TIDMZTF
RNS Number : 8477J
Zotefoams PLC
10 April 2015
Zotefoams plc
2014 Annual Report and Accounts and Notice of the 2015 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
2014, incorporating the Notice of the 2015 Annual General Meeting;
and
2 Form of Proxy for the 2015 Annual General Meeting.
Copies of the 2014 Annual Report and Accounts and the Notice of
the 2015 Annual General Meeting are available on our website,
www.zotefoams.com under the Company and then Investor Relations
tab.
A condensed set of the financial statements, the Chairman's
statement, Managing Director'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 17 March 2015. 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 2014 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
2014 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 impact Mitigation actions
Operational The Group has extensive SHE
As the Group's operations are policies and procedures in
mainly on one site, a significant place, which are in line with
operational disruption or Safety, best practice. In the UK the
Health and Environmental ('SHE') Company is certified to accredited
incident could impact the ability standards OHSAS 18001 on Health
to manufacture and supply products, and Safety and ISO 14001, the
which could have reputational International Standard for
issues and, in certain defined Environment Management Systems.
circumstances, have contractual
commercial consequences which Regular training is provided
may result in customer claims. on SHE matters to the staff.
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.
The Group 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.
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Operational The extension of our facilities
The Group is extending its in Kentucky will replicate,
operations in Kentucky to cover where appropriate, machinery
the full block foam manufacturing and processes already in operation
process stages. This is a significant in the UK. Existing managerial
capital project and needs to and engineering support in
be managed to time and budget. North America will be supplemented
by external project expertise
and resource from the Group's
Croydon operations. Raw materials
will be trialled in the UK
first to reduce the commissioning
risk.
----------------------------------------
Supply chain Wherever possible, supplies
Certain of the Group's raw are sourced from more than
materials and engineering components one supplier or location. However,
are sourced from single suppliers. this is not always possible,
Disruption in those supplies, due to the special nature of
either on a temporary or more the raw materials used.
permanent basis, could affect
production and supply to the The Group continually monitors
Group's customers and in certain suppliers and undertakes research
defined circumstances have of alternative suppliers that
contractual commercial consequences could be used.
which may result in customer
claims.
----------------------------------------
Technology There are high barriers of
The Group's processes for the entry to the market. Significant
manufacture of its products capital investment is required
are substantially unique to for the autoclaves and related
the Group. Whilst the principles infrastructure.
behind the processes are not
confidential, the precise know-how The Group patents its technology
is. A competitor could match wherever it believes it is
or improve upon the properties appropriate to do so. Where
and economics of the Group's technology is not subject to
products. patent, patents are no longer
applicable or the technology
Key to the success of the business is incapable of being patented,
of MuCell Extrusion LLC ('MEL') the Group guards its know-how.
is the strength of its intellectual
property and, on the back of The development of High-Performance
that, its ability to grant Products ('HPP') and MEL, where
commercial licences. The risks the product offerings are unique
to MEL are that its intellectual and protected by both patents
property becomes dated or its and/or process know-how and
patents expire or are successfully capability, opens up new markets
challenged. for the Group with potential
significant and lasting differential
advantages.
MEL actively maintains and
updates its intellectual property
portfolio. This is done by
undertaking 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 to the
The Company has a Defined Benefit Company of meeting the obligations
Pension Scheme ('Scheme') and under the Scheme, the Company
any inability of the Scheme closed the Scheme to new members
to meet its liabilities to in 2001 and closed it to future
its members could, ultimately, accrual of benefits in 2005.
be the responsibility of the
Company. The Company is currently in
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
is currently making a discretionary
contribution to the Scheme
of GBP42k per month to reduce
the deficit.
----------------------------------------
Foreign exchange The Group reduces its foreign
The Group has significant exposure exposure for transactional
to foreign exchange fluctuations. items by making purchases either
This is both transactional in euros or US dollars where
and on the translation of foreign possible. For example, there
currency balances and the consolidation are US dollar costs associated
of its foreign subsidiaries. with the Group's operations
in Kentucky, USA and with MEL.
The Group's operations are In addition, the majority of
substantially based in the the Group's raw materials are
UK and, therefore, most of purchased in euros.
its manufacturing assets and
costs are sterling denominated. The Group is currently undertaking
a major capital investment
The Group's customers are normally in North America which will
invoiced in their local currencies. reduce exposure for transactional
In 2014, approximately 80% items on the US dollar significantly.
of the Group's revenue was
in currencies other than sterling. The Group has a hedging policy,
The Group, therefore, generates which is approved by the Board.
surpluses in US dollars and The Group hedges a proportion
euros, which are converted of its exposure for transactional
into sterling. items to foreign exchange for
the next nine months 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 markets
Most of our markets are exposed can be cyclical. However, this
to general economic conditions. risk is spread geographically
The Group is operationally and across a number of segments
geared and a fall in demand which are expected to diversify
for its products could adversely further with the growth of
impact the Group. HPP and 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 cash generation
The Group needs to have sufficient from its operations.
cash, or be able to draw on
loan facilities, to finance The Group has:
its operations and growth. -- a GBP4.9m overdraft facility
(payable on demand); and
-- a GBP3.5m loan facility
taken out in December 2012
(GBP1.3m of which had been
repaid at 31 December 2014).
The loan facility is repayable
over five years and has no
major financial operating covenants,
but is secured against certain
items of plant and equipment.
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 customers
Loss, poor performance or insolvency are distributors and converters
of a major customer or joint-venture of foam. 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 risk for constructing a
satellite plant in Asia has
been mitigated by partnering
with the plant's major customer.
The joint-venture agreements
contain clauses to address
performance and insolvency
issues.
----------------------------------------
IT The system has been implemented
The business is highly dependent with minimal software changes,
on its ERP (Enterprise Resource which reduces the risk substantially.
Planning) system and has implemented It has been operational since
a new system, which poses risks October 2014 with no major
of there being flaws in its system software issues so far
design and in user understanding encountered. Lesser issues
and operation of the new system. remain and are being addressed
in a prioritised order. A team
of business analysts has been
retained to support and control
the operation of the system.
----------------------------------------
People The Group keeps under review
The failure to attract, develop its skill needs and labour
or retain the right calibre requirements. The Group aims
of staff for a growing business. to provide its employees with
varied and interesting work
and to incentivise them appropriately.
The Group has recently 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 2014 and their
immediate relatives control approximately 1.76% of the voting
shares of the Company. Details of Directors' pay and remuneration
are given in the Directors' Remuneration Report on pages 45 to 51.
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
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
Key management emoluments 488 334 488 334
Company contributions to money purchase pension plan 71 68
71
68
Share related awards 78 120 78 120
637 522 637 522
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 Investments in
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
Zotefoams Inc 1,604 3,029 - -
Azote Asia Limited 995 - - -
Zotefoams International Limited - - 10,172 6,352
In addition there is a net payable balance of GBP1,025,000 owed
by MuCell Extrusion LLC to Zotefoams Inc.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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