Final Results

Zotefoams PLC
26 February 2001

26th February 2001

                                Zotefoams plc

           Preliminary Results for the year ended 31 December 2000

Zotefoams plc, the world's leading manufacturer of cross-linked polyethylene
block foam, today announces its preliminary results for the year ended 31
December 2000.

Summary:

  * Turnover of £20.8 million (1999: £22.4 million)
  * Profit before tax down to £2.3 million (1999: £5.8 million)
  * Headline results impacted by:
  * strategic withdrawal from the volatile toy market
  * disruption caused by October fire at Croydon site
  * New executive management team in place
  * Global alliance with Sekisui Chemical Company now operational
  * US satellite plant due to be commissioned in H1 2001
  * Total dividend for the year maintained at 7.5 pence net per share

Commenting on the results, David Stirling, Managing Director said:

'Following the strategic review and conclusion of our alliance with Sekisui
last year we now have a balanced, high margin growth business with an
expanding international dimension. Zotefoams has always had leading-edge
technology and we are very excited to have secured an alliance that will allow
us to realise its full potential.

We anticipate a rapid recovery from the fire to re-estabish sustainable sales
growth. Acceleration of this growth will come from the production presence in
North America and the progressive benefits of the strategic alliance.'

Enquiries:
Zotefoams plc                                            020 8664 1600
David Stirling, Managing Director
Financial Dynamics                                       020 7831 3113
Tom Baldock



Introduction

We signalled 2000 as a year of transition for Zotefoams and, as announced in
our interim report, we completed a strategic review of our markets and
development priorities and in July successfully completed a highly significant
strategic alliance with Sekisui Chemical Company Limited of Japan. In the
second half-year we continued to grow our major markets in a climate of
continuing high raw material price and Euro weakness. On 22 October 2000 a
fire at our Croydon facility destroyed or damaged over 70% of our stock and
some 25% of our buildings. Our foam production area was largely undamaged and
production capability is not a limitation. Although supplies to our customers
resumed in early November, demolition and clearance work on the site, in
addition to long lead times on replacing some raw materials, meant we did not
fully meet our customers requirements during November and December. Insurance
is in place to cover assets and business interruption and we received an
initial £2.0 million interim payment from our insurers in December.



Results

Profit before tax for the year ended 31 December 2000 was £2.3 million
compared with £5.8 million for the year ended 31 December 1999. The 2000
figure includes one-off stock and capital equipment write-downs of £0.8
million. Turnover was £20.8 million (1999: £22.4 million). Earnings per share
were 4.8p compared with 11.2p in 1999.

These results do not include any adjustments for insured losses incurred as a
result of the fire.

Capital expenditure was £6.1 million, associated mainly with the new North
American production facility.



Operating Review

Our headline results in 2000 show the impact of three major events taking
place in the year. Certainly the most dramatic has been the impact of the fire
which struck Zotefoams on 22 October. Also very prominent has been the effect
of the fall in demand for the Puzz 3D toy segment from 12% of turnover in 1999
to 1% this year. Less noticeable, but perhaps more important to the long-term
prospects of Zotefoams was the strategic review undertaken in June. The
immediate consequences of this were a reassessment of our development
priorities resulting in a clearer, value-added focus and concentration on
fewer development projects.

Turnover in 2000 was £20.8million, a fall of 7% from 1999. Profit before tax
was £2.3million (1999: £5.8million) due to the fall in turnover, restructuring
costs and higher costs of LDPE our major raw material.

Sales in our core business increased by 4% over 1999. However, excluding
adverse foreign exchange movements of £0.5m, the growth rate for the year was
£1.25m (6.3%). In the first 9 months of the year Zotefoams achieved an average
growth rate of 9.3% in core markets before the effects of exchange rate
movements.



Toy segment

Sales to the Puzz 3D application were 12% (£2.7million) of our total turnover
in 1999. This year they accounted for only 1% of total sales. This fall of £
2.4million was the principal reason for the fall in sales in 2000 compared
with 1999. The majority of our stock and capital equipment write-down of £
0.8million taken in the first half of 2000 also related to the fall in demand
from this segment.

Going forward Zotefoams will benefit significantly from this dramatic change
in the demand profile of our business. The inherent volatility in the toy
business is now gone, leaving a stable core business with a diverse
application base and growth prospects.



Impact of the fire

The fire at Zotefoams which occurred on 22 October destroyed or damaged over
70% of our stock and 25% of buildings, including our despatch facilities,
materials storage, maintenance workshops and project facilities and also our
technical laboratory.

Such a major incident obviously affected the normal operation of our business
and, short-term, the ability to meet customer demand. Thanks to the London
Fire Brigade and our fire protection systems the main production facilities
were largely undamaged. It is due to the effort and dedication of all our
staff, working under adverse conditions, that Zotefoams was producing foams
only 3 days after the fire.

Initially, this production was constrained by some factors, including supply
of speciality raw materials, restricting our ability to supply a full grade
range to all customers. Each month has seen a marked improvement in production
capability, however the effects of the fire are still being felt.

Rebuilding work has commenced and production output has returned to pre-fire
levels. Materials storage remains a problem affecting our planning and
despatch operations. However good progress has been made in learning to live
with the constraints of the site during this restoration period. We know that
as rebuilding work advances the site improvement will help productivity and
therefore are very confident that, towards the end of the year, we will be in
a better position than before the fire.

At this stage it is difficult to fully quantify the effect of the fire on our
business. Insurance is in place to cover the loss of stock, buildings and
machinery and also any loss of business or increased costs for an 18 month
indemnity period. A payment of £2 million was received from our insurers in
December to cover fire-related expenditure to the end of the year.

Due to the effects of the fire it is more informative to analyse our
performance pre and post fire rather than for the year as a whole. For this
reason the sales and market analysis for non-Puzz 3D business is split between
the first 9 months and the last 3 months of the year.



First Nine Months

In the first nine months turnover increased 6.5% over the comparable period.
Excluding adverse currency movements of £0.4million underlying growth was 9.3%
(£1.4million).

North America

The major contributor to this was North America where focused sales effort and
a broadening of product range in anticipation of our Kentucky plant opening,
lead to a 19.8% growth in local currency.

The major growth segments were packaging (30% growth), and automative (85%
growth). Both areas were targeted for growth with new products launched
specifically for the North American market. Modifications to these products
included new polymer blends and introducing American standard sizes thereby
allowing customers better yields.

United Kingdom

Growth of 4.3% was a combination of 3%volume growth and a slight improvement
in product mix.

Again the focused effort in automative and packaging segments produced the
main growth areas. However slow general economic conditions were behind falls
in the marine products and sports and leisure markets.

Continental Europe

Underlying activity was strong with an average 7% volume increase across
continental Europe. This, combined with price increases in all major markets,
led to a 9.5% sales increase in constant currency.

The main growth area in Europe was in general industrial goods with a 17%
increase. All market segments, other than military, grew compared with the
same period last year.

Our fastest growing market was Italy where a change of distribution strategy
two years ago was the main factor behind a growth rate of 51%.



Last Three Months

Sales in the last three months of 2000 declined by 3.4% (£0.16million)
compared to 1999. The Board believes that the growth rates seen in the first 9
months of the year were a good indication of the strength of underlying market
demand in to the final quarter of the year. The loss of 3 weeks finished goods
stock and much of our work-in-progress and raw materials in the fire meant
that, despite production capacity being available in the first week after the
fire, we were unable fully to meet demand.

Early indications are that the loss of sales in the final quarter will not
adversely affect 2001. However the fire came at a sensitive time as we began
to offer new products to customers as an alternative to Sekisui-produced
foams. It is therefore likely that some customers' intentions to switch to
Zotefoams products were affected by the fire.



Manufacturing and Capacity

The majority of capital expenditure during 2000 was in our new satellite plant
in Northern Kentucky, which is expected to be commissioned in the first half
of 2001. This facility will utilise the technology development, announced
during 1999, of shipping non-expanded nitrogen saturated plastic sheets before
final expansion at our Kentucky site. The only other significant item of
capital expenditure relates to our investment in a fully integrated,
multi-site computer system, which is due for commissioning in the second
quarter of 2001.

Gross margins fell to 32% compared to 43% in 1999. There are three main
reasons for the fall; adverse macro-economic variables, lower plant
utilisation due to the fall in turnover and one-off stock and capital
equipment write-downs.

The environment of continued Euro weakness, combined with high raw material
prices, is estimated to have reduced profits by £1million compared to 1999.
The average price of LDPE, our main raw material, increased by 19% (while
similar movements were evident in other commodity polymers). In addition we
estimate the fall in turnover reduced our gross margins by some 4.2%. Our June
strategic review resulted in a write-down of £0.8 million of stock and assets;
of which £0.7 million was a non-cash charge to cost of sales.



Technical Development

Since its stock market flotation in 1995 Zotefoams has concentrated
development resource on improving its process capability and working with
customers to meet their specific needs in product variants. While development
of variants will continue to be an important element in customer service and
sales growth, the time is now right for Zotefoams to focus on increasing
development of new products and areas of greater opportunity. This means
future investment will concentrate on establishing an organisation capable of
exploiting Zotefoams' unique technology in areas of high differential
advantage.

During the year much of our focus has been to develop products which have
similar attributes/characteristics to those foams produced by Sekisui, our
alliance partner. These developments have allowed Sekisui to offer Zotefoams
products to their customers in Europe; paving the way for the closure of their
low-density block foam manufacturing operation in December 2000.



Strategic Alliance

As a business whose products are used in many industrial and consumer
applications our future depends on developing and maintaining links to support
these markets, to drive our growth and focus our activity.

During the year Zotefoams finalised a co-operation agreement with Sekisui
Chemical Co Ltd of Osaka, Japan. Sekisui are the largest producer of
cross-linked foams in the world, with the majority of their sales being in
roll form rather than the block products which Zotefoams make. The deal with
Sekisui is world-wide and positions Zotefoams as a replacement of Sekisui
block foams in Europe and as a supplement to their product range elsewhere.
The co-operation differs across geographic regions as follows:

Europe - Sekisui will market and sell Zotefoams product in exclusion to all
other block foams through its Alveo subsidiary. In December 2000 Alveo ceased
production of competing block foams.

North America - Voltek, the foam division of Sekisui in America, have
cross-agency agreement with Zotefoams. This allows both companies exclusive
agency rights to a portfolio of foams.

Asia - Sekisui and their affiliates will act as exclusive distributor of
Zotefoams products.

The European co-operation is already considerably advanced giving Zotefoams
access to Alveo customer base and increasing our visibility of market trends.
This allows us to work more closely to the specifier of the end application,
driving product development and ensuring a partnership approach to meeting
customer requirements.



Dividend

The Directors are recommending a final dividend of 5.0p net per share. This
brings the total dividend for the year to 7.5p and is unchanged from the
dividend in respect of the year ended 31 December 1999.



Board Changes

As announced in the interim report, David Stirling, Finance Director and
Company Secretary since 1997, was appointed Managing Director in May 2000.

Clifford Hurst was appointed Finance Director and Company Secretary with
effect from 2 October 2000. I am delighted to welcome Clifford who was
previously Commercial Director, and before that, Finance Director, of Thermos
Limited.

Randall Redd resigned as a Director of Zotefoams plc and President of
Zotefoams Inc in July 2000.



Employees

On behalf of the Board, I would like to thank all our employees for their
continued commitment to Zotefoams, and particularly for their dedication
following the fire at Croydon. It was due to their exceptional efforts in very
difficult working conditions that we were able to minimise the disruption to
our customers.



Prospects

Although some adverse effects of the fire have continued into 2001, we are now
close to re-establishing a quality service to our customers. We intend to
maintain this service during the site restoration work and by the end of the
year emerge better equipped to meet future requirements.

We anticipate a rapid recovery from the majority of negative effects of the
fire to re-establish sustainable sales growth. Acceleration of this growth
will come from the production presence in North America which is due to
commence late first half 2001, and from the progressive benefits of the
strategic alliance with Sekisui.

As we indicated in August, we believe we have a strategy to deliver a
balanced, high margin growth business with an expanding international
dimension.



Consolidated Profit and Loss Account
for the year ended 31 December 2000
                                                   2000    2000   1999    1999
                                                  £'000   £'000  £'000   £'000
Turnover - continuing operations                         20,828         22,426
Cost of sales                                           (14,265)       (12,843)
Gross Profit                                              6,563          9,583
Distribution costs                                      (2,037)        (1,945)
Administrative expenses                                 (2,175)        (1,932)
Operating profit - continuing operations                  2,351          5,706
(Loss) on disposal of fixed assets - continuing

operations                                                 (94)              -
Profit on ordinary activities before interest             2,257          5,706
and tax
Interest receivable                                          93             76
Interest payable and similar charges                       (42)            (9)
Profit on ordinary activities before taxation             2,308          5,773
Tax on profit on ordinary activities                      (557)        (1,704)
Profit for the financial year                             1,751          4,069
Equity dividends - paid                           (906)          (906)
Equity dividends - proposed                     (1,813)        (1,813)
Total dividends paid and proposed                       (2,719)        (2,719)
Retained (loss)/profit for the financial year             (968)          1,350
Earnings per ordinary share                                4.8p          11.2p
Diluted earnings per ordinary share                        4.8p          11.2p



Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 December 2000
                                                                   2000    1999
                                                                  £'000   £'000
Profit for the financial year                                     1,751   4,069
Currency translation differences on foreign currency net

investments                                                          52      16
Total recognised gains and losses relating to the year            1,803   4,085



Consolidated Balance Sheet
as at 31 December 2000
                                              2000     2000     1999     1999
                                             £'000    £'000    £'000    £'000
Fixed assets
Intangible assets                                -                27
Tangible assets                             30,112            28,034
                                                     30,112            28,061
Current assets
Stocks                                       2,148             2,487
Debtors                                      5,889             4,858
Cash at bank and in hand                     1,518             2,975
                                             9,555            10,320
Creditors: amounts falling due within
one year                                   (7,349)           (5,411)
Net current assets                                    2,206             4,909
Total assets less current liabilities                32,318            32,970
Creditors: amounts falling due after more
than one year                                         (433)              (36)
Provisions for liabilities and charges              (3,742)           (3,875)
Net assets                                           28,143            29,059
Capital and reserves
Called-up share capital                               1,813             1,813
Share premium account                                13,707            13,707
Capital redemption reserve                                5                 5
Profit and loss account                              12,618            13,534
Total shareholders' funds - equity                   28,143            29,059


Consolidated Cash Flow Statement
for the year ended 31 December 2000
                                                   2000    2000    1999    1999
                                                  £'000   £'000   £'000   £'000
Net cash flow from operating activities                   5,504           7,688
Returns on investments and servicing of finance
Interest received                                    92              76
Interest paid -- bank and other                    (22)               -
-- finance leases                                  (20)             (9)
                                                             50              67
Taxation
Mainstream corporation tax                        (963)         (1,562)
Overseas tax                                       (22)             22
                                                          (985)         (1,540)
Capital expenditure
Purchase of fixed assets                        (6,139)         (2,626)
Sale of fixed assets                                982              11
                                                        (5,157)         (2,615)
Equity dividends paid                                   (2,719)         (2,646)
Cash (outflow)/ inflow before financing                 (3,307)             954
Capital element of finance lease payments                  (86)            (34)
New finance leases                                          595               -
Management of liquid resources                             1600         (1,600)
Decrease in cash in the year                            (1,198)           (680)




Reconciliation of Net Cash Flow to Movement in Net Funds
for the year ended 31 December 2000
                                                                  2000     1999
                                                                 £'000    £'000
(Decrease) in cash in the year                                 (1,198)    (660)
Cash outflow from decrease in debt
and lease finance                                                   86       34
Cash used to (decrease)/increase liquid
resources                                                       (1600)    1,600
Change in net (debt)/ funds resulting from
cash flows                                                     (2,712)      954
Net new finance leases                                           (595)        -
Translation differences                                             53     (19)
Movement in net (debt)/ funds in the year                      (3,254)      935
Net funds at the start of the year                               2,871    1.936
Net (debt)/ funds at the end of the year                         (383)    2,871

Note

The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 1999 or 2000 but is derived
from those accounts. Statutory accounts for 1999 have been delivered to the
registrar of companies, whereas those for 2000 will be delivered following the
company's annual general meeting. The auditors have reported on those
accounts; their reports were unqualified and did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985.