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Caught in Quixant

Customers sneezed and the gaming group caught a cold
September 18, 2019

There has been trouble down under for Quixant (QXT) this year. The gaming and broadcast technology group brought forward its half-year results announcement by a week to warn that weakness in orders would lead profits for the full year to fall in the range of $12m-$13m (£9.6m-£10.4m). Prior to the announcement, house broker FinnCap had been forecasting profits of $22m. 

IC TIP: Hold at 164p

The market reaction – which was to wipe out almost half of the group's market value – might have seemed extreme given the group’s revenue is typically second-half weighted, but follows a warning in January of weaker 2018 profits. 

Quixant produces technology used in gambling machines and management explained that, while it had not lost any customers, some of its largest customers in Australia had suffered a large drop-off in sales due to increased competition. Ainsworth, its largest customer in the region, has a raft of new products, but does not expect them to yield an improvement in sales until the second half of next year.

Part of the problem is the group’s reliance on a small number of large customers. It has been working to reduce this, and management expects sports betting terminals and a major new Japanese customer to start delivering growth in 2020 and beyond.

FinnCap is forecasting adjusted pre-tax profits of $12m for the full year, giving EPS of 15.6¢, compared with $18.2m and 27.4¢ in 2018.

QUIXANT (QXT)    
ORD PRICE:164pMARKET VALUE:£109m
TOUCH:162-165p12-MONTH HIGH:479pLOW: 145p
DIVIDEND YIELD:1.5%PE RATIO:12
NET ASSET VALUE:89¢*NET CASH:$12.4m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201850.36.127.57nil
201941.92.963.48nil
% change-17-52-54-
Ex-div:na   
Payment:na   
*Includes intangible assets of $15.5m, or 23¢ a share £1=$1.25