HALF YEAR RESULTS FOR 6 MONTHS ENDED 30 JUNE 2017

RNS Number : 3690M

Morgan Advanced Materials PLC

28 July 2017

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017

£ million unless otherwise stated	1H 2017	1H 2016	As Reported Change %	Organic Constant Currency⁽¹⁾ Change %
Headline results Revenue	518.9	475.4	9.2%	0.2%
Group headline operating profit⁽¹⁾	61.6	55.1	11.8%	1.5%
Group headline operating profit margin⁽¹⁾	11.9%	11.6%
Headline EPS ⁽¹⁾	11.6p	10.5p	10.5%
Interim dividend per share	4.0p	4.0p
Cash flow from operations⁽¹⁾	51.6	47.5	8.6%
Free cash flow before acquisitions, disposals and dividends⁽¹⁾	16.8	11.1

Statutory results
Operating profit	58.0	55.6
Profit before tax	92.3	46.2
Basic EPS	27.0p	10.2p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

Group highlights

· Improving momentum in the business with organic constant currency growth* in the second quarter

· Continued progress on strategy implementation, with two divestments completed. These reduce complexity and strengthen the balance sheet, with net debt / EBITDA* at 1.1 times (FY 2016: 1.6 times)

· On track to make the planned £6 million incremental increase in research and development and sales capability

· Group headline operating profit margin* improved to 11.9% (1H 2016: 11.6%)

· Headline EPS* increased to 11.6 pence (1H 2016: 10.5 pence)

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

"We have delivered in line with our expectations in the first half of the year with improved momentum driving organic growth in the second quarter.

We are making good progress with the implementation of our strategy. Operational improvements are ahead of plan and providing the funds for reinvestment in research and development, sales and infrastructure."

Strategy implementation on track

We have made good progress with the implementation of our strategy, against the execution priorities we defined in February 2016:

1. Move to a global structure. We successfully completed the move to a global structure in March 2016 with the establishment of six global business units: Thermal Ceramics, Molten Metal Systems, Electrical Carbon, Seals & Bearings, Technical Ceramics, and Composites and Defence Systems.

2. Extend our technology leadership. We have increased technology investment at the half-year to 3.2% of sales. We will increase investment for the full year against our three to four-year goal of increasing R&D investment to around 4.0% of sales.

3. Improve operational execution. We are driving improvements in global procurement, through lean and continuous improvement activity in our production plants, through targeted improvements in yield and scrap, and through further investments in automation. Our operational improvement activity is ahead of plan at the half-year, we have delivered £3.5 million of the £6.0 million target for the full year.

4. Drive sales effectiveness and market focus. In 2016 we completed the global mapping of our sales resources to understand the roles and capabilities of our people. We are now realigning the sales teams to ensure we have the right people in the right roles. We are using pilot projects to establish the optimal organisational structures, sales processes and incentives for the business.

5. Increase investment in people management and development. During 2016 we strengthened the senior leadership population in the group and we have further strengthened that group in 2017. We have made good progress in understanding the capabilities of our scientists and started to define the roles and career paths for our materials science personnel. In the first half of 2017 we have launched the leadership behaviours we need across the group to deliver the strategy, and started development activity with our senior leaders.

6. Simplify the business. We have completed two divestments, exiting businesses where we are sub-scale and where there is limited synergy with the remainder of the group. We are simplifying the group through organic management of the tail and we continue to review the portfolio for fit with our corporate strategy.

Enquiries


Pete Raby	Morgan Advanced Materials	01753 837 000
Peter Turner	Morgan Advanced Materials
Mike Smith	Brunswick	0207 404 5959

Results presentation today

There will be an analyst and investor presentation at 10.00 (UK time) today at The Lincoln Centre, 18 Lincoln's 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 by 09:45 (UK time).

Basis of preparation

Non-GAAP measures

Throughout this report adjusted measures are used to describe the Group's financial performance. These are not recognised under IFRS or other generally accepted accounting principles (GAAP).

The Executive Committee and the Board manage and assess the performance of the business on these measures and believe that they are more representative of ongoing trading, facilitate meaningful year-on-year comparisons, and hence provide additional useful information to shareholders.

Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text, and by a footnote when they appear in tables and charts. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on page 10 to 14.

Operating review

	Revenue		EBITA⁽¹⁾		Margin %
	1H 2017	1H 2016	1H 2017	1H 2016	1H 2017	1H 2016
	£m	£m	£m	£m	%	%
Thermal Ceramics	213.1	193.9	28.6	25.6	13.4	13.2
Molten Metal Systems	23.8	20.6	3.6	2.9	15.1	14.1
Thermal Products Total	236.9	214.5	32.2	28.5	13.6	13.3
Electrical Carbon	81.3	75.6	8.7	10.3	10.7	13.6
Seals and Bearings	55.9	47.6	9.1	6.6	16.3	13.9
Technical Ceramics	133.2	121.8	14.9	12.8	11.2	10.5
Carbon and Technical Ceramics Total	270.4	245.0	32.7	29.7	12.1	12.1
Composites and Defence Systems	11.6	15.9	(0.4)	1.1	(3.4)	6.9
Divisional Total	518.9	475.4
Divisional EBITA⁽¹⁾			64.5	59.3
Corporate costs			(2.9)	(2.7)
Group EBITA⁽¹⁾			61.6	56.6	11.9	11.9
Restructuring costs and other items			-	(1.5)
Group headline operating profit⁽¹⁾			61.6	55.1	11.9	11.6
Amortisation of intangible assets			(3.6)	(3.3)
Operating profit before specific adjusting items			58.0	51.8
Specific adjusting items included in operating profit²			-	3.8
Operating profit			58.0	55.6	11.2	11.7
Net financing costs			(11.8)	(9.8)
Profit on disposal of business			46.1	-
Share of profit of associate (net of income tax)			-	0.4
Profit before taxation			92.3	46.2

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

2. Details of Specific adjusting items can be found in Note 4 to the financial statements

Thermal Products

Revenue for the first half of the year was £236.9 million (1H 2016: £214.5 million), an increase of 10.4% compared with 1H 2016. Organic constant currency revenue* decreased by 1.4% compared to 1H 2016.

Thermal Products EBITA* for the half-year was £32.2 million (1H 2016: £28.5 million), with an EBITA margin* of 13.6% (1H 2016: 13.3%).

Revenue for Thermal Ceramics for the half-year was £213.1 million (1H 2016: £193.9 million), an increase of 9.9% compared with 2016. Organic constant currency revenue* decreased by 1.8% compared with 1H 2016. Growth in China and India was offset by a decline in North America and Europe.

Thermal Ceramics EBITA* for the half-year was £28.6 million (1H 2016: £25.6 million) with an EBITA margin* improving to 13.4% (1H 2016: 13.2%), as volume decreases were offset by operational efficiency improvements.

Revenue for Molten Metals Systems for the half-year was £23.8 million (1H 2016: £20.6 million), an increase of 15.5% compared with 1H 2016. Organic constant currency revenue* increased by 2.4%. Revenue grew in most markets, and was strongest in China and Europe.

Molten Metal Systems EBITA* for the half-year was £3.6 million (1H 2016: £2.9 million) with an EBITA margin* of 15.1% (1H 2016: 14.1%), reflecting the benefits from both operational improvements and increased volumes.

Carbon and Technical Ceramics

Revenue for Carbon and Technical Ceramics for the half-year was £270.4 million (1H 2016: £245.0 million), an increase of 10.4% compared with 2016. Organic constant currency revenue* increased by 3.4% compared with 1H 2016.

Carbon and Technical Ceramics EBITA* for the half-year was £32.7 million (1H 2016: £29.7 million), with an EBITA margin* of 12.1% (1H 2016: 12.1%).

Revenue for Electrical Carbon for the half-year was £81.3 million (1H 2016: £75.6 million), an increase of 7.5% compared with 1H 2016. Organic constant currency revenue* increased by 1.1%, with modest growth across key regions.

Electrical Carbon EBITA* for the half-year was £8.7 million (1H 2016: £10.3 million) with an EBITA margin* of 10.7% (1H 2016: 13.6%), impacted by the divestment of the Rotary Transfer Systems business and adverse product mix in the first half compared to the prior year.

Revenue for Seals and Bearings for the half-year was £55.9 million (1H 2016: £47.6 million) an increase of 17.4% compared with 1H 2016. Organic constant currency revenue* increased by 7.6%. Strong sales into the aerospace, oil and gas and water markets, with increasing demand in China and Europe, have offset the impact of weaker automotive markets in Korea.

Seals and Bearings EBITA* for the half-year was £9.1 million (1H 2016: £6.6 million) with an EBITA margin* of 16.3% (1H 2016: 13.9%), driven by increased revenue and continued operational improvements.

Revenue for Technical Ceramics was £133.2 million (1H 2016: £121.8 million) an increase of 9.4% compared with 1H 2016. Organic constant currency revenue* increased by 3.3%, reflecting growth in the aerospace and semiconductor markets.

Technical Ceramics EBITA* for the half-year was £14.9 million (1H 2016: £12.8 million) with an EBITA margin* of 11.2% (1H 2016: 10.5%), as increases in volumes and improvements in operational execution more than offset the impact of the divestment of the UK Electro-Ceramics business.

Composites and Defence Systems

Revenue for Composites and Defence Systems for the half-year was £11.6 million (1H 2016: £15.9 million), representing a decrease of 27.0% as defence markets remain subdued. Organic constant currency revenue* declined 27.7%.

Composites and Defence Systems EBITA* for the half-year was a loss of £(0.4) million (1H 2016: £1.1 million) with an EBITA margin* of (3.4)% (1H 2016: 6.9%), reflecting the impact of lower activity levels in the defence markets.

Group Financial review

Group revenue was £518.9 million (1H 2016: £475.4 million), an increase of 9.2% compared with 2016. The increase was as a result of the decline in value of sterling against other currencies, with much of the Group's businesses being denominated in non-sterling currencies. On an organic constant currency basis* the Group grew at 0.2% in the first half.

Group headline operating profit* was £61.6 million (1H 2016: £55.1 million). Headline operating profit margin* was 11.9%, compared to 11.6% for 2016.

The Group amortisation charge for the half-year 2017 was £3.6 million (1H 2016: £3.3 million).

Operating profit was £58.0 million (1H 2016: £55.6 million). Operating profit margin was 11.2%, compared to 11.7% for 2016.

The net finance charge was £11.8 million (1H 2016: £9.8 million), comprising the net bank interest and similar charges of £8.4 million (1H 2016: £6.4 million), income from financial instruments of £0.1 million (1H 2016: £0.2 million) and the finance charge under IAS 19 (revised) £3.5 million (1H 2016: £3.6 million), being the interest charge on pension scheme net liabilities.

The Group taxation charge, excluding specific adjusting items, was £13.8 million (1H 2016: £12.7 million). The effective tax rate, excluding specific adjusting items for the half-year was 29.9% (1H 2016: 30.0%).

Headline EPS* was 11.6 pence (1H 2016: 10.5 pence), and basic earnings per share was 27.0 pence (1H 2016: 10.2 pence).

Specific adjusting items

	1H 2017 £m	1H 2016 £m
Specific adjusting items
Net pension settlement credit	-	3.8
Net profit on disposal of business	46.1	-
Total specific adjusting items	46.1	3.8
Income tax (charge) / credit from specific adjusting items	1.3	(1.5)
Total specific adjusting items after income tax (charge) / credit	47.4	2.3

Specific adjusting items were £46.1 million (1H 2016: £3.8 million), and consisted of the following disposals:

· On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton. The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business. This latter site will be closed when delivery of the last time orders from customers have been completed, currently anticipated to be in 2019.

The Group reflected a profit on disposal of £27.2 million associated with this transaction.

· On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.

The Group reflected a profit on disposal of £18.9 million associated with this transaction.

Cash Flow

	1H 2017	1H 2016
	£m	£m
Cash generated from operations	51.0	43.2
Add back cash flows from restructuring costs and other items	0.6	4.3
Cash flow from operations⁽¹⁾	51.6	47.5
Net capital expenditure	(13.9)	(17.7)
Net interest paid	(8.3)	(6.2)
Tax paid	(12.0)	(8.3)
Restructuring costs and other items	(0.6)	(4.2)
Free cash flow before acquisitions, disposals and dividends⁽¹⁾	16.8	11.1
Dividends paid to external plc shareholders	(20.0)	(20.0)
Net cash flows from other investing and financing activities	75.4	(1.4)
Exchange movement	1.7	(15.3)
Movement in net debt⁽¹⁾ in period	73.9	(25.6)
Opening net debt⁽¹⁾	(242.5)	(216.0)
Closing net debt⁽¹⁾	(168.6)	(241.6)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

Cash flow from operations* was £51.6 million (1H 2016: £47.5 million).

Free cash flow before acquisitions, disposals and dividends* was £16.8 million (1H 2016: £11.1 million).

Net debt* at 30 June 2017 was £168.6 million (FY 2016: £242.5 million) representing a net debt to EBITDA ratio* of 1.1 times (FY 2016: 1.6 times).

Defined benefit pension plans

The Group pension deficit has decreased by £12.4 million since the year end to £258.7 million on an IAS 19 basis (FY 2016: £271.1 million), due to the increased contributions paid by the Company, investment gains, primarily in the UK and US offsetting actuarial losses arising from a fall in bond yields:

· The UK schemes deficit decreased by £5.7 million to £174.8 million (FY 2016: £180.5 million). Increased company contributions and investment gains offset actuarial losses from movements in the discount rate.

The discount rate reduced to 2.57% (FY 2016: 2.62%).

· The US schemes deficit decreased by £4.7 million to £44.3 million (FY 2016: £49.0 million). Increased company contributions, exchange rate benefits and investment gains offset actuarial losses from movements in the discount rate. The discount rate reduced to 3.85% (FY 2016: 4.16%).

· The European schemes deficit decreased by £2.3 million to £35.2 million (FY 2016: £37.5 million). Impacts from the Rotary Transfer systems disposal and benefits from movements in the discount rate offset negative exchange rate impacts. The discount rate increased to 1.90% (FY 2016: 1.60%).

· The Rest of World schemes deficit increased by £0.3 million to £4.4 million (FY 2016: £4.1 million).

The discount rate decreased to 2.80% (FY 2016: 2.9 %).

The triennial valuations of the two UK Defined Benefit (DB) Pensions schemes completed in the half year ended 30 June 2017.

The valuations identified a combined actuarial deficit across both schemes of around £132 million, an increase of £50 million on the position reported by the previous actuarial valuations in 2013. The deterioration in the funded position of the schemes was due principally to adverse market conditions, particularly the low prevailing interest rate environment which has significantly increased the value of the Schemes' liabilities.

Agreement has been reached with the Trustees to increase the Company's contributions to address these funding shortfalls. The funding plan agreed with the Trustees will see the Company's annual deficit-related contributions to the schemes increase by £5 million to £12 million per year (with effect from April 2017 and increasing thereafter by 2.75% per year) for the next 8-10 years (depending on the Scheme).

These arrangements will be reviewed again following the next triennial valuations as at 31 March 2019.

Total contributions to the Group's Global DB pension schemes, principally in the UK and the US, are expected to total £25 million over the full year.

Foreign exchange

The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:

	1H 2017		1H 2016
GBP to:	Closing rate	Average rate	Closing rate	Average rate
US dollar	1.30	1.26	1.33	1.43
Euro	1.14	1.16	1.20	1.28

For illustrative purposes, the table below provides details of the impact on first half 2017 revenue and Group EBITA* if the actual reported results, calculated using 2017 average exchange rates for the six months to 30 June 2017 were restated for GBP weakening by 10 cents against USD in isolation and 10 cents against the Euro in isolation:

Increase in first half 2017 revenue/Group EBITA⁽¹⁾ if:	Revenue £m	Group EBITA⁽¹⁾ £m
GBP weakens by 10c against the US dollar in isolation	18.4	2.6
GBP weakens by 10c against the Euro in isolation	10.4	2.0
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

Interim dividend

The Board has resolved to pay an interim dividend of 4.0 pence per Ordinary share. The dividend will be paid on 24 November 2017 to Ordinary shareholders on the register of members at the close of business on 3 November 2017.

Principal risks and uncertainties

The Group has an established risk management methodology which seeks to identify, prioritise and mitigate risks, underpinned by a 'three lines of defence' model comprising of an internal control framework, monitoring and independent assurance processes. The Board considers that risk management and internal control are fundamental to achieving the Group aim of creating long-term sustainable shareholder value.

The current risks, representing those risks that the Board feels could have the most significant effect on achieving the Group's strategy of building a sustainable business for the long term and delivering strong returns to the Group's shareholders, are set out in the 2016 Annual Report, which is available on the Group's website at www.morganadvancedmaterials.com.

The Group has reviewed these risks and concluded that they adequately represent the current principal risks and uncertainties of the Group and will continue to remain relevant for the second half of the financial year.

The following are the Group's principal risks and uncertainties: Technical leadership; Macro-economic and political environment; Environment, health and safety; Product quality, safety and liability; IT risks and cyber risks; Supply chain and business continuity; Contract risk management; Treasury and Tax risks; Pension funding; Changes to or non-compliance with laws and regulations.

The Board reviews the status of all principal risks with a notable potential impact at Group level throughout the year. Additionally, the Audit Committee carried out focused risk reviews of each Division. The reviews include an analysis of principal risks, together with the controls, monitoring and assurance processes established to mitigate those risks to acceptable levels.

Going Concern

As reported on page 34 of the 2016 Annual Report, the Group meets its day-to-day working capital requirements through local banking arrangements and the committed £200 million unsecured five-year multi-currency revolving credit facility, which remains undrawn at the half-year.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to operate within the level of its committed facilities. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of 12 months from the date of this Statement. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements for the six months ended 30 June 2017.

Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

· The condensed consolidated set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

· The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7 of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8 of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Information on the current directors of Morgan Advanced Materials plc responsible for providing this Statement is maintained on the Company's website at www.morganadvancedmaterials.com.

By order of the Board

Pete Raby

Chief Executive Officer

Peter Turner

Chief Financial Officer

Definitions and reconciliations of non-GAAP to GAAP measures

Reference is made to the following non-GAAP measures throughout this document. These measures are shown because the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures.

Headline profit and earnings measures

Group headline operating profit is stated before specific adjusting items and amortisation of intangible assets. Specific adjusting items are excluded on the basis that they distort trading performance. Amortisation is excluded as the charge arises primarily on externally acquired intangible assets since the adoption of IFRS and does not therefore reflect all intangible assets consistently.

Earnings before interest, tax and amortisation (EBITA) is stated before specific adjusting items, amortisation of intangible assets, restructuring costs and other items. Segment EBITA is stated before unallocated corporate costs.

1H 2017	Thermal Ceramics £m	Molten Metal Systems £m	Thermal Products Division £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Carbon and Technical Ceramics Division £m	Composites and Defence Systems £m	Segment total £m	Corporate costs⁽¹⁾ £m	Group £m
Operating profit/(loss)	27.7	3.5	31.2	8.5	9.0	12.6	30.1	(0.4)	60.9	(2.9)	58.0
Add back specific adjusting items included in operating profit	-	-	-	-	-	-	-	-	-	-	-
Add back amortisation of intangible assets	0.9	0.1	1.0	0.2	0.1	2.3	2.6	-	3.6	-	3.6
Group headline operating profit											61.6
Add back restructuring costs and other items	-	-	-	-	-	-	-	-	-	-	-
Group EBITA											61.6
Corporate costs⁽¹⁾										2.9	2.9
Divisional EBITA/global business unit EBITA	28.6	3.6	32.2	8.7	9.1	14.9	32.7	(0.4)	64.5

1.Corporate costs consist of the cost of the central head office.

1H 2016	Thermal Ceramics £m	Molten Metal Systems £m	Thermal Products Division £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Carbon and Technical Ceramics Division £m	Composites and Defence Systems £m	Segment total £m	Corporate costs⁽¹⁾ £m	Group £m
Operating profit/(loss)	24.9	2.8	27.7	9.5	6.5	11.4	27.4	0.4	55.5	0.1	55.6
Add back specific adjusting items included in operating profit	-	-	-	-	-	-	-	-	-	(3.8)	(3.8)
Add back amortisation of intangible assets	0.7	0.1	0.8	0.2	0.1	1.4	1.7	0.8	3.3	-	3.3
Group headline operating profit											55.1
Add back restructuring costs and other items	-	-	-	0.6	-	-	0.6	(0.1)	0.5	1.0	1.5
Group EBITA											56.6
Corporate costs⁽¹⁾	-	-	-	-	-	-	-	-	-	2.7	2.7
Divisional EBITA/global business unit EBITA	25.6	2.9	28.5	10.3	6.6	12.8	29.7	1.1	59.3

1.Corporate costs consist of the cost of the central head office.

Group Organic Growth

Group organic growth is the growth of the business excluding the impacts of acquisitions, divestments and foreign currency impacts. This measure is used as it allows revenue and EBITA to be compared on a like for like basis.

Year-on-year movements in Segment Revenue

	Thermal Ceramics	Molten Metal Systems	Thermal Products Division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics Division	Composites and Defence Systems	Segment Total
	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017
	£m	£m	£m	£m	£m	£m	£m	£m	£m

2016 Revenue	193.9	20.6	214.5	75.6	47.6	121.8	245.0	15.9	475.4

Impact of foreign currency movements	22.6	2.7	25.3	8.9	4.7	12.8	26.4	0.1	51.8
Impacts of acquisitions and disposals	-	-	-	(4.0)	-	(5.4)	(9.4)	-	(9.4)
Impact of underlying business	(3.4)	0.5	(2.9)	0.8	3.6	4.0	8.4	(4.4)	1.1
Underlying %	(1.8)%	2.4%	(1.4)%	1.1%	7.6%	3.3%	3.4%	(27.7%)	0.2%

2017 Revenue	213.1	23.8	236.9	81.3	55.9	133.2	270.4	11.6	518.9

Year-on-year movements in Segment and Group EBITA

	Thermal Ceramics	Molten Metal Systems	Thermal Products Division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics Division	Composites and Defence Systems	Segment Total	Corporate Costs	Group
	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017	1H 2016 versus 1H 2017
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

2016 Segment & Group EBITA	25.6	2.9	28.5	10.3	6.6	12.8	29.7	1.1	59.3	(4.2)	55.1

Impact of foreign currency movements	3.5	0.4	3.9	1.6	0.8	1.6	4.0	-	7.9	-	7.9
Impacts of acquisitions and disposals	-	-	-	(1.0)	-	(1.2)	(2.2)	-	(2.2)	-	(2.2)
Impact of underlying business	(0.5)	0.3	(0.2)	(2.2)	1.7	1.7	1.2	(1.5)	(0.5)	1.3	0.8
Underlying %	(2.0)%	10.3%	(0.7)%	(21.4)%	25.8%	13.3%	4.0%	-	(0.8)%	-	1.5%

2017 Segment & Group EBITA	28.6	3.6	32.2	8.7	9.1	14.9	32.7	(0.4)	64.5	(2.9)	61.6

Group EBITDA

Group EBITDA is defined as operating profit before specific adjusting items, restructuring costs, other items, depreciation and amortisation of intangible assets.

The Group uses this measure as it is a key metric in covenants over debt facilities. A reconciliation of operating profit to Group EBITDA is as follows:

	1H 2017 £m	1H 2016 £m
Operating Profit	58.0	55.6
Add back: specific adjusting items included in operating profit	-	3.8
Add back: restructuring costs and other items	-	1.5
Add back: depreciation	15.7	14.1
Add back: amortisation of intangible assets	3.6	3.3
Group EBITDA	77.3	78.3

Cash flow from operations and free cash flow before acquisitions, disposals and dividends

Cash flow from operations excludes the cash flows associated with restructuring activities and is shown because it illustrates the timing of the outflows relating to restructuring charges that may be incurred over more than one reporting period.

Free cash flow before acquisitions and disposals is defined as cash generated from operations less net capital expenditure, net interest paid and tax paid.

The Group discloses this measure of free cash flow as this provides readers of the financial statements with a measure of the cash flows from the business before corporate level cash flows (acquisitions, disposals and dividends).

A reconciliation of cash generated from operations to cash flow from operations and free cash flow before acquisitions, disposals and dividends is as follows:

	1H 2017 £m	1H 2016 £m
Cash generated from operations	51.0	43.2
Add back: cash flows from restructuring costs and other items	0.6	4.3
Cash flow from operations	51.6	47.5
Net capital expenditure	(13.9)	(17.7)
Net interest paid	(8.3)	(6.2)
Tax paid	(12.0)	(8.3)
Restructuring costs and other items	(0.6)	(4.2)
Free cash flow before acquisitions, disposals and dividends	16.8	11.1

Net debt

Net debt is defined as interest-bearing loans and borrowings and bank overdrafts less cash and cash equivalents. The Group discloses this metric as it is a key metric in covenants over debt facilities.

	1H 2017 £m	1H 2016 £m
Cash and cash equivalents	164.7	57.2
Non-current interest-bearing loans and borrowings	(197.0)	(274.9)
Current interest-bearing loans and borrowings and bank overdrafts	(136.3)	(23.9)
Net debt	(168.6)	(241.6)

Return on invested capital

Return on invested capital (ROIC) is defined as the 12-month Group headline operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 12-month average adjusted net assets (third-party working capital, property, plant and equipment, land and buildings, intangible assets and other balance sheet items).

	1H 2017 £m	1H 2016 £m
Operating Profit	109.6	81.0
Add back: specific adjusting items included in operating profit	5.6	12.1
Add back: amortisation of intangible assets	8.2	6.9
Group headline operating profit (12 month rolling)	123.4	100.0

12-month average adjusted net assets:
Third-party working capital	174.1	165.0
Property, plant and equipment	181.8	160.2
Land and buildings	112.5	97.8
Intangible assets	236.9	233.1
Other assets (net)	15.1	13.5
12-month average adjusted net assets	720.4	669.6

ROIC	17.2%	14.9%

Headline earnings per share

Headline earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of ordinary shares during the period. This measure of earnings is shown because the Directors consider it provides a better indication of headline performance.

Whilst amortisation of intangible assets is a recurring charge it is excluded from these measures on the basis that it primarily arises on externally acquired intangible assets and therefore does not reflect consistently the benefit that all of Morgan's businesses realise from their intangible assets, which may not be recognised separately.

Further information on earnings per share can be found in note 7 to the financial statements.

Constant currency revenue and Group headline operating profit

Constant currency revenue and Group headline operating profit are derived by translating the prior year results at current year average exchange rates. These measures are used as they allow revenue to be compared excluding the impact of foreign exchange rates. Page 8 provides further information on the principal foreign currency exchange rates used in the translation of the Group's results to constant currency at average exchange rates.

CONDENSED CONSOLIDATED INCOME STATEMENT

		Six months to 30 June 2017			Six months to 30 June 2016				Year ended 31 December 2016
		Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹		Total	Results before specific adjusting items	Specific adjusting items¹	Total
	Note	£m	£m	£m	£m	£m		£m	£m	£m	£m

Revenue	3	518.9	-	518.9	475.4	-	475.4		989.2	-	989.2
Operating costs before restructuring costs, other one-off items and amortisation / impairment of intangible assets		(457.3)	-	(457.3)	(418.8)	-	(418.8)		(871.3)	-	(871.3)

Profit from operations before restructuring costs, other one-off items and amortisation / impairment of intangible assets		61.6	-	61.6	56.6	-	56.6		117.9	-	117.9

Retructuring costs and other one-off items:	4
Restructuring costs		-	-	-	(1.5)	-	(1.5)		(1.5)	-	(1.5)
Net pension settlement credit		-	-	-	-	3.8	3.8		-	6.8	6.8
Gain on disposal of properties		-	-	-	-	-	-		0.5	-	0.5

Profit from operations before amortisation / impairment of intangible assets	3	61.6	-	61.6	55.1	3.8	58.9		116.9	6.8	123.7

Amortisation of intangible assets		(3.6)	-	(3.6)	(3.3)	-	(3.3)		(7.9)	-	(7.9)
Impairment of intangible assets	4	-	-	-	-	-	-		-	(8.5)	(8.5)

Operating profit	3	58.0	-	58.0	51.8	3.8	55.6		109.0	(1.7)	107.3

Finance income		0.9	-	0.9	0.7	-	0.7		2.3	-	2.3
Finance expense		(12.7)	-	(12.7)	(10.5)	-	(10.5)		(22.3)	-	(22.3)
Net financing costs	5	(11.8)	-	(11.8)	(9.8)	-	(9.8)		(20.0)	-	(20.0)

Net profit / (loss) on disposal of businesses	4	-	46.1	46.1	-	-	-		-	-	-
Share of profit of associate (net of income tax)		-	-	-	0.4	-	0.4		0.6	-	0.6

Profit before taxation		46.2	46.1	92.3	42.4	3.8	46.2		89.6	(1.7)	87.9

Income tax expense	6	(13.8)	1.3	(12.5)	(12.7)	(1.5)	(14.2)		(26.6)	(2.8)	(29.4)

Profit for the period		32.4	47.4	79.8	29.7	2.3	32.0		63.0	(4.5)	58.5

Profit for the period attributable to:
Owners of the parent		29.5	47.4	76.9	26.7	2.3	29.0		56.8	(4.5)	52.3
Non-controlling interests		2.9		2.9	3.0	-	3.0		6.2	-	6.2

Profit for the period		32.4	47.4	79.8	29.7	2.3	32.0		63.0	(4.5)	58.5

Earning per share from continuing operations	7
Basic				27.0p			10.2p				18.4p
Diluted				27.0p			10.2p				18.3p

Dividends²
Proposed interim dividend - pence				4.0p			4.0p				4.0p
- £m				11.4			11.4				11.4

Approved final dividend - pence											7.0p
- £m											20.0

1. Details of 'Specific adjusting items' are given in note 4 to the financial statements.

2. The proposed interim and approved final dividends are based upon the number of shares outstanding at the balance sheet date.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Translation reserve	Hedging reserve	Retained earnings	Total parent comprehensive income	Non- contoliing interests	Total comprehensive income
	£m	£m	£m	£m	£m	£m

Six months ended 30 June 2016
Profit for the period	-	-	29.0	29.0	3.0	32.0
Items that will not be reclassified subsequently to profit or loss:
Remeasurement loss on defined benefit plans	-	-	(65.0)	(65.0)	-	(65.0)
Tax effect of components of other comprehensive income not reclassified	-	-	5.1	5.1	-	5.1
	-	-	(59.9)	(59.9)	-	(59.9)
Items that may not be reclassified subsequently to profit or loss:
Foreign exchange transation differences	29.3	-	-	29.3	4.7	34.0
Net loss on hedge of net investment in foreign subsidiaries	(14.8)	-	-	(14.8)	-	(14.8)
Cash flow hedges:
Change in fair value	-	(2.2)	-	(2.2)	-	(2.2)
	14.5	(2.2)	-	12.3	4.7	17.0

Total Comprehensive income, net of tax	14.5	(2.2)	(30.9)	(18.6)	7.7	(10.9)

Year ended 31 December 2016
Profit for the period	-	-	52.3	52.3	6.2	58.5
Items that will not be reclassified subsequently to profit or loss:
Remeasurement loss on defined benefit plans	-	-	(68.1)	(68.1)	-	(68.1)
Tax effect of components of other comprehensive income not reclassified	-	-	0.6	0.6	-	0.6
	-	-	(67.5)	(67.5)	-	(67.5)
Items that may not be reclassified subsequently to profit or loss:
Foreign exchange transation differences	37.4	-	-	37.4	5.5	42.9
Net loss on hedge of net investment in foreign subsidiaries	(17.7)	-	-	(17.7)		(17.7)
Cash flow hedges:
Change in fair value	-	(3.7)	-	(3.7)	-	(3.7)
Transferred to profit or loss	-	0.8	-	0.8	-	0.8
	19.7	(2.9)	-	16.8	5.5	22.3

Total Comprehensive income, net of tax	19.7	(2.9)	(15.2)	1.6	11.7	13.3

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Translation reserve	Hedging reserve	Retained earnings	Total parent comprehensive income	Non- contoliing interests	Total comprehensive income
	£m	£m	£m	£m	£m	£m

Six months ended 30 June 2017
Profit for the period	-	-	76.9	76.9	2.9	79.8
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit plans	-	-	5.3	5.3	-	5.3
Tax effect of components of other comprehensive income not reclassified	-	-	(0.3)	(0.3)	-	(0.3)
	-	-	5.0	5.0	-	5.0
Items that may not be reclassified subsequently to profit or loss:
Foreign exchange transation differences	(6.9)	-	-	(6.9)	-	(6.9)
Cash flow hedges:
Change in fair value	-	2.5	-	2.5	-	2.5
Transferred to profit or loss	-	0.1	-	0.1	-	0.1
	(6.9)	2.6	-	(4.3)	-	(4.3)

Total Comprehensive income, net of tax	(6.9)	2.6	81.9	77.6	2.9	80.5

CONDENSED CONSOLIDATED BALANCE SHEET

	Note	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
		£m	£m	£m
Assets
Property, plant and equipment		288.3	283.0	303.7
Intangible assets		219.8	242.9	240.4
Investments		7.3	5.9	6.0
Other receivables		4.6	4.9	4.7
Deferred tax assets		4.7	14.1	6.1
Total non-current assets		524.7	550.8	560.9

Inventories		144.8	147.7	148.2
Derivative financial assets	9	1.0	1.2	2.1
Trade and other receivables		199.3	203.2	205.7
Cash and cash equivalents	8	164.7	57.2	122.4
Total current assets		509.8	409.3	478.4
Total assets		1034.5	960.1	1,039.3

Liabilities
Interest-bearing loans and borrowings		197.0	274.9	204.0
Employee benefits	11	258.7	271.4	271.1
Provisions		6.7	1.7	2.3
Derivative financial liabilities	9	0.1	7.2	1.8
Non-trade payables		1.9	1.5	0.3
Deferred tax liabilities		6.2	5.1	8.3
Total non-current liabilities		470.6	561.8	487.8

Interest-bearing loans and borrowings and bank overdrafts		136.3	23.9	160.9
Trade and other payables		174.0	179.7	192.5
Current tax payable		17.9	19.6	16.6
Provisions		8.4	7.7	5.8
Derivitative financial liabilities	9	3.9	11.0	11.0
Total current liabilities		340.5	241.9	386.8
Total liabilities		811.1	803.7	874.6
Total net assets		223.4	156.4	164.7

Equity
Share capital		71.8	71.8	71.8
Share premium		111.7	111.7	111.7
Reserves		42.5	48.3	46.8
Retained earnings		(46.0)	(118.1)	(109.5)
Total equity attributable to equity holders of parent Company		180.0	113.7	120.8
Non-controlling interests		43.4	42.7	43.9
Total equity		223.4	156.4	164.7

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share Capital	Share premium	Translation reserve	Hedging reserve	Fair value reserve	Capital redemption reserve	Other reserves	Retained earnings ⁽¹⁾	Total parent equity	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Balance at 1 January 2016	71.8	111.7	(16.5)	0.4	(1.0)	35.7	11.4	(63.7)	149.8	36.6	186.4
Profit for the period	-	-	-	-	-	-	-	29.0	29.0	3.0	32.0
Other comprehensive income	-	-	14.5	(2.2)	-	-	-	(59.9)	(47.6)	4.7	(42.9)
Transactions with owners:
Dividends	-	-	-	-	-	-	-	(19.8)	(19.8)	(1.6)	(21.4)
Equity-settled share-based payment transactions	-	-	-	-	-	-	-	1.4	1.4	-	1.4
Adjustment arising from change in non-controlling interest	-	-	-	-	-	-	-	0.9	0.9	-	0.9
Balance at 30 June 2016	71.8	111.7	(2.0)	(1.8)	(1.0)	35.7	11.4	(112.1)	113.7	42.7	156.4

Balance at 1 January 2016	71.8	111.7	(16.5)	0.4	(1.0)	35.7	11.4	(63.7)	149.8	36.6	186.4
Profit for the period	-	-	-	-	-	-	-	52.3	52.3	6.2	58.5
Other comprehensive income	-	-	19.7	(2.9)	-	-	-	(67.5)	(50.7)	5.5	(45.2)
Transactions with owners:
Dividends	-	-	-	-	-	-	-	(31.2)	(31.2)	(4.4)	(35.6)
Equity-settled share-based payment transactions	-	-	-	-	-	-	-	0.8	0.8	-	0.8
Own shares acquired for share incentive schemes	-	-	-	-	-	-	-	(0.2)	(0.2)	-	(0.2)
Balance at 31 December 2016	71.8	111.7	3.2	(2.5)	(1.0)	35.7	11.4	(109.5)	120.8	43.9	164.7

Balance at 1 January 2017	71.8	111.7	3.2	(2.5)	(1.0)	35.7	11.4	(109.5)	120.8	43.9	164.7
Profit for the period	-	-	-	-	-	-		76.9	76.9	2.9	79.8
Other comprehensive income	-	-	(6.9)	2.6	-	-	-	5.0	0.7	(0.9)	(0.2)
Transactions with owners:
Disposal of a Non-Controlling Interest without a change in control	-	-	-	-	-	-	-	0.5	0.5	-	0.5
Dividends	-	-	-	-	-	-	-	(20.0)	(20.0)	(2.5)	(22.5)
Equity-settled share-based payment transactions	-	-	-	-	-	-	-	1.0	1.0	-	1.0
Proceeds from exercise of share options	-	-	-	-	-	-	-	0.1	0.1	-	0.1
Balance at 30 June 2017	71.8	111.7	(3.7)	0.1	(1.0)	35.7	11.4	(46.0)	180.0	43.4	223.4

1. The 2016 Special Reserves have been incorporated into Retained Earnings for the presentation of Changes in Equity.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Note	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
		£m	£m	£m
Operating activities
Profit for the period		79.8	32.0	58.5
Adjustments for:
Depreciation		15.7	14.1	29.5
Amortisation	3	3.6	3.3	7.9
Net financing costs	5	11.8	9.8	20.0
Profit on disposal of business	4	(46.1)	-	-
Share of profit from associate (net of income tax)		-	(0.4)	(0.6)
Profit on sale of property, plant and equipment		0.1	-	(0.4)
Income tax expense	6	12.5	14.2	29.4
Non-cash specific adjusting items included in operating profit	4	-	(4.0)	1.1
Equity-settled share-based payment expenses		0.9	1.4	0.8
Cash generated from operations before changes in working capital and provisions		78.3	70.4	146.2

(Increase)/decrease in trade and other receivables		(1.9)	(8.2)	(6.1)
(Increase)/decrease in inventories		(5.3)	(3.6)	1.4
(Decrease)/increase in trade and other payables		(11.2)	(4.5)	(0.1)
Decrease in provisions		(2.1)	(3.1)	(5.2)
Payments to defined benefit pension plans		(6.8)	(7.8)	(14.5)
Cash generated from operations		51.0	43.2	121.7

Interest paid		(9.2)	(6.9)	(15.3)
Income tax paid		(12.0)	(8.3)	(22.2)
Net cash from operating activities		29.8	28.0	84.2

Investing activities
Purchase of property, plant and equipment		(15.1)	(17.7)	(39.5)
Proceeds from sale of property, plant and equipment		1.2	-	1.1
Purchase of investments		(0.5)	(0.4)	(1.0)
Interest received		0.9	0.7	2.2
Disposal of subsidiaries, net of cash disposed		78.3	-	-
Loan repayment by associate		-	0.2	2.1
Forward contracts used in net investment hedging		-	(0.7)	(12.3)
Net cash from investing activities		64.8	(17.9)	(47.4)

Financing activities
Proceeds from exercise of share options		0.1	0.9	(0.2)
Increase/(decrease) in borrowings	8	(23.9)	12.1	63.4
Payment of finance lease liabilities	8	(0.2)	(0.2)	(0.3)
Dividends paid - to external plc shareholders		(20.0)	(20.0)	(31.4)
Proceeds from unclaimed dividends		-	0.2	0.2
Dividends paid to non-controlling interests		(2.5)	(1.6)	(4.4)
Net cash from financing activities		(46.5)	(8.6)	27.3

Net increase/(decrease) in cash and cash equivalents		48.1	1.5	64.1
Cash and cash equivalents at start of period		122.4	49.8	49.8
Effect of exchange rate fluctuations on cash held		(5.8)	5.9	8.5
Cash and cash equivalents at period end⁽¹⁾	8	164.7	57.2	122.4

1. A reconciliation of cash and cash equivalents to net borrowings is shown in note 8.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

Morgan Advanced Materials plc (the 'Company') is a company domiciled in the United Kingdom. The condensed consolidated financial statements of the Company for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates. The half-year condensed consolidated financial statements have been drawn up to 30 June 2017.

The condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements for the year ended 31 December 2016. The condensed consolidated financial statements do not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards. These condensed consolidated half-year financial statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report 2016.

Preparing the condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing the condensed consolidated financial statements, significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, these condensed consolidated financial statements have been prepared by applying the accounting policies that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2016.

The following accounting standards that are applicable to the Group have been issued by the IASB, but are not yet effective at 30 June 2017. The Group is currently analysing the impact these standards would have on its consolidated results and financial position.

IFRS 15 - Revenue form contracts with customers (see further details below)

IFRS 16 - Leases

IFRS 15 Revenue from Contracts with Customers is effective for periods beginning on or after 1 January 2018 and introduces a new revenue recognition model that requires the transaction price receivable from customers to be allocated between the Group's performance obligations under contracts on a relative stand-alone selling price basis.

The Group is systematically reviewing its customer contracts and its systems data capture capability across the six global business units to assess the impact of the new Standard and ensure compliance. Based on the Group's review, it is anticipated that there are no significant impacts to the Group as a result of the new Standard. Both Thermal Ceramics and Composites and Defence customers receive a combination of goods and services, therefore we anticipate that the timing of revenue recognition on these could change under IFRS 15.

There were no other new accounting standards or amendments to standards that were required to be adopted in the period and the Group did not adopt any of the new accounting standards that could have been adopted early.

The comparative figures for the financial year ended 31 December 2016 are not the Company's statutory consolidated accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The consolidated financial statements of the Group as at and for the year ended 31 December 2016 are available on request from the Company's registered office at Quadrant, 55-57 High Street, Windsor, Berkshire SL4 1LP or at www.morganadvancedmaterials.com.

The condensed consolidated financial statements for the six months ended 30 June 2017 and the comparative period have neither been audited nor reviewed. The condensed consolidated financial statements for the six months ended 30 June 2017 were approved by the Board on 27 July 2017.

2. DISPOSALS

Half year ended 30 June 2017

Electro - Ceramics:

On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton.

The transaction was structured as a sale of the business, assets and goodwill for a consideration of £47 million on a cash-free, debt-free basis, paid in cash on completion and subject to customary working capital adjustments.

In the year ended 31 December 2016, UK Electro-Ceramics generated an operating profit of £6.2 million on revenues of £22.7 million. Gross assets at 31 December 2016 were £6.7 million.

The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business.

The disposal and closure of the electro-ceramics business reduced the Group's assets and liabilities as follows:

	31 March 2017
	£m
Trading net assets of disposal group	7.4
Goodwill of disposal group	5.8

Transaction costs associated with the disposal	6.5

Total consideration	46.9

Gain on disposal	27.2

The disposal group was included in the Technical Ceramics operating segment.

Global Rotary Transfer Systems Business:

On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.

The sale valued the business at €40.0 million on a cash-free, debt-free basis, with consideration payed in cash on completion, subject to customary closing working capital adjustments.

In the year to 31 December 2016, the Rotary business generated £3.2 million of operating profit on £15.5 million of sales. Gross assets at 31 December 2016 were £5.9 million.

The disposal and closure of the rotary transfer systems business reduced the Group's assets and liabilities as follows:

	31 March 2017
	£m
Trading net assets of disposal group	3.5
Goodwill of disposal group	7.1

Transaction costs associated with the disposal	3.1

Total consideration	32.6

Gain on disposal	18.9

The disposal group was included in the Electrical Carbon operating segment.

Half year ended 30 June 2016

During the half year ended 30 June 2016 the Group disposed of its remaining 28.77% shareholding in Assam Carbon Products Limited for nil consideration. This shareholding was held at nil value and, as a result, there is no profit or loss on disposal.

There were no other acquisitions or disposals made during the half year ended 30 June 2016.

3. SEGMENT INFORMATION

The Group reports as two Divisions and six global business units, which have been identified as the Group's 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.

The information presented below represents the operating segments of the Group.

	Thermal Ceramics	Molten Metal Systems	Thermal Products Division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics Division	Composites and Defence Systems	Segment totals	Corporate costs	Group
	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017	Six months to 30 June 2017
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	213.1	23.8	236.9	81.3	55.9	133.2	270.4	11.6	518.9	-	518.9

Divisional EBITA²	28.6	3.6	32.2	8.7	9.1	14.9	32.7	(0.4)	64.5	-	64.5
Corporate costs	-	-	-	-	-	-	-	-	-	(2.9)	(2.9)
Group EBITA²											61.6
Restructuring costs and other items	-	-	-	-	-	-	-	-	-	-	-
Group headline operating profit²											61.6
Amortisation of intangible assets	(0.9)	(0.1)	(1.0)	(0.2)	(0.1)	(2.3)	(2.6)	-	(3.6)	-	(3.6)
Operating profit before specific adjusting items											58.0
Specific adjusting items included in operating profit ¹	-	-	-	-	-	-	-	-	-	-	-
Operating profit/(loss)	27.7	3.5	31.2	8.5	9.0	12.6	30.1	(0.4)	60.9	(2.9)	58.0
Finance income											0.9
Finance expense											(12.7)
Profit on disposal of business											46.1
Share of profit of associate (net of income tax)											-
Profit before taxation											92.3


Segment assets	399.4	42.0	441.4	143.9	85.2	179.5	408.6	10.5	860.5	174.0	1034.5

Segment liabilities	81.6	6.8	88.4	26.3	15.0	38.0	79.3	6.1	173.8	637.3	811.1

Segment capital expenditure	4.2	0.7	4.9	3.5	1.9	4.3	9.7	0.5	15.1	-	15.1

Segment depreciation	6.1	1.0	7.1	2.6	2.3	3.4	8.3	0.3	15.7	-	15.7

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

2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

	Thermal Ceramics	Molten Metal Systems	Thermal Products Division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics Division	Composites and Defence Systems	Segment totals	Corporate costs	Group
	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 2016	Six months to 30 June 201 67	Six months to 30 June 2016	Six months to 30 June 2016
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	193.9	20.6	214.5	75.6	47.6	121.8	245.0	15.9	475.4	-	475.4

Divisional EBITA²	25.6	2.9	28.5	10.3	6.6	12.8	29.7	1.1	59.3	-	59.3
Corporate costs	-	-	-	-	-	-	-	-	-	(2.7)	(2.7)
Group EBITA²											56.6
Restructuring costs and other items	-	-	-	(0.6)	-	-	(0.6)	0.1	(0.5)	(1.0)	(1.5)
Group headline operating profit²											55.1
Amortisation of intangible assets	(0.7)	(0.1)	(0.8)	(0.2)	(0.1)	(1.4)	(1.7)	(0.8)	(3.3)	-	(3.3)
Operating profit before specific adjusting items											51.8
Specific adjusting items included in operating profit ¹	-	-	-	-	-	-	-	-	-	3.8	3.8
Operating profit/(loss)	24.9	2.8	27.7	9.5	6.5	11.4	27.4	0.4	55.5	0.1	55.6
Finance income											0.7
Finance expense											(10.5)
Loss on disposal of business											-
Share of profit of associate (net of income tax)											0.4
Profit before taxation											46.2


Segment assets	404.4	40.9	445.3	149.1	82.9	185.9	417.9	19.4	882.6	77.5	960.1

Segment liabilities	82.2	6.4	88.6	28.9	16.7	38.4	84.0	6.6	179.2	624.5	803.7

Segment capital expenditure	9.5	0.6	10.1	2.8	1.8	2.8	7.4	0.2	17.7	-	17.7

Segment depreciation	5.0	0.8	5.8	2.3	2.1	3.7	8.1	0.2	14.1	-	14.1

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

2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

	Thermal Ceramics	Molten Metal Systems	Thermal Products Division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics Division	Composites and Defence Systems	Segment totals	Corporate costs	Group
	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016	Year ended 31 December 2016
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	413.3	43.5	456.8	156.2	97.7	248.1	502.0	30.4	989.2	-	989.2

Divisional EBITA²	55.0	6.7	61.7	19.7	14.2	26.6	60.5	1.1	123.3	-	123.3
Corporate costs	-	-	-	-	-	-	-	-	-	(5.4)	(5.4)
Group EBITA²											117.9
Restructuring costs and other items	0.1	-	0.1	(0.1)	0.1	-	-	0.1	0.2	(1.2)	(1.0)
Group headline operating profit²											116.9
Amortisation of intangible assets	(1.5)	(0.1)	(1.6)	(0.4)	(0.3)	(4.2)	(4.9)	(1.4)	(7.9)	-	(7.9)
Operating profit before specific adjusting items											109.0
Specific adjusting items included in operating profit ¹	-	-	-	-	-	-	-	(8.5)	(8.5)	6.8	(1.7)
Operating profit/(loss)	53.6	6.6	60.2	19.2	14.0	22.4	55.6	(8.7)	107.1	0.2	107.3
Finance income											2.3
Finance expense											(22.3)
Loss on disposal of business											-
Share of profit of associate (net of income tax)											0.6
Profit before taxation											87.9


Segment assets	417.8	42.2	460.0	154.9	86.1	188.1	429.1	15.8	904.9	134.4	1,039.3

Segment liabilities	88.5	7.5	96.0	30.0	18.2	37.0	85.2	7.9	189.1	685.5	874.6

Segment capital expenditure	17.7	2.1	19.8	8.3	4.4	6.5	19.2	0.5	39.5	-	39.5

Segment depreciation	10.8	1.7	12.5	4.9	4.3	7.3	16.5	0.5	29.5	-	29.5

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

2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.

4. SPECIFIC ADJUSTING ITEMS

In the condensed 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.

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	£m	£m	£m
Specific adjusting items:
Net pension settlement credit	-	3.8	6.8
Impairment of intangible assets	-	-	(8.5)
Net profit on disposal of business	46.1	-	-
Total specific adjusting items before income tax credit	46.1	3.8	(1.7)
Income tax (charge) / credit from specific adjusting items	1.3	(1.5)	(2.8)
Total specific adjusting items after income tax credit	47.4	2.3	(4.5)

Half year ended 30 June 2017

Net profit on disposal of business:

On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton. The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business.

The Group reflected a profit on disposal of £27.2 million associated with this transaction.

On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.

The Group reflected a profit on disposal of £18.9 million associated with this transaction.

Half year ended 30 June 2016

Net pension settlement credit:

During the half year ended 30 June 2016 the Group has completed the final termination and payment of all earned benefits for one of its North American Defined Benefit Plans.

As a result of this termination the Group recognised a net pension settlement credit of £3.8 million. An income tax credit of £1.5 million was recognised in respect of this item.

5. NET FINANCE INCOME AND EXPENSE

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	£m	£m	£m

Amounts derived from financial instruments	0.1	0.2	0.3
Interest income on bank deposits measured at amortised cost	0.8	0.5	2.0
Finance income	0.9	0.7	2.3

Interest expense on financial liabilities measured at amortised cost	(9.2)	(6.9)	(15.2)
Net interest on IAS 19 obligations	(3.5)	(3.6)	(7.1)
Finance expense	(12.7)	(10.5)	(22.3)
Net financing costs recognised in profit or loss	(11.8)	(9.8)	(20.0)

6. TAXATION - INCOME TAX EXPENSE

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	£m	£m	£m
Tax on profit	12.5	14.2	29.4

The Group's consolidated effective tax rate for the six months ended 30 June 2017 is based on the Directors' best estimate of the effective tax rate for the year excluding specific adjusting items.

7. EARNINGS PER SHARE

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	£m	£m	£m

Profit for the period attributable to equity shareholders	76.9	29.0	52.3
Specific adjusting items	(46.1)	(3.8)	1.7
Amortisation of intangible assets	3.6	3.3	7.9
Tax effect of the above	(1.3)	1.5	2.8
Non-controlling interests' share of the above adjustments	-	-	-
Adjusted profit for the period	33.1	30.0	64.7


	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	Pence	Pence	Pence

Earnings per ordinary share	27.0p	10.2p	18.4p
Specific adjusting items	(16.2)p	(1.3)p	0.6p
Amortisation of intangible assets	1.3p	1.1p	2.7p
Tax effect of the above	(0.5)p	0.5p	1.0p
Non-controlling interests' share of the above adjustments	-	-	-
Headline earnings per share⁽¹⁾	11.6p	10.5p	22.7p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted

measures can be found on pages 10 to 14.

8. CASH AND CASH EQUIVALENTS RECONCILED TO NET DEBT

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
	£m	£m	£m

Bank balances	57.1	44.4	61.4
Cash deposits	107.6	12.8	61.0
Cash and cash equivalents	164.7	57.2	122.4

Reconciliation of cash and cash equivalents to net debt⁽¹⁾
	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 30 December 2016
	£m	£m	£m

Opening borrowings	(364.9)	(265.8)	(265.8)
(Increase)/decrease in borrowings	23.9	(12.1)	(63.4)
Payment of finance lease liabilities	0.2	0.2	0.3
Effect of movements in foreign exchange on borrowings	7.5	(21.1)	(36.0)
Closing borrowings	(333.3)	(298.8)	(364.9)
Cash and cash equivalents	164.7	57.2	122.4
Closing net debt⁽¹⁾	(168.6)	(241.6)	(242.5)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted

measures can be found on pages 10 to 14.

9. FINANCIAL RISK MANAGEMENT

Fair Values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

	Six months to 30 June 2017		Six months to 30 June 2016		Year ended 31 December 2016
	Carrying Amount	Fair value	Carrying Amount	Fair value	Carrying Amount	Fair value
	£m	£m	£m	£m	£m	£m

Financial assets and liabilities at amortised cost
4.32% Euro Senior Notes 2017	-	-	(16.9)	(17.4)	(17.3)	(17.5)
6.12% US Dollar Senior Notes 2017	(134.5)	(136.2)	(131.6)	(138.2)	(142.1)	(146.3)
6.26% US Dollar Senior Notes 2019	(57.6)	(61.2)	(56.4)	(62.7)	(60.8)	(65.4)
1.18% Euro Senior Notes 2023	(22.0)	(21.4)	-	-	(21.3)	(21.0)
3.17% US Dollar Senior Notes 2023	(11.6)	(11.2)	-	-	(12.2)	(11.7)
1.55% Euro Senior Notes 2026	(22.0)	(21.1)	-	-	(21.4)	(20.8)
3.37% US Dollar Senior Notes 2026	(74.8)	(70.5)	-	-	(79.0)	(73.1)
1.74% Euro Senior Notes 2028	(8.8)	(8.3)	-	-	(8.6)	(8.3)
Bank and other loans	(1.3)	(1.3)	(92.9)	(84.7)	(1.3)	(1.3)
Obligations under finance leases	(0.7)	(0.7)	(1.0)	(1.0)	(0.9)	(0.9)
Trade and other payables	(92.7)	(92.7)	(96.4)	(96.4)	(100.5)	(100.5)
Loans and receivables	179.7	179.7	182.6	182.6	184.5	184.5
Cash and cash equivalents	164.7	164.7	57.2	57.2	122.4	122.4
	(81.6)	(80.2)	(155.4)	(160.6)	(158.5)	(159.9)

Available-for-sale financial instruments
Available-for-sale financial assets	0.4	0.4	0.6	0.6	0.5	0.5

Derivatives and other items at fair value
Forward exchange contracts used for hedging	(0.7)	(0.7)	(11.0)	(11.0)	(2.0)	(2.0)
Cross currency swaps	(2.3)	(2.3)	(6.0)	(6.0)	(7.2)	(7.2)
	(84.2)	(82.8)	(171.8)	(177.0)	(167.2)	(168.6)

The 4.32% Senior notes were repaid on 30 June 2017.

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the preceding table.

Equity securities

Fair value is based on quoted market prices at the balance sheet date.

Derivatives

Forward exchange contracts are marked to market either using listed market prices or by discounting the contractual forward price and deducting the current spot rate.

Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows. The interest rates used to determine the fair value of loans and borrowings are 1.3% - 2.8% (30 June 2016: 1.3% - 2.8%; 31 December 2016: 1.1% - 4.2%).

Finance lease liabilities

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.

Trade and other receivables/payables

For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value.

Cash and cash equivalents, trade and other payables and loans and receivables

The Group has disclosed the fair value of cash and cash equivalents, current loans and receivables and current payables at their carrying amount, given their notional amount is deemed to be their fair value.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices)

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	Six months to 30 June 2017			Six months to 30 June 2016
	Level 1	Level 2	Total	Level 1	Level 2	Total
	£m	£m	£m	£m	£m	£m

Available-for-sale financial assets	0.4	-	0.4	0.6	-	0.6
Derivative financial assets	-	1.0	1.0	-	1.2	1.2
	0.4	1.0	1.4	0.6	1.2	1.8

Derivative financial liabilities	-	(4.0)	(4.0)	-	(18.2)	(18.2)

				Year ended 31 December 2016
				Level 1	Level 2	Total
				£m	£m	£m

Available-for-sale financial assets				0.5	-	0.5
Derivative financial assets				-	2.1	2.1
				0.5	2.1	2.6

Derivative financial liabilities				-	11.3	11.3

The table below analyses financial instruments disclosed at fair value, by valuation method:

	Six months to 30 June 2017			Six months to 30 June 2016
	Level 1	Level 2	Total	Level 1	Level 2	Total
	£m	£m	£m	£m	£m	£m

4.32% Euro Senior Notes 2017	-	-	-	-	(17.4)	(17.4)
6.12% US Dollar Senior Notes 2017	-	(136.2)	(136.2)	-	(138.2)	(138.2)
6.26% US Dollar Senior Notes 2019	-	(61.2)	(61.2)	-	(62.7)	(62.7)
1.18% Euro Senior Notes 2023	-	(21.4)	(21.4)	-	-	-
3.17% US Dollar Senior Notes 2023	-	(11.2)	(11.2)	-	-	-
1.55% Euro Senior Notes 2026	-	(21.1)	(21.1)	-	-	-
3.37% US Dollar Senior Notes 2026	-	(70.5)	(70.5)	-	-	-
1.74% Euro Senior Notes 2028	-	(8.3)	(8.3)	-	-	-
Obligations under finance leases	-	(0.7)	(0.7)	-	(1.0)	(1.0)
	-	(330.6)	(330.6)	-	(219.3)	(219.3)

				Year ended 31 December 2016
				Level 1	Level 2	Total
				£m	£m	£m
4.32% Euro Senior Notes 2017				-	(17.5)	(17.5)
6.12% US Dollar Senior Notes 2017				-	(146.3)	(146.3)
6.26% US Dollar Senior Notes 2019				-	(65.4)	(65.4)
1.18% Euro Senior Notes 2023				-	(21.0)	(21.0)
3.17% US Dollar Senior Notes 2023				-	(11.7)	(11.7)
1.55% Euro Senior Notes 2026				-	(20.8)	(20.8)
3.37% US Dollar Senior Notes 2026				-	(73.1)	(73.1)
1.74% Euro Senior Notes 2028				-	(8.3)	(8.3)
Obligations under finance leases				-	(0.9)	(0.9)
				-	(365.0)	(365.0)

There have been no transfers between Level 1 and Level 2 between 1 January 2016 and 30 June 2017, and there were no Level 3 financial instruments between Level 1 and Level 2 between 1 January 2016 and 30 June 2017.

10. RELATED PARTIES

The Company has related party relationships with its subsidiaries and its associates and with its Directors and executive officers.

Transactions with key management personnel

Details of transactions with key management personnel are described in note 26 of the Group's 2016 Annual Report.

	Six months to 30 June 2017	Six months to 30 June 2016	Year ended 31 December 2016
Transactions with associate	£m	£m	£m

Purchases from associate	0.6	1.0	1.4
Loan owed by associate	-	1.8	-
Trade payables due to associate	0.3	0.4	0.2

At 30 June 2017 the Group does not have any trade receivables owed by associates which have been fully provided for (30 June 2016 and 31 December 2016: Nil).

Except as disclosed in the table above:

There were no related party transactions during the period that have materially affected the financial position or the performance of the Group during the period; and

There have been no changes in the nature of related party transactions as described in note 26 of the Group's 2016 Annual Report, (page 151) which could have a material effect on the financial position or performance of the Group during the period.

11. EMPLOYEE BENEFITS

	30 June 2017 UK	30 June 2017 USA	30 June 2017 Europe	30 June 2017 Rest of World	30 June 2017 Total
	£m	£m	£m	£m	£m
Pension plans and employee benefits

Present value of unfunded defined benefit obligations	-	(8.7)	(34.9)	(2.1)	(45.7)
Present value of funded defined benefit obligations	(591.1)	(142.1)	(0.8)	(10.0)	(744.0)
Fair value of plan assets	416.3	106.5	0.5	7.7	531.0
Net obligations	(174.8)	(44.3)	(35.2)	(4.4)	(258.7)

Movements in present value of defined benefit obligation

At 1 January 2017	(588.7)	(155.9)	(37.9)	(12.3)	(794.8)
Current service cost	(1.2)	-	(0.5)	(0.8)	(2.5)
Interest cost	(7.5)	(3.0)	(0.3)	(0.1)	(10.9)
Remeasurement losses	(4.0)	(4.9)	1.8	0.2	(6.9)
Benefits paid	10.6	4.7	0.6	0.5	16.4
Contributions by members	(0.3)	-	-	-	(0.3)
Acquisitions / Disposals	-	-	1.6	-	1.6
Exchange adjustments	-	8.3	(1.0)	0.4	7.7
At 30 June 2017	(591.1)	(150.8)	(35.7)	(12.1)	(789.7)

Movements in fair value of plan assets

At 1 January 2017	408.2	106.9	0.4	8.2	523.7
Interest on plan assets	5.2	2.2	-	0.1	7.5
Remeasurement gains	8.2	4.4	-	(0.3)	12.3
Contributions by employer	5.5	3.6	0.6	0.6	10.3
Contributions by members	0.3	-	-	-	0.3
Administrative expenses	(0.5)	-	-	-	(0.5)
Benefits paid	(10.6)	(4.7)	(0.6)	(0.5)	(16.4)
Exchange adjustments	-	(5.9)	0.1	(0.4)	(6.2)
At 30 June 2017	416.3	106.5	0.5	7.7	531.0

Principal actuarial assumptions at 30 June 2017 were:
Discount rate	2.57	3.85	1.90	2.80
Inflation (UK: RPI/CPI)	3.13 / 2.03	n/a	1.70	n/a

	30 June 2016 UK	30 June 2016 USA	30 June 2016 Europe	30 June 2016 Rest of World	30 June 2016 Total
	£m	£m	£m	£m	£m
Pension plans and employee benefits

Present value of unfunded defined benefit obligations	-	(9.4)	(36.6)	(2.3)	(48.3)
Present value of funded defined benefit obligations	(566.4)	(169.6)	(1.8)	(15.7)	(753.5)
Fair value of plan assets	399.7	116.7	0.4	13.6	530.4
Net obligations	(166.7)	(62.3)	(38.0)	(4.4)	(271.4)

Principal actuarial assumptions at 30 June 2016 were:	%	%	%	%
Discount rate	2.80	3.80	1.30	2.10
Inflation (UK: RPI/CPI)	2.70 / 1.50	n/a	1.70	n/a

	31 December 2016 UK	31 December 2016 USA	31 December 2016 Europe	31 December 2016 Rest of World	31 December 2016 Total
	£m	£m	£m	£m	£m
Pension plans and employee benefits

Present value of unfunded defined benefit obligations	-	(9.4)	(35.9)	(2.5)	(47.8)
Present value of funded defined benefit obligations	(588.7)	(146.5)	(2.0)	(9.8)	(747.0)
Fair value of plan assets	408.2	106.9	0.4	8.2	523.7
Net obligations	(180.5)	(49.0)	(37.5)	(4.1)	(271.1)


Principal actuarial assumptions at 31 December 2016 were:	%	%	%	%
Discount rate	2.62	4.16	1.60	2.90
Inflation (UK: RPI/CPI)	3.20 / 2.10	n/a	1.70	n/a

Glossary

Cash flow from operations*	Cash generated from operations before cash flows from restructuring costs and other items. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Constant currency	Constant currency revenue and Group headline operating profit are derived by translating the prior year results at current year average exchange rates. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Corporate costs	Corporate costs consist of the costs of the central head office.
Free cash flow before acquisitions and dividends*	Cash generated from operations less net capital expenditure, net interest paid and tax paid. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Group earnings before interest, tax and amortisation (EBITA) *	EBITA is defined as Group operating profit before specific adjusting items and amortisation of intangible assets. Segment - Divisional and global business unit - EBITA is stated before unallocated corporate costs. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Group earnings before interest, tax, depreciation and amortisation (EBITDA)*	EBITDA is defined as operating profit before specific adjusting items, amortisation of intangible assets, restructuring costs and other items, and depreciation. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Group headline operating profit*	Operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Headline earnings per share (EPS)*	Headline earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of ordinary shares during the period. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Net debt*	Interest-bearings loans and borrowings and bank overdrafts less cash and cash equivalents. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Group Organic	The Group results excluding acquisition and disposal impacts at constant currency.
Restructuring costs and other items	Include the costs of restructuring activity and gain on disposal of property. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Return on invested capital (ROIC)*	Group headline operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 12-month average adjusted net assets (excludes long term employee benefits, deferred tax assets and liabilities, current tax payable, provisions, cash and cash equivalents and interest-bearing loans and borrowings. See Definitions and Reconciliations of Non-GAAP Measures to GAAP Measures on pages 10 to 14.
Revenue growth	Revenue growth is defined as current year revenue translated using current year average exchange rates divided by prior year revenue translated using prior year average exchange rates.
Specific adjusting items	See note 6 to the financial statements for further details

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