Zytronic

A strong trading performance from touch sensor manufacturer Zytronic has led to a significant upgrade in broker forecasts. In the year to September 2010 pre-tax profits jumped 27% to £2.9m as sales increased 16% to £18.5m. Shareholders are also being rewarded with a 40% hike in the total dividend to 7p a share.

Record orders of £19.8m have been driven by strong demand from the self-service and kiosk markets. AIM quoted Zytronic is also enjoying a raft of new orders from developing countries for optical filters used in cash machines. However demand from gaming equipment customers has stuttered due to weak markets in Europe.

To help boost future sales Zytronic continues to expand its global reach. It has signed six new representation agreements and has opened new sales channels in emerging markets such as South Africa, Brazil and Africa. Some 90 per cent of sales are derived abroad with a network spanning 39 countries.

Strong cash flow has helped cut borrowings with net debt of £1.2m (£2.8m) equating to a gearing level of a comfortable 11%. As has typically been the case visibility is low at 2 to 3 months, however order intake has increased as the year has progressed.

House broker Brewin Dolphin has upped its 2011 pre-tax profits forecast from £2.8m to £3.2m producing EPS of 16p. We highlighted the attractions of Zytronic in Growth Company Investor in January 2010 at 212.5p. Despite the recent rally the price is still only at 205p, or 13 times forecast earnings. With a great range of products and international exposure we continue to rate Zytronic as a long-term buy.