Morgan Crucible on course to hit ambitious targets

Industrial materials maker Morgan Crucible saw record revenues and operating profit in 2011, with the group making rapid progress towards the attainment of the goals of its three-year plan announced a year ago.

Revenue rose 8.2% to £1,101.0m in 2011 from £1,017.1m in 2010, bang in line with market expectations. Underlying profit before tax rose 58.1% to £119.7m from £75.7m in 2010, and ahead of the market consensus of £116.6m. Earnings before interest, tax and amortisation (EBITA) improved to £141.5m from £101.6m the year before, with the EBITA margin hardening to 12.9% from 10.0% in 2010.

Organic growth in Western markets, rapid expansion in dynamic growth economies and increased revenue from new products and technologies have all contributed to top-line growth and profit and margin enhancement, Morgan Crucible said. Management has continued to keep a tight rein on costs while the benefits from the merger of its Technical and Thermal Ceramics units also contributed to the profit and margin improvement in 2011.

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The Ceramics division saw revenue climb to £685.1m from £609.1m, while the division's EBITA jumped to £92.7m from £68.8m, pushing the EBITA margin up to 13.5% from 11.3% in the preceding year.

The Engineered Materials division's revenue edged up to £415.8m from £408.0m, while EBITA surged to £55.7m from 2010's £45.5m. The EBITA margin for this division moved up to 13.4% from 11.2% the year before.

Order books for both divisions were healthy at the start of 2012, the group said.

Things are not looking so rosy on the pension obligations front, with the group pension deficit increasing by £31.2m since the end of 2010 to £135.1m.

Net debt at the year end was £215.4m, down from £236.2m at the end of 2010. As a result of the significant improvement in operating performance the net debt to EBITDA (EBITA plus depreciation) ratio at the year end was improved to just below 1.2 times (2010: 1.7 times).

For the group as a whole, underlying earnings per share climbed 59.9% to 29.9p from 18.7p the year before; market consensus was 27.68p. The full year dividend of 9.25p was below market expectations of 9.40p but up from the 7.70p paid in 2010. The final dividend in respect of 2011 was 6p, up a penny from the year before.

"Whilst the macroeconomic outlook remains uncertain, the group believes that with its innovative and differentiated technologies and developing businesses in dynamic growth economies, Morgan Crucible remains well placed to make further progress in 2012 against the three-year financial goals that were announced in early 2011," the group statement said.

The aforementioned three-year financial goals included targets of doubling 2010's underlying profits by 2013, boosting underlying operating profit margins into the mid-teens and improving the return on operating capital employed from 25.4% in 2010 to over 35%.

Return on operating profit employed in 2011 rose to 33.7% from 25.4% in 2010, so the group is almost there on one of its targets, while it is less than two points off achieving its operating margin ambitions.

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