A Platform
for success
Annual Report
and Accounts
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Annual Report and Accounts
for the year ended 31 December 2023
Contents
Strategic report
Introduction
Highlights
Business Overview
Business Model and Strategy
Our Investment Proposition
Nexteq at a Glance
Chair’s Statement
Chief Executive’s Report
Financial Review
Key Performance Indicators
Risk Management and Principal Risks
Section 172 Statement
Sustainability Report
Governance
Chair’s Introduction to Governance
Board of Directors
Corporate Governance Report
Directors’ Remuneration Report
Audit and Risk Committee Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect of the Annual Report
and the Financial Statements
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 to the Financial Statements
Company Information
Contents
01
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128
02
Our Vision and values
Introduction
Nexteq is a B2B technology company that enables
customers in selected industrial markets to outsource
the design, development and supply of non-core
aspects of their product offering.
Our Vision
We are the leading experts in delivering pioneering technology that empowers our partners
to fulfil their creative visions.
Our Values
Innovation
We believe that success comes through innovation. We champion creative
thinking within our Group and actively seek new viewpoints.
Collaboration
We work together with our customers to fully support them and understand
their needs. Together with our colleagues and partners, we're always
friendly, honest and supportive.
Expertise
We value knowledge and take pride in our professionalism. We invest
in skills and state-of-the-art thinking so our customers can depend
on our expertise.
Determination
We don't cut corners, even while we strive for efficiency. We enjoy
hard work and have an absolute commitment and determination to
see a task to completion.
Responsibility
We believe in being held accountable for our actions. We're open and
honest about how we do business and are always accessible to our
Shareholders, employees and customers.
Highlights
03
Highlights
Operational highlights
• Diversified manufacturing exposure with mass
production in 2nd manufacturing facility in Malaysia.
• Dividend of 3.1p per share proposed (2022: 3.0p
per share) reflecting confidence in growth and
cash generation.
• Active stock management leading to significantly
• Entered 2024 with confirmed order book covering
improved working capital position.
five months revenue.
• Broadcast delivering growth with continued
progression of pipeline of sales opportunities.
• Refreshed Quixant product range, with all products now
harnessing Intel processors.
• Strong balance sheet with net cash position and
good operational liquidity; supported by good cash
generation, positioning the Group for future organic
and acquisitive growth.
Group
revenue
Group gross
margin
Adjusted profit
before tax1
Group profit
before tax
-5%
$114.3m 36.3%
410bps
45%
$14.7m $12.9m
47%
(2022: $119.9m)
(2022: 32.2%)
(2022: $10.2m)
(2022: $8.8m)
Adjusted diluted
earnings per share1
Diluted earnings
per share
Net cash from
operating activities
Net
cash1
2%
18.09¢
(2022: 17.79¢/share)
-1%
16.02¢
(2022: 16.16¢/share)
2,375%
$19.8m $27.9m
116%
(2022: $0.8m)
(2022: $12.9m)
1 For details of adjusted measures refer to Note 1 and Note 9 of the financial statements.
04
Business Overview
Business overview
Nexteq is a technology business that
enables global industrial electronic
equipment manufacturers in selected
vertical markets to outsource design and
development of their embedded computing
and human machine interface.
We provide the technology that is often invisible to
the end-user but nonetheless forms a critical part of
our customers’ products and the user experience. By
utilisation of our technology, customers can focus their
development efforts on realising new products and
accelerate market entry.
Customers across 47 countries trust Nexteq to be an
integral design and supply partner.
Business model
Nexteq is primarily a hardware product business,
operating as a technology design and supply chain
partner to customers in selected industrial markets.
Key value attributes of the hardware we supply include
firmware embedded within the product, software
included as standard, and unparalleled service when it
comes to integration support, supply chain management,
logistics and after-sales support.
Typically, our Business-to-Business (B2B) customers
integrate our solutions with their own intellectual
property, to bring exceptional products to the market.
By outsourcing elements of their technology stack
to Nexteq, our customers can focus their product
development effort on the most critical drivers of their
business’s success.
The Group generates revenue each time a customer
purchases one of its products for integration into their
solutions. The closely integrated nature of our products
with customers’ designs, often including software we
have developed, drives a repeatability in our revenue.
This characteristic is strengthened by the regulations in
some of the markets in which we operate.
We select markets in which there is a technology
evolution occurring, which require products and solutions
that are not addressed by other generalist technology
businesses. With considerable focus, we are able to
become experts in these industries, both commercially
and technologically. As a result, we not only offer
solutions to customers’ known challenges, but also drive
innovation to improve their products.
Growth strategy
Nexteq serves as an outsource technology and supply
chain partner for major global industrial electronic
equipment manufacturers, with a focus on specific
vertical markets. By combining hardware, software,
display and mechanical engineering expertise with a
global sales network with in-depth industry knowledge
and an Asian manufacturing base, Nexteq is the ideal
global strategic technology provider for ambitious
dynamic industrial equipment manufacturers.
The Group’s origins are in its highly respected Quixant
brand of specialised industrial computer platforms,
which are designed to power machines in the global
casino gaming and slot machine market. These
computer platforms, which our customers integrate into
electronic gaming machine manufacturers installed in
casinos and other gaming venues globally, combine
optimised hardware and software elements to address
the specialist needs of this highly regulated market.
By outsourcing their computer platform to Quixant,
manufacturers can focus their research and development
(R&D) on the game design, which has the greatest impact
on their commercial success.
Business Overview
05
They are also able to bring new products to the market
quicker. The Board believes the gaming market continues
to offer compelling organic growth opportunities
as more manufacturers seek to outsource their
computer platforms.
A key Group objective is to diversify its revenue across
a greater variety of customers, product offerings and
vertical markets. The Board believes this not only
reduces market and customer risk but also increases
the total addressable market while leveraging the
engineering capabilities and global footprint the Group
already has. Having penetrated new markets, we seek to
identify opportunities to elevate the value proposition of
our product through innovation and product development.
Nexteq’s acquisition of Densitron in 2015 materially
diversified the revenue base across a wide range of
industrial sectors into which Densitron supplies industrial
display products. Densitron has developed its product
proposition in the broadcast market to offer integrated,
innovative complete Human Machine Interface
(HMI) solutions.
With a strong net cash balance sheet and a capital light
operating model able to generate strong cash flows,
Nexteq is well positioned to take advantage of new
acquisition opportunities.
The Board believes that the combination of organic
growth opportunities in current markets combined with
acquisitions can deliver transformative growth in
earnings for Shareholders over the medium term.
Identify vertical
Customer acquisition
Product innovation
Value expansion
M&A
Identify and target
verticals that don't
currently benefit
from the expertise of
specialist solution
outsource providers.
Acquire new
customers in our
chosen target market
segments, further
diversifying Nexteq's
revenue base.
Focused R&D to
move up the value
chain through a
combination of
hardware and
software technology.
Increase our share
of customer spend
by providing
additional outsource
solutions that enable
us to become a
fully integrated
technology partner.
From time to time,
the business may
complement its
organic growth
strategy with
strategic acquisitions
that enhance the
Group's technical
capabilities and
market reach.
06
Our investment proposition
Our investment proposition
Why invest in Nexteq?
We believe our growth opportunities and resilient, profitable business
model, combined with a strong net cash balance sheet positions us
well to deliver transformative organic and acquisitive growth over the
medium term and support our diversification agenda to drive growth.
Exposure to attractive and growing
end markets
• We are a leading supplier to the gaming market,
which has structural long-term growth prospects.
The unique and stringent regulatory requirements
in regulated global gaming jurisdictions provide a
barrier to entry.
• We have established a presence in other markets
through Densitron, including recognition as
a respected HMI (Human Machine Interface)
innovator in the broadcast sector.
• We have forged strong partnerships with our key
customers, supplying them for many years.
Attractive technology and capabilities
• We are leaders in the design, development and
manufacture of industrial computer technology
including hardware and software.
• We have a deep understanding of the detailed
regulatory and technical requirements within our
target markets.
• Our Densitron Display Components business
is experienced in developing and sourcing
electronic displays for a wide range
of applications.
• We have demonstrable ability to create and
launch innovative products to market with 22
active patents across the business.
Resilient business model
• We have an agile supply chain structure where
Financial strength
• We have a capital light business model with low
levels of capital required to operate, which allows
the business to generate strong cash flows.
• Good liquidity and a net cash position allow us to
invest in organic and acquisitive growth to drive
our strategy.
we control and manage quality and procurement
but outsource manufacturing. The benefits of this
structure were evident in navigating the business
through major macroeconomic challenges such as
the COVID-19 pandemic and subsequent supply
chain shortages.
• Once our technology is designed in, it is used
throughout our customers’ product lifecycle,
resulting in long-term repeat revenues.
• The diversity of our Densitron Display
Components customer base provides resilience in
times of economic weakness.
Nexteq at a glance
07
Nexteq at a glance
Our revenue by geography
Our revenue by sector
North America
Europe Excl. UK
Asia
UK
Australia
Rest of World
51%
8%
7%
Gaming
Other
Broadcast
Medical
24%
61%
8%
6%
1%
11%
23%
Global locations
Our 219 employees are located across offices in six countries.
Track record of growth
160
140
120
100
80
60
40
20
0
+17% CAGR
since float
to FY23
24
114
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
08
Our brands
Nexteq trades under two brands, Quixant and Densitron
Quixant is focused on the casino gaming
and slot machine markets, designing,
developing and manufacturing gaming
platforms and display solutions for this
thriving sector.
Through Quixant, major gaming video slot manufacturers can
outsource those aspects of their machines that offer limited
commercial differentiation, including the computer platform and
low-level software. Recently, Quixant has also launched a range of
turnkey cabinets that enable customers to exclusively focus their
research and development resources on game design, which
is critical to enhancing the player experience – and in turn, our
customers' commercial success.
Our brands
09
Densitron services the broad industrial marketplace as a
specialist in Human Machine Interaction. It brings innovative
displays, control surfaces, and control systems to a wide
range of global industrial markets.
Through Densitron, we aim to execute our
business strategy of diversifying into new sectors
and migrating up the value chain within those
sectors. The broadcast sector has been identified
as a particular market of focus, and Densitron
technology is already revolutionising the control
of devices in this sector bringing the advantages
of touchscreens while overcoming the challenges
encountered in using them.
10
Chair's statement
Francis Small | Chair
Chair’s statement
Group results overview
I am pleased to report on a year of meaningful progress
as the Group continues its evolution as a high-value
technology partner across multiple selected industrial
markets. While navigating a challenging and evolving
economic environment, we stayed the course, executing
our growth strategy. As a result, the Group delivered a
resilient revenue performance against a record prior year,
significant improvement to profitability, and encouraging
operational and strategic progress. I would like to thank all
colleagues for their ongoing commitment, perseverance
and adaptability during the year.
Higher interest rates and inflation led to weakened
demand for many of our customers’ end products,
leading to lower order intake and customers pushing
shipments out into 2024. Despite these headwinds, the
Group delivered a resilient sales performance with Group
revenues down 5%, Densitron revenues broadly in line
with 2022 and Quixant revenues down 6%.
Significant progress was made in the operational
performance of the business, particularly in managing
supply chains and driving the shift towards higher value
products. This allowed for materially improved profitability,
with adjusted profit before tax up 45% to $14.7m (2022:
$10.2m) and statutory profit before tax up 47% to
$12.9m (2022: $8.8m).
The Group’s capital-light model generates strong
cash flows, which management looks to reinvest into
accelerating the strategy and delivering further value
for Shareholders. The year saw an easing in the acute
component shortages experienced in the prior two years
and restoration of a better supply and demand equilibrium.
This allowed for the unwind of stock balances and
improved cash generation, with $19.8m cash generated
from operating activities.
I am pleased to report that we commenced our first mass
production run in Malaysia in the fourth quarter of 2023,
complementing our Taiwanese manufacturing capability
and in line with our strategic decision to diversify our
manufacturing exposure. This was an incredible effort
by our manufacturing operations team to ramp up from
initiation through yield testing to production in nine
months. We plan to increase our manufacturing output in
2024, with finished goods manufacturing dual sourced
between Taiwan and Malaysia.
Nexteq rebrand supports Group diversification
A significant milestone in the Group’s growth journey
was marked during the year with the rebrand to Nexteq.
This reflects the evolution of the business from a niche,
specialist hardware provider servicing a single end market,
to a technology solutions partner with broad industrial
exposure in multiple carefully selected vertical markets
with strong growth prospects.
“ Significant progress was made in the operational
performance of the business.”
Francis Small | Chair
Chair's statement
11
Progression of sustainability agenda
The Board has a commitment to long-term, sustainable
value creation. During the past year, we’ve worked
on broadening our sustainable business strategy,
implementing measurable goals and targets, and aligning
to the UN Sustainable Development Goals (SDGs).
We have focused on around five of the UNSDGs, which we
believe are most appropriate and practical for the Group to
support in its sustainability activities.
As part of our support of the Climate Action UN SDG, we
have also committed to achieving Net Zero emissions by
2050 and the Company was Carbon Neutral in 2023.
Clear strategic vision
The Board completed its annual strategy review in July
2023, which confirmed that the medium-term plan remains
appropriate and robust. The Group’s strategy is focused
on sustainable long-term growth, through both organic and
acquisitive means. We believe that organic growth can be
achieved by:
• New markets: Identification and analysis of market
sectors, focusing on those that do not currently benefit
from dominant deep specialist solution outsource
providers and are undergoing a technology evolution.
• Customer acquisition: Building new customer
partnerships in its chosen target market segments,
further diversifying the Group’s revenue base.
Alongside organic growth, selected acquisitions are
a key factor in the Group‘s strategy; to complement
and accelerate its strategy. The Board is investigating
opportunities in selected other industrial PC markets,
which leverage our experience and capabilities already
deployed in the gaming sector.
Capital allocation prioritising capital growth
The Group’s cash generative business model and strong
balance sheet with good liquidity allow it to invest in the
business to drive organic growth and take advantage of
acquisition opportunities. With net cash of $27.9m and
negligible debt, we are well positioned to take advantage
of opportunities. Priorities for capital allocation are:
• Maintain a strong balance sheet with good liquidity.
• Investment in acquisitions to progress the Group’s
ongoing growth and diversification agenda.
• Maintain a progressive dividend payment, growing in
line with earnings growth.
• Any excess cash not required for investment in the
medium-term growth of the business will be available
for distribution to Shareholders, including by means
of a limited share buyback programme.
The Board considers it appropriate to recommend a
moderate increase in the full year dividend to 3.3p per
share (2022: 3.0p per share).
• Product innovation: Focused R&D to move up the value
chain, including within the software stack.
Francis Small
Chair
• Land-and-expand: Increase share of customer wallet by
providing additional outsource solutions to become a
fully integrated technology partner.
12
Chief Executive's report
Jon Jayal | Chief Executive Officer
Chief Executive’s report
Key messages
• Profitability enhancements driven by successful
execution of strategic focus on higher value products.
• Normalisation of order book with easing supply chain
lead times.
• New business development gathered pace in 2023 as
Gaming manufacturers reignited product development
with new business wins supporting organic growth
in 2024.
• Excellent cash generation in 2023 leading to record
net cash position.
• Range of organic growth and acquisition opportunities
to significantly enhance the Group's financial scale in
the medium term.
Year in summary
The Group continued to make good strategic progress
in the year despite some challenging macroeconomic
conditions. Following the buoyant post pandemic
industrial market demand in 2021/2022, coupled with
unprecedented supply shortages, we entered 2023
with significant order backlog and revenue visibility. The
normalisation of order intake first reported in September
2023 with the 2023 interim results, continued in the
second half of the year. This is a result of customers
reducing inventory levels because of easing of supply
chain pressures, together with wider economic
uncertainty. The Group enters 2024 with good visibility of
demand with the order book representing a more typical
five months’ revenue cover, compared to seven months’
revenue cover at the start of 2023.
It is particularly pleasing in this environment to be
reporting 45% growth in Group adjusted profit before
tax to $14.7m (2022: $10.2m), with a corresponding 47%
growth in Group statutory profit before tax to $12.9m
(2022: $8.8m). As noted above, Group revenues in the
year were down 5% to $114.3m (2022: $119.9m) against a
record prior year. Initiatives taken to improve the quality
of revenue through focusing on higher value products
and a stable operating expense base delivered an
adjusted Group profit before tax margin of 12.9% (2022:
8.5%). It is a key objective for the business to deliver mid-
teen adjusted profit before tax margins in the medium
term and it is pleasing to report the positive progress
towards this objective in the last year. In conjunction
with the easing in supply chains, we started to unwind
our working capital tied up in inventory supporting 142%
adjusted operating cash conversion to leave us with a
record Year end net cash balance of $27.9m.
“ Profitability enhancements driven by
successful execution of strategic focus
on higher value products.”
Jon Jayal | Chief Executive Officer
Chief Executive's report
13
Our strategy has been to leverage engineering capability
and business philosophy across a diversifying customer
base, product offering and vertical markets. We acquired
Densitron, a supplier of display and human machine
interface components to a wide range of industrial
markets. Through Densitron we have identified the
broadcast market as a second focus sector in which
equipment manufacturers are seeking to replace
outdated mechanical control with graphical touch
technology. To support this agenda, we have developed
unique solutions that modernise human machine
interaction (HMI) and control of broadcast equipment.
We delivered our fourth consecutive year of double-
digit revenue growth in the broadcast sector with $8.4m
recognised in the year (2022: $7.5m).
The Group’s growth strategy is defined as follows:
• Identification and analysis of market sectors that do
not currently benefit from dominant deep specialist
solution outsource providers and are undergoing a
technology evolution.
• Building new customer partnerships in its chosen target
market segments, further diversifying the Group’s
revenue base.
• Focused R&D to move up the value chain, including
within the software stack.
• Increase share of customer wallet by providing
additional outsource solutions to become a fully
integrated technology partner.
• Undertake acquisitions to complement and accelerate
its organic growth and diversification strategy.
Growth strategy – the outsource partner of
choice in selected markets
Nexteq is founded on the principle that selected
industrial markets are inadequately supported by more
generalist computer and human machine interface
technology companies. As a result, original equipment
manufacturers in these markets are required to develop
aspects of their products that are non-core or non-
differentiating to meet the specific and bespoke needs
of the market. This makes their businesses less efficient
and reduces focus on their core competencies.
The Board believes that by building domain knowledge
in these markets, focusing research and development
to innovate and supply optimised solutions that cater
for technical and operational characteristics required
and deploying global expert sales teams into each of
them, we can become the preferred outsource provider.
This enables our customers to outmanoeuvre their
competition and grow market share.
Our global team encompasses a powerful combination
of computer hardware, software, display and mechanical
engineering expertise that, together with a diversified
Asian manufacturing base, enables us to engineer and
supply well-matched solutions to meet market needs.
The business was founded in 2005, operating in the
casino gaming sector by designing and supplying
optimised computer platforms to electronic gaming
machine manufacturers. Our customers’ machines
installed in casinos and other gaming venues globally,
combine optimised hardware and software elements
to address the specialist needs of this highly regulated
market. By outsourcing their computer platform to
Quixant, manufacturers can focus their R&D on the
game design, which has the greatest impact on their
commercial success. They are also able to bring new
products to market quicker.
14
Chief Executive's report
Business Review: Quixant
Quixant is Nexteq’s brand that supplies outsourced
solutions to the casino gaming and slot machine market,
representing 61% of the Group total revenue.
Growth in computer platform volumes tempered
by reduced monitor sales
Continuing a strong performance in 2022, we grew
computer platform volumes by 5% to 54.5k in 2023 with
particularly healthy demand for the cost-effective IQ and
mid-range IQON products. While the margins achieved
are consistent across all our products, the average
selling price of IQ and IQON products are lower, which
led to platform revenues in line with 2022. Against this
growth in computer platform sales, we saw a decline in
monitor sales partly driven by cessation of sales to the
Aruze Group following their US entity filing for Chapter
11 bankruptcy in February 2023. Overall gaming sector
revenues were down 6% year on year to $69.2m (2022:
$74.1m) albeit with product mix driving higher gross
margins. Gaming monitors typically carry a lower gross
margin than computer platforms because they carry less
bespoke intellectual property.
Gaming Platform sales (quantity) by product family
61,080
52,167
52,044
54,513
39,439
40,070
21,976
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2017
2018
2019
2020
2021
2022
2023
Cost effective Mid-range High-range
Refreshed product range
2021 and 2022 saw extraordinary disruption in electronic
supply chains with high volatility in pricing, extended
supply lead times and unexpected component end-of-
life notices. Maintaining supply through this period was
a major challenge for the business and engineering
teams across the Group were heavily occupied with
re-designing existing product and validating new
components to replace those that were unavailable.
Component markets in 2023 were substantially more
stable than previous years, and greater confidence
returned in supply availability and reliability. While
there remain some challenges and we cannot be
complacent, we were able to resume focus on new
product development. In 2022, we started the process
of migrating our newest products from AMD to Intel
processor technology. Graphic processing capability
is critical for the high-resolution video slots that the
computer platforms power and traditionally AMD offered
better performance-embedded graphics than Intel. In
recent years Intel has significantly improved its graphics
processing performance, likely partly driven by their
recognition of the importance of GPU Compute in artificial
intelligence. This has benefited their embedded processor
parts and enabled them to offer significantly more
compelling processors with longer supply lifetimes.
With the roll out of IQ-2 and IQON-2 in 2024 to join the
already launched QMAX-3, all our latest products now
harness Intel processors.
Combined with Quixant’s Software Hub, a value-add
library of support software libraries, tools and drivers,
the new hardware product launches give us a complete
portfolio at all price points, which we can market
with confidence in long-term availability and price
competitiveness for the first time since the pandemic.
New business development gathered pace in 2023 as
manufacturer reignited new product development rather
than focusing on maintaining supply of existing product.
With our refreshed product suite, we are well positioned
to drive the conversion of new business.
Growth in new markets augmenting flat
demand from established jurisdictions
The US Gaming market continued to see strong player
spend with the American Gaming Association reporting
US slot machine gross gaming revenues growing by 3.3%
year on year to $32.4bn1. The tribal gaming market, which
covers casinos that are located on reservation land,
represents the other major source of US gaming.
1 Source: American Gaming Association Commercial Revenue Tracker Q4 2024 Report
Chief Executive's report
15
odds betting’. The law allows companies to run fixed-
odds betting operations in relation to sports events and
online games. This has resulted in many companies
competing for licences to manage lottery and sports
betting locations. Significant challenges remain around
import logistics of any gaming product in the country
and whether legislation to approve gaming will ever be
passed remains to be seen but there are tailwinds in
what would be a substantial market. Despite the optimism
around Brazil, we are aware of the political uncertainty
that exists in many LATAM countries and therefore
are cautious about relying on new market growth in
the region.
Across all jurisdictions ‘omnichannel gaming’ is increasing
in popularity and importance. Players expect a seamless
experience between bricks-and-mortar venues and
virtual online gaming. This is driving major investment
from traditional land-based manufacturers into online, but
also a tide of online game developers looking to bring
out land-based machines with their content. The latter
is exciting for us because our turnkey product offerings
allow them to realise their ambitions without designing or
manufacturing hardware.
The National Indian Gaming Commission reported gross
gaming revenues in 2022 of $40.9bn2, 4.9% growth year
on year.
The market replacement cycle, however, has seen
stagnant growth in the year and the major manufacturers
have been trading places in market share with Aristocrat
and Light & Wonder leading the pack. This competitive
environment has led some of the majors to enter atypical
US markets for them such as Historical Horse Racing and
the Route Markets seeking growth. This presents a risk
for some of our larger customers as they have historically
been strong in these segments. It also, however, presents
an opportunity for us because it is increasing the
emphasis on content creation to be competitive, which
plays into our outsource proposition.
Our two largest customers, Everi Holdings (Everi) and
Ainsworth Game Technology (AGT) made important
new product launches at the Global Gaming Expo
(G2E) 2023, held in Las Vegas in October 2023. Both
launched several new cabinets, which has put them in
a competitive position, and introduced new ‘hold and
spin’ games at the show – a type of bonus game that is
dominating player appetite at the moment.
While European market revenues recovered from
pandemic lows in 2020, the replacement cycle has
continued to lag pre-pandemic levels and sentiment
generally remains weak. Exceptions to this are Bulgaria
and Romania where we have seen elevated activity, with
the latter supported by legislative changes.
Latin America represents a significant growth opportunity
as markets regulate and evolve. We continue to follow
developments in Brazil closely where, in December
2023, the government enacted a law regulating ‘fixed-
2 Source: National Indian Gaming Commission FY22 Gross Gaming Revenue Report
16
Chief Executive's report
Business Review: Densitron
Densitron is Nexteq’s brand that supplies industrial display
components and bespoke human machine interface (HMI)
solutions to selected industrial markets outside gaming,
representing 39% of the Group total revenue.
Significant margin enhancement in 2023
after a record 2022
In 2022, we delivered record revenues in Densitron
since its acquisition in 2015. Despite challenging macro
conditions in many industrial markets driving weaker than
anticipated demand, overall, Densitron delivered another
strong revenue performance of $45.1m, broadly in line
with prior year (2022: $45.8m).
Initiatives introduced over the last few years to improve
profitability yielded results in 2023 as Densitron delivered
several percentage points improvements in gross margin.
Combined with revenues remaining at historical highs,
this meant Densitron delivered a materially increased
adjusted profit before tax contribution in the year.
Double digit broadcast sector growth
Broadcast sector revenues were up 12% to $8.4m
(2022: $7.5m), the fourth consecutive year in which we
have achieved double-digit growth. This is despite the
broadcast market seeing similar macro headwinds to
many other industrial markets. Importantly, the higher
value product propositions supplied to the broadcast
sector are at higher gross margins than other Densitron
sectors, which is partly responsible for the better margin
performance in 2023.
Broadcast is a strategic market for the Group in which we
seek to modernise the control of technology that typically
resides in Production Control Rooms (PCRs). We believe
that there are around 220,000 PCRs worldwide, which
results in an equipment spend every year of $880m, of
which we believe our realistic total addressable market is
$220m. These PCRs are found in broadcast corporation
studios, corporate broadcast theatres, outside broadcast
trucks and houses of worship and are the venues
in which the broadcast operations are directed, and
composition of the outgoing programme takes place.
Densitron has three offerings for the broadcast sector:
1. Finished Products – These products incorporate the
best of our display, touch and computing technology
to provide plug and play solutions to broadcast HMI
and control problems. These are supplied not only to
broadcast equipment manufacturers but also to the
end broadcast corporations such as the BBC.
2. HMI Modular Solutions – We can supply any
element of our HMI technology as a sub-assembly to
broadcast manufacturers for incorporation into their
equipment. This gives them access to newer interface
technology, helps them get to market faster and
reduces their engineering workload.
3. Original Design Manufacturer Plus (ODM+) Services
– Broadcast manufacturers can outsource their entire
product design and development to Densitron and in
developing this product Densitron will incorporate our
patented technologies where appropriate. This allows
the broadcast manufacturers to either reduce costs or
invest in engineering, manufacturing and supply chain
capacity in other projects.
As our product portfolio matures and gains greater
traction across the industry, we are increasingly seeing
customers adopting more standardised variants. This
is expected behaviour and supports the R&D effort
expended in developing the product portfolio.
During the year we expanded the range of our ‘Tactila’
tactile objects and commenced work on smaller rotaries,
which, while technically difficult to accomplish, expands
the application into more broadcast equipment and
applications. This helped drive new business activity in
the second half of 2023. Our patented button technology
will be adopted by Ross Video. These buttons are
overlaid onto a display to enable the user to enjoy
the benefits of a touchscreen but with the tactility of a
mechanical button. We also secured an order for our
Tactila rotaries to be applied to a market-leading piece of
broadcast hardware by Wohler.
Display component book delivering record margins
While 2023 saw a slight downturn in revenue amid wider
weakness in the industrial equipment demand, margin gains
more than offset this from a profit perspective. We believe
this new margin level can be sustained going forward with
the value proposition we now offer customers.
Chief Executive's report
17
Current trading and outlook
In the first months of 2024 we have seen a continuation
of the slower order intake across our end markets as
customers continue to focus on managing working
capital tied up in inventory. We expect these conditions to
persist in the near term but improve into the second half
of the year. The Group enjoys a healthy order backlog
providing good revenue visibility and remains confident
in meeting market expectations for 2024 revenues, with
the typical second half weighting. The Board continues
to have confidence in the Group’s organic growth
opportunities in the medium term.
Driving further operational efficiency and profitability
remain key priorities for the Group, and we expect to
make further improvements in the current year. With
the normalisation of supply chains, we expect cash
conversion to remain at high levels, further improving
our net cash position. The strength of our balance sheet
and accumulated cash balance also positions us well to
undertake acquisitions to deliver further earnings growth.
Jon Jayal
CEO
We are recognised as a trusted supplier to a loyal
customer base and have worked successfully during
the year to secure new business wins to support future
revenue growth. The second largest sector in the Nexteq
Group by revenue is the medical market and we have
a longstanding book of customers who require high
service levels, need to work with trusted supply partners
and tend to buy the same display for up to a decade
so present a very attractive customer base for the
display component business to grow from within. Having
exhibited at the Medica trade show in 2023 we are
exploring growth opportunities in this market.
Expanded manufacturing footprint for
efficiency and resilience
All our electronics product manufacturing takes place
in Asia with most components sourced from China and
Taiwan. Our finished goods are all assembled in Taiwan.
Initiatives introduced over the last few years to improve
profitability yielded results in 2023 as Densitron delivered
several percentage points’ improvement in gross margin
during the year.
Considering continuing geopolitical tensions in the
region, we made the decision at the end of 2022 to
explore manufacturing options elsewhere and I am
pleased to report that we commenced the first mass
production run of the IQON 2 gaming product in
Malaysia in Q4 2023. This was an incredible effort by our
manufacturing operations team to ramp up from initiation
through yield testing to production in nine months. Going
forward, finished goods manufacturing will be dual
sourced between Taiwan and Malaysia for Quixant and
Densitron finished goods.
We also signed a manufacturing partnership with ELAS,
a respected Bosnia-based gaming cabinet manufacturer.
They will enable us to efficiently supply our Quantum
cabinet products to the European market alongside
our other manufacturing partners who are focused on
North America.
18
Financial review
Johan Olivier | Chief Financial Officer
Financial review
The Nexteq Group delivered improved
profitability and cash generation
Statutory results
Group revenue was $114.3m, 5% lower than the $119.9m
delivered in 2022. Gross profit was $41.5m (2022:
$38.6m), an increase of 8% over the prior year, with gross
margins at 36.3% (2022: 32.2%). Operating expenses
were $29.1m (2022: $29.6m), resulting in operating profit
of $12.4m (2022: $8.9m). Net finance income was $0.5m
(2022: Net finance cost of $0.1m), resulting in profit before
tax of $12.9m (2022: $8.8m) and an income tax expense
of $2.0m (2022: tax credit of $2.2m), equivalent to an
effective tax rate of 15.6% (2022: -24.8%). Basic earnings
per share (EPS) were 16.39cents (2022: 16.53cents), a
decrease of 1%. Diluted EPS were 16.02cents (2022:
16.16cents), a decrease of 1%.
Revenue
Quixant revenues were $69.2m, a decrease of 6% on the
prior year (2022: $74.1m). Unit sales increased to 54,513
platforms delivered in the year, up 5% on the prior year
(2022: 52,044). Demand for our cost effective and mid-
range products were particularly high in 2023, resulting in
a slightly lower average selling price resulting in platform
revenues in line with the prior year. The decrease in overall
Quixant revenues was largely due to product mix, as the
Group delivered fewer monitors than in 2022.
Densitron delivered another strong revenue performance
with $45.1m, broadly in line with the prior year (2022:
$45.8m). The strong demand for Densitron products seen
in 2022 continued through 2023, across all its subsectors.
The broadcast sector in particular had another strong year
with revenues of $8.4m, up 12% on the $7.5m delivered
in 2022.
Gross profit and gross profit margin
The Group generated gross profit during the year of
$41.5m (2022: $38.6m) representing a gross margin
of 36.3% (2022: 32.2%). Gross margins continued their
recovery from the lower levels seen in 2021 and 2022,
which was a result of component price inflation from global
supply chain shortages and higher freight charges.
Adjusted operating expenses
Adjusted operating expenses decreased by 4% to $27.3m
(2022: $28.3m). See Note 1 to the financial statements
for a reconciliation of adjusted operating expenses to
operating expenses. For the first year since the outbreak
“ Cash conversion of 142%, returning to historic
levels as the Group reduced working capital.”
Johan Olivier | Chief Financial Officer
Financial review
19
of COVID-19 in 2020, operations were not impacted by
pandemic-related restrictions. This resulted in travel and
marketing spend returning to normal levels, increasing
$0.6m to $2.6m (2022: $2.0m). In addition to this, the
Group has also invested in headcount, with average
employees increasing from 228 in 2022 to 238 in 2023
as the Group grew its engineering, supply chain and
sales teams to support the growing demand across both
Quixant and Densitron. This resulted in payroll costs
increasing by $1.5m to $21.7m (2022: $20.2m).
During the year, Group expenditure on research and
development reduced to $4.6m (2022: $4.8m). These
costs relate to investment activities principally undertaken
in Taiwan, Italy, the UK and Slovenia. Of these costs, $1.8m
were capitalised (2022: $1.8m) as the Group continues to
focus on developing new products, with amortisation for
the year on total capitalised development costs of $1.4m
(2022: $1.1m). During the year the Group abandoned in-
progress development projects with a carrying value of
$1.0m (2022: $0.5m). This was following internal review
where it was determined that the projects no longer met
the criteria to capitalise product development cost as set
out in IAS38.
Offsetting these increases were lower impairment of
trade receivables, with no impairment loss recorded in
the current year compared to $0.9m in 2022 when the
Group recognised an impairment loss related to Aruze.
The Group also recognised exchange rate gains of $0.6m,
compared to an exchange rate loss of $1.6m in 2022.
The Group benefited from less volatile foreign exchange
markets, particularly the US Dollar exchange rate to Pound
Sterling and the Taiwan Dollar. In addition, management
took measures to have natural hedges in place to limit the
impact of foreign exchange fluctuations.
Adjusted operating expenses also benefited from a
$0.4m R&D tax credit. The Group has received R&D tax
credits for many years due to its product development
efforts as part of the SME R&D tax credit scheme, which
is recognised as a credit in tax expense. In 2023 the
Group qualified for the large company Research and
Development Expenditure Credit (RDEC) regime due
to the size of the Company’s balance sheet. Under the
RDEC scheme the tax credits should be recognised
within operating expenses. Apart from the change in
accounting treatment of the tax credits there are no
changes in the timing or amount of tax credits the Group
expects to receive.
Valuation of Aruze-related assets
As disclosed in the 2022 Annual Report, the Group,
through its Quixant brand, had active contracts in place
with Aruze Philippines Manufacturing Inc. (‘APMI’), for
the supply of display products and gaming boards. On
1 February 2023 Aruze Gaming America, Inc (‘AGA’), a
US-based affiliate of APMI, filed a voluntary petition under
Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the State of Nevada. As at the date
of this Annual Report, the Chapter 11 proceedings are still
ongoing. AGA’s operations and assets have been sold
as part of the proceedings and AGA also closed its Las
Vegas operations. APMI filed for voluntary liquidation on
22 August 2023 and a liquidation order was issued by the
Philippine courts. As at the date of this Annual Report the
liquidation proceedings were still ongoing.
There remains uncertainty over the recoverability of
balances related to APMI, and Nexteq management
evaluated their carrying value as at the balance
sheet date.
As at 31 December 2023, APMI owed $1.0m to the Group
from the sale of goods (2022: $0.7m). The amounts were
impaired in full as at 31 December 2022 and due to the
uncertainty referenced above remain fully impaired at 31
December 2023. The Group continues to take steps to
recover these balances.
Inventory, consisting of raw materials with a book value
of $1.7m (2022: $2.2m) and finished goods with a book
value of $0.6m (2022: $1.1m) originally earmarked for use
by APMI, was included in the Nexteq Group’s balance
sheet as at 31 December 2023. The raw materials can
be used to manufacture products sold to the Group’s
existing or new customers, and the finished goods
can be used in the Group’s turnkey cabinet offering.
Management expects to fully recover the net book value
of $2.3m and considers that no provision against it was
required as at 31 December 2023.
The Group balance sheet also previously included
capitalised development costs with a book value of
$0.4m related to the development of products for APMI’s
future use. Management assessed the commercial
opportunities for these products and determined that
it was not probable that these would generate future
economic benefits for other customers. As a result,
development of these products was ceased. An
impairment charge of the full book value of $0.4m was
recorded within operating expenses.
Net finance income/(expense)
The Group recognised net finance income of $0.5m
(2022: net finance expense of $0.1m). Finance income
increased to $0.6m (2022: $0.0m) as the Group took
advantage of higher interest rates coupled with the
higher cash balances the Group had during the year.
Finance expense of $0.1m (2022: $0.1m) principally
related to leases.
20
Financial review
Adjusted profit before tax
Adjusted profit before tax increased by 45% to $14.7m
(2022: $10.2m). The adjustments to statutory profit before
tax of $1.9m (2022: $1.4m) consisted of:
• Share-based payments charge of $1.0m (2022: $0.6m).
During the year the Group granted further Long-
Term Incentive Plan (LTIP) shares to employees. The
LTIP awards vest in three years providing continuous
employment during the period, and attainment of
performance conditions relating to earnings per share
(EPS), as outlined on page 112 of the Annual Report.
• Amortisation of acquired intangibles charge of $0.6m
(2022: $0.8m). This charge relates to intangible assets
recognised in the acquisition of Densitron and IDS.
• Restructuring charges of $0.3m (2022: nil). The
restructuring charges relate to a restructuring
programme completed in December 2023 to improve
the efficiency of the Group’s operations. We took
the difficult but necessary decision to reduce our
workforce by 10%, reducing the Group’s annual staff
costs by $1.2m. The effect of this reduction will only be
fully reflected in 2024 due to the timing of when the
programme was completed.
Taxation
The Group recognised a corporation tax charge of
$2.0m in the year, compared to a credit of $2.2m in
2022. The tax charge consists of a current tax charge
of $2.3m (2022: $0.5m) and $0.3m credit relating to the
movement in deferred tax assets and liabilities in the
current year (2022: credit of $2.7m). The 2022 tax credit
included a $1.8m credit in relation to the recognition of
a deferred tax asset for tax losses that were considered
recognisable due to the Group having enhanced visibility
over their availability and utilisation.
The effective tax rate on statutory profit before tax
increased to 15.6% (2022: -24.8%). The Group had higher
than previously expected tax relief from the research and
development efforts and a greater mix of patented product
sales increasing patent box claims in the UK. Going forward,
we expect the effective tax rate to be approximately
16%−19%, depending on the regional mix of profits and
product mix sold.
Earnings per share
Basic EPS decreased by 1% to 16.39c per share (2022:
16.53c per share). Adjusted diluted earnings per share
increased by 2% to 18.09c per share (2022: 17.79c
per share).
Balance sheet
Non-current assets decreased to $24.3m as at 31
December 2023 (31 December 2022: $26.2m) mainly
due to amortisation and impairment of intangible assets.
Included in non-current assets are goodwill of $7.7m
(31 December 2022: $7.7m) and acquisition-related
intangible assets of $0.5m (2022: $1.0m) allocated to cash
generating units (CGUs). The annual impairment review
indicated that no impairment of goodwill is necessary at 31
December 2023 or 31 December 2022. The impairment
reviews did indicate that the estimated recoverable
amounts of the Densitron US and Densitron Europe
CGUs are sensitive to a reasonably possible change in
key assumptions. The change in key assumptions could
cause the carrying amount of the CGUs to exceed the
recoverable amount, which would lead to an impairment.
Refer to Note 11 to the financial statements for further
disclosure of the annual impairment review.
Current assets increased to $78.6m at 31 December 2023
(31 December 2022: $69.7m) mainly due to a significant
increase in cash and cash equivalents from $13.5m at
the start of the year to $28.4m at 31 December 2023.
This was offset by a decrease in inventory to $24.3m (31
December 2022: $32.2m), as the Group consumed the
strategic stock purchased during 2021 and 2022.
Cash flow
The Group generated $19.8m cash from operating
activities in the year (2022: $0.8m). Adjusted operating
cash flow, which excludes tax payments, was $21.0m
(2022: $2.5m) which represented 142% of adjusted profit
before tax (2022: 25%). This was ahead of the Group’s
2023 cash conversion KPI target due to reduced working
capital, as the Group consumed strategic stock balances.
The Group capitalised $1.8m of development
costs (2022: $1.8m), which reflects the continued
development of new products as the Group expands its
product portfolio.
The Group finished 2023 with net cash of $27.9m (2022:
$12.9m), comprising cash and cash equivalents of $28.4m
(2022: $13.5m) and gross debt of $0.5m (2022: $0.6m).
The debt relates to a mortgage over the Group’s offices
in Taiwan.
Dividend
The Board proposes a dividend for the year ended
31 December 2023 of 3.3p per share (2022: 3.0p per
share). This dividend will be payable on 23 August 2024
to all Shareholders on the register on 26 July 2024. The
corresponding ex-dividend date is 25 July 2024.
Foreign exchange
The Group reports its results in US Dollars as this is the
principal currency in which it trades with customers,
with approximately 91% (2022: 91%) of our revenues
denominated in US Dollars.
The Group’s reported results are impacted by US Dollar
movements against currencies in the territories in which
it operates, principally Pounds Sterling, Euros and Taiwan
Dollars. The following are the average and closing rates for
the current and prior year:
Income statement
USD/GBP
USD/Euro
USD/TWD
Balance sheet
USD/GBP
USD/Euro
USD/TWD
Average rate
2023
1.24
1.08
0.032
2022
1.24
1.05
0.034
Closing rate
2023
1.27
1.11
0.033
2022
1.20
1.07
0.033
As most of the Group’s revenues are denominated in US
Dollars, the impact of foreign exchange movements on
reported revenues was minimal in 2023 and 2022. The
impact on foreign exchange movement on profit before
tax is mostly due to operating expenses incurred in
Pound Sterling and Taiwan Dollars.
The average US Dollar exchange rate against currencies
in the territories in which the Group operates for
2023 were very similar to 2022 levels, resulting in a
negligible impact on adjusted operating expenses, when
compared to 2022 average rates. The Group recognised
translational foreign exchange rate gains of $0.6m in
2023, compared with losses of $1.6m in the prior year,
a positive $2.2m impact year over year. Combining the
impact of these foreign exchange elements resulted in
a net positive foreign exchange rate impact of $2.2m
on adjusted profit before tax for 2023 when compared
to 2022.
Financial review
21
Alternative performance measures (APMs)
Throughout this Annual Report, alternative performance
measures (APMs) are used to describe the Group’s
performance. These are not recognised under UK-
adopted international accounting standards or other
generally accepted accounting principles (GAAP).
When reviewing Nexteq’s performance, the Board and
management team focus on adjusted results in addition
to statutory results.
APMs are non-GAAP measures and provide
supplementary information to assist with the
understanding of the Group’s financial results and with
evaluation of operating performance for the periods
presented in the Annual Report. APMs, however, are
not a measure of financial performance under IFRS and
should not be considered a substitute for measures
determined in accordance with IFRS. APMs have been
provided for the following reasons:
1. To present users of the Annual Report with a clear
view of what we consider to be the results of our
underlying operations, enabling consistent comparisons
over time and making it easier for users of the report
to identify trends.
2. To provide additional information to users of the
Annual Report about our financial performance or
financial position.
3. To show the performance measures that are linked
to remuneration for the Executive Directors.
4. The following APMs appear in this Annual Report.
Reason for use
Reconciliation
Adjusted profit
before tax
Adjusted profit
after tax
Adjusted
operating
expenses
Adjusted
operating
cash flow
Adjusted
diluted EPS
Johan Olivier
Chief Financial Officer
1,3
1,2
1,2
1,2
1,2
Note 1
Note 1
Note 1
Note 1
Note 9
22
Key performance indicators
Key performance indicators
The Board uses the key performance indicators (KPIs) to measure the
performance of the business. KPIs were updated in 2022 to more
closely align with the Group’s strategy.
Revenue growth (%)
Performance
2023
2022
2021
2020
2019
-5%
-31.0%
-20%
Revenue from top ten customers (%)
Performance
38%
36%
2023
2022
2021
2020
2019
51%
56%
48%
45%
52%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
0%
10%
20%
30%
40%
50%
60%
Purpose
Purpose
Measures the Group’s ability to continue to grow
our business.
Demonstrates the Group’s ability to diversify our revenue
streams, which forms part of the Group’s strategy.
Definition
Definition
Group revenue in current year divided by Group revenue
in the prior year.
Revenue from ten largest customers as a % of total
Group revenue.
Target
Target
We target double digit growth over the medium term.
Performance in 2023
Revenue growth was impacted by macro-economic
headwinds as higher inflation and interest rates
dampened global demand. This resulted in many of our
customers pushing out demand into 2024.
We expect % of revenue from our top ten customers
to reduce as we pursue our strategy of revenue
diversification.
Performance in 2023
Revenue from top ten customers decreased to 51% in
2023 (2022: 56%) as the Group broadened its customer
base across both Quixant and Densitron brands.
Key performance indicators
23
Adjusted operating cash conversion (%)
Adjusted diluted earnings per share growth (%)
Performance
Performance
2023
142%
2022
25%
90%
2021
2020
2019
161%
351%
1.7%
100%
199%
2022
2021
2020
2019
2018
-103.2%
-41.4%
0%
50% 100%
150%
200%
250%
300%
350%
400%
-150%
-100%
-50%
0%
50%
100%
150%
200%
250%
Purpose
Purpose
Demonstrates the Group’s ability to effectively manage
its working capital.
Measures the Group’s ability to deliver profitable growth
to Shareholders.
Definition
Definition
Operating cash flow, adding back tax payments. divided
by adjusted profit before tax.
Adjusted profit after tax, divided by the weighted average
number of shares in issue in the year.
Target
Target
We target adjusted operating cash conversion
approaching 100%.
Performance in 2023
The Group achieved cash conversion of 142% as
consumption of stock levels improved unwound,
delivering working capital improvements.
We target double digit EPS growth each year.
Performance in 2023
Profit before tax grew by 47% year-over-year, but this was
partially offset by the 2022 tax credit. This credit was a
one-off item related to the recognition of deferred tax
assets on unrecognised losses.
24
Key performance indicators
Employee survey score
Performance
2023
77
0
20
40
60
80
100
Purpose
Measures employees’ perception about working for the
Group and the changes that they’d like to see.
Definition
Employee score as expressed by the employee
survey provider.
Target
We target to improve this score and be at least above the
benchmark for similar-sized international companies.
Performance in 2023
We undertook an annual employee engagement survey
provided by Great Place to Work for the first time in
2023, to identify areas our people tell us can improve
employee experience.
Key performance indicators
25
26
Risk management and principal risks
Risk management and principal risks
Risk management process
The Board is ultimately responsible for the Group’s risk
management framework. It has established a formal risk
management process, under which it identifies, evaluates
and monitors the principal risks facing the Group and the
effectiveness of the controls and procedures in place to
mitigate against them. This includes:
• The Board’s approval of a detailed corporate risk
register, which identifies the principal risks and is
prepared and kept under review by the Audit and
Risk Committee.
• An assessment of the Group’s risk appetite for
categories of risk, as a basis against which to assess
whether the principal risks are being mitigated against
to an acceptable level.
The Audit and Risk Committee reviews the risk register at
least annually. The review includes:
• Any substantial changes to the principal risks, including
new or emerging risks.
• Changes in risk impact and risk likelihood.
• Financial impact assessment for each risk.
• Progress with mitigating actions that have been agreed.
Principal risks
Nexteq shares the same generic macro-economic risk
profile as would other companies in our geographies and
sectors. We take particular care to identify and mitigate
internally controllable risks and have plans for externally
controlled and originating risks. The table below shows the
principal risks and uncertainties that could have a material
adverse impact on the Group. This is not an exhaustive
list and there may be risks and uncertainties of which the
Board is not aware, or that are believed to be immaterial,
which could have an adverse effect on the Group. For
the 2024 risk review cycle the Group intends to include
climate-related risks as the Group continues to expand on
its sustainable business strategy.
Risk
Description
Mitigation
Comment
Change in the year
Geopolitical
Threatened conflict or
outbreaks of war between
countries in which Nexteq or
its customer and suppliers
operate causes disruption
and financial impact to the
business.
We have globally diverse
operations but concentration
of manufacturing and
product development
teams in Taiwan and a large
proportion of customer
revenue from the USA.
Key customer
dependency
The Group generates a
significant portion of its
revenue from key gaming
customers.
To mitigate the possible
disruption from this risk
the Group has established
a second manufacturing
facility in Malaysia, with the
first production from the site
delivered in the fourth quarter
of 2023.
The Group will continue
to focus its operations
on those countries
that provide the best
opportunity for growth
and avoid those countries
that pose significant
country risk.
Diversification of Group
revenues is a strategic focus
of the Board. This is achieved
through diversification of
the gaming revenue base
through new customers and
new products such as gaming
cabinets; and the growth in the
Densitron business.
In 2023, revenue
generated by the ten
largest customers
decreased to 51% of
total Group revenues,
compared to 56%
in 2022.
Risk reduced.
Tensions between Taiwan
and China have remained
at high levels in 2023. The
second manufacturing facility
in Malaysia does mitigate the
risk to the Group and as a
result we have reduced the
risk in 2023.
Management has considered
the recent disruption in the
Red Sea and the impact
it has on global shipping.
To date this has had no
significant impact on the
Group’s results
Unchanged.
Risk management and principal risks
27
Risk
Description
Mitigation
Comment
Change in the year
Product quality Product sold to customers
needs to be of a high quality
Continual assessment of
quality processes; Board
regularly reviews quality control
reports. Ensure new product
introductions are adequately
tested before delivery to
customers.
The Group will continue
to focus on ensuring
products are of the
highest quality.
Component
supply and
price inflation
The Group relies on
a steady supply of
components used in the
manufacture of its products.
Commercial
The marketplace for the
Group’s display products is
highly competitive.
Supply chain constraints eased
in 2023, following the severe
shortages experienced in 2021
and 2022. The Group continues
to closely monitor stock
availability with its suppliers and
where needed proactively source
stocks to act as a safety net.
The Board expects this
issue to continue to be
relevant in 2024 and is
regularly briefed.
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.
The Group has the
capabilities and skills to
create highly engineered,
optimised products
targeted at specific
markets.
Unchanged.
The Group commenced mass
production of Intel-designed
products for the first time in
Quixant. Inherent with any
new product introduction,
this carries additional risk
of design quality issues but
the Group has successfully
introduced many other new
products over the years and
has a well evolved DQA team
to mitigate this.
Risk reduced.
Component market
shortages and reliance on
certain key vendors have
eased in the last year and
are expected to reduce
further in 2024.
Unchanged.
Quixant customers may
decide to design their
computer platforms in-house
or source from another
supplier.
The Group works closely with
its customers to ensure its
product roadmap is robust,
technologically advanced and
ahead of the competition.
Key persons
Regulation
The Board recognises
the importance of its key
employees and the risk
of losing the expertise
and knowledge that they
possess.
Additional laws and
regulations may be enacted
covering issues such as
law enforcement, pricing,
taxation and quality of
products and services.
The executive officers are
subject to long-term contracts.
Key staff have contractual
arrangements designed to
develop and incentivise.
Key roles can be replaced.
The Group monitors prospective
changes in local laws and
regulations that may impact its
business.
Unchanged.
Unchanged.
The Group maintains an
ongoing dialogue with
its customers to maintain
the relationships that it
has developed and foster
new ones.
Key persons recruited
and retained with the
business, often through
the use of long-term
share incentives.
Unchanged.
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.
28
Risk management and principal risks
Risk
Description
Mitigation
Comment
Change in the year
Technological
Intellectual
property
protection
Cyber risks
The Group’s business is
dependent upon technology
that 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 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 Group works closely with its
technology partners to provide
products that incorporate the
most advanced technology
available to our market. The
Group also develops its own
innovations to incorporate into
new products.
The Group recognises the
technology requirements
of its customers and
works with them to
provide the products
that they need in their
business.
Unchanged.
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.
Unchanged.
No major issues were
reported in 2023 but
we maintain on-going
vigilance.
Unchanged.
Deploying the latest generation
of firewall protection.
Ongoing improvement in
the rigour of authentication
processes including wider use
of single sign-on and multi-factor
authentication.
Improved protection of
confidential data on portable
computers.
Improved process of system
patching to close security
loopholes.
Use of third-party audits.
Business
interruption
An event that results in the
temporary or permanent
loss of a manufacturing
facility would be a
serious issue.
The Group now has a second
manufacturing facility in
Malaysia, meaning it could
transfer some production from
Taiwan if needed.
This could include
climate-related events
such as severe weather
or government-imposed
restrictions.
In addition, insurance coverage
for business interruption is in
place.
No issues reported
in 2023.
Unchanged.
Section 172(1) statement
29
Section 172(1) statement
How we engage with our stakeholders
The Board recognises the importance of setting high
standards of corporate governance and complying with
all legal requirements. Section 172 of the Companies
Act 2006 requires a Director of a company to act in the
way they consider, in good faith, would be most likely to
promote the success of the company for the benefit of its
members as a whole. In doing this, section 172 requires a
Director to have regard, among other matters, to:
• The likely consequences of any decision in the
long term.
• The interests of the Company’s employees.
• The need to foster the Company’s business relationships
with suppliers, customers and others.
• The impact of the Company’s operations on the
community and the environment.
• The desirability of the Company maintaining a reputation
for high standards of business conduct.
• The need to act fairly with members of the Company.
The Directors give careful consideration to the factors set
out above in discharging their duties under section 172.
The stakeholders we consider in this regard are the people
who work for us, buy from us, supply to us, own us, regulate
us, and live in the societies we serve and the planet we
all inhabit. The Board recognises that building strong
relationships with our stakeholders will help us to deliver
our strategy in line with our long-term values and operate
the business in a sustainable way. The Board is committed
to effective engagement with all its stakeholders.
For further details of how the Board operates and the way
in which it makes decisions, including key activities during
2023 and Board governance, see pages 37 to 44 and the
Board committee reports thereafter. The Board regularly
receives reports from management on issues concerning
customers, the environment, communities, suppliers,
employees, regulators, governments and investors,
which it considers in its discussions and in its decision-
making process under section 172. In addition to this, the
Board seeks to understand the interests and views of
the Group’s stakeholders by engaging with them directly
as appropriate. The Board receives updates from senior
management on various metrics and feedback
tools in relation to employees, including an annual
employee survey.
Engagement with employees is two-way to ensure that
employees are kept well informed about the business
and valuable feedback is received to ensure continuation
of being a trusted employer. In December 2023 the
Company carried out a Group-wide global restructuring
programme across the business that unfortunately
resulted in job losses across some of our offices. While
the restructuring was felt necessary, it was regretful
and, in such circumstances, we believe it is only right to
ensure our dedicated employees were all well treated.
To this effect, for all those who were impacted by the job
losses, the meetings were carried out with empathy and
respect. Our severance packages were in excess of legal
requirements and this also included support for finding
new roles. An aftercare programme was also implemented
for those employees who remain within the organisation,
since losing a colleague also impacts those who remain.
The Board regularly receives updates on feedback from
investors and senior management. In addition, various
members of the Board, including the Chair, CEO and CFO
meet frequently with institutional investors to discuss
and provide updates about – and seek feedback on –
the business, strategy, long-term financial performance,
Directors’ remuneration policy and dividend policy to the
extent appropriate. Considering the capital growth aims of
Shareholders, the Directors are focused on growing the
revenue and product portfolio to ensure that the Group
continues to grow, while remaining profitable. This is
done by development of new products over the previous
years and by acquisitions when appropriate. Products are
developed based on an identified market demand.
Relationships with customers and key suppliers are
fostered through a collaborative approach using technical
services, evaluation software and products and customer-
specific product development where appropriate.
It is the Group’s policy to manage and operate worldwide
business activities in conformity with applicable laws and
regulations, as well as with the highest ethical standards.
Both the Group’s Board of Directors and executive
management are determined to comply fully with the
applicable law and regulations, and to maintain the
Company’s reputation for integrity and fairness in business
dealings with third parties.
30
Sustainability
Sustainability
Introduction to sustainability
In today’s corporate landscape, climate change,
sustainability and ESG (Environmental, Social and
Governance) aspects are taking centre stage. As we
strive to balance profit with purpose, sustainability
reporting becomes crucial.
I am delighted to share this report which
aims to provide a comprehensive view of our
organisation’s sustainable practices, impact,
and commitment to long-term value creation.
For the full sustainability report please visit our
corporate website at www.nexteqplc.com.
During the past year, we’ve worked on
broadening our sustainable business
strategy, implementing measurable goals and
targets, aligning to five of the UN Sustainable
Development Goals (SDGs).
While good progress has been made to
support sustainability initiatives, the Board
recognises its responsibility to drive further
improvement and focus by identifying our
long-term ambitions, our key performance
indicators and appropriate targets against
which we will measure our progress.
Jon Jayal
Chief Executive Officer
Read more of our sustainability progress in our ESG Report at www.nexteqplc.com
Sustainability
31
Sustainable business goals
The 17 Sustainable Development Goals (SDGs) were adopted by the
United Nations in 2015 and are in place to help achieve a better and
more sustainable future for all. We have aligned to five SDGs that have
been identified as material to our business.
Quality education
Climate action
Goal 4 focusses on the acquisition of foundational and
higher-order skills, greater and more equitable access to
technical and vocational education and training.
Decent work and economic growth
Goal 8 aims to provide opportunities for full and productive
employment and decent work for all while eradicating
forced labour, human trafficking, and child labour.
Responsible consumption and production
Goal 12 aims to ensure good use of resources, improving
energy efficiency and sustainable infrastructure, providing
access to basic services, creating green and decent jobs,
and ensuring a better quality of life for all.
Goal 13 focusses on the urgent action that is needed not
only to combat climate change and its impacts but also to
build resilience in responding to climate-related risks and
natural disasters.
Peace, justice and strong institutions
Goal 16 envisages peaceful and inclusive societies
based on respect for human rights, the rule of law, good
governance at all levels, and transparent, effective, and
accountable institutions.
Aiming for positive impact to our aligned SDGs allows us
to input to these globally recognised initiatives and while
we cannot input to all the SDG targets, we have identified
key aspects aligned to our business operations which are
within our ability to influence positively.
32
Environmental matters
Environmental matters
Nexteq is committed to a programme to assess and
reduce its environmental impact more accurately.
This aligns to UNSDG 13 ‘Climate Action’.
We manufacture electronic products in facilities that are
geographically adjacent to the manufacturing plants of
the raw materials to reduce energy footprint in our supply
chain. We seek to utilise sea freight wherever possible
over air freight in shipping finished goods to customers.
Our global operations comply with the Waste Electrical
and Electronic Equipment (WEEE) Directive to ensure safe
reuse or disposal of depreciated product.
We drove several initiatives during the year towards
improving our environmental footprint, including:
• Commit to measuring carbon footprint aligned to SECR
for required business activities to identify areas of risk
and improvement to reduce these emissions.
• Created a global team to lead initiatives made up
of representatives from different locations and
departments to support the rollout of initiatives and
management of data; this includes sharing and
collaborating throughout our organisation.
• Implement low-cost options such as reducing boiler
temperatures, adding solar control reflective window
sheets and sensor lighting at UK locations.
• Implement behavioural change initiatives within the
workplace for reduction of emissions including clear
messaging for turning off lights, monitors, computers
and other electrical appliances.
• Procure 100% renewable electricity tariff to reduce
market-based emissions.
• Develop and implement a sustainable travel policy
to support environmental impact of choices when
travelling, staying in hotels, and commuting utilising the
emissions travel hierarchy.
Energy Consumption and Emissions Data
Energy use (kwh)
Electricity
2023
Group
Rest of
Total
World
107,733 500,952 608,685
UK
2022
Group
Rest of
Total
World
57,449 475,008 532,457
UK
Fuel oil for heating
33,492
–
33,492
57,880
–
57,880
Fuel for transport
69,702
15,355
85,056
49,112
20,154
69,266
Total energy use
210,927 516,307 727,234
164,441 495,162 659,603
Change
Rest of
World
5%
–
-24%
4%
UK
88%
-42%
42%
28%
Group
Total
14%
-42%
23%
10%
GHG emissions
(kg CO2e)
Electricity
22,309
103,734
126,043
11,110
91,857
102,967
8,220
16,998
–
8,220
14,276
–
3,590
20,588
12,117
4,973
14,276
17,090
101%
-42%
40%
13%
–
-28%
22%
-42%
20%
Fuel oil for heating
Fuel for transport
Total gross CO2e
emissions
Intensity ratio
Average number of
employees
Total GHG emission
per employee (kg
CO2e / employee)
47,527
107,324 154,851
37,503
96,830 134,333
27%
11%
15%
71
167
238
62
166
228
15%
1%
4%
669
643
651
605
583
589
11%
10%
10%
Environmental matters
33
The rise in electricity consumption
in the UK during 2023 can be
attributed to increases in the UK
workforce and regular office-based
working, with more staff regularly
attending the UK offices during
2023 under the Group’s hybrid
working approach.
We asked a total of 60 questions about the organisation,
focusing on Respect, Fairness, Pride and Camaraderie.
We had a 70% response rate from our staff who overall
voted 77% positively in our favour. The following metrics
were rated as exceptional by our employees:
• 90% said management are honest and ethical in their
working practices.
• 93% said people are treated the same regardless of
age, race, sex, sexual orientation.
• 95% said it is a physically safe place to work.
In addition, the number of Electric Vehicle (EV) chargers
were increased at our Balsham and Crawley sites to
support the increased number of employees participating
in our EV scheme, resulting in increased electricity
consumption from our EV charging facilities. Both the
Balsham and Crawley sites operate under green energy
contracts with electricity suppliers.
As part of our support of the Climate Action UN
Sustainable Development Goal, we have committed
to achieving Net Zero emissions by 2050. Net Zero
emissions are defined as the activities within the
business’s value chain resulting in no net accumulation
of carbon dioxide (CO2) and other GHG emissions in the
atmosphere. Currently we are not measuring full Scope
3 across the value chain, so Net Zero only applies to
sections measured. The organisation was also Carbon
Neutral in 2023, taking measures to reduce inherent
emissions through a combination of in-house measures
and investing in carbon offsetting projects.
Our people
We believe the Company has a role to play, both as an
employer and as a good corporate citizen, to help our
stakeholders through the period.
Understanding our people
We want to create an environment where our people can
be at their best. This aligns with the UNSDG 8 ‘Decent
Work and Economic Growth’.
Towards the end of 2023, the Group completed its first
ever employee survey that was administered by an
externally recognised professional firm, Great Place to
Work. The aim of this was to improve our understanding
of our employees by asking them for their views on
us as an organisation, to ensure that our initiatives are
employee led.
The level of positive feedback from our employees
earned us the ‘Great Place to Work’ accreditation, which
is an excellent result for the organisation.
We have also embarked on a series of focus groups
across our offices, in a bid to understand what we can do
to improve the employee experience.
The aim is to convert the key initiatives into a series of
actions, with a view to further improve our results.
Employee volunteering
This year we introduced an employee volunteering policy
that enables all employees to carry out volunteering that
is important to them.
We’ve targeted ourselves to achieve at least ten days’
volunteering per annum throughout our Company. We
exceeded our target by completing 22 days’ volunteering
across a range of organisations.
Charitable activities
As a global organisation we made the decision to set up
a charity committee with local representatives from all
our offices to understand the needs of communities and
causes local to our locations.
We’ve aligned to recognised charities across the globe
and have already made good progress on supporting our
chosen organisations.
Diversity and inclusion
As a global business, the Group always strives to ensure
that we recruit employees from a range of ages, ethnic/
racial groups, religious beliefs, gender and personal
backgrounds. This is to always ensure an inclusive and
diverse workplace.
This can often prove to be a challenge since there can
be lower levels of representation in some roles.
34
Environmental matters
However, we always ensure that we at least try our best to
consider and act to positively discriminate where we can.
We monitor gender diversity and inclusion across all levels
of our business and promote the inclusion of females into
historically male roles, where possible. At present 35% of
our workforce is female. The majority of management roles
within the business are also held by males. It is the Group’s
aim to improve these statistics over time as we believe
becoming a more diverse business is key to growing the
business and attracting and retaining the best talent for it.
However, we need to be mindful of the fact that there is a
level of competition for these types of roles and therefore
must balance this with the commercial challenges faced by
a small organisation. Before proposing targets, we will
carry out analysis of how we can realistically drive a more
diverse workforce.
Operating responsibly
We are committed to ensuring our business operates
ethically, lawfully and with integrity and believe doing
so is critical to our long-term success. This aligns with
UNSDG 8 ‘Decent Work and Economic Growth’, 12
‘Responsible Consumption and Production’ and 16
‘Peace, Justice and Strong Institutions’.
Supply chain integrity
We work with several hundred direct suppliers that assist
us in meeting our business and customer needs. We
rely on complex and multilayer supply chains with our
direct suppliers often having multiple suppliers of their
own, who in turn rely on multiple suppliers. We manage
the integrity of our supply chain by analysing and acting
upon various legal, social, ethical, and environmental risks
and encourage our direct suppliers to adopt sustainable
business practices and work to our Supplier Code of
Conduct, which is developed around the principles in the
Responsible Business Alliance Code of Conduct.
Safety in our supply chain is critically important,
comprehensive measures are in place and designed to
make sure that everyone who works for us does so in a
safe and lawful way. We reinforce this culture across our
supply chains through close working relationships and
contractual arrangements to meet the standards that
Nexteq requires.
We believe that engaging directly with suppliers through
regular review and monitoring is one of the most effective
ways of improving performance in our supply chain and
work, where evidence of non-conformance is identified,
with improvement plans to strengthen our interaction and
working practices together.
Supply chain risks
Some of the highest-level risks along the supply chain in
the electronics industry include injury to people working
operationally in the field, forced labour, disposal of
harmful substances, corruption and human rights abuse
in the mining of metals and minerals.
Our Supplier Code of Conduct and period supplier
reviews seek to challenge our direct suppliers to
demonstrate their adherence to our mandatory ethical,
workforce and environmental standards. We expect all
suppliers to adhere to our Supplier Code of Conduct and
uphold lawful business practices.
Environmental matters
35
Our suppliers are responsible
for managing risks within their
organisations and understand
that we expect them to hold their
suppliers accountable to the
same, high standards. They are
also responsible for maintaining
their upstream suppliers to the
same standards.
When selecting suppliers or continuing to work
with existing suppliers we assess their compliance
to our Supplier Code of Conduct, achievement of
environmental and social activities and successful
management of health and safety in the same way that
we assess commercial factors such as cost, quality, and
achievement of service level agreements. Each supplier
is analysed, and risk assessed.
Levels of influence
We manage the provision of new suppliers to support
the needs of our business and complete regular
supplier reviews.
A supplier cannot be engaged without appropriate due
diligence being completed prior to entering contractual
arrangements. For all component suppliers these audits
are completed by expert supplier management and
procurement personnel in our Taiwan office.
We have relationships with international, national, and
local suppliers. Our support for local businesses has a
positive impact on communities local to our offices through
providing employment near to our operating locations.
Monitoring our supplier’s compliance against our code
of conduct is a complex activity and can be challenging
because of the multiple suppliers and their suppliers
within our supply chain. The level of influence we have
over businesses in our supply chain can vary significantly
and we concentrate on the management of our direct
suppliers where impact would be felt most by our
customers and our business.
Minerals in the supply chain
Nexteq does not purchase raw materials such as minerals
or Ores.
All electronic products contain numerous components
that may contain one or more of the 3TG metals (tin,
tantalum, tungsten, and gold):
• Tin is used for soldering metal and
electronic components.
• Gold and tantalum are used in components such as
connectors or capacitors.
• Cobalt is used within lithium-ion batteries.
For example, smelters and refiners mine and process
cobalt. It is then supplied to component manufacturers,
assemblers and onward sold as part of a unit.
The minerals come from many locations across the globe,
some with an opaque supply chain. The smelters, refiners
and miners are many supply chain tiers away from the
Group and we have little, if no, influence on the provision
of these minerals.
We work with suppliers to identify components and
products likely to contain these minerals and ask them to
understand and influence the provision through reviewing
standards and onward ethical process adherence.
Monitoring compliance
We expect our suppliers to monitor their compliance
to our code of conduct and address any failures
immediately. Our approach to monitoring is determined
by the nature of the risks and the supplier activities
involved. In general, our suppliers are expected to
confirm compliance to our code of conduct and be open
to regular audit by the Group.
Modern slavery
As a responsible and ethical business, the Group has
a zero-tolerance approach to all types of activities
that pertain to slavery and human trafficking within our
business and supply chain.
We are committed to ensuring that there is not modern
slavery or human trafficking in our supply change and if we
become aware of any such practice, we act immediately
and decisively to highlight and remedy the issue.
36
Environmental matters
Our anti-slavery position reflects our commitment to acting
ethically and with integrity in all our business relationships and
this is supported by our policies on bribery and corruption,
and whistleblowing.
Our payment practices
Our payment terms consider the size of the supplier, the
contractual arrangements and the nature of the service or
product provided. We have suppliers ranging from small-
and medium-sized enterprises to global organisations.
Health and safety
The Group has an excellent record in our approach to
health and safety (H&S) and takes appropriate steps
to keep our employees safe. We are committed to
managing H&S effectively to protect our employees
and other persons with whom we interact because we
recognise that we have not only a moral and legal duty
but also that our employees are our greatest asset. Our
commitment to H&S does not differentiate between our
employees, contractors, or suppliers and their onwards
contractors. We want everyone to work in a safe and
healthy way, every day.
A fully inclusive and consultative approach to H&S is
embedded across our organisation. All employees can
input to and discuss safety concerns and decisions.
H&S performance
Continual monitoring of our safety performance is
essential to ensure the safety of everyone working with
us and for us, it also helps us focus on and address any
risks that are identified.
Accident and near-miss data is collected centrally, and
all accidents and near-misses must be investigated,
mitigated, and reported.
Anti-bribery and corruption
Bribery and corruption are, unfortunately, a feature
of corporate and public life in many countries across
the world. It is widely accepted that corruption inhibits
economic growth, damages businesses both financially
and reputationally and may result in criminal or civil
liabilities and penalties for organisations and individuals.
We do not tolerate any form of bribery and corruption and
are committed to operating responsibly and engaging
with stakeholders to manage the social, environmental,
and ethical impact of our activities in the various markets
in which we operate.
We have a clear gifts and entertainment policy that all
employees are bound 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.
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 Nexteq Plc and its
subsidiary undertakings when viewed as a whole.
We continued to maintain our low accident rate
throughout 2023.
This report was approved by the Board of Directors on 12
March 2024 and signed on its behalf by:
Jon Jayal
Chief Executive Officer
37
Francis Small | Chair
Governance
Chair’s Introduction to Governance
Dear Shareholder,
I am pleased to present the Group’s Corporate
Governance Report for the year ended 31 December
2023. This statement provides details of our current
governance framework and practices and how we
discharge our governance duties.
The Board has a collective responsibility and legal
obligation to promote the interests of the Group and for
the overall leadership of the Group, setting the vision,
purpose, values and standards. As the Chair of Nexteq Plc,
I am ultimately responsible for the corporate governance
of the Group, but the Board 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 corporate governance statement and committee
reports on the following pages outline the Company’s
approach to corporate governance. The Board follows
the principles set out in the Quoted Companies Alliance
Corporate Governance Code (the ‘QCA Code’). The QCA
Code follows ten basic principles that require 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. The Board
considers that it does not depart from any of the
principles of the QCA code. A complete index of
the disclosures required by the QCA Code, including
those on the Company’s website, can be found at
https://nexteqplc.com/sustainability/#governance.
Francis Small
Chair
“ The governance structures in place ensure we are
well positioned for further growth.”
Francis Small | Chair
Governance 38
Board of directors
Board of directors
Francis Small
Chair
Appointed: 15 January 2021
Committees:
Chair of the Remuneration Committee and member of
the Audit and Risk Committee
Skills and experience:
Before commencing his non-executive career in 2015,
Francis had a highly successful 36-year executive
career at Ernst & Young, in which he undertook a
variety of international roles including serving on the
E&Y Global Board, leading the UK Corporate Finance
business and operating as managing partner of
European Transaction Advisory Services.
Francis currently serves as a non-executive director
on the board of AIM-listed software business
1Spatial Plc and as chair of the board of governors of
Kingston University. Francis also served as chair of
the government-backed investment company British
Business Investment from 2016 to 2022.
Francis serves on the Remuneration and Audit and
Risk Committees and is the Senior Independent
Director (SID). The Board considers Francis to be an
independent Director.
Francis has a degree in Law from Cambridge
University and is a Fellow of the Institute of Chartered
Accountants in England and Wales.
Nicholas Jarmany
Non-Executive Deputy Chair
Appointed: 16 March 2005
Skills and experience:
Nick is a founding Director of Nexteq and was the
Group’s Chief Executive Officer until 2018 when he
became Deputy Chair. An engineer himself, Nick has
a background in the technology industry, and prior
to founding Nexteq was employed by Densitron
Technologies Plc for 22 years during which time he
held numerous roles in design, engineering, sales
and, finally, as group technical director.
Nick has an honours degree in Electronic
Engineering from the University of Sheffield.
Board of directors
39
Gary Mullins
Non-Executive Director
Duncan Penny
Independent Non-Executive Director
Appointed: 11 January 2006
Appointed: 12 September 2022
Skills and experience:
Gary is a founding Director of Nexteq and was Sales
Director until 2020 before becoming a Non-Executive
Director. Gary has a proven track record in global
technology sales and marketing, establishing the
Quixant brand in the gaming industry and securing
business from the Group’s first major customers.
Prior to founding Nexteq, Gary was sales director at
Ntera, a nanotech electronic displays business and
before that was employed by Densitron Technologies
Plc in sales and marketing for over ten years.
Gary has an honours degree in Electronic Systems
from the Royal Military College of Science.
Committees:
Member of the Remuneration Committee and Audit
and Risk Committee
Skills and experience:
Duncan has an exceptional track record of scaling
businesses and delivering shareholder value. Duncan
served as chief executive officer at XP Power Plc
from February 2003 to December 2020 and was
previously finance director from April 2000 to 2003.
He led the business through transformational growth
to being a constituent of the FTSE 250 with a market
cap in excess of £1bn.
Duncan has also served as non-executive director on
the board of Videndum Plc (formerly The Vitec Group
Plc) until May 2022. Earlier in his career, Duncan held
senior roles with Dell Computer Corporation and LSI
Logic Corporation.
Duncan has an MA in Chemistry from
Oxford University.
40
Board of directors
Carol Thompson
Independent Non-Executive Director
Appointed: 12 September 2022
Jon Jayal
Chief Executive Officer
Appointed: 20 June 2016
Skills and experience:
Jon was one of the key members of the design
engineering team that developed Nexteq’s first
product. Having spent the start of his career in
electronic engineering, Jon went on to broaden his
experience by working in the financial services sector
as an investment consultant at Mercer and a strategic
account manager at BlackRock. Ahead of flotation in
2013, Jon rejoined Nexteq as General Manager. Prior
to becoming Chief Executive Officer in March 2018,
he was Chief Operating Officer (COO).
Jon is a Chartered Financial Analyst and has a first-
class honours degree in Electronic Engineering from
the University of Warwick.
Committees:
Chair of the Audit and Risk Committee and member
of the Remuneration Committee
Skills and experience:
Carol brings significant finance expertise to Nexteq
following a 20-year career in senior finance roles in
both private and public companies, as well as strong
technology industry experience. Between 2011 and
2015 she held the position of chief financial officer
at SSP Plc, a global software company. Prior to SSP
Plc, she was chief financial officer at Electricity North
West, and also served as group finance director
at The Tote and IT and finance director at Stanley
Leisure Plc.
Carol is currently the executive chair and chief
executive officer at Maintel Plc, chair of the audit and
risk committee and member of the remuneration
committee at Foresight Solar and Technology VCT
Plc. Carol also acts as a strategic and transaction
adviser to private equity firms.
Carol has an honours degree in Economics from
Manchester University and a Masters in Business
Strategy from Manchester University.
Carol is a fellow of the Chartered Institute of
Management Accountants.
Board of directors
41
Johan Olivier
Chief Financial Officer
Appointed: 31 August 2021
Skills and experience:
Johan is a Chartered Accountant with extensive
experience in both publicly listed and international
businesses. Prior to joining Nexteq, Johan was group
finance director at XP Power Plc, responsible for
financial planning, reporting and treasury functions.
Johan also served as XP Power's acting CFO while
the company was seeking a permanent candidate.
Prior to this, Johan held finance roles at Logica
Plc and Finastra after beginning his career in
public practice.
42
Corporate governance report
Corporate governance report
Board structure
The Board is made up of five Non-Executive (three
independent) and two Executive Directors and has
devolved responsibility for certain matters to two
committees, an Audit and Risk Committee and a
Remuneration Committee, each of which has clear terms
of reference. It does not operate a separate Nominations
Committee, with all Board members being responsible for
the appointment of new Directors. The biographies of the
Directors can be found on pages 38 to 41.
The Chair and Chief Executive Officer have separate,
clearly defined roles. The Chair is responsible for leading
the Board, setting the agenda for Board meetings (with
the Company Secretary) and for ensuring the Board
operates effectively and with integrity.
The Chief Executive Officer is responsible for setting
and implementing the Group’s strategy, for leading and
developing the Executive team and for managing the
Group’s day-to-day operations, ensuring that Board
decisions are implemented effectively.
Company culture
Our long-term growth is underpinned by our corporate
culture and core values. As part of our employee starter
pack all new employees are provided with our code
of conduct and policy handbook, which include a clear
statement of the Group’s values and purpose.
Our culture is characterised by five pillars. These are the
values that have helped us achieve our success:
• Innovation: We believe that success comes through
innovation. We champion creative thinking within our
Group and actively seek new viewpoints.
• Collaboration: We work together with our customers
to truly understand their needs and support them. With
our colleagues and partners, we’re always friendly,
honest and supportive.
• Expertise: We value knowledge and take pride in our
professionalism. We invest in skills and state-of-the-art
thinking so our customers can depend on
our expertise.
• Determination: We don’t cut corners even while we
strive for efficiencies. We enjoy hard work and have an
absolute commitment and determination to see a task
to completion.
• Responsibility: We believe in being accountable for
our actions. We’re open and honest about how we do
business and are always accessible to Shareholders,
employees and customers.
We believe that creating a thriving, dynamic, inclusive
and welcoming environment fosters creativity and
unlocks career potential, which in turn brings benefits to
our Shareholders, customers and suppliers. 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. These policies
form part of a globally applicable Group Policy Handbook
and Code of Conduct.
Corporate governance report
43
Board meetings
Generally, 10–11 Board meetings are held each year and Directors are expected to attend as many as practicable,
either in person or by video or telephone conference arrangements. Meetings held between January 2023 and
December 2023 and the attendance of Directors are summarised below:
F Small
N C L Jarmany
G P Mullins
D J Penny
C Thompson
J F Jayal
J J Olivier
G Van Zwanenberg (stepped down in April 2023)
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 Chair
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 a cycle of matters that are reviewed annually, and
these are spread through the programme of meetings in
the year.
Advice for Directors
All Directors have access to the advice and services of
the Company Secretary, who ensures that the Board’s
procedures are followed, and that applicable rules and
regulations are complied with.
Re-election of Directors
To comply with the revised QCA Corporate Governance
Code, it has been agreed that, with immediate effect, all
Directors will stand for re-election annually at the AGM.
Board
Audit and Risk
Committee
Remuneration
Committee
10/10
10/10
10/10
10/10
10/10
10/10
10/10
3/3
4/4
3/3
4/4
1/1
3/3
3/3
1/1
2/2
Directors’ time commitments
Non-Executive Directors are expected to devote
sufficient time to the Company to meet their
responsibilities. This includes preparation for and
attendance at scheduled Board and committee meetings,
as well as ad hoc meetings or calls as required. The
Board confirms that each of the Non-Executive Directors
can commit the necessary time to fulfil their roles.
Directors’ training
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
advisers. The Directors receive regular updates from the
Company Secretary and other external advisers on legal
requirements and regulations, remuneration matters and
corporate governance best practice.
44
Corporate governance report
Board effectiveness
A Board evaluation process is carried out annually as part
of a wider strategy review and future planning discussion.
The process is led by the Chair and, with the help of an
external facilitator, the Board is challenged to review its
performance and effectiveness objectively. The 2024
Board evaluation took the form of a questionnaire based
on several themes including:
• 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.
• Management information and reporting.
• Stakeholder engagement.
• Training, development and succession planning.
The findings of the Board evaluation were consolidated
into a report which was circulated to all Directors and
discussed at the February 2024 Board meeting. The
overall findings from the evaluation were positive. Areas
for improvement were identified, including increasing
time spent reviewing progress against the Group’s
strategy; succession planning; increasing stakeholder
engagement; and creating more opportunities for
the Non-Executive Directors to meet. The Board and
committees are in the process of implementing the
recommendations from the evaluation.
Board committees
The Board has established Audit and Risk and
Remuneration Committees, which operate under
written terms of reference. The terms of reference for
both committees are reviewed and updated regularly.
The current approved versions can be found on the
Company’s website. The reports of these committees can
be found on pages 45 to 59.
45
Francis Small | Chair
Directors’ remuneration report
Annual Statement
Dear Shareholder,
On behalf of the Remuneration Committee (‘the
Committee’), I am pleased to present the Directors’
Remuneration Report for the year ended 31 December
2023. This report is divided into three sections, being:
• This Annual Statement, which summarises the work of
the Committee, remuneration outcomes for 2023 and
how the remuneration policy will be operated in 2024.
• The Remuneration Policy Report, which summarises
the Company’s remuneration policy.
• The Annual Report on Remuneration, which discloses
how the remuneration policy was implemented in the
year ending 31 December 2023 and how the policy will
operate for the year ending 31 December 2024.
Committee members
The Committee is comprised of three Independent
Non-Executive Directors, 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 Francis Small
(Chair), Duncan Penny and Carol Thompson (who
joined the Committee in December 2023) and it invites
Executive Directors to attend as it considers necessary.
FIT Remuneration Consultants LLP (FIT) provided
independent advice to the Committee during 2023.
Advice was provided on the AIM market and best
practice, share plan operations and support provided
to management with undertakings such as producing
this Directors’ Remuneration Report. FIT did not provide
any other services to the Group during the year and
the Committee is satisfied that the advice received
was objective and independent. FIT is a member and
signatory of the Remuneration Consultants Group and
voluntarily operates under the Code of Conduct in
relation to executive remuneration consulting in the
UK, details of which can be found at
www.remunerationconsultantsgroup.com
Governance 46
Directors' remuneration report
Activities during the year
• Set Executive Director remuneration packages.
• Reviewed the 2022 Directors’ Remuneration Report
prior to its approval by the Board and subsequent
approval by Shareholders at the 2023 AGM.
• Reviewed performance against the 2022 annual bonus
plan targets and resulting awards and agreed the
metrics and targets for the 2023 bonus plan.
• Reviewed LTIP award levels and performance metrics/
targets for the 2023 LTIP awards.
Performance and reward
Implementing the policy for 2024
In respect of the implementation of the remuneration
policy for 2024:
• Base salaries will not be increased for Jon Jayal and
Johan Olivier who remain on a salary of £302,300 and
£225,000, respectively. In contrast, most employees in
the business received salary increases.
• Pension provision will remain unchanged.
• Bonus potential will remain capped at 100% of salary
based on sliding scale adjusted profit targets (65%),
sliding scale cash generation targets (15%) and
strategic targets (20%). While the targets are currently
considered to be commercially sensitive, they will
be disclosed retrospectively in next year’s Directors’
Remuneration Report.
• The Committee intends to make LTIP awards in 2024
to Executive Directors and other employees in the
business of shares equal to up to 100% of salary.
Awards will normally vest after three years from grant
subject to continued employment and performance
targets based on three-year, sliding scale, EPS and
Total Shareholder Return performance targets, which
will be set in advance of grant. In addition, a two-year
post vesting holding period will apply.
Remuneration Policy Report
Executive Director remuneration policy
Executive remuneration packages are prudently
designed to attract, motivate and retain Directors of a
high calibre needed to maintain the Company’s position
and to reward them for enhancing value to Shareholders.
The Committee considers the remuneration packages
of Executive Directors and key senior management and
discusses policy on annual reviews with the Board. The
Remuneration Committee considers a number of factors
in setting remuneration policy including:
• Salary and benefits packages awarded to Executives of
comparable companies.
• Our ability to attract and retain Executives with the
necessary skills and capabilities to enable the Group to
operate successfully.
• Encouraging Executives to deliver long-term
sustainable growth using share-based incentives.
Component
Base Salary
Component
Benefits
Pension
Annual
Bonus
LTIP
Directors' remuneration report
47
Maximum
Performance
Not applicable.
Not applicable.
Purpose and link to
strategy
Operation
To ensure that the
Company can recruit
and retain high-quality
Executives to deliver on
the Company strategy
in the interest of the
Shareholders.
Base salary is paid monthly and reviewed
annually, with any increases normally applying
from 1 April.
In deciding appropriate levels, the Remuneration
Committee considers the Company as a whole
and benchmarks against salaries of Executives in
comparable companies with equivalent skills and
experience.
Purpose and link to
strategy
To provide a market-
competitive package.
To provide an
appropriate level of
benefits that allows for
retirement planning.
To reward performance
against annual targets
that support the strategic
direction of Group.
To drive and reward the
achievement of longer-
term objectives to
deliver sustainable
earnings growth.
To support the
retention and promote
share ownership for
Executive Directors.
Operation
Maximum
Performance
Offered in line with market practice, and may
include a car allowance, private medical, auxiliary
medical benefits and death in service insurance.
Pension contributions are made by the Company
to a defined contribution scheme.
Not applicable.
Not applicable.
10% of salary.
Not applicable.
The Committee sets annual performance targets.
100% of salary.
Nominal (or nil) cost share options. Vesting
is normally subject to the achievement of
challenging performance conditions, normally
over a period of three years. Dividend equivalents
may be awarded to the extent awards vest.
Awards are subject to malus/clawback provisions
at the discretion of the Committee, up to two
years after the date of vesting.
200% of salary.
(although the
normal policy is
to grant annual
awards up to 100%
of salary).
Sliding scale
financial (majority)
and strategic
targets (minority).
Performance
metrics may be
linked to financial
and/or share price
and/or strategic
performance.
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.
Non-Executive Director remuneration policy
Component
Base Salary
Purpose and link to
strategy
To attract Non-Executive
Directors with relevant
experience and
skills to oversee the
development and
implementation of the
Group’s strategy.
Operation
Maximum
Performance
Fees are normally reviewed annually considering
the level of responsibility and relevant experience.
Fees may include a basic fee and additional fees
for further responsibilities. Fees are normally paid
in cash via payroll. Travel and other reasonable
expenses incurred while performing their duties
may be reimbursed. Non-Executive Directors may
also receive pension contributions.
Not applicable.
Non-Executive
Directors do
not participate
in variable pay
arrangements.
There is no
prescribed
maximum.
The Board is
guided by general
increase in the
market for Non-
Executive Director
roles and the
broader employee
population.
Non-Executive Directors’ service contracts incorporate notice periods of not less than three months’ notice from the
Non-Executive to the Company and vice-versa.
48
Directors' remuneration report
Annual Report on Remuneration
Total Directors’ remuneration (audited
Executive Directors
Jon Jayal
Johan Olivier
Total Executive Directors
Non-Executive Directors
Nick Jarmany
Gary Mullins
Francis Small
Carol Thompson1
Duncan Penny1
Guy van Zwanenberg2
Total Non-Executive Directors
Total Board
1 Appointed 12 September 2022.
2 Retired 27 April 2023.
Year
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Salary
$000
Pension3
$000
Benefits4
$000
Bonus5
$000
Total
$000
396
384
299
288
695
672
62
61
62
61
116
110
60
16
54
15
19
57
373
320
1,068
992
12
12
5
11
17
23
6
6
6
6
–
–
–
–
–
–
1
3
13
15
30
38
14
5
–
–
14
5
1
2
1
1
2
2
–
1
–
–
1
5
6
19
11
143
334
106
249
249
583
–
–
–
–
–
–
–
–
–
–
–
–
–
–
249
583
565
735
410
548
975
1,283
69
69
69
68
118
112
60
16
55
15
20
61
391
341
1,366
1,624
3 Pension contributions were paid at 10% to Nick Jarmany and Gary Mullins and 5% to Guy van Zwanenberg. Jon Jayal and Johan Olivier elected
to be paid £10,000 and £4,000 a year, respectively, as pension contributions from the Company with the remainder of their 10% pension
contributions paid as a salary supplement. The salary supplements were reduced by the employers’ national insurance payable by the Company.
4 The Directors received private medical insurance in line with other UK employees.
5 Annual bonus awards for the year ended 31 December 2023 were based on achievement of targets as set out below.
Directors' remuneration report
49
Annual bonus
The annual bonus for 2023 was based on achieving an adjusted profit before tax (PBT), adjusted operating cash
conversion and the attainment of strategic objectives. The table below summarises performance against the Group
performance targets set by the Remuneration Committee for the year.
Weighting
Threshold On Target
Max
Actual % achieved
Adjusted PBT
Adjusted operating cash conversion
Strategic objectives
% of salary
65%
15%
20%
100%
$13.5m
$17.0m
$20.5m
$14.7m
80%
100%
120%
142%
See below
0%
50%
100%
7%
–
15%
15%
7%
37%
The table below summarises the strategic team objectives for the CEO and CFO in the year.
Diversify the Group’s revenue base through
broadcast business conversion.
Jon Jayal
Johan
Olivier
Not met
Not met
Diversify the Group’s Quixant gaming offering
through cabinet business conversion.
Not met
Not met
Build manufacturing resilience by establishing
second manufacturing facility outside of
Taiwan and complete mass production by end
of FY23.
Deliver accurate regular reporting of research
development project spend and revenue
generation.
Met
n/a
n/a
Met
2023 Performance assessment
While the broadcast business grew by
double digits in 2023, the growth fell short
of the targets set by the Remuneration
Committee.
The Group’s cabinet offering was
expanded into Europe, establishing a
manufacturing partnership with Elas.
However, the order intake target for
cabinet sales was not met.
The Group established a manufacturing
facility in Malaysia during 2023, with
the first mass production of products
completed in the final quarter of the year.
R&D project spend reporting established,
tracking return generated from completed
projects.
50
Directors' remuneration report
Directors’ share options (audited)
The interests of Directors at the balance sheet date in options to subscribe for ordinary shares of the Company,
together with details of any options granted during the year, are as follows:
Jon
Jayal
Johan
Olivier
Award
type
Date of
grant
1 Jan
2023 Granted Lapsed Exercised5
31 Dec
2023
Exercise
price (p)
Options1 06.10.20 65,000
− 65,000
−
−
112.5
LTIP2 09.05.22 199,934
−
LTIP3 22.03.23
−
169,831
Recruitment4
25.10.21 100,000
Recruitment4
25.10.21 25,000
−
−
LTIP2 09.05.22 148,810
LTIP3 22.03.23
− 126,404
−
−
−
−
−
−
− 199,934
− 169,831
− 100,000
− 25,000
− 148,810
− 126,404
0.1
0.1
190
0.1
0.1
0.1
First date
normally
exercisable
Last date
normally
exercisable
2022
results
06.10.30
09.05.25
09.05.32
22.03.26
22.03.33
2023
results
2023
results
25.10.31
25.10.31
09.05.25
09.05.32
22.03.26
22.03.33
1 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 2020, 2021, and 2022) being equal to or greater than 10% in each financial year. As a result of annual EPS growth over
the three years being less than 10%, these options lapsed in 2023.
2 The options are exercisable subject to vesting of 70% of awards (the EPS Part), which are dependent on the Company’s adjusted earnings per
share (EPS) performance for the financial year ending 31 December 2025. 25% of the EPS Part vests for EPS of $0.068 increasing pro-rata to
full vesting of the EPS Part for EPS of $0.102 pence or higher. The vesting of 30% of awards (the TSR Part) are dependent on the Company’s
total shareholder return (TSR) over a three-year period commencing on the grant of the awards. 25% of the TSR Part vests for TSR over the
measurement period equal to 10% p.a. increasing pro-rata to full vesting for TSR of 20% p.a. Once vested, a two-year post vesting holding period
applies in respect of awards granted to Executive Directors.
3 See ‘Long-term incentives granted during the year’ section below.
4
100,000 market value share options with an exercise price of 190 pence and 25,000 share options with an exercise price of 0.1 pence granted to
Johan Olivier in October 2021 will vest in full on 13 March 2024. The performance condition for these grants was EPS growth exceeding 10% p.a.
growth which was met in full.
5 No share options were exercised by the Directors in 2023 or 2022.
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.
Directors' remuneration report
51
Long-term incentives granted during the year (audited)
The following share awards were granted on 22 March 2023 under the Nexteq Plc 2023 Long-Term Incentive Plan for
which Shareholder approval was obtained at the 2023 AGM:
Executive
Jon Jayal
Johan Olivier
Type of
awards
Basis of
award
Share
price
Nominal
cost
options
100%
salary
100%
salary
£1.86
Number of
shares over
which award was
granted
Face value
of award
Performance period
169,831
£316,000
EPS – Three financial years to 31
December 2025
126,404
£235,000
TSR – Three years
from grant
The vesting of 70% of awards is dependent on the Company’s adjusted earnings per share (EPS) performance for
the financial year ending 31 December 2025. 25% of the EPS Part vests for EPS of $0.206 increasing pro-rata to full
vesting of the EPS Part for EPS of $0.307 or higher. The vesting of 30% of awards is dependent on the Company’s total
shareholder return (TSR) over a three-year period commencing on the grant of the awards. 25% of the TSR Part vests
for TSR over the measurement period equal to 10% p.a. increasing pro-rata to full vesting for TSR of 20% p.a.
Once vested, a two-year post vesting holding period applies in respect of awards granted to Executive Directors.
Francis Small
Chair of the Remuneration Committee
12 March 2024
52
Audit and risk committee report
Carol Thompson | Chair of the Audit and Risk Committee
Audit and risk committee report
Dear Shareholder,
I am pleased to report on the activities of the Audit
and Risk Committee (‘the Committee’) during the year
under review.
Role of the Committee:
The Committee is responsible for monitoring the
Group’s risk management framework, the integrity of
financial reporting and audit process and overseeing the
maintenance of internal control.
The Committee comprises three independent Non-
Executive Directors: Carol Thompson (Chair), Duncan
Penny and Francis Small. The current Committee
members are all independent Non-Executive Directors
and have financial and/or related business experience
gained in senior positions in other organisations. The
Board considers that Carol Thompson has recent and
relevant financial experience in accordance with the
Quoted Companies Alliance (QCA) code.
Key responsibilities of the Committee:
1. Risk assessment and management
• On behalf of the Board, review and monitor
the Company’s risk register and risk
management framework.
• Consider the appropriate risk appetite for the Company
across all major activities, taking into account the
overall strategy of the Company, its future plans and
other internal information, as well as the external
environment, including economic, political and
industry information.
• Oversee and advise the Board and Remuneration
Committee on how the remuneration of Executives
shapes their view of risk.
• On an annual basis, ensure that a robust assessment
of the emerging and principal risks facing the
Company has been undertaken (including those
risks that would threaten its business model, future
performance, solvency or liquidity and reputation), that
procedures are in place to identify emerging risks and
provide advice on the management and mitigation of
those risks.
• Oversee the current and prospective risks faced by the
Company and its strategy in relation to future risks.
• Ensure that risk management is properly considered in
Board decisions.
• Review the methodology for reporting risk to the Board.
Audit and risk committee report
53
• Set triggers for reporting and escalation of significant
• Review and challenge where necessary:
emerging risks that may be critical to the Company and
assess the Company's ability to manage new risks.
• Consider whether risks have been properly considered
in relation to all major transactions, as defined by the
Board, by the Company, including but not limited to
mergers and acquisitions, disposals, joint ventures,
significant expenditure on property, plant and
equipment and material multi-year service contracts.
This should involve consideration of whether all due
diligence and/or procurement processes have been
carried out, including obtaining external advice, as well
as an assessment of whether the transaction meets the
Company's risk appetite criteria and the implications for
future risk tolerance.
• Review all material adverse crystallisation of risks,
including those involving breaches of the Company's
procedures, carrying out root cause analysis and
introducing lessons learned into the risk
management framework.
2. Internal control
• On behalf of the Board, review the Company's internal
financial controls and internal control systems and, at
least annually, carry out a review of their effectiveness.
3. Financial reporting
• Monitor the integrity of the financial statements of
the Group, including its Annual and Interim Reports,
preliminary results’ announcements and any other
formal announcement relating to its financial
performance, reviewing significant financial reporting
issues and judgements which they contain. The
Committee shall also review summary financial
statements, significant financial returns to regulators
and any financial information contained in certain
other documents, such as announcements of a price
sensitive nature.
− The consistency of and changes to
accounting policies.
− The methods used to account for significant and
unusual transactions where different approaches
are possible.
− Whether the Company has followed appropriate
accounting standards and made appropriate
estimates and judgements, considering the views of
the External Auditor.
− The clarity of disclosure in the Company’s Financial
Reports and the context in which statements
are made.
− All material information presented with the financial
statements, including the information in the Strategic
Report and the Corporate Governance Statement
(insofar as it relates to the audit and
risk management).
4. Fraud and whistleblowing
• Review the Group's arrangements for its employees,
contractors, and external parties to raise concerns, in
confidence, about possible wrongdoing in financial
reporting or other matters. The Committee shall
ensure that these arrangements allow proportionate
and independent investigation of such matters and
appropriate follow up action.
• Review the Group’s procedure for detecting fraud.
• Review the Group’s systems and controls for the
prevention of bribery and receive reports
on non-compliance.
54
Audit and risk committee report
5. External audit
• Consider and make recommendations to the Board
for approval at the AGM as regards the appointment,
re-appointment and removal of the Company’s
External Auditors.
• Oversee the selection process for new External
Auditors and if an External Auditor resigns the
Committee shall investigate the issues leading to this
and decide whether any action is required.
• Oversee the relationship with the External Auditor
including (but not limited to):
− Approval of their remuneration, whether fees for
audit or non-audit services and that the level of fees
is appropriate to enable an adequate audit to
be conducted.
− Approval of their terms of engagement, including any
engagement letter issued at the start of each audit
and the scope of the audit.
− Assessing annually their independence and objectivity
considering relevant UK professional and regulatory
requirements, the Financial Reporting Standard's
Revised Ethical Standard 2019 (Ethical Standard) and
the relationship with the Auditor as a whole, including
the provision of any non-audit services.
− Satisfying itself that there are no relationships (such
as family, employment, investment, financial or
business) between the Auditor and the Company
(other than in the ordinary course of business).
− Agreeing with the Board a policy on the employment
of former employees of the Company’s Auditor,
considering the Ethical Standard and legal
requirements, then monitoring the implementation of
this policy.
− Monitoring the Auditor’s compliance with relevant
professional guidance and the Ethical Standard on
the rotation of audit partners, the level of fees paid by
the Company compared to the overall fee
income of the firm, office and partner and other
related requirements.
− Assessing annually their qualifications, expertise and
resources and the effectiveness of the audit process,
which shall include a report from the External Auditor
on their own internal quality procedures.
• Meet regularly with the External Auditor, including once
at the planning stage before the audit and once after
the audit at the reporting stage. The Committee shall
meet the External Auditor at least once a year, without
management being present, to discuss their remit and
any issues arising from the audit.
• Review and approve the annual audit plan and ensure
that it is consistent with the scope of the
audit engagement.
• Review the findings of the audit with the External
Auditor. This shall include, but not be limited to,
the following:
− A discussion of any major issues which arose during
the audit.
− Any accounting and audit judgements.
− Levels of errors identified during the audit.
6. Reporting responsibilities
• The Committee Chair shall report formally to the Board
on its proceedings after each meeting on all matters
within its duties and responsibilities.
• The Committee shall make whatever recommendations
to the Board it deems appropriate on any area within its
remit where action or improvement is needed.
• The Committee shall compile a report to Shareholders
on its activities to be included in the company’s
Annual Report.
Audit and risk committee report
55
7. Other matters
The Committee shall:
• Have access to sufficient resources to carry out its
duties, including access to the Company Secretary for
assistance as required.
• Be provided with appropriate and timely training,
both in the form of an induction programme for new
members and on an ongoing basis for all members.
• Give due consideration to laws and regulations, the
provisions and recommendations of the Quoted
Companies Alliance’s Corporate Governance Code, as
well as the UK Corporate Governance Code and the
requirements of the London Stock Exchange Plc (the
AIM Market) as appropriate.
• Oversee any investigation of activities that are within its
terms of reference and act as a court of the last resort.
• At least once a year, review its own performance,
constitution and terms of reference to ensure it is
operating at maximum effectiveness and recommend
any changes it considers necessary to the Board
for approval.
• Consider such other matters as may be requested by
the Board.
The terms of reference of the Committee are available
in the Governance section of the Company’s website
www.nexteqplc.com
56
Audit and risk committee report
Meetings of the Committee
The Committee met four times during the year with attendance as set out in the table on page 43. Although not
members of the Committee, the Chief Executive Officer and Chief Financial Officer attended all meetings. The External
Auditor, KPMG, attended all meetings, apart from the May meeting as the focus of this meeting was the review of
the Company risk register. The Committee also discussed matters with the External Auditor without the Group’s
management present.
The Committee supports the Board and reports to it on a regular basis, certainly no less frequently than at every Board
meeting following a Committee meeting.
The following specific business was dealt with at each meeting held in 2023:
March
Annual results for 31 December 2022, including:
• Accounting issues report from the CFO.
• Full-year Report from the External Auditor including Auditor’s Report to be included in the 2022 Annual Report.
• Consolidated financial statements for the year ended 31 December 2022.
• Principal risks and uncertainties.
• Consideration of the going concern basis for preparation of the financial statements.
Reviewed the going concern statement.
Assessed and agreed the independence of the External Auditor.
May
August
October
Recommendations to the Board on:
• Consolidated financial statements.
• Going concern statement.
Review of the Group risk register.
Review of QCA internal control guidance and implementation of internal control review.
Interim results for the six months ended 30 June 2023, including:
• Accounting issues reporting from the CFO.
• Interim financial statements for the six months ended 30 June 2023.
Reviewed scope for the external audit for the 2023 audit, including agreeing fees.
Review of key accounting matters for 2023 Annual Report.
Review of Group risk register.
Audit and risk committee report
57
Significant risks and judgements in financial reporting
In relation to the 31 December 2023 annual financial statements included in this report on pages 74 to 127, the
Committee considered the following topics listed below. It considered these areas to be significant, considering
the level of materiality and the degree of judgement exercised by management. The Committee questioned and
challenged the judgements and estimates made on each of the significant issues detailed below and resolved that they
were appropriate and acceptable.
Significant matter
Audit Committee actions taken
Revenue cut-off
In 2023, there were a higher number of revenue transactions occurring closer to Year end than in the prior year and a
larger amount of revenue was recognised in the month of December. Revenue is recognised based on the contractual
terms agreed with the customer, typically either on a Delivered At Place (DAP) or Ex-works (EXW) basis. Management
performed additional procedures to ensure that revenue was recognised in the correct financial period, with particular
focus on ex-works shipments. These procedures included reviewing customers’ collection of ex-works shipments around
the year end date and ensuring that the customer had taken control of the goods at the balance sheet date.
The Committee reviewed management’s procedures and was satisfied that there were no material misstatements of
revenue recognition.
Impairment of
goodwill and
intangible assets
The carrying value of goodwill is a significant item within the Group’s balance sheet. Impairment assessments, performed
annually, require judgements in relation to discount rates and future growth forecasts to generate discounted cash flows for
the cash generating units.
The Committee challenged the appropriateness of judgements and forecasts used in management’s impairment
assessment. In particular, the Committee enquired and challenged the assumptions made regarding forecasted growth
rates and profit margins and understanding the discount rates.
In addition, the Committee reviews the calculation to ensure that sensitivity analysis is performed by management, which
reflects reasonable downside scenarios. It also assesses the carrying value in the context of the Group’s wider net asset
value and market capitalisation.
Other than the goodwill associated with the acquisition of Densitron US and Densitron Europe, the impairment calculations
indicated that there remains significant headroom between the value in use and the carrying value. As such, the Committee
was satisfied that no reasonable possible change in key assumptions would result in an impairment for any CGU other than
IDS, Densitron US and Densitron Europe.
The impairment calculation for the Densitron US CGU estimated that the recoverable amount of the CGU exceeded its
carrying amount by approximately $4.7m (2022: $4.8m). Management’s sensitivity analysis identified that a reasonably
possible change in the revenue and gross margin assumptions could cause the carrying amount to exceed the recoverable
amount. The Committee reviewed the appropriateness of the estimates applied and was satisfied that no impairment of the
Densitron US CGU was required for the year ended 31 December 2023.
The impairment calculation for the Densitron Europe CGU estimated that the recoverable amount of the CGU exceeded
its carrying amount by approximately $0.5m (2022: $1.7m). Management’s sensitivity analysis identified that a reasonably
possible change in the revenue growth and gross margin assumptions could cause the carrying amount to exceed the
recoverable amount. The Committee reviewed the appropriateness of the estimates applied and was satisfied that no
impairment of the Densitron Europe CGU was required for the year ended 31 December 2023.
Valuation of
inventory
In 2023, raw material inventory levels decreased from the historically high levels seen in 2021 and 2022 as global supply
chain constraints eased.
The Committee considered the provision policy, provision levels and the nature and condition of inventory at the balance
sheet date and was satisfied that appropriate provisions for loss and delinquency were made.
Physical inventory was validated through wall-to-wall stock counts held at Year end, covering all sites where the Group
holds inventory. These counts were attended by the External Auditor and the results reported to the Committee. The
Committee was satisfied that the counts were conducted appropriately.
58
Audit and risk committee report
Significant matter
Audit Committee actions taken
Valuation of
APMI debtors
and inventory
As disclosed in the 2022 Annual Report, the Group, through its Quixant brand, had active contracts in place with Aruze
Philippines Manufacturing Inc. (‘APMI’), for the supply of display products and gaming boards. On 1 February 2023 Aruze
Gaming America, Inc (‘AGA’), a US-based affiliate of APMI, filed a voluntary petition under Chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the State of Nevada. As at the date of this Annual Report, the Chapter 11 proceedings
are still ongoing. AGA’s operations and assets have been sold as part of the proceedings and AGA also closed its Las Vegas
operations. APMI filed for voluntary liquidation on 22 August 2023 and a liquidation order was issued by the Philippine courts.
As at the date of this Annual Report the liquidation proceedings were still ongoing.
There remains uncertainty over the recoverability of balances related to APMI and Nexteq management evaluated their
carrying value as at the balance sheet date.
As at 31 December 2023, APMI owed $1.0m to the Group from the sale of goods (2022: $0.7m). The amounts were impaired
in full as at 31 December 2022 and due to the uncertainty referenced above remain fully impaired at 31 December 2023. The
Group continues to take steps to recover these balances.
Inventory, consisting of raw materials with a book value of $1.7m (2022: $2.2m) and finished goods with a book value of $0.6m
(2022: $1.1m) originally earmarked for use by APMI was included in the Nexteq Group’s balance sheet as at 31 December 2023.
The raw materials can be used to manufacture products sold to the Group’s existing or new customers, and the finished goods
can be used in the Group’s turnkey cabinet offering. Management expects to fully recover the net book value of $2.3m and
considers that no provision against it was required as at 31 December 2023.
The Group balance sheet also previously included capitalised development costs with a book value of $0.4m related to the
development of products for APMI’s future use. Management assessed the commercial opportunities for these products and
determined that it was not probable that these would generate future economic benefits for other customers. As a result,
development of these products was ceased. An impairment charge of the full book value of $0.4m was recorded within
operating expenses.
With regards to the recoverability of trade receivables, the Committee reviewed management’s assessment, which included
the latest status of the Chapter 11 filing and liquidation proceedings that led to the review. Due to the inherent uncertainty in the
outcome of bankruptcy proceedings the Committee agreed with management’s view that the trade receivables should remain
fully impaired as at 31 December 2023.
The Committee reviewed management’s assessment of alternative uses for the inventory originally allocated for APMI. This
review included understanding the engineering efforts required to have the inventory ready for sale to other customers or use
it in the Group’s turnkey cabinet solution. The Committee also reviewed the commercial opportunities management identified,
which included details of existing and prospective customers. The Committee agreed with management’s view that the Group
will be able to recover the book value of the inventory through alternative sale opportunities.
The Committee reviewed management’s assessment of the recoverability of the capitalised development costs of $0.4m. This
review included an understanding of the technical feasibility of completing the development and revenue streams to sell the
finished product into. The Committee agreed with management’s view that the capitalised development should be impaired in
full at the balance sheet date.
Going concern
The Committee reviewed management’s assessment of the Group’s ability to continue as a going concern for a period of at
least 12 months from the date of signing the financial statements. In reviewing management’s assessment, the Committee
considered the Group’s latest budgets and financial position and concluded that the assumptions used in the going concern
review were appropriate.
The Committee also reviewed management’s downside scenario to the above going concern forecast. Under the downside
scenario, which is severe but plausible, the Group continues to have sufficient liquidity to operate. The Committee believes that
there is no material uncertainty in the use of the going concern assumption.
External audit
The Committee has primary responsibility for overseeing
the relationship with the External Auditors, KPMG LLP.
This includes monitoring and reviewing their objectivity
and independence on an ongoing basis, recommending
their appointment, re-appointment and removal, and
approving the scope of the statutory audit and fees.
KPMG LLP presented to the Committee its detailed audit
plan for the 2023 financial year, which outlined its audit
scope, planning materiality and its assessment of key
audit risks. The Committee also received reports from
KPMG LLP on its assessment of the accounting and
disclosures in the financial statements and
financial controls.
In 2023, the most significant risks identified were the
valuation of goodwill and acquired intangibles in the
Densitron US CGU, revenue recognition fraud risk over
cut-off, valuation of inventory in the Quixant gaming
CGU and Nexteq Plc standalone Company accounts,
and management override of controls. The Committee
reviewed and challenged KPMG LLP on these matters
and reviewed their reporting and feedback from
management on the effectiveness of the audit process.
No major concerns over the effectiveness of the audit
process were raised by management.
Non-audit services
The Committee approves all non-audit services provided
by the Auditors before they are undertaken and
reviews the level of these services to ensure KPMG’s
independence is not compromised. KPMG provided tax
advice to the Group in Taiwan. The total fees for non-
audit services paid to KPMG during the year was $27,000
(2022: $21,000), which is considered immaterial when
compared with the audit fees of $492,000
(2022: $460,000).
Audit and risk committee report
59
Risk management
The Board is responsible for the Group’s risk
management framework and the Committee has been
delegated responsibility for reviewing the overall process
of assessing business risks and managing the impact on
the Group. The Board retains overall responsibility for the
level of risk the Group is willing to take and for allocating
sufficient resource to the management of business risk.
The Executive Directors review the Company risk
register regularly and report any proposed changes to
the Committee and the Board. As part of the ongoing
assessment of the business’s principal risks and
uncertainties, the Committee has considered several
factors including the macroeconomic landscape, supply
chain disruption and cyber and technology risks.
The review of risks facing the Group is shown on
pages 26 to 28.
Internal controls
The Group has clearly defined lines of accountability
and delegation of authority, which are closely adhered
to, policies and procedures that cover financial planning
and reporting, accounts preparation, information
security and operational management. During the year
the Group implemented a controls self-assessment
programme covering all sites. Management provided the
Committee with a summary of the key findings from the
first self-assessment questionnaire, which was issued
to the business in Q4 2023. Control observations and
management’s response to matters raised were reviewed
by the Committee during their meeting in February 2024.
The reporting and review processes provide regular
assurance to the Board as to the adequacy and
effectiveness of internal controls. The Committee also
reviewed and agreed financial control issues that arose
during the audit with the External Auditor. The resolution
of those financial control issues is ongoing, and progress
will be reported to the Committee at future meetings.
The Committee has determined that an internal audit
function is not currently required by the Group and
that there are other monitoring processes applied
to provide assurance that internal controls are
functioning satisfactorily.
60
Directors' report
Jon Jayal | Chief Executive Officer
Directors' report
The Directors present their Annual Report and Accounts for the
year ended 31 December 2023.
Statutory information
Nexteq Plc (the ‘Company’) is a Public Limited Company
incorporated in the United Kingdom (Registration number:
04316977). The Company’s ordinary shares are traded on
the Alternative Investment Market of the London Stock
Exchange (AIM).
The Company has a branch, located in Taiwan, whose
operations and results are included in the standalone
financial statements of the Company.
Details of the share capital of the Company are set out in
Note 22 of the consolidated financial statements.
Annual General Meeting
The date and other details of the next Annual General
Meeting (AGM) of the Company are contained within the
notice of this meeting. The Board proposes a dividend
for the year ended 31 December 2023 of 3.3p per share
(2022: 3.0p per share).
Principal activities, results and likely
future developments
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.
• The design, development and delivery of
electronic displays and control solutions into the
industrial marketplace.
The profit for the year after taxation amounted to $10.9m
(2021: $11.0m). Further comments on the development
of the business are included in the Chair’s Statement,
Chief Executive’s Report and Financial Review on
pages 10 to 21.
The Group has adopted the corporate governance code
of the QCA. Further comments are included in the Chair’s
Introduction to Governance on page 37.
Engagement with suppliers, customers and others in
a business relationship with the Company are also
disclosed in the Governance Report.
The Group has made disclosures in the Sustainability
Report on pages 30 to 36 regarding greenhouse gas
emissions, energy consumption and energy efficiency of
the business.
Directors' report
61
Substantial shareholdings
Based on the share register analysis as at 31 December 2023, unless otherwise notified, the Company was aware of
the following interests in 3% or more of the issued ordinary share capital of the Company:
N C L Jarmany and his wife
Liontrust Asset Management
Schroder Investment Management1
Mr J & Mrs S Mullins
Chelverton Asset Management
Mr JJ Lin
Crucible Clarity Fund2
G P Mullins and his wife
Columbia Threadneedle Investments
Alexander Taylor
Shares held
Ordinary
shares of
£0.001 each
% of issued
share capital
11,201,163
9,073,922
3,191,783
3,858,920
3,685,000
3,446,559
2,740,332
2,215,653
2,123,832
2,058,958
16.84%
13.64%
4.80%
5.80%
5.54%
5.18%
4.12%
3.33%
3.19%
3.10%
1 Notified on 8 February 2024 under the Disclosure and Transparency Rules (DTR 5).
2 Notified on 6 February 2024 under the Disclosure and Transparency Rules (DTR 5).
Directors
The Directors who served during the year and their interests in the share capital of the Company were as follows:
F Small
N C L Jarmany
J F Jayal
G P Mullins
J J Olivier
D J Penny
C Thompson
G C v Zwanenberg (stepped down 27 April 2023)
Shares held Ordinary
shares of £0.001 each
2023
30,000
2022
30,000
11,201,163
11,201,163
394,720
389,567
2,215,653
2,215,653
–
–
30,000
20,000
–
–
27,837
27,837
There has been no other change in the interests set out above between 31 December 2023 and 12 March 2024.
6262
Directors' report
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.
Share buyback authority
The Board intends to take the steps required to enable
the Company to commence a limited share buyback
programme. The buyback authority will only be
exercised in circumstances where the Directors regard
such purchases as being in the best interests of all
shareholders in order to provide liquidity in the market,
while helping to moderate volatility in the Company's
shares and minimising dilution as a result of the exercise
of employee options.
A further announcement will be made in due course
setting out details of the proposed share buyback and
details of the requisite shareholder and regulatory
approvals ahead of authority being sought at the
Company's AGM.
Research and development
The Group continues to undertake 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 development efforts.
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 23 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 (2022: Nil).
Going concern
In assessing the appropriateness of adopting the going
concern basis in the preparation of these financial
statements, the Directors have prepared cash flow
forecasts and projections for the twelve months ending
31 March 2025. Following careful consideration of the
base case forecasts and the application of severe but
plausible downside scenarios to these forecasts, the
Directors have a reasonable expectation that the Group
has adequate resources to continue to operate within
the level of its current facilities for a period of at least
12 months from the date of this report. Therefore, the
Directors continue to adopt the going concern basis
of accounting in preparing the Group and Company
financial statements.
Further details on going concern are provided in Note 1
of the Group financial statements, which is incorporated
by reference and forms part of this Directors’ Report.
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 12 March 2024.
Statement of directors' responsibilities
6363
Statement of Directors’
responsibilities
In respect of the Annual Report and the financial statements
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Parent Company and enable them to ensure that
its financial statements comply with the Companies Act
2006. They are responsible for such internal control as
they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report and a
Directors’ Report that complies with that law and
those regulations.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in
other jurisdictions.
The Directors are responsible for preparing the Annual
Report and the Group and Parent Company financial
statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group
and Parent Company financial statements for each
financial year. Under the AIM Rules of the London Stock
Exchange they are required to prepare the Group
financial statements in accordance with UK-adopted
international accounting standards and applicable law
and they 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 the Group’s 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 UK-adopted international accounting standards.
• Assess the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern.
• 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.
64
Nexteq PLC
Financial
statements
Independent auditor’s report
Independent auditor's report
65
To the members of Nexteq PLC
1. Our opinion is unmodified
We have audited the financial statements of Nexteq
Plc (“the Company”) for the year ended 31 December
2023 which comprise the Consolidated Statement of
Profit and Loss and Other Comprehensive Income,
Consolidated and Company Balance Sheets,
Consolidated and Company Statements of Changes
in Equity, Consolidated 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 2023 and of the Group’s
profit for the year then ended;
• The Group financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards;
• The parent Company financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards 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.
Overview
Materiality:
Group financial
statements as
a whole
Coverage
Key audit
matters
Event driven
$490k (2022: $405k)
3.8% (2022: 4.6%) of
Group profit before tax
85% (2022: 82%) of total profits and
losses that make up Group profit
before tax
vs 2022
Risk of fraudulent revenue
recognition
Recurring risks Recoverability of Group
goodwill and acquisition
related intangibles in the
Densitron US and Densitron
Europe Cash Generating
Units (CGUs) (2022:
Recoverability of Group
goodwill and acquisition
related intangibles in the IDS
Cash Generating Unit (CGU))
Measurement of inventory
at the lower of cost and NRV
in the Quixant CGU and the
parent Company
66
Independent auditor’s report
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, 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, in decreasing order
of audit significance, were as follows:
Risk of fraudulent revenue
recognition
Revenue (sale of products):
$113.9m (2022: $119.3m)
Refer to page 57 (Audit and Risk
Committee Report), page 81
(Accounting Policy) and note 3 of the
financial statements.
Our response
We performed the detailed tests below rather than seeking
to rely on any of the Group’s controls because our knowledge
of the design of these controls indicated that we would not
be able to obtain the required evidence to support reliance
on controls.
Our procedures included:
• Application of policy: We compared the revenue recognised
by the Group for consistency with the Group’s policy and
assessed whether the Group’s policy is in accordance with
applicable accounting standards.
• Tests of details: We tested a sample of sales invoices raised
around the year end date to check whether revenue had
been recorded in the appropriate period, with reference to
delivery documentation and contractual terms of sale.
• Tests of details: We tested a sample of credit notes raised
subsequent to the year end date to check whether revenue
had been recorded in the appropriate period.
• Assessing transparency: We assessed the adequacy of
the Group’s disclosures in respect of revenue recognised
in the year.
The risk
2023 sales:
The Group derives its revenue from
the sale of products, namely gaming
boards or platforms, gaming monitors
and display products.
Revenue from the sale of products
has one single performance obligation
and this performance obligation is
satisfied once control of the goods
are transferred to the customer, in
accordance with the contractual terms
of sale (Incoterms). These contractual
terms of sale vary from customer to
customer. During the year, the Group
have also agreed revised contractual
terms with a number of customers,
which introduces judgement into the
assessment as to when a customer
takes control of products in a sale
transaction.
Revenue is a key metric when
evaluating financial performance of the
Group and is subject to internal and
external scrutiny.
The Group’s revenue is also subject to
peaks in demand, particularly around
period end financial reporting dates.
Given these peaks in demand,
pressure on the directors, and the
differing contractual terms of sale,
we considered there to be a risk
of fraudulent revenue recognition,
specific to revenue recognised around
the year end date.
Independent auditor’s report
67
Recoverability of Group goodwill
and acquisition related intangibles
in the Densitron US and Densitron
Europe CGUs
Goodwill US and Europe: $2.1m and
$2.8m (2022: $2.1m and $2.8m)
Acquisition related intangibles
US and Europe: $0.4m and $nil
(2022: $0.4m and $0.3m)
Refer to page 57 (Audit and Risk
Committee Report), page 79
(Accounting Policy) and note 11
of the financial statements.
The risk
Our response
Forecast based assessment:
The estimated recoverable amount
of these balances is subjective due
to the inherent uncertainty involved
in forecasting and discounting future
cash flows.
The recent financial performance
of the Densitron US and Densitron
Europe CGUs and the size of these
balances makes this a core area on
which our audit focused.
The effect of these matters is that,
as part of our risk assessment, we
determined that the value in use of the
above mentioned CGU’s had a high
degree of estimation uncertainty due
to these CGU’s performance in the
current year, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements
as a whole.
The financial statements (note 11)
disclose the sensitivity estimated by
the Group for these CGU’s.
We performed the detailed tests below rather than seeking
to rely on any of the Group’s controls because our knowledge
of the design of these controls indicated that we would not
be able to obtain the required evidence to support reliance
on controls.
Our procedures included:
• Benchmarking assumptions: We compared the Group's
assumptions to externally derived data in relation to key
inputs, such as discount rates and long term growth rates.
We used our own valuation specialist to set our own
independent expectation of the discount rate.
• Historical comparisons: We assessed the reasonableness
of the forecasts used by considering the historical accuracy
of previous forecasts and the conversion of sales pipeline
opportunities.
• Sensitivity analysis: We performed our own sensitivity
analysis on the key assumptions within their cashflow
forecast, such as compound annual revenue growth rate,
gross profit margins, discount rate and long term growth
rate. We critically assessed the extent to which a change in
these assumptions, both individually or in aggregate, would
result in an impairment and considered the likelihood of such
events occurring.
• Assessing transparency: We assessed 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 recoverable amount of
goodwill and acquisition related intangibles.
68
Independent auditor’s report
Measurement of inventory in
the Quixant CGU and the parent
Company at the lower of cost
and NRV
Quixant CGU inventory:
$19.1m (2022: $26.0m)
Quixant CGU inventory held in
Parent Company:
$14.7m (2022: $22.7m)
Refer to page 57 (Audit and Risk
Committee Report), page 79
(Accounting Policy) and note 15 of the
financial statements.
The risk
Our response
We performed the detailed tests below rather than seeking
to rely on any of the Group’s controls because our knowledge
of the design of these controls indicated that we would not
be able to obtain the required evidence to support reliance
on controls.
Our procedures included:
• Application of policy: We inspected the inventory provision
recorded by the Group for consistency with the Group’s
policy and accounting standards and recalculated the
provision recognised by the Group.
• Test of detail: We assessed the key assumptions
underlying the sales forecasts prepared by the Group
for reasonableness by inspecting the committed orders
in the pipeline.
• Test of detail: We compared the levels of inventory held
at year end with the consumption during the year and
subsequent to the year end. Based on this, we selected
a risk focussed sample of inventory items that were not
provided against and challenged the directors’ assessment
of the level of inventory provision based on historic
consumption, future committed orders and by applying our
wider knowledge and experience of the Group.
• Assessing transparency: We assessed the adequacy of the
Group’s disclosures about the degree of estimation involved
in arriving at the measurement of inventory at the lower of
cost and NRV.
Subjective estimate:
The measurement of the inventory
balance in the Quixant CGU and
the parent Company at the lower of
cost and NRV is subjective due to
the inherent uncertainty involved in
forecasting future sales.
The risk has reduced in the year as
the overall level of inventory in the
Quixant CGU and the parent Company
has decreased. However, inventory
days remain high, the Group continue
to make strategic inventory purchases
and future sales are dependent on
specific customer actions and the
forecast sales demand. As a result,
there remains a risk that future sales
may not sufficiently utilise current
inventory levels, and therefore
inventory is not being held at the lower
of cost and net realisable value.
The effect of these matters is that, as
part of our risk assessment for audit
planning purposes, we determined
that the measurement of inventory
in the Quixant CGU and the parent
Company has a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole.
The financial statements (note 1)
disclose the sensitivity estimated by
the Group for the measurement of
inventory.
We continue to perform procedures over the recoverability of goodwill in the IDS CGU. However, following an assessment of the headroom in the
models to support the goodwill balance in the IDS CGU, we have not assessed this as a significant risk in our current year audit and, therefore, it is
not separately identified as a Key Audit Matter in our report this year.
The Disclosure of events after the reporting period is not a significant risk or a Key Audit Matter in the current year. The risk in determining whether
the circumstances represented an adjusting event, and in determining the recoverable amount of the affected assets is no longer a significant risk,
as this was a one-off event in the previous year.
Independent auditor’s report
69
3. Our application of materiality and an
overview of the scope of our audit
Group profit before tax
$12,909k (2022: $8,801k)
Group materiality
$490k (2022: $405k)
Materiality for the Group financial statements as a whole was
set at $490k (2022: $405k), determined with reference to a
benchmark of Group profit before tax, of which it represents
3.8% (2022: 4.6% Group profit before tax).
Materiality for the parent Company financial statements as
a whole was set at $400k (2022: $370k), determined with
reference to a benchmark of parent Company total assets,
of which it represents 0.6% (2022: 0.6% of parent Company
total assets).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality was set at 65% (2022: 65%) of
materiality for the financial statements as a whole, which
equates to $318k (2022: $263k) for the Group and $260k
(2022: $240k) for the parent Company. We applied this
percentage in our determination of performance materiality
based on the level of identified misstatements and control
deficiencies during the prior period.
We agreed to report to the audit and risk committee
any corrected or uncorrected identified misstatements
exceeding $24.5k (2022: $20k), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
Of the Group’s 12 (2022: 12) reporting components, we
subjected 6 (2022: 6) to full scope audits for Group purposes.
The components within the scope of our work accounted for
the percentages illustrated on this page.
The remaining 17% (2022: 17%) of total Group revenue, 15%
(2022: 18%) of total profits and losses that made up Group
profit before tax and 11% (2022: 13%) of total Group assets is
represented by 6 (2022: 6) reporting components, none of
which individually represented more than 8% (2022: 8%) of
any of total Group revenue, total profits and losses that made
up Group profit before tax or total Group assets. For these
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.
$490k
Whole financial statements
materiality (2022: $405k)
$318k
Whole financial statements
performance materiality
(2022: $263k)
$343k
Range of materiality at 6
components ($221k-$343k)
(2022: $162k - $344k)
Group profit before tax
Group materiality
$24.5k
Misstatements reported to
the audit and risk committee
(2022: $20k)
Group revenue
Total profits and losses
that made up Group
profit before tax
85%
(2022: 82%)
9182
85
83%
(2022: 83%)
9183
83
Group total assets
89%
(2022: 87%)
9187
89
Full scope for Group audit purposes 2023
Full scope for Group audit purposes 2022
2022 Residual components
70
Independent auditor’s report
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 $221k to $343k (2022: $162k to $344k),
having regard to the mix of size and risk profile of the
Group across the components.
The work on 1 of the 12 components (2022: 1 of the 12
components) was performed by component auditors and
the rest, including the audit of the parent Company, was
performed by the Group team. The scope of the audit
work performed was predominantly substantive as we
placed limited reliance upon the Group’s internal control
over financial reporting.
In regards to this component, video and telephone
conference meetings were held with the component
auditor 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.
The scope of the audit work performed was predominately
substantive as we placed limited reliance upon the Group’s
internal control over financial reporting.
4. Going concern
The directors have prepared the financial statements on
the going concern basis as they do not intend to liquidate
the Group or the parent Company or to cease their
operations, and as they have concluded that the Group
and the parent Company’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”).
We used our knowledge of the Group, its industry,
and the general economic environment to identify
the inherent risks to its business model and analysed
how those risks might affect the Group’s and parent
Company’s financial resources or ability to continue
operations over the going concern period.
The risk that we considered most likely to adversely
affect the Group’s and parent Company’s available
financial resources over this period was a downturn in
customer demand. We also considered less predictable
but realistic second order impacts, such as
the issues in the sourcing of raw materials which could
result in the Group's inability to meet its performance
obligations under contracts with its customers, and, as a
consequence of this, a reduction of sales.
We considered whether these risks could plausibly affect
the liquidity in the going concern period by comparing
severe, but plausible downside scenarios that could arise
from these risks individually and collectively against the
level of available financial resources indicated by the
Group’s financial forecasts.
Our procedures also included:
• Assessing the reasonableness of the Group’s
assumptions in relation to key inputs such as projected
growth rates with our knowledge of the industry,
externally derived data and the actual performance of
the Group;
• Assessing whether the directors’ downside scenarios
applied mutually consistent assumptions in aggregate,
using our assessment of the possible range of each
key assumption and
• Comparing past budgets to actual results to assess the
directors’ track record of budgeting accurately.
We considered whether the going concern disclosure in
note 1 to the financial statements gives a full and accurate
description of the directors’ assessment of going
concern, including the identified risks and, dependencies,
and related sensitivities.
Our conclusions based on this work:
• We consider that the directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate;
• We have not identified, and concur with the directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s
or parent Company’s ability to continue as a going
concern for the going concern period; and
• We found the going concern disclosure in note 1
to be acceptable.
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 above
conclusions are not a guarantee that the Group or the
parent Company will continue in operation.
Independent auditor’s report
71
5. Fraud and breaches of laws and regulations
– ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that
could indicate an incentive or pressure to commit fraud
or provide an opportunity to commit fraud.
Our risk assessment procedures included:
• Enquiring of directors, the audit and risk committee and
inspection of policy documentation as to the Group’s
high-level policies and procedures to prevent and
detect fraud, as well as whether they have knowledge
of any actual, suspected or alleged fraud;
• Reading board and audit and risk committee
meeting minutes;
• Considering remuneration incentive schemes and
performance targets for management, directors and
sales staff; and
• Using analytical procedures to identify any unusual or
unexpected relationships.
We communicated identified fraud risks throughout the
audit team and remained alert to any indications of fraud
throughout the audit. This included communication
from the Group audit team to component audit teams
of relevant fraud risks identified at the Group level and
request to component audit teams to report to the Group
audit team any instances of fraud that could give rise to a
material misstatement at the Group level.
As required by auditing standards, and taking into
account possible pressures to meet profit targets, we
perform procedures to address the risk of management
override of controls and the risk of fraudulent revenue
recognition, in particular the risk that product sales
revenue recognised around the year end date were
recorded in the inappropriate period.
Further detail in respect of fraudulent revenue
recognition and the measurement of inventory at the
lower of cost and NRV in the Quixant CGU and the parent
Company is set out in the key audit matter disclosures in
section 2 of this report.
We also perform procedures to address the risk that
Group and component management may be in a position
to make inappropriate accounting entries, and the risk of
bias in accounting estimates and judgements, such as the
measurement of inventory at the lower of cost and NRV.
We also performed procedures including:
• Identifying journal entries to test for all full scope
components based on risk criteria and comparing the
identified entries to supporting documentation. These
included those posted to unusual account pairings for
revenue and cash; and
• Assessing whether the judgements made in making
accounting estimates are indicative of a potential bias.
Identifying and responding to risks of material
misstatement related to compliance with laws
and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on
the financial statements from our general commercial
and sector experience and through discussion with
the directors (as required by auditing standards), and
discussed with the directors and other management the
policies and procedures regarding compliance with laws
and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any
indications of non-compliance throughout the audit.
This included communication from the Group audit
team to component audit teams of relevant laws and
regulations identified at the Group level, and a request
for component auditors to report to the Group audit
team any instances of non-compliance with laws and
regulations that could give rise to a material misstatement
at the Group level.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies
legislation), distributable profits legislation and taxation
legislation and we assessed the extent of compliance
with these laws and regulations as part of our procedures
on the related financial statement items.
72
Independent auditor’s report
Secondly, the Group is subject to many other laws
and regulations where the consequences of non-
compliance could have a material effect on amounts
or disclosures in the financial statements, for instance
through the imposition of fines or litigation. We identified
the following areas as those most likely to have such
an effect: GDPR, health and safety, gaming regulation,
anti-bribery and corruption, employment law, money
laundering, Foreign Corrupt Practices Act, export control,
environmental protection legislation, Consumer Rights
Act and Sale of Goods Act, overseas local legislation
in respect of the overseas components in the Group
and certain aspects of Company legislation recognising
the nature of the Group’s activities. Auditing standards
limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry
of the directors and inspection of regulatory and
legal correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect
that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is
an unavoidable risk that we may not have detected
some material misstatements in the financial statements,
even though we have properly planned and performed
our audit in accordance with auditing standards. For
example, the further removed non- compliance with
laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher risk
of non-detection of fraud, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non- compliance with all
laws and regulations.
6. 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.
7. 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.
Independent auditor’s report
73
8. Respective responsibilities
9. 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.
Matthew Radwell
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
20 Station Road
Cambridge
CB1 2JD
12 March 2024
Directors’ responsibilities
As explained more fully in their statement set out
on page 63, 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.
74
Consolidated statement of profit and loss and other comprehensive income
Consolidated statement of profit and loss
and other comprehensive income
For the years ended 31 December 2023 and 2022
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit
Finance income
Finance expense
Profit before tax
Taxation
Profit for the year
Other comprehensive income/(expense) for the year, net of income tax
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences
Total comprehensive income for the year
Basic earnings per share
Diluted earnings per share
Note
3
15
2023
$’000
114,349
(72,828)
41,521
2022
$’000
119,873
(81,319)
38,554
4, 6
(29,091)
(29,622)
12,430
585
(106)
12,909
(2,012)
10,897
8,932
–
(131)
8,801
2,185
10,986
723
11,620
$0.1639
$0.1602
(1,644)
9,342
$ 0.1653
$ 0.1616
7
7
8
9
9
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.
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 79 to 127 form part of the financial statements.
Consolidated and company balance sheets
75
Consolidated and company
balance sheets
As at 31 December 2023 and 2022
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Investment property
Investments in Group companies and associated
undertakings
Deferred tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Loans and borrowings
Trade and other payables
Tax payable
Lease liabilities
Non-current liabilities
Loans and borrowings
Provisions
Deferred tax liabilities
Lease 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
Group
Company
Note
2023
$’000
2022
$’000
10
11
24
12
13
14
16
15
16
17
18
19
18
18
21
14
18
22
22
5,478
14,243
1,558
−
−
2,951
54
24,284
24,338
25,828
28,406
78,572
102,856
(91)
(16,763)
(1,247)
(569)
(18,670)
(382)
(351)
−
(1,107)
(1,840)
(20,510)
82,346
106
6,747
1,905
74,398
(810)
82,346
5,668
15,533
1,694
−
−
2,636
712
26,243
32,169
24,047
13,508
69,724
95,967
(90)
(20,437)
(530)
(562)
(21,619)
(473)
(350)
(40)
(1,271)
(2,134)
(23,753)
72,214
106
6,708
895
66,038
(1,533)
72,214
2023
$’000
3,649
408
667
−
9,586
2,637
−
16,947
16,180
9,889
24,857
50,926
67,873
(91)
(26,583)
(421)
(296)
(27,391)
(382)
−
−
(364)
(746)
(28,137)
39,736
106
6,747
1,905
30,464
514
39,736
2022
$’000
3,750
652
745
–
9,244
2,389
–
16,780
22,717
10,917
9,042
42,676
59,456
(90)
(15,176)
(274)
(329)
(15,869)
(473)
–
–
(441)
(914)
(16,783)
42,673
106
6,708
895
35,085
(121)
42,673
The Company’s loss for the year was $2.1m (2022: loss of $0.6m).
These financial statements were approved and authorised for issue by the Board of Directors on 12 March 2024 and
were signed on behalf of the Board by:
Jon Jayal
Chief Executive Officer
Company registered number: 04316977
Notes on pages 79 to 127 form part of the financial statements.
76
Consolidated and company statement of changes in equity
Consolidated and company
statement of changes in equity
For the years ended 31 December 2023 and 2022
GROUP
Balance at 31 December 2022
106
6,747
(810)
Balance at 1 January 2022
Total comprehensive income for
the year
Profit for the year
Other comprehensive expense
Total comprehensive (expense)/
income for the year
Transactions with owners, recorded
directly in equity
Share-based payment expense
Deferred tax on share-based payment
expense
Dividend paid
Total contributions by and
distributions to owners
Balance at 1 January 2023
Total comprehensive income for
the year
Profit for the year
Other comprehensive income
Total comprehensive income for
the year
Transactions with owners, recorded
directly in equity
Share-based payment expense
Deferred tax on share-based payment
expense
Dividend paid
Exercise of share options
Total contributions by and
distributions to owners
Share
Capital
$’000
106
Share
Premium
Translation
Reserve
$’000
6,708
$’000
(1,533)
Share-
Based
Payments
$’000
895
Retained
Earnings
$’000
66,038
Total
Equity
$’000
72,214
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,644)
(1,644)
–
–
–
–
–
–
–
618
65
–
10,897
–
10,897
723
10,897
11,620
–
–
618
65
(1,888)
(1,888)
683
1,905
(1,888)
74,398
(1,205)
82,346
Share
Capital
$’000
106
Share
Premium
Translation
Reserve
Share-
Based
Payments
Retained
Earnings
$’000
6,708
$’000
(1,533)
$’000
$’000
895
66,038
Total
Equity
$’000
72,214
–
–
–
–
–
–
–
–
–
–
–
–
–
–
39
39
–
723
723
–
–
–
–
–
–
–
–
962
48
–
–
10,897
10,897
–
723
10,897
11,620
–
–
962
48
(2,537)
(2,537)
–
39
1,010
1,905
(2,537)
(1,488)
74,398
82,346
Balance at 31 December 2023
106
6,747
(810)
COMPANY
Balance at 1 January 2022
Total comprehensive loss for the year
Loss for the year
Other comprehensive expense
Total comprehensive expense for
the year
Transactions with owners, recorded
directly in equity
Share-based payment expense
Deferred tax on share-based payment
expense
Dividend paid
Total contributions by and
distributions to owners
Consolidated and company statement of changes in equity
77
Share
Capital
$’000
106
Share Translation
Reserve
Premium
$’000
6,708
$’000
1,049
Share-
Based
Payments
$’000
212
Retained
Earnings
$’000
37,533
Total
Parent
Equity
$’000
45,608
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,170)
(1,170)
–
–
–
–
–
–
–
618
65
–
683
895
(560)
–
(560)
(1,170)
(560)
(1,730)
–
–
618
65
(1,888)
(1,888)
(1,888)
35,085
(1,205)
42,673
Share Translation
Reserve
Premium
Share-
Based
Payments
Retained
Earnings
$’000
$’000
$’000
Total
Parent
Equity
$’000
(121)
895
35,085
42,673
Balance at 31 December 2022
106
6,708
(121)
Balance at 1 January 2023
Total comprehensive loss for the year
Loss for the year
Other comprehensive income
Total comprehensive expense for
the year
Transactions with owners, recorded
directly in equity
Share-based payment expense
Deferred tax on share-based payment
expense
Dividend paid
Exercise of share options
Total contributions by and
distributions to owners
Share
Capital
$’000
106
–
–
–
–
–
–
–
–
$’000
6,708
–
–
–
–
–
–
39
39
Balance at 31 December 2023
106
6,747
514
Notes on pages 79 to 127 form part of the financial statements.
–
635
635
–
–
–
–
–
–
–
–
962
48
–
–
(2,084)
(2,084)
–
635
(2,084)
(1,449)
–
–
962
48
(2,537)
(2,537)
–
39
1,010
1,905
(2,537)
(1,488)
30,464
39,736
78
Consolidated and company cash flow statements
Consolidated and company
cash flow statements
For the years ended 31 December 2023 and 2022
Cash flows from operating activities
Profit/(Loss) for the year
Adjustments for:
Depreciation and amortisation
Loss on disposal of property, plant and equipment
Impairment losses on intangible assets
Depreciation of leased assets
Increase in provision for doubtful debts
Movement in provisions
R&D tax credit
Taxation charge/(credit)
Finance income
Finance expense
Exchange rate losses/(gains)
Share-based payment expenses
Operating cash flows before movement in
working capital
(Increase)/Decrease in trade and other receivables
Decrease/(Increase) in inventories
(Decrease)/Increase in trade and other payables
Interest paid
Lease liability interest paid
Tax paid
Net cash from operating activities
Cash flows from investing activities
Addition of development costs
Purchase of property, plant and equipment
Addition of externally purchased intangible assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from loans
Proceeds from intercompany loans
Mortgage interest paid
Payment of lease liabilities principal
Exercise of share options
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Foreign exchange rate movements
Cash and cash equivalents at 31 December
Group
Company
Note
2023
$’000
2022
$’000
2023
$’000
2022
$’000
10,897
10,986
(2,084)
(560)
4
10
4
4
23
21
7
7
18
11
10
11
18
18
11
18
17
2,764
14
967
638
136
7
(382)
2,012
(585)
106
120
962
17,656
(1,283)
8,573
(3,888)
21,058
(3)
(92)
(1,208)
19,755
(1,839)
(262)
(135)
461
(1,775)
(926)
842
–
(11)
(624)
39
(2,537)
(3,217)
14,763
13,508
135
28,406
2,652
5
509
660
722
43
–
(2,185)
–
131
(403)
618
13,738
(2,017)
(4,633)
(4,439)
2,649
(42)
(89)
(1,716)
802
(1,817)
(545)
(418)
−
(2,780)
(6,922)
6,842
–
–
(546)
–
(1,888)
(2,514)
(4,492)
18,347
(347)
13,508
701
–
–
360
–
–
–
413
(563)
47
124
676
(326)
1,016
7,176
(3,448)
4,418
−
(35)
(522)
3,861
–
(219)
(135)
440
86
(926)
842
14,711
(11)
(358)
39
(2,537)
11,760
15,707
9,042
108
24,857
687
4
–
413
–
–
–
(1,776)
–
86
(371)
499
(1,018)
16,940
(2,980)
(6,774)
6,168
(41)
(45)
(648)
5,434
–
(407)
(108)
(515)
(6,922)
6,842
–
–
(405)
–
(1,888)
(2,373)
2,546
6,604
(108)
9,042
Notes on pages 79 to 127 form part of the financial statements.
Notes to the financial statements
Notes to the financial statements
79
1. Principal accounting policies
Use of judgements and estimates
The accounting policies set out below have, unless
otherwise stated, been applied consistently to all periods
presented in these consolidated financial statements.
Nexteq Plc (the ‘Company’) develops and supplies
specialist computer systems. The Company is a public
company that is incorporated and domiciled in the UK.
The registered number is 04316977. 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 inclusive of its branch in
Taiwan, and not about this Group.
Basis of preparation
The Group financial statements have been prepared in
accordance with UK-adopted international accounting
standards (‘UK Adopted IFRS’). The Company financial
statements have been prepared in accordance with
UK-adopted international accounting standards and
as applied in accordance with the provisions of the
Companies Act 2006. 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. The loss of the Company is disclosed at the
foot of the Company Balance sheet.
This financial information has been prepared under the
historical cost convention.
Functional and presentation currency
These consolidated financial statements are presented in
US Dollars, which is the Company’s functional currency.
The Company’s Taiwan branch has a functional currency
of New Taiwan Dollars. All amounts have been rounded
to the nearest thousand, unless otherwise indicated.
The preparation of financial information in conformity with
UK-adopted international accounting standards requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of
applying the Group accounting policies. The areas involving
a higher degree of judgement and estimation relate to
the recoverable amount of goodwill in the Densitron US
CGU, valuation of Quixant CGU inventory, capitalisation of
development costs and valuation of Aruze debtors, inventory
and capitalised development costs. Estimates and underlying
assumptions are reviewed on an annual basis. Revisions to
estimates are recognised prospectively.
Significant estimates
Recoverability of goodwill and acquisition-related
intangibles in the Densitron US and Densitron
Europe CGUs
The estimated recoverable amounts of the Densitron US and
Densitron Europe CGUs 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 that are subjective due to the inherent
uncertainty involved in forecasting and discounting future
cash flows. Reasonably possible changes to the assumptions
in the future may lead to material adjustments to the carrying
value of the CGUs. See Note 11 for further details.
Quixant inventory valuation in the Quixant CGU for the
Group and in the Parent company
Inventories, which comprise goods held for resale, are stated
at the lower of cost and net realisable value, on a weighted
average cost basis. The estimated recoverable amount of the
inventory balance in the Quixant CGU for the Group financial
statements and in the Parent Company financial statements
is subjective, due to the inherent uncertainty involved in
forecasting of future sales. Provisions are made to write down
any slow-moving or obsolete inventory to net realisable value.
As at 31 December 2023, the Nexteq Group balance sheet
and Parent company balance sheet included Quixant
inventory of $19.1m (2022: $26.0m) and $14.7m (2022: $22.7m)
respectively. The provision against slow-moving and obsolete
inventory for the Group as at 31 December 2023 is $2.6m
(2022: $2.1m) and in the Parent company is $2.3m
(2022: $1.5m). A difference of 3.7% in the provision as a
percentage of gross inventory would give rise to a difference
of +/- $1.0m in gross margin. The choice of a 3.7% change for
the determination of sensitivity represents the change to the
level of provisioning for the prior year.
80
Notes to the financial statements
1. Principal accounting policies
Other important judgements
Valuation of Aruze debtors, inventory and capitalised
development costs
As disclosed in the 2022 Annual Report, the Group,
through its Quixant brand, had active contracts in place
with Aruze Philippines Manufacturing Inc. (‘APMI’), for
the supply of display products and gaming boards. On
1 February 2023 Aruze Gaming America, Inc (‘AGA’), a
US-based affiliate of APMI, filed a voluntary petition under
Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the State of Nevada. As at the date
of this Annual Report, the Chapter 11 proceedings are still
ongoing. AGA’s operations and assets have been sold
as part of the proceedings and AGA also closed its Las
Vegas operations. APMI filed for voluntary liquidation on
22 August 2023 and a liquidation order was issued by
the Philippine courts. As at the date of this Annual Report
the liquidation proceedings were still ongoing.
There remains uncertainty over the recoverability of
balances related to APMI and Nexteq management
evaluated their carrying value as at the balance
sheet date.
As at 31 December 2023, APMI owed $1.0m to the Group
from the sale of goods (2022: $0.7m). The amounts were
impaired in full as at 31 December 2022 and due to the
uncertainty referenced above remain fully impaired at 31
December 2023. The Group continues to take steps to
recover these balances.
Inventory, consisting of raw materials with a book value
of $1.7m (2022: $2.2m) and finished goods with a book
value of $0.6m (2022: $1.1m) originally earmarked for use
by APMI was included in the Nexteq Group’s balance
sheet as at 31 December 2023. The raw materials can
be used to manufacture products sold to the Group’s
existing or new customers, and the finished goods
can be used in the Group’s turnkey cabinet offering.
Management expects to fully recover the net book value
of $2.3m and considers that no provision against it was
required as at 31 December 2023.
The Group balance sheet also previously included
capitalised development costs with a book value of
$0.4m related to the development of products for APMI’s
future use. Management assessed the commercial
opportunities for these products and determined that
it was not probable that these would generate future
economic benefits for other customers. As a result,
development of these products was ceased. An
impairment charge of the full book value of $0.4m was
recorded within operating expenses.
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.
Separate Parent Company financial statements
In the Parent Company financial statements, all
investments in subsidiaries are carried at cost
less impairment. The functional and presentational
currency adopted by the Parent Company is US Dollars,
and the functional currency of the branch is New
Taiwan Dollars.
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance
and position, are set out in the Strategic Report on
pages 2 to 36.
Notes to the financial statements
81
The Group’s operational and financially robust position is
supported by:
• Increased profitability, with profit before tax of $12.9m,
47% higher than 2022 ($8.8m).
• Improved cash generation, leading to a net cash
balance of $27.9m at 31 December 2023 (31 December
2022: $12.9m).
• Good order book at 31 December 2023, covering five
months of forecasted 2024 revenues (31 December
2022: seven months of forecasted 2023 revenues).
In undertaking a going concern assessment, the
Directors have reviewed financial projections for a period
of at least twelve months from the date of this report (the
assessment period). Management prepared a base case
scenario based on the approved budget for 2024 and
forecasts for the first three months of 2025. Management
also prepared a severe but plausible downside scenario,
using the following key assumptions:
Revenue recognition
Revenue is measured at the fair value of the
consideration received or receivable and represents
amounts receivable for goods and services provided in
the normal course of business by subsidiary companies
to external customers, net of discounts, Value Added Tax
(VAT) and other sales-related taxes. Revenue is reduced
for customer returns and other allowances.
Revenue from the sale of goods, namely gaming boards
or platforms, gaming monitors and display products,
which represents 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 at a point in time when the contractual terms of
sale have been met; and
• The Group no longer retains effective control over
• A 25% reduction in 2024 and 2025 Quixant revenues
the goods.
The Group operates under different contractual terms
for each customer with these terms being based on
Incoterms (International Commercial Terms), a set of
standardised international trade terms published by
the International Chamber of Commerce. The Group
recognises revenue once control of the goods has
been passed to the customer in accordance with these
contractual terms, which could be at different points in
time (for example, on delivery to the customer premises,
or when the goods have been made available for a
customer to collect from an agreed place).
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 based on standalone
selling prices.
to replicate the impact that a downturn similar to
that experienced in 2019 would have on the
Group’s revenues.
• Supply chain disruptions similar to that experienced
in 2021 and 2022 leading to increased levels of
working capital.
In this scenario, the Group continues to have sufficient
cash reserves and working capital to continue operating
as a going concern through the review period.
While the Directors’ have no reason to believe that
customer revenues and receipts will decline to the point
that the Group no longer has sufficient resources to fund
its operations, should this occur, the Group would look
to take out additional funding facilities, as well as making
further reductions in controllable costs. There would also
be an opportunity to sell certain property and inventory
assets to accelerate cash generation and/or mitigate risk.
Consequently, the Directors are confident that the Group
and Company will have sufficient funds to continue to
meet its liabilities as they fall due for at least 12 months
from the date of approval of these financial statements
and, therefore, have prepared these financial statements
on a going concern basis.
82
Notes to the financial statements
1. Principal accounting policies
The Group has an active contract, which includes a
financing component, and consideration is payable over
36 months, however, it has not identified any contracts
that include variable consideration. The financing
element of the revenue is deferred in the balance sheet
and recognised in the statement of profit and loss over
the period of a contract.
IDS, which forms part of the Densitron operating
segment, provides support and maintenance services to
customers. Efforts are expended evenly throughout the
performance period therefore revenue is recognised on
a straight-line basis over the period of the contract.
Cost of sales
Cost of goods sold includes excess and obsolete
inventory, as well as any other costs associated
with the direct manufacturing and shipping of the
Group’s products.
Adjusting items
When items of income or expense are considered
significant by virtue of their size, nature or incidence or
which have a distortive effect on current year earnings
and are relevant to an understanding of the Group’s
financial performance, they are disclosed separately
within the financial statements. Such adjusting items
may include but are not limited to share-based payment
expense, restructuring charges, acquisition-related
costs and amortisation of intangible assets arising from
business combinations.
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 not amortised but is tested for impairment annually.
Any impairment is recognised immediately through the
income statement and is not subsequently reversed.
Impairment losses recognised are allocated first to
reduce the carrying value of the goodwill the business
relates to, and then to reduce the carrying value of the
other assets of that business on a pro rata basis.
Impairment excluding inventories, investment
properties and deferred tax assets
Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than inventories, investment property and deferred
tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable
amount is estimated. For goodwill, and intangible assets
that have indefinite useful lives or that are not yet
available for use, the recoverable amount is estimated
each year at the same time.
The recoverable amount of an asset or cash generating
unit is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. For the purpose of impairment
testing, assets that cannot be tested individually are
grouped together into the smallest group of assets
that 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).
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.
Notes to the financial statements
83
Property, plant and equipment
• The ability to use or sell the intangible asset.
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 that 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, order
backlog, technology
In accordance with IFRS3, 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
Technology
Between 4 and 10 years
Between 1 and 4 years
5 years
Intangible assets – development costs
The Group incurs significant expenditure on the research
and development of new 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 probability that the asset created will generate
future economic benefits.
• The availability of adequate technical, financial and
other resources to complete the development.
• The ability to measure reliably the expenditure
attributable to the intangible asset during
its development.
Development costs not meeting these criteria and
all research costs are expensed in the Consolidated
Statement of Profit and Loss and Other Comprehensive
Income as incurred. Capitalised development costs are
amortised on a straight-line basis over their expected
useful economic lives of five years once the related
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 is accounted for on a weighted average basis
and includes all costs in acquiring the inventories
and bringing each product to its present location and
condition, as well as an appropriate share of overheads
based on normal operating capacity. 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.
84
Notes to the financial statements
1. Principal accounting policies
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 foreign operations are
translated using the average exchange rate for the
period. The Balance Sheets of foreign operations are
translated to the Group’s presentational currency, US
Dollars, using the closing year-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 because 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.
Leases, right-of-use assets and lease liabilities
All leases are accounted for by recognising a right-of-use
asset and a lease liability except for:
• Leases of low value assets.
• Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease
term, with the discount rate determined by reference
to the rate inherent in the lease. If not available, the
Group’s incremental borrowing rate on commencement
of the lease is used. It is remeasured when there is a
change in future lease payments arising from a change
in an index or rate, there is a change in the Group’s
estimate of the amount expected to be payable under
a residual value guarantee, if the Group changes its
assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised
in-substance fixed lease payment. When the lease liability
is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset,
to the extent that the right-of-use asset is reduced
to nil, with any further adjustment required from the
remeasurement being recorded in profit or loss.
The right-of-use assets are initially measured at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred
and an estimate of costs to dismantle and remove the
asset or to restore the site on which it is located less
any lease incentives received. The right-of-use asset
is subsequently depreciated using the straight-line
method from the commencement date to the end of the
lease term.
Notes to the financial statements
85
Income tax
Financial assets
The charge for current income tax is based on the results
for the year as adjusted for items that are not taxed or
disallowed. Tax is recognised in the income statement
except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
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. The amount of deferred tax provided
is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the
balance sheet date. 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 Consolidated
Statement of Profit and Loss and 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.
When determining whether the credit risk of a financial
asset has increased significantly since initial recognition
and when estimating expected credit loss (ECL), the
Group considers reasonable and supportable information
that is relevant and available without undue cost or effort.
This includes both quantitative and qualitative information
and analysis, based on the Group’s historical experience
and informed credit assessment and including forward-
looking information. The gross carrying amount of a
financial asset is written off (either partially or in full) to
the extent that there is no realistic prospect of recovery.
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 are initially and
subsequently measured at amortised cost.
• Cash and cash equivalents: Cash and cash equivalents
in the Consolidated Balance Sheet comprise cash at
bank and in hand and short-term deposits. Cash and
cash equivalents are measured at amortised cost.
Financial assets are not reclassified subsequent to their
initial recognition unless the Group changes its business
model for managing financial assets, in which case all
affected financial assets are reclassified on the first day
of the first reporting period following the change in the
business model.
In the Consolidated Cash Flow Statement, cash and
cash equivalents comprise cash and cash equivalents as
defined above, net of bank overdrafts.
The Group considers a financial asset to be in default
when the trade receivable is unlikely to pay its credit
obligations to the Group in full, without recourse by the
Group to actions such as realising security (if any is held);
or the financial asset is more than 90 days past due
(unless there is no evidence of unwillingness or of an
inability to settle the debt).
86
Notes to the financial statements
1. Principal accounting policies
Financial liabilities
All the Group’s financial liabilities are classified as
financial liabilities carried at amortised cost.
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 fair value, are
subsequently measured at amortised cost, using the
effective interest method. Trade payables and accrued
liabilities with a short duration are not discounted, as
the carrying amount is a reasonable approximation of
fair 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 Balance Sheet. 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.
Financial assets and financial liabilities are offset, and
the net amount presented in the statement of financial
position when, and only when, the Group currently has
a legally enforceable right to set off the amounts and it
intends to either settle them on net basis or to realise the
asset and settle the liability simultaneously.
Financing income comprises interest receivable on funds
invested, interest income on lease receivables.
Interest income and interest payable is recognised
in profit or loss as it accrues, using the effective
interest method.
Derivative financial instruments
A derivative financial instrument for which no hedge
accounting is applied is initially recognised at its fair
value at the date the contract is entered into and is
subsequently carried at its fair value. Changes in fair
value are recognised in profit or loss. The Group
does not apply hedge accounting for its derivative
financial instruments.
The Group’s activities expose it primarily to the financial
risks of changes in foreign currency exchange rates.
The Group periodically uses foreign exchange forward
contracts to manage the foreign currency exposures.
Pension
The Group operates a defined contribution scheme to
the benefit of its employees. Contributions payable are
charged to the Consolidated Statement of Profit and
Loss and Other Comprehensive Income in the year
they are payable.
Earnings per share
The Group presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary
Shareholders of the Company by the weighted average
number of ordinary shares outstanding during the
reporting period. Diluted EPS is determined by adjusting
the weighted average number of ordinary shares
outstanding for the effects of all potential dilutive
ordinary shares.
Financing income and expenses
Dividends
Financing expenses include interest payable, finance
charges on shares classified as liabilities and finance
charges on lease liabilities recognised in profit or loss
using the effective interest method and unwinding of the
discount on provisions. Borrowing costs that are directly
attributable to the acquisition, construction or production
of an asset that takes a substantial time to be prepared
for use, are capitalised as part of the cost of that asset.
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.
Notes to the financial statements
87
Determination and presentation of operating segments
The 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 Group’s Chief Operating Decision
Maker (CODM).
An operating segment is a component of the 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
Group’s other components. The operating segment’s
operating results are reviewed regularly by the CODM
to make decisions about resources to be allocated to
the segment to assess its performance, and for which
discrete financial information is available.
Share-based payments
The grant date fair value of share-based payments
awards granted to employees is recognised as an
employee expense, with a corresponding increase in
equity, over the period in which employees become
unconditionally entitled to the awards. The fair value
of the awards granted is measured using an option
valuation model, taking into account the terms and
conditions upon which the awards were granted. The
amount recognised as an expense is adjusted to reflect
the actual number of awards for which the related service
and non-market vesting conditions are expected to
be met, such that the amount ultimately recognised as
an expense is based on the number of awards that do
meet the related service and non-market performance
conditions at the vesting date. For share-based payment
awards with non-vesting conditions, the grant date for fair
value of the share-based payment is measured to reflect
such conditions and there is no true-up for differences
between expected and actual outcomes.
Adoption of new and revised IFRS standards
The Nexteq Group considers the applicability of the
following IFRSs, including permission for early adoption of
new and amended IFRSs, in the current reporting period.
The following amendments required to be adopted in
annual periods beginning from 1 January 2023 onwards
do not have a material impact on the financial statements
of the Group:
• IFRS17 Insurance Contracts, Amendments to IFRS17 and
Initial Application of IFRS17 and IFRS9 – Comparative
information (effective date 1 January 2023).
• Amendments to IAS8 Accounting Policies, changes in
Accounting Estimates and Errors to introduce a new
definition for accounting estimates (effective date 1
January 2023).
• Amendments to IAS1 Presentation of Financial
Statements and IFRS Practice Statement 2 Making
Materiality Judgements (effective date 1 January 2023).
• Amendments to IAS12 Income Taxes – Deferred Tax
related to Assets and Liabilities Arising from a Single
Transaction (effective date 1 January 2023).
At the date of authorisation of these financial statements,
the following revised IFRSs that have been issued but are
not yet effective have not been applied by the Group:
• Amendments to IAS1 Presentation of Financial
Statements: Classification of Liabilities as Current or
Non-current and Classification of Liabilities as Current
and Non-current (effective date 1 January 2024).
• Amendments to IAS7 and IFRS7 Supplier Finance
Arrangements: Updated disclosures of supplier finance
arrangements and the effect of liabilities, cash flows
and exposure to liquidity risk.
Management does not expect these amendments to
have a material impact on the financial statements of the
Group in future periods.
Reconciliation of adjusted performance measures
The Group uses certain alternative performance
measures to evaluate performance and as a method to
provide Shareholders with clear and consistent reporting.
The Directors consider that these represent a more
consistent measure of performance by removing items
of income or expense that are considered significant by
virtue of their size, nature or incidence or which have a
distortive effect on current year earnings and are relevant
to an understanding of the Group’s financial performance.
These measures include Adjusted Profit before tax,
Adjusted Profit after tax, Adjusted Operating expenses
and Adjusted Operating cash flow. See below for
analysis of the adjusting items in reaching adjusted
performance measures.
88
Notes to the financial statements
1. Principal accounting policies
Adjusted Profit before tax
Profit before tax
Adjustments:
Amortisation of customer relationships, technology and order backlog1
Share-based payments expense2
Restructuring charges3
Adjusted Profit before tax
Adjusted Profit before tax % (Adjusted Profit before tax/Revenue)
2023
$’000
12,909
582
962
293
14,746
12.9%
1 The amortisation of customer relationships, technology and order backlog has been excluded as it is not a cash expense to the Group.
2 Share-based payments expense has been excluded as it is not a cash-based expense.
3 Restructuring charges relates to leaver costs incurred in headcount reduction actions taken in December 2023.
Adjusted Profit after tax
Profit after tax
Adjustments:
Amortisation of customer relationships, technology and order backlog1
Share-based payments expense2
Restructuring charges3
Non-recurring tax benefits4
Adjusted Profit after tax
2023
$’000
10,897
582
962
293
(432)
12,302
2022
$’000
8,801
751
618
–
10,170
8.5%
2022
$’000
10,986
751
618
–
(260)
12,095
1 The amortisation of customer relationships, technology and order backlog has been excluded as it is not a cash expense to the Group.
2 Share-based payments expense has been excluded as it is not a cash-based expense.
3 Restructuring charges relates to leaver costs incurred in headcount reduction actions taken in December 2023.
4 Tax on adjusted items relating to amortisation of customer relationships, technology and order backlog of $0.6m (2022: $0.8m), share-based
payment expense of $1.0m (2022: $0.6m) and restructuring charges of $0.3m (2022: $Nil).
Adjusted Operating expenses
Operating expenses
Adjustments:
Amortisation of customer relationships, technology and order backlog1
Share-based payments expense2
Restructuring charges3
Adjusted Operating expenses
2023
$’000
2022
$’000
(29,091)
(29,622)
582
962
293
751
618
–
(27,254)
(28,253)
Notes to the financial statements
89
Adjusted Operating cash flow
Net cash from operating activities
Add back:
Tax paid
Adjusted Operating cash flow
Adjusted Operating cash conversion % (Adjusted operating cash flow/Adjusted profit
before tax)
2. Business and geographical segments
2023
$’000
19,755
1,208
20,963
142%
2022
$’000
802
1,716
2,518
25%
The Chief Operating Decision Maker (CODM) in the organisation is an executive management committee comprising
the Board of Directors. The segmental information is presented in a format consistent with management information.
The Group assesses the performance of the segments based on a measure of revenue and operating profit. The
segmental split of the balance sheet is not reviewed by the CODM, and they do not look at assets/liabilities of each
division separately but combined as a group. Therefore, this split for assets has not been included.
The operating segments applicable to the Group are as follows:
• Quixant – Design, development and manufacturing of gaming platforms and display solutions for the casino gaming
and slot machine industry.
• Densitron – Sale of electronic display products to global industrial markets. IDS is included in the Densitron reporting
segment, since the nature of IDS business, the products that are sold and the market that the business operates in
are all consistent with that segment.
Reconciliation of segment results to profit after tax:
Quixant
Densitron
Segment results
Corporate cost
Operating profit
Net finance income/(expense)
Profit before tax
Taxation
Profit after tax
2023
$’000
17,165
7,538
24,703
(12,273)
12,430
479
12,909
(2,012)
10,897
2022
$’000
17,348
5,165
22,513
(13,581)
8,932
(131)
8,801
2,185
10,986
90
Notes to the financial statements
2. Business and geographical segments
Year to 31 December 2023
$’000
$’000
Quixant
Densitron
$’000
Total1
Year to 31 December 2022
$’000
$’000
Quixant
Densitron
Other information
Depreciation of owned assets
Amortisation of ntangible assets
Impairment of intangible assets
93
1,020
489
1,602
8
337
478
823
101
1,357
967
2,425
92
804
194
1,090
5
291
315
611
1 Depreciation and amortisation of $977k (2022: $1,611k) were not allocated to segments as these are considered corporate costs.
3. Analysis of turnover
By primary geographical market
Asia
Australia
UK
Europe excl. UK
North America
Rest of World
2023
$’000
Quixant
2023
$’000
Densitron1
2,911
6,067
4,733
10,777
44,380
405
9,311
79
4,370
15,668
14,404
1,244
2023
$’000
Total
12,222
6,146
9,103
26,445
58,784
1,649
2022
$’000
2022
$’000
Quixant
Densitron
3,306
4,958
4,373
12,483
48,123
839
10,353
66
3,474
13,067
16,162
2,669
45,791
69,273
45,076
114,349
74,082
1 2023 Densitron revenue from products splits into Densitron $43.5m (2022: $44.7m) and IDS $1.6m (2022: $1.1m). IDS revenue included revenue of $0.4m (2022:
$0.5m) recognised throughout the performance period.
The above analysis includes sales to individual countries in excess of 10% of total turnover of:
USA
2023
$’000
56,069
2022
$’000
61,019
Two customers (2022: two customers) individually accounted for more than 10% of Group revenues in 2023, with
revenues of $19.4m (2022: $22.5m) and $14.8m (2022: $17.9m), respectively. These revenues are attributable to the
Quixant segment.
$’000
Total1
97
1,095
509
1,701
2022
$’000
Total
13,659
5,024
7,847
25,550
64,285
3,508
119,873
Notes to the financial statements
91
4. Expenses
Included in profit before tax are the following:
Restructuring charge
(Gain)/loss on foreign exchange transactions
Research and development expenditure
Of which capitalised
Impairment of capitalised development cost
R&D tax credit
Depreciation of owned assets
Depreciation of leased assets
Amortisation of intangible assets
Auditor’s remuneration:
Amounts receivable by the Company’s Auditor and its associates in respect of:
Audit of the consolidated and Parent Company financial statements
Additional audit fee charged in relation to the prior year financial statements
Audit of the subsidiary company financial statements
Non-audit services1
2023
$’000
293
(514)
4,575
(1,839)
967
(382)
467
638
2,297
2023
$’000
492
-
27
27
2022
$’000
−
1,645
4,823
(1,817)
509
−
456
660
2,196
2022
$’000
460
33
44
21
1 The policy for the approval of non-audit fees is set out in the Audit and Risk Committee Report on pages 52 to 59. Non-audit services related to tax-related services
provided in Taiwan.
5. Directors’ remuneration
The remuneration of the Directors is set out on pages 43 to 51 within the Directors’ Remuneration Report described as
being audited and forms part of these financial statements.
Director’s remuneration comprises:
Wages and salaries
Social security costs
Contributions to defined contribution plans
2023
$’000
1,336
–
30
2022
$’000
1,575
11
38
1,366
1,624
92
Notes to the financial statements
6. Staff 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 development
Sales and marketing
Central functions
Directors
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Share-based payments expense (See Note 20)
Social security costs
Contributions to defined contribution plans
Restructuring charges
2023
2022
Number
Number
45
86
55
45
7
44
84
51
42
7
238
228
2023
$’000
18,215
962
1,443
779
293
2022
$’000
17,595
618
1,311
663
−
21,692
20,187
Key management personnel consists of the Executive Directors and the Executive Committee and their remuneration
(included in the totals above) was as follows:
Wages and salaries
Contributions to defined contribution plans
Share-based payments1
2023
$’000
2,139
83
602
2,824
2022
$’000
2,574
102
420
3,096
1 The 2022 comparatives have been restated to include $420k of share-based payments expense.
The charge for share-based payments of $0.6m (2022: $0.4m) relates to the Group’s LTIP as detailed in Note 20.
The aggregate remuneration of the highest paid Director was $551,000 (2022: $723,000) and Company pension
contributions of $12,000 (2022: $12,000) were made to a defined contribution scheme on his behalf. Further detail is
included within the Directors’ Remuneration Report on pages 43 to 51.
Notes to the financial statements
93
7. Net finance income/(expense)
Total interest expense on financial liabilities measured at amortised cost
Bank interest income
Net finance income/(expense)
8. 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 (Note 14)
Origination and reversal of temporary differences
Adjustments for prior years
Change in deferred tax rate to 25%
Deferred tax
Total tax expense / (credit) in the income statement
2023
$’000
(106)
585
479
2023
$’000
382
1,801
136
2,319
120
(427)
–
(307)
2,012
2022
$’000
(131)
–
(131)
2022
$’000
–
1,483
(934)
549
(2,262)
(599)
127
(2,734)
(2,185)
94
Notes to the financial statements
8. Taxation
Reconciliation of effective tax rate
Profit for the year
Total taxation expense / (credit)
Profit excluding taxation
Tax using the UK corporation tax rate of 23.52% (2022: 19%)
Non-deductible expenses
Fixed asset differences
Enhanced research and development relief1
Patent box tax relief
Foreign tax expensed
Change in deferred tax rate to 25%
Effect of tax rates in foreign jurisdictions
Recognition of previously unrecognised tax losses2
Deferred tax credited directly to equity
Change to estimates related to prior years3
Other
Total taxation expense / (credit) in statement of profit and loss
2023
$’000
10,897
2,012
12,909
3,036
239
47
–
(1,531)
513
14
124
10
48
(291)
(197)
2,012
2022
$’000
10,986
(2,185)
8,801
1,672
246
7
(399)
(897)
392
(64)
273
(1,815)
65
(1,533)
(132)
(2,185)
1
2
In 2023 the Group breached the SME thresholds for the UK R&D tax credits regime for the second year in a row, meaning the Group claimed the
R&D tax benefit under the large company RDEC regime, resulting in a credit of $382k within Profit before tax (2022: $Nil).
In 2022, management recognised the tax effect of $9.6m of previously unrecognised tax losses in Nexteq Plc and Nexteq UK Ltd because
management considered it probable that future UK taxable profits would be available against which such losses can be utilised. The availability of
future taxable profits was based on the Group’s budget for 2023 and forecasts for 2024 and 2025. These forecasts have been updated for the
Group's 2024 budget and forecast through to 2028, and management still considers it probable that future UK taxable profits would be available
against which such losses can be utilised.
3 The 2022 tax provision included an adjustment for enhanced research and development relief relating to 2020 and movement on the final
deferred tax balances included within tax returns submitted during 2022. The 2023 tax provision included an adjusted for patent box and
enhanced research and development relief claims relating to the tax returns submitted for 2022.
Deferred tax credit arising in the reporting period and not recognised in net profit or loss or other comprehensive
income but directly (credited) or debited to equity:
Deferred tax asset – share-based payments
Total
Factors that may affect future tax charges
2023
$’000
(48)
(48)
2022
$’000
(65)
(65)
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on
24 May 2021. This has increased the Company’s future current tax charge accordingly. The deferred tax asset at 31
December 2023 has been calculated based on these rates, reflecting the expected timing of reversal of the related
temporary differences.
Notes to the financial statements
95
9. Earnings per ordinary share (EPS)
2023
$’000
2022
$’000
Earnings
Earnings for the purposes of basic and diluted EPS being net profit attributable to equity
Shareholders
10,897
10,986
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
Number
Number
66,501,570 66,450,060
1,519,943
1,531,052
68,021,513
67,981,112
$0.1639
$0.1602
$0.1653
$0.1616
Calculation of adjusted diluted earnings per share:
$’000
$’000
Earnings
Earnings for the purposes of basic and diluted EPS being net profit attributable to equity
Shareholders
10,897
10,986
Adjustments
Amortisation of customer relationships, technology and order backlog
Share-based payments expense
Restructuring charges
Tax effect of adjustments
Adjusted earnings
Adjusted basic earnings per share
Adjusted diluted earnings per share
582
962
293
12,734
(432)
12,302
$0.1850
$0.1809
751
618
–
12,355
(260)
12,095
$0.1820
$0.1779
96
Notes to the financial statements
10. Property, plant and equipment – Group
Cost
Balance at 1 January 2022
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Depreciation
Balance at 1 January 2022
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Net book value
At 1 January 2022
At 31 December 2022 and 1 January 2023
At 31 December 2023
Land and
Plant and
buildings equipment
$’000
$’000
6,111
193
(135)
(302)
5,867
5,867
21
(9)
33
3,472
352
(28)
(188)
3,608
3,608
241
(41)
11
5,912
3,819
884
148
(132)
(44)
856
856
173
(1)
8
2,825
308
(26)
(156)
2,951
2,951
294
(35)
7
Total
$’000
9,583
545
(163)
(490)
9,475
9,475
262
(50)
44
9,731
3,709
456
(158)
(200)
3,807
3,807
467
(36)
15
1,036
3,217
4,253
5,227
5,011
4,876
647
657
602
5,874
5,668
5,478
Notes to the financial statements
97
Plant and
Land and
buildings equipment
$’000
$’000
4,030
2,391
177
(135)
(244)
3,828
3,828
16
–
(1)
230
(26)
(106)
2,489
2,489
203
(31)
5
Total
$’000
6,421
407
(161)
(350)
6,317
6,317
219
(31)
4
3,843
2,666
6,509
573
101
(132)
(35)
507
507
125
–
1
1,960
206
(25)
(81)
2,060
2,060
197
(31)
1
2,533
307
(157)
(116)
2,567
2,567
322
(31)
2
633
2,227
2,860
3,457
3,321
3,210
431
429
439
3,888
3,750
3,649
10. Property, plant and equipment – Company
Cost
Balance at 1 January 2022
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Additions
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Depreciation
Balance at 1 January 2022
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Net book value
At 1 January 2022
At 31 December 2022 and 1 January 2023
At 31 December 2023
98
Notes to the financial statements
11. Intangible assets – Group
Goodwill
$’000
Customer
relationships,
technology
Internally
generated
capitalised
and order Computer development
costs
software
backlog
$’000
$’000
$’000
Total
$’000
Cost
Balance at 1 January 2022
7,683
7,096
2,596
14,303
31,678
Additions – internally developed
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Additions – internally developed
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Amortisation and impairment
Balance at 1 January 2022
Amortisation for the year
Impairment loss
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Amortisation for the year
Impairment loss1
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Net book value
At 1 January 2022
At 31 December 2022 and 1 January 2023
At 31 December 2023
–
–
–
–
–
–
–
–
7,683
7,683
7,096
7,096
–
–
–
–
–
–
–
–
–
112
(19)
(106)
2,583
2,583
–
135
–
2
1,817
306
(509)
–
15,917
15,917
1,839
–
(967)
–
1,817
418
(528)
(106)
33,279
33,279
1,839
135
(967)
2
7,683
7,096
2,720
16,789
34,288
–
–
–
–
–
–
–
–
–
–
–
–
5,310
751
–
–
–
6,061
6,061
582
–
–
–
1,645
380
–
(19)
(82)
1,924
1,924
380
–
–
2
8,696
1,065
509
(509)
–
9,761
9,761
1,335
967
(967)
–
15,651
2,196
509
(528)
(82)
17,746
17,746
2,297
967
(967)
2
6,643
2,306
11,096
20,045
7,683
7,683
7,683
1,786
1,035
453
951
659
414
5,607
6,156
5,693
16,027
15,533
14,243
1 During the year the Group abandoned in-progress development projects with a carrying value of $0.5m (2022: $0.2m) related to the Quixant segment and $0.5m
($0.3m) related to the Densitron segment. This was following internal review where it was determined that the projects no longer met the criteria to capitalise product
development cost as set out in IAS38.
Notes to the financial statements
99
Impairment testing
Goodwill and acquisition-related intangibles have been allocated to Cash Generating Units (CGUs) as follows:
Quixant
IDS
Densitron Europe
Densitron US
Densitron France
Densitron Japan
Goodwill
Acquisition related
intangibles
2023
$’000
1,363
744
2,873
2,076
485
142
7,683
2022
$’000
1,363
744
2,873
2,076
485
142
7,683
2023
$’000
–
88
–
365
–
–
453
2022
$’000
–
267
263
442
63
–
1,035
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be
impaired at the individual CGU level. The recoverable amounts of the CGUs are determined from the higher of the fair
value less costs to sell and the calculations of value in use.
Value-in-use calculations have been prepared for each CGU by discounting the cash flow projections included in the
financial budgets prepared by management and approved by the Board for 2024, together with a four-year forecast to
2028. The budgets were prepared taking into consideration the planned roadmaps for the business and any specific
market condition in which the CGU operates. The corporate costs have been directly allocated to the respective CGUs
as part of the value-in-use calculations. The costs were allocated on a reasonable and consistent basis based on CGU
revenues. The terminal growth rates used do not exceed the long-term average growth rates for the regions in which
the CGUs operate. The cash flows have been discounted using pre-tax discount rates appropriate for each CGU, and
these are reviewed annually.
We have assessed the individual CGUs separately.
The annual impairment review indicated that no impairment of goodwill is necessary at 31 December 2023 or 31
December 2022.
Key assumptions
The following table summarises the key assumptions that have been adopted in the calculations of goodwill
impairment for each CGU:
CGU
Quixant
IDS
Densitron Europe
Densitron US
Densitron France
Densitron Japan
*Compound annual growth rate for 2024 to 2028.
31 December 2023
31 December 2022
Revenue
growth
rate*
Pre-tax
discount
rate
Terminal
growth
rate
Revenue
growth
rate*
Pre-tax
discount
rate
Terminal
growth rate
5.2%
5.0%
5.1%
8.8%
3.0%
7.0%
16.8%
18.7%
18.5%
18.6%
18.6%
18.0%
1.0%
1.0%
1.0%
1.0%
1.0%
1.0%
9.3%
15.0%
7.4%
7.4%
7.4%
7.4%
18.4%
21.2%
18.9%
19.4%
18.8%
17.7%
1.0%
1.0%
1.0%
1.0%
1.0%
1.0%
100
Notes to the financial statements
11. Intangible assets – Group
Revenue growth rates used in the estimation process are consistent with the approved budget for 2024, outlook for
2025 and 2026 and management projections thereon.
Pre-tax discount rates have been calculated in a consistent manner to previous years and are based on current market
assessment of the risk specific to each CGU. The reduction from 2022 to 2023 reflects the impact of reduction in
equity risk premium globally.
Gross margins used in the estimation process are consistent with recent historic trends and approved budget levels.
Sensitivity to changes in assumptions
The Directors believe only the Densitron US and Densitron Europe CGUs are sensitive to a reasonably possible
change in key assumptions that could cause impairment.
Densitron Europe CGU
The estimated recoverable amount of the CGU exceeded its carrying amount by approximately $0.5m (2022: $1.7m).
Management has identified that a reasonably possible change in two key assumptions could cause the carrying
amount to exceed the recoverable amount. The following table shows the amount by which these two assumptions
would need to change individually for the estimated recoverable amount to be equal to the carrying amount.
The Directors believe there were no reasonably possible changes in the other key assumptions that could
cause impairment.
Revenue growth rate for the period 2024 to 2028
Gross profit margin
Densitron US CGU
Change required for
carrying amount to equal
recoverable amount
2023
(50bps)
(40bps)
2022
(260bps)
(170bps)
The estimated recoverable amount of the CGU exceeded its carrying amount by approximately $4.7m (2022: $4.8m).
Management has identified that a reasonably possible change in two key assumptions could cause the carrying
amount to match the recoverable amount. The following table shows the amount by which these two assumptions
would need to change individually for the estimated recoverable amount to be equal to the carrying amount.
The Directors believe there were no reasonably possible changes in other assumptions that could cause impairment.
Revenue growth rate for the period 2024 to 2028
Gross profit margin
Change required for
carrying amount to equal
recoverable amount
2023
(380bps)
(340bps)
2022
(510bps)
(350bps)
Notes to the financial statements
101
Internally
generated
capitalised
Computer development
costs
software
$’000
$’000
Total
$’000
2,575
3,763
6,338
108
(19)
(107)
2,557
2,557
135
–
1
–
–
–
3,763
3,763
–
–
–
108
(19)
(107)
6,320
6,320
135
–
1
2,693
3,763
6,456
1,626
380
(19)
(82)
1,905
1,905
379
–
1
3,763
5,389
–
–
–
3,763
3,763
–
–
–
380
(19)
(82)
5,668
5,668
379
–
1
2,285
3,763
6,048
949
652
408
–
–
–
949
652
408
11. Intangible assets – Company
Cost
Balance at 1 January 2022
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Additions – externally purchased
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Amortisation
Balance at 1 January 2022
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2022
Balance at 1 January 2023
Amortisation for the year
Disposals
Effect of movements in foreign exchange
Balance at 31 December 2023
Net book value
At 1 January 2022
At 31 December 2022 and 1 January 2023
At 31 December 2023
102
Notes to the financial statements
12. Investment property
Balance at 1 January and 31 December
Group
Company
2023
$’000
–
2022
$’000
–
2023
$’000
–
2022
$’000
–
Investment property relates to an area of land owned by the Group at Blackheath in London. In 2019, the Group had
written off the previously booked value of the land as it has failed to sell the land and failed more than once to get
planning permission to build on the land. Previous valuations were based on the ability to build on the land, which
is subject to a Metropolitan Land Order that restricts this. The fair value of the investment property was previously
determined by external, independent property valuers, having appropriate professional qualifications and recent
experience in the location and category of the property being valued. The previous carrying value was based on
a valuation carried out on 10 May 2013 – an updated valuation was carried out in 2017 but not used as it relied on
residential planning permission that had failed to be achieved. In the years where an external valuation was not
undertaken (including as at 31 December 2023), the Directors performed a desktop review to ascertain the fair value of
the investment property.
13. Investments in Group companies
The principal subsidiary undertakings in which the Company had an interest in the year were:
Company name
Quixant USA, Inc.
Nexteq UK Limited
Quixant Gaming Limited
Densitron Limited***
Quixant Italia Srl.
Densitron Corporation of Japan
Densitron Corporation of America
Densitron France SAS*
Nexteq Deutschland GmbH
Densitron Embedded d.o.o.
Singularity Games, LLC**
Registered
office of
business
Principal activities
Class of
shares held
Ownership
2023 and
2022
1
2
2
2
3
4
5
6
7
8
9
Sales of specialist computer systems
Ordinary
Sales of specialist computer systems
and electronic display products
Ordinary
100%
100%
Sales of specialist computer systems Ordinary
100%
Dormant
Ordinary
100% / 0%
Software development
Ordinary
Sales of electronic display products
Ordinary
Sales of electronic display products
Ordinary
Sales of electronic display products
Ordinary
Sales of specialist computer systems
and electronic display products
Ordinary
99%
100%
100%
100%
100%
Design of electronic displays
Development and distribution of
Gaming technology solutions
Ordinary
Ordinary
100%
100%
*
Subsidiary of Nexteq UK Limited
1.
2147 Pama Lane, Bldg 6, Las Vegas, NV 89119, USA
** Subsidiary of Densitron Corporation of America
2. Aisle Barn, 100 High Street, Balsham, Cambridge, CB21 4EP, UK
***
Incorporated on 25 January 2023 as Nexteq Limited and subsequently
renamed to Densitron Limited
3. Contrada Case Bruciate, 1, Torrita Tiberina (RM), 00060, Italy
4. Aichiya Building 2F, 1-26-2, Omori-kita, Ota-ku, Tokyo 143-0016, Japan
5. 2330 Pomona Road, Corona, CA 92880, USA
6. 3 Rue de Tasmanie, 44115 Basse-Goulaine, France
7. Münchener Straße 1, 83022 Rosenheim, Germany
8. Kotnikova ulica 5, 1000 Ljubljana, Slovenia
9. 1209 Orange Street, Wilmington, DE 9801, USA
Notes to the financial statements
103
Company
2023
$’000
9,244
342
9,586
2022
$’000
9,125
119
9,244
Investments in subsidiaries
Balance at 1 January
Group-settled share-based payment charge
Balance at 31 December
14. 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
Trade and other receivables
Inventories
Tax losses carried forward
Other
Deferred tax (assets)/liabilities before set-off
Set-off of tax
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
Trade and other receivables
Inventories
Tax losses carried forward1
Other
Assets
Liabilities
2023
$’000
2022
$’000
–
–
–
(185)
(10)
(546)
(3,614)
(233)
(4,588)
1,637
(2,951)
–
–
–
(112)
(34)
(547)
(3,564)
(82)
(4,339)
1,703
(2,636)
2023
$’000
277
1,247
113
–
–
–
–
–
2022
$’000
259
1,225
259
–
–
–
–
–
1,637
(1,637)
–
1,743
(1,703)
40
1 1 January
2023
$’000
Recognised
in profit
& loss
$’000
Recognised
in equity
$’000
31
December
2023
$’000
–
–
98
(112)
(34)
(362)
(2,100)
(86)
(2,596)
18
22
(146)
(25)
24
1
(50)
(151)
(307)
–
–
–
(48)
–
–
–
–
(48)
18
22
(48)
(185)
(10)
(361)
(2,150)
(237)
(2,951)
104
Notes to the financial statements
14. Deferred tax assets and liabilities – Group
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
Trade and other receivables
Inventories
Tax losses carried forward1
Other
1 January Recognised in Recognised
in equity
profit & loss
2022
31
December
2022
$’000
$’000
$’000
$’000
20
(20)
203
–
(7)
(89)
–
79
186
(20)
20
(105)
(47)
(27)
(294)
(2,100)
(161)
(2,734)
–
–
–
(65)
–
21
–
(4)
(48)
–
–
98
(112)
(34)
(362)
(2,100)
(86)
(2,596)
1 The Group recognises deferred tax assets on unutilised tax losses to the extent that it is probable that future taxable profits will be available against which the unused
tax losses can be utilised. As at 31 December 2023, the Group had unutilised tax losses of $Nil (31 December 2022: $Nil) for which it has not recognised deferred tax
assets.
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
Share-based payments
Inventories
Tax losses carried forward
Other
Deferred tax (assets)/liabilities before set-off
Set-off of tax
Net deferred tax (assets)/liabilities
Assets
Liabilities
2023
$’000
–
–
(115)
(396)
2022
$’000
–
–
(68)
(360)
(2,417)
(2,287)
–
(2,928)
291
(2,637)
–
(2,715)
326
(2,389)
2023
$’000
275
–
–
–
–
16
291
(291)
–
2022
$’000
261
7
–
–
–
58
326
(326)
–
Notes to the financial statements
105
1 January
2023
$’000
Recognised
in profit &
loss
$’000
Recognised
in equity
$’000
31
December
2023
$’000
(68)
(302)
(2,019)
(2,389)
(56)
(78)
(123)
(257)
9
–
–
9
(115)
(380)
(2,142)
(2,637)
1 January Recognised
in profit &
loss
$’000
2022
$’000
Recognised
in equity
$’000
31
December
2022
$’000
81
37
(201)
(37)
–
(120)
(81)
(77)
(125)
37
(2,019)
(2,265)
–
(28)
24
–
–
(4)
Group
Company
2023
$’000
12,380
2,386
9,572
24,338
2022
$’000
21,304
2,258
8,607
32,169
2023
$’000
12,379
2,347
1,454
16,180
–
(68)
(302)
–
(2,019)
(2,389)
2022
$’000
18,282
2,142
2,293
22,717
Movement in deferred tax during the year
Share-based payments
Inventories
Tax losses carried forward
Movement in deferred tax during the prior year
Property, plant and equipment
Share-based payments
Inventories
Foreign exchange
Tax losses carried forward
15. Inventories
Raw materials and consumables
Work in progress
Finished goods
Raw materials, consumables and movement in finished goods and work in progress recognised as cost of sales in the
year amounted to $67,841k (2022: $70,804k).
The cost of inventories recognised as an expense includes $538k (2022: $811k) in respect of write downs of inventory
to net realisable value.
As at 31 December 2023 inventories of $416k were held at net realisable value (31 December 2022: $839k).
106
Notes to the financial statements
16. Trade and other receivables
Non-current
Trade receivables
Trade receivables
Amounts receivable from subsidiary undertakings1
Other receivables
Group
Company
2023
$’000
54
54
2022
$’000
712
712
23,504
20,682
–
2,324
25,828
25,882
–
3,365
24,047
24,759
2023
$’000
2022
$’000
–
–
–
8,332
1,557
9,889
9,889
–
–
–
8,702
2,215
10,917
10,917
1 The amounts receivable from subsidiary undertakings are interest free and repayable on demand. At 31 December 2023 the receivable principally related to the
Company’s operating activities, being the sale of product from the Taiwan branch to other subsidiary undertakings in the Group.
The non-current trade receivables relate to sales where consideration is payable in monthly instalments. In accordance
with the payment plan the balance is interest free and the non-current element will be settled by February 2025.
In respect of expected credit losses $1,044,000 has been provided as at 31 December 2023 (31 December 2022:
$908,000). The Directors have considered the nature of the customers, the historic levels of bad debts and the
payment profile of customer contracts in reaching the value of the expected credit losses above. See Note 23 for
further disclosure regarding the credit quality of the Group’s trade receivables. Management has also considered
the expected credit losses in relation to amounts owed from subsidiary undertakings and has considered it to
be immaterial.
As at 31 December 2023, the following sets out the trade receivables that were past due but not impaired. These
relate to customers where there is no evidence of unwillingness or of an inability to settle the debt. The ageing of
these receivables is as follows:
30 – 60 days
61 – 90 days
Over 90 days
Group
Company
2023
$’000
320
90
366
776
2022
$’000
1,205
55
1,756
3,016
2023
$’000
2022
$’000
–
–
–
–
–
–
–
–
The trade receivables over 90 days are mainly comprised of long-standing customers who are on fixed payment plans
to clear the balances owed.
Notes to the financial statements
107
17. Notes to the consolidated cash flow statement
Analysis of cash and cash equivalents
Cash and cash equivalents per balance sheet
Cash and cash equivalents per cash flow statement
Group
Company
2023
$’000
28,406
28,406
2022
$’000
13,508
13,508
2023
$’000
24,857
24,857
2022
$’000
9,042
9,042
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of
three months or less from inception. The carrying amount of these assets approximates their fair value.
Analysis of net cash
Cash and bank balances
Bank loans falling due within one year
Bank loans falling due after more than one year
Net cash
18. Loans and borrowings
Group
Company
2023
$’000
2022
$’000
2023
$’000
28,406
13,508
24,857
(91)
(382)
(90)
(473)
(91)
(382)
27,933
12,945
24,384
2022
$’000
9,042
(90)
(473)
8,479
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 23.
Non-current liabilities
Secured bank loans
Current liabilities
Secured bank loans
Group
2023
$’000
Company
2022
$’000
2023
$’000
2022
$’000
382
382
91
91
473
473
90
90
382
382
91
91
473
473
90
90
108
Notes to the financial statements
18. Loans and borrowings
Terms and debt repayment schedule
Nominal
interest
rate
Year of
maturity
Face value
2023
$000
Currency
Carrying
amount
2023
$000
Face value
2022
$000
Carrying
amount
2022
$000
Loan secured on the
Group’s freehold property
in Taiwan
NTD
1.45%
2028
473
473
473
473
563
563
563
563
Reconciliation of liabilities arising from financing activities
Group
2022
Additions
Current liabilities
$’000
$’000
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
2023
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
90
842
(839)
1
(3)
562
652
427
1,269
(716)
(1,555)
92
93
40
37
−
−
−
−
91
164
164
569
660
2023
2022
Additions
Non-current liabilities
$’000
$’000
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
473
1,271
1,744
−
−
−
(98)
−
(98)
10
−
10
(3)
−
(3)
−
−
−
−
382
(164)
(164)
1,107
1,489
Notes to the financial statements
109
2021
Additions
Current liabilities
$’000
$’000
Repay-
ments
$’000
Interest
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
$’000
2022
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
99
6,842
(6,830)
−
(21)
599
7,441
(635)
(7,465)
89
89
(189)
(210)
609
708
2021
−
−
−
−
89
89
90
562
652
2022
Non-current liabilities
$’000
$’000
Additions
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
621
1,360
1,981
−
−
−
(92)
-
(92)
−
−
−
(56)
−
(56)
−
−
−
−
473
(89)
(89)
1,271
1,744
Reconciliation of liabilities arising from financing activities
Company
2022
Additions
Current liabilities
$’000
$’000
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
2023
Other interest-bearing
loans and borrowings
Intercompany loans
payable
Lease liabilities (Refer to
Notes 23 and 24)
90
−
842
(839)
14,711
−
329
419
248
(393)
15,801
(1,232)
1
−
35
36
(3)
−
−
(3)
−
−
−
−
−
−
77
77
91
14,711
296
15,098
110
Notes to the financial statements
18. Loans and borrowings
2022
Additions
Non-current liabilities
$’000
$’000
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
2023
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
473
441
914
2021
−
−
−
(98)
−
(98)
10
−
10
(3)
−
(3)
−
−
−
−
382
(77)
(77)
364
746
2022
Current liabilities
$’000
$’000
Additions
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
99
6,842
(6,830)
−
(21)
351
450
242
7,084
(437)
(7,267)
45
45
(99)
(120)
−
−
−
−
90
227
227
329
419
Notes to the financial statements
111
2021
Additions
Non-current liabilities
$’000
$’000
Repay-
ments
$’000
Interest
$’000
Foreign
exchange
Release
Reclass-
ification
$’000
$’000
$’000
$’000
2022
Other interest-bearing
loans and borrowings
Lease liabilities (Refer to
Notes 23 and 24)
621
668
1,289
−
−
−
(92)
−
(92)
−
−
−
(56)
-
(56)
−
−
−
−
473
(227)
(227)
441
914
19. Trade and other payables
Current
Trade payables
Other tax and social security payables
Other payables and accrued expenses
Amounts payable to subsidiary undertakings1
Group
Company
2023
$’000
2022
$’000
2023
$’000
2022
$’000
12,325
15,025
11,366
12,028
296
4,142
–
–
5,412
–
8
1,678
13,531
16,763
20,437
26,583
–
2,624
524
15,176
1 The amounts payable to subsidiary undertakings are interest free and repayable on demand. At 31 December 2023 the payable arises from
the centralisation of treasury activities in the Company where cash reserves are held in term deposits in the name of the Company and the
Company’s operating activities.
112
Notes to the financial statements
20. 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 $778,759 (2022: $662,585).
Share-based payments – Group and Company
The Group operates two equity-settled share-based payment plans. The total expense relating to these plans in the
current year was $962,065 (2022: $617,683).
a. 2013 Equity Incentive Plan
Options have been granted under the Company’s Equity Incentive Plan since 2013. 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.
The options may only be exercised within ten years from grant date.
Set out below are summaries of options granted under the plan:
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Exercised during the period
Outstanding at the end of the period
Weighted
average
exercise
price
Number of
options
2023
2023
£1.47
1,183,290
–
–
Weighted
average
exercise
price
2022
£1.47
–
Number of
options
2022
1,213,290
–
(£0.88)
(335,500)
£1.49
(30,000)
(£0.49)
(64,000)
–
–
£1.48
783,790
£1.47
1,183,290
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
22 May 20131
16 April 20151
23 March 20161
05 October 2020
15 October 2020
20 May 2021
06 October 2021
06 October 2021
Total
Weighted average remaining contractual life of options
outstanding at end of period
1 These awards are fully vested.
Expiry date
Exercise
price
22/05/2023
£0.49
16/04/2025
23/03/2026
15/10/2030
15/10/2030
20/05/2031
06/10/2031
06/10/2031
£1.59
£1.63
£1.13
£0.01
£1.59
£1.90
£0.01
Share
options 31
December
2023
Share
options 31
December
2022
–
43,790
40,500
64,000
43,790
40,500
–
–
255,500
75,000
574,500
579,500
100,000
100,000
25,000
25,000
783,790
1,183,290
6.8 years
7.4 years
Notes to the financial statements
113
Fair value of awards
The fair values at grant date of awards granted during the year under the 2013 Equity Incentive Plan are determined
using the valuation models below. The model inputs are as follows:
Options granted
Fair value at grant date
Model used
Assumptions used:
Share price
Exercise price
Expected volatility1
Expected option life
Expected dividend yield
Risk-free interest rate
Issue 12
6 October
2021
Issue 11
6 October
2021
Issue 10
20 May
2021
100,000 25,000
603,500
£0.79
£1.79
Black-
Scholes
model
Black-
Scholes
model
£0.58
Black-
Scholes
model
£1.90
£1.90
£1.90
£0.01
£1.59
£1.59
45.00%
45.00%
45.00%
10 years
10 Years
10 Years
1.07%
0.90%
1.07%
0.90%
1.07%
0.90%
1 Volatility was estimated based on the historical volatility prior to grant date.
b. Nexteq Plc 2022 Long-Term Incentive Plan Awards (the ‘LTIP’)
Options have been granted under the LTIP since 2022, after it was approved by Shareholders on 5 May 2022. A total
of 1,077,912 options were granted under the LTIP in 2023 (2022: 1,112,092 options).
There are three different types of awards granted under the LTIP:
1. Restricted Share Awards
2. Executive Committee Performance Share Awards
3. General Performance Share Awards
Restricted Share Awards vest over the service period of three years. There is no performance condition attached.
Performance Share Awards ‘(Executive Committee and General)’ vest only if certain performance conditions are met.
The vesting of Executive Committee Performance Share Awards is based on adjusted earnings per share growth
and Total Shareholder Return (TSR) growth. The vesting of General Performance Share Awards is based on adjusted
earnings per share growth. Performance Share Awards vest over a three-year service period.
114
Notes to the financial statements
20. Employee benefits
Restricted Share Awards
Set out below are summaries of options granted under the plan:
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Exercised during the period
Weighted
average
exercise
price
2023
£0.01
£0.01
£0.01
–
Number of
options
2023
70,488
80,341
(5,737)
–
Weighted
average
exercise
price
2022
–
£0.01
–
–
Number of
options
2022
–
70,488
–
–
Outstanding at the end of the period
£0.01
145,092
£0.01
70,488
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
06 May 2022
22 March 2023
Total
Weighted average remaining contractual life of options
outstanding at end of period
Executive Committee Performance Share Awards
Set out below are summaries of options granted under the plan:
Expiry date
06/05/2032
21/03/2033
Share
options 31
December
2023
Exercise
price
£0.01
£0.01
70,488
74,604
Share
options 31
December
2022
70,488
–
145,092
70,488
8.8 years
9.3 years
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Exercised during the period
2023
£0.01
£0.01
–
–
727,732
746,945
–
–
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
2023
2022
Number of
options
2022
–
–
£0.01
727,732
–
–
–
–
Outstanding at the end of the period
£0.01
1,474,677
£0.01
727,732
Notes to the financial statements
115
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
06 May 2022
22 March 2023
18 September 2023
Total
Weighted average remaining contractual life of options
outstanding at end of period
General Performance Share Awards
Set out below are summaries of options granted under the plan:
Expiry date
06/05/2032
21/03/2033
18/03/2033
Exercise
price
£0.01
£0.01
£0.01
Share
options 31
December
2023
727,732
616,073
130,872
Share
options 31
December
2022
727,732
–
–
1,474,677
727,732
8.8 years
9.3 years
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Exercised during the period
2023
£0.01
£0.01
–
–
313,872
250,626
–
–
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
2023
2022
Number of
options
2022
–
–
£0.01
313,872
–
–
–
–
Outstanding at the end of the period
£0.01
564,498
£0.01
313,872
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant date
06 May 2022
08 September 2022
22 March 2023
Total
Weighted average remaining contractual life of options
outstanding at end of period
Expiry date
06/05/2032
06/05/2032
21/03/2033
Share
options 31
December
2023
Share
options 31
December
2022
Exercise
price
£0.01
£0.01
£0.01
186,353
127,519
250,626
186,353
127,519
–
564,498 313,872
8.7 years
9.3 years
116
Notes to the financial statements
20. Employee benefits
Fair value of awards
The fair values at grant date of awards granted during the year under the LTIP are determined using the valuation
models below. The model inputs are as follows:
Options granted
Fair value at grant date
Model used
Assumptions used:
Share price
Exercise price
Expected volatility1
Expected option life
Expected dividend yield
Risk-free interest rate
1 Volatility was estimated based on the historical volatility prior to grant date.
21. Provisions
Group
Balance at 1 January
Provisions made during the period
Provisions used during the period
Balance at 31 December
Executive
Committee
Performance
Share Awards
General
Performance
Share Awards
Restricted
Share Awards
145,092
1,474,677
564,498
£1.41 to £1.71
£0.85 to £1.71
£1.41 to £1.71
Black-Scholes
model
Monte Carlo
and Black-
Scholes model
Black-Scholes
model
£1.53 to £1.86
£1.53 to £1.86
£1.53 to £1.86
£0.01
£0.01
39.38% to
46.00%
39.38% to
46.00%
3 years
3 years
£0.01
39.38% to
46.00%
3 years
1.57% to 1.6%
1.57% to 1.6%
1.57% to 1.6%
0.90% to
3.88%
0.90% to
3.88%
0.90% to 3.88%
2023
$’000
350
94
(93)
351
2022
$’000
335
94
(79)
350
The provision is in respect of long-term employment liabilities in Italy, Japan and the UK and is non-current.
The Company has considered the existing lease arrangements and has not identified any material
dilapidation provisions.
The Company has no provisions.
Notes to the financial statements
117
22. Capital and reserves
Share capital
Fully paid ordinary shares of 0.1p per share
Balance at 31 December 2023
Balance at 31 December 2022 and 1 January 2023
Balance at 1 January 2022
Ordinary
shares
Number
66,514,060
66,450,060
66,450,060
Share
capital
$’000
106
106
106
Share
premium
$’000
6,747
6,708
6,708
During the year, the Company issued 64,000 ordinary shares to employees under the 2013 Equity Incentive Plan
(Note 20) for proceeds of $39,271, resulting in an increase to share capital of $80 and an increase to share premium of
$39,191.
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.
Dividends
The Board proposed a dividend for the year ended 31 December 2023 of 3.3p (31 December 2022: 3.0p) per share at
the 2024 AGM, which is not recognised as a distribution to equity holders during the period.
The following dividends were recognised during the year:
3.0p (2022: 2.4p) per qualifying ordinary share
Total dividends recognised in the year
23. Financial instruments – Group and Company
2023
$’000
2,537
2,537
2022
$’000
1,888
1,888
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.
118
Notes to the financial statements
23. Financial instruments – Group and Company
Financial risks
The Group’s activities expose it to a number of financial risks including credit risk, liquidity risk and exchange rate risk:
Credit risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss
to the Group. The Group’s principal financial assets are bank balances and cash and trade and other receivables. The
Group’s credit risk is primarily attributable to its trade receivables. Operations in emerging or new markets may have a
higher-than-average risk of political or economic instability and may carry increased credit risk. The risk to the Group is
the recoverability of the cash flows.
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. A provision of $1,044,141 has been provided in respect of expected credit losses as at 31 December 2023
(31 December 2022: $908,025). The Directors have considered the nature of the customers, the historic levels
of bad debts and the payment profile of customer contracts in reaching the value of the expected credit losses
above. Management has also considered the expected credit losses in relation to amounts owed from subsidiary
undertakings and has considered it to be immaterial.
The ageing of trade receivables at the Balance Sheet date is set out in Note 16.
The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial
instruments but does not currently expect any counterparties to fail to meet their obligations. Credit risk on liquid
funds is mitigated because the counterparties are banks with high credit ratings assigned by international credit rating
agencies.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Group’s objective when managing liquidity
is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Group cash balances and expected cash flow are monitored daily 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.
Capital management
Group and Company
The capital management policy is to maintain a strong capital base 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, while controlling the cost of capital.
Notes to the financial statements
119
The Group monitors capital based on 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 (Note 17)
Capital
Total equity
Other financial liabilities (Note 18)
Total financing
Financial assets and liabilities
Group
Company
2023
$’000
82,346
(28,406)
53,940
2022
$’000
72,214
(13,508)
58,706
2023
$’000
39,736
(24,857)
14,879
Group
Company
2023
$’000
82,346
473
82,819
2022
$’000
72,214
563
72,777
2023
$’000
39,736
473
40,209
2022
$’000
42,673
(9,042)
33,631
2022
$’000
42,673
563
43,236
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 – non-current
Trade and other receivables – current
Group
Company
2023
$’000
28,406
54
25,828
54,288
2022
$’000
13,508
712
24,047
38,267
2023
$’000
24,857
–
9,889
34,746
2022
$’000
9,042
–
8,702
17,744
The Group held all cash and cash equivalents with banks which are rated at least BBB+, of which $26,675,000 is held
at 31 December 2023 with banks rated A- to A+ (30 December 2022: $11,275,000).
120
Notes to the financial statements
23. Financial instruments – Group and Company
The maximum exposure to credit risk for external trade receivable amounts past due that are not impaired at the
reporting date by geographic region was:
Australia
North America
Asia
Europe
Rest of World
Group
Company
2023
$’000
458
13,922
1,308
7,325
545
2022
$’000
307
15,163
1,509
4,339
76
23,558
21,394
2023
$’000
2022
$’000
–
–
–
–
–
–
–
–
–
–
–
–
The Group’s credit risk exposure in relation to external trade receivable amounts past due that are not impaired is set
out in the provision matrix as follows:
At 31 December 2022
At 31 December 2023
61−90
days
91−120
days
>120
days
Total
1,205
320
55
90
1,756
3,016
366
776
The movement in the allowance for impairment of trade receivables is as follows:
Beginning of financial year
Loss allowance recognised in profit or loss during the year
Release of loss allowance previously recognised
End of financial year
Liquidity risk
2023
908
358
(222)
1,044
2022
186
952
(230)
908
Group policy is to maintain a strong capital base to enhance investor, creditor and market confidence. Surplus funds
are placed on deposits with cash balances available for immediate withdrawal if required.
Liquidity needs are managed by regular review of the timing of expected receivables and the maintenance of cash
on deposit. This review ensures the Group has sufficient cash balances to meet the contractual financial liabilities and
interest payments.
Notes to the financial statements
121
The following show the contractual undiscounted cash flows and the contractual maturities of financial liabilities,
including interest payments and excluding the impact of netting agreements.
Group
31 December 2023
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Group
31 December 2022
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Company
31 December 2023
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Company
31 December 2022
Carrying amount
Contractual cash flows
6 months or less
6 to 12 months
More than 12 months
Trade and
other
Loans
and
payables borrowings
Lease
liabilities
$’000
$’000
$’000
Lease
interest
$’000
Total
$’000
12,325
473
1,852
(176)
14,474
12,325
–
–
12,325
$’000
46
45
382
473
$’000
340
305
1,207
1,852
$’000
(42)
(34)
(100)
(176)
$’000
15,025
563
1,833
15,025
–
–
15,025
45
45
473
563
281
281
1,271
1,833
–
–
–
–
–
–
Trade and
other
Loans
and
payables borrowings
Lease
liabilities
$’000
$’000
$’000
12,669
316
1,489
14,474
$’000
17,421
15,351
326
1,744
17,421
Total
$’000
24,897
24,897
–
–
24,897
$’000
12,552
12,552
–
–
12,552
473
46
45
382
473
660
26,030
148
148
364
660
25,091
193
746
26,030
$’000
$’000
$’000
563
45
45
473
563
770
13,885
165
164
441
770
12,762
209
914
13,885
122
Notes to the financial statements
23. Financial instruments – Group and Company
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 – non-current
Trade and other receivables – current
Group
Company
2023
$’000
2022
$’000
2023
$’000
28,406
13,508
24,857
54
25,828
54,288
712
24,047
38,267
–
9,889
34,746
2022
$’000
9,042
–
8,702
17,744
All the above relate to the IFRS9 category loans and receivables and are measured at amortised cost.
Current liabilities
Trade and other payables
Loans and borrowings
Lease liabilities
Non-current liabilities
Loans and borrowings
Lease liabilities
(16,763)
(20,437)
(26,583)
(12,552)
(91)
(569)
(90)
(562)
(91)
(296)
(90)
(329)
(17,423)
(21,089)
(26,970)
(12,971)
(382)
(1,107)
(1,489)
(473)
(1,271)
(1,744)
(382)
(364)
(746)
(473)
(441)
(914)
All the above relate to the IFRS9 category other financial liabilities and are measured at amortised cost.
Fair value measurements
The table below presents assets and liabilities recognised and measured at fair value and classified by level of the
following fair value measurement hierarchy:
i. Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
ii. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices) (Level 2).
iii. Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
As at 31 December 2023
$’000
Derivative financial instruments
As at 31 December 2022
$’000
Derivative financial instruments
Level 1
Level 2
Level 3
–
178
–
–
–
–
Total
–
178
The fair values of financial instruments traded in active markets (such as exchange-traded and over-the counter
securities and derivatives) are based on quoted market prices at the balance sheet date.
The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.
Notes to the financial statements
123
Currency risk
Transactional currency risk
The Group is exposed to foreign currency risks arising from sales or purchases in currencies other than their functional
currencies. Before agreeing any overseas transactions, consideration is given to utilising financial instruments, such as
hedging and forward purchase contracts.
This risk is mitigated by the majority of revenue and cost of sales being denominated in US Dollars, which is the
Group’s reporting currency.
Translational currency risk
The Group has significant investments in overseas operations. As a result, the US Dollar value of the Group’s balance
sheet can be affected by movements in exchange rates.
The Group’s currency exposure is as follows:
USD
$’000
GBP
$’000
EUR
$’000
TWD
$’000
JPY
$’000
Total
$’000
At 31 December 2023
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Financial liabilities
Loans and borrowings
Trade payables
Other payables
Lease liabilities
20,631
165
20,599
41,395
–
(11,601)
(1,097)
(326)
1,102
534
5,996
7,632
–
(540)
(1,378)
(631)
Net financial assets/(liabilities)
28,371
5,083
(13,024)
(2,549)
–
–
1,223
515
479
2,217
–
(144)
(872)
–
(1,016)
1,201
–
686
168
854
(473)
(3)
(881)
(660)
(2,017)
(1,163)
–
602
424
1,164
2,190
–
(37)
(210)
(59)
(306)
1,884
–
23,558
2,324
28,406
54,288
(473)
(12,325)
(4,438)
(1,676)
(18,912)
35,376
–
Less: Currency forwards
Currency profile
Financial (liabilities)/assets
denominated in the respective entities’
functional currencies
Currency exposure of financial
(liabilities)/assets
28,371
5,083
1,201
(1,163)
1,884
35,376
(36,049)
–
(898)
1,163
(1,884)
(37,668)
(7,678)
5,083
303
–
–
(2,292)
124
Notes to the financial statements
23. Financial instruments – Group and Company
At 31 December 2022
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Financial liabilities
Loans and borrowings
Trade payables
Other payables
Lease liabilities
Net financial assets/(liabilities)
Less: Currency forwards
Currency profile
Financial (liabilities)/assets
denominated in the respective entities’
functional currencies
Currency exposure of financial
(liabilities)/assets
USD
$’000
GBP
$’000
EUR
$’000
TWD
$’000
JPY
$’000
Total
$’000
19,679
227
9,889
29,795
–
(14,514)
(1,163)
(353)
(16,030)
13,765
–
13,765
236
640
601
1,477
–
(290)
(1,972)
(670)
(2,932)
(1,455)
4,465
3,010
1,200
194
623
2,017
–
(181)
(510)
(11)
(702)
1,315
–
1,315
–
1,726
484
2,210
(563)
(4)
(1,670)
(770)
279
578
1,911
21,394
3,365
13,508
2,768
38,267
–
(36)
(97)
(29)
(563)
(15,025)
(5,412)
(1,833)
(3,007)
(162)
(22,833)
(797)
2,606
–
–
(797)
2,606
15,434
4,465
19,899
(24,184)
–
(763)
797
(2,606)
(26,756)
(10,419)
3,010
552
–
–
(6,857)
If the GBP and EUR change against USD by 1% and 3%, respectively (2022: GBP 10%, EUR 11%) with all other variables,
including tax rates, being held constant, the effects from the net financial asset/(liability) that are exposed to currency
risk will be as follows:
GBP against USD
- Strengthened
- Weakened
EUR against USD
- Strengthened
- Weakened
2023
2022
Profit after
tax
Profit after
tax
51
(51)
9
(9)
296
(296)
58
(58)
Interest rate and currency profile
The Group’s financial assets comprise trade and other receivables and cash at bank. The average interest rates
earned on the daily closing balances during 2023 were 3.0% due to the current economic climate (2022: negligible).
Notes to the financial statements
125
Fair values versus carrying amounts
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market
rate of interest at the balance sheet date. The Directors consider that there is no material difference between fair
values and carrying amounts of financial assets and liabilities.
24. Leases
The Group and Company lease offices and the Group a small number of cars of immaterial value where employment
practice demands company cars be available. Office leases typically run from two to ten years with options to renew.
Lease payments are negotiated every five years to reflect market rentals. Sub-leasing arrangements are not always
available. Car leases are typically three years long. Group expenses of $29,890 were incurred in 2023 (2022: $18,237)
on leases excluded because they are short term (less than one year) or low value (asset is less than $5,000). The
following table summarises the IFRS16 disclosures for the Group and Company:
$’000
2023
Balance at 1 January
Effect of movements in foreign exchange
Additions to right-of-use assets
Depreciation charge
Balance at 31 December
$’000
2022
Balance at 1 January
Effect of movements in foreign exchange
Additions to right-of-use assets
Depreciation charge
Balance at 31 December
$’000
2023
Balance at 1 January
Effect of movements in foreign exchange
Additions to right-of-use assets
Depreciation charge
Balance at 31 December
Land &
building
Group
motor
vehicles
1,683
75
427
(627)
1,558
11
–
–
(11)
–
Land &
building
Group
motor
vehicles
1,896
(167)
599
(645)
1,683
28
(2)
–
(15)
11
Total
1,694
75
427
(638)
1,558
Total
1,924
(169)
599
(660)
1,694
Land &
building
Company
total
745
34
248
(360)
667
745
34
248
(360)
667
126
Notes to the financial statements
24. Leases
$’000
2022
Balance at 1 January
Effect of movements in foreign exchange
Additions to right-of-use assets
Depreciation charge
Balance at 31 December
Profit and Loss Account
Depreciation
Lease interest expenses
Expenses on excluded leases (short term or low value)
25. Commitments
Land &
building
Company
total
1,000
1,000
(84)
242
(413)
745
(84)
242
(413)
745
Group
Company
2023
$’000
2022
$’000
2023
$’000
2022
$’000
638
92
30
660
89
18
360
35
29
413
45
17
The Group entered into last time buy purchase orders with AMD, a key supplier, in 2021. These relate to the purchase
of components affected by an end-of-life notice from AMD and will ensure that Quixant can satisfy future Gaming
customer orders across several products. The last time buy orders will cost $9.0m (2022: $8.4m), with payments
running through 2024.
26. Contingencies
Neither the Group nor Company had any contingencies existing at 31 December 2023 (2022: none).
Notes to the financial statements
127
27. Related parties
Group
During the year, the Group paid €31,200 (2022: €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 5.
Other related-party transactions
There are no other transactions and balances with key management not included within the Directors’ remuneration.
Company
Directors and key management compensation disclosed in Note 5 to the consolidated financial statements.
These related-party transactions with other Group companies and the balance outstanding are as follows:
Income
Sales to Group companies
Fees recharged to Group companies
Balances due (to)/from Group companies
Amounts receivable from subsidiary undertakings
Amounts payable to subsidiary undertakings
28. Post balance sheet events
There were no material post balance sheet events that were required to be disclosed.
Profit and Loss Account
2023
$’000
74,019
3,014
77,033
2022
$’000
84,955
3,278
88,233
Balance Sheet
16
19
8,332
(13,531)
(5,199)
8,702
(524)
8,178
128
Notes to the financial statements
Company information
Directors
F D Small
N C L Jarmany
G P Mullins
J F Jayal
J J Olivier
D J Penny
C Thompson
Company Secretary
S M Wallace
Registered office
Auditor
Nominated adviser
and broker
Financial PR
Aisle Barn
100 High Street
Balsham
Cambridge
CB21 4EP
KPMG LLP
Fora
20 Station Road
Cambridge
CB1 2JD
Cavendish Capital Markets
1 Bartholomew Close
London
EC1A 7BL
Alma Strategic Communications
71-73 Carter Lane
London
EC4V 5EQ
Registrars and CREST
settlement agents
Neville Registrars
Neville House
Steelpark Road
Halesowen
B62 8HD
Registered number
04316977
Website
Ticker
www.nexteqplc.com
London: NXQ
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NEXTEQ PLC
Aisle Barn
100 High Street
Balsham
Cambridge
CB21 4EP UK
T: +44 (0)1223 892696
E: info@nexteqplc.com
Registered Number: 04316977
Registered in England and Wales