Full Year Results

RNS Number : 3031B

Morgan Crucible Co PLC

16 February 2011

 



FULL YEAR RESULTS FOR THE PERIOD ENDED 2 JANUARY 2011

Summary

·   Revenue for the full year increased by 7.9% to £1,017.1 million (2009: £942.6 million).

·   Group EBITA (operating profit before restructuring charges and one-off items) increased by 23.0% to £109.5 million (2009: £89.0 million), a margin of 10.8% (2009: 9.4%).  Group EBITA margins increased to 11.5% in the second half of the year compared to 10.0% in the first half.

·   Group underlying operating profit (EBITA after restructuring charges and one-off items) increased by 31.9% to £101.6 million (2009: £77.0 million), a margin of 10.0% (2009: 8.2%).    

·   Profit before tax increased by 115.6% to £67.7 million (2009: £31.4 million).

·   Underlying EPS** increased by 41.7% to 18.7 pence per share (2009:13.2 pence).

·   Net debt was £236.2 million at the year end (2009: £252.7 million), reducing the net debt to EBITDA ratio to below 1.7 times (2009: 2.1 times).

·   The final dividend will be increased by 11.1% to 5.0 pence (2009: Final 4.5 pence), giving a full year dividend of 7.7 pence (2009: 7.0 pence).

·   The growth prospects of the business and the opportunity for further cost reduction through self-help initiatives gives us the confidence to announce our ambition over the next 3 years to:

·   Double 2010 Underlying PBT by 2013, primarily through organic growth but supported by value accretive acquisitions,

·   Achieve mid-teen underlying operating profit margins, and

·   Improve Return on Operating Capital Employed from 25.4% in 2010 to over 35% by 2013.

£m unless otherwise stated		2010	2009	Change
Revenue		1,017.1	942.6	+7.9%
Group EBITA~		109.5	89.0	+23.0%
Underlying operating profit++		101.6	77.0	+31.9%
Underlying PBT*		75.7	47.7	+58.7%
Underlying EPS** (pence)		18.7p	13.2p	+41.7%
Net cash inflow from operating activities		148.1	134.5	+10.1%
Basic EPS (pence)		15.8p	7.1p	+122.5%
Operating profit		93.6	60.7	+54.2%
Profit before tax		67.7	31.4	+115.6%
Return on Operating Capital Employed^		25.4%	18.8%	+35.1%

~	Group EBITA is defined as operating profit before restructuring costs, other one-off items and amortisation of intangible assets.
++	Underlying operating profit is defined as operating profit of £93.6 million (2009: £60.7 million) before amortisation of £8.0 million (2009: £16.3 million).
*	Underlying PBT is defined as operating profit of £93.6 million (2009: £60.7 million) before amortisation of £8.0 million (2009: £16.3 million), less net financing costs of £25.9 million (2009: £29.3 million).
**	Underlying earnings per share ("EPS") is defined as basic earnings per share of 15.8 pence (2009: 7.1     pence) adjusted to exclude amortisation of 2.9 pence (2009: 6.1 pence).
^	Return on Operating Capital Employed is defined as Underlying Operating Profit divided by the sum of Working Capital (which excludes pension liability and provisions) and the net book value of tangible assets; goodwill and other intangible assets are excluded.

Commenting on the results, strategy and outlook for Morgan Crucible, Chief Executive Officer, Mark Robertshaw said:

"Morgan Crucible has delivered strong performance in 2010 with improving momentum through the year.  Our strategy of focusing on technically differentiated products targeted at growth markets and of maintaining a continued focus on managing costs has meant that the Group has delivered much improved earnings.  In 2010 the Group also delivered robust cash generation, enabling us to continue to invest both organically and through bolt-on acquisitions, such as that of the Changsha Hairong advanced materials business in China. 

Through the continued execution of our proven strategy and given the good momentum that we have, I am confident that Morgan Crucible is well placed to deliver further improvements to our performance in 2011 and beyond.  This confidence is underscored by the new three year financial goals we have announced today."  

For further enquiries:

Kevin Dangerfield	Morgan Crucible	01753 837207
Rollo Head/Clare Hunt	Finsbury	020 7251 3801

Operating Review

Reference is made to Divisional EBITA throughout the operational reviews for each of our Divisions, the breakdown of which is shown in the table below.

	Revenue		EBITA			EBITA Margin %
	2010	2009	2010	2009		2010	2009
Technical Ceramics	250.1	206.0	34.0	25.1		13.6%	12.2%
Thermal Ceramics	359.0	315.1	34.8	26.7		9.7%	8.5%
Ceramics	609.1	521.1	68.8	51.8		11.3%	9.9%
AM&T including NP Aerospace	367.7	391.4	39.2	40.5		10.7%	10.3%
Molten Metal Systems	40.3	30.1	6.3	0.9		15.6%	3.0%
Engineered Materials	408.0	421.5	45.5	41.4		11.2%	9.8%
Unallocated central costs*			(4.8)	(4.2)
EBITA pre one-off items**	1,017.1	942.6	109.5	89.0		10.8%	9.4%
One-off items**			(7.9)	(12.0)
EBITA post one-off items**			101.6	77.0		10.0%	8.2%

*   Includes plc costs (eg. Report & Accounts, AGM, Non-Executives) and Group Management costs (eg. Corporate head office rent, utilities, staff etc.).

**   One-off items include the costs of restructuring activity, profit/(loss) on disposal of property and other one-off items.

Divisional Reviews

In July 2010 the Morgan Crucible Group simplified and streamlined its organisational structure into two divisions: the Morgan Engineered Materials Division, comprising Morgan Advanced Materials & Technology (formerly Carbon), NP Aerospace and Molten Metal Systems; and, the Morgan Ceramics Division, comprising Technical Ceramics and Thermal Ceramics.  In this press release and in our financial statements for the year ended 2^nd January 2011, the Group is reporting on the basis of these two new divisions.  However, further analysis of the segments is provided, which is consistent with the former basis of reporting, in order to give visibility and continuity of reporting. Our intention is to provide this analysis for the 2011 half year and full year results.   

Engineered Materials Division

The Engineered Materials Division comprises Morgan Advanced Materials & Technology (formerly Carbon), NP Aerospace and Molten Metal Systems.

Revenue in the Engineered Materials Division was £408.0 million (2009: £421.5 million), representing a decrease at reported rates of 3.2%. At constant currency this decrease in revenue was 4.6%. The revenue for Advanced Materials & Technology (AM&T) was £246.8 million (2009: £205.2 million) representing a significant increase of 20.3% at reported rates and 17.2% on a constant currency basis. NP Aerospace (NPA) revenue was £120.9 million (2009: £186.2 million), in line with our expectations following the exceptional level of vehicle integration contracts in 2009. Molten Metal Systems (MMS) achieved revenue of £40.3 million (2009: £30.1 million) representing very strong growth of 33.9% (29.9% on a constant currency basis).

EBITA for the Engineered Materials Division was £45.5 million (2009: £41.4 million) a margin of 11.2% (2009: 9.8%).  This improvement reflects the strong recovery in AM&T and MMS and the fact that NPA continued to deliver mid-teen margins despite the large reduction in sales volumes. AM&T EBITA profit margins were 8.9% (2009: 5.7%), NPA 14.2% (2009: 15.5%) and MMS 15.6% (2009: 3.0%).

The improvement in the AM&T results reflects the recovery of its core business across most end-markets with the order book showing continued improvement through the period. AM&T continues to benefit from the strong development of its Chinese business with revenue growing more than 40% in 2010. The AM&T business also continues to see the benefits of the extensive cost reduction actions taken in 2008 and 2009, with improved margins being achieved from moves to low cost regions such as Mexico, China and Hungary and from the ongoing Operational Excellence Programme. In addition to the recovery of the traditional markets, AM&T has continued to pursue further growth opportunities in areas such as renewable energy, with success in supplying a broader product offering into the wind energy market, and further progress in our high temperature offering into the solar and LED sectors. 2010 also saw the acquisition of Changsha Hairong New Materials Co., Ltd, a recognised technical leader in the production of advanced graphite materials used in manufacturing anodes for lithium ion batteries for use in portable electronics, electric vehicles and energy storage.

Revenue in NPA was in line with expectations following the anticipated decline from the record levels of 2009 as UK Ministry of Defence demand for new Cougar based vehicles reduced from the initial surge requirements of 2009.  NPA continues to pursue a number of additional domestic and international opportunities with existing and new customers, leveraging its strong portfolio of advanced materials, ballistic expertise, and long history of delivering advanced armour solutions to the UK's Ministry of Defence.  A dedicated NPA office was opened in Detroit in 2010 as part of the ongoing globalisation strategy.  Based on the current order book and visibility of other opportunities, we believe that the previously provided guidance of c.£90m sales in 2011 remains reasonable. 

MMS revenue grew across all regions with a particularly strong performance in China, India and South Korea driving total revenue above the pre-recession levels of 2008. The business returned to strong profitability, at mid-teen EBITA margins, as a result of the realignment of its cost base and focus on high growth markets.

For the Division as a whole, the order book is at a healthy level and the outlook remains positive for continued growth in Emerging Markets and further recovery in Europe and the Americas.

Ceramics Division

The Ceramics Division consists of Technical Ceramics and Thermal Ceramics.  Revenue in the Ceramics Division was £609.1 million (2009: £521.1 million), representing an increase at reported rates of 16.9%. At constant currency the increase in revenue was 15.4%.

Revenue for the Technical Ceramics business in 2010 was £250.1 million (2009: £206.0 million), an increase of 21.4% at reported rates. Revenue was up by 20.5% on a like-for-like constant currency basis with all regions showing strong improvement.  Thermal Ceramics' revenue increased by 13.9% to £359.0 million in 2010 (2009: £315.1 million). On a constant currency basis, the year-on-year increase was 12.1%.

EBITA for the Ceramics Division was £68.8 million (2009: £51.8 million), a margin of 11.3% (2009: 9.9%).  For Technical Ceramics, EBITA was £34.0 million (2009: £25.1 million), reflecting a year-on-year increase of 35.5% at reported rates.  At constant currency this increase was 34.0%.   Technical Ceramics raised its EBITA profit margin by 1.4 percentage points, reaching 13.6% for the year (2009: 12.2%). Thermal Ceramics' EBITA also increased in the year to £34.8 million (2009: £26.7 million), an increase of 30.3% at reported rates.  The EBITA margin also showed good improvement to 9.7% (2009: 8.5%).

For Technical Ceramics, the improved market conditions in most geographies and market sectors, such as aerospace and general industrial, drove volumes and margins. The business maintained its focus on positive mix shift, increasing the number of new business projects in higher margin, higher value-add end-markets such as medical and aerospace, whilst continuing to reduce exposure to more commoditised and economically cyclical product areas. Continuous operational improvement programmes, cost reduction initiatives and an emphasis on positive price pass through all helped to support margin growth. In the USA, the plan to consolidate the majority of the Auburn business with Hayward was completed on time.  The benefits produced were in line with our expectations and also improved margins in the year.  Investments in 2010 concentrated on opportunities in the key market for next generation hard disc drive components.

Thermal Ceramics is a later cycle business so market conditions remained difficult through the early part of 2010.  However, since the second quarter, significant growth has been seen in all markets. Of particular note is the strength of the South American market which is being led by significant new business wins in the petrochemical sector.  With its strong emerging markets footprint, Thermal Ceramics is very well positioned to take further advantage of the population growth and industrialisation in these regions. The benefits to profit from the volume improvements were further supported by a number of operational excellence initiatives. Thermal Ceramics' new product development remains concentrated in the field of low bio-persistent fibre with the continued roll-out of Superwool Plus^TM, a product which offers improved insulation performance, as well as the higher temperature Superwool HT^TM.

A number of actions have been taken since the integration of the Technical and Thermal Ceramics businesses which will drive reductions in the overhead cost base, particularly in, though not limited to, Europe.  As a result we remain well on track to deliver £5 million of integration benefits in 2011, rising to £6-8 million in 2012 and beyond.  Technical Ceramics' successful focus on higher value-add markets and products is expected to bring business mix benefits to Thermal, and the opportunities afforded to Technical by Thermal's strength in a number of emerging markets are being developed.

Order intake has been good in both parts of the Division during the year, with particular improvements being seen in Thermal Ceramics in the second half of the year.  The strong order book and positive market dynamics provide cause for optimism for further improvements in performance in 2011.

Financial Review

Reference is made to 'Underlying operating profit' and 'Underlying EPS' below, both of which are defined at the front of this statement.  These measures of earnings are shown because the Directors consider that they give the best indication of underlying performance.

Group revenue in 2010 was £1,017.1 million, an increase of 7.9% compared to 2009. On a constant currency basis, revenue increased by 6.4%, and at constant currency and excluding NP Aerospace, by 16.5%.

Group EBITA before restructuring charges and one-off items was £109.5 million (2009: £89.0 million) representing a margin of 10.8% (2009: 9.4%).

Group underlying operating profit (EBITA after restructuring costs and one-off items) for the year was £101.6 million (2009: £77.0 million).  Underlying operating profit margins were 10.0%, compared to 8.2% for 2009.

During 2010, there has been a good recovery across most of the markets and the geographies served by the Group.  Whilst like-for-like revenue has not yet returned to its pre-recession 2008 levels, the Group enters 2011 with good business momentum and growing order books.  A strong focus on cost management has been maintained and the Group has continued to invest in and transfer work to its low cost operations and to rationalise its overhead cost base, particularly in high cost Western locations.  The streamlining of the divisional structure in July was an important part of this and actions taken following this streamlining account for a significant part of the restructuring costs in the year of £8.5 million.  A profit of £0.6 million was made in the year on the sale of certain vacant sites.  

The Group amortisation charge for the year was £8.0 million (2009: £16.3 million). The charge is greatly reduced compared to prior year due to the fact that 2009 includes the amortisation charge relating to the fair value of the NP Aerospace order book on the date of acquisition which was amortised fully in 2009.  The 2010 charge is in respect of the amortisation on the other ongoing intangible assets the Group has booked on the acquisition of NP Aerospace, the Carpenter businesses and other historical acquisitions.

The net finance charge was £25.9 million (2009: £29.3 million). This charge was primarily net bank interest and similar charges of £24.7 million (2009: £22.8 million), an increase of £1.9 million.  Whilst there was a saving of £0.7 million due to lower debt levels and improved cash management, there was a net increase in the charge due to 2010 being the first full year of the new Revolving Credit Facility established in 2009 with higher margins and commensurate arrangement and commitment fees.  The balance of the finance charge under IFRS is the net interest charge on pension scheme net liabilities which was £2.0 million (2009: £4.3 million), an interest expense on the unwinding of discount on deferred consideration of £1.2 million (2009: £2.2 million) relating to the NP Aerospace acquisition and a £2.0 million one-off gain arising from the closing out of certain US$/Euro forward foreign exchange contracts.

The tax charge for the period was £19.7 million (2009: £8.7 million). The effective tax rate for this year is 29.1% (2009: 27.7%). The effective tax rate is likely to rise to c.30% in the coming year.

Underlying EPS was 18.7 pence (2009: 13.2 pence).

The Group pension deficit has decreased by £2.0 million since last year end to £103.9 million on an IAS 19 basis.  The main movements were in the US and UK pension schemes. The UK scheme deficit improved by £7.9 million to £26.6 million (2009: £34.5 million), with £6.5 million of this improvement being due to a switch from RPI to CPI indexation in respect of the deferred members in the scheme.  The US scheme deteriorated by £4.1 million to £50.3 million (2009: £46.2 million) mainly due to changes in the mortality assumptions. 

The net cash inflow from operating activities was £148.1 million (2009: £134.5 million), an increase of 10.1%.  The Group was able to generate positive cash flow from working capital of £10.5 million despite the growth in sales volumes. Free cash flow before acquisitions and dividends was £76.5 million, a substantial increase on the £53.5 million in 2009.  

Net debt at the year end was £236.2 million, an improvement of £16.5 million compared to the 2009 year end position even after spending £32.9 million in respect of deferred consideration for NP Aerospace and the acquisition of Hairong.  As a result of the significant improvement in operating results and effective cash management, the net debt to EBITDA ratio at the year end was reduced to below 1.7 times (2009 year end 2.1 times).  With our improving debt position and cash management and the raising of Euro 60 million of private placement debt in May we substantially reduced our bank facilities from £280 million to £180 million, and in January 2011 they were reduced further to £150 million.

Cash Flow

						2010	2009
						£m	£m
Net cash inflow from operating activities						148.1	134.5
Net capital expenditure						(17.0)	(13.7)
Restructuring costs and other one-off items						(7.8)	(12.1)
Net interest paid						(22.7)	(23.2)
Tax paid						(24.1)	(32.0)
Free cash flow before acquisitions and dividends						76.5	53.5
Cash flows in respect of acquisitions						(32.9)	(31.9)
Dividends paid						(15.4)	(12.1)
Exchange movement and other items						(11.7)	28.2
Movement in net debt in period						16.5	37.7
Opening net debt*						(252.7)	(290.4)
Closing net debt						(236.2)	(252.7)

* Net debt is defined as interest-bearing loans and borrowings, bank overdrafts less cash and cash equivalents.

Final Dividend

In view of the continued improvement in Group performance in 2010 and the positive future outlook the Board has recommended a final dividend of 5.0 pence per Ordinary share (2009: 4.5 pence). The dividend will be paid on 8^th July 2011 to Ordinary shareholders on the register of members at the close of business on 20^th May 2011.

Subject to shareholder approval at this year's AGM a scrip alternative to the cash dividend will once again be offered.

Outlook

The Group entered 2011 with an encouraging level of trading momentum across both Divisions and across the geographies and end-markets that we serve. Our ongoing focus on higher growth, higher margin, non-economically cyclical markets has continued to improve the Group's prospects.  Even though risks remain in the global economy, we believe that we are well placed and are optimistic that the Group will continue to make good progress in 2011.

The growth prospects of the business and the opportunity for further cost reduction through self-help initiatives underpin our ambition to:

·    Double 2010 Underlying PBT by 2013, primarily through organic growth but supported by value accretive acquisitions,

·    Achieve mid-teen underlying operating profit margins, and

·    Improve our Return on Operating Capital Employed from 25.4% in 2010 to over 35% by 2013.

CONSOLIDATED INCOME STATEMENT
for the year ended 2 January 2011
			2010		2009
		Note	£m		£m
Revenue		1	1,017.1		942.6
Operating costs before restructuring costs, other one-off items and amortisation of intangible assets			(907.6)		(853.6)
Profit from operations before restructuring costs, other one-off items and amortisation of intangible assets			109.5		89.0
Restructuring costs and other one-off items:
	Restructuring costs and costs associated with settlement of prior period anti-trust litigation	4	(8.5)		(14.0)
	Gain on disposal of property		0.6		2.0
Profit from operations before amortisation of intangible assets		1	101.6		77.0
Amortisation of intangible assets			(8.0)		(16.3)
Operating profit		1	93.6		60.7
Finance income			29.0		24.4
Finance expense			(54.9)		(53.7)
Net financing costs		2	(25.9)		(29.3)
Profit before taxation			67.7		31.4
Income tax expense		3	(19.7)		(8.7)
Profit for the period			48.0		22.7
Profit for period attributable to:
	Owners of the parent		42.5		19.0
	Non-controlling interests		5.5		3.7
			48.0		22.7
Earnings per share		5
Basic			15.8p		7.1p
Diluted			15.0p		6.8p
Dividends
Proposed interim dividend                  - pence			2.70p		2.50p
- £m			7.3		6.8
Proposed final dividend                       - pence			5.00p		4.50p
	- £m		13.6		12.1
The proposed interim and final dividends (2009: actual) are based upon the number of shares outstanding at the balance sheet date.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 2 January 2011
				2010		2009
				£m		£m
Profit for the period				48.0		22.7
Foreign exchange translation differences				6.2		(17.5)
Actuarial loss on defined benefit plans				(6.1)		(18.7)
Revaluation on step acquisition				-		10.8
Net (loss)/gain on hedge of net investment in foreign subsidiary				(0.6)		9.1
Cash flow hedges:
	Effective portion of changes in fair value			0.6		0.2
	Transferred to profit or loss			(0.5)		4.6
Change in fair value of equity securities available-for-sale				0.2		1.0
Tax effect on components of other comprehensive income				2.6		5.5
Total comprehensive income for the period				50.4		17.7
Total comprehensive income attributable to:
	Owners of the parent			42.2		17.1
	Non-controlling interests			8.2		0.6
Total comprehensive income for the period				50.4		17.7

CONSOLIDATED BALANCE SHEET
as at 2 January 2011
		2010		2009
	Note	£m		£m
Assets
Property, plant and equipment		269.2		276.2
Intangible assets		285.0		296.9
Investment in associates		1.5		1.5
Other investments		5.6		5.7
Other receivables		2.0		2.1
Deferred tax assets		38.5		37.2
Total non-current assets		601.8		619.6
Inventories		161.0		146.3
Derivative financial assets		0.7		0.5
Trade and other receivables		184.7		165.8
Cash and cash equivalents	6	85.0		107.6
Assets classified as held for sale		-		1.4
Total current assets		431.4		421.6
Total assets		1,033.2		1,041.2
Liabilities
Interest-bearing loans and borrowings		310.4		346.6
Employee benefits		103.9		105.9
Grants for capital expenditure		0.1		0.2
Provisions		7.6		5.5
Non-trade payables		13.5		31.7
Derivative financial liabilities		-		4.1
Deferred tax liabilities		45.2		47.5
Total non-current liabilities		480.7		541.5
Bank overdraft	6	1.0		1.2
Interest-bearing loans and borrowings		9.8		12.5
Trade and other payables		265.4		250.3
Current tax payable		5.8		4.5
Provisions		12.8		10.9
Derivative financial liabilities		5.6		5.7
Total current liabilities		300.4		285.1
Total liabilities		781.1		826.6
Total net assets		252.1		214.6
Equity
Share capital		68.5		67.9
Share premium		88.3		85.3
Reserves		64.6		61.4
Retained earnings		(6.4)		(30.0)
Total equity attributable to equity holders of parent company		215.0		184.6
Non-controlling interests		37.1		30.0
Total equity		252.1		214.6

The financial statements were approved by the Board of Directors on 16 February 2011 and were signed on its behalf by:

Mark Robertshaw, Chief Executive Officer

Kevin Dangerfield, Chief Financial Officer

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 2 January 2011
						Fair		Capital			Total	Non-
		Share	Share	Translation	Hedging	value	Special	redemption	Other	Retained	parent	controlling	Total
		capital	Premium	reserve	reserve	reserve	reserve	reserve	reserves	earnings	equity	interests	equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 4 January 2009		67.9	85.3	9.9	(4.6)	(2.7)	6.0	35.7	1.0	(20.7)	177.8	30.2	208.0
Profit for the year		-	-	-	-	-	-	-	-	19.0	19.0	3.7	22.7
Other comprehensive income		-	-	0.2	4.8	1.0	-	-	10.8	(18.7)	(1.9)	(3.1)	(5.0)
Other movements		-	-	-	-	-	-	-	(0.7)	0.2	(0.5)	0.5	-
Transactions with owners:
Dividends		-	-	-	-	-	-	-	-	(12.1)	(12.1)	(1.3)	(13.4)
Equity-settled share-based payment transactions		-	-	-	-	-	-	-	-	2.3	2.3	-	2.3
Balance at 3 January 2010		67.9	85.3	10.1	0.2	(1.7)	6.0	35.7	11.1	(30.0)	184.6	30.0	214.6
Balance at 4 January 2010		67.9	85.3	10.1	0.2	(1.7)	6.0	35.7	11.1	(30.0)	184.6	30.0	214.6
Profit for the year		-	-	-	-	-	-	-	-	42.5	42.5	5.5	48.0
Other comprehensive income		-	-	2.9	0.1	0.2	-	-	-	(3.5)	(0.3)	2.7	2.4
Transactions with owners:
Dividends		0.5	2.9	-	-	-	-	-	-	(18.9)	(15.5)	(1.1)	(16.6)
Equity-settled share-based payment transactions		-	-	-	-	-	-	-	-	3.5	3.5	-	3.5
Issue of shares		0.1	0.1	-	-	-	-	-	-	-	0.2	-	0.2
Balance at 2 January 2011		68.5	88.3	13.0	0.3	(1.5)	6.0	35.7	11.1	(6.4)	215.0	37.1	252.1

CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 2 January 2011
			2010	2009
		Note	£m	£m
Operating activities
Profit for the period			48.0	22.7
Adjustments for:
	Depreciation		32.3	31.7
	Amortisation		8.0	16.3
	Net financing costs		25.9	29.3
	Profit on sale of property, plant and equipment		(0.5)	(2.1)
	Income tax expense	3	19.7	8.7
	Equity-settled share based payment expenses		3.1	2.0
Cash generated from operations before changes in working capital and provisions			136.5	108.6
(Increase)/decrease in trade and other receivables			(13.7)	26.5
(Increase)/decrease in inventories			(11.6)	8.1
Increase/(decrease) in trade and other payables			35.8	(7.3)
Decrease in provisions and employee benefits			(6.7)	(13.5)
Cash generated from operations			140.3	122.4
Interest paid			(25.7)	(25.5)
Income tax paid			(24.1)	(32.0)
Net cash from operating activities			90.5	64.9
Investing activities
Purchase of property, plant and equipment			(19.1)	(18.1)
Proceeds from sale of property, plant and equipment			2.1	4.4
Sale of investments			0.3	0.2
Interest received			3.0	2.3
Acquisition of subsidiaries and associate, net of cash acquired			(32.9)	(31.9)
Forward contracts used in net investment hedging			(6.0)	(0.3)
Net cash from investing activities			(52.6)	(43.4)
Financing activities
Increase in borrowings		6	54.3	169.2
Repayment of borrowings		6	(102.1)	(204.7)
Payment of finance lease liabilities		6	(0.5)	(0.6)
Dividends paid			(15.4)	(12.1)
Net cash from financing activities			(63.7)	(48.2)
Net decrease in cash and cash equivalents			(25.8)	(26.7)
Cash and cash equivalents at start of period			107.6	139.4
Effect of exchange rate fluctuations on cash held			3.2	(5.1)
Cash and cash equivalents at period end		6	85.0	107.6

Basis of Preparation The preliminary announcement for the year ended 2 January 2011 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as issued by the International Accounting Standards Board. There has been no significant impact arising from new accounting policies adopted in the year. The Group has considerable financial resources available. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook and as such, the preliminary announcement has been prepared on a Going Concern basis. The financial information set out above does not constitute the Company's statutory accounts for the years ended 2 January 2011 or 3 January 2010. Statutory accounts for the year ended 3 January 2010 have been delivered to the registrar of companies, and those for the year ended 2 January 2011 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2010 and 2009.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.		Segment reporting
		The Group comprises the following four operating segments: - Morgan AM&T  - the Morgan AM&T Business delivers highly engineered solutions built from a portfolio of advanced material technologies that includes carbon, silicon carbide, oxide-based ceramics and advanced polymeric composite materials.
		- Molten Metal Systems - the Molten Metal Systems Business produces crucibles, foundry consumables and furnaces.
		- Technical Ceramics - the Technical Ceramics Business is a leading supplier of customer specific, applications-engineered, industrial products with core products manufactured from advanced materials including structural ceramic, electro-ceramic and precious metals.
		- Thermal Ceramics - the Thermal Ceramics Business provides thermal management solutions for high-temperature applications which benefit technically, financially and environmentally from optimised thermal and energy efficiency management. The information presented below represents the operating segments of the Group.
									Morgan Engineered Materials											Morgan Ceramics
							Morgan AM&T						Molten Metal Systems				Technical Ceramics					Thermal Ceramics					Consolidated
							2010			2009			2010		2009		2010		2009			2010		2009			2010	2009
							£m			£m			£m		£m		£m		£m			£m		£m			£m	£m
	Revenue from external customers						367.7			391.4			40.3		30.1		250.1		206.0			359.0		315.1			1,017.1	942.6
	Divisional EBITA+						39.2			40.5			6.3		0.9		34.0		25.1			34.8		26.7			114.3	93.2
	Unallocated costs																										(4.8)	(4.2)
	Group EBITA~																										109.5	89.0
	Restructuring costs and other one-off items							(1.6)			(5.0)		0.1		(1.7)		(1.7)		(2.0)				(4.7)	(4.2)			(7.9)	(12.9)
	Unallocated gain associated with settlement of prior period anti-trust litigation																										-	0.9
	Underlying operating profit*																										101.6	77.0
	Amortisation of intangible assets								(4.2)			(12.7)	(0.1)		(0.1)		(2.5)		(2.4)				(1.2)	(1.1)			(8.0)	(16.3)
	Operating profit																										93.6	60.7
	Finance income																										29.0	24.4
	Finance expense																										(54.9)	(53.7)
	Profit before taxation																										67.7	31.4
	+ Divisional EBITA is defined as segment operating profit before restructuring costs, other one-off items and amortisation of intangible assets.
	~ Group EBITA is defined as operating profit before restructuring costs, other one-off items and amortisation of intangible assets.
	* Underlying operating profit is defined as operating profit before amortisation of intangible assets.
	The above measures of profit are shown because the Directors use them to measure the underlying performance of the business.
	The Group did not have any significant inter-segment revenue between reportable operating segments in 2010 and 2009.

			Morgan Engineered Materials							Morgan Ceramics
		Morgan AM&T			Molten Metal Systems		Technical Ceramics				Thermal Ceramics		Consolidated
		2010		2009	2010	2009	2010		2009		2010	2009	2010	2009
		£m		£m	£m	£m	£m		£m		£m	£m	£m	£m
	Segment assets	378.9		384.4	31.3	31.6	224.8		220.9		273.1	258.2	908.1	895.1
	Unallocated assets												125.1	146.1
	Total assets												1,033.2	1,041.2
	Segment liabilities	81.6		78.5	7.6	7.4	43.2		32.9		85.4	64.9	217.8	183.7
	Unallocated liabilities												563.3	642.9
	Total liabilities												781.1	826.6
	Segment capital expenditure	6.8		5.0	1.0	0.9	4.9		6.1		6.3	5.9	19.0	17.9
	Unallocated capital expenditure												0.1	0.2
	Total capital expenditure												19.1	18.1
	Segment depreciation	10.1		9.9	1.4	1.2	9.0		9.1		11.8	11.5	32.3	31.7

		Europe		Americas		Far East & Australia		Middle East & Africa		Consolidated
		2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
	Revenue from external customers (based on geographical location of selling company)	422.7	453.3	388.5	325.1	180.0	140.1	25.9	24.1	1,017.1	942.6
	Non-current assets (excluding deferred tax and financial instruments)	260.0	285.0	212.9	216.9	88.7	78.8	1.7	1.7	563.3	582.4
	Segment assets are based on the geographical location of the assets.
	Revenue from external customers attributed to the United Kingdom (the Group's country of domicile) was £197.6 million (2009: £252.7 million) and non-current assets (excluding deferred tax and financial instruments) attributed to the UK was £175.0 million (2009: £193.2 million).
	Major Customer
	Revenue from a range of different products to one customer of the Group's AM&T business represent £106.5 million of the Group's total revenue (2009: £161.1million).

2.	Net finance income and expense
						2010		2009
						£m		£m
	Recognised in profit or loss
	Interest income on bank deposits					1.0		2.3
	Expected return on IAS 19 scheme assets					26.0		22.1
	Gain on foreign exchange derivatives in respect of financial indebtedness					2.0		-
	Finance income					29.0		24.4
	Interest expense on financial liabilities measured at amortised cost					(25.7)		(25.1)
	Interest on IAS 19 obligations					(28.0)		(26.4)
	Interest expense on unwinding of discount on deferred consideration					(1.2)		(2.2)
	Finance expense					(54.9)		(53.7)
	Net financing costs recognised in profit or loss					(25.9)		(29.3)
	The above finance income and expense include the following in respect of assets/(liabilities) not at fair value through profit or loss:
	Total interest income on financial assets					1.0		2.3
	Total interest expense on financial liabilities					(25.7)		(25.1)
	Recognised directly in equity
	Net change in fair value of available for sale financial assets					0.2		1.0
	Cash flow hedges:
	Effective portion of changes in fair value of cash flow hedges					0.6		0.2
	Transferred to profit or loss					(0.5)		4.6
	Effective portion of change in fair value of net investment hedge					(0.6)		9.1
	Foreign currency translation differences for foreign operations					3.5		(8.9)
						3.2		6.0
	Recognised in:
	Fair value reserve					0.2		1.0
	Translation reserve					2.9		0.2
	Hedging reserve					0.1		4.8
						3.2		6.0

3.	Taxation - income tax expense
	Recognised in the income statement
					2010	2009
					£m	£m
	Current tax expense
	Current year				23.3	17.3
	Adjustments for prior years				(2.5)	(0.8)
					20.8	16.5
	Deferred tax expense
	Origination and reversal of temporary differences				(1.1)	(7.8)
	Total income tax expense in income statement				19.7	8.7
	Reconciliation of effective tax rate	2010		2010	2009	2009
		£m		%	£m	%
	Profit before tax	67.7			31.4
	Income tax using the domestic corporation tax rate	18.9		28.0	8.8	28.0
	Non-deductible expenses	0.6		0.8	6.4	20.4
	Temporary differences not equalised in deferred tax	2.8		4.1	(4.3)	(13.7)
	Over-provided in prior years	(2.5)		(3.7)	(0.2)	(0.6)
	Other (including the impact of overseas tax rates)	(0.1)		(0.1)	(2.0)	(6.4)
		19.7		29.1	8.7	27.7
	Income tax recognised directly in equity
	Tax effect on components of other comprehensive income:
	- Deferred tax associated with defined benefit schemes	2.6			-
	- Utilisation of losses previously booked directly to equity	-			5.5
	Other	-			(0.2)
	Total income tax recognised directly in equity	2.6			5.3
	The Emergency Budget on 22 June 2010 announced that the UK corporation tax rate will reduce from 28% to 24% over a period of 4 years from 2011.  The first reduction in the UK corporation tax rate from 28% to 27% was enacted in Finance (No 2) Act 2010 and will be effective from 1 April 2011.

4.	Restructuring costs and costs associated with settlement of prior period anti-trust litigation
	Costs of restructuring were £8.5 million (2009: £14.9 million). During the prior year, net legal costs of £0.9 million were recovered relating to the settlement of prior period anti-trust litigation.

5.	Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 2 January 2011 was based on the profit attributable to equity holders of The Morgan Crucible Company plc of £42.5 million (3 January 2010: £19.0 million) and a weighted average number of Ordinary shares outstanding during the period ended 2 January 2011 of 269,828,216 (3 January 2010: 268,070,252) calculated as follows:
			2010	2009
			£m	£m
Profit attributable to equity holders of The Morgan Crucible Company plc			42.5	19.0
Weighted average number of Ordinary shares
Issued Ordinary shares at the beginning of the period			270,206,256	270,206,256
Effect of shares issued in period and treasury shares held by the Company			(378,040)	(2,136,004)
Weighted average number of Ordinary shares during the period			269,828,216	268,070,252
Basic earnings per share (pence)			15.8p	7.1p
Diluted earnings per share
The calculation of diluted earnings per share at 2 January 2011 was based on the profit attributable to equity holders of The Morgan Crucible Company plc of £42.5 million (3 January 2010: £19.0 million) and a weighted average number of Ordinary shares outstanding during the period ended 2 January 2011 of 283,821,251 (3 January 2010: 279,724,482), calculated as follows:
			2010	2009
			£m	£m
Profit attributable to equity holders of The Morgan Crucible Company plc			42.5	19.0
Weighted average number of Ordinary shares:
Weighted average number of Ordinary shares during the period			269,828,216	268,070,252
Effect of share options/incentive schemes			13,993,035	11,654,230
Diluted weighted average number of Ordinary shares			283,821,251	279,724,482
Diluted earnings per share (pence)			15.0p	6.8p
Underlying earnings per share The calculation of underlying earnings per share at 2 January 2011 was based on operating profit before amortisation, less net financing costs, income tax expense and non-controlling interests of £50.5 million (3 January 2010: £35.3 million) and a weighted average number of Ordinary shares outstanding during the period ended 2 January 2011 of 269,828,216 (3 January 2010: 268,070,252) calculated as follows:
			2010	2009
			£m	£m
Operating profit before amortisation, less net financing costs, income tax expense and non-controlling interests			50.5	35.3
Issued Ordinary shares at the beginning of the period			270,206,256	270,206,256
Effect of shares issued in period and treasury shares held by the Company			(378,040)	(2,136,004)
Weighted average number of Ordinary shares during the period			269,828,216	268,070,252
Earnings per share before amortisation of intangible assets (pence)			18.7p	13.2p
Diluted underlying earnings per share
The calculation of diluted underlying earnings per share at 2 January 2011 was based on operating profit before amortisation, less net financing costs, income tax expense and non-controlling interests of £50.5 million (3 January 2010: £35.3 million) and a weighted average number of Ordinary shares outstanding during the period ended 2 January 2011 of 283,821,251 (3 January 2010: 279,724,482), calculated as follows:
			2010	2009
			£m	£m
Operating profit before amortisation, less net financing costs, income tax expense and non-controlling interests			50.5	35.3
Weighted average number of Ordinary shares during the period			269,828,216	268,070,252
Effect of share options/incentive schemes			13,993,035	11,654,230
Diluted weighted average number of Ordinary shares during the period			283,821,251	279,724,482
Diluted earnings per share before amortisation of intangible assets (pence)			17.8p	12.6p

6.	Cash and cash equivalents/bank overdrafts
		2010	2009
		£m	£m
	Bank balances	68.0	92.9
	Cash deposits	17.0	14.7
	Cash and cash equivalents	85.0	107.6
	Bank overdrafts	(1.0)	(1.2)
	Reconciliation of cash and cash equivalents to net debt*
		2010	2009
		£m	£m
	Opening borrowings	(360.3)	(429.8)
	Net decrease in borrowings	47.8	35.5
	Payment of finance lease liabilities	0.5	0.6
	Effect of movements in foreign exchange on borrowings	(9.2)	33.4
	Closing borrowings	(321.2)	(360.3)
	Cash and cash equivalents	85.0	107.6
	Closing net debt	(236.2)	(252.7)
	*Net debt is defined as interest-bearing loans and borrowings, bank overdrafts less cash and cash equivalents.

 

END

 

 

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