Quixant (AIM: QXT), a leading provider of innovative, highly engineered technology products principally for the global gaming and broadcast industries, announces its Interim Results for the six months ended 30 June 2019.
Group revenue and profit for H1 2019 is in line with management expectations and with the expectations at the time of the Group’s March 2019 results announcement and its trading update on 23 July 2019. Quixant’s revenue has historically been second half-weighted and as previously announced, management expect this trend to be reflected in full year 2019 results. However, new information from some customers regarding order levels for the remainder of 2019 indicates that, while this second-half weighting will occur, due to lower than expected demand for our customers’ gaming machines, Quixant’s total revenues will be below previous expectations and consequently will result in a reduction in full year profits for the Group to between $12.0m and $13.0m.
· Group revenue $41.9m (H1 2018: $50.3m)
o Quixant Gaming division revenue $23.6m (H1 2018: $31.4m)
– Gaming platforms revenue $19.6m (H1 2018: $27.0m)
– Gaming monitors revenue $4.0m (H1 2018: $4.4m)
o Densitron division revenue $18.4m (H1 2018: $18.9m)
· Group pre-tax profit $3.0m (H1 2018: $6.1m)
· Group adjusted pre-tax profit1 $3.4m (H1 2018: $7.1m)
· Fully diluted EPS of $0.0346/share (H1 2018: $0.0750/share)
· Net cash from operating activities of $6.7m (H1 2018: $1.9m)
· Net cash at 30 June 2019 of $12.4m (30 June 2018: $2.5m)
1. Adjusted by adding back items included in the adjusted PBT reconciliation in note 1 totaling $0.4m (H1 2018: $1.0m).
• Greater than expected slow-down in gaming customer orders, particularly in the Australian market as major customers face significant competitive pressure and have lost market share to competitors. Gross margins remain robust. Concentration of revenues from top 5 customers continues to decline.
· Customer retention remains strong, new business pipeline is robust and we have successfully converted $12m of the $30m pipeline indicated in the March 2019 results which will lead to growth in 2020 and beyond.
· Expect to commence shipments of sports betting terminals in 2020
· Won gaming platform business of a major Japanese customer which is expected to contribute around $10m per year in revenue starting in the second half of 2021
· Acquisition of the Intelligent Display Systems (IDS) solution by Densitron in the broadcast sector. IDS combines proprietary hardware and software allowing broadcasters to connect, control and automate devices and activities in and around the studio.
· Densitron continues to see good growth opportunities in the broadcast market, with a pipeline of new opportunities totaling $9.5m as at September 2019.
• Continued development of business infrastructure, including further high calibre, key hires in Gaming product and sales leadership and in the Densitron management team.
Jon Jayal, CEO of Quixant, commented:
“As announced in our trading update in July 2019, the first six months of 2019 have seen a deepening in the slow-down of ordering by some large customers. The second half began with better ordering from some of these customers, but we have now been informed that order levels will not return to those achieved in previous years both for the rest of this year and for at least the first half of 2020. New business from other customers has partially offset this shortfall and we see strong growth coming from sports betting terminals and new gaming platform customers in 2020 and 2021. We continue to gain new customers and the market opportunity remains very positive over the medium to longer term.
Densitron continue to make progress in the broadcast market under a top-quality new management team and the acquisition of the IDS product set will only strengthen their offering in that sector.
Despite this challenging trading period, we continue to make major enhancements to our management team, bringing high calibre expertise to the business. Combined with the technical expertise of our staff, continued profitable trading, positive cash generation and a strong balance sheet, Quixant is in a strong position to return to double-digit growth despite short term softness from some key customers.
Our belief in Quixant’s long term growth potential is undiminished. We have a challenging trading period at present but through this we continue to win new business to generate long term growth, seek greater diversity of growth drivers and evolve the organisation to enable operation as a larger entity.”