Interim Results
Zotefoams PLC
12 August 2003
Tuesday 12 August 2003
Zotefoams plc
Interim Results
Zotefoams PLC, the world's leading manufacturer of cross-linked polyolefin block
foam, today announces its interim results for the six months ended 30 June 2003.
Summary
• Turnover increased by 2% to £12.1m (2002: £11.9 million) offset by higher
raw material prices, depreciation and property rates
• Pre-tax profit, pre-exceptional items, was £0.8 million (2002: £1.0
million)
• Strong balance sheet with net debt at £4.7 million
• Interim dividend maintained at 2.5p.
Commenting on the results, Bill Fairservice, Chairman, said:
'Market conditions in the UK and Europe have been difficult and we expect a
continuation of this situation with trading conditions remaining at or around
the levels of last year. In North America, however, we anticipate improving
sales growth through the year driven by new development projects with existing
and new customers.
The Board therefore believes that the second half will show some moderate
overall sales growth with margins benefiting from lower polymer prices. However,
this is unlikely to offset the increased fixed costs of the business and we
continue to believe that profit for the full year is likely to be slightly below
that of 2002.'
Enquiries:
Zotefoams plc 020 8664 1600
David Stirling, Managing Director
Clifford Hurst, Finance Director
Financial Dynamics 020 7831 3113
Charlie Armitstead
Chairmans Statement
Results
Profit before tax and pre-exceptional items for the six months ended 30 June
2003 was £0.8 million compared with £1.0 million for the same period last year.
Sales growth of 2% to £12.1 million (2002: £11.9 million) was offset by higher
raw material prices, depreciation and property rates including, as indicated in
our May AGM statement, an unexpected retrospective rates assessment for 2002 of
£0.1 million.
Earnings per share pre-exceptional items were 1.6p compared with 2.1p in 2002.
As outlined in our statement on 27 June, trading conditions have deteriorated in
Europe where sales were 1% below that of last year, although favourable currency
exchange rates mean the Sterling equivalent value increased by 9%. In the UK,
sales declined by 4% as we experienced a significant reduction in demand from a
major OEM customer due to the conditions in its export markets. Encouragingly,
however, sales to other UK customers increased by 4% compared with 2002.
In North America, although generally market conditions were poor from the start
of the year, sales growth of 6% was achieved through an increased share of the
market for lower density foams, made possible by our Kentucky facility. These
gains were offset by a weaker US dollar and reported sales from North America
are therefore 4% below the same period last year.
The price of LDPE, our major raw material, was high for most of the period,
averaging £565 per tonne some 33% higher than the same period last year.
Capital additions of £0.9 million for the period were associated mainly with
investment in flexible, high-pressure capacity at Croydon and minor expenditure
at our Kentucky plant.
Net debt as at 30 June 2003 was £4.7 million equating to a 15% level of gearing.
The development of new high performance foams, a major element of our
medium-term business strategy, is progressing well with positive reaction from
the market to some of the new materials sampled. Discussions are underway with
potential partners to accelerate both the technical development and marketing of
high performance foams.
Dividend
Despite the disappointing trading conditions, the Board has decided to maintain
the interim dividend of 2.5p net per share. This will be paid on 25 September
2003 to shareholders who are on the Company's register at the close of business
on 29 August 2003. It is currently the Board's intention, subject to the trading
outcome for the full year, to maintain the final dividend at the same level as
last year.
Outlook
Market conditions in the UK and Europe have been difficult and we expect a
continuation of this situation with trading conditions remaining at or around
the levels of last year. In North America, however, we anticipate improving
sales growth through the year driven by new development projects with existing
and new customers. The Board therefore believes that the second half will show
some moderate overall sales growth with margins benefiting from lower polymer
prices. However, this is unlikely to offset the increased fixed costs of the
business and we continue to believe that profit for the full year is likely to
be slightly below that of 2002.
W H FAIRSERVICE
Chairman
11 August 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003
Six months Six months ended 30 June 2002 Year ended 31 December 2002
Ended Pre Exceptional Post Pre Exceptional Post
30 June exceptional item exceptional exceptional item exceptional
2003* item (Note 4) item item (Note 4) item
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Audited)
£000 £000 £000 £000 £000 £000 £000
Turnover -
continuing operations 12,101 11,876 - 11,876 23,468 - 23,468
Cost of sales (9,207) (8,512) 2,155 (6,357) (17,242) 2,155 (15,087)
Gross profit 2,894 3,364 2,155 5,519 6,226 2,155 8,381
Distribution costs (979) (1,054) (36) (1,090) (1,923) (36) (1,959)
Administrative expenses (1,036) (1,126) 165 (961) (2,152) 165 (1,987)
Other operating income - - 3,464 3,464 - 3,464 3,464
Operating profit -
continuing operations 879 1,184 5,748 6,932 2,151 5,748 7,899
Profit on disposal of
fixed assets - - 875 875 - 875 875
Profit on ordinary
activities before interest
and tax 879 1,184 6,623 7,807 2,151 6,623 8,774
Interest receivable 1 2 - 2 9 - 9
Interest payable and
similar charges (61) (140) - (140) (208) - (208)
Profit on ordinary
activities before tax 819 1,046 6,623 7,669 1,952 6,623 8,575
Tax on profit on ordinary
activities (222) (293) (2,019) (2,312) (517) (2,019) (2,536)
Profit for the period 597 753 4,604 5,357 1,435 4,604 6,039
Equity dividends - paid - - (906)
Equity dividends - proposed (906) (906) (1,813)
Retained (loss)/profit
for the period (309) 4,451 3,320
Earnings per ordinary share 1.6p 2.1p - 14.8p 4.0p - 16.6p
Diluted earnings per
ordinary share 1.6p 2.1p - 14.8p 4.0p - 16.6p
*There is no exceptional item in 2003
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED
GAINS AND LOSSES
for the six months ended 30 June 2003
Six months Six months Year
Ended ended ended
30 June 30 June 31 December
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Profit for the period 597 5,357 6,039
Currency translation differences
on foreign currency net investment (187) (368) (730)
Total recognised gains and
losses relating to the period 410 4,989 5,309
Prior year adjustment (note 2) - 751 751
Total gains and losses reported
since last annual report 410 5,740 6,060
CONSOLIDATED BALANCE SHEET
as at 30 June 2003
As at As at As at
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
£000 £000 £000 £000 £000 £000
Fixed assets
Tangible assets 33,818 35,718 34,765
33,818 35,718 34,765
Current assets
Stocks 3,453 3,340 3,380
Debtors 6,339 10,799 5,625
Cash at bank and in hand 146 253 372
9,938 14,392 9,377
Creditors: amounts falling
due within one year (7,577) (11,160) (6,831)
Net current assets 2,361 3,232 2,546
Total assets less current
liabilities 36,179 38,950 37,311
Creditors: amounts falling
due after more than one year (541) (1,615) (1,049)
Provision for liabilities
and charges (4,543) (4,251) (4,671)
Net assets 31,095 33,084 31,591
Capital and reserves
Called-up share capital 1,813 1,813 1,813
Share premium account 13,707 13,707 13,707
Capital redemption reserve 5 5 5
Profit and loss account 15,570 17,559 16,066
Shareholders' funds - equity 31,095 33,084 31,591
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2003
Six months Six months Year
ended ended ended
30 June 2003 30 June 2002 31 December 2002
(Unaudited) (Unaudited) (Audited)
£000 £000 £000 £000 £000 £000
Net cash inflow from
operating activities (note 6) 895 3,638 10,954
Returns on investment
and servicing of finance
Interest received 1 2 9
Interest paid - bank and other (48) (119) (181)
- finance leases (13) (21) (27)
(60) (138) (199)
Taxation
Mainstream corporation tax (1,137) (100) (566)
Overseas tax (31) - 39
(1,168) (100) (527)
Capital expenditure
Purchase of tangible fixed assets (895) (3,776) (5,197)
Sale of tangible fixed assets 28 38 26
Capital receipts from insurers
relating to the fire - 875 875
(867) (2,863) (4,296)
Equity dividends paid (1,813) (1,813) (2,719)
Cash (outflow)/inflow before use
of liquid resources and financing (3,013) (1,276) 3,213
Repayment of loan instalment (424) (605) (928)
Capital element of finance
lease payments (59) (78) (138)
(Decrease)/increase in
cash in the period (3,496) (1,959) 2,147
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 30 June 2003
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
(Decrease)/increase in cash in the period (3,496) (1,959) 2,147
Cash outflow from decrease in debt and
lease finance 483 683 1,066
Change in net debt resulting from cash flows (3,013) (1,276) 3,213
Translation differences 20 135 212
Movement in net debt in the period (2,993) (1,141) 3,425
Net debt at the start of the period (1,675) (5,100) (5,100)
Net debt at the end of the period (4,668) (6,241) (1,675)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
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 2002 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 237(2) or (3) of the Companies Act 1985.
Taxation has been estimated at the rate expected to be incurred in the full
year.
2. Prior year adjustment
The adoption of FRS19 'Deferred Taxation' in the 2002 accounts resulted in an
increase of £0.75 million in opening reserves at 1 January 2002.
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.
Diluted earnings per share is also shown in compliance with FRS14.
4. Exceptional item
On 22 October 2000, there was a fire at the Group's Croydon site. The insurance
proceeds received and expenses incurred as a result of this fire formed an
exceptional item in the 2001 and 2002 accounts.
2003 2002
£000 £000
Revenue costs incurred - (1,207)
Cash received from insurers - 7,830
Exceptional item before taxation - 6,623
Tax on exceptional item - (2,019)
Exceptional item after taxation - 4,604
5. Reconciliation of movement in shareholders' funds
£000
Profit for the six months ended 30 June 2003 597
Dividend (906)
Retained loss for the period (309)
Other recognised gains and losses (187)
Opening shareholders' funds at 1 January 2003 31,591
Closing shareholders' funds at 30 June 2003 31,095
6. Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Operating profit 879 6,932 7,899
Depreciation charge 1,583 1,428 3,084
Loss on disposal of fixed assets - - 4
(Increase)/decrease in stocks (148) 162 120
Increase in debtors (709) (5,443) (274)
(Decrease)/increase in creditors (710) 559 121
Net cash inflow from operating activities 895 3,638 10,954
7. Circulation and enquiries
This interim report will be sent to shareholders and will be available from the
Company's registrars, Computershare Investor Services PLC, PO Box 82, The
Pavilions, Bridgwater Road, Bristol BS99 7NH.
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