced provider
of gaming platforms
Very strong gaming
customer retention
Considerable scope for
long-term growth with
13% market share currently
Making inroads with the
largest gaming
manufacturers
Major new geographies
opening up to gaming
Opportunity to leverage
engineering capability into
new vertical markets
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Chief Executive’s Report
CHIEF EXECUTIVE’S REPORT
Continued strong growth
despite market headwinds
Jon Jayal
Chief Executive Officer
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Quixant Annual Report and Accounts 2018
Quixant has continued to deliver
healthy year on year growth in
2018 driven by the core gaming
platforms business posting 14%
growth in revenue over the year
to $62.5m (2017: $54.8m) relative
to the previous year.
As explained in the interim results, during
the year we made a strategic decision
to reduce the amount of low margin,
commoditised gaming monitors business
we were supplying due to increasing
competition and the low achievable return
on investment. As a result, gaming monitor
revenue reduced to $15.1m from $16.3m
in 2017. Densitron revenue was stable as
expected at $37.5m (2017: $38.1m) and the
business continues to be profitable and
provide interesting opportunities in markets
outside gaming.
Gross margins across the Group remained
stable over the year despite significant
upward pressure on component prices.
Revenue breakdown
Gaming division
Business model
Quixant’s gaming platform solutions have
been the core of our business proposition
since the Company started in 2005. The
founders of Quixant have a pedigree in
industrial computer and display systems and
identified a niche opportunity to develop
bespoke computer solutions specifically for
the casino gaming and slot machine industry.
These gaming platforms have always
incorporated both computer hardware and
computer software elements packaged in
solutions which meet the stringent regulatory
needs of global gaming markets.
The game software is the most important
factor in our customers’ commercial
success – a game which attracts players and
retains them at machines for longer is the
objective all customers seek. However, many
manufacturers allocate significant resources
developing the underlying computer
platforms on which the games operate,
despite the fact that the player does not
directly experience these elements. Quixant
brought to market a credible, purpose built,
outsourced option which enabled customers
to focus on the core element of game
design and rely on Quixant for a regulatory
compliant gaming computer platform.
Our continued investment into the gaming
specific hardware and software features of
our gaming computer platforms has earned
us the recognition of being the industry
leaders in outsourcing for these elements
of the machines. Outsourcing computer
platform design also enables customers to
bring products to market quicker. Whilst
typically there is a 12-18 month gestation
period for new gaming platform wins
generating revenue, we have helped reduce
this to as little as 6 months on occasions,
providing customers with a short cut to
bringing products to market.
Our Gaming Ecosystem® is the cornerstone
of our gaming proposition. Combining all
elements of our hardware and software
solutions, third party device support as well
as our partnership and customer support
model, the industry recognises Quixant’s
Gaming Ecosystem® as the standard-bearer in
regulatory compliant, fit for purpose, gaming
02040608010012020172018Gaming Platforms Gaming Monitors Densitron62.554.437.538.115.116.3 $mRevenue breakdown Content Section at start:
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Sales by customer unit purchase quantity
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This new feature is a blend of both
hardware and software elements and is
available on our newer gaming platforms as
well as through an add-on product which
can be retrospectively purchased.
Gaming platforms
The success of the business strategy has
resulted in Quixant increasing its market
share every year and in 2018 we supplied
61,000 platforms, an increase of 17% over
the 52,000 we supplied in 2017. Based on
an annual replacement cycle of around
475,000 machines this suggests a market
share of around 13%.
During the year we also made the first
volume shipments to Novomatic, one of
the largest gaming companies in Europe,
after several years of collaboration. We have
undertaken several projects with Novomatic
and enjoy a privileged relationship with
them as a technology partner. We see
scope for continued and expanded
collaboration with them over the
coming years.
We also saw strong growth in 2019 from
a major manufacturer who we started
supplying for the first time in 2017 with one
of our cost-effective computer platforms
used in their jackpot controllers. This
exciting new business win has led to us
collaborating on several other projects
which strengthen our pipeline. Overall, we
saw a migration of the mid-tier of customers
(by volume) growing into top tier customers
as their consumption of Quixant computer
platforms grows. This is a typical scenario as
new business ramps.
We also saw healthy growth in our cost-
effective platform range, which is well
suited to casino systems product and lower
cost markets where high levels of graphical
intensity are not critical.
technology. The strength of the Gaming
Ecosystem® is that it empowers customers
with a wealth of compatible, supported
hardware and software which accelerate
game design, enable faster new market
penetration and save development costs.
Some of the largest customers in the
industry have started to recognise the
benefits of Quixant’s Gaming Ecosystem,
opening doors to us in niche areas of these
businesses. These types of engagement
provide an excellent platform for these
major customers to test Quixant’s value
proposition and lead to further outsourcing.
We have seen this already with one of our
customers in this space who first started
working with us in 2016. We have since
won another project with them and they
contributed several million dollars of
revenue in 2018.
Quixant introduced gaming monitors to
its product portfolio in 2015 to augment
the revenue generated by the platforms
business. There is at least one but typically
several gaming monitors per machine, all
of which are connected to the gaming
platforms. Whilst the extent of innovation
in these products is more limited, we
have been gradually adding increased
functionality which enables Quixant to
differentiate itself. This is particularly true in
gaming button decks which are the control
device used for the latest machines to
replace mechanical buttons.
New Gaming Ecosystem® features
A new feature we started promoting in the
Gaming Ecosystem® in late 2017 was our
LED driving solution called QxLED. Slot
machines are increasingly making use of
LED illumination around the cabinet to
make them more vibrant and enticing.
Driving these LEDs requires both hardware
and software elements which are time
consuming to develop. QxLED brings an
off-the-shelf product to the industry which
manufacturers can use to drive the LEDs
while minimising development effort. With
Quixant’s tools, the LEDs can be synchronised
to content on the screen to enable ambient
lighting effects as part of game play.
Quixant Annual Report and Accounts 2018
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010,00020,00030,00040,00050,00060,00070,00020172018<1k pcs 1k-5k pcs >5k pcs8,8698,55746,63231,9235,57911,726 $mSales by customer unit purchase quality
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CHIEF EXECUTIVE’S REPORT CONTINUED
Gaming monitors
In 2018, we shipped 13,150 button decks
(2017: 12,950) and 17,650 (2017: 18,500)
main screen monitors. We also shipped
a significant value of associated monitor
product such as touch sensors and
controllers which are not reflected in the
figures above. Quixant’s gaming monitors
business has been broadly separated
into two product categories: main screen
monitors and electronic button decks.
The majority of the competitors for gaming
monitors originate in Asia (mainly Korea)
and have typically been more focused on
the main screen monitors (which have
widespread adoption in markets outside
gaming) rather than the gaming specific
button decks.
Our decision to reduce exposure to some
of the highly price sensitive main screen
gaming monitors business has released
resources to develop more bespoke
button deck solutions, which we believe
represent an increase in our addressable
market by around $250m. Whilst this as
expected resulted in our 2018 gaming
monitors business revenue falling to
$15.1m from $16.3m in 2017, it has led to
profitability improvements and in the long
term we believe a more stable platform for
sustainable growth.
During the year we commenced shipments
of button deck solutions to a major Japanese
gaming manufacturer. Supported by our
Tokyo team who were brought on as part
of the Densitron acquisition, this exciting
business win positions us well for further
opportunities in this significant market.
We will be launching a new modular design
27” floating monitor in 2019 which offers the
flexibility for cost-effective customisation of
the main screen monitors to fit customers
specific requirements.
Sales by gaming monitor product type
Supply chain challenges
Shortages in the electronic components
industry have presented a significant
challenge to electronics equipment
manufacturers over the last couple of
years. The supply of several categories of
component, including memory components
(DRAM) and sub $1 commodity “passive”
components (resistors, capacitors and
inductors) has failed to meet the demand
in the market. The resulting shortages have
placed major upward pressure on prices
and dramatically extended lead times for
these components. The chart illustrates the
spot memory price of DDR4 progression of a
specific type of DRAM memory components
over the last 24 months.
DDR4 memory price relative to H1 2016
Passive components have historically been
available with, in some cases zero lead times
but during 2018 were being quoted with up
to 8-month lead times.
Quixant recognised the potential dislocation
early and in 2017 we gradually started to
build strategic stock of critical component
lines. This continued throughout 2018 and
the elevated stock position has enabled us
to maintain gross margins and, critically,
maintain committed customer lead times.
Whilst this environment has been
challenging for us to navigate, our expertise
in component sourcing has enabled us to
maintain our historic core gaming platform
business gross margin.
Gaming market outlook
The land-based gaming industry continues
to present major opportunities for market
share expansion. With the opening of new
territories such as Japan, there is scope for a
general growth in regulated markets which
Quixant is well-positioned to benefit from.
With a background of overall market growth,
we continue to grow market share of the
annual replacement cycle as manufacturers
continue to look to outsource.
Densitron division
Business strategy
Densitron’s business has traditionally been
in the supply of small display components
which are used in industrial equipment in a
wide variety of vertical markets. The business
has global reach and an experienced
sales and engineering team capable of
identifying and delivering suitable display
solutions which meet customers’ specific
requirements. An understanding of the
environmental characteristics, performance
requirements and available technologies has
been a key strength of the business.
The commoditised nature of the display
components market and the strengthening
capability for industrial equipment
manufacturers to source directly from Asia
has increased competition in Densitron’s
core business. When Quixant acquired
Densitron in November 2015, we embarked
on a change in direction for the business
to identify opportunities for higher value,
differentiated products.
To be successful in the crowded electronics
marketplace, it is essential to focus on
specific verticals and offer compelling
products which are difficult for the bulge
bracket component suppliers to attack.
This change in business strategy has required
a change in management and mindset to
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02468101214161820172018Main screens Button decks8.76.45.910.4 $mSales by gaming monitor product type0.00.51.01.52.02.53.0Dec-18Jun-18Dec-17Jun-17Dec-16Jun-16DDR4 Memory Price Content Section at start:
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enable us to identify suitable vertical market
opportunities and thereafter evolve new
product offerings which capitalise on them.
Broadcast market opportunity
Shortly after completion of the acquisition,
we undertook a detailed analysis of the
vertical markets Densitron supplied and
evaluated the products supplied, market
dynamics/size, technology requirements
and other participants in the markets with
a view to identifying opportunities for
Densitron to execute its vertical market
focused strategy. We built a set of criteria
which a vertical market needed to meet to
be suitable for consideration.
Broadcast was identified as one of several
sectors which fulfilled many of the necessary
criteria and as a result in early 2017 we
exhibited at a London broadcast industry
show, BVE 2017. We have since exhibited
twice at IBC in Amsterdam and once at NAB
in Las Vegas which address the EMEA and
North American broadcast markets.
We have also started launching market-
centric products. Our UReady TFT display
range won a best of show award at NAB
in 2018 and gives broadcast customers
a unique, high quality display for their
rackmount equipment. Densitron’s mission
in broadcast is to empower customers with
a route to implementing the benefits of
touch screen technology whilst addressing
the lack of tactile feel which is essential for
certain applications.
We are also introducing embedded
computer products and software to make
driving these displays easier and have
brought our first solutions to market, which
are now being marketed to customers.
Our broadcast pipeline has now grown
to $4.5m and we have confidence the
industry represents a major opportunity for
a diversified source of revenue for Quixant
Group. We believe the business secured
to date is a source of top line growth for
Densitron in the coming 12-24 months.
Investment case
Quixant has built a successful business
focused on delivering technically innovative
products targeted at specific vertical markets.
The business has an ingrained culture of
engineering competence, innovative thinking
and commerciality which has delivered healthy
growth in the gaming industry. The highly
regulated nature of the gaming industry, the
size of the market and strength of Quixant’s
brand and products provide the engine for
continued strong growth in the gaming sector.
Alongside this growth, Quixant’s ability
to generate vertical market focused
technology has wider applications in a
variety of other markets and Densitron
has the ability to identify those markets
and augment the growth in gaming. The
broadcast opportunity is in its infancy but is
starting to gather momentum.
The Company also generates significant cash,
has a strong balance sheet and low leverage.
Organisation enhancements
Quixant’s growth over the last 5 years has
been strong with revenues increasing close
to 5 times. In addition, the acquisition of
Densitron and the trebling in the headcount
creates a more complex enterprise to
manage. It is therefore right that we have
taken significant steps to ensure an effective
management structure to deliver the
business today and the significant growth
potential for the future. We undertook the
move to a Corporate/Divisional operating
structure to ensure both Gaming and
Densitron business are expertly managed
and leverage Group resources in HR,
finance, IT and legal effectively.
Alongside the appointment of Guy Millward
and Andrew Miller to Quixant’s corporate
team, we have also brought two high calibre
executive directors to Densitron’s Board
in early 2019. Simon Jones will be joining
Densitron as Group Managing Director for the
Densitron Division. Simon has a distinguished
career, initially as a consultant at Mercer,
Capgemini and KPMG and subsequently and
latterly as a director in B2B businesses such as
Dyson, Jewson and PHS. Martyn Gates was
also appointed in January 2019, as Product
Director and brings 36 years commercial,
engineering and research experience in the
broadcast sector to Densitron.
We have also complemented these Board
level hires with staff across a spectrum of roles
to enhance our commercial and technical
edge. For example, we have brought on
former gaming industry engineers which
not only enables us to collaborate more
effectively with customers but also to be more
innovative in our solutions.
We enter 2019 with a significantly
strengthened management team and an
effective scalable organisation structure
which positions us well for the future.
Summary and outlook
Our core gaming platforms business
continues to grow strongly and as expected,
the gaming monitors business saw reduced
revenues in 2018, but the focus on higher
value product and our greater technical
expertise leads us to believe in strong,
profitable growth potential for this area of the
business. During the year we experienced
softer than anticipated demand for our
platforms from some of our key customers.
Overall market conditions have normalised
during 2019, although some of our key
customers have indicated to us that their
demand for our gaming platforms will be
more second half weighted than previous
years, and we consequently anticipate our
performance to mirror this trend. In light
of this, we are taking a modestly more
prudent view of our anticipated revenues
for 2019, although our flexible cost model
will ensure that the consequential impact
on our anticipated profitability for 2019 is
minimised. Nonetheless, with a substantial
gaming opportunity pipeline, we remain
confident in long term buoyant growth and
we believe a nuanced sales message, our
strategy of targeting a range of stakeholders
in the customers and continued investment
into innovation in our product will lead to
long term success in converting the largest
manufacturers to increasingly adopt Quixant.
With a healthy pipeline, we will be delivering
revenue in the broadcast sector through
the Densitron business in 2019. We have
a considerably strengthened team and
combined with our streamlined organisational
structure, we believe Quixant is excellently
positioned to deliver sustainable, healthy
growth in revenue and profits.
Jon Jayal,
Chief Executive Officer
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Financial Review
FINANCIAL REVIEW
The Quixant Group achieved revenues of $115.2 million
in the year, an increase of 5% on 2017 ($109.2 million).
Revenue
Gaming division revenues were $77.6 million,
an increase of 9% on 2017 ($71.1 million). This
was split between Gaming platform revenue
of $62.5 million, a 14% increase on 2017
(2017: $54.8 million), and Gaming monitor
revenue of $15.1 million, a 7% decrease on
2017 (2017: $16.3 million). Densitron division
revenues were $37.5 million, a decrease of
2% on 2017 (2017: $38.1 million).
The growth in the Gaming division has
largely been driven by the continuing
development of existing customer
relationships. Gaming monitor revenue
declined following the strategic decision
to reduce the amount of low margin,
commoditised gaming monitors business
we were supplying. Densitron revenues
declined marginally as sales of new products
are yet to ramp up to replace declining older
product revenue.
Gross profit and gross profit margin
Our gross profit for the year was $39.8 million
representing a gross margin of 35%. This
compares with a gross profit achieved in
2017 of $37.0 million and a gross margin of
34%. The underlying gross margin for each
part of the business has been maintained
in the year with the improvement coming
from the move away from low margin
gaming monitor sales. Component pricing
and lead times have proved challenging
in 2018 with component shortages raising
prices and pushing some lead times out to
9 months, we have adapted our buying to
accommodate this and maintain
our margins.
Profit before tax (PBT)
Adjusted PBT increased 3% to $18.2 million
(2017: $17.7 million). PBT decreased by
5% to $14.3 million (2017: $15.0 million).
Adjustments to profit before tax amounted
to $3.9 million in 2018 (2017: $2.7 million)
and comprise share-based payments and
amortisation of acquired intangibles that are
not cash expenses and restructuring costs,
which are not comparable with the prior
year, as we strengthened resources in the
business – see note 1.
Expenses
During the year the Group expenditure
on research and development increased
by 21% to $6.4 million (2017: $5.3 million)
representing 16% of gross profit (2017:
14%). These costs relate to investment
activities principally undertaken in Taiwan,
Italy and Slovenia. $2.6 million of these costs
were capitalised (2017: $1.6 million) with
amortisation for the year on total capitalised
development costs of $1.3 million
(2017: $1.0 million).
We have continued to strengthen the
business across all areas in the year,
including increasing our headcount to
203 people (2017: 176 people). Staff
costs, being the largest contributor to
overheads, increased by 27% in the year
to $16.3 million (2017: $12.8 million).
Taxation
The tax charge for the year decreased
to $0.2 million (2017: $1.9 million),
representing a corporation tax charge of
1.2% on pre-tax profits (2017: 12.6%), due
to higher tax allowances and lower taxable
profits. 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, tax relief on the exercise
of employee share options (some of which
relates to prior years), prior year double tax
relief not previously claimed and the use of
brought forward losses in Densitron.
Earnings per share
Basic earnings per share increased by
7% to $0.214 per share (2017: $0.200 per
share). Diluted earnings per share increased
8% to $0.213 per share (2017: $0.197 per
share). Adjusted fully diluted earnings per
share as set out in note 10 to the financial
statements increased by 14% to $0.260 per
share (2017: $0.229 per share).
Balance Sheet and Cash Flow
Non-current assets have increased in the year
to $22.5 million (2017: $21.3 million) due to
the increased R&D discussed above. We have
changed the methodology for assessing
impairment this year, the Densitron group
of CGUs has been used, rather than the four
sub divisions of Densitron used in prior years,
because the Board of Directors no longer
monitor goodwill at the lower level of
sub divisions for internal purposes.
Reporting to the Board has also changed
in the same way. Inventory has decreased
to $19.4 million (2017: $21.2 million). Raw
material inventory has increased as we
have made purchases to counter long lead
times and to ensure we have sufficient
components that are no longer sold by
suppliers to continue to deliver our product
set. Finished goods have decreased owing
to a strong trading month in December
which also caused the large increase in
trade receivables. Trade payables have
increased as we continue to maintain stock
levels for growing sales.
The cash generated from operating
activities in the year amounted to $11.3
million (2017: $8.1 million). The increase
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 $4.1 million (2017: $2.3
million) on investing activities including
capitalised product development.
In the year $5.4 million has been used
to repay borrowings (2017: $2.2 million).
The only remaining debt at 31 December
2018 was a $0.9m mortgage on the Taiwan
property and a factoring facility in France of
$0.3m which was repaid in February 2019.
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 3.1p per share, an
increase of 19% on the previous year (2017:
2.60p per share) payable on 10 May 2019 to
all shareholders on the register on 23 April
2019. The corresponding ex-dividend date is
18 April 2019.
Guy Millward
Chief Financial Officer
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BUSINESS MODEL AND STRATEGY
Financially, 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.
To measure the success or otherwise of
the strategy, 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.
Our business model is different for each
division. In Gaming, we invest in research
and development to design and produce
computer platforms and electronic display
solutions. We then manage the outsourced
manufacture of these products and then
sell them to customers in the gaming and
slot machine industry, holding stock of the
raw materials, work-in-progress and finished
goods so we can control the whole process.
The customers take our products and use
them to manufacture gaming machines
which are then sold to various outlets
where the games can be played, primarily
in casinos. Our gaming customers include
many of the world’s leading manufacturers of
gaming machines. In Densitron, we design
and develop electronic display products for
various industrial sectors as well as re-selling
other display products. Once a design is
agreed with a customer we outsource
the manufacture and deliver the finished
products to the customer. Our strategy
for the Group and each specific division is
covered in the Chief Executive’s report
on page 6.
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Business Model, Strategy and
Key Performance Indicators
KEY PERFORMANCE INDICATORS
Operational
KPI and objective
Procedure
Comment
Revenues
Revenues are reviewed to ensure that the
Group’s business continues to grow in
line with expectations.
The Board reviews revenues against budget
as part of its management reporting review
each month.
Revenues have continued to grow during
the year.
Gross profit margin
To ensure that the Group maintains
appropriate returns for the products that
it is selling.
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.
Margins are being maintained in all areas of
the Group.
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 (usually 3 months revenues).
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 2018 the
Board is satisfied that the level of inventory
obsolescence is being controlled and that
levels of raw material inventory at year end
were required to offset long lead times (9
months or more) for key components.
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Financial
KPI and objective
Procedure
Comment
Profit before tax (PBT)
To ensure that the Group is providing a
sufficient return to its shareholders and
that the Group’s profit is growing in line
with market expectations.
Debtor days
The Board reviews PBT and adjusted PBT
monthly as part of its review of
management information.
The level of adjusted PBT has increased and
PBT decreased year-on-year and is slightly
behind 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.
Additionally, it is provided with a monthly
analysis of the profile of aged debts for each
part of the business.
The Board is satisfied with the procedures that
are in place to qualify customers to mitigate
the Group’s exposure to credit losses.
In both the current year and previous year the
Group has incurred minimal levels of
credit losses.
Cash and borrowings balances
To ensure that the business has sufficient
headroom to meet its future obligations.
The Board is provided with a report showing
cash generated in the year and the current level
of cash balances within the Group along with
the current level of borrowings and available
facilities.
At 31 December 2018 the Group had net cash
(cash less borrowings) of $9.7m compared with
$4.5m at 31 December 2017.
Most debt has been repaid during the year
and the remaining debt is expected to be
repaid early in 2019.
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Principal risks relating to the
business
of the Group
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.
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.
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Risk
Description
Mitigation
Comment
Key persons
Intellectual
property
protection
Cyber risks
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.
Cyber risk causes disruption to
the business or loss of IP following
a cyber-attack. This could cause
interruption of internal or external
facing systems, including interruption
to the business caused by a loss of data
and reputational damage from a loss of
personal or confidential data. The cost or
effort to reconstitute data that has been
stolen or corrupted and commercial loss
from the theft of commercially sensitive
data, including IP.
The executive officers are subject to
long-term contracts.
Staff turnover of key personnel
continues to be low.
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.
Deploying the latest generation of
firewall protection.
No issues were reported in 2018 but
we maintain on-going vigilance.
Ongoing improvement in the rigour
of authentication processes including
wider use of single sign on.
Improved protection of confidential
data on portable computers.
Improved process of system patching
to close security loopholes.
Use of third party audits.
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. The Group’s EU-based subsidiaries can operate
independently of the UK and vice-versa. The Board notes that in
the event of a no-deal Brexit WTO tariffs on the Group’s products are
currently zero for goods exported to the EU from a non-EU country.
The Strategic report contains certain forward-looking statements.
These statements are made by the Directors in good faith based on
the information available to them up to the time of their approval
of this report and such statements should be treated with caution
due to the inherent uncertainties, including both economic
and business risk factors, underlying any such forward looking
information. This Strategic report has been prepared for the Group
as a whole and therefore gives greater emphasis to those matters
which are significant to Quixant plc and its subsidiary undertakings
when viewed as a whole.
This report was approved by the Board of Directors on 25 March
2019 and signed on its behalf by:
This Strategic report has been prepared solely to provide additional
information to shareholders to assess the Group’s strategies and the
potential for those strategies to succeed. The Directors, in preparing
this Strategic report, have complied with section 414c of the
Companies Act 2006.
Guy Millward
Director
Quixant Annual Report and Accounts 2018
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Board of Directors
BOARD OF DIRECTORS
Michael Peagram
Non-executive Chairman
Nicholas Jarmany
Executive Vice-Chairman
Jon Jayal
Chief Executive Officer
Gary Mullins
Group Strategic Sales Director
Appointed: 1 February 2013
Appointed: 16 March 2005
Appointed: 20 June 2016
Appointed: 11 January 2006
Skills and experience:
Nick is a founding Director
of Quixant and has brought
extensive management
experience and computer
engineering knowledge to
the Company. Nick has a
background in the technology
industry and he was employed
by Densitron Technologies PLC
for 22 years. In this time, he
held numerous roles in design,
engineering, sales and, finally,
as Group Technical Director.
Nick had overall responsibility
for Densitron’s gaming business
strategy, led the design process
and negotiated with key
suppliers and customers in the
USA, Europe and Asia.
Nick has an honours degree in
Electronic Engineering from the
University of Sheffield.
Skills and experience:
Jon Jayal was one of the key
members of the design team
which developed Quixant’s
first product, the QX-10. Jon
left Quixant in 2006 to broaden
his experience in the financial
sector, both as an investment
consultant at Mercer Limited
and as account manager at
BlackRock, Inc. He re-joined
Quixant in July 2012 as General
Manager of Quixant plc and
latterly Chief Operating Officer
(COO) and is based at the
Company’s UK headquarters in
Cambridge. The Directors believe
that Jon’s deep knowledge
of the technology that is the
foundation of Quixant’s business
together with his wider financial
and managerial experience
means he is well positioned to
lead the management team.
Jon is a Chartered Financial
Analyst and has a first class
honours degree in Electronic
Engineering from the University
of Warwick.
Skills and experience:
Gary is a founding Director of
Quixant and has a proven track
record in technology sales and
marketing. He was employed by
Densitron Technologies PLC for
more than 10 years in sales and
marketing. At Densitron, Gary
was responsible for securing
contracts with numerous multi-
nationals. Gary has a proven
track record of winning large
orders for technical products
from major companies. Prior
to founding Quixant, he was
sales director at NTera Limited,
a nanotech electronic paper
displays developer.
Gary has an honours degree
in Electronic Systems from the
Royal Military College of Science.
Committees:
Chairman of the remuneration
and member of the
audit committees
Skills and experience:
Michael has a background in the
pharmaceutical and chemical
industry. As managing director of
Holliday Chemical Holdings PLC,
he oversaw the international
expansion of the company,
leading to a listing on the Official
List in 1993 and the subsequent
sale to Yule Catto PLC in 1998,
following which he remained
as deputy chairman until 2007.
Subsequently, Michael has
held various non-executive
director positions, principally as
chairman, for growing AIM listed
companies such as CRC Group
PLC (computer and mobile
phone servicing) and RMR plc
(internet conferencing).
Michael is also an active investor
in numerous private technology
companies and is involved
with a number of community-
based business and technology
development ventures.
Michael has a doctorate in
Chemistry from Oxford University
and an MBA from Manchester
Business School.
Other appointments: Michael
is a non-executive director of
GAMA Aviation plc along with a
number of other appointments.
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C-T Lin
Manufacturing Director
Guy van Zwanenberg
Non-executive Director
Gaye Hudson
Non-executive Director
Guy Millward
Chief Financial Officer
Appointed: 12 July 2007
Appointed: 1 March 2013
Appointed: 22 March 2017
Appointed: 1 October 2018
Committees:
Member of the remuneration
committee
Skills and experience:
Gaye’s experience is in the world
of corporate communications,
driving and promoting award
winning communications
programmes to meet the
business objectives of global
enterprises. Most recently Gaye
was Vice President of Corporate
Communications Europe,
Middle East & Africa for Oracle
Corporation, building its brand
and protecting its reputation.
Prior to her experience within
the technology industry
she was on the UK board of
directors of international PR
agencies Hill and Knowlton
and Burson-Marsteller
shaping the development of
communications strategies
and driving sales for B2B and
B2C corporations.
Gaye is a Fellow of the
Public Relations and
Communications Association.
Skills and experience:
Guy qualified as a Chartered
Accountant at Ernst and Young
in 1989. He has extensive
experience as Finance Director of
several public and privately held
companies in the electronics,
software and IT sectors. Prior to
taking up his role with Quixant,
Guy was a director and the Chief
Financial Officer of Imagination
Technologies Group plc, which
he joined as CFO in 2015. His
previous roles include that of
CFO at Advanced Computer
Software Group plc, Metapack
Limited and Bighand Limited,
Group Finance Director at
Alterian plc, Morse plc and Kewill
plc. Guy is currently a non-
executive director at Eckoh plc.
Guy has an honours degree in
Economics from the University
of Sheffield and is an Associate
of the Institute of Chartered
Accountants in England and
Wales.
Skills and experience:
C-T is a founding Director
of Quixant and has 23 years’
experience in computer
hardware manufacturing.
C-T’s previous roles include
leading the design teams at GIT
Technologies Ltd and TC-Tech,
developing automotive test
systems and managing the
hardware production at Intimate
Partner Co., a major EMS house,
producing motherboards
and graphics cards for large
Taiwanese brands. C-T was the
General Manager of Densitron
Computers Taiwan Ltd, a
manufacturer of long-life custom
embedded PC products for the
gaming market and became the
General Manager of Techware
Technology Co. Ltd, a Taiwanese
Windows CE development
house.
C-T has a degree in Electronic
Engineering from the National
Taiwan University of Science
and Technology.
Committees:
Chairman of the audit
and member of the
remuneration committees
Skills and experience:
Guy has 40 years’ experience
in industry and practice.
He qualified as a Chartered
Accountant with Grant Thornton
and then spent three years
working with James Gulliver.
Guy subsequently moved to
become UK Finance Director of
an American computer accessory
company which was taken public
in 1989. In 1991, he established
his own interim financial
management business and has
since been involved in a number
of SME businesses providing
strategic and financial help. He
joined Gaming King PLC in 1998
on a part time basis as Finance
Director and became Company
Secretary and non-executive
director in 2006, remaining as
a non-executive director when
the company reversed its listing
on AIM by acquiring Sceptre
Leisure PLC in 2008, whilst with
them he sat on the Audit and
Remuneration committees. The
company was sold in 2013. In
2015 he joined Smartspace plc,
an AIM listed software business
specialising in smart offices.
He is a member of the Audit
committee and in July 2018 was
made Chairman of the company.
Guy is both a Fellow of
the Institute of Chartered
Accountants in England and
Wales and a Chartered Director.
Quixant Annual Report and Accounts 2018
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Chairman’s introduction to
governance
CHAIRMAN’S INTRODUCTION TO GOVERNANCE
On 30 March 2018 the AIM Rules were
amended to require all companies quoted
on AIM to implement a recognised
corporate governance code and comply
with that code from 28 September 2018.
Quixant plc (“Quixant”) is a member of the
Quoted Companies Alliance (QCA) and it
is their corporate governance code that
the Company has chosen to apply.
The QCA Code follows 10 basic principles
that requires companies to provide an
explanation of how they consider that
they are meeting those principles through
a set of disclosures on their website and in
their Annual Report.
As the Chairman of Quixant plc, I am
ultimately responsible for the Corporate
Governance of the Group but the Board
as a whole considers that good corporate
governance is a key driver in the success
of the business and accountability to
the Company’s stakeholders, including
shareholders, customers, suppliers and
employees is a vital element in that
governance.
The Directors consider that the corporate
governance framework that the Group
operates within is proportionate to the
size, risk and complexity of its business.
The Board considers that it does not
depart from any of the principles of the
QCA Code.
A board evaluation process has not been
run in the past but will be run in 2019.
All the information required for
remuneration reporting is included
within this Annual Report.
In the statements within this section
we outline the Company’s approach to
corporate governance. This is the first time
that the current QCA Code has required
adoption and it is the intention that the
information contained within the report
will be updated annually alongside the
publication of the Group’s Annual
Report or more frequently for any
fundamental changes.
Michael Peagram
Chairman
25 March 2019
Michael Peagram,
Chairman
As the Chairman
of Quixant plc, I am
ultimately responsible
for the Corporate
Governance of the
Group but the Board
as a whole considers
that good corporate
governance is a key
driver in the success
of the business.”
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GOVERNANCE REPORT
Quoted Companies Alliance Code Compliance
The following paragraphs set out the 10 QCA Code principles and
either how Quixant has complied with those principles or where a more
detailed discussion can be found on the Group’s website following the
disclosure guidance in the QCA Corporate Governance Code:
1. Establish a strategy and business model which promote
long-term value for shareholders
The Quixant business is split into two divisions: the Gaming division and
the Densitron division. The business model and strategy are discussed
earlier in this report in the Chief Executive’s report and subsequent sections.
2. Seek to understand and meet shareholder needs and expectations
3. Take into account wider stakeholder and social responsibilities
and their implication for long-term success
Details of the Group’s compliance with these principles can be found
on the Group’s website at https://www.quixant.com/investors/
corporate-governance.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The Board has in place a disaster recovery plan and risk registers
for the Group that identify the key areas of risk within the Group
particularly in respect of strategy, customers, suppliers, industry,
regulatory, financial, legal and technology. The registers are formally
reviewed by the Board annually and updated as considered necessary.
5. Maintain the Board as a well-functioning, balanced team
led by the chair.
The Board, led by the Chairman, has a collective responsibility and
legal obligation to promote the interests of the Group. The Chairman
is ultimately responsible for Corporate Governance. However, the
Board is responsible for defining the corporate governance policies.
The Board is made up of three non-executives and five executives and
has devolved responsibility for certain matters to two committees. It
does not operate a separate nominations committee with all Board
members being responsible for the appointment of new directors.
Non-executive directors are expected to devote sufficient time to the
company to meet their responsibilities. Generally, 10-11 Board meetings
and an annual strategy meeting are held each year and directors in
principle attend all meetings either in person or by video or telephone
conference arrangements and visit some of the major locations.
Meetings held between January 2018 and December 2018 and the
attendance of directors is summarised below:
Board
Meetings
Audit
Committee
Meetings
Remuneration
Committee
Meetings
3
3
3
3
Number of meetings:
M J Peagram
G Van Zwanenberg
G A Y Hudson
N C L Jarmany
G P Mullins
J F Jayal
A C Preddy
C-T Lin
G L Millward *
2
2
2
2 (as an
invitee)
10
10
10
9
10
10
9
10
5
3
* G L Millward joined the board on 1 October 2018
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The Board is provided with Board papers in advance of the meetings
and minutes of the meetings are provided to the Board following the
meeting. The Chairman is responsible for ensuring that the directors
receive the information that they require for decision-making and
each member of the Board understands the information that they
are expected to provide. The Board meetings have an annual cycle of
matters that are reviewed annually, and these are spread through the
program of meetings in the year.
6. Ensure that between them the directors have the
necessary up-to-date experience, skills and capabilities
All members bring different experiences and knowledge to the Board
and between them they provide a blend of business understanding,
technical knowhow, experience of public markets and financial
expertise. The Board consider that this is appropriate to enable it to
successfully execute its long-term strategy.
All members of the Board attend seminars and regulatory and
trade events to ensure that their knowledge is up to date and
relevant. Where the Board considers that it does not possess the
necessary expertise or experience it will engage the services of
professional advisors. The board considers that the three non-
executive directors, including the Chairman, are independent.
For biographies of each of the directors see pages 16 and 17.
7. Evaluate board performance based on clear and
relevant objectives, seeking continuous improvement
A Board evaluation process will be carried out annually going forward
as part of a wider strategy review and future planning discussion. The
process will be led by the Chairman and with the help of an external
facilitator, the Board will be challenged to review its performance and
effectiveness objectively. During this process the Board will consider:
• Performance of the Board against the current strategy;
• Effectiveness of the Board in areas such as supervision, leadership
and management of personnel and risk areas;
• Areas of weakness either at Board level or executive management
level for which recruitment may be required; and
• Succession planning.
8. Promote a corporate culture that is based on ethical values
and behaviours
Our long-term growth is underpinned by our corporate culture and
core beliefs. As part of a new starter pack all new employees are
provided with a statement on culture in which the Group operates.
Our Culture – Quixant has a culture of openness and transparency,
where team work is key. We embrace ideas and above all we respect
one another. Together Everyone Achieves More (TEAM). As members
of the TEAM you will work in a diverse and vibrant environment and
are encouraged to contribute to the growth of the Quixant Group.
Our core beliefs are embedded in our DNA:
• Being passionate about team work.
• Being innovative.
• Embracing high standards.
• Defying market expectations.
• We are ethically driven.
• We play to win.
• Creating a fun, friendly working environment.
Quixant Annual Report and Accounts 2018
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Chairman’s Statement to
Corporate Governance
company and vice-versa. Directors‘ remuneration is shown in note
7 to the financial statements. Directors’ shareholdings are shown in
the Directors’ Report on page 21. We have not wasted shareholders’
money by employing external remuneration advisors as plenty of
information on market practice is available free of charge and the
directors are able to use experience gathered in other roles in making
decisions at Quixant.
Audit committee
The audit committee is comprised of not less than two non-executive
directors, it meets at least twice a year and is responsible for ensuring
the financial performance of the Company is properly reported on
and monitored, including reviews of the annual and interim reports,
internal control systems and procedures and accounting policies.
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 key features of the Group’s internal control systems that ensure
the accuracy and reliability of financial reporting include clearly
defined lines of accountability and delegation of authority, policies
and procedures that cover financial planning and reporting,
preparation of monthly management accounts, project governance
and information security. 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 Audit Committee comprises Guy van Zwanenberg (Chairman)
and Michael Peagram. The board considers that Guy van Zwanenberg
has recent and relevant financial experience in accordance with the
QCA code. The committee has met twice during the year inviting the
external auditors to both of these meetings and the Group Finance
Director to each meeting (at the meetings where the auditors were
present time was taken to meet with the auditors without the Chief
Financial Officer being present). During these meetings the audit
committee considered the impact of future accounting standards
on the business and the financial statements and reviewed the
accounting policies, internal controls, the reports of the auditors to
the audit committee and the interim and annual reports.
GOVERNANCE REPORT CONTINUED
These core beliefs are reinforced by senior management throughout
the year at Town Hall and other meetings. The Group has policies in
the following areas to help promote ethical values and behaviour:
whistleblowing, anti-bribery, anti-slavery, fraud, equal opportunities,
disciplinary and grievance procedures, health and safety.
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
Details of the Group’s compliance with this principle can be found
on the Group’s website at https://www.quixant.com/investors/
corporate-governance.
10. Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders and
other relevant stakeholders
See items 2, 3 and 9 on the Group’s website at:
https://www.quixant.com/investors/corporate-governance
and in this annual report.
Remuneration committee
The remuneration committee is comprised of not less than
two non-executive directors, it meets at least once a year and is
responsible for setting the remuneration policy for the executives
and senior management of the Company. The Remuneration
committee comprises Michael Peagram (Chairman), Guy van
Zwanenberg and Gaye Hudson, it will invite executive directors as
it considers necessary. The committee met three times during the
year. They consider the executive directors and senior management
remuneration packages and discuss policy on annual reviews with
the Board. They will, subsequently, review and approve the Executive
proposals for salary reviews and annual profit linked bonus schemes
and awards. In doing so it ensures that individual packages have
been set in line with companies of a similar size and operation.
The committee is responsible for the overall package offered to
staff including employee incentive schemes in each of the group’s
operating territories. Each package is designed to attract, motivate
and retain our staff and ensure executive directors’ remuneration is
aligned with the interests of shareholders. An employee share option
scheme was established in 2013 and the committee grants new
options to employees and executive directors. At 31 December 2018,
options had been granted over a total of 2,525,294 shares (only 3.8%
of the shares in issue) of which options over 429,068 shares were
outstanding. 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. 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, except for C-T Lin where the notice from the company
to the executive is six months’ (Cresten Preddy’s contract contained
the same notice periods as C-T Lin). Guy Millward’s contract has a six-
month probation period at the beginning of his employment where
the notice period is reduced to one month for both parties, this initial
probation period can be extended by three months by both parties.
Non-executive directors’ service contracts incorporate notice periods
of not less than three months’ notice from the non-executive to the
20
Quixant Annual Report and Accounts 2018
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DIRECTORS’ REPORT
The Directors present their Annual Report and accounts for the year
ended 31 December 2018.
Details of the share capital of the Company are set out in note 23 of
the consolidated financial statements.
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
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 3.1p per share (2017: 2.60p), to
be approved at the Annual General Meeting. During the year the
Company paid a dividend of 2.60p per share amounting to $2.3m.
the industrial marketplace.
The profits for the year after taxation amounted to $14.2 million
(2017: $13.1 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 4-10.
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.
Substantial shareholdings
On 24 March 2019 the Company had been notified of the following
significant interests in its share capital:
Shares held
Ordinary shares of
£0.001 each
% of issued
share capital
N C L Jarmany and his wife
Canaccord Genuity Wealth Management
Liontrust Asset Management
Mr J and Mrs S Mullins
Amati Global Investors
Schroders Plc
C-T Lin and his wife
Axa Framlington Investment Managers
M&G Investment Management
Tellworth Investments
G P Mullins and his wife
Octopus Investments Nominees Limited
Alexander Taylor
10,870,763
6,827,345
5,567,906
3,858,920
3,606,382
3,603,292
3,446,559
3,069,199
2,539,114
2,506,938
2,199,395
2,125,025
2,058,958
16.38%
10.29%
8.39%
5.82%
5.43%
5.43%
5.19%
4.63%
3.83%
3.78%
3.31%
3.20%
3.10%
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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
N C L Jarmany
J F Jayal
C-T Lin
G L Millward (appointed 1 October 2018)
G P Mullins
M J Peagram
A C Preddy (retired 31 December 2018)
G van Zwanenberg
Shares held Ordinary shares of
£0.001 each
Options granted
£0.001 each
Exercise
price
2018
2017
2018
2,350
10,870,763
360,200
3,446,559
–
2,199,395
227,174
79,000
26,087
2,350
12,179,970
460,200
3,446,559
–
2,829,243
227,174
40,000
26,087
–
–
65,000
-
100.000
–
–
–
–
2017
–
–
–
–
-
–
–
39,000
–
–
–
£4.08
–
£4.30
–
–
£0.49
–
There has been no change in the interests set out above between 31 December 2018 and 25 March 2019. A C Preddy was a full-time director
until she retired on 31 December 2018, she remains available to advise the board.
Quixant Annual Report and Accounts 2018
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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 $6.4 million (2017:
$5.3 million) in its R&D and customer support programmes in the
year, of which $2.6 million (2017: $1.6 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 (2017: 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 auditor is 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 25 March 2019.
Guy Millward
Director
22
Quixant Annual Report and Accounts 2018
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In Respect of the Annual Report and the Financial Statements
The directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. As required
by the AIM Rules of the London Stock Exchange they are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards 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.
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 comply 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.
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Quixant Annual Report and Accounts 2018
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INDEPENDENT AUDITOR’S REPORT
To the Members of Quixant Plc
Overview
Materiality:
Group financial
statements as a whole
$700k (2017: $760k)
4.9% (2017: 5%) of Group profit before tax
Coverage
97% (2017: 95%) of Group profit before tax
Key audit matters
Recurring risks
New risks
vs 2017
Recoverability of Group goodwill in
the Densitron group of CGUs and
Recoverability of parent company’s
investment in Densitron Technologies
Limited
Impact of uncertainties due to the UK
exiting the European Union on our audit
1. Our opinion is unmodified
We have audited the financial statements of Quixant plc (“the Company”) for the year ended 31 December 2018 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 2018
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: Including 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 matters were as follows:
24
Quixant Annual Report and Accounts 2018 The impact of uncertainties due to
the UK exiting the European Union
on our audit
Refer to page 14 (principal risks)
Recoverability of group goodwill
in the Densitron group of CGUs
and Recoverability of parent
company’s investment in
Densitron Technologies Limited
Densitron group of CGUs
goodwill
$5,576k (2017: $5,571k)
Parent company investment in
Densitron Technologies Limited
$11,601k (2017: $11,601k)
See page 35 (accounting policy)
and page 46 (financial disclosures).
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The risk
Our response
Unprecedented levels of
uncertainty
All audits assess and challenge
the reasonableness of estimates,
in particular as described in
recoverability of group goodwill
in the Densitron group of
CGUs and the recoverability of
parent company investment in
Densitron Technologies Limited
below, and related disclosures
and the appropriateness of
the going concern basis of
preparation of the financial
statements. All of these depend
on assessments of the future
economic environment and the
group’s future prospects and
performance.
Brexit is one of the most
significant economic events for
the UK and at the date of this
report its effects are subject
to unprecedented levels of
uncertainty of outcomes, with
the full range of possible effects
unknown.
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in
planning and performing our audits. Our procedures included:
• Our Brexit knowledge: We considered the directors’
assessment of Brexit-related sources of risk for the group’s
business and financial resources compared with our own
understanding of the risks. We reviewed the directors’ plans
to take action to mitigate the risks.
• Sensitivity analysis: When addressing recoverability of
group goodwill in the Densitron group of CGUs and the
recoverability of parent company investment in Densitron
Technologies Limited and other areas that depend on
forecasts, we compared the directors’ analysis to our
assessment of the full range of reasonably possible scenarios
resulting from Brexit uncertainty and, where forecast cash
flows are required to be discounted, considered adjustments
to discount rates for the level of remaining uncertainty.
• Assessing transparency: As well as assessing individual
disclosures as part of our procedures on Recoverability
of group goodwill in the Densitron group of CGUs and
recoverability of parent company’s investment in Densitron
Technologies Limited we considered all of the Brexit related
disclosures together, including those in the strategic report,
comparing the overall picture against our understanding of
the risks.
However, no audit should be expected to predict the
unknowable factors or all possible future implications for a
company and this is particularly the case in relation to Brexit.
Forecast based valuation
Our procedures included:
The estimated recoverable
amount of these balances is
subjective due to the inherent
uncertainty involved in
forecasting and discounting
future cash flows.
Whilst the risk of misstatement
is relatively low in this case,
the size of the balance, and
in the case of goodwill,
the requirement to test for
impairment on an annual basis,
makes this a core area on which
our audit focused.
• Benchmarking assumptions: Comparing the group’s
assumptions to externally derived data (for example
competitor discount rates and IMF growth forecast data) in
relation to key inputs such as projected economic growth,
cost inflation and discount rates;
• Historical comparisons: We assessed the reasonableness of
the forecasts used by considering the historical accuracy of
previous budgets;
• Sensitivity analysis: Performing breakeven analysis on the
assumptions noted above;
• Comparing valuations: Comparing the sum of the
discounted cash flows to the group’s market capitalisation to
assess the reasonableness of those cash flows; and
• Assessing transparency: Assessing whether the group’s
disclosures about the sensitivity of the outcome of the
impairment assessment to changes in key assumptions
reflected the risks inherent in the valuation of goodwill.
We continue to perform procedures over recoverability of group goodwill in the Quixant CGU and recoverability of the parent company’s
investments in Quixant Italia Srl, Quixant USA Inc and Quixant UK Limited. However, following a review of the headroom in the client model to
support the goodwill balance in the Quixant CGU and the Quixant investment carrying values, we have not assessed this as one of the most
significant risks in our current year audit and, therefore, it is not separately identified in our report this year.
25
Quixant Annual Report and Accounts 2018
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the Members of Quixant Plc
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 $700k, determined with reference to a benchmark of group profit before
tax of $14,333k, of which it represents 4.9% (2017: 5%).
Materiality for the parent company financial statements as a whole was set at $177k (2017: $152k), determined with reference to a benchmark
of company profit before tax, of which it represents 5% (2017: 3%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $35k, in addition to other
identified misstatements that warranted reporting on qualitative grounds.
Of the group’s 15 (2017: 15) reporting components, we subjected 8 (2017: 9) to full scope audits for group purposes and 1 (2017: 0) to specified
risk-focused audit procedures. The latter was 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. We conducted reviews of financial information (including enquiry) at a
further 6 (2017: 6) non-significant components and we performed analysis at an aggregated Group level to re-examine our assessment that
were no significant risks of material misstatement with these.
The components within the scope of our work accounted for the percentages illustrated below.
The remaining 8% of total group revenue, 1% of group profit before tax and 10% of total group assets is represented by 6 of 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 within these.
The Group team instructed 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 $63k to $560k, having regard to
the mix of size and risk profile of the Group across the components.
The work on 2 of the 15 components (2017: 2 of the 15 components) was performed by component auditors and the rest, including the audit
of the parent company, was performed by the Group team.
In relation to these 2 components video and telephone conference meetings were held with these component auditors (in place of the visits
conducted in the prior year) to assess audit risk and strategy. At these meetings, the findings reported to the Group team were discussed in
more detail, and any further work required by the Group team was then performed by the component auditor.
26
Quixant Annual Report and Accounts 2018Full scope for group audit purpose 2018 Specified risk-focused audit procedures 2018Full scope for group audit purposes 2017Specified risk-focused audit procedures 2017Residual componentsGroup total assets90%(2017: 94%)84946106Group profit before tax99%(2017: 95%)9795215Group revenue92%(2017: 95%)13799585Profit Before TaxProfit Before Tax$14,333k (2017: $15,045k)Group materialityGroup Materiality$700k (2017: $760k)$700kWhole financial statements materiality (2017: $760k)$560kRange of materiality at 15 components $63k to $560k (2017: $70k to $611k)$35kMisstatements reported to the audit committee (2017: $38k) 4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group
or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this is realistic. They
have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty related to
going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of
reference to a material uncertainty in this auditor’s report is not a guarantee that the group or the company will continue in operation.
In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business model and analysed
how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period.
The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period was the
impact of Brexit on the Group’s supply chain.
As these were risks that could potentially cast significant doubt on the Group’s and the Company’s ability to continue as a going concern, we
considered sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of reasonably
possible (but not unrealistic) adverse effects that could arise from these risks individually and collectively and evaluated the achievability of the
actions the Directors consider they would take to improve the position should the risks materialise. We also considered less predictable but
realistic second order impacts, such as the impact of Brexit and the erosion of customer confidence, which could result in a rapid reduction of
available financial resources.
Based on this work, 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 a
year from the date of approval of the financial statements.
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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.
27
Quixant Annual Report and Accounts 2018
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the Members of Quixant Plc
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 23, 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.
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
25 March 2019
28
Quixant Annual Report and Accounts 2018 CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
For the years ended 31 December 2018 and 2017
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
Diluted earnings per share
Note
3,4
5
5
8
9
2018
Total
$000
115,150
(75,392)
39,758
(8,100)
(17,074)
14,584
(251)
14,333
(177)
14,156
2017
Total
$000
109,238
(72,269)
36,969
(7,785)
(13,837)
15,347
(302)
15,045
(1,899)
13,146
(176)
869
13,980
–
13,980
14,015
(6)
14,009
10 $ 0.2137
$ 0.1999
10 $ 0.2125
$ 0.1972
The consolidated statement of profit and loss and other comprehensive income has been prepared on the basis that all operations are
continuing operations.
Notes on pages 34 to 58 form part of the financial statements.
29
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
CONSOLIDATED AND COMPANY BALANCE SHEETS
As at 31 December 2018 and 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
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
Total equity
Note
11
12
13
14
15
16
17
18
Group
2018
$000
2017
$000
Company
2018
$000
2017
$000
6,104
15,538
631
–
236
6,153
14,278
674
–
195
3,751
2,085
–
11,992
101
3,699
2,059
–
11,982
91
22,509
21,300
17,929
17,831
19,439
31,087
11,082
21,246
20,095
11,194
13,763
9,955
2,456
13,924
10,398
2,205
61,608
52,535
26,174
26,527
84,117
73,835
44,103
44,358
19
20
(530)
(21,052)
(759)
(5,811)
(17,604)
(931)
(263)
(19,157)
(631)
(5,479)
(15,238)
(1,114)
(22,341)
(24,346)
(20,051)
(21,831)
19
22
15
(823)
(306)
(1,214)
(924)
–
(1,305)
(823)
–
(181)
(924)
–
(399)
(2,343)
(2,229)
(1,004)
(1,323)
(24,684)
(26,575)
(21,055)
(23,154)
59,433
47,260
23,048
21,204
23
23
106
6,499
1,102
51,488
238
106
6,102
991
39,647
414
106
6,499
1,102
15,364
(23)
106
6,102
991
13,752
253
59,433
47,260
23,048
21,204
These financial statements were approved and authorised for issue by the Board of Directors on 25 March 2019 and were signed on behalf of
the Board by:
G L Millward
Director
Company registered number: 04316977
Notes on pages 34 to 58 form part of the financial statements.
30
Quixant Annual Report and Accounts 2018
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2018 and 2017
GROUP
Balance at 1 January 2017
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
105
Share
Premium
$000
5,676
Translation
Reserve
$000
Share-Based
Payments
$000
Retained
Earnings
$000
Total Equity
$000
(455)
782
28,192
34,300
–
–
–
–
–
1
1
–
–
–
–
–
426
426
–
869
869
–
–
–
–
–
–
–
13,146
–
13,146
869
13,146
14,015
209
–
–
209
–
(1,691)
–
(1,691)
209
(1,691)
427
(1,055)
Balance at 31 December 2017
106
6,102
414
991
39,647
47,260
Balance at 1 January 2018
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
106
Share
Premium
$000
6,102
Translation
Reserve
$000
Share Based
Payments
$000
Retained
Earnings
$000
Total Equity
$000
414
991
39,647
47,260
–
–
–
–
–
–
–
–
–
–
–
(176)
(176)
– 14,156
–
–
14,156
(176)
–
14,156
13,980
–
–
397
397
–
–
–
111
–
–
–
(2,315)
–
111
(2,315)
397
–
111
(2,315)
(1,807)
Balance at 31 December 2018
106
6,499
238
1,102
51,488
59,433
31
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY CONTINUED
FOR THE YEARS ENDED 31 DECEMBER 2018 and 2017
COMPANY
Balance at 1 January 2017
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
105
Share
Premium
$000
5,676
Translation
Reserve
$000
Share-based
Payments
$000
(187)
782
Retained
Earnings
$000
10,893
Total Parent
Equity
$000
17,269
–
–
–
–
–
1
1
–
–
–
–
–
426
426
–
440
440
–
–
–
–
–
–
–
209
–
–
209
4,550
–
4,550
–
(1,691)
–
(1,691)
4,550
440
4,990
209
(1,691)
427
(1,055)
Balance at 31 December 2017
106
6,102
253
991
13,752
21,204
Balance at 1 January 2018
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
106
Share
Premium
$000
6,102
Translation
Reserve
$000
Share-based
Payments
$000
Retained
Earnings
$000
Total Parent
Equity
$000
253
991
13,752
21,204
–
–
–
–
–
–
–
–
–
–
–
–
397
397
–
(276)
(276)
–
–
–
–
–
–
–
3,927
–
3,927
3,927
(276)
3,651
111
–
–
–
(2,315)
–
111
(2,315)
397
111
(2,315)
(1,807)
Balance at 31 December 2018
106
6,499
(23)
1,102
15,364
23,048
Notes on pages 34 to 58 form part of the financial statements.
32
Quixant Annual Report and Accounts 2018 CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2018 and 2017
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation, amortisation and impairment
Taxation expense
Financial expense
Equity-settled share-based payment expenses
(Increase)/decrease in trade and other receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade and other payables
Interest paid
Tax paid
Net cash from operating activities
Cash flows from investing activities
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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Notes on pages 34 to 58 form part of the financial statements.
Group
2018
$000
2017
$000
Company
2018
$000
2017
$000
Note
14,156
13,146
3,927
4,550
2,745
177
251
111
17,440
(10,992)
1,807
3,751
12,006
(251)
(481)
2,422
1,899
302
209
17,978
908
(8,346)
(100)
10,440
(302)
(2,076)
1,167
483
221
111
5,909
444
161
3,718
10,232
(232)
(1,194)
11,274
8,062
8,806
1,064
781
270
175
6,840
1,636
(6,469)
2,326
4,333
(270)
(503)
3,560
11
12
(632)
(3,457)
(4,089)
(409)
(1,861)
(2,270)
(431)
(889)
(1,320)
(252)
(455)
(707)
(5,382)
(2,315)
397
(7,300)
(2,187)
(1,691)
427
(3,451)
(5,317)
(2,315)
397
(7,235)
(112)
11,194
2,341
8,853
251
2,205
18
11,082
11,194
2,456
(759)
(1,691)
427
(2,023)
830
1,375
2,205
33
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
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 December 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 to the development cost criteria, such as the commercial
viability of a product, 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 $2.6m 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 2020. 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.
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 2018 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, other than in disclosure. These standards and interpretations have been endorsed by the European Union.
34
Quixant Annual Report and Accounts 2018 Annual Improvements to IFRSs 2014–2016 Cycle
Amendments to IFRS 2 Clarification and Measurement of Share-based Payment Transactions.
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
Amendments to IAS 40 Transfers of Investment Property.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
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 16 Leases
Amendments to IFRS 9 Prepayment features with negative consideration
Amendments to IAS 28 Long-term interests in associates and joint ventures
IFRIC 23 Uncertainty over income tax treatments
IFRS 17 Insurance contracts
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement
Annual Improvements to IFRS Standards 2015–2017 Cycle
Amendments to References to Conceptual Framework in IFRS Standards
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 16 will change the way in which operating leases are treated within the financial statements. Right of use assets and related liabilities will
be recognised for all material leases from 1 January 2019. The Group expects to record an opening balance on 1 January 2019 for a right of
use asset of around $720,000 and a liability of around $780,000 with the difference being booked to retained earnings.
Revenue recognition
The Group adopted IFRS 15 from 1 January 2018 which had no material impact on revenue recognition. All performance obligations under
customer contracts, where they exist, were reviewed and we concluded that this did not change the way revenue had been recognised in
the past. 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
namely gaming boards or platforms, gaming monitors and display products, which represent the significant majority of the Group revenue, is
recognised in the income statement when:
• The performance obligation of transferring control over a product to the buyer in accordance with the contracted terms of sale has
occurred. This usually occurs when the delivery terms of the terms of sale have been met,
• The Group retains neither continuing managerial involvement nor effective control over the goods.
Consideration is payable based on contractual payment terms which are usually 30 days after the performance obligation has been met.
Transaction prices are set up front for each contract. The group has not identified any contracts which include either variable consideration or
significant financing components.
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.
35
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1. Principal accounting policies continued
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 generate 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 IFRS3, in profit and loss.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual value of each
asset on a straight-line basis over its expected useful economic life, as follows:
Freehold buildings
Plant and machinery
20 – 50 years
Between 3 and 6 years
No depreciation is provided on freehold land.
The carrying value of property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate the carrying
value may not be recoverable.
Investment property
Investment properties are properties 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.
Intangible assets – customer relationships and order backlog
In accordance with IFRS 3, on the acquisition of subsidiary companies the Group assesses 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.
36
Quixant Annual Report and Accounts 2018
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.
Share capital and share premium
Share issue costs are incremental costs directly attributable to the issue of new shares or options and are shown as a deduction, net of tax,
from the proceeds. Any excess of the net proceeds over the nominal value of any shares issued is credited to the share premium account.
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the shares
are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
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.
37
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1. Principal accounting policies continued
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 charged to income in the year
they are payable.
Dividends
Dividends are recorded in the financial statements in the period in which they are approved by the Company’s shareholders. Interim
dividends are recorded in the financial statements in the period in which they are approved and paid.
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.
38
Quixant Annual Report and Accounts 2018 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 profit before tax (adjusted PBT) as a measure that enables the assessment of
the performance of the Group and assists in financial, operational and commercial decision-making. In adjusting for this measure 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 PBT to adjusted PBT identifying those reconciling items of income and expense.
PBT reconciliation
PBT and adjusted PBT for the current and prior year have been derived as follows:
Profit for the year
Adding back:
Taxation expense
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
Restructuring cost3
Adjusted PBT
PBT
2018
$000
2017
$000
14,156
13,146
177
14,333
1,899
15,045
757
111
–
3,036
822
209
1,633
–
18,237
17,709
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 means that a year on year comparison of year on year 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 and restructuring costs due to their incomparability with the previous year.
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 Group has included $1,125,000 as contingent consideration related to the additional consideration, which is
an increase of $375,000 on the value represented as its fair value at the acquisition date. The calculation of the deferred consideration has been
reassessed at 31 December 2018 and the new assessment is the deemed fair value of the liability.
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 17.2% of reported revenues for the year ended 31 December 2018 (2017: 25.1%).
• Densitron – previously together, Densitron Europe, Densitron America, Densitron France, and Densitron Japan comprise the Densitron
division and were reported separately, this reporting ceased at the beginning of 2018 and the segments below reflect the reporting to the
Board of Directors.
39
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Business and geographical segments continued
2018
Revenue from products
Profit before tax
Balance Sheet
Assets
Liabilities
Net assets
Capital expenditure
Depreciation/amortisation
2017
Revenue from products
Profit before tax
Balance Sheet
Assets
Liabilities
Net assets
Capital expenditure
Depreciation/amortisation
Quixant
$000
Densitron
$000
Total
$000
77,6231
37,527 115,150
14,078
255
14,333
68,963
14,636
54,327
3,607
2,546
15,154
10,048
84,117
24,684
5,106
59,433
482
199
4,089
2,745
Quixant
$000
Densitron
$000
Total
$000
71,1321
38,106
109,238
12,941
2,104
15,045
58,545
16,236
42,309
1,854
2,248
15,290
10,339
4,951
73,835
26,575
47,260
416
174
2,270
2,422
1
2018 Quixant revenue from products splits into Gaming Platforms $62,549,000 (2017: $54,793,000) and Gaming Monitors $15,074,000 (2017: $16,399,000). Gaming Monitors also splits into
Buttondecks $6,404,000 (2017: $5,919,000) and Monitors $8,676,000 (2017: $10,480,000).
4. Analysis of turnover
By primary geographical market
Asia
Australia
UK
Europe excl. UK
North America
Other
2018
$000
2017
$000
16,255
8,790
8,275
26,273
54,089
1,468
15,126
12,447
4,936
24,051
51,356
1,322
115,150
109,238
The company has initially applied IFRS 15 using the cumulative effect method which resulted in no material impact on revenue recognition.
Under this method, the comparative information is not restated. The above analysis includes sales to individual countries in excess of 10% of
total turnover of:
Australia
USA
40
2018
$000
2017
$000
8,790
51,306
12,447
51,292
Quixant Annual Report and Accounts 2018 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
Included in operating profit:
Restructuring cost
Gain 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
2018
$000
2017
$000
–
1,633
3,036
196
6,432
(2,558)
548
2,190
–
38
5,328
(1,638)
512
1,910
2018
$000
2017
$000
191
64
26
212
144
36
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
2018
Number
2017
Number
36
84
37
46
203
31
68
29
48
176
2018
$000
13,922
111
1,582
689
2017
$000
11,046
209
1,140
409
16,304
12,804
41
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
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
G L Millward
NON-EXECUTIVE DIRECTORS
M J Peagram
G van Zwanenberg
G A Y Hudson
Salary/Fee
2018
$000
Share-based
payment
2018
$000
Pension
contributions
2018
$000
Total
2018
$000
164
159
264
198
420
121
Total
2017
$000
210
214
251
159
669
–
1,326
1,503
113
61
54
93
60
35
11
12
6
18
32
–
79
–
1
1
81
1,554
1,691
153
147
258
180
356
100
1,194
113
60
53
1,420
–
–
–
–
32
21
53
–
–
–
53
During the year, A C Preddy exercised options over 39,000 shares (2017: 30,000 shares) realising a theoretical gain of $199,000, she has not sold
the shares. J F Jayal was granted options over 65,000 shares during the year at an exercise price of 408.5p, G L Millward was granted options
over 100,000 shares during the year at an exercise price of 430p. The options are exercisable subject to the growth of the diluted earnings per
Ordinary Share (as set out in each of the audited accounts for the years ending 31 December 2018, 2019 and 2020) being equal to or greater
than 10 per cent in each financial year.
Pension contributions are paid to executive directors, except G.L. Millward, at 10% of salary, Pension contributions are paid to non-executive
directors, except M J Peagram, at 5%. No other benefits are paid. Bonus are paid when profit targets have been met, no performance bonuses
were paid in 2018 for 2017 performance and none are payable for 2018’s financial performance.
There were no directors’ advances, credits or guarantees outstanding at 31 December 2018 or 2017.
8. Finance expense
Total interest expense on financial liabilities measured at amortised cost
Total finance expense
9. Taxation
Recognised in the profit and loss account
Current tax expense
UK corporation tax
Foreign tax
Adjustments for prior years
Current tax expense
Deferred tax (credit)/expense
Origination and reversal of temporary differences
Deferred tax (credit)/expense
Total tax expense
42
2018
$000
251
251
2017
$000
302
302
2018
$000
2017
$000
187
1,158
(1,037)
308
(131)
(131)
780
1,498
(296)
1,982
(83)
(83)
177
1,899
Quixant Annual Report and Accounts 2018
Reconciliation of effective tax rate
Profit for the year
Total taxation expense
Profit excluding taxation
Tax using the UK corporation tax rate of 19% (2017: 19.25%)
Non-deductible expenses
Enhanced research and development claim
Patent box tax relief
Change in deferred tax rate to 17% (2017: 18%)
Overseas tax in excess of standard UK rate
Exercise of share options
Unrelieved losses
Other
Over provided in prior years
Total taxation expense
2018
$000
14,156
177
14,333
2,723
69
(944)
(372)
(53)
56
(135)
(61)
(69)
(1,037)
177
2017
$000
13,146
1,899
15,045
2,896
153
(722)
(273)
62
704
(530)
(95)
–
(296)
1,899
Adjustments for prior years mainly reflect the deductions allowed for share option exercises by Taiwan branch employees and double taxation
relief for Taiwan taxes which had not been previously claimed.
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 2018 has been calculated based on these rates.
The Group has tax losses carried forward in certain UK Companies of $2.9m. The tax effect of these losses has not been included as an asset in
the group financial statements because their recovery is uncertain as other tax allowances can be used before losses.
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
Diluted earnings per share
2018
$000
2017
$000
14,156
13,146
Number
Number
66,239,967
65,756,667
380,383
909,513
66,620,350
66,666,180
$0.2137
$0.2125
$0.1999
$0.1972
43
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. Earnings per ordinary share (EPS) continued
Calculation of adjusted 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
Restructuring cost
Tax effect of adjustments
Adjusted earnings
Adjusted diluted earnings per share
11. Property, plant and equipment – Group
Cost
Balance at 1 January 2017
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2018
Depreciation
Balance at 1 January 2017
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017 and 1 January 2018
At 31 December 2018
44
$000
$000
14,156
13,146
–
111
757
3,036
18,060
(764)
17,296
1,633
209
822
–
15,810
(516)
15,294
$ 0.2596
$ 0.2294
Land and
Buildings
$000
Plant and
Equipment
$000
5,387
33
(59)
267
5,628
5,628
90
(35)
(112)
5,571
353
115
(59)
15
424
424
125
(35)
(8)
506
2,177
376
–
55
2,608
2,608
542
(42)
(37)
3,071
1,234
397
–
28
1,659
1,659
423
(37)
(12)
2,033
Total
$000
7,564
409
(59)
322
8,236
8,236
632
(77)
(149)
8,642
1,587
512
(59)
43
2,083
2,083
548
(72)
(21)
2,538
5,034
5,204
943
949
5,977
6,153
5,066
1,038
6,104
Quixant Annual Report and Accounts 2018
11. Property, plant and equipment – Company
Cost
Balance at 1 January 2017
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2018
Depreciation
Balance at 1 January 2017
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017 and 1 January 2018
At 31 December 2018
Land and
Buildings
$000
Plant and
Equipment
$000
3,422
27
(59)
140
3,530
3,530
74
(35)
(64)
3,505
270
70
(59)
12
293
293
81
(35)
(6)
333
3,152
3,237
3,172
1,395
225
–
33
1,653
1,653
357
(34)
(19)
1,957
977
196
–
18
1,191
1,191
230
(33)
(10)
1,378
418
462
579
Total
$000
4,817
252
(59)
173
5,183
5,183
431
(69)
(83)
5,462
1,247
266
(59)
30
1,484
1,484
311
(68)
(16)
1,711
3,570
3,699
3,751
45
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
Customer
Relationships
and Order
Backlog
$000
5,201
–
–
–
–
5,201
5,201
–
–
–
–
5,201
1,228
822
–
–
2,050
2,050
757
–
–
2,807
Goodwill
$000
6,934
–
–
–
16
6,950
6,950
–
–
–
(11)
6,939
–
–
–
–
–
–
–
–
–
–
Internally
Generated
Capitalised
Development
costs
$000
Total
$000
4,534
1,638
–
(113)
–
17,478
1,638
229
(113)
50
Computer
Software
$000
809
–
229
–
34
1,072
6,059
19,282
1,072
–
899
–
(17)
1,954
6,059
2,558
–
(166)
–
19,282
2,558
899
(166)
(28)
8,451
22,545
320
94
–
15
429
429
112
–
(9)
532
1,885
994
(107)
(247)
3,433
1,910
(107)
(232)
2,525
5,004
2,525
1,321
(166)
(12)
5,004
2,190
(166)
(21)
3,668
7,007
6,934
6,950
3,973
3,151
489
643
2,649
14,045
3,534
14,278
6,939
2,394
1,422
4,783
15,538
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. Intangible assets – Group
Cost
Balance at 1 January 2017
Additions – internally developed
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Additions – internally developed
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2018
Amortisation and impairment
Balance at 1 January 2017
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017 and 1 January 2018
At 31 December 2018
46
Quixant Annual Report and Accounts 2018 Impairment testing
Goodwill has been allocated to Cash Generating Units (CGUs) as follows:
Quixant
Densitron
Goodwill
2018
$000
1,363
5,576
6,939
2017
$000
1,379
5,571
6,950
We have changed the methodology for assessing impairment this year, the Densitron group of CGUs has been used, rather than the 4 sub-
divisions of Densitron used in prior years, because the Board of Directors no longer monitor goodwill at the lower level of sub-divisions for
internal purposes. The Densitron division as a whole and not its sub-divisions are the way the Board of Directors measures the business. 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 2018 or 31 December 2017.
Quixant CGU
The recoverable amounts of the Quixant cash generating unit have been determined from value in use calculations based on cash flow
projections from formally approved budgets covering the year to 31 December 2019. The following assumptions have been adopted:
• Cash flows were based on the internal budgets for 2019 together with a further four year forecast to 2023;
• The revenue growth rates and increase in operating costs adopted for the years 2019, 2020, 2021, 2022 and 2023 were 1% in order to take a
conservative valuation approach;
• The terminal growth rate was estimated to be 0% for the same reason;
• 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 7.44%. This is the discount rate that has been applied in determining the value in use.
Densitron group of CGUs
The recoverable amounts of the Densitron group of cash generating unit have been determined from value in use calculations based on cash
flow projections from formally approved budgets covering the year to 31 December 2019. The following assumptions have been adopted:
• Cash flows were based on the internal budgets for 2019 together with a further four year forecast to 2023;
• The revenue growth rate adopted for the years 2019, 2020, 2021, 2022 and 2023 were 1%. The increase in operating costs for the years
2019, 2020, 2021 and 2022 have been estimated to be 2%. Both these growth rates are in line with recent performance of the business;
• The terminal growth rate was estimated to be 0% for the same reason;
• 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 unit was calculated with reference to its
risk profile and calculated to be 8.99%. This is the discount rate that has been applied in determining the value in use.
A sensitivity analysis was carried out for each of the cash generating units. The anticipated growth rates for each CGU were reduced, terminal
values were halved 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 2018 or 2017 except that Densitron was sensitive to the doubling of the discount rate and halving the terminal value which both
brought the headroom down to zero.
47
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. Intangible assets – Company
Cost
Balance at 1 January 2017
Additions – internally developed
Additions– externally purchased
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Additions – internally developed
Additions– externally purchased
Effect of movements in foreign exchange
Balance at 31 December 2018
Amortisation
Balance at 1 January 2017
Amortisation for the year
Effect of movements in foreign exchange
Balance at 31 December 2017
Balance at 1 January 2018
Amortisation for the year
Effect of movements in foreign exchange
Balance at 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017 and 1 January 2018
At 31 December 2018
13. Investment property
Balance at 1 January 2018
Effect of movements in foreign exchange
Balance at 31 December
Internally
Generated
Capitalised
Development
costs
$000
Computer
Software
$000
806
–
219
35
1,060
1,060
–
889
(17)
1,932
319
91
16
426
426
107
(9)
524
487
634
1,409
3,527
236
–
–
3,763
3,763
–
–
–
3,763
1,631
707
–
2,338
2,338
748
–
3,086
1,896
1,425
677
Total
$000
4,333
236
219
35
4,823
4,823
–
889
(17)
5,695
1,950
798
16
2,764
2,764
855
(9)
3,610
2,383
2,059
2,085
Group
Company
2018
$000
674
(43)
631
2017
$000
617
57
674
2018
$000
–
–
–
2017
$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 but the increase in that
valuation of $226,000 has not been incorporated in 2018 as the Directors believe, following market soundings taken in December 2018, that
this increase in value is no longer appropriate given market conditions. The previous carrying value is based on a valuation carried out on
10 May 2013. The property valuation has been based on the average current property prices in the area.
48
Quixant Annual Report and Accounts 2018 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
Principal
activities
1
2
3
2
2
4
5
6
7
8
2
9
10
11
Distribution company
Sales of specialist computer systems
Software development
Holding company
Sales of electronic displays products
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
Ownership
2018 and 2017
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
99%
100%
100%
100%
100%
100%
80%
100%
100%
0%/100%
100%
100%
Densitron Display Taiwan Limited has been liquidated following the transfer of its business to Quixant plc’s Taiwan branch.
Subsidiary of Densitron Technologies Limited
*
** Subsidiary of Densitron Europe Limited
2147 Pama Lane Bldg 6 Las Vegas NV 89119 USA
1.
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
2330 Pomona Rincon Road, Corona, CA 92880
5.
3 Rue de Tasmanie, 441115, Basse-Goulaine
6.
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
Fixed asset investments
Balance at 1 January
Acquisitions – Group-settled share-based payments
Balance at 31 December
Company
2018
$000
11,982
10
11,992
2017
$000
11,948
34
11,982
49
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 deferred 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
Other
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
Foreign exchange
Deferred tax (assets)/liabilities
50
Assets
Liabilities
2018
$000
–
–
–
(93)
(18)
(25)
(100)
(236)
2017
$000
–
–
–
(84)
(18)
(25)
(68)
2018
$000
100
686
431
–
–
–
(3)
2017
$000
158
582
565
–
–
–
–
(195)
1,214
1,305
1 January
2018
$000
Recognised In
Income
$000
Movements in
exchange
$000
31 December
2018
$000
158
582
565
(84)
(18)
(25)
(68)
1,110
(58)
104
(134)
(9)
–
–
(35)
(132)
–
–
–
–
–
–
–
100
686
431
(93)
(18)
(25)
(103)
978
1 January
2017
$000
Recognised In
Income
$000
Movements in
exchange
$000
31 December
2017
$000
115
463
715
(109)
(32)
(25)
58
1,185
43
119
(150)
25
14
–
(134)
(83)
–
–
–
–
–
–
8
8
158
582
565
(84)
(18)
(25)
(68)
1,110
Assets
Liabilities
2018
$000
–
–
(12)
(89)
(101)
2017
$000
–
–
(12)
(79)
–
(91)
2018
$000
72
97
–
–
12
181
2017
$000
131
255
–
–
13
399
Quixant Annual Report and Accounts 2018
Movement in deferred tax during the year
Property, plant and equipment
Intangible assets – capitalised development costs
Share-based payments
Inventories
Foreign 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
1 January
2018
$000
Recognised
in income
$000
31 December
2018
$000
131
255
(79)
(12)
13
308
(59)
(158)
(10)
–
(1)
(228)
72
97
(89)
(12)
12
80
1 January
2017
$000
Recognised
in income
$000
31 December
2017
$000
97
340
(88)
(12)
13
350
34
(85)
9
–
–
(42)
131
255
(79)
(12)
13
308
Group
Company
2018
$000
9,792
2,425
7,222
2017
$000
7,532
2,731
10,983
2018
$000
9,791
2,158
1,814
2017
$000
7,532
2,731
3,661
19,439
21,246
13,763
13,924
Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales in the year amounted to
$77,200,000 (2017: $80,615,000).
The cost of inventories recognised as an expense includes $750,000 (2017: $285,000) in respect of write downs of inventory to net
realisable value.
17. Trade and other receivables
Trade receivables
Amounts receivable from subsidiary undertakings
Other receivables
Group
Company
2018
$000
25,912
–
5,175
31,087
2017
$000
16,967
–
3,128
20,095
2018
$000
–
8,023
1,932
9,955
2017
$000
–
8,722
1,676
10,398
All trade and other receivables are receivable within one year and are included as current assets.
A provision of $234,437 has been provided in respect of potential doubtful debts as at 31 December 2018 (31 December 2017: $219,706).
51
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17. Trade and other receivables continued
As at 31 December 2018 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
2018
$000
1,331
422
110
1,864
2017
$000
2,384
159
85
2,628
2018
$000
–
–
–
–
2017
$000
–
–
–
–
Group
Company
2018
$000
11,082
11,082
2017
$000
11,194
11,194
2018
$000
2,456
2,456
2017
$000
2,205
2,205
19. Other interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group and Company’s interest-bearing loans and borrowings, which are
measured at cost. For more information about the Group and Company’s exposure to interest rate and foreign currency risk, see note 24.
Non-current liabilities
Secured bank loans
Current liabilities
Current portion of secured bank loans
Terms and debt repayment schedule
Group
Company
2018
$000
823
823
530
530
2017
$000
924
924
5,811
5,811
2018
$000
823
823
263
263
Currency
Nominal Interest Rate
Year of
Maturity
Face Value
2018
$000
Carrying
Amount
2018
$000
Face Value
2017
$000
Loan 1 – secured on the Group’s freehold property
in Taiwan
Loan 2 – secured on the Group assets
Letters of credit
Factoring
1.45%
NTD
USD 2.75% over LIBOR
NTD
2.6% to 2.68%
Euro 1.3% over Euribor
2028
2018
2019
2019
908
–
178
267
908
–
178
267
1,353
1,353
1,036
4,175
1,192
332
6,735
2017
$000
924
924
5,479
5,479
Carrying
Amount
2017
$000
1,036
4,175
1,192
332
6,735
52
Quixant Annual Report and Accounts 2018
Reconciliation of liabilities arising from financing activities
Non-current liabilities
Current liabilities
Non-current liabilities
Current liabilities
20. Trade and other payables
Current
Trade payables
Other tax and social security payables
Other payables and accrued expenses
Amounts payable to subsidiary undertakings
Cash flows
Reclassification
2017
$000
924
5,811
6,735
2016
$000
6,148
2,774
8,922
$000
$000
(16)
(5,366)
(5,382)
(85)
85
–
(49)
(2,138)
(2,187)
(5,175)
5,175
–
2018
$000
823
530
1,353
2017
$000
924
5,811
6,735
Group
2018
$000
2017
$000
Company
2018
$000
2017
$000
16,744
421
3,887
–
21,052
12,272
272
5,060
–
17,604
11,883
5
1,752
5,517
19,157
9,360
5
1,257
4,616
15,238
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 $689,000 (2017: $409,000).
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.
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 6b
£1.48
Issue 6
£1.402
Issue 5
£1.51
Issue 4
£2.09
Issue 3
£1.63
Issue 2
£0.61
Issue 1
£0.19
£4.30
£4.30
40%
5 years
0.90%
£4.085
£4.085
40%
5 years
0.90%
£3.90
£3.90
44%
5 years
0.90%
£2.09
£2.09
44%
5 years
0.90%
£1.63
£1.63
44%
5 years
0.90%
£1.37
£1.40
50%
5 years
0.90%
£0.46
£0.49
50%
5 years
0.90%
The fair values at grant date were converted at the exchange rate on the grant date to give fair values of $2.07, $1.96, $5.01, $2.93, $2.43, $0.98
and $0.29 per option. The total expense recognised in the period in respect of share options is $111,000 (2017: $209,000).
53
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. Employee benefits continued
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
22. Provisions
Group
Balance at 1 January
Provisions made during the year
Balance at 31 December
The provision is in respect of long-term employment liabilities in Italy and Japan.
The Company has no provisions.
23. Capital and reserves
Share capital
Fully paid ordinary shares of 0.1p per share
Balance at 1 January 2018
Issued for cash
Exercise of share options (see note 21)
Balance at 31 December 2018
Balance at 1 January 2017
Issued for cash
Exercise of share options (see note 21)
Balance at 31 December 2017
Weighted
Average
Exercise Price
2018
Number Of
Options
2018
Weighted
Average
Exercise Price
2017
Number Of
Options
2017
631,198
£1.31
165,000
£4.22
(45,830)
£2.76
£0.91 (321,300)
£0.78 1,254,398
47,000
£3.90
–
–
(670,200)
£0.49
£2.63
429,068
£1.31
631,198
2018
$000
–
306
306
2017
$000
–
–
–
Ordinary shares
Number
Share Capital
$000
Share
Premium
$000
66,034,982
106
6,102
321,300
66,356,282
65,364,782
–
670,200
66,034,982
–
106
105
–
1
106
397
6,499
5,676
–
426
6,102
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.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
54
Quixant Annual Report and Accounts 2018 Dividends
The following dividends were recognised during the period:
2.6p (2017: 2.0p) per qualifying ordinary share
Total dividends recognised in the year
2018
$000
2,315
2,315
2017
$000
1,691
1,691
After the Balance Sheet date dividends of 3.1p per qualifying ordinary share (2017: 2.6p) were proposed by the Directors. This dividend has not
been provided for.
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.
55
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 Financial instruments – Group and Company continued
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.
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
2018
$000
2017
$000
Company
2018
$000
2017
$000
59,433
(11,082)
47,260
(11,194)
23,048
(2,456)
48,351
36,066
20,592
21,204
(2,205)
18,999
Group
2018
$000
59,433
1,353
60,786
Company
2017
$000
47,260
6,735
53,995
2018
$000
23,048
1,086
24,134
2017
$000
21,204
6,403
27,607
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
2018
$000
11,082
25,912
36,994
2017
$000
11,194
16,967
28,161
Company
2018
$000
2,456
8,065
2017
$000
2,205
8,722
10,521
10,927
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Group
2018
$000
856
9,450
14,193
1,413
–
2017
$000
2,547
7,649
5,942
652
177
25,912
16,967
Company
2018
$000
2017
$000
–
–
–
–
–
–
–
–
–
–
–
–
Australia
USA
Europe
Asia
Rest of world
56
Quixant Annual Report and Accounts 2018
Liquidity risk
The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting
agreements.
Group
31 December 2018
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Group
31 December 2017
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Company
31 December 2018
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
Trade and
Other
Payables
$000
Other
Financial
Liabilities
$000
Total
$000
21,052
1,353 22,405
21,052
–
–
21,052
537
7
940
1,484
21,589
7
940
22,536
$000
$000
$000
17,604
6,735
24,339
17,022
582
–
17,604
1,588
4,239
1,123
6,950
18,610
4,821
1,123
24,554
$000
$000
$000
19,157
1,086
20,243
19,157
–
–
270
7
940
19,157
1,217
19,427
7
940
20,374
$000
$000
$000
15,238
6,403
21,641
15,238
–
–
15,238
1,256
4,239
1,123
6,618
16,494
4,239
1,123
21,856
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
2018
$000
2017
$000
Company
2018
$000
2017
$000
11,082
25,912
36,994
11,194
16,967
2,456
8,065
2,205
8,722
28,161
10,521
10,927
All of the above relate to the IFRS9 category ‘loans and receivables’ and are measured at amortised cost.
57
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Financial instruments – Group and Company continued
Current liabilities
Trade and other payables
Other financial liabilities
Non-current liabilities
Other financial liabilities
(21,052)
(530)
(17,604)
(5,811)
(19,157)
(263)
(15,238)
(5,479)
(21,582)
(23,415)
(19,420)
(20,717)
(823)
(924)
(823)
(924)
(22,405)
(24,339)
(20,243)
(21,641)
All of the above relate to the IFRS9 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 2018 the average interest rates earned on
the daily closing balances were 1.69% and 1.64% (2017: 1.3% and 1.25%).
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
Less than one year
Between one and five years
More than five years
Group
Company
2018
$000
452
608
167
2017
$000
438
686
–
1,227
1,124
2018
$000
199
191
–
390
2017
$000
198
199
–
397
Group
During the year $471,000 was recognised as an expense in the Profit and Loss Account in respect of operating leases (2017: $495,000).
Company
During the year $203,000 was recognised as an expense in the Profit and Loss Account in respect of operating leases (2017: $175,000).
26. Commitments
The Group and Company were committed to the implementation of a group accounting system which was in progress at 31 December 2018.
The amount committed, not spent, at that date was $320,000 (2017: $434,000).
27. Contingencies
Neither the Group nor Company had any contingencies existing at 31 December 2018 (2017: 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 provided the house rent-free to
J F Jayal. It was agreed between Mrs Mullins and Mr Jayal to terminate the agreement in March 2018. Two months of rent of £5,000 was paid
by the subsidiary company to Mrs Mullins in 2018. In addition, the Group paid £0 (2017: £3,976) to Ruth Jayal, the wife of Jon Jayal.
During the year the Group paid €31,200 (2017: €31,200) for administration services to Francesca Marzilli, the wife of Nick Jarmany.
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.
58
Quixant Annual Report and Accounts 2018
COMPANY INFORMATION
Directors
Company secretary
Registered office
Auditor
Nominated advisor and Broker
Financial PR
Registrars and CREST settlement agents
M J Peagram
G A Y Hudson
N C L Jarmany
J F Jayal
C-T Lin
G L Millward
G P Mullins
G van Zwanenberg FCA
L E Park
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
71-73 Carter Lane
London
EC4V 5EQ
Neville Registrars
Neville House
Steelpark Road
Halesowen
B62 8HD
Registered number
04316977
Website
Ticker:
www.quixant.com
London: QXT
59
Quixant Annual Report and Accounts 2018FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT 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
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