Zytronic is at an interesting stage of its career. From being a manufacturer of gas-mask lenses in World War II, today it’s a maker of touch-screen sensors. Two new products may reduce its continuing dependency on two US makers of automated teller machines (ATMs) - NCR and Diebold. They still account for over half its sales. One new product is a Coca Cola Freestyle drinks fountain, the other is touch activated cooker hob. At the same time the relationship with the two big customers is changing. At the beginning of 2010, Zytronic launched new designs for NCR. Previous ones were over-designed and over-engineered and Zytronic seems confident that lower manufacturing costs will push up margins despite a 25 per cent price cut. Time will tell but its target is to increase gross margins to 38 per cent.
In the six months to end-March 2010 gross margins declined by almost two points to 32 per cent. That was not a bad performance taking into account reduced sales of touch and non-touch ATM products coupled with notably weak demand for sensors from the gaming industry. The good news is that during this interim period new orders increased by 16 per cent to £9.7m. That encourages broker Brewin Dolphin to forecast 12 months sales rising from £15.92m to £17.60m with profits £400,000 higher at £2.70m. Earnings are expected to advance from 11.5p to 13.1p.
ZYTRONIC (ZYT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 196p | MARKET VALUE: | £28.8m | |
| TOUCH: | 192-200p | 12-MONTH HIGH: | 241p | LOW: 142p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 70p | NET DEBT: | 27% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 7.98 | 1.05 | 5.20 | 1.20 |
| 2010 | 8.20 | 1.06 | 5.40 | 2.00 |
| % change | +3 | +1 | +4 | +67 |
Ex-div: 9 June Payment: 25 June Aim: Electronic components | ||||
