QXT.L Regulatory News (QXT)

14 September 2016

Quixant plc("Quixant", "Group" or the "Company")

Interim Results

Quixant (AIM: QXT), a leading provider of innovative, highly engineered technology products principally to the global gaming industry, is pleased to announce its interim financial results for the six months ended 30 June 2016. The results include a full six month contribution by Densitron Technologies Ltd, acquired in November 2015.

H1 2016 Financial Highlights

1. Adjusted by adding back $0.150m in respect of share based payments (1H 2015: $0.097m)

2. Adjusted by adding back $0.150m in respect of share based payments and subtracting the associated tax effect of $0.030m (1H 2015: $0.097m adjustment less tax effect of $0.019m).

Operational Highlights

Nick Jarmany, CEO of Quixant commented: "I am delighted with the performance of the Group over the first six months of the year. Our core gaming business is going from strength to strength and has continued its track record of revenue and profit growth. I am particularly pleased to see our progress in the largest gaming machine manufacturers and our increasingly diversified customer base. As we continue to diversify our customer base and revenue streams our historic second half weighting will reduce.

The Densitron division since acquisition in November 2015 has performed well. We have worked hard to leverage the benefits of the combined business and introduced new strategic initiatives which we believe will enhance performance. We are also being introduced to the wider industrial marketplace and seeing opportunities to leverage Quixant's capabilities and infrastructure in a number of sectors.

Quixant is in an excellent position to continue its track record of profitable growth. Our share of the gaming market is growing fast, although in percentage terms is still relatively modest. We have an excellent reputation and are a highly trusted partner of many major gaming machine manufacturers. Densitron has grown strongly and we believe that the enhancements we have introduced will lead to continued growth in both revenue and profits.

We remain on track to achieve full year market expectations and are well placed to continue our record of strong growth."

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

For further information please contact:

About Quixant

Quixant, founded in 2005, designs and manufactures highly optimised computing solutions and monitors principally to 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 much of which is copyright protected.

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.

CHAIRMAN'S STATEMENT

I am pleased to report on a strong first half performance by the Group, with both the core Gaming division and recently acquired Densitron division performing well. We have delivered growth in both turnover and profits over the first six months of the year, with total turnover of $41.33m, adjusted EBITDA of $5.96m and pre-tax profit of $4.40m. The first full six month contribution from Densitron has made a significant contribution to the results. Quixant's core Gaming division continues to grow strongly both in turnover and profit as we successfully execute our strategy of converting major gaming machine manufacturers to outsourcing the supply and development of their gaming computer platforms to Quixant.

Pleasingly, we have also seen significant interest in Quixant's gaming monitor product range from both new and existing customers. Quixant made a strategic investment in 2015 in the monitor business, bringing on board a specialist team dedicated to business development and product innovation. We have already seen this translate into sales revenue in the first half of the year and a healthy pipeline of new business.

We have initiated several strategies since the acquisition of Densitron which we believe will enhance the division's growth, improve operational efficiency and profitability. Densitron's business has delivered strong performance for the first six months of the year and is well positioned entering the second half.

Quixant is a global business with a diverse international customer base and principally US dollar denominated sales and purchasing. As we also report in US dollars the Group is therefore largely unaffected by the turbulence in currency markets and the long term changes of the UK leaving the European Union.

We have continued to strengthen our balance sheet in the first half of the year and our strong cash generation has enabled us to reduce our net borrowings to $3.3m.

We enter the second half of the year on track to meet market expectations for the full year and with a wealth of opportunities for growth in 2017 and beyond in both gaming and Densitron divisions.

Michael Peagram

Chairman

CHIEF EXECUTIVE'S STATEMENT

The first half of 2016 has seen the Group continue to make excellent progress, achieving strong financial growth, creating increasing opportunities in the gaming market and making strategic enhancements in the Densitron division which we believe will deliver considerable benefits in the future.

Our turnover for the half was $41.33m (2015 1H: $13.59m), comprising Gaming division revenue of $21.20m, an increase of 56%, and Densitron division revenue of $20.13m. Adjusted pre-tax profit of $4.55m (Gaming division $3.43m, an increase of 27%, and Densitron division $1.12m) compares to adjusted pre-tax profit to June 2015 of $2.70m.

The Gaming division gross margin was 42% and Densitron division was 28%. Gaming division gross margin in percentage terms was slightly lower than the comparable period due to the significant increase in sales of monitor products which operate on a structurally lower margin.

Gaming Division

Sales in Quixant's Gaming division have been strong in the first half as we continue to grow our market share in both gaming platforms and gaming monitors. In May 2016 we announced the signing of a new contract with Ainsworth Game Technology, confirming Quixant as the exclusive supplier of the gaming platforms which power their machines until 2021, consolidating our position with a key customer. Although Ainsworth remains our largest customer, we have continued to diversify our customer base and revenues.

Our progress with Tier 1 customers continues, demonstrated by our success in winning a side project with a new customer during the first half of the year. We expect this project to generate volume sales in the first half of 2017. We also made volume shipments of gaming platforms to another Tier 1 customer for a project related to betting shops.

Following the commencement of volume production of gaming monitor products in the first half of 2015, we have seen continued growth in this business line, mainly from customers who were introduced in the second half of 2015. Going into 2016, we shipped significant volumes to two major customers. The gaming monitor business has a shorter gestation period than we typically see for gaming platform customers. Our belief that gaming customers would see benefit in being able to select a single trusted supplier for both monitor and computer platform solutions has been confirmed.

Densitron division

In November 2015, Quixant achieved a significant milestone in our first acquisition of Densitron Technologies. This business has progressed in 2016 contributing significant turnover and profit to our results. Several projects that commenced mass production during 2015 have continued during 2016 and significant re-orders have been received from existing customers. We have seen benefits in the first half of the year and expect them to continue into the future.

Since their acquisition, we have focused on strengthening Densitron operations through integration with Quixant personnel in Taiwan and the implementation of Quixant standards across the Group. We continue to refine the Densitron products and sales strategy into the future. It is pleasing to see the Densitron division performing well since the acquisition and we are confident that the improvements we have introduced will lead to further growth and profitability.

Infrastructure for growth

We have taken steps at a group level to create a scalable infrastructure which can support our long term growth objectives. These include establishing a central shared services team which will have responsibility for functions such as IT, HR and legal services.

We have also invested in the team in Taiwan, particularly in the area of gaming monitor and Densitron display solutions, and brought on board several experienced senior hires.

In July 2016 we made our first employee appointment in Australia. Traditionally this market has been serviced out of the UK and US, but given the importance of this market for Quixant's business and the major opportunities presented to us, we believe it is appropriate to have local presence. We identified a candidate who had previously worked as a hardware engineering manager at one of our customers and was responsible for the selection and integration of Quixant's platforms into their machines. This experience and ability makes him a valuable asset to develop our continued growth with our customers in this important region.

Financial review

Revenue for the six months ended 30 June 2016 was $41.33m (1H 2015: $13.59m), comprising Gaming division revenue of $21.20m and Densitron division revenue of $20.13m. Adjusted profit before tax of $4.55m (Gaming division $3.43m and Densitron division $1.12m) compares to first half 2015 adjusted pre-tax profits of $2.70m. Adjusted EBITDA increased 95% to $5.96m (1H 2015: $3.05m). Profit before tax and EBITDA are adjusted to add back share based payments of $0.150m (1H 2015: $0.097m).

Adjusted fully diluted earnings per share (EPS) for the period were $0.052 (1H 2015: $0.032). The adjustment for fully diluted EPS incorporates the tax effect $0.030m of adding back share based payments of $0.150m (1H 2015: $0.097m adjustment for share based payments less tax effect of $0.019m).

The Group continues to maintain a strong balance sheet with net assets at 30 June 2016 of $28.78m (31 December 2015: $25.65m). Intangible assets of $14.79m represent our investment in internally generated R&D together with the goodwill in respect of the acquisitions in 2H 2015. Full details of these acquisitions are provided in our published accounts as at 31 December 2015. Driven by net cash from operating activities of $6.07m (1H 2015: $5.12m) the Group has a cash balance of $8.51m, which compares to $3.86m at the end of December 2015. As a consequence, net debt has fallen to $3.36m, from its year-end level of $7.88m. We have reduced our debtors to $12.58m (31 December 2015: $19.48m), which is in part a reflection of the weighting of our sales in 2015.

The Group maintained a progressive dividend policy in making a payment at 1.5p per share, totaling $1.40m, in May 2016. This was in respect of full year 2015 and represents the third dividend payment made by the Group.

Outlook

Quixant's business is in excellent shape. Within the Gaming division, we have several opportunities to win major business with the largest gaming machine manufacturers and we have continued to invest in the business for many years to ensure we maximise our chances of success. Our decision to aggressively market our gaming monitor line has also yielded success in addressing our customers' desire to have a smaller number of trusted suppliers for the components in their machine. Consequentially, the impact is an increased spend with Quixant.

The Densitron division has also demonstrated growth. We believe that the benefit of the enhancements will lead to improvements in profitability and growth over time in the division.

Following a strong first half, we enter the second half of the year with confidence in achieving market expectations for the full year. Our positioning in several major opportunities also gives us strong confidence for continued growth in 2017 and beyond.

Nick Jarmany

Chief Executive

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2016 AND 2015 AND YEAR ENDED 31 DECEMBER 2015

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2016 AND 2015 AND YEAR ENDED 31 DECEMBER 2015

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016 AND 2015 AND AT 31 DECEMBER 2015

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2016, 31 DECEMBER 2015 AND 30 JUNE 2015

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2016 AND 2015 AND YEAR ENDED 31 DECEMBER 2015

General information and reporting entity

Quixant Plc ("Quixant") is a Public Limited Company incorporated and domiciled in England and Wales, whose shares are publically traded on the Alternative Investment Market (AIM) of the London Stock Exchange. The address of the Company's registered office is Aisle Barn, 100 High Street, Balsham, Cambridge, CB21 4EP. Quixant is a leading provider of innovative, highly engineered technology products principally for the global gaming industry. The Group designs and manufactures highly optimised computing solutions and monitors. In November 2015 Quixant acquired Densitron Technologies, which has a strong heritage in the sale of electronic display solutions to global industrial markets. This condensed consolidated interim financial information for the Quixant Group comprises the Company, its branch in Taiwan and its subsidiaries (the "Group").

The condensed consolidated interim financial information is neither audited nor reviewed and the results of operations for the six months ended 30 June 2016 are not necessarily indicative of the operating results for future operating periods. The condensed consolidated interim financial information has not been reviewed under IRSE 2410.

The financial information shown for the year ended 31 December 2015 in the interim financial information does not constitute full statutory financial statements as defined in Section 434 of the Companies Act 2006 and has been extracted from the Company's annual report and accounts. The Auditor's Report on the annual report and accounts was unqualified.

The value of intangible assets has increased significantly following the acquisitions made in 2015. Full details of these acquisitions were included in notes 2 and 12 to the Company's annual report and accounts for the year ended 31 December 2015.

1. Principal accounting policies

Statement of compliance

This condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2015. This condensed consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards. The reporting currency adopted by the Quixant Group is the US dollar as this is the trading currency of the Group.

This condensed consolidated interim financial report was approved by the Board of Directors on 13 September 2016.

Judgements and estimates

Preparing the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The preparation of financial information requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Quixant Group accounting policies. The areas involving a higher degree of judgement and estimation continue to relate to determining the point at which the criteria for development cost capitalisation have been met and inventory and bad debt provisions respectively. In addition, management considers the recoverable amount of goodwill and the assessment of the contingent consideration payable to be judgemental areas. Goodwill is reviewed for impairment at each reporting date or when indicators of impairment arise.

The Group is in the process of evaluating the goodwill on the acquisition of Quixant Deutschland GmbH which was estimated at 31 December 2015. The results of the evaluation will be incorporated into the Group accounts at 31 December 2016.

Segmental analysis

The Quixant Group determines and presents operating segments based on the information that internally is provided to the executive management team, the body which is considered to be the Quixant Group's Chief Operating Decision Maker ("CODM"). An operating segment is a component of the Quixant Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Quixant Group's other components. The operating segments' operating results are reviewed regularly by the CODM to make decisions about resources to be allocated to the segment, to assess its performance and for which discrete financial information is available. The financial information of the operating segments is set out in Note 2.

Significant accounting policies

The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2015.

EBITDA reconciliation

EBITDA for the current and prior periods has been derived as follows:

2. Business and geographical segments

The Chief Operating Decision Maker in the organisation is an executive management committee comprising the Board of Directors. They have determined the operating segments detailed within this report on which the business is managed. The Group assesses the performance of the segments based on a measure of revenue and EBITDA. The principal divisions are the Quixant Gaming division, which is the core gaming business, and the Densitron division, which comprises the Densitron operating segments in Europe, America, France and Japan. No single customer accounted for more than 20% of total revenue for the six months to 30 June 2016. The operating segments applicable to the Group are as follows:

· Quixant Gaming division.

· Densitron Europe

· Densitron America

· Densitron France

· Densitron Japan

The Densitron results are included for the period since acquisition on 10 November 2015 to 31 December 2015.

For periods up to 10 November 2015, the Group had determined that it had only one operating and reportable segment. All significant assets and liabilities were located within the UK, Taiwan and USA.

3. Taxation

4. Share capital

The Company paid a full year dividend of 1.5p per share for the year ended 31 December 2015 on 19 May 2016.

5. Earnings per ordinary share (EPS)

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the period.

6. Related party transactions

In June 2016 two Directors entered into a related party transaction. The wife of G P Mullins rented a house to a subsidiary company. The rent payable is determined on an arm's length basis. This subsidiary company provides the house rent free to J F Jayal.

There were no other related party transactions, other than the operation of standard service agreements with key management personnel.