Morgan Advanced Materials
Our 2024 annual report
2024 has been a year of further progress for the Group in a difficult end-market environment. Our industrial end-markets, in particular Europe and China, weakened through the year and we saw a significant slowdown in semiconductor sales as customers for our graphite products addressed excess inventories, triggered by slower than expected growth in electric vehicles. Against this difficult trading backdrop, we nonetheless made good progress across the Group.
The Group has emerged from the cyber security incident in good shape and we are well placed as we enter 2024. We have a clear strategy for growth and are investing in the business to deliver this growth. We are starting to see the benefits of the capital investment programme which will grow capacity in our faster growing markets as well as our core markets and the increased investment in our IT estate, accelerating our modernisation plans and improving our resilience.
We have simplified how we manage our business, consolidating into three segments (Thermal Products, Performance Carbon, Technical Ceramics), and we have expanded the restructuring programme we launched in 2023 to simplify our business further,reducing the number of sites and improving efficiency. These actions delivered savings of £8.0 million in 2024 and will deliver a cumulative adjusted operating profit* benefit of £24 million in 2025, compared to our 2023 baseline. We have made further advances with our IT systems and infrastructure, continuing the high level of investment in new capabilities and the replacement of older systems.
Our capital investment programme continues as we increase capacity in key market segments including semiconductors, healthcare, clean transportation and aerospace as well as our faster growing regions, for example in India. We have seen a slowdown in our largest growth market in silicon carbide (SiC) power electronics driven by slower demand for electric vehicles.
We expect this to persist in 2025 as excess inventories are consumed, but the Board remains convinced of the long-term potential here. We have slowed our investments in this area, but overall our new capital investment programme is progressing well. We deployed £96.1 million of capital in 2024 and expect high levels of investment to continue in 2025 and 2026 as we position the Group for faster growth.
We were not successful in completing any acquisitions in the year. This remains a focus for the Executive team and the Board, but we are being disciplined in our approach. In the absence of acquisitions we announced a share buyback programme in November 2024 of up to £40.0 million that we expect to execute over 18 months, with shares to the value of £4.7 million repurchased during 2024. The Group is well placed as we enter 2025. Our balance sheet is strong; the importance of our solutions and the long-term growth driver of providing sustainable solutions to support the energy transition are still the same. The Board remain confident in the Group’s long-term structural growth opportunities. While 2024 has brought some very specific, short-term headwinds, our focus has been on ensuring that we are managing the business appropriately to position ourselves for growth in 2025 and beyond as our end-markets recover.
As we prepare for the future, I am confident in our prospects and that our team will continue to help deliver on our purpose – to use advanced materials to make the world more sustainable and to improve the quality of life.
Performance in 2024
Our first imperative is the safety and wellbeing of our colleagues, and I am pleased to report that during 2024 our safety performance continued to improve, reflecting the significant focus on employee safety and wellbeing. The lost-time accident (LTA) rate, the headline measure for health and safety, was 0.13 (2023: 0.19). Although we are pleased that the LTA rate reduced significantly this year, we are aware that there is more work to be done, particularly in relation to process safety. My fellow non-executive Directors and I will continue to support the Executive team to achieve a position of ‘zero harm’.
It has been a challenging year with our end-markets weakening during the second half of the year, with declining and low order levels in European and Chinese industrial and metals markets, slowing in those same markets in the US and lower growth in Semiconductors. Group revenue was 1.3% lower than in 2023 at reported rates and 3.7% higher on an organic constant-currency basis*. Adjusted operating profit margin* was below the bottom of our 12.5%-15% range, reflecting the sharp reduction in end-market demand, but we expect to be back in the range during 2025 as the restructuring and efficiency actions we are taking come through.
The Board in 2024
In January 2025, Pete Raby announced that he would retire from the business after a decade as CEO. Pete will be succeeded by Damien Caby, currently President of the Thermal Products business.
Pete joined Morgan Advanced Materials in 2015 and has steeredthe Company through a turbulent period, including the COVID-19 pandemic, the European energy crisis and a cyber security incident in 2023. We will be sad to see him go. Pete leaves behind a better business. From a personal perspective, Pete has been a pleasure to work with and truly a driving force in setting up Morgan Advanced Materials to have the bright prospects we see ahead. The whole Board extends its sincere thanks and gratitude to Pete and wishes him well in the future.
I would like to congratulate Damien on his appointment, a reflection of his strong contribution and development since joining us in 2022. We look forward to supporting Damien in his new role and to his leading the Company to execute on its strategy and deliver against the medium-term targets.
Laurence Mulliez, our Senior Independent Director, stepped down in November 2024 after eight years on the Board. Having served nine years on the Board, Helen Bunch, our Remuneration Committee Chair, will be stepping down at this year’s AGM. We are pleased that Alison Wood joined the Board in November 2024 as our new Senior Independent Director and will take over as Remuneration Committee Chair after the AGM. Alison is an experienced non-executive director with a significant background in international industrials. She brings deep governance expertise gained across numerous listed businesses, having served as Chair, Senior Independent Director, and Remuneration Committee Chair in FTSE 350 businesses and is a very capable addition to the Board. I would like to thank Laurence and Helen for their valued contribution to the Board.
Responsible business
The Board takes its responsibilities to all its stakeholders seriously and we are committed to maintaining direct and productive relationships with our shareholders, colleagues and communities, taking a range of perspectives and feedback into account in our decision-making and stewardship.
The wellbeing of our colleagues remained a priority throughout the year. We have listened to their views through regular engagement surveys and employee listening sessions. Information on how we as a Board and business responded to their views and the actions we took locally and globally to improve their experiences can be found on pages 66 and 67 of the Annual Report.
I am pleased by the progress we have made this year in reducing the Group’s environmental impact. We reduced scope 1 and 2 emissions during the year and are now 55% below our 2015 baseline. We also reduced our overall water usage. We are on track to meet our 2030 goals. Not only are we making our manufacturing processes more efficient, but more importantly our products, which have properties to withstand heat and endure other extreme environments, assist our customers in reducing their environmental impact, either by lasting longer or improving the efficient use of resources.
Dividend
The Board is recommending a final dividend for 2024 of 6.8 pence (2023: 6.7 pence). Combined with the interim dividend of 5.4 pence (2023: 5.3 pence), the resulting total dividend in respect of 2024 is 12.2 pence (2023: 12.0 pence). The dividend will be payable on 13 May 2025 to shareholders on the register on 11 April 2025, subject to shareholder approval. The Board has committed to grow the ordinary dividend as the economic environment and the Group’s earnings improve, targeting a dividend cover of around 2.5 times over the medium term.
Looking forward to 2025
As we enter 2025, we remain cautious about the pressures on some of our end-markets and heightened geopolitical risks, and we have positioned the Group prudently as a result. We are focused on capitalising on the increased capacity in our business from the capital investment programme and remain open to inorganic growth opportunities.
We are confident that continued focus on the strengths of the business, underpinned by our diverse set of product and market positions, resilient balance sheet and the efficiency and productivity gains from our restructuring programme, will support the further progress and the success of the Group in the years ahead.
