QXT.L Regulatory News (QXT)

22 March 2018

Quixant plc

("Quixant" or the "Company")

Final Results

Quixant (AIM: QXT), a leading provider of specialised computing platforms and monitors for gaming and slot machine applications, is pleased to announce its Final Results for the year ended 31 December 2017.

Financial Highlights:

· Strong revenue growth of 21% to $109.2 million (2016: $90.4 million)

o Quixant Gaming Division revenue $71.1m (2016 $53.0m)

o Densitron division revenue of $38.1m (2016 $37.4m)

· Adjusted pre-tax profit1 up 28% to $17.7m (2016: $13.8m)

· Pre-tax profit up 29% to $15.0m (2016: $11.7m)

· Adjusted fully diluted EPS2 of $0.229/share (2016: 0.166/share)

· Fully diluted EPS of $0.197/share (2016: $0.139/share)

· Net cash from operating activities of $8.1m (2016: $10.1m)

· Net cash at period end of $4.5m (2016: $(0.1)m

· Proposed full year dividend of 2.6p per share (2016: 2.0p)

1. Adjusted by adding back items included in the adjusted PBT reconciliation in note 5 totalling $2.7m (2016: $2.2m)

2. Adjusted by adding back the items included in note 1 above and subtracting the associated tax effect as set out in note 3. In 2017 these amounted to $2.1m (2016: $1.7m)

Operational Highlights:

· 52,000 gaming platforms shipped during the year, up from 41,000 in 2016

· Strong performance from Quixant's established customer base, contribution to revenue from new customers and cultivation of new long-term opportunities

· Three patents applied for during the year and four granted

· Quixant Gaming Ecosystem® recognised by customers as a key differentiator and a key marketing message

· Densitron division performed in line with management expectations

Post year end:

· In March 2018, announced a strengthened Board with Executive promotions and a new CFO joining in October 2018

· Shipments to new major Japanese customer commenced in early 2018

· First volume shipments commenced to Novomatic for a new product

Jon Jayal, Chief Executive Officer of Quixant, commented:

"I am delighted to be commenting on another very good year for Quixant with strong revenue and profit growth. Our core gaming platforms business continues to grow market share and this has been supplemented by shipping over 31,000 gaming monitors last year. Densitron performed in line with our expectations and we have identified the broadcast industry as a market to target with innovative new products and are exhibiting bespoke products targeted at this market at several events in 2018.

We have started 2018 with robust trading performance and are well positioned to deliver full year growth ahead of our previous expectations. The new prospects we are working on give us with confidence in our longer-term growth prospects."

For further information please contact:

About Quixant

Quixant, founded in 2005, designs and manufactures highly optimised computing solutions and monitors principally for the global gaming industry. The Company is headquartered in Cambridge in the UK where the global sales function is based. North America sales and sales support is run from their subsidiary in Las Vegas. Quixant has its own manufacturing and engineering operation based in Taiwan and software engineering and customer support team based in Italy. All the specialised products software and manufacturing are produced in-house and Quixant owns all its own IP some of which is protected by patents and design rights.

In November 2015 Quixant acquired Densitron Technologies plc. Densitron has a strong heritage in the sale of electronic display solutions to global industrial markets. Through Densitron's experienced sales team, Quixant has a robust platform to build its business into wider industrial markets. In-depth information on the Company's products, markets, activities and history can be found on the corporate website at www.quixant.com.

The information contained in this announcement is inside information for the purposes of article 7 of Regulation 596/2014.

Chairman's Statement

I am delighted to report another very successful year for the Group with excellent growth in both revenue and profits, whilst continuing to strengthen our organisation to support continued progress.

The organisation has evolved smoothly through several phases in the last five years. We have moved from a small, entrepreneurial, private company, to now being listed on the AIM public market. We continue to branch out into new product areas in gaming and, through the acquisition of Densitron, added a portfolio of products targeted at non-gaming markets. Throughout these phases, the Group has remained flexible and focused enabling it to thrive with the new challenges each has presented to us. We are justifiably proud of our outstanding record over these five years. Our revenues have grown from $24.2m in 2013 to $109.2m in 2017 and adjusted profit before tax from $6m to $17.7m.

We continue our planning to meet the future demands of the Group and execution of our corporate strategy. It is therefore right that we continue to evolve the management in the organisation. 

On 1 March 2018, we announced some major changes to our Board. Our current Chief Executive and founder Nick Jarmany was appointed Executive Vice-Chairman while retaining executive responsibilities for technology leadership and product innovation. This has always been a particular strength and passion for Nick and his new position enables him to focus on it.

I would personally like to both thank and congratulate Nick for his vision and ambition in developing the Group since he co-founded it in 2005 and building it up to the first-rate business it is today. It is a huge asset for us to be able to be able to continue to utilise his experience and skill set as he concentrates his efforts on technology leadership and product innovation.

Nick had delegated many of his responsibilities to Jon Jayal, Chief Operating Officer, in March 2017 while he undertook medical treatment. It was therefore with confidence that Jon was promoted to take over as Chief Executive Officer from 1 March 2018. Jon has a long background with Quixant, commencing at inception of the Group when, as an electronic engineer, he was a key member of the design team for the first product. This grass roots appreciation for Quixant's culture, combined with expertise working in the City for several large blue chip financial institutions and a detailed understanding of the technology underpinning our products makes him ideally qualified to lead the Group and continue our outstanding track record of growth. 

In addition, current CFO Cresten Preddy informed the Board last year of her desire to step back from full time employment. After an exhaustive process we are delighted that Guy Millward has agreed to join us as CFO with effect from 1 October 2018. Guy has vast experience working in senior management positions of public technology companies. Cresten will continue working for the Group, both to ensure a smooth handover but also to operate certain specific initiatives which are currently underway, including the Global SAP system implementation project.

Gaye Hudson also joined the Board as a Non-Executive Director in March 2017. Gaye's 19 years of at Oracle Corporation introduced a strong skillset in HR and Communications to the Board.

The changes that have been made to the Board and a number of other senior appointments positions us well to retain the entrepreneurial style and company culture which has made the Group so successful, while introducing new management skills and resources to take the Group forward. I firmly believe that we have the quality of people and systems to continue to thrive.

A dividend of 2.0p per share was paid in May 2017 representing a growth of 33% on the prior period. The Board is pleased to propose a 2018 full year dividend of 2.6p per share, representing an increase of 30% over the previous year. This remains consistent with our progressive dividend policy and demonstrates the continued strength of the Company's balance sheet and financial performance.

Michael Peagram,

Chairman

Chief Executive Officer's Report

It is my privilege to be writing my first report to you as Chief Executive Officer of Quixant. I am very pleased that the Group has continued to deliver outstanding financial and operational performance during the year. Group revenue increased 21% to a record $109.2m and adjusted profit before tax increased 28% to $17.7m (statutory profit before tax also increased 29% to $15.0m).

Gaming Division

Our core business continues to be focused around the global gaming industry. When we launched Quixant in 2005, we focussed on the design and manufacture of highly optimised computing solutions for gaming which incorporate purpose-built computer hardware and a rich software infrastructure. Our unique value-added proposition rapidly gained traction and we earned a position as a key supplier to many major electronic gaming machine manufacturers.

In 2015 we began developing gaming monitors which, whilst operating on a structurally lower margin, present an excellent opportunity to expand our revenue share in each machine. We have also continued to evolve our monitor product portfolio to embed Quixant's ethos of innovation. The table below shows the sales of our gaming product lines for the last two years during which margins have been maintained. In the last two years, the Gaming Division has grown by 94%.

Since it was launched in 2015 our gaming monitor business has grown rapidly and is now an integral part of the Group. While we expect to see the rate of growth normalise in 2018, we continue to see considerable opportunities for growth in this part of the business.

Gaming Ecosystem®

The foundation of Quixant's value proposition in gaming is our Gaming Ecosystem®, which has been developed over the last 12 years. There are multiple facets to the Gaming Ecosystem® which extend far beyond the physical computer hardware, including:

Once a customer selects Quixant and integrates their game around our Gaming Ecosystem®, they unlock all these benefits for developing their games and machines. Previously, many of the requirements which the Gaming Ecosystem® meets had to be catered for by customers' in-house R&D teams and often solutions were developed for specific markets or product categories which both increased development cost and time-to-market and also reduced flexibility to enter new markets.

Increasingly, even the largest customers in the gaming industry recognise and embrace the value of Quixant's Gaming Ecosystem® and as the gaming market becomes ever more competitive and fast moving they are adapting their games to be compatible with our products. Those that have adopted it have a more streamlined development process and are able to respond more quickly to new market openings and opportunities for growth in markets they had previously never serviced.

Whilst the core of our Gaming Ecosystem® is well-established, we have developed several exciting tools and features to add to it over the last two years which we believe significantly strengthen the value proposition.

QxVDR is a video decoding and rendering software infrastructure which enables customers to playback videos on Quixant gaming platforms which combine transparent text and graphic overlays whilst making highly efficient use of the hardware. Pre-rendered videos are commonplace in most electronic games and there are often multiple videos playing at once, so reducing the performance impact on the system during playback is critical. 

We have also created a tool, QxATS, which provides real-time debugging information to aid game authors during the development process. They can "see" the flow of data into and out of the Quixant platform and also within it and isolate issues which arise during creation of their software which cause it to behave unexpectedly. QxATS also provides real time monitoring information with near zero performance impact on the Quixant gaming platform. QxATS combines software and hardware elements.

Gaming Platforms

We shipped over 52,000 gaming platforms in 2017, up from 41,000 shipped in 2016, making Quixant, we believe, to be the highest volume manufacturer of computer platforms for gaming. We estimate our market share is a little over 10% of the estimated 475,000 unit annual new/replacement machines deployed globally (source: G3 Magazine). Our growth has been driven by continued gains in market share as manufacturers continue to outsource development of their computer platforms and focus on their core competencies. Our estimated market share has grown from 6% in 2013 to a little over 10% in 2017. We are confident that this trend remains buoyant and that we have the ability to further increase our market share.

Our growth in the gaming platforms business has been seen across all sizes of customer, but with particularly strong performance from our mid-size (1,000 - 5,000 pcs per year volume) accounts, which represented 22% of unit sales in 2017 compared to 10% in 2016.

Alongside strong performance from well-established customers, it was pleasing to see commencement of volume shipments to Novomatic. 

We have continued to see our high-end products dominating our sales both in revenue and quantity terms. These products tend to be more aligned with casino market applications and many of our major customers have adopted products from the High-End family, including the QX-40, QX-50 and recently launched QX-60. In 2015 we launched a new "Ultimate" family of products, the first generation of which was called QMax-1.The Ultimate family of products represent the highest performance variants in Quixant's portfolio and promise graphics performance similar to consumer video games consoles. This opens a new segment of the machines for Quixant to drive.

We have also continued to be successful in winning business in casino "systems-type" product. These products sit alongside the machines which the players enjoy in the venues and provide infrastructure to facilitate things such as progressive jackpots. The computer platform requirements are very similar in nature to those for installation in the electronic gaming machines, but there are subtle differences which Quixant has experience of catering for. Whilst a lower volume market, we remain successful in growing our sales volume in this area. We won a new customer in 2017 for a jackpot controller which falls into this category.

During 2017 Quixant experienced an issue related to an externally sourced component which was integrated into many of our products. This component, a DRAM module, had been used for several years, but due to a change made by the manufacturer, we were forced to change to a replacement version which subsequently demonstrated incompatibilities with the rest of Quixant's computer platform once installed in gaming machines. We therefore took an immediate, proactive response to swap the incompatible DRAM modules for an alternative. Whilst our prompt response mitigated damage to our brand and reputation, we spent around $1.6m to rectify the problem. We have since undertaken an extensive review of our validation procedures and, along with conducting more extensive testing over a longer period, we have also started developing a more relevant real-world test suite which more accurately replicates the behaviour of a real game. We believe this serves to mitigate the potential of such unidentified component issues affecting future sales. Product quality and reliability has been and will continue to be a major focus for management.

There continue to be potential new markets for our customers. However, there are always considerable uncertainties as to when these new markets may open most recently evidenced by the Brazilian senate rejecting one of the gaming bills in motion. Whilst we adopt a cautious stance to the timing and potential value of such market openings, we believe there continue to be significant opportunities. Japan is the most recent new market opportunities. Through Densitron's office in Tokyo, Quixant has been able to leverage the knowledge and experience of its personnel and cultivate exciting new opportunities with major manufacturers headquartered in Japan. We have won business with a major Japanese manufacturer, to which we have commenced shipments in early 2018.

Gaming Monitors

The growth of our Gaming Monitors business continues to be exceptional. We shipped over 31,000 gaming monitor products during the year, up from around 25,000 shipped during 2016. We have brought on both new customers as well as converted existing gaming platform customers with monitor products during the year. It is pleasing to see that customers view our product offering in monitors is attractive on a standalone basis.

Whilst much of our business in gaming monitors to date has been supplying a product which is very similar to others in the industry we have generated several ideas during the year for higher value products which offer tangible benefits to customers and differentiate them from the competition. We are working hard on developing these ideas in 2018 and bringing new monitor innovations to the market during the year.

We have enjoyed phenomenal growth in the Gaming Monitors business and as the business matures we expect the rate of growth will normalise. There remain considerable opportunities and while margins are lower than platforms the design-in period and research and development spend is lower.

Densitron Division

During 2017 we progressed our business strategy to target specific vertical markets. The broadcast industry has been identified as the first of these markets and during the year we exhibited at two major Broadcast trade shows: BVE in February at the ExCel exhibition centre in London and IBC at RAI conference centre in Amsterdam. These shows not only enabled us to meet and explore our product ideas with several new and existing customers, but crucially they also provided a clear insight into the broadcast industry trends and where the Densitron Division can support them.

Our initiatives in the Broadcast sector have been well received and we remain confident in the opportunities in this sector. The success of this realignment of the business to a specific vertical has encouraged us to seek to develop dedicated product groupings for other markets which will begin to be rolled out during 2018.

Densitron performed in line with management expectations during the year. We have invested significantly in the development of the Densitron Division principally to enable the business to be more market focussed and to differentiate it from its competitors.

Our dedicated embedded board design and development facility located in Slovenia is critical to the creation of more value rich embedded solutions. In concert with our operations in Taiwan they are launching a single board computer and a range of adaptor boards in the first quarter of 2018 that, when bundled with our range of displays enables Densitron to offer higher added value products to the market. This is being reinforced by a strengthened approach to marketing. Further hardware and software solutions are in development.

We see a continued need to invest in the Densitron division in 2018 to realign the business to deliver long term revenue growth and enhance profitability over the longer term.

Product Innovation and development

Innovation is key to the success of Quixant and our library of intellectual property is, I believe, second to none in our market. An indication of our continuing innovation is the number of patents we apply for and the number granted each year. At the end of 2016, we had seven patents under application and had been granted a further three. At the end of 2017, we had seven patents under application and had been granted a total of seven patents. During the year three new filings were made.

Quixant has been working on QMax-2, an exciting new product which builds on the design of QMax-1 in the Ultimate range of gaming platforms. With a considerably enhanced cooling solution, QMax-2 is designed to cater for the next generation of microprocessors and GPUs to power the highest performance gaming machines in the market. One of the patents granted during 2017 related to the thermal solution designed for QMax-2.

During the year, Quixant had been evaluating AMD's new RyzenTM Embedded processors which were launched in February 2018 publicly at a press event in which we participated as a launch partner. On the day of AMD's launch, Quixant had three new products based on the RyzenTM Embedded V1000 processor: Quixant X, QMax-2 and the QXi-7000. The products leverage all the benefits of the Quixant Gaming Ecosystem® and give gaming customers the quickest route to embrace AMD's highly anticipated, cutting-edge new processor technology. This is a key launch for Quixant and demonstrates not only our innovation skills but also our strong partnership with AMD.

Personnel and infrastructure

Alongside the changes to the Board, our programme of continuous enhancement and investment in the organisation has been evident during the year. 

We continued to attract high-quality talent to Quixant which we believe will bolster our expertise and enhance our sales and product development efforts going forward. In November 2017, we recruited Eric Walla to our Las Vegas office as Vice President of Business Development. Eric has a respected career in the gaming industry spanning over 17 years and has worked with several key technology suppliers. We also recruited Martin Salter in early 2018 as Business Development Manager located in the UK. Martin has extensive experience in the monitors business most recently in his role in Zytronic Displays.

On the product side we have been fortunate to recruit Chris Caress as a leader in our gaming monitor development team in Taiwan. Chris' previous role was in Scientific Games where he was heavily involved in their technology development, most recently in monitor products. Chris brings to Quixant a wealth of real customer technical expertise and we are excited at leveraging his knowledge to enhance our product offerings.

During 2018 we will continue to invest in the business to ensure that it is positioned to enable future growth. We shall be introducing a common enterprise resource planning system, which has been developed during 2017, enabling the Group to have a harmonised accounting, reporting and procurement platform that may be scaled as the business continues to grow in the future.

Outlook

2017 was another very successful year for the Group, with record profits being delivered alongside structural investment in the business. Whilst Densitron remains a business in a state of change, with short term investment we continue to be optimistic that long term revenue growth and margin expansion is achievable. In the gaming business, the outsourcing trend for manufacturers remains buoyant and we have several exciting opportunities which position us well for continued excellent growth. 

The 2018 financial year has started well, giving us confidence that the year will continue to be one of strong growth and now we anticipate delivering growth ahead of our previous expectations.

Jon Jayal,

Chief Executive Officer

Financial review

Revenue

The Quixant Group achieved revenues of $109.2 million in the year, an increase of 21% on 2016 ($90.4 million). Gaming division revenues were $71.1 million, an increase of 34% on 2016 ($53.0 million). This was split between Gaming platform revenue of $58.8 million a 35% increase on 2016 (2016: $43.7 million) and Gaming monitor revenue of $12.3 million a 32% increase on 2016 (2016: $9.3 million). Densitron division revenues were $38.1 million, an increase of 2% on 2016 ($37.4 million).

The growth in the Gaming division has largely been driven by the continuing development of existing customer relationships and the broadening of the customer base. In 2017 the Gaming division increased its number of customers to 218 compared with 180 in 2016.

Gross profit and gross profit margin

Our gross profit for the year was $37.0 million representing a gross margin of 34%. This compares with a gross profit achieved in 2016 of $32.1 million and a gross margin of 36%. The underlying gross margin for each part of the business has been maintained in the year with the reduction being caused by the cost incurred resolving the DRAM issue and the lower functional margin achieved on the growth in Gaming monitors.

Earnings, before interest tax, depreciation and amortisation (EBITDA) and profit before tax (PBT)

Adjusted EBITDA increased 26% to $19.7 million (2016: $15.6 million) and adjusted PBT increased 28% to $17.7 million (2016: $13.8 million). EBITDA increased 21% to $17.8 million (2016: $14.7 million) and PBT increased by 29% to $15.0 million (2016: $11.7 million). Adjustments to EBITDA are to add back the items set out in note 1 to the financial statements. In 2017 these totalled $1.8 million (2016: $0.9 million). Adjustments to profit before tax amounted to $2.7 million in 2017 (2016: $2.1 million).

As outlined in the Chief Executive's Report the Group experienced a significant issue relating to a DRAM module. The resulting cost to the Group in the year has been $1.6 million. The situation has been carefully managed in the year ensuring that there will be no additional future costs.

The share based payment charge has been added back since it is not a cash expense to the Company. It is a benefit to our employees which we are required to expense through the income statement in accordance with IFRS2.

Expenses

In order to maintain our market leading position, it is imperative that the business continues to invest in developing new products. During the year the Group expenditure on research and development increased by 51% to $5.3 million (2016: $3.5 million) representing 14% of gross profit (2016: 11%). These costs relate to investment activities principally undertaken in Taiwan, Italy and Slovenia. $1.6 million of these costs were capitalised (2016: $0.7 million) with amortisation for the year on total capitalised development costs of $1.0 million (2016: $0.9 million).

The management of overheads while ensuring that sufficient investment continues to be made to support the business is key. We have continued to strengthen the business across all areas in the year, including increasing our headcount to 176 people (2016: 160 people). Staff costs, being the largest contributor to overheads, increased by 13% in the year to $12.8 million (2016: $11.3 million).

Taxation

The tax charge for the year decreased to $1.9 million (2016: $2.4 million) representing a corporation tax charge of 12.6% on pre-tax profits (2016: 20.3%). The Group continues to benefit from enhanced tax reliefs available in respect of qualifying research and development expenditure and has also benefited from patent box relief and tax relief on the exercise of employee share options.

Earnings per share

Basic earnings per share increased by 40% to $0.1999 per share (2016: $0.1430 per share). Fully diluted earnings per share increased 41% to $0.1972 per share (2016: $0.1395 per share). Adjusted fully diluted earnings per share as set out in note 10 to the financial statements increased by 38% to $0.229 per share (2016: $0.166 per share).

Balance Sheet

The Group continues to maintain a strong Balance Sheet with net assets totalling $47.3 million (2016: $34.3 million).

Non-current assets have increased in the year to $21.3 million (2016: $20.9 million). The overall increase in the year is not significant but included within the total non-current asset balance is an additional investment in intangibles of $1.9 million and an amortisation of existing intangibles of $1.9 million (including amortisation of intangible assets relating to customer relationships and order backlog following the acquisition of Densitron of $0.8 million).

Current assets principally comprise inventory, trade receivables and cash. Inventory has increased to $21.2 million (2016: $12.9 million). While the level of inventory includes significant levels of last time buy items and items on long lead times, a buffer stock of key product lines and sufficient levels to ensure that near term production is met we still consider that it is too high. Consequently, tighter policies surrounding inventory purchasing have been introduced. Trade and other receivables have reduced in the year reflecting the reduction in the time taken to collect cash from customers.

Current liabilities are principally made up of trade and other payables. In the year trade payables reduced to $12.3 million (2016: $13.0 million). During the year the Group has taken advantage of the opportunity to secure better pricing from certain suppliers by settling invoices earlier. This has resulted in a reduction in the level of trade creditors despite the increase in the level of business in the year.

Cash Flow

The cash generated from operating activities in the year amounted to $8.1 million (2016: $10.1 million). The reduction in cash generated is largely due to the movements in working capital in the year which have been explained above.

The Group has continued to invest in the business, spending $2.3 million (2016: $1.4 million) on investing activities including $1.6 million (2016: $0.7 million on capitalised product development.

In the year $2.2 million has been used to repay borrowings (2016: $2.8 million). We continue to review banking arrangement and treasury arrangements around the Group to ensure that the level and cost of financing arrangements are appropriate to the Group.

Dividend

The Board intends to maintain its progressive dividend policy while continuing to invest in the business. As such, the Board proposes a dividend in respect of the year of 2.6p per share, an increase of 30% on the previous year (2016: 2.00p per share) payable on 18 May 2018 to all shareholders on the register on 12 May 2018. The corresponding ex-dividend date is 11 May 2018.

Cresten Preddy,

Group Finance Director 

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED 31 DECEMBER 2017 AND 2016

BALANCE SHEETS

AS AT 31 DECEMBER 2017

STATEMENT OF CHANGES IN EQUITY

GROUP

COMPANY

CASH FLOW STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2017 and 2016

NOTES

(forming part of the financial statements)

1. General information

Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted by the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs. The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2017.

The financial information set out in this document, which was approved by the Board on 21 March 2018, is derived from the full Group accounts for the year ended 31 December 2017 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2017, will be delivered to the Registrar of Companies in due course.

The Board of Quixant plc approved the release of this preliminary announcement on 21 March 2018.

The Annual Report for the year ended 31 December 2017 will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. 

Further copies will be available on request and free of charge from the Company Secretary.

2. Analysis of turnover

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

3. Earnings per ordinary share (EPS)

4. Capital and reserves

Share capital

Fully paid ordinary shares of 0.1p per share

The holders of fully paid ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

670,200 ordinary shares were issued following the exercise of vested options arising from issue 1 in 2013 (2016: 730,000) (see note 21). Options were exercised at an average price of £0.49 per share.

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

Dividends

The following dividends were recognised during the period:

After the Balance Sheet date dividends of 2.6p per qualifying ordinary share (2016: 2.0p) were proposed by the Directors. This dividend has not been provided for.

5. EBITDA and PBT reconciliation

EBITDA, adjusted EBITDA, PBT and adjusted PBT for the current and prior year have been derived as follows:

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

2. Share based payments expense has been excluded as they are not a cash based expense.

3. Other items of income and expense - where other items of income and expense occur in a particular year and their inclusion in PBT and EBITDA means that a year on year comparison of operational results is not on a consistent basis the directors will exclude them from the adjusted numbers. During the years under review the directors have excluded the costs arising from the replacement of faulty DRAM component due to its exceptional size and incomparability with the previous year. The adjustments to 2016 relate to non-operational events, specifically the costs in discontinuing a product line and associated termination payments.

6. AGM / Annual Report

Pursuant to AIM Rule 20, the Annual Report and Accounts for the financial year ended 31 December 2017 ("Annual Report") is available to view on the Group's website: www.quixant.com and will be posted to shareholders shortly. Quixant will hold its AGM on 24 April 2018.