Zotefoams Plc · LSE:ZTF
Zotefoams — FY2019 Earnings Presentation
35 slides from Zotefoams's earnings presentation, Apr 7, 2020
Slide 1: Preliminary results 7 April 2020: Setting the pace
1 Preliminary results 7 April 2020 Setting the pace ZOTEK® AZOTE® MuCell® David Stirling Group CEO Presenters Gary McGrath name Group CFO T-FIT® AZOTE® / ZOTEK® / T-FIT® / MuCell®
Slide 2: Important notice
Important notice By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: This presentation is being made only in the United Kingdom and this document is being distributed only to and is directed only at pers
Slide 3: Introduction
Introduction AZOTE®® / / ZOTEK AZOTE ZOTEK®® / T-FIT® /®MuCell® ® / T-FIT / MuCell 3
Slide 4: Outlook comment
Outlook comment On 24 March 2020 we stated: - challenging market conditions experienced in the latter part of 2019, particularly within our Polyolefin Foams business, yet to improve noticeably - outbreak of the COVID-19 virus is causing additional disruption and uncertainty - Board anticipates a str
Slide 5: COVID-19
COVID-19 TRADING LIQUIDITY • ZTF facilities operational and inbound • 31 December 2019: supply chains functional • Net debt under bank definitions, of • Update on sites and people £30.69m • Q1 – challenging market conditions • Liquidity headroom of £24.5m following slowdown in H2:2019 • Dividend sus
Slide 6: Business overview
Business overview EXTRUSION AUTOCLAVE TECHNOLOGY TECHNOLOGY POLYOLEFINS HPP MEL AZOTE® ZOTEK® T-FIT® MuCell® Premium durable foams Lightweight technical foams Technical insulation for industry Innovative and accessible Uniformly dense foam sheets with a Ultra durable, highly heat and A range of bact
Slide 7: Strategy
Strategy “Our ambition is to Zotefoams remains well positioned be the world leader competitively and environmentally. in cellular materials Our core materials offer improved technology in our We intend to develop chosen markets” business through product performance using less sustained high material
Slide 8: Key Points
Key Points Adjusted2 profit Gross revenue before tax Basic1 EPS Gross Margin in line with PY £9.04m 14.91p stable at 35.4% at £80.9m 2018: £11.07m) (2018: 18.66p) (2018: 35.8%) • Higher margin HPP sales now account for 33% of Group revenue (2018: 27%) and 53% of consolidated segment profit (2018: 43
Slide 9: Segment Overview
Segment Overview Revenue by geography Revenue by business unit Polyolefins HPP MEL 2019 UK 16% 1,945 Dec 18 57,158 22,009 25% Europe 21% 17% N America 2018 ROW 26% 36% 32% Dec 19 51,360 26,480 3,100 27% - 20,000 40,000 60,000 80,000 £ THOUSANDS 35% Product Revenue by industry 30% protection 25% Tran
Slide 10: Financial Review
Financial Review AZOTE® / ZOTEK® / T-FIT® / MuCell® 10
Slide 11: Key points
Key points Liquidity headroom - As at 31.12.19 the Group has sufficient liquidity headroom of £24.5m Covenants (two) - Net debt to EBITDA (leverage) of 3.0x (31 December 2019: 2.0x), increased to 4.0x for the 12 months to 30 June 2020 - EBITDA to net finance charges of 4 (31 December 2019: 73) Going
Slide 12: Abbreviated income statement
Abbreviated income statement £million Dec-19 Dec-18 Change Group Revenue 80.86 81.04 (0%) Gross Profit 28.59 29.00 (1%) Gross Profit Margin 35.4% 35.8% Adjusted Operating Profit 9.38 11.84 (21%) Adjusted Profit before Tax 9.04 11.07 (18%) Tax Charge 1.59 2.00 (21%) Adjusted Profit after Tax 7.45 8.9
Slide 13: Statement of financial position, free cash flow and net debt
Statement of financial position, free cash flow and net debt Statement of Cash Flows Statement of Financial Position £million Dec-19 Dec-18 Profit before tax 9.81 9.86 £million Dec-19 Dec-18 Change Depreciation 5.77 5.08 Intangible assets 6.61 6.52 1% Other (0.19) 2.54 Tangible assets 86.86 67.61 28
Slide 14: Key performance metrics
Key performance metrics Polyolefin Foams Growth % HPP and MEL Share of Gross Revenue 20% 41.0% 15% 36.0% 10% 31.0% 26.0% 5% 21.0% 0% 2015 2016 2017 2018 2019 16.0% -5% 11.0% -10% 6.0% -15% 2015 2016 2017 2018 2019 Group Operating Margin % Return on Capital Employed 15% 18% 14% 16% 14% 13% 12% 12% 10
Slide 15: Segment headlines
Segment headlines High-Performance Products sales up MuCell Extrusion 20% to £26.5m. returning to growth, 33% of Group with sales up 59% to revenue and 53% Polyolefin Foams £3.10m of consolidated sales down 10% in segment profit challenging H2 market conditions AZOTE® / ZOTEK® / T-FIT® / MuCell® 15
Slide 16: HPP results
HPP results ® ZOTEK® foams: retaining the attributes of high-performance polymers ZOTEK with the added benefits of consistent foaming T-FIT® T-FIT® high-performance insulation Revenue HPP Dec 19 Dec 18 Change £m £m • 20% sales growth (15% constant currency) Segment revenue 26.48 22.01 20% • Footwear
Slide 17: HPP: high-margin growth portfolio
HPP: high-margin growth portfolio ZOTEK® T-FIT® UK plant has significant capacity to support further HPP sales growth Footwear • Significant exclusive strategic partnership announced December 2017 with Nike • Close co-operation on materials for wider adoption across Nike product lines £000s HPP Sale
Slide 18: Polyolefin Foams results
Polyolefin Foams results ® Common polymers made extraordinary by Zotefoams’ unique AZOTE process, creating premium, durable, consistent materials Revenue Polyolefin Dec 19 Dec 18 Change Foams £m £m • Strong start to 2019 Segment revenue 51.36 57.16 (10%) • Difficult market conditions experienced in S
Slide 19: MuCell Extrusion results
MuCell Extrusion results MuCell® microcellular technology MEL Dec 19 Dec 18 Change Revenue & Growth £m £m • Equipment sales and related license and royalty Segment revenue 3.10 1.95 59% income Segment loss pre (1.27) (1.63) 22% • Revenue growth driven by equipment sales amortisation • Growth potenti
Slide 20: Investment strategy: Delivering +60% capacity vs end 2017
Investment strategy Delivering +60% capacity vs end 2017 North America 27% Europe 48% ROW 25% of Revenue of Revenue of Revenue ROW North America capacity development European capacity • T-FIT® facility in 1. Infrastructure & first high- development Kunshan, China pressure line in place 1. Two low-pr
Slide 21: Progress in 2019
Progress in 2019 21 AZOTE® / ZOTEK® / T-FIT® / MuCell®
Slide 22: Industry firsts
Industry firsts ReZorce®: 100% recyclable AZOTE® Adapt: Redefining mono-material barrier packaging chemical foaming • 100% HDPE = recycling stream no. 2 • Combines autoclave process with • Complies with all food standards latest blowing agent technology • Feels, prints and folds like paper • Low res
Slide 23: Key message & outlook
Key message & outlook KEY MESSAGES OUTLOOK HPP strategy delivering growth Challenging markets and uncertain with record revenue and profits demand environment from this segment Zotefoams facilities operational and ReZorce® offers new revenue in-bound supply chains functional stream opportunity for M
Slide 24: Appendices
Appendices AZOTE® / ZOTEK® / T-FIT® / MuCell® 24
Slide 25: Investment case
Investment case Sustained high levels of organic growth with margin enhancement through product mix and operational gearing Flexible core autoclave MuCell optionality: capacity for block investment in foam production customer base (AZOTE® & with long value tail ZOTEK®) Downstream HPP growth rates in
Slide 26: Revenue and profit momentum – Full year 2015 - 2019
Revenue and profit momentum – Full year 2015 - 2019 Revenue & Op Profit excl. exceptional items Divisional Revenue Split 4.9% 4.8% 6.1% 2.4% 3.8% £100m £25m 100% 15.3% 17.4% 18.7% £80m £20m 27.1% 80% 32.7% 81.0 81.0 £60m 70.1 £15m 60% 57.4 53.9 £40m £10m 40% 79.8% 77.9% 11.6 75.2% 70.5% 9.4 63.5% 9.
Slide 27: Overview
Overview Organisation Products Founded on innovation Polyolefin stretching back Foams to 1921 Environmentally friendly High Nitrogen/CO2 A world leader Performance gas foaming in cellular Products processes Barriers materials to entry: technology IP, capital, Technology application Licencing for spe
Slide 28: Group overview - locations
Group overview - locations MuCell Extrusion HQ Woburn, MA, USA Zotefoams plc Zotefoams T-FIT licenses MuCell® Croydon UK Material Technology technology to end Block foam main (Kunshan) Co. Ltd, users manufacturing site China Zotefoams Poland, T-FIT® products SP z.o.o., Brzeg manufacture Zotefoams In
Slide 29: Main markets & typical applications
Main markets & typical applications Product Transport Industrial Protection AZOTE® ZOTEK® MuCell® AZOTE® ZOTEK® T-FIT® AZOTE® ZOTEK® MuCell® Aircraft seats, seals Seals and gaskets Automotive seals, gaskets Marine hoses and fenders Luxury, fine art and museum Galley areas / window seals Clean room e
Slide 30: Three stage process
Three stage process AZOTE® / ZOTEK® / T-FIT® / MuCell® 30
Slide 31: MuCell process technology
MuCell® process technology MuCell® technology produces foam that performs like solid plastic. It creates micro-bubbles in the centre of plastic extrusions by injecting gas into the melt during manufacture. Lighter Greener Lower cost cost AZOTE® / ZOTEK® / T-FIT® / MuCell® 31
Slide 32: Sustainability
Sustainability Pure Performance Lighter from the outset Durable for a decade Our core AZOTE® and ZOTEK® Our foams are typically 15-20% less A decade ago, one of the largest foams are expanded using pure dense than any competing foam for biotech plants in the world chose T-FIT® nitrogen only. The air
Slide 33: Polymer (LDPE) prices/kg
Polymer (LDPE) prices/kg £ € Polymer Prices 1.40 1.40 1.25 1.20 1.09 1.20 1.00 1.11 1.00 0.97 0.80 0.80 0.60 0.60 0.40 0.40 0.20 0.20 - - Price € Price £ AZOTE® / ZOTEK® / T-FIT® / MuCell® 33
Slide 34: Market information
Market information Share price 155.0p (03/04/20) Shareholder Profile* Market Main Market Ticker ZTF.L Market cap. £74.9m Ord. shares in issue 48,301,234 700 2000 1800 600 1600 500 1400 Share price (p) Volume (000s) 1200 400 1000 300 800 200 600 Schroders 11.3% Oppenheimer 8.3% 400 Sekisui Alveo 7.9%
Slide 35: Board of Directors
Board of Directors Steve Good Non-Executive Chairman (Chair of the Nominations Committee and a member of the Remuneration Committee) Angela Bromfield MBA Non-Executive Director Appointed to the Board in October 2014 as a Non-Executive Director and (Chair of the Remuneration Committee and member of th