Advanced materials and engineering group Morgan Advanced Materials (MGAM) reported a stronger than expected rebound in trading and profitability in the year to December 2021.
After plumbing 12-month lows yesterday, the shares surged 13% to 318p.
EARNINGS UPGRADES
Adjusted operating margins expanded by 3% to 20-year highs of 13.1% pushing profit up 36% to £124.5 million, ahead of analysts’ forecasts.
The share price weakness before today’s stunning results is puzzling because analysts have been busily increasing their earnings forecasts over the last few months which is usually supportive.
The company said demand recovered strongly across the global economy, and despite supply chain and inflation pressures it was able to make good progress.
Chief executive Pete Raby commented: ‘We made further progress with the execution of our strategy, strengthening our capabilities and improving the sustainability of our business.
‘This resulted in strong growth and saw margins at their highest point in more than 20 years.’
Management anticipates organic growth of between 4%-to-7% in 2022 amid plans to increase exposure towards faster growing segments such as clean energy, semiconductors and healthcare.
RECOVERY AND SELF HELP
Full year revenues increased 4.4% to £950.5 million, while on an organic underlying basis they were up more than 10% on the previous year.
Pricing and efficiency improvements offset cost inflation while operating profit benefited by £20 million from the restructuring and efficiency programme.
The company confirmed the progamme concluded in 2021 and is on target to deliver a further £23 million benefit in 2022.
Adjusted earnings per share were up 43% to 27.2p, ahead of market expectations of 25.2p per share. The board recommended a final dividend of 5.9p per share.
Together with the 3.2p per share paid in November, the full-year dividend increased 65% to 9.1p per share.
The company has committed to growing the dividend in line with profit, while maintaining a coverage ratio of three times.
