Morgan Advanced Materials Plc · LSE:MGAM

Morgan Advanced Materials — FY2022 Earnings Presentation

35 slides from Morgan Advanced Materials's earnings presentation, Apr 28, 2023

  1. Slide 1: FY2022 results presentation

    FY2022 results presentation Strong growth, returns and strategic progress 28 April 2023

  2. Slide 2: Agenda

    © Morgan Advanced Materials 2 Agenda •Introduction and summary – Pete Raby •2022 financial results – Richard Armitage •Operational and strategic update – Pete Raby

  3. Slide 3: Strong growth, returns & strategic progress

    © Morgan Advanced Materials 3 Strong growth, returns & strategic progress Strong organic constant currency revenue growth of 11.2% Continued trajectory of improving returns: • Adjusted operating profit margin +50 bps to 13.6% • ROIC +190 bps to 22.4% Adjusted earnings per share +24.3% to 33.8p and D

  4. Slide 4: Cyber incident

    © Morgan Advanced Materials 4 Cyber incident In early January, we experienced a significant cyber attack on our business. • Customer demand has remained robust throughout • We are well on our way to recovery, with our ERP systems substantially restored • We have accelerated our IT modernisation prog

  5. Slide 5: FY 2022 results

    © Morgan Advanced Materials 5 FY 2022 results Richard Armitage

  6. Slide 6: Group Performance

    © Morgan Advanced Materials 6 Group Performance % change from FY 2021 £m FY 2022 FY 2021 At organic constant- As reported currency Revenue 1,112.1 950.5 17.0% 11.2% Group adjusted operating profit1 151.0 124.5 21.3% 14.7% Group adjusted operating profit margin % 13.6% 13.1% ROIC % 22.4% 20.5% Cash g

  7. Slide 7: Group adjusted operating profit bridge

    © Morgan Advanced Materials 7 Group adjusted operating profit bridge £m 220 210 • Operating margin expanded through drop 200 190 through on strong revenue growth 180 170 • Pricing and efficiency savings more than 160 150 offset cost inflation 140 130 • Restructuring programme completed 120 110 100 •

  8. Slide 8: Cash flow summary

    © Morgan Advanced Materials 8 Cash flow summary Working capital outflow of £44.7m driven by business growth £100m 2021: £(9.0)m Pension contributions of £85.9m including £67m one-off contribution to UK schemes Working Capital 2021: £16.9m 0 Capital investment of £57.4m, including £29.3m invested in

  9. Slide 9: Reducing the UK pensions burden

    © Morgan Advanced Materials 9 Reducing the UK pensions burden Deficit/(surplus) 2019 - 2022 (£m) Deficit Contributions to UK schemes (£m) • Accelerated contribution of £67m paid in December 2022 Gross debt/ Gross debt/ 240 EBITDA EBITDA 84.3 • FCF improvement of 2019: 2022: £15m per annum • Inflatio

  10. Slide 10: FY2023 technical guidance

    © Morgan Advanced Materials 10 FY2023 technical guidance Effective tax rate 26-28% Net finance charge: Interest charges (c. £10-12m) IAS 19 pensions net interest charge (c. £0.5m) c. £13-15m IFRS 16 lease interest (c. £2.0m) © Morgan Advanced Materials Non-UK defined benefit pension scheme contribut

  11. Slide 11: A disciplined approach to delivering improving growth & returns

    © Morgan Advanced Materials 11 A disciplined approach to delivering improving growth & returns Delivering enhanced EPS growth Clear through cycle financial framework Organic revenue growth 3-6% organic revenue growth + Continuing profit growth 12.5% to 15% adjusted operating profit margin + Accretiv

  12. Slide 12: Operational and strategic update

    © Morgan Advanced Materials 12 Operational and strategic update Pete Raby

  13. Slide 13: Leading differentiated positions

    © Morgan Advanced Materials 13 Leading differentiated positions Share of revenue (%) Market (YE2022) Market Position Differentiation Faster growing L H Semiconductors 8% Emerging Healthcare 7% Leader Clean energy + clean transportation 5% Emerging 20% Core L H Industrial 31% Leader/Top 3 Metals 14%

  14. Slide 14: Growth across major market segments

    © Morgan Advanced Materials 14 Growth across major market segments Year-on-year organic % change at constant-currency % of Group revenue Semiconductors 37% 1 8% • Strong market growth and share wins Healthcare 2% 7% • In implantable devices and analytic eqt. Offset by declines in vacuum packaging 5%

  15. Slide 15: Thermal Ceramics performance summary

    © Morgan Advanced Materials 15 Thermal Ceramics performance summary % change from FY 2021 £m FY 2022 FY 2021 At organic constant- As reported currency Revenue 421.4 364.7 15.5% 11.4% Adjusted operating profit1 48.7 42.0 16.0% 19.3% Margin % 11.6% 11.5% Performance commentary • Revenue growth of 11.4

  16. Slide 16: Molten Metal Systems performance summary

    © Morgan Advanced Materials 16 Molten Metal Systems performance summary % change from FY 2021 £m FY 2022 FY 2021 At organic constant- As reported currency Revenue 57.8 47.7 21.2% 15.8% 1 Adjusted operating profit 7.8 6.3 23.8% 21.9% Margin % 13.5% 13.2% Performance commentary • Revenue growth from s

  17. Slide 17: Electrical Carbon performance summary

    © Morgan Advanced Materials 17 Electrical Carbon performance summary % change from FY 2021 £m FY 2022 FY 2021 At organic constant- As reported currency Revenue 188.7 164.9 14.4% 9.7% Adjusted operating profit1 39.7 32.8 21.0% 21.0% Margin % 21.0% 19.9% Performance commentary • Strong revenue growth

  18. Slide 18: Seals & Bearings performance summary

    © Morgan Advanced Materials 18 Seals & Bearings performance summary % change from FY 2021 £m FY 2022 FY 2021 At organic constant- As reported currency Revenue 148.5 135.9 9.3% 2.8% 1 Adjusted operating profit 19.0 22.9 (17.0%) (21.5%) Margin % 12.8% 16.9% Performance commentary • Organic revenue gro

  19. Slide 19: Technical Ceramics performance summary

    © Morgan Advanced Materials 19 Technical Ceramics performance summary % change from FY 2021 £m FY 2022 FY 2021 At organic constant- As reported currency Revenue 295.7 237.3 24.6% 15.8% 1 Adjusted operating profit 41.7 26.4 58.0% 51.1% Margin % 14.1% 11.1% Performance commentary • Organic revenue gro

  20. Slide 20: Environment, Social and Governance (ESG)

    © Morgan Advanced Materials 20 Environment, Social and Governance (ESG) Our purpose is to use advanced materials to make the world more sustainable and to improve the quality of life. Our aspiration Our 2030 goals2 PROTECT THE • A CO2e net zero business by 20501 • 50% reduction in Scope 1 and Scope

  21. Slide 21: CO2e emissions

    © Morgan Advanced Materials 21 CO2e emissions Absolute CO2e (Scope 1 and 2)1 8% reduction in absolute CO2e emissions on the prior year driven by improvements in: • Green energy procurement: transition to 343 338 339 renewable and other carbon free energy sources 328 319 • Efficiency & process optimi

  22. Slide 22: Water, Safety & Diversity

    © Morgan Advanced Materials 22 Water, Safety & Diversity Water usage Water usage in stressed areas 2500 250 2000 200 '000 m3 '000 m3 1500 150 1000 100 500 50 0 0 2015 Baseline 2019 2020 2021 2022 2030 Goal 2015 Baseline 2019 2020 2021 2022 2030 Goal Lost time accident rate % Female leadership popula

  23. Slide 23: Outlook

    © Morgan Advanced Materials 23 Outlook Customer demand remains robust. As a consequence of the cyber incident, we expect revenue in our first half to be in line with prior year, whilst experiencing temporary cost inefficiency as previously highlighted. In the second half, we expect to return to grow

  24. Slide 24: Resilient financial performance

    © Morgan Advanced Materials 24 Resilient financial performance • A stronger more dynamic business Revenue CAGR 1,112 Adjusted Operating Profit CAGR +6% (ongoing £m) +4% • Delivering growth in underlying revenue and (ongoing £m) earnings since 2016 1,112 151 • Resilience through the pandemic; 1,013 1

  25. Slide 25: Summary

    © Morgan Advanced Materials 25 Summary • Delighted with progress made in delivering all aspects of our strategy in FY2022 • Strong organic constant currency revenue growth • Improving returns with further expansion of margins and ROIC • Strong balance sheet, further very significant step in de-riski

  26. Slide 26: Appendix

    © Morgan Advanced Materials Appendix

  27. Slide 27: Our strategy for growth

    © Morgan Advanced Materials 27 Our strategy for growth We have a strategy to ensure we are the leaders in our field, with the customer and materials insight to apply our capabilities quickly and effectively We apply these skills to a portfolio of businesses where: • Our technical expertise and diffe

  28. Slide 28: End-market mix (as a % of revenue)

    © Morgan Advanced Materials 28 End-market mix (as a % of revenue) Main markets by GBU Thermal Ceramics Industrial, Chemical and petrochemical, Metals, Automotive MMS Aluminium (automotive), Copper (construction), Precious metals Electrical Carbon Rail, Industrial equipment, Power generation, Electro

  29. Slide 29: Segmental performance

    © Morgan Advanced Materials 29 Segmental performance Revenue Adjusted operating profit1 Margin £m £m % FY 2022 FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 Thermal Ceramics 421.4 364.7 48.7 42.0 11.6% 11.5% Molten Metal Systems 57.8 47.7 7.8 6.3 13.5% 13.2% Electrical Carbon 188.7 164.9 39.7 32.8 21.0% 1

  30. Slide 30: Reported statutory figures

    © Morgan Advanced Materials 30 Reported statutory figures Year ended 31 December 2022 Year ended 31 December 2021 Results before Results before £m Specific adjusting Specific adjusting specific adjusting Total specific adjusting Total items items items items Revenue 1,112.1 - 1,112.1 950.5 - 950.5 O

  31. Slide 31: Cash flow summary

    © Morgan Advanced Materials 31 Cash flow summary £m FY 2022 FY 2021 • Working capital outflow primarily EBITDA 189.1 162.5 driven by business growth, including an Change in working capital (44.7) (9.0) Change in provisions and other (incl. pension contribution) (85.3) (17.6) increase in inventory of

  32. Slide 32: Strong balance sheet and available liquidity

    © Morgan Advanced Materials 32 Strong balance sheet and available liquidity Facilities maturity profile Headroom on banking covenants Net debt to EBITDA excluding the impact of IFRS 16: 0.8x (FY2021: 0.3x) © Morgan Advanced Materials Significant liquidity £154.0m undrawn RCF plus available net cash

  33. Slide 33: Foreign currency impacts

    © Morgan Advanced Materials 33 Foreign currency impacts The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows: FY 2022 FY 2021 Closing Average Closing Average GBP to: rate rate rate rate USD 1.21 1.24 1.35 1.38 Euro 1.13 1.17 1.19 1.16 For illus

  34. Slide 34: Adjusted earnings per share

    © Morgan Advanced Materials 34 Adjusted earnings per share £m FY 2022 FY 2021 Profit for the period attributable to shareholders of the Company 88.0 73.8 Profit from discontinued operations (1.1) (5.7) Profit from continuing operations 86.9 68.1 Specific adjusting items 5.5 5.4 Amortisation of intan

  35. Slide 35: Contact

    © Morgan Advanced Materials 35 Contact investorrelations@morganplc.com +44 (0)1753 837 000 morganadvancedmaterials.com

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