ZYTRONIC PLC

Earnings Release • May 14, 2019

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RNS Number : 8880Y

Zytronic PLC

14 May 2019

	14 May 2019

Zytronic plc

("Zytronic" or the "Company" and, together with its subsidiaries, "Group")

Interim Results for the six months ended 31 March 2019 (unaudited)

Zytronic plc, a leading specialist manufacturer of touch sensors, announces its consolidated interim results for the six months ended 31 March 2019.  Comparative data is given for the six months ended 31 March 2018, except where indicated.

Overview

·    Group revenue of £9.5m (2018: £10.6m), impacted by decrease in Gaming revenue

(partially offset by stronger revenues in other sectors)

·    Profit before tax of £1.4m (2018: £2.2m)

·    Interim dividend maintained at 7.6p per share (2018: 7.6p)

·    Basic earnings per share ("EPS") of 7.4p (2018: 11.7p)

·    Net cash of £12.1m (30 September 2018: £14.6m)

Commenting on the results, Tudor Davies, Chairman said:

"As stated in our recent trading update, whilst historically trading in the second half has shown an improvement over the first half, and there are several projects that should improve performance as they come to fruition, at this stage the Board is taking a cautious and conservative view on an increase in activity levels from the Gaming sector in the second half."

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 announced in the trading update on 2 May 2019, we have experienced lower than expected revenues and profitability in the first half of this year, principally due to considerably slower sales of our touchscreen products into the previously buoyant Gaming sector.

Results

Revenues for the first half to 31 March 2019 were £9.5m (2018: £10.6m), with profit before tax of £1.4m (2018: £2.2m).

The reduction in revenues was due to the decline in sales into the Gaming market to £3.1m (2018: £4.2m) with sales to sectors such as Financial, Vending and Signage showing an increase to £5.1m (2018: £4.6m), and other sales including Industrial of £1.3m (2018: £1.8m).

The Gaming revenues were affected by a slower conversion of opportunities to orders of new design projects not replacing the anticipated reduction in volumes from several longer running projects, which had consisted of higher margin larger format products. In volume terms the numbers of touchscreens sold remained at similar levels to last year, but the number of larger panels dropped by 35% and this change in mix contributed toward a decline in gross margin to 34.7% (2018: 39.6%) and had a knock-on effect on profitability.     

Cash generation

Net cash generation from operating activities was £0.2m (2018: £2.4m) as a result of a £1.7m increase in working capital.  Along with further investment made into capital expenditure during the first half of £0.4m and with the payment of the 2018 final dividend of £2.4m, this resulted in closing cash balances of £12.1m (30 September 2018: £14.6m).

Dividend

The Directors have maintained the interim dividend at 7.6p per share (2018: 7.6p), payable on 19 July 2019 to shareholders on the Register on 5 July 2019.

Outlook

As stated in our recent trading update, whilst historically trading in the second half has shown an improvement over the first half, and there are several projects that should improve performance as they come to fruition, at this stage the Board is taking a cautious and conservative view on an increase in activity levels from the Gaming sector in the second half.

Tudor Davies

Chairman

14 May 2019

Consolidated statement of comprehensive income

Unaudited results for the six months to 31 March 2019

		Six months to	Six months to	Year to
		31 March	31 March	30 September
		2019	2018	2018
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Group revenue		9,463	10,605	22,288
Cost of sales		(6,178)	(6,408)	(14,047)
Gross profit		3,285	4,197	8,241
Distribution costs		(182)	(213)	(461)
Administration expenses		(1,755)	(1,806)	(3,639)
Group trading profit		1,348	2,178	4,141
Finance costs		-	(3)	(21)
Finance revenue		35	27	68
Profit before tax		1,383	2,202	4,188
Tax expense	3	(193)	(330)	(541)
Profit for the period		1,190	1,872	3,647
Earnings per share
Basic	4	7.4p	11.7p	22.7p
Diluted	4	7.4p	11.7p	22.7p

All activities are from continuing operations.

Consolidated statement of changes in equity

Unaudited results for the six months to 31 March 2019

	Called up
	share	Share	Retained
	capital	premium	earnings	Total
	£'000	£'000	£'000	£'000
At 1 October 2018	160	8,994	17,611	26,765
Profit for the period	-	-	1,190	1,190
Dividends	-	-	(2,439)	(2,439)
At 31 March 2019 (unaudited)	160	8,994	16,362	25,516

Consolidated statement of financial position

Unaudited results at 31 March 2019

		At	At	At
		31 March	31 March	30 September
		2019	2018	2018
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Assets
Non-current assets
Intangible assets		1,460	1,660	1,585
Property, plant and equipment		6,566	6,790	6,605
		8,026	8,450	8,190
Current assets
Inventories		3,948	2,969	3,021
Trade and other receivables		3,856	3,562	3,738
Derivative financial assets		-	28	-
Cash and short term deposits		12,060	13,730	14,626
		19,864	20,289	21,385
Total assets		27,890	28,739	29,575
Equity and liabilities
Current liabilities
Trade and other payables		978	1,030	1,446
Derivative financial liabilities		3	-	7
Accruals		591	700	767
Tax liabilities		227	175	13
		1,799	1,905	2,233
Non-current liabilities
Government grants		13	17	15
Deferred tax liabilities (net)		562	608	562
		575	625	577
Total liabilities		2,374	2,530	2,810
Net assets		25,516	26,209	26,765
Equity
Equity share capital		160	160	160
Share premium		8,994	8,994	8,994
Revenue reserve		16,362	17,055	17,611
Total equity		25,516	26,209	26,765

Consolidated cashflow statement

Unaudited results for the six months to 31 March 2019

		Six months to	Six months to	Year to
		31 March	31 March	30 September
		2019	2018	2018
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Operating activities
Profit before tax		1,383	2,202	4,188
Net finance income		(35)	(24)	(47)
Depreciation and impairment of property, plant and equipment		361	369	709
Amortisation, impairment and write-off of intangible assets		205	175	438
Amortisation of government grant		(3)	(8)	(10)
Fair value movement on foreign exchange forward contracts		(4)	26	61
Working capital adjustments
(Increase)/decrease in inventories		(927)	27	(25)
Increase in trade and other receivables		(118)	(56)	(232)
(Decrease)/increase in trade and other payables and provisions		(648)	(165)	295
Cash generated from operations		214	2,546	5,377
Tax received/(paid)		25	(195)	(573)
Net cashflow from operating activities		239	2,351	4,804
Investing activities
Interest received		30	27	65
Payments to acquire property, plant and equipment		(322)	(103)	(273)
Payments to acquire intangible assets		(74)	(202)	(390)
Net cashflow used in investing activities		(366)	(278)	(598)
Financing activities
Interest paid		-	(3)	(21)
Dividends paid to equity shareholders of the Parent		(2,439)	(2,439)	(3,658)
Net cashflow used in financing activities		(2,439)	(2,442)	(3,679)
(Decrease)/increase in cash and cash equivalents		(2,566)	(369)	527
Cash and cash equivalents at the beginning of the period		14,626	14,099	14,099
Cash and cash equivalents at the end of the period	6	12,060	13,730	14,626

Notes to the interim report

Unaudited results for the six months to 31 March 2019

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 2019 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 2018 annual report and financial statements.

The financial information for the six months to 31 March 2019 and the comparative financial information for the six months to 31 March 2018 have not been audited. The comparative financial information for the year ended 30 September 2018 has been extracted from the 2018 annual report and financial statements.

The annual report and financial statements for the year ended 30 September 2018, which were approved by the Board of Directors on 10 December 2018, 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 2019.

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 2019 and 2018

		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
	2019	2019	2019	2018	2018	2018
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after tax	1,190	16,044	7.4	1,872	16,044	11.7
Basic EPS	1,190	16,044	7.4	1,872	16,044	11.7

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
	2019	2019	2019	2018	2018	2018
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after tax	1,190	16,044	7.4	1,872	16,044	11.7
Weighted average number of shares under option	-	-	-	-	-	-
Diluted EPS	1,190	16,044	7.4	1,872	16,044	11.7

For the year to 30 September 2018

		Weighted
		average
		number
	Earnings	of shares	EPS
	30 September	30 September	30 September
	2018	2018	2018
	£'000	Thousands	Pence
Profit on ordinary activities after tax	3,647	16,044	22.7
Basic EPS	3,647	16,044	22.7

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
	2018	2018	2018
	£'000	Thousands	Pence
Profit on ordinary activities after tax	3,647	16,044	22.7
Weighted average number of shares under option	-	-	-
Diluted EPS	3,647	16,044	22.7

5. Dividends

The Directors propose the payment of an interim dividend of 7.6p per share (2018: 7.6p), payable on 19 July 2019 to shareholders on the Register on 5 July 2019. This dividend has not been accrued in these interim accounts. The dividend payment will be approximately £1.2m.

	Six months to 31 March	Six months to 31 March	Year to 30 September
	2019	2018	2018
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Ordinary dividends on equity shares
Final dividend of 15.2p per ordinary share paid on 9 March 2018	-	2,439	2,439
Interim dividend of 7.6p per ordinary share paid on 20 July 2018	-	-	1,219
Final dividend of 15.2p per ordinary share paid on 22 February 2019	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
	2019	2018	2018
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash at bank and in hand	12,060	13,730	14,626

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
	2019	2018	2018
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash at bank and in hand	5,991	11,382	8,580
Short term deposits	6,069	3,030	6,046
Bank overdraft	-	(682)	-
	12,060	13,730	14,626

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 2019 the Group had available a net £1.0m (cash less overdrawn accounts) overdraft facility from Barclays Bank plc, which will fall for review in September 2019.

The fair value of cash and cash equivalents is £12.1m (2018: £13.7m).

7. Availability of the interim report

A copy of the interim report is available on the Company's website, www.zytronicplc.com, and can be obtained from the Company's registered office: Whiteley Road, Blaydon-on-Tyne, Tyne and Wear NE21 5NJ. Copies will be made available to shareholders shortly.  A copy of the presentation made to institutional investors is also available on the Company's website.

Corporate information

Websites:

www.zytronicplc.com

www.zytronic.co.uk

www.zytronic-inc.com

www.zytronic.cn

www.zytronic.jp

Secretary

Claire Smith

Email: claire.smith@zytronic.co.uk

Registered office

Whiteley Road

Blaydon-on-Tyne

Tyne and Wear

NE21 5NJ

Tel:   0191 414 5511

Fax:   0191 414 0545

Registration number

3881244

Stockbroker and Nominated Adviser

N+1 Singer

One Bartholomew Lane

London

EC2N 2AX

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