Half-year results, 6 Aug 2024 07:00

06 August 2024, 07:00

Source - LSE Regulatory

RNS Number : 2676Z

Morgan Advanced Materials PLC

06 August 2024

Half-year results for the period ended 30 June 2024

£ million unless otherwise stated	1H 2024	1H 2023	As reported change	Organic constant- currency¹ change
Adjusted results Revenue	572.6	553.9	3.4%	8.2%
Group adjusted operating profit¹	71.3	50.0	42.6%	59.5%
Group adjusted operating profit margin¹	12.5%	9.0%	350bps
Return on invested capital¹	19.7%	18.7%	100bps
Adjusted EPS¹	14.7p	9.9p	48.5%
Free cash flow before acquisitions, disposals and dividends¹	(7.9)	(37.1)	78.7%
Net debt (incl. lease liabilities)¹	270.5	257.7	5.0%

Statutory results
Revenue	572.6	553.9
Operating profit	66.8	34.5	32.3
Profit before taxation	57.5	28.4	29.1
Continuing EPS	13.2p	5.2p	8.0p
Cash generated from continuing operations	66.1	12.9	53.2
Interim dividend per share	5.4p	5.3p	0.1p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20. Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text and by a footnote where they appear in tables.

Group highlights

·	Organic constant-currency* revenue growth of 8.2%, with 14.9% from our faster growing markets
·	Group adjusted operating profit margin* of 12.5%, in line with our financial framework. Pricing measures continue to more than offset inflation
·	Adjusted EPS* at 14.7p has grown +48.5% versus 1H 2023
·	Capital investment programme progressing well
·	Return on invested capital* 19.7% for 1H, at the higher end of our financial framework range
·	Strong balance sheet with net debt/EBITDA (excl. leasing) of 1.3 times
·	Interim dividend increased 0.1p to 5.4p per share
·	Absolute scope 1 and 2 emissions CO₂e reduced by 11.6% compared with 1H 2023
·	2H revenue in line with 1H; margin to remain at around 12.5%

Commenting on the results, Chief Executive Officer, Pete Raby said:

"We are continuing to implement our strategy successfully. Whilst our constant currency revenue growth benefitted from the weaker, cyber impacted, prior year comparator, we have seen underlying revenue growth in both our Core and Faster Growing markets. Our investment in Semiconductor capacity, where we continue to see strong demand and have attractive growth opportunities, along with our simplification programme, are both on-track. Our balance sheet remains strong. I want to thank all our employees for their commitment and support."

Outlook

We are cautious on demand in a number of our end-markets and now expect revenue in our second half to be in line with that in our first half. Nevertheless, we are well-positioned with our market leading differentiated positions and expect constant-currency* full-year revenue growth to continue to be towards the top end of our financial framework at 4-7%. We have made good progress with our simplification programme and expect our full-year margin outlook to remain at around 12.5%.

Business Simplification

As announced with our 2023 financial results we are now managing the Company through three distinct segments, as detailed below, in order to streamline our management structures and optimise plant operations:

Thermal Products: comprising the Thermal Ceramics and MMS segments, focused on growth opportunities in which heat resistance, fire protection and insulation are principal product attributes.

Performance Carbon: comprising the Electrical Carbon and part of the Seals and Bearings segments, with a clear strategy to pursue opportunities for carbon-based components in Semiconductor, Rail, Aerospace, Power Generation and other markets.

Technical Ceramics: comprising the Technical Ceramics and part of the former Seals and Bearings segments, focused on development of our advanced ceramic applications in Semiconductor, Healthcare, Aerospace and Industrial equipment.

This change forms part of a broader restructuring plan that is expected to deliver £10 million of annualised savings by 2025, with an expected implementation cost of around £20 million, of which £18 million are cash costs expected to be incurred during the programme.

FY 2023

£m

FY 2024

£m

FY 2025

£m

Total

£m

Adjusted operating profit^* benefits (incremental)

Costs charged to specific adjusting items

(7)

(11)

(2)

(20)

Our purpose

Our purpose is to use advanced materials to make the world more sustainable and to improve the quality of life. This purpose guides our actions: it underpins our work to reduce our environmental impact, informs how we treat our people, and ensures we fulfil our responsibility for good corporate governance.

We deliver on our purpose through the products that we make and the way that we make them.

·	We improve the quality of life by supporting medical diagnostics with our power tubes in medical scanners. Our feedthroughs are at the core of cochlear implants and our seals are used in blood pumps. These products transform people's lives.
·	Our products help keep people safe. We are proud to design fire protection in everything from cars to tunnels, and ships to oil platforms.
·	We design and manufacture our products to help customers save energy.
·	Our carbon brushes are integral to wind turbines and power generators and enable electrified rail transport.
·	Our ceramic rollers are used to make thin-film solar panels, our insulation is used in solar towers and steam turbines, and our ceramic cores are used to make more efficient industrial gas turbines. These are all products which promote a more sustainable and environmentally secure future for our planet.

Our strategy

Our strategy builds on our strengths and focuses the Group on scalable businesses in attractive markets, and on the development of our three core capabilities in customer focus, application engineering and materials science. To continue the development of our core capabilities, and improve the execution of our strategy, we have three execution priorities:

Big positive difference - making sure we govern our business the right way, looking after the environment, looking after our people and operating to high ethical standards. This priority supports our focus on living and breathing our commitments on inclusion, treating people fairly, reducing waste, managing our water consumption, and reducing emissions.

Delight the customer - following on from our foundational work on sales effectiveness, we are working to shape our product and service offerings further based on customer needs, with the overall objective of making our business more customer-centric.

Innovate to grow - many of our customers have an increasing need to reduce their energy consumption and CO₂e emissions, these customers need our help. This priority supports our focus on working with the customer to innovate in traditional heavy industries whilst also contributing to greener technologies for the future.

We want to accelerate our growth, by winning in our core markets and increasing our exposure to four faster growing market segments: clean energy & clean transportation, semiconductors and healthcare.

We have been focusing our product development and business development efforts in these four market segments over the last several years to develop new and differentiated products that solve complex problems for our customers.

Clean energy and clean transportation - solutions for energy storage, brushes and slip rings for onshore wind applications and ceramic and carbon products used in solar panel manufacture. Our rail collector business for metro and main rail applications, water and vacuum pump components for electric vehicle applications, fire protection solutions for electric vehicles.

Semiconductors - we supply carbon and ceramic consumables for key semiconductor process steps including crystal growth, deposition, lithography and etch.

Healthcare - enabling medical imaging and supply of low temperature insulation for medicine and vaccine transport and storage.

Organic constant-currency* revenue growth in these segments for the six months to 30 June 2024 was 14.9%. These segments represented 22.4% of our revenue overall.

Our financial framework

As previously announced, our financial framework is:

·	Organic constant currency* revenue growth of 4%-7% through the cycle
·	Adjusted operating profit margin* of 12.5%15%
·	Return on invested capital* of 17%-20%
·	Leverage (net debt/EBITDA excl. leasing) of 1.01.5 times without M&A, 1.0-2.0 times with M&A

Our environment, social and governance (ESG) priorities

In March 2021, we set stretching targets to improve our environmental, social and governance performance and become a more sustainable business. We take these commitments seriously and have plans in place to deliver against them in the coming years, making a step change in our performance.

Protect the environment

Our goal is to be a scope 1 and 2 CO₂e net zero business by 2050. Our 2030 target is to reduce our scope 1 and scope 2 CO₂e emissions by 50% (from a 2015 baseline). For the full year 2023 we reduced our scope 1 and scope 2 emissions by 54% versus the 2015 baseline. In the first half we have reduced our CO₂e emissions by 11.6% compared with 1H 2023 through a combination of switching to renewable or carbon free electricity and a range of energy reduction projects across the Group.

Our goal is to use water sustainably across our business. Our 2030 target is to reduce our overall water usage by 30% and reduce our water usage in high and extremely high stress areas by 30% (from a 2015 baseline). In the first half, overall water usage decreased by 8.1% whilst high stress water usage decreased by 4.4% compared with 1H 2023.

Provide a safe, fair and inclusive workplace

Our goal is to create an environment and culture with zero harm to our employees. Our 2030 target is a lost-time accident rate below 0.1 (lost-time accidents per 100,000 hours worked). Our lost time accident rate in the first half was 0.13, compared with 0.28 for 1H 2023. Safety is our top priority and continues to receive a high level of focus throughout the organisation.

Our goal is that our employee demographics reflect the communities that we operate in. Our 2030 target is for 40% female representation across the leadership population of our organisation. At 30 June 2024, we have 34% females in our leadership population, compared with 30% at the end of 2023.

Our goal is to be a welcoming and inclusive organisation where our employees can grow and thrive. Our 2030 target is to attain a top quartile employee engagement score. We survey our employees annually and we will provide an updated engagement score with our preliminary results in 2025.

Our Group Environment, Health and Sustainability Director and Group HR Director coordinate our improvement projects. In addition, the Board reviews progress quarterly and takes an active role in holding the executive team to account on improving ESG performance.

Enquiries


Pete Raby	Morgan Advanced Materials	01753 837 000
Richard Armitage	Morgan Advanced Materials
Nina Coad	Brunswick	0207 404 5959

Results presentation today

There will be an analyst and investor presentation at 10:00 (UK time) today via web-conference.

A live audio webcast and slide presentation of this event will be available on www.morganadvancedmaterials.com

We recommend that you register by 09:45 (UK time).

Basis of preparation

Non-GAAP measures

Throughout this report adjusted measures are used to describe the Group's financial performance. These are not recognised under IFRS or other generally accepted accounting principles (GAAP). The Executive Committee and the Board manage and assess the performance of the business on these measures and they are presented as the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures.

Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text, and by a footnote when they appear in tables. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

All periods presented in these condensed consolidated financial statements are for continuing operations, with separate disclosure of discontinued operations where appropriate.

Operating review

	Revenue		Adjusted operating profit¹		Margin %¹
	1H 2024	1H 2023	1H 2024	1H 2023	1H 2024	1H 2023
	£m	£m	£m	£m	%	%
Thermal Products	221.5	231.4	24.2	15.8	10.9%	6.8%
Performance Carbon	178.9	157.4	31.3	19.6	17.5%	12.5%
Technical Ceramics	172.2	165.1	18.8	17.6	10.9%	10.7%
Segment total²	572.6	553.9	74.3	53.0	13.0%	9.6%
Corporate costs			(3.0)	(3.0)
Group adjusted operating profit¹			71.3	50.0	12.5%	9.0%
Amortisation of intangible assets			(1.1)	(2.1)
Operating profit before specific adjusting items			70.2	47.9	12.3%	8.6%
Specific adjusting items included in operating profit²			(3.4)	(13.4)
Operating profit			66.8	34.5	11.7%	6.2%
Net financing costs			(9.3)	(6.1)
Profit before taxation			57.5	28.4

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items can be found in note 3 to the condensed consolidated financial statements.

Thermal Products

Revenue for the Thermal Products segment for the six months ended 30 June 2024 was £221.5 million, representing a decline of 4.3% compared with £231.4 million in 1H 2023 driven predominantly by foreign exchange. On an organic constant-currency* basis, year-on-year revenue increased by 2.4%, with growth in aerospace and the petrochemical market segments.

Operating profit for the six months ended 30 June 2024 was £22.7 million (1H 2023: 13.1 million) with an operating profit margin of 10.2% (1H 2023: 5.7%). Adjusted operating profit* was £24.2 million (1H 2023 £15.8 million) with an adjusted operating profit margin* of 10.9% (1H 2023: 6.8%), with margin growth due to recovered efficiencies lost during the cyber incident in 1H 2023, pricing measures continue to recover inflation. Details of the specific adjusting items charge of £1.0 million (1H 2023: £1.8 million) are included in note 3.

Performance Carbon

Revenue for the Performance Carbon segment for the six months ended 30 June 2024 was £178.9 million, representing an increase of 13.7% on a reported basis compared with £157.4 million in 1H 2023. On an organic constant-currency* basis, year-on-year revenue increased by 18.1%, with continued strong growth in our faster growing markets with particular strength in semiconductors. Core markets are also showing year over year growth led by the industrial market segment.

Operating profit for the six months ended 30 June 2024 was £30.3 million (1H 2023: £18.9 million) with an operating profit margin of 16.9% (1H 2023: 12.0%). Adjusted operating profit* was £31.3 million (1H 2023: £19.6 million) with an adjusted operating profit margin* of 17.5% (1H 2023: 12.5%), with margin growth due to recovered efficiencies lost during the cyber incident in 1H 2023, pricing measures continue to recover inflation. Details of the specific adjusting items charge of £0.8 million (1H 2023: £0.2 million) are included in note 3.

Technical Ceramics

Revenue for the Technical Ceramics segment for the six months ended 30 June 2024 was £172.2 million, an increase of 4.3% compared with £165.1 million in 1H 2023. On an organic constant-currency* basis, year-on-year revenue increased by 6.7%, with growth led by aerospace and healthcare offsetting a weaker industrial market.

Operating profit for the six months ended 30 June 2024 was £18.0 million (1H 2023: £18.0 million) with an operating profit margin of 10.5% (1H 2023: 10.9%). Adjusted operating profit* was £18.8 million (1H 2023: £17.6 million) with an adjusted operating profit margin* of 10.9% (1H 2023: 10.7%), with margin growth due to returned efficiencies after the cyber incident impacting 1H 2023, pricing measures continue to recover inflation. Details of the specific adjusting items charge of £0.4 million (1H 2023: credit of £1.1 million) are included in note 3.

Group financial review

Group revenue for the six months ended 30 June 2024 was £572.6 million (1H 2023: £553.9 million), an increase of 3.4% on a reported basis compared with 1H 2023. On an organic constant-currency* basis revenue increased by 8.2%.

Group adjusted operating profit* for the six months ended 30 June 2024 was £71.3 million (1H 2023: £50.0 million). Adjusted operating profit margin* was 12.5%, compared with 9.0% for 1H 2023.

Specific adjusting items before tax for the six months ended 30 June 2024 totalled £3.4 million. See Note 3 of the condensed consolidated financial statements on page 32, for additional information.

Operating profit for the six months ended 30 June 2024 was £66.8 million (1H 2023: £34.5 million) and profit before taxation was £57.5 million (1H 2023: £28.4 million).

The Group amortisation charge for the six months ended 30 June 2024 was £1.1 million (1H 2023: £2.1 million).

The net finance charge for the six months ended 30 June 2024 was £9.3 million (1H 2023: £6.1 million) comprising net bank interest and similar charges of £7.4 million (1H 2022: £5.0 million), net interest on IAS 19 pension obligations of £0.2 million (1H 2023: £nil), loss on sale of bonds of 0.4 million (1H 2023: £nil) and interest expense on lease liabilities of £1.3 million (1H 2023: £1.1 million).

Looking forward to the full year, we anticipate that the net finance charge will be around £17-19 million, comprising net bank interest and similar charges of £15-16 million; net interest on IAS 19 pension obligations of £0.5 million; and interest expense on lease liabilities of £2 million.

The Group tax charge for the six months ended 30 June 2024, excluding specific adjusting items, was £15.8 million (1H 2023: £11.3 million), tax on specific adjusting items was a credit of £0.4 million (1H 2023: £2.2 million). The effective tax rate, excluding specific adjusting items, was 26.0% (1H 2023: 27.0%). Note 5 to the condensed consolidated financial statements provides additional information on the Group's tax charge. Looking forward to the full year, we anticipate an effective tax rate around 25-27%.

Adjusted earnings per share* for the six months ended 30 June 2024 was 14.7 pence (1H 2023: 9.9 pence) and basic profit per share from continuing operations was 13.2 pence (1H 2023: 5.2 pence). Details of these calculations can be found in note 7 to the condensed consolidated financial statements.

The Group's balance sheet and liquidity remains robust. Net debt* for the six months ended 30 June 2024 was £270.5 million, with net debt* excluding lease liabilities of £222.3 million. The Group has cash and cash equivalents of £116.6 million and undrawn headroom on its revolving credit facility of £159.1 million.

Our key financial covenants are measured on a pre-IFRS 16 Leases basis. As at 30 June 2024, net debt* to EBITDA*, excluding the impact of IFRS 16 Leases, was 1.3 times compared with a covenant not to exceed 3.0 times, and our interest cover excluding the impact of IFRS 16 Leases was 12.1 times, compared with a covenant to exceed 4.0 times.

Acquisitions, divestments and business exits

There were no acquisitions, divestments or business exits in the six months to 30 June 2024 or the six months to 30 June 2023.

Specific adjusting items

In the consolidated income statement, the Group presents specific adjusting items separately. In the judgement of the Directors, as a result of the nature and value of these items they should be disclosed separately from the underlying results of the Group to allow the reader to obtain an alternative understanding of the financial information and an indication of the underlying performance of the Group.

Details of the specific adjusting items arising during the comparative period are given in note 3 to the condensed consolidated financial statements.

	1H 2024 £m	1H 2023 £m
Specific adjusting items
Cyber incident recovery costs and charges	(1.1)	(12.0)
Business closure and exit costs	-	(1.8)
Restructuring (charge)/credit	(2.3)	0.4
Total specific adjusting items before income tax	(3.4)	(13.4)
Income tax credit from specific adjusting items	0.4	2.2
Total specific adjusting items after income tax	(3.4)	(11.2)

2024

Cyber incident recovery costs and charges

As disclosed in the 2023 Annual Report, the Group experienced a cyber security incident in January 2023. £1.1 million of specialist support costs were incurred in early 2024, which did not meet the recognition criteria as at 31 December 2023.

Restructuring charge

As disclosed in our 2023 Annual Report, the Group has taken the opportunity to reduce our global footprint and rationalise costs in order to focus resources on our faster growing markets and optimise factory operations. This restructuring programme commenced in the second half of 2023 and further costs are anticipated in 2024. A charge of £2.3 million has been recognised in relation to this and comprises costs associated with staff redundancies and site closure costs.

2023

Cyber incident recovery costs and charges

As disclosed in the 2023 Annual Report, the Group experienced a cyber security incident in January 2023. Costs and charges of £11.2 million were incurred during the six months to June 2023 relating to system recovery and specialist support costs and £0.8 million of leased and owned IT assets which were impacted by the incident were impaired.

Business closure and exit costs

In July 2023, the Board of our joint venture in Dalian, China made the decision to liquidate the entity as the joint venture agreement expired in August 2023. A £1.8 million charge associated with the liquidation costs was recognised, mainly in relation to severance costs, costs of dismantling equipment and advisor fees.

Restructuring credit

The Group recognised a £0.4 million credit relating mainly to the partial release of a provision following final settlement of the US multi-employer pension plan for our Technical Ceramics, Ceramics Cores site which was closed in 2021.

Foreign currency impact

The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:

	1H 2024		1H 2023
GBP to:	Closing rate	Average rate	Closing rate	Average rate
US dollar	1.26	1.27	1.27	1.23
Euro	1.18	1.17	1.16	1.14

For illustrative purposes, the table below provides details of the impact on 1H 2024 revenue and adjusted operating profit* if the actual reported results, calculated using 1H 2024 average exchange rates were restated for GBP weakening by 10 cents against US dollar in isolation and 10 cents against the Euro in isolation:

Increase in 2024 revenue/adjusted operating profit¹ if:

Revenue

£m

Adjusted operating profit¹

£m

GBP weakens by 10c against the US dollar in isolation

22.2

2.8

GBP weakens by 10c against the Euro in isolation

10.4

1.8

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

Cash flow

	1H 2024 £m	1H 2023 £m
Cash generated from continuing operations	66.1	12.9
Net capital expenditure	(44.6)	(24.0)
Net interest on cash and borrowings	(7.3)	(4.5)
Tax paid	(16.0)	(15.8)
Lease payments and interest	(6.1)	(5.7)
Free cash flow before acquisitions, disposals and dividends¹	(7.9)	(37.1)
Dividends paid to external plc shareholders	(19.1)	(19.1)
Net cash flows from other investing and financing activities	(8.7)	(2.4)
Exchange movement and other non-cash movements	(1.4)	(1.4)
Opening net debt¹ excluding lease liabilities	(185.2)	(148.5)
Closing net debt¹ excluding lease liabilities	(222.3)	(208.5)
Closing lease liabilities	(48.2)	(49.2)
Closing net debt¹	(270.5)	(257.7)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

Cash generated from continuing operations for the six months ended 30 June 2024 was £66.1 million (1H 2023: £12.9 million). Working capital increased by £22.0 million as a result of an increase in receivables of £15.0 million and other working capital of £7.0 million. The increase in working capital is largely driven by the growth in sales.

Free cash flow before acquisitions, disposals and dividends* was £(7.9) million (1H 2023: £(37.1) million).

Net debt* for the six months ended 30 June 2024 was £270.5 million (1H 2023: £257.7 million), representing a net debt* to EBITDA* ratio of 1.5 times (1H 2023: 1.5 times).

Net debt* for the six months ended 30 June 2024 excluding lease liabilities was £222.3 million (1H 2023: £208.5 million), representing a net debt* to EBITDA* ratio excluding the impact of IFRS 16 Leases of 1.3 times (1H 2023: 1.3 times).

Further information on the Group's net debt* is provided in note 10 to the condensed consolidated financial statements.

Defined benefit pension plans

The Group pension deficit for the six months ended 30 June 2024 has decreased by £7.2 million since 31 December 2023 to £18.0 million on an IAS 19 (revised) basis, with UK discount rates increasing as a result of an increase in corporate bond yields, whilst the US, Eurozone and the Rest of World discount rates have remained stable:

·	The UK schemes surplus increased by £3.6 million to £16.1 million (FY 2023: surplus £12.5 million; 1H 2023: deficit £19.0 million), (discount rate 1H 2024: 5.12%; FY 2023: 4.52%; 1H 2023: 5.26%).
·	The US schemes deficit decreased by £1.7 million to £3.8 million (FY 2023: £5.5 million; 1H 2023: £6.9 million), (discount rate 1H 2024: 5.28%; FY 2023: 4.80%; 1H 2023: 4.93%).
·	The European schemes deficit decreased by £2.2 million to £26.0 million (FY 2023: £28.2 million; 1H 2023: £27.3 million), (discount rate 1H 2024: 3.80%; FY 2023: 3.40%; 1H 2023: 3.70%).
·	The Rest of World schemes deficit increased by £0.3 million to £4.3 million (FY 2023: £4.0 million; 1H 2023: £4.0 million), (discount rate 1H 2024: 5.52%; FY 2023: 5.52%; 1H 2023: 5.30%).

Note 12 to the condensed consolidated financial statements provides additional information on the Group's pension plans.

The most recent full actuarial valuations of the UK Schemes were undertaken as at 31 March 2022 and resulted in combined assessed deficits of £49.7 million on the 'Technical Provisions' basis. The Company subsequently agreed with the Trustees to make a lump sum contribution to the Schemes of £67.0 million on 29 December 2022 in lieu of the remaining contributions that would otherwise have been due under the existing recovery plans from the 31 March 2019 valuations. The sum paid also represented the value of the deficit on the more prudent 'Long Term Objective' basis. As a result, no further contributions to the UK Schemes are expected to be required pending the results of the next full valuations as at 31 March 2025.

Interim dividend

The Board has resolved to pay an interim dividend of 5.4 pence (2023: 5.3 pence) per Ordinary share. The interim dividend will be paid on 15 November 2024 to Ordinary shareholders on the register of members at the close of trading on 25 October 2024. The ex-dividend date will be 24 October 2024.

Principal risks and uncertainties

The Group has an established risk management methodology, which seeks to identify, prioritise and mitigate risks, underpinned by a 'three lines of defence' model comprising an internal control framework, internal monitoring and independent assurance processes. The Board considers that risk management and internal control are fundamental to achieving the Group aim of creating long-term sustainable shareholder value.

The current principal risks, representing those risks that the Board feels could have the most significant impact on achieving the Group's strategy of building a sustainable business for the long-term and delivering strong returns to the Group's shareholders, are set out in the 2023 Annual Report and Accounts, which are available on the Group's website at www.morganadvancedmaterials.com

The following are the Group's principal risks and uncertainties:

·	Technical leadership The Group's strategic success depends on maintaining and developing its technical leadership in materials science over its competitors. Unforeseen or unmitigated technology obsolescence, the emergence of competing technologies, the loss of control of proprietary technology or the loss of intellectual property/ know-how or inability to recruit, retain and develop the right people would negatively impact the Group's ability to achieve its strategic goals.
·	Operational execution/organisational change As part of the Group's strategy to improve the efficiency of its operations and organisation, various changes have been made to operational processes at individual sites and to the Group's structure. Further improvements and changes are planned for future years. Failure to manage these changes adequately could result in interruption to operations or customer service, or a failure to maximise the Group's opportunities.
·	Portfolio management Failure to manage the Group's portfolio of businesses proactively and in line with this technology profile could lead to the value of the Group's businesses being eroded over time or to a failure to exploit opportunities to acquire businesses with the capability to add further value to the Group.
·	Macro-economic and political environment The Group operates in a range of markets and geographies around the world and could be affected by political, economic, social or regulatory developments or instability, for example an economic slowdown or issues stemming from oil and natural resource price shocks.
·	Environment, health and safety The Group operates a number of manufacturing facilities around the world. A failure in the Group's EHS procedures could lead to environmental damage or to injury or death of employees or third parties, with a consequential impact on operations and increased risk of regulatory or legal action being taken against the Group.
·	Pandemic The overall risk severity has been increased based on assessing a potentially higher impact of a future pandemic. Communicable disease impacts ways of working, the supply chain and the ability of employees to travel to work in affected areas. The Company's priority is to take all actions and precautions necessary to ensure the safety and wellbeing of our employees.
·	Climate Change Global climate change poses short-term and longer-term challenges for our business. The expected changes are far-reaching and difficult to reverse.
·	Product quality, safety and liability Products used in applications for which they were not intended or inadequate quality control/ over commitment on customer specifications could result in products not meeting customer requirements, which could in turn lead to significant liabilities and reputational damage.
·	Compliance A failure to comply with any applicable export, data and other laws/regulations could result in civil or criminal liabilities and/or individual or corporate fines and could also result in debarment from government-related contracts or rejection by financial market counterparties and reputational damage.
·	IT & cyber security Key business system failure might impact the ability of the business to deliver on its strategic goals. Following the cyber incident experienced in January 2023, the Group's IT modernisation security programme has been accelerated.
·	Supply chain and business continuity The Group has a number of potential single-point exposure risks. These include: Single-point supplier: a significant interruption of internal or external key supply could impact business continuity. Single-point site: a key site exposed to a strike, a natural catastrophe or a serious incident, such as fire, could impact business continuity.
·	Treasury The Group's global reach means that it is exposed to uncertainties in the financial markets, the fiscal jurisdictions where it operates, and the banking sector. These heighten the Group's funding, foreign exchange, tax, interest rate, credit and liquidity risks as well as the risk that a bank failure could impact the Group's cash.
·	Pension funding The Group sponsors several defined benefit pension arrangements, whose liabilities are subject to fluctuating interest rates, investment values and inflation. This coupled with the increased longevity of members and a tougher regulatory funding regime can result in increased funding burdens on the Group in the future.
·	Tax The Group operates in many jurisdictions around the world and could be affected by changes in tax laws and regulations within the complex international tax environment.
·	Contract management As a global advanced materials business supplying components into critical applications, the Group may be exposed to liabilities arising from the use of its products.
·	Compliance A failure to comply with any applicable laws/regulations could result in civil or criminal liabilities and/or individual or corporate fines and could also result in debarment from government-related contracts or rejection by financial market counterparties and reputational damage.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the 2023 Annual Report and Accounts on pages 2 to 75. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, are described earlier in the Financial Review on pages 64 to 69. In addition, note 11 to the condensed consolidated financial statements for the six months ended 30th June 2024 provides details of the Group's policies and processes for managing financial risk, details of its financial instruments and hedging activities and details of its exposures to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through local banking arrangements underpinned by the Group's £230 million unsecured multi-currency revolving credit facility, which matures in November 2028. As at 30th June 2024 the Group had both significant available liquidity and headroom on its covenants. Total committed borrowing facilities were £494.8. The amount drawn under these facilities was £335.7m, which together with net cash and cash equivalents of £115.0m, gave total headroom of £274.1m. The multi-currency revolving credit facility was £70.9m drawn. The Group has no scheduled debt maturities until January 2026.

The principal borrowing facilities are subject to covenants that are measured semi-annually in June and December, being net debt to EBITDA of a maximum of 3x and interest cover of a minimum of 4x, based on measures defined in the facilities agreements which are adjusted from the equivalent IFRS amounts.

The Group has carefully modelled its cash flow outlook, taking account of reasonably possible changes in trading performance, exchange rates and plausible downside scenarios. This review indicated that there was sufficient headroom and liquidity for the business to continue for the 18-month period based on the facilities available as discussed in note 11 to the financial statements. The Group was also expected to be in compliance with the required covenants discussed above.

The Board has also reviewed the Group's reverse stress testing performed to demonstrate how much headroom is available on covenant levels in respect of changes in net debt, EBITDA, and underlying revenue. Based on this assessment, a combined reduction in EBITDA of 45% and an increase in net debt of 45% would still allow the Group to operate within its financial covenants. The Directors do not consider either of these scenarios to be plausible given the diversity of the Group's end-markets and its broad manufacturing base.

The Board and Executive Committee have regular reporting and review processes in place in order to closely monitor the ongoing operational and financial performance of the Group. As part of the ongoing risk management process, principal and emerging risks are identified and reviewed on a regular basis. In addition, the Directors have assessed the risk of climate change and do not consider that it will impact the Group's ability to operate as a going concern for the period under consideration.

The Board fully recognises the challenges that lie ahead but, after making enquiries, and in the absence of any material uncertainties, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of 18 months from the date of signing this Half-yearly report. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements for the six months ended 30 June 2024.

Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

The condensed consolidated financial statements have been prepared in accordance with UK-adopted IAS 34 Interim Financial Reporting;

The interim management report for the six-month period ended 30 June 2024 includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the year); and

The interim management report for the six-month period ended 30 June 2024 includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Information about the current Directors of Morgan Advanced Materials plc responsible for providing this Statement is maintained on the Company's website at www.morganadvancedmaterials.com

By order of the Board

Pete Raby

Chief Executive Officer

Richard Armitage

Chief Financial Officer

5 August 2024

Definitions and reconciliations of non-GAAP to GAAP measures

Reference is made to the following non-GAAP measures throughout this document. These measures are shown because the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures. As defined in the basis of preparation on page 6, these measures are calculated on a continuing basis.

Adjusted operating profit

Adjusted operating profit is stated before specific adjusting items and amortisation of intangible assets. Specific adjusting items are excluded on the basis that they distort trading performance. Amortisation is excluded consistent with previous years.

1H 2024	Thermal Products £m	Performance Carbon £m	Technical Ceramics £m	Segment total £m	Corporate costs¹ £m	Group £m
Operating profit	22.7	30.3	18.0	71.0	(4.2)	66.8
Add back: specific adjusting items included in operating profit	1.0	0.8	0.4	2.2	1.2	3.4
Add back: amortisation of intangible assets	0.5	0.2	0.4	1.1		1.1
Group and segmental adjusted operating profit/(loss)	24.2	31.3	18.8	74.3	(3.0)	71.3

1. Corporate costs consist of central head office costs.

1H 2023	Thermal Products £m	Performance Carbon £m	Technical Ceramics £m	Segment total £m	Corporate costs¹ £m	Group £m
Operating profit	13.1	18.9	18.0	50.0	(15.5)	34.5
Add back: specific adjusting items included in operating profit	1.8	0.2	(1.1)	0.9	12.5	13.4
Add back: amortisation of intangible assets	0.9	0.5	0.7	2.1		2.1
Group and segmental adjusted operating profit/(loss)	15.8	19.6	17.6	53.0	(3.0)	50.0

1. Corporate costs consist of central head office costs.

Organic growth

Organic growth is the growth of the business excluding the impacts of acquisitions, divestments and foreign currency impacts. This measure is used as it allows revenue and adjusted operating profit to be compared on a like-for-like basis.

Commentary on the underlying business performance is included as part of the operating review on pages 6 to 11.

Year-on-year movements in segment revenue

	Thermal Products	Performance Carbon	Technical Ceramics	Segment total¹
	£m	£m	£m	£m

1H 2023	231.4	157.4	165.1	553.9

Impact of foreign currency movements	(14.2)	(5.9)	(3.7)	(23.8)
Impacts of acquisitions, disposals and business exits	(0.9)			(0.9)
Organic constant-currency change	5.2	27.4	10.8	43.4
Organic constant-currency change %	2.4%	18.1%	6.7%	8.2%

1H 2024	221.5	178.9	172.2	572.6

Year-on-year movements in segment and Group adjusted operating profit

	Thermal Products	Performance Carbon	Technical Ceramics	Segment total	Corporate costs¹	Group
	£m	£m	£m	£m	£m	£m

1H 2023	15.8	19.6	17.6	53.0	(3.0)	50.0

Impact of foreign currency movements	(3.5)	(0.9)	(1.0)	(5.4)		(5.4)
Impact of acquisitions, disposals and business exits	0.1			(0.1)		(0.1)
Organic constant-currency change	11.8	12.6	2.2	26.6		26.6
Organic constant-currency change %	95.2%	67.4%	13.3%	55.8%		59.5%

1H 2024	24.2	31.3	18.8	74.3	(3.0)	71.3

1. Corporate costs consist of the cost of the central head office.

Group EBITDA

Group EBITDA is defined as operating profit before specific adjusting items, depreciation and amortisation of intangible assets. The Group uses this measure as it is a key metric in covenants over debt facilities, these covenants use EBITDA on a pre-IFRS 16 basis i.e. excluding capital and interest payments on leases which have been capitalised following the adoption of IFRS 16. This is used as a proxy for the charge that would have been attributable to operating leases under the now defunct IAS 17. A reconciliation of operating profit to Group EBITDA is as follows:

	1H 2024 £m	1H 2023 £m
Operating profit	66.8	34.5
Add back: specific adjusting items included in operating profit	3.4	13.4
Add back: depreciation - property, plant and equipment	17.0	15.7
Add back: depreciation - right-of-use assets	4.3	3.8
Add back: amortisation of intangible assets	1.1	2.1
Group EBITDA	92.6	69.5
Group EBITDA excluding IFRS 16 Leases impact	86.5	63.8

Free cash flow before acquisitions, disposals and dividends

Free cash flow before acquisitions, disposals and dividends is defined as cash generated from continuing operations less net capital expenditure, net interest (interest paid on borrowings, overdrafts and lease liabilities, net of interest received), tax paid and lease payments.

The Group discloses this measure of free cash flow as this provides readers of the condensed consolidated financial statements with a measure of the cash flows from the business before corporate level cash flows (acquisitions, disposals and dividends).

A reconciliation of cash generated from continuing operations to free cash flow before acquisitions, disposals and dividends is as follows:

	1H 2024 £m	1H 2023 £m
Cash generated from continuing operations	66.1	12.9
Net capital expenditure	(44.6)	(24.0)
Net interest on cash and borrowings	(7.3)	(4.5)
Tax paid	(16.0)	(15.8)
Lease payments and interest	(6.1)	(5.7)
Free cash flow before acquisitions, disposals and dividends	(7.9)	(37.1)

Net cash and cash equivalents

Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts. The Group also discloses this measure as it provides an indication of the net short-term liquidity available to the Group.

	1H 2024 £m	1H 2023 £m
Cash and cash equivalents	116.6	137.5
Bank overdrafts	(1.6)	(7.2)
Net cash and cash equivalents	115.0	130.3

Net debt

Net debt is defined as borrowings, bank overdrafts and lease liabilities, less cash and cash equivalents. The Group discloses net debt because it helps readers of the consolidated financial statements assess its ability to meet financial obligations, manage debt and its capacity to invest in growth opportunities. The Group also discloses this metric excluding lease liabilities as this is the measure used in the covenants over the Group's debt facilities.

	1H 2024 £m	1H 2023 £m
Cash and cash equivalents	116.6	137.5
Non-current borrowings	(337.3)	(305.9)
Non-current lease liabilities	(39.3)	(38.0)
Current borrowings and bank overdrafts	(1.6)	(40.1)
Current lease liabilities	(8.9)	(11.2)
Closing net debt	(270.5)	(257.7)
Closing net debt excluding IFRS 16 Leases liabilities	(222.3)	(208.5)

Return on invested capital

The Group discloses return on invested capital (ROIC) to assess its efficiency in generating profits from the capital it has invested in its operations. ROIC is defined as 12-month adjusted operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the average adjusted net assets (excludes long-term employee benefits, deferred tax assets and liabilities, current tax payable, provisions, cash and cash equivalents, borrowings, bank overdrafts and lease liabilities). Third party working capital includes inventories, trade and other receivables, and trade and other payables.

	1H 2024 £m	1H 2023 £m
Operating profit before specific adjusting items	139.3	124.0
Add back: amortisation of intangible assets	2.3	4.5
Group adjusted operating profit	141.6	128.5

Average adjusted net assets:
Third-party working capital	210.1	197.5
Property, Plant and equipment	293.6	271.7
Goodwill	177.2	179.3
Right-of-use assets	32.4	32.5
Intangible assets	4.2	6.8
Average adjusted net assets	717.5	687.8

ROIC	19.7%	18.7%
ROIC excluding IFRS 16 Leases impact	20.7%	19.6%

Adjusted earnings per share

Adjusted earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of Ordinary shares during the period. This measure of earnings is shown because the Directors consider that it provides a helpful indication of the Group's financial performance excluding material non-recurring expenses or gains and non-financial asset impairments and impairment reversals, and therefore facilitates the evaluation of the Group's performance over time.

A reconciliation from IFRS profit to the profit used to calculate adjusted earnings per share is included in note 7 to the condensed consolidated financial statements.

Constant-currency revenue and adjusted operating profit

Constant-currency revenue and adjusted operating profit are derived by translating the prior year results at current year average exchange rates. These measures are used as they allow revenue to be compared excluding the impact of foreign exchange rates. Page 9 provides further information on the principal foreign currency exchange rates used in the translation of the Group's results to constant-currency at average exchange rates.

Condensed consolidated income statement

		Six months ended 30 June 2024			Six months ended 30 June 2023			Year ended 31 December 2023
		Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹	Total
	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	2	572.6	-	572.6	553.9	-	553.9	1,114.7	-	1,114.7
Operating costs before amortisation of intangible assets, impairments and reversal of impairments of non-financial assets		(501.3)	(3.4)	(504.7)	(503.9)	(13.4)	(517.3)	(994.4)	(25.9)	(1,020.3)
Profit from operations before amortisation of intangible assets, impairments and reversals of impairments of non-financial assets	2	71.3	(3.4)	67.9	50.0	(13.4)	36.6	120.3	(25.9)	94.4

Amortisation of intangible assets		(1.1)	-	(1.1)	(2.1)	-	(2.1)	(3.3)	-	(3.3)
Impairment of non-financial assets	3	-	-	-	-	-	-	-	(7.3)	(7.3)
Reversal of impairment of non-financial assets	3	-	-	-	-	-	-	-	8.1	8.1

Operating profit	2	70.2	(3.4)	66.8	47.9	(13.4)	34.5	117.0	(25.1)	91.9

Finance income		1.3	-	1.3	2.2	-	2.2	3.9	-	3.9
Finance expense		(10.6)	-	(10.6)	(8.3)	-	(8.3)	(18.0)	-	(18.0)
Net financing costs	4	(9.3)	-	(9.3)	(6.1)	-	(6.1)	(14.1)	-	(14.1)

Profit before taxation		60.9	(3.4)	57.5	41.8	(13.4)	28.4	102.9	(25.1)	77.8

Income tax expense	5	(15.8)	0.4	(15.4)	(11.3)	2.2	(9.1)	(26.0)	3.8	(22.2)

Profit from continuing operations		45.1	(3.0)	42.1	30.5	(11.2)	19.3	76.9	(21.3)	55.6
Profit from discontinued operations	6	-	-	-	-	-	-	-	0.7	0.7
Profit for the period		45.1	(3.0)	42.1	30.5	(11.2)	19.3	76.9	(20.6)	56.3

Profit for the period attributable to:
Shareholders of the Company		40.4	(3.0)	37.4	26.0	(11.2)	14.8	67.9	(20.6)	47.3
Non-controlling interests		4.7	-	4.7	4.5	-	4.5	9.0	-	9.0

Profit for the period		45.1	(3.0)	42.1	30.5	(11.2)	19.3	76.9	(20.6)	56.3

Earnings per share	7
Continuing and discontinued operations
Basic earnings per share				13.2p			5.2p			16.6p
Diluted earnings per share				13.0p			5.2p			16.5p

Continuing operations
Basic earnings per share				13.2p			5.2p			16.4p
Diluted earnings per share				13.0p			5.2p			16.3p

Dividends²
Proposed interim dividend - pence				5.40p			5.30p			5.30p
- £m				15.4			15.1			15.1

Final dividend - pence										6.70p
- £m										19.1

1. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

2. The proposed interim and approved final dividends are based upon the number of shares outstanding at the balance sheet date.

Condensed consolidated statement of comprehensive income

	At 30 June 2024	At 30 June 2023	At 31 December 2023
	£m	£m	£m

Profit for the period	42.1	19.3	56.3

Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain/(loss) on defined benefit plans	6.2	(5.0)	(11.5)
Tax effect of components of other comprehensive income not reclassified	(0.8)	(0.4)	(0.5)
	5.4	(5.4)	(12.0)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(6.7)	(27.5)	(32.8)
Net investment hedges:
Change in fair value	1.1	(0.3)	(0.3)
Cash flow hedges:
Change in fair value	(0.8)	0.5	1.1
Transferred to profit or loss	(0.5)	(0.1)	0.2
	(6.9)	(27.4)	(31.8)
Total other comprehensive income	(1.5)	(32.8)	(43.8)
Total comprehensive income	40.6	(13.5)	12.5

Attributable to:
Shareholders of the Company	36.8	(14.3)	6.7
Non-controlling interests	3.8	0.8	5.8
	40.6	(13.5)	12.5

Total comprehensive income attributable to shareholders of the Company arising from:
Continuing operations	36.8	(14.3)	6.0
Discontinued operations	-	-	0.7
	36.8	(14.3)	6.7

Condensed consolidated balance sheet

		At 30 June 2024	At 30 June 2023	At 31 December 2023
	Note	£m	£m	£m
Assets
Property, plant and equipment	8	311.6	275.6	293.8
Right-of-use assets		33.0	31.7	31.6
Intangible assets: goodwill	9	177.2	177.3	177.5
Intangible assets: other	9	3.8	4.6	4.7
Investments		1.0	-	2.2
Other receivables		2.0	3.0	3.4
Deferred tax assets		17.2	14.5	17.6
Total non-current assets		545.8	506.7	530.8
Inventories		182.2	181.4	175.1
Derivative financial assets	11	0.3	0.8	1.5
Trade and other receivables		208.2	227.7	191.6
Current tax receivable		1.3	0.5	1.2
Cash and cash equivalents	10	116.6	137.5	124.5
Total current assets		508.6	547.9	493.9
Total assets		1,054.4	1,054.6	1,024.7
Liabilities
Borrowings	10	337.3	305.9	309.1
Lease liabilities		39.3	38.0	36.6
Employee benefits: pensions	12	18.0	19.2	25.2
Provisions	13	10.5	9.5	11.5
Non-trade payables		2.4	1.8	2.4
Deferred tax liabilities		2.4	2.8	1.8
Total non-current liabilities		409.9	377.2	386.6
Borrowings and bank overdrafts	10	1.6	40.1	0.6
Lease liabilities		8.9	11.2	10.5
Trade and other payables		187.2	192.2	192.0
Current tax payable		24.7	22.2	25.6
Provisions	13	9.0	13.7	10.3
Derivative financial liabilities	11	0.8	0.6	0.5
Total current liabilities		232.2	280.0	239.5
Total liabilities		642.1	657.2	626.1
Total net assets		412.3	397.4	398.6
Equity
Share capital		71.3	71.3	71.3
Share premium		111.7	111.7	111.7
Reserves		0.5	11.4	6.5
Retained earnings		191.2	163.2	170.8
Total equity attributable to shareholders of the Company		374.7	357.6	360.3
Non-controlling interests		37.6	39.8	38.3
Total equity		412.3	397.4	398.6

Condensed consolidated statement of changes in equity

	Share capital		Share premium	Translation reserve	Hedging reserve	Fair value reserve	Capital redemption reserve	Other reserves	Retained earnings	Total parent equity	Non-controlling interests	Total equity
	£m		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2023	71.3		111.7	-	(0.2)	(1.0)	35.7	0.6	170.9	389.0	40.6	429.6
Profit for the period	-		-	-	-	-	-	-	14.8	14.8	4.5	19.3
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes	-		-	-	-	-	-	-	(5.4)	(5.4)	-	(5.4)
Foreign exchange differences	-		-	(23.8)	-	-	-	-	-	(23.8)	(3.7)	(27.5)
Cash flow hedging fair value changes and transfers	-		-	-	0.4	-	-	-	-	0.4	-	0.4
Net investment hedging fair value changes and transfers	-		-	-	(0.3)	-	-	-	-	(0.3)	-	(0.3)
Total comprehensive income/(expense)	-		-	(23.8)	0.1	-	-	-	9.4	(14.3)	0.8	(13.5)
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(19.1)	(19.1)	(1.6)	(20.7)
Equity-settled share-based payments	-		-	-	-	-	-	-	2.6	2.6	-	2.6
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(0.6)	(0.6)	-	(0.6)
At 30 June 2023	71.3		111.7	(23.8)	(0.1)	(1.0)	35.7	0.6	163.2	357.6	39.8	397.4

At 1 January 2023	71.3		111.7	-	(0.2)	(1.0)	35.7	0.6	170.9	389.0	40.6	429.6
Profit for the year	-		-	-	-	-	-	-	47.3	47.3	9.0	56.3
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes	-		-	-	-	-	-	-	(12.0)	(12.0)	-	(12.0)
Foreign exchange differences and related taxes	-		-	(29.6)	-	-	-	-	-	(29.6)	(3.2)	(32.8)
Cash flow hedging fair value changes and transfers	-		-	-	1.3	-	-	-	-	1.3	-	1.3
Net investment hedging fair value changes and transfers	-		-	(0.3)	-	-	-	-	-	(0.3)	-	(0.3)
Total comprehensive income/(expense)		-	-	(29.9)	1.3	-	-	-	35.3	6.7	5.8	12.5
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(34.2)	(34.2)	(8.1)	(42.3)
Equity settled share-based payments	-		-	-	-	-	-	-	2.9	2.9	-	2.9
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(4.1)	(4.1)	-	(4.1)
At 31 December 2023	71.3		111.7	(29.9)	1.1	(1.0)	35.7	0.6	170.8	360.3	38.3	398.6

At 1 January 2024	71.3		111.7	(29.9)	1.1	(1.0)	35.7	0.6	170.8	360.3	38.3	398.6
Profit for the period	-		-	-	-	-	-	-	37.4	37.4	4.7	42.1
Other comprehensive income/(expense):
Remeasurement gain on defined benefit plans and related taxes	-		-	-	-	-	-	-	5.4	5.4	-	5.4
Foreign exchange differences	-		-	(5.8)	-	-	-	-	-	(5.8)	(0.9)	(6.7)
Cash flow hedging fair value changes and transfers	-		-	-	(1.3)	-	-	-	-	(1.3)	-	(1.3)
Net investment hedging fair value changes and transfers	-		-	1.1	-	-	-	-	-	1.1	-	1.1
Total comprehensive income/(expense)		-	-	(4.7)	(1.3)	-	-	-	42.8	36.8	3.8	40.6
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(19.1)	(19.1)	(2.3)	(21.4)
Purchase of non-controlling interest	-		-	-	-	-	-	-	(2.7)	(2.7)	(2.2)	(4.9)
Equity-settled share-based payments	-		-	-	-	-	-	-	2.7	2.7	-	2.7
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(3.3)	(3.3)	-	(3.3)
At 30 June 2024	71.3		111.7	(34.6)	(0.2)	(1.0)	35.7	0.6	191.2	374.7	37.6	412.3

Condensed consolidated statement of cash flows

		Six months ended 30 June 2024	Six months ended 30 June 2023¹	Year ended 31 December 2023¹
	Note	£m	£m	£m
Operating activities
Profit for the period from continuing operations		42.1	19.3	55.6
Profit for the period from discontinued operations	6	-	-	0.7

Adjustments for:
Depreciation - property, plant and equipment	2,8	17.0	15.7	31.9
Depreciation - right-of-use assets	2	4.3	3.8	7.6
Amortisation	2,9	1.1	2.1	3.3
Net financing costs	4	9.3	6.1	14.1
Non-cash specific adjusting items included in operating profit	3	(0.2)	0.8	(2.5)
Fair value gain on equity instruments held at FVTPL		(1.0)	-	(0.9)
Profit on sale of property, plant and equipment		(0.1)	-	(1.6)
Income tax expense	5	15.4	9.1	22.2
Equity-settled share-based payment expenses		2.7	2.6	2.9
Cash generated from operations before changes in working capital and provisions		90.6	59.5	133.3

Increase in trade and other receivables		(15.0)	(34.3)	(4.0)
Increase in inventories		(9.1)	(17.2)	(12.3)
Increase in trade and other payables		2.1	6.3	13.3
Decrease in provisions		(2.0)	(1.6)	(3.4)
Payments to defined benefit pension plans (net of IAS 19 pension charges)		(0.5)	0.2	(0.2)
Cash generated from operations		66.1	12.9	126.7

Interest paid - borrowings and overdrafts		(8.6)	(6.7)	(15.5)
Interest paid - lease liabilities		(1.3)	(1.1)	(2.4)
Income tax paid		(16.0)	(15.8)	(30.3)
Net cash from operating activities		40.2	(10.7)	78.5

Investing activities
Purchase of property, plant and equipment and software		(45.9)	(24.0)	(60.4)
Purchase of investments		-	(0.2)	(5.6)
Proceeds from sale of property, plant and equipment		0.7	-	1.8
Grants received for purchase of equipment		0.6	-	0.1
Interest received		1.3	2.2	3.9
Disposal of investments		1.8	-	-
Net cash from investing activities		(41.5)	(22.0)	(60.2)

Financing activities
Purchase of own shares for share incentive schemes		(3.7)	(0.7)	(4.7)
Net proceeds from exercise of share options		0.4	0.1	0.6
Increase in borrowings		44.2	194.8	247.2
Reduction and repayment of borrowings		(14.7)	(112.2)	(193.0)
Payment of lease liabilities		(4.8)	(4.6)	(8.9)
Dividends paid to shareholders of the Company		(19.1)	(19.1)	(34.2)
Dividends paid to non-controlling interests		(2.3)	(1.6)	(8.1)
Purchase of non-controlling interest		(4.9)	-	-
Net cash from financing activities		(4.9)	56.7	(1.1)

Net (decrease)/increase in net cash and cash equivalents		(6.2)	24.0	17.2
Net cash and cash equivalents at start of period		123.9	116.2	116.2
Effect of exchange rate fluctuations on cash held		(2.7)	(9.9)	(9.5)
Net cash and cash equivalents at period end	10	115.0	130.3	123.9

1. The condensed consolidated statement of cash flows for the six months ended 30 June 2023 and the year ended 31 December 2023 have been re-presented to net bank overdrafts against cash and cash equivalents.

Notes to the condensed consolidated financial statements

Note 1. Basis of preparation, accounting policies and judgment and estimates

Morgan Advanced Materials plc (the 'Company') is a company incorporated in the UK under the Companies Act 2006.

The unaudited condensed consolidated financial statements of the Company for the six months ended 30 June 2024 comprise the Company and the Group's subsidiaries (together 'the Group').

The condensed consolidated financial statements for the six months ended 30 June 2024 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and International Financial Reporting Standards ('IFRSs') as adopted by the UK. There has been no change to the recognition, measurement or disclosure from preparation in previous periods under IFRSs as adopted by the European Union. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements for the year ended 31 December 2023.

The condensed consolidated financial statements and the comparative information for the six months ended 30 June 2024 have neither been audited nor reviewed, do not comprise statutory accounts for the purpose of section 434 of Companies Act 2006 and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2023. Those accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The condensed consolidated financial statements have been prepared on a going concern basis, see page 28 for further details.

The consolidated financial statements of the Group for the year ended 31 December 2023 are available on request from the Company's registered office at York House, Sheet Street, Windsor, SL4 1DD or at morganadvancedmaterials.com.

The condensed consolidated financial statements for the six months ended 30 June 2024 were approved by the Board on 5 August 2024.

Accounting policies

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, these condensed consolidated financial statements have been prepared by applying the accounting policies that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2023, except for newly effective standards listed below.

Use of judgements and estimates

Preparing the condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The Group's critical accounting judgments and key sources of estimation uncertainty remain unchanged from those set out in the Group's consolidated financial statements for the year ended 31 December 2023.

Adoption of new and revised accounting standards

There are no new standards that became effective during the period.

During the period the following amendments to standards became effective. The amendments did not have a material impact on the Group:

·	Classification of Liabilities as Current or Non-Current (Amendments to IAS 1);
·	Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
·	Non-current Liabilities with Covenants (Amendments to IAS 1);
·	Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).

Accounting developments and changes

There are no new standards or interpretations that are in issue but not yet effective.

Non-GAAP measures

Where non-GAAP measures have been referenced, these have been identified by an asterisk (*) where they appear in text and by a footnote where they appear in a table. Definitions of these non-GAAP measures, and their reconciliation to the relevant GAAP measure, are provided on pages 16 to 20.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the 2023 Annual Report and Accounts on pages 2 to 75. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, are described earlier in the Financial Review on pages 64 to 69. In addition, note 11 to the condensed consolidated financial statements for the six months ended 30 June 2024 provides details of the Group's policies and processes for managing financial risk, details of its financial instruments and hedging activities and details of its exposures to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through local banking arrangements underpinned by the Group's £230.0 million unsecured multi-currency revolving credit facility, which matures in November 2028. As at 30 June 2024 the Group had both significant available liquidity and headroom on its covenants. Total committed borrowing facilities were £494.8 million. The amount drawn under these facilities was £335.7 million, which together with net cash and cash equivalents of £115.0 million, gave total headroom of £274.1 million. The multi-currency revolving credit facility was £70.9 million drawn. The Group has no scheduled debt maturities until January 2026.

The principal borrowing facilities are subject to covenants that are measured semi-annually in June and December, being net debt to EBITDA of a maximum of 3 times and interest cover of a minimum of 4 times, based on measures defined in the facilities agreements which are adjusted from the equivalent IFRS amounts.

Note 2. Segment reporting

As announced with the 2023 financial results, the Group is now managed through three distinct segments, as detailed below. These have been identified on the basis of internal management reporting information that is regularly reviewed by the Group's Board of Directors (the Chief Operating Decision Maker) in order to allocate resources and assess performance.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments and related income, borrowings and related expenses, corporate assets and head office expenses, and income tax assets and liabilities.

The information presented below represents the operating segments of the Group.

Six months ended 30 June 2024


	Thermal Products	Performance Carbon	Technical Ceramics	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m

Revenue from external customers	221.5	178.9	172.2	572.6	-	572.6

Segment adjusted operating profit¹	24.2	31.3	18.8	74.3	-	74.3
Corporate costs					(3.0)	(3.0)
Group adjusted operating profit¹						71.3
Amortisation of intangible assets	(0.5)	(0.2)	(0.4)	(1.1)	-	(1.1)
Operating profit before specific adjusting items	23.7	31.1	18.4	73.2	(3.0)	70.2
Specific adjusting items included in operating profit²	(1.0)	(0.8)	(0.4)	(2.2)	(1.2)	(3.4)
Operating profit	22.7	30.3	18.0	71.0	(4.2)	66.8
Finance income						1.3
Finance expense						(10.6)
Profit before taxation						57.5

Segment assets	377.0	307.9	230.4	915.3	139.1	1,054.4

Segment liabilities	100.8	51.9	82.5	235.2	406.9	642.1

Segment capital expenditure	8.0	25.8	11.5	45.3	0.6	45.9

Segment depreciation - property, plant and equipment	7.3	5.6	4.1	17.0	-	17.0

Segment depreciation - right-of-use assets	1.9	0.8	1.6	4.3	-	4.3

Segment impairment of non-financial assets	-	-	-	-	-	-

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

Six months ended 30 June 2023³


	Thermal Products	Performance Carbon	Technical Ceramics	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m

Revenue from external customers	231.4	157.4	165.1	553.9	-	553.9

Segment adjusted operating profit¹	15.8	19.6	17.6	53.0	-	53.0
Corporate costs					(3.0)	(3.0)
Group adjusted operating profit¹						50.0
Amortisation of intangible assets	(0.9)	(0.5)	(0.7)	(2.1)	-	(2.1)
Operating profit before specific adjusting items	14.9	19.1	16.9	50.9	(3.0)	47.9
Specific adjusting items included in operating profit²	(1.8)	(0.2)	1.1	(0.9)	(12.5)	(13.4)
Operating profit	13.1	18.9	18.0	50.0	(15.5)	34.5
Finance income						2.2
Finance expense						(8.3)
Profit before taxation						28.4

Segment assets	398.3	271.4	224.8	894.5	160.1	1,054.6

Segment liabilities	100.0	49.8	83.6	233.4	423.8	657.2

Segment capital expenditure	7.4	10.0	6.6	24.0	-	24.0

Segment depreciation - property, plant and equipment	6.8	5.7	3.2	15.7	-	15.7

Segment depreciation - right-of-use assets	1.7	0.7	1.4	3.8	-	3.8

Segment impairment of non-financial assets	-	-	-	-	0.8	0.8

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

3. The figures above have been restated to show the segmental results for the three operating segments.

Year ended 31 December 2023³


		Thermal Products	Performance Carbon	Technical Ceramics	Segment totals	Corporate costs	Group
Continuing operations		£m	£m	£m	£m	£m	£m

Revenue from external customers		454.5	327.1	333.1	1,114.7	-	1,114.7

Segment adjusted operating profit¹		40.2	49.0	37.0	126.2	-	126.2
Corporate costs						(5.9)	(5.9)
Group adjusted operating profit¹							120.3
Amortisation of intangible assets		(1.4)	(0.8)	(1.1)	(3.3)	-	(3.3)
Operating profit before specific adjusting items		38.8	48.2	35.9	122.9	(5.9)	117.0
Specific adjusting items included in operating profit²		(9.3)	(9.3)	7.6	(11.0)	(14.1)	(25.1)
Operating profit		29.5	38.9	43.5	111.9	(20.0)	91.9
Finance income							3.9
Finance expense							(18.0)
Profit before taxation							77.8

Segment assets	376.2		278.2	217.6	872.0	152.7	1,024.7

Segment liabilities	101.0		55.0	80.4	236.4	389.7	626.1

Segment capital expenditure	17.2		27.2	15.9	60.3	-	60.3

Segment depreciation - property, plant and equipment	13.9		11.2	6.8	31.9	-	31.9

Segment depreciation - right-of-use assets	3.5		1.3	2.8	7.6	-	7.6

Segment impairment of non-financial assets	-		7.0	0.3	7.3	-	7.3

Segment reversal of impairment of non-financial assets	2.4		-	5.7	8.1	-	8.1

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

3. The figures above have been restated to show the segmental results for the three operating segments.

Revenue from external customers by geography

Continuing operations	Six months ended 30 June 2024 £m	Six months ended 30 June 2023 £m	Year ended 31 December 2023 £m
US	233.6	203.7	427.4
China	53.1	56.7	114.8
Germany	43.4	45.3	88.7
UK (the Group's country of domicile)	21.6	22.6	43.6
Other Asia, Australasia, Middle East and Africa	98.4	97.3	197.1
Other Europe	87.6	92.3	173.2
Other North America	19.4	21.4	44.9
South America	15.5	14.6	25.0
	572.6	553.9	1,114.7

Revenue from external customers is based on geographic location of the end-customer. No customer represents more than 5% of revenue.

Revenue from external customers by end-market

Continuing operations	Six months ended 30 June 2024 £m	Six months ended 30 June 2023 £m	Year ended 31 December 2023 £m
Semiconductors	56.8	51.6	108.6
Healthcare	41.8	39.1	78.7
Clean energy and clean transportation	29.6	24.4	50.0
Faster growing markets	128.2	115.1	237.3
Industrial	156.6	170.3	315.9
Conventional transportation	106.3	91.8	200.2
Metals	73.1	72.0	150.2
Petrochemical and chemical	51.8	57.2	110.8
Security and defence	37.0	32.4	68.5
Conventional energy	19.6	15.1	31.8
Core markets	444.4	438.8	877.4
	572.6	553.9	1,114.7

Intercompany sales to other segments

Continuing operations	Six months ended 30 June 2024 £m	Six months ended 30 June 2023¹ £m	Year ended 31 December 2023¹ £m
Thermal Products	0.9	0.3	1.0
Performance Carbon	0.3	0.3	0.6
Technical Ceramics	0.4	0.1	0.7
	1.6	0.7	2.3

1. The figures above have been restated to show the segmental results for the three operating segments.

Note 3. Specific adjusting items

Continuing operations	Six months ended 30 June 2024 £m	Six months ended 30 June 2023 £m	Year ended 31 December 2023 £m
Specific adjusting items:
Cyber incident recovery costs and charges	(1.1)	(12.0)	(14.7)
Charges in relation to the impact of Argentina's currency devaluation	-	-	(5.8)
Net business closure and exit costs	-	(1.8)	(1.9)
Net restructuring (charge)/credit	(2.3)	0.4	(3.5)
Impairment of non-financial assets	-	-	(7.3)
Reversal of impairment of non-financial assets	-	-	8.1
Total specific adjusting items before income tax	(3.4)	(13.4)	(25.1)
Income tax credit from specific adjusting items	0.4	2.2	3.8
Total specific adjusting items after income tax	(3.0)	(11.2)	(21.3)

There were no specific adjusting items in relation to discontinued operations in the six months to 30 June 2024 and to 30 June 2023.

2024

Cyber incident recovery costs and charges

Restructuring charge

2023

Cyber incident recovery costs and charges

Business closure and exit costs

Restructuring credit

The Group recognised a £0.4 million credit relating to the partial release of a provision following final settlement of the US multi-employer pension plan for our Technical Ceramics, Ceramics Cores site which was closed in 2021.

Note 4. Finance income and expense

Continuing operations	Six months ended 30 June 2024 £m	Six months ended 30 June 2023 £m	Year ended 31 December 2023 £m
Interest on bank balances and cash deposits	1.3	2.2	3.9
Finance income	1.3	2.2	3.9

Interest expense on borrowings and overdrafts	(8.7)	(7.2)	(15.6)
Interest expense on lease liabilities	(1.3)	(1.1)	(2.4)
Net interest on IAS 19 defined benefit pension obligations	(0.2)	-	-
Net loss on sale of bonds	(0.4)	-	-
Finance expense	(10.6)	(8.3)	(18.0)
Net financing costs recognised in profit or loss	(9.3)	(6.1)	(14.1)

No finance income or expense related to discontinued operations in either the current or preceding periods.

Note 5. Taxation

Continuing operations	Six months ended 30 June 2024 £m	Six months ended 30 June 2023 £m	Year ended 31 December 2023 £m
Income tax charge on profit before specific adjusting items	(15.8)	(11.3)	(26.0)
Income tax credit from specific adjusting items	0.4	2.2	3.8
Total income tax expense recognised in profit or loss	(15.4)	(9.1)	(22.2)

The Group's consolidated effective tax rate, excluding specific adjusting items, was 26.0% for the six months ended 30 June 2024 (30 June 2023: 27.0%; 31 December 2023: 25.3%) and is based on the Directors' best estimate of the effective tax rate for the year.

The Group operates in many jurisdictions around the world and is subject to factors that may impact future tax charges including the implementation of the OECD's BEPS actions, tax rate and legislation changes, expiry of the statute of limitations and resolution of tax audits and disputes.

On 11 July 2023, Finance (No.2) Act 2023 was enacted in the UK, introducing a global minimum effective tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up-tax which will be effective for the Group's financial year beginning 1 January 2024. The Group is in scope of the substantively enacted legislation and has performed an assessment of the Group's potential exposure to Pillar Two income taxes. The assessment of the potential exposure to Pillar Two income taxes is based on the submitted country-by-country reporting data of the constituent entities in the Group. Based on the assessment, the Pillar Two effective tax rates in the majority of the jurisdictions in which the Group operates are above 15%. However, the Group has an entity in United Arab Emirates where the transitional safe harbour relief does not apply as the Pillar Two effective tax rate is below 15%. The Group does not expect a material exposure to Pillar Two income taxes in this jurisdiction.

Note 6. Discontinued operations

The results from discontinued operations, which represent the Composites and Defence Systems business disposed in 2018, are set out below:

	Six months ended 30 June 2024			Six months ended 30 June 2023			Year ended 31 December 2023
	Results before specific adjusting items	Specific adjusting items	Total	Results before specific adjusting items	Specific adjusting items	Total	Results before specific adjusting items	Specific adjusting items	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	-	-	-	-	-	-	-	0.7	0.7
Operating income	-	-	-	-	-	-	-	-	-
Profit before taxation	-	-	-	-	-	-	-	0.7	0.7
Income tax expense	-	-	-	-	-	-	-	-	-
Profit from discontinued operations	-	-	-	-	-	-	-	0.7	0.7

Basic profit per share from discontinued operations			-			-			0.2p
Diluted profit per share from discontinued operations			-			-			0.2p

For the period to 30 June 2024 and the comparative period in the previous year, there were no transactions from discontinued operations.

In December 2023, a gain of £0.7 million was recognised from a long-term contract.

There was no income tax expense in relation to the discontinued operations in either the current or preceding periods.

There were no cash flows from discontinued operations for the six months ended 30 June 2024 or 30 June 2023. There were net cash inflows from operating activities of £0.4 million during the year ended 31 December 2023.

Note 7. Earnings per share

	Six months ended 30 June 2024			Six months ended 30 June 2023			Year ended 31 December 2023
	Earnings	Basic earnings per share	Diluted earnings per share	Earnings	Basic earnings per share	Diluted earnings per share	Earnings	Basic earnings per share	Diluted earnings per share
	£m	pence	pence	£m	pence	pence	£m	pence	pence
Profit for the period attributable to shareholders of the Company	37.4	13.2p	13.0p	14.8	5.2p	5.2p	47.3	16.6p	16.5p
Profit from discontinued operations	-	-	-	-	-	-	(0.7)	(0.2)p	(0.2)p
Profit from continuing operations	37.4	13.2p	13.0p	14.8	5.2p	5.2p	46.6	16.4p	16.3p
Specific adjusting items	3.4	1.2p	1.2p	13.4	4.7p	4.7p	25.1	8.8p	8.7p
Amortisation of intangible assets	1.1	0.4p	0.4p	2.1	0.8p	0.7p	3.3	1.2p	1.1p
Tax effect of the above	(0.4)	(0.1)p	(0.1)p	(2.2)	(0.8)p	(0.8)p	(3.8)	(1.3)p	(1.3)p
Non-controlling interests' share of the above adjustments	-	-	-	-	-	-	-	-	-
Adjusted profit for the period from continuing operations as used in adjusted earnings per share¹	41.5	14.7p	14.5p	28.1	9.9p	9.8p	71.2	25.0p	24.8p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

	Six months ended 30 June 2024 millions	Six months ended 30 June 2023 millions	Year ended 31 December 2023 millions
Number of shares
Weighted average number of Ordinary shares for the purposes of basic earnings per share¹	284.4	284.5	284.8
Effect of dilutive potential Ordinary shares:
Share options	3.8	1.8	2.5
Weighted average number of Ordinary shares for the purposes of diluted earnings per share	288.2	286.3	287.3

1. The calculation of the weighted average number of shares excludes the shares held by The Morgan General Employee Benefit Trust, on which dividends are waived.

Note 8. Property, plant and equipment

	Land and buildings £m	Plant, equipment and fixtures £m	Total £m
Cost
At 1 January 2024	216.1	777.4	993.5
Additions	10.4	27.0	37.4
Disposals	(0.6)	(15.6)	(16.2)
Transfer between categories	0.2	(0.2)	-
Effect of movement in foreign exchange	(1.5)	(2.8)	(4.3)
At 30 June 2024	224.6	785.8	1,010.4

Depreciation and impairment losses
At 1 January 2024	119.0	580.7	699.7
Depreciation charge for the period	2.7	14.3	17.0
Disposals	(0.6)	(15.1)	(15.7)
Transfer between categories	(0.2)	0.2	-
Effect of movement in foreign exchange	(0.6)	(1.6)	(2.2)
At 30 June 2024	120.3	578.5	698.8

Carrying amounts
At 1 January 2024	97.1	196.7	293.8
At 30 June 2024	104.3	207.3	311.6

As at 30 June 2024, commitments for property, plant and equipment and computer software expenditure for which no provision has been made in these accounts amount to £21.2 million (30 June 2023: £3.9 million).

Note 9. Intangible assets

	Acquisition intangibles
	Goodwill £m	Customer relationships £m	Other £m	Capitalised development costs £m	Computer software £m	Total £m
Cost
At 1 January 2024	177.5	60.9	4.2	0.8	36.2	279.6
Additions	-	-	-	-	0.1	0.1
Disposals	-	-	-	-	(0.8)	(0.8)
Effect of movement in foreign exchange	(0.3)	0.4	(0.1)	-	0.1	0.1
At 30 June 2024	177.2	61.3	4.1	0.8	35.6	279.0

Amortisation and impairment losses
At 1 January 2024	-	59.8	3.2	0.8	33.6	97.4
Amortisation charge for the period	-	0.1	0.1	-	0.9	1.1
Disposals	-	-	-	-	(0.8)	(0.8)
Effects of movement in foreign exchange	-	0.4	(0.1)	-	-	0.3
At 30 June 2024	-	60.3	3.2	0.8	33.7	98.0

Carrying amounts
At 1 January 2024	177.5	1.1	1.0	-	2.6	182.2
At 30 June 2024	177.2	1.0	0.9	-	1.9	181.0

Note 10. Cash and cash equivalents reconciled to net debt*

	At 30 June 2024 £m	At 30 June 2023 £m	At 31 December 2023 £m

Bank balances	105.2	123.9	112.5
Cash deposits	11.4	13.6	12.0
Cash and cash equivalents	116.6	137.5	124.5
Bank overdrafts	(1.6)	(7.2)	(0.6)
Net cash and cash equivalents	115.0	130.3	123.9

Reconciliation of net cash and cash equivalents to net debt*

	Six months ended 30 June 2024 £m	Six months ended 30 June 2023² £m	Year ended 31 December 2023² £m
Opening borrowings and lease liabilities excluding bank overdrafts	(356.2)	(316.6)	(316.6)
Increase in borrowings	(44.2)	(194.8)	(247.2)
Reduction and repayment of borrowings	14.7	112.2	193.0
Payment of lease liabilities	4.8	4.6	8.9
Total changes from cash flows	(24.7)	(78.0)	(45.3)
New leases and lease remeasurement	(6.1)	(4.0)	(6.4)
Effect of movements in foreign exchange on borrowings	1.5	10.6	12.1
Closing borrowings and lease liabilities excluding bank overdrafts	(385.5)	(388.0)	(356.2)
Net cash and cash equivalents	115.0	130.3	123.9
Closing net debt¹	(270.5)	(257.7)	(232.3)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Re-presented to net bank overdrafts against cash and cash equivalents.

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes.

	Borrowings excluding bank overdrafts £m	Lease liabilities £m	Total financing liabilities £m	Net cash and cash equivalents £m	Movement in net debt¹ £m
At 1 January 2024	(309.1)	(47.1)	(356.2)	123.9	(232.3)
Cash inflow	-	-	-	7.4	7.4
Borrowings and lease liability cash flow	(29.5)	4.8	(24.7)	-	(24.7)
Interest paid	-	-	-	(9.9)	(9.9)
Net cash inflow/(outflow)	(29.5)	4.8	(24.7)	(2.5)	(27.2)
Share purchases	-	-	-	(3.7)	(3.7)
New leases and lease remeasurement	-	(6.1)	(6.1)	-	(6.1)
Exchange and other movements	1.3	0.2	1.5	(2.7)	(1.2)
At 30 June 2024	(337.3)	(48.2)	(385.5)	115.0	(270.5)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 43, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

Note 11. Financial risk management

Fair values

	At 30 June 2024				At 30 June 2023				At 31 December 2023
	Carrying amount £m	Fair value			Carrying amount £m	Fair value			Carrying amount £m	Fair value
	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m
Financial assets and liabilities held at amortised cost
1.18% Euro Senior Notes 2023	-	-	-	-	(21.5)	-	(21.2)	(21.2)	-	-	-	-
3.17% US Dollar Senior Notes 2023	-	-	-	-	(11.9)	-	(11.7)	(11.7)	-	-	-	-
1.55% Euro Senior Notes 2026	(21.2)	-	(19.8)	(19.8)	(21.5)	-	(19.5)	(19.5)	(21.7)	-	(20.3)	(20.3)
3.37% US Dollar Senior Notes 2026	(77.1)	-	(71.8)	(71.8)	(76.8)	-	(69.8)	(69.8)	(76.6)	-	(71.6)	(71.6)
4.87% US Dollar Senior Notes 2026	(20.2)	-	(19.6)	(19.6)	(20.1)	-	(19.2)	(19.2)	(20.0)	-	(19.4)	(19.4)
1.74% Euro Senior Notes 2028	(8.5)	-	(7.7)	(7.7)	(8.6)	-	(7.6)	(7.6)	(8.7)	-	(8.0)	(8.0)
2.89% Euro Senior Notes 2030	(21.2)	-	(18.8)	(18.8)	(21.5)	-	(18.7)	(18.7)	(21.7)	-	(19.6)	(19.6)
5.47% US Dollar Senior Notes 2031	(7.9)	-	(7.5)	(7.5)	(7.9)	-	(7.6)	(7.6)	(7.9)	-	(7.7)	(7.7)
5.53% US Dollar Senior Notes 2033	(7.9)	-	(7.4)	(7.4)	(7.9)	-	(7.6)	(7.6)	(7.9)	-	(7.6)	(7.6)
5.61% US Dollar Senior Notes 2035	(23.8)	-	(22.0)	(22.0)	(23.7)	-	(22.7)	(22.7)	(23.7)	-	(22.8)	(22.8)
5.50% Cumulative First Preference shares	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)
5.00% Cumulative Second Preference shares	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)
	(188.2)	-	(175.0)	(175.0)	(221.8)	-	(206.0)	(206.0)	(188.6)	-	(177.4)	(177.4)

Financial assets held at FVTPL	1.0	1.0	-	1.0	-	-	-	-	2.2	2.2	-	2.2
Derivative financial assets held at fair value	0.3	-	0.3	0.3	0.8	-	0.8	0.8	1.5	-	1.5	1.5
	1.3	1.0	0.3	1.3	0.8	-	0.8	0.8	3.7	2.2	1.5	3.7
Derivative financial liabilities held at fair value	(0.8)	-	(0.8)	(0.8)	(0.6)	-	(0.6)	(0.6)	(0.5)	-	(0.5)	(0.5)

The table above analyses financial instruments carried at fair value, by valuation method, together with the carrying amounts shown in the balance sheet. The fair value of cash and cash equivalents, current trade and other receivables/payables and floating-rate bank and other borrowings are excluded from the preceding table as their carrying amount approximates to their fair value.

Fair value hierarchy

The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: not traded in an active market but the fair values are based on quoted market prices or alternative pricing sources with reasonable levels of price transparency. Fair value is calculated using discounted cash flow methodology, future cash flows are estimated based on forward exchange rates.

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between Level 1 and Level 2 during the six months to 30 June 2024 or 2023 and there were no Level 3 financial instruments in either the six months to 30 June 2024 or 2023.

The major methods and assumption used in estimating the fair values of financial instruments reflected in the preceding table are as follows:

Fixed-rate borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows. The interest rates used to determine the fair value of borrowings are 4.2-6.8% (30 June 2023: 4.3-7.1%; 31 December 2023: 3.7-6.3%).

Equity securities

Fair value is based on quoted market prices at the balance sheet date.

Derivatives

Forward exchange contracts are marked to market either using listed market prices or by discounting the contractual forward price and deducting the current spot rate.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on financial instruments such as liquid assets, derivative assets and trade receivables.

The current economic climate gives rise to an increased credit risk, primarily with respect to trade receivables.

The Group establishes an allowance for impairment that represents its estimate of expected credit losses in respect of trade receivables.

The loss allowance for trade receivables by ageing category is as follows:

	At 30 June 2024				At 30 June 2023				At 31 December 2023
	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables
	%	£m	£m	£m	%	£m	£m	£m	%	£m	£m	£m
Not past due	0.1%	150.2	(0.1)	150.1	0.1%	152.1	(0.1)	152.0	0.2%	133.3	(0.2)	133.1
Past due 0-30 days	1.1%	19.0	(0.2)	18.8	0.4%	25.7	(0.1)	25.6	1.0%	19.9	(0.2)	19.7
Past due 31-60 days	0.0%	4.2	-	4.2	0.0%	7.2	-	7.2	0.0%	3.7	-	3.7
Past due 61-90 days	5.3%	1.9	(0.1)	1.8	2.2%	4.5	(0.1)	4.4	6.3%	1.6	(0.1)	1.5
Past due more than 90 days	87.6%	8.9	(7.8)	1.1	77.4%	11.5	(8.9)	2.6	81.0%	10.5	(8.5)	2.0
		184.2	(8.2)	176.0		201.0	(9.2)	191.8		169.0	(9.0)	160.0

Full details of the Group's policies and processes for managing financial risk are described in note 21 of the Group's 2023 Annual Report and Accounts.

Offsetting financial assets and liabilities

The following table shows the amounts recognised for forward exchange contracts, which are subject to offsetting arrangements on a gross basis, and the amounts offset in the balance sheet.

The Group also has cash pooling agreements which cannot be offset under IFRS, but which could be settled net under the terms of master netting agreements, are also presented in the table to show the total net exposure of the Group.

	Gross amounts of recognised financial assets/ (liabilities)¹	Amounts offset	Net amounts presented on the balance sheet	Financial instruments not offset in the balance sheet	Net amount
	£m	£m	£m	£m	£m
At 30 June 2024
Derivative financial assets	0.3	-	0.3	-	0.3
Derivative financial liabilities	(0.8)	-	(0.8)	-	(0.8)
Cash and cash equivalents	116.6	-	116.6	(1.6)	115.0
Current bank and other borrowings	(1.6)	-	(1.6)	1.6	-

At 30 June 2023
Derivative financial assets	0.8	-	0.8	-	0.8
Derivative financial liabilities	(0.6)	-	(0.6)	-	(0.6)
Cash and cash equivalents	137.5	-	137.5	(6.8)	130.7
Current bank and other borrowings	(6.8)	-	(6.8)	6.8	-

At 31 December 2023
Derivative financial assets	1.5	-	1.5	-	1.5
Derivative financial liabilities	(0.5)	-	(0.5)	-	(0.5)
Cash and cash equivalents	124.5	-	124.5	(0.6)	123.9
Current bank and other borrowings	(0.6)	-	(0.6)	0.6	-

1. Gross amounts of recognised financial assets and liabilities in June 2023 have been re-presented to show the mark-to-market position of the individual derivatives.

Note 12. Pensions and other post-retirement employee benefits

Defined benefit obligations

Six months ended 30 June 2024
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(4.8)	(25.8)	(4.5)	(35.1)
Present value of funded defined benefit obligations	(338.3)	(101.8)	(0.5)	(7.9)	(448.5)
Fair value of plan assets	354.4	102.8	0.3	8.1	465.6
	16.1	(3.8)	(26.0)	(4.3)	(18.0)

Movements in present value of defined benefit obligation
At 1 January 2024	(362.8)	(112.2)	(28.4)	(12.7)	(516.1)
Current service cost	-	-	(0.4)	(0.8)	(1.2)
Interest cost	(8.0)	(2.6)	(0.4)	(0.1)	(11.1)
Actuarial gain/(loss):
Experience (loss)/gain on plan obligations	(0.1)	-	-	0.3	0.2
Changes in financial assumptions - gain	21.8	4.5	1.3	-	27.6
Benefits paid	10.8	4.5	0.9	0.5	16.7
Exchange adjustments	-	(0.8)	0.7	0.4	0.3
At 30 June 2024	(338.3)	(106.6)	(26.3)	(12.4)	(483.6)

Movements in fair value of plan assets
At 1 January 2024	375.3	106.7	0.2	8.7	490.9
Interest on plan assets	8.2	2.5	-	0.2	10.9
Remeasurement loss	(18.3)	(2.8)	-	(0.5)	(21.6)
Contributions by employer	-	0.3	0.9	0.6	1.8
Benefits paid	(10.8)	(4.5)	(0.9)	(0.5)	(16.7)
Exchange adjustments	-	0.6	0.1	(0.4)	0.3
At 30 June 2024	354.4	102.8	0.3	8.1	465.6
Actual return on assets	(10.1)	(0.3)	-	(0.3)	(10.7)

Fair value of plan assets by category
Equities	-	5.1	-	-	5.1
Growth assets	46.2	-	-	-	46.2
Bonds	27.8	95.1	-	-	122.9
Liability-driven investments (LDI)	184.1	-	-	-	184.1
Matching insurance policies	95.2	1.4	0.3	6.0	102.9
Other	1.1	1.2	-	2.1	4.4
	354.4	102.8	0.3	8.1	465.6

Principal actuarial assumptions at 30 June 2024 were:	%	%	%	%
Discount rate	5.12	5.28	3.80	5.52
Inflation (UK: RPI/CPI)	3.18/2.45	n/a	2.10	n/a

Six months ended 30 June 2023
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(5.4)	(26.6)	(3.8)	(35.8)
Present value of funded defined benefit obligations	(341.1)	(109.0)	(0.9)	(7.8)	(458.8)
Fair value of plan assets	360.1	107.5	0.2	7.6	475.4
	19.0	(6.9)	(27.3)	(4.0)	(19.2)

Principal actuarial assumptions at 30 June 2023 were:	%	%	%	%
Discount rate	5.26	4.93	3.70	5.30
Inflation (UK: RPI/CPI)	3.28/2.52	n/a	2.20	n/a

Year ended 31 December 2023
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(5.2)	(27.1)	(4.6)	(36.9)
Present value of funded defined benefit obligations	(362.8)	(107.0)	(1.3)	(8.1)	(479.2)
Fair value of plan assets	375.3	106.7	0.2	8.7	490.9
	12.5	(5.5)	(28.2)	(4.0)	(25.2)

Principal actuarial assumptions at 31 December 2023 were:	%	%	%	%
Discount rate	4.52	4.80	3.40	5.52
Inflation (UK: RPI/CPI)	3.05/2.31	n/a	2.10	n/a

Note 13. Provisions and contingent liabilities

	Closure and restructuring provisions £m	Legal and other provisions £m	Environmental provisions £m	Total £m
At 1 January 2024	7.9	5.6	8.3	21.8
Provisions made during the period	1.5	0.2	-	1.7
Provisions used during the period	(1.6)	(0.4)	(1.1)	(3.1)
Provisions reversed during the period	(0.4)	(0.2)	-	(0.6)
Effect of movements in foreign exchange	(0.1)	(0.2)	-	(0.3)
At 30 June 2024	7.3	5.0	7.2	19.5

Current	5.3	2.0	1.7	9.0
Non-current	2.0	3.0	5.5	10.5
At 30 June 2024	7.3	5.0	7.2	19.5

Closure and restructuring provisions

Closure and restructuring provisions are based on the Group's restructuring programmes and represent committed expenditure at the balance sheet date. The amounts provided are based on the costs of terminating relevant contracts, under the contract terms, and management's best estimate of other associated restructuring costs including professional fees.

We retain provisions for remaining lease exit costs and a multi-employer pension plan from two US sites which were closed during 2021. The cash outflows relating to the pension obligations may continue for up to seventeen years, subject to any settlement being reached in advance of that date. Cash outflows in relation to the lease may continue for the next three years.

Legal and other provisions

Legal and other provisions mainly comprise amounts provided against open legal and contractual disputes arising in the normal course of business and long-service costs. Provisions are made for the expected costs associated with such matters, based on past experience of similar items and other known factors, taking into account professional advice received, and represent management's best estimate of the most likely outcome. The timing of utilisation of these provisions is frequently uncertain, reflecting the complexity of issues and the outcome of various court proceedings and associated negotiations.

Environmental provisions

Environmental provisions are made for quantifiable environmental liabilities arising from known environmental issues. The amounts provided are based on the best estimate of the costs required to remedy these issues. At one site, a remediation feasibility study has been conducted in relation to a known environmental issue and in conjunction with the local Environmental Regulator. A remediation plan has been prepared. The provision recorded reflects the estimated costs of remediation and awaits final regulatory approval. The provision is expected to be utilised in the next five years.

Environmental contingent liabilities

The Group is subject to local health, safety and environmental laws and regulations concerning its manufacturing operations around the world. These laws and regulations may require the Group to take future action to remediate the impact of historical manufacturing processes on the environment or lead to other economic outflows. Such contingencies may exist for various sites which the Group currently operates or has operated in the past. There is a contingent liability arising from additional, as yet unknown, environmental issues at the site referred to above, pending the completion of the feasibility study.

Tax contingent liabilities

The Group is subject to periodic tax audits by various fiscal authorities covering corporate, employee and sales taxes in the various jurisdictions in which it operates. We have provided for estimates of the Group's likely exposures where these can be reliably estimated.

Note 14. Related parties

Identification of related parties

The Company has related party relationships with its subsidiaries and with its Directors and executive officers.

Transactions with key management personnel

Details of transactions with key management personnel are described in note 26 of the Group's 2023 Annual Report and Accounts.

Transactions with related parties

There were no related party transactions during the period that have materially affected the financial position or the performance of the Group during the period. There have been no changes in the nature of related party transactions as described in note 26 to the Group's 2023 Annual Report and Accounts which could have a material effect on the financial position or performance of the Group during the period.

Note 15. Subsequent events

There were no reportable events subsequent to the balance sheet date.

Glossary

Constant-currency¹	Constant-currency revenue and Group adjusted operating profit are derived by translating the prior year results at current year average exchange rates.
Corporate costs	Corporate costs consist of the costs of the central head office.
Free cash flow before acquisitions, disposals and dividends¹	Cash generated from continuing operations less net capital expenditure, net interest paid, tax paid and lease payments.
Group earnings before interest, tax, depreciation and amortisation (EBITDA)¹	EBITDA is defined as operating profit before specific adjusting items, amortisation of intangible assets and depreciation.
Group adjusted operating profit¹	Operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets.
Group adjusted operating profit margin¹	The ratio of Group adjusted operating profit to revenue.
Group organic¹	The Group results excluding acquisition, disposal and business exit impacts at constant-currency.
Adjusted earnings per share (EPS)¹	Adjusted earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax and non-controlling interests, divided by the weighted average number of Ordinary shares during the period.
Net debt¹	Borrowings, bank overdrafts and lease liabilities less cash and cash equivalents.
Net cash and cash equivalents¹	Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts.
Return on invested capital (ROIC)¹	Group 12-month adjusted operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the average adjusted net assets (excludes long-term employee benefits, deferred tax assets and liabilities, current tax payable, provisions, cash and cash equivalents, borrowings, bank overdrafts and lease liabilities).
Specific adjusting items	See note 3 to the condensed consolidated financial statements for further details.
Underlying	Reference to underlying reflects the trading results of the Group without the impact of specific adjusting items and amortisation of intangible assets that would otherwise impact the users' understanding of the Group's performance. The Directors believe that adjusted results provide additional useful information on the core operational performance of the Group and review the results of the Group on an adjusted basis internally.

1. See definitions and reconciliations of non-GAAP measures to GAAP measures on pages 16 to 20.

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