Final Results

RNS Number : 8126P

Morgan Advanced Materials PLC

23 February 2016

 



       FULL-YEAR RESULTS FOR THE YEAR ENDED 31^st DECEMBER 2015

Results summary

£ million unless otherwise stated	2015	2014	Reported change %	Constant currency* change %	Like-for-like** change %
Business Performance Revenue	911.8	921.7	-1.1%	-1.2%	-0.8%
Group EBITA*	109.6	118.0	-7.1%	-7.7%	-9.0%
Group EBITA margin	12.0%	12.8%
Group underlying operating profit~	106.0	112.4	-5.7%
Underlying PBT~	88.2	91.6	-3.7%
Underlying EPS~ (pence)	20.8p	22.1p	-5.9%
Return on Operating Capital Employed~	27.1%	27.7%
Full-Year dividend (pence)	11.0p	10.9p	+0.9%
Cash flow from operations~	135.6	120.0	+13.0%
Statutory Reporting Operating profit	82.9	54.3
Profit before tax	59.0	31.5
Basic EPS from continuing  operations	11.9p	2.7p

*    Applying 2015 exchange rates to 2015 and 2014 figures

**  Constant currency adjusted for acquisition and disposals

~   Definitions of the financial measures can be found in the glossary

The Group has carried out a review of its strategy and today sets out its overall vision and direction and six execution priorities to position Morgan to deliver resilient financial performance and faster growth.

Financial highlights

·     In very challenging markets, revenue on a like-for-like basis decreased by 0.8% compared to 2014.  

·     The full year book-to-bill ratio was 0.99 times, with the outstanding order book at the end of 2015 c.5% below that at the end of 2014.

·     EBITA margin for the full-year was 12.0% (2014: 12.8%).

·     Cash flow from operations was strong at £135.6 million (2014: £120.0 million).

·     Net debt at the year end was £216.0 million (2014: £207.0 million). Net debt to EBITDA ratio at the year end was 1.6 times (2014: 1.4 times).

·     The Group has booked a £22.1 million charge before tax in the income statement (2014: £51.9 million) in respect of a number of specific adjusting items, £21.6 million relates to non-cash items.  Details of are provided in the Financial Review below. Due to the nature of these items they are excluded from the underlying operating profit figures.

·     Proposed final dividend of 7.0 pence per share (2014: final 7.0 pence per share), which would result in a full-year dividend of 11.0 pence (2014: 10.9 pence), a 0.9% increase.

Regional Highlights

·     In North America, as outlined in the November Trading update, the majority of businesses saw a decline in revenue in the second half of 2015 having achieved revenue growth in the first half. For the full year, revenue decreased by 2.3% on a like-for-like basis compared to 2014, maintaining mid-teen EBITA margins at reported rates of 14.0% (2014: 14.9%).

·     The Europe region achieved like-for-like currency revenue growth of 1.7% compared to 2014 despite a weaker second half of the year.  Full year reported European EBITA margins declined to 11.7% (2014: 12.2%).

·     The Asia/Rest of World region continued to experience headwinds in trading with revenue down by 1.5% on a like-for-like basis. China remained the principal headwind, with revenue down 11.2% year-on-year. EBITA margin at reported rates reduced to 11.6% (2014: 12.8%).

Strategy and Organisational developments

Since September 2015 the Group has carried out a review of its strategy and today sets out the overall vision and direction for the Group, and the execution priorities.

The Group today has key strengths in Ceramic and Carbon materials science and associated technologies and products, in application engineering, in the ability to solve difficult problems for its customers, and has strong reputation, brand loyalty and customer relationships. These key strengths, together with the Group's skilled and engaged employees form a good foundation on which to build.

The long-term strategy is to focus on building three distinctive core capabilities: materials science, applications engineering and customer focus. The Group will apply these capabilities to a portfolio of scalable global businesses where technical expertise and differentiation is valued to solve challenging problems for its customers. Through this, the aim is to strengthen the Group to deliver resilient financial performance and faster growth.

The Group has set six key execution priorities:

1.   Move to a global business structure.

The Group is changing its organisation structure, moving from the current regional model to a global business structure. The Group will be organised around two global divisions and six business units:

·     Thermal Products division. Organised in two global business units:

o  Thermal Ceramics

o  Molten Metal Systems

·     Carbon and Technical Ceramics division. Organised in three global business units:

o  Electrical Carbon

o  Seals and Bearings

o  Technical Ceramics

·     A single global business unit: Composites and Defence Systems.

This re-organisation will improve global coordination across the Group and will strengthen accountability within each global business unit. There will be a simplified approach to global customers and markets, increased efficiencies driven through best practice sharing, and better leverage of R&D across regions. There will be greater operational focus, including better capacity planning and management of the manufacturing footprint, better alignment of technology development priorities with customer needs and growth opportunities in global market segments. The Group will ensure that the key benefits the regional structure delivered will not be lost.  The Asia/Rest of World region is an important growth driver for the Group and the investment in capability and capacity will continue and there is a dedicated senior resource in the structure to drive Asian growth.  Where appropriate, resources will continue to be shared, for example in IT and key HR functions, within regions rather than diluted or replicated.  

2.   Improve technical leadership.

The Group plans to increase its R&D investment to grow its technical lead and accelerate new product development, reducing time to market. The Group has two successful centres of excellence today, Insulating Fibre, part of Thermal Ceramics, and Structural Ceramics, part of Technical Ceramics, and two more will be established, Brazing and Joining, in Technical Ceramics, and one for carbon science that will support Electrical Carbon and Seals and Bearings.  These centres allow the Group to concentrate development efforts for these materials and capabilities. R&D investment was increased to 2.8% of sales in 2015 (2014: 2.3%) and the Group anticipates increasing this by around 1% of sales over the next three to five years funded by savings from improved operational execution. The Group will strengthen its stage gate development process and ensure it is applied consistently across the Group.

3.  Improve operational execution.

The Group has a number of opportunities to improve operational execution - both in terms of efficiency and effectiveness. The operational opportunity varies by business unit and the Group will allocate capital and target specific improvements to efficiency and effectiveness on a business-by-business basis. For example, Thermal Ceramics will target efficiency improvements through a combination of global best practice implementation, application of lean manufacturing techniques and global sourcing of raw materials; Technical Ceramics will focus on improvements in quality, yield, scrap and delivery; and, Electrical Carbon on capacity utilisation and efficiency.   

4.   Drive sales effectiveness and market focus.

During 2016 the Group will focus on improving a number of aspects of its sales capabilities and process - focusing on the sales process and its efficiency, the management of key customer accounts, the management of distribution channels and deepening the understanding of end markets and their faster growing segments. The Group has a good relationship with its existing customers but there is more to be done to win new customers and take its solutions to new markets.

5.   Increase investment in people management and development.

The Group will strengthen its leadership capability and deepen functional capabilities across the business, including in sales and engineering. Senior leaders will be benchmarked externally, new talent introduced and future leadership candidates identified from within the business. Performance management will be enhanced for the Group's top management and the structures and targets for incentive schemes will be reviewed. The Group will invest more in executive training and create clear career paths for its technologists and engineers. The intake of graduate trainees will be increased from 30 to 50 a year over the next four years.

6.   Simplify the business.

Through the reorganisation of the business the Group will focus on running each business unit on a global basis. The intent is to grow each business to global scale and to exit those products and markets where that cannot be achieved.

The Group will continue to refine its strategy and approach during 2016 and, in particular, will build the implementation plans in greater detail as lessons are learnt from the initial work.

Commenting on the strategy review, results and outlook for Morgan Advanced Materials, Chief Executive Officer, Pete Raby said:

"Since joining the business in August, I have carried out a review of the Group's strategy and today set out the vision and six execution priorities to position Morgan to deliver resilient financial performance and faster growth. We have committed employees, good businesses in attractive markets and we have a number of opportunities to grow.

We will focus on the Group's core strengths, and on doing fewer things better in order to deliver resilient financial performance and faster growth.

Whilst 2015 has been a very challenging year for the business, with sharp slowdowns in a number of our markets, we have delivered a solid set of results. We are planning prudently for 2016 in a market where we take a cautious view of trading conditions, with a focus on increasing our efficiency and reinvesting in the business."

For further enquiries:

Pete Raby	Morgan Advanced Materials	01753 837000
Mike Smith/Nina Coad	Brunswick	0207 404 5959

There will be an analyst and investor presentation at 09.45 (UK time) today at The Lincoln Centre,     18 Lincoln Inn Fields, London WC2A 3ED.  A live video webcast and slide presentation of this event will be available on www.morganadvancedmaterials.com. We recommend you register at 09.30 (UK time). 

www.morganadvancedmaterials.com

                                  Morgan Advanced Materials plc  Registered in England & Wales at Quadrant, 55-57 High Street, Windsor, Berkshire SL4 1LP UK  Company No. 286773

Operating Review

Business Performance	Revenue		EBITA		EBITA Margin
	2015	2014	2015	2014	2015	2014
	£m	£m	£m	£m	%	%
North America	368.4	353.1	51.5	52.5	14.0%	14.9%
Europe	305.7	325.7	35.8	39.8	11.7%	12.2%
Asia/Rest of World	237.7	242.9	27.5	31.2	11.6%	12.8%
	911.8	921.7	114.8	123.5
Unallocated central costs*			(5.2)	(5.5)
Group EBITA*			109.6	118.0	12.0%	12.8%
Restructuring costs and other one-off items*			(3.6)	(5.6)
Underlying operating profit*			106.0	112.4	11.6%	12.2%

* Definitions of the financial measures can be found in the glossary

     Sales by market for Full-Year 2015

	Group	North America	Europe	Asia/Rest of World
Industrial	44%	30%	54%	51%
Transportation	22%	31%	14%	17%
Petrochemical	9%	6%	8%	14%
Electronics	7%	14%	2%	3%
Security and Defence	6%	6%	12%	1%
Energy	6%	6%	4%	12%
Healthcare	6%	7%	6%	2%

North America

Revenue for the North America region for the year was £368.4 million, representing an increase of 4.3% compared with £353.1 million in 2014.  At constant currency the year-on-year decrease was 2.3%. Revenue in the second half of 2015 was 6.7% lower than the first half at constant currency.

EBITA for the region was £51.5 million (2014: £52.5 million) with the margin maintained in the mid-teen range at 14.0% (2014: 14.9%). 

The North America business experienced a weak second half of 2015 across the majority of its businesses compared to the first half, resulting in a 2.3% decrease in constant currency revenue year-on-year. Thermal Ceramics for the year was marginally down on 2014 by 1.0% with the second half down 9.8% compared to the second half of 2014. The decline in large project orders coupled with reduction in orders in automotive, oil and gas and general industrial applications were the major reasons for this decline. The Technical Ceramics business continued to experience a mixed trading landscape with flat revenue half-on-half with some positive growth from consumer electronics offset by declines in other parts of the business. The Certech business, that supplies ceramic cores used in the manufacture of turbine blades, has continued to improve its operational yields in 2015, with EBITA margins improving, however yields and operational performance need to improve further in 2016 in order to achieve acceptable profit levels. Seals and Bearings was negatively impacted by oil and gas in the second half as well as a general slowdown in trading and a further reduction in body armour revenue to a very low level of business.  

The order book in North America has declined each month through the second half of 2015 with the full year book-to-bill ratio at December 2015 at 0.98 times.

Europe

Revenue for the Europe region for the year was £305.7 million, representing a decrease of 6.1% compared to 2014.  At constant currency and adjusting for the impact of acquisitions and exits, the increase was 1.7%.

EBITA for the region decreased to £35.8 million (2014: £39.8 million), with the full-year margin reduced to 11.7% (2014: 12.2%).

The Thermal Ceramics business achieved good organic revenue growth of 10.7% at constant      currency compared to 2014, with large project orders from North America and the Middle East the main driver for this. The other businesses in Europe had a much more mixed performance, as the second half of 2015 saw declines in demand across many end markets. Revenue growth in Seals and Bearings was close to 2% for the full year but the second half was marginally weaker than the second half of 2014, reflecting the impact of oil and gas market declines. The Electrical Carbon business was down 3.5% year-on-year at constant currency reflecting softer general industrial demand. Technical Ceramics' revenue in the period fell 3.0% at constant currency, with end-market conditions generally soft, but particularly in the piezo ceramics product range that serves the aerospace, automotive, marine and medical markets. The Composites and Defence Systems (C&DS) business saw a further decline in second half revenue with this business continuing to operate in a difficult UK defence market whilst still looking to develop new business to increase its international and wider commercial exposure.

The order book in Europe has declined through the second half of 2015 with the full year book-to-bill ratio at December 2015 at 0.98 times.

Asia & Rest of the World (ROW)

Revenue for the Asia & Rest of the World region for the year was £237.7 million, representing a decrease of 2.1% at reported rates. On an organic and constant currency basis, revenue declined by 1.5%.

EBITA for the region was £27.5 million (2014: £31.2 million), a margin of 11.6% (2014: 12.8%).

Trading conditions in Asia/ROW have been mixed throughout the year. China revenue fell by 11.2% compared to 2014 on a constant currency basis. The Chinese domestic market has been weak through 2015 across the industrial markets served with large project orders particularly impacted.  Indian revenue was down by 3.0%, whilst the first half of 2015 was encouraging, the second half saw general weakness across industrial markets. South East Asia, including Korea, continued to achieve revenue growth, up 13.3% year-on-year on a constant currency basis. Other parts of the region were mixed, the Middle East flat year-on-year, while the South American business continued to experience very weak economic conditions. The Molten Metal Systems, business with approximately 50% of its revenue in the region, continued to experience weak demand in Asia offset by improved demand in the Middle East. Lower revenue in China and reduced profitability in South America were the two main contributors to the margin reduction in 2015.

The order book in Asia/ROW overall was steady through the second half of 2015 with the full year book-to-bill ratio at December 2015 at 1.04 times.

Financial Review

Reference is made to 'Underlying operating profit' and 'Underlying EPS' below, both of which are defined in the glossary. These measures of earnings are shown because in the judgement of the Directors they allow the reader to obtain a proper understanding of the financial information and the best indication of underlying performance of the Group.

Business Performance Review

In the consolidated income statement the Group separately presents "Specific adjusting items" totalling £22.1 million and the associated tax credit of £3.3 million separately. In this Business Performance Review results are shown before these items.

Group revenue in 2015 was £911.8 million, a decrease of 1.1% on a reported basis compared with 2014.

Group EBITA before restructuring charges was £109.6 million (2014: £118.0 million) representing a margin of 12.0% (2014: 12.8%).

Group underlying operating profit (EBITA after restructuring costs) was £106.0 million (2014: £112.4 million).  Underlying operating profit margin was 11.6%, compared to 12.2% for 2014.

The £3.6 million (2014: £5.6million) of net restructuring costs and other one-off items relate to a number of rationalisation actions in the second half of 2015 mainly in Asia and Europe.

The Group amortisation charge for the year was £7.1 million (2014: £8.2 million).

The net finance charge was £18.1 million (2014: £20.8 million), comprising the net bank interest and similar charges of £12.2 million (2014: £15.8 million), gain from financial instruments of £1.0 million (2014: £0.7 million) and the finance charge under IAS 19 (revised), being the interest charge on pension scheme net liabilities which was £6.9 million (2014: £5.7 million).

The tax charge for the period, excluding specific adjusting items, was £24.2 million (2014: £24.7 million). The effective tax rate, excluding specific adjusting items, was 29.8% (2014: 29.6%).

Underlying EPS was 20.8 pence (2014: 22.1 pence).

The Return on Operating Capital Employed at 31 December 2015, defined as Group underlying profit for the last 12 months divided by the sum of working capital and the net book value of tangible assets, was 27.1%, compared with 27.7% at 31 December 2014.

          Specific adjusting items

In the consolidated income statement the Group presents specific adjusting items separately. In the judgment of the Directors, due to the nature and value of these items they should be disclosed separately from the underlying results of the Group to allow the reader to obtain a proper understanding of the financial information and the best indication of underlying performance of the Group.        

	2015 £m	2014 £m
Restructuring costs	1.5	16.3
Business exit costs	2.8	1.9
Impairment of property, plant and equipment	5.9	-
Transaction-related costs	-	1.2
Settlement of prior period anti-trust litigation	-	3.6
Impairment of intangible assets	5.8	26.9
Net loss on disposal of business	6.1	2.0
Total specific adjusting items before income tax credit	22.1	51.9
Income tax credit from specific adjusting items	(3.3)	(5.5)
Total specific adjusting items after income tax credit	18.8	46.4

2015                              

Restructuring costs                           

As reported in 2014, the strategic objective to drive the performance of the Electrical Carbon and Seals and Bearings businesses to mid-teen margins and beyond has resulted in the Group undertaking a significant rationalisation of the carbon material footprint.  This started in 2014 with the downsizing of activities at the Swansea, UK site.  This footprint rationalisation has continued in 2015 with the decision to and the announcement of the cessation of carbon material manufacturing at the Shanghai, China site.  These operations will be consolidated into other Group locations, mainly the USA.  This decision has resulted in a charge of £1.5 million in 2015, £0.7 million of which relates to the impairment loss on plant and equipment and the balance to site clean-up costs and other write-offs.  £0.4 million is expected to be settled in cash in 2016.  An income tax credit of £0.2 million was recognised in respect of these restructuring costs.  The £0.7 million of impairment loss forms part of the total plant and equipment impairment loss of £6.6 million.       

Business exit costs                           

The business exit costs in the year relate to the deconsolidation of Thermal Ceramics Sukhoy Log Limited ("Sukhoy") and the subsequent remeasurement to fair value of the retained investment. 

In April 2006 the Group acquired a 51% shareholding in Sukhoy, a fibre business based near Yekaterinburg, Russia.  The results and assets of Sukhoy have previously been consolidated on the basis that the Group was satisfied that it exercised management control.  During 2015 there has been a deterioration in the relationship between Morgan and the minority partner, exacerbated by the increasingly difficult market conditions in Russia. As a result, it became clear to the Group towards the end of 2015 that it no longer had effective control of the business and that it was no longer appropriate to consolidate.  Based on the recent financial performance and the Group's view of the future prospects of the business it was concluded that the value of the Group's investment in Sukhoy is nil. As a result the Group has recognised a £2.8 million charge in business exit costs in the 2015 accounts.       

Impairment of property, plant and equipment                                

The impairment of property, plant and equipment for the year ended 31 December 2015 is as a result of a review of the carrying value of assets that support the Group's North America vehicle and personal protection and high-temperature furnace-lining businesses.  Both of these businesses saw significant growth and investment in previous years but more recently they have been in decline.  The Group has compared its expected future cash flows from these businesses with the book value of the property, plant and equipment that is dedicated to them and determined that a total impairment charge of £5.9 million is required.  An income tax credit of £2.1 million was recognised in respect of the impairment charge. The £5.9 million of impairment loss forms part of the total plant and equipment impairment loss of £6.6 million.      

Impairment of intangible assets                               

As a result of the continued reduction in demand on C&DS from UK MoD, the review of the carrying value of the remaining intangible assets of C&DS resulted in a further impairment charge of £5.8 million, relating to a full impairment of the customer relationships.  Following this impairment charge, the carrying value of the C&DS intangibles was £9.8 million, all in respect of technology and trademarks.  This was supported by the current expectations of the future trading performance of the C&DS business.  An income tax credit of £1.0 million was recognised in respect of the impairment charge.

Loss on disposal of business

As reported in the 2014 Annual Report and Accounts, on 30 January 2015 the Group completed the sale of a Thermal Ceramics business in Wissembourg, France.  This business manufactures low-temperature fibre boards used mainly in the building industry.  The Group has incurred a loss on the disposal of this business of £6.1 million in 2015, in addition to the £1.9 million of business exit costs recognised in the 2014 accounts.                

IAS 19 Employee Benefits

The IAS 19 charges are summarised in the table below. 

	2015 £m	2014 £m
Operating costs:
- Service Cost	(4.3)	(4.2)
- Administration costs	(2.2)	(1.7)
Total operating costs	(6.5)	(5.9)
Net finance charge	(6.9)	(5.7)
Total IAS 19 charge before taxation	(13.4)	(11.6)

The Group pension deficit has decreased by £7.3 million since last year end to £204.5 million (2014: £211.8 million) on an IAS 19 (revised) basis.  The UK defined benefit pension schemes deficit marginally decreased by £1.4 million to £117.4 million (2014: £118.8 million) and the US deficit decreased by £3.7 million to £55.1 million (2014: £58.8 million).

Cash Flow

						2015	2014
						£m	£m
Cash flow from operations						135.6	120.0
Net capital expenditure						(62.7)	(32.5)
Restructuring costs and other one-off items						(5.5)	(12.1)
Net interest paid						(11.2)	(15.3)
Tax paid						(29.9)	(20.0)
Free cash flow before acquisitions and dividends						26.3	40.1
Cash flows in respect of acquisitions/disposals						(1.1)	(22.4)
Dividends paid						(31.4)	(30.2)
Purchase of own shares for share incentive schemes						(2.9)	(2.3)
Exchange movement and other items						0.1	(5.7)
Movement in net debt in period						(9.0)	(20.5)
Opening net debt						(207.0)	(186.5)
Closing net debt						(216.0)	(207.0)

Cash flow from operations was strong at £135.6 million (2014: £120.0 million). Free cash flow before acquisitions and dividends was £26.3 million (2014: £40.1 million). Dividend payments increased to £31.4 million (2014: £30.2 million).

Net debt at the year-end was £216.0 million (2014: £207.0 million), representing a net debt to EBITDA ratio of just below 1.6 times (2014 year end: 1.4 times).

Foreign exchange - translation effect - illustration

For illustrative purposes, the table below provides details of the impact on 2015 revenue and EBITA if the actual reported results, calculated using 2015 average exchange rates, were restated at 2015 closing exchange rates.

Currency
	Revenue by currency £m	% of Group revenue	FX rate change		Revenue impact £m		EBITA impact £m
USD	370.0	40.6%	+3.7%		13.6		2.0
EUR	189.1	20.7%	+1.5%		2.8		0.5
GBP	103.1	11.3%	-		-		-
CNY	82.7	9.1%	+0.3%		0.2		0.0
Other	166.9	18.3%	-2.1%		(3.5)		(0.3)
	911.8				13.1		2.2

* Other FX rate change is the weighted average of a number of other currencies, of which the largest declines are in Russian Rouble, Brazilian Real and South African Rand, partially offset by the Japanese yen.

Final Dividend

The Board is recommending a final dividend, subject to shareholder approval, of 7.0 pence per Ordinary share (2014: 7.0 pence). The dividend will be paid on 27 May 2016 to Ordinary shareholders on the register of members at the close of business on 6 May 2016.

 Glossary of terms

Cash flow from operations	Group EBITA of £109.6 million (2014: £118.0 million), plus depreciation of £27.1 million (2014: £27.8 million), plus loss on sale of plant and machinery of £0.1 million (2014: £0.3 million), plus the decrease in working capital of £12.1 million (2014: less the increase of £10.4 million), less the decrease in provisions (excluding restructuring) and employee benefits of £13.3 million (2014: £15.7 million)
Group earnings before interest, tax, depreciation and amortisation ("EBITDA")	Operating profit before specific adjusting items, restructuring costs and other one-off items, depreciation and amortisation of intangible assets
Group earnings before interest, tax and amortisation (" Group EBITA")	Operating profit before specific adjusting items, restructuring costs and other one-off items and amortisation of intangible assets
Group underlying operating profit	Operating profit of £82.9 million (2014: £54.3 million) before specific adjusting items of £16.0 million (2014: £49.9 million), amortisation of intangibles of £7.1 million (2014: £8.2 million)
Net debt	Interest-bearing loans and borrowings, bank overdrafts less cash and cash equivalents
Restructuring costs and other one-off items	Include the costs of restructuring activity and gain on disposal of property
Return on operating capital employed ("ROCE")	Group underlying profit for the last 12 months divided by the sum of working capital and the net book value of property, plant and equipment
Unallocated central costs	Includes plc costs (e.g. Report & Accounts, AGM, Non-Executive Directors) and Group management costs (eg. Corporate head office rent, utilities, staff etc.)
Underlying earnings per share ("EPS")	Basic earnings per share of 11.9 pence (2014: 2.7 pence) adjusted to exclude specific adjusting items of 6.4 pence (2014: 16.5 pence) and amortisation of 2.5 pence (2014: 2.9 pence)
Underlying profit before tax ("PBT")	Operating profit of £82.9 million (2014: £54.3 million) before specific adjusting items of £16.0 million (2014: £49.9 million) and amortisation of intangibles of £7.1 million (2014: £8.2 million), less net financing costs of £18.1 million (2014: £20.8 million), plus share of income from equity accounted investments of £0.3 million (2014: nil)
Working capital (as used in the ROCE calculation)	Working capital for ROCE is the sum of inventories, £129.2 million (2014: £126.6 million), trade and other receivables, £174.4 million (2014: £193.9 million), net derivative financial liabilities £(0.3) million (2014: asset of £5.2 million), net assets classified as held-for-sale nil (2014: £3.2 million), trade and other payables, £(168.6) million (2014: £(165.1) million), plus the net of deferred consideration, third party dividends payable and other sundry items, £(0.5) million (2014: £0.9 million).

CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2015
		Results before specific	Specific			Results before specific	Specific
		adjusting items	adjusting items*	Total		adjusting items	adjusting items*	Total
		2015	2015	2015		2014	2014	2014
	Note	£m	£m	£m		£m	£m	£m
Revenue	2	911.8	-	911.8		921.7	-	921.7
Operating costs before restructuring costs, other one-off items and amortisation of intangible assets		(802.2)	-	(802.2)		(803.7)	-	(803.7)
Profit from operations before restructuring costs, other one-off items and amortisation of intangible assets		109.6	-	109.6		118.0	-	118.0
Restructuring costs and other one-off items:
Restructuring costs	5	(4.1)	(1.5)	(5.6)		(5.9)	(16.3)	(22.2)
Business exit costs	5	-	(2.8)	(2.8)		-	(1.9)	(1.9)
Impairment of property, plant and equipment	5		(5.9)	(5.9)		-	-	-
Transaction-related costs	5	-	-	-		-	(1.2)	(1.2)
Settlement of prior period anti-trust litigation	5	-	-	-		-	(3.6)	(3.6)
Gain on disposal of properties		0.5	-	0.5		0.3	-	0.3
Profit from operations before amortisation of intangible assets	2	106.0	(10.2)	95.8		112.4	(23.0)	89.4
Amortisation of intangible assets		(7.1)	-	(7.1)		(8.2)	-	(8.2)
Impairment of intangible assets	5	-	(5.8)	(5.8)		-	(26.9)	(26.9)
Operating profit	2	98.9	(16.0)	82.9		104.2	(49.9)	54.3
Finance income		2.5	-	2.5		2.1	-	2.1
Finance expense		(20.6)	-	(20.6)		(22.9)	-	(22.9)
Net financing costs	3	(18.1)	-	(18.1)		(20.8)	-	(20.8)
Net loss on disposal of business	5	-	(6.1)	(6.1)		-	(2.0)	(2.0)
Share of profit of associate (net of income tax)		0.3	-	0.3		-	-	-
Profit before taxation		81.1	(22.1)	59.0		83.4	(51.9)	31.5
Income tax expense	4	(24.2)	3.3	(20.9)		(24.7)	5.5	(19.2)
Profit for the period		56.9	(18.8)	38.1		58.7	(46.4)	12.3
Profit for period attributable to:
Owners of the parent		52.3	(18.4)	33.9		54.8	(47.0)	7.8
Non-controlling interests		4.6	(0.4)	4.2		3.9	0.6	4.5
		56.9	(18.8)	38.1		58.7	(46.4)	12.3

	CONSOLIDATED INCOME STATEMENT (continued)
for the year ended 31 December 2015
							Total		Total
		Note					2015		2014
Basic earnings per share		6
Continuing operations							11.9p		2.7p
Diluted earnings per share
Continuing operations							11.9p		2.7p
Dividends
Interim dividend                 - pence							4.00p		3.90p
- £m							11.4		11.1
Proposed final dividend     - pence							7.00p		7.00p
- £m							20.0		20.0

The proposed final dividend is based upon the number of shares outstanding at the balance sheet date.

* Details of 'Specific adjusting items' are given in note 5 to the financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2015
					Total
			Fair		parent	Non-	Total
	Translation	Hedging	value	Retained	comprehensive	controlling	comprehensive
	reserve	reserve	reserve	earnings	income	interests	income
	£m	£m	£m	£m	£m	£m	£m
2014
Profit for the period	-	-	-	7.8	7.8	4.5	12.3
Items that will not be reclassified subsequently to profit or loss:
Remeasurement loss on defined benefit plans	-	-	-	(75.2)	(75.2)	-	(75.2)
Tax effect of components of other comprehensive income not reclassified	-	-	-	10.0	10.0	-	10.0
	-	-	-	(65.2)	(65.2)	-	(65.2)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(6.6)	-	-	-	(6.6)	(0.4)	(7.0)
Net gain on hedge of net investment in foreign subsidiaries	7.9	-	-	-	7.9	-	7.9
Cash flow hedges:
Transferred to profit or loss	-	(0.1)	-	-	(0.1)	-	(0.1)
	1.3	(0.1)	-	-	1.2	(0.4)	0.8
Total comprehensive income, net of tax	1.3	(0.1)	-	(57.4)	(56.2)	4.1	(52.1)
2015
Profit for the period	-	-	-	33.9	33.9	4.2	38.1
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit plans	-	-	-	1.3	1.3	-	1.3
Tax effect of components of other comprehensive income not reclassified	-	-	-	(0.9)	(0.9)	-	(0.9)
	-	-	-	0.4	0.4	-	0.4
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(5.0)	-	-	-	(5.0)	0.6	(4.4)
Net gain on hedge of net investment in foreign subsidiaries	2.0	-	-	-	2.0	-	2.0
Cash flow hedges:
Change in fair value	-	(0.1)	-	-	(0.1)	-	(0.1)
	(3.0)	(0.1)	-	-	(3.1)	0.6	(2.5)
Total comprehensive income, net of tax	(3.0)	(0.1)	-	34.3	31.2	4.8	36.0

CONSOLIDATED BALANCE SHEET
as at 31 December 2015
				2015		2014
						Restated*
		Note		£m		£m
Assets
Property, plant and equipment				256.7		241.0
Intangible assets				229.8		235.3
Investments				5.4		6.2
Other receivables				5.3		4.0
Deferred tax assets				4.4		8.5
Total non-current assets				501.6		495.0
Inventories				129.2		126.6
Derivative financial assets				2.0		6.0
Trade and other receivables				174.4		193.9
Cash and cash equivalents		7		49.8		63.0
Assets classified as held for sale		5		-		4.5
Total current assets				355.4		394.0
Total assets				857.0		889.0
Liabilities
Interest-bearing loans and borrowings				257.4		232.9
Employee benefits				204.5		211.8
Provisions				1.6		2.6
Non-trade payables				0.7		0.8
Deferred tax liabilities				2.3		2.4
Total non-current liabilities				466.5		450.5
Interest-bearing loans and borrowings and bank overdrafts				8.4		37.1
Trade and other payables				168.6		165.1
Current tax payable				14.4		26.3
Provisions				10.4		20.2
Derivative financial liabilities				2.3		0.8
Liabilities classified as held for sale		5		-		1.3
Total current liabilities				204.1		250.8
Total liabilities				670.6		701.3
Total net assets				186.4		187.7
Equity
Share capital				71.8		71.8
Share premium				111.7		111.7
Reserves				36.0		39.1
Retained earnings				(69.7)		(71.4)
Total equity attributable to equity owners of parent Company				149.8		151.2
Non-controlling interests				36.6		36.5
Total equity				186.4		187.7
* 2014 has been restated for the reclassification of current tax payable and deferred tax assets and liabilities.
The financial statements were approved by the Board of Directors on 23 February 2016 and were signed on its behalf by:
Pete Raby, Chief Executive Officer                                                            Kevin Dangerfield,  Chief Financial Officer

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2015
					Fair		Capital			Total	Non-
	Share	Share	Translation	Hedging	value	Special	redemption	Other	Retained	parent	controlling	Total
	capital	premium	reserve	Reserve	reserve	reserve	reserve	reserves	earnings	equity	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2014	71.8	111.7	(14.8)	0.6	(1.0)	6.0	35.7	11.4	16.7	238.1	36.0	274.1
Profit for the year	-	-	-	-	-	-	-	-	7.8	7.8	4.5	12.3
Other comprehensive income	-	-	1.3	(0.1)	-	-	-	-	(65.2)	(64.0)	(0.4)	(64.4)
Transactions with owners:
Dividends	-	-	-	-	-	-	-	-	(30.2)	(30.2)	(4.8)	(35.0)
Equity-settled share-based payment transactions	-	-	-	-	-	-	-	-	1.8	1.8	-	1.8
Own shares acquired for share incentive schemes	-	-	-	-	-	-	-	-	(2.3)	(2.3)	-	(2.3)
Adjustment arising from change in non-controlling interest	-	-	-	-	-	-	-	-	-	-	1.2	1.2
Balance at 31 December 2014	71.8	111.7	(13.5)	0.5	(1.0)	6.0	35.7	11.4	(71.4)	151.2	36.5	187.7
Balance at 1 January 2015	71.8	111.7	(13.5)	0.5	(1.0)	6.0	35.7	11.4	(71.4)	151.2	36.5	187.7
Profit for the year	-	-	-	-	-	-	-	-	33.9	33.9	4.2	38.1
Other comprehensive income	-	-	(3.0)	(0.1)	-	-	-	-	0.4	(2.7)	0.6	(2.1)
Transactions with owners:
Dividends	-	-	-	-	-	-	-	-	(31.4)	(31.4)	(3.8)	(35.2)
Equity-settled share-based payment transactions	-	-	-	-	-	-	-	-	1.7	1.7	-	1.7
Own shares acquired for share incentive schemes	-	-	-	-	-	-	-	-	(2.9)	(2.9)	-	(2.9)
Adjustment arising from change in non-controlling interest	-	-	-	-	-	-	-	-	-	-	(0.9)	(0.9)
Balance at 31 December 2015	71.8	111.7	(16.5)	0.4	(1.0)	6.0	35.7	11.4	(69.7)	149.8	36.6	186.4

CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2015
				2015	2014
	Note			£m	£m
Operating activities
Profit for the period				38.1	12.3
Adjustments for:
Depreciation				27.1	27.8
Amortisation				7.1	8.2
Net financing costs	3			18.1	20.8
Loss on disposal of business				6.1	2.0
Share of profit from associate				(0.3)	-
Profit on sale of property, plant and equipment				(0.4)	-
Income tax expense	4			20.9	19.2
Non-cash operating costs relating to restructuring				0.2	2.0
Non-cash specific adjusting items included in operating profit				15.5	38.0
Equity-settled share-based payment expenses				1.4	1.7
Cash generated from operations before changes in working capital and provisions				133.8	132.0
Decrease/(increase) in trade and other receivables				15.5	(2.8)
Increase in inventories				(4.7)	(9.5)
Increase in trade and other payables				1.9	3.1
Decrease in provisions and employee benefits				(16.4)	(15.0)
Cash generated from operations				130.1	107.8
Acquisition-related costs				-	(0.3)
Interest paid				(13.4)	(17.2)
Income tax paid				(29.9)	(20.0)
Net cash from operating activities				86.8	70.3
Investing activities
Purchase of property, plant and equipment				(63.5)	(33.8)
Proceeds from sale of property, plant and equipment				0.8	1.3
Sale of investments				-	0.9
Interest received				2.2	1.9
Disposal of subsidiaries, net of cash disposed				(0.1)	(0.6)
Acquisition of subsidiaries, net of cash acquired				-	(20.7)
Loan made to associate				-	(1.5)
Loan made to purchaser of business				(1.5)	-
Investment made by non-controlling interests				0.5	-
Forward contracts used in net investment hedging				4.9	0.9
Deferred consideration received on disposal of subsidiary				-	0.7
Net cash from investing activities				(56.7)	(50.9)
Financing activities
Purchase of own shares for share incentive schemes				(2.9)	(2.3)
Repayment of borrowings	7			(8.5)	(1.2)
Payment of finance lease liabilities	7			(0.2)	(0.1)
Finance leases acquired	7			-	1.2
Dividends paid				(31.4)	(30.2)
Net cash from financing activities				(43.0)	(32.6)
Net decrease in cash and cash equivalents				(12.9)	(13.2)
Cash and cash equivalents at start of period				63.0	76.0
Effect of exchange rate fluctuations on cash held				(0.3)	0.2
Cash and cash equivalents at period end	7			49.8	63.0
A reconciliation of cash and cash equivalents to net borrowings is shown in note 7.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Preparation

The preliminary announcement for the year ended 31 December 2015 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as issued by the International Accounting Standards Board. There has been no significant impact arising from new accounting policies adopted in the year. Going Concern The Group meets its day-to-day working capital requirements through local banking arrangements underpinned by the Group's £200 million unsecured multi-currency revolving credit facility maturing October 2019. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance and exchange rates, show the Group operating comfortably within its debt financial covenants for the next 12 months. The current economic climate continues to have an impact on the Group, its customers and suppliers. The Board fully recognises the challenges that lie ahead but, after making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the consolidated statements for the year ended 31 December 2015. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 31 December 2014. Statutory accounts for the year ended 31 December 2014 have been delivered to the registrar of companies, and those for the year ended 31 December 2015 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2015 and 2014.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Segment reporting
Accounting policies
The Group has identified three reportable operating segments. These have been identified on the basis of internal management reporting information that is regularly reviewed by the Group's Board of Directors (the Chief Operating Decision Maker) in order to allocate resources and assess performance.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments and related income, loans and borrowings and related expenses, corporate assets and head office expenses, and income tax assets and liabilities.
The Group comprises the following three reportable operating segments: North America, Europe and Asia/Rest of World.
The information presented below represents the operating segments of the Group.
		North America			Europe				Asia/Rest of World						Consolidated
		2015	2014		2015	2014			2015			2014			2015		2014
																	Restated*
		£m	£m		£m	£m			£m			£m			£m		£m
Revenue from external customers		368.4	353.1		305.7	325.7			237.7			242.9			911.8		921.7
Regional EBITA 1		51.5	52.5		35.8	39.8			27.5			31.2			114.8		123.5
Unallocated costs															(5.2)		(5.5)
Group EBITA 2															109.6		118.0
Restructuring costs and other one-off items		(0.9)	(0.8)		(1.2)	(1.2)			(0.1)			(3.6)			(2.2)		(5.6)
Unallocated restructuring costs and other one-off items															(1.4)		-
Underlying operating profit 3															106.0		112.4
Amortisation of intangible assets		(3.3)	(3.4)		(2.7)	(3.8)			(1.1)			(1.0)			(7.1)		(8.2)
Operating profit before specific adjusting items															98.9		104.2
Specific adjusting items included in operating profit 4															(16.0)		(49.9)
Operating profit															82.9		54.3
Finance income															2.5		2.1
Finance expense															(20.6)		(22.9)
Loss on disposal of business															(6.1)		(2.0)
Share of profit of associate (net of income tax)															0.3		-
Profit before taxation															59.0		31.5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.     Segment reporting (continued)

North America Europe Asia/Rest of World Consolidated 2015 2014 2015 2014 2015 2014 2015 2014 Restated* £m £m £m £m £m £m £m £m Segment assets 305.8 300.1 252.9 283.1 233.3 225.3 792.0 808.5 Unallocated assets 65.0 80.5 Total assets 857.0 889.0 Segment liabilities 106.5 108.9 212.1 217.1 56.4 53.2 375.0 379.2 Unallocated liabilities 295.6 322.1 Total liabilities 670.6 701.3 Segment capital expenditure 21.1 13.9 23.2 9.8 19.2 10.1 63.5 33.8 Total capital expenditure 63.5 33.8 Segment depreciation 11.5 11.2 8.5 9.3 7.1 7.3 27.1 27.8 Total depreciation 27.1 27.8

During the year ended 31 December 2015 the Group recognised impairment losses totalling £5.9 million in the North America reportable operating segment, which has been recognised in the 'Impairment of property, plant and equipment' line of the income statement, impairment losses totalling £5.8 million in the Europe reportable operating segment, which has been recognised in the 'Impairment of intangible assets' line of the income statement and impairment losses totalling £0.7 million in the Asia/Rest of World reportable operating segment, which has been recognised in 'restructuring costs' line of the income statement. See note 5 for further details.

During the year ended 31 December 2014 the Group recognised impairment losses totalling £28.6 million in the Europe reportable operating segment. Of this amount £26.9 million has been recognised in the 'Impairment of intangible assets' line of the income statement and £1.7 million has been recognised in the "Business exit costs" line of the income statement (with a further £0.2 million of related disposal costs). See note 5 for further details. In the year ended 31 December 2015, the Group incurred £1.5 million of restructuring costs in specific adjusting items in the Asia/Rest of World reportable operating segment. In the year ended 31 December 2014, the Group incurred £16.3 million of restructuring costs in specific adjusting items in the Europe reportable operating segment. See note 5 for further details.

1. Segment profit is defined as Regional EBITA, which is segment operating profit before restructuring costs, other one-off items and amortisation of intangible assets.

2. Group EBITA is defined as operating profit before restructuring costs, other one-off items and amortisation of intangible assets.

3. Underlying operating profit is defined as operating profit before amortisation of intangible assets.

4. Details of 'specific adjusting items' are given in note 5 to the financial statements

* 2014 has been restated for the reclassification of current tax payable and deferred tax assets and liabilities

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.     Segment reporting (continued)
										Revenue from external customers		Non-current assets (excluding tax and financial instruments)
										2015	2014	2015	2014
										£m	£m	£m	£m
USA										323.8	308.2	186.5	176.2
China										75.7	83.8	56.8	53.2
Germany										64.6	68.6	44.5	47.6
UK (the Group's country of domicile)										64.0	72.3	129.7	130.5
France										29.9	36.2	17.3	13.1
Other Asia, Australasia, Middle East and Africa										162.9	155.9	30.4	30.9
Other Europe										130.8	133.2	18.4	20.4
Other North America										32.2	31.8	5.4	6.3
South America										27.9	31.7	8.2	8.3
										911.8	921.7	497.2	486.5
Revenue from external customers is based on geographic location of the end-customer. Segment assets are based on geographical location of the assets. No customer represents greater than 10% of revenue.
Segment revenue by product
										2015	2014
										£m	£m
Industrial										398.3	412.1
Transportation										197.9	184.9
Petrochemical										79.5	89.4
Energy										61.7	65.5
Security and Defence										58.6	64.8
Electronics										63.7	53.7
Healthcare										52.1	51.3
										911.8	921.7
Intercompany sales to other segments				North America			Europe			Asia/Rest of World
				2015	2014		2015	2014		2015	2014
				£m	£m		£m	£m		£m	£m
Intercompany sales to other segments				30.1	26.6		17.8	19.0		10.3	9.4

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.		Net finance income and expense
					2015	2014
					£m	£m
		Recognised in profit or loss
		Amounts derived from financial instruments			1.0	0.7
		Interest income on bank deposits measured at amortised cost			1.5	1.4
		Finance income			2.5	2.1
		Interest expense on financial liabilities measured at amortised cost			(13.7)	(17.2)
		Net interest on IAS 19 obligations			(6.9)	(5.7)
		Finance expense			(20.6)	(22.9)
		Net financing costs recognised in profit or loss			(18.1)	(20.8)
		Recognised directly in equity
		Cash flow hedges:
		Effective portion of changes in fair value of cash flow hedges			(0.1)	-
		Transferred to profit or loss			-	(0.1)
		Effective portion of change in fair value of net investment hedges			2.0	7.9
		Foreign currency translation differences for foreign operations			(5.0)	(6.6)
					(3.1)	1.2
4.		Taxation - income tax expense
		Recognised in the income statement
					2015	2014
					£m	£m
		Current tax expense
		Current year			22.2	23.6
		Adjustments for prior years			(4.9)	(1.3)
					17.3	22.3
		Deferred tax expense
		Origination and reversal of temporary differences			3.6	(3.1)
		Total income tax expense in income statement			20.9	19.2
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.	Taxation - income tax expense (continued)
	Reconciliation of effective tax rate		2015	2015	2014	2014
			£m	%	£m	%
	Profit before tax		59.0		31.5
	Income tax using the domestic corporation tax rate		11.9	20.2	6.8	21.6
	Non-deductible expenses		6.7	11.4	10.9	34.6
	Temporary differences not equalised in deferred tax		(0.3)	(0.5)	(0.3)	(1.0)
	Adjustments in respect of prior years		(3.0)	(5.1)	(0.8)	(2.5)
	Recognition of previously unrecognised temporary differences		1.7	2.9	1.1	3.5
	Other (including the impact of overseas tax rates)		3.9	6.6	1.5	4.8
			20.9	35.5	19.2	61.0
	Income tax recognised directly in equity
	Tax effect on components of other comprehensive income:
	- Deferred tax associated with defined benefit schemes and share schemes		0.9		(10.0)
	Total income tax recognised directly in equity		0.9		(10.0)
	The effective rate of tax before specific adjusting items is 29.8% (2014: 29.6%).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.		Specific adjusting items
		Accounting policies The Group separately presents specific adjusting items (non-underlying) in the consolidated income statement which, in the Directors' judgement, need to be disclosed separately by virtue of their size and incidence in order for users of the consolidated financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. In the years ending 31 December 2015 and 31 December 2014 business exit costs, impairment of plant, property and equipment, transaction-related costs, settlement of prior period anti-trust litigation and impairment of intangible assets are included as specific adjusting items as they meet this criteria.
			2015		2014
			£m		£m
		Specific adjusting items:
		- Restructuring costs	1.5		16.3
		- Business exit costs	2.8		1.9
		- Impairment of property, plant and equipment	5.9		-
		- Transaction-related costs	-		1.2
		- Settlement of prior period anti-trust litigation	-		3.6
		- Impairment of intangible assets	5.8		26.9
		- Net loss on disposal of businesses	6.1		2.0
		Total specific adjusting items before income tax credit	22.1		51.9
		- Income tax credit from specific adjusting items	(3.3)		(5.5)
		Total specific adjusting items after income tax credit	18.8		46.4
		2015
		Restructuring costs
		As reported in 2014, the strategic objective to drive the performance of the Electrical Carbon and Seals and Bearings businesses to mid-teen margins and beyond has resulted in the Group undertaking a significant rationalisation of the carbon material footprint.  This started in 2014 with the downsizing of activities at the Swansea, UK site.  This footprint rationalisation has continued in 2015 with the decision to and the announcement of the cessation of carbon material manufacturing at the Shanghai, China site.  These operations will be consolidated into other Group locations, mainly the USA.  This decision has resulted in a charge of £1.5 million in 2015, £0.7 million of which relates to the impairment loss on plant and equipment and the balance to site clean-up costs and other write-offs.  £0.4 million is expected to be settled in cash in 2016.  An income tax credit of £0.2 million was recognised in respect of these restructuring costs.  The £0.7 million of impairment loss forms part of the total plant and equipment impairment loss of £6.6 million.
		Business exit costs
		The business exit costs in the year relate to the deconsolidation of Thermal Ceramics Sukhoy Log Limited ("Sukhoy") and the subsequent remeasurement to fair value of the retained investment.
		In April 2006 the Group acquired a 51% shareholding in Sukhoy, a fibre business based near Yekaterinburg, Russia.  The results and assets of Sukhoy have previously been consolidated on the basis that the Group was satisfied that it exercised management control.  During 2015 there has been a marked change in the nature of the relationship between Group and minority partner management, exacerbated by the increasingly difficult market conditions in Russia, with the minority partner blocking a number of operational and strategic changes that Morgan wished to implement.  As a result, it became clear to the Group towards the end of 2015 that it no longer had effective control of the business and that it was no longer appropriate to consolidate.  Based on the recent financial performance and the Group's view of the future prospects of the business it was concluded that the value of the Group's investment in Sukhoy is nil. As a result the Group has recognised a £2.8 million charge in business exit costs in the 2015 accounts.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.		Specific adjusting items (continued)
		Impairment of property, plant and equipment
		The impairment of property, plant and equipment for the year ended 31 December 2015 is as a result of a review of the carrying value of assets that support the Group's North America vehicle and personal protection and high-temperature furnace-lining businesses.  Both of these businesses saw significant growth and investment in previous years but more recently they have been in decline.  The Group has compared its expected future cash flows from these businesses with the book value of the property, plant and equipment that is dedicated to them and determined that a total impairment charge of £5.9 million is required.  An income tax credit of £2.1 million was recognised in respect of the impairment charge. The £5.9 million of impairment loss forms part of the total plant and equipment impairment loss of £6.6 million.
		Impairment of intangible assets
		As a result of the continued reduction in demand on C&DS from UK MoD, the review of the carrying value of the remaining intangible assets of C&DS resulted in a further impairment charge of £5.8 million, relating to a full impairment of the customer relationships.  Following this impairment charge, the carrying value of the C&DS intangibles was £9.8 million, all in respect of technology and trademarks.  This was supported by the current expectations of the future trading performance of the C&DS business.  An income tax credit of £1.0 million was recognised in respect of the impairment charge.
		Net loss on disposal of business
		As reported in the 2014 Annual Report and Accounts, on 30 January 2015 the Group completed the sale of a Thermal Ceramics business in Wissembourg, France.  This business manufactures low-temperature fibre boards used mainly in the building industry.  The Group has incurred a loss on the disposal of this business of £6.1 million in 2015, in addition to the £1.9 million of business xxit Costs recognised in the 2014 accounts.
		2014
		Restructuring costs
		As part of the strategic objective to drive the performance of the Electrical Carbon and Seals and Bearings businesses to mid-teen margins and beyond the Group is undertaking a significant rationalisation of the carbon material footprint. Specifically, the cessation of carbon material manufacturing and a number of other finishing operations at the Swansea, UK site.  These operations are being consolidated in to other Group locations, mainly USA and Hungary. This has resulted in a charge of £16.3 million in 2014, which is predominantly in respect of property related provisions, redundancy costs and asset write-offs.  An income tax credit of £1.2 million has been recognised in respect of these items.
		Business exit costs
		In January 2015 the Group completed the sale of a Thermal Ceramics business in Wissembourg, France. This business manufactures low-temperature fibre boards used mainly in the building industry.  The Group has incurred a £1.9 million loss on disposal of this business and has booked an impairment charge in 2014 to reflect this. An income tax credit of £0.2 million has been recognised in respect of this item.
	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.	Specific adjusting items (continued)
	The assets and liabilities that were intended to be disposed of have been classified as held for sale and are as follows:
				2014
				£m
	Property, plant and equipment			2.5
	Intangible assets			0.1
	Inventories			1.9
	Total assets classified as held for sale			4.5
	Trade and other payables			0.6
	Employee benefits			0.7
	Total liabilities classified as held for sale			1.3
	Net assets of disposal group			3.2
	Transaction-related costs
	Transaction-related costs consist of £0.6 million of adviser costs incurred in relation to dealing with the proposal made by Vesuvius plc to acquire the Group, £0.4 million of legal and due diligence fees on the purchase of Porextherm Dämmstoffe GmbH and £0.2 million of legal fees relating to the establishment of a new joint venture in China.  An income tax credit of £0.1 million has been recognised in respect of these items.
	Settlement of prior period anti-trust litigation
	During the year the Group has fully and finally settled a number of the European Anti-Trust actions relating to pre-2000 cartel activity and has a provision adequate to cover the remaining claim and the related legal fees.  The net charge to the Income Statement in the year in relation to this is £3.6 million.
	Impairment of intangible assets
	As a result of the continued reduction in demand on C&DS from UK MoD, the review of the carrying value of the intangible assets and goodwill of C&DS has resulted in an impairment charge of £26.9 million. Following this impairment charge, the carrying value of the C&DS intangibles and goodwill is £17.2 million.  This is supported by the current expectations of the future trading performance of the C&DS business.  An income tax credit of £2.1 million has been recognised in respect of the impairment charge.
	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.	Specific adjusting items (continued)
	Net loss on disposal of businesses The net loss on disposal of businesses for the year ended 31 December 2014 consists of two business disposals: a) UK Fired Shapes Business
	On 3 April 2014 the Group sold its UK Fired Shapes business to Jemmtec Limited in exchange for a 35% shareholding in Jemmtec Limited, a fired ceramics shapes business.  The profit recognised on disposal of the business was £1.3 million. Assets disposed of consisted of £0.9 million of property, plant & equipment, £0.8 million of inventory and £0.2 million of goodwill. Based on the management structure of Jemmtec Limited the Group has determined that it does not have control of Jemmtec Limited and is therefore accounting for its 35% shareholding in Jemmtec as an associate.
	b) Morgan AM&T Hairong Co. Limited
	On 20 June 2014 the Group disposed of the whole of the share capital of Morgan AM&T Hairong Co. Limited ('Hairong') for £0.3 million consideration. The loss recognised on disposal of this shareholding was £3.3 million. Prior to the acquisition the immediate parent company of Hairong was Morgan AM&T (Shanghai) Co., Ltd, in which the Group holds a 70% shareholding. The adjustment to the non-controlling interest component of equity due to this transaction was £1.2 million. An income tax credit of £1.9 million has been recognised in respect of this item.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.            Earnings per share
Earnings per share from continuing operations
The calculation of basic/diluted earnings per share from continuing operations at 31 December 2015 was based on the following:
	2015			2014
	Basic	Diluted		Basic		Diluted
	£m	£m		£m		£m
Profit attributable to equity holders of the Company from continuing operations	33.9	33.9		7.8		7.8
Weighted average number of Ordinary shares
Issued Ordinary shares at the beginning of the period (millions)	285.4	285.4		285.4		285.4
Effect of shares held by The Morgan General Employee Benefit Trust (millions)	(0.3)	(0.3)		(0.3)		(0.3)
Dilutive effect of share options/incentive schemes (millions)	n/a	0.4		n/a		0.5
Basic/diluted weighted average number of Ordinary shares during the period (millions)	285.1	285.5		285.1		285.6
Earnings per share from continuing operations (pence)	11.9p	11.9p		2.7p		2.7p
Underlying earnings per share
The calculation of basic/diluted underlying earnings per share at 31 December 2015 was based on the following:
	2015				2014
	Basic	Diluted			Basic	Diluted
	£m	£m			£m	£m
Underlying operating profit and share of profit of associate before specific adjusting items and amortisation, less net financing costs, income tax expense and non-controlling interests	59.4	59.4			63.0	63.0
Basic/diluted weighted average number of Ordinary shares during the period - calculated as above (millions)	285.1	285.5			285.1	285.6
Earnings per share before specific adjusting items and amortisation of intangible assets (pence)	20.8p	20.8p			22.1p	22.1p

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7.	Cash and cash equivalents
	Cash and cash equivalents
					2015	2014
					£m	£m
	Bank balances				38.8	49.1
	Cash deposits				11.0	13.9
	Cash and cash equivalents				49.8	63.0
	Reconciliation of cash and cash equivalents to net debt*
					2015	2014
					£m	£m
	Opening borrowings				(270.0)	(262.5)
	Net decrease in borrowings				8.5	1.2
	Payment of finance lease liabilities				0.2	0.1
	Finance leases acquired as part of acquisition of subsidiary				-	(1.2)
	Effect of movements in foreign exchange on borrowings				(4.5)	(7.6)
	Closing borrowings				(265.8)	(270.0)
	Cash and cash equivalents				49.8	63.0
	Closing net debt				(216.0)	(207.0)
	* Net debt is defined as interest-bearing loans and borrowings and bank overdrafts less cash and cash equivalents.

 

END

 

 

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