For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240806:nRSF2676Za&default-theme=true
RNS Number : 2676Z Morgan Advanced Materials PLC 06 August 2024
Half-year results for the period ended 30 June 2024
£ million 1H 1H As reported Organic
unless otherwise stated 2024 2023 change constant- currency(1) change
Adjusted results 572.6 553.9 3.4% 8.2%
Revenue
Group adjusted operating profit(1) 71.3 50.0 42.6% 59.5%
Group adjusted operating profit margin(1) 12.5% 9.0% 350bps
Return on invested capital(1) 19.7% 18.7% 100bps
Adjusted EPS(1) 14.7p 9.9p 48.5%
Free cash flow before acquisitions, disposals and dividends(1) (7.9) (37.1) 78.7%
Net debt (incl. lease liabilities)(1) 270.5 257.7 5.0%
Statutory results
Revenue 572.6 553.9
Operating profit 66.8 34.5 32.3
Profit before taxation 57.5 28.4 29.1
Continuing EPS 13.2p 5.2p 8.0p
Cash generated from continuing operations 66.1 12.9 53.2
Interim dividend per share 5.4p 5.3p 0.1p
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.
Group highlights
· Organic constant-currency* revenue growth of 8.2%, with 14.9% from our faster
growing markets
· Group adjusted operating profit margin* of 12.5%, in line with our financial
framework. Pricing measures continue to more than offset inflation
· Adjusted EPS* at 14.7p has grown +48.5% versus 1H 2023
· Capital investment programme progressing well
· Return on invested capital* 19.7% for 1H, at the higher end of our financial
framework range
· Strong balance sheet with net debt*/EBITDA (excl. leasing)* of 1.3 times
· Interim dividend increased 0.1p to 5.4p per share
· Absolute scope 1 and 2 emissions CO(2)e reduced by 11.6% compared with 1H 2023
· 2H revenue in line with 1H; margin to remain at around 12.5%
Commenting on the results, Chief Executive Officer, Pete Raby said:
"We are continuing to implement our strategy successfully. Whilst our
constant currency revenue growth benefitted from the weaker, cyber impacted,
prior year comparator, we have seen underlying revenue growth in both our Core
and Faster Growing markets. Our investment in Semiconductor capacity, where
we continue to see strong demand and have attractive growth opportunities,
along with our simplification programme, are both on-track. Our balance
sheet remains strong. I want to thank all our employees for their commitment
and support."
Outlook
We are cautious on demand in a number of our end-markets and now expect
revenue in our second half to be in line with that in our first half.
Nevertheless, we are well-positioned with our market leading differentiated
positions and expect constant-currency* full-year revenue growth to continue
to be towards the top end of our financial framework at 4-7%. We have made
good progress with our simplification programme and expect our full-year
margin outlook to remain at around 12.5%.
Business Simplification
As announced with our 2023 financial results we are now managing the Company
through three distinct segments, as detailed below, in order to streamline our
management structures and optimise plant operations:
Thermal Products: comprising the Thermal Ceramics and MMS segments, focused on
growth opportunities in which heat resistance, fire protection and insulation
are principal product attributes.
Performance Carbon: comprising the Electrical Carbon and part of the Seals and
Bearings segments, with a clear strategy to pursue opportunities for
carbon-based components in Semiconductor, Rail, Aerospace, Power Generation
and other markets.
Technical Ceramics: comprising the Technical Ceramics and part of the former
Seals and Bearings segments, focused on development of our advanced ceramic
applications in Semiconductor, Healthcare, Aerospace and Industrial equipment.
This change forms part of a broader restructuring plan that is expected to
deliver £10 million of annualised savings by 2025, with an expected
implementation cost of around £20 million, of which £18 million are cash
costs expected to be incurred during the programme.
FY 2023 FY 2024 FY 2025 Total
£m £m £m £m
Adjusted operating profit(*) benefits (incremental) 1 7 10 -
Costs charged to specific adjusting items (7) (11) (2) (20)
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 tunnels, and ships to oil platforms.
· We design and manufacture our products to help customers save energy.
· Our carbon brushes are integral to wind turbines and power generators and
enable electrified rail transport.
· 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. These are all products which
promote a more sustainable and environmentally secure future for our planet.
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, and improve the
execution of our strategy, 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.
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 market segments over the last several years to develop new and
differentiated products that solve complex problems for our customers.
· Clean energy and clean transportation - solutions for energy storage, brushes
and slip rings for onshore wind applications and ceramic and carbon products
used in solar panel manufacture. 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 for the six months
to 30 June 2024 was 14.9%. These segments represented 22.4% of our revenue
overall.
Our financial framework
As previously announced, our financial framework is:
· Organic constant currency* revenue growth of 4%-7% 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 1.01.5 times without M&A,
1.0-2.0 times with M&A
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.
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). For the full year 2023 we reduced our scope 1 and scope 2
emissions by 54% versus the 2015 baseline. In the first half we have reduced
our CO(2)e emissions by 11.6% compared with 1H 2023 through a combination of
switching to renewable or carbon free electricity and a range of energy
reduction projects across the Group.
· Our goal 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). In the first
half, overall water usage decreased by 8.1% whilst high stress water usage
decreased by 4.4% compared with 1H 2023.
Provide a safe, fair and inclusive workplace
· Our goal 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 lost time accident rate in the first
half was 0.13, compared with 0.28 for 1H 2023. Safety is our top priority and
continues to receive a high level of focus throughout the organisation.
· Our goal 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. At 30 June 2024, we have 34%
females in our leadership population, compared with 30% at the end of 2023.
· Our goal 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. We survey our employees annually and we will provide an
updated engagement score with our preliminary results in 2025.
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 10:00 (UK time) today
via web-conference.
A live audio webcast and slide presentation of this event will be available on
www.morganadvancedmaterials.com (http://www.morganadvancedmaterials.com)
We recommend that you register by 09:45 (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 2024 1H 2023 1H 2024 1H 2023 1H 2024 1H 2023
£m £m £m £m % %
Thermal Products 221.5 231.4 24.2 15.8 10.9% 6.8%
Performance Carbon 178.9 157.4 31.3 19.6 17.5% 12.5%
Technical Ceramics 172.2 165.1 18.8 17.6 10.9% 10.7%
Segment total(2) 572.6 553.9 74.3 53.0 13.0% 9.6%
Corporate costs (3.0) (3.0)
Group adjusted operating profit(1) 71.3 50.0 12.5% 9.0%
Amortisation of intangible assets (1.1) (2.1)
Operating profit before specific adjusting items 70.2 47.9 12.3% 8.6%
Specific adjusting items included in operating profit(2) (3.4) (13.4)
Operating profit 66.8 34.5 11.7% 6.2%
Net financing costs (9.3) (6.1)
Profit before taxation 57.5 28.4
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.
2. Details of specific adjusting items can be found in note 3 to the condensed
consolidated financial statements.
Thermal Products
Revenue for the Thermal Products segment for the six months ended 30 June
2024 was £221.5 million, representing a decline of 4.3% compared with £231.4
million in 1H 2023 driven predominantly by foreign exchange. On an organic
constant-currency* basis, year-on-year revenue increased by 2.4%, with growth
in aerospace and the petrochemical market segments.
Operating profit for the six months ended 30 June 2024 was £22.7 million (1H
2023: 13.1 million) with an operating profit margin of 10.2% (1H 2023: 5.7%).
Adjusted operating profit* was £24.2 million (1H 2023 £15.8 million) with an
adjusted operating profit margin* of 10.9% (1H 2023: 6.8%), with margin growth
due to recovered efficiencies lost during the cyber incident in 1H 2023,
pricing measures continue to recover inflation. Details of the specific
adjusting items charge of £1.0 million (1H 2023: £1.8 million) are included
in note 3.
Performance Carbon
Revenue for the Performance Carbon segment for the six months ended 30 June
2024 was £178.9 million, representing an increase of 13.7% on a reported
basis compared with £157.4 million in 1H 2023. On an organic
constant-currency* basis, year-on-year revenue increased by 18.1%, with
continued strong growth in our faster growing markets with particular strength
in semiconductors. Core markets are also showing year over year growth led by
the industrial market segment.
Operating profit for the six months ended 30 June 2024 was £30.3 million (1H
2023: £18.9 million) with an operating profit margin of 16.9% (1H 2023:
12.0%). Adjusted operating profit* was £31.3 million (1H 2023: £19.6
million) with an adjusted operating profit margin* of 17.5% (1H 2023: 12.5%),
with margin growth due to recovered efficiencies lost during the cyber
incident in 1H 2023, pricing measures continue to recover inflation. Details
of the specific adjusting items charge of £0.8 million (1H 2023: £0.2
million) are included in note 3.
Technical Ceramics
Revenue for the Technical Ceramics segment for the six months ended 30 June
2024 was £172.2 million, an increase of 4.3% compared with £165.1 million in
1H 2023. On an organic constant-currency* basis, year-on-year revenue
increased by 6.7%, with growth led by aerospace and healthcare offsetting a
weaker industrial market.
Operating profit for the six months ended 30 June 2024 was £18.0 million (1H
2023: £18.0 million) with an operating profit margin of 10.5% (1H 2023:
10.9%). Adjusted operating profit* was £18.8 million (1H 2023: £17.6
million) with an adjusted operating profit margin* of 10.9% (1H 2023: 10.7%),
with margin growth due to returned efficiencies after the cyber incident
impacting 1H 2023, pricing measures continue to recover inflation. Details of
the specific adjusting items charge of £0.4 million (1H 2023: credit of £1.1
million) are included in note 3.
Group financial review
Group revenue for the six months ended 30 June 2024 was £572.6 million (1H
2023: £553.9 million), an increase of 3.4% on a reported basis compared with
1H 2023. On an organic constant-currency* basis revenue increased by 8.2%.
Group adjusted operating profit* for the six months ended 30 June 2024 was
£71.3 million (1H 2023: £50.0 million). Adjusted operating profit margin*
was 12.5%, compared with 9.0% for 1H 2023.
Specific adjusting items before tax for the six months ended 30 June 2024
totalled £3.4 million. See Note 3 of the condensed consolidated financial
statements on page 32, for additional information.
Operating profit for the six months ended 30 June 2024 was £66.8 million (1H
2023: £34.5 million) and profit before taxation was £57.5 million (1H 2023:
£28.4 million).
The Group amortisation charge for the six months ended 30 June 2024 was £1.1
million (1H 2023: £2.1 million).
The net finance charge for the six months ended 30 June 2024 was £9.3 million
(1H 2023: £6.1 million) comprising net bank interest and similar charges of
£7.4 million (1H 2022: £5.0 million), net interest on IAS 19 pension
obligations of £0.2 million (1H 2023: £nil), loss on sale of bonds of 0.4
million (1H 2023: £nil) and interest expense on lease liabilities of £1.3
million (1H 2023: £1.1 million).
Looking forward to the full year, we anticipate that the net finance charge
will be around £17-19 million, comprising net bank interest and similar
charges of £15-16 million; net interest on IAS 19 pension obligations of
£0.5 million; and interest expense on lease liabilities of £2 million.
The Group tax charge for the six months ended 30 June 2024, excluding specific
adjusting items, was £15.8 million (1H 2023: £11.3 million), tax on specific
adjusting items was a credit of £0.4 million (1H 2023: £2.2 million). The
effective tax rate, excluding specific adjusting items, was 26.0% (1H 2023:
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 25-27%.
Adjusted earnings per share* for the six months ended 30 June 2024 was 14.7
pence (1H 2023: 9.9 pence) and basic profit per share from continuing
operations was 13.2 pence (1H 2023: 5.2 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 2024 was £270.5 million, with net debt* excluding lease
liabilities of £222.3 million. The Group has cash and cash equivalents of
£116.6 million and undrawn headroom on its revolving credit facility of
£159.1 million.
Our key financial covenants are measured on a pre-IFRS 16 Leases basis. As at
30 June 2024, net debt* to EBITDA*, excluding the impact of IFRS 16 Leases,
was 1.3 times compared with a covenant not to exceed 3.0 times, and our
interest cover excluding the impact of IFRS 16 Leases was 12.1 times, compared
with 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 2024 or the six months to 30 June 2023.
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 2024 1H 2023
£m £m
Specific adjusting items
Cyber incident recovery costs and charges (1.1) (12.0)
Business closure and exit costs - (1.8)
Restructuring (charge)/credit (2.3) 0.4
Total specific adjusting items before income tax (3.4) (13.4)
Income tax credit from specific adjusting items 0.4 2.2
Total specific adjusting items after income tax (3.4) (11.2)
2024
Cyber incident recovery costs and charges
As disclosed in the 2023 Annual Report, the Group experienced a cyber security
incident in January 2023. £1.1 million of specialist support costs were
incurred in early 2024, which did not meet the recognition criteria as at 31
December 2023.
Restructuring charge
As disclosed in our 2023 Annual Report, the Group has taken the opportunity to
reduce our global footprint and rationalise costs in order to focus resources
on our faster growing markets and optimise factory operations. This
restructuring programme commenced in the second half of 2023 and further costs
are anticipated in 2024. A charge of £2.3 million has been recognised in
relation to this and comprises costs associated with staff redundancies and
site closure costs.
2023
Cyber incident recovery costs and charges
As disclosed in the 2023 Annual Report, the Group experienced a cyber security
incident in January 2023. Costs and charges of £11.2 million were incurred
during the six months to June 2023 relating to system recovery and specialist
support costs and £0.8 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 expired in
August 2023. A £1.8 million charge associated with the liquidation costs was
recognised, mainly in relation to severance costs, costs of dismantling
equipment and advisor fees.
Restructuring credit
The Group recognised a £0.4 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.
Foreign currency impact
The principal exchange rates used in the translation of the results of
overseas subsidiaries were as follows:
1H 2024 1H 2023
GBP to: Closing rate Average rate Closing rate Average rate
US dollar 1.26 1.27 1.27 1.23
Euro 1.18 1.17 1.16 1.14
For illustrative purposes, the table below provides details of the impact on
1H 2024 revenue and adjusted operating profit* if the actual reported results,
calculated using 1H 2024 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 2024 revenue/adjusted operating profit(1) if: Revenue Adjusted operating profit(1)
£m
£m
GBP weakens by 10c against the US dollar in isolation 22.2 2.8
GBP weakens by 10c against the Euro in isolation 10.4 1.8
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.
Cash flow
1H 2024 1H 2023
£m £m
Cash generated from continuing operations 66.1 12.9
Net capital expenditure (44.6) (24.0)
Net interest on cash and borrowings (7.3) (4.5)
Tax paid (16.0) (15.8)
Lease payments and interest (6.1) (5.7)
Free cash flow before acquisitions, disposals and dividends(1) (7.9) (37.1)
Dividends paid to external plc shareholders (19.1) (19.1)
Net cash flows from other investing and financing activities (8.7) (2.4)
Exchange movement and other non-cash movements (1.4) (1.4)
Opening net debt(1) excluding lease liabilities (185.2) (148.5)
Closing net debt(1) excluding lease liabilities (222.3) (208.5)
Closing lease liabilities (48.2) (49.2)
Closing net debt(1) (270.5) (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.
Cash generated from continuing operations for the six months ended 30 June
2024 was £66.1 million (1H 2023: £12.9 million). Working capital increased
by £22.0 million as a result of an increase in receivables of £15.0 million
and other working capital of £7.0 million. The increase in working capital is
largely driven by the growth in sales.
Free cash flow before acquisitions, disposals and dividends* was £(7.9)
million (1H 2023: £(37.1) million).
Net debt* for the six months ended 30 June 2024 was £270.5 million (1H 2023:
£257.7 million), representing a net debt* to EBITDA* ratio of 1.5 times (1H
2023: 1.5 times).
Net debt* for the six months ended 30 June 2024 excluding lease liabilities
was £222.3 million (1H 2023: £208.5 million), representing a net debt* to
EBITDA* ratio excluding the impact of IFRS 16 Leases of 1.3 times (1H 2023:
1.3 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 2024 has decreased
by £7.2 million since 31 December 2023 to £18.0 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 increased by £3.6 million to £16.1 million (FY 2023:
surplus £12.5 million; 1H 2023: deficit £19.0 million), (discount rate 1H
2024: 5.12%; FY 2023: 4.52%; 1H 2023: 5.26%).
· The US schemes deficit decreased by £1.7 million to £3.8 million (FY 2023:
£5.5 million; 1H 2023: £6.9 million), (discount rate 1H 2024: 5.28%; FY
2023: 4.80%; 1H 2023: 4.93%).
· The European schemes deficit decreased by £2.2 million to £26.0 million (FY
2023: £28.2 million; 1H 2023: £27.3 million), (discount rate 1H 2024: 3.80%;
FY 2023: 3.40%; 1H 2023: 3.70%).
· The Rest of World schemes deficit increased by £0.3 million to £4.3 million
(FY 2023: £4.0 million; 1H 2023: £4.0 million), (discount rate 1H 2024:
5.52%; FY 2023: 5.52%; 1H 2023: 5.30%).
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 £49.7 million
on the 'Technical Provisions' basis. The Company subsequently agreed with the
Trustees to make a lump sum contribution to the Schemes of £67.0 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 5.4 pence (2023: 5.3
pence) per Ordinary share. The interim dividend will be paid on 15 November
2024 to Ordinary shareholders on the register of members at the close of
trading on 25 October 2024. The ex-dividend date will be 24 October 2024.
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 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 2023 Annual Report and
Accounts, which are available on the Group's website at
www.morganadvancedmaterials.com (http://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.
· Compliance
A failure to comply with any applicable export, data and other
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.
· IT & cyber security
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 IT modernisation security programme has been
accelerated.
· 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 2023
Annual Report and Accounts on pages 2 to 75. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities, are
described earlier in the Financial Review on pages 64 to 69. In addition, note
11 to the condensed consolidated financial statements for the six months ended
30th June 2024 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 £230 million unsecured
multi-currency revolving credit facility, which matures in November 2028. As
at 30th June 2024 the Group had both significant available liquidity and
headroom on its covenants. Total committed borrowing facilities were £494.8.
The amount drawn under these facilities was £335.7m, which together with net
cash and cash equivalents of £115.0m, gave total headroom of £274.1m. The
multi-currency revolving credit facility was £70.9m drawn. The Group has no
scheduled debt maturities until January 2026.
The principal borrowing facilities are subject to covenants that are measured
semi-annually in June and December, being net debt to EBITDA of a maximum of
3x and interest cover of a minimum of 4x, 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. 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 as discussed in note 11 to the financial
statements. 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 45% and an increase in net debt of 45% 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 2024.
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 2024
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 2024
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
(http://www.morganadvancedmaterials.com)
By order of the Board
Pete Raby
Chief Executive Officer
Richard Armitage
Chief Financial Officer
5 August 2024
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
consistent with previous years.
1H 2024 Thermal Products Performance Carbon Technical Ceramics Segment total Corporate costs(1) Group
£m £m
£m £m £m £m
Operating profit 22.7 30.3 18.0 71.0 (4.2) 66.8
Add back: specific adjusting items included in operating profit 1.0 0.8 0.4 2.2 1.2 3.4
Add back: amortisation of intangible assets 0.5 0.2 0.4 1.1 1.1
Group and segmental adjusted operating profit/(loss) 24.2 31.3 18.8 74.3 (3.0) 71.3
1. Corporate costs consist of central head office costs.
1H 2023 Thermal Products Performance Carbon Technical Ceramics Segment total Corporate costs(1) Group
£m
£m £m £m £m
£m
Operating profit 13.1 18.9 18.0 50.0 (15.5) 34.5
Add back: specific adjusting items included in operating profit 1.8 0.2 (1.1) 0.9 12.5 13.4
Add back: amortisation of intangible assets 0.9 0.5 0.7 2.1 2.1
Group and segmental adjusted operating profit/(loss) 15.8 19.6 17.6 53.0 (3.0) 50.0
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 Products Performance Carbon Technical Ceramics Segment total(1)
£m £m £m £m
1H 2023 231.4 157.4 165.1 553.9
Impact of foreign currency movements (14.2) (5.9) (3.7) (23.8)
Impacts of acquisitions, disposals and business exits (0.9) (0.9)
Organic constant-currency change 5.2 27.4 10.8 43.4
Organic constant-currency change % 2.4% 18.1% 6.7% 8.2%
1H 2024 221.5 178.9 172.2 572.6
Year-on-year movements in segment and Group adjusted operating profit
Thermal Products Performance Carbon Technical Ceramics Segment total Corporate costs(1) Group
£m £m £m £m £m £m
1H 2023 15.8 19.6 17.6 53.0 (3.0) 50.0
Impact of foreign currency movements (3.5) (0.9) (1.0) (5.4) (5.4)
Impact of acquisitions, disposals and business exits 0.1 (0.1) (0.1)
Organic constant-currency change 11.8 12.6 2.2 26.6 26.6
Organic constant-currency change % 95.2% 67.4% 13.3% 55.8% 59.5%
1H 2024 24.2 31.3 18.8 74.3 (3.0) 71.3
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 basis i.e. excluding capital and
interest payments on leases which have been capitalised following the adoption
of IFRS 16. This is used as a proxy for the charge that would have been
attributable to operating leases under the now defunct IAS 17. A
reconciliation of operating profit to Group EBITDA is as follows:
1H 2024 1H 2023
£m £m
Operating profit 66.8 34.5
Add back: specific adjusting items included in operating profit 3.4 13.4
Add back: depreciation - property, plant and equipment 17.0 15.7
Add back: depreciation - right-of-use assets 4.3 3.8
Add back: amortisation of intangible assets 1.1 2.1
Group EBITDA 92.6 69.5
Group EBITDA excluding IFRS 16 Leases impact 86.5 63.8
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 2024 1H 2023
£m £m
Cash generated from continuing operations 66.1 12.9
Net capital expenditure (44.6) (24.0)
Net interest on cash and borrowings (7.3) (4.5)
Tax paid (16.0) (15.8)
Lease payments and interest (6.1) (5.7)
Free cash flow before acquisitions, disposals and dividends (7.9) (37.1)
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 2024 1H 2023
£m £m
Cash and cash equivalents 116.6 137.5
Bank overdrafts (1.6) (7.2)
Net cash and cash equivalents 115.0 130.3
Net debt
Net debt is defined as borrowings, bank overdrafts and lease liabilities, less
cash and cash equivalents. The Group discloses net debt because it helps
readers of the consolidated financial statements assess its ability to meet
financial obligations, manage debt and its capacity to invest in growth
opportunities. 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 2024 1H 2023
£m £m
Cash and cash equivalents 116.6 137.5
Non-current borrowings (337.3) (305.9)
Non-current lease liabilities (39.3) (38.0)
Current borrowings and bank overdrafts (1.6) (40.1)
Current lease liabilities (8.9) (11.2)
Closing net debt (270.5) (257.7)
Closing net debt excluding IFRS 16 Leases liabilities (222.3) (208.5)
Return on invested capital
The Group discloses return on invested capital (ROIC) to assess its efficiency
in generating profits from the capital it has invested in its operations. ROIC
is defined as 12-month adjusted operating profit (operating profit excluding
specific adjusting items and amortisation of intangible assets) divided by the
average adjusted net assets (excludes long-term employee benefits, deferred
tax assets and liabilities, current tax payable, provisions, cash and cash
equivalents, borrowings, bank overdrafts and lease liabilities). Third party
working capital includes inventories, trade and other receivables, and trade
and other payables.
1H 2024 1H 2023
£m £m
Operating profit before specific adjusting items 139.3 124.0
Add back: amortisation of intangible assets 2.3 4.5
Group adjusted operating profit 141.6 128.5
Average adjusted net assets:
Third-party working capital 210.1 197.5
Property, Plant and equipment 293.6 271.7
Goodwill 177.2 179.3
Right-of-use assets 32.4 32.5
Intangible assets 4.2 6.8
Average adjusted net assets 717.5 687.8
ROIC 19.7% 18.7%
ROIC excluding IFRS 16 Leases impact 20.7% 19.6%
Adjusted earnings per share
Adjusted earnings per share is defined as operating profit adjusted to exclude
specific adjusting items and amortisation of intangible assets, 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 that it provides a helpful
indication of the Group's financial performance excluding material
non-recurring expenses or gains and non-financial asset impairments and
impairment reversals, and therefore facilitates the evaluation of the Group's
performance over time.
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 9 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.
Condensed consolidated income statement
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Results Specific Total Results Specific Total Results Specific Total
before specific adjusting before specific adjusting before specific adjusting
adjusting items items( 1) adjusting items items( 1) adjusting items items( 1)
Note £m £m £m £m £m £m £m £m £m
Revenue 2 572.6 - 572.6 553.9 - 553.9 1,114.7 - 1,114.7
Operating costs before amortisation of intangible assets, impairments and (501.3) (3.4) (504.7) (503.9) (13.4) (517.3) (994.4) (25.9) (1,020.3)
reversal of impairments of non-financial assets
Profit from operations before amortisation of intangible assets, impairments 2 71.3 (3.4) 67.9 50.0 (13.4) 36.6 120.3 (25.9) 94.4
and reversals of impairments of non-financial assets
Amortisation of intangible assets (1.1) - (1.1) (2.1) - (2.1) (3.3) - (3.3)
Impairment of non-financial assets 3 - - - - - - - (7.3) (7.3)
Reversal of impairment of non-financial assets 3 - - - - - - - 8.1 8.1
Operating profit 2 70.2 (3.4) 66.8 47.9 (13.4) 34.5 117.0 (25.1) 91.9
Finance income 1.3 - 1.3 2.2 - 2.2 3.9 - 3.9
Finance expense (10.6) - (10.6) (8.3) - (8.3) (18.0) - (18.0)
Net financing costs 4 (9.3) - (9.3) (6.1) - (6.1) (14.1) - (14.1)
Profit before taxation 60.9 (3.4) 57.5 41.8 (13.4) 28.4 102.9 (25.1) 77.8
Income tax expense 5 (15.8) 0.4 (15.4) (11.3) 2.2 (9.1) (26.0) 3.8 (22.2)
Profit from continuing operations 45.1 (3.0) 42.1 30.5 (11.2) 19.3 76.9 (21.3) 55.6
Profit from discontinued operations 6 - - - - - - - 0.7 0.7
Profit for the period 45.1 (3.0) 42.1 30.5 (11.2) 19.3 76.9 (20.6) 56.3
Profit for the period attributable to:
Shareholders of the Company 40.4 (3.0) 37.4 26.0 (11.2) 14.8 67.9 (20.6) 47.3
Non-controlling interests 4.7 - 4.7 4.5 - 4.5 9.0 - 9.0
Profit for the period 45.1 (3.0) 42.1 30.5 (11.2) 19.3 76.9 (20.6) 56.3
Earnings per share 7
Continuing and discontinued operations
Basic earnings per share 13.2p 5.2p 16.6p
Diluted earnings per share 13.0p 5.2p 16.5p
Continuing operations
Basic earnings per share 13.2p 5.2p 16.4p
Diluted earnings per share 13.0p 5.2p 16.3p
Dividends(2)
Proposed interim dividend - pence 5.40p 5.30p 5.30p
15.4 15.1 15.1
- £m
Final dividend - pence 6.70p
19.1
- £m
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.
Condensed consolidated statement of comprehensive income
At 30 June 2024 At 30 June 2023 At 31 December 2023
£m £m £m
Profit for the period 42.1 19.3 56.3
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain/(loss) on defined benefit plans 6.2 (5.0) (11.5)
Tax effect of components of other comprehensive income not reclassified (0.8) (0.4) (0.5)
5.4 (5.4) (12.0)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (6.7) (27.5) (32.8)
Net investment hedges:
Change in fair value 1.1 (0.3) (0.3)
Cash flow hedges:
Change in fair value (0.8) 0.5 1.1
Transferred to profit or loss (0.5) (0.1) 0.2
(6.9) (27.4) (31.8)
Total other comprehensive income (1.5) (32.8) (43.8)
Total comprehensive income 40.6 (13.5) 12.5
Attributable to:
Shareholders of the Company 36.8 (14.3) 6.7
Non-controlling interests 3.8 0.8 5.8
40.6 (13.5) 12.5
Total comprehensive income attributable to shareholders of the Company arising
from:
Continuing operations 36.8 (14.3) 6.0
Discontinued operations - - 0.7
36.8 (14.3) 6.7
Condensed consolidated balance sheet
At 30 June 2024 At 30 June 2023 At 31 December 2023
Note £m £m £m
Assets
Property, plant and equipment 8 311.6 275.6 293.8
Right-of-use assets 33.0 31.7 31.6
Intangible assets: goodwill 9 177.2 177.3 177.5
Intangible assets: other 9 3.8 4.6 4.7
Investments 1.0 - 2.2
Other receivables 2.0 3.0 3.4
Deferred tax assets 17.2 14.5 17.6
Total non-current assets 545.8 506.7 530.8
Inventories 182.2 181.4 175.1
Derivative financial assets 11 0.3 0.8 1.5
Trade and other receivables 208.2 227.7 191.6
Current tax receivable 1.3 0.5 1.2
Cash and cash equivalents 10 116.6 137.5 124.5
Total current assets 508.6 547.9 493.9
Total assets 1,054.4 1,054.6 1,024.7
Liabilities
Borrowings 10 337.3 305.9 309.1
Lease liabilities 39.3 38.0 36.6
Employee benefits: pensions 12 18.0 19.2 25.2
Provisions 13 10.5 9.5 11.5
Non-trade payables 2.4 1.8 2.4
Deferred tax liabilities 2.4 2.8 1.8
Total non-current liabilities 409.9 377.2 386.6
Borrowings and bank overdrafts 10 1.6 40.1 0.6
Lease liabilities 8.9 11.2 10.5
Trade and other payables 187.2 192.2 192.0
Current tax payable 24.7 22.2 25.6
Provisions 13 9.0 13.7 10.3
Derivative financial liabilities 11 0.8 0.6 0.5
Total current liabilities 232.2 280.0 239.5
Total liabilities 642.1 657.2 626.1
Total net assets 412.3 397.4 398.6
Equity
Share capital 71.3 71.3 71.3
Share premium 111.7 111.7 111.7
Reserves 0.5 11.4 6.5
Retained earnings 191.2 163.2 170.8
Total equity attributable to shareholders of the Company 374.7 357.6 360.3
Non-controlling interests 37.6 39.8 38.3
Total equity 412.3 397.4 398.6
Condensed consolidated statement of changes in equity
Share capital Share premium Translation Hedging Fair value reserve Capital redemption reserve Other reserves Retained earnings Total parent equity Non-controlling interests Total
reserve reserve equity
£m £m £m £m £m £m £m £m £m £m £m
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)
Cash flow hedging fair value changes and transfers - - - 0.4 - - - - 0.4 - 0.4
Net investment hedging fair value changes and transfers - - - (0.3) - - - - (0.3) - (0.3)
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
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 year - - - - - - - 47.3 47.3 9.0 56.3
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes - - - - - - - (12.0) (12.0) - (12.0)
Foreign exchange differences and related taxes - - (29.6) - - - - - (29.6) (3.2) (32.8)
Cash flow hedging fair value changes and transfers - - - 1.3 - - - - 1.3 - 1.3
Net investment hedging fair - - (0.3) - - - - - (0.3) - (0.3)
value changes and transfers
Total comprehensive income/(expense) - - (29.9) 1.3 - - - 35.3 6.7 5.8 12.5
Transactions with owners:
Dividends - - - - - - - (34.2) (34.2) (8.1) (42.3)
Equity settled share-based payments - - - - - - - 2.9 2.9 - 2.9
Own shares acquired for share incentive schemes (net) - - - - - - - (4.1) (4.1) - (4.1)
At 31 December 2023 71.3 111.7 (29.9) 1.1 (1.0) 35.7 0.6 170.8 360.3 38.3 398.6
At 1 January 2024 71.3 111.7 (29.9) 1.1 (1.0) 35.7 0.6 170.8 360.3 38.3 398.6
Profit for the period - - - - - - - 37.4 37.4 4.7 42.1
Other comprehensive income/(expense):
Remeasurement gain on defined benefit plans and related taxes - - - - - - - 5.4 5.4 - 5.4
Foreign exchange differences - - (5.8) - - - - - (5.8) (0.9) (6.7)
Cash flow hedging fair value changes and transfers - - - (1.3) - - - - (1.3) - (1.3)
Net investment hedging fair - - 1.1 - - - - - 1.1 - 1.1
value changes and transfers
Total comprehensive income/(expense) - - (4.7) (1.3) - - - 42.8 36.8 3.8 40.6
Transactions with owners:
Dividends - - - - - - - (19.1) (19.1) (2.3) (21.4)
Purchase of non-controlling interest - - - - - - - (2.7) (2.7) (2.2) (4.9)
Equity-settled share-based payments - - - - - - - 2.7 2.7 - 2.7
Own shares acquired for share incentive schemes (net) - - - - - - - (3.3) (3.3) - (3.3)
At 30 June 2024 71.3 111.7 (34.6) (0.2) (1.0) 35.7 0.6 191.2 374.7 37.6 412.3
Condensed consolidated statement of cash flows
Six months ended Six months ended Year ended
30 June 2024 30 June 2023(1) 31 December 2023(1)
Note £m £m £m
Operating activities
Profit for the period from continuing operations 42.1 19.3 55.6
Profit for the period from discontinued operations 6 - - 0.7
Adjustments for:
Depreciation - property, plant and equipment 2,8 17.0 15.7 31.9
Depreciation - right-of-use assets 2 4.3 3.8 7.6
Amortisation 2,9 1.1 2.1 3.3
Net financing costs 4 9.3 6.1 14.1
Non-cash specific adjusting items included in operating profit 3 (0.2) 0.8 (2.5)
Fair value gain on equity instruments held at FVTPL (1.0) - (0.9)
Profit on sale of property, plant and equipment (0.1) - (1.6)
Income tax expense 5 15.4 9.1 22.2
Equity-settled share-based payment expenses 2.7 2.6 2.9
Cash generated from operations before changes in working capital and 90.6 59.5 133.3
provisions
Increase in trade and other receivables (15.0) (34.3) (4.0)
Increase in inventories (9.1) (17.2) (12.3)
Increase in trade and other payables 2.1 6.3 13.3
Decrease in provisions (2.0) (1.6) (3.4)
Payments to defined benefit pension plans (net of IAS 19 pension charges) (0.5) 0.2 (0.2)
Cash generated from operations 66.1 12.9 126.7
Interest paid - borrowings and overdrafts (8.6) (6.7) (15.5)
Interest paid - lease liabilities (1.3) (1.1) (2.4)
Income tax paid (16.0) (15.8) (30.3)
Net cash from operating activities 40.2 (10.7) 78.5
Investing activities
Purchase of property, plant and equipment and software (45.9) (24.0) (60.4)
Purchase of investments - (0.2) (5.6)
Proceeds from sale of property, plant and equipment 0.7 - 1.8
Grants received for purchase of equipment 0.6 - 0.1
Interest received 1.3 2.2 3.9
Disposal of investments 1.8 - -
Net cash from investing activities (41.5) (22.0) (60.2)
Financing activities
Purchase of own shares for share incentive schemes (3.7) (0.7) (4.7)
Net proceeds from exercise of share options 0.4 0.1 0.6
Increase in borrowings 44.2 194.8 247.2
Reduction and repayment of borrowings (14.7) (112.2) (193.0)
Payment of lease liabilities (4.8) (4.6) (8.9)
Dividends paid to shareholders of the Company (19.1) (19.1) (34.2)
Dividends paid to non-controlling interests (2.3) (1.6) (8.1)
Purchase of non-controlling interest (4.9) - -
Net cash from financing activities (4.9) 56.7 (1.1)
Net (decrease)/increase in net cash and cash equivalents (6.2) 24.0 17.2
Net cash and cash equivalents at start of period 123.9 116.2 116.2
Effect of exchange rate fluctuations on cash held (2.7) (9.9) (9.5)
Net cash and cash equivalents at period end 10 115.0 130.3 123.9
1. The condensed consolidated statement of cash flows for the six months ended
30 June 2023 and the year ended 31 December 2023 have been re-presented to net
bank overdrafts against cash and cash equivalents.
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 2024 comprise the Company and the Group's
subsidiaries (together 'the Group').
The condensed consolidated financial statements for the six months ended 30
June 2024 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 2023.
The condensed consolidated financial statements and the comparative
information for the six months ended 30 June 2024 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 2023. 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 28
for further details.
The consolidated financial statements of the Group for the year ended 31
December 2023 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 2024 were approved by the Board on 5 August 2024.
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 2023, 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 2023.
Adoption of new and revised accounting standards
There are no new standards that became effective during the period.
During the period the following amendments to standards became effective. The
amendments did not have a material impact on the Group:
· Classification of Liabilities as Current or Non-Current (Amendments to IAS 1);
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
· Non-current Liabilities with Covenants (Amendments to IAS 1);
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).
Accounting developments and changes
There are no new standards or interpretations that are in issue but not yet
effective.
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 2023
Annual Report and Accounts on pages 2 to 75. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities, are
described earlier in the Financial Review on pages 64 to 69. In addition, note
11 to the condensed consolidated financial statements for the six months ended
30 June 2024 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 £230.0 million unsecured
multi-currency revolving credit facility, which matures in November 2028. As
at 30 June 2024 the Group had both significant available liquidity and
headroom on its covenants. Total committed borrowing facilities were £494.8
million. The amount drawn under these facilities was £335.7 million, which
together with net cash and cash equivalents of £115.0 million, gave total
headroom of £274.1 million. The multi-currency revolving credit facility was
£70.9 million drawn. The Group has no scheduled debt maturities until January
2026.
The principal borrowing facilities are subject to covenants that are measured
semi-annually in June and December, being net debt to EBITDA 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. 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 as discussed in note 11 to the financial
statements. 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 45% and an increase in net debt of 45% 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 2024.
Note 2. Segment reporting
As announced with the 2023 financial results, the Group is now managed through
three distinct segments, as detailed below. 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 2024
Thermal Products Performance Carbon Technical Ceramics Segment totals Corporate costs Group
Continuing operations £m £m £m £m £m £m
Revenue from external customers 221.5 178.9 172.2 572.6 - 572.6
Segment adjusted operating profit(1) 24.2 31.3 18.8 74.3 - 74.3
Corporate costs (3.0) (3.0)
Group adjusted operating profit(1) 71.3
Amortisation of intangible assets (0.5) (0.2) (0.4) (1.1) - (1.1)
Operating profit before specific adjusting items 23.7 31.1 18.4 73.2 (3.0) 70.2
Specific adjusting items included in operating profit(2) (1.0) (0.8) (0.4) (2.2) (1.2) (3.4)
Operating profit 22.7 30.3 18.0 71.0 (4.2) 66.8
Finance income 1.3
Finance expense (10.6)
Profit before taxation 57.5
Segment assets 377.0 307.9 230.4 915.3 139.1 1,054.4
Segment liabilities 100.8 51.9 82.5 235.2 406.9 642.1
Segment capital expenditure 8.0 25.8 11.5 45.3 0.6 45.9
Segment depreciation - property, plant and equipment 7.3 5.6 4.1 17.0 - 17.0
Segment depreciation - right-of-use assets 1.9 0.8 1.6 4.3 - 4.3
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.
Six months ended 30 June 2023(3)
Thermal Products Performance Carbon Technical Ceramics Segment totals Corporate costs Group
£m £m £m £m £m £m
Continuing operations
Revenue from external customers 231.4 157.4 165.1 553.9 - 553.9
Segment adjusted operating profit(1) 15.8 19.6 17.6 53.0 - 53.0
Corporate costs (3.0) (3.0)
Group adjusted operating profit(1) 50.0
Amortisation of intangible assets (0.9) (0.5) (0.7) (2.1) - (2.1)
Operating profit before specific adjusting items 14.9 19.1 16.9 50.9 (3.0) 47.9
Specific adjusting items included in operating profit(2) (1.8) (0.2) 1.1 (0.9) (12.5) (13.4)
Operating profit 13.1 18.9 18.0 50.0 (15.5) 34.5
Finance income 2.2
Finance expense (8.3)
Profit before taxation 28.4
Segment assets 398.3 271.4 224.8 894.5 160.1 1,054.6
Segment liabilities 100.0 49.8 83.6 233.4 423.8 657.2
Segment capital expenditure 7.4 10.0 6.6 24.0 - 24.0
Segment depreciation - property, plant and equipment 6.8 5.7 3.2 15.7 - 15.7
Segment depreciation - right-of-use assets 1.7 0.7 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.
3. The figures above have been restated to show the segmental results for the
three operating segments.
Year ended 31 December 2023(3)
Thermal Performance Carbon Technical Ceramics Segment totals Corporate costs Group
Products
Continuing operations £m £m £m £m £m £m
Revenue from external customers 454.5 327.1 333.1 1,114.7 - 1,114.7
Segment adjusted operating profit(1) 40.2 49.0 37.0 126.2 - 126.2
Corporate costs (5.9) (5.9)
Group adjusted operating profit(1) 120.3
Amortisation of intangible assets (1.4) (0.8) (1.1) (3.3) - (3.3)
Operating profit before specific adjusting items 38.8 48.2 35.9 122.9 (5.9) 117.0
Specific adjusting items included in operating profit(2) (9.3) (9.3) 7.6 (11.0) (14.1) (25.1)
Operating profit 29.5 38.9 43.5 111.9 (20.0) 91.9
Finance income 3.9
Finance expense (18.0)
Profit before taxation 77.8
Segment assets 376.2 278.2 217.6 872.0 152.7 1,024.7
Segment liabilities 101.0 55.0 80.4 236.4 389.7 626.1
Segment capital expenditure 17.2 27.2 15.9 60.3 - 60.3
Segment depreciation - property, plant and equipment 13.9 11.2 6.8 31.9 - 31.9
Segment depreciation - right-of-use assets 3.5 1.3 2.8 7.6 - 7.6
Segment impairment of non-financial assets - 7.0 0.3 7.3 - 7.3
Segment reversal of impairment of non-financial assets 2.4 - 5.7 8.1 - 8.1
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.
3. The figures above have been restated to show the segmental results for the
three operating segments.
Revenue from external customers by geography
Continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£m £m £m
US 233.6 203.7 427.4
China 53.1 56.7 114.8
Germany 43.4 45.3 88.7
UK (the Group's country of domicile) 21.6 22.6 43.6
Other Asia, Australasia, Middle East and Africa 98.4 97.3 197.1
Other Europe 87.6 92.3 173.2
Other North America 19.4 21.4 44.9
South America 15.5 14.6 25.0
572.6 553.9 1,114.7
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
Continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Semiconductors 56.8 51.6 108.6
Healthcare 41.8 39.1 78.7
Clean energy and clean transportation 29.6 24.4 50.0
Faster growing markets 128.2 115.1 237.3
Industrial 156.6 170.3 315.9
Conventional transportation 106.3 91.8 200.2
Metals 73.1 72.0 150.2
Petrochemical and chemical 51.8 57.2 110.8
Security and defence 37.0 32.4 68.5
Conventional energy 19.6 15.1 31.8
Core markets 444.4 438.8 877.4
572.6 553.9 1,114.7
Intercompany sales to other segments
Continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023(1) 31 December 2023(1)
£m £m £m
Thermal Products 0.9 0.3 1.0
Performance Carbon 0.3 0.3 0.6
Technical Ceramics 0.4 0.1 0.7
1.6 0.7 2.3
1. The figures above have been restated to show the segmental results for
the three operating segments.
Note 3. Specific adjusting items
Continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Specific adjusting items:
Cyber incident recovery costs and charges (1.1) (12.0) (14.7)
Charges in relation to the impact of Argentina's currency devaluation - - (5.8)
Net business closure and exit costs - (1.8) (1.9)
Net restructuring (charge)/credit (2.3) 0.4 (3.5)
Impairment of non-financial assets - - (7.3)
Reversal of impairment of non-financial assets - - 8.1
Total specific adjusting items before income tax (3.4) (13.4) (25.1)
Income tax credit from specific adjusting items 0.4 2.2 3.8
Total specific adjusting items after income tax (3.0) (11.2) (21.3)
There were no specific adjusting items in relation to discontinued operations
in the six months to 30 June 2024 and to 30 June 2023.
2024
Cyber incident recovery costs and charges
As disclosed in the 2023 Annual Report, the Group experienced a cyber security
incident in January 2023. £1.1 million of specialist support costs were
incurred in early 2024, which did not meet the recognition criteria as at 31
December 2023.
Restructuring charge
As disclosed in our 2023 Annual Report, the Group has taken the opportunity to
reduce our global footprint and rationalise costs in order to focus resources
on our faster growing markets and optimise factory operations. This
restructuring programme commenced in the second half of 2023 and further costs
are anticipated in 2024. A charge of £2.3 million has been recognised in
relation to this and comprises costs associated with staff redundancies and
site closure costs.
2023
Cyber incident recovery costs and charges
As disclosed in the 2023 Annual Report, the Group experienced a cyber security
incident in January 2023. Costs and charges of £11.2 million were incurred
during the six months to June 2023 relating to system recovery and specialist
support costs and £0.8 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 expired in
August 2023. A £1.8 million charge associated with the liquidation costs was
recognised, mainly in relation to severance costs, costs of dismantling
equipment and advisor fees.
Restructuring credit
The Group recognised a £0.4 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.
Note 4. Finance income and expense
Continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Interest on bank balances and cash deposits 1.3 2.2 3.9
Finance income 1.3 2.2 3.9
Interest expense on borrowings and overdrafts (8.7) (7.2) (15.6)
Interest expense on lease liabilities (1.3) (1.1) (2.4)
Net interest on IAS 19 defined benefit pension obligations (0.2) - -
Net loss on sale of bonds (0.4) - -
Finance expense (10.6) (8.3) (18.0)
Net financing costs recognised in profit or loss (9.3) (6.1) (14.1)
No finance income or expense related to discontinued operations in either the
current or preceding periods.
Note 5. Taxation
Continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Income tax charge on profit before specific adjusting items (15.8) (11.3) (26.0)
Income tax credit from specific adjusting items 0.4 2.2 3.8
Total income tax expense recognised in profit or loss (15.4) (9.1) (22.2)
The Group's consolidated effective tax rate, excluding specific adjusting
items, was 26.0% for the six months ended 30 June 2024 (30 June 2023: 27.0%;
31 December 2023: 25.3%) 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.
On 11 July 2023, Finance (No.2) Act 2023 was enacted in the UK, introducing a
global minimum effective tax rate of 15%. The legislation implements a
domestic top-up tax and a multinational top-up-tax which will be effective for
the Group's financial year beginning 1 January 2024. The Group is in scope of
the substantively enacted legislation and has performed an assessment of the
Group's potential exposure to Pillar Two income taxes. The assessment of the
potential exposure to Pillar Two income taxes is based on the submitted
country-by-country reporting data of the constituent entities in the Group.
Based on the assessment, the Pillar Two effective tax rates in the majority of
the jurisdictions in which the Group operates are above 15%. However, the
Group has an entity in United Arab Emirates where the transitional safe
harbour relief does not apply as the Pillar Two effective tax rate is below
15%. The Group does not expect a material exposure to Pillar Two income taxes
in this jurisdiction.
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 2024 30 June 2023 31 December 2023
Results Specific Total Results Specific Total Results Specific Total
before specific adjusting before specific adjusting before specific adjusting
adjusting items items adjusting items items adjusting items items
£m £m £m £m £m £m £m £m £m
Revenue - - - - - - - 0.7 0.7
Operating income - - - - - - - - -
Profit before taxation - - - - - - - 0.7 0.7
Income tax expense - - - - - - - - -
Profit from discontinued operations - - - - - - - 0.7 0.7
Basic profit per share from discontinued operations - - 0.2p
Diluted profit per share from discontinued operations - - 0.2p
For the period to 30 June 2024 and the comparative period in the previous
year, there were no transactions from discontinued operations.
In December 2023, a gain of £0.7 million was recognised from a long-term
contract.
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 2024 or 30 June 2023. There were net cash inflows from operating
activities of £0.4 million during the year ended 31 December 2023.
Note 7. Earnings per share
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Earnings Basic earnings Diluted earnings Earnings Basic earnings Diluted earnings Earnings Basic earnings Diluted earnings
per share per share per share per share per share per share
£m pence pence £m pence pence £m pence pence
Profit for the period attributable to shareholders of the Company 37.4 13.2p 13.0p 14.8 5.2p 5.2p 47.3 16.6p 16.5p
Profit from discontinued operations - - - - - - (0.7) (0.2)p (0.2)p
Profit from continuing operations 37.4 13.2p 13.0p 14.8 5.2p 5.2p 46.6 16.4p 16.3p
Specific adjusting items 3.4 1.2p 1.2p 13.4 4.7p 4.7p 25.1 8.8p 8.7p
Amortisation of intangible assets 1.1 0.4p 0.4p 2.1 0.8p 0.7p 3.3 1.2p 1.1p
Tax effect of the above (0.4) (0.1)p (0.1)p (2.2) (0.8)p (0.8)p (3.8) (1.3)p (1.3)p
Non-controlling interests' share of the above adjustments - - - - - - - - -
Adjusted profit for the period from continuing operations as used in adjusted 41.5 14.7p 14.5p 28.1 9.9p 9.8p 71.2 25.0p 24.8p
earnings per share(1)
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 ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
millions millions millions
Number of shares
Weighted average number of Ordinary shares for the purposes of basic earnings 284.4 284.5 284.8
per share(1)
Effect of dilutive potential Ordinary shares:
Share options 3.8 1.8 2.5
Weighted average number of Ordinary shares for the purposes of diluted 288.2 286.3 287.3
earnings per share
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
£m £m £m
Cost
At 1 January 2024 216.1 777.4 993.5
Additions 10.4 27.0 37.4
Disposals (0.6) (15.6) (16.2)
Transfer between categories 0.2 (0.2) -
Effect of movement in foreign exchange (1.5) (2.8) (4.3)
At 30 June 2024 224.6 785.8 1,010.4
Depreciation and impairment losses
At 1 January 2024 119.0 580.7 699.7
Depreciation charge for the period 2.7 14.3 17.0
Disposals (0.6) (15.1) (15.7)
Transfer between categories (0.2) 0.2 -
Effect of movement in foreign exchange (0.6) (1.6) (2.2)
At 30 June 2024 120.3 578.5 698.8
Carrying amounts
At 1 January 2024 97.1 196.7 293.8
At 30 June 2024 104.3 207.3 311.6
As at 30 June 2024, commitments for property, plant and equipment and computer
software expenditure for which no provision has been made in these accounts
amount to £21.2 million (30 June 2023: £3.9 million).
Note 9. Intangible assets
Acquisition intangibles
Goodwill Customer Other Capitalised Computer Total
relationships development software
costs
£m £m £m £m £m £m
Cost
At 1 January 2024 177.5 60.9 4.2 0.8 36.2 279.6
Additions - - - - 0.1 0.1
Disposals - - - - (0.8) (0.8)
Effect of movement in foreign exchange (0.3) 0.4 (0.1) - 0.1 0.1
At 30 June 2024 177.2 61.3 4.1 0.8 35.6 279.0
Amortisation and impairment losses
At 1 January 2024 - 59.8 3.2 0.8 33.6 97.4
Amortisation charge for the period - 0.1 0.1 - 0.9 1.1
Disposals - - - - (0.8) (0.8)
Effects of movement in foreign exchange - 0.4 (0.1) - - 0.3
At 30 June 2024 - 60.3 3.2 0.8 33.7 98.0
Carrying amounts
At 1 January 2024 177.5 1.1 1.0 - 2.6 182.2
At 30 June 2024 177.2 1.0 0.9 - 1.9 181.0
Note 10. Cash and cash equivalents reconciled to net debt*
At 30 June 2024 At 30 June 2023 At 31 December 2023
£m £m £m
Bank balances 105.2 123.9 112.5
Cash deposits 11.4 13.6 12.0
Cash and cash equivalents 116.6 137.5 124.5
Bank overdrafts (1.6) (7.2) (0.6)
Net cash and cash equivalents 115.0 130.3 123.9
Reconciliation of net cash and cash equivalents to net debt*
Six months ended Six months ended Year ended
30 June 2024 30 June 2023(2) 31 December 2023(2)
£m £m £m
Opening borrowings and lease liabilities excluding bank overdrafts (356.2) (316.6) (316.6)
Increase in borrowings (44.2) (194.8) (247.2)
Reduction and repayment of borrowings 14.7 112.2 193.0
Payment of lease liabilities 4.8 4.6 8.9
Total changes from cash flows (24.7) (78.0) (45.3)
New leases and lease remeasurement (6.1) (4.0) (6.4)
Effect of movements in foreign exchange on borrowings 1.5 10.6 12.1
Closing borrowings and lease liabilities excluding bank overdrafts (385.5) (388.0) (356.2)
Net cash and cash equivalents 115.0 130.3 123.9
Closing net debt(1) (270.5) (257.7) (232.3)
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. Re-presented to net bank overdrafts against cash and cash equivalents.
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes.
Borrowings excluding bank overdrafts Lease liabilities Total financing liabilities Net cash and cash equivalents Movement in
net debt(1)
£m £m £m
£m
£m
At 1 January 2024 (309.1) (47.1) (356.2) 123.9 (232.3)
Cash inflow - - - 7.4 7.4
Borrowings and lease liability cash flow (29.5) 4.8 (24.7) - (24.7)
Interest paid - - - (9.9) (9.9)
Net cash inflow/(outflow) (29.5) 4.8 (24.7) (2.5) (27.2)
Share purchases - - - (3.7) (3.7)
New leases and lease remeasurement - (6.1) (6.1) - (6.1)
Exchange and other movements 1.3 0.2 1.5 (2.7) (1.2)
At 30 June 2024 (337.3) (48.2) (385.5) 115.0 (270.5)
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.
Note 11. Financial risk management
Fair values
At 30 June 2024 At 30 June 2023 At 31 December 2023
Carrying Fair value Carrying Fair value Carrying Fair value
amount amount amount
£m £m £m
Level 1 Level 2 Total Level 1 Level 2 Total Level 1 Level 2 Total
£m £m £m £m £m £m £m £m £m
Financial assets and liabilities held at
amortised cost
1.18% Euro Senior Notes 2023 - - - - (21.5) - (21.2) (21.2) - - - -
3.17% US Dollar Senior Notes 2023 - - - - (11.9) - (11.7) (11.7) - - - -
1.55% Euro Senior Notes 2026 (21.2) - (19.8) (19.8) (21.5) - (19.5) (19.5) (21.7) - (20.3) (20.3)
3.37% US Dollar Senior Notes 2026 (77.1) - (71.8) (71.8) (76.8) - (69.8) (69.8) (76.6) - (71.6) (71.6)
4.87% US Dollar Senior Notes 2026 (20.2) - (19.6) (19.6) (20.1) - (19.2) (19.2) (20.0) - (19.4) (19.4)
1.74% Euro Senior Notes 2028 (8.5) - (7.7) (7.7) (8.6) - (7.6) (7.6) (8.7) - (8.0) (8.0)
2.89% Euro Senior Notes 2030 (21.2) - (18.8) (18.8) (21.5) - (18.7) (18.7) (21.7) - (19.6) (19.6)
5.47% US Dollar Senior Notes 2031 (7.9) - (7.5) (7.5) (7.9) - (7.6) (7.6) (7.9) - (7.7) (7.7)
5.53% US Dollar Senior Notes 2033 (7.9) - (7.4) (7.4) (7.9) - (7.6) (7.6) (7.9) - (7.6) (7.6)
5.61% US Dollar Senior Notes 2035 (23.8) - (22.0) (22.0) (23.7) - (22.7) (22.7) (23.7) - (22.8) (22.8)
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)
(188.2) - (175.0) (175.0) (221.8) - (206.0) (206.0) (188.6) - (177.4) (177.4)
Financial assets held at FVTPL 1.0 1.0 - 1.0 - - - - 2.2 2.2 - 2.2
Derivative financial assets held at fair value 0.3 - 0.3 0.3 0.8 - 0.8 0.8 1.5 - 1.5 1.5
1.3 1.0 0.3 1.3 0.8 - 0.8 0.8 3.7 2.2 1.5 3.7
Derivative financial liabilities held at fair value (0.8) - (0.8) (0.8) (0.6) - (0.6) (0.6) (0.5) - (0.5) (0.5)
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 2024 or 2023 and there were no Level 3 financial instruments in either
the six months to 30 June 2024 or 2023.
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 4.2-6.8% (30 June 2023: 4.3-7.1%; 31 December 2023: 3.7-6.3%).
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 2024 At 30 June 2023 At 31 December 2023
Expected credit loss rate Gross trade receivables Expected credit losses Net trade receivables Expected credit loss rate Gross trade receivables Expected credit losses Net trade receivables Expected credit loss Gross trade receivables Expected credit losses Net trade receivables
rate
% £m £m £m % £m £m £m % £m £m £m
Not past due 0.1% 150.2 (0.1) 150.1 0.1% 152.1 (0.1) 152.0 0.2% 133.3 (0.2) 133.1
Past due 0-30 days 1.1% 19.0 (0.2) 18.8 0.4% 25.7 (0.1) 25.6 1.0% 19.9 (0.2) 19.7
Past due 31-60 days 0.0% 4.2 - 4.2 0.0% 7.2 - 7.2 0.0% 3.7 - 3.7
Past due 61-90 days 5.3% 1.9 (0.1) 1.8 2.2% 4.5 (0.1) 4.4 6.3% 1.6 (0.1) 1.5
Past due more than 90 days 87.6% 8.9 (7.8) 1.1 77.4% 11.5 (8.9) 2.6 81.0% 10.5 (8.5) 2.0
184.2 (8.2) 176.0 201.0 (9.2) 191.8 169.0 (9.0) 160.0
Full details of the Group's policies and processes for managing financial risk
are described in note 21 of the Group's 2023 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 of recognised financial assets/ (liabilities)(1) Amounts offset Net amounts presented on the balance sheet Financial instruments not offset in the balance sheet Net amount
£m £m £m £m £m
At 30 June 2024
Derivative financial assets 0.3 - 0.3 - 0.3
Derivative financial liabilities (0.8) - (0.8) - (0.8)
Cash and cash equivalents 116.6 - 116.6 (1.6) 115.0
Current bank and other borrowings (1.6) - (1.6) 1.6 -
At 30 June 2023
Derivative financial assets 0.8 - 0.8 - 0.8
Derivative financial liabilities (0.6) - (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 31 December 2023
Derivative financial assets 1.5 - 1.5 - 1.5
Derivative financial liabilities (0.5) - (0.5) - (0.5)
Cash and cash equivalents 124.5 - 124.5 (0.6) 123.9
Current bank and other borrowings (0.6) - (0.6) 0.6 -
1. Gross amounts of recognised financial assets and liabilities in June 2023
have been re-presented to show the mark-to-market position of the individual
derivatives.
Note 12. Pensions and other post-retirement employee benefits
Defined benefit obligations
Six months ended 30 June 2024
UK US Europe Rest of World Total
£m £m £m £m £m
Summary of net obligations
Present value of unfunded defined benefit obligations - (4.8) (25.8) (4.5) (35.1)
Present value of funded defined benefit obligations (338.3) (101.8) (0.5) (7.9) (448.5)
Fair value of plan assets 354.4 102.8 0.3 8.1 465.6
16.1 (3.8) (26.0) (4.3) (18.0)
Movements in present value of defined benefit obligation
At 1 January 2024 (362.8) (112.2) (28.4) (12.7) (516.1)
Current service cost - - (0.4) (0.8) (1.2)
Interest cost (8.0) (2.6) (0.4) (0.1) (11.1)
Actuarial gain/(loss):
Experience (loss)/gain on plan obligations (0.1) - - 0.3 0.2
Changes in financial assumptions - gain 21.8 4.5 1.3 - 27.6
Benefits paid 10.8 4.5 0.9 0.5 16.7
Exchange adjustments - (0.8) 0.7 0.4 0.3
At 30 June 2024 (338.3) (106.6) (26.3) (12.4) (483.6)
Movements in fair value of plan assets
At 1 January 2024 375.3 106.7 0.2 8.7 490.9
Interest on plan assets 8.2 2.5 - 0.2 10.9
Remeasurement loss (18.3) (2.8) - (0.5) (21.6)
Contributions by employer - 0.3 0.9 0.6 1.8
Benefits paid (10.8) (4.5) (0.9) (0.5) (16.7)
Exchange adjustments - 0.6 0.1 (0.4) 0.3
At 30 June 2024 354.4 102.8 0.3 8.1 465.6
Actual return on assets (10.1) (0.3) - (0.3) (10.7)
Fair value of plan assets by category
Equities - 5.1 - - 5.1
Growth assets 46.2 - - - 46.2
Bonds 27.8 95.1 - - 122.9
Liability-driven investments (LDI) 184.1 - - - 184.1
Matching insurance policies 95.2 1.4 0.3 6.0 102.9
Other 1.1 1.2 - 2.1 4.4
354.4 102.8 0.3 8.1 465.6
Principal actuarial assumptions at 30 June 2024 were: % % % %
Discount rate 5.12 5.28 3.80 5.52
Inflation (UK: RPI/CPI) 3.18/2.45 n/a 2.10 n/a
Six months ended 30 June 2023
UK US Europe Rest of World Total
£m £m £m £m £m
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)
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
Year ended 31 December 2023
UK US Europe Rest of World Total
£m £m £m £m £m
Summary of net obligations
Present value of unfunded defined benefit obligations - (5.2) (27.1) (4.6) (36.9)
Present value of funded defined benefit obligations (362.8) (107.0) (1.3) (8.1) (479.2)
Fair value of plan assets 375.3 106.7 0.2 8.7 490.9
12.5 (5.5) (28.2) (4.0) (25.2)
Principal actuarial assumptions at 31 December 2023 were: % % % %
Discount rate 4.52 4.80 3.40 5.52
Inflation (UK: RPI/CPI) 3.05/2.31 n/a 2.10 n/a
Note 13. Provisions and contingent liabilities
Closure and Legal and other Environmental Total
restructuring provisions provisions
provisions
£m £m £m £m
At 1 January 2024 7.9 5.6 8.3 21.8
Provisions made during the period 1.5 0.2 - 1.7
Provisions used during the period (1.6) (0.4) (1.1) (3.1)
Provisions reversed during the period (0.4) (0.2) - (0.6)
Effect of movements in foreign exchange (0.1) (0.2) - (0.3)
At 30 June 2024 7.3 5.0 7.2 19.5
Current 5.3 2.0 1.7 9.0
Non-current 2.0 3.0 5.5 10.5
At 30 June 2024 7.3 5.0 7.2 19.5
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 seventeen
years, subject to any settlement being reached in advance of that date. Cash
outflows in relation to the lease may continue for the next three 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.
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 has been 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 2023 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 2023 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 before acquisitions, disposals and dividends(1) Cash generated from continuing operations less net capital expenditure, net
interest paid, tax paid and lease payments.
Group earnings before interest, tax, depreciation EBITDA is defined as operating profit before specific adjusting items,
and amortisation (EBITDA)(1) amortisation of intangible assets and depreciation.
Group adjusted operating profit(1) Operating profit adjusted to exclude specific adjusting items and amortisation
of intangible assets.
Group adjusted operating profit margin(1) The ratio of Group adjusted operating profit to revenue.
Group organic(1) The Group results excluding acquisition, disposal and business exit impacts at
constant-currency.
Adjusted earnings per share (EPS)(1) 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 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 cash Net cash and cash equivalents is defined as cash and cash equivalents less
bank overdrafts.
equivalents(1)
Return on invested capital (ROIC)(1) Group 12-month adjusted operating profit (operating profit excluding specific
adjusting items and amortisation of intangible assets) divided by the average
adjusted net assets (excludes long-term employee benefits, deferred tax assets
and liabilities, current tax payable, provisions, cash and cash equivalents,
borrowings, bank overdrafts and lease liabilities).
Specific adjusting items See note 3 to the condensed consolidated financial 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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://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 (https://www.lseg.com/privacy-and-cookie-policy)
. END IR GZGGRMKLGDZZ