07:00 Tue 10 Dec 2019
Zytronic PLC - Preliminary Results
("
and, together with its subsidiaries, the "Group")
Preliminary Results for the year ended
Overview
§ Group revenue of
§ Gross margin reduced to 33.7% (2018: 37.0%) due to the change in product mix sold, with fewer large format sensors being invoiced in the year
§ Profit before tax of
§ Basic earnings per share of 16.8p (2018: 22.7p)
§ Final dividend of 15.2p proposed (2018: 15.2p), bringing total dividends for the year to 22.8p (2018: 22.8p)
Commenting on the outlook, Chairman,
"On the basis of the first two months of trading being at lower levels than last year, we are cautious about the short term. However, as we have seen in prior years, trading results in the second half can improve as the year progresses and the level of enquiries for new projects are higher than last year."
It is intended that the AGM will take place at the Company's offices at
Enquiries:
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(Today: 020 7496 3000; Thereafter 0191 414 5511)
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N+1 Singer (Nominated Adviser & Broker) |
(020 7496 3000) |
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Notes to Editors
Operating from a single site near
CHAIRMAN'S REVIEW
Introduction
As announced in May this year, trading results have been lower than the prior year, but our strong liquidity position has enabled us to maintain the dividend at the same level as last year.
Results
There was improvement in trading in the second half of the year with profits improving by 21% on revenues 12% ahead of the first half.
Revenue for the year ended
Cash generation
The cash position has reduced over 2019 to
Dividend
The Directors have recommended a final dividend of 15.2p, which, together with the interim dividend of 7.6p paid in
Shareholder value
Over the last four years, we have pursued a policy of increasing the dividend considerably ahead of earnings principally because our trading and cash generation were strong and we have had the additional comfort of a growing cash balance.
However, the last two years' results have been lower than expected, and dividends at current levels compared with performance are only sustainable by our strong liquidity position. We are also cognisant of the potential effect on the share price with a current yield of 11%* from an uncovered dividend.
The Board is already undertaking a strategic review of its operations to improve future returns for shareholders and, as part of that review, the subject of the appropriate level of future distributions compared with earnings and cash resources is under consideration.
Outlook
On the basis of the first two months of trading being at lower levels than last year, we are cautious about the short term. However, as we have seen in prior years, trading results in the second half can improve as the year progresses and the level of enquiries for new projects are higher than last year.
Chairman
* Note - dividend yield is calculated using a share price of 200p as at mid-morning on
2019 CHIEF EXECUTIVE OFFICER'S REVIEW
The information detailed in the review provides insights into the various operational aspects of
Sales
Revenue for the year was
However, unlike the prior year, where a reduction in financial touch product revenue impacted the performance, the issue in 2019 was not associated with the financial market, which did decline by
When evaluating ZDL's sales mix, several intrinsically linked factors have a significant and well-documented influence, primarily the number of touch sensor units produced and their mix based on size, shape and sensing technology formats, across the diverse set of applications and markets.
The volumes and respective revenue generated from sensors based on size range are presented in the table below.
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2019 |
2018 |
Variance |
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Sensor Sizes |
Units |
Sales |
Units |
Sales |
Units |
Sales |
'Small' (≤ 14.9") |
30 |
1.6 |
35 |
1.7 |
(5) |
(0.1) |
'Medium' (15.0 - 29.9") |
79 |
8.7 |
79 |
8.5 |
- |
0.2 |
'Large' (≥ 30.0") |
15 |
6.0 |
19 |
7.2 |
(4) |
(1.2) |
TOTALS |
124 |
16.3 |
133 |
17.4 |
(9) |
(1.1) |
From the data, it is evident that it is the large format sensors that exhibited the greatest proportional reduction in both units sold and consequently revenue generated.
Within the size ranges ZDL produces several shape and technology variants in the medium and large sensor categories, where the sensors can be any combinations of either flat or curved and either PCT™ (single-touch) or MPCT™ (multi-touch) in functionality. Of the total units supplied, 17,000 units were of an MPCT™ configuration (2018: 17,000), although after the 2018 release of our ZXY500 series controllers, incorporating the MPCT™ Application Specific Integrated Circuit ("ASIC"), we saw a 2,000-unit increase in the volume of medium-sized MPCT™ sensors supplied to 7,000 units. Of sensors with a curved shape we shipped 7,000 units, of which 96% were of an MPCT™ type (2018: 10,000, 99%).
Gaming, which is predominantly casino-based upright cabinet designs, has continued to be our top revenue-generating market, albeit with a marked reduction of
Financial, which are ATM products, exhibited a slight decline in revenue of
Vending, remained our third market in terms of revenue at
Industrial revenue was
Signage market revenue was
The other markets, which are predominantly small PCT™ format touch products and various niche display products are open to much greater alternative supplier competitive pressures in total, saw a further decrease in revenue to
Strategic sales and marketing initiatives
The strategic sales and marketing initiatives during 2019 and going forward continue to be centred around advancing the organic growth potential of our touch interactive component solutions for self-service and commercial use, with a continued focus on large format, curved shapes and MPCT™ designs to provide our bespoke touch componentry to equipment designers and manufacturers across several markets, as detailed above, whilst increasing the volume and level of opportunities across all geographies.
As a
In support of the sales and marketing function, we have built a global network of channel partners, which we continually address for suitability based upon their performance, as well as local market preference and requirements. These partners are a combination of commissioned manufacturers' representatives or agents, who aid our direct sales team, and value-added resellers ("VARs"), which buy and resell our products (indirect sales). The type and choice of channel partner varies by what is the right construct for each specific territory. The current composition of our global channel partners is presented on the ZDL website and can be found at https://zytronic.co.uk/where-to-buy/.
During the year we changed our trade public relations company to one that was able to provide unified global coverage across the regions and market-specific areas in which we trade. Several new international case studies were also issued during the year, highlighting various applications of our technology, plus whitepapers, "thought leadership" articles and new technology advancements. These can be viewed online at https://zytronic.co.uk/about-us/.
We continue to see the benefits of directly participating in relevant market trade shows, primarily as regional networking opportunities with customers, suppliers and channel partners. In 2019, ZDL exhibited at several events: Global Gaming Exhibition,
To advance the customer engagement process, we have also invested in a bespoke demonstration room within our development facility, to showcase our technical capabilities and advancements in several simulated real-world market uses.
Opportunities Analysis
Due to the bespoke, long maturation and project based nature of our business, the creation, evaluation and monitoring of opportunities is critical to ongoing business performance.
The procedure for the analysis of opportunities within
As at
Strategic research and development
The research and development team has undertaken a number of activities during the course of the year, in particular one development relates to the use of our unique micro-fine filament system to not only provide our unique touch sensing capability, but also to provide invisible micro-tracks to allow for power and data transfer from mechanical devices such as buttons, and LED lighting features which appear unconnected and floating within the touch active and display viewable area. This work has resulted in a further
Development continued with third party providers on the further evaluation of alternative materials and processes to our present micro-fine filament system as a sensing medium, particularly around the well-established solution of mixed metal oxide coatings as a conductive medium. To determine the potential of market acceptance of a ZDL derived product, a soft launch pack, incorporating datasheets and samples, is being established and feedback sought from several of our channel partners.
Significant firmware development continued on the MPCT™ ASIC ZXY500 series controllers to develop an enhanced functionality which will support on a single piece of glass an active multi-touch sensor area, in combination with a separate touch sensing fully functioning keyboard and configurable function keys, for industrial type HMI control panels. Demonstration systems have been provided to several of our channel partners.
The team has also worked closely with operations on the design and development of bespoke fourth industrial revolution ("4IR") data acquisition systems, for integration on our filament dispensing and 2D writing equipment to measure and improve the overall equipment efficiencies of these devices.
Operations
Over the course of 2019, the productive labour headcount was steadily reduced to align with the demand cycles. The higher headcount at the beginning of the year was associated with the continuation of the Q4 yield issues reported last year. However, with the observed reductions in gaming, and expected reduction in the financial market, we have undertaken a further review of production staffing levels, which has resulted in a temporary reduction in headcount.
During the year, we have continued with our tailored apprenticeship scheme and with two former apprentices having successfully finalised their schemes and taking permanent roles within the business, we initiated schemes for a further two new apprentices. In total we have three active apprentice schemes running covering, technical, quality and maintenance roles.
With regards to the Q4 2018 yield issues, significant work continued in the early part of the year to understand the issues observed and bring the yields of the affected processes back in line with expectations. This work was not fully concluded until
Finally, I would like to conclude the review, by thanking all
Chief Executive Officer
2019 FINANCIAL REVIEW
Group revenue
Gross margin
The reported gross margin for the year ended
Group trading profit
With reduced levels of revenues and the gross margin reduction noted above, Group trading profit decreased to
Tax
The Group continues to benefit from the many reliefs available to it and the reported tax charge of
Earnings per share
The issued share capital of 16,044,041 ordinary shares of 1.0p has remained constant over the year and the associated EPS recorded is 16.8p, which is lower than that reported for last year (2018: 22.7p) by 26%. The recorded decline arises wholly due to lower profits over 2019.
Dividend
During the year the Group paid a final dividend for 2018 of 15.2p per share and a 2019 interim dividend of 7.6p per share totalling
Capital expenditure
Spend on capital expenditure over the year totalled
Cash and debt
The Group continues to turn profit into cash despite the increase in working capital over last year which arose due to several reasons. Inventory levels remained constant year on year, but the Group saw an increase in debtors of
The Group maintains an 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 and had cash and cash equivalents of
Group Finance Director
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
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2019 |
2018 |
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Notes |
£'000 |
£'000 |
Group revenue |
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20,104 |
22,288 |
Cost of sales |
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(13,311) |
(14,047) |
Gross profit |
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6,793 |
8,241 |
Distribution costs |
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(350) |
(461) |
Administration expenses |
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(3,462) |
(3,639) |
Group trading profit |
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2,981 |
4,141 |
Finance costs |
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- |
(21) |
Finance revenue |
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76 |
68 |
Profit before tax |
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3,057 |
4,188 |
Tax expense |
3 |
(366) |
(541) |
Profit for the year |
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2,691 |
3,647 |
Other comprehensive income |
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- |
- |
Total comprehensive income |
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2,691 |
3,647 |
Earnings per share |
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Basic |
5 |
16.8p |
22.7p |
Diluted |
5 |
16.8p |
22.7p |
All profits are from continuing operations.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
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Called |
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up share |
Share |
Retained |
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capital |
premium |
earnings |
Total |
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£'000 |
£'000 |
£'000 |
£'000 |
At |
160 |
8,994 |
17,622 |
26,776 |
Profit for the year |
- |
- |
3,647 |
3,647 |
Dividends |
- |
- |
(3,658) |
(3,658) |
At |
160 |
8,994 |
17,611 |
26,765 |
Profit for the year |
- |
- |
2,691 |
2,691 |
Dividends |
- |
- |
(3,658) |
(3,658) |
At |
160 |
8,994 |
16,644 |
25,798 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September 2019
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2019 |
2018 |
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Notes |
£'000 |
£'000 |
Assets |
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Non-current assets |
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Intangible assets |
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1,299 |
1,585 |
Property, plant and equipment |
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6,385 |
6,605 |
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7,684 |
8,190 |
Current assets |
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Inventories |
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3,034 |
3,021 |
Trade and other receivables |
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4,127 |
3,738 |
Cash and short term deposits |
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13,143 |
14,626 |
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20,304 |
21,385 |
Total assets |
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27,988 |
29,575 |
Equity and liabilities |
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Current liabilities |
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Trade and other payables |
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962 |
1,446 |
Derivative financial liabilities |
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21 |
7 |
Accruals |
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499 |
767 |
Tax liabilities |
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192 |
13 |
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1,674 |
2,233 |
Non-current liabilities |
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Government grants |
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- |
15 |
Deferred tax liabilities (net) |
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516 |
562 |
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516 |
577 |
Total liabilities |
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2,190 |
2,810 |
Net assets |
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25,798 |
26,765 |
Capital and reserves |
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Equity share capital |
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160 |
160 |
Share premium |
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8,994 |
8,994 |
Retained earnings |
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16,644 |
17,611 |
Total equity |
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25,798 |
26,765 |
CONSOLIDATED CASH FLOW STATEMENT
For the year ended
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2019 |
2018 |
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£'000 |
£'000 |
Operating activities |
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Profit before tax |
3,057 |
4,188 |
Net finance income |
(76) |
(47) |
Depreciation and impairment of property, plant and equipment |
726 |
709 |
Amortisation, impairment and write-off of intangible assets |
430 |
438 |
Amortisation of government grant |
(15) |
(10) |
Fair value movement on foreign exchange forward contracts |
14 |
61 |
Working capital adjustments |
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Increase in inventories |
(13) |
(25) |
Increase in trade and other receivables |
(389) |
(232) |
(Decrease)/increase in trade and other payables and provisions |
(742) |
295 |
Cash generated from operations |
2,992 |
5,377 |
Tax paid |
(238) |
(573) |
Net cashflow from operating activities |
2,754 |
4,804 |
Investing activities |
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Interest received |
71 |
65 |
Payments to acquire property, plant and equipment |
(506) |
(273) |
Payments to acquire intangible assets |
(144) |
(390) |
Net cashflow used in investing activities |
(579) |
(598) |
Financing activities |
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Interest paid |
- |
(21) |
Dividends paid to equity shareholders of the Parent |
(3,658) |
(3,658) |
Net cashflow used in financing activities |
(3,658) |
(3,679) |
Increase in cash and cash equivalents |
(1,483) |
527 |
Cash and cash equivalents at the beginning of the year |
14,626 |
14,099 |
Cash and cash equivalents at the year end |
13,143 |
14,626 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The preliminary results for the year ended
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
Each of the Directors confirms that, to the best of their knowledge, the financial statements, prepared in accordance with IFRS as adopted by EU standards, 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
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
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Touch |
Non-touch |
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Touch |
Non-touch |
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£'000 |
£'000 |
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£'000 |
£'000 |
Sale of goods - |
300 |
23 |
|
541 |
39 |
- |
3,152 |
257 |
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3,449 |
302 |
- EMEA (excluding |
5,735 |
223 |
|
4,224 |
396 |
- |
1,718 |
172 |
|
1,602 |
473 |
- |
1,609 |
455 |
|
2,119 |
667 |
- APAC (excluding |
1,883 |
174 |
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2,652 |
239 |
- |
4,327 |
76 |
|
5,531 |
54 |
|
18,724 |
1,380 |
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20,118 |
2,170 |
Total revenue |
20,104 |
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22,288 |
Individual revenues from three major customers exceeded 10% of total revenue for the year. The total amount of revenue was
The individual revenues from each of these three customers were:
4. Tax
|
30 September |
30 September |
|
2019 |
2018 |
|
£'000 |
£'000 |
Current tax |
|
|
|
420 |
621 |
Tax due on foreign subsidiary |
2 |
- |
Corporation tax over-provided in prior years |
(10) |
(35) |
Total current tax charge |
412 |
586 |
Deferred tax |
|
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Origination and reversal of temporary differences |
(46) |
(45) |
Total deferred tax credit |
(46) |
(45) |
Tax charge in the statement of comprehensive income |
366 |
541 |
Reconciliation of the total tax charge
The effective tax rate of the tax expense in the statement of comprehensive income for the year is 12.0% (2018: 13%) compared with the average rate of corporation tax in the
|
30 September |
30 September |
|
2019 |
2018 |
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£'000 |
£'000 |
Accounting profit before tax |
3,057 |
4,188 |
Accounting profit multiplied by the average |
581 |
796 |
Effects of: |
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Expenses not deductible for tax purposes |
1 |
8 |
Depreciation in respect of non-qualifying items |
22 |
24 |
Enhanced tax reliefs - R&D |
(147) |
(169) |
Enhanced tax reliefs - Patent Box |
(70) |
(79) |
Effect of deferred tax rate reduction and difference in tax rates |
(13) |
(4) |
Tax over-provided in prior years |
(10) |
(35) |
Tax due on foreign subsidiary |
2 |
- |
Total tax expense reported in the statement of comprehensive income |
366 |
541 |
Factors that may affect future tax charges
Under current tax legislation, some of the amortisation of licenses will continue to be non-deductible for tax purposes.
There are no tax losses to carry forward at
The main rate of corporation tax in the
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.
5. Dividends
The Directors propose the payment of a final dividend of 15.2p per share (2018: 15.2p), payable on
|
30 September |
30 September |
|
2019 |
2018 |
|
£'000 |
£'000 |
Ordinary dividends on equity shares |
|
|
Final dividend of 15.2p per ordinary share paid on |
- |
2,439 |
Interim dividend of 7.6p per ordinary share paid on |
- |
1,219 |
Final dividend of 15.2p per ordinary share paid on |
2,439 |
- |
Interim dividend of 7.6p per ordinary share paid on |
1,219 |
- |
|
3,658 |
3,658 |
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.
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Weighted |
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Weighted |
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average |
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average |
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number |
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number |
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Earnings |
of shares |
EPS |
Earnings |
of shares |
EPS |
|
30 September |
30 September |
30 September |
30 September |
30 September |
30 September |
|
2019 |
2019 |
2019 |
2018 |
2018 |
2018 |
|
£'000 |
Thousands |
Pence |
£'000 |
Thousands |
Pence |
Profit on ordinary activities after tax |
2,691 |
16,044 |
16.8 |
3,647 |
16,044 |
22.7 |
Basic EPS |
2,691 |
16,044 |
16.8 |
3,647 |
16,044 |
22.7 |
The weighted average number of shares for diluted EPS is calculated by including the weighted average number of potentially dilutive shares under option.
|
|
Weighted |
|
|
Weighted |
|
|
|
average |
|
|
average |
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|
|
number |
|
|
number |
|
|
Earnings |
of shares |
EPS |
Earnings |
of shares |
EPS |
|
30 September |
30 September |
30 September |
30 September |
30 September |
30 September |
|
2019 |
2019 |
2019 |
2018 |
2018 |
2018 |
|
£'000 |
Thousands |
Pence |
£'000 |
Thousands |
Pence |
Profit on ordinary activities after tax |
2,691 |
16,044 |
16.8 |
3,647 |
16,044 |
22.7 |
Weighted average number of shares under option |
- |
- |
- |
- |
- |
- |
Diluted EPS |
2,691 |
16,044 |
16.8 |
3,647 |
16,044 |
22.7 |
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