When investing, it's important to note the quality of profits - not just the amount. So while Zytronic has reported respectable half-year results to end-March 2011, there's encouraging news behind the scenes. Not only is the company reducing dependency on two ATM makers - NCR and Diebold - but margins are improving as the business sells more higher-margin touch screen sensors.
For many years NCR and Diebold have accounted for 60 per cent-plus of sales of both sensors and other products including optical filters and displays. That figure is now down to 45 per cent and set to fall further once sales of two new products - sensors for Bosch's new Gaggenau induction cook-top and Coca Cola's Freestyle vending machines - really get going. Even at an early stage these two products accounted for a big rise in reseller unit sales. Half-year sales of sensors rose by 29 per cent to £6m while revenues from other products declined 14 per cent to £3.1m; exports accounted for 89 per cent of turnover.
Orders have been up to expectations in April and May, but bedding in two new laminators to make larger sensors for display signage and vending markets will increase costs in the short term. So broker Bewin Dolphin is sticking with existing forecasts of pre-tax profits of £3.2m and EPS of 16p (from £2.92m and 14.8p in 2010).
ZYTRONIC (ZYT) | ||||
---|---|---|---|---|
ORD PRICE: | 218.5p | MARKET VALUE: | £32.1m | |
TOUCH: | 214-223p | 12-MONTH HIGH: | 244.5p | LOW: 155.5p |
DIVIDEND YIELD: | 3.2% | PE RATIO: | 14 | |
NET ASSET VALUE: | 80p* | NET DEBT: | 12% |
Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2010 | 8.20 | 1.06 | 5.4 | 2.0 |
2011 | 9.09 | 1.27 | 6.4 | 2.1 |
% change | +11 | +20 | +19 | +5 |
Ex-div: 13 Jul Payment: 29 Jul Aim: Electronic equipment. * Includes intangible assets of £1.84m, or 13p a share. |