At first glance, it’s difficult to get excited about Morgan Advanced Materials’ (MGAM) latest update. Organic constant currency revenue grew just 1.4 per cent, while pre-tax profit, without factoring in the £45.7m pocketed from several disposals, also barely nudged upwards.
Put these figures into context, however, and there’s reason for encouragement. The carbon and ceramic products manufacturer is currently implementing sweeping changes to reposition it for long-term growth. After several difficult years, these destabilising measures are slowly starting to have the desired effect.
Offloading businesses with limited synergies weighed on profit margins, but also helped management to achieve its goal of simplifying operations and slashing net debt by a quarter to £181.3m. Management also generated better than expected net savings of £8.5m by reducing operating costs. Those cutbacks often led to greater productivity, while helping to fund sales and R&D investments – £34.3m, or 3.4 per cent of revenues, was poured into technology development during the year. That advancement, coupled with better organisation of staff, was partly responsible for an uptick in organic sales in the second half of 2017.
Broker Numis expects adjusted pre-tax profit of £105.5m in 2018, giving adjusted EPS of 24.5p, up from £97.4m and 21.7p in 2017.
| MORGAN ADVANCED MATERIALS (MGAM) | ||||
| ORD PRICE: | 339p | MARKET VALUE: | £967m | |
| TOUCH: | 339-340p | 12-MONTH HIGH: | 367p | LOW: 277p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 68p* | NET DEBT: | 77% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 0.96 | 64.0 | 14.8 | 10.5 |
| 2014 | 0.92 | 31.5 | 2.7 | 10.9 |
| 2015 | 0.91 | 59.0 | 11.9 | 11.0 |
| 2016 | 0.99 | 87.9 | 18.4 | 11.0 |
| 2017 | 1.02 | 136 | 37.8 | 11.0 |
| % change | +3 | +54 | +105 | - |
| Ex-div: | 3 May | |||
| Payment: | 25 May | |||
| *Includes intangible assets of £217m, or 76p a share | ||||
