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Zotefoams halts dividends to conserve cash

Tue 07 April 2020 11:30 | A A A

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(Sharecast News) - Zotefoams has put dividends on hold after the Covid-19 crisis added to market pressures that caused profit to fall in 2019.

The maker of foam products said it would not propose a final dividend for the year to the end of December because of the "extraordinary uncertainty" created by the Covid-19 outbreak. It will keep hold of the cash to support its financial position during the crisis.

The group's annual operating profit excluding an exceptional item fell 21% to £9.1m in 2019 as revenue edged down to £80.9m from £81m. Profit fell because demand for its polyolefin foam products dropped sharply in the second half of the year as economic growth slowed and uncertainty increased.

The company said that since late March conditions had stayed difficult with customers uncertain, demand subdued and customers demanding rapid response times. Zotefoams is cutting costs and considering taking government support.

Zotefoams is based in the London suburb of Croydon with manufacturing operations there and in Kentucky, USA. Its main business is makes polyolefin block foams for use in products ranging from air conditioning systems and cars to camping mats and cricket pads.

The company said: "The challenging market conditions experienced in the latter part of 2019, particularly within our polyolefin foams business, have yet to improve noticeably. Adding to this, the outbreak of the Coviud-19 virus is causing additional disruption.

"We are focused on minimising cash outflows and strengthening our financial position in the short term. As such, the board believes it is prudent not to recommend a final dividend."

Zotefoams said it would decide when to start paying dividends again as conditions stabilise. The company said it believed it had enough liquidity to get through the crisis.

The company's shares rose 20% to 190p, helping lead a wider increase in UK small-cap companies at 09:55 BST.

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