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Zytronic on track

RESULTS: And the manufacturer of touch screen sensors is improving the quality of its earnings, too
May 11, 2011

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.

IC TIP: Buy at 218.50p

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:218.5pMARKET VALUE:£32.1m
TOUCH:214-223p12-MONTH HIGH:244.5pLOW: 155.5p
DIVIDEND YIELD:3.2%PE RATIO:14
NET ASSET VALUE: 80p*NET DEBT:12%

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20108.201.065.42.0
20119.091.276.42.1
% 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.

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