Zytronic Share Discussion Threads

[1pencil] 07/6/2020 15:32

Interesting company (ref links at footer)

One or two general observation’s when assessing Zytronic as a possible recovery play/beneficiary of shifting hygiene trends.

I don't think anyone knows how this whole Covid thing will eventually play out but removing physical buttons and crevices at point of contact has to be a sensible option, the convergence of a single cleanable screen with EPOS functionality built in could further justify costs of upgrading.

Examples already exist such as Australian cinema chain merging ticket sales with main their main video wall, saving precious foyer space along with associated hardware.

Multi Touch screens (MPCT) can also be used whilst wearing gloves with little or no loss of sensitivity, all sorts of applications spring to mind given our current environment.

Looking at the underlying business there is no doubt it has up and downs as and when large projects commence (J Screen slot machine) or subsequently reach EOL.

The move away from cash and ATM's which for some time has been Zytronics bread and butter could be masking a more stable underlying trend driven by Touch over the last five years

Diebold Nixdorf one of Zytronics largest ATM customers released Q1 results last month which suggested ATM sales may have started to stabilise at least for the moment.

In terms of full year 21 what to expect. Interims in May came in at 7.4m revenue with a PBT of 0.5m, cancelling the interim divi will help cash balance which stood at 12.4m

Zytronic indicated that H2 had started to pick with an increased order book up 15% on prior year before impact of Covid. H2 2019 came in at 10.6m with PBT 1.4m. If we assume factory is running at 50% during the lock-down removing 3.2m from top line, H2 could be similar to H1 which would give 1m PBT and enough for a final divi depending on outlook

Zytronic have a long record of returning excess capital to shareholders, in the last 5 years alone it has totalled 91.02p

All speculation of course, but doesn't seem unreasonable given the strong uptick in H2 order book.

[value viper] 06/6/2020 13:43

with around 12 million GBP cash it bank and no debt I hope it is too low now and can recover : the balance sheet strength is a key positive and the business right now is valued at very little net of cash - i suspect the stock is at the wrong price and surprised it's not yet really moving - although a minor attempt underway y'day

[kiwihope] 12/5/2020 13:59

I was also somewhat pleasantly surprised at the results. I know there is no coronavirus effect but they were already in a major downturn and still managed to stay profitable. The positive cashflow is common at the start of a downturn as they have income without investing in future sales. Conversely cash can be tight in an upturn but ZYT have plenty. Cancelling temporarily the uncovered dividend makes total sense. It will come back but at a lower, sustainable level.

Obviously tough times ahead but they look to be weathering the storm well so far...

[bookbroker] 12/5/2020 10:17

This company was one I put some money to work six years ago, sold well before it hit its recent highs, but but acquired as it recovered from the previous downturn. Somewhere in the 190p range. Touchscreens and large scale I think have a good few years left in them, and this company’s balance sheet in a pretty robust state, and particularly relative to mkt cap. Even if they did not see such a hasty recovery, the furlough scheme gives them time at little cost to themselves, but likely they will lay people off when they do return, they will be figuring out that they can run the business more effectively at this current time with fewer staff, and the decision is made largely for themselves by the current situation. Touch screens are easy to maintain as regards viral control, think attendants wiping supermarket trolley handles, how time consuming that is, so I think the market will exist even with folk pre-ordering via Apps for things like meals, although I am not sure if that is part of their end market. But the valuation on a partial recovery is pretty compelling, the IP. has to be worth something along with the existing assets in excess of current value.

[dangersimpson2] 12/5/2020 09:59

I was pleasantly surprised by these results given what the market seems to be pricing - which is zero value to the ongoing business.

The £1.7m FCF is particularly pleasing & gives them about 2 years worth of ongoing expenses with which to see this crisis through, putting them in a far stronger position than almost every other UK trading business.

With only 30% of staff operating and no end in sight for the crisis then I am going to assume H2 revenue is c30% of a normal H2 so around £3m. GM of say 20% much lower than usual due to lack of economies of scale, partially offset by furlough payments.

This would give close to worst-case £440k LBITDA & -£500k FCF, given a small bit of further working capital reduction.

So that's £11.9m cash balance at year-end, plus over £5m net working capital vs £17m market cap after the worst possible H2 for the economy ever. (Touch screens weren't around when the great frost hit in 1708 so think we probably should take too many learnings from that recession!)

I don't see why they don't return to their usual £3-4m annual FCF sometime 2021/2/3 when we are finally past this crisis and out of severe recession. I doubt many of their competitors are as financially secure either.

[pugugly] 12/5/2020 08:07

Now we know why Brown Shipley were selling down - At fist glance results far worse than expected (imo) Possibly more to follow later once digested in greater detail)

Added

"and a deferral in orders. In common with most other businesses it is far too early for us to be able to assess how long this situation will last for. On a more positive note, our growth markets within the APAC countries where the pandemic has had the earliest effects will hopefully return to normality quicker than others.

Subsequently, our operations have continued, at reduced levels of activity, without needing to shut the factory following appropriate adjustments to working practices and the cost base. Since 31 March we have in stages reduced factory hourly labour from 101 to 32 persons and staff from 63 to 35, principally through utilisation of the Government Job Retention Scheme (Furlough), and reduced other expenditure accordingly, with everything under constant review. "

As no mntion of order position since 1st April to date coupled with massive reduction in labour messaqge received is that orderws in the period since April 1st have fallen off the proverial cliff

The $64K question is "What will be the cash burn when the government support funding dries up?" and when and by how muchwill orders start to recover? The Spike news from Korea today suggests that the lock-down in hospitality venues will continue for longer than many expected.

[pugugly] 11/5/2020 13:57

Brown Shipley *very wise boys" (imo) selling down - Now I wonder why?

[nchanning] 11/5/2020 09:37

We're in the middle of the greatest economic shock in our lifetimes . Zytronic share price down about 2/3 in a couple of months . Should the company bother communicating anything to its shareholders ? Zytronic Board : 'Nah'

[aleman] 07/5/2020 21:43

Parts of US gambling opening up, too, but with more distancing..

[aleman] 07/5/2020 11:46

There are rumours that Macau is about to significantly relax travel restrictions. It won't bring a surge in orders but it's a another step back to normality.

[pugugly] 07/5/2020 10:30

garth:> Agreed - ditto - What are chances that dividend will be suspended to preserve cash? Also virus is continuing to mutate so chance of even worse 2nd wave higher than 50/50 imo - See also FT re COVID-19 Free to read = not behind paywall.

[garth] 29/4/2020 07:32

Cerrito,

The cash and divi tempted me in at lower levels. I have to say that I sold back out somewhere above 120p. I can't see anything but bad news in the short term and suspect that will drag it back lower. Just a hunch. Hope for existing holders it is wrong. I am keeping an eye on it though.

Just a view.

G.

[cerrito] 28/4/2020 21:34

I do not see very clearly if I should be buying more at these prices.
The following posted on the website last Friday the 24th is not very encouraging but of course hardly surprising.
Other companies have RNS'd such comments
quote
With the coronavirus (COVID-19) pandemic continuing to cause a global crisis, and with the UK Government extending the ‘lockdown̵7; period until at least the 11 May 2020, the Zytronic Directors have had to take further steps to protect its employees and the longer term sustainability of the business.

Therefore, in addition to the distancing, hygiene and changed working practices implemented several weeks ago, the UK manufacturing operation will now enter a partial furlough period beginning on Monday 27 April, which will last until at least 18 May 2020. This means that a significant proportion of Zytronic’s UK employees (production and office) will be furloughed and therefore be non-operational. At such time as the Directors believe necessary to restart the facilities towards fuller operations (which we consider to be not before the 18th May), personnel will be brought back from furlough at a rate commensurate to meet achievable demands.

It is the Directors intentions to keep enough UK employees on site and working-from-home to maintain an effective technical support structure and operational level consistent with manufacturing and dispatching finished product during this period, dependent upon:

1. Having approval from the UK Government to do so
2. Being able to source raw materials
3. Having carriers able to collect orders
4. Receiving enough customer orders to operate efficiently

Customers should continue to place new orders as usual, but as a result of our reduced operations, lead times will be temporarily extended by at least 3 weeks beyond those normally achieved and until such time as we are fully operational again (based upon the 4 criteria above). There is also likely to be a delay in communicating order acknowledgements due to the reduced staffing levels.

Relevant Zytronic sales points of contact will be contacting customers shortly to advise of any change in planned dispatch dates for existing acknowledged orders once our production planning team have reviewed and re-planned the manufacturing schedule.

The Directors continue to closely monitor the situation and will review the Company’s policies in line with the latest UK Government regulations and advice.

Thank you for your patience and support during this exceptionally difficult and unprecedented global pandemic.

Regards,

Ian Crosby
Sales & Marketing Director

[aleman] 19/4/2020 16:23

Everywhere seems to be reopening slowly now, apart from the UK. Texas are behind us in the virus trend but all shops there can reopen this weekend IF staff mask and distance - BUT staff have to bring purchases to the door or deliver. Basically, the whole global economy is starting to slowly reopen. How this translates into sales for ZTY, who knows!?

[arthur_lame_stocks] 19/4/2020 13:45

I bought a few more of these the other day. I had been waiting for a profit warning but one doesn't seem to have been forthcoming.

Must be safe during this downturn with all that cash and may soon return to more normal times with the Far East opening up again gradually.

[garth] 11/4/2020 13:29

Varies,

Good to hear. Yes, Dad is asfely shielded - mostly planting seeds and digging gently in the garden.

Best wishes,

G.

[varies] 11/4/2020 11:55

garth
Thanks so much for your kind wishes.
I am very well and I hope your dad is too.

[dangersimpson2] 11/4/2020 10:54

I take a look at ZYT in the following talk on UK Net Nets:

[garth] 07/4/2020 11:39

Varies,Comforting to hear a common perspective. Age? Yeah, you are neck and neck with my dad.Take care of yourself, I trust you are well shielded?Best wishes,G.

[aleman] 07/4/2020 11:26

Pics of China with no social spacing in train stations look very optimistic for ZYT (though the majority still seem to prefer to wear masks). Normal life will return quickly so long as the transmission rate is cut from 2+ to less than 1. Masks in public spaces seem to nearly do that on their own. China went for overkill and have virtually elimated the virus quite quickly but it is probably not necessary to be so severe. It's possible people will live fairly normally from here and just adopt masks temporarily in regions where there is an occasional breakout.

[varies] 07/4/2020 11:14

garth
I wonder if you are as old as I am : 78y.o. but growing little wiser !
I looked carefully at ZYT yesterday with a view to selling my shares in advance of the inevitable cut in the dividend, now 22.8p p.a.
I was also worried about the high proportion of sales related to gaming consoles for casinos about which, having been a compulsive gambler in my youth, I have mixed feelings. If the punters at these consoles had to sit 2 metres apart, then there would plainly be many fewer of them. Furthermore most of these casinos will be shut for a couple of months.
Like you, however, I was struck by the strength of the balance sheet with Net Current Assets of £18 million of which £13m is in cash. This leaves only a modest value put on the intellectual property and production facilities as the present market cap is about £20m.
So I shall hold on.
If the annual dividend is reduced to 5p, then we shall still get a respectable yield.

[mctmct] 07/4/2020 10:39

bigger than their buys, at present :-)

[garth] 07/4/2020 09:32

Zytronic continuing to see interest. I bought a little early on the down, so just breaking even again. I am concerned about impact on trading. But we'll supported by plenty of cash. I can't see the Divi being paid this time, but it will be a decent yield when it returns.I must be getting old. Find myself adding income plays...G.

[oldvic] 17/3/2020 19:59

are they big then , those buts ?