TIDMZTF
RNS Number : 9536U
Zotefoams PLC
04 August 2015
Tuesday 4 August 2015
Zotefoams plc
Interim Results for the Six Months Ended 30 June 2015
Zotefoams plc ("Zotefoams", or "the Group" or "the Company"), a
world leader in cellular material technology, today announces its
interim results for the six months ended 30 June 2015.
Highlights
-- Total Revenue(1) increased by 8% to a record GBP26.6m
-- MuCell Extrusion revenue growth of 39%
-- High-Performance Products revenue growth of 23%
-- Gross margin excluding exceptional items(2) of 29.8% (2014:27.3%)
-- Operating profit excluding exceptional items increased 20% in constant currency(3)
-- 47% increase in Cash generated from Operations to GBP5.0m (2014:GBP3.4m)
-- All business units have strong forward order books
-- Investment in global manufacturing capacity in Kentucky, USA proceeding to plan
-- Interim dividend increased by 3% to 1.80 pence
Financial highlights
Six months Six months Change Change
ended 30 ended 30 in constant
June 2015 June 2014 currency
GBPm GBPm % %
Total Revenue 26.63 24.70 8 10
Group Revenue 26.49 24.65 7 10
Gross Profit excluding exceptional
items 7.94 6.73 18 20
Operating Profit excluding
exceptional items 3.17 3.00 6 20
Adjusted profit(4) before
tax excluding exceptional
items 3.19 3.02 6 19
Profit before tax excluding
exceptional items 3.02 2.87 5 20
Profit before tax 3.02 1.61 88
Basic eps excluding exceptional
items (p) 5.5 5.8 (5)
Basic eps (p) 5.5 3.2 72
Interim dividend (p) 1.80 1.75 3
Commenting on the results, Nigel Howard, Chairman said:
"I am delighted to report a rise of 8% in Total Revenue to a
record GBP26.6m for the first half of the year. Zotefoams has
delivered growth in all business segments. MuCell Extrusion LLC
('MEL') sales have grown by 39%, High-Performance Products grew by
23% and Polyolefin sales increased by 5%. Total Revenue increased
by 10% in constant currency.
Zotefoams continues to maintain a consistent strategy and
approach. We enter the second half of the year with strong order
books and a portfolio of products to deliver further organic
growth. We remain mindful of economic uncertainty and the impact of
foreign exchange in particular, but are confident in the long-term
prospects for the business."
(1) Total Revenue consolidates all external sales made by joint
ventures as well as those made by Zotefoams plc and its
subsidiaries.
(2) In 2014 the non-cash impairment charge made following the
decision to curtail manufacturing activity on the microZOTE(R)
extrusion line was treated as an exceptional item.
(3) Estimated impact of restating 2015 at 2014 average foreign
currency exchange rates, including the restatement of gains/losses
on maturing forward exchange hedges in the period at 2014 average
rates which increases the profit impact by GBP0.25m. Balance sheet
foreign exchange translation differences have not been
restated.
(4) Before amortisation of acquired intangible assets.
Enquiries:
Zotefoams plc Tel Today: 0203-727-1000
David Stirling, Managing Director Thereafter: 0208-664-1600
Clifford Hurst, Finance Director
FTI Consulting 0203-727-1000
Victoria Foster Mitchell/Simon
Conway
About Zotefoams plc
Zotefoams plc (LSE - ZTF) is a world leader in cellular material
technology. Using a unique manufacturing process with
environmentally friendly nitrogen expansion, Zotefoams produces
lightweight foams in Croydon, UK and Kentucky, USA for diverse
markets worldwide. Zotefoams also owns and licenses patented
MuCell(R) microcellular foam technology from a base in
Massachusetts, USA to customers worldwide and sells T-Tubes(R)
advanced insulation systems made from its patented ZOTEK(R)
fluoropolymer foams.
www.zotefoams.com
CHAIRMAN'S STATEMENT
In the first six months of 2015 Total Revenue increased by 8% to
a record GBP26.63m (2014: 24.70m), delivering a rise of 18% in
Gross Profit to GBP7.94m (2014: GBP6.73m before exceptional items).
Group revenue increased by 7% to GBP26.49m (2014: GBP24.65m) and
profit before tax and exceptional items rose to GBP3.02m (2014:
GBP2.87m). Basic earnings per share were 5.5p (2014: 3.2p after
exceptional items). The Directors have decided to increase the
interim dividend by 3% to 1.80p per share (2014: 1.75p) reflecting
the Board's continued confidence in the Group's future.
Macroeconomic Environment
As a predominantly UK-based exporter Zotefoams has approximately
80% of sales denominated in US Dollars and Euros. With most costs
incurred in Sterling, other than our main raw materials which are
denominated in Euros and some staff and operational costs which are
in US Dollars, movements in foreign exchange rates can have a
significant impact on our results. The average Euro rate was
1.38:GBP1 for the first six months of 2015 (equivalent 2014 rate
1.22:GBP1) and US Dollar rate was 1.53:GBP1 (equivalent 2014 rate
1.67:GBP1). The period end closing exchange rates, and in
particular the movement between the period opening and closing
rates, generated a non-cash translational loss of GBP0.44m in the
period (2014: GBP0.29m), which is reported as an administration
expense.
In constant currency, Total Revenue would have increased by 10%
to GBP27.15m and we estimate profit before tax and exceptional
items would have increased by 20% to GBP3.44m.
Financial and operational review
Polyolefin Foams
Overall sales volumes of Azote(R) polyolefin foams increased by
7% compared with the first six months of 2014. Price and product
mix were at similar levels to last year and the increase in sales
volume delivered constant currency sales growth of 8%. Adverse
currency movements in the Euro, partially offset by a more
favourable US Dollar rate, reduced the reported Total Revenue
growth to 5%. Group Revenue, which excludes the mark-up on sales
made by our Azote Asia Limited joint venture, increased by 4%.
In constant currency, growth in Total Revenue in the UK was 6%
and in Continental Europe was 10% while North America was
relatively flat. Azote Asia Limited delivered constant currency
growth of 33% and now accounts for 7% of polyolefin foams
sales.
Prices for our main raw material, low density polyethylene
('LDPE'), fell rapidly in the early part of the year due to lower
oil prices. However from March, prices began to increase as
European demand outstripped available supply and, although overall
prices are at a similar average level to the same period in 2014,
the current price is approximately 20% above the average price for
the first half of last year. LDPE is priced in Euros which offers a
natural hedge against our Euro-denominated sales and the Sterling
cost of LDPE is currently at a similar level to the average cost
for the first half of 2014.
Operating profit in Polyolefin foams before exceptional items
increased by 20% to GBP4.08m (2014: GBP3.41m) driven by the
increase in sales volumes.
High-Performance Products ('HPP')
I am pleased to report that HPP sales increased by 23% to
GBP3.39m (2014: GBP2.76m), consolidating the very strong 53% growth
delivered in the previous 12 months. HPP now represents 13% of
Total Revenue. Segment operating profit increased to GBP0.67m
(2014: GBP0.53m) as sales growth was offset somewhat by additional
development and sales and marketing expenditure.
The HPP segment comprises four main product lines based on our
unique technology. North America is currently the largest market,
where our fire-retardant ZOTEK(R) F fluoropolymer foams are
specified for aviation use and growth is driven by new
applications, increased adoption of existing uses and an increasing
number of aircraft being built. Encouragingly sales of ZOTEK(R) F
outside the North American market more than doubled, again mainly
in aviation, benefitting from our investment in people and market
development over the past few years. New projects in our speciality
ZOTEK(R) Peba foams for kinetic-energy management and ZOTEK(R) N
nylon foams, which exhibit high temperature resistance, delivered
moderate gains in the first six months of this year, although we
are very encouraged that these will further develop our market
presence particularly in sports and automotive in the medium
term.
Revenue from T-Tubes(R) insulation products, which more than
doubled last year, declined in the first six months of this year
due to the timing of projects, with some larger installations
scheduled for the latter part of this year and into 2016. The main
markets for these insulation products are in clean-rooms for
pharmaceutical, biotech and semiconductor manufacture in Asia. Our
joint venture with King Lai Group, announced in March this year, to
manufacture insulation products from our ZOTEK(R) high-performance
foams in China is progressing well and expected to be operational
from October this year. We have begun the process of hiring
additional staff in China and in Thailand where a wholly owned
Zotefoams' entity will be responsible for all sales outside of
China.
MuCell Extrusion LLC ('MEL')
MEL licenses microcellular foam technology and sells related
machinery. Sales increased by 39% to GBP1.01m (2014: GBP0.72m)
mainly as a result of equipment sales which increased 88% to
GBP0.52m (2014: GBP0.28m). MEL is an early stage growth business
and currently represents 4% of Group revenues with licensees mainly
in consumer packaging utilising our technology to reduce the
material content of their products.
Licensees have now converted 64 extrusion lines to use MuCell
technology, an increase of 12 lines in the installed base during
the six month period with orders for a further 18 units on hand at
30 June 2015. This compares favourably with 20 lines converted in
the whole of 2014. As our technology becomes better understood, and
the cost and environmental benefits are demonstrated by an
increasing number of users, we expect the rate of adoption to
increase. In the six months to 30 June 2015, contribution net of
commissions to third parties increased by 33% and, consistent with
our growth strategy for this business, we invested in excess of
this into future development. Sales and development costs, which
are mainly salaries and technology enhancements, increased by
approximately 41% as we respond to increasing levels of interest
from our target markets. MEL offers a strong platform for future
growth and in the period reported an operating loss before
amortisation costs of GBP0.22m (2014: GBP0.14m).
Distribution and Administration
Costs of distribution and administration are either incurred
directly or allocated to each business unit according to management
estimates. The main elements of administrative expenses are
technical development, finance and administration, and information
systems as well as the cost (or benefit) of foreign exchange hedges
maturing in the period and non-cash foreign exchange translation
expenses. Administrative costs excluding the impact of foreign
exchange hedges and translation were GBP2.49m (2014: GBP2.04m) with
the main increase resulting from IT and recruitment costs. We
estimate the increase in underlying costs on a like-for-like basis,
adjusted for timing differences, to be approximately 10% as we
invest for future growth.
Tax and Cash Flow
Zotefoams' estimated effective tax rate for the period was 20.5%
(2014: 20.5%), which is similar to the UK corporation tax rate for
the period. Cash generated from operations was GBP5.00m (2014:
GBP3.40m). Capital expenditure was GBP3.20m, GBP1.47m higher than
depreciation and amortisation, which together with tax and dividend
payments reduced net funds (cash less bank overdrafts and other
bank borrowings) by GBP0.56m from GBP2.42m at 31 December 2014 to
GBP1.86m.
Pensions
The April 2014 triennial actuarial valuation, on a Statutory
Funding Objective basis, calculated a deficit for the Pension
Scheme of GBP2.50m. As a result of this, the Company has agreed
with the Trustees to make contributions to the Scheme of GBP41,000
per month until April 2020 to eliminate this deficit and in
addition pay the ongoing Scheme expenses of GBP14,000 per month.
This will be reviewed following the next actuarial valuation which
is scheduled for April 2017.
Capital Expenditure
Zotefoams is investing significantly for future growth. Our
largest project is extending our existing facility in Kentucky, USA
and installing extrusion and high-pressure gassing processes to
deliver approximately 20% additional global capacity for block
foams. The total investment of USD $22m, of which $4.5m is an
extension to existing buildings and infrastructure, is proceeding
to plan and is anticipated to be operational in approximately 12
months' time. We continue to invest in our Croydon, UK facility
increasing production capacity and capability, mainly in speciality
extrusion, high-pressure gassing services and Group IT systems.
Planned capital investment in China, where our Kunshan ZOTEK
King Lai joint venture is located, is not expected to be material
to the Group.
Employees and Talent Management
Talent management is becoming increasingly important as
Zotefoams grows and evolves. The opportunities we have, in new
products, markets and geographies, require we identify and develop
the right people to define and deliver to our potential. Over the
past six months we have redefined our approach to talent management
to meet the needs of the business and this is being developed as a
core business practice.
On behalf of the Board, I would like to thank all of our
employees for their continued contribution to Zotefoams in the
period.
Dividend
Reflecting the Board's continued confidence in the Group's
future, the Directors have increased the interim dividend by 3% to
1.80 pence per share (2014: 1.75 pence). The dividend will be paid
on 8 October 2015 to shareholders on the Company's register at the
close of business on 11 September 2015.
Risks and uncertainties
Zotefoams' business and share price may be affected by a number
of risks, not all of which are within our control. The process
Zotefoams has in place for identifying, assessing and managing
risks is set out in the Company statement of Principal Risks and
Uncertainties on pages 18 to 21 of the 2014 Annual Report and
Accounts. The specific principal risks (which could impact
Zotefoams' sales, profits and reputation) and relevant mitigating
factors, as currently identified by Zotefoams' risk management
process, have not changed significantly since the publication of
the last Annual Report and detailed explanations of these can be
found in the 2014 Annual Report. Broadly, these risks include
operational disruption, supply chain disruption, technological
change and competitor activity, pension liabilities, foreign
exchange, macro-economic factors, financing, commercial, IT and
people.
Current Trading and Prospects
In our Azote(R) Polyolefin foams business we have good forward
visibility across all geographic regions and expect sales volume
growth to exceed that experienced in the first six months of 2015.
Indications are that the price of LDPE, which has risen sharply in
recent months, may not sustain this momentum, although on average
it is likely that prices in the second half of 2015 will be above
those in the first six months and therefore dampen Polyolefin foam
margins in the short term. In our HPP business, orders plus
invoiced sales for ZOTEK(R) technical foams currently exceed 2014
sales and in T-Tubes(R) insulation products we anticipate growth
from a second-half weighted pipeline of bids. MEL's level of
activity and current order book also provide leading indicators of
strong future growth justifying our continued investment in this
business. Supporting growth potential beyond 2015 we will invest
further in resources during the second half of this year,
increasing sales and administration, including technical, costs in
the short term. Foreign exchange rates are currently unfavourable
for our business and, if they remain at the current levels, we
expect second half sales to be adversely impacted by approximately
3% compared to exchange rates for the same period in 2014.
Outlook
In the first half of 2015 we delivered an 8% increase in Total
Revenue, 18% increase in Gross Profit before exceptional items and
demonstrated confidence in the future of our business with
investment in sales, development and technical resource. Zotefoams
is also committed to some significant capital investments to
support our medium and longer-term growth potential. We enter the
second half of the year with a strong order book and high levels of
activity in all business segments. Zotefoams continues to maintain
a consistent strategy and approach while being mindful of economic
uncertainty and the impact of foreign exchange in particular. We
therefore remain confident in the long-term prospects for the
business.
N G Howard
Chairman
3 August 2015
ZOTEK(R), Azote(R) and microZOTE(R) are registered trademarks of
Zotefoams plc. T-Tubes(R) is a registered trademark of UFP
Technologies Inc. MuCell(R) is a registered trademark of Trexel
Inc.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that this consolidated interim financial
information has been prepared in accordance with IAS 34 as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
consolidated interim financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Zotefoams plc are listed in the Zotefoams plc
Annual Report for 31 December 2014. A list of current directors is
maintained on the Zotefoams plc website: www.zotefoams.com
The maintenance and integrity of the Zotefoams plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
By order of the Board:
N G Howard C G Hurst
Chairman Finance Director
3 August 2015 3 August 2015
CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED
30 JUNE 2015
Six Six months Six months Six months ended Year ended 31 Year ended Year ended 31
months ended 30 June ended 30 30 June 2014 December 2014 31 December December 2014
ended 30 2014 June 2014 2014
June
2015
Pre-exceptional Exceptional Post-exceptional Pre-exceptional Exceptional Post-exceptional
items items (see items items items (see items
note 7) note 7)
(unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Total Revenue 6 26,630 24,698 24,698 49,081 - 49,081
Adjustment for
JV sales (141) (50) - (50) (136) - (136)
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Group Revenue 6 26,489 24,648 - 24,648 48,945 - 48,945
Cost of sales (18,545) (17,915) (1,265) (19,180) (36,103) (1,265) (37,368)
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Gross profit 7,944 6,733 (1,265) 5,468 12,842 (1,265) 11,577
Distribution
costs (1,832) (1,723) - (1,723) (3,442) - (3,442)
Administrative
expenses (2,939) (2,011) - (2,011) (3,829) - (3,829)
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Operating
profit 6 3,173 2,999 (1,265) 1,734 5,571 (1,265) 4,306
Finance income 2 1 - 1 2 - 2
Finance costs (153) (110) - (110) (235) - (235)
Share of loss
from JVs (5) (19) - (19) (64) - (64)
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Profit before
tax 3,017 2,871 (1,265) 1,606 5,274 (1,265) 4,009
Taxation 8 (618) (583) 253 (330) (926) 253 (673)
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Profit for the
period 2,399 2,288 (1,012) 1,276 4,348 (1,012) 3,336
---------------- ----- --------- ---------------- ------------- ----------------- ---------------- ------------- -----------------
Attributable
to:
Equity holders
of the Parent 2,399 2,288 1,276 4,348 (1,012) 3,336
Earnings per
share:
Basic (p) 10 5.5 5.8 3.2 10.7 - 8.2
Diluted (p) 10 5.4 5.7 3.2 10.5 - 8.1
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
SIX MONTHS ENDED 30 JUNE 2015
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
--------------------------------------------- ------------- ------------- -------------
Profit for the period 2,399 1,276 3,336
--------------------------------------------- ------------- ------------- -------------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss
Foreign exchange translation (losses)/gains
on investment in foreign subsidiaries
and joint ventures (190) (269) 669
Actuarial losses on defined benefit
schemes - - (2,334)
Tax relating to items that will
not be reclassified - - 467
--------------------------------------------- ------------- ------------- -------------
Total items that will not be reclassified
to profit or loss (190) (269) (1,198)
--------------------------------------------- ------------- ------------- -------------
Items that may be classified subsequently
to profit or loss
Effective portion of changes in
fair value of cash flow hedges
net of recycling 604 (28) (394)
Tax relating to items that may
be reclassified (121) 6 79
Total items that may be classified
subsequently to profit or loss 483 (22) (315)
--------------------------------------------- ------------- ------------- -------------
Other comprehensive income/(expense)
for the period, net of tax 293 (291) (1,513)
--------------------------------------------- ------------- ------------- -------------
Total comprehensive income for
the period 2,692 985 1,823
--------------------------------------------- ------------- ------------- -------------
Attributable to equity holders
of the Parent 2,692 985 1,823
--------------------------------------------- ------------- ------------- -------------
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30
JUNE 2015
30 June 30 June 31 December
2015 2014 2014
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
--------------------------------------- ------------- ------------- ------------
Non-current assets
Property, plant and equipment 29,781 28,559 28,561
Investments in JVs 338 219 174
Intangible assets 6,791 4,643 6,851
Deferred tax assets 458 474 502
--------------------------------------- ------------- ------------- ------------
Total non-current assets 37,368 33,895 36,088
--------------------------------------- ------------- ------------- ------------
Current assets
Inventories 8,487 8,509 9,218
Trade and other receivables 14,884 13,067 13,437
Cash and cash equivalents 4,020 454 4,628
--------------------------------------- ------------- ------------- ------------
Total current assets 27,391 22,030 27,283
--------------------------------------- ------------- ------------- ------------
Total assets 64,759 55,925 63,371
--------------------------------------- ------------- ------------- ------------
Current liabilities
Interest-bearing loans and borrowings (726) (709) (718)
Tax payable (481) (655) (385)
Bank overdraft (313) (2,156) -
Trade and other payables (6,876) (6,765) (6,715)
--------------------------------------- ------------- ------------- ------------
Total current liabilities (8,396) (10,285) (7,818)
--------------------------------------- ------------- ------------- ------------
Non-current liabilities
Interest-bearing loans and borrowings (1,125) (1,851) (1,489)
Employee benefits (5,912) (4,047) (6,132)
Deferred tax liabilities (857) (1,067) (698)
--------------------------------------- ------------- ------------- ------------
Total non-current liabilities (7,894) (6,965) (8,319)
--------------------------------------- ------------- ------------- ------------
Total liabilities (16,290) (17,250) (16,137)
--------------------------------------- ------------- ------------- ------------
Total net assets 48,469 38,675 47,234
--------------------------------------- ------------- ------------- ------------
Equity
Issued share capital 2,191 1,992 2,191
Own shares held (9) (18) (17)
Share premium 24,340 16,090 24,340
Capital redemption reserve 15 15 15
Translation reserve 637 (111) 827
Hedging reserve 455 217 (149)
Retained earnings 20,840 20,490 20,027
----------------------------------- --------- --------- ---------
Total equity attributable to
the equity holders of the Parent 48,469 38,675 47,234
----------------------------------- --------- --------- ---------
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX
MONTHS ENDED 30 JUNE 2015
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------------------------- ------------- ------------- -------------
Cash flows from operating activities:
Profit for the period 2,399 1,276 3,336
Adjustments for:
Depreciation, amortisation and impairment 1,733 3,035 4,669
Finance income (2) (1) (2)
Finance costs 153 110 235
Loss from joint venture 5 19 64
Equity-settled share-based payments 136 86 138
Taxation 618 330 673
------------------------------------------- ------------- ------------- -------------
Operating profit before changes in
working capital and provisions 5,042 4,855 9,113
Increase in trade and other receivables (1,045) (2,183) (2,398)
Decrease/(increase) in inventories 765 (538) (1,249)
Increase in trade and other payables 560 1,599 1,171
Employee benefit contributions (330) (330) (660)
------------------------------------------- ------------- ------------- -------------
Cash generated from operations 4,992 3,403 5,977
Interest paid (45) (13) (55)
Tax paid (365) (336) (868)
------------------------------------------- ------------- ------------- -------------
Net cash from operating activities 4,582 3,054 5,054
------------------------------------------- ------------- ------------- -------------
Interest received 2 1 2
Investment in joint ventures (169) (238) (238)
Acquisition of intangible assets (300) (6) (1,606)
Acquisition of property, plant and
equipment (2,898) (4,608) (5,967)
------------------------------------------- ------------- ------------- -------------
Net cash used in investing activities (3,365) (4,851) (7,809)
------------------------------------------- ------------- ------------- -------------
Proceeds from issue of share capital 10 3 8,453
Repurchase of own shares (4) - (19)
Repayment of borrowings (383) (512) (865)
Dividends paid (1,615) (1,421) (2,112)
------------------------------------------- ------------- ------------- -------------
Net cash (used)/generated in financing
activities (1,992) (1,930) 5,457
------------------------------------------- ------------- ------------- -------------
Net (decrease)/increase in cash and
cash equivalents (775) (3,727) 2,702
Cash and cash equivalents at 1 January 4,628 1,957 1,957
Effect of exchange rate fluctuations
on cash held (146) 68 (31)
------------------------------------------- ------------- ------------- -------------
Cash and cash equivalents at the
end of period 3,707 (1,702) 4,628
------------------------------------------- ------------- ------------- -------------
Cash and cash equivalents comprise cash at bank, short-term
highly liquid investments with a maturity date of less than three
months and bank overdrafts.
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
SIX MONTHS ENDED 30 JUNE 2015
Share Own shares Share Capital Translation Hedging Retained Total
capital held premium redemption reserve reserve earnings equity
GBP000 reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Balance at 1 January
2015 2,191 (17) 24,340 15 827 (149) 20,027 47,234
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Foreign exchange
translation loss
on investment in
foreign subsidiaries
and joint ventures - - - - (190) - - (190)
Effective portion
of changes in fair
value of cash flow
hedges net of
recycling - - - - - 604 - 604
Tax relating to
effective portion
of changes in fair
value of cash flow
hedges net of
recycling - - - - - - (121) (121)
Profit for the
period - - - - - - 2,399 2,399
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Total comprehensive
(loss)/income for
the period - - - - (190) 604 2,278 2,692
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Transactions with
owners of the Parent
Shares issued - 10 - - - - - 10
Shares acquired - (2) - - - - (2) (4)
Equity-settled
share-based payment
transactions net
of tax - - - - - - 152 152
Dividends paid - - - - - - (1,615) (1,615)
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Total transactions
with owners of
the Parent - 8 - - - - (1,465) (1,457)
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Balance at 30 June
2015 (unaudited) 2,191 (9) 24,340 15 637 455 20,840 48,469
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
During the six months period ended 30 June 2015, 82,239 shares
vested and were issued from the Zotefoams Employee Benefit Trust
('EBT') following the exercise of these options.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
SIX MONTHS ENDED 30 JUNE 2014
Share Own shares Share Capital Translation Hedging Retained Total
capital held premium redemption reserve reserve earnings equity
GBP000 reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Balance at 1 January
2014 1,992 (21) 16,090 15 158 245 20,535 39,014
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Foreign exchange
translation loss
on investment
in foreign
subsidiaries
and joint ventures - - - - (269) - - (269)
Effective portion
of changes in
fair value of
cash flow hedges
net of recycling - - - - - (28) - (28)
Tax relating to
effective portion
of changes in
fair value of
cash flow hedges
net of recycling - - - - - - 6 6
Profit for the
period - - - - - - 1,276 1,276
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Total comprehensive
(loss)/income
for the period - - - - (269) (28) 1,282 985
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Transactions with
owners of the
Parent
Shares issued - 3 - - - - - 3
Equity-settled
share-based payment
transactions net
of tax - - - - - - 94 94
Dividends paid - - - - - - (1,421) (1,421)
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Total transactions
with owners of
the Parent - 3 - - - - (1,327) (1,324)
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
Balance at 30
June 2014
(unaudited) 1,992 (18) 16,090 15 (111) 217 20,490 38,675
---------------------- --------- ----------- --------- ------------ ------------ --------- ---------- --------
The notes below form part of these financial statements.
NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED 30 JUNE 2015
1. GENERAL INFORMATION
The Company is a public limited liability company incorporated
and domiciled in the UK. The address of the registered office is
675 Mitcham Road, Croydon, CR9 3AL. The Group is principally
engaged in manufacturing and selling cellular materials and,
through MuCell Extrusion LLC ('MEL'), licensing microcellular foam
technology and supplying related equipment. The Group has
manufacturing sites in the UK and the USA and sells into worldwide
markets. The Company is listed on the London Stock Exchange and is
registered in England and Wales with Company Number 2714645.
2. BASIS OF PREPARATION
This condensed set of consolidated interim financial statements
has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU.
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of consolidated
interim financial statements has been prepared applying the
accounting policies and presentation that were applied in the
preparation of the Group's published consolidated financial
statements for the year ended 31 December 2014. Those consolidated
financial statements were prepared in accordance with IFRSs as
adopted by the EU.
This condensed set of consolidated interim financial statements
has been reviewed, but not audited, and was approved for issue on 3
August 2015. This condensed set of consolidated interim financial
statements does not comprise statutory accounts within the meaning
of Section 434 of the Companies Act 2006. Statutory accounts for
the year ended 31 December 2014 were approved by the Board of
Directors on 16 March 2015 and delivered to the Registrar of
Companies. The Independent Audit on those accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statement under Section 498 of the Companies Act 2006.
There were no significant changes to the pension scheme or
significant changes to market conditions during the period and
therefore the Company did not update its actuarial valuation during
this period. The Income Statement charge is based on the set of
assumptions laid out in the consolidated financial statements for
the year ended 31 December 2014.
Forward-looking statements
Certain statements in this condensed set of consolidated interim
financial statements are forward-looking. Although the Group
believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these
expectations will prove to be correct. Because these statements
involve risks and uncertainties, actual results may differ
materially from those expressed or implied by these forward-looking
statements.
We undertake no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Going Concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis of accounting
in preparing its condensed consolidated interim financial
statements.
3. ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the
Group's published consolidated financial statements for the year
ended 31 December 2014, as described in those consolidated
financial statements with the exception of tax which is accrued
based on an estimated tax rate that would be applicable to
estimated annual earnings.
Joint ventures
Joint ventures are jointly controlled entities whose activities
the Group has the power to control jointly, established by
contractual agreement. The consolidated financial statements
include the Group's share of the total recognised income and
expense and changes in equity of joint ventures on an equity
accounted basis, from the date that joint control or significant
influence respectively commences until the date that it ceases.
Joint ventures are recorded at cost as adjusted for
post-acquisition changes in the Group's share of net assets of the
entity including goodwill net of accumulated impairment loss. When
the Group's share of losses exceeds the carrying amount of the
joint venture, the carrying amount is reduced to GBPnil and
recognition of further losses is discontinued except to the extent
that the Group has incurred legal or constructive obligations or
made payments on behalf of the joint venture or associate.
4. CYCLICAL NATURE OF BUSINESS
Zotefoams generally makes more profit in the first six months of
the year. This cyclical nature of the business can be attributed to
a number of factors, namely:
-- Reduced polyolefin sales in the second half of the year due
to customer holiday periods and factory shutdowns in August and
December.
-- Timing of maintenance/servicing cost which is concentrated around shutdown periods.
However, the Group is also subject to a number of other factors
such as customer demand, growth of new products or markets and
changes to the MEL licence portfolio which can affect this
underlying cyclicality.
5. ESTIMATES
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results for which
form the basis of making the judgements about carrying values of
assets and liabilities that are not readily available from other
sources. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
December 2014.
6. SEGMENT REPORTING
The Group manufactures and sells high-performance foams and
licenses related technology for specialist markets worldwide.
Zotefoams' activities are categorised as follows:
-- Polyolefins: these foams are made from olefinic homopolymer
and copolymer resin. The most common resin used is low density
polyethylene ('LDPE').
-- High-Performance Products (HPP): these foams exhibit
high-performance on certain key properties, such as improved
chemical, flammability or temperature performance, due to the
resins on which they are based. Turnover in the segment is
currently mainly derived from our ZOTEK(R) F foams and T-Tubes(R)
insulation both made from PVDF fluoropolymer. Other commercially
launched products are foams made from polyamide (nylon) and
polyether block amide ('PEBA').
-- MEL: licenses microcellular foam technology and sells related machinery.
Due to our unique manufacturing technology Zotefoams can produce
polyolefin foams with superior performance to other manufacturers.
Our strategy is to use the capabilities of our technology to
produce foams from other materials in addition to polyolefins.
There were no significant transactions within the period between
reportable segments.
Polyolefins HPP MEL Consolidated
Six months ended 30 June GBP000 GBP000 GBP000 GBP000
2015 (unaudited)
Total Revenue* 22,228 3,394 1,008 26,630
Adjustment for joint
venture sales (141) - - (141)
---------------------------- ------------ -------- -------- -------------
Group revenue 22,087 3,394 1,008 26,489
Segment profit/(loss)
before amortisation 4,102 670 (221) 4,551
Amortisation of acquired
intangible assets (24) - (153) (177)
---------------------------- ------------ -------- -------- -------------
Segment profit/(loss) 4,078 670 (374) 4,374
Foreign exchange losses - - - (444)
Unallocated central costs - - - (757)
---------------------------- ------------ -------- -------- -------------
Operating profit before
exceptional items 3,173
---------------------------- ------------ -------- -------- -------------
Polyolefins HPP MEL Consolidated
Six months ended 30 June GBP000 GBP000 GBP000 GBP000
2014 (unaudited) Restated Restated Restated Restated
** ** ** **
Total Revenue* 21,217 2,757 724 24,698
Adjustment for joint
venture sales (50) - - (50)
---------------------------- ------------ ---------- ---------- -------------
Group revenue 21,167 2,757 724 24,648
Segment profit/(loss)
before amortisation 3,410 528 (139) 3,799
Amortisation of acquired
intangible assets - - (149) (149)
---------------------------- ------------ ---------- ---------- -------------
Segment profit/(loss) 3,410 528 (288) 3,650
Foreign exchange gains - - 24
Unallocated central costs - - - (675)
---------------------------- ------------ ---------- ---------- -------------
Operating profit before
exceptional items 2,999
---------------------------- ------------ ---------- ---------- -------------
* Total Revenue consolidates all external sales made by the
joint ventures as well as those made by Zotefoams plc and its
subsidiaries.
** Previously the HPP business result included direct costs and
an allocation of Research and Development and manufacturing
overhead but not a share of indirect administration costs. As the
HPP business has grown the result has been restated to reflect
better HPP's use of indirect resource. Central Group costs have
also been excluded from the business segments as these are
non-business specific.
7. EXCEPTIONAL ITEM
On 27 June 2014 the Company made the decision to curtail
manufacturing activity on its microZOTE(R) extrusion line within
its Polyolefin business segment. This resulted in a non-cash
impairment charge as follows:
Six months Six months
ended ended
30 June 30 June 2014
2015 GBP000
GBP000
------------------------ ------------ --------------
Fixed asset impairment - 1,175
Inventory impairment - 90
------------------------ ------------ --------------
- 1,265
------------------------------------- --------------
8. TAXATION
Six months Six months
ended ended
30 June 30 June
2015 2014
GBP000 GBP000
--------------------- ----------- -----------
Current tax:
UK corporation tax 454 475
Foreign tax 7 10
--------------------- ----------- -----------
461 485
Deferred tax 157 (155)
--------------------- ----------- -----------
618 330
--------------------- ----------- -----------
The Group's consolidated effective tax rate for the six months
ended 30 June 2015 was 20.5% (2014: 20.5%)
Tax is accrued based on an estimated tax rate that would be
applicable to estimated annual earnings.
9. DIVIDENDS
Six months Six months
ended ended
30 June 30 June
2015 2014
GBP000 GBP000
----------------------------------------------- ----------- -----------
Final dividend for the year ended 31 December
2014 of 3.7p
(2013: 3.6p) per share 1,615 1,421
----------------------------------------------- ----------- -----------
The final dividend for the year ended 31 December 2014 was paid
on 27 May 2015.
10. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months
ended ended
30 June 30 June
2015 2014
GBP000 GBP000
----------------------------------------------- ----------- -----------
Earnings
Earnings for the purpose of basic earnings
per share pre-exceptional items being net
profit attributable to equity holders of
the parent pre-exceptional items 2,399 2,288
Earnings for the purposes of diluted earnings
per share pre-exceptional items 2,399 2,288
Earnings for the purpose of basic earnings
per share being net profit attributable
to equity holders of the parent 2,399 1,276
Earnings for the purposes of diluted earnings
per share 2,399 1,276
----------------------------------------------- ----------- -----------
Number of shares Number Number
----------------------------------------------- ------------- -------------
Weighted average number of ordinary shares
for the purposes of basic earnings per share 43,549,103 39,444,150
Effect of dilutive potential ordinary shares:
Share options and Long-Term Incentive Plans 598,840 660,253
----------------------------------------------- ------------- -------------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 44,147,943 40,104,403
----------------------------------------------- ------------- -------------
11. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks
including credit risk, interest rate risk, liquidity risk and
foreign currency risk.
The condensed interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 31 December
2014. There have been no changes in any risk management policies
since the year end.
Fair value estimation
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
The following table presents the Group's financial instruments
that are measured at fair value at 30 June 2015.
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Assets
Forward exchange contracts - 456 - 456
Total assets - 456 - 456
---------------------------- --------- -------- -------- -------
Liabilities
Forward exchange contracts - - - -
Total liabilities - - - -
---------------------------- --------- -------- -------- -------
The following table presents the Group's financial instruments
that are measured at fair value at 30 June 2014.
Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
Assets
Forward exchange contracts - 216 - 216
Total assets - 216 - 216
---------------------------- --------- -------- -------- -------
Liabilities
Forward exchange contracts - - - -
Total liabilities - - - -
---------------------------- --------- -------- -------- -------
The forward exchange contracts have been fair valued using
forward exchange rates that are quoted in an active market.
Group's valuation process
The Group's finance department performs the valuation of forward
exchange contracts required for financial reporting purposes. This
is reported to the Audit Committee.
The results of the valuation processes are included in the
Group's monthly reporting to the directors which include all
members of the Audit Committee.
Fair value of financial assets and liabilities measured at
amortised cost
The fair value of borrowings is as follows:
30 June 2015 30 June 2014
GBP000 GBP000
Current 711 687
Non-current 1,115 1,826
Total 1,826 2,513
The fair value of the following financial assets and liabilities
approximate their carrying amount:
-- Trade and other receivables
-- Other current financial assets
-- Cash and cash equivalents
-- Trade and other payables
-- Other current liabilities
12. RELATED PARTY TRANSACTIONS
There were no material related party transactions for the
periods ended 30 June 2015 and 30 June 2014.
Independent review report to Zotefoams plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements, defined below, in the Interim Results of Zotefoams plc
for the six months ended 30 June 2015. Based on our review, nothing
has come to our attention that causes us to believe that the
condensed consolidated interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The condensed consolidated interim financial statements, which
are prepared by Zotefoams plc, comprise:
-- the condensed consolidated statement of financial position as at 30 June 2015;
-- the condensed consolidated income statement and statement of
comprehensive income for the period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
As disclosed in note 2, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The condensed consolidated interim financial statements included
in the Interim Results have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
What a review of condensed consolidated financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the Interim
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
Responsibilities for the condensed consolidated interim
financial statements and the review
Our responsibilities and those of the directors
The Interim Results, including the condensed consolidated
interim financial statements, is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the Interim Results in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express to the company a conclusion on
the condensed consolidated interim financial statements in the
Interim Results based on our review. This report, including the
conclusion, has been prepared for and only for the company for the
purpose of complying with the Disclosure and Transparency Rules of
the Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
3 August 2015
Gatwick
This information is provided by RNS
The company news service from the London Stock Exchange
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