Half-year Results, 29 Jul 2021 07:00

29 July 2021, 07:00

Source - LSE Regulatory

RNS Number : 8247G

Morgan Advanced Materials PLC

29 July 2021

Morgan Advanced Materials

Half-year results for the period ended 30 June 2021

£ million unless otherwise stated	1H 2021	1H 2020	As reported change	Organic constant- currency¹ change
Adjusted results Revenue	461.2	477.8	(3.5)%	4.2%
Group adjusted operating profit¹	59.1	52.9	11.7%	29.0%
Group adjusted operating profit margin¹	12.8%	11.1%
Adjusted EPS¹	12.7p	11.5p	10.4%
Interim dividend per share	3.2p	-
Cash generated from continuing operations	63.1	59.0	6.9%
Free cash flow before acquisitions, disposals and dividends¹	36.5	26.4

Statutory results
Operating profit/(loss)²	60.2	(19.7)
Profit/(loss) before tax²	56.2	(25.5)
Continuing earnings/(loss) per share³	13.2p	(9.9)p
Continuing and discontinued earnings/(loss) per share³	13.2p	(9.6)p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found

on pages 15 to 19. Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text and by a footnote where they appear in tables.

2. The statutory loss in 1H 2020 arises from an impairment charge of £63.4 million. Further details are provided in note 4 to the condensed consolidated financial statements.

3. EPS is presented on a 'continuing' and a combined 'continuing and discontinued' basis for statutory reporting. Further details are provided in note 8 to the condensed consolidated financial statements.

Group highlights

· The safety of our people is our priority and we continue to operate protection measures to keep our employees safe during the pandemic.

· Organic constant-currency revenue growth* was 4.2%, with broad based growth across our healthcare, semiconductor, energy and industrial segments.

· Adjusted operating profit margin* was 12.8%, up by 170bps, driven by the acceleration of the benefits from our restructuring programme and volume leverage.

· Pricing and continuous improvement efficiency actions continue to more than offset cost inflation.

· Strong first half cash flow, with free cash flow* of £36.5 million driving a further reduction in leverage, with net debt* / EBITDA* excluding the impact of IFRS 16 Leases of 0.5x.

· Adjusted earnings per share of 12.7p, up to 10.4% on the year.

· Interim dividend of 3.2p, up 60% on the interim dividend declared in Q4 2020.

· CO₂ emissions reduced by 17% compared to the prior year.

Commenting on the results for Morgan Advanced Materials, Chief Executive Officer, Pete Raby said:

"I am pleased with the progress we have seen during the first half of the year. We have seen the business return to organic growth*, with a broad-based recovery in our end markets and with benefits from the growth initiatives we have taken in the implementation of our strategy.

Profitability has improved significantly, with the delivery of our restructuring programme savings ahead of target and continued progress in pricing and continuous improvement actions which are more than offsetting cost inflation.

The safety of our people remains our priority and we are maintaining our COVID-19 controls across the business. I would like to thank our people for their hard work in the first half of the year and the focus they have displayed in keeping each other safe while supporting customers with a rapid increase in volumes.

We have good momentum going into the second half of the year and we expect to see an acceleration of organic growth* and a further improvement in margins as we continue to execute against our strategic priorities."

Outlook

With the good performance seen so far this year and good order momentum, we anticipate organic constant-currency revenue growth* to be in the range of 7 to 9% for the full year, assuming no significant COVID-19 related operating restrictions. Operating margins are expected to improve, driven by volume leverage and the benefits from our restructuring programme.

Beyond the underlying trends in the business, we have headwinds to our reported results from foreign exchange

translation, the impact of the completion of our previously announced divestments and business exits.

Managing the impact of COVID-19

The safety of our people has always been our top priority and our focus through the pandemic has been to ensure their safety and wellbeing, as well as the safety of customers and communities. We continue to have a range of measures in place in all facilities to protect employees including physical changes to layout and people flow, social distancing, requirements for additional protective equipment, and additional hygiene and disinfection protocols. We have enacted flexible working for all roles (that can do so) and enhanced cleaning regimes where our people attended sites.

Emerging stronger: Group restructuring and efficiency programme

The Group restructuring and efficiency programme to simplify Morgan's structure and drive efficiency in operations is ahead of plan. We have made significant progress across the programme, with only one remaining site closure to be completed in the second half of the year. With this acceleration of activity, current year savings are now expected to be £20m (vs £17m previously reported). Full year run rate benefits of £23m in 2022 remain unchanged.

The expected phasing of the benefits and costs are as follows:

FY 2020

£m

FY 2021

£m

FY 2022

£m

Total

£m

Adjusted operating profit¹ benefits (incremental)

n/a

Cash cost to specific adjusting items

(24)

(4)

(28)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

Our purpose

Our purpose is to use advanced materials to make the world more sustainable and to improve the quality of life.

The world is changing at an extraordinary pace, sustainability is ever more important and advanced materials have

a key role to play in delivering a sustainable world.

Using advanced materials we deliver on our purpose through the products that we make, and the way that we make

them - we enable greener electricity generation; we enable electrification for cleaner transportation, we enable the

digital world, and all the benefits to the environment and health that brings; we help to keep people safe, we help

customers manage heat, reducing their energy usage; we improve the quality of life through medical applications.

Our strategy

Our strategy is to build distinctive capabilities in customer focus, application engineering and materials science and

apply those capabilities to solve difficult problems for customers where they value our solutions. Over the last

five years we have made considerable progress in developing capabilities and simplifying our portfolio to improve

performance.

We are seeing growing demand for advanced materials as customers push the boundaries of technology to make

their processes and products more efficient and more sustainable. This applies across our end markets, and in

particular in four faster growing segments where we have been working closely with customers to develop new

solutions for their next generation of products and processes:

· Clean energy. We have developed new ceramic materials for customers producing solar panels that support their latest generation of production technology. We are developing brushes that provide longer lifetimes and higher current carrying capability to support the next generation of wind turbines.

· Clean transportation. We have streamlined our production processes for carbon strips allowing us to develop and test new materials formulations quickly to meet the very diverse needs of customers in the rail and metro markets. We have a leading range of products and solutions that provide battery fire protection packs in electric vehicles and we are constantly innovating these to meet the myriad requirements of our customers.

· Semiconductors. Our materials are used throughout the semiconductor manufacturing process, in wafer growth, in etch, ion implantation, photolithography, and deposition steps. As chip density increases, the manufacturing processes get more demanding and put increasing demands on the components used in the process. We are working with customers on carbon and ceramic materials and product configurations to support their latest generation of equipment.

· Healthcare. We provide ceramic and brazing products for diagnostic and life support equipment, and for implantable devices, and low temperature insulation for medicine and vaccine transportation and storage. Our latest generation of materials solutions deliver performance improvements for customers. Our materials are used in power tubes for medical scanning and with new materials design we can increase the lifetime of the product. We have developed new capabilities for the implantable feedthrough market (e.g. for cochlear implants and neurostimulation) that allow us to provide higher pin densities enabling smaller package sizes for our customers' next generation products.

Through our investments in sales, application engineering and technology we are increasing our exposure to these

faster growing market segments and steadily improving the underlying growth rate of the Group.

Our environment, social and governance (ESG) objectives:

Underpinned by our purpose we are becoming a more sustainable business, while also helping customers to become more sustainable through the products we design and manufacture. We have stretching environmental goals that we are working hard to achieve. We are improving social factors to keep our people safe and we are looking to provide meaningful work that contributes to an improved society and enables the communities where we operate to thrive. We have robust governance processes across our business and operate to high ethical standards.

We have set stretching targets to make further improvements to our environmental impact, to the safety of employees and to the diversity and inclusion of our workplaces and the engagement of employees.

Reduce our environmental impact

Our aspiration is to be a CO₂ net zero business by 2050. Our 2030 target is to reduce Scope 1 and Scope 2 CO₂ emissions by 50% (from a 2015 baseline). In the first half we have reduced our CO₂ emissions by 17% compared to the prior year comparable period through a combination of switching to renewable or carbon free electricity and a range of energy reduction projects across the group.

Our aspiration is to use water sustainably across our business. Our 2030 target is to reduce our overall water usage by 30% and reduce water usage in high stress areas by 30% (from a 2015 baseline). In the first half overall water usage increased by 20% and high stress water usage increased by 21%, compared to the prior half year as volumes increased, and our mix of product changed. We have activity underway to improve overall water usage, and usage in high stress areas, through both continuous improvement and larger capital projects.

Improve our safety performance

· Our aspiration is to create an environment and culture with zero harm to our employees. Our 2030 target is a lost time accident rate below 0.1 (lost time accidents per 100,000 hours worked). Our lost time accident rate in the first half was 0.25, an increase over the 0.18 in the prior year. We are accelerating the roll out of our next phase of behavioural safety in response to this, as well as completing pilot activity looking at the safety of key manufacturing processes.

Improve the diversity & inclusion of our business

Our aspiration is that our employee demographics reflect the communities that we operate in. Our 2030 target is for 40% female representation across our leadership population. At 30 June 2021, we have 27% female representative in our leadership population.

Our aspiration is a welcoming and inclusive environment where our employees can grow and thrive. Our 2030 target is to attain a top quartile employee engagement score. We will complete our next employee engagement survey in the second half of the year.

Enquiries

Pete Raby

Morgan Advanced Materials

01753 837 000

Peter Turner

Morgan Advanced Materials

Nina Coad

Brunswick

0207 404 5959

Results presentation today

There will be an analyst and investor presentation at 11:00 (UK time) today via web-conference.

A live audio webcast and slide presentation of this event will be available on morganadvancedmaterials.com.

We recommend you register by 10:45 (UK time).

Basis of preparation

Non-GAAP measures

Throughout this report adjusted measures are used to describe the Group's financial performance. These are not recognised under IFRS or other generally accepted accounting principles (GAAP). The Executive Committee and the Board manage and assess the performance of the business on these measures and they are presented as the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures.

Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text, and by a footnote when they appear in tables. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

All periods presented in these condensed consolidated financial statements are for continuing operations, with separate disclosure of discontinued operations where appropriate.

Operating review

	Revenue		Operating profit¹		Margin %¹
	1H 2021	1H 2020	1H 2021	1H 2020	1H 2021	1H 2020
	£m	£m	£m	£m	%	%
Thermal Ceramics	174.7	175.3	21.2	13.5	12.1%	7.7%
Molten Metal Systems	22.8	20.4	2.5	1.7	11.0%	8.3%
Thermal Products division	197.5	195.7	23.7	15.2	12.0%	7.8%
Electrical Carbon	82.3	77.7	15.6	12.5	19.0%	16.1%
Seals and Bearings	64.3	77.6	10.7	15.5	16.6%	20.0%
Technical Ceramics	117.1	126.8	12.1	12.2	10.3%	9.6%
Carbon and Technical Ceramics division	263.7	282.1	38.4	40.2	14.6%	14.3%
Divisional total	461.2	477.8	62.1	55.4	13.5%	11.6%
Corporate costs			(3.0)	(2.5)
Group adjusted operating profit¹			59.1	52.9	12.8%	11.1%
Amortisation of intangible assets			(2.6)	(3.7)
Operating profit/(loss) before specific adjusting items			56.5	49.2	12.3%	10.3%
Specific adjusting items included in operating profit²			3.7	(68.9)
Operating profit/(loss)			60.2	(19.7)	13.1%	(4.1)%
Net financing costs			(4.4)	(5.9)
Share of profit of associate (net of income tax)			0.4	0.1
Profit/(loss) before taxation			56.2	(25.5)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

2. Details of specific adjusting items can be found in note 4 to the condensed consolidated financial statements.

Thermal Products division

Revenue for the Thermal Products division for the six months ended 30 June 2021 was £197.5 million, representing an increase of 0.9% compared with £195.7 million in 1H 2020. On an organic constant-currency* basis, year-on-year revenue increased by 6.6%.

Divisional statutory operating profit for the Thermal Products division was £21.3 million (1H 2020: loss of £21.0 million) with a divisional statutory operating profit margin of 10.8% (1H 2020: loss of 10.7%).

Divisional adjusted operating profit* for the Thermal Products division was £23.7 million (1H 2020: £15.2 million) with a divisional adjusted operating profit* margin of 12.0% (1H 2020: 7.8%).

Revenue for the Thermal Ceramics global business unit for the six months ended 30 June 2021 was £174.7 million, representing a decrease of 0.3% compared with £175.3 million in 1H 2020. On an organic constant-currency* basis, year-on-year revenue increased by 5.5%, with strong growth in automotive, healthcare and industrial market segments reflecting general market recovery, partially offset by a decline in the chemical and petrochemical market, reflecting the late cycle nature of this business segment.

Adjusted operating profit* for the Thermal Ceramics global business unit for the six months ended 30 June 2021 was £21.2 million (1H 2020: £13.5 million) with adjusted operating profit margin* of 12.1% (1H 2020: 7.7%). The margin expansion was driven by volume leverage, operational efficiencies and accelerated restructuring benefits.

Revenue for the Molten Metal Systems global business unit for the six months ended 30 June 2021 was £22.8 million, representing an increase of 11.8% compared with £20.4 million in 1H 2020. On an organic constant-currency* basis, year-on-year revenue increased by 16.3% with growth from strong demand in the aluminium and copper segments.

Adjusted operating profit* for the Molten Metal Systems global business unit for the six months ended 30 June 2021 was £2.5 million (1H 2020: £1.7 million) with adjusted operating profit margin* of 11.0% (1H 2020: 8.3%), with margin improvement from volume leverage and efficiency measures.

Carbon and Technical Ceramics division

Revenue for the Carbon and Technical Ceramics division for the six months ended 30 June 2021 was £263.7 million, representing a decrease of 6.5% compared with £282.1 million in 1H 2020. On an organic constant-currency* basis, year-on-year revenue increased by 2.4%.

Divisional statutory operating profit for the Carbon and Technical Ceramics division for the six months ended 30 June 2021 was £36.7 million (1H 2020: £3.9 million) with a divisional statutory operating profit margin of 13.9% (1H 2020: 1.4%).

Divisional adjusted operating profit* for the Carbon and Technical Ceramics division for the six months ended 30 June 2021 was £38.4 million (1H 2020: £40.2 million) with a divisional adjusted operating profit margin* of 14.6% (1H 2020: 14.3%).

Revenue for the Electrical Carbon global business unit for the six months ended 30 June 2021 was £82.3 million, representing an increase of 5.9% compared with £77.7 million in 1H 2020. On an organic constant-currency* basis, year-on-year revenue increased by 10.5%, with growth in the industrial, renewable energy and transportation market segments.

Adjusted operating profit* for the Electrical Carbon global business unit for the six months ended 30 June 2021 was £15.6 million (1H 2020: £12.5 million) with an adjusted operating profit margin* of 19.0% (1H 2020: 16.1%). Margin expansion from volume leverage, strong operational efficiencies and cost reduction actions.

Revenue for the Seals and Bearings global business unit for the six months ended 30 June 2021 was £64.3 million, representing a decrease of 17.1% compared with £77.6 million in 1H 2020. On an organic constant-currency* basis year-on-year revenue decreased by 12.2%, with the expected decline in ceramic armour to £13 million in the first half (1H 2020: £25 million) and lower volume in the aerospace market segment partially offset by growth in the industrial market segment.

Adjusted operating profit* for the Seals and Bearings global business unit for the six months ended 30 June 2021 was £10.7 million (1H 2020: £15.5 million) with an adjusted operating profit margin* of 16.6% (1H 2020: 20.0%). The lower margin reflects the decline in ceramic armour volume.

Revenue for the Technical Ceramics global business unit for the six months ended 30 June 2021 was £117.1 million, a decrease of 7.6% compared with £126.8 million in 1H 2020. On an organic constant-currency* basis, year-on-year revenue increased by 6.6%, with growth in healthcare, renewable energy and semiconductor segments partially offset by a decline in aerospace in the first quarter.

Adjusted operating profit* for the Technical Ceramics global business unit for the six months ended 30 June 2021 was £12.1 million (1H 2020: £12.2 million) with an adjusted operating profit margin* of 10.3% (1H 2020: 9.6%), with margin improvements from operational efficiencies and benefits from the restructuring programme offset by a £2.8 million headwind from business exits.

Group financial review

Group revenue for the six months ended 30 June 2021 was £461.2 million (1H 2020: £477.8 million), a decrease of 3.5% on a reported basis compared with 1H 2020. On an organic constant-currency* basis revenue increased by 4.2%.

Group adjusted operating profit* for the six months ended 30 June 2021 was £59.1 million (1H 2020: £52.9 million). Adjusted operating profit margin* was 12.8%, compared to 11.1% for 1H 2020.

Specific adjusting items for the six months ended 30 June 2021 were a net gain of £3.7 million including restructuring costs of £(0.6) million, impairment of assets of £(0.8) million, net profit on disposal of businesses £5.1 million (1H 2020: charge of £68.9 million). Note 4 to the condensed consolidated financial statements on page 32, provides additional information on the Group's specific adjusting items.

Operating profit for the six months ended 30 June 2021 was £60.2 million (1H 2020: loss of £19.7 million) and profit before taxation was £56.2 million (1H 2020: loss of £25.5 million).

The Group amortisation charge for the six months ended 30 June 2021 was £2.6 million (1H 2020: £3.7 million).

The net finance charge for the six months ended 30 June 2021 was £4.4 million (1H 2020: £5.9 million) comprising net bank interest and similar charges of £2.5 million (1H 2020: £3.3 million), net interest on IAS 19 pension obligations of £0.8 million (1H 2020: £1.2 million), and interest expense on lease liabilities of £1.1 million (1H 2020: £1.4 million).

Looking forward to the full year, we anticipate that the net finance charge will reduce to around £10 million, comprising net bank interest and similar charges of £6 million; net interest on IAS 19 pension obligations of £2 million; and interest expense on lease liabilities of £2 million.

The Group taxation charge for the six months ended 30 June 2021, excluding specific adjusting items, was £14.4 million (1H 2020: £11.7 million), tax on specific adjusting items was a credit of £0.3 million (1H 2020: credit of £10.2 million). The effective tax rate, excluding specific adjusting items, was 27.4% (1H 2020: 27.0%). Note 6 to the condensed consolidated financial statements provides additional information on the Group's tax charge. Looking forward to the full year, we anticipate that the effective tax rate will remain at around 27-28%.

Adjusted earnings per share* for the six months ended 30 June 2021 was 12.7 pence (1H 2020: 11.5 pence) and basic profit per share from continuing operations was 13.2 pence (1H 2020: loss per share of 9.9 pence). Details of these calculations can be found in note 8 to the condensed consolidated financial statements.

The Group's balance sheet and liquidity remains robust. Net debt* for the six months ended 30 June 2021 was £116.6 million, with net debt* excluding lease liabilities of £65.2 million, with no debt maturities until 2023. The Group has cash and cash equivalents of £107.6 million and undrawn headroom on its revolving credit facility of £200 million.

Our key financial covenants are measured on a pre-IFRS 16 Leases basis. As at 30 June 2021, net debt* to EBITDA*, excluding the impact of IFRS 16 Leases, was 0.5 times compared to a covenant not to exceed 3.0 times, and our interest cover was 21.8 times, compared to a covenant to exceed 4.0 times.

Acquisitions, divestments and business exits

2021

On 1 March 2021, the Group purchased the business and assets of the magnesium oxide milling business from Delamin Limited, previously a supplier to the Seals & Bearings business, for a cash consideration of £1.9 million. The assets comprise largely intangible assets such as know-how, customer lists and contracts.

The Group completed the disposal of a non-controlling participation (35% share) of our Jemmtec business on 28 April 2021. Jemmtec was accounted for as an associate to the Group via the equity method. Morgan's share of the proceeds is an initial consideration of £12.2 million, subject to customary working capital adjustments, and up to £1.75 million of contingent consideration.

On 15 January 2021, the Group sold the inventory and fixed assets of the Technical Ceramics business based in Latrobe USA. The sale excluded the extruded ceramic manufacturing business and related assets. The business achieved cash consideration of £0.6 million.

2020

In 2017, the Group divested its UK Electro-ceramics business, which was part of the Technical Ceramics global business unit. At the same time, it announced the closure of its US Electro-ceramics business, which formed the remainder of the Group's Electro-ceramics business. The final delivery of the last-time orders from customers was completed in the first half of 2020, and the site closed on 30 June 2020. The revenues for the US Electro-ceramics business for the period ended 30 June 2020 were £4.7 million with a profit contribution of £2.9 million.

See note 2 for further details.

Specific adjusting items

In the consolidated income statement, the Group presents specific adjusting items separately. In the judgement of the Directors, as a result of the nature and value of these items they should be disclosed separately from the underlying results of the Group to allow the reader to obtain an alternative understanding of the financial information and an indication of the underlying performance of the Group.

Details of specific adjusting items arising during the year and the comparative period are given in note 4 to the condensed consolidated financial statements.

	1H 2021 £m	1H 2020 £m
Specific adjusting items
Restructuring costs	(0.6)	(5.5)
Impairment of assets	(0.8)	(63.4)
Net profit on disposal of businesses	5.1	-
Total specific adjusting items before income tax	3.7	(68.9)
Income tax credit from specific adjusting items	0.3	10.2
Total specific adjusting items after income tax	4.0	(58.7)

Specific adjusting items for the six months ended 30 June 2021 were a net gain of £3.7 million (1H 2020: charge of £68.9 million) and comprised the following associated with the Group restructuring and efficiency programme:

Restructuring costs

Following the announcement of the Group's restructuring programme the Group has recognised a charge of £0.6 million related to redundancies and other costs.

Impairment of assets

Impairment of assets primarily relate to assets associated with closed manufacturing lines within Thermal Ceramics.

Net profit on disposal of businesses

In the period the Group disposed of its 35% shareholding in Jemmtec Limited and the business assets associated with the Latrobe business, these disposals generated a profit of £5.2 million and a loss of £0.1 million respectively. See the above 'acquisitions, divestments and business exits' section and note 2 for further information.

Foreign currency impact

The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:

	1H 2021		1H 2020
GBP to:	Closing rate	Average rate	Closing rate	Average rate
US dollar	1.38	1.39	1.24	1.26
Euro	1.17	1.15	1.10	1.14

For illustrative purposes, the table below provides details of the impact on 1H 2021 revenue and adjusted operating profit* if the actual reported results, calculated using 1H 2021 average exchange rates were restated for GBP weakening by 10 cents against US dollar in isolation and 10 cents against the Euro in isolation:

Increase in 2021 revenue/adjusted operating profit¹ if:

Revenue

£m

Adjusted operating profit¹

£m

GBP weakens by 10c against the US dollar in isolation

14.4

1.8

GBP weakens by 10c against the Euro in isolation

9.1

1.6

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

Cash flow

	1H 2021 £m	1H 2020¹ £m
Cash generated from continuing operations	63.1	59.0
Net capital expenditure	(8.6)	(15.8)
Net interest on cash and borrowings	(2.5)	(3.2)
Tax paid	(9.9)	(7.0)
Lease payments and interest	(5.6)	(6.6)
Free cash flow before acquisitions, disposals and dividends²	36.5	26.4
Dividends paid to external plc shareholders	(10.0)	-
Net cash flows from other investing and financing activities	7.5	(7.2)
Net cash flows from discontinued operations	-	(0.1)
Exchange movement and other non-cash movements	1.8	(10.6)
Opening net debt² excluding lease liabilities	(101.0)	(157.3)
Closing net debt² excluding lease liabilities	(65.2)	(148.8)
Closing lease liabilities	(51.4)	(63.5)
Closing net debt²	(116.6)	(212.3)

1. 1H 2020 has been restated to classify the Group's cumulative preference shares, totalling £0.4 million, as borrowings. See note 1 to the condensed consolidated financial

statements.

2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

Cash generated from continuing operations for the six months ended 30 June 2021 was £63.1 million (1H 2020: £59.0 million).

Free cash flow before acquisitions, disposals and dividends* was £36.5 million (1H 2020: £26.4 million).

Net debt* for the six months ended 30 June 2021 was £116.6 million (1H 2020: £212.3 million), representing a net debt* to EBITDA* ratio of 0.9 times (1H 2020: 1.3 times).

Net debt* for the six months ended 30 June 2021 excluding lease liabilities was £65.2 million (1H 2020: £148.8 million), representing a net debt* to EBITDA* ratio excluding the impact of IFRS 16 Leases of 0.5 times (1H 2020: 1.0 times).

Further information on the Group's net debt* is provided in note 11 to the condensed consolidated financial statements.

Defined benefit pension plans

The Group pension deficit for the six months ended 30 June 2021 has decreased by £48.1 million since 31 December 2020 to £128.2 million on an IAS 19 (revised) basis, with UK, US and Eurozone discount rates increasing as a result of an increase in corporate bond yields, whilst the Rest of World discount rates have remained stable:

· The UK schemes deficit decreased by £43.4 million to £76.9 million (FY 2020: £120.3 million; 1H 2020: £106.9 million), (discount rate 1H 2021: 1.87%; FY 2020: 1.23%; 1H 2020: 1.47%).

· The US schemes deficit decreased by £1.2 million to £6.1 million (FY 2020 £7.3 million; 1H 2020: £11.3 million), (discount rate 1H 2021: 2.65%; FY 2020: 2.34%; 1H 2020: 2.58%).

· The European schemes deficit decreased by £4.0 million to £40.8 million (FY 2020 £44.8 million; 1H 2020: £41.2 million), (discount rate 1H 2021: 0.80%; FY 2020: 0.40%; 1H 2020: 0.90%).

· The Rest of World schemes deficit increased by £0.5 million to £4.4 million (FY 2020 £3.9 million; 1H 2020: £5.8 million), (discount rate 1H 2021: 2.40%; FY 2020: 2.40%; 1H 2020: 2.20%).

Note 13 to the condensed consolidated financial statements provides additional information on the Group's pension schemes.

The most recent full actuarial valuations of the UK Schemes were undertaken as at March 2019 and resulted in combined assessed deficits of £120.3 million. On the basis of these full valuations the Trustees of the UK Schemes, having consulted with the Group, agreed past service deficit recovery payments totaling £16.5 million a year from January 2020, increasing by 2.75% pa until 2025, with further payments to Morgan Pension Scheme for 2026 and 2027.

Interim dividend

The Board has resolved to pay an interim dividend of 3.2 pence per Ordinary share. The interim dividend will be paid on 19 November 2021 to Ordinary shareholders on the register of members at the close of trading on 29 October 2021. The ex-dividend date will be 28 October 2021. This compares to an interim dividend paid in the fourth quarter of 2020 of 2.0 pence per Ordinary share.

Looking forward, the Board is looking to grow the ordinary dividend as the economic environment and the Group's earnings improve, targeting a full year dividend cover of around 3 times adjusted EPS* on average over the medium-term.

This level of cover ensures sufficient resources are available to continue to invest to support the Group's long-term prospects, as well as meet the needs of other stakeholders of the Group, including deficit contributions to the Group's defined benefit pension schemes.

Principal risks and uncertainties

The Group has an established risk management methodology, which seeks to identify, prioritise and mitigate risks, underpinned by a 'three lines of defence' model comprising of an internal control framework, internal monitoring and independent assurance processes. The Board considers that risk management and internal control are fundamental to achieving the Group aim of creating long-term sustainable shareholder value.

The current principal risks, representing those risks that the Board feels could have the most significant impact on achieving the Group's strategy of building a sustainable business for the long-term and delivering strong returns to the Group's shareholders, are set out in the 2020 Annual Report and Accounts, which are available on the Group's website at morganadvancedmaterials.com.

The following are the Group's principal risks and uncertainties:

· Technical leadership
The Group's strategic success depends on maintaining and developing its technical leadership in materials science over its competitors.

· Operational execution/organisational change
To improve the efficiency of the Group's operations and organisation, various changes have been made. Failure to manage these changes adequately could result in interruption to operations or customer service, or a failure to maximise the Group's opportunities.

· Portfolio management
Failure to manage the Group's portfolio of businesses across a wide range of product and technology families proactively and in line with this technology profile could lead to the value of the Group's businesses being eroded over time or to a failure to exploit opportunities to acquire businesses.

· Macro-economic and political environment
The Group operates in a range of markets and geographies around the world and could be affected by political, economic, social or regulatory developments or instability, for example an economic slowdown or issues stemming from oil and natural resources price shocks.

· Environment, health and safety
A failure in the Group's EHS procedures could lead to environmental damage or to injury or death of employees or third parties, with a consequential impact on operations and increased risk of regulatory or legal action being taken against the Group.

· Product quality, safety and liability
Products used in applications for which they were not intended or inadequate quality control/over-commitment on customer specifications could result in products not meeting customer requirements, which could in turn lead to significant liabilities and reputational damage.

· IT and cyber security
There is a general rise in remote working and an accelerated shift to cloud platforms, thereby increasing the cyber risk severity. If the Group were to lose critical information (such as IP or regulatory data) or if critical systems availability is affected through cyber-attacks, the business would be impacted or could suffer reputational damage.

· Supply chain and business continuity
The Group has a number of potential single-point exposure risks. These include:

Single-point supplier: a significant interruption of internal or external key supply could impact business continuity.
Single-point customer: the unmitigated loss of a major customer could have an impact on Group profit. Single-point site: key sites exposed to a strike, a natural catastrophe or serious incident, such as fire, could impact business continuity.

· Treasury
The Group's global reach means that it is exposed to uncertainties in the financial markets, the fiscal jurisdictions where it operates, and the banking sector. These heighten the Group's funding, foreign exchange, tax, interest rate, credit and liquidity risks as well as the risk that a bank failure could impact the Group's cash.

· Pension funding
The Group sponsors several defined benefit pension arrangements, whose liabilities are subject to fluctuating interest rates, investment values and inflation. Increased longevity of members and a tougher regulatory funding regime can result in increased funding burdens on the Group in the future.

· Tax
The Group operates in many jurisdictions around the world and could be affected by changes in tax laws and regulations within the complex international tax environment.

· Contract management
As a global advanced materials business supplying components into critical applications, the Group may be exposed to liabilities arising from the use of its products.

· Compliance
A failure to comply with any applicable laws/regulations could result in civil or criminal liabilities and/or individual or corporate fines and could also result in debarment from government-related contracts or rejection by financial market counterparties and reputational damage.

Since the beginning of 2021 there have been favourable movements in Treasury, Macroeconomic, Pandemic and Political risks.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the 2020 Annual Report and Accounts on pages 2 to 45. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described earlier in this financial review. Additionally note 12 to the condensed consolidated financial statements for the six months ended 30 June 2021 provide details of the Group's policies and processes for managing financial risk; details of its financial instruments and hedging activities; and details of its exposures to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through local banking arrangements underpinned by the Group's £200 million unsecured multi-currency revolving credit facility, which matures in September 2024. As at 30 June 2021 the Group had significant headroom on its covenants and available liquidity with the Group's £200 million multi-currency revolving credit facility being undrawn and net cash and cash equivalents* available of £107.5 million. Net debt* for the six months ended 30 June 2021 was £116.6 million, with net debt* excluding lease liabilities of £65.2 million, with no debt maturities until 2023.

Our key financial covenants are measured on a pre-IFRS 16 Leases basis. As at 30 June, excluding the impact of IFRS 16 Leases, net debt* to EBITDA* was 0.5 times compared to a covenant not to exceed 3.0 times, and our interest cover was 21.8 times, compared to a covenant to exceed 4.0 times.

The Board and Executive Committee have regular reporting and review processes in place in order to closely monitor the ongoing operational and financial performance of the Group. These processes include the ongoing review of the impact of COVID-19 on the Group and its stakeholders. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance and exchange rates, show the Group operating within its debt financial covenants for the next 18 months.

The Board has also reviewed the Group's reverse stress testing performed to demonstrate how much headroom is available on covenant levels in respect of changes in net debt*, EBITDA* and organic revenue*. Based on this assessment, a combined reduction in EBITDA* of 60% and an increase in net debt* of 100% would still allow the Group to operate within its financial covenants. The Board has reviewed this with management and is satisfied that this is appropriate and is supporting the Group as a going concern.

Under all scenarios the Group has headroom against its available facilities and considers there are sufficient controllable actions it can take, even if a severe downside case were to materialise, to operate within its financial covenants. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of 18 months from the date of this statement. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements for the six months ended 30 June 2021.

Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

· The condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the UK.

· The interim management report for the six-month period ended 30 June 2021 includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Information on the current Directors of Morgan Advanced Materials plc responsible for providing this Statement is maintained on the Company's website at morganadvancedmaterials.com.

By order of the Board

Pete Raby

Chief Executive Officer

Peter Turner

Chief Financial Officer

29 July 2021

Definitions and reconciliations of non-GAAP to GAAP measures

Reference is made to the following non-GAAP measures throughout this document. These measures are shown because the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures. As defined in the basis of preparation on page 5, these measures are calculated on a continuing basis.

Adjusted operating profit

Adjusted operating profit is stated before specific adjusting items and amortisation of intangible assets. Specific adjusting items are excluded on the basis that they distort trading performance. Amortisation is excluded as the charge arises primarily on externally acquired intangible assets since the adoption of IFRS and does not therefore reflect all intangible assets consistently.

1H 2021	Thermal Ceramics £m	Molten Metal Systems £m	Thermal Products division £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Carbon and Technical Ceramics division £m	Corporate costs¹ £m	Group £m
Operating profit	18.9	2.4	21.3	14.8	10.5	11.4	36.7	2.2	60.2
Add back: specific adjusting items included in operating profit	1.4	(0.3)	1.1	0.4	-	-	0.4	(5.2)	(3.7)
Add back: amortisation of intangible assets	0.9	0.4	1.3	0.4	0.2	0.7	1.3	-	2.6
Group and divisional adjusted operating profit/(loss)	21.2	2.5	23.7	15.6	10.7	12.1	38.4	(3.0)	59.1

1. Corporate costs consist of central head office costs.

1H 2020	Thermal Ceramics £m	Molten Metal Systems £m	Thermal Products division £m	Electrical Carbon £m	Seals and Bearings £m	Technical Ceramics £m	Carbon and Technical Ceramics division £m	Corporate costs¹ £m	Group £m
Operating profit/(loss)	(22.4)	1.4	(21.0)	11.0	15.2	(22.3)	3.9	(2.6)	(19.7)
Add back: specific adjusting items included in operating profit	35.0	0.2	35.2	1.2	0.2	32.2	33.6	0.1	68.9
Add back: amortisation of intangible assets	0.9	0.1	1.0	0.3	0.1	2.3	2.7	-	3.7
Group and divisional adjusted operating profit/(loss)	13.5	1.7	15.2	12.5	15.5	12.2	40.2	(2.5)	52.9

1. Corporate costs consist of central head office costs.

Organic growth

Organic growth is the growth of the business excluding the impacts of acquisitions, divestments and foreign currency impacts. This measure is used as it allows revenue and adjusted operating profit to be compared on a like-for-like basis.

Commentary on the underlying business performance is included as part of the operational review on pages 5 to 11.

Year-on-year movements in segment revenue

	Thermal Ceramics		Molten Metal Systems	Thermal Products division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics division	Segment total
		£m	£m	£m	£m	£m	£m	£m	£m

1H 2020	175.3		20.4	195.7	77.7	77.6	126.8	282.1	477.8

Impact of foreign currency movements	(9.7)		(0.8)	(10.5)	(3.2)	(4.6)	(8.4)	(16.2)	(26.7)
Impacts of disposals and business exits	-		-	-	-	0.2	(8.5)	(8.3)	(8.3)
Organic constant-currency change	9.1		3.2	12.3	7.8	(8.9)	7.2	6.1	18.4
Organic constant-currency change %	5.5%		16.3%	6.6%	10.5%	(12.2)%	6.6%	2.4%	4.2%

1H 2021	174.7		22.8	197.5	82.3	64.3	117.1	263.7	461.2

Year-on-year movements in segment and Group adjusted operating profit

	Thermal Ceramics	Molten Metal Systems	Thermal Products division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics division	Corporate costs¹	Group
	£m	£m	£m	£m	£m	£m	£m	£m	£m

1H 2020	13.5	1.7	15.2	12.5	15.5	12.2	40.2	(2.5)	52.9

Impact of foreign currency movements	(1.3)	-	(1.3)	(0.7)	(1.3)	(1.1)	(3.1)	-	(4.4)
Impact of disposals and business exits	-	-	-	-	0.1	(2.8)	(2.7)	-	(2.7)
Organic constant-currency change	9.0	0.8	9.8	3.8	(3.6)	3.8	4.0	(0.5)	13.3
Organic constant-currency change %	73.8%	47.1%	70.5%	32.2%	(25.2)%	45.8%	11.6%	20.0%	29.0%

1H 2021	21.2	2.5	23.7	15.6	10.7	12.1	38.4	(3.0)	59.1

1. Corporate costs consist of the cost of the central head office.

Group EBITDA

Group EBITDA is defined as operating profit before specific adjusting items, depreciation and amortisation of intangible assets. The Group uses this measure as it is a key metric in covenants over debt facilities, these covenants use EBITDA on a pre-IFRS 16 Leases basis. A reconciliation of operating profit to Group EBITDA is as follows:

	1H 2021 £m	1H 2020 £m
Operating profit/(loss)	60.2	(19.7)
Add back: specific adjusting items included in operating profit/(loss)	(3.7)	68.9
Add back: depreciation - property, plant and equipment	14.6	17.3
Add back: depreciation - right-of-use assets	3.8	5.1
Add back: amortisation of intangible assets	2.6	3.7
Group EBITDA	77.5	75.3
Group EBITDA excluding IFRS 16 Leases impact	71.9	68.8

Free cash flow before acquisitions, disposals and dividends

Free cash flow before acquisitions, disposals and dividends is defined as cash generated from continuing operations less net capital expenditure, net interest (interest paid on borrowings, overdrafts and lease liabilities, net of interest received), tax paid and lease payments.

The Group discloses this measure of free cash flow as this provides readers of the condensed consolidated financial statements with a measure of the cash flows from the business before corporate level cash flows (acquisitions, disposals and dividends).

A reconciliation of cash generated from continuing operations to free cash flow before acquisitions, disposals and dividends is as follows:

	1H 2021 £m	1H 2020 £m
Cash generated from continuing operations	63.1	59.0
Net capital expenditure	(8.6)	(15.8)
Net interest on cash and borrowings	(2.5)	(3.2)
Tax paid	(9.9)	(7.0)
Lease payments and interest	(5.6)	(6.6)
Free cash flow before acquisitions, disposals and dividends	36.5	26.4

Net cash and cash equivalents

Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts. The Group also discloses this measure as it provides an indication of the net short-term liquidity available to the Group.

	1H 2021 £m	1H 2020 restated¹ £m
Cash and cash equivalents	107.6	197.0
Bank overdrafts	(0.1)	(74.3)
Net cash and cash equivalents	107.5	122.7

1. As disclosed in note 1, cash and cash equivalents and bank overdrafts have been restated to meet the presentational requirements of IAS 32. This had no impact on net assets or net debt.

Net debt

Net debt is defined as borrowings, bank overdrafts and lease liabilities, less cash and cash equivalents. The Group also discloses this metric excluding lease liabilities as this is the measure used in the covenants over the Group's debt facilities.

	1H 2021 £m	1H 2020¹ £m
Cash and cash equivalents	107.6	197.0
Non-current borrowings	(172.7)	(188.9)
Non-current lease liabilities	(41.1)	(51.5)
Current borrowings and bank overdrafts	(0.1)	(156.9)
Current lease liabilities	(10.3)	(12.0)
Closing net debt	(116.6)	(212.3)
Closing net debt excluding IFRS 16 Leases liabilities	(65.2)	(148.8)

1. 1H 2020 has been restated to classify the Group's cumulative preference shares, totalling £0.4 million, as borrowings. Cash and cash equivalents and bank overdrafts have been restated to meet the presentational requirements of IAS 32. See note 1 to the condensed consolidated financial statements.

Return on invested capital

Return on invested capital (ROIC) is defined as the 12-month Group adjusted operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 12-month average adjusted net assets (third-party working capital, plant and equipment, land and buildings, right-of-use assets, intangible assets and other balance sheet items). This measure excludes long-term employee benefits, deferred tax assets and liabilities, current tax payable, provisions, cash and cash equivalents, borrowings and lease liabilities.

	1H 2021 £m	1H 2020 £m
Operating profit before specific adjusting items	93.0	112.0
Add back: amortisation of intangible assets	5.0	7.7
Group adjusted operating profit	98.0	119.7

12-month average adjusted net assets:
Third-party working capital	144.7	180.7
Plant and equipment	159.2	196.8
Land and buildings	104.8	121.4
Right-of-use assets	35.5	49.1
Intangible assets	186.8	209.0
Other assets (net)	6.2	8.3
12-month average adjusted net assets	637.2	765.3

ROIC	15.4%	15.6%
ROIC excluding IFRS 16 Leases impact	15.7%	16.5%

Adjusted earnings per share

Adjusted earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of Ordinary shares during the period. This measure of earnings is shown because the Directors consider it provides an indication of adjusted performance which is less impacted by adjusting items and therefore reflects the underlying performance trends in the business.

A reconciliation from IFRS profit to the profit used to calculate adjusted earnings per share is included in note 8 to the condensed consolidated financial statements.

Constant-currency revenue and adjusted operating profit

Constant-currency revenue and adjusted operating profit are derived by translating the prior year results at current year average exchange rates. These measures are used as they allow revenue to be compared excluding the impact of foreign exchange rates. Page 9 provides further information on the principal foreign currency exchange rates used in the translation of the Group's results to constant-currency at average exchange rates

Condensed Consolidated Financial Statements Interim Results Announcement

for the six months ended 30 June 2021

Condensed consolidated income statement

		Six months ended 30 June 2021			Six months ended 30 June 2020			Year ended 31 December 2020
		Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹	Total
	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	3	461.2	-	461.2	477.8	-	477.8	910.7	-	910.7
Operating costs before amortisation of intangible assets		(402.1)	3.7	(398.4)	(424.9)	(68.9)	(493.8)	(819.0)	(87.4)	(906.4)

Profit/(loss) from operations before amortisation of intangible assets	3	59.1	3.7	62.8	52.9	(68.9)	(16.0)	91.7	(87.4)	4.3

Amortisation of intangible assets		(2.6)	-	(2.6)	(3.7)	-	(3.7)	(6.1)	-	(6.1)

Operating profit/(loss)	3	56.5	3.7	60.2	49.2	(68.9)	(19.7)	85.6	(87.4)	(1.8)

Finance income		0.4	-	0.4	0.5	-	0.5	0.9	-	0.9
Finance expense		(4.8)	-	(4.8)	(6.4)	-	(6.4)	(12.8)	-	(12.8)
Net financing costs	5	(4.4)	-	(4.4)	(5.9)	-	(5.9)	(11.9)	-	(11.9)

Share of profit of associate (net of income tax)		0.4	-	0.4	0.1	-	0.1	0.6	-	0.6

Profit/(loss) before taxation		52.5	3.7	56.2	43.4	(68.9)	(25.5)	74.3	(87.4)	(13.1)

Income tax (charge)/credit	6	(14.4)	0.3	(14.1)	(11.7)	10.2	(1.5)	(20.2)	13.3	(6.9)

Profit/(loss) from continuing operations		38.1	4.0	42.1	31.7	(58.7)	(27.0)	54.1	(74.1)	(20.0)
Profit from discontinued operations	7	-	-	-	-	0.8	0.8	-	2.0	2.0
Profit/(loss) for the period		38.1	4.0	42.1	31.7	(57.9)	(26.2)	54.1	(72.1)	(18.0)

Profit/(loss) for the period attributable to:
Shareholders of the Company		33.6	4.0	37.6	29.1	(56.5)	(27.4)	48.1	(70.6)	(22.5)
Non-controlling interests		4.5	-	4.5	2.6	(1.4)	1.2	6.0	(1.5)	4.5

Profit/(loss) for the period		38.1	4.0	42.1	31.7	(57.9)	(26.2)	54.1	(72.1)	(18.0)

Earnings per share	8
Continuing and discontinued operations
Basic earnings/(loss) per share				13.2p			(9.6)p			(7.9)p
Diluted earnings/(loss) per share				13.1p			(9.6)p			(7.9)p

Continuing operations
Basic earnings/(loss) per share				13.2p			(9.9)p			(8.6)p
Diluted earnings/(loss) per share				13.1p			(9.9)p			(8.6)p

Dividends²
Proposed interim dividend - pence				3.20p			-			2.00p
- £m				9.1			-			5.7

Final dividend - pence										3.50p
- £m										10.0

1. Details of specific adjusting items are given in note 4 to the condensed consolidated financial statements.

2. The proposed interim and approved final dividends are based upon the number of shares outstanding at the balance sheet date.

Condensed consolidated statement of comprehensive income

	At 30 June 2021	At 30 June 2020	At 31 December 2020
	£m	£m	£m

Profit/(loss) for the period	42.1	(26.2)	(18.0)

Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain/(loss) on defined benefit plans	38.6	(12.0)	(33.9)
Tax effect of components of other comprehensive income not reclassified	(0.8)	(0.3)	0.4
	37.8	(12.3)	(33.5)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(5.4)	11.9	(3.2)
Cash flow hedges:
Change in fair value	0.1	(0.5)	0.4
Transferred to profit or loss	(0.4)	(0.6)	(0.8)
	(5.7)	10.8	(3.6)
Total other comprehensive income/(expense)	32.1	(1.5)	(37.1)
Total comprehensive income/(expense)	74.2	(27.7)	(55.1)

Attributable to:
Shareholders of the Company	70.5	(30.4)	(59.8)
Non-controlling interests	3.7	2.7	4.7
	74.2	(27.7)	(55.1)

Total comprehensive income/(expense) attributable to shareholders of the Company arising from:
Continuing operations	70.5	(31.2)	(61.8)
Discontinued operations	-	0.8	2.0
	70.5	(30.4)	(59.8)

Condensed consolidated balance sheet

		At 30 June 2021	At 30 June 2020 restated^1,2	At 31 December 2020
	Note	£m	£m	£m
Assets
Property, plant and equipment	9	251.0	286.8	267.6
Right-of-use assets		33.2	41.0	35.5
Intangible assets	10	183.6	196.3	185.4
Investments		-	6.7	7.2
Other receivables		2.8	2.8	4.0
Deferred tax assets		13.8	11.8	14.4
Total non-current assets		484.4	545.4	514.1
Inventories		128.7	149.8	122.4
Derivative financial assets	12	0.7	0.6	1.0
Trade and other receivables		161.2	176.3	143.6
Current tax receivable		0.5	1.8	1.6
Cash and cash equivalents	11	107.6	197.0	147.8
Total current assets		398.7	525.5	416.4
Total assets		883.1	1,070.9	930.5
Liabilities
Borrowings		172.7	188.9	177.5
Lease liabilities		41.1	51.5	43.1
Employee benefits: pensions	13	128.2	165.2	176.3
Provisions	14	11.7	9.6	8.5
Non-trade payables		3.6	2.5	4.9
Deferred tax liabilities		0.5	1.0	0.5
Total non-current liabilities		357.8	418.7	410.8
Borrowings and bank overdrafts		0.1	156.9	71.3
Lease liabilities		10.3	12.0	11.5
Trade and other payables		165.1	160.8	148.4
Current tax payable		24.0	31.6	20.4
Provisions	14	21.8	10.4	27.3
Derivative financial liabilities	12	0.4	1.4	0.8
Total current liabilities		221.7	373.1	279.7
Total liabilities		579.5	791.8	690.5
Total net assets		303.6	279.1	240.0
Equity
Share capital		71.3	71.3	71.3
Share premium		111.7	111.7	111.7
Reserves		13.8	31.8	18.7
Retained earnings		67.0	24.8	0.6
Total equity attributable to shareholders of the Company		263.8	239.6	202.3
Non-controlling interests		39.8	39.5	37.7
Total equity		303.6	279.1	240.0

1. Comparative information has been restated to include the Group's cumulative preference shares within borrowings. The cumulative preference shares were previously presented in equity, see note 1 for further details.

2. Cash and cash equivalents and borrowings have been restated to meet the presentational requirements of IAS 32 as further described in note 1. This had no impact on net assets or net debt*.

Condensed consolidated statement of changes in equity

	Share capital		Share premium	Translation reserve	Hedging reserve	Fair value reserve	Capital redemption reserve	Other reserves	Retained earnings	Total parent equity	Non-controlling interests	Total equity
	£m		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2020 restated¹	71.3		111.7	(13.6)	0.8	(1.0)	35.7	0.6	64.7	270.2	41.5	311.7
Profit/(loss) for the period	-		-	-	-	-	-	-	(27.4)	(27.4)	1.2	(26.2)
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes	-		-	-	-	-	-	-	(12.3)	(12.3)	-	(12.3)
Foreign exchange differences	-		-	10.4	-	-	-	-	-	10.4	1.5	11.9
Cash flow hedging fair value changes and transfers	-		-	-	(1.1)	-	-	-	-	(1.1)	-	(1.1)
Total comprehensive income/(expense)	-		-	10.4	(1.1)	-	-	-	(39.7)	(30.4)	2.7	(27.7)
Transactions with owners:
Dividends	-		-	-	-	-	-	-	-	-	(4.1)	(4.1)
Purchase of non-controlling interest	-		-	-	-	-	-	-	(2.2)	(2.2)	(0.6)	(2.8)
Equity settled share-based payments	-		-	-	-	-	-	-	1.9	1.9	-	1.9
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	0.1	0.1	-	0.1
At 30 June 2020	71.3		111.7	(3.2)	(0.3)	(1.0)	35.7	0.6	24.8	239.6	39.5	279.1

At 1 January 2020	71.3		111.7	(13.6)	0.8	(1.0)	35.7	0.6	64.7	270.2	41.5	311.7
(Loss)/profit for the year	-		-	-	-	-	-	-	(22.5)	(22.5)	4.5	(18.0)
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes	-		-	-	-	-	-	-	(33.5)	(33.5)	-	(33.5)
Foreign exchange differences	-		-	(3.4)	-	-	-	-	-	(3.4)	0.2	(3.2)
Cash flow hedging fair value changes and transfers	-		-	-	(0.4)	-	-	-	-	(0.4)	-	(0.4)
Total comprehensive (expense)/income		-	-	(3.4)	(0.4)	-	-	-	(56.0)	(59.8)	4.7	(55.1)
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(5.7)	(5.7)	(7.9)	(13.6)
Purchase of non-controlling interest	-		-	-	-	-	-	-	(2.2)	(2.2)	(0.6)	(2.8)
Equity settled share-based payments	-		-	-	-	-	-	-	1.2	1.2	-	1.2
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(1.4)	(1.4)	-	(1.4)
At 31 December 2020	71.3		111.7	(17.0)	0.4	(1.0)	35.7	0.6	0.6	202.3	37.7	240.0

At 1 January 2021	71.3		111.7	(17.0)	0.4	(1.0)	35.7	0.6	0.6	202.3	37.7	240.0
Profit/(loss) for the period	-		-	-	-	-	-	-	37.6	37.6	4.5	42.1
Other comprehensive income/(expense):
Remeasurement loss on defined benefit plans and related taxes	-		-	-	-	-	-	-	37.8	37.8	-	37.8
Foreign exchange differences	-		-	(4.6)	-	-	-	-	-	(4.6)	(0.8)	(5.4)
Cash flow hedging fair value changes and transfers	-		-	-	(0.3)	-	-	-	-	(0.3)	-	(0.3)
Total comprehensive income/(expense)		-	-	(4.6)	(0.3)	-	-	-	75.4	70.5	3.7	74.2
Transactions with owners:
Dividends	-		-	-	-	-	-	-	(10.0)	(10.0)	(1.6)	(11.6)
Equity settled share-based payments	-		-	-	-	-	-	-	2.2	2.2	-	2.2
Own shares acquired for share incentive schemes (net)	-		-	-	-	-	-	-	(1.2)	(1.2)	-	(1.2)
At 30 June 2021	71.3		111.7	(21.6)	0.1	(1.0)	35.7	0.6	67.0	263.8	39.8	303.6

1. Balances have been restated to remove the cumulative preference shares previously presented in equity, see note 1 for further details.

Condensed consolidated statement of cash flows

		Six months ended 30 June 2021	Six months ended 30 June 2020 restated¹	Year ended 31 December 2020
	Note	£m	£m	£m
Operating activities
Profit/(loss) for the period from continuing operations		42.1	(27.0)	(20.0)
Profit for the period from discontinued operations	7	-	0.8	2.0

Adjustments for:
Depreciation - property, plant and equipment	3,9	14.6	17.3	32.7
Depreciation - right-of-use assets	3	3.8	5.1	9.2
Amortisation	3,10	2.6	3.7	6.1
Net financing costs	5	4.4	5.9	11.9
(Profit)/loss on disposal of business and business exits	4,7	(5.1)	-	(2.2)
Non-cash specific adjusting items included in operating profit	4,7	0.8	62.6	65.7
Share of profit from associate (net of income tax)		(0.4)	(0.1)	(0.6)
Loss/(profit) on sale of property, plant and equipment		1.2	(1.2)	(1.0)
Income tax expense	6	14.1	1.5	6.9
Equity-settled share-based payment expenses		2.2	1.4	0.7
Cash generated from operations before changes in working capital and provisions		80.3	70.0	111.4

(Increase)/decrease in trade and other receivables		(18.9)	14.8	36.1
(Increase)/decrease in inventories		(9.2)	(1.2)	18.4
Increase/(decrease) in trade and other payables		20.7	(18.0)	(19.7)
Increase/(decrease) in provisions		(1.8)	1.3	17.8
Payments to defined benefit pension plans (net of IAS 19 pension charges)	13	(8.0)	(8.0)	(17.9)
Cash generated from operations		63.1	58.9	146.1

Interest paid - borrowings and overdrafts		(2.9)	(3.6)	(7.5)
Interest paid - lease liabilities		(1.1)	(1.4)	(2.8)
Income tax paid		(9.9)	(7.0)	(26.0)
Net cash from operating activities		49.2	46.9	109.8

Investing activities
Purchase of property, plant and equipment and software		(10.9)	(16.0)	(30.0)
Purchase of investments		(0.5)	(0.4)	(1.0)
Acquisition of business assets	2	(1.9)	-	-
Proceeds from sale of property, plant and equipment		2.3	0.2	1.4
Interest received		0.4	0.4	0.9
Disposal of investments	2	12.2	-	-
Disposal of subsidiaries, net of cash disposed	2	0.5	-	5.3
Net cash from investing activities		2.1	(15.8)	(23.4)

Financing activities
Purchase of own shares for share incentive schemes		(1.4)	-	(1.8)
Proceeds from exercise of share options		0.2	0.1	0.4
Increase in borrowings		-	45.8	7.9
Reduction and repayment of borrowings		(72.4)	(3.3)	(49.8)
Payment of lease liabilities		(4.5)	(5.2)	(9.9)
Dividends paid to shareholders of the Company		(10.0)	-	(5.7)
Dividends paid to non-controlling interests		(1.6)	(4.1)	(7.9)
Purchase of shares from non-controlling interest		-	(2.8)	(2.8)
Net cash from financing activities		(89.7)	30.5	(69.6)

Net increase/(decrease) in cash and cash equivalents		(38.4)	61.6	16.8
Cash and cash equivalents at start of period		147.8	132.8	132.8
Effect of exchange rate fluctuations on cash held		(1.8)	2.6	(1.8)
Cash and cash equivalents at period end	11	107.6	197.0	147.8

1. As disclosed in note 1, the Group's cash and cash equivalents have been restated to meet the presentational requirements for offsetting in accordance with IAS 32. Comparative information for the six months ended 30 June 2020 has increased from £122.7 million to £197.0 million.

Notes to the condensed consolidated financial statements

Note 1. Basis of preparation, accounting policies and judgment and estimates

Morgan Advanced Materials plc (the 'Company') is a company incorporated in the UK under the Companies Act 2006.

The unaudited condensed consolidated financial statements of the Company for the six months ended 30 June 2021 comprise the Company, its subsidiaries and the Group's interest in associates (together 'the Group').

The condensed consolidated financial statements for the six months ended 30 June 2021 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and International Financial Reporting Standards ('IFRSs') as adopted by the UK. There has been no change to the recognition, measurement or disclosure from preparation in previous periods under IFRSs as adopted by the European Union. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements for the year ended 31 December 2020.

The condensed consolidated financial statements and the comparative information for the six months ended 30 June 2021 have neither been audited nor reviewed, do not comprise statutory accounts for the purpose of section 434 of Companies Act 2006 and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2020. Those accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The condensed consolidated financial statements have been prepared on a going concern basis, see page 26 for further details.

The consolidated financial statements of the Group for the year ended 31 December 2020 are available on request from the Company's registered office at York House, Sheet Street, Windsor, SL4 1DD or at morganadvancedmaterials.com.

The condensed consolidated financial statements for the six months ended 30 June 2021 were approved by the Board on 29 July 2021.

Accounting policies

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, these condensed consolidated financial statements have been prepared by applying the accounting policies that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2020, except for newly effective standards listed below.

Use of judgements and estimates

Preparing the condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The Group's critical accounting judgments and key sources of estimation uncertainty remain unchanged from those set out in the Group's consolidated financial statements for the year ended 31 December 2020.

Adoption of new and revised accounting standards

During the period the following amendments to standards became effective. The amendments did not have a material impact on the Group:

· Amendments to IFRS 9, IAS 39 and IFRS 7 - interest rate benchmark reform - phase 2.

Accounting developments and changes

New standards and interpretations that are in issue but not yet effective are listed below, none of which are anticipated to have a material impact on the Group's financial statements:

· Amendments to IAS 1- classification of liabilities as current or non-current and disclosure of accounting policies;

· Amendments to IAS 8 - definition of accounting estimates;

· Amendments to IAS 16 - property, plant and equipment, proceeds before intended use;

· Amendments to IAS 12 and IFRS 1- deferred tax related to assets and liabilities arising from a single transaction; and

· 2018-2020 annual improvements cycle.

Prior period restatement

Cash pooling arrangements

In accordance with the restatement presented in the Group's published consolidated financial statements for the year ended 31 December 2020, amounts have been restated for period ending 30 June 2020 for notional cash pooling arrangements. The impact of this change for the period ended 30 June 2020 is to increase both cash and cash equivalents and overdrafts within current loans and other borrowings by £74.3 million.

This has had no impact on net assets as seen on the face of the consolidated balance sheet.

Preference shares

In accordance with the restatement presented in the Group's published consolidated financial statements for the year ended 31 December 2020, the Group's cumulative preference shares previously classified as equity have been reclassified to borrowings. The impact of this change for the period ended 30 June 2020 is an increase in non-current borrowings and a decrease in share capital of £0.4 million, this change decreased net assets by the same amount.

There was no impact to the consolidated income statement as the dividends, previously classified as distributions from equity that have been reclassified to finance charges within the consolidated income statement totalled less than £0.1 million.

Non-GAAP measures

Where non-GAAP measures have been referenced, these have been identified by an asterisk (*) where they appear in text and by a footnote where they appear in a table. Definitions of these non-GAAP measures, and their reconciliation to the relevant GAAP measure, are provided on pages 15 to 19.

Going concern

Note 2. Acquisitions and disposals

2021

Disposal of Latrobe

On 15 January 2021, the Group completed the sale of assets associated with the Technical Ceramics business, based in Latrobe, US. The transaction was structured as a sale of the business and related assets for total consideration of £0.6 million. The loss on disposal of £0.1 million was recognised in specific adjusting items within the consolidated income statement, see also note 4.

The disposal of Latrobe reduced the Group's assets and liabilities as follows:

		30 June 2021
		£m
Trading net assets of disposal group		0.6
Goodwill of disposal group		0.1
Cumulative foreign exchange gains and losses recycled on disposal		(0.1)
Total net assets		0.6

Total consideration		0.6
Transaction costs associated with the disposal		(0.1)
Loss on disposal		(0.1)

In the year ended 31 December 2020, Latrobe generated an operating profit of £0.2 million on revenues of £3.4 million. The disposal group was included in the Technical Ceramics operating segment.

Disposal of Jemmtec

On 28 April 2021, the Group completed the sale of its investment in associate, Jemmtec Limited ('Jemmtec'). The Group's share of the total consideration is up to £14.0 million, comprising £12.2 million of initial consideration, on a cash-free, debt-free basis subject to customary working capital adjustments, and up to £1.75 million of consideration contingent on the future performance of Jemmtec which, if earned, would be payable in 2022 or 2023. The contingent consideration recognised at 30 June 2021 was £nil. The profit on disposal of £5.2 million was recognised in specific adjusting items within the consolidated income statement, see also note 4.

The disposal of Jemmtec reduced the Group's assets and liabilities as follows:

		30 June 2021
		£m
Investment carrying value		7.0

Total consideration		12.2
Profit on disposal		5.2

In the year ended 31 December 2020, the Group's share of profit in associate (net of income tax) was £0.6 million.

Acquisition of Delamag

On 1 March 2021, Morgan Technical Ceramics Limited purchased the business and assets of the 'Delamag' business of sourcing raw materials for the processing and manufacture of magnesium oxide from Delamin Limited. The acquisition comprised primarily all rights to the 'Delamag' business name, technical knowledge, intellectual property and business contracts.

The acquisition of Delamag increased the Group's assets and liabilities as follows:

		30 June 2021
		£m
Identifiable intangible assets acquired		1.9
Goodwill		-
Total consideration		1.9

The intangible assets recognised represent the initial measurement of assets acquired based on information available at acquisition. Assets acquired may be remeasured as further information is obtained during the measurement period, which is up to 12 months from the date of acquisition.

The acquisition was a vertical integration and preserves existing income, as such the incremental profit from acquisition is immaterial in the six months to 30 June 2021. The Delamag acquisition forms part of the Seals and Bearings operating segment.

Note 3. Segment reporting

The Group reports as two divisions and five global business units, which have been identified as the Group's reportable operating segments. These have been identified on the basis of internal management reporting information that is regularly reviewed by the Group's Board of Directors (the Chief Operating Decision Maker) in order to allocate resources and assess performance.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments and related income, borrowings and related expenses, corporate assets and head office expenses, and income tax assets and liabilities.

The information presented below represents the operating segments of the Group.

	Six months ended 30 June 2021
	Thermal Ceramics	Molten Metal Systems	Thermal Products division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics division	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	174.7	22.8	197.5	82.3	64.3	117.1	263.7	461.2	-	461.2

Segment adjusted operating profit¹	21.2	2.5	23.7	15.6	10.7	12.1	38.4	62.1	-	62.1
Corporate costs									(3.0)	(3.0)
Group adjusted operating profit¹										59.1
Amortisation of intangible assets	(0.9)	(0.4)	(1.3)	(0.4)	(0.2)	(0.7)	(1.3)	(2.6)	-	(2.6)
Operating profit before specific adjusting items	20.3	2.1	22.4	15.2	10.5	11.4	37.1	59.5	(3.0)	56.5
Specific adjusting items included in operating profit²	(1.4)	0.3	(1.1)	(0.4)	-	-	(0.4)	(1.5)	5.2	3.7
Operating profit	18.9	2.4	21.3	14.8	10.5	11.4	36.7	58.0	2.2	60.2
Finance income										0.4
Finance expense										(4.8)
Share of profit of associate (net of income tax)										0.4
Profit before taxation										56.2

Segment assets	309.2	39.1	348.3	143.5	102.9	161.6	408.0	756.3	126.8	883.1

Segment liabilities	85.2	7.6	92.8	31.0	19.6	80.5	131.1	223.9	355.6	579.5

Segment capital expenditure	2.4	0.9	3.3	1.4	2.9	3.3	7.6	10.9	-	10.9

Segment depreciation - property, plant and equipment	5.2	1.0	6.2	2.6	2.9	2.9	8.4	14.6	-	14.6

Segment depreciation - right-of-use assets	1.7	0.2	1.9	0.5	0.3	1.1	1.9	3.8	-	3.8

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

2. Details of specific adjusting items are given in note 4 to the condensed consolidated financial statements.

	Six months ended 30 June 2020
	Thermal Ceramics	Molten Metal Systems	Thermal Products division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics division	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	175.3	20.4	195.7	77.7	77.6	126.8	282.1	477.8	-	477.8

Segment adjusted operating profit¹	13.5	1.7	15.2	12.5	15.5	12.2	40.2	55.4		55.4
Corporate costs									(2.5)	(2.5)
Group adjusted operating profit¹										52.9
Amortisation of intangible assets	(0.9)	(0.1)	(1.0)	(0.3)	(0.1)	(2.3)	(2.7)	(3.7)	-	(3.7)
Operating profit before specific adjusting items	12.6	1.6	14.2	12.2	15.4	9.9	37.5	51.7	(2.5)	49.2
Specific adjusting items included in operating profit²	(35.0)	(0.2)	(35.2)	(1.2)	(0.2)	(32.2)	(33.6)	(68.8)	(0.1)	(68.9)
Operating profit/(loss)	(22.4)	1.4	(21.0)	11.0	15.2	(22.3)	3.9	(17.1)	(2.6)	(19.7)
Finance income										0.5
Finance expense										(6.4)
Share of profit of associate (net of income tax)										0.1
Loss before taxation										(25.5)

Segment assets restated³	341.6	42.3	383.9	157.1	111.9	200.3	469.3	853.2	217.7	1,070.9

Segment liabilities restated^3,4	83.8	7.2	91.0	31.8	20.5	76.0	128.3	219.3	572.5	791.8

Segment capital expenditure	4.0	2.0	6.0	1.8	4.1	4.1	10.0	16.0	-	16.0

Segment depreciation - property, plant and equipment	6.8	1.1	7.9	2.8	2.9	3.7	9.4	17.3	-	17.3

Segment depreciation - right-of-use assets	2.2	0.2	2.4	0.6	0.4	1.7	2.7	5.1	-	5.1

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

2. Details of specific adjusting items are given in note 4 to the condensed consolidated financial statements.

3. Cash and cash equivalents and borrowings have been restated to meet the presentational requirements of IAS 32 as further described in note 1. This had no impact on net assets.

4. Segment liabilities have been restated to include the Group's cumulative preference shares within borrowings, see note 1 for further details.

	Year ended 31 December 2020
	Thermal Ceramics	Molten Metal Systems	Thermal Products division	Electrical Carbon	Seals and Bearings	Technical Ceramics	Carbon and Technical Ceramics division	Segment totals	Corporate costs	Group
Continuing operations	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Revenue from external customers	344.3	41.2	385.5	151.4	146.4	227.4	525.2	910.7	-	910.7

Segment adjusted operating profit¹	26.7	3.2	29.9	23.6	27.5	14.8	65.9	95.8		95.8
Corporate costs									(4.1)	(4.1)
Group adjusted operating profit¹										91.7
Amortisation of intangible assets	(1.9)	(0.3)	(2.2)	(0.7)	(0.4)	(2.8)	(3.9)	(6.1)	-	(6.1)
Operating profit before specific adjusting items	24.8	2.9	27.7	22.9	27.1	12.0	62.0	89.7	(4.1)	85.6
Specific adjusting items included in operating profit²	(39.4)	(0.9)	(40.3)	(3.7)	(0.6)	(42.3)	(46.6)	(86.9)	(0.5)	(87.4)
Operating profit/(loss)	(14.6)	2.0	(12.6)	19.2	26.5	(30.3)	15.4	2.8	(4.6)	(1.8)
Finance income										0.9
Finance expense										(12.8)
Share of profit of associate (net of income tax)										0.6
Loss before taxation										(13.1)

Segment assets	315.7	39.5	355.2	141.5	98.7	158.3	398.5	753.7	176.8	930.5

Segment liabilities	84.8	7.4	92.2	31.1	19.9	72.6	123.6	215.8	474.7	690.5

Segment capital expenditure	7.2	2.9	10.1	4.8	7.7	7.4	19.9	30.0	-	30.0

Segment depreciation - property, plant and equipment	12.5	2.3	14.8	5.4	5.7	6.8	17.9	32.7	-	32.7

Segment depreciation - right-of-use assets	4.1	0.4	4.5	1.2	0.7	2.8	4.7	9.2	-	9.2

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

2. Details of specific adjusting items are given in note 4 to the condensed consolidated financial statements.

Revenue from external customers by geography

Continuing operations	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 £m	Year ended 31 December 2020 £m
US	161.8	199.9	359.8
China	55.6	46.7	97.1
Germany	33.6	27.8	59.3
UK (the Group's country of domicile)	20.3	20.3	37.5
Other Asia, Australasia, Middle East and Africa	85.3	83.1	164.6
Other Europe	78.1	74.9	142.3
Other North America	16.2	15.9	32.9
South America	10.3	9.2	17.2
	461.2	477.8	910.7

Revenue from external customers is based on geographic location of the end-customer. No customer represents more than 10% of revenue.

Revenue from external customers by end-market

Continuing operations	Six months ended 30 June 2021 £m	Six months ended 30 June 2020¹ £m	Year ended 31 December 2020 £m
Industrial	208.1	197.7	390.9
Transportation	83.4	87.1	157.0
Chemical and petrochemical	46.8	55.4	103.7
Healthcare	34.9	30.4	60.7
Energy	30.7	26.0	50.5
Security and defence	28.8	50.3	90.1
Semiconductor and electronics	28.5	30.9	57.8
	461.2	477.8	910.7

1. Revenue form external customers by end market has been re-presented for the six months ended 30 June 2020 to better reflect the end-markets of our customers.

Intercompany sales to other segments

Continuing operations	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 £m	Year ended 31 December 2020 £m
Thermal Ceramics	0.2	0.5	0.9
Molten Metal Systems	0.1	0.1	0.1
Thermal Products division	0.3	0.6	1.0
Electrical Carbon	-	0.3	0.3
Seals and Bearings	0.4	0.6	0.8
Technical Ceramics	0.2	0.1	1.0
Carbon and Technical Ceramics division	0.6	1.0	2.1

Note 4. Specific adjusting items

Continuing operations	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 £m	Year ended 31 December 2020 £m
Specific adjusting items:
Restructuring costs	(0.6)	(5.5)	(24.0)
Impairment of assets	(0.8)	(63.4)	(65.6)
Net profit on disposal of businesses	5.1	-	2.2
Total specific adjusting items before income tax	3.7	(68.9)	(87.4)
Income tax credit from specific adjusting items	0.3	10.2	13.3
Total specific adjusting items after income tax	4.0	(58.7)	(74.1)

Specific adjusting items in relation to discontinued operations are disclosed in note 7.

2021

Restructuring costs

Restructuring costs incurred in the six months to 30 June 2021 primarily comprise staff redundancy costs related to the Group's restructuring programme announced on 5 June 2020 which, while anticipated by these plans, had not previously met the recognition criteria set out by IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Impairment of assets

Impairment of assets primarily relate to assets associated with closed manufacturing lines within Thermal Ceramics.

Net profit on disposal of businesses

In the period the Group disposed of its 35% shareholding in Jemmtec Limited and the business assets associated with the Latrobe business, these disposals generated a profit of £5.2 million and a loss of £0.1 million respectively. Refer to note 2 for further information on disposals.

2020

Restructuring costs

In 2020, following the announcement of the Group's restructuring programme the Group recognised £24.0 million relating to staff redundancies, site closure costs, legal and professional fees and the exit of certain multi-employer defined contribution pension plans.

Impairment of assets

Technical Ceramics, ceramic cores

A significant downturn in aerospace demand resulted in an impairment loss of £28.8 million in the ceramic cores businesses. The assets relating to these businesses were impaired to align their recoverable value to their value in use. The impairment was allocated to customer relationship intangible assets recognised upon the acquisition of the Carpenter business in 2008, right-of-use assets and property, plant and equipment.

A change in assumptions for the ceramic cores impairment assessment could lead to a material reversal of impairment. An accelerated recovery of demand, with return to 2019 demand levels in the forecast period to 2025, would lead to a full reversal of the above impairment. There is no scenario that would lead to a further, material impairment of the existing assets.

Technical Ceramics, China

On 15 June 2020 the Group announced the closure of its Suzhou manufacturing facility in China and recognised £1.1 million relating to the impairment of plant and equipment, aligning their recoverable value to their fair value less costs of disposal.

Thermal Ceramics

The reduced demand in the aerospace, automotive and industrial market segments resulted in impairment losses of £35.7 million in Thermal Ceramics.

Impairments relating to the closure of sites and under-utilised product lines totalled £21.7 million relating to property, plant and equipment, land use rights, right-of-use assets, other debtors and inventory, aligning their recoverable value to their fair value less costs of disposal.

Two further businesses, which remain in operation, have recognised combined impairment losses of £14.0 million after reassessment of their value in use. The impairment was allocated to customer relationship and technology and trademark intangible assets recognised upon the acquisition of Porextherm in Germany in 2014 as well as right-of-use assets and property, plant and equipment across both businesses.

A change in assumptions for the Porextherm impairment assessment could lead to a material reversal of impairment. An accelerated recovery of demand in the forecast period to levels which existed before the decline, which started in 2018, would lead to a full reversal of the above impairment. There is no scenario that would lead to a further, material impairment of the existing assets.

Note 5. Finance income and expense

Continuing operations	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 £m	Year ended 31 December 2020 £m
Interest on bank balances and cash deposits	0.4	0.5	0.9
Finance income	0.4	0.5	0.9

Interest expense on borrowings and overdrafts	(2.9)	(3.8)	(7.4)
Interest expense on lease liabilities	(1.1)	(1.4)	(2.8)
Net interest on IAS 19 defined benefit pension obligations	(0.8)	(1.2)	(2.6)
Finance expense	(4.8)	(6.4)	(12.8)
Net financing costs recognised in profit or loss	(4.4)	(5.9)	(11.9)

No finance income or expense related to discontinued operations in either the current or preceding periods.

Note 6. Taxation

Continuing operations	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 £m	Year ended 31 December 2020 £m
Income tax charge on profit before specific adjusting items	(14.4)	(11.7)	(20.2)
Income tax credit from specific adjusting items	0.3	10.2	13.3
Total income tax expense recognised in profit or loss	(14.1)	(1.5)	(6.9)

The Group's consolidated effective tax rate for the six months ended 30 June 2021 is based on the Directors' best estimate of the effective tax rate for the year.

The Group operates in many jurisdictions around the world and is subject to factors that may impact future tax charges including the implementation of the OECD's BEPS actions, tax rate and legislation changes, expiry of the statute of limitations and resolution of tax audits and disputes.

Note 7. Discontinued operations

The results from discontinued operations, which represent the Composites and Defence Systems business disposed in 2018, are set out below:

	Six months ended 30 June 2021			Six months ended 30 June 2020			Year ended 31 December 2020
	Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹	Total	Results before specific adjusting items	Specific adjusting items¹	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	-	-	-	-	-	-	-	-	-
Operating income	-	-	-	-	0.8	0.8	-	2.0	2.0
Profit before taxation	-	-	-	-	0.8	0.8	-	2.0	2.0
Income tax expense	-	-	-	-	-	-	-	-	-
Profit from discontinued operations	-	-	-	-	0.8	0.8	-	2.0	2.0

Basic profit per share from discontinued operations			-			0.3p			0.7p
Diluted profit per share from discontinued operations			-			0.3p			0.7p

Specific adjusting items in 2020 relate to the reassessment of provisions associated with the disposal.

There was no income tax expense in relation to the discontinued operations in either the current or preceding periods.

Cash flows from discontinued operations are set out below:

	Six months ended 30 June 2021	Six months ended 30 June 2020	Year ended 31 December 2020
	£m	£m	£m
Net cash inflow from operating activities	-	(0.1)	(0.1)
Net cash inflow from investing activities	-	-	-
Net cash flow used in financing activities	-	-	-
	-	(0.1)	(0.1)

Note 8. Earnings per share

	Six months ended 30 June 2021			Six months ended 30 June 2020			Year ended 31 December 2020
	Earnings	Basic earnings per share	Diluted earnings per share	Earnings/ (loss)	Basic earnings/ (loss) per share	Diluted earnings/ (loss) per share	Earnings/ (loss)	Basic earnings/ (loss) per share	Diluted earnings/ (loss) per share
	£m	pence	pence	£m	pence	pence	£m	pence	pence
Profit/(loss) for the period attributable to shareholders of the Company	37.6	13.2p	13.1p	(27.4)	(9.6)p	(9.6)p	(22.5)	(7.9)p	(7.9)p
(Profit)/loss from discontinued operations	-	-	-	(0.8)	(0.3)p	(0.3)p	(2.0)	(0.7)p	(0.7)p
Profit/(loss) from continuing operations	37.6	13.2p	13.1p	(28.2)	(9.9)p	(9.9)p	(24.5)	(8.6)p	(8.6)p
Specific adjusting items	(3.7)	(1.3)p	(1.3)p	68.9	24.2p	24.1p	87.4	30.7p	30.5p
Amortisation of intangible assets	2.6	0.9p	0.9p	3.7	1.3p	1.3p	6.1	2.1p	2.1p
Tax effect of the above	(0.3)	(0.1)p	(0.1)p	(10.2)	(3.6)p	(3.6)p	(13.3)	(4.7)p	(4.6)p
Non-controlling interests' share of the above adjustments	-	-	-	(1.4)	(0.5)p	(0.5)p	(1.5)	(0.5)p	(0.5)p
Adjusted profit for the period from continuing operations as used in adjusted earnings per share¹	36.2	12.7p	12.6p	32.8	11.5p	11.5p	54.2	19.0p	18.9p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

	Six months ended 30 June 2021 millions	Six months ended 30 June 2020 millions	Year ended 31 December 2020 millions
Number of shares
Weighted average number of Ordinary shares for the purposes of basic earnings per share¹	284.8	284.6	284.7
Effect of dilutive potential Ordinary shares:
Share options	2.2	1.2	1.4
Weighted average number of Ordinary shares for the purposes of diluted earnings per share	287.0	285.8	286.1

1. The calculation of the weighted average number of shares excludes the shares held by The Morgan General Employee Benefit Trust, on which dividends are waived.

Note 9. Property, plant and equipment

	Land and buildings £m	Plant, equipment and fixtures £m	Total £m
Cost
At 1 January 2021	215.2	678.2	893.4
Additions	0.3	7.5	7.8
Disposals	(7.5)	(12.0)	(19.5)
Sale of business	(0.8)	(3.5)	(4.3)
Transfer between categories	0.2	(0.2)	-
Effect of movement in foreign exchange	(3.7)	(12.3)	(16.0)
At 30 June 2021	203.7	657.7	861.4

Depreciation and impairment losses
At 1 January 2021	109.7	516.1	625.8
Depreciation charge for the period	2.4	12.2	14.6
Impairment losses	-	0.8	0.8
Disposals	(4.7)	(11.4)	(16.1)
Sale of business	(0.6)	(3.5)	(4.1)
Effect of movement in foreign exchange	(1.6)	(9.0)	(10.6)
At 30 June 2021	105.2	505.2	610.4

Carrying amounts
At 1 January 2021	105.5	162.1	267.6
At 30 June 2021	98.5	152.5	251.0

Note 10. Intangible assets

	Acquisition intangibles
	Goodwill £m	Customer relationships £m	Other £m	Capitalised development costs £m	Computer software £m	Total £m
Cost
At 1 January 2021	173.2	56.2	3.6	0.7	34.5	268.2
Additions	-	-	-	-	0.8	0.8
Business acquisitions (note 2)	-	0.8	1.1	-	-	1.9
Disposals	-	-	-	-	(0.2)	(0.2)
Sale of business	(0.1)	-	-	-	-	(0.1)
Effect of movement in foreign exchange	(1.6)	(0.8)	(0.2)	-	(0.4)	(3.0)
At 30 June 2021	171.5	56.2	4.5	0.7	34.7	267.6

Amortisation and impairment losses
At 1 January 2021	-	54.8	3.6	0.7	23.7	82.8
Amortisation charge for the period	-	0.6	-	-	2.0	2.6
Disposals	-	-	-	-	(0.2)	(0.2)
Effects of movement in foreign exchange	-	(0.8)	(0.2)	-	(0.2)	(1.2)
At 30 June 2021	-	54.6	3.4	0.7	25.3	84.0

Carrying amounts
At 1 January 2021	173.2	1.4	-	-	10.8	185.4
At 30 June 2021	171.5	1.6	1.1	-	9.4	183.6

Note 11. Cash and cash equivalents reconciled to net debt*

	At 30 June 2021 £m	At 30 June 2020 restated¹ £m	At 31 December 2020 £m

Bank balances	101.0	146.2	139.7
Cash deposits	6.6	50.8	8.1
Cash and cash equivalents	107.6	197.0	147.8

1. As disclosed in note 1, the Group's cash and cash equivalents have been restated to meet the presentational requirements for offsetting in accordance with IAS 32. Comparative information for the six months ended 30 June 2020 increased from £122.7.0 million to £197.0 million. This has had no impact on the Group's net assets.

Reconciliation of cash and cash equivalents to net debt*

	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 restated¹ £m	Year ended 31 December 2020 £m
Opening borrowings and lease liabilities	(303.4)	(354.4)	(354.4)
Increase in borrowings	-	(45.8)	(7.9)
Reduction and repayment of borrowings	72.4	3.3	49.8
Payment of lease liabilities	4.5	5.2	9.9
Total changes from cash flows	76.9	(37.3)	51.8
New leases and lease remeasurement	(2.3)	(0.8)	(0.9)
Effect of movements in foreign exchange on borrowings	4.6	(16.8)	0.1
Closing borrowings and lease liabilities	(224.2)	(409.3)	(303.4)
Cash and cash equivalents	107.6	197.0	147.8
Closing net debt²	(116.6)	(212.3)	(155.6)

1. Balances for the period ended 30 June 2020 have been restated to include the Group's cumulative preference shares within borrowings, this increased net debt* and decreased net assets by £0.4 million. Cash and cash equivalents and borrowings have been restated to meet the presentational requirements of IAS 32. This has had no impact on net assets or net debt*. Further details of both adjustments are described in note 1.

2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes.

	Borrowings £m	Lease liabilities £m	Total financing liabilities £m	Cash and cash equivalents £m	Movement in net debt¹ £m
At 1 January 2021	(248.8)	(54.6)	(303.4)	147.8	(155.6)
Cash inflow	-	-	-	(34.4)	(34.4)
Borrowings and lease liability cash flow	72.4	4.5	76.9	-	76.9
Net interest paid	-	-	-	(4.0)	(4.0)
Net cash inflow/(outflow)	72.4	4.5	76.9	(38.4)	38.5
New leases and lease remeasurement	-	(2.3)	(2.3)	-	(2.3)
Exchange and other movements	3.6	1.0	4.6	(1.8)	2.8
At 30 June 2021	(172.8)	(51.4)	(224.2)	107.6	(116.6)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 44, reconciliations of the statutory results to the adjusted measures can be found on pages 15 to 19.

Note 12. Financial risk management

Fair values

	At 30 June 2021				At 30 June 2020				At 31 December 2020
	Carrying amount £m	Fair value			Carrying amount £m	Fair value			Carrying amount £m	Fair value
	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m	Carrying amount £m	Level 1 £m	Level 2 £m	Total £m
Financial assets and liabilities held at amortised cost
1.18% Euro Senior Notes 2023	(21.5)	-	(21.6)	(21.6)	(22.7)	-	(22.9)	(22.9)	(22.4)	-	(22.6)	(22.6)
3.17% US Dollar Senior Notes 2023	(10.9)	-	(11.2)	(11.2)	(12.2)	-	(12.7)	(12.7)	(11.0)	-	(11.4)	(11.4)
1.55% Euro Senior Notes 2026	(21.5)	-	(22.0)	(22.0)	(22.7)	-	(23.5)	(23.5)	(22.4)	-	(23.2)	(23.2)
3.37% US Dollar Senior Notes 2026	(70.5)	-	(72.7)	(72.7)	(78.5)	-	(83.7)	(83.7)	(71.4)	-	(75.1)	(75.1)
4.87% US Dollar Senior Notes 2026	(18.4)	-	(19.9)	(19.9)	(20.6)	-	(23.0)	(23.0)	(18.6)	-	(20.7)	(20.7)
1.74% Euro Senior Notes 2028	(8.6)	-	(8.8)	(8.8)	(9.1)	-	(9.5)	(9.5)	(9.0)	-	(9.4)	(9.4)
2.89% Euro Senior Notes 2030	(21.4)	-	(22.8)	(22.8)	(22.6)	-	(24.5)	(24.5)	(22.3)	-	(24.3)	(24.3)
5.5% Cumulative First Preference shares	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)	(0.1)	-	(0.1)	(0.1)
5.0% Cumulative Second Preference shares	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)	(0.3)	-	(0.3)	(0.3)
	(173.2)	-	(179.4)	(179.4)	(188.8)	-	(200.2)	(200.2)	(177.5)	-	(187.1)	(187.1)

Financial instruments held at FVOCI¹
Equity securities	0.8	0.8	-	0.8	0.8	0.8	-	0.8	0.7	0.7	-	0.7

Derivatives held at fair value
Derivative financial assets	0.7	-	0.7	0.7	0.6	-	0.6	0.6	1.0	-	1.0	1.0
Derivative financial liabilities	(0.4)	-	(0.4)	(0.4)	(1.4)	-	(1.4)	(1.4)	(0.8)	-	(0.8)	(0.8)
	0.3	-	0.3	0.3	(0.8)	-	(0.8)	(0.8)	(0.2)	-	(0.2)	(0.2)
	(172.1)	0.8	(179.1)	(178.3)	(188.8)	0.8	(201.0)	(200.2)	(177.0)	0.7	(187.3)	(186.6)

1. Fair value through other comprehensive income.

The table above analyses financial instruments carried at fair value, by valuation method, together with the carrying amounts shown in the balance sheet. The fair value of cash and cash equivalents, current trade and other receivables/ payables and floating-rate bank and other borrowings are excluded from the preceding table as their carrying amount approximates to their fair value.

Fair value hierarchy

The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: not traded in an active market but the fair values are based on quoted market prices or alternative pricing sources with reasonable levels of price transparency. Fair value is calculated using discounted cash flow methodology, future cash flows are estimated based on forward exchange rates.

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between Level 1 and Level 2 during 2021 or 2020 and there were no Level 3 financial instruments in either 2021 or 2020.

The major methods and assumption used in estimating the fair values of financial instruments reflected in the preceding table are as follows:

Fixed-rate borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows. The interest rates used to determine the fair value of borrowings are 1.0-3.0% (30 June 2020: 0.9-2.5%; 31 December 2020: 0.9-2.4%).

Equity securities

Fair value is based on quoted market prices at the balance sheet date.

Derivatives

Forward exchange contracts are marked to market either using listed market prices or by discounting the contractual forward price and deducting the current spot rate.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on financial instruments such as liquid assets, derivative assets and trade receivables.

The current economic climate gives rise to an increased credit risk, primarily with respect to trade receivables.

The Group establishes an allowance for impairment that represents its estimate of expected credit losses in respect of trade receivables.

The loss allowance for trade receivables by aging category is as follows:

	30 June 2021				30 June 2020				31 December 2020
	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables	Expected credit loss rate	Gross trade receivables	Expected credit losses	Net trade receivables
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Not past due	0.2%	123.0	(0.3)	122.7	0.2%	131.0	(0.3)	130.7	0.4%	109.1	(0.4)	108.7
Past due 0-30 days	1.4%	14.5	(0.2)	14.3	1.2%	16.9	(0.2)	16.7	1.8%	11.3	(0.2)	11.1
Past due 31-60 days	1.9%	5.4	(0.1)	5.3	2.3%	4.4	(0.1)	4.3	4.0%	2.5	(0.1)	2.4
Past due 61-90 days	6.9%	2.9	(0.2)	2.7	8.0%	2.5	(0.2)	2.3	12.0%	2.5	(0.3)	2.2
Past due more than 90 days	95.1%	8.2	(7.8)	0.4	92.6%	10.8	(10.0)	0.8	100.0%	6.8	(6.8)	-
		154.0	(8.6)	145.4		165.6	(10.8)	154.8		132.2	(7.8)	124.4

Full details of the Group's policies and processes for managing financial risk are described in note 22 of the Group's 2020 Annual Report and Accounts.

Offsetting financial assets and liabilities

The following table shows the amounts recognised for forward exchange contracts, which are subject to offsetting arrangements on a gross basis, and the amounts offset in the balance sheet.

The Group also has cash pooling agreements which cannot be offset under IFRS, but which could be settled net under the terms of master netting agreements, are also presented in the table to show the total net exposure of the Group.

	Gross amounts of recognised financial assets/ (liabilities)	Amounts set off	Net amounts presented on the balance sheet	Financial instruments not set off in the balance sheet	Net amount
	£m	£m	£m	£m	£m
At 30 June 2021
Derivative financial assets	64.4	(63.7)	0.7	-	0.7
Derivative financial liabilities	(64.1)	63.7	(0.4)	-	(0.4)
Cash and cash equivalents	107.6	-	107.6	(0.1)	107.5
Current bank and other borrowings	(0.1)	-	(0.1)	0.1	-

At 30 June 2020
Derivative financial assets	77.2	(76.6)	0.6	-	0.6
Derivative financial liabilities	(78.0)	76.6	(1.4)	-	(1.4)
Cash and cash equivalents	197.0	-	197.0	(74.3)	122.7
Current bank and other borrowings	(156.9)	-	(156.9)	74.3	(82.6)

At 31 December 2020
Derivative financial assets	85.4	(84.4)	1.0	-	1.0
Derivative financial liabilities	(85.3)	84.4	(0.8)	-	(0.8)
Cash and cash equivalents	147.8	-	147.8	(69.8)	78.0
Current bank and other borrowings	(71.3)	-	(71.3)	69.8	1.5

Note 13. Pensions and other post-retirement employee benefits

Defined benefit obligations

Six months ended 30 June 2021
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(6.3)	(39.8)	(2.6)	(48.7)
Present value of funded defined benefit obligations	(549.1)	(131.8)	(1.5)	(8.5)	(690.9)
Fair value of plan assets	472.2	132.0	0.5	6.7	611.4
	(76.9)	(6.1)	(40.8)	(4.4)	(128.2)

Movements in present value of defined benefit obligation
At 1 January 2021	(603.4)	(147.5)	(45.3)	(11.1)	(807.3)
Current service cost	-	-	(0.5)	(0.7)	(1.2)
Interest cost	(3.6)	(1.6)	(0.1)	(0.1)	(5.4)
Actuarial gain/(loss):
Experience gain/(loss) on plan obligations	(0.2)	-	-	0.3	0.1
Changes in financial assumptions - gain/(loss)	49.1	5.1	2.2	-	56.4
Changes in demographic assumptions - gain/(loss)	(1.2)	-	-	-	(1.2)
Benefits paid	10.2	4.2	0.7	0.1	15.2
Exchange adjustments	-	1.7	1.7	0.4	3.8
At 30 June 2021	(549.1)	(138.1)	(41.3)	(11.1)	(739.6)

Movements in fair value of plan assets
At 1 January 2021	483.1	140.2	0.5	7.2	631.0
Interest on plan assets	3.0	1.6	-	-	4.6
Remeasurement loss	(12.1)	(4.3)	-	(0.3)	(16.7)
Contributions by employer	8.4	0.3	0.7	0.2	9.6
Benefits paid	(10.2)	(4.2)	(0.7)	(0.1)	(15.2)
Exchange adjustments	-	(1.6)	-	(0.3)	(1.9)
At 30 June 2021	472.2	132.0	0.5	6.7	611.4
Actual return on assets	(9.1)	(2.7)	-	(0.3)	(12.1)

Fair value of plan assets by category
Equities	40.0	-	-	-	40.0
Growth assets	95.0	6.7	-	-	101.7
Bonds	65.1	122.5	-	-	187.6
Liability-driven investments (LDI)	93.4	-	-	-	93.4
Matching insurance policies	152.3	-	0.5	4.4	157.2
Other	26.4	2.8	-	2.3	31.5
	472.2	132.0	0.5	6.7	611.4

Principal actuarial assumptions at 30 June 2021 were:	%	%	%	%
Discount rate	1.87	2.65	0.8	2.4
Inflation (UK: RPI/CPI)	3.17/2.32	n/a	1.7	n/a

30 June 2020
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(8.2)	(39.4)	(2.3)	(49.9)
Present value of funded defined benefit obligations	(575.9)	(156.4)	(2.2)	(12.0)	(746.5)
Fair value of plan assets	469.0	153.3	0.4	8.5	631.2
	(106.9)	(11.3)	(41.2)	(5.8)	(165.2)

Principal actuarial assumptions at 30 June 2020 were:	%	%	%	%
Discount rate	1.47	2.58	0.90	2.20
Inflation (UK: RPI/CPI)	2.59/1.74	n/a	1.50	n/a

31 December 2020
	UK £m	US £m	Europe £m	Rest of World £m	Total £m
Summary of net obligations
Present value of unfunded defined benefit obligations	-	(6.9)	(43.1)	(2.6)	(52.6)
Present value of funded defined benefit obligations	(603.4)	(140.6)	(2.2)	(8.5)	(754.7)
Fair value of plan assets	483.1	140.2	0.5	7.2	631.0
	(120.3)	(7.3)	(44.8)	(3.9)	(176.3)

Principal actuarial assumptions at 31 December 2020 were:	%	%	%	%
Discount rate	1.23	2.34	0.40	2.40
Inflation (UK: RPI/CPI)	2.88/2.03	n/a	1.60	n/a

Note 14. Provisions and contingent liabilities

	Closure and restructuring provisions £m	Legal and other provisions £m	Environmental provisions £m	Total £m
At 1 January 2021	17.3	10.2	8.3	35.8
Provisions made during the year	1.0	0.4	1.5	2.9
Provisions used during the year	(2.8)	(0.1)	(0.7)	(3.6)
Provisions reversed during the year	(0.8)	(0.3)	-	(1.1)
Effect of movements in foreign exchange	(0.2)	(0.2)	(0.1)	(0.5)
At 30 June 2021	14.5	10.0	9.0	33.5

Current	10.1	6.4	5.3	21.8
Non-current	4.4	3.6	3.7	11.7
At 30 June 2021	14.5	10.0	9.0	33.5

Closure and restructuring provisions

Closure and restructuring provisions are based on the Group's restructuring programmes and represent committed expenditure at the balance sheet date. The amounts provided are based on the costs of terminating relevant contracts, under the contract terms, and management's best estimate of other associated restructuring costs including professional fees. Due to the nature of the provision for closure and restructuring provisions, the timing of any potential future outflows in respect of these liabilities is uncertain until the restructuring programme is completed.

Legal and other provisions

Legal and other provisions mainly comprise amounts provided against open legal and contractual disputes arising in the normal course of business and long-service costs. Provisions are made for the expected costs associated with such matters, based on past experience of similar items and other known factors, taking into account professional advice received, and represent management's best estimate of the most likely outcome. The timing of utilisation of these provisions is frequently uncertain, reflecting the complexity of issues and the outcome of various court proceedings and associated negotiations.

Where obligations are not capable of being reliably estimated, or if a material outflow of economic resources is considered remote, it is classified as a contingent liability. The Group is of the opinion that any associated claims that might be brought can be defeated successfully and, therefore, the possibility of any material outflow in settlement is assessed as remote.

Environmental provisions

Environmental provisions are made for quantifiable environmental liabilities arising from known environmental issues. The amounts provided are based on the best estimate of the costs required to remedy these issues. At one site, a remediation feasibility study is currently being conducted in relation to a known environmental issue, in conjunction with the local Environmental Regulator. Whilst this study has yet to be finalised, sufficient work has been completed to enable an estimate to be made for the costs of remediating the known environmental issues at this site. This cost has been provided for in the table above.

Environmental contingent liabilities

The Group is subject to local health, safety and environmental laws and regulations concerning its manufacturing operations around the world. These laws and regulations may require the Group to take future action to remediate the impact of historical manufacturing processes on the environment or lead to other economic outflows. Such contingencies may exist for various sites which the Group currently operates or has operated in the past. There is a contingent liability arising from additional, as yet unknown, environmental issues at the site referred to above, pending the completion of the feasibility study.

Tax contingent liabilities

The Group is subject to periodic tax audits by various fiscal authorities covering corporate, employee and sales taxes in the various jurisdictions in which it operates. We have provided for estimates of the Group's likely exposures where these can be reliably estimated.

Note 15. Related parties

Identification of related parties

The Company has related party relationships with its subsidiaries and its associates and with its Directors and executive officers.

Transactions with key management personnel

Details of transactions with key management personnel are described in note 27 of the Group's 2020 Annual Report and Accounts.

Transactions with associate:

	Six months ended 30 June 2021 £m	Six months ended 30 June 2020 £m	Year ended 31 December 2020 £m
Sales to associate	-	-	-
Purchases from associate	0.6	1.0	1.8
Trade receivables due from associate	-	-	-
Trade payables due to associate	-	0.3	0.3

On 28 April 2021, the Group sold its share in its associate undertaking Jemmtec Limited, see note 2.

Except as disclosed above:

· There were no related party transactions during the period that have materially affected the financial position or the performance of the Group during the period; and

· There have been no changes in the nature of related party transactions as described in note 27 to the Group's 2020 Annual Report and Accounts which could have a material effect on the financial position or performance of the Group during the period.

Note 16. Subsequent events

There were no reportable events subsequent to the balance sheet date.

Glossary

Constant-currency¹	Constant-currency revenue and Group adjusted operating profit are derived by translating the prior year results at current year average exchange rates.
Corporate costs	Corporate costs consist of the costs of the central head office.
Free cash flow before acquisitions, disposals and dividends¹	Cash generated from continuing operations less net capital expenditure, net interest paid, tax paid and lease payments.
Group earnings before interest, tax, depreciation and amortisation (EBITDA)¹	EBITDA is defined as operating profit before specific adjusting items, amortisation of intangible assets and depreciation.
Group adjusted operating profit¹	Operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets.
Adjusted earnings per share (EPS)¹	Adjusted earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax and non-controlling interests, divided by the weighted average number of Ordinary shares during the period.
Net debt¹	Borrowings, bank overdrafts and lease liabilities less cash and cash equivalents.
Net cash and cash equivalents¹	Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts.
Group organic¹	The Group results excluding acquisition, disposal and business exit impacts at constant-currency.
Return on invested capital (ROIC)¹	Group adjusted operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 12-month average adjusted net assets (excludes long-term employee benefits, deferred tax assets and liabilities, current tax payable, provisions, cash and cash equivalents, borrowings, bank overdrafts and lease liabilities).
Specific adjusting items	See note 4 to the condensed consolidated financial statements for further details.

1. See definitions and reconciliations of non-GAAP measures to GAAP measures on pages 15 to 19.

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