MGAM Morgan Advanced Materials Plc

Press Release

Morgan Advanced Materials plc

5 November 2024

Trading Update

Expanded simplification programme, and

Commencement of a £40m share buy-back programme

Morgan Advanced Materials plc, the global manufacturer of advanced carbon and ceramic materials for technically demanding applications, announces today a trading update for the first nine months to 30 September 2024 with an outlook for the current financial year, an expanded simplification programme and the commencement of a share buy-back programme of up to £40m.

Current Trading

Sales for the first nine months of the year to 30 September 2024 were 3.8% higher for the Group on an organic constant currency basis, compared to the same period last year.  By reporting segment, organic constant-currency sales performance for the nine months to September 2024, was as follows:

Thermal Products                            -2.3%

Performance Carbon                      +12.6%

Technical Ceramics                          +3.4%

2024 Outlook

Market conditions have weakened during the second half and we are now seeing a further deterioration in our outlook for the fourth quarter.  Our outlook for constant currency revenue growth for the full financial year is now around 3%.  Together with additional FX headwinds, we now expect an adjusted operating profit margin for the year of c.11.4%.

Expansion of Simplification Programme

Our simplification programme, announced in March 2024, included restructuring that was expected to deliver £10 million of annualised savings by 2025 with an expected implementation cost of around £20m incurred over 2023 to 2025.  Our increased focus on simplification has now allowed us to expand this programme in order to achieve further cost reductions in our supply chain and back office, and in order to help us return adjusted operating profit margin to our target range in 2025.  We expect to deliver an additional £12m of annualised savings with an associated exceptional charge of around £25m incurred over 2024 to mid-2026 (resulting in expected overall programme savings of £22m with an exceptional charge of £45m).

Our expected overall investment in both simplification and growth remains unchanged, as we allocate capital to the near term cost opportunity in weaker markets in preference to capacity investment in core industrial markets.

Expected returns from our previously announced investment in Faster Growing Markets also remains unchanged.

Announcement of a Share Buy-back Programme

The Group is pleased to announce the commencement of a share buy-back programme of up to £40m.   The programme reflects the Group's strong prospects and balance sheet, which have allowed us to increase returns to shareholders by supplementing our regular dividend with the launch of this share buy-back programme.

Whilst we continue to pursue acquisition targets in line with our strict criteria, we expect that the timing of any likely transaction is such that a share buy-back programme can now be prioritised, in line with our capital allocation policy.  The Group continues to target through the cycle leverage range of 1.0x to 1.5x net debt to adjusted EBITDA excluding M&A, and expects to remain within this range during 2025.

Further detail is provided in a separate RNS released today.

Pete Raby, Chief Executive Officer, said:

"We are seeing a weaker trading environment in the near term and are expanding our simplification programme, continuing our track record of self-help.  We remain focused on delivering enhanced returns to shareholders and are pleased to be able to support this in the near term with the additional cost savings and share buy-back programme, both announced today. Our business is well positioned with leading market positions, a strong balance sheet, and attractive opportunities in both faster growth and core markets as markets recover."

For further enquiries:

This announcement contains inside information.  The person responsible for arranging the release of this announcement on behalf of Morgan Advanced Materials plc is Richard Armitage, Chief Financial Officer. The Company's LEI number is I4K14LL95N2PHDL7EG85.

Notes to editors

1.      Simplification Programme

2.      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% to 15.0%

-        Return on invested capital of 17.0% to 20.0%

-        Leverage (net debt/EBITDA excl. leasing) of 1.0x to 1.5x without M&A, 1.5x to 2.0x with M&A

3.      This announcement contains forward-looking statements. These statements have been made in good faith based on the information available up to the time of the approval of this announcement. No assurance can be given that these expectations will prove to have been correct. By their nature, forward-looking statements involve risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. As such, undue reliance should not be placed on forward-looking statements..

The Directors undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.