REG - Zotefoams PLC - Final Results <Origin Href="QuoteRef">ZTF.L</Origin> - Part 2
14/03/2017 07:07
- Part 2: For the preceding part double click ID:nRSN3469Za
Options exercised - 7 - - - - 23 - 30
Purchase of non-controlling interest - - - - - - (148) (47) (195)
Equity-settled share-based payments net of tax - - - - - - 210 - 210
Dividends paid 6 - - - - - - (2,474) - (2,474)
Total transactions with owners of the Parent - 7 - - - - (2,389) (47) (2,429)
Balance as at 31 December 2016 2,221 (31) 24,340 15 5,947 (319) 24,210 - 56,383
1. Accounting policies
Zotefoams plc (the 'Company') is a company incorporated in Great Britain.The
registered office of the Company is 675 Mitcham Road, Croydon CR9 3AL.
The Group unaudited preliminary results consolidate those of the Company and
its subsidiaries (together referred to as the 'Group'). The unaudited
consolidated financial results of Zotefoams plc have been prepared in
accordance with International Financial Reporting Standards ('IFRS') as
adopted by the European Union and IFRS Interpretations Committee ('IFRS IC')
interpretations applicable to companies reporting under IFRS, in accordance
with the Companies Act 2006.
The information for the year ended 31 December 2016 does not constitute
statutory accounts for the purposes of section 435 of the Companies Act 2006.
A copy of the accounts for the year ended 31 December 2015 has been delivered
to the Registrar of Companies. The auditor's report on those accounts was not
qualified and did not contain statements under section 498(2) or 498(3) of the
Companies Act 2006. The audit of the statutory accounts for the year ended 31
December 2016 is not yet complete. These accounts will be finalised on the
basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's annual general meeting.
The unaudited preliminary results have been prepared under the historical cost
convention, except for the revaluation of certain financial instruments except
as explained below, the same accounting policies, presentation and methods of
computation are followed in these financial statements as were applied in the
Group's 2015 annual audited financial statements.
2. Segment reporting
The Group's operating segments are reported in a manner consistent with the
internal reporting provided to and regularly reviewed by the Group Chief
Executive Officer, David Stirling, who is considered to be the 'chief
operating decision maker' for the purpose of evaluating segment performance
and allocating resources.
The Group manufactures and sells high-performance foams and licenses related
technology for specialist markets worldwide. Zotefoams' activities are
categorised as follows:
· Polyolefins: these foams are made from olefinic homopolymer and
copolymer resin. The most common resin used is polyethylene.
· High-Performance Products ('HPP'): these foams exhibit high-performance
on certain key properties, such as improved chemical, flammability,
temperature or energy management performance. Turnover in the segment is
currently mainly derived from products manufactured from three main polymer
types: PVDF fluoropolymer, polyamide (nylon) and polyether block amide (PEBA).
Foams are sold under the brand names ZOTEK® while technical insulation
products manufactured from certain materials are branded as T-FIT®.
· MuCell Extrusion LLC ('MEL'): licenses microcellular foam technology
and sells related machinery.
Polyolefins HPP MEL Eliminations Consolidated
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
£`000 £`000 £`000 £`000 £`000 £`000 £`000 £`000 £`000 £`000
Group revenue 44,729 43,040 9,988 8,274 2,733 2,621 (74) (66) 57,376 53,869
Segment profit/(loss) pre-amortisation 8,003 7,601 2,483 816 (396) (497) - - 10,090 7,920
Amortisation of acquired intangible assets (48) (47) - - (419) (304) - - (467) (351)
Segment profit/(loss) 7,955 7,553 2,483 816 (815) (801) - - 9,623 7,568
Foreign exchange (losses)/gains - - - - - - - - (33) 213
Unallocated central costs - - - - - - - - (1,944) (1,456)
Operating profit - - - - - - - - 7,646 6,325
Net financing costs - - - - - - - - (393) (304)
Share of loss from joint venture (21) - - - - - - - (21) (11)
Taxation (pre-exceptional items) - - - - - - - - (1,342) (1,213)
Profit for the year (pre-exceptional items) 5,890 4,797
Segment assets 68,610 59,423 11,607 8,989 10,409 7,057 - - 90,626 75,469
Unallocated assets - - - - - - - - 851 737
Total assets 91,477 76,206
Segment liabilities (30,643) (20,318) (980) (2,420) (1,828) (684) - - (33,451) (23,422)
Unallocated liabilities - - - - - - - - (1,643) (1,664)
Total liabilities (35,094) (25,086)
Depreciation 2,626 2,606 122 178 37 43 - - 2,785 2,827
Amortisation 391 345 - - 419 304 - - 810 649
Capital expenditure:
Tangible fixed assets 10,996 8,800 1,162 456 - 12 - - 12,158 9,268
Intangible fixed assets 245 413 198 - - 9 - - 443 422
Unallocated assets and liabilities are made up of corporation tax and deferred
tax assets and liabilities and, in 2015, investments in joint ventures.
Following a reassessment of cost classifications, certain costs at the Group's
subsidiaries, previously recognised as cost of sales, have been reclassified
to distribution and administration costs of £1,342,000 and £919,000
respectively, impacting the Group's gross margin percentage.
Geographical segments
Polyolefins, HPP and MEL are managed on a worldwide basis but operate from UK
and US locations. In presenting information on the basis of geographical
segments, segmental revenue is based on the geographical location of
customers. Segment assets are based on the geographical location of assets.
United Kingdom & Eire Continental Europe North America Rest Total
of the world
£`000 £`000 £`000 £`000 £`000
For the year ended 31 December 2016
Group revenue from external customers 10,008 21,864 19,940 5,564 57,376
Non-current assets 29,399 - 25,648 - 55,047
Capital expenditure 3,731 - 7,593 865 12,158
For the year ended 31 December 2015
Group revenue from external customers 11,372 21,568 15,975 4,954 53,869
Non-current assets 27,157 - 14,882 201 42,240
Capital expenditure 2,725 - 6,342 201 9,268
Non-current assets do not include financial instruments, deferred tax assets
or investments in joint ventures.
Major customer
Revenues from one customer of the Group represent approximately £4.61m (2015:
£4.90m) of the Group's revenue.
3. Exceptional item
On 24 June 2016 the Group and the Company incurred redundancy costs totalling
£242,000, as a result of an efficiency improvement programme, which have been
included in the Income Statement as an operating exceptional item.
2016 2015
£`000 £`000
Restructuring costs 242 -
4. Finance income and costs
Finance income
2016 2015
£`000 £`000
Interest on bank deposits - 2
Finance costs
2016 2015
£`000 £`000
On bank loans and overdrafts 207 97
Interest on defined benefit pension obligation 186 209
393 306
5. Taxation
2016 2015
£`000 £`000
UK corporation tax 1,422 989
Overseas taxation 43 124
Adjustment in respect of prior years (132) 10
Current taxation 1,333 1,123
Deferred taxation (39) 90
Total tax charge 1,294 1,213
Factors affecting the tax charge
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
2016 2015
£`000 £`000
Tax reconciliation
Profit before tax 6,990 6,010
Tax at 20.00% (2015: 20.25%) 1,398 1,217
Effects of:
Expenses that are not deductible in determining taxable profit 641 573
Research and development tax credits and other allowances (855) (911)
Overseas earnings and effect of US tax losses (33) 135
Effect of different tax rates of subsidiaries operating in other jurisdictions 275 224
Re-measurement of deferred tax - (35)
Adjustments to prior year UK corporation tax charge (132) 10
Total tax charge 1,294 1,213
The weighted average applicable tax rate for the Group is similar to the
standard rate of corporation tax in the UK of 20.00%
(2015: 20.25%).
Changes to the UK corporation tax rates were substantively enacted as part of
the Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7
September 2016). These include reductions to the main rate to reduce the rate
to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred taxes at the
Statement of Financial Position date have been measured using these enacted
tax rates and reflected in these consolidated financial statements.
6. Dividends and earnings per share
2016 2015
£`000 £`000
Final dividend prior year of 3.80p (2014: 3.70p) per 5.0p ordinary share 1,664 1,615
Interim dividend of 1.85p (2015: 1.80p) per 5.0p ordinary share 810 785
Dividends paid during the year 2,474 2,400
The proposed final dividend for the year ended 31 December 2016 of 3.90p per
share (2015: 3.80p) is subject to approval by shareholders at the AGM and has
not been recognised as a liability in these consolidated financial statements.
The proposed dividend would amount to £1,732,163 if paid to all the shares in
issue.
Earnings per ordinary share
Earnings per ordinary share is calculated by dividing consolidated profit
after tax attributable to equity holders of the Parent Company of £5.80m
(2015: £4.82m) by the weighted average number of shares in issue during the
year, excluding own shares held by employee trusts which are administered by
independent trustees. The number of shares held in the trust at 31 December
2016 was 628,979 (2015: 768,911). Distribution of shares from the trust is at
the discretion of the trustees. Diluted earnings per ordinary share adjusts
for the potential dilutive effect of share option schemes in accordance with
IAS 33
Earnings
2016 2015
Weighted average number of ordinary shares in issue 43,750,811 43,595,921
Deemed issued for no consideration 590,974 599,401
Diluted number of ordinary shares issued 44,341,785 44,195,323
7. Post-employment benefits
Defined benefit pension plans
The Company operates a UK registered trust-based pension scheme that provides
defined benefits. Pension benefits are linked to the members' final
pensionable salaries and service at their retirement (or date of leaving if
earlier). The Trustees are responsible for running the Scheme in accordance
with the Scheme's Trust Deed and Rules, which set out their powers. The
Trustees of the Scheme are required to act in the best interests of the
beneficiaries of the Scheme. There is a requirement that one-third of the
Trustees are nominated by the members of the Scheme.
There are two categories of pension scheme members:
· Deferred members: former and current employees of the Company; and
· Pensioner members: in receipt of pension.
The defined benefit obligation is valued by projecting the best estimate of
future benefit outgoings (allowing for revaluation to retirement for deferred
members and annual pension increases for all members) and then discounting to
the Statement of Financial Position date. The majority of benefits received
increases in line with inflation (subject to a cap of no more than 5% per
annum). The valuation method is known as the Projected Unit Method. The
approximate overall duration of the Scheme's defined benefit obligation as at
31 December 2016 was 19 years.
Since 1 October 2001 the Scheme has been closed to new members and, from 31
December 2005, the future accrual of benefits for existing members of the
Scheme ceased.
Future funding obligation
The Trustees are required to carry out an actuarial valuation every three
years. The last actuarial valuation of the Scheme was performed by the Scheme
Actuary for the Trustees as at 5 April 2014, and the next valuation is
expected to be performed in 2017. This valuation revealed a funding shortfall
of £2,500,000. In respect of the deficit in the Scheme as at 5 April 2014, the
Company has agreed to pay £492,000 per annum until 5 April 2020. In addition,
the Company will pay £127,200 per annum to cover administration expenses. The
Company therefore expects to pay £619,200 to the Scheme during the accounting
year beginning 1 January 2017, until an updated valuation is performed.
Risks
Through the Scheme, the Company is exposed to a number of risks:
· Asset volatility: the Scheme's defined benefit obligation is calculated
using a discount rate set with reference to corporate bond yields, however the
Scheme invests significantly in equities and other growth assets. These assets
are expected to outperform corporate bonds in the long term, but provide
volatility and risk in the short term.
· Changes in bond yields: a decrease in corporate bond yields would
increase the Scheme's defined benefit obligation, however this would be
partially offset by an increase in the value of the Scheme's bond holdings.
· Inflation risk: a significant proportion of the Scheme's defined
benefit obligation is linked to inflation, therefore higher inflation will
result in a higher defined benefit obligation (subject to the appropriate caps
in place). The majority of the Scheme's assets are either unaffected by
inflation, or only loosely correlated with inflation, therefore an increase in
inflation would also increase the deficit.
· Life expectancy: if Scheme members live longer than expected, the
Scheme's benefits will need to be paid for longer, increasing the Scheme's
defined benefit obligation.
The Trustees and Company manage risks in the Scheme through the following
strategies:
· Diversification: investments are well diversified, such that the
failure of any single investment would not have a material impact on the
overall level of assets.
· Investment strategy: the Trustees are required to review their
investment strategy on a regular basis.
· Annuities: the Scheme holds insurance contracts to pay some members'
AVC benefits and spouses' pensions. This removes investment, inflation and
longevity risk for those members.
The Company has recognised all actuarial gains and losses immediately in Other
Comprehensive Income. The initial results calculated as part of the formal
actuarial valuation as at 5 April 2014 have been updated to 31 December 2016
by a qualified independent actuary. The major assumptions used by the actuary
were (in nominal terms) as follows:
As at As at
31 December 31 December
2016 2015
Discount rate 2.70% 3.80%
RPI inflation (before retirement) 3.30% 2.70%
CPI inflation (before retirement) 2.30% 1.70%
Assumptions regarding future mortality are set based on actuarial advice in
accordance with published statistics and experience in each territory. These
assumptions translate into an average life expectancy in years for a pensioner
retiring at age 65:
2016 2015
For an individual aged 65 in 2016
- Male 22.4 22.4
- Female 24.5 24.4
At age 65 for an individual aged 45 in 2016
- Male 24.1 24.1
- Female 26.4 26.3
The table below outlines where the Group's post-employment amounts and
activity are included in the consolidated financial statements.
2016 2015
£`000 £`000
Statement of Financial Position obligations for:
- Defined pension benefits (7,439) (5,238)
Income statement charge included in operating profit for:
- Defined pension benefits (186) (209)
Actuarial (losses)/gains recognised in Other Comprehensive Income:
- Defined pension benefits (2,707) 443
The amounts recognised in the Statement of Financial Position are determined
as follows:
2016 2015
£`000 £`000
Market value of assets 25,617 22,989
Present value of defined benefit obligation (33,056) (28,227)
Funded status (7,439) (5,238)
Liability in the balance sheet (7,439) (5,238)
The movement in the defined benefit obligation over the year is as follows:
2016 2015
£`000 £`000
Value of defined benefit obligation at start of year 28,227 28,951
Interest cost 1,044 1,023
Benefits paid (1,502) (1,078)
Actuarial gains: experience differing from that assumed (399) (186)
Actuarial losses/(gains): changes in financial assumptions 5,686 (483)
Value of defined benefit obligation at end of year 33,056 28,227
The movement in the value of the Scheme's assets over the year is as follows:
2016 2015
£`000 £`000
Market value of assets at start of year 22,989 22,819
Interest income 858 814
Actual gain/(loss) 2,580 (226)
Employer contributions 692 660
Benefits paid (1,502) (1,078)
Market value of assets at end of year 25,617 22,989
The sensitivity of the defined benefit obligation to changes in the weighted
principal assumptions is:
Change in assumption Change in defined
benefit obligation
Discount rate +0.5%/-0.5% pa -8%/+9%
RPI inflation +0.5% pa/-0.5% pa + 7%/-7%
Assumed life expectancy +1 year +3%
The above sensitivity analyses are based on a change in an assumption while
holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the other assumptions may be correlated. When
calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the
reporting period) has been applied as when calculating the pension liability
recognised within the statement of financial position. The assets of the
Scheme are invested as follows:
Year ended Year ended
31 December 2016 31 December 2015
Asset class Market % of total Scheme assets Market % of total Scheme assets
value value
£'000 £'000
Equities 16,187 63% 15,120 66%
Corporate Bonds 4,849 19% 3,967 17%
Gilts 2,958 12% 2,597 11%
Cash 1,034 4% 873 4%
Insured pensioners 589 2% 432 2%
Total 25,617 100% 22,989 100%
Actual return on assets over the year: 3,438 588
Other pension schemes
On 1 January 2006 a separate stakeholder scheme was set up for those employees
who were originally in the closed defined benefit pension scheme. The
contributions paid by the Company in 2016 were £404,000 (2015: £390,000).
In addition to this scheme, the Company operates a stakeholder scheme which is
open to employees who joined after 1 October 2001. The contributions paid by
the Company in 2016 were £204,000 (2015: £228,000).
The Company also operates another stakeholder scheme which is open to
employees who joined after 1 March 2014. The contributions paid by the Company
in 2016 were £141,000 (2015: £76,000).
For certain non UK based employees of the Company, the Company makes
contributions into individual schemes. The contributions paid by the Company
in 2016 were nil (2015: £2,000).
For USA based employees, Zotefoams Inc. operates a 401(k) plan. The
contributions paid by Zotefoams Inc. in 2016 were £65,000; (2015: £52,000).
This information is provided by RNS
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