Zotefoams plc (LON:ZTF), a world leader in cellular materials technology, has announced its interim results for the six months ended 30 June 2020.
Business highlights
· H1 experienced challenging conditions in a number of markets, particularly for Polyolefin Foams
· Swift and effective operational response to the COVID-19 pandemic by the Group, ensuring business continuity and preserving financial strength
· Proactive commercial response including specification in substantial UK Government PPE contract awarded to largest UK customer
· All government COVID-19 support now repaid
· General market conditions expected to remain subdued but stable in H2
· Specific growth factors generated good momentum in late Q2 and are expected to underpin record six-month revenues in the second half of the year:
o Significantly increased footwear sales, as previously flagged
o PPE demand to remain elevated during H2
o Strong growth momentum in T-FIT® advanced insulation expected to continue
· Poland facility ready for commissioning Q4:2020, provides ability to respond to any acceleration in recovery
Financial highlights
· Group revenue of £34.6m, 18% below strong prior period comparative (30 June 2019: £42.3m):
o 7% decline in High-Performance Products
o 23% decline in Polyolefin Foams
o 2% increase in MuCell Extrusion sales
· Gross margins broadly stable at 34.8% ( 30 June 2019: 35.5%)
· Strong cost control resulted in profit before income tax of £2.7m (30 June 2019: £4.9m)
· £6.0m ( 30 June 2019: £5.2m) cash generated from operations
· Liquidity headroom of £18.8m (31 December 2019: £24.5m) after £7.4m of capex mainly related to the Poland manufacturing facility
· Net borrowings to EBITDA ratio for the period to 30 June 2020 of 2.6x (bank covenant 4.0x)
· Interim dividend of 2.03p declared (30 June 2019: 2.03p), reflecting the resilience of the H1 performance as well as the Board’s confidence in future prospects
Financial summary
| Six months ended 30 June 2020 | Six months ended 30 June 2019 | Change | |
| £m | £m | % | |
| Group revenue | 34.6 | 42.3 | (18) |
| Gross profit | 12 | 15 | -20 |
| Gross profit margin | 34.80% | 35.50% | – |
| Operating profit | 3.1 | 5.1 | -38 |
| Profit before income tax | 2.7 | 4.9 | -45 |
| Basic EPS (p) | 4.48 | 8.55 | -48 |
| Interim dividend (p) | 2.03 | 2.03 | – |
| Net debt | 36.2 | 23.4 | -55 |
Commenting on the results, David Stirling, Zotefoams Group CEO, said:
“Despite the impact of COVID-19 on the first half, the Group responded quickly and effectively to the challenges, implementing a number of operating, cost management and capital expenditure actions to protect the financial and operational capability of the business, with positive results.
“In light of the financial performance delivered by the business, as well as our ability to manage profitability and cash generation across a wide range of possible scenarios, the Board has sufficient confidence to pay an interim dividend.
“We expect the second six months of 2020 to deliver record sales, beating the previous best half year sales of £43.1m. Our expectations are based on relatively subdued but stable demand in most polyolefin foams markets other than PPE, where demand is very strong, and a much stronger second half for footwear products and T-FIT® technical insulation, continuing the momentum experienced late in the first half. We remain mindful of high levels of uncertainty in most markets as well as political uncertainties around Brexit, so these expectations must be tempered with caution, particularly around our assessment of market conditions.”
Listen to CEO David Stirling discuss these results in out interview here.
