Zotefoams plc (LON:ZTF), a world leader in cellular materials technology, has announced its interim results for the six months ended 30 June 2021.
Results highlights
• Group revenue of £48.2m, 39% above the same period last year (HY 2020: £34.6m) and 14% ahead of the comparative period for 2019:
– High-Performance Products (HPP) sales up 66% to £19.6m
– Polyolefin foams sales up 24% to £27.3m
– MuCell Extrusion LLC (MEL) sales up 50% to £1.3m
• At constant currency, Group revenue was 46% ahead of prior year at £50.7m
• Favourable operational leverage from higher sales volumes was partially offset by gross margin pressures:- Significant supply chain inflationary pressures, particularly in polyolefin raw materials and freight, with selective pricing actions taken to mitigate
– Commissioning of the Poland plant, with expected low initial utilisation
– Reversal of some short-term cost savings, implemented to conserve cash in 2020
– Profit before tax (PBT) increased 49% to £4.0m (HY 2020: £2.7m). FX headwinds impacted PBT by £1.2m, with constant currency PBT increasing 93% to £5.2m
• Strong cash and profit performance reduced the period-end leverage ratio to 1.9x (net debt: EBITDA), down from 2.1x at year-end and retaining significant covenant headroom
• Interim dividend of 2.10p per share declared (HY 2020: 2.03p per share), reflecting strong growth and positive outlook
Strategic highlights
• Broad-based recovery in most polyolefin foam markets and territories provides good momentum leading into H2
• Poland, our third major manufacturing site, commissioned on time and budget in Q1 2021
• HPP footwear market now accounts for 34% of Group revenue, with strong order pipeline and good visibility
• T-FIT® insulation demonstrated continued growth, despite significant COVID-19 related disruption to the Indian market
• ReZorce® recyclable packaging technology validation progressing as planned
Financial summary
| Six months ended 30 June 2021 | Six months ended 30 June 2020 | Change | |
| £m | £m | % | |
| Group revenue | 48.2 | 34.6 | 39 |
| Operating profit | 4.7 | 3.1 | 49 |
| Profit before tax | 4 | 2.7 | 49 |
| Basic EPS (p) | 6.52 | 4.48 | 46 |
| Cash generated from operations | 5.6 | 6 | -6 |
| Leverage ratio (multiple) | 1.9 | 2.6 | – |
| Interim dividend (p) | 2.1 | 2.03 | 3 |
| Net debt | 35.6 | 36.2 |
Commenting on the results and the outlook, David Stirling, Group CEO, said:
“We are delighted to have produced such a strong trading performance across most regions and markets. The Group has responded well operationally to the strong demand recovery despite challenging supply-chain conditions from Brexit and COVID-19.
“In the second six months of 2021 we expect further positive momentum in sales, with a strong order book underpinned by improving economic conditions. Product mix is anticipated to be slightly more favourable, with good growth in HPP products and recent sales price rises in polyolefin foams. FX headwinds are expected to continue. Gross margin, benefitting from strong sales and better mix, is expected to remain steady despite cost inflation, predominantly in polyolefin raw materials, the price of which increased sharply during the first six months and is now, we believe, at its peak. We anticipate these raw material price levels and operational disruption to freight to persist for the remainder of this year before seeing a return towards more normal conditions early in 2022.
“We are mindful of the high level of uncertainty in the current economic climate, with supply chain challenges and COVID-related risks of operational disruption remaining high, so these expectations must be tempered with caution. Overall, we are pleased to have delivered another solid performance in difficult conditions and remain optimistic about our future.”
