TIDMZTF
RNS Number : 4960V
Zotefoams PLC
18 April 2016
Zotefoams plc
2015 Annual Report and Accounts and Notice of the 2016 Annual
General Meeting
In compliance with Listing Rule 9.6.1, the following documents
have been submitted to the National Storage Mechanism and will
shortly be available for inspection at:
http://www.morningstar.co.uk/uk/NSM
1 Annual Report and Accounts for the year ended 31 December
2015, incorporating the Notice of the 2016 Annual General Meeting;
and
2 Form of Proxy for the 2016 Annual General Meeting.
Copies of the 2015 Annual Report and Accounts and the Notice of
the 2016 Annual General Meeting are available on our website,
www.zotefoams.com under the Investor Relations tab.
A condensed set of the financial statements, the Chairman's
statement, Strategic report and responsibility statement of the
Directors in respect of the annual financial report were included
in the preliminary results announcement issued on 15 March 2016.
This announcement contains additional information for the purposes
of compliance with the Disclosure and Transparency Rules, including
principal risks and uncertainties and details of related party
transactions. This information is extracted from the 2015 Annual
Report and Accounts in full unedited text. This announcement is not
a substitute for reading the full Annual Report and Accounts. Page
and note references in the text below refer to page numbers and
notes in the 2015 Annual Report and Accounts.
Principal risks and uncertainties
The Board of Directors believes that the Principal Risks and
Uncertainties that the Group currently faces are as stated below.
Regular risk reviews are undertaken to ensure that the major risks
in the business, that could affect the Group's operations and
financial performance, have been identified and that, where
possible, mitigating actions and controls are put in place.
Significant risks are reviewed by the Board and the Audit
Committee. It is not possible to identify every risk that could
affect the Group's business, and the mitigating actions and
controls that have been put in place may not provide absolute
assurance that the risk will neither occur nor materially affect
the Group's operations or financial performance.
Risk and potential Mitigation actions
impact
--------------------------------- ---------------------------------
Operational The Group has extensive
As the Group's operations SHE policies and procedures
are currently mainly in place, which are
on one site, a significant in line with best practice.
operational disruption In the UK the Company
or Safety, Health and is certified to accredited
Environmental ('SHE') standards OHSAS 18001
incident could impact on Health and Safety
the ability to manufacture and ISO 14001, the
and supply products, International Standard
which could have reputational for Environment Management
issues and, in certain Systems.
defined circumstances,
have contractual commercial Regular training is
consequences which provided on SHE matters
may result in customer to the staff.
claims.
Pressure equipment
used is operated under
the Pressure Systems
Safety Regulations
2000 and is subject
to systematic internal
and frequent external
inspections in accordance
with the Safety Assessment
Federation.
The Group has extensive
fire prevention systems
in place and also has
appropriate contingency
plans in place in the
event of the failure
of certain major pieces
of equipment.
Reporting of incidents,
including 'near misses'
and damage to plant
or equipment not resulting
in personal injury,
is mandatory in order
to track issues and
to prevent reoccurrences.
Insurance is in place
to cover capital restatement
and loss of profits
in the event of operational
disruption caused by
certain events.
The Group is investing
in its Kentucky, USA,
site which, when completed,
will give multi-site
capability, subject
to capacity, on many
polyolefin products.
--------------------------------- ---------------------------------
Operational The extension of our
The Group is extending facilities in Kentucky
its operations in Kentucky will replicate, where
to cover the full block appropriate, machinery
foam manufacturing and processes already
process stages. This in operation in the
is a significant capital UK. Existing managerial
project, which is reliant and engineering support
on some specialist in North America will
suppliers, and needs be supplemented by
to be managed to time external project expertise
and budget. and resource from the
Group's Croydon operations.
Alternative suppliers
were considered. Raw
materials will be trialled
in the UK first to
reduce the commissioning
risk.
--------------------------------- ---------------------------------
Supply chain Wherever possible,
Certain of the Group's supplies are sourced
raw materials and engineering from more than one
components are sourced supplier or location.
from single suppliers. However, this is not
Disruption in those always possible, due
supplies, either on to the special nature
a temporary or more of the raw materials
permanent basis, could and machines used.
affect production and
supply to the Group's
customers and in certain
defined circumstances
have contractual commercial
consequences which
may result in customer
claims.
--------------------------------- ---------------------------------
Technology There are high barriers
The Group's processes of entry to the market.
for the manufacture Significant capital
of its products are investment is required
substantially unique for the autoclaves
to the and related infrastructure.
Group. Whilst the principles
behind the processes The Group actively
are not confidential, maintains its intellectual
the precise know-how property. It patents
is. A competitor could its technology wherever
match or improve upon it believes it is appropriate
the properties and to do so. Where technology
economics of the Group's is not subject to patent,
products. Key to the patents are no longer
success of the business applicable or the technology
of MuCell Extrusion is incapable of being
LLC ('MEL') is the patented, the Group
strength of its intellectual guards its know-how.
property and, on the
back of that, its ability The Group reduces its
to grant commercial technology risk by
licences. The risks entering into new markets.
to MEL are that its For example, the development
intellectual property of High-Performance
becomes dated or its Products ('HPP') and
patents expire or are MEL, where the product
successfully challenged. offerings are unique
and protected by patents
and/or process know-how
and capability, opens
up new markets for
the Group with potential
significant and lasting
differential advantages.
MEL actively maintains
and updates its intellectual
property portfolio.
This is done by undertaking
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research and development
to add new patents
to the portfolio, further
developing its know-how
and obtaining licences
of key third-party
patents, which are
complementary to the
existing portfolio.
MEL licences typically
include a bundle of
patents and know-how
and therefore are not
completely dependent
on any particular patent.
--------------------------------- ---------------------------------
Pension To minimise the risk
The Company has a Defined to the Company of meeting
Benefit Pension Scheme the obligations under
('Scheme') and any the Scheme, the Company
inability of the closed the Scheme to
Scheme to meet its new members in 2001
liabilities to its and closed it to future
members could, ultimately, accrual of benefits
be the responsibility in 2005. The Company
of the Company. is currently working
together with the Trustees
to undertake de-risking
activities to the Scheme.
The Company has concluded
discussions with the
Trustees of the Scheme
on the triennial actuarial
valuation of the Scheme
as at 5 April 2014,
and the associated
recovery plan for the
Scheme. The Company
has agreed to make
a contribution to the
Scheme of GBP41k per
month until April 2020
to reduce the deficit.
--------------------------------- ---------------------------------
Foreign exchange The Group reduces its
The Group's operations foreign exposure for
are substantially based transactional items
in the UK and, therefore, by making purchases
most of its manufacturing either in euros or
assets and costs are US dollars where possible.
sterling denominated. For example, there
are US dollar costs
The Group has significant associated with the
exposure to foreign Group's operations
exchange fluctuations. in Kentucky, USA and
This is both transactional with MEL. In addition,
and on the translation the majority of the
of foreign currency Group's raw materials
balances and the consolidation are purchased in euros.
of its foreign subsidiaries.
The Group is currently
The Group's customers undertaking a circa
are normally invoiced $22m capital investment
in their local currencies. in North America which
In 2015, approximately will reduce exposure
80% of the Group's for transactional items
revenue was in currencies on the US dollar significantly.
other than sterling.
The Group, therefore, The Group has a hedging
generates surpluses policy, which is approved
in US dollars and euros, by the Board. The Group
which are converted hedges a proportion
into sterling. of its exposure for
transactional items
to foreign exchange
by using forward exchange
contracts. The Company,
like most public companies,
does not hedge for
the translation of
its foreign subsidiaries'
assets or liabilities
in the consolidation
of its Group accounts.
--------------------------------- ---------------------------------
Macro economics Some of the Group's
Most of our markets markets can be cyclical.
are exposed to general However, this risk
economic conditions. is spread geographically
The Group is operationally and across a number
geared and a fall in of segments which are
demand for its products expected to diversify
could adversely impact further with the growth
the Group. of HPP, MEL and the
joint ventures. The
Group's experience
is that in these circumstances
operational labour
costs can be reduced,
polymer prices generally
fall with reduced economic
demand giving a cost
benefit and cash can
be generated from reducing
working capital and
slowing capital expenditure
projects to help offset
the effects of a downturn.
The Group targets a
low financial gearing
to give it operational
flexibility in a downturn.
--------------------------------- ---------------------------------
Financing The Group has strong
The Group needs to cash generation from
have sufficient cash, its operations.
or be able to draw
on loan facilities, The Group:
to finance its operations -- has at 31.12.15
and growth. a $8m loan and GBP1.5m
of a GBP3.5m loan outstanding;
and
-- from 1 March 2016
a GBP8m multi-currency
revolving credit facility
('RCF') and a GBP2m
overdraft facility.
The loans and RCF facility
are secured against
certain Group assets
and are subject to
covenants as described
in note 21 and 27 of
the Annual Report.
When considering investment
projects the Group
has regard to its ability
to raise finance for
the project and will
not commit to a project
until acceptable and
appropriate finance
is in place, or believed
to be available.
--------------------------------- ---------------------------------
Commercial The Group's largest
Loss, poor performance customers are distributors
or insolvency of a and converters of foam.
major customer or joint-venture The Group has good
partner. knowledge of the end-customers
of its major customers
and, with some additional
short-term work, would
be able to bring or
identify additional
converter capacity
to service these markets.
The risks associated
with implementation
of joint ventures in
Asia have been mitigated
by partnering with
the JVs' major customers.
The joint venture agreements
contain clauses to
address performance
and insolvency issues.
--------------------------------- ---------------------------------
People The Group keeps under
The failure to attract, review its skill needs
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develop or retain the and labour requirements.
right calibre of staff The Group aims to provide
to deliver growing its employees with
opportunities by product varied and interesting
and geographic reach. work and to incentivise
them appropriately.
The Group has appointed
a Global Talent Manager,
whose remit is to ensure
senior and emerging
talent is appropriate
for the Group's current
and future needs.
--------------------------------- ---------------------------------
Related parties
Directors
The Directors of the Company as at 31 December 2015 and their
immediate relatives control approximately 1.9% of the voting shares
of the Company. Details of Directors' pay and remuneration are
given in the Remuneration Report on pages 48 to 55. The Executive
Directors are considered to be the only key management
personnel.
Transactions with key management personnel
The compensation of key management personnel is as follows:
Group Company
2015 2014 2015 2014
GBP000 GBP000 GBP000 GBP000
Key management emoluments 505 488 505 488
Company contributions to money purchase pension plan 73 71
73
71
Share related awards 140 78 140 78
718 637 718 637
Subsidiaries
Details of the subsidiaries of the Company are set out in note
13. These companies are considered to be related parties.
In addition the Company has a 50% interest in associate
companies Azote Asia Limited (incorporated in Hong Kong) and Inoac
Zotefoams Korea Limited (incorporated in South Korea).
Common control exists between the Company and Zotefoams Employee
Benefit Trust (EBT) and Zotefoams EBT has therefore been
consolidated as described in note 1b.
Zotefoams Inc. owns 100% of the ownership units of MuCell
Extrusion LLC, which is incorporated in the USA.
Balances between the Company and its active subsidiaries and
associates are as follows:
Receivables owed by/(to) Investments in
2015 2014 2015 2014
GBP000 GBP000 GBP000 GBP000
Zotefoams Inc 4,747 1,604 - -
KZ Trading and Investment Ltd 125 - - -
Azote Asia Limited 1,817 995 - -
MuCell Extrusion LLC (67) - - -
Zotefoams International Limited - - 13,265 10,172
In addition there is a net payable balance of GBP2,166,000 owed
by MuCell Extrusion LLC to Zotefoams Inc.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCAKFDDCBKKAQD
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