RNS Number : 2321H
Quixant PLC
05 April 2022
 

5 April 2022

Quixant plc

("Quixant" or the "Group")

 

Audited Final Results

 

Quixant (AIM: QXT), a leading provider of innovative, highly engineered technology products principally for the global gaming and broadcast industries, announces its audited full year results for the 12 months ended 31 December 2021.

 

Year ended 31 December 2021

 

Year ended 31 December 2020

 

Change

 

($m)

 

($m)

 

 

Group Revenue

87.1

 

63.8

 

37%

 

 

 

 

 

 

Gaming Division Revenue

47.3

 

30.3

 

56%

 

 

 

 

 

 

Densitron Revenue

39.8

 

33.5

 

19%

 

 

 

 

 

 

Group gross profit

25.9

 

20.1

 

29%

 

 

 

 

 

 

Adjusted profit before tax1

5.4

 

1.3

 

315%

 

 

 

 

 

 

Group profit / (loss) before tax

4.9

 

(2.0)

 

nm

 

 

 

 

 

 

Adjusted diluted earnings per share1

$0.0595

 

($0.004)

 

nm

 

 

 

 

 

 

Net cash from operating activities

4.4

 

4.0

 

10%

 

 

 

 

 

 

Net cash

17.6

 

17.4

 

1%

 

 

 

1For details on adjusted measures refer to note 1 and note 2 of the condensed consolidated financial statements

OPERATIONAL HIGHLIGHTS

 

·    

Strong order intake through 2021 and into 2022 giving us excellent visibility of customer demand.

·    

Double-digit growth in Group and divisional revenues and Group gross profit driven by recovery in end-markets and new business wins.

·    

Strategic positioning of Densitron leading to highest revenue for the business since acquisition including second consecutive year of double-digit growth from Broadcast sector.

·    

Supply chain disruption mitigated through robust management and strategic stock purchase programme, ensuring customer retention and reduced impact of price inflation.

·    

Launch of range of turnkey cabinet solutions for Gaming customers with first orders received and further new business wins.

·    

Healthy balance sheet and net cash position supportive of future organic and acquisitive growth.

 

Jon Jayal, Chief Executive Officer of Quixant, commented:

 

"We are seeing increasing demand for our specialist technology outsource solutions following the recovery in our end markets. This has led to a strong improvement in trading in 2021, with revenues reaching pre-pandemic levels in the second half of the year.  Demand in the first quarter of 2022 has remained strong, with order intake ahead of current year revenues and prior year order book.

 

As with all technology businesses, supply chain issues have been a challenge and have impacted margins, however we have demonstrated resilience in 2021 through close customer and supplier management and deployment of our cash to enable strategic stock purchases.  While we expect these challenges to persist, our financial strength and global supply network positions us well to manage these through 2022.   There are no structural reasons why our margins will be compromised in the long-term.

 

Our strategic positioning, strength of order book and proven operational effectiveness position us well for sustained growth in 2022 and beyond."

 

 

A video overview of the results featuring CEO Jon Jayal and CFO Johan Olivier is available to view here: https://bit.ly/QXT_FY21_overview_video 

 

Investor Presentation

Jon Jayal, CEO, and Johan Olivier, CFO, will provide a live presentation relating to the Group's results for the year ended 31 December 2021 via the Investor Meet Company platform on 6 April 2022 at 4:30pm. The presentation is open to all existing and potential shareholders and registration can be completed via the following link: https://www.investormeetcompany.com/quixant-plc/register-investor.

 

Quixant plc

Jon Jayal, Chief Executive Officer

Johan Olivier, Chief Financial Officer

 

Tel: +44 (0)1223 892 696

Nominated Adviser and Broker:

finnCap Ltd

Matt Goode / Simon Hicks (Corporate Finance)

Alice Lane (ECM)

 

Tel: +44 (0) 20 7220 0500

Joint Broker:

Canaccord Genuity Limited

Simon Bridges / Andrew Potts

 

Tel: +44 (0) 20 7523 8000

Financial PR:

Alma PR

John Coles / Hilary Buchanan / Kieran Breheny

Tel: +44 (0)20 3405 0205

 

About Quixant

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

 

 

 

CHAIR'S STATEMENT

Double-digit growth across both business segments

 

In this, my first year as Chair of the Board, I am delighted to report on a year of strong financial results and strategic progress, despite the well-publicised global supply chain challenges which the Group has also had to deal with. The Group entered 2021 with a healthy balance sheet, fully resourced and with strengthened customer relationships, despite the challenges presented by the pandemic in 2020. This enabled us to fully capitalise on the recovery in demand across our end-markets, despite the wider backdrop of supply chain challenges that weighed on technology markets throughout the year.

The Group as a whole, and both trading businesses - Gaming and Densitron - posted double-digit revenue growth in the year, continuing the upward trading momentum we have seen since the second half of 2020. Strong demand from new and existing customers was tempered somewhat by acute electronic component shortages and freight disruption, which our global teams grappled with to mitigate customer and financial impact. The Board took decisive action in January 2021 to engage in a strategic stock purchase programme to safeguard component supplies many months ahead of the demand. This has enabled us to reduce delivery delays and mitigate against component price inflation, further cementing our strong customer relationships.

We empower our customers with specialist technology outsource solutions, enabling them to innovate where it matters most.

 

Underpinned by a well-defined multi-year growth strategy, the outlook is positive. We have confidence that the Gaming business offers significant growth potential over and above the recovery in our customer's end markets, and we continue to invest in new product categories to support new growth opportunities. The Board also places significant importance on strategically diversifying the Group's revenue into other sectors. We have demonstrated the Group's' competence in developing specialist hardware and software solutions for the global Gaming industry. We believe this capability is relevant in other markets that could also benefit from a technology outsourcing model/partnership but have had little specialist provider penetration. 

Progress in our first targeted adjacent sector, Broadcast, has continued with double digit year-on-year growth at enhanced margins. The Board will continue to invest in the Broadcast market opportunity with the aim of delivering sustainable profit growth.

Supporting the financial and trading achievements is the Group's sustainability agenda

Within the framework of its Corporate Responsibility Strategy, the Board set realistic achievable goals in 2021 and will continue to identify and set new targets as goals are completed. Key initiatives during the year include:

-      

Supporting all staff to facilitate them getting fully vaccinated against COVID-19 if they wish;

-      

Implementing our Supplier Code of Conduct based on the principles set out by the Responsible Business Alliance Code of Conduct in our supply chain. By the end of the year 138 out of a total of 148 suppliers had signed up to the code and in 2022 we are committed to auditing at least 50% of these suppliers;

-      

Offering free electric charge points at UK offices and a tax-efficient electric car scheme. We have also implemented a cycle to work scheme as an employee benefit from 1 January 2022;

-      

Appointing a new external Company Secretary who has conducted a full Governance review for the Board to consider; and

-      

Launching a dedicated corporate responsibility microsite setting out our strategy and annual targets.

 

Strong business model and diversified opportunities supporting positive outlook

We enter 2022 with an experienced and fully resourced team. We welcomed Johan Olivier to the Board in August 2021 as Chief Financial Officer and are delighted with his input to the Board and broader business already. I believe the management team has the right blend of skills to drive the business through the next phase of growth. I would like to take this opportunity to thank everyone in the business for their commitment and hard work. Since joining the Company I have been struck by the capability, enthusiasm and healthy culture demonstrated by the team.

The Group's net cash position allows it flexibility when taking capital allocation decisions. The Group has identified opportunities to strongly grow its revenue base which, in the short-term, requires continued investment in working capital in what remains a volatile global supply chain environment.  The Board is confident that a progressive dividend policy remains appropriate and recommends a 20 per cent increase in the dividend to 2.4p per share for 2021 (2020: 2.0p per share).

Francis Small
Chair

 

 

 

CHIEF EXECUTIVE'S REPORT

Strong demand and robust supply chain management yields 37% revenue growth

 

In 2021 we delivered Group revenue of $87.1m, 37% ahead of 2020 revenue of $63.8m and approaching 2019 revenue of $92.3m.  Revenue in the second half of the year reached pre-pandemic levels and was the highest revenue performance since the second half of 2018. Both Gaming and Densitron divisions performed well, delivering double-digit year-over-year revenue growth with Densitron delivering its highest revenue performance since acquisition.  This led to adjusted profit before tax growth of 315% to $5.4m (2020: $1.3m) with a corresponding reported profit before tax of $4.9m (2020: loss of $2.0m). 

 

Supply chain pressures, which severely impacted the global technology sector, were a major headwind for trading during the year for both our Gaming and Densitron divisions. However, our experienced Taiwanese procurement teams and significant investment into strategic stock early in year supported trading and reduced the impact of component price inflation, which continued throughout the year. While the strategic stock investments weighed on working capital, we nonetheless generated cashflow from operations of $4.4m (2020: $4.0m) and grew our net cash balance to $17.6m (31 December 2020: $17.4m). We expect to make continued investment in strategic stock to enable us to satisfy growing customer demand and new business opportunities in 2022 despite ongoing component shortages.

 

Business Overview

 

Quixant is an outsource technology and supply chain partner for major global industrial electronic equipment manufacturers, with a focus on specific vertical markets. The Group combines hardware, software, display and mechanical engineering expertise, a global sales network with in-depth industry knowledge and a Far Eastern manufacturing base making it the ideal global strategic technology provider.

 

The Group's heritage is in its highly respected Quixant brand of specialised computer platforms, designed to power machines in the global casino gaming and slot machine market. These computer platforms, which are supplied to global gaming machine manufacturers, 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. 

 

Complementing the Group's track record in bringing an outsource model to the gaming market, the Group has diversified into other vertical markets through its Densitron brand. Densitron supplies display components to a wide range of industrial sectors, from which the Board has selected sectors in which there is the opportunity to develop tailor-made products, which are different to those readily available from broad-based technology corporations. We believe the Broadcast market represents such an opportunity, in which we have developed unique solutions which revolutionise the human machine interaction and control of Broadcast equipment. We delivered our second consecutive year of double-digit revenue growth in 2021.

 

The Group's organic growth strategy is centred around the following axis of growth:

-      

New customer acquisition in its chosen target market segments, further diversifying the Group's revenue base;

 

-      

Increase share of customer wallet by providing additional outsource solutions to become a fully integrated technology partner. An example of this is the Group's recently launched range of turnkey cabinet solutions, which enable customers to focus exclusively on game software development and outsource their whole hardware offering to Quixant;

 

-      

Focused R&D to move up the value chain, including within the software stack; and

 

-      

Identify and target adjacent verticals that do not currently benefit from deep specialist solution outsource providers, such as Broadcast.    

 

From time to time, the Board may complement its organic growth strategy with strategic acquisitions that enhance the Group's technical capabilities and market reach.

Gaming Business Review

 

Gaming customer demand built strongly through 2021 after the pandemic closed casinos around the world and heavily disrupted the gaming industry in 2020. Gaming business revenue grew 56% in the year to $47.3m (2020: $30.3m) driven by a combination of recovery in existing customer demand and ten new business wins entering production.  Revenue in the first half of the year was tempered by the unprecedented electronic component shortages, which delayed some deliveries into the second half. The strategic stock purchase programme mitigated the effects of these delays and enabled us to deliver revenue well ahead of 2020; return to pre-pandemic levels in the second half of 2021; as well as further cementing the strong relationships we have with our customers. We expect this positive upward trading momentum to continue in 2022.

 

The strong financial performance in the period was driven by several factors:

 

Recovery in gaming market demand

Following a period of stasis in the gaming market in 2020 as a result of government-imposed lockdowns, player attendance and spend rebounded strongly in 2021 stimulating a return in placement of new machines and therefore demand for our products.  This trend was most prominent in the US market, which represented 65% of gaming revenue in the year.

 

US commercial casino land-based slot revenues in 2021 reached $32.5bn, 10% higher than 2019 and 68% higher than 20201.  This market has also seen revenue growth on top of land-based slot revenues growth as a result of the legislation of sports betting and online gaming.  This growth is despite lagging business and international travel and a reduction in the number of conventions weighing on demand.  Overall, the US commercial casino market reached record revenues of $53bn in 2021, 21% higher than the previous record year in 2019.

 

The tribal gaming market is the other major US casino gaming segment.  During 2020 US tribal revenue declined by 19.5% to $28bn compared to 2019 due to the pandemic2.  Initial reports suggest a solid rebound in revenue in 2021, with official figures yet to be published.

 

Across Europe, our second largest Gaming market, the recovery has been more muted. European land-based Gaming revenue has been lower than predicted in 2021 as the pandemic continued to restrict land-based Gaming activities, however, the projections indicate that revenues in 2022 are now expected to recover to 5% below pre-pandemic before steadily climbing to their former levels in the following years3.

 

We estimate, based on analysis of data provided by a sample of the public gaming companies in their annual reports, that aggregate annual machine replacements fell by 50% in 2020 compared to 2019 but recovered in 2021 to around 65% of the rate in 2019.  Some of Quixant's major customers within this appear to have grown market share based on our estimates of their production volumes versus their competition.

 

More diversified Gaming business

We saw growth across all gaming computer product families, shipping 40,100 platforms during the year, 83% ahead of the 22,000 shipped in 2020 and in line with 2019 (40,700 platforms). Our three families of gaming computer products are offered at different price points (but broadly consistent sales margins) to cater for the different end-markets and jurisdictions into which our customers' machines are deployed. The mid-range IQON product range saw the highest sales volume since its introduction. This is driven by the greater diversification across our Gaming customer base through new business wins, which meant that the Gaming revenue concentration to the top ten customers reduced to 80% (2020: 86%; 2019: 85%).  

 

Turnkey cabinet business opportunities progressing

In addition to a gaming market recovery driving a rebound in demand along with new business orders, the Group was also successful in expanding outsource offering to include cabinet solutions.  Amid the challenges in supply chains this is a natural extension in hardware outsourcing for customers to adopt and increases our addressable market.  The Group's turnkey cabinet range, which combines Quixant's proven computer platform and monitor technology with integrated software solutions, is seeing early interest. The Group's first sports betting terminal received its first customer orders in 2021 which ship in 2022. The Group has also expanded its cabinet range with the launch of a video lottery terminal (VLT). Our turnkey cabinet offerings allow VLT game manufacturers to focus development on game content and design instead and to streamline their hardware design, procurement and deployment.

 

Densitron Business Review

 

Densitron revenue grew to $39.8m in 2021, the highest revenue performance from the division since acquisition.  This represents year-on-year revenue growth of 19% compared to 2020 and 10% growth over 2019.  Demand built through the second half of the year with shipments 24% ahead of the H2 2020 and 22% ahead of H2 2019. Order intake has been buoyant through 2021 and the business entered 2022 with a strong order book providing good revenue visibility. 

 

Strong Broadcast sector progress

Densitron's broadcast sector revenue grew by 19%, reaching $5.3m in the year (2020: $4.4m) at enhanced margins relative to the rest of the Densitron business.  This growth was driven by a combination of new business pipeline conversion and ramp up of mass production and strong customer retention.

 

While IDS continued to face challenging trading conditions through the first half due to COVID-19 enforced lockdowns making many customers reticent to undertake new equipment deployment and upgrades, in the second half we saw a marked uptick in activity.

 

Operational resilience driving broad based market growth

 

Densitron has continued its programme of operational improvements, delivering a consistent global operating model to customers.  Centralising procurement and supply chain in Asia in 2020 was a critical enhancement in operating model, which resulted in 95% of orders which were due to be shipped to customers in 2021 being delivered by year end.  We have also centralised quality control across all global operations in Taiwan which has delivered a consistent quality management process, implementation of our Supplier Code of Conduct and close scrutiny of suppliers operational and ESG performance. 

 

A consistent regional sales team, field application engineering and operations structure has created a resilient and consistent customer experience for our global customers.  As we move towards an increasing number of cross-geographic strategic accounts, this is an essential progression in our operating model.

 

In an environment of intense pressure on customers to secure stock from a trusted supplier who are easy to engage with and have solid corporate responsibility credentials, this has proven a successful formula in delivering broad based growth across many of Densitron's market sectors.

 

Innovation and product development

 

During the year Densitron continued to invest in exciting R&D to open up new ways for humans to interact with machines, with a focus on the broadcast sector.

·     

Tactila® - We released our first demonstration of this technology which enables rotaries and buttons to be placed on top of a touch screen.  This is a unique technology to Densitron, which we will be building upon in future years

·     

UReady 2U monitor - We expanded our range of broadcast rack mount control surfaces to include new models including 1 and 3 row Tactila buttons and added the option of a computer to make these control surfaces 'smart'

·     

UReady 4U monitor - We launched our next size of control surface in monitor form allowing broadcast operators to reduce their reliance on large overhead monitors and to use space more efficiently in outside and remote broadcasts

·     

Mitsubishi drop-in replacements - With Mitsubishi exiting the small display market to focus on bigger screens, Densitron's range of drop-in replacements were launched to give ex-Mitsubishi customers continuity of supply. We have 50 RFQs in train, seven of which have been won already.

Supply chain management

Alongside all other technology companies, the greatest challenge facing the Group during the year was electronic component shortages, freight capacity issues and price inflation. With buoyant demand from our customers after the challenges of 2020, we took decisive action in January 2021 to protect our supply of critical components by embarking on a sizeable strategic stock purchase programme. 

 

Early in the first quarter we initiated negotiations with customers, warning them of radically extended lead times and starting the process of price negotiations given the growing component pricing pressures in the components market. Through the year these issues continued to worsen, mitigated only by the strategic stock purchases we undertook.  Before 2021, typically electronic component lead times were 4-6 weeks and during the course of the year this extended out to 16-52 weeks. 

 

In the second half of the year, the delivery of many strategic stock lines, together with action taken by our engineering teams to re-engineer several products to design out end-of-life components or those with poor availability meant we were able to better align our product supply with customer demand.

 

While several rounds of sale price increases have been implemented, the timing of these as reflected in our results has lagged the inflation in input stocks and consequentially, we have seen a weaker gross margin performance in 2021 than historically. Structurally, we are confident that our gross margin remains consistent with previous years and once we see a levelling off in component prices, this will lead to a recovery in gross margins.


Investing in growth

The Group remains well placed to grow and deliver shareholder value, backed by a strong financial position. Over the last two years we have built a strong Executive Team, who have been effective in managing the business through the challenges of 2020 and 2021. With the recovery in the global gaming market, complemented by new business opportunities because of our diversifying focus, we will continue to bolster our well-resourced team to underpin core gaming computer business but importantly also to fuel growth in the new gaming cabinet and Broadcast solutions businesses.

 

Post year end, we opened a new office in Atlanta, Georgia, which is managed by our joint Gaming Business Leader and Chief Technology Officer (CTO), Abhinay Bhagavatula.  Atlanta has several gaming studios and software developers in the vicinity and provides an important location for the delivery of our gaming cabinet business opportunity.

 

Outlook

Revenue and demand across the Group was strong not only from existing customers but also from a range of new business opportunities. This has continued into 2022 and the current order book is ahead of current year revenues and the prior year order book, giving us confidence that we will deliver growth in line with market expectations for the full year.

 

The supply chain challenges all technology businesses faced in 2021 have persisted through the first quarter of 2022 and we expect will continue for the remainder of the year.  Our deep relationships with suppliers have been a significant benefit and alongside our strategic stock purchases have enabled us to mitigate much of the impact. During the first half of 2022 we plan to continue investing in inventory to be well placed for future growth, which will, in the short term, lead to an increase in working capital, facilitated by the strength of our balance sheet.

 

Quixant is an increasingly diversified Group, respected for its product innovation and domain expertise.  This gives us confidence in our ability to sustainably grow revenue and profits.

 

 

 

Jon Jayal

Chief Executive Officer

 

 

1 Source: American Gaming Association Commercial Gaming Revenue Tracker, Q4 2021

2 Source: National Indian Gaming Commission Gross Gaming Revenue Report

3 Source: European Gaming and Betting Association 

 

 

 

 

Financial Review

 

The Quixant Group achieved revenues of $87.1m in the year, up by 37% on 2020 revenues of $63.8m, driven by strong demand across both Gaming and Densitron.

 

Statutory Results

Group Revenue was $87.1m (2020: $63.8m), representing year-on-year growth of 37%. Gross profit was $25.9m (2020: $20.1m), an increase of 29% over the prior year, with gross margins at 29.7% (2020: 31.4%). Operating expenses were $21.4m (2020: $21.9m), resulting in operating profit of $4.5m (2020: operating loss of $1.9m). Net finance income was $0.4m (2020: Net finance cost of $0.2m), resulting in profit before tax of $4.9m (2020: loss before tax of $2.0m) and an income tax expense of $1.4m (2020: $1.0m), equivalent to an effective tax rate of 27.6% (2020: 47.7%). Basic earnings per share were $0.0536 (2020: ($0.0445)), an increase of 221%. Diluted earnings per share were $0.0533 (2020: ($0.0445)), an increase of 220%.

 

Adjusted Results

Throughout this Annual Report, adjusted and other alternative performance measures are used to describe the Group's performance. These are not recognised under International Financial Reporting Standards (IFRS) or other generally accepted accounting principles (GAAP). When reviewing Quixant's performance, the Board and Management team focus on adjusted results in addition to statutory results. There are several items that are included in statutory results but are considered to be one-off in nature or not representative of the Group's performance and are excluded from adjusted results. The tables in Note 1 show the full list of adjustments between statutory profit before tax and adjusted profit before tax and between statutory profit after tax and adjusted profit after tax at Group level for both 2021 and 2020.

 

Revenue

Gaming division revenues were $47.3m, an increase of 56% on the prior year (2020: $30.3m). Densitron division revenues were $39.8m, an increase of 19% on the prior year (2020: $33.5m).

 

The increase in Gaming revenues was due to a combination of market recovery and also commencement of revenue from new business.  Demand for our gaming products was strong, with shipment levels returning to pre-pandemic levels in the second half of 2021. The global shortage of electronic components impacted the Gaming supply chain, but the strategic stock purchases made early in 2021 enabled us to continue deliveries of product to customers.

 

Densitron, saw growing demand for its products, particularly in the Broadcast sector, and achieved the highest annual revenue performance since the Group acquired the business in 2015. This was achieved despite the division facing similar supply chain challenges to the Gaming division in the year.

 

Gross profit and gross profit margin

The Group generated gross profit during the year of $25.9m (2020: $20.1m) representing a gross margin of 29.7% (2020: 31.4%).  Component price inflation was evident throughout 2021, driven by acute component shortages across global technology markets. This led to gross margin volatility, especially in the Gaming division, and the lower gross margin compared to 2020.  The Group has continued to take action to mitigate the impact of this cost inflation by passing on prices rises to customers but there is a lag in the effect of these flowing through the income statement.

 

Foreign exchange

The Group reports its results in US Dollars as this is the principal currency in which it trades with customers.

 

The Group's reported results are impacted by US Dollar movements against currencies in the territories it operates, principally Pound Sterling, Euro and Taiwan Dollar. The average Pound Sterling to US Dollar exchange rate in 2021 was 1.38, an 8% depreciation against 2020 average of 1.28. The average Euro to US Dollar exchange rate in 2021 was 1.18, a 4% depreciation against the 2020 average of 1.14. The average Taiwan Dollar to US Dollar exchange rate in 2021 was 0.036, a 5% depreciation against the 2020 average of 0.034.

 

Adjusted operating expenses

The Group invested in the business in 2021 to support increased demand, which when combined with exchange rate movements, resulted in adjusted operating expenses increasing by 12% to $20.9m (2020: $18.6m). The largest increase was in salary costs, as $0.5m of COVID-19 government grants to support payroll received in 2020 did not recur in 2021. During the year, Group expenditure on research and development increased to $4.7m (2020: $4.3m). These costs relate to investment activities principally undertaken in Taiwan, Italy, the UK and Slovenia. Of these costs, $1.7m were capitalised (2020: $1.7m) as the Group continues to focus on developing new products, with amortisation for the year on total capitalised development costs of $0.9m (2020: $1.3m).  A significant amount of research and development time during the year was spent on re-engineering products to substitute unavailable or long lead time components. 

 

Finance income

The Group received COVID-19 support loans from the USA Government in 2020 and 2021. During 2021, these loans were all forgiven by the USA Government, resulting in finance income of $0.5m recognised in the income statement. The Group also incurred finance expenses of $0.2m (2020: $0.2m), principally related to leases.

 

Adjusted Profit Before Tax

Adjusted profit before tax increased by 315% to $5.4m (2020: $1.3m). The adjustments to statutory profit before tax of $0.5m in 2021 (2020: addition of $3.3m) comprised a share-based payments credit of $0.2m (2020: share-based payments charge of $0.2m), restructuring credit of $0.2m (2020: restructuring charge of $0.7m) and amortisation of acquired intangibles charge of $0.9m (2020: $0.9m). The 2020 adjustments also included the write off of $1.5m of capitalised research and development expenditure due to unexpected early end-of-life of certain third-party components.

 

Taxation

The effective tax rate on statutory profit before tax decreased to 27.6% (2020: 47.7%). The lower effective tax rate was due to deductions for research and development tax credits and patent box tax relief.

 

Earnings per share

Basic earnings per share increased by 221% to $0.0536 per share (2020: ($0.0445) per share). Adjusted diluted earnings per share increased to $0.0595 per share (2020: ($0.0040) per share).

 

Balance Sheet and Cash Flow

Non-current assets decreased to $24.3m as at 31 December 2021 (31 December 2020: $24.7m) mainly due to a decrease in deferred tax assets, offset by an increase in right-of-use assets. Included in non-current assets are goodwill of $7.7m (31 December 2020: $7.7m) and acquisition related intangible assets of $1.8m (2020: $2.7m) allocated to cash generating units (CGUs). The annual impairment review indicated that no impairment of goodwill is necessary at 31 December 2021 or 31 December 2020. The IDS CGU is sensitive to a reasonably possible change in key assumptions which could cause impairment.

 

Inventory has increased to $29.1m (31 December 2020: $21.6m), due to the increase in raw materials as the Group made strategic stock purchases to mitigate the impact of the global component shortages and secure product for customer demand.  

 

The cash generated from operating activities in the year amounted to $4.4m, a 10% increase from the prior year (2020: $4.0m).

 

The Group capitalised $1.7m development costs (2020: $1.7m), which reflects the continued development of new products as the Group expands it product portfolio.

 

 

Capital Allocation

The Group will continue its disciplined approach to capital allocation, prioritising the maintenance of a strong balance sheet, and sufficient cash reserves, while continuing to focus on investing in the business to drive organic growth.

 

The Board propose a dividend for the year ended 31 December 2021 of 2.4p per share (2020: 2.0p per share). This dividend will be payable on 26 August 2022 to all shareholders on the register on 29 July 2022. The corresponding ex-dividend date is 28 July 2022.

 

 

 

 

 

Johan Olivier
Chief Financial Officer

 

 

 

 

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

For the years ended 31 December 2021 and 2020

 

 

 

2021

2020

 

 

Total

Total

 

Note

$000

$000

Revenue

3

87,128

63,794

Cost of sales

 

(61,224)

(43,742)

Gross profit

 

25,904

20,052

Operating expenses

 

(21,361)

(21,904)

Operating profit/(loss)

 

4,543

(1,852)

Finance income

 

534

-

Finance expense

 

(157)

(151)

Profit/(Loss) before tax

 

4,920

(2,003)

Taxation

4

(1,356)

(955)

Profit/(Loss) for the year

 

3,564

(2,958)

Other comprehensive (expense)/income for the year, net of income tax

 

 

 

Items that are or may be reclassified subsequently to profit or loss:

Foreign currency translation differences

 

(771)

788

Total comprehensive income/(expense) for the year

 

2,793

(2,170)

Basic earnings per share

5

$0.0536

($ 0.0445)

Diluted earnings per share

5

$0.0533

($ 0.0445)

 

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.

 

 

CONSOLIDATED AND COMPANY BALANCE SHEETS

As at 31 December 2021 and 2020

 

 

Group

 

Company

 

 

2021

$000

2020

$000

 

2021

$000

2020

$000

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

5,874

6,004

 

3,888

3,975

Intangible assets

 

16,027

16,189

 

949

1,280

Right-of-use assets

 

1,924

1,276

 

1,000

200

Investment property

 

-

-

 

-

-

Investments in group companies and associated undertakings

 

-

-

 

9,125

9,376

Deferred tax assets

 

116

1,267

 

238

314

Trade and other receivables

 

336  

-  

 

18,798

25,393

 

 

24,277

24,736

 

33,998

40,538

Current assets

 

 

29,085

 

 

20,725

 

Inventories

 

21,601

 

13,779

Trade and other receivables

 

22,960

16,517

 

8,933

6,282

Cash and cash equivalents

 

18,347

18,804

 

6,604

3,080

 

 

70,392

56,922

 

36,262

23,141

Total assets

 

94,669

81,658

 

70,260

63,679

Current liabilities

 

(99)

 

 

(99)

 

Loans and borrowings

 

(695)

 

(96)

Trade and other payables

 

(25,510)

(12,913)

 

(22,325)

(10,723)

Tax payable

 

(1,756)

(1,022)

 

(470)

(83)

Lease liabilities

 

(609)

(386)

 

(351)

(200)

 

 

(27,974)

(15,016)

 

(23,245)

(11,102)

Non-current liabilities

 

(621)

 

 

(621)

 

Loans and borrowings

 

(712)

 

(712)

Provisions

 

(335)

(354)

 

-

-

Deferred tax liabilities

 

(302)

(1,322)

 

(118)

(76)

Lease liabilities

 

(1,360)

(901)

 

(668)

-

 

 

(2,618)

(3,289)

 

(1,407)

(788)

Total liabilities

 

(30,592)

(18,305)

 

(24,652)

(11,890)

Net assets

 

64,077

63,353

 

45,608

51,789

Equity attributable to equity holders of the parent

 

106

 

 

106

 

Share capital

 

106

 

106

Share premium

 

6,708

6,708

 

6,708

6,708

Share-based payments reserve

 

212

1,571

 

212

1,571

Retained earnings

 

56,940

54,086

 

37,533

42,040

Translation reserve

 

111

882

 

1,049

1,364

Total equity

 

64,077

63,353

 

45,608

51,789

 

The Company's loss for the year was $3.7m (2020: $3.9m).

 

These financial statements were approved and authorised for issue by the Board of Directors on 4 April 2022 and were signed on behalf of the Board by:

 

 

 

 

Jon Jayal

Chief Executive Officer

 

 

Company registered number: 04316977

 

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2021 and 2020

 

GROUP

 

Share Capital

Share Premium

Translation Reserve

Share-Based

Payments

Retained

Earnings

Total Equity

 

$000

$000

$000

$000

$000

$000

Balance at 1 January 2020

106

6,698

94

1,345

57,044

65,287

Total comprehensive loss for the year

 

 

 

 

 

 

Loss for the year

-

-

-

-

(2,958)

(2,958)

Other comprehensive income

-

-

788

-

-

788

Total comprehensive income/(expense) for the year

-

-

788

-

(2,958)

(2,170)

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

Share-based payments

-

-

-

226

-

226

Exercise of share options

-

10

-

-

-

10

Total contributions by and distributions to owners

-

10

-

226

-

236

Balance at 31 December 2020

106

6,708

882

1,571

54,086

63,353

 

 

Share Capital

Share Premium

Translation Reserve

Share-Based

Payments

Retained

Earnings

Total Equity

 

$000

$000

$000

$000

$000

$000

Balance at 1 January 2021

106

6,708

882

1,571

54,086

63,353

Total comprehensive income for the year

-

-

-

-

 

3,564

 

3,564

Profit for the year

Other comprehensive loss

-

-

(771)

-

-

(771)

Total comprehensive income/(expense) for the year

-

-

(771)

-

3,564

2,793

Transactions with owners, recorded directly in equity

-

-

-

 

 

(221)

-

 

(221)

Share-based payments

Reserve transfer1

-

-

-

(1,138)

1,138

-

Dividend paid

-

-

-

-

(1,848)

(1,848)

Total contributions by and distributions to owners

-

-

-

(1,359)

(710)

(2,069)

Balance at 31 December 2021

106

6,708

111

212

56,940

64,077

 

1 Share-based payment charge is recognised against the share-based payment reserve over the vesting period based on the Group's estimate of equity instruments that will vest. In the year the Group revised the estimated vesting for share awards downwards based on expected achievement of performance conditions for previous financial periods, which should have been revised in previous periods. This resulted in a transfer of reserves to retained earnings. 

 

 

COMPANY

 

Share

Share

Translation

Share-Based

Retained

Total Parent

 

Capital

Premium

Reserve

Payments

Earnings

Equity

 

$000

$000

$000

$000

$000

$000

Balance at 1 January 2020

106

6,698

344

1,345

45,915

54,408

Total comprehensive loss for the year

 

 

 

 

 

 

Loss for the year

-

-

-

-

(3,875)

(3,875)

Other comprehensive income

-

-

1,020

-

-

1,020

Total comprehensive income/(expense) for the year

-

-

1,020

-

(3,875)

(2,855)

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

Share-based payments

-

-

-

226

-

226

Exercise of share options

-

10

-

-

-

10

Total contributions by and distributions to owners

-

10

-

226

-

236

Balance at 31 December 2020

106

6,708

1,364

1,571

42,040

51,789

 

 

 

 

 

 

 

 

 

Share

Share

Translation

Share-Based

Retained

Total Parent

 

Capital

Premium

Reserve

Payments

Earnings

Equity

 

$000

$000

$000

$000

$000

$000

Balance at 1 January 2021

106

6,708

1,364

1,571

42,040

51,789

Total comprehensive loss for the year

-

-

-

-

(3,663)

(3,663)

Loss for the year

Other comprehensive loss

-

-

(315)

-

-

(315)

Total comprehensive income/(expense) for the year

-

-

(315)

-

(3,663)

(3,978)

Transactions with owners, recorded directly in equity

-

-

-

(355)

-

(355)

Share-based payments

Reserve transfer1

-

-

-

(1,004)

1,004

-

Dividend paid

-

-

-

-

(1,848)

(1,848)

Total contributions by and distributions to owners

-

-

-

(1,359)

(844)

(2,203)

Balance at 31 December 2021

106

6,708

1,049

212

37,533

45,608

 

1 Share-based payment charge is recognised against the share-based payment reserve over the vesting period based on the Group's estimate of equity instruments that will vest. In the year the Group revised the estimated vesting for share awards downwards based on expected achievement of performance conditions for previous financial periods, which should have been revised in previous periods.5This resulted in a transfer of reserves to retained earnings. 

 

 

 

CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2021 and 2020

 

 

 

Group

 

Company

 

 

2021

2020

 

2021

2020

 

Note

$000

$000

 

$000

$000

Cash flows from operating activities

 

3,564

(2,958)

 

(3,663)

(3,875)

Profit/(Loss) for the year

 

 

Adjustments for:

 

 

 

 

 

 

 

Depreciation, amortisation and impairment

 

2,529

3,084

 

584

970

Impairment losses on intangible assets

 

-

1,503

 

-

-

Depreciation of leased assets

 

701

473

 

433

230

Movement in provisions

 

(15)

(1,061)

 

-

(194)

Taxation expense

 

1,356

955

 

588

105

Dividends received

 

-

-

 

-

(391)

Finance income

 

(534)

-

 

-

-

Finance expense

 

157

151

 

43

25

  Share-based payment (credit)/expenses

 

(221)

226

 

(355)

166

 

 

7,537

2,373

 

(2,370)

(2,964)

(Increase)/Decrease in trade and other receivables

 

(6,737)

7,026

 

3,944

5,734

(Increase)/Decrease in inventories

 

(7,735)

14

 

(6,932)

923

Increase/(Decrease) in trade and other payables

 

11,982

(4,625)

 

11,001

(1,523)

 

 

5,047

4,788

 

5,643

2,170

Interest paid

 

(63)

(96)

 

-

(12)

Lease liability interest paid

 

(94)

(55)

 

(40)

(13)

Tax paid

 

(492)

(663)

 

(83)

(73)

Net cash from operating activities

 

4,398

3,974

 

5,520

2,072

Cash flows from investing activities

 

 

 

 

 

 

Capitalised development expenditure

 

(1,676)

(1,738)

 

-

-

Acquisition of property, plant and equipment

 

(160)

(431)

 

(78)

(383)

Acquisition of intangible assets

 

(323)

(71)

 

(61)

(71)

Proceeds from investments

 

-

-

 

258

-

Dividends received

 

-

-

 

-

391

Net cash from investing activities

 

(2,159)

(2,240)

 

119

(63)

Cash flows from financing activities

 

 

 

 

 

 

 

Reduction/repayment of borrowings

 

(132)

(19)

 

(88)

(11)

Repayment of government loans

 

(476)

-

 

-

-

Proceeds from government loans

 

415

606

 

-

-

Payment of lease liabilities

 

(666)

(526)

 

(188)

(191)

Dividends paid

 

(1,848)

-

 

(1,848)

-

Proceeds from issue of shares

 

-

10

 

-

10

Net cash from financing activities

 

(2,707)

71

 

(2,124)

(192)

Net (decrease)/increase in cash and cash equivalents

 

(468)

1,805

 

3,515

1,817

Cash and cash equivalents at 1 January

 

18,804

16,954

 

3,080

1,219

Foreign exchange rate movements

 

11

45

 

9

44

Cash and cash equivalents at 31 December

 

18,347

18,804

 

6,604

3,080

                 

 

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  General information

The financial information set out below, does not constitute the company's statutory accounts for the years ended 31 December 2021 or 2020 but is derived from those accounts that was approved by Directors on 4 April 2022. Statutory accounts for 2020 have been delivered to the registrar of Companies, and those for 2021 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006, this announcement does not itself contain sufficient information to comply with UK-adopted international accounting standards. The Company expects to publish full Financial Statements that comply with UK-adopted international accounting standards during April 2022.

Going concern

The possible continuing and future impact of COVID-19 on the Group has been considered in the preparation of the financial statements including within our evaluation of critical accounting estimates and judgements. The Group's operational and financially robust position is supported by:

·     Strong recovery in Gaming revenues from the impact of the COVID-19 imposed lockdowns experienced in 2020; and continued good performance from Densitron;

·     Resilient cash generation, despite investing in working capital to support growth and good liquidity position; and

·     Strong balance sheet.

 

In undertaking a going concern review, the Directors have reviewed financial projections for a period of at least twelve months (the review period) and have additionally prepared projections through to 31 December 2023. Management prepared a base case scenario based on the approved budget for 2022 and forecasts for 2023. Management also prepared a severe but plausible downside scenario, using the following key assumptions:

·      A 31% reduction in 2022 and 2023 budgeted revenues to replicate the impact that COVID-19 had on the Group's revenues in 2020; and

·    The Group remains committed to making last time buy purchases of key components from AMD and these purchases continue and are in addition to the regular supplier payments made in the normal course of business.

 

The impact of these assumptions is mitigated by:

·     Reduction in operating expenses to reflect reduction in bonuses, delay, or suspension of new headcount additions etc., consistent with the actions management took in response to the COVID-19 pandemic in 2020 and 2021;

·      No dividend paid in 2023, although a dividend is still paid in 2022; and

·      Reduction of discretionary capital expenditure spend.

 

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.

 

Use of judgements and estimates

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 IDS CGU, valuation of Quixant CGU inventory and capitalisation of development costs.

 

Significant estimates

Recoverability of goodwill and acquisition related intangibles in the IDS CGU

The estimated recoverable amount of the IDS CGU has 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 I 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 CGU.

 

Inventory valuation in the Quixant CGU and 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 and the Parent Company 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 2021, the total inventory in the Quixant CGU is $26.9m (2020: $19.1m) and in the Parent company is $20.7m (2020: $13.8m). The provision against slow-moving and obsolete inventory for the Quixant Group as at 31 December 2021 is $1.6m (2020: $1.3m) and in the Parent company is $1m (2020: $0.6m). A difference of 0.2% in the provision as a percentage of gross inventory would give rise to a difference of +/- $0.1m in gross margin. The choice of a 0.2% change for the determination of sensitivity represents the change to the level of provisioning for the prior year.

 

Significant judgement

The impact on the financial statements of a change in judgement with respect to the development cost criteria, such as the commercial viability of a product, could affect the value capitalised in respect of intangible assets and the corresponding profit and loss effect. If the criteria had not been met in the current year, the impact would have been to expense $1.7m (2020: $1.7m) of development costs.

 

Reconciliation of adjusted measures

The Group presents adjusted profit before tax by making adjustments for costs and profits, which management believes to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings. Such items may include but are not limited to share-based payments expense, restructuring charges, acquisition related costs and amortisation of intangible assets arising from business combinations.

 

In addition, the Group presents an adjusted profit after tax measure by making adjustments for certain tax charges and credits, which management believes to be significant by virtue of their size, nature or incidence or which have a distortive effect.

 

The Group uses these adjusted measures to evaluate performance and as a method to provide Shareholders with clear and consistent reporting. See below for a reconciliation of profit before tax to adjusted profit before tax, a reconciliation of profit after tax to adjusted profit after tax and a reconciliation of operating expenses to adjusted operating expenses

 

 

 

2021

2020

 

$000

$000

Profit/(Loss) before tax

4,920

(2,003)

Adjustments:

 

 

Capitalised development costs derecognised1

-

1,503

Amortisation of customer relationships, technology and order backlog2

920

920

Share-based payments (credit)/expense3

(222)

226

(189)

674

Adjusted Profit before tax

5,429

1,320

 

1.     To derecognise capitalised development costs due to one-off notifications by key suppliers to end-of-life key components utilised in our Gaming products; citing changing market demands and supply chain issues brought about by the COVID-19 pandemic.

2.     The amortisation of customer relationships and order backlog has been excluded as it is not a cash expense to the Group.

3.     Share-based payments (credit)/expense has been excluded as they are not a cash-based expense. The income is related to the reversal of the options charge for the grants in prior periods, triggered mainly by forfeiture of performance conditions and exercise of options in the past.

4.    Restructuring (credit)/charge - This related to the reversal of provision, set aside in the past, which settled in the current period for lower than estimated provision.

 

 

 

 

2021

2020

 

$000

$000

Profit / (Loss) after tax

3,564

(2,958)

Adjustments:

 

 

Capitalised development costs derecognised1

-

1,503

Amortisation of customer relationships, technology and order backlog2

920

920

Share-based payments (credit)/expense3

(222)

226

Restructuring (credit)/charge4

(189)

674

(97)

(631)

Adjusted Profit/(Loss) after tax

3,976

(266)

 

5.     Tax on adjusted items relating to amortisation of customer relationships and orders of $0.9m (2020: $0.9m), share based payment (credit)/expense of $0.2m (2020: charge of $0.2m), restructuring (credit)/charge of $0.2m (2020: charge of $0.7m).

 

 

 

2021

2020

 

$000

$000

Operating expenses

(21,361)

(21,904)

Adjustments:

 

 

Capitalised development costs derecognised1

-

1,503

Amortisation of customer relationships, technology and order backlog2

920

920

Share-based payments (credit)/expense3

(222)

226

Restructuring (credit)/charge4

(189)

674

Adjusted Operating expenses

(20,852)

(18,581)

 

2. Business and geographical segments

 

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 consistent format with management information. The Group assesses the performance of the segments based on a measure of revenue and profit before tax. 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:

·        Gaming - 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, due to 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:

 

 

2021

2020

 

$000

$000

Gaming

9,807

6,382

Densitron

4,597

3,459

Segment results

14,404

9,841

Corporate cost

(9,861)

(11,693)

Operating profit/(loss)

4,543

(1,852)

Finance income / (expense)

377

(151)

Profit/(loss) before tax

4,920

(2,003)

Taxation

(1,356)

(955)

Profit/(loss) after tax

3,564

(2,958)

 

 

 

Year to 31 December 2021

 

Year to 31 December 2020

 

 

$000

 

$000

 

$000

 

$000

 

$000

 

$000

 

 

Gaming

 

Densitron

 

Total

 

Gaming

 

Densitron

 

Total

Other information

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of owned assets

 

97

 

4

 

101

 

-

 

-

 

-

Amortisation of intangible assets

 

670

 

213

 

883

 

678

 

122

 

800

 

 

767

 

217

 

984

 

678

 

122

 

800

 

 

3. Analysis of turnover

 

 

2021

 

2021

 

2021

 

2020

 

2020

 

2020

 

 

$000

 

$000

 

$000

 

$000

 

$000

 

$000

 

 

Gaming1

 

Densitron2

 

Total

 

Gaming

 

Densitron

 

Total

By primary geographical market

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

1,822

 

8,264

 

10,086

 

1,464

 

7,347

 

8,811

Australia

 

4,597

 

47

 

4,644

 

2,695

 

98

 

2,793

UK

 

2,021

 

2,443

 

4,464

 

918

 

3,457

 

4,375

Europe excl. UK

 

7,865

 

13,722

 

21,587

 

6,391

 

11,142

 

17,533

North America

 

30,595

 

13,540

 

44,135

 

19,004

 

10,601

 

29,605

Other

 

399

 

1,813

 

2,212

 

(154)

 

831

 

677

 

 

47,299

 

39,829

 

87,128

 

30,318

 

33,476

 

63,794

                           

1.     2021 Gaming no longer report revenue by products, which was split into Gaming Platforms (2020: $27.5m) and Gaming Monitors (2020: $2.8m). Gaming Monitors were split into Button-decks (2020: $2.5m) and Monitors (2020: $0.3m).

2.     2021 Densitron revenue from products splits into Densitron $39.0m (2020: $32.5m) and IDS $0.8m (2020: $1.0m). IDS revenue included revenue of $0.3m (2020: $0.3m) recognised throughout the performance period.

 

 

 

The above analysis includes sales to individual countries in excess of 10% of total turnover of:

 

 

2021

2020

 

$000

$000

USA

42,136

27,786

 

Revenues of $15.4m (2020: $16.2m) are derived from one customer (2020: two customers) who individually accounted for more than 10% of Group revenues in 2021. These revenues are attributable to the Gaming segment.

 

 

4. Taxation

Recognised in the profit and loss account

 

2021

2020

 

$000

$000

Current tax expense

-

 

UK corporation tax

618

Foreign tax

2,057

1,009

Adjustments for prior years

(832)

400

Current tax expense

1,225

2,027

Deferred tax

(303)

 

Origination and reversal of temporary differences

(1,074)

Adjustments for prior years

-

(80)

Change in deferred tax rate to 25% (2020: 19%)

434

82

Deferred tax

131

(1,072)

Total tax expense in the income statement

1,356

955

 

Reconciliation of effective tax rate                                           

 

2021

2020

 

$000

$000

Profit/(Loss) for the year

3,564

(2,958)

Total taxation expense

1,356

955

Profit/(Loss) excluding taxation

4,920

(2,003)

Tax using the UK corporation tax rate of 19% (2020: 19%)

935

(381)

Non-deductible expenses

46

30

Enhanced research and development (relief)/reversal

(363)

445

Patent box tax relief

(382)

-

Change in deferred tax rate to 25% (2020: 19%)

433

84

Overseas tax in excess of standard UK rate

501

323

Exercise of share options

6

8

Unrecognised losses

1,009

200

(Over)/under provided in prior years1

(832)

320

Other

3

(74)

Total taxation expense in the income statement

1,356

955

 

1 The 2020 tax provision included a reversal of enhanced research and development relief due to uncertainty over whether the relief would be granted. In 2021 the Group completed the necessary actions to ensure relief may be claimed and filed a tax return on that basis, leading to the adjustment to the 2021 tax provision.

 

 

Factors that may affect future tax charges

 

An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. This will increase the company's future current tax charge accordingly. The deferred tax liability at 31 December 2021 has been calculated based on these rates, reflecting the expected timing of reversal of the related temporary differences (2020: 19%).

 

5. Earnings per ordinary share (EPS)

 

2021

2020

 

$000

$000

Earnings

 

 

Earnings for the purposes of basic and diluted EPS being net profit/(loss) attributable to equity shareholders

3,564

(2,958)

 

Number of shares

Number

Number

 

Weighted average number of ordinary shares for the purpose of basic EPS

66,450,060

66,437,683

Effect of dilutive potential ordinary shares:

425,500

 

Share options

154,375

Weighted number of ordinary shares for the purpose of diluted EPS

66,875,560

66,592,058

Basic earnings per share

$0.0536

($0.0445)

Diluted earnings per share

$0.0533

($0.0445)

 

Calculation of adjusted diluted earnings per share:

$000

$000

Earnings

 

 

Earnings for the purposes of basic and diluted EPS being net profit/(loss) attributable to equity shareholders

3,564

(2,958)

Adjustments

 

 

Research and development derecognised

-

1,503

Amortisation of customer relationships, technology and order backlog

920

920

Share-based payments (credit)/expense

(222)

226

Restructuring (credit)/charge

(189)

674

 

4,073

365

Tax effect of adjustments

(97)

(631)

Adjusted earnings

3,976

(266)

Adjusted diluted earnings per share

$0.0595

($0.004)  

 

 

 

 

 

 

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