Zotefoams – excellent Interims point to fresh growth, shares 278p, I set a new TP at 347p, brokers TP 590p

05.08.2025

This morning’s Interim Results announcement from Zotefoams (LON:ZTF), a world leader in supercritical foams, made good reading and should help the group’s shares bounce upwards.

The shares closed at 278p, this morning I set a new Target Price at 347p.

In the six months to end-June the group reported record first-half sales 9% better at £77.4m (£71.1m), while its pre-tax profits were up a massive 37% at £11.4m (£8.3m), with basic earnings up an impressive 55% at 19.99p (12.89p) per share.

The rise in sales has been driven by growth in the EMEA and North American regions, plus a strong performance in the Aerospace and footwear markets.

The £135m-capitalised group recently announced a refreshed strategy that would see a move towards a market-centred approach across three key verticals – Consumer & Lifestyle, Transport & Smart Technologies and Construction & Other Industrial.

In addition, the business has implemented a global regional management and reporting structure.

The Business

The company was founded in 1921by Charles Marshall as an expanded rubber manufacturer known as Onazote Limited.

It then expanded into polyethylene foams in the 1960s, in 1995 it went public.

The group manufactures a range of closed-cell crosslinked foams from polyolefins and engineering polymers for global use in sports, construction, marine, automation, medical equipment, and aerospace.

Zotefoams is the world's largest manufacturer of lightweight crosslinked polyolefin block foams (AZOTE®) and additionally sells and licenses high-performance products (ZOTEK® and T-FIT®) and microcellular materials technology (MuCell®).

Today it is a world leader in supercritical fluid foam technology, delivering optimal material solutions for the benefit of society.

The business is based in Croydon, Surrey, with additional manufacturing sites in Kentucky in the USA, Brzeg, Poland (foam manufacture), and foam products conversion in Oklahoma, USA and Jiangsu Province, China (T-FIT).

Management Comment

CEO Ronan Cox stated that:

"I am pleased to report a record first-half performance for Zotefoams, as we embark on a refreshed strategy.

Our commercial transformation into market-focused verticals continues to progress well, with our pipeline of opportunities growing across all three sectors.

While this remains a longer-term strategic initiative, we are encouraged by early benefits from this more targeted approach to market development.

The curtailing of investment in MEL has improved profitability significantly and we are targeting continued strong margin performance, supported by stable polymer pricing and the benefits of ongoing efficiency improvement programmes.

We are successfully absorbing the costs of our commercial and operational reorganisation within normal operations while maintaining our focus on operational efficiency and reinvesting in new capability aligned with the refreshed strategy.

We enter the second half with positive momentum.

Structural trends across our three key verticals remain supportive, albeit we remain mindful of near-term volatility created by the current macroeconomic backdrop.

We anticipate some moderation in Consumer & Lifestyle demand as expected seasonal patterns emerge and the exceptional growth rates experienced in H1 normalise.  

Given the strong H1 2025 performance and momentum carried into the second half, the Board now expects to deliver full-year underlying profit before taxation ahead of current market expectations.

We are delighted to be partnering with Seoheung in our investment in Vietnam.

This partnership goes far beyond just investment, as it de-risks the programme start-up, leverages over 30 years of local knowledge and explores best practice for injection moulding and footwear component manufacturing systems and processes.

The Board is pleased with the Group's early progress of its refreshed strategy, as shared at the Capital Markets Day held in March 2025, and the clear focus on the three market verticals provides both stability and opportunities to unlock growth in a mixed economic backdrop.

Our ongoing investment in Vietnam, innovation capabilities, and the development of our M&A pipeline positions us well for sustainable growth in line with our medium-term targets."

The Outlook

Given the strong H1 2025 performance and momentum carried into the second half, the Board now expects to deliver full-year underlying profit before taxation ahead of current market expectations.

The Board continues to expect the group to deliver overall growth in 2025, supported by the strong performance in the period, a growing order book and with good opportunities across all geographies.

It understands that current market expectations for the year to end-December, were for revenue of £149.7m and adjusted profit before tax of £19.4m.

Merger and Acquisition Strategy

The group has stated that its primary focus is on driving organic growth, but the potential opportunity exists to use targeted M&A as a new growth lever where it meets the Board's stringent criteria.

Value could be enhanced through either market consolidation, and portfolio expansion with complementary products, acquisition of technologies to deepen expertise, or through downstream extension, to shorten the value chain, gain machining and processing capabilities and get closer to customers, while respecting existing customers, many of whom are active in this area.

The Equity

There are some 48.85m shares in issue.

The larger holders include Schroder Investment Management (19.43%), Raymond James Investment Services (11.12%), Odd Asset Management (10.35%), BGF Group (6.62%), Premier Miton Group (5.39%), BlackRock Investment Management (4.74%), Premier Fund Managers (4.58%), IG Markets (3.98%), Nick Beaumont Dark (3.91%), and Interactive Investor Services (3.88%).

Broker’s View

Prior to this morning’s results, analysts Caroline de La Soujeole and Carl Diebitsch, at Singer Capital Markets, had rated the group’s shares as a conviction Buy, with a 590p Target Price.

They had noted that the group has a clear path to creating shareholder value by becoming a larger, higher-quality business, delivering high single-digit organic growth, operating margins trending over 18% and ROCE exceeding 20%.

The analysts stated that the group’s ongoing strategic progress and ambition are not reflected in the current valuation.

For the current year, to end-December, their estimates are for revenues of £149.8m (£147.8m), with adjusted pre-tax profits of £20.3m (£15.6m), generating earnings of 30.6p (25.3p) per share easily covering a dividend of 7.98p (7.53p).

For next year they see £160.3m sales, £22.8m profits, 34.4p earnings and a dividend of 8.46p per share.

My View

Following today’s Interim statement and considering the progress that this group is making under the recently appointed CEO Ronan Cox, I am now setting a new Target Price at 347p against their current 278p trading price.

(Profile 26.06.19 @ 600p set a Target Price of 750p) 

(Profile 06.03.24 @ 330p set a Target Price of 395p*) 

(Profile 05.08.25 @ 278p set a Target Price of 347p)

Aerospace materials are lightweight, temperature resistant and offer a wide range of technical qualities that make them perfect for Aviation and Aerospace applications

Asterisk * denotes that Target Price has been achieved since Profile publication.