Morgan Advanced Materials Plc · LSE:MGAM
Morgan Advanced Materials — FY2021 Earnings Presentation
35 slides from Morgan Advanced Materials's earnings presentation, Mar 4, 2022
Slide 1: 2021 Year end results presentation
2021 Year end results presentation 4 March 2022 1
Slide 2: Agenda
Agenda • Introduction and summary – Pete Raby • 2021 Year end results – Peter Turner • Operational and strategic update – Pete Raby © Morgan Advanced Materials 2
Slide 3: Key highlights
Key highlights • The safety of our people is our priority and we continue to operate protection measures to keep our employees safe during the pandemic • Organic constant-currency revenue growth of 10.3% with 22%1 from our faster growing markets and 7% from our core markets • Adjusted operating prof
Slide 4: 2021 Year end results
2021 Year end results Peter Turner © Morgan Advanced Materials 4
Slide 5: Group performance
Group performance % change from FY 2020 £m FY 2021 FY 2020 At organic constant- As reported currency Revenue 950.5 910.7 4.4% 10.3% Group adjusted operating profit1 124.5 91.7 35.8% 48.6% Group adjusted operating profit margin % 1 13.1% 10.1% ROIC % 20.5% 13.0% Cash generated from continuing operati
Slide 6: Group adjusted operating profit bridge
Group adjusted operating profit bridge £m 150 140 • Margin expansion from volume growth driven by recovery in the economy 130 • Delivery of the restructuring 120 programme benefits 110 • Pricing and continuous improvement 100 efficiency actions continue to more 90 than offset cost inflation 80 • Rev
Slide 7: Emerging stronger: Group restructuring and efficiency programme
Emerging stronger: Group restructuring and efficiency programme The Group restructuring and efficiency programme to simplify Morgan’s structure and drive efficiency in operations is on track. We have closed sites as planned with the last site closed in the second half of 2021. 2021 savings were £20
Slide 8: Cash flow summary
Cash flow summary £m FY 2021 FY 2020 EBITDA 162.5 133.6 Change in working capital (9.0) 34.8 • Working capital outflow driven by Change in provisions and other (17.6) (22.1) business growth Cash generated from continuing operations 135.9 146.3 Net capital expenditure (28.1) (28.6) • Free cash flow o
Slide 9: Net leverage
Net leverage We have made significant progress in reducing leverage in recent years. Net debt1 Defined benefit pensions deficit £m £m 250 1.8 300 1.6 1.6 250 200 1.4 1.2 1.2 1.2 200 150 1.0 1.0 242 0.8 150 0.8 271 100 181 180 218 157 0.6 100 190 176 157 50 101 0.3 0.4 50 103 47 0.2 - - - 2016 2017 2
Slide 10: FY22 financial framework
FY22 financial framework Effective tax rate 27-28% Net finance charge: Interest charge (c. £6m) IAS 19 pensions net interest charge (c. £1m) c. £9m IFRS 16 lease interest (c. £2m) Defined benefit pension scheme contributions c. £20m Foreign currency impacts see slide 33 Capital expenditure c. £60m ©
Slide 11: Operational and strategic update
Operational and strategic update Pete Raby © Morgan Advanced Materials 11
Slide 12: Broad based growth across most major market segments
Broad based growth across most major market segments Year-on-year organic % change at constant-currency % of 2021 Group revenue Industrial 16% 45% • Broad based recovery in the major industrial geographies Transportation 7% 17% • Growth in automotive and aerospace segments Chemical and petrochemical
Slide 13: Thermal Ceramics performance summary
Thermal Ceramics performance summary % change from FY 2020 £m FY 2021 FY 2020 At organic As reported constant-currency Revenue 364.7 344.3 5.9% 9.8% 1 Adjusted operating profit 42.0 26.7 57.3% 61.5% Margin % 11.5% 7.8% Performance commentary • Strong growth with a broad based recovery in industrial
Slide 14: Molten Metal Systems performance summary
Molten Metal Systems performance summary % change from FY 2020 £m FY 2021 FY 2020 At organic As reported constant-currency Revenue 47.7 41.2 15.8% 20.8% 1 Adjusted operating profit 6.3 3.2 96.9% 103.2% Margin % 13.2% 7.8% Performance commentary • Revenue growth from strong demand in the aluminium an
Slide 15: Electrical Carbon performance summary
Electrical Carbon performance summary % change from FY 2020 £m FY 2021 FY 2020 At organic As reported constant-currency Revenue 164.9 151.4 8.9% 13.1% 1 Adjusted operating profit 32.8 23.6 39.0% 46.4% Margin % 19.9% 15.6% Performance commentary • Growth in the industrial, renewable energy and semico
Slide 16: Seals and Bearings performance summary
Seals and Bearings performance summary % change from FY 2020 £m FY 2021 FY 2020 At organic As reported constant-currency Revenue 135.9 146.4 (7.2%) (3.1%) 1 Adjusted operating profit 22.9 27.5 (16.7%) (11.6%) Margin % 16.9% 18.8% Performance commentary • Revenue from ceramic armour declined as expec
Slide 17: Technical Ceramics performance summary
Technical Ceramics performance summary % change from FY 2020 £m FY 2021 FY 2020 At organic As reported constant-currency Revenue 237.3 227.4 4.4% 16.1% 1 Adjusted operating profit 26.4 14.8 78.4% 151.4% Margin % 11.1% 6.5% Performance commentary • Growth in the industrial, semiconductor, healthcare,
Slide 18: Clean Energy, Clean Transportation, Semiconductors and Healthcare grew rapidly
Clean Energy, Clean Transportation, Semiconductors and Healthcare grew rapidly Year-on-year organic % change at constant-currency % of 2021 Group revenue • We are investing in business, and new Faster product, development and new 1 growing 22% 20% markets capacity in our four faster growing segments
Slide 19: Environment, Social and Governance (ESG)
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 2 environment CO2e emissions3 •
Slide 20: CO2e emissions
CO2e emissions Absolute CO2e (Scope 1 and 2)1 17% reduction in absolute CO2e emissions on the prior year driven by improvements in: • Green energy procurement: transitions to renewable and other carbon free energy sources 343 338 339 328 319 • Behavioural changes: changes in our behaviours '000 metr
Slide 21: Water, safety and diversity
Water, safety and diversity Water usage Water usage in stressed areas 0.5 2500 0.5 160 140 m3 worked m3 worked 0.4 2000 0.4 120 hours hours 0.3 1500 100 0.3 '000 '000 80 LTAs/100K LTAs/100K 0.2 1000 0.2 60 40 0.1 500 0.1 20 0 00 20152015 Baseline 2018 2019 2019 2020 2020 2021 2021 2030 2030Goal Goal
Slide 22: Our journey
Our journey What have we done Where are we now Our future • Invested in safety and ESG • Improved safety Focus on our three execution • Strengthened our sales effectiveness • Exploit global megatrends: Improved environmental performance priorities: and customer relationships • • Delivering Climatefa
Slide 23: Outlook
Outlook • There is considerable geopolitical uncertainty, in particular the Russian conflict in Ukraine • However, we have seen good order momentum coming into the year and anticipate organic revenue growth of 4-7% in 20221 • With our investments in new products and new technologies, we plan to incr
Slide 24: Summary
Summary • The safety of our people is our priority and we continue to operate protection measures to keep our employees safe during the pandemic • Organic constant-currency revenue growth of 10.3% with 22%1 from our faster growing markets and 7% from our core markets • Adjusted operating profit marg
Slide 25: Appendix
Appendix © Morgan Advanced Materials 25
Slide 26: Our strategy for growth
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 differentiation is valued • We can o
Slide 27: End-market mix (as a % of revenue)
7% 17% Energy Energy 17% Energy Energy End-market 7% 7% 7% mix (as a % of revenue) Security and Security and defence defence Security and defence Transportation 7% 44% 44% Security and defence 7% 44% 14% 14% Semiconductor Semiconductor Chemical and Main markets by GBU 7% 44% 14% and and electronics
Slide 28: Divisional performance
Divisional performance Revenue Adjusted operating profit1 Margin £m £m % FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020 Thermal Ceramics 364.7 344.3 42.0 26.7 11.5% 7.8% Molten Metal Systems 47.7 41.2 6.3 3.2 13.2% 7.8% Thermal Products division2 412.4 385.5 48.3 29.9 11.7% 7.8% Electrical Carbon 1
Slide 29: Reported statutory figures
Reported statutory figures Year ended 31 December 2021 Year ended 31 December 2020 Results before Results before £m Specific adjusting Specific adjusting specific adjusting Total specific adjusting Total items1 items1 items items Revenue 950.5 - 950.5 910.7 - 910.7 Operating costs before amortisatio
Slide 30: Specific adjusting items
Specific adjusting items £m FY 2021 FY 2020 Impairment of non-financial assets (12.4) (65.6) Restructuring credit/(costs) 0.1 (24.0) Net profit on disposal of business 7.1 2.2 Business closure and exit costs (0.2) - Total specific adjusting items before income tax (5.4) (87.4) • Specific adjusting i
Slide 31: Pensions update
Pensions update Deficit movement since 31 December 2020 £m Deficit at 31 December 2020 (176) Contributions (net of service costs) 17 Net IAS 19 interest costs (2) Actuarial gain on liabilities 53 Remeasurement gain on assets 2 Currency adjustment 3 Deficit at 31 December 2021 (103) £m 31 December 20
Slide 32: Strong balance sheet and available liquidity
Strong balance sheet and available liquidity Facilities maturity profile £m Headroom on banking covenants • Net debt to EBITDA excluding the impact of IFRS 16: 0.3x (FY2020: 0.8x) Significant liquidity • £200 million undrawn RCF plus available cash and cash equivalents of £127.3 million Average cost
Slide 33: Foreign currency impacts
Foreign currency impacts The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows: FY 2021 FY 2020 Closing Average Closing Average GBP to: rate rate rate rate USD 1.35 1.38 1.37 1.28 Euro 1.19 1.16 1.12 1.13 For illustrative purposes, the table bel
Slide 34: Adjusted earnings per share
Adjusted earnings per share £m £m FY FY 2021 2021 FY FY2020 2020 Profit/(loss)for Profit/(loss) for the the period period attributable attributable to shareholders of the Company Company 73.8 73.8 (22.5) (22.5) Profit from Profit from discontinued discontinued operations operations (5.7) (5.7) (2.0)
Slide 35: MMorgan
MMorgan E Advance: .d Materials ° TTT =P), (ll PBXEN U
Morgan Advanced Materials — FY2021 Earnings Presentation on 6ix