ZYTRONIC PLC

Interim / Quarterly Report • May 12, 2020

National Storage Mechanism | Additional information

RNS Number : 5615M

Zytronic PLC

12 May 2020

	12 May 2020

Zytronic plc

("Zytronic" or the "Company" and, together

with its subsidiaries, the "Group")

Interim Results for the six months ended 31 March 2020 (unaudited)

Zytronic plc, a leading specialist manufacturer of touch sensors, announces its consolidated interim results for the six months ended 31 March 2020.  Comparative data is given for the six months ended 31 March 2019, except where indicated.

Overview

·    Group revenue of £7.4m (2019: £9.5m), impacted by decreases in Gaming, Financial and Vending revenues

·    Profit before tax of £0.5m (2019: £1.4m)

·    No interim dividend due to COVID-19 (2019: 7.6p)

·    Basic earnings per share ("EPS") of 2.5p (2019: 7.4p)

·    Positive operating cashflow of £2.0m (2019: £0.2m)

·    Net cash of £12.4m (30 September 2019: £13.1m), reflecting payment of final dividend of £2.4m in respect of the prior financial year

Commenting on the results, Tudor Davies, Chairman said:

"We shall keep shareholders informed of any material developments, but in common with all businesses we are facing difficult and unprecedented circumstances with anything except very short term forecasts challenging.  Management will continue to respond accordingly to ensure operations are maintained in a safe manner and will utilise any Government assistance to safeguard the employment of our workforce."

Enquiries:

Zytronic plc Mark Cambridge, Chief Executive Claire Smith, Group Finance Director	0191 414 5511
N+1 Singer (Nominated Adviser and Broker) Aubrey Powell, Alex Bond (Corporate Finance) Rachel Hayes (Corporate Broking)	020 7496 3000

Notes to Editors

Zytronic is the developer and manufacturer of a unique range of internationally award-winning and patented touch sensor products, operating from three modern factories totaling 80,000ft2 near Newcastle-upon-Tyne in the United Kingdom.

Zytronic touch products employ an embedded sensing solution and are readily configurable to enable multi-user and multi-touch touch sensing sizes from five inches to ultra-large 85", making them an ideal solution for system designers' specific requirements, offering significant durability, environmental stability and optical enhancement benefits to touch interactivity for industrial, self-service and public access equipment.

Chairman's statement

Introduction

As we indicated in December 2019 and at the AGM in February, the first half results are, as management expected, lower than the previous year as a result of a low conversion of opportunities into orders and sales. However, we were expecting an upturn as the year progressed, and in February and March the order book and sales improved considerably and until the impact of COVID-19, we were well on track for a second half at significantly improved levels.

Trading

Revenues for the half year ended 31 March 2020 were £7.4m (2019: £9.5m), EBITDA was £1.0m (2019: £1.9m) and profits for the half year before tax were £0.5m (2019: £1.4m).

The decline in revenues principally arose from a low level of order intake in the latter part of 2019 which, as expected, recovered significantly thereafter. In January, February and March 2020 order intake was 15% higher than the same period in 2019, resulting in an order book of £2.7m at 31 March 2020 (2019: £2.0m).

In normal circumstances this improved order position would have formed the basis for a good performance in the second half and a much better result for the year as a whole. However, in recent weeks the effect of the COVID-19 pandemic has begun to affect supplies, deliveries and a deferral in orders. In common with most other businesses it is far too early for us to be able to assess how long this situation will last for. On a more positive note, our growth markets within the APAC countries where the pandemic has had the earliest effects will hopefully return to normality quicker than others.

Subsequently, our operations have continued, at reduced levels of activity, without needing to shut the factory following appropriate adjustments to working practices and the cost base.  Since 31 March we have in stages reduced factory hourly labour from 101 to 32 persons and staff from 63 to 35, principally through utilisation of the Government Job Retention Scheme (Furlough), and reduced other expenditure accordingly, with everything under constant review.

Cash and dividend

We continue to be in a strong financial position with cash balances of £12.4m (30 September 2019 £13.1m), although as we explained in December 2019, with the recent downturn in results we were uncomfortable continuing to pay an uncovered dividend, which we had done for the prior two years. In considering an interim dividend we are cognisant of the relatively low profits for the year to date and the extremely uncertain prospects for the remainder of the year as a whole and have decided that in these circumstances we should not pay an interim dividend and returns to shareholders should be deferred until there is a return towards normality.

Outlook

We shall keep shareholders informed of any material developments, but in common with all businesses we are facing difficult and unprecedented circumstances with anything except very short term forecasts challenging, and as each month progresses without a real change of circumstances, the opportunity to benefit from what was an improving and promising situation to produce a positive return during this financial year is remote.

Tudor Davies

Chairman

12 May 2020

Consolidated statement of comprehensive income

Unaudited results for the six months to 31 March 2020

		Six months to	Six months to	Year to
		31 March	31 March	30 September
		2020	2019	2019
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Group revenue		7,378	9,463	20,104
Cost of sales		(5,146)	(6,178)	(13,311)
Gross profit		2,232	3,285	6,793
Distribution costs		(135)	(182)	(350)
Administration expenses		(1,679)	(1,755)	(3,462)
Group trading profit		418	1,348	2,981
Finance revenue		40	35	76
Profit before tax		458	1,383	3,057
Tax expense	3	(64)	(193)	(366)
Profit for the period		394	1,190	2,691
Earnings per share
Basic	4	2.5p	7.4p	16.8p
Diluted	4	2.5p	7.4p	16.8p

All activities are from continuing operations.

Consolidated statement of changes in equity

Unaudited results for the six months to 31 March 2020

	Called up
	share	Share	Retained
	capital	premium	earnings	Total
	£'000	£'000	£'000	£'000
At 1 October 2019	160	8,994	16,644	25,798
Profit for the period	-	-	394	394
Dividends	-	-	(2,439)	(2,439)
At 31 March 2020 (unaudited)	160	8,994	14,599	23,753

Consolidated statement of financial position

Unaudited results at 31 March 2020

		At	At	At
		31 March	31 March	30 September
		2020	2019	2019
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Assets
Non-current assets
Intangible assets		1,208	1,460	1,299
Property, plant and equipment		6,126	6,566	6,385
		7,334	8,026	7,684
Current assets
Inventories		2,713	3,948	3,034
Trade and other receivables		3,357	3,856	4,127
Cash and short term deposits		12,369	12,060	13,143
		18,439	19,864	20,304
Total assets		25,773	27,890	27,988
Equity and liabilities
Current liabilities
Trade and other payables		650	978	962
Derivative financial liabilities		93	3	21
Accruals		636	591	499
Tax liabilities		125	227	192
		1,504	1,799	1,674
Non-current liabilities
Government grants		-	13	-
Deferred tax liabilities (net)		516	562	516
		516	575	516
Total liabilities		2,020	2,374	2,190
Net assets		23,753	25,516	25,798
Capital and reserves
Equity share capital		160	160	160
Share premium		8,994	8,994	8,994
Retained earnings		14,599	16,362	16,644
Total equity		23,753	25,516	25,798

Consolidated cashflow statement

Unaudited results for the six months to 31 March 2020

		Six months to	Six months to	Year to
		31 March	31 March	30 September
		2020	2019	2019
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Operating activities
Profit before tax		458	1,383	3,057
Net finance income		(40)	(35)	(76)
Depreciation and impairment of property, plant and equipment		365	361	726
Amortisation, impairment and write-off of intangible assets		213	205	430
Amortisation of government grant		ꟷ	(3)	(15)
Fair value movement on foreign exchange forward contracts		72	(4)	14
Working capital adjustments
Decrease/(increase) in inventories		321	(927)	(13)
Decrease/(increase) in trade and other receivables		770	(118)	(389)
Decrease in trade and other payables and provisions		(170)	(648)	(742)
Cash generated from operations		1,989	214	2,992
Tax (paid)/received		(127)	25	(238)
Net cashflow from operating activities		1,862	239	2,754
Investing activities
Interest received		31	30	71
Payments to acquire property, plant and equipment		(106)	(322)	(506)
Payments to acquire intangible assets		(122)	(74)	(144)
Net cashflow used in investing activities		(197)	(366)	(579)
Financing activities
Dividends paid to equity shareholders of the Parent		(2,439)	(2,439)	(3,658)
Net cashflow used in financing activities		(2,439)	(2,439)	(3,658)
Decrease in cash and cash equivalents		(774)	(2,566)	(1,483)
Cash and cash equivalents at the beginning of the period		13,143	14,626	14,626
Cash and cash equivalents at the end of the period	6	12,369	12,060	13,143

Notes to the interim report

Unaudited results for the six months to 31 March 2020

1. Basis of preparation

The financial information in these interim statements is prepared under the historical cost convention and in accordance with international accounting standards. It does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and does not reflect all the information contained in the Group's annual report and financial statements.

The tax charge is calculated by applying the Directors' best estimate of the annual tax rate to the profit for the period. Other expenses are accrued in accordance with the same principles used in the preparation of the annual report and financial statements.

The interim results for the six months to 31 March 2020 are not reviewed by Ernst & Young LLP and accordingly no opinion has been given.

The interim financial statements have been prepared using the same accounting policies and methods of computation used to prepare the 2019 annual report and financial statements.

The financial information for the six months to 31 March 2020 and the comparative financial information for the six months to 31 March 2019 have not been audited. The comparative financial information for the year ended 30 September 2019 has been extracted from the 2019 annual report and financial statements.

The annual report and financial statements for the year ended 30 September 2019, which were approved by the Board of Directors on 9 December 2019, received an unqualified audit report, did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006 and have been filed with the Registrar of Companies.

The Group has one reportable business segment comprising the development and manufacture of customised optical products to enhance electronic display performance. Products in this reportable business segment include touch sensors, filters and other laminated products. All revenue, profits or losses before tax and net assets are attributable to this reportable business segment.

2. Basis of consolidation

The Group results consolidate the accounts of Zytronic plc and all its subsidiary undertakings drawn up to 31 March 2020.

3. Tax charge on profit on ordinary activities

The estimated tax rate for the year of 14% has been applied to the half year's profit before tax, in accordance with the Auditing Standard Board's statement on interim reports.

4. Earnings per share

Basic EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period. All activities are continuing operations and therefore there is no difference between EPS arising from total operations and EPS arising from continuing operations.

For the six months to 31 March 2020 and 2019

		Weighted			Weighted
		average			average
		number			number
	Earnings	of shares	EPS	Earnings	of shares	EPS
	31 March	31 March	31 March	31 March	31 March	31 March
	2020	2020	2020	2019	2019	2019
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after tax	394	16,044	2.5	1,190	16,044	7.4
Basic EPS	394	16,044	2.5	1,190	16,044	7.4

The weighted average number of shares for diluted EPS is calculated by including the weighted average number of shares under option.

		Weighted			Weighted
		average			average
		number			number
	Earnings	of shares	EPS	Earnings	of shares	EPS
	31 March	31 March	31 March	31 March	31 March	31 March
	2020	2020	2020	2019	2019	2019
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after tax	394	16,044	2.5	1,190	16,044	7.4
Weighted average number of shares under option	-	-	-	-	-	-
Diluted EPS	394	16,044	2.5	1,190	16,044	7.4

For the year to 30 September 2019

		Weighted
		average
		number
	Earnings	of shares	EPS
	30 September	30 September	30 September
	2019	2019	2019
	£'000	Thousands	Pence
Profit on ordinary activities after tax	2,691	16,044	16.8
Basic EPS	2,691	16,044	16.8

The weighted average number of shares for diluted EPS is calculated by including the weighted average number of shares under option.

		Weighted
		average
		number
	Earnings	of shares	EPS
	30 September	30 September	30 September
	2019	2019	2019
	£'000	Thousands	Pence
Profit on ordinary activities after tax	2,691	16,044	16.8
Weighted average number of shares under option	-	-	-
Diluted EPS	2,691	16,044	16.8

5. Dividends

As explained above, and under the present circumstances, the Directors consider that it is appropriate to defer returns to shareholders until there is clear evidence of a return towards normality.  Accordingly, no interim dividend is proposed for the period (2019: 7.6p per share).  The table below reflects historic dividend payments.

	Six months to 31 March	Six months to 31 March	Year to 30 September
	2020	2019	2019
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Ordinary dividends on equity shares
Final dividend of 15.2p per ordinary share paid on 22 February 2019	-	2,439	2,439
Interim dividend of 7.6p per ordinary share paid on 19 July 2019	-	-	1,219
Final dividend of 15.2p per ordinary share paid on 7 February 2020	2,439	-	-
	2,439	2,439	3,658

6. Cash and cash equivalents

	Six months to 31 March	Six months to 31 March	Year to 30 September
	2020	2019	2019
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash at bank and in hand	12,369	12,060	13,143

For the purpose of the consolidated cashflow statement, cash and cash equivalents comprise the following:

	Six months to 31 March	Six months to 31 March	Year to 30 September
	2020	2019	2019
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash at bank and in hand	9,839	5,991	7,351
Short term deposits	2,530	6,069	5,792
	12,369	12,060	13,143

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for variable lengths, being overnight, three months or one year (with break conditions), depending on the immediate cash requirements of the Group, and earn interest at variable rates.

At 31 March 2020 the Group had available a net £1.0m (cash less overdrawn accounts) overdraft facility from Barclays Bank plc, which will fall for review in July 2020.

The fair value of cash and cash equivalents is £12.4m (2019: £12.1m).

7. Availability of the interim report

A copy of the interim report and interim results presentation is available on the Company's corporate website, www.zytronicplc.com. Copies can be requested from the Company's registered office: Whiteley Road, Blaydon-on-Tyne, Tyne and Wear NE21 5NJ. 

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