ZYTRONIC PLC

Interim / Quarterly Report • May 16, 2017

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RNS Number : 1958F

Zytronic PLC

16 May 2017

	16 May 2017

Zytronic plc

("Zytronic" or the "Group")

Interim Results for the six months ended 31 March 2017

Zytronic plc, a leading specialist manufacturer of touch sensors, announces its consolidated interim results for the six months ended 31 March 2017.

Overview

·    Group revenue of £11.3m (H1 2016: £9.9m)

·    Touch revenues increased to £10.0m (H1 2016: £8.3m)

·    Gross profit margin improved to 43.1% (H1 2016: 42.3%)

·    Profit before tax increased to £2.5m (H1 2016: £1.8m)

·    Basic earnings per share ("EPS") increased by 44% to 13.8p (H1 2016: 9.6p)

·    Interim dividend increased by 10% to 3.80p per share (2016: 3.45p)

·    Net cash increased by £0.9m to £12.5m (30 September 2016: £11.6m)

Commenting on the results, Chairman, Tudor Davies said:

"The second half of the year has started well and is in line with expectations and on this basis we expect to make further progress in creating value for shareholders."

Enquiries:

Zytronic plc Mark Cambridge, Chief Executive Claire Smith, Group Finance Director	0191 414 5511
N+1 Singer (Nominated Advisor and Broker) Aubrey Powell, Liz Yong	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

The Board is pleased to announce that the period for the half year ended 31 March 2017 has continued to show an increase in demand, especially for our large format proprietary touch products, resulting in an improvement in the Group's overall margins and profits.

Results

Revenues have increased by 14% to £11.3m (H1 2016: £9.9m).  Administration overheads of £2.1m benefited from a reduction in the foreign exchange hedging charge of £0.1m compared with the previous half year of £0.4m. Overall after adjusting for the benefit of the reduction in foreign exchange charges the profit before tax increased by 19% to £2.6m (H1 2016: £2.2m).

Reported profit before tax was £2.5m (H1 2016: £1.8m) and after tax of 14.5% (H1 2016: 15.5%) this resulted in a profit after tax for the period of £2.2m (H1 2016: £1.5m) with basic earnings per share increasing by 44% to 13.8p (H1 2016: 9.6p). 

Touch revenues increased to £10.0m (H1 2016: £8.3m) and together with the focus on our proprietary technology for larger format and multi-user sensors, combined to improve gross margin to 43.1% (H1 2016: 42.3%). The principal drivers of growth continues to be the large format sizes in particular in the gaming sector for upright cabinet designs through both APAC and UK-based customers.

Cash generation

The Group continued to generate cash with £2.5m (H1 2016: £2.3m) being earned before the payment of £1.7m in respect of the final dividend for last year (final dividend 2016: £1.4m).

The Group's net cash position at 31 March 2017 was £12.5m (30 September 2016: £11.6m) after the £1.0m liability in relation to the property mortgage.

Capital reduction scheme

The capital reduction scheme resolution to increase distributable reserves, which was proposed and passed at the AGM on 16 February 2017, was approved by the Court on 15 March 2017 and was effected through the registration at Companies House on 22 March 2017.

Dividend

The Directors have declared a 10% increase to the interim dividend to 3.80p per share (2016: 3.45p) payable on 21 July 2017 to shareholders on the Register on 7 July 2017.

Outlook

The second half of the year has started well and is in line with expectations and on this basis we expect to make further progress in creating value for shareholders.

Tudor Davies

Chairman

16 May 2017

Consolidated statement of comprehensive income

Unaudited results for the six months to 31 March 2017

		Six months to	Six months to	Year to
		31 March	31 March	30 September
		2017	2016	2016
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Group revenue		11,281	9,868	21,087
Cost of sales		(6,414)	(5,692)	(12,071)
Gross profit		4,867	4,176	9,016
Distribution costs		(229)	(198)	(378)
Administration expenses		(2,117)	(2,220)	(4,365)
Group trading profit		2,521	1,758	4,273
Finance costs		(9)	(12)	(23)
Finance revenue		5	8	20
Profit before tax		2,517	1,754	4,270
Tax expenses	3	(366)	(271)	(183)
Profit for the period		2,151	1,483	4,087
Earnings per share
Basic	4	13.8p	9.6p	26.6p
Diluted	4	13.6p	9.5p	26.1p

All profits are from continuing operations.

Consolidated statement of changes in equity

Unaudited results for the six months to 31 March 2017

	Called up
	share	Share	Retained
	capital	premium	earnings	Total
	£'000	£'000	£'000	£'000
At 1 October 2016	154	7,766	15,316	23,236
Profit for the period	-	-	2,151	2,151
Exercise of share options	5	1,039	-	1,044
Issue of capital reduction shares*	8,919	-	(8,919)	-
Cancellation of capital reduction shares*	(8,919)	-	8,919	-
Dividends	-	-	(1,744)	(1,744)
At 31 March 2017 (unaudited)	159	8,805	15,723	24,687

* Refer to note 8.

Consolidated balance sheet

Unaudited results at 31 March 2017

		At	At	At
		31 March	31 March	30 September
		2017	2016	2016
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets		1,585	1,507	1,457
Property, plant and equipment		7,228	7,547	7,389
		8,813	9,054	8,846
Current assets
Inventories		3,479	3,140	2,760
Trade and other receivables		3,563	3,362	3,745
Cash and short term deposits		13,520	10,757	12,763
		20,562	17,259	19,268
Total assets		29,375	26,313	28,114
Liabilities
Current liabilities
Trade and other payables		1,494	1,378	1,302
Financial liabilities		1,049	200	1,148
Derivative financial liabilities		442	470	959
Provisions		-	-	205
Accruals		1,021	1,013	834
Tax liabilities		405	286	122
		4,411	3,347	4,570
Non-current liabilities
Financial liabilities		-	1,096	-
Provisions	5	-	170	-
Government grants		17	54	48
Deferred tax liabilities (net)		260	590	260
		277	1,910	308
Total liabilities		4,688	5,257	4,878
Net assets		24,687	21,056	23,236
Equity
Equity share capital		159	154	154
Share premium		8,805	7,766	7,766
Revenue reserve	8	15,723	13,136	15,316
Total equity		24,687	21,056	23,236

Consolidated cashflow statement

Unaudited results for the six months to 31 March 2017

		Six months to	Six months to	Year to
		31 March	31 March	30 September
		2017	2016	2016
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Operating activities
Profit before tax		2,517	1,754	4,270
Net finance costs		4	4	3
Depreciation and impairment of property, plant and equipment		387	405	766
Amortisation and impairment of intangible assets		178	152	355
Loss on disposal of intangible assets		28	-	-
Amortisation of government grant		(31)	(5)	(11)
Share-based payments		-	35	71
Fair value movement on foreign exchange forward contracts		(517)	381	870
Working capital adjustments
(Increase)/decrease in inventories		(719)	74	454
Decrease/(increase) in trade and other receivables		316	(313)	(690)
Increase in trade and other payables and provisions		27	286	76
Cash generated from operations		2,190	2,773	6,164
Tax paid		(83)	(234)	(576)
Net cashflow from operating activities		2,107	2,539	5,588
Investing activities
Interest received		5	8	20
Payments to acquire property, plant and equipment		(214)	(176)	(387)
Payments to acquire intangible assets		(333)	(232)	(385)
Net cashflow from investing activities		(542)	(400)	(752)
Financing activities
Interest paid		(8)	(12)	(21)
Dividends paid to equity shareholders of the Parent		(1,744)	(1,368)	(1,900)
Proceeds from share issues relating to options		1,044	215	215
Repayment of borrowings		(100)	(50)	(200)
Net cashflow from financing activities		(808)	(1,215)	(1,906)
Increase in cash and cash equivalents		757	924	2,930
Cash and cash equivalents at the beginning of the period		12,763	9,833	9,833
Cash and cash equivalents at the end of the period	7	13,520	10,757	12,763

Notes to the interim report

Unaudited results for the six months to 31 March 2017

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 2017 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 2016 annual report and financial statements.

The financial information for the six months to 31 March 2017 and the comparative financial information for the six months to 31 March 2016 have not been audited. The comparative financial information for the year ended 30 September 2016 has been extracted from the 2016 annual report and financial statements.

The annual report and financial statements for the year ended 30 September 2016, which were approved by the Board of Directors on 12 December 2016, received an unqualified audit report, did not contain a statement under Section 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 2017.

3. Tax charge on profit on ordinary activities

The estimated tax rate for the year of 14.5% 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 2017 and 2016

		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
	2017	2017	2017	2016	2016	2016
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after tax	2,151	15,626	13.8	1,483	15,369	9.6
Basic EPS	2,151	15,626	13.8	1,483	15,369	9.6

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
	2017	2017	2017	2016	2016	2016
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after tax	2,151	15,626	13.8	1,483	15,369	9.6
Weighted average number of shares under option	-	168	(0.2)	-	197	(0.1)
Diluted EPS	2,151	15,794	13.6	1,483	15,566	9.5

For the year to 30 September 2016

		Weighted
		average
		number
	Earnings	of shares	EPS
	30 September	30 September	30 September
	2016	2016	2016
	£'000	Thousands	Pence
Profit on ordinary activities after tax	4,087	15,346	26.6
Basic EPS	4,087	15,346	26.6

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
	2016	2016	2016
	£'000	Thousands	Pence
Profit on ordinary activities after tax	4,087	15,346	26.6
Weighted average number of shares under option	-	299	(0.5)
Diluted EPS	4,087	15,645	26.1

5. Provisions

	Total
	£'000
At 1 October 2016	205
Utilised during the year	(205)
At 31 March 2017	-

Long term incentive scheme

The provision for the long term incentive scheme relating to the Chief Executive, the Group Finance Director and other management personnel was calculated based on future expectations that the bonus would be payable.

6. Dividends

The Directors propose the payment of an interim dividend of 3.80p per share (2016: 3.45p), payable on 21 July 2017 to shareholders on the Register on 7 July 2017. This dividend has not been accrued in these interim accounts. The dividend payment will be approximately £606,000.

	Six months to 31 March	Six months to 31 March	Year to 30 September
	2017	2016	2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Ordinary dividends on equity shares
Final dividend of 8.87p per ordinary share paid on 11 March 2016	-	1,368	1,368
Interim dividend of 3.45p per ordinary share paid on 22 July 2016	-	-	532
Final dividend of 10.96p per ordinary share paid on 3 March 2017	1,744	-	-
	1,744	1,368	1,900

7. Cash and cash equivalents

	Six months to  31 March	Six months to  31 March	Year to  30 September
	2017	2016	2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash at bank and in hand	13,520	10,757	12,763

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
	2017	2016	2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash at bank and in hand	10,709	9,088	9,097
Short term deposits	3,671	2,586	3,666
Bank overdraft	(860)	(917)	-
	13,520	10,757	12,763

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 2017 the Group had available a net £1.0m (cash less overdrawn accounts) overdraft facility from Barclays Bank plc which will fall for review in November 2017.

The fair value of cash and cash equivalents is £13.5m (31 March 2016: £10.8m).

8. Revenue reserve

On 22 March 2017, the Group carried out a capital reduction exercise whereby £8.9m of the Group's undistributable profits (within the retained earnings reserve) were capitalised by way of a bonus issue of newly created capital reduction shares.  These shares were subsequently cancelled and the £8.9m credited to the retained earnings reserve as distributable profits.

9. 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 sent to shareholders shortly.

This information is provided by RNS

The company news service from the London Stock Exchange

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