TIDMMGAM
RNS Number : 6373G
Morgan Advanced Materials PLC
25 July 2019
Morgan Advanced Materials
Half-year results for the six months ended 30 June 2019
Organic
constant-
As reported currency(2)
GBP million 1H 1H change change
unless otherwise stated 2019(1) 2018(1) % %
Headline results
Revenue 525.8 514.4 2.2% 1.0%
Group headline operating profit(2) 67.4 62.4 8.0% 3.1%
Group headline operating profit
margin(2) 12.8% 12.1%
Headline EPS(2) 13.8p 13.4p 3.0%
Interim dividend per share 4.0p 4.0p
Cash generated from continuing operations 61.1 55.2 10.7%
Free cash flow before acquisitions,
disposals and dividends(2) 11.4 20.5
Statutory results
Operating profit 63.3 58.6
Profit before tax 54.7 52.4
Cash generated from operations(3) 60.7 53.5
Continuing EPS(4) 12.4p 12.1p
Continuing and discontinued EPS(4) 12.4p 9.1p
=========================================== ========= ========= ============ =============
1. The Group disposed of the Composites and Defence Systems
business in 2018, the disposal group formed the Composites and
Defence Systems operating segment and has been classified as a
discontinued operation under IFRS 5. In line with the requirements
of IFRS 5 all periods presented in these condensed consolidated
financial statements are for continuing operations, with separate
disclosure of discontinued operations where appropriate. Further
details are provided in notes 2 and 7 to the condensed consolidated
financial statements.
2. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
3. Cash generated from continuing and discontinued
operations.
4. EPS is presented on a 'continuing' and a combined 'continuing
and discontinued' basis for statutory reporting. Further details
are provided in note 8 to the condensed consolidated financial
statements.
Highlights
-- Strategy implementation continuing to progress well and remains on track.
-- Revenue growth of 1.0% on an organic constant-currency* basis.
-- Group headline operating profit margin* of 12.8% an
improvement of 70bps from organic revenue* growth and benefit of
efficiency actions.
-- Headline EPS* growth of 3.0% reflecting improvement in operating profit.
-- The expectations of profitability for the full year remain unchanged.
Pete Raby - Chief Executive Officer:
'The Group has made good progress during the first half of the
year. We are on track with the implementation of our strategy,
improving our sales capability, driving new product development and
improving operational performance. We have delivered organic
constant-currency* revenue growth of 1.0% under more challenging
end market conditions and we have expanded our headline operating
margin* to 12.8%.
Looking forward into the second half of 2019 there are a number
of global headwinds and uncertainties leading to a slowing of
industrial markets. Based on our current assessment of business
trends and orders, we expect Group revenues to be broadly flat in
the second half compared to the prior year. Our expectations of
profitability for the full year remain unchanged.'
Strategic progress
The Group has four execution priorities which will continue the
implementation of our strategy.
We have made good progress against those priorities in the first
half of 2019:
1. Drive sales effectiveness and market focus. The Group is
focused on improving a number of aspects of its sales capabilities:
sales processes and their efficiency, the management of key
customer accounts and distribution channels, and deeper
understanding of end-markets and faster-growing segments.
Throughout 2019 we have been deploying the approaches we
developed in 2018 including: embedding our pricing tools across the
sales teams; rolling out our sales skills training to our
commercial organisation; launching our new sales incentive plans
across; deploying and enhancing our customer relationship
management (CRM) system and implementing a clearly defined and
mapped sales process with associated leading KPIs across the
business.
2. Extend technical leadership. Investment has been increased to
build our technical lead and accelerate new product development,
supporting the Group's emphasis on both manufacturing process and
materials technology, producing materials which transform our
customers' processes.
We have maintained investment levels in line with the prior year
and we continue to focus our new product development efforts in our
four research and development Centres of Excellence. Our
development teams are focused on 5-10 priority development projects
in each global business unit that deliver improved materials
properties and performance to meet the needs of our customers, and
expand our fundamental understanding of the characteristics of our
materials as well as their performance in varied environments.
There has been good progress across our business including the
development of new insulation products for our Thermal customers;
further development of materials and material combinations to
enhance corrosion resistance and resistivity for semiconductor
manufacturing applications; continued development of our additive
manufacturing capability for ceramic materials expanding the size
and tolerance range of parts that we can produce. We are making
good progress with a number of developments of our carbon materials
for both electrical and seals and bearings applications. We are
developing materials with better wear characteristics, better
temperature performance and higher current carrying capabilities
for a range of end markets.
3. Increase investment in people management and development. Our
objective is to strengthen our leadership capability and deepen
functional capabilities across the business, including in sales and
engineering.
We have been filling the last remaining gaps in our leadership
teams and working with them to strengthen their performance as
teams. In 2019 we also launched new Group-wide development
programmes for our future leaders at multiple levels of the
organisation. These programmes are designed to develop a global
network and pipeline of leaders who inspire and develop our people,
drive alignment to our purpose and strategic execution priorities,
and to support the leaders to drive and manage change. As part of
the sales effectiveness programme, we have training programmes
underway with our sales and customer service functions.
We also continue to enhance our approach to driving higher
performance by integrating our leadership behaviours into a
globally consistent performance management process, creating a
stronger link between performance and reward, and building the
performance culture across the Group.
4. Improve operational execution. Our objective is to strengthen
our operational capabilities, reduce operational costs to fund
reinvestment in the business, and improve delivery and quality
performance.
We continue to make good progress with our operational
efficiency programmes, with year-to-date net savings underpinning
the margin expansion seen in the first half. These savings come
from a wide variety of projects in automation, global sourcing and
multiple local projects designed to improve efficiency and
eliminate waste across all of our global business units.
Enquiries
Pete Raby Morgan Advanced Materials 01753 837 000
Peter Turner Morgan Advanced Materials
Alison Lea Brunswick 0207 404 5959
Results presentation today
There will be an analyst and investor presentation at 11.30 (UK
time) today at The Lincoln Centre, 18 Lincoln's Inn Fields, London,
WC2A 3ED.
A live video webcast and slide presentation of this event will
be available on morganadvancedmaterials.com. We recommend you
register by 11.15 (UK time).
Basis of preparation
Non-GAAP measures
Throughout this report adjusted measures are used to describe
the Group's financial performance. These are not recognised under
IFRS or other generally accepted accounting principles (GAAP).
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.
The Executive Committee and the Board manage and assess the
performance of the business on these measures as they are more
representative of performance, facilitate meaningful year-on-year
comparisons and hence provide additional useful information to
shareholders.
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 and charts. Definitions of
these non-GAAP measures can be found in the glossary of terms on
page 39, reconciliations of the statutory results to the adjusted
measures can be found on pages 10 to 14.
The Group disposed of the Composites and Defence Systems
business in 2018. The disposal group formed the Composites and
Defence Systems operating segment and has been classified as a
discontinued operation under IFRS 5 Non-current Assets Held For
Sale and Discontinued Operations. In line with the requirements of
IFRS 5 all periods presented in these condensed consolidated
financial statements are for continuing operations, with separate
disclosure of discontinued operations where appropriate.
Further details on the disposal of Composites and Defence
Systems are provided in notes 2 and 7 on pages 23 and 30 of the
condensed consolidated financial statements.
Operating review
Revenue Segment EBITA(1) Margin
================ ================== ================
1H 2019 1H 2018 1H 2019 1H 2018 1H 2019 1H 2018
GBPm GBPm GBPm GBPm %%
================================ ======= ======= ======== ======== ======= ======
Thermal Ceramics 207.8 217.3 25.7 26.1 12.4% 12.0%
Molten Metal Systems 24.7 24.5 2.7 3.6 10.9% 14.7%
Thermal Products Division 232.5 241.8 28.4 29.7 12.2% 12.3%
Electrical Carbon 85.4 82.9 11.1 10.3 13.0% 12.4%
Seals and Bearings 71.1 65.6 13.4 12.1 18.8% 18.4%
Technical Ceramics 136.8 124.1 17.5 13.2 12.8% 10.6%
Carbon and Technical Ceramics
Division 293.3 272.6 42.0 35.6 14.3% 13.1%
================================ ======= ======= ======== ======== ======= =======
Divisional total 525.8 514.4 70.4 65.3 13.4% 12.7%
================================ ======= ======= ======== ======== ======= =======
Corporate costs (3.0) (2.9)
================================ ======= ======= ======== ======== ======= =======
Group headline operating
profit(1) 67.4 62.4 12.8% 12.1%
================================ ======= ======= ======== ======== ======= =======
Amortisation of intangible
assets (4.1) (3.8)
Operating profit 63.3 58.6 12.0% 11.4%
Net financing costs (8.6) (6.6)
Share of profit of associate (net
of income tax) - 0.4
========================================= ======= ======== ======== ======= =======
Profit before taxation 54.7 52.4
================================ ======= ======= ======== ======== ======= =======
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
Thermal Products Division
Revenue for Thermal Products for the six months ended 30 June
2019 was GBP232.5 million, representing a decrease of 3.8% compared
with GBP241.8 million in 1H 2018. On an organic constant-currency*
basis, year-on-year revenue decreased by 3.3%.
Divisional EBITA* for Thermal Products was GBP28.4 million (1H
2018: GBP29.7 million) with a Divisional EBITA* margin of 12.2% (1H
2018: 12.3%).
Revenue for Thermal Ceramics for the six months ended 30 June
2019 was GBP207.8 million, representing a decrease of 4.4% compared
with GBP217.3 million in 1H 2018. On an organic constant-currency*
basis, year-on-year revenue decreased by 3.8%. The year-on-year
decrease in revenue was primarily driven by the automotive market
segment, which declined GBP7.7 million (30%) from prior year, and
the decline in the overall European industrial market segment.
Growth was seen in the North American and Asian chemical and
petrochemical (CPI) market segments as well as iron and steel.
EBITA* for Thermal Ceramics for the six months ended 30 June
2019 was GBP25.7 million (1H 2018: GBP26.1 million) with EBITA
margin* of 12.4% (1H 2018: 12.0%). The year-on-year margin
improvement was driven by prior year plant closures and operational
efficiencies.
Revenue for Molten Metals Systems for the six months ended 30
June 2019 was GBP24.7 million, representing an increase of 0.8%
compared with GBP24.5 million in 1H 2018. On an organic
constant-currency* basis, year-on-year revenue increased by 0.4%.
The core crucibles business growth was primarily driven by good
performance in India and South America, offsetting automotive
industry driven demand decline in China, North America and Europe.
Industrial equipment sales increased globally into the precious
metals fire assay markets.
EBITA* for Molten Metals Systems for the six months ended 30
June 2019 was GBP2.7 million (1H 2018: GBP3.6 million) with EBITA
margin* of 10.9% (1H 2018: 14.7%). During 2019 margin was impacted
by one-off restructuring costs, as well as the annualised impact of
prior year planned investments in technology, product development
and sales capability, designed to improve the future prospects of
the business.
Carbon and Technical Ceramics Division
Revenue for the Carbon and Technical Ceramics Division for the
six months ended 30 June 2019 was GBP293.3 million, representing an
increase of 7.6% compared with GBP272.6 million in 1H 2018. On an
organic constant-currency* basis, year-on-year revenue increased
4.6%.
Divisional EBITA* for the Carbon and Technical Ceramics Division
was GBP42.0 million (1H 2018: GBP35.6 million) with Divisional
EBITA margin* of 14.3% (1H 2018: 13.1%).
Revenue for Electrical Carbon for the six months ended 30 June
2019 was GBP85.4 million, representing an increase of 3.0% compared
with GBP82.9 million in 1H 2018. On an organic constant-currency*
basis, year-on-year revenue increased by 2.0%.
The year-on-year growth was driven primarily by the wind and
semiconductor market segments. On a regional basis, Europe achieved
strong sales into the semiconductor market segment and also from
sales of carbon collector strip products for electrified rail
applications, supported by recent investments. Within North America
products for diesel-electric locomotives in the rail market were
negatively impacted by the general industrial slowdown in the
region, this was partially mitigated by growth in products
supporting power generation applications in the growing wind
market. Sales in Asia were impacted by slowing general industrial
output.
EBITA* for Electrical Carbon for the six months ended 30 June
2019 was GBP11.1 million (1H 2018: GBP10.3 million) with an EBITA
margin* of 13.0% (1H 2018: 12.4%), reflecting the benefit of
revenue growth supported by operational efficiency actions.
Revenue for Seals and Bearings for the six months ended 30 June
2019 was GBP71.1 million, representing an increase of 8.4% compared
with GBP65.6 million in 1H 2018. On an organic constant-currency*
basis year-on-year revenue increased by 5.2%. Revenue growth was
driven by the petrochemical, healthcare and ceramic armour market
segments, partially offset by some contraction in the Asian
domestic heating circulating pumps end market caused by demand
outpacing local infrastructure capabilities, and decline in the
automotive market segment. In a continuation of the contracts
awarded in 2017, sales of ceramic armour increased to GBP15 million
in 1H 2019 (1H 2018: GBP11 million).
EBITA* for Seals and Bearings for the six months ended 30 June
2019 was GBP13.4 million (1H 2018: GBP12.1 million) with an EBITA
margin* of 18.8% (1H 2018: 18.4%). The increase in volume and a
continued strong continuous improvement projects pipeline yielded
incremental savings, which offset cost inflation and investments in
its sales and operations teams, research and development and
targeted functional capabilities in support of its growth
strategy.
Revenue for Technical Ceramics for the six months ended 30 June
2019 was GBP136.8 million, an increase of 10.2% compared with
GBP124.1 million in 1H 2018. On an organic constant-currency*
basis, year-on-year revenue increased by 6.0% primarily driven by
demand increases for ceramic cores in the aerospace market, the
supply of ceramic parts into the semiconductor and medical markets,
and growth in the renewable energy market segment.
EBITA* for Technical Ceramics for the six months ended 30 June
2019 was GBP17.5 million (1H 2018: GBP13.2 million) with an EBITA
margin* of 12.8% (1H 2018: 10.6%). Margins expanded due to the
benefit of higher volume, operational efficiencies, and the
implementation of the new lease accounting standard, IFRS 16.
Group financial review
Group revenue for the six months ended 30 June 2019 was GBP525.8
million (1H 2018: GBP514.4 million), an increase of 2.2% on a
reported basis compared with 1H 2018, driven by improvements in the
underlying business and foreign exchange. On an organic
constant-currency* basis revenue increased by 1.0%.
Group headline operating profit* for the six months ended 30
June 2019 was GBP67.4 million (1H 2018: GBP62.4 million). Headline
operating profit* margin was 12.8%, compared to 12.1% for 1H
2018.
Operating profit was GBP63.3 million (1H 2018: GBP58.6 million)
and profit before tax was GBP54.7 million (1H 2018: GBP52.4
million). There were no specific adjusting items in either six
month period.
The net finance charge was GBP8.6 million (1H 2018: GBP6.6
million), primarily comprising net bank interest and similar
charges of GBP4.8 million (1H 2018: GBP4.2 million), the IAS 19
(revised) finance charge, being the interest charge on pension
scheme net liabilities, of GBP2.3 million (1H 2018: GBP2.4
million), and the interest charge on the Group's lease liabilities
of GBP1.5 million (1H 2018: GBPnil), following the implementation
of IFRS 16 Leases.
The Group amortisation charge was GBP4.1 million (1H 2018:
GBP3.8 million), with the higher year-on-year charge driven by the
amortisation of computer software.
The Group tax charge was GBP15.3 million (1H 2018: GBP14.4
million). The effective tax rate was 28.0% (1H 2018: 27.5%).
Further information is provided in note 6 on page 29 to the
condensed consolidated financial statements.
We anticipate that the effective tax rate will remain at around
28% for the full year, with cash tax paid slightly higher than the
charge to the income statement.
Headline earnings per share* was 13.8 pence (1H 2018: 13.4
pence) and basic earnings per share from continuing operations was
12.4 pence (1H 2018: 12.1 pence). Details of these calculations can
be found in note 8 to the condensed consolidated financial
statements on page 31.
Specific adjusting items
For the six month periods ended 30 June 2019 and 2018 there were
no specific adjusting items.
Cash flow
1H 2019 1H 2018
GBPm GBPm
============================================================== ======= =======
Cash generated from continuing operations 61.1 55.2
Capital expenditure (29.2) (23.1)
Net interest (6.1) (4.1)
Tax paid (14.4) (7.5)
============================================================== ======= =======
Free cash flow before acquisitions, disposals and
dividends(1) 11.4 20.5
============================================================== ======= =======
Dividends paid to external plc shareholders (19.9) (20.0)
Net cash flows from other investing and financing
activities (1.7) (1.3)
Net cash flows from divestments and discontinued operations 0.3 (1.7)
Exchange movement and other non-cash movements (5.6) (4.4)
Movement in net debt(1) in period (15.5) (6.9)
======= =======
Opening net debt(1) (180.0) (181.3)
======= =======
Impact of change in accounting policy (IFRS 16 Leases) (67.4) -
============================================================== ======= =======
Closing net debt(1) (262.9) (188.2)
============================================================== ======= =======
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
Cash generated from continuing operations was GBP61.1 million
(1H 2018: GBP55.2 million), an improvement on 2018 driven by cash
generated from operations, partially offset by movements in working
capital.
Free cash flow before acquisitions, disposals and dividends* was
GBP11.4 million (1H 2018: GBP20.5 million), with the increase in
cash generated from operations offset by increased capital
expenditure and higher cash tax paid compared to 2018, which
benefitted by the one-off US pension contribution in December
2017.
Net debt* was GBP262.9 million (1H 2018: GBP188.2 million). Net
debt* excluding lease liabilities was GBP193.9 million (1H 2018:
GBP187.8 million), representing a net debt*(excluding lease
liabilities) to EBITDA* ratio of 1.2x (1H 2018: 1.2x). Further
information on the Group's net debt* is provided on page 13 and
within note 11 to the condensed consolidated financial statements
on page 33.
Defined benefit pension plans
The Group pension deficit has increased by GBP5.2 million since
last year end to GBP195.6 million (FY 2018: GBP190.4 million) on an
IAS 19 (revised) basis as a result of the lower European discount
rates.
-- The UK schemes deficit increased by GBP0.1 million to
GBP140.2 million, (discount rate 2019 2.22%; FY 2018 2.74%).
-- The US schemes deficit increased by GBP0.5 million to GBP9.3
million, (discount rate 2019 3.53%; FY 2018 4.34%).
-- The European schemes deficit increased by GBP4.2 million to
GBP41.1 million, (discount rate 2019 1.00%; FY 2018 1.70%).
-- The Rest of World schemes deficit increased by GBP0.4 million
to GBP5.0 million, (discount rate 2019 2.10%; FY 2018 2.60%).
Note 13 to the condensed consolidated financial statements, on
pages 35 to 36, provides additional information on the Group's
pension schemes.
Foreign exchange
The principal exchange rates used in the translation of the
results of overseas subsidiaries were as follows:
1H 2019 1H 2018
=========== ============================ ============================
GBP to: Closing rate Average rate Closing rate Average rate
US dollar 1.27 1.29 1.32 1.38
Euro 1.12 1.15 1.13 1.14
=========== ============= ============= ============= =============
For illustrative purposes, the table below provides details of
the impact on first half 2019 revenue and Group headline operating
profit* if the actual reported results, calculated using 2019
average exchange rates for the six months ended 30 June 2019 were
restated for GBP weakening by 10 cents against USD in isolation and
10 cents against the Euro in isolation:
Increase in first half 2019 revenue/Group Revenue Group headline
headline operating profit(1) if: GBPm operating profit(1)
GBPm
================================================== ======== =====================
GBP weakens by 10c against the US dollar
in isolation +19.6 +3.2
GBP weakens by 10c against the Euro in isolation +9.9 +1.5
================================================== ======== =====================
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
Interim dividend
The Board has resolved to pay an interim dividend of 4.0 pence
per Ordinary share. The interim dividend will be paid on 22
November 2019 to Ordinary shareholders on the register of members
at the close of business on 1 November 2019.
Principal risks and uncertainties
The Group has an established risk management methodology, which
seeks to identify, prioritise and mitigate risks, underpinned by a
'three lines of defence' model comprising of an internal control
framework, 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 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 2018 Annual Report, which is available on the Group's
website at morganadvancedmaterials.com.
The Group has reviewed these risks and concluded that they
adequately represent the current principal risks and uncertainties
of the Group and will continue to remain relevant for the second
half of the financial year.
The following are the Group's principal risks and uncertainties:
technical leadership; operational execution, organisational change
and sales effectiveness; portfolio management; macro-economic and
political environment; environment, health and safety; product
quality, safety and liability; IT and cyber security; supply chain
and business continuity; treasury and tax; pension funding;
contract management; and compliance.
The current economic climate continues to have an impact on the
Group, its customers and its suppliers. The UK's exit from the
European Union (EU) may have an impact on the Group if subsequent
tariff changes, or border effects, negatively impact the
profitability of the Group's products or the ability to manufacture
or distribute products on a timely basis. However, given the
current value of the Group's UK exports to the EU (ca. GBP25
million in 2018) and imports into the UK from the EU (ca. GBP15
million in 2018), it is not considered that this will have a
significant impact overall on the Group's liquidity or
operations.
The Board reviews the status of all principal risks with a
notable potential impact at Group level throughout the year.
Additionally, the Audit Committee carries out focused risk reviews
of each Division. These reviews include an analysis of principal
risks, together with the controls, monitoring and assurance
processes established to mitigate those risks to acceptable
levels.
Going concern
As reported on pages 20, 29-30, and 116-124 of the 2018 Annual
Report and Accounts, the Group meets its day-to-day working capital
requirements through local banking arrangements and the committed
GBP200 million unsecured five-year multi-currency revolving credit
facility.
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, show that the
Group is able to operate within the level of its committed
facilities. The Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for a period of 12-months from the date of this Statement.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated financial statements for the
six months ended 30 June 2019.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- The condensed consolidated financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union;
-- The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
of the Financial Conduct Authority, being an indication of
important events that have occurred during the first six months of
the financial year and their impact on the condensed consolidated
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
Information on the current directors of Morgan Advanced
Materials plc responsible for providing this Statement is
maintained on the Company's website at
morganadvancedmaterials.com.
By order of the Board
Pete Raby
Chief Executive Officer
Peter Turner
Chief Financial Officer
25 July 2019
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 4, these
measures are calculated on a continuing basis.
Headline profit and earnings measures
Group headline 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. For the six month periods ended 30 June 2019 and 2018
there were no specific adjusting items. Amortisation is excluded as
the charge arises primarily on externally acquired intangible
assets since the adoption of IFRS and does not therefore reflect
all intangible assets consistently.
Earnings before interest, tax and amortisation (EBITA) is stated
before specific adjusting items and amortisation of intangible
assets. Segment EBITA is stated before unallocated corporate
costs.
Thermal Molten Thermal Electrical Seals Technical Carbon Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and total costs(1)
Systems Division Bearings Technical
Ceramics
GBPm GBPm GBPm GBPm GBPm Division GBPm GBPm GBPm
GBPm GBPm
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
Operating
profit/(loss) 24.6 2.5 27.1 10.7 13.2 15.3 39.2 66.3 (3.0) 63.3
Add back:
amortisation
of intangible
assets 1.1 0.2 1.3 0.4 0.2 2.2 2.8 4.1 - 4.1
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
Group headline
operating
profit 67.4
Corporate
costs(1) 3.0 3.0
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
1H 2019 EBITA 25.7 2.7 28.4 11.1 13.4 17.5 42.0 70.4
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
1.Corporate costs consist of the cost of the central head
office.
Thermal Molten Thermal Electrical Seals Technical Carbon Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and total costs(1)
Systems Division Bearings Technical
Ceramics
GBPm GBPm GBPm GBPm GBPm Division GBPm GBPm GBPm
GBPm GBPm
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
Operating
profit/(loss) 25.1 3.5 28.6 9.9 11.9 11.1 32.9 61.5 (2.9) 58.6
Add back:
amortisation
of intangible
assets 1.0 0.1 1.1 0.4 0.2 2.1 2.7 3.8 - 3.8
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
Group headline
operating
profit 62.4
Corporate
costs(1) 2.9 2.9
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
1H 2018 EBITA 26.1 3.6 29.7 10.3 12.1 13.2 35.6 65.3
============== ========= ======== ========= ========== ========= ========= ========= ======= ========= =====
1.Corporate costs consist of the cost of the central head
office.
Group organic growth
Group organic growth is the growth of the business excluding the
impact of acquisitions, divestments, business exits and foreign
currency. This measure is used as it allows revenue and EBITA to be
compared on a like-for-like basis.
Commentary on the underlying business performance is included as
part of the operational review on pages 4 to 6.
Year-on-year movements in segment revenue
Thermal Molten Thermal Electrical Seals Technical Carbon Segment
Ceramics Metal Products Carbon and Bearings Ceramics and total
Systems Division Technical
Ceramics
Division
========== ========= ========== =========== ============= ========== ============ ========
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== ========== ========= ========== =========== ============= ========== ============ ========
1H 2018 revenue 217.3 24.5 241.8 82.9 65.6 124.1 272.6 514.4
=================== ========== ========= ========== =========== ============= ========== ============ ========
Impact of foreign
currency
movements 0.3 0.1 0.4 0.8 2.0 4.9 7.7 8.1
Impact of
disposals
and business
exits (1.7) - (1.7) - - - - (1.7)
Organic
constant-currency
change (8.1) 0.1 (8.0) 1.7 3.5 7.8 13.0 5.0
Organic
constant-currency
change % (3.8)% 0.4% (3.3)% 2.0% 5.2% 6.0% 4.6% 1.0%
1H 2019 revenue 207.8 24.7 232.5 85.4 71.1 136.8 293.3 525.8
=================== ========== ========= ========== =========== ============= ========== ============ ========
Year-on-year movements in segment and Group EBITA
Thermal Molten Thermal Electrical Seals Technical Carbon Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and total costs(1)
Systems Division Bearings Technical
Ceramics
Division
========== ========= ========== =========== ========== ========== =========== ======== ========== ======
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== ========== ========= ========== =========== ========== ========== =========== ======== ========== ======
2018 EBITA 26.1 3.6 29.7 10.3 12.1 13.2 35.6 65.3 (2.9) 62.4
=================== ========== ========= ========== =========== ========== ========== =========== ======== ========== ======
Impact of foreign
currency
movements (0.3) - (0.3) 0.1 0.6 0.6 1.3 1.0 - 1.0
Impact of
disposals
and business
exits 1.9 - 1.9 - - 0.1 0.1 2.0 - 2.0
Organic
constant-currency
change (2.0) (0.9) (2.9) 0.7 0.7 3.6 5.0 2.1 (0.1) 2.0
Organic
constant-currency
change % (7.2)% (25.0)% (9.3)% 6.7% 5.5% 25.9% 13.5% 3.1% (3.4)% 3.1%
2019 EBITA 25.7 2.7 28.4 11.1 13.4 17.5 42.0 70.4 (3.0) 67.4
=================== ========== ========= ========== =========== ========== ========== =========== ======== ========== ======
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. A reconciliation of operating
profit to Group EBITDA is as follows:
1H 2019 1H 2018
GBPm GBPm
============================================== ======== ========
Operating profit 63.3 58.6
Add back: depreciation - property, plant
and equipment 15.9 15.4
Add back: depreciation - right-of-use assets 4.7 -
Add back: amortisation of intangible assets 4.1 3.8
============================================== ======== ========
Group EBITDA 88.0 77.8
============================================== ======== ========
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 capital
expenditure, net interest (interest paid on borrowings, overdrafts
and lease liabilities, net of interest received) and tax paid.
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 2019 1H 2018
GBPm GBPm
=============================================== ======== ========
Cash generated from continuing operations 61.1 55.2
Capital expenditure (29.2) (23.1)
Net interest (6.1) (4.1)
Tax paid (14.4) (7.5)
=============================================== ======== ========
Free cash flow before acquisitions, disposals
and dividends 11.4 20.5
=============================================== ======== ========
Net debt
Net debt is defined as borrowings, bank overdrafts and lease
liabilities, less cash and cash equivalents. The Group also
discloses this metric excluding lease liabilities as this is the
measure used in the covenants over the Group's debt facilities.
1H 2019 1H 2018
GBPm GBPm
======================================== ======== ========
Cash and cash equivalents 59.7 58.9
Non-current borrowings (184.9) (195.6)
Current borrowings and bank overdrafts (68.7) (51.1)
Lease liabilities (69.0) (0.4)
Net debt (262.9) (188.2)
======================================== ======== ========
Net debt excluding lease liabilities (193.9) (187.8)
======================================== ======== ========
Return on invested capital
Return on invested capital (ROIC) is defined as the 12-month
Group headline operating profit (operating profit excluding
specific adjusting items and amortisation of intangible assets)
divided by the 12-month average adjusted net assets (third-party
working capital, plant and equipment, land and buildings,
right-of-use assets, intangible assets and other balance sheet
items). This measure excludes long-term employee benefits, deferred
tax assets and liabilities, current tax payable, provisions, cash
and cash equivalents, borrowings and lease liabilities.
1H 2019 1H 2018
GBPm GBPm
============================================= ======== ========
Operating profit 121.4 114.0
Add back: amortisation of intangible assets 8.3 7.6
============================================= ======== ========
Group headline operating profit (12-month
rolling) 129.7 121.6
============================================= ======== ========
12-month average adjusted net assets:
Third-party working capital 177.3 166.6
Plant and equipment 187.6 176.2
Land and buildings 120.8 115.1
Right-of-use assets 24.7 -
Intangible assets 213.7 213.8
Other assets (net) 10.8 9.5
============================================= ======== ========
12-month average adjusted net assets 734.9 681.2
============================================= ======== ========
ROIC 17.6% 17.9%
============================================= ======== ========
Headline earnings per share
Headline earnings per share is defined as operating profit
adjusted to exclude specific adjusting items and amortisation of
intangible assets, plus share of profit of associate less net
financing costs, income tax expense and non-controlling interests,
divided by the weighted average number of Ordinary shares during
the period. This measure of earnings is shown because the Directors
consider it provides a better indication of headline
performance.
Whilst amortisation of intangible assets is a recurring charge
it is excluded from these measures on the basis that it primarily
arises on externally acquired intangible assets and therefore does
not reflect consistently the benefit that all of Morgan's
businesses realise from their intangible assets, which may not be
recognised separately.
Constant-currency revenue and Group headline operating
profit
Constant-currency revenue and Group headline 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 8 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 Financial Statements
for the six months ended 30 June 2019
Condensed consolidated income statement
Six months ended Restated six months Year ended
30 June 2019 ended 31 December 2018
30 June 2018(1)
Results Specific Total Results Specific Total Results Specific Total
before adjusting before adjusting before adjusting
specific items(2) specific items(2) specific items(2)
adjusting adjusting adjusting
items items items
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========= ========= ======= ========= ========= ======= ========= ========= =======
Revenue 3 525.8 - 525.8 514.4 - 514.4 1,033.9 - 1,033.9
Operating costs before
amortisation of intangible
assets (458.4) - (458.4) (452.0) - (452.0) (909.1) (9.5) (918.6)
Profit from operations
before amortisation
of intangible assets 3 67.4 - 67.4 62.4 - 62.4 124.8 (9.5) 115.3
Amortisation of intangible
assets (4.1) - (4.1) (3.8) - (3.8) (8.0) - (8.0)
Operating profit 3 63.3 - 63.3 58.6 - 58.6 116.8 (9.5) 107.3
Finance income 0.6 - 0.6 0.5 - 0.5 1.3 - 1.3
Finance expense (9.2) - (9.2) (7.1) - (7.1) (14.5) - (14.5)
========= ========= ======= ========= ========= ======= ========= ========= =======
Net financing costs 5 (8.6) - (8.6) (6.6) - (6.6) (13.2) - (13.2)
Share of profit of
associate (net of income
tax) - - - 0.4 - 0.4 0.8 - 0.8
Profit before taxation 54.7 - 54.7 52.4 - 52.4 104.4 (9.5) 94.9
Income tax expense 6 (15.3) - (15.3) (14.4) - (14.4) (29.0) (1.7) (30.7)
Profit from continuing
operations 39.4 - 39.4 38.0 - 38.0 75.4 (11.2) 64.2
========= ========= ======= ========= ========= ======= ========= ========= =======
Loss from discontinued
operations(1) 7 - - - (0.9) (7.6) (8.5) (1.4) (9.3) (10.7)
========= ========= ======= ========= ========= ======= ========= ========= =======
Profit for the period 39.4 - 39.4 37.1 (7.6) 29.5 74.0 (20.5) 53.5
========= ========= ======= ========= ========= ======= ========= ========= =======
Profit for the period
attributable to:
Shareholders of the
Company 35.3 - 35.3 33.5 (7.6) 25.9 66.8 (20.5) 46.3
Non-controlling interests 4.1 - 4.1 3.6 - 3.6 7.2 - 7.2
39.4 - 39.4 37.1 (7.6) 29.5 74.0 (20.5) 53.5
========= ========= ======= ========= ========= ======= ========= ========= =======
Earnings per share 8
Continuing operations and discontinued
operations
Basic earnings per
share 12.4p 9.1p 16.2p
Diluted earnings per
share 12.3p 9.0p 16.1p
Continuing operations
Basic earnings per
share 12.4p 12.1p 20.0p
Diluted earnings per
share 12.3p 12.0p 19.9p
Dividends(3)
Proposed interim dividend
- pence 4.0p 4.0p 4.0p
-
GBPm 11.4 11.4 11.4
Final dividend - pence 7.0p
-
GBPm 20.0
1. The Group disposed of the Composites and Defence Systems
business in 2018, the disposal group formed the Composites and
Defence Systems operating segment and has been classified as a
discontinued operation under IFRS 5. In line with the requirements
of IFRS 5 all periods presented in these condensed consolidated
financial statements are for continuing operations, with separate
disclosure of discontinued operations where appropriate. Further
details are provided in notes 2 and 7 to the condensed consolidated
financial statements.
2. Details of specific adjusting items are given in note 4 to
the condensed consolidated financial statements.
3. 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
Translation Hedging Retained Total parent Non- Total comprehensive
reserve reserve earnings comprehensive controlling income
income interests
GBPm GBPm GBPm GBPm GBPm GBPm
=========== ======== ========= ============== ============ ===================
Six months ended 30 June 2019
Profit for the period - - 35.3 35.3 4.1 39.4
=========== ======== ========= ============== ============ ===================
Items that will not be
reclassified
subsequently to profit or loss:
Remeasurement loss on defined
benefit plans - (9.8) (9.8) - (9.8)
Tax effect of components of other
comprehensive income not
reclassified - - 1.6 1.6 - 1.6
=========== ======== ========= ============== ============ ===================
- - (8.2) (8.2) - (8.2)
=========== ======== ========= ============== ============ ===================
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange translation
differences 1.3 - - 1.3 0.3 1.6
Cash flow hedges:
Change in fair value - 0.1 - 0.1 - 0.1
Transferred to profit or loss - 0.1 - 0.1 - 0.1
=========== ======== ========= ============== ============ ===================
1.3 0.2 - 1.5 0.3 1.8
=========== ======== ========= ============== ============ ===================
Total comprehensive income, net
of tax 1.3 0.2 27.1 28.6 4.4 33.0
=========== ======== ========= ============== ============ ===================
Total comprehensive income
attributable
to:
Continuing operations 1.3 0.2 27.1 28.6 4.4 33.0
Discontinued operations - - - - - -
=========== ======== ========= ============== ============ ===================
Total comprehensive income, net
of tax attributable to
shareholders
of the Company 1.3 0.2 27.1 28.6 4.4 33.0
=========== ======== ========= ============== ============ ===================
Year ended 31 December 2018
Profit for the period - - 46.3 46.3 7.2 53.5
=========== ======== ========= ============== ============ ===================
Items that will not be
reclassified
subsequently to profit or loss:
Remeasurement gain on defined
benefit plans - - 14.2 14.2 - 14.2
Tax effect of components of other
comprehensive income not
reclassified - - (0.7) (0.7) - (0.7)
=========== ======== ========= ============== ============ ===================
- - 13.5 13.5 - 13.5
=========== ======== ========= ============== ============ ===================
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange translation
differences 9.9 - - 9.9 0.2 10.1
Cash flow hedges:
Change in fair value - (0.2) - (0.2) - (0.2)
Transferred to profit or
loss - (0.5) - (0.5) - (0.5)
=========== ======== ========= ============== ============ ===================
9.9 (0.7) - 9.2 0.2 9.4
=========== ======== ========= ============== ============ ===================
Total comprehensive income, net
of tax 9.9 (0.7) 59.8 69.0 7.4 76.4
=========== ======== ========= ============== ============ ===================
Total comprehensive
income/(expense)
attributable to:
Continuing operations 9.9 (0.7) 70.5 79.7 7.4 87.1
Discontinued operations - - (10.7) (10.7) - (10.7)
=========== ======== ========= ============== ============ ===================
Total comprehensive income, net
of tax attributable to
shareholders
of the Company 9.9 (0.7) 59.8 69.0 7.4 76.4
=========== ======== ========= ============== ============ ===================
Condensed consolidated statement of comprehensive income
(continued)
Translation Hedging Retained Total parent Non- Total comprehensive
reserve reserve earnings comprehensive controlling income
income interests
GBPm GBPm GBPm GBPm GBPm GBPm
=========== ======== ========= ============== ============ ===================
Six months ended 30 June 2018
Profit for the period - - 25.9 25.9 3.6 29.5
=========== ======== ========= ============== ============ ===================
Items that will not be
reclassified
subsequently to profit or loss:
Remeasurement gain on defined
benefit plans - - 22.8 22.8 - 22.8
Tax effect of components of other
comprehensive income not
reclassified - - (0.5) (0.5) - (0.5)
=========== ======== ========= ============== ============ ===================
- - 22.3 22.3 - 22.3
=========== ======== ========= ============== ============ ===================
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange translation
differences (1.5) - - (1.5) (0.2) (1.7)
Cash flow hedges:
Change in fair value - (0.2) - (0.2) - (0.2)
Transferred to profit or loss - (0.4) - (0.4) - (0.4)
=========== ======== ========= ============== ============ ===================
(1.5) (0.6) - (2.1) (0.2) (2.3)
=========== ======== ========= ============== ============ ===================
Total comprehensive income, net
of tax (1.5) (0.6) 48.2 46.1 3.4 49.5
=========== ======== ========= ============== ============ ===================
Total comprehensive
income/(expense)
attributable to:
Continuing operations (1.5) (0.6) 56.7 54.6 3.4 58.0
Discontinued operations - - (8.5) (8.5) - (8.5)
=========== ======== ========= ============== ============ ===================
Total comprehensive income, net
of tax attributable to
shareholders
of the Company (1.5) (0.6) 48.2 46.1 3.4 49.5
=========== ======== ========= ============== ============ ===================
Condensed consolidated balance sheet
30 June 2019 30 June 2018(1) 31 December
Note 2018(1)
GBPm GBPm GBPm
============ =============== ===========
Assets
Property, plant and equipment 9 321.1 296.4 314.5
Right-of-use assets 52.0 - -
Intangible assets 10 213.8 214.8 215.6
Investments 5.9 6.8 5.9
Other receivables 5.1 6.0 6.3
Deferred tax assets 12.5 9.3 6.9
============ =============== ===========
Total non-current assets 610.4 533.3 549.2
============ =============== ===========
Inventories 152.7 152.1 145.3
Derivative financial assets 0.3 0.9 0.6
Trade and other receivables 208.9 204.9 200.5
Current tax receivable 0.9 2.8 1.3
Cash and cash equivalents 11 59.7 58.9 67.6
============ =============== ===========
Total current assets 422.5 419.6 415.3
============ =============== ===========
Total assets 1,032.9 952.9 964.5
============ =============== ===========
Liabilities
Borrowings 184.9 195.6 164.8
Lease liabilities 57.2 - -
Employee benefits: pensions 13 195.6 191.2 190.4
Provisions 14 8.5 11.1 10.1
Non-trade payables 2.5 3.1 2.5
Deferred tax liabilities 10.8 10.9 11.0
============ =============== ===========
Total non-current liabilities 459.5 411.9 378.8
============ =============== ===========
Borrowings and bank overdrafts 68.7 51.1 82.6
Lease liabilities 11.8 0.4 0.2
Trade and other payables 178.7 190.3 190.5
Current tax payable 27.0 26.6 26.0
Provisions 14 9.5 7.6 8.6
Derivative financial liabilities 0.5 1.1 0.6
============ =============== ===========
Total current liabilities 296.2 277.1 308.5
============ =============== ===========
Total liabilities 755.7 689.0 687.3
============ =============== ===========
Total net assets 277.2 263.9 277.2
============ =============== ===========
Equity
Share capital 71.8 71.8 71.8
Share premium 111.7 111.7 111.7
Reserves 38.7 37.2 37.2
Retained earnings 9.0 1.4 12.1
============ =============== ===========
Total equity attributable
to shareholders of the Company 231.2 222.1 232.8
============ =============== ===========
Non-controlling interests 46.0 41.8 44.4
============ =============== ===========
Total equity 277.2 263.9 277.2
============ =============== ===========
1. Borrowings on the comparative balance sheets have been
re-presented to disaggregate lease liabilities and align with the
current period. See note 1 to the condensed consolidated financial
statements for more information on IFRS 16 Leases.
Condensed consolidated statement of changes in equity
Share Share Translation Hedging Fair Capital Other Retained Total Non- Total
capital premium reserve reserve value redemption reserves earnings parent controlling equity
reserve reserve equity interests
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Balance at 1
January
2018 71.8 111.7 (7.8) 0.5 (1.0) 35.7 11.8 (27.5) 195.2 39.1 234.3
Profit for the
period - - - - - - - 25.9 25.9 3.6 29.5
Other
comprehensive
income - - (1.5) (0.6) - - - 22.3 20.2 (0.2) 20.0
Transactions
with
owners:
Transfer between
reserves - - - - - - 0.1 (0.1) - - -
Dividends - - - - - - - (20.0) (20.0) (0.7) (20.7)
Equity-settled
share-based
payment
transactions - - - - - - - 1.1 1.1 - 1.1
Own shares
acquired
for share
incentive
schemes - - - - - - - (0.3) (0.3) - (0.3)
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Balance at 30
June
2018 71.8 111.7 (9.3) (0.1) (1.0) 35.7 11.9 1.4 222.1 41.8 263.9
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Balance at 1
January
2018 71.8 111.7 (7.8) 0.5 (1.0) 35.7 11.8 (27.5) 195.2 39.1 234.3
Profit for the
period - - - - - - - 46.3 46.3 7.2 53.5
Other
comprehensive
income - - 9.9 (0.7) - - - 13.5 22.7 0.2 22.9
Transactions
with
owners:
Capital
contributions
by
non-controlling
interests - - - - - - - - - 0.5 0.5
Transfer between
reserves - - - - - - (11.2) 11.2 - - -
Dividends - - - - - - - (31.4) (31.4) (2.6) (34.0)
Equity-settled
share-based
payment
transactions - - - - - - - 2.8 2.8 - 2.8
Own shares
acquired
for share
incentive
schemes - - - - - - - (2.8) (2.8) - (2.8)
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Balance at 31
December
2018 71.8 111.7 2.1 (0.2) (1.0) 35.7 0.6 12.1 232.8 44.4 277.2
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Balance at 1
January
2019 as
previously
reported 71.8 111.7 2.1 (0.2) (1.0) 35.7 0.6 12.1 232.8 44.4 277.2
Impact of change
in
accounting
policy,
net of tax - - - - - - - (12.2) (12.2) - (12.2)
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Adjusted balance
at
1 January
2019 71.8 111.7 2.1 (0.2) (1.0) 35.7 0.6 (0.1) 220.6 44.4 265.0
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Profit for the
period - - - - - - - 35.3 35.3 4.1 39.4
Other
comprehensive
income - - 1.3 0.2 - - - (8.2) (6.7) 0.3 (6.4)
Transactions
with
owners:
Dividends - - - - - - - (19.9) (19.9) (2.8) (22.7)
Equity-settled
share-based
payment
transactions - - - - - - - 1.6 1.6 - 1.6
Own shares
acquired
for share
incentive
schemes - - - - - - - 0.3 0.3 - 0.3
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Balance at 30
June
2019 71.8 111.7 3.4 - (1.0) 35.7 0.6 9.0 231.2 46.0 277.2
======= ======= =========== ======= ======= ========== ======== ======== ======= =========== =======
Condensed consolidated statement of cash flows
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========== ============ ====== ========== ============ ====== ========== ============ ======
Operating activities
Profit for the period 39.4 - 39.4 38.0 (8.5) 29.5 64.2 (10.7) 53.5
Adjustments for:
Depreciation - property,
plant and equipment 3 15.9 - 15.9 15.4 0.3 15.7 31.3 0.4 31.7
Depreciation -
right-of-use
assets 3 4.7 - 4.7 - - - - - -
Amortisation 3 4.1 - 4.1 3.8 - 3.8 8.0 - 8.0
Net financing costs 5 8.6 - 8.6 6.6 - 6.6 13.2 - 13.2
Loss on disposal of
businesses 2,7 - - - - - - - 1.7 1.7
Non-cash specific
adjusting
items included in
operating
profit 4,7 - - - - 2.0 2.0 6.5 1.5 8.0
Share of profit from
associate
(net of income tax) - - - (0.4) - (0.4) (0.8) - (0.8)
(Profit)/loss on sale
of property, plant and
equipment - - - (0.1) - (0.1) 0.4 - 0.4
Income tax expense 6 15.3 - 15.3 14.4 - 14.4 30.7 - 30.7
Equity-settled
share-based
payment expenses 1.2 - 1.2 0.9 - 0.9 2.8 - 2.8
========== ============ ====== ========== ============ ====== ========== ============ ======
Cash generated from
operations
before changes in working
capital and provisions 89.2 - 89.2 78.6 (6.2) 72.4 156.3 (7.1) 149.2
========== ============ ====== ========== ============ ====== ========== ============ ======
(Increase)/decrease in
trade and other
receivables (6.3) - (6.3) (9.5) (0.1) (9.6) (7.2) (0.1) (7.3)
(Increase)/decrease in
inventories (7.2) - (7.2) (11.5) - (11.5) (4.2) (0.7) (4.9)
Increase/(decrease) in
trade and other payables (6.7) - (6.7) 5.5 (0.7) 4.8 1.7 (1.4) 0.3
Increase/(decrease) in
provisions (1.7) (0.4) (2.1) (1.4) 5.3 3.9 (2.4) 6.3 3.9
Payments to defined
benefit
pension plans 13 (6.2) - (6.2) (6.5) - (6.5) (12.9) - (12.9)
========== ============ ====== ========== ============ ====== ========== ============ ======
Cash generated from
operations 61.1 (0.4) 60.7 55.2 (1.7) 53.5 131.3 (3.0) 128.3
========== ============ ====== ========== ============ ====== ========== ============ ======
Interest paid - borrowings
and overdrafts 11 (5.3) - (5.3) (4.6) - (4.6) (9.7) - (9.7)
Interest paid - lease
liabilities 11 (1.5) - (1.5) - - - - - -
Income tax paid (14.4) - (14.4) (7.5) - (7.5) (20.9) - (20.9)
========== ============ ====== ========== ============ ====== ========== ============ ======
Net cash from operating
activities 39.9 (0.4) 39.5 43.1 (1.7) 41.4 100.7 (3.0) 97.7
========== ============ ====== ========== ============ ====== ========== ============ ======
Investing activities
Purchase of property,
plant
and equipment and
software (29.2) - (29.2) (23.1) - (23.1) (53.1) - (53.1)
Purchase of investments (0.5) - (0.5) (0.5) - (0.5) (1.0) - (1.0)
Disposal of investments - - - - - - 0.6 - 0.6
Proceeds from sale of
property,
plant and equipment 1.3 - 1.3 0.1 - 0.1 - - -
Loan made to associate 15 - - - (1.0) - (1.0) (1.0) - (1.0)
Loan repaid by associate 15 - - - 1.0 - 1.0 1.0 - 1.0
Interest received 0.7 - 0.7 0.5 - 0.5 1.3 - 1.3
Disposal of subsidiaries,
net of cash disposed - 0.7 0.7 - - - - 1.9 1.9
Net cash from investing
activities (27.7) 0.7 (27.0) (23.0) - (23.0) (52.2) 1.9 (50.3)
========== ============ ====== ========== ============ ====== ========== ============ ======
Financing activities
Purchase of own shares
for share incentive
schemes - - - (0.3) - (0.3) (3.2) - (3.2)
Proceeds from exercise
of share options 0.3 - 0.3 0.2 - 0.2 0.4 - 0.4
Net increase/(decrease)
in borrowings 11 6.1 - 6.1 13.0 - 13.0 7.5 - 7.5
Payment of lease
liabilities
(2018: payment of finance
lease liabilities) 11 (4.3) - (4.3) (0.2) - (0.2) (0.4) - (0.4)
Dividends paid to external
plc shareholders (19.9) - (19.9) (20.0) - (20.0) (31.4) - (31.4)
Dividends paid to
non-controlling
interests (2.8) - (2.8) (0.7) - (0.7) (2.6) - (2.6)
Capital contributions made
by non-controlling
interest
partners - - - - - - 0.5 - 0.5
========== ============ ====== ========== ============ ====== ========== ============ ======
Net cash from financing
activities (20.6) - (20.6) (8.0) - (8.0) (29.2) - (29.2)
========== ============ ====== ========== ============ ====== ========== ============ ======
Net (decrease)/increase
in cash and cash
equivalents (8.4) 0.3 (8.1) 12.1 (1.7) 10.4 19.3 (1.1) 18.2
========== ============ ========== ============ ========== ============
Cash and cash equivalents
at start of period 67.6 50.4 50.4
Effect of exchange rate
fluctuations on cash held 0.2 (1.9) (1.0)
====== ====== ======
Cash and cash equivalents
at period end 11 59.7 58.9 67.6
====== ====== ======
Notes to the condensed consolidated financial statements
1. Basis of preparation, accounting policies, judgements 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 2019 comprise the Company,
its subsidiaries and the Group's interest in associates (together
the 'Group'). The half-year condensed consolidated financial
statements have been prepared for the six months ended 30 June
2019.
The condensed consolidated financial statements for the six
months ended 30 June 2019 have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting 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 2018.
The condensed consolidated financial statements and the
comparative information for the six months ended 30 June 2019 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 2018. 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 financial statements have been prepared on
a going concern basis, refer to page 9 for further details.
The consolidated financial statements of the Group for the year
ended 31 December 2018 are available on request from the Company's
registered office at Quadrant, 55-57 High Street, Windsor,
Berkshire SL4 1LP or at morganadvancedmaterials.com.
The condensed consolidated financial statements for the six
months ended 30 June 2019 were approved by the Board on 25 July
2019.
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.
In preparing the condensed consolidated financial statements,
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 31 December 2018.
Accounting policies
Except for the changes set out in the newly adopted standards
section below, 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 Company's
published consolidated financial statements for the year ended 31
December 2018.
Newly adopted standards - IFRS 16 Leases
The Group adopted IFRS 16 Leases with effect from 1 January
2019. IFRS 16 introduced a single, on-balance sheet accounting
model that is similar to previous finance lease accounting. Under
the standard, from 1 January 2019 the Group:
-- recognises right-of-use assets and lease liabilities
(including those previously assessed as operating leases) on the
consolidated balance sheet at the present value of future lease
payments;
-- recognises depreciation relating to the right-of-use asset
and interest charge on the lease liability in the consolidated
income statement; and
-- separates cash payments made on the outstanding lease
liability into repayment of principal (within financing activities)
and interest paid (within operating activities) in the consolidated
statement of cash flows.
Under IFRS 16, right-of-use assets are tested annually for
impairment in accordance with IAS 36 Impairment of Assets,
replacing the previous requirement to recognise a provision for
onerous lease contracts.
Applied transition options
For leases in existence at 31 December 2018, the Group applied a
modified retrospective approach. Comparative periods are not
restated. The modified retrospective approach has two available
options, under both options the calculation of the lease liability
considered future lease payments only and current discount
rates.
In the calculation of the right-of-use assets for material land
and buildings leases, the Group adopted a modified retrospective
approach using historical payment data as if IFRS 16 had always
existed but with the benefit of hindsight for actual events. This
calculation led to an equity adjustment of GBP16 million before
tax.
1. Basis of preparation, accounting policies, judgements and
estimates (continued)
In the calculation of right-of-use assets for its remaining
lease portfolio (non-material land, buildings, plant and
equipment), the Group used the alternative modified retrospective
approach, whereby the asset is equal to the liability (with the
exception of any transition balance sheet adjustments such as
rent-free periods). There is no equity adjustment arising from this
calculation.
On 1 January 2019 the Group recognised right-of-use assets of
GBP51 million, lease liabilities of GBP67 million and an equity
adjustment of GBP16 million before tax.
The Group utilised the practical expedient available on
transition to IFRS 16 to grandfather assessments on whether an
existing contract contains a lease. From 1 January 2019, the Group
applies the definition of a lease as outlined in IFRS 16, which
examines whether the Group has the right to control the use of an
asset in exchange for consideration. The difference in definition
would not have had a material impact on the Group's financial
statements on transition.
The Group also utilised practical expedients available under a
modified retrospective approach, namely excluding leases with short
remaining terms, excluding leases of low value and relying on the
assessment on whether a lease is considered onerous by applying IAS
37 Provisions, Contingent Liabilities and Contingent Assets
immediately before the date of initial application as an
alternative to performing an impairment review.
The following table provides a reconciliation of the Group's
reported lease liability obligations as at 31 December 2018 and the
lease liabilities recognised under IFRS 16 as at 1 January
2019:
GBPm
======
Future operating lease commitments as at 31
December 2018 64.8
Recognition exemptions:
For leases of low value assets (0.4)
Reasonably certain lease extension/termination
options 24.5
Operating lease commitments for which IFRS 16
has been applied 88.9
Effect of discounting at the incremental borrowing
rate (23.6)
======
Liabilities additionally recognised on initial
application of IFRS 16 on 1 January 2019 65.3
======
Liabilities from finance leases as at 31 December
2018 0.2
Effect of foreign exchange rates(1) 1.9
======
Liabilities from leases as at 1 January 2019 67.4
======
1. Representing the difference in foreign exchange rates between
future operating lease commitments, prepared using 2018 average
rates, and the opening balance sheet rates used for the initial
application of IFRS 16.
The weighted-average incremental borrowing rate for lease
liabilities recognised on 1 January 2019 was 5.14%.
Newly adopted standards - other
The Group has also adopted the following standards and with
effect from 1 January 2019. There has been no material impact on
the Group on adoption of these standards:
-- IFRIC 23 Uncertainty over Income Tax Treatments
There were no other new accounting standards or amendments to
standards that were required to be adopted in the period and the
Group did not adopt any of the new accounting standards that could
have been adopted early.
Accounting developments and changes
There are no upcoming accounting standards or amendments that
are applicable to the Group.
2. Business exits and disposals
2019
There were no business exits or disposals in the six months
ended 30 June 2019.
2018
Composites and Defence Systems
On 20 November 2018, the Group completed the sale of its
Composites and Defence Systems business with its principle site in
Coventry, UK. The transaction was structured as a share sale on a
debt-free and cash-free basis, for a total consideration of GBP2.5
million, of which GBP2.0 million was received on completion and
GBP0.5 million was received on 21 January 2019, with a closing cash
adjustment also received of GBP0.2 million.
The transaction was structured to leave Morgan with the economic
benefit of certain assets, most notably the principal freehold
property associated with the business, as well as certain
liabilities relating to the exit of parts of the business. These
liabilities were provided for in the interim results for the six
months ended 30 June 2018.
In the year ended 31 December 2017, the Composite and Defence
Systems business generated a GBP1.0 million headline operating
loss* on GBP21.0 million of revenue.
The disposal and closure of the Composites and Defence Systems
business reduced the Group's assets and liabilities as follows:
31 December
2018
GBPm
===========
Trading net assets of disposal
group (4.2)
Transaction costs associated
with the business exit and disposal (7.6)
Recycling of deferred foreign
exchange losses (0.2)
Total consideration 2.7
===========
Loss on disposal (9.3)
===========
The disposal group formed the Composites and Defence Systems
operating segment, it was therefore classified as a discontinued
operation under IFRS 5. Further detail is disclosed in note 7 to
the condensed consolidated financial statements.
3. Segment reporting
The Group reports as two Divisions and five global business
units, which have been identified as the Group's reportable
operating segments. These have been identified on the basis of
internal management reporting information that is regularly
reviewed by the Group's Board of Directors (the Chief Operating
Decision Maker) in order to allocate resources and assess
performance.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise mainly investments
and related income, borrowings and related expenses, corporate
assets and head office expenses and income tax assets and
liabilities. The results for the six months to 30 June 2018 have
been restated for discontinued operations, for further details see
note 7 to the condensed consolidated financial statements.
The information presented below represents the operating
segments of the Group.
Six months ended 30 June 2019
Thermal Molten Thermal Electrical Seals Technical Carbon Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and total costs
Systems Division Bearings Technical
Ceramics
Division
Continuing GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
operations
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Revenue from
external
customers 207.8 24.7 232.5 85.4 71.1 136.8 293.3 525.8 - 525.8
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment EBITA1 25.7 2.7 28.4 11.1 13.4 17.5 42.0 70.4 70.4
======== ======= ======== ========== ======== ========= ========= =======
Corporate
costs (3.0) (3.0)
========= =======
Group headline
operating
profit1 67.4
Amortisation
of intangible
assets (1.1) (0.2) (1.3) (0.4) (0.2) (2.2) (2.8) (4.1) - (4.1)
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Operating
profit before
specific
adjusting
items 63.3
Specific
adjusting
items included
in
operating
profit2 - - - - - - - - - -
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Operating
profit/(loss) 24.6 2.5 27.1 10.7 13.2 15.3 39.2 66.3 (3.0) 63.3
======== ======= ======== ========== ======== ========= ========= ======= =========
Finance income 0.6
Finance
expense (9.2)
Share of
profit of
associate (net
of
income tax) -
=======
Profit before
taxation 54.7
=======
Segment assets 415.4 43.4 458.8 163.3 105.6 221.6 490.5 949.3 83.6 1,032.9
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
liabilities 102.8 8.6 111.4 33.7 21.6 79.7 135.0 246.4 509.3 755.7
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
capital
expenditure 6.0 1.4 7.4 4.2 5.0 12.6 21.8 29.2 - 29.2
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
depreciation
- property,
plant
and equipment 6.8 0.9 7.7 2.5 2.4 3.3 8.2 15.9 - 15.9
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
depreciation
-
right-of-use
assets 1.9 0.2 2.1 0.6 0.3 1.7 2.6 4.7 - 4.7
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
2. Details of specific adjusting items are given in note 4 to
the condensed consolidated financial statements.
3. Segment reporting (continued)
Six months ended 30 June 2018
=====
Thermal Molten Thermal Electrical Seals Technical Carbon Segment Restated1 Group
Ceramics Metal Products Carbon and Ceramics and total corporate
Systems Division Bearings Technical costs
Ceramics
Division
Continuing GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
operations
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Revenue from
external
customers 217.3 24.5 241.8 82.9 65.6 124.1 272.6 514.4 - 514.4
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Segment EBITA2 26.1 3.6 29.7 10.3 12.1 13.2 35.6 65.3 65.3
======== ======= ======== ========== ======== ========= ========= =======
Corporate
costs (2.9) (2.9)
========= =====
Group headline
operating
profit2 62.4
Amortisation
of intangible
assets (1.0) (0.1) (1.1) (0.4) (0.2) (2.1) (2.7) (3.8) - (3.8)
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Operating
profit before
specific
adjusting
items 58.6
Specific
adjusting
items included
in
operating
profit3 - - - - - - - - - -
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Operating
profit/(loss) 25.1 3.5 28.6 9.9 11.9 11.1 32.9 61.5 (2.9) 58.6
======== ======= ======== ========== ======== ========= ========= ======= =========
Finance income 0.5
Finance
expense (7.1)
Share of
profit of
associate
(net of
income tax) 0.4
=====
Profit before
taxation 52.4
=====
Segment
assets4 397.0 40.4 437.4 152.1 93.3 183.2 428.6 866.0 79.6 945.6
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Segment
liabilities4 86.6 7.3 93.9 30.3 20.6 41.6 92.5 186.4 493.0 679.4
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Segment
capital
expenditure4 7.5 0.7 8.2 4.5 4.0 6.4 14.9 23.1 - 23.1
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
Segment
depreciation
- property,
plant
and
equipment4 6.6 0.9 7.5 2.4 2.3 3.2 7.9 15.4 - 15.4
======== ======= ======== ========== ======== ========= ========= ======= ========= =====
1. Specific adjusting items of GBP7.6 million were previously
reported within corporate costs, these costs relate solely to
business closure and exit costs within the Composites and Defence
Systems business, therefore they have been restated under IFRS 5
discontinued operations, see also note 7 to the condensed
consolidated financial statements.
2. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
3. Details of specific adjusting items are given in note 4 to
the condensed consolidated financial statements.
4. Segment assets, liabilities, capital expenditure and
depreciation attributed to discontinued operations at 30 June 2018
were GBP7.3 million, GBP9.6 million, GBPnil and GBP0.3 million
respectively and are excluded from the table above.
3. Segment reporting (continued)
Year ended 31 December 2018
Thermal Molten Thermal Electrical Seals Technical Carbon Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and total costs
Systems Division Bearings Technical
Ceramics
Division
Continuing GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
operations
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Revenue from
external
customers 433.6 48.6 482.2 166.8 132.7 252.2 551.7 1,033.9 - 1,033.9
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment EBITA1 52.9 6.6 59.5 19.4 23.7 28.1 71.2 130.7 130.7
======== ======= ======== ========== ======== ========= ========= =======
Corporate
costs (5.9) (5.9)
========= =======
Group headline
operating
profit1 124.8
Amortisation
of intangible
assets (2.2) (0.3) (2.5) (0.7) (0.4) (4.4) (5.5) (8.0) - (8.0)
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Operating
profit before
specific
adjusting
items 116.8
Specific
adjusting
items
included in
operating
profit2 (13.8) - (13.8) - - (1.4) (1.4) (15.2) 5.7 (9.5)
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Operating
profit/(loss) 36.9 6.3 43.2 18.7 23.3 22.3 64.3 107.5 (0.2) 107.3
======== ======= ======== ========== ======== ========= ========= ======= =========
Finance income 1.3
Finance
expense (14.5)
Share of
profit of
associate
(net of
income tax) 0.8
=======
Profit before
taxation 94.9
=======
Segment assets 393.1 41.2 434.3 157.6 97.6 187.2 442.4 876.7 87.8 964.5
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
liabilities 83.3 8.0 91.3 32.2 21.4 42.4 96.0 187.3 500.0 687.3
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
capital
expenditure 15.7 2.4 18.1 11.1 8.8 15.1 35.0 53.1 - 53.1
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
Segment
depreciation
- property,
plant
and equipment 13.6 1.9 15.5 4.7 4.5 6.6 15.8 31.3 - 31.3
======== ======= ======== ========== ======== ========= ========= ======= ========= =======
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
2. Details of specific adjusting items are given in note 4 to
the condensed consolidated financial statements.
3. Segment reporting (continued)
Segment revenue from external customers by geography
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018
Continuing operations GBPm GBPm GBPm
========== ========== ============
US 209.3 186.6 381.3
China 51.0 52.3 104.0
Germany 35.2 37.2 69.9
UK (the Group's country of domicile) 23.0 21.0 42.8
France 13.0 14.6 29.0
Other Asia, Australasia, Middle
East and Africa 96.1 96.3 202.9
Other Europe 66.8 74.7 140.5
Other North America 16.0 16.0 32.4
South America 15.4 15.7 31.1
========== ========== ============
525.8 514.4 1,033.9
========== ========== ============
Revenue from external customers is based on geographic location
of the end customer. No customer represents greater than 10% of
revenue.
Segment revenue by end market
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018
Continuing operations GBPm GBPm GBPm
========== ========== ============
Industrial 243.6 250.2 492.5
Transportation 107.7 110.4 221.9
Chemical and petrochemical 48.6 46.5 96.7
Semiconductor and electronics 34.5 29.5 61.9
Security and defence 33.9 25.3 52.3
Energy 30.8 29.5 58.8
Healthcare 26.7 23.0 49.8
========== ========== ============
525.8 514.4 1,033.9
========== ========== ============
4. Specific adjusting items
In the condensed consolidated income statement the Group
presents specific adjusting items separately. In the judgement of
the Directors, due to 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 a proper understanding of the
financial information and the best indication of underlying
performance of the Group.
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018
2018
Continuing operations GBPm GBPm GBPm
============= ========== ============
Specific adjusting items:
Net pension past service credit - - 5.7
Business closure and exit costs - - (15.2)
============= ========== ============
Total specific adjusting items
before income tax charge - - (9.5)
Income tax charge from specific
adjusting items - - (1.7)
============= ========== ============
Total specific adjusting items
after income tax charge - - (11.2)
============= ========== ============
Specific adjusting items relating to discontinued operations are
disclosed in note 7 to the condensed consolidated financial
statements.
2019
There were no specific adjusting items from continuing
operations in the six months ended 30 June 2019.
2018
Net pension past service credit, UK
Early and late retirement adjustment
In 2018, the Group reviewed with the Trustees of Morgan Pension
Scheme the factors applied on early and late retirement, and
clarified the practice regarding the calculation of pension
payments with members who elected to retire other than at the
normal date of retirement. This was effected via a Deed of
Amendment. This change resulted in a net gain of GBP7.6 million in
the income statement.
Adjustment for Guaranteed Minimum Pensions (GMPs)
On 26 October 2018, the High Court ruled that the Trustee of the
Lloyds Banking Group pension schemes needed to remove the
inequalities in pension scheme benefits that arise from unequal
GMPs. This resulted in a charge of GBP1.9 million to reflect the
potential cost of removing the GMP inequalities for the Group's UK
defined benefit pension schemes.
The net impact of these pension adjustments was a credit to the
income statement of GBP5.7 million.
Business closure and exit costs
Brazil, Thermal Ceramics
In 2018 the Group announced its decision to close the Thermal
Ceramics site in Rio de Janeiro. A GBP6.2 million charge was
recognised. This comprised cash exit costs of GBP2.6 million
relating to site clean-up costs, professional and legal fees and
staff redundancies and impairment costs of GBP3.6 million relating
to the impairment of property, plant and equipment and other
assets. In the year ended December 2018 the business generated a
headline operating loss* of GBP2.6 million on revenues of GBP3.0
million, (year ended 31 December 2017: headline operating loss* of
GBP2.0 million on revenues of GBP6.5 million).
China, Technical Ceramics
In 2018 the Group decided to close its ceramic cores operations
in China, a part of the Technical Ceramics operating segment. A
GBP1.4 million impairment charge was recognised relating to the
impairment of plant and equipment and other assets. In the year
ended December 2018 the business generated a headline operating
loss* of GBP0.9 million on revenues of GBP0.5 million, (year ended
31 December 2017: headline operating loss* of GBP0.9 million on
revenues of GBP0.6 million).
Venezuela, Thermal Ceramics
In 2018 the Group decided to exit its Thermal Ceramics
operations in Venezuela. A GBP7.6 million charge was recognised, of
which GBP7.3 million related to the recycling of deferred foreign
exchange translation losses in accordance with IAS 21 The Effects
of Changes in Foreign Exchange Rates and GBP0.3 million related to
the impairment of assets. In the years ended December 2018 and
December 2017 the business had negligible revenue and headline
operating profit* (GBP0.0 million).
5. Finance income and expense
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018
2018
Continuing operations GBPm GBPm GBPm
============= ========== ============
Interest on bank balances and
cash deposits 0.6 0.5 1.3
============= ========== ============
Finance income 0.6 0.5 1.3
============= ========== ============
Interest on borrowings and overdrafts (5.4) (4.7) (9.8)
Interest on lease liabilities (1.5) - -
Net interest on IAS 19 obligations (2.3) (2.4) (4.7)
============= ========== ============
Finance expense (9.2) (7.1) (14.5)
============= ========== ============
Net financing costs recognised
in profit or loss (8.6) (6.6) (13.2)
============= ========== ============
6. Taxation - income tax expense
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018
2018
Continuing operations GBPm GBPm GBPm
============= ========== ============
Total income tax expense in profit
of loss (15.3) (14.4) (30.7)
============= ========== ============
The Group's consolidated effective tax rate for the six months
ended 30 June 2019 is based on the Directors' best estimate of the
effective tax rate for the year.
EU State Aid
On 2 April 2019 the European Commission ruled that a Group
Financing Exemption under the UK controlled foreign company rules
was partly contrary to EU State Aid rules. The UK government has
filed an annulment application with the EU General Court against
this decision. Like many other multinational groups that have acted
in accordance with the UK legislation in force at the time, the
Group may be affected. The estimated maximum potential liability
for the Group is approximately GBP2.5 million. Based on the Group's
current assessment of the circumstances under which tax would be
payable, no provision has been made.
7. Discontinued operations
The Group disposed of its Composites and Defence Systems
business on 20 November 2018. The business represented a separate
reportable operating segment and therefore, in accordance with IFRS
5 Non-current Assets Held For Sale and Discontinued Operations, the
disposal group was classified as discontinued and the six month
period ended 30 June 2018 has been restated to reflect this.
The results from discontinued operations, which have been
disclosed in the Group's income statement, are set out below:
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
Results Specific Total Results Specific Total Results Specific Total
before adjusting before adjusting before adjusting
specific items(1) specific items(1) specific items(1)
adjusting adjusting adjusting
items items items
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========= ========= ===== ========= ========= ======== ========= ========= ========
Revenue - - - 7.4 - 7.4 11.2 - 11.2
Operating costs - - - (8.3) (7.6) (15.9) (12.6) (9.3) (21.9)
========= ========= ===== ========= ========= ======== ========= ========= ========
Loss before taxation - - - (0.9) (7.6) (8.5) (1.4) (9.3) (10.7)
Income tax expense - - - - - - - - -
========= ========= ===== ========= ========= ======== ========= ========= ========
Loss from
discontinued
operations - - - (0.9) (7.6) (8.5) (1.4) (9.3) (10.7)
========= ========= ===== ========= ========= ======== ========= ========= ========
Basic loss per
share - (3.0)p (3.8)p
Diluted loss per
share - (3.0)p (3.7)p
1. The discontinued specific adjusting items relate to the loss
on disposal of assets and provisions for business exit costs. Refer
also to note 2 to the condensed consolidated financial
statements.
There is no income tax expense in relation to discontinued
operations in either the current or preceding periods.
8. Earnings per share
Six months ended Restated six months Year ended
30 June 2019 ended 31 December 2018
30 June 2018
Earnings Basic Diluted Earnings Basic Diluted Earnings Basic Diluted
earnings earnings earnings earnings earnings earnings
per share per share per share per share per share per share
GBPm pence pence GBPm pence pence GBPm pence pence
======== ========= ========= ======== ========= ========= ======== ========= ==========
Profit for the
period
attributable to
shareholders
of the Company 35.3 12.4p 12.3p 25.9 9.1p 9.0p 46.3 16.2p 16.1p
Loss from
discontinued
operations - - - 8.5 3.0p 3.0p 10.7 3.8p 3.7p
======== ========= ========= ======== ========= ========= ======== ========= ==========
Profit from
continuing
operations 35.3 12.4p 12.3p 34.4 12.1p 12.0p 57.0 20.0p 19.9p
======== ========= ========= ======== ========= ========= ======== ========= ==========
Specific
adjusting items - - - - 9.5 3.3p
Amortisation of
intangible
assets 4.1 1.4p 3.8 1.3p 8.0 2.8p
Tax effect of
the above - - - - 1.7 0.6p
Non-controlling - - - - - -
interests'
share of the
above
adjustments
======== ========= ======== ========= ======== =========
Adjusted profit
for the
period from
continuing
operations
for use in
headline
earnings
per share1 39.4 13.8p 38.2 13.4p 76.2 26.7p
======== ========= ======== ========= ======== =========
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
30 June 30 June 31 December
Number of shares 2019 2018 2018
======== ========================= =========================
Weighted average number of Ordinary
shares for the purposes of basic
earnings per share(1) 284.6 285.3 285.2
Effect of dilutive potential
Ordinary shares:
Share options 1.8 1.8 1.6
======== ========================= =========================
Weighted average number of Ordinary
shares for the purposes of diluted
earnings per share 286.4 287.1 286.8
======== ========================= =========================
1. The calculation of the weighted average number of shares
excludes the shares held by The Morgan General Employee Benefit
Trust, on which the dividends are waived.
9. Property, plant and equipment
Land and Plant, equipment Total
buildings and
fixtures
GBPm GBPm GBPm
========== ================================ ======
Cost
At 1 January 2019 218.3 697.6 915.9
Additions 6.3 16.8 23.1
Disposals (2.4) (13.7) (16.1)
Transfers between categories 0.3 (0.3) -
Effect of movement in foreign exchange 0.6 1.7 2.3
========== ================================ ======
At 30 June 2019 223.1 702.1 925.2
========== ================================ ======
Depreciation and impairment losses
At 1 January 2019 95.9 505.5 601.4
Depreciation charge for the period 2.7 13.2 15.9
Reversal of impairment charge - (0.5) (0.5)
Disposals (1.2) (13.6) (14.8)
Transfers between categories - - -
Effect of movement in foreign exchange 0.6 1.5 2.1
========== ================================ ======
Balance at 30 June 2019 98.0 506.1 604.1
========== ================================ ======
Carrying amounts
At 1 January 2019 122.4 192.1 314.5
========== ================================ ======
At 30 June 2019 125.1 196.0 321.1
========== ================================ ======
10. Intangible assets
Goodwill Customer Technology Capitalised Computer Total
relationships and trademarks development software
costs
GBPm GBPm GBPm GBPm GBPm GBPm
======== ============== =============== ============ ========= =====
Cost
At 1 January 2019 179.4 60.4 3.7 0.8 29.8 274.1
Additions - - - - 1.6 1.6
Disposals - - - - - -
Effect of movement in
foreign exchange 0.5 0.3 - - 0.1 0.9
======== ============== =============== ============ ========= =====
At 30 June 2019 179.9 60.7 3.7 0.8 31.5 276.6
======== ============== =============== ============ ========= =====
Amortisation and impairment
losses
At 1 January 2019 - 38.1 0.5 0.8 19.1 58.5
Amortisation charge for
the year - 2.0 0.1 - 2.0 4.1
Impairment losses for - - - - - -
the period
Disposals - - - - - -
Effect of movement in
foreign exchange - 0.2 - - - 0.2
======== ============== =============== ============ ========= =====
Balance at 30 June 2019 - 40.3 0.6 0.8 21.1 62.8
======== ============== =============== ============ ========= =====
Carrying amounts
At 1 January 2019 179.4 22.3 3.2 - 10.7 215.6
======== ============== =============== ============ ========= =====
At 30 June 2019 179.9 20.4 3.1 - 10.4 213.8
======== ============== =============== ============ ========= =====
11. Cash and cash equivalents reconciled to net debt*
At 30 June At 30 June At 31 December
2019 2018 2018
GBPm GBPm GBPm
========== ========== ==============
Bank balances 49.6 49.5 57.9
Cash deposits 10.1 9.4 9.7
========== ========== ==============
Cash and cash equivalents 59.7 58.9 67.6
========== ========== ==============
Reconciliation of cash and cash
equivalents to net debt*
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018
GBPm GBPm GBPm
========== ========== ==============
Opening borrowings and lease liabilities
as reported (247.6) (231.7) (231.7)
Impact of change in accounting
policy (67.4) - -
========== ========== ==============
Adjusted opening borrowings and
lease liabilities (315.0) (231.7) (231.7)
Net increase in borrowings (6.1) (13.0) (7.5)
Payment of lease liabilities 4.3 0.2 0.4
========== ========== ==============
Total changes from cash flows (1.8) (12.8) (7.1)
New leases and lease remeasurement (5.6) - -
Effect of movements in foreign
exchange (0.2) (2.6) (8.8)
========== ========== ==============
Closing borrowings and lease liabilities (322.6) (247.1) (247.6)
========== ========== ==============
Cash and cash equivalents 59.7 58.9 67.6
========== ========== ==============
Closing net debt(1) (262.9) (188.2) (180.0)
========== ========== ==============
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes:
Borrowings Lease liabilities Total financing Cash and Movement
liabilities cash equivalents in
net debt(1)
GBPm GBPm GBPm GBPm GBPm
=========== ================== ================ ================== =============
At 1 January 2019 as
reported (247.4) (0.2) (247.6) 67.6 (180.0)
Impact of change in accounting
policy - (67.4) (67.4) - (67.4)
=========== ================== ================ ================== =============
Adjusted 1 January 2019 (247.4) (67.6) (315.0) 67.6 (247.4)
Cash outflow - - - (2.0) (2.0)
Borrowings and lease
liability cash flow (6.1) 4.3 (1.8) - (1.8)
Net interest paid - - - (6.1) (6.1)
=========== ================== ================ ================== =============
Net cash (outflow)/inflow (6.1) 4.3 (1.8) (8.1) (9.9)
Share purchases - - - - -
New leases and lease
remeasurement - (5.6) (5.6) - (5.6)
Exchange and other movements (0.1) (0.1) (0.2) 0.2 -
=========== ================== ================ ================== =============
At 30 June 2019 (253.6) (69.0) (322.6) 59.7 (262.9)
=========== ================== ================ ================== =============
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 39, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to
14.
12. Financial risk management
Fair values
The fair values of financial assets and liabilities, together
with the carrying amounts shown in the balance sheet, are as
follows:
At 30 June 2019 At 30 June 2018 At 31 December
2018
==================== ==================== ====================
Carrying Fair value Carrying Fair value Carrying Fair value
amount amount amount
GBPm GBPm GBPm GBPm GBPm GBPm
======== ========== ======== ========== ======== ==========
Financial assets and liabilities
at amortised cost
6.26% US Dollar Senior Notes
2019 (59.2) (59.7) (56.8) (58.1) (59.0) (59.6)
1.18% Euro Senior Notes 2023 (22.4) (22.7) (22.1) (22.0) (22.5) (22.3)
3.17% US Dollar Senior Notes
2023 (11.9) (11.8) (11.4) (10.7) (11.8) (11.3)
1.55% Euro Senior Notes 2026 (22.4) (23.1) (22.2) (21.9) (22.5) (22.3)
3.37% US Dollar Senior Notes
2026 (76.7) (74.9) (73.8) (67.0) (76.4) (70.6)
1.74% Euro Senior Notes 2028 (9.0) (9.3) (8.9) (8.6) (9.0) (8.8)
2.89% Euro Senior Notes 2030 (22.4) (23.7) - - (22.5) (22.5)
4.87% US Dollar Senior Notes
2026 (20.1) (21.1) - - - -
Bank and other borrowings (9.5) (9.5) (51.5) (51.5) (23.7) (23.7)
Obligations under finance
leases(1) - - (0.4) (0.4) (0.2) (0.2)
Trade and other payables (90.1) (90.1) (104.2) (104.2) (95.0) (95.0)
Trade and other receivables 183.4 183.4 182.7 182.7 177.8 177.8
Cash and cash equivalents 59.7 59.7 58.9 58.9 67.6 67.6
======== ========== ======== ========== ======== ==========
(100.6) (102.8) (109.7) (102.8) (97.2) (90.9)
Financial instruments - held
at FVOCI(2)
Financial assets - held at
FVOCI(2) 0.5 0.5 1.0 1.0 0.5 0.5
======== ========== ======== ========== ======== ==========
Derivatives and other items
at fair value
Forward exchange contracts
used for hedging (0.2) (0.2) (0.2) (0.2) - -
======== ========== ======== ========== ======== ==========
(100.3) (102.5) (108.9) (102.0) (96.7) (90.4)
======== ========== ======== ========== ======== ==========
1. Comparative information represents finance leases accounted
for under IAS 17.
2. Fair value through other comprehensive income.
On 28 January 2019, the Group completed funding on a US private
placement, raising $25 million for a seven year tenor, to refinance
existing financial indebtedness.
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the preceding table.
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.
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 0.9 - 4.2% (30 June
2018: 1.4 - 4.7%; 31 December 2018: 1.4 - 4.7%).
At 30 June 2019, the carrying value of fixed-interest rate
bearing borrowings totalled GBP244.1 million (30 June 2018:
GBP195.2 million and 31 December 2018: GBP223.7 million) and the
fair value approximated GBP246.3 million (30 June 2018: GBP188.3
million and 31 December 2018: GBP217.4 million).
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the notional amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine the fair
value.
Cash and cash equivalents, trade and other payables and trade
and other receivables
The Group has disclosed the fair value of cash and cash
equivalents, current trade and other receivables and current
payables at their carrying amount, given their notional amount is
deemed to be their fair value.
There have been no transfers between level 1 and level 2 during
2019 and 2018 and there were no level 3 financial instruments in
either 2019 or 2018.
13. Employee benefits
30 June 30 June 30 June 30 June 30 June
2019 2019 2019 2019 2019
UK US Europe Rest of Total
World
GBPm GBPm GBPm GBPm GBPm
========= ======= ======= ======== =======
Pension plans and employee benefits
Present value of unfunded defined
benefit obligations - (8.0) (39.2) (2.0) (49.2)
Present value of funded defined benefit
obligations (582.4) (141.3) (2.4) (11.5) (737.6)
Fair value of plan assets 442.2 140.0 0.5 8.5 591.2
========= ======= ======= ======== =======
Net obligations (140.2) (9.3) (41.1) (5.0) (195.6)
========= ======= ======= ======== =======
Movements in present value of defined
benefit obligation
At 1 January 2019 (544.4) (138.8) (37.3) (13.6) (734.1)
Current service cost - - (0.4) (0.9) (1.3)
Interest cost (7.2) (2.9) (0.3) (0.1) (10.5)
Actuarial gain/(loss):
Experience gain/(loss) on plan obligations 0.8 - - 0.5 1.3
Changes in financial assumptions
- gain/(loss) (49.4) (11.5) (4.3) (0.3) (65.5)
Changes in demographic assumptions
- gain/(loss) 5.3 - - - 5.3
Benefits paid 12.5 4.6 0.7 0.5 18.3
Contributions by members - - - - -
Curtailments and settlements - - - 0.1 0.1
Exchange adjustments - (0.7) - 0.3 (0.4)
========= ======= ======= ======== =======
At 30 June 2019 (582.4) (149.3) (41.6) (13.5) (786.8)
========= ======= ======= ======== =======
Movements in fair value of plan assets
At 1 January 2019 404.3 130.0 0.4 9.0 543.7
Interest on plan assets 5.4 2.7 - 0.1 8.2
Remeasurement gain/(loss) 38.9 10.6 - (0.4) 49.1
Contributions by employer 6.1 0.5 0.8 0.6 8.0
Contributions by members - - - - -
Benefits paid (12.5) (4.6) (0.7) (0.5) (18.3)
Curtailments and settlements - - - (0.1) (0.1)
Exchange adjustments - 0.8 - (0.2) 0.6
========= ======= ======= ======== =======
At 30 June 2019 442.2 140.0 0.5 8.5 591.2
========= ======= ======= ======== =======
The fair values of the plan assets
at 30 June 2019 were as follows:
Equities and growth assets 125.6 6.9 - - 132.5
Bonds and liability-driven investments 142.6 129.0 - - 271.6
Matching insurance policies 173.3 - 0.5 6.4 180.2
Other 0.7 4.1 - 2.1 6.9
========= ======= ======= ======== =======
Total 442.2 140.0 0.5 8.5 591.2
========= ======= ======= ======== =======
Principal actuarial assumptions at % % % %
30 June 2019 were:
Discount rate 2.22 3.53 1.00 2.10
Inflation (UK: RPI/CPI) 3.18/2.08 n/a 1.70 n/a
13. Employee benefits (continued)
30 June 30 June 30 June 30 June 30 June
2018 2018 2018 2018 2018
UK US Europe Rest of Total
World
GBPm GBPm GBPm GBPm GBPm
Pension plans and employee benefits
Present value of unfunded defined
benefit obligations - (7.9) (34.9) (2.7) (45.5)
Present value of funded defined benefit
obligations (560.0) (131.2) (2.0) (9.6) (702.8)
Fair value of plan assets 419.0 129.7 0.6 7.8 557.1
======= ========
Net obligations (141.0) (9.4) (36.3) (4.5) (191.2)
======= ========
Principal actuarial assumptions at
30 June 2018 were: % % % %
Discount rate 2.63 4.26 1.60 3.20
Inflation (UK: RPI/CPI) 3.05/1.95 n/a 1.70 n/a
31 December 31 December 31 December 31 December 31 December
2018 2018 2018 2018 2018
UK US Europe Rest of Total
World
GBPm GBPm GBPm GBPm GBPm
Pension plans and employee benefits
Present value of unfunded defined
benefit obligations - (7.9) (35.9) (2.8) (46.6)
Present value of funded defined benefit
obligations (544.4) (130.9) (1.4) (10.8) (687.5)
Fair value of plan assets 404.3 130.0 0.4 9.0 543.7
===========
Net obligations (140.1) (8.8) (36.9) (4.6) (190.4)
===========
Principal actuarial assumptions at
31 December 2018 were: % % % %
Discount rate 2.74 4.34 1.70 2.60
Inflation (UK: RPI/CPI) 3.17/2.07 n/a 1.70 n/a
14. Provisions and contingent liabilities
Closure Legal and Environmental Total
and restructuring other provisions
provisions provisions
GBPm GBPm GBPm GBPm
At 1 January 2019 3.5 10.3 4.9 18.7
Provisions made during the year 0.1 1.1 - 1.2
Provisions used during the year (0.7) (0.4) (0.6) (1.7)
Provisions reversed during the year - (0.2) - (0.2)
Transfers between categories (0.1) (0.5) 0.6 -
Effect of movements in foreign exchange - - - -
At 30 June 2019 2.8 10.3 4.9 18.0
Current 2.2 6.0 1.3 9.5
Non-current 0.6 4.3 3.6 8.5
At 30 June 2019 2.8 10.3 4.9 18.0
14. Provisions and contingent liabilities (continued)
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. Due to the nature of the provision for
closure and restructuring provisions, the timing of any potential
future outflows in respect of these liabilities is uncertain until
the restructuring programme is completed.
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.
The Company has on occasion been required to take legal or other
actions to protect its intellectual property rights, to enforce
commercial contracts or otherwise and similarly to defend itself
against proceedings brought by other parties. 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.
Other provisions represent the best estimate of the cost of
settling current obligations although there is a higher degree of
judgement involved.
Where obligations are not capable of being reliably estimated,
or if a material outflow of economic resources is considered
remote, it is classified as a contingent liability. The Group is of
the opinion that any associated claims that might be brought can be
defeated successfully and, therefore, the possibility of any
material outflow in settlement is assessed as remote.
Environmental provisions
Environmental provisions are made for quantifiable environmental
liabilities arising from known environmental issues. The amounts
provided are based on the best estimate of the costs required to
remedy these issues. At one site, a remediation feasibility study
is currently being conducted in relation to a known environmental
issue, in conjunction with the local Environmental Regulator. The
costs of completing this study have been provided. At this stage it
is not possible to reliably quantify the liabilities arising from
this environmental issue until the outcome of this feasibility
study is known.
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 the known environmental issue
referred to above under the heading 'environmental provisions'
where the financial impact cannot be reliably estimated until the
completion of the remediation feasibility study.
The Group is of the opinion that, whilst the amounts of future
costs not provided for could be significant, it is not possible to
estimate the amounts involved reliably. However, the Group does not
expect that costs associated with these environmental contingent
liabilities will significantly impact the Group's operations or its
liquidity.
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.
15. Related parties
Identification of related parties
The Company has related party relationships with its
subsidiaries and its associates 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 2018 Annual Report and
Accounts.
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Transactions with associate: GBPm GBPm GBPm
Sales to associate - - 0.3
Purchases from associate 1.1 0.8 1.3
Loan made to associate - 1.0 1.0
Loan repaid by associate - 1.0 1.0
Trade receivables due from associate - - -
Trade payables due to associate 0.3 0.3 1.2
At 30 June 2019 the Group does not have any trade receivables
owed by associates which have been fully provided for (30 June 2018
and 31 December 2018: GBPnil).
Except as disclosed in the table above:
-- There were no related party transactions during the period
that have materially affected the financial position or the perfor
mance of the Group during the period; and
-- There have been no changes in the nature of related party
transactions as described in note 26 to the Group's 2018 Annual
Report and Accounts (page 135) which could have a material effect
on the financial position or performance of the Group during the
period.
Glossary of terms
Constant-currency1 Constant-currency revenue and Group headline operating profit
are derived by translating the prior year results at current
year average exchange rates.
Corporate costs Corporate costs consist of the costs of the central head
office.
Free cash flow Cash generated from operations less capital expenditure,
before acquisitions, net interest paid and tax paid.
diposals and dividends1
Earnings before EBITA is defined as Group operating profit before specific
interest, tax adjusting items and amortisation of intangible assets.
and amortisation
(EBITA)1 Segment - Divisional and global business unit - EBITA is
stated before unallocated corporate costs.
Group earnings EBITDA is defined as operating profit before specific adjusting
before interest, items, amortisation of intangible assets and depreciation.
tax, depreciation
and amortisation
(EBITDA)1
Group headline Operating profit adjusted to exclude specific adjusting
operating profit1 items and amortisation of intangible assets.
Headline earnings Headline earnings per share is defined as operating profit
per share (EPS)1 adjusted to exclude specific adjusting items and amortisation
of intangible assets, plus share of profit of associate
less net financing costs, income tax expense and non-controlling
interests, divided by the weighted average number of Ordinary
shares during the period.
Net debt1 Borrowings, bank overdrafts and lease liabilities less cash
and cash equivalents.
Group organic1 The Group results at constant-currency excluding the impacts
of acquisitions, disposals and business exits.
Return on invested Group headline operating profit (operating profit excluding
capital (ROIC)1 specific adjusting items and amortisation of intangible
assets) divided by the 12-month average adjusted net assets
(third-party working capital, plant and equipment, land
and buildings, right-of-use assets, intangible assets and
other balance sheet items). This measure excludes long-term
employee benefits, deferred tax assets and liabilities,
current tax payable, provisions, cash and cash equivalents,
borrowings and lease liabilities.
Specific adjusting See note 4 to the condensed consolidated financial statements
items1 for further details.
1. Reconciliations of these non-GAAP measures and
reconciliations to GAAP measures can be found on pages 10 to
14.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFLDDAISFIA
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Morgan Advanced Materials (LSE:MGAM)
Historical Stock Chart
From Apr 2024 to May 2024
Morgan Advanced Materials (LSE:MGAM)
Historical Stock Chart
From May 2023 to May 2024