Zytronic anticipates growth after improved financial results

Zytronic is looking to expand its facilities, grow exports and take on more staff after significantly improved performance

Sales & marketing director at Zytronic, Ian Crosby
Sales & marketing director at Zytronic, Ian Crosby

Technology firm Zytronic is anticipating further expansion after a rapid turnaround in its fortunes.

The Blaydon-based company, which develops and manufactures touch sensor products, was hit by a 55% drop in pre-tax profits last year, as the result of a difficult first six months.

Its upward trajectory, however, has continued, with interim results for the half-year ended March 31, 2014, showing revenue increasing to £8.8m, compared to £8.5m in the same period last year.

Profit before tax, meanwhile, increased 87%, from £0.8m to £1.4m, while net cash went from £2.8m to £4.6m.

Speaking to the Journal, chief executive Mark Cambridge said the company was now keen to invest in some new equipment and, in the longer term, wanted to expand its environmentally controlled cleanrooms, where it assembles its sensors using special glass and plastic materials.

Zytronic, which exports 95% of its products, has also incorporated a support office, Zytronic Inc., in the US, to boost sales there, and is considering a similar move in Asia

Ultimately, it hopes to recruit more employees, both on the factory floor and in professional positions.

“We said the first half of last could be described as close to a perfect storm,” Cambridge said.

“Things came together at the wrong time for us, but then we saw ourselves coming out of that, and we’ve just continued on a similar track with improvements.

“The business is project-based and we live or die by the number of active projects we have.

“We’re in a very positive position; we’ve pulled everything round and are going forward with great confidence.”

Sales and marketing director Ian Crosby said:  “We are working on some really exciting new touchscreen projects with customers from all over the world, and we’re in the process of setting up new offices in North America and Asia so we can provide faster support to our clients in these important sales regions. As a result, I’m confident we can continue the positive momentum.”

Zytronic, which operates three factories in the North East and employs around 185 people, bases its products around an embedded sensing element, incorporating so-called projected capacitive technology (PCT) sensing.

This offers significant environmental stability and optical enhancement benefits to designers of touch interactive, industrial, self-service and public access equipment.

Cambridge said it typically took two or three years for the firm to see the benefit of new products.

Such has been the case with its ‘mutual projected capacitive technology’ (MPCT), developed in 2012, which enables multi-user and multi-touch sensing in ultra-large form.

According to the interim statement, the increase in profits principally arose from a significant improvement in gross margin, from 26% to 34%, driven by increased touch sensor revenues of 9% to £6.8m, compared to £6.3m last year, a better mix of large format touch products and production efficiencies.

The business also benefited from a redesign in the ATM market, increased orders from ticket machine manufacturing in EMEA and large format-sized gaming application in the USA.

Its newer ultra-large format multi-touch technology solution for signage and interactive table applications likewise made encouraging progress, and the firm is now working on such innovative products as a curved touchscreen for applications like gaming machines.

Going forward, Cambridge acknowledged there were a number of factors that could influence the company’s performance.

“We have low visibility.” he said.

“We don’t have a long order book.

“We revolve around what’s required and built by our customers; we can’t dictate to them.”

Despite being a “just-in-time reactor”, however, Zytronic was seeing orders come in at a “reasonably high level”.

“We want to continue to drive forward, improving shareholder value, improving revenue, margins and ultimately profitability,” Cambridge said.

Zytronic chairman Tudor Davies added: “We are pleased to announce a considerable increase in the interim results for the half year ended March 31, 2014, led by an improved mix of touch product orders and a significant improvement in margins.

“We have a good pipeline of future prospects from both existing and new customers, and, with current trading continuing at the recent improved levels, we expect to make further progress.”

Earnings per share at Zytronic increased from 4.1p to 7.7p, and the firm has upped its interim dividend 3.6% to 2.85p per share.

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