Nexteq (NXQ) – the company formerly known as Quixant – delivered a six per cent increase in sales to $56.3m in the first half of 2023, driven by its gaming technology division, which retained the Quixant name after the group’s rebranding in May.
The division saw sales rise 9% to $34.3m as it delivered against the strong order book it started the year with, with most if its growth in the period the result of higher volumes. It shipped 25,900 boards in the period, a 13% increase, with deliveries of entry- and mid-level products rising particularly rapidly.
The company also started delivery of its turnkey gaming cabinets after receiving its first mass production order last year. It pointed to opportunities with other prospective cabinet customers, which should help it tap into the continued growth in the global gaming market as land-based gaming continues its post-Covid recovery, particularly in Asia where the gaming equipment market is expected to grow at a compound annual growth rate of 5% a year
The Densitron division, which supplies display components into industrial sectors, saw slightly weaker demand, with revenues flat year-on-year at $22m. It said that having forecast a strong 2023, worsening economic conditions had led some customers to request delays to deliveries.
However, a focus on higher quality revenues is driving improved margins – with gross margins up from 31.6% to 34.2% year-on-year - while its emerging broadcast technology division saw sales jump 10% to $3.4m.
Densitron has invested heavily in developing touch-screen technology for production control rooms, which have been late adopters of such technology due to the need for tactile feedback, a problem which Densitron appears to have overcome, and which is resulting in increased integration of its solutions.
Overall, the company delivered adjusted pre-tax profit of $5.9m, an 81% jump, and said it was on target to meet full year expectations of $12.9m, giving adjusted EPS of 14.9p. The company finished the year with net cash of $18.5m, up 43% year-on-year.
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With the global component shortage in the rear-view mirror, Nexteq has demonstrated its ability to deliver solid growth, particularly at the bottom line as it focuses on higher margin revenues.
That’s being supported by continued product development, underpinning its ability to upsell customers from component purchases to full solutions. With 20 patents under its belt and plenty of cash in the bank to continue such focused investment, growth is set to continue.
Broker finnCap has a 250p price target on the shares, double the current 126p, at which the shares trade on a forecast PE of just 10x and 5x EV-to-Ebitda. That rating which fails to reflect the group’s competitive strengths and potential for further profit growth as its transition to becoming a solution supplier continues.