Trading/Restructuring Update
Morgan Crucible Co PLC
5 February 2002
THE MORGAN CRUCIBLE COMPANY PLC
Trading and Restructuring Plan Update
• 2001 trading and overall financial performance in line with market
expectations.
• Positive second half free cash flow of approximately £20 million.
• Net borrowings reduced to below £280 million at year-end.
• Board recommends no final dividend to accelerate cost reduction
programme.
• Scale of cost reduction programmes announced.
On October 29th 2001 Morgan referred to 'unprecedented and difficult
circumstances', particularly post September 11th. On December 20th we stated
that it was our intention to issue an update on our cost reduction programme
early in February 2002. The purpose of today's announcement is to outline the
extent and timing of that programme as was promised in that statement.
5th February 2002
Dr. E. B. Farmer, CBE, Chairman Registered Office
Ian P. Norris, Group Chief Executive Morgan House
On behalf of the Board Madeira Walk
Windsor
Berkshire
SL4 1EP
Registered in England No. 286773
TRADING STATEMENT
Trading since October has been in line with Morgan's expectation and the overall
2001 financial performance is in line with market expectations.
Morgan maintained its sales volume against very difficult trading conditions in
the first half of 2001. However, with the weakening European market after
mid-year and the general collapse of order intake post the terrorist action in
the US, it focussed the business on cash generation. Tight controls,
particularly relating to working capital, successfully produced sharp reductions
in both debtor and inventory levels. This produced a positive free cash inflow
of approximately £20 million in the second half, after payment of the interim
dividend and despite the remarkably difficult market background. Net borrowings
during the second half were successfully reduced to below £280 million at
year-end.
Morgan had already announced that it intended to divest its dense refractory
brick business which predominantly serves the steel industry. Before the
year-end Morgan entered into an agreement for a phased sale of all of its
interests in its Australian based dense refractory business to Shinagawa
Refractories Limited of Japan. This reduced its equity interest to 49% with a
contractual agreement for Shinagawa to purchase the remainder of the interest
over the next four years.
COST REDUCTIONS
Morgan has over the last three months undertaken an extensive review of its
operations in order substantially to reduce its cost base. The intention is to
reduce fixed operational gearing in a number of Western countries and increase
the scale of our more flexible Asian operations. Over the next two years this
restructuring programme will result in the implementation of a considerable
number of projects aimed specifically at improving the operational efficiency of
the Group.
Key elements include:
1. Closure or downsizing of specific manufacturing operations in the
Americas and Europe.
2. A significant reduction in overall total employment cost. Headcount
reductions will exceed 1,000 and in addition up to 1,000 jobs will be
transferred to lower cost Eastern European, Asian and South American facilities.
The execution of this programme will result in exceptional costs, to be incurred
in 2002 to 2004 of approximately £70 million of which the net cash costs of
redundancy and reorganisation are expected to be approximately £40 million.
When fully implemented, these initiatives will reduce the Group's operating cost
base by an estimated £30 million per annum from 2004 onwards.
DIVIDEND
In light of the scale and cost of this restructuring programme, the Board has
decided not to recommend a final dividend for 2001, in order to preserve cash to
accelerate the 2002 reorganisation. It is the intention of the Board to resume
a policy of progressive dividend payments at the earliest opportunity.
2001 RESULTS ANNOUNCEMENT
A full analysis of Morgan's financial performance for 2001 together with
detailed information on the restructuring programme will be given at the time of
the publication of the preliminary announcement on March 12th 2002.
Enquiries:
Ian Norris, Group Chief Executive 01753 837000
David Davies, Finance Director 01753 837000
Locksley Ryan, Harry Chathli, Brunswick 020 7404 5959
This information is provided by RNS
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