Final Results - to 31 December 1999 & Other News
Zotefoams PLC
28 February 2000
ZOTEFOAMS PLC
Announcement of strategic alliance with Sekisui Chemical Company Ltd
Preliminary results for the year ended 31 December 1999
Zotefoams plc, the world's leading manufacturer of cross-linked polyolefin
block foam, is delighted to announce that it has signed a memorandum of
understanding relating to a major new global sales and marketing agreement
with Sekisui Chemical Company Ltd of Japan ('Sekisui'), the world's leading
producer of roll polyolefin foam. The Company also announces today its
preliminary results for the year ended 31 December 1999.
Highlights of the agreement:
- Combines the world's leading block and roll foam products to create a unique
and complementary product portfolio
- Accelerates Zotefoams' penetration of major global market areas:
- combined portfolio to be sold via Sekisui's global network of sales and
marketing offices
- gives immediate access to growing markets in Asia and South America
- provides superior service and access to European customers
- strengthens profile of sales by end-user application, reducing exposure
to single market segments
- Increases significantly the potential of our investment in manufacturing at
Cincinnati, USA
Preliminary results summary:
- Turnover reduced to £22.4m (1998: £24.2m)
- Profit before tax of £5.8m (1998: £8.0m)
- Earnings per share of 11.2 pence (1998: 15.6 pence)
- Results impacted by rising raw materials prices and sharp reduction in
turnover to the toys market segment, as forewarned in October 1999 trading
statement
-Major technological advance, substantially lowering economic hurdles to
future overseas manufacturing
- Dividend increased by 4%, reflecting management's confidence in the
Company's future prospects
Commenting on the alliance, Andrew Gingell, Managing Director of Zotefoams
said:
'Our new alliance with Sekisui will transform Zotefoams' ability to penetrate
new markets around the world with its growing portfolio of high quality block-
foam products. Together we will be able to supply an unparalleled product
portfolio through an established sales and marketing operation to a broader
range of end users.'
T Yamamoto, President of Sekisui (Chemical) Europe Ltd said:
'Sekisui is delighted to enter into this alliance with Zotefoams which will
contribute to improved customer service through a combined portfolio of the
finest block and roll foams and will lead to the opening of new market
opportunities.'
Enquiries:
Zotefoams plc 020 8664 1600
Andrew Gingell, Managing Director
David Stirling, Finance Director
Financial Dynamics 020 7831 3113
Tom Baldock
Chairman's statement
During 1999 we experienced continuing growth in continental Europe and North
America with a slight upturn in the UK market. However, as indicated in our
trading statement on 29 October 1999, the dual impact of sharply increasing
raw materials prices and a major reduction in demand from the toy segment
reduced turnover and profits in the second half year.
Results
Profit before tax for the year ended 31 December 1999 was £5.8 million
compared with a profit before tax, excluding exceptional profit on disposal of
land, of £7.3 million in 1998. Turnover was £22.4 million (1998: £24.2
million). Earnings per share were 11.2p compared with 13.9p in 1998 excluding
profits on the sale of land.
Capital expenditure was £2.7 million, associated mainly with the commissioning
of a new autoclave at Croydon and the purchase and levelling of the site in
North America for our North American facility.
Dividend
The Directors are recommending a final dividend of 5.0p net per share (1998:
4.8p). This brings the total dividend for the year to 7.5p and represents a
4% increase on the dividend for 1998. The final dividend will be paid on 25
April 2000 to shareholders who are on the Company's register at the close of
business on 31 March 2000. Dividend cover is 1.5 times.
The Board
As announced in the interim report, Roger Elmhirst resigned as a non-executive
Director on 14 April due to ill health. Sadly Roger died shortly afterwards
following a lengthy illness.
Randall Redd, President of our North American subsidiary, Zotefoams Inc,
joined the Board on 2 August 1999.
On 1 October Andrew Gingell, previously Chief Operating Officer, was appointed
Managing Director. At the same date, in line with the Board's succession
plan, I took up the position of part-time executive Chairman having previously
been full-time.
The appointment of a third non-executive Director was made on 1 December when
Christopher Ryan joined the Board. I am delighted to welcome Chris who is
currently a non-executive Director at Air Products plc, having previously been
Senior Vice President of Air Products Europe Inc.
Employees
In the difficult external environment, we continue to rely on the hard work,
creativity and dedication of our employees and I would like to thank them for
their efforts and loyalty.
Prospects
The pressures that impacted on our performance in the second half of 1999 have
continued into the current year. However we are very excited by two new
strategic developments that the Board believes will enhance significantly
Zotefoams' medium- and longer-term growth prospects.
Agreement has in principle been reached with Sekisui Chemical Company Ltd for
a global marketing and sales agreement. Under the terms of the agreement,
Zotefoams' block foam products will be marketed alongside Sekisui's market-
leading thin roll foam product in the three major global market areas of
Europe, Asia and North America. It is anticipated that the new alliance will
be implemented during the second quarter of 2000, with benefits expected
thereafter.
In addition, in support of our globalisation objectives, we have developed and
proven the technology to allow the long-distance shipment of nitrogen-
saturated polymer slabs. This development substantially lowers the economic
hurdle to establishing manufacturing in other parts of the world and will be
applied to our planned North American facility, due for commissioning in 2001.
We believe 2000 will be a year of transition from which Zotefoams will emerge
as a balanced, high margin growth business with an expanding international
dimension.
W H Fairservice Chairman
25 February 2000
Consolidated profit and loss account
for the year ended 31 December 1999
1999 1998
£000 £000 £000 £000
Turnover - continuing
operations 22,426 24,199
Cost of sales (12,843) (13,148)
Gross profit 9,583 11,051
Distribution costs (1,945) (1,895)
Administrative expenses (1,932) (1,867)
Operating profit - continuing
operations 5,706 7,289
Profit on disposal of fixed
assets - continuing operations - 763
Interest receivable 76 38
Interest payable and similar
charges (9) (59)
Profit on ordinary activities
before taxation 5,773 8,031
Tax on profit on ordinary
activities (1,704) (2,380)
Profit for the financial year 4,069 5,651
Equity dividends - paid (906) (870)
Equity dividends - proposed (1,813) (1,740)
Total dividends paid and
proposed (2,719) (2,610)
Retained profit for the
financial year 1,350 3,041
Earnings per ordinary share 11.2p 15.6p
Diluted earnings per ordinary
share 11.2p 15.6p
Consolidated statement of total recognised gains and losses
for the year ended 31 December 1999
1999 1998
£000 £000
Profit for the financial year 4,069 5,651
Currency translation differences on
foreign currency net investments 16 3
Total recognised gains and losses 4,085 5,654
relating to the year
Consolidated balance sheet
at 31 December 1999
1999 1998
£000 £000 £000 £000
Fixed assets
Intangible assets 27 37
Tangible assets 28,034 27,462
28,061 27,499
Current assets
Stocks 2,487 2,253
Debtors 4,858 4,952
Cash at bank and in hand 2,975 2,044
10,320 9,249
Creditors: amounts falling due
within one year (5,411) (5,282)
Net current assets 4,909 3,967
Total assets less current
liabilities 32,970 31,466
Creditors: amounts falling due
after more than one year (36) (67)
Provisions for liabilities and
charges (3,875) (3,706)
Net assets 29,059 27,693
Capital and reserves
Called-up share capital 1,813 1,813
Share premium account 13,707 13,707
Capital redemption reserve 5 5
Profit and loss account 13,534 12,168
Total shareholders' funds -
equity 29,059 27,693
Consolidated cash flow statement
for the year ended 31 December 1999
1999 1998
£000 £000 £000 £000
Net cash inflow from operating
activities 7,688 9,158
Returns on investments and
servicing of finance
Interest received 76 38
Interest paid - bank and other - (48)
- finance leases (9) (11)
67 (21)
Taxation
ACT - (626)
Mainstream corporation tax (1,562) (1,330)
Overseas tax refunded 22 2
(1,540) (1,954)
Capital expenditure
Purchase of fixed assets (2,626) (4,379)
Sale of fixed assets 11 1,471
(2,615) (2,908)
Equity dividends paid (2,646) (2,501)
Cash inflow before financing 954 1,774
Financing (34) (36)
Management of liquid resources (1,600) -
(Decrease)/increase in cash in
the year (680) 1,738
Reconciliation of net cash flow to movement in net funds
for the year ended 31 December 1999
1999 1998
£000 £000
(Decrease)/increase in cash in the
year (680) 1,738
Cash outflow from decrease in debt 34 36
and lease finance
Cash used to increase liquid
resources 1,600 -
Change in net funds resulting from 954 1,774
cash flows
New finance leases - (19)
Translation differences (19) 14
Movement in net funds in the year 935 1,769
Net funds at the start of the year 1,936 167
Net funds at the end of the year 2,871 1,936
Notes
Financial Information
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 1999 and 1998 but is
derived from those accounts. Statutory accounts for 1998 have been delivered
to the Registrar of Companies, whereas those for 1999 will be delivered
following the Company's Annual General Meeting. The auditors have reported on
those accounts; their reports were unqualified and did not contain a statement
under Section 237 (2) or (3) of the Companies Act 1985.
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