TIDMZYT
RNS Number : 0427K
Zytronic PLC
11 December 2018
11 December 2018
Zytronic plc
("Zytronic" or the "Company"
and, together with its subsidiaries, the "Group")
Preliminary Results for the year ended 30 September 2018
(audited)
Zytronic plc, a leading specialist manufacturer of touch
sensors, announces its preliminary results for the year ended 30
September 2018.
Overview
-- Group revenues of GBP22.3m (2017: GBP22.9m), impacted by a
GBP1.3m reduction in revenues generated from the Financial market,
offset in part by growth in the Gaming market
-- Gross margin reduced to 37% (2017: 41.1%), reflecting the
impact from reduced Financial market products on production
efficiencies and the combined effects of some new product and
process introductions
-- Administration costs of GBP3.6m (2017: GBP3.6m); with savings
in salaries offset by GBP0.3m of one-off, settled litigation
costs
-- Reported profit before tax of GBP4.2m (2017: GBP5.4m), as a
result of reduced revenues, lower gross margin and litigation
costs
-- Final dividend of 15.2p proposed (2017: 15.2p), bringing
total dividends for the year to 22.8p (2017: 19.0p), up 20% year on
year
-- Basic earnings per share of 22.7p (2017: 29.0p)
-- Finalisation of new MPCT(TM) ASIC chip development and new
ZXY500 series controller family
Commenting on the outlook, Chairman, Tudor Davies said:
"We are in a strong financial position and cash generative which
provides a strong platform on which to develop our business, and to
grow profits and dividends for shareholders. Revenues and trading
are currently at similar levels as last year, and the focus will be
to improve margins from production efficiencies and to secure new
projects from the launch of the new electronic ASIC
controllers."
It is intended that the AGM will take place at the Company's
offices at Whiteley Road, Blaydon-on-Tyne, Tyne and Wear, NE21 5NJ
on Wednesday 6 February 2019 at 9.30 a.m. Notice of the AGM will be
sent to shareholders with the annual report and accounts in due
course.
Enquiries:
Zytronic plc Today: 020 7496 3000;
Mark Cambridge, Chief Executive Thereafter 0191 414 5511
Claire Smith, Group Finance Director
N+1 Singer 020 7496 3000
(Nominated Adviser & Broker)
Aubrey Powell/Alex Bond (Corporate Finance)
Rachel Hayes (Corporate Broking)
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 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(TM) ("Projected Capacitive Technology") and
the second being multi-touch, multi-user mutual-capacitive which
Zytronic markets as MPCT(TM) ("Mutual Projected Capacitive
Technology"), in which Zytronic holds eight 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.
Chairman's review
Introduction
After four years of uninterrupted growth we have this year
experienced a flattening of revenues and a change in the mix of our
business but, despite lower profits, we have continued to generate
more than our profits in cash enabling us to increase dividends for
shareholders by 20%.
Results
Revenues for the year ended 30 September 2018 were slightly
lower at GBP22.3m (2017: GBP22.9m) but a lower gross margin of
37.0% (2017: 41.1%) was the main contributor to the fall in
reported profit before tax to GBP4.2m (2017: GBP5.4m).
This year we continued to experience encouraging growth in sales
of our touchscreens to the Gaming sector which somewhat offset the
decline in the sales to Financial markets. However, the benefit of
growth in this market area was partly offset by lower margins,
principally from labour and material inefficiencies, as new and
different products and methods associated with Gaming replaced more
familiar tried and tested touchscreens for the ATM sector.
Distribution and administration costs remained tightly
controlled at GBP4.1m (2017: GBP4.0m) even after incurring GBP0.3m
of one-off costs associated with an intellectual property claim
which was settled during the year.
Cash generation
Net cashflow from operating activities was GBP4.8m (2017:
GBP4.7m). GBP0.7m was invested in capital expenditure during the
year and after the payment of dividends of GBP3.7m (2017: GBP2.4m)
resulted in a net increase in cash of GBP0.5m to GBP14.6m (2017:
GBP14.1m).
Dividend
The Directors have recommended a final dividend of 15.2p which,
together with the interim dividend of 7.6p paid in July 2018, has
resulted in an increase in the total dividend payable for the year
ended 30 September 2018 of 20% to 22.8p (2017: 19.0p).
Outlook
We are in a strong financial position and cash generative which
provides a strong platform on which to develop our business, and to
grow profits and dividends for shareholders. Revenues and trading
are currently at similar levels as last year, and the focus will be
to improve margins from production efficiencies and to secure new
projects from the launch of the new electronic ASIC
controllers.
Tudor Davies
Chairman
10 December 2018
2018 Chief Executive Officer's review
I would like to start this review by thanking all employees for
their valued contribution to the performance of the business over
the reporting period.
The information detailed below provides insights into the
various operational aspects of Zytronic Displays Limited ("ZDL"),
our wholly owned operating subsidiary, that have influenced the
reported trading performance over the fiscal year, drawing
comparisons with the prior periods where necessary.
Sales
The second half trading revenues of GBP11.7m showed a 10%
improvement on the GBP10.6m reported for the first half. However,
as detailed at the interims, first half revenues were affected by
the performance of the Financial market (comprising ATM touch and
non-touch products), which at GBP2.8m was GBP1.1m lower than the
prior year (H1 2017: GBP3.9m). The second half performance was also
impacted by the Financial market, but to a lesser degree, as the
improvement in the level of sales did not materialise as quickly as
hoped. As a result, the total impact was GBP1.3m of reduced
Financial sales for the full year, composed of GBP0.9m of touch and
GBP0.4m of non-touch. Although growth was seen in other areas such
as Gaming, it was the reduced Financial market revenues that
significantly contributed to the reported 3% full-year reduction in
trading revenues to GBP22.3m (2017: GBP22.9m). Total export
revenues (as measured by ZDL, being the location of the customers
to whom products are invoiced), were GBP19.5m (2017: GBP19.9m).
Revenues generated by sales of our touch products were lower
than the prior year at GBP20.1m (2017: GBP20.6m). As inferred
above, the Financial market significantly contributed to this
reduction, as Financial touch revenues reduced from GBP6.3m to
GBP5.4m. Export touch product revenues remained flat at GBP18.0m,
even though all of our Financial touch products are exported, with
the Americas (North, Central and South America) and Asia Pacific
("APAC") regions growing, by GBP0.2m to GBP4.0m (2017: GBP3.8m) and
GBP1.0m to GBP8.2m (2017: GBP7.2m) respectively. Europe, Middle
East and Africa ("EMEA") experienced the brunt of the Financial
market decline, reducing to GBP5.8m (2017: GBP7.0m).
Touch sales
Gaming, which was dominated by casino-based upright cabinet
designs, as it was in the prior year, has continued to be our top
revenue-generating application market, with growth in both units
produced at 23,000 (2017: 20,000 units) and revenues generated,
contributing GBP8.2m (2017: GBP7.7m). This growth reflects the
maturation of existing projects and new predominantly Asian
invoiced PCT(TM) and MPCT(TM) projects which moved into production
during the period.
Financial touch sales saw a decline on the back of total unit
volumes falling by 6,000 to 44,000 units. We believe the observed
decline has been down to several factors which have generally been
felt by the larger ATM OEMs in the market. These were: an imposed
change in procurement practices in China for the Chinese market; a
slower than anticipated change to the outsourcing of ATM assembly
to third parties; and the move by Financial institutions to a
Windows 10 operating system from the previously deployed Windows 7
and the consequent delays caused in them placing new unit orders.
There is also little doubt that consumer digital money management
may be influencing future ATM deployment levels.
Vending continued to be our second highest market in terms of
units produced at 28,000 units, but this was 7,000 units lower than
the prior year, due in the main to two factors: the finalised
supply of the Freestyle(TM) Coca Cola(R) drinks machine and a
reduced supply into a German-based customer in the field of parking
management and fare collection. In terms of revenue, it remained
our third largest market at GBP3.0m (2017: GBP3.5m).
The Industrial market (comprising applications for control
panels in difficult operating environments and non-transactional
kiosks) saw an 8,000 unit increase in sensors sold to 24,000 units,
and an increase in revenues generated to GBP1.8m (2017: GBP1.6m).
The Signage market increased to GBP1.2m (2017: GBP0.8m), on the
back of a 1,000 unit increase in large sensors sold to 2,000 units
as the number of Smart City type street furniture deployments
increased, particularly for cities in the USA, which offer on the
street internet, wayfinding and wifi hotspot capabilities.
The other markets which are predominantly in the small size
ranges and are open to much greater competition from alternative
suppliers are Home Automation, Healthcare and Telematics, in total
decreased to GBP0.5m (2017: GBP0.7m). This reflects the units
supplied to Home Automation almost halving to 5,000 units, as the
Bosch cooktop moves towards end of design life and those supplied
to Health reduced by nearly two thirds to 1,000 units.
As has been well documented in prior years, ZDL's touch revenues
are not only linked to the markets, which influence the number of
touch sensors produced, but more substantially to the mix of the
sensor sizes, as large format units carry a higher price per unit,
as well as technology choice between MPCT(TM) and PCT(TM) and
sensor shape. The total number of sensor units supplied was lower
than that of 2017 by 5,000 units to 133,000 units (2017: 138,000
units) but, as the below table illustrates, there was growth in the
higher priced large format sensors.
2018 2017 Variance
Sensor Size Units % total Units % total Units % total
('000) ('000) ('000)
-------- -------- -------- -------- -------- --------
Small - (0 -14.9") 35 26 33 24 2 6
-------- -------- -------- -------- -------- --------
Medium - (15.0 -29.9") 79 60 87 63 (8) (9)
-------- -------- -------- -------- -------- --------
Large - (30.0" +) 19 14 18 13 1 6
-------- -------- -------- -------- -------- --------
TOTALS 133 100 138 100 (5) (4)
-------- -------- -------- -------- -------- --------
Within the 133,000 totals, we had a 5,000 unit increase in the
number of MPCT(TM) sensors sold to 17,000, as well as continued
opportunities in and the uptake of non-flat touch sensors, with the
volume of shaped sensors increasing to 10,000 units from 9,000
units in 2017.
Strategic sales and marketing initiatives
As a business, ZDL focuses on the development and production of
touch interactive component solutions for self-service and
commercial use, providing its bespoke touch componentry to
equipment designers and manufacturers across several market
sectors, as detailed above.
As a UK operating business with the overwhelming majority of
sales represented by exports, we employ a team of sales and
business development managers located at our headquarters and in
more recent years have expanded to provide equivalent direct local
support in international locations within our major markets. In
addition, we have built a global network of sales channel partners.
These partners are a combination of commissioned manufacturers'
representatives or agents, aiding our direct sales team, and
distributors or value-added resellers ("VARs"), which buy and
resell our products (indirect sales). The choice of the type of
sales channel partner for any specific territory is determined
after significant territory and market evaluation.
The current composition of our global channel partners is
presented on the ZDL website and can be found at
zytronic.co.uk/where-to-buy/. ZDL continually reviews the
suitability of its direct and indirect partners depending upon
their performance, as well as local market preferences and
requirements. This is continually refined and over the course of
the year, we made several changes.
-- We concluded the year with twelve regional agreements covering the Americas as we terminated the agreement with
one underperforming agent. Looking forward we are likely to terminate a further three agencies but have already
agreed terms with two replacements. Although previously stating our intention to increase the USA-based Zytronic
Inc. direct sales team from two persons to three, a conscious decision was made to delay the recruitment. We
continue to evaluate this with a view to restarting the search and selection process during 2019.
-- At the end of the fiscal period we had twelve agreements covering the APAC region. During the year we appointed a
further indirect employee in Japan, through our service partner Business Link Japan, to increase the regional
technical sales support. Additionally, we have been working closely with a new VAR for Thailand, which we shortly
expect to sign an agreement with.
-- In EMEA and the UK we concluded the financial year with 13 active agreements, unchanged from 2017.
-- Additionally, we continued to work with two global distribution/VAR partners, Future Electronics and Quixant
Group.
Our 2018 marketing strategy in support of sales activities
continued to focus on increasing our regional profile in European,
North American and Chinese trade publications in key vertical
markets, both in traditional press and digital online publications.
Much of the activity during the first half of the year was geared
to the launch and promotion of our new MPCT(TM) application
specific integrated circuit ("ASIC") chip and the resultant
associated products and benefits. Several new international case
studies were also issued during the year, highlighting the various
applications of our technology. These included Cryptera (Denmark),
Ebebek (Turkey), Santander (Chile) and Smartlink (USA), in addition
to several whitepapers, "thought leadership" articles and product
releases.
Towards the latter part of the year, having reviewed the
respective outputs of each, we moved our Asian focus from China and
have repositioned it to Japan, appointing a Japan-based search
engine optimisation ("SEO") specialist to better manage the
microsite and a local PR agency. In addition, we completed a review
of our digital and social media requirements and changed our UK
service provider to improve our SEO success. The new agency has
helped us enhance our main website to further highlight our product
attributes and improve site navigation, with many of these changes
cascaded down to the regional microsites. During the year we have
also initiated trial pay-per-click advertising campaigns on
appropriate social media platforms, targeting relevant keywords and
job functions. We continue to review the results of these
programmes and will adapt and continue or stop as appropriate.
We continue to see the benefits of directly participating in
relevant market tradeshows, primarily as regional networking
opportunities with customers, suppliers and sales channel partners.
Consequently, during 2018 we exhibited at several events: the
Global Gaming Exhibition ("G2E" October 2017, Las Vegas), the
International Casino Exhibition (February 2018, London), Integrated
Systems Europe (February 2018, Amsterdam) and the Digital Signage
Exhibition (March 2018, Las Vegas).
Indirectly, our products were also well represented at
tradeshows around the world by distributors and customers. These
included Embedded World (February 2018, Nuremberg), Infocomm (June
2018, Las Vegas) and Transport Publics (June 2018, Paris). Notably,
the encrypted touch solution sold by Cryptera was shown by it at
several USA retail and financial shows, such as the National Retail
Federation (January 2018, New York) and additionally Money 20/20
(June 2018, Amsterdam).
Opportunities Analysis
Incoming leads from all sources (website, tradeshows, channel
partners, sales management, etc.) are fed into our tailored
Microsoft Dynamics customer relationship management ("CRM")
software system. Once validated those leads are then categorised as
opportunities according to vertical market (application), annual
quantity, touch sensor type, project duration, estimated unit price
and production start date. Opportunities have an average maturation
period of two years from lead to production.
As an opportunity progresses, an estimated probability of
success is dynamically assigned. Only those opportunities at the
point in time when they are assigned with a high probability, are
then classified as a "Project"; otherwise they remain a "Prospect"
and only those designated as a Project at the time of our quarterly
sales reviews are added into our dynamic forecast model. As this is
a dynamic system, probability levels can change, so a Prospect one
day can be upgraded to a Project on another, or vice versa.
The CRM information is constantly being updated by the sales
team to account for changes to opportunities, which may be because
they become dead or lost to a competitor, moved into production or,
as mentioned above, reassessed for probability of success.
Accordingly, the number of active opportunities and the volume and
value of active Projects varies significantly day to day. At 30
September 2018, there were a total of 414 active opportunities in
the system, with 41 of those opportunities classified on that day
as Projects, with an unsensitised and theoretical lifetime
contribution of GBP8.0m. This compares with 30 September 2017
values of 551, 60 and GBP8.2m respectively.
The net movement in 19 Projects over the year was represented by
six Projects being re-classified back to Prospects as they did not
maintain their high probability status; 15 Projects were lost, due
to projects either being terminated by the customer, or lost to a
competitor; 129 new Projects were added during the year and 127
Projects moved through into production.
Strategic research and development
As is customary, the emphasis of the research and development
team evolved throughout 2018 as the year progressed. At the start
of the fiscal year, the emphasis was on the completion of the
development of our MPCT(TM) ASIC chip and its introduction into
production and to customers. An initial supply of 24,000 production
ASICs were received around January 2018. This spawned further
complimentary work on the release of a new family of controllers
incorporating the new ASIC with a designation of ZXY500 and the
availability of an MPCT(TM) chipset, to allow equipment designers
the freedom of building Zytronic touch control features directly on
to mother or daughterboards.
In conjunction with the release of the ZXY500 series, new
flexible printed circuit ("FPC") tail designs and sensor
configurations were introduced, that provided industry leading
narrow border considerations, which had been configured using years
of customer feedback and wider market input. To bring these
components together, a new fibre laser bonding system was
introduced, which had been designed and developed by the R&D
team over the prior 18-month period.
As these elements were handed off to production, the R&D
team returned to other future development programmes and those
related to alternative material considerations based on the
functional performance headroom created by the new ASIC
development. The collaboration work undertaken on the Hi-Response
European funded H2020 project for ink-jet printed electronics
continues to progress, but extremely slowly and it now looks likely
as that project moves to conclusion that an immediately usable
output will not be the result. However, a resurgence in indium tin
oxide ("ITO"), due in the main to the instability issues of
emerging tech such as metal mesh and silver nano-wire, has had ZDL
look much closer to the marrying of ITO with its new ASIC and the
results presently look promising. However, competitiveness and
pricing need further consideration.
Over the course of the year, ZDL has had three further patents
granted, associated with USA and China regional divisions of
selected GB MPCT(TM) 2012 filed patents. The team continued to
progress innovative work on the incorporation of mechanical push
buttons within the active and visible area of touchscreens. In
doing so, it worked on using our unique micro-wire and pattern
design capabilities to develop an interlacing method to provide
invisible power and data lines to and from the button. A further
patent application has been filed for this, with the solution
successfully demonstrated on a four button player 55" multi-touch
table game at the G2E tradeshow.
Operations
Over the course of 2018, the productive headcount has varied
significantly with a weekly average of 118 persons compared with
115 persons over 2017. The higher average in 2018, being more a
result of production inefficiencies from the significant reduction
in the manufacture of Financial products, and unprecedented yield
issues associated with related new product and process
introductions whilst maintaining on-time customer deliveries in Q4,
resulted in an average 128-person headcount in Q4.
As a result of the short order book and batch project nature of
the business, productionising of new processes or product
configurations on active orders is our common practice and when
issues arise, they are normally readily managed. However, the yield
issues observed in Q4 were extreme and unfortunately related to the
productionising of new Gaming projects. These comprised large
format and new shaped touch sensors, which incorporated the new FPC
tail designs and narrow inactive border features of the new ZXY500
MPCT(TM) solutions, and required the exclusive use of the new fibre
laser jointing process. Adopting these new technologies and
manufacturing processes in combination proved problematic.
Significant work continues to be undertaken to understand, and
where possible, eradicate the issues observed and bring the yields
of the new product offerings and newly introduced processes back in
line with our expectations.
Mark Cambridge
Chief Executive Officer
10 December 2018
2018 Financial review
Group revenue
Total Group revenue for the year decreased by GBP0.6m to
GBP22.3m (2017: GBP22.9m), as a result of the underperformance of
both the touch and non-touch elements of the Financial market
compared to the previous year. The Chief Executive Officer's review
explains in detail the reasons for this.
Gross margin
Gross margin for the year was 37.0% (2017: 41.1%), and has been
impacted by several factors:
-- the reduction in units supplied into the Financial market
eroded operational efficiencies as the manufacture of these
relatively vanilla products provides a volume baseline albeit with
month-on-month variability;
-- increased costs of raw materials, exacerbated by new product
introductions in Q4, due to operational yield issues where product
had to be reworked or rebuilt to achieve the desired customer
requirements; and
-- year-on-year increased labour costs and increased numbers of
personnel and overtime in production as a consequence of the
above.
Profit before tax
Because of the reduced levels of revenues and the gross margin
reduction noted above, Group profit before tax decreased to GBP4.2m
(2017: GBP5.4m). Distribution costs show a slight year-on-year
increase as we have sold more products where the responsibility for
distribution sits with the Group. On a year-on-year basis,
administration costs are in line with those of 2017 at GBP3.6m
despite this year's figure including the GBP0.3m costs of the claim
litigation described below. All other costs were well controlled,
with salary costs showing a saving over the year due to fewer bonus
provisions being required given the performance of the Group.
Claim litigation
Over the course of the financial year, ZDL has been in dispute
with a former licensor, over the process used to write micro-fine
wire to a substrate. The licensor alleged that ZDL owed it duties
of confidentiality in relation to information alleged to have been
imparted to ZDL in 1999 and asserted that ZDL had breached that
duty in the content of its MPCT(TM) patent applications filed in
2012 and ZDL's processes infringed a patent filed by the licensor
in 2014 in response to the alleged breach of duty. These
allegations were strongly refuted by ZDL.
A claim was made against ZDL in the Intellectual Properties
Enterprise Court, reference IP-2017-000218, towards the end of Q1
2018. On ZDL's instigation, the claim was transferred to the
Patents Court in Q2 2018, reference HP-2018-000016. Whilst ZDL did
not accept it was liable, it took a commercial approach to dealing
with the claim, mindful of the time and cost associated with High
Court litigation and in May 2018 made an offer pursuant to Part 36
of the Civil Procedure Rules by which ZDL agreed to pay GBP72k in
settlement of the claim, which was accepted in September 2018, plus
costs which were to be subsequently assessed, if not agreed, which
have been settled by the parties with ZDL agreeing to pay GBP25k.
The total costs incurred in the year including ZDL's own legal
expenses were GBP0.3m.
Tax
The Group's tax charge of GBP0.5m represents an effective tax
rate of 13.0%, compared to the GBP0.8m and 15.0% recorded in the
prior year. In the year, the Group continued to claim relief under
the Patent Box regime and the utilisation of R&D tax credits. A
slight overprovision recorded for 2017 has also benefited the tax
charge in the year, the impact of this being a 0.8% reduction in
tax on profit.
Earnings per share
There has been no change to the issued share capital of
16,044,041 ordinary shares of 1.0p each over the year and the EPS
recorded is 22.7p (fully diluted:22.7p), which is lower than that
reported for last year (2017: 29.0p; fully diluted: 28.8p) by 22%
due to lower profits arising.
Dividend
The Directors recommend the payment of a final dividend of 15.2p
per share for the year ended 30 September 2018 giving a total
dividend for the year of 22.8p per share (2017: 19.0p) and an
increase of 20% over last year. Subject to approval by
shareholders, the dividend will be paid on Friday 22 February 2019
to shareholders on the register as at the close of business on
Friday 8 February 2019.
Capital expenditure
The Group additions to capital expenditure totalled some GBP0.7m
and was weighted more to intangible assets with GBP0.4m of spend
occurring on the conclusion of the MPCT(TM) ASIC project and
subsequent controller releases as well as new product development.
Tangible additions have been for a number of small items of
equipment to assist in production capabilities, as well as health
and safety improvements. Depreciation and amortisation for the year
was the same as last year at GBP1.1m.
Cash and debt
The Group continues to generate cash and has recorded an
increase in cash and cash equivalents of GBP0.5m (2017: GBP1.3m) at
30 September 2018. Cash generated from operations (pre-tax) of
GBP5.4m (2017: GBP5.2m) offset the net cashflow used in financing
activities of GBP3.7m (2017: GBP2.3m), being the payment of the
final and interim dividends, and the net cashflow used in investing
activities of GBP0.6m (2017: GBP1.0m). Working capital is neutral
in the year (2017: GBP0.4m increase) but the Group is coming under
more pressure from its customers to increase payment terms. The
Group is mindful of its cash holdings and will continue its policy
to invest in internal R&D and capital refurbishments to drive
growth, and also maintain its progressive dividend policy as it has
sufficient cash and reserves to do so.
The Group maintains an overdraft facility, which is available
for use in any of its 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 in line with its working capital
policies to try to better manage its net GBP inflows from its
surplus currency requirements.
The Group continues to be debt free and reported cash and cash
equivalents of GBP14.6m at 30 September 2018 (2017: GBP14.1m).
Claire Smith
Group Finance Director
10 December 2018
Consolidated statement of comprehensive income
For the year ended 30 September 2018
2018 2017
Notes GBP'000 GBP'000
------------------------- ------ --------- ---------
Group revenue 22,288 22,892
Cost of sales (14,047) (13,481)
Gross profit 8,241 9,411
Distribution costs (461) (393)
Administration expenses (3,639) (3,591)
------------------------- ------ --------- ---------
Group trading profit 4,141 5,427
Finance costs (21) (24)
Finance revenue 68 10
------------------------- ------ --------- ---------
Profit before tax 4,188 5,413
Tax expense 3 (541) (825)
------------------------- ------ --------- ---------
Profit for the year 3,647 4,588
------------------------- ------ --------- ---------
Earnings per share
Basic 5 22.7p 29.0p
Diluted 5 22.7p 28.8p
------------------------- ------ --------- ---------
All activities are from continuing operations.
Consolidated statement of changes in equity
For the year ended 30 September 2018
Called
up share Share Retained
capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- -------- --------- --------
At 1 October 2016 154 7,766 15,316 23,236
Profit for the year - - 4,588 4,588
Tax recognised directly in
equity - - 72 72
Exercise of share options 6 1,228 - 1,234
Issue of capital reduction
shares* 8,919 - (8,919) -
Cancellation of capital reduction
shares* (8,919) - 8,919 -
Dividends - - (2,354) (2,354)
--------- -------- --------- --------
At 1 October 2017 160 8,994 17,622 26,776
Profit for the year - - 3,647 3,647
Dividends - - (3,658) (3,658)
----------------------------------- --------- -------- --------- --------
At 30 September 2018 160 8,994 17,611 26,765
----------------------------------- --------- -------- --------- --------
(*Refer to note 6)
Consolidated statement of financial position
At 30 September 2018
2018 2017
Notes GBP'000 GBP'000
---------------------------------- ------- -------- --------
Assets
Non-current assets
Intangible assets 1,585 1,633
Property, plant and equipment 6,605 7,030
8,190 8,663
------------------------------------------ -------- --------
Current assets
Inventories 3,021 2,996
Trade and other receivables 3,738 3,506
Derivative financial assets - 54
Cash and short term deposits 14,626 14,099
------------------------------------------- -------- --------
21,385 20,655
------------------------------------------ -------- --------
Total assets 29,575 29,318
------------------------------------------- -------- --------
Equity and liabilities
Current liabilities
Trade and other payables 1,446 1,042
Derivative financial liabilities 7 -
Accruals 767 862
Tax liabilities 13 3
2,233 1,907
------------------------------------------ -------- --------
Non-current liabilities
Government grants 15 25
Deferred tax liabilities (net) 562 610
577 635
------------------------------------------ -------- --------
Total liabilities 2,810 2,542
------------------------------------------- -------- --------
Net assets 26,765 26,776
------------------------------------------- -------- --------
Capital and reserves
Equity share capital 160 160
Share premium 8,994 8,994
Revenue reserve 17,611 17,622
------------------------------------------- -------- --------
Total equity 26,765 26,776
------------------------------------------- -------- --------
Consolidated cashflow statement
For the year ended 30 September 2018
2018 2017
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Operating activities
Profit before tax 4,188 5,413
Net finance (income)/costs (47) 14
Depreciation and impairment of property,
plant and equipment 709 749
Amortisation, impairment and write-off of
intangible assets 438 424
Amortisation of government grant (10) (42)
Fair value movement on foreign exchange
forward contracts 61 (1,013)
Working capital adjustments
Increase in inventories (25) (236)
(Increase)/decrease in trade and other receivables (232) 239
Increase/(decrease) in trade and other payables
and provisions 295 (356)
---------------------------------------------------- -------- --------
Cash generated from operations 5,377 5,192
Tax paid (573) (521)
---------------------------------------------------- -------- --------
Net cashflow from operating activities 4,804 4,671
---------------------------------------------------- -------- --------
Investing activities
Interest received 65 10
Receipt of government grant - 19
Payments to acquire property, plant and
equipment (273) (472)
Payments to acquire intangible assets (390) (600)
---------------------------------------------------- -------- --------
Net cashflow used in investing activities (598) (1,043)
---------------------------------------------------- -------- --------
Financing activities
Interest paid (21) (24)
Dividends paid to equity shareholders of
the Parent (3,658) (2,354)
Proceeds from share issues relating to options - 1,234
Repayment of borrowings - (1,148)
Net cashflow used in financing activities (3,679) (2,292)
---------------------------------------------------- -------- --------
Increase in cash and cash equivalents 527 1,336
---------------------------------------------------- -------- --------
Cash and cash equivalents at the beginning
of the year 14,099 12,763
---------------------------------------------------- -------- --------
Cash and cash equivalents at the year end 14,626 14,099
---------------------------------------------------- -------- --------
Notes to the consolidated financial statement
1. Basis of preparation
The preliminary results for the year ended 30 September 2018
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 2018. 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 2017 have been filed with the
Registrar of Companies. The statutory accounts for the year ended
30 September 2018 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
IFRS as adopted by EU standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group and the undertakings included in the consolidation taken as a
whole; and the Group results, Operational review and Financial
review includes a fair review of the development and performance of
the business and the position of the Group and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they
face
2. Basis of consolidation and goodwill
The Group results comprise the financial statements of Zytronic
plc and its subsidiaries as at 30 September each year. They are
presented in Sterling and all values are rounded to the nearest
thousand pounds (GBP'000) except where otherwise indicated.
3. Tax
30 September 30 September
2018 2017
GBP'000 GBP'000
--------------------------------------------------- ------------- -------------
Current tax
UK corporation tax 621 576
Corporation tax over-provided in prior years (35) -
--------------------------------------------------- ------------- -------------
Total current tax charge 586 576
--------------------------------------------------- ------------- -------------
Deferred tax
Origination and reversal of temporary differences (45) 249
--------------------------------------------------- ------------- -------------
Total deferred tax (credit)/charge (45) 249
--------------------------------------------------- ------------- -------------
Tax charge in the statement of comprehensive
income 541 825
--------------------------------------------------- ------------- -------------
Tax relating to items debited to equity
30 September 30 September
2018 2017
GBP'000 GBP'000
------------------------------------------- -------------- -------------
Deferred tax
Tax on share-based payments - (72)
------------------------------------------- -------------- -------------
Total deferred tax debit - (72)
------------------------------------------- -------------- -------------
Tax charge in the statement of changes in
equity - (72)
------------------------------------------- -------------- -------------
Reconciliation of the total tax charge
The effective tax rate of the tax expense in the statement of
comprehensive income for the year is 13.0% (2017: 15%) compared
with the average rate of corporation tax in the UK of 19% (2017:
19.5%). The differences are reconciled below:
30 September 30 September
2018 2017
GBP'000 GBP'000
--------------------------------------------- ------------- -------------
Accounting profit before tax 4,188 5,413
--------------------------------------------- ------------- -------------
Accounting profit multiplied by the average
UK rate of corporation tax of 19% (2017:
19.5%) 796 1,056
Effects of:
Expenses not deductible for tax purposes 8 32
Depreciation in respect of non-qualifying
items 24 33
Enhanced tax reliefs - R&D (169) (229)
Enhanced tax reliefs - Patent Box (79) (31)
Effect of deferred tax rate reduction and
difference in tax rates (4) (36)
Tax over-provided in prior years (35) -
--------------------------------------------- ------------- -------------
Total tax expense reported in the statement
of comprehensive income 541 825
--------------------------------------------- ------------- -------------
Factors that may affect future tax charges
Under current tax legislation, some of the amortisation of
licences will continue to be non-deductible for tax purposes.
There are no tax losses to carry forward at 30 September 2018
(2017: GBPNil).
The main rate of corporation tax in the UK reduced to 19% with
effect from 1 April 2017. The rate will be reduced to 17% from 1
April 2020. Both of these lower rates have been substantively
enacted by the statement of financial position date. As the
majority of the temporary differences will reverse when the rate is
17%, this rate has been applied to the deferred tax assets and
liabilities arising at the statement of financial position
date.
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. Consequently, Patent Box
claims have been made for 2014 to 2017 accounting periods, and the
2018 benefit has been estimated.
4. Dividends
The Directors propose the payment of a final dividend of 15.2p
per share (2017: 15.20p), payable on 22 February 2019 to
shareholders on the Register of Members on 8 February 2019. This
dividend has not been accrued in these financial statements. The
dividend payment will amount to some GBP2.4m.
30 September 30 September
2018 2017
GBP'000 GBP'000
---------------------------------------------- ------------- -------------
Ordinary dividends on equity shares
Final dividend of 10.96p per ordinary share
paid on 3 March 2017 - 1,744
Interim dividend of 3.80p per ordinary share
paid on 21 July 2017 - 610
Final dividend of 15.20p per ordinary share 2,439 -
paid on 9 March 2018
Interim dividend of 7.60p per ordinary share 1,219 -
paid on 20 July 2018
---------------------------------------------- ------------- -------------
3,658 2,354
---------------------------------------------- ------------- -------------
5. 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
Earnings of shares EPS Earnings of shares EPS
30 September 30 September 30 September 30 September 30 September 30 September
2018 2018 2018 2017 2017 2017
GBP'000 Thousands Pence GBP'000 Thousands Pence
------------- ------------- ------------- ------------- ------------- ------------- -------------
Profit on
ordinary
activities
after tax 3,647 16,044 22.7 4,588 15,819 29.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
Basic EPS 3,647 16,044 22.7 4,588 15,819 29.0
------------- ------------- ------------- ------------- ------------- ------------- -------------
The weighted average number of shares for diluted EPS is
calculated by including the weighted average number of potentially
dilutive shares under option.
Weighted Weighted
average average
number number
Earnings of shares EPS Earnings of shares EPS
30 September 30 September 30 September 30 September 30 September 30 September
2018 2018 2018 2017 2017 2017
GBP'000 Thousands Pence GBP'000 Thousands Pence
----------------- ------------- ------------- ------------- ------------- ------------- -------------
Profit on
ordinary
activities
after tax 3,647 16,044 22.7 4,588 15,819 29.0
Weighted
average number
of shares
under option - - - - 131 (0.2)
----------------- ------------- ------------- ------------- ------------- ------------- -------------
Diluted EPS 3,647 16,044 22.7 4,588 15,819 28.8
----------------- ------------- ------------- ------------- ------------- ------------- -------------
6. Revenue reserve
On 22 March 2017, the Group carried out a capital reduction
exercise whereby GBP8.9m of the Group's undistributable profits
(within the retained earnings reserve) were capitalised by way of a
bonus issue of newly created capital reduction shares. These shares
were subsequently cancelled and the GBP8.9m credited to the
retained earnings reserve as distributable profits.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UAURRWKAUARA
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December 11, 2018 02:01 ET (07:01 GMT)
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