MIDAS SHARE TIPS: Want a winner? Try Zotefoams, the firm behind faster trainers that works with brands include Nike

Updated: 08:46 EDT, 18 March 2019

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Nike is the largest sportswear company in the world, generating revenues of more than £15billion a year from shoes and trainers alone.

The group prides itself on working with the best suppliers globally, especially when it comes to high-performance gear, worn by medal-winning athletes.

Zotefoams is one of those suppliers, a business based in Croydon, South London and the mastermind behind a set of unique foams that are exceptionally light, resilient and environmentally friendly.

Triumphant: : Zotefoams supplies shoe foam for GB athletics sponsor Nike

Zotefoams shares are £5.92 and should increase, as the company develops its partnership with Nike and expands into new areas. The company is relatively resilient to Brexit chaos too, as 85 per cent of sales are generated outside the UK.

Zotefoams can trace its roots back to 1921, when a British engineer pioneered a way of producing expandable rubber and set up Onazote.

The business has nurtured a reputation for innovation ever since. In recent years, that drive resulted in the creation of high-performance foams, which are very different from competitor products.

Most foam is made from polymers (long chains of molecules, such as plastics), nitrogen gas and a selection of chemicals. Zotefoams uses just advanced polymers and nitrogen, so there are no chemical residues and the foam itself is particularly effective.

In Nike trainers, it provides cushioning while barely adding to the shoes’ weight. Over the years, however, the group has acquired customers from a wide range of industries and organisations.

The Natural History Museum and British Museum use Zotefoams materials to store precious artefacts in their vaults.

Aeroplane manufacturers such as Airbus use the foam for air conditioning ducts, seating and as a sealant for windows, helping to reduce fuel usages because it is so lightweight.

The Natural History Museum (pictured) and British Museum use Zotefoams materials to store precious artefacts in their vaults

Carmakers, including Daimler Benz, BMW and Toyota, use the foam as a sealant as well, while biotech businesses and hospitals use the foam in clean rooms because it is does not absorb moisture, it does not burn and it inhibits bacterial growth.

Zotefoams’ technology is in demand and the group has customers in more than 50 countries, with manufacturing plants not just in Croydon but also in Kentucky.

Last year too, chief executive David Stirling raised £20million on the stock market to build a new site in Poland, expected to be up and running in 2020.

Further expansion is likely in America and Stirling is keen to increase sales in Asia, having already established a base in China, where revenues are growing fast.

Although most of Zotefoam’s business comes from materials manufactured in-house, Stirling also licenses technology to other firms, including consumer goods giant Unilever.

That company uses Zotefoam’s processes to reduce plastic consumption – Dove body wash dispensers for example are made with 17 per cent less plastic through the application of Stirling’s technology.

Other firms are catching on to this idea, including yogurt producers in Japan and dairy groups in South America.

Over time, Stirling hopes to attract more customers from the food industry, having recently developed a cost effective foam especially suited for this sector.

Zotefoams 2018 results are out on Tuesday and analysts expect revenues to increase by 14 per cent to £80million with profits up more than 17 per cent to £10.8million. The outlook is promising as well, with profits of £13.7million pencilled in for this year and £16.6million in 2020.

Stirling pays a dividend, forecast at 6.2p for 2018, but the group is focused on growth so surplus cash is largely ploughed back into the business to boost profits over the longer term.

Midas verdict: At £5.92, Zotefoams shares could be considered expensive relative to peers. However, the stock has come off from more than £7 at the end of last year, the business is growing fast and exemplifies British innovation and drive at its best. An attractive buy, particularly for long-term investors.