3rd Aug 2006 07:02
Morgan Crucible Co PLC03 August 2006 INTERIM RESULTS FOR THE HALF YEAR ENDED 4 JULY 2006 • Double digit growth and margins: Turnover from continuing operations up 11.7% to £336.3 million (2005: £301.0 million) including a favourable currency translation impact of £8.8 million Underlying operating profit from continuing operations up 39.5% to £35.7 million (2005: £25.6 million) including a favourable currency translation impact of £1.1 million Group underlying operating profit margins for continuing businesses improved from 8.5% to 10.6% Underlying EPS improved by 34.9% to 8.5p (2005:6.3p) • Strong financial position : Net debt of £22.9 million (2005: net debt of £165.0 million) Group pension deficit substantially reduced to £44.4 million UK pension schemes now in surplus on an IAS 19 basis Interim dividend recommended at 1.5p per share 2006 2005 ------------------------------------------------------------------------ Revenue £m 336.3 391.7 ------------------------------------------------------------------------ Underlying operating profit* £m 35.7 33.2 ------------------------------------------------------------------------ Underlying PBT** £m 34.2 26.1 ------------------------------------------------------------------------ Underlying EPS *** pence 8.5 6.3 ------------------------------------------------------------------------ Net debt £m 22.9 165.0 ------------------------------------------------------------------------ Operating profit £m 31.6 22.2 ------------------------------------------------------------------------ Profit before tax £m 30.1 15.1 ------------------------------------------------------------------------ Basic EPS pence 7.5 2.8 ------------------------------------------------------------------------ Commenting on the results, Chief Executive Officer, Warren Knowlton said: "I am delighted that we have delivered our promises ahead of schedule. Morgan is in a substantially better position than it was three years ago. Our profit improvement plan is nearly complete, having delivered both the strategic repositioning of the Group and financial benefits. At the same time we have also successfully demonstrated our capacity to achieve good top line growth. Morgan has delivered significant shareholder value and has the capacity to create more. The Group is in a strong financial position and this, coupled with our profitable growth, allows us to look to the future with confidence." * Defined as operating profit of £31.6 million (2005: £22.2 million) before financing costs of £1.5 million (2005: £6.7 million) and before restructuring costs of £14.4 million (2005: £9.8 million), costs associated with the settlement of prior period litigation of £0.8 million (2005: £1.2 million), gain on curtailment of United Kingdom employee benefit schemes of £11.0 million (2005: £nil) and gains on property disposals of £0.1 million (2005: £ nil). This measure of earnings is shown because the Directors consider that it gives a better indication of underlying performance. ** Defined as operating profit of £31.6 million (2005: £22.2 million) before restructuring costs of £14.4 million (2005: £9.8 million), costs associated with the settlement of prior period litigation of £0.8 million (2005: £1.2 million), gain on curtailment of United Kingdom employee benefit schemes of £11.0 million (2005: £nil) and gains on property disposals of £0.1 million (2005: £nil) and after net financing costs of £1.5 million (2005: £6.7 million) and losses on partial disposal of businesses of £nil (2005: £0.4 million). *** Defined as basic earnings per share of 7.5p (2005: 2.8p) adjusted to exclude the after tax impact of restructuring costs, costs of settlement of prior period litigation, gain on curtailment of United Kingdom employee benefit schemes and gains on property disposals of 1.0p (2005: 3.5p). Strategy Morgan Crucible's strong performance has continued into 2006. The Group has successfully driven its core business to 10.6% underlying operating margins, putting us ahead of our announced target of achieving double-digit margins on a run rate basis by the end of 2006. Our cost base has consistently improved since 2002. We are progressively shifting our manufacturing footprint to lower cost countries and, combined with ongoing reductions in overhead costs, this has driven down our total employment costs (from continuing businesses) as a percentage of sales from 39.3% in 2003 to 33.8% for the first half of 2006. We have targeted attractive, higher growth markets and coupled with our concentration on increasing the value-added component within our product range, have reversed year on year price erosion. Our pricing position is now strongly positive at 1.7% and as a continuing Group we have averaged over 5% top line growth over the past three years on a constant currency basis. We have actively pursued a positive shift in product mix by exiting price competitive cyclical markets and targeting higher growth, less commoditised markets such as medical and defence. The significantly improved financial strength of the Group leaves us well placed to invest in profitable growth both organically and through bolt-on acquisitions in our core markets. We have made six acquisitions/ joint ventures in 2006 so far which have given us both enhanced market access and lower cost country penetration. This financial strength, combined with our organic growth and bolt-on acquisitions, creates a secure base for the Group to target mid-teen margins. Financial Review Reference is made to underlying operating profit and underlying EPS below, both of which are defined at the front of this statement. These measures of earnings are shown because the Directors consider that they give a better indication of underlying performance. Group underlying operating profit for continuing businesses increased by 39.5% to £35.7 million (2005: £25.6 million). Underlying operating profit margins from continuing businesses for the six months were 10.6%. This compares to 8.5% in the equivalent period in 2005. All three of our major business units contributed to this increase in margin. The Group has continued to implement its "Profit Improvement Programme" in this period with restructuring charges being £14.4 million (2005: £9.8 million). We have also incurred costs associated with settlement of prior period anti-trust litigation in 2006 of £0.8 million (2005: £1.2 million). The net finance charge was £1.5 million (2005: £6.7 million). Net bank interest and similar charges were £1.6 million (2005: £4.9 million), an improvement of £3.3 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 £0.1 million (2005: charge of £1.8 million). The tax charge for the period was £6.7 million (2005: £5.5 million). The tax charge on underlying operating profit net of finance costs was £8.6 million. There was a tax credit of £1.9 million on restructuring costs and costs associated with prior period anti-trust litigation. The effective tax rate before restructuring costs, costs associated with settlement of prior period anti-trust litigation, gain on curtailment of United Kingdom employee benefit schemes and gains on property disposals was 25% (2005: 28%). Over the medium term we would expect the effective tax rate to trend towards 30% as losses are utilised. Underlying earnings per share were 8.5 pence (2005: 6.3 pence). The Group pension deficit has improved by £79.8 million since last year end to £44.4 million on an IAS 19 basis. The main movements are in the UK pension schemes which show a surplus of £5.7 million at the half year on an IAS 19 basis, an improvement of £71.9 million in the period. The two main one-off changes for the UK are a £40 million cash injection and an £11 million curtailment to the deficit due to the changes implemented in the schemes. Improvement in bond yields contributed to a higher discount rate and hence a lower liability position. The net cash outflow from operating activities was £51.4 million (2005: inflow £2.7 million) which included an adverse cash impact from restructuring costs and costs associated with anti-trust litigation of £14.3 million (2005: £14.9 million). Working capital increased by £35.0 million (2005: increase £22.1 million) in the first half of the year. Seasonality in inventory levels, due to stock building for shut down periods in July and August is a large part of this increase. Combined with higher raw material and energy prices included in inventory and strong sales in June increasing debtors, working capital was £12.9 million adverse compared to the same time last year. Working capital levels are expected to improve significantly in the second half of the year as this half year position unwinds. HY HY ------------------------------------------------------------------------- 2006 2005 ------------------------------------------------------------------------- £m £m ------------------------------------------------------------------------- Net cash from operating activities before UK pension payment (11.4) 2.7 ------------------------------------------------------------------------- UK pension scheme payment (40.0) - ------------------------------------------------------------------------- Interest received 2.3 0.9 ------------------------------------------------------------------------- Net capital expenditure (14.1) (12.3) ------------------------------------------------------------------------- Free cash flow (63.2) (8.7) ------------------------------------------------------------------------- Cash flows from other investing activities (5.8) (4.2) ------------------------------------------------------------------------- Cash flows from financing activities (6.4) (3.4) ------------------------------------------------------------------------- Exchange movement 2.0 (0.8) ------------------------------------------------------------------------- Opening net cash/(debt) 50.5 (147.9) ------------------------------------------------------------------------- Closing net (debt) (22.9) (165.0) Interim Dividend Further to the return to the dividend list as announced at the presentation of our Final 2005 results, the Board has declared an interim dividend of 1.5 pence per Ordinary share. The dividend will be paid on 8 January 2007 to Ordinary shareholders on the register of members at the close of business on 1 December 2006. Operating Review Carbon Sales in the first half were up by 5.6% compared to the same period last year at £106.5 million (2005: £100.9 million) and on a constant currency basis up 3.2%. Underlying operating profit for the period was up 30.6% to £16.2 million (2005: £12.4 million). This profit improvement is due to a combination of sales growth in niche applications such as rotary systems and armour and the impact on both gross margin and overheads from the restructuring projects in USA and Western Europe. Performance has been robust across most regions and markets. In the Americas, sales have been strong in the traditional brush and seals and bearings markets. Additional capacity has been installed to meet the demands for armour from the US and European military. Good progress has also been made in the increased utilisation of the Mexican business to provide a low cost manufacturing site. Whilst trading conditions remain more difficult in Europe, there have been some signs of recovery and sales in a number of markets have shown improvement on 2005. Major re-organisation projects have been completed and the first half has seen some of the benefits of these. The Asian business, particularly in China , continues to enjoy strong organic growth and our continued investment in terms of financial, technical and human resource has allowed us to take advantage of the opportunities in this area. We have recently completed the acquisition of an armour technology business, Aceram, based in Canada for a maximum purchase price of c.£6.0 million of which £1.8 million will be paid upfront and the remainder deferred and linked to business performance. This acquisition will broaden the portfolio of products and materials available to Morgan in the armour market. Technical Ceramics Sales in the first half showed strong organic growth, increasing 18.1% to £84.0 million (2005: £71.1 million) and on a constant currency basis up 16.0%. This sales growth is flattered by the inclusion of metal price increases that are a component of our sales and this accounts for 2.8% of this increase. The organic growth was achieved across all geographic regions, with the highest growth rates in percentage terms being seen in Asia as the business continues to expand its activities in this area. Underlying operating profit grew 45.9% to £8.9 million (2005: £6.1 million), increasing operating margins to 10.6% (2005: 8.6%). Costs were controlled while the top line was grown and new product introductions helped to support gross margins in the face of pressure from raw materials and energy price increases. We maintain our focus on niche opportunities within selected target markets, and overall have experienced strong market conditions in Europe and in the US throughout the period. Telecoms in the US continue to improve, and demand for our products in Aerospace applications has also been good. Our factory in Yixing, China continues to expand toward full utilization of the recent new capacity installed and is serving local customers as well as export markets. Insulating Ceramics Insulating Ceramics sales in the first half were up by 12.9% (including revenue in 2006 of £4.1 million from acquisitions) at £145.8 million (2005: £129.0 million) and on a constant currency basis up 10.5%. Underlying operating profit increased 32.3% to £13.1 million (2005: £9.9 million) despite the continued rise of input price pressures from raw materials and energy suppliers. Within the Thermal Ceramics business price increases were implemented in January and July 2006 in order to offset these cost increases. In addition we have implemented further restructuring plans within the division continuing to streamline our infrastructure and ensure that our main European and American facilities become the lowest cost producers in their respective markets. The overall cost reduction programme to counter higher input costs and to fully leverage the Vesuvius ceramic fibre acquisition has resulted in further restructuring costs of c.£8 million for an expected annualised benefit of c.£8 million. The Thermal Ceramics business has continued to expand its geographic presence with the formation of a 75% joint venture ("JV") with Beijing Yingtelai Textile Corporation in Beijing, China, a 51% JV with Shandong Luyang in China to manufacture high temperature sol gel fibres, a 51% JV in Yekaterinburg, Russia with Sukhoy Log to produce ceramic fibres and the acquisition of the ceramic fibre division of Vesuvius with plants in Erwin, USA and Skawina, Poland. Investment in our fibre facility in France has allowed closure of our Italian site and closure of our UK fibre line in the second half of the year. The launch of a new high temperature bio-soluble fibre (SuperwoolTM 607HT) has enabled Thermal Ceramics to be at the forefront of developing new products adapted to the changing needs and environmental demands of the European and global markets. The first half of the year saw improved trading conditions for the Crucibles business, with sales growth evident in all regions. Escalating fuel prices stimulated an increasing interest in energy efficient metal melting systems, particularly in the Americas. Operating margins continued to improve, assisted by the fixed cost reduction programmes implemented in the second half of last year. Consolidation of our Indian operations was achieved by the purchase of the remaining equity owned by our joint venture partner and by the subsequent acquisition of the Diamond Crucible Company in Gujarat. Additional technical and sales resources have been deployed in Asia, in order to accelerate the capacity expansion that is required to support the anticipated market growth in the region. Outlook All three divisions continue to make progress in both margin improvement and top line growth. Our strong market positions and current trading give the Board confidence that the Group will make further progress in the second half of the year. Lars Kylberg Chairman Warren Knowlton Chief Executive Officer CONSOLIDATED INCOME STATEMENTfor the six months ended 4 July 2006 Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Six Six Six Six Six Six months months months months months months Year Year Year Contd D'contd Total Cont D'contd Total Cont D'cont Total opera- opera- opera- opera- opera- opera- tions tions tions tions tions tions 2006 2006 2006 2005 2005 2005 2005 2005 2005 Note £m £m £m £m £m £m £m £m £m -------------------------------------------------------------------------------------------------Revenue 1 336.3 - 336.3 301.0 90.7 391.7 609.8 135.9 745.7 -------------------------------------------------------------------------------------------------Operating costs beforespecial items (300.6) - (300.6) (275.4) (83.1) (358.5) (554.4) (125.3) (679.7) ------------------------------------------------------------------------------------------------- Profit from operations before special 1 35.7 - 35.7 25.6 7.6 33.2 55.4 10.6 66.0items Restructuringcosts & costsassoc withsettlement of prior period anti- trust litigation 4 (15.2) - (15.2) (9.9) (1.1) (11.0) (29.9) (2.1) (32.0)Gaincurtailmentof UK employee benefit schemes 11.0 - 11.0 - - - - - - Gain/ (loss) on disposalof property 0.1 - 0.1 - - - (0.4) - (0.4) -------------------------------------------------------------------------------------------------Operatingprofit 1 31.6 - 31.6 15.7 6.5 22.2 25.1 8.5 33.6 Finance income 12.8 - 12.8 11.9 - 11.9 22.7 - 22.7Finance expenses (14.3) - (14.3) (17.2) (1.4) (18.6) (33.4) (2.4) (35.8) -------------------------------------------------------------------------------------------------Net financingcosts 2 (1.5) - (1.5) (5.3) 1.4) (6.7) (10.7) (2.4) (13.1) Loss onpartialdisposal ofbusinesses - - - (0.4) - (0.4) (0.1) - (0.1) -------------------------------------------------------------------------------------------------Profit beforetaxation 30.1 - 30.1 10.0 5.1 15.1 14.3 6.1 20.4 Income taxexpense 3 (6.7) - (6.7) (4.5) (1.0) (5.5) (4.8) (4.0) (8.8) -------------------------------------------------------------------------------------------------Profit aftertaxation but before loss/(gain) on sale of discontinuedoperations 23.4 - 23.4 5.5 4.1 9.6 9.5 2.1 11.6 Loss/(gain)on sale ofdiscontinuedoperations, - (0.6) (0.6) - (0.6) (0.6) - 42.6 42.6net of tax -------------------------------------------------------------------------------------------------Profit/(loss)for the 23.4 (0.6) 22.8 5.5 3.5 9.0 9.5 44.7 54.2period =================================================================================================Profit/(loss)for the periodattributable to: Equityholders of the parent 22.2 (0.6) 21.6 4.7 3.5 8.2 7.2 44.7 51.9Minority interest 1.2 - 1.2 0.8 - 0.8 2.3 - 2.3 ------------------------------------------------------------------------------------------------- 23.4 (0.6) 22.8 5.5 3.5 9.0 9.5 44.7 54.2 ================================================================================================= Earnings/(loss) 5per shareBasic 7.7p (0.2p) 7.5p 1.6p 1.2p 2.8p 2.5p 15.6p 18.1pDiluted 7.4p (0.2p) 7.2p 1.5p 1.2p 2.7p 2.4p 14.8p 17.2p DividendsProposed interim/finaldividend - pence 1.5p - 2.5p - £m 4.4 - 7.3 CONSOLIDATED BALANCE SHEET As at 4 July 2006 Unaudited Unaudited Six months Six months Year 2006 2005 2005 £m £m £m -----------------------------------------AssetsProperty, plant and equipment 228.7 321.9 235.3Intangible assets 58.2 107.0 46.6Other investments 5.8 6.0 6.1Other receivables 0.4 3.5 0.3Deferred tax assets 27.4 31.2 27.4 ----------------------------------------- Total non-current assets 320.5 469.6 315.7 ----------------------------------------- Inventories 86.0 133.1 77.8Trade and other receivables 141.7 176.7 140.9Cash and cash equivalents 85.1 69.6 160.0 -----------------------------------------Total current assets 312.8 379.4 378.7 -----------------------------------------Total assets 633.3 849.0 694.4 ----------------------------------------- LiabilitiesInterest-bearing loans and borrowings 76.8 181.1 57.3Employee benefits 44.4 185.0 124.2Grants for capital expenditure 0.3 0.6 0.3Provisions 3.7 5.2 4.3Deferred tax liabilities 28.7 42.1 28.1 -----------------------------------------Total non-current liabilities 153.9 414.0 214.2 ----------------------------------------- Bank overdraft 15.7 14.1 27.2Interest-bearing loans and borrowings 15.5 39.4 25.0Trade and other payables 202.2 192.3 203.9Provisions 27.2 34.1 28.4 -----------------------------------------Total current liabilities 260.6 279.9 284.5 -----------------------------------------Total liabilities 414.5 693.9 498.7 ----------------------------------------- -----------------------------------------Total net assets 218.8 155.1 195.7 ========================================= EquityIssued capital 75.6 74.8 75.5Share premium 85.2 84.1 85.0Reserves 33.3 36.5 41.4Retained earnings 10.6 (52.3) (19.6) -----------------------------------------Total equity attributable toequity holders of the parent company 204.7 143.1 182.3 ----------------------------------------- Minority interest 14.1 12.0 13.4 -----------------------------------------Total equity 218.8 155.1 195.7 ========================================= CONSOLIDATED STATEMENT OF CASH FLOWSfor the six months ended 4 July 2006 Unaudited Unaudited Six months Six months Year 2006 2005 2005 Note £m £m £m -----------------------------------------Operating activitiesNet profit from ordinary activities 22.8 9.0 54.2Adjustments for:Depreciation 12.7 16.3 30.0Amortisation 0.4 0.7 1.3Interest expense 1.5 6.7 13.1(Profit)/loss on saleof property, plant & equipment (0.2) 0.1 0.6Income tax expense 6.7 5.5 8.8 Equity settled share based payment expenses 1.6 1.5 2.5 -----------------------------------------Operating profit before changes in working capital and provisions 45.5 39.8 110.5 (Increase)/decrease in trade and other receivables (11.7) (13.1) (5.8)(Increase)/decrease in inventories (9.9) (11.3) (9.0)Increase/(decrease) in trade and other payables (13.4) 2.3 8.6Non cash operating costs relating to restructuring 1.6 1.6 8.5Increase/(decrease) in provisions and employee benefits (17.0) (6.8) (1.9)Payment to UK pension schemes (40.0) - - ----------------------------------------- Cash generated from the operations (44.9) 12.5 110.9 Interest paid (3.7) (6.7) (13.7) Taxation (3.4) (4.1) (6.2) Loss on partial - 0.4 0.1 disposal of businessesLoss/(gain) on sale ofdiscontinued operations 0.6 0.6 (42.6) -----------------------------------------Net cash flows from operating activities (51.4) 2.7 48.5 Investing activities Purchase of property, plant and equipment (14.8) (17.3) (43.6)Proceeds from sale ofproperty, plant and equipment 0.7 5.0 5.5Purchase of investments (0.3) (0.6) (2.8)Proceeds from sale of investments 0.3 - 0.7Interest received 2.3 0.9 2.3Acquisitions of subsidiaries, net of cash acquired (15.5) (2.6) (3.0)Disposal of subsidiaries, net of cash disposed 9.7 (1.0) 195.9 -----------------------------------------Net cash flows from investing activities (17.6) (15.6) 155.0 Financing activitiesProceeds from the issue of share capital 0.2 0.1 1.7 Purchase of shares for LTIP (6.2) (3.5) (3.5) Increase/(repayment)of borrowings 14.2 14.7 (125.2) Payment of finance lease liabilities (0.3) - (1.2) Dividends paid (0.4) - - -----------------------------------------Net cash flows from financing activities 7.5 11.3 (128.2) Net increase/(decrease) in cash and cash equivalents (61.5) (1.6) 75.3Cash and cash equivalents at start of period 133.6 56.3 56.3Effect of exchange ate fluctuations on cash held (1.7) 1.1 2.0 -----------------------------------------Cash and cash 6 70.4 55.8 133.6equivalents at period end ========================================= CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the six months ended 4 July 2006 Unaudited Unaudited Six months Six months Year 2006 2005 2005 £m £m £m -----------------------------------------Foreign exchange translation differences (10.1) (0.4) 5.0Actuarial gain/(loss) ondefined benefit plans 23.8 (4.1) (16.2)Deferred tax associated withemployee benefit schemes (1.7) - -Net gain/(loss) on hedge ofnet investment in foreign subsidiary - 0.6 (1.5)Cash flow hedges:Effective portion of changes in fair value 0.4 (1.2) 0.2Change in fair value ofequity securities available-for-sale - - 0.3 -----------------------------------------Income and expense recogniseddirectly in equity 12.4 (5.1) (12.2) Profit for the period 22.8 9.0 54.2 -----------------------------------------Total recognised income andexpense for the period 35.2 3.9 42.0 ========================================= Attributable to:Equity holders of the parent 34.0 3.1 39.7 Minority interest 1.2 0.8 2.3 -----------------------------------------Total recognised income andexpenses for the period 35.2 3.9 42.0 ========================================= NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Basis of preparationThe Morgan Crucible Company plc (the "Company") is a company domiciledin the United Kingdom. The consolidated financial statements of theCompany for the period ended 4 July 2006 comprise the Company and itssubsidiaries (together referred to as the "Group") and the Group'sinterest in associates and jointly controlled entities. These financial statements have been prepared on the basis of therecognition and measurement requirements of IFRS applied in thefinancial statements at 4 January 2006 and those standards that havebeen endorsed and will be applied at 4 January 2007. The results for each half year are unaudited. The comparative figuresfor the year to 4 January 2006 have been abridged from the Group'sfinancial statements for that year, which have been delivered to theregistrar of Companies. The auditors have reported on these financialstatements; their report was unqualified and did not contain statementsunder section 237 (2) or (3) of the Companies Act 1985 The interim financial statements for the six months ended 4 July 2006were approved by the Board on 3 August 2006. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segment reporting Business segments Carbon Technical Ceramics Thermal Ceramics Crucibles Discontinued Consolidated 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 6 mths 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 fromexternalcustomers 106.5 100.9 84.0 71.1 130.5 114.8 15.3 14.2 - 90.7 336.3 391.7 ---------------------------------------------------------------------------------------------------------------Segment profit 14.1 8.6 12.4 4.7 4.6 6.6 2.5 0.8 - 6.5 33.6 27.2 ----------------------------------------------------------------------------------------------Unallocatedcosts (2.0) (5.0) -----------------Operating Profit 31.6 22.2 =================Segment underlyingoperating profit * 16.2 12.4 8.9 6.1 11.4 9.0 1.7 0.9 - 7.6 38.2 36.0 ----------------------------------------------------------------------------------------------Unallocated costs (2.5) (2.8) -----------------Underlying operatingprofit 35.7 33.2 ================= Technical Thermal Carbon Ceramics Ceramics Crucibles Discontinued Consolidated Year Year Year Year Year Year 2005 2005 2005 2005 2005 2005 £m £m £m £m £m £m -----------------------------------------------------------------------------Revenue from external customers 199.9 144.8 236.7 28.4 135.9 745.7 -----------------------------------------------------------------------------Segment profit 15.3 8.6 9.2 1.3 8.5 42.9 ------------------------------------------------------------Unallocated costs (9.3) -----------------Operating profit 33.6 =================Segment underlying operatingprofit* 27.4 12.2 19.7 1.8 10.6 71.7 ------------------------------------------------------------ Unallocated costs (5.7) -----------------Underlying operating profit 66.0 ================= * This measure of profit (before special items) is shown because the Directors consider that it gives a better indication of underlying performance. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. Finance income and expenses Six months Six months Year 2006 2005 2005 £m £m £m ----------------------------------- Interest income 1.3 0.9 1.3Expected return on IAS 19 scheme assets 11.5 10.6 21.0Fair value gain on interest rate swaps - 0.4 0.4 ----------------------------------- Finance income 12.8 11.9 22.7 =================================== Interest expense (2.9) (6.2) (11.3)Interest on IAS 19 obligations (11.4) (12.4) (24.5) -----------------------------------Finance expenses (14.3) (18.6) (35.8) =================================== 3. Taxation Six months Six months Year 2006 2005 2005 £m £m £m -----------------------------------Tax on profit before special itemsand sale of discontinued operations 8.6 7.4 13.1 Tax on special items (1.9) (1.9) (4.3) -----------------------------------Income tax expense 6.7 5.5 8.8Tax on sale of discontinued operations - - 21.4 ----------------------------------- Total taxation 6.7 5.5 30.2 =================================== The interim taxation charge is calculated by applying the Directors'best estimate of the annual tax rate to the profit for the period. 4. Restructuring costs and costs associated with settlement ofanti-trust litigation Costs of restructuring were £14.4 million (2005: £9.8 million) and legalcosts associated with settlement of prior period anti-trust litigationwere £0.8 million (2005: £1.2 million). 5. Earnings per share Basic earnings per share--------------------------The calculations of basic earnings per share at 4 July 2006 was based onthe net profit/(loss) attributable to Equity holders of The MorganCrucible Company plc of £21.6 million (2005: £8.2 million) and aweighted average number of Ordinary shares outstanding during the periodended 4 July 2006 of 288,175,695 (2005: 290,279,006) calculated asfollows: Six months Six months Year 2006 2005 2005 £m £m £m --------------------------------------------------Net profit/(loss) attributable to Equity holders of The Morgan Crucible Company plc 21.6 8.2 51.9 --------------------------------------------------Weighted average number of Ordinary sharesIssued Ordinary shares at 5 January 293,188,372 290,200,179 290,200,179Effect of shares issued in period and Treasury shares held by the Company (5,012,677) 78,827 (3,646,412) --------------------------------------------------Weighted average number of Ordinary shares at period end 288,175,695 290,279,006 286,553,767 ================================================== Diluted earnings per share----------------------------The calculation of diluted earnings per share at 4 July 2006 was basedon net profit/(loss) attributable to Equity holders of The MorganCrucible Company plc of £21.6 million (2005: £8.2 million) and aweighted average number of Ordinary shares outstanding during the periodended 4 July 2006 of 300,271,233 (2005: 301,688,291), calculated asfollows: Six months Six months Year 2006 2005 2005 £m £m £m -------------------------------------------------- Net profit/(loss) attributable to Equity holders of The Morgan Crucible Company plc 21.6 8.2 51.9 ================================================== Weighted average number of Ordinary shares Weighted average number of Ordinary shares 288,175,695 290,279,006 286,553,767Effect of share options/incentive schemes 12,095,538 11,409,285 14,534,593 --------------------------------------------------Diluted weighted average number of Ordinary shares 300,271,233 301,688,291 301,088,360 ================================================== 5. Earnings per share (continued) Underlying earnings per share-------------------------------The calculations of underlying earnings per share at 4 July 2006 wasbased on profit from operations before special items less net financecosts, income tax expense (excluding tax credit arising from specialitems) and minority interest of £24.4 million (2005: £18.3 million) anda weighted average number of Ordinary shares outstanding during theperiod ended 4 July 2006 of 288,175,695 (2005: 290,279,006) calculatedas follows: Six months Six months Year 2006 2005 2005 £m £m £m -------------------------------------------------- Profit from operations before special items less net finance charge costs, income taxexpense and minority interest 24.4 18.3 37.5 ==================================================Weighted average number of Ordinary shares Issued Ordinary shares at 5 January 293,188,372 290,200,179 290,200,179Effect of shares issued in period and Treasury shares held by the Company (5,012,677) 78,827 (3,646,412) --------------------------------------------------Weighted average number of Ordinary sharesat period end 288,175,695 290,279,006 286,553,767 ==================================================Underlying earnings per share (pence) 8.5p 6.3p 13.1p Underlying diluted earnings per share---------------------------------------The calculations of underlying diluted earnings per share at 4 July 2006was based on profit from operations before special items less net financecosts, income tax expense (excluding tax credit arising from specialitems) and minority interest of £24.4 million (2005: £18.3 million) and aweighted average number of Ordinary shares outstanding during the periodended 4 July 2006 of 300,271,233 (2005: 301,688,291) calculated asfollows: Six months Six months Year 2006 2005 2005 £m £m £m -------------------------------------------------- Profit from operations before special items less net finance charge costs, income taxexpense and minority interest 24.4 18.3 37.5 --------------------------------------------------Weighted average number of Ordinary shares Weighted average number of Ordinary shares 288,175,695 290,279,006 286,553,767Effect of shares options/incentive schemes 12,095,538 11,409,285 14,534,593 --------------------------------------------------Diluted weighted average number of Ordinary shares 300,271,233 301,688,291 301,088,360 ==================================================Underlying diluted earnings per share (pence) 8.1p 6.1p 12.5p 6. Cash and cash equivalents/bank overdrafts Six months Six months Year 2006 2005 2005 £m £m £m --------------------------------------------------Bank balances 61.3 41.9 69.0Cash deposits 23.8 27.7 91.0 --------------------------------------------------Cash and cash equivalents per balance sheet 85.1 69.6 160.0Bank overdrafts subject to cash pooling arrangements (14.7) (13.8) (26.4) Cash and cash equivalents per cashflow statement 70.4 55.8 133.6 ==================================================Bank overdrafts subject to cashpooling arrangements (14.7) (13.8) (26.4)Other bank overdrafts (1.0) (0.3) (0.8) --------------------------------------------------Total bank overdrafts (15.7) (14.1) (27.2) ================================================== Reconciliation of cash and cash equivalents to net borrowings Six months Six months Year 2006 2005 2005 £m £m £m --------------------------------------------------Opening (borrowings) (83.1) (204.2) (204.2)(Increase)/repayment of borrowings (14.2) (14.7) 125.2Payment of finance lease liabilities 0.3 - 1.2Effect of movements in foreign exchange on borrowings 3.7 (1.9) (5.3) -------------------------------------------------- Closing (borrowings) (93.3) (220.8) (83.1)Cash and cash equivalents per cashflow statement 70.4 55.8 133.6 -------------------------------------------------- Closing net cash and equivalents/(borrowings) (22.9) (165.0) 50.5 ================================================== This Interim Statement will be dispatched to all registered holders ofOrdinary shares. Copies of this statement may be obtained from theSecretary at the Registered Office of the Company, Quadrant, 55 - 57High Street, Windsor, Berkshire, SL4 1EP. (Registered in EnglandNo.286773) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Morgan Advanced Materials