Morgan Advanced Materials Full Year 2023 Results

Morgan Advanced Materials PLC

12 March 2024

 

Full-year results for the period ended 31 December 2023

Results in line, business simplification announced, higher growth outlook

£ million unless otherwise stated	2023	2022	As reported change	Organic constant- currency1 change
Adjusted results Revenue	1,114.7	1,112.1	+0.2%	+2.5%
Group adjusted operating profit1	120.3	151.0	(20.3)%	(16.6)%
Group adjusted operating profit margin1	10.8%	13.6%	(280)bps
Return on invested capital1,2	17.6%	23.7%	(610)bps
Adjusted EPS1	25.0p	33.8p	(26.0)%
Free cash flow before acquisitions, disposals and dividends1	14.6	(46.9)	+131.1%
Net debt (excl. lease liabilities)1	185.2	148.5	+24.7%
Statutory results
Revenue	1,114.7	1,112.1
Operating profit	91.9	140.8	(34.7)%
Profit before taxation	77.8	131.6	(40.9)%
Continuing EPS3	16.4p	30.6p	(46.4)%
Continuing and discontinued EPS3	16.6p	31.0p	(46.5)%
Cash generated from continued operations	126.3	59.1	+113.7%
Total dividend per share	12.0p	12.0p

1.  Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18. 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.  The return on invested capital calculation has been simplified so that it can be calculated from published information and the prior period comparative has been restated. See details on page 17.

3. EPS is presented on a 'continuing' and a combined 'continuing and discontinued' basis for statutory reporting. Further details are provided in note 8 to the consolidated financial statements.

Group highlights

·	Organic constant-currency* revenue growth of 2.5%, with 10.4% from our faster growing markets
·	Adjusted operating profit £120.3m, adjusted operating profit margin 10.8% and ROIC 17.6%
·	Recovery from cyber security incident now substantially complete
·	Cash generated from continued operations of £126.3 million, reflecting full recovery of the mid-year increase in working capital
·	Strong balance sheet with net debt*/EBITDA (excl. leasing)* of 1.2 times
·	Absolute CO2e emissions (from scope 1 and 2) reduced by 25% compared with 2022
·	Simplification of Group structure announced alongside additional cost reduction programme
·	Further market demand driving an acceleration of Semiconductor investment, with higher medium-term Group growth now expected
·	Underlying outlook for 2024 performance unchanged, foreign exchange headwind anticipated

Commenting on the results, Chief Executive Officer, Pete Raby said:

"Our product differentiation and successful business model have enabled us to deliver solid revenue growth in both our Core and Faster Growing markets, despite the impact of the cyber security incident in the first half and weaker market conditions in the second. We have substantially completed our recovery from the cyber security incident, with our profitability and cash performance in line with our financial framework in the second half.  We are pleased to be able to announce an acceleration of our Semiconductor capacity investment, and a simplification of the Group that supports a leaner structure as we enter 2024. I want to thank all our employees for their hard work in achieving this result."

Semiconductor Investment

The Company continues to experience strong demand for its semiconductor consumable products driven by growth in the Silicon Carbide wafer market for power electronics.  Having announced in December 2022 a £60 million investment over three years to create additional capacity, we are now increasing our investment such that we expect to have invested £100 million by 2026.  We expect this investment to drive attractive long-term growth and strong returns, transitioning the Group further towards faster growing markets.

Business Simplification

The Company's growth targets are underpinned by the development of leading differentiated positions in attractive growth markets delivered through deep process and material know how in our manufacturing sites. In order to streamline our management structures and optimise plant operations, we will in future manage the Company through three distinct segments:

Thermal Products: comprising the current Thermal Ceramics and MMS segments, focused on growth opportunities in which heat resistance, fire protection and insulation are principal product attributes.

Performance Carbon: comprising the current Electrical Carbon and part of the Seals and Bearings segments, with a clear strategy to pursue opportunities for carbon-based components in Semiconductor, Rail, Aerospace, Power Generation and other markets.

Technical Ceramics: comprising the current Technical Ceramics and part of the Seals and Bearings segments,  focused on development of our advanced ceramic applications in Semiconductor, Healthcare, Aerospace and Industrial equipment.

This change forms part of a broader restructuring plan that is expected to deliver £10 million of annualised savings by 2025, with an expected implementation cost of around £20 million, of which £18 million are cash costs expected to be incurred over 2023 to 2025. As well as the savings from simplification of our structure, the Company is progressing with the next phase of its site rationalisation programme with four factories identified for closure.

	FY 2023 £m	FY 2024 £m	FY 2025 £m	Total £m
Adjusted operating profit1 benefits (incremental)	1	7	10	-
Costs charged to specific adjusting items	(7)	(11)	(2)	(20)

Outlook

Whilst mindful of weaker market conditions in the near term, our outlook for full-year constant currency revenue growth remains in line with our financial framework.  We expect our restructuring plan to deliver initial cost benefits in 2024, whilst we are also accelerating our investment in Semiconductor capacity as we ramp up to meet strong demand, and increasing our investment in IT.  Our underlying outlook for 2024 performance is unchanged, with a slight weighting to our second half as additional capacity comes online, and a foreign exchange headwind anticipated.

1.     Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

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 tunnels, 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 gathered customer feedback during 2022 through a range of channels and are 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 CO₂ emissions, or to deliver higher performance from their processes, and these customers need our help. This priority supports our focus on working with the customer to innovate in traditional heavy industries whilst accelerating our development in our faster growing markets: clean energy, clean transportation, semiconductors and healthcare.

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

·	Clean energy. Growth in energy storage, brushes and slip rings for onshore wind applications and ceramic and carbon products used in solar panel manufacture.
·	Clean transportation. Growth in our rail collector business for metro and main rail applications, and in water and vacuum pump components for electric vehicle applications.
·	Semiconductors. Growth from carbon and ceramic consumable supply into key semiconductor process steps including crystal growth, deposition, lithography and etch.
·	Healthcare. Growth from medical imaging and supply of low temperature insulation for medicine and vaccine transport and storage.

During 2023, organic constant-currency* revenue growth in these segments was 10.4%, which represented 21.3% of our revenue overall.

Our financial framework

We have a clear, through-cycle financial framework, consisting of:

·	Organic constant-currency* revenue growth of 4%-7% through the cycle
·	Adjusted operating profit margin* of 12.5%-15%
·	Return on invested capital* of 17%-20%
·	Leverage (net debt*/EBITDA excl. leasing*) of 1.0-2.0 times

Our framework drives enhanced earnings growth and underpins our strategy. We have upgraded our constant-currency* growth guidance for 2024 onwards (previously 3%-6%)  in anticipation of the significant Semiconductor investment, noted on page 2.

Our environment, social and governance (ESG) priorities

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.

Protect the environment

·	Our goal is to be a CO2e Scope 1 and 2 net zero business by 2050. Our 2030 target is to reduce our scope 1 and 2 CO2e emissions by 50% (from a 2015 baseline), and during the year we reduced our emissions by  25%. We are now 54% below our 2015 baseline and on track to meet our 2030 goal.
·	Our goal is to use water sustainably across our business. Our 2030 target is to reduce our overall water usage, as well as our water usage in high and extremely high stress areas, by 30% (from a 2015 baseline). Our overall water usage decreased by 11% compared with last year and water in high-stress areas has reduced by 14%. We are on track to meet our 2030 goal.

Provide a safe, fair and inclusive workplace

·	Our goal 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 LTA rate was 0.19 (2022: 0.28), an improvement over the prior year reflecting the significant focus on employee safety and wellbeing. During the year we refreshed our 'take 5 for safety' process, introducing new templates and training all of our people. We also completed further work to improve the safety of our high temperature processes and deployed a new EHS system to facilitate reporting and management of EHS activities.
·	Our goal is that our employee demographics reflect the communities that we operate in. Our 2030 target is for 40% female representation across our leadership population of our organisation. Our diversity position improved slightly over the year with 30% females in our leadership population. While we have done a lot to improve our business as an environment for female leaders, we have yet to make progress on this metric and we will be taking further steps in 2024 including further policy improvements, ensuring diverse shortlists when filling roles and accelerating the development of our female leaders.
·	Our goal 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 completed a pulse engagement survey in December 2023 and our engagement score was 54%, this reflects a 1% reduction from the equivalent population last year. We will be completing a full survey in June 2024 and are continuing to drive actions locally and globally to improve the experience of our people.

Our Group Environment, Health and Sustainability Director and Group HR Director coordinate our improvement projects. In addition, the Board reviews progress quarterly and takes an active role in holding the executive team to account on improving ESG performance.

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 09:30 (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 you register by 09:15 (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 and charts. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, and reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18. Review of operations Revenue Adjusted operating profit1 Adjusted operating profit margin1 % 2023 2022 2023 2022 2023 2022 £m £m £m £m % % Thermal Ceramics 402.2 421.4 34.5 48.7 8.6% 11.6% Molten Metal Systems 52.2 57.8 5.7 7.8 10.9% 13.5% Electrical Carbon 201.4 188.7 41.5 39.7 20.6% 21.0% Seals and Bearings 145.8 148.5 11.4 19.0 7.8% 12.8% Technical Ceramics 313.1 295.7 33.1 41.7 10.6% 14.1% Segment total 1,114.7 1,112.1 126.2 156.9 11.3% 14.1% Corporate costs (5.9) (5.9) Group adjusted operating profit1 120.3 151.0 10.8% 13.6% Amortisation of intangible assets (3.3) (4.7)  Operating profit before specific adjusting items 117.0 146.3  10.5% 13.2% Specific adjusting items included in operating profit2 (25.1) (5.5)  Operating profit 91.9 140.8  8.2% 12.7% Net financing costs (14.1) (9.2) Profit before taxation 77.8 131.6

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

    2. Details of specific adjusting items from continuing operations are disclosed in note 4 to the consolidated financial statements.

Thermal Ceramics

Revenue for Thermal Ceramics for the year was £402.2 million, representing a decrease of 4.6% compared with £421.4 million in 2022. Reductions in Conventional energy and Industrial segments were partially offset by growth across several segments including Healthcare, Conventional transportation and Metals. Foreign exchange has been a substantial driver of the decline as on an organic constant-currency* basis, year-on-year revenue decreased by 0.7%.

Thermal Ceramics operating profit was £25.3 million (2022: £44.3 million), and operating margin was 6.3% (2022: 10.5%). Operating margin has declined versus prior year owing to inefficiencies from the cyber security incident impacting the first half of the year. Full year margins show significant recovery through H2. Details of the specific adjusting items charge of £8.0 million (2022: £2.8 million) are included in note 4. Adjusted operating profit* was £34.5 million (2022: £48.7 million) with adjusted operating profit margin* of 8.6% (2022: 11.6%).

Molten Metal Systems

Revenue for Molten Metals Systems for the year was £52.2 million, a decrease of 9.7% compared with £57.8 million in 2022. Revenue decline is seen across both Industrial and Metals segments due to reduced market demand. On an organic constant-currency* basis, year-on-year revenue decreased by 8.1%.

Molten Metal Systems operating profit was £4.2 million (2022: £7.5 million), and operating profit margin was 8.0% (2022: 13.0%). Margin weakening has been caused by the drop through of volume decline as well as cyber security related inefficiencies in the first half. Details of the specific adjusting items charge of £1.3 million (2022: £nil) are included in note 4. Adjusted operating profit* was £5.7 million (2022: £7.8 million) with adjusted operating profit margin* of 10.9% (2022: 13.5%).

Electrical Carbon

Revenue for Electrical Carbon for the year was £201.4 million, representing an increase of 6.7% compared with £188.7 million in 2022, driven by significant growth in our Semiconductor segment. On an organic constant-currency* basis, year-on-year revenue increased by 9.7%.

Electrical Carbon operating profit was £38.7 million (2022: £39.1 million), and operating profit margin was 19.2% (2022: 20.7%). Slight margin reduction is a result of cyber security incident related inefficiencies in the first half of the year. Details of the specific adjusting items charge of £2.3 million (2022: £0.1 million credit) are included in note 4. Adjusted operating profit* was £41.5 million (2022: £39.7 million) with an adjusted operating profit margin* of 20.6% (2022: 21.0%).

Seals and Bearings

Revenue for Seals and Bearings in 2023 was £145.8 million, representing a decrease of 1.8% compared with £148.5 million in 2022, with the primary driver being a decline in the Industrial segment offset by strong growth in the Healthcare and Petrochemical segments. On an organic constant-currency* basis, year-on-year revenue decreased by 1.2%. Ceramic armour sales in 2023 were £25.4 million (2022: £25.5 million).

Seals and Bearings operating profit was £3.3 million (2022: £16.6 million), and operating profit margin was 2.3% (2022: 11.2%). Details of the specific adjusting items charge of £7.4 million (2022: £1.6 million) are included in note 4. Margin deteriorated as a result of manufacturing inefficiencies from the cyber security incident. Adjusted operating profit* was £11.4 million (2022: £19.0 million), with an adjusted operating profit margin* of 7.8% (2022: 12.8%).

Technical Ceramics

Revenue for the Technical Ceramics global business unit in 2023 was £313.1 million, an increase of 5.9% compared with £295.7 million in 2022, driven by strong growth in Conventional transport (particularly Aerospace) and Security and defense with a combination of market growth and share wins. On an organic constant-currency* basis, year-on-year revenue increased by 6.4%.

Technical Ceramics operating profit was £40.4 million (2022: £39.2 million), and operating profit margin was 12.9% (2022: 13.3%). Details of the specific adjusting items credit of £8.0 million (2022: £1.2 million charge) are included in note 4. Margin decline due to continued system recovery from the cyber security incident and related inefficiencies. Adjusted operating profit* was £33.1 million (2022: £41.7 million), with an adjusted operating profit margin* of 10.6% (2022: 14.1%).

Group financial review

Group revenue was £1,114.7 million (2022: £1,112.1 million), an increase of 0.2% on a reported basis compared with 2022.

Group adjusted operating profit* was £120.3 million (2022: £151.0 million). Adjusted operating profit margin* was 10.8%, compared with 13.6% for 2022.

Operating profit was £91.9 million (2022: £140.8 million) and profit before tax was £77.8 million (2022: £131.6 million). Specific adjusting items in 2023 was a net pre-tax charge of £25.1 million (2022: £5.5 million), primarily relating to the cyber security incident in January 2023, impairment of non-financial assets, and impact of Argentina's currency devaluation. Further details are included under Specific adjusting items below.

The Group amortisation charge was £3.3 million (2022: £4.7 million).

The net finance charge was £14.1 million (2022: £9.2 million) comprising net bank interest and similar charges of £11.7 million (2022: £5.4 million), net interest on IAS 19 pension obligations of £nil (2022: £1.4 million), and the interest expense on lease liabilities of £2.4 million (2022: £2.4 million) resulting from IFRS 16 Leases. Bank charges have increased because of higher borrowings and interest rates.

Looking forward to 2024, we anticipate that the net finance charge will be around £18-20 million, comprising: net bank interest and similar charges of £16-17 million; net interest on IAS 19 pension obligations of £0.5 million; and net interest expense on lease liabilities of £2 million.

The Group tax charge from continuing operations, excluding specific adjusting items, was £26.0 million (2022: £37.1 million). The effective tax rate, excluding specific adjusting items, was 25.3.% (2022: 27.0%). Note 6 to the consolidated financial statements on page 34 provides additional information on the Group's tax charge. Looking forward to 2024, we anticipate that the effective tax rate will be around 25%-27%. On a statutory basis, the Group tax charge was £22.2 million (2022: £36.0 million), lower than the previous year due to the lower taxable profits.

Basic earnings per share from continuing operations was 16.4 pence (2022: 30.6 pence) and adjusted earnings per share* was 25.0 pence (2022: 33.8 pence). Details of these calculations can be found in note 8 to the consolidated financial statements on page 36.

The Group's balance sheet and liquidity remain robust. Net debt* for the year ended 31 December 2023 was £232.3 million, with net debt excluding lease liabilities* of £185.2 million. The Group has cash and cash equivalents* of £124.5 million and undrawn headroom on its revolving credit facility of £187.9 million.

Our key financial covenants are measured on a pre-IFRS 16 Leases basis. As at 31 December 2023, net debt* to EBITDA*, excluding lease liabilities, was 1.2 times compared to a covenant not to exceed 3.0 times, and our interest cover was 12.7 times, compared with a covenant to exceed 4.0 times.

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 the performance of the Group excluding these items.

Details of specific adjusting items arising from continuing operations during the year and the comparative period are given in note 4 to the consolidated financial statements. Specific adjusting items in relation to discontinued operations are disclosed in note 7 to the consolidated financial statements.

In 2023, pre-tax specific adjusting items from continuing operations totalled £25.1 million (2022: £5.5 million) and comprised the following:

	2023 £m	2022 £m
Specific adjusting items from continuing operations1
Costs associated with the cyber security incident	(14.7)	-
Charges in relation to the impact of Argentina's currency devaluation	(5.8)	-
Net restructuring (charge)/credit	(3.5)	0.6
Net business closure and exit costs	(1.9)	-
Impairment review of non-financial assets	(7.3)	(6.5)
Reversal of impairment of non-financial assets	8.1	-
Net profit on disposal of business	-	0.4
Total specific adjusting items before income tax	(25.1)	(5.5)
Income tax credit from specific adjusting items	3.8	1.1
Total specific adjusting items after income tax	(21.3)	(4.4)

1.Specific adjusting items relating to discontinued operations are disclosed in note 7.

2023

Costs associated with the cyber security incident

During 2023, we incurred £14.7 million of exceptional costs and charges in relation to the cyber security incident in January 2023. These were comprised of legal and advisory costs, IT recovery and support costs and impairment charges for IT assets which were rendered unusable as a result of the incident.

Charges in relation to the impact of Argentina's currency devaluation

On 13 December 2023, Argentina devalued its currency by more than 50%. The impact of the currency devaluation (£2.6 million) has been classified as a specific adjusting item. An impairment review was also performed as at 31 December 2023 and, due to restrictions on imports limiting the ability to purchase raw materials and the subsequent effect on forecast trading, we have fully impaired the carrying value of property, plant and equipment and the value of raw materials which, in the current circumstances, we would be unable to sell. The impairment charges in relation to property, plant and equipment and inventory were £1.9 million and £1.3 million respectively.

Net restructuring charge

The Group has taken the opportunity to reduce our global footprint and rationalise costs in order to focus resources on our faster growing markets and optimise factory operations. This restructuring programme commenced in the second half of 2023 and will continue into 2024. A charge of £6.5 million has been recognised in relation to this and comprises costs associated with staff redundancies and site closure costs.

A restructuring provision of £3.0 million held for Technical Ceramics, ceramic cores during the Group's 2020 restructuring programme has been released following settlement of a multi-employer pension plan and the re-letting of the site.

Net business closure and exit costs

During 2023, we commenced liquidation of a Thermal Ceramics business in China. Costs associated with this were £1.9 million and included severance, decommissioning and advisory fees.

The land and buildings owned by another Thermal Ceramics business in China which was closed in 2020 were sold in December 2023. The gain associated with this sale was £2.4 million.

We disposed of a Thermal Ceramics business in France in 2015, for which we retained responsibility for remediating the impact of historical manufacturing processes on the environment. An assessment of the remaining required remediation was performed in 2023 and as a consequence of this review we have provided £2.4 million.

Impairment of non-financial assets

Seals and Bearings, Europe

An impairment charge of £2.9 million was recognised after reassessing the value in use of property, plant and equipment in a business in Italy, which was experiencing limited growth. This represents a partial impairment of the assets; the carrying value of the assets following this impairment was £5.3 million. The calculation of value in use was performed as at 31 December 2023, a long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value, with a pre-tax discount rate of 17.3%.

An impairment charge of £0.3 million was recognised after assessing the viability of a development asset, which could not be successfully commissioned.

Seals and Bearings, Asia

An impairment charge of £1.9 million was recognised after reassessing the value in use of property, plant and equipment in a business which was experiencing limited growth and under-utilisation of key assets. This represents a partial impairment of assets; the carrying value of the assets following this impairment was £2.2 million. The calculation was performed as at 31 December 2023, using a long-term growth rate of 1.0% and a pre-tax discount rate of 13.9%.

Electrical Carbon, North America

An impairment charge of £1.5 million was recognised after assessing the viability of a development asset in North America which was not deemed to be commercially viable.

Electrical Carbon, Asia

An impairment charge of £0.7 million was recognised in relation to assets associated with a manufacturing line which, based on current projections, is expected to be under-utilised from 2025 onwards.

Reversal of impairment of non-financial assets (recognised in previous periods)

In 2020, as a result of the COVID-19 pandemic, we impaired property, plant and equipment within our Technical Ceramics, ceramic cores business and Thermal Ceramics, Europe. Following our review as at 31 December 2023 of assets which continue to be used and which were impaired in previous years, we have reversed a portion of this impairment. For the ceramic cores business, we reversed £5.7 million being a full reversal, reinstating the net book value at which the assets would have been held if the impairment had not been booked in 2020, because the business and the aerospace industry have demonstrated sustained growth. For Thermal Ceramics, Europe we have recorded a partial impairment reversal of £2.4 million following sustained recovery of the industrial market segments. This reversal is based on a value in use calculation which was performed at 31 December 2023, using a long-term growth rate of 1.0% for years beyond the five-year forecast period and in calculating terminal value, with a pre-tax discount rate of 13.6%.

Review of cumulative impairment of non-financial assets

Impairment charges of £20.6 million for non-financial assets which the business continues to use have been recorded during the current and previous years (Technical Ceramics, Asia £7.7 million, Thermal Ceramics £7.2 million, Seals and Bearings, Asia £2.9 million and Seals and Bearings, Europe £2.8 million). These impaired amounts could be reversed if the related businesses were to outperform significantly against their budget. A sensitivity analysis was carried out using reasonably possible changes to the key assumptions in assessing the value in use of these non-financial assets. This did not result in a material reversal of the impaired amounts.

2022

Impairment of non-financial assets

Seals and Bearings, Asia

An impairment charge of £0.6 million was recognised relating to assets purchased to support a customer contract which did not materialise.

A further impairment charge of £1.0 million was recognised after reassessing the value in use of property, plant and equipment in a business in Asia which was taking longer than anticipated to generate revenues. This represented a partial impairment of the assets; the carrying value of the assets following this impairment was £5.2 million. The calculation of the value in use was performed as at December 2022. A long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value. A pre-tax discount rate of 12.9% was used to determine the value in use.

Thermal Ceramics, Europe

An impairment charge of £1.2 million was recognised following a fire in December which destroyed a warehouse and inventory. The assets were subsequently written off.

An impairment charge of £1.1 million was recognised after reassessing the value in use of property, plant and equipment in a business in France which was experiencing limited growth and under-utilisation of key assets. This represented a partial impairment of the assets. The carrying value of the assets following the impairment was £0.3 million. The calculation of value in use was performed as at December 2022. A long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value. A pre-tax discount rate of 13.7% was used to determine the value in use.

Thermal Ceramics, South America

An impairment charge of £0.9 million was recognised in relation to assets associated with a closed manufacturing line.

Technical Ceramics, Asia

An impairment charge of £1.7 million was recognised after reassessing the value in use of property, plant and equipment in a business in Asia which was taking longer than anticipated to generate revenues. This represented a partial impairment of the assets; the carrying value of the assets following this impairment was £3.2 million. The calculation of the value in use was performed as at December 2022.

A long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value. A pre-tax discount rate of 12.9% was used to determine the value in use.

Restructuring credit

A credit of £0.6 million was recognised in the year ended 31 December 2022. This represented the release of restructuring provisions recorded in relation to the Group's 2020 restructuring programme. The remaining provision of £10.5 million as at 31 December 2022 included lease exit costs and multi-employer pension obligations for two sites which were closed in 2021. In 2022, the cash outflows relating to the pension obligations were expected to continue for up to 19 years, subject to any settlement being reached in advance of that date. Cash outflows in relation to the lease were expected to continue for four years.

Net profit on disposal of business

The Group disposed of its investment in the joint venture Sukhoy Log, based in Russia, during 2022. This disposal generated a net profit of £0.4 million. Refer to note 2 for further information.

Foreign currency impact

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

	2023		2022
GBP to:	Closing rate	Average rate	Closing rate	Average rate
US dollar	1.27	1.24	1.21	1.24
Euro	1.15	1.15	1.13	1.17

For illustrative purposes, the table below provides details of the impact on 2023 revenue and Group adjusted operating profit* if the actual reported results, calculated using 2023 average exchange rates were restated for GBP weakening by 10 cents against USD in isolation and 10 cents against the Euro in isolation:

Increase in 2023 revenue/adjusted operating profit1 if:	Revenue £m	Adjusted operating profit1 £m
GBP weakens by 10c against the USD in isolation	42.8	4.9
GBP weakens by 10c against the Euro in isolation	21.5	2.5

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

Retranslating the 2023 full year results at the February 2024 closing exchange rates would lead to revenue of £1,091.7 million and adjusted operating profit* of £112.7 million.

Cash flow

	2023 £m	2022 £m
Cash generated from continuing operations	126.3	59.1
Net capital expenditure	(58.5)	(57.4)
Net interest on cash and borrowings	(11.6)	(5.4)
Tax paid	(30.3)	(31.8)
Lease payments and interest	(11.3)	(11.4)
Free cash flow before acquisitions, disposals and dividends1	14.6	(46.9)
Dividends paid to external plc shareholders	(34.2)	(31.6)
Net cash flows from other investing and financing activities	(17.8)	(10.3)
Cash flows from sale of subsidiaries and associates	-	0.4
Net cash flows from discontinued operations	0.4	1.1
Exchange movement and other non-cash movements	0.3	(14.5)
Opening net debt1 excluding lease liabilities	(148.5)	(46.7)
Closing net debt1 excluding lease liabilities	(185.2)	(148.5)
Closing lease liabilities	(47.1)	(51.9)
Closing net debt1	(232.3)	(200.4)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

Cash generated from continuing operations was £126.3 million (2022: 59.1 million).

Free cash flow before acquisitions, disposals and dividends* was £14.6 million (2022: £(46.9) million).

Net debt* at the year end was £232.3. million (2022: £200.4 million), representing a net debt* to EBITDA* ratio of 1.5. times (2022: 1.1 times).

Net debt* excluding lease liabilities was £185.2. million (2022: £148.5 million), representing a net debt* to EBITDA* ratio excluding lease liabilities of 1.2 times (2022: 0.8 times).

Defined benefit pension plans

The Group pension deficit has increased by £9.6 million since last year end to £25.2 million on an IAS 19 (revised) basis.

·	The UK Schemes' surplus decreased by £12.7 million to £12.5 million (2022 surplus: £25.2 million), (discount rate 2023: 4.52%; discount rate 2022: 4.81%).
·	The US Schemes' deficit decreased by £3.7 million to £5.5 million (2022: £9.2 million), (discount rate 2023: 4.80%; discount rate 2022: 4.99%).
·	The European Schemes' deficit increased by £0.3 million to £28.2 million (2022: £27.9 million), (discount rate 2023: 3.40%; discount rate 2022: 3.70%).
·	The Rest of World Schemes' deficit increased by £0.3 million to £4.0 million (2022: £3.7 million), (discount rate 2023: 5.52%; discount rate 2023: 5.30%).

The most recent full actuarial valuations of the UK Schemes were undertaken as at 31 March 2022 and resulted in combined assessed deficits of £49.7 million on the 'Technical Provisions' basis. The Company subsequently agreed with the Trustees to make a lump sum contribution to the Schemes of £67.0 million on 29 December 2022 in lieu of the remaining contributions that would otherwise have been due under the existing recovery plans from the 31 March 2019 valuations. The sum paid represented the value of the deficit on the more prudent 'Long Term Objective' basis on the date of that agreement, 25 October 2022. As a result, no further contributions to the Schemes are expected to be required pending the results of the next full valuations as at 31 March 2025.

Final dividend

The Board is recommending a final dividend, subject to shareholder approval, of 6.7 pence per share on the Ordinary share capital of the Group, payable on 17 May 2024 to Ordinary shareholders on the register at the close of business on 26 April 2024. The ex-dividend date is 25 April 2024.

Together with the interim dividend of 5.3 pence per share paid on 17 November 2023, this final dividend, if approved by shareholders, brings the total distribution for the year to 12.0 pence per share (2022: 12.0 pence).

A total dividend of 12.0 pence per share represents a dividend cover of adjusted EPS* of 2.1 times.

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 2.5 times over the medium term. While the results in 2023 were depressed by the impact of the cyber security incident, the balance sheet is strong and the Board is confident about the outlook for the business. Consequently, the Board is recommending a flat dividend in 2023 even though cover is lower than our target for this year.

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 24, 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 consistent with previous years.

2023	Thermal Ceramics £m	Molten  Metal Systems £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Segment total  £m	Corporate costs1 £m	Group £m
Operating profit	25.3	4.2	38.7	3.3	40.4	111.9	(20.0)	91.9
Add back specific adjusting items included in operating profit	8.0	1.3	2.3	7.4	(8.0)	11.0	14.1	25.1
Add back amortisation of intangible assets	1.2	0.2	0.5	0.7	0.7	3.3	-	3.3
Adjusted operating profit	34.5	5.7	41.5	11.4	33.1	126.2	(5.9)	120.3
Adjusted operating profit margin	8.6%	10.9%	20.6%	7.8%	10.6%			10.8%

1.  Corporate costs consist of central head office costs.

2022	Thermal Ceramics £m	Molten  Metal Systems £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Segment total  £m	Corporate costs1 £m	Group £m
Operating profit	44.3	7.5	39.1	16.6	39.2	146.7	(5.9)	140.8
Add back specific adjusting items included in operating profit	2.8	-	(0.1)	1.6	1.2	5.5	-	5.5
Add back amortisation of intangible assets	1.6	0.3	0.7	0.8	1.3	4.7	-	4.7
Adjusted operating profit	48.7	7.8	39.7	19.0	41.7	156.9	(5.9)	151.0
Adjusted operating profit margin	11.6%	13.5%	21.0%	12.8%	14.1%			13.6%

1.  Corporate costs consist of central head office costs.

Organic growth

Organic growth is the growth of the business excluding the impacts of acquisitions and 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 within the Review of operations on pages 6 to 8.

Year-on-year movements in segment revenue

	Thermal Ceramics £m	Molten Metal Systems £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Segment total £m
2022 revenue	421.4	57.8	188.7	148.5	295.7	1,112.1
Impact of foreign currency movements	(16.3)	(1.0)	(5.1)	(0.9)	(1.5)	(24.8)
Impact of acquisitions, disposals and business exits	-	-	-	-	-	-
Organic constant-currency change	(2.9)	(4.6)	17.8	(1.8)	18.9	27.4
Organic constant-currency change %	(0.7)%	(8.1)%	9.7%	(1.2)%	6.4%	2.5%
2023 revenue	402.2	52.2	201.4	145.8	313.1	1,114.7

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

	Thermal Ceramics £m	Molten Metal Systems £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Segment total £m	Corporate costs1 £m	Group £m
2022 adjusted operating profit	48.7	7.8	39.7	19.0	41.7	156.9	(5.9)	151.0
Impact of foreign currency movements	(4.7)	(0.3)	(1.7)	(0.2)	0.1	(6.8)	-	(6.8)
Impact of acquisitions, disposals and business exits	-	-	-	-	-	-	-	-
Organic constant-currency change	(9.5)	(1.8)	3.5	(7.4)	(8.7)	(23.9)	-	(23.9)
Organic constant-currency change %	(21.6)%	(24.0)%	9.2%	(39.4)%	(20.8)%	(15.9)%	-	-
2023 adjusted operating profit	34.5	5.7	41.5	11.4	33.1	126.2	(5.9)	120.3

1. Corporate costs consist of central head office costs.

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 basis i.e. excluding capital and interest payments on leases which have been capitalised following the adoption of IFRS 16. This is used as a proxy for the charge that would have been attributable to operating leases under the now defunct IAS 17.  A reconciliation of operating profit to Group EBITDA is as follows:

	2023 £m	2022 £m
Operating profit	91.9	140.8
Add back: specific adjusting items included in operating profit	25.1	5.5
Add back: depreciation - property, plant and equipment	31.9	30.3
Add back: depreciation - right-of-use assets	7.6	7.8
Add back: amortisation of intangible assets	3.3	4.7
Group EBITDA	159.8	189.1
Group EBITDA excluding IFRS 16 Leases impact	148.5	177.7

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 free cash flow as this provides readers of the 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:

	2023 £m	2022 £m
Cash generated from continuing operations	126.3	59.1
Net capital expenditure	(58.5)	(57.4)
Net interest on cash and borrowings	(11.6)	(5.4)
Tax paid	(30.3)	(31.8)
Lease payments and interest	(11.3)	(11.4)
Free cash flow before acquisitions, disposals and dividends	14.6	(46.9)

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.

	2023 £m	2022 £m
Cash and cash equivalents	124.5	117.7
Bank overdrafts	(0.6)	(1.5)
Net cash and cash equivalents	123.9	116.2

Net debt

Net debt is defined as borrowings, bank overdrafts and lease liabilities, less cash and cash equivalents. The Group discloses net debt because it helps readers of the consolidated financial statements assess its ability to meet financial obligations, manage debt and its capacity to invest in growth opportunities. The Group also discloses this metric excluding lease liabilities as this is the measure used in the covenants over the Group's debt facilities.

	2023 £m	2022 £m
Cash and cash equivalents	124.5	117.7
Non-current borrowings	(309.1)	(230.1)
Non-current lease liabilities	(36.6)	(41.4)
Current borrowings and bank overdrafts	(0.6)	(36.1)
Current lease liabilities	(10.5)	(10.5)
Closing net debt	(232.3)	(200.4)
Closing net debt excluding lease liabilities	(185.2)	(148.5)

Return on invested capital

The Group discloses return on invested capital (ROIC) to assess its efficiency in generating profits from the capital it has invested in its operations. The ROIC calculation has been simplified this year so that it can be calculated from published information. Prior period comparatives have been restated to follow the same methodology. ROIC is now defined as 12-month adjusted operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 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). Third party working capital includes inventories, trade and other receivables, and trade and other payables.

	2023 £m	20221 £m
Operating profit	91.9	140.8
Add back: specific adjusting items	25.1	5.5
Add back: amortisation of intangible assets	3.3	4.7
Group adjusted operating profit	120.3	151.0
Third-party working capital	174.7	181.7
Plant and equipment	293.8	283.2
Right-of-use assets	31.6	33.6
Goodwill	177.5	181.9
Other Intangible assets	4.7	7.1
Capital employed	682.3	687.5
Average capital employed	684.9	637.8
ROIC	17.6%	23.7%

1. The return on invested capital calculation has been simplified so that it can be calculated from published information and the prior period comparative has been restated. Under the previous methodology (which used 12-month adjusted operating profit and 12-month adjusted net assets), ROIC as at 31 December 2023 was 16.9% (2022: 23.0%).

Adjusted earnings per share

Adjusted earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, 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 that it provides a helpful indication of the Group's financial performance excluding material non-recurring expenses or gains and non-financial asset impairments and impairment reversals, and therefore facilitates the evaluation of the Group's performance over time.

A reconciliation from IFRS profit to the profit used to calculate adjusted earnings per share* is included in note 8 to the consolidated financial statements on page 36.

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 11 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.

Business simplification

As mentioned on page 2, in order to focus our resources on the most attractive opportunities, we will in future manage the Company through three distinct segments, Thermal Products, Performance Carbon and Technical Ceramics. This structure is effective from 1 January 2024.

	Revenue			Adjusted operating profit			Adjusted operating profit margin %
	2023		2022	2023		2022	2023		2022
	£m		£m	£m		£m	%		%
Thermal Products	454.4		479.2	40.2		56.5	8.8%		11.8%
Performance Carbon	327.2		321.7	50.0		57.3	15.3%		17.8%
Technical Ceramics1	333.1		311.2	36.0		43.1	10.8%		13.8%
Segment total	1,114.7		1,112.1	126.2		156.9	11.3%		14.1%
Corporate costs				(5.9)		(5.9)
Group adjusted operating profit				120.3		151.0	10.8%		13.6%

The table above displays restated comparative figures for 2022. The restatements reflect the impact of the changes made to the Group's internal organisation which has caused the composition of its reportable segments to change.

1.The new Technical Ceramics segment comprises the current Technical Ceramics GBU and one business from the Seals and Bearings GBU.

Consolidated income statement

		Year ended 31 December 2023				Year ended 31 December 2022
		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
Revenue	3	1,114.7	-	1,114.7		1,112.1	-	1,112.1
Operating costs before amortisation of intangible assets, impairments and reversal of impairments of non-financial assets		(994.4)	(25.9)	(1,020.3)		(961.1)	1.0	(960.1)
Profit from operations before amortisation of intangible assets, impairments and reversal of impairments of non-financial assets	3	120.3	(25.9)	94.4		151.0	1.0	152.0
Amortisation of intangible assets		(3.3)	-	(3.3)		(4.7)	-	(4.7)
Impairment of non-financial assets	4	-	(7.3)	(7.3)		-	(6.5)	(6.5)
Reversal of impairment of non-financial assets	4	-	8.1	8.1		-	-	-
Operating profit	3	117.0	(25.1)	91.9		146.3	(5.5)	140.8
Finance income		3.9	-	3.9		1.6	-	1.6
Finance expense		(18.0)	-	(18.0)		(10.8)	-	(10.8)
Net financing costs	5	(14.1)	-	(14.1)		(9.2)	-	(9.2)
Profit before taxation		102.9	(25.1)	77.8		137.1	(5.5)	131.6
Income tax expense	6	(26.0)	3.8	(22.2)		(37.1)	1.1	(36.0)
Profit from continuing operations		76.9	(21.3)	55.6		100.0	(4.4)	95.6
Profit from discontinued operations2	7	-	0.7	0.7		-	1.1	1.1
Profit for the year		76.9	(20.6)	56.3		100.0	(3.3)	96.7
Profit for the year attributable to:
Shareholders of the Company		67.9	(20.6)	47.3		91.3	(3.3)	88.0
Non-controlling interests		9.0	-	9.0		8.7	-	8.7
Profit for the year		76.9	(20.6)	56.3		100.0	(3.3)	96.7
Earnings per share	8
Continuing and discontinued operations
Basic earnings per share				16.6p				31.0p
Diluted earnings per share				16.5p				30.7p
Continuing operations
Basic earnings per share				16.4p				30.6p
Diluted earnings per share				16.3p				30.3p
Dividends3
Interim dividend                 - pence				5.30p				5.30p
- £m				15.1				15.1
Proposed final dividend     - pence				6.70p				6.70p
- £m				19.1				19.1

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

2. Profits from discontinued operations are entirely attributable to the Shareholders of the Company.

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

Consolidated statement of comprehensive income

		31 December 2023	31 December 2022
	Note	£m	£m
Profit for the year		56.3	96.7
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently to profit or loss:
Remeasurement (loss)/gain on defined benefit plans	14	(11.5)	5.5
Tax effect of components of other comprehensive income not reclassified	6	(0.5)	(3.4)
		(12.0)	2.1
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences		(32.8)	17.5
Cash flow hedges:
Change in fair value		1.1	(0.2)
Transferred to profit or loss		0.2	0.1
Net investment hedges:
Change in fair value		(0.3)	-
		(31.8)	17.4
Total other comprehensive (expense)/income		(43.8)	19.5
Total comprehensive income		12.5	116.2
Attributable to:
Shareholders of the Company		6.7	106.7
Non-controlling interests		5.8	9.5
		12.5	116.2
Total comprehensive income attributable to shareholders of the Company arising from:
Continuing operations		6.0	105.6
Discontinued operations		0.7	1.1
		6.7	106.7

Consolidated balance sheet

			As at 31 December 2023	As at  31 December 2022
		Note	£m	£m
Assets
Property, plant and equipment		9	293.8	283.2
Right-of-use assets		10	31.6	33.6
Intangible assets: goodwill		11	177.5	181.9
Intangible assets: other		11	4.7	7.1
Investments			2.2	-
Other receivables			3.4	3.2
Deferred tax assets			17.6	15.3
Total non-current assets			530.8	524.3
Inventories			175.1	174.2
Derivative financial assets		13	1.5	1.3
Trade and other receivables			191.6	202.5
Current tax receivable			1.2	0.3
Cash and cash equivalents		12	124.5	117.7
Total current assets			493.9	496.0
Total assets			1,024.7	1,020.3
Liabilities
Borrowings			309.1	230.1
Lease liabilities			36.6	41.4
Employee benefits: pensions		14	25.2	15.6
Provisions		15	11.5	16.1
Non-trade payables			2.4	2.1
Deferred tax liabilities			1.8	2.0
Total non-current liabilities			386.6	307.3
Borrowings and bank overdrafts			0.6	36.1
Lease liabilities			10.5	10.5
Trade and other payables			192.0	195.0
Current tax payable			25.6	30.3
Provisions		15	10.3	9.9
Derivative financial liabilities		13	0.5	1.6
Total current liabilities			239.5	283.4
Total liabilities			626.1	590.7
Total net assets			398.6	429.6
Equity
Share capital			71.3	71.3
Share premium			111.7	111.7
Reserves			6.5	35.1
Retained earnings			170.8	170.9
Total equity attributable to shareholders of the Company			360.3	389.0
Non-controlling interests			38.3	40.6
Total equity			398.6	429.6

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 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 year	-	-	-	-	-	-	-	88.0	88.0	8.7	96.7
Other comprehensive income/(expense):
Remeasurement gain on defined benefit plans and related taxes	-	-	-	-	-	-	-	2.1	2.1	-	2.1
Foreign exchange differences and related taxes	-	-	16.7	-	-	-	-	-	16.7	0.8	17.5
Cash flow hedging fair value changes and transfers	-	-	-	(0.1)	-	-	-	-	(0.1)	-	(0.1)
Total other comprehensive income/(expense)	-	-	16.7	(0.1)	-	-	-	2.1	18.7	0.8	19.5
Total comprehensive income/(expense)	-	-	16.7	(0.1)	-	-	-	90.1	106.7	9.5	116.2
Transactions with owners:
Dividends	-	-	-	-	-	-	-	(31.6)	(31.6)	(7.9)	(39.5)
Equity-settled share-based payments	-	-	-	-	-	-	-	5.7	5.7	-	5.7
Own shares acquired for share incentive schemes (net)	-	-	-	-	-	-	-	(2.4)	(2.4)	-	(2.4)
At 31 December 2022	71.3	111.7	-	(0.2)	(1.0)	35.7	0.6	170.9	389.0	40.6	429.6
At 1 January 2023	71.3	111.7	-	(0.2)	(1.0)	35.7	0.6	170.9	389.0	40.6	429.6
Profit for the year	-	-	-	-	-	-	-	47.3	47.3	9.0	56.3
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes	-	-	-	-	-	-	-	(12.0)	(12.0)	-	(12.0)
Foreign exchange differences and related taxes	-	-	(29.6)	-	-	-	-	-	(29.6)	(3.2)	(32.8)
Cash flow hedging fair value changes and transfers	-	-	-	1.3	-	-	-	-	1.3	-	1.3
Net investment hedging fair value changes and transfers	-	-	(0.3)	-	-	-	-	-	(0.3)	-	(0.3)
Total other comprehensive income/(expense)	-	-	(29.9)	1.3	-	-	-	(12.0)	(40.6)	(3.2)	(43.8)
Total comprehensive income/(expense)	-	-	(29.9)	1.3	-	-	-	35.3	6.7	5.8	12.5
Transactions with owners:
Dividends	-	-	-	-	-	-	-	(34.2)	(34.2)	(8.1)	(42.3)
Equity-settled share-based payments	-	-	-	-	-	-	-	2.9	2.9	-	2.9
Own shares acquired for share incentive schemes (net)	-	-	-	-	-	-	-	(4.1)	(4.1)	-	(4.1)
At 31 December 2023	71.3	111.7	(29.9)	1.1	(1.0)	35.7	0.6	170.8	360.3	38.3	398.6

Consolidated statement of cash flows

		Year ended 31 December 2023	Year ended 31 December 2022
	Note	£m	£m
Operating activities
Profit for the year from continuing operations		55.6	95.6
Profit for the year from discontinued operations	7	0.7	1.1
Adjustments for:
Depreciation - property, plant and equipment		31.9	30.3
Depreciation - right-of-use assets		7.6	7.8
Amortisation		3.3	4.7
Net financing costs	5	14.1	9.2
Profit on disposal of business	2,4	-	(0.4)
Non-cash specific adjusting items included in operating profit		(2.5)	6.6
Fair value gain on equity instruments held at FVTPL		(0.9)	-
Profit on sale of property, plant and equipment		(1.6)	(0.3)
Income tax expense	6	22.2	36.0
Equity-settled share-based payment expense		2.9	5.1
Cash generated from operations before changes in working capital and provisions		133.3	195.7
Increase in trade and other receivables		(4.0)	(26.5)
Increase in inventories		(12.3)	(25.2)
Increase in trade and other payables		13.3	7.0
Decrease in provisions		(3.4)	(4.9)
Payments to defined benefit pension plans (net of IAS 19 pension charges)	14	(0.2)	(85.9)
Cash generated from operations		126.7	60.2
Interest paid - borrowings and overdrafts		(15.5)	(7.0)
Interest paid - lease liabilities		(2.4)	(2.4)
Income tax paid		(30.3)	(31.8)
Net cash from operating activities		78.5	19.0
Investing activities
Purchase of property, plant and equipment and software		(60.4)	(58.0)
Purchase of investments		(5.6)	-
Proceeds from sale of property, plant and equipment		1.8	0.6
Grants received for purchase of equipment		0.1	-
Interest received		3.9	1.6
Disposal of investments		-	0.4
Net cash from investing activities		(60.2)	(55.4)
Financing activities
Purchase of own shares for share incentive schemes		(4.7)	(2.9)
Proceeds from exercise of share options		0.6	0.5
Increase in borrowings		247.2	113.3
Repayment of borrowings		(193.9)	(39.0)
Payment of lease liabilities		(8.9)	(9.0)
Dividends paid to shareholders of the Company		(34.2)	(31.6)
Dividends paid to non-controlling interests		(8.1)	(7.9)
Net cash from financing activities		(2.0)	23.4
Net decrease in cash and cash equivalents		16.3	(13.0)
Cash and cash equivalents at start of the year		117.7	127.3
Effect of exchange rate fluctuations on cash held		(9.5)	3.4
Cash and cash equivalents at year end	12	124.5	117.7

Notes on consolidated financial statements

Note 1. Basis of preparation, changes in accounting policies and areas of significant judgement and estimate     

The preliminary announcement for the year ended 31 December 2023, which is an abridged statement of the full Annual Report and Accounts, has been prepared in accordance with the requirements of the Companies Act 2006 and International Financial Reporting Standards ('IFRSs') as adopted by the UK. Except for the changes set out in the adoption of new and revised standards section, there has been no other significant impact arising from new accounting policies adopted in the year.

The financial information set out in this report does not constitute the Company's statutory accounts for the years ended 31 December 2023 or 31 December 2022. Statutory accounts for the year ended 31 December 2022 have been delivered to the registrar of companies, and those for the year ended 31 December 2023 will be delivered in due course.

The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2023 and 2022.

Critical accounting judgements and key sources of estimation uncertainty

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Final outcomes may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.

Critical accounting judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included in the following notes: 

Note 4: Specific adjusting items

The Group uses specific adjusting items, which are not defined or specified under IFRS. These specific adjusting items, which are not considered to be a substitute for IFRS measures, provide additional helpful information. In the consolidated income statement, the Group presents specific adjusting items separately. In the judgement of the Directors, due to the nature and value of these items they should be disclosed separately from the underlying results of the Group to provide the reader with an alternative understanding of the financial information and an indication of the underlying performance of the Group. These items which occur infrequently and include (but are not limited to):

·	Individual restructuring projects which are material or relate to the closure of a part of the business and are not expected to recur.
·	Impairment of non-financial assets which are material.
·	Gains or losses on disposal or exit of businesses.
·	Significant costs incurred as part of the integration of an acquired business.
·	Gains or losses arising on significant changes to or closures of defined benefit pension plans.

For the year ended 31 December 2023, costs associated with our response to the cyber security incident and charges in relation to the impact of Argentina's currency devaluation were also classified as specific adjusting items, due to their size and nature.

Determining whether an item is part of specific adjusting items requires judgement to determine the nature and the intention of the transaction.

Note 15: Provisions and contingent liabilities                                                                                                                                                               

Due to the nature of its operations, the Group holds provisions for its environmental obligations. Judgement is needed in determining whether a contingent liability has crystallised into a provision. Management assesses whether there is sufficient information to determine that an environmental liability exists and whether it is possible to estimate with sufficient reliability what the cost of remediation is likely to be. For environmental remediation matters, this tends to be at the point in time when a remediation feasibility study has been completed, or sufficient information becomes available through the study to estimate the costs of remediation.

The Group will recognise a legal provision at the point when the outcome of a legal matter can be reliably estimated. Estimates are based on past experience of similar issues, professional advice received and the Group's assessment 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.                                                                                                                                           

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are included in the notes below.

Management has assessed the potential financial impacts relating to climate change-related risks, primarily considering the useful lives of property, plant and equipment, the possibility of impairment of goodwill and other long-lived assets and the recoverability of the Group's deferred tax assets. Management has exercised judgement in concluding that there are no further material financial impacts of the Group's climate-related risks and opportunities on the consolidated financial statements. These judgements are kept under review by management as the future impacts of climate change depend on environmental, regulatory and other factors outside of the Group's control which are not all currently known.

Note 14: Pensions and other post-retirement employee benefits: key actuarial assumptions

The principal actuarial assumptions applied to pensions are shown in note 14. The actuarial evaluation of pension assets and liabilities is based on assumptions in respect of inflation, future salary increases, discount rates, returns on investments and mortality rates. Relatively small changes in the assumptions underlying the actuarial valuations of pension schemes can have a significant impact on the net pension liability included in the balance sheet.

Adoption of new and revised accounting standards

Newly adopted standards

In the current year, the Group has applied a number of amendments to IFRS Accounting Standards as adopted by the UK that are mandatorily effective for an accounting period that begins on or after 1 January 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

·	IFRS 17 Insurance Contracts (including the June 2020 and December 2021 Amendments to IFRS 17)
·	Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Material Judgements - Disclosure of Accounting Policies
·	Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction
·	Amendments to IAS 12 Income Taxes - International Tax Reform - Pillar Two Model Rules
·	Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates.

Accounting developments and changes

New accounting standards in issue but not yet effective

New standards and interpretations that are in issue but not yet effective are listed below:

·	Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
·	Amendments to IAS 1 Classification of Liabilities as Current or Non-current
·	Amendments to IAS 1 Non-current Liabilities with Covenants
·	Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
·	Amendments to IFRS 16 Lease Liability in a Sale and Leaseback.

The above standards and interpretations are effective for the period beginning 1 January 2024 and adoption is not expected to lead to any material changes to the Group's accounting policies or have any other material impact on the financial position or performance of the Group.

There are no other upcoming accounting standards or amendments that are applicable to the Group.

Non-GAAP measures

Where non-GAAP measures have been referenced these have been identified by an asterisk (*) where they appear in the 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 14 to 18.

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 Strategic Report contained in the Annual Report and Accounts. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, are described in the Financial Review contained in the Annual Report and Accounts. In addition, note 21 to the Annual Report and Accounts includes 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 £230.0 million unsecured multi-currency revolving credit facility, which matures in November 2028. As at 31 December 2023, the Group had both significant available liquidity and headroom on its covenants. Total committed borrowing facilities were £496.9 million. The amount drawn under these facilities was £309.0 million, which together with net cash and cash equivalents of £123.9 million, gave a total headroom of £311.8 million. The multi-currency revolving credit facility was £42.1 million drawn. The Group had no scheduled debt maturities until 2026.

The principal borrowing facilities are subject to covenants that are measured semi-annually in June and December, being net debt to EBITDA of a maximum of 3 times and interest cover of a minimum of 4 times, based on measures defined in the facilities agreements which are adjusted from the equivalent IFRS amounts.

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 as discussed in note 21 to the Annual Report and Accounts. 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 46% and an increase in net debt of 40% 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. 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 Annual Report and Accounts. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Directors’ Responsibility Statement

The 2023 Annual Report and Accounts, which will be issued in March 2024, contains a responsibility statement in compliance with DTR 4.1.12 of the Listing Rules which sets out that as at the date of approval of the Annual Report on 11 March 2024, the directors confirm to the best of their knowledge:

-      the Group and unconsolidated Company financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company, and the undertakings included in the consolidation taken as a whole; and

-      the performance review contained in the Annual Report and Accounts includes a fair review of the development and performance of the business and the position of the Group and the undertakings including the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

 

Note 2. Acquisitions and disposals

2023

There were no acquisitions or disposals of businesses by the Group in 2023.

2022

Disposal of Sukhoy Log

On 29 July 2022, the Group completed the sale of its investment in the joint venture Sukhoy Log, based in Russia. The investment had a carrying value of £nil having been fully impaired in previous years. The Group received consideration of £0.6 million and incurred transaction costs of £0.2 million, resulting in a net consideration of £0.4 million. A profit on disposal of £0.4 million was recognised in specific adjusting items within the consolidated income statement, see also note 4.

There was no income received from Sukhoy Log in the year ended 31 December 2022. The disposal group was included in the Thermal Ceramics operating segment.

Note 3. Segment reporting

The Group's results are reported as five separate 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. We will in future manage the Group through three distinct segments: Thermal Products, Performance Carbon and Technical Ceramics. This new structure will be effective from 1 January 2024.

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:

Year ended 31 December 2023
	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	402.2	52.2	201.4	145.8	313.1	1,114.7	-	1,114.7
Segment adjusted operating profit1	34.5	5.7	41.5	11.4	33.1	126.2	-	126.2
Corporate costs2							(5.9)	(5.9)
Group adjusted operating profit1								120.3
Amortisation of intangible assets	(1.2)	(0.2)	(0.5)	(0.7)	(0.7)	(3.3)	-	(3.3)
Operating profit before specific adjusting items	33.3	5.5	41.0	10.7	32.4	122.9	(5.9)	117.0
Specific adjusting items included in operating profit/(loss)3	(8.0)	(1.3)	(2.3)	(7.4)	8.0	(11.0)	(14.1)	(25.1)
Operating profit/(loss)	25.3	4.2	38.7	3.3	40.4	111.9	(20.0)	91.9
Finance income								3.9
Finance expense								(18.0)
Profit before taxation								77.8
Segment assets	333.9	42.6	174.1	110.8	210.6	872.0	152.7	1,024.7
Segment liabilities	92.6	8.5	35.5	25.1	74.7	236.4	389.7	626.1
Segment capital expenditure	13.6	3.6	16.1	12.1	14.9	60.3	-	60.3
Segment depreciation - property, plant and equipment	11.8	2.1	5.8	5.8	6.4	31.9	-	31.9
Segment depreciation - right-of-use assets	3.2	0.3	0.9	0.5	2.7	7.6	-	7.6
Segment impairment of non-financial assets	-	-	1.5	5.8	-	7.3	-	7.3
Segment reversal of impairment of non-financial assets	2.4	-	-	-	5.7	8.1	-	8.1

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

2. Corporate costs consist of central head office costs.

3. Details of specific adjusting items from continuing operations are given in note 4 to the consolidated financial statements.

Year ended 31 December 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	421.4	57.8	188.7	148.5	295.7	1,112.1	-	1,112.1
Segment adjusted operating profit1	48.7	7.8	39.7	19.0	41.7	156.9	-	156.9
Corporate costs2							(5.9)	(5.9)
Group adjusted operating profit1								151.0
Amortisation of intangible assets	(1.6)	(0.3)	(0.7)	(0.8)	(1.3)	(4.7)	-	(4.7)
Operating profit before specific adjusting items	47.1	7.5	39.0	18.2	40.4	152.2	(5.9)	146.3
Specific adjusting items included in operating profit/(loss)3	(2.8)	-	0.1	(1.6)	(1.2)	(5.5)	-	(5.5)
Operating profit	44.3	7.5	39.1	16.6	39.2	146.7	(5.9)	140.8
Finance income								1.6
Finance expense								(10.8)
Profit before taxation								131.6
Segment assets	361.2	44.0	159.5	115.8	199.8	880.3	140.0	1,020.3
Segment liabilities	93.2	8.9	32.6	26.5	86.3	247.5	343.2	590.7
Segment capital expenditure	16.8	3.5	8.7	9.7	19.3	58.0	-	58.0
Segment depreciation - property, plant and equipment	11.2	2.1	5.3	6.0	5.7	30.3	-	30.3
Segment depreciation - right-of-use assets	3.2	0.3	1.0	0.6	2.7	7.8	-	7.8
Segment impairment of non-financial assets	3.2	-	-	1.6	1.7	6.5	-	6.5
Segment reversal of impairment of non-financial assets	-	-	-	-	-	-	-	-

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

2. Corporate costs consist of central head office costs.

3. Details of specific adjusting items from continuing operations are given in note 4 to the consolidated financial statements.

Revenue from external customers and non-current assets by geography

	Revenue from external customers		Non-current assets (excluding tax and financial instruments)
Continuing operations	2023 £m	2022 £m	2023 £m	2022 £m
US	427.4	405.6	219.8	212.6
China	114.8	121.4	43.4	45.5
Germany	88.7	85.1	41.9	38.0
UK (the Group's country of domicile)	43.6	53.2	101.6	101.1
Other Asia, Australasia, Middle East and Africa	197.1	194.1	54.6	61.2
Other Europe	173.2	182.0	37.1	37.5
Other North America	44.9	39.1	2.1	2.1
South America	25.0	31.6	12.7	11.0
	1,114.7	1,112.1	513.2	509.0

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

Revenue from external customers by end-market

Continuing operations			2023 £m	2022 £m
Semiconductors			108.6	91.3
Healthcare			78.7	74.7
Clean energy and clean transportation			50.0	51.7
Faster growing markets			237.3	217.7
Industrial			315.9	344.5
Conventional transportation			200.2	179.9
Metals			150.2	159.9
Petrochemical and chemical			110.8	112.6
Security and defence			68.5	65.2
Conventional energy			31.8	32.3
Core markets			877.4	894.4
			1,114.7	1,112.1

Intercompany sales to other segments

Thermal Ceramics

Molten Metal Systems

Electrical Carbon

Seals and Bearings

Technical Ceramics

Segment totals

Continuing operations

2023 £m

2022 £m

2023 £m

2022 £m

2023 £m

2022 £m

2023 £m

2022 £m

2023 £m

2022 £m

2023 £m

2022 £m

Intercompany sales to other segments

1.0

0.4

0.1

0.1

0.7

0.5

2.0

0.7

0.7

1.0

4.5

2.7

Note 4. Specific adjusting items

		2023	2022
Continuing operations	Note	£m	£m
Costs associated with the cyber security incident		(14.7)	-
Charges in relation to the impact of Argentina's currency devaluation		(5.8)	-
Net restructuring (charge)/credit		(3.5)	0.6
Net business closure and exit costs		(1.9)	-
Impairment of non-financial assets		(7.3)	(6.5)
Reversal of impairment of non-financial assets		8.1	-
Net profit on disposal of business	2	-	0.4
Total specific adjusting items before income tax		(25.1)	(5.5)
Income tax credit from specific adjusting items		3.8	1.1
Total specific adjusting items after income tax		(21.3)	(4.4)

Specific adjusting items in relation to discontinued operations are disclosed in note 7.

2023

Costs associated with the cyber security incident

During 2023, we incurred £14.7 million of exceptional costs and charges in relation to the cyber security incident in January 2023. These were comprised of legal and advisory costs, IT recovery and support costs and impairment charges for IT assets which were rendered unusable as a result of the attack.

Charges in relation to the impact of Argentina's currency devaluation

On 13 December 2023, Argentina devalued its currency by more than 50%. The impact of the currency devaluation (£2.6 million) has been classified as a specific adjusting item. An impairment review was also performed as at 31 December 2023 and, due to restrictions on imports limiting the ability to purchase raw materials and the subsequent effect on forecast trading, we have fully impaired the carrying value of property, plant and equipment and the value of raw materials which, in the current circumstances, we would be unable to sell. The impairment charge in relation to property, plant and equipment and inventory were £1.9 million and £1.3 million respectively.

Net restructuring charge

The Group has taken the opportunity to reduce our global footprint and rationalise costs in order to focus resources on our faster growing markets, and optimise factory operations. This restructuring programme commenced in the second half of 2023 and will continue into 2024. A charge of £6.5 million has been recognised in relation to this and comprises costs associated with staff redundancies and site closure costs.

A restructuring provision of £3.0 million recorded for Technical Ceramics, ceramic cores during the Group's 2020 restructuring programme has been released following settlement of a multi-employer pension plan and the re-letting of a site.

Net business closure and exit costs

During 2023, we commenced liquidation of a Thermal Ceramics business in China. Costs associated with this were £1.9 million and included severance, decommissioning and advisory fees.

The land and buildings owned by another Thermal Ceramics business in China which was closed in 2020 were sold in December 2023. The gain associated with this sale was £2.4 million.

We disposed of a Thermal Ceramics business in France in 2015, for which we retained responsibility for remediating the impact of

historical manufacturing processes on the environment. An assessment of the remaining required remediation was performed in 2023 and as a consequence of this review we have provided £2.4 million.

Net credit from impairment review of non-financial assets

Seals and Bearings, Europe

An impairment charge of £2.9 million has been recognised after reassessing the value in use of property, plant and equipment in a business in Italy which was experiencing limited growth. This represents a partial impairment of the assets; the carrying value of the assets following this impairment was £5.3 million. The calculation of value in use was performed as at 31 December 2023, a long-

term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value, with a pre-tax discount rate of 17.3%.

An impairment charge of £0.3 million has been recognised after assessing the viability of a development asset, which could not be successfully commissioned.

Seals and Bearings, Asia

An impairment charge of £1.9 million has been recognised after reassessing the value in use of property, plant and equipment in a business which was experiencing limited growth and under-utilisation of key assets. This represents a partial impairment of assets; the carrying value of the assets following this impairment was £2.2 million. The calculation was performed as at 31 December 2023, using a long-term growth rate of 1.0% and a pre-tax discount rate of 13.9%. 

Electrical Carbon, North America

An impairment charge of £1.5 million has been recognised after assessing the viability of a development asset in North America which was not deemed to be commercially viable.

Electrical Carbon, Asia

An impairment charge of £0.7 million has been recognised in relation to assets associated with a manufacturing line which, based on current projections, is expected to be under-utilised from 2025 onwards.

Reversal of impairments recognised in prior periods

In 2020, as a result of the COVID-19 pandemic, we impaired property, plant and equipment within our Technical Ceramics, ceramic cores business and Thermal Ceramics, Europe. Following our review as at 31 December 2023 of assets which continue to be used and which were impaired in previous years, we have reversed a portion of this impairment. For the ceramic cores business, we reversed £5.7 million being a full reversal, reinstating the net book value at which the assets would have been held if the impairment had not been booked in 2020, because the business and the aerospace industry have demonstrated sustained growth. For Thermal Ceramics, Europe we have recorded a partial impairment reversal of £2.4 million following sustained recovery of the industrial market segments. This reversal is based on a value in use calculation which was performed at 31 December 2023, using a long-term growth rate of 1.0% for years beyond the five-year forecast period and in calculating terminal value, with a pre-tax discount rate of 13.6%.

Review of cumulative impairment of non-financial assets

Impairment charges of £20.6 million for non-financial assets which the business continues to use have been recorded during the current and previous years (Technical Ceramics, Asia £7.7 million, Thermal Ceramics £7.2 million, Seals and Bearings, Asia £2.9 million and Seals and Bearings, Europe £2.8 million). These impaired amounts could be reversed if the related businesses were to outperform significantly against their budget. A sensitivity analysis was carried out using reasonably possible changes to the key assumptions in assessing the value in use of these non-financial assets. This did not result in a material reversal of the impaired amounts.

2022

Impairment of non-financial assets

Seals & Bearings, Asia

An impairment charge of £0.6 million was recognised relating to assets purchased to support a customer contract which did not

materialise.

A further impairment charge of £1.0 million was recognised after reassessing the value in use of property, plant and equipment in a business in Asia which is taking longer than anticipated to generate revenues. This represented a partial impairment of the assets; the carrying value of the assets following this impairment was £5.2 million. The calculation of value in use was performed as at December 2022. A long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value. A pre-tax discount rate of 12.9% was used to determine the value in use.

Thermal Ceramics, Europe

An impairment charge of £1.2 million was recognised following a fire in December which destroyed a warehouse and inventory. The assets were subsequently written off.

An impairment charge of £1.1 million was recognised after reassessing the value in use of property, plant and equipment in a business in France which was experiencing limited growth and under-utilisation of key assets. This represented a partial impairment of the assets; the carrying value of the assets following this impairment was £0.3 million. The calculation of value in use was performed as at December 2022. A long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value. A pre-tax discount rate of 13.7% was used to determine the value in use.

Thermal Ceramics, South America

An impairment charge of £0.9 million was recognised in relation to assets associated with a closed manufacturing line.

Technical Ceramics, Asia

An impairment charge of £1.7 million was recognised after reassessing the value in use of property, plant and equipment in a business in Asia which was taking longer than anticipated to generate revenues. This represented a partial impairment of the assets; the carrying value of the assets following this impairment was £3.2 million. The calculation of value in use was performed as at December 2022. A long-term growth rate of 1.0% was used for years beyond the five-year forecast period and in calculating the terminal value. A pre-tax discount rate of 12.9% was used to determine the value in use.

Restructuring credit

A credit of £0.6 million was recognised in the year ended 31 December 2022. This represented the release of restructuring provisions recorded in relation to the Group's 2020 restructuring programme. The remaining provision of £10.5 million as at 31 December 2022 included lease exit costs and multi-employer pension obligations for two sites which were closed during the year ended 31 December 2021. In 2022, the cash outflows relating to the pension obligations were expected to continue for up to 19 years, subject to any settlement being reached in advance of that date. Cash outflows in relation to the lease were expected to continue for four years.

Net profit on disposal of business

The Group disposed of its investment in the joint venture Sukhoy Log, based in Russia, during the year ended 31 December 2022. This disposal generated a net profit of £0.4 million.

Note 5. Finance income and expense

	2023	2022
Continuing operations	£m	£m
Recognised in profit or loss
Interest on bank balances and cash deposits	3.9	1.6
Finance income	3.9	1.6
Interest expense on borrowings and overdrafts	(15.6)	(7.0)
Interest expense on lease liabilities	(2.4)	(2.4)
Net interest on IAS 19 defined benefit pension obligations	-	(1.4)
Finance expense	(18.0)	(10.8)
Net financing costs recognised in profit or loss	(14.1)	(9.2)

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

Note 6. Taxation

Continuing operations			2023 £m	2022 £m
Recognised in profit or loss
Current tax
Current year			25.5	36.5
Adjustments for prior years			-	0.5
			25.5	37.0
Deferred tax
Current year			(2.5)	(0.4)
Adjustments for prior years			(0.8)	(0.6)
			(3.3)	(1.0)
Total income tax expense recognised in profit or loss			22.2	36.0
Recognised in other comprehensive income
Tax effect on components of other comprehensive income:
Deferred tax associated with defined benefit schemes			0.5	3.4
Total tax recognised in other comprehensive income			0.5	3.4

Reconciliation of effective tax rate	2023 £m	2023 %	2022 £m	2022 %
Profit before tax	77.8		131.6
Income tax charge using the domestic corporation tax rate	18.3	23.5	25.0	19.0
Effect of different tax rates in other jurisdictions	1.4	1.8	7.5	5.7
Local taxes including withholding tax suffered	1.3	1.7	3.4	2.6
Permanent differences	0.1	0.1	0.2	0.2
Movements related to unrecognised temporary differences	2.0	2.6	(0.1)	(0.1)
Adjustments in respect of prior years	(0.9)	(1.2)	-	-
Statutory effective rate of tax	22.2	28.5	36.0	27.4

The effective rate of tax before specific adjusting items is 25.3% (2022: 27.0%).

The Group operates in many jurisdictions around the world and is subject to factors that may impact future tax charges including the recently enacted US tax reform, 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.

The Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on BEPS (Base Erosion and Profit Shifting) published the Pillar Two model rules designed to address the tax challenges arising from the digitalisation of the global economy.

The International Accounting Standards Board ("IASB") issued amendments to IAS 12 'Income taxes'. The Amendments apply with

immediate effect and introduce a mandatory temporary exception from the recognition and disclosure of deferred taxes arising from the implementation of the OECD's Pillar Two Model Rules. The Group has applied the exception under the IAS 12 amendment to recognising and disclosing information about deferred tax assets and liabilities related to top-up income in preparing its consolidated financial statements for the year ending 31 December 2023.

On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up-tax which will be effective for the Group's financial year beginning 1 January 2024. The Group is in scope of the substantively enacted legislation and has performed an assessment of the Group's potential exposure to Pillar Two income taxes.

The assessment of the potential exposure to Pillar Two income taxes is based on the submitted country-by-country reporting data of the constituent entities in the Group. Based on the assessment, the Pillar Two effective tax rates in the majority of the jurisdictions in which the Group operates are above 15%. However, the Group has an entity in United Arab Emirates where the transitional safe harbour relief does not apply as the Pillar Two effective tax rate is below 15%. The Group does not expect a material exposure to Pillar Two income taxes in this jurisdiction.

Note 7. Discontinued operations

The Group disposed of its Composites and Defence Systems business on 20 November 2018. The business represented a separate reportable segment and therefore, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the disposal group was classified as discontinued.                                                                                           

The results from discontinued operations, which have been disclosed in the consolidated income statement, are set out below:

		Year ended 31 December 2023				Year ended 31 December 2022
		Results before specific adjusting items	Specific adjusting items	Total		Results before specific adjusting items	Specific adjusting items	Total
	Note	£m	£m	£m		£m	£m	£m
Revenue		-	0.7	0.7		-	0.7	0.7
Operating income		-	-	-		-	0.4	0.4
Profit before taxation		-	0.7	0.7		-	1.1	1.1
Income tax expense		-	-	-		-	-	-
Profit from discontinued operations		-	0.7	0.7		-	1.1	1.1
Basic earnings per share from discontinued operations	8			0.2p				0.4p
Diluted earnings per share from discontinued operations	8			0.2p				0.4p

In 2023, a gain of £0.7 million was recognised from a long-term contract.

In 2022, a gain of £1.1 million was recognised following the receipt of cash from a long-term contract and disposal of an investment in accordance with the terms of the disposal agreement.

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

Cash flows from discontinued operations are set out below:

	Year ended 31 December 2023	Year ended 31 December 2022
	£m	£m
Net cash generated in operating activities	0.4	1.1
Net cash generated from investing activities	-	-
Net cash flow used in financing activities	-	-
	0.4	1.1

Note 8. Earnings per share

	Year ended 31 December 2023				Year ended 31 December 2022
	Earnings	Basic earnings per share	Diluted earnings per share		Earnings	Basic earnings per share	Diluted earnings per share
	£m	pence	pence		£m	pence	pence
Profit for the year attributable to shareholders of the Company	47.3	16.6p	16.5p		88.0	31.0p	30.7p
Profit from discontinued operations	(0.7)	(0.2)p	(0.2)p		(1.1)	(0.4)p	(0.4)p
Profit from continuing operations	46.6	16.4p	16.3p		86.9	30.6p	30.3p
Specific adjusting items	25.1	8.8p	8.7p		5.5	1.9p	1.9p
Amortisation of intangible assets	3.3	1.2p	1.1p		4.7	1.7p	1.6p
Tax effect of the above1	(3.8)	(1.3)p	(1.3)p		(1.1)	(0.4)p	(0.4)p
Non-controlling interests' share of the    above adjustments	-	-	-		-	-	-
Adjusted profit for the year from continuing    operations as used in adjusted earnings    per share2	71.2	25.0p	24.8p		96.0	33.8p	33.5p

1. The tax effect of the amortisation of intangible assets was £nil (2022: £nil).

2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

		2023	2022
Number of shares (millions)
Weighted average number of Ordinary shares for the purposes of basic earnings per share1		284.8	284.2
Effect of dilutive potential Ordinary shares:
Share options		2.5	2.6
Weighted average number of Ordinary shares for the purposes of diluted earnings per share		287.3	286.8

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

Note 9. Property, plant and equipment

		Land and buildings £m	Plant, equipment and fixtures £m	Total £m
Cost
Balance at 1 January 2022		199.8	677.2	877.0
Additions		3.8	49.7	53.5
Disposals		(1.3)	(9.1)	(10.4)
Transfers between categories		0.3	(0.3)	-
Effect of movement in foreign exchange		16.6	52.7	69.3
Balance at 31 December 2022		219.2	770.2	989.4
Balance at 1 January 2023		219.2	770.2	989.4
Additions		7.3	54.0	61.3
Disposals		(0.3)	(12.4)	(12.7)
Transfers between categories		0.4	(0.4)	-
Effect of movement in foreign exchange		(10.5)	(34.0)	(44.5)
Balance at 31 December 2023		216.1	777.4	993.5
Depreciation and impairment losses
Balance at 1 January 2022		103.0	525.9	628.9
Depreciation charge for the year		5.0	25.3	30.3
Impairment losses		2.0	2.6	4.6
Disposals		(0.7)	(8.4)	(9.1)
Transfers between categories		(0.4)	0.4	-
Effect of movement in foreign exchange		8.8	42.7	51.5
Balance at 31 December 2022		117.7	588.5	706.2
Balance at 1 January 2023		117.7	588.5	706.2
Depreciation charge for the year		6.0	25.9	31.9
Impairment losses		1.7	8.3	10.0
Impairment reversals		(0.1)	(5.4)	(5.5)
Disposals		(0.2)	(11.6)	(11.8)
Effect of movement in foreign exchange		(6.1)	(25.0)	(31.1)
Balance at 31 December 2023		119.0	580.7	699.7
Carrying amounts
At 1 January 2022		96.8	151.3	248.1
At 31 December 2022		101.5	181.7	283.2
At 31 December 2023		97.1	196.7	293.8

In 2023, no assets were pledged as security for liabilities (2022: none). Profit on sale of property, plant and equipment presented in the cash flow includes £nil (2022: £nil) of insurance proceeds for replacement of assets.

Note 10. Leases

The reconciliation in the movement of the Group's right-of-use assets is set out in the table below:

		Land and buildings £m	Plant and equipment £m	Total £m
Balance at 1 January 2022		27.5	4.4	31.9
Additions		1.2	1.8	3.0
Remeasurements		3.1	0.6	3.7
Depreciation charge for the year		(5.1)	(2.7)	(7.8)
Effect of movement in foreign exchange		2.3	0.5	2.8
Balance at 31 December 2022		29.0	4.6	33.6
Balance at 1 January 2023		29.0	4.6	33.6
Additions		0.6	5.1	5.7
Remeasurements		0.9	(0.2)	0.7
Depreciation charge for the year		(4.8)	(2.8)	(7.6)
Impairment losses		-	(0.4)	(0.4)
Impairment reversals		1.3	-	1.3
Effect of movement in foreign exchange		(1.8)	0.1	(1.7)
Balance at 31 December 2023		25.2	6.4	31.6

The weighted average lease term is 10.8 years for land and buildings and 3.7 years for plant and equipment (2022: 11.6 years and 3.3 years respectively).

Amounts recognised in the consolidated income statement in respect of leasing arrangements are set out in the table below:

			2023 £m	2022 £m
Depreciation expense on right-of-use assets			(7.6)	(7.8)
Interest expense on lease liabilities			(2.4)	(2.4)
Expense relating to short-term leases and leasing of low value assets			(0.5)	(0.5)
			(10.5)	(10.7)

The total cash flows from leasing activities in the year ended 31 December 2023 was £11.8 million (2022: £11.9 million) as set out in the table below:

			2023 £m	2022 £m
Payment of lease liabilities			(8.9)	(9.0)
Interest expense on lease liabilities			(2.4)	(2.4)
Expenses relating to short-term leases of low value assets			(0.5)	(0.5)
			(11.8)	(11.9)

At 31 December 2023, the Group is committed to future payments of £0.5 million (2022: £0.6 million) for short-term leases and leasing of low value assets.

At 31 December 2023, future cash flows in respect of lease which the Group had entered into, but which had not yet commenced was £nil (2022: £nil).

The total of future minimum lease income under non-cancellable leases, where the Group is a lessor is £nil (2022: £nil).

Note 11. Intangible assets

		Goodwill £m	Customer relationships £m	Technology and trademarks £m	Capitalised development costs £m	Computer software £m	Total £m
Cost
Balance at 1 January 2022		172.9	57.6	4.1	0.7	34.8	270.1
Additions (externally purchased)		-	-	-	-	1.2	1.2
Disposals		-	-	-	-	(0.1)	(0.1)
Effect of movement in foreign exchange		9.0	6.3	0.2	0.1	1.9	17.5
Balance at 31 December 2022		181.9	63.9	4.3	0.8	37.8	288.7
Balance at 1 January 2023		181.9	63.9	4.3	0.8	37.8	288.7
Additions (externally purchased)		-	-	-	-	0.6	0.6
Disposals		-	-	-	-	(1.0)	(1.0)
Effect of movement in foreign exchange		(4.4)	(3.0)	(0.1)	-	(1.2)	(8.7)
Balance at 31 December 2023		177.5	60.9	4.2	0.8	36.2	279.6
Amortisation and impairment losses
Balance at 1 January 2022		-	56.1	3.5	0.7	26.7	87.0
Amortisation charge for the year		-	0.7	0.1	-	3.9	4.7
Disposals		-	-	-	-	(0.1)	(0.1)
Effects of movement in foreign exchange		-	6.3	0.2	0.1	1.5	8.1
Balance at 31 December 2022		-	63.1	3.8	0.8	32.0	99.7
Balance at 1 January 2023		-	63.1	3.8	0.8	32.0	99.7
Amortisation charge for the year		-	0.4	0.1	-	2.8	3.3
Impairment losses		-	-	-	-	0.7	0.7
Impairment reversals		-	(0.6)	(0.7)	-	-	(1.3)
Disposals		-	-	-	-	(1.0)	(1.0)
Effects of movement in foreign exchange		-	(3.1)	-	-	(0.9)	(4.0)
Balance at 31 December 2023		-	59.8	3.2	0.8	33.6	97.4
Carrying amounts
At 1 January 2022		172.9	1.5	0.6	-	8.1	183.1
At 31 December 2022		181.9	0.8	0.5	-	5.8	189.0
At 31 December 2023		177.5	1.1	1.0	-	2.6	182.2

Impairment test for cash-generating units or groups of cash-generating units containing goodwill

In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group's cash-generating units or

groups of cash-generating units that are expected to benefit from the synergies of the business combination that gave rise to the goodwill. Goodwill impairment testing is performed at the operating segment level as defined by IFRS 8, as this is the lowest level at which goodwill is monitored.

Goodwill is attributed to each operating segment as follows:

	2023 £m	2022 £m
Thermal Ceramics	86.8	88.8
Molten Metal Systems	9.2	9.4
Electrical Carbon	30.0	30.7
Seals and Bearings	15.3	15.8
Technical Ceramics	36.2	37.1
	177.5	181.8

Each operating segment is assessed for impairment annually and whenever there is an indication of impairment.

The carrying value of goodwill has been assessed with reference to its value in use, reflecting the projected discounted cash flows of

each operating segment to which goodwill has been allocated. The key assumptions used in determining value in use relate to short- and long-term growth rates and discount rates.

The cash flow projections in year one are based on the most recent Board approved budget. Cash flow projections for years two to five are based on the most recent Board approved strategic plan. The key assumptions that underpin these cash flow projections relate to sales and operating margins, which are based on past experience, taking into account the effect of known or likely changes in market or operating conditions. External data sources have been considered as to the strength and recovery of the Group's end-markets in building an expectation of the future cash flows of each operating segment.

In 2023, a 1.0% growth rate (2022: 1.0%) has been used for years beyond 2028 and to calculate a terminal value. Management has

assessed these growth rates, including the terminal growth rate as reasonable for each operating segment.

In 2023, the Group has used the following pre-tax discount rates for calculating the value in use of each of the operating segments:

Thermal Ceramics: 14.4% (2022: 13.8%), Molten Metal Systems: 15.9% (2022: 15.6%), Electrical Carbon: 15.0% (2022: 14.6%),

Seals and Bearings: 14.2% (2022: 14.0%), Technical Ceramics 14.1% (2022: 14.1%).

The Directors have considered the following individual sensitivities and are confident that no impairment would arise for each of the

Thermal Ceramics, Molten Metal Systems, Electrical Carbon, Seals and Bearings and Technical Ceramics operating segments in any one of the following three circumstances, which are considered reasonably possible changes:

Ø If the pre-tax discount rate was increased by 10%.

Ø If growth for years two to five was decreased by 10% and no growth was assumed in the calculation of terminal value.

Ø If the cash flow projections of all businesses were reduced by 10%.

Note 12. Cash and cash equivalents

	2023 £m	2022 £m
Bank balances	112.5	105.8
Cash deposits	12.0	11.9
Cash and cash equivalents	124.5	117.7

In 2023, the Group had restricted cash of £1.6 million (2022: £4.0 million) as a result of exchange controls in Argentina.

Reconciliation of cash and cash equivalents to net debt¹

	2023	2022
	£m	£m
Opening borrowings and lease liabilities	(318.1)	(223.8)
Increase in borrowings	(247.2)	(113.3)
Repayment of borrowings	193.9	39.0
Payment of lease liabilities	8.9	9.0
Total changes from cash flows	(44.4)	(65.3)
New leases and lease remeasurement	(6.4)	(6.7)
Effect of movements in foreign exchange	12.1	(22.3)
Closing borrowings and lease liabilities	(356.8)	(318.1)
Cash and cash equivalents	124.5	117.7
Closing net debt 1	(232.3)	(200.4)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

2. Comparative information has been restated to present the increase and reduction in borrowings separately.

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 debt1 £m
At 1 January 2022	(174.0)	(49.8)	(223.8)	127.3	(96.5)
Cash outflow	-	-	-	(0.7)	(0.7)
Borrowings and lease liability cash flow	(74.3)	9.0	(65.3)	-	(65.3)
Net interest paid	-	-	-	(9.4)	(9.4)
Net cash inflow/(outflow)	(74.3)	9.0	(65.3)	(10.1)	(75.4)
Share purchases	-	-	-	(2.9)	(2.9)
New leases and lease remeasurement	-	(6.7)	(6.7)	-	(6.7)
Exchange and other movements	(17.9)	(4.4)	(22.3)	3.4	(18.9)
At 31 December 2022	(266.2)	(51.9)	(318.1)	117.7	(200.4)
At 1 January 2023	(266.2)	(51.9)	(318.1)	117.7	(200.4)
Cash inflow	-	-	-	38.9	38.9
Borrowings and lease liability cash flow	(53.3)	8.9	(44.4)	-	(44.4)
Net interest paid	-	-	-	(17.9)	(17.9)
Net cash inflow/(outflow)	(53.3)	8.9	(44.4)	21.0	(23.4)
Share purchases	-	-	-	(4.7)	(4.7)
New leases and lease remeasurement	-	(6.4)	(6.4)	-	(6.4)
Exchange and other movements	9.8	2.3	12.1	(9.5)	2.6
At 31 December 2023	(309.7)	(47.1)	(356.8)	124.5	(232.3)

1.     Definitions of these non-GAAP measures can be found in the glossary of terms on page 46, reconciliations of the statutory results to the adjusted measures can be found on pages 14 to 18.

Note 13. Financial risk management

Fair Values

	31 December 2023				31 December 2022
	Carrying amount £m	Fair value			Carrying amount £m	Fair value
		Level 1 £m	Level 2 £m	Total £m		Level 1 £m	Level 2 £m	Total £m
Financial assets and liabilities held at amortised cost
1.18% Euro Senior Notes 2023	-	-	-	-	(22.1)	-	(21.6)	(21.6)
3.17% US Dollar Senior Notes 2023	-	-	-	-	(12.4)	-	(12.1)	(12.1)
3.37% US Dollar Senior Notes 2026	(76.6)	-	(71.6)	(71.6)	(80.6)	-	(73.5)	(73.5)
1.55% Euro Senior Notes 2026	(21.7)	-	(20.3)	(20.3)	(22.2)	-	(20.1)	(20.1)
4.87% US Dollar Senior Notes 2026	(20.0)	-	(19.4)	(19.4)	(21.1)	-	(20.2)	(20.2)
1.74% Euro Senior Notes 2028	(8.7)	-	(8.0)	(8.0)	(8.9)	-	(7.7)	(7.7)
2.89% Euro Senior Notes 2030	(21.7)	-	(19.6)	(19.6)	(22.1)	-	(19.0)	(19.0)
5.47% US Dollar Senior Notes 2031	(7.9)	-	(7.7)	(7.7)	-	-	-	-
5.53% US Dollar Senior Notes 2033	(7.9)	-	(7.6)	(7.6)	-	-	-	-
5.61% US Dollar Senior Notes 2035	(23.7)	-	(22.8)	(22.8)	-	-	-	-
5.50% Cumulative First Preference shares	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)
5.00% Cumulative Second Preference shares	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)
	(188.6)	-	(177.4)	(177.4)	(189.8)	-	(174.6)	(174.6)
Financial assets held at FVTPL	2.2	2.2	-	2.2	-	-	-	-
Derivative financial assets held at fair value	1.5	-	1.5	1.5	1.3	-	1.3	1.3
	3.7	2.2	1.5	3.7	1.3	-	1.3	1.3
Derivative financial liabilities held at fair value	(0.5)	-	(0.5)	(0.5)	(1.6)	-	(1.6)	(1.6)

The table above analyses the fair values of financial instruments held by the Group, 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 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).

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

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.

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 3.7%-6.3% (2022: 4.2%-6.4%).

There have been no transfers between Level 1 and Level 2 during 2023 and 2022 and there were no Level 3 financial instruments in either 2023 or 2022.

Note 14. Pensions and other post-retirement employee benefits

	31 December 2023
	UK	US	Europe	Rest of World	Total
	£m	£m	£m	£m	£m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(5.2)	(27.1)	(4.6)	(36.9)
Present value of funded defined benefit obligations	(362.8)	(107.0)	(1.3)	(8.1)	(479.2)
Fair value of plan assets	375.3	106.7	0.2	8.7	490.9
	12.5	(5.5)	(28.2)	(4.0)	(25.2)
Movements in present value of defined benefit obligation
At 1 January 2023	(359.5)	(121.9)	(28.3)	(12.1)	(521.8)
Current service cost	-	-	(0.8)	(1.6)	(2.4)
Interest cost	(16.7)	(5.6)	(1.0)	(0.3)	(23.6)
Actuarial gain/(loss)
Experience gain/(loss) on plan obligations	(0.3)	2.0	-	(0.5)	1.2
Changes in financial assumptions - gain/(loss)	(10.4)	(1.9)	(0.6)	0.2	(12.7)
Changes in demographic assumptions - gain/(loss)	2.9	-	-	-	2.9
Benefits paid	21.2	9.2	1.7	0.9	33.0
Exchange adjustments	-	6.0	0.6	0.7	7.3
At 31 December 2023	(362.8)	(112.2)	(28.4)	(12.7)	(516.1)
Movements in fair value of plan assets
At 1 January 2023	384.7	112.7	0.4	8.4	506.2
Interest on plan assets	17.9	5.4	-	0.3	23.6
Remeasurement gain/(loss)	(6.1)	2.9	-	0.3	(2.9)
Contributions by employer	-	0.6	1.6	1.2	3.4
Benefits paid	(21.2)	(9.2)	(1.7)	(0.9)	(33.0)
Exchange adjustments	-	(5.7)	(0.1)	(0.6)	(6.4)
At 31 December 2023	375.3	106.7	0.2	8.7	490.9
Actual return on assets	11.8	8.3	-	0.6	20.7

				31 December 2023
	UK	US	Europe	Rest of World	Total
	£m	£m	£m	£m	£m
Fair value of plan assets by category
Equities	-	6.3	-	-	6.3
Growth assets1	48.9	-	-	-	48.9
Bonds	26.5	97.7	-	-	124.2
Liability-driven investments (LDI)2	196.6	-	-	-	196.6
Matching insurance policies	101.9	1.4	0.2	6.3	109.8
Other	1.4	1.3	-	2.4	5.1
	375.3	106.7	0.2	8.7	490.9

1. Growth assets include investment in Global Diversified and Multi-Asset Funds as well as UK Property.

2. The LDI assets are pooled funds in the UK that provide a leveraged return linked to long duration fixed interest and index-linked government bonds valued at the bid price of the units. This provides interest rate and inflation hedging equivalent in size to circa 100% of the invested assets of the UK Schemes measured on the 'Long Term Objective' basis (Gilts +50bps) (excluding matching insurance policies).

The Group expects to contribute £3.6 million to these arrangements in 2024.

	31 December 2022
	UK	US	Europe	Rest of World	Total
	£m	£m	£m	£m	£m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(5.8)	(26.7)	(4.0)	(36.5)
Present value of funded defined benefit obligations	(359.5)	(116.1)	(1.6)	(8.1)	(485.3)
Fair value of plan assets	384.7	112.7	0.4	8.4	506.2
	25.2	(9.2)	(27.9)	(3.7)	(15.6)

	UK	US	Europe	Rest of World
Principal actuarial assumptions at 31 December 2023 were:	%	%	%	%
Discount rate	4.52	4.80	3.40	5.52
Inflation (UK: RPI/CPI)	3.05/2.31	n/a	2.10	n/a
Principal actuarial assumptions at 31 December 2022 were:	%	%	%	%
Discount rate	4.81	4.99	3.70	5.30
Inflation (UK: RPI/CPI)	3.26/2.47	n/a	2.20	n/a

Note 15. Provisions and contingent liabilities

	Closure and restructuring provisions £m	Legal and other provisions £m	Environmental provisions £m	Total £m
Balance at 1 January 2023	10.5	8.1	7.4	26.0
Provisions made during the year	3.0	0.9	2.6	6.5
Provisions used during the year	(2.2)	(1.3)	(1.4)	(4.9)
Provisions reversed during the year	(3.0)	(1.8)	(0.2)	(5.0)
Effect of movements in foreign exchange	(0.4)	(0.3)	(0.1)	(0.8)
Balance at 31 December 2023	7.9	5.6	8.3	21.8
Current	5.6	2.3	2.4	10.3
Non-current	2.3	3.3	5.9	11.5
	7.9	5.6	8.3	21.8

Closure and restructuring provisions

Closure and restructuring provisions relate to 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. The provisions are expected to be utilised in the next one to two years.

We have a provision for a multi-employer pension obligation for a site which was closed during 2021. The cash outflows relating to the pension obligation may continue for up to 18 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.

Where obligations are not capable of being reliably estimated, or if a material outflow of economic resources is considered not probable, it is classified as a contingent liability. The Group is of the opinion that any associated claims that might be brought can be defeated successfully and, therefore, the possibility of any material outflow in settlement is assessed as remote.

Subsidiary undertakings within the Group have given unsecured guarantees of £10.3 million (2022: £10.2 million) in the ordinary course of business.         

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. The provisions are expected to be utilised in the next five to ten 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.

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 16. Subsequent events

There were no reportable subsequent events following 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. Group organic1 The Group results excluding acquisition, disposal and business exit impacts at constant-currency. 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 expense 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.  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 4 to the consolidated financial statements for further details. Underlying Reference to underlying reflects the trading results of the Group without the impact of specific adjusting items and amortisation of intangible assets that would otherwise impact the users understanding of the Group's performance. The Directors believe that adjusted results provide additional useful information on the core operational performance of the Group and review the results of the Group on an adjusted basis internally.

   1.  See definitions and reconciliations of non-GAAP measures to GAAP measures on page 14 to 18.

 

END