Annual Report 2017 Overview
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Delivering world-class materials solutions Annual Report 2017 Overview World-class problem solving Morgan Advanced Materials is We work in the electronics, energy, healthcare, industrial, petrochemical, a global engineering company. security and transport markets, forming close We apply world-class materials collaborative relationships with our customers. Morgan is a global leader in materials science science and manufacturing and application engineering. expertise to solve technical challenges that our customers face everyday. 2 5 4 1 3 Overview Materia ls S Overview ci en c e 02 About us s u Reliable c o F problem 08 Financial and operational highlights r e m solving o t 09 Chairman’s statement s g u ethically and in C r e safely e in ng n E Applicatio Strategic Report 10 Chief Executive Officer’s review Chief Executive Officer’s Group business model 12 Group business model review Page 10 Page 12 14 Key performance indicators Strategic Report 16 Group strategy 17 Our strategy in action 26 Risk management 30 Review of operations 40 Directors’ statements 41 Definitions and reconciliations of non-GAAP measures to GAAP measures 45 Corporate responsibility Governance Our strategy in action Financial Statements Governance Page 17 Page 100 55 Chairman’s letter to shareholders 56 Board of Directors 58 Corporate governance 64 Report of the Audit Committee 68 Report of the Nomination Committee 70 Remuneration report 90 Other disclosures 94 Independent auditor’s report to the members of Morgan Statements Financial Industrial Advanced Materials plc 1 Thermal Ceramics 4 Seals and Bearings Financial Statements Thermal ceramics to protect Seals for industrial applications 100 Consolidated income statement critical components Our carbon, graphite and silicon 101 Consolidated statement of Our high temperature fibre, carbide seals possess superior wear comprehensive income refractory and microporous characteristics, making them ideal insulation provide thermal for industrial use. 102 Consolidated balance sheet management in manufacturing. 103 Consolidated statement of changes in equity 5 Technical Ceramics 104 Consolidated statement 2 Molten Metal Systems Laser reflectors of cash flows Crucibles for casting of We produce laser reflector tubes, industrial components in large and complex dimensions, 105 Notes to the consolidated We produce crucibles which which are used in cutting and financial statements are used in manufacturing welding. 155 Company balance sheet large components in a variety 156 Company statement of of industries. changes in equity 157 Notes to the Company 3 Electrical Carbon balance sheet Wheel motors for mining 173 Group statistical information We are the leading manufacturer of carbon brushes for mining, 174 Cautionary statement used in applications such as wheel 175 Glossary of terms motors, hoists or conveyors. 176 Shareholder information Annual Report 2017 Morgan Advanced Materials 01 Overview About us Our engineered solutions are developed to exacting specifications and deliver ever greater performance through materials and production process innovation. The Group’s highly experienced scientists and application engineers are constantly engaged with our customers to find new solutions for complex and technologically demanding problems. This work is underpinned by a passion to develop the next generation of skilled materials scientists and application engineers, coupled with a commitment to the environment, to health and safety, and operating to high ethical standards. Our structure £1,021.5m Thermal Products Carbon and Technical Division Ceramics Division Total global sales Selling into Thermal Ceramics Electrical Carbon 100 countries Molten Metal Seals and Bearings Manufacturing in Systems 30 countries Technical Ceramics Approximately 8,800 employees Composites and Defence Systems Our strengths Our products > Leading technology and materials Morgan Advanced Materials Thermal Products Division, organised science capability and process in two global business units: know-how manufactures an extensive > Thermal Ceramics: 42% of Group revenue in 2017 – insulating fibre, board, > Application engineering range of products, satisfying a variety of applications across paper, bricks and monolithics – an extensive > Customer focus, reputation range of high-temperature insulation and brand numerous end-markets. products used to reduce energy consumption in industrial processes > Strong market positions The Group’s products sit in two and provide fire protection. global Divisions and six global business > People and culture > Molten Metal Systems: 5% of Group units which Morgan operates: revenue in 2017 – crucibles for metals > Selling into 100 countries processing – a comprehensive range > Manufacturing in 30 countries of crucibles for optimum performance in non-ferrous metal and alloy melting > Approximately 8,800 employees in foundries, die-casters and metal processing facilities. 02 Morgan Advanced Materials Annual Report 2017 Overview Strategic Report Governance Financial Statements Financial Carbon and Technical Ceramics > Technical Ceramics: 25% of Group Composites and Defence Systems: revenue in 2017 – ceramic cores for Division, organised into three > 2% of Group revenue in 2017 – ballistic investment casting – consumable products global business units: protection in the form of personal body used to create intricate internal cooling armour or vehicle armour, utilising the > Electrical Carbon: 15% of Group revenue cavities in aero-engine and industrial gas Group’s advanced ceramics for lightweight in 2017 – electrical carbon and graphite turbine blades; structural ceramics – armour systems. products – primarily used for transferring advanced ceramic components which electrical energy in motor and generator demonstrate exceptional properties In addition to these principal product ranges, applications within the mining, transportation in harsh environments. and power generation markets, and in Morgan also offers application-specific products semiconductor processing. for each of its target markets. These are products designed and manufactured to specific customer > Seals and Bearings: 11% of Group revenue requirements using a wide range of thermal in 2017 – carbon, graphite and silicon carbide ceramics, structural ceramics and precious metals. components which deliver improved performance, reliability and extended life to pumps and similar equipment used in petrochemical, automotive, aerospace and water applications. Annual Report 2017 Morgan Advanced Materials 03 Overview About us Our markets % of revenue 2017 Industrial The Group operates in a 5% 48% number of market sectors. 6% Examples of the products 6% Morgan supplies, and its 7% customer collaborations, are provided on the 8% following pages. 48% 20% of 2017 revenue Industrial Morgan Advanced Materials designs and manufactures Transportation products for use in a broad Petrochemical range of challenging process Security and defence and manufacturing Energy environments. Electronics The Group’s advanced materials offer a wide Healthcare range of performance characteristics including superior insulating properties, dimensional stability, strength and stiffness. Components which are highly resistant to chemical and physical wear, corrosion and extreme temperatures support optimised process efficiency and increase productivity. These attributes are helping to reduce industrial waste, improve safety and lower environmental impact. For example, Morgan’s Molten Metal Systems global business unit has focused on reducing aluminium contamination in molten metal processing. The development of two specialist crucible coatings, designed to act as a diffusion barrier during the melting process, is helping aluminium casters to improve quality of output and reduce rejections by avoiding metal contamination in the melting and holding process. Morgan has also continued to invest in research and development (R&D) to support its role in the industrial market, with construction work underway at our new Carbon Science Centre of Excellence (CoE) at Penn State University, Pennsylvania, USA. The collaboration between the university and Morgan aims to drive innovation in the field of carbon science for a range of sectors and applications. The findings generated by the CoE will support Morgan in the delivery of world-class materials science solutions to meet the challenges of customers worldwide, safely and efficiently. 04 Morgan Advanced Materials Annual Report 2017 Overview Transportation Petrochemical 20% 8% Strategic Report of 2017 revenue of 2017 revenue Morgan Advanced Materials Morgan Advanced Materials manufactures high- makes critical components performance products for for challenging applications aerospace, automotive, in the global petrochemical Governance marine and rail applications. industry. These applications require high-performance The petrochemical industry operates components and sub-assemblies in demanding environments, creating a manufactured to exacting standards. requirement for more durable, resistant and efficient materials. Morgan’s components are The Group combines its materials science and used globally in critical applications to meet manufacturing capabilities to offer consistent on- and offshore exploration challenges, and and reliable products in flexible production support drilling and downstream processing, quantities. For example, Morgan’s carbon thanks to their resistance to chemical and brushes and collectors are used extensively physical wear,