Zotefoams Interim Results: Profit Rises 34% as Growth Broadens Beyond Footwear

Zotefoams PLC has delivered a strong set of interim results, with revenue, profit and margins all moving firmly higher during the first half of 2026.

The high-performance foam specialist generated revenue of £95.2 million, up 23%, while adjusted operating profit rose 34% to £16.3 million. The interim dividend increased by 5.2% to 2.63p per share.

There is an important qualification, however. The recently acquired Overseas Konstellation Company, or OKC, contributed £14.8 million of revenue. Excluding acquisitions, organic growth was a more modest 4%, or 6% at constant currency. Constant currency strips out the effect of exchange-rate movements to show the underlying trading comparison.

These results therefore show a business becoming broader and more profitable, but also one entering a complicated manufacturing transition. The full original company announcement provides the detailed financial statements and risk disclosures.

Zotefoams' key first-half figures

Metric	HY 2026	HY 2025	Change
Revenue	£95.2 million	£77.4 million	23%
Gross margin	35.6%	34.6%	100 bps
Adjusted operating profit	£16.3 million	£12.2 million	34%
Adjusted operating margin	17.1%	15.8%	130 bps
Adjusted profit before tax	£15.3 million	£11.4 million	34%
Statutory profit before tax	£14.0 million	£11.4 million	23%
Basic earnings per share	23.60p	19.99p	Not disclosed
Covenant net debt	£39.1 million	£21.1 million	85%
Interim dividend	2.63p	2.50p	5.2%

A basis point, or bp, is one-hundredth of a percentage point. The 130 bps improvement in adjusted operating margin means it increased from 15.8% to 17.1%.

Profit growth ran ahead of revenue

The most encouraging feature is that adjusted operating profit grew faster than revenue. Gross margin improved by one percentage point to 35.6%, helped by OKC, price increases and temporary surcharges introduced to offset higher raw-material, freight and utility costs.

Adjusted operating margin reached 17.1%, despite wage inflation, investment in Asia and higher administrative costs. North America did much of the heavy lifting, with its regional operating margin rising from 8.3% to 17.6% as higher output and a more favourable product mix improved operational gearing.

Operational gearing describes how additional revenue can produce a proportionally larger increase in profit when the existing cost base is used more efficiently.

The difference between adjusted and statutory profit also deserves attention. Adjusted profit before tax rose 34% to £15.3 million, while statutory profit before tax increased 23% to £14.0 million after £1.3 million of adjusting items.

Growth is becoming more diversified

Zotefoams' regional performance was strong across the board.

• EMEA revenue increased 20% to £73.6 million, including OKC's £14.8 million contribution.
• North American revenue rose 29% to £18.7 million.
• Asian revenue more than doubled to £2.9 million.

The product mix is also changing. Transport & Smart Technologies revenue increased to £46.1 million from £26.2 million, with momentum in areas including aerospace and space. Construction & Other Industrial revenue rose to £17.9 million from £12.7 million.

That growth more than offset a sharp decline in Consumer & Lifestyle revenue, which fell to £31.2 million from £38.6 million. Footwear revenue alone dropped by around 23% to £28.5 million following exceptional demand in 2025.

OKC appears to be performing well, integrating ahead of plan and delivering early cross-selling wins. It is also earnings accretive, meaning the acquisition is adding to earnings. Even so, investors should separate acquired growth from the underlying business. Organic revenue growth of 4% gives a more restrained picture than the headline 23% increase.

The footwear transition is the main operational challenge

Zotefoams is moving high-volume footwear production from the UK to its new Vietnam facility, which remains on track for trial production from October 2026. It is also changing from supplying foam sheets to producing 3D preforms closer to customers.

This is intended to shorten supply chains and create a more cost-efficient manufacturing platform. Before those benefits arrive, however, the transition is expected to weigh on footwear revenue and profitability.

Management expects footwear volumes to remain lower during the second half of 2026 and into 2027. Sheet volumes will decline before preform production has fully ramped up, while operating across both the UK and Vietnam will bring start-up costs, learning-curve effects and temporary inefficiencies.

The company expects footwear to begin recovering from 2028. That makes successful commissioning and customer adoption in Vietnam central to the medium-term investment case.

Croydon restructuring could save £4 million annually

Zotefoams has proposed a restructuring of its Croydon operations, subject to collective consultation. More than 100 employees are expected to be affected, although no final decisions on individual roles have been made.

If implemented, the proposals could deliver annualised savings of approximately £4 million, with a payback period of less than one year. The Croydon site would be repositioned towards materials innovation and higher-value non-footwear applications, including industrial packaging, electric vehicles, defence and aerospace.

The financial benefits look meaningful, but the restructuring will create material one-off costs, principally in the second half of 2026. The total cost has not yet been disclosed and will be quantified after consultation.

Debt increased as cash was absorbed by investment

Cash generation was weaker than the profit figures might initially suggest. Cash generated from operations fell to £8.2 million from £15.8 million, largely because working capital absorbed £14.0 million.

Inventory and receivables increased to support the Vietnam transition and OKC's seasonal requirements. Capital expenditure was £7.2 million, while free cash flow was an outflow of £0.4 million compared with an inflow of £6.2 million a year earlier.

Covenant net debt rose to £39.1 million from £31.5 million at the end of 2025 and £21.1 million in June 2025. Leverage, which compares net debt with EBITDA, increased to 0.98 times.

That is still comfortably below the banking covenant maximum of 3.5 times. Zotefoams also has £50.2 million of liquidity headroom following the expansion of its revolving credit facility from £50 million to £90 million.

The balance sheet therefore appears to have room for the current investment programme, but converting profit into cash will be an important second-half test.

Outlook remains unchanged

Zotefoams has maintained its full-year expectations. Market expectations before the results were revenue of £190.8 million and adjusted profit before tax of £26.3 million.

The Board also remains confident in its FY2029 ambitions of revenue above £230 million and operating profit above £40 million.

Strong first-half trading provides a useful foundation, but the second half includes several moving parts: lower footwear volumes, the Vietnam ramp-up, restructuring costs and continued uncertainty around raw-material, freight and energy prices.

What investors should watch next

The results provide evidence that Zotefoams is reducing its dependence on footwear. North American profitability, Asian growth, OKC integration and momentum in Transport & Smart Technologies are all encouraging.

The less comfortable parts are rising debt, weaker free cash flow and the scale of the footwear transition. The headline growth rate also relies heavily on an acquisition rather than purely organic expansion.

The next milestones are clear: trial production in Vietnam, progress with 3D preforms, delivery of the proposed Croydon savings and an improvement in cash conversion. If those pieces come together, the group should enter 2028 with a broader and more efficient manufacturing base. Until then, execution matters just as much as the strong first-half numbers.