Zytronic

Investors looking for a sustainable income story twinned with exciting long-term growth should investigate touch sensors and optical filters maker Zytronic.

The Newcastle-based concern, whose products are used within a wide array of electronic displays, delivered robust half-year financials to March. Sales increased by a modest 3% to £8.2m, with subdued activity in the ATM and gaming markets offset by strong sales of ZYPOS touch sensors into areas such as DVD vending and industrial control.

Pre-tax profits moved in the right direction, despite toughening markets, from £1.05m to £1.06m. And in recognition of the group’s profitability, cash generation and strengthened balance sheet – net debt fell from £3.1m at the year-end to £2.8m – the interim dividend was upped 67% to 2p.

CEO Mark Cambridge was keen to highlight continued strong exports, which increased as a proportion of sales to 89% (2009: 86%), whilst flagging up good growth in new orders written, up a healthy 16% to £9.7m (2009: £8.4m) and auguring well for the second half. Going forwards, Cambridge believes orders should continue to build on the back of new projects in both the white goods sector and with drinks giant Coca Cola.

Annual forecasts to September point to adjusted pre-tax profits growth to £2.6m (2009: £2.3m), as Zytronic's top line rises from £15.9m to £17m, with earnings of 12.6p expected and analysts now looking for progression in the dividend from 5p to 6p.

Offering an attractive forecast yield of 3.4%, Zytronic shares, recommended by Growth Company Investor in early 2009 at 113.5p, remain good value and should have further to travel. Buy/hold.