Interim Results

Zotefoams PLC
10 August 2004


Tuesday 10th August 2004


Zotefoams plc


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 2004.


Summary


  • Turnover increased by 7% to £13.0m (2003: £12.1 million)

  • Pre-tax profit was £0.87 million (2003: £0.82 million) despite negative
    impact of the weak US dollar

  • Net debt reduced to £3.27 million

  • Further progress made in North America

  • Strong development pipeline with several products moving into late stage
    technical development

  • Interim dividend 1.5p per share (2003: 2.5p)

Commenting on the results, Bill Fairservice, Chairman, said:

'Overall we believe we are in good shape to face the challenges we anticipate
for the second half of the year and our investment in new product development is
showing promising signs for the medium term.'


Enquiries:

Zotefoams plc                                        020 8664 1600
David Stirling, Managing Director
Clifford Hurst, Finance Director

Financial Dynamics                                   020 7831 3113
Charlie Armitstead



About us

Zotefoams plc is the world's leading manufacturer of cross-linked polyolefin
block foams. Its products are used in a wide range of markets, including sports
and leisure, packaging, transport, healthcare, toys, building, marine and the
military.

Through a unique production process, Zotefoams produces foams which have
controllable properties and are of a strength, consistency, quality and purity
superior to foams produced by other methods.

Zotefoams' strategy is to create sustained profit growth by expanding its sales
internationally and by broadening its potential market with new unique products.


Chairman's Statement

Results

Profit before tax for the six months ended 30 June 2004 was £0.87 million
compared with £0.82 million for the same period last year. This profit increase
of 7% was achieved by strong sales growth and in spite of the negative impact of
the weak US Dollar relative to Sterling. Excluding exchange rate movements, our
profit before tax for the six months would have been approximately £0.15 million
higher.


Markets

Sales grew 7% to £12.95 million (2003: £12.10 million) with particularly good
progress being made in North America which saw an increase of 31% in dollar
sales. Our UK sales were similar to 2003 although we believe that our progress
in developing opportunities will stand us in good stead for the future in what
we expect to be a difficult market. In Europe sales growth of 8% in local
currency was achieved through a focus on developments with key customers and
partially reflects a pick-up in the first quarter of this year after a poor
final quarter of 2003.


Product Development

Zotefoams has embarked on a program of development to exploit our unique
manufacturing technology for high-performance foams. Working with potential
customers we have extended the ZOTEK(R) range of PVDF foams and continue to
progress these for a number of interesting applications. I am also pleased to
report that we have a strong development pipeline with some interesting products
moving into later stage technical development. We are seeking market and
development partners for selected projects in order to accelerate the assessment
and launch of some of these products. Early indications are that we should
achieve our first orders for the ZOTEK(R) range late in 2004.


Operations

The price of LDPE, our major raw material, has increased sharply from February,
leaving the average price for the period at similar levels to the first six
months of 2003.

Performance improvement continues in our North American operations and I am
pleased to report that June was a new record production month in the plant. In
our Croydon plant additional high-pressure capacity was commissioned in April
and this gives us the flexibility to begin a rolling program of maintenance and
improvement on some of our older vessels, ultimately leaving us with enhanced
capacity and capability in this key area of operations.


Earnings and Dividend

Earnings per share for the six months ended 30 June 2004 were 1.7p compared with
1.6p for the six months ended 30 June 2003. The Directors have declared an
interim dividend of 1.5p net per share (2003: 2.5p). The dividend will be paid
on 23 September 2004 to shareholders who are on the Company's register at the
close of business on 27 August 2004.


Cash Flow and Balance Sheet

£2.00 million cash was generated from operating activities in the period which,
combined with lower levels of capital expenditure, reduced net debt by £0.31
million to £3.27 million at 30 June 2004 (31 December 2003: £3.58 million).
Working capital increased by £0.65 million which reflects the seasonality of the
business and is due to the increase in sales and a build-up of inventory in
advance of our annual Croydon plant shut-down in early August.


Outlook

Increasing energy costs represent a major challenge for Zotefoams. These costs
will increase significantly from October when our existing energy contracts
expire. We are currently reviewing all our options, including selling price
rises, with respect to these and other inflationary cost increases. Little
relief is anticipated from the weak dollar and the rise in raw material prices
is expected to continue into the second half of the year.

In the short-term we anticipate continuing sales growth in the Group as we
recover from the poor performance in Europe during the second half of 2003 and
further benefit from our investment in North America.

Overall we believe we are in good shape to face the challenges we anticipate for
the second half of the year and our investment in new product development is
showing promising signs for the medium term.


W H Fairservice
Chairman
9 August 2004



Consolidated profit and loss account
For the six months ended 30 June 2004

                                                           Six months          Six months                Year
                                                                ended               ended               ended
                                                              30 June             30 June         31 December
                                                                 2004                2003                2003
                                                          (Unaudited)         (Unaudited)           (Audited)
                                                                 £000                £000                £000

                                                               ______              ______              ______
Turnover - continuing operations                               12,950              12,101              23,504
Cost of sales                                                 (9,974)             (9,207)            (18,478)

                                                               ______              ______              ______
Gross profit                                                    2,976               2,894               5,026
Distribution costs                                              (940)               (979)             (1,884)
Administrative expenses                                       (1,055)             (1,036)             (2,047)

                                                               ______              ______              ______
Operating profit - continuing operations                          981                 879               1,095
Interest receivable                                                 -                   1                  18
Interest payable and similar charges                            (107)                (61)               (158)

                                                               ______              ______              ______
Profit on ordinary activities before
taxation                                                          874                 819                 955
Tax on profit on ordinary activities                            (265)               (222)               (219)

                                                               ______              ______              ______
Profit for the period                                             609                 597                 736
Equity dividends - paid                                             -                   -               (906)
Equity dividends - proposed                                     (544)               (906)               (725)

                                                               ______              ______              ______
Total dividends paid and proposed                               (544)               (906)             (1,631)

                                                               ______              ______              ______
Retained profit/(loss) for the period                              65               (309)               (895)

                                                               ______              ______              ______
Earnings per ordinary share                                      1.7p                1.6p                2.0p

                                                               ______              ______              ______
Diluted earnings per ordinary share                              1.7p                1.6p                2.0p

                                                               ______              ______              ______





Consolidated statement of total recognised gains and losses
for the six months ended 30 June 2004

                                                           Six months          Six months                Year
                                                                ended               ended               ended
                                                              30 June             30 June         31 December
                                                                 2004                2003                2003
                                                          (Unaudited)         (Unaudited)           (Audited)
                                                                 £000                £000                £000

                                                               ______              ______              ______
Profit for the period                                             609                 597                 736
Currency translation differences on
foreign currency net investment                                 (108)               (187)               (860)

                                                               ______              ______              ______
Total recognised gains and losses
relating to the period                                            501                 410               (124)

                                                               ______              ______              ______




Consolidated balance sheet
As at 30 June 2004

                                                As at                   As at                   As at
                                              30 June                 30 June             31 December
                                                 2004                    2003                    2003
                                          (Unaudited)             (Unaudited)               (Audited)
                                     £000        £000        £000        £000        £000        £000

                                   ______      ______      ______      ______      ______      ______
Fixed assets
Tangible assets                    31,170                  33,818                  32,375

                                   ______                  ______                  ______
                                               31,170                  33,818                  32,375
Current assets
Stocks                              3,177                   3,453                   3,178
Debtors                             6,378                   6,339                   5,893
Cash at bank and
in hand                               240                     146                     212

                                   ______                  ______                  ______
                                    9,795                   9,938                   9,283
Creditors: amounts
falling due within
one year                          (7,189)                 (7,577)                 (7,263)

                                   ______                  ______                  ______
Net current assets                              2,606                   2,361                   2,020

                                               ______                  ______                  ______
Total assets less
current liabilities                            33,776                  36,179                  34,395

Creditors: amounts
falling due after
more than one year                                  -                   (541)                    (57)

Provision for liabilities
and charges                                   (3,983)                 (4,543)                 (4,502)

                                               ______                  ______                  ______
Net assets                                     29,793                  31,095                  29,836

                                               ______                  ______                  ______
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                                        14,268                  15,570                  14,311

                                               ______                  ______                  ______
Shareholders' funds
- equity                                       29,793                  31,095                  29,836

                                               ______                  ______                  ______




Consolidated cash flow statement
for the six months ended 30 June 2004


                                        Six months ended        Six months ended              Year ended
                                                 30 June                 30 June             31 December
                                                    2004                    2003                    2003
                                             (Unaudited)             (Unaudited)               (Audited)
                                         £000       £000        £000        £000        £000        £000

                                       ______     ______      ______      ______      ______      ______
Net cash inflow from
operating activities
(note 4)                                           1,994                     895                   3,516

Returns on investment
and servicing of
finance

Interest received                           -                      1                      18
Interest paid
- bank and other                        (124)                   (48)                    (89)
- finance leases                         (12)                   (13)                    (27)

                                       ______                 ______                  ______
                                                   (136)                    (60)                    (98)
Taxation
Mainstream
corporation tax                         (231)                (1,137)                 (1,103)
Overseas tax                             (12)                   (31)                    (57)

                                       ______                 ______                  ______
                                                   (243)                 (1,168)                 (1,160)
Capital expenditure
Purchase of tangible
fixed assets                            (603)                  (895)                 (1,614)

Sale of tangible fixed
assets                                      -                     28                      27

                                       ______                 ______                  ______
                                                   (603)                   (867)                 (1,587)
Equity dividends paid                              (725)                 (1,813)                 (2,719)

                                                  ______                  ______                  ______
Cash inflow/(outflow)
before use of liquid
resources and
financing                                            287                 (3,013)                 (2,048)

Repayment of loan
instalment                                         (381)                   (424)                   (832)

Capital element of
finance lease
payments                                            (60)                    (59)                   (119)

                                                  ______                  ______                  ______
Decrease in cash in
the period                                         (154)                 (3,496)                 (2,999)

                                                  ______                  ______                  ______





Reconciliation of net cash flow to movement in net debt
for the six months ended 30 June 2004

                                                            Six months         Six months               Year
                                                                 ended              ended              ended
                                                               30 June            30 June        31 December
                                                                  2004               2003               2003
                                                           (Unaudited)        (Unaudited)          (Audited)
                                                                  £000               £000               £000

                                                                ______             ______             ______
Decrease in cash in the period                                   (154)            (3,496)            (2,999)
Cash outflow from decrease in debt
and lease finance                                                  441                483                951

                                                                ______             ______             ______
Change in net debt resulting from cash flows                       287            (3,013)            (2,048)
Translation differences                                             22                 20                145

                                                                ______             ______             ______
Movement in net debt in the period                                 309            (2,993)            (1,903)
Net debt at the start of the period                            (3,578)            (1,675)            (1,675)

                                                                ______             ______             ______
Net debt at the end of the period                              (3,269)            (4,668)            (3,578)

                                                                ______             ______             ______




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 2003 are not
the Company's statutory accounts for that financial year. Those accounts have
been reported upon by the Company's auditor and delivered to the Registrar of
Companies.

The report of the auditor 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. 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.


3. Reconciliation of movement in shareholders' funds
                                                                                              £000

                                                                                            ______
Profit for the six months ended 30 June 2004                                                   609
Dividend                                                                                     (544)

                                                                                            ______
Retained profit for the period                                                                  65
Other recognised losses                                                                      (108)
Opening shareholders' funds at 1 January 2004                                               29,836

                                                                                            ______
Closing shareholders' funds at 30 June 2004                                                 29,793

                                                                                            ______



4. 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
                                                                  2004               2003               2003
                                                           (Unaudited)        (Unaudited)          (Audited)
                                                                  £000               £000               £000

                                                                ______             ______             ______
Operating profit                                                   981                879              1,095
Depreciation charge                                              1,658              1,583              3,157
Decrease/(increase) in stocks                                        4              (148)                 75
Increase in debtors                                              (523)              (709)              (397)
Decrease in creditors                                            (126)              (710)              (414)

                                                                ______             ______             ______
Net cash inflow from operating activities                        1,994                895              3,516

                                                                ______             ______             ______



5 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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