- Part 2: For the preceding part double click ID:nRSO0722Sa
Union and IFRS Interpretations Committee (IFRS IC) interpretations applicable
to companies reporting under IFRS.
The financial information does not constitute the Company's statutory
accounts, as defined in Sections 434 of the Companies Act 2006, for the year
ended 31 December 2015 or 2014 but is derived from those accounts which have
been approved by the Board of Directors. Statutory accounts for 2014 have
been delivered to the Registrar of Companies and those for 2015 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
statements under Section 498 (2) of the Companies Act 2006.
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 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. Included in this
segment were microZOTE foams made using polyolefin resins, an activity
curtailed in 2014.
· High-Performance Products ('HPP'): these foams exhibit high-performance
on certain key properties, such as improved chemical, flammability or
temperature performance, due to the resins on which they are based. Turnover
in the segment is currently mainly derived from our ZOTEK F foams and T-FIT
insulation, both made from PVDF fluoropolymer. Other products either
commercially launched or being assessed in development include foams made from
polyamide (nylon) and PEBA.
· MuCell Extrusion LLC ('MEL'): licenses microcellular foam technology
and sells related machinery.
·
Polyolefins HPP MEL Eliminations Consolidated
2015 £000 2014 £000 2015 £000 2014 £000 2015 £000 2014 £000 2015 £000 2014 £000 2015 £000 2014 £000
Total Revenue 43,608 40,440 8,274 6,614 2,621 2,088 (66) (61) 54,437 49,081
Adjustment for JV sales (568) (136) - - - - - - (568) (136)
Group Revenue 43,040 40,304 8,274 6,614 2,621 2,088 (66) (61) 53,869 48,945
Segment profit/(loss) pre-amortisation 7,601 6,008 816 1,022 (497) (103) - - 7,920 6,927
Amortisation of acquired intangible assets (47) (21) - - (304) (304) - - (351) (325)
Segment profit/(loss) 7,553 5,987 816 1,022 (801) (407) - - 7,568 6,602
Foreign exchange gains - - - - - - - - 213 310
Unallocated central costs - - - - - - - - (1,456) (1,341)
Operating profit - - - - - - - - 6,325 5,571
Net financing costs - - - - - - - - (304) (233)
Share of loss from joint-ventures - - - - - - - - (11) (64)
Taxation - - - - - - - - (1,213) (926)
Profit for the year (pre-exceptional items) 4,797 4,348
Segment Assets 59,423 48,214 8,989 7,955 7,057 6,526 - - 75,469 62,695
Unallocated assets - - - - - - - - 737 676
Total assets 76,206 63,371
Segment liabilities (20,318) (14,257) (2,420) (210) (684) (587) - - (23,422) (15,054)
Unallocated liabilities - - - - - - - - (1,664) (1,083)
Total liabilities (25,086) (16,137)
Depreciation and impairment 2,606 4,155 178 151 43 38 - - 2,827 4,344
Amortisation 345 21 - - 304 304 - - 649 325
Capital expenditure:
Tangible fixed assets 8,800 5,488 456 129 12 94 - - 9,268 5,711
Intangible fixed assets 413 1,577 - - 9 29 - - 422 1,606
-
422
1,606
Unallocated assets and liabilities are made up of corporation tax and deferred
tax assets and liabilities and investments in joint-ventures.
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 £000 Continental Europe £000 North America £000 Rest of the world £000 Total £000
For the year ended 31 December 2015
Total Revenue 11,372 21,568 15,975 5,522 54,437
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
For the year ended 31 December 2014
Total Revenue 10,465 20,381 14,277 3,958 49,081
Group Revenue from external customers 10,465 20,381 14,277 3,822 48,945
Non-current assets 26,473 - 8,939 - 35,412
Capital expenditure 4,625 - 1,086 - 5,711
Non current assets do not include financial instruments, deferred tax assets
or investments in joint-ventures.
Major customer
Revenue from one customer of the Group represents approximately £4.90m (2014:
£5.13m) of the Group's Total Revenue.
3. Exceptional Item
On 27 June 2014 the Company made the decision to curtail manufacturing
activity on its microZOTE extrusion line within its Polyolefin business
segment. This resulted in a non-cash impairment charge as follows:
2015 £000 2014 £000
Fixed asset impairment - 1,175
Inventory impairment - 90
- 1,265
4. Finance income and costs
Finance income
2015 £000 2014 £000
Interest on bank deposits 2 2
Finance costs
2015 £000 2014 £000
On bank loans and overdrafts 97 57
Interest on defined benefit pension obligation 209 178
306 235
5. Taxation
2015 £000 2014 £000
UK corporation tax 989 859
Overseas taxation 124 44
Adjustment to prior year UK tax charge 10 (154)
Current taxation 1,123 749
Deferred taxation 90 (76)
Total tax charge 1,213 673
Factors affecting the tax charge
The tax charge for the year is equal to (2014: lower than) the standard rate
of corporation tax in the UK of 20.25% (2014: 21.5%). The differences are
explained below:
2015 £000 2014 £000
Tax reconciliation
Profit before tax 6,010 4,009
Tax at 20.25% (2014: 21.5%) 1,217 862
Effects of:
Research and development tax credits and other allowances less expenses not deductible for tax purposes (114) (61)
Overseas earnings and effect of US tax losses 135 26
Re-measurement of deferred tax (35) -
Adjustments to prior year UK corporation tax charge 10 (154)
Total tax charge 1,213 673
6. Dividends and earnings per share
2015 £000 2014 £000
Final dividend prior year of 3.70p (2013: 3.60p) net per 5.0p ordinary share 1,615 1,421
Interim dividend of 1.80p (2014: 1.75p) net per 5.0p ordinary share 785 691
Dividends paid during the year 2,400 2,112
The proposed final dividend for the year ended 31 December 2015 of 3.80p per
share (2014: 3.70p) is subject to approval by shareholders at the AGM and has
not been recognised as a liability in these financial statements. The proposed
dividend would amount to £1,688,000 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 £4.82m
(2014: £3.34m) 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
2015 was 768,911 (2014: 340,611). 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
IAS33 Earnings.
2015 2014
Average number of ordinary shares issued 43,595,921 40,664,440
Deemed issued for no consideration 599,401 599,430
Diluted number of ordinary shares issued 44,195,323 41,263,870
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 sets 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
· Pensioner members: in receipt of pension.
The defined benefit obligation is valued by projecting the best estimate of
future benefit outgo (allowing for revaluation to retirement for deferred
members and annual pension increases for all members) and then discounting to
the balance sheet date. The majority of benefits receive increases linked to
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 2015 was 20
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 3 years.
The last actuarial valuation of the Scheme was performed by the Scheme Actuary
for the Trustees as at 5 April 2014. 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 £168,000 per annum to cover administration
expenses and premiums for death in service benefits. The Company therefore
expects to pay £660,000 to the Scheme during the accounting year beginning 1
January 2016.
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 2015
by a qualified independent actuary. The major assumptions used by the actuary
were (in nominal terms) as follows:
As at 31 December 2015 As at 31 December 2014
Discount rate 3.8% 3.6%
RPI inflation (before retirement) 2.7% 2.9%
CPI inflation (before retirement) 1.7% 1.9%
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:
2015 2014
For an individual aged 65 in 2015
- Male 22.4 22.3
- Female 24.4 24.3
At age 65 for an individual aged 45 in 2015
- Male 24.1 24.0
- Female 26.3 26.2
The table below outlines where the Group's post-employment amounts and
activity are included in the financial statements.
2015 £000 2014 £000
Balance Sheet obligations for:
- Defined pension benefits 5,238 6,132
Income statement charge included in operating profit for:
- Defined pension benefits 209 178
Actuarial gains/(losses) recognised in Other Comprehensive Income:
- Defined pension benefits 443 (2,334)
The amounts recognised in the balance sheet are determined as follows:
2015 £000 2014 £000
Market value of assets 22,989 22,819
Present value of defined benefit obligation (28,227) (28,951)
Funded status (5,238) (6,132)
Liability in the Balance Sheet (5,238) (6,132)
The movement in the defined benefit obligation over the year is as follows:
2015 £000 2014 £000
Value of defined benefit obligation at start of year 28,951 25,826
Interest cost 1,023 1,138
Benefits paid (1,078) (1,100)
Actuarial gains: experience differing from that assumed (186) (56)
Actuarial gains: changes in demographic assumptions - 381
Actuarial (gains)/losses: changes in financial assumptions (483) 2,762
Value of defined benefit obligation at end of year 28,227 28,951
The movement in the value of the Scheme's assets over the year is as follows:
2015 £000 2014 £000
Market value of assets at start of year 22,819 21,546
Interest income 814 960
Actual (loss)/gain (226) 753
Employer contributions 660 660
Benefits paid (1,078) (1,100)
Market value of assets at end of year 22,989 22,819
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% pa -8%/+9%
RPI inflation +0.5% pa/-0.5% pa + 7%/-6%
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 31 December 2015 Year ended 31 December 2014
Asset class Market value £'000 % of total Scheme assets Market value £'000 % of total Scheme assets
Equities 15,120 66% 15,512 68%
Corporate Bonds 3,967 17% 3,487 15%
Gilts 2,597 11% 2,633 12%
Cash 873 4% 752 3%
Insured pensioners 432 2% 435 2%
Total 22,989 100% 22,819 100%
Actual return on assets over the year: 588 1,713
1,713
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 2015 were £390,000 (2014: £431,000).
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 2015 were £228,000 (2014: £276,000).
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 2015 were £76,000 (2014: £65,000).
For certain non UK based employees of the Company, the Company makes
contributions into individual schemes. The contributions paid by the Company
in 2015 were £1,000 (2015: £2,000).
For US based employees, Zotefoams Inc. operates a 401(k) plan. The
contributions paid by Zotefoams Inc. in 2015 were £52,000 (2014: £54,000).
This information is provided by RNS
The company news service from the London Stock Exchange