Notes to the interim report

Unaudited results for the six months to 31 March 2016

1. Basis of preparation

The financial information in these interim statements is prepared under the historical cost convention and in accordance with international accounting standards. It does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and does not reflect all the information contained in the Group's annual report and financial statements.

The tax charge is calculated by applying the Directors' best estimate of the annual tax rate to the profit for the period. Other expenses are accrued in accordance with the same principles used in the preparation of the annual report and financial statements.

The interim results for the six months to 31 March 2016 are not reviewed by Ernst & Young LLP and accordingly no opinion has been given.

The interim financial statements have been prepared using the same accounting policies and methods of computation used to prepare the 2015 annual report and financial statements.

The financial information for the six months to 31 March 2016 and the comparative financial information for the six months to 31 March 2015 have not been audited. The comparative financial information for the year ended 30 September 2015 has been extracted from the 2015 annual report and financial statements.

The annual report and financial statements for the year ended 30 September 2015, which were approved by the Board of Directors on 7 December 2015, received an unqualified audit report, did not contain a statement under Section 498(2) or (3) of the Companies Act 2006 and have been filed with the Registrar of Companies.

The Group has one reportable business segment comprising the development and manufacture of customised optical products to enhance electronic display performance. Products in this reportable business segment include touch sensors, filters and other laminated products. All revenue, profits or losses before tax and net assets are attributable to this reportable business segment.

2. Basis of consolidation

The Group results consolidate the accounts of Zytronic plc and all its subsidiary undertakings drawn up to 31 March 2016.

3. Tax charge on profit on ordinary activities

The estimated tax rate for the year of 15.5% has been applied to the half year's profit before tax, in accordance with the Auditing Standard Board's statement on interim reports.

4. Earnings per share

Basic EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period. All activities are continuing operations and therefore there is no difference between EPS arising from total operations and EPS arising from continuing operations.

For the six months to 31 March 2016 and 2015

The weighted average number of shares for diluted EPS is calculated by including the weighted average number of shares under option.

For the year to 30 September 2015

The weighted average number of shares for diluted EPS is calculated by including the weighted average number of shares under option.

5. Provisions

Long term incentive scheme

The provision for the long term incentive scheme relating to the Chief Executive,  the Group Finance Director and other management personnel is calculated based on future expectations that the bonus will be payable.  Management has assessed the criteria that determine the payout and taken a view that a proportion of the bonus should again be provided for in the half year ended 31 March 2016.

6.  Dividends

The Directors propose the payment of an interim dividend of 3.45p per share (2015 interim dividend: 3.14p), payable on 22 July 2016 to shareholders on the Register on 8 July 2016. This dividend has not been accrued in these interim accounts. The dividend payment will be approximately £532,000.

7. Cash and cash equivalents

For the purpose of the consolidated cashflow statement, cash and cash equivalents comprise the following:

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for variable lengths, being overnight, three months or one year (with break conditions), depending on the immediate cash requirements of the Group, and earn interest at variable rates.

At 31 March 2016 the Group had available a net £1.0m (cash less overdrawn accounts) overdraft facility from Barclays Bank plc which will fall for review in November 2016.

The fair value of cash and cash equivalents is £10.8m (31 March 2015: £8.7m).

8. Availability of the Interim Report

A copy of the interim report is available on the Company's website, www.zytronicplc.com, and can be obtained from the Company's registered office: Whiteley Road, Blaydon-on-Tyne, Tyne and Wear, NE21 5NJ. Copies will be sent to shareholders shortly.