TIDMZYT

RNS Number : 7542U

Zytronic PLC

07 December 2021

 
   7 December 2021 
 

Zytronic plc

("Zytronic" or the "Company"

and, together with its subsidiaries, the "Group")

Final Results for the year ended 30 September 2021 (audited)

Zytronic plc, a leading specialist manufacturer of touch sensors , announces its audited full year results for the period ended 30 September 2021.

Overview

-- Recovery in H2 revenue of 44% with growth from Gaming 99%, Vending 63% and Financial 29%

-- Gross margin improved to 30.3% (2020: 20.1%) due to production efficiencies from restructuring in 2020

-- EBITDA of GBP1.4m (2020: GBP0.7m) and a return to profitability with profit before tax of GBP0.5m (2020: loss of GBP0.4m)

-- Earnings per share of 3.0p (2020: loss per share of 1.8p)

-- Dividend proposed of 1.5p (2020: Nil)

-- Successful Share Tender offer, returning GBP6.7m cash and cancellation of 4.6m shares

-- Closing net cash of GBP9.2m (2020: GBP14.0m)

Commenting on the outlook, Chairman, Tudor Davies said:

" The first two months of the year have seen an improvement in order intake, and with the improved margins and levels of demand across most sectors, this provides the basis for good progress in the coming year."

Enquiries:

 
 Zytronic plc 
  Mark Cambridge, Chief Executive 
  Claire Smith, Group Finance Director        (0191 414 5511) 
 
 
 Singer Capital Markets (Nominated Adviser 
  & Broker)                                   (020 7496 3000) 
 Aubrey Powell, Amanda Gray (Corporate 
  Finance) 
 Rachel Hayes (Corporate Broking) 
 
 
 

Notes to Editors

Zytronic is a developer and manufacturer of a unique range of internationally award winning optically transparent interactive touch sensor overlay products for use with electronic displays in industrial, self-service and public access equipment.

Zytronic's products employ a sensing solution that is readily configurable and is embedded in a laminate core which offers significant durability, environmental stability and optical enhancement benefits to system designers' specific requirements.

Zytronic has continually developed process and technological know-how and IP since the late 1990's around two sensing methodologies; the first being single-touch self-capacitive which Zytronic markets as PCT(TM) ("Projected Capacitive Technology") and the second being multi-touch, multi-user mutual-capacitive which Zytronic markets as MPCT(TM) ("Mutual Projected Capacitive Technology"), in which Zytronic holds a number of GB and international granted patents.

Operating from a single site near Newcastle-upon-Tyne in the United Kingdom, Zytronic is relatively unique in the touch eco-system as it offers a complete one-stop solution from processing internally the form and factor of the glass substrates, assembles their touch overlay products to customers specific requirements, in environmentally controlled cleanrooms and develops the bespoke firmware, software and electronic hardware to link the interactive overlays to customer's integrated systems and products.

Further information on the Group can be found on the Company's corporate website www.zytronicplc.com , and additional information on the Company's technology and products is available at www.zytronic.co.uk

2021 Chairman's review

Introduction

I am pleased to report that the year to 30 September 2021 has seen a significant increase in gross margins from last year's restructuring and a return to profitability, driven by a much improved second half with sales increasing by 44% to GBP6.9m from GBP4.8m in the first half.

Results

The results for the year produced a Group EBITDA of GBP1.4m (2020: GBP0.7m) and Group operating profit of GBP0.5m (2020: loss of GBP0.5m) on reduced revenue of GBP11.7m (2020: GBP12.7m) with an increase in earnings per share to 3.0p (2020: loss of 1.8p) with 16% of this year's earnings per share arising from the reduction in share capital following the tender offer and buyback completed in February 2021.

Whilst sales for the year were lower than last year the recovery in second half trading with a 44% increase in sales versus first half was particularly encouraging with the larger markets increasing the most: Gaming by 99%, Vending by 63%, Financial by 29%.

The improvement in operating profit this year principally arose from the considerable increase in gross margins from 20.1% to 30.3%, following the extensive reorganisations initiated in July and September 2020 in response to the second half downturn following the effects of the Coronavirus pandemic.

Current trading

The first two months have seen the positive recovery in our markets continue. Revenue and profits are ahead of the comparable period last year. The order intake for October and November is a very encouraging 77% ahead and, although this does include some large orders for the Gaming market for delivery over several months, provides a sound basis for revenue for the coming months. However, there are still challenges from the well-publicised shortages and supply chain issues, particularly of electronic components.

Cash

The cash position is still strong at GBP9.2m (2020: GBP14.0m) as even after distributing GBP6.7m by way of a share buyback, cash of GBP2.0m (2020: GBP3.4m) was generated from operations and control of working capital.

Dividend/return to shareholders

In February 2021 the Board decided it was in shareholders' interests to use our surplus cash balances to fund a tender offer and share buyback at 145p per Ordinary Share which resulted in 4.6 million shares, 28.8% of the then issued share capital, being purchased at a cost of GBP6.7m.

In the light of a return to profitability and the recent improvement to current trading the Board has decided to recommend a final dividend of 1.5p per share.

Board changes

As announced on 17 November 2021, having remained on the Board past the nine-year corporate governance guidelines whilst the business navigated the significant challenges posed by the COVID-19 pandemic, I shall step down at the AGM when David Buffham, currently a Non-executive Director will take over as Chair. We are in the process of recruiting an additional independent Non-executive Director to take over David's current responsibilities.

Outlook

The first two months of the year have seen an improvement in order intake, and with the improved margins and levels of demand across most sectors, this provides the basis for good progress in the coming year.

Tudor Davies

Chairman

6 December 2021

2021 Chief Executive review

I would like to begin this review by thanking all of the employees of Zytronic Displays Limited ("ZDL"), the operating subsidiary of the Group, for their understanding of the various decisions made during the course of the year, in what has been one of the most difficult trading years for Zytronic. In particular, for everyone's efforts in turning an expectation at the start of the fiscal year of a potential trading loss before tax of GBP0.9m, into the actual reported position of a profit before tax of GBP0.5m.

There is little doubt that the turmoil caused by the ongoing global effects of the COVID-19 pandemic from its start in FY20 continued into and throughout FY21. Therefore, drawing comparisons between the performance metrics of FY21 with that of FY20 is of limited value. A more thoughtful comparison can be drawn from the half year periods starting H2 FY20.

The mapping of how COVID-19 impacted the business and how it continued to impact is more readily observable by looking at how order intake patterns significantly altered from April 2020 onwards and the resultant measures taken within the business, to mitigate and control the dynamically changing environment.

As with most global manufacturing businesses, April 2020 became an almost overnight watershed moment, having experienced supply chain turmoil manifesting out of Asia and the near closing down of global economies, which for ZDL displayed initially as order delay requests, then order cancellations and subsequently fewer new order placements. The outcome of the above was an order intake value for H2 FY20 of GBP3.7m being 59% lower than H1 FY20.

As previously reported, this prompted management to look at combinations of the government's Job Retention Scheme through to the end of September 2020, single day shift working as opposed to our normal four-shift pattern and four-day working weeks to balance the declining workload, restructuring and as a last measure redundancy, at various appropriate stages over that period.

As the business moved into the start of FY21, the restructuring process concluded, but the single shift four-day working week continued through to the end of Q1. The reasons for this can be observed by analysing the order intake over H1, which although at GBP6.4m represented a substantial 72% increase compared to that of H2 FY20, was skewed somewhat when looking at the individual quarters. Therefore, when comparing the respective order intake value ratio of Q3 FY20 against that of Q4 FY20, Q1 FY21 and Q2 FY21, the ratio of 0.9:1.0:2.3 is more revealing. What occurred over Q2 FY21, was an initial reinstatement of the order delays and cancellations that arose at the start of the COVID-19 pandemic, particularly from our Gaming market customers. In addition, some customers placed longer lead time orders as the news of electronic component shortages emerged. This is further supported by the observed 11% decrease of the H2 FY21 order intake at GBP5.7m compared to H1.

Although variations in order intake occurred over the year, the manpower controls put in place very much allowed for more of an operational balance in the month-to-month output levels from the end of February 2021 onwards. Unfortunately, production was negatively impacted as the year progressed by the significant down-shift in electronic component supplies, which resulted in significant and well documented major global supply issues and inevitable delays. Due to ZDL's operational size, this left ZDL exposed to major market fluctuations and where necessary to ensure the continuation of some supply volume, our supply chain utilised grey market purchasing for hand-to-mouth component volumes, causing an almost inevitable drag on the achievable production output.

Total FY21 sales revenue of GBP11.7m was GBP1.0m lower than that of FY20, but although order intake varied considerably, the business was able to utilise the higher order intake of H1 FY20, to buffer the output through H2 FY20 and whilst the lower order intake of H2 FY20 had an effect on the output of H1 FY21, the combined higher order intake of Q2 and H2 FY21 enabled the significant 44% growth in H2 FY21 revenue compared to H1.

Of our four major contributory markets being Gaming, Financial, Vending and Industrial, it was only Vending which showed year-on-year growth in sales against FY20, with the revenue decline in Financial providing the biggest negative impact. However, when reviewing the FY21 data and comparing H2 against H1, pleasingly, all of the major contributory markets showed a material improvement.

 
 Market          2021        2020      % Var   H1 FY21   H2 FY21   % Var 
                                        (A)                         (A) 
              ----------  ----------          --------  -------- 
 Other          GBP1.0m     GBP0.9m     18     GBP0.5m   GBP0.4m   (25) 
 Signage        GBP0.7m     GBP1.1m    (38)    GBP0.3m   GBP0.4m    27 
 Industrial     GBP1.6m     GBP1.6m     (0)    GBP0.7m   GBP0.9m    31 
 Vending        GBP2.6m     GBP2.2m     18     GBP1.0m   GBP1.6m    63 
 Gaming         GBP2.9m     GBP3.1m     (7)    GBP1.0m   GBP1.9m    99 
 Financial      GBP2.9m     GBP3.8m    (24)    GBP1.3m   GBP1.6m    29 
              ----------  ----------  ------  --------  --------  ------ 
 Total         GBP11.7m    GBP12.7m     (8)    GBP4.8m   GBP6.9m    44 
              ----------  ----------  ------  --------  --------  ------ 
 Note: all GBP values in the above table are rounded to 
  nearest GBP0.1m whilst % variance is based on actual 
  values. 
 
 

As we consider that the Financial market was probably only slightly impacted by COVID-19 and the true market effect we continue to experience is related to the now well established major move towards a cashless society (digital and mobile banking) and with ZDL not being awarded with the new platform design wins for both of the major ATM global customers several years ago, which have since been launched, a sustained year-on-year decline is more likely and not reverse despite the H2 recovery.

Gaming, although still behind that of FY20, experienced a much-improved performance from February/March onwards, which is reflected in the H2/H1 FY21 comparator data. This market benefited from a resumption of unit builds for our Japanese, USA and Australian based end customers for the Las Vegas markets, which is predominantly where ZDL product finally resides. Pleasingly around that time, the development teams of our end customers also began to look at re-starting previously delayed programmes.

Vending, as previously indicated, was our only market to show annual growth against FY20, but again, the growth in FY21 was much more skewed to H2. The majority of this is a result of our European customers resuming demand, particularly through our channel partners in Italy and France for traditional style vending. We also saw a resumption of demand for a drinks fountain unit project in the USA.

As can be seen from the data, Industrial was little affected in comparison, whilst Signage in percentage terms showed the greatest decrease, mostly being attributable to a decline in the supply of large format size units for previously well performing smart city street furniture kiosk programmes through our Asian channels for deployment in the USA.

In total across all markets, we shipped 76.5k touch sensor units in FY21, compared to 78k units in FY20. The mix being more skewed to smaller sized <14.9" diagonal units (FY21 39%: FY20 24%) than the large size. A similar volume of the premium MPCT(TM) units were supplied at circa 13k units. Although Gaming resumed stronger growth in H2, the volume of curved units for Gaming customers was 53% lower in FY21 compared to FY20, at 3.4k units (FY20:7.2k units).

Although the necessary restructuring in ZDL impacted every department including R&D and sales and marketing, it did not over the course of the year diminish the work undertaken by both to continue the innovation within the product offerings and the marketing efforts to increase news flow etc. under very different circumstances.

Over the course of the year, a significant amount of time has been spent by the R&D team in identifying, approving and in some instances redesigning, to accommodate the various electronic component shortages that manifested; a number of key development projects were concluded, including finalising the release of the now multi-industry award-winning ZYBRID(R)hover (non-touch) technology and productionising the developed ZYBRID(R)edge controllers for multi-stacked sensor video wall designs, for formal release at the ISE expo in Spain during Q2 FY22.

In combination with the above, a significant amount of effort has also been undertaken to bring the developed ElectroglaZ(TM) concept to market, and although we have demonstrated facets of the technology at some of the FY21 digital signage and touch trade shows undertaken, it is intended to be more appropriately demonstrated at its own market-specific Light + Building expo in Germany during Q2 FY22.

COVID-19 has had a profound effect on the sales and marketing function over the fiscal period, beyond the restructuring programmes undertaken. As has previously been well documented, our major marketing efforts are normally centred around undertaking numerous end-market and region-specific trade shows and expositions yearly. Such events provide substantial networking and showcasing potential and bolster the consultative technical prospecting nature of the sales and business development process, generally in combination with our substantial channel partner network.

Unfortunately, the numerous travel bans and restrictions, have impacted the sales process, as work from home policies followed by a lot of our customers made and continue to make physical meetings impossible. Similarly, physical trade shows and the like, were also affected during H2 FY20 and H1 FY21, with numerous service providers experimenting pretty unsuccessfully with virtual attendance and participation. It was only towards the latter part of FY21 that physical trade shows reappeared, but unfortunately either the UK or destination country travel restrictions prevented any UK personnel attendance. ZDL did undertake two physical trade shows in that period, Digital Signage Japan and Touch Taiwan, both being solely serviced by our locally based employees.

Over the period, the marketing efforts became much more social media and digital content focused. Consequently, time has been spent in digital content creation, using our own in-house studio and an increase in the number of successful applications made for several electronic media-based industry awards. Details of all relevant news including customer testimonials, thought pieces, technology updates and event attendance, can be referenced at: https://www.zytronic.co.uk/news/.

Due to the hiatus in travel and the subsequent restrictions imposed since April 2020 the effect on our sales prospecting and normal marketing activities, as detailed above, has meant that the volume and value of our dynamic CRM opportunities log has been affected, as new opportunity entries were at a lower rate than the conversion of existing opportunities to production.

As of 30 September 2021, there were 391 opportunities in our CRM log, with a potential forecasted lifetime value of GBP28.0m, 17 being classified as "Project" which is the status of an opportunity when a high probability of moving to production at a future point is flagged, which at that point in time are projected to generate GBP1.5m of revenue over their future production cycle. Over the course of FY21, we had 135 total "Project"' status opportunities move to production with a projected revenue generation potential of GBP2.6m over their production cycle. These being additive to existing business as they move through their production lifecycle.

The CRM opportunities log is a very dynamic system, which changes daily, based on new entries and status updates. Two months on from the year-end, on 30 November 2021, it is encouraging to see that the log has positively increased to 420 opportunities with a potential forecasted lifetime value of GBP31.4m, 23 at "Project" status, projected to generate GBP3.5m of future revenue over their production cycle.

Mark Cambridge

Chief Executive Officer

6 December 2021

2021 Financial review

Financial review

The global effects of the COVID-19 pandemic have continued to impact the financial performance of the Group over the year with revenue decreasing from that of financial year 2020 of GBP12.7m to a reported GBP11.7m. However, what is pleasing is that the Group returned a reported profit before tax of GBP0.5m (2020: loss of GBP0.4m) as a result of its previously announced restructuring programme and internal efforts to control costs. Reported EBITDA grew by GBP0.7m to GBP1.4m (2020: GBP0.7m) which generated an increase in cash, excluding the payment of GBP6.7m for the share tender and GBP0.6m for the restructuring, of GBP2.4m to close at GBP9.2m (2020: GBP14.0m).

Group revenue

Group revenue decreased by 8% for the year to GBP11.7m (2020: GBP12.7m) as the impact of the pandemic continued alongside the well highlighted shortage of electronic component supplies impacting not only the Group, but also the customer base it serves. The Chief Executive Officer's review talks in more detail around revenue.

Gross margin

Reported gross margin for the year ended 30 September 2021 improved to 30.3% ( 2020: 20.1%) as a result of the following:

-- The prior year's restructuring enabled savings in gross margin over the year and with the reduction in trading over the Q1 period, the Group operated on single day-shift working and four-day working weeks, which also improved margin;

-- The introduction of the four-day working week also saw savings of GBP0.1m in general factory expenditure; and

-- Efficiencies were achieved throughout production and with lower year-on-year scrap rates this contributed to an improved margin

Group trading result

Group trading in the year increased to an operating profit of GBP0.5m (2020: loss of GBP1.0m), mainly as a result of the restructuring and cost control measures. Distribution costs were in line with last year at GBP0.2m as sales where the Group is responsible for carriage were similarly consistent. Administration costs reduced by GBP0.4m to GBP2.9m (2020: GBP3.3m) as the Group saw savings in its salary, marketing and travel expenditure. Marketing and travel costs over the year continued to be reflective of the pandemic as it was not permitted to attend many of the usual exhibitions and travel restrictions were still imposed in a number of key market territories. As the world continues to open up, the Group would expect costs over these areas to increase over the coming year. The Group is also mindful of the rising costs of living which may also impact across the salary costs (and margins) in the year ahead.

Exceptional other income

In the previous year the Group benefited from government support of GBP0.5m for employees who were furloughed under the CJRS and for our US personnel under the Paycheck Protection Programme ("PPP"). This was not utilised in the current year and so consequently the Group reports no other income received.

Tax

The Group utilises the reliefs available to it, which positively impacts the reported tax charge, which for the year is less than GBP0.1m (2020: credit of GBP0.1m). The prior year tax loss, at the time of the last annual report, was being proposed to be carried back to recover cash already paid. However, following the announcement to raise the corporation tax rate to 25% in 2023, the Group made the decision to instead carry forward the loss to obtain future relief at a higher rate of tax. Given the healthy cash position, the Board believe this is appropriate.

Earnings/loss per share

The opening issued shares of 16,044,041 were reduced by 4,624,889 shares following the Tender Offer capital reduction exercise undertaken in H1, leaving 11,419,152 ordinary shares of 1p remaining. With the profit after tax of GBP0.4m this has resulted in an EPS of 3.0p (2020: LPS of 1.8p) which is calculated on the weighted average shares of 13,346,189 for the year.

Dividend

The Board announced at the time of its last annual report that it would not be considering the resumption of the payment of dividends until there is a return towards normality and at the time of the interim report for FY21 it declared a zero dividend payment. Following the results for the year the Board has proposed a final dividend of 1.5p per share for the year ended 30 September 2021, being the total dividend for the year (2020: Nil). Subject to approval by shareholders, the dividend will be paid on Friday 18 March 2022 to shareholders on the register as at the close of business on Friday 4 March 2022, with an ex-dividend date of Thursday 3 March 2022. The Board believes that this is an appropriate level of payment given the performance for the year.

Capital expenditure

The Group continued to spend on capital investments over the year totalling GBP0.3m (2020: GBP0.4m) across both tangible and intangible expenditure. GBP0.1m (2020: GBP0.2m) of this was incurred to further develop ElectroglaZ(TM) and its ZYBRID(R)hover product offerings to enable market launches during the year, and also commence new patent applications. GBP0.2m (2020: GBP0.2m) was spent on tangible acquisitions with an approval being granted for a second laser bonding machine, of which GBP0.1m of the total cost of GBP0.4m was incurred in 2021. The remaining GBP0.1m spend occurred across a number of replacement pieces of kit. Depreciation and amortisation reduced over the year to GBP1.0m (2020: GBP1.2m).

Cash position

Despite the impact of the COVID-19 pandemic, the Group was in a comfortable cash position and conti nued to strategically assess its operations to improve future returns for shareholders. In early February 2021 the Company announced a proposed return of up to GBP10.0m of capital by way of a Tender Offer. This Tender Offer concluded later in the month of February and resulted in a reduction of 28.8% in the number of shares to 11,419,152 (2020: 16,044,041 shares) and returned GBP6.7m of cash to shareholders.

The Group also announced in the prior year a significant restructuring programme which completed in late October and early November of this financial year, the costs of which at GBP0.6m were provided for in the 2020 results but the cash was paid out during this financial year.

The cash position opened at GBP14.0m and closed at GBP9.2m, which adjusting for the one-off items above of GBP7.3m, generated an increase to cash of GBP2.4m. Net cash from operating activities was GBP2.1m, GBP0.6m of which arose from the unwinding of the working capital (2020: GBP3.2m) and GBP1.0m from depreciation and amortisation. Stocks decreased by GBP0.9m over the year as the Group utilised its supply of raw materials and reduced its value of goods manufactured for invoicing post year end. Creditors also increased by GBP0.1m as the orders placed with suppliers increased in the later months of the year, with the previous year's stock being sufficient to fulfil the earlier demand. Debtors, however, saw an increase as the sales made in H2 were considerably higher, and with a mix of credit terms being offered, this elevated the year-end debtor position. No bad debts materialised over the period and the excellent work in cash collection continues.

Cashflow used in investing activities was GBP0.3m (2020: GBP0.3m), wholly due to the costs of investment in capital expenditure, and cashflow used in financing activities was GBP6.7m (2020: GBP2.0m) due to the payment for the return of cash in the Tender Offer.

The Group maintains its overdraft facility, which is available for use in any of its three currencies. The Group also has an FX policy in place whereby it is hedged in both US Dollars and Euros for a period of four months ahead to correspond with its working capital policies and currency requirements.

The Group remains debt free at the year end and despite the continuing uncertainty the Group remains in a strong financial position for the year ahead.

Claire Smith

Group Finance Director

6 December 2021

Consolidated statement of comprehensive income

For the year ended 30 September 2021

 
                                                                 2021           2020 
                                                 Notes        GBP'000        GBP'000 
----------------------------------------------  ------  -------------  ------------- 
 Group revenue                                   3             11,683         12,680 
 Cost of sales                                                (8,146)       (10,130) 
----------------------------------------------  ------  -------------  ------------- 
 Cost of sales excluding exceptional 
  items                                                       (8,146)        (9,015) 
 Exceptional items                               4(a)               -        (1,115) 
----------------------------------------------  ------  -------------  ------------- 
 Gross profit                                                   3,537          2,550 
 Distribution costs                                             (183)          (196) 
 Administration expenses                                      (2,901)        (3,318) 
----------------------------------------------  ------  -------------  ------------- 
 Administration expense excluding exceptional 
  items                                                       (2,901)        (3,060) 
 Exceptional items                               4(b)               -          (258) 
----------------------------------------------  ------  -------------  ------------- 
 Group trading profit/(loss)                                      453          (964) 
 Exceptional other income                        5                  -            500 
----------------------------------------------  ------  -------------  ------------- 
 Group operating profit/(loss)                                    453          (464) 
 Finance revenue                                                    -             41 
----------------------------------------------  ------  -------------  ------------- 
 Profit/(loss) before tax                                         453          (423) 
 Tax (expense)/credit                            6               (47)            129 
----------------------------------------------  ------  -------------  ------------- 
 Profit/(loss) for the year                                       406          (294) 
 Other comprehensive income                                         -              - 
----------------------------------------------  ------  -------------  ------------- 
 Total comprehensive income/(loss)                                406          (294) 
----------------------------------------------  ------  -------------  ------------- 
 Earnings/(loss) per share 
 Basic                                           8               3.0p         (1.8p) 
----------------------------------------------  ------  -------------  ------------- 
 

All activities are from continuing operations.

Consolidated statement of changes in equity

For the year ended 30 September 2021

 
                                 Equity                Capital 
                                  share     Share   redemption   Retained 
                                capital   premium      reserve   earnings     Total 
                                GBP'000   GBP'000      GBP'000    GBP'000   GBP'000 
-----------------------------  --------  --------  -----------  ---------  -------- 
 At 1 October 2019                  160     8,994            -     16,644    25,798 
 Loss for the year                    -         -            -      (294)     (294) 
 Dividends                            -         -            -    (2,439)   (2,439) 
                               --------  --------  -----------  ---------  -------- 
 At 30 September 2020               160     8,994            -     13,911    23,065 
 Profit for the year                  -         -            -        406       406 
 Repurchase and cancellation 
  of shares                        (46)         -           46    (6,706)   (6,706) 
-----------------------------  --------  --------  -----------  ---------  -------- 
 At 30 September 2021               114     8,994           46      7,611    16,765 
-----------------------------  --------  --------  -----------  ---------  -------- 
 

Consolidated statement of financial position

At 30 September 2021

 
                                                 2021      2020 
                                     Notes    GBP'000   GBP'000 
----------------------------------  -------  --------  -------- 
 Assets 
 Non-current assets 
 Intangible assets                                733     1,043 
 Property, plant and equipment                  5,370     5,820 
                                                6,103     6,863 
 ------------------------------------------  --------  -------- 
 Current assets 
 Inventories                                    1,435     2,332 
 Trade and other receivables                    2,200     1,888 
 Cash and short term deposits                   9,157    14,038 
-------------------------------------------  --------  -------- 
                                               12,792    18,258 
 ------------------------------------------  --------  -------- 
 Total assets                                  18,895    25,121 
-------------------------------------------  --------  -------- 
 Equity and liabilities 
 Current liabilities 
 Trade and other payables                       1,080       591 
 Derivative financial liabilities                  16         - 
 Provisions                                         -       582 
 Accruals                                         551       376 
 Government grants                                 26        27 
 Tax liabilities                                  121         - 
                                                1,794     1,576 
 ------------------------------------------  --------  -------- 
 Non-current liabilities 
 Deferred tax liabilities (net)                   336       480 
                                                  336       480 
 ------------------------------------------  --------  -------- 
 Total liabilities                              2,130     2,056 
-------------------------------------------  --------  -------- 
 Net assets                                    16,765    23,065 
-------------------------------------------  --------  -------- 
 Capital and reserves 
 Equity share capital                             114       160 
 Share premium                                  8,994     8,994 
 Capital redemption reserve                        46         - 
 Retained earnings                              7,611    13,911 
-------------------------------------------  --------  -------- 
 Total equity                                  16,765    23,065 
-------------------------------------------  --------  -------- 
 

Consolidated cashflow statement

For the year ended 30 September 2021

 
                                                          2021      2020 
                                                       GBP'000   GBP'000 
----------------------------------------------------  --------  -------- 
 Operating activities 
 Profit/(loss) before tax                                  453     (423) 
 Finance income                                              -      (41) 
 Depreciation and impairment of property, 
  plant and equipment                                      629       718 
 Amortisation, impairment and write-off of 
  intangible assets                                        379       457 
 Amortisation of government grant                          (1)     (442) 
 Fair value movement on foreign exchange 
  forward contracts                                         16      (21) 
 Loss on disposal of asset                                  23         - 
 Working capital adjustments 
 Decrease in inventories                                   897       702 
 (Increase)/decrease in trade and other receivables      (433)     2,360 
 Increase in trade and other payables and 
  provisions                                                85        88 
----------------------------------------------------  --------  -------- 
 Cash generated from operations                          2,048     3,398 
 Tax received/(paid)                                        48     (220) 
----------------------------------------------------  --------  -------- 
 Net cashflow from operating activities                  2,096     3,178 
----------------------------------------------------  --------  -------- 
 Investing activities 
 Interest received                                           -        41 
 Payments to acquire property, plant and 
  equipment                                              (179)     (153) 
 Payments to acquire intangible assets                    (92)     (201) 
----------------------------------------------------  --------  -------- 
 Net cashflow used in investing activities               (271)     (313) 
----------------------------------------------------  --------  -------- 
 Financing activities 
 Dividends paid to equity shareholders of 
  the Parent                                                 -    (2439) 
 Receipt of government grants                                -       469 
 Repurchase and cancellation of shares                 (6,706)         - 
 Net cashflow used in financing activities             (6,706)   (1,970) 
----------------------------------------------------  --------  -------- 
 (Decrease)/increase in cash and cash equivalents      (4,881)       895 
----------------------------------------------------  --------  -------- 
 Cash and cash equivalents at the beginning 
  of the year                                           14,038    13,143 
----------------------------------------------------  --------  -------- 
 Cash and cash equivalents at the year end               9,157    14,038 
----------------------------------------------------  --------  -------- 
 

Notes to the consolidated financial statements

1. Basis of preparation

The preliminary results for the year ended 30 September 2021 have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards ("IFRS") as endorsed by the European Union regulations as they apply to the financial statements of the Group for the year ended 30 September 2021. Whilst the financial information included in this preliminary announcement has been computed in accordance with the recognition and measurement requirements of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies adopted are consistent with those of the previous year.

The financial information set out in this announcement does not constitute the statutory accounts for the Group within the meaning of Section 435 of the Companies Act 2006. The statutory accounts for the year ended 30 September 2020 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 September 2021 will be filed in due course. The auditors' report on these accounts was not qualified or modified and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006 or any preceding legislation.

Each of the Directors confirms that, to the best of their knowledge, the financial statements, prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and the Group results, Operational review and Financial review includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

   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 (GBP'000) except where otherwise indicated.

3. Group revenue and segmental analysis

Revenue represents the invoiced amount of goods sold and services provided, stated net of value-added tax, rebates and discounts.

For management purposes, the Chief Operating Decision Maker considers that it has a single business unit comprising the development and manufacture of customised optical filters to enhance electronic display performance. All revenue, profits or losses before tax and net assets are attributable to this single reportable business segment.

The Board monitors the operating results of its entire business for the purposes of making decisions about resource allocation and performance assessment. Business performance is evaluated based on operating profits.

All manufacturing takes place in the UK and accordingly all segment assets are located in the UK. The analysis of segment revenue by geographical area based on the location of customers is given below:

 
                                                         30 September 2021    30 September 2020 
-----------------------------------------------------  -------------------  ------------------- 
                                                          Touch  Non-touch     Touch  Non-touch 
-----------------------------------------------------  --------  ---------  --------  --------- 
                                                        GBP'000    GBP'000   GBP'000    GBP'000 
-----------------------------------------------------  --------  ---------  --------  --------- 
Sale of goods - Americas (excluding 
 USA)                                                       273         13       154         31 
 
                     *    USA                             1,683        183     2,419        175 
                   - EMEA (excluding UK and Hungary)      3,658        220     3,513        239 
                   - Hungary                                757        165     1,263        223 
                   - UK                                     233        257       316        241 
                   - APAC (excluding South Korea)         1,230        299       918         89 
                   - South Korea                          2,544        168     2,956        143 
-----------------------------------------------------  --------  ---------  --------  --------- 
                                                         10,378      1,305    11,539      1,141 
-----------------------------------------------------  --------  ---------  --------  --------- 
Total revenue                                                11,683                   12,680 
-----------------------------------------------------  -------------------  ------------------- 
 

Individual revenues from three major customers exceeded 10% of total revenue for the year. The total amount of revenue was GBP4.3m (2020: GBP4.9m).

The individual revenues from each of these three customers were: GBP1.6m (2020: GBP1.9m); GBP1.4m (2020: GBP1.1m); and GBP1.3m (2020: GBP1.9m).

4. Exceptional costs

(a) Cost of sales

 
                             30 September   30 September 
                                     2021           2020 
                                  GBP'000        GBP'000 
-------------------------  --------------  ------------- 
 Costs of restructuring                 -            652 
 Costs of Furlough                      -            463 
 Total exceptional costs                -          1,115 
-------------------------  --------------  ------------- 
 

These charges have arisen as a direct result of the COVID-19 impact on the Group whereby restructuring was necessary to align headcount with operations.

(b) Administration expenses

 
                             30 September   30 September 
                                     2021           2020 
                                  GBP'000        GBP'000 
-------------------------  --------------  ------------- 
 Costs of restructuring                 -            144 
 Costs of Furlough                      -            114 
 Total exceptional costs                -            258 
-------------------------  --------------  ------------- 
 

These charges have arisen as a direct result of the COVID-19 impact on the Group whereby restructuring was necessary to align headcount with operations.

5. Exceptional other income

 
                                      30          30 
                               September   September 
                                    2021        2020 
                                 GBP'000     GBP'000 
----------------------------  ----------  ---------- 
Grant monies received                  -         500 
----------------------------  ----------  ---------- 
Total grant monies received            -         500 
----------------------------  ----------  ---------- 
 

The income received as above is as a result of claims made under the CJRS for when personnel were on Furlough leave.

6. Tax

 
                                                      30 September   30 September 
                                                              2021           2020 
                                                           GBP'000        GBP'000 
---------------------------------------------------  -------------  ------------- 
 Current tax 
 UK corporation tax                                            122           (92) 
 Tax due on foreign subsidiary                                   1              2 
 Corporation tax under/(over)-provided in 
  prior years                                                   70            (4) 
---------------------------------------------------  -------------  ------------- 
 Total current tax charge/(credit)                             193           (94) 
---------------------------------------------------  -------------  ------------- 
 Deferred tax 
 Origination and reversal of temporary differences           (106)          (108) 
 Movement related to change in tax rates                        26             60 
 Movement related to prior year adjustments                   (66)             13 
---------------------------------------------------  -------------  ------------- 
 Total deferred tax credit                                   (146)           (35) 
---------------------------------------------------  -------------  ------------- 
 Tax charge/(credit) in the statement of 
  comprehensive income                                          47          (129) 
---------------------------------------------------  -------------  ------------- 
 

Reconciliation of the total tax charge/(credit)

The effective tax rate of the tax charge in the statement of comprehensive income for the year is 10% (2020: credit of 30%) compared with the average rate of corporation tax charge in the UK of 19% (2020: 19%). The differences are reconciled below:

 
                                               30 September   30 September 
                                                       2021           2020 
                                                    GBP'000        GBP'000 
--------------------------------------------  -------------  ------------- 
 Accounting profit/(loss) before tax                    453          (423) 
--------------------------------------------  -------------  ------------- 
 Accounting profit/(loss) multiplied by the 
  average UK rate of corporation tax of 19% 
  (2020: 19%)                                            86           (80) 
 Effects of: 
 Expenses not deductible for tax purposes                19              1 
 Depreciation in respect of non-qualifying 
  items                                                  19             19 
 Enhanced tax reliefs - R&D                           (100)          (140) 
 Effect of deferred tax rate reduction and 
  difference in tax rates                                18             60 
 Tax under-provided in prior years                        4              9 
 Tax due on foreign subsidiary                            1              2 
--------------------------------------------  -------------  ------------- 
 Total tax expense/(credit) reported in the 
  statement of comprehensive income                      47          (129) 
--------------------------------------------  -------------  ------------- 
 

Factors that may affect future tax charges

The main rate of corporation tax has remained at 19% throughout the period ended 30 September 2021. An increase in the main rate of corporation tax to 25% was enacted prior to the year end. This is applicable from 1 April 2023, and therefore the Group has considered the timing of the unwind of its deferred tax and has calculated its deferred tax balances at the rates at which they are expected to unwind. This has resulted in a range of rates from 19% - 25% being applied to deferred tax balances at the year end. As a result of the impending increase in the main rate of corporation tax, the Group expects its effective tax rate to increase in the medium term.

The Patent Box regime allows companies to apply a rate of corporation tax of 10% to profits earned from patented inventions and similar intellectual property. Zytronic generates such profits from the sale of products incorporating patented components. The Group has determined that all relevant criteria has been satisfied for bringing income within the regime. While the loss-making position of the Group in 2020 meant that there was no benefit from the regime in 2020 and 2021, the Group will continue to make Patent Box claims and expects to obtain tax deductions from such claims from 2022 onwards.

7. Dividends

The Directors propose the payment of a final dividend of 1.5p per ordinary share for this year's results. This will bring the total dividend for the year to 1.5p (2020: Nil).

 
                                                30 September   30 September 
                                                        2021           2020 
                                                     GBP'000        GBP'000 
--------------------------------------------  --------------  ------------- 
 Ordinary dividends on equity shares 
 Final dividend of 15.2p per ordinary share 
  paid on 7 February 2020                                  -          2,439 
                                                                   2,439 
 -----------------------------------------------------------  ------------- 
 

8. Earnings/(loss) per share

Basic EPS/LPS is calculated by dividing the profit/(loss) 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/LPS arising from total operations and EPS/LPS arising from continuing operations.

 
                                     Weighted                                     Weighted 
                                      average                                      average 
                                       number                                       number 
                        Profit      of shares            EPS           Loss      of shares            LPS 
                  30 September   30 September   30 September   30 September   30 September   30 September 
                          2021           2021           2021           2020           2020           2020 
                       GBP'000      Thousands          Pence        GBP'000      Thousands          Pence 
---------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Profit/(loss) 
  on ordinary 
  activities 
  after tax                406         13,346            3.0          (294)         16,044          (1.8) 
---------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Basic EPS/LPS             406         13,346            3.0          (294)         16,044          (1.8) 
---------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 

There are no dilutive or potentially dilutive instruments.

9. Capital and reserves

On 1 February 2021 the Company announced a proposed return of up to GBP10.0m of capital by way of a Tender Offer to all shareholders. This was approved by shareholders on 25 February 2021. As a result, 4,624,889 shares were purchased on 26 February 2021 and subsequently cancelled by the Company at a price of 145p per share, returning GBP6.7m of the Company's cash to participating shareholders.

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END

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December 07, 2021 02:00 ET (07:00 GMT)

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