REG - Zytronic PLC - Final Results for the year ended 30 September 2021
07/12/2021 07:00
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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 £1.4m (2020: £0.7m) and a return to profitability with profit
before tax of £0.5m (2020: loss of £0.4m)
§ 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 £6.7m cash and cancellation of
4.6m shares
§ Closing net cash of £9.2m (2020: £14.0m)
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 (0191 414 5511)
Mark Cambridge, Chief Executive
Claire Smith, Group Finance Director
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™ ("Projected
Capacitive Technology") and the second being multi-touch, multi-user
mutual-capacitive which Zytronic markets as MPCT™ ("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
(file://///singercm/drives/Departmental/CorporateFinance/Corporate%20Finance/Companies/Z/Zytronic/Announcements/2020/December/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 £6.9m from £4.8m in the first half.
Results
The results for the year produced a Group EBITDA of £1.4m (2020: £0.7m) and
Group operating profit of £0.5m (2020: loss of £0.5m) on reduced revenue of
£11.7m (2020: £12.7m) 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 £9.2m (2020: £14.0m) as even after
distributing £6.7m by way of a share buyback, cash of £2.0m (2020: £3.4m)
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 £6.7m.
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 £0.9m, into the
actual reported position of a profit before tax of £0.5m.
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 £3.7m 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 £6.4m 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 £5.7m 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 £11.7m was £1.0m 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 (A) H1 FY21 H2 FY21 % Var (A)
Other £1.0m £0.9m 18 £0.5m £0.4m (25)
Signage £0.7m £1.1m (38) £0.3m £0.4m 27
Industrial £1.6m £1.6m (0) £0.7m £0.9m 31
Vending £2.6m £2.2m 18 £1.0m £1.6m 63
Gaming £2.9m £3.1m (7) £1.0m £1.9m 99
Financial £2.9m £3.8m (24) £1.3m £1.6m 29
Total £11.7m £12.7m (8) £4.8m £6.9m 44
Note: all £ values in the above table are rounded to nearest £0.1m 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™ 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(®hover) (non-touch)
technology and productionising the developed ZYBRID(®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™ 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/.
(https://www.zytronic.co.uk/news/.%20%20%20%0d)
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 £28.0m, 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 £1.5m 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 £2.6m 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 £31.4m, 23
at "Project" status, projected to generate £3.5m 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 £12.7m to a reported £11.7m. However, what
is pleasing is that the Group returned a reported profit before tax of £0.5m
(2020: loss of £0.4m) as a result of its previously announced restructuring
programme and internal efforts to control costs. Reported EBITDA grew by
£0.7m to £1.4m (2020: £0.7m) which generated an increase in cash, excluding
the payment of £6.7m for the share tender and £0.6m for the restructuring,
of £2.4m to close at £9.2m (2020: £14.0m).
Group revenue
Group revenue decreased by 8% for the year to £11.7m (2020: £12.7m) 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
£0.1m 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 £0.5m (2020:
loss of £1.0m), mainly as a result of the restructuring and cost control
measures. Distribution costs were in line with last year at £0.2m as sales
where the Group is responsible for carriage were similarly consistent.
Administration costs reduced by £0.4m to £2.9m (2020: £3.3m) 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 £0.5m 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 £0.1m (2020: credit of
£0.1m). 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 £0.4m 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
£0.3m (2020: £0.4m) across both tangible and intangible expenditure.
£0.1m (2020: £0.2m) of this was incurred to further develop ElectroglaZ™
and its ZYBRID(®hover ) product offerings to enable market launches during
the year, and also commence new patent applications. £0.2m (2020: £0.2m)
was spent on tangible acquisitions with an approval being granted for a second
laser bonding machine, of which £0.1m of the total cost of £0.4m was
incurred in 2021. The remaining £0.1m spend occurred across a number of
replacement pieces of kit. Depreciation and amortisation reduced over the
year to £1.0m (2020: £1.2m).
Cash position
Despite the impact of the COVID-19 pandemic, the Group was in a comfortable
cash position and continued to strategically assess its operations to improve
future returns for shareholders. In early February 2021 the Company
announced a proposed return of up to £10.0m 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 £6.7m 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 £0.6m were provided for in the 2020 results but
the cash was paid out during this financial year.
The cash position opened at £14.0m and closed at £9.2m, which adjusting for
the one-off items above of £7.3m, generated an increase to cash of
£2.4m. Net cash from operating activities was £2.1m, £0.6m of which arose
from the unwinding of the working capital (2020: £3.2m) and £1.0m from
depreciation and amortisation. Stocks decreased by £0.9m 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 £0.1m
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 £0.3m (2020: £0.3m), wholly due to
the costs of investment in capital expenditure, and cashflow used in financing
activities was £6.7m (2020: £2.0m) 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 £'000 £'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
£'000 £'000 £'000 £'000 £'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 £'000 £'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
£'000 £'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 (£'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
£'000 £'000 £'000 £'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 11,683 12,680
revenue
Individual revenues from three major customers exceeded 10% of total revenue
for the year. The total amount of revenue was £4.3m (2020: £4.9m).
The individual revenues from each of these three customers were: £1.6m (2020:
£1.9m); £1.4m (2020: £1.1m); and £1.3m (2020: £1.9m).
4. Exceptional costs
(a) Cost of sales
30 September 30 September
2021 2020
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'000
Accounting profit/(loss) before tax 453 (423)
Accounting profit/(loss) multiplied by the average UK rate of corporation tax 86 (80)
of 19% (2020: 19%)
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
£'000 £'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
£'000 Thousands Pence £'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 £10.0m 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 £6.7m of the Company's cash to
participating shareholders.
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