Preliminary Results

RNS Number : 5492X

Zytronic PLC

08 December 2010

 



For Immediate Release

8 December 2010

Zytronic plc

Preliminary Results for the year ended 30 September 2010 (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 2010.

Highlights

§  Group revenue increased by 16% to £18.5m (2009: £15.9m)

§  Export sales now represent 90% of Group sales (2009: 86%)

§  Record orders for the year of £19.8m (2009: £16.1m)

§  Profit before tax increased by 27% to £2.9m (2009: £2.3m)

§  EPS increased by 28% to 14.9p (2009: 11.6p)

§  Final dividend proposed of 5.0p (2009: 3.8p) - total for year increased by 40% to 7.0p (2009: 5.0p)

§  Growth in network of sales representatives includes new sales channels in Brazil and South Africa

§  Net cash inflow from operations of £3.8m (2009: £3.1m);

§  Gearing reduced to 11% (2009: 31%)

Commenting on the results, Chairman, David Banks said:

"The success of our touch sensor products in the self-service, kiosk and digital signage markets augurs well for the future. To this must be added recent contract wins in the gaming sector and the first white-goods product with a Zytronic touch sensor display which is expected to be launched early in 2011.

Whilst we do not expect a repeat of this year's dramatic growth in sales of optical filters to the ATM market, the Directors are confident that the continuous efforts to broaden both the product range and geographical coverage will provide the platform for further improvements in the Group's trading performance."

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, Ben Romney
Brewin Dolphin Ltd
Neil Baldwin, Neil McDonald	0845 270 8610

Notes to Editors

Zytronic is the developer and manufacturer of an 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.

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

In my first statement since becoming Chairman on 1 July 2010 I am pleased to be able to report significant growth in both sales and profits in the year to 30 September 2010, following a strong second half performance.

Results

At £18.5m (2009: £15.9m), sales for the year were 16% higher than last year.  Due to changes in sales mix, gross margin dipped slightly to 32% (2009: 34%), but pre-tax profits and earnings per share were still 27% and 28% ahead of last year at £2.9m (2009: £2.3m) and 14.9p (2009: 11.6p) respectively.

Trading

Orders received during the year were a record for the Group at £19.8m (2009: £16.1m).

A number of new touch sensor developments have been introduced successfully, giving customers better value and helping to increase the volume of units sold by nearly 11% over last year.  In value terms, touch sensor sales recovered in the second half, having been 6% down on last year in the first half, to finish 2% ahead for the full year.

Increased sales in the self-service and kiosk markets have offset the downturn in sales to the gaming market, which has been hard hit by the recession.

The growth in total sales was driven principally by sales of optical filters to the cash dispenser (ATM) market where volume increased by 36%.

We continue to see efficiency gains in the ZYPOS production facility, created two years ago.

Our network of sales representatives, agents and distributors has grown, including new sales channels in Brazil and South Africa, where we have not previously been represented.  Since the year end, we have also increased resources in our own direct sales team.

Exports in the year to 30 September 2010 were 90% of total sales (2009: 86%).

Cash and gearing

The Group's balance sheet remains solid, with net assets increasing by 14% to £11.5m (2009: £10.0m).

Net cash inflow generated in the year from operations was £3.8m (2009: £3.1m) and a further £0.5m was received as the final instalment of a government grant.  After £0.9m of capital expenditure, paying interest, tax and dividends and repaying £0.8m of borrowings, cash and cash equivalents increased by £1.1m in the year to £1.2m (2009: £0.1m).

At the year end net borrowings were £1.2m (2009: £3.1m) and gearing (net borrowings divided by net assets) had reduced to 11% (2009: 31%).

Dividend

The Directors are pleased to recommend a final dividend of 5.0p per share (2009: 3.8p per share), payable on Friday 25 February 2011 to shareholders on the Register of Members on Friday 11 February 2011.  This will make the total dividend for the year 7.0p per share (2009: 5.0p per share), an increase of 40% over last year.

Management and personnel

The trading performance could not have been achieved without the abilities and hard work of Chief Executive Mark Cambridge and his team.  I would like to thank all employees for their contributions to a successful year for the Zytronic group.

I would also like to thank my predecessor, John Kennair MBE, who stepped down as Chairman at the end of June after thirty five years as either Chairman or Chief Executive.  Zytronic simply would not be enjoying the success it is today if it were not for John's entrepreneurship and his capability in leading and developing the business of the Group.  I am delighted that John agreed to stay on as a Non-Executive Director so that we can continue to enjoy the benefits of his wise counsel.

I am pleased to welcome David Buffham to the Board; he joined as an Independent Non-Executive Director in September 2010.

Outlook

The success of our touch sensor products in the self-service, kiosk and digital signage markets augurs well for the future. To this must be added recent contract wins in the gaming sector and the first white-goods product with a Zytronic touch sensor display which is expected to be launched early in 2011.

Whilst we do not expect a repeat of this year's dramatic growth in sales of optical filters to the ATM market, the Directors are confident that the continuous efforts to broaden both the product range and geographical coverage will provide the platform for further improvements in the Group's trading performance.

David E Banks

Non-Executive Chairman

8 December 2010

Business Review

The following review provides information on the sales, profitability, operational activities, research and development and the financial aspects of the business during FY2010 and, where helpful, draws comparisons with the previous year.

Trading results

A summary of the results over the last four years shows the strong performance from 2007, the growth in sales and the improving profitability (profit before tax) of the business:

	2010	2009	2008	2007
	£'000	£'000	£'000	£'000
Group revenue	18,483	15,921	14,717	11,437
Gross profit	5,894	5,407	4,739	3,466
Gross profit (%)	31.9%	34.0%	32.2%	30.3%
Profit from continuing operations (before tax)	2,924	2,300	1,740	683
	pence	pence	pence	pence
Basic EPS	14.9p	11.6p	7.3p	3.6p
Dividends paid & proposed for the year	7.0p	5.0p	4.0p	3.0p

Overview of order intake, sales and profitability

FY2010 has continued the trend of being a year of "two halves" as follows;

a)         orders received in the first half increased by 16% to £9.7m (2009: £8.4m), whereas in the second half they improved even further, by 31%, to £10.1m (2009: £7.7m), resulting in an overall growth of 23% for the year.

b)         in the case of sales, there was a modest 3% increase in turnover during H1 (£8.2m compared to £8m in H1 2009), followed by significantly increased H2 demand of £10.3m (H2 2009: £7.9m).This resulted in 16% growth for the full year to £18.5m (2009: £15.9m).

c)         similarly, profit before tax was only slightly ahead at the half year, by 1% at £1.06m (H1 2009: £1.05m), but increased in H2 by 49% to £1.86m (H2 2009: £1.25m), resulting in an increase of 27% for the full year to £2.92m (2009:£2.30m).

Key market factors

The key market factors affecting the reported 2010 sales and profitability include;

·      with infrastructural upgrades scaled-back in the largely saturated market of North America, global competition in the ATM market is continuing to drive cost reduction pressure within the supply chain. This requirement has empowered us to re-design a large proportion of the components supplied, and from March 2010, both Zytronic and its ATM related customers began to benefit from the introduction of such products;

§ with our ATM customers reporting continued strong sales to the BRIC economies, we, in turn, have benefitted 

     from an increase in the volume of optical display filter units sold, as non-touch ATM's are deployed more widely in these countries. This increase, coupled with the one-off uplift of sales from the introduction of Vendor Managed Inventory (VMI) has resulted in a 36% total increase in the volume of units sold;

§ there has been a significant downturn in demand from some of our established gaming equipment customers, resulting from a market hit badly by the global economic conditions, particularly in Europe. Despite the prevailing conditions in the gaming market, the Zytronic touch sensor value proposition (customisation, robustness and durability) continues to gain momentum. As a result, a significant new gaming project in North America, with a global top 3 manufacturer, moved forward into production during the second half of 2010;

§ the advantages of our touch technology for public interactivity are continuing to gain traction in the Self-Service & Vending market. One notable current example is the increasing deployment of the Blockbuster Express branded DVD vending kiosk throughout North America, which uses our ZYBRID touch sensor; and

§ as The Coca-Cola Company moved its innovative Freestyle™ drinks fountain out of field trials and into pilot deployment in North America, we have benefited from an increase in demand for this touch sensor during the latter months of the fiscal year.

Touch sensor sales

The net effect of these market factors has seen total touch sensor units sold increase by around 11%. This has been driven by a 25% improvement in the volume of units sold through our growing global network of value added resellers, a more than doubling of units sold into the Self-Service & Vending market, as well as small, but notable, gains in other important markets of future opportunity such as digital signage and telematics. The improvements in these areas have been offset, not only by the softening in the gaming market described earlier, but also by a 7% decrease in the volume of touch sensors sold to our ATM customers as demand for high-end touch-operated machines in Europe and North America remains soft.

Taking into account the shifting mix in touch sensor designs and sizes, these market movements have resulted in a favourable 8.5% upswing in touch sensor turnover in the second half compared with the reported 6.0% decline for the first half of the year, leading to a net 2.5% increase for the year.

Order intake and sales channels

Encouragingly, the overall growth in sales in FY2010 has been underpinned by strong order intake throughout the year of £19.8m which, by the close of the fiscal year, exhibited a healthy 23% increase against the £16.1m of orders received in FY2009.

Our strategy for sales' growth includes the strengthening of our global sales channels, which has continued with the signing of six new representation agreements during the year. This includes two new appointments in China where we are looking to reproduce our successful countrywide model, pioneered in the USA, through regionalised representation agreements. We are also actively establishing further sales support in other emerging markets, and have appointed new sales channels in Brazil and South Africa. In total the Group now has sales channels covering 39 countries.

It is anticipated that these additional resources will continue to drive our export sales, which reached 90% of total sales (2009: 86%), and more impressively our touch export sales which reached a record high of 93% (2009: 88%).

Operations

Production management has made significant strides forward in operational efficiency during FY2010. This is highlighted by a comparison of the increasing turnover of the Group with a reduction in the productive labour being used, moving from an average headcount of 169 persons in Q4 FY2009 to an average of 144 in Q4 FY2010.

The reduction in the average headcount is testament to the efficiency improvements made in using the new Britannia Court ZYPOS facility, in introducing the new ATM product designs and in effecting numerous changes to the manufacturing processes.

To continue to gain efficency improvements in FY2011, two new laminating machines have been ordered. The first arrived in November 2010 and the second should be delivered in early January 2011. We also plan to refurbish the oldest cleanroom facility in 2011 which will reduce running costs and enhance its capabilities.

Research and Development (R&D) Review

The R&D function has continued in 2010 to drive forward the underlying technology behind the Group's touch sensor products, satisfying both customer expectations and service requirements.

In the year ended 30 September 2010, the Group has expensed R&D costs of £215,000 directly to the income statement (2009: £291,000) and capitalised £172,000 of development expenditure within intangible assets (2009: £133,000). Amortisation of £153,000 on past capitalised development expenditure has also been charged to the income statement (2009: £135,000).

New family of controllers

By mid-term 2010, the R&D team had completed a new controller configuration, trade named the ZXY100 series, which combined work undertaken on the development of the Zytronic Application Specific Integrated Circuit ("ASIC") chip and new ARM® core processor chip. The new controller family was successfully launched into the market at the Society of Information Displays expo in Seattle, USA during May 2010.

The new controller family now provides for a complete suite of electronic solutions for sensor sizes from 5" through to the largest commercial panel size produced in 2010 at 72", without any changes in relative performance.

The development work also brings three key features to the product which to date had not been possible or practicable, these being:

§ an in-field programming capability to allow customers to update firmware in a manner similar to that of other traditional consumer hardware devices;

§ dual touch functionality including full Windows 7 gesturing and interactivity; and

§ a two chip solution for high volume applications, where direct integration of the electronic circuitry onto the customer's motherboard is more advantageous and cost effective to the end user.

Other PCT™ media

During 2010, the R&D team actively designed and evaluated other sensor configurations and processing media, especially those relating to the use of transparent metallic coatings on both glass and plastic substrates. Prototype sensors have been manufactured based upon a Zytronic proprietary derived array design, which utilises the same patented sensing methodology as used in the existing products, working in conjunction with the new ZXY100 controller configuration.

Several early stage new projects, which have been sampled with this new product revision, particularly for products designed for robustness when used in larger volume telematics and self-service applications, are progressing well and the revised media has been very favourably received by prospective customers.

Other developments

Our material, mechanical and industrial engineers have continued to evaluate new processes and materials throughout the year, as a means of offering and meeting internal and customer specific cost reduction programmes.

So far, the main beneficiary of this work has been our optical display customers, especially those within the ATM market, where new designs utilising fewer materials and more time efficient processes were brought to market towards the end of March 2010.

As well as the specific development work, described above, and general customer technical support, the R&D team has continued to undertake numerous customer specific development projects in application fields including vending and digital signage. These should start to impact positively on the Group's performance during 2011.

As we move into 2011, the main R&D efforts will be focused on:

§   the continuation of the work initiated in reviewing and developing alternative sensing media;

§   the development, and then support, of our own in-house driver source code to reduce our dependence on our existing third party driver software provider. We can then more readily flex the code to meet the ever changing demands for various operating system support; and

§   the evaluation of methods whereby Zytronic can achieve true multi touch capabilities above the already achieved dual input functionality.

Gross profit

The gross margin percentage has shown a decrease this year, from 34% to 32%, reflecting two main influences during the year. The larger effect on the margin arose from the unusually large volume of sales of the privacy filter option in ATM displays as the material cost in these products is relatively expensive.

In addition, as already reported in the Interim Results, we also experienced a significant fall-off in sales of ULFF (Ultra Large Form Factor) touch sensors.

To improve the gross margin percentage, we review regularly the sources and costs of raw material supplies, the design of our products and the processes that we are using in their manufacture as well as our number and use of staff.

Administration overheads & distribution costs

Overheads are continually challenged and opportunities are taken to reduce them whenever possible.

As salary costs remain the largest single item in administration overheads (over 55%), we review them annually in comparison to market rates and the developing roles of our employees and only add to our headcount when necessary. We have continued to keep these, and our other admin costs, under tight control during the year. We have also enjoyed the benefit of a full year's saving in rent and other related costs from the acquisition of the freeholds of two of our factories in June 2009. The net result is that our administration overheads and distribution costs have shown a marginal decrease, being £2.97m in 2010 against £3.03m in 2009.

Other operating income

In April 2010, we received the second and final instalment of a Selective Finance for Investment ("SFI") grant from the local regional development agency, One North East. This follows on from the first instalment which was received in April 2008. Both grants are being amortised over a five year period commencing with the first receipt, and ending on 31 March 2013. The "other income" of £112,000 in FY2010 contains £102,000 of amortised SFI grant.

Pre-tax profit

The profit before tax of £2.9m has increased by £624,000 (27%) on the prior year figure of £2.3m. The reasons for this excellent performance are noted elsewhere in this annual report and financial statements.

Taxation

The Group's taxation charge of £736,000 (25%) (2009: £593,000 (26%)) is slightly lower than the standard rate of corporation tax of 28%.

EPS and dividends

The reported basic EPS of 14.9p has increased by 28% from last year (2009:11.6p) which largely reflects the significant improvement in profitability, discussed above. The number of shares in issue of 14,710,484 has increased only slightly from last year (2009: 14,674,121), following the exercise of options over 36,363 shares.

There was a grant of share options during the financial year over 82,500 shares at 177.5p and the total number of share options outstanding at 30 September 2010 was 561,215 (2009: 527,598), excluding the CEO's incentive scheme. The dilutive effect on the EPS of all existing share-based payments is 0.1p.

The Group paid an interim dividend of 2.0p on 25 June 2010. With the increasing profitability seen in this financial year, the Group intends to continue its progressive dividend policy. A resolution to approve the payment on Friday 25 February 2011 of a final dividend for the year ended 30 September 2010 of 5.0p is included in the Notice of Annual General Meeting. This will bring the total dividend for the year to 7.0p (2009: 5.0p), an increase of 40%.

Cashflow and working capital

The Group has continued to generate net cashflow from operating activities, as shown in the consolidated cashflow statement and this has increased again with the growth in profitability. It amounted to just over £3.1m this year in comparison to £2.5m in 2009.

As expected, our working capital has increased with the growth in the Group's business, but only by £0.2m (2009: £0.2m). Stocks have increased by £85,000 (2009: static). Trade and other receivables have increased by £356,000 (2009: £59,000) reflecting the growth in sales in Q4, while trade creditors increased by £258,000 (2009: decrease £133,000).

Capital expenditure on fixed assets

Capital additions to plant & machinery within property, plant and equipment and intangible assets were £552,000 and £228,000 respectively (2009: £152,000 and £223,000 respectively). Total capex was £894,000 while total depreciation and amortisation for the year was £987,000 (2009: £920,000).

Funding and gearing

The Group has continued with the scheduled repayments on all of its debt, and total repayments in the year amounted to £818,000 (2009: £639,000). Six of the HP agreements were finished by 30 September 2010 and the remaining four, together with the Chattel mortgage loan, will be paid off by 31 March 2011.

To ensure that the Group has adequate longer term funding to provide cover for future working capital requirements and capital expenditure needs, the Group has in place further loan facilities. In particular, the Group has an unused £2.0m three year revolving credit facility with Lloyds TSB Bank, expiring in June 2012. The Group also has an overdraft facility of £1.0m with Lloyds TSB Bank, of which £291,000 was in use at the year end (for foreign exchange management purposes).

The Group has built up its cash balances and at the year end the net cash balances were £1.2m (2009: £109,000). Medium term borrowings were £2.4m (2009:£3.2m) so the total net debt was £1.2m (2009: £3.1m). The net gearing level (all borrowings less positive cash balances divided by net assets) was reduced significantly to 11% (2009: 31%).

Thanks to all employees

Finally, we would like to express the thanks of the Board of Directors to all employees of the Zytronic Group for their commitment and enthusiasm throughout 2010 in delivering the business performance described above.

Mark Cambridge

Chief Executive

D G W Mullan

Finance Director

8 December 2010

Consolidated income statement

for the year ended 30 September 2010

		Unaudited
		30 September	30 September
		2010	2009
	Notes	£'000	£'000
Group revenue		18,483	15,921
Cost of sales		12,589	10,514
Gross profit		5,894	5,407
Distribution costs		231	183
Administration expenses		2,738	2,850
Group trading profit		2,925	2,374
Other operating income		112	20
Group operating profit from continuing operations		3,037	2,394
Finance costs		(126)	(98)
Finance revenue		13	4
Profit from continuing operations		2,924	2,300
Tax expense	3	(736)	(593)
Profit for the year from continuing operations		2,188	1,707
Earnings per share
Earnings per share - basic	5	14.9	11.6p
Earnings per share - diluted	5	14.8	11.5p

Consolidated statement of comprehensive income

for the year ended 30 September 2010

There are no recognised gains or losses other than the profit attributable to shareholders of the Company as presented in the Consolidated Income Statement above.

Consolidated statement of changes in equity

for the year ended 30 September 2010

	Called
	up share	Share	Retained
	Capital*	Premium**	earnings	Total
	£'000	£'000	£'000	£'000
At 30 September 2008	147	6,479	2,256	8,882
Profit for the year	-	-	1,707	1,707
Tax recognised directly in equity	-	-	(4)	(4)
Share-based payments	-	-	29	29
Dividends	-	-	(616)	(616)
At 30 September 2009	147	6,479	3,372	9,998
Profit for the year	-	-	2,188	2,188
Tax recognised directly in equity	-	-	5	5
Exercise of share options	-	40	-	40
Refund of VAT on flotation expenses previously disallowed	-	31	-	31
Share-based payments	-	-	42	42
Dividends	-	-	(852)	(852)
At 30 September 2010	147	6,550	4,755	11,452

*               Share capital represents proceeds on issue of the Company's equity share capital.

**             Share premium comprises the excess in proceeds on issue of the Company's equity share capital above the nominal value of the shares issued.

Consolidated balance sheet

for the year ended 30 September 2010

		Unaudited
		30 September	30 September
		2010	2009
		£'000	£'000
Assets
Non-current assets
Intangible assets		1,869	1,974
Property, plant and equipment		8,387	8,375
Trade and other receivables		198	210
		10,454	10,559
Current assets
Inventories		2,588	2,503
Trade and other receivables		3,466	3,110
Cash and short term deposits		1,505	739
		7,559	6,352
Total assets		18,013	16,911
Equity and liabilities
Current liabilities
Trade and other payables		1,582	1,306
Financial liabilities		669	1,442
Accruals		600	574
Taxation liabilities		357	300
Government grants		192	-
		3,400	3,622
Non-current liabilities
Financial liabilities		2,045	2,428
Deferred tax liabilities (net)		827	820
Government grants		289	43
		3,161	3,291
Total liabilities		6,561	6,913
Net assets		11,452	9,998
Capital and reserves
Equity share capital		147	147
Share premium		6,550	6,479
Revenue reserve		4,755	3,372
Total equity		11,452	9,998

Consolidated cashflow statement

for the year ended 30 September 2010

		Unaudited
		30 September	30 September
		2010	2009
		£'000	£'000
Operating activities
Profit before tax		2,924	2,300
Net interest expense		113	94
Depreciation of property, plant and equipment		654	613
Amortisation of intangible assets		333	307
Amortisation of government grant		(102)	(12)
Share-based payments		42	29
Increase in inventories		(85)	(7)
Increase in trade and other receivables		(356)	(59)
Increase/(decrease) in trade and other payables		279	(137)
Cash generated from operations		3,802	3,128
Taxation paid		(655)	(646)
Net cashflow from operating activities		3,147	2,482
Investing activities
Interest received		13	4
Receipt of government grant		540	-
Purchases of property, plant and equipment		(640)	(3,673)
Payments to acquire intangible assets		(228)	(223)
Net cashflow from investing activities		(315)	(3,892)
Financing activities
Interest paid		(128)	(94)
Dividends paid to equity shareholders of the parent		(852)	(616)
Proceeds from share issues re options		40	-
New borrowings		-	2,217
Refund of VAT on flotation expenses previously disallowed		31	-
Repayment of borrowings		(342)	(163)
Repayment of capital element of hire purchase contracts		(476)	(476)
Net cashflow from financing activities		(1,727)	868
Increase/(decrease) in cash and cash equivalents		1,105	(542)
Cash and cash equivalents at the beginning of the year		109	651
Cash and cash equivalents at the year end		1,214	109

Notes to consolidated financial statements

for the year ended 30 September 2010

Notes to the preliminary results for the year ended 30 September 2010

1.         Statement of compliance

The group results 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 2006.

2.         Basis of consolidation and goodwill

The group results 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.

3.         Taxation

	Unaudited
	30 September	30 September
	2010	2009
	£'000	£'000
Current tax
UK corporation tax	(728)	(602)
Corporation tax over-provided in prior years	4	10
Total current tax charge	(724)	(592)
Deferred tax
Effect of change in tax rates	20	-
Origination and reversal of temporary differences	(32)	(1)
Total deferred tax charge	(12)	(1)
Tax charge in the income statement	(736)	(593)

Tax relating to items charged or credited to equity

	30 September	30 September
	2010	2009
	£'000	£'000
Deferred tax
Tax on share-based payment	5	(4)
Total deferred tax charge	5	(4)
Tax charge in the statement of comprehensive income	5	(4)

Reconciliation of the total tax charge

The effective tax rate of the tax expense in the income statement for the year is 25% (2009: 26%) compared with the standard rate of corporation tax in the UK of 28% (2009: 28%). The differences are reconciled below:

	30 September	30 September
	2010	2009
	£'000	£'000
Accounting profit before tax	2,924	2,300
Accounting profit multiplied by the UK standard rate of corporation tax of 28% (2009: 28%)	819	644
Effects of:
Expenses not deductible for tax purposes	4	14
"Gain" on exercise of share options allowed for taxation purposes but not reflected in the income statement	(22)	-
Depreciation in respect of non-qualifying items	51	40
Enhanced tax reliefs	(93)	(95)
Difference in tax rates	(11)	-
Tax over-provided in prior years	(12)	(10)
Total tax expense reported in the income statement	736	593

Notes to consolidated financial statements

for the year ended 30 September 2010

Factors that may affect future tax charges

Under current tax legislation, some of the amortisation of 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 2010 was £100,000 (2009: £130,000). 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 no tax losses carried forward at 30 September 2010 (2009: £Nil).

4.         Dividends

The Directors propose the payment of a final dividend of 5.0p per share (2009: 3.8p), payable on Friday 25 February 2011 to shareholders on the Register on Friday 11 February 2011. This dividend has not been accrued in these financial statements. The dividend payment will amount to some £735,000.

	Unaudited
	30 September	30 September
	2010	2009
	£'000	£'000
Ordinary dividends on equity shares
Final dividend of 3.0p per ordinary share paid on 9 March 2009	-	440
Interim dividend of 1.2p per ordinary share paid on 26 June 2009	-	176
Final dividend of 3.8p per ordinary share paid on 26 February 2010	558	-
Interim dividend of 2.0p per ordinary share paid on 25 June 2010	294	-
	852	616

Notes to consolidated financial statements

for the year ended 30 September 2010

5.         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 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
		average			average
		number			number
	Earnings	of shares	EPS	Earnings	of shares	EPS
	30 September	30 September	30 September	30 September	30 September	30 September
	2010	2010	2010	2009	2009	2009
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after taxation	2,188	14,696	14.9	1,707	14,674	11.6
Basic EPS	2,188	14,696	14.9	1,707	14,674	11.6

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
	30 September	30 September	30 September	30 September	30 September	30 September
	2010	2010	2010	2009	2009	2009
	£'000	Thousands	Pence	£'000	Thousands	Pence
Profit on ordinary activities after taxation attributable to ordinary equity holders	2,188	14,696	14.9	1,707	14,674	11.6
Weighted average number of shares under option	-	111	(0.1)	-	79	(0.1)
Diluted EPS	2,188	14,807	14.8	1,707	14,753	11.5

6.         Report and accounts

The Board approved the preliminary release for the year ended 30 September 2010 on Tuesday 7 December 2010. 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, will be available from the registered office at Whiteley Road, Blaydon on Tyne, Tyne & Wear, NE21 5NJ and will be put onto the Group's website www.zytronic.co.uk.

The results for the year ended 30 September 2009 have been extracted from the 2009 accounts of Zytronic plc.  The 2009 accounts, which have been filed with the Registrar of Companies, received an unqualified audit report and did not contain a statement under Section 498 of the Companies Act 2006.

7.         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 Thursday 10 February 2011 at 2.00pm.  Notice of the AGM will be sent to shareholders with the financial statements.

 

END

 

 

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