20th Feb 2007 07:02
Morgan Crucible Co PLC20 February 2007 PRELIMINARY RESULTS FOR THE YEAR ENDED 4 JANUARY 2007 • Strong revenue growth and double-digit margins: Revenue from continuing operations increased by over 11%, which included organic growth of over 9% at constant currency Group underlying operating margins from continuing businesses improved from 9.1% to 10.9%, driven by favourable mix shift, improved pricing, growth in emerging markets and reduced costs Underlying operating profit** from continuing operations up from £55.4 million to £73.7 million Underlying EBITDA* from continuing operations up 24.3% to £99.6 million (2005: £80.1 million) Underlying EPSdegrees improved by 36.6% to 17.9 pence (2005: 13.1 pence) • Margin improvement and growth in excess of GDP across all three divisions: Carbon achieved underlying operating profit margins of 15.8% (2005: 13.7%) and revenue growth at constant currency of 8.7%, with a particularly strong performance in Armour Technical Ceramics achieved underlying operating profit margins of 10.5% (2005:8.4%) and revenue growth at constant currency of 13.0%, with strong growth in the medical, aerospace and electronics segments Insulating Ceramics achieved underlying operating profit margins of 9.2% (2005:8.1%) and revenue growth at constant currency of 14.3% with a strong contribution from acquisitions and growth in Asia and cost reductions partially offsetting higher energy and raw material costs • Strong financial position: Net debt of ^^£34.1 million (2005: net cash of £50.5 million) after cash payments into the UK pension fund, acquisitions, restructuring and share purchases for LTIP/ESOS Group pension deficit substantially reduced by £81.5 million to £42.7 million Final dividend proposed at 3.0 pence per share £m unless otherwise stated 2006 2005 Change--------------------------------------------------------------------------------Revenue 677.8 745.7 -9.1%%--------------------------------------------------------------------------------Underlying EBITDA* 99.6 97.3 +2.4%--------------------------------------------------------------------------------Underlying operating profit** 73.7 66.0 +11.7%--------------------------------------------------------------------------------Underlying PBT*** 70.3 52.9 +32.9%--------------------------------------------------------------------------------Underlying EPS^ degrees (pence) 17.9 13.1 +36.6%-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Basic EPS (pence) 12.9 18.1 -28.7%--------------------------------------------------------------------------------Operating profit 55.2 33.6 +64.3%--------------------------------------------------------------------------------Profit before tax 50.3 20.4 +146.6%-------------------------------------------------------------------------------- Commenting on the results, Chief Executive Officer, Mark Robertshaw said: "Morgan has delivered another year of improved financial performance, withstrong momentum both in top line growth and in continued profit marginenhancement. The top line progress has been driven by our strategy of focusingon higher growth, higher margin end markets whilst reducing our exposure toslower growing, more commoditised market segments. In parallel we havemaintained our rigorous ongoing focus on cost management and operationalefficiency. The Morgan Group is in robust financial health and is in a strongposition to continue targeting further profitable growth and the creation ofsuperior shareholder value. Our strong market positions and healthy balancesheet enable the Board to look to the future with confidence." Special items are defined as costs of restructuring £23.9 million (2005: £29.7million), legal costs associated with settlement of anti-trust litigation £3.8million (2005: £2.3 million), gain on curtailment of UK employee benefit schemes£(11.0) million (2005: £nil), costs of terminated bid approach £2.1 million(2005: £nil) and (profit)/loss on disposal of property £(0.3) million (2005:£0.4 million). * Defined as operating profit of £55.2 million (2005: £33.6 million) beforespecial items of £18.5 million (2005: £32.4 million) and before depreciation andamortisation of £25.9 million (2005: £31.3 million). ** Defined as operating profit of £55.2 million (2005: £33.6 million) beforespecial items of £18.5 million (2005: £32.4 million). This measure of earningsis shown because the Directors use it to measure the underlying performance ofthe business. *** Defined as operating profit of £55.2 million (2005: £33.6 million) beforespecial items of £18.5 million (2005: £32.4 million) and after financing costsof £3.4 million (2005: £13.1 million). ^ Degrees Defined as basic earnings per share of 12.9 pence (2005: 18.1 pence)adjusted to exclude the after tax impact of special items of 5.0 pence (2005:9.5 pence) and gain on disposal of discontinued operations 2006 nil pence (2005:(14.5 pence)) ^^ Defined as interest bearing loans and borrowings, bank overdrafts less cash and other cash equivalents. Strategy The Group has delivered a 33% increase in underlying operating profit from 2005on a continuing business basis at underlying operating profit margins for theyear approaching 11%. Our goal remains to reach mid-teen margins in good timesand double digit margins in bad times. We are concentrating on higher growth, higher margin markets and are continuallylooking to reduce our exposure to commoditised markets. We aim to provide highvalue-added solutions for our customers and we aim to be number one or two inour chosen market sectors At the same time, we continue to focus on reducing and managing our cost base.Our manufacturing footprint is continuously being reviewed for opportunities tosimplify and rationalise the number and efficiency of our sites to provideoptimum results. Our total overheads as a percentage of sales have reduced from29.1% in 2003 to 23.2% in 2006 driven by both the simplification of ourmanufacturing footprint and by the reduction in the number of our divisions.Over the same period our total employment costs (from continuing businesses) asa percentage of sales have fallen from 39.6% in 2003 to 31.7% for the secondhalf of 2006. The Group is in very good financial health, with minimal debt and substantiallyreduced Group pension deficits. This balance sheet strength leaves us wellplaced to look for suitable bolt-on acquisitions that are aligned with ourstrategic priorities to accelerate profitable growth. It should be noted that weview our M&A activity as a means to accelerate the delivery of our strategyrather than being a stand-alone strategy in itself. We made six acquisitions in2006 and we continue to look for further targets that are aligned with ourstrategic priorities. In summary the combination of continuing strong top line and profit marginprogression allied to a healthy balance sheet sees the Group in robust health aswe enter 2007. Financial Review Reference is made to underlying operating profit and underlying EPS below, bothof which are defined at the front of this statement. These measures of earningsare shown because the Directors use them to measure the underlying performanceof the business. Revenue from continuing businesses increased by over 11% from the previous yearat £677.8 million (2005: £609.8 million). This was driven by organic growth atconstant currency of over 9% and the benefit from the six bolt-on acquisitionscompleted in 2006. Group underlying operating profit for continuing businesses increased by 33.0%to £73.7 million (2005: £55.4 million). Underlying operating profit margins fromcontinuing businesses for the second six months of 2006 were 11.1%, incomparison to 9.7% in the equivalent period in 2005. All three of our majorbusiness units contributed to this increase in margin. The Group has continued to implement its "Profit Improvement Programme" in thisperiod with restructuring charges of £23.9 million (2005: £29.7 million). Whilethis programme has drawn to a close, we would expect a modest level ofoperational restructuring going forwards. We have also incurred costs associatedwith settlement of prior period anti-trust litigation in 2006 of £3.8 million(2005: £2.3 million). The net finance charge was £3.4 million (2005: £13.1 million). Net bank interestand similar charges were £4.6 million (2005: £10.0 million), an improvement of£5.4 million from 2005. Part of the finance charge under IFRS is the net IAS 19(Employee Benefits) interest receipt on pension scheme net liabilities which was£1.2 million (2005: charge of £3.5 million). The tax charge for the period was £10.6 million (2005: £30.2 million including£25.4 million relating to discontinued operations). The tax charge on underlyingoperating profit net of finance costs was £16.2 million. There was a tax creditof £5.6 million on special items. The effective tax rate before special itemswas 23.0% (2005: 25.0%) which is a lower rate than the half year estimate of 25%due to deferred tax asset recognition in the second half of the year. Over themedium term we would expect the effective tax rate to trend towards 30% aslosses are utilised. Underlying earnings per share were 17.9 pence (2005: 13.1 pence). The Group pension deficit has improved by £81.5 million since last year end to£42.7 million on an IAS 19 basis. The main movements are in the UK pensionschemes which show a surplus of £3.1 million on an IAS 19 basis, an improvementof £69.3 million in the period. The two main one-off changes for the UK are a£40.0 million cash injection and an £11.0 million curtailment to the deficit dueto the changes implemented in the schemes. The net cash from operating activities, before a one off UK pension payment of£40 million, was £18.1 million (2005: £48.5 million) which included an adversecash impact from restructuring costs and costs associated with anti-trustlitigation of £34.3 million (2005: £30.8 million). Working capital levelscontinue to improve as a percentage of sales. In absolute terms, working capitalgrew by £22.9 million (2005: £6.2 million), reflecting the increasing level ofsales in our continuing businesses. Cash flows from other investing activitiesincluded consideration paid in respect of acquisitions of £20.7 million (2005:£3.0 million) and receipts from prior year disposals of £11.6 million (2005:£195.9 million). Cash flows from financing activities include payment of £18.9million (2005: £3.5 million) for the purchase of shares in respect of the longterm incentive and employee share option schemes and £0.5 million (2005: £nil)for the buy back of own shares. FY FY 2006 2005 £m £mNet cash from operating activities before UK pension payment 18.1 48.5UK pension scheme payment (40.0) -Interest received 3.5 2.3Net capital expenditure (32.9) (38.1)Dividends paid (7.4) - ----------------Free cash flow (58.7) 12.7Cash flows from other investing activities (10.9) 190.8Cash flows from financing activities (19.2) (1.8)Exchange movement 4.2 (3.3)Opening net cash/(debt) 50.5 (147.9) ----------------Closing net (debt) (34.1) 50.5 Final Dividend The Board has proposed a final dividend of 3.0 pence per Ordinary share. Thedividend will be paid on 6th July 2007 to Ordinary shareholders on the registerof members at the close of business on 1st June 2007. Operating Review Carbon Revenues for the full year increased by 6.9% to £213.6 million (2005: £199.9million) and on a constant currency basis were up 8.7%. Underlying operatingprofit for the period was up 23.4% to £33.8 million (2005: £27.4 million). Thisstrong increase in profit reflects the revenue growth in both our traditionaland emerging businesses, the benefits of recent restructuring projects in USAand Western Europe and the increased use of low cost manufacturing operations inMexico, China and India. All regions and most markets have delivered revenue growth compared to 2005. Inthe Americas, revenue has been strong in the traditional brush and seals andbearings markets. We have seen strong demand from the US military for personaland vehicle protection and additional capacity continues to be installed to meetthis demand. Armour demand is also increasing in Europe and the rest of theworld, and additional capability and production capacity is being installed inthe UK to ensure we are best placed to take advantage of these opportunities.The Aceram business acquired in July 2006 has increased the armour materialsportfolio and has been successfully integrated into the existing business. In Europe, we have seen growth in our traditional markets, supported by goodgrowth in our German-based rotary business, which has benefited from robustdemand in the defence sector. All the major re-organisation projects have beeneffectively completed and we will see the full year benefit of these in 2007. There has also been significant progress in our Asian businesses. This wasnotably strong in China which has delivered more than double digit growth inboth sales and profits. Significant financial, technical and human resourceinvestment has been made in the region and this will allow us to continue totake advantage of the organic growth to provide a high quality/low costmanufacturing resource for the rest of the world and to provide local supportfor customers as they move east. Technical Ceramics The Technical Ceramics division enjoyed another strong year in 2006, combiningtop line growth with further operating margin improvement. Revenues for the fullyear increased by 12.2% to £162.5 million (2005: £144.8 million) and on aconstant currency basis were up 13.0%, of which c.2% was due to the higher thanaverage levels of precious metal prices in 2006 compared to 2005. Underlyingoperating profit increased by 39.3% to £17.0 million (2005: £12.2 million), withonly a negligible positive impact from the higher metals prices. Good balancesheet discipline continued during the year, ensuring that the profit performancewas also reflected in strong free cash flow. The business remains focused on continued profit margin progression, withimprovements seen in all regions during 2006, supported by investment in newproduct introductions. Although raw material and energy costs have increasedthrough the year, these have been countered by a combination of price increasesand operational efficiencies. Globally the industrial equipment, medical,aerospace and electronics segments continue to show good growth. The US marketshave remained robust and our European business is also seeing a strongperformance, particularly in laser and power tube products for communicationsand security equipment. In Asia the additional capacity recently installed tomeet demand for the thermal processing market is now fully utilised andperforming well. Insulating Ceramics Revenues for the full year increased by 13.8% to £301.7 million (2005: £265.1million) and on a constant currency basis were up 14.3%, including revenue of£12.4 million from acquisitions. Underlying operating profit increased 29.8% to£27.9 million (2005: £21.5 million) as a combination of top line growth and costreduction programmes. Within the Insulating Ceramics division there are twotrading divisions: Thermal Ceramics and Molten Metal Systems (formerly known asCrucibles). Within Thermal Ceramics, improved sales growth has been driven by continuedpositive market conditions in the USA, Middle East and Asia, as well as a numberof major orders for aluminium and petrochemical projects sourced from ourEuropean production sites. As previously noted the division has seen large inputcost rises over the past couple of years, particularly for energy and rawmaterials. However, we have taken a number of steps to counteract these marginpressures both in terms of operational improvements and price increases.Additional overhead and cost rationalisation programmes were implemented earlierin 2006, including the closure of fibre production in the UK. The new JointVentures in China and Russia started well, while the Vesuvius insulating fibreacquisition in the US has been fully integrated into our organisation andoperations. Trading conditions for the Molten Metals Systems business improved during 2006,with higher demand in all geographical areas. Revenue increased in all regions,in particular Asia and the Americas, which delivered double digit growth.Operating margins improved, benefiting from continued cost control, augmentingthe overhead reduction programmes implemented during 2005. Upgrading of theIndian manufacturing operations will continue in 2007 to facilitate anincreasing share of the growing domestic market and increase exports in theregion. The business has also announced its intention to establish amanufacturing operation in China, to be operational in the first half of 2008,in order to consolidate its market position in the Far East. Further recruitmentis underway in China to increase development strength for that market. Theoutlook for 2007 is positive, with continued growth in sales alongside asignificant repositioning of the manufacturing footprint. Outlook The group continued to make strong progress in both top line growth and profit margin enhancement in 2006. With all divisions showing positive momentum, our objective remains to deliver continued top line growth and margin progression. Despite the impact of a weak US Dollar in our sterling results, we look forward to 2007 with confidence. Tim Stevenson Chairman Mark Robertshaw Chief Executive Office Consolidated Income StatementFor the year ended 4 January 2007 Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations 2006 2006 2006 2005 2005 2005 Note £m £m £m £m £m £m----------------------------------------------------------------------------------------------------------------------Revenue 1 677.8 - 677.8 609.8 135.9 745.7 Operating costs before Special items (604.1) - (604.1) (554.4) (125.3) (679.7)----------------------------------------------------------------------------------------------------------------------Profit from operations before special items 73.7 - 73.7 55.4 10.6 66.0Special items:Restructuring costs and costs associated with settlement ofprior period anti-trust litigation 4 (27.7) - (27.7) (29.9) (2.1) (32.0)Gain on curtailment ofUnited Kingdom employeebenefit schemes 11.0 - 11.0 - - -Costs of terminated bidapproach (2.1) - (2.1) - - -Profit/(Loss)on disposal ofproperty 0.3 - 0.3 (0.4) - (0.4)----------------------------------------------------------------------------------------------------------------------Operating profit 55.2 - 55.2 25.1 8.5 33.6 Finance income 26.8 - 26.8 22.7 - 22.7Finance expenses (30.2) - (30.2) (33.4) (2.4) (35.8)----------------------------------------------------------------------------------------------------------------------Net financing costs 2 (3.4) - (3.4) (10.7) (2.4) (13.1) Loss on partial disposal ofbusiness - (1.5) (1.5) (0.1) - (0.1)----------------------------------------------------------------------------------------------------------------------Profit/(loss) before taxation 51.8 (1.5) 50.3 14.3 6.1 20.4 Income tax expense (all relates to overseas tax payable) 3 (10.6) - (10.6) (4.8) (4.0) (8.8)----------------------------------------------------------------------------------------------------------------------Profit/(loss)after taxation but before gain on sale ofdiscontinued operations 41.2 (1.5) 39.7 9.5 2.1 11.6 Gain on sale of discontinuedoperations, net of tax - - - - 42.6 42.6----------------------------------------------------------------------------------------------------------------------Profit/(loss)for the period 41.2 (1.5) 39.7 9.5 44.7 54.2======================================================================================================================Profit/(loss)for periodattributable to: Equity holders of the parent 38.4 (1.5) 36.9 7.2 44.7 51.9 Minority interest 2.8 - 2.8 2.3 - 2.3 ---------------------------------------------------------------------------------------------------------------------- 41.2 (1.5) 39.7 9.5 44.7 54.2======================================================================================================================Earnings/(loss) per share 5Basic 13.4p (0.5p) 12.9p 2.5p 15.6p 18.1pDiluted 12.8p (0.5p) 12.3p 2.4p 14.8p 17.2p DividendsInterim dividend - pence 1.5p -Proposed final dividend - pence 3.0p 2.5p - £m 8.8 7.3 The proposed final dividend is based upon the number of sharesoutstanding at the balance sheet date CONSOLIDATED BALANCE STATEMENTas at 4 January 2007 2006 2005 Note £m £m -------------------------------AssetsProperty, plant and equipment 230.2 235.3Intangible assets 66.4 46.6Other investments 7.2 6.1Other receivables 1.2 0.3Deferred tax assets 28.8 27.4 -------------------------------Total non-current assets 333.8 315.7 ------------------------------- Inventories 84.9 77.8Trade and other receivables 136.0 140.9Cash and cash equivalents 97.4 160.0 -------------------------------Total current assets 318.3 378.7 -------------------------------Total assets 652.1 694.4 ------------------------------- LiabilitiesInterest-bearing loans and borrowings 93.2 57.3Employee benefits 42.7 124.2Grants for capital expenditure 0.1 0.3Provisions 6.7 4.3Non-trade payables 3.6 -Deferred tax liabilities 28.4 28.1 -------------------------------Total non-current liabilities 174.7 214.2 ------------------------------- Bank overdraft 24.5 27.2Interest-bearing loans and borrowings 13.8 25.0Trade and other payables 210.3 195.8Current tax payable 9.9 8.1Provisions 15.8 28.4 -------------------------------Total current liabilities 274.3 284.5 -------------------------------Total Liabilities 449.0 498.7 ------------------------------- ------------------------------- Total net assets 203.1 195.7 =============================== EquityIssued capital 73.7 75.5Share premium 85.2 85.0Reserves 28.9 41.4Retained earnings (1.1) (19.6) -------------------------------Total equity attributable to equity holders ofparent 186.7 182.3company ------------------------------- Minority interest 16.4 13.4 -------------------------------Total equity 203.1 195.7 =============================== CONSOLIDATED STATEMENT OF CASH FLOWSFor the year end 4th January 2007 2006 2005 Note £m £m -------------------------Operating activitiesProfit for the period 39.7 54.2Adjustments for: Depreciation 24.7 30.0 Amortisation 1.2 1.3 Interest expense 3.4 13.1 (Profit)/Loss on sale of property, plant and equipment (0.4) 0.6 Income tax expense 10.6 8.8 Equity settled share based payment expenses 3.2 2.5 --------------------------Operating profit before changes inworking capital and provisions 82.4 110.5 (Increase)/decrease in trade and other receivables (18.7) (5.8)(Increase)/decrease in inventories (11.3) (9.0)Increase/(decrease) in trade and other payables 7.1 8.6Non cash operating costs relating to restructuring 4.2 8.5Increase/(decrease) in provisions and employee benefits (72.6) (1.9) ---------------------------Cash (absorbed)/generated from operations (8.9) 110.9 Interest paid (8.2) (13.7)Taxation (6.3) (6.2)Loss on partial disposal of business 1.5 0.1Loss/(Gain) on sale of discontinued operations - (42.6) ---------------------------Net cash from operating activities (21.9) 48.5 Investing activitiesPurchase of property, plant and equipment (34.0) (43.6)Proceeds from sale of property, plant and equipment 1.1 5.5Purchase of investments (1.8) (2.8)Proceeds from sale of investments - 0.7Interest received 3.5 2.3Acquisitions of subsidiaries, net of cash acquired (20.7) (3.0)Disposal of subsidiaries, net of cash disposed of 11.6 195.9 ---------------------------Net cash from investing activities (40.3) 155.0 Financing activitiesProceeds from the issue of share capital 0.2 1.7Purchase of own shares (19.4) (3.5)Repayment of borrowings 32.3 (125.2)Payment of finance lease liabilities (0.4) (1.2)Dividends paid (7.4) - ---------------------------Net cash from financing activities 5.3 (128.2) Netincrease/(decrease) in cash and cash equivalents (56.9) 75.3Cash and cash equivalents at start of period 133.6 56.3Effect of exchange rate fluctuations on cash held (3.2) 2.0 ----------------------------Cash and Cash equivalents at period end 6 73.5 133.6 ============================ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year eneded 4 January 2007 2006 2005 £m £m ----------------------- Foreign exchange translation differences (17.8) 5.0Actuarial gain/(losses) on defined benefit plans 15.2 (16.2)Deferred tax associated with employee benefit schemes (1.2) -Net gain/(loss) on hedge of net investment in foreign subsidiary - (1.5)Cash flow hedges: Effective portion of changes in fair value (0.1) 0.2 Change in fair value of equity securities available-for-sale 0.3 0.3 -----------------------Income and expense recognised directly in equity (3.6) (12.2) Profit/(loss)for the period 39.7 54.2 -----------------------Total recognised income and expense for the period 36.1 42.0 ======================= Attributable to: Equity holders of the parent 33.3 39.7 Minority interest 2.8 2.3 -----------------------Total recognised income and expenses for the period 36.1 42.0 ======================= Basis of Preparation These financial statements have been prepared in accordance with IFRS adoptedfor use in the EU ('Adopted IFRS') in accordance with EU law (IAS regulation EC/606/202). The financial information set out above does not constitute the company'sstatutory accounts for the years ended 4 January 2007 or 2006. Statutoryaccounts for 2005 have been delivered to the registrar of companies, and thosefor 2006 will be delivered in due course. The auditors have reported on thoseaccounts; their report was (i) unqualified, (ii) did not include a reference toany matters to which the auditors drew attention by way of emphasis withoutqualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Revenue Analysis Carbon Technical Thermal Molten Metal Ceramics Ceramics Systems (formerly Discontinued Consolidated Crucibles) 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m £m £m £m £m----------------------------------------------------------------------------------------------------------------------- Revenue fromexternal customers 213.6 199.9 162.5 144.8 271.2 236.7 30.5 28.4 - 135.9 677.8 745.7-----------------------------------------------------------------------------------------------------------------------Segment profit 28.5 15.3 19.3 8.6 12.9 9.2 4.1 1.3 - 8.5 64.8 42.9-----------------------------------------------------------------------------------------------------------------------Unallocated costs (9.6) (9.3) ----------------Operating profit/(loss) 55.2 33.6Net financing costs (3.4) (13.1)Loss of partialdisposal of business (1.5) (0.1)Income tax expense (10.6) (8.8)Gain/(loss) on sale ofdiscontinued operations,net of tax - 42.6 ----------------Profit/(loss)for the period 39.7 54.2 ================ Segment underlyingoperating profit 33.8 27.4 17.0 12.2 24.7 19.7 3.2 1.8 - 10.6 78.7 71.7------------------------------------------------------------------------------------------------------------------------Unallocated costs (5.0) (5.7) ----------------Underlying operating profit 73.7 66.0 ================ Revenue from external customers in discontinued comprises the Magnetics division£nil (2005: £135.9 million). Segment profit in discontinued comprises theMagnetics division £nil (2005: £8.5 million). Segment underlying operatingprofit in discontinued comprises the Magnetics division £nil (2005:£10.6million). Far East & Middle East Europe Americas Australia & Africa Discontinued Consolidated 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m £m £m £m £m------------------------------------------------------------------------------------------------------------------------Revenue from external customers 261.9 237.6 302.4 268.2 100.0 90.5 13.5 13.5 - 135.9 677.8 745.7------------------------------------------------------------------------------------------------------------------------ 2. Net Finance income and expense 2006 2005 £m £m --------------------------- Interest income 3.5 1.3 Expected return on IAS 19 scheme assets 23.3 21.0 Fair value gain on interest rate swaps - 0.4 --------------------------- Finance income 26.8 22.7 =========================== Interest expense (8.1) (11.3) Interest on IAS 19 obligations (22.1) (24.5) --------------------------- Finance expenses (30.2) (35.8) =========================== 3. Taxation - Income tax expense Recognised in the income statement 2006 2005 £m £m --------------------------- Current tax expense Current year 12.5 36.0 Adjustments for prior years 0.6 0.3 --------------------------- 13.1 36.3 --------------------------- Deferred tax expense Origination and reversal of temporary differences 2.9 4.0 Benefit of losses recognised (5.4) (10.1) --------------------------- (2.5) (6.1) --------------------------- Total income tax expense in income statement 10.6 30.2 =========================== Included in the total income tax expense is £nil million tax charge/(credit) related to the sale of discontinued operations (2005: £25.4 million charge). Reconciliation of effective tax rate 2006 2006 2005 2005 £m % £m % Profit before tax 50.3 84.4 Income tax using the domestic corporation tax rate 15.1 30.0 25.3 30.0 Non-deductible expenses 2.3 4.6 14.7 17.4 Effect of tax losses utilised (7.3) (14.5) (10.1) (12.0) Under provided in prior years 0.6 1.2 0.5 0.6 Other (0.1) (0.2) (0.2) (0.2) -------------------------------- 10.6 21.1 30.2 35.8 ================================ Reconciliation of profit before tax 2006 2005 £m £m ------------------ Shown on income statement 50.3 20.4 Add: gain on sale of discontinued operations, gross of tax - 64.0 ------------------ Profit/(loss) before tax shown above in tax rate reconciliation 50.3 84.4 ================== 4. Restructuring costs and costs associated with settlement of anti-trust litigation Costs of restructuring were £23.9 million (2005: £29.7 million) and legal costs associated with settlement of anti-trust litigation were £3.8 million (2005: £2.3 million). 5. Earnings per share Basic earnings per share--------------------------The calculation of basic earnings per share at 4 January 2007 was based on theprofit attributable to Equity holders of The Morgan Crucible Company plc of£36.9 million (4 January 2006: £51.9 million) and a weighted average number ofOrdinary shares outstanding during the period ended 4 January 2007 of287,110,574 (4 January 2006: 286,553,767) calculated as follows: 2006 2005 £m £m ------------------------------Profit attributable to Equity holders of TheMorgan Crucible Company plc 36.9 51.9 ============================== Weighted average number of Ordinary sharesIssued Ordinary shares at 5 January 293,188,372 290,200,179Effect of shares issued in period and Treasuryshares held by the Company (6,077,798) (3,646,412) ------------------------------Weighted average number of Ordinary shares atperiod end 287,110,574 286,553,767 ==============================Basic earnings per share (pence) 12.9p 18.1p Diluted earnings per share----------------------------The calculation of diluted earnings per share at 4 January 2007 was based on theprofit attributable to Equity holders of The Morgan Crucible Company plc of£36.9 million (4 January 2006: £51.9 million) and a weighted average number ofOrdinary shares outstanding during the period ended 4 January 2007 of298,938,120 (4 January 2006: 301,088,360), calculated as follows: 2006 2005 £m £m ------------------------------Profit attributable to Equity holders of TheMorgan Crucible Company plc 36.9 51.9 ============================== Weighted average number of Ordinary sharesWeighted average number of Ordinary shares 287,110,574 286,553,767Effect of share options/incentive schemes 11,827,546 14,534,593 ------------------------------Diluted weighted average number of Ordinaryshares 298,938,120 301,088,360 ==============================Diluted earnings per share (pence) 12.3p 17.2p Underlying earnings per share-------------------------------The calculation of underlying earnings per share at 4 January 2007 was based onprofit from operations before special items less net finance costs, income taxexpense (excluding tax credit arising from special items of £5.6 million, (4January 2006: £4.3 million)) and minority interest of £ 51.3 million (4 January2006: £37.5 million) and a weighted average number of Ordinary sharesoutstanding during the period ended 4 January 2007 of 287,110,574 (4 January2006: 286,553,767) calculated as follows: 2006 2005 £m £m ------------------------------Profit from operations before special itemsless net finance charge costs, income taxexpense and minority interest 51.3 37.5 ============================== Weighted average number of Ordinary sharesIssued Ordinary shares at 5 January 293,188,372 290,200,179Effect of shares issued in period and Treasuryshares held by the Company (6,077,798) (3,646,412) ------------------------------Weighted average number of Ordinary shares atperiod end 287,110,574 286,553,767 ==============================Underlying earnings per share (pence) 17.9p 13.1p Underlying diluted earnings per share---------------------------------------The calculation of underlying diluted earnings per share at 4 January 2007 wasbased on profit from operations before special items less net finance costs,income tax expense (excluding tax credit arising from special items £ 5.6million (4 January 2006: £4.3 million)) and minority interest of £ 51.3 million(4 January 2006: £37.5 million) and a weighted average number of Ordinary sharesoutstanding during the period ended 4 January 2007 of 298,938,120 (4 January2006: 301,088,360) calculated as follows: 2006 2005 £m £m ------------------------------Profit from operations before special itemsless net finance charge costs, income taxexpense and minority interest 51.3 37.5 ==============================Weighted average number of Ordinary sharesWeighted average number of Ordinary shares 287,110,574 286,553,767Effect of share options/incentive schemes 11,827,546 14,534,593 ------------------------------Diluted weighted average number of Ordinaryshares 298,938,120 301,088,360 ==============================Underlying diluted earnings per share (pence) 17.2p 12.5p 6. Cash and cash equivalents/bank overdrafts 2006 2005 £m £m ---------------------- Bank balances 70.2 69.0 Cash deposits 27.2 91.0 ---------------------- Cash and cash equivalents per balance sheet 97.4 160.0 Bank overdrafts subject to cash pooling (23.9) (26.4) arrangements ---------------------- Cash and cash equivalents per cash flow statement 73.5 133.6 ====================== Bank overdrafts subject to cash pooling (23.9) (26.4) arrangements Other bank overdrafts (0.6) (0.8) ---------------------- Total bank overdrafts (24.5) (27.2) ====================== Enquiries: Mark Robertshaw Chief Executive Officer 01753 837 306 Kevin Dangerfield Chief Financial Officer 01753 837 302 Mike Smith/Robin Walker Finsbury Group 020 7251 3801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Morgan Advanced Materials