RNS Number : 3166F

Morgan Advanced Materials PLC

27 July 2016

HALF-YEAR RESULTS FOR THE PERIOD ENDED 30 JUNE 2016

Solid performance and implementation of strategy on track

Results summary

£ million unless otherwise stated	H1   2016	H1 2015	Reported Change %	Constant Currency Change %
Business performance Revenue	475.4	469.2	+1.3%	-2.4%
Group underlying operating profit*	55.1	61.1	-9.8%	-13.9%
Group underlying operating profit margin*	11.6%	13.0%
Underlying EPS* (pence)	10.5p	12.6p	-16.7%
Interim dividend (pence)	4.0p	4.0p
Cash flow from operations*	47.5	59.2
Statutory reporting
Operating profit	55.6	57.5	-3.3%
Profit before tax	46.2	49.2	-6.1%
Basic EPS (pence)	10.2p	11.4p	-10.5%

*     Definitions of the financial measures can be found in the glossary

Group highlights

·     Financial performance in line with management expectations - as anticipated, trading conditions stabilised in the first half of the year and have been similar to the second half of last year.

·   Implementation of the new strategy, announced in February, is on track, with the move to the new global organisation complete.

·   Group revenue at £475.4 million (H1 2015: £469.2 million) was up 1.3% on a reported basis, down 2.4% on a constant currency basis.

·   Group underlying operating profit margin for the first half of the year was 11.6% (H1 2015: 13.0%), reflecting volume deleverage on weaker underlying revenue. Sequential improvement in margin from the second half of last year.

·   Overall order intake in the first half was steady with a book-to-bill ratio of 1.01 times.

·   Underlying EPS was lower at 10.5 pence (H1 2015: 12.6 pence).

·   Net debt at the half-year was £241.6 million (Full-year 2015: £216.0 million). Net debt to EBITDA ratio* at the half-year was 1.7x (Full-year 2015: 1.6x), reflecting recent foreign exchange movements.

·   Interim dividend of 4.0 pence per share maintained (2015: Interim 4.0 pence per share).

Divisional highlights

·   In Thermal Products reported revenue was up 3.8% compared to the first half of 2015 at £214.5 million (H1 2015: £206.6 million). At constant currency, the increase was 0.4% compared to H1 2015. The Thermal Ceramics business saw growth in Asia and Europe, partially offset by declines in North America.  EBITA margins declined to 13.3% (H1 2015: 14.1%), driven by regional mix changes.

·   In Carbon and Technical Ceramics reported revenue was marginally down against the first half of 2015 at £245.0 million (H1 2015: £246.0 million).  On a constant currency basis, revenue was down 4.5% compared to the first half of 2015 with declines across all the businesses.  EBITA margins declined to 12.1% (H1 2015: 13.8%), as a result of the lower activity levels.

·   Trading in Composites and Defence Systems business was at a similar level to the first half of 2015.

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

"As anticipated, trading conditions in the first half of the year have been similar to the second half of last year in many of our markets.  Against this backdrop, we have delivered a solid set of results for the first half of the year, in line with the expectations set in November of last year. 

The implementation of our strategy is on track, with a new organisation structure in place, plans for our two new technology Centres of Excellence defined and operational improvements underway across the Group.

Looking to the balance of the year, we continue to remain cautious in terms of market outlook and are expecting underlying trading levels to be similar to that achieved in the first half and our guidance for underlying trading for the full year remains unchanged.  We have planned prudently for this year and will be focused on the execution of our strategy, improving our efficiency and investing in the business to drive future growth."

For further enquiries:

Pete Raby	Morgan Advanced Materials	01753 837000
Peter Turner
Mike Smith	Brunswick	0207 404 5959

There will be an analyst and investor presentation at 09.45 (UK time) today at The Lincoln Centre, 18 Lincoln's Inn Fields WC2A 3ED. A live video webcast and slide presentation of this event will be available on www.morganadvancedmaterials.com. We recommend you register at 09.15 (UK time).

Operating review

	Revenue			EBITA			EBITA Margin
	H1		H1	H1		H1	H1		H1
	2016		2015	2016		2015	2016		2015
	£m		£m	£m		£m	%		%
Thermal Ceramics	193.9		186.0	25.6		26.6	13.2%		14.3%
Molten Metal Systems	20.6		20.6	2.9		2.6	14.1%		12.6%
Thermal Products	214.5		206.6	28.5		29.2	13.3%		14.1%
Electrical Carbon	75.6		78.1	10.3		12.1	13.6%		15.5%
Seals and Bearings	47.6		47.7	6.6		6.9	13.9%		14.5%
Technical Ceramics	121.8		120.2	12.8		15.0	10.5%		12.5%
Carbon and Technical Ceramics	245.0		246.0	29.7		34.0	12.1%		13.8%
Composites and Defence Systems	15.9		16.6	1.1		0.4	6.9%		2.4%
	475.4		469.2	59.3		63.6	12.5%		13.6%
Corporate costs				(2.7)		(2.5)
Group EBITA*				56.6		61.1	11.9%		13.0%
Restructuring costs				(1.5)		-
Group underlying operating profit*				55.1		61.1	11.6%		13.0%

*     Definitions of the financial measures can be found in the glossary

Thermal Products

Revenue for the first half of the year was £214.5 million (H1 2015: £206.6 million) representing an increase of 3.8% at reported rates. At constant currency there was an increase of 0.4%.

EBITA for the first half of the year was £28.5 million (H1 2015: £29.2 million), with EBITA margin declining to 13.3% in the first half of 2016 compared with 14.1% in H1 2015.

Thermal Ceramics achieved 0.6% revenue growth at constant currency in the first half, with strong growth in Asia, driven in particular by Japan.  In Europe, growth was driven by applications in consumer products and medical, as well as projects in iron and steel and ceramics.  In North America activity levels were significantly lower in most industrial markets reflecting a continuation of the slowdown in activity that began in H2 2015. EBITA margins declined due to the regional mix changes described above.

Molten Metal Systems saw a 1.4% constant currency decline in the first half, with weaker activity in its non-ferrous metals end markets.  EBITA margins improved due to the benefits of productivity enhancements.

Carbon and Technical Ceramics

Revenue for the first half of the year was £245.0 million (H1 2015: £246.0 million) representing a decrease of 0.4% at reported rates. At constant currency there was a decrease of 4.5%.

EBITA for the first half of the year was £29.7 million (H1 2015: £34.0 million), with EBITA margin declining to 12.1% in the first half of 2016 compared with 13.8% in H1 2015.

Electrical Carbon saw a constant currency decline in revenue of 6.0% in the first half, with declines in North America and in Asia on weaker traction, mining and industrial demand, again reflecting a continuation of the slowdown experienced in H2 2015.  For Seals and Bearings the constant currency decline in revenue was 4.4% in the first half due to a weaker oil and gas market. Within Technical Ceramics, the 3.6% constant currency decline in revenue was primarily due to lower sales of electro ceramic components, with product sales for hard disc drive applications reducing as expected.  Across each of the businesses, EBITA margins declined as a result of the lower activity levels.

Composites and Defence Systems

Revenue for the first half of the year was £15.9 million (H1 2015: £16.6 million) representing a decrease of 4.2% at both reported and constant currency rates. 

EBITA for the first half of the year was £1.1 million (H1 2015: £0.4 million), with EBITA margin improving to 6.9% in the first half of 2016 compared with 2.4% in H1 2015.  The EBITA progression reflects the mix of contracts delivered in the first half, as well as the benefits from efficiency improvements

Financial review

Reference is made to 'Group underlying operating profit', 'Underlying EPS', 'Cash flow from operations', 'Net debt' and 'Free cash flow before acquisitions and dividends' below, all of which are defined in the glossary at the end of this statement.  These measures are shown because the Directors consider that they give the best indication of underlying performance.

Business performance review

Group revenue in the first half of 2016 was £475.4 million, an increase of 1.3% compared to the first half of 2015. On a constant currency, basis revenue decreased by 2.4%.

Group underlying operating profit for the first half of 2016 was £55.1 million (H1 2015: £61.1 million), a margin of 11.6%, compared to 13.0% for the first half of 2015.

Restructuring costs in H1 2016 were £1.5 million (H1 2015: nil).  These costs represent the conclusion of the significant rationalisation of the Carbon material footprint and corporate restructuring. 

Specific adjusting items were £3.8 million credit (H1 2015: nil). During the first half of 2016 the Group has completed the final termination and payment of all earned benefits for one of its North American defined benefit pension plans. As a result of this termination, the Group has recognised a net pension settlement credit of £3.8 million. No specific adjusting items were incurred in H1 2015. Details of specific adjusting items incurred during the year ended 31 December 2015 are given in note 4 to the condensed consolidated financial statements

The Group amortisation charge for the half-year was £3.3 million (H1 2015: £3.6 million).

The net finance charge was £9.8 million (H1 2015: £8.5 million), comprising the net bank interest and similar charges of £6.4 million (H1 2015: £6.1 million), income derived from financial instruments of £0.2 million (H1 2015: £1.0 million) and the finance charge under IAS 19 (revised), being the interest charge on pension scheme net liabilities, of £3.6 million (H1 2015: £3.4 million).

The Group taxation charge, excluding specific adjusting items, was £12.7 million (H1 2015: £14.5 million). The effective tax rate, excluding specific adjusting items for the half-year is 30.0% (H1 2015: 29.5%).

Underlying EPS is 10.5 pence (H1 2015: 12.6 pence), and basic earnings per share was 10.2 pence (H1 2015: 11.4 pence).

R&D spend increased to 2.9% of sales (H1 2015: 2.7%).  Plans for two new technology 'Centres of Excellence' have been defined.

The Return on Operating Capital Employed at 30 June 2016, defined as Group underlying profit for the last 12 months divided by the sum of working capital and the net book value of tangible assets, was 22.8%, compared with 29.7% at 30 June 2015.

Defined benefit pension plans

The Group pension deficit has increased by £66.9 million since last year end to £271.4 million on an IAS 19 basis due to lower discount rates and the weakening of GBP against the US dollar and the Euro:

·     The UK schemes deficit increased by £49.3 million to £166.7 million (31 December 2015: £117.4 million), mainly as result of the discount rate reducing to 2.8% (31 December 2015: 3.7%).

·     The US schemes deficit increased by £7.2 million to £62.3 million (December 2015: £55.1 million), as changes in assumptions and exchange rate adjustments more than offset investment gains, employer contributions and settlements. The discount rate on US schemes reduced to 3.8% (31 December 2015: 4.5%).

·     The European schemes deficit increased by £9.7 million to £38.0 million (December 2015: £28.3 million), with approximately half of deterioration due to changes in assumptions and half due to exchange rate adjustments. The discount rate on European schemes reduced to 1.3% (31 December 2015: 2.3%).

Cash Flow

						H1 2016	H1 2015
						£m	£m
Cashflow from operations*						47.5	59.2
Net capital expenditure						(17.7)	(31.8)
Net interest paid						(6.2)	(4.9)
Tax paid						(8.3)	(17.4)
Restructuring costs and other one-off items						(4.2)	(2.6)
Free cash flow before acquisitions and dividends*						11.1	2.5
Dividends paid to external plc shareholders						(20.0)	(20.0)
Cash flows from other investing and financing						(1.4)	2.5
Exchange movement						(15.3)	4.9
Movement in net debt* in period						(25.6)	(10.1)
Opening net debt*						(216.0)	(207.0)
Closing net debt*						(241.6)	(217.1)

*     Definitions of the financial measures can be found in the glossary

Cash flow from operations was £47.5 million (H1 2015: £59.2 million).

Free cash flow before acquisitions and dividends was £11.1 million (H1 2015: £2.5 million).

Net debt at the half-year end was £241.6 million (2015 year end: £216.0 million) representing a net debt to EBITDA ratio of 1.7x (2015 year end: 1.6x). The net debt to EBITDA ratio is defined in the glossary of terms.

Foreign exchange

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

	H1 2016		FY 2015		H1 2015
GBP to:	Closing rate	Average Rate	Closing rate	Average Rate	Closing rate	Average rate
US dollar	1.33	1.43	1.47	1.53	1.57	1.52
Euro	1.20	1.28	1.36	1.38	1.41	1.37

For illustrative purposes, the table below provides details of the impact on H1 2016 revenue and Group EBITA if the actual reported results, calculated using H1 2016 average exchange rates, were restated for GBP weakening by 10 cents against the US dollar in isolation and 10 cents against the Euro in isolation:

Increase in H1 revenue/Group EBITA if:	Revenue £m	Group EBITA £m
GBP weakens by 10c against the US dollar in isolation	+14.0	+1.9
GBP weakens by 10c against the Euro in isolation	+9.0	+1.5

Interim dividend

The Board has declared an interim dividend of 4.0 pence per ordinary share (H1 2015 4.0 pence per ordinary share). The dividend will be paid on 25 November 2016 to Ordinary shareholders on the register of members at the close of business on 4 November 2016.

Principal risks and uncertainties

The Group has in place processes for identifying, evaluating and managing the key risks which could have an impact upon the Group's performance.

The current risks, which the Board considers could have the most serious effect on achieving the Group's strategy, and the approach to managing them, are set out in the 2015 Annual Report, which is available at the Group's website at www.morganadvancedmaterials.com  The Group has reviewed these risks and concluded that they adequately represent the current principal risks and uncertainties of the Group and will continue to remain relevant for the second half of the financial year.

The principal risks comprise: technical leadership; people management and development; treasury risks; quality of contracts; IT risks and cyber risks; product quality, safety and liability; single point exposures; environment, health and safety risks; changes to or non-compliance with laws and regulation; a changing political, economic and social environment; taxation; and, pension funding.

Based on the Group's geographical spread and the cross-border transaction flows, the potential direct impact of the recent UK referendum on EU membership is not considered to be a major risk.  The greater uncertainty created relates to the potential risk of a weakening global economy and the volatility since the referendum seen in both foreign exchange and bond yields, which in particular impacts pension funding.  The Board will continue to monitor developments and implement plans to offset these impacts where practical. 

Going Concern

As reported on page 47 of the 2015 Annual Report, the Group meets its day-to-day working capital requirements through local banking arrangements and the committed £200 million unsecured five-year multi-currency revolving credit facility.  The headroom on this at the half-year was £116 million.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to operate within the level of its committed facilities. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of 12 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 2016.

Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

·     the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

·     the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7 of the Disclosure 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 set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8 of the Disclosure 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 www.morganadvancedmaterials.com.

By order of the Board

Pete Raby

Chief Executive Officer

Peter Turner

Chief Financial Officer

                                                    Glossary of terms

Cash flow from operations	Group EBITA of £56.6 million (H1 2015: £61.1 million), plus depreciation of £14.1 million (H1 2015: £13.8 million), less the increase in working capital of £16.3 million (H1 2015: £9.0 million) less the decrease in provisions (excluding restructuring) and employee benefits of £6.9 million (H1 2015: £6.7 million). H1 2015 has been represented for the reclassification of £1.1 million of dividends paid to non-controlling interests from working capital to cash flows from other investing and financing activities.
Constant currency	Applying H1 2016 average exchange rates to current year and comparative period figures
Corporate costs	Includes plc costs (e.g. Report & Accounts, AGM, Non-Executive Directors) and Group management costs (e.g. Corporate head office rent, utilities, staff etc.)
Free cash flow before acquisitions and dividends	Cash flow from operations (defined above) of £47.5 million (H1 2015: £59.2 million), less purchase of property, plant and equipment of £17.7 million (H1 2015: £32.2 million), plus proceeds from sale of property, plant and equipment of £nil (H1 2015: £0.4 million), less interest paid of £6.9 million (H1 2015: £6.8 million), plus interest received of £0.7 million (H1 2015: £1.9 million), less tax paid of £8.3 million (H1 2015: £17.4 million) and less restructuring costs and other one-off items of £4.2 million (H1 2015: £2.6 million)
Group earnings before interest, tax, depreciation and amortisation ("EBITDA")	Operating profit of £55.6 million (H1 2015: £57.5 million) before £3.8 million credit of specific adjusting items (H1 2015: nil), restructuring costs and other one-off items of £1.5 million (H1 2015: nil), depreciation of £14.1 million (H1 2015: £13.8 million) and amortisation of intangible assets of £3.3 million (H1 2015: £3.6 million)
Group earnings before interest, tax and amortisation ("Group EBITA")	Operating profit of £55.6 million (H1 2015: £57.5 million) before £3.8 million credit of specific adjusting items (H1 2015: nil), restructuring costs and other one-off items of £1.5 million (H1 2015: nil), and amortisation of intangible assets of £3.3 million (H1 2015: £3.6 million)
Group underlying operating profit	Operating profit of £55.6 million (H1 2015: £57.5 million) before £3.8 million credit of specific adjusting items (H1 2015: nil) and amortisation of intangibles of £3.3 million (H1 2015: £3.6 million)
Net debt	Interest-bearing loans and borrowings, bank overdrafts less cash and cash equivalents
Net debt to EBITDA ratio	This is calculated as net debt divided by annualised EBITDA for the six months ending 30 June 2016
Restructuring costs and other one-off items	Include the costs of restructuring activity and gain on disposal of property

Return on operating capital employed ("ROCE")	Group underlying operating profit for the last 12 months divided by the sum of working capital (which excludes pension liability and provisions) and the net book value of tangible assets. Goodwill and other intangible assets are excluded
Segment profit	Segment profit is defined as Group EBITA, which is segment operating profit before restructuring costs and amortisation of intangible assets
Specific adjusting items	See note 4 for further details
Underlying earnings per share ("EPS")	Basic earnings per share of 10.2 pence (H1 2015: 11.4 pence) adjusted to exclude specific adjusting items of 0.8 pence (H1 2015: nil) and amortisation of 1.1 pence (H1 2015: 1.2 pence)
Working capital (as used in the ROCE calculation)	Working capital as used in the calculation of ROCE is the sum of inventories, £147.7 million (H1 2015: £130.9 million), trade and other receivables, £203.2 million (H1 2015: £186.5 million), net derivative financial liabilities, £(17.0) million (H1 2015: £3.1 million net derivative financial assets), trade and other payables, £(179.7) million (H1 2015: £(159.3) million), plus the net of deferred consideration, third party dividends payable and other sundry items, £0.8 million  (H1 2015: £(0.5) million)

CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2016							Six months		Six months		Six months		Six months		Year	Year	Year
							Results before specific adjusting items		Specific adjusting items*		Total		Total		Results before specific adjusting items	Specific adjusting items*	Total
							2016		2016		2016		2015		2015	2015	2015
						Note	£m		£m		£m		£m		£m	£m	£m
Revenue						3	475.4		-		475.4		469.2		911.8	-	911.8
Operating costs before restructuring costs, other one-off items and
amortisation of intangible assets							(418.8)		-		(418.8)		(408.1)		(802.2)	-	(802.2)
Profit from operations before restructuring costs, other one-off items
and amortisation of intangible assets							56.6		-		56.6		61.1		109.6	-	109.6
Restructuring costs and other one-off items:						4
	Restructuring costs						(1.5)		-		(1.5)		-		(4.1)	(1.5)	(5.6)
	Net pension settlement credit						-		3.8		3.8		-		-	-	-
	Business exit costs						-		-		-		-		-	(2.8)	(2.8)
	Impairment of property, plant and equipment						-		-		-		-		-	(5.9)	(5.9)
	Gain on disposal of properties						-		-		-		-		0.5	-	0.5
Profit from operations before amortisation of intangible assets						3	55.1		3.8		58.9		61.1		106.0	(10.2)	95.8
Amortisation of intangible assets							(3.3)		-		(3.3)		(3.6)		(7.1)	-	(7.1)
Impairment of intangible assets						4	-		-		-		-		-	(5.8)	(5.8)
Operating profit						3	51.8		3.8		55.6		57.5		98.9	(16.0)	82.9
Finance income							0.7		-		0.7		1.9		2.5	-	2.5
Finance expense							(10.5)		-		(10.5)		(10.4)		(20.6)	-	(20.6)
Net financing costs						5	(9.8)		-		(9.8)		(8.5)		(18.1)	-	(18.1)
Net loss on disposal of businesses						4	-		-		-		-		-	(6.1)	(6.1)
Share of profit of associate (net of income tax)							0.4		-		0.4		0.2		0.3	-	0.3
Profit before taxation							42.4		3.8		46.2		49.2		81.1	(22.1)	59.0
Income tax expense						6	(12.7)		(1.5)		(14.2)		(14.5)		(24.2)	3.3	(20.9)
Profit for the period							29.7		2.3		32.0		34.7		56.9	(18.8)	38.1
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2016 continued							Six months		Six months		Six months		Six months		Year	Year	Year
							Results before specific adjusting items		Specific adjusting items*		Total		Total		Results before specific adjusting items	Specific adjusting items*	Total
							2016		2016		2016		2015		2015	2015	2015
Profit for the period attributable to:						Note	£m		£m		£m		£m		£m	£m	£m
	Owners of the parent						26.7		2.3		29.0		32.4		52.3	(18.4)	33.9
	Non-controlling interests						3.0		-		3.0		2.3		4.6	(0.4)	4.2
Profit for the period							29.7		2.3		32.0		34.7		56.9	(18.8)	38.1
Earnings per share from continuing operations						7
Basic											10.2p		11.4p				11.9p
Diluted											10.2p		11.3p				11.9p
Dividends
Proposed interim dividend			- pence								4.00p		4.00p
			- £m								11.4		11.4
Approved final dividend			- pence														7.00p
			- £m														20.0
The proposed interim and approved final dividends are based upon the number of shares outstanding at the balance sheet date.
* Details of 'Specific adjusting items' are given in note 4 to the financial statements. There were no specific adjusting items in the six months ended 30 June 2015.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2016
					Total
			Fair		parent	Non-	Total
	Translation	Hedging	value	Retained	comprehensive	controlling	comprehensive
	reserve	reserve	reserve	earnings	income	interests	income
	£m	£m	£m	£m	£m	£m	£m
Six months ended 30 June 2015
Profit for the period	-	-	-	32.4	32.4	2.3	34.7
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit plans	-	-	-	12.7	12.7	-	12.7
Tax effect of components of other comprehensive income not reclassified	-	-	-	(3.1)	(3.1)	-	(3.1)
	-	-	-	9.6	9.6	-	9.6
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(11.1)	-	-	-	(11.1)	(0.5)	(11.6)
Net gain on hedge of net investment in foreign subsidiaries	5.1	-	-	-	5.1	-	5.1
Cash flow hedges:
Effective portion of changes in fair value	-	1.4	-	-	1.4	-	1.4
	(6.0)	1.4	-	-	(4.6)	(0.5)	(5.1)
Total comprehensive income, net of tax	(6.0)	1.4	-	42.0	37.4	1.8	39.2
Year ended 31 December 2015
Profit for the period	-	-	-	33.9	33.9	4.2	38.1
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit plans	-	-	-	1.3	1.3	-	1.3
Tax effect of components of other comprehensive income not reclassified	-	-	-	(0.9)	(0.9)	-	(0.9)
	-	-	-	0.4	0.4	-	0.4
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(5.0)	-	-	-	(5.0)	0.6	(4.4)
Net gain on hedge of net investment in foreign subsidiaries	2.0	-	-	-	2.0	-	2.0
Cash flow hedges:
Change in fair value	-	(0.1)	-	-	(0.1)	-	(0.1)
	(3.0)	(0.1)	-	-	(3.1)	0.6	(2.5)
Total comprehensive income, net of tax	(3.0)	(0.1)	-	34.3	31.2	4.8	36.0
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2016 continued
					Total
			Fair		parent	Non-	Total
	Translation	Hedging	value	Retained	comprehensive	controlling	comprehensive
	reserve	reserve	reserve	earnings	income	interests	income
	£m	£m	£m	£m	£m	£m	£m
Six months ended 30 June 2016
Profit for the period	-	-	-	29.0	29.0	3.0	32.0
Items that will not be reclassified subsequently to profit or loss:
Remeasurement loss on defined benefit plans	-	-	-	(65.0)	(65.0)	-	(65.0)
Tax effect of components of other comprehensive income not reclassified	-	-	-	5.1	5.1	-	5.1
	-	-	-	(59.9)	(59.9)	-	(59.9)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	29.3	-	-	-	29.3	4.7	34.0
Net loss on hedge of net investment in foreign subsidiaries	(14.8)	-	-	-	(14.8)	-	(14.8)
Cash flow hedges:
Change in fair value	-	(2.2)	-	-	(2.2)	-	(2.2)
	14.5	(2.2)	-	-	12.3	4.7	17.0
Total comprehensive income, net of tax	14.5	(2.2)	-	(30.9)	(18.6)	7.7	(10.9)

CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 June 2016
		30 June		30 June	31 December
		2016		2015	2015
				Restated *
	Note	£m		£m	£m
Assets
Property, plant and equipment		283.0		240.4	256.7
Intangible assets		242.9		230.1	229.8
Investments		5.9		6.0	5.4
Other receivables		4.9		10.9	5.3
Deferred tax assets		14.1		7.6	4.4
Total non-current assets		550.8		495.0	501.6
Inventories		147.7		130.9	129.2
Derivative financial assets	9	1.2		4.0	2.0
Trade and other receivables		203.2		186.5	174.4
Cash and cash equivalents	8	57.2		52.4	49.8
Total current assets		409.3		373.8	355.4
Total assets		960.1		868.8	857.0
Liabilities
Interest-bearing loans and borrowings		274.9		269.5	257.4
Employee benefits	11	271.4		193.0	204.5
Provisions		1.7		2.3	1.6
Derivative financial liabilities	9	7.2		-	-
Non-trade payables		1.5		0.7	0.7
Deferred tax liabilities		5.1		3.4	2.3
Total non-current liabilities		561.8		468.9	466.5
Interest-bearing loans and borrowings and bank overdrafts		23.9		-	8.4
Trade and other payables		179.7		159.3	168.6
Current tax payable		19.6		24.4	14.4
Provisions		7.7		8.6	10.4
Derivative financial liabilities	9	11.0		0.9	2.3
Total current liabilities		241.9		193.2	204.1
Total liabilities		803.7		662.1	670.6
Total net assets		156.4		206.7	186.4
Equity
Share capital		71.8		71.8	71.8
Share premium		111.7		111.7	111.7
Reserves		48.3		34.5	36.0
Retained earnings		(118.1)		(49.0)	(69.7)
Total equity attributable to equity holders of parent Company		113.7		169.0	149.8
Non-controlling interests		42.7		37.7	36.6
Total equity		156.4		206.7	186.4
* 30 June 2015 has been restated for the reclassification of current tax payable and deferred tax assets and liabilities. See note 6 for further details.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2016
						Fair		Capital			Total	Non-
		Share	Share	Translation	Hedging	value	Special	redemption	Other	Retained	parent	controlling	Total
		capital	premium	reserve	reserve	reserve	reserve	reserve	reserves	earnings	equity	interests	equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2015		71.8	111.7	(13.5)	0.5	(1.0)	6.0	35.7	11.4	(71.4)	151.2	36.5	187.7
Profit for the period		-	-	-	-	-	-	-	-	32.4	32.4	2.3	34.7
Other comprehensive income		-	-	(6.0)	1.4	-	-	-	-	9.6	5.0	(0.5)	4.5
Transactions with owners:
Dividends		-	-	-	-	-	-	-	-	(20.0)	(20.0)	(1.1)	(21.1)
Equity-settled share-based payment transactions		-	-	-	-	-	-	-	-	1.3	1.3	-	1.3
Own shares acquired for share incentive schemes		-	-	-	-	-	-	-	-	(0.9)	(0.9)	-	(0.9)
Adjustment arising from change in non-     controlling interest		-	-	-	-	-	-	-	-	-	-	0.5	0.5
Balance at 30 June 2015		71.8	111.7	(19.5)	1.9	(1.0)	6.0	35.7	11.4	(49.0)	169.0	37.7	206.7
Balance at 1 January 2015		71.8	111.7	(13.5)	0.5	(1.0)	6.0	35.7	11.4	(71.4)	151.2	36.5	187.7
Profit for the period		-	-	-	-	-	-	-	-	33.9	33.9	4.2	38.1
Other comprehensive income		-	-	(3.0)	(0.1)	-	-	-	-	0.4	(2.7)	0.6	(2.1)
Transactions with owners:
Dividends		-	-	-	-	-	-	-	-	(31.4)	(31.4)	(3.8)	(35.2)
Equity-settled share-based payment transactions		-	-	-	-	-	-	-	-	1.7	1.7	-	1.7
Own shares acquired for share incentive schemes		-	-	-	-	-	-	-	-	(2.9)	(2.9)	-	(2.9)
Adjustment arising from change in non-     controlling interest		-	-	-	-	-	-	-	-	-	-	(0.9)	(0.9)
Balance at 31 December 2015		71.8	111.7	(16.5)	0.4	(1.0)	6.0	35.7	11.4	(69.7)	149.8	36.6	186.4
Balance at 1 January 2016		71.8	111.7	(16.5)	0.4	(1.0)	6.0	35.7	11.4	(69.7)	149.8	36.6	186.4
Profit for the period		-	-	-	-	-	-	-	-	29.0	29.0	3.0	32.0
Other comprehensive income		-	-	14.5	(2.2)	-	-	-	-	(59.9)	(47.6)	4.7	(42.9)
Transactions with owners:
Dividends		-	-	-	-	-	-	-	-	(19.8)	(19.8)	(1.6)	(21.4)
Equity-settled share-based payment transactions		-	-	-	-	-	-	-	-	1.4	1.4	-	1.4
Proceeds from exercise of share options		-	-	-	-	-	-	-	-	0.9	0.9	-	0.9
Balance at 30 June 2016		71.8	111.7	(2.0)	(1.8)	(1.0)	6.0	35.7	11.4	(118.1)	113.7	42.7	156.4

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2016
					Six months		Six months Represented *		Year Represented *
					2016		2015		2015
				Note	£m		£m		£m
Operating activities
Profit for the period					32.0		34.7		38.1
Adjustments for:
	Depreciation				14.1		13.8		27.1
	Amortisation			3	3.3		3.6		7.1
	Net financing costs			5	9.8		8.5		18.1
	Loss on disposal of business			4	-		-		6.1
	Share of profit from associate (net of income tax)				(0.4)		(0.2)		(0.3)
	Profit on sale of property, plant and equipment				-		(0.2)		(0.4)
	Income tax expense			6	14.2		14.5		20.9
	Non-cash operating costs relating to restructuring				-		-		0.2
	Non-cash specific adjusting items included in operating profit			4	(4.0)		-		15.5
	Equity-settled share-based payment expenses				1.4		1.0		1.4
Cash generated from operations before changes in working           capital and provisions					70.4		75.7		133.8
(Increase)/decrease in trade and other receivables					(8.2)		(1.3)		15.5
(Increase) in inventories					(3.6)		(9.4)		(4.7)
(Decrease)/increase in trade and other payables					(4.5)		1.6		5.7
(Decrease) in employee benefits and provisions					(10.9)		(10.1)		(16.4)
Cash generated from operations					43.2		56.5		133.9
Interest paid					(6.9)		(6.8)		(13.4)
Income tax paid					(8.3)		(17.4)		(29.9)
Net cash from operating activities					28.0		32.3		90.6
Investing activities
Purchase of property, plant and equipment					(17.7)		(32.2)		(63.5)
Proceeds from sale of property, plant and equipment					-		0.4		0.8
Purchase of investments					(0.4)		-		-
Interest received					0.7		1.9		2.2
Disposal of subsidiaries, net of cash disposed					-		-		(0.1)
Repayment of loan made to associate					0.2		-		-
Loan made to purchaser of business					-		(1.2)		(1.5)
Investment made by non-controlling interests					-		0.5		0.5
Forward contracts used in net investment hedging					(0.7)		5.2		4.9
Net cash from investing activities					(17.9)		(25.4)		(56.7)
Financing activities
Purchase of own shares for share incentive schemes					-		(0.9)		(2.9)
Proceeds from exercise of share options					0.9		-		-
Increase/(decrease) in borrowings				8	12.1		6.6		(8.5)
Payment of finance lease liabilities				8	(0.2)		(0.1)		(0.2)
Dividends paid - to external plc shareholders					(20.0)		(20.0)		(31.4)
Proceeds from unclaimed dividends					0.2		-		-
Dividends paid to non-controlling interests					(1.6)		(1.1)		(3.8)
Net cash from financing activities					(8.6)		(15.5)		(46.8)
Net increase/(decrease) in cash and cash equivalents					1.5		(8.6)		(12.9)
Cash and cash equivalents at start of period					49.8		63.0		63.0
Effect of exchange rate fluctuations on cash held					5.9		(2.0)		(0.3)
Cash and cash equivalents at period end				8	57.2		52.4		49.8
A reconciliation of cash and cash equivalents to net borrowings is shown in note 8.
* 2015 has been represented for the reclassification of dividends paid to non-controlling interests from (decrease)/increase in trade and other payables to financing activities.
													NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.		Basis of preparation
Morgan Advanced Materials plc (the 'Company') is a company domiciled in the United Kingdom. The condensed consolidated financial statements of the Company as at and for the six months ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates.
These half-year condensed consolidated financial statements have been drawn up to 30 June 2016.
The condensed consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 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 as at and for the year ended 31 December 2015. The condensed consolidated financial statements do not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards.
											These condensed consolidated half-year financial statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report 2015.
																							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.
											In preparing the condensed consolidated financial statements, significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2015.
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 Company's published consolidated financial statements for the year ended 31 December 2015.
												During the period, the Group adopted a number of minor amendments to standards which became effective, none of which had a material impact on the Group's net cash flow, financial position, total comprehensive income or earnings per share. There were no other new accounting standards or amendments to standards that were required to be adopted in the period and the Group did not adopt any of the new accounting standards that could have been adopted early.
																								The comparative figures for the financial year ended 31 December 2015 are not the Company's statutory consolidated accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The consolidated financial statements of the Group as at and for the year ended 31 December 2015 are available on request from the Company's registered office at Quadrant, 55-57 High Street, Windsor, Berkshire SL4 1LP or at www.morganadvancedmaterials.com.
The condensed consolidated financial statements for the six months ended 30 June 2016 and the comparative period have neither been audited nor reviewed.
The condensed consolidated financial statements for the six months ended 30 June 2016 were approved by the Board on 27 July 2016.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.    Acquisitions & disposals
2016
During the half year ended 30 June 2016 the Group disposed of its remaining 28.77% shareholding in Assam Carbon Products Limited for nil consideration. This shareholding was held at nil value and, as a result, there is no profit or loss on disposal.
There were no other acquisitions or disposals made during the half year ended 30 June 2016.
2015
There were no acquisitions made in 2015. On 30 January 2015 the Group disposed of its Thermal Ceramics business in Wissembourg, France. The assets and liabilities disposed of were classified as held for sale as at 31 December 2014:
		£m
Property, plant and equipment		2.5
Intangible assets		0.1
Inventories		1.9
Total assets classified as held for sale		4.5
Trade and other payables		0.6
Employee benefits		0.7
Total liabilities classified as held for sale		1.3
Net assets of disposal group		3.2
Deferred consideration		3.2
The Group incurred a £1.9 million loss of business exit costs and incurred a loss on the disposal of this business of £6.1 million in 2015.
				The Group also made a loan of £1.5 million to the purchasers of the Wissembourg business. This is shown in 'loan made to purchaser of business' in the condensed consolidated statement of cash flows.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3.	Segment information
The tables below show restated comparative figures for the operating segments for the year ended 31 December 2015 and the half-year ended 30 June 2015. The restatements reflect the impact of changes the Group made to its internal organisation during the half-year ended 30 June 2016, which caused the composition of its reportable segments to change. Following the internal organisation changes made, the Group is now organised on a divisional basis and comprises the following six reportable operating segments: Thermal Ceramics, Molten Metal Systems, Electrical Carbon, Seals and Bearings, Technical Ceramics and Composites and Defence Systems.
																														The information presented below represents the operating segments of the Group.
																																	Thermal Ceramics			Molten Metal Systems			Electrical Carbon			Seals and Bearings					Technical Ceramics				Composites and Defence Systems				Consolidated
																																	Six months	Six months		Six months	Six months		Six months	Six months		Six months	Six months				Six months	Six months			Six months	Six months			Six months				Six months
			2016	2015		2016	2015		2016	2015		2016	2015				2016	2015			2016	2015			2016				2015
				Restated			Restated			Restated			Restated					Restated				Restated							Restated
			£m	£m		£m	£m		£m	£m		£m	£m				£m	£m			£m	£m			£m				£m
Revenue from external customers			193.9	186.0		20.6	20.6		75.6	78.1		47.6	47.7				121.8	120.2			15.9	16.6			475.4				469.2
Divisional EBITA 1			25.6	26.6		2.9	2.6		10.3	12.1		6.6	6.9				12.8	15.0			1.1	0.4			59.3				63.6
Corporate costs																									(2.7)				(2.5)
Group EBITA 2																									56.6				61.1
Restructuring costs			-	-		-	-		(0.6)	-		-	-				-	-			0.1	-			(0.5)				-
Unallocated restructuring costs and other one-      off items																									(1.0)				-
Group underlying operating profit 3																									55.1				61.1
Amortisation of intangible assets			(0.7)	(0.9)		(0.1)	(0.1)		(0.2)	(0.2)		(0.1)	(0.1)				(1.4)	(1.3)			(0.8)	(1.0)			(3.3)				(3.6)
Operating profit before specific adjusting items																									51.8				57.5
Specific adjusting items included in operating      profit 4																									3.8				-
Operating profit																									55.6				57.5
Finance income																									0.7				1.9
Finance expense																									(10.5)				(10.4)
Share of profit of associate (net of income tax)																									0.4				0.2
Profit before taxation																									46.2				49.2
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3.		Segment information continued
			Thermal Ceramics			Molten Metal Systems			Electrical Carbon			Seals and Bearings					Technical Ceramics				Composites and Defence Systems				Consolidated
			Six months	Six months		Six months	Six months		Six months	Six months		Six months	Six months				Six months	Six months			Six months	Six months			Six months				Six months
			2016	2015		2016	2015		2016	2015		2016	2015				2016	2015			2016	2015			2016				2015
				Restated			Restated			Restated			Restated					Restated				Restated							Restated
			£m	£m		£m	£m		£m	£m		£m	£m				£m	£m			£m	£m			£m				£m
Segment assets			404.4	341.3		40.9	37.0		149.1	136.4		82.9	77.7				185.9	167.4			19.4	36.3			882.6				796.1
Unallocated assets																									77.5				72.7
Total assets																									960.1				868.8
Segment liabilities			82.2	66.1		6.4	5.8		28.9	25.0		16.7	14.9				38.4	36.3			6.6	9.7			179.2				157.8
Unallocated liabilities: employee benefits																									271.4				193.0
Other unallocated liabilities																									353.1				311.3
Total liabilities																									803.7				662.1

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3.	Segment information continued
			Thermal		Molten Metal	Electrical		Seals and	Technical			Composites and
			Ceramics		Systems	Carbon		Bearings	Ceramics			Defence Systems		Consolidated
			Year		Year	Year		Year	Year			Year		Year
			2015		2015	2015		2015	2015			2015		2015
			Restated		Restated	Restated		Restated	Restated			Restated		Restated
			£m		£m	£m		£m	£m			£m		£m
Revenue from external customers			372.4		39.7	145.6		88.6	237.8			27.7		911.8
Divisional EBITA 1			55.2		5.3	19.3		9.9	26.1			(1.0)		114.8
Corporate costs														(5.2)
Group EBITA 2														109.6
Restructuring costs and other one-off items			(0.1)		-	(0.7)		(0.7)	(0.4)			(0.3)		(2.2)
Unallocated restructuring costs and other one-off items														(1.4)
Group underlying operating profit 3														106.0
Amortisation of intangible assets			(1.8)		(0.2)	(0.3)		(0.2)	(2.7)			(1.9)		(7.1)
Operating profit before specific adjusting items														98.9
Specific adjusting items included in operating profit 4														(16.0)
Operating profit														82.9
Finance income														2.5
Finance expense														(20.6)
Loss on disposal of business														(6.1)
Share of profit of associate (net of income tax)														0.3
Profit before taxation														59.0
Segment assets			359.4		38.1	132.4		74.0	169.4			22.6		795.9
Unallocated assets														61.1
Total assets														857.0
Segment liabilities			74.6		6.0	27.4		16.0	35.0			9.4		168.4
Unallocated liabilities: employee benefits														204.5
Other unallocated liabilities														297.7
Total liabilities														670.6
1. Segment profit is defined as Divisional EBITA which is segment operating profit before restructuring costs, other one-off items and amortisation of intangible assets.
2. Group EBITA is defined as operating profit before specific adjusting items, restructuring costs, other one-off items and amortisation of intangible assets.
3. Underlying operating profit is defined as operating profit before specific adjusting items and amortisation of intangible assets.
4. Details of 'specific adjusting items' are given in note 4 to the financial statements
The above measures of profit are shown because the Directors use them to measure the underlying performance of the business, as referred to throughout the half-year report.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.	Specific adjusting items
	In the condensed consolidated income statement the Group presents specific adjusting items separately. In the judgment of the Directors, due to 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 a proper understanding of the financial information and the best indication of underlying performance of the Group.
		Six months	Six months	Year
		2016	2015	2015
		£m	£m	£m
	Specific adjusting items:
	- Restructuring costs	-	-	(1.5)
	- Net pension settlement credit	3.8	-	-
	- Business exit costs	-	-	(2.8)
	- Impairment of property, plant and equipment	-	-	(5.9)
	- Impairment of intangible assets	-	-	(5.8)
	- Net loss on disposal of businesses	-	-	(6.1)
	Total specific adjusting items before income tax credit	3.8	-	(22.1)
	- Income tax credit from specific adjusting items	(1.5)	-	3.3
	Total specific adjusting items after income tax credit	2.3	-	(18.8)
	Half year ended 30 June 2016
	Net pension settlement credit
	During the half year ended 30 June 2016 the Group has completed the final termination and payment of all earned benefits for one of its North American Defined Benefit Plans. As a result of this termination the Group has recognised a net pension settlement credit of £3.8 million. An income tax credit of £1.5 million was recognised in respect of this item.
	Year ended 31 December 2015
	Restructuring costs
	The strategic objective to drive the performance of the Electrical Carbon and Seals and Bearings businesses to mid-teen margins and beyond has resulted in the Group undertaking a significant rationalisation of the carbon material footprint.  This started in 2014 with the downsizing of activities at the Swansea, UK site.  This footprint rationalisation continued in 2015 with the decision to and the announcement of the cessation of carbon material manufacturing at the Shanghai, China site.  These operations will be consolidated into other Group locations, mainly the USA.  This decision resulted in a charge of £1.5 million in the year ended 31 December 2015, £0.7 million of which relates to the impairment loss on plant and equipment and the balance to site clean-up costs and other write-offs.  An income tax credit of £0.2 million was recognised in respect of these restructuring costs.  The £0.7 million of impairment loss formed part of the total plant and equipment impairment loss of £6.6 million recognised in the year ended 31 December 2015.
	Business exit costs
	The business exit costs in the year ended 31 December 2015 related to the deconsolidation of Morgan Thermal Ceramics Sukhoy Log Limited Liability Company ("Sukhoy") and the subsequent remeasurement to fair value of the retained investment.
	In April 2006 the Group acquired a 51% shareholding in Sukhoy, a fibre business based near Yekaterinburg, Russia.  The results and assets of Sukhoy have previously been consolidated on the basis that the Group was satisfied that it exercised management control.  During 2015 there was a deterioration in the relationship between Morgan and the minority partner, exacerbated by the increasingly difficult market conditions in Russia. As a result, it became clear to the Group towards the end of 2015 that it no longer had effective control of the business and that it was no longer appropriate to consolidate.  Based on the recent financial performance and the Group's view of the future prospects of the business it was concluded that the value of the Group's investment in Sukhoy was nil. As a result the Group recognised a £2.8 million charge in business exit costs in the year ended 31 December 2015.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.	Specific adjusting items continued
	Impairment of property, plant and equipment
	The impairment of property, plant and equipment for the year ended 31 December 2015 was as a result of a review of the carrying value of assets that support the Group's North America vehicle and personal protection and high-temperature furnace-lining businesses.  Both of these businesses saw significant growth and investment in previous years but more recently they have been in decline.  The Group compared its expected future cash flows from these businesses with the book value of the property, plant and equipment that is dedicated to them and determined that a total impairment charge of £5.9 million was required.  An income tax credit of £2.1 million was recognised in respect of the impairment charge. The £5.9 million of impairment loss forms part of the total plant and equipment impairment loss of £6.6 million recognised in the year ended 31 December 2015.
	Impairment of intangible assets
	As a result of the continued reduction in demand on C&DS from UK MoD, the review of the carrying value of the remaining intangible assets of C&DS resulted in a further impairment charge of £5.8 million in the year ended 31 December 2015, relating to a full impairment of the customer relationships.  Following this impairment charge, the carrying value of the C&DS intangibles was £9.8 million, all in respect of technology and trademarks.  This was supported by the current expectations of the future trading performance of the C&DS business.  An income tax credit of £1.0 million was recognised in respect of the impairment charge.
	Net loss on disposal of business
	On 30 January 2015 the Group completed the sale of a Thermal Ceramics business in Wissembourg, France.  This business manufactures low-temperature fibre boards used mainly in the building industry.  The Group incurred a loss on the disposal of this business of £6.1 million in the year ended 31 December 2015, in addition to the £1.9 million of business exit costs recognised in the year ended 31 December 2014.

5.	Net finance income and expense
				Six months	Six months	Year
				2016	2015	2015
				£m	£m	£m
Amounts derived from financial instruments				0.2	1.0	1.0
Interest income on bank deposits measured at amortised cost				0.5	0.9	1.5
Finance income				0.7	1.9	2.5
Interest expense on financial liabilities measured at amortised cost				(6.9)	(7.0)	(13.7)
Net interest on IAS 19 obligations				(3.6)	(3.4)	(6.9)
Finance expense				(10.5)	(10.4)	(20.6)
Net financing costs recognised in profit or loss				(9.8)	(8.5)	(18.1)

6.	Taxation - income tax expense
				Six months		Six months	Year
				2016		2015	2015
				£m		£m	£m
Tax on profit				14.2		14.5	20.9
The Group's consolidated effective tax rate for the six months ended 30 June 2016 is based on the Directors' best estimate of the effective tax rate for the year excluding specific adjusting items.
Following a review of the presentation of tax balances the deferred tax asset and liability balances at 30 June 2015 have been re-presented to reflect management's view of a more likely basis for recovery of the assets and settlement of the liabilities. The re-presentation results in a decrease of the deferred tax asset at 30 June 2015 of £31.0 million and an equal decrease to the deferred tax liability. Therefore there is no effect on the prior year net asset position.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.

Earnings per share

Earnings per share from continuing operations

The calculation of basic/diluted earnings per share from continuing operations at 30 June 2016 was based on the following:

Six months  2016

Six months  2015

Year  2015

Basic

Diluted

Basic

Diluted

Basic

Diluted

£m

£m

£m

£m

£m

£m

Profit attributable to equity holders of the Company from           continuing operations

29.0

29.0

32.4

32.4

33.9

33.9

Weighted average number of Ordinary shares

Issued Ordinary shares at the beginning of the period (millions)

285.4

285.4

285.4

285.4

285.4

285.4

Effect of shares issued in period and shares held by The     Morgan General Employee Benefit Trust (millions)

(0.6)

(0.6)

(0.3)

(0.3)

(0.3)

(0.3)

Dilutive effect of share options/incentive schemes (millions)

n/a

0.1

n/a

0.5

n/a

0.4

Basic/diluted weighted average number of Ordinary shares    during the period (millions)

284.8

284.9

285.1

285.6

285.1

285.5

Earnings per share from continuing operations (pence)

10.2p

10.2p

11.4p

11.3p

11.9p

11.9p

Underlying earnings per share

The calculation of basic/diluted underlying earnings per share at 30 June 2016 was based on the following:

Six months  2016

Six months  2015

Year  2015

Basic

Diluted

Basic

Diluted

Basic

Diluted

£m

£m

£m

£m

£m

£m

Underlying operating profit and share of profit of associate before specific adjusting items and amortisation, less net financing costs, income tax expense and non-controlling interests

30.0

30.0

36.0

36.0

59.4

59.4

Basic/diluted weighted average number of Ordinary shares    during the period - calculated as above (millions)

284.8

284.9

285.1

285.6

285.1

285.5

Earnings per share before specific adjusting items and amortisation of intangible assets (pence)

10.5p

10.5p

12.6p

12.6p

20.8p

20.8p

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.   Cash and cash equivalents
							30 June		30 June			31 December
							2016		2015			2015
							£m		£m			£m
Bank balances							44.4		43.8			38.8
Cash deposits							12.8		8.6			11.0
Cash and cash equivalents							57.2		52.4			49.8
Reconciliation of cash and cash equivalents to net debt*
							Six months		Six months			Year
							2016		2015			2015
							£m		£m			£m
Opening borrowings							(265.8)		(270.0)			(270.0)
(Increase)/decrease in borrowings							(12.1)		(6.6)			8.5
Payment of finance lease liabilities							0.2		0.1			0.2
Effect of movements in foreign exchange on borrowings							(21.1)		7.0			(4.5)
Closing borrowings							(298.8)		(269.5)			(265.8)
Cash and cash equivalents							57.2		52.4			49.8
Closing net debt							(241.6)		(217.1)			(216.0)
* Net debt is defined as interest-bearing loans and borrowings, bank overdrafts less cash and cash equivalents.
9.   Financial risk management
Fair Values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
		Carrying amount	Fair value			Carrying amount		Fair value		Carrying amount			Fair value
		30 June	30 June			30 June		30 June		31 December			31 December
		2016	2016			2015		2015		2015			2015
		£m	£m			£m		£m		£m			£m
Financial assets and liabilities at amortised cost
4.32% Euro Senior Notes 2017		(16.9)	(17.4)			(14.3)		(15.1)		(14.9)			(15.5)
6.12% US Dollar Senior Notes 2017		(131.6)	(138.2)			(111.5)		(119.6)		(118.8)			(125.5)
6.26% US Dollar Senior Notes 2019		(56.4)	(62.7)			(47.7)		(52.8)		(50.9)			(56.0)
Bank and other loans		(92.9)	(84.7)			(94.9)		(94.9)		(80.2)			(80.2)
Obligations under finance leases		(1.0)	(1.0)			(1.1)		(1.1)		(1.0)			(1.0)
Trade and other payables		(96.4)	(96.4)			(91.3)		(91.3)		(96.1)			(96.1)
Loans and receivables		182.6	182.6			167.3		167.3		155.9			155.9
Cash and cash equivalents		57.2	57.2			52.4		52.4		49.8			49.8
		(155.4)	(160.6)			(141.1)		(155.1)		(156.2)			(168.6)
Available-for-sale financial instruments
Available-for-sale financial assets		0.6	0.6			1.2		1.2		0.5			0.5
Derivatives and other items at fair value
Forward exchange contracts used for hedging		(11.0)	(11.0)			2.5		2.5		0.5			0.5
Cross currency swaps		(6.0)	(6.0)			0.6		0.6		(0.8)			(0.8)
		(171.8)	(177.0)			(136.8)		(150.8)		(156.0)			(168.4)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.   Financial risk management continued
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the preceding table.
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.
Interest-bearing loans and 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 loans and borrowings are 1.3-2.8% (30 June 2015: 1.7-3.7%; 31 December 2015: 1.6-3.5%).
Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements.  The estimated fair values reflect changes in interest rates.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.  All other receivables/payables are discounted to determine the fair value.
Cash and cash equivalents, trade and other payables and loans and receivables
The Group has disclosed the fair value of cash and cash equivalents, current loans and receivables and current payables at their carrying amount, given their notional amount is deemed to be their fair value.
												Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	30 June 2016		30 June 2015
	Level 1	Level 2	Total		Level 1	Level 2	Total
	£m	£m	£m		£m	£m	£m
Available-for-sale financial assets	0.6	-	0.6		1.2	-	1.2
Derivative financial assets	-	1.2	1.2		-	4.0	4.0
	0.6	1.2	1.8		1.2	4.0	5.2
Derivative financial liabilities	-	(18.2)	(18.2)		-	(0.9)	(0.9)
					31 December 2015
					Level 1	Level 2	Total
					£m	£m	£m
Available-for-sale financial assets					0.5	-	0.5
Derivative financial assets					-	2.0	2.0
					0.5	2.0	2.5
Derivative financial liabilities					-	(2.3)	(2.3)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.   Financial risk management continued
The table below analyses financial instruments disclosed at fair value, by valuation method.
	30 June 2016				30 June 2015
	Level 1	Level 2	Total		Level 1	Level 2	Total
	£m	£m	£m		£m	£m	£m
4.32% Euro Senior Notes 2017	-	(17.4)	(17.4)		-	(15.1)	(15.1)
6.12% US Dollar Senior Notes 2017	-	(138.2)	(138.2)		-	(119.6)	(119.6)
6.26% US Dollar Senior Notes 2019	-	(62.7)	(62.7)		-	(52.8)	(52.8)
Obligations under finance leases	-	(1.0)	(1.0)		-	(1.1)	(1.1)
	-	(219.3)	(219.3)		-	(188.6)	(188.6)
					31 December 2015
					Level 1	Level 2	Total
					£m	£m	£m
4.32% Euro Senior Notes 2017					-	(15.5)	(15.5)
6.12% US Dollar Senior Notes 2017					-	(125.5)	(125.5)
6.26% US Dollar Senior Notes 2019					-	(56.0)	(56.0)
Obligations under finance leases					-	(1.0)	(1.0)
					-	(198.0)	(198.0)
There have been no transfers between level 1 and level 2 between 1 January 2015 and 30 June 2016 and there were no level 3 financial instruments between 1 January 2015 and 30 June 2016.

10.	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 26 of the Group's 2015 Annual Report.
													Six months		Six months		Year
				2016		2015		2015
Transactions with associate				£m		£m		£m
Sales to associates				-		0.1		0.3
Purchases from associate				1.0		0.9		1.5
Loan owed by associate				1.8		1.9		1.8
Trade receivables due from associate				-		2.3		1.3
Trade payables due to associate				0.4		0.6		0.5
At 30 June 2016 the Group does not have any trade receivables owed by associates which have been fully provided for (30 June 2015 and 31 December 2015: £1.3 million).
Except as disclosed in the table 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 26 of the Group's 2015 Annual Report that could have a material effect on the financial position or performance of the Group during the period.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.	Employee benefits
		30 June	30 June	30 June	30 June	30 June
		2016	2016	2016	2016	2016
		UK	USA	Europe	Rest of the World	Total
	Pension plans and employee benefits	£m	£m	£m	£m	£m
	Present value of unfunded defined benefit obligations	-	(9.4)	(36.6)	(2.3)	(48.3)
	Present value of funded defined benefit obligations	(566.4)	(169.6)	(1.8)	(15.7)	(753.5)
	Fair value of plan assets	399.7	116.7	0.4	13.6	530.4
	Net obligations	(166.7)	(62.3)	(38.0)	(4.4)	(271.4)
	Movements in present value of defined benefit obligation
	At 1 January 2016	(500.9)	(178.9)	(28.7)	(14.9)	(723.4)
	Current service cost	(1.1)	-	(0.3)	(0.7)	(2.1)
	Interest cost	(9.1)	(4.0)	(0.3)	(0.2)	(13.6)
	Remeasurement losses	(65.1)	(15.1)	(5.1)	(0.2)	(85.5)
	Benefits paid	10.2	5.1	0.5	0.3	16.1
	Contributions by members	(0.4)	-	-	-	(0.4)
	Settlements	-	31.7	-	-	31.7
	Exchange adjustments	-	(17.8)	(4.5)	(2.3)	(24.6)
	At 30 June 2016	(566.4)	(179.0)	(38.4)	(18.0)	(801.8)
	Movements in fair value of plan assets
	At 1 January 2016	383.5	123.8	0.4	11.2	518.9
	Interest on plan assets	7.0	2.8	-	0.2	10.0
	Remeasurement gains	15.0	5.5	-	-	20.5
	Contributions by employer	4.6	5.4	0.4	0.5	10.9
	Contributions by members	0.4	-	-	-	0.4
	Benefits paid	(10.2)	(5.1)	(0.5)	(0.3)	(16.1)
	Administrative expenses	(0.6)	-	-	-	(0.6)
	Settlements	-	(27.7)	-	-	(27.7)
	Exchange adjustments	-	12.0	0.1	2.0	14.1
	At 30 June 2016	399.7	116.7	0.4	13.6	530.4
	Principal actuarial assumptions at 30 June 2016 were:	%	%	%	%
	Discount rate	2.80	3.80	1.30	2.10
	Inflation (UK: RPI/CPI)	2.70/1.50	n/a	1.70	n/a
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.	Employee benefits continued
		30 June	30 June	30 June	30 June	30 June
		2015	2015	2015	2015	2015
		UK	USA	Europe	Rest of the World	Total
	Pension plans and employee benefits	£m	£m	£m	£m	£m
	Present value of unfunded defined benefit obligations	-	(8.1)	(25.7)	(1.5)	(35.3)
	Present value of funded defined benefit obligations	(506.7)	(160.1)	(1.7)	(12.1)	(680.6)
	Fair value of plan assets	393.8	117.9	0.4	10.8	522.9
	Net obligations	(112.9)	(50.3)	(27.0)	(2.8)	(193.0)
	Principal actuarial assumptions at 30 June 2015 were:	%	%	%	%
	Discount rate	3.70	4.50	2.30	2.90
	Inflation (UK: RPI/CPI)	3.10/1.90	n/a	1.70	n/a
		31 December	31 December	31 December	31 December	31 December
		2015	2015	2015	2015	2015
		UK	USA	Europe	Rest of the World	Total
	Pension plans and employee benefits	£m	£m	£m	£m	£m
	Present value of unfunded defined benefit obligations	-	(8.3)	(27.2)	(1.9)	(37.4)
	Present value of funded defined benefit obligations	(500.9)	(170.6)	(1.5)	(13.0)	(686.0)
	Fair value of plan assets	383.5	123.8	0.4	11.2	518.9
	Net obligations	(117.4)	(55.1)	(28.3)	(3.7)	(204.5)
	Principal actuarial assumptions at 31 December 2015 were:	%	%	%	%
	Discount rate	3.70	4.50	2.30	2.90
	Inflation (UK: RPI/CPI)	3.00/1.80	n/a	1.70	n/a

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