Perhaps the writing was beginning to show up faintly on the wall when Zytronic (LON:ZYT) earlier this year signalled lower year-on-year sales.
In mid-May, when announcing its Interim Results to end-March, the Blaydon-upon-Tyne based group, which is a leading specialist manufacturer of touch sensors, reported sales down from £4.7m to just £3.3m at half-way.
The Business
The group’s operating subsidiary, Zytronic Display, is a world-renowned developer and manufacturer of a unique range of internationally award-winning optically transparent interactive touch sensor overlay products for use with electronic displays in industrial, self-service and public access equipment.
ZDL’s products employ a sensing solution that is readily configurable and is embedded in a laminate core which offers significant durability, environmental stability, and optical enhancement benefits to meet system-specific design requirements.
The ZDL service is relatively unique in the touch eco-system as it offers a complete one-stop solution including processing internally of the form and factor of glass and film substrates, the assembly of the associated touch overlay products, in environmentally controlled cleanrooms to customers’ specific requirements and the development of the bespoke firmware, software and electronic hardware which links the manufactured touch interactive overlays to customer’s integrated systems and product.
Yesterday’s Pre-Close Trading Update
The group guided that it expects to report unaudited revenues for the year to the end of September of £7.2m (£8.6m), and that is despite a 22% increase in revenues in the second half.
It noted that trading conditions remained challenging and based on current order intake, that the Board does not anticipate a material recovery in volumes over the short to medium term.
Strategic Review
As an extension to the Update the group announced its intention to undertake a strategic review, in conjunction with shareholders, to assess the future options for the company.
The group’s Management considers that those options are:
1. the implementation of a new strategic business plan;
2. an orderly solvent liquidation of the group’s assets;
3. the potential sale of the company;
4. de-listing and continuing as a private company, either continuing with the business as currently undertaken but without the considerable costs associated with maintaining the company’s admission to trading on AIM, or through implementing its Transformation Plan; or
5. selling the company’s assets and continuing as a ‘cash shell’.
Solvent Liquidation
As at the end of March, the company’s notified statement of financial position, stated that it had net assets of £12.9m, of which £8.4m comprised property, plant and equipment and cash.
The company’s cash balance as at end-September was £3.7m (H1 FY24: £3.7m).
The Potential Sale Of the Company
The company noted that it is not in discussions with, nor in receipt of any approach from, any potential offeror.
In My View
Yesterday the group’s shares collapsed to a 40p low at one stage, down 25% in reaction to the news.
However, by the close of trading they had picked up to 46.75p, valuing the company at just £4.75m.
At that price I would suggest that Zytronic shares could well prove to be an exciting gamble on any of its options coming to a successful conclusion.
Protected by its solvent position, its quoted status, with some 45% of its 10.16m shares in ‘professional’ hands, I would consider that it is now coming up on corporate screens as a potential play, most likely as a very usable vehicle for a technology entrepreneur looking for a quick quote.