Morgan Advanced impresses despite cyber attack

In January, Morgan Advanced Materials (MGAM) was hit by an attempted cyber attack that will constrain sales and profitability in the short term, meaning it now expects first-half revenue in 2023 to be in line with the prior year comparator. The breach shouldn’t detract from a solid operational performance throughout a year characterised by spiking energy and raw materials prices.

The materials science manufacturing group held the line on margins, with the adjusted operating rate up 48 basis points to 13.57 per cent. It meant that the adjusted operating profit came in at £151mn against £124.5mn last time around.

As ever, there was a mixed showing across the group, with the most noteworthy performance attributable to the Technical Ceramics unit, which recorded a 48 per cent rise in the adjusted operating profit to £41.7mn on a 300 basis points increase in the underlying margin to 14.1 per cent.

The balance sheet remains in reasonable order, although net debt as a proportion of cash profits increased to a multiple of 1.1 times, well within the debt covenant, but appreciably up on the previous half-year. However, the group’s pension liabilities were significantly de-risked by a one-off contribution of £67mn. The net finance charge for this year is pitched at £13mn-£15mn, against £9.2mn in 2022.

Group chief executive Pete Raby said that management had “worked hard to recover significant cost inflation in a challenging environment” and efforts are still being made to offset input inflation. The inflationary challenges persist but a rating of 11.5 times Peel Hunt’s latest EPS estimate is undemanding given that investment is being targeted at Morgan’s fastest-growing business segments. Buy.

Last IC View: Buy, 319p, 29 Jul 2022