REG - Zytronic PLC - Interim Results
16/05/2023 07:00
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RNS Number : 4914Z Zytronic PLC 16 May 2023
16 May 2023
Zytronic plc
("Zytronic" or the "Company" and, together
with its subsidiaries, the "Group")
Interim Results for the six months ended 31 March 2023 (unaudited)
Zytronic plc, a leading specialist manufacturer of touch sensors, announces
its consolidated interim results for the six months ended 31 March 2023.
Comparative data is given for the six months ended 31 March 2022, except where
indicated.
Overview
· Group revenue of £4.7m (2022: £5.9m)
· Loss before tax of £0.9m (2022: profit of £0.4m)
· Basic loss per share of 7.5p (2022: earnings per share of 3.0p)
· Cash used in operations £0.4m (2022: generated from operations
£0.1m)
· Net cash of £5.4m (30 September 2022: £6.4m)
Commenting on the results, Mark Butcher, Interim Chair said:
"Having been confident in December 2022 that the Group was positioned for
progress, it is disappointing to report these results for the 6 months to 31
March 2023. As recently announced on 4 May 2023, we have downgraded our
expectations for the full year even though there remain encouraging signs
reflected by the increase in the number of open opportunities in our pipeline.
As a Board we are working on a number of initiatives to address the headwinds
the Group is currently facing so that the Group may return to revenue growth
and profitability as soon as practicably possible."
Enquiries:
Zytronic plc 0191 414 5511
Mark Cambridge, Chief Executive
Claire Smith, Group Finance Director
Singer Capital Markets (Nominated Adviser and Broker) 020 7496 3000
Aubrey Powell, Alex Bond, Alex Emslie (Investment Banking)
Notes to Editors
Zytronic is the developer and manufacturer of a unique range of
internationally award-winning and patented touch sensor products, operating
from three modern factories totaling 80,000ft(2) near Newcastle-upon-Tyne in
the United Kingdom.
Zytronic touch products employ an embedded sensing solution and are readily
configurable to enable multi-user and multi-touch touch sensing sizes from
five inches to ultra-large 85", making them an ideal solution for system
designers' specific requirements, offering significant durability,
environmental stability and optical enhancement benefits to touch
interactivity for industrial, self-service and public access equipment.
Chair statement
Introduction
As commented on in the trading updates issued at the time of the AGM on 9
February 2023 and latterly on 4 May 2023, the Group has observed a lower level
of performance over the first half period of the year than was expected. Sales
in H1 were £4.7m (2022: £5.9m), with some of this change related to degrees
of overstocking by customers in Gaming and Vending during FY2022, as a result
of the supply chain uncertainties that were prevailing in the electronic
components markets. However, these issues became further compounded in Gaming
towards the end of the period, with customers whose end market customer is
Aruze Gaming America, Inc. ("AGA"), who filed a voluntary petition under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the State of Nevada.
Results
Group revenue for the half year ended 31 March 2023 was £4.7m (2022: £5.9m).
The resultant gross margin was 23.5% (2022: 31.7%), adversely impacted by 4.5%
due to the impairment of £0.2m of stock associated with the status of end
customer AGA, as noted above. This gave rise to an EBITDA loss of £0.6m
(2022: EBITDA of £0.8m) and a loss before tax of £0.9m (2022: profit of
£0.4m), both of which were impacted by the £0.3m impairment of trade
receivables also associated with products supplied for ultimate sale by AGA.
Basic loss per share was 7.5p (2022: earnings per share of 3.0p).
As well as the now expected low levels of sales in the Financial market, sales
in the period have generally been impacted across most markets, with the most
sizeable impacts being in our top two market sectors of Gaming and Vending.
Gaming, for reasons noted above, is approximately £0.6m lower than the same
period last year, with reported sales of £1.5m (2022: £2.1m). Vending is
£0.4m lower, with sales of £1.5m (2022: £1.9m), impacted in the main by the
£0.5m reduction in comparable revenues for touch sensors supplied for a
US-based end customer's brand-independent OEM drinks fountain (2022: £0.7m)
due to FY2022 product overstocking. In both instances of overstocking we are
expecting to see associated product supply delays, possibly into the start of
FY2024.
Activities
Although the results are somewhat reflective of the effects on the business of
the periods of global business development inactivity caused by the pandemic
across a near two-year period from the start of the second half of FY2020, and
the well-reported historical two-year average bespoke project maturation
timeframe, the increasing business development activity levels over this first
half period are encouraging.
This has continued to be demonstrated by the steady progress as measured by
our CRM system which records the number of open opportunities. With the
inevitable dynamic movement of opportunities closing for reasons previously
detailed, the period ended with 491 open opportunities with a customer
projected lifetime value ("CPLV") of £62m (30 September 2022: 484 and £59m
respectively).
This activity has all been underpinned by the positive return of the
international and regional, application-based trade expos and the business
development activities that ensue around them, and our research and
development ("R&D") department no longer having to spend excessive
manpower on supporting supply chain issues. Our R&D function has
therefore been able to allocate more time to supporting the critical business
development process with customers and establishing new product development
programmes.
As part of this process, R&D is continuing with work associated with
utilising our technologies, capabilities and processes in the development of
potential end-use products, such as bespoke interactive tables, rather than
solely the touch components used in them.
Cash
Cash has inevitably been impacted over the period and closed at £5.4m (30
September 2022: £6.4m). Cash used in operations was £0.4m despite working
capital decreasing by £0.2m over the first half of the year. £0.3m was due
for collection at the half year end, relating to our customers in the AGA
supply chain, and has subsequently been impaired. As the Group continues its
recovery it has been more active in investing activities with £0.5m being
incurred over tangible and intangible purchases. £0.2m was also paid over
to shareholders for the final dividend from the prior year. More positively,
the Group has been able to earn reasonable interest over the period from its
cash balances.
Dividends
On the basis of the interim results detailed above, and the Board's stated
policy to only pay covered interim or full year dividends, the Board is not
proposing the payment of a 2023 interim dividend (2022: Nil).
Recruitment
Over the course of the period, we unfortunately saw the early retirement due
to ill health of our Chair, David Buffham. Mark Cambridge was then temporarily
appointed as Acting Executive Chair, to provide continuity through to the
issuing and acceptance of the annual report for FY2022 at the AGM on 9
February 2023. At the conclusion of the AGM, I was appointed as Interim
Chair whilst John Walter joined the Board as a temporary Non-executive
Director on 10 February 2023.
John has subsequently been appointed as Chair of the nominations committee and
is overseeing the present recruitment process to source a permanent Chair of
the Board, which, it is hoped, will have concluded in the coming few months.
Outlook
The headwinds caused by the noted effects of the overstocking and Chapter 11
event are expected to remain to the end of the financial year. The positive
resumption of business development activities and the Group's Board
restructuring with the future Chair appointment, together with other
initiatives being pursued, are expected to help position the Group more
favourably for a future return to growth.
Mark Butcher
Interim Chair
16 May 2023
Consolidated statement of comprehensive income
Unaudited results for the six months to 31 March 2023
Six months to Six months to Year to
31 March 31 March 30 September
2023 2022 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Group revenue 4,728 5,910 12,340
Cost of sales excluding impairment (3,403) (4,034) (8,577)
Impairment 3a (214) - -
Total cost of sales (3,617) (4,034) (8,577)
Gross profit 1,111 1,876 3,763
Distribution costs (107) (132) (258)
Administration expenses excluding impairment (1,638) (1,345) (2,810)
Impairment 3b (342) - -
Total administration expenses (1,980) (1,345) (2,810)
Group operating (loss)/profit (976) 399 695
Finance revenue 79 - 10
(Loss)/profit before tax (897) 399 705
Tax credit/(expense) 4 134 (56) (94)
(Loss)/profit for the period (763) 343 611
Other comprehensive income - - -
Total comprehensive (loss)/income (763) 343 611
(Loss)/earnings per share
Basic 5 (7.5p) 3.0p 5.6p
All activities are from continuing operations.
Consolidated statement of changes in equity
Unaudited results for the six months to 31 March 2023
Called up Capital
share Share redemption Retained
capital premium reserve earnings Total
£'000 £'000 £'000 £'000 £'000
At 1 October 2022 102 8,994 58 6,033 15,187
Profit for the period - - - (763) (763)
Dividends - - - (224) (224)
At 31 March 2023 (unaudited) 102 8,994 58 5,046 14,200
Consolidated statement of financial position
Unaudited results at 31 March 2023
At At At
31 March 31 March 30 September
2023 2022 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Assets
Non-current assets
Intangible assets 872 635 711
Property, plant and equipment 5,154 5,310 5,107
6,026 5,945 5,818
Current assets
Inventories 2,292 2,093 2,184
Trade and other receivables 1,834 2,078 2,957
Cash and short term deposits 7 5,385 7,538 6,403
9,511 11,709 11,544
Total assets 15,537 17,654 17,362
Equity and liabilities
Current liabilities
Trade and other payables 326 881 1,055
Derivative financial liabilities - 18 92
Accruals 543 580 560
Tax liabilities - 53 -
869 1,532 1,707
Non-current liabilities
Deferred tax liabilities (net) 468 336 468
468 336 468
Total liabilities 1,337 1,868 2,175
Net assets 14,200 15,786 15,187
Capital and reserves
Equity share capital 102 106 102
Share premium 8,994 8,994 8,994
Capital redemption reserve 58 54 58
Retained earnings 5,046 6,632 6,033
Total equity 14,200 15,786 15,187
Consolidated cashflow statement
Unaudited results for the six months to 31 March 2023
Six months to Six months to Year to
31 March 31 March 30 September
2023 2022 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Operating activities
(Loss)/profit before tax (897) 399 705
Finance income 79 - 10
Depreciation and impairment of property, plant and 233 279 543
equipment
Amortisation, impairment and write-off of intangible assets 102 121 223
Amortisation of government grant - (26) (26)
Fair value movement on foreign exchange forward contracts (92) 2 76
Loss on disposal of asset - - 2
Working capital adjustments
Increase in inventories (108) (658) (749)
Decrease/(increase) in trade and other receivables 1,123 122 (757)
(Decrease)/increase in trade and other payables and provisions (838) (169) 106
Cash (used in)/generated from operations (398) 70 133
Tax received/(paid) 77 (125) (224)
Net cashflow used in operating activities (321) (55) (91)
Investing activities
Interest received 70 - 7
Payments to acquire property, plant and equipment (280) (219) (280)
Payments to acquire intangible assets (263) (23) (201)
Net cashflow used in investing activities (473) (242) (474)
Financing activities
Dividends paid to equity shareholders of the Parent (224) (170) (170)
Repurchase and cancellation of shares - (1,152) (2,019)
Net cashflow used in financing activities (224) (1,322) (2,189)
Decrease in cash and cash equivalents (1,018) (1,619) (2,754)
Cash and cash equivalents at the beginning of the period 6,403 9,157 9,157
Cash and cash equivalents at the end of the period 7 5,385 7,538 6,403
Notes to the interim report
Unaudited results for the six months to 31 March 2023
1. Basis of preparation
The financial information in these interim statements is prepared under the
historical cost convention and in accordance with international accounting
standards. It does not constitute statutory accounts as defined in Section 435
of the Companies Act 2006 and does not reflect all the information contained
in the Group's annual report and financial statements.
The tax charge is calculated by applying the Directors' best estimate of the
annual tax rate to the profit for the period. Other expenses are accrued in
accordance with the same principles used in the preparation of the annual
report and financial statements.
The interim results for the six months to 31 March 2023 are not reviewed by
Crowe U.K. LLP and accordingly no opinion has been given.
The interim financial statements have been prepared using the same accounting
policies and methods of computation used to prepare the 2022 annual report and
financial statements.
The financial information for the six months to 31 March 2023 and the
comparative financial information for the six months to 31 March 2022 have not
been audited. The comparative financial information for the year ended 30
September 2022 has been extracted from the 2022 annual report and financial
statements.
The annual report and financial statements for the year ended 30 September
2022, which were approved by the Board of Directors on 12 December 2022,
received an unqualified audit report, did not contain a statement under
Sections 498(2) or (3) of the Companies Act 2006 and have been filed with the
Registrar of Companies.
The Group has one reportable business segment comprising the development and
manufacture of customised optical products to enhance electronic display
performance. Products in this reportable business segment include touch
sensors, filters and other laminated products. All revenue, profits or losses
before tax and net assets are attributable to this reportable business
segment.
2. Basis of consolidation
The Group results consolidate the accounts of Zytronic plc and all its
subsidiary undertakings drawn up to 31 March 2023.
3. Impairment
(a) Cost of sales
Six months to 31 March Six months to 31 March Year to 30 September
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Write-down of stock associated with doubtful debt 214 - -
Total impairment 214 - -
The consolidated statement of profit and loss includes a charge amounting to
£0.2m relating to the impairment of stock associated with AGA and its Chapter
11 filing as described in the Chair statement. The Group does not have a
direct relationship with AGA but as AGA has delayed its payments to its
suppliers then the Group is consequently impacted and has prudently impaired
any associated stock for its customers.
(b) Administration expenses
Six months to 31 March Six months to 31 March Year to 30 September
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Write-down of stock associated with doubtful debt 342 - -
Total impairment 342 - -
The consolidated statement of profit and loss includes a charge amounting to
£0.3m relating to the impairment of debt associated with AGA and its Chapter
11 filing as described in the Chair statement. The Group is actively seeking
to recover this debt.
4. Tax charge on (loss)/profit on ordinary activities
The estimated tax rate for the year of 15% has been applied to the half year's
loss before tax, in accordance with the Auditing Standards Board's statement
on interim reports.
5. (Loss)/earnings per share ("LPS" / "EPS")
Basic LPS/EPS is calculated by dividing the (loss)/profit attributable to
ordinary equity holders of the Company by the weighted average number of
ordinary shares in issue during the period. All activities are continuing
operations and therefore there is no difference between LPS/EPS arising from
total operations and LPS/EPS arising from continuing operations.
For the six months to 31 March 2023 and 2022
Weighted Weighted
average average
number number
Loss of shares LPS Profit of shares EPS
31 March 31 March 31 March 31 March 31 March 31 March
2023 2023 2023 2022 2022 2022
£'000 Thousands Pence £'000 Thousands Pence
(Loss)/profit on ordinary activities after tax (763) 10,162 (7.5) 343 11,357 3.0
Basic LPS/EPS (763) 10,162 (7.5) 343 11,357 3.0
For the year to 30 September 2022
Weighted
average
number
Profit of shares EPS
30 September 30 September 30 September
2022 2022 2022
£'000 Thousands Pence
Profit on ordinary activities after tax 611 10,836 5.6
Basic EPS 611 10,836 5.6
6. Dividends
As the Group has not made a profit for the period, the Directors considered it
prudent not to pay an interim dividend. Accordingly, no interim dividend is
proposed for the period (2022: Nil). The table below reflects historical
dividend payments.
Six months to 31 March Six months to 31 March Year to 30 September
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Ordinary dividends on equity shares
Final dividend of 1.5p per ordinary share paid on 18 March 2022 - 170 170
Final dividend of 2.2p per ordinary share paid on 24 February 2023 224 - -
224 170 170
7. Cash and cash equivalents
Six months to 31 March Six months to 31 March Year to 30 September
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash at bank and in hand 5,385 7,538 6,403
For the purpose of the consolidated cashflow statement, cash and cash
equivalents comprise the following:
Six months to 31 March Six months to 31 March Year to 30 September
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash at bank and in hand 850 7,267 6,132
Short term deposits 4,535 271 271
5,385 7,538 6,403
Cash at bank earns interest at floating rates based on daily bank deposit
rates. Short term deposits are made for variable lengths, being overnight,
three months or one year (with break conditions), depending on the immediate
cash requirements of the Group, and earn interest at variable rates.
At 31 March 2023 the Group had available a net £1.0m (cash less overdrawn
accounts) overdraft facility from Barclays Bank plc, which will fall for
review in October 2023.
The fair value of cash and cash equivalents is £5.4 (2022: £7.5m).
8. Availability of the interim report
The interim report and interim results presentation are available online at
the Company's corporate website, www.zytronicplc.com. Copies can be requested
from the Company's registered office: Whiteley Road, Blaydon-on-Tyne, Tyne and
Wear NE21 5NJ.
Corporate information
Websites:
www.zytronicplc.com
www.zytronic.co.uk
www.zytronic-inc.com
www.zytronic.cn
www.zytronic.jp
Secretary
Claire Smith
Email: claire.smith@zytronic.co.uk
Registered office
Whiteley Road
Blaydon-on-Tyne
Tyne and Wear
NE21 5NJ
Tel: 0191 414 5511
Fax: 0191 414 0545
Registration number
3881244
Stockbroker and Nominated Adviser
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Registrars
Computershare Investor Services PLC
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Auditor
Crowe U.K. LLP
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Bankers
Barclays Bank plc
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USA
Solicitors
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Muckle LLP
Time Central
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