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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