Subdued global industrial growth made life tough for engineer Morgan Advanced Materials (MGAM) in 2013. Management admits the first half of 2014 is unlikely to be much different. But an ongoing programme of self-help has had a major impact on margins, and further progress should drive double-digit earnings growth this year.
Morgan put underperforming businesses generating annual revenue of £20m up for sale a few months ago. Most have now been sold, and units worth another £30m in sales will be jettisoned this year. Sixty per cent of the company already generates mid-teen margins or better, and the remaining 35 per cent should too, in time. Chief executive Mark Robertshaw says the latter made most progress last year, helping drive group underlying operating profit margin to 12.9 per cent in the second half, up 190 basis points on 2012 to a decade-high. A mixture of growth and cost-cutting at Morgan’s European electrical carbon business takes much of the credit.
Other end markets are improving, too. After a subdued 2013, Morgan is quoting for more work in the petrochemicals industry. Contracts have already been won, and healthcare in Asia is also picking up.
Broker JP Morgan Cazenove expects adjusted pre-tax profit of £101m in 2014, giving adjusted EPS of 23.9p (from £85.2m/21.5p in 2013).
MORGAN ADVANCED MATERIALS (MGAM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 316p | MARKET VALUE: | £902m | |
| TOUCH: | 315-316p | 12-MONTH HIGH: | 341p | LOW: 239p |
| DIVIDEND YIELD: | 3.3% | PE RATIO: | 21 | |
| NET ASSET VALUE | 83p* | NET DEBT: | 68% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 0.94 | 31.4 | 7.1 | 7.0 |
| 2010 | 1.02 | 67.7 | 15.8 | 7.7 |
| 2011 | 1.10 | 111.0 | 26.9 | 9.3 |
| 2012 | 1.01 | 76.7 | 18.7 | 10.0 |
| 2013 | 0.96 | 64.0 | 14.8 | 10.5 |
| % change | -5 | -17 | -21 | +5 |
Ex-div: 14 May Payment: 30 May *Includes intangible assets of £249.5m, or 87p per share | ||||
