Final Results

RNS Number : 4255J

Zytronic PLC

03 December 2008

 



For Immediate Release

3 December 2008

ZYTRONIC PLC

('Zytronic' or the 'Company')

Preliminary Results for the year ended 30 September 2008 (unaudited)

Zytronic Plc, a leading specialist manufacturer of touch sensors and optical filters for electronic displays, announces its preliminary results for the year ended 30 September 2008.

Highlights

Financial  

• Group turnover increased by 29% to £14.7m (2007: £11.4m).

• Pre-tax profits increased by 155% to £1.74m (2007: £0.68m)

• Gross margins improved by 1.9% to 32.2% (2007: 30.3 %)

• Basic earnings per share increased to 7.3 p (2007: 3.6p)

• Total dividend for year of 4p (2007: 3p)

Operational 

• Mark Cambridge appointed as CEO of Group in January 2008

• Efficiency improvements arising from new manufacturing facilities 

• Sales of touch sensor products increased by 47%

• Sales of ZYPOS touch sensors increased by 83%

• Exports account for 79% of total sales with the Far East being fastest area of growth

Commenting in the results, Chairman, John Kennair said:  

'We are delighted with the Group's strong financial performance over the year. We believe that Zytronic has a robust business model with a unique patented technology and a wide industrial and geographical base of customers. We continue to make a number of technological developments in order to retain our leading edge and also to further reduce our cost base. With strong operating cash generation, a low level of gearing, and a strengthening order book, the Board is confident about the Group's prospects going forward.'

  Enquiries:

Zytronic plc	(Today: 020 7466 5000; Thereafter 0191 414 5511)
Mark Cambridge, Chief Executive
Denis Mullan, Finance Director
Buchanan Communications Ltd	020 7466 5000
Richard Darby, Isabel Podda
Brewin Dolphin Ltd
Andrew Emmott, Neil McDonald	0845 270 8610

Notes to Editors

Zytronic is the developer and manufacturer of a unique range of internationally award winning touch sensor products. These products employ an embedded sensing element and are based on projected capacitive technology ('PCT™'). PCT offers significant durability, environmental stability and optical enhancement benefits to system designers of integrated electronic displays, beyond that which was previously attainable.

Zytronic is also an industry leader in the development and manufacture of customised optical filters to enhance electronic display performance and an innovator in the production of specialised and transparent laminates for niche markets.

Operating from three modern factories near Newcastle-upon-Tyne in the United Kingdom, Zytronic assembles touch sensors, optical filters and other laminates, using special glass and plastic materials, in environmentally controlled clean rooms.

Chairman's statement

The year under review has seen significant improvement in both turnover and group profitability. Continued strong growth in sales of touch sensors, together with the new manufacturing facilities, which were fully commissioned in January 2008, has led to a substantial improvement in trading results.

Results

This is the first year in which we have presented our accounts under International Financial Reporting Standards (IFRS). 

Turnover for the year under review has increased by 29% to £14.7m (2007 £11.4m).

The new manufacturing facilities, which were fully commissioned in January 2008, have enabled further improvements in our manufacturing efficiency, the benefits of which will be more fully realised in 2009 and 2010. This year gross margins improved by 1.9%, from 30.3% to 32.2% and this increase, together with the growth in sales, has led to an increase in pre-tax profits to £1.74m (2007 £0.68m). Our reported basic earnings per share increased to 7.3p (2007 3.6p). 

In July 2008, the Finance Act 2008 enacted the abolition of Industrial Building Allowances (IBAs) and, as a consequence, we have incurred a one-off deferred tax charge of £174,000. As a result of this, our reported tax rate is 39%. Adjusting for this one-off deferred tax charge, our Adjusted EPS has increased by 140% to 8.4p (2007 3.5p). 

Trading

The sales growth of 28.7% in the year under review has been led primarily by the increase in sales of the Group's touch sensor products, which have grown by almost 47% and constitute 58% of the Group's total sales.  

Exports now account for over 79% of total sales with the fastest area of geographical growth being the Far East where sales have doubled. The split is as follows:

	FY2008	FY2007
	£m	£m
U.K.	3.0	4.1
Americas	3.3	2.6
EMEA (excl UK)	6.1	3.6
Asia Pacific	_2.3	1.1
Total	14.7	11.4

Whilst ATMs still account for the largest industrial group of touch sensor sales at £3.6m, it is the area of gaming which has shown the fastest growth, where first year sales in this market have reached almost £1m.  

The Group has a number of projects awaiting approval in the areas of self service, information systems, kiosks, digital displays, music centres and industrial control systems and there is likely to be further growth in the gaming sector.

Our ZYPOS® product is winning most of its new business in the gaming, self service and information markets and sales of ZYPOS touch sensors in the year ended 30 September 2008 have grown by 83% over the prior year. 

Cash 

The cashflows resulting from this year's earnings before interest, tax, depreciation and amortisation (EBITDA) of £2.7m (2007: £1.5m) have enabled the Group to reduce the net gearing ratio to 11% (2007: 20%) after taking account of net cash balances of £651,000 (2007 £140,000). This significant reduction in gearing has arisen despite additions to fixed assets of £918,000, including completing the investment in the new manufacturing facilities, which have cost £3.2m, over the last three years. The Directors anticipate only modest capital expenditure on new plant and equipment will be necessary to further expand the new facilities' capacity when required.

At 30 September 2008, the Group had cash balances and unused banking facilities at its disposal of £4.1m.

Technology

The continuing growth of ZYTOUCH® products, together with the growth of the newly introduced ZYPOS products, which have a lower cost base and consequently a lower selling price, has clearly demonstrated the market acceptance of Zytronic's underlying projective capacitive technology.

Throughout 2008 the R&D team has initiated several programmes to continue the development and advancement of the electronics associated with Zytronic's principal technology and also to evaluate new sensing materials. 

All of the programmes are still on-going and will draw to their conclusions in 2009, at which point they will aid further reductions in the cost of manufacture as volumes increase.

  Dividend

The Directors are pleased to recommend a final dividend of 3.0p per share payable on 7 March 2009 to shareholders on the Register of Members on 22 February 2009. Following a dividend of 1.0p per share paid on 27 June 2008, this will bring the total dividend for the year to 4.0p per share (2007: 3p per share).

Management

In my statement in May, in the Interim Results, I reported that Mark Cambridge had been appointed to the position of Chief Executive Officer of the Group on 21 January 2008. Mark's depth of knowledge of the Group and, in particular, our technology and the markets, is clearly standing him in good stead as evidenced by these results. The Directors are confident that the strong management team will continue to be very successful in the coming years.  

Outlook

The financial crisis which is affecting all countries in the world and which, in the past few months, has begun to impact on the wider economy is clearly of serious concern to everyone. However, the Zytronic Group has unique patented technology, a wide industrial and geographical base of customers and a number of new technical development programmes, to be introduced in 2009, which will further reduce the cost base of the touch sensor products. These factors, combined with strong operating cash generation and a low level of gearing, are important, if not essential, for any SME to weather the difficulties that may be encountered in 2009.  

A number of new customer programmes, where Zytronic's products are on field trial or awaiting final approval, together with the strength of the order book over the first quarter of the new financial year, lead the Directors to be confident of the prospects of the Group going forward.   

John M Kennair MBE

Chairman

3 December 2008

Consolidated income statement for the year ended 30 September 2008  

		Unaudited 2008	2007
	Notes	£'000	£'000
Group revenue		14,717	11,437
Cost of sales		9,978	7,971
Gross profit		4,739	3,466
Distribution costs		217	197
Administration expenses		2,675	2,556
Group trading profit		1,847	713
Other operating income		27	36
Group operating profit from continuing operations		1,874	749
Finance costs		(146)	(73)
Finance revenue		12	7
Profit from continuing operations		1,740	683
Tax expense	4	(677)	(149)
Profit for the year from continuing operations		1,063	534
Earnings per share
Earnings per share - basic	6	7.3p	3.6p
Earnings per share - diluted	6	7.2p	3.6p

The results for both the years above derive from continuing operations.

Consolidated statement of recognised income and expense for the year ended 30 September 2008 

		Unaudited 2008	2007
		£'000	£'000
Income and expense recognised directly in equity
Current tax recognised directly in equity		5	3
Deferred tax recognised directly in equity		(7)	(55)
Net expense recognised directly in equity		(2)	(52)
Profit for the year		1,063	534
Total recognised income and expense for the year		1,061	482

Consolidated balance sheet at 30 September 2008 

	Unaudited 2008	2007
	£'000	£'000
Assets
Non-current assets
Intangible assets	2,058	2,122
Property, plant and equipment	5,315	5,208
Trade and other receivables	210	194
	7,583	7,524
Current assets
Inventories	2,496	1,828
Trade and other receivables	3,039	2,767
Cash and short term deposits	1,260	317
	6,795	4,912
Total assets	14,378	12,436
Equity and liabilities
Current liabilities
Trade and other payables	1,480	1,376
Financial liabilities	1,182	621
Accruals and deferred income	533	399
Taxation liabilities	341	-
	3,536	2,396
Non-current liabilities
Financial liabilities	1,088	1,340
Deferred tax liabilities	817	479
Government grants	55	-
	1,960	1,819
Total liabilities	5,496	4,215
Net assets	8,882	8,221
Capital and reserves
Equity share capital	147	147
Share premium	6,479	6,473
Revenue reserve	2,256	1,601
Total equity	8,882	8,221

Consolidated cashflow statement  for the year ended 30 September 2008

	Unaudited 2008	2007
	£'000	£'000
Operating activities
Profit before tax	1,740	683
Net interest expense	134	66
Depreciation of property, plant and equipment	565	453
Amortisation of intangible assets	310	285
Amortisation of government grant	(5)	-
Share-based payments	34	46
Gain on sale of property, plant and equipment	-	(1)
Increase in inventories	(668)	(122)
Increase in trade and other receivables	(301)	(96)
Increase in trade and other payables	166	34
Cash generated from operations	1,975	1,348
Taxation repayments/(paid)	13	(29)
Net cashflow from operating activities	1,988	1,319
Investing activities
Interest received	12	7
Receipt of government grant	60	-
Sale of property, plant and equipment	-	1
Purchases of property, plant and equipment	(605)	(1,816)
Payments to acquire intangible assets	(246)	(287)
Net cashflow from investing activities	(779)	(2,095)
Financing activities
Interest paid	(141)	(73)
Dividends paid to equity shareholders of the parent	(440)	(439)
Proceeds from share issues re options	6	24
New borrowings	438	1,123
Repayment of borrowings	(96)	(134)
Repayment of capital element of finance lease and hire purchase contracts	(465)	(78)
Net cashflow from financing activities	(698)	423
Increase/(decrease) in cash and cash equivalents	511	(353)
Cash and cash equivalents at the beginning of the year	140	493
Cash and cash equivalents at the year end	651	140

Notes to the financial statements for the year ended 30 September 2008

1.    Statement of compliance

The consolidated financial statements have been prepared in accordance with IFRS as adopted for use in the European Union and as applied in accordance with the provisions of the Companies Act 1985. The accounting policies used in the preparation of the financial statements are consistent with those published in Zytronic plc's 'Implementation of International Financial Reporting Standards and Restatement of Financial Information' report.

2.   First time adoption (IFRS1)

In accordance with the requirements of IFRS1 'First-time Adoption of International Financial Reporting Standards', the Group is subject to a number of voluntary and mandatory exemptions from full restatement to the requirements of IFRS, which have been applied as follows:

• IFRS 2 'Share-based Payments' has only been applied to grants of equity instruments after 7 November 2002 that had not vested at 1 October 2006.

• The Group has taken the option not to apply IFRS 3 'Business Combinations' retrospectively to acquisitions that occurred prior to 1 October 2006.

3.   Basis of consolidation and goodwill

The consolidated financial statements comprise the financial statements of Zytronic plc and its subsidiaries as at 30 September each year. They are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

All intra-group balances and transactions, including unrealised profits arising from them, are eliminated.  

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Acquisitions are accounted for using the purchase method. Goodwill arising on acquisitions is initially measured at cost, being the excess of the cost of the acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities, is capitalised and classified as an asset on the balance sheet and is not amortised. After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may be impaired. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated.

When subsidiaries are sold, the difference between the selling price and the net assets plus un-impaired goodwill is recognised in the consolidated income statement. 

Goodwill recognised as an asset as at 30 September 2006 is recorded at its carrying amount under UK GAAP and is subject to impairment review but is not amortised. 

4.   Taxation

	Unaudited 2008	2007
	£'000	£'000
Current tax:
UK corporation tax	(346)	(3)
Corporation tax over-provided in prior years	-	12
Total current tax (charge)/credit	(346)	9
Deferred tax:
Effect of change in tax rates and legislation on opening balances	(174)	18
Origination and reversal of temporary differences	(157)	(176)
Total deferred tax	(331)	(158)
Tax charge in the income statement	(677)	(149)

Tax relating to items charged or credited to equity

	Unaudited 2008	2007
	£'000	£'000
Current tax:
Tax on share-based payments	5	3
Total current tax credit	5	3
Deferred Tax:
Tax on share-based payments	(7)	(55)
Total deferred tax charge	(7)	(55)
Tax charge in the statement of recognised income and expense	(2)	(52)

The tax expense in the income statement for the year is higher than the standard rate of corporation tax in the UK of 29% (2007: 30%). The differences are reconciled below:

	Unaudited 2008	2007
	£'000	£'000
Reconciliation of the total tax charge
Accounting profit before tax	1,740	683
Accounting profit multiplied by standard rate of corporation tax (29%) (2007: 30%)	505	205
Effects of:
Expenses not deductible for tax purposes	24	6
Depreciation in respect of non-qualifying items	37	39
Enhanced tax reliefs	(64)	(63)
Difference in tax rate	(29)	(30)
Effect of changes in legislation on industrial buildings	204	-
Tax over-provided in previous years	-	(12)
Other	-	4
Total tax expense reported in the income statement	677	149

Factors that may affect future tax charges: 

Under current tax legislation, some of the licences will continue to be non-deductible for tax purposes.

Under HMRC's R&D tax credit scheme, the Group will receive an annual uplift of 75% on qualifying R&D expenditure for tax purposes. Until the financial year 2006, where R&D expenditure has been capitalised, the benefit of this uplift is only recognised as the asset is amortised. The unrecognised element, relating to the year ended 30 September 2005 and prior, at 30 September 2008 was £100,000 (2007: £90,000). Following changes to HMRC's rules which took effect for financial year 2006, the uplift on expenditure which has been capitalised in any year is recognised in that year.

The 'gain' on the exercise of share options, being the difference between the grant/exercise price and the market value at the time of exercise, is allowable as a taxable deduction from profits although it is not reflected within the income statement. These gains will arise in future years but their timing and amount is uncertain. 

There are tax losses carried forward at 30 September 2008 of £Nil (2007: £145,000).

5.   Dividends

The Directors propose the payment of a final dividend of 3.0p per share (2007: 2.0p), payable on 7 March 2009 to shareholders on the Register on 22 February 2009. This dividend has not been accrued in these financial statements. The dividend payment will amount to some £440,000.

	Unaudited 2008	2007
	£'000	£'000
Ordinary dividends on equity shares
Final dividend of 2.0p per ordinary share paid on 16 March 2007	-	293
Interim dividend of 1.0p per ordinary share paid on 29 June 2007	-	146
Final dividend of 2.0p per ordinary share paid on 7 March 2008	293	-
Interim dividend of 1.0p per ordinary share paid on 27 June 2008	147	-
	440	439

6.   Earnings per share

Basic earnings per share ('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 year. All activities are continuing operations and therefore there is no difference between EPS arising from total operations and EPS arising from continuing operations.

		Weighted			Weighted
	Unaudited	average	Unaudited		average
		number	Earnings		number	Earnings
	Earnings	of shares	per share	Earnings	of shares	per share
	30 September	30 September	30 September	30 September	30 September	30 September
	2008	2008	2008	2007	2007	2007
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after taxation attributable to ordinary equity holders	1,063	14,667	7.3	534	14,640	3.6
Basic EPS	1,063	14,667	7.3	534	14,640	3.6

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

		Weighted			Weighted
	Unaudited	average	Unaudited		average
		number	Earnings		number	Earnings
	Earnings	of shares	per share	Earnings	of shares	per share
	30 September	30 September	30 September	30 September	30 September	30 September
	2008	2008	2008	2007	2007	2007
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after taxation attributable to ordinary equity holders	1,063	14,667	7.3	534	14,640	3.6
Weighted average number of shares  under option	-	110	(0.1)	-	147	-
Diluted EPS	1,063	14,777	7.2	534	14,787	3.6

  7.   Report and accounts

The Board approved the preliminary release for the year ended 30 September 2008 on Wednesday 3 December 2008. The above unaudited results do not represent statutory accounts. The audit report is yet to be signed. The audited accounts will be mailed to shareholders shortly and will be available from the registered office at Whiteley Road, Blaydon on Tyne, Tyne & Wear, NE21 5NJ.

The results for the year ended 30 September 2007 have been extracted from the 2007 accounts of Zytronic plc, which have been restated following the adoption of IFRS in the accounts for the year ended 30 September 2008. The 2007 accounts, which have been filed with the Registrar of Companies, received an unqualified audit report and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

8.   AGM date

It is intended that the AGM will take place at the Company's offices at Whiteley Road, Blaydon on Tyne, Tyne & Wear, NE21 5NJ on Tuesday 19 February 2009 at 2.00pm. Notice of the AGM will be sent to shareholders with the financial statements.

 

END

 

 

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