Interim Results
ZOTEFOAMS PLC
2 August 1999
Contact: Zotefoams plc
Bill Fairservice/David Stirling 0181 664 1600
Financial Dynamics
Tom Baldock 0171 831 3113
Zotefoams plc
Interim Results for the six months ended 30 June 1999
Zotefoams plc, the world's leading manufacturer of cross-linked polyethylene
block foam, today announces its interim results for the six months ended 30
June 1999.
Summary
- Turnover of £12.4m (1998: £12.3m)
- Operating profit of £3.8m (1998: £3.7m)
- Profit before tax of £3.8m (1998: £3.7m)
- Earnings per share of 7.3p (1998: 7.1p)
- Stronger mix of end-use applications achieved
- Sales to the toy segment down from 21% to 17% by value
- Dividend up 4% to 2.5p net (1998: 2.4p)
Commenting on the results, Chairman Bill Fairservice said:
'With UK demand relatively flat and sales to the European toy segment
reducing progressively, we expect trading conditions in the second half to
remain challenging. However, looking further forward the outlook is much
brighter. We have worked hard to improve our sales mix by application and
this is now feeding through. In addition, the strength of our US and European
markets gives us considerable comfort going forward.'
Chairman's Statement
In a challenging market climate we have maintained sales turnover and profits
while achieving a more balanced mix of end-use applications. The market
trends of 1998 persisted through the first half of 1999 with strong growth
continuing in our mainland European market while our domestic market remained
static. Strong demand from our North American market helped to offset weak
demand from the toy segment in Europe.
Results
Profit before taxation for the six months ended 30 June 1999 was £3.82
million compared to £3.72 million for the same period last year. The 1998
figure was increased by a prior year adjustment of £69,000. Turnover at
£12.44 million was similar to the same period last year (1998: £12.34
million). Earnings per share for the six months ended 30 June 1999 were 7.3p
compared to 7.1p for the six months ended 30 June 1998.
The first half of 1999 was characterised by a change in end user application
mix. Focused product development and marketing effort produced volume growth
of 15% in packaging applications and 47% in automotive applications, albeit
the latter was from a relatively low sales base. This offset a reduction in
sales to the toy segment which were down from 21% to 17% of sales value.
Sales to our UK market remained flat throughout the period compared to the
same period last year; however our high market share was maintained. Sales
to Eire were significantly lower due to reduced demand from the toy segment
following a poor Christmas sell through.
Sales to mainland Europe were 12% up on the corresponding period last year
providing the third consecutive half year period of strong growth.
All major areas of our North American market grew, with strong demand from
the toy segment being the main element of a 21% overall increase in sales.
Lower raw material costs and minor currency benefits compared to the
corresponding period last year contributed to improved margins. Gross profit
margin increased to 45.7% from 44.7% and operating profit margin to 30.5%
from 30.2%.
Capital additions for the period of £1.15 million were mainly associated with
the additional production capacity at Croydon commissioned during the period.
Only minor capital expenditure has been incurred to date in relation to our
planned North American production facility with forecast expenditure on the
project to end 1999 being around £1.3 million. Net cash balance at 30 June
1999 was £2.86 million (1998: £0.74 million).
Dividend
The Directors have declared an interim dividend of 2.5p net per share in
respect of the six months ended 30 June 1999. The dividend will be paid on
16 September 1999 to shareholders who are on the Company's register at the
close of business on 13 August 1999. This represents a 4% increase on the
interim dividend of 2.4p net paid in September 1998 in respect of the six
months ended 30 June 1998.
Board changes
Roger Elmhirst resigned as a non-executive Director during the period due to
ill health, and it is with great regret that I report that Roger died in
April following a lengthy illness.
It is our intention to appoint a third independent non-executive Director.
The Board is pleased to announce the appointment of Randall Redd as an
executive Director of the Company with effect from 2 August 1999. Randall
will continue as President of Zotefoams Inc., a position he has held since
joining the Group in 1997.
Appointment of broker
The Board announces the appointment, with effect from 2 August 1999, of
Charterhouse Securities Limited as sole broker to the Company.
Year 2000
The Company is aware of the possible disruption to business caused by date-
related system failures. We have been working to minimise any possible
impact through discussions with our customers and suppliers and have
completed an audit of all Company equipment, with remediation and testing on
schedule and planned for completion in good time. Contingency plans are in
place where considered appropriate.
Other than the capital expenditure on planned upgrades of certain process
control equipment, all costs to date have been expensed with only minor
additional costs anticipated in the next few months.
While the objective of our actions is to minimise possible impact of date-
related systems failures, there can be no absolute assurance that the
business will not be adversely affected.
Outlook
For the short term we continue to face demanding market conditions
particularly with reducing sales to the European toy segment.
However, there are positive signs of slowly improving trading conditions
which, coupled with a steady flow of new products and good levels of
application development in our markets, gives us confidence of the medium and
long term.
Bill Fairservice
Chairman
Consolidated profit and loss account
For the six months ended 30 June 1999
Six months Six months Year ended
ended ended 31 December
30 June 1999 30 June 1998 1998
(Unaudited) (restated-note (Audited)
£000 2) £000
(Unaudited)
£000
Turnover - continuing 12,435 12,335 24,199
operations
Cost of sales (6,749) (6,823) (13,148)
Gross profit 5,686 5,512 11,051
Distribution costs (990) (909) (1,895)
Administrative expenses (908) (875) (1,867)
Operating profit - 3,788 3,728 7,289
continuing operations
Profit on disposal of fixed
assets
- continuing operations - - 763
Interest received 39 20 38
Interest paid (5) (26) (59)
Profit on ordinary 3,822 3,722 8,031
activities before taxation
Taxation (1,165) (1,152) (2,380)
Profit on ordinary 2,657 2,570 5,651
activities after taxation
Interim dividend (906) (870) (870)
Final dividend - - (1,740)
Retained profit for the 1,751 1,700 3,041
period
Earnings per share 7.3p 7.1p 15.6p
Fully diluted earnings per 7.3p 7.1p 15.6p
share
Consolidated statement of total recognised gains and losses
Profit for the period 2,657 2,570 5,651
Currency translation
differences on foreign 69 (17) 3
currency net investment
Total recognised gains and
losses relating to the 2,726 2,553 5,654
period
Prior period adjustment (376) (376)
(note 2)
Total recognised gains and
losses since the last period 2,177 5,278
Consolidated balance sheet
As at 30 June 1999
As at As at As at
30 June 1999 30 June 1998 31 December
(Unaudited) (restated-note 1998
2) (Audited)
(Unaudited)
£000 £000 £000 £000 £000 £000
Fixed assets
Intangible assets 32 42 37
Tangible assets 27,453 27,225 27,462
27,485 27,267 27,499
Current assets
Stocks 2,441 2,101 2,253
Debtors 5,911 5,386 4,952
Cash at bank and in 2,939 1,032 2,044
hand
11,291 8,519 9,249
Creditors: amounts
falling due (5,287) (6,785) (5,282)
within one year
Net current assets 6,004 1,734 3,967
Total assets less
current 33,489 29,001 31,466
liabilities
Creditors: amounts
falling due (83) (66) (67)
after more than one
year
Provision for
liabilities and (3,893) (2,604) (3,706)
charges
Net assets 29,513 26,331 27,693
Capital and reserves
Called-up share 1,813 1,813 1,813
capital
Share premium account 13,707 13,707 13,707
Capital redemption 5 5 5
reserve
Profit and loss 13,988 10,806 12,168
account
Total shareholders' 29,513 26,331 27,693
funds - equity
Consolidated cash flow statement
For the six months ended 30 June 1999
Six months Year ended
Six months ended 31 December
ended 30 June 1998 1998
30 June 1999 (restated- (Audited)
(Unaudited) note 2) £000
£000 (Unaudited)
£000
Net cash inflow from
operating activities (note 3,779 4,795 9,158
5)
Returns on investment and
servicing of
Finance
Interest received 39 20 38
Interest paid - bank and - (21) (48)
others
- (5) (5) (11)
finance leases
Taxation
ACT - - (626)
Mainstream corporation tax - - (1,330)
Overseas tax refunded/(paid) 16 (17) 2
Capital expenditure
Purchase of tangible fixed (1,150) (2,581) (4,379)
assets
Sale of tangible fixed 8 16 1,471
assets
Equity dividends paid (1,740) (1,631) (2,501)
Cash inflow before financing 947 576 1,774
Financing (14) (17) (36)
Increase in cash in the 933 559 1,738
period
Increase in cash in the 933 559 1,738
period
Cash outflow from decrease
in debt and lease 14 17 36
finance
Change in net cash resulting 947 576 1,774
from cash flows
New finance leases - - (19)
Translation differences (27) (2) 14
Movement in net cash in the 920 574 1,769
period
Net cash at the start of the 1,936 167 167
period
Net cash at the end of the 2,856 741 1,936
period
Notes to the interim financial information.
1. Basis of preparation
The accounting policies used in the preparation of the interim financial
information are the same as those used in the last annual report and
accounts. The comparative figures for the financial year ended 31 December
1998 are not the Company's statutory accounts for that financial year.
Those accounts have been reported upon by the Company's auditors and
delivered to the Registrar of Companies.
The report of the auditors was unqualified and did not contain a statement
under section 273(2) or (3) of the Companies Act 1985.
The interim financial information is unaudited but has been reviewed by the
auditors and their report to the Company is set out on page 9.
2. Change of accounting policy
In accordance with FRS 12 the Company changed its accounting policy on
onerous contracts subsequent to announcing results for the six months to 30
June 1998.
These results have therefore been restated under the revised accounting
policy, which gave rise to a prior year adjustment, increasing profit
before tax for the six months ended 30 June 1998 by £69,000. The
restatement is more fully explained in the 1998 financial statements.
3. Earnings per share
Earnings per share in each period is calculated by dividing profit after
tax, by the number of shares in issue. There has been no change to the
number of shares in issue since the Company's flotation in February 1995.
Fully diluted earnings per share is also shown in compliance with FRS14.
4. Movement in shareholders' funds
£000
Profit for the six months ended 30 June 1999 2,657
Dividends (906)
Retained profit for the period 1,751
Other recognised gains and losses 69
Opening shareholders' funds at 31 December 1998 27,693
Closing shareholders' funds at 30 June 1999 29,513
5. Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year ended
ended 30 ended 30 31 December
June 1999 June 1998 1998
(Unaudited) (restated- (restated-
£'000 note 2) note 2)
(Unaudited) (Audited)
£000 £000
Operating profit 3,788 3,728 7,289
Depreciation charge and 1,034 871 1,767
amortisation of licences
Loss on the sale of tangible 9 1 1
fixed assets
(Increase)/decrease in stocks (178) 141 (41)
(Increase)/decrease in debtors (894) 67 494
Increase/(decrease) in 20 (17) (395)
creditors
Increase in provisions - - 43
Other non-cash movements - 4 -
Net cash inflow from operating 3,779 4,795 9,158
activities
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