Morgan Crucible's challenges aren't in Europe - they're actually in China where oversupply in the solar market hurt demand for its HiTemp graphite, and a weak construction industry needed fewer insulating fire bricks. Management predicts little change in the second half, yet the bad news already looks priced in.
Blame the engineered materials division for this earnings miss. The solar slowdown and fall in sales of body armour to the US military carved 13 per cent off revenue and 31 per cent from operating profit, before one-offs. However, strip out last year's big Ministry of Defence order for blast-resistant Mastiff vehicles and sales fell just 3 per cent. Management remains bearish on solar, but orders received and pending do point to a better second half for bulletproof vests. And profits grew 14 per cent at the larger ceramics division on flat sales, driven by demand for high-temperature insulating material 'superwool', and from more secular growth markets such as oil & gas, aerospace and medical. Crucially, Morgan remains on track to deliver on both its ambitious three-year plan and £8m of cost savings by merging its two ceramics businesses.
Having cut forecasts by 7 per cent, broker Numis Securities now expects full-year adjusted pre-tax profit of £121m, giving adjusted EPS of 28.4p (£125.3m and 29.9p for 2011).
MORGAN CRUCIBLE (MGCR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 247p | MARKET VALUE: | £690.9m | |
| TOUCH: | 246-247p | 12-MONTH HIGH: | 368p | Low: 220p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 84p* | NET DEBT: | 80% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 560 | 55.6 | 13.1 | 3.25 |
| 2012 | 533 | 53.7 | 13.0 | 3.60 |
| % change | -5 | -3 | -1 | +11 |
Ex-div: 21 Nov Payment: 10 Jan *Includes intangible assets of £275.4m, or 98p a share | ||||
