Zotefoams plc (LON:ZTF), a world leader in cellular materials technology, has announced its interim results for the six months ended 30 June 2024.
Results highlights
| · | Record H1 sales performance, with Group revenue up 10% to £71.1m (HY 2023: £64.6m) and by 13% at constant currency |
| – High-Performance Products (HPP) revenue up 37% to £36.1m (HY 2023: £26.4m) | |
| · | Record H1 earnings and continuing improvements in profit margins |
| – Gross margin up 40 bps to 33.2% (up 50 bps to 34.3% excl. MEL) | |
| – Profit before tax up 12% to a record £8.3m (HY 2023: £7.4m) | |
| – Profit before tax excl. MEL up 12% to a record £10.5m (HY 2023: £9.4m) | |
| · | Basic earnings per share up 12% to 12.89p (HY 2023: 11.53p) |
| · | Strong balance sheet |
| – Improved cash generation from operations of £8.5m (HY 2023: £5.8m) supporting higher levels of growth investment | |
| · | Interim dividend increased by 4.4% to 2.38p per share (2023: 2.28p per share) |
Strategic highlights
| · | Continued strong performance in Footwear, driven by our partnership with Nike |
| · | Significant progress in ReZorce®, a transformative opportunity for the consumer packaging market with our recyclable barrier packaging technology. Our initial target market is liquid paperboard (LPB) cartons, where an estimated 300 billion cartons are currently made globally per annum |
| – Announced Refresco, the world’s largest independent beverage packager, as joint development partner. | |
| – Preparing for market trial of 150,000 sterile juice cartons in Western Europe | |
| – Exploring strategic investment partnership during H2 2024 to facilitate the scale-up and delivery of the ReZorce solution globally | |
| · | Future organic growth in North America supported by capital investment on a second low-pressure vessel on track for mid-2025 commissioning |
| · | Expanded technical capabilities and growth potential in new and existing markets through global alliance agreement signed with Suzhou Shincell New Materials Co. Ltd., China |
Financial summary
| June 2024 | June2023 | Change | ||
| Revenue (£m) | 71.1 | 64.6 | 10% | |
| Gross margin (%) | 33.2 | 32.8 | 40 bps | |
| Operating profit1 (£m) | 9.7 | 8.5 | 14% | |
| Operating margin (%) | 13.6 | 13.1 | 50 bps | |
| Profit before tax1 (£m) | 8.3 | 7.4 | 12% | |
| Basic EPS1 (p) | 12.89 | 11.53 | 12% | |
| Net debt (£m) | 44.6 | 28.3 | (58%) | |
| Net debt (£m) covenant basis2 | 35.1 | 26.7 | (31%) | |
| Leverage ratio3 | 1.4 | 1.1 | – | |
| Interim dividend (p) | 2.38 | 2.28 | 4.4% |
1 This is a reported number under UK adopted IAS and is after the deduction of amortisation of acquired intangibles amounting to £0.126m (HY 2023: £0.131m)
2 Net debt (covenant basis) is that defined under the bank facility, adjusted for the impact of IFRS16. The main adjustment is the elimination of Shincell (£7.1m), treated as a right-of-use asset and a corresponding lease liability
3 Leverage is not an IFRS measure and is that defined under the bank facility, with net debt, adjusted for IFRS16, at the end of the period divided by the preceding 12 months’ EBITDA, adjusted for IFRS2 and IFRS16
Commenting on the results and the outlook, Ronan Cox, Group CEO, said:
“I am pleased to report a strong first half performance for Zotefoams, demonstrating the resilience and growth potential of our business. Group revenue grew by 10% to £71.1m, driven primarily by exceptional demand from Nike, where underlying platform growth was amplified by an Olympic year and inventory build at Tier 1 suppliers. Coupled with our focus on operational efficiency, we achieved an increase in profit before tax of 12% to a record £8.3m (HY 2023: £7.4m). This figure includes cost an operating loss of £2.2m (HY 2023: £2.0m) in our MEL business as we progress our ReZorce recyclable barrier packaging technology.
ReZorce is a transformative opportunity for the consumer packaging market. In May, we announced Refresco, the world’s largest independent beverage packager, as our joint development partner, generating significant industry interest globally. We are now preparing for a trial of sterile juice cartons in Western Europe and in parallel are holding discussions with potential strategic partners to drive this initiative forward.
In May, we signed a global alliance agreement with Shincell, that combines our century of experience in nitrogen-expanded foams with their innovations in foaming technology. It enhances our technical capabilities and allows us to leverage their technology to get closer to our key customers and enter new markets, further strengthening our competitive position.
We enter the second half with positive momentum and with the expectation that market trends seen in H1 will remain largely consistent going into the latter part of the year. Footwear demand is expected to normalise over the coming months, as some of the near-term factors benefiting H1 work through, which will free up capacity to supply markets in both North America and Europe. We will continue to focus on cost efficiency, supported by a stable outlook for energy and polymer input prices.
The Board is delighted with the Group’s continued progress, with the benefits of our diverse market profile providing both stability and opportunities to unlock growth in a mixed economic backdrop. We remain confident that the Company will deliver a full year performance in line with market expectations, underpinned by the strong first half performance, and optimistic that we will continue our positive momentum in the medium term.”
