TIDMZYT
RNS Number : 4580J
Zytronic PLC
13 December 2022
13 December 2022
Zytronic plc
("Zytronic" or the "Company"
and, together with its subsidiaries, the "Group")
Final Results for the year ended 30 September 2022 (audited)
Zytronic plc, a leading specialist manufacturer of touch sensors
, announces its audited full year results for the period ended 30
September 2022 ("FY22"). Comparative data is provided for the year
ended 30 September 2021 ("FY21").
Overview
-- Increase in revenues to GBP12.3m (2021: GBP11.7m)
-- Gross margin improved to 30.5% (2021: 30.3%) despite
increased costs of manufacture, as a result of a positive change in
product mix
-- Gaming revenues increased 62% to GBP4.7m, Vending increased
39% to GBP3.6m, offset by a 59% reduction in Financial to
GBP1.2m
-- Volume increase in sale of large (> 30" diagonal) sensors
of 70% to 13k units, multi-touch technology sensors of 44% to 18.5k
units, and curved format sensors of 97% to 7k units
-- Continuing profitability with EBITDA of GBP1.5m (2021:
GBP1.4m) and profit before tax of GBP0.7m (2021: GBP0.5m)
-- Basic earnings per share increased by 87% to 5.6p (2021:
3.0p)
-- Proposed final dividend of 2.2p (2021: 1.5p), a 47% increase
on the prior year
-- Share buyback programme returned a further GBP2.0m of surplus
cash and cancelled 1.3m shares
-- Closing net cash of GBP6.4m (2021: GBP9.2m)
Commenting on the outlook, Acting Executive Chair, Mark
Cambridge said:
"Whilst supply chain issues persist equally for Zytronic and its
customer markets, and average order intake for the first two months
is running at a level similar to the second half of the prior year,
we are encouraged by the full return of our key face to face global
business development and marketing. These activities provide the
basis for progress, as we continue to accelerate the rebuilding of
the opportunities pipeline."
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, Alex Bond
A copy of this announcement can be found on the Group's website
as detailed below. The Annual Report and Accounts for FY22 will be
made available on the website and posted to shareholders who have
requested a hard copy in late January. A further announcement will
be made in this regard and also to confirm posting of the Group's
notice of Annual General Meeting.
Notes to Editors
Zytronic is a world-renowned 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 meet systems-specific design
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 12 internationally granted
patents.
Zytronic operates from a single site near Newcastle-upon-Tyne in
the United Kingdom, providing its manufactured products globally
through a number of sales channel partners. Zytronic is relatively
unique in the touch eco-system as it offers a complete one-stop
solution including processing internally of the form and factor of
the glass and film substrates, the assembly of the associated touch
overlay products, in environmentally controlled cleanrooms to
customers' specific requirements and the development of the bespoke
firmware, software and electronic hardware which links the
manufactured touch interactive overlays to customer's integrated
systems and product.
For more information about the Group's technologies and products
please see www.zytronic.co.uk and for information about the Group,
please see https://www.zytronicplc.com ,
Introduction
On behalf of the Zytronic plc Board, I would like to thank all
UK and internationally based employees for their efforts in
realising an improvement in the reported trading performance of the
Group for the year ended 30 September 2022, during another year of
unpredictability in underlying global supply chains and revenue
generating markets in which the Zytronic business operates.
Results
The detailed results and commentary for the year are presented
in the operational and financial reviews that follow, but the
salient points are that the Group produced a profit before tax of
GBP0.7m (2021: GBP0.5m) on revenues of GBP12.3m (2021: GBP11.7m)
and a gross margin of 30.5% (2021: 30.3%). This, combined with a
13% corporation tax rate for the year and the lower weighted
average number of shares in issue (due to the tender offer and
buyback programmes in FY21 and FY22, as detailed in the financial
review), has resulted in an increase in the earnings per share to
5.6p (2021: 3.0p).
Whilst sales for the year showed a solid 5.6% improvement over
last year, the revenue increases in two of our key markets, being
62% in Gaming and 39% in Vending, were countered by the 59%
reduction in Financial. The weighting of sales this year was 48%
and 52% across the first and second halves respectively. This is
much closer to the historic norm than the pattern in FY21, which
was 59% H2-weighted reflecting the release of pent-up demand in
markets such as Gaming after the initial easing of COVID-19
lockdown measures.
Current trading
The first two months of the new fiscal year have continued to be
affected by the same global supply chain considerations that were
described in the trading update issued on 18 August 2022. The
average monthly order intake is at levels similar to those of the
second half of FY22 and therefore lower than the same period in
FY21. The Board maintains the opinion that this is also being
impacted by the more than two years of postponed face-to-face
business development and marketing activities due to the pro-longed
global impact of COVID-19. Encouragingly, those global activities
have now resumed to pre-pandemic levels, which is observable in the
improved volume and value of opportunities in our pipeline log.
Statement of financial position
The cash position at the year-end remains strong at GBP6.4m
(2021: GBP9.2m) providing the basis for stability. In the year,
working capital increased by GBP1.4m, impacted by the necessary
increase in raw material stocks undertaken to mitigate various
supply chain issues, particularly in support of our customer
supplied electronic touch controllers, and increases in debtors at
the year end. GBP0.5m was spent on investing activities (2021:
GBP0.3m) and GBP2.2m in financing activities, being the on-market
share buybacks of GBP2.0m and the GBP0.2m payment of the FY21 final
dividend (2021: GBP6.7m, GBP6.7m and GBPNil).
Return to shareholders / dividend
In February 2022 the Board decided it was in shareholders'
interests to continue to use our previously identified surplus cash
balances to undertake on-market share buybacks, utilising
pre-existing authority and that additionally granted at the 2022
AGM. Consequently, a total of 1,257,415 Ordinary shares were
repurchased and cancelled by the Company at a weighted average
share price of 161p. The resultant closing shares in issue at the
year-end were 10,161,737.
As the Group has achieved an improved profitability over the
year the Board has decided to recommend to shareholders a final
dividend of 2.2p per share (2021: 1.5p), payable on 24 February
2023 to shareholders on the Register on 10 February 2023.
Board changes and corporate governance
As announced in last year's Chair's statement, Tudor Davies
stepped down from his position at the conclusion of the 3 March
2022 AGM, after serving ten years as Chair of the Company, at which
point David Buffham was appointed as the new Non-executive Chair.
On 4 March 2022, after an extensive search, Mark Butcher joined the
Company as an independent Non-executive Director ("INED").
In early October 2022, David Buffham informed the Company of a
medical issue and requested a temporary leave of absence, which by
the end of the month had unfortunately resulted in his formal
retirement as a Director (including as Chair) on the grounds of ill
health. We wish David the best in his recovery and take the
opportunity to express the Boards gratitude for his tenure,
formerly as an INED and Chair of sub-committees and latterly as
Chair of the Company.
To maintain stewardship, continuity of leadership and corporate
governance at the time of David's temporary (and then permanent)
leave of absence, the Board considered the appropriate interim
course of action, being that I should relinquish my position as CEO
and take up the new position of Acting Executive Chair. This
enabled Mark Butcher to continue to Chair the Board's
sub-committees independently. During this period, to maintain an
appropriate level of independent influence, should there be
situations regarding a decision on which the Board was not
unanimously agreed, then Mark Butcher as INED would carry the
casting vote, with one of the Executive Directors abstaining. This
decision remains in force whilst the Company undertakes the
recruitment and appointment of at least one new INED to reconfigure
the Board and comply with the QCA Corporate Governance Code.
Outlook
Whilst supply chain issues persist equally for Zytronic and its
customer markets, and average order intake for the first two months
is running at a level similar to the second half of the prior year,
we are encouraged by the full return of our key face to face global
business development and marketing. These activities provide the
basis for progress, as we continue to accelerate the rebuilding of
the opportunities pipeline.
Mark Cambridge
Acting Executive Chair
12 December 2022
Performance / business activity
Total sales revenues for the year of GBP12.3m were 5.6% greater
than the GBP11.7m of FY21. Order intake over the year matched
revenues at GBP12.3m, which represented a 2% increase over the
GBP12.1m of FY21. Revenues generated over the year continue to show
the historical norm of a stronger second half performance against
first half, being H1 of GBP5.9m against H2 of GBP6.4m. This
weighting is less pronounced than that observed in FY21 (H1:
GBP4.8m; H2: GBP6.9m), as the second half of FY21 saw the
resumption of delayed Gaming demand, in particular after the easing
of previous periods of COVID-19 lockdowns. The much improved first
half order intake of GBP7.4m was contrary to normal weighting
across the two halves of the financial year, as customers placed
longer visibility purchase orders to mitigate supply chain risk for
scheduled second half output, being 33% higher than the GBP4.9m
order intake in the second half of the year.
A number of factors influenced the degree of variation over the
year. The recognised and well-documented issues in global
electronic component supply chains, which have gone well-beyond
just those of reported issues with semiconductors still remain
challenging, for sales into all regions. The global effects of the
Omicron variants of COVID-19, which particularly impacted the
critical business development lead generation processes and
face-to-face marketing efforts, continued well into the second half
of the fiscal year and in some instances into the start of the
current fiscal year. The Russian war in Ukraine has particularly
affected our non-touch electromechanical interference shielding
products, due to their export dual-use status and therefore
potential military use in Russia, and also several future
opportunities in encrypted touch for our application partner.
Of our major contributory markets, both Gaming and Vending
showed considerable growth in revenues against FY21, being somewhat
offset by the decline in our Financial market revenues across the
comparative period. This was also reflected in our export revenues
as we observed a year-on-year 32% increase in revenues to Asia, as
Gaming increased, offsetting the observed 24% decline in revenues
to Europe as Financial sales decreased.
Market 2022 2021
--------- ---------
Gaming GBP4.7m GBP2.9m
Vending GBP3.6m GBP2.6m
Industrial GBP1.6m GBP1.6m
Financial GBP1.2m GBP2.9m
Signage GBP0.6m GBP0.7m
Other GBP0.6m GBP1.0m
Total GBP12.3m GBP11.7m
--------- ---------
Gaming
Our products sold into the Gaming market have continued to show
a reasonable recovery from the pandemic, which is reflected in the
doubling of sales to our primary display integrator customers based
in South Korea. In turn these have benefited from a resumption of
OEM unit builds in our primary deployment market of Las Vegas.
However, the effects of the pandemic are still being experienced,
evidenced by the lack of new cabinet design innovation observed at
the latest October 2022 Global Gaming Expo ("G2E"), although
discussions and indicators point towards 2023 being a trigger point
for the OEMs to commence new design work, in preparation for
product launches post G2E in late autumn 2023.
Vending
Sales of our products to the Vending market have also shown
reasonable year-on-year growth, albeit slightly skewed to the first
half this year. Revenue growth has mainly been generated from the
US, as well as France and Spain, in FY22. The primary performance
driver is an increase in unit sales to a US-based display system
integrator for a brand-independent OEM drinks fountain
manufacturer. France and Spain both benefited from volume increases
to regional electric vehicle public charging station OEMs, an
application area which presently remains regionally fragmented.
Industrial
Sales of products to the Industrial market, which are generally
associated with machine control interfaces and informational
kiosks, have shown little year-on-year variance; however,
geographically we observed a doubling of revenues from the UK and
Americas, offset by an equal aggregate decline in Europe and the
Asia Pacific region ("APAC").
Financial
Product sales to the Financial market, which historically up
until FY21 has been one of our top two revenue-generating markets
and dominated by ATM products, has now achieved a maintenance level
of revenue generation with our primary market customers as
previously indicated. A number of factors have influenced this
position, but the main factor is that the latest ATM platforms to
market are no longer utilising Zytronic products. We continue to
interface with customers in this market, either directly or in
partnership for our encrypted touch solution, of which we had been
very hopeful of seeing our partners product to market this year,
prior to the Russian war in Ukraine.
Signage
Sales of products to the Signage market, which comprise
non-transactional informational systems, and tables, remained
fairly consistent year-on-year, with small improvements observed in
UK and APAC sales, offset by a more significant drop in US sales as
the deployment of smart cities street furniture has declined during
the pandemic years.
Other
Sales of products to our combined Other general category,
including smaller individual markets such as Healthcare, Home
Automation, Industrial Telematics and Military, and others, also
exhibited lower year-on-year revenue generation. This drop in
comparative performance is largely associated with the revenues
observed from a Singaporean medical OEM during the pandemic height,
which has not been repeated during FY22.
In total across all markets, 60k touch sensor units have been
supplied in FY22, compared to 76.5k units in FY21. As Gaming
returned, we realised a better mix shift to larger unit sizes
(>30" diagonal) with a 70% volume improvement to 13k, countered
by a 43% drop to 17.5k in the small (<14.9" diagonal) size range
and a 23% drop to 29.5k in the medium (15 - 29.9" diagonal) size
range. Along with an improvement in larger sizes, we also saw a 44%
improvement in the volume of our MPCT(TM) sensors supplied to 18.5k
units and a 97% improvement in the volume of curved and shaped
touch sensors to 7k units.
The observed electronic component shortage issues, which went
well beyond the reported semiconductor supply issues, resulted in
the R&D team spending a significant amount of resource
identifying, approving, and re-designing our families of electronic
controllers, on an almost constant basis over the course of the
year. We anticipate that this is a situation that is likely not to
ease until the middle of calendar year 2023 at the earliest.
New product development/opportunities
Major R&D projects which have been worked on over the course
of FY22 include:
-- the formal product launch of the ZyBrid(R)edge zero border
touch sensor at the Barcelona ISE Expo in May 2022;
-- demonstrator design concepts for ElectroglaZ(TM) solutions,
including a conceptual high end Hi-Fi unit, for the October 2022
Frankfurt Light + Building Expo;
-- developments around the independent powering of low voltage
items and associated communication data transfer, like mechanical
buttons, LED lighting and mobile phone chargers, by the utilisation
of the same micro filament structures that form the basis of our
touch technology, for the October 2022 Las Vegas Global Gaming
Expo;
-- glass processing and novel structures, to create localised
enhanced areas in conjunction with our touch technology to provide
static tactile feedback, such as touch buttons; and
-- a second jointing laser for siting within the main factory
cleanroom to provide risk mitigation and comparable production
capabilities across the site, which is expected to be fully
operational in early 2023.
Intellectual property
Some of the work around novel glass structures and their
interaction with our touch technology has resulted in a further
patent application being made in the year, relating to a
non-mechanical touch sensing button, titled "An interactive
device". Three further international patents have also been granted
during the year, GB2576674, titled "User preference indication",
US11,392,215, titled "Button Supply", and EP2856294, titled
"Non-planar touch panel production method", taking the total of
internationally granted patents within our portfolio to twelve,
with a further twelve still at either application or pending
examination stages.
Business development activity
As we entered FY22, we were fully expectant of a resumption of
our pre-pandemic business development and marketing practices by
early January 2022. Unfortunately, the global surge in the two
Omicron variants of COVID-19 put the timing of physically
addressing our global markets significantly backwards. The European
Gaming show, ICE, was cancelled in January, only to be re-confirmed
for Easter, consequently with a very poor attendee and exhibitor
turn-out, whilst the ISE Expo was moved from its original first
week of February slot to mid-May, and the Light + Building Expo was
moved from early March to early October. However, we were still
able to maintain a modest presence at the Global Gaming Expo in
October 2021, Touch Taiwan in May 2022, and Digital Signage Japan
in June 2022 through our internationally based employees. In
conjunction with our German channel partner, we also undertook
active participation at Embedded World in June and InnoTrans in
September 2022.
During the year, with a return of an ever-increasing calendar of
tradeshow events as well as a continuation of the developed social
media, digital content focus and written trade publications
platforms, we strengthened the internal team with the appointment
of a marketing specialist. Consequently, a review of our present
and potential future marketing strategy is being undertaken.
Details of all relevant news from customer testimonials, to thought
pieces, technology updates and event attendance, can be found on
our operating company website at
https://www.zytronic.co.uk/news/.
For a number of years now we have reported on the utilisation of
our CRM system, to log and monitor leads and opportunities
generated from a combination of tradeshow participation, direct
business development, indirect channel partner engagement and
application directed marketing campaigns. As a dynamic system,
opportunities are either "Open", or "Closed". A Closed opportunity
is either "Won", as it has moved from our CRM system to productive
purchase order(s) (not sampling orders), or "Lost", being the point
at which the potential customer has confirmed either it has lost
its opportunity or it no longer has interest in pursuing a Zytronic
solution, which can be for reasons of price, specification,
capability, or opportunity duplication.
One simple way of looking at the dynamic changes in the data, is
by assessing the levels of Open opportunities at month ends, in
terms of the total quantity and associated total customer projected
lifetime value ("CPLV"). What is clearly discernible is as COVID-19
impacted, and global lockdown protocols initiated from circa
January 2020 onwards, how our inability to add new opportunities to
the pipeline from that point, whilst existing opportunities Closed,
meant that the pipeline of opportunities declined for a near
two-year period, bottoming around late summer 2021.
It is from this point onwards as degrees of our previously
impacted business development and marketing actions began the slow
return to pre-pandemic activity levels through FY22, we see the
evidence of the pipeline rebuild.
It should be noted that in the Zytronic addressable markets and
position within the touch eco-system, the rate and timing of the
maturation of opportunity conversion to Won status, has a
well-reported historical average two-year timeframe, which is
likely to still exist as the pipeline continues the rebuild.
As of 30 September 2022, there were 484 Open opportunities in
our CRM system, with a CPLV of GBP59m (2021: 391 and GBP28m), and,
of the two largest addressable markets, Vending applications
accounted for 156 Open opportunities, with a CPLV of GBP33m, whilst
Gaming accounted for 26 and GBP11m respectively. At the end of the
year the log did not contain any ElectroglaZ(TM) Open opportunities
as this time-point was prior to the Light + Building Expo.
Organisational adaptation
In the 2020 and 2021 reviews, comment was made regarding the
significant restructuring that was undertaken to match the business
conditions that prevailed at that time. However, as those
conditions started to show evidence of improvement over the year,
as well as increasing the productive labour workforce and the
strengthening of marketing support, we have also added to
electronics engineering and software development in the R&D
department and latterly to sales with the appointment of a US West
Coast-based Business Development Manager (appointed on 1 October
2022), as well as considerations around changes to working
practices across the whole business to improve both retention and
recruitment.
Skills gaps and recruitment of productive labour continue to
prove generally problematic in the manufacturing sector. Our
Operations department therefore took an active part in July 2022 in
the MAKE UK (The Manufacturers' Organisation) inaugural National
Manufacturing Day, as part of a UK-wide open house, to provide a
better understanding of the diversity of opportunities in the
manufacturing sector, to illustrate for the education community the
benefit and application of STEM within a workplace and to foster
local community interaction and relationships, with an overarching
remit to help in the recruitment process for businesses.
Post the event, the Group successfully recruited one of the
local attendees and has continued to multi-skill the productive
labour force to provide resilience to the changing business
needs.
Mark Cambridge
Acting Executive Chair
12 December 2022
The 2022 financial year has been another year of continued
progression, despite the continuing impacts of the COVID-19
pandemic and the associated global lockdowns continuing to affect
the operations of the Group, as well as strong macro-economic
headwinds and industry-wide electronic component shortages.
Zytronic achieved another year of EBITDA growth, albeit a modest
increase to GBP1.5m compared to that of the prior year of GBP1.4m,
and an increase in profit before tax of GBP0.2m to GBP0.7m (2021:
GBP0.5m). The continued strong cash position will allow the Group
to further invest in opportunities to deliver future growth.
Group revenue
It is pleasing to report that Group revenue has increased by
5.6% over the year to GBP12.3m (2021: GBP11.7m), with recovery
being observed in the Gaming and Vending markets in particular,
offsetting the expected and well-documented decline in the
Financial market. The Gaming market, with revenues of GBP4.7m,
accounted for 38% of overall Group revenue whilst Vending revenues
of GBP3.6m accounted for 29%. The Financial market, which was for a
number of years the Group's biggest revenue generator, displayed
revenues of GBP1.2m, accounting for only 10% of overall sales. The
Group continues to work closely with its key customers and
potential customers on new opportunities for future revenue
growth.
Gross margin
Reported gross margin for the year improved marginally to 30.5%
( 2021: 30.3%) with a number of factors influencing this closing
position:
-- increased sales of the larger format, bespoke sensors over
the year, in particular into the Gaming market, brought margin
benefits;
-- the Group was not exposed to the significant price rises in
utility costs over the year as its strategy of purchasing the
commodities ahead mitigated against this;
-- the well-highlighted semiconductor shortages had a negative
impact on the cost of materials to the Group, as the sourcing of
those came at a higher cost than in previous times. There were also
a number of other raw material price rises over the period as
suppliers were impacted by their own procurement issues and rising
utility costs, subsequently negatively impacting gross margin;
-- in October 2018, the Group negotiated an 18-month pay award
with its employees taking it through to April 2020. However, as the
pandemic started to impact, the decision was made not to enter into
pay negotiations over this period. Subsequently, in April 2022, the
Group was conscious of this prolonged situation and negotiated an
agreeable and deserved pay award to all its employees for the
benefit of maintaining retention, but at the same time increasing
the costs of production;
-- the recruitment of additive production personnel was a
challenge over the year and, the ability to source willing labour
was problematic and ultimately impacted on costs. Feedback received
on this matter from our manufacturing peer group was consistent
with the Group's situation; and
-- commissions payable over the year was higher as revenues
generated through channel partners increased, particularly in
Gaming.
Profit before tax
Profit before tax over FY22 increased to GBP0.7m (2021: GBP0.5m)
due to the improvements in gross profit and savings achieved in
administration costs. Administration costs were reduced by GBP0.1m
over the year, but are expected to increase over the coming year as
the business continues with its essential face-to-face prospecting
activities. The FY22 figure also benefited from a reduction in
professional fees compared to the prior year, as the costs of the
successful capital reduction exercise and return of surplus cash to
shareholders were higher previously. As with the direct workforce,
administration staff were also remunerated for their continued
efforts in the year. The Group continues to be mindful of the
current political situation and the rising costs of living for all
employees and would expect that these considerations will have an
impact going forward.
Tax
The Group continues to utilise all available reliefs, which have
a positive impact on the rate of tax it pays. The effective tax
rate for the year is 13% and GBP0.1m (2021: 10%, < GBP0.1m). The
UK government has increased the rate of corporation tax from 1
April 2023 to 25% from 19% and the Group expects its effective tax
rate to therefore increase over the medium term.
Earnings per share
The ordinary shares in issue at the start of the year of
11,419,152 were further reduced over the period as the Group
undertook a share buyback programme under the authorities obtained
at the two prior Annual General Meetings in order to return the
surplus cash. This programme proved to be successful with the Group
purchasing 1,257,415 shares in the period at a weighted average
price of 161p and returning GBP2.0m of cash to shareholders. The
resultant number of shares in issue at the year-end are
10,161,737.
With profits after tax of GBP0.6m arising, this has generated an
EPS of 5.6p (2021: 3.0p).
Dividend
Following a return to profitability in FY21 the Group declared a
final dividend of 1.5p (2020: GBPNil) costing GBP0.2m. With another
year of increased profitability, the Group has again proposed to
continue to pay a final dividend this year of 2.2p, costing GBP0.2m
and an increase of 47% over the prior year. Subject to shareholder
approval, this will be paid on Friday 24 February 2023 to those on
the Register as at close of business on Friday 10 February
2023.
Capital expenditure
Investment in capital expenditure, particularly in R&D
development, is a key enabler in the future success of the Group.
This was improved upon in FY22 with GBP0.5m being incurred in
combined costs of tangible and intangible assets (2021: GBP0.3m).
The R&D department continued its work in investments in
patents, with another new patent being applied for, and it was also
active in a number of other key development areas as described in
the Operational review. During the second half of the year the
Group commenced investment in a new ERP system implementation,
which will enable it to have access to more production data. This
will continue into the year ahead. There was also spend on other
replacement and additive assets over the year. Depreciation and
amortisation reduced slightly over FY22 to GBP0.8m (2021: GBP1.0m),
which has been impacted by the lower investment over the previous
two reporting periods, due to uncertainty arising around
COVID-19.
Cash position
Cash at the beginning of the year was GBP9.2m and closed at
GBP6.4m, with the biggest cash expense being the share buyback
exercise as described earlier, which reduced the cash position by
GBP2.0m. Working capital, as the Group had expected, increased over
the period due to both the increase in stocks of GBP0.7m and
debtors of GBP0.8m. Stocks were increased over FY22 as commitments
to secure more electronic control board stock were made as the
world responded to a supply shortage of various electronic
components, particularly semiconductors. The supply of adhesives
and hardcoat polyester film, which was a problem in the previous
two years, returned to more normal levels but, also contributed to
increasing stock over the period. The Group also observed price
rises across several key raw materials, increasing the valuation of
its holding at the year-end.
The increase to debtors at the year-end was in the main due to
an overdue debt from one particular slow paying debtor of GBP0.4m.
The Group controlled this situation by postponing any further
deliveries to the customer until the debt was recovered. The Group,
whilst frustrated with the customer, did not see the need to
provide for this debt as it had complete confidence it would be
repaid which proved to be correct. Aside from this one-off
situation the Group has a very good history of cash collection
which continued over the year, with no bad debts arising. What has
been noted over the year is that there is a change in customer
expectations for extended credit terms, most likely as a result of
the pandemic, and contributing to the overall increase in working
capital.
Cashflow used in investing activities was GBP0.5m (2021:
GBP0.3m), wholly due to the costs of investment in capital
expenditure. The Group also returned to paying dividends over the
year at a cost of GBP0.2m (2021: GBPNil).
The Group maintains its overdraft facility of up to GBP1.0m,
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 up to four months ahead to
correspond with its working capital policies and currency
requirements. Following the Bank of England's decision to increase
the rates of interest, the Group is very active in ensuring it is
maximising its interest earning potential, whilst continuing to
meet the cashflow demands on the business.
The Group has no debt and, with strong cash levels, remains in a
strong financial position for the year ahead.
Claire Smith
Group Finance Director
12 December 2022
2022 2021
Notes GBP'000 GBP'000
---------------------------- ------ -------- --------------
Group revenue 3 12,340 11,683
Cost of sales (8,577) (8,146)
---------------------------- ------ -------- --------------
Gross profit 3,763 3,537
Distribution costs (258) (183)
Administration expenses (2,810) (2,901)
---------------------------- ------ -------- --------------
Group operating profit 695 453
Finance revenue 10 -
---------------------------- ------ -------- --------------
Profit before tax 705 453
Tax expense 4 (94) (47)
---------------------------- ------ -------- --------------
Profit for the year 611 406
Other comprehensive income - -
---------------------------- ------ -------- --------------
Total comprehensive income 611 406
---------------------------- ------ -------- --------------
Earnings per share
Basic 6 5.6p 3.0p
---------------------------- ------ -------- --------------
All activities are from continuing operations.
Equity Capital
share Share redemption Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- ----------- --------- --------
At 1 October 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
Profit for the year - - - 611 611
Repurchase and cancellation
of shares (12) - 12 (2,019) (2,019)
Dividends - - - (170) (170)
----------------------------- -------- -------- ----------- --------- --------
At 30 September 2022 102 8,994 58 6,033 15,187
----------------------------- -------- -------- ----------- --------- --------
2022 2021
Notes GBP'000 GBP'000
---------------------------------- ------- -------- --------
Assets
Non-current assets
Intangible assets 711 733
Property, plant and equipment 5,107 5,370
5,818 6,103
------------------------------------------ -------- --------
Current assets
Inventories 2,184 1,435
Trade and other receivables 2,957 2,200
Cash and short term deposits 6,403 9,157
------------------------------------------- -------- --------
11,544 12,792
------------------------------------------ -------- --------
Total assets 17,362 18,895
------------------------------------------- -------- --------
Equity and liabilities
Current liabilities
Trade and other payables 1,055 1,080
Derivative financial liabilities 92 16
Accruals 560 551
Government grants - 26
Tax liabilities - 121
1,707 1,794
------------------------------------------ -------- --------
Non-current liabilities
Deferred tax liabilities (net) 468 336
468 336
------------------------------------------ -------- --------
Total liabilities 2,175 2,130
------------------------------------------- -------- --------
Net assets 15,187 16,765
------------------------------------------- -------- --------
Capital and reserves
Equity share capital 102 114
Share premium 8,994 8,994
Capital redemption reserve 58 46
Retained earnings 6,033 7,611
------------------------------------------- -------- --------
Total equity 15,187 16,765
------------------------------------------- -------- --------
2022 2021
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Operating activities
Profit before tax 705 453
Finance income 10 -
Depreciation of property, plant and equipment 543 629
Amortisation and write-off of intangible
assets 223 379
Amortisation of government grant (26) (1)
Fair value movement on foreign exchange
forward contracts 76 16
Loss on disposal of asset 2 23
Working capital adjustments
(Increase)/decrease in inventories (749) 897
Increase in trade and other receivables (757) (433)
Increase in trade and other payables and
provisions 106 85
-------------------------------------------------- -------- --------
Cash generated from operations 133 2,048
Tax (paid)/received (224) 48
-------------------------------------------------- -------- --------
Net cashflow (used in)/from operating activities (91) 2,096
-------------------------------------------------- -------- --------
Investing activities
Interest received 7 -
Payments to acquire property, plant and
equipment (280) (179)
Payments to acquire intangible assets (201) (92)
-------------------------------------------------- -------- --------
Net cashflow used in investing activities (474) (271)
-------------------------------------------------- -------- --------
Financing activities
Dividends paid to equity shareholders of (170) -
the Parent
Repurchase and cancellation of shares (2,019) (6,706)
Net cashflow used in financing activities (2,189) (6,706)
-------------------------------------------------- -------- --------
Decrease in cash and cash equivalents (2,754) (4,881)
-------------------------------------------------- -------- --------
Cash and cash equivalents at the beginning
of the year 9,157 14,038
-------------------------------------------------- -------- --------
Cash and cash equivalents at the year end 6,403 9,157
-------------------------------------------------- -------- --------
1. Basis of preparation
The preliminary results for the year ended 30 September 2022
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 2022. 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 2021 have been filed with the
Registrar of Companies. The statutory accounts for the year ended
30 September 2022 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 (the
Board) 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 2022 30 September 2021
---------------------------------- ------------------- -------------------
Touch Non-touch Touch Non-touch
---------------------------------- -------- --------- -------- ---------
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- -------- ---------
Sale of goods
- Americas (excluding USA) 322 15 273 13
USA 2,015 191 1,683 183
- EMEA (excluding UK and Hungary) 3,153 58 3,658 220
- Hungary 251 187 757 165
- UK 339 314 233 257
- APAC (excluding South Korea) 283 254 1,230 299
- South Korea 4,586 372 2,544 168
---------------------------------- -------- --------- -------- ---------
10,949 1,391 10,378 1,305
---------------------------------- -------- --------- -------- ---------
Total revenue 12,340 11,683
---------------------------------- ------------------- -------------------
Individual revenues from two major customers exceeded 10% of
total revenue for the year. The total amount of revenue was GBP4.1m
(2021: GBP2.3m).
The individual revenues from each of these two customers were:
GBP2.4m (2021: GBP1.3m) and GBP1.7m (2021: GBP1.0m).
4. Tax
30 September 30 September
2022 2021
GBP'000 GBP'000
--------------------------------------------------- ------------- -------------
Current tax
UK corporation tax 40 122
Tax due on foreign subsidiary - 1
Corporation tax (over)/under provided in
prior years (79) 70
--------------------------------------------------- ------------- -------------
Total current tax (credit)/charge (39) 193
--------------------------------------------------- ------------- -------------
Deferred tax
Origination and reversal of temporary differences (24) (106)
Movement related to change in tax rates 43 26
Movement related to prior year adjustments 114 (66)
--------------------------------------------------- ------------- -------------
Total deferred tax charge/(credit) 133 (146)
--------------------------------------------------- ------------- -------------
Tax charge in the statement of comprehensive
income 94 47
--------------------------------------------------- ------------- -------------
Reconciliation of the total tax charge
The effective tax rate of the tax charge in the statement of
comprehensive income for the year is 13% (2021: 10%) compared with
the average rate of corporation tax charge in the UK of 19% (2021:
19%). The differences are reconciled below:
30 September 30 September
2022 2021
GBP'000 GBP'000
--------------------------------------------- ------------- -------------
Accounting profit before tax 705 453
--------------------------------------------- ------------- -------------
Accounting profit multiplied by the average
UK rate of corporation tax of 19% (2021:
19%) 134 86
Effects of:
Expenses not deductible for tax purposes (4) 19
Depreciation in respect of non-qualifying
items 18 19
Enhanced tax reliefs - R&D and patent box (99) (100)
Enhanced tax reliefs - super deduction (27) -
Effect of deferred tax rate reduction and
difference in tax rates 37 18
Tax under-provided in prior years 35 4
Tax due on foreign subsidiary - 1
--------------------------------------------- ------------- -------------
Total tax expense reported in the statement
of comprehensive income 94 47
--------------------------------------------- ------------- -------------
Factors that may affect future tax charges
The main rate of corporation tax has remained at 19% throughout
the period ended 30 September 2022. 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 rate of 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.
5. Dividends
The Directors propose the payment of a final dividend of 2.2p
per ordinary share for this year's results. This will bring the
total dividend for the year to 2.2p (2021: 1.5p).
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Ordinary dividends on equity shares
Final dividend of 1.5p per ordinary share
paid on 18 March 2022 170
170
------------------------------------------- ------------- -------------
6. 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
Profit of shares EPS Profit of shares EPS
30 September 30 September 30 September 30 September 30 September 30 September
2022 2022 2022 2021 2021 2021
GBP'000 Thousands Pence GBP'000 Thousands Pence
------------- ------------- ------------- ------------- ------------- ------------- -------------
Profit on
ordinary
activities
after tax 611 10,836 5.6 406 13,346 3.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
Basic EPS 611 10,836 5.6 406 13,346 3.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
There are no dilutive or potentially dilutive instruments.
7. 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.
On 17 February 2022, the Company announced a further proposed
return of capital via a share buyback programme under the
authorities obtained at the Company's AGM and Tender Offer General
Meeting, both held on 25 February 2021. The Company obtained
further authorities to continue to undertake this at its AGM held
on 3 March 2022. This action was successfully concluded on 25 May
2022, with a total of 1,257,415 shares having been purchased in
aggregate, at a volume weighted average price of 161p per share,
returning GBP2.0m of the Company's cash.
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END
FR BKBBDNBDBKBD
(END) Dow Jones Newswires
December 13, 2022 02:00 ET (07:00 GMT)
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