Half-year results

RNS Number : 1696U

Morgan Advanced Materials PLC

29 July 2022

Half-year results for the period ended 30 June 2022

£ million unless otherwise stated	1H 2022	1H 2021	As reported change	Organic constant- currency¹ change
Adjusted results Revenue	530.2	461.2	15.0%	11.2%
Group adjusted operating profit¹	72.5	59.1	22.7%	16.6%
Group adjusted operating profit margin¹	13.7%	12.8%
Return on invested capital¹	22.2%	15.4%
Adjusted EPS¹	15.9p	12.7p	25.2%
Free cash flow before acquisitions, disposals and dividends¹	(1.0)	36.5

Statutory results
Revenue	530.2	461.2	15.0%	11.2%
Operating profit	70.2	60.2	16.6%
Profit before tax	65.7	56.2	16.9%
Continuing EPS²	15.1p	13.2p
Interim dividend per share	5.3p	3.2p
Cash generated from continuing operations	45.2	63.1

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found

on pages 16 to 20. Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text and by a footnote where they appear in tables.

2. EPS is presented on a 'continuing' and a combined 'continuing and discontinued' basis for statutory reporting. Further details are provided in note 7 to the condensed consolidated financial statements.

Group highlights

• Organic constant-currency* revenue growth of 11.2% with 15% from our faster growing markets (excluding one-off solar projects) and 11% from our core markets.

• Adjusted operating profit margin* of 13.7%, up by 90 bps, reflecting the drop through on organic growth and the benefits from our restructuring programme.

• Pricing and continuous improvement efficiencies continue to more than offset inflation.

• Strong sales and profit growth drives a material improvement in return on invested capital* to 22.2%, up 680 bps on 1H 2021.

• Adjusted earnings per share* of 15.9p, up 25.2% on 1H 2021.

• Positive cash generated from continuing operations at £45.2m, free cash flow* of £(1.0) million and net debt/EBITDA (excluding lease liabilities) of 0.5 times.

• Absolute CO₂e emissions (from scope 1 and 2) reduced by 11% compared with 1H 2021.

• Full year outlook around top end of current analysts' forecasts.

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

"We have delivered robust revenue growth in the first half of the year reflecting growing markets and the benefits of our strategy. This was a really good performance from our team in a challenging environment. Profitability has improved from the drop through on the higher volumes and the benefits from our restructuring programme.

Our order momentum remains good. We have seen higher levels of inflation across the business, and we continue to more than offset that through pricing and continuous improvement activity. As previously stated on 5 May 2022, we expect a moderation of growth rates in the second half, reflecting challenges in the wider economy. While mindful of market conditions, we now expect adjusted operating profit for full year 2022 to be around the top end of current analysts' forecasts¹."

1. Company-compiled summary of current analysts' forecasts for full year 2022 is a range of £132.9 million to £139.2 million.

COVID-19

The safety of our people remains our priority. Parts of our business, particularly in Asia, continue to be impacted by COVID-19. We have maintained our COVID-19 controls across the business in line with the requirements of local jurisdictions. I would like to thank our people for their hard work in the first half of the year and the focus they have shown in keeping each other safe whilst supporting our customers.

Our purpose

Our purpose is to use advanced materials to make the world more sustainable and to improve the quality of life. This purpose guides our actions: it underpins our work to reduce our environmental impact, informs how we treat our people, and ensures we fulfil our responsibility for good corporate governance.

We deliver on our purpose through the products that we make and the way that we make them.

· We improve the quality of life by supporting medical diagnostics with our power tubes in medical scanners. Our feedthroughs are at the core of cochlear implants and our seals are used in blood pumps. These products transform people's lives.

· Our products help keep people safe. We are proud to design fire protection in everything from cars to buildings, and ships to oil platforms.

· We design and manufacture our products to help customers save energy.

· Our carbon brushes are integral to wind turbines and power generators and enable electrified rail transport. Our ceramic rollers are used to make thin-film solar panels, our insulation is used in solar towers and steam turbines, and our ceramic cores are used to make more efficient industrial gas turbines. These are all products which promote a more sustainable and environmentally secure future for our planet.

Our strategy

Our strategy builds on our strengths and focuses the Group on scalable businesses in attractive markets, and on the development of our three core capabilities in customer focus, application engineering and materials science. To continue the development of our core capabilities we have three execution priorities:

Big positive difference - making sure we govern our business the right way, looking after the environment, looking after our people and operating to high ethical standards. This priority supports our focus on living and breathing our commitments on inclusion, treating people fairly, reducing waste, managing our water consumption, and reducing emissions.

Delight the customer - following on from our foundational work on sales effectiveness, we are working to shape our product and service offerings further based on customer needs, with the overall objective of making our business more customer-centric. We are gathering customer feedback during the year through a range of channels and using that to understand our customer segments in more detail. This will enable us to align our product, service and support offerings more closely to customer needs.

Innovate to grow - many of our customers have an increasing need to reduce their energy consumption and CO₂e emissions, these customers need our help. This priority supports our focus on working with the customer to innovate in traditional heavy industries whilst also contributing to greener technologies for the future.

We want to accelerate our growth, by winning in our core markets and increasing our exposure to four faster growing market segments: clean energy, clean transportation, semiconductors and healthcare.

We have been focusing our product development and business development efforts in these markets over the last several years to develop new and differentiated products that solve complex problems for our customers.

· Clean energy - solutions for energy storage, brushes and slip rings for onshore wind applications and ceramic and carbon products used in solar panel manufacture.

· Clean transportation - our rail collector business for metro and main rail applications, and in water and vacuum pump components for electric vehicle applications.

· Semiconductors - we supply carbon and ceramic consumables for key semiconductor process steps including crystal growth, deposition, lithography and etch.

· Healthcare - enabling medical imaging and supply of low temperature insulation for medicine and vaccine transport and storage.

Organic constant-currency* revenue growth in these segments was 15% (excluding one-off solar projects*), and they represented 21% of our revenue overall.

Our environment, social and governance (ESG) objectives:

In March 2021, we set stretching targets to improve our environmental, social and governance performance and become a more sustainable business. We take these commitments seriously and have plans in place to deliver against them in the coming years, making a step change in our performance.

Whilst some progress has been achieved, we recognise that there is more work to do, particularly around water sustainability, safety and employee engagement.

Reduce our environmental impact

· Our aspiration is to be a CO₂e net zero business by 2050. Our 2030 target is to reduce scope 1 and scope 2 CO₂e emissions by 50% (from a 2015 baseline). We will start to measure scope 3 emissions from 2023 onwards. In the first half we have reduced our CO₂e emissions by 11% compared with 1H 2021 through a combination of switching to renewable or carbon free electricity and a range of energy reduction projects across the Group.

· Our aspiration is to use water sustainably across our business. Our 2030 target is to reduce our overall water usage by 30% and reduce water usage in high stress areas by 30% (from a 2015 baseline). In the first half, overall water usage increased by 10% whilst high stress water usage increased by 6% compared with 1H 2021. Ongoing capital projects to improve both overall water usage and usage in high stress areas include water harvesting and recycling. We are reviewing our manufacturing processes to reduce the amount of water they consume and we are implementing submetering capabilities to identify leaks and efficiencies promptly.

Improve our safety performance

· Our aspiration is to create an environment and culture with zero harm to our employees. Our 2030 target is a lost time accident rate below 0.1 (lost time accidents per 100,000 hours worked). Our lost time accident rate in the first half was 0.29, an increase compared with 0.22 as at 31 December 2021. Last year we launched our thinkSAFE programme, a major refresh to our approach to safety. Formal training is being deployed to all employees focusing on our safety culture; more than 80% of our employees have participated in this training so far, and it will be completed during the second half. The changes are being sustained by our leaders in their daily engagement with our teams, and via follow-up training on specific safety topics throughout the year.

Improve the diversity & inclusion of our business

· Our aspiration is that our employee demographics reflect the communities that we operate in. Our 2030 target is for 40% female representation across our leadership population. At 30 June 2022, we have 31% female representative in our leadership population compared with 29% as at 31 December 2021.

· Our aspiration is to be a welcoming and inclusive environment where our employees can grow and thrive. Our 2030 target is to attain a top quartile employee engagement score. We conducted an employee engagement survey in the fourth quarter of 2021 which directed our focus to the areas most important to our people. During the first half, we have been regularly communicating our improvement plans to our employees as they are being developed. We have sought feedback through employee resource groups and meetings across all levels of the organisation to ensure we meet their expectations.

Capital Markets Event

We plan to hold a capital markets event in the second half of 2022. Further information will be published shortly.

Enquiries


Pete Raby	Morgan Advanced Materials	01753 837 000
Richard Armitage	Morgan Advanced Materials
Nina Coad	Brunswick	0207 404 5959

Results presentation today

There will be an analyst and investor presentation at 10:00 (UK time) today via web-conference.

A live audio webcast and slide presentation of this event will be available on www.morganadvancedmaterials.com

We recommend that 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 they are presented as 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.

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. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

All periods presented in these condensed consolidated financial statements are for continuing operations, with separate disclosure of discontinued operations where appropriate.

Operating review

	Revenue		Operating profit¹		Margin %¹
	1H 2022	1H 2021	1H 2022	1H 2021	1H 2022	1H 2021
	£m	£m	£m	£m	%	%
Thermal Ceramics	200.5	174.7	22.7	21.2	11.3%	12.1%
Molten Metal Systems	28.1	22.8	4.2	2.5	14.9%	11.0%
Electrical Carbon	91.3	82.3	18.9	15.6	20.7%	19.0%
Seals and Bearings	71.8	64.3	10.9	10.7	15.2%	16.6%
Technical Ceramics	138.5	117.1	18.8	12.1	13.6%	10.3%
Segment total²	530.2	461.2	75.5	62.1	14.2%	13.5%
Corporate costs			(3.0)	(3.0)
Group adjusted operating profit ¹			72.5	59.1	13.7%	12.8%
Amortisation of intangible assets			(2.3)	(2.6)
Operating profit before specific adjusting items			70.2	56.5	13.2%	12.3%
Specific adjusting items included in operating profit³			-	3.7
Operating profit			70.2	60.2	13.2%	13.1%
Net financing costs			(4.5)	(4.4)
Share of profit of associate (net of income tax)			-	0.4
Profit before taxation			65.7	56.2

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. The Group reported the results of its five global business units as two divisions until 31 December 2021. From 1 January 2022 onwards, divisional subtotals have been removed from our segmental reporting; we continue to report the five separate global business units.

3.Details of specific adjusting items can be found in note 3 to the condensed consolidated financial statements.

Thermal Ceramics

Revenue for the Thermal Ceramics global business unit for the six months ended 30 June 2022 was £200.5 million, representing an increase of 14.8% compared with £174.7 million in 1H 2021. On an organic constant-currency* basis, year-on-year revenue increased by 11.1%, with strong growth from industrial and energy market segments.

Operating profit for the six months ended 30 June 2022 was £21.8 million (1H 2021: £18.9 million) with an operating profit margin of 10.9% (1H 2021: 10.8%), with margin decline due to price and continuous operational improvement only recovering inflation. Adjusted operating profit* was £22.7 million (1H 2021: £21.2 million) with an adjusted operating profit margin* of 11.3% (1H 2021: 12.1%).

Molten Metal Systems

Revenue for the Molten Metal Systems global business unit for the six months ended 30 June 2022 was £28.1 million, representing an increase of 23.2% compared with £22.8 million in 1H 2021. On an organic constant-currency* basis, year-on-year revenue increased by 20.6% with growth from strong demand in the aluminium segment.

Operating profit for the six months ended 30 June 2022 was £4.1 million (1H 2021: £2.4 million) with an operating profit margin of 14.6% (1H 2021: 10.5%), with margin improvement from volume leverage and efficiency measures. Adjusted operating profit * was £4.2 million (1H 2021: £2.5 million) with an adjusted operating profit margin* of 14.9% (1H 2021: 11.0%).

Electrical Carbon

Revenue for the Electrical Carbon global business unit for the six months ended 30 June 2022 was £91.3 million, representing an increase of 10.9% compared with £82.3 million in 1H 2021. On an organic constant-currency* basis, year-on-year revenue increased by 8.4%, with strong growth in the semiconductor and wind market segments.

Operating profit for the six months ended 30 June 2022 was £18.6 million (1H 2021: £14.8 million) with an operating profit margin of 20.4% (1H 2021: 18.0%), with margin expansion from volume leverage and strong operational efficiencies. Adjusted operating profit * was £18.9 million (1H 2021: £15.6 million) with an adjusted operating profit margin* of 20.7% (1H 2021: 19.0%).

Seals and Bearings

Revenue for the Seals and Bearings global business unit for the six months ended 30 June 2022 was £71.8 million, representing an increase of 11.7% compared with £64.3 million in 1H 2021, with the ceramic armour sales declining to £12 million in the first half (1H 2021: £13 million). On an organic constant-currency* basis year-on-year revenue increased by 7.8%, driven by growth in the petrochemical and aerospace market segments.

Operating profit for the six months ended 30 June 2022 was £10.5 million (1H 2021: £10.5 million) with an operating profit margin of 14.6% (1H 2021: 16.3%), with the lower margin driven by adverse ceramic armour mix. Adjusted operating profit* was £10.9 million (1H 2021: £10.7 million) with an adjusted operating profit margin* of 15.2% (1H 2021: 16.6%).

Technical Ceramics

Revenue for the Technical Ceramics global business unit for the six months ended 30 June 2022 was £138.5 million, an increase of 18.3% compared with £117.1 million in 1H 2021. On an organic constant-currency* basis, year-on-year revenue increased by 13.3%, with growth in industrial, semiconductor, healthcare and aerospace market segments.

Operating profit for the six months ended 30 June 2022 was £18.2 million (1H 2021: £11.4 million) with an operating profit margin of 13.1% (1H 2021: 9.7%), with margin improvements from volume leverage and benefits from the restructuring programme, which concluded in 2021. Adjusted operating profit* was £18.8 million (1H 2021: £12.1 million) with an adjusted operating profit margin* of 13.6% (1H 2021: 10.3%).

Group financial review

Group revenue for the six months ended 30 June 2022 was £530.2 million (1H 2021: £461.2 million), an increase of 15.0% on a reported basis compared with 1H 2021. On an organic constant-currency* basis revenue increased by 11.2%.

Group adjusted operating profit* for the six m onths ended 30 June 2022 was £72.5 million (1H 2021: £59.1 million). Adjusted operating profit margin* was 13.7%, compared with 12.8% for 1H 2021.

There were no specific adjusting items for the six months ended 30 June 2022. Specific adjusting items before income tax for the comparable period last year were a net gain of £3.7 million, comprising: restructuring costs of £(0.6) million; impairment of non-financial assets of £(0.8) million and a net profit on disposal of businesses of £5.1 million. Note 3 to the condensed consolidated financial statements on page 32, provides additional information on the Group's specific adjusting items.

Operating profit for the six months ended 30 June 2022 was £70.2 million (1H 2021: £60.2 million) and profit before taxation was £65.7 million (1H 2021: £56.2 million).

The Group amortisation charge for the six months ended 30 June 2022 was £2.3 million (1H 2021: £2.6 million).

The net finance charge for the six months ended 30 June 2022 was £4.5 million (1H 2021: £4.4 million) comprising net bank interest and similar charges of £2.7 million (1H 2021: £2.5 million), net interest on IAS 19 pension obligations of £0.7 million (1H 2021: £0.8 million), and interest expense on lease liabilities of £1.1 million (1H 2021: £1.1 million).

Looking forward to the full year, we anticipate that the net finance charge be around £10 million, comprising net bank interest and similar charges of £7 million; net interest on IAS 19 pension obligations of £1 million; and interest expense on lease liabilities of £2 million.

The Group taxation charge for the six months ended 30 June 2022, excluding specific adjusting items, was £17.7 million (1H 2021: £14.4 million), tax on specific adjusting items was £nil (1H 2021: credit of £0.3 million) . The effective tax rate, excluding specific adjusting items, was 27.0% (1H 2021: 27.4%). Note 5 to the condensed consolidated financial statements provides additional information on the Group's tax charge. Looking forward to the full year, we anticipate an effective tax rate in the range of 26-28%.

Adjusted earnings per share* for the six months ended 30 June 2022 was 15.9 pence (1H 2021: 12.7 pence) and basic profit per share from continuing operations was 15.1 pence (1H 2021: 13.2 pence). Details of these calculations can be found in note 7 to the condensed consolidated financial statements.

The Group's balance sheet and liquidity remains robust. Net debt* for the six months ended 30 June 2022 was £128.5 million, with net debt* excluding lease liabilities of £76.3 million, with no material debt maturities until 2024. The Group has net cash and cash equivalents of £120.5 million, with £10 million of its £200 million revolving credit facility drawn owing to short term intra group funding needs.

Our key financial covenants are measured on a pre-IFRS 16 Leases basis. As at 30 June 2022, net debt* to EBITDA*, excluding the impact of IFRS 16 Leases , was 0.5 times compared to a covenant not to exceed 3.0 times, and our interest cover excluding the impact of IFRS 16 Leases was 30.0 times, compared to a covenant to exceed 4.0 times.

Acquisitions, divestments and business exits

2 0 22

There were no acquisitions, divestments or business exits in the six months to 30 June 2022.

2021

On 15 January 2021, the Group sold the inventory and fixed assets of the Technical Ceramics business based in Latrobe, US. The cash consideration was £0.6 million and a loss on disposal of £0.1 million, recognised in specific adjusting items.

On 1 March 2021, the Group purchased the trade and assets of the magnesium oxide milling business from Delamin Limited, previously a supplier to the Seals and Bearings business, for a cash consideration of £1.9 million. The assets largely comprised largely intangible assets such as know-how, customer lists and contracts.

On 28 April 2021, the Group completed the disposal of its non-controlling interest (35% share) in Jemmtec. Jemmtec had been accounted for as an associate to the Group using the equity method. Morgan's share of the proceeds as at 30 June 2021 was an initial consideration of £12.2 million with a £5.2 million gain on disposal, recognised within specific adjusting items. In the second half of 2021, the Group received £0.2 million for working capital adjustments and a further £1.8 million of contingent consideration.

Specific adjusting items

In the consolidated income statement, the Group presents specific adjusting items separately. In the judgement of the Directors, as a result of 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 an alternative understanding of the financial information and an indication of the underlying performance of the Group.

There were no specific adjusting items in the six months to 30 June 2022.

Details of the specific adjusting items arising during the comparative period are given in note 3 to the condensed consolidated financial statements.

	1H 2022 £m	1H 2021 £m
Specific adjusting items
Impairment of non-financial assets	-	(0.8)
Restructuring costs	-	(0.6)
Net profit on disposal of businesses	-	5.1
Total specific adjusting items before income tax	-	3.7
Income tax credit from specific adjusting items	-	0.3
Total specific adjusting items after income tax	-	4.0

Specific adjusting items before income tax for the six months ended 30 June 2021 were a net gain of £3.7 million and related to the Group's restructuring and efficiency programme, as follows:

Impairment of non-financial assets

A £0.8 million charge was recognised, primarily relating to assets associated with closed manufacturing lines within Thermal Ceramics.

Restructuring costs

The Group recognised a charge of £0.6 million for redundancies and other costs associated with the restructuring and efficiency programme. Whilst these costs were anticipated in 2020, they did not meet the recognition criteria set out by IAS 37 Provisions, Contingent Liabilities and Contingent Assets until 2021.

Net profit on disposal of businesses

In the period ended 30 June 2021, the Group disposed of its 35% shareholding in Jemmtec Limited and the business assets associated with the Latrobe business. These disposals generated a gain of £5.2 million and a loss of £0.1 million respectively. See the above 'acquisitions, divestments and business exits' section.

Emerging stronger: Group restructuring and efficiency programme

The Group has delivered its restructuring and efficiency programme, which has simplified Morgan's structure and driven efficiency in operations. The programme was completed last year. The current year's expected benefits of £23 million remain unchanged.

The phasing of the benefits and costs is as follows:

FY 2020

£m

FY 2021

£m

FY 2022

£m

Total

£m

Adjusted operating profit¹ benefits (cumulative)

n/a

Cash cost to specific adjusting items

(24)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

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

	1H 2022		1H 2021
GBP to:	Closing rate	Average rate	Closing rate	Average rate
US dollar	1.22	1.30	1.38	1.39
Euro	1.16	1.19	1.17	1.15

For illustrative purposes, the table below provides details of the impact on 1H 2022 revenue and adjusted operating profit* if the actual reported results, calculated using 1H 2022 average exchange rates were restated for GBP weakening by 10 cents against US dollar in isolation and 10 cents against the Euro in isolation:

Increase in 2022 revenue/adjusted operating profit ¹ if:

Revenue

£m

Adjusted operating profit ¹

£m

GBP weakens by 10c against the US dollar in isolation

18.6

2.5

GBP weakens by 10c against the Euro in isolation

10.0

1.7

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

Cash flow

	1H 2022 £m	1H 2021 £m
Cash generated from continuing operations	45.2	63.1
Net capital expenditure	(22.5)	(8.6)
Net interest on cash and borrowings	(2.7)	(2.5)
Tax paid	(15.3)	(9.9)
Lease payments and interest	(5.7)	(5.6)
Free cash flow before acquisitions, disposals and dividends¹	(1.0)	36.5
Dividends paid to external plc shareholders	(16.5)	(10.0)
Net cash flows from other investing and financing activities	(2.6)	7.5
Exchange movement and other non-cash movements	(9.5)	1.8
Opening net debt¹ excluding lease liabilities	(46.7)	(101.0)
Closing net debt¹ excluding lease liabilities	(76.3)	(65.2)
Closing lease liabilities	(52.2)	(51.4)
Closing net debt¹	(128.5)	(116.6)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

Cash generated from continuing operations for the six months ended 30 June 2022 was £45.2 million (1H 2021: £63.1 million). Working capital increased by £38.7m as a result of an increase in inventory of £18.8m and other working capital of £19.9m. Whilst this increase was principally driven by higher sales, an element of the inventory increase reflects additional safety stocks held in response to global supply chain risks, some of which may reverse over time.

The increase in capital expenditure reflects a return to a more normalised level of investment following the pandemic. The increased tax charge reflects the growth in profitability with the Group's effective tax rate unchanged from 26-28%.

Free cash flow before acquisitions, disposals and dividends* was £(1.0) million (1H 2021: £36.5 million).

Net debt* for the six months ended 30 June 2022 was £128.5 million (1H 2021: £116.6 million), representing a net debt* to EBITDA* ratio of 0.7 times (1H 2021: 0.9 times).

Net debt* for the six months ended 30 June 2022 excluding lease liabilities was £76.3 million (1H 2021: £65.2 million), representing a net debt* to EBITDA* ratio excluding the impact of IFRS 16 Leases of 0.5 times (1H 2021: 0.5 times).

Further information on the Group's net debt* is provided in note 10 to the condensed consolidated financial statements.

Defined benefit pension plans

The Group pension deficit for the six months ended 30 June 2022 has decreased by £29.2 million since 31 December 2021 to £73.5 million on an IAS 19 (revised) basis, with UK, US and Eurozone discount rates increasing as a result of an increase in corporate bond yields, whilst the Rest of World discount rates have remained stable:

· The UK schemes deficit decreased by £21.3 million to £30.4 million (FY 2021: £51.7 million; 1H 2021: £76.9 million), (discount rate 1H 2022: 3.86%; FY 2021: 1.92%; 1H 2021: 1.87%).

· The US schemes deficit increased by £0.5 million to £8.2 million (FY 2021: £7.7 million; 1H 2021: £6.1 million), (discount rate 1H 2022: 4.52%; FY 2021: 2.71%; 1H 2021: 2.65%).

· The European schemes deficit decreased by £9.2 million to £29.8 million (FY 2021 £39.0 million; 1H 2021: £40.8 million), (discount rate 1H 2022: 3.00%; FY 2021: 0.90%; 1H 2021: 0.80%).

· The Rest of World schemes deficit increased by £0.8 million to £5.1 million (FY 2021: £4.3 million; 1H 2021: £4.4 million), (discount rate 1H 2022: 2.90%; FY 2021: 2.90%; 1H 2021: 2.40%).

Note 12 to the condensed consolidated financial statements provides additional information on the Group's pension plans.

The full actuarial valuation process for the UK Schemes as at 31 March 2022 is currently in progress and is expected to be completed in the Autumn. The most recent full valuations in 2019 reported combined assessed deficits of £120.3 million. The Group has been making past service deficit recovery payments of £16.5 million a year since January 2020, increasing by 2.75% per annum from April 2021 until 2025, with further payments to Morgan Pension Scheme for 2026 and 2027.

Interim dividend

The Board has resolved to pay an interim dividend of 5.3 pence per Ordinary share. The interim dividend will be paid on 18 November 2022 to Ordinary shareholders on the register of members at the close of trading on 28 October 2022. The ex-dividend date will be 27 October 2022. This compares to an interim dividend paid in the fourth quarter of 2021 of 3.2 pence per Ordinary share.

The Board has committed to grow the Ordinary dividend as the economic environment and the Group's earnings improve, targeting a dividend cover of around 3 times adjusted EPS* on average over the medium term.

This level of cover ensures sufficient resources are available to continue to invest to support the Group's long-term prospects, as well as meet the needs of other stakeholders of the Group, including deficit contributions to the Group's defined benefit pension schemes.

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, internal 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 principal risks, representing those risks that the Board feels could have the most significant impact 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 2021 Annual Report and Accounts, which are available on the Group's website at www.morganadvancedmaterials.com

The following are the Group's principal risks and uncertainties:

· Technical leadership
The Group's strategic success depends on maintaining and developing its technical leadership in materials science over its competitors. Any inability to recruit, retain and develop the right people would negatively impact the Group's ability to achieve its strategic goals.

· Operational execution/organisational change
To improve the efficiency of the Group's operations and organisation, various changes have been made from individual sites to the global business unit set-up. Failure to manage these changes adequately could result in interruption to operations or customer service, or a failure to maximise the Group's opportunities.

· Portfolio management
Failure to manage the Group's portfolio of businesses across a wide range of product and technology families proactively and in line with this technology profile could lead to the value of the Group's businesses being eroded over time or to a failure to exploit opportunities to acquire businesses.

· Macro-economic and political environment
The Group operates in a range of markets and geographies around the world and could be affected by political, economic, social or regulatory developments or instability, for example, inflationary pressure on raw materials, energy and labour, or an economic slowdown driven by current global changes.

· Environment, health and safety
The Group operates a number of manufacturing facilities around the world. A failure in the Group's EHS procedures could lead to environmental damage or to injury or death of employees or third parties, with a consequential impact on operations and increased risk of regulatory or legal action being taken against the Group.

· Product quality, safety and liability
Some products are used in potentially high-risk applications such as aerospace, automotive, electric vehicle, medical and power industries. Products used in applications for which they were not intended or inadequate quality control/over-commitment on customer specifications could result in products not meeting customer requirements, which could in turn lead to significant liabilities and reputational damage.

· IT & cyber security
Across the industry, the impact of cyber-attacks has been growing. The general rise in remote working and an accelerated shift to cloud platforms continues. If the Group were to lose critical information (such as IP or regulatory data) or if critical systems availability is affected through cyber-attacks, the business would be impacted or could suffer reputational damage.

· Supply chain and business continuity
The Group has a number of potential single-point exposure risks. These include:

Single-point supplier: a significant interruption of internal or external key supply could impact business continuity.
Single-point customer: the unmitigated loss of a major customer could have an impact on Group profit. Single-point site: key sites exposed to a strike, a natural catastrophe or serious incident, such as fire, could impact business continuity.

· Treasury
The Group's global reach means that it is exposed to uncertainties in the financial markets, the fiscal jurisdictions where it operates, and the banking sector. These heighten the Group's funding, foreign exchange, tax, interest rate, credit and liquidity risks as well as the risk that a bank failure could impact the Group's cash.

· Pension funding
The Group sponsors several defined benefit pension arrangements, whose liabilities are subject to fluctuating interest rates, investment values and inflation. Increased longevity of members and a tougher regulatory funding regime can result in increased funding burdens on the Group in the future.

· Tax
The Group operates in many jurisdictions around the world and could be affected by changes in tax laws and regulations within the complex international tax environment.

· Contract management
As a global advanced materials business supplying components into critical applications, the Group may be exposed to liabilities arising from the use of its products.

· Compliance
A failure to comply with any applicable laws/regulations could result in civil or criminal liabilities and/or individual or corporate fines and could also result in debarment from government-related contracts or rejection by financial market counterparties and reputational damage.

Since the beginning of 2022 there have been favourable movements in Compliance risk and IT & cyber security risk as a consequence of investments in training, monitoring and other measures.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the 2021 Annual Report and Accounts on pages 2 to 57. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described earlier in this financial review. Additionally note 11 to the condensed consolidated financial statements for the six months ended 30 June 2022 provide details of the Group's policies and processes for managing financial risk; details of its financial instruments and hedging activities; and details of its exposures to credit risk and liquidity risk.

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, which matures in September 2024. As at 30 June 2022 the Group had significant headroom on its covenants and available liquidity with the Group's £200 million multi-currency revolving credit facility being £10 million drawn. Total committed borrowing facilities were £386.7million, none of which are due to mature in the following 12 months. The amount drawn under these facilities was £196.7 million, which together with net cash and cash equivalents of £120.5 million, gave a total headroom of £310.5 million.

The Group has carefully modelled its cash flow outlook, taking account of reasonably possible changes in trading performance, exchange rates and plausible downside scenarios. This review indicated that there was sufficient headroom and liquidity for the business to continue for the 18-month period based on the facilities available. The Group was also expected to be in compliance with the required covenants discussed above.

The Board has also reviewed the Group's reverse stress testing performed to demonstrate how much headroom is available on covenant levels in respect of changes in net debt, EBITDA, and underlying revenue. Based on this assessment, a combined reduction in EBITDA of 70% and an increase in net debt of 120% would still allow the Group to operate within its financial covenants. The Directors do not consider either of these scenarios to be plausible given the diversity of the Group's end-markets and its broad manufacturing base.

The Board and Executive Committee have regular reporting and review processes in place in order to closely monitor the ongoing operational and financial performance of the Group. As part of the ongoing risk management process, principal and emerging risks are identified and reviewed on a regular basis. This process includes the ongoing review of the impact of the prevailing macroeconomic environment on the Group and its stakeholders. In addition, the Directors have assessed the risk of climate change and do not consider that it will impact the Group's ability to operate as a going concern for the period under consideration.

The Board fully recognises the challenges that lie ahead but, after making enquiries, and in the absence of any material uncertainties, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of 18 months from the date of signing 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 2022.

Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

· The condensed consolidated financial statements have been prepared in accordance with UK-adopted IAS 34 Interim Financial Reporting;

· The interim management report for the six-month period ended 30 June 2022 includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the year); and

· The interim management report for the six-month period ended 30 June 2022 includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Information about 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

Richard Armitage

Chief Financial Officer

29 July 2022

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. As defined in the basis of preparation on page 6, these measures are calculated on a continuing basis.

Adjusted operating profit

Adjusted 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.

1H 2022	Thermal Ceramics £m	Molten Metal Systems £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Segment total¹ £m	Corporate costs² £m	Group £m
Operating profit	21.8	4.1	18.6	10.5	18.2	73.2	(3.0)	70.2
Add back: specific adjusting items included in operating profit	-	-	-	-	-	-	-	-
Add back: amortisation of intangible assets	0.9	0.1	0.3	0.4	0.6	2.3	-	2.3
Group and segmental adjusted operating profit/(loss)	22.7	4.2	18.9	10.9	18.8	75.5	(3.0)	72.5

1. The Group reported the results of its five global business units as two divisions until 31 December 2021. From 1 January 2022 onwards, divisional subtotals have been removed from our segmental reporting; we continue to report the five separate global business units.

2.Corporate costs consist of central head office costs.

1H 2021	Thermal Ceramics £m	Molten Metal Systems £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Segment total¹ £m	Corporate costs² £m	Group £m
Operating profit	18.9	2.4	14.8	10.5	11.4	58.0	2.2	60.2
Add back: specific adjusting items included in operating profit	1.4	(0.3)	0.4	-	-	1.5	(5.2)	(3.7)
Add back: amortisation of intangible assets	0.9	0.4	0.4	0.2	0.7	2.6	-	2.6
Group and segmental adjusted operating profit/(loss)	21.2	2.5	15.6	10.7	12.1	62.1	(3.0)	59.1

2.Corporate costs consist of central head office costs.

Organic growth

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 adjusted operating profit to be compared on a like-for-like basis.

Commentary on the underlying business performance is included as part of the operating review on pages 6 to 13.

Year-on-year movements in segment revenue

	Thermal Ceramics	Molten Metal Systems	Electrical Carbon	Seals and Bearings	Technical Ceramics	Segment total¹
	£m	£m	£m	£m	£m	£m

1H 2021	174.7	22.8	82.3	64.3	117.1	461.2

Impact of foreign currency movements	5.8	0.5	2.0	2.1	5.2	15.6
Impacts of acquisitions, disposals and business exits	-	-	-	0.2	(0.1)	0.1
Organic constant-currency change	20.0	4.8	7.0	5.2	16.3	53.3
Organic constant-currency change %	11.1%	20.6%	8.3%	7.8%	13.3%	11.2%

1H 2022	200.5	28.1	91.3	71.8	138.5	530.2

Year-on-year movements in segment and Group adjusted operating profit

	Thermal Ceramics	Molten Metal Systems	Electrical Carbon	Seals and Bearings	Technical Ceramics	Segment total¹	Corporate costs²	Group
	£m	£m	£m	£m	£m	£m	£m	£m

1H 2021	21.2	2.5	15.6	10.7	12.1	62.1	(3.0)	59.1

Impact of foreign currency movements	1.2	0.1	0.2	0.6	0.7	2.8	-	2.8
Impact of acquisitions, disposals and business exits	-	-	-	0.2	0.1	0.3	-	0.3
Organic constant-currency change	0.3	1.6	3.1	(0.6)	5.9	10.3	-	10.3
Organic constant-currency change %	1.3%	61.5%	19.6%	(5.2)%	45.7%	15.8%	-	16.6%

1H 2022	22.7	4.2	18.9	10.9	18.8	75.5	(3.0)	72.5

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

Group EBITDA

Group EBITDA is defined as operating profit before specific adjusting items, depreciation and amortisation of intangible assets. The Group uses this measure as it is a key metric in covenants over debt facilities, these covenants use EBITDA on a pre-IFRS 16 Leases basis. A reconciliation of operating profit to Group EBITDA is as follows:

	1H 2022 £m	1H 2021 £m
Operating profit	70.2	60.2
Add back: specific adjusting items included in operating profit	-	(3.7)
Add back: depreciation - property, plant and equipment	14.4	14.6
Add back: depreciation - right-of-use assets	3.9	3.8
Add back: amortisation of intangible assets	2.3	2.6
Group EBITDA	90.8	77.5
Group EBITDA excluding IFRS 16 Leases impact	85.1	71.9

Free cash flow before acquisitions, disposals and dividends

Free cash flow before acquisitions, disposals and dividends is defined as cash generated from continuing operations less net capital expenditure, net interest (interest paid on borrowings, overdrafts and lease liabilities, net of interest received), tax paid and lease payments.

The Group discloses this measure of free cash flow as this provides readers of the condensed consolidated 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 continuing operations to free cash flow before acquisitions, disposals and dividends is as follows:

	1H 2022 £m	1H 2021 £m
Cash generated from continuing operations	45.2	63.1
Net capital expenditure	(22.5)	(8.6)
Net interest on cash and borrowings	(2.7)	(2.5)
Tax paid	(15.3)	(9.9)
Lease payments and interest	(5.7)	(5.6)
Free cash flow before acquisitions, disposals and dividends	(1.0)	36.5

Net cash and cash equivalents

Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts. The Group also discloses this measure as it provides an indication of the net short-term liquidity available to the Group.

	1H 2022 £m	1H 2021 £m
Cash and cash equivalents	121.6	107.6
Bank overdrafts	(1.1)	(0.1)
Net cash and cash equivalents	120.5	107.5

Net debt

Net debt is defined as borrowings, bank overdrafts and lease liabilities, less cash and cash equivalents. The Group also discloses this metric excluding lease liabilities as this is the measure used in the covenants over the Group's debt facilities.

	1H 2022 £m	1H 2021 £m
Cash and cash equivalents	121.6	107.6
Non-current borrowings	(187.1)	(172.7)
Non-current lease liabilities	(42.2)	(41.1)
Current borrowings and bank overdrafts	(10.8)	(0.1)
Current lease liabilities	(10.0)	(10.3)
Closing net debt	(128.5)	(116.6)
Closing net debt excluding IFRS 16 Leases liabilities	(76.3)	(65.2)

Return on invested capital

Return on invested capital (ROIC) is defined as the 12-month Group adjusted 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, plant and equipment, land and buildings, right-of-use assets, intangible assets and other balance sheet items). This measure excludes long-term employee benefits, deferred tax assets and liabilities, current tax payable, provisions, cash and cash equivalents, borrowings and lease liabilities.

	1H 2022 £m	1H 2021 £m
Operating profit before specific adjusting items	132.2	93.0
Add back: amortisation of intangible assets	5.7	5.0
Group adjusted operating profit	137.9	98.0

12-month average adjusted net assets:
Third-party working capital	152.1	144.7
Plant and equipment	154.0	159.2
Land and buildings	98.0	104.8
Right-of-use assets	31.9	35.5
Intangible assets	184.8	186.8
Other assets (net)	1.4	6.2
12-month average adjusted net assets	622.2	637.2

ROIC	22.2%	15.4%
ROIC excluding IFRS 16 Leases impact	22.8%	15.7%

Adjusted earnings per share

Adjusted 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 an indication of adjusted performance which is less impacted by adjusting items and therefore reflects the underlying performance trends in the business.

A reconciliation from IFRS profit to the profit used to calculate adjusted earnings per share is included in note 7 to the condensed consolidated financial statements.

Constant-currency revenue and adjusted operating profit

Constant-currency revenue and adjusted 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 10 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 Financial Statements

for the six months ended 30 June 2022

Condensed consolidated income statement

		Six months ended 30 June 2022			Six months ended 30 June 2021			Year ended 31 December 2021
		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	2	530.2	-	530.2	461.2	-	461.2	950.5	-	950.5
Operating costs before amortisation of intangible assets		(457.7)	-	(457.7)	(402.1)	3.7	(398.4)	(826.0)	(5.4)	(831.4)

Profit/(loss) from operations before amortisation of intangible assets	2	72.5	-	72.5	59.1	3.7	62.8	124.5	(5.4)	119.1

Amortisation of intangible assets		(2.3)	-	(2.3)	(2.6)	-	(2.6)	(6.0)	-	(6.0)

Operating profit/(loss)	2	70.2	-	70.2	56.5	3.7	60.2	118.5	(5.4)	113.1

Finance income		0.4	-	0.4	0.4	-	0.4	0.8	-	0.8
Finance expense		(4.9)	-	(4.9)	(4.8)	-	(4.8)	(10.0)	-	(10.0)
Net financing costs	4	(4.5)	-	(4.5)	(4.4)	-	(4.4)	(9.2)	-	(9.2)

Share of profit of associate (net of income tax)		-	-	-	0.4	-	0.4	0.4	-	0.4

Profit/(loss) before taxation		65.7	-	65.7	52.5	3.7	56.2	109.7	(5.4)	104.3

Income tax (charge)/credit	5	(17.7)	-	(17.7)	(14.4)	0.3	(14.1)	(29.7)	1.5	(28.2)

Profit/(loss) from continuing operations		48.0	-	48.0	38.1	4.0	42.1	80.0	(3.9)	76.1
Profit from discontinued operations	6	-	-	-	-	-	-	-	5.7	5.7
Profit for the period		48.0	-	48.0	38.1	4.0	42.1	80.0	1.8	81.8

Profit for the period attributable to:
Shareholders of the Company		42.9	-	42.9	33.6	4.0	37.6	71.5	2.3	73.8
Non-controlling interests		5.1	-	5.1	4.5	-	4.5	8.5	(0.5)	8.0

Profit for the period		48.0	-	48.0	38.1	4.0	42.1	80.0	1.8	81.8

Earnings per share	7
Continuing and discontinued operations
Basic earnings per share				15.1p			13.2p			25.9p
Diluted earnings per share				15.0p			13.1p			25.7p

Continuing operations
Basic earnings per share				15.1p			13.2p			23.9p
Diluted earnings per share				15.0p			13.1p			23.7p

Dividends ²
Proposed interim dividend - pence				5.30p			3.20p			3.20p
- £m				15.1			9.1			9.1

Final dividend - pence										5.90p
- £m										16.8

1. Details of specific adjusting items are given in note 3 to the condensed consolidated 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

	At 30 June 2022	At 30 June 2021	At 31 December 2021
	£m	£m	£m

Profit for the period	48.0	42.1	81.8

Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit plans	23.3	38.6	55.5
Tax effect of components of other comprehensive income not reclassified	(3.1)	(0.8)	(0.6)
	20.2	37.8	54.9
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	21.6	(5.4)	1.0
Tax effect of components of other comprehensive income that may be reclassified	-	-	(0.8)
Cash flow hedges:
Change in fair value	(0.9)	0.1	(0.1)
Transferred to profit or loss	-	(0.4)	(0.4)
	20.7	(5.7)	(0.3)
Total other comprehensive income	40.9	32.1	54.6
Total comprehensive income	88.9	74.2	136.4

Attributable to:
Shareholders of the Company	82.3	70.5	128.5
Non-controlling interests	6.6	3.7	7.9
	88.9	74.2	136.4

Total comprehensive income attributable to shareholders of the Company arising from:
Continuing operations	82.3	70.5	122.8
Discontinued operations	-	-	5.7
	82.3	70.5	128.5

Condensed consolidated balance sheet

		At 30 June 2022	At 30 June 2021	At 31 December 2021
	Note	£m	£m	£m
Assets
Property, plant and equipment	8	268.1	251.0	248.1
Right-of-use assets		33.2	33.2	31.9
Intangible assets: goodwill	9	181.2	171.5	172.9
Intangible assets: other	9	8.9	12.1	10.2
Other receivables		4.5	2.8	2.9
Deferred tax assets		14.9	13.8	15.9
Total non-current assets		510.8	484.4	481.9
Inventories		169.0	128.7	140.7
Derivative financial assets	11	0.4	0.7	0.6
Trade and other receivables		195.2	161.2	161.4
Current tax receivable		0.6	0.5	0.6
Cash and cash equivalents	10	121.6	107.6	127.3
Total current assets		486.8	398.7	430.6
Total assets		997.6	883.1	912.5
Liabilities
Borrowings		187.1	172.7	174.0
Lease liabilities		42.2	41.1	40.0
Employee benefits: pensions	12	73.5	128.2	102.7
Provisions	13	17.4	11.7	14.8
Non-trade payables		2.3	3.6	2.4
Deferred tax liabilities		1.1	0.5	1.2
Total non-current liabilities		323.6	357.8	335.1
Borrowings and bank overdrafts		10.8	0.1	-
Lease liabilities		10.0	10.3	9.8
Trade and other payables		186.2	165.1	177.2
Current tax payable		29.6	24.0	25.4
Provisions	13	13.0	21.8	14.8
Derivative financial liabilities	11	1.7	0.4	0.6
Total current liabilities		251.3	221.7	227.8
Total liabilities		574.9	579.5	562.9
Total net assets		422.7	303.6	349.6
Equity
Share capital		71.3	71.3	71.3
Share premium		111.7	111.7	111.7
Reserves		37.7	13.8	18.5
Retained earnings		157.9	67.0	109.1
Total equity attributable to shareholders of the Company		378.6	263.8	310.6
Non-controlling interests		44.1	39.8	39.0
Total equity		422.7	303.6	349.6

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	Total parent equity	Non-controlling interests	Total equity
	£m		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2021	71.3		111.7	(17.0)	0.4	(1.0)	35.7	0.6	0.6	202.3	37.7	240.0
Profit for the period	-		-	-	-	-	-	-	37.6	37.6	4.5	42.1
Other comprehensive income/(expense):
Remeasurement gain on defined benefit plans and related taxes	-		-	-	-	-	-	-	37.8	37.8	-	37.8
Foreign exchange differences and related taxes	-		-	(4.6)	-	-	-	-	-	(4.6)	(0.8)	(5.4)
Cash flow hedging fair value changes and transfers	-		-	-	(0.3)	-	-	-	-	(0.3)	-	(0.3)
Total comprehensive income/(expense)	-		-	(4.6)	(0.3)	-	-	-	75.4	70.5	3.7	74.2
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(10.0)	(10.0)	(1.6)	(11.6)
Equity settled share-based payments	-		-	-	-	-	-	-	2.2	2.2	-	2.2
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(1.2)	(1.2)	-	(1.2)
At 30 June 2021	71.3		111.7	(21.6)	0.1	(1.0)	35.7	0.6	67.0	263.8	39.8	303.6

At 1 January 2021	71.3		111.7	(17.0)	0.4	(1.0)	35.7	0.6	0.6	202.3	37.7	240.0
Profit for the year	-		-	-	-	-	-	-	73.8	73.8	8.0	81.8
Other comprehensive income/(expense):
Remeasurement gain on defined benefit plans and related taxes	-		-	-	-	-	-	-	54.9	54.9	-	54.9
Foreign exchange differences and related taxes	-		-	0.3	-	-	-	-	-	0.3	(0.1)	0.2
Cash flow hedging fair value changes and transfers	-		-	-	(0.5)	-	-	-	-	(0.5)	-	(0.5)
Total comprehensive income/(expense)		-	-	0.3	(0.5)	-	-	-	128.7	128.5	7.9	136.4
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(19.1)	(19.1)	(6.6)	(25.7)
Equity settled share-based payments	-		-	-	-	-	-	-	4.5	4.5	-	4.5
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(5.6)	(5.6)	-	(5.6)
At 31 December 2021	71.3		111.7	(16.7)	(0.1)	(1.0)	35.7	0.6	109.1	310.6	39.0	349.6

At 1 January 2022	71.3		111.7	(16.7)	(0.1)	(1.0)	35.7	0.6	109.1	310.6	39.0	349.6
Profit for the period	-		-	-	-	-	-	-	42.9	42.9	5.1	48.0
Other comprehensive income/(expense):
Remeasurement gain on defined benefit plans and related taxes	-		-	-	-	-	-	-	20.2	20.2	-	20.2
Foreign exchange differences	-		-	20.1	-	-	-	-	-	20.1	1.5	21.6
Cash flow hedging fair value changes and transfers	-		-	-	(0.9)	-	-	-	-	(0.9)	-	(0.9)
Total comprehensive income/(expense)		-	-	20.1	(0.9)	-	-	-	63.1	82.3	6.6	88.9
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(16.5)	(16.5)	(1.5)	(18.0)
Equity settled share-based payments	-		-	-	-	-	-	-	3.0	3.0	-	3.0
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(0.8)	(0.8)	-	(0.8)
At 30 June 2022	71.3		111.7	3.4	(1.0)	(1.0)	35.7	0.6	157.9	378.6	44.1	422.7

Condensed consolidated statement of cash flows

		Six months ended 30 June 2022	Six months ended 30 June 2021	Year ended 31 December 2021
	Note	£m	£m	£m
Operating activities
Profit for the period from continuing operations		48.0	42.1	76.1
Profit for the period from discontinued operations	6	-	-	5.7

Adjustments for:
Depreciation - property, plant and equipment	2,8	14.4	14.6	30.1
Depreciation - right-of-use assets	2	3.9	3.8	7.9
Amortisation	2,9	2.3	2.6	6.0
Net financing costs	4	4.5	4.4	9.2
Profit on disposal of business	3,6	-	(5.1)	(7.1)
Non-cash specific adjusting items included in operating profit	3,6	-	0.8	10.4
Share of profit from associate (net of income tax)		-	(0.4)	(0.4)
(Profit)/loss on sale of property, plant and equipment		(0.2)	1.2	0.3
Income tax expense	5	17.7	14.1	28.2
Equity-settled share-based payment expenses		2.3	2.2	4.5
Cash generated from operations before changes in working capital and provisions		92.9	80.3	170.9

Increase in trade and other receivables		(23.4)	(18.9)	(17.2)
Increase in inventories		(18.8)	(9.2)	(20.1)
Increase in trade and other payables		3.5	20.7	28.3
Decrease in provisions		(0.7)	(1.8)	(5.8)
Payments to defined benefit pension plans (net of IAS 19 pension charges)		(8.3)	(8.0)	(16.9)
Cash generated from operations		45.2	63.1	139.2

Interest paid - borrowings and overdrafts		(3.1)	(2.9)	(6.1)
Interest paid - lease liabilities		(1.1)	(1.1)	(2.3)
Income tax paid		(15.3)	(9.9)	(25.4)
Net cash from operating activities		25.7	49.2	105.4

Investing activities
Purchase of property, plant and equipment and software		(22.9)	(10.9)	(31.6)
Purchase of investments		(0.3)	(0.5)	(0.9)
Acquisition of business assets		-	(1.9)	(1.9)
Proceeds from sale of property, plant and equipment		0.4	2.3	5.5
Interest received		0.4	0.4	0.8
Disposal of investments		-	12.2	14.2
Disposal of subsidiaries, net of cash disposed		-	0.5	0.8
Net cash from investing activities		(22.4)	2.1	(13.1)

Financing activities
Purchase of own shares for share incentive schemes		(0.9)	(1.4)	(5.9)
Proceeds from exercise of share options		0.1	0.2	0.3
Increase in borrowings		9.7	-	-
Reduction and repayment of borrowings		-	(72.4)	(72.3)
Payment of lease liabilities		(4.6)	(4.5)	(8.6)
Dividends paid to shareholders of the Company		(16.5)	(10.0)	(19.1)
Dividends paid to non-controlling interests		(1.5)	(1.6)	(6.6)
Net cash from financing activities		(13.7)	(89.7)	(112.2)

Net decrease in cash and cash equivalents		(10.4)	(38.4)	(19.9)
Cash and cash equivalents at start of period		127.3	147.8	147.8
Effect of exchange rate fluctuations on cash held		4.7	(1.8)	(0.6)
Cash and cash equivalents at period end	10	121.6	107.6	127.3

Notes to the condensed consolidated financial statements

Note 1. Basis of preparation, accounting policies and judgment and estimates

Morgan Advanced Materials plc (the 'Company') is a company incorporated in the UK under the Companies Act 2006.

The unaudited condensed consolidated financial statements of the Company for the six months ended 30 June 2022 comprise the Company, its subsidiaries and the Group's interest in associates (together 'the Group').

The condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and International Financial Reporting Standards ('IFRSs') as adopted by the UK. There has been no change to the recognition, measurement or disclosure from preparation in previous periods under IFRSs as adopted by the European Union. 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 2021.

The condensed consolidated financial statements and the comparative information for the six months ended 30 June 2022 have neither been audited nor reviewed, do not comprise statutory accounts for the purpose of section 434 of Companies Act 2006 and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2021. Those accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The condensed consolidated financial statements have been prepared on a going concern basis, see page 27 for further details.

The consolidated financial statements of the Group for the year ended 31 December 2021 are available on request from the Company's registered office at York House, Sheet Street, Windsor, SL4 1DD or at morganadvancedmaterials.com.

The condensed consolidated financial statements for the six months ended 30 June 2022 were approved by the Board on 29 July 2022.

Accounting policies

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 Group's published consolidated financial statements for the year ended 31 December 2021, except for newly effective standards listed below.

Use of judgements and estimates

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. The Group's critical accounting judgments and key sources of estimation uncertainty remain unchanged from those set out in the Group's consolidated financial statements for the year ended 31 December 2021.

Adoption of new and revised accounting standards

During the period the following amendments to standards became effective. The amendments did not have a material impact on the Group:

· Amendments to IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use;

· Annual Improvements to IFRS Standards 2018 - 2020;

· Amendments to IFRS 3 - Reference to the Conceptual Framework;

· Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract; and

· Amendments to IFRS 16 - Covid-19-related Rent Concessions beyond 30 June 2021.

Accounting developments and changes

New standards and interpretations that are in issue but not yet effective are listed below, none of which are anticipated to have a material impact on the Group's financial statements:

· Amendments to IFRS 17 - Insurance Contracts;

· Amendments to IAS 1 - Classification of Liabilities as Current or Non-current;

· Amendments to IFRS 4 - Extension of the Temporary Exemption from Applying IFRS 9;

· Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies;

· Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction; and

· Amendments to IAS 8 - Definition of Accounting Estimates.

Non-GAAP measures

Where non-GAAP measures have been referenced, these have been identified by an asterisk (*) where they appear in text and by a footnote where they appear in a table. Definitions of these non-GAAP measures, and their reconciliation to the relevant GAAP measure, are provided on pages 16 to 20.

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, which matures in September 2024. As at 30 June 2022 the Group had significant headroom on its covenants and available liquidity with the Group's £200 million multi-currency revolving credit facility being £10 million drawn. Total committed borrowing facilities were £386.7 million, none of which are due to mature in the following 12 months. The amount drawn under these facilities was £196.7 million, which together with net cash and cash equivalents of £120.5 million, gave a total headroom of £310.5 million.

The Board fully recognises the challenges that lie ahead but, after making enquiries, and in the absence of any material uncertainties, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of 18 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 2022.

Note 2. Segment reporting

The Group reports as five 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.

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, borrowings and related expenses, corporate assets and head office expenses, and income tax assets and liabilities.

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

	Six months ended 30 June 2022
	Thermal Ceramics	Molten Metal Systems	Electrical Carbon	Seals and Bearings	Technical Ceramics	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	200.5	28.1	91.3	71.8	138.5	530.2	-	530.2

Segment adjusted operating profit¹	22.7	4.2	18.9	10.9	18.8	75.5	-	75.5
Corporate costs							(3.0)	(3.0)
Group adjusted operating profit¹								72.5
Amortisation of intangible assets	(0.9)	(0.1)	(0.3)	(0.4)	(0.6)	(2.3)	-	(2.3)
Operating profit before specific adjusting items	21.8	4.1	18.6	10.5	18.2	73.2	(3.0)	70.2
Specific adjusting items included in operating profit²	-	-	-	-	-	-	-	-
Operating profit	21.8	4.1	18.6	10.5	18.2	73.2	(3.0)	70.2
Finance income								0.4
Finance expense								(4.9)
Share of profit of associate (net of income tax)								-
Profit before taxation								65.7

Segment assets	360.9	45.9	152.5	112.4	183.5	855.2	142.4	997.6

Segment liabilities	98.9	8.7	31.9	22.6	80.8	242.9	332.0	574.9

Segment capital expenditure	6.9	1.1	3.0	3.8	8.1	22.9	-	22.9

Segment depreciation - property, plant and equipment	5.2	1.0	2.5	3.0	2.7	14.4	-	14.4

Segment depreciation - right-of-use assets	1.7	0.1	0.5	0.3	1.3	3.9	-	3.9

Segment impairment of non-financial assets	-	-	-	-	-	-	-	-

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

	Six months ended 30 June 2021
	Thermal Ceramics	Molten Metal Systems	Electrical Carbon	Seals and Bearings	Technical Ceramics	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	174.7	22.8	82.3	64.3	117.1	461.2	-	461.2

Segment adjusted operating profit¹	21.2	2.5	15.6	10.7	12.1	62.1	-	62.1
Corporate costs							(3.0)	(3.0)
Group adjusted operating profit¹								59.1
Amortisation of intangible assets	(0.9)	(0.4)	(0.4)	(0.2)	(0.7)	(2.6)	-	(2.6)
Operating profit before specific adjusting items	20.3	2.1	15.2	10.5	11.4	59.5	(3.0)	56.5
Specific adjusting items included in operating profit²	(1.4)	0.3	(0.4)	-	-	(1.5)	5.2	3.7
Operating profit	18.9	2.4	14.8	10.5	11.4	58.0	2.2	60.2
Finance income								0.4
Finance expense								(4.8)
Share of profit of associate (net of income tax)								0.4
Profit before taxation								56.2

Segment assets	309.2	39.1	143.5	102.9	161.6	756.3	126.8	883.1

Segment liabilities	85.2	7.6	31.0	19.6	80.5	223.9	355.6	579.5

Segment capital expenditure	2.4	0.9	1.4	2.9	3.3	10.9	-	10.9

Segment depreciation - property, plant and equipment	5.2	1.0	2.6	2.9	2.9	14.6	-	14.6

Segment depreciation - right-of-use assets	1.7	0.2	0.5	0.3	1.1	3.8	-	3.8

Segment impairment of non-financial assets	(0.7)	-	-	-	(0.1)	(0.8)	-	(0.8)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

	Year ended 31 December 2021
	Thermal Ceramics	Molten Metal Systems	Electrical Carbon	Seals and Bearings	Technical Ceramics	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	364.7	47.7	164.9	135.9	237.3	950.5	-	950.5

Segment adjusted operating profit¹	42.0	6.3	32.8	22.9	26.4	130.4	-	130.4
Corporate costs							(5.9)	(5.9)
Group adjusted operating profit¹								124.5
Amortisation of intangible assets	(2.1)	(0.6)	(0.9)	(0.9)	(1.5)	(6.0)	-	(6.0)
Operating profit before specific adjusting items	39.9	5.7	31.9	22.0	24.9	124.4	(5.9)	118.5
Specific adjusting items included in operating profit²	(2.1)	0.3	(6.3)	-	(6.0)	(14.1)	8.7	(5.4)
Operating profit	37.8	6.0	25.6	22.0	18.9	110.3	2.8	113.1
Finance income								0.8
Finance expense								(10.0)
Share of profit of associate (net of income tax)								0.4
Profit before taxation								104.3

Segment assets	319.9	41.8	137.6	107.5	156.5	763.3	149.2	912.5

Segment liabilities	88.9	8.4	30.6	23.6	73.9	225.4	337.5	562.9

Segment capital expenditure	8.0	2.2	5.9	7.6	7.9	31.6	-	31.6

Segment depreciation - property, plant and equipment	10.2	2.0	5.5	6.4	6.0	30.1	-	30.1

Segment depreciation - right-of-use assets	3.5	0.3	1.1	0.6	2.4	7.9	-	7.9

Segment impairment of non-financial assets	0.7	-	5.7	-	6.0	12.4	-	12.4

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

2. Details of specific adjusting items are given in note 3 to the condensed consolidated financial statements.

Revenue from external customers by geography

Continuing operations	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £ m	Year ended 31 December 2021 £m
US	190.7	161.8	336.4
China	61.0	55.6	114.4
Germany	39.1	33.6	68.7
UK (the Group's country of domicile)	22.9	20.3	38.5
Other Asia, Australasia, Middle East and Africa	94.1	85.3	174.6
Other Europe	88.2	78.1	157.4
Other North America	18.2	16.2	33.4
South America	16.0	10.3	27.1
	530.2	461.2	950.5

Revenue from external customers is based on geographic location of the end-customer. No customer represents more than 5% of revenue.

Revenue from external customers by end-market

Continuing operations	Six months ended 30 June 2022 £m	Six months ended 30 June 2021¹ £ m	Year ended 31 December 2021 ¹ £m
Clean energy and clean transportation	27.3	29.7	54.3
Semiconductors	44.5	28.5	63.8
Healthcare	37.8	34.9	70.1
Faster growing markets	109.6	93.1	188.2
Conventional transportation	81.6	71.9	141.7
Conventional energy	14.9	16.0	30.4
Petrochemical and chemical	55.8	46.8	98.7
Industrial and metals	238.9	204.6	431.0
Security and defence	29.4	28.8	60.5
Core markets	420.6	368.1	762.3
	530.2	461.2	950.5

1. Revenue from external customers by end market for the period ended 30 June 2021 and the year ended 31 December 2021 has been re-presented to better reflect the end-markets of our customers.

Intercompany sales to other segments

Continuing operations	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £ m	Year ended 31 December 2021 £m
Thermal Ceramics	0.3	0.2	0.8
Molten Metal Systems	-	0.1	0.1
Electrical Carbon	0.1	-	0.2
Seals and Bearings	0.4	0.4	1.0
Technical Ceramics	0.6	0.2	0.5
	1.4	0.9	2.6

Note 3. Specific adjusting items

Continuing operations	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £m	Year ended 31 December 2021 £m
Specific adjusting items:
Impairment of non-financial assets	-	(0.8)	(12.4)
Restructuring credit/(cost)	-	(0.6)	0.1
Net profit on disposal of businesses	-	5.1	7.1
Business closure and exit costs	-	-	(0.2)
Total specific adjusting items before income tax	-	3.7	(5.4)
Income tax credit from specific adjusting items	-	0.3	1.5
Total specific adjusting items after income tax	-	4.0	(3.9)

Specific adjusting items in relation to discontinued operations are disclosed in note 6.

2022

There were no specific adjusting items in the six months to 30 June 2022.

2021

Specific adjusting items before income tax for the six months ended 30 June 2021 were a net gain of £3.7 million and related to the Group's restructuring and efficiency programme, as follows:

Impairment of non-financial assets

A £0.8 million charge was recognised, primarily relating to assets associated with closed manufacturing lines within Thermal Ceramics.

Restructuring costs

Net profit on disposal of businesses

In the period ended 30 June 2021, the Group disposed of its 35% shareholding in Jemmtec Limited and the business assets associated with the Latrobe business. These disposals generated a profit of £5.2 million and a loss of £0.1 million respectively.

Note 4. Finance income and expense

Continuing operations	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £m	Year ended 31 December 2021 £m
Interest on bank balances and cash deposits	0.4	0.4	0.8
Finance income	0.4	0.4	0.8

Interest expense on borrowings and overdrafts	(3.1)	(2.9)	(6.1)
Interest expense on lease liabilities	(1.1)	(1.1)	(2.3)
Net interest on IAS 19 defined benefit pension obligations	(0.7)	(0.8)	(1.6)
Finance expense	(4.9)	(4.8)	(10.0)
Net financing costs recognised in profit or loss	(4.5)	(4.4)	(9.2)

No finance income or expense related to discontinued operations in either the current or preceding periods.

Note 5. Taxation

Continuing operations	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £m	Year ended 31 December 2021 £m
Income tax charge on profit before specific adjusting items	(17.7)	(14.4)	(29.7)
Income tax credit from specific adjusting items	-	0.3	1.5
Total income tax expense recognised in profit or loss	(17.7)	(14.1)	(28.2)

The Group's consolidated effective tax rate, excluding specific adjusting items, was 27.0% for the six months ended 30 June 2022 (30 June 2021: 27.4%; 31 December 2021: 27.1%) and is based on the Directors' best estimate of the effective tax rate for the year.

The Group operates in many jurisdictions around the world and is subject to factors that may impact future tax charges including the implementation of the OECD's BEPS actions, tax rate and legislation changes, expiry of the statute of limitations and resolution of tax audits and disputes.

Note 6. Discontinued operations

The results from discontinued operations, which represent the Composites and Defence Systems business disposed in 2018, are set out below:

	Six months ended 30 June 2022				Six months ended 30 June 2021			Year ended 31 December 2021
	Results before specific adjusting items	Specific adjusting items	Total		Results before specific adjusting items	Specific adjusting items	Total	Results before specific adjusting items	Specific adjusting items	Total
	£m	£m	£m		£m	£m	£m	£m	£m	£m
Revenue	-	-	-		-	-	-	-	3.3	3.3
Operating income	-	-	-		-	-	-	-	2.4	2.4
Profit before taxation	-	-	-		-	-	-	-	5.7	5.7
Income tax expense	-	-	-		-	-	-	-	-	-
Profit from discontinued operations	-	-	-		-	-	-	-	5.7	5.7

Basic profit per share from discontinued operations				-			-			2.0p
Diluted profit per share from discontinued operations				-			-			2.0p

In 2021, £3.3 million of the specific adjusting items balance relate to the full and final settlement of certain long-term contracts. A further £2.4 million relates to the reassessment of certain provisions associated with the disposal of the Composites and Defence Systems business.

There was no income tax expense in relation to the discontinued operations in either the current or preceding periods.

Cash flows from discontinued operations are set out below:

	Six months ended 30 June 2022	Six months ended 30 June 2021	Year ended 31 December 2021
	£m	£m	£m
Net cash inflow from operating activities	-	-	3.3
Net cash inflow from investing activities	-	-	2.0
Net cash flow used in financing activities	-	-	-
	-	-	5.3

Note 7. Earnings per share

	Six months ended 30 June 2022			Six months ended 30 June 2021			Year ended 31 December 2021
	Earnings	Basic earnings per share	Diluted earnings per share	Earnings/ (loss)	Basic earnings/ (loss) per share	Diluted earnings/ (loss) per share	Earnings/ (loss)	Basic earnings/ (loss) per share	Diluted earnings/ (loss) per share
	£m	pence	pence	£m	pence	pence	£m	pence	pence
Profit for the period attributable to shareholders of the Company	42.9	15.1p	15.0p	37.6	13.2p	13.1p	73.8	25.9p	25.7p
Profit from discontinued operations	-	-	-	-	-	-	(5.7)	(2.0)p	(2.0)p
Profit from continuing operations	42.9	15.1p	15.0p	37.6	13.2p	13.1p	68.1	23.9p	23.7p
Specific adjusting items	-	-	-	(3.7)	(1.3)p	(1.3)p	5.4	1.9p	1.9p
Amortisation of intangible assets	2.3	0.8p	0.8p	2.6	0.9p	0.9p	6.0	2.1p	2.1p
Tax effect of the above	-	-	-	(0.3)	(0.1)p	(0.1)p	(1.5)	(0.5)p	(0.5)p
Non-controlling interests' share of the above adjustments	-	-	-	-	-	-	(0.5)	(0.2)p	(0.2)p
Adjusted profit for the period from continuing operations as used in adjusted earnings per share¹	45.2	15.9p	15.8p	36.2	12.7p	12.6p	77.5	27.2p	27.0p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

	Six months ended 30 June 2022 millions	Six months ended 30 June 2021 millions	Year ended 31 December 2021 millions
Number of shares
Weighted average number of Ordinary shares for the purposes of basic earnings per share¹	284.4	284.8	284.6
Effect of dilutive potential Ordinary shares:
Share options	1.8	2.2	2.4
Weighted average number of Ordinary shares for the purposes of diluted earnings per share	286.2	287.0	287.0

1. The calculation of the weighted average number of shares excludes the shares held by The Morgan General Employee Benefit Trust, on which dividends are waived.

Note 8. Property, plant and equipment

	Land and buildings £m	Plant, equipment and fixtures £m	Total £m
Cost
At 1 January 2022	199.8	677.2	877.0
Additions	1.1	16.5	17.6
Disposals	(0.1)	(4.5)	(4.6)
Effect of movement in foreign exchange	15.2	47.4	62.6
At 30 June 2022	216.0	736.6	952.6

Depreciation and impairment losses
At 1 January 2022	103.0	525.9	628.9
Depreciation charge for the period	2.1	12.3	14.4
Disposals	-	(4.3)	(4.3)
Effect of movement in foreign exchange	8.4	37.1	45.5
At 30 June 2022	113.5	571.0	684.5

Carrying amounts
At 1 January 2022	96.8	151.3	248.1
At 30 June 2022	102.5	165.6	268.1

Note 9. Intangible assets

	Acquisition intangibles
	Goodwill £m	Customer relationships £m	Other £m	Capitalised development costs £m	Computer software £m	Total £m
Cost
At 1 January 2022	172.9	57.6	4.1	0.7	34.8	270.1
Additions	-	-	-	-	0.7	0.7
Disposals	-	-	-	-	(0.1)	(0.1)
Effect of movement in foreign exchange	8.3	5.9	0.1	0.2	1.8	16.3
At 30 June 2022	181.2	63.5	4.2	0.9	37.2	287.0

Amortisation and impairment losses
At 1 January 2022	-	56.1	3.5	0.7	26.7	87.0
Amortisation charge for the period	-	0.4	0.1	-	1.8	2.3
Effects of movement in foreign exchange	-	5.8	0.1	0.2	1.5	7.6
At 30 June 2022	-	62.3	3.7	0.9	30.0	96.9

Carrying amounts
At 1 January 2022	172.9	1.5	0.6	-	8.1	183.1
At 30 June 2022	181.2	1.2	0.5	-	7.2	190.1

Note 10. Cash and cash equivalents reconciled to net debt*

	At 30 June 2022 £m	At 30 June 2021 £m	At 31 December 2021 £m

Bank balances	114.6	101.0	101.2
Cash deposits	7.0	6.6	26.1
Cash and cash equivalents	121.6	107.6	127.3

Reconciliation of cash and cash equivalents to net debt*

	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £m	Year ended 31 December 2021 £m
Opening borrowings and lease liabilities	(223.8)	(303.4)	(303.4)
Increase in borrowings	(9.7)	-	-
Reduction and repayment of borrowings	-	72.4	72.3
Payment of lease liabilities	4.6	4.5	8.6
Total changes from cash flows	(5.1)	76.9	80.9
New leases and lease remeasurement	(3.0)	(2.3)	(4.4)
Effect of movements in foreign exchange on borrowings	(18.2)	4.6	3.1
Closing borrowings and lease liabilities	(250.1)	(224.2)	(223.8)
Cash and cash equivalents	121.6	107.6	127.3
Closing net debt²	(128.5)	(116.6)	(96.5)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes.

	Borrowings £m	Lease liabilities £m	Total financing liabilities £m	Cash and cash equivalents £m	Movement in net debt ¹ £m
At 1 January 2022	(174.0)	(49.8)	(223.8)	127.3	(96.5)
Cash outflow	-	-	-	(5.3)	(5.3)
Borrowings and lease liability cash flow	(9.7)	4.6	(5.1)	-	(5.1)
Interest paid	-	-	-	(4.2)	(4.2)
Net cash inflow/(outflow)	(9.7)	4.6	(5.1)	(9.5)	(14.6)
Share purchases	-	-	-	(0.9)	(0.9)
New leases and lease remeasurement	-	(3.0)	(3.0)	-	(3.0)
Exchange and other movements	(14.2)	(4.0)	(18.2)	4.7	(13.5)
At 30 June 2022	(197.9)	(52.2)	(250.1)	121.6	(128.5)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 16 to 20.

Note 11. Financial risk management

Fair values

	At 30 June 2022				At 30 June 2021				At 31 December 2021
	Carrying amount £m	Fair value			Carrying amount £m	Fair value			Carrying amount £m	Fair value
	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m
Financial assets and liabilities held at amortised cost
1.18% Euro Senior Notes 2023	(21.6)	-	(21.3)	(21.3)	(21.5)	-	(21.6)	(21.6)	(21.0)	-	(21.1)	(21.1)
3.17% US Dollar Senior Notes 2023	(12.4)	-	(12.2)	(12.2)	(10.9)	-	(11.2)	(11.2)	(11.1)	-	(11.3)	(11.3)
1.55% Euro Senior Notes 2026	(21.6)	-	(20.7)	(20.7)	(21.5)	-	(22.0)	(22.0)	(21.1)	-	(21.4)	(21.4)
3.37% US Dollar Senior Notes 2026	(80.1)	-	(75.4)	(75.4)	(70.5)	-	(72.7)	(72.7)	(72.2)	-	(72.8)	(72.8)
4.87% US Dollar Senior Notes 2026	(20.9)	-	(20.8)	(20.8)	(18.4)	-	(19.9)	(19.9)	(18.8)	-	(20.6)	(20.6)
1.74% Euro Senior Notes 2028	(8.6)	-	(8.1)	(8.1)	(8.6)	-	(8.8)	(8.8)	(8.4)	-	(8.6)	(8.6)
2.89% Euro Senior Notes 2030	(21.5)	-	(20.2)	(20.2)	(21.4)	-	(22.8)	(22.8)	(21.0)	-	(22.1)	(22.1)
5.50% Cumulative First Preference shares	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)
5.00% Cumulative First Preference shares	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)
Bank and other borrowings	(10.0)	-	(10.0)	(10.0)	-	-	-	-	-	-	-	-
	(197.1)	-	(189.1)	(189.1)	(173.2)	-	(179.4)	(179.4)	(174.0)	-	(178.3)	(178.3)

Derivatives held at fair value
Derivative financial assets	0.4	-	0.4	0.4	0.7	-	0.7	0.7	0.6	-	0.6	0.6
Derivative financial liabilities	(1.7)	-	(1.7)	(1.7)	(0.4)	-	(0.4)	(0.4)	(0.6)	-	(0.6)	(0.6)
	(1.3)	-	(1.3)	(1.3)	0.3	-	0.3	0.3	-	-	-	-
	(198.4)	-	(190.4)	(190.4)	(172.9)	-	(179.1)	(179.1)	(174.0)	-	(178.3)	(178.3)

The table above analyses financial instruments carried at fair value, by valuation method, together with the carrying amounts shown in the balance sheet. The fair value of cash and cash equivalents, current trade and other receivables/ payables and floating-rate bank and other borrowings are excluded from the preceding table as their carrying amount approximates to their fair value.

Fair value hierarchy

The different levels have been defined as follows:

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

Level 2: not traded in an active market but the fair values are based on quoted market prices or alternative pricing sources with reasonable levels of price transparency. Fair value is calculated using discounted cash flow methodology, future cash flows are estimated based on forward exchange rates.

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

There were no transfers between Level 1 and Level 2 during 2022 or 2021 and there were no Level 3 financial instruments in either 2022 or 2021.

The major methods and assumption used in estimating the fair values of financial instruments reflected in the preceding table are as follows:

Fixed-rate 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 borrowings are 2.1-5.1% (30 June 2021: 1.0-3.0%; 31 December 2021: 1.0-3.1%).

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.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on financial instruments such as liquid assets, derivative assets and trade receivables.

The current economic climate gives rise to an increased credit risk, primarily with respect to trade receivables.

The Group establishes an allowance for impairment that represents its estimate of expected credit losses in respect of trade receivables.

The loss allowance for trade receivables by ageing category is as follows:

	30 June 2022				30 June 2021				31 December 2021
	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables
	%	£m	£m	£m	%	£m	£m	£m	%	£m	£m	£m
Not past due	0.1%	146.9	(0.1)	146.8	0.2%	123.0	(0.3)	122.7	0.3%	119.1	(0.4)	118.7
Past due 0-30 days	0.5%	18.9	(0.1)	18.8	1.4%	14.5	(0.2)	14.3	-	14.8	-	14.8
Past due 31-60 days	0.0%	3.6	-	3.6	1.9%	5.4	(0.1)	5.3	-	3.8	-	3.8
Past due 61-90 days	7.7%	1.3	(0.1)	1.2	6.9%	2.9	(0.2)	2.7	7.1%	1.4	(0.1)	1.3
Past due more than 90 days	90.7%	10.7	(9.7)	1.0	95.1%	8.2	(7.8)	0.4	94.5%	11.0	(10.4)	0.6
		181.4	(10.0)	171.4		154.0	(8.6)	145.4		150.1	(10.9)	139.2

Full details of the Group's policies and processes for managing financial risk are described in note 22 of the Group's 2021 Annual Report and Accounts.

Offsetting financial assets and liabilities

The following table shows the amounts recognised for forward exchange contracts, which are subject to offsetting arrangements on a gross basis, and the amounts offset in the balance sheet.

The Group also has cash pooling agreements which cannot be offset under IFRS, but which could be settled net under the terms of master netting agreements, are also presented in the table to show the total net exposure of the Group.

	Gross amounts of recognised financial assets/ (liabilities)	Amounts set off	Net amounts presented on the balance sheet	Financial instruments not set off in the balance sheet	Net amount
	£m	£m	£m	£m	£m
At 30 June 2022
Derivative financial assets	75.2	(74.8)	0.4	-	0.4
Derivative financial liabilities	(76.5)	74.8	(1.7)	-	(1.7)
Cash and cash equivalents	121.6	-	121.6	(1.1)	120.5
Current bank and other borrowings	(10.8)	-	(10.8)	1.1	(9.7)

At 30 June 2021
Derivative financial assets	64.4	(63.7)	0.7	-	0.7
Derivative financial liabilities	(64.1)	63.7	(0.4)	-	(0.4)
Cash and cash equivalents	107.6	-	107.6	(0.1)	107.5
Current bank and other borrowings	(0.1)	-	(0.1)	0.1	-

At 31 December 2021
Derivative financial assets	84.0	(83.4)	0.6	-	0.6
Derivative financial liabilities	(84.0)	83.4	(0.6)	-	(0.6)
Cash and cash equivalents	127.3	-	127.3	-	127.3
Current bank and other borrowings	-	-	-	-	-

Note 12. Pensions and other post-retirement employee benefits

Defined benefit obligations

Six months ended 30 June 2022
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(7.1)	(29.1)	(4.3)	(40.5)
Present value of funded defined benefit obligations	(404.7)	(121.2)	(1.1)	(8.2)	(535.2)
Fair value of plan assets	374.3	120.1	0.4	7.4	502.2
	(30.4)	(8.2)	(29.8)	(5.1)	(73.5)

Movements in present value of defined benefit obligation
At 1 January 2022	(544.0)	(139.3)	(39.4)	(11.8)	(734.5)
Current service cost	-	-	(0.4)	(0.8)	(1.2)
Interest cost	(5.1)	(1.9)	(0.1)	(0.1)	(7.2)
Actuarial gain/(loss):
Experience (loss)/gain on plan obligations	(8.2)	(0.1)	-	0.4	(7.9)
Changes in financial assumptions - gain/(loss)	140.0	22.9	9.9	(0.1)	172.7
Changes in demographic assumptions - gain/(loss)	-	-	-	-	-
Benefits paid	12.6	4.4	0.6	0.3	17.9
Exchange adjustments	-	(14.3)	(0.8)	(0.4)	(15.5)
At 30 June 2022	(404.7)	(128.3)	(30.2)	(12.5)	(575.7)

Movements in fair value of plan assets
At 1 January 2022	492.3	131.6	0.4	7.5	631.8
Interest on plan assets	4.6	1.8	-	0.1	6.5
Remeasurement loss	(118.6)	(22.5)	-	(0.4)	(141.5)
Contributions by employer	8.6	0.3	0.6	0.3	9.8
Benefits paid	(12.6)	(4.4)	(0.6)	(0.3)	(17.9)
Exchange adjustments	-	13.3	-	0.2	13.5
At 30 June 2022	374.3	120.1	0.4	7.4	502.2
Actual return on assets	(114.0)	(20.7)	-	(0.3)	(135.0)

Fair value of plan assets by category
Equities	26.5	-	-	-	26.5
Growth assets	85.4	5.9	-	-	91.3
Bonds	59.1	110.5	-	-	169.6
Liability-driven investments (LDI)	82.4	-	-	-	82.4
Matching insurance policies	119.1	-	0.4	4.8	124.3
Other	1.8	3.7	-	2.6	8.1
	374.3	120.1	0.4	7.4	502.2

Principal actuarial assumptions at 30 June 2022 were:	%	%	%	%
Discount rate	3.86	4.52	3.00	2.90
Inflation (UK: RPI/CPI)	3.23/2.44	n/a	2.00	n/a

30 June 2021
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(6.3)	(39.8)	(2.6)	(48.7)
Present value of funded defined benefit obligations	(549.1)	(131.8)	(1.5)	(8.5)	(690.9)
Fair value of plan assets	472.2	132.0	0.5	6.7	611.4
	(76.9)	(6.1)	(40.8)	(4.4)	(128.2)

Principal actuarial assumptions at 30 June 2021 were:	%	%	%	%
Discount rate	1.87	2.65	0.80	2.40
Inflation (UK: RPI/CPI)	3.17/2.32	n/a	1.70	n/a

31 December 2021
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(6.4)	(37.5)	(3.4)	(47.3)
Present value of funded defined benefit obligations	(544.0)	(132.9)	(1.9)	(8.4)	(687.2)
Fair value of plan assets	492.3	131.6	0.4	7.5	631.8
	(51.7)	(7.7)	(39.0)	(4.3)	(102.7)

Principal actuarial assumptions at 31 December 2021 were:	%	%	%	%
Discount rate	1.92	2.71	0.90	2.90
Inflation (UK: RPI/CPI)	3.40/2.61	n/a	1.90	n/a

Note 13. Provisions and contingent liabilities

	Closure and restructuring provisions £m	Legal and other provisions £m	Environmental provisions £m	Total £m
At 1 January 2022	11.8	10.0	7.8	29.6
Provisions made during the period	0.3	1.1	0.5	1.9
Provisions used during the period	(1.7)	(0.2)	(0.6)	(2.5)
Provisions reversed during the period	-	(0.1)	-	(0.1)
Effect of movements in foreign exchange	1.2	0.2	0.1	1.5
At 30 June 2022	11.6	11.0	7.8	30.4

Current	3.6	6.4	3.0	13.0
Non-current	8.0	4.6	4.8	17.4
At 30 June 2022	11.6	11.0	7.8	30.4

Closure and restructuring provisions

Closure and restructuring provisions are based on the Group's restructuring programmes and represent committed expenditure at the balance sheet date. The amounts provided are based on the costs of terminating relevant contracts, under the contract terms, and management's best estimate of other associated restructuring costs including professional fees.

Whilst the Group's restructuring programme was completed in 2021, we retain provisions for remaining lease exit costs and multi-employer pension obligations from two sites which were closed last year. The cash outflows relating to the pension obligations may continue for up to 20 years, subject to any settlement being reached in advance of that date.

Legal and other provisions

Legal and other provisions mainly comprise amounts provided against open legal and contractual disputes arising in the normal course of business and long-service costs. Provisions are made for the expected costs associated with such matters, based on past experience of similar items and other known factors, taking into account professional advice received, and represent management's best estimate of the most likely outcome. The timing of utilisation of these provisions is frequently uncertain, reflecting the complexity of issues and the outcome of various court proceedings and associated negotiations.

Legal and other contingent liabilities

The Group has ceased all trading with Russia. There is a contingent liability in relation to terminated/suspended contracts with some Russian customers. These customers have indicated that they dispute our termination/suspension rights and may initiate formal proceedings. The timing of any such proceedings is uncertain.

Environmental provisions

Environmental provisions are made for quantifiable environmental liabilities arising from known environmental issues. The amounts provided are based on the best estimate of the costs required to remedy these issues. At one site, a remediation feasibility study is currently being conducted in relation to a known environmental issue and in conjunction with the local Environmental Regulator. A remediation plan has been prepared. The provision recorded reflects the estimated costs of remediation and awaits final regulatory approval. The provision is expected to be utilised in the next five years.

Environmental contingent liabilities

The Group is subject to local health, safety and environmental laws and regulations concerning its manufacturing operations around the world. These laws and regulations may require the Group to take future action to remediate the impact of historical manufacturing processes on the environment or lead to other economic outflows. Such contingencies may exist for various sites which the Group currently operates or has operated in the past. There is a contingent liability arising from additional, as yet unknown, environmental issues at the site referred to above, pending the completion of the feasibility study.

Tax contingent liabilities

The Group is subject to periodic tax audits by various fiscal authorities covering corporate, employee and sales taxes in the various jurisdictions in which it operates. We have provided for estimates of the Group's likely exposures where these can be reliably estimated.

Note 14. Related parties

Identification of 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 27 of the Group's 2021 Annual Report and Accounts.

Transactions with associate:

	Six months ended 30 June 2022 £m	Six months ended 30 June 2021 £m	Year ended 31 December 2021 £m
Sales to associate	-	-	-
Purchases from associate	-	0.6	0.6
Trade receivables due from associate	-	-	-
Trade payables due to associate	-	-	-

On 28 April 2021, the Group sold its share in its associate undertaking Jemmtec Limited.

Except as disclosed 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 27 to the Group's 2021 Annual Report and Accounts which could have a material effect on the financial position or performance of the Group during the period.

Note 15. Subsequent events

There were no reportable events subsequent to the balance sheet date.

Glossary

Constant-currency¹	Constant-currency revenue and Group adjusted operating profit are derived by translating the prior year results at current year average exchange rates.
Corporate costs	Corporate costs consist of the costs of the central head office.
Free cash flow before acquisitions, disposals and dividends¹	Cash generated from continuing operations less net capital expenditure, net interest paid, tax paid and lease payments.
Group earnings before interest, tax, depreciation and amortisation (EBITDA)¹	EBITDA is defined as operating profit before specific adjusting items, amortisation of intangible assets and depreciation.
Group adjusted operating profit¹	Operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets.
Adjusted earnings per share (EPS)¹	Adjusted 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 and non-controlling interests, divided by the weighted average number of Ordinary shares during the period.
Net debt¹	Borrowings, bank overdrafts and lease liabilities less cash and cash equivalents.
Net cash and cash equivalents¹	Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts.
Group organic¹	The Group results excluding acquisition, disposal and business exit impacts at constant-currency.
Return on invested capital (ROIC)¹	Group adjusted 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, borrowings, bank overdrafts and lease liabilities).
Specific adjusting items	See note 3 to the condensed consolidated financial statements for further details.

1. See definitions and reconciliations of non-GAAP measures to GAAP measures on pages 16 to 20.

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