Interim Results
Zytronic PLC
25 May 2006
For Immediate Release 25 May 2006
ZYTRONIC PLC
Interim Results for the Six Months to 31 March 2006
Zytronic Plc, a leading specialist manufacturer of touchscreens and optical
filters for electronic displays, announces its interim results for the six
months to 31 March 2006.
Financial Highlights
• Group turnover of £5.7m showed growth of 11% (2005: £5.1m);
• Profit before tax increased 6% to £464,000 (2005: £437,000);
• Proposed interim dividend of 1.0p per share (2005: Interim 0.5p);
• Basic earnings per share increased 14% to 2.4p (2005: 2.1p).
Operational Highlights
• Strong growth in touchscreen orders;
• ZYPOS (R) touchscreens being specified in several projects already;
• Completed acquisition of adjacent freehold factory premises in January
2006 to provide dedicated facility for future manufacture of ZYPOS(R)
touchscreens.
Commenting on outlook, John Kennair, Chairman, said:
'The very significant growth in new orders received in the first half of this
year, combined with the enthusiastic reception that ZYPOS(R) has received in the
market place, particularly in the Far East, leads the Directors to have
continued confidence in the future prospects of the Group.'
Enquiries:
Zytronic Plc (Today: 020 7466 5000; thereafter 0191 414 5511)
John Kennair, Chief Executive
Denis Mullan, Finance Director
Buchanan Communications 020 7466 5000
Richard Darby, Isabel Podda
Notes to Editors
Zytronic is an industry leader in the development and manufacture of customised
optical filters to enhance electronic display performance. It is also an
innovator in the production of specialised and transparent laminates for niche
markets.
Based on this lamination expertise, Zytronic has developed a unique range of
touchscreen products employing Projected Capacitive Technology(TM) which enables
the pointing device to sense through an anti-vandal screen in front of the
display. This system offers significant benefits to electronic display
manufacturers.
Operating from two modern factories near Newcastle-upon-Tyne in England,
Zytronic assembles touchscreens and filters, utilising special glass and plastic
materials, in environmentally controlled clean rooms.
CHAIRMAN'S STATEMENT
In the six months to 31 March 2006, the business has again shown solid
improvement over the corresponding period last year.
Results
Sales at £5.7m (2005: £5.1m) grew by 11% producing a 6% increase in pre-tax
profits to £464,000 (2005: £437,000).
Trading
New orders received in the first half have grown by 33% over the same period
last year. The primary growth in orders has come from the touchscreen sector and
has been fairly evenly spread over the territories of North America, the Far
East and Europe. This growth in orders has necessitated putting additional
production facilities in place and training new staff which, in turn, has
contributed to a temporary reduction in gross profit margins of 2.5% over the
corresponding period last year. These additional production facilities will
benefit output and improve margins in the second half.
ZYPOS(R)
As I reported in my statement of 20 January 2006, the Directors anticipate that
the sales of the new ZYPOS(R) product will begin to impact on the business
towards the end of the 2006 financial year. Nevertheless, sales of approximately
£100,000 were achieved in the first half. Significant interest has been shown in
the product, particularly in the Far East and North America. The number of
enquiries received, and the number of projects in which this new technology has
now been specified, lead the Directors to be optimistic about the future growth
in this product sector.
The production facilities already in place for ZYPOS(R) within the existing
factory will be adequate for the rest of this calendar year. As indicated in my
statement in January 2006, the conversion of part of the factory premises
acquired in January will proceed in the October/December quarter of 2006.
Cash
In the six months to 31 March 2006, £1.5m has been spent on fixed assets,
including the purchase of the adjoining factory premises at £775,000. In
addition, working capital has increased by £313,000 resulting from the strength
in the order book as we prepare for the second half. These investments have been
funded by a £750,000 medium term loan and from the Group's cash resources.
Dividend
The Directors have declared an interim dividend of 1.0p per share (2005: 0.5p
per share) payable on 30 June 2006 to shareholders on the Register at 9 June
2006.
Outlook
The very significant growth in new orders received in the first half of this
year, combined with the enthusiastic reception that ZYPOS(R) has received in the
market place, particularly in the Far East, leads the Directors to have
continued confidence in the future prospects of the Group.
J Kennair, MBE
Chairman
25 May 2006
GROUP PROFIT AND LOSS ACCOUNT
unaudited results for the six months to 31 March 2006
Six months to Six months to Year to
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Unaudited
Notes £'000 £'000 £'000
Turnover 5,670 5,112 10,590
Cost of sales 3,987 3,465 7,312
Gross profit 1,683 1,647 3,278
Distribution costs 82 62 140
Administrative expenses 1,124 1,141 2,137
1,206 1,203 2,277
Operating profit 477 444 1,001
Interest payable (18) (18) (33)
Interest receivable 5 11 16
Profit on ordinary activities before
taxation 464 437 984
Tax charge on profit on ordinary activities 3 (116) (140) (310)
Profit on ordinary activities after
taxation 348 297 674
Earnings per share
Earnings per share - basic 4 2.4p 2.1p 4.7p
Earnings per share - diluted 4 2.4p 2.0p 4.6p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
unaudited accounts for the six months to 31 March 2006
There were no recognised gains or losses as defined in Financial Reporting
Standard No. 3 other than those stated above. In addition the effect of
implementing Financial Reporting Standard 21 ('FRS 21') - events after the
balance sheet date - is that an amount of £71,000 for the six months to 31 March
2005 (£215,000 for the year to 30 September 2005) previously included within
creditors has been added back to the profit and loss account reserve.
GROUP BALANCE SHEET
unaudited results for the six months to 31 March 2006
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Unaudited
(restated) (restated)
Notes £'000 £'000 £'000
Fixed assets
Intangible assets 2,046 2,122 2,133
Tangible assets 3,731 2,420 2,494
5,777 4,542 4,627
Current assets
Stocks 1,504 1,188 1,201
Debtors: amounts falling due within one year 2,639 2,098 2,641
Cash at bank and in hand 316 919 810
4,459 4,205 4,652
Creditors: amounts falling due within one year 6 1,993 1,582 1,878
Net current assets 2,466 2,623 2,774
Total assets less current liabilities 8,243 7,165 7,401
Creditors: amounts falling due after more than one year 783 278 161
Provisions for liabilities and charges 239 195 239
7,221 6,692 7,001
Capital and reserves
Called up share capital 144 143 143
Share premium 6,299 6,212 6,215
Profit and loss account 6 778 337 643
Equity shareholders' funds 7,221 6,692 7,001
GROUP STATEMENT OF CASH FLOWS
unaudited results for the six months to 31 March 2006
Six months Six month Year
to to to
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Unaudited
Notes £'000 £'000 £'000
Net cash inflow from operating activities 7a 516 319 939
Returns on investments and servicing of finance
Interest received 5 11 16
Interest paid (11) (6) (12)
Interest element of finance lease rental payments (7) (12) (21)
Net outflow from returns on investments and servicing of
finance (13) (7) (17)
Taxation
Corporation tax repayment/(paid) 10 11 (28)
Capital expenditure and financial investment
Payments to acquire intangible fixed assets (44) (53) (209)
Payments to acquire tangible fixed assets - property (792) - -
Payments to acquire tangible fixed assets - plant and
equipment (666) (486) (830)
Receipt from sale of short term property investment - 75 75
Net outflow from capital expenditure and financial
investment (1,502) (464) (964)
Equity dividends paid (215) - (71)
Net cash outflow before financing (1,204) (141) (141)
Financing
Issue of ordinary share capital re options 84 - 3
Receipt from new bank loan - property 750 - -
Repayments of bank loans (51) (42) (83)
Repayments of capital element of finance lease (73) (69) (140)
Net inflow/(outflow) from financing 710 (111) (220)
Decrease in cash (494) (252) (361)
Reconciliation of net cash flow to movement
in net (debt)/funds
Decrease in cash (494) (252) (361)
Receipt from new bank loan - property (750) - -
Repayments of bank loans 51 42 83
Repayments of capital element of finance lease 73 69 140
Movement in net funds (1,120) (141) (138)
Net funds at beginning of period 416 554 554
Net (debt)/funds at end of period 7b (704) 413 416
NOTES TO THE INTERIM REPORT
unaudited results for the six months to 31 March 2006
1. Basis of preparation
The financial information in this interim statement is prepared under the
historical cost convention and in accordance with applicable accounting
standards. It does not constitute statutory accounts as defined in Section 240
of the Companies Act 1985. The financial information for the full preceding year
is based on the statutory accounts for the year to 30 September 2005. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
30 September 2005 as adjusted for the change in accounting for dividends
discussed below. The taxation 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 accounts.
FRS 21 requires a change of accounting policy in respect of the accrual of
proposed dividends. Dividends are now included in the profit and loss account
reserve in the accounting period in which the dividend is approved for payment.
The interim accounts for the six months ended 31 March 2005 and the full year
accounts for the year ended 31 September 2005 have been restated via a prior
year adjustment to reflect this change in accounting policy.
Dividends proposed or paid are no longer to be shown as part of the profit and
loss account statement.
2. Basis of consolidation
The Group results consolidate the accounts of Zytronic Plc and all its
subsidiary undertakings drawn up to 31 March 2006.
3. Tax charge on profit on ordinary activities
The estimated tax rate for the year of 25% has been applied to the half year's
profit before tax, in accordance with the ASB's statement on interim reports.
The estimated rate is lower than the standard rate of UK corporation tax (30%)
due, in particular, to the effect of allowances from the exercise of share
options but also because of the continuing beneficial effect of the Research &
Development tax credit scheme.
4. Earnings per share
The calculations of earnings per share are based on a profit after taxation of
£348,000, (2005: £297,000) and a basic and diluted weighted average of
14,306,408 and 14,455,781 shares respectively in issue (2005: basic and diluted
14,291,539 and 14,528,351). The calculations of earnings per share for the full
year to 30 September 2005 are based on a profit after taxation of £674,000 and a
basic and diluted weighted average of 14,292,242 and 14,594,284 shares in issue
respectively.
NOTES TO THE INTERIM REPORT
unaudited results for the six months to 31 March 2006
5. Dividends
The Directors propose the payment of an interim dividend of 1.0p per share
(2005: 0.5p), payable on 30 June 2006 to shareholders on the Register on
9 June 2006. As stated in note 1 above, this dividend has not been accrued in
these Interim Accounts. The dividend payment will be £145,000.
Under FRS 21 the dividends in the current and prior year have been restated as
follows:
Six months to Six months to Year to
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Ordinary dividends on equity shares
Interim dividend of 0.5p per ordinary share
paid on 29 June 2005 - - 71
Final dividend of 1.5p per ordinary share
paid on 24 March 2006 215 - -
215 - 71
NOTES TO THE INTERIM REPORT
unaudited results for the six months to 31 March 2006
6. Creditors and profit and loss account - prior year adjustment
As explained in note 1, FRS 21 requires a change of accounting policy in respect
of the accrual of proposed dividends. These are now no longer to be accrued in
the accounts until they have been approved by the shareholders or been paid.
As a consequence it is necessary to restate the comparative figures for
creditors and profit and loss account reserve as at 31 March 2005 and as at 30
September 2005.
Six months to Year to
31 March 30 September
2005 2005
Unaudited Unaudited
(restated) (restated)
£'000 £'000
Creditors - as previously shown 1,653 2,093
Prior year adjustment (71) (215)
As restated 1,582 1,878
Profit and loss account reserve - as previously shown 266 428
Prior year adjustment 71 215
As restated 337 643
7. Notes to the Group statement of cash flows
a) Reconciliation of operating profit to net cash inflow from operating
activities:
Six months to Six months to Year to
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Operating profit 477 444 1,001
Depreciation 221 204 427
Amortisation 131 124 246
Gross cash inflows 829 772 1,674
Decrease/(increase) in debtors 2 (225) (117)
Increase in stocks (303) (104) (767)
(Decrease)/increase in creditors (12) (124) 149
Net cash inflow from operating activities 516 319 939
NOTES TO THE INTERIM REPORT
unaudited results for the six months to 31 March 2006
7. Notes to the Group statement of cash flows (continued)
b) Analysis of net (debt)/funds:
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Cash at bank and in hand 316 919 810
Bank loans (866) (208) (167)
Finance lease (154) (298) (227)
(704) 413 416
8. Contingent liability regarding Ian Lawson, former Chief Executive
The contract of employment for Ian Lawson, the former Chief Executive, ceased on
30 June 2005, after he had served out his notice period of 12 months on
gardening leave. On 29 September 2005, Mr Lawson filed an unfair dismissal claim
against Zytronic Displays Limited. This claim was heard by an Employment
Tribunal in March 2006. In its ruling in April 2006, the Employment Tribunal
found that Mr Lawson had been unfairly dismissed and that his dismissal was by
way of redundancy. Zytronic Displays Limited has appealed against the decision.
Running parallel to this appeal, a separate remedies hearing is scheduled for
June 2006 at which the level of compensation will be determined by the
Employment Tribunal.
If the appeal is unsuccessful, then Zytronic Displays Limited will have to pay
the level of compensation imposed by the tribunal.
The maximum compensation payable under the Employment Tribunal ruling is
£58,060. Due to the uncertanties of the outcome of the appeal process and the
findings of the remedies hearing, a provision for compensation has not been
included in these accounts.
Mr Lawson has reserved his position against the Company as regards the lapse of
his share options, over 142,857 shares granted at 70p per share, following the
cessation of his employment. A provision has not been made as there is currently
no legal action in this regard.
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