Final Results

Morgan Crucible Co PLC 19 February 2004 19 February 2004 PRELIMINARY RESULTS FOR THE YEAR TO 4 JANUARY 2004 2003 2002 ----- ----- Group Turnover £m 849.6 880.3 Operating Profit* £m 42.6 34.1 Underlying PBT** £m 26.9 21.3 Net Debt £m 249.3 251.6 Underlying EPS*** pence 9.6p 5.0p * Defined as statutory operating loss of £32.2 million (2002: loss £30.9million) before goodwill amortisation of £7.5 million (2002: £7.7 million) and operating exceptional charges of £67.3 million (2002: £57.3 million). This measure of earnings is shown because the Directors consider that it gives a better indication of underlying performance. ** Defined as statutory loss before tax of £78.0 million (2002: loss £58.7 million) before goodwill amortisation of £7.5 million (2002: £7.7 million) and corporate and operating exceptional charges of £97.4 million (2002: £72.3 million). *** Basic underlying loss per share of 30.5p (2002: 23.2p) loss adjusted to exclude the after tax impact of corporate and operating exceptional items of 40.1p (2002: 28.2p). • Total turnover £849.6 million (2002: £880.3 million), equivalent to £844.8 million at constant exchange rates • Operating profit from continuing operations before goodwill amortisation and operating exceptional charges up 38.8% to £41.5 million (2002: £29.9 million) • Underlying EPS before goodwill amortisation and operating exceptional charges of 9.6 pence (2002: 5.0 pence) • Net debt reduced to £249.3 million (2002: £251.6 million) • First half working capital outflow reversed, resulting in net inflow of £1.2 million • Operating exceptional costs of £67.3 million in the year - £60.8 million arising from restructuring initiatives and £6.5 million from anti-trust and other legal costs • Restructuring programme announced in February 2002 on track and nearing completion • Restructuring initiatives from the strategic review as outlined in September 2003 made good progress in the second half of the year at a cost of approximately £21 million • £54 million Rights Issue announced separately today to fund a profit improvement programme aimed at cost savings and profit improvement opportunities of up to £50 million per annum by end of 2006 Commenting on the results, Chief Executive Officer, Warren Knowlton said: 'Today's improved underlying results reflect the significant positive impact that our restructuring initiatives are already having on Group performance. While our markets overall have stabilised, the timing of a recovery remains uncertain. We are therefore not relying on a market upturn to improve future trading performance but instead are vigorously implementing our programme of cost reduction and profit improvement to drive future profitability and cash flow generation. As a result, the Board is confident in the Group's financial and trading prospects for the current financial year.' Enquiries Warren Knowlton, Chief Executive Officer 01753 837 302 Nigel Young, Finance Director 01753 837 306 Rupert Younger/Charlotte Hepburne-Scott, Finsbury 020 7251 3801 Overview Our markets overall stabilised during 2003 with demand in Europe steady, America weak, and Asia, the smallest of our three geographical markets, growing strongly. We did not rely on a market upturn to improve Morgan Crucible's performance during the year, but instead focused upon simplifying our businesses, optimising our product mix and reducing costs in real terms in order to drive profitability and cash flow. The timing of a recovery remains uncertain and we will continue with this strategy in 2004. Restructuring and Disposals The restructuring programme announced in February 2002 is on track and nearing completion. All the cash costs and operating exceptional charges for that programme are included in the Group's financial statements for 2002 and 2003. An intensive and detailed strategic review of the Group's activities was conducted during the first half of 2003 that identified further significant opportunities to reduce cost and enhance performance. In September 2003, we announced that the anticipated costs of pursuing those opportunities would be between £55 million and £70 million and that the annualised benefits would be between £35 million and £50 million by mid 2006. During the second half of 2003, we pressed forward with the initial restructuring actions identified by the 2003 strategic review. Some of the benefits arising from actions initiated in the second half were achieved in 2003 but the majority will be realised in 2004. Approximately £21 million was spent during the period in respect of the strategic plan and its initial actions and further specific actions are planned for 2004. The Group also disposed of a number of non-core activities during the year. These included six soft coatings operations in the USA, a superconductor operation in Germany and our graflon polymer rings and packing business. The total gross consideration from these disposals was £38.4 million. We also continued our programme of disposals of land and buildings made surplus as a result of the restructuring actions. The gross proceeds from disposals of these surplus sites was £6.7 million although one of these disposals, for a gross cash consideration of £5.1 million, will not be received until the end of 2004. We remain committed to the disposal of businesses that fail to meet the required performance criteria. However, the timing of such disposals is uncertain. Net Debt Net debt at the end of the period was £249.3 million compared with £251.6 million last year. Net proceeds from corporate and property disposals of £34.8 million were more than offset by the redemption in July of £28.0 million of preference shares and the cash spent on restructuring of £36.8 million. The balance sheet gearing increased during the year from 71.8 per cent. to 95.7 per cent. Financial Review Group turnover for the year was £849.6 million (2002: £880.3 million), equivalent to £844.8 million at constant exchange rates. Operating profit on a continuing business basis before goodwill and exceptional costs was £41.5 million (2002:£29.9 million) resulting in an operating margin on this basis of 5.0 per cent. (2002: 3.6 per cent.). Group operating profit at constant exchange rates was approximately £1 million greater. Operating exceptional costs in the year were £67.3 million (2002: £57.3 million). This charge includes £15.2 million relating to non-cash asset write-offs, £40.6 million in respect of cash spent in 2003 and £11.5 million for an increase in provisions made for 2004 expenditure. The charge includes both £60.8 million (2002: £45.0 million) of costs for the Group's restructuring programmes and £6.5 million (2002: £12.3 million) of legal and associated costs in respect of various anti trust matters. Goodwill authorisation was slightly lower than a year earlier at £7.5 million (2002: £7.7 million) reflecting the impact of the corporate disposals made during the year. Corporate exceptional charges were £30.1 million (2002: £15.0 million) and include principally losses on the disposal of the Superconductor business, the six US Soft Coatings operations and the Graflon business, together with the net loss on disposal of surplus properties. The loss from corporate disposals includes goodwill previously written off of £24.2 million. Net finance charges increased to £15.7 million (2002: £12.8 million) reflecting the impact of the more costly long term bank and private placement facilities negotiated in the first quarter of the year, and the redemption of the preference shares in July. Taxation for the year showed a net credit of £2.4 million (2002: a net credit £0.5 million). The effective rate before all exceptional items, release of tax provisions and goodwill amortisation was 23 per cent. (2002: 30 per cent.). Underlying earnings per share for the period before goodwill amortisation and operating exceptional charges were 9.6 pence (2002: 5.0 pence). Net cash inflow from operating activities was £45.3 million (2002: £75.2 million). The cash outflow from operating exceptional items was £40.6 million. As expected, the second half saw a complete reversal of the working capital outflow that occurred in the first half year, resulting in a net inflow of £1.2 million (2002: £18.7 million). Free cash outflow after net capital expenditure was £8.8 million (2002: £5.1 million inflow). Capital expenditure was 0.79 times the depreciation charge in 2003 compared with 0.75 times in the previous year. Pensions The Group operates a number of pension schemes throughout the world with the largest of these schemes being in the UK, Germany and the US. The majority of these schemes are of a funded defined benefit type. Provisions included in the Group's balance sheet at the year end for unfunded schemes increased by £7 million to £94 million; £5.9 million of this increase arose from foreign exchange translation. During the year, the Group's total net deficit for funded, defined benefit schemes under Financial Reporting Standard No 17, which compares the market value of a funded pension scheme's asset with an actuarial valuation of its future pension liabilities, showed a significant reduction compared with 2002. The amount of the net deficit (after taking provisions for unfunded schemes into account) fell by £38.8 million (from £82 million) to £43.2 million. The Group operates two defined benefit schemes in the UK that are actuarially valued biennially. At the time of its last valuation in April 2002, the larger of the two schemes met the minimum funding requirement. The results of an actuarial valuation of the second smaller scheme as at April 2003 showed that the minimum funding requirement had not been met. As a result, the contribution rates for both employer and employee were increased. The future impact of this change on the Group's annual pension charge is some £0.3 million per annum. Dividends In view of the current conditions in certain of our markets and the need to invest in the cost reduction programme, the Board has decided not to recommend a dividend. Once the Group is achieving a level of sustained profitability and cash generation, the Board will consider resuming the payment of dividends at a level that would then reflect the Group's financial performance and prospects. Operating Review In the operating review all references to operating profit are stated before goodwill authorisation and operating exceptionals. Turnover and operating profits are shown on a continuing basis. Carbon As a result of the strategic restructuring actions announced in September 2003, the Industrial and Rail Traction business within Electrical Carbon and the Mechanical Carbon business, which includes speciality carbons, are being amalgamated. The Auto and Consumer Electrical Carbon business is managed separately. Electrical Carbon Sales were £186.0 million (2002: £199.9 million) with an operating profit of £13.4 million (2002: £14.6 million). The industrial and rail traction activity within Electrical Carbon suffered during the year from poor market conditions in Europe and the US. Efforts to leverage the business' strong market position and sales channels continued and led to successful growth initiatives in complementary areas such as diagnostic products and services. In the Auto and Consumer business, demand from the North American market was weak, Asia grew strongly and Europe was flat. Success in securing new automotive contracts continued throughout the year as the automotive part of the business pursued its strategic transformation from being exclusively a components supplier of brushes, commutators and magnets to being increasingly a provider of energy conversion systems. Engineered Carbon Sales were £78.4 million (2002: £74.6 million) with an operating profit of £6.2 million (2002: £2.5 million). The sales and operating profit of engineered carbon increased by 5.1 per cent. and 148.0 per cent. respectively, led by strong demand for silicon carbide body armour and aircraft protection for the US market. The balance of the business stabilised but continues to be effected by poor demand from OEM customers. Restructuring actions to enhance profitability continued during the year. These included the closure of the engineered carbon facility at Gosport, England and the transfer of production to the main UK carbon facility in South Wales. Magnetics Sales were £172.1 million (2002: £163.5 million) with an operating profit of £3.3 million (2002: loss £4.3 million). This significant improvement was achieved as a result of both on-going restructuring and the growing sales of certain magnetic products including those used in earth linkage breakers, watt hour meters and retail security tags. The restructuring actions included the transfer of production activity from the higher cost German site to newly constructed production space built within Magnetics' existing facility in Slovakia. They also included the closure, in the last quarter of the year, of Magnetics' US and Malaysian facilities that were involved in the production of permanent magnets for the highly competitive computer disc drive market. Technical Ceramics As a result of the strategic restructuring actions announced in September 2003, the amalgamation of Morgan Crucible's Electrical and Advanced Ceramics businesses is underway. Sales were £132.5 million (2002: £135.7 million) with an operating profit of £1.4 million (2002: £3.2 million). During the year, the business continued to experience weak demand in the telecommunications, aerospace and semiconductor markets although the medical and healthcare markets continued to be strong. Market conditions facing the electro ceramic part of Technical Ceramics, which accounts for some 20 per cent. of the total, were in line with the previous year but as yet show no sign of recovery. However, electro ceramics has begun to supply components to a major disc drive manufacturer that will allow an enhanced level of data to be stored on a computer disc. Restructuring initiatives to increase efficiency and reduce costs also continued during the year. Insulating Ceramics Sales were £258.3 million (2002: £256.8 million) with an operating profit of £17.2 million (2002: £13.9 million). Sales were ahead of the prior year led by growing demand in Asia although overall they were held back by weaker demand in Europe, in particular Germany. The Asian growth was dominated by iron and steel, ceramic and petrochemical demand. The performance also reflects the strong pipeline of on-going restructuring actions, many of which will benefit 2004. During the year, we also began to supply fibre to certain new automotive applications which could offer potential opportunities for future growth. Current Trading and Prospects The Group's geographical markets, taken overall, stabilised in 2003. The timing of a recovery remains uncertain: the Board expects demand for the Group's products in Europe and America to remain steady in 2004. In Asia, the smallest of Morgan Crucible's three geographical markets, demand continues to grow strongly. Current trading is in line with the Board's expectations. Morgan Crucible is not relying on a market upturn to improve its future trading performance: instead, the Group intends to implement its programme of cost reduction and profit improvement vigorously to drive future profitability and cashflow generation. As a result, the Board is confident in the financial and trading prospects of the Group for the current financial year. Warren D Knowlton Group Chief Executive CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED 4 JANUARY 2004 2003 2002 Restated* Note Total Total £m £m ---- ---- Turnover Continuing operations 827.3 830.5 Discontinued operations 22.3 49.8 --------- --------- Group turnover 1 849.6 880.3 Other operating income 3.3 3.7 --------- --------- 852.9 884.0 -------------------------------------------------------------------------------- Operating profit before goodwill amortisation and operating exceptionals Continuing operations 41.5 29.9 Discontinued operations 1.1 4.2 --------- --------- 42.6 34.1 Operating exceptionals 2 (67.3) (57.3) --------- --------- Operating (loss) before goodwill amortisation (24.7) (23.2) Goodwill amortisation (7.5) (7.7) -------------------------------------------------------------------------------- Operating (loss) Continuing operations (32.8) (34.2) Discontinued operations 0.6 3.3 --------- --------- Group operating (loss) 1 (32.2) (30.9) Corporate exceptional items Discontinued operations -Loss on sale of businesses (21.3) (8.6) Continuing operations -Disposal of fixed assets (2.3) (3.4) -Loss on partial disposal of businesses (6.5) (3.0) --------- --------- 3 (30.1) (15.0) --------- --------- (Loss) on ordinary activities before interest and taxation (62.3) (45.9) Net finance charges and similar items (15.7) (12.8) --------- --------- (Loss) on ordinary activities before taxation (78.0) (58.7) Taxation credit 4 2.4 0.5 (including exceptional tax credit of £4.4 million (2002: £6.9 million)) --------- --------- (Loss) on ordinary activities after taxation (75.6) (58.2) Equity minority interest (1.4) (1.2) --------- --------- Net (loss) attributable to The Morgan Crucible Company plc (77.0) (59.4) Preference dividends on non-equity shares 5 (1.2) (2.1) --------- --------- Retained (loss) for the year (78.2) (61.5) ========= ========= (Loss)/earnings per share (Note 6) 2003 2002 Before goodwill After goodwill Before goodwill After goodwill amortisation amortisation amortisation amortisation - underlying 9.6p 6.4p 5.0p 1.7p - basic (30.5p) (33.7p) (23.2p) (26.5p) - diluted (33.7p) (26.5p) - underlying diluted 6.3p 1.7p * Restated comparatives for the results of operations discontinued in the year. CONSOLIDATED AND COMPANY BALANCE SHEET AS AT 4 JANUARY 2004 The Group The Company 2003 2002 2003 2002 £m £m £m £m ----- ----- ----- ----- Fixed assets Intangible assets - goodwill 112.2 130.5 - - Tangible assets 386.3 433.6 1.7 1.7 Investment in subsidiary undertakings - - 811.8 908.5 Investment in associated undertakings - 1.2 - - Other investments 6.3 6.0 1.6 1.2 -------- -------- -------- -------- 504.8 571.3 815.1 911.4 Current assets Stocks 131.5 156.6 - - -------------------------------------------------------------------------------- Debtors - due within one year 178.2 188.2 44.6 29.1 - due after one year 28.5 22.9 7.5 8.2 ------------------------------------------------------------------------------- Total debtors 206.7 211.1 52.1 37.3 Cash at bank and in hand 57.9 60.5 17.2 17.1 -------- -------- -------- -------- 396.1 428.2 69.3 54.4 Creditors - amounts falling due within one 253.1 331.5 39.7 115.1 year -------- -------- -------- -------- Net current assets/(liabilities) 143.0 96.7 29.6 (60.7) -------- -------- -------- -------- Total assets less current liabilities 647.8 668.0 844.7 850.7 Creditors - amounts falling due after more than one year Amounts payable to subsidiary undertakings - - 231.9 218.6 Borrowings 230.6 178.6 166.0 142.5 Grants for capital expenditure 0.6 0.8 - - -------- -------- -------- -------- 231.2 179.4 397.9 361.1 Provisions for liabilities and charges 156.1 138.2 8.3 8.8 -------- -------- -------- -------- 387.3 317.6 406.2 369.9 -------- -------- -------- -------- NET ASSETS 260.5 350.4 438.5 480.8 ======== ======== ======== ======== Capital and reserves Equity shareholders' funds Called up share capital 58.0 58.0 58.0 58.0 Share premium account 44.4 44.4 44.4 44.4 Revaluation reserve 3.7 7.4 - - Merger reserve - - 91.6 91.6 Other reserves 1.4 1.4 - - Special reserve 6.0 - 41.7 41.7 Profit and loss account 134.4 198.6 200.5 214.8 -------- -------- -------- -------- 247.9 309.8 436.2 450.5 Non-equity shareholders' funds Called up share capital 2.3 30.3 2.3 30.3 -------- -------- -------- -------- 250.2 340.1 438.5 480.8 -------- -------- -------- -------- Minority interest Equity 10.2 10.2 - - Non-equity 0.1 0.1 - - -------- -------- -------- -------- 10.3 10.3 - - -------- -------- -------- -------- CAPITAL EMPLOYED 260.5 350.4 438.5 480.8 ======== ======== ======== ======== CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 4 JANUARY 2004 2003 2002 Note £m £m £m £m ----- ----- ----- ----- Net cash inflow from operating (a) 45.3 75.2 activities Returns on investments and servicing of finance Interest received 2.3 2.7 Interest paid (15.8) (16.1) Preference dividends paid (2.3) (2.1) -------- -------- Net cash (outflow) from returns on investments and servicing of finance (15.8) (15.5) Taxation (6.0) (10.8) Capital expenditure and financial investments Purchase of tangible fixed assets (34.3) (35.0) Other proceeds on sale of tangible 2.0 8.4 fixed assets Purchase of investments (0.6) (5.8) Disposal of investments 0.9 20.8 -------- -------- Net cash (outflow) from capital expenditure and financial investments (32.0) (11.6) Acquisitions and disposals Acquisition of subsidiary - (0.1) undertakings Deferred consideration for prior (0.4) (3.4) year acquisitions Disposal of businesses 32.8 (0.7) -------- -------- Net cash inflow/(outflow) from 32.4 (4.2) acquisitions and disposals Equity dividends paid - (17.2) -------- -------- Cash inflow before use of liquid 23.9 15.9 resources and financing Management of liquid resources 10.3 3.4 Financing Redemption of preference shares (28.0) - Increase in bank loans 274.2 26.5 Repayment of bank loans (270.5) (49.6) Repurchase of exchangeable - (3.9) redeemable preference shares -------- -------- (24.3) (27.0) ------- -------- Net increase/(decrease) in cash in 9.9 (7.7) the year ------------------------------------------------------------------------------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET BORROWINGS Net increase/(decrease) in cash in 9.9 (7.7) the year Cash flow from (increase)/decrease (3.7) 23.1 in loans Cash flow from (decrease) in (10.3) (3.4) deposits Cash flow from repurchase of exchangeable redeemable preference shares - 3.9 -------- -------- Change in net borrowings resulting (4.1) 15.9 from cash flows Issue of exchangeable redeemable - (0.9) preference shares Bank loans acquired with - (0.5) acquisitions Bank loans reduced with disposals - 0.2 Exchange movement 6.4 9.8 -------- -------- Movement in net borrowings during 2.3 24.5 the period Opening net borrowings (251.6) (276.1) -------- -------- Closing net borrowings (249.3) (251.6) ======== ======== CONSOLIDATED FREE CASH FLOW 2003 2002 Note £m £m ----- ----- Net cash inflow from operating activities (a) 45.3 75.2 Net interest paid (13.5) (13.4) Taxation (6.0) (10.8) -------- -------- Cash earnings 25.8 51.0 Dividends paid (2.3) (19.3) -------- -------- Post dividend cash flow 23.5 31.7 Capital expenditure (34.3) (35.0) Proceeds on sale of tangible fixed assets 2.0 8.4 -------- -------- Free cash flow (8.8) 5.1 ======== ======== -------------------------------------------------------------------------------- (a) Reconciliation 2003 2002 of operating cash inflow from operating activities Contin- Discon- Contin- Discon- uing tinued Total uing tinued Total £m £m £m £m £m £m ----- ----- ----- ----- ----- ----- Operating (loss) (32.8) 0.6 (32.2) (34.2) 3.3 (30.9) Depreciation 42.7 0.7 43.4 45.0 1.7 46.7 Amortisation of 7.1 0.4 7.5 6.9 0.8 7.7 goodwill Loss on sale of 0.6 - 0.6 0.4 - 0.4 plant and machinery Exceptional 15.2 - 15.2 17.2 - 17.2 non-cash operating costs (Increase)/ 5.0 (1.7) 3.3 22.3 (4.7) 17.6 decrease in stocks (Increase)/ 11.5 1.8 13.3 4.9 (0.9) 4.0 decrease in debtors Increase/ (15.6) 0.2 (15.4) (4.4) 1.5 (2.9) (decrease) in creditors Increase/ 9.7 (0.1) 9.6 15.5 (0.1) 15.4 (decrease) in provisions ------------------------------------------------------------------------------- Net cash inflow 43.4 1.9 45.3 73.6 1.6 75.2 from operating activities ================================================================================ CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2003 2002 £m £m ----- ----- Net (loss) attributable to shareholders (77.0) (59.4) (Deficit) on write-off of revalued assets (0.3) - Return on investments 0.3 (0.3) Foreign currency translation 4.5 (13.2) -------- -------- Total recognised (losses) relating to the year (72.5) (72.9) -------- -------- FRS 19 prior year adjustment effected in 2002 - (21.8) -------- -------- Total recognised (losses) since last annual report (72.5) (94.7) ======== ======== CONSOLIDATED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2003 2002 £m £m ----- ----- Net (loss) attributable to shareholders (77.0) (59.4) (Deficit) on write-off of revalued assets (0.3) - Return on investments 0.3 (0.3) Goodwill written back to profit and loss account on 11.8 4.8 disposals Dividends (1.2) (2.1) -------- -------- (66.4) (57.0) Redemption of preference shares (28.0) - Foreign currency translation 4.5 (13.2) -------- -------- Net decrease to shareholders' funds (89.9) (70.2) Opening shareholders' funds 340.1 410.3 -------- -------- Closing shareholders' funds 250.2 340.1 ======== ======== NOTES TO THE ACCOUNTS 1. SEGMENTAL INFORMATION Net Operating Turnover Operating Assets profit/(loss) 2003 2002 2003 2002 2003 2002 Restated Restated £m £m £m £m £m £m ----- ----- ----- ----- ----- ----- Product Group Electrical Carbon 131.2 141.8 186.0 199.9 13.4 14.6 Magnetics 134.3 168.6 172.1 163.5 3.3 (4.3) Engineered Carbon 59.1 94.8 78.4 74.6 6.2 2.5 Technical Ceramics 103.7 108.2 132.5 135.7 1.4 3.2 Insulating Ceramics 138.1 152.1 258.3 256.8 17.2 13.9 ------- ------- ------- ------ ------- ------- Continuing 566.4 665.5 827.3 830.5 41.5 29.9 operations Discontinued 22.3 49.8 1.1 4.2 operations Central assets 6.2 8.8 ------- ------- ------- ------- ------- ------- 572.6 674.3 849.6 880.3 42.6 34.1 Operating (67.3) (57.3) exceptionals Goodwill (7.5) (7.7) amortisation ------- ------- Group operating (loss) (32.2) (30.9) ======= ======= The central assets include land and buildings, prepayments and other creditors of the non operating and holding companies. The discontinued operations in 2003 are the Superconductors business, the six Coatings operations and the Graflon business. The operating exceptionals of £67.3 million comprise, Electrical Carbon £18.0 million (2002: £6.9 million), Magnetics £19.8 million (2002: £7.8 million), Engineered Carbon £4.0 million (2002: £7.2 million), Technical Ceramics £10.3 million (2002: £5.2 million), Insulating Ceramics £10.3 million (2002: £17.9 million), and Holding Companies £4.9 million (2002: £12.3 million). Goodwill comprises, Electrical Carbon £1.0 million (2002: £1.0 million), Magnetics £4.0 million (2002: £4.1 million), Engineered Carbon £0.5 million (2002: £0.6 million), Technical Ceramics £1.5 million (2002: £1.5 million) and Insulating Ceramics £0.5 million (2002: £0.5 million). Geographical Area The analysis shown below is based on the location of the contributing companies: Net Operating Turnover Operating Assets profit/(loss) 2003 2002 2003 2002 2003 2002 Restated Restated £m £m £m £m £m £m ----- ----- ----- ----- ----- ----- United Kingdom Sales in the UK 37.3 40.2 Sales overseas 43.1 41.6 Total United 93.3 98.1 80.4 81.8 1.1 1.6 Kingdom Rest of Europe 218.5 241.8 327.3 300.2 20.1 10.4 The Americas 195.1 265.8 310.6 353.6 7.8 9.8 Far East and 55.2 55.4 95.8 83.5 10.1 6.4 Australasia Middle East and 4.3 4.4 13.2 11.4 2.4 1.7 Africa ------------------------------------------------ 566.4 665.5 827.3 830.5 41.5 29.9 Discontinued 22.3 49.8 1.1 4.2 operations Central assets 6.2 8.8 ------------------------------------------------ 572.6 674.3 849.6 880.3 42.6 34.1 Operating (67.3) (57.3) exceptionals Goodwill (7.5) (7.7) amortisation ------- ------- Group operating (32.2) (30.9) (loss) ======= ======= 1. SEGMENTAL INFORMATION (continued) Turnover 2003 2002 Restated £m £m The analysis shown below is based on the location of the customer: United Kingdom 54.3 53.2 Rest of Europe 316.4 293.7 The Americas 304.6 345.8 Far East and 132.1 120.0 Australasia Middle East and 19.9 17.8 Africa ---------------------------------------------------- 827.3 830.5 Discontinued 22.3 49.8 operations ---------------------------------------------------- 849.6 880.3 2.Operating Exceptionals The Group has incurred and provided for the costs of restructuring, £60.8 million (2002: £45.0 million), and the costs of ongoing legal claims associated with the Department of Justice enquiry in the USA, and anti-trust investigations in Canada and Europe, £6.5 million (2002: £12.3 million). 3.Corporate Exceptional Items The corporate exceptional items relating to the sale of businesses, £21.3 million (2002: £8.6 million), include disposals of the Superconductors business, the six Coatings operations and the Graflon business. The loss on partial disposal of businesses, £6.5 million (2002: £3.0 million), includes the disposal of small manufacturing facilities in Germany and the U.S. The goodwill written off as part of the business disposals is £24.2 million (2002: £3.5 milllion). Disposal of fixed assets, £2.3 million (2002: £3.4 million), relates to various property disposals. 4.Taxation (Credit)/Charge 2003 2002 £m £m ----- ----- United Kingdom corporation tax: Corporation tax on (loss) for the period at 30% (0.4) 6.1 (2002: 30%) Adjustment in respect of prior years (4.5) (1.9) ------- ------- (4.9) 4.2 Overseas current tax 3.1 2.7 ------- ------- Total current tax (1.8) 6.9 ======= ======= Deferred tax United Kingdom - 0.3 Overseas (0.6) (7.7) ------- ------- Total deferred tax (0.6) (7.4) ======= ======= Total taxation (2.4) (0.5) ======= ======= Overseas tax includes a credit of £2.2 million (2002: £5.7 million credit) arising on total exceptional losses of £66.6 million (2002: losses of £58.5 million). United Kingdom tax includes a tax credit of £2.2 million (2002: £1.2 million credit) arising on total exceptional losses of £30.8 million (2002: £13.8 million). Factors affecting the tax (credit)/charge for the period: The tax assessed for the period is higher than the standard rate of corporation tax in the UK. The differences are explained below. 2003 2002 £m £m (Loss) on ordinary activities before taxation (78.0) (58.7) Taxation on (loss) on ordinary activities at standard rate of UK corporation tax of 30% (2002: 30%) (23.4) (17.6) Difference comprises: Exceptional items not deductible for tax purposes 11.3 9.7 Goodwill amortisation not deductible for tax purposes 2.3 2.3 Overseas losses not utilised 10.8 4.0 Overseas rate differences (1.0) 1.9 Effect of reversal of timing differences 0.6 7.4 Other, including adjustments in respect of prior years (2.4) (0.8) ------- ------- Current tax (credit)/charge for the period (1.8) 6.9 ======= ======= 5.Dividends 2003 2002 £m £m Preference dividends on non-equity shares 1.2 2.1 ======= ======= 6.(Loss)/ Earnings per Ordinary share a.Basic and underlying( loss)/ earnings per share 2003 2002 Before goodwill After goodwill Before goodwill After goodwill amortisation amortisation amortisation amortisation £m £m £m £m ---- ---- ---- ---- (Loss) after tax (69.5) (77.0) (51.7) (59.4) and minority interest Preference (1.2) (1.2) (2.1) (2.1) dividend -------- -------- -------- -------- Basic (loss) (70.7) (78.2) (53.8) (61.5) Adjusted by 93.0 93.0 65.4 65.4 all post tax -------- -------- -------- -------- exceptional items Underlying 22.3 14.8 11.6 3.9 earnings ======== ======== ======== ======== Weighted 232,018,129 231,990,704 average number of Ordinary shares Basic (30.5p) (33.7p) (23.2p) (26.5p) (loss) per share Underlying 9.6p 6.4p 5.0p 1.7p earnings per share The Directors have disclosed an underlying earnings per share as, in their opinion, this gives a better indication of the underlying performance of the Group and assists comparison with the results of earlier years. (loss) b.Diluted earnings 2003 2002 £m £m ---- ---- Basic (loss) (78.2) (61.5) Preference dividend to be eliminated on conversion of preference shares - - --------- -------- Diluted (loss) (78.2) (61.5) Adjusted by all post tax exceptional 93.0 65.4 items --------- -------- Underlying diluted earnings 14.8 3.9 ========= ======== Weighted average number of Ordinary 232,018,129 231,990,704 shares Dilutive effect of share option schemes 1,677,339 2,718,929 --------- -------- 233,695,468 234,709,633 ========= ======== Diluted (loss) per share (33.7p) (26.5p) Diluted underlying earnings per share 6.3p 1.7p 7. PENSION COSTS The Group accounts for pension costs in accordance with SSAP 24: Accounting for Pension Costs or local best practice. Where local best practice is followed the resulting charge is not materially different from the charge which would arise under SSAP 24. The transitional disclosures required by FRS 17: Post Retirement Benefits will be made in the financial statements. These show that had FRS 17 been fully adopted in the year, the liability provided for on the balance sheet as at 4 January 2004 would increase by £43.2 million (2002: £82.0 million). The financial information contained in this preliminary statement does not amount to statutory accounts for the Company's financial years ended 4 January 2004 and 4 January 2003. It has been approved by the Board of Directors on 13 February 2004 and has been prepared on a consistent basis with the accounting policies set out in the Group's 2002 annual report and accounts. The financial information for 2002 is derived from the statutory accounts for the year ended 4 January 2003 which have been filed with the Registrar of Companies. The auditors have reported on the 2002 accounts; their report was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2003 will be finalised on the basis of the financial information presented by the directors in this preliminary statement and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company in April 2004. This preliminary statement will be dispatched to all registered holders of Ordinary shares and first and second Preference shares. Copies of this statement may be obtained from the Secretary at the Registered Office of the Company, Morgan House, Madeira Walk, Windsor, Berkshire, SL4 1EP. This information is provided by RNS The company news service from the London Stock Exchange

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Morgan Advanced Materials (MGAM)
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