For a company at the forefront of materials science, you might view Morgan Advanced Materials’ (MGAM) half-year organic revenue and operating profit – flat and 1.5 per cent up respectively on a constant currency basis – as fairly uninspiring. Then again, one of the planks of the Windsor engineering group’s 2016 strategy was to move to a global structure, so the statutory numbers’ reliance on a weak pound should be seen in a broader context.
Shareholders can be modestly pleased with recent performance. In the period under review, earnings before interest, tax and amortisation climbed in all but two business segments. One was the electrical carbon business, which makes graphite brushes for motors and generators, and where margins dropped 290 basis points to 10.7 per cent due to the disposal of Rotary Transfer Systems and an “adverse product mix”. The other was the niche composites and defence group, which swung to a £0.4m loss due to subdued defence markets.
A 9 per cent uptick in operating cash flow to £51.6m should be seen as a positive, particularly as investment in research and development edged up to 3.2 per cent of sales. That puts Morgan well in line to hit a 4 per cent target by the end of the decade, while the £3.5m in cost savings puts the company on-track to deliver the year-end target of £6m.
Average consensus forecasts are for pre-tax profits of £91.4m and adjusted EPS of 21.4p in 2017, against £89.6m and 22.7p last year.
| MORGAN ADVANCED MATERIALS (MGAM) | ||||
| ORD PRICE: | 299p | MARKET VALUE: | £ 853m | |
| TOUCH: | 298.5-299p | 12-MONTH HIGH: | 338p | LOW: 225p |
| DIVIDEND YIELD: | 3.7% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 63p* | NET DEBT: | 72% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 475 | 46.2 | 10.2 | 4.0 |
| 2017 | 519 | 92.3 | 27.0 | 4.0 |
| % change | +9 | +100 | +165 | - |
| Ex-div: | 02 Nov | |||
| Payment: | 24 Nov | |||
| *Includes intangible assets of £220m, or 77p a share. | ||||
