Morgan Advanced Materials
Annual Report CEO's Review
Our business and our people have demonstrated great resilience this year, responding to and recovering from a cyber security incident while keeping each other safe and delivering for our customers. I would like to thank all of our people for their commitment and support during the year.
"While it has been a tough year, we are well placed as we head into 2024. We have good positions in our core markets, a significant capital programme underway to add growth capacity for our faster growing segments and for the core, and increased investment going into our IT estate, accelerating our modernisation plans and improving our resilience."
Pete Raby, CEO
Cyber security incident
On 8 January 2023, we experienced a cyber security incident in our network. Our teams worked quickly to compartmentalise the network and shut down our systems to limit the damage. Despite the rapid action of our teams, there was considerable damage to networks and systems, in particular in our US businesses. During the first half we recovered our core ERP systems and started recovery of supporting applications. In parts of the business, representing around 27% of revenues, ERP systems could not be restored and we implemented a new ERP solution, accelerating the work we had underway to implement a new, common, Group system.
By the end of the year, we had largely recovered with a few applications still to be restored and some local network constraints still being addressed. We have accelerated our IT modernisation programme which includes changes to our network design, the deployment of additional security tooling and acceleration of our Group ERP programme. Our factories operated throughout the disrupted first half. Our teams worked closely with our customers to manage their deliveries and customer demand remained robust during our recovery. The cyber security incident impacted revenues and profitability largely in the first half, and £14.7 million of exceptional costs associated with the IT remediation.
Group results
Markets have been mixed during the year with high inflation persisting in some geographies leading to high interest rates as central banks look to cool economies and contain inflation. Growth in our faster growing segments, driven by power semiconductor demand for electric vehicles, along with growth in aerospace and petrochemical has offset contraction in European and Chinese industrial and metals markets.
Outlook
As has been typical in recent years, there is a high level of uncertainty as we head into 2024, with ongoing geopolitical risks and a broad range of possible outcomes. We expect our faster growing markets to continue to grow strongly, driven by semiconductors and healthcare in particular. In our core markets, our central case is for European and South East Asian markets to start to recover in the second half, and the US to slow in the first half. We expect strong growth in India and continued strength in aerospace and defence markets.
