Newcastle-based Zytronic’s strong recent run looks well merited, with the improved touchscreens maker having delivered another year of strong sales growth to September. Pre-tax profits surged 181% north to £984,000 on a 21% rise in sales to £10.6m, with earnings soaring 176% higher to 4.7p.
Though sales of Zytronic’s traditional optical filters are going well, its ZYTOUCH touchscreens – anti-vandal touch sensitive screens adopted by ATM makers like NCR and Diebold – is where the real investment case lies. ZYTOUCH sales grew 50% last year, are set to represent more than half of group sales in 2006, and have grown consistently over the past three years, driving the business forward. Last year, gross margins edged up from 29.3% to 31%, as touch screens became the dominant part of the business.
Zytronic has also launched a new range of touch screens for the point of sale and gaming markets known as ZYPOS. Management has installed additional production capacity for ZYPOS to facilitate pilot orders from OEMs, ahead of the opening of a new purpose built factory to come on stream in late 2006. Chairman and chief executive John Kennair envisages ZYPOS sales beginning to flow through towards the end of the current year.
Zytronic closed the year with cash balances of £810,000, and has resumed dividends with a 2p total payout. For 2006, house broker Bell Lawrie forecasts a leap in pre-tax profits to £1.6m from £12.45m sales, giving earnings of 7.67p. Admittedly that leaves the shares switching hands for a very expensive 38 times forecast 2006 earnings. However, with earnings forecast to burgeon by 63%, the PEG ratio is appealingly low at 0.6, and the rating deserved. Zytronic is well worth holding.
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