TIDMZTF
RNS Number : 9774W
Zotefoams PLC
07 August 2018
Tuesday 7 August 2018
Zotefoams plc
Interim Report for the Six Months Ended 30 June 2018
Continuing strong organic sales growth
Capacity investment projects on track
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 2018.
Highlights
-- Record Group Revenue of GBP37.89m, up 12% on prior year
(2017: GBP33.84m) and 17% in constant currency:
o 4% increase in Polyolefin Foams supported by new USA
capacity
o 82% growth in High Performance Products ("HPP"), which now
represents 24% (2017: 15%) of Group sales
o MuCell Extrusion sales of GBP0.86m (2017: GBP1.96m) with 20%
underlying growth excluding the large, one-off capital equipment
sale in 2017
-- Profit before tax and exceptional item up 21% to GBP4.60m (2017: GBP3.81m)
-- Profit before tax up 64% to GBP4.60m (2017: GBP2.81m)
-- Successful bank refinancing and GBP20.6m equity raise (before expenses) completed in May
-- Three major capital projects to expand capacity to support growth are on schedule
-- Interim dividend increased by 3.1% to 1.97 pence
-- The Group continues to trade in line with Board expectations
Financial highlights
Six months Six months Change
ended 30 ended 30
June 2018 June 2017
GBPm GBPm %
Group Revenue 37.89 33.84 12
Gross Profit 12.92 12.02 7
Gross Profit margin 34.1% 35.5% (4)
Adjusted1 Operating Profit 5.17 4.26 21
Operating Profit pre exceptional
item 5.02 4.10 22
Operating Profit 5.02 3.10 62
Adjusted1 Profit before tax 4.75 3.97 20
Profit before tax pre exceptional
item 4.60 3.81 21
Profit before tax 4.60 2.81 64
Basic EPS (p) pre exceptional
item 8.07 7.04 15
Basic EPS (p) 8.07 5.20 55
Interim dividend (p) 1.97 1.91 3
(1) Before amortisation of acquired intangible assets GBP0.15m;
(2017 GBP0.16m) and exceptional items GBPnil; 2017: GBP1.0m)
Commenting on the results, David Stirling, Group CEO, said:
"Zotefoams' ambition is to be the world leader in cellular
materials technology in our chosen markets and, in the period, we
have delivered strong organic growth and accelerated our investment
plans to realise this ambition.
In the first half of 2018 we also commissioned the initial phase
of capacity expansion in Kentucky, USA, which allowed us to
increase sales volumes in what remains a capacity constrained
environment. Sales of higher value High Performance Products have
grown very strongly and now represent 24% (2017: 15%) of Group
sales. We enter the second half of the year with a strong order
book, a differentiated product portfolio and continued growth
expectations across all business units.
The Group continues to trade in line with the Board's
expectations and the Board remains confident in the future
prospects for the business".
Enquiries:
Zotefoams plc +44 (0) 208 664 1600
David Stirling, Group CEO
Gary McGrath, Group CFO
IFC Advisory +44 (0) 203 934 6630
Graham Herring
Miles Nolan
Zach Cohen
About Zotefoams plc
Zotefoams plc (LSE - ZTF) is a world leader in cellular
materials technology. Utilising a variety of unique manufacturing
processes, including environmentally friendly nitrogen expansion
for lightweight AZOTE(R) polyolefin and ZOTEK(R) high-performance
foams, Zotefoams sells to diverse markets worldwide. Zotefoams uses
its own cellular materials to manufacture T-FIT(R) advanced
insulation for demanding industrial markets. In addition, Zotefoams
owns and licenses patented MuCell(R) microcellular foam technology,
developed specifically for extrusion applications, from a base in
Massachusetts, USA to customers worldwide.
Zotefoams is headquartered in Croydon, UK, with additional
manufacturing sites in Kentucky and Oklahoma, USA (foam products
manufacture and conversion), Massachusetts, USA (MuCell Extrusion)
and Jiangsu Province, China (T-FIT(R)). A third foam-manufacturing
site, in Poland, is planned to begin operations in 2020.
www.zotefoams.com
AZOTE(R), ZOTEK(R), T-FIT(R) are registered trademarks of
Zotefoams plc
MuCell(R) is a registered trademark of Trexel Inc.
Results overview
In the first six months of 2018 Group revenue increased by 12%
to a record GBP37.89m (2017: GBP33.84m). In constant currency,
growth was 17%, with particularly strong sales performance in our
HPP business and continued good progress in Polyolefin Foams.
Gross profit increased by 7% to GBP12.92m (2017: GBP12.02m) with
improved volumes, a strong positive mix impact from our HPP
business growth and price increases in polyolefin foams across the
UK and Europe. Our gross margin percentage moved from 35.5% in 2017
to 34.1%, reflecting unfavourable foreign exchange movements and
higher overhead and non-optimal running costs as we started up
polyolefin capacity in the USA.
In H1 2018 profit before tax and exceptional item grew by 21% to
GBP4.60m (2017: GBP3.81m), while profit before tax was up 64% to
GBP4.60m (2017: GBP2.81m). In H1 2017 the Group reported an
exceptional item in relation to the breakage of salary linkage of
its Defined Benefit Pension Scheme, amounting to GBP1.0m.
Basic earnings per share before exceptional item increased to
8.07p (2017: 7.04p) and includes the two-month impact of the equity
raise completed in May 2018. The Directors have decided to increase
the interim dividend to 1.97p per share (2017: 1.91p), an increase
of 3.1%, reflecting the Board's continued confidence in the Group's
future.
Financial and operational review
High-Performance Products ('HPP')
HPP sales almost doubled in constant currency, to GBP9.70m
(2017: GBP4.98m). This increase was predominantly a result of very
strong growth in footwear products as our foam becomes established
in more shoe models. Footwear is now the largest market within HPP.
We also saw strong growth in ZOTEK(R) F fluoropolymer foams,
against a weaker comparative which had been adversely affected by
an aviation customer destocking. ZOTEK(R) N nylon foam and our
T-FIT(R) insulation products reported small absolute declines in
revenue, although these were timing-related, and we remain excited
about the long-term growth prospects of these products. In
reporting currency sales of GBP9.04m were 82% above the previous
year (2017: GBP4.98m).
The segment profit in HPP is an aggregate of products and
markets at different stages of development. Within this portfolio
ZOTEK(R) PEBA and ZOTEK(R) F foams, mainly used for footwear and
aviation respectively, have both reached a scale such that they are
now profitable, and we are focusing on cycle time and material
efficiency in advance of additional equipment commissioning to
increase capacity for these products scheduled in H1 2019. T-FIT(R)
insulation has a mixture of profitable lines and earlier stage
products, with investment in operational capability in China and
sales teams globally. We intend to continue with both this
investment and that in nylon foam, both of which we believe offer
good potential to support our long-term ambition. Segment profit in
HPP increased by 158% to GBP1.68m (2017: GBP0.65m), delivering a
19% segment profit margin for the period (2017: 13%).
Polyolefin Foams
In constant currency, sales in Polyolefin Foams increased by 7%
to GBP29.4m (2017: GBP27.5m), with volumes 3% ahead of 2017. This
sales increase was tempered as we operated at capacity during the
period, as HPP took a higher allocation of UK capacity and our USA
facility ramped up output in the second quarter. As a consequence
of this, some capacity allocation decisions were required across
the product range and in most geographical markets. In continental
Europe, our largest market, sales increased by 12% with
transportation and industrial sales particularly strong. In the UK
revenue grew 3% while in North America, which was most impacted by
capacity allocation, sales increased 2%. Sales in other
geographies, representing 7% of Polyolefin Foams revenue, were
relatively flat due to our allocation policies. In reporting
currency, Polyolefin Foams sales increased 4% to GBP27.98m (2017:
GBP26.90m).
Segment profit in Polyolefin Foams, before exceptional items,
declined by 21% to GBP4.55m (2017: GBP5.73m), as the benefit of
increased sales volume, better average sales prices and lower
average input costs for our main raw material, low density
polyethylene ('LDPE'), was more than offset by additional
depreciation and operating costs in the recently commissioned USA
capacity expansion. While the additional costs of operating this
facility were expected, a slower than planned ramp-up of capacity
resulted in less favourable operating leverage, additional shipping
costs from the UK to support North American customers and higher
than normal scrap levels. This situation is largely resolved at
this time and we are continuing to work through a sales backlog and
deliver operational efficiency improvements, the last of which will
come on line late in Q4. This delivered a segment profit margin of
16% (2017: 21%).
MuCell Extrusion LLC ('MEL')
MEL licenses microcellular foam technology and sells related
machinery. Sales in the period were GBP0.86m (2017: GBP1.96m) with
2017 benefiting from the shipment of a full extrusion line to a
customer in Japan, representing MEL's largest individual equipment
order. Excluding the extruder shipment from 2017, in constant
currency total sales increased by 20%, with licence and royalty
fees also increasing by 20%. We continue to make progress in
developing our technology and selling equipment to convert
additional licensee lines but at a pace which has not been in line
with the longer-term goals of the Zotefoams Group. A recent review
has resulted in a more focused organisational structure with
clarity on the required engineering and support staff to deliver to
the potential of the technology.
MEL reported a segment loss after amortisation costs of GBP0.78m
(2017: loss GBP0.87m, which included a one-off charge of GBP0.31m
arising from inventory adjustments).
Currency review
As a predominantly UK-based exporter, Zotefoams has over 80% of
its sales denominated in US dollars and euros. With most costs
incurred in sterling, other than the main raw materials processed
at the Croydon, UK, plant, which are in euros, and the operating
costs of the Group's US and Chinese activities, which are in US
dollars, movements in foreign exchange rates can have a significant
impact on the Group's results. The average Euro rate was 1.14:GBP1
for the first six months of 2018 (equivalent 2017 rate 1.16:GBP1)
and the average US dollar rate was 1.38:GBP1 (equivalent 2017 rate
1.27:GBP1).
The period-end exchange rates and the movement between the
period opening and closing rates generated a combined forward
contract and non-cash translation gain of GBP0.67m (2017: loss of
GBP0.27m), offsetting movements related to trading activity, which
is included in administration expenses.
Investment in organisation
The Group continues to pursue its expansion strategy, founded on
proprietary cellular-materials technology with an increasing
portfolio of differentiated products.
Organic growth with unique products requires the Group to
actively invest in manufacturing, processing and engineering
capability to deliver the new capacity coming on-stream around the
world. Within cost of sales, these costs increased by GBP1.5m in H1
2018 vs the previous period.
This organic growth also requires investment in, and
reprioritisation of technical, sales-focused and administration
resources to create, execute and manage this growth. Included
within distribution and administrative expenses in the Group's
Income Statement are sales and marketing, warehousing, technical
development, finance, information systems and administration costs
as well as the impact of foreign exchange hedges maturing in the
period and non-cash foreign exchange translation expenses. These
costs, excluding the impact of foreign exchange hedges and
translation, increased by a further GBP0.92m to GBP8.56m in H1 2018
(2017: GBP7.65m). The Group expects this investment to continue as
it progresses its strategy of mix enrichment and completes its
ongoing capital investments.
Group financing
In May 2018 the Group completed a debt refinancing to enable it
to continue to grow capacity and meet its expected demand growth
securing increased facilities of GBP57.5m (up 64% from previous
facilities of approximately GBP35m) at improved pricing. The
Facility comprises a GBP25 million multi-currency term loan, a
GBP25 million multi-currency revolving credit facility and a
further GBP7.5 million sterling annually renewable term loan. The
negotiated facility also includes a GBP25 million accordion feature
to provide additional flexibility to pursue further investment
opportunities in the future.
Simultaneously, the Group successfully raised GBP20.6m (before
expenses) of equity through a placing, with proceeds intended for
investment in a new Central European foam manufacturing
facility.
Tax and cash flow
Zotefoams' estimated average annual tax rate used for the period
to 31 December 2018 is 21.41% (31 December 2017: 20.40%), which is
above the UK corporation tax rate for the period of 19% due to
differences in tax rates across jurisdictions. Cash used in
operations was GBP0.63m (2017: generated from operations GBP5.80m),
impacted by net investment in working capital in the period of
GBP7.82m, mainly growth, mix and timing related. Capital
expenditure was GBP5.75m (2017: GBP4.96m), primarily related to
completing the capacity expansion project in Kentucky, USA as well
as investing in high-temperature low-pressure vessels at the
Croydon, UK, manufacturing facility.
After the net cash inflow of GBP20.08m from the May equity
raise, net debt (cash less bank overdrafts and other bank
borrowings) decreased by GBP10.82m from GBP17.96m (December 2017)
to GBP7.14m.
Pensions
A full actuarial valuation of the Defined Benefit Pension Scheme
(DB Scheme) as at 5 April 2017, in line with the requirement to
have a triennial valuation, was completed during the period and
calculated a deficit for the DB Scheme, on a Statutory Funding
Objective basis, of GBP4.18m (up from the previous deficit of
GBP2.50m). As a result, the Company has agreed with the Trustees to
make contributions to the DB Scheme of GBP43,300 per month until
October 2026 to eliminate this deficit, up from GBP41,000 per month
previously. In addition, the Company will pay the ongoing DB Scheme
expenses of GBP15,000 per month (previously GBP10,600).
In the previous period, following legal advice received by the
pension trustees and an estimate calculated by the actuaries, the
Company provided GBP1m for potential additional liabilities, which
was treated as an exceptional item. In the period to June 2018 the
process of obtaining informed consent from members of the DB
Scheme, to close the scheme effectively, was completed. 70% of the
affected members of the scheme consented and a majority of these
members are in the higher salary bands, resulting in a low risk of
material exposure.
Capital expenditure
Zotefoams is investing significantly in capacity to support
future growth. In March 2018 the Group successfully commissioned
its full process capability in Kentucky, USA, which cost a total of
approximately $33m, including a second high-pressure autoclave for
future commissioning, and increases global capacity by
approximately 20%. In March 2018 the Group announced the investment
of $9m to proceed with the commissioning of that second autoclave,
with an expected commissioning date of late 2019. Furthermore, the
Group has been investing, since December 2017, in additional
high-temperature, low-pressure capacity at its Croydon, UK, plant,
expected to come on stream during 2019, with a total investment
cost of approximately GBP12m which, although capable of expanding
all foams produced by Zotefoams, is targeted at the fast-growing
HPP business. And most recently, in May 2018, the Group raised new
equity and debt to support investment in a new foam manufacturing
plant in Poland, expected to become operational in 2020 and to cost
approximately GBP23m to cover land, buildings and the first phase
of capacity. All capital projects remain on target for their
scheduled completion dates.
Employees and talent management
Talent management continues to be very important to Zotefoams as
it grows and evolves, both in the UK and overseas. 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
continued to recruit to meet the needs of our business.
On behalf of the Board, we would like to thank all 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 3.1%%
to 1.97 pence per share (2017: 1.91 pence). The dividend will be
paid on 11 October 2018 to shareholders on the Company's register
at the close of business on 14 September 2018.
Principal risks and uncertainties
Zotefoams' business and share price may be affected by a number
of risks, not all of which are within its control. The process
Zotefoams has in place for identifying, assessing and managing
risks is set out in the Risk Statement and Principal Risks section
on pages 23 to 29 of the 2017 Annual Report. 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 2017 Annual Report.
Broadly, these risks include operational disruption, operational
execution, technology change and competitor activity, people,
operational span of control, supply chain disruption, foreign
exchange, macro-economic factors, financing, commercial, pension
and operational cyber threats.
Current trading and prospects
In our AZOTE(R) Polyolefin Foams business the additional
capacity from our Kentucky facility will allow us to deliver
against a strong order book through to the end of 2018. In HPP we
anticipate sales to increase further with demand for all product
lines expected to be higher than first half shipments. In MEL we
expect sales to be higher than in the first half as there is a
normal seasonality in this business and underlying growth, although
with both MEL and T-FIT(R) there is a higher than normal timing
risk to revenue linked to customer project completions. Foreign
exchange rates are currently at similar levels to those experienced
in the second half of 2017 and therefore we anticipate no
significant transactional impact for the remainder of the year.
Indications are that pricing of Low Density Polyethylene ("LDPE"),
our major raw material, will remain at a similar level to the first
six months of this year.
Outlook
We enter the second half of the year with a strong order book, a
differentiated product portfolio, continued good growth
expectations across all business units, and progressing as expected
with our capacity expansion projects in the USA, UK and Poland.
The Group continues to trade in line with the Board's
expectations and the Board remains confident in the future
prospects for the business.
S P Good D B Stirling
Chairman Group CEO
6 August 2018 6 August 2018
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
financial statements have 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 2017, with the exception of the
following change in the period: Mr Richard Clowes retired on 16 May
2018. A list of current Directors is maintained on the Zotefoams
plc website: www.zotefoams.com
By order of the Board:
S P Good G C McGrath
Chairman Group CFO
6 August 2018 6 August 2018
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT FOR THE SIX
MONTHSED 30 JUNE 2018
Six months ended Year ended
--------------------------
30-Jun-18 30-Jun-17 31-Dec-17
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
Revenue 6 37,888 33,842 70,146
Cost of sales (24,972) (21,826) (44,659)
------------------------------------- ------ ------------ ------------ -----------
Gross profit 12,916 12,016 25,487
Distribution costs (3,432) (2,603) (5,754)
Administrative expenses before
exceptional item (4,460) (5,313) (10,359)
Exceptional item - (1,000) (1,265)
Administrative expenses after
exceptional item (4,460) (6,313) (11,624)
------------------------------------- ------ ------------ ------------ -----------
Operating profit 5,024 3,100 8,109
------------------------------------- ------ ------------ ------------ -----------
Operating profit before exceptional
item 5,024 4,100 9,374
------------------------------------- ------ ------------ ------------ -----------
Finance costs (419) (287) (508)
Share of loss from joint venture (3) (6) (53)
------------------------------------- ------ ------------ ------------ -----------
Profit before income tax 4,602 2,807 7,548
Profit before income tax and exceptional
item 4,602 3,807 8,813
Income tax expense 7 (983) (530) (1,540)
------------------------------------- ------ ------------ ------------ -----------
Profit for the period/year 3,619 2,277 6,008
Profit for the period/year
before exceptional item 3,619 3,084 7,033
------------------------------------- ------ ------------ ------------ -----------
Profit attributable to:
Owners of the Parent 3,619 2,277 6,008
------------------------------------- ------ ------------ ------------ -----------
3,619 2,277 6,008
Earnings per share attributable
to the equity holders of the
parent during the period/year
(expressed in pence per share)
Basic earnings per share 10 8.07 5.20 13.70
------------------------------------- ------ ------------ ------------ -----------
Diluted earnings per share 10 7.94 5.11 13.52
------------------------------------- ------ ------------ ------------ -----------
The notes below form an integral part of these condensed
consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2018
Six months ended Year ended
--------------------------
30-Jun-18 30-Jun-17 31-Dec-17
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------
Profit for the period/year 3,619 2,277 6,008
------------------------------------------------ ------------ ------------ -----------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss
Actuarial gains on defined benefit pension
schemes - - 2,080
Tax relating to items that will not
be reclassified - - (502)
------------------------------------------------ ------------ ------------ -----------
Total items that will not be reclassified
to profit or loss - - 1,578
------------------------------------------------ ------------ ------------ -----------
Items that may be reclassified subsequently
to profit or loss
Effective portion of changes in fair
value of cash flow hedges (372) 497 508
Tax relating to items that may be reclassified 63 (94) (93)
Foreign exchange translation gains/(losses)
on investment in foreign subsidiaries 371 (2,081) (3,336)
------------------------------------------------ ------------ ------------ -----------
Total items that may be reclassified
subsequently to profit or loss 62 (1,678) (2,921)
------------------------------------------------ ------------ ------------ -----------
Other comprehensive income/(expense)
for the period/year, net of tax 62 (1,678) (1,343)
------------------------------------------------ ------------ ------------ -----------
Total comprehensive income for the period/year 3,681 599 4,665
------------------------------------------------ ------------ ------------ -----------
Total comprehensive income attributable
to owners of the parent for the period/year 3,681 599 4,665
------------------------------------------------ ------------ ------------ -----------
The notes below form an integral part of these condensed
consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
30-Jun-18 30-Jun-17 31-Dec-17
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
---------------------------------- ------ ------------ ------------ ----------
Assets
Non-current assets
Property, plant and equipment 58,533 50,975 54,116
Intangible assets 6,582 7,080 6,681
Investments in joint venture 86 136 89
Deferred tax assets 442 859 362
---------------------------------- ------
65,643 59,050 61,248
---------------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 16,516 12,244 14,710
Trade and other receivables 25,631 19,844 19,733
Derivative financial instruments 4 223 213
Cash and cash equivalents 5,802 2,530 4,360
---------------------------------- ------ ------------ ------------ ----------
47,953 34,841 39,016
---------------------------------- ------ ------------ ------------ ----------
Total assets 113,596 93,891 100,264
---------------------------------- ------ ------------ ------------ ----------
Liabilities
Current liabilities
Trade and other payables (10,641) (11,730) (10,429)
Derivative financial instruments (222) (80) (59)
Current tax liability (1,939) (1,489) (1,662)
Interest-bearing loans and
borrowings 12 (7,477) (10,251) (11,316)
Bank overdraft - (1,104) (2,550)
---------------------------------- ------ ------------ ------------ ----------
(20,279) (24,654) (26,016)
---------------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Interest-bearing loans and
borrowings 12 (5,466) (4,869) (8,450)
Deferred tax liabilities (614) (550) (540)
Post-employment benefits (5,986) (8,311) (6,168)
---------------------------------- ------ ------------ ------------ ----------
(12,066) (13,730) (15,158)
---------------------------------- ------ ------------ ------------ ----------
Total liabilities (32,345) (38,384) (41,174)
---------------------------------- ------ ------------ ------------ ----------
Total net assets 81,251 55,507 59,090
---------------------------------- ------ ------------ ------------ ----------
Equity
Issued share capital 14 2,415 2,221 2,221
Share premium 14 44,178 24,340 24,340
Own shares held (21) (27) (26)
Capital redemption reserve 15 15 15
Translation reserve 2,982 3,866 2,611
Hedging reserve (213) 84 96
Retained earnings 31,895 25,008 29,833
---------------------------------- ------ ------------ ------------ ----------
81,251 55,507 59,090
---------------------------------- ------ ------------ ------------ ----------
The notes below form an integral part of these condensed
consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE
SIX MONTHSED 30 JUNE 2018
Six months ended Year ended
--------------------------
30-Jun-18 30-Jun-17 31-Dec-17
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ -----------
Cash flows from operating activities
Profit for the period/year 3,619 2,277 6,008
Adjustments for:
Depreciation and amortisation 2,289 1,649 3,496
Finance costs 419 287 508
Share of loss from joint venture 3 6 53
Employee defined benefit service
charges - 1,000 1,235
Equity-settled share-based payments 182 240 459
Taxation 983 530 1,540
---------------------------------------- ------------ ------------ -----------
Operating profit before changes
in working capital and provisions 7,495 5,989 13,299
Increase in trade and other
receivables (6,045) (326) (99)
Increase in inventories (1,938) (341) (2,795)
Increase in trade and other
payables 166 796 190
Decrease in post-employment
benefits (309) (318) (619)
---------------------------------------- ------------ ------------ -----------
Cash (used in)/generated from
operations (631) 5,800 9,976
Interest paid (272) (108) (301)
Income taxes paid (773) (208) (943)
---------------------------------------- ------------ ------------ -----------
Net cash flows (used in)/ from
operating activities (1,676) 5,484 8,732
---------------------------------------- ------------ ------------ -----------
Cash flows from investing activities
Purchases of intangibles (119) (78) (360)
Proceeds on disposal of property,
plant and equipment - - 4
Purchases of property, plant
and equipment (5,629) (4,885) (11,385)
---------------------------------------- ------------ ------------ -----------
Net cash used in investing activities (5,748) (4,963) (11,741)
---------------------------------------- ------------ ------------ -----------
Cash flows from financing activities
Proceeds from options exercised
and issue of share capital 31 - 30
Proceeds of share issue, net
of expenses 20,078 - -
Repayment of borrowings (43,294) (651) (1,309)
Proceeds from borrowings, net
of expenses 36,476 1,500 6,605
Dividends paid (1,763) (1,710) (2,547)
---------------------------------------- ------------ ------------ -----------
Cash flows from/ (used in) financing
activities - net 11,528 (861) 2,779
---------------------------------------- ------------ ------------ -----------
Net increase/(decrease) in cash,
cash equivalents and bank overdrafts 4,104 (340) (230)
Cash, cash equivalents and bank
overdrafts at start of period/year 1,810 2,063 2,063
Exchange losses (112) (297) (23)
---------------------------------------- ------------ ------------ -----------
Cash and cash equivalents at
end of period/year 5,802 1,426 1,810
---------------------------------------- ------------ ------------ -----------
Cash and cash equivalents comprises:
Bank overdrafts - (1,104) (2,550)
Cash at bank and in hand 5,802 2,530 4,360
---------------------------------------- ------------ ------------ -----------
Cash and cash equivalents 5,802 1,426 1,810
---------------------------------------- ------------ ------------ -----------
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 an integral part of these condensed
consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2018
Own Capital
Share Share shares redemption Translation Hedging Retained Total
capital premium held reserve reserve reserve earnings equity
Notes GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance as at 1
January
2018 2,221 24,340 (26) 15 2,611 96 29,833 59,090
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Profit for the
period - - - - - - 3,619 3,619
Foreign exchange
translation
gains
on investment in
subsidiaries - - - - 371 - - 371
Effective portion
of changes in
fair
value of cash
flow
hedges net of
recycling - - - - - (372) - (372)
Tax relating to
effective
portion of
changes
in fair value of
cash flow hedges
net of recycling - - - - - 63 - 63
Actuarial loss on
defined benefit
pension
scheme - - - - - - - -
Tax relating to
actuarial
loss on defined
benefit
pension scheme - - - - - - - -
Total
comprehensive
income/(expense) - - - - 371 (309) 3,619 3,681
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Transactions with
owners of the
Parent:
Options exercised - - 5 - - - 26 31
Proceeds from
shares
issued, net of
expenses 14 194 19,838 - - - - - 20,032
Equity-settled
share-based
payments net of
tax - - - - - - 180 180
Dividends 9 - - - - - - (1,763) (1,763)
Total
transactions
with owners,
recognised
directly in
equity 194 19,838 5 - - - (1,557) 18,480
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Balance at 30
June
2018 (Unaudited) 2,415 44,178 (21) 15 2,982 (213) 31,895 81,251
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Own Capital
Share Share shares redemption Translation Hedging Retained Total
capital premium held reserve reserve reserve earnings equity
Notes GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1
January
2017 2,221 24,340 (31) 15 5,947 (319) 24,210 56,383
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Profit for the
period - - - - - - 2,277 2,277
Foreign exchange
translation
losses
on investment in
subsidiaries - - - - (2,081) - - (2,081)
Effective portion
of changes in
fair
value of cash
flow
hedges net of
recycling - - - - - 497 - 497
Tax relating to
effective
portion of
changes
in fair value of
cash flow hedges
net of recycling - - - - - (94) - (94)
Total
comprehensive
(expense)/
income - - - - (2,081) 403 2,277 599
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Transactions with
owners of the
Parent: - - - - - - - -
Options exercised - - 4 - - - (4) -
Equity-settled
share-based
payments net of
tax - - - - - - 235 235
Dividends 9 - - - - - - (1,710) (1,710)
Total
transactions
with owners,
recognised
directly in
equity - - 4 - - - (1,479) (1,475)
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
Balance at 30
June
2017 (Unaudited) 2,221 24,340 (27) 15 3,866 84 25,008 55,507
------------------ ------ -------- --------- -------- -------------------- ---------------------- ------------------- --------- --------
During the six months period ended 30 June 2018, 117,593 (June
2017: 79,512) shares vested and were issued from the Zotefoams
Employee Benefit Trust ('EBT') following the exercise of these
options.
The notes below form an integral part of these condensed
consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2018
1. GENERAL INFORMATION
Zotefoams plc ('the 'Company') and its subsidiaries and joint
venture (together, 'the Group') manufacture and sell
high-performance foams and license related technology for
specialist markets worldwide.
The Group has manufacturing sites in the UK, the US and
China.
The Company is a public limited company which is listed on the
London Stock Exchange and incorporated and domiciled in the UK. The
address of the registered office is 675 Mitcham Road, Croydon, CR9
3AL.
These condensed consolidated interim financial statements were
approved for issue on 7 August 2018.
These condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31
December 2017 were approved by the Board of Directors on 6 April
2018 and delivered to the Registrar of Companies. The report of the
auditors 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.
These condensed consolidated interim financial statements have
been reviewed, not audited.
These condensed consolidated interim financial statements for
the six months ended 30 June 2018 have been prepared in accordance
with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority and with IAS 34, 'Interim financial
reporting', as adopted by the European Union. The condensed
consolidated interim financial statements should be read in
conjunction with the annual financial statements for the year ended
31 December 2017, which have been prepared in accordance with IFRSs
as adopted by the European Union.
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. As 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 basis
The Group both refinanced its debt facilities and raised new
equity in May 2018 generating sufficient liquidity to support its
medium-term growth expectations. The Group meets its day-to-day
working capital requirements through its bank facilities. The
Group's forecasts and projections, taking account of reasonably
possible changes in trading performance and accounting for the
Group's ability to control the timing of its capital expenditure
projects, show that the Group should be able to operate within the
level of its current facilities. After making enquiries, the
directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements.
Having reassessed the principal risks, the directors considered it
appropriate to adopt the going concern basis of accounting in
preparing its condensed consolidated interim financial
statements.
2. BASIS OF PREPARATION
ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the
previous financial year except as described below.
-- The Group has had to change its accounting policies as a
result of adopting the following new standards:
o IFRS 9 'Financial Instruments'
o IFRS 15 'Revenue from Contracts with Customers'
The above accounting standards became effective from 1 January
2018. No material retrospective adjustments have been made or
prospective adjustments expected as of date.
-- A number of amendments to IFRSs became effective for the
financial year beginning on 1 January 2018. The other standards did
not have any impact on the Group's accounting policies and did not
require retrospective adjustments. The Group has made further
progress in assessing the potential impact of IFRS 16 and expects
to complete its assessment before end of year.
-- Taxes on income in the interim periods are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
Standards issued but not yet applied
IFRS 16 'Leases' is effective and will be applied for the
financial year beginning on 1 January 2019. The interim results for
FY19 will be IFRS 16 compliant with the first annual report
published in accordance with IFRS 16 being the 31 December 2019
report.
On the adoption of IFRS 16, lease agreements will give rise to
both a right-of-use asset and a lease liability for future lease
payables. The lease liability will be initially measured based on
the present value of lease payments to be made, excluding any
contingent rentals, over the lease term. The lease term includes
any extension options reasonably certain of being exercised. The
right-of-use asset will be initially measured at the value of the
lease liability plus any initial direct costs, less any impairment
provisions and will be depreciated on a straight-line basis over
the life of the lease. Interest will be recognised on the lease
liability as the discount unwinds, resulting in a higher interest
expense in the earlier years of the lease term. The total expense
recognised in the Income Statement over the life of the lease will
be unaffected by the new standard. However, IFRS 16 will result in
the timing of lease expense recognition being accelerated for
leases which would be currently accounted for as operating
leases.
The Group plans to adopt a modified retrospective transition
approach and so comparative information will not be adjusted.
Rather the cumulative effect of initially applying the standard is
recognised as an adjustment to the opening Statement of Financial
Position. On transition the Group will measure the right-of-use
asset at the value of the lease liability plus any initial direct
costs, less any impairment provisions.
The Group also plans to take advantage of the following
practical expedients in adopting IFRS 16:
-- application of a single discount rate to a portfolio of
leases with similar characteristics and
-- electing not to apply IFRS 16 requirements to leases with a
lease term that ends within 12 months of the date of initial
application.
3. ESTIMATES AND JUDGEMENTS
The preparation of 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 expense. 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 for the year
ended 31 December 2017, with the exception of changes in
estimates that are required in determining the provision for income
taxes.
4. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk and interest rate
risk), credit risk and liquidity risk.
The condensed consolidated 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 2017.
There have been no changes in the risk management department or
in any risk management policies since the year end. Refer to note
13 for changes to the Group's risks arising from developments
during the six-month period ended 30 June 2018.
5. SEASONALITY OF OPERATIONS
The seasonality of the Groups' 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 the Group sells into a wide variety of business segments,
many of which are themselves cyclical.
6. SEGMENT REPORTING
The Group's operating segments are reported in a manner
consistent with the internal reporting provided to and regularly
reviewed by the Group Chief Executive Officer, David Stirling, who
is considered to be the 'chief operating decision maker' for the
purpose of evaluating segment performance and allocating
resources.
The Group manufactures and sells high-performance foams and
licenses related technology for specialist markets worldwide.
Zotefoams' activities are categorised as follows:
-- Polyolefins foams: these foams are made from olefinic
homopolymer and copolymer resin. The most common resin used is
polyethylene.
-- High-Performance Products ('HPP'): these foams exhibit
high-performance on certain key properties, such as improved
chemical, flammability or temperature performance or energy
management performance. Turnover in the segment is currently mainly
derived from products manufactured from three main polymer types:
PVDF fluoropolymer, polyamide (nylon) and polyether block amide
(PEBA). Foams are sold under the brand names ZOTEK(R) while
technical insulation products manufactured from certain materials
are branded as T-FIT(R).
-- MuCell Extrusion LLC ('MEL'): licenses microcellular foam
technology and sells related machinery.
Polyolefins HPP MEL Eliminations Consolidated
------------------------------------- ------------------- ------------------ ----------------------------- --------------------
2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1
---------------------
Six months ended 30
June (Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------------------------- --------- --------- -------- -------- -------- -------- ------------------- --------- ---------
Group revenue 27,982 26,905 9,044 4,979 862 1,958 37,888 33,842
Segment
profit/(loss)
before amortisation 4,552 5,728 1,683 652 (633) (704) 5,602 5,676
Amortisation of
acquired intangible
assets - - - - (150) (165) (150) (165)
--------------------- -------------------------- --------- --------- -------- -------- -------- -------- ------------------- --------- ---------
Segment
profit/(loss) 4,552 5,728 1,683 652 (783) (869) - - 5,452 5,511
Foreign exchange
gains/ (losses) 672 (266)
Unallocated central
costs (1,100) (1,145)
--------------------- -------------------------- --------- --------- -------- -------- -------- -------- ------------------- --------- ---------
Operating profit
before exceptional
items 5,024 4,100
Financing costs (419) (287)
Share of loss from
joint venture (3) (6)
Taxation (before
exceptional items) (983) (723)
--------------------- -------------------------- --------- --------- -------- -------- -------- -------- ------------------- --------- ---------
Profit for the year
(before exceptional
items) 3,619 3,084
Segment assets 81,090 73,535 23,829 10,576 8,145 8,562 - - 113,064 92,673
Unallocated assets 532 1,218
--------------------- -------------------------- --------- --------- -------- -------- -------- -------- ------------------- --------- ---------
Total assets 113,596 93,891
Segment liabilities (18,394) (33,855) (10,671) (1,606) (505) (804) - - (29,570) (36,265)
Unallocated
liabilities (2,775) (2,119)
--------------------- -------------------------- --------- --------- -------- -------- -------- -------- ------------------- --------- ---------
Total liabilities (32,345) (38,384)
Geographical segments
Polyolefin foams are managed regionally but operate from the UK
and the US locations. HPP and MEL are managed on a worldwide basis
but operate from the UK, the US and Asian locations. In presenting
information on the basis of geographical segments, segmental
revenue is based on the geographical location of customers. Segment
assets are based on the geographical location of assets.
United Kingdom Europe North America Rest of the world Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
------------------------------------- --------------- ------------ -------------- ------------------ ------------
For the period ended 30 June 2018
Group revenue from external
customers 6,217 14,748 9,300 7,623 37,888
Non-current assets 32,766 - 32,480 396 65,642
------------------------------------- --------------- ------------ -------------- ------------------ ------------
For the period ended 30 June 2017
Group revenue from external
customers 6,409 12,454 9,757 5,222 33,842
Non-current assets 30,082 - 28,345 623 59,050
------------------------------------- --------------- ------------ -------------- ------------------ ------------
Analysis of revenue by category
Breakdown of revenues by products and services for the
Group:
Six months ended
--------------------------
30-Jun-18 30-Jun-17
(Unaudited) (Unaudited)
GBP'000 GBP'000
---------------------------- ------------ ------------
Sale of foam 37,026 31,884
Licence and royalty income 536 464
Sale of equipment 326 1,494
---------------------------- ------------ ------------
Total 37,888 33,842
---------------------------- ------------ ------------
7. INCOME TAX EXPENSE
Six months ended
--------------------------
30-Jun-18 30-Jun-17
(Unaudited) (Unaudited)
GBP'000 GBP'000
UK corporation tax 1041 611
Overseas tax 9 27
--------------------- ------------ ------------
Total current tax 1,050 638
Deferred tax (67) (108)
--------------------- ------------ ------------
Income tax expense 983 530
--------------------- ------------ ------------
Income tax expense is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year. The estimated average annual tax rate used for
the year to 31 December 2018 is 21.41% (the effective tax rate for
the year ended 31 December 2017 was 20.40%).
8. EXCEPTIONAL ITEMS
Items that are material either because of their size or their
nature or that are nonrecurring are considered as exceptional items
and are presented within the line items to which they best relate.
During the current period, no exceptional items have been recorded
in the Income Statement.
During the prior period, following legal advice received by the
pension trustees, the Company increased its defined benefit pension
scheme liability by GBP1,000k, to reflect the fact that the Scheme
may not have been closed to future accrual in 2005. This cost was
included in the Condensed Consolidated Interim Income Statement as
an operating exceptional item. At 31 December 2017, after further
review, the Company increased its defined benefit pension scheme
liability by a further GBP235k and provided GBP30k for related
expenses.
9. DIVIDS
A dividend of GBP1,763k (2017: GBP1,710k) that relates to the
period to 31 December 2017 was paid in May 2018.
An interim dividend of 1.97 pence per share (2017: 1.91 pence
per share) was proposed by the Board of Directors on 2 August 2018.
It is payable on 11 October 2018 to shareholders who are on the
register at 14 September 2018. This interim dividend, amounting to
GBP944k (2017: GBP837k), 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 2018.
10. EARNINGS PER SHARE
Earnings per ordinary share is calculated by dividing the
consolidated profit after tax attributable to equity holders of the
Parent Company of GBP3,619k (2017: GBP2,277k) by the weighted
average number of shares in issue during the period, excluding own
shares held by employee trusts which are administered by
independent trustees. The number of shares held in the trust at 30
June 2018 was 403,758 (2017: 549,467). Distribution of shares from
the trust is at the discretion of the trustees. Diluted earnings
per ordinary share adjusts for the potential dilutive effect of
share option schemes in accordance with IAS 33 Earnings per
share.
Six months ended
30-Jun-18 30-Jun-17
(Unaudited) (Unaudited)
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
in issue 44,839,931 43,819,872
Deemed issued for no consideration 777,033 777,305
-------------------------------------------- ------------ ------------
Diluted number of ordinary shares issued 45,566,964 44,597,177
-------------------------------------------- ------------ ------------
11. RELATED PARTY TRANSACTIONS
There were no material related party transactions requiring
disclosure for the periods ended 30 June 2018 and 30 June 2017.
12. BORROWINGS
In May the Group completed a debt refinancing to enable it to
continue to grow capacity and meet its expected demand growth.
Switching to Handelsbanken and NatWest, the Group secured increased
facilities of GBP57.5m (up 64% from previous facilities of
approximately GBP35m) at improved pricing. These facilities are
secured against the property, plant and equipment, and debtors, of
the Group. The facility comprises a GBP25 million multi-currency
term loan, repayable in two equal instalments of GBP5m in year four
and year five, with the reminder at the end of year five, a GBP25
million multi-currency revolving credit facility, repayable at the
end of five years and a further GBP7.5 million sterling term loan,
renewable annually and repayable over five years in equal quarterly
repayments over the term. The negotiated facility also includes a
GBP25 million accordion feature to provide additional flexibility
to pursue further investment opportunities in the future.
Non-cash
changes
Transaction
costs and
foreign exchange
Group 2017 Cashflows movement 30-Jun-18
----------------------- ---------- ---------- ------------------ ----------
Long-term borrowings 8,155 (2,926) - 5,229
Short-term borrowings 11,228 (3,843) (5) 7,380
Lease liabilities 383 (49) - 334
----------------------- ---------- ---------- ------------------ ----------
Total liabilities 19,766 (6,818) (5) 12,943
----------------------- ---------- ---------- ------------------ ----------
Non-cash
changes
Transaction
costs and
foreign exchange
Group 2016 Cashflows movement 30-Jun-17
----------------------- ---------- ---------- ------------------ ----------
Long-term borrowings 5,464 (281) (314) 4,869
Short-term borrowings 9,156 1,130 (35) 10,251
----------------------- ---------- ---------- ------------------ ----------
Total liabilities 14,620 849 (349) 15,120
----------------------- ---------- ---------- ------------------ ----------
13. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Interest rate risk
The Group's interest rate risk arises from long-term borrowings
and short-term bank overdraft. All the Group's current borrowings
are issued at variable rates and expose the Group to cash flow
interest rate risk. The Group has strong cash generation from its
operations and closely monitors its borrowing levels to manage the
interest rate risk. The Group's interest rate risk profile changed
due to the debt refinancing explained in note 12.
The interest rate profile of the Group's borrowings at 30 June
is shown below:
30-Jun-18 30-Jun-17
---------------------------------------- ----------------------------------------
Effective Effective
interest Variable interest Variable
rate Fixed rates rates rate Fixed rates rates
------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------------
% GBP'000 GBP'000 % GBP'000 GBP'000
------------------ ------------ ------------ ------------ ------------ ------------ ------------
Dollar long-term
borrowings 3.92% - 5,229 3.95% 5,409 -
Sterling
long-term
borrowings 2.80% - 7,380 3.50% 383 -
Multi-currency
RCF - - - 2.37% 8,224
Bank overdraft - - - 2.40% - 1,104
------------------ ------------ ------------ ------------ ------------ ------------ ------------
Total - 12,609 5,792 9,328
------------------ ------------ ------------ ------------ ------------ ------------ ------------
Liquidity risk
Group Finance performs cash flow forecasting in the operating
entities of the Group, which is then aggregated. Group Finance
monitors rolling forecasts of the Group's liquidity requirements to
ensure that it has sufficient cash to meet operational needs, while
maintaining sufficient headroom on its undrawn committed borrowing
facilities at all times, so that the Group does not breach
borrowing limits or covenants (where applicable) on any of its
borrowing facilities. Such forecasting takes into consideration the
Group's debt financing plans, covenant compliance, compliance with
internal balance sheet ratio targets and any applicable external
regulatory or legal requirements.
During the period ended 30 June 2018 the Group completed a debt
refinancing on improved terms, as well as raised new equity of
GBP20,032k, net of fees. This has changed the liquidity risk
profile of the Group.
The following are the contractual maturities of financial
liabilities, including estimated payments and excluding the effect
of netting agreements:
30-Jun-18
---------------------------------------------------------------------------------------------
Group Carrying amount Contractual cash flows 1 year or less 1 to 2 years More than 2 years
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------------- ----------------------- --------------- ------------- ------------------
Non-derivative
financial liabilities
Interest-bearing loans
and borrowings (12,943) (12,943) (7,500) (49) (5,394)
Trade and other
payables (10,641) (10,641) (10,641) - -
----------------------- ---------------- ----------------------- --------------- ------------- ------------------
30-Jun-17
---------------------------------------------------------------------------------------------
Group Carrying amount Contractual cash flows 1 year or less 1 to 2 years More than 2 years
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------------- ----------------------- --------------- ------------- ------------------
Non-derivative
financial liabilities
Interest-bearing loans
and borrowings (15,120) (15,120) (10,251) (540) (4,329)
Trade and other
payables (11,730) (11,730) (11,730) - -
----------------------- ---------------- ----------------------- --------------- ------------- ------------------
Fair value estimation
To provide an indication about the reliability of the inputs
used in determining fair value, the Group classifies its financial
instruments into the three levels prescribed under the accounting
standards. An explanation of each level follows underneath the
table.
The following table presents the Group's financial assets and
financial liabilities measured and recognised at fair value at 30
June 2018 and 30 June 2017:
Level 1 Level Level Total
2 3
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------- ------------ ------------ ------------
Assets
Forward exchange contracts - 4 - 4
---------------------------- ------------- ------------ ------------ ------------
Total assets - 4 - 4
---------------------------- ------------- ------------ ------------ ------------
Liabilities
Forward exchange contracts - (222) - (222)
---------------------------- ------------- ------------ ------------ ------------
Total liabilities - (222) - (222)
---------------------------- ------------- ------------ ------------ ------------
Level 1 Level 2 Level Total
3
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
30 June 2017 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------- ------------ ------------ ------------
Assets
Forward exchange contracts - 223 - 223
---------------------------- ------------- ------------ ------------ ------------
Total assets - 223 - 223
---------------------------- ------------- ------------ ------------ ------------
Liabilities
Forward exchange contracts - (80) - (80)
---------------------------- ------------- ------------ ------------ ------------
Total liabilities - (80) - (80)
---------------------------- ------------- ------------ ------------ ------------
The forward exchange contracts have been fair valued using
forward exchange rates that are quoted in an active market.
Level 1: The fair value of financial instruments traded in
active markets (such as publicly traded derivatives, and trading
and available-for-sale securities) is based on quoted (unadjusted)
market prices at the end of the reporting period. The quoted marked
price used for financial assets held by the Group is the current
bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not
traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. These
valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in
level 2.
Level 3: If one or more of the significant inputs is not based
on observable market data, the instrument is included in level 3.
This is the case for unlisted equity securities.
Group's valuation process
Derivatives financial instruments are valued using Barclays
Bank's mid-market rate at the Statement of Financial Position
date.
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 includes all
members of the Audit Committee.
The Group also has a number of financial instruments which are
not measured at fair value in the balance sheet. For the majority
of these instruments, the fair values are not materially different
to their carrying amounts, since the interest receivable/payable is
either close to current market rates or the instruments are
short-term in nature. The fair value of the following financial
assets and liabilities approximate to their carrying amount:
-- Trade and other receivables
-- Cash and cash equivalents
-- Trade and other payables
Fair value of financial assets and liabilities measured at
amortised cost
The fair value of borrowings (excluding bank overdraft) is as
follows:
30-Jun-18 30-Jun-17
(Unaudited) (Unaudited)
GBP'000 GBP'000
------------- ------------ ------------
Current 7,477 10,251
Non-current 5,466 4,869
------------- ------------ ------------
Total 12,943 15,120
------------- ------------ ------------
14. SHARE CAPITAL
Six months ended
--------------------------
30-Jun-18 30-Jun-17
(Unaudited) (Unaudited)
GBP'000 GBP'000
Allotted, called up and fully paid
At 30 June:
Equity: 48,301,234 (30 June 2017: 44,414,442)
ordinary shares of 5.0p each 2,415 2,221
------------------------------------------------ ------------ ------------
In May 2018 Zotefoams plc raised GBP20,032k of equity, net of
fees, through a placing of 3,886,792 shares at GBP5.30 per
share.
15. CAPITAL COMMITMENTS
Capital expenditure commitments of GBP3,848K (2017: GBP3,200K)
have been contracted for at the end of the reporting period but not
yet incurred, and are in respect of Property, Plant and
Equipment.
16. EVENTS OCCURING AFTER THE REPORTING PERIOD
There are no material events occurring after the reporting
period except for those given in note 9.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UGUGURUPRGQQ
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