Specialty materials maker Zotefoams (ZTF) raised its 2025 sales and earnings guidance after strong Q4 trading. The group now expects both metrics to beat both its own and market expectations.
| Share price: 420p (+3.5%) | PE: 13.5x |
| Market cap: £203m | Yield: 1.9% |
ANOTHER ‘EXCEPTIONAL’ YEAR
The group, which makes specialty foams for customers including German footwear giant Adidas, enjoyed strong sales growth last year. Revenue for 2025 is now seen around £158 million, above market expectations and ahead of 2024.
Growth in EMEA (Europe, Middle East & Africa) was 9% due to another ‘exceptional’ year in Consumer & Lifestyle, in particular footwear. The acquisition of Spain’s OKC, the firm’s first M&A deal, will help support growth in the region going forward.
Growth in North America was 6.7% helped by a strong performance in Transport and Smart Technologies. The division makes fire-retardant foam insulation for aircraft, cars, buses and trains.
Adjusted pre-tax profit is expected to be £21.1m, up 37.9%, which is a group record and above market expectations. The company-compiled consensus for 2025 is for pre-tax profit of £20.5 million.
Cash generation was strong with year-end leverage expected to be around 0.8 times. The group also just signed a large borrowing facility to support its ongoing investment plans.
We’ve liked Zotefoams for a while due to its exposure to the athletic footwear market. The news today that its Transport & Smart Tech unit is also doing well is a bonus.
The group is working on moving production from the UK to Vietnam where its big footwear customers are based. Expansion in Asia with a site in Vietnam and an innovation centre in South Korea points the way.
The firm hasn’t had the easiest ride due to the macro backdrop, but it is making strategic progress. Also, having made one acquisition, it now has the confidence to look at more M&A opportunities to supplement organic growth.
Read the press release here: https://www.zotefoams.com/investors/
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