Annual Report 2007 Annual Enabling the Future the Morgan Crucible Company Plc Crucible Company the Morgan
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THE MORGAN CRUCIBLE COMPANY PLC QUADRANT, 55–57 HIGH STREET, WINDSOR BERKSHIRE SL4 1LP TEL: +44 (0)1753 837000 FAX: +44 (0)1753 837008 ENABLING THE FUTURE THE MORGAN CRUCIBLE COMPANY PLC CRUCIBLE COMPANY THE MORGAN ANNUAL REPORT 2007 ANNUAL THE MORGAN CRUCIBLE COMPANY PLC ANNUAL REPORT 2007 THE GROUP AT A GLANCE CARBON TECHNICAL CERAMICS INSULATING CERAMICS Dedicated to providing engineering solutions Innovative design and application If your business involves materials heated built on advanced materials technology, engineering, underpinned by customer to very high temperatures, there is a strong our Carbon Division utilises its unparalled focused research and development, chance that Insulating Ceramics products expertise in carbon, graphite, silicon carbide are the drivers that have kept Technical or solutions are involved. We are a world and related materials to serve a global Ceramics at the forefront of so many rapidly leader in the production of insulating customer base. Carbon’s leading edge developing markets. From scratch-resistant materials such as fibres and firebricks, technology solutions are applied to a wide coatings for MP3 players to the latest as well as heating vessels such as range of products including; body armour, advances in pioneering medical technology, crucibles and furnaces. Our continuously petrochemical processing plants, synthetic we work closely with our customers developing expertise ensures close, diamonds, windmills, cars, computers, to provide engineered, manufacturing long-term relationships with customers photovoltaics and railway networks, solutions that add-value to the end product. across a range of global markets from among many others. Our base materials include ceramic, automotive, to iron and steel making, glass, precious metals, piezoelectric the chemical processing industries, and dielectric materials. to power generation and fire protection. £216.6m £152.6m £324.0m Revenues Revenues Revenues Carbon represents Technical Ceramics Insulating Ceramics 38.0% of Group represents 21.8% of Group represents 40.2%of Group operating profit* operating profit* operating profit* GROWTH MARKETS GROWTH MARKETS GROWTH MARKETS We provide solutions for fluid Our power tube components Our leading SuperwoolTM handling in chemical and are used in security range is extensively other processing industries scanning devices used for fire protection in several markets This Report and Accounts is printed on Sovereign silk and Kaskad peacock blue, which are totally chlorine We manufacture the protective Our braze alloys are used for Our heat management free (TCF) papers. plates for bullet proof vests engine build and repair and solutions are crucial for our ceramic components steel manufacturing Both the paper mill and printer involved in the and sub-assemblies are used in engine monitoring production support the growth of responsible and control equipment forest management and are both accredited to ISO14001 which specifies a process for continuous environmental improvement. Our carbon and graphite Our high quality ceramics Our materials are used in components are are favoured by medical the chemical processing If you have finished reading this report and no used in many thermal device manufacturers and industry for heat management management applications the medical professions applications at temperatures longer wish to retain it, please pass it on to other up to 1400˚C interested readers, return it to Morgan Crucible or dispose of it in your recycled paper waste. Thank you. This annual report is available at www.morgancrucible.com * Operating profit before unallocated costs and one-off items. Designed and produced by Radley Yeldar (London) OUR STRATEGY OUR VISION IS TO BE ONE OF THE WORLD’S VERY BEST ADVANCED MATERIALS COMPANIES OUR AIM IS TO CREATE LONG-TERM SUPERIOR SHAREHOLDER VALUE OUR STRATEGIC PRIORITIES ARE TO: 1: FOCUS ON HIGHER GROWTH, HIGHER MARGIN, NON-ECONOMICALLY CYCLICAL MARKETS 2: BE HIGH VALUE-ADDED TO OUR CUSTOMERS 3: BE NUMBER 1 OR 2 IN OUR CHOSEN MARKET SEGMENTS 4: HAVE A CULTURE OF OPERATIONAL EXCELLENCE AND COST EFFICIENCY 5: FIND, KEEP AND DEVELOP THE RIGHT PEOPLE OVER THE FOLLOWING PAGES WE TAKE A LOOK AT OUR STRATEGY IN ACTION INTRODUCTION BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER Group at a glance 16 Review of operations 40 Directors and Executive 62 Consolidated income 107 Group statistical 1 Our strategy 30 Financial review Committee statement information under 2 Our strategy in action 32 Risk management 42 Directors’ report 63 Consolidated balance UK GAAP 12 Chairman’s statement 34 Corporate responsibility 45 Corporate governance sheet 108 Group statistical 14 Chief Executive 39 Cautionary statement 50 Remuneration report 64 Consolidated statement information under Officer’s review 60 Shareholder information of cash flows adopted IFRS 61 Report of the 65 Consolidated statement independent auditors of recognised income and expense 66 Notes to the financial statements 100 Company balance sheet OUR STRATEGY /// THE MORGAN CRUCIBLE COMPANY PLC /// 1 OUR STRATEGY IN ACTION 1 FOCUS ON HIGHER GROWTH, HIGHER MARGIN, NON-ECONOMICALLY CYCLICAL MARKETS ENABLING A PERFECT SMILE Our Technical Ceramics plant in Stourport, UK, is applying ceramic injection moulding techniques to a rapidly expanding market: dental implants. Replacement teeth have traditionally used titanium supports, whereas Technical Ceramics offers a solution using zirconia material that is both medically and cosmetically superior. Approved for medical implants with ISO 13356, we are participating in a market currently growing by 15%–25% a year. In addition to this dental application, we are also using ceramic injection moulding to provide solutions in a wide variety of demanding sectors. 2 /// THE MORGAN CRUCIBLE COMPANY PLC /// OUR STRATEGY IN ACTION SUN SHINES ON RENEWABLE ENERGY The rapidly increasing global need for renewable energy is driving markets such as solar power to achieve growth rates in excess of 30%. Links with the silicon semiconductor industry helps our Carbon Division to compete effectively in this marketplace. With strong sector expansion predicted, the potential for growth is significant. MIDDLE EAST ENJOYS THREE PRONGED SUCCESS Thermal Ceramics in the Middle East is targeting three areas of strong end market growth: petrochemical, power generation and aluminium production. Being a major producer of oil and gas, the Middle East is investing heavily in petrochemical plants to meet the growing plastics needs of emerging economies like China and India. Increasing local demand for power plants, to meet the electricity need of consumers and industry as well as to run the region’s desalination plants, is predicted to double the power capacity during the next eight years. Aluminium production is also forecast to double between 2005 and 2010. Thermal Ceramics’ supply of total package and insulation solutions for each of these industries places us in a strong position to deliver continued strong growth in the region. 2 BEING HIGHER VALUE-ADDED TO OUR CUSTOMERS SLIPPERY TREATMENT FOR DIRTY FINGERS A project that has the potential to be regarded as a step-change for the company is currently being pursued by our Technical Ceramics Division. It has developed hi-tech, scratch and wear resistant coatings to protect biometric recognition devices. In addition to providing for greatly enhanced product lifetimes, the coatings are slippery so that dirt and contaminants are less likely to adhere. The market uses retina and fingerprint recognition technology in commercial and for military security applications, such as protection from identity theft and for the policing of high security sites. This is a young market that is growing rapidly. SUPERWOOL EARNS “SUPER” STATUS Our new high temperature Superwool product, the Superwool 607HT (SW607HT), has been significantly improved so that it equals the strength and quality of our existing lower temperature Superwool 607 but can be used at much higher temperatures. The enhancements have been well received by customers resulting in SW607HT becoming the insulation material of choice for a wide range of manufacturers in the steel, ceramics and glass industries. Engineered to meet increasingly stringent environmental regulations, SW607HT offers low biopersistency, making it environmentally friendly. Already achieving robust, profitable growth in Europe from its manufacturing base in France, SW607HT will be rolled out to the rest of the world during 2008. DEFLECTING THE FLAK Through its investment in NP Aerospace, the Carbon Division has expanded its geographical spread, materials capability and customer base in the armour market. NP Aerospace is a major supplier to the UK Ministry of Defence for personal protection, both body armour and helmets, and for vehicle protection. The composite technology that NP Aerospace has, combined with Carbon’s ceramic technology, gives a product that can meet the needs for both lighter and more resilient protection against ballistic threats. OUR STRATEGY IN ACTION /// THE MORGAN CRUCIBLE COMPANY PLC /// 5 3 BEING NUMBER ONE OR TWO IN OUR CHOSEN MARKET SEGMENTS LUXEMBOURG’S SUCCESS IS SEALED Seal faces, engineered, marketed and manufactured at our Carbon Division’s Luxembourg site enjoy a leading position in the petrochemical market. The components, composed of carbon graphite or silicon carbide, are used in sealing devices for chemical and petrochemical pumps and other critical equipment. High growth in the petrochemical industry, caused