24th Mar 2020 11:30
(Alliance News) - Zotefoams PLC on Tuesday confirmed plans to temporarily halt dividends amid the Covid-19 crisis.
Shares were up 1.0% on Tuesday morning in London at a price of 207.00 pence each.
Croydon-based Zotefaoms said all foam production facilities are currently open, and there has been no major supply chain disruption.
However, it noted the Covid-19 is constantly evolving and it cannot give any guidance on how it may affect the customer base in future.
"In these circumstances and in anticipation of likely reduced demand levels in the short term, we are actively focused on cash and cost management actions that are prudent, but also ensure the group is well placed to benefit when market conditions recover," said Zotefoams.
"These actions include appropriate and targeted cost reduction measures across the business and the deferral of capital expenditure."
"Due to the current uncertainty, the board intends to suspend dividend payments in the short term," Zotefoams continued.
The company has "ample" headroom, it said, with undrawn facilities of GBP17.7 million as of the end of 2019. It has also secured changes to leverage covenants from banks.
There was previously a net debt to earnings before interest, tax, depreciation, and amortisation covenant of 3.0 times, testing twice a year, but this has now been increased to 4.0 times for the June 2020 test.
As of December 31, Zotefoams's leverage was 2.0 times.
Zotefoams, following a request by the UK Financial Conduct Authority, has postponed releasing 2019 results. It sees revenue falling marginally, by 0.1%, to GBP80.9 million.
Pretax profit is guided to slip 1.0% to GBP9.8 million, with the figure excluding exceptional items down 19% to GBP8.8 million.
"This performance reflects the previously reported difficult trading conditions in the Polyolefin Foams business in the latter part of 2019, offset in part by the continued progress in HPP and MEL during the year," said Zotefoams.
"2019 was also a year of significant investment for Zotefoams and the strategic capacity expansion projects to support long-term growth expectations are all progressing on track and to budget. Whilst market demand and the unprecedented macroeconomic uncertainty will affect the pace of ramp-up in utilisation in the near term, these assets provide a platform for significantly enhanced returns over the medium term," it continued.
By George Collard; [email protected]
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