The information contained within this announcement is deemed by the Company to constitute inside information pursuant to Article 7 of EU Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended.

19 March 2025

Nexteq plc

("Nexteq" or the "Group")

Audited Final Results

Significant reorganisation to deliver three-year plan

Nexteq (AIM: NXQ), a leading technology solutions provider to customers in selected industrial markets, is pleased to announce its audited full year results for the 12 months ended 31 December 2024.

¹Adjusted for amortisation of customer relationships, technology and order backlog, share based payments, restructuring charges and goodwill impairment. For further details refer to note 1 and note 5 of the condensed consolidated financial statements. Adjusted profit before tax of $4.8m includes a charge of $2.7m to reduce the carrying value of Aruze inventory.

²Net cash is a non-GAAP measure of cash inflows from operations less cash tax paid

FINANCIAL HIGHLIGHTS:

OPERATIONAL HIGHLIGHTS:

Duncan Faithfull, Chief Executive Officer of Nexteq plc, commented:

"2024 was a challenging year for Nexteq, with a significant impact on volume driven by continuing destocking across our customer base, and the wider economic environment, characterised by high interest rates, which impacted our customers' willingness to invest.

2024 was also a year of significant change, with the appointment of a new Senior Leadership Team and Board transition, including my appointment in the CEO position. We now look forward to the future with this reorganisation behind us, and a renewed platform of leadership stability to drive forward our ambitions.

This change has given the Group the opportunity to re-build; re-energise; and refocus on delivering a new three-year plan based upon what made us great in the first place. Nexteq is a technology product business - and a very good one - with world-class engineering, both hardware and software, at its core. Re-focussing these skills to develop market leading innovative solutions will be the cornerstone of that plan, with our 'One Nexteq' approach to our markets driving customer adoption of these new products and solutions.

The Board is excited about the three-year plan and remains confident that our renewed focus on creating innovative technology solutions will unlock the growth potential of the business, with 2025 being a year to focus on our current strong customer relationships; winning and integrating new customers; and diversifying our revenue streams, with the objective to deliver growth from 2026. Nexteq's impressive cash reserves provide the Senior Leadership Team with the opportunity to invest to accelerate growth in our target markets, and to further diversify the Group. We look ahead with a clear plan, robust financial position and established, market-leading position from which to grow."

Investor Presentation

Nexteq is hosting an online presentation open to all investors today via Investor Meet Company at 10.00am. Anyone wishing to join the session should register here: 

https://www.investormeetcompany.com/nexteq-plc/register-investor

Capital Markets Day video recording

A video recording of the Group's Capital Markets Day, held on 26 February 2025, in which the Group presented detail on its three-year plan and strategic ambitions for the end of 2027, can be found on the Company's website at  Investor Hub - Nexteq plc.

^* Three-year organic growth ambitions, targeting revenue of $108m-$120m, gross margin of 35-38% and 10-15% EBITDA¹ margin by the end of 2027.

About Nexteq

Nexteq (AIM: NXQ) is a strategic technology solutions provider to customers in selected industrial markets. Its innovative technology enables the manufacturers of global electronic equipment to outsource the design, development and supply of non-core aspects of their product offering. By outsourcing elements of their technology stack to Nexteq, customers can focus their product development effort on the most critical drivers of their business' success.

Our solutions are delivered through a global sales team and leverage the Group's electronic hardware, software, display and mechanical engineering expertise. Our Taiwan operation is at the heart of Asian supply networks and facilitates cost effective manufacturing and strategic supply chain management.

The Group operates in six countries and services over 500 customers across 47 countries.

Nexteq operates two distinct brands: Quixant, a specialised computer platforms provider, and Densitron, leaders in human machine interface technology, each with dedicated sales, account management and product innovation teams. Founded in 2005, and later floating on the London Stock Exchange's AIM stock market as Quixant plc, the Group rebranded to Nexteq in 2023.

Further information on Nexteq and its divisions can be found at www.nexteqplc.com.

CHAIR'S STATEMENT

As one of the three founders of Quixant, I am delighted to continue in my role of Interim Chair as we move into 2025.  With Quixant celebrating its 20th Anniversary in March 2025, and with Densitron recently turning 50 years old, we have established brands, with a reputation for engineering excellence; quality and innovation.  Coming out of the pandemic years, and the subsequent component crisis, I truly believe that we now have an organisational structure and strategy to deliver a diversified group, and consistent growth for all our stakeholders.

2025 will see a new Chair in role, now that the new Senior Leadership Team has set out its strategy, but my continuing affection and drive for this business will see me retaining my position as a non-executive on the Board, supporting the new Chair, and the business as we move through the next phase of Nexteq's evolution.

Review of 2024

The year under review has been a challenging period for the Group, both in terms of the wider market backdrop, which was characterised by the continued trend of industry-wide destocking and low business confidence, but also a period of major leadership transition with the resignation of the Chair, CEO and CFO, each having made major contributions to the Group's evolution and success. This was followed by the appointment of strong internal successors following a rigorous process, with Duncan Faithfull taking on the role of CEO and Matt Staight appointed to CFO. I have been impressed in my time working with Duncan and Matt on their clarity of vision, early strategy execution and determination in delivering results, and I am delighted we now enter the new year with a renewed platform of stability with an excellent blend of expertise and experience.

Notwithstanding the above challenges, the robustness of the underlying business meant the Group delivered total revenues of $86.7m, albeit 24% down on a strong comparative year, together with gross margins maintained at historically high levels. Careful management of costs meant that adjusted profit before tax was $4.8m. The Group ended the year with a net cash position of $29.1m, reflecting continued strong cash generation net of the impact of returns to shareholders over the year via our $6.9m share buyback programme and dividends of $2.8m.

Growth ambitions building on our core strengths

Following a strategic review, the newly installed Senior Leadership Team restructured the business in Q4 2024 to align it to a new three-year strategy of delivering revenue of $108m-$120m, gross margins of 35-38% and Adjusted EBITDA margins of 10-15%. The building blocks of this plan are driving organic growth within the current product suite, expanding the addressable opportunity through product innovation and accelerating diversification into new verticals through bolt-on M&A. Further details of the Group's three-year plan can be found in the CEO's report.

My confidence in the Group achieving these ambitions is underpinned by Nexteq's core strengths and competitive market positioning built up over its 20-year heritage. First, the established and close relationships Nexteq has earned with its customers are stronger than ever, working alongside them as a key engineering and technology partners for their business-critical products. Our persistent focus on product quality and collaborative approach to customer care is part of Nexteq's DNA and is evidenced by the Group's long-standing customer relationships and high retention rates.  

Second, the Group's track-record of successfully launching and bringing new products to market across its core verticals of Gaming, Broadcast and Medical means that the Group has grown from a reputation as a technology pioneer within its chosen markets, which continues to support new customer wins today. The next step is to accelerate the pace and rigor of product innovation to drive new growth opportunities and enhance our value proposition to customers. The Group has a robust hardware and software product roadmap and I am excited to support the team in their strategy.

Third, I continue to be impressed by the quality of the team and skills within the organisation. The dedication to delivering for customers and enthusiasm through a period of uncertainty has been inspiring, and on behalf of the Board, I would like to thank all of our team members for their hard work.

Moving ahead sustainably

Our commitment to long-term, sustainable value creation remains a central component of evolution. In addition to being Carbon Neutral in 2024, the Group continues to make progress towards its target of achieving Net Zero emissions by 2050. The work we have done against the five UN Sustainability Development Goals (SDGs) we identified for the Group include expanding the number of apprenticeships and continuing our contribution to carbon reduction projects.

Dividend and share buyback programme

The Board has agreed to maintain growth in the dividend despite the reduction in earnings, supported by the healthy operating cash flow and record cash balance which supports continued investment to grow the business. As a result, the Board considers it appropriate to recommend a full year dividend of 3.7p per share (2023: 3.3p per share). The Group's share buyback programme, launched in H2 of 2024, has returned $6.9m of cash to shareholders during the year with 89% of the approved buybacks having been completed at year end.

Looking ahead

Nexteq has demonstrated resilience withstanding the headwinds in 2024 and addressing the continued global uncertainties which face all business in 2025. In Q4 the business made the purposeful decision to refocus investment, both time and skills, on the areas of the business driving new product development and new business wins.  The successful transition in leadership, continued focus on operational efficiencies, and the establishment of a clear three-year plan means we enter 2025 in a stronger position. Evidenced by significant business wins secured across the Group and a clear path to delivering the three-year strategy, the Board expects positive movements in order book generation to be seen through 2025, with revenue growth becoming more material from 2026.

On behalf of the Board, I would like to thank our employees, customers, and shareholders for their continued support and confidence in Nexteq. We look forward to the next phase of our journey with optimism and determination. 

Nick Jarmany
Interim Chair

CHIEF EXECUTIVE'S REPORT

2024 in summary

2024 was a challenging year for Nexteq, but my first few months as CEO of the Group have demonstrated to me the solid foundations the Group has built over its 20-year history. I continue to be impressed by the Group's heritage of technology leadership in its focus markets, excellent team of people with deep technology expertise and best-in-class customer service that we have become known for.

The market backdrop in 2024 was characterised by difficult conditions, including geopolitical uncertainty, elevated inflation which both impact business confidence combined with the ongoing cycle of destocking. As a result, our trading performance was not at the high standard that we set ourselves. Notwithstanding external factors, there are a number of operational and organisational factors within our control that I, together with the newly appointed Senior Leadership Team, have identified to change in order to become leaders of markets again, and to drive the growth that this business is capable of, in line with our three-year ambitions of being $108m-$120m revenue, with gross margins of 35-38% and Adjusted EBITDA margins of 10-15%.  This refocus was presented at our recent Capital Markets Event in February and detailed later in this report.

Despite a tough market environment, our gross margins remained strong and resilient; and our operating costs remained controlled.  Our challenge in 2024 was one of revenue generation and order intake, resulting in revenue lower than 2023 across both of our trading brands, Quixant and Densitron.

Trading environment

The lower revenue performance in 2024 was driven by three critical factors occurring simultaneously.  Firstly, during the years post-pandemic, stock was procured by our customer base expecting continuing growth in demand for their products, which did not transpire to be the case.  The subsequent destocking process impacted 2024 significantly, and in fact, in certain geographies and markets, still continues.  Secondly, throughout 2024, across all our market verticals, our customers' confidence to invest in capital projects was impacted negatively by an uncertain macro-economic environment translating into higher-than-expected cost of capital.  Thirdly, across the business, 2023 was positively impacted by end of life / last time purchase situations in key customers, providing a very strong comparative year. 

These issues were felt across the business, but especially in our non-USA business, which saw a 40% reduction in revenue between 2023 and 2024, driven largely by the EMEA business in both the Quixant and Densitron brands.  In the USA, revenue was impacted in the same way, but to a lesser extent, with an 8% reduction in revenue being seen year on year, mirroring our two largest customers' performance in their home market.

Following rigorous analysis of the situation, we are very clear about what has driven these revenue challenges, and we have implemented specific regional growth plans across the business verticals to win material new business through 2025 and drive growth from 2026 and beyond. This is detailed later in my report.

Excellent cash generation continues

As a result of the efficient Nexteq business model, cash generation continues to be exceptionally strong.  Throughout 2024, this has enabled the share buyback scheme, in which $6.9m was returned to shareholders, alongside $2.8m in dividends. Despite this investment we ended 2024 with $29.1m of net cash, and as we move to 2025, this provides the flexibility to invest in our organic and targeted "bolt on" M&A growth strategy.

Managing change

2024 also brought a period of significant leadership change within the business, including the appointment of an interim Chair and new permanent Executive team, along with the reorganisation of the business into a regionally aligned 'One-Nexteq' structure to support the execution of our new strategy in 2025 and beyond. I would like to extend my thanks to all our global teams for their perseverance and focused commitment to delivering a best-in-class service to clients through this period of disruption.

Business Review - Quixant

Quixant is our trading brand which delivers technology outsourcing solutions to the Casino and slot machine industry, focused on specific hardware gaming platforms (PCs); monitor and cabinet solutions.  Quixant turned 20 years old in March 2025.

Quixant increased its percentage share of Group revenue in 2024 to 63%, despite a year-on-year decline in its own revenue of $13.4m to a total of $54m.  The reduction in revenue in Gaming was spread between the trading regions, with our largest market, the USA, down 12%, or $6m versus 2023, and the Rest of the World (RoW) region by 40%, which equated to a $7.6m reduction. Driving this was an overall reduction in hardware platform sales as customers' confidence to invest was impacted by persistent macro-economic uncertainty.  This uncertainty, coupled with the destocking process which followed the 2022 and 2023 post pandemic optimism led to reductions in volume of sales of the three hardware platform categories that Quixant offers.  

Our cost-effective solutions (IQ range) saw the smallest decline of the three product categories.  We saw no customer losses through 2024, and our newest variants - the IQ 2 and IQ Connect - were launched, so we expect material progress to be made in this category in 2025.

Traditionally the mid-range products (IQON range) are the biggest selling products but saw a 38% reduction in volume between 2023 and 2024, driven by general destocking, and one large customer in the UK being acquired by a business which has not historically used Quixant.

Our QMAX range, our premium solutions range, declined by 33% in volume in 2024 as a result of three large customers having difficult trading years themselves.  No distribution has been lost, and the three customers have now invested significantly in game design - the factor which determines the success of a Cabinet and our sales of hardware platforms.

2024 saw the continuing improvement in supply chain lead times and component pricing. Quixant's lead times are now back at pre-pandemic levels and whilst component pricing has not returned to pre-pandemic levels, the market is now stable, with supply and demand in balance.

Throughout 2024, Quixant refocused onto product development and concentrated on the following activities:

Quixant continued its progress in Gaming Cabinets in 2024, with new customers to complement the significant win of one of the UKs largest Casino operators in 2023.  Quixant now works with leading Cabinet manufacturers in North America and Europe to deliver its 'Turnkey' Cabinet solutions, for customers who need a fully outsourced cabinet.  Through 2024 Quixant sold over 200 full Turnkey cabinets globally. The partnership 'Turnkey' model is gaining traction as the trend for online game providers looking for a land-based solution increases in popularity. 

Quixant Outlook  

There are many reasons to be positive as we move into 2025: 

Business Review - Densitron

Through our Densitron brand we sell advanced display solutions and human machine interface (HMI) technology into several market segments, which we have been doing for 50+ years.

2024 was a tough year for Densitron, with revenues falling 29% versus 2023, driven largely by significant reductions in the RoW business.  In this region we declined by $12m, driven by the planned loss of one major customer, coupled with the impact of several last time buys (LTB) of displays in 2022 and 2023, which enhanced the outcomes for those two years.  In North America, which includes sales to customers in Asia, the business declined by 10.4%, translating into a revenue decline of $1.1m, driven by LTBs and general destocking across the customer base.  As evidenced in the chart below, Densitron was impacted by the same destocking pressure as felt across many industries, including the gaming market.

The above numbers represent the core Densitron Industrial displays business in 2024, which involves applying advanced engineering solutions to 3rd party monitors.  Whilst revenues have been disappointing, over recent years a huge amount of effort has gone into margin development, with 2024 seeing Densitron overtaking Gaming in terms of Gross Margin %, and in doing so achieving a Company record.

Through 2024, a concerted effort has been made with our key supplier partners to ensure certainty of supply from China, and other industrial display markets, and to ensure dual supply solutions, to prevent previous issues around LTBs.  

The Densitron business generates revenues from several key market verticals, including Medical, Automotive, Agriculture and Broadcast. The Broadcast market continues to be a significant opportunity for Densitron with $4.7m revenue from the sector in 2024.  Over recent years, the business has focused on delivering innovation in terms of Nexteq I.P. based solutions, where we own the product design and overall solution.  We believe that we will make significant traction in this Market over the coming years as we move to this more 'Quixant style' of doing business in Display solutions. 

Our Tactila product

This can be seen in the continued development of our patented 'Tactila' solution, which is truly unique in terms of engineering innovation, which allows tactile rotaries to be bonded to single pieces of glass, revolutionising the user experience in the 'Production Control Rooms' (PCRs) of our Broadcast partners. Tactila shows off the engineering expertise of Nexteq and now includes software support delivery from our Software centre of excellence, which historically was exclusively focused on the gaming vertical.

ProDeck

Delivering value add, innovative solutions is how we are driving growth in the Densitron vertical markets.  Another example being the 'ProDeck' solution - our stand-alone desktop control solution.  ProDeck combines a PC from Quixant and the display solutions from our consumer grade broadcast models, which can be linked to our IDS software solution.  With the ProDeck solution, anywhere can become a broadcast studio.

The Medical sector is another significant market vertical for Nexteq.  In 2024 the Group enjoyed $8m of revenue from this sector and it presents the next focus market opportunity after Broadcast.  Leveraging technology and expertise from across the group, we are developing Medical grade HMI solutions, building on the technology innovation we have developed for the Broadcast sector.

Densitron is critical to our Group's growth strategy as the solutions which we are developing in Broadcast and Medical, are incubated in the service of excellence of the core Densitron business.

Densitron Outlook

Densitron operates in a highly competitive environment, and markets are still recovering from the over-stocking seen through 2023.  We expect significant strategic progress to be made over the coming years in both the core business, where increased focus on targeted marketing and a new process on LTBs, and in the chosen markets of Broadcast and Medical to deliver high quality, I.P. based revenue from our innovative suite of new solutions.

Forward-looking growth strategy and pillars for future success

We have developed a three-year strategic plan, with the objective at the end of 2027 to have a diversified revenue base, hitting organic growth targets to deliver $108m-$120m of revenue, with a consistent growth trajectory to reach significantly higher levels by 2030.  This will be achieved through a combination of organic, innovation and acquisitional growth. Importantly, significant new business has already been won - we have to integrate our technology into customers products exceptionally for revenue to make a material impact from 2026.

Structure - Create an environment to deliver growth

·      Right size the business to deliver 2025 profit expectation.

·      Invest in the right technical skills to deliver organic growth and innovation revenue growth.

·      Drive sales activity through 'One Nexteq' regional approach.

Retention - Build from a solid base

·      Retain 100% of our current Gaming and Industrial Displays core business.

·      Deliver two new hardware platforms to our biggest Gaming customers.

·      Maintain excellent customer service and close customer collaboration.

Organic growth - build on what we do in our current markets

·      Deliver our exciting hardware product roadmaps.

·      On-board secured Broadcast vertical customer wins and Gaming customer wins in 2025.

·      Win new Gaming customers in identified new route market opportunities.

·      Secure 10% market share in Brazil market post legalisation of Gaming.

·      Double the number of strategic customers with $1m annual revenues from ten in 2024 to 20 in 2027.

Diversify - Innovation and acquisition

·      Launch new Gaming software proposition in 2025.

·      Enhance focus on bolt-on acquisition opportunities to accelerate growth in new target verticals.

'One Nexteq'

Our brands and our products are what set us apart from our competition and we will protect and nurture both. In order to leverage the expertise across all of our product areas, we have instilled a 'One Nexteq' approach, tying the organisation closer together.  We now have a new Senior Leadership Team (SLT), made up of key leaders from across the business, including those responsible for delivering innovation across our product range, as well as our General Manager from our Taiwan engineering and manufacturing centre, responsible for delivering on that innovation agenda.   

Critically, we have moved to a regional based model, as opposed to a brand-based, global one.  We now have a commercial leader based in the USA, our largest market, and another one responsible for the Rest of the World (RoW), based in the UK.  These two highly experienced Commercial leaders have market vertical specific sales teams reporting to them, but are managed in a consistent way, relevant to their own customer bases. Importantly, our sales teams are now supported with a new incentive plan, which better aligns with our growth ambitions and visibility. 

An example of our 'One Nexteq' approach in action is with our exciting new Broadcast solutions product range, where we are using our traditionally Gaming-focused Software Engineers in Italy to work with our mechanical and electrical engineers in Taiwan to deliver our product roadmap.  This maximises the use of our expertise and streamlines the operational cost of delivery.  These changes mark a distinct evolution in the business.

Retention of our customer base

Our high customer retention is underpinned by our excellent service and customer care, and exceptional product quality which truley differentiate us from our competition. As a result, our customers remain loyal, confident in the knowledge that we are excellent at what we do, which enables them to deliver their product and commercial objectives. 

Everything we do is about delivering on our customer expectation and the value our customers place on our partnership, and on our innovative approach to product design and problem solving.  Retention and delighting our customers will unashamedly be the cornerstone of our growth strategy.

Regaining our technology innovation leadership

2023 and 2024 were both years where our innovation process and R&D initiatives stalled slightly as we focussed on retention and the conversion to Intel as a graphics provider in the Gaming sector.  In our DNA, we are technology innovators, and to be successful we must be bold; invest in R&D and deliver creative solutions for our customers.

In Q4 2024, we restructured our cost base to allow for investment in software innovation across our target market verticals and refocussed our hardware teams to look at new Gaming hardware solutions designed to make our customers' graphics performance 'ahead of the game', and our new Broadcast market innovation to be deliverable at scale to service our exciting new customer wins.

Nexteq has invested in Senior Product Directors to deliver the ambitious product roadmaps that we have in Gaming and Broadcast and the Group continues to invest in supplier management to create a Display innovation roadmap for our core Densitron operation.

Throughout 2025 and beyond we will deliver increasing amounts of thought leadership as we fuel our innovation pipeline.  We are a product and solution innovation business at our core - this will become more evident as we grow via our innovations.

Diversify our revenue through product innovation and new verticals

Traditionally, Nexteq has been focused on the industrial display market through its Densitron brand, and on the gaming sector via Quixant.  Other than our IDS software business we have been a hardware-based organisation, and as part of the diversification agenda we are delighted to be launching our new software innovation in the gaming business in 2025.  Having invested in our own software development team, and with focused R&D effort, we will launch a subscription-based solution to market to assist our gaming hardware platform customers with bringing their game content to life.  This, coupled with the IDS software solution will create a meaningful Nexteq software business of 4-5% of Group revenue in 2027.

We believe that we have significant opportunity to grow our Quixant business in the key Gaming market vertical, especially with the software solution described above, but it has been our objective for some time to increase the share of revenue from other markets.  In 2022 we made the strategic decision to invest in R&D in the Broadcast vertical, which we have experience of through the Densitron display business, with the objective to introduce our own innovative and tailored Broadcast solutions alongside the traditional displays we supply already. It has taken some time to gain traction here, but I am delighted to report that we have made significant progress in winning long-term contracts with some of the largest broadcast operators in the world.  The integration cycles are long, but some of our key milestones within our plan are around onboarding these wins, with revenue expected to flow from late 2025, and beyond.

Our third target vertical is the medical sector, which currently accounts for 5% of our business. We see good opportunity to growth in this sector organically to 11-14%, with the growth potential enhanced through bolt-on acquisitions.

Our healthy cash position means that we can invest in acquisitions in target verticals, and we continue to assess opportunities to transform our offerings in our traditional Densitron areas of expertise.

Summary and focus areas

2024 was a difficult year, but we move into our three-year plan period (2025 to 2027) with renewed focus, energy, people and structure, and clarity of thought. 

We start the new year with secured customer wins, an orderbook of five months' revenue and a healthy financial position. The business is energised around being brave and creating innovative products, manufactured to the highest standard, that will delight new and existing customers. Everything we do will be focused around our core strategy to expand our offering through continued innovation, establish the Group in new territories and markets, and continue to provide a first-class service to our existing customers.  We are excited to move into delivering our plan and building on what we learned through 2024.  As ever, it's what you do next that counts, so please join me in being excited about our future.

Duncan Faithfull

Chief Executive Officer

Financial Review

Strong margin and operating cash flows

Statutory results

Group revenue was $86.7m, 24% lower than the $114.3m delivered in 2023. Gross profit was $31.1m (2023: $41.5m), a reduction of 25% over the prior year, with gross margins at 35.9% (2023: 36.3%). Operating expenses were $30.8m (2023: $29.1m), resulting in operating profit of $0.3m (2023: $12.4m). Net finance income was $1.4 (2023: $0.5m), resulting in profit before tax of $1.7m (2023: $12.9m) and an income tax expense of $1.4m (2023: $2.0m), equivalent to an effective tax rate of 82.0% (2023: 15.6%). Basic earnings per share (EPS) were 0.48cents (2023: 16.39cents), a decrease of 97%. Diluted EPS were 0.48cents (2023: 16.02cents), a decrease of 97%.

Revenue

Quixant revenues were $54.8m, a decrease of 21% on the prior year (2023: $69.2m). Unit sales decreased to 43,569 platforms delivered in the year, down 20% on the prior year (2023: 54,513). Demand for our cost-effective range held flat, but mid-range and high-end products had lower demand in 2024. The decrease in overall Quixant revenues was largely due to the decline in unit sales.

Densitron delivered revenue of $31.9m, a decrease of 29% on the prior year (2023: $45.1m). Demand for Densitron products seen in 2022 and 2023 reduced as the impact of customers destocking reduced sales across all its subsectors.

Gross profit and gross profit margin

The Group generated gross profit during the year of $31.1m (2023: $41.5m) representing a gross margin of 35.9% (2023: 36.3%). Gross margins continued their recovery from the lower levels seen in 2021 and 2022 but were impacted in 2024 by a charge of $2.7m to reduce the carrying value of Aruze inventory.

Adjusted operating expenses

Adjusted operating expenses increased by 2% to $27.8m (2023: $27.3m). See Note 1 to the financial statements for a reconciliation of adjusted operating expenses to operating expenses. The Group continued to invest in sales activities with travel and marketing spend remaining flat at $2.6m (2023: $2.6m). The reductions in headcount implemented at the end of 2023 resulted in average employees reducing to 223 in 2024 from 238 in 2023. Alongside lower performance related bonus payouts, this resulted in payroll costs reducing by $1.4m to $20.3m (2023: $21.7m).

During the year, Group expenditure on research and development remained at $4.6m (2023: $4.6m). These costs relate to investment activities principally undertaken in Taiwan, Italy, the UK and Slovenia. Of these costs, $1.8m were capitalised (2023: $1.8m) as the Group continues to focus on developing innovative new products, with amortisation for the year on total capitalised development costs of $1.2m (2023: $1.3m).  During the year the Group abandoned in-progress development projects with a carrying value of $0.1m (2023: $1.0m). 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.

Impairment of trade receivables remained low, with an impairment loss recorded in the current year of $0.2m compared to $0.1m in 2023. The Group also recognised exchange rate gains of $0.4m, compared to $0.5m in 2023. 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 $0.1m R&D tax credit (2023: $0.4m). 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. Since 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 are recognised within operating expenses in-line with the R&D expense. 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 2023 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 2024, APMI owed $1.0m to the Group from the sale of goods (2023: $1.0m). The amounts were impaired in full as at 31 December 2022 and due to the uncertainty referenced above remain fully impaired at 31 December 2024. The Group continues to take steps to recover these balances.

Inventory, consisting of raw materials with a book value of $2.4m (2023: $1.7m) and finished goods with a book value of $0.2m (2023: $0.6m) originally earmarked for use by APMI, was included in the Nexteq Group's balance sheet as at 31 December 2024. As of 31 December 2023, management believed the raw materials could be used to manufacture products sold to the Group's existing or new customers, and the finished goods could be used in the Group's turnkey cabinet offering. However, in 2024 management has determined there is limited opportunity to use the raw materials to manufacture finished products for sale to the Group's existing or new customers and is exploring opportunities to sell these raw materials. Management does not expect to fully recover the net book value of $2.6m and considered a provision against the raw materials of $2.2m was required as at 31 December 2024.

Net finance income

The Group recognised net finance income of $1.4m (2023: $0.5m). Finance income increased to $1.4m (2023: $0.6m) as the Group took advantage of higher interest rates coupled with the higher cash balances the Group held during the year. Finance expense of $0.0m (2023: $0.1m) principally related to leases.

Adjusted profit before tax

Adjusted profit before tax reduced by 67% to $4.8m (2023: $14.7m). The adjustments to statutory profit before tax of $3.1m (2023: $1.9m) consisted of:

Taxation

The Group recognised a corporation tax charge of $1.4m in the year, compared to $2.0m in 2023. The tax charge consists of a current tax charge of $0.9m (2023: $2.3m) and a deferred tax charge of $0.5m (2023: credit of $0.3m) relating to the movement in deferred tax assets and liabilities in the current year.

The effective tax rate on statutory profit before tax increased to 82.0% (2023: 15.6%). The increase in effective tax rate results from $3.2m of tax being derecognised as a deferred tax asset due to uncertainty over the recoverability. This off-set the impact of UK patent box claims which reduce the Group tax charge. 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 97% to 0.48c per share (2023: 16.39c per share). Adjusted diluted earnings per share decreased by 72% to 5.08c per share (2023: 18.09c per share).

Balance sheet

Non-current assets decreased to $22.1m as at 31 December 2024 (31 December 2023: $24.3m) mainly due to the $2.9m impairment of goodwill related to the Densitron Europe CGU. Included in non-current assets are goodwill of $4.8m (31December 2023: $7.7m) and acquisition-related intangible assets of $0.2m (2023: $0.5m) allocated to cash generating units (CGUs). The annual impairment review determined a $2.9m impairment of Densitron Europe CGU goodwill. The impairment reviews did indicate that the estimated recoverable amount of the Densitron Japan CGU as sensitive to a reasonably possible change in key assumptions. Refer to Note 11 to the financial statements for further disclosure of the annual impairment review.

Current assets decreased to $63.4m at 31 December 2024 (31 December 2023: $78.6m) mainly due to a significant reductions in Trade and other receivables to $16.5m at 31 December 2024 from $25.8m at 31 December 2023, and inventories reducing to $17.4m at 31 December 2024 from 24.3m at 31 December 2023 reflecting the reduction in the Group's trading activity during the year. This was offset by an increase of Cash and cash equivalents by $1.1m from $28.4m at the start of the year to $29.5m at 31 December 2024.

Cash flow

The Group generated $13.0m cash from operating activities in the year (2023: $19.8m). Adjusted operating cash flow, which excludes tax payments, was $15.5m (2023: $21.0m) which represented 324% of adjusted profit before tax (2023: 142%). This was ahead of the Group's 2024 cash conversion KPI target of 100% (see Director's Remuneration Report on pages 40-45) due to reduced working capital, as the Group consumed strategic stock balances.

The Group capitalised $1.8m of development costs (2023: $1.8m), which reflects the continued development of new products as the Group expands its product portfolio.

The Group finished 2024 with net cash of $29.1m (2023: $27.9m), comprising cash and cash equivalents of $29.5m (2023: $28.4m) and gross debt of $0.4m (2023: $0.5m). 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 2024 of 3.7p per share (2023: 3.3p per share). This dividend will be payable on 30 May 2025 to all Shareholders on the register on 2 May 2025. The corresponding ex-dividend date is 1 May 2025.

Foreign exchange

The Group reports its results in US Dollars as this is the principal currency in which it trades with customers, with approximately 93% (2023: 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:

As most of the Group's revenues are denominated in US Dollars, the impact of foreign exchange movements on reported revenues was minimal in 2024 and 2023. 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 2024 were very similar to 2023 levels, resulting in a negligible impact on adjusted operating expenses, when compared to 2023 average rates. The Group recognised translational foreign exchange rate gains of $0.4m in 2024, compared with gains of $0.5m in the prior year, a negative $0.1m impact year over year. Combining the impact of these foreign exchange elements resulted in a net negative foreign exchange rate impact of 0.4m on adjusted profit before tax for 2024 when compared to 2023.

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.

The following APMs appear in this Annual Report.

Matt Staight

Chief Financial Officer

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

For the years ended 31 December 2024 and 2023

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 BALANCE SHEET

As at 31 December 2024 and 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2024 and 2023

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2024 and 2023

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  General information

The financial information set out above and below, does not constitute the company's statutory accounts for the years ended 31 December 2024 or 2023 but is derived from those accounts. Statutory accounts for 2023 have been delivered to the registrar of Companies, and those for 2024 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 March 2025.

Going concern

The Group's operational and financially robust position is supported by: 

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 2025 and forecasts for the first three months of 2026. Management also prepared a severe but plausible downside scenario, using the following key assumptions:

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 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 Densitron Europe and Densitron Japan CGUs, valuation of Quixant CGU inventory, capitalisation of development costs, deferred tax asset recognition and valuation of Aruze debtors and inventory. 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 Europe and Densitron Japan CGUs

The estimated recoverable amounts of the Densitron Europe and Densitron Japan 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

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 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 2024, the Group balance sheet included Quixant inventory of $13.9m (2023: $19.1m) and $10.6m (2023: $14.7m) respectively. The provision against slow-moving and obsolete inventory for the Group as at 31 December 2024 is $4.9m (2023: $2.6m) and in the Parent company is $4.4m (2023: $2.3m). A difference of 12.0% in the provision as a percentage of gross inventory would give rise to a difference of +/- $2.7m in gross margin. The choice of a 12.0% change for the determination of sensitivity represents the change to the level of provisioning for the prior year.

Deferred tax asset recognition

A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profits will be available to utilise the temporary difference. The Group has made estimates on the likelihood that future taxable profit will utilise the tax losses, meaning the deferred tax assets being realised by the Group is contingent upon the estimates regarding future tax profits of the Group in the jurisdiction where the loss exists. At the reporting date, the Group had unused tax loss of $16.8m (2023: $15.7m) available for offset against future profits.

In order to support the recognition of $3.4m (2023: $3.6m) deferred tax asset on losses, modelling was undertaken to review the recovery period of the deferred tax asset. The modelling was based on management forecasts for the subsequent five years and showed that the deferred tax asset on losses is not expected to be fully recovered by 2029. A probability weighted model was used to determine the loss recoverability. The reduction in the recoverability of the asset recorded in 2024 is predominately due to reducing the probability of forecast results in year four and five of the forecast period after factoring in the results achieved in 2024. 

This modelling is judgemental given the forward-looking nature of performance, taking into account inherent uncertainties constraining the expected level of profit as appropriate. Changes in the estimates will affect future taxable profits and therefore the recoverability of the deferred tax assets. The value of unrecognised deferred tax asset in the UK as at 31 December 2024 is $3.2m (2023: $Nil). The losses may be carried forward indefinitely. 

Other important judgements

Valuation of Aruze 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 2024, APMI owed $1.0m to the Group from the sale of goods (2023: $1.0m). The amounts were impaired in full in 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 $2.4m (2023: $1.7m) and finished goods with a book value of $0.2m (2023: $0.6m) originally earmarked for use by APMI, was included in the Nexteq Group's balance sheet as at 31 December 2024. As of 31 December 2023, management believed the raw materials could be used to manufacture products sold to the Group's existing or new customers, and the finished goods could be used in the Group's turnkey cabinet offering. However, in 2024 management determined there is limited opportunity to fully recover the net book value of $2.6m. Consequently, in 2024 an inventory provision of $2.7m was recorded, which after utilisation of $0.5m of this provision for loss on sale of some of the inventory, leaves a closing provision balance of $2.2m as at 31 December 2024.

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, Adjusted Operating cash flow and Net cash. The adjusted measures are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, IFRS measures. See below for analysis of the adjusting items in reaching adjusted performance measures.

Adjusted Profit before tax

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 2024 and 2023.

4.     The impairment of goodwill has been excluded as it is not a cash expense to the Group.

Adjusted Profit after tax

5.     Tax on adjusted items relating to amortisation of customer relationships, technology and order backlog of $Nil (2023: $0.6m), share-based payment credit of $0.8m (2022: expense of $1.0m) and restructuring charges of $0.7m (2023: $0.3m).

Adjusted Operating expenses

Adjusted Operating cash flow

Net cash

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 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:

Reconciliation of segment results to profit after tax:

¹ _{Depreciation and amortisation of $796k (2023: $977k) were not allocated to segments as these are considered corporate costs.}

_{2 Includes impairment of Densitron Europe CGU Goodwill of $2,873k (2023:$Nil).}

3. Analysis of revenue

¹

_{2024 Densitron revenue from products splits into Densitron $31.0m (2023: $43.5m) and IDS $0.9m (2023: $1.6m). IDS revenue included revenue of $0.4m (2023: $0.4m) recognised throughout the performance period.}

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

Two customers (2023: two customers) individually accounted for more than 10% of Group revenues in 2024,

with revenues of $16.8m (2023: $19.4m) and $9.0m (2023: $14.8m), respectively. These revenues are attributable to the Quixant segment.

4. Taxation

Recognised in the profit and loss account

Reconciliation of effective tax rate                                           

^{1 The Group has elected into the UK patent box regime under which patent box profits from certain patents are taxed at a reduced rate of corporation tax.}

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:

5. Earnings per ordinary share (EPS)

6. Post balance sheet events

Post year end, the Group has placed its property in Balsham, Cambridge on the market and expects the sale to complete in 2025. As of 31 December 2024, the property in Balsham was recorded within land and buildings in non-current assets. The intended sale will help to promote the centralisation and collaboration of the UK labour force in one location. The sale will facilitate a change of UK registered office to Crawley, West Sussex.

There were no other material post balance sheet events that were required to be disclosed.