Demand for Zytronic's high-margin touch screen sensors in fast-growing Asian markets has driven profits sharply higher over the past six months. The technology, used in Boris Bike payment terminals and cash point machines, has gone down well in the US, Australia and Germany, too. In fact, 92 per cent of sales are overseas. So impressed is broker N+1 Brewin that it has upgraded adjusted pre-tax profit forecasts for the year by 8 per cent to £4.1m, giving adjusted EPS of 21.2p (£3.6m and 18.1p in 2011).
In the first half, sales of sensors jumped 23 per cent to £7.4m and now account for 70 per cent of all revenue. That will only increase because Zytronic is shedding none-core businesses like its legacy ballistic visor and light diffuser operations. Gross margins, up 430 basis points to 36.4 per cent, will benefit. Higher volumes have helped lift profitability, and so will a deal to supply more of the big screens used in sandwich chain Subway's drive through kiosks.
Zytronic grew sales by more than a fifth in Europe, mostly Germany, the Netherlands and Hungary. The region remains its largest market, but will not be for long, according to management. Growth of 21 per cent in the Americas and 35 per cent in Asia Pacific means both will overtake Europe, perhaps within two to three years.
ZYTRONIC (ZYT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 305p | MARKET VALUE: | £45.2m | |
| TOUCH: | 295-315p | 12-MONTH HIGH: | 325p | Low: 184p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 96p* | NET CASH: | £0.9m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 9.09 | 1.27 | 6.40 | 2.1 |
| 2012 | 10.6 | 2.12 | 11.1 | 2.6 |
| % change | +17 | +68 | +73 | +24 |
Ex-div: 11 Jul Payment: 27 Jul | ||||
