Morgan Advanced Materials Plc · LSE:MGAM

Morgan Advanced Materials — H1 2023 Earnings Presentation

35 slides from Morgan Advanced Materials's earnings presentation, Aug 4, 2023

  1. Slide 1: 2023 Interim results presentation

    2023 Interim results presentation Encouraging progress; FY23 guidance unchanged 4 August 2023

  2. Slide 2: Agenda

    © Morgan Advanced Materials 2 Agenda •Introduction and summary – Pete Raby •2023 Interim results – Richard Armitage •Operational and strategic update – Pete Raby

  3. Slide 3: Encouraging progress; FY23 guidance unchanged

    © Morgan Advanced Materials 3 Encouraging progress; FY23 guidance unchanged • Organic constant-currency revenue growth of 2.6%, with 5.6% from our faster growing markets • Financial performance for the first half of the year reflects short term impact of the cyber incident in January, with subsequen

  4. Slide 4: Cyber incident recovery on track

    © Morgan Advanced Materials 4 Cyber incident recovery on track • Manufacturing sites remained operational throughout • Customer demand remained robust; H1 revenue growth +2.6% • We are well on our way to recovery, with our ERP systems substantially restored • IT modernisation programme accelerated •

  5. Slide 5: 2023 Interim results

    © Morgan Advanced Materials 5 2023 Interim results Richard Armitage

  6. Slide 6: Group Performance

    © Morgan Advanced Materials 6 Group Performance % change from 1H 2022 £m 1H 2023 1H 2022 At organic constant- As reported currency Revenue 553.9 530.2 4.5% 2.6% Group adjusted operating profit1 50.0 72.5 (31.0)% (31.4)% Group adjusted operating profit margin % 9.0% 13.7% Return on invested capital %

  7. Slide 7: Group adjusted operating profit bridge

    © Morgan Advanced Materials 7 Group adjusted operating profit bridge £m Impact of cyber incident • Pricing measures continue to more than offset cost inflation • Increased investment in IT infrastructure • Small tailwind from foreign exchange • The two principal impacts of the cyber event are: - low

  8. Slide 8: Cash flow summary

    © Morgan Advanced Materials 8 Cash flow summary Working capital outflow of £(45.2)m Inventory £(17.2)m Trade receivables £(34.3)m Trade payables £6.3m 0 2022 1H: £(38.7)m Capital investment of £24.0m £(100)m 2022 1H: £22.9m Free cash flow of £(37.1)m Working £(200)m Capital £200.4m EBITDA Capex 2022

  9. Slide 9: FY2023 technical guidance unchanged

    © Morgan Advanced Materials 9 FY2023 technical guidance unchanged Effective tax rate 27% 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. £2.3m) © Morgan Advanced Materials Non-UK defined benefit pension scheme con

  10. Slide 10: A disciplined approach to delivering improving growth & returns

    © Morgan Advanced Materials 10 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

  11. Slide 11: Operational and strategic update

    © Morgan Advanced Materials 11 Operational and strategic update Pete Raby

  12. Slide 12: Leading differentiated positions

    © Morgan Advanced Materials 12 Leading differentiated positions Share of revenue (%) Market (1H 2023) Market Position Differentiation Faster growing L H Semiconductors 9.3% Emerging Healthcare 7.1% Leader Clean energy + clean transportation 4.4% Emerging 20.8% Core L H Industrial 30.7% Leader/Top 3

  13. Slide 13: Growth across major market segments

    © Morgan Advanced Materials 13 Growth across major market segments Year-on-year organic % change at constant-currency Semiconductors 1 16.5% • Strong semiconductor growth in both carbon and ceramic Healthcare 2.4% products with SiC power electronics particularly strong Clean Energy & Clean Transport

  14. Slide 14: Thermal Ceramics performance summary

    © Morgan Advanced Materials 14 Thermal Ceramics performance summary % change from 1H 2022 £m 1H 2023 1H 2022 At organic constant- As reported currency Revenue 205.2 200.5 2.3% 2.1% Adjusted operating profit1 14.0 22.7 (38.3)% (35.5)% Margin % 6.8% 11.3% Performance commentary • Revenue growth of 2.1

  15. Slide 15: Electrical Carbon performance summary

    © Morgan Advanced Materials 15 Electrical Carbon performance summary % change from 1H 2022 £m 1H 2023 1H 2022 At organic constant- As reported currency Revenue 95.5 91.3 4.6% 3.7% Adjusted operating profit1 16.4 18.9 (13.2)% (13.7)% Margin % 17.2% 20.7% Performance commentary • Revenue growth driven

  16. Slide 16: Molten Metal Systems performance summary

    © Morgan Advanced Materials 16 Molten Metal Systems performance summary % change from 1H 2022 £m 1H 2023 1H 2022 At organic constant- As reported currency Revenue 26.1 28.1 (7.1)% (8.4)% 1 Adjusted operating profit 1.9 4.2 (54.8)% (55.8)% Margin % 7.3% 14.9% Performance commentary • Revenue decline

  17. Slide 17: Seals & Bearings performance summary

    © Morgan Advanced Materials 17 Seals & Bearings performance summary % change from 1H 2022 £m 1H 2023 1H 2022 At organic constant- As reported currency Revenue 72.8 71.8 1.4% (1.6)% Adjusted operating profit1 5.9 10.9 (45.9)% (47.3)% Margin % 8.1% 15.2% Performance commentary • Organic revenue declin

  18. Slide 18: Technical Ceramics performance summary

    © Morgan Advanced Materials 18 Technical Ceramics performance summary % change from 1H 2022 £m 1H 2023 1H 2022 At organic constant- As reported currency Revenue 154.3 138.5 11.4% 7.1% 1 Adjusted operating profit 14.8 18.8 (21.3)% (24.9)% Margin % 9.6% 13.6% Performance commentary • Revenue growth dr

  19. Slide 19: Environment, Social and Governance (ESG)

    © Morgan Advanced Materials 19 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

  20. Slide 20: CO2e emissions

    © Morgan Advanced Materials 20 CO2e emissions 19% reduction in absolute CO2e emissions Absolute CO2e (Scope 1 and 2)1 compared with 1H 2022 driven by: • Green energy procurement: transition to renewable and other carbon free energy sources • Efficiency & process optimisation actions: changes to proc

  21. Slide 21: Water, Safety & Diversity

    © Morgan Advanced Materials 21 Water, Safety & Diversity Water usage Water usage in stressed areas 2500 500 2000 400 '000 m3 '000 m3 1500 300 1000 200 100 500 0 0 2015 2019 2020 2021 2022 1H22 1H23 2030 Goal 2015 2019 2020 2021 2022 1H22 1H23 2030 Goal Baseline Baseline Lost time accident rate % Fem

  22. Slide 22: Outlook

    © Morgan Advanced Materials 22 Outlook Our recovery is well progressed and we have used this as an opportunity to accelerate investment in our IT infrastructure across the Group Customer demand remains robust. Whilst mindful of market conditions, our outlook for full- year revenue growth remains unc

  23. Slide 23: Summary

    © Morgan Advanced Materials 23 Summary • Our employees have been at the heart of our response to the cyber incident; I would like to thank them for their hard work during a challenging period of recovery • Customer demand for our products and technology remains robust • We are positioned in attracti

  24. Slide 24: Appendix

    © Morgan Advanced Materials Appendix

  25. Slide 25: Our strategy for growth

    © Morgan Advanced Materials 25 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

  26. Slide 26: End-market mix (as a % of revenue)

    © Morgan Advanced Materials 26 End-market mix (as a % of revenue) Main markets by GBU1 Thermal Ceramics Industrial, Chemical and petrochemical, Metals, Automotive MMS Aluminium (automotive), Copper (construction), Precious metals Electrical Carbon Rail, Industrial equipment, Power generation, Electr

  27. Slide 27: Segmental performance

    © Morgan Advanced Materials 27 Segmental performance Revenue Adjusted operating profit1 Margin £m £m % 1H 2023 1H 2022 1H 2023 1H 2022 1H 2023 1H 2022 Thermal Ceramics 205.2 200.5 14.0 22.7 6.8% 11.3% Molten Metal Systems 26.1 28.1 1.9 4.2 7.3% 14.9% Electrical Carbon 95.5 91.3 16.4 18.9 17.2% 20.7%

  28. Slide 28: Reported statutory figures

    © Morgan Advanced Materials 28 Reported statutory figures Six months ended 30 June 2023 Six months ended 30 June 2022 £m Results before Results before Specific adjusting Specific adjusting specific adjusting Total specific adjusting Total items items items items Revenue 553.9 - 553.9 530.2 - 530.2 O

  29. Slide 29: Cash flow summary

    © Morgan Advanced Materials 29 Cash flow summary £m 1H 2023 1H 2022 • The increase in working capital reflects EBITDA 69.5 90.8 collection challenges which arose as a Change in working capital (45.2) (38.7) Change in provisions and other (11.4) (6.9) result of the cyber incident and an increase in s

  30. Slide 30: Strong balance sheet and available liquidity

    © Morgan Advanced Materials 30 Strong balance sheet and available liquidity Headroom on banking covenants • Net debt to EBITDA excluding the impact of IFRS 16: 1.3x (FY2022: 0.8x) Significant liquidity • £190.2m available RCF plus available net cash and cash equivalents of £130.3m Average cost of lo

  31. Slide 31: Foreign currency impacts

    © Morgan Advanced Materials 31 Foreign currency impacts The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows: 1H 2023 1H 2022 Closing Average Closing Average GBP to: rate rate rate rate USD 1.27 1.23 1.22 1.30 Euro 1.16 1.14 1.16 1.19 For illus

  32. Slide 32: Adjusted earnings per share

    © Morgan Advanced Materials 32 Adjusted earnings per share £m 1H 2023 1H 2022 Profit for the period attributable to shareholders of the Company 14.8 42.9 Profit from discontinued operations - - Profit from continuing operations 14.8 42.9 Specific adjusting items 13.4 - Amortisation of intangible ass

  33. Slide 33: ROIC Definition Chart

    © Morgan Advanced Materials 33 ROIC Definition Chart Return on invested capital (ROIC) has been redefined so that it can be recalculated from published data. It is now defined as: 12-month adjusted operating profit (operating profit excluding specific adjusting items and amortisation of intangible a

  34. Slide 34: FY 2022 financial performance

    © Morgan Advanced Materials 34 FY 2022 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 1,0

  35. Slide 35: Contact

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

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