REG - Zytronic PLC - Final Results for the year ended 30 September 2022
13/12/2022 07:00
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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 £12.3m (2021: £11.7m)
§ 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 £4.7m, Vending increased 39% to £3.6m,
offset by a 59% reduction in Financial to £1.2m
§ 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 £1.5m (2021: £1.4m) and profit
before tax of £0.7m (2021: £0.5m)
§ 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 £2.0m of surplus cash and
cancelled 1.3m shares
§ Closing net cash of £6.4m (2021: £9.2m)
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 (0191 414 5511)
Mark Cambridge, Chief Executive
Claire Smith, Group Finance Director
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™ ("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 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 (https://www.zytronic.co.uk/) and for information about the
Group, please see https://www.zytronicplc.com (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 £0.7m (2021: £0.5m) on revenues of
£12.3m (2021: £11.7m) 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 £6.4m (2021: £9.2m)
providing the basis for stability. In the year, working capital increased by
£1.4m, 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. £0.5m was spent on investing activities (2021: £0.3m) and
£2.2m in financing activities, being the on-market share buybacks of £2.0m
and the £0.2m payment of the FY21 final dividend (2021: £6.7m, £6.7m and
£Nil).
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 £12.3m were 5.6% greater than the
£11.7m of FY21. Order intake over the year matched revenues at £12.3m, which
represented a 2% increase over the £12.1m 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 £5.9m against H2 of £6.4m. This
weighting is less pronounced than that observed in FY21 (H1: £4.8m; H2:
£6.9m), 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 £7.4m 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 £4.9m 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 £4.7m £2.9m
Vending £3.6m £2.6m
Industrial £1.6m £1.6m
Financial £1.2m £2.9m
Signage £0.6m £0.7m
Other £0.6m £1.0m
Total £12.3m £11.7m
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™ 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(®edge) zero border touch
sensor at the Barcelona ISE Expo in May 2022;
· demonstrator design concepts for ElectroglaZ(™) 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/.
(https://www.zytronic.co.uk/news/.%20%20%20%0d)
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 £59m (2021: 391 and £28m), and, of the two largest
addressable markets, Vending applications accounted for 156 Open
opportunities, with a CPLV of £33m, whilst Gaming accounted for 26 and £11m
respectively. At the end of the year the log did not contain any
ElectroglaZ(™) 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 £1.5m compared to that of the prior year of £1.4m, and an
increase in profit before tax of £0.2m to £0.7m (2021: £0.5m). 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 £12.3m (2021: £11.7m), 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 £4.7m,
accounted for 38% of overall Group revenue whilst Vending revenues of £3.6m
accounted for 29%. The Financial market, which was for a number of years the
Group's biggest revenue generator, displayed revenues of £1.2m, 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 £0.7m (2021: £0.5m) due to the
improvements in gross profit and savings achieved in administration costs.
Administration costs were reduced by £0.1m 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 £0.1m (2021: 10%, < £0.1m). 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 £2.0m of cash to shareholders.
The resultant number of shares in issue at the year-end are 10,161,737.
With profits after tax of £0.6m 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: £Nil) costing £0.2m. With another year of
increased profitability, the Group has again proposed to continue to pay a
final dividend this year of 2.2p, costing £0.2m 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 £0.5m being incurred in combined costs of tangible and intangible
assets (2021: £0.3m). 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 £0.8m (2021:
£1.0m), 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 £9.2m and closed at £6.4m, with the
biggest cash expense being the share buyback exercise as described earlier,
which reduced the cash position by £2.0m. Working capital, as the Group had
expected, increased over the period due to both the increase in stocks of
£0.7m and debtors of £0.8m. 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 £0.4m. 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 £0.5m (2021: £0.3m), wholly due to
the costs of investment in capital expenditure. The Group also returned to
paying dividends over the year at a cost of £0.2m (2021: £Nil).
The Group maintains its overdraft facility of up to £1.0m, 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 £'000 £'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
£'000 £'000 £'000 £'000 £'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 £'000 £'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
£'000 £'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 the Parent (170) -
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 (£'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
£'000 £'000 £'000 £'000
Sale of goods 322 15 273 13
- Americas (excluding USA)
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 12,340 11,683
revenue
Individual revenues from two major customers exceeded 10% of total revenue for
the year. The total amount of revenue was £4.1m (2021: £2.3m).
The individual revenues from each of these two customers were: £2.4m (2021:
£1.3m) and £1.7m (2021: £1.0m).
4. Tax
30 September 30 September
2022 2021
£'000 £'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
£'000 £'000
Accounting profit before tax 705 453
Accounting profit multiplied by the average UK rate of corporation tax of 19% 134 86
(2021: 19%)
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
£'000 £'000
Ordinary dividends on equity shares
Final dividend of 1.5p per ordinary share paid on 18 March 2022 170 ꟷ
170 ꟷ
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
£'000 Thousands Pence £'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 £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.
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
£2.0m of the Company's cash.
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