REG - Zotefoams PLC - Preliminary Results
18/03/2025 07:00
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RNS Number : 0236B Zotefoams PLC 18 March 2025
Zotefoams plc
Preliminary Results (unaudited) for the Year Ended 31 December 2024
18 March 2025 - Zotefoams plc ("Zotefoams" or "the Company" or "the Group"), a world leader in supercritical foams, today announces its unaudited preliminary results for the year ended 31 December 2024.
"Record revenue and profitability form a firm foundation for our next growth
phase"
Financial Headlines
Group
2024 2023 Change
Revenue (£m) 147.8 127.0 16%
Gross profit (£m) 46.1 41.1 12%
Operating profit(1) before exceptional items (£m) 18.1 15.1 20%
Exceptional items (15.2) - -
Operating profit(1,4) after exceptional items (£m) 3.0 15.1 (80)%
Profit before tax(1) before exceptional items (£m) 15.3 12.8 19%
Profit before tax(1,4) after exceptional items (£m) 0.2 12.8 (99)%
Cash generated from operations (£m) 30.4 12.1 151%
Net debt (£m) 33.0 31.6 (4)%
Net debt ex IFRS16 (£m) 24.1 30.2 20%
Leverage ratio(2) 0.9 1.2 -
Final dividend(3) (p) 5.10 4.90 4%
( )
(1) This is a reported number under UK adopted IAS and is after the deduction
of amortisation of acquired intangibles amounting to £0.250m in 2024 and
£0.257m in 2023
(2) Leverage is that defined under the bank facility, with net debt at the end
of the period divided by the preceding 12 months' EBITDA, adjusted for the
impact of IFRS2 and IFRS16
(3) Final dividend is subject to approval at the May 2025 Annual General
Meeting
(4) After rounding
Results Headlines
· Record Group revenue of £147.8m, 16% higher than the prior year
· High-performance product sales surpass those of Polyolefin Foams for the first
time, reflecting the Group's focus on mix enrichment
· Record operating profit before exceptional items up 20% to £18.1m
- Includes £4.9m of non-recurring operating cost in the now paused ReZorce
project
· Basic EPS before exceptional items up 37% to 25.95p
· Non-recurring exceptional costs of £15.2m reflect the impairment of MEL and
associated closure costs
· Strong cash generation reinvested in growth opportunities
- Cash generated from operations up 151% to £30.4m
· Strong balance sheet foundation for refreshed strategy
- Net debt excluding leases down 20% to £24.1m
- Leverage ratio down to 0.9x from 1.2x
- Final dividend up 4% to 5.10p
Strategic Progress
· The Group is today launching its new "Expanding Beyond the Core" strategy
aimed at driving long term sustainable growth and shareholder value creation
· Through increased focus on the customer, continued commitment to innovation,
expanding capability to move up the value chain and enhanced organisational
execution, the Group is targeting ambitious progress in the medium term:
- Organic growth of 7% CAGR to deliver FY2029 revenue of >£200m
- Operating margin of over 18% by FY2029
- ROCE of over 20% by FY2029
- Cash conversion of >95%
· Medium-term targets reflect a longer-term ambition to grow revenues to
>£300m and operating profit to >£60m, with the opportunity to
accelerate progress through inorganic growth
· Initial enabling investments for this transformation are underway:
- Access to new processing technology via a licensing agreement signed in May
24 extends technical capabilities and know-how
- Capital project in USA to increase local expansion capacity running to
budget and on target for commissioning in early H2 2025
- As announced on 10 March 2025, significant new production and innovation
facilities being established in Asia to support the long-term growth of the
Group's Consumer & Lifestyle business
Ronan Cox, Group CEO, said:
"We have made a positive start overall to 2025, with our Consumer &
Lifestyle and Transport & Smart Technology verticals performing well
across all regions. Demand in our Construction & Other Industries vertical
remains more subdued, as expected, but we continue to anticipate some
improvement in conditions as the year progresses.
"We have set out, and are executing, a refreshed, focused strategy,
prioritising innovation and profitable growth. Our market realignment is
progressing well as we transition from a product-centric to an industry-led
approach. Our investment in manufacturing excellence is advancing, with
continued good progress towards completion of our £10m expansion in the USA,
which remains on schedule for early H2 2025 commissioning, and we are
commencing with investments in our innovation centre of excellence in the UK,
our innovation hub in South Korea, and our new manufacturing facility in
Vietnam.
"The emerging trade landscape, including recent trade tariffs, creates both
challenges and opportunities for Zotefoams. While these may impact global
supply chains and market dynamics, our diversified manufacturing footprint
across the UK, USA, Poland and, soon, Vietnam positions us well to navigate
these uncertainties and potentially capture market share from less adaptable
competitors.
"Our new regional operating model, launched at the start of 2025, structures
our business across EMEA, North America, and Asia. This enables us to better
serve our customers' complete needs through a global commercial team that
coordinates decisions worldwide, while execution and delivery happens
regionally. This product-agnostic approach creates a platform for accelerated
growth. In 2025, we will target inefficiencies in overheads, with identified
annualised savings to be in part reinvested in our refreshed strategy.
"Polymer and energy input prices remain relatively stable; however, we are
monitoring these closely for the impact of tariffs, and our focus on improved
asset utilisation, product mix, price increases and operational efficiency
continues to be our key driver of margin enhancement.
"While we remain mindful of the uncertain economic backdrop and the evolving
trade landscape, we are confident in our ability to deliver another year of
good progress for Zotefoams. With a refreshed strategy and investment in
significant growth enablers underway, we are excited by the potential for the
Group to deliver both on its medium-term targets and longer-term ambition."
Enquiries:
Zotefoams plc +44 (0) 208 664 1600
Ronan Cox, Group CEO
Gary McGrath, Group CFO
IFC Advisory (Financial PR & IR) +44 (0) 203 934 6630
Graham Herring
Tim Metcalfe
Zach Cohen
About Zotefoams plc
Zotefoams plc (LSE - ZTF) is a world leader in cellular materials technology
delivering optimal material solutions for the benefit of society. Utilising a
variety of unique manufacturing processes, including environmentally friendly
nitrogen expansion for lightweight AZOTE(®) polyolefin and ZOTEK(®)
high-performance foams, Zotefoams sells to diverse markets worldwide.
Zotefoams uses its own cellular materials to manufacture T-FIT(®) advanced
insulation for demanding industrial markets. Zotefoams also owns and licenses
patented microcellular foam technology to reduce plastic use in extrusion
applications and for ReZorce(®) mono-material recyclable barrier packaging.
Zotefoams is headquartered in Croydon, UK, with additional manufacturing sites
in Kentucky, USA and Brzeg, Poland (foam manufacture), Oklahoma, USA (foam
products manufacture and conversion), Massachusetts, USA, Stilling, Denmark
(microcellular foam technology) and Jiangsu Province, China (T-FIT).
www.zotefoams.com (http://www.zotefoams.com)
AZOTE(®), ZOTEK(®), ReZorce(®) and T-FIT(®) are registered trademarks of
Zotefoams plc
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 as it forms part of UK Domestic
Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR")
Chair's statement
A refreshed, focused strategy, prioritising innovation and profitable growth
Dear shareholders
2024 represented the beginning of a transition period for the Group as it
sought to invest in its core business, backed by market-leading products, and
prepared to expand both sector and geographic presence, underpinned by
innovation and an enhanced leadership team. We finished the year in a strong
position, with record revenues and profits and a strong balance sheet. The
decision to pause our investment in ReZorce(®) circular packaging was
difficult but necessary, having been unable to secure the important investing
partner the Board considered essential to capture the commercial opportunity
the technology offers. However, this frees up resources to invest behind an
exciting, refreshed strategy to capture market opportunities where we believe
we have the right to win and where there is a clear runway for growth. We are
switching from a product focus to an industry focus, moving closer to our
customers, increasing investment in sustainable innovation and actively
assessing inorganic growth options to extend our capabilities. We are
investing in our people and have strengthened our executive leadership team to
execute our strategy. We believe that this strategy can deliver compelling
returns for our shareholders over the medium term and put the Group firmly on
the pathway to revenues of over £300m and operating profit of over £60m.
Board composition
The Zotefoams Board welcomed a new Group CEO to the business during the year.
Ronan Cox joined the Board in April 2024 and became Group CEO following the
Annual General Meeting held on 22 May 2024, replacing David Stirling. I would
like to offer my personal thanks to David, as well as my thanks on behalf of
everyone connected to Zotefoams for his significant contributions to the Group
during his 23 years of leadership. On 3 March 2025, the Board announced that
Gary McGrath, Group CFO, will retire from his role during 2025. He will remain
in his existing role until 31 October 2025 or longer if required, as part of a
managed succession process. I thank Gary for his ongoing contribution to the
business and wish him the very best in his future retirement.
Dividend
The Board is proposing a 4% increase in the final dividend to 5.10p (2023:
4.90p) which, if approved by shareholders, would make a total dividend for the
year of 7.48p (2023: 7.18p), an increase of 4.2%. This reflects the Board's
continued confidence in the Group's future and is in line with its progressive
dividend policy, recognising the importance to our shareholders of the
dividend as part of their overall return. See the Group's approach to capital
allocation in the Group CFO's review. If approved, the final dividend will be
paid on 2 June 2025 to shareholders on the register on 2 May 2025.
Sustainability
Our purpose is to provide optimal material solutions for the benefit of
society, reflecting our knowledge that, used appropriately, plastics are the
best solution for a wide range of sophisticated, long-term applications
typically delivered by our customers. The Board is focused on the importance
of sustainability, and we are targeting an increase in our investment in
sustainable innovation while continuing to consider the impacts of climate
change in everything we do. Further progress was made in 2024 towards our
sustainability targets. See the Group CEO's review.
Acting responsibly
The Board leads an ongoing programme to ensure the highest standards of
corporate governance and integrity across the Group and has remained abreast
of developing governance standards. The Board's interactions and
communications with executive management continue to be excellent and, as a
result, the Board is well placed to challenge, guide and support executive
management in the delivery of the growth strategy. We continue to pay
particular attention to the provision of a safe working environment for our
staff across all global locations and to the empowerment of our employees. The
Board also acknowledges the benefits of diversity, including that of gender
and ethnicity, and is committed to setting an appropriate tone from the top in
all diversity and inclusion matters.
Looking to the future
Zotefoams has well-invested and differentiated assets across EMEA and North
America alongside committed, capable and passionate people and our refreshed
strategy expands the Group beyond this core, supporting future profitable
growth. Our recently announced investment in Vietnam, supported by a new
innovation centre in Busan, South Korea will ensure that Zotefoams is in a
strong position to amplify the success of its strategic move in the footwear
market, which now represents the Group's largest segment by revenue. While we
are mindful of ongoing macroeconomic and geopolitical headwinds, we remain
confident about our future prospects for sustainable growth, improving returns
and strong cash generation.
L Drummond
Chair
18 March 2025
Group CEO's review
Zotefoams has delivered strong business performance, reporting a 16% increase
in revenue and 20% growth in operating profit before exceptional items, both
of which are at record levels for the Group. As a result of this, and our
continued investment to support capacity and innovation, the Group remains
well positioned to take market share and capitalise on significant
opportunities in our exciting supercritical fluid foams markets
Overview
In recent years and throughout 2024, the business has comprised two distinct
elements: the manufacturing and sale of specialist foams, which is
well-established, profitable and growing; and the MuCell business (MEL),
which, over the past 5 years transitioned into a development project focused
on ReZorce(®), an innovative and sustainable barrier packaging alternative to
existing composite solutions. Going forward, under my leadership, the Group
will pivot from a product to an industry-led approach in order to support our
wider growth ambitions.
Group revenue in 2024 was a record £147.8m, 16% higher than the previous year
(2023: £127.0m), with significant growth in Footwear and modest growth in our
ZOTEK(®) technical foams and North American polyolefin foams businesses. This
performance demonstrates the strength of our core product portfolio and the
success of an industry-focused strategy. MEL, at £1.2m, was a far smaller
part of Group revenue. Our operating profit growth of 20% before exceptional
items was pleasingly ahead of our revenue growth and, alongside improved cash
generation, the business enters the 2025 financial year well positioned for
continued profitable growth.
2024 United Continental Europe North Rest of Total
Kingdom
America
the world*
Change % 7% (6%) 6% 37% 16%
Group revenue (£000's) 12,740 30,475 28,696 75,880 147,791
% of Group revenue 9% 21% 19% 51% 100%
2023
Group revenue (£000's) 11,879 32,514 27,195 55,387 126,975
% of Group revenue 9% 26% 21% 44% 100%
* Rest of the world comprises China: £34.9m (2023: £27.1m) and other
countries: £41.0m (2023: £28.3m).
Our business strategy targets the expanding market for differentiated,
high-performance foam materials, driven by three fundamental macro-trends:
1. increasing urbanisation and ageing demographics
2. enhanced safety regulations
3. growing demand for environmental sustainability.
These trends, combined with our commitment to sustainability and safety across
all operations, position us well for future growth. Building upon our
century-long heritage in specialist foam manufacturing, Zotefoams is embarking
on a refreshed strategy that expands beyond our core capabilities through
strategic investments and deeper customer partnerships. By leveraging our
supercritical fluid foam technology and investing in innovation and
customer-focused manufacturing capabilities, we will strengthen our position
to capture long-term growth opportunities driven by the increasing demand for
sustainable, innovative, lightweight and durable materials. Our medium-term
ambition is to grow Group organic revenue well in excess of £200m, operating
profit in excess of £40m, cash conversion above 95% and ROCE beyond 20%.
Formative Impressions
I became Group CEO of Zotefoams in May 2024 and have spent significant time
engaging with our teams, customers, and operations across the business. What I
have found is a company comprised of dedicated teams with extraordinary
technical capabilities and significant untapped potential for growth.
The foundation of our success lies in our talented workforce, particularly our
concentration of STEM specialists, who have established Zotefoams as the clear
market leader in cross-linked and low-density polyethylene block foams. This
technical excellence has enabled us to build and maintain strong relationships
with major Original Equipment Manufacturers across a range of sectors
globally.
A key observation has been the substantial value our products generate
throughout the value chain. There is a clear opportunity to better structure
and formalise relationships with distributors and fabricators, potentially
capturing more of this value. This forms part of a broader opportunity I see
for Zotefoams to create its next growth curve by expanding further beyond our
UK core base and traditional block foam offerings. With much of the required
investment already made in building capacity globally, this will be a key
driver in delivering profitable growth in selected high-opportunity
industries.
Our technical capabilities and market position give us a strong 'right to win'
in several exciting growth industries. Many of these are already well served
by our current product base; however, there is still scope to expand in these
industries. To capitalise on these opportunities, in some instances we may
choose to advance along the value chain and deploy new technologies. While
M&A has not historically been a core focus for Zotefoams, we have begun to
develop this capability during 2024 and view it as a complementary accelerator
for growth alongside organic investment and strategic partnerships. Our
M&A strategy is well defined and will ensure that we remain disciplined in
our approach to this growth opportunity.
Innovation will be central to our future success. Our global leadership in
foaming technologies enables us to work with an extensive range of polymers -
from commodity materials right through to highly engineered materials -
creating both rigid and flexible foamed products that can effectively compete
against traditional plastics, metals, composites, and other performance
materials.
Looking ahead, I see significant runway for both revenue and margin growth.
Global trends favouring clean products, lightweighting, durability,
sustainability, and enhanced technical performance align perfectly with our
capabilities. Our emerging technology initiatives, and associated investment
priorities, including new capacity in Vietnam, are designed to bring us closer
to customers and move along the value chain, while making our core
supercritical fluid foams business more cost-effective and sustainable.
Strategic Market Realignment
During 2024 and into 2025, we engaged a reputable global market research
organisation to help us perform an extensive market mapping study. The current
core business focuses on a portion of the £4bn polyolefin foams market, with
some participation in select high-performance engineered polymer foam
applications. This has historically limited our addressable market to
approximately £0.8bn within these segments. However, with the strategic
direction we intend to take, moving along the value chain and expanding
Zotefoams' technology platforms, we can now set our sights on a significantly
larger £15bn market opportunity - £4bn polyolefin and £11bn engineered
polymers.
To meet this opportunity, we are implementing a shift in how we view and serve
our markets. Moving beyond our traditional product-centric structure of
Polyolefin Foams and High-Performance Products (HPP), we are realigning our
commercial teams around three core market verticals:
- Consumer and Lifestyle - encompassing our footwear business alongside other
applications in sports, leisure and personal care
- Transport and Smart Technologies - includes our aviation, automotive and
medical applications
- Construction and Other Industrial - captures our growing presence in
building technologies and other industrial applications
This strategic shift recognises that most of our customers can benefit from
products across our entire portfolio. By organising around market verticals
rather than product lines, we can better serve our customers' complete needs
and unlock additional value through our comprehensive solutions offering.
This industry-focused approach, combined with our new regional operating
model, creates a powerful platform for growth. Our regional teams can now
leverage our full product portfolio to provide integrated solutions within
each market vertical, whilst maintaining the technical excellence that
underpins our success. This structure enables us to:
- Develop deeper market understanding and customer relationships
- Create more comprehensive solutions using our entire product range
- Identify cross-selling opportunities more effectively
- Drive innovation based on industry needs rather than product capabilities
- Streamline customer engagement through single points of contact
These market verticals each contain significant sub-segments with strong
growth potential. For example, Consumer and Lifestyle encompasses our footwear
business alongside other applications in sports, leisure and personal care,
Transport and Smart Technologies includes our aviation, automotive and medical
applications, while Construction and Other Industrial captures our growing
presence in building technologies and other industrial applications.
This reorganisation aligns with our strategic focus on sustainable growth and
value creation, enabling us to better serve customers locally, while
leveraging our global capabilities and innovations across all product
technologies. We believe that this transformed commercial strategy will enable
sustained organic growth well ahead of underlying markets, with a target for
Group revenues to exceed £200m by 2029.
Strategic Investment in Technology and Innovation
Zotefoams invests in assets and technology with the capability to support the
growth opportunities afforded by its diverse and often unique products. During
the year, we continued to pursue a strategy of mix-enrichment and increasing
asset utilisation and, for the first time, revenue generated from our
High-Performance Product business unit (ZOTEK and T-FIT brands) exceeded that
in our Polyolefin Foams business (AZOTE). We made good progress preparing to
install our second low-pressure autoclave in the USA, which will provide
additional expansion capacity and supplement an aging asset in a critical
region where we see significant growth opportunities. We also partnered in May
2024 with Suzhou Shincell New Materials Co., Ltd ("Shincell") of Suzhou,
China, accessing Shincell's technology via a licensing agreement and thereby
extending our technical capabilities and know-how, enabling a wider scope of
products and processes in both new and existing markets and enhancing the
Group's technology platform for new products to deliver growth.
During the year, we also began the transition to a new internal, regional
operating model. This model marks a fundamental shift in how we approach and
serve our markets, moving us beyond our traditional product-centric structure
to an industry-oriented organisation that can better capture global
opportunities whilst maintaining our technical leadership. The new structure
is organised across EMEA, North America and Asia and enables us to align our
capabilities more closely with customer needs and regional market dynamics.
There has been significant recruitment of new talent to support this
reorientation, and the operating model became effective from the beginning of
the new year.
This strategic evolution delivers two key advantages:
Firstly, it enables us to manage key customer relationships on a truly global
scale. Many of our most significant customers operate across multiple regions
and require a diverse range of material solutions, and our new structure
allows us to serve them more effectively with coordinated account management
and consistent service levels. This is particularly valuable in sectors such
as aviation, automotive and footwear, where global programmes require seamless
coordination across regions and where our customers require diverse material
solutions that can be satisfied from across our portfolio of products.
Secondly, our regional model creates platforms for accelerated growth through
organic expansion, partnerships and strategic M&A opportunities. Each
region now has the autonomy to pursue market opportunities whilst leveraging
our global leadership in technology and innovation. This structure positions
us to better identify and implement downstream activities that can enhance our
market presence or technical capabilities within specific regions.
Our industry approach is supported by well invested assets and capacity. We
also see significant opportunity for accelerated growth through increased
investment in new technology and manufacturing capabilities. A planned
facility in Vietnam, alongside our existing operations in the UK, USA, and
Poland, demonstrates our commitment to positioning our manufacturing
capabilities closer to key customers and growth markets, which in this case is
our important Footwear market, and capitalises on innovation within our own
technology. Zotefoams will also establish a small purpose-built footwear
innovation centre in Busan, South Korea, that will allow us to work more
closely with key partners and allow a more rapid and responsive product
development capability in this rapidly evolving industry. See 'capacity and
investment' below, for further information.
Our primary focus is on driving organic growth, but we do see opportunity to
use targeted M&A as a new growth lever where it meets our stringent
criteria. We plan to enhance value through either market consolidation, where
we expand our portfolio with complementary products, acquire technologies to
deepen our expertise, or through downstream extension, where we will shorten
the value chain, gain machining and processing capabilities and get closer to
our customers, while respecting our existing customers, many of whom are
active in this area.
Cultural Transformation
Underpinning this strategic shift is a significant cultural transformation
centred on our new values of Courage, Impact and Respect. These values reflect
both our heritage of technical innovation and our ambition to become an even
more customer-centric organisation.
Courage enables us to challenge conventional thinking and pursue ambitious
goals. This should manifest itself in developing innovative solutions for
customers, entering new markets, or implementing organisational change to
drive operational efficiencies. Our teams are encouraged to think boldly about
how we can better serve our markets and customers.
Impact focuses our attention on delivering meaningful results for all
stakeholders. Whether through product innovation, operational excellence, or
customer service, we measure success by the tangible value we create. This
value-driven approach guides our investment decisions and strategic
initiatives across all regions.
Respect acknowledges the importance of collaborative relationships - with
colleagues, customers, suppliers, shareholders and communities. In our new
regional structure, this translates into stronger local partnerships and a
deeper understanding of market needs, whilst maintaining strong global
coordination.
These values are being embedded through comprehensive leadership programmes,
regular cross-regional forums, and enhanced communication channels. Our new
regional structure provides additional opportunities for career development
and knowledge-sharing across markets, strengthening our global capability
whilst maintaining local market expertise.
Sustainability
Sustainability remains integral to both our operations and value proposition.
Our products typically serve long-term, multiple-use applications and many can
be recycled at end-of-life, contributing positively to our customers'
sustainability objectives. In 2024, we observed an accelerating trend towards
lighter-weight foams across several markets, particularly in our Polyolefin
Foams business. This evolution aligns with our commitment to resource
efficiency, reducing material usage while delivering cost benefits to our
customers.
We continue to make progress against our environmental targets for Scope 1 and
2 emissions through focused initiatives in energy consumption, material
efficiency, and waste reduction. In 2024, we maintained our momentum in
reducing energy consumption and waste while increasing our recycling rates,
often incorporating recycled material into new foam products. Our core markets
increasingly demand 'best in class' solutions that align with our purpose of
delivering optimal material solutions for the benefit of society.
Following our commitment made in 2023, we conducted a comprehensive review of
our environmental strategy during our 2024 Board strategy session and are now
developing science-based targets. We maintain our adherence to ISO 14021:2016
guidelines for environmental claims, ensuring independent certification where
appropriate.
Notably, in 2024, 89% of our revenue came from products classified as "green"
based on resource efficiency criteria, demonstrating substantial improvements
in resource utilisation during either manufacture or use. This metric
underscores our commitment to sustainable innovation and our ability to meet
evolving market demands for environmentally conscious solutions.
Our planned investment in Vietnam is scalable and transitions manufacturing
from larger flat sheets to individual 3D foam parts, which particularly suits
the demands of the footwear customer, significantly reducing the skeleton of
waste. Being close to the customer, it also significantly reduces transport.
Our planned investment in an innovation centre of excellence in the UK will
build on our supercritical fluid foaming technology, which demonstrates its
green credentials through the absence of chemical foaming agents, foams that
carry lighter weight and thus use less material, and forms that are durable
and last longer. This facility will help us to further evolve existing
technology, and invest in new technology, to reduce the energy used in
manufacture and improve the Group's sustainable offering.
Executing the strategy
We expect this strategy to grow sustainable cash flows and increase
shareholder returns. We will:
- Transform from a position of strength to get closer to the customer
- Orientate our activities to where we have the greatest runway for growth and
the right to win
- Innovate to create the next generation of supercritical foams, doubling down
on weight and waste reduction and bringing new technical performance
- Target M&A to move the Group along the value chain and/or introduce new
technology
We have invested into the Group Executive Team in order to deliver on our
strategic priorities and drive profitable growth. To be fit for the future,
and with a new operating model and structure realigned for growth, we will
remove waste from our processes and automate, using AI where possible and
appropriate. In 2025, we will target inefficiency in sales, general and
administration spend as well as in indirect manufacturing overhead spend, with
possible annualised savings of up to £3-4m, £1-2m of which will be
reinvested in this refreshed strategy.
Through increased focus on the customer, continued commitment to innovation,
expanding capability to move up the value chain and enhanced organisational
execution, the Group is targeting ambitious progress in the medium term:
· Organic growth of 7% CAGR to deliver FY2029 revenue of >£200m
· Operating margin of over 18% by FY2029
· ROCE of over 20% by FY2029
· Cash conversion of >95%
These 2029 targets reflect a longer-term ambition to grow revenues to
>£300m and operating profit to >£60m, with the opportunity to
accelerate progress through inorganic growth.
HIGH-PERFORMANCE PRODUCTS (HPP)
ZOTEK(®)
T-FIT(®)
( )
Segment revenue: £79.6m
Change +37%
2023: £58.1m
Segment profit margin: 26.9%
2023: 26.5%
Segment profit: £21.5m
Change +39%
2023: £15.4m
( )
In 2024, our HPP business unit performed very well, with volumes up 39% and
sales growing significantly to £79.6m (2023: £58.1m), after an FX headwind
of £2.4m. The year marked a key milestone at Zotefoams, with sales in the HPP
business unit surpassing those of Polyolefin Foams for the first time. The
business unit comprises three main product groups: footwear, ZOTEK
fluoropolymer foams and T-FIT technical insulation.
The footwear segment, primarily serving the performance running shoe market
with specialist midsole materials, delivered robust growth with sales reaching
£66.1m (2023: £45.3m), an increase of 46%. In addition to strong underlying
growth in the platforms we supply foam for, this growth also benefitted from
an Olympic year, supply chain reconfiguration of our end customer, a rebuild
in inventory at the beginning of the year by our direct customers related to
Red Sea logistical challenges and, later in the year, additional demand as
Nike embarked on its strategy of building back the trust of wholesale partners
in line with their CEO's strategy. Longer term, our investment in Asia will
increase our total addressable market in the footwear industry by bringing us
to the heart of the athletic footwear manufacturing base, supplying 3D parts
and being more cost effective by reducing customer material waste and
leveraging a lower cost of production.
Our exclusive partnership with Nike until 2029 continues to yield benefits
beyond pure sales, enabling deeper collaboration on supply chain optimisation,
production efficiency and environmental sustainability. A notable achievement
has been the near elimination of waste in our foam production process, with
most scrap in our manufacturing process being successfully reintegrated into
the footwear supply chain. Our pricing mechanism with Nike maintains
transparency, reflecting material input costs, production efficiencies and
foreign exchange movements. We also recognise the opportunity to reduce foam
waste in our Tier 1 partner manufacturing processes, which currently sits as
high as 50%, and the move to a new production technique in an Asian facility
will reduce this waste by as much as 90%.
Beyond footwear, our ZOTEK brand offers advanced foamed sheet materials for
technically demanding applications globally. The aviation sector remains a key
market, where our materials meet critical requirements for insulation and fire
performance whilst minimising weight- major factors in both safety and
sustainability. The portfolio serves additional sectors including space,
automotive, technical packaging, military and personal protection through a
diverse range of foams with specific properties, achieved through our unique
combination of material selection and proprietary foaming technology.
ZOTEK F materials, our largest product offering within the portfolio,
experienced a 7% increase in sales value to £7.0m (2023: £6.5m). Whilst the
aviation sector, particularly Boeing, continues to face challenges despite
robust order books, we anticipate significant growth as these issues resolve
and we diversify our offering with other aircraft manufacturers. The high
input cost inflation reported previously began to impact profitability as we
consumed previously purchased inventory. We implemented pricing adjustments
from 2024, carefully balancing full cost recovery against our long-term growth
ambitions. ZOTEK F foam sheet sales represented 9% of HPP segment sales (2023:
11%).
T-FIT insulation, manufactured using our HPP products and specifically
designed for clean processing environments, saw sales decline marginally to
£5.8m (2023: £5.9m). Performance varied by region, with China showing growth
in food processing but experiencing slower activity in biotech and
pharmaceutical sectors, alongside lower conversion rates on larger targeted
projects. India demonstrated strong growth across our portfolio. We are
strengthening our position in other markets through strategic staff
investments and enhanced sales processes. Our manufacturing strategy combines
local production-either at Zotefoams facilities or through trusted
partners-for North American and European markets, whilst our Chinese facility
supplies other markets and the complete dimensional range globally. T-FIT
sales accounted for 7% of HPP segment sales (2023: 10%).
Segment profit reached £21.5m (2023: £15.4m), delivering a margin of 26.9%
(2023: 26.5%). The majority of the increased inventory provision made in 2024
affected slow-moving HPP foams, without which, the segment margin was 28.5%,
an increase of 200 bps.
POLYOLEFIN FOAMS
AZOTE(®)
Segment revenue: £66.9m
Change -1%
2023: £67.6m
Segment profit margin: 8.2%
2023: 11.1%
Segment profit: £5.5m
Change -27%
2023: £7.5m
( )
In 2024, the Polyolefin Foams business experienced mixed performance across
regions and market segments, with overall volumes showing modest growth
globally. Whilst North American volumes increased by 23%, EMEA saw a decline
of 5%, resulting in 4% lower overall volumes compared with 2023.
Sales performance varied significantly by region and market segment. In
Europe, which represents the majority of segment sales, sales were down 8%,
with performance impacted by economic headwinds, particularly in Germany where
automotive and construction markets reached their lowest levels since
2008-2009. The UK showed resilience with a 4% revenue growth despite lower
volumes, driven by strong average selling prices and new projects in
construction and industrial applications. The Far East demonstrated robust
growth with an 18% revenue increase, driven by new electric vehicle battery
applications and strong performance in high-margin aviation, semiconductor,
and medical segments. Overall, the EMEA region saw a 3% sales decline.
Sales in the North American business grew 3%, but there were significant
shifts in market mix, with automotive volumes increasing by 55% whilst
higher-margin segments such as medical and military experienced declines. The
medical segment faced temporary challenges due to inventory adjustments at key
customers, whilst military sales were impacted by reduced aircraft production
schedules and lower demand for specialised products. The outlook for these
segments as we head into 2025 is more positive.
The main polymers used in our Polyolefin Foams business are low-density
polyethylene (LDPE) and other similar polyolefins. During the year, the price
of LDPE held steady at 2024 levels and in Europe was trending around its
long-term average when the turbulence of the COVID years is excluded. LDPE
pricing is related to the pricing of its feedstock and ethylene, and the
regional supply vs demand balance.
In 2024, profitability was impacted by product mix as well as increased
operational costs, particularly in labour and maintenance. Labour costs
increased due to inflation, with salary increases averaging 7% in EMEA, and
strategic additions to our workforce, where the Group made significant
staffing investments in North America to support increased production
capabilities, volumes and quality initiatives to ensure we are well placed to
capture the growth opportunities in this region.
Manufacturing efficiency continued to be a focus across all facilities. We
manufacture polyolefin foams in three facilities, with full-process
manufacture in the UK and USA and foam expansion, fabrication and logistics in
Poland. An increasing proportion of European business is served through our
Polish facility, which is now operating 24 hours, six days per week. In North
America, additional production supervisors and fabrication operators were
added to support increased demand in specialised segments, and staffing levels
at our fabrication facility in Tulsa were increased to support an extension to
our service offering, while both UK and US facilities focused on continuous
improvement initiatives.
Segment profit for Polyolefin Foams declined by 27% to £5.5m and margin fell
from 11.1% to 8.2%. However, several positive developments emerged, including
new project wins in the UK that are expected to continue into 2025, strong
growth in high-value applications in the Far East, and improved operational
capabilities across our manufacturing network.
Looking ahead, our focus remains on optimising our product mix, continuing
operational improvements, and capitalising on growth opportunities in emerging
applications, particularly in the electric vehicle and specialised industrial
segments. The business maintains a strong foundation for future growth,
supported by our global manufacturing footprint and diverse market presence.
Our new regional operating model will enable better market responsiveness and
customer service, whilst our continued investment in manufacturing efficiency
positions us well for margin recovery as market conditions improve.
MEL
In December 2024, following a comprehensive strategic review, we made the
decision to pause investment in ReZorce circular technology to focus our
resources and innovation capabilities on our core supercritical fluid foams
business, where we see substantial opportunities for growth and value
creation.
During 2024, the Group achieved several important technical milestones with
ReZorce and produced an award-winning beverage carton capable of being run at
full industrial speed through existing production machinery. Validation that
the packaging was food sterile was still pending, but the route to this was
clear and considered readily attainable, albeit requiring more time to
complete.
This disruptive technology had demonstrated compelling sustainability
credentials, including potential carbon footprint reductions of over 50% for
commonly packaged foodstuffs. Despite these achievements and an extensive
process across the value chain to secure a strategic partner, supported by
specialist advisers, we did not identify a partner prepared to advance the
technology. Given the capital investment, market access and expertise required
to achieve high volume production of finished packaging, the Board had
consistently believed that a strategic partner was necessary to realise the
commercial potential of the ReZorce technology. Based on the feedback from
this process we concluded that the inherently low visibility over factors such
as pricing, within the overall evolution of the packaging market, when set
against the capital commitments required, was the principal reason why the
process had been unsuccessful.
The intellectual property and know-how associated with ReZorce remains well
protected and will be retained by the Group in order to preserve its ability
to realise the value of the unique technology, should market conditions become
more favourable.
Revenue from our MEL business unit remained at £1.2m (2023: £1.2m), while
the segment loss before amortisation of acquired intangibles increased to
£4.6m (2023: £4.1m). Following this strategic decision, we have recognised a
non-cash asset impairment of £13.8m and provided for related closure costs of
£1.4m and treated the combined amount of £15.2m as exceptional items in the
2024 financial statements.
Going forward, small revenue streams from royalties at existing customers of
MuCell Extrusion LLC will continue, and costs will include those to protect
patents considered of value. An agreement with Censco LLC will see MEL
equipment assembled and sold globally by Censco, for which royalty payments
will be received.
Capacity and Investment
Our manufacturing excellence is built on three core processes: polymer sheet
extrusion, high-pressure nitrogen gassing, and controlled expansion. This
specialised infrastructure represents a significant competitive advantage,
supporting multiple production lines and enabling flexible manufacturing
across our product portfolio.
In the UK, our investment strategy is targeted at driving operational
excellence through cost reduction and efficiency improvements, directly
supporting our sustainability goals. The UK facility remains our centre of
excellence for HPP products and serves as a strategic hub for preliminary
production of certain polyolefin products, which are then finished in Poland
to optimise logistics and reduce environmental impact. A new innovation centre
of excellence is being established in the UK to develop platform technologies
that can be implemented across industries, providing the next generation of
industry solutions; it will work hand-in-hand with the footwear innovation hub
in Asia. The UK innovation centre of excellence will protect our know-how and
trade secrets, give us access to great talent and will build on a strong
legacy of material and process innovation. We will evolve current, and invest
in new, technology to reduce the energy of manufacture and improve our
sustainable product offering. It will also enable us to design products and
processes that significantly reduce waste and emissions along the value chain
while delivering even greater performance characteristics.
Activity in our Polish facility increased significantly in 2024, with the
capacity being used to support growth in both polyolefin foams and
high-performance product lines. In 2025, we will continue to drive up
utilisation of this investment and assess how this modern facility with a
well-skilled workforce can contribute further to the refreshed Group strategy.
We are executing an expansion strategy in the USA, where market opportunities
are compelling. Our £10m investment in a second low-pressure autoclave,
alongside upgraded systems and expanded warehousing, is progressing on
schedule for early H2 2025 completion. This investment will significantly
enhance our capacity and operational resilience in this key market.
As announced on 10 March 2025, the Board has approved strategic investments in
Vietnam and Korea to support our growing Footwear business, positioning us
closer to key end markets and customers. This investment represents a
transformative move to secure our position as Nike's key, high-end, foam
technology partner. Vietnam, a global hub for athletic footwear manufacturing,
offers proximity to customers, faster lead times and reduced environmental
impact through shortened supply chains and a significant reduction in material
waste. Innovation of the Group's own manufacturing core technology will enable
the £24m Vietnam facility to offer additional footwear capacity with improved
flexibility, allowing modular increments, faster implementation and a lower
cost than previous builds. The investment will create a state-of-the-art
manufacturing facility capable of initially producing approximately 10 million
pairs of midsole preforms annually. A £2m, cutting-edge innovation centre in
South Korea will provide a platform to showcase Zotefoams' unique technology
and enable a more rapid and responsive product development capability in a
fast-moving industry. The total investment in these facilities will be spread
across 2025 (c.£8m), 2026 (c.£11m) and 2027 (c.£7m) and be funded from the
Group's existing financing facilities and cash flow. These investments secure
our Nike partnership and establish a foothold in Asia's broader manufacturing
ecosystem for future growth.
Measuring Strategic Progress
We track five key metrics that drive value creation:
1. Product Mix Enhancement: 2.8% improvement in adjusted average selling price
(2023: 2.7%), reflecting success in growing our higher-value portfolio
2. Asset Optimisation: 5.6% improvement in asset utilisation (2023: 2.6%),
supported by a 2.1% increase in effective capacity (2023: 1.5%) through
manufacturing efficiency gains
3. Margin Development: Operating margin before exceptional items, increased 40
bps to 12.3%, supported by HPP growth and manufacturing efficiencies.
Operating margin for our core business (excluding MEL) increased 20 bps to
15.7%. Our medium-term ambition for operating margin is to surpass 18%.
4. Capital Efficiency: Return on average capital employed (ROCE), which excludes
the exceptional items, increased to 11.7% (2023: 10.3%). Removing MEL, ROCE
increased to 16.0% (2023: 14.2%). Additionally, working capital now represents
33% of net sales, down from 41% in 2023, reflecting enhanced management of
receivables, inventory, and supplier terms. Our medium-term ambition for ROCE
is to surpass 20%.
5. Sustainability Leadership: Environmental sustainability remains fundamental to
our strategy, with ESG metrics integrated into our financing arrangements and
robust internal target
People
Safety remains our highest priority. While we experienced four reportable
incidents in 2024, our overall safety metrics continue to outperform industry
benchmarks by approximately 66%. Each incident has been thoroughly analysed,
with corrective actions implemented and reviewed at Board level.
We are strengthening our culture through enhanced employee engagement,
including the launch of our new corporate values and regular executive
leadership team townhalls across all regions. Our ambition to achieve Great
Place to Work accreditation underscores our commitment to creating an
exceptional workplace environment.
On behalf of the Board and my executive colleagues, I extend sincere thanks to
all Zotefoams employees and their families for their dedication and support
throughout the year.
Forward-looking Statements
Forward-looking statements have been made by the Directors in good faith using
information available up until the date they approved these preliminary
results.
Current Trading and Outlook
We have made a positive start overall to 2025, with our Consumer &
Lifestyle and Transport & Smart Technology verticals performing well
across all regions. Demand in our Construction & Other Industries vertical
remains more subdued, as expected, but we continue to anticipate some
improvement in conditions as the year progresses.
We have set out, and are executing, a refreshed, focused strategy,
prioritising innovation and profitable growth. Our market realignment is
progressing well as we transition from a product-centric to an industry-led
approach. Our investment in manufacturing excellence is advancing, with
continued good progress towards completion of our £10m expansion in the USA,
which remains on schedule for early H2 2025 commissioning, and we are
commencing with investments in our innovation centre of excellence in the UK,
our innovation hub in South Korea, and our new manufacturing facility in
Vietnam.
The emerging trade landscape, including recent trade tariffs, creates both
challenges and opportunities for Zotefoams. While these may impact global
supply chains and market dynamics, our diversified manufacturing footprint
across the UK, USA, Poland and, soon, Vietnam positions us well to navigate
these uncertainties and potentially capture market share from less adaptable
competitors.
Our new regional operating model, launched at the start of 2025, structures
our business across EMEA, North America, and Asia. This enables us to better
serve our customers' complete needs through a global commercial team that
coordinates decisions worldwide, while execution and delivery happens
regionally. This product-agnostic approach creates a platform for accelerated
growth. In 2025, we will target inefficiencies in overheads, with identified
annualised savings to be in part reinvested in our refreshed strategy.
Polymer and energy input prices remain relatively stable; however, we are
monitoring these closely for the impact of tariffs, and our focus on improved
asset utilisation, product mix, price increases and operational efficiency
continues to be our key driver of margin enhancement.
While we remain mindful of the uncertain economic backdrop and the evolving
trade landscape, we are confident in our ability to deliver another year of
good progress for Zotefoams. With a refreshed strategy and investment in
significant growth enablers underway, we are excited by the potential for the
Group to deliver both on its medium-term targets and longer-term ambition.
Ronan Cox
Group CEO
18(th) March 2025
Group CFO's review
A significant increase in revenue and profitability within the foams
businesses, led by 46% growth in Footwear sales. Profit before tax is impacted
by exceptional costs in our MEL business as we pause investment in our
ReZorce(®) circular packaging technology
Overview
Group revenue increased significantly to £147.8m (2023: £127.0m), with HPP
revenue increasing 37% to £79.6m and exceeding sales of AZOTE(®) polyolefin
foams for the first time. At constant currency, Group revenue increased 20% to
£151.8m.
Before exceptional items, operating profit for the year grew 20% to £18.1m
and profit before tax (PBT) increased 19% to a Group record of £15.3m (2023:
£12.8m), after higher interest charges. In December, the Board made the
decision to pause investment in our ReZorce circular packaging technology,
having been unable to secure a strategic investing partner, identified as
critical to enable commercialisation and scale-up of this award-winning,
sustainable technology. We have recorded an exceptional charge of £15.2m in
the consolidated income statement, which comprises a £13.8m asset impairment
and a £1.4m provision for closing costs. After these exceptional items,
operating profit for the year declined 80% to £3.0m and PBT declined 99% to
£0.2m. Currency movements negatively impacted PBT by £1.0m.
The underlying foams business, comprising the Polyolefin Foams and
High-Performance Foams business units, achieved a significant increase in PBT
of 18% to £20.3m (2023: £17.2m), while MEL operating losses, before
exceptional items, increased to £4.9m (2023: £4.4m). With the pausing of
investment in ReZorce, MEL operating losses generated from the ReZorce project
will no longer be incurred.
Basic earnings per share (EPS) excluding the exceptional items, increased 37%
to 25.95p (2023: 19.00p). EPS after the exceptional items declined to a loss
per share of 5.66p. Return on capital employed (ROCE, see below for
definition) increased to 11.7% (2023: 10.3%). Excluding MEL, ROCE increased to
16.0% (2023: 14.2%).
The Group's balance sheet at 31 December 2024 is strong, with the leverage
multiple (calculated as a multiple of net debt to EBITDA using definitions
under the bank facility agreement, see section "Debt facility") improving to
0.9x (31 December 2023: 1.2x) and financial headroom of £25.7m (31 December
2023: £19.4m).
Summary P&L
Foams business units only
2024 2023 Change (%)(1) 2024 2023 Change (%)
Net revenue 147.8 127.0 16 146.6 125.7 17
Gross profit 46.1 41.1 12 48.1 42.5 13
Distribution and administrative costs (28.0) (25.9) (8) (25.0) (23.1) (8)
Operating profit before exceptional items 18.1 15.1(2) 20 23.1 19.5 18
Exceptional items (15.2) - - - - -
Operating profit after exceptional items 3.0(2) 15.1 (80) 23.1 19.5 18
Finance costs & profit from joint venture (2.8) (2.3) (22) (2.8) (2.3) (22)
Profit before tax before exceptional items 15.3 12.8 19 20.3 17.2 18
Profit before tax after exceptional items 0.2 12.8 (99) 20.3 17.2 18
Taxation (2.9) (3.6)
EPS before exceptional items 25.95 19.00 37%
(LPS)/EPS after exceptional items (5.66) 19.00 -
1 Calculation based on the full number, not this number rounded to one
decimal place
2 Adjusted for rounding.
Revenue performance
HPP sales increased 37% to £79.6m (2023: £58.1m), and by 41% to £82.0m at
constant currency. Footwear is the largest application within HPP, and revenue
in this market grew 46% to £66.1m (2023: £45.3m), or 50% to £68.1m at
constant currency, with increased underlying demand for our foams and the
addition of basketball programmes accentuated by supply chain reconfiguration
of our end customer, increased demand in an Olympic year and one-off increased
orders from Tier 1 suppliers resulting from a rebuild of inventory. This has
resulted in this business division accounting for 45% of Group sales in the
year (2023: 36%). ZOTEK(®) F fluoropolymer foam sales closed the year 7% up
at £7.0m (2023: £6.5m), or 10% to £7.2m at constant currency, still
significantly below the 2019 peak of £10.0m as the highly publicised
challenges faced by Boeing have slowed the expected recovery in aviation.
T-FIT(®) advanced insulation sales declined 1% to £5.8m (2023: £5.9m), or
grew 2% to £6.0m at constant currency, with a downturn in demand in China
fully offset by very strong growth in India.
Polyolefin Foams business unit sales fell 1% to £66.9m (2023: £67.6m) but
rose 1% to £68.5m at constant currency. There was a 4% increase in the UK and
a 3% increase in the USA (up 6% at constant currency), where the smaller but
rapidly growing Zotefoams Midwest operation grew 24%. Offsetting this was a
decrease in European polyolefin foam revenues of 8%, or down 5% at constant
currency, with challenging market conditions particularly in German
industrials. MEL sales remained flat at £1.2m (2023: £1.2m), as the Group
maintained its focus during the year on the ReZorce mono-material barrier
packaging initiative.
Revenue by segment (£m)
2024 Reported 2024 Adjusted(1) Net change %(3)
2023 Reported
Reported Adjusted
Polyolefin Foams 66.9 68.5(2) 67.6 (1) 1
UK 11.4 11.4 10.9 4 4
Europe 28.3 29.1 30.7 (8) (5)
USA 23.0 23.8 22.5 3 6
Rest of the world 4.2 4.3 3.5 18 22
HPP 79.6 82.0 58.1 37 41
Footwear 66.1 68.1 45.3 46 50
ZOTEK(®) F 7.0 7.2 6.5 7 10
T-FIT(®) 5.8 6.0 5.9 (1) 2
Other 0.7 0.7 0.4 61 65
Group excluding MEL 146.6(2) 150.5 125.7 17 20
MEL 1.2 1.2 1.2 (2) 0
Group 147.8 151.8(2) 127.0(2) 16 20
1 Constant currency, adjusting 2024 values to 2023 rates. See exchange
rates table.
2 Adjusted for rounding.
3 Calculation based on the full number, not this number rounded to one
decimal place
Revenue by market (%)
2024 2023
Sports and leisure 48 39
Product protection 18 22
Building and construction 11 12
Transportation* 11 11
Industrial 5 5
Medical 4 6
Other 3 5
* Within the transportation segment, aviation represented 6.1% (2023:
6.4%) and automotive 5.3% (2023: 5.0%) of Group revenue.
Gross profit
Gross profit increased £5.1m to £46.1m (2023: £41.1m) on £20.8m additional
sales, while gross margin decreased to 31.2% (2023: 32.3%). Gross profit
growth has been impacted by an additional £1.0m inventory provision following
an in-depth assessment of recoverability and mostly affecting aged HPP foams,
and £0.5m of amortisation charges in respect of a Global Alliance agreement
signed in May 2024 with Suzhou Shincell New Materials Co., Ltd ("Shincell").
Adjusted for these, gross margin was 32.2%, in line with the previous year.
Gross profit benefited from the increased revenue generated from HPP, while
HPP gross margin remained unchanged. Within HPP, the high-volume footwear
business dominates gross margin, and while the small benefits of additional
revenue boosted margin, this was offset by the inventory provision made across
the HPP product portfolio. In the Polyolefin Foams business, a gross margin
decline was driven for the most part by the US business, which was affected by
lower demand at its higher margin customers and which it offset with higher
volume lower margin sales. It also continued to experience inefficiencies in
its production processes, for which there is a clear path to cost and
efficiency savings as we progress through 2025.
Distribution and administrative costs
Distribution and administrative costs breakdown
2024 2023 Change (%)
Distribution costs 8.5 7.9 (7)
Administrative costs excluding hedging movements 20.3 17.7 (15)
Hedging movements (0.8) 0.3 >100
Administrative costs 19.5 18.0 (9)
Distribution and administrative costs 28.0 25.9 (8)
The Group has continued to pursue its expansion strategy founded on
proprietary cellular materials technology and linked to longer-term demand
growth in our chosen markets. While we began to formulate a refreshed strategy
during the year, driven by a new CEO, we have continued to invest in, and
prioritise, technical, sales-focused and administrative resources to create,
execute and manage our growth.
Included within distribution costs in the consolidated income statement are
sales, marketing and warehousing expenses. These costs increased by £0.6m, or
7%, to £8.5m (2023: £7.9m) during the year as a result of salary inflation
and investment in sales and marketing personnel. Included within
administrative expenses are technical development, finance, information
systems and administration costs as well as the impact of foreign exchange
hedges maturing in the period and non-cash foreign exchange translation
expenses. These costs increased in 2024 by £1.5m, or 9%, to £19.5m (2023:
£18.0m). However, after stripping out foreign exchange effects, which
generated a gain of £0.8m (2023: loss of £0.3m), these administrative costs
increased by 15%, or £2.6m, to £20.3m (2023: £17.7m). See "Currency review"
below for further information and context around foreign exchange movements.
This increase of £2.6m is almost entirely related to payroll costs, both
inflationary and through 2024 additions and the full-year impact of 2023
additions. It includes costs attributable to the transition to a new CEO,
including a seven-month period with both the current and former CEOs employed
by the business, as well as part-year costs of an expanded executive team to
support the Group's growth ambitions.
The specific business unit results and margins that we report, see 'CEO
review', do not include central plc costs, which are not considered to be
segment specific. Neither do they include hedging movements. In 2024, central
plc costs increased 50% to £4.6m (2023: £3.1m) and mainly comprise the
additional CEO costs, executive team costs reflecting a strengthening of
management, and £0.5m in respect of amortisation charges of Shincell fees
payable under the license agreement, which are not allocatable to a specific
business segment. This global alliance consists of agreements on technology
licensing from Shincell to Zotefoams, development and market co-operation, and
regional product distribution agreements, where certain products from
Shincell's unique technology will be marketed alongside Zotefoams' existing
and future product range. This alliance is accounted for under IFRS 16 as a
right-of-use asset, being amortised over a period of ten years in line with
the Group's assessment of useful life, and as a liability, being paid down
over five years. Given the payment term, it has been discounted using the
Group's incremental rate of borrowing.
Exceptional items MEL
On 18 December 2024, the Group announced its decision to pause investment in
ReZorce and focus the Group's resources on near-term opportunities in the core
supercritical foams business. It immediately began the process of winding down
operations of the MEL business unit, which includes the operations related to
MuCell Extrusion LLC and Zotefoams Denmark ApS.
An impairment assessment has been conducted on the fixed assets of the MEL
business unit, in accordance with IAS 36 "Impairment of Assets", to determine
their recoverable amount, which we determined to be £0.7m as a result of
being unable to secure a strategic investing partner necessary to drive the
opportunity to commercialisation. Impairment losses of £11.6m have been
recorded against intangible fixed assets, comprising the write-off of
capitalised development expenditure of £9.2m and £2.4m in respect of
Goodwill and acquired intangible assets originally arising from the
acquisition of MuCell Extrusion LLC.
A further £2.1m has been recognised in respect of tangible fixed assets,
which primarily relate to plant and machinery used in the development of
ReZorce technology and £0.1m has been recognised against onerous IFRS 16
right-of-use assets, representing the remaining term of lease agreements for
the business unit's rented premises. Total impairment losses amount to
£13.8m.
In addition to the impairment losses, a provision of £1.4m has been
recognised in respect of estimated closure costs including the dismantling and
disposal of tangible assets and materials, the settlement of committed but not
yet incurred costs and settlements with affected employees.
Due to the nature of these items, these are considered exceptional and have
been treated as such in the financial statements. Total exceptional costs of
the closure of the business amount to £15.2m.
MEL is not being treated as a discontinued operation. We currently intend to
maintain MuCell Extrusion LLC, which holds the ReZorce IP and taxation
benefits by way of net operating losses and is expected to receive small
royalty payments from contracts that remain in place with customers.
Operating profit
Operating profit before exceptional items was £18.1m, 20% above 2023
(£15.1m) and the operating margin increased to 12.3% from 11.9%. After
exceptional items, operating profit was £3.0m, down 80% on 2023 and the
operating margin reduced to 2.0%. Operating profit of the foams businesses
alone, excluding MEL, was £23.1m, 18% above 2023 (£19.5m), and the operating
margin increased to 15.7% from 15.5%.
Finance costs
Gross finance costs for the year increased 24% to £3.1m (2023: £2.5m) and
include £0.1m (2023: £0.1m) of interest on the Defined Benefit Pension
Scheme obligation. This increase comprises £0.3m IFRS 16 interest charges
from the Shincell agreement and a higher average debt balance throughout the
year that reflects funding of the Group's growth initiatives. Net finance
costs, after finance income, increased 22% to £2.9m (2023: £2.3m).
Profit before tax
Profit before tax and exceptional items increased 19% to £15.3m (2023:
£12.8m). The foams businesses increased 18% to £20.3m (2023: £17.2m), while
the MEL loss increased to £4.9m (2023: £4.4m). After exceptional items, PBT
decreased 99% to £0.2m.
Currency review
Exchange rates
Zotefoams transacts significantly in US dollars and euros. The exchange rates
used to translate the key flows and balances were:
2024 2023
Average Closing Average Closing
Euro/sterling 1.177 1.210 1.150 1.150
US dollar/sterling 1.278 1.252 1.243 1.271
Movements in foreign exchange rates can have a significant impact on Group
results, and while the Group seeks to mitigate this risk, as outlined in more
detail below, the impact was a reduction in profits of £1.0m on a constant
currency basis (2023: £0.5m reduction). During the year, the sterling average
exchange rate year-on-year against the US dollar strengthened by 2.8% and the
sterling average exchange rate against the euro strengthened by 2.3%. The
sterling spot rate against the US dollar from 31 December 2023 to 31 December
2024 weakened by 1.5%, while the sterling spot rate against the euro
strengthened by 5.2% over the same period.
Zotefoams is a predominantly UK-based exporter which invoices in local
currency, with the exception of Asia where all business is invoiced in US
dollars. In 2024, approximately 92% of sales (2023: approximately 92%) were
denominated in currencies other than sterling, mostly US dollars or euros.
Operating costs at the Croydon, UK, site are incurred in sterling, and the
main raw materials for polyolefin foams used for production in the UK are euro
denominated. US subsidiary production and operating costs, most other
subsidiaries' staff and operating costs and some HPP raw materials are US
dollar denominated, while Poland operating costs are incurred in zloty. The
Group uses forward exchange contracts to hedge up to 80% of its forecast net
cash flows over the following twelve months that are subject to US dollar and
euro transaction risk. The Group recorded a gain on forward exchange contracts
in the year of £1.0m (2023: gain £0.2m).
Zotefoams also faces translation risk. Zotefoams plc, the parent company,
holds the Group's multi-currency borrowings facility and has provided
intercompany loans and intercompany trading facilities to the USA and Poland
to support Group expansion. This translation exposure is mitigated, where
possible, through an offset with same-currency liabilities, primarily through
borrowing in the relevant currency. Every month, these foreign
currency-denominated intercompany net positions, despite being cash neutral,
require to be translated by Zotefoams plc on a mark to market basis and the
movement taken to the Company income statement. The Group also has a
fast-growing HPP business, which is mostly invoiced from the UK in US dollars,
which adds to its exposure to foreign currency-denominated net assets and is
accounted for in the same way as above. While FX exposure is partly mitigated
by the forward currency contracts, risk remains based on the amount of
forecast exposure not hedged, in line with Group policy, and the fact that
there is a timing difference between the recording of accounts receivable and
cash received. This timing difference is managed by further hedging
activities, but their effectiveness is subject to the accuracy of forecasting
cash receipts. The Group recorded a translation loss in the year of £0.2m
(2023: loss £0.5m).
Currency movements during the year negatively impacted Group revenue by £4.0m
(2023: £0.5m positive impact). They positively impacted operating costs by
£2.2m (2023: £0.7m negative impact), resulting in a net negative impact of
£1.8m (2023: negative impact £0.2m) before hedging. After deducting the net
hedging gain of £0.8m (2023: loss of £0.3m), the currency net negative
impact on profit before tax for the year was £1.0m (2023: negative impact
£0.5m).
We recognise that one of our principal risks is our exposure to foreign
currency fluctuations, particularly the US dollar, which we will aim to manage
through hedging strategies. Based on 2024 and with respect to transaction
risk, it is estimated that for every one percentage point movement in the US
dollar/sterling rate, profit moves by £0.6m unhedged and £0.2m hedged. In
the year, the transaction risk from euro/sterling movements continues to be
substantially naturally hedged, with the risk arising on sales revenues offset
by the opportunity on costs, primarily related to raw material purchases and
certain further processing costs.
The Group does not currently hedge for the translation of its foreign
subsidiaries' assets or liabilities. The foreign currency hedging policy is
kept under regular review and is formally approved by the Board on an annual
basis.
Profit before tax by segment (£m)
2024 2024 Adjusted(1) 2023 Net change %(3)
Reported
Reported
Reported Adjusted
Polyolefin Foams 5.5 6.1 7.5 (27) (19)
HPP 21.5 22.8 15.4 39 48
MEL before exceptional items (4.9) (5.1) (4.4) (13) (16)
Subtotal business units before exceptional items 22.0(2) 23.9(2) 18.5(2) 19 28
Exceptional items - MEL (15.2) (15.2) - - -
Subtotal business units after exceptional items 6.8 8.7 18.5 (63) (53)
Central costs (4.6) (4.6) (3.1) (50) (50)
Hedging 0.8 - (0.3) - -
Finance costs (2.9) (2.9) (2.3) (22) (25)
Subtotal Other (6.7) (7.5) (5.7) (17) (32)
Group PBT before exceptional items 15.3 16.3(2) 12.8 19 27
Group PBT after exceptional items 0.2(2) 1.1 12.8 (99) (91)
(1) Constant currency, adjusting 2024 values to 2023 rates. See exchange rates
table above.
(2) After roundings
(3) Calculation based on the full number, not this number rounded to one
decimal place
Taxation charge and earnings per share
The tax charge for the year is £2.9m (2023: £3.6m). The effective tax rate
before exceptional items for the year is 19.0% (2023: 28.0%). The lower tax
charge reflects the tax-deductible elements of MEL intercompany balances
written off, while the underlying losses are eliminated in the consolidated
income statement, and the benefits of R&D and patent box claims.
Basic earnings per share before exceptional items was 25.95p (2023: 19.00p),
an increase of 37%. Diluted earnings per share was 25.24p (2023: 18.55p).
Including exceptionals, basic earnings per share was a loss of 5.66p, and
diluted earnings per share was a loss of 5.66p. The loss attributable to
equity shareholders and weighted average number of ordinary shares for the
purposes of calculating diluted earnings per ordinary share are identical to
those used for basic earnings per ordinary share. This is because the exercise
of share options and warrants would have the effect of reducing the loss per
ordinary share and is therefore anti-dilutive.
Capital allocation
The discipline with which a company allocates capital is a key determinant of
growth and sustained financial returns. The Board is actively engaged in this
process. Zotefoams focuses on achievable sustainable profit growth by
investing and developing its business in the following ways.
Capital expenditure in foam manufacturing
The autoclave technology manufacturing processes we operate in the UK, USA and
Poland are capital intensive and certain key equipment can have long lead
times. Investment decisions require planning and are made with a clear
assessment of strategic fit, risk, risk appetite, sustainability credentials
and expected returns. Confidence in the Group's developing portfolio of HPP
opportunities is a significant consideration in determining the timing of
certain investments, while the strategic importance of maintaining growth in
the profitable Polyolefin Foams business, the Group's largest-volume product
range, informs the decision to increase total Group capacity versus relying
solely on mix enrichment.
Supported by increased investment in innovation, see below, and partnerships
such as the global alliance we signed in May 24 with Shincell, we intend to
reduce capital intensity and lead times that will allow us to invest more
quickly and flexibly. The first representation of this is the expansion of our
geographic reach into Asia and closer collaboration with Nike and its Tier 1
partners, all of whom are located in the region.
Outside significant capacity-related investments, the Group also invests to
maintain its capital-intensive assets, mindful of the risk of operational
disruption and opportunities to improve energy efficiency and further reduce
health and safety risk, particularly at the older UK facility. The annual and
five-year capital requirements planning outcomes, as well as progress against
them, are reviewed by the Board and individual projects of a certain
expenditure level require Board approval beyond that given in the normal
annual Budget cycle.
Zotefoams targets improvements in the Group's return on capital over the
investment cycle, while recognising the short-term impact on the return of
sizeable capital investments during their construction and early operations
phases, where they may initially run at lower utilisation and mix optimisation
levels. With our switch to small modular foaming production from large,
capital-intensive extruders and autoclaves in Asia, we expect a faster return
on our capital outlay in this investment.
Investment in sustainable innovation
Zotefoams is an innovator in advanced technical foams and pursues a strategy
to continuously develop a portfolio of products that leverages its unique
technology. As part of our refreshed strategy, we intend to adopt a hub and
spoke model for innovation and will invest in an innovation centre of
excellence (the hub), and smaller innovation centres (spokes) that are focused
on, and embedded within specific markets. Investing more in dedicated teams,
we will protect our intellectual property and build on 100+ years of
supercritical fluid foam experience. We will expand our capability into foam
and plastic fabrication to move along the value chain by providing solutions
beyond a raw material to customers. We will evolve our current technology and
invest in new technologies to reduce energy consumed in manufacture, while
developing products that significantly reduce waste and emissions along the
value chain and will harness AI to reduce the number of iterative development
cycles and time required.
During 2025, the Group will select a location in the UK, outside of its
Croydon manufacturing site, to base its innovation hub and staff the location
with qualified resource. It will form its first innovation spoke in South
Korea in order to greatly improve the collaboration and innovation time
required to support Nike alongside their close Tier 1 suppliers, who are all
based in the region.
Working capital
The business requires investment in working capital to achieve high levels of
customer service and targeted margins. Customer payment terms reflect the
competitive environment of each of the geographical and industrial markets in
which the Group operates. Inventory levels reflect the value of the raw
materials, the length of the supply chain and the volume of inventory required
to achieve targeted customer satisfaction levels. Growing beyond the
space-restricted site in the UK, as well as growing HPP at a faster rate than
Polyolefin Foams, where supply chains can be longer, technical testing may be
required, the customer is likely to be more strategic, and raw material
purchase costs are likely to be significantly higher, is increasing the
investment required in inventory. The Group's main suppliers are either large
multinational polymer manufacturers or energy companies, where the ability to
negotiate credit terms is limited. The Group believes there are opportunities
to optimise its working capital balance and will be pursuing and tracking
initiatives through 2025. The Board receives monthly financial updates, which
include performance on working capital against the annual budget and the
quarterly forecasts, both of which are reviewed and approved by the Board.
Non-organic growth
The Group's refreshed strategy explicitly identifies acquisitions as a new
lever to complement organic growth that will help us expand market access,
acquire new capability and expertise, and diversify into adjacent markets.
Return on capital employed
Zotefoams defines the return on capital employed (ROCE), which is a non-IFRS
measure, as operating profit before exceptional items divided by the average
sum of its equity, net debt and other non-current liabilities. This measure
excludes acquired intangible assets and their amortisation costs. It also
excludes significant capacity investments under construction until they enter
production. We do not attempt to adjust for first phase inefficiencies.
In 2024, the Group's ROCE increased to 11.7% (2023: 10.3%), mostly reflecting
improved profitability in the year as the Group increased utilisation of its
assets and improved the product mix. Excluding MEL operating losses that
mostly resulted from investment in ReZorce, which will not occur from 2025,
ROCE increased to 16.0% (2023: 14.2%). In line with the definition, we have
removed capitalised costs related to investment in our second low-pressure
vessel in the USA, which we expect to commission in H2 2025 and would then add
to ROCE on a time-apportioned basis.
Dividend
The Board has a progressive dividend policy, recognising the importance to our
shareholders of the dividend as part of their overall return while ensuring
sufficient capital and liquidity to pursue its growth ambition. Minimum
earnings cover of 2 times is targeted. The Board regularly reviews this policy
as the Group grows and capital expenditure demands a lower share of the cash
generated.
The Directors are proposing a final dividend of 5.10p (2023: 4.90p), which
would be payable on 2 June 2025 to shareholders on the Company register at the
close of business on 2 May 2025. Taken with the interim dividend of 2.38p
(2023: 2.28p), this would bring the total dividend for the year to 7.48p
(2023: 7.18p) and would represent a dividend cover of 3.5 times (2023: 2.6
times).
Cash flow
The Group is by its nature highly cash generative and, this year, cash
generated from operations has significantly increased by £18.3m (151%) to
£30.4m (2023: £12.1m). Within this, there was a £2.5m net working capital
inflow (2023: £11.1m net working capital outflow). Trade and other
receivables decreased £1.5m (2023: increased £3.8m), reflecting continued
strong cash recovery across the Group combined with the year-end timing of
certain sizeable footwear customer receipts. Inventory decreased £1.9m (2023:
increased £6.3m), reflecting the reversal of a Q4 2023 £2.2m strategic build
of footwear and European polyolefin foam to capitalise on available capacity
and in anticipation of high levels of capacity utilisation in 2024, together
with focused management action on inventory levels. Trade and other payables
decreased £1.0m (2023: decreased £1.0m) reflecting general payment timings.
Zotefoams recognises the importance of its supplier relationships and is proud
of its performance with respect to honouring agreed payment terms.
During the year, the Group paid interest on its borrowings of £2.5m (2023:
£2.1m), reflecting slightly higher average debt levels across much of the
year. Net taxation paid during the year, net of refunds, amounted to £2.9m
(2023: £2.2m), reflecting higher profits at the Company alongside a full year
of the increased corporation tax rate in the UK.
Zotefoams' property, plant and equipment capital expenditure amounted to
£10.3m (2023: £5.8m). This was largely due to capacity expansion to install
a second low-pressure autoclave in North America and investment in equipment
required for late-stage ReZorce development trials. Expenditure was split
across several categories, the most significant being 38% on capacity
expansion and 15% on new product development. ESG initiatives were a key
component of capital expenditure in the year with 68% of expenditure offering
benefits through improved energy efficiency, safety or reduced waste.
Geographically, 22% was directed to our Croydon, UK, plant (2023: 68%), 34% to
our Walton, USA, plant (2023: 18%) and 33% (2023: 5%) towards the MEL business
unit.
Summary cash flow
2024 2023
Profit before tax 0.2 12.8
Depreciation and amortisation 9.0 8.2
Exceptional costs of closure of business 15.2 -
Other 4.4 3.1
Net cash from operations before provisions and investment in working capital 28.8 24.1
Employee defined benefit contributions (0.9) (0.9)
Working capital movement 2.5 (11.1)
Receivables 1.5 (3.8)
Inventory 2.0 (6.3)
Payables (1.0) (1.0)
Cash generated from operations 30.4 12.1
Interest paid (2.5) (2.1)
Taxation paid (2.9) (2.2)
Investments in intangible assets (3.3) (2.7)
Investments in tangible assets (10.3) (5.8)
Dividends (3.5) (3.4)
Net movement in borrowings (1.6) 0.4
Lease payments (2.3) (0.8)
Other 0.3 0.1
Movement in cash and cash equivalents 4.3 (4.2)
The Group also invested £3.3m (2023: £2.7m) in intangible assets, almost
entirely related to MEL patents and capitalised development costs for ReZorce,
which have subsequently been impaired.
Dividends paid in the year amounted to £3.5m (2023: £3.4m) and lease
payments increased to £2.3m (2023: £0.8m), with £1.3m of these payments
related to the Shincell agreement (2023: nil). Closing net debt (as defined
under the bank facility definition) decreased £6.1m (20%) to £24.1m (2023:
£30.2m), while on an IFRS basis, closing net debt rose to £33.0m (2023:
£31.6m) as a result of IFRS 16 leases, £6.6m of which relate to the year-end
Shincell liability. At the year end, the Group remains comfortably within its
bank facility covenants, with a multiple of EBITDA to net finance charges of
10.8 (2024: 11.2), against a covenant minimum of 4 (2023: 4), and net debt to
EBITDA (leverage) multiple of 0.9 (2023: 1.2), against a covenant of 3.5
(2024: 3.5). See "Debt facility" for a definition of leverage and information
on the Group's bank facility arrangements.
Debt facility
The Group's gross finance facilities with Handelsbanken and NatWest comprise a
£50.0m multi-currency revolving credit facility with a £25.0m accordion with
a renewal date of March 2027 and an interest rate ratchet, and include a small
element related to the achievement of sustainability targets. The facility has
two covenants: a finance cost covenant with a multiple of 4.0x and a leverage
covenant with a multiple of 3.5x.
At 31 December 2024, headroom, which we define as the combination of amount
undrawn on the facility and cash and cash equivalents disclosed on the
statement of financial position, amounted to £25.7m (2023: £19.4m).
Zotefoams defines EBITDA as profit for the year before tax, adjusted for
depreciation and amortisation, net finance costs, the share of profit/loss
from its joint venture, equity-settled share-based payments and exceptional
costs.
Net debt comprises short- and long-term loans less cash and cash equivalents
and is adjusted from IFRS by the impacts of IFRS 2 and IFRS 16 under the bank
facility definition.
Post-employment benefits
The Company operates a UK-registered trust-based Defined Benefit Pension
Scheme (the "DB Scheme"), which 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 DB Scheme in accordance with the DB Scheme's Trust Deed and Rules,
which set out their powers. The Trustees of the DB Scheme are required to act
in the best interests of the beneficiaries of the DB Scheme. There is a
requirement that at least one third of the Trustees are nominated by the
members of the DB Scheme. The DB Scheme was closed to new members in 2001, as
was the link to future accrual of salary in 2005. Inconsistencies in the way
the DB Scheme's link to future accrual of salary was closed in 2005 were
rectified in 2019. There are three categories of pension scheme members:
> deferred members with salary linkage: current employees of the Company
who have not consented to the break in their salary linkage;
> deferred members: former and current employees of the Company not yet in
receipt of pension; and
> pensioner members: in receipt of pension.
The Trustees are required to carry out an actuarial valuation every three
years. The last full actuarial valuation of the DB Scheme took place as at 5
April 2023. On a Statutory Funding Objective basis, a deficit was calculated
for the DB Scheme of £2.9m (previous triennial valuation: £7.7m). In respect
of the shortfall, the Company agreed with the Trustees to make contributions
to the DB Scheme of £643,200 p.a. (previously £643,200 p.a.) to meet the
shortfall by 31 July 2028 (previously 31 October 2026). In addition, the
Company pays the ongoing DB Scheme expenses of £216,000 p.a. (previously
£216,000 p.a.) to cover administration expenses, PPF levies and premiums for
death-in-service lump sums associated with the Scheme. The Company therefore
expects to pay £859,200 to the Scheme during the accounting year beginning 1
January 2025.
The defined benefit obligation is valued by projecting the best estimate of
the future benefit from the outlay of monies (allowing for future salary
increases for deferred members with salary linkage, 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% p.a.). The
valuation method used is known as the Projected Unit Method. The approximate
overall duration of the Scheme's defined benefit obligation as at 31 December
2024 was around 10 years. The net IAS 19 deficit on the DB Scheme decreased by
£1.1m to £1.6m as at 31 December 2024 (31 December 2023: £2.7m) and
represents 1.4% (2023: 2.3%) of consolidated net assets. The present value of
the defined benefit obligation at the year-end decreased by £1.8m from
£26.5m in 2023 to £24.7m in 2024 which was partially offset by the actual
investment return achieved on the assets, which decreased by £0.6m from
£23.8m in 2023 to £23.2m in 2024. Zotefoams does not consider its pension
scheme to be a key risk to its ability to achieve its strategic objectives,
due to the immaterial share of net assets that the deficit represents.
Mitigation of further risk is expected to come from our growth expectations
and the continued focus by the Trustees on a lower-risk strategy to meet the
DB Scheme's deficit.
Group banking covenants definition
Net debt to EBITDA ratio (Leverage)
£m 2024 2023 £m 2024 2023
Profit after tax (2.8) 9.2 Net debt per IFRS 33.1 31.6
Adjusted for: IFRS 16 leases (9.0) (1.3)
Depreciation and amortisation 9.0 8.2 Roundings - (0.1)
Finance costs 3.1 2.5 Net debt per bank 24.1 30.2
Finance income (0.3) (0.2)
Share of result from joint venture (0.1) -
Equity-settled share-based payments 1.1 1.3
Exceptional costs of closure of business 15.2 -
Taxation 2.9 3.6
Roundings 0.1 0.1
EBITDA 28.2 24.7 Leverage per bank 0.9 1.2
EBITDA to net finance charges ratio
£m 2024 2023 £m 2024 2023
EBITDA, as above 28.2 24.7 Finance costs 3.1 2.5
Finance income (0.3) (0.2)
Share of result from -
joint venture
-
EBITDA to net finance charges 10.8 11.2 Net finance charges 2.9(1) 2.3
(1) After roundings
Going concern
The Directors believe that the Group is well placed to manage its business
risks and, after making enquiries including a review of forecasts and
predictions, taking account of reasonably possible changes in trading
performance and its available debt facilities, have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
the next twelve months following the date of approval of the financial
statements. The Directors have also continued to draw upon the Group's success
in reacting to the challenges of COVID-19 through its safety protocols and
cost and cash management, all of which could be replicated in a similar
scenario.
After due consideration of the range and likelihood of potential outcomes, the
Directors continue to adopt the going concern basis of accounting in preparing
these preliminary results.
Financial risk management
The main financial risks of the Group relate to funding and liquidity, credit,
interest rate fluctuations and currency exposures.
G C McGrath
Group CFO
18 March 2025
Consolidated income statement
For the year ended 31 December 2024
2024 2023
Note £'000 £'000
Revenue 2 147,791 126,975
Cost of sales (101,658) (85,920)
Gross profit 46,133 41,055
Distribution costs (8,478) (7,927)
Administrative expenses (19,525) (17,993)
Exceptional costs of closure of business 3 (15,178) -
Operating profit 2,952 15,135
Operating profit before exceptional items 18,130 15,135
Finance costs (3,147) (2,540)
Finance income 274 191
Share of profit from joint venture 74 54
Profit before income tax 153 12,840
Profit before income tax and exceptional items 15,331 12,840
Income tax expense (2,908) (3,598)
(Loss) / profit for the year (2,755) 9,242
Profit for the year before exceptional items 12,423 9,242
(Loss) / profit attributable to:
Equity holders of the Company (2,755) 9,242
(Losses) / earnings per share:
Basic (p) 7 (5.66) 19.00
Diluted (p) * 7 (5.66) 18.55
Earnings per Share excluding exceptional closure costs **
Basic (p) 7 25.95 19.00
Diluted (p) 7 25.24 18.55
* The loss attributable to equity shareholders and weighted average number of
ordinary shares for the purposes of calculating diluted earnings per ordinary
share are identical to those used for basic earnings per ordinary share. This
is because the exercise of share options and warrants would have the effect of
reducing the loss per ordinary share and is therefore anti-dilutive
** This is not an IFRS measure and has been calculated based on the
pre-exceptional lines above
Consolidated statement of comprehensive income
For the year ended 31 December 2024
2024 2023
£'000 £'000
(Loss) / profit for the year (2,755) 9,242
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes 348 (88)
Tax relating to items that will not be reclassified (87) 22
Total items that will not be reclassified to profit or loss 261 (66)
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation losses on investment in foreign subsidiaries (371) (1,885)
Change in fair value of hedging instruments (965) 1,712
Hedging losses reclassified to profit or loss (968) (192)
Tax relating to items that may be reclassified 590 (575)
Total items that may be reclassified subsequently to profit or loss (1,714) (940)
Other comprehensive loss for the year, net of tax (1,453) (1,006)
Total comprehensive (loss) / income for the year (4,208) 8,236
Total comprehensive (loss) / income attributable to:
Equity holders of the Company (4,208) 8,236
Total comprehensive (loss) / income for the year (4,208) 8,236
Consolidated statement of financial position
As at 31 December 2024
2024 2023
Notes £'000 £'000
Non-current assets
Property, plant and equipment 4 92,088 91,743
Right-of-use assets 2,153 1,272
Intangible assets 438 9,418
Intangible Right-of-use assets 7,233 -
Investment in joint venture 281 207
Trade and other receivables 14 70
Deferred tax assets 548 435
Total non-current assets 102,755 103,145
Current assets
Inventories 29,924 31,904
Trade and other receivables 31,494 33,002
Derivative financial instruments 42 1,264
Cash and cash equivalents 10,534 6,294
Total current assets 71,994 72,464
Total assets 174,749 175,609
Current liabilities
Trade and other payables (11,878) (12,953)
Provisions (1,381) -
Derivative financial instruments (1,164) (28)
Current tax liability (757) (1,078)
Lease liabilities (2,134) (507)
Interest-bearing loans and borrowings 5/8 (34,602) (36,527)
Total current liabilities (51,916) (51,093)
Non-current liabilities
Lease liabilities (6,821) (827)
Deferred tax liabilities (5,103) (5,270)
Post-employment benefits (1,552) (2,656)
Total non-current liabilities (13,476) (8,753)
Total liabilities (65,392) (59,846)
Total net assets 109,357 115,763
Equity
Issued share capital 6 2,442 2,442
Share premium 6 44,178 44,178
Own shares held (7) (12)
Capital redemption reserve 15 15
Translation reserve 3,653 4,024
Hedging reserve (683) 660
Retained earnings 59,759 64,456
Total equity 109,357 115,763
Consolidated statement of cash flows
For the year ended 31 December 2024
2024 2023
Note £'000 £'000
Cash flows from operating activities
(Loss) / profit for the year (2,755) 9,242
Adjustments for:
Depreciation and amortisation 8,983 8,217
Loss on disposal of assets 28 4
Finance costs 2,873 2,349
Share of profit from joint venture (74) (54)
Net exchange differences 524 (641)
Equity-settled share-based payments 1,077 1,335
Non-cash cost of closure of business 3 15,178 -
Taxation 2,908 3,598
Operating profit before changes in working capital and provisions 28,742 24,050
Decrease / (increase) in trade and other receivables 1,539 (3,774)
Decrease / (increase) in inventories 1,948 (6,279)
Decrease in trade and other payables (997) (1,027)
Employee defined benefit contributions (859) (859)
Cash generated from operations 30,373 12,111
Interest paid (2,515) (2,082)
Income taxes paid, net of refunds (2,857) (2,248)
Net cash flows generated from operating activities 25,001 7,781
Cash flows from investing activities
Interest received 274 191
Purchases of intangibles (3,306) (2,739)
Purchases of property, plant and equipment (10,342) (5,744)
Proceeds from disposal of property, plant and equipment 39 -
Net cash used in investing activities (13,335) (8,292)
Cash flows from financing activities
Proceeds of exercise of share options 72 -
Repayment of borrowings (8,357) (1,231)
Proceeds from borrowings 6,750 1,609
Payment of principal portion of lease liabilities (2,335) (753)
Dividends paid to equity holders of the Company (3,542) (3,350)
Net cash used in financing activities (7,412) (3,725)
Net increase / (decrease) in cash and cash equivalents 4,254 (4,236)
Cash and cash equivalents at 1 January 6,294 10,594
Exchange losses on cash and cash equivalents (14) (64)
Cash and cash equivalents at 31 December 10,534 6,294
Consolidated statement of changes in equity
For the year ended 31 December 2024
Share capital Share premium Own shares held Capital redemption reserve Translation reserve Hedging reserve Retained earnings Total equity
£`000 £`000 £`000 £`000 £`000 £`000 £`000 £`000
Balance as at 1 January 2023 2,431 44,178 (5) 15 5,909 (285) 57,295 109,538
Profit for the year - - - - - - 9,242 9,242
Other Comprehensive Income for the year
Foreign exchange translation losses on investment in subsidiaries - - - - (1,885) - - (1,885)
Change in fair value of hedging instruments recognised in other comprehensive - - - - - 1,712 - 1,712
income
Reclassification to income statement - administrative expenses - - - - - (192) - (192)
Tax relating to effective portion of changes in fair value of cash flow - - - - - (575) - (575)
hedges, net of recycling
Actuarial loss on defined benefit pension scheme - - - - - - (88) (88)
Tax relating to actuarial loss on defined benefit pension scheme - - - - - - 22 22
Total comprehensive income for the year - - - - (1,885) 945 9,176 8,236
Transactions with owners of the Parent:
Options exercised - - 4 - - - (4) -
Proceeds of shares issued, net of expenses 11 - (11) - - - - -
Equity-settled share-based payments net of tax - - - - - - 1,339 1,339
Dividends paid - - - - - - (3,350) (3,350)
Total transactions with owners of the Parent 11 - (7) - - - (2,015) (2,011)
Balance as at 31 December 2023 2,442 44,178 (12) 15 4,024 660 64,456 115,763
Balance as at 1 January 2024 2,442 44,178 (12) 15 4,024 660 64,456 115,763
Loss for the year - - - - - - (2,755) (2,755)
Other Comprehensive Income for the year
Foreign exchange translation losses on investment in subsidiaries - - - - (371) - - (371)
Change in fair value of hedging instruments recognised in other comprehensive - - - - - (965) - (965)
income
Reclassification to income statement - administrative expenses - - - - - (968) - (968)
Tax relating to effective portion of changes in fair value of cash flow - - - - - 590 - 590
hedges, net of recycling
Actuarial gain on defined benefit pension scheme - - - - - - 348 348
Tax relating to actuarial gain on defined benefit pension scheme - - - - - - (87) (87)
Total comprehensive loss for the year - - - - (371) (1,343) (2,494) (4,208)
Transactions with owners of the Parent:
Options exercised - - - - - - 72 72
Proceeds of shares issued, net of expenses - - 5 - - - - 5
Equity-settled share-based payments net of tax - - - - - - 1,267 1,267
Dividends paid - - - - - - (3,542) (3,542)
Total transactions with owners of the Parent - - 5 - - - (2,203) (2,198)
Balance as at 31 December 2024 2,442 44,178 (7) 15 3,653 (683) 59,759 109,357
1. General overview and accounting policies
Zotefoams plc (the "Company") is a public limited company, which is listed on
the London Stock Exchange and incorporated and domiciled in England, UK. The
registered office of the Company is 675 Mitcham Road, Croydon, CR9 3AL.
The preliminary results (unaudited) (referred to as the 'preliminary results')
include the results of the Company and its subsidiaries (together referred to
as the 'Group'). The preliminary results of the Group have been prepared on
the basis of the accounting policies set out in the statutory financial
statements for the year ended 31 December 2023. Whilst the financial
information included in this announcement has been computed in accordance with
the recognition and measurement requirements of UK adopted international
accounting standards ("UK adopted IAS") and as applied in accordance with the
provisions of the Companies Act 2006, this announcement does not itself
contain sufficient disclosures to comply with UK adopted IAS.
The information for the year ended 31 December 2024 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 2023 was delivered to
the Registrar of Companies. The auditors' 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 2024 is not yet complete. These accounts will be finalised on the
basis of the financial information presented by the Directors in these
'preliminary results' and will be delivered to the Registrar of Companies
following the Company's annual general meeting.
The preliminary results are prepared on the historical cost basis except for
derivative financial instruments which are stated at their fair value. The
same accounting policies, presentation, methods of computation, judgement and
estimate bases are followed in the 'preliminary results' as were applied in
the Group's 2023 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, Ronan Cox who is considered to be the "chief operating
decision maker" for the purpose of evaluating segment performance and
allocating resources. The Group Chief Executive Officer primarily uses a
measure of profit for the year (before exceptional items) to assess the
performance of the operating segments.
The Group manufactures and sells high-performance foams and licenses related
technology for specialist markets worldwide. The Group's activities are
categorised as follows:
Polyolefin Foams: 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. Revenue in the segment is currently mainly
derived from products manufactured from three main polymer types:
polyvinylidene fluoride (PVDF) fluoropolymer, polyamide (nylon) and
thermoplastic elastomers. Foams are sold under the brand name 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. It was developing a fully circular solution
for mono-material barrier packaging, which it has branded ReZorce(®);
however, at the end of 2024 this line of business was wound down and will not
be a separate segment in future years. The exceptional items recognised in
this segment represent impairment of the associated assets and closure costs
(see note 3).
Polyolefin Foams HPP MEL Consolidated
2024 2023 2024 2023 2024 2023 2024 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Group revenue 66,929 67,596 79,642 58,132 1,220 1,247 147,791 126,975
Segment profit/(loss) pre-amortisation of acquired intangibles 5,428 7,455 21,459 15,418 (4,636) (4,098) 22,251 18,775
Amortisation of acquired intangible assets - - - - (255) (257) (255) (257)
Exceptional costs of closure of business - - - - (15,178) - (15,178) -
Segment profit/(loss) 5,428 7,455 21,459 15,418 (20,069) (4,355) 6,818 18,518
Foreign exchange losses - - - - (43) - 754 (296)
Unallocated central costs - - - - - - (4,620) (3,087)
Operating profit - - - - - - 2,952 15,135
Financing costs - - - - - - (3,147) (2,540)
Financing income - - - - - - 274 191
Share of profit from joint venture 74 54 - - - - 74 54
Taxation - - - - - - (2,908) (3,598)
Profit for the year (2,755) 9,242
Segment assets 105,095 110,374 59,641 50,456 2,232 14,344 166,968 175,174
Unallocated assets - - - - - - 7,781 435
Total assets 174,749 175,609
Segment liabilities (29,054) (37,631) (21,218) (14,363) (2,677) (1,504) (52,949) (53,498)
Unallocated liabilities - - - - - - (12,443) (6,348)
Total liabilities (65,392) (59,846)
Depreciation of PPE 5,083 5,189 1,428 1,122 560 532 7,071 6,843
Depreciation of right-of-use assets 401 422 153 92 294 204 848 718
Unallocated depreciation of right-of-Use Assets - - - - - - 517 -
Amortisation 151 223 90 101 306 332 547 656
Capital expenditure:
Property, plant and equipment 7,931 4,619 904 1,421 1,266 343 10,101 6,383
Intangible assets 60 118 37 56 3,140 2,565 3,237 2,739
Geographical segments
Polyolefin Foams, HPP and MEL are managed on a worldwide basis but operate
from UK, USA, European and Asian 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 Continental Europe North America Rest of the world Total
£'000 £'000 £'000 £'000 £'000
For the year ended 31 December 2024
Group revenue from external customers 12,740 30,475 28,696 75,880 147,791
Non-current assets 50,556 18,498 33,176 525 102,755
Capital expenditure - PPE 2,212 1,873 6,011 4 10,101
For the year ended 31 December 2023
Group revenue from external customers 11,879 32,514 27,195 55,387 126,975
Non-current assets 42,745 19,815 39,697 246 102,503
Capital expenditure - PPE 4,393 524 1,464 2 6,383
3. Exceptional items
Closure of MEL business
On 18(th) December 2024 the Group decided to pause its investment in
ReZorce(®) circular packaging and focus all of the Group's resources on the
near-term opportunities in the core supercritical foams businesses. The
intellectual property and know-how associated with MEL is well protected and
will be retained by the Group in order to preserve its ability to realise the
value of this unique technology, should market conditions become more
favourable. A process to wind down the operations of its MuCell business unit
(MEL), began on that date. This includes both MEL and the operations related
to MuCell Extrusion LLC.
The exit from these activities is expected to reduce ongoing Group overheads
and will allow resources to be re-deployed into the foams businesses.
Since the future value of the know-how has now become uncertain, this has
resulted in an impairment of the carrying value of associated assets of
£13,797k, consisting of £2,157k of PPE, £2,386k of Goodwill and £9,254k of
other intangible assets. Of this, £1,271k (2023: £656k) of PPE and £3,213k
(2023: £2,512k) of intangible assets was capitalised in the year. This
reduces all intangible assets associated with MEL to zero and the PPE to
£689k representing assets which will be sold or utilised elsewhere in the
group. There were also one-off closure costs of £1,381k which have been fully
provided for. The total cost has been shown as an exceptional charge of
£15,178k in the income statement forming part of operating profit.
The income statement for the discontinued MEL business was as follows:
2024 2023
£'000 £'000
Revenue 1,220 1,247
Cost of sales (3,139) (2,629)
Gross Loss (1,919) (1,382)
Distribution costs (589) (596)
Administrative expenses (2,426) (2,443)
Exceptional costs of closure of business (15,178) -
Operating loss (20,112) (4,421)
Finance costs(1) (1,442) (1,068)
Loss before income tax (21,554) (5,489)
Income tax expense (35) -
Loss for the year (21,589) (5,489)
(1) Finance costs represent £1,435k (2023: £1,056k) of intercompany interest
charges which eliminate on consolidation and £7k (2023: £12k) of third-party
interest payable.
4. Property, plant and equipment
Group
Land and buildings Plant and equipment Fixtures and fittings Under construction Total
£'000 £'000 £'000 £'000 £'000
Cost
Balance at 01 January 2023 47,398 118,591 3,562 3,048 172,599
Additions 8 77 93 6,205 6,383
Disposals - (941) (194) (44) (1,179)
Effect of movement in foreign exchange (793) (2,451) (73) (91) (3,408)
At 31 December 2023 46,613 115,276 3,388 9,118 174,395
At 1 January 2024 46,613 115,276 3,388 9,118 174,395
Additions 26 26 18 10,031 10,101
Disposals - (148) (9) - (157)
Transfers 1,852 7,669 450 (9,977) (6)
Effect of movement in foreign exchange (477) 177 (11) 83 (228)
At 31 December 2024 48,014 123,000 3,836 9,255 184,105
Accumulated depreciation
Balance at 01 January 2023 15,653 59,919 2,732 - 78,304
Depreciation charge 1,737 4,862 244 - 6,843
Disposals - (984) (191) - (1,175)
Effect of movement in foreign exchange (331) (925) (64) - (1,320)
At 31 December 2023 17,059 62,872 2,721 - 82,652
At 1 January 2024 17,059 62,872 2,721 - 82,652
Depreciation charge 1,597 5,155 319 - 7,071
Impairment 6 1,186 53 856 2,101
Disposals - (74) (8) - (82)
Transfers 1 (14) 13 - -
Effect of movement in foreign exchange 37 223 11 4 275
At 31 December 2024 18,700 69,348 3,109 860 92,017
Net book value
At 1 January 2023 31,745 58,672 830 3,048 94,295
At 31 December 2023 and 1 January 2024 29,554 52,404 667 9,118 91,743
At 31 December 2024 29,314 53,652 727 8,395 92,088
5. Interest-bearing loans and borrowings
Note Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Current bank borrowings 8 34,602 36,527 34,602 36,527
At the end of the financial year, the Group has utilised £34.8m (31 December
2023: £36.9m) of its multi-currency revolving credit facility of £50m. This
amount is repayable on the last day of each loan interest period, which is of
either a three- or six-month duration. The amount above of £34.6m, is net of
£0.2m (2023: £0.3m) origination fees paid up front and being amortised over
four years. The Group has headroom of £25.7m, being £10.5m cash and cash
equivalents and the undrawn facility of £15.2m, being the facility of £50m
less the drawn-down balance of £34.8m.
The interest rates on the debt facility ranged between 4.3% and 6.6% in 2024
(2023: between 3.7% and 6.6%).
6. Issued share capital
Issued, allotted and fully paid ordinary shares of 5p each:
Number of shares Par value Share premium Total
£'000 £'000 £'000
At 1 January 2023 48,621,234 2,431 44,178 46,609
Share issue to Employee Benefit Trust 225,000 11 - 11
At 31 December 2023 and 31 December 2024 48,846,234 2,442 44,178 46,620
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled, on a poll, to one vote per share at
meetings of the Company.
7. Dividends and earnings per share
2024 2023
£'000
£'000
Prior year final dividend of 4.90p (2023: 4.62p) per 5.0p ordinary share 2,383 2,243
Interim dividend of 2.38p (2023: 2.28p) per 5.0p ordinary share 1,159 1,107
Dividends paid during the year 3,542 3,350
The proposed final dividend for the year ended 31 December 2024 of 5.10p per
share (2023: 4.90p) 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 £2,491k if paid to all shareholders on the Company
register at the close of business on 31 December 2024.
Earnings per ordinary share
Earnings per ordinary share is calculated by dividing the consolidated loss
after tax attributable to equity holders of the Company of £2,755k (2023:
£9,242k profit) by the weighted average number of shares in issue during the
year and excluding own shares held by the EBT which are administered by
independent trustees. The number of shares held in the trust at 31 December
2024 was 133,573 (2023: 244,286). 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 per Share".
2024 2023
Weighted average number of ordinary shares in issue 48,669,691 48,643,755
Adjustments for share options 1,361,985 1,161,180
Diluted number of ordinary shares issued 50,031,676 49,804,935
8. Financial instruments and financial risk management
Capital management
The Group's objectives when managing capital are to safeguard its ability to
continue as a going concern, in order to provide returns for shareholders and
benefits for other stakeholders, and to maintain an optimal capital structure
to reduce the cost of capital. In order to maintain or adjust the capital
structure, the Group can adjust the amount of dividends paid to shareholders,
issue new shares or redeem existing ones or borrow funds from financial
institutions.
The Group monitors capital on the basis of the following leverage ratio: net
borrowings divided by EBITDA (as per bank facility agreement).
Loan covenants
Under the terms of its borrowing facilities, the Group is required to comply
with the following financial covenants:
- The ratio of net borrowings on the last day of the relevant period to
earnings before interest, tax, depreciation and amortisation, share of
profit/(loss) from joint venture, equity-settled share-based payments and
exceptional items (EBITDA) shall not exceed 3.50:1.00
- The ratio of EBITDA to net finance charges in respect of the relevant period
shall not be less than 4.00:1.00.
The Group has complied with its covenants throughout the financial year.
As at 31 December 2024 As at 31 December 2023
£'000 £'000
Net borrowings 24,068 30,233
EBITDA 28,190 24,687
Net borrowings/EBITDA 0.85 1.22
Net finance charges 2,600 2,212
EBITDA/Net finance charges 10.84 11.16
Net borrowings comprise current and non-current interest-bearing loans and
borrowings of £34,602k (2023: £36,527k), as per note 5, and cash and cash
equivalents of £10,534k (2023: £6,294k).
The definition of net finance charges for the purpose of calculating the ratio
of EBITDA to net finance charges includes bank loan interest expensed of
£2,738k, less interest income of £138k, which is gross interest of £274k
less interest income from customers of £136k.
EBITDA comprises:
2024 2023
£'000 £'000
Loss/profit for the year (2,755) 9,242
Depreciation and amortisation 8,983 8,217
Finance costs 2,873 2,349
Share of profit from joint venture (74) (54)
Equity-settled share-based payments 1,077 1,335
Taxation 2,908 3,598
EBITDA before exceptional items 13,012 24,687
Add back exceptional items 15,178 -
EBITDA 28,190 24,687
The definition of Finance costs when calculating EBITDA includes finance costs
expensed of £3,147k less interest income of £274k.
The Group's objective is to maintain leverage below the Board's appetite of
2.0. However, it is prepared to accept increases in this ratio at times of
sizeable, capacity-related, capital expenditure to support continued growth.
Subject to short-term macroeconomic and geopolitical volatility, this is
always expected to reduce quickly back below the Board's appetite, and to
significantly lower levels, as capacity utilisation improves.
The bank covenant definition does not include the impact of IFRS 16 "Leases",
which would have moved the ratio from 0.85 to 1.17.
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