8th Mar 2005 07:01
Zotefoams PLC08 March 2005 Tuesday 7th March 2005Zotefoams PLC Preliminary Results Zotefoams PLC, the world's leading manufacturer of cross-linked block foam,today announces its preliminary results for the 12 months ended 31st December2004. Summary • Turnover up 7% at £25.2 million (2003: £23.5 million)• Gross profit up 10% to £5.5 million• Pre-tax profit, pre-exceptional items up 39% to £1.3 million• Continuing sales growth in North America, up 18%• Strong sales across continental Europe, in particular Germany and France, which grew by 13% and 18% respectively• 5.3 million net cash inflow from operating activities• Net debt reduced by £1.9 million to £1.7 million• Net assets of £28.8 million and gearing under 6%• Launch of ZOTEK(R) PVDF foams using patented processes• Dividend of 3.0p, making a total of 4.5p declared for 2004 Commenting on the results, Bill Fairservice, Chairman, said: "2004 was an extremely robust year for Zotefoams. During the year, we launchedthe first in a range of foams based on Kynar(R) PVDF under our new ZOTEK(R)brand name and progressed other projects for silicone and nylon foams to plantscale trials. The company particularly benefited from our investment in NorthAmerica, where sales grew by 18%. We enter 2005 with a strongly cash generative business, well invested incapacity and with a series of options for the future in both our productportfolio and our market place." Enquiries:Zotefoams plc 020 8664 1600David Stirling, Managing DirectorClifford Hurst, Finance Director Financial Dynamics 020 7831 3113Deborah Scott Chairman's statement Our strategy Zotefoams' strategy is to create sustained profit growth by expanding its salesinternationally and by broadening its potential market with new unique products.This strategy is supported by our commitment to quality, innovation and customerservice through investment in the training and development of our employees.Zotefoams' technology affords us many different opportunities with significantprofit potential. To optimise these opportunities we must concentrate our ownresources in key areas and leverage our unique capability where appropriate. Our objectives We intend to grow sales in our core polyolefin foams business in excess of therate of inflation in Europe and achieve double-digit percentage growth in NorthAmerica and Asia. Our sales growth in America is supported by our factory inKentucky which opened in mid 2001 while in Asia we will consider a similaroperation, either as a license or joint venture, as sales increase to a levelwhere such an investment is sensible. We are also committed to developing aportfolio of unique foam products from high-performance materials which willenjoy significant advantages over competitive materials, allow higher marginsfor Zotefoams and confirm our position as the pre-eminent foam technologycompany. We intend to achieve these while continuing to improve our return oncapital employed through a more efficient use of assets and working capital andexpect our net operating assets (excluding cash) to reduce further over the nextfew years while we continue to grow our sales. Our achievements During 2004 we grew sales by 7% and profit before tax by 39%. Our UK performancewas flat in what continues to be a difficult market, while sales in ContinentalEurope grew 12% and North America grew 18% before the effect of exchange ratefluctuations which, primarily due to the US dollar reduced profit before tax byapproximately £0.3 million after currency hedges. During 2004, we launched thefirst in a range of foams based on Kynar(R) PVDF under our new ZOTEK(R) brandname and progressed other projects for silicone and nylon foams to plant scaletrials. Our return on capital employed, measured as EBITDA as a percentage ofaverage net assets employed, was 16.7% up from 14.7% in 2003, as Group cash flowstrengthened and we begin to see the positive impact of our large investment inNorth America. The Directors are recommending a final dividend of 3.0p net per share payable on24 May 2005 to shareholders on the Company register as at the close of businessof 22 April 2005. This brings the total declared dividend to 4.5p for 2004 andis unchanged from the dividend declared for 2003. Further, as announced on 14 January 2005, Zotefoams has received a verypreliminary approach that may or may not lead to an offer being made for itsentire issued share capital. A further announcement concerning this matter willbe made in due course. W H FairserviceChairman7 March 2005 Managing Director's review Our year Results for 2004 showed a marked improvement following a difficult year in 2003.Sales growth of 7% to £25.2 million and operational improvements produced a 42%increase in operating profit and 50% increase in net cash inflow from operatingactivities. Earnings per share increased 65% to 3.3p (2003: 2.0p). Overall sales growth of 7% was driven by growth in North America, France andGermany. In North America our dollar sales growth of 18% translated to 7% growthin sterling due to the weaker US dollar while, with the Euro at similar levelsto last year, growth of 18% in France and 13% in Germany was achieved by closercontact with, and focus on, key customers. Operational benefits were most apparent in our North American plant wheremanagement changes late in 2003 and early in 2004 provided additional focus onplant performance, product quality and cost control. The improvements at thisplant, which takes solid materials from our UK plant for final expansion tofoams, gave us sufficient confidence to place reliance on this facility toexpand our full range of foam products resulting in significant freight savings.I am pleased to report that this plant is now operating at close to the levelswhich we routinely achieve in our UK facility and during 2004 set new productionrecords in three different months as sales volumes increased 18% over 2003. Production volume increases also lead to operational benefits in our Croydonplant where higher levels of capacity utilisation improved overhead recovery andprofitability. Rises in raw material prices reduced operating profits by approximately £0.3million. Low density polyethylene (LDPE) is our major raw material and issubject to commodity pricing. This means that prices change frequently and, onoccasion, quite significantly. In 2004, prices for LDPE began at levelsmoderately above our average price for 2003. However, in September 2004, LDPEprices began to rise rapidly and continued to do so throughout the rest of theyear. On average the price we paid for LDPE was 10% higher than in 2003. Themost significant impact on the business was after October 2004 when margins weremuch tighter as LDPE rose above £600 per tonne for the first sustained timesince 2000. This increase in the fourth quarter coincided with a very sharpincrease in energy prices which we estimate increased our energy costs byapproximately £0.1 million in the fourth quarter alone. Scheduled list priceincreases and a surcharge based on LDPE costs have been discussed with Zotefoamscustomers for implementation during the first quarter of 2005. Zotefoams' business remains strongly cash generative with substantial investmentin North America and the UK completed over the past five years. In 2004,depreciation was £3.4 million compared to capital expenditure of £1.3 million,which itself is at the lowest level for ten years. With significant excess andflexible capacity at both our UK and North American facilities we anticipatecapital expenditure, other than that identified in the development of newproducts, to be low for the foreseeable future. Expenditure on research and development, all of which is charged against profitsin the year of expenditure, increased by 16% to £734,000. During the yearZotefoams patented manufacturing processes and applications of PVDF foams. PVDFis a fluoropolymer with excellent fire, chemical and UV-light resistance and ourfoams, marketed under the ZOTEK(R) trademark are under evaluation inapplications as diverse as aerospace, aviation, construction and semiconductorprocessing. Also during 2004, we developed processes to apply our uniquetechnology to make foams from polyamide (nylon) and silicone. Patentapplications were made for both of these developments early in 2005. We expectthese foams to find applications in markets where high temperature resistancecombined with other properties, predominantly sound and heat insulation, areneeded. Overall, during 2004 we made substantial progress in product developmentand I expect this to accelerate during 2005. While sales of new products were negligible in 2004, we have a significantnumber of applications under development, some of which have been approved andsales orders received for shipment in 2005. We believe that developments of thistype offer the potential of higher returns and diversification into new and fastgrowing markets. Zotefoams approach is to develop a portfolio of materialsacross a number of different markets to ensure a diversified product mix. Weconstantly review our projects, approach and resource allocation to ensure thatwe are focussing on the areas of greatest return. I consider these new products,and others which are at an earlier stage in our development efforts, to offerexcellent potential for future growth and margin enhancement of our business. Our marketplace Zotefoams manufactures and sells crosslinked block foams used in a variety ofmarkets and applications worldwide. Our major markets are in the UK and WesternEurope, supplied from our Croydon, UK plant, and North America, supplied fromour Walton, Kentucky plant. Zotefoams has a worldwide sales and marketing alliance for polyolefin foams withthe Sekisui Chemical Company Ltd, who act as exclusive agent and distributor inContinental Europe and Asia respectively. Sekisui also act as agent for certaincustomers in North America. Our new products such as PVDF, silicone andpolyamide, fall outside the scope of these arrangements and are being marketeddirectly by Zotefoams to a diverse range of existing and new customers. In the UK, Zotefoams holds a high market share which means growth must come fromthe development of new market applications for our products. Although we workclosely with customers in these areas the general UK industrial climate has asignificant effect on our business. During 2004 sales increased by 1%, which hashalted the declines seen in the past two years, in what continues to be adifficult economic climate for UK manufacturing industry. Increases in thepackaging and construction segments offset some business decline in generalindustrial and marine segments. In Germany sales increased 13% which was the fourth successive year of growth.This reflects another year of good performance by our main distributor and anincreasing contribution from directly supplied accounts. Sales grew by 18% inFrance, recovering strongly after a decline in 2003, the majority of this growthcoming from the sports and leisure market. Italy continues to be a difficultmarket with traditional business in footwear and lingerie declining due toconsumer trends and moves by manufacturers to lower cost locations. Despitethis, sales in Italy grew by 3% through the development of new business in thisimportant market. This is in contrast to Spain where loss of business due tomarket trends was not replaced at the necessary rate and we need additionalfocus in this area. North America grew by 18% in both volumes and dollar value. Gains of business inthe construction and automotive sectors were the principal drivers here.However, we also secured additional business in the sports and leisure andmedical segments. All of this growth is supported from and made possible by ourfacility in Kentucky. We have now grown 64% since commissioning the plant in2001 and expect further gains in this market, with sports and leisure, packagingand construction being the medium term focus. Currently only 1% of turnover is in Asia. However we do have longer termambitions in this region and know that there are significant opportunities forZotefoams products here. We believe we do have good brand recognition in certainsegments and our products can enjoy the same competitive advantage in Asia asthey do in Europe and America. Ultimately we believe that a facility similar toour plant in Kentucky would be an attractive investment giving acceleratedgrowth prospects, particularly as we can reduce the capital cost by using localsuppliers while benefiting from our experience of such a project in the USA. Toshare risk and capital cost and to optimise sales, it is our intention to enterinto a joint venture or license for production in the Asian market. Our business Customers, employees and technology define our business. I would like tocongratulate our employees for their efforts during 2004. Through theirdedication, commitment and achievements we maintain customer satisfaction andthis shows through in our sales growth for the year. In the last five years Zotefoams generated £26.1 million operating cash inflow,paid £12.1 million in dividends and currently have a net debt of only £1.7million. We have rebuilt our site in Croydon following the fire in late 2000 andhave established a significant business in North America which is growingstrongly. Our technical portfolio has a pipeline of products which we believeoffers excellent potential for growth in the future and has both patent andtechnology protection. We therefore enter 2005 with a strongly cash generative business, well investedin capacity and with a series of options for the future in both our productportfolio and our market place. D B StirlingManaging Director7 March 2005 Finance Director's review Group turnover of £25.2 million was 7% higher than 2003. Gross margin was £5.5million (10% higher) with an improved margin rate compared to 2003 (21.9%compared to 21.4% in 2003) in a difficult macro-economic environment. A weak USdollar reduced gross margin on North American sales by approximately £0.4million, while high polymer prices also adversely affected profit by about £0.3million compared to 2003. The average price of LDPE, our major raw material,increased from €770 per tonne in 2003 to €850 per tonne in 2004. Depreciationincreased by £0.2 million. These adverse impacts on profit were partly offset bya reduction in freight costs to the USA due to operational improvements in theGroup's American manufacturing operations. Distribution and administration expenses were similar to 2003 and despite anincrease in interest charges, profit before tax improved by 39% to £1.3 millionin 2004 as most of the gross margin improvement flowed through to profit beforetax. Taxation Corporation tax has been provided for at the rate of 30%. The Group tax chargeis slightly below this due to research and development credits and taxablelosses in North America. In addition 2004 benefited from a £0.2 million creditadjustment in respect of prior periods. This reduced the profit and loss accounttax charge to £0.13 million which is 10% of pre-tax profits. Earnings per shareconsequently rose by 65% to 3.3p. Cash flow and funding The underlying strength of the business is its strong cash generation. With highdepreciation EBITDA is £4.9 million (2003: £4.3 million) and net cash inflowfrom operating activities to £5.3 million. Capital expenditure of £1.3 million(2003: £1.6 million) is less than 50% of the Group depreciation charge followinga period of major expenditure on a new plant in North America and replacingassets destroyed in a fire on the Croydon site in 2000. Limited capitalexpenditure requirements are foreseen in the next few years. The Group therefore is strongly cash generative. Net debt was reduced from £3.6million at the end of 2003 to £1.7 million at the end of 2004. With net assetsof £28.8 million gearing is under 6%. A final dividend of 3.0p net per share is proposed which brings the totaldeclared dividend for the year to 4.5p, the same level declared for 2003. Pensions The Group has made the disclosures required under the transitional rules ofFRS17 'Retirement Benefits' in respect of the defined benefit pension scheme forUK employees. Under these rules this pension fund had assets of £11.5 millionand a present value of liabilities of £16.1 million as at 31 December 2004. Thisdeficit of £4.6 million is a slight reduction from 2003 (£4.8 million). However,the tri-annual actuarial review of the fund is due on 6 April 2005 and it islikely to show a deterioration in the funding position since the date of thelast review in April 2002 when the deficit was £0.6 million on an ongoingvaluation basis. The importance of this review is that it determines thecontribution rates required for the fund. Following this actuarial review theCompany will discuss with the trustees and members the future strategy for thedefined benefit scheme which has been closed to new entrants since 1 October2001. Treasury With most of the costs in the business denominated in sterling and the majorityof sales being in either euros or US dollars the Group has a significant foreignexchange exposure. While the average euro/sterling rate was similar to 2003 witha £0.1 million adverse impact, the US dollar weakened against sterling and thishad an adverse impact on profit of approximately £0.3 million. This was partlyoffset by a £0.1 million gain from the Group's hedging policy. The Board has defined policies and procedures relating to treasury managementand accounting policies. These are designed to provide appropriate businesssupport, consistency of reporting and to mitigate risk. Foreign currency hedgesare used to reduce the foreign currency exposure on a proportion of the next sixmonth's sales. Translation exposure is not hedged. Interest rates on borrowingsare all based on variable rates plus a bank margin and are unhedged as theinterest rate risk is not, at present, considered material. Accounting policies Although no new accounting standards were adopted in 2004, InternationalAccounting Standards became mandatory for all listed companies in the UK foraccounting periods beginning on or after 1 January 2005. Accordingly the Grouphas adopted International Accounting Standards with effect from 1 January 2005.The Group plans to restate its 2004 accounts under these standards in June 2005,prior to publishing its interim results for the first sixth months of the yearin August 2005. Going concern statement After making enquiries, the Directors have a reasonable expectation that theGroup has adequate resources to continue in operational existence for theforeseeable future. For this reason they continue to adopt the going concernbasis in preparing the financial statements. C G HurstFinance Director7 March 2005 Consolidated profit and loss accountFor the year ended 31 December 2004 Note 2004 2003 £000 £000 ______ ______Turnover 2 25,176 23,504Cost of sales (19,669) (18,478) ______ ______Gross profit 5,507 5,026Distribution costs (1,871) (1,884)Administrative expenses (2,080) (2,047) ______ ______Operating profit 1,556 1,095 ______ ______Other interest receivable and similar income 5 - 18Interest payable and similar charges 6 (225) (158) ______ ______Profit on ordinary activities before taxation 3 1,331 955Tax on profit on ordinary activities 7 (130) (219) ______ ______Profit for the financial year 9 1,201 736Equity dividends - paid (544) (906)Equity dividends - proposed (1,087) (725) ______ ______Total dividends paid and proposed 8 (1,631) (1,631) ______ ______Retained loss for the financial year 18 (430) (895) ______ ______Basic earnings per ordinary share 8 3.3p 2.0p ______ ______Diluted earnings per ordinary share 8 3.3p 2.0p ______ ______ All amounts in the profit and loss account are derived from continuingoperations for the current and prior year. There is no difference in profit forthe financial year stated above and the historical cost equivalents andtherefore no separate note of historical cost profits and losses has beenpresented. Consolidated statement of total recognised gains and lossesFor the year ended 31 December 2004 2004 2003 £000 £000 ______ ______Profit for the financial year 1,201 736Currency translation differences on foreign currency net investments (576) (860) ______ ______Total recognised gains and losses relating to the year 625 (124) ______ ______ Consolidated balance sheetAs at 31 December 2004 Note 2004 2004 2003 2003 £000 £000 £000 £000 ______ ______ ______ ______Fixed assetsTangible assets 10 29,795 32,375 29,795 32,375 ______ ______Current assetsStocks 12 3,126 3,178Debtors 13 5,675 5,893Cash at bank and in hand 298 212 ______ ______ 9,099 9,283Creditors: amounts falling due within one 14year (4,651) (7,263) ______ ______Net current assets 4,448 2,020 ______ ______Total assets less current liabilities 34,243 34,395Creditors: amounts falling due after more than 15one year (1,500) (57) Provisions for liabilities and charges 16 (3,913) (4,502) ______ ______Net assets 28,830 29,836 ______ ______Capital and reservesCalled-up share capital 17, 18 1,813 1,813Share premium account 18 13,707 13,707Capital redemption reserve 18 5 5Profit and loss account 18 13,305 14,311 ______ ______Total shareholders' funds - equity 19 28,830 29,836 ______ ______ Company balance sheetAs at 31 December 2004 Note 2004 2004 2003 2003 £000 £000 £000 £000 ______ ______ ______ ______Fixed assetsTangible assets 10 23,787 25,728Investments 11 6,416 7,581 ______ ______ 30,203 33,309Current assetsStocks 12 2,274 2,365Debtors 13 5,373 5,041Cash at bank and in hand 65 - ______ ______ 7,712 7,406Creditors: amounts falling due within 14one year (4,315) (7,156) ______ ______Net current assets 3,397 250 ______ ______Total assets less current liabilities 33,600 33,559Creditors: amounts falling due after more than 15one year (1,500) (57) Provisions for liabilities and charges 16 (3,891) (4,174) Net assets 28,209 29,328 ______ ______Capital and reservesCalled-up share capital 17, 18 1,813 1,813Share premium account 18 13,707 13,707Capital redemption reserve 18 5 5Profit and loss account 18 12,684 13,803 ______ ______Total shareholders' funds- equity 19 28,209 29,328 ______ ______ Consolidated cash flow statementFor the year ended 31 December 2004 Note 2004 2004 2003 2003 £000 £000 £000 £000 ______ ______ ______ ______ Net cash inflow from operating activities 23 5,261 3,516 Returns on investments and servicing of financeInterest received - 18Interest paid- bank and other (230) (89)- finance leases (24) (27) ______ ______ (254) (98)TaxationMainstream corporation tax (506) (1,103)Overseas tax (14) (57) ______ ______ (520) (1,160)Capital expenditurePurchase of fixed assets (1,331) (1,614)Sale of fixed assets 1 27 ______ ______ (1,330) (1,587)Equity dividends paid (1,269) (2,719) ______ ______Cash inflow/(outflow) before financing 1,888 (2,048) ______ ______FinancingCapital element of finance lease payments (119) (119)New borrowings 2,000 -Repayment of loan instalments (851) (832) ______ ______ 1,030 (951) ______ ______Increase/(decrease) in cash in the year 2,918 (2,999) ______ ______ Reconciliation of net cash flow to movement in net debtFor the year ended 31 December 2004 Note 2004 2003 £000 £000 ______ ______Increase/(decrease) in cash in the year 2,918 (2,999)Cash (inflow)/outflow from change in debt and lease finance (1,030) 951 ______ ______Change in net debt resulting from cash flows 1,888 (2,048)Translation differences 31 145 ______ ______Movement in net debt in the year 1,919 (1,903)Net debt at the start of the year (3,578) (1,675) ______ ______Net debt at the end of the year 24 (1,659) (3,578) ______ ______ Notes to the financial statements 1. Accounting policies Basis of preparation The financial statements have been prepared in accordance with applicableAccounting Standards, and under the historical cost accounting rules. Thefollowing principal accounting policies have been applied consistently indealing with items which are considered material in relation to the Group'sfinancial statements. The Group has followed the transitional rules of FRS 17 "Retirement Benefits"this year, providing certain additional disclosures for its defined benefitpension scheme. Basis of consolidation The Group financial statements consolidate the financial statements of theCompany and its subsidiary undertakings. All companies within the Group make uptheir financial statements to 31 December. Unless, otherwise stated, theacquisition method of accounting has been adopted. Under this method, theresults of subsidiary undertakings acquired or disposed of in the year areincluded in the consolidated profit and loss account from the date ofacquisition or up to the date of disposal. A separate profit and loss account dealing with the results of the ParentCompany only has not been presented, as permitted by Section 230 of theCompanies Act 1985 (see note 9). Tangible fixed assets and depreciation Depreciation is provided by the Group to write off the cost less the estimatedresidual value of tangible fixed assets by equal annual instalments over theirestimated useful economic lives as follows: Freehold buildings 20 yearsPlant and machinery 5 - 15 yearsComputer equipment and vehicles 3 - 5 years No depreciation is provided on freehold land. Licences purchased by the Groupare amortised over five years. Assets held under finance leases are depreciated over the lease term where thisis shorter than the estimated useful economic life. Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translatedinto sterling at rates of exchange at the balance sheet date and the gains orlosses on translation are included in the profit and loss account. Transactions in foreign currencies are recorded using the rate of exchangeruling at the date of the transaction. The results of the overseas subsidiaryundertakings and overseas branches are translated at the average rate ofexchange ruling during the year. The assets and liabilities of the overseasundertakings are translated at the closing exchange rate. Exchange differencesarising from the retranslation of the opening net investment in overseasundertakings, and differences between the profits for the year translated at theaverage and closing rates, are taken to reserves, net of exchange differencesarising on related foreign currency borrowings. Research and development expenditure Expenditure on research and development is written off against profits in theyear in which it is incurred. Stocks Stocks are stated at the lower of cost and net realisable value. In determiningthe cost of raw materials, consumables and goods purchased for resale, theweighted average purchase price is used. For work in progress and finished goodsmanufactured by the Group, cost is taken as production cost, which includes anappropriate proportion of attributable overheads. Goodwill Purchased goodwill (both positive and negative) arising on consolidation inrespect of acquisitions before 1 January 1998, when FRS 10 Goodwill andintangible assets was adopted, was written off to reserves in the year ofacquisition. When a subsequent disposal occurs any related goodwill previouslywritten off to reserves is written back through the profit and loss account aspart of the profit or loss on disposal. Purchased goodwill (representing the excess of the fair value of theconsideration given and associated costs over the fair value of the separablenet assets acquired) arising on consolidation in respect of acquisitions since 1January 1998 is capitalised. Positive goodwill is amortised to nil by equalannual instalments over its estimated useful life, not exceeding 20 years. On the subsequent disposal or termination of a business acquired since 1 January1998, the profit or loss on disposal or termination is calculated after chargingthe unamortised amount of any related goodwill. In the Company's financial statements, investment in subsidiary undertakings isstated at cost less any provision against the value. Pensions The Company operates a pension scheme providing benefits based on finalpensionable pay, the assets of which are held independently from those of theCompany. Contributions to the scheme are charged to the profit and loss accountso as to spread the cost of pensions over employees' working lives with theCompany. The Group also operates defined contribution pension schemes in the USand the UK. Contributions to these schemes are charged to the profit and lossaccount as they are incurred. Finance leases Where the Company enters into a lease which entails taking substantially all therisks and rewards of ownership of an asset, the lease is treated as a financelease. The asset is recorded in the Balance sheet as a tangible fixed asset anddepreciated in accordance with the Group's depreciation policy. The capital element of future lease payments is included under creditors.Interest is included within "interest payable and similar charges" within theprofit and loss account. Operating leases Operating leases are any other leases which are not finance leases. Rentalcharges in respect of operating leases are charged to the profit and lossaccount on a straight line basis over the life of the lease. Taxation The charge for taxation is based on the profit for the year and takes intoaccount taxation deferred because of timing differences between the treatment ofcertain items for taxation and accounting purposes. Deferred tax is recognised,without discounting, in respect of all timing differences between the treatmentof certain items for taxation and accounting purposes which have arisen but notreversed by the balance sheet date, except as otherwise required by FRS 19. Turnover Turnover represents the amounts (excluding value added tax) derived from theprovision of goods and services to customers during the year. Revenue isrecognised on the despatch of goods for which specific orders have been placed. Cash Cash, for the purpose of the cash flow statement, comprises cash in hand anddeposits repayable on demand, less overdrafts payable on demand. 2. Turnover by geographical market UK and Other North Rest of Eire France Germany Europe America the World Total £000 £000 £000 £000 £000 £000 £000 ______ ______ ______ ______ ______ ______ ______2004 6,985 3,022 4,345 4,397 5,909 518 25,176 ______ ______ ______ ______ ______ ______ ______2003 6,895 2,568 3,857 4,191 5,531 462 23,504 ______ ______ ______ ______ ______ ______ ______ In the opinion of the Directors the Group is engaged in only one class ofbusiness. All turnover originates in the UK. 3. Profit on ordinary activities before taxation 2004 2003 £000 £000 ______ ______Profit on ordinary activities before taxation is stated:After chargingAmounts payable under operating leases 75 74Research and development costs 734 635Auditors' remuneration:Audit: Group 66 64 Company 61 58Other fees paid to the auditors and their associates- recurring 12 12- non-recurring 37 32 ______ ______ 49 44Depreciation and amortisation of fixed assets- owned assets 3,212 2,998- leased assets 159 159After creditingNet exchange gains (108) (168) ______ ______ 4. Staff numbers and costs The average number of people employed by the Group (including Directors) duringthe year, analysed by category, was as follows: Number of employees 2004 2003 ______ ______Production 128 124Maintenance 19 19Distribution and marketing 33 29Administration and technical 60 64 ______ ______ 240 236 ______ ______ The aggregate payroll costs of these persons were as follows: 2004 2003 £000 £000 ______ ______Wages and salaries 6,415 6,328Social security costs 589 508Other pension costs 560 559 ______ ______ 7,564 7,395 ______ ______ 5. Other interest receivable and similar income 2004 2003 £000 £000 ______ ______Interest on bank deposits - 1Interest on other deposits - 17 ______ ______ - 18 ______ ______ 6. Interest payable and similar charges 2004 2003 £000 £000 ______ ______On bank loans and overdrafts 201 131On finance leases 24 27 ______ ______ 225 158 ______ ______ 7. Tax on profit on ordinary activities Note 2004 2003 £000 £000 ______ ______UK corporation tax at 30% (2003: 30%) 871 291Overseas taxation 24 45Adjustment to prior year UK tax charge (176) 52 ______ ______Current taxation 719 388Deferred taxation 16 (589) (169) ______ ______Total tax charge 130 219 ______ ______ Factors affecting the tax charge for the current period The current charge for the period is higher (2003: higher) than the standardrate of corporation tax in the UK of 30% (2003: 30%). The differences areexplained below. 2004 2003 £000 £000 ______ ______Current tax reconciliationProfit on ordinary activities before tax 1,331 955 ______ ______Current tax at 30% (2003: 30%) 399 287Effects of:Research and Development tax credits less expenses not deductible for tax purposes (28) (25) Depreciation in excess of Capital Allowances for period 327 58Intra-group fixed asset movements 179 -(Lower)/higher tax rates on overseas earnings (17) 16Intra-group stock movements 35 -Adjustments to tax charge in respect of previous periods (176) 52 ______ ______Total current tax charge 719 388 ______ ______ 8. Dividends and earnings per share 2004 2003 £000 £000 ______ ______Interim dividend of 1.5p (2003: 2.5p) net per 5p ordinary share 544 906Proposed final dividend of 3.0p (2003: 2.0p) net per 5p ordinary share 1,087 725 ______ ______ 1,631 1,631 ______ ______Dividends per ordinary share 4.5p 4.5p ______ ______ Earnings per ordinary share Earnings per ordinary share is calculated by dividing profit after tax of£1,201,000 (2003: £736,000) by the weighted average number of shares in issueduring the year. Diluted earnings per ordinary share adjusts for the potentialdilutive effect of share option schemes in accordance with FRS 14. 2004 2003 ______ ______Average number of ordinary shares issued 36,255,772 36,255,772Deemed issued for no consideration 30,973 69,168 ______ ______Diluted 36,286,745 36,324,940 ______ ______ Shares deemed issued for no consideration have been calculated based on thepotential dilutive effect of the Save As You Earn share option scheme, theExecutive Share Option Scheme and options granted under the Inland RevenueApproved Share Option Scheme: Number of shares under option ExerciseDate from which exercisable Price 2004 2003 ______ ______ ______4 April 2004 92.5p - 64,86424 April 2004 93.5p - 301,60321 August 2004 107.5p - 125,5801 June 2005 77.0p 177,475 212,54020 August 2005 80.5p 654,494 654,49418 March 2006 80.0p 872,865 872,8657 April 2007 72.5p 1,130,034 - ______ ______ ______ The average fair value of one ordinary share during the year was considered tobe 75.3p (2003: 83.5p). 9. Profit for the financial year The Group accounts do not include a separate profit and loss account forZotefoams plc (the parent undertaking) as permitted by Section 230 of theCompanies Act 1985. The Parent Company profit after tax for the financial yearis £936,000 (2003 loss: £1,508,000). 10. Tangible fixed assets Freehold Computer land and Plant and equipment buildings machinery and vehicles Total £000 £000 £000 £000 ______ ______ ______ ______The GroupCostAt 1 January 2004 14,275 36,336 2,088 52,699Additions 256 964 75 1,295Foreign exchange (284) (277) (8) (569) Disposals - (54) - (54) ______ ______ ______ ______At 31 December 2004 14,247 36,969 2,155 53,371 ______ ______ ______ ______DepreciationAt 1 January 2004 2,478 16,374 1,472 20,324Charge for the year 563 2,442 366 3,371Foreign exchange (32) (51) (6) (89)On disposals - (30) - (30) ______ ______ ______ ______At 31 December 2004 3,009 18,735 1,832 23,576 ______ ______ ______ ______Net book valueAt 31 December 2004 11,238 18,234 323 29,795 ______ ______ ______ ______At 31 December 2003 11,797 19,962 616 32,375 ______ ______ ______ ______CompanyCostAt 1 January 2004 10,462 32,201 1,995 44,658Additions 125 826 53 1,004Disposals - (10) - (10) ______ ______ ______ ______At 31 December 2004 10,587 33,017 2,048 45,652 ______ ______ ______ ______DepreciationAt 1 January 2004 2,114 15,401 1,415 18,930Charge for the year 416 2,186 338 2,940On disposals - (5) - (5) ______ ______ ______ ______At 31 December 2004 2,530 17,582 1,753 21,865Related Shares:
Zotefoams