14 April 2021

Quixant plc

("Quixant" or "the Group")

Final Results

Quixant (AIM:QXT), a leading provider of innovative, highly engineered technology products principally for the global gaming and broadcast industries, announces its final results for the year ended 31 December 2020.

FINANCIAL HIGHLIGHTS

1. Adjusted by adding back items included in the adjusted PBT reconciliation in note 1 to the financial statements totalling $3.3m (2019: $1.3m).

2. Adjusted by adding back the items included in note 1 above and subtracting the associated tax effect as set out in note 9 to the financial statements. In 2020 these amounted to $2.7m (2019: $1.0m).

OPERATIONAL HIGHLIGHTS

Jon Jayal, Chief Executive Officer of Quixant, commented:

"Considering that our key global gaming market was so materially impacted in 2020 due to the pandemic, I believe that to report an adjusted profit before tax and an improvement in our net cash position from FY 2019 is a remarkable achievement. It reflects the resilience in our Densitron business, the strength of the relationship we have with our customers and a robust balance sheet entering the year."

"2021 has started strongly with healthy order intake such that we now have 106% coverage of internal budget for the first half of the year. As the gaming industry evolves out the crisis, we are bringing pioneering new offerings to market which we believe will support customers in their recovery.  It is also pleasing to see double digit growth in our Densitron broadcast business despite the headwinds caused by the pandemic.  The electronic component shortages present us with short-term supply chain risks, but we continue to utilise our strong cash position to mitigate the impact of these on 2021 trading."

"The Board is confident in the future prospects of the Group which is reflected in our decision to recommend payment of a dividend."

Presentation and overview video

Quixant is hosting an online presentation open to all investors today at 4.45pm BST. Anyone wishing to connect should register here: https://www.investormeetcompany.com/quixant-plc/register-investor

A video overview of the results featuring CEO Jon Jayal and Interim CFO Andrew Jarvis is available to view here: http://bit.ly/QXT_FY20_results_overview

Enquiries:

About Quixant

Quixant, founded in 2005, designs and manufactures highly optimised computing solutions and monitors principally for the global gaming and broadcast industries. The Company is headquartered in Cambridge in the UK, with offices throughout Europe, North America and Asia.  Quixant has its own manufacturing and engineering operation based in Taiwan and software engineering and customer support teams based in Italy and Slovenia. 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.

CHAIRMAN'S STATEMENT

Resilient trading through unprecedented gaming market disruption

When we reported on our 2019 annual results, many of the countries in which the Group operates had moved into government mandated lockdown measures and we were entering into a second quarter in which we saw an unprecedented closure of almost all global land-based gaming markets.  This had a profound impact on our gaming business, which saw an 87% year on year decline in revenues in the second quarter of 2020.  During this time Densitron continued to trade resiliently, supported by its highly diversified industrial sector exposure.

Thanks to our preceding years of strong profitability, we entered this period of uncertainty with a healthy cash balance.  This allowed us to make a measured and creative response during the tumultuous period that followed, as well as positioning us strongly for expected future growth as normal trading resumes.

We provided extraordinary support to our gaming customers who faced significant financial and operational challenges, some of which continue today.  These times of crisis have confirmed our position as a close outsource technology partner for them which in the long run positions us well for new business.  It has also provided us with the opportunity to re-evaluate and refresh our gaming market propositions and align them with the challenges the market is facing in the recovery.

We undertook some streamlining of our overheads during the year, but importantly avoiding cost reductions which would inhibit our ability to take advantage of the re-emergence of normal demand across our end markets.

We made progress in strengthening the senior management team, executing our succession plan for the business founders and implementing a new corporate governance framework.  Having successfully hired senior management in the Gaming and Densitron businesses over the last 18 months, we have established an Executive Committee.  As part of this transition, two of the founders, Nick Jarmany and Gary Mullins, moved to non-executive roles on the board in May 2020 and JJ (C-T) Lin stepped down from the board.

In January 2021 we welcomed Francis Small to the board as senior independent non-executive director.  He has had a distinguished business and professional career and I am delighted with the contribution he has already made. 

I believe the business is in a good position with high quality leadership, a robust balance sheet and strong growth opportunities. 

I joined Quixant some months before the AIM flotation in 2013 and after nine years of service, now is an appropriate time for me to retire.  I shall therefore step down from the Board at the AGM and I am delighted that Francis Small will take over as Chairman. 

While we remain necessarily cautious about the outlook, we are confident in the resilience of our business and its continued cash generation.  We are therefore recommending payment of a dividend of 2.0p per share for 2020 (2019: no dividend paid).

Michael Peagram
Chairman

CHIEF EXECUTIVE'S REPORT

Profitable second half and growth in net cash balance

I am pleased to report that a return to profitable trading during the second half of the year enabled the Group to post an adjusted profit before tax for the year ending 31 December 2020 of $1.3m (2019: $10.7m) corresponding to a full year reported pre-tax loss of $2.0m (2019: profit of $9.4m).  Full year Group revenue of $63.8m was down 31% on prior (2019: $92.3m) due to the impact of COVID-19 weighing heavily on demand in the gaming business, which ended the year with revenue of $30.3m (2019: $56.2m).  Densitron traded resiliently through the period and, despite supply chain challenges and weak demand across certain sectors, posted revenue of $33.5m (2019: $36.2m).

Careful cash management, recovery in the gaming business and stable Densitron trading enabled us to grow our net cash position from $16.1m at the start of the year to $17.4m by December 2020. 

Gaming Business Review

After a strong first quarter in which revenue was up 54% year-on-year, the gaming business experienced a sharp decline in demand in the second quarter (down 87% on prior year) as almost all global gaming venues closed their doors due to the pandemic. 

We shipped 22,000 gaming platforms during 2020 compared to just over 40,000 in 2019, with a higher concentration of revenue from mid-range product than in the previous year.  This was driven by sustained demand through the year from European customers for our QXi-6000 and new business wins in the year using its successor - the QXi-7000.  Conversely high-end product sales from the casino markets were down year-on-year due to COVID-19 related weakness in customer demand.

Despite having retained all our customers through the year, gaming monitor shipments were weak due to the pandemic and contributed $2.8m of revenue (2019: $9.6m).  We nonetheless continue to see opportunities ahead for our monitor propositions and, in particular, our more niche button deck products. 

Careful management through second quarter shutdown

Our gaming customers saw an immediate cessation of both machine sales and revenue share income in March 2020 which put many under significant financial pressure.  During this extremely challenging period, our primary objectives were to:

1.     Maintain close dialogue with the senior management of our customers to understand their position, evaluate market sentiment and plan for the recovery;

2.     Establish payment schemes to ensure outstanding debts owed to us were settled while being sympathetic to customers' cashflow challenges; and

3.     Protect our cashflow through working with our suppliers to defer our orders with them where possible.

I am proud of the team's performance through this period.  Our customers faced difficult business decisions in some cases in order to survive the second quarter with the sharp decline in revenue driving widespread salary cuts, furloughs and redundancies, payment deferrals and debt raises to supplement liquidity. 

The result of the actions by our team has been to secure settlement of outstanding debts and demonstrate our commitment and partnership to our customers, all of whom we continue to supply.  I believe this has significantly strengthened customer relationships and led to new business opportunities as the recovery continues. 

Improvement in second half and strong business potential generated

The third quarter saw a significant improvement in business activity with a recommencement of order intake and even new business wins with a number of European customers, including one which entered mass production during the fourth quarter.  This improvement in activity was such that second half gaming revenues were 55% higher than first half revenues.  The gaming business has a strong order book in 2021 with coverage of 105% of budget to June.

The pandemic has certainly provided a catalyst for change in the gaming market.  While gaming revenues continue to build, the replacement market remains muted as working capital challenges face both the casinos and the game manufacturers.  In September, we announced our intention to investigate new business models with our customers including lease programs for our computer boards and monitors and fully populated turnkey hardware cabinet solutions.  I am pleased to report that substantial progress was made during the second half of 2020 with our first pilot customer for a lease model which we expect to commence shipments in H2 2021.  These new business models set a precedent for a new way of manufacturers bringing their gaming offerings to market and increase their ability to focus resources on game design.

While new business generation was challenging in a year when game manufacturers were mainly concerned with survival, nonetheless we converted new business during the second half which we expect to deliver in excess of $5m of revenue in 2021.

Supply chain challenges persist

The disruption to the gaming business in 2020 was not isolated to customer demand - throughout the year we saw volatile input stocks due to the lockdown and subsequent reduced production capacity across mainland China and Taiwan.  Our strategic inventory holding through the year enabled us to meet our delivery commitments to customers. 

In December 2020, we started to see more acute shortages in the semiconductor market impacting our supply chain and took action to bolster our strategic inventory.  Since the start of 2021, the semiconductor shortages have worsened as booming demand for electronic products has outstripped semiconductor component production capacity.  We are experiencing manufacturers' unexpectedly issuing end-of-life notices on parts, more than a doubling of their normal lead times and serving price increases on the components.  We are utilising our strategic inventory holdings to enable uninterrupted customer deliveries through Q1 but expect to see some impact from Q2.  In mid-January the Board took decisive action to allocate up to a further $5m of our cash reserves towards further strategic stock purchases to support anticipated demand over the next 6-9 months of the year and mitigate the short-term supply chain risks. 

Sports betting progress delayed

We demonstrated our QSBT-1000 sports betting terminal at the ICE Show at ExCel in February 2020.   With the expectation of an explosion in sports betting around the industry, this was well positioned for new business. 

Unfortunately, the second quarter shutdown in most retail sports betting outlets delayed sports betting progress through 2020.  We remain optimistic about the opportunities in the market and have live prospects with several vendors as part of our full cabinet offering.

Product Development

We launched a new gaming platform at the low end of the range in March 2021 - IQ-1.  This is the first of our revised, streamlined roadmap of products. During the second quarter, we learned of a major change in strategy from one of our key suppliers, AMD, who supply microprocessors and graphics accelerators which are used in all our products.  AMD, despite being very popular in the gaming industry because of their attractive pricing and high-performance graphics processors, have decided to defocus on the casino gaming market, as well as several other industrial sectors.  Instead, their future strategy is to focus on data centre and networking devices alongside their client business.

We have therefore committed to a roadmap using Intel processors with some of our higher end products using NVIDIA graphics accelerators.  We already have QMax-2i which uses Intel technology but will gradually be rolling out further gaming platforms using Intel, the first of which will be sampled during May 2021.

While we do not expect to undertake any new product designs using AMD, we expect to offer gaming platforms already in production until the end of the decade. 

The consequence of this one-off repositioning of our product portfolio was a derecognition of $1.5m of capitalised R&D in the year.

Densitron Business Review

The Densitron business celebrated its 50^th anniversary in 2020, with the origins of the firm tracing back to 1970 in Japan.  There have been countless economic and financial shocks during this period which the business has weathered, and it is therefore unsurprising that, through the pandemic in 2020, Densitron continued to trade resiliently.  Revenues in 2020 were $33.5m, down 7% on prior year primarily due to a weak first quarter (2019: $36.2m).  While the Gaming business suffered more critically from demand weakness, Densitron was immediately affected by the Chinese manufacturing shutdown in February which caused delays to shipments.  Consequentially the first quarter was down 31% year on year, with the second and third quarters up 7% and 8% respectively.

From a Group perspective, the resilience of the Densitron business was essential in the maintenance of our strong cash position and ability to take a more measured approach to streamlining cost.  During the gaming shutdown in the second quarter of 2020, we redeployed some of the Group's product development and operational resource to Densitron which enabled accelerated progress on development of the new Densitron 2.0 and 3.0 product lines.

Double digit broadcast business growth

Our strategy of market focus and elevation of the value proposition from pure display products towards integrated Human Machine Interface (HMI) solutions is showing early signs of success despite the headwinds caused by the pandemic.  Excluding IDS, our broadcast sector revenue grew 13% to $3.8m.  Many of the pipeline opportunities due to enter mass production during 2020 were delayed but we expect these to contribute to Densitron revenue in 2021. 

IDS, the broadcast hardware and software solution which we acquired in 2019, had a difficult year because the current revenue generation model relies on our field technicians installing equipment into broadcast venues which was generally prohibited during the year due to the pandemic. The future release of the IDS software allows for virtualised deployments on a licensed basis, and we are starting to introduce this service to potential customers. 

Double digit medical sector growth 

Densitron medical exposure, the single largest sector exposure in the business, grew 17% in 2020 to $8.2m.   We agreed a corporate policy to support medical market customers over other business to help with their rollout of solutions to tackle the pressure being created by the pandemic.  We were involved in several high-profile projects including supplying displays to manufacturers of COVID-19 test equipment and ventilators.

We believe there are long term opportunities to build on our status as a trusted supplier of displays into medical equipment.  Many of the innovative HMI and control solutions we have developed for broadcast can be applied to the medical sector and we are starting to explore their usage for a range of medical equipment, leveraging the strong customer relationships already established.

One example of such an application is use of our IDS technology to enable simple control of cameras used in operating theatres to record surgical procedures.  Beyond this, there is scope for greater integration into, for example, other non-life-critical operating theatre systems such as those used for lighting and entertainment.

Component shortages and price inflation

Densitron has seen evidence of material future price inflation from many of our Chinese display suppliers.  Combined with the US trade tariffs on goods imported from China, this will put pressure on our gross margin.  We have engaged with our customers to pass on the tariffs, enforce price increases across many of our product lines and also extend customer order visibility to enable us to increase our purchasing power.  In aggregate these initiatives have so far proven positive with no degradation to gross margin experienced and no net loss of business and have also led to us having 107% order coverage of the revenue budget in the first half of this year.

Management Team Changes

Over the last two years, we have welcomed several leaders to the business in key roles.  After Simon Jones joined in April 2019 to lead the Densitron business, Abhinay Bhagavatula joined in September 2019 as Gaming CTO and Duncan Faithfull joined in January 2020 as Gaming CCO.  We have since promoted them to the Executive Committee.

After Guy Millward, CFO, left the business in August 2020, we brought Andrew Jarvis in as interim CFO.  Andrew has since made considerable improvements in our management information and reporting, leveraging the benefits of our global SAP system.  We will be evaluating our options for installing a permanent CFO in the second quarter.

As he retires from the board, I would like to thank Michael Peagram for his nine years of service to the business.  His commitment, experience and professionalism have been invaluable to the business.  We are delighted to have Francis Small onboard and I am looking forward to working closely with him as he assumes his role as Chairman.

Outlook

With a 55% improvement in second half trading compared to the first half, we enter 2021 with positive momentum towards full year growth.  Trading during the first three months of this year has been strong and ahead of last year and our Group order coverage for the first half of 2021 is already 106% of internal budgets. In the context of the supply chain issues previously flagged, importantly we have secured sufficient parts to fulfil most of the orders. With 95% of US casinos currently open and with positive sentiment they will remain open, the signs for the gaming market are positive. 

We are crucially aware that the future remains uncertain and any exponential spread of the pandemic in the US could materially impact the gaming industry although we believe the experience since the second quarter of 2020 puts a lower probability on that scenario. We are working through the unprecedented electronic component shortages and recognise the risk of delays to shipments and inflation in prices over the coming months.  We are working through contingency plans with customers and suppliers to mitigate this risk.

Our strong balance sheet and strengthened customer relationships, combined with the new business propositions targeted towards changes in our end markets give the Board confidence in tremendous opportunities for the Group ahead.

Jon Jayal

Chief Executive Officer

Financial Review

The Quixant Group achieved revenues of $63.8m in the year, down by 31% on 2019 revenues of $92.3m due to the significant impact of COVID-19.

Revenue

Gaming business revenues were $30.3m, a decrease of 46% on prior year (2019: $56.2m). This was split between Gaming platform revenue of $27.5m, a 41% decrease on prior year (2019: $46.6m), and Gaming monitor revenue of $2.8m, a 71% decrease on prior year (2019: $9.6m). Densitron division, which includes IDS, revenues were $33.5m, a decrease of 7% on prior year (2019: $36.2m).

The decline in Gaming revenues was due to the closures across the gaming market caused by government response to the COVID-19 pandemic negatively impacting demand for our products.  This resulted in very weak second quarter trading in the Gaming business, with some recovery in demand seen during the second half of the year.  Densitron, which has sector exposure across a broad range of industrial markets, was less heavily impacted by the pandemic and despite some delays due to supply chain challenges, continued to trade profitably through the year.

Gross profit and gross profit margin

We generated gross profit during the year of $20.1m (2019 restated: $32.1m) representing a gross margin of 31% (2019 restated: 35%).  The decline in margin is due to an increased proportion of our Group revenue being generated by Densitron, which operates at lower gross margin than Gaming.  Underlying Gaming and Densitron gross margins were consistent with previous years.  We have seen price inflation in our supply chain since the second half of 2020 primarily due to component shortages and the imposition of import tariffs for Densitron goods entering the US from mainland China.  We have acted to increase our prices to customers to protect our gross margin from this price inflation.

Profit Before Tax (PBT)

Adjusted pre-tax profit decreased by 88% to $1.3m (2019: $10.7m).  Adjustments to pre-tax profit were $3.3m in 2020 (2019: $1.3m) and comprise share-based payments of $0.2m, the write off of $1.5m of capitalised research and development expenditure due to unexpected early end-of-life of certain third party components, restructuring costs of $0.7m and an amortisation charge of acquired intangibles of $0.9m.  Reported pre-tax profit declined to a loss of $2.0m (2019: Profit before tax of $9.4m). 

Expenses

During the year the Group expenditure on research and development reduced to $4.3m (2019: $6.6m). These costs relate to investment activities principally undertaken in Taiwan, Italy, UK and Slovenia. $1.7m of these costs were capitalised (2019: $2.2m) with amortisation for the year on total capitalised development costs of $2.4m (2019: $1.4m).

To mitigate the effect of the decline in revenue on profitability, we took action to streamline full year operating costs by 3% to $21.9m (2019 restated: $22.5m) - which includes $3.3m of adjustments to the reported PBT.  This Group has seen a reduction in headcount from an average of 223 people in 2019 to 209 in 2020.

Taxation

The tax charge for the year was $1.0m (2019: $1.1m).  There has been limited reduction in the tax charge when compared to 2019, as a result of taxable positions in overseas entities.

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.

Earnings per share

Basic earnings per share decreased by 136% to -$0.0445 per share (2019: $0.1252 per share). Adjusted fully diluted earnings per share as set out in note 9 to the financial statements decreased by 103% to -$0.0040 per share (2019: $0.1396 per share).

Balance Sheet and Cash Flow

Non-current assets decreased in the year to $24.7m (2019: $25.6m) mainly due to the derecognition of R&D discussed above. Inventory has increased to $21.6m (2019: $20.2m). Raw material inventory has remained in line with 2019, and work-in-progress and finished goods have increased as we await to ship committed products to customers who have requested later delivery dates. 

The cash generated from operating activities in the year amounted to $4.0m (2019: $14.9m). The reduction in cash generated is largely due to the losses incurred in the year due to the pandemic. The Group has reduced its investments in the business, spending $2.2m (2019: $5.3m) on investing activities, in line with trading conditions.

Government COVID-19 support

The Group has received government grants to support payroll costs during the COVID-19 pandemic.  This includes $217k for Quixant Taiwan and $32k for Quixant Italia. These grants and helped the business to maintain employment during the pandemic.  A government-backed, revolving credit facility of £7.5m granted in the UK - however, this has substantively not been used in 2020, with only £25k drawn down to maintain the facility. The business seeks to close this facility before the 2021 AGM. In the year, we have also received cash from COVID-19 support loans in France and the USA, totaling $0.9m, of which $0.3m has been forgiven in the USA.  $0.5m in France will be repaid in 2021, and we expect the other $0.1m loan in the USA to also be forgiven in 2021.

Dividend

While we suspended payment of a dividend in 2020 due to the risks facing the business in relation to COVID-19, we maintained a strong cash position through the year and saw profitable trading in the second half of the year.  The Board therefore proposes reinstatement of a dividend for the year ended 31 December 2020 of 2.0p per share (2019: nil) payable on 14 May 2021 to all shareholders on the register on 23 April 2021. The corresponding ex-dividend date is 22 April 2021.

Andrew Jarvis
Interim Chief Financial Officer

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

For the years ended 31 December 2020 and 2019

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.

* See prior year adjustment note (note 5).

CONSOLIDATED AND COMPANY BALANCE SHEETS

As at 31 December 2020 and 2019

These financial statements were approved and authorised for issue by the Board of Directors on 14 April 2021 and were signed on behalf of the Board by:

Jon Jayal

Director

Company registered number: 04316977

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2020 and 2019

GROUP

COMPANY

CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2020 and 2019

NOTES TO 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 accounting standards in conformity with the requirements of the Companies Act 2006 ("Adopted IFRSs"), this announcement does not itself contain sufficient information to comply with Adopted IFRSs. The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2020.

The financial information set out in this document, which was approved by the Board on 14 April 2021, is derived from the full Group accounts for the year ended 31 December 2020 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 2020, will be delivered to the Registrar of Companies in due course. The Board of Quixant plc approved the release of this preliminary announcement on 14 April 2021.

Pursuant to AIM Rule 20, the Annual Report and Accounts for the financial year ended 31 December 2020 ("Annual Report") is available to view on the Group's website: www.quixant.com. Quixant will hold its AGM on 6 May 2021.

Going concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of these financial statements.

Following the global pandemic in 2020, the world continues to recover as economies begin to re-open following the rollout of COVID-19 vaccines. Governments around the world continue to impose various restrictions on economic activity, the movement of people, and various other initiatives to minimise the opportunity for the disease to spread.

The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of signing the financial statements. Ongoing effects of the pandemic on the forecasts include delays in recovering debts from customers who may be facing financial difficulties, further drops in customer demand in the coming months despite the recovery seen in H2 2020, and the uncertain timing of sales recovering to levels prior to the pandemic.

The Board considered their reasonably plausible but severe downside scenario where 2021 reported revenues were halved compared to forecast, and the performance expected in the 2021 Budget being achieved in 2022 instead. The total revenues modelled in 2021 were lower than the extrapolated annual revenue based on Q2 2020 performance, when the impact of COVID-19 was most significant. In this scenario, the Group will have sufficient cash reserves and working capital to continue operating as a going concern beyond the 12-month period analysed.

The Board's other reasonably plausible but severe downside scenario can be viewed as similar to trading conditions that were experienced in 2020.  In Q2 2020, due to the global pandemic and a significant lockdown in the USA, Gaming revenues dropped off in Q2 2020, and but then recovered through H2 2020.  However, rather than the ongoing trading conditions due to the pandemic, the challenge in 2021 might be related to stock and component availability.  Therefore, the Board has considered a scenario where orders are not completed, and revenues are not received, in Q3 2021, and resume in Q4 2021. This situation would also not cause the Group any difficulty with cashflow as per the analysis.

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 reductions in controllable costs.  There would also be an opportunity to sell certain property and inventory assets to accelerate cash generation and/or mitigate risk.

Consequently, the directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of these financial statements and therefore have prepared these financial statements on a going concern basis.

2. Profit Before Tax reconciliation

Profit Before Tax and adjusted PBT for the current and prior year have been derived as follows:

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

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

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

4.     Other items of income and expense - where other items of income and expense occur in a particular year and their inclusion in PBT means that a year on year comparison of year on year results is not on a consistent basis the directors will exclude them from the adjusted numbers. During the year under review the directors have excluded restructuring costs in respect of employee departures.

3. Earnings per ordinary share (EPS)

4. Subsequent events

The Group continues to monitor and assess the impact of COVID-19 on the performance of the business in 2021.  The Directors are confident in the Group's ability to react to any further economic uncertainties that may occur in 2021 and will continue to utilise its experiences from 2020. The global component shortage is likely to have an impact on procurement. The Board has approved a plan to purchase additional buffer stock to support the 2021 order book and protect the business from ongoing global shortages, which will be managed within our current working capital structure.

5. Prior year adjustment

During the year, Quixant plc identified that a consolidation journal between operating expenses and cost of sales in respect of overheads absorbed in the production of finished goods, was omitted in the prior year.

As a result, the cost of sales previously recognised in 2019 of $58.0m has now increased by $2.2m whilst the operating expenses recognised in 2019 of $24.7m has now decreased by $2.2m. This adjustment has no effect on the profit before tax and profit for the year for 2019.