Corporate acquisitions often look good on paper or in investment bankers' PowerPoint presentations, but folding them into a fast-moving business can be extraordinarily difficult. Fortunately for shareholders in computer game hardware supplier Quixant (QXT), November 2015's acquisition of electronic display specialist Densitron already looks vindicated.
Excellent sales from the new company meant revenues for the first six months of 2016 were just $0.5m (£0.38m) below the 2015 total, but a dip in the overall profit margin was more than compensated for by a $1.1m adjusted pre-tax profit contribution in the period. Management reports that "the implementation of Quixant standards across the group" has helped to increase repeat business, which was previously a weakness at Densitron.
Organic growth was also very strong. Adjusted cash profits from the core gaming division increased by 52 per cent to $4.7m, as sales of the gaming monitor product range increased, and Quixant continued to successfully convince the largest gaming machine manufacturers it can outsource the manufacture and supply of specific machines to particular markets.
Taking into account Quixant's growing pipeline of 'side project' opportunities, FinnCap has set full-year forecasts for $13m in adjusted pre-tax profits and EPS of 15.7¢, rising to $15.1m and 18¢ in 2017.
QUIXANT (QXT) | ||||
---|---|---|---|---|
ORD PRICE: | 243p | MARKET VALUE: | £157m | |
TOUCH: | 236-250p | 12-MONTH HIGH: | 245p | LOW: 133p |
DIVIDEND YIELD: | 0.5% | PE RATIO: | 27 | |
NET ASSET VALUE: | 45¢* | NET DEBT: | 11% |
Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
---|---|---|---|---|
2015 | 13.6 | 2.6 | 3.2 | nil |
2016 | 41.3 | 4.4 | 5.4 | nil |
% change | +204 | +69 | +68 | - |
Ex-div: na Payment: na £1=$1.32. *Includes intangible assets of $14.8m, or 23¢ a share |