REG - Zytronic PLC - Interim Results
14/05/2024 07:00
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RNS Number : 2565O Zytronic PLC 14 May 2024
14 May 2024
Zytronic plc
("Zytronic" or the "Company" and, together
with its subsidiaries, the "Group")
Interim Results for the six months ended 31 March 2024 (unaudited)
Zytronic plc, a leading specialist manufacturer of touch sensors, announces
its consolidated interim results for the six months ended 31 March 2024.
Comparative data is given for the six months ended 31 March 2023, except where
indicated.
Financial overview*
· Group revenue of £3.3m (2023: £4.7m)
· Order intake 2024 Q2 at £2.1m, versus £2.6m combined 2023 Q4 and
2024 Q1
· Loss before tax of £0.6m (2023: £0.9m)
· Basic loss per share of 4.8p (2023: 7.5p)
· Cash used in operations £1.0m (2023: £0.4m), with working capital
increases of £0.5m
· Net cash of £3.7m (30 September 2023: £4.7m)
Operational highlights
· Successful participation in numerous major trade shows to illustrate
new product developments
· New Sales Director appointed in October 2023; undertook a review of the
opportunities pipeline to provide the Board with a reliable view of sales
prospects
· A process is now planned for a full business and operational review
over the summer months, with conclusions to follow, to inform strategic
initiatives and direction
* All monetary values quoted in this release are rounded to the nearest
£0.1m, whereas percentage values are based on actual value calculations.
Commenting on the results, Chris Potts, Chair said:
"The Board is cautiously encouraged by the observed improvement in the Group
order intake during the last several months and the progression of business
development activities, which are now firmly re-established with customers and
partners showing interest in our innovative product solutions. While it is too
early to call this the start of a sequence of recovering quarters, it does
give some grounds for optimism while we undertake a formal business and
operational review process, to establish an enhanced strategic direction for
the Group, for the benefit of all stakeholders. A core objective remains the
return to positive cash generation and growth over the medium term."
Enquiries:
Zytronic plc 0191 414 5511
Mark Cambridge, Chief Executive
Claire Smith, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Broker) 020 7496 3000
Aubrey Powell, Alex Bond, Finn Gordon (Investment Banking)
Notes to Editors
The Group's operating subsidiary Zytronic Display Ltd ("ZDL") 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.
ZDL'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 system-specific design
requirements.
ZDL has continually developed process and technological know-how and IP since
the late 1990's around two projected capacitance ("PCAP") sensing
methodologies; trademarked by as PCT™ ("Projected Capacitive Technology")
and MPCT™ ("Mutual Projected Capacitive Technology"), in which 15
internationally granted patents are held.
The Group is headquartered at Blaydon-upon-Tyne in the United Kingdom. ZDL
operates from this site, providing its manufactured products globally through
a number of sales channel partners. ZDL 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 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 ZDL'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)
Chair statement
Introduction
This is my first interim results statement as Chair of the Group and follows
on from my inaugural statement in the annual results for the financial year
ended 30 September 2023 ("FY23"), and the AGM trading update announced in
February 2024. In these I commented that the year-to-date performance
continued to follow the trends observed over the second half of the prior
fiscal year. In line with the Board's expectations, first-half revenue to 31
March 2024 ("FY24 H1") was £3.3m (FY23 H1: £4.7m; H2: £3.9m). In the annual
report I also highlighted the operations restructuring which occurred in
September 2023, to reduce the cost base in anticipation of the trend.
The FY24 H1 performance continues to reflect the project-driven nature of the
Group's operations, exacerbated over this period by the particularly low order
intake levels observed over the last quarter of FY23 and the first quarter of
FY24, being £2.6m combined. It is pleasing, however, to note that the order
intake has improved over the second quarter of the current year, concluding at
£2.1m.
During the first half of this year, research and development work has
continued, to provide enhanced offerings for the future, including
ElectroglaZ™ design solutions, integrated buttons and dials, and improved
controller hardware and software for our PCAP touch. Preparatory work for the
planned wide-reaching business and operational review has also been
undertaken, and the review will take place during the summer, with conclusions
to follow.
Results
Group revenue for FY24 H1 was £3.3m (FY23 H1: £4.7m). The resultant gross
margin was 27.3% (FY23 H1: 23.5%), which included a 6.5 basis point benefit
due to the almost-full reversal of the £0.2m stock impairment charge created
last year by the bankruptcy events of Aruze Gaming Americas ("AGA"). Margin
and revenue both benefitted from sales of £0.3m in the first half to the
entity which purchased the auctioned AGA assets. This resulted in a reported
LBITDA of £0.5m (FY23 H1: LBITDA of £0.6m) and a loss before tax ("LBT") of
£0.6m (FY23 H1: LBT of £0.9m). Both measures benefitted by the £0.1m part
reversal of last year's £0.3m impairment of trade receivables, as associated
with products supplied for ultimate sale by AGA. The basic loss per share was
4.8p (FY23 H1: LPS of 7.5p).
Revenues over FY24 H1 have been significantly impacted in comparison to FY23
H1: in Gaming, down by 50% to £0.8m (FY23 H1: £1.5m) and Vending, down by
43% to £0.9m (FY23 H1: £1.5m). Both reductions generally arose from a
continuation of the half-year trends seen in H2 vs H1 of FY23 (Gaming down
£0.6m and Vending down £0.4m across the two halves of FY23) as previously
described in the FY23 results. Two notable developments were first,
pleasingly, the above-mentioned benefit in Gaming of £0.3m in sales to the
new Aruze entity, and second in Vending which, over FY24 H1, saw a
disappointing reduction in demand from our channel partner in Spain,
associated with EV charging station activity.
In our other markets, we observed varying degrees of revenue performance over
the first half, from a 13% decline in Financial to £0.5m (FY23 H1: £0.6m),
to a 56% improvement in our combined "Other" categories at £0.4m (FY23 H1:
£0.3m). In aggregate, across all markets excluding Gaming and Vending, there
was a broadly neutral comparative performance between the first halves of FY23
and FY24.
Activity
We continue to monitor the activity performance levels and movements of
opportunities within our CRM system. As noted in the FY23 results, the Board
had requested in October 2023 the new Sales Director, appointed on 17 October
2023, to undertake an immediate review of all opportunities considered to be
active (defined as 'Open') in our CRM system, which concluded by the end of
November 2023. The aim was to provide the Board with confidence that the
opportunities in the CRM system were all live prospects, albeit of uncertain
outcome. The number of 'Open' opportunities 'Closed' over that review period
was 124, with a customer projected lifetime value ("CPLV") of £8.5m, 111 and
£7.2m respectively as a direct consequence of the review.
In summary, following this opportunity review and the normal process of new
opportunities being added, existing opportunities becoming orders or losses to
competitors, or projects discontinued by customers, on 31 March 2024, the
number of 'Open' opportunities stood at 487 with a CPLV of £57.9m, with 119
and £10.2m respectively being FY24 H1 entries, compared to 564 and £68.6m
respectively at the end of FY23. The Board is now confident that the CRM
opportunities in the system provide a reliable view of the sales prospects.
A good example of a long maturation period of prospects, as discussed in
previous annual reports, is an FY24 opportunity conversion, as part of a
medical equipment project which entered the CRM system in FY18 Q3, for which
production orders were received, and the opportunity then 'Closed' as won, in
FY24 Q1. By 31 March 2024, deliveries of this multi-year project had
contributed an initial £0.1m of revenue, from a £1.1m CPLV.
Since the start of FY24 we have successfully participated in, or supported our
channel partners at, numerous major trade shows to illustrate new product
developments. These included:
· showing our 'floating' button concepts for casino gaming video
button deck opportunities;
· an improvement in the optics of our touch sensors utilising a
different material concept; and
· launching a fully integrated interactive table product and a
hybrid unit for advanced human-to-machine interface solutions for industrial
process equipment.
The development work on the Group's new combined website is progressing well.
New business development videos have been commissioned and are in preparation
for integration with the new website to highlight the Group's market solutions
and overall operational capabilities.
Cash
Cash at the period end was £3.7m (30 September 2023: £4.7m), the change
resulting mainly from the operational loss before tax made in H1 of £0.6m.
Working capital increased by £0.5m over the first half of the year, £0.3m of
which was from a rise in stock, as the Group had a commitment to receive
microprocessor componentry that had been ordered at least 12 months prior,
because of supply chain restrictions at that time. £0.1m was used in
investing activities through continued spend into intangible assets of almost
£0.2m, partly offset by almost £0.1m of interest earned. The Group did not
undertake any financing activities during the first half of the year.
Dividends
Based on the reported interim results and the Board's stated policy to only
pay covered interim or full year dividends, the Board is not proposing to pay
an interim dividend this year (FY23 H1: Nil).
Strategic direction
The Group has now formalised its plans and process to undertake a complete
business and operational review, which will take place over the summer, with
conclusions to follow. Terms of reference have been agreed by the Board and
the senior executive management team, and an external strategy facilitator
appointed after a comprehensive search process.
The review is designed to consider all potential options for improvement in
operational and fundamental performance and to enhance the Company's
positioning and prospects for growth, and to enable the Board to identify
prioritised strategies whilst also considering the interests of all
stakeholders.
Outlook
The Board is cautiously encouraged by the observed improvement in the Group
order intake during the last several months and the progression of business
development activities, which are now firmly re-established with customers and
partners showing interest in our innovative product solutions. While it is too
early to call this the start of a sequence of recovering quarters, it does
give some grounds for optimism while we undertake a formal business and
operational review process, to establish an enhanced strategic direction for
the Group, for the benefit of all stakeholders. A core objective remains the
return to positive cash generation and growth over the medium term.
Chris Potts
Chair
14 May 2024
Consolidated statement of comprehensive income
Unaudited results for the six months to 31 March 2024
Six months to Six months to Year to
31 March 31 March 30 September
2024 2023 2023
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Group revenue 3,316 4,728 8,610
Cost of sales (2,411) (3,617) (7,109)
Cost of sales excluding exceptional items (2,627) (3,403) (6,500)
Exceptional items - Goodwill impairment - - (235)
Exceptional items - Other 3a 216 (214) (374)
Gross profit 905 1,111 1,501
Distribution costs (65) (107) (159)
Administration expenses (1,549) (1,980) (3,547)
Administration expenses excluding exceptional items (1,650) (1,638) (3,092)
Exceptional items 3b 101 (342) (455)
Group operating loss (709) (976) (2,205)
Finance revenue 94 79 200
Loss before tax (615) (897) (2,005)
Tax credit 4 123 134 441
Loss for the period (492) (763) (1,564)
Other comprehensive income - - -
Total comprehensive loss (492) (763) (1,564)
Loss per share
Basic 5 (4.8)p (7.5)p (15.4)p
All activities are from continuing operations.
Consolidated statement of changes in equity
Unaudited results for the six months to 31 March 2024
Called up Capital
share Share redemption Retained
capital premium reserve earnings Total
£'000 £'000 £'000 £'000 £'000
At 1 October 2023 102 8,994 58 4,245 13,399
Loss for the period - - - (492) (492)
At 31 March 2024 (unaudited) 102 8,994 58 3,753 12,907
Consolidated statement of financial position
Unaudited results at 31 March 2024
At At At
31 March 31 March 30 September
2024 2023 2023
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Assets
Non-current assets
Intangible assets 926 872 840
Property, plant and equipment 4,768 5,154 4,958
5,694 6,026 5,798
Current assets
Inventories 3,056 2,292 2,711
Trade and other receivables 1,419 1,834 1,252
Cash and short-term deposits 7 3,665 5,385 4,706
8,140 9,511 8,669
Total assets 13,834 15,537 14,467
Equity and liabilities
Current liabilities
Trade and other payables 559 326 488
Accruals 342 543 554
901 869 1,042
Non-current liabilities
Deferred tax liabilities (net) 26 468 26
26 468 26
Total liabilities 927 1,337 1,068
Net assets 12,907 14,200 13,399
Capital and reserves
Equity share capital 102 102 102
Share premium 8,994 8,994 8,994
Capital redemption reserve 58 58 58
Retained earnings 3,753 5,046 4,245
Total equity 12,907 14,200 13,399
Consolidated cashflow statement
Unaudited results for the six months to 31 March 2024
Six months to Six months to Year to
31 March 31 March 30 September
2024 2023 2023
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Operating activities
Loss before tax (615) (897) (2,005)
Finance income (94) (79) (200)
Depreciation and impairment of property, plant and 193 233 445
equipment
Amortisation, impairment and write-off of intangible assets 58 102 140
Impairment of goodwill - - 235
Fair value movement on foreign exchange forward contracts - (92) (92)
Working capital adjustments
Increase in inventories (345) (108) (527)
(Increase)/decrease in trade and other receivables (167) 1,123 1,705
Decrease in trade and other payables and provisions (7) (680) (723)
Cash used in operations (977) (398) (1,022)
Tax received - 77 137
Net cashflow used in operating activities (977) (321) (885)
Investing activities
Interest received 83 70 189
Payments to acquire property, plant and equipment (3) (280) (296)
Payments to acquire intangible assets (144) (263) (481)
Net cashflow used in investing activities (64) (473) (588)
Financing activities
Dividends paid to equity shareholders of the Parent - (224) (224)
Net cashflow used in financing activities - (224) (224)
Decrease in cash and cash equivalents (1,041) (1,018) (1,697)
Cash and cash equivalents at the beginning of the period 4,706 6,403 6,403
Cash and cash equivalents at the end of the period 7 3,665 5,385 4,706
Notes to the interim report
Unaudited results for the six months to 31 March 2024
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 2024 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 2023 annual report and
financial statements.
The financial information for the six months to 31 March 2024 and the
comparative financial information for the six months to 31 March 2023 have not
been audited. The comparative financial information for the year ended 30
September 2023 has been extracted from the 2023 annual report and financial
statements.
The annual report and financial statements for the year ended 30 September
2023, which were approved by the Board of Directors on 8 January 2024,
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 2024.
3. Exceptional costs
(a) Cost of sales
Six months to 31 March Six months to 31 March Year to 30 September
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Write-down of stock associated with doubtful debt - 214 239
Write-back of stock associated with doubtful debt (216) - -
Costs of goodwill impairment - - 235
Costs of restructuring - - 135
Total exceptional costs (216) 214 609
The write-down of stock in the consolidated statement of comprehensive income
relates to the effects on the Group of AGA filing a voluntary petition under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the State of Nevada. The write-back of stock relates to sales made in the
period of the prior year's written down stock.
The goodwill impairment costs of write-down relate to the operations of
Intasolve Limited.
The Group undertook a restructuring exercise in the prior year and these costs
are classed as exceptional as this was a one-off event.
(b) Administration expenses
Six months to 31 March Six months to 31 March Year to 30 September
2024 2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Write-down of doubtful debt - 342 332
Write-back of doubtful debt (101) - -
Costs of restructuring - - 123
Total exceptional costs (101) 342 455
The write-down of debt in the consolidated statement of comprehensive income
relates to the effects on the Group of AGA filing of a voluntary petition
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the State of Nevada. Over the course of the first half period of the
current year, one of the two associated customers whose debt was impaired has
since made a part repayment of it.
The Group undertook at restructuring exercise in FY2023 and those costs were
classed as exceptional as this was a one-off event.
4. Tax charge on loss on ordinary activities
The estimated tax rate for the year of 20% 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 per share ("LPS")
Basic LPS is calculated by dividing the loss 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 arising from total operations and
LPS arising from continuing operations.
For the six months to 31 March 2024 and 2023
Weighted Weighted
average average
number number
Loss of shares LPS Loss of shares LPS
31 March 31 March 31 March 31 March 31 March 31 March
2024 2024 2024 2023 2023 2023
£'000 Thousands Pence £'000 Thousands Pence
Loss on ordinary activities after tax (492) 10,162 (4.8) (763) 10,162 (7.5)
Basic LPS (492) 10,162 (4.8) (763) 10,162 (7.5)
For the year to 30 September 2023
Weighted
average
number
Loss of shares LPS
30 September 30 September 30 September
2023 2023 2023
£'000 Thousands Pence
Loss on ordinary activities after tax (1,564) 10,162 (15.4)
Basic LPS (1,564) 10,162 (15.4)
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 (2023: Nil). The table below reflects historical
dividend payments.
Six months to 31 March Six months to 31 March Year to 30 September
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Ordinary dividends on equity shares
Final dividend of 2.2p per ordinary share paid on 24 February 2023 - 224 224
- 224 224
7. Cash and cash equivalents
Six months to 31 March Six months to 31 March Year to 30 September
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash at bank and in hand 3,665 5,385 4,706
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
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash at bank and in hand 1,004 850 2,113
Short term deposits 2,661 4,535 2,593
3,665 5,385 4,706
Cash at bank earns interest at floating rates based on daily bank deposit
rates. Short term deposits are made for variable lengths, depending on the
immediate cash requirements of the Group, and earn interest at variable rates.
At 31 March 2024 the Group had available a net £1.5m (cash less overdrawn
accounts) overdraft facility from Barclays Bank plc, which will fall for
review in October 2024.
The fair value of cash and cash equivalents is £3.7m (2023: £5.4m).
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
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
Crowe U.K. LLP
Black Country House
Rounds Green Road
Oldbury
B69 2DJ
Bankers
Barclays Bank plc
71 Grey Street
Newcastle-upon-Tyne
NE99 1JP
Handelsbanken
8 Keel Row
The watermark
Gateshead
NE11 9SZ
Santander Corporate Banking
Baltic Place
South Shore Road
Gateshead
NE8 3AE
Yorkshire Bank
131-135 Northumberland Street
Newcastle-upon-Tyne
NE1 7AG
Regions Bank
2653 Marietta Hwy
Canton, GA
30114
USA
Solicitors
Ward Hadaway
Sandgate House
102 Quayside
Newcastle-upon-Tyne
NE1 3DX
Muckle LLP
Time Central
32 Gallowgate
Newcastle-upon-Tyne
NE1 4BF
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