TIDMMGAM
RNS Number : 2808I
Morgan Advanced Materials PLC
04 August 2023
Half-year results for the period ended 30 June 2023
Encouraging progress; FY23 guidance unchanged
Organic
constant-
GBP million 1H 1H As reported currency(1)
unless otherwise stated 2023 2022 change change
Adjusted results
Revenue 553.9 530.2 4.5% 2.6%
Group adjusted operating profit(1) 50.0 72.5 (31.0)% (31.4)%
Group adjusted operating profit
margin (1) 9.0% 13.7% -470bps
Return on invested capital (1,2) 18.7% 21.9% -320bps
Adjusted EPS (1) 9.9p 15.9p (37.7)%
Free cash flow before acquisitions,
disposals and dividends (1) (37.1) (1.0) (36.1)
Net debt (incl. lease liabilities)(1) 257.7 128.5 100.5%
Statutory results
Revenue 553.9 530.2
Operating profit 34.5 70.2 (35.7)
Profit before taxation 28.4 65.7 (37.3)
Continuing EPS 5.2p 15.1p (9.9)p
Interim dividend per share 5.3p 5.3p -%
======================================= ======= ====== ============ =============
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to 20.
Throughout this report these non-GAAP measures are clearly
identified by an asterisk (*) where they appear in text and by a
footnote where they appear in tables.
2. The return on invested capital calculation has been
simplified so that it can be calculated from published information
and the prior period comparative has been restated. See details on
page 19.
Group highlights
-- Organic constant-currency* revenue growth of 2.6%, with 5.6% from our faster growing markets
-- Financial performance for the first half of the year reflects
short term impact of cyber incident in January, with subsequent
recovery well progressed in line with management expectations
-- Semiconductor expansion underway, further increasing exposure
to faster growing markets over time
-- Group adjusted operating profit* margin of 9.0%; pricing
measures continue to more than offset inflation
-- Cash generated from continued operations of GBP12.9 million;
temporary working capital outflow of GBP45.2 million to be
substantially recovered by year end
-- Strong balance sheet with net debt*/EBITDA (excl. leasing)* of 1.3 times
-- Interim dividend maintained at 5.3p
-- Absolute CO(2) e emissions (from scope 1 and 2) reduced by 19% compared with 1H 2022
-- Outlook for FY2023 adjusted operating profit* unchanged
Commenting on the results, Chief Executive Officer, Pete Raby
said:
"We have delivered revenue growth in the first half in line with
our expectations and continue to see the benefits of our leading
differentiated positions in attractive growth markets. As
previously announced, the cyber event we experienced at the start
of the year has impacted sales, profitability and cash in the short
term. Our recovery is well progressed and we have used this as an
opportunity to accelerate investment in our IT infrastructure
across the Group. I want to thank our employees for their hard work
during a challenging period of recovery.
Outlook
Customer demand remains robust. We continue to see inflation
across the business and have more than offset that through pricing
measures. Whilst mindful of market conditions, our outlook for
full-year revenue growth remains unchanged at 2-4%, with adjusted
operating profit recovering in the second half, in line with our
financial framework. Our targeted investment in capacity for our
faster growing segments continues at pace, providing us with a
solid foundation to continue to deliver in line with our strategy
as we go into 2024.
Our overall outlook remains unchanged (1) ."
1. Company-compiled summary of current analysts' forecasts for
adjusted operating profit at half year 2023 is a range of GBP120.5
million to GBP131.0 million.
.
Cyber impact
We experienced a cyber attack on our networks on 8 January 2023.
Our teams worked quickly to compartmentalise the network and shut
down our systems to limit the damage. During the first half our
recovery from this has progressed well. Our core ERP systems are
online and remaining applications are being steadily recovered. We
have accelerated our IT modernisation programme which includes
changes to our network design, the deployment of additional
security tooling, and acceleration of our Group ERP programme.
Our factories have operated throughout the disrupted first half.
Our teams have worked closely with our customers to manage their
deliveries and customer demand has remained robust during our
recovery. Output improved steadily through the first half, as we
expected.
Overall, we saw volume decline in the first quarter and volume
growth in the second quarter as our factories recovered, leading to
a net volume decline for the first half of around 5%. The volume
decline, and inefficiencies from the cyber incident led to an
operating profit impact of GBP23 million in the first half as we
expected. Our expectation for specific adjusting items related to
the incident for the year ending 31 December 2023 is unchanged at
around GBP15 million.
Our purpose
Our purpose is to use advanced materials to make the world more
sustainable and to improve the quality of life. This purpose guides
our actions: it underpins our work to reduce our environmental
impact, informs how we treat our people, and ensures we fulfil our
responsibility for good corporate governance.
We deliver on our purpose through the products that we make and
the way that we make them.
-- We improve the quality of life by supporting medical
diagnostics with our power tubes in medical scanners. Our
feedthroughs are at the core of cochlear implants and our seals are
used in blood pumps. These products transform people's lives.
-- Our products help keep people safe. We are proud to design
fire protection in everything from cars to buildings, and ships to
oil platforms.
-- We design and manufacture our products to help customers save
energy. Our thermal insulation enables high temperature industrial
processes and makes them more energy efficient. Our ceramic cores
enable more efficient engines. Our carbon insulation is integral to
efficient and effective semiconductor manufacturing.
-- We enable cleaner power generation. Our carbon brushes are
integral to wind turbines and power generators. Our ceramic rollers
are used to make thin-film solar panels, our insulation is used in
solar towers and steam turbines, and our ceramic cores are used to
make more efficient industrial gas turbines.
Our strategy
Our strategy builds on our strengths and focuses the Group on
scalable businesses in attractive markets, and on the development
of our three core capabilities in customer focus, application
engineering and materials science. To continue the development of
our core capabilities we have three execution priorities:
Big positive difference - making sure we govern our business the
right way, looking after the environment, looking after our people
and operating to high ethical standards. This priority supports our
focus on living and breathing our commitments on inclusion,
treating people fairly, reducing waste, managing our water
consumption, and reducing emissions.
Delight the customer - following on from our foundational work
on sales effectiveness, we are working to shape our product and
service offerings further based on customer needs, with the overall
objective of making our business more customer-centric. We are
gathering customer feedback during the year through a range of
channels and using that to understand our customer segments in more
detail. This will enable us to align our product, service and
support offerings more closely to customer needs.
Innovate to grow - many of our customers have an increasing need
to reduce their energy consumption and CO(2) e emissions, these
customers need our help. This priority supports our focus on
working with the customer to innovate in traditional heavy
industries whilst also contributing to greener technologies for the
future.
We want to accelerate our growth, by winning in our core markets
and increasing our exposure to four faster growing market segments:
clean energy, clean transportation, semiconductors and
healthcare.
We have been focusing our product development and business
development efforts in these four markets over the last several
years to develop new and differentiated products that solve complex
problems for our customers.
-- Clean energy - solutions for energy storage, brushes and slip
rings for onshore wind applications and ceramic and carbon products
used in solar panel manufacture.
-- Clean transportation - our rail collector business for metro
and main rail applications, water and vacuum pump components for
electric vehicle applications, fire protection solutions for
electric vehicles.
-- Semiconductors - we supply carbon and ceramic consumables for
key semiconductor process steps including crystal growth,
deposition, lithography and etch.
-- Healthcare - enabling medical imaging and supply of low
temperature insulation for medicine and vaccine transport and
storage.
Organic constant-currency* revenue growth in these segments was
5.6%, and they represented 21% of our revenue overall.
Our financial framework
During our Capital Markets Event in December 2022, we introduced
our financial framework:
-- Organic constant-currency* revenue growth of 3%-6% through the cycle
-- Adjusted operating profit margin* of 12.5%-15%
-- Return on invested capital* of 17%-20%
-- Leverage (net debt*/EBITDA excl. leasing*) of 1.0-2.0 times
Our framework drives enhanced earnings growth and underpins our
strategy. We expect to return to our target margin range in the
second half.
Our environment, social and governance (ESG) priorities
In March 2021, we set stretching targets to improve our
environmental, social and governance performance and become a more
sustainable business. We take these commitments seriously and have
plans in place to deliver against them in the coming years, making
a step change in our performance.
Whilst some progress has been made, we recognise that there is
more work to do, particularly around water sustainability, safety
and employee engagement.
Protect the environment
-- Our goal is to be a scope 1 and 2 CO(2) e net zero business
by 2050. Our 2030 target is to reduce our scope 1 and scope 2 CO(2)
e emissions by 50% (from a 2015 baseline).
-- Our aspiration is to use water sustainably across our
business. Our 2030 target is to reduce our overall water usage by
30% and reduce our water usage in high and extremely high stress
areas by 30% (from a 2015 baseline).
Provide a safe, fair and inclusive workplace
-- Our aspiration is to create an environment and culture with
zero harm to our employees. Our 2030 target is a lost-time accident
rate below 0.1 (lost-time accidents per 100,000 hours worked).
-- Our aspiration is that our employee demographics reflect the
communities that we operate in. Our 2030 target is for 40% female
representation across the leadership population of our
organisation.
-- Our aspiration is to be a welcoming and inclusive
organisation where our employees can grow and thrive. Our 2030
target is to attain a top quartile employee engagement score.
Our performance to date is as follows:
-- Scope 1 & 2 CO(2) e emissions. In the first half we have
reduced our CO(2) e emissions by 19% compared with 1H 2022 through
a combination of volume reduction in the first quarter, switching
to renewable or carbon free electricity and a range of energy
reduction projects across the Group.
-- Water usage in stressed areas. In the first half, overall
water usage decreased by 8.4% whilst high stress water usage
decreased by 14.2% compared with 1H 2022. We saw benefits from
capital projects to enable water harvesting and improve recycling
as well as benefit from the reduced volumes. We continue to review
our manufacturing processes to reduce the amount of water they
consume and to implement submetering capabilities to identify
further efficiencies.
-- Lost-time accident (LTA) rate. Our lost time accident rate in
the first half was 0.28, compared with 0.29 for 1H 2022. Following
completion of our Group-wide thinkSAFE programme last year, we
continue to focus on plant-level activities including start of
shift briefings, safety tours, near miss identification and
reporting and 5S (Sort, Straighten, Shine, Standardise and
Sustain). Safety is our top priority and continues to receive a
high level of focus throughout the organisation.
-- Diversity in our leadership population. At 30 June 2023, we
have 29% females in our leadership population, which is unchanged
from 29% as at 31 December 2022. Last year we established three
employee resource groups for women, veterans and the LGBTQ+
communities. Training for hiring managers continues and we are
standardising and modernising our parental leave policies, starting
in the UK.
-- We conducted an employee engagement survey in the fourth
quarter of 2022 which was designed to direct our attention to the
areas which are most important to our people. During the first
half, we have been communicating our improvement plans to our
employees as they are being developed. Progress has been slower
than desired due to the necessary focus on cyber recovery; in the
second half we will continue to seek feedback through employee
resource groups and meetings across all levels of the organisation
to ensure we meet expectations.
Our Group Environment, Health and Sustainability Director and
Group HR Director coordinate our improvement projects. In addition,
the Board reviews progress quarterly and takes an active role in
holding the executive team to account on improving ESG
performance.
Enquiries
Pete Raby Morgan Advanced Materials 01753 837 000
Richard Armitage Morgan Advanced Materials
Nina Coad Brunswick 0207 404 5959
Results presentation today
There will be an analyst and investor presentation at 09:30 (UK
time) today via web-conference.
A live audio webcast and slide presentation of this event will
be available on www.morganadvancedmaterials.com
We recommend that you register by 09:15 (UK time).
Basis of preparation
Non-GAAP measures
Throughout this report adjusted measures are used to describe
the Group's financial performance. These are not recognised under
IFRS or other generally accepted accounting principles (GAAP). The
Executive Committee and the Board manage and assess the performance
of the business on these measures and they are presented as the
Directors consider they provide useful information to shareholders,
including additional insight into ongoing trading and year-on-year
comparisons. These non-GAAP measures should be viewed as
complementary to, not replacements for, the comparable GAAP
measures.
Throughout this report these non-GAAP measures are clearly
identified by an asterisk (*) where they appear in text, and by a
footnote when they appear in tables. Definitions of these non-GAAP
measures can be found in the glossary of terms on page 43,
reconciliations of the statutory results to the adjusted measures
can be found on pages 16 to 20.
All periods presented in these condensed consolidated financial
statements are for continuing operations, with separate disclosure
of discontinued operations where appropriate.
Operating review
Revenue Adjusted Margin %(1)
operating profit(1)
==================== ======================= ====================
1H 2023 1H 2022 1H 2023 1H 2022 1H 2023 1H 2022
==============================
GBPm GBPm GBPm GBPm % %
============================== ========= ========= =========== ========== ======== ========
Thermal Ceramics 205.2 200.5 14.0 22.7 6.8% 11.3%
Molten Metal Systems 26.1 28.1 1.9 4.2 7.3% 14.9%
Electrical Carbon 95.5 91.3 16.4 18.9 17.2% 20.7%
Seals and Bearings 72.8 71.8 5.9 10.9 8.1% 15.2%
Technical Ceramics 154.3 138.5 14.8 18.8 9.6% 13.6%
============================== ========= ========= =========== ========== ======== ========
Segment total(2) 553.9 530.2 53.0 75.5 9.6% 14.2%
============================== ========= ========= =========== ========== ======== ========
Corporate costs (3.0) (3.0)
========================================= ========= =========== ========== ======== ========
Group adjusted operating profit
(1) 50.0 72.5 9.0% 13.7%
========================================= ========= =========== ========== ======== ========
Amortisation of intangible assets (2.1) (2.3)
==================================================== =========== ========== ======== ========
Operating profit before specific adjusting
items 47.9 70.2 8.6% 13.2%
Specific adjusting items included in operating (13.4) -
profit(2)
==================================================== =========== ========== ======== ========
Operating profit 34.5 70.2 6.2% 13.2%
Net financing costs (6.1) (4.5)
Profit before taxation 28.4 65.7
========================================= ========= =========== ========== ======== ========
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
2. Details of specific adjusting items can be found in note 3 to
the condensed consolidated financial statements.
Thermal Ceramics
Revenue for the Thermal Ceramics global business unit for the
six months ended 30 June 2023 was GBP205.2 million, representing an
increase of 2.3% compared with GBP200.5 million in 1H 2022. On an
organic constant-currency* basis, year-on-year revenue increased by
2.1%, with growth from petrochemical and industrial market
segments, partially offset by a decline in metals.
Operating profit for the six months ended 30 June 2023 was
GBP11.4 million (1H 2022: GBP21.8 million) with an operating profit
margin of 5.6% (1H 2022: 10.9%), with margin decline due to the
volume reduction in the first quarter and inefficiencies from the
cyber incident, whilst pricing measures continue to recover
inflation. Adjusted operating profit* was GBP14.0 million (1H 2022:
GBP22.7 million) with an adjusted operating profit margin* of 6.8%
(1H 2022: 11.3%).
Electrical Carbon
Revenue for the Electrical Carbon global business unit for the
six months ended 30 June 2023 was GBP95.5 million, representing an
increase of 4.6% compared with GBP91.3 million in 1H 2022. On an
organic constant-currency* basis, year-on-year revenue increased by
3.7%, with strong growth from semiconductors partially offset by
decline in industrial markets.
Operating profit for the six months ended 30 June 2023 was
GBP16.0 million (1H 2022: GBP18.6 million) with an operating profit
margin of 16.8% (1H 2022: 20.4%), with margin decline from a fall
in volumes and inefficiencies from the cyber incident, whilst
pricing measures continue to recover inflation. Adjusted operating
profit* was GBP16.4 million (1H 2022: GBP18.9 million) with an
adjusted operating profit margin* of 17.2% (1H 2022: 20.7%).
Molten Metal Systems
Revenue for the Molten Metal Systems global business unit for
the six months ended 30 June 2023 was GBP26.1 million, representing
a decrease of (7.1)% compared with GBP28.1 million in 1H 2022. On
an organic constant-currency* basis, year-on-year revenue decreased
by (8.4)% with driven by weakness in metals markets and the impact
of the cyber incident, partially offset by pricing.
Operating profit for the six months ended 30 June 2023 was
GBP1.8 million (1H 2022: GBP4.1 million) with an operating profit
margin of 6.9% (1H 2022: 14.6%), with the lower margin due to the
drop through of volume reduction and inefficiencies from the cyber
incident. Adjusted operating profit* was GBP1.9 million (1H 2022:
GBP4.2 million) with an adjusted operating profit margin* of 7.3%
(1H 2022: 14.9%).
Seals and Bearings
Revenue for the Seals and Bearings global business unit for the
six months ended 30 June 2023 was GBP72.8 million, representing an
increase of 1.4% compared with GBP71.8 million in 1H 2022, with the
ceramic armour sales declining slightly to GBP11.4 million in the
first half (1H 2022: GBP12.0 million). On an organic
constant-currency* basis year-on-year revenue decreased by (1.6)%,
with weakness in industrial markets and the impact of the cyber
incident, partially offset by pricing.
Operating profit for the six months ended 30 June 2023 was
GBP5.4 million (1H 2022: GBP10.5 million) with an operating profit
margin of 7.4% (1H 2022: 14.6%), with the lower margin driven by
the volume reduction and inefficiencies from the cyber incident.
Adjusted operating profit* was GBP5.9 million (1H 2022: GBP10.9
million) with an adjusted operating profit margin* of 8.1% (1H
2022: 15.2%).
Technical Ceramics
Revenue for the Technical Ceramics global business unit for the
six months ended 30 June 2023 was GBP154.3 million, an increase of
11.4% compared with GBP138.5 million in 1H 2022. On an organic
constant-currency* basis, year-on-year revenue increased by 7.1%,
with growth in our semiconductor industrial, defence and aerospace
market segments.
Operating profit for the six months ended 30 June 2023 was
GBP15.4 million (1H 2022: GBP18.2 million) with an operating profit
margin of 10.0% (1H 2022: 13.1%), with margin reduction from
inefficiencies resulting from the cyber incident. Adjusted
operating profit* was GBP14.8 million (1H 2022: GBP18.8 million)
with an adjusted operating profit margin* of 9.6% (1H 2022:
13.6%).
Group financial review
Group revenue for the six months ended 30 June 2023 was GBP553.9
million (1H 2022: GBP530.2 million), an increase of 4.5% on a
reported basis compared with 1H 2022. On an organic
constant-currency* basis revenue increased by 2.6%.
Group adjusted operating profit* for the six months ended 30
June 2023 was GBP50.0 million (1H 2022: GBP72.5 million). Adjusted
operating profit margin* was 9.0%, compared with 13.7% for 1H
2022.
Specific adjusting items before tax for the six months ended 30
June 2023 totalled GBP13.4 million. See Note 3 of the condensed
consolidated financial statements on page 32, for additional
information. For the full year ending 31 December 2023, we expect
to incur specific adjusting items of around GBP15 million in
relation to the cyber incident.
Operating profit for the six months ended 30 June 2023 was
GBP34.5 million (1H 2022: GBP70.2 million) and profit before
taxation was GBP28.4 million (1H 2022: GBP65.7 million), with
higher IT costs in the first half as a result of the cyber
incident.
The Group amortisation charge for the six months ended 30 June
2023 was GBP2.1 million (1H 2022: GBP2.3 million).
The net finance charge for the six months ended 30 June 2023 was
GBP6.1 million (1H 2022: GBP4.5 million) comprising net bank
interest and similar charges of GBP5.0 million (1H 2022: GBP2.7
million), net interest on IAS 19 pension obligations of GBPnil (1H
2022: GBP0.7 million), and interest expense on lease liabilities of
GBP1.1 million (1H 2022: GBP1.1 million).
Looking forward to the full year, we anticipate that the net
finance charge will be around GBP13-15 million, comprising net bank
interest and similar charges of GBP10-12 million; net interest on
IAS 19 pension obligations of GBP0.5 million; and interest expense
on lease liabilities of GBP2.3 million.
The Group taxation charge for the six months ended 30 June 2023,
excluding specific adjusting items, was GBP11.3 million (1H 2022:
GBP17.7 million), tax on specific adjusting items was a credit of
GBP2.2 million (1H 2022: GBPnil). The effective tax rate, excluding
specific adjusting items, was 27.0% (1H 2022: 27.0%). Note 5 to the
condensed consolidated financial statements provides additional
information on the Group's tax charge. Looking forward to the full
year, we anticipate an effective tax rate around 27.0%.
Adjusted earnings per share* for the six months ended 30 June
2023 was 9.9 pence (1H 2022: 15.9 pence) and basic profit per share
from continuing operations was 5.2 pence (1H 2022: 15.1 pence).
Details of these calculations can be found in note 7 to the
condensed consolidated financial statements.
The Group's balance sheet and liquidity remains robust. Net
debt* for the six months ended 30 June 2023 was GBP257.7 million,
with net debt* excluding lease liabilities of GBP208.5 million. The
Group has cash and cash equivalents of GBP137.5 million, with
GBP39.8 million of its GBP230.0 million revolving credit facility
drawn owing to short term intra group funding needs.
Our key financial covenants are measured on a pre-IFRS 16 Leases
basis. As at 30 June 2023, net debt* to EBITDA*, excluding the
impact of IFRS 16 Leases , was 1.3 times compared to a covenant not
to exceed 3.0 times, and our interest cover excluding the impact of
IFRS 16 Leases was 20.3 times, compared to a covenant to exceed 4.0
times.
Acquisitions, divestments and business exits
There were no acquisitions, divestments or business exits in the
six months to 30 June 2023 or the six months to 30 June 2022.
Specific adjusting items
In the consolidated income statement, the Group presents
specific adjusting items separately. In the judgement of the
Directors, as a result of the nature and value of these items they
should be disclosed separately from the underlying results of the
Group to allow the reader to obtain an alternative understanding of
the financial information and an indication of the underlying
performance of the Group.
Details of the specific adjusting items arising during the
comparative period are given in note 3 to the condensed
consolidated financial statements.
1H 2023 1H 2022
GBPm GBPm
============================================ ======= ===================
Specific adjusting items
Cyber incident recovery costs and
charges (12.0) -
Business closure and exit costs (1.8)
Restructuring credit 0.4 -
Total specific adjusting items before
income tax (13.4) -
Income tax credit from specific adjusting
items 2.2 -
============================================ ======= ===================
Total specific adjusting items after
income tax (11.2) -
============================================ ======= ===================
2023
Cyber incident recovery costs and charges
As disclosed in the 2022 Annual Report, the Group experienced a
cyber security incident in January 2023. GBP11.2 million was
incurred during the six months to June 2023 relating to system
recovery and specialist support costs and GBP0.8 million of leased
and owned IT assets which were impacted by the incident were
impaired.
Business closure and exit costs
In July 2023, the Board of our joint venture in Dalian, China
made the decision to liquidate the entity as the joint venture
agreement is due to expire in August 2023. A GBP1.8 million charge
associated with the liquidation costs has been recognised, mainly
in relation to severance costs, costs of dismantling equipment and
advisor fees.
Restructuring credit
The Group recognised a GBP0.4 million credit relating mainly to
the partial release of a provision following final settlement of
the US multi-employer pension plan for our Technical Ceramics,
Ceramics Cores site which was closed in 2021.
2022
There were no specific adjusting items in the six months to 30
June 2022.
The principal exchange rates used in the translation of the
results of overseas subsidiaries were as follows:
1H 2023 1H 2022
=========== ============================ ============================
GBP to: Closing rate Average rate Closing rate Average rate
US dollar 1.27 1.23 1.22 1.30
Euro 1.16 1.14 1.16 1.19
=========== ============= ============= ============= =============
For illustrative purposes, the table below provides details of
the impact on 1H 2023 revenue and adjusted operating profit* if the
actual reported results, calculated using 1H 2023 average exchange
rates were restated for GBP weakening by 10 cents against US dollar
in isolation and 10 cents against the Euro in isolation:
Increase in 2023 revenue/adjusted operating Revenue Adjusted operating
profit (1) if: profit (1)
GBPm GBPm
============================================= ======== ===================
GBP weakens by 10c against the US dollar
in isolation 20.6 1.5
GBP weakens by 10c against the Euro in
isolation 11.3 1.5
============================================= ======== ===================
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
Cash flow
1H 2023 1H 2022
GBPm GBPm
==================================================== ======= ========
Cash generated from continuing operations 12.9 45.2
Net capital expenditure (24.0) (22.5)
Net interest on cash and borrowings (4.5) (2.7)
Tax paid (15.8) (15.3)
Lease payments and interest (5.7) (5.7)
==================================================== ======= ========
Free cash flow before acquisitions, disposals and
dividends(1) (37.1) (1.0)
==================================================== ======= ========
Dividends paid to external plc shareholders (19.1) (16.5)
Net cash flows from other investing and financing
activities (2.4) (2.6)
Exchange movement and other non-cash movements (1.4) (9.5)
Opening net debt(1) excluding lease liabilities (148.5) (46.7)
==================================================== ======= ========
Closing net debt(1) excluding lease liabilities (208.5) (76.3)
==================================================== ======= ========
Closing lease liabilities (49.2) (52.2)
==================================================== ======= ========
Closing net debt(1) (257.7) (128.5)
==================================================== ======= ========
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
Cash generated from continuing operations for the six months
ended 30 June 2023 was GBP12.9 million (1H 2022: GBP45.2 million).
Working capital increased by GBP45.2 million as a result of an
increase in receivables of GBP34.3 million and other working
capital of GBP10.9 million. The increase in working capital
reflects temporary growth in receivables which arose as a result of
the cyber incident and an increase in safety stocks held to protect
against production delays. This will reverse by the year end.
Free cash flow before acquisitions, disposals and dividends* was
GBP(37.1) million (1H 2022: GBP(1.0) million).
Net debt* for the six months ended 30 June 2023 was GBP257.7
million (1H 2022: GBP128.5 million), representing a net debt* to
EBITDA* ratio of 1.5 times (1H 2022: 0.7 times).
Net debt* for the six months ended 30 June 2023 excluding lease
liabilities was GBP208.5 million (1H 2022: GBP76.3 million),
representing a net debt* to EBITDA* ratio excluding the impact of
IFRS 16 Leases of 1.3 times (1H 2022: 0.5 times).
Further information on the Group's net debt* is provided in note
10 to the condensed consolidated financial statements.
Defined benefit pension plans
The Group pension deficit for the six months ended 30 June 2023
has increased by GBP3.6 million since 31 December 2022 to GBP19.2
million on an IAS 19 (revised) basis, with UK discount rates
increasing as a result of an increase in corporate bond yields,
whilst the US, Eurozone and the Rest of World discount rates have
remained stable:
-- The UK schemes surplus decreased by GBP6.2 million to GBP19.0
million (FY 2022: surplus GBP25.2 million; 1H 2022: deficit GBP30.4
million), (discount rate 1H 2023: 5.26%; FY 2022: 4.81%; 1H 2022:
3.86%).
-- The US schemes deficit decreased by GBP2.3 million to GBP6.9
million (FY 2022: GBP9.2 million; 1H 2022: GBP8.2 million),
(discount rate 1H 2023: 4.93%; FY 2022: 4.99%; 1H 2022: 4.52%).
-- The European schemes deficit decreased by GBP0.6 million to
GBP27.3 million (FY 2022: GBP27.9 million; 1H 2022: GBP29.8
million), (discount rate 1H 2023: 3.70%; FY 2022: 3.70%; 1H 2022:
3.00%).
-- The Rest of World schemes deficit increased by GBP0.3 million
to GBP4.0 million (FY 2022: GBP3.7 million; 1H 2022: GBP5.1
million), (discount rate 1H 2023: 5.30%; FY 2022: 5.30%; 1H 2022:
2.90%).
Note 12 to the condensed consolidated financial statements
provides additional information on the Group's pension plans.
The most recent full actuarial valuations of the UK Schemes were
undertaken as at 31 March 2022 and resulted in combined assessed
deficits of GBP49.7 million on the 'Technical Provisions' basis.
The Company subsequently agreed with the Trustees to make a lump
sum contribution to the Schemes of GBP67.0 million on 29 December
2022 in lieu of the remaining contributions that would otherwise
have been due under the existing recovery plans from the 31 March
2019 valuations. The sum paid also represented the value of the
deficit on the more prudent 'Long Term Objective' basis. As a
result, no further contributions to the UK Schemes are expected to
be required pending the results of the next full valuations as at
31 March 2025.
Interim dividend
The Board has resolved to pay an interim dividend of 5.3 pence
per Ordinary share. The interim dividend will be paid on 17
November 2023 to Ordinary shareholders on the register of members
at the close of trading on 27 October 2023. The ex-dividend date
will be 26 October 2023. This compares to an interim dividend paid
in the fourth quarter of 2022 of 5.3 pence per Ordinary share.
Principal risks and uncertainties
The Group has an established risk management methodology, which
seeks to identify, prioritise and mitigate risks, underpinned by a
'three lines of defence' model comprising of an internal control
framework, internal monitoring and independent assurance processes.
The Board considers that risk management and internal control are
fundamental to achieving the Group aim of creating long-term
sustainable shareholder value.
The current principal risks, representing those risks that the
Board feels could have the most significant impact on achieving the
Group's strategy of building a sustainable business for the
long-term and delivering strong returns to the Group's
shareholders, are set out in the 2022 Annual Report and Accounts,
which are available on the Group's website at
www.morganadvancedmaterials.com
The following are the Group's principal risks and
uncertainties:
-- Technical leadership
The Group's strategic success depends on maintaining and
developing its technical leadership in materials science over its
competitors. Unforeseen or unmitigated technology obsolescence, the
emergence of competing technologies, the loss of control of
proprietary technology or the loss of intellectual property/
know-how or inability to recruit, retain and develop the right
people would negatively impact the Group's ability to achieve its
strategic goals.
-- Operational execution/organisational change
As part of the Group's strategy to improve the efficiency of its
operations and organisation, various changes have been made to
operational processes at individual sites and to the Group's
structure. Further improvements and changes are planned for future
years. Failure to manage these changes adequately could result in
interruption to operations or customer service, or a failure to
maximise the Group's opportunities.
-- Portfolio management
Failure to manage the Group's portfolio of businesses
proactively and in line with this technology profile could lead to
the value of the Group's businesses being eroded over time or to a
failure to exploit opportunities to acquire businesses with the
capability to add further value to the Group.
-- Macro-economic and political environment
The Group operates in a range of markets and geographies around
the world and could be affected by political, economic, social or
regulatory developments or instability, for example an economic
slowdown or issues stemming from oil and natural resource price
shocks.
-- Environment, health and safety
The Group operates a number of manufacturing facilities around
the world. A failure in the Group's EHS procedures could lead to
environmental damage or to injury or death of employees or third
parties, with a consequential impact on operations and increased
risk of regulatory or legal action being taken against the
Group.
-- Pandemic
The overall risk severity has been increased based on assessing
a potentially higher impact of a future pandemic. Communicable
disease impacts ways of working, the supply chain and the ability
of employees to travel to work in affected areas. The Company's
priority is to take all actions and precautions necessary to ensure
the safety and wellbeing of our employees.
-- Climate Change
Global climate change poses short-term and longer-term
challenges for our business. The expected changes are far-reaching
and difficult to reverse.
-- Product quality, safety and liability
Products used in applications for which they were not intended
or inadequate quality control/ over commitment on customer
specifications could result in products not meeting customer
requirements, which could in turn lead to significant liabilities
and reputational damage.
-- IT & cyber security
The global regulatory compliance landscape, including export
regulations, continues to mature and add complexity to how we
process, store and share internal and external data on a global
level within the Group, failure adds significant risk to the GBUs
and the Company. Key business system failure might impact the
ability of the business to deliver on its strategic goals.
Following the cyber incident experienced in January 2023, the
Group's security and monitoring programme has been expedited.
-- Supply chain and business continuity
The Group has a number of potential single-point exposure risks.
These include:
Single-point supplier: a significant interruption of internal or
external key supply could impact business continuity.
Single-point site: a key site exposed to a strike, a natural
catastrophe or a serious incident, such as fire, could impact
business continuity.
-- Treasury
The Group's global reach means that it is exposed to
uncertainties in the financial markets, the fiscal jurisdictions
where it operates, and the banking sector. These heighten the
Group's funding, foreign exchange, tax, interest rate, credit and
liquidity risks as well as the risk that a bank failure could
impact the Group's cash.
-- Pension funding
The Group sponsors several defined benefit pension arrangements,
whose liabilities are subject to fluctuating interest rates,
investment values and inflation. This coupled with the increased
longevity of members and a tougher regulatory funding regime can
result in increased funding burdens on the Group in the future.
-- Tax
The Group operates in many jurisdictions around the world and
could be affected by changes in tax laws and regulations within the
complex international tax environment.
-- Contract management
As a global advanced materials business supplying components
into critical applications, the Group may be exposed to liabilities
arising from the use of its products.
-- Compliance
A failure to comply with any applicable laws/regulations could
result in civil or criminal liabilities and/or individual or
corporate fines and could also result in debarment from
government-related contracts or rejection by financial market
counterparties and reputational damage.
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 2022 Annual Report and Accounts on pages 2 to
47. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities, are described earlier in this
Financial Review. In addition, note 11 to the condensed
consolidated financial statements for the six months ended 30 June
2023 provides details of the Group's policies and processes for
managing financial risk, details of its financial instruments and
hedging activities and details of its exposures to credit risk and
liquidity risk.
The Group meets its day-to-day working capital requirements
through local banking arrangements underpinned by the Group's
GBP230.0 million unsecured multi-currency revolving credit
facility, which matures in November 2027. As at 30 June 2023 the
Group had both significant available liquidity and headroom on its
covenants. Total committed borrowing facilities were GBP529.3
million, representing an increase of GBP111.0 million from 31
December 2022 following the issue of three US Private Placements
and a Schuldschein in H1 2023. The amount drawn under these
facilities was GBP339.1 million, which together with net cash and
cash equivalents of GBP130.3 million, gave total headroom of
GBP320.5 million. The multi-currency revolving credit facility was
GBP39.8 million drawn. Total committed borrowing facilities are
expected to decrease to GBP496.0 million by the end of the year due
to the maturity of GBP33.4 million of senior notes in October
2023.
The principal borrowing facilities are subject to covenants that
are measured semi-annually in June and December, being net debt* to
EBITDA*, excluding the impact of IFRS 16 Leases , of a maximum of 3
times and interest cover of a minimum of 4 times, based on measures
defined in the facilities agreements which are adjusted from the
equivalent IFRS amounts.
The Group has carefully modelled its cash flow outlook, taking
account of reasonably possible changes in trading performance,
exchange rates and plausible downside scenarios, including the
impact of cyber security incident on 2023 cashflows. This review
indicated that there was sufficient headroom and liquidity for the
business to continue for the 18-month period based on the
facilities available. The Group was also expected to be in
compliance with the required covenants discussed above.
The Board has also reviewed the Group's reverse stress testing
performed to demonstrate how much headroom is available on covenant
levels in respect of changes in net debt*, EBITDA*, and underlying
revenue*. Based on this assessment, a combined reduction in EBITDA*
of 37% and an increase in net debt* of 40% would still allow the
Group to operate within its financial covenants. The Directors do
not consider either of these scenarios to be plausible given the
diversity of the Group's end markets and its broad manufacturing
base.
The Board and Executive Committee have regular reporting and
review processes in place in order to closely monitor the ongoing
operational and financial performance of the Group. As part of the
ongoing risk management process, principal and emerging risks are
identified and reviewed on a regular basis. In addition, the
Directors have assessed the risk of climate change and do not
consider that it will impact the Group's ability to operate as a
going concern for the period under consideration.
The Board fully recognises the challenges that lie ahead but,
after making enquiries, and in the absence of any material
uncertainties, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for a period of 18 months from the date of
signing this half-yearly report. Accordingly, they continue to
adopt the going concern basis in preparing the condensed
consolidated financial statements for the six months ended 30 June
2023.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- The condensed consolidated financial statements have been
prepared in accordance with UK-adopted IAS 34 Interim Financial
Reporting;
-- The interim management report for the six-month period ended
30 June 2023 includes a fair review of the information required by
DTR 4.2.7R (indication of important events and their impact during
the first six months of the financial year and a description of the
principal risks and uncertainties for the remaining six months of
the year); and
-- The interim management report for the six-month period ended
30 June 2023 includes a fair review of the information required by
DTR 4.2.8R (disclosure of related parties' transactions and changes
therein).
Information about the current Directors of Morgan Advanced
Materials plc responsible for providing this Statement is
maintained on the Company's website at
www.morganadvancedmaterials.com
By order of the Board
Pete Raby
Chief Executive Officer
Richard Armitage
Chief Financial Officer
3 August 2023
Definitions and reconciliations of non-GAAP to GAAP measures
Reference is made to the following non-GAAP measures throughout
this document. These measures are shown because the Directors
consider they provide useful information to shareholders, including
additional insight into ongoing trading and year-on-year
comparisons. These non-GAAP measures should be viewed as
complementary to, not replacements for, the comparable GAAP
measures. As defined in the basis of preparation on page 6, these
measures are calculated on a continuing basis.
Adjusted operating profit
Adjusted operating profit is stated before specific adjusting
items and amortisation of intangible assets. Specific adjusting
items are excluded on the basis that they distort trading
performance. Amortisation is excluded as the charge arises
primarily on externally acquired intangible assets since the
adoption of IFRS and does not therefore reflect all intangible
assets consistently.
Thermal Molten Electrical Seals Technical Segment Corporate Group
Ceramics Metal Carbon and Bearings Ceramics total(1) costs(2)
Systems
1H 2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ========= ======== ========== ============= ========= ========= ========= =====
Operating profit 11.4 1.8 16.0 5.4 15.4 50.0 (15.5) 34.5
Add back: specific
adjusting items
included in operating
profit 1.8 - 0.1 0.1 (1.1) 0.9 12.5 13.4
Add back: amortisation
of intangible assets 0.8 0.1 0.3 0.4 0.5 2.1 - 2.1
========================= ========= ======== ========== ============= ========= ========= ========= =====
Group and segmental
adjusted operating
profit/(loss) 14.0 1.9 16.4 5.9 14.8 53.0 (3.0) 50.0
========================= ========= ======== ========== ============= ========= ========= ========= =====
1. Corporate costs consist of central head office costs.
Thermal Molten Electrical Seals Technical Segment Corporate Group
Ceramics Metal Carbon and Bearings Ceramics total(1) costs(2)
Systems
1H 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ========= ======== ========== ============= ========= ========= ========= =====
Operating profit 21.8 4.1 18.6 10.5 18.2 73.2 (3.0) 70.2
Add back: specific - - - - - - - -
adjusting items
included in operating
profit
Add back: amortisation
of intangible assets 0.9 0.1 0.3 0.4 0.6 2.3 - 2.3
========================= ========= ======== ========== ============= ========= ========= ========= =====
Group and segmental
adjusted operating
profit/(loss) 22.7 4.2 18.9 10.9 18.8 75.5 (3.0) 72.5
========================= ========= ======== ========== ============= ========= ========= ========= =====
1. Corporate costs consist of central head office costs.
Organic growth
Organic growth is the growth of the business excluding the
impacts of acquisitions, divestments and foreign currency impacts.
This measure is used as it allows revenue and adjusted operating
profit to be compared on a like-for-like basis.
Commentary on the underlying business performance is included as
part of the operating review on pages 6 to 11.
Year-on-year movements in segment revenue
Thermal Molten Electrical Seals and Technical Segment
Ceramics Metal Systems Carbon Bearings Ceramics total(1)
GBPm GBPm GBPm GBPm GBPm GBPm
========================== ========== =============== =========== ========== ========== ==========
1H 2022 200.5 28.1 91.3 71.8 138.5 530.2
========================== ========== =============== =========== ========== ========== ==========
Impact of foreign
currency movements 0.5 0.4 0.8 2.2 5.6 9.5
Impacts of acquisitions, - - - - - -
disposals and
business exits
Organic constant-currency
change 4.2 (2.4) 3.4 (1.2) 10.2 14.2
Organic constant-currency
change % 2.1% (8.4%) 3.7% (1.6%) 7.1% 2.6%
1H 2023 205.2 26.1 95.5 72.8 154.3 553.9
========================== ========== =============== =========== ========== ========== ==========
Year-on-year movements in segment and Group adjusted operating
profit
Thermal Molten Electrical Seals Technical Segment Corporate Group
Ceramics Metal Carbon and Ceramics total(1) costs(2)
Systems Bearings
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================== ========== ========= =========== ========== ========== ========== ========== ========
1H 2022 22.7 4.2 18.9 10.9 18.8 75.5 (3.0) 72.5
======================== ========== ========= =========== ========== ========== ========== ========== ========
Impact of foreign
currency movements (1.0) 0.1 0.1 0.3 0.9 0.4 - 0.4
Impact of acquisitions, - - - - - - - -
disposals and
business exits
Organic
constant-currency
change (7.7) (2.4) (2.6) (5.3) (4.9) (22.9) - (22.9)
Organic
constant-currency
change % (35.5%) (55.8%) (13.7%) (47.3%) (24.9%) (30.3%) - (31.4%)
1H 2023 14.0 1.9 16.4 5.9 14.8 53.0 (3.0) 50.0
======================== ========== ========= =========== ========== ========== ========== ========== ========
1. Corporate costs consist of the cost of the central head
office.
Group EBITDA
Group EBITDA is defined as operating profit before specific
adjusting items, depreciation and amortisation of intangible
assets. The Group uses this measure as it is a key metric in
covenants over debt facilities, these covenants use EBITDA on a
pre-IFRS 16 Leases basis. A reconciliation of operating profit to
Group EBITDA is as follows:
1H 2023 1H 2022
GBPm GBPm
============================================== ======== ========
Operating profit 34.5 70.2
Add back: specific adjusting items included 13.4 -
in operating profit
Add back: depreciation - property, plant
and equipment 15.7 14.4
Add back: depreciation - right-of-use assets 3.8 3.9
Add back: amortisation of intangible assets 2.1 2.3
============================================== ======== ========
Group EBITDA 69.5 90.8
============================================== ======== ========
Group EBITDA excluding IFRS 16 Leases impact 63.8 85.1
============================================== ======== ========
Free cash flow before acquisitions, disposals and dividends
Free cash flow before acquisitions, disposals and dividends is
defined as cash generated from continuing operations less net
capital expenditure, net interest (interest paid on borrowings,
overdrafts and lease liabilities, net of interest received), tax
paid and lease payments.
The Group discloses this measure of free cash flow as this
provides readers of the condensed consolidated financial statements
with a measure of the cash flows from the business before corporate
level cash flows (acquisitions, disposals and dividends).
A reconciliation of cash generated from continuing operations to
free cash flow before acquisitions, disposals and dividends is as
follows:
1H 2023 1H 2022
GBPm GBPm
=============================================== ======== ========
Cash generated from continuing operations 12.9 45.2
Net capital expenditure (24.0) (22.5)
Net interest on cash and borrowings (4.5) (2.7)
Tax paid (15.8) (15.3)
Lease payments and interest (5.7) (5.7)
=============================================== ======== ========
Free cash flow before acquisitions, disposals
and dividends (37.1) (1.0)
=============================================== ======== ========
Net cash and cash equivalents
Net cash and cash equivalents is defined as cash and cash
equivalents less bank overdrafts. The Group also discloses this
measure as it provides an indication of the net short-term
liquidity available to the Group.
1H 2023 1H 2022
GBPm GBPm
=============================== ======== ========
Cash and cash equivalents 137.5 121.6
Bank overdrafts (7.2) (1.1)
Net cash and cash equivalents 130.3 120.5
=============================== ======== ========
Net debt
Net debt is defined as borrowings, bank overdrafts and lease
liabilities, less cash and cash equivalents. The Group also
discloses this metric excluding lease liabilities as this is the
measure used in the covenants over the Group's debt facilities.
1H 2023 1H 2022
GBPm GBPm
=========================================== ======== ========
Cash and cash equivalents 137.5 121.6
Non-current borrowings (305.9) (187.1)
Non-current lease liabilities (38.0) (42.2)
Current borrowings and bank overdrafts (40.1) (10.8)
Current lease liabilities (11.2) (10.0)
=========================================== ======== ========
Closing net debt (257.7) (128.5)
=========================================== ======== ========
Closing net debt excluding IFRS 16 Leases
liabilities (208.5) (76.3)
=========================================== ======== ========
Return on invested capital
Return on invested capital (ROIC) is defined as Group adjusted
operating profit (operating profit excluding specific adjusting
items and amortisation of intangible assets) divided by the
year-on-year average adjusted net assets (excludes long-term
employee benefits, deferred tax assets and liabilities, current tax
receivable and payable, non-current other receivables, non-trade
payables, provisions, cash and cash equivalents, borrowings, bank
overdrafts, derivative financial assets and liabilities, and lease
liabilities).
1H 2023 1H 2022 (1)
GBPm GBPm
============================================= ======== ============
Operating profit before specific adjusting
items 124.0 132.2
Add back: amortisation of intangible assets 4.5 5.7
============================================= ======== ============
Group adjusted operating profit 128.5 137.9
============================================= ======== ============
Average adjusted net assets:
Third-party working capital 197.5 151.4
Property, Plant and equipment 271.7 259.5
Goodwill 179.3 176.4
Right-of-use assets 32.5 33.2
Intangible assets 6.8 10.5
Average adjusted net assets 687.8 631.0
============================================= ======== ============
ROIC 18.7% 21.9%
============================================= ======== ============
ROIC excluding IFRS 16 Leases impact 19.6% 23.1%
============================================= ======== ============
1. The return on invested capital calculation has been
simplified so that it can be calculated from published information;
the prior period comparative has also been restated. Under the
previous methodology (which used 12-month adjusted operating profit
and 12-month average adjusted net assets), ROIC as at 30 June 2023
was 18.1% (30 June 2022: 22.8%).
Adjusted earnings per share
Adjusted earnings per share is defined as operating profit
adjusted to exclude specific adjusting items and amortisation of
intangible assets, plus share of profit of associate less net
financing costs, income tax expense and non-controlling interests,
divided by the weighted average number of Ordinary shares during
the period. This measure of earnings is shown because the Directors
consider it provides an indication of adjusted performance which is
less impacted by adjusting items and therefore reflects the
underlying performance trends in the business.
A reconciliation from IFRS profit to the profit used to
calculate adjusted earnings per share is included in note 7 to the
condensed consolidated financial statements.
Constant-currency revenue and adjusted operating profit
Constant-currency revenue and adjusted operating profit are
derived by translating the prior year results at current year
average exchange rates. These measures are used as they allow
revenue to be compared excluding the impact of foreign exchange
rates. Page 10 provides further information on the principal
foreign currency exchange rates used in the translation of the
Group's results to constant-currency at average exchange rates.
Interim Results Announcement
Condensed Consolidated Financial Statements
for the six months ended 30 June 2023
Condensed consolidated income statement
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Results Specific Total Results Specific Total Results Specific Total
before adjusting before adjusting before adjusting
specific items specific items specific items
adjusting (1) adjusting (1) adjusting (1)
items items items
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
Revenue 2 553.9 - 553.9 530.2 - 530.2 1,112.1 - 1,112.1
Operating costs before
amortisation of intangible
assets (503.9) (13.4) (517.3) (457.7) - (457.7) (961.1) (5.5) (966.6)
Profit from operations
before amortisation
of intangible assets 2 50.0 (13.4) 36.6 72.5 - 72.5 151.0 (5.5) 145.5
Amortisation of intangible
assets (2.1) - (2.1) (2.3) - (2.3) (4.7) - (4.7)
Operating profit 2 47.9 (13.4) 34.5 70.2 - 70.2 146.3 (5.5) 140.8
Finance income 2.2 - 2.2 0.4 - 0.4 1.6 - 1.6
Finance expense (8.3) - (8.3) (4.9) - (4.9) (10.8) - (10.8)
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
Net financing costs 4 (6.1) - (6.1) (4.5) - (4.5) (9.2) - (9.2)
Profit before taxation 41.8 (13.4) 28.4 65.7 - 65.7 137.1 (5.5) 131.6
Income tax expense 5 (11.3) 2.2 (9.1) (17.7) - (17.7) (37.1) 1.1 (36.0)
Profit from continuing
operations 30.5 (11.2) 19.3 48.0 - 48.0 100.0 (4.4) 95.6
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
Profit from discontinued
operations 6 - - - - - - - 1.1 1.1
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
Profit for the period 30.5 (11.2) 19.3 48.0 - 48.0 100.0 (3.3) 96.7
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
Profit for the period
attributable to:
Shareholders of the
Company 26.0 (11.2) 14.8 42.9 - 42.9 91.3 (3.3) 88.0
Non-controlling interests 4.5 - 4.5 5.1 - 5.1 8.7 - 8.7
Profit for the period 30.5 (11.2) 19.3 48.0 - 48.0 100.0 (3.3) 96.7
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
Earnings per share 7
Continuing and discontinued
operations
Basic earnings per
share 5.2p 15.1p 31.0p
Diluted earnings per
share 5.2p 15.0p 30.7p
Continuing operations
Basic earnings per
share 5.2p 15.1p 30.6p
Diluted earnings per
share 5.2p 15.0p 30.3p
Dividends (2)
Proposed interim dividend
- pence 5.30p 5.30p 5.30p
-
GBPm 15.1 15.1 15.1
Final dividend - pence 6.70p
-
GBPm 19.1
=============================================== ==== ========= ========= ======= ========= ========= ======= ========= ========= =======
1. Details of specific adjusting items are given in note 3 to
the condensed consolidated financial statements.
2. The proposed interim and approved final dividends are based
upon the number of shares outstanding at the balance sheet
date.
Interim Results Announcement
Condensed Consolidated Financial Statements (continued)
for the six months ended 30 June 2023
Condensed consolidated statement of comprehensive income
At 30 June At 30 June At 31 December
2023 2022 2022
GBPm GBPm GBPm
================================================= ========== ========== ================
Profit for the period 19.3 48.0 96.7
================================================= ========== ========== ================
Other comprehensive income/(expense):
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement (loss)/gain on defined benefit
plans (5.0) 23.3 5.5
Tax effect of components of other comprehensive
income not reclassified (0.4) (3.1) (3.4)
================================================= ========== ========== ================
(5.4) 20.2 2.1
================================================= ========== ========== ================
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange translation differences (27.5) 21.6 17.5
Net investment hedges:
Change in fair value (0.3) - -
Cash flow hedges:
Change in fair value 0.5 (0.9) (0.2)
Transferred to profit or loss (0.1) - 0.1
================================================= ========== ========== ================
(27.4) 20.7 17.4
================================================= ========== ========== ================
Total other comprehensive income (32.8) 40.9 19.5
================================================= ========== ========== ================
Total comprehensive income (13.5) 88.9 116.2
================================================= ========== ========== ================
Attributable to:
Shareholders of the Company (14.3) 82.3 106.7
Non-controlling interests 0.8 6.6 9.5
================================================= ========== ========== ================
(13.5) 88.9 116.2
================================================= ========== ========== ================
Total comprehensive income attributable to
shareholders of the Company arising from:
Continuing operations (14.3) 82.3 105.6
Discontinued operations - - 1.1
================================================= ========== ========== ================
(14.3) 82.3 106.7
================================================= ========== ========== ================
Condensed consolidated balance sheet
At 30 June At 30 June At 31 December
2023 2022 2022
Note GBPm GBPm GBPm
========================================== ==== ========== ========== ====================
Assets
Property, plant and equipment 8 275.6 268.1 283.2
Right-of-use assets 31.7 33.2 33.6
Intangible assets: goodwill 9 177.3 181.2 181.9
Intangible assets: other 9 4.6 8.9 7.1
Other receivables 3.0 4.5 3.2
Deferred tax assets 14.5 14.9 15.3
Total non-current assets 506.7 510.8 524.3
========================================== ==== ========== ========== ====================
Inventories 181.4 169.0 174.2
Derivative financial assets 11 0.8 0.4 1.3
Trade and other receivables 227.7 195.2 202.5
Current tax receivable 0.5 0.6 0.3
Cash and cash equivalents 10 137.5 121.6 117.7
========================================== ==== ========== ========== ====================
Total current assets 547.9 486.8 496.0
========================================== ==== ========== ========== ====================
Total assets 1,054.6 997.6 1,020.3
========================================== ==== ========== ========== ====================
Liabilities
Borrowings 10 305.9 187.1 230.1
Lease liabilities 38.0 42.2 41.4
Employee benefits: pensions 12 19.2 73.5 15.6
Provisions 13 9.5 17.4 16.1
Non-trade payables 1.8 2.3 2.1
Deferred tax liabilities 2.8 1.1 2.0
========================================== ==== ========== ========== ====================
Total non-current liabilities 377.2 323.6 307.3
========================================== ==== ========== ========== ====================
Borrowings and bank overdrafts 10 40.1 10.8 36.1
Lease liabilities 11.2 10.0 10.5
Trade and other payables 192.2 186.2 195.0
Current tax payable 22.2 29.6 30.3
Provisions 13 13.7 13.0 9.9
Derivative financial liabilities 11 0.6 1.7 1.6
========================================== ==== ========== ========== ====================
Total current liabilities 280.0 251.3 283.4
========================================== ==== ========== ========== ====================
Total liabilities 657.2 574.9 590.7
========================================== ==== ========== ========== ====================
Total net assets 397.4 422.7 429.6
========================================== ==== ========== ========== ====================
Equity
Share capital 71.3 71.3 71.3
Share premium 111.7 111.7 111.7
Reserves 11.4 37.7 35.1
Retained earnings 163.2 157.9 170.9
========================================== ==== ========== ========== ====================
Total equity attributable to shareholders
of the Company 357.6 378.6 389.0
Non-controlling interests 39.8 44.1 40.6
========================================== ==== ========== ========== ====================
Total equity 397.4 422.7 429.6
========================================== ==== ========== ========== ====================
Condensed consolidated statement of changes in equity
Share Share Translation Hedging Fair Capital Other Retained Total Non-controlling Total
capital premium reserve reserve value redemption reserves earnings parent interests equity
reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
At 1 January 2022 71.3 111.7 (16.7) (0.1) (1.0) 35.7 0.6 109.1 310.6 39.0 349.6
Profit for the
period - - - - - - - 42.9 42.9 5.1 48.0
Other comprehensive
income/(expense):
Remeasurement
gain
on defined
benefit
plans and
related
taxes - - - - - - - 20.2 20.2 - 20.2
Foreign exchange
differences - - 20.1 - - - - - 20.1 1.5 21.6
Cash flow hedging
fair value
changes
and transfers - - - (0.9) - - - - (0.9) - (0.9)
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
Total
comprehensive
income/(expense) - - 20.1 (0.9) - - - 63.1 82.3 6.6 88.9
Transactions with
owners:
Dividends - - - - - - - (16.5) (16.5) (1.5) (18.0)
Equity-settled
share-based
payments - - - - - - - 3.0 3.0 - 3.0
Own shares
acquired
for share
incentive
schemes (net) - - - - - - - (0.8) (0.8) - (0.8)
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
At 30 June 2022 71.3 111.7 3.4 (1.0) (1.0) 35.7 0.6 157.9 378.6 44.1 422.7
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
At 1 January 2022 71.3 111.7 (16.7) (0.1) (1.0) 35.7 0.6 109.1 310.6 39.0 349.6
Profit for the
year - - - - - - - 88.0 88.0 8.7 96.7
Other comprehensive
income/(expense):
Remeasurement
gain
on defined
benefit
plans and
related
taxes - - - - - - - 2.1 2.1 - 2.1
Foreign exchange
differences - - 16.7 - - - - - 16.7 0.8 17.5
Cash flow hedging
fair value
changes
and transfers - - - (0.1) - - - - (0.1) - (0.1)
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
Total
comprehensive
income/(expense) - - 16.7 (0.1) - - - 90.1 106.7 9.5 116.2
Transactions with
owners:
Dividends - - - - - - - (31.6) (31.6) (7.9) (39.5)
Equity settled
share-based
payments - - - - - - - 5.7 5.7 - 5.7
Own shares
acquired
for share
incentive
schemes (net) - - - - - - - (2.4) (2.4) - (2.4)
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
At 31 December
2022 71.3 111.7 - (0.2) (1.0) 35.7 0.6 170.9 389.0 40.6 429.6
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
At 1 January 2023 71.3 111.7 - (0.2) (1.0) 35.7 0.6 170.9 389.0 40.6 429.6
Profit for the
period - - - - - - - 14.8 14.8 4.5 19.3
Other comprehensive
income/(expense):
Remeasurement
loss
on defined
benefit
plans and
related
taxes - - - - - - - (5.4) (5.4) - (5.4)
Foreign exchange
differences - - (23.8) - - - - - (23.8) (3.7) (27.5)
Net investment
hedging fair
value
changes and
transfers - - - (0.3) - - - - (0.3) - (0.3)
Cash flow hedging
fair value
changes
and transfers - - - 0.4 - - - - 0.4 - 0.4
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
Total
comprehensive
income/(expense) - - (23.8) 0.1 - - - 9.4 (14.3) 0.8 (13.5)
Transactions with
owners:
Dividends - - - - - - - (19.1) (19.1) (1.6) (20.7)
Equity-settled
share-based
payments - - - - - - - 2.6 2.6 - 2.6
Own shares
acquired
for share
incentive
schemes (net) - - - - - - - (0.6) (0.6) - (0.6)
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
At 30 June 2023 71.3 111.7 (23.8) (0.1) (1.0) 35.7 0.6 163.2 357.6 39.8 397.4
================= ======= ======= =========== ======= ======= ========== ======== ======== ====== =============== ======
Condensed consolidated statement of cash flows
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
Note GBPm GBPm GBPm
=========================================== ==== ============= ============= ============
Operating activities
Profit for the period from continuing
operations 19.3 48.0 95.6
Profit for the period from discontinued
operations 6 - - 1.1
Adjustments for:
Depreciation - property, plant and
equipment 2,8 15.7 14.4 30.3
Depreciation - right-of-use assets 2 3.8 3.9 7.8
Amortisation 2,9 2.1 2.3 4.7
Net financing costs 4 6.1 4.5 9.2
Profit on disposal of business 3,6 - - (0.4)
Non-cash specific adjusting items
included in operating profit 3,6 0.8 - 6.6
Profit on sale of property, plant
and equipment - (0.2) (0.3)
Income tax expense 5 9.1 17.7 36.0
Equity-settled share-based payment
expenses 2.6 2.3 5.1
=========================================== ==== ============= ============= ============
Cash generated from operations before
changes in working capital and provisions 59.5 92.9 195.7
=========================================== ==== ============= ============= ============
Increase in trade and other receivables (34.3) (23.4) (26.5)
Increase in inventories (17.2) (18.8) (25.2)
Increase in trade and other payables 6.3 3.5 7.0
Decrease in provisions (1.6) (0.7) (4.9)
Payments to defined benefit pension
plans (net of IAS 19 pension charges) 0.2 (8.3) (85.9)
=========================================== ==== ============= ============= ============
Cash generated from operations 12.9 45.2 60.2
=========================================== ==== ============= ============= ============
Interest paid - borrowings and overdrafts (6.7) (3.1) (7.0)
Interest paid - lease liabilities (1.1) (1.1) (2.4)
Income tax paid (15.8) (15.3) (31.8)
=========================================== ==== ============= ============= ============
Net cash from operating activities (10.7) 25.7 19.0
=========================================== ==== ============= ============= ============
Investing activities
Purchase of property, plant and equipment
and software (24.0) (22.9) (58.0)
Purchase of investments (0.2) (0.3) -
Proceeds from sale of property, plant
and equipment - 0.4 0.6
Interest received 2.2 0.4 1.6
Disposal of investments - - 0.4
Net cash from investing activities (22.0) (22.4) (55.4)
=========================================== ==== ============= ============= ============
Financing activities
Purchase of own shares for share incentive
schemes (0.7) (0.9) (2.9)
Net proceeds from exercise of share
options 0.1 0.1 0.5
Increase in borrowings 200.5 23.6 113.3
Reduction and repayment of borrowings (112.2) (13.9) (39.0)
Payment of lease liabilities (4.6) (4.6) (9.0)
Dividends paid to shareholders of
the Company (19.1) (16.5) (31.6)
Dividends paid to non-controlling
interests (1.6) (1.5) (7.9)
Net cash from financing activities 62.4 (13.7) 23.4
=========================================== ==== ============= ============= ============
Net increase/(decrease) in cash and
cash equivalents 29.7 (10.4) (13.0)
Cash and cash equivalents at start
of period 117.7 127.3 127.3
Effect of exchange rate fluctuations
on cash held (9.9) 4.7 3.4
=========================================== ==== ============= ============= ============
Cash and cash equivalents at period
end 10 137.5 121.6 117.7
=========================================== ==== ============= ============= ============
Notes to the condensed consolidated financial statements
Note 1. Basis of preparation, accounting policies and judgment
and estimates
Morgan Advanced Materials plc (the 'Company') is a company
incorporated in the UK under the Companies Act 2006.
The unaudited condensed consolidated financial statements of the
Company for the six months ended 30 June 2023 comprise the Company
and the Group's subsidiaries (together 'the Group').
The condensed consolidated financial statements for the six
months ended 30 June 2023 have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting
and International Financial Reporting Standards ('IFRSs') as
adopted by the UK. There has been no change to the recognition,
measurement or disclosure from preparation in previous periods
under IFRSs as adopted by the European Union. Selected explanatory
notes are included to explain events and transactions that are
significant to an understanding of the changes in financial
position and performance of the Group since the last annual
consolidated financial statements for the year ended 31 December
2022.
The condensed consolidated financial statements and the
comparative information for the six months ended 30 June 2023 have
neither been audited nor reviewed, do not comprise statutory
accounts for the purpose of section 434 of Companies Act 2006 and
should be read in conjunction with the Annual Report and Accounts
for the year ended 31 December 2022. Those accounts have been
reported on by the Group's auditor and delivered to the Registrar
of Companies. The report of the auditor was unqualified, did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying his report, and did
not contain a statement under section 498(2) or (3) of the
Companies Act 2006. The condensed consolidated financial statements
have been prepared on a going concern basis, see page 27 for
further details.
The consolidated financial statements of the Group for the year
ended 31 December 2022 are available on request from the Company's
registered office at York House, Sheet Street, Windsor, SL4 1DD or
at morganadvancedmaterials.com.
The condensed consolidated financial statements for the six
months ended 30 June 2023 were approved by the Board on 3 August
2023.
Accounting policies
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, these condensed consolidated financial
statements have been prepared by applying the accounting policies
that were applied in the preparation of the Group's published
consolidated financial statements for the year ended 31 December
2022, except for newly effective standards listed below.
Use of judgements and estimates
Preparing the condensed consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. The Group's critical
accounting judgments and key sources of estimation uncertainty
remain unchanged from those set out in the Group's consolidated
financial statements for the year ended 31 December 2022.
Adoption of new and revised accounting standards
During the period the following amendments to standards became
effective. The amendments did not have a material impact on the
Group:
-- Amendments to IFRS 17 - Insurance Contracts;
-- Amendments to IAS 1 - Classification of Liabilities as Current or Non-current;
-- Amendments to IFRS 4 - Extension of the Temporary Exemption from Applying IFRS 9;
-- Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies;
-- Amendments to IAS 12 - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction;
-- Amendments to IAS 8 - Definition of Accounting Estimates;
-- Amendments to IFRS 17 - Initial Application of IFRS 17 and
IFRS 19 - Comparative Information; and
-- Amendment to IAS 12 - International Tax Reform - Pillar Two Model Rules.
Accounting developments and changes
New standards and interpretations that are in issue but not yet
effective are listed below, none of which are anticipated to have a
material impact on the Group's financial statements:
-- Amendment to IFRS 16 - Covid-19-Related Rent Concessions beyond 30 June 2021;
-- Amendment to IFRS 16 - Lease Liability in a Sale and Leaseback;
-- Amendments to IAS 7 and IFRS 7 - Supplier Finance Arrangements; and
-- Amendments to IAS 1 - Non-current Liabilities with Covenants.
Non-GAAP measures
Where non-GAAP measures have been referenced, these have been
identified by an asterisk (*) where they appear in text and by a
footnote where they appear in a table. Definitions of these
non-GAAP measures, and their reconciliation to the relevant GAAP
measure, are provided on pages 16 to 20.
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 2022 Annual Report and Accounts on pages 2 to
47. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities, are described earlier in this
Financial Review. In addition, note 11 to the condensed
consolidated financial statements for the six months ended 30 June
2023 provides details of the Group's policies and processes for
managing financial risk, details of its financial instruments and
hedging activities and details of its exposures to credit risk and
liquidity risk.
The Group meets its day-to-day working capital requirements
through local banking arrangements underpinned by the Group's
GBP230.0 million unsecured multi-currency revolving credit
facility, which matures in November 2027. As at 30 June 2023 the
Group had both significant available liquidity and headroom on its
covenants. Total committed borrowing facilities were GBP529.3
million, representing an increase of GBP111.0 million from 31
December 2022 following the issue of three US Private Placements
and a Schuldschein in H1 2023. The amount drawn under these
facilities was GBP339.1 million, which together with net cash and
cash equivalents of GBP130.3 million, gave total headroom of
GBP320.5 million. The multi-currency revolving credit facility was
GBP39.8 million drawn. Total committed borrowing facilities are
expected to decrease to GBP496.0 million by the end of the year due
to the maturity of GBP33.4 million of senior notes in October
2023.
The principal borrowing facilities are subject to covenants that
are measured semi-annually in June and December, being net debt* to
EBITDA*, excluding the impact of IFRS 16 Leases, of a maximum of 3
times and interest cover of a minimum of 4 times, based on measures
defined in the facilities agreements which are adjusted from the
equivalent IFRS amounts.
The Group has carefully modelled its cash flow outlook, taking
account of reasonably possible changes in trading performance,
exchange rates and plausible downside scenarios, including the
impact of cyber security incident on 2023 cashflows. This review
indicated that there was sufficient headroom and liquidity for the
business to continue for the 18 month period based on the
facilities available. The Group was also expected to be in
compliance with the required covenants discussed above.
The Board has also reviewed the Group's reverse stress testing
performed to demonstrate how much headroom is available on covenant
levels in respect of changes in net debt*, EBITDA*, and underlying
revenue*. Based on this assessment, a combined reduction in EBITDA*
of 37% and an increase in net debt* of 40% would still allow the
Group to operate within its financial covenants. The Directors do
not consider either of these scenarios to be plausible given the
diversity of the Group's end markets and its broad manufacturing
base.
The Board and Executive Committee have regular reporting and
review processes in place in order to closely monitor the ongoing
operational and financial performance of the Group. As part of the
ongoing risk management process, principal and emerging risks are
identified and reviewed on a regular basis. In addition, the
Directors have assessed the risk of climate change and do not
consider that it will impact the Group's ability to operate as a
going concern for the period under consideration.
The Board fully recognises the challenges that lie ahead but,
after making enquiries, and in the absence of any material
uncertainties, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for a period of 18 months from the date of
signing this half-yearly report. Accordingly, they continue to
adopt the going concern basis in preparing the condensed
consolidated financial statements for the six months ended 30 June
2023.
Note 2. Segment reporting
The Group reports as five global business units, which have been
identified as the Group's reportable operating segments. These have
been identified on the basis of internal management reporting
information that is regularly reviewed by the Group's Board of
Directors (the Chief Operating Decision Maker) in order to allocate
resources and assess performance.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise mainly investments
and related income, borrowings and related expenses, corporate
assets and head office expenses, and income tax assets and
liabilities.
The information presented below represents the operating
segments of the Group.
Six months ended 30 June 2023
Thermal Molten Electrical Seals Technical Segment Corporate Group
Ceramics Metal Carbon and Ceramics totals costs
Systems Bearings
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================ ========= ======== ========== ========= ========= ======= ========= =======
Revenue from external customers 205.2 26.1 95.5 72.8 154.3 553.9 - 553.9
================================ ========= ======== ========== ========= ========= ======= ========= =======
Segment adjusted operating
profit(1) 14.0 1.9 16.4 5.9 14.8 53.0 - 53.0
================================ ========= ======== ========== ========= ========= ======= ========= =======
Corporate costs (3.0) (3.0)
================================ ========= ======== ========== ========= ========= ======= ========= =======
Group adjusted operating
profit(1) 50.0
Amortisation of intangible
assets (0.8) (0.1) (0.3) (0.4) (0.5) (2.1) - (2.1)
================================ ========= ======== ========== ========= ========= ======= ========= =======
Operating profit before specific
adjusting items 13.2 1.8 16.1 5.5 14.3 50.9 (3.0) 47.9
Specific adjusting items
included
in operating profit(2) (1.8) - (0.1) (0.1) 1.1 (0.9) (12.5) (13.4)
================================ ========= ======== ========== ========= ========= ======= ========= =======
Operating profit 11.4 1.8 16.0 5.4 15.4 50.0 (15.5) 34.5
================================ ========= ======== ========== ========= ========= ======= =========
Finance income 2.2
Finance expense (8.3)
Profit before taxation 28.4
=======
Segment assets 355.9 42.8 161.9 119.4 214.5 894.5 160.1 1,054.6
================================ ========= ======== ========== ========= ========= ======= ========= =======
Segment liabilities 92.0 7.9 32.1 23.2 78.2 233.4 423.8 657.2
================================ ========= ======== ========== ========= ========= ======= ========= =======
Segment capital expenditure 6.1 1.2 5.6 5.2 5.9 24.0 - 24.0
================================ ========= ======== ========== ========= ========= ======= ========= =======
Segment depreciation - property,
plant and equipment 5.8 1.0 2.9 3.0 3.0 15.7 - 15.7
================================ ========= ======== ========== ========= ========= ======= ========= =======
Segment depreciation -
right-of-use
assets 1.5 0.1 0.5 0.3 1.4 3.8 - 3.8
================================ ========= ======== ========== ========= ========= ======= ========= =======
Segment impairment of
non-financial
assets - - - - - - 0.8 0.8
================================ ========= ======== ========== ========= ========= ======= ========= =======
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
2. Details of specific adjusting items are given in note 3 to
the condensed consolidated financial statements.
Six months ended 30 June 2022
Thermal Molten Electrical Seals Technical Segment Corporate Group
Ceramics Metal Carbon and Bearings Ceramics totals costs
Systems
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================ ========= ======== ========== ============= ========= ======= ========= =====
Revenue from external customers 200.5 28.1 91.3 71.8 138.5 530.2 - 530.2
================================ ========= ======== ========== ============= ========= ======= ========= =====
Segment adjusted operating
profit(1) 22.7 4.2 18.9 10.9 18.8 75.5 - 75.5
================================ ========= ======== ========== ============= ========= ======= ========= =====
Corporate costs (3.0) (3.0)
================================ ========= ======== ========== ============= ========= ======= ========= =====
Group adjusted operating
profit(1) 72.5
Amortisation of intangible
assets (0.9) (0.1) (0.3) (0.4) (0.6) (2.3) - (2.3)
================================ ========= ======== ========== ============= ========= ======= ========= =====
Operating profit before specific
adjusting items 21.8 4.1 18.6 10.5 18.2 73.2 (3.0) 70.2
Specific adjusting items - - - - - - - -
included
in operating profit(2)
================================ ========= ======== ========== ============= ========= ======= ========= =====
Operating profit 21.8 4.1 18.6 10.5 18.2 73.2 (3.0) 70.2
================================ ========= ======== ========== ============= ========= ======= =========
Finance income 0.4
Finance expense (4.9)
Profit before taxation 65.7
=====
Segment assets 360.9 45.9 152.5 112.4 183.5 855.2 142.4 997.6
================================ ========= ======== ========== ============= ========= ======= ========= =====
Segment liabilities 98.9 8.7 31.9 22.6 80.8 242.9 332.0 574.9
================================ ========= ======== ========== ============= ========= ======= ========= =====
Segment capital expenditure 6.9 1.1 3.0 3.8 8.1 22.9 - 22.9
================================ ========= ======== ========== ============= ========= ======= ========= =====
Segment depreciation - property,
plant and equipment 5.2 1.0 2.5 3.0 2.7 14.4 - 14.4
================================ ========= ======== ========== ============= ========= ======= ========= =====
Segment depreciation -
right-of-use
assets 1.7 0.1 0.5 0.3 1.3 3.9 - 3.9
================================ ========= ======== ========== ============= ========= ======= ========= =====
Segment impairment of - - - - - - - -
non-financial
assets
================================ ========= ======== ========== ============= ========= ======= ========= =====
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
2. Details of specific adjusting items are given in note 3 to
the condensed consolidated financial statements.
Year ended 31 December 2022
Thermal Ceramics Molten Electrical Seals Technical Segment Corporate Group
Metal Carbon and Bearings Ceramics totals costs
Systems
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================= ================ ======== ========== ============= ========= ======= ========= =======
Revenue from external
customers 421.4 57.8 188.7 148.5 295.7 1,112.1 - 1,112.1
======================= ================ ======== ========== ============= ========= ======= ========= =======
Segment adjusted
operating
profit(1) 48.7 7.8 39.7 19.0 41.7 156.9 - 156.9
======================= ================ ======== ========== ============= ========= ======= ========= =======
Corporate costs (5.9) (5.9)
======================= ================ ======== ========== ============= ========= ======= ========= =======
Group adjusted
operating
profit(1) 151.0
Amortisation of
intangible
assets (1.6) (0.3) (0.7) (0.8) (1.3) (4.7) - (4.7)
======================= ================ ======== ========== ============= ========= ======= ========= =======
Operating profit before
specific adjusting
items 47.1 7.5 39.0 18.2 40.4 152.2 (5.9) 146.3
Specific adjusting
items
included in operating
profit(2) (2.8) - 0.1 (1.6) (1.2) (5.5) - (5.5)
======================= ================ ======== ========== ============= ========= ======= ========= =======
Operating profit 44.3 7.5 39.1 16.6 39.2 146.7 (5.9) 140.8
======================= ================ ======== ========== ============= ========= ======= =========
Finance income 1.6
Finance expense (10.8)
Profit before taxation 131.6
=======
Segment assets 361.2 44.0 159.5 115.8 199.8 880.3 140.0 1,020.3
======================= ================ ======== ========== ============= ========= ======= ========= =======
Segment liabilities 93.2 8.9 32.6 26.5 86.3 247.5 343.2 590.7
======================= ================ ======== ========== ============= ========= ======= ========= =======
Segment capital
expenditure 16.8 3.5 8.7 9.7 19.3 58.0 - 58.0
======================= ================ ======== ========== ============= ========= ======= ========= =======
Segment depreciation -
property, plant and
equipment 11.2 2.1 5.3 6.0 5.7 30.3 - 30.3
======================= ================ ======== ========== ============= ========= ======= ========= =======
Segment depreciation -
right-of-use assets 3.2 0.3 1.0 0.6 2.7 7.8 - 7.8
======================= ================ ======== ========== ============= ========= ======= ========= =======
Segment impairment of
non-financial
assets 3.2 - - 1.6 1.7 6.5 - 6.5
======================= ================ ======== ========== ============= ========= ======= ========= =======
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
2. Details of specific adjusting items are given in note 3 to
the condensed consolidated financial statements.
Revenue from external customers by geography
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
Continuing operations GBPm GBP m GBPm
================================================ ============= ============= ============
US 203.7 190.7 405.6
China 56.7 61.0 121.4
Germany 45.3 39.1 85.1
UK (the Group's country of domicile) 22.6 22.9 53.2
Other Asia, Australasia, Middle East and Africa 97.3 94.1 194.1
Other Europe 92.3 88.2 182.0
Other North America 21.4 18.2 39.1
South America 14.6 16.0 31.6
================================================ ============= ============= ============
553.9 530.2 1,112.1
================================================ ============= ============= ============
Revenue from external customers is based on geographic location
of the end-customer. No customer represents more than 5% of
revenue.
Revenue from external customers by end-market
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022(1) 2022
Continuing operations GBPm GBP m GBPm
====================================== ============= ================ ============
Semiconductors 51.6 43.2 91.3
Healthcare 39.1 36.8 74.7
Clean energy and clean transportation 24.4 26.4 51.7
====================================== ============= ================ ============
Faster growing markets 115.1 106.4 217.7
====================================== ============= ================ ============
Industrial 170.3 165.2 344.5
Conventional transportation 91.8 82.2 179.9
Metals 72.0 75.6 159.9
Petrochemical and chemical 57.2 56.2 112.6
Security and defence 32.4 29.6 65.2
Conventional energy 15.1 15.0 32.3
====================================== ============= ================ ============
Core markets 438.8 423.8 894.4
553.9 530.2 1,112.1
====================================== ============= ================ ============
1. Revenue from external customers by end market for the period
ended 30 June 2022 has been re-presented to better reflect the
end-markets of our customers.
Intercompany sales to other segments
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
Continuing operations GBPm GBP m GBPm
====================== ============= ============= ============
Thermal Ceramics 0.3 0.3 0.4
Molten Metal Systems - - 0.1
Electrical Carbon 0.1 0.1 0.5
Seals and Bearings 0.3 0.4 0.7
Technical Ceramics 0.1 0.6 1.0
====================== ============= ============= ============
0.8 1.4 2.7
====================== ============= ============= ============
Note 3. Specific adjusting items
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
Continuing operations GBPm GBPm GBPm
Specific adjusting items:
Cyber incident recovery costs and charges (12.0) - -
Business closure and exit costs (1.8) - -
Restructuring credit 0.4 - 0.6
Impairment of non-financial assets - - (6.5)
Net profit on disposal of businesses - - 0.4
Total specific adjusting items before income
tax (13.4) - (5.5)
Income tax credit from specific adjusting items 2.2 - 1.1
Total specific adjusting items after income
tax (11.2) - (4.4)
================================================ ============= ============= ============
There were no specific adjusting items in relation to
discontinued operations in the six months to 30 June 2023 and to 30
June 2022.
2023
Cyber incident recovery costs and charges
As disclosed in the 2022 Annual Report, the Group experienced a
cyber security incident in January 2023. GBP11.2 million was
incurred during the six months to June 2023 relating to system
recovery and specialist support costs and GBP0.8 million of leased
and owned IT assets which were impacted by the incident were
impaired.
Business closure and exit costs
In July 2023, the Board of our joint venture in Dalian, China
made the decision to liquidate the entity as the joint venture
agreement is due to expire in August 2023. A GBP1.8 million charge
associated with the liquidation costs has been recognised, mainly
in relation to severance costs, costs of dismantling equipment and
advisor fees.
Restructuring credit
The Group recognised a GBP0.4 million credit relating to the
partial release of a provision following final settlement of the US
multi-employer pension plan for our Technical Ceramics, Ceramics
Cores site which was closed in 2021.
2022
There were no specific adjusting items in the six months to 30
June 2022.
Note 4. Finance income and expense
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
Continuing operations GBPm GBPm GBPm
=============================================== ============= ============= ============
Interest on bank balances and cash deposits 2.2 0.4 1.6
=============================================== ============= ============= ============
Finance income 2.2 0.4 1.6
=============================================== ============= ============= ============
Interest expense on borrowings and overdrafts (7.2) (3.1) (7.0)
Interest expense on lease liabilities (1.1) (1.1) (2.4)
Net interest on IAS 19 defined benefit pension
obligations - (0.7) (1.4)
=============================================== ============= ============= ============
Finance expense (8.3) (4.9) (10.8)
=============================================== ============= ============= ============
Net financing costs recognised in profit or
loss (6.1) (4.5) (9.2)
=============================================== ============= ============= ============
No finance income or expense related to discontinued operations
in either the current or preceding periods.
Note 5. Taxation
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
Continuing operations GBPm GBPm GBPm
================================================ ============= ============= ============
Income tax charge on profit before specific
adjusting items (11.3) (17.7) (37.1)
Income tax credit from specific adjusting items 2.2 - 1.1
================================================ ============= ============= ============
Total income tax expense recognised in profit
or loss (9.1) (17.7) (36.0)
================================================ ============= ============= ============
The Group's consolidated effective tax rate, excluding specific
adjusting items, was 27.0% for the six months ended 30 June 2023
(30 June 2022: 27.0%; 31 December 2022: 27.0%) and is based on the
Directors' best estimate of the effective tax rate for the
year.
The Group operates in many jurisdictions around the world and is
subject to factors that may impact future tax charges including the
implementation of the OECD's BEPS actions, tax rate and legislation
changes, expiry of the statute of limitations and resolution of tax
audits and disputes.
Note 6. Discontinued operations
The results from discontinued operations, which represent the
Composites and Defence Systems business disposed in 2018, are set
out below:
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Results Specific Total Results Specific Total Results Specific Total
before adjusting before adjusting before adjusting
specific items specific items specific items
adjusting adjusting adjusting
items items items
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= =========== =========== ====== ========== ========== ===== ========== ========== =====
Revenue - - - - - - - 0.7 0.7
Operating income - - - - - - - 0.4 0.4
Profit before
taxation - - - - - - - 1.1 1.1
Income tax - - - - - - - - -
expense
Profit from
discontinued
operations - - - - - - - 1.1 1.1
================= =========== =========== ======= ========== ========== ===== ========== ========== =====
Basic profit per share from
discontinued operations - - 0.4p
Diluted profit per share
from discontinued operations - - 0.4p
=========================================== ===== ========== ========== ===== ========== ========== =====
In 2022, a gain of GBP1.1 million was recognised following the
receipt of cash from a long-term contract and disposal of an
investment in accordance with the terms of the disposal
agreement.
There was no income tax expense in relation to the discontinued
operations in either the current or preceding periods.
There were no cash flows from discontinued operations for the
six months ended 30 June 2023 or 30 June 2022. There were net cash
inflows from operating activities of GBP1.1 million during the year
ended 31 December 2022.
Note 7. Earnings per share
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Earnings Basic Diluted Earnings Basic Diluted Earnings Basic Diluted
earnings earnings earnings earnings earnings earnings
per per per share per share per share per share
share share
GBPm pence pence GBPm pence pence GBPm pence pence
================ ======== ========= ========= ======== ========= ========= ======== ========== ==========
Profit for the
period
attributable
to shareholders
of the Company 14.8 5.2p 5.2p 42.9 15.1p 15.0p 88.0 31.0p 30.7p
Profit from
discontinued
operations - - - - - - (1.1) (0.4)p (0.4)p
================ ======== ========= ========= ======== ========= ========= ======== ========== ==========
Profit from
continuing
operations 14.8 5.2p 5.2p 42.9 15.1p 15.0p 86.9 30.6p 30.3p
================ ======== ========= ========= ======== ========= ========= ======== ========== ==========
Specific
adjusting items 13.4 4.7p 4.7p - - - 5.5 1.9p 1.9p
Amortisation of
intangible
assets 2.1 0.8p 0.7p 2.3 0.8p 0.8p 4.7 1.7p 1.6p
Tax effect of
the above (2.2) (0.8)p (0.8)p - - - (1.1) (0.4)p (0.4)p
Non-controlling - - - - - - - - -
interests'
share of the
above
adjustments
================ ======== ========= ========= ======== ========= ========= ======== ========== ==========
Adjusted profit
for the period
from continuing
operations
as used in
adjusted
earnings
per share(1) 28.1 9.9p 9.8p 45.2 15.9p 15.8p 96.0 33.8p 33.5p
================ ======== ========= ========= ======== ========= ========= ======== ========== ==========
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
millions millions millions
================================================ ============= ============= ============
Number of shares
Weighted average number of Ordinary shares for
the purposes of basic earnings per share(1) 284.5 284.4 284.2
Effect of dilutive potential Ordinary shares:
Share options 1.8 1.8 2.6
================================================ ============= ============= ============
Weighted average number of Ordinary shares
for the purposes of diluted earnings per share 286.3 286.2 286.8
================================================ ============= ============= ============
1. The calculation of the weighted average number of shares
excludes the shares held by The Morgan General Employee Benefit
Trust, on which dividends are waived.
Note 8. Property, plant and equipment
Land and Plant, Total
buildings equipment
and fixtures
GBPm GBPm GBPm
======================================= ========== ============= ======
Cost
At 1 January 2023 219.2 770.2 989.4
Additions 1.7 19.7 21.4
Disposals - (1.1) (1.1)
Transfer between categories 0.4 (0.4) -
Effect of movement in foreign exchange (10.9) (34.6) (45.5)
======================================= ========== ============= ======
At 30 June 2023 210.4 753.8 964.2
======================================= ========== ============= ======
Depreciation and impairment losses
At 1 January 2023 117.7 588.5 706.2
Depreciation charge for the period 2.7 13.0 15.7
Disposals - (1.0) (1.0)
Effect of movement in foreign exchange (6.4) (25.9) (32.3)
======================================= ========== ============= ======
At 30 June 2023 114.0 574.6 688.6
======================================= ========== ============= ======
Carrying amounts
At 1 January 2023 101.5 181.7 283.2
======================================= ========== ============= ======
At 30 June 2023 96.4 179.2 275.6
======================================= ========== ============= ======
Note 9. Intangible assets
Acquisition intangibles
===============================
Goodwill Customer Other Capitalised Computer Total
relationships development software
costs
GBPm GBPm GBPm GBPm GBPm GBPm
=============================== ======== ============== ===== ============ ========= =====
Cost
At 1 January 2023 181.9 63.9 4.3 0.8 37.8 288.7
Additions - - - - 0.2 0.2
Disposals - - - - (0.7) (0.7)
Effect of movement in foreign
exchange (4.6) (2.9) 0.2 - (1.0) (8.3)
=============================== ======== ============== ===== ============ ========= =====
At 30 June 2023 177.3 61.0 4.5 0.8 36.3 279.9
=============================== ======== ============== ===== ============ ========= =====
Amortisation and impairment
losses
At 1 January 2023 - 63.1 3.8 0.8 32.0 99.7
Amortisation charge for
the period - 0.3 0.1 - 1.7 2.1
Impairment losses - - - - 0.4 0.4
Disposals - - - - (0.7) (0.7)
Effects of movement in foreign
exchange - (2.9) 0.3 - (0.9) (3.5)
=============================== ======== ============== ===== ============ ========= =====
At 30 June 2023 - 60.5 4.2 0.8 32.5 98.0
=============================== ======== ============== ===== ============ ========= =====
Carrying amounts
At 1 January 2023 181.9 0.8 0.5 - 5.8 189.0
=============================== ======== ============== ===== ============ ========= =====
At 30 June 2023 177.3 0.5 0.3 - 3.8 181.9
=============================== ======== ============== ===== ============ ========= =====
Note 10. Cash and cash equivalents reconciled to net debt*
At 30 June At 30 June At 31 December
2023 2022 2022
GBPm GBPm GBPm
Bank balances 123.9 114.6 105.8
Cash deposits 13.6 7.0 11.9
========================== ========== ========== ==============
Cash and cash equivalents 137.5 121.6 117.7
========================== ========== ========== ==============
Reconciliation of cash and cash equivalents to net debt*
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
GBPm GBPm GBPm
Opening borrowings and lease liabilities (318.1) (223.8) (223.8)
Increase in borrowings (200.5) (23.6) (113.3)
Reduction and repayment of borrowings 112.2 13.9 39.0
Payment of lease liabilities 4.6 4.6 9.0
=========================================== ============= ============= ============
Total changes from cash flows (83.7) (5.1) (65.3)
New leases and lease remeasurement (4.0) (3.0) (6.7)
Effect of movements in foreign exchange on
borrowings 10.6 (18.2) (22.3)
=========================================== ============= ============= ============
Closing borrowings and lease liabilities (395.2) (250.1) (318.1)
Cash and cash equivalents 137.5 121.6 117.7
=========================================== ============= ============= ============
Closing net debt(1) (257.7) (128.5) (200.4)
=========================================== ============= ============= ============
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes.
Borrowings Lease liabilities Total financing Cash and Movement
liabilities cash equivalents in
GBPm GBPm GBPm net debt
GBPm (1)
GBPm
=================================== =========== ================== ================ ================== ==========
At 1 January 2023 (266.2) (51.9) (318.1) 117.7 (200.4)
Cash inflow - - - 38.2 38.2
Borrowings and lease liability
cash flow (88.3) 4.6 (83.7) - (83.7)
Interest paid - - - (7.8) (7.8)
=================================== =========== ================== ================ ================== ==========
Net cash inflow/(outflow) (88.3) 4.6 (83.7) 30.4 (53.3)
=================================== =========== ================== ================ ================== ==========
Share purchases - - - (0.7) (0.7)
New leases and lease remeasurement - (4.0) (4.0) - (4.0)
Exchange and other movements 8.5 2.1 10.6 (9.9) 0.7
=================================== =========== ================== ================ ================== ==========
At 30 June 2023 (346.0) (49.2) (395.2) 137.5 (257.7)
=================================== =========== ================== ================ ================== ==========
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 43, reconciliations of the statutory
results to the adjusted measures can be found on pages 16 to
20.
Note 11. Financial risk management
Fair values
At 30 June 2023 At 30 June 2022 At 31 December 2022
=================
Fair value Fair value Fair value
================= ======== ======================= ======== ======================= ======== =======================
Carrying Level Level Total Carrying Level Level Total Carrying Level Level Total
amount 1 2 GBPm amount 1 2 GBPm amount 1 2 GBPm
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======== ===== ======= ======= ======== ===== ======= ======= ======== ===== ======= =======
Financial assets and liabilities held at
amortised cost
1.18% Euro Senior
Notes 2023 (21.5) - (21.2) (21.2) (21.6) - (21.3) (21.3) (22.1) - (21.6) (21.6)
3.17% US Dollar
Senior Notes
2023 (11.9) - (11.7) (11.7) (12.4) - (12.2) (12.2) (12.4) - (12.1) (12.1)
1.55% Euro Senior
Notes 2026 (21.5) - (19.5) (19.5) (21.6) - (20.7) (20.7) (22.2) - (20.1) (20.1)
3.37% US Dollar
Senior Notes
2026 (76.8) - (69.8) (69.8) (80.1) - (75.4) (75.4) (80.6) - (73.5) (73.5)
4.87% US Dollar
Senior Notes
2026 (20.1) - (19.2) (19.2) (20.9) - (20.8) (20.8) (21.1) - (20.2) (20.2)
1.74% Euro Senior
Notes 2028 (8.6) - (7.6) (7.6) (8.6) - (8.1) (8.1) (8.9) - (7.7) (7.7)
2.89% Euro Senior
Notes 2030 (21.5) - (18.7) (18.7) (21.5) - (20.2) (20.2) (22.1) - (19.0) (19.0)
5.47% US Dollar
Senior Notes
2031 (7.9) - (7.6) (7.6) - - - - - - - -
5.53% US Dollar
Senior Notes
2033 (7.9) - (7.6) (7.6) - - - - - - - -
5.61% US Dollar
Senior Notes
2035 (23.7) - (22.7) (22.7) - - - - - - - -
5.50% Cumulative
First Preference
shares (0.1) - (0.1) (0.1) (0.1) - (0.1) (0.1) (0.1) - (0.1) (0.1)
5.00% Cumulative
Second
Preference
shares (0.3) - (0.3) (0.3) (0.3) - (0.3) (0.3) (0.3) - (0.3) (0.3)
(221.8) - (206.0) (206.0) (187.1) - (179.1) (179.1) (189.8) - (174.6) (174.6)
================= ======== ===== ======= ======= ======== ===== ======= ======= ======== ===== ======= =======
Derivatives held at fair value
Derivative
financial
assets 0.8 - 0.8 0.8 0.4 - 0.4 0.4 1.3 - 1.3 1.3
Derivative
financial
liabilities (0.6) - (0.6) (0.6) (1.7) - (1.7) (1.7) (1.6) - (1.6) (1.6)
================= ======== ===== ======= ======= ======== ===== ======= ======= ======== ===== ======= =======
0.2 - 0.2 0.2 (1.3) - (1.3) (1.3) (0.3) - (0.3) (0.3)
================= ======== ===== ======= ======= ======== ===== ======= ======= ======== ===== ======= =======
(221.6) - (205.8) (205.8) (188.4) - (180.4) (180.4) (190.1) - (174.9) (174.9)
================= ======== ===== ======= ======= ======== ===== ======= ======= ======== ===== ======= =======
The table above analyses financial instruments carried at fair
value, by valuation method, together with the carrying amounts
shown in the balance sheet. The fair value of cash and cash
equivalents, current trade and other receivables/payables and
floating-rate bank and other borrowings are excluded from the
preceding table as their carrying amount approximates to their fair
value.
Fair value hierarchy
The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: not traded in an active market but the fair values are
based on quoted market prices or alternative pricing sources with
reasonable levels of price transparency. Fair value is calculated
using discounted cash flow methodology, future cash flows are
estimated based on forward exchange rates.
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
There were no transfers between Level 1 and Level 2 during the
six months to 30 June 2023 or 2022 and there were no Level 3
financial instruments in either the six months to 30 June 2023 or
2022.
The major methods and assumption used in estimating the fair
values of financial instruments reflected in the preceding table
are as follows:
Fixed-rate borrowings
Fair value is calculated based on discounted expected future
principal and interest cash flows. The interest rates used to
determine the fair value of borrowings are 4.3-7.1% (30 June 2022:
2.1-5.1%; 31 December 2022: 4.2-6.4%).
Equity securities
Fair value is based on quoted market prices at the balance sheet
date.
Derivatives
Forward exchange contracts are marked to market either using
listed market prices or by discounting the contractual forward
price and deducting the current spot rate.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is exposed to credit risk on
financial instruments such as liquid assets, derivative assets and
trade receivables.
The current economic climate gives rise to an increased credit
risk, primarily with respect to trade receivables.
The Group establishes an allowance for impairment that
represents its estimate of expected credit losses in respect of
trade receivables.
The loss allowance for trade receivables by ageing category is
as follows:
At 30 June 2023 At 30 June 2022 At 31 December 2022
Expected Gross Expected Net Expected Gross Expected Net trade Expected Gross Expected Net trade
credit trade credit trade credit trade credit receivables credit trade credit receivables
loss receivables losses receivables loss receivables losses loss receivables losses
rate rate rate
% GBPm GBPm GBPm % GBPm GBPm GBPm % GBPm GBPm GBPm
====== ======== =========== ======== =========== ======== =========== ======== =========== ======== =========== ======== ===========
Not
past
due 0.1% 152.1 (0.1) 152.0 0.1% 146.9 (0.1) 146.8 0.1% 144.7 (0.2) 144.5
Past
due
0-30
days 0.4% 25.7 (0.1) 25.6 0.5% 18.9 (0.1) 18.8 0.5% 21.5 (0.1) 21.4
Past
due
31-60
days 0.0% 7.2 - 7.2 0.0% 3.6 - 3.6 - 3.9 - 3.9
Past
due
61-90
days 2.2% 4.5 (0.1) 4.4 7.7% 1.3 (0.1) 1.2 61.9% 2.1 (1.3) 0.8
Past
due
more
than
90
days 77.4% 11.5 (8.9) 2.6 90.7% 10.7 (9.7) 1.0 100.0% 7.5 (7.5) -
====== ======== =========== ======== =========== ======== =========== ======== =========== ======== =========== ======== ===========
201.0 (9.2) 191.8 181.4 (10.0) 171.4 179.7 (9.1) 170.6
====== ======== =========== ======== =========== ======== =========== ======== =========== ======== =========== ======== ===========
Full details of the Group's policies and processes for managing
financial risk are described in note 21 of the Group's 2022 Annual
Report and Accounts.
Offsetting financial assets and liabilities
The following table shows the amounts recognised for forward
exchange contracts, which are subject to offsetting arrangements on
a gross basis, and the amounts offset in the balance sheet.
The Group also has cash pooling agreements which cannot be
offset under IFRS, but which could be settled net under the terms
of master netting agreements, are also presented in the table to
show the total net exposure of the Group.
Gross amounts Amounts Net amounts Financial Net amount
of recognised offset presented instruments
financial on the balance not offset
assets/ sheet in the balance
(liabilities) sheet
GBPm GBPm GBPm GBPm GBPm
================================== ============== ======= =============== =============== ==========
At 30 June 2023
Derivative financial assets 61.1 (60.3) 0.8 - 0.8
Derivative financial liabilities (60.9) 60.3 (0.6) - (0.6)
Cash and cash equivalents 137.5 - 137.5 (6.8) 130.7
Current bank and other borrowings (6.8) - (6.8) 6.8 -
At 30 June 2022
Derivative financial assets 75.2 (74.8) 0.4 - 0.4
Derivative financial liabilities (76.5) 74.8 (1.7) - (1.7)
Cash and cash equivalents 121.6 - 121.6 (1.1) 120.5
Current bank and other borrowings (10.8) - (10.8) 1.1 (9.7)
At 31 December 2022
Derivative financial assets 97.4 (96.1) 1.3 - 1.3
Derivative financial liabilities (97.7) 96.1 (1.6) - (1.6)
Cash and cash equivalents 117.7 - 117.7 (1.5) 116.2
Current bank and other borrowings (1.5) - (1.5) 1.5 -
================================== ============== ======= =============== =============== ==========
Note 12. Pensions and other post-retirement employee
benefits
Defined benefit obligations
Six months ended 30 June 2023
UK US Europe Rest of Total
GBPm GBPm GBPm World GBPm
GBPm
Summary of net obligations
Present value of unfunded defined
benefit obligations - (5.4) (26.6) (3.8) (35.8)
Present value of funded defined
benefit obligations (341.1) (109.0) (0.9) (7.8) (458.8)
Fair value of plan assets 360.1 107.5 0.2 7.6 475.4
====================================== ========= ======= ====== ======= =======
19.0 (6.9) (27.3) (4.0) (19.2)
====================================== ========= ======= ====== ======= =======
Movements in present value of defined
benefit obligation
At 1 January 2023 (359.5) (121.9) (28.3) (12.1) (521.8)
Current service cost -- (0.3) (1.0) (1.3)
Interest cost (8.3) (2.8) (0.5) (0.1) (11.7)
Actuarial gain/(loss):
Experience (loss)/gain on plan
obligations (1.2)- - 0.4 (0.8)
Changes in financial assumptions
- gain/(loss) 17.7 (0.1) -- 17.6
Benefits paid 10.2 4.6 0.7 0.5 16.0
Exchange adjustments - 5.8 0.9 0.7 7.4
====================================== ========= ======= ====== ======= =======
At 30 June 2023 (341.1) (114.4) (27.5) (11.6) (494.6)
====================================== ========= ======= ====== ======= =======
Movements in fair value of plan
assets
At 1 January 2023 384.7 112.7 0.4 8.4 506.2
Interest on plan assets 8.9 2.6 - 0.2 11.7
Remeasurement loss/(gain) (23.3) 1.8 0.1 (0.4) (21.8)
Contributions by employer - 0.3 0.7 0.6 1.6
Benefits paid (10.2) (4.6) (0.7) (0.5) (16.0)
Exchange adjustments - (5.3) (0.3) (0.7) (6.3)
====================================== ========= ======= ====== ======= =======
At 30 June 2023 360.1 107.5 0.2 7.6 475.4
====================================== ========= ======= ====== ======= =======
Actual return on assets (14.4) 4.4 0.1 (0.2) (10.1)
====================================== ========= ======= ====== ======= =======
Fair value of plan assets by category
Equities - 5.9 -- 5.9
Growth assets 48.9- -- 48.9
Bonds 24.9 98.3 -- 123.2
Liability-driven investments (LDI) 186.0- -- 186.0
Matching insurance policies 99.0 1.3 0.2 5.9 106.4
Other 1.3 2.0 - 1.7 5.0
====================================== ========= ======= ====== ======= =======
360.1 107.5 0.2 7.6 475.4
====================================== ========= ======= ====== ======= =======
Principal actuarial assumptions %% %%
at 30 June 2023 were:
Discount rate 5.26 4.93 3.70 5.30
Inflation (UK: RPI/CPI) 3.28/2.52 n/a 2.20 n/a
====================================== ========= ======= ====== =======
Six months ended 30 June 2022
UK US Europe Rest of Total
GBPm GBPm GBPm World GBPm
GBPm
Summary of net obligations
Present value of unfunded defined
benefit obligations - (7.1) (29.1) (4.3) (40.5)
Present value of funded defined
benefit obligations (404.7) (121.2) (1.1) (8.2) (535.2)
Fair value of plan assets 374.3 120.1 0.4 7.4 502.2
================================== ========= ======= ====== ======= =======
(30.4) (8.2) (29.8) (5.1) (73.5)
================================== ========= ======= ====== ======= =======
Principal actuarial assumptions %% %%
at 30 June 2022 were:
Discount rate 3.86 4.52 3.00 2.90
Inflation (UK: RPI/CPI) 3.23/2.44 n/a 2.00 n/a
================================== ========= ======= ====== =======
Year ended 31 December 2022
UK US Europe Rest of Total
GBPm GBPm GBPm World GBPm
GBPm
Summary of net obligations
Present value of unfunded defined
benefit obligations - (5.8) (26.7) (4.0) (36.5)
Present value of funded defined
benefit obligations (359.5) (116.1) (1.6) (8.1) (485.3)
Fair value of plan assets 384.7 112.7 0.4 8.4 506.2
================================== ========= ======= ====== ======= =======
25.2 (9.2) (27.9) (3.7) (15.6)
================================== ========= ======= ====== ======= =======
Principal actuarial assumptions %% %%
at 31 December 2022 were:
Discount rate 4.81 4.99 3.70 5.30
Inflation (UK: RPI/CPI) 3.26/2.47 n/a 2.20 n/a
================================== ========= ======= ====== =======
Note 13. Provisions and contingent liabilities
Closure and Legal and other Environmental Total
restructuring provisions provisions
provisions
GBPm GBPm GBPm GBPm
================================== ============== =============== ============= =====
At 1 January 2023 10.5 8.1 7.4 26.0
Provisions made during the period 2.8 0.6 - 3.4
Provisions used during the period (1.7) (0.9) (0.6) (3.2)
Provisions reversed during the
period (1.3) (0.6) - (1.9)
Effect of movements in foreign
exchange (0.6) (0.4) (0.1) (1.1)
================================== ============== =============== ============= =====
At 30 June 2023 9.7 6.8 6.7 23.2
================================== ============== =============== ============= =====
Current 7.3 2.9 3.5 13.7
Non-current 2.4 3.9 3.2 9.5
================================== ============== =============== ============= =====
At 30 June 2023 9.7 6.8 6.7 23.2
================================== ============== =============== ============= =====
Closure and restructuring provisions
Closure and restructuring provisions are based on the Group's
restructuring programmes and represent committed expenditure at the
balance sheet date. The amounts provided are based on the costs of
terminating relevant contracts, under the contract terms, and
management's best estimate of other associated restructuring costs
including professional fees.
We retain provisions for remaining lease exit costs and a
multi-employer pension plan from two US sites which were closed
during 2021. The cash outflows relating to the pension obligations
may continue for up to eighteen years, subject to any settlement
being reached in advance of that date. Cash outflows in relation to
the lease may continue for the next four years.
Legal and other provisions
Legal and other provisions mainly comprise amounts provided
against open legal and contractual disputes arising in the normal
course of business and long-service costs. Provisions are made for
the expected costs associated with such matters, based on past
experience of similar items and other known factors, taking into
account professional advice received, and represent management's
best estimate of the most likely outcome. The timing of utilisation
of these provisions is frequently uncertain, reflecting the
complexity of issues and the outcome of various court proceedings
and associated negotiations.
Legal and other contingent liabilities
Whilst we have completed our investigation into the cyber
incident which occurred in January, we are in the process of
informing impacted parties and consequently have a contingent
liability relating to potential enforcement action or civil claims
pending the completion of these discussions.
Environmental provisions
Environmental provisions are made for quantifiable environmental
liabilities arising from known environmental issues. The amounts
provided are based on the best estimate of the costs required to
remedy these issues. At one site, a remediation feasibility study
is currently being conducted in relation to a known environmental
issue and in conjunction with the local Environmental Regulator. A
remediation plan has been prepared. The provision recorded reflects
the estimated costs of remediation and awaits final regulatory
approval. The provision is expected to be utilised in the next five
years.
Environmental contingent liabilities
The Group is subject to local health, safety and environmental
laws and regulations concerning its manufacturing operations around
the world. These laws and regulations may require the Group to take
future action to remediate the impact of historical manufacturing
processes on the environment or lead to other economic outflows.
Such contingencies may exist for various sites which the Group
currently operates or has operated in the past. There is a
contingent liability arising from additional, as yet unknown,
environmental issues at the site referred to above, pending the
completion of the feasibility study.
Tax contingent liabilities
The Group is subject to periodic tax audits by various fiscal
authorities covering corporate, employee and sales taxes in the
various jurisdictions in which it operates. We have provided for
estimates of the Group's likely exposures where these can be
reliably estimated.
Note 14. Related parties
Identification of related parties
The Company has related party relationships with its
subsidiaries and with its Directors and executive officers.
Transactions with key management personnel
Details of transactions with key management personnel are
described in note 26 of the Group's 2022 Annual Report and
Accounts.
Transactions with related parties
There were no related party transactions during the period that
have materially affected the financial position or the performance
of the Group during the period. There have been no changes in the
nature of related party transactions as described in note 26 to the
Group's 2022 Annual Report and Accounts which could have a material
effect on the financial position or performance of the Group during
the period.
Note 15. Subsequent events
There were no reportable events subsequent to the balance sheet
date.
Glossary
Constant-currency(1) Constant-currency revenue and Group adjusted operating
profit are derived by translating the prior year
results at current year average exchange rates.
====================== =========================================================
Corporate costs Corporate costs consist of the costs of the central
head office.
====================== =========================================================
Free cash flow Cash generated from continuing operations less net
before acquisitions, capital expenditure, net interest paid, tax paid
disposals and and lease payments.
dividends(1)
====================== =========================================================
Group earnings EBITDA is defined as operating profit before specific
before interest, adjusting items, amortisation of intangible assets
tax, depreciation and depreciation.
and amortisation
(EBITDA)(1)
====================== =========================================================
Group adjusted Operating profit adjusted to exclude specific adjusting
operating profit(1) items and amortisation of intangible assets.
====================== =========================================================
Group adjusted The ratio of Group adjusted operating profit to
operating profit revenue.
margin(1)
====================== =========================================================
Group organic(1) The Group results excluding acquisition, disposal
and business exit impacts at constant-currency.
====================== =========================================================
Adjusted earnings Adjusted earnings per share is defined as operating
per share (EPS)(1) profit adjusted to exclude specific adjusting items
and amortisation of intangible assets, plus share
of profit of associate less net financing costs,
income tax and non-controlling interests, divided
by the weighted average number of Ordinary shares
during the period.
====================== =========================================================
Net debt(1) Borrowings, bank overdrafts and lease liabilities
less cash and cash equivalents.
====================== =========================================================
Net cash and Net cash and cash equivalents is defined as cash
cash and cash equivalents less bank overdrafts.
equivalents(1)
====================== =========================================================
Return on invested Group adjusted operating profit (operating profit
capital (ROIC)(1) excluding specific adjusting items and amortisation
of intangible assets) divided by the year-on-year
average adjusted net assets (excludes long-term
employee benefits, deferred tax assets and liabilities,
current tax receivable and payable, non-current
other receivables, non-trade payables, provisions,
cash and cash equivalents, borrowings, bank overdrafts,
derivative financial assets and liabilities, and
lease liabilities).
====================== =========================================================
Specific adjusting See note 3 to the condensed consolidated financial
items statements for further details.
====================== =========================================================
Underlying Reference to underlying reflects the trading results
of the Group without the impact of specific adjusting
items and amortisation of intangible assets that
would otherwise impact the users' understanding
of the Group's performance. The Directors believe
that adjusted results provide additional useful
information on the core operational performance
of the Group and review the results of the Group
on an adjusted basis internally.
====================== =========================================================
1. See definitions and reconciliations of non-GAAP measures to
GAAP measures on pages 16 to 20.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR KZGGRVFDGFZM
(END) Dow Jones Newswires
August 04, 2023 02:00 ET (06:00 GMT)
Morgan Advanced Materials (LSE:MGAM)
Graphique Historique de l'Action
De Nov 2024 à Déc 2024
Morgan Advanced Materials (LSE:MGAM)
Graphique Historique de l'Action
De Déc 2023 à Déc 2024
