Morgan Advanced Materials Regulatory News (MGAM)

1 Aug 2007 07:01

Morgan Crucible Co PLC01 August 2007 INTERIM RESULTS FOR THE HALF YEAR ENDED 4 JULY 2007 • Strong revenue growth and continuing profit margin progression: Revenue from continuing operations increased by 9.7% on a constant currency basis Group operating profit margins before one off costs(+) rose to 12.4% from 10.6% driven by favourable mix shift, improved pricing, growth in emerging markets and cost efficiencies Group operating margins after one off costs(+) improved to 11.4% from 6.1% Underlying EPS(++) improved by 32.9% to 11.3 pence (2006: 8.5 pence) • All three divisions now well into double digit operating profit margins: Carbon achieved underlying operating profit margins of 16.5% (2006: 15.2%) with a strong performance in armour and increased higher margin sales in the Americas and Asia Technical Ceramics achieved underlying operating margins of 11.7% (2006: 10.6%)through positive mix shift and further manufacturing footprint rationalisation Insulating Ceramics achieved underlying operating margins of 11.3% (2006: 9.0%)with particularly strong growth in the top line due to large project-based business • Strategic investment announced to accelerate move to higher margin, higher growth, less economically cyclical markets: An initial 49% stake acquired in NP Aerospace, a UK-based armour/ composites business Entry price represents c.6.5 times NP Aerospace's 2006 EBITDA, and values NP Aerospace at £71 million The initial investment from Morgan Crucible will be £41 million, structured as £36 million in a shareholder loan paying c.10% per annum, £4.5 million in preference shares yielding 8% per annum, and £0.5 million for ordinary equity • Strong financial position: Net debt(+++) remains low at less than one times annualised EBITDA even after c£35 million of share buybacks Interim dividend increased by 50% to 2.25 pence per share (2006: 1.5 pence) £m unless otherwise stated 2007 2006 Change--------------------------------------------------------------------------------Revenue 347.8 336.3 +3.4%--------------------------------------------------------------------------------Underlying EBITDA* 55.9 48.8 +14.5%--------------------------------------------------------------------------------Underlying operating profit** 43.1 35.7 +20.7%----------------------------------------------------------------------------------------------------------------------------------------------------------------Underlying PBT*** 40.5 34.2 +18.4%--------------------------------------------------------------------------------Underlying EPS(++) (pence) 11.3 8.5 +32.9%--------------------------------------------------------------------------------Basic EPS (pence) 9.8 7.5 +30.7%--------------------------------------------------------------------------------Operating profit 39.1 31.6 +23.7%--------------------------------------------------------------------------------Profit before tax 36.2 30.1 +20.3%-------------------------------------------------------------------------------- Commenting on the results, Chief Executive Officer, Mark Robertshaw said: "I am pleased with our results in the first half of 2007. Revenue growth hasbeen strong and we continue to show good progress towards our goal of mid-teenoperating profit margins. Our strategy remains to focus on higher margin, highergrowth, value-added products and markets and to continue to drive down our costbase as we further rationalise our manufacturing footprint and increase theproportion of manufacturing in low-cost locations. I am delighted to announce the acquisition of NP Aerospace, which complementsour rapidly growing armour business. NP Aerospace develops, manufactures andmarkets high value armour products for the defence and civil sectors and will beimmediately earnings accretive. We continue to search for further acquisitions;but remain determined to maintain our financial and strategic discipline wherewe believe sellers' price expectations to be unrealistic. The strong organicgrowth of the Group combined with our robust balance sheet puts Morgan Cruciblein a strong position to continue to drive towards our target of mid-teenoperating profit margins." + One off costs are defined as costs of restructuring £4.3 million (2006: £14.4 million) and legal costs recovered associated with settlement of anti-trust litigation £0.8 million (2006: charge of £0.8 million). * Underlying EBITDA defined as operating profit of £ 39.1 million (2006: £31.6 million) before special items of £4.0 million (2006: £4.1 million) and before depreciation and amortisation of £12.8 million (2006: £13.1 million). Special items are defined as one off costs (as defined above), gain on curtailment of UK employee benefit schemes £nil (2006: £11.0 million) and gain/(loss) on disposal of property £0.5 million loss (2006: gain of £0.1 million). ** Underlying operating profit defined as operating profit of £39.1 million (2006: £31.6 million) before special items of £4.0 million (2006: £4.1 million). This measure of earnings is shown because the Directors use it to measure the underlying performance of the business. *** Underlying PBT defined as operating profit of £39.1 million (2006: £31.6 million) before special items of £4.0 million (2006: £4.1 million) and after financing costs of £2.6 million (2006: £1.5 million). ++ Underlying EPS defined as basic earnings per share of 9.8 pence (2006: 7.5 pence) adjusted to exclude the after tax impact of special items of 1.5 pence (2006: 0.8 pence) and gain on disposal of discontinued operations of nil pence (2006: 0.2 pence). +++ Net debt defined as interest bearing loans and borrowings, bank overdrafts less cash and other cash equivalents. For further enquiries: Victoria Gould Morgan Crucible Plc 01753 837 306Mike Smith / Robin Walker Finsbury 020 7251 3801 Strategy The Group has delivered a 20.7% increase in underlying operating profit in thefirst six months of 2007 (31.3% on a constant currency basis) with underlyingoperating profit margins for the half year reaching 12.4%. Our goal remains toreach mid-teen margins in good times and maintain double digit margins in badtimes. We are concentrating on higher growth, higher margin markets and are looking toreduce our exposure to commoditised markets. We aim to provide high value-addedsolutions for our customers and to be number one or two in our chosen marketsegments. Simultaneously, we are focused on reducing and managing our cost base. Ourmanufacturing footprint is continually being reviewed for opportunities tosimplify and rationalise the number of our sites. In our continuing businesses,total overheads as a percentage of sales have reduced, on a constant currencybasis, from 32.9% in 2003 to 25.6% for the first half of 2007 driven by both thesimplification of our manufacturing footprint and by the reduction in the numberof our divisions. Over the same period total employment costs (from continuingbusinesses) as a percentage of sales have fallen from 39.6% in 2003 to 30.8% forthe first half of 2007. The Group is in excellent financial health. Our balance sheet strength hasenabled us to pursue suitable bolt-on acquisitions that are aligned with ourstrategic priorities to accelerate profitable growth. Today we announce the acquisition of an initial 49% stake in NP Aerospace, whichvalues this business at £71 million. Our initial investment of £41 million willbe in the form of Morgan Crucible acquiring £0.5 million of ordinary shares,£4.5 million of preference shares yielding 10% per annum and providing £36million of debt. Morgan Crucible will receive interest on this debt of c.10%p.a. There is a phased process, on agreed multiples, for moving to majorityownership and control of NP Aerospace within 3 years. In summary, we are delivering on our stated strategy across the board. Thecombination of continuing strong top line and profit margin progression alliedto a healthy balance sheet sees the Group in robust health. Financial Review Reference is made to underlying operating profit and underlying EPS below, bothof which are defined at the front of this statement. These measures of earningsare shown because the Directors consider that they give a better indication ofunderlying performance than basic earnings per share on a statutory basis. Group underlying operating profit for continuing businesses increased by 20.7%to £43.1 million (2006: £35.7 million) on a reported basis (at constant currencythis was an increase of 31.4%). Underlying operating profit margin fromcontinuing businesses for the six months were 12.4%. This compares to 10.6% inthe equivalent period in 2006. All three of our business divisions contributedto this increase in margin. The Group has continued to undertake restructuring activity in the first half of2007. Restructuring costs and other one-off items were £3.5 million (2006: £15.2million). The net finance charge was £2.6 million (2006: £1.5 million). Net bank interestand similar charges were £3.6 million (2006: £1.6 million). Part of the financecharge under IFRS is the net IAS 19 (Employee Benefits) interest receipt onpension scheme net liabilities which was £1.0 million (2006: £0.1 million). The tax charge for the period was £7.1 million (2006: £6.7 million). The taxcharge on underlying operating profit net of finance costs was £7.4 million.There was a tax credit of £0.3 million on restructuring costs and the net legalcosts recovered associated with prior period anti-trust litigation. Theeffective tax rate before restructuring costs, the net legal costs associatedwith settlement of prior period anti-trust litigation, gain on curtailment ofUnited Kingdom employee benefit schemes and gain/(loss) on property disposalswas 18% (2006: 25%). Over the medium term we would expect the effective tax rateto trend towards 30% as taxable losses are utilised. Underlying earnings per share were 11.3 pence (2006: 8.5 pence). The Group pension deficit has improved by £7.7 million since last year end to£35.0 million on an IAS 19 basis. The main movements are in the UK pensionschemes which show a surplus of £6.0 million at the half year on an IAS 19basis, an improvement of £2.9 million in the period. Improvement in bond yieldscontributed to a higher discount rate and hence a lower liability position. The net cash inflow from operating activities was £9.8 million (2006: outflow£51.4 million) which included an adverse cash impact from restructuring costsand costs associated with anti-trust litigation of £5.0 million (2006: £14.3million). Working capital increased by £26.7 million (2006: increase £35.0million) in the first half of the year. Seasonality in inventory levels, due tostock building for shut down periods in July and August is a large part of thisincrease, as well as trade debtors being high due to healthy revenue levels.Working capital levels are expected to improve significantly in the second halfof the year as this half-year position unwinds. Cashflow Six months Six months 2007 2006 £m £mNet cash from operating activities before UK pensionpayment 9.8 (11.4)UK pension scheme payment - (40.0)Interest received 1.5 2.3Net capital expenditure (15.1) (14.1)Dividends paid (4.4) - ---------------------Free cash flow (8.2) (63.2)Cash flows from other investing activities (2.4) (5.8)Cash flows from financing activities (32.7) (6.4)Exchange movement 1.3 2.0Opening net cash/(debt) (34.1) 50.5 ---------------------Closing net (debt) (76.1) (22.9) ===================== Interim Dividend Given the good continuing performance of the Group, the Board has declared aninterim dividend of 2.25 pence per Ordinary share, an increase of 50% on thedividend declared for the first six months of 2006. The dividend will be paid on7 November 2007 to Ordinary shareholders on the register of members at the closeof business on 28 September 2007. Operating Review Carbon Sales in the first half were up by 3.5% on a reported basis compared to the sameperiod last year at £110.2 million (2006: £106.5 million). On a constantcurrency basis the year on year growth was 10.9%. Underlying operatingprofit for the period was up 12.3% to £18.2 million (2006: £16.2 million)representing a 20.4% growth on a constant currency basis. The increase inprofits is due to strong sales in our armour, rotary and Asian businesses,combined with the benefits from restructuring projects in USA and Western Europethat have lead to an increase in the low cost manufacturing base and a declinein overheads. Performance has been good across most regions and markets. Whilst significantgrowth has come from our armour and rotary businesses, most of our traditionalbrush and seals and bearings businesses have also shown progress. Further armourmanufacturing capacity has been installed in the Americas to meet growing demandfor personal and vehicle protection and significant investment in our capabilityand capacity has also been made in Europe to allow us to take full advantage ofthe opportunities in this market. Our rotary business has delivered double digitgrowth driven in large part by military opportunities. A rotary assemblyoperation has been established in Taiwan to provide us with a lower costmanufacturing option and to increase our presence in Asian markets. In Europeand the Americas there has been modest growth in the brush and seals markets.The focus here continues to be on managing the cost base, particularly throughincreased use of our low cost manufacturing operations in Mexico and Hungary.The Asian businesses, particularly in China, continue to enjoy strong organicgrowth and our continued investment in terms of financial, technical and humanresource has allowed us to take advantage of the opportunities in this area. The NP Aerospace business, whose acquisition was announced today, will bemanaged within the Carbon Division. Technical Ceramics Sales in the first half of 2007 were £77.8 million (2006: £84.0 million),influenced by significant unfavourable currency translation impact, mainly fromthe US dollar. On a constant currency basis sales were 2.2% lower than in thesame period last year, with the underlying growth in all regions outweighed bythe impact of one large US customer reaching the end of lifecycle on a majorproduct for which we were the supplier of ceramic parts. Aside from this, USmarkets were healthy overall with order intake and order books both ahead of thesame point last year. Markets in Europe were strong throughout, with medicalassemblies, electronics, and thermal processing products all experiencingparticularly robust demand. Asia showed good organic growth, particularly inthermal processing. Underlying operating profit was £9.1 million (2006: £8.9 million), which atconstant currency equated to an increase of 3.4%. Operating margins madefurther progress to 11.7% (2006: 10.6%) driven by positive mix shift and ongoingefficiencies in the operating cost base. Insulating Ceramics Within the Insulating Ceramics division there are two business units: ThermalCeramics and Molten Metal Systems. Insulating Ceramics sales in the first half were up by 9.6% at £159.8 million(2006: £145.8 million) and on a constant currency basis up 15.7%. Underlyingoperating profit increased 38.2% to £18.1 million (2006: £13.1 million), andoperating margins from 9.0% to 11.3%. In the Thermal Ceramics business unit, while energy and raw material rises havemoderated over the last few months, these input costs have still shown asignificant rise over 2006 average levels. However, these cost increases havebeen offset by pricing action, improvements in manufacturing efficiency togetherwith the benefits of the 2006 restructuring plans in Europe and North America. In terms of project based sales, the first half of the year has been very strongcompared to 2006. The main impetus has come from our European businesses wherethe drivers have been a series of major orders for aluminium, petrochemical andiron & steel projects for delivery into the Middle East, India and other Asianmarkets. As a number of large orders will have shipped in the first six monthsof 2007 these project-based sales are not expected to show the same rate ofprogression in the second half of the year. Nevertheless, the overall order bookremains at strong levels compared to prior years. The new joint ventures in China and Russia continue to make good progress andthe Vesuvius insulating fibre acquisition in the US has been successfully andseamlessly integrated into our operations. New products launched during the lastthree years now account for 20% of European fibre sales; these include Superwool607HT, Low Shot Fibre and engineered fibre for Diesel Particulate Filters. Ourglobal Superwool sales are growing steadily with seven plants now in regularSuperwool production and an additional plant due for conversion in November. During the first half of the year, Molten Metal Systems saw a furtherimprovement in performance over the same period last year. This was temperedsomewhat by some reduction in demand from the automotive and constructionsectors in North America, coupled with the significant weakening of the USdollar over the period. Demand in Europe was in line with expectations, whilstdemand in Asia, Africa and the Middle East continued to improve. Expansion ofour Indian manufacturing plant is well advanced and our new facility in SuzhouChina is on schedule for completion in 2008. We intend to cease manufacturing inthe UK during 2008 and transfer production to our expanded German and Indianmanufacturing facilities. Completion of these projects will see globalproduction capacity more closely aligned with anticipated levels of regionaldemand in the future. Outlook All divisions continue to make strong margin progress in 2007. Our leadingmarket positions and healthy balance sheet enable the Board to look to thefuture with confidence. Tim Stevenson Chairman Mark Robertshaw Chief Executive Officer CONSOLIDATED INCOME STATEMENTfor the six months ended 4 July 2007 Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Six months Six months Six months Six months Six months Six months Year Year Year Cont Discont Total Cont Discont Total Cont Discont Total Note 2007 2007 2007 2006 2006 2006 2006 2006 2006 £m £m £m £m £m £m £m £m £m ------------------------------------------------------------------------------------------------------------------------Revenue 1 347.8 - 347.8 336.3 - 336.3 677.8 - 677.8 Operating costs before special items (304.7) - (304.7) (300.6) - (300.6) (604.1) - (604.1)------------------------------------------------------------------------------------------------------------------------Profit from operationsbefore special items 1 43.1 - 43.1 35.7 - 35.7 73.7 - 73.7 Restructuring costs and costs associatedwith settlement ofprior periodanti-trust litigation 4 (3.5) - (3.5) (15.2) - (15.2) (27.7) - (27.7) Gain on curtailment of United Kingdom employee benefit schemes - - - 11.0 - 11.0 11.0 - 11.0 Terminated bidapproach costs - - - - - - (2.1) - (2.1) Gain/(loss) ondisposal of property (0.5) - (0.5) 0.1 - 0.1 0.3 - 0.3------------------------------------------------------------------------------------------------------------------------Operating profit 1 39.1 - 39.1 31.6 - 31.6 55.2 - 55.2 Finance income 13.3 - 13.3 12.8 - 12.8 26.8 - 26.8 Finance expenses (15.9) - (15.9) (14.3) - (14.3) (30.2) - (30.2)------------------------------------------------------------------------------------------------------------------------Net financingcosts 2 (2.6) - (2.6) (1.5) - (1.5) (3.4) - (3.4) Loss on partialdisposal of businesses (0.3) - (0.3) - - - - (1.5) (1.5)------------------------------------------------------------------------------------------------------------------------Profit before taxation 36.2 - 36.2 30.1 - 30.1 51.8 (1.5) 50.3 Income tax expense (all relates tooverseas tax payable) 3 (7.1) - (7.1) (6.7) - (6.7) (10.6) - (10.6)------------------------------------------------------------------------------------------------------------------------Profit after taxation but before loss on sale of discontinuedoperations 29.1 - 29.1 23.4 - 23.4 41.2 (1.5) 39.7 Loss on saleof discontinuedoperations, net of tax - - - - (0.6) (0.6) - - -------------------------------------------------------------------------------------------------------------------------Profit/(loss)for the period 29.1 - 29.1 23.4 (0.6) 22.8 41.2 (1.5) 39.7 ======================================================================================================================== Profit/(loss)for the period attributable to: Equity holdersof the parent 27.4 - 27.4 22.2 (0.6) 21.6 38.4 (1.5) 36.9 Minoity interest 1.7 - 1.7 1.2 - 1.2 2.8 - 2.8 ------------------------------------------------------------------------------------------------------------------------ 29.1 - 29.1 23.4 (0.6) 22.8 41.2 (1.5) 39.7 ========================================================================================================================Earnings/(loss) per share 5Basic 9.8p - 9.8p 7.7p (0.2p) 7.5p 13.4p (0.5p) 12.9pDiluted 9.5p - 9.5p 7.4p (0.2p) 7.2p 12.8p (0.5p) 12.3p Dividends Interimdividend - pence 2.25p 1.5p 1.5p- £m 6.3 4.4 4.4Proposed finaldividend - pence 3.0p- £m 8.8 CONSOLIDATED BALANCE SHEETas at 4 July 2007 Unaudited Unaudited Six months Six months Year 2007 2006 2006 £m £m £m ------------------------------------------AssetsProperty, plant and equipment 226.6 228.7 230.2Intangible assets 65.9 58.2 66.4Other investments 6.6 5.8 7.2Other receivables 0.3 0.4 1.2Deferred tax assets 27.1 27.4 28.8 ------------------------------------------Total non-current assets 326.5 320.5 333.8 ------------------------------------------ Inventories 91.3 86.0 84.9Trade and other receivables 141.4 141.7 136.0Cash and cash equivalents 89.6 85.1 97.4 ------------------------------------------Total current assets 322.3 312.8 318.3 ------------------------------------------Total assets 648.8 633.3 652.1 ------------------------------------------ LiabilitiesInterest-bearing loans and borrowings 130.3 76.8 93.2Employee benefits 35.0 44.4 42.7Grants for capital expenditure 0.3 0.3 0.1Provisions 3.7 3.7 6.7Non-trade payables 3.7 - 3.6Deferred tax liabilities 28.4 28.7 28.4 ------------------------------------------Total non-current liabilities 201.4 153.9 174.7 ------------------------------------------ Bank overdraft 21.5 15.7 24.5Interest-bearing loans and borrowings 13.9 15.5 13.8Trade and other payables 192.8 189.4 210.3Current tax payable 8.0 12.8 9.9Provisions 16.5 27.2 15.8 ------------------------------------------Total current liabilities 252.7 260.6 274.3 ------------------------------------------Total liabilities 454.1 414.5 449.0 ------------------------------------------ ------------------------------------------Total net assets 194.7 218.8 203.1 ========================================== EquityIssued capital 70.6 75.6 73.7Share premium 85.2 85.2 85.2Reserves 29.5 33.3 28.9Retained earnings (8.1) 10.6 (1.1) ------------------------------------------Total equity attributable to equityholders of the parent company 177.2 204.7 186.7 ------------------------------------------ Minority interest 17.5 14.1 16.4 ------------------------------------------Total equity 194.7 218.8 203.1 ========================================== CONSOLIDATED STATEMENT OF CASH FLOWSfor the six months ended 4 July 2007 Unaudited Unaudited Six months Six months Year 2007 2006 2006 Note £m £m £m ----------------------------------------Operating activitiesNet profit from ordinary activities 29.1 22.8 39.7Adjustments for:Depreciation 12.0 12.7 24.7Amortisation 0.8 0.4 1.2Interest expense 2.6 1.5 3.4(Profit) on sale of property, plant andequipment - (0.2) (0.4)Income tax expense 7.1 6.7 10.6Equity settled share based paymentexpenses 1.3 1.6 3.2 ----------------------------------------Operating profit before changes inworking capital and provisions 52.9 45.5 82.4 Increase in trade and other receivables (5.5) (11.7) (18.7)Increase in inventories (7.2) (9.9) (11.3)Increase/(decrease) in trade and otherpayables (14.0) (13.4) 7.1Non cash operating costs relating torestructuring - 1.6 4.2Decrease in provisions and employeebenefits (2.3) (17.0) (72.6)Payments to UK pension schemes - (40.0) - ---------------------------------------- Cash generated from the operations 23.9 (44.9) (8.9) Interest paid (5.4) (3.7) (8.2)Taxation (9.0) (3.4) (6.3)Loss on partial disposal of businesses 0.3 - 1.5Loss on sale of discontinued operations - 0.6 - ----------------------------------------Net cash flows from operatingactivities 9.8 (51.4) (21.9) Investing activitiesPurchase of property, plant andequipment (16.5) (14.8) (34.0)Proceeds from sale of property, plantand equipment 1.4 0.7 1.1Purchase of investments - (0.3) (1.8)Proceeds from sale of investments 0.4 0.3 -Interest received 1.5 2.3 3.5Acquisitions of subsidiaries, net ofcash acquired (2.7) (15.5) (20.7)Disposal of subsidiaries, net of cashdisposed (0.1) 9.7 11.6 ----------------------------------------Net cash flows from investingactivities (16.0) (17.6) (40.3) Financing activitiesProceeds from the issue of sharecapital - 0.2 0.2Purchase of own shares (32.7) (6.2) (19.4)Increase in borrowings 39.1 14.2 32.3Payment of finance lease liabilities (0.1) (0.3) (0.4)Dividends paid (4.4) (0.4) (7.4) ----------------------------------------Net cash flows from financingactivities 1.9 7.5 5.3 Net decrease in cash and cashequivalents (4.3) (61.5) (56.9)Cash and cash equivalents at start ofperiod 73.5 133.6 133.6Effect of exchange rate fluctuations oncash held (0.3) (1.7) (3.2) ----------------------------------------Cash and cash equivalents at period end 6 68.9 70.4 73.5 ======================================== CONSOLIDATED STATEMENT OF RECOGNISEDINCOME AND EXPENSEfor the six months ended 4 July 2007 Unaudited Unaudited Six months Six months Year 2007 2006 2006 £m £m £m ----------------------------------------Foreign exchange translationdifferences (0.8) (10.1) (17.8)Actuarial gain on defined benefit plans 5.0 23.8 15.2Deferred tax associated with employee benefit schemes (1.2) (1.7) (1.2)Cash flow hedges:Effective portion of changes in fairvalue 0.1 0.4 (0.1)Change in fair value of equitysecurities available-for-sale - - 0.3 ----------------------------------------Income and expense recognised directlyin equity 3.1 12.4 (3.6)Profit for the period 29.1 22.8 39.7 ----------------------------------------Total recognised income and expense forthe period 32.2 35.2 36.1 ======================================== Attributable to:Equity holders of the parent 30.5 34.0 33.3Minority interest 1.7 1.2 2.8 ----------------------------------------Total recognised income and expense forthe period 32.2 35.2 36.1 ======================================== NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSBasis of Preperation The Morgan Crucible Company plc (the "Company") is a company domiciled in theUnited Kingdom. The consolidated financial statements of the Company for theperiod ended 4 July 2007 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest inassociates and jointly controlled entities. These financial statements have been prepared on the basis of the recognitionand measurement requirements of IFRSs applied in the financial statements at 4January 2007 and those standards that have been endorsed and will beapplied at 4 January 2008. The results of each half year are unaudited. The comparative figures for thefinancial year ended 4 January 2007 are not the Group's statutory accounts forthat financial year. Those accounts have been reported on by the Group'sauditors and delivered to the registrar of companies. The report of the auditorswas (i) unqualified, (ii) did not include a reference to any matters to whichthe auditors drew attention by way of emphasis without qualifying their report,and (iii) did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. The interim financial statements for the six months ended 4 July 2007 wereapproved by the Board on 1st August 2007. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Revenue and profit analysis Molten Metal Carbon Technical Ceramics Thermal Ceramics Systems Consolidated Six Six Six Six Six Six Six Six Six Six months months months months months months months months months months 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m £m £m Revenue fromexternalcustomers 110.2 106.5 77.8 84.0 144.1 130.5 15.7 15.3 347.8 336.3 ------------------------------------------------------------------------------------------------------------- Segment profit 16.3 14.1 6.6 12.4 16.4 4.6 1.2 2.5 40.5 33.6 -------------------------------------------------------------------------------------- Unallocated costs (1.4) (2.0) ----------------------- 39.1 31.6 =======================Segmentunderlyingoperating profit* 18.2 16.2 9.1 8.9 16.2 11.4 1.9 1.7 45.4 38.2 -------------------------------------------------------------------------------------- Unallocated (2.3) (2.5)costs -----------------------Underlyingoperating profit 43.1 35.7 ======================= Molten Technical Thermal Metal Carbon Ceramics Ceramics Systems Consolidated Year Year Year Year Year 2006 2006 2006 2006 2006 £m £m £m £m £m -----------------------------------------------------Revenue from external customers 213.6 162.5 271.2 30.5 677.8 -----------------------------------------------------Segment profit 28.5 19.3 12.9 4.1 64.8 ----------------------------------------- Unallocated costs (9.6) ----------Operating profit 55.2 ========== Segment underlying operating profit* 33.8 17.0 24.7 3.2 78.7 -------------------------------------------Unallocated costs (5.0) ----------Underlying operating profit 73.7 ========== * This measure of profit (before special items) is shown because the Directors consider that it gives a better indication of underlying performance. 2. Finance income and expenses Six months Six months Year 2007 2006 2006 £m £m £m -------------------------------- Interest income 0.8 1.3 3.5 Expected return on IAS 19 scheme 12.5 11.5 23.3 assets -------------------------------- Finance income 13.3 12.8 26.8 ================================ Interest expense (4.4) (2.9) (8.1) Interest on IAS 19 obligations (11.5) (11.4) (22.1) -------------------------------- Finance expenses (15.9) (14.3) (30.2) ================================ 3. Taxation Six months Six months Year 2007 2006 2006 £m £m £m -------------------------------- Tax on profit before special items and 7.4 8.6 16.2 sale of discontinued operations Tax on special items (0.3) (1.9) (5.6) -------------------------------- Income tax expense 7.1 6.7 10.6 ================================ The interim taxation charge is calculated by applying the Directors' best estimate of the annual tax rate to the profit for the period. 4. Restructuring costs and costs associated with settlement of anti-trust litigation Costs of restructing were £4.3 million (2005: £14.4 million) and net legal costs recovered associated with the settlement of prior period anti-trust litigation were £0.8 million (2005: charge of £0.8 million). 5. Earnings per share Basic earnings per share The calculation of basic earnings per share at 4 July 2007 was based on the net profit attributable to Equity holders of the Morgan Crucible Company Plc of £27.4 million (2006: £21.6 million) and a weighted average number of Ordinary shares outstanding during the period ended 4 July 2007 of 278,480,232 (2006: 288,175,695) calculated as follows: Six months Six months Year 2007 2006 2006 £m £m £m ------------------------------------------ Net profit attributable to Equity holders of the Morgan Crucible Company plc 27.4 21.6 36.9 Weighted average number of Ordinary shares: Issued Ordinary shares at 5 January 293,225,142 293,188,372 293,188,372 Effect of shares issued/ cancelled in the period and treasury shares held by the Company (14,744,910) (5,012,677) (6,077,798) ------------------------------------------ Weighted average number of Ordinary shares at period end 278,480,232 288,175,695 287,110,574 ========================================== Diluted earnings per share The calculation of diluted earnings per share at 4 July 2007 was based on the net profit attributable to Equity holders of the Morgan Crucible Company Plc of £27.4 million (2006: £21.6 million) and a weighted average number of Ordinary shares outstanding during the period ended 4 July 2007 of 287,697,364 (2006: 300,271,233) calculated as follows: Six months Six months Year 2007 2006 2006 £m £m £m ----------------------------------------- Net profit attributable to Equity holders of the Morgan Crucible Company plc 27.4 21.6 36.9 Weighted average number of Ordinary shares: Weighted average number of Ordinary shares 278,480,232 288,175,695 287,110,574 Effect of share options/ incentive schemes 9,217,132 12,095,538 11,827,546 Diluted weighted average number ------------------------------------------ of Ordinary shares 287,697,364 300,271,233 298,938,120 ========================================== Underlying earnings per share The calculation of underlying earnings per share at 4 July 2007 was based on profit from operations before special items less net finance costs, income tax expense (excluding tax credit arising from special items of £0.3 million, (2006: £1.9 million)) and minority interest of £31.4 million (2006: £24.4 million) and a weighted average number of Ordinary shares outstanding during the period ended 4 July 2007 of 278,480,232 (2006: 288,175,695) calculated as follows: Six months Six months Year 2007 2006 2006 £m £m £m ----------------------------------------- Profit from operations before special items less net finance costs, income tax expense and minority interest 31.4 24.4 51.3 Weighted average number of Ordinary shares at period end: Issued Ordinary shares at 5 January 293,225,142 293,188,372 293,188,372 Effect of shares issued/ cancelled in the period and treasury shares held by the Company (14,744,910) (5,012,677) (6,077,798) Weighted average number of ----------------------------------------- Ordinary shares at period end 278,480,232 288,175,695 287,110,574 Underlying earnings per share ========================================= (pence) 11.3p 8.5p 17.9p Underlying diluted earnings per share The calculation of underlying diluted earnings per share at 4 July 2007 was based on profit from operations before special items less net finance costs, income tax expense (excluding tax credit arising from special items of £0.3 million, (2006: £1.9 million)) and minority interest of £31.4 million (2006: £24.4 million) and a weighted average number of Ordinary shares outstanding during the period ended 4 July 2007 of 287,697,364 (2006: 300,271,233) calculated as follows: Six months Six months Year 2007 2006 2006 £m £m £m ---------------------------------------- Profit from operations before special items less net finance costs, income tax expense and minority interest 31.4 24.4 51.3 Weighted average number of Ordinary shares: Weighted average number of Ordinary shares 278,480,232 288,175,695 287,110,574 Effect of share options/ incentive schemes 9,217,132 12,095,538 11,827,546 Diluted weighted average number ----------------------------------------- of Ordinary shares 287,697,364 300,271,233 298,938,120 Underlying diluted earnings per ========================================= share (pence) 10.9p 8.1p 17.2p 6. Cash and cash equivalents/bank overdrafts Six months Six months Year 2007 2006 2006 £m £m £m ----------------------------------- Bank balances 72.3 61.3 70.2 Cash deposits 17.3 23.8 27.2 ----------------------------------- Cash and cash equivalents per balance sheet 89.6 85.1 97.4 Bank overdrafts subject to cash pooling arrangements (20.7) (14.7) (23.9) Cash and cash equivalents per cash flow ----------------------------------- statement 68.9 70.4 73.5 =================================== Bank overdrafts subject to cash pooling arrangements (20.7) (14.7) (23.9) Other bank overdrafts (0.8) (1.0) (0.6) ----------------------------------- Total bank overdrafts (21.5) (15.7) (24.5) =================================== Reconciliation of cash and cash equivalents to net borrowings Six months Six months Year 2007 2006 2006 £m £m £m ----------------------------------- Opening (borrowings) (107.6) (83.1) (83.1) (Increase) in borrowings (39.1) (14.2) (32.3) Payment of finance lease liabilities 0.1 0.3 0.4 Effect of movement in foreign exchange on borrowings 1.6 3.7 7.4 ----------------------------------- Closing (borrowings) (145.0) (93.3) (107.6) Cash and cash equivalents per cash flow statement 68.9 70.4 73.5 ----------------------------------- Closing net (borrowings) (76.1) (22.9) (34.1) =================================== This information is provided by RNS The company news service from the London Stock Exchange