7th Aug 2007 07:00
Zotefoams PLC07 August 2007 Zotefoams plc Interim Results for Six Months Ended 30 June 2007 7 August 2007 -- Zotefoams plc, the world's leading manufacturer of cross-linkedblock foam, today announces its interim results for the six months ended 30 June2007. Summary • Revenue of £15.65 million (2006: £15.88 million) • Polyolefin sales up 1% in constant currency but down 2% when converted into sterling • Revenue from High-Performance Polymers increased by 61% to £427,000 • Profit before tax £1.80 million (2006: £1.52 million excluding exceptional items), up 18%* • Gross margin of 28.3% (2006: 26.8%) • Net debt of £2.52 million as at 30 June 2007 (2006: £2.55 million), with continued capital refurbishment and upgrade programme • Gearing at 30 June 2007 of 10% (2006: 10%) • Basic EPS excluding exceptional items were 4.5p (2006: 2.9p), up 55% • Interim dividend maintained at 1.5p per share (2006: 1.5p) *Profit before tax in the six months ended June 2006 of £0.4 million included anexceptional item of £1.1 million for costs incurred in terminating commercialrelationships with the Sekisui Group. Nigel Howard, Chairman of Zotefoams, commented: "The business has performed well in the first six months of 2007 with goodprofit growth and improved gross margins. Zotefoams' continued investment incapacity and in the development and marketing of new products shows the Board'sconfidence in the future. We see encouraging signs with many customers andapplications for both our polyolefin and ZOTEK (R) foams. We therefore believethe business is developing well and we look forward to the future with optimism." Enquiries: Zotefoams plc Tel Today: 020 7831 3113 David Stirling, Managing Director Thereafter: 020 8664 1600Clifford Hurst, Finance Director Financial Dynamics Tel: 020 7831 3113 Deborah Scott Notes to editors Zotefoams plc (LSE - ZTF) is the world's leading producer of light weight,cross-linked, closed cell, block foams. These pure, consistent foams aremanufactured using a unique environmentally friendly nitrogen expansiontechnology. Zotefoams was the first to develop cross-linked polyolefin foamsand is increasingly using its production technology to manufacture foamedmaterials based on high performance polymers. Based in Croydon UK, Zotefoamsalso manufactures in Kentucky USA and markets its products worldwide through aglobal sales network. Visit: http://www.zotefoams.com Chairman's statement Nigel Howard Results I am pleased to announce a healthy set of results for the business and,importantly, continued progress on our strategy to develop sales of new productsoutside our core polyolefin foam business. For the six months ending 30 June2007 revenues were £15.65 million (2006: £15.88 million). Gross marginincreased to 28.3% (2006: 26.8%) and profit before tax and exceptional itemsincreased 18% to £1.80 million (2006: £1.52 million). Basic earnings per sharewere 4.5p (2006: 2.9p before and 0.8p after exceptional items). Revenue Revenue for the six months ended 30 June 2007 was £15.65 million (2006: £15.88million). Polyolefin foam sales increased by 1% in constant currency, althoughin sterling this changed to a 2% decline principally because of the strength ofsterling in the period compared to the US dollar. High-performance polymersales increased by 61% in what is still a nascent business. In all markets ourapproach is to work on end-user market development as well as support our directcustomers in developing specific market segments. We plan to continue to investour marketing resources in this manner. Polyolefin foams In Europe we built on our very strong performance in 2006, achieving a salesgrowth rate of 3% for the six months to 30 June 2007. Within Europe our twolargest national markets, Germany and the UK, both exhibited good overallgrowth. North America was affected by lower levels of spending in theconstruction and military sectors combined with a temporary decline in purchasesby a medical customer, resulting in an overall decline in sales of 15% in localcurrency. In Asia, which is currently around 3% of our business, we benefitedfrom directly employed sales resource with sales increasing by 87%. High-performance polymer foams Our product strategy exploits our unique manufacturing technology in thedevelopment of high-performance polymer foams. This business is at an earlystage of development and revenues are expected to be lumpy and remain difficultto predict for some time. In our high-performance polymers business salesgrowth of 61% was primarily driven by a good performance in our ZOTEK (R) Ffluoropolymer foams in the North American aerospace market. Applications forZOTEK (R) F foams were also developed in markets such as high-performanceinsulation where prospects for the future appear promising. Sales from our "world-first" polyamide (nylon) foam are developing slowly with the initialproduct considered too stiff for many of the applications trialled. However, weremain confident of the potential for polyamide foam as market trials have shownthere is a substantial opportunity for a product which combines high-temperatureperformance and hydrocarbon resistance. We are in the process of developing asecond generation polyamide foam and ultimately believe that we will develop aportfolio of polyamide products, similar to our polyolefin business, to addressthe needs of the marketplace. Operations Sales volumes for the six months to 30 June 2007 were at similar levels to thesame period last year. Gross margins increased to 28.3% (2006: 26.8%) with thebenefit of reduced sales commissions and operational improvements more thanoffsetting energy price increases and the adverse impact of a stronger pound.Prices of LDPE, our major raw material, have remained at similar levels to thoseexperienced during the first six months of 2006. Zotefoams continues to investin the rolling refurbishment and upgrading of major items of plant and expectsto bring additional refurbished high-pressure capacity on-line late in 2007. Tax, cash flow and balance sheet The effective tax charge fell from 30% of pre-tax profit to 10% due to areduction in the deferred tax liability reflecting the change in the futurecorporation tax rate from 30% to 28% and an adjustment in respect of priorperiods. Both these adjustments were taken in full in the six month period andtheir effect is less pronounced over a year Cash generated from operations was £1.74 million (2006: £1.72 million). Thiswas after payment of the final instalment of the termination agreement withSekisui of €0.70 million in March 2007 (the first half of the terminationpayment was paid following the signing of the agreement in March 2006). Capitalexpenditure of £1.48 million was at a similar level to the same period last yearand was less than the depreciation charge of £1.65 million (2006: £1.62million). At 30 June 2007 net debt was £2.52 million (2006: £2.55 million)giving a strong balance sheet with gearing of 10%. Board changes On 23 July 2007 Richard Clowes joined the Board as a non-executive director.Richard has become a member of the Remuneration, Nominations and Auditcommittees. Richard is an engineer and was previously a main Board director ofGKN plc from 2001-2005. He brings a wealth of operational, general managementand international commercial experience to the Board. Chris Ryan, currently anon-executive director of Zotefoams plc, announced in July 2007 his intention toresign as a director at the end of 2007 at which point he will have served eightyears as a director of the Company. Although he will remain a member of theRemuneration, Nominations and Audit committees until his departure, DavidCampbell has succeeded Chris as Chairman of the Remuneration Committee. DavidCampbell is a non-executive director and the Board regards Richard Clowes, ChrisRyan and David Campbell as being independent according to the definitions of theCombined Code on corporate governance. Dividend The Directors have declared an interim dividend of 1.5p net per share (2006:1.5p). The dividend will be paid on 27 September 2007 to shareholders who are onthe Company's register at the close of business on 31 August 2007. Outlook The business has performed well in the first six months of 2007 with good profitgrowth and improved gross margins. With a significant portion of our revenuesdenominated in US dollars and euros we are exposed to fluctuations in exchangerates. Currency hedging contracts in place for 2007 will mitigate the negativetransactional impact of the recent weakening of these currencies againststerling, although we choose not to hedge translational impacts and remainexposed to these. Prices of LDPE, our major raw material, which were high inearly 2006, have remained at high levels for the first six months of 2007 and weanticipate that these levels could be sustained throughout 2007. Zotefoams' continued investment in capacity and in the development and marketingof new products shows the Board's confidence in the business. We seeencouraging signs with many customers and applications for both our polyolefinand ZOTEK (R) foams. We therefore believe the business is developing well andwe look forward to the future with optimism. N G HowardChairman6 August 2007 Consolidated income statementfor the six months ended 30 June 2007 Six months ended 30 June 2007 Pre-exceptional Exceptional Post-exceptional items items items Note £000 £000 £000 ______ ______ ______Revenue 2 15,645 - 15,645Cost of sales (11,219) - (11,219)Gross profit 4,426 - 4,426Distribution costs (1,184) - (1,184)Administrative expenses (1,402) - (1,402) ______ ______ ______Operating profit 1,840 - 1,840Financial income 525 - 525Finance costs (563) - (563) ______ ______ ______Profit before tax 1,802 - 1,802Taxation 3 (184) - (184) ______ ______ ______Profit for the period 1,618 - 1,618 ______ ______ ______Attributable to: -Equity holders of the parent 1,618 - 1,618 ______ ______ ______ Earnings per shareBasic (p) 5 4.5 ______Diluted (p) 5 4.4 ______ CONTINUED FROM TABLE ABOVE Six months ended 30 June 2006 Pre-exceptional Exceptional Post-exceptional items items items Note £000 £000 £000 ______ ______ ______Revenue 2 15,875 - 15,875Cost of sales (11,616) - (11,616) ______ ______ ______Gross profit 4,259 - 4,259Distribution costs (1,031) - (1,031)Administrative expenses (1,618) (1,092) (2,710) ______ ______ ______Operating profit 1,610 (1,092) 518Financial income 441 - 441Finance costs (528) - (528) ______ ______ ______Profit before tax 1,523 (1,092) 431Taxation 3 (458) 328 (130) ______ ______ ______Profit for the period 1,065 (764) 301 ______ ______ ______Attributable to:Equity holders of the parent 1,065 (764) 301 ______ ______ ______ Earnings per shareBasic (p) 5 0.8 ______Diluted (p) 5 0.8 ______ CONTINUED FROM TABLE ABOVE Year ended 31 December 2006 Pre-exceptional Exceptional Post-exceptional items items items Note £000 £000 £000 ______ ______ ______Revenue 2 30,052 - 30,052Cost of sales (22,257) - (22,257) ______ ______ ______Gross profit 7,795 - 7,795Distribution costs (2,117) - (2,117)Administrative expenses (2,842) (1,074) (3,916) ______ ______ ______Operating profit 2,836 (1,074) 1,762Financial income 884 - 884Finance costs (1,047) - (1,047) ______ ______ ______Profit before tax 2,673 (1,074) 1,599Taxation 3 (682) 322 (360) ______ ______ ______Profit for the period 1,991 (752) 1,239 ______ ______ ______Attributable to:Equity holders of the parent 1,991 (752) 1,239 ______ ______ ______ Earnings per shareBasic (p) 5 3.4 ______Diluted (p) 5 3.4 ______ Consolidated statementof recognised income and expensefor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 Note £000 £000 £000 ______ ______ ______Foreign exchange translation differences oninvestment in foreign subsidiary (158) (514) (905) Effective portion of change in fair value ofcash flow hedges net of recycling (34) 147 163Actuarial gains on defined benefit schemes 1 - 92 426Tax on items taken directly to equity 11 (28) (159) ______ ______ ______Net expense recognised directly in equity (181) (303) (475)Profit for the period 1,618 301 1,239 ______ ______ ______Total recognised income and expense for the period 1,437 (2) 764 ______ ______ ______Attributable to equity holders of the parent 1,437 (2) 764 ______ ______ ______ Consolidated balance sheetas at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Note £000 £000 £000 ______ ______ ______AssetsProperty, plant and equipment 26,649 27,841 27,018Deferred tax assets 83 147 99 ______ ______ ______Total non-current assets 26,732 27,988 27,117Current assetsInventories 4,144 3,824 3,785Trade and other receivables 7,073 7,275 6,163Cash and cash equivalents 117 124 82 ______ ______ ______Total current assets 11,334 11,223 10,030 ______ ______ ______Total assets 38,066 39,211 37,147 ______ ______ ______EquityIssued share capital 6 (1,820) (1,816) (1,816)Share premium 6 (13,941) (13,753) (13,753)Capital redemption reserve 6 (15) (5) (5)Hedging reserve 6 (50) (68) (84)Retained earnings 6 (9,363) (8,928) (9,180) ______ ______ ______Total equity attributable to the equityholders of the Company (25,189) (24,570) (24,838) ______ ______ ______Non-current liabilitiesInterest-bearing loans and borrowings (500) (900) (700)Employee benefits (3,931) (4,873) (4,240)Deferred tax liabilities (2,438) (2,721) (2,764) ______ ______ ______Total non-current liabilities (6,869) (8,494) (7,704) ______ ______ ______Current liabilitiesInterest-bearing loans and borrowings (400) (400) (400)Bank overdraft (1,739) (1,373) (411)Tax payable (585) (330) (307)Trade and other payables (3,284) (4,044) (3,487) ______ ______ ______Total current liabilities (6,008) (6,147) (4,605) ______ ______ ______Total liabilities (12,877) (14,641) (12,309) ______ ______ ______Total equity and liabilities (38,066) (39,211) (37,147) ______ ______ ______ Consolidated cash flow statementfor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 ______ ______ ______Cash flows from operating activitiesProfit for the period 1,618 301 1,239Adjustments for:Depreciation, amortisation and impairment 1,646 1,623 3,248(Gain)/loss on sale of property, plant and equipment (12) 3 3Financial income (525) (441) (884)Finance expense 563 528 1,047Equity-settled share-based payments 50 40 64Taxation 184 130 360 ______ ______ ______Operating profit before changes in working capital andprovisions 3,524 2,184 5,077 Increase in trade and other receivables (982) (975) (107)(Increase)/decrease in inventories (377) 29 51(Decrease)/increase in trade and other payables (125) 665 314Decrease in provisions and employee benefits (300) (186) (619) ______ ______ ______Cash generated from the operations 1,740 1,717 4,716Interest paid (46) (49) (126)Tax paid (198) (551) (823) ______ ______ ______Net cash from operating activities 1,496 1,117 3,767 ______ ______ ______Proceeds on disposal of property, plant and equipment 12 - 3Interest received 3 4 8Acquisition of property, plant and equipment (1,479) (1,541) (2,641) ______ ______ ______Net cash used in investing activities (1,464) (1,537) (2,630) ______ ______ ______ Consolidated cash flow statementfor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 £000 £000 £000 ______ ______ ______Proceeds from the issue of share capital 38 - -Repurchase of own shares (77) - -Repayment of borrowings (200) (200) (400)Dividends paid (1,091) (1,090) (1,634) ______ ______ ______Net cash used in financing activities (1,330) (1,290) (2,034) ______ ______ ______Net decrease in cash and cash equivalents (1,298) (1,710) (897)Cash and cash equivalents at 1 January (329) 432 432Effect of exchange rate fluctuations on cash held 5 29 136 ______ ______ ______Cash and cash equivalents at the end of period (1,622) (1,249) (329) ______ ______ ______ Cash and cash equivalents comprise cash at bank and short-term highly liquidinvestments with a maturity date of less than three months. Notes to the interim financial statementsfor the six months ended 30 June 2007 1. Basis of preparation This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the Company'spublished consolidated financial statements for the year ended 31 December 2006. The comparative figures for the financial year ended 31 December 2006 are notthe Company's statutory accounts for that financial year. Those accounts havebeen reported on by the Company's auditor and delivered to the Registrar ofCompanies. The report of the auditor was (i) unqualified, (ii) did not include areference to any matters to which the auditor drew attention by way of emphasiswithout qualifying their report, and (iii) did not contain a statement underSection 237(2) or (3) of the Companies Act 1985. There were no significant changes to the pension scheme or significant changesto market conditions during the period year and therefore the Company did notupdate its actuarial valuation during this period. The Income Statement chargeis based on the set of assumptions laid out in the consolidated financialstatements for the year ended 31 December 2006. However, no actuarial gains/losses have been recognised and therefore there is no movement on the Statementof Recognised Income and Expense for the half year ending 30 June 2007. 2. Segment reporting The Group manufactures and sells high performance foams for specialist marketsworldwide. These fall into two main business segments best categorised by theirconstituent raw materials. • Polyolefins: these foams are made from olefinic homopolymer and copolymer resin. The most common resin used is polyethylene. • High-performance polymers: these foams exhibit high performance on certain key properties, such as improved chemical, flammability or temperature performance, due to the resins on which they are based. Turnover in the segment is currently derived from our ZOTEK(R) F foams made from PVDF fluoropolymer. Other polymers being assessed in development include polyamide (nylon) and silicone. Due to our unique manufacturing technology Zotefoams can produce polyolefinfoams with superior performance to other manufacturers. However, our strategy isto use the capabilities of our technology to produce foams from other materialsas well as polyolefins. The development of foams from high-performance polymersbusiness is currently in its early stages with development and marketing costsexceeding revenues. High- performance Polyolefins polymers ConsolidatedSix months ended 30 June 2007 £000 £000 £000 ______ ______ ______Revenue 15,218 427 15,645Pre-exceptional operating profit/(loss) 1,994 (154) 1,840 ______ ______ ______ High- performance Polyolefins polymers ConsolidatedSix months ended 30 June 2006 £000 £000 £000 ______ ______ ______Revenue 15,609 266 15,875Pre-exceptional operating profit/(loss) 1,885 (275) 1,610 ______ ______ ______Exceptional item * (1,092) - (1,092) ______ ______ ______Post-exceptional operating profit/(loss) 793 (275) 518 ______ ______ ______ * The exceptional item relates to costs incurred in respect of the termination of a commercial relationship with the Sekisui Group which was announced in March 2006. 3. Taxation Six months Six months ended ended 30 June 30 June 2007 2006 £000 £000 ______ ______Current tax:UK corporation tax 476 170Foreign tax - 12 ______ ______ 476 182Deferred tax (292) (52) ______ ______ 184 130 ______ ______ The Group's consolidated effective tax rate for the six months ended 30 June2007 was 10% (2006: 30%) due to a £0.2m release of deferred tax to reflect thechange in the future corporation tax rate from 30% to 28% and a £0.1m prior yearadjustment in respect of prior periods. 4. Dividends Six months Six months ended ended 30 June 30 June 2007 2006 £000 £000 ______ ______Final dividend for the year ended 31 December 2006 of 3.0p (2005: 3.0p) per share 1,091 1,090 ______ ______ The final dividend for the year ended 31 December 2006 was paid on 24 May 2007. A proposed interim dividend for the year ended 31 December 2007 of 1.5p pershare (2006: 1.5p) was approved by the Board on 26 July 2007 and has not beenincluded as a liability as at 30 June 2007. 5. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: Six months Six months ended ended 30 June 30 June 2007 2006 £000 £000 ______ ______EarningsEarnings for the purpose of basic earnings per share being net profitattributable to equity holders of the parent 1,618 301Earnings for the purposes of diluted earnings per share 1,618 301 ______ ______ Number of shares Number NumberWeighted average number of ordinary shares for the purposes of basicearnings per share 36,347,325 36,319,924 Effect of dilutive potential ordinary shares:Share options and Long Term Incentive Plans 701,017 66,041 Weighted average number of ordinary shares for the purposes of dilutedearnings per share 37,048,342 36,385,965 ______ ______ 6. Capital and reserves Reconciliation of movement in capital and reserves Capital Share Share redemption Translation capital premium reserve reserve £000 £000 £000 £000 ______ ______ ______ ______Balance as at 1 January 2007 1,816 13,753 5 (635)Shares issued 14 188 - -Shares purchased (10) - 10 -Total recognised income and expense - - - (158)Equity-settled share-based paymenttransactions net of tax - - - -Dividends - - - - ______ ______ ______ ______Balance as at 30 June 2007 1,820 13,941 15 (793) ______ ______ ______ ______ (CONTINUED FROM TABLE ABOVE) Hedging Retained Total reserve earnings equity £000 £000 £000 ______ ______ ______Balance as at 1 January 2007 84 9,815 24,838Shares issued - (242) (40)Shares purchased - - -Total recognised income and expense (34) 1,629 1,437Equity-settled share-based payment transactions net of tax - 45 45Dividends - (1,091) (1,091) ______ ______ ______Balance as at 30 June 2007 50 10,156 25,189 ______ ______ ______ During the six month period ended 30 June 2007 431,848 share options vested and279,014 were exercised at 72.5p. Zotefoams plc repurchased 196,330 ordinary 5pshares which were subsequently cancelled in the period. Zotefoams plc did nothold any of its own shares in treasury at 30 June 2007. Independent review report to Zotefoams plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the Consolidated IncomeStatement, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement,the Consolidated Statement of Recognised Income and Expense and the relatednotes. We have read the other information contained in the Interim Report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The Interim Report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the Interim Report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. KPMG Audit Plc Chartered Accountants1 Forest GateBrighton RoadCrawley RH11 9PT6 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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