Zotefoams’ (ZTF) key polyolefin foam segment struggled over the second half of 2019, as falling demand in Western Europe and North America dragged the division’s full-year turnover down 10 per cent to £51.36m, from £57.16m in the prior year. Polyolefin foams made up 64 per cent of the company’s 2019 revenues.
Advanced materials specialist Zotefoams’ High Performance Products (HPP) division is growing in prominence. It carries higher margins (24 per cent in 2019, against the group’s operating margin of 11.3 per cent) and now accounts for a third of Zotefoams’ revenue. But HPP’s significantly higher raw material costs pushed inventories up by £0.89m, and the company’s inventories as a percentage of sales rose again, up five percentage points from 2015 to 23 per cent.
Zotefoams has completed capacity increases in the UK and US, while the commissioning of new Polish capacity is subject to resolution of the coronavirus issue. Capital expenditure rose 52 per cent to £24.8m, 85 per cent of which was dedicated to polyolefin foam assets. The conclusion of these projects along with coronavirus delays will bring down Zotefoams’ capital expenditure. The outbreak also prompted the company to suspend its dividend last month.
House broker Peel Hunt forecasts full-year 2020 adjusted pre-tax profits of of £5.3m and earnings per share of 8.8p, rising to £7.2m and 11.8p in 2021.
ZOTEFOAMS (ZTF) | ||||
| ORD PRICE: | 207p | MARKET VALUE: | £100m | |
| TOUCH: | 201-209p | 12-MONTH HIGH: | 650p | LOW: 152p |
| DIVIDEND YIELD: | nil | PE RATIO: | 12 | |
| NET ASSET VALUE: | 186p | NET DEBT: | 36%** | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015* | 53.9 | 6.0 | 10.1 | 5.10 |
| 2016* | 57.4 | 7.0 | 12.1 | 5.22 |
| 2017* | 70.2 | 7.6 | 12.4 | 5.38 |
| 2018 | 81.0 | 9.9 | 17.0 | 6.12 |
| 2019 | 80.9 | 9.8 | 17.1 | nil |
| % change | -0.1 | -1 | +1 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *EPS and DPS adjusted for May 2018 rights issue **Includes lease liabilities of £1.21m | ||||
