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Quixant 25 March 2014



Some solid and in-line numbers this morning  from QUIXANT, the company serving manufacturers of gaming machines.


As previously mentioned, I was scheduled to speak with management and that subsequently took place earlier today, proving very worthwhile.


Firstly, a look at the numbers, which are reported in Dollars.

  • Revenue came out at $24.2m up 12%
  • EBITDA of $6.4m an increase of 25%, with diluted EPS of 7.6c.
  • Adjusted Pre-tax profit $6m
  • Maiden dividend announced of 1p per share
  • Net cash position of $4.9m

The results today, would seem to demonstrate that Quixant has the ability to sign up new customers, having largely been aligned to the Australian game manufacturer Ainsworth.

While there still exists a strong relationship with that company and a deal was recently signed, cementing the partnership until 2019, Quixant has announced that it has commenced work with  with a new Tier 2 customer which is in addition to two previous Tier 2’s already signed up. 




That should bode well and speaking with the company this morning there is not just a sense of optimism, but confidence in the future.


By the end of this year Ainsworth will account for slightly less than 50% of the revenue against a current 72% as the new wins make their mark.


Perhaps importantly, the current order book is double the size of last year and prospects for further wins look solid.    


While it is tempting to think of the gaming machines as typically casino based, that isn’t the case, as management informed me.

Many machines are located in bars or cafés particularly in Italy, where the company has a strong presence.


And it seems that new markets are opening up for the manufacturers of gaming machines too, as Countries look for new ways of gaining in tax revenues.  

Japan, Macau and Taiwan were mentioned in this area, which adds to the view that the Industry is alive and well.


In terms of the internet impacting on the business, it appears that this is not something the Industry particularly sees as a threat and it can actually prove to be a positive feed through.


Quixant, has not only made excellent progress in broadening its customer base, which according to management has been enhanced by its decision to float, but is delivering on the numbers.  


Forecasts for 2014 are for revenues to increase again to $31.5m with an adjusted pre-tax profit of $7.1m.

The board believe there are ample opportunities for growth and with Quixant currently only serving around 5% of the available market there  is plenty of potential growth on offer.

I enquired about possible acquisitions and while they would not dismiss it, this isn’t an area they are actively pursuing, as they feel there is plenty for them to be going on with.


The real game changer for the future however could come in the shape of Tier 1 manufacturers which are expected to go down the same outsourcing route as that adopted by Tier 2 players such as Ainsworth and would make economic sense for them.


If Quixant can make serious in-roads here, than the numbers could well really ramp up in the coming years.  


Naturally downside exists, sales could possibly become lumpy and the shares are already highly rated.


Still, management appear confident in the future and the shares have held up well today closing 4p higher at £1.47p.


Broker FinnCap has now initiated coverage with a £1.95p target while Numis’s target price stands at £1.90p.


I covered these recently in the weekly column, but am currently in the process of arranging a visit to their Balsham based HQ near Cambridge, for a more in depth look at the business.  















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