TIDMZTF
RNS Number : 9167F
Zotefoams PLC
02 August 2016
Tuesday 2 August 2016
Zotefoams plc
Interim Report for the Six Months Ended 30 June 2016
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 2016.
Highlights
-- Group revenue increased by 2% to GBP27.07m (2015: GBP26.49m)
-- Operating profit pre-exceptional items increased by 5%
-- Adjusted profit before tax(1) in line with prior year
-- Group focus on development and investment
-- Positive sales momentum going into second half of 2016
o AZOTE(R) polyolefin foam orders strengthening after soft June
and July
o ZOTEK(R) technical foam sales plus orders currently in excess
of 2015 sales
o MuCell Extrusion, record open order book including a "one-off"
extrusion line order from Japan
-- Significant operational improvements in Croydon, UK facility
delivering improved service and reduced labour requirements, with
an exceptional item due to associated restructuring costs
-- Dow Chemical announced promotion of MuCell(R) extrusion
technology in South America to mitigate the carbon footprint of the
2016 Rio Olympic Games
-- Interim dividend increased by 3% to 1.85 pence
Financial highlights
Six months Six months Change
ended ended
30 June 30 June
2016 2015
GBPm GBPm %
Group Revenue 27.07 26.49 2
Gross Profit 8.14 7.94 3
Operating Profit pre
exceptional item 3.33 3.17 5
Operating Profit post
exceptional item 3.07 3.17 (3)
Adjusted profit before
tax1 3.21 3.19 1
Profit before tax pre
exceptional item 3.03 3.02 0
Profit before tax 2.77 3.02 (8)
Basic eps (p) 5.18 5.50 (6)
Basic eps (p) pre exceptional
item 5.78 5.50 5
Interim dividend (p) 1.85 1.80 3
(1) Before amortisation of acquired intangible assets and
exceptional items
Commenting on the results, Steve Good, Chairman said:
"We enter the second half of the year with a good order book, a
strong product portfolio, growth expectations in all business units
and the benefits of the weaker Sterling. Whilst today we reported
record revenue for the first half of the year, growth was muted by
customer inventory adjustments and sales phasing. In addition,
profits were broadly flat, but this was due to increased
expenditure in selling, development and technical resource to
support long-term growth opportunities.
Therefore, whilst recognising the significant uncertainty
resulting from the macro-economic backdrop, the Board remains
confident in the prospects for the business."
Enquiries:
Zotefoams plc Tel Today: 0203-727-1000
David Stirling, Group Thereafter: 0208-664-1600
CEO
Gary McGrath, 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-FIT(R)
advanced insulation systems.
www.zotefoams.com
Results overview
In the first six months of 2016 Group revenue increased by 2% to
GBP27.07m (2015: GBP26.49m), delivering a record figure for the
first six months aided by a weaker GBP against our main trading
currencies. However, growth was impacted by customer inventory
adjustments and sales phasing, primarily in our HPP Business Unit,
where we see a much stronger second half developing. An efficiency
improvement programme at our Croydon, UK factory has increased
effective capacity and will reduce operating costs in the future,
resulting in an exceptional cost of GBP0.3m during the period. We
also increased operational expenditure to accelerate development of
the Zotefoams Group, with a new venture in Oklahoma, USA and
Kunshan, PRC, and a large number of new products and applications
approaching commercialisation. These investments, in the short
term, dampened the benefit of currency gains. Gross profit
increased by 3% and profit before tax pre-exceptional item
increased to GBP3.03m (2015: GBP3.02m), while adjusted profit
before tax remained consistent with prior year. Basic earnings per
share were 5.18p after exceptional items (2015: 5.50p). The
Directors have decided to increase the interim dividend by 3% to
1.85p per share (2015: 1.80p), reflecting the Board's continued
confidence in the Group's future.
Currency review
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 1.28:GBP1 for the first six months of 2016
(equivalent 2015 rate 1.38:GBP1) and the average US Dollar rate was
1.42:GBP1 (equivalent 2015 rate 1.53:GBP1). The period end closing
exchange rates, and in particular the movement between the period
opening and closing rates, generated a non-cash translational gain
of GBP0.51m in the period (2015: loss of GBP0.44m), the benefit of
which is credited against administration expenses.
Financial and operational review
Polyolefin Foams
Overall sales volumes were at similar levels to 2015. We
estimate underlying growth of 4% offset by a reduction in inventory
held by our direct customers. UK sales volumes increased by 9% with
a strong start to the year being maintained until a poor June 2016
with obvious lower confidence in the market, which continued into
July 2016, but has reverted with a more robust August 2016 order
book. In continental Europe, where we saw the most marked reduction
in customer inventory levels, sales volumes were down by 5%, but
again we believe the underlying demand was positive. In Asia, where
Japan is the dominant market, sales volumes declined by almost 25%,
again with some destocking exacerbating the impact of a relatively
weak Japanese Yen, which has made imports more expensive for the
past few years. Sales increased by 12% in North America, with the
benefit of a stronger USD and added value from Zotefoams Midwest in
a market where volume increased by 9%.
Group revenue from Azote(R) Polyolefin Foams increased by 3% to
GBP22.79m (2015: GBP22.09m), although at constant currency it would
have been GBP21.30m.
The Euro-denominated cost for one tonne of our main raw
material, low density polyethylene ('LDPE'), was approximately 12%
higher than in H1:2015. We also suffered from a force majeure event
from our main polymer supplier for a significant period. Although
this material is multi-sourced, such a supply disruption does incur
meaningful additional costs, which fell wholly within the first
half of this year. Overall this added approximately GBP0.4m to our
polyolefin foams cost base in the period.
Operating profit in polyolefin foams, before exceptional items,
declined by 7% to GBP3.81m (2015: GBP4.08m), mainly due to
increased material costs and additional expenditure related to our
investment in Kentucky, USA, which is due to begin operation in
2017, and in Oklahoma USA, which began operation in March 2016.
High-Performance Products ('HPP')
HPP sales of GBP3.17m were slightly below the previous year
(2015: GBP3.39m). Customer orders are, typically, strongly
second-half weighted and therefore the performance in the first six
months understates the underlying growth in this Business Unit. As
fixed costs have been increased to support our sales opportunities,
the phasing of sales also impacts our reported Business Unit profit
margin disproportionately in the period, with segment operating
profit pre-exceptional Item of GBP0.30m (2015: GBP0.67m).
We are very pleased with the progress of a large number of
opportunities within our HPP business generally. ZOTEK(R) F foams,
where the main market is in aviation, is the largest segment and
continues to offer medium-term growth consistent with our past
experience, although 2016 is likely to show more muted growth in
aviation, with our customers managing inventory lower in the
downstream supply chain. Markets such as composites, automotive and
sports are using ZOTEK(R) Nylon foams in small initial quantities,
which we believe could offer excellent potential in the future and
we have secured the first orders for what we expect to be a
significant business in our ZOTEK(R) PEBA foams within the sport
and leisure sector.
In the period, one disappointing aspect within our HPP Business
Unit has been the difficulty experienced in setting up the
manufacturing site for our T-FIT(R) insulation products. In 2015,
we announced a joint venture in China for the manufacture of this
product range and expected this to be operational by October 2015.
Unforeseen operational difficulties forced the joint venture
company to find another factory location and re-apply for a
business license in China. We now expect the business to be
operational during Q3:2016. This delay has impacted management
time, while the additional overhead costs, in China and in
Thailand, have been underutilised. However, we remain fully
committed to T-FIT(R) insulation with a high level of current
quotes into clean-room insulation and, with very promising trials
of nylon-based insulation tube for process industries and a
modified PVDF foam for food and dairy, we intend to launch further
products within this range which target a much larger potential
market.
In addition to supporting and developing the product offering
within HPP, Zotefoams' technical department continues to enhance
our unique technology. Traditionally, Zotefoams has manufactured
rectangular sheets of foam with extrusion of a solid sheet being
the primary step. While this has many advantages, there are markets
where this cuboid shape results in large material yield loss as
complex shapes are cut from the foam, often needing high levels of
machine time and labour input. We have recently successfully
trialled the manufacture of complex 3-dimensional foam shapes,
which can be manufactured using an initial step of injection
moulding or 3D printing technology. This is an exciting development
for some large volume applications and we are currently working to
commercialise this promising new technology.
MuCell Extrusion LLC ('MEL')
MEL licenses microcellular foam technology and sells related
machinery. Sales increased by 10% to GBP1.11m (2015: GBP1.01m) with
an increase of 11 lines installed at licensees (2015: 12 lines in
H1) bringing the total installed base to 99 lines, of which we
estimate approximately half are currently in use by the
licensee.
In the period, The Dow Chemical Company ("Dow") announced they
are promoting MuCell(R) extrusion technology in South America to
mitigate the carbon footprint of the 2016 Rio Olympic Games. As a
direct result of this initiative, MuCell(R) extrusion technology
for foamed film will be used by four major packaging companies in
the region.
In addition, MEL secured its largest individual order, where we
will deliver an entire extrusion line with MuCell(R) technology to
a customer in Japan for use in consumer packaging. This order is in
excess of GBP1m and contributed significantly to our record order
intake in the period.
Enquiry levels and the installed equipment base at MEL continue
to increase and during the second half of 2016 we plan to hire
additional technical and engineering staff to meet the demand for
customer support. Finally, the development of our technology
continues to be a priority and we have filed additional patent
applications in blow moulding, which we believe will significantly
enhance our product offering almost immediately.
MEL reported an operating loss before exceptional item and
amortisation costs of GBP0.24m (2015: loss GBP0.22m).
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 GBP3.23m (2015: GBP2.49m),
with the main increase resulting from additional expenditure on raw
materials and product development, new business start-ups, finance
and systems.
Tax and Cash Flow
Zotefoams' estimated effective tax rate for the period was 19%
(2015: 20.5%), which is slightly below the UK corporation tax rate
for the period of 20%. Cash generated from operations was GBP4.93m
(2015: GBP4.99m). Capital expenditure was GBP8.00m, GBP6.22m higher
than depreciation and amortisation, and primarily related to group
capacity expansion via the Kentucky, USA, manufacturing facility,
which, together with tax and dividend payments, increased net debt
(cash less bank overdrafts and other bank borrowings) by GBP5.64m
from GBP1.59m at 31 December 2015 to GBP7.23m.
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.
Following declining bond yields and the immediate aftermath of
the UK's decision to exit the European Union, the Company has
obtained guidance from the actuaries as at 30 June 2016. Based on
guidance received, the Company has increased the pension deficit by
GBP2.4m to reflect current market conditions. The position will
further be reviewed at year end and a full actuarial valuation is
scheduled for April 2017.
Capital Expenditure
Zotefoams is investing significantly to support future growth.
Our largest project is extending our existing facility in Kentucky,
USA. Initially we committed to installing sufficient extruders and
a single high-pressure autoclave to deliver approximately 20%
additional global capacity for block foams. As previously
announced, we have experienced unforeseen delays in delivery of the
autoclave since this initial decision was made. The Board has
therefore taken a decision to invest in a second high-pressure
autoclave, which will allow us the certainty of additional core
capacity at relatively short notice. Overall the project is now
expected to be $30m, of which $4.5m is an extension to existing
buildings and infrastructure. The project is proceeding to
previously announced timescales and is anticipated to be
operational, with the first autoclave commissioned, in H1:2017. We
continue to invest in our Croydon, UK facility increasing
production capacity and capability, mainly in speciality extrusion,
and two further low-pressure autoclaves for expansion of HPP
products.
Planned capital investment in China, where our Kunshan ZOTEK
King Lai joint venture is located, is not expected to be
significant 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 that we identify and
develop the right people to define and deliver to our potential.
Over the past six months we have recruited substantially to meet
the needs of our business and, as at 30 June 2016, headcount was
352, with approximately 11% of employees recruited within the past
12 months.
On behalf of the Board, we 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
1.85 pence per share (2015: 1.80 pence). The dividend will be paid
on 13 October 2016 to shareholders on the Company's register at the
close of business on 16 September 2016.
Principal 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 22 to 25 of the 2015 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 2015 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 and
people.
Current Trading and Prospects
In our Azote(R) Polyolefin foams business, where customers are
predominantly based in the UK and continental Europe, the softening
of orders experienced in June 2016 has continued into July 2016,
whereas demand for August 2016 looks strong by comparison to
previous years. The recent devaluation of Sterling against both the
USD and Euro is positive for the business, as approximately 80% of
our revenues are denominated in these currencies, however most raw
materials are bought in Euros and our US operational costs are in
USD, therefore giving a partial natural hedge. The trading impact
of Sterling devaluation will benefit us a little for the remainder
of this year, with a more significant positive impact during 2017
when our financial hedges at higher rates have expired. We expect
the costs of LDPE for the remainder of the year to be at a similar
level to the first six months. In our HPP business, orders plus
invoiced sales for ZOTEK(R) technical foams currently exceed 2015
sales. In T-Fit(R) insulation products, where the order book is
typically shorter, we anticipate growth in the second half of the
year from a strong pipeline of bids. In MEL we have a record order
book by value and a significant number of quotations out to
potential customers, but the number of machines currently on order
is below the record levels seen at this time last year.
Outlook
We enter the second half of the year with a good order book, a
strong product portfolio, growth expectations in all business units
and the benefits of the weaker Sterling. Whilst recognising the
significant uncertainty resulting from the macro-economic backdrop,
the Board remains confident in the prospects for the business.
S P Good D B Stirling
Chairman Group CEO
1 August 2016 1 August 2016
ZOTEK(R), Azote(R) and T-FIT(R) are registered trademarks of
Zotefoams plc. MuCell(R) is a registered trademark of Trexel
Inc.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed consolidated interim
statements have has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting' 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
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 2015, with the exception of the
following changes in the period: Mr N G Howard retired on 31 March
2016 and Mr C G Hurst retired on 16 May 2016. 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:
S P Good G C McGrath
Chairman Finance Director
1 August 2016 1 August 2016
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT FOR THE SIX
MONTHSED 30 JUNE 2016
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2015
2016 2015
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Group revenue 6 27,069 26,489 53,869
Cost of sales (18,931) (18,545) (38,863)
--------------------------- ----- -------------------- -------------------- --------------------
Gross profit 8,138 7,944 15,006
Distribution
costs (2,089) (1,832) (3,886)
Administrative
expenses pre-exceptional
item (2,716) (2,939) (4,795)
Exceptional
item 14 (262) - -
Total administrative
expenses (2,978) (2,939) (4,795)
Operating profit 3,071 3,173 6,325
--------------------------- ----- -------------------- -------------------- --------------------
Operating profit
pre exceptional
item 6 3,333 3,173 6,325
--------------------------- ----- -------------------- -------------------- --------------------
Finance income - 2 2
Finance costs (288) (153) (306)
Share of loss
from Joint Venture (17) (5) (11)
Profit before
Income tax 2,766 3,017 6,010
Income tax expense 7 (522) (618) (1,213)
--------------------------- ----- -------------------- -------------------- --------------------
Profit for the
period 2,244 2,399 4,797
--------------------------- ----- -------------------- -------------------- --------------------
Attributable
to:
Equity holders
of the Parent 2,266 2,399 4,824
Non controlling
interest (22) - (27)
2,244 2,399 4,797
--------------------------- ----- -------------------- -------------------- --------------------
Earnings per
share:
Basic (p) 9 5.18 5.50 11.10
Diluted (p) 9 5.11 5.40 10.90
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2016
Six months Six months Year
--------------------------------------------
ended ended ended
-------------------------------------------
30-Jun 30-Jun 31-Dec
2016 2015 2015
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------- --------------- --------------- ---------------
Profit for the period 2,244 2,399 4,797
-------------------------------------------- --------------- --------------- ---------------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss
Actuarial (losses)/gains on defined
benefit schemes (2,534) - 443
Tax relating to items that will
not be reclassified 481 - (84)
-------------------------------------------- --------------- ---------------
Total items that will not be reclassified
to profit or loss (2,053) - 359
-------------------------------------------- --------------- --------------- ---------------
Items that may be re-classified
subsequently to profit or loss
Effective portion of changes in
fair value of cash flow hedges
net of recycling (915) 604 (46)
Foreign exchange translation
gains/(losses) on investment
in foreign subsidiaries and
joint ventures 2,171 (190) 814
Tax relating to items that may
be reclassified 174 (121) 6
-------------------------------------------- --------------- --------------- ---------------
Total items that may be classified
subsequently to profit or loss 1,430 293 774
-------------------------------------------- --------------- --------------- ---------------
Other comprehensive (expense)/income
for the period, net of tax (623) 293 1,133
-------------------------------------------- ---------------
Total comprehensive income for
the period 1,621 2,692 5,930
-------------------------------------------- --------------- --------------- ---------------
Attributable to:
Equity holders of the parent 1,643 2,692 5,952
Non-controlling interest (22) - (22)
Total comprehensive income for
the period 1,621 2,692 5,930
-------------------------------------------- --------------- --------------- ---------------
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
30-Jun 30-Jun 31-Dec
----------------------------------
2016 2015 2015
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
ASSETS
---------------------------------- --------------- ------------ -------------
Non-current assets
Property, plant and equipment 41,983 29,781 35,372
Intangible assets 7,219 6,791 6,868
Investments in joint venture 163 338 163
Deferred income tax assets 669 458 574
---------------------------------- --------------- ------------ -------------
Total non-current assets 50,034 37,368 42,977
---------------------------------- --------------- ------------ -------------
Current assets
Inventories 10,898 8,487 9,862
Trade and other receivables 15,605 14,428 17,219
Derivative financial instruments - 456 -
Cash and cash equivalents
(excluding bank overdrafts) 2,578 4,020 6,148
---------------------------------- --------------- ------------ -------------
Total current assets 29,081 27,391 33,229
---------------------------------- --------------- ------------ -------------
Total assets 79,115 64,759 76,206
---------------------------------- --------------- ------------ -------------
LIABILITIES
Current liabilities
Trade and other payables (8,482) (6,876) (10,250)
Current income tax liabilities (447) (481) (726)
Interest-bearing loans and
borrowings (1,146) (726) (1,102)
Derivative financial instruments (1,110) - (195)
Bank overdraft (2,900) (313) (879)
Total current liabilities (14,085) (8,396) (13,152)
---------------------------------- --------------- ------------ -------------
Non-current liabilities
Interest-bearing loans and
borrowings (5,765) (1,125) (5,758)
Deferred income tax liabilities (499) (857) (938)
Retirement benefit obligations (7,621) (5,912) (5,238)
Total non-current liabilities (13,885) (7,894) (11,934)
---------------------------------- --------------- ------------ -------------
Total liabilities (27,970) (16,290) (25,086)
---------------------------------- --------------- ------------ -------------
Total net assets 51,145 48,469 51,120
---------------------------------- --------------- ------------ -------------
Equity
Issued share capital 2,221 2,191 2,221
Own shares held (31) (9) (38)
Share premium 24,340 24,340 24,340
Capital redemption reserve 15 15 15
Translation reserve 3,807 637 1,636
Non-controlling interest 116 - 138
Hedging reserve (936) 334 (195)
Retained earnings 21,613 20,961 23,003
---------------------------------- --------------- ------------ -------------
Total equity attributable
to the equity holders of the
Parent 51,145 48,469 51,120
---------------------------------- --------------- ------------ -------------
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE
SIX MONTHSED 30 JUNE 2016
Six months Six months Year
--------------------------------------
ended ended ended
--------------------------------------
30-Jun 30-Jun 31-Dec
2016 2015 2015
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ -----------
Cash flows from operating
activities:
Profit for the period 2,244 2,399 4,797
Adjustments for:
Depreciation, amortisation
and impairment 1,780 1,733 3,476
Finance income - (2) (2)
Finance costs 288 153 306
Loss from joint venture 17 5 11
Equity-settled share-based
payments 75 136 223
Taxation 521 618 1,213
-------------------------------------- ------------ ------------ -----------
Cashflow from operating activities
before changes in working
capital and provisions 4,925 5,042 10,024
Decrease/(increase) in trade
and other receivables 2,175 (1,045) (3,546)
(Increase)/decrease in inventories (801) 765 (471)
(Decrease)/increase in trade
and other payables (1,039) 560 3,065
Employee benefit contributions (330) (330) (660)
-------------------------------------- ------------ ------------ -----------
Cash generated from operations 4,930 4,992 8,412
Interest paid (109) (45) (97)
Tax paid (715) (365) (782)
-------------------------------------- ------------ ------------ -----------
Net cash from operating activities 4,106 4,582 7,533
-------------------------------------- ------------ ------------ -----------
Interest received - 2 2
Investment in joint ventures - (169) -
Acquisition of intangible
assets (69) (300) (422)
Acquisition of property,
plant and equipment (7,934) (2,898) (8,683)
-------------------------------------- ------------ ------------ -----------
Net cash used in investing
activities (8,003) (3,365) (9,103)
-------------------------------------- ------------ ------------ -----------
Issue of share capital to
employees 30 10 126
Repurchase of own shares - (4) (127)
Repayment of borrowings (457) (383) (741)
Proceeds from borrowings - - 5,356
Investment in subsidiary
by non-controlling interest - - 160
Dividends paid (1,664) (1,615) (2,400)
-------------------------------------- ------------ ------------ -----------
Net cash (used)/generated
in financing activities (2,091) (1,992) 2,374
-------------------------------------- ------------ ------------ -----------
Net (decrease)/increase in
cash and cash equivalents (5,988) (775) 804
Cash and cash equivalents
at 1 January 5,269 4,628 4,628
Effect of exchange rate fluctuations
on cash held 397 (146) (163)
-------------------------------------- ------------ ------------ -----------
Cash and cash equivalents
at the end of period (322) 3,707 5,269
-------------------------------------- ------------ ------------ -----------
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 INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2016
Share Own Share Capital Translation Hedging Non-controlling Retained Total
capital shares premium redemption reserve reserve interest earnings equity
held reserve
----------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- -------- ----------- ------------ -------- ---------------- --------- --------
Balance at
1 January
2016 2,221 (38) 24,340 15 1,636 (195) 138 23,003 51,120
---------------- -------- -------- -------- ----------- ------------ -------- ---------------- --------- --------
Foreign
exchange
translation
profit on
investment
in foreign
subsidiaries
and joint
ventures - - - - 2,171 - - - 2,171
Effective
portion of
changes in
fair value
of cash flow
hedges net
of recycling - - - - - (915) - - (915)
Tax relating
to effective
portion of
changes in
fair value
of cash flow
hedges net
of recycling - - - - - 174 - - 174
Actuarial
losses on
defined
benefit
scheme - - - - - - - (2,534) (2,534)
Tax relating
to actuarial
losses on
defined
benefit
scheme - - - - - - - 481 481
Profit for
the period - - - - - - (22) 2,266 2,244
Total
comprehensive
income/(loss)
for the period - - - - 2,171 (741) (22) 213 1,621
---------------- -------- -------- -------- ----------- ------------ -------- ---------------- --------- --------
Transactions
with owners
of the Parent
Shares issued
to employees - 7 - - - - - 23 30
Equity-settled
share-based
payment
transactions
net of tax - - - - - - - 38 38
Dividends
paid - - - - - - - (1,664) (1,664)
---------------- -------- -------- -------- ----------- ------------ -------- ---------------- --------- --------
Total
transactions
with owners
of the Parent - 7 - - - - - (1,603) (1,596)
---------------- -------- -------- -------- ----------- ------------ -------- ---------------- --------- --------
Balance at
30 June 2016
(unaudited) 2,221 (31) 24,340 15 3,807 (936) 116 21,613 51,145
---------------- -------- -------- -------- ----------- ------------ -------- ---------------- --------- --------
During the six months period ended 30 June 2016, 82,239 shares
vested and were issued from the Zotefoams Employee Benefit Trust
('EBT') following the exercise of these options.
The notes below form part of these financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2015
Share Own Share Capital Translation Hedging Retained Total
capital shares premium redemption reserve reserve earnings equity
held reserve
GBP000 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) 483 2,399 2,692
----------------------- --------- -------- --------- ------------ ------------ --------- ---------- --------
Transactions
with owners
of the Parent
Shares issued
to employees - 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 15 637 334 20,961 48,469
----------------------- --------- -------- --------- ------------ ------------ --------- ---------- --------
The notes below form part of these financial statements.
NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHSED
30 JUNE 2016
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 2015. 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 1
August 2016. 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 2015 were approved by the Board of
Directors on 14 March 2016 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.
Pension
Pension obligations have increased by GBP2.4m in the period to
GBP7.62m, from GBP5.24m at December 2015. This is due to yields
decreasing following the referendum result, announcing that the UK
would leave the European Union. The discount factor used to
calculate the future pension obligations has therefore decreased,
resulting in a larger net present value of the pension deficit at
30 June 2016. The income statement charge is based on the set of
assumptions laid out in the consolidated financial statements for
the year ended 31 December 2015.
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 2015, 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.
Exceptional items
Exceptional items are items which due to their size, incidence
and non-recurring nature have been classified separately in order
to draw them to the attention of the reader of the financial
statements and, in management's judgement, to show more accurately
the underlying profits of the Group. Such items are included within
the consolidated interim income statement caption to which they
relate, and are separately disclosed either in the notes to the
consolidated interim financial statements or on the face of the
consolidated interim income statement.
4. CYCLICAL NATURE OF BUSINESS
Recently, the seasonality of Zotefoams' business has been
largely eliminated, with most variability derived from order timing
from HPP and MEL, and customer inventory management according to
their specific business needs. There remains an underlying cyclical
nature of our markets, over the longer macroeconomic business
cycle, as Zotefoams sells into a wide variety of business segments,
many of which are themselves cyclical.
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, 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 of which form the
basis for 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 2015.
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 derived mainly from our ZOTEK(R) F foams and T-FIT(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 GBP'000 GBP'000 GBP'000 GBP'000
30 June 2016 (unaudited)
Group revenue 22,789 3,174 1,106 27,069
Segment profit/(loss)
before amortisation 3,832 300 (241) 3,891
Amortisation of
acquired intangible
assets (24) - (162) (186)
--------------------------- ------------ -------- -------- -------------
Segment profit/(loss) 3,808 300 (403) 3,705
Foreign exchange
gains - - - 510
Unallocated central
costs - - - (882)
--------------------------- ------------ -------- -------- -------------
Operating profit
pre exceptional
item 3,333
--------------------------- ------------ -------- -------- -------------
Polyolefins HPP MEL Consolidated
Six months ended GBP'000 GBP'000 GBP'000 GBP'000
30 June 2015 (unaudited)
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
pre exceptional
item 3,173
--------------------------- ------------ -------- -------- -------------
7. INCOME TAX EXPENSE
Six months Six months
--------------------
ended ended
--------------------
30 June 30 June
2016 2015
GBP'000 GBP'000
-------------------- ----------- -----------
Current tax:
UK corporation tax 433 454
Foreign tax 3 7
-------------------- ----------- -----------
436 461
Deferred tax 86 157
-------------------- ----------- -----------
522 618
-------------------- ----------- -----------
The Group's consolidated effective tax rate for the six months
ended 30 June 2016 was 19% (2015: 20.5%).
Tax is accrued based on an estimated tax rate applicable to
estimated annual earnings.
8. DIVIDS
Six months Six months
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
----------------------------------- ----------- -----------
Final dividend for the year ended
31 December 2015 of 3.80p
(2014: 3.70p) per share 1,664 1,615
----------------------------------- ----------- -----------
The final dividend for the year ended 31 December 2015 was paid
on 25 May 2016. The interim dividend of 1.85p (2015: 1.80p) per
share, amounting to GBP0.8m (2015: GBP0.79m) has not been
recognised as a liability in this interim financial information. It
will be recognised in shareholders' equity in the year to 31
December 2016.
9. 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-Jun 30-Jun
2016 2015
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
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 2,528 2,399
Earnings for the purposes of
diluted earnings per share pre-exceptional
items 2,528 2,399
Earnings for the purpose of basic
earnings per share being net
profit attributable to equity
holders of the parent 2,266 2,399
Earnings for the purposes of
diluted earnings per share 2,266 2,399
--------------------------------------------- ----------- -----------
Number of shares Number Number
--------------------------------------------- ----------- -----------
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 43,715,063 43,549,103
Effect of dilutive potential
ordinary shares:
-----------
Share options and Long-Term Incentive
Plans 603,994 598,840
--------------------------------------------- ----------- -----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 44,319,057 44,147,943
--------------------------------------------- ----------- -----------
10. 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
2015. 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 2016.
Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Forward exchange - - - -
contracts
Total assets - - - -
------------------- --------- -------- -------- --------
Liabilities
Forward exchange
contracts - (1,110) - (1,110)
Total liabilities - (1,110) - (1,110)
------------------- --------- -------- -------- --------
The following table presents the Group's financial instruments
that are measured at fair value at 30 June 2015.
Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Forward exchange
contracts - 456 - 456
Total assets - 456 - 456
------------------- --------- -------- -------- --------
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 2016 30 June 2015
GBP'000 GBP'000
Current 1,146 726
Non-current 5,765 1,125
Total 6,911 1,851
------------- ------------- -------------
The fair value of the following financial assets and liabilities
approximate to their carrying amount:
-- Trade and other receivables
-- Other current financial assets
-- Cash and cash equivalents
-- Trade and other payables
-- Other current liabilities
11. RELATED PARTY TRANSACTIONS
There were no material related party transactions requiring
disclosure for the periods ended 30 June 2016 and 30 June 2015.
12. BORROWINGS
On 1 March 2016 the Group and Company reduced its overdraft
facility from GBP4.9m to GBP2.0m and took out a 4 year
multi-currency revolving credit facility ('RCF') for GBP8m secured
on the property and book debts of the Company. This facility has
financial covenants on net debt/EBITDA and EBIT/gross financing
costs ratios. The group also took out an $8m mortgage in the prior
year, which is being repaid over 10 years.
13. CAPITAL COMMITMENTS
Capital expenditure commitment of GBP9.5m has been contracted
for at the end of the reporting period but not yet incurred, and is
in respect of Property, Plant and Equipment.
14. EXCEPTIONAL ITEMS
Items that are material either because of their size or their
nature, or that are non-recurring are considered as exceptional
items and are presented within the line items to which they best
relate. During the period, the exceptional item related to
redundancy costs totalling GBP262k, as a result of the efficiency
improvement programme, which have been included in the income
statement as an operating exceptional cost.
15. EVENTS OCCURING AFTER THE REPORTING PERIOD
An interim dividend of 1.85p per share (2015: 1.80p per share)
was proposed by the board of directors on 1 August 2016. It is
payable on 13 October 2016 to shareholders who are on the register
at 16 September 2016. This interim dividend has not been recognised
as a liability in this interim financial information. It will be
recognised in shareholders' equity in the year to 31 December
2016.
INDEPENDENT REVIEW REPORT TO ZOTEFOAMS PLC
Report on the Interim Results
Our conclusion
We have reviewed Zotefoams plc's Interim Results (the "interim
financial statements") in the Interim Report for the 6 month period
ended 30 June 2016. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 30 June 2016;
-- the condensed consolidated income statement and condensed
consolidated 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.
The interim financial statements included in the Interim Report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Rules and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, 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.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Report, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the Interim Report in
accordance with the Disclosure Rules and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Report 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 Rules and Transparency Rules of the United Kingdom's
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.
What a review of interim financial statements involves
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
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Gatwick
1 August 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UGUQGRUPQPGG
(END) Dow Jones Newswires
August 02, 2016 02:01 ET (06:01 GMT)
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