Zytronic has now released its interim results for the year ending 2015.
Revenues increased by £1.2M when compared to the first half of last year and with a much smaller increase in cost of sales, gross profits increased by £1M. We then see a small increase in distribution costs, share based payments and other admin expenses and the group also experienced a detrimental £233K cost relating to foreign exchange movements to give an operating profit some £211K higher. After finance costs and revenues broadly cancelled each other out, a higher tax expense gave a profit for the year of £1.3M, an increase of £177K when compared to the first six months of 2014.
When compared to the end point of last year, total assets increased by £1.2M driven by a £924K increase in cash levels and a £234K growth in the value of property, plant and equipment. Liabilities also increased during the year as a £599K increase in payables, a £295K growth in other financial liabilities and a £202K increase in current tax liabilities were partially offset by a £305K fall in accruals to give a net tangible asset level some £468K higher at £17.1M.
When compared to the first half of last year, cash profits increased by £513K to £2.5M which after broadly favourable working capital movements and a reduction in the tax paid, translated into a £650K increase to £2.6M in net cash from operations. Capital expenditure increased during the period to nearly half a million in tangible assets and £168K in intangibles but this was partially offset by a £63K government grant to give a free cash flow of £2M, a £261K increase. This was more than enough to pay for the dividends so the cash flow for the half year stood at £924K to give a good looking cash pile of £8.7M at the period end.
The year so far has seen an increase in demand for the group’s touchscreen products. The production efficiencies and recent capital expenditure projects, together with increased revenues and focus on products such as the larger format multi-touch sensors helped increase gross margins from 34% to 40%. This was partially offset by an increase in admin overheads and adverse currency movements between Sterling and the US Dollar. The group has continued to see increased market penetration and growth in their largest market sectors of ATM machines and vending machines and have been able to exploit the potential from the newer multi-touch and larger format touchscreens in other niche markets, in particular the introduction of the new touchscreens into table and gaming machines for the leisure markets have resulted in considerable interest.
Going forward, the group is continuing to benefit from an improvement in current trading and expect to make further progress for the remainder of the year. After the interim dividend increased by 10%, at the current share price the shares yield a decent 3.3%. The net cash position at the period end increased by £1M from the end point of last year to £7.3M.
Overall then, this is a brief but positive set of results. Profits are up, net assets increased and operational cash flow improved to give a decent looking free cash flow and a growing cash pile. The gaming machine markets seems like it could be an interesting one and with a good dividend and growing net cash, I am very happy with my investment here.
After a couple of wobbles, the shares now seem to have resumed their upwards trajectory.
On the 15th October the group released a trading update covering the full year. The second half showed an improvement in revenues over those in the first half which was particularly marked in Q4, resulting in a 13% increase year on year. The improvement in revenues together with benefits of the production efficiencies and capital investments have resulted in the board expecting pre-tax profit for the full year to be materially ahead of market expectations. This is excellent stuff and I have added to my holding here.