A year of momentum with a significant increase in revenue and profitability within the core foams business, with growth in our key markets and our first acquisition, which is anticipated to be earnings accretive in 2026. Revenue and profit before tax were at record levels, with a strong uplift in margins and effective cost control, along with good cash generation, a strong balance sheet and recent refinancing, meaning we are well positioned for future profitable growth.
Nick Wright
Group CFO
Overview
Group revenue increased by 7.2% to £158.5m (2024: £147.8m), with an 8% increase at constant currency. Key areas of growth were our largest regions of EMEA and North America. EMEA grew 9.3% to £124.0m (2024: £113.4m), including contribution from OKC of £2m, but with a healthy underlying c. 7.5% growth rate, largely driven by another year of exceptional growth in Consumer and Lifestyle, driven by our footwear customer.
North America saw revenue increase 7.1% to £30.1m (2024: £28.1m), driven by strong growth in Transport & Smart Technologies. We saw robust orders in automotive and transit applications and, encouragingly, demand in Construction improved towards the end of the year after a slow start. Asia saw revenue fall to £4.2m (2024: £5.1m) due to a shift in our China insulation business following changes in local government support on pharmaceutical construction, but we expect Asia to be a very significant growth driver going forwards once our new manufacturing facility in Vietnam is fully operational later this year/early 2027.
Adjusted operating profit for the year grew 26% to £22.8m (2024: £18.1m) and adjusted profit before tax (PBT) increased 39% to a Group record of £21.2m (2024: £15.3m), after margin improvement and lower interest charges. Some additional costs, largely relating to one of the MEL leases and other closure costs, have led to an exceptional charge of £0.9m being recorded in the consolidated income statement along with £0.2m of intangible amortisation relating to the acquisition of OKC which is being treated as exceptional. Currency movements had £0.1m positive effect on PBT.
Adjusted basic earnings per share (EPS), which excludes the exceptional item, amortisation of acquired intangible assets and a recognition of deferred tax assets in EMEA and North America, increased 46% to 38.00p (2024: 25.95p). Return on capital employed (ROCE, see section "Return on capital employed" for definition) increased to 13.9% (2024: 11.7%).
The Group’s balance sheet at 31 December 2025 is strong, with the leverage multiple (calculated as a multiple of net debt to EBITDA using definitions under the bank facility agreement, see the Debt facility section) improving to 0.8x (31 December 2024: 0.9x) and financial headroom of £18.5m (31 December 2024: £25.7m) after completing the OKC acquisition, which shows the benefits of the strong cash generation of the Group.
Summary P&L
Zotefoams Group | Excluding MEL and OKC | ||||||
|---|---|---|---|---|---|---|---|
2025 | 2024 | Change (%) | 2025 | 2024 | Change (%) | ||
Net revenue | 158.5 | 147.8 | 7.2 | 156.2 | 146.6 | 6.5 | |
Gross profit | 52.9 | 46.1 | 14.8 | 52.9 | 48.1 | 10.0 | |
Distribution and administrative costs | (30.3) | (28.0) | (8.2) | (30.0) | (25.0) | (20.0) | |
Adjusted operating profit | 22.8 | 18.1 | 26.0 | 22.9 | 23.1 | (0.9) | |
Exceptional items & amortisation of acquired intangibles | (1.2) | (15.2) | – | – | – | – | |
Operating profit | 21.6 | 3.0 | 620 | 22.9 | 23.1 | (0.9) | |
Finance costs and profit from joint venture | (1.7) | (2.8) | 39 | (1.7) | (2.8) | 39 | |
Adjusted profit before tax | 21.2 | 15.3 | 39 | 21.2 | 20.3 | 4.4 | |
Profit before tax | 20.0 | 0.2 | – | 21.2 | 20.3 | 4.4 | |
Taxation | 2.7 | (2.9) | – | ||||
Adjusted basic EPS | 38.00 | 25.95 | 46 | ||||
Basic EPS/(LPS) | 46.37 | (5.66) | – | ||||
Revenue performance
EMEA sales increased 9% to £124.0m (2024: £113.4m), and by 9% to £124.4m at constant currency. The robust performance was driven by another exceptional year in our Consumer & Lifestyle market, reflecting continued high demand for footwear products. We benefited both from new product launches and the ongoing migration of athletic footwear from China to Vietnam, which boosted sales to our flagship customer. After several years of rapid growth in footwear, we anticipate demand to moderate as inventory levels normalise. EMEA revenues also include an initial £2.0m from the acquired OKC business since mid‑November. Excluding this acquisition, underlying organic growth in EMEA was 8%, reflecting healthy demand after a record footwear year in 2025.
North America sales increased 7% to £30.1m (2024: £28.1m) and 10% to £30.9m at constant currency. This was driven by strong growth in Transport & Smart Technologies. We saw robust orders in automotive and transit applications and, encouragingly, demand in Construction strengthened in the final quarter after a subdued first half. We continue to focus on operational efficiencies and commercial initiatives in this region, which helped maintain sales despite some macroeconomic headwinds earlier in the year. MEL sales reduced to £0.2m (2024: £1.2m), following the pausing and subsequent closure of the ReZorce business.
Revenue by region (£m)
Net change % | ||||||
|---|---|---|---|---|---|---|
2025 | 2025 | 2024 | Reported | Adjusted | ||
EMEA | 124.0 | 124.4 | 113.4 | 9.3 | 9.7 | |
North America | 30.1 | 30.9 | 28.1 | 7.1 | 10.0 | |
Asia | 4.2 | 4.4 | 5.1 | (17.6) | (13.7) | |
Group excluding MEL | 158.3 | 159.7 | 146.6 | 8.0 | 8.9 | |
MEL | 0.2 | 0.2 | 1.2 | (83) | (83) | |
Group | 158.5 | 159.9 | 147.8 | 7.2 | 8.2 | |
1 Constant currency, adjusting 2025 values to 2024 exchange rates. See exchange rates table.
Revenue by vertical (%)
2025 | 2024 | |
|---|---|---|
Consumer & Lifestyle | 50 | 48 |
Transport & Smart Technologies | 33 | 33 |
Construction & Other Industrial | 17 | 19 |
Gross profit
Gross profit increased £6.8m to £52.9m (2024: £46.1m), while gross margin increased to 33.4% (2024: 31.2%), reflecting a more favourable product mix and operational efficiencies, with pricing and mix management successfully offsetting input cost pressures. The uplift also reflects successful price increases implemented in certain markets in 2025, which helped offset cost inflation. EMEA gross profit increased 9.9% to £44.2m (2024: £40.2m), driven primarily by higher revenue in the Consumer & Lifestyle market, notably stronger footwear sales. North America recorded the highest percentage growth in gross profit, up 27% to £7.7m (2024: £6.1m), largely due to growth in the Transport & Smart Technologies vertical. Additionally, we selectively built inventory of key foam grades during 2024 (especially in H2 2024) ahead of capacity constraints expected in 2025. We entered 2025 well stocked, which enabled us to meet demand without incurring additional costs related to overtime or external processing, again supporting our gross margin.
The Group has continued to pursue its refreshed strategy, Expanding Beyond the Core, investing in innovation and geographic expansion and completing our first significant acquisition. We have continued to invest in, and prioritise, our talent, leadership, technical expertise, sales and the resources needed to deliver our investment, execute our strategy and focus on our customers.
Distribution and administrative costs
2025 | 2024 | Change (%) | |
|---|---|---|---|
Distribution costs | 8.2 | 8.5 | (3.5) |
Administrative costs excluding hedging movements | 21.7 | 20.3 | 6.9 |
Foreign Exchange losses/(gains) | 0.4 | (0.8) | – |
Administrative costs | 22.1 | 19.5 | 13.3 |
Distribution and administrative costs | 30.3 | 28.0 | 8.2 |
Included within distribution costs are sales, marketing and warehousing expenses. These costs reduced by £0.3m, or 4%, to £8.2m (2024: £8.5m) during the year as we optimised logistics and warehouse usage, reducing reliance on external overflow storage that had been needed previously.
Included within administrative costs are technical development, finance and information systems as well as the impact of foreign exchange hedges maturing in the period and the revaluation of non-cash assets denominated in foreign currencies. These costs increased in 2025 by £2.6m, or 13%, to £22.1m (2024: £19.5m). However, after stripping out foreign exchange effects, which generated a loss of £0.4m (2024: gain of £0.8m), these administrative costs increased by 7%, or £1.4m, to £21.7m (2024: £20.3m). See “Currency review”, below, for further information and context around foreign exchange movements.
This increase of £1.4m reflects our investment in our teams; we added key roles in R&D and management to support our key strategic projects, including the regional expansion in Asia and our innovation centres, and annual pay rises were above historical norms due to the ongoing inflationary environment.
These cost increases were largely offset by reductions in one-time and non-core spend, in particular MEL ReZorce development spend that we incurred in prior years. The pausing of investment in MEL resulted in a £4.9m reduction in non-recurring operating costs in 2025, which has been redeployed into our core innovation and commercial activities, the net effect of which was a significant reduction in our overhead base.
The specific business unit results and margins that we report, (see "Group CEO's review") do not include central plc costs, which are not considered to be market-specific. Neither do they include hedging movements. In 2025, central plc costs increased 41% to £6.5m (2024: £4.6m) and mainly comprise the additional Executive team costs, reflecting a strengthening of management, and £0.5m in respect of amortisation charges of Shincell fees payable under the licence agreement, which are not allocatable to a specific market.
Acquisition of Overseas Konstellation Company S.A. (OKC)
On 18 November 2025, Zotefoams completed the acquisition of OKC, a business based in Spain that specialises in advanced foam conversion and distribution in niche markets. OKC was acquired to strengthen our value chain integration and market reach in EMEA, particularly in high-performance technical foams for industries like automotive and sustainable packaging. The transaction aligns with our strategy of expanding into complementary markets.
The purchase consideration comprised a €27.6m initial cash payment (funded from our existing debt facilities and cash on hand) and a further deferred €6.9m cash payment and contingent payments, of which €1.5m is tied to OKC’s future performance.
Integration is proceeding smoothly: OKC’s management team and 99 employees have joined Zotefoams, and their operations are being integrated with our existing European business. We have formulated a detailed integration plan, focusing on cross-selling opportunities, operational synergies (for example, leveraging Zotefoams’ extrusion capacity to supply OKC’s conversion processes), and sharing technical expertise.
OKC brings us closer to certain end-customers with its direct relationships with automotive and industrial clients that complement our own, along with providing downstream fabrication capabilities that broaden our offering. Rather than selling foam blocks/sheets, we can now supply more value-added foam components and assemblies, capturing a greater share of the value chain. The acquisition is expected to be earnings accretive in 2026.
Looking ahead, OKC will be fully integrated into our EMEA operations. We expect to see revenue growth (through combined sales efforts and a broader product range) and the benefit of OKC’s excellent reputation for customer service and its proprietary recycling technology.
Exceptional item: MEL
In 2024 we recognised a substantial exceptional item of £15.2m related to the impairment and closure of the MuCell Extrusion (“MEL”) business (principally the ReZorce packaging project). During 2025, the Group incurred a charge of £0.9m relating to additional costs of closing these activities down.
Operating profit
Adjusted operating profit was £22.8m, 26% above 2024 (£18.1m) and the operating margin increased to 14.4% from 12.2%. Operating profit was £21.6m, up substantially on 2024 (£3.0m) and the operating margin increased to 13.6%.
Finance costs
Gross finance costs for the year decreased 32% to £2.1m (2024: £3.1m) and include £0.1m (2024: £0.1m) of interest on the Defined Benefit Pension Scheme obligation. This decrease arose from a lower average debt balance throughout the year that reflects the Group’s strong cash generation. Net finance costs, after finance income, decreased 41% to £1.7m (2024: £2.9m).
Profit before tax
Adjusted profit before tax increased 39% to £21.2m (2024: £15.3m). PBT increased to £20.0m (2024 £0.2m).
Currency review
Exchange rates
Zotefoams transacts significantly in US dollars and euros. The exchange rates used to translate the key flows and balances were:
2025 | 2024 | ||||
|---|---|---|---|---|---|
Average | Closing | Average | Closing | ||
Euro/sterling | 1.173 | 1.146 | 1.177 | 1.210 | |
US dollar/sterling | 1.312 | 1.345 | 1.278 | 1.252 | |
Movements in foreign exchange rates can have a significant impact on Group results, and while the Group seeks to mitigate this risk, as outlined in more detail below, the impact was an increase in profits of £0.1m on a constant currency basis (2024: £1.0m reduction). During the year, the sterling average exchange rate year-on-year against the US dollar strengthened by 2.7% and the sterling average exchange rate against the euro weakened by 0.4%. The sterling spot rate against the US dollar from 31 December 2024 to 31 December 2025 strengthened by 7.4%, while the sterling spot rate against the euro weakened by 5.3% over the same period.
Zotefoams is a predominantly UK-based exporter which invoices in local currency, with the exception of Asia where all business is invoiced in US dollars. In 2025, approximately 91% of sales (2024: approximately 92%) were denominated in currencies other than sterling, mostly US dollars or euros. Operating costs at the Croydon, UK, site are incurred in sterling, and the main raw materials for polyolefin foams used for production in the UK are euro‑denominated. US subsidiary production and operating costs, most other subsidiaries’ staff and operating costs and some HPP raw materials are US dollar-denominated, while Poland operating costs are incurred in zloty. The Group uses forward exchange contracts to hedge up to 80% of its forecast net cash flows over the following twelve months that are subject to US dollar and euro transaction risk. The Group recorded a gain on forward exchange contracts in the year of £1.3m (2024: gain £1.0m).
Zotefoams also faces translation risk. Zotefoams plc, the parent company, holds the Group’s multi-currency borrowings facility and has provided intercompany loans and intercompany trading facilities to the USA and Poland to support Group expansion. This translation exposure is mitigated, where possible, through an offset with same‑currency liabilities, primarily through borrowing in the relevant currency. Every month, these foreign currency-denominated intercompany net positions, despite being cash neutral, are required to be translated by Zotefoams plc on a mark to market basis and the movement taken to the Company income statement. The Group also has a fast-growing footwear business, which is mostly invoiced from the UK in US dollars, which adds to its exposure to foreign currency-denominated net assets and is accounted for in the same way as above. While FX exposure is partly mitigated by the forward currency contracts, residual risk remains based on the amount of forecast exposure not hedged, in line with Group policy, and the fact that there is a timing difference between the recording of accounts receivable and cash received. This timing difference is managed by further hedging activities, but their effectiveness is subject to the accuracy of forecasting cash receipts.
Currency movements during the year negatively impacted Group revenue by £2.6m (2024: £4.0m negative impact). They positively impacted operating costs by £1.4m (2024: £2.2m positive impact), resulting in a net negative impact of £1.2m (2024: negative impact £1.8m) before hedging. After deducting the net hedging gain of £1.3m (2024: gain of £0.8m), the currency net positive impact on profit before tax for the year was £0.1m (2024: negative impact £1.0m).
We recognise that one of our principal risks is our exposure to foreign currency fluctuations, particularly the US dollar, which we will aim to manage through hedging strategies. Based on 2025 and with respect to transaction risk, it is estimated that for every one percentage point movement in the US dollar/sterling rate, profit moves by £0.0m hedged and £0.6m unhedged. Unhedged this consists of £1.0m relating to sales, offset by £0.4m relating to costs. In the year, the transaction risk from euro/sterling movements continues to be substantially naturally hedged, with the risk arising on sales revenues offset by the opportunity on costs, primarily related to raw material purchases and certain further processing costs.
The Group does not currently hedge for the translation of its foreign subsidiaries’ assets or liabilities. The foreign currency hedging policy is kept under regular review and is formally approved by the Board on an annual basis.
Profit before tax by region (£m)
Net change % | ||||||
|---|---|---|---|---|---|---|
2025 | 2025 | 2024 | Reported | Adjusted | ||
EMEA | 24.1 | 24.8 | 23.6 | 2.1 | 5.1 | |
North America | 3.5 | 4.0 | 1.8 | 94 | 122 | |
Asia | 0.2 | 0.3 | 1.4 | (86) | (79) | |
MEL before exceptional item | 0.2 | 0.2 | (5.0) | – | – | |
Subtotal before exceptional item | 28.0 | 29.3 | 21.8 | 28 | 34 | |
Exceptional items & amortisation of acquired intangibles | (1.2) | (1.2) | (15.2) | (92) | (92) | |
Subtotal after exceptional item | 26.8 | 28.1 | 6.6 | 306 | 326 | |
Central costs | (6.4) | (6.6) | (4.4) | 45 | 50 | |
Hedging | 1.3 | NA | 0.8 | 63 | (100) | |
Finance costs | (1.7) | (1.6) | (2.8) | (39) | (43) | |
Subtotal other | (6.8) | (8.2) | (6.4) | 6.3 | 28 | |
Adjusted Group Profit before tax | 21.2 | 21.1 | 15.3 | 39 | 38 | |
Group Profit before tax | 20.0 | 19.9 | 0.2 | – | – |
1 Constant currency, adjusting 2025 values to 2024 rates. See exchange rates table above.
Taxation charge and earnings per share
The tax credit for the year is £2.7m (2024: charge £2.9m). In the year, we have recognised two deferred tax assets, one relating to our Poland business and the other relating to our North America business. In Poland, our factory is situated in the special economic zone which enables cumulative profits of c.£6.7m up until 2034 to be treated on a tax-free basis, Our Poland plant has been profitable and this profitability is now anticipated to be sustainable into the future, given the refreshed strategy and ongoing utilisation of this facility, therefore it is now appropriate to recognise a £3.6m deferred tax asset in Poland.
The pausing of investment in MEL in 2024 means that we have profitable operations in the US going forwards. After considering the brought forward loss position in detail, management believes recognition of a deferred tax asset of £1.5m is appropriate, given the certainty that now exists following the complete wind down of the ReZorce business during the year.
The effective tax rate for the year was (13.4%) (2024: >100%). This reflects the tax credit recognised in 2025 in respect of the first-time recognition of deferred tax assets in Poland and the US. The effective tax rate using adjusted PBT and tax charge for the year is 12.3% (2024: 19.0%). The lower tax charge reflects the benefits of R&D and two years of patent box claims made in 2025, reducing the effective tax rate considerably on the UK business.
Adjusted basic earnings per share was 38.00p (2024: 25.95p), an increase of 46%. Adjusted diluted earnings per share was 36.77p (2024: 25.24p). Basic earnings per share was 46.37p, and diluted earnings per share was 44.87p.
Capital allocation
Disciplined capital allocation is a key driver of sustainable growth and long‑term financial returns, and is a principal focus area for the Board. Zotefoams prioritises achievable, sustainable profit growth by directing investment into the areas that support the development and long‑term strength of the business.
Capital expenditure in foam manufacturing
The autoclave‑based manufacturing processes operated in the UK, USA and Poland are capital‑intensive, with certain key equipment requiring long lead times. Investment decisions are therefore planned carefully and assessed against strategic fit, risk and risk appetite, sustainability considerations and expected returns. Confidence in the Group’s developing portfolio of HPP opportunities influences the timing of specific investments, while the strategic importance of sustaining growth in the profitable Polyolefin Foams business, the Group’s largest‑volume product range, supports decisions to expand total Group capacity rather than relying solely on mix enrichment.
The Group continues to invest in its manufacturing footprint in the UK, USA and Poland, and is now extending this investment to Vietnam to support the Footwear business segment. In parallel, ongoing investment in Innovation and R&D centres in the UK and Korea underpins future product development and long‑term growth. Supported by increased investment in innovation and partnerships, the Group aims to reduce capital intensity and lead times, enabling faster and more flexible deployment of capital. The first representation of this strategy is the expansion of our geographic reach into Asia and closer collaboration with Nike and its Tier 1 partners, with significant investment committed in 2025 to both the Korea and Vietnam operations, scheduled for completion in 2026/early 2027.
Beyond major capacity‑related projects, the Group also invests to maintain and enhance its existing assets, with a focus on minimising operational disruption, improving energy efficiency and further reducing health and safety risks. Annual and five‑year capital planning outcomes, along with progress against them, are reviewed by the Board, and individual projects above defined expenditure thresholds require specific Board approval in addition to the annual budget cycle.
Zotefoams targets improvements in the Group’s return on capital over the investment cycle, while recognising the short‑term impact of large capital projects during construction and early operation, when utilisation and mix optimisation may initially be lower. The transition to smaller modular production in Asia is expected to deliver improved returns and lower capital intensity compared with the Group’s traditional large‑scale extruders and autoclaves in the UK and USA.
Investment in sustainable innovation
Zotefoams is an innovator in advanced technical foams and pursues a strategy to continuously develop a portfolio of products that leverages its unique technology. As part of our refreshed strategy, we intend to adopt a hub and spoke model for innovation and will invest in an Innovation Centre of Excellence (the hub), and smaller Innovation Centres (spokes) that are focused on, and embedded within, specific markets. Investing more in dedicated teams, we will protect our intellectual property and build on 100+ years of supercritical fluid foam experience. We will expand our capability into foam and plastic fabrication to move along the value chain by providing solutions beyond a raw material to customers. We will evolve our current technology and invest in new technologies to reduce energy consumed in manufacture, while developing products that significantly reduce waste and emissions along the value chain, and will harness AI to reduce the number of iterative development cycles and time required.
During 2026, the Group will site its innovation centre in Croydon, to ensure that the greatest synergies are obtained with its manufacturing operation and to further enhance innovation, and will staff the location with qualified resource. It has also commissioned the first Innovation spoke in South Korea to support closer technical collaboration with key customers and partners, who are all based in the region.
Working capital
The Group continues to require investment in working capital to support high customer service levels and targeted margins. Customer payment terms reflect competitive market conditions, while inventory levels are driven by raw material values, supply‑chain length and the stock needed to meet service expectations. Growth beyond the capacity‑restricted UK site, together with the faster expansion of HPP relative to Polyolefin Foams, is increasing inventory requirements, given HPP’s longer supply chains, additional technical testing, more strategic customer relationships and higher raw material costs. Supplier terms remain consistent with those typically offered by large multinational polymer and energy companies. The Group progressed initiatives to optimise working capital through 2025, including improvements to supplier payment terms, with performance monitored monthly by the Board. The transition of manufacturing for the Footwear business segment from the UK to Vietnam in 2026–2027 will temporarily increase inventory to support the move and maintain customer service, after which shorter supply chains and reduced in‑transit inventory are expected to deliver a structural working‑capital benefit.
Non-organic growth
The Group’s refreshed strategy explicitly identifies acquisitions as a new lever to complement organic growth that will help us expand market access, acquire new capability and expertise, and diversify into adjacent markets. Our first acquisition of OKC is in line with this strategy and expands our geographic reach and adds complementary products to the Group, as well as diversifying the customer base with its long‑standing range of customers.
Return on capital employed
Zotefoams defines the return on capital employed (ROCE), which is a non-IFRS measure, as adjusted operating profit divided by the average sum of its equity, net debt and other non-current liabilities. This measure excludes acquired intangible assets and their amortisation costs. It also excludes significant capacity investments under construction until they enter production. We do not attempt to adjust for first phase inefficiencies.
In 2025, the Group’s ROCE increased to 13.9% (2024: 11.7%), mostly reflecting improved profitability in the year as the Group increased utilisation of its assets and improved the product mix. In line with the definition, we have removed capitalised costs to date in Vietnam and costs related to investment in our second low‑pressure vessel in the USA, which was commissioned in H2 2025 and will add to ROCE on a time‑apportioned basis.
Dividend
The Board has a progressive dividend policy, recognising the importance to our shareholders of the dividend as part of their overall return while ensuring sufficient capital and liquidity to pursue its growth ambition. Minimum earnings cover of 2 times is targeted. The Board regularly reviews this policy as the Group grows and capital expenditure demands a lower share of the cash generated.
The Directors are proposing a final dividend of 5.35p (2024: 5.10p), which would be payable on 3 June 2026 to shareholders on the Company register at the close of business on 1 May 2026. The ex-dividend date will be 30 April 2026. Taken with the interim dividend of 2.50p (2024: 2.38p), this would bring the total dividend for the year to 7.85p (2024: 7.48p) and would represent a dividend cover of 5.1 times based on an adjusted PAT number (2024: 3.4 times).
Cash flow
The Group is by its nature highly cash generative and this year, cash generated from operations has significantly increased by £9.3m (31%) to £39.7m (2024: £30.4m). Within this, there was a £7.4m net working capital inflow (2024: £2.5m). Trade and other receivables increased £1.6m (2024: decreased £1.5m), slightly lower than revenue growth thanks to strong collections and some large end-of-year receipts. Inventory decreased £4.5m (2024: decreased £1.9m), reflecting the reversal of a 2024 stock build to maximise use of available capacity at that time in anticipation of high levels of demand in 2025, together with focused management action to bring down inventory levels. Trade and other payables increased £4.5m (2024: decreased £0.8m), reflecting a concerted effort by our management and procurement teams to agree more favourable supplier payment terms and to pay in line with the agreed terms. Free cash flow before M&A was £23.1m (2024: £13.9m), which represents cash conversion of 101% (2024: 77%).
During the year, the Group paid interest on its borrowings of £1.6m (2024: £2.5m), reflecting both lower interest rates and lower average debt levels across much of the year. Net taxation paid during the year, net of refunds, amounted to £3.0m (2024: £2.9m), reflecting higher profits at the Company offset by expected savings from the patent box.
Zotefoams' property, plant and equipment capital expenditure amounted to £14.0m (2024: £10.3m, £9.1m excluding ReZorce). Capital deployment in the current year increased relative to the prior year, primarily driven by strategic investments to expand beyond the core business. This included the ramp-up of the second low-pressure autoclave in North America (46%) and expansion initiatives within the Footwear business in Asia (28%). Geographically, expenditure was predominantly concentrated in North America, which accounted for 60% (2024: 55%) of total spend, with Footwear Asia representing 34% (2024: 0%) due to the ongoing investment in Vietnam and Korea, and with EMEA accounting for the remaining 6% (2024: 22%) and MEL 0% (2024: 33%). While capital expenditure at established plants has been moderated, this reflects the fact that they are well invested. These sites continue to receive sufficient funding to preserve asset integrity, ensure operational reliability and maintain a safe working environment for operators.
Summary cash flow
2025 | 2024 | |
|---|---|---|
Profit before tax | 20.0 | 0.2 |
Depreciation and amortisation | 8.9 | 9.0 |
Exceptional non-cash costs of closure of business | 0.9 | 15.2 |
Other | 3.4 | 4.3 |
Net cash from operations before provisions and investment in working capital | 33.2 | 28.8 |
Receivables | (1.6) | 1.5 |
Inventory | 4.5 | 1.9 |
Payables | 4.5 | (0.8) |
Employee defined benefit contributions | (0.9) | (0.9) |
Cash generated from operations | 39.7 | 30.4 |
Net interest paid | (1.2) | (2.2) |
Taxation paid | (3.0) | (2.9) |
Investments in intangible assets | (0.3) | (3.3) |
Investments in tangible assets | (14.0) | (10.3) |
Acquisition of business, net of cash acquired | (23.4) | – |
Proceeds on disposal of fixed assets | 0.7 | – |
Net movement in borrowings | 11.3 | (1.6) |
Lease payments | (2.6) | (2.3) |
Dividends | (3.7) | (3.5) |
Movement in cash and cash equivalents | 3.5 | 4.3 |
The net effect of working capital movements was an inflow of £7.4m (2024: £2.5m). Lease payments increased to £2.6m (2024: £2.3m), with £1.8m of these payments related to the Shincell agreement (2024: £1.3m). Closing net debt (as defined under the bank facility definition) increased £7.4m (31%) to £31.5m (2024: £24.1m), while on an IFRS basis, closing net debt rose to £43.0m (2024: £33.0m) as a result of IFRS 16 leases, with the increase on last year arising from the OKC acquisition.
At the year end, the Group remains comfortably within its bank facility covenants, with a multiple of EBITDA to net finance charges of 23.1 (2024: 10.8), against a covenant minimum of 4 (2024: 4), and net debt to EBITDA (leverage) multiple of 0.8x (2024: 0.9x), against a covenant of 3.5x (2024: 3.5x).
Debt facility
The Group’s gross finance facilities with Handelsbanken, NatWest and HSBC were renewed in January 2026 and comprise a £90.0m multi-currency revolving credit facility, a £30.0m accordion with a renewal date of January 2029, and an interest rate ratchet. The facility has two covenants: a finance cost covenant with a multiple of 4.0x and a leverage covenant with a multiple of 3.5x.
At 31 December 2025, headroom, which we define as the combination of amount undrawn on the facility and cash and cash equivalents disclosed on the statement of financial position, amounted to £18.5m (2024: £25.7m).
Zotefoams defines EBITDA as profit for the year before tax, adjusted for depreciation and amortisation, net finance costs, the share of profit/loss from its joint venture, equity-settled share-based payments (IFRS 2) and exceptional costs.
Net debt comprises short- and long-term loans less cash and cash equivalents and is adjusted from IFRS by the impacts of IFRS 16 under the bank facility definition.
Group banking covenants definition
Net debt to EBITDA ratio (Leverage)
£m | 2025 | 2024 | £m | 2025 | 2024 | |
|---|---|---|---|---|---|---|
Profit after tax | 25.8 | (2.8) | Net debt per IFRS | 43.0 | 33.1 | |
Adjusted to: | IFRS 16 leases | (11.5) | (9.0) | |||
Depreciation and amortisation | 9.6 | 9.0 | ||||
Finance costs | 2.1 | 3.1 | Net debt per bank | 31.5 | 24.1 | |
Finance income | (0.4) | (0.2) | Leverage per bank | 0.8 | 0.9 | |
Share of result from joint venture | 0.0 | (0.1) | ||||
Equity-settled share-based payments | 1.7 | 1.1 | ||||
Exceptional costs of closure of business | 0.9 | 15.2 | ||||
Taxation | (1.9) | 2.9 | ||||
| EBITDA | 37.8 | 28.2 |
EBITDA to net finance charges ratio
£m | 2025 | 2024 | £m | 2025 | 2024 | |
|---|---|---|---|---|---|---|
EBITDA, as above | 37.8 | 28.2 | Finance costs | 1.9 | 2.7 | |
| Finance income | (0.2) | (0.1) | ||||
EBITDA to net finance charges | 23.1 | 10.8 | Net finance charges | 1.7 | 2.6 |
Post-employment benefits
The Company operates a UK-registered trust‑based Defined Benefit Pension Scheme (the “DB Scheme”).
The net IAS 19 deficit on the DB Scheme decreased by £1.6m to zero as at 31 December 2025 (31 December 2024: £1.6m). The present value of the defined benefit obligation at the year-end decreased by £1.2m from £24.7m in 2023 to £23.5m in 2024 which was offset by the actual investment return achieved on the assets, which increased by £0.3m, from £23.2m in 2024 to £23.5m in 2025. Mitigation of further risk is expected to come from the continued focus by the Trustees on a lower-risk strategy to lock in this improved funding position. Annual payments into the scheme will continue at £0.8m per annum.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report and the section "Risk management and principal risks”. These also describe the financial position of the Group, its cash flows and liquidity position. In addition, Note 22 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, its borrowing facilities and its exposure to credit risk and liquidity risk.
The Directors believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading performance and its available debt facilities, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the next twelve months following the date of approval of the Annual Report. The Directors have also continued to draw on the Group’s success in reacting to the challenges of COVID-19 through its safety protocols and cost and cash management, all of which could be replicated in a similar scenario.
After due consideration of the range and likelihood of potential outcomes, the Directors continue to adopt the going concern basis of accounting in preparing this Annual Report.
Financial risk management
The main financial risks of the Group relate to funding and liquidity, credit, interest rate fluctuations and currency exposures.
The management of these risks is documented in Note 22.
N Wright
Group CFO
10 April 2026