Interim Results
Zotefoams PLC
13 August 2002
13 August 2002
Enquiries:
Zotefoams plc 020 8664 1600
David Stirling, Chief Executive
Clifford Hurst, Finance Director
Financial Dynamics 020 7831 3113
Charlie Armitstead
Zotefoams plc
Interim Results for the six months ended 30 June 2002
Results
Profit before tax pre-exceptional items for the six months ended 30 June 2002
was £1.0 million compared with £2.1 million for the same period last year. This
resulted from a reduced turnover of £11.9 million (2001: £12.6 million) and
higher depreciation and insurance charges. The 6% reduction in turnover compared
to 2001 reflects tougher economic conditions. In addition, the first half of
2001 benefited from customer restocking following a fire at the Group's main
production facility in October 2000.
Earnings per share pre-exceptional items were 2.1p compared with 4.3p in 2001.
As announced on 16 July 2002, a final settlement of £13.9 million was received
from the insurers following the fire at Croydon in October 2000. As disclosed in
our preliminary results, which were announced on 12 March 2002, total proceeds
received from the date of the fire to 31 December 2001 were £6.0 million.
Revenue costs of £1.3 million have been offset against the remaining proceeds of
£7.9 million, with the balance of £6.6 million being recorded as an exceptional
profit. Profit before tax after exceptional items is £7.7 million and earnings
per share after exceptional items are 14.8p.
The weakness in our major markets encountered in the second half of 2001
continued into 2002. Our UK market remained subdued through the period with a 4%
reduction in sales compared to the same period in 2001. In Continental Europe,
sales fell 12%, the combined effect of customer restocking in the comparative
period and weaker economic conditions in 2002. In North America, 8% sales growth
in local currency was achieved compared with the same period of 2001.
The price of LDPE, our major raw material, reached £600 per tonne in July 2002,
an increase of 40% over the average price for the first half. We expect prices
to moderate from this level but remain significantly higher than those
experienced in the first half of the year.
Capital additions of £3.8 million for the period were associated mainly with
fire replacement assets (£2.3 million) and investment in high-pressure capacity
(£0.6 million). When these projects are completed we do not anticipate any major
capital requirements, other than maintenance capital or investment to support
technical development, in the near future.
Net debt as at 30 June 2002 was £6.2 million. Of the £7.9 million insurance
proceeds received in 2002, £3.4 million was received in the period to 30 June
2002 and the remaining £4.5 million in July 2002.
During the period, we finished the rebuilding of our maintenance workshop,
stores and technical laboratory. The last project to restore the site following
the fire in 2000 is the construction of the finished goods storage area. This is
proceeding to plan and will be completed by the end of the year.
Our development strategy is to leverage our proprietary technology to produce
materials with superior performance characteristics. We have now proven that our
process can be used to foam a wide variety of materials, the most promising of
which are currently under further assessment in our new technical facilities.
Dividend
The Directors have declared an interim dividend of 2.5p net per share. The
dividend will be paid on 19 September 2002 to shareholders who are on the
Company's register at the close of business on 30 August 2002. This dividend is
unchanged from the interim dividend in respect of the six months ended 30 June
2001.
Board changes
As signalled in our preliminary results in March 2002, Ian Buckley retired as a
non-executive Director in April 2002. I would like to thank Ian for his
contribution to the Company. It is the intention of the Board to appoint another
non-executive Director in due course.
Outlook
While the first half year of 2002 fell below expectations, our major markets are
showing improving trends with the exception of the UK market which remains
subdued. The Board believes that, if current market conditions continue, the
second half will show moderate sales growth compared to the first half although
margins are likely to be affected by higher polymer prices.
WH Fairservice Chairman
12 August 2002
Consolidated profit and loss account
For the six months ended 30 June 2002
Six months
ended 30 June 2002
________________________________________
Pre Exceptional Post Six months Year ended
exceptional item exceptional ended 31 December
item (Note 4) item June 2001 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
£000 £000 £000 £000 £000
_________________________________ _______________ ___________ __________ _________ ____________
Turnover - continuing operations 11,876 - 11,876 12,588 22,975
Cost of sales (8,512) 2,155 (6,357) (8,349) (18,834)
_______________________________ _______________ ________ ________ _______ _________
Gross profit 3,364 2,155 5,519 4,239 4,141
Distribution costs (1,054) (36) (1,090) (1,028) (2,119)
Administrative expenses (1,126) 165 (961) (1,027) (2,171)
Other operating income - 3,464 3,464 - -
_______________________________ _______________ ________ ________ _______ _________
Operating profit - continuing
operations 1,184 5,748 6,932 2,184 (149)
Profit on disposal of fixed - 875 875 - 3,760
assets
_______________________________ _______________ ________ ________ _______ _________
Profit on ordinary activities
before interest and tax 1,184 6,623 7,807 2,184 3,611
Interest receivable 2 - 2 31 35
Interest payable and similar (140) - (140) (80) (184)
charges
_______________________________ ______________ ________ ________ _______ _________
Profit on ordinary activities
before tax 1,046 6,623 7,669 2,135 3,462
Tax on profit on ordinary (293) (2,019) (2,312) (576) (944)
activities
_______________________________ ______________ ________ ________ _______ _________
Profit for the period 753 4,604 5,357 1,559 2,518
Equity dividends - paid (906)
Equity dividends - proposed (906) (906) (1,813)
_______________________________ ______________ ________ ________ _______ _________
Retained profit/(loss) for the
period 4,451 653 (201)
_______________________________ ______________ ________ ________ _______ _________
Earnings per ordinary share 2.1p 12.7p 14.8p 4.3p 6.9p
_______________________________ ______________ ________ ________ _______ _________
Diluted earnings per ordinary
share 2.1p 12.7p 14.8p 4.3p 6.9p
_______________________________ ______________ ________ ________ _______ _________
Consolidated statement of total recognised gains and losses
for the six months ended 30 June 2002
Six months Six months Year ended
ended ended
30 June 2002 30 June 2001 31 December
2001
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
_________________________________________________________ ___________ _________ ____________
Profit for the period 5,357 1,559 2,518
Currency translation differences on foreign currency net (368) 85 308
investment
_________________________________________________________ ____ ________ _________
Total recognised gains and losses relating to the period 4,989 1,644 2,826
_________________________________________________________ ________ ________ _________
Prior year adjustment 751 - -
_________________________________________________________ ________ ________ _________
Total gains and losses reported since last annual report 5,740 1,644 2,826
_________________________________________________________ ________ ________ _________
Consolidated balance sheet
As at June 2002
As at
As at As at 31 December 2001
30 June 2002 30 June 2001 restated
(Unaudited) (Unaudited) (Audited)
______________________ ___________________ ________________
£000 £000 £000 £000 £000 £000
Fixed assets
Tangible assets 35,718 32,222 33,920
_______________________________ ________ ________ _______ ______ ______ ______
35,718 32,222 33,920
Current assets
Stocks 3,340 2,903 3,540
Debtors 10,799 6,147 5,843
Cash at bank and in hand 253 382 245
________ ________ _______ ______ ______ ______
14,392 9,432 9,628
Creditors: amounts falling due (11,160) (8,774) (8,066)
within one year
_______________________________ ________ ________ _______ ______ ______ ______
Net current assets 3,232 658 1,562
_______________________________ ________ ________ _______ ______ ______ ______
Total assets less current
liabilities 38,950 32,880 35,482
Creditors: amounts falling due (1,615) (365) (2,229)
after more than one year
Provision for liabilities and
charges (4,251) (3,634) (4,251)
_______________________________ ________ _______ ______ ______ ______
Net assets 33,084 28,881 29,002
_______________________________ ________ ________ _______ ______ ______ ______
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 17,559 13,356 13,477
_______________________________ ________ ________ _______ ______ ______ ______
Shareholders' funds - equity 33,084 28,881 29,002
_______________________________ ________ ________ _______ ______ ______ ______
Consolidated cash flow statement
For the six months ended 30 June 2002
Six months ended Six months ended Year ahead
30 June 2002 30 June 2001 31 December 2001
(Unaudited) (Unaudited) (Audited)
£000 £000 £000 £000 £000 £000
__________________________ ___________ ___________ ___________ ___________ ________ __________
Net cash inflow from
operating activities
(note 6) 3,638 3,073 842
Returns on investment and
servicing of finance
Interest received 2 31 35
Interest paid
- bank and other (119) (63) (151)
- finance leases (21) (17) (33)
__________________________ ________ ________ ________ ________ ______ ________
(138) (49) (149)
Taxation
Mainstream corporation tax (100) (322) (671)
Overseas tax paid - - (49)
__________________________ ________ ________ ________ ________ ______ ________
(100) (322) (720)
Capital expenditure
Purchase of tangible (3,776) (2,907) (6,065)
fixed assets
Sale of tangible fixed
assets 38 36 36
Capital receipts from
insurers relating to the
fire 875 - 4,049
____________________________ ______ ________ ________ ________ ______ ________
(2,863) (2,871) (1,980)
Equity dividends paid (1,813) (1,813) (2,719)
____________________________ ________ ________ ________ ________ ______ ________
Cash outflow before use of
liquid resources and
financing (1,276) (1,982) (4,726)
Repayment of loan instalment (605) - -
Capital element of
finance lease payments
(78) (72) (139)
New borrowings - - 2,876
____________________________ ________ ________ ________ ________ ______ ________
Decrease in cash in the
period (1,959) (2,054) (1,989)
___________________________ ________ ________ ________ ________ ______ ________
Reconciliation of net cash flow to movement in net debt
For the six months ended 30 June 2002
Six months ended Six months ended Year ended
30 June 2002 30 June 2001 31 December 2001
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
______________________________________ __________________ __________________ _________________
Decrease in cash in the period (1,959) (2,054) (1,989)
Cash outflow/(inflow) from decrease in
debt
and lease finance 683 72 (2,737)
______________________________________ __________________ __________________ _________________
Change in net debt resulting
from cash flows (1,276) (1,982) (4,726)
Translation differences 135 12 9
______________________________________ __________________ __________________ _________________
Movement in net debt in the period (1,141) (1,970) (4,717)
Net debt at the start of the period (5,100) (383) (383)
______________________________________ __________________ __________________ _________________
Net debt at the end of the period (6,241) (2,353) (5,100)
______________________________________ __________________ __________________ _________________
Notes to the interim financial statements
1. Basis of preparation
With the exception of the implementation of Financial Reporting Standard 19 '
Deferred Taxation', the interim report and accounts have been prepared using the
accounting policies set out in the last annual report. The comparative figures
for the financial year ended 31 December 2001 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.
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 in accounting policy
The adoption of FRS 19 'Deferred Taxation' has increased opening reserves at 1
January 2002 by £0.75 million. Comparative figures have been restated
accordingly.
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. In 2001 the
expenses incurred and insurance proceeds received up to 31 December 2001 were
shown in the accounts as an exceptional item. A final settlement of £13.9
million was agreed with insurers in July 2002. £6.0 million was received in 2000
/1, £3.4 million in the six months ending 30 June 2002 and the remaining balance
of £4.5 million was received in July and has been accrued as an insurance
receivable in these accounts. The expenses incurred so far in 2002 plus those
further expenses which are expected to be incurred have been netted off against
the proceeds received to form an exceptional item.
2002 2001
£000 £000
_______________________________________________ _______________ _______________
Stock destroyed - (1,215)
Net book value of fixed assets destroyed - (941)
Revenue costs incurred (1,207) (3,201)
Cash receivable from insurers 7,830 6,049
_______________________________________________ _______________ _______________
Exceptional item before taxation 6,623 692
Tax on exceptional item (2,019) (206)
_______________________________________________ _______________ _______________
Exceptional item after taxation 4,604 486
_______________________________________________ _______________ _______________
The insurance proceeds have not been allocated to specific items by the loss
adjusters and Zotefoams' management have therefore allocated these proceeds
using their best estimates at the time of issuing this report. Of the £7.8
million receivable in 2002 management have allocated £3.4 million to revenue
cost, £0.9 million to fixed assets destroyed in the fire and the remaining £3.5
million has been treated as compensation for lost sales and allocated to other
operating income.
5. Reconciliation of movement in shareholders' funds
£000
___________________________________________________________________ _____________
Profit for the six months ended 30 June 2002 5,357
Dividend (906)
___________________________________________________________________ _____________
Retained profit for the period 4,451
Other recognised gains and losses (368)
Prior period adjustment 751
Opening shareholders' funds at 1 January 2002 (as previously stated) 28,250
___________________________________________________________________ _____________
Closing shareholders' funds at 30 June 2002 33,084
___________________________________________________________________ _____________
6. Reconciliation of operating profit to net cash inflow from operating
activities
Six months ended Six months ended Year ended
30 June 2002 30 June 2001 31 December 2001
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
_________________________________________ _______________ _______________ _______________
Operating profit 6,932 2,184 (149)
Depreciation charge 1,428 1,133 2,458
Decrease/(increase) in stocks 162 (732) (1,394)
(Increase)/decrease in debtors (5,443) (186) 184
Increase/(decrease) in creditors 559 674 (257)
_________________________________________ _______________ _______________ _______________
Net cash inflow from operating activities 3,638 3,073 842
_________________________________________ _______________ _______________ _______________
7. Circulation and enquiries
This interim report will be sent to shareholders and will be available from the
Company's registrars, Computershare Services PLC, PO Box 82, The Pavilions,
Bridgwater Road, Bristol BS99 7NH.
Independent review by KPMG Audit Plc to Zotefoams plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 4 to 8 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where they are to be
changed in the next annual accounts in which case any changes, and the reasons
for them, are to be disclosed.
Review of work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board.
A review consists principally of making enquires of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A review
is substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London
12 August 2002
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