Source: Sharecast
Canaccord noted that Zotefoam's full-year figures contained an improved year-end cash flow performance, which resulted in net debt dropping from £37m to £32m, and a net debt-to-underlying ratio of 1.0x. Return on capital, at 13.9%, was also said to be "particularly striking", up from an "already-robust" 11.7% in FY24.
The Canadian bank also acknowledged that trading for FY26 had "started with good momentum", particularly demand in its transport and smart technologies unit, improved order books across multiple markets, and overall "more balanced activity" following moderation in footwear volumes after two record years. OKC, Zotefoams' first material acquisition, was also said to be "trading well", with integration progressing as planned.
Canaccord also highlighted that Zotefoam's capital-light expansion in Vietnam was progressing on track, with management confident in its progress towards the FY29 goals of revenue above £230m, operating profits above £40m, and return on capital employed above 20%.
"We are making minor updates to forecasts to reflect the better cash flow; 2025 includes some complex non-cash adjustments to the tax charge resulting in a substantial beat on EPS (37.1p adjusted diluted vs. CGe 32.4p) which do not materially affect our 2026E & beyond forecasts," said Canaccord.
"There is also a small upgrade to DPS following the final dividend proposal of 5.35p, bringing overall 2025 DPS +5% y/y. With the stock back to trading below 10x P/E, we reiterate our existing 'buy' and raise target to 675p (was 640p)."
Reporting by Iain Gilbert at Sharecast.com