Morgan Advanced Materials Annual Report 2021

FY2021 Annual Report · Morgan Advanced Materials

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CONTENTS

2021 highlights

STRATEGIC REPORT

Chairman’s statement
Section 172 statement
Our stakeholders
Chief Executive Officer’s review
Our strategy in action
Our business model
Sustainability and responsibility
Key performance indicators
Risk management
Review of operations
Group financial review
Directors’ statements
Definitions and reconciliations of
non-GAAP measures to GAAP measures

GOVERNANCE

Chairman’s letter to shareholders
Board of Directors
Corporate governance
Report of the Audit Committee
Report of the Nomination Committee
Remuneration report
Other disclosures
Independent auditor’s report to the
members of Morgan Advanced Materials plc

02
04
06
08
10
14
16
36
38
44
50
53

59
60
62
74
79
82
106

110

FINANCIAL STATEMENTS

Consolidated income statement
118
Consolidated statement of comprehensive income 119
120
Consolidated balance sheet
121
Consolidated statement of changes in equity
122
Consolidated statement of cash flows
123
Notes to the consolidated financial statements
169
Company balance sheet
170
Company statement of changes in equity
171
Notes to the Company balance sheet
185
Group statistical information
186
Cautionary statement
186
Glossary of terms
187
Shareholder information

“

WE HAVE WORKED HARD TO BUILD
OUR CAPABILITIES AND IMPROVE OUR
PROCESSES, AND THIS FOUNDATION
HAS ENABLED US TO DELIVER STRONG
ORGANIC GROWTH AND EXPAND OUR
MARGINS, DESPITE SOME OF THE SUPPLY
CHAIN CHALLENGES AS THE GLOBAL
ECONOMY RECOVERS.

”

Pete Raby
Chief Executive Officer

Significant trends shape our
modern world, accelerating
the demand for new and
more sustainable advanced
materials.

At Morgan Advanced Materials, we
use advanced carbon and ceramics
materials to support the move
to a more sustainable world.
Our people are driven to solve
complex customer problems:
from managing heat and enabling
greener technologies, to
supporting improved medical
diagnostics and protecting life.

Our purpose is ‘to use advanced
materials to make the world
more sustainable, and to improve
the quality of life’. This purpose
is underpinned by our safe, ethical
and inclusive culture, embraced

by our 7,800 employees spanning over 25
countries. Working across many industries
and in a number of markets, we deliver the
materials science and technologies the
world needs now.

OUR STRATEGY
We are a global advanced manufacturing
organisation with leading capabilities in
three areas: materials science, application
engineering and customer focus.

Read more on page 17

2021 HIGHLIGHTS

ADJUSTED
PERFORMANCE1

STATUTORY
PERFORMANCE

REVENUE

£950.5m

2020: £910.7m | 2019: £1,049.5m

OPERATING PROFIT/(LOSS)

£113.1m

2020: £(1.8)m | 2019: £126.1m

GROUP ADJUSTED OPERATING PROFIT1

PROFIT/(LOSS) BEFORE TAX

£124.5m

2020: £91.7m | 2019: £134.2m

£104.3m

2020: £(13.1)m | 2019: £109.7m

ADJUSTED EPS1

27.2p

CONTINUING EPS

23.9p

2020: 19.0p | 2019: 28.0p

2020: (8.6)p | 2019: 25.2p

TOTAL DIVIDEND PER SHARE

CONTINUING AND DISCONTINUED EPS

9.1p

2020: 5.5p | 2019: 4.0p

25.9p

2020: (7.9)p | 2019: 25.7p

HEALTH, SAFETY AND
ENVIRONMENTAL
PERFORMANCE

LOST-TIME ACCIDENT FREQUENCY
per 100,000 hours worked

0.22

2020: 0.18 | 2019: 0.14

ABSOLUTE CO2e 2
Tonnes

229,887

2020: 276,678 | 2019: 318,842

1. Throughout the Annual Report, including the Strategic Report, adjusted measures are used to describe the Group’s financial performance. These adjusted
measures are not recognised under IFRS or other generally accepted accounting principles (GAAP). 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. 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 and charts. Definitions and
reconciliations of these non-GAAP measures to the relevant GAAP measures can be found in the Group Financial Review on pages 55 to 57.

2. Absolute CO2e has replaced energy intensity as a key measure of environmental performance. The Directors consider this to be a more stringent metric

as the business continues to grow and it is aligned to our 2030 targets.

Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsCHAIRMAN’S STATEMENT

“

I AM PLEASED TO
INTRODUCE MORGAN’S
ANNUAL REPORT FOR 2021.
OUR PEOPLE AND BUSINESS
MODEL SHOWED THE
GROUP’S RESILIENCE
FOLLOWING THE
CHALLENGES OF 2020.

Douglas Caster CBE FIET
Chairman

”

In 2021 we continued to make
good progress in delivering
our strategy and the results
demonstrate that we are well
positioned for the long term.

I am proud of the way our people
have performed during the
challenging environment owing
to the COVID-19 pandemic and
achieved the results for 2021
which demonstrate increasing
demand for our products, driving
increases in revenues, profitability
and cash flows.

SAFETY OF OUR PEOPLE
The people in our business have shown strength
and stamina facing the challenges of 2021.
COVID-19 protocols are still in place across all
our sites, and we have experienced temporary
interruptions during peak infection periods.
Demand for our products has increased through
the year and sites are operating at full capacity in
some instances. I would like to thank our people
for their hard work and commitment.

The first imperative is the safety of our people
and I am disappointed that during 2021 our safety
performance dipped. Supporting executive
management, your Board has spent a significant
amount of time discussing safety performance
and overseeing a new approach to safety culture.
These discussions have emphasised a more
holistic approach to safety, and this now
encompasses greater focus on the wellbeing of
our people. My fellow non-executive Directors
and I will continue to support management
to achieve a position of ‘zero harm’.

BOARD CHANGES
Later this year, we will say goodbye to Peter
Turner who has been Chief Financial Officer
since 2016. On behalf of the Board I would like
to thank Peter for his support and significant
contribution to the Group over the last five years.
Peter has worked tirelessly and successfully to
strengthen the financial position of the Group,
and his calm and rigorous leadership has been
invaluable to the Board and executive team.
He leaves the Group much stronger and
healthier than when he arrived, and we wish
him well in his retirement.

Richard Armitage will join the Board as
Chief Financial Officer in May 2022 and we
look forward to welcoming him to the Group.

OUTLOOK
The global business environment continues
to be challenging. The role of the Board is
more important than ever in assisting executive
management to navigate through the competing
priorities of managing the business day to day,
whilst continuously looking to the future in order
to secure the Group’s position. The fulfilment of
our purpose, execution of our strategy and focus
on environmental, social and governance matters
support the position of the Group for the long
term, and I am confident for the future.

Douglas Caster CBE FIET
Chairman

ENVIRONMENT AND STRATEGY
We are working to reduce the Group’s
environmental impact, and this has become an
increasingly important area not only for you, our
shareholders, but also our customers, suppliers
and employees. I am pleased by the progress we
have made to date and the opportunities we
have identified for the future. Not only are we
making our manufacturing processes more
efficient and reducing our CO2e emissions, but
more importantly our products, which have
properties to withstand heat and endure other
extreme environments, assist our customers
in reducing their environmental impact, either
by lasting longer or improving the efficient use
of resources.

During 2021, we set our execution priorities for
the next three years and these are explained
in more detail in the Chief Executive Officer’s
Report. Following the restructuring and efficiency
programme which completed in 2021, we are
well positioned for growth and will focus on
opportunities to innovate in faster-growing
markets, whilst further developing our service
to customers.

I strongly believe that the next phase of our
strategy, whilst including stretching targets for
our environmental performance and focus on
our people and their safety, supports Morgan’s
purpose to use advanced materials to make
the world more sustainable, and to improve
the quality of life.

FINANCIAL PERFORMANCE
Morgan’s financial health has improved
significantly during recent years, and this is
reflected in a progressive dividend payment
policy. The Board considers the allocation of
capital carefully and the investments needed for
the future of the business. The Group has made
good progress in reducing debt, proactively
managing the defined benefit pension deficit
and improving cash generation.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
SECTION 172 STATEMENT

STATEMENT BY THE DIRECTORS IN PERFORMANCE
OF THEIR STATUTORY DUTIES IN ACCORDANCE
WITH SECTION 172(1) COMPANIES ACT 2006
The Board is committed to the creation of value through sustainable
growth. When making decisions and considering key matters of
business, the Board considers the implications of its decisions for
the long term; takes account of the interests of the Group’s key
stakeholders and how decisions might impact them; and has regard
to the need to maintain high standards of business conduct and our
commitment to environmental, social and governance (ESG) matters.

HOW THE BOARD TAKES STAKEHOLDER INTERESTS
AND OTHER MATTERS INTO ACCOUNT
All decisions and business conducted by the Board are considered
in the context of Morgan Advanced Materials’ overriding purpose
to ensure alignment.

During 2021, the Board reviewed the Group’s key stakeholders
and confirmed that they continue to be its investors, customers,
employees, suppliers, pensioners and pension trustees and
communities. Our key stakeholders, why they are significant, the
main methods we use to engage with them, and the issues of interest
to them are set out on pages 6 and 7.

Further information on the mechanisms used by the Board to engage
with key stakeholders, in particular with investors and the workforce,
and details of the issues raised by them as a result of the engagement
and the effectiveness of the methods of engagement, can be found
on page 30 of the Sustainability and Responsibility section and
pages 69 to 72 of the Corporate Governance Report.

HOW THE BOARD TAKES DECISIONS
A robust governance framework ensures that the appropriate
decisions are referred to the Board for consideration. Further
information on the Company’s governance structures, delegation
of authority and how the Board operates is set out in the Corporate
Governance Report on pages 64 to 66. The Board reviews the
Group’s principal and emerging risks regularly and takes into account
the Group’s appetite for risk when taking decisions.

The Board spent time during 2021 engaging with a diverse cross-
section of employees, as well as monitoring and assessing the Group’s
culture. These insights have informed the Board’s discussion when
assessing progress in relation to fostering a safe, ethical and diverse
workplace. These interactions have also enabled the Board to
understand the capabilities of the current and future leadership team
and the extent to which employees understand and are aligned with
the Group’s strategic direction.

The principal matters and key decisions considered by the Board
during 2021 are set out on pages 68 to 69 of the Corporate
Governance Report.

CONSEQUENCE OF ANY DECISION IN THE LONG TERM
The Board considers the long-term success of the Group when
conducting its business, for example, when monitoring the
implementation of the Group strategy, approving investments in
new product development, approving capital expenditure to upgrade
plant and equipment and in overseeing the development of
Morgan’s people. Information on the Group’s purpose and strategy,
and how these serve to guide the long-term direction of the Group,
is set out on page 10.

KEY DECISIONS TAKEN DURING 2021
1. Approval of a new environmental, social and governance

(ESG) strategy which set goals for 2030 in relation to safety
performance, CO2e emissions, water usage, employee
engagement and diversity and inclusion.

How the decision was taken: The strategy was developed
by comparing the ESG areas that investors are focused on and
how these are aligned with Morgan’s business to determine
five priority areas. The Board of Directors had oversight of the
process to develop the strategy and reviews progress at each
Board meeting.

How stakeholder interests were taken into account:
´ Workforce – A cross-section of employees were asked for

their views on the most important ESG issues to the business
and this assessment was taken into account by the Board when
selecting the main objectives of the ESG strategy and the key
issues to focus on and improve;

´ Customers – Our ESG performance is increasingly important

to our customers who view us as partners who share the same
values and approach to conducting business responsibly. This
safeguards our customers’ reputation and ensures that we
remain a reliable party in their supply chain for the long term.
Consequently, our customers expect us to be able to
demonstrate ESG performance and plans for improvement;
´ Suppliers – Our suppliers depend on our success and support

the steps we take to maximise efficiency and remain competitive;

´ Community – There is a widespread expectation that large

corporates behave responsibly, minimise the use of resources
and take steps towards a more sustainable future;

´ Investors – The integration of ESG into our long-term business
strategy responds to demands from investors for companies to
manage the environmental impact, take care of their people and
the communities in which they operate and behave responsibly,
with a view to ensuring their long-term success.

Impact of the decision: ESG targets for 2030 and aspirational
goals for 2050 are set out on page 9 and in the Sustainability and
Responsibility section.

2. Approval of a fresh approach to safety comprising a two-pronged
strategy: (i) evolution to a caring culture and (ii) a new health
and safety management system, with a long-term aspiration
of ‘zero harm’.

How the decision was taken: In addition to the regular reports
presented by executive management containing details of safety
performance, the Board received an analysis of Morgan’s position
in relation to safety culture. The Board reviewed and approved
the strategy.

´ Customers and suppliers – The Board determined that a prudent
balance of reinvesting capital in the business with dividends paid
to investors served these stakeholder groups’ interests for the
longer term.

Impact of the decision: The Board approved the dividend policy.

4. Continuous review of the Group-wide restructuring programme
to improve performance and support long-term growth which
was approved and commenced in 2020, with the addition of
further select small portfolio changes.

How the decision was taken: The Board received progress
reports on the implementation of the restructuring programme
from the dedicated project manager at each Board meeting.

How stakeholder interests were taken into account:
´ Employees – The Board considered the restructuring activities
taken to be in the interests of employees in order to promote
sustainable performance of the Group for the long term. The
Board ensured that executive management provided clear and
timely communication of the decisions which impacted specific
sites, and that there was meaningful dialogue on the changes
between employees, their representatives and management;
´ Investors, customers, suppliers, pensioners and pension trustees
and communities – The Board determined that the restructuring
activities served these stakeholder groups’ interests for the
longer term.

Impact of the decision: The restructuring programme
efficiencies have contributed to the robustness of the Group
which is well placed for growth and to serve customers’ needs.

Further information on these significant decisions can be found
throughout this Annual Report:
´ The Chairman’s Statement on page 3 and the Chief Executive
Officer’s Review on pages 8 to 9 provide information on the
strategic context;

´ The Review of Operations on pages 44 to 49 contains information

on the restructuring programme;

´ The Group Financial Review on pages 50 to 52 provides

information on measures taken in relation to the Group’s financial
performance; and

´ Pages 18 and 19 of the Sustainability and Responsibility section
contain information on our safety policy and performance.

How stakeholder interests were taken into account:
´ Workforce – A detailed explanation of the Board’s engagement

with the workforce on safety is set out on page 70 of the
Corporate Governance Report;

´ Customers – We work with customers who expect us to manage
our business responsibly and to demonstrate that we comply
with their expectations so that they can demonstrate that there
is a consistent and responsible approach to safety throughout
their supply chain;

´ Investors – Our investors expect us to implement safety policies
and procedures and to improve safety performance in order to
protect our reputation and preserve the value of their investment;

´ Community – Contractors, visitors and other third parties enter
our sites and business premises. The strategy ensures that the
safety procedures and protocols apply consistently across our
business to create a safe environment for all.

Impact of the decision: The new strategy is being rolled out
across the Group with activities and training to build a caring
safety culture and develop standard safety systems across the
Group. This is described further in the section on Health and
Safety on pages 18 to 19 in the Sustainability and Responsibility
Report.

3. Consideration of capital allocation taking into account the needs
of the business in the shorter term and balancing these with
the long-term sustainability of the Group and its responsibilities
to our people and the society in which we operate.

How the decision was taken: The Board received an
evaluation, prepared by executive management, which set out a
number of considerations including cash performance, level of
financial indebtedness, position relative to financial covenants,
contributions to the defined benefit pension schemes, dividend
policy and investor needs, and proposals to invest to grow the
business and to meet environmental and safety commitments.

How stakeholder interests were taken into account:
´ Employees – The Board considered that investments in plant
and machinery in order to improve safety, efficiency and
environmental impact and production, and to grow the business,
would benefit current employees by improving their safety
and environment, whilst also safeguarding jobs for the future;
´ Investors – Investor expectations in relation to the progression

of dividend payments, both from a capital return perspective and
as a signal of future performance, were taken into account and
a dividend policy was discussed and agreed. The discussion
included consideration of key questions around quantum, timing
and dividend progression;

´ Pensioners and pension trustees – The Company’s obligations

in relation to funding the defined benefit pension schemes were
considered. In addition, the Board considered the likely impact
of funding allocations to promote a stable and sustainable
Company which would benefit pensioners and pension trustees
in the longer term;

´ Lenders/providers of debt – The impact of paying a dividend

on whether the Company remained within the financial covenants
agreed with lenders;

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

OUR STAKEHOLDERS

Our stakeholders are key to the delivery of our strategy. Below we set out the
many ways we engage with stakeholders and why their engagement matters.

WHO ARE OUR
STAKEHOLDERS?

INVESTORS
Those who own shares or wish to own
shares in Morgan Advanced Materials

CUSTOMERS
Those who have purchased our products or will do so
in the future

We aim to deliver great service so that our customers feel valued and
choose us as their ‘go-to’ supplier. To do this effectively we need to
listen to and engage with them.
We develop relationships with our customers based on mutual trust
and constructive dialogue.
We have a diverse customer base across the globe, which we serve
directly, and also through joint venture partnerships and local suppliers.
We are seeing growing demand for advanced materials as customers
push the boundaries of technology.
We have been working closely with our customers to develop new
solutions for their next generation of products and processes.
We are providing products that are differentiated from those of our
competitors.

The relationship with our customers starts from the moment they look
to find out about our products. We keep customers updated on the
progress of our innovation and new product applications through digital
and physical channels.
Our sales and service colleagues also keep customers updated on the
progress of manufacturing; sometimes working alongside the customer
to fine-tune the product and production process.
We also gather key feedback from customers about the service we
provide and use this to help improve relationships and secure future
business.

´ Reliable and consistent service;
´ Quality products;
´ Product and process innovation;
´ Ability to solve complex problems;
´ Application engineering capabilities;
´ How we source our raw materials;
´ Environmental impact of the products we produce.

WHY OUR
STAKEHOLDERS
ARE IMPORTANT
TO US

Our investors provide capital for our business.
We value this commitment and want to ensure
investors have a deep understanding of our
business, our strategy, the market environment
and our governance arrangements.
It is important to us that we foster an open and
transparent relationship to enable investors to
make effective investment decisions.

HOW WE
ENGAGE WITH
STAKEHOLDERS

We engage with our investors directly through
both the formal presentation of results and investor
roadshows. We also use these opportunities to talk
about the future and the longer-term plans for
our business.
When asked, we complete investor questionnaires
which give a further insight into key aspects of our
business performance.
We provide a dedicated section on our website
which offers timely information on how we are
performing against our stated ESG goals.
We publish a yearly sustainability and responsibility
report that details the progress we are making
against our ESG targets, including full disclosure
of metrics and ratings linked to environmental
performance.

´ Capital gain through share price appreciation;
´ Capital return via dividends;
´ Profitability and business growth potential;
´ Quality of governance;
´ Responsibility and fairness;
´ The protection of the environment through

the use of more sustainable materials and the
reduction of carbon emissions, reduction in
water use and improved waste management;
´ Demonstrating our ‘good governance’ approach

throughout our decision making;

´ Demonstrating the positive contribution we
make to society through the employment
opportunities we provide, through our
interactions with the communities where
we have our sites and through the support
we provide to our people.

WHAT MATTERS
TO OUR
STAKEHOLDERS?

EMPLOYEES
Anyone directly employed by
Morgan Advanced Materials

Having people who bring a diverse range of
talents and perspectives, and who feel engaged
in their role, is of paramount importance
to our long-term success.
Our employees have been instrumental
in making Morgan Advanced Materials the
company it is today. They are key to driving the
brand forward and ensuring it remains relevant
in the future.
We work to attract, develop and retain the
right people and ensure they are in the right
roles.

The Board is committed to fostering a safe,
ethical and inclusive workplace and spends
time engaging with a diverse cross-section of
employees, as well as monitoring and assessing
the Group’s culture. These insights help inform
the Board’s discussions on health, safety and
environmental matters, in monitoring progress
in relation to embedding ethical conduct and
implementation of the Morgan Code, and
in strengthening the capabilities of our leaders
and teams.
At a local level, leadership teams use feedback
from surveys, focus groups, pilot groups,
manager one-to-one conversations and
employee communications to shape
engagement activities with employees.
At a Group level, we solicit feedback through
our social media channels both internally and
externally, and through employee satisfaction
platforms such as Glassdoor.
At all levels we engage on subjects important
to our people including: mental health at work,
safety, the environment, developing a diverse
and inclusive culture, and the important role
of community and charity.

´ Meaningful roles linked to our purpose;
´ Flexible working;
´ Focus on wellbeing;
´ Career development;
´ A diverse and inclusive culture.

SUPPLIERS
Those from whom
we purchase goods
or services

We believe in an open
and collaborative business
approach and seek
opportunities for innovation.
This collaborative approach
is particularly important to
ensure a more sustainable
supply chain.
We aim to use all our
resources as efficiently as
possible, minimising the
environmental and social
impact on ourselves, our
suppliers, our customers
and the world around us.

We treat our suppliers as
an extension of our business
and therefore expect them
to uphold the same high
standards we set for
ourselves. To achieve this,
we are in constant dialogue
with our suppliers to address
any issues and maintain
productive relationships.
We have published a new
Supplier Code of Conduct
which provides a set of
minimum conduct standards
that we expect from our
suppliers globally. Our
Supplier Code focuses
on treating people fairly,
complying with health and
safety rules, protecting the
environment, and adhering
to important ethics and
compliance obligations.

´ Human rights;
´ Environmental and
climate impact;

´ Quality management;
´ Cost efficiency;
´ Ethical trading policies

and sustainable sourcing;

´ Developing long-term

relationships.

PENSIONERS AND
PENSION TRUSTEES

After more than 160 years in
business, we would not be
as strong as we are today
without the combined efforts
of all those who went before.
By keeping our pension
commitments, we honour
the hard work and dedication
of both current and past
employees.

We engage with both current
pensioners and those yet to
retire through regular pension
communications in conjunction
with our pension trustees.
New employees receive
communications about our
pension schemes in a bid to
promote financial wellbeing.

COMMUNITIES
Those who live or operate in areas
where we work – for example
residents, businesses and charities

Our people live and work within wider
communities and relationships with these
communities are key in supporting our
business for the future.
Our relationship with local communities
is mutually beneficial, offering us the ideal
place to find the talent of tomorrow,
while enabling our people to get involved
in activities which directly benefit these
communities.
We seek to build trust by understanding
the issues core to our communities,
operating responsibly and addressing
concerns that are material to them.
We aim to create long-term relationships
with the communities in which we
operate, that drive positive change and
help build a more sustainable future.

Our aim is to have a positive impact
on the communities we serve, from
supporting job creation and skills
advancement, to reducing energy and
water consumption at our plants. All our
efforts and engagements are governed
by the Morgan Code, our purpose
and our policies on the environment.
As our sites and operations are spread
across the globe, we have the
opportunity to work with many
communities. We pride ourselves
on engaging at a local level and look to
understand each community’s priorities
and concerns. We also support our
employees’ involvement in their local
community, from charity giving to local
fundraising, and from volunteering
to health and wellbeing initiatives.

´ The commitment of the
Company to ensure the
pension scheme is fully
funded and any deficit
reduction plan is
maintained.

´ Our commitment to the local

environment;

´ Our conduct as a socially responsible

organisation;

´ The positive impact we can have

on the community living and working
around us;

´ Employment opportunities.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsCHIEF EXECUTIVE OFFICER’S REVIEW

“

I AM EXTREMELY PROUD OF

HOW OUR PEOPLE HAVE
WORKED TOGETHER THIS YEAR,
LOOKING OUT FOR EACH
OTHER AND DELIVERING FOR
OUR CUSTOMERS. WE MADE
FURTHER PROGRESS WITH THE
EXECUTION OF OUR STRATEGY,
STRENGTHENING OUR
CAPABILITIES AND IMPROVING
THE SUSTAINABILITY OF
OUR BUSINESS.

Pete Raby
Chief Executive Officer

”

2021 was the second challenging
year with the COVID-19 pandemic
driving various restrictions on
mobility and activity around
the world. Demand recovered
strongly across the global
economy following the sharp
slowdown in 2020, and the
combination of high demand
and the pandemic led to supply
chain disruptions, and inflation
in materials and labour in various
parts of our business. Nevertheless,
in spite of these challenges,
we have made good progress
as a business, with further
implementation of our strategy
and progress against our long-
term goals. This resulted in
strong growth and saw margins
at their highest point in more
than 20 years.

COVID-19
We have maintained our COVID-19 controls
across the business as needed, in line with the
requirements of local jurisdictions and our Group
COVID-19 standards. Our employees have
been diligent in looking out for one another
and following our protocols to keep each other
safe. Sadly, we have seen further loss of life due
to the pandemic, and our thoughts are with all
those affected.

SUSTAINABILITY
Our purpose is ‘to use advanced materials to
make the world more sustainable and to improve
the quality of life’. In 2021, we set out five
aspirations for our business together with goals
for 2030. We have made good progress against
each of these, and we are starting to see that
reflected in some of our KPIs:

1. ‘Zero harm’ to our employees, with a 2030
goal of a lost-time accident rate of 0.1.
Our lost-time accident rate in the year was
0.22 compared to 0.18 in the prior year.
We launched a major refresh of our approach
to safety during the year, with training being
deployed to all employees focusing on our
safety culture. This formal training will
complete during 2022 and the changes will
be sustained by our leaders in their daily
engagement with our teams, and via
follow-up training on specific safety topics
through the year. We have also continued
to invest in safety improvements across our
business to improve the quality and safety
of our infrastructure.

2. A CO2e net zero business by 2050, with

a 2030 goal of a 50% reduction in scope 1
and 2 CO2e emissions, additionally we will
start to measure scope 3 emissions from
2023 onwards, with coverage increasing over
time. Our teams across the business have
embraced this challenge and put in place plans
to improve our energy efficiency and switch
to zero-carbon energy sources. During the
year, we reduced our absolute CO2e
emissions by 17%.

3. Use water sustainably across our business,
with 2030 goals of reducing water use and
water use in high-stress areas by 30%. We
have launched a number of capital projects to
recycle water and improve water efficiency.
They started to deliver some benefits in 2021
and will drive further improvements in 2022.
Our water usage in the short-term increased
by 15%, driven by business growth and
changes in mix. Our water usage in stressed
areas increased by 9%. We expect to make
progress on reducing water usage in 2022
as our projects start to deliver.

4. A workforce reflective of the communities
in which we operate, with a 2030 goal of
40% of our leadership population being
female. At the end of 2021, 29% of our
leadership population were female, compared
with 30% in the prior year. We are making
a wide range of changes to improve our
diversity, from amending policies, to training
and changes in our approach to recruitment.
We have also established our first employee
resource group, Women@Morgan. It
comprises a diverse group of women from
across the business; they will review our
approach and develop and drive changes
to help us support women through their
careers in our business.

5. A welcoming and inclusive environment

where employees can grow and thrive with
a 2030 goal of a top-quartile engagement
score. We conducted an employee
engagement survey in the fourth quarter
of 2021 to understand how our employees
are feeling and what we can do to improve.
Our engagement score was 50%, a reduction
from the 55% we scored when we last
surveyed our people in 2019. We have
much we can do to improve and will be
communicating the results and developing
plans in the early part of 2022.

DELIVERING OUR STRATEGY
Beyond our focus on sustainability, we have
two priority areas where we want to develop
our capabilities further:

´ Adjusted operating profit* was £124.5 million
representing adjusted operating profit margin*
of 13.1%;

´ Group adjusted earnings per share* was

1. Delighting our customers. Following

27.2p (2020: 19.0p);

on from our foundational work on sales
effectiveness, we are working to shape
our product and service offerings further
based on customer needs, with the overall
objective of making our business more
customer centric. We will be gathering
customer feedback during 2022 through
a range of channels and using that to
understand our customer segments in
more detail. This will enable us to tailor
our product, service and support offerings
more closely to customer needs.

2. Innovating to grow. We want to accelerate
our growth, by winning in our core markets
and increasing our exposure to four
faster-growing market segments: clean
energy, clean transportation, semiconductors
and healthcare. We have been focusing
our product development and business
development efforts in these markets over
the last several years to develop new and
differentiated products that solve hard
problems for our customers. During 2021
the organic revenue growth in these
segments was 22% (excluding one-off solar
projects*), and this represented around
20% of our revenue overall.

We have concluded our restructuring
programme during the year by completing the
last of our planned site closures as we move
volumes to more efficient plants around the
Group. This has improved our robustness as
a Group, concentrating work where we have
more scale and, in line with our targets, has
delivered £20 million of annual savings by the
end of 2021. Full-year run-rate benefits of
£23 million for 2022 remain unchanged.

GROUP FINANCIAL PERFORMANCE
The business grew strongly during the year
reflecting good end-market demand and good
execution by our teams. This led to a strong
overall financial performance with the revenue
growth driving expansion in profitability and
cash flow.
´ Group revenue in 2021 was £950.5 million,
4.4% ahead of the prior year at reported
rates and 10.3% higher on an organic
constant-currency* basis;

´ Statutory operating profit was £113.1 million,
profit before tax was £104.3 million, basic
earnings per share was 25.9p;

´ Basic earnings per share from continuing

operations was 23.9p (2020: loss per share
8.6p);

´ Net capital expenditure* was £28.1 million
(2020: £28.6 million), with investment
focused on health, safety and environmental
improvements, investments in efficiency,
select capacity expansion and improvements
to the underlying infrastructure of the Group;

´ Free cash flow before acquisitions,

disposals and dividends* was £66.2 million
(2020: £72.4 million);

´ Net debt excluding lease liabilities* was

£46.7 million, with a net debt* excluding lease
liabilities to EBITDA* ratio of 0.3x.

Overall, our results demonstrate the
improvements we have made to the business in
the last six years, with significant expansion in
adjusted operating profit margins arising from
both the growth in the business and the benefits
of our restructuring programme.

OUTLOOK
We have seen good order momentum coming
into the year and anticipate organic revenue
growth of 4 to 7% in 2022, assuming no
significant change in market momentum. With
our investments in new products and new
technologies, we plan to increase further our
exposure to our faster growing segments (clean
energy, clean transportation, semiconductors
and healthcare), and to continue to win in our
core markets.

We will see higher inflation in 2022 and expect
higher pricing and continuous improvement
to offset this. We expect our margins to expand
further reflecting the drop-through on our
organic growth and the remaining full-year
benefits from our restructuring programme.

I would like to thank our employees for their
outstanding commitment and support during
the year as they have cared for each other while
working diligently to meet the increased demand
from our customers.

Pete Raby
Chief Executive Officer

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
OUR STRATEGY IN ACTION

STRATEGY AND PURPOSE

We have a strategy to make sure that
we are the leaders in our field, with the
customer and materials insight to apply
our capabilities quickly and effectively.

us
c
o
F
r
e
m

Materials Scie

RELIABLE
PROBLEM
SOLVING

ethically
and safely

Appl i c a t i o

n E ngineerin

MAKING A
POSITIVE DIFFERENCE

At Morgan Advanced Materials we are driven
to live our purpose, by creating more sustainable
products and manufacturing processes, and
by creating an inclusive workplace. We support
a number of awareness days throughout the year
as a way to celebrate, educate and engage
ourselves and others, and to highlight our desire
to make a big positive difference.

We want to accelerate our growth, by winning
in our core markets and increasing our exposure
to four faster-growing market segments: clean
energy, clean transportation, semiconductors and
healthcare. We have been focusing our product
development and business development efforts
in these markets over the last several years to
develop new and differentiated products that
solve hard problems for our customers.
´ Clean energy. Growth in energy storage,
brushes and slip rings for onshore wind
applications and ceramic and carbon products
used in solar panel manufacture;

´ Clean transportation. Growth in our rail
collector business for metro and main rail
applications, and in water and vacuum pump
components for electric vehicle applications;

´ Semiconductors. Growth from carbon

and ceramic consumable supply into key
semiconductor process steps including crystal
growth, deposition, lithography and etch;
´ Healthcare. Growth from medical imaging

and supply of low temperature insulation for
medicine and vaccine transport and storage.

During 2021, organic constant-currency*
revenue growth in these segments was 22%
(excluding one-off solar projects*), and they
represented 20% of our revenue overall.

OUR PURPOSE
Our purpose is ‘to use advanced materials to
make the world more sustainable and to improve
the quality of life’. This purpose guides our
actions: it underpins our work to reduce our
environmental impact, informs how we treat our
people, and ensures we fulfil our responsibility
for good corporate governance.

We deliver on our purpose through the products
that we make and the way that we make them.
´ We improve the quality of life by supporting
medical diagnostics with our power tubes
in medical scanners. Our Vacuum Insulation
Panels are used to insulate COVID-19
vaccines as they are transported. Our
feedthroughs are at the core of cochlear
implants and our seals are used in blood
pumps. These products transform people’s
lives;

´ Our products help keep people safe. We are
proud to design fire protection in everything
from cars to tunnels, and ships to oil platforms;

´ We design and manufacture our products

to help customers save energy;

´ Our carbon brushes are integral to wind

turbines and power generators and enable
electrified rail transport. Our ceramic rollers
are used to make thin-film solar panels, our
insulation is used in solar towers and steam
turbines, and our ceramic cores are used
to make more efficient industrial gas turbines.
These are all products which promote
a more sustainable and environmentally
secure future for our planet.

OUR STRATEGY
Our strategy builds on our strengths and focuses
the Group on scalable businesses in attractive
markets, and on the development of our three
core capabilities in customer focus, application
engineering and materials science. To support
our efforts in bringing together the parts of our
strategy and to achieve our ESG goals we have
three new execution priorities:

To create a ‘big positive difference’ making
sure we govern our business the right way,
looking after the environment, looking after our
people and operating to high ethical standards.
This priority supports our focus on living and
breathing our commitments on inclusion,
treating people fairly, reducing waste, managing
our water consumption, and reducing emissions.

To ‘delight the customer’ – following on from
our foundational work on sales effectiveness,
we are working to shape our product and service
offerings further based on customer needs,
with the overall objective of making our business
more customer-centric. We will be gathering
customer feedback during 2022 through a range
of channels and using that to understand our
customer segments in more detail. This will
enable us to tailor our product, service and
support offerings more closely to customer
needs.

To ‘innovate to grow’– many of our customers
have an increasing need to reduce their energy
consumption and CO2e emissions; these
customers need our help. This priority supports
our focus on working with the customer to
innovate in traditional heavy industries whilst
also contributing to greener technologies for
the future.

“

BEING VISUALLY
IMPAIRED IMPACTS
MOST PARTS OF MY LIFE,
WHICH IS WHY MY
GUIDE DOG PIPPIN
GOES EVERYWHERE
I GO, WHETHER IT BE
TRAVELLING FOR MY
HOBBIES OR WORK.
SHE IS MY EYES AND
KEEPS ME SAFE.

Materials Procurement Co-ordinator”

Paul

Awareness days include demonstrating support
for positive changes to our environment and highlight
the need for inclusivity, diversity and equity.

Our Materials Procurement Co-ordinator Paul,
shares his experience of adapting his work
environment to support his visual impairment. For
Paul this involves an additional member of the team,
dedicated to his needs, guide dog Pippin.

When Paul’s sight was impacted, he was supported
by amazing resources from Guide Dogs for the Blind
on what to expect when working with a guide dog
in the workplace. The team at Morgan then shared
the information with everyone in Paul’s office, which
made his experience easier, and meant everyone
knew what to expect.

Alongside Pippin’s assistance, the team have worked
to support Paul by providing specialist equipment,
such as magnification devices and software through
the UK Government’s ‘Access to Work’ scheme.
These adjustments enable Paul to carry out all the
tasks that his role requires, and mean we get Paul
and his expertise in our business.

In addition, the team have introduced a flexible
working arrangement, allowing Paul to adjust his
hours of working to suit public transport timetables,
whilst maintaining a full-time working week. Paul
has even moved his desk to allow space for Pippin
to settle in, and with the aid of a personal risk
assessment, he is able to access the production
office and break area, which are connected with
a green gangway.

Paul shares his advice for creating a more inclusive
workplace: “In my experience, if people know you
have a disability, they are more likely to help you.
So I think it is always better to be open about your
disability, as this makes people aware that you may
not see all the risks around you. I am lucky to work
with colleagues who constantly look out for one
another, which helped me to share my disability and
gain their support.”

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

OUR STRATEGY IN ACTION

DELIGHTING
THE CUSTOMER

Our success comes from aligning everything
we do to focus on the customer, and one of the
ways we aim to delight a customer is by incremental
improvements to our product offering.

INNOVATING
TO GROW

We deliver on our purpose through the
products we make, as well as the way in
which we make them.

Through continuous improvement efforts in 2021
we have delivered savings in time, energy and labour
across the business. Examples of this include:
´ Halving the production lead times for spot

maintenance spare parts;

´ Creating a ‘daily group accountability’ (DGA)
process to ensure focus on safety, quality,
delivery, inventory and productivity;

´ Improving our saw blade replacement process,

enabling a 40% work time reduction; and
´ Implementing our new fully virtual sales

effectiveness training, which allows us to deliver
insights in more languages, ensuring that our
people are better equipped to focus on our
customers.

Our Commercial Process Manager in Augusta,
Justin, commented on the impact of the training:

“

VITAL TO MORGAN’S SUCCESS IS THE

ABILITY OF OUR TEAMS TO SPEAK THE
SAME ‘SALES LANGUAGE’ AND HAVE
A COMMON GLOBAL APPROACH; THIS
PROGRAMME ENABLES JUST THAT. OUR
AIM IS TO DELIGHT OUR CUSTOMERS
AND THIS TRAINING IS AN IMPORTANT
FOUNDATIONAL PILLAR OF THAT
JOURNEY.

”

We are developing the next generation of materials,
processes and solutions to meet our purpose and
position our business for the future.
´ The thermal properties of our products have

long been known as a key way to manage heat,
but in 2021 it was our ability to manage cold that
provided our latest innovation. In light of the
requirement to store COVID-19 vaccines
at 2-8°C, Morgan’s innovative Vacuum Insulation
Panels (VIPs) provide the perfect solution to
ensure that this precious cargo is correctly
insulated in transit;

´ In 2021 we announced a new research

partnership with the Faraday Institution.
This 15-month collaboration is dedicated
to investigating the use of oxide ceramics
as electrolytes. The initial focus has been
on investigating lithium-ion conducting fibres
for composite solid-state electrolytes, which
might in turn support better electric vehicle
(EV) batteries;

´ Our partnership with the National Graphene
Institute, in Manchester, UK, supports our
understanding of interfacial interactions
between different components of a composite.
We are focused on carbon-related technology
developments using new materials, such as
graphene. This collaboration allows us to
work with cutting-edge technology daily, whilst
utilising the research in real-world applications
throughout Morgan Advanced Materials.

IMPROVING QUALITY OF
LIFE WITH OUR SUPPORT
OF THE COVID-19 VACCINE
DISTRIBUTION

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
BUSINESS MODEL

Our strategy builds on
our strengths and focuses
the Group on scalable
businesses in attractive
markets.

We have three core capabilities:
´ Materials science;
´ Application engineering;
´ Customer focus.

We serve markets that are
growing and where we have
room to grow, and where our
customers value our
differentiated products and
services.

The Group’s products are
produced within two global
divisions and five global
business units.

Our Thermal Products
division, organised in
two global business units:

Our Carbon and Technical
Ceramics division,
organised into three global
business units:

Our thermal products are
used in high-temperature
industrial processing of metals,
petrochemicals, cement,
ceramics and glass, and by
manufacturers of equipment for
automotive, marine, aerospace,
and domestic applications in
insulation and fire protection.

Our electrical carbon
products are used in the rail
industry, for power generation,
in the mining of iron and steel
and to enable wind power
generation.

Our seals and bearings
products are used in pumps for
industrial and domestic use, or
other sealing applications. We
use advanced carbon/graphite,
silicon carbide, alumina and
zirconia materials to engineer
lightweight, low-friction bearings
and seals.

Our technical ceramics
products are used in selected
segments of the electronics and
semiconductor, energy,
healthcare, industrial,
petrochemicals, security and
transport markets, typically in
close collaborative customer
relationships.

We manufacture advanced
ceramic materials, products and
systems for thermal insulation in
high-temperature environments.

We engineer systems for the
safety of people and equipment
in demanding applications.
Our products help customers,
especially those operating
energy-intensive processes,
to reduce energy consumption,
emissions and operating costs.

We manufacture an extensive
range of high-performance,
energy-saving crucibles and
foundry consumables for
non-ferrous metal melting
applications.

We produce a wide range
of products which are used
to transfer electrical current
between stationary and rotating
or linear moving parts in motor,
generator, and current collector
applications.

We create high-performance
self-lubricating bearing and
seal components, used
predominantly in pumps.

We engineer high-
performance functional and
structural ceramic materials,
components and sub-
assemblies to address
customer-specific technical
challenges.

The economic value we
generate includes wages paid
to our people, purchases from
local and global suppliers,
taxes, and dividends – in
addition to indirect benefits
arising from expenditure by
our suppliers, customers and
employees.

Our business contributes
positively to society. We
support the skills development
of our people, from apprentice
level and operators, through to
senior executives.

Our global makeup reflects the
communities we serve with
representatives from many
backgrounds, and we strive to
promote inclusivity and
opportunity for all.

Our operations look to benefit
our environment through the
products we design and
manufacture, products which
make more efficient use of
resources and can improve the
quality of life.

TO FIND OUT HOW

our people work with our communities
visit our website at
www.morganadvancedmaterials.com/
community

TO FIND OUT MORE

about our products and services visit
www.morganadvancedmaterials.com/
whatwedo

WE UTILISE OUR DISTINCT COMPETENCIES…Our purpose is to use advanced materials to make the world more sustainable, and to improve the quality of life.This purpose guides our actions: it underpins our work to reduce our environmental impact, informs how we treat our people, and ensures we fulfil our responsibility for good corporate governance.We play an important role in society, using our deep materials science knowledge and process capability to solve customer problems and deliver on our purpose. ´ WE SUPPORT THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS AND HAVE SIGNED UP TO THE SCIENCE-BASED TARGET INITIATIVE (SBTi); ´ WE AIM TO BE A CO2e NET ZERO1 BUSINESS BY 2050.1 Excludes indirect emissions generated by our supply chain, distribution network and employee travel.Thermal CeramicsMolten Metal SystemsElectrical CarbonSeals and BearingsTechnical CeramicsTO SERVICE MARKETS RANGING FROM INDUSTRIAL TO HEALTHCARE.OUR PRODUCTS DELIVER ON OUR PURPOSE...CONTRIBUTING TO THE ECONOMY AND SUPPORTING AN IMPROVED SOCIETY FOR OUR PEOPLE, CUSTOMERS, AND INVESTORS.Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

NON-FINANCIAL INFORMATION STATEMENT

OUR APPROACH TO ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

The information which follows is intended to
explain our non-financial information, the
relevant Group policies, the due diligence
processes we follow to embed these policies
and their effectiveness.

Our business model on pages 14 and 15 provides
an insight into the key resources and relationships
that support the generation and preservation
of value within Morgan.

EMPLOYEES

Policies

Our Environmental, Health and Safety
(EHS) Policy is designed to promote a
culture of ‘zero harm’ for our employees,
contractors and visitors and eliminate
and control health risks proactively.

A detailed description of our safety
programme and safety performance
is set out on pages 18 and 19 of the
Sustainability and Responsibility section.

The Group has an overarching policy
designed to attract, retain and engage
talented people and support an inclusive,
safe and ethical workplace. The Group
policy is supplemented by a wide range
of detailed policies specific to the business
or jurisdiction.

Due diligence in pursuance
of policies

Outcome of policies and
impacts of activities

´ Audits under the EHS programme;

´ Annual self-certification process;

´ ‘Speak Up’ hotline;

´ All other applicable regulatory reporting.

Our KPI in relation to lost-time
accident frequency is set out on
page 37.

Our safety performance is set out
in detail on pages 18 to 19 of the
Sustainability and Responsibility
section.

Related principal risks

See page 40 of the Risk
Management section.

´ A detailed description of the methods

used to support the Group’s people
policies is set out on pages 28 to 31
of the Sustainability and Responsibility
section.

Our performance in relation to our
KPI on employee retention is set
out on page 37.

The attraction, retention and
engagement of people is not
considered a principal risk.

ENVIRONMENTAL
MATTERS

Our Environmental Policy sets out the
Group’s commitment to the protection
of the environment in the communities
where we operate, work and live. The
Policy sets out our intention to reduce
energy and water use, reduce our
dependence on natural resources,
and maximise the positive impact of
our products. Detailed information on
implementation of our Environmental
Policy is set out on pages 20 to 24.

´ Data gathering on greenhouse gas

(GHG) emissions;

´ Our submission to the Carbon
Disclosure Project (CDP);

´ Annual self-certification;

´ Our ‘Speak Up’ hotline;

´ Internal audit processes;

´ We have engaged ERM CVS to

conduct third party data assurance
of the environmental metrics for 2021.

SOCIAL MATTERS We do not have formal policies on

community engagement, but employees
are encouraged to support their
community through a range of activities,
for example volunteering and fundraising
for good causes.

´ Activities are reported internally,

including on our social media platforms.

HUMAN RIGHTS

Our Human Rights Policy establishes our
commitment to protect the human rights
of everyone who works for the Company
and all those who have dealings with us.
The Policy is supplemented by the
Morgan Code.

´ Monitoring of compliance with the

Morgan Code;

´ Due diligence processes associated

with new suppliers and our supply chain;

´ Publication of our Modern Slavery

Transparency Statement on our website;

´ More information is contained on

pages 28 and 35 of the Sustainability
and Responsibility section.

Our workforce composition and
information on gender diversity are
set out on page 31.

See pages 20 to 24 of the
Sustainability and Responsibility
section for information on our
GHG emissions, and progress
in 2021 in respect of CO2e
intensity, total energy use, water
use and withdrawal, waste intensity
and waste generation.

Minimising our environmental
impact helps to protect the
environment and enables us
to attract talented employees
and to win new business from
customers.

Our business and our employees
are more deeply connected to our
local communities.

Although not a principal risk,
social risk, and specifically
the potential difficulties of
recruiting to replace an
ageing direct workforce in
parts of the business, is an
emerging risk.

No incidents of human rights abuse
or modern slavery were identified
during 2021.

See page 43 of the Risk
Management section.

In March 2021, we set stretching
targets to improve our
environmental, social and
governance performance and
become a more sustainable
business. We take these
commitments seriously and have
plans in place to deliver against
them in the coming years, making
a step change in our performance.

We are making investments in our manufacturing
processes and technology to reduce the
environmental impact of our business. We are
also investing in new materials and process
technologies that improve the performance of
our products, to deliver greater environmental
and safety benefits to our customers.

We are monitoring emerging ESG risks against
the changing business landscape, alongside
collecting stakeholder feedback, and we continue
to work to position our business for sustainable
growth.

Our workplace policies and practices as
defined in the Morgan Code underpin our
efforts to reach our ESG goals.

Sustainability and environmental stewardship
have been integrated into our daily operations
and across our corporate functions. We have
invested in manufacturing technology to
reduce our carbon emissions and we continue
to help our customers with design and
material selection to enable them to reduce
their own carbon emissions. We also use
our engineering tools and design capabilities
to provide our customers with innovative
product options that bring positive benefits.

See page 40 of the Risk
Management section.

ESG PRIORITIES

PROVIDE A SAFE,
FAIR AND
INCLUSIVE
WORKPLACE

OUR ASPIRATION

OUR 2030 GOALS2

´ ‘Zero harm’ to our employees;
´ A workforce reflective of the
communities in which we
operate;

´ A welcoming and inclusive

environment where
employees can grow and
thrive.

´ 0.10 lost-time accident

rate, on the way to ‘zero
harm’ by 2050;

´ 40% of our leadership

population will be female;
´ Top-quartile engagement
score of 75% or greater.

ANTI-BRIBERY
AND ANTI-
CORRUPTION

Bribery, Corruption and Facilitation
Payments Policy, Ethical Trading Policy,
Conflicts of Interest Policy and the
Morgan Code. Together these policies
seek to prevent bribery and ensure that
our business is undertaken in an ethical
manner and in compliance with all
applicable anti-bribery and anti-
corruption laws. More information on
the policies and processes to prevent
bribery and corruption are contained
on pages 34 and 35 of the Sustainability
and Responsibility section.

´ Detailed procedures in place designed to
prevent anti-bribery and anti-corruption,
supported by explanatory manuals and
the ethics and compliance programme
of work;

´ Regular training for relevant employees

During the year more than 99% of
relevant employees participated in
the Group’s ethics e-learning
programme, which included
specific training modules on
anti-bribery and anti-corruption.

is undertaken;

´ Any reports of breaches in compliance
are investigated, reported to the
Audit Committee and appropriate
action is taken;

´ A description of the control environment,

the internal audit function and the
processes for the review of investigations
by the Audit Committee are set out
in the Report of the Audit Committee
on pages 74 to 78.

90 reports were made to the
Group’s whistleblowing hotline
during 2021, including reports
on concerns relating to potential
unethical conduct. The reports
varied in their nature and
materiality, with certain matters
requiring the support of external
advisers and giving rise to
disciplinary action against
employees for breaches of Group
policies.

See page 43 of the Risk
Management section.

PROTECT THE
ENVIRONMENT

´ A CO2e net zero business

´ 50% reduction in scope 1

by 20501;

´ Use water sustainably across
our business as defined by
our 2030 goals.

and scope 2 CO2e
emissions2;

´ 30% reduction in water

use in high and extremely
high stress areas2;

´ 30% reduction in total

water usage2.

1 Excludes indirect emissions generated by our supply
chain, distribution network and employee travel.

2 Reduction targets shown are compared with

a 2015 baseline.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

OUR 2021 PERFORMANCE
We have continued to work in a stringent
manner with regard to COVID-19, and have
maintained high standards across our sites
in line with World Health Organization and
local jurisdiction guidance.

Our key metric, the lost-time accident (LTA)
frequency (namely, the number of LTAs per
100,000 hours worked) increased to 0.22.
There was also a rise in the number of LTAs
(+8 vs 2020). We have refreshed our approach
to safety with the goal of improving our safety
culture, seeking to build a more caring safety
culture where all of our people look out for
each other and we learn from the incidents
we experience. We are delivering these changes
through our ‘thinkSAFE’ programme.

We have performed well against leading indicator
metrics. Our near miss reporting has been strong
at 3.3 per employee vs target of 2.5, our site
‘Don’t Walk By’ programmes have been very
successful with a 94% action closure rate, our
audit action closure rate was 98%, and all
businesses achieved their visual safety leadership
targets.

2021 2020 2019 2018 2017

Lost-time
accidents 1
Number of
LTAs
Lost-time
accident
frequency
LTAs/100,000
hours worked

0.22 0.18 0.14 0.22 0.38

1. A lost-time accident (LTA) is defined as an accident or

work-related illness which results in one or more days’
lost working time.

In 2021 we successfully trained over 130
‘thinkSAFE’ ambassadors. These ambassadors
are running interactive training workshops for
every Morgan Advanced Materials employee, to
bring our ‘thinkSAFE’ commitments to life. They
allow for self-reflection and realisation of the role
each of us plays in supporting a safe environment.

We have received excellent feedback from the
ambassador training and workshops, and we
are starting to see the impact and changes to
behaviour as a result. This training will continue
throughout 2022.

A key part in changing our safety culture is
learning from what we do well. In 2021, we
launched a positive recognition feature in our
‘Don’t Walk By’ app. This gives us the platform
to capture what we are doing well and build
upon our successes, not just our failures.

We have continued our quarterly topics with
a focus on safety conversations, discussing with
our people what a caring culture looks like
and why it is important.

Our root cause analysis reviews have continued
for lost-time accidents and significant near misses.
We seek to learn as much as we can from
incidents rather than blame individuals for their
failures. We have created videos from some
of our more serious incidents to help share
learnings across the Group, and we continue to
proactively capture our near misses to maintain
a focus on the leading indicators for safety.

Progress has also been made on our safety alert
programme. We completed a review of all lifting
equipment across the business and implemented
a standard that all sites have applied. The method
and collaborative approach will form the basis
of our implementation approach for the future.

Our risk programme also progressed with
‘hazard profiles’ carried out for all our sites
and global business units. This provides guidance
on where to focus efforts, based on the sites’
individual profiles.

POLICY AND FRAMEWORK
Our Health and Safety Policy provides all our
locations with minimum standards, advice and
guidance. Our minimum standard is based
on current requirements from the UK and US
legislative codes and associated best practice.
If a local in-country standard is higher than these,
the sites are required to achieve the local
standard. There are a number of key sub-
policies. The compliance audit programme
is conducted against the health and safety
framework, systems and KPIs, with a focus on
high-risk items. All our manufacturing facilities
are reviewed on a four-year rolling cycle.

TO FIND OUT MORE

Visit our website to find out more about
our Health and Safety Policy
www.morganadvancedmaterials.com/
policy

POLICY GOVERNANCE
Governance of the Health and Safety Policy is
achieved through performance monitoring and
the management and mitigation of identified risks,
to drive continuous improvement in our health
and safety performance.

We are committed to providing effective
leadership in pursuit of a safe and healthy
workplace. The Chief Executive Officer,
global business unit leadership teams and site
management teams are responsible and
accountable for health and safety performance.
The Group’s Health and Safety Director is
responsible for Group direction and the oversight
of the Group’s strategic programmes. There are
health and safety leaders and resources in each
of the global business units and their locations.

Our Group-level processes include a monthly
review of performance and progress in the
implementation of our improvement plans by
the Executive Committee, and regular review
of performance by the Board.

2022 FOCUS
We have a two-pronged approach to creating
a ‘zero harm’ business. The two areas are:

1. ‘thinkSAFE’ – developing our culture
´ The caring culture we are aiming for is

underpinned by our ‘thinkSAFE’ commitments.
We are working through the roll out of
commitment workshops to bring these
commitments to life for all our employees
throughout 2022;

´ Leading the commitments. We have

developed an additional workshop, specific
to leaders, outlining the mindset, skillset and
toolset we require of our leaders to maintain
momentum on our cultural journey. This will
be rolled out in 2022;

´ New activities including a cultural survey,
refreshed quarterly topics, and monthly
scenarios, will be delivered throughout 2022.
These activities align and empower our
people so that they live and breathe the
‘thinkSAFE’ commitments, every time,
all of the time.

2. Systems – robust process safety
´ We aim to develop our EHS system further
with a focus on robust implementation. We
will work collaboratively across all business
units to improve our processes and enable
a longer-lasting impact at all our sites;

´ Hazard profiles documented in 2021 provide
site-specific focus areas, which allow for
targeted improvement at each site. The profiles
will be used to devise site improvements
plans in 2022.

HEALTH AND SAFETY

We are working towards our
aspiration of ‘zero harm’ to all
our employees. We are
committed to conducting all our
activities in a manner that builds
a caring safety culture and
develops a world-class safety
system that supports this effort.

TO FIND OUT MORE

Visit our website to find out more about
how we operate and our safety policies
www.morganadvancedmaterials.com/
safety

“

AFTER THE TRAINING WE SEE

MORE OFTEN THAT PEOPLE PAY
MORE ATTENTION AND TALK
TO THEIR COLLEAGUES IF THEY
SEE SAFETY ISSUES, SUCH AS
FORGOTTEN SAFETY GLASSES
OR WALKING IN THE WAY OF
THE FORK-LIFT. WE’VE ALSO SEEN
THAT THE PEOPLE WHO RECEIVE
THE COMMENTS ARE VERY
THANKFUL AND THAT EVERYONE
IS HAPPY THAT OUR PEOPLE
ARE LOOKING OUT FOR EACH
OTHER.

”

Armin

‘thinkSAFE’

At Morgan Advanced Materials,
‘thinkSAFE’ is a mindset. This means
we approach every moment of every
working day with safety in mind.
We do this by being curious not
complacent, by looking out for each
other and by speaking up about safety
issues. We consider safety in everything
that we do because we care.

The five Morgan ‘thinkSAFE’ commitments
provide guidance on how we should
behave and remind us that:
´ We care, and we consider the impact

of our decisions;

´ We must be trained and always follow

the safety rules;

´ We take 5 for safety and stop for

danger;

´ We don’t walk by and we report safety

problems we identify;

´ We challenge positively and respect

those who challenge us.

We cannot reach our long-term aspiration
of ‘zero harm’ without the dedication and
commitment of our people to creating and
maintaining a safe working environment.
Here are some of the things they did
in 2021:
´ At our Pachuca, Mexico site, the team
celebrate safety actions with a ‘Safer
Employee of the Month’ award
ceremony. This helps to recognise and
reward those who have gone the extra
mile for safety at the site;

´ Our Aurangabad, India team organised
a COVID-19 vaccination camp, to help
protect their team from the virus. The
vaccination camp was available to all
staff, including shop-floor workers,
casual labourers, trainees and family
members.

“

FOLLOWING THE

TRAINING I HAVE
A GREATER
UNDERSTANDING OF
THE IMPACT WHICH
I HAVE; IF YOU DON’T
‘THINKSAFE’ YOU WON’T
ACT SAFE AND MAKE
SAFER CHOICES.

Prasant

”

SAFETY METRICS

The Group’s lost-time accident
frequency in 2021 was

The number of reported lost-time
accidents in 2021 was

0.22

2020: 0.18

2020: 29

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

SUSTAINABILITY AND RESPONSIBILITY

ENVIRONMENT

At Morgan Advanced Materials
we are committed to a
sustainable future. Our aim
is to ensure that our products
and manufacturing processes
are designed, built and
managed in a way that
enhances their value to society
and our environment.

WATER FOOTPRINT
Water scarcity is an increasing challenge in many
parts of the world. As the world tackles climate
change, our bio-energy demands will exacerbate
water demand, meaning many will face water
scarcity due to both physical shortages and
scarcity in access.

We use water in a number of our manufacturing
processes, and we recognise that in some
instances our water demands are in areas
of increasing water stress. By improving our
water usage we will positively impact the local
communities in which we operate, and therefore
society more generally.

By 2030, we will reduce our total withdrawal
of water by 30%, with the same goal in areas
of high and extremely high stress.

Approximately 21% of our manufacturing
operations are in these water stress areas. For
stressed areas we are 9% higher in our water
withdrawal than 2020 but 12% below our 2015
baseline.

For total water withdrawal, we are 15% higher
than 2020 levels, but 26% below our 2015
baseline. Overall, our water withdrawal increase
compared with 2020 is primarily due to an
increase in production levels, with all of our
manufacturing facilities back in full operation
after the impact of the pandemic.

We are implementing various water sustainability
projects globally. In São Paulo for example, the
team has installed a system to collect rainwater
for irrigation which reduces the facility’s
dependence on the stretched city water supply.

OUR PROGRESS IN 2021
Our approach to sustainability continues to
evolve as we bring into scope more and more
elements related to our operations, processes
and products.

The Group’s sustainability performance,
compared with 2020, has been impacted due
to the business’s growth after the COVID-19
pandemic. The environmental metrics results
are as follows:
´ CO2e intensity1 20% decrease;
´ Absolute CO2e1 17% decrease;
´ Total energy use 7% increase;
´ Water use 15% increase;
´ Water use in stressed areas 9% increase;
´ Waste intensity 7% increase;
´ Waste recycling 3% increase.

1. Comparative information has been restated to exclude
CO2e emissions from carbon-neutral raw materials
(reported separately as biogenic emissions included
on page 22).

THE IMPACT OF CLIMATE
ON OUR BUSINESS
Scientists have identified that one of the most
important impacts of climate change will be
rising sea levels. Using climate scenario analysis
modelling methodology, we have evaluated
the impact of a 1.5°C to a 4°C rise in global
temperatures on our businesses.

We have identified 10 of our manufacturing
locations that could be negatively impacted by
rising sea levels. We expect to finalise the climate
scenario analysis modelling in Q1 2022. Based
on these results, we will develop contingency
plans with our local sites to enable manufacturing
to shift to alternative sites should the need arise.

TO FIND OUT MORE

Visit our website to learn more about how
we are becoming a more sustainable business
www.morganadvancedmaterials.com/
sustainablebusiness

WASTE
Through continuous improvement efforts we
are reducing all hazardous and non-hazardous
waste streams.

Our facilities implemented various projects
in 2021 to reduce the generation of waste.
Continuous improvements aligned with the
5S methodology (sort, set in order, shine,
standardise and sustain) have also been
implemented globally. For example, our
Martinsicuro site in Italy eliminated the use of lead
in its products, therefore eliminating a hazardous
waste stream.

During 2021, we also introduced several process
improvements to reduce waste generation,
including minimising overweight products,
fine-tuning equipment to ensure proper thickness
and recycling of air pollution control dust
collector wastes. In addition, we have stepped
up our focus on recycling for all other materials,
including wood, cartons, pallets, plastic and
jumbo bags.

Our waste intensity has increased 7% compared
with 2020, due to the business growth after the
COVID-19 pandemic.

Recycling has improved by 3% compared with
2020. Our recycling efforts have been dampened
by the COVID-19 pandemic, which has led
to some restrictions in recycling opportunities
(for example, some recycling operators ceased
operations and we also saw additional recycling
restrictions in China).

TO FIND OUT MORE

Our CDP, Water Security submission,
available at www.cdp.net, contains extensive
disclosures on our water risks, opportunities,
impacts and mitigating actions.

WATER

WATER WITHDRAWAL IN STRESSED AREAS

Water Withdrawal (million m3)1
Water Consumption (million m3)1

Water Withdrawal (million m3)1
Water Use Intensity (m3/£m)2
Water Consumption (million m3)1
Water Consumption Intensity (m3/£m)2

2,097

1,790

1,646

1,821

593

613

609

542

2.17 0.61
2018

1.88 0.64
2019

1.50

0.57

2020

1.73 0.52
2021

0.111 0.079
2018

0.110 0.076
2019

0.109

0.077

2020

0.118 0.086
2021

1. Water from all sources, including process, irrigation

and sanitary use.

2. Constant-currency* revenue basis, updated to reflect
clarifications and changes in reporting methodology to
ensure year-on-year consistency.

1. Water from all sources, including process, irrigation
and sanitary use in countries of high and extremely
high water stress as identified by the World Resource
Institute.

WASTE

RECYCLE

ENERGY

Waste Generation (metric tonnes)
Waste Intensity (metric tonnes/£m)1

Recycle (tonnes)
Recycle (% of total waste)

Energy Use (GWh)1
Energy Intensity (MWh/£m)2

45.1

47.1

39.2

42.0

46,605

48,676

35,660

39,918

25,457

27,351

17,847

21,190

2018

2019

2020

2021

2018

2019

2020

2021

1,142

1,180

2018

1,123

1,092

1,080

1,134

2019

994

2020

1,067

2021

1. Constant-currency* revenue
basis, updated to reflect
clarifications and changes in
reporting methodology to
ensure year-on-year consistency.

1. Energy from all sources.
2. Constant-currency* revenue
basis, updated to reflect
clarifications and changes in
reporting methodology to
ensure year-on-year consistency.

USING WATER SUSTAINABLY

Our 2030 water goals are to reduce
our overall water usage by 30% and to
reduce our water usage in high stress
areas by 30%.

It takes a lot of energy to make water safe
to drink, and to treat sewerage, so by
reducing our water consumption, we are
reducing our carbon footprint too. Here
are some examples of the progress we
have made in 2021:

´ St Marys, USA – closed loop system.

Installed a cooling tower, which allows
the same water to be used to cool
machines, with no discharge. 90%
reduction in water usage;

´ Augusta, USA – water recycling.

Connected the nozzles used in blowing
the product, to the blown water-
cooling system. 5.9 million gallons
of water saved annually;

´ Stourport, UK – water-saving

opportunity. The team identified this
opportunity in our automated ball-mill
cleaning system. By increasing the time
interval between the flushing
operations we were able to save an
estimated 4 million litres of water
per year;

´ Gujarat, India – rainwater harvesting.
Staff at this site focused on conserving
and protecting water with the
installation of a new rainwater
harvesting system.

30%

reduction in
overall water
usage by 2030

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

SUSTAINABILITY AND RESPONSIBILITY

ENVIRONMENT continued

GREENHOUSE GAS EMISSIONS
Our sustainability agenda includes actions
to reduce greenhouse gas (GHG) emissions
and combat climate change. As public concern
grows, more customers are asking about
GHG emissions within the manufacturing
process. The increasing demand for low-
carbon products and processes, and the need
to consider the effects of climate change in
general, have had an impact on our long-term
strategy. In March 2021, we announced
a commitment to reduce absolute GHG
emissions (scope 1 and 2) by 50% (against
2015 levels) by 2030.

Drawing on our expertise as a leading
innovator of products that reduce our
customers’ GHG emissions, our focus in 2021
was on improving our own energy efficiency,
procuring renewable and clean energy and
evaluating the replacement of higher-emission
fuels with less-carbon-intensive fuels.

As our planet continues to be impacted by
the effects of climate change and population
growth, it is imperative that individuals and
businesses take responsibility and reduce their
environmental footprint. At Morgan Advanced
Materials, lowering carbon emissions,
growing our renewable and carbon-free
energy portfolio and conserving water are
our priorities. Procuring renewable and
carbon-free energy is beneficial for the
environment and we have made significant
progress. In the year ended 31 December
2021, 33% of our electricity is procured
from renewable and carbon-free sources,
compared with 6% in 2020.

By the end of 2021, we had lowered GHG
emissions by 33% against 2015 levels and
emission intensity by 38%. Our sites are
continuing to implement best practice to
reduce energy consumption globally, as part
of an effort to not only use energy more
wisely but also drive down CO2e emissions.

Metric Tonnes (MT) CO2e1
Scope 12
Scope 2
Total3
Biogenic4
Total Energy (GWh)
Intensity (MT CO2e/£m)5

2015

2016

2017

2018

2019

2020

2021

205,570 202,333 192,229 163,866 137,578 116,552 122,817
137,124 135,427 135,590 174,665 181,264 160,126 107,070
342,694 337,760 327,819 338,531 318,842 276,678 229,887
877
1,067
242

1,368
1,222
391

1,391
1,067
346

1,628
1,180
327

1,627
1,147
327

913
1,134
304

501
994
304

1. For scope 1 and 2 we report our CO2e emissions from energy and refrigerants and other process related CO2e emissions.

Carbon emission factors are used to convert energy used in our operations to emissions of CO2e. Carbon emission factors for
fuels are provided by International Energy Agency (IEA). We report our emissions with reference to the latest Greenhouse Gas
Protocol Corporate Accounting and Reporting Standard. Scope 2 includes market-based and location-based factors. In 2021,
the value of scope 2 GHG location-based only emissions is 124,868 tonnes.

2. Total scope 1 emissions were calculated from the addition of direct scope 1 emissions and process emissions. Carbon emission
factors for grid electricity are calculated according to the ‘location-based method’ and ‘market-based’ where received. The
location-based method reflects the average emissions intensity of the grids on which energy consumption occurs (using mostly
grid-average emission factor data). Process emissions disclosed (4,070 tonnes, or circa 3% of scope 1) in 2021 rely on historical
calculations that could not be evidenced for assurance purposes.

3. Total emissions include scope 1 and scope 2 only. Biogenic emissions are treated as carbon neutral and reported separately.

4. The GHG Protocol requires that CO2e emissions from biomass combustion at stationary sources are reported as biomass CO2e
emissions (in terms of total amount of biogenic CO2e emitted) and are tracked separately from fossil CO2e emissions. Biogenic
emissions have also been updated to reflect an error identified in an emission factor. In previous years biogenic emissions were
included as part of our scope 1 emissions and calculated utilising an emission factor of 1.336 MT CO2e/MT of wood. The factor
has been revised to reflect the factors provided by DEFRA of 0.059 MT CO2e/MT of wood and therefore scope 1 emissions
have been restated to remove biogenic emissions.

5. For manufacturing, we have selected an intensity ratio based on sales (on a constant-currency* basis). This aligns with our

longstanding reporting of manufacturing performance. Emissions from the combustion of biogenic fuels (such as biomass and
coffee husks) within our operations are reported separately from other scope 1 and 2 emissions, as recommended by the
GHG Protocol, and are excluded from our intensity ratio calculation. The data also excludes scope 3 emissions and emissions
from Company-owned and leased vehicles.

SCOPE 3 EMISSIONS
Morgan Advanced Materials recognises that
assessing the Group’s value chain emissions
is an important part of our long-term
sustainability strategy. We aim to work with
our key stakeholders and top tier suppliers to
reduce indirect emissions and this is Morgan’s
preliminary step towards minimising product
lifecycle impact.

For GHG reporting purposes, we outline its
organisational boundary on an operational
control basis, and our scope 1 and 2 emissions
are reported on this basis; we account for 100%
of such emissions from operations over which
Morgan or one of its subsidiaries has operational
control. Generally, ‘scope 3’ is the term used
to label the indirect GHG emissions resulting
from activities in our value chain. Examples are
upstream emissions related to the raw materials
we consume; downstream emissions from the
use of the products we sell; and emissions from
both upstream and downstream transportation
activities. The scope 3 Standard further
categorises these emissions into fifteen distinct
categories. However, based on our priorities,
we will be focusing on key categories in the
upstream and downstream.

We are actively evaluating the following areas:
´ Supplier goods and services. We identified
a system to evaluate our suppliers in 2021
and conducted a pilot on our top tier
suppliers in terms of climate and other
environmental, social and governance (ESG)
criteria. Our next steps will be to calculate
the GHG Reporting Protocol categories
deemed ‘relevant’ and to evaluate the
remaining categories’ relevance;

´ Capital goods. We anticipate having a system
identified in 2022 to begin our evaluation
of scope 3 emissions associated with capital
goods using a Life Cycle Analysis (LCA) based
method. Systems to conduct LCAs were
evaluated and a LCA platform was selected
in 2021;

´ Fuel-and energy-related activities. We are
currently evaluating systems to account
accurately for scope 3 for Fuel-and energy-
related activities (not included in scope 1
or 2). We anticipate having a plan defined in
2022 to capture this data. Scope 3 emissions
associated with Fuel-and energy-related
activities both upstream and downstream
will be estimated using various tools such
as the GHG Protocol Scope 3 Evaluator and
IEA emission data.

Our strategy to address scope 3 emissions
is developing. In 2022, we will expand our
work with our customers, suppliers, and other
stakeholders in our value chain to calculate
a scope 3 emissions baseline.

SCIENCE-BASED TARGET INITIATIVE
In December 2021, Morgan Advanced Materials
submitted its commitment to the science-based
target initiative (SBTi) and commenced the
process of defining targets to align with the
SBTi and reduce its climate impact. The SBTi
encourages companies to demonstrate climate
leadership through publicly committing to
GHG reductions aligned to science-based
targets. As by the nature of our business, we
support our customers on their low-carbon
journey, we understand it is crucial to reduce
our own climate impact.

STREAMLINED ENERGY
AND CARBON REPORTING
We comply with the UK Government’s
Streamlined Energy and Carbon Reporting
(SECR) requirements. We also support the
recommendations of the Financial Stability
Board’s Taskforce on Climate-related Financial
Disclosures (TCFD) and will be taking action
to implement these.

This table shows our energy use and associated
GHG emissions from fuel and electricity in the
UK for the 2018, 2019, 2020 and 2021 reporting
years, in compliance with the mandatory reporting
requirements under the UK Government’s
SECR policy. The scope of this data covers all
of our UK entities and locations, which include
five manufacturing sites and two non-manufacturing
sites. The year-on-year reductions are associated
with the initiatives referred to on page 27.

In 2021, the UK accounted for 3% of our global
total scope 1 and 2 emissions, as outlined in our
mandatory GHG reporting. Our absolute GHG
emissions (scope 1 and 2) for our UK operations
reduced by 34% compared with 2020 levels.

ENERGY
We have an improvement
programme underway covering
energy procurement, process
improvements, and process and
behavioural changes in our plants.

In 2021, the largest sustainability
contribution came from
procurement, where we have
transitioned to carbon-free
energy for a number of
our sites.

33%

of our electricity now comes from
green or carbon-free sources

UK OPERATIONS

Biogas (MWh)
Natural gas (MWh)
LPG (MWh)1
Fuel oils (MWh)
Coal (MWh)
Standard electricity (MWh)
Green electricity (MWh)
Total (MWh)
Total scope 1 emissions (tonnes CO2e)
Total scope 2 emissions (tonnes CO2e)1
Total emissions (tonnes CO2e)
CO2e intensity (tonnes CO2e/MWh)

2018

–
45,661
23
–
–
17,705
215
63,604
8,380
4,919
13,299
0.21

2019

–
42,210
31
–
–
16,894
200
59,335
7,750
3,818
11,568
0.19

2020

–
36,253
24
–
–
986
14,687
51,950
6,670
3,657
10,327
0.20

2021

–
37,325
3
–
–
–
15,083
52,411
6,763
–
6,763
0.13

1. Carbon emission factors for grid electricity are calculated according to the location-based method.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

ENVIRONMENT continued

PRODUCT STEWARDSHIP
We have seen growing demand for advanced
materials, as customers push the boundaries
of technology to make their processes and
products more sustainable.

We supply products that, when used in
compliance with product safety communications
and common safety practices, will not present
an unacceptable risk to human health and
safety. We strive to maintain communications
with stakeholders on environmental and health
and safety matters to ensure transparency and
alignment with their needs and expectations.

Our business units maintain policies,
programmes and practices to comply with
laws and regulations, and to conform to the
Group’s corporate standards regarding the
products we sell.

In addition, our businesses communicate and
cooperate with suppliers and customers, to
conform to regulatory requirements that apply
through the supply chain (such as Registration,
Evaluation, Authorisation and Restriction
of Chemicals (REACH) and Restriction
of Hazardous Substances in Electrical and
Electronic Equipment (RoHS) in the EU,
California Proposition 65, Conflict Mineral
regulations and similar laws). We register the
manufacture and import of substances of
heightened concern, notify others of the
presence of such substances in products and,
where appropriate, restrict usage of such
substances.

WASTE AND RECYCLING
Each year we set internal targets to reduce waste
intensity by 5%. We also target an increase
in recycling efforts by the same percentage.
We drive improvements in these areas through
Kaizen and 5S (sort, set in order, shine,
standardise, sustain) activities. Primarily, our
operations team follow the principles of Kaizen,
which eliminates waste from overproduction,
improves quality, increases efficiency, decreases
idle time and reduces unnecessary activities.

During 2021, waste generation improvements
were made at several sites, through an increased
focus on waste segregation, and by improving
waste by category. This allows each site to
understand its waste streams better in order to
evaluate improvement opportunities. Examples
of some of the waste reduction improvements
include:
´ Reduced waste by introducing recycling

facilities for scrap metal from our production
processes;

´ Stepped up our recycling efforts to prevent

over 160,000 pounds of cardboard and paper
going to landfill at one of our largest sites;
´ Our team in Ranipet, India have taken a great
step forward in reducing their plastic waste;
by eliminating polybags from their ceramic
blanket packaging in favour of a single, woven
sack.

In 2021 our businesses increased waste intensity
by 7% compared with 2020, with an overall
waste generation increase of 12% (on an
absolute basis). The increase compared with
2020 was primarily due to production levels
resuming to normal after the 2020 COVID-19
operational restrictions.

OUR POLICIES AND PROCESSES
Morgan Advanced Materials’ Environmental
Policy sets out the Group’s commitment to
protect and enhance the environment, to
minimise the environmental impacts of our
activities and to maximise the positive effects of
our products and services. Our Policy is regularly
reviewed and is communicated across all sites
within the Group and applied to all businesses
worldwide.

Our manufacturing processes have
environmental impacts arising from the
consumption of resources, air emissions, waste
generation and water discharge. We seek to
minimise these impacts and to go beyond
minimum legal requirements, by focusing on
continuous improvement and establishing
certified environmental management systems at
our operating facilities. Our Policy and framework
set minimum standards and provide guidance
on what is expected of our sites. The Policy
is regularly reviewed, and our priorities are
communicated across all sites within the Group
and applied to all businesses worldwide.

Environmental performance is managed at
the local level, with top-level oversight by
the Group. Guided by our Policy, designated
EHS personnel are responsible for compliance
with local laws and regulations and for facilitating
continuous improvement at a site level. The
Chief Executive Officer, global business unit
leadership teams and site management teams are
responsible and accountable for environmental
performance. There are environmental leaders
and resources in each of the global business units.
Our Group-level environmental management
processes include a monthly review of
performance and progress in the implementation
of our improvement plans by the Executive
Committee and business leaders, and regular
review of performance by the Board. An
audit programme is conducted against the
environmental framework, systems and
KPIs with a focus on high-risk items.

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES

Morgan recognises climate change
as both a risk and an opportunity
for our business and we fully
support the implementation of
the recommendations of the
Task Force on Climate-related
Financial Disclosures (TCFD).

Climate change poses challenges to Morgan’s
supply chain and production operations, as well
as to our employees and customers, and as such
we aim to address this as part of our corporate
strategy.

This statement provides an overview of TCFD
Governance, Strategy, Risk Management and
Metrics and Targets. The Group complies with
the requirements of LR 9.8.6R by including
climate-related financial disclosures consistent
with the TCFD recommendations and
recommended disclosures, except for Strategy
pillar C: “Describe the resilience of the
organisation’s strategy, taking into consideration
different climate-related scenarios, including a
2°C or lower scenario”. We have not complied
at this time because we are in the process of
finalising our scenario analysis. We expect to
finalise this modelling in Q1 2022. We will then
develop contingency plans based on the results
which will be used to inform the resilience of the
Company’s strategy; this will be completed in
2022 and included in our 2023 Annual Report.
We intend to improve our climate-related
disclosures continually across all of the pillars
as we develop a deeper understanding of the
potential effects on our business as the climate
continues to change.

The Group has been disclosing climate risk
under CDP since 2010. Our CDP climate change
and water security responses provide further
information on our approach to climate change.
In 2021 we scored a ‘B’ for both disclosures,
placing us at the management level. This
recognises that we are taking steps to assess
the environmental risks of our business and
acknowledges that we have implemented actions
to manage those risks. Our responses are
available at www.cdp.net/en.

GOVERNANCE
The Board of Directors has oversight of our
climate change, environmental and corporate
responsibility matters and ensures that our
executive team progresses as planned to meet
our commitments and goals. The Board of
Directors also monitors progress against
climate-related actions.

Metrics monitored include:
´ Absolute scope 1 and 2 CO2e emissions;
´ Water usage;
´ Absolute energy use;
´ Energy intensity.

Where appropriate, sustainability capital spend
projects are reviewed.

The Chief Executive Officer is responsible for
climate change, environmental and corporate
responsibility matters. He is supported by
the Chief Financial Officer, the Executive
Committee and the Group Director for
Environmental, Health, Safety and Sustainability
(EHS&S).

The Chief Executive Officer, Chief Financial
Officer and Executive Committee are involved
in the Group’s ESG materiality assessment and
in the selection of key ESG priorities each year.

A Group Director of Environment and
Sustainability was appointed in November
2020, reporting to the CEO, and was
responsible for developing further and
driving the Environmental Sustainability and
Governance strategy, and managing and
reporting progress to the executive team and
the Board. This includes monitoring climate-
related issues, driving strategy execution and
reporting into monthly executive meetings
on environment and sustainability matters.

The Group has reviewed activities around
environmental governance and health
and safety. From 1 February 2022, the roles
of Group Director Environment and
Sustainability and Group Director Health
and Safety have been combined under
a single Group Director for Environment,
Health, Safety and Sustainability (EHS&S).

The implementation of the climate-related
projects is managed at a site level across
each global business unit (GBU). The GBU
leads are part of the Executive Committee,
reviewing progress against ESG targets,
communicating and driving strategy execution
within their GBUs.

The ESG strategy and communications from
the Executive Team are cascaded to the wider
business through monthly EHS&S leadership
calls with the GBU EHS leads, and quarterly
internal updates from the Chief Executive
Officer to the wider GBU and site leadership
teams.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES continued

The Remuneration Committee reviews the
structure of the annual bonus and Long-term
Incentive Plan (LTIP) to ensure that the
framework remains appropriately aligned with
our strategic aims and culture and motivates
and rewards management for delivering
sustainable performance. As in prior years, the
measures used for the annual bonus for 2022
include ESG measures being covered in the
Executive Directors’ personal objectives
and therefore reflected in the personal
performance element of bonus. For the LTIP,
an ESG measure (carbon reduction) has been
added to the structure, to align more closely
with Morgan’s strategy and priorities. The ESG
targets are 5% to 15% carbon reduction.

Training for the Executive Team on TCFD and
climate risk will be delivered later in 2022 to
support Morgan’s ESG targets and to improve
future disclosures.

In 2021, Morgan committed to the science-
based target initiative (SBTi). This commitment
drives the governance agenda, including setting
targets and monitoring progress against them.
We are progressing in 2022 with setting our
targets to align with a <2°C SBT.

STRATEGY
Climate change is considered as part of a
Group-wide, multi-disciplinary risk management
process, and is considered a contributory
factor within several risk categories.

As part of the Group’s ongoing risk
management process, the Board and the
GBUs have identified and assessed emerging
risks, including environmental risk. Additional
information about environmental risk is shown
in the emerging risks section of this Report
on page 38. Our aspiration is to be a CO2e
net zero business by 2050. Our 2030 target
is to reduce our scope 1 and scope 2 CO2e
emissions by 50% (from a 2015 baseline).
We also aspire to use water sustainably across
our business. Our 2030 target is to reduce
both our overall water usage and our water
usage in high stress areas by 30% (from a
2015 baseline).

The materiality assessment was updated in
Q4 2021 (as described in the Sustainability
and Responsibility section on page 20) and
identifies the ESG topics which impact our
business and are of interest to our external
stakeholders. This focused Morgan’s existing
environmental strategy around CO2e and
water usage.

During 2022, Morgan will set targets to align
with a <2°C SBT and undertake climate scenario
analysis to build a strategy toward transition to
a low carbon economy. We are conducting
climate scenario analysis to evaluate the following
scenarios: technology, heat stress, water scarcity
and carbon tax. We will increasingly use scenario
analysis to inform the risk management process
to understand the uncertainty of the risks and
opportunities climate change poses to the
business.

During the course of 2021, Morgan assembled
a cross-GBU engineering team to identify
and evaluate environmental projects across the
business. This opportunity to collaborate and
share best practice has yielded a project portfolio
to complete during the next three years in order
to reduce our emissions and meet our stated
CO2e and water reduction targets.

Work is underway to assess the technologies we
will need for the longer term (i.e. beyond 2030)
to address the CO2e emissions from existing
natural gas-driven production processes.
A portion of our research and development
resource is now dedicated to exploiting low
carbon opportunities. We have partnered with
the British Ceramics Confederation (BCC) and
are part of the ‘Towards Net Zero’ commitment.
This collaboration brings together businesses
from the ceramic manufacturing sector in the UK
and shares best practice approaches and proven
decarbonising technologies, helps nurture
and encourage industry decarbonisation, and
communicates related challenges for the industry.
Our involvement will allow us to explore
alternatives to natural gas and share best practice
as part of an industry group.

RISK MANAGEMENT
The Board recognises the need to understand
and assess climate-related risk and the inherent
uncertainty therein. Risk management and
internal control are fundamental to achieving the
Group aim of delivering long-term sustainable
growth in shareholder value. Principal and
emerging risks are identified both ‘top down’
by the Board and the Executive Committee
and ‘bottom up’ through the global business
units. Further details on Morgan’s procedures
for identifying, assessing, and managing risk
can be found in the Risk Management section
on page 38.

The environment, health and safety team meets
monthly to oversee the management of our
most significant environmental risks, including
climate-related risks. This group is chaired by
the Group Director for EHS&S who, in turn,
reports each month to the Executive
Committee. A third-party platform is used to
monitor current and emerging environmental
regulations across our industry and business
sectors. We evaluate compliance regularly and
consider how these regulations may impact the
Group.

The severity of each risk is quantified by assessing
its inherent impact and mitigated probability,
to ensure that the residual risk exposure is
understood and prioritised for control
throughout the Group. Senior executives are
responsible for the strategic management of the
Group’s principal risks, including climate-related
risk. The output of ongoing scenario analyses
will be integrated into the risk register using this
approach.

Throughout 2021, the Board reviewed the
preparedness of Morgan to all known principal
risks with a significant potential impact at Group
level. Additionally, the Audit Committee carried
out focused risk reviews of each GBU. These
reviews included an analysis of the principal
and emerging risks, and the controls, monitoring
and assurance processes established to mitigate
those risks to acceptable levels.

Substantive impacts are assessed and monitored
through the risk assessment process. Morgan
evaluates all management risks including health,
safety, and environment (including climate-related
risks). Our five GBUs maintain business-specific
risk registers and business continuity plans which
are used in their annual strategic planning. These
registers identify internal and external factors
which could pose threats and opportunities
to each business. They evaluate the inherent
impact, mitigated probability, risk severity, control
effectiveness and risk trends. Each risk is assessed
by the global business unit’s senior management
team who consider the indicators of relevance
and their associated impact. Financial impact,
litigation outcomes, sites disruption, applicable
fines and other issues are all quantifiable
indicators that could affect each GBU’s risk
classification.

The Group recognises the importance of climate
scenario analysis and has engaged a third party
to support the modelling and interpretation of
results. This will be incorporated into the risk
management process to identify further actions
towards our 2030 strategy.

Climate risk and scenario analysis awareness
training was undertaken with functional leads
from the different GBUs in December 2021.
Training will also be delivered to the Executive
Committee and Group finance team on TCFD,
climate change and scenario analysis in Q2 2022.
This will upskill the risk teams at Group level and
across the GBUs to understand how to respond
to scenario analysis, and climate change risk.

METRICS AND TARGETS
We use GHG Protocol reporting standards to
monitor CO2e intensity for scope 1 and scope 2
GHG emissions. The intensity figure is reported
as tonnes of CO2e/million GBP. In addition,
we monitor total water use, and water use in
water-stressed areas.

In 2021, the Group committed to the science-
based target initiative (SBTi) and anticipates
receiving confirmation of our scope 1 and scope
2 emissions targets within the next 24 months,
confirming alignment with the Paris Agreement
target to limit global warming to a 2°C or lower
scenario. This commitment meant that during
2021 we focused on driving energy efficiency
improvements within our operations and
continued to grow our carbon free and
renewable energy portfolio, in line with our
commitment to the SBTi.

To achieve this, we established a cross-GBU
engineering project team to execute CO2e and
water reduction projects, in line with the SBTi
and our 2030 targets and 2050 aspirations. The
group meets monthly and includes the Group
Director for EHS&S. Outputs from this are
reported on a monthly basis to the CEO,
CFO, Executive Committee and the Board.

We track scope 1 and 2 absolute CO2e on
a monthly basis. The scope 1 and 2 absolute
values for the year ended 31 December 2021
for the Group were as follows:
´ Scope 1 emissions (metric tonnes CO2e)

122,817;

´ Scope 2 emissions (metric tonnes CO2e)

107,070.

In line with Streamlined Energy and Carbon
Reporting (SECR) requirements, Scope 1 and 2
emissions and energy use are disclosed in the
Environment section on page 23.

In 2022, we will expand our work with our
customers, suppliers and other stakeholders
in our value chain to calculate an initial scope 3
emissions baseline.

We recognise that the assessment of the Group’s
value chain emissions is an important part of our
long-term sustainability strategy. We aim to work
with our key stakeholders and top tier suppliers
to reduce indirect emissions; this is a preliminary
step towards minimising product lifecycle impact.

In addition to this we are actively exploring
product Life Cycle Assessment (LCA). Systems
to conduct LCAs were evaluated in 2021, and
pilot studies are planned for 2022. Product
LCA information will support scope 3
evaluation across a number of categories.

For GHG reporting purposes, Morgan outlines
its organisational boundary on an operational
control basis, and our scope 1 and 2 emissions
are reported on this basis.

The scope 3 Standard further categorises
these emissions into fifteen distinct categories.
However, based on the Group’s priorities,
we will be focusing on the key categories
in the upstream and downstream.

We are evaluating the following areas:

Purchased goods and services During 2021
we conducted a pilot on our top tier suppliers
in terms of climate and other ESG criteria. We
will implement a system to evaluate our suppliers
during 2022. The evaluation of the associated
scope 3 emissions will begin in 2022 using the
GHG Protocol Scope 3 Evaluator and we expect
to start reporting on them from 2023 onwards,
with coverage increasing over time.

Capital goods We anticipate having a system
identified in 2022 to begin our evaluation of
scope 3 emissions associated with capital goods.

Fuel- and energy-related activities We are
currently evaluating adequate systems to account
accurately for scope 3 for Fuel-and energy-
related activities (not included in scope 1 or 2).
We anticipate having a plan identified in 2022 to
capture this data. We anticipate these Scope 3
emissions associated with Fuel-and energy-
related activities both upstream and downstream
will be performed using various tools such
as the GHG Protocol Scope 3 Evaluator and
IEA emission data.

Criteria currently being evaluated include:
´ Upstream transportation and distribution;
´ Waste generated in operations;
´ Downstream transportation and distribution;
´ Processing of sold products;
´ Use of sold products;
´ Downstream leased assets.

The Group’s greenhouse gas (GHG) emissions
are mostly generated by the combustion
of fossil fuels at various stages of our
manufacturing processes. We are pleased to
report that our absolute GHG emissions for
Scope 1 and 2 for 2021 have reduced by 17%
compared with 2020, representing a 33%
reduction compared with our 2015 baseline.
Additional details of our progress towards
2030 can be found in the Environment section
of this report on page 22. Scope 1 & 2 CO2e
emissions continue to fall as a result
of efficiency improvements completed by the
cross-GBU engineering team and increased
renewable energy procurement.

We are also focusing on water reductions in
areas of high or extremely high-water stress.
Water withdrawal in water stressed areas
accounts for 7% of our total water
withdrawals. Water management plans will
be integrated into regular facility assessments
to proactively engage our workforce in
reduction activities to address water-related
issues within the watershed of these local
communities. We are pleased to report that
absolute water withdrawal continues to fall
across the business, being 26% lower in
2021 when compared with our 2015 baseline.
Water use in high and extremely high water
stressed areas is down 12% compared
with 2015.

Water withdrawal and use increased slightly
from 2020, reflecting the manufacturing
facilities returning to pre-pandemic levels of
production. Investment is underway in 2022
to upgrade key facilities and install new
equipment in water stressed areas to reduce
water usage and increase water recycling.

Additional details of our progress towards
2030 can be found in the Environment section
of this report on pages 20 to 21.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

PEOPLE

Our people contribute to the
culture and are the driving force
behind our success. In return we
aim to be a caring organisation
where everyone feels valued
and appreciated. Our key
principle is that ‘it is not just
what you do, but how you do it’
that is important.

We use our ‘Leadership
Behaviours’ and the Morgan
Code to guide the actions we
take. This helps us to achieve
our strategic aim of delivering
performance and value creation
for our stakeholders.

CULTURE
Our Board and governance systems, aligned
to our purpose, safeguard our approach. There
is commitment from both the Board and the
Executive Committee to demonstrate the
‘Leadership Behaviours’ and the principles of the
Code, and this underpins the tone from the top.

We have increased the use of our internal social
media channel Yammer, to reinforce messaging
with employees. This has included discussions on
issues that our people want to hear about, such
as mental health at work, safety, cyber security,
inclusion, environmental matters and discussions
on our execution priorities.

In 2020, due to COVID-19, virtual site-based
focus groups were held, to ensure the Board was
still able to hear direct feedback on our culture
and understand the extent to which our
employees were engaged. In 2021, we have
continued virtual engagement sessions with
employees and, as restrictions have reduced,
we have held site visits in the UK.

The Board also received additional resources
to help measure and monitor our culture, which
included:
´ Areas of culture highlighted in ethics

reporting, including any terminations as
a result of breach of the Morgan Code;
´ Safety and environmental updates and

performance metrics;

´ Talent reviews with a focus on key talent

retention, employee turnover, and diversity
and inclusion metrics and initiatives;
´ Updates on training and development

programmes – including ethics, leadership
development programmes and on-the-job
training;

´ Results of our recent engagement survey.

The feedback is giving us a better picture of
our culture as a Group.

PEOPLE POLICIES
We support the UN Universal Declaration of
Human Rights, and our Human Rights Policy
commits us to protect the rights of everyone
(who works for us) and all those who have
dealings with us. The principles of the Policy
cover child labour, forced labour, health and
safety, freedom of association, inclusion,
discrimination, discipline, working hours and
compensation. The Policy is published on our
website.

We do not unfairly discriminate, and we respect
human rights. Our employee policies are set
locally to comply with local law and are within
the overall Group framework. We operate
a ‘Speak Up’ hotline which enables individuals
who are aware of, or suspect, issues
contravening Morgan’s Human Rights Policy, or
wider concerns on policy adherence, to report
these confidentially. All issues are investigated,
individuals responded to where contact
information is given, and progress is tracked
to conclusion.

UK GENDER PAY GAP REPORTING
We are continuing our efforts to improve equality
and transparency across the business.

The UK Government requires gender pay gap
reporting for companies with more than 250
employees. In 2021, the average gender pay gap
for our UK workforce was 26.0% (2020: 19.4%,
2019: 21.5%, 2018: 18.6%, 2017: 24.7%).

Our gender pay gap exists because a greater
proportion of our senior leadership is male
and compared to last year our gap has increased.
The gender pay gap is fluctuating according to
the number of male employees at the higher
pay ranges relative to female employees. The
percentages are sensitive to small changes.
We have set ourselves a target that 40% of our
leadership population will be female by 2030.
We have launched ‘Women@Morgan’, our
employee resource group to engage women
and men in addressing female specific topics that
will support the development of a more gender
inclusive culture. We have invested in female-
specific development with a number of our high
potential women.

ATTRACTION AND RETENTION
To help solve our customers’ challenges, we
need to recruit and retain a diverse range of
professionals, including materials scientists,
application engineers, functional specialists and
salespeople. We are evolving our strategies for
recruiting and developing talent. We are
developing our employer brand to help us
compete more effectively in the talent market
and to attract a more diverse pool of potential
employees.

In 2021 we increased the size of our internal
talent acquisition team and have leveraged our
direct sourcing approach to widen our external
talent pool. In addition we launched a new talent
acquisition platform, which resulted in a threefold
increase in traffic to the careers section of our
website. This includes a similar increase in
individuals who have explicitly expressed an
interest in working for Morgan Advanced
Materials online. We continue to ensure that
our candidate lists are diverse and have a more
inclusive approach using assessment to inform
decision making. We have made some key
internal development moves, which have
positively impacted retention of our high
potential talent.

INCLUSION
We promote equal opportunities for all
employees and job applicants and do not
unlawfully discriminate. We make reasonable
adjustments to accommodate any employee
who may have a disability within the meaning
of all global equality legislation, and where the
Company is aware of such disability.

See also our Board Inclusion and
Diversity Policy on page 80.

DEVELOPING OUR PEOPLE
We want every employee to perform at their
best, reach their full potential and feel rewarded
for what they do. In 2021, each employee
received on average 13 hours of training
(2020: 8 hours), and we have continued to
increase our volume of virtual training blended
with face to face (as and when COVID-19
restrictions allowed).

We have launched new language training
(available to all our people) and saw a 10% take
up in the first month. Our professional and
functional skills development continues to
expand, as we increase our investment to meet
the growing demand. Approximately 12% of our
population had access to personal effectiveness
and functional online on-demand learning in
2021. This population has completed a total
of 4,000 hours of training. In our project
management function, this has also led to
a number of individuals achieving accreditations.
In 2022, we will be expanding access to these
resources to all our people.

We completed the conversion of our supervisor
training to enable virtual and blended delivery,
as well as more traditional classroom delivery.
This included increased support for the line
managers of participants to ensure the learning
was embedded successfully into the workplace.
During 2021, 277 managers and supervisors
completed the training.

We have evolved our talent identification process
with more granular assessment of potential
versus performance, to enable targeted and
proactive actions. These improve our succession
pipeline and indicate the readiness of individuals
to take on more complex roles in the future.
We have also reviewed the relative size and
complexity of our roles, which will inform
development conversations and our ability
to identify moves between businesses and
functions.

NEW LANGUAGES ARE HELPING US COLLABORATE

As a global company we’re helping
bridge the gap between our teams.

With employees in over 25 countries,
improved language skills are an important
part of successfully connecting and
collaborating. In 2021 we launched
goFLUENT as our online language learning
platform, available to every one of our
employees.

Using online learning our people are able
to learn English, French, German, Italian,
Mandarin, Portuguese, Spanish, Dutch
or Russian, using this hyper-personalised
platform.

We’ve had more than 700 of our people
activate their learning account so far. That
is 700 people taking extra steps to connect
with others.

We know that investing in our people and
their skills is an important part of building
an environment where everyone can do
their best work.

INVESTING IN PEOPLE

Investing in the development of our
people enables us to invest in our
future.

´ In 2021, we continued our online

learning focus. Our online learning
system Percipio was used by almost
3,000 of our people across the world
for compliance training;

´ Our top 100 dedicated learners clocked
up nearly 3,000 learning hours across
the year;

´ Our leadership development

programmes, ‘Catalyst’ and ‘Ignite’, saw
the latest cohort focused on developing
their personal and professional
leadership skills, to help us achieve our

purpose, keep our people safe and
provide meaningful work that
contributes to an improved society;
´ We welcomed the first cohort on our

new early careers programme, ‘Spark’.
The programme is focused on
empowering participants to take
ownership of and drive their career,
and helps people prepare to progress
to more senior or complex roles in
the future. The programme aims to
springboard those in the early stages
of their career. High potential and
a commitment to self-development
are the criteria for our group. Our
22 candidates in this first cohort were
based in eight different countries.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

PEOPLE continued

INCLUSION AND
DIVERSITY
We are creating a work environment
where all employees are valued and
can do their best work. Marking and
celebrating global awareness days
which reflect our differences, as well
as our similarities, gives our teams a
great opportunity to learn more about
each other and foster an inclusive
work environment.

We support a number of these
awareness days throughout the year
as a way to celebrate, educate and
engage ourselves, and to highlight our
desire to make a big positive
difference.

Our leadership programmes continue to add
value. They have remained virtual in delivery
but without any negative impact on the
outcomes. In all, 31% of participants completing
the programmes received a promotion, or
changed or expanded their role. Business
projects included as part of the programme
have informed executive and business unit
management team thinking and plans.

In addition, we have relaunched our early careers
programme, with an increased focus on the
diversity of the cohort to build our pipeline of
talent. In 2021, 45% of the cohort were female.

PERFORMANCE MANAGEMENT
AND REWARD
Since 2020, all employees in professional roles
participate in our globally consistent performance
management process. This process measures
both what is achieved and how it is achieved,
through assessment against our ‘Leadership
Behaviours’. We set clear expectations for our
leaders and managers, aimed at driving a culture
of constructive feedback, and we provide
development coaching to improve performance
in role. Our employees in manufacturing roles
follow a job-based approach to setting
expectations and providing feedback.

The principle of pay for performance underpins
our compensation approach and we set
compensation levels using external benchmarking
and relevant commercial considerations
(i.e. compensation is designed to be both
competitive in the countries in which the role
operates, and affordable). We also offer
short-term performance incentives globally to
managers and to technical and functional experts.

The Executive Committee and senior management
additionally have long-term incentives tied to
business performance. At manufacturing site
level, most sites offer incentives to their people,
with payments based on meeting locally-set
performance targets. We regularly review bonus
arrangements and benefits to ensure they
encourage and reward commercial and personal
performance. In 2022, we will be including
a carbon reduction target within our long-term
incentive elements to reinforce our commitment
to sustainability performance.

ENGAGING OUR EMPLOYEES
Effective engagement enables our employees
to contribute to improving Morgan Advanced
Material’s business performance. We keep
employees informed about what is happening
across the business, including Company financial
results, major business decisions, and other
matters which affect them. We seek to maintain
constructive relationships with all trade and
labour unions across the geographies in which

we work. Additional details on the engagement
of our workforce are included on pages 70 and 71
of the Corporate Governance Report.

In 2021, we communicated and engaged our
people on our new execution priorities and
longer-term aspirations. The initial communication
to our leadership population was delivered
virtually, utilising innovative technology to run an
engaging inclusive event where all leaders could
participate and explore the topics. Subsequently
the priorities have been communicated by
our leadership teams to all our people, using
cut-down engagement sessions and through
the use of posters and newsletters (at site level).
Our aspiration is for all employees to understand
and engage with our longer-term ambitions so
that they can both relate to and contribute to
them. We are keeping our people updated on
our progress through internal channels, such as
Yammer and the intranet and through external
social media.

In late 2021, we conducted our employee
engagement survey ‘Your Voice’. 77% of our
people participated. The overall engagement
score is 50%, a reduction from 55% engagement
score in a 2019 pulse survey. Engagement is
broadly similar across our global business units
with variation seen across regions and sites.
Our action planning is a combination of a small
number of company initiatives to address
common feedback, and targeted actions at key
locations. Responses reconfirmed the need for a
continued focus on our investment in technology
and infrastructure, career development and
collaboration.

Employee feedback from ‘Your Voice’ showed
strong employee alignment with Morgan’s
purpose and good focus on the customer.

We continue to leverage the virtual engagement
approaches we initiated in 2020, coupled with
encouraging face-to-face engagement within
country. We are now evolving to a blended
approach which we will continue to use in the
future.

We have increased communication with our
people on key Morgan topics, such as
sustainability and inclusion, where we are looking
to evolve our culture. In 2022, we are investing
in a global engagement app to improve our
ability to communicate and engage all our people,
regardless of any language barriers, to ensure
a better cascade of messaging.

In November 2021 a virtual meeting of the
European Employee Forum was held. We will
continue to use the employee forum to engage
with our employees and will return to face-to-
face if COVID-19 restrictions allow in 2022.

WORKFORCE BY GEOGRAPHY
Number of employees as at 31 December 2021

US
2021

27.4%

2020: 31.1%
2019: 32.8%
2018: 32.7%

EUROPE
(EXCLUDING UK)
2021

19.0%

2020: 19.7%
2019: 18.0%
2018: 18.2%

CHINA
2021

13.9%

2020: 14.8%
2019: 14.2%
2018: 14.8%

REST OF WORLD
2021

13.5%

2020: 13.8%
2019: 12.8%
2018: 12.6%

UK
2021

9.5%

2020: 9.1%
2019: 9.5%
2018: 9.8%

OTHER NORTH
AMERICA
2021

14.5%

2020: 9.0%
2019: 10.1%
2018: 8.9%

SOUTH AMERICA
2021

2.2%

2020: 2.5%
2019: 2.6%
2018: 3.0%

TOTAL WORKFORCE1
2021

7,800

2020: 7,470
2019: 8,560
2018: 8,720

1 This number has been rounded to

the nearest 10.

WORKFORCE BY GENDER
Members as at 31 December 2021

MALE

BOARD

Male 57%
(2020: 4; 57%)

EXECUTIVE
COMMITTEE

Male 60%
(2020: 6; 67%)

SENIOR
LEADERS

Male 69%
(2020: 48; 73%)

ALL LEADERS
(includes Executive
w/o CEO/CFO plus
2nd to 4th tier)

295

Male 71%
(2020: 315; 70%)

ALL
EMPLOYEES1

5,400

Male 69%
(2020: 5,450; 73%)

1 This number has

been rounded to the
nearest 10.

FEMALE

BOARD

Female 43%
(2020: 3; 43%)

EXECUTIVE
COMMITTEE

Female 40%
(2020: 3; 33%)

SENIOR
LEADERS

Female 31%
(2020: 18; 27%)

ALL LEADERS
(includes Executive
w/o CEO/CFO plus
2nd to 4th tier)

122

Female 29%
(2020: 132; 30%)

ALL
EMPLOYEES1

2,400

Female 31%
(2020: 2,020; 27%)

1 This number has
been rounded
to the nearest 10.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsTAX
Morgan Advanced Materials has approximately
70 manufacturing sites across over 25 countries
and about 7,800 employees. The Group’s
business activities incur a substantial amount and
variety of taxes including corporate income taxes,
excise duties and employment and other taxes.
The Group also collects and pays employee taxes
and other indirect taxes such as VAT.

We are committed to complying with tax laws
in the jurisdictions in which we do business.
We work closely with tax authorities and support
initiatives to increase trust in tax systems around
the world. The Group’s tax strategy applies
to all Group entities and the latest update was
approved by the Board of Directors on
10 December 2021.

SUSTAINABILITY AND RESPONSIBILITY

WELLBEING, COMMUNITY AND ETHICS

At Morgan Advanced Materials
we recognise the importance
of our people, and we strive
to support their wellbeing.

We have built up a grass-roots
wellbeing programme called
‘Better You, Better Life’, which
supports our purpose of
improving quality of life.
In a similar way to our Morgan
safety week, the programme
runs activities across the Group
to promote healthy choices
and encourages our people
to take part.

THE IMPORTANCE OF WELLBEING
In 2021, we ran our second mental health
awareness month, supporting our people to
make better, healthier choices. We believe that
good mental health is as important as good
physical health and wellbeing. We therefore
provide our people with resources and links to
charities and organisations across the globe that
can support them. We offer managers and
colleagues practical tips on communicating
with employees with mental health issues,
and we are backing a campaign to help break
down the stigma of asking for help at work.

We have an employee assistance programme
in the UK and US that our people can contact,
and we are looking at similar schemes in other
locations.

In 2021, we trained our first mental health
first-aiders.

SUPPORTING OUR COMMUNITIES
We aim to have a positive impact on the
communities we serve, from supporting job
creation and skills advancement to reducing
energy and water consumption at our plants.
All our efforts and engagements are driven
by our Morgan Code, our purpose and our
Group policies.

As our sites and operations are spread across
the globe, we have the opportunity to work with
many communities. We get involved at a local
level and look to understand each community’s
priorities and concerns.

We also pride ourselves on having some of the
most passionate and inspiring people working at
Morgan Advanced Materials. Not only do our
people have a real love of science, mathematics
and technology, but many also carry that
passionate spirit through into other aspects
of their lives – by giving back to their local
communities.

We want our people to have the freedom to
support what they care about most. We share
their stories through our internal social media
platform, Yammer, where you will often see
the generous spirit and nature of our employees
displayed: from bake sales to cultural celebrations,
and from charity donations to sponsorship
events.

CHARITY IN THE
COMMUNITY
´ Our Durham, USA site has held a

food drive for Connecticut Foodshare
every year for the last three years.
In 2021 they scheduled a week-long
volunteering event, at which nearly
a third of the site employees
volunteered;

´ Our St. Marys, USA site organised
a ‘back-to-school supplies’ drive for
their local elementary school, with
over 1,000 donated items provided
to the children in support of their
studies;

´ Our Thouarcé, France team
supported local charity
‘TAKAMAIDER’, who raise funds for
schools in their region, by collecting
plastic and cork stoppers. The
collection supports the association in
their mission to purchase equipment
for children with learning difficulties;

´ Our Shanghai, China site has been
actively involved in the community
initiative to clean up floating waste
on Huangpu River;

´ Our Stourport, UK site spent time
at a local school, supporting the
improvement of their outdoor
learning space.

1,000

donated items provided to the children
in support of their studies.

MENTAL HEALTH FIRST AIDERS
Individuals in the UK and US have
completed mental health first aid
training, ensuring they are better
equipped to support employee
mental health.

This fantastic scheme is another way that
we’re supporting our people to access
mental health support and resources,
when they need them the most.

Supporting the wellbeing of our teams is
a key part of building a safe and inclusive
culture and we’re proud our people
want to reach out, help and be there
for colleagues.

‘BETTER YOU, BETTER LIFE’
In 2021, our people have been embracing our ‘Better You, Better Life’ wellbeing
programme, taking part in activities from hiking in the mountains with family,
to exciting aerospace commutes and cycling in the countryside.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSUSTAINABILITY AND RESPONSIBILITY

WELLBEING, COMMUNITY AND ETHICS continued

ETHICS AND COMPLIANCE
We remain committed to
operating ethically in everything
we do across our business. Our
renewed ethics and compliance
strategy will guide our efforts
over the coming years to
strengthen and embed our
ethical culture and reinforce
controls in key compliance risk
areas covered by the Morgan
Code.

The Morgan Code is a foundational component
of our ethics and compliance programme. The
Morgan Code is a set of principles, supported
by Group policies, which set out how we must
conduct ourselves in support of our people,
our communities, our business partners and
our shareholders. It applies to all employees and
extends, as appropriate, to Morgan’s business
partners including agents, joint venture partners
and other third-party representatives.

Our Code has four sections: Working safely,
Working ethically, Treating our people fairly, and
Protecting our business. The Code is published
publicly and is available in 21 languages. It requires
our people to operate in accordance with
applicable laws, regulations and Company
policies and processes relating to areas such as
ethical business behaviour, trade compliance, gifts
and entertainment, donations and sponsorships.
Our Code is implemented through a suite of
Group policies which set out our expectations
in detail.

We required all senior employees to certify that
they have read, understood and agree to comply
with the Morgan Code and the supporting
policies which are relevant to their role. In 2021,
there were 515 such certifications recorded
across the business (all of the relevant population).

TRAINING
We provide training to raise awareness of ethics
and compliance expectations and give guidance
on handling situations where the proper course
of action may be unclear. New hires are required
to complete mandatory online training soon
after joining the Group which covers anti-bribery,
anti-trust, business ethics and cyber security.
During 2021, our employees were provided
training during three global initiatives through
our new online platform on topics including
modern slavery, anti-bribery, gifts and gratuities,
anti-trust and protection of trade secrets.
Our training completion rates for these global
initiatives continue to reach or exceed 99% of
the relevant employee population, completing
more than 16,000 courses during the year.
We are committed to providing ongoing training
as an important component of our ethics and
compliance programme.

THIRD-PARTY MANAGEMENT
We have published a new Supplier Code of
Conduct which provides a set of minimum
conduct standards that we expect from our
suppliers globally. Our Supplier Code focuses
on treating people fairly, complying with health
and safety rules, protecting the environment,
and adhering to important ethics and compliance
obligations. In 2022, we will continue embedding
the Supplier Code into our supply chain and
assess conformance.

A new Conflict Minerals Policy was published
which sets out Morgan’s position on avoiding the
sourcing of conflict minerals including tantalum,
tin, tungsten and gold from areas where the
revenue may aid the furtherance of human rights
violations and other illegal activities. We expect
our suppliers to adhere to the same principle.

We recognise the importance of making
informed decisions when considering new or
renewed business relationships with third parties.
We began implementing a new third party
management system which will go live in early
2022. The system will strengthen our ability to
risk assess and conduct appropriate due diligence
checks on certain third parties such as agents
and distributors.

HANDLING CONCERNS
We maintain a confidential ‘Speak Up’ ethics
helpline operated by an independent third party
where anyone can raise a concern or report
a suspected violation of our policies, procedures
or the law as an alternative channel to reporting
concerns internally. Reporters can raise concerns
by telephone, web form or email and may elect
to remain anonymous. During 2021, a total of
90 concerns were raised through this channel,
consistent with the 87 raised during 2020. This
volume of concerns aligns with benchmarking
data compiled by NAVEX Global based on the
Group’s global headcount. All concerns are
reviewed or investigated and necessary
disciplinary and/or corrective action is taken as
appropriate. Oversight of all cases within the
internal investigation programme is performed
monthly by members of the leadership team
and four times annually during meetings of the
Audit Committee. We will continue emphasising
the importance of speaking up as it allows us to
address problems in the business and supports
our work to strengthen the ethical culture
at Morgan.

ANTI-BRIBERY AND
ANTI-CORRUPTION
´ In some parts of the world where Morgan
operates, bribery and corruption present
a high risk. We have a responsibility to our
employees, our shareholders and the
countries and communities in which we
do business to be ethical and lawful in all our
work. The Code explicitly prohibits engaging
in bribery or corruption in any form;

´ A total of 2,841 employees (more than 99%
of the relevant population) completed on-line
anti-bribery and anti-corruption training
in 2021;

´ This year we completed a risk assessment
to better understand areas of the business
that may present an elevated risk for bribery
and corruption;

´ We reviewed the adequacy of controls in
place to combat bribery and corruption.
Enhanced mitigation measures and training
are planned for higher risk areas of the
business during 2022;

´ A global Gifts and Entertainment Policy is in
place which requires increasing seniority of
approval based on the value of the item or
entertainment event. Any limited gifts and
entertainment involving a public official
– whether given or received – require
pre-approval by the relevant GBU President
or Finance Director. An online repository
is in place for employees to log any gifts or
entertainment given or received and attach
the appropriate pre-approval in accordance
with the Policy.

HUMAN RIGHTS
´ As an international business, the Group

supports the UN’s Universal Declaration
of Human Rights, and the Group’s Human
Rights Policy applies to all our businesses
worldwide. The Policy is available on our
website and covers child labour, forced
labour, health and safety, freedom of
association, discrimination, discipline, working
hours and compensation;

´ The Director of Human Resources reports to
the Chief Executive Officer and is responsible
for the development of the Human Rights
Policy and related matters, with the
Presidents of each global business unit having
responsibility for policy implementation within
their respective businesses;
´ The Group’s Modern Slavery Act

Transparency Statement, which is published
annually on our website, details action taken
to support the elimination of modern slavery
and human trafficking.

PRIORITIES FOR ETHICS AND
COMPLIANCE IN 2022
´ Provide enhanced management information
and analysis to business leaders to allow
greater insight in to how the ethics and
compliance programme is operating within
each business unit;

´ Further strengthen our controls related to
bribery and corruption, anti-trust and third
party management for higher risk areas
of our business;

´ Increase two-way engagement with
employees and middle management
on relevant ethics and compliance topics
and challenges;

´ Implement employee training and

communications activities in new ways
to help foster a culture of integrity;

´ Clarify and emphasise the important role

leaders play in our ethical culture and set clear
expectations of what we expect from them.

DOING THINGS THE RIGHT WAY, SAFELY, AND ETHICALLY
The mining of and trade in tantalum, tin,
From treating people fairly, to free
tungsten and gold (so called conflict
and fair competition, our Code and
minerals) has been linked to human rights
policies ensure that we are able to
violations in the Democratic Republic of
maintain a safe, fair and ethical
Congo and nearby countries. At Morgan,
approach throughout all elements
we are committed to upholding human
of our business at Morgan
rights, and as a consequence we have in
place a Conflict Minerals Policy to ensure
the materials we use are mined in an
ethical and safe manner. We expect our
suppliers to adopt the same practices and
adhere to Morgan’s ethics and compliance
expectations. Our Conflict Minerals Policy
describes how we work with our suppliers
to ensure they responsibly source
materials used in the manufacture of
our products.

´ Our suppliers play an important role in
helping us achieve our safety and ethics
objectives, therefore it is critical that
we ensure our suppliers adhere to our
high standards of conduct. This is why
in 2021 we launched our Supplier Code
of Conduct.

OUR CODE MATTERS
We encourage everyone at Morgan Advanced Materials to speak up and report
any misconduct they may see. Any breaches in Group policy can be reported
internally to local management or confidentially via our Group compliance
team. The third party ‘EQS Integrity Line’ offers an external source in which
reports can be made anonymously and are treated confidentially.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsKEY PERFORMANCE INDICATORS

We assess our performance
across a wide range of metrics.
To support the Group’s strategy
and to monitor performance,
the Board of Directors and the
Executive Committee use
a number of financial and
non-financial key performance
indicators (KPIs).

Our KPIs are a balanced set of metrics that give
emphasis to both financial and non-financial
measures. These help the Board and the
Executive Committee assess performance and
progress against our execution priorities and
business plans. Divisional and global business
unit management use these and additional
benchmarks and other KPIs to evaluate operating
performance and make financial, strategic and
operating decisions.

In order to measure the organic* performance
of the business, management further review
the adjusted KPIs after excluding the impacts
of acquisitions and foreign exchange.

Financial and non-financial performance is
reviewed in more detail in the Sustainability and
Responsibility, Review of Operations and Group
Financial Review sections of this Report.

REMUNERATION
To help align the focus of the Board and the
Executive Committee with the interests of our
shareholders, certain measures are used for
executive remuneration.

Measures for determining employee annual
bonuses are focused on both Group financial and
personal performance. Measures for awarding
performance shares (long-term share incentive
programmes), are focused on shareholder value
and future growth. For more information on
Executive Directors’ remuneration please see
the Remuneration Report on pages 82 to 105.

FINANCIAL KPIs
(STATUTORY
AND ADJUSTED
PERFORMANCE
KPIs)

REVENUE
(£M)

ORGANIC CONSTANT
CURRENCY REVENUE
GROWTH (%)

OPERATING PROFIT
(£M)

1,049.5

910.7

950.5

10.3

126.1

0.8

(11.4)

2019

2020

2021

2019

2020

2021

2019

113.1

2021

(1.8)

2020

Why a KPI?
Creating consistent long-term
value for shareholders. Focus
on higher-growth markets.

Performance commentary
On a reported basis, revenue
increased by £39.8 million,
4.4%. See Review of
Operations on pages 44 to 49
for more detail.

Why a KPI?
Creating consistent long-term
value for shareholders. Focus
on higher-growth markets.

Performance commentary
On an organic constant-
currency* basis revenue grew
by £88.5 million, 10.3%.
See Review of Operations on
pages 44 to 49 for more detail.

Why a KPI?
Creating consistent long-term
value for shareholders. To have
a culture of operational
excellence and cost-efficiency.

Performance commentary
Margin improvement from
delivery of our restructuring
programme and increased
volumes.

CONTINUING EPS
(P)

ADJUSTED EPS
(P)

NON-FINANCIAL
KPIs

EMPLOYEE TURNOVER
(%)

25.2

23.9

28.0

27.2

(8.6)

19.0

2019

2020

2021

2019

2020

2021

Why a KPI?
Creating consistent long-term
value for shareholders.

Performance commentary
Benefits arising from delivery of
our restructuring programme
and increased volumes.

ADJUSTED OPERATING
PROFIT MARGIN (%)

FREE CASH FLOW BEFORE
ACQUISITIONS, DISPOSALS
AND DIVIDENDS (£M)

RETURN ON INVESTED
CAPITAL (%)

CONTINUING AND
DISCONTINUED EPS
(P)

DIVIDEND PER SHARE
(P)

12.8

13.1

10.1

72.4

66.2

59.2

17.4

13.0

20.5

25.7

25.9

11.0

(7.9)

9.1

5.5

2019

2020

2021

2019

2020

2021

2019

2020

2021

2019

2020

2021

2019

2020

2021

Why a KPI?
Creating consistent long-term
value for shareholders. To have
a culture of operational
excellence and cost-efficiency.

Performance commentary
Margin improvement from
delivery of our restructuring
programme and increased
volumes.

Why a KPI?
Creating consistent long-term
value for shareholders.

Performance commentary
Strong cashflows from lower
capex, net interest and lease
payments.

Performance commentary
Higher return on invested
capital is driven by improved
adjusted profit.

Why a KPI?
Creating consistent long-term
value for shareholders.

Performance commentary
Benefits arising from delivery of
our restructuring programme
and increased volumes.

Performance commentary
The Board has committed to
growing the dividend to around
three times dividend cover.

* Pro forma

1. Definitions of these non-GAAP

measures, and their
reconciliation to the relevant
GAAP measure, are provided
on pages 55 to 57.

2. This KPI uses revenue at
constant currency 1 in its
calculation.

* Pro forma

1. Definitions of these non-GAAP

measures, and their
reconciliation to the relevant
GAAP measure, are provided
on pages 55 to 57.

2. This KPI uses revenue at
constant currency 1 in its
calculation.

15.6

17.5

14.3

2019

2020

2021

Why a KPI?
To attract, retain, and develop
the right people in the right
roles.

Performance commentary
Employee retention remains a
challenge particularly in a
number of our North American
manufacturing sites where
labour shortages have been
exacerbated by the pandemic.

LOST-TIME ACCIDENT
FREQUENCY (PER 100,000
HOURS WORKED)

0.22

0.18

0.14

2019

2020

2021

Why a KPI?
To maintain a workplace that
focuses on the health and safety
of its employees and others
affected by the Group’s operations.

Performance commentary
We have refreshed our approach
to safety and are deploying
training to all employees to
strengthen our safety culture.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsRISK MANAGEMENT

We have an established risk
management methodology which
seeks to identify, prioritise and
mitigate risks, underpinned by
a ‘three lines of defence’ model
comprising 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 delivering long-term sustainable
growth in shareholder value.

Principal risks and emerging risks are identified
both ‘top down’ by the Board and the Executive
Committee and ‘bottom up’ through the Group’s
global business units (GBUs) and divisions.
The severity of each risk is quantified by assessing
its inherent impact and mitigated probability,
to ensure that the residual risk exposure is
understood and prioritised for control
throughout the Group.

Senior executives are responsible for the strategic
management of the Group’s principal and
emerging risks, including related policy, guidelines
and processes, subject to Board oversight.

Throughout 2021, the Board reviewed the status
of all principal and emerging risks with a significant
potential impact at Group level. Additionally,
the Audit Committee carried out focused risk
reviews of each GBU. These reviews included an
analysis of both the principal risks and emerging
risks, together with the controls, monitoring and
assurance processes established to mitigate those
risks to acceptable levels.

As a result of these reviews, a number of actions
were identified to continue to improve internal
controls and the management of risk, including:
´ Refresh of the Group’s ‘thinkSAFE’ programme,
focusing on developing a caring safety culture,
together with work to strengthen our safety
systems.

´ Increased awareness of the IT function’s

‘thinkSECURE’ approach, including a cyber
security month;

´ Increased focus on Trade Compliance with
the appointment of a Group Trade Control
Director;

´ Promotion of the Group’s ‘Speak Up’

process;

´ Further emphasis on the ethics agenda,
including implementing self-certification
of policy compliance and change to the
Ethics & Compliance training platform;
´ Driving forward the Group’s sustainability

and environmental agenda.

The Board reviewed its appetite for the Group’s
principal risks and concluded its appetite for
these risks was unchanged from the previous
year. Risk appetite is determined through
management review and discussion with the
Board. The Group is willing to take considered
risks to develop new technologies, applications,
partnerships and markets for its products and
to meet customer needs. The Group strives
to eliminate risks to product quality and health
and safety, an approach which is essential to the
success of the Company’s products and the
safety of our people and contractors.

The appetite for risk in the areas of legal and
regulatory compliance is extremely low and the
Group expects its businesses to comply with
all laws and regulations in the countries in which
they operate. The Group also has a low appetite
for financial risk. During the year, the Board
monitored the Group’s current risk exposure
relative to the Board’s appetite for different risks.
There were no risks where the current risk
exposure exceeded the Board’s risk appetite.

EMERGING RISKS
As part of the ongoing risk management process,
the Board and the GBUs also identified and
assessed emerging risks. None of these emerging
risks are currently deemed to be significant
and they are therefore not listed amongst the
Group’s principal risks below. They are identified,
assessed and monitored continuously to be able
to respond effectively when they crystallise.

RISKS

The key emerging risk areas identified were:
´ Environmental risk: climate change – including

the potential impact of rising sea levels
on low-lying or coastal sites and Morgan
Advanced Materials’ role in protecting and
enhancing the environment. Energy intensity
and water scarcity – including ways of
adjusting the Company’s production
processes to reduce usage of natural
resources . Raw materials and potential
issues with their continued availability;

´ Regulatory risk: manufacturing regulations –

regulatory requirements for certain
hazardous materials;

´ Social/Societal: longer-term changes to
end-markets redirecting effort to new
end-markets for example, electric vehicles,
domestic heating, decentralised generation
of energy;

´ Business model: route to market – potential
permanent change in traditional selling
models requiring an accelerated shift to
e-commerce. Change to permanent remote
working models with own employees,
customers and vendors.

These emerging risks have been recorded and
will be monitored so that their potential impact
can be understood and mitigated. They will also
be considered as an integral part of the strategic
planning process and they form part of the
focused risk review of each GBU.

The following are the Group’s principal risks and
uncertainties and represent the 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 could
impact the delivery of strong returns to the
Group’s shareholders. An indication of the
Board’s assessment of the trend of each principal
risk – whether the potential severity has
increased, decreased or is broadly unchanged
over the past year – is provided.

OPERATIONAL
RISKS

FINANCIAL
RISKS

LEGAL AND
COMPLIANCE
RISKS

RISK KEY

Increased

Unchanged

Decreased

Improved

Risk

Risk description, assessment
and trend from 2020

Mitigation

OPERATIONAL RISKS

TECHNICAL
LEADERSHIP

Severity: Moderate

Trend: Unchanged

Risk appetite: Moderate

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

Unforeseen/unmitigated technology
obsolescence, the emergence of competing
technologies, the loss of control of proprietary
technology or the loss of intellectual property/
know-how would impact the Group’s business
and its ability to deliver on its strategic goals.

The advanced technological nature of the
Group requires people with highly differentiated
skillsets. Any inability to recruit, retain and
develop the right people would negatively
impact the Group’s ability to achieve its
strategic goals.

OPERATIONAL RISKS

OPERATIONAL
EXECUTION/
ORGANISATIONAL
CHANGE

Severity: Low

Trend: Unchanged

Risk appetite: Moderate

As part of the Group’s strategy to improve the
efficiency of its operations and organisation,
various changes have been made to operational
processes at individual sites, to the GBU
set up and to the Group’s structure. Further
improvements and changes are planned for
future years. Failure to manage these changes
adequately could result in interruption to
operations or customer service, or a failure
to maximise the Group’s opportunities.

OPERATIONAL RISKS

PORTFOLIO
MANAGEMENT

Severity: Low

Trend: Unchanged

Risk appetite: Moderate

The Group operates across a range of product
and technology families. These are subject to
long-term market trends which may lead to
either obsolescence or opportunities to further
expand the Group. Failure to manage the
Group’s portfolio of businesses 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 with the
capability to add further value to the Group.

The Group has a dedicated technology team within each GBU which
monitors relevant technology and business developments, using
technology roadmaps linked to 20 major technology families, to ensure
it remains at the leading edge of development. The Group also has
four Centres of Excellence. These Centres focus Morgan Advanced
Materials’ expertise and research resources on further developing
core technologies and identifying new opportunities and applications.

The GBU leadership teams proactively monitor their technology
priorities and R&D investments and have implemented a stage-gate
process to manage this effectively. These projects are also regularly
reviewed by the CEO and CFO.

Where Group products are designed for a specific customer, they are
developed in partnership with the customer. The Group seeks to secure
intellectual property protection, where appropriate via a Trade Secret
standard, for its existing and emerging portfolio of products and has an
in-house counsel dedicated to intellectual property protection, with the
support of external advisors.

During the year, the Group continued its global leadership programme,
adding an advanced programme to develop more high-potential
commercial, functional and technical leaders.

Further detail on our people can be found on pages 28 to 31.

Further detail on research and development can be found on page 107.

Changes to operational processes are carefully considered by site and
GBU management before implementation. Operational improvements
and savings are monitored against budget by the GBUs and the
Executive Committee to ensure that changes deliver the savings
promised without disruption to business operations. New capital
investments are approved at appropriate levels of the Group and
delivery of these is overseen by GBU and Group management.

Organisational changes are assessed by the Chief Executive Officer,
the Executive Committee and sometimes the Board before being
implemented in line with local employment regulations.

A number of functionalisation initiatives commenced within the GBUs
and IT in 2021 to align and standardise data and processes. The rollout
of these projects will continue in 2022.

Changes to the global and functional structure of our GBUs are
reviewed at various levels of the organisation before being implemented.

Further detail on Morgan Advanced Materials’ strategy can be found
on page 10.

The Board performs regular reviews of the Group’s portfolio.

During 2020, the Group launched a COVID-19-related restructuring
and efficiency programme. This accelerated existing plans to simplify the
Group’s portfolio and align capacity with the anticipated demand across
the business.

The site closures completed in the second half of 2021.

Opportunities to acquire businesses are reviewed on a continuing basis.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
RISK MANAGEMENT

Risk

Risk description, assessment
and trend from 2020

Mitigation

Risk

Risk description, assessment
and trend from 2020

Mitigation

OPERATIONAL RISKS

MACRO-
ECONOMIC AND
POLITICAL
ENVIRONMENT

Severity: High

Trend: Unchanged

OPERATIONAL RISKS

ENVIRONMENT,
HEALTH AND
SAFETY (EHS)

Severity: High

Trend: Unchanged

Risk appetite: Very low

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 resource price
shocks.

Whilst a ‘‘no-deal’ Brexit was avoided and new
tariffs have not as yet been introduced, the UK’s
exit from the EU impacts border controls,
product standards, and controls around the
flow of data. The current value of Group’s UK
exports to the EU is approximately £26 million
and imports into the UK from the EU are
approximately £16 million.

We fully support the sanctions that have been
put in place against Russia and we have ceased
all trading with Russia. In 2021, we had
£4.0 million of revenues from Russia, representing
less than 0.5% of Group revenues. We have no
significant dependency on material supply from
Russia or Ukraine.

The Group operates a number of manufacturing
facilities around the world. 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. Any such action could result in both
financial damages and damage to reputation.
Given the long history of many of the operations
of the Group, there is also a risk that historical
operating and environmental standards may
not have met today’s environmental regulations.
In addition, the Group may have obligations
relating to prior asset sales or closed facilities.

OPERATIONAL RISKS

CORONAVIRUS
(COVID-19)
PANDEMIC

Severity: High

Trend: Unchanged

Communicable disease impacts ways of
working, the supply chain and the ability of
employees to travel to work in affected areas.

The Company’s priority is to take all actions
and precautions necessary to ensure the safety
and wellbeing of our employees.

The Group’s broad market and geographic spread helps to mitigate
the effects of political and economic changes.

Budgets and forecasts for Morgan Advanced Materials’ different
businesses are used to monitor delivery against expectations and
anticipate potential external risks to performance. These are subject
to regular review by the Executive Committee and the Board.

In 2021, the Group saw strong organic growth as end-markets
recovered. There has also been some impact of inflationary pressures
on raw materials, energy and labour.

Global issues considered by the Board this year included the continuing
impact and uncertainty relating to the trade negotiations between
the USA and China. The impact of the UK’s exit from the EU has been
minimal; however, tariffs could be introduced in the future.

Managing its operations safely is the Group’s number one priority.
The Group has a comprehensive EHS programme managed by the
Group Health and Safety Director and the Group Environment and
Sustainability Director, with clear EHS standards and a refreshed
programme of audits to assess compliance.

The Group Health and Safety Director and the Group Environment and
Sustainability Director, working with the Global EHS Leads, set annual
priorities for EHS which are approved by the Executive Committee.
These form the basis for individual sites’ own EHS priorities and plans
and complement the Group’s ‘thinkSAFE’ behavioural safety programme.

EHS performance is monitored by the Group Executive Committee
and the Board. EHS metrics are regularly assessed. Overall EHS
performance deteriorated slightly during 2021.

As at 31 December 2021, the Group was managing projects to
remediate legacy contamination at a number of former operational
sites in conjunction with external specialists and relevant authorities.

The Group’s commitment to protecting and enhancing the environment
is set out on pages 20 to 24.

TCFD disclosures are set out on pages 25 to 27.

Details of the Group’s provisions and contingent liabilities can be found
in note 25 to the consolidated financial statements.

In all manufacturing sites, ways of working were successfully adapted
to respond to the pandemic and keep people safe; introducing social
distancing, hygiene measures and additional PPE. Flexible working from
home was also introduced for all roles that could do so.

The Company has continued to be able to supply its key customers
operating in essential sectors, including healthcare and power
generation.

The Group has provided clear and timely communication to reinforce
the importance of following safety measures in every part of the
organisation.

OPERATIONAL RISKS

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.

Severity: High

Trend: Unchanged

Risk appetite: Very low

Some of our products are used in potentially
high-risk applications, for example in the
aerospace, automotive, electric vehicle, medical
and power industries.

Many of the Group’s products are designed to customer specifications.
Morgan Advanced Materials’ quality management systems and training
help ensure that all our products meet or exceed customer
requirements and national/international standards.

The Group Legal Policy requires that contracts relating to products used
in potential high-risk applications are subject to legal review to ensure
that appropriate protections are in place for product quality risks.

The Group insurance programme includes product liability insurance;
this Group-level insurance is reviewed annually by the Board.

OPERATIONAL RISKS

IT AND
CYBERSECURITY

Across the industry the impact of cyber-attacks
has been growing rapidly influenced by
increased connectivity, remote working
and regulatory intervention and compliance.

During 2021 information security and compliance function was further
matured. Morgan Advanced Materials is currently in the second year
of a three-year security programme and we have strengthened the
‘thinkSECURE’ internal brand through an awareness programme.

Severity: Significant

Trend: Increased

Risk appetite: Very low

OPERATIONAL RISKS

SUPPLY CHAIN/
BUSINESS
CONTINUITY

Severity: Moderate

Trend: Unchanged

Risk appetite: Moderate

The COVID-19 pandemic resulted in a further
rise in remote working and an accelerated shift
to cloud platforms, thereby increasing the cyber
risk severity due to threats such as email-
propagated attacks (e.g phishing, cyber-fraud,
impersonation, malware, ransomware).

If the Group were to lose critical information
(such as IP or regulatory data) or if critical
systems availability were affected through
cyber-attacks, the business would be impacted
or could suffer reputational damage.

The effective management of the Group’s IT
infrastructure is important in enabling our
businesses to deliver customer requirements
reliably. If a key business system were to fail
or core systems implementation were to be
ineffective, the ability of the business to deliver
on its strategic goals might be impacted.

The Group has a number of potential
single-point exposure risks, which include:

Æ Single-point supplier – a significant

interruption of a key internal or external
supply could impact business continuity;

Æ Single-point customer – the unmitigated loss
of a major customer could have an impact
on Group profit. The Group’s largest
customer represents circa 2% of Group
revenue;

Æ Single-point site – a key site exposed to
a strike, natural catastrophe or serious
incident such as fire, could impact business
continuity. One Group site, Hayward, is
situated in the California earthquake zone
(USA). Certain of the Group’s businesses
are important for intercompany supply
purposes.

Multi-factor authentication has now been fully implemented.

The Group has continued to monitor the regulatory and compliance
landscape and is following emerging regulations, such as the US
Department of Defense’s Cybersecurity Maturity Model Certificate
(CMMC), and the EU-GDPR and UK Data Protection Act (DPA) 2018.

Residual and emerging risks will be mitigated through continuation of the
Company’s IT strategy and information security programme, including
‘thinkSECURE’ and implementation of the related cybersecurity projects.

The Group has a diversified manufacturing, customer and geographic
base which provides a level of resilience against single-point exposures.
Were any site to be unavailable, production in many cases could
be switched to other sites. The Business Continuity Policy supports
minimum standards at the Group’s most important sites for
intercompany supply.

Management of these risks also involves monitoring and reviewing
supply chains (internal and external), dual/multiple sourcing of materials
or strategic stock, site security and safety mechanisms, business
continuity plans, and maintenance of product quality and strong
customer relationships.

The Group insurance programme includes business interruption cover
and specific cover in relation to the impact of an earthquake in California,
USA; this Group-level insurance is reviewed annually by the Board.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsRISK MANAGEMENT

Risk

Risk description, assessment
and trend from 2020

Mitigation

Risk

Risk description, assessment
and trend from 2020

Mitigation

FINANCIAL RISKS

TREASURY

Severity: Moderate

Trend: Improved

Risk appetite: Very low

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.

FINANCIAL RISKS

PENSION
FUNDING

Severity: High

Trend: Unchanged

Risk appetite: Very low

The Group sponsors several defined benefit
pension arrangements (the Schemes), whose
liabilities are subject to fluctuating interest rates,
investment values and inflation. This coupled
with the increased longevity of members and
a tougher regulatory funding regime will result
in increased funding burdens on the Group
in the future.

The deficit in Morgan Advanced Materials’ global
defined benefit pension schemes calculated
on the basis required for IAS 19 accounting
disclosures decreased from £176.3 million as
at 31 December 2020 to £102.7 million as at
31 December 2021.

The Group also participates in two multi-
employer defined benefit schemes in the USA,
both of which have significant funding deficits.

The Group’s treasury function operates on a risk-averse basis. Required
controls over selection of banks, cash management and other treasury
practices and payments globally are documented in Morgan Advanced
Materials’ Treasury Policy and related procedures. The Group treasury
team manages the Group’s funding, liquidity, cash management, interest
rate, foreign exchange, counterparty credit and other treasury-related
risks. Treasury matters are regularly reviewed by the Board and Audit
Committee.

As at 31 December 2021, the Group had an undrawn Revolving Credit
Facility of £200m which matures in September 2024. Headroom
on committed facilities increased during the period to £327.3m
(2020: £275.8m) providing protection against future refinancing risk and
ensuring sufficient funds are available to support the Group’s activities.

Further detail on the Company’s Treasury Policy is set out in the Group
Financial Review, which can be found on page 52.

Morgan’s primary means of mitigating pensions funding risk is proactive
management of the pension scheme assets and liabilities through an
integrated pension strategy focusing on funding, investment and benefit
risk. This involves both internal management within the Group and also
external management through the Schemes’ trustees, corporate
actuaries and professional advisors.

In the UK, both Schemes are closed to the future accrual of benefits.
In consultation with the Company, the trustees have adopted a proactive
approach to the management of risk in the Schemes’ investment
portfolios, significantly reducing their unhedged interest and inflation rate
exposure. Following the most recent Scheme valuations in March 2019,
Company contributions increased to £16.5 million pa from 2020
(further increasing by 2.75% each year) for the length of the current
recovery plans (2025 and 2027). The next valuations will be
commenced in March 2022 with funding arrangements reviewed.

Risk for both of the defined benefit Pension Plans in the US has been
reduced. One completed a full legal termination (in June 2016). For the
other Scheme, a formal offer of a present-value-equivalent, lump-sum
cash payment was made to members. Following a $36 million additional
contribution (in December 2017) and a move to a significantly de-risked
investment portfolio, this Scheme is now almost fully funded on an
accounting basis.

A liability management strategy for both of the US multi-employer plans
has been agreed and a proposal for withdrawal made to the Trustees
of the more severely underfunded arrangement.

No significant funding obligations exist in any other individual country
although German legacy defined benefit schemes are unfunded, in
accordance with local practice. The recent risk review identified no
significant liability increases were likely in foreseeable future.

FINANCIAL RISKS

TAX

Severity: Moderate

Trend: Unchanged

Risk appetite: Very low

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.

The OECD’s Base Erosion and Profit Shifting
(BEPS) framework is generating additional
obligations and filing requirements for the
Group as countries continue to implement
the actions in the framework. These could have
an impact on the tax paid by the Group.

LEGAL AND
COMPLIANCE RISKS

CONTRACT
MANAGEMENT

Severity: High

Trend: Unchanged

Risk appetite: Very low

LEGAL AND
COMPLIANCE RISKS

COMPLIANCE

Severity: High

Trend: Unchanged

Risk appetite: Very low

As a global advanced materials business,
supplying components for critical applications,
the Group may be exposed to liabilities arising
from the use of its products. Ineffective contract
risk management could result in significant
liabilities for the Group and could damage
customer relationships.

The Group’s global operations must comply
with a range of national and international laws
and regulations including those related to
bribery and corruption, human rights, trade/
export compliance and competition/anti-trust
activities.

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.

The Group’s tax function, working in conjunction with external
specialists as required, closely monitors fiscal developments and changes
such as BEPS to ensure that the Group’s tax arrangements and practices
continue to comply with the requirements of all relevant jurisdictions,
whilst also enabling efficient management of the tax liability. The Group’s
Head of Tax reports to the Audit Committee on key tax issues and
initiatives.

The Group has published its tax strategy on its website in line with UK
corporate governance requirements.

www.morganadvancedmaterials.com/en-gb/sustainability-
responsibility/governance/

The Group has an in-house legal function supplemented by specialist
external lawyers.

The Group Legal Policy requires in-house legal review of high-value
or high-risk contracts to ensure they contain appropriate protections for
the Group. The Policy requires Chief Executive Officer approval before
a business can enter into an unlimited liability contract or one where
the liability cap exceeds £5 million.

The Legal Policy has been updated, focusing on clarifying understanding
and the position on high-risk purchase contracts. A training programme
is in place.

The Group has product liability insurance that would respond to product
liability claims (up to policy limits) to the extent this is not limited contractually.

The Group is committed to the highest standards of corporate and
individual behaviour. To support this, in 2018 the Group issued the
Morgan Code, which has been continuously in force since then. The
Code defines the Group’s approach to doing business ethically and
confirms Morgan Advanced Materials’ commitment to high standards
of ethical behaviour. The Code is supported by a range of documents
and mechanisms: policies, standards and guidance; training materials;
the provision of an ethics hotline for employees; and systems to support
effective screening of and due diligence on third parties. In 2021,
the Company introduced the Supplier Code of Conduct.

Mandatory ethics training for staff covers topics including anti-bribery
and anti-corruption, anti-trust, harassment and bullying and trade
controls. The Group’s ‘Speak Up’ methods enable staff to report
concerns anonymously.

The Group has a Global Ethics and Compliance Director organising
and leading the Group’s activities and programmes. The Group also
has a Global Trade Compliance Director whose role is dedicated to
ensuring compliance with trade controls.

In addition to Group-level compliance specialists, the businesses are
required to establish compliance officer roles, which are responsible
for supporting local training and monitoring. Morgan also employs
country-specific trade and export compliance specialists in higher-risk
businesses and jurisdictions.

Further details on ethics and compliance can be found on
pages 34 to 35.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREVIEW OF OPERATIONS

GROUP PERFORMANCE
GROUP REVENUE
AND OPERATING PROFIT
Group revenue was £950.5 million
(2020: £910.7 million), an increase of 4.4%
on a reported basis compared with 2020,
as demand starts to recover following last
year’s slowdown.

Group adjusted operating profit* was
£124.5 million (2020: £91.7 million). Adjusted
operating profit margin* was 13.1%, compared
with 10.1% for 2020.

Operating profit was £113.1 million (2020:
loss of £1.8 million) and profit before tax was
£104.3 million (2020: loss of £13.1 million).
Specific adjusting items in 2021 was a net
pre-tax charge of £5.4 million (2020:
£87.4 million), primarily relating to the
impairment of assets offset by profit on
disposal of our shareholding in an associate.
Further details are included under ‘Specific
adjusting items’.

SPECIFIC ADJUSTING ITEMS FROM
CONTINUING OPERATIONS
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 understanding of
the financial information and the underlying
performance of the Group.

Details of specific adjusting items arising during
the year and the comparative period are
given in note 6 to the consolidated financial
statements. Specific adjusting items in relation
to discontinued operations are disclosed in
note 9 to the consolidated financial statements.

In 2021 specific adjusting items were
£5.4 million (2020: £87.4 million) and
comprised the following:

Continuing operations

Revenue

Adjusted operating
profit1

Thermal Ceramics
Molten Metal Systems
Thermal Products division
Electrical Carbon
Seals and Bearings
Technical Ceramics
Carbon and
Technical Ceramics division
Divisional total
Corporate costs
Group adjusted
operating profit1
Amortisation of intangible assets
Operating profit before
specific adjusting items
Specific adjusting items included
in operating profit2
Operating profit/(loss)
Net financing costs
Share of profit of associate
(net of income tax)
Profit/(loss) before taxation

2021
£m

364.7
47.7
412.4
164.9
135.9
237.3

538.1
950.5

2020
£m

344.3
41.2
385.5
151.4
146.4
227.4

525.2
910.7

2021
£m

42.0
6.3
48.3
32.8
22.9
26.4

82.1
130.4
(5.9)

124.5
(6.0)

2020
£m

26.7
3.2
29.9
23.6
27.5
14.8

65.9
95.8
(4.1)

91.7
(6.1)

Margin %1

2021
%

2020
%

7.8%
11.5%
7.8%
13.2%
7.8%
11.7%
19.9% 15.6%
16.9% 18.8%
6.5%
11.1%

15.3% 12.5%
13.7% 10.5%

13.1% 10.1%

118.5

85.6

12.5%

9.4%

11.9%

(0.2)%

(5.4)
113.1
(9.2)

0.4
104.3

(87.4)
(1.8)
(11.9)

0.6
(13.1)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory

results to the adjusted measures can be found on pages 55 to 57.

2. Details of specific adjusting items from continuing operations can be found in note 6 to the consolidated financial statements.

Read more about our Thermal Products division on pages 46 to 47 and our Carbon
and Technical Ceramics division on pages 48 to 49.

Specific adjusting items from continuing operations1
Impairment of non-financial assets
Restructuring credit/(costs)
Net profit on disposal of business
Business closure and exit costs
Total specific adjusting items before income tax
Income tax credit from specific adjusting items
Total specific adjusting items after income tax

1. Specific adjusting items relating to discontinued operations are disclosed in note 9.

2021
£m

(12.4)
0.1
7.1
(0.2)
(5.4)
1.5
(3.9)

2020
£m

(65.6)
(24.0)
2.2
–
(87.4)
13.3
(74.1)

RESTRUCTURING COSTS
Following the announcement of the Group’s
restructuring programme in 2020,
a £24.0 million charge was recognised which
related to staff redundancies, site closure costs,
legal and professional fees and the exit of
certain multi-employer defined contribution
pension plans.

PROFIT ON DISPOSAL OF BUSINESS
On 31 August 2020, the Group completed
the sale of its Diamonex business, based
in Allentown, USA. The transaction was
structured as a sale of the business and related
assets. Consideration of £5.9 million was
recognised, which comprised £5.6 million
cash received on completion and £0.3 million
of deferred consideration which was received
in December 2021. A gain of £2.2 million was
realised on disposal – see note 2 for more
details.

NET PROFIT ON DISPOSAL
OF BUSINESS
The Group disposed of its 35% shareholding
in Jemmtec Limited and the business assets
associated with the Latrobe business during
the year. These disposals generated a profit
of £7.2 million and a loss of £0.1 million,
respectively. Refer to note 2 for further
information.

BUSINESS CLOSURE AND EXIT COSTS
A £0.2 million charge has been recognised
relating to the liquidation of businesses in
Europe and Asia.

2020
IMPAIRMENT OF NON-FINANCIAL
ASSETS
Technical Ceramics, ceramic cores
A significant downturn in aerospace demand
in 2020 resulted in impairment losses of
£28.8 million relating to the ceramic cores
business. The impaired assets comprised
intangible assets recognised upon the acquisition
of the Carpenter business in 2008, and property,
plant and equipment.

Technical Ceramics, China
On 15 June 2020 the Group announced the
closure of its Suzhou manufacturing facility
in China and recognised a £1.1 million charge
relating to the impairment of property, plant
and equipment.

Thermal Ceramics
Reduced demand in the aerospace, automotive
and industrial market segments in 2020 resulted
in impairment losses of £35.7 million in Thermal
Ceramics, which related to the closure of sites
and under-utilised product lines, as well as the
impairment of intangible assets recognised upon
the acquisition of Porextherm in Germany
in 2014.

2021
IMPAIRMENT OF NON-FINANCIAL
ASSETS
Technical Ceramics, Asia
An impairment charge of £6.0 million has been
recognised after reassessing the value in use
of property, plant and equipment in a business
in Asia which is taking longer than anticipated
to generate revenues. This represents a partial
impairment of the assets; the carrying value
of the assets following this impairment is
£5.4 million. The calculation of value in use was
performed as at 31 December 2021. A long-term
growth rate of 1% was used for years beyond
the five year forecast period and in calculating
the terminal value. A pre-tax discount rate of
11.5% was used to determine the value in use.

Electrical Carbon,
Europe and North America
Impairment charges of £4.8 million and
£1.0 million have been recognised after assessing
the viability of two development assets in Europe
and North America, respectively. The European
asset was not deemed viable as we were unable
to commission it safely and the American asset
was not deemed to be commercially viable.

Thermal Ceramics, North America
An impairment charge of £0.6 million has been
recognised relating to assets associated with
closed manufacturing lines within Thermal
Ceramics.

RESTRUCTURING CREDIT
A net credit of £0.1 million has been recognised
in the current year representing £2.1 million of
further redundancy and closure costs related to
the Group’s restructuring programme, offset by
a £2.2 million release of restructuring provisions
booked last year in relation to this programme.
Whilst the Group’s restructuring programme
was completed in 2021, we retain restructuring
provisions of £11.8 million for the Group’s
obligations at the balance sheet date (2020:
£17.3 million). This provision includes remaining
lease exit costs and multi-employer pension
obligations for two sites which have been closed
during the year. The cash outflows relating to
the pension obligations may continue for up to
20 years, subject to any settlement being reached
in advance of that date. Refer to note 25 for
further information.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREVIEW OF OPERATIONS

DIVISIONAL AND
GLOBAL BUSINESS
UNIT PERFORMANCE
THERMAL PRODUCTS

REVENUE
(£M)

2021

2020

2019

412.4

385.5

467.5

DIVISIONAL ADJUSTED OPERATING PROFIT*
(£M)

2021

2020

2019

48.3

29.9

HIGHLIGHTS
´ The Thermal Products division’s 2021
reported revenue was £412.4 million
(2020: £385.5 million), an increase of 7.0%
compared with 2020;

´ On an organic constant-currency* basis,

revenue increased by 11.0% compared with
2020;

´ Divisional operating profit was £43.8 million
(2020: loss £12.6 million) and divisional
operating profit margin was 10.6% (2020:
loss 3.3%), with improvement driven by
the delivery of the restructuring programme
and volume growth. Details of the
specific adjusting items of £1.8 million
(2020: £40.3 million) are included in note 6;

´ Divisional adjusted operating profit* was
£48.3 million (2020: £29.9 million) and
divisional adjusted operating profit margin*
was 11.7% (2020: 7.8%).

BUSINESS DESCRIPTION
The Thermal Products division comprises the
Thermal Ceramics and Molten Metal Systems
global business units.

58.1

Thermal Ceramics manufactures advanced
ceramic materials, products and systems for
thermal insulation in high-temperature
environments.

We engineer systems for the safety of people
and equipment in demanding applications.
Our products help customers, especially those
operating energy-intensive processes, to reduce
energy consumption, emissions and operating
costs.

Our products are used in high-temperature
industrial processing of metals, petrochemicals,
cement, ceramics and glass, and by manufacturers
of equipment for aerospace, automotive, marine
and domestic applications. Our core strength
is our ability to address individual customer
problems, using our materials and our applications
expertise to design, manufacture and install
optimum thermal solutions.

Our product range includes high-temperature
insulating fibre products, microporous products,
firebricks, monolithic products, heat shields, fired
refractory shapes and structural block insulation
products.

Molten Metal Systems manufactures an extensive
range of high-performance crucibles and foundry
consumables for non-ferrous-metal melting
applications. We provide melting solutions
for foundries, die-casters and melting facilities
working with zinc, precious metals, aluminium,
copper, brass, bronze and other non-ferrous
metals.

With its extensive applications experience and
process knowledge, Molten Metal Systems helps
customers put together the optimal system for
their needs. The global business unit works with
customers in non-ferrous castings, metal powder
production, refining and recycling of precious
metals, and the production of pure aluminium
for electronics applications.

Our product range includes crucibles and
foundry products.

FOOTPRINT
As at 31 December 2021 Thermal Products
comprised 28 operating sites employing
approximately 2,830 people, with manufacturing
sites across the world. It also has a comprehensive
network of sales offices allowing immediate
access to and facilitating direct working with
end-users. Some sales, particularly for the
insulating fibre and crucible product ranges,
are made through a well-established distributor
network.

PERFORMANCE AND BUSINESS REVIEW
Revenue for Thermal Products for the year was
£412.4 million, representing an increase of 7.0%
compared with £385.5 million in 2020. On an
organic constant-currency* basis, year-on-year
revenue increased by 11.0%. Divisional adjusted
operating profit* for Thermal Products was
£48.3 million (2020: £29.9 million) with
a divisional adjusted operating profit* margin
of 11.7% (2020: 7.8%) with improvement driven
by the delivery of the restructuring programme
and volume growth. Divisional operating profit
was £43.8 million (2020: loss £12.6 million).

Revenue for Thermal Ceramics for the year was
£364.7 million, representing an increase of 5.9%
compared with £344.3 million in 2020. On an
organic constant-currency* basis, year-on-year
revenue increased by 9.8%. Revenue was higher
due to a recovery in the industrial markets and
energy segments and growth in healthcare and
automotive segments.

Thermal Ceramics’ 2021 adjusted operating
profit* was £42.0 million (2020: £26.7 million)
with adjusted operating profit margin* of 11.5%
(2020: 7.8%). Margin improvement was driven
by higher volumes and the delivery of efficiency
actions from the restructuring programme.

Revenue for Molten Metals Systems for the
year was £47.7 million, an increase of 15.8%
compared with £41.2 million in 2020. On an
organic constant-currency* basis, year-on-year
revenue increased by 20.8%. Revenue growth
is driven by a strong demand in the aluminium
and copper segments.

Molten Metal Systems’ 2021 adjusted operating
profit* was £6.3 million (2020: £3.2 million)
with adjusted operating profit margin* of 13.2%
(2020: 7.8%). During 2021, margins improved
due to the higher volumes and cost control
actions.

STRATEGY
The priorities for the division remain in line
with the execution priorities of the Group.
We have put increased emphasis on growth
markets where we bring clear technological
differentiation. We have invested in changes
in our customer-facing organisation to improve
our understanding of customer needs and market
drivers and to develop sales effectiveness as
a distinctive capability.

We recognise the key advantages we have in the
markets we serve and will build on these: our
global manufacturing footprint, broad product
range, application experience, and technological
advancements. We will continue to drive
operational excellence through lean
manufacturing, process efficiency, and automation.

We are investing in product and process technology
to optimise our products and processes to
serve the challenging performance needs of
our customers. We will continue to invest in this
differentiation, as we see increasing competition
which is putting pressure on margins for our
standard products.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREVIEW OF OPERATIONS

DIVISIONAL AND
GLOBAL BUSINESS
UNIT PERFORMANCE
CARBON AND
TECHNICAL CERAMICS

REVENUE
(£M)

2021

2020

2019

538.1

525.2

582.0

DIVISIONAL ADJUSTED OPERATING PROFIT*
(£M)

2021

2020

2019

65.9

82.1

82.0

The business’s components often help to extend
the operating life of customers’ equipment and
make it more energy-efficient. The main markets
served are specialist applications in the oil and
gas, automotive, industrial, water pump,
aerospace and home appliance sectors.

Our product range includes seals, bearings and
general pump components (shafts, vanes, rotors
and washers).

Technical Ceramics engineers high-performance
functional and structural ceramic materials,
components and sub-assemblies to address
customer-specific technical challenges. The
business employs advanced materials science
and applications expertise to produce parts that
enhance reliability or improve the performance
of its customers’ products. Much of what the
global business unit makes is used in demanding,
harsh or critical environments. The global
business unit works in selected segments of the
semiconductor, energy, healthcare, industrial,
petrochemicals, security and transport markets,
typically in close collaborative customer
relationships.

Our product range includes structural ceramic
components, engineered coatings, ceramic-to-
metal assemblies including brazed and metallised
assemblies, ceramic cores, braze alloys and
ceramic tubes and rollers.

FOOTPRINT
As at 31 December 2021 the Carbon and Technical
Ceramics division comprised 44 operating sites
employing approximately 4,740 people, with
manufacturing sites across the world. As a result
of the customer-specific nature of most of the
products sold and the importance of staying very
close to the market, most sales are made directly
by the division’s sales force and application
engineers, with limited use being made of
distributors. The global spread of operating sites
supplemented by a comprehensive network
of sales offices allows immediate access to and
facilitates direct working with customers and
the products’ end-users.

HIGHLIGHTS
´ The Carbon and Technical Ceramics

division’s reported revenue for 2021 was
£538.1 million (2020: £525.2 million), an
increase of 2.5% compared with 2020;
´ On an organic constant-currency* basis,

revenue increased by 9.7% compared with
2020, with an increase in Technical Ceramics
and Electrical Carbon offsetting a decrease
in Seals and Bearings;

´ Divisional operating profit was £66.5 million
(2020: £15.4 million). Divisional operating
profit margin was 12.4% (2020: 2.9%).
Details of the specific adjusting items of
£12.3 million (2020: £46.6 million) are
included in note 6;

´ Divisional adjusted operating profit* for the
Carbon and Technical Ceramics division
was £82.1 million (2020: £65.9 million) and
divisional adjusted operating profit margin*
was 15.3% (2020: 12.5%).

BUSINESS DESCRIPTION
The Carbon and Technical Ceramics division
comprises the Electrical Carbon, Seals and Bearings
and Technical Ceramics global business units.

Electrical Carbon develops and manufactures
a wide range of products which are used to
transfer electrical current between stationary
and rotating or linear moving parts in motor,
generator, and current-collector applications.
Our products are engineered for specific
customer applications and they are often
required to operate in harsh or extreme
environments. Electrical Carbon’s main markets
are rail, industrial drives, power generation, iron
and steel, mining and wind-power. The business’
core strength is its longstanding materials and
applications experience and its ability to engineer
appropriate, reliable solutions for individual
customer requirements.

Our product range includes electrical carbon
brushes and collectors, brush holders, slip rings
and linear transfer systems.

Seals and Bearings makes high-performance
self-lubricating bearing and seal components,
used predominantly in pumps – industrial and
domestic – or other sealing applications. We use
advanced carbon/graphite, silicon carbide, alumina
and zirconia materials to engineer lightweight,
low-friction bearings and seals. These materials
help solve the problems associated with use
of lubricants in extreme temperatures, corrosive
or hygienic environments and where access
is restricted, and are engineered into products
which provide customer-specific solutions.

Technical Ceramics’ adjusted operating profit*
was £26.4 million (2020: £14.8 million), with
an adjusted operating profit margin* of 11.1%
(2020: 6.5%). Margins improved with the
impact of higher volumes and benefits from
the restructuring programme, partially offset
by a £3 million headwind from business exits.

STRATEGY
The priorities of the Carbon and Technical
Ceramics division, and of the three global
business units which it comprises, remain
in line with the execution priorities of the Group.
The division remains focused on delivering
operational efficiencies to support reinvestment
in product development and sales to support
growth in our selected markets and to drive
margin expansion.

The focus on operating costs is reflected in the
division’s results, most notably in the improved
adjusted operating profit margins*. Plant-specific
initiatives include a focus on reducing scrap and
improving yields, which when combined with
the benefits of global footprint management,
and the increased use of low-cost manufacturing
operations, underpin the reductions in the
operational cost base of the business. A significant
part of the division’s capital expenditure is on
investments which will improve the operational
efficiency of the division.

Carbon and Technical Ceramics has two global
Centres of Excellence – Carbon Science,
and Metals and Joining. Their focus will be on
ensuring a strong pipeline of innovation for the
businesses within the Carbon and Technical
Ceramics division.

PERFORMANCE AND BUSINESS REVIEW
Revenue for the Carbon and Technical Ceramics
division for the year was £538.1 million,
representing an increase of 2.5% compared with
£525.2 million in 2020. On an organic constant-
currency* basis, year-on-year revenue increased
by 9.7%. Divisional operating profit was
£66.5 million (2020: £15.4 million). Divisional
adjusted operating profit* for the Carbon and
Technical Ceramics division was £82.1 million
(2020: £65.9 million), with divisional adjusted
operating profit margin* of 15.3% (2020: 12.5%).

Revenue for the Electrical Carbon global business
unit in 2021 was £164.9 million, representing an
increase of 8.9% compared with £151.4 million
in 2020. On an organic constant-currency* basis,
year-on-year revenue improved by 13.1%. The
increase in revenue has been driven by growth
in the industrial, renewable energy and
semiconductor market segments.

Electrical Carbon’s adjusted operating profit*
was £32.8 million (2020: £23.6 million) with
an adjusted operating profit margin* of 19.9%
(2020: 15.6%). Adjusted operating profit
margins* were expanded through operational
efficiency, cost reduction actions and increased
volume.

Revenue for the Seals and Bearings global
business unit in 2021 was £135.9 million,
representing a decrease of 7.2% compared with
£146.4 million in 2020. On an organic constant-
currency* basis, year-on-year revenue decreased
by 3.1%. The business decline was driven by an
expected reduction of contract awards in ceramic
armour (2021: £29 million; 2020: £49 million).
This was largely offset by growth in the industrial,
petrochemical and transportation market segments.

Seals and Bearings’ adjusted operating profit*
was £22.9 million (2020: £27.5 million), with
an adjusted operating profit margin* of 16.9%
(2020: 18.8%). The margin decline has resulted
from lower ceramic armour volume.

Revenue for the Technical Ceramics global
business unit in 2021 was £237.3 million, an
increase of 4.4% compared with £227.4 million
in 2020. On an organic constant-currency* basis,
year-on-year revenue increased by 16.1%,
primarily driven by growth in the industrial,
semiconductor, healthcare, energy and
aerospace market segments.

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

GBP to:

US dollar
Euro

The potential impact of changes in foreign
exchange rates is given in note 22 to the
consolidated financial statements on page 157.

Retranslating the 2021 full-year results at the
January 2022 closing exchange rates would lead
to revenue of £954.6 million and adjusted
operating profit* of £124.6 million.

2021

2020

Closing rate Average rate Closing rate Average rate

1.35
1.19

1.38
1.16

1.37
1.12

1.28
1.13

For illustrative purposes, the table below
provides details of the impact on 2021 revenue
and Group adjusted operating profit* if the actual
reported results, calculated using 2021 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 2021 revenue/adjusted operating profit1 if:

GBP weakens by 10c against the US dollar in isolation
GBP weakens by 10c against the Euro in isolation

Adjusted
operating
profit1
£m

3.9
3.3

Revenue
£m

29.6
18.8

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory

results to the adjusted measures can be found on pages 55 to 57.

AMORTISATION OF INTANGIBLE
ASSETS
The Group amortisation charge was £6.0 million
(2020: £6.1 million).

FINANCE COSTS
The net finance charge was £9.2 million
(2020: £11.9 million) comprising net bank
interest and similar charges of £5.3 million
(2020: £6.5 million), net interest on IAS 19
pension obligations of £1.6 million (2020:
£2.6 million), and the interest expense on lease
liabilities of £2.3 million (2020: £2.8 million)
resulting from IFRS 16 Leases.

The impacts of potential changes in interest rates
on profit or loss are stated in note 22 to the
consolidated financial statements on page 154.

Looking forward to 2022, we anticipate that
the net finance charge will be around £9 million,
comprising: net bank interest and similar charges
of £6 million; net interest on IAS 19 pension
obligations of £1 million; and net interest expense
on lease liabilities of £2 million.

TAXATION
The Group tax charge from continuing
operations, excluding specific adjusting items, was
£29.7 million (2020: £20.2 million). The effective
tax rate, excluding specific adjusting items,
was 27.1% (2020: 27.2%). Note 8 to the
consolidated financial statements, on page 140,
provides additional information on the Group’s
tax charge.

Looking forward to 2022, we anticipate that
the effective tax rate will be around 27-28%,
with cash tax paid slightly lower than the charge
to the income statement.

On a statutory basis, the Group tax charge
was £28.2 million (2020: £6.9 million), higher
than the previous year due to the higher taxable
profits.

EARNINGS PER SHARE
Basic earnings per share from continuing
operations was 23.9 pence (2020: loss per share
8.6 pence) and adjusted earnings per share* was
27.2 pence (2020: 19.0 pence). Details of these
calculations can be found in note 10 to the
consolidated financial statements on page 141.

FINAL DIVIDEND
The Board is recommending a final dividend,
subject to shareholder approval, of 5.9 pence
per share on the Ordinary share capital of the
Group, payable on 20 May 2022 to Ordinary
shareholders on the register at the close of
business on 29 April 2022. The ex-dividend
date is 28 April 2022.

Together with the interim dividend of 3.2 pence
per share paid on 19 November 2021, this final
dividend, if approved by shareholders, brings the
total distribution for the year to 9.1 pence per
share (2020: 5.5 pence).

A total dividend of 9.1 pence per share represents
a dividend cover of adjusted EPS* of 3.0 times.

The Board has committed to grow the Ordinary
dividend as the economic environment and the
Group’s earnings improve, targeting a dividend
cover of around 3 times 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 by making
deficit contributions to the Group’s defined
benefit pension schemes.

Note 42 to the Company financial statements,
on page 180, provides additional information
on the Company’s distributable reserves.

CASH FLOW
Cash generated from continuing operations
was £135.9 million (2020: £146.3 million).

Free cash flow before acquisitions, disposals and
dividends* was £66.2 million (2020: £72.4 million).

Net debt* at the year end was £96.5 million
(2020: £155.6 million), with no term debt
maturities until 2023, representing a net debt*
to EBITDA* ratio of 0.6 times (2020: 1.2 times).

The Group has cash and cash equivalents*
of £127.3 million and undrawn headroom
on its revolving credit facility of £200 million.

Net debt excluding lease liabilities* was
£46.7 million (2020: £101.0 million), representing
a net debt* to EBITDA* ratio excluding lease
liabilities of 0.3 times (2020: 0.8 times).

Commitments for property, plant and equipment
and computer software for which no provision
has been made are set out in note 26 to the
consolidated financial statements on page 167.

DEFINED BENEFIT PENSION PLANS
The Group pension deficit has decreased by
£73.6 million since last year end to £102.7 million
on an IAS 19 (revised) basis, largely driven by
higher corporate bond yields in the UK leading
to a higher discount rate and employer
contributions.
´ The UK Schemes’ deficit decreased
by £68.6 million to £51.7 million
(2020: £120.3 million), (discount rate
2021: 1.92%; discount rate 2020: 1.23%);

´ The US Schemes’ deficit increased
by £0.4 million to £7.7 million
(2020: £7.3 million), (discount rate
2021: 2.71%; discount rate 2020: 2.34%);
´ The European Schemes’ deficit decreased

by £5.8 million to £39.0 million
(2020: £44.8 million), (discount rate
2021: 0.90%; discount rate 2020: 0.40%);

´ The Rest of World Schemes’ deficit

increased by £0.4 million to £4.3 million
(2020: £3.9 million), (discount rate
2021: 2.90%; discount rate 2020: 2.40%).

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. Further details can be found in
note 23 to the consolidated financial statements
on page 161. On the basis of these full valuations,
the Trustees of the UK Schemes, having
consulted with the Group, agreed past service
deficit recovery payments totalling £16.5 million
a year from January 2020, increasing by 2.75% pa
until 2025, with further payments to the Morgan
Pension Scheme for 2026 and 2027.

Cash generated from continuing operations
Net capital expenditure
Net interest on cash and borrowings
Tax paid
Lease payments and interests
Free cash flow before acquisitions, disposals and dividends
Dividends paid to external plc shareholders
Net cash* flows from other investing and financing activities
Cash flows from sale of subsidiaries and associates
Net cash* flows from discontinued operations
Exchange movement and other non-cash movements
Opening net debt1 excluding lease liabilities
Closing net debt1 excluding lease liabilities
Closing lease liabilities
Closing net debt1

2021
£m

135.9
(28.1)
(5.3)
(25.4)
(10.9)
66.2
(19.1)
(15.0)
15.0
5.3
1.9
(101.0)
(46.7)
(49.8)
(96.5)

2020
£m

146.3
(28.6)
(6.6)
(26.0)
(12.7)
72.4
(5.7)
(13.1)
5.3
(0.1)
(2.5)
(157.3)
(101.0)
(54.6)
(155.6)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory

results to the adjusted measures can be found on pages 55 to 57.

CAPITAL STRUCTURE
At the year-end total equity was £349.6 million
(2020: £240.0 million) with closing net debt*
of £96.5 million (2020: £155.6 million).

Non-current assets were £481.9 million
(2020: £514.1 million) and total assets were
£912.5 million (2020: £930.5 million).

Details of undiscounted contracted maturities
of financial liabilities and capital management are
set out in note 22 to the consolidated financial
statements on page 159.

Capital structure is further discussed in note 22 to
the consolidated financial statements on page 157
under the heading Capital management.

PENSIONS
The Group operates a number of pension
schemes throughout the world, the majority
of which are of a funded defined benefit type.
The largest of these are located in the UK
and the USA, and the majority of the others
in continental Europe.

The charge incurred in relation to the Group’s
defined benefit arrangements is summarised
in the table below.

Operating costs:
Current and past service cost
Administration expenses recognised outside the pension liabilities
Curtailments and settlements
Total operating costs
Net interest on net defined benefit liability
Total

2021
£m

2020
£m

(3.2)
(1.3)
0.1
(4.4)
(1.6)
(6.0)

(2.9)
(1.2)
0.3
(3.8)
(2.6)
(6.4)

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DIRECTORS’ STATEMENTS

TREASURY POLICIES
The following policies were in place across the
Group throughout the year. The manager of
each global business unit is required to confirm
compliance as part of the year-end process.

Financial Risk Management
and Treasury Policy
Group Treasury works within a framework
of policies and procedures approved by the
Audit Committee. It acts as a service to Morgan
Advanced Materials’ businesses, not as a profit
centre and manages and controls risk in the
treasury environment through the establishment
of such procedures.

Group Treasury seeks to align treasury goals,
objectives and philosophy to those of the Group.
It is responsible for all of the Group’s funding,
liquidity, cash management, interest rate risk,
foreign exchange risk and other treasury business.
As part of the policies and procedures, there is
strict control over the use of financial instruments
to hedge foreign currencies and interest rates.
Speculative trading in derivatives and other
financial instruments is not permitted.

Foreign exchange risks
Currency transaction exposures exist as a result
of the global nature of the Group. The Group
has a policy in place to hedge all material firm
commitments and a large proportion of highly
probable forecast foreign currency exposures in
respect of sales and purchases over the following
12 months and achieves this through the use
of the forward foreign exchange markets.
A significant proportion of the forward exchange
contracts have maturities of less than one year
after the balance sheet date. The Group
continues its practice of not hedging income
statement translation exposure.

There are exchange control restrictions which
affect the ability of a small number of the Group’s
subsidiaries to transfer funds to the Group. The
Group does not believe such restrictions have
had or will have any material adverse impact
on the Group as a whole or on the ability of
the Group to meet its cash flow requirements.

Currency translation risks are controlled centrally.
To defend against the impact of a permanent
reduction in the value of its overseas net assets
through currency depreciation, the Group seeks
to match the currency of financial liabilities
with the currency in which the net assets are
denominated. This is achieved by raising funds
in different currencies and through the use
of hedging instruments such as swaps and is
implemented only to the extent that the Group’s
gearing covenant under the terms of its loan
documents, as well as its facility headroom,
are likely to remain comfortably within limits.
In this way, the currencies of the Group’s financial
liabilities become more aligned to the currencies
of the trading cash flows which service them.

Interest rate risk
The Group seeks to reduce the volatility in
its interest charge caused by rate fluctuations.
The proportions of fixed and floating rate debt
are determined having regard to a number of
factors, including prevailing market conditions,
interest rate cycle, the Group’s interest cover and
leverage position, and any perceived correlation
between business performance and rates.

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.

Cash balances held by companies representing
over 65% of the Group’s revenue are managed
centrally through a number of pooling
arrangements. Credit risk is managed by investing
in liquid assets and acquiring derivatives in a
diversified way from high-credit-quality financial
institutions. Counterparties are assessed
through the use of rating agencies, systemic risk
considerations, and regular review of the financial
press. Credit risk is further discussed in note 22
to the consolidated financial statements on
page 151.

Capital investment
The Group has well-established formal
procedures for the approval of investment
in new businesses and for capital expenditure,
to ensure appropriate senior management
review and sign-off.

Borrowing facilities and liquidity
All of the Group’s borrowing facilities are
arranged by Group Treasury with Morgan
Advanced Materials plc as the principal obligor.
In a few cases operating subsidiaries have
external borrowings but these are supervised
and controlled centrally. Group Treasury seeks
to obtain certainty of access to funding in the
amounts, diversity of maturities and diversity
of counterparties as required to support the
Group’s medium-term financing requirements
and to minimise the impact of poor credit market
conditions.

The Group’s debt and its maturity profile are
detailed in notes 21 and 22 to the consolidated
financial statements on page 151.

Tax risks
The Group follows a tax policy to fulfil local
and international tax requirements, maintaining
accurate and timely tax compliance whilst seeking
to maximise long-term shareholder value.
The Group adopts an open and transparent
approach to relationships with tax authorities and
continues to monitor and adopt new reporting
requirements, for example those arising from
the implementation of the OECD Base Erosion
and Profit Shifting proposals within tax legislation
across various jurisdictions.

The tax strategy is aligned to the Group’s
business strategy and ensures that tax affairs have
strong commercial substance. Tax risks are set
out in the Risk Management section on page 43.

GOING CONCERN STATEMENT
The Group’s business activities, together with
the factors likely to affect its future development,
performance and position are set out in the
Strategic Report on pages 2 to 57. The financial
position of the Group, its cash flows, liquidity
position and borrowing facilities, are described
earlier in this Group Financial Review. In addition,
note 22 to the consolidated financial statements,
includes 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 31 December 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. Total committed borrowing facilities
were £372.6 million, none of which is due to
mature in the following 12 months. The amount
drawn under these facilities was £172.6 million,
which together with cash and cash equivalents
of £127.3 million, gave a total headroom
of £326.8 million.

The principal borrowing facilities are subject to
covenants that are measured biannually in June
and December, being net debt to EBITDA
of a maximum of 3x and interest cover of
a minimum of 4x, based on measures defined
in the facilities agreements which are adjusted
from the equivalent IFRS amounts.

The Group has carefully modelled its cash flow
outlook, taking account of reasonably possible
changes in trading performance, exchange rates
and plausible downside scenarios. This review
indicated that there was sufficient headroom
and liquidity for the business to continue for the
18 month period based on the facilities available
as discussed in note 22 to the financial
statements. The Group was also expected to
be in compliance with the required covenants
discussed above.

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 underlying revenue. Based on this
assessment, a combined reduction in EBITDA of
80% and an increase in net debt of 80% would
still allow the Group to operate within its financial
covenants. The Directors do not consider either
of these scenarios to be plausible given the
diversity of the Group’s end markets and its
broad manufacturing base.

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. As part of the ongoing risk management
process, principal and emerging risks are
identified and reviewed on a regular basis.
This process includes the ongoing review of the
impact of the pandemic on the Group and its
stakeholders. Potential uncertainties in demand
remain across the countries that the Group
operates in as a result of COVID-19, despite
these uncertainties the Group saw a robust
recovery in most of its end markets, leading to
a return to growth for the 2021 financial year.
In addition, the Directors have assessed the risk
of climate change and do not consider that it will
impact the Group’s ability to operate as a going
concern for the period under consideration.

The Board fully recognises the challenges that
lie ahead but, after making enquiries, and in
the absence of any material uncertainties, the
Directors have a reasonable expectation that
the Company and the Group have adequate
resources to continue in operational existence
for a period of 18 months from the date of signing
this Annual Report and Accounts. Accordingly,
they continue to adopt the going concern basis
in preparing the Annual Report and Accounts.

VIABILITY STATEMENT
In accordance with provision 31 of the UK
Corporate Governance Code, the Directors
have assessed the prospects of the company
over a period significantly longer than 12 months.
The Directors have extended the period of the
viability assessment to five years to 31 December
2026 in the line with impairment review testing
and the strategic planning process which was also
extended as a result of reduced uncertainty in the
markets operated in. The Directors consider this
an appropriate period over which to provide
its viability statement based on management’s
reasonable expectations of the position and
performance of the company and the dynamics
in the markets in which it operates. Taking into
account the Group’s current position and the
potential impact of the principal risks documented
on pages 38 to 43 of the Annual Report, the
Directors have a reasonable expectation that the
Company will be able to continue in operation
and meet its liabilities as they fall due over the
period to 31 December 2026.

To allow the Directors to make this assessment,
a business base case has been built up, initially
using a detailed, bottom-up approach, and then
applying what the Directors consider to be an
appropriate set of assumptions in respect of
growth, margins, working capital flows, capital
expenditure, dividends, refinancing of borrowing
facilities and all other matters that could have
a significant impact on the financial performance
and liquidity of the Group. The resulting base
case provides the Directors with EBITDA,
net debt, and finance charge headroom relative
to current bank covenants.

The Directors’ assessment also included a review
of the financial impact on revenue, EBITDA,
net debt, and the adequacy of the financial
headroom, relative to a severe but plausible
combination of principal risks crystalising that
could threaten the viability of the company. The
Directors also considered the likely effectiveness
of the potential mitigations that management
reasonably believes would be available to the
company over this period.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsDIRECTORS’ STATEMENTS

While the review has considered all the principal risks identified by the Group, the following were
focused on for enhanced stress testing:

Scenarios modelled

Impacts modelled

Link to principal risks
and uncertainties

Operational Risk

Reduction in revenue and its impact
on profitability along with costs
required to reinstate the system
to latest cyber security standards.

IT and cybersecurity
The effective management of the
Group’s IT infrastructure is important
in enabling our businesses to deliver
customer requirements reliably.
If a key business system were to fail
or core systems implementation
were to be ineffective, the ability
of the business to deliver on its
strategic goals might be impacted.
The sensitivity analysis performed
considered the impact of a loss
of access to the Group’s main
ERP system.
Coronavirus (COVID-19) pandemic
Due to the geographical spread of
the Group, it is exposed to disruption
as a result of COVID-19 in multiple
markets. An increase in the rate of
infection or new variant could impact
ways of working, the supply chain,
and the ability of employees to work
in affected areas.

Compliance breach
The Group operates in a number
of different jurisdictions and must
comply with a range of national and
international laws and regulations
including those related to bribery
and corruption, human rights, trade/
export compliance and competition/
anti-trust activities. The impact of
a regulatory fine or penalty has
been considered.

Reduction in revenue linked to loss
of sales and its impact on profitability.
Working capital deterioration due
to supply chain issues.

Operational Risk

Increase in costs and net debt from
fines and legal fees. Reduction in
revenue due to reputational impacts.

Legal and
Compliance Risk

Whilst this review does not consider all of the
possible risks that the Group could face, the
Directors consider that the approach adopted,
and the work performed is reasonable in the
circumstances of the inherent uncertainty
involved and that it allows the Board to confirm
that they have a reasonable expectation that the
Group will be able to continue in operation and
meet its liabilities as they fall due over the period
to 31 December 2026.

As part of the ongoing risk management process,
principal and emerging risks are identified and
reviewed on a regular basis. There are a number
of mitigating actions the Group takes to manage
and reduce risk, further details of which can
be found in the Risk Management section
on pages 38 to 43.

The Group has significant financial resources
including committed and uncommitted banking
and debt facilities, as outlined in the going
concern statement. In assessing the Group’s
viability, the Directors have assumed availability
of debt capital markets and that the existing
banking and debt facilities will remain in place
or mature as intended.

DEFINITIONS AND RECONCILIATIONS OF
NON-GAAP MEASURES 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 section on page 131,
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, consistent with previous years.

2021

Operating profit
Add back specific adjusting items
included in operating profit
Add back amortisation
of intangible assets
Group and divisional adjusted
operating profit

Thermal
Ceramics
£m

37.8

Molten
Metal
Systems
£m

Thermal
Products
division
£m

6.0

43.8

Electrical
Carbon
£m

25.6

Seals and
Bearings
£m

22.0

Carbon and
Technical
Ceramics
division
£m

Technical
Ceramics
£m

Corporate
costs1
£m

18.9

66.5

2.8

2.1

42.0

(0.3)

0.6

6.3

1.8

2.7

6.3

0.9

–

0.9

6.0

1.5

12.3

(8.7)

3.3

–

48.3

32.8

22.9

26.4

82.1

(5.9)

124.5

Group
£m

113.1

5.4

6.0

1. Corporate costs consist of central head office costs.

2020

Operating (loss)/profit
Add back specific adjusting items
included in operating profit
Add back amortisation
of intangible assets
Group and divisional adjusted
operating profit/(loss)

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

2.0

0.9

0.3

3.2

(12.6)

19.2

26.5

(30.3)

40.3

2.2

29.9

3.7

0.7

0.6

0.4

23.6

27.5

42.3

2.8

14.8

15.4

46.6

3.9

65.9

(4.6)

0.5

–

(4.1)

Thermal
Ceramics
£m

(14.6)

39.4

1.9

26.7

Group
£m

(1.8)

87.4

6.1

91.7

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 Review of Operations on pages 44 to 49.

Year-on-year movements in segment revenue

2020 revenue
Impact of foreign currency movements
Impact of acquisitions, disposals and business exits
Organic constant-currency change
Organic constant-currency change %
2021 revenue

Thermal
Ceramics
£m

Molten Metal
Systems
£m

344.3
(12.3)
–
32.7
9.8%
364.7

41.2
(1.7)
–
8.2
20.8%
47.7

Thermal
Products
division
£m

385.5
(14.0)
–
40.9
11.0%
412.4

Electrical
Carbon
£m

Seals and
Bearings
£m

Technical
Ceramics
£m

151.4
(5.6)
–
19.1
13.1%
164.9

146.4
(6.8)
0.7
(4.4)
(3.1)%
135.9

227.4
(12.0)
(11.0)
32.9
16.1%
237.3

Carbon and
Technical
Ceramics
division
£m

525.2
(24.4)
(10.3)
47.6
9.7%
538.1

Segment
total
£m

910.7
(38.4)
(10.3)
88.5
10.3%
950.5

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
DEFINITIONS AND RECONCILIATIONS OF
NON-GAAP MEASURES TO GAAP MEASURES

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

Thermal
Ceramics
£m

Molten Metal
Systems
£m

Thermal
Products
division
£m

29.9

Electrical
Carbon
£m

23.6

Seals and
Bearings
£m

27.5

Carbon and
Technical
Ceramics
division
£m

Technical
Ceramics
£m

Corporate
costs1
£m

14.8

65.9

(4.1)

Group
£m

91.7

(0.8)

(1.2)

(1.7)

(1.2)

(4.1)

–

(4.9)

3.2

(0.1)

2020 adjusted operating profit
Impact of foreign currency
movements
Impact of acquisitions, disposals
and business exits
Organic constant-currency change
Organic constant-currency change %
2021 adjusted operating profit

26.7

(0.7)

–
16.0
61.5%
42.0

1. Corporate costs consist of central head office costs.

REVENUE FROM FASTER GROWING
MARKETS AND CORE MARKETS
Revenue from faster growing markets and core
markets at constant-currency is:

2020 revenue
2021 revenue
Less: one-off solar projects
2021 revenue (excluding
one-off solar projects)
Year-on-year movement
Year-on-year movement (%)

Faster
growing
markets

148.9
188.2
(5.9)

182.3
33.4
22%

Core
markets

712.3
762.2
–

762.2
49.9
7%

Group revenue is split into revenues from
our four faster growing market segments (clean
energy, clean transportation, semiconductors and
healthcare) which made up 20%, and revenues
from our core markets which made up 80% of
Group revenue in 2021. In 2021, we benefitted
from one-off solar projects of £5.9 million.
Excluding the one-off benefits from these
projects, organic constant-currency revenue
growth in the faster growing market segments
was 22%.

–
3.2
103.2%
6.3

–
19.2
66.0%
48.3

–
10.4
46.4%
32.8

0.1
(3.0)
(11.6)%
22.9

(3.1)
15.9
151.4%
26.4

(3.0)
23.3
39.6%
82.1

–
(1.8)

(5.9)

(3.0)
40.7
48.6%
124.5

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 basis.

A reconciliation of operating profit to Group
EBITDA* is as follows:

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.

Operating profit/(loss)
Add back: specific
adjusting items included
in operating profit
Add back: depreciation
– property, plant and
equipment
Add back: depreciation
– right-of-use assets
Add back: amortisation
of intangible assets
Group EBITDA*
Group EBITDA*
excluding IFRS 16
Leases impact

2021
£m

113.1

2020
£m

(1.8)

5.4

87.4

30.1

32.7

7.9

9.2

6.0
162.5

6.1
133.6

151.6

120.9

The Group discloses this measure of free cash
flow as this provides readers of the 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:

Cash generated from
continuing operations
Net capital expenditure
Net interest on cash
and borrowings
Tax paid
Lease payments
and interests
Free cash flow before
acquisitions, disposals
and dividends

2021
£m

2020
£m

135.9
(28.1)

(5.3)
(25.4)

146.3
(28.6)

(6.6)
(26.0)

(10.9)

(12.7)

66.2

72.4

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

Cash and cash equivalents
Bank overdrafts
Net cash and
cash equivalents

2021
£m

127.3
(0.5)

2020
£m

147.8
(72.0)

126.8

75.8

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.

Cash and cash equivalents
Non-current borrowings
Non-current lease
liabilities
Current borrowings and
bank overdrafts
Current lease liabilities
Closing net debt*
Closing net debt*
excluding lease liabilities

2021
£m

127.3
(174.0)

2020
£m

147.8
(177.5)

(40.0)

(43.1)

–
(9.8)
(96.5)

(71.3)
(11.5)
(155.6)

(46.7)

(101.0)

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, overdrafts and lease liabilities.

Operating profit/(loss)
Add back: specific
adjusting items
Add back: amortisation
of intangible assets
Group adjusted
operating profit
12-month average
adjusted net assets:
Third-party working
capital
Plant and equipment
Land and buildings
Right-of-use assets
Intangible assets
Other assets (net)
12-month average
adjusted net assets

2021
£m

113.1

5.4

6.0

2020
£m

(1.8)

87.4

6.1

124.5

91.7

135.0
152.2
98.9
33.0
183.8
3.3

166.4
179.8
114.0
42.2
198.2
7.5

606.2

708.1

ROIC

20.5% 13.0%

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.

Whilst amortisation of intangible assets is
a recurring charge it is excluded from these
measures on the basis that it primarily arises
on externally acquired intangible assets and
therefore does not reflect consistently the benefit
that all of Morgan’s businesses realise from their
intangible assets, which may not be recognised
separately.

A reconciliation from IFRS profit to the profit
used to calculate adjusted earnings per share*
is included in note 10 to the consolidated financial
statements on page 141.

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 157
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.

This Strategic Report, as set out on pages 2 to 57,
has been approved by the Board.

On behalf of the Board

Stephanie Mackie
Company Secretary

3 March 2022

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsGOVERNANCE

CHAIRMAN’S LETTER TO SHAREHOLDERS

The image was taken during
the COVID-19 pandemic.

DEAR SHAREHOLDER
I reported to you last year that Morgan’s governance framework served
the Company well during 2020. In some ways 2021 proved even more
challenging, with a bounce back in trading and resumption of growth in the
business, the reintroduction of improvement initiatives that had been put
on hold during 2020, and the launch of the next phase of our strategy –
all whilst continuing to deal with the challenges of the COVID-19 pandemic.

My fellow Directors and I continued to support and guide executive management and
worked collaboratively to navigate through competing priorities against a challenging trading
and environmental backdrop.

The report which follows explains the governance framework and the workings of the
Board and Committees and demonstrates how the Board continued to perform effectively.

Apart from the priorities I discussed in my introductory statement to this Report the
key governance priorities for the Board during 2021 were:

BOARD’S OVERSIGHT OF STRATEGY
The Board undertook an essential role in overseeing the development of the next phase
of the Group’s strategy with the identification of three new execution priorities, explained
in detail in the Strategic Report. When debating the strategic direction of the Group, the
Board is mindful of the Company’s wider role in society and our desire to conduct our
business responsibly and with respect to the environment.

ENGAGEMENT WITH THE WORKFORCE AND OTHER KEY STAKEHOLDERS
During 2021, we held a number of engagement sessions with small groups of employees,
both virtually and in person, which provided a forum for the non-executive Directors to
listen to employees and hear about the issues that are important to them. These sessions
have also afforded the non-executive Directors an insight into whether employees are
aligned with the Group’s purpose and how employees experience the Group’s culture.

ENHANCING BOARD DISCUSSION
The Board’s role in both supporting and challenging executive management has been even
more important during 2021, as the Group navigated a return to robust growth. Every
Board meeting reviewed the health and safety performance of the Group to ensure the
continued safety of our people. The lost time accident trend increased during 2021 and
the Board has been closely engaged with the development and deployment of our updated
approach to safety training and management. The Board supported the completion of the
restructuring programme started in 2020 and has continued to review the continuing
operational challenges caused by the economic and geopolitical environment. Discussions
during Board meetings have focused on the immediate challenges whilst also having regard
to the future of the Group.

BOARD EFFECTIVENESS
During 2021, the Board undertook a thorough evaluation of its own performance with the
assistance of an external facilitator. The overall conclusion of the review was that the Board
is operating effectively, however, the process proved insightful and highlighted a number
of recommendations which were discussed by the Board. The key areas for improvement
are set out in the Corporate Governance Report.

BOARD CHANGES
In May 2021, Peter Turner announced his intention to retire, and he will step down from
the Board in June 2022. Following a selection process conducted by the Nomination
Committee, the Board has appointed Richard Armitage who will join the Board on
30 May 2022 and will take over from Peter as Chief Financial Officer.

SECURING OUR FUTURE
As I reflect on the role of the Board in this time of challenge and change, I believe that the
governance framework that we have in place has enabled the Board to achieve the right
balance between monitoring the performance of executive management, identifying the
risks and opportunities that are relevant to the Group’s future success, setting the strategic
direction for the Group, whilst ensuring that we take care of our employees, customers
and shareholders.

Douglas Caster CBE FIET
Chairman

GOVERNANCE
Chairman’s letter to shareholders
Board of Directors
Corporate governance
Report of the Audit Committee
Report of the Nomination Committee
Remuneration report
Other disclosures
Independent auditor’s report to the
members of Morgan Advanced Materials plc

59
60
62
74
79
82
106

110

“

THE GUIDING PRINCIPLE OF
THE BOARD IS TO ‘DO THE
RIGHT THING’ WITH RESPECT
TO ALL OUR STAKEHOLDERS
AND THE ENVIRONMENT.

”

Douglas Caster CBE FIET
Chairman

Morgan Advanced Materials
Annual Report 2021

Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsBOARD OF DIRECTORS

The image was
taken pre-COVID.

3. PETER TURNER
Chief Financial Officer

APPOINTED: April 2016.

SKILLS AND CONTRIBUTION: Peter has
significant financial experience combined with
a strong track record of driving improved
business performance in multiple large-scale
and complex organisations.

CAREER AND EXPERIENCE: Peter joined
Morgan Advanced Materials in April 2016 as
Chief Financial Officer. Before this, Peter was
Finance Director at Smiths Group plc from 2010
to 2015. During this time, he was responsible for
driving restructuring programmes across the
Group to enhance operating margins, with a
strong focus on improving operating cash flow.
Prior to Smiths, Peter was Finance Director from
2007 to 2009 at Venture Production plc, before
it was acquired by Centrica plc in 2009. From
1995 to 2006, Peter held several senior positions
at The BOC Group plc, including Finance
Director of the Industrial and Special Products
division. Peter started his career as an auditor
at Price Waterhouse. He holds a degree in
chemistry from Oxford University.

ADDITIONAL APPOINTMENTS: None.

Peter will step down as Morgan’s Chief Financial
Officer on 30 May 2022 and from the Board
in June 2022.

4. JANE AIKMAN
Independent Non-executive Director

APPOINTED: Non-executive Director and
Audit Committee Chair in July 2017.

SKILLS AND CONTRIBUTION: Jane brings
to the Board significant financial experience
and knowledge of growing manufacturing and
technology businesses gained in a variety of
senior executive positions. Jane brings a valuable
perspective from her current executive role in
the technology marketing and advertising sector.

CAREER AND EXPERIENCE: Jane has been
Group Chief Financial Officer of Inside Ideas
Group Limited since July 2020. Up until May
2019, Jane was Chief Financial Officer of Arqiva
Group Limited, a communications infrastructure
company. Prior to this, she was the Chief
Financial Officer of KCOM Group plc, a listed
communications services and IT solutions
provider. She was Chief Financial Officer and
Chief Operating Officer of Phoenix IT Group plc
until its acquisition by Daisy Group in 2015.
Jane has also held Chief Financial Officer positions
at Infinis plc, Wilson Bowden plc and Pressac plc
and a senior finance position at Asia Pulp and
Paper in south-east Asia. Jane was a non-
executive Director of Halma plc from 2007
and chaired its audit committee from 2009 until
her departure in July 2016. Jane holds a civil
engineering degree and qualified as a Chartered
Accountant with Ernst & Young.

ADDITIONAL APPOINTMENTS: Group
Director and Group Chief Financial Officer
of Inside Ideas Group Limited.

COMMITTEES:

1. DOUGLAS CASTER CBE FIET
Non-executive Chairman

APPOINTED: Non-executive Director in
February 2014. Non-executive Chairman
and Nomination Committee Chairman on
1 January 2019.

SKILLS AND CONTRIBUTION: Douglas
is an experienced Chairman with leadership and
governance experience and a strong track record
of managing and driving growth within electronics
businesses.

CAREER AND EXPERIENCE: Douglas began
his career as an electronics design engineer with
the Racal Electronics Group in 1975, before
moving to Schlumberger in 1986 and then to
Dowty as Engineering Director of Sonar &
Communication Systems in 1988. In 1992, he
became Managing Director of that business and,
after participating in the management buy-out
that formed Ultra Electronics, joined the Board
in October 1993. In April 2000, he became
Managing Director of Ultra’s Information &
Power Systems division. In April 2004 he was
appointed Chief Operating Officer and became
Chief Executive in April 2005. He was appointed
Deputy Chairman in April 2010 and was
Chairman of Ultra from April 2011 until
28 January 2019. Douglas was non-executive
Chairman of Metalysis Limited from January 2015
until June 2019.

Douglas was Morgan Advanced Materials plc’s
Senior Independent Director from January 2015
until December 2017. He was appointed to the
role of Chairman in January 2019.

ADDITIONAL APPOINTMENTS: None.

COMMITTEES:

2. PETE RABY
Chief Executive Officer

APPOINTED: August 2015.

SKILLS AND CONTRIBUTION: Pete has
a strong technical background and extensive
experience in planning and executing business
strategy across global technology and
manufacturing operations.

CAREER AND EXPERIENCE: Pete joined
Morgan Advanced Materials in August 2015 as
Chief Executive Officer. Before joining Morgan,
Pete was President of the Communications
and Connectivity sector of Cobham plc. Pete
demonstrated strong leadership across a range
of senior strategy, technology and operational
positions at Cobham over a nine-year period.
Prior to Cobham, Pete was a partner at
McKinsey & Company in London, specialising
in strategy and operations in the aerospace,
defence and power and gas sectors. He has
a PhD in satellite navigation and an MEng from
the Department of Electronic and Electrical
Engineering at the University of Leeds.

ADDITIONAL APPOINTMENTS: Non-
executive Director, Hill & Smith Holdings PLC.

COMMITTEES

Committee Chair
Audit

Nomination
Remuneration

BOARD COMPOSITION

Ethnic origin

Gender

● South
East Asian
● White
European
● White
British

Board balance of roles

Tenure on Board

● Executive
● Non-executive

● Female
● Male

● 0-3 years
● 4-6 years
● 7-9 years

5. HELEN BUNCH
Independent Non-executive Director

6. LAURENCE MULLIEZ
Senior Independent Director

APPOINTED: Non-executive Director in
February 2016. Remuneration Committee Chair
on 1 January 2019.

APPOINTED: Non-executive Director
in May 2016. Senior Independent Director
in December 2017.

SKILLS AND CONTRIBUTION: Helen
has significant experience of driving business
performance and building businesses in new
markets. Helen also brings to the Board a
valuable perspective from her current executive
role leading a business in the construction sector.

CAREER AND EXPERIENCE: At the start
of her career, Helen spent 17 years working
in global businesses serving a wide variety of
industries from automotive to household
products, including 11 years with ICI and the
remainder with a successor company, Lucite
International Ltd. In 2006, Helen joined Wates
Group, the privately-owned construction and
property services company, as Group Strategy
Director, and became Managing Director of
Wates Retail Limited in January 2011. From 2015
to July 2020 Helen was Managing Director
of Wates Smartspace Limited, the enlarged
property services business following a merger
with another Wates company and the acquisition
of a facilities management business. In July 2020,
Helen became Executive Managing Director
of Wates Residential.

ADDITIONAL APPOINTMENTS: Executive
Managing Director of Wates Residential.

COMMITTEES:

SKILLS AND CONTRIBUTION: Laurence
has significant experience in growing, simplifying
and unifying complex international and industrial
manufacturing businesses, and brings valuable
knowledge of the energy (including renewables),
steel and infrastructure industries, and insight into
some of Morgan’s key markets.

CAREER AND EXPERIENCE: Laurence joined
Banque Nationale de Paris in 1988, followed
by M&M Mars Inc. in 1992 and then Amoco
Chemical Inc. in 1993, which was acquired by
BP p.l.c. in 1998. She spent a further 11 years at
BP in a variety of roles including Chief Executive
of Castrol Industrial Lubricants and Services.
Laurence was Chief Executive of independent
power producer Eoxis UK Limited from
2010 to 2013.

ADDITIONAL APPOINTMENTS: Chair
of Voltalia S.A. and of Globeleq Ltd, member
of the supervisory board of SBM Offshore N.V.
and member of the supervisory board of
Siemens Energy AG.

COMMITTEES:

7. CLEMENT WOON
Independent Non-executive Director

APPOINTED: May 2019.

SKILLS AND CONTRIBUTION: Clement has
broad managerial experience in globally operating
technology and consumer-related industries.
He has a strong track record of renewing
traditional industries and revitalising growth
through strategic interventions, and in-depth
experience and knowledge of markets within
the Asia Pacific region.

CAREER AND EXPERIENCE: From August
2016 to March 2020, Clement was Group CEO
of Saurer Intelligent Technology Co. Ltd,
a €1 billion textile machinery and components
business listed on the Shanghai Stock Exchange.
Clement continued to serve on the board of
Saurer as non-executive director until August
2021. Prior to this, from April 2014 to July 2016,
Clement was Advisor and Co-CEO of Jinsheng
Industry Co. Ltd, an industrial company in China
with diverse interests including biotech,
automotive and textiles. Previously Clement
held various senior positions at companies based
in Switzerland and Singapore including Division
CEO of Leica Geosystems AG, President &
CEO of SATS Ltd, and CEO Textile Division
of OC Oerlikon AG. Clement has an MBA
in Technology Management from Nanyang
Technological University, Singapore, an MSc in
Industrial Engineering and a BEng in Electrical
Engineering from the National University
of Singapore.

ADDITIONAL APPOINTMENTS: Chairman
of PFI Foods Industries Pte. Ltd.

COMMITTEES:

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

CORPORATE GOVERNANCE

THE UK CORPORATE GOVERNANCE CODE
In July 2018 the Financial Reporting Council published the most recent version of the UK Corporate Governance Code (the Code), which is available
on its website www.frc.org.uk.

APPLICATION OF CODE PRINCIPLES
The table below lists the Code Principles and an explanation of how the Board has applied the Principles during 2021.

Code
Principle Summary

Board leadership and company purpose
A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the
company, generating value for shareholders and contributing to wider society.

The role of the Board is set out on page 64. The Chairman explains the Board’s approach to stewardship in his letter on page 59. The section 172
statement on pages 4 and 5 explains how the Directors carry out their duty to promote the long-term success of the Company whilst taking into
account the output from their engagement with key stakeholders. The externally-facilitated evaluation of the Board concluded that the Board was
effective (as reported on page 73 of the Corporate Governance Report).
The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors
must act with integrity, lead by example and promote the desired culture.

The Group’s purpose and strategy are described in the dedicated section on pages 10 to 13 of the Strategic Report. The Board explains how it has
monitored and assessed the Group’s culture on pages 69 and 70 of the Corporate Governance Report.
The board should ensure that the necessary resources are in place for the company to meet its objectives, and measure performance against
them. The board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed.

The methods used by the Board to monitor performance and challenge executive management are described on pages 66 to 69 of the Corporate
Governance Report. The Report of the Audit Committee contains a description of the controls framework and the Risk Management section on
pages 38 to 43 sets out the key risks and how these are managed.
In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective engagement with,
and encourage participation from, these parties.

The methods used by the Board to engage with its key stakeholders, and why the Board continues to believe these are effective, are set out in the
Corporate Governance Report on pages 70 to 72.
The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable
success. The workforce should be able to raise any matters of concern.

The Board monitors implementation of the Morgan Code and the polices that are in place to support a safe and ethical business. Pages 75 and 77
of the Audit Committee Report explains how the Board has come to this conclusion.
Division of responsibilities
The chair leads the board and is responsible for its overall effectiveness in directing the company. He or she should demonstrate objective
judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive board relations
and the effective contribution of all non-executive directors, and ensures that directors receive accurate, timely and clear information.

The performance of the Board, the Chairman and individual Directors are reviewed annually. The externally-facilitated Board performance evaluation
conducted in 2021 concluded that the Board is effective and operates in an environment of openness and trust. Further information on the Board
performance evaluation can be found on page 73.
The board should include an appropriate combination of executive and non-executive (and in particular, independent non-executive) directors,
such that no one individual or small group of individuals dominates the board’s decision-making. There should be a clear division of
responsibilities between the leadership of the board and the executive leadership of the company’s business.

The composition of the Board is reviewed annually. Details of the composition of the Board, and the roles of Board members, are set out in the
Corporate Governance Report on pages 66 and 67.
Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive challenge and
strategic guidance, offer specialist advice, and hold management to account.

The Chairman ensures that the non-executive Directors understand their role and carry out their duties effectively, providing support and guidance
where required. The time commitment expected of non-executive Directors is set out on page 81 of the Corporate Governance Report.
The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs
in order to function effectively and efficiently.

The externally-facilitated Board performance evaluation conducted in 2021 included a review of Board processes and concluded that these were
effective, with recommended actions for improvement which are set out in the Corporate Governance Report on page 73.

Composition, succession and evaluation
Appointments to the board should be subject to a formal, rigorous and transparent procedure, and an effective succession plan should be
maintained for board and senior management. Both appointments and succession plans should be based on merit and objective criteria and,
within this context, should promote diversity of gender, social and ethnic backgrounds, and cognitive and personal strengths.

The process used for appointments to the Board, and other considerations related to succession planning and the Board’s Inclusion and Diversity Policy,
are set out in the Nomination Committee Report on pages 80 to 81.
The board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length
of service of the board as a whole and membership regularly refreshed.

The skills and attributes required by the Board are reviewed at least annually as part of discussion on succession planning. Further information may
be found in the Nomination Committee Report on pages 79 to 80.
Annual evaluation of the board should consider its composition, diversity and how effectively members work together to achieve objectives.
Individual evaluation should demonstrate whether each director continues to contribute effectively.

The individual performance of the Directors is assessed annually. The externally-facilitated Board performance evaluation conducted in 2021 concluded
that the Board members work effectively together, with a small number of recommendations for improvement as set out on page 73.
Audit, risk and internal control
The board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and
external audit functions and satisfy itself of the integrity of financial and narrative statements.

The Board monitors the policies and processes that are in place to ensure the independence and effectiveness of the internal audit function and
external auditor. Further details are set out in the Audit Committee Report on pages 77 and 78.
The board should present a fair, balanced and understandable assessment of the company’s position and prospects.

The process which supports the Board’s confirmation that the presentation of results is fair, balanced and understandable is set out in the Audit
Committee Report on page 76.
The board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the
principal risks the company is willing to take in order to achieve its long-term strategic objectives.

The risk management process is set out in the Risk Management section on pages 38 to 43 and the Audit Committee Report on pages 76 to 77.
Remuneration
Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration
should be aligned to company purpose and values and be clearly linked to the successful delivery of the company’s long-term strategy.

The Remuneration Committee considers the alignment of reward policies and mechanisms with the Group’s strategy.
A formal and transparent procedure for developing policy on executive remuneration and determining director and senior management
remuneration should be established. No director should be involved in deciding their own remuneration outcome.

Further details of the Remuneration Committee, its composition and how it operates are set out in the Remuneration Committee Report on page 104.
Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company
and individual performance, and wider circumstances.

The Remuneration Committee exercises discretion in relation to remuneration outcomes as it sees fit as described in the Remuneration Report.
All members of the Remuneration Committee are independent non-executive Directors.

STATEMENT OF COMPLIANCE WITH THE CODE PROVISIONS
The Board confirms that during the year ended 31 December 2021, the Company complied with the provisions of the Code with the exception of
Provision 38 on the alignment of pension contribution rates, or payments in lieu, for executive directors with those available to the workforce. The value
of pension benefits for the current executive Directors has reduced since 2019 when the allowance was fixed at the 2018 value (20% of 2018 base salary).
The current Remuneration Policy, which was approved by shareholders at the Annual General Meeting (AGM) in 2019, included a pension policy for any
newly appointed executive Director which aligned their contribution rate to that of the UK workforce. Shareholders will be asked to approve a new
Remuneration Policy at the AGM in 2022 which includes an amendment to the pension policy to align pension contributions for all (whether existing or
newly appointed) executive Directors with that available to the UK workforce with effect from 31 December 2022. Subject to approval from shareholders
for the new Remuneration Policy, the Company will be fully compliant with Provision 38 by the end of 2022. Further details of the specific pension
arrangements for each executive Director are set out in the Remuneration Report on pages 84 and 95.

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OUR GOVERNANCE FRAMEWORK
A strong corporate governance framework underpins the activities of the Board.

BOARD OF DIRECTORS
Chaired by Douglas Caster

THE ROLE OF THE BOARD
The Board is collectively and ultimately responsible to
the Company’s shareholders for the long-term sustainable
success of the Company, and oversees how the
organisation generates and preserves value. It establishes
the Group’s purpose, sets the strategic direction and
monitors Morgan Advanced Materials’ culture to ensure
this is aligned to the strategic vision.

The Board engages with key stakeholders, including
shareholders and employees, and sets the tone from
the top by operating with the utmost integrity in decision-
making and business conduct.

The Board supervises and monitors progress against
execution priorities, whilst ensuring that there are robust
and effective controls which enable risks and emerging
risks to be identified, assessed and managed.

The Board operates within a clear framework consisting
of matters reserved for the Board as well as an established
structure of committees, each with distinct terms of
reference and delegated authorities. The key areas of
responsibility for the Board and each of its Committees
are detailed on pages 64 and 65.

MATTERS RESERVED FOR THE BOARD
´ Overall leadership, purpose, strategic
aims and long-term objectives and
risk appetite of the Group;

´ Alignment of the Group’s culture with
purpose and values and monitoring
implementation of the Morgan Code;
´ Any changes relating to Group capital

and corporate structure;

´ Oversight and approval of full-year

and half-year financial results, including
approval of the Annual Report
and ensuring a ‘fair, balanced and
understandable’ presentation of the
Group’s financial position;
´ Approval of dividend policy and

any significant changes to accounting,
treasury and tax policies;

´ Approval of contracts and expenditure
as specified in the Limits of Authority
schedule;

´ Stakeholder communication and

engagement;

´ Changes to Board membership

following recommendations from
the Nomination Committee, and
ensuring adequate succession planning
for the Board and senior leadership;

´ Determining remuneration policy
for the Directors and other senior
executives, following recommendations
from the Remuneration Committee;

´ Delegation of authority, approving
levels of authority including for the
principal Committees, and approving
the Committees’ terms of reference;

´ Corporate governance matters,
including a review of its own
performance, determining non-
executive Director independence,
review of overall governance
arrangements and authorising
any conflicts of interest;
´ Other specific matters.

PRINCIPAL COMMITTEES
OF THE BOARD
(and key responsibilities)

AUDIT COMMITTEE
´ Ensure the integrity of, and review processes
for financial reporting and the narrative
information presented to stakeholders;
´ Monitor and ensure the effectiveness of

the external audit;

´ Ensure the effectiveness of the internal

audit function;

´ Review the management of the Group’s

principal risks;

´ Ensure the effectiveness of internal controls;
´ Oversee implementation of, and compliance

with, the Morgan Code.

REMUNERATION COMMITTEE
´ Set, review and monitor the remuneration
policy and ensure it is aligned with strategy;
´ Agree the remuneration for the Chairman,
executive Directors and certain senior
executives;

´ Oversee incentive structure and target

setting;

´ Set and review the policy for post-

employment shareholding requirements;

´ Determine the policy for pension

arrangements;

´ Consider wider workforce remuneration

and the alignment of executive remuneration
with this.

NOMINATION COMMITTEE
´ Lead on Board succession planning;
´ Review Board and Committee composition;
´ Lead the process for appointments to the

Board;

´ Monitor the process for the induction

of new Directors;

´ Monitor progress in relation to the Board’s
Inclusion and Diversity Policy and have
oversight of the Group’s overall inclusion
and diversity aims.

OTHER BOARD COMMITTEES

EXECUTIVE COMMITTEE
´ Drive Group and business unit strategic

implementation;

´ Deliver operational, financial and non-

financial performance;

´ Review health, safety and environmental
performance, drive improvement and
embed the safety culture;

´ Approve Group policies and review their

implementation and effectiveness;
´ Lead on assessment and control of risk;
´ Oversee prioritisation and allocation

of resources.

DISCLOSURE COMMITTEE
´ Assist and inform the Board concerning
the identification of inside information;
´ Recommend how and when the Company

should disclose such information;

´ Ensure any such information is managed and
disclosed in accordance with all applicable
legal and regulatory requirements.

GENERAL PURPOSES COMMITTEE
´ Approve opening of/changes to bank

accounts;

´ Approve arrangements with financial

institutions;

´ Approve guarantees and indemnities;
´ Approve substantive intra-Group loans;
´ Approve intra-Group dividends and capital

restructuring;

´ Approve awards under the Company’s share
schemes (after Remuneration Committee
approval) and any Employee Benefit
Trust-related loans.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsCORPORATE GOVERNANCE

The Disclosure Committee meets on an ad-hoc
basis during the year to assess whether
information which directly concerns the Group
is inside information (as defined by the Market
Abuse Regulation), and to discharge other
responsibilities relating to the control and
disclosure of inside information. The membership
of the Disclosure Committee comprises the
Directors and the Company Secretary, but
meetings are generally attended by the executive
Directors and the Company Secretary. In 2021
the Disclosure Committee met twice.

BOARD SIZE AND COMPOSITION
Throughout 2021 the Board comprised five
non-executive Directors (including the Chairman)
and two executive Directors. This is considered
to be the appropriate number of members
for the Board, given the scale of the Group’s
operations at this time. Biographies of the
Directors in post at the date of this Report,
including details of their skills, career and
experience and any other significant external
commitments, are set out on pages 60 and 61.

HOW THE BOARD AND ITS
COMMITTEES OPERATE
The Company’s governance framework
comprises the Articles of Association which
form the Company’s constitution and set out
the powers of the Board and the Board’s clearly
defined role, which includes matters specifically
reserved for the Board. The Board delegates
specific responsibilities to three principal
Committees of the Board, namely the Audit,
Remuneration and Nomination Committees.
Each Committee has terms of reference
which set out its membership, duties and how
it operates. The individual reports of each
of the principal Committees can be found
on pages 74 to 78, 79 to 81, and 104.

The Board delegates day-to-day management
of the Group and operational matters to the
Executive Committee. This Committee is led by
the Chief Executive Officer and its membership
comprises the Chief Financial Officer, the Group
Human Resources Director, the Group General
Counsel, the Chief Information Officer and
the Presidents of each of the global or divisional
business units. In 2021 the Executive Committee
met at least monthly to discuss a variety of
matters including: development of Morgan
Advanced Materials’ execution priorities, ESG
performance, talent management and succession
planning, diversity and inclusion, financial
performance, and the review of Group policies.
It also held monthly dedicated meetings on health
and safety and on ethics and compliance. The
Company Secretary acts as Secretary to the
Committee and attends all meetings.

The Board delegates authority for certain other
specific matters including routine approvals
to a General Purposes Committee, at which
a non-executive Director must be present.
The Committee meets as required.

ROLES AND RESPONSIBILITIES OF THE BOARD
There is a clear division of responsibilities between the Chairman and Chief Executive Officer and each role is clearly defined as outlined below:

CHAIRMAN

´ Promotes the highest standards of

´ Promotes open debate and constructive

corporate governance;

challenge by Directors;

´ Leads, chairs and manages the Board;
´ Ensures an effective Board with effective

decision-making processes;
´ Shapes boardroom culture;

´ Encourages contributions from fellow
Directors, drawing on their skills,
experience and knowledge;

´ Ensures ongoing awareness of stakeholders’

views;

´ Sets the Board’s agenda;
´ Chairs the Nomination Committee;
´ Ensures constructive relationships between
executive and non-executive Directors.

SENIOR INDEPENDENT DIRECTOR

CHIEF EXECUTIVE OFFICER

“

THE CHAIRMAN

AND CHIEF
EXECUTIVE
OFFICER
MAINTAIN A
STRONG WORKING
RELATIONSHIP
AND OPEN
DIALOGUE,
WHICH ENSURES
COGENT
LEADERSHIP OF
THE GROUP.

”

´ Acts as a trusted sounding board for the

Chairman;

´ Leads the annual review of the Chairman’s
performance with the non-executive
Directors;

´ Acts as an intermediary for the other

non-executive Directors;

´ Acts as a second point of contact for

shareholders;

´ As required, leads discussions on Chair
succession and selection processes.

NON-EXECUTIVE DIRECTORS

´ Monitor and review the performance

of executive management;

´ Provide alternative views and expertise

on key matters;

´ Assist with the development and review

of strategy;

´ Provide support and challenge to executive

Directors;

´ Engage with stakeholders and employees

in relation to Morgan’s culture;

´ Chair/attend meetings of and contribute to
the work of the principal committees of the
Board, reviewing remuneration, financial
performance, external and internal audit and
succession planning of senior management.

´ Manages the Group;
´ Formulates and implements Group strategy;
´ Delivers the Group’s business plan;
´ Leads the Executive Committee effectively;
´ Ensures implementation of the Group’s

policies;

´ Promotes and embeds Morgan’s culture.

CHIEF FINANCIAL OFFICER

´ Supports the Chief Executive Officer in the
development and delivery of Group strategy;

´ Leads the Group’s finance function;
´ Oversees effective financial reporting and

ensures suitable processes and controls are
in place;

´ Oversees the processes and controls

regarding principal risks;

´ With the Chief Executive Officer, recommends
the annual budget and long-term financial
plans of the Group.

COMPANY SECRETARY

´ Supports the Board by ensuring information

is made available in a timely manner;

´ Supports the Board by facilitating induction,

training and performance evaluations;
´ Supports the Chairman in designing the

annual Board programme and ensuring the
Board functions efficiently and effectively;
´ Provides advice on corporate governance

matters;

´ Oversees the processes required for
corporate governance and regulatory
compliance.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
CORPORATE GOVERNANCE

Board meetings/activities
In 2021, the Board met formally on nine occasions. Due to the COVID-19 pandemic, Board meetings were held by a mixture of attendance in person
and video conference attendance.

Attendance at meetings
The attendance of each Director at Board, Audit, Remuneration and Nomination Committee meetings is set out below:

Director

Douglas Caster
Pete Raby
Peter Turner
Jane Aikman
Helen Bunch
Laurence Mulliez
Clement Woon

1. Attended by invitation.

Board
(maximum 9)

9/9
9/9
9/9
9/9
9/9
9/9
9/9

Audit
Committee
(maximum 4)
4/41
4/41
4/41
4/4
4/4
4/4
4/4

Nomination
Committee
(maximum 3)

Remuneration
Committee
(maximum 6)

3/3
3/31
1/12
3/3
3/3
3/3
3/3

6/6
6/61
–
6/6
6/6
6/6
6/6

2. Peter Turner attended the December meeting of the Nomination Committee by invitation in order to participate in a discussion on succession planning.

During the year, the Board received regular updates on implementation of strategy, trading and financial performance, environmental and sustainability
performance, health and safety performance, markets and customers, investors’ and analysts’ views, and restructuring. Throughout 2021 the Board
continued to monitor the impact of the COVID-19 pandemic and its impact on the workforce and business operations.

TIMELINE OF KEY REVIEWS AND DECISIONS TAKEN BY THE BOARD DURING THE YEAR

FEBRUARY

MAY

JULY

NOVEMBER

´ Health and safety;
´ Approval of FY2020
results and dividend
policy;

´ Approval of ESG

strategy;
´ Review of

restructuring
programme;
´ Annual review
of pensions.

´ Health and safety
Approval of Q1
trading statement;
´ Review comments
from shareholders
pre-AGM and review
proxy voting results.

´ Health and safety;
´ GBU and Group
strategic reviews;
´ Approval of H1
2021 results;
´ Annual review of

the Group’s funding
and treasury
matters;

´ Environment and
sustainability.

´ Health and safety;
´ Talent management
and succession
planning;
´ IT update;
´ Assessment of

Morgan’s culture;
´ Progress review of
a major investment
in new technology;
´ Site tour of Rugby,
UK, engagement
session with
employees and
meeting with site
leadership team.

APRIL

JUNE

SEPTEMBER

DECEMBER

´ Updates from CEO

and CFO;

´ Review comments from
investors on FY2020
results.

´ Health and safety;
´ Global business unit

(GBU) strategic reviews;

´ Final detailed report
on the restructuring
programme;

´ Principal and emerging

risks.

´ Health and safety;
´ Deep dive into certain
key risks and their
assessment;
´ Environment and
sustainability;

´ Engagement session
with employees in
Kempten, Germany.

´ Health and safety;
´ Approval of 2022

budget;

´ Environment and
sustainability;
´ Principal and

emerging risks;
´ Digital presence;
´ Discussion of Board

performance
evaluation outcomes.

Board’s monitoring and assessment of culture
and workforce engagement
As set out in greater detail on pages 28 to 35
in the Sustainability and Responsibility section,
Morgan Advanced Materials’ objective is to
build an organisation where collaboration and
empowered decision-making at all levels of
management (rather than in isolation locally) is
more prevalent, and where the right outcomes
are reached, in the right way (ethically, safely and
inclusively). The Morgan Leadership Behaviours
support the ethos that ‘it is not just what you do,
but how you do it that counts’. The Board
continues to monitor and assess the development
of the Group’s culture to ensure this is aligned
with Morgan’s purpose and strategy.

The Board has developed its approach to the
monitoring and assessment of culture by building
on the work already undertaken to embed
a foundation of ethics, safety and inclusion whilst
enabling the Board to set the tone from the top.
The Board uses a range of qualitative and
quantitative measures, supplemented by
opportunities for Board members to experience
the culture for themselves, which include:
´ Ethics reporting including the monitoring of
compliance with the Morgan Code, reports
on certain areas investigated and the
effectiveness of the ‘Speak Up’ hotline;
´ Regular safety performance reviews which
include the ‘‘thinkSAFE’ programme, and
updates on safety metrics and performance
against them;

´ Regular discussion and monitoring of ways to
achieve the objective of a zero-harm culture;

´ Annual talent review of leadership

development, with added focus on promoting
diversity and inclusion;

´ Presentations to the Board by each global

business unit on strategy;

´ Presentations to the Board by members of
the Executive Committee, representatives
from the businesses and functional leaders.
Virtual meetings have enabled a wider range
of presenters to take part to discuss a greater
breadth of topic; and

´ Insight from the results of the all-employee

engagement survey, ‘Your Voice’, which was
conducted in November 2021.

The following table summarises the Board’s work and key decisions taken during the year:

Strategy

Performance

´ Group and business strategies reviewed

´ Impact of COVID-19 pandemic on

and targets agreed;

productivity and customers monitored;

´ ESG strategy strengthened and expanded

´ Employee health and safety reports

with new targets and plans set;

considered;

´ Health and safety strategy redeveloped
with new focus, training and system
implementation agreed;

´ Group leadership succession planning and

future talent capability programme discussed
and agreed;

´ Restructuring and efficiency improvement

programme discussed and individual projects
agreed;

´ Update on IT strategy progress received;
´ Digital presence and plans for development

discussed;

´ Certain capital expenditure proposals
to assist business growth approved.

´ Group financial performance reviewed;
´ Group restructuring programme monitored

and individual projects agreed;

´ Post-implementation reviews of capital

expenditure projects previously approved
by the Board;

´ Dividend policy discussed and 2021

dividend payments approved;

´ 2022 budget approved;
´ Chief Executive Officer and Chief Financial
Officer reports discussed at each Board
meeting;

´ Updates from all Presidents of the divisions
and global business units reviewed and
discussed.

Culture and stakeholder engagement

Governance and risk

´ Group’s culture monitored;
´ Mechanisms to capture and report safety,
ethics and inclusion matters reviewed;
´ Progress of the action plan to promote
diversity and inclusion across the Group
discussed;

´ Further development of a safe, ethical and

diverse culture discussed in depth;
´ Safety performance achieved compared
to safety targets reported and analysed;
´ Work on identifying the core values to
be embedded in the Group’s culture
commenced;

´ Talent and leadership development

considered;

´ Through reports from the Audit Committee,

progress against implementation of the
Morgan Code monitored and reports
made to the ethics hotline reviewed;
´ Employment engagement sessions held

with employees from a wide range of roles
across the Group;

´ Shareholder engagement sought, through
roadshows, meetings with brokers and
invitation to submit questions in advance
of the AGM;

´ Discussion held with the independent
director of the defined benefit pension
trustee board.

´ Group’s principal and emerging risks

reviewed;

´ In-depth assessment of certain key risks

performed;

´ Group’s appetite for risk reviewed;
´ Tax strategy reviewed;
´ Pension strategy and funding strategy

for pensions approved;
´ Litigation matters discussed;
´ Group’s compliance with corporate
governance codes and regulations
considered;

´ Externally-facilitated Board performance
evaluation undertaken and actions arising
considered;

´ Following recommendation from the
Nomination Committee, new CFO’s
appointment approved;

´ Reports from the chairs of the

Remuneration, Audit and Nomination
Committees considered;

´ Half-year and full-year financial results

approved;

´ Consideration given to whether the Annual
Report and Accounts are fair, balanced and
understandable given.

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CORPORATE GOVERNANCE

EMBEDDING A SAFETY CULTURE

The Board considers the safety of employees to be a top priority. During 2021, the Board
had oversight of a fresh approach to safety which is set out in detail on pages 18 to 19
in the Health and Safety section of the Sustainability and Responsibility report.

HOW GOVERNANCE SUPPORTS STRATEGY

The Board approves the Group’s environmental, Health & Safety Policy and in 2021,
a new ESG Strategy:

THE GROUP’S ENVIRONMENTAL,
HEALTH & SAFETY POLICY

ESG STRATEGY
(new ESG Strategy
approved in 2021)

HOW THE BOARD
MONITORS AND
ASSESSES CULTURE

HOW THE BOARD
ENGAGED WITH
STAKEHOLDERS

The Board receives an update in
person from the EHS Director at most
Board meetings which contains safety
statistics, both leading and lagging
indicators, progress on safety initiatives
and against the plan of work for the
year, as well as details of serious
incidents and root cause analysis.
Safety performance is also part of
presentations to the Board by the
Presidents of the Divisions and global
business units, proposals for capital
expenditure, key risks and other ad
hoc presentations to the Board. The
Board is able to gauge ‘tone at the top’.

There were a number of ways in which
the Board engaged with stakeholders.
The reports to the Board from the
EHS Director contained insights gained
from workshops with a cross section
of employees to gauge the current
status of safety culture. The summary
of reports to the Ethics Hotline
presented to the Audit Committee
provided an insight into the frequency
and type of issue being raised by
employees and whether safety was
a particular concern. Finally, the
non-executive Directors heard
first-hand from employees during the
employee engagement sessions held
during 2021. The non-executive
Directors asked open questions and
listened to the feedback. This included
comments on specific issues such
as the progress of replacing old
machinery, availability and adoption
of personal protection equipment,
housekeeping on site and adoption
of COVID-19 protocols, implementation
of wellbeing initiatives, as well as local
leadership’s approach to safety and
communication of safety issues.

WHAT WAS THE OUTCOME OF THE ENGAGEMENT?

The Board learned that senior leadership’s message that safety was the top priority
was communicated clearly and that this was supported through the thinkSAFE
programme. At local level, site leadership took a pro-active approach to health, safety
and wellbeing. However, improvement could be made to embedding a caring culture
and further focus on consistent systems. This culminated in the approval of the fresh
approach to health and safety which is described in the section on Health and Safety
on pages 18 to 19.

A number of additional mechanisms will be
employed in 2022 to promote and embed
the Group’s desired culture as follows:
´ Voluntary employee resource groups to

be established to further develop employee
participation in areas they are passionate
about;

´ Development of a set of Group-wide core

values and their communication to employees;
´ Definition and reinforcement of the behaviours
required in the role of the Group’s leaders;
´ Training for all employees on behavioural

safety and the Group’s safety commitments;
´ Implementation of actions arising from insights
gained from the all-employee engagement
survey; and

´ Further employee engagement sessions by
the non-executive Directors within various
areas of the business/groups of employees.

Workforce engagement
For the purposes of workforce engagement, the
Board defines the workforce as all employees
directly employed by the Group.

The Board has reviewed the three methods
suggested for employee engagement in the UK
Corporate Governance Code and has concluded
the most effective approach for its workforce
is a combination of methods (which is also
permitted under the Code). This approach has
been chosen by the Board as it recognises the
global reach of the Group with operations in
over 25 countries, with varied working conditions
and with many employees in operational and
manufacturing roles without internet access in
the workplace. A hybrid approach to workforce
engagement enables flexibility to ensure all
employees in all locations are considered.

The mechanisms selected by the Board to
engage with the workforce primarily comprise
a number of dedicated meetings between
the non-executive Directors and small groups
of employees (without senior management
present), to hear the views of the workforce
directly; as well as taking other opportunities
for informal engagement.

Due to the COVID-19 pandemic, which
restricted international travel, all the employee
engagement sessions that took place in 2021
were virtual, apart from one in-person meeting
at the Group’s manufacturing site in Rugby, UK
where Directors also had a tour of the site and
met employees who demonstrated operations
and explained their roles, and received a
presentation from site leadership. The virtual
meetings were held by video conference with
all participants able to see each other, and where
required a professional interpreter was employed
to ensure effective communication between
all participants.

The details of the employee engagement sessions with the non-executive Directors are outlined below:

Board attendee(s)

Date

Type of engagement

Team location(s)

Who the Directors met

Douglas Caster, Laurence
Mulliez, Jane Aikman
and Clement Woon
All non-executive
Directors

All non-executive
Directors
All non-executive
Directors
Douglas Caster, Laurence
Mulliez, Jane Aikman and
Clement Woon

Jun 2021 Virtual employee engagement session and
feedback session with the CIO and other
senior IT leadership

Jun 2021 Virtual employee engagement session
and feedback with employees, leaders
and management team from the site and
Centre of Excellence

Sep 2021 Virtual employee engagement session and

feedback session with site management team

Nov 2021 Site visit

Nov 2021 Virtual employee engagement session and

feedback session with site management team

Global

Members of the global IT team

Hayward, California, USA
facility and Metals & Joining
Centre of Excellence, USA
(Technical Ceramics facility)
Kempten, Germany
(Thermal Ceramics facility)
Rugby, Warwickshire, UK
(Technical Ceramics facility)
Aurangabad, India
(Molten Metal Systems facility)

Site employees and management

The engagement sessions generally involved groups of 10-14 employees from a wide selection of roles to ensure the views expressed were from a diverse
mix of the employee population. Employees were welcomed to the meeting and encouraged to express their views on a variety of matters including site
practices during the COVID-19 pandemic, wider safety issues, culture, leadership, understanding of the Group strategy and execution priorities and the
strategic goals of their business, investment in the future of the site and any other matters they wished to raise. The output from the discussion was fed back
to the leadership team for further discussion with the Chief Executive Officer and reported back to the next Board meeting, to create a greater awareness
of the views of employees amongst the whole Board. Follow-up discussions were held with site managers to convey key themes and to foster a positive
culture.

The meetings between the non-executive Directors and small groups of employees give the non-executive Directors the opportunity to gain a direct
insight into the issues of concern to employees, as well as areas where employees feel things are going well. The sessions have helped to foster an
atmosphere of trust and a feeling of care, which encourages employees to speak openly and honestly about their working environment and the matters
which mean the most to them.

The Board is satisfied that the combination of:

(i) dedicated engagement sessions with diverse groups of employees, encouraging meaningful discussion and frank feedback;

(ii) meetings with employees in their place of work during Board visits to Morgan facilities; and

(iii) the varied encounters with employees during other Morgan events gives a real insight into the working conditions of employees and provides a range

of effective mechanisms with which to engage with them.

Feedback from employees indicated they appreciate these interactions, which promote a feeling of being valued and listened to by the Board.

Engagement with shareholders
The Board is responsible for and oversees Morgan Advanced Materials’ dialogue and communication mechanisms with shareholders. It recognises that
it is important that communication is two-way, to ensure the shareholding community is kept informed of the Company’s key corporate messages and the
Board is aware of shareholder views and any concerns.

Ways in which the Board engages with shareholders and listens to their views include:

Results presentations
and trading updates

Roadshows

Broker presentations

Annual General
Meeting (AGM)

Specific matters:
2022 Remuneration
Policy

Other engagement
methods
Chairman and
Senior Independent
Director

The CEO and CFO present the full-year and half-year results to the market. In addition, the Group normally publishes two
trading updates during the year. The Board reviews the feedback from investors and potential investors to gauge investor
sentiment and establish whether their expectations have been met.
The CEO and CFO meet institutional investors and potential institutional investors primarily via designated roadshows which
are generally held twice a year, after the half-year and full-year results are published; but also via other meetings and conference
calls outside the designated roadshows.
The Company’s brokers present to the Board annually, which includes the reporting of insights from investors and the market
and a discussion of the key points.
Ordinarily the AGM provides shareholders with the opportunity to ask questions to the Board in person and to meet them
informally after the meeting. This was not possible during 2021 due to COVID-19. In order to provide an opportunity for
engagement with the Board, shareholders were asked to submit their questions ahead of the Company’s AGM to the Company
Secretary for the Board to consider and respond to. The questions and answers were published on the Company’s website.
On occasion, a matter is of sufficient interest to shareholders that feedback from key investors to a proposal is necessary
before the proposal is put to shareholders to vote on at the AGM. During 2021 the views of key investors were sought on
the proposed new Remuneration Policy. Further details of the engagement with shareholders on the proposed new
Remuneration Policy are contained in the Remuneration Report on pages 82 to 83. The feedback from investors was taken
into account in the final formulation of the Policy, which will be put to a shareholder vote at the 2022 AGM.
Other methods used to provide shareholders with up-to-date information include regulatory announcements, press releases,
the Annual Report and Accounts, presentations and webcasts.
Any shareholder who has concerns which cannot be addressed in another way may contact the Chairman or the Senior
Independent Director. To do so please write in the first instance to the Company Secretary. To date, no shareholder has found
this method of engagement necessary.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsCORPORATE GOVERNANCE

Relations with customers
The Board keeps abreast of relations with
customers through regular reports from the
Chief Executive Officer as well as insights
provided by the Presidents of the divisions and
global business units as part of their business
presentations to the Board. The Group seeks
to foster long-term relationships with customers,
built on trust and openness. On occasion, the
Board reviews and approves the entering into,
or renewal, of long-term agreements with
customers.

Engagement with pension trustee
The Board met the Independent Trustee of the
UK defined benefit pension scheme in February
2022 and had the opportunity to ask questions.
The Director of Pensions and the Chief Financial
Officer also provide regular updates to the Board
on pension issues and funding and regulatory
developments affecting the Company’s main
defined benefit schemes around the world,
including those in the USA where, as in the UK,
there are a significant number of pensioner
members.

Conflicts of interest
Under the 2006 Companies Act directors are
required to avoid conflicts of interest and are
required to:
´ Disclose any outside commitments and seek

Board approval before accepting any
additional external appointments, to enable
any actual or potential conflict to be fully and
properly assessed; and

´ Disclose any situation which gives rise to

an actual or potential conflict without delay.

Relations with suppliers
Morgan Advanced Materials ensures its
interactions with suppliers are always ethical, by
applying the Morgan Code and specific Group
policies, supported by risk assessment and due
diligence. The Company seeks to ensure that
suppliers operate in a similarly responsible
manner, by fostering long-term relationships built
on trust, being truthful in communications, and
meeting agreed payment terms. During 2021,
the Board was kept informed of the publication
of a new Supplier Code of Conduct, which seeks
to ensure that new suppliers operate in a
responsible way, and that their workers are safe
and treated fairly. We ensure that environmental
and social impacts are taken into consideration
during our process for sourcing new suppliers.

Also in 2021, a new Conflict Minerals Policy was
published which sets out Morgan’s position on
avoiding the sourcing of conflict minerals including
tantalum, tin, tungsten and gold from areas
where the revenue may aid the furtherance of
human rights violations and other illegal activities.
Further details of the Supplier Code of Conduct
and Conflict Minerals Policy may be found
on page 34 of the Responsibility and Sustainability
section.

Morgan publishes its Modern Slavery Act
Transparency Statement annually, explaining
steps taken by the Group to seek to ensure that
there are no incidents of modern slavery within
the business and its supply chain, in accordance
with the UK Modern Slavery Act 2015. The
Board reviews the Group’s operational, legal
and compliance framework to prevent modern
slavery in its supply chain, which includes
employee training, contractual terms and
conditions, and due diligence processes.
The Statement can be found on the website:
www.morganadvancedmaterials.com/
media/8499/modern-slavery-statement-fy-
ended-31-dec-2020-approved-21062021.pdf

Informed decision-making and Board support
The Company Secretary, with the Chairman,
ensures the Board has full and timely access to all
necessary information, with Board papers being
made electronically available at least five working
days prior to each Board and Committee
meeting to enable informed decision-making.
Non-executive Directors also receive
information and updates between formal Board
meetings. The Company Secretary attends all
Board meetings and all Directors have access to
her advice and if necessary professional advice at
the Company’s expense to assist them in fulfilling
their duties as Directors. Should a Director have
concerns about the running of the Company or
about a proposed action, such concern would
be recorded in the Board minutes. In 2021 no
such concerns were raised or recorded. The
Company ensures that appropriate directors’
and officers’ liability insurance cover is in place
for the Board.

Time commitment of the Board
Before an individual joins the Board, discussions
are held with them to ensure they will have
sufficient availability and time to meet the needs
of the Company. The number of external
directorships already held is taken into account
to ensure overboarding issues do not arise.

In addition, prior to undertaking any additional
external roles, the Chairman and non-executive
Directors are asked to confirm that they will
continue to have sufficient time to fulfil their
commitments to the Company. In accordance
with the Code, Directors are asked to seek
Board approval prior to accepting any additional
external appointments and, in 2021, Clement
Woon sought approval from fellow Directors
before accepting the position as non-executive
Director at PFI Foods Industries Pte. Ltd. The
Directors are also asked to confirm, on an
annual basis, whether there has been any change
to the directorships they hold.

Despite the extra burdens caused by the
COVID-19 pandemic, it is pleasing to note that
during 2021 no availability or time commitment
issues were experienced.

The Company has procedures in place to ensure
any conflicts of interest which arise are captured,
assessed and declared. If a Director declares
a conflict of interest the Board will consider the
matter and, if necessary, the conflict of interest
will be recorded and the Director excluded from
being provided with any further information
or being involved in any further discussion or
decision-making associated with affected topics.
The Directors are also asked to review and
declare any conflicts of interests and outside
interests on an annual basis. The review for 2021
confirmed that no actual or potential conflicts
of interest had occurred during the year.

Board balance, experience, diversity
and independence
The size, structure and composition of the Board
is reviewed annually, taking into account the skills
and experience of existing Board members and
the requirements of the business, to ensure there
is a good balance of professional, sector and
global experience drawn from a variety
of backgrounds. The Nomination Committee
agrees that the number of Directors on the
Board is appropriate for the scale of the Group’s
operations. The importance of having Board
members from a diverse background is also
recognised and succession plans are in place
for key top and mid-level leadership positions
to ensure the Group continues to retain and
develop the necessary skills and business
knowledge required.

In May 2021, Morgan announced the retirement
of Peter Turner from the Company as Chief
Financial Officer and a successor, Richard
Armitage, has been identified. In selecting the
new appointee the Nomination Committee
considered the balance of skills, experience and
background of current Board members as well
as the business needs and strategic direction
of the Company. Details of the search process
implemented by the Nomination Committee
for the recruitment of Richard Armitage can be
found on page 80.

The Board undertakes an annual review of the
independence of each non-executive Director
and in 2021 continued to consider each
non-executive Director to be independent.
The Company therefore complied with the
Corporate Governance Code requirement that
at least half the Board, excluding the Chairman,
should comprise non-executive Directors
determined by the Board to be independent.

ACCOUNTABILITY
Financial reporting
A summary of the statement of Directors’
responsibilities in respect of the Annual Report
and the consolidated financial statements is set
out on page 108, and the going concern and
viability statements are set out in the Strategic
Report on pages 53 to 54.

Business model and strategy
Details of the Group’s business model, how it is
working to generate and sustain long-term value,
and details of the Board’s strategy for ensuring
the Group meets its objectives, are set out in the
Strategic Report on pages 10 to 15.

Environmental, social and governance issues
The Board has overall responsibility for the
Group’s environmental, social and governance
strategy and priorities and for monitoring the
implementation of the strategy.

Internal control
The Board has overall responsibility for
establishing and maintaining a sound system
of internal control to safeguard shareholders’
investments and the Group’s assets, and for
reviewing the effectiveness of this system.

The system of internal control, and the role of
the Audit Committee in ensuring its effectiveness,
are set out in the Report of the Audit Committee
on pages 74 to 78.

Information on share capital and other matters
The information about share capital required
to be included in this Report can be found on
pages 106 to 109 in the Other Disclosures section.

4. Observation of Board and Committee

meetings – Clare Chalmers attended a full
day of Board and Committee meetings in
person and observed an engagement session
between employees and non-executive
Directors.

5. Interviews – Clare Chalmers held one-to-
one interviews with all the Directors, the
Company Secretary, and other regular
attendees at Board and Committee meetings,
namely the Group General Counsel, the
Group HR Director, the Head of Internal
Audit and the external audit partner. The
interviews covered a broad range of topics
around how the Board works and how
it helps the business.

6. Presentation of findings – The

comprehensive and descriptive report
prepared by Clare Chalmers was circulated
to the Board in advance and presented to
the Board by Clare Chalmers at the Board
meeting in December. The observations
and recommendations were discussed
by Board members.

7. Approval of actions to be taken – Following
the discussion, a number of actions were
agreed and will be implemented during 2022.
These are discussed in outline below.

Recommendations from the 2021 Board
performance review
The overall conclusion of the 2021 Board
performance evaluation was that the Board
was effective. However, a number of
recommendations for improvement were
agreed as follows:
´ Incorporation of discussions on different

aspects of Group strategy during the year,
which has resulted in a number of dedicated
strategy discussions being included in the
forthcoming Board programme for 2022;
´ A review of the way risks are presented to
the Board to encourage focus on the key
risks and risk appetite, scheduled to take
place during 2022;

´ Adjustments to the scheduling of certain
Committee meetings so that more time
is allowed for discussion;

´ Format of presentations to the Board to
encourage discussion on the key points;

´ Inclusion of more regular reporting on people
matters by the Group HR Director, with
dedicated items on three specific aspects
of the Group’s people strategy being included
in the Board programme for 2022.

Director inductions and development
On joining the Board, new Directors receive a
formal and comprehensive induction programme
tailored to take into account their skills,
experience and background. The programme
usually includes an information pack containing
recent Board and Committee packs, recent
investor feedback, details of all key policies and
other central information. Meetings with senior
executives and functional heads are set up, as
are a number of site visits. A thorough, tailored
induction and handover will be carried out
for Richard Armitage, the new Chief Financial
Officer, on his arrival.

The individual training and development needs
of each Director are considered by the Chairman
on an annual basis. The Board receives detailed
technical updates on corporate governance and
other regulatory changes, presentations from
external specialists or internal managers, training
via online platforms, and site visits to ensure their
skills, knowledge and experience are kept up
to date. During 2021, for example, the Board
received briefings on the global pension
landscape and the new disclosure requirements
on climate change. Training on cyber security
was available via an online platform.

Board performance evaluation
An externally-facilitated review of the Board’s
performance was undertaken in 2021.
(The previous externally-facilitated review took
place in 2018.) The review was undertaken by
Clare Chalmers Limited, which has no other
relationship with the Company or the individual
Directors and is independent.

The process for the evaluation of the Board
and its Committees was as follows:

1. Appointment of selected facilitator – The
Company Secretary reviewed the suitability
and approach of a range of third-party
providers and interviewed short-listed
providers. A final shortlist was presented
to the Chairman for review prior to approval
by the Board.

2. Scoping – Clare Chalmers met the Chairman
to discuss the objectives of the review, which
included how well the members of the Board
work together, and any specific areas of focus.
The process and scope were discussed with
the Company Secretary.

3. Review of documentation – Clare Chalmers

reviewed a comprehensive selection of
papers from recent meetings of the Board
and its principal Committees, as well as terms
of reference and other governance
documentation. In addition to facilitating an
understanding of the issues that the Board
had been dealing with and its decision-making
process, this desk research allowed for a
review of the balance of items on the agendas
and feedback on how to improve the papers.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
REPORT OF THE AUDIT COMMITTEE

COMMITTEE MEMBERS
JANE AIKMAN (CHAIR)
HELEN BUNCH
LAURENCE MULLIEZ
CLEMENT WOON

Jane Aikman has chaired the Committee
since July 2017 and has recent and
relevant financial experience and
competence in accounting and auditing
gained from her current executive role
and various prior Chief Financial Officer
roles.

The Committee as a whole has
competence in the sectors in which
the Group operates. All Committee
members are independent non-
executive Directors. Biographies of the
Committee members including details
of relevant sector experience are set
out on pages 60 to 61.

This is the second Annual Report to be audited
by Deloitte LLP, following their appointment after
the audit tender process which concluded in
2019. Last year, the Committee monitored the
successful transition to a new audit approach and
has scrutinised the performance and effectiveness
of the external audit and found it to be effective.
Feedback was provided to the audit partner and
the Committee reviewed the scope and content
of the FY2021 audit plan.

The Committee has monitored the reports
raised through the ethics hotline and ensured that
executive management has responded to these
quickly and appropriately. The Committee has
overseen improvements in the case management
of reports and has reviewed the key themes and
trends in the number, type and source of these
reports to gain an understanding of how
effectively the Morgan Code of Conduct is
embedded. This information has been used by
the Board of Directors as part of its assessment
of Morgan’s culture.

The Committee continues to monitor and
address any changes in governance and reporting
requirements. The landscape in which audit
services are provided is likely to change in the
near future and we await the recommendations
following the Government’s consultation on
Restoring Trust in Audit and Corporate
Governance.

The role of the Audit Committee will remain
in sharp focus in the year ahead and we continue
to be committed to meaningful disclosure of the
Committee’s activities.

COMMITTEE EVALUATION
The Committee’s performance was reviewed
as part of the externally-facilitated Board
performance evaluation aimed at identifying areas
for improvement. I am pleased to report that the
Committee is continuing to work well and is fully
discharging its responsibilities, whilst contributing
effectively to the Group’s overall governance
framework.

Jane Aikman
Committee Chair

This Report gives an insight into
the responsibilities, activities and
workings of the Audit Committee
and how it discharged its duties
during 2021.

DEAR SHAREHOLDER
I am pleased to present the Audit Committee’s
report for 2021. Following 2020, which was an
exceptional year for the Group, the Committee’s
work in 2021 was more routine, however, the
Committee continued to challenge management
and the external auditor across a number of
key areas of focus, including key accounting
judgements and control issues.

The Committee’s primary function is to ensure
the integrity of the Group’s financial reporting and
external audit processes and the maintenance
of sound internal control and risk management
procedures.

The Audit Committee reports to the Board of
Directors on whether the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s position and performance, business
model and strategy. The Committee’s role is to
ensure that management’s disclosures reflect the
supporting detail or to challenge them to explain
and justify their interpretation and, if necessary,
re-present the information.

The Committee has provided assurance to
the Board that the Group’s financial statements
faithfully represent the Group’s financial
performance. Where adjusted, non-statutory
measures have been disclosed, the Committee
is satisfied that they provide useful, additional
insight into the Company’s ongoing trading.
They are considered to be complementary
to the comparable statutory measures, without
undue prominence, and their definitions
and the reconciliations to statutory measures
are clearly disclosed.

In addition, the Committee monitored the
systems of internal control to ensure that these
continued to operate effectively. In particular, the
Committee reviewed the progress of the internal
audit plan and the effectiveness of the internal
audit function and was pleased that the function
has adapted its processes to be able to operate
effectively despite the continuation of some
restrictions on travelling to Morgan sites.

MEETINGS
The Committee met four times during the year,
with the timing and the agendas of the meetings
closely linked to key points in the annual reporting
cycle.

The Chairman of the Board, the executive
Directors and key members of senior
management attend the meetings by invitation, as
do senior representatives of the external auditor.

At the end of each meeting, Committee
members meet the external auditor, the Head
of Internal Audit and the Director of Ethics and
Compliance without the executive Directors
or other members of management present.

Between meetings, the Chair of the Audit
Committee keeps in contact with the Chairman
of the Board, the Chief Executive Officer, the
Chief Financial Officer, the Group Financial
Controller, the external auditor, the Head of
Internal Audit and the Director of Ethics and
Compliance as necessary.

INFORMATION AND SUPPORT
The Committee may request the attendance
at meetings of any Director or employee as may
be considered appropriate by the Committee.
Committee members receive appropriate and
timely information on all matters needed to
enable the Committee to fulfil its responsibilities.
Training and development information is made
available to Committee members as appropriate.

AUDIT COMMITTEE TERMS
OF REFERENCE
The Committee supports the Board in its
responsibilities in relation to corporate reporting,
risk management and internal controls, and
manages the relationship with the Group’s
external auditor. The Committee provides
regular reports to the Board. The Committee’s
terms of reference, reviewed during the year,
are available on the Company’s website.

KEY ACTIVITIES DURING 2021
During 2021 the key areas of focus for the
Committee were:
´ Receiving reports on progress in relation

to the internal audit plan, providing guidance
and ensuring continuous improvement
of the function;

´ Conducting a robust review of the scope,

remit and effectiveness of the internal control
environment and ensuring risk management
procedures are appropriate and effective;

´ Overseeing the Group’s ethics and

compliance programme and monitoring
progress in compliance with the Morgan
Code across the Group;

´ Reviewing the management of all reports
made to the ‘Speak Up’ hotline, or to
management on ethics and compliance
matters, considering the findings and
recommended actions, including whether the
Board should be notified of any investigations;

´ Reviewing the trends arising from the ethics
and compliance investigations to draw
conclusions on control areas for improvement;

´ Assessing the key areas of significant
judgement in relation to the 2021
consolidated financial statements, which
were: pensions, environmental provisions
and contingent liabilities, the impairment
of non-financial assets (excluding goodwill),
recognition of deferred tax assets and the
presentation of specific adjusting items;

The Committee has an annual cycle of business
which is designed to ensure it discharges in full its
responsibilities over the course of each reporting
year. This plan includes a number of standing
agenda items, such as:
´ Scheduled financial reporting updates which
enable the Committee to monitor the
integrity of the consolidated financial
statements, agree the content of the full-year
and half-year announcements relating to the
Company’s financial performance, and review
all significant financial reporting judgements;

´ Review of the FRC’s most recent Annual

Review and Year-end Letter and
consideration of the proposed focus areas;
´ Reports from the external auditor covering

their views on key judgements and accounting
estimates, and progress against the agreed
audit plan;

´ Review and discussion of the external audit
plan and strategy for the 2022 year end;
´ Approval of the audit engagement letter and

audit fee, and confirmation of auditor
independence;

´ Updates presented by the Head of Internal
Audit covering progress against the internal
audit annual plan, management reports on
internal financial control and risk management
systems, and the implementation of
management actions to address any control
weaknesses that have been identified;

´ Review the internal audit plan for the coming

´ Considering the appropriateness of

year;

´ Annual review of the effectiveness of the

internal audit function;

´ Ethics and compliance updates, including

reports on whistleblowing and investigations;
´ On behalf of the Board, annual review of the
effectiveness of the whistleblowing reporting
line; and

´ Review of the Committee’s terms of reference.

management’s assessment of going concern
and the viability statement;

´ Reviewing the Company’s draft 2021 Annual
Report and Accounts and recommending to
the Board that the document be approved.
The review included specific consideration
of whether the document was fair, balanced
and understandable and whether alternative
performance measures were appropriately
defined and reconciled to statutory reporting
measures, and were not given undue
prominence;

´ Reviewing the effectiveness of the external

audit process;

´ Receiving annual risk presentations from the
Thermal Ceramics global business unit, the
Technical Ceramics global business unit, the
Electrical Carbon global business unit, the
Seals and Bearings global business unit and
the Molten Metals Systems global business
unit;

´ Receiving an update from the Director of

Group Tax on taxation issues;

´ Recommending the tax strategy for Board

approval; and

´ Approving the appointments of both the

Director of Ethics and Compliance and the
Head of Internal Audit.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREPORT OF THE AUDIT COMMITTEE

PUBLIC REPORTING
The Committee, as requested by the Board,
considered the Code requirement for the Board
to make a statement on whether the Annual
Report and Accounts taken as a whole is fair,
balanced and understandable. The Committee
approached this by following the process below:
´ Considered the questions which need to be
answered in order to evaluate whether the
Annual Report and Accounts meets the fair,
balanced and understandable test;

´ Reviewed the methodology used to construct
the narrative sections of the Annual Report;
´ Reviewed the disclosure judgements made by
the authors of each section and considered
the overall balance and consistency of the
Annual Report;

´ Received confirmation from external advisors
that all regulatory requirements are satisfied;

´ Received confirmation of verification of

content from the authors of each section;

´ Received confirmation from the Chief

Financial Officer that the narrative reports and
consolidated financial statements are
consistent; and

´ Made a recommendation to the Board to
assist it in determining whether it is able to
make the statement that the Annual Report
and Accounts taken as a whole is fair,
balanced and understandable.

The FRC included Morgan Advanced Materials
plc’s Annual Report and Accounts to
31 December 2020 in its Viability and Going
Concern Thematic review: The FRC carried out
a limited scope review of our viability and going
concern disclosures and confirmed that it had
no queries or concerns arising from their review.
The FRC asks that companies make clear the
inherent limitations of their review, and that their
review is based on Morgan’s Annual Report and
Accounts and does not benefit from detailed
knowledge of our business or an understanding
of the underlying transactions entered into during
the period.

The significant areas of judgement considered
by the Committee in relation to the 2021
consolidated financial statements, and how
these were addressed, were as follows:

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. The Group believes that these
APMs, which are not considered to be a
substitute for, or superior to, IFRS measures,
provide stakeholders with additional helpful
information on the performance of the business.

Details of specific adjusting items arising during
the year and the comparative period are given
in note 6 to the consolidated financial statements.
Specific adjusting items in relation to discontinued
operations are disclosed in note 9 to the
consolidated financial statements.

The Committee reviewed the key assumptions
underpinning the accounting for specific
adjusting items for the half-year and full year
results, including receiving presentations from
Deloitte LLP on this matter.

Recognition of deferred tax assets
Deferred tax assets are recognised when
management judges it probable that future
taxable profits will be available against which the
temporary differences can be utilised. This relies
on the use of estimates of future taxable profits
which may differ from the actual results delivered.
In the event future taxable profits do not
materialise this would lead to a write-off of
recognised deferred tax assets. The Committee
and the Board address these issues through
reporting from the Chief Financial Officer and the
Director of Group Tax, supported as necessary
by external professional advice.

Environmental provisions and contingent
liabilities
Due to the nature of its operations, the
Group holds environmental provisions for its
environmental obligations. Judgement is required
to determine whether a contingent liability has
crystallised into a provision. These are addressed
by the Committee and the Board discussing
with various members of senior management
the key judgements made, supported, where
appropriate, by relevant external advice.

Deloitte LLP also regularly present their view
on all material provisions and contingent liabilities.
Environmental provisions are disclosed in note 25
to the consolidated financial statements.

Pensions and other post retirement
employee benefits
The Group operates a number of defined benefit
arrangements as well as defined contribution
plans. The defined benefit plans primarily relate
to the UK, US and Europe and predominantly
provide pensions based on service and
career-average pay.

Accounting assumptions, given in note 23 to
the consolidated financial statements, are used
to calculate the year-end net pension liability
in accordance with the relevant accounting
standard, IAS 19 (revised) Employee Benefits.
Relatively small changes in the assumptions
underlying the actuarial valuations of pension
schemes can have a significant impact on the
net pension liability included in the balance sheet.

The Committee reviewed the key assumptions
underpinning the accounting for these defined
benefit arrangements for the half-year and full
year results, including receiving presentations
from Deloitte LLP on this matter.

Impairment of non-financial assets
The Group monitors the performance of
individual assets and cash-generating units at each
balance sheet date to determine whether there
is any indication of impairment. An impairment
loss is recognised in the income statement where
the carrying amount of an asset exceeds its
recoverable amount.

The impairment charge for the year relates to
the impairment of assets in Technical Ceramics,
Asia, which are taking longer than anticipated
to generate revenues and to assets in Electrical
Carbon, Europe and North America, and
Thermal Ceramics, North America which are
not being utilised by the business. Additional
disclosure is included in note 6 to the
consolidated financial statements.

The Committee reviewed the key assumptions
that underpin the value in use calculations,
including receiving the views from Deloitte LLP
on these matters.

Public reporting statement
The Committee reviewed the content of the
Annual Report and Accounts and advised the
Board that, taken as a whole, it is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model and
strategy.

INTERNAL FINANCIAL CONTROL
AND RISK MANAGEMENT SYSTEMS
The Committee assists the Board in fulfilling
its responsibilities relating to the adequacy and
effectiveness of the control environment and risk
management systems. The Group’s system of
internal control has been in place for the year
under review and up to the date of approval
of the Annual Report.

The Committee, on behalf of the Board,
undertakes an annual review of the effectiveness
of the Group’s system of internal control and did
so again for the year under review. This system
is consistent with the FRC’s guidance on internal
control requirements contained within the Code.
The review conducted in February 2022
comprised:
´ A review of the relevant Principles and

Provisions in the UK Corporate Governance
Code;

´ A review of the Company’s governance

structures;

´ A review of the sources of assurance and the
Company’s three lines of defence model,
including policies, annual self-certification
process, reports from specialist functions such
as Ethics & Compliance, Tax, Treasury and
Legal functions, and internal audit reports;
´ A review of all material controls, including

financial, operational and compliance controls,
and risk management systems, including
the improvements achieved in 2021 and
identification of further areas for improvement;

The Committee oversees the progress and
outcome of any investigations arising from
reports made to the hotline or directly to
management, where there is a concern regarding
ethical conduct. The reports investigated have
varied in their nature and materiality, with certain
matters requiring the support of external advisors
and giving rise to disciplinary action against
employees for breaches of Group policies.

The divisional and global business unit Presidents
and other senior operational and functional
management make an annual statement of
compliance to the Board confirming that, for each
of the businesses for which they are responsible,
the consolidated financial statements are fairly
presented in all material respects, appropriate
systems of internal controls have been developed
and maintained, and the businesses comply
with Group policies and procedures or have
escalated known exceptions to an appropriate
level of management.

Financial reporting
Risk management systems and internal controls
are in place in relation to the Group’s financial
reporting processes and the process for
preparing consolidated accounts. These include
policies and procedures which require the
maintenance of records which accurately and
fairly reflect transactions and disposals of assets,
provide reasonable assurance that transactions
are recorded as necessary to allow the
preparation of consolidated financial statements
in accordance with International Financial
Reporting Standards (IFRS), and the review and
reconciliation of reported data. Representatives
of the businesses are required to certify that their
reported information gives a true and fair view
of the state of affairs of the business and its
results for the period. The Audit Committee
is responsible for monitoring these risk
management systems and internal controls.

Performance monitoring
The Board and the Executive Committee hold
regular, scheduled meetings, at which they
monitor performance and consider a comparison
of forecast and actual results, including cash flows
and comparisons against budget and the prior
year. Divisional and global business unit
management teams also meet regularly to review
performance. Executive Committee members
also visit sites on a regular basis.

´ The Committee and Board receive regular
risk management reports and together they
ensure that there are adequate internal
controls in place and that these are
functioning effectively.

The Directors consider that the Group’s system
of internal financial control provides reasonable,
but not absolute, assurance in the following areas:
that the assets of the Group are safeguarded;
that transactions are authorised and recorded
in a correct and timely manner; and that such
controls would prevent or detect, within a timely
period, material errors or irregularities. The
system is designed to mitigate and manage risk,
rather than eliminate it, and to address key
business and financial risks. The majority of
internal financial controls are manual; this is
driven by a diverse IT landscape and the Group’s
geographical breadth; as such, there is a heavy
reliance on central review controls. The
Directors are satisfied that an appropriate
amount of time and consideration is dedicated to
the review and challenge of results, judgements
and estimates – both by the global business
units and the Group leadership team.

The main features of the Group’s system of
internal control and for assessing the potential
risks to which the Group is exposed are
summarised as follows:

Control environment
The Group’s control environment is underpinned
by the Morgan Code and its associated policies
and guidelines. The Group policies cover:
financial procedures; environmental, health
and safety practice; ethics and compliance, for
example anti-bribery and anti-corruption,
anti-trust and anti-competitive behaviour and
trade compliance); and other areas such as IT and
HR. There is a Limits of Authority Policy, which
describes the matters reserved for the Board
and the delegations granted to the Chief
Executive Officer and other executives. The
Group operates various programmes to improve
the control environment and management
of risk. These include the Group’s ethics and
compliance programme and the Group internal
audit function, which present updates to the
Committee at each meeting. In addition, the
Committee receives reports from the Presidents
and Finance Directors of each of the divisions and
global business units on their specific key risks,
how these risks are managed and an assessment
of the control environment, on an annual basis.

Part of the ethics and compliance programme
is the provision of an externally managed,
independent whistleblower (Speak Up) hotline
which is made available to workers to raise
concerns. Any reports made to the hotline are
investigated by senior management, with reports
made to the Committee at each meeting.

Risk management
The Board undertakes a formal assessment of
the Group’s principal and emerging risks at least
twice a year. The identification, assessment and
reporting of risks is a continuous process carried
out in conjunction with operational management.
Appropriate steps are taken to mitigate and
manage all material risks including those relating
to the Group’s business model, solvency and
liquidity. The Board, either directly or through
the Committee, receives updates on risks,
internal controls and future actions from both
divisional and Group perspectives. The Executive
Committee collectively reviews risk management
and internal controls for all principal Group risks.
The Group’s risk management system, which is
described in more detail in the Risk Management
section of the Strategic Report on pages 38 to 43,
supports the Directors’ statements on going
concern and viability on pages 53 to 54.

Risk factors
The Group’s businesses are affected by a number
of factors, many of which are influenced by
macro-economic trends beyond Morgan
Advanced Materials’ control; nevertheless,
as described above and in the Strategic Report,
the identification and mitigation of such risks are
regularly reviewed by the Executive Committee
and the Board. These risk factors are further
discussed in the Risk Management section
on pages 38 to 43.

Internal audit
The Group’s internal audit function reviews
internal control and risk management processes.
The Audit Committee approves the annual
internal audit plan and ensures that there are
adequate resources in place for the function
to carry out the plan. The Committee receives
reports showing the ratings and key findings
from each audit. The Committee challenges
management over the key findings, discusses
key themes identified by the internal audits and
guides management in identifying areas of focus
to continuously improve controls. Actions arising
from internal audit reviews are agreed with
management and the Committee monitors
progress on any outstanding actions. The
Head of Internal Audit has direct access to the
Committee’s Chair and meets separately
with Committee members without executive
management at least twice a year.

During 2021, travel to sites was limited, but the
members of the internal audit team continued
to perform audits according to the planned
programme, using remote procedures.

In 2021, the Committee reviewed the
effectiveness of the Group’s internal audit
function by way of surveys completed by
Committee members and key management
personnel. This is the approach taken in those
years that the review is not externally-facilitated.
The last externally-facilitated review was in 2018.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
REPORT OF THE AUDIT COMMITTEE

REPORT OF THE
NOMINATION COMMITTEE

Auditor effectiveness
The Committee discussed the quality of the audit
during the year and considered the performance
of the external auditor as a separate agenda
item at the meeting in February 2022. The
Committee conducted a full review following
the 2021 year end to gather feedback and look
for continuous improvement opportunities.
The Committee considered all aspects of the
auditor’s performance, based on a review of the
effectiveness of the external audit process, which
was conducted through a questionnaire taking
into consideration relevant professional and
regulatory requirements. The questionnaire was
completed by each GBU finance director and
nine Group functional teams. In addition to the
questionnaire, the following external auditor
areas were reviewed:
´ Independence confirmation;
´ Audit methodology, use of component
auditors and audit scope and coverage;
´ Assessment of materiality and areas of audit
focus, consideration of appropriate audit
procedures, professional scepticism,
appropriate management challenge, clarity
and candour in reporting; and

´ The FRC’s Audit Quality Review findings for

Deloitte for the 2020/21 cycle of reviews and
Deloitte’s proposed actions to address these
findings as a firm.

The Committee confirmed Deloitte’s
independence before recommending its
reappointment for approval by shareholders at
the Annual General Meeting (AGM) scheduled
for May 2022.

External audit rotation
Deloitte LLP was appointed by shareholders
as the Group’s statutory auditor in 2020 following
a formal tender process. The external audit
contract will be put out to tender at least every
10 years. The Committee considers that it would
be appropriate to conduct an external audit
tender by no later than 2030.

The Company has complied with the provisions
of the Competition and Markets Authority’s
Order on statutory audit services.

The Committee considers the internal audit
function to be effective, with the quality,
experience and expertise appropriate to
the business.

External auditor, including independence
and Non-Audit Services Policy
The external auditor, Deloitte LLP, has processes
in place to safeguard its independence and
objectivity, including specific safeguards where
it is providing permissible non-audit services, and
has confirmed in writing to the Committee that,
in its opinion, it is independent.

In addition, the Company has a policy on the
provision of non-audit services by the external
auditor which was revised in 2019 and is in line
with the FRC’s revised Ethical Standard 2019
which took effect on 15 March 2020:
´ Certain non-audit services may not be
provided. The external auditor may not
review their own work, make any
management decisions, create a mutuality
of interest, and/or put themselves in the
position of advocate;

´ Any permissible non-audit work proposed
to be placed with the external auditor with
a total fee between £50,000 and £200,000
must be approved in advance by the Chair
of the Audit Committee. Projects in excess
of £200,000 must be approved in advance by
the Audit Committee, with any such proposal
being submitted in writing to the Chief
Financial Officer, who would in turn seek
approval from the Audit Committee.
All permissible non-audit work, regardless
of value, must be approved by the Group
Financial Controller. Work which includes
multiple phases is treated as a single project
for approval purposes;

´ The prior approval of the Audit Committee is
required for any non-audit work which, when
added to the fees paid for other non-audit
work, would total more than 60% (previously
80%) of the audit fee;

´ The value of non-audit fees must not under

any circumstances exceed 70% of the average
Group statutory audit fee incurred in the
last three consecutive financial years.

To safeguard the objectivity and independence
of the external auditor, the Company ensures
that any non-audit services to be provided by
the auditor are given prior approval by the Audit
Committee where required under the Policy.

In the opinion of the Committee the auditor’s
objectivity and independence were safeguarded
despite the provision of a limited number of
non-audit services by Deloitte LLP during 2021.

In 2021, the proportion of the auditor’s fees
for non-audit work relative to the audit fee
was 0.0% (or £28,000), (2020: 8.0%).

COMMITTEE MEMBERS
DOUGLAS CASTER (CHAIR)
JANE AIKMAN
HELEN BUNCH
LAURENCE MULLIEZ
CLEMENT WOON

The Committee is composed solely of
non-executive Directors and is chaired
by the Chairman of the Board.
Biographies of the Committee members
can be found on pages 60 to 61.

The Company Secretary is secretary to
the Committee and attends all meetings.

The Chief Executive Officer and
Group HR Director attend all scheduled
meetings by invitation.

The Nomination Committee
monitors the Board’s succession
plans and considers appointments
to the Board in support of the
strategy and long-term success
of the Group.

NOMINATION COMMITTEE ROLE
The Nomination Committee is responsible for
keeping under review the composition of the
Board and its succession, and monitors and
regularly reviews the balance of skills, knowledge,
experience, independence and diversity of the
Board and its Committees. It reviews succession
planning for the Executive Committee and overall
talent strategy for senior leadership positions,
by reference to Morgan’s Board Inclusion and
Diversity Policy, which sets the overall tone
for the Group’s approach to diversity. The
Committee leads the process for appointments
to the Board and ensure plans are in place for
orderly succession to both the Board and senior
management positions and to oversee a diverse
pipeline for succession.

The Committee’s formal role is set out in its
terms of reference, which are available to view
on the Company’s website.

NOMINATION COMMITTEE
ACTIVITY IN 2021
On behalf of the Nomination Committee,
I present our report for 2021. The Committee
met three times during 2021 and members’
attendance is set out in the table on page 68.

The Committee performs a vital role in
reviewing the composition and balance of skills
and experience on the Board, enabling it to lead
the process for appointments to the Board, keep
under review the leadership needs of the Group,
and ensure plans are in place for orderly
succession to Board and senior management
positions. During 2021, the Committee reviewed
Board succession and assessed whether the
objectives of the Board’s Inclusion and Diversity
Policy, including how it supports Morgan’s
strategy, had been implemented and what
progress has been achieved. During the year,
the Board reviewed succession planning and
talent strategy for the Executive Committee
and its direct reports, with a particular lens on
our aim to foster diversity within the leadership
population and increase the female leadership
population to 40% by 2030.

In May 2021, the Company announced
Peter Turner’s retirement as Chief Financial
Officer. The Committee identified his successor,
Richard Armitage, who will join the Board on
30 May 2022 after a thorough search process
which is set out in this Report.

The Committee remains conscious that to
execute on Morgan’s execution priorities of
Big Positive Difference, Innovate to Grow and
Delight the Customer, building our talent pool
with individuals whose skill sets and thinking can
drive Morgan’s strategy and shape our culture
is critical to the Group’s long-term success.

Douglas Caster CBE FIET
Committee Chair

MAIN AREAS OF WORK DURING 2021
During 2021, the Committee’s key activities
included:
´ Considering the skills mix on the Board,

including diversity of gender, ethnicity and
geographical representation;

´ Recommending the appointment of a new

Chief Financial Officer;

´ Reviewing how the objectives of the Board’s

Inclusion and Diversity Policy, and its
support of the Group’s strategy, have been
implemented, and assessing progress against
the objectives;

´ Reviewing the structure, size and composition
of the Board and its Committees, ensuring
that they remain appropriate;

´ Reviewing the results of the annual

performance evaluation of the Committee;

´ Considering whether each Director

continued to be able to allocate sufficient time
to discharge their responsibilities effectively;
´ Considering the Directors’ annual re-election
at the 2021 Annual General Meeting (AGM);

´ Overseeing the development of a diverse
succession pipeline for Executive Directors
and other senior leaders;

´ Considering Board succession planning, taking
each non-executive Director’s tenure into
account; and

´ Reviewing the Committee’s terms of

reference.

SKILLS, SIZE AND COMPOSITION
OF THE BOARD
The Committee reviews the Board’s
composition, including the length of tenure of
non-executive Directors, to ensure that it has the
correct balance of skills, experience, knowledge
and diversity required for the leadership of the
Group, to support the delivery of the Group’s
strategy, and to comply with the UK Corporate
Governance Code. The Committee considers
that the Board members have a range
of experience in safety, customer focus,
environmental sustainability, global business
management and operations, strategy execution,
finance, and risk management, from a variety of
sectors, including engineering, global technology,
manufacturing, construction, energy, and
marketing which will be relevant in overseeing
the delivery of Morgan’s strategy and execution
priorities.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREPORT OF THE
NOMINATION COMMITTEE

The percentage of women on the Group’s
Executive Committee is 40%. At 31 December
2021, 27% (2020: 25% and 2019: 29%) of senior
management (defined in accordance with the
Code as the members of the Executive
Committee including the Company Secretary)
and their direct reports were female. The
Committee takes diversity into account in
broader discussions on succession planning and
talent development and supports management
in its wider commitment to promoting diversity.
The Company submitted data to both the FTSE
Women Leaders Review and the Parker Review
during 2021.

The Board has agreed objectives for achieving
gender, ethnic and cultural diversity on the
Board, and places high emphasis on ensuring
the development of diversity both in senior
management roles and the workforce in general
within the Company.

To promote diversity and inclusion the Board will:
´ Consider all aspects of diversity when

reviewing the composition and effectiveness
of the Board;

´ Only engage with executive search firms
which are accredited under the Enhanced
Code of Conduct for Executive Search Firms,
or which have a proven track record in
sourcing diverse candidates, when seeking
to make new appointments;

´ Ensure that candidate lists include individuals

from a broad and diverse range of
backgrounds and that all candidates with the
requisite skills and capability are considered,
including those with less traditional track
records than the corporate mainstream;
´ Agree new Board appointments based on

merit against the objective criteria set, taking
account of the unique benefits each candidate
can bring;

´ Review senior executive succession planning
annually and monitor the development of
a diverse pipeline of future senior leaders,
reflecting the composition of Morgan’s
workforce;

´ Set the tone and provide visible support for

the Group’s diversity and inclusion objectives,
including the fostering of an inclusive culture
which allows individuals to bring their whole
selves to work, role modelling and promoting
inclusive leadership; and

´ Reviewing and challenging the goals and
progress of executive management in
improving inclusion and diversity.

Looking at progress achieved against the
objectives set out in the Board’s Inclusion and
Diversity Policy during the year, the diversity of
the Board’s members remained unchanged with
43% women and one male Board member of
South East Asian origin. Going forward, with
the refreshment of the Board into future years,
the Policy will inform and steer the Committee
in identifying candidates and set the tone for the
wider Group’s diversity aspirations, in particular
in the context of developing its leadership
population.

TO FIND OUT MORE

The Board’s Inclusion and Diversity Policy
can be viewed on the Company’s website
www.morganadvancedmaterials.com/
media/8349/199221-morgan-board-
inclusion-diversity-policy_.pdf.

EXECUTIVE DIRECTOR SUCCESSION
Richard Armitage is expected to join the Board
on 30 May 2022 as Chief Financial Officer when
Peter Turner retires.

When Peter informed the Board of his intention
to retire, the Committee engaged Spencer Stuart
to carry out a targeted external search for his
successor, using a role profile which set out
the desired skills of financial leadership and
commercial and strategic experience. It was also
crucial that a successor should be an effective
business partner to the CEO, a proven
communicator with investors, and align strongly
with Morgan’s culture and values. The search
process was carried out against the criteria
and the objectives of the Board’s Inclusion and
Diversity Policy. Spencer Stuart was given a wide
brief to ensure a wide and diverse talent pool
was considered and were advised that the
Company would be open to consider both
established listed company CFOs and ‘step up’
candidates.

Spencer Stuart is accredited under the Enhanced
Code of Conduct for Executive Search Firms.
Spencer Stuart has been used for other recent
senior leader appointments within the Morgan
Group but has no other connection with the
Group nor its Directors.

Candidates met with the CEO, the Group
HR Director, the Audit Committee Chair and
the Chairman of the Board. The Committee
reviewed the final short-listed candidates and,
after consideration, recommended to the Board
that Richard Armitage be appointed the next
CFO. The recommendation was unanimously
approved by the Board and announced on
15 October 2021. Richard Armitage will join
the Board as an executive Director and CFO
on 30 May 2022. Peter Turner will cease in his
role as CFO on 30 May 2022 and will step
down from the Board in June 2022 following
a handover period.

During the year, the Committee reviewed and
agreed that the overall size of the Board and
its Committees, including the non-executive
Director/executive Director split, was
appropriate for Morgan. It agreed that the current
Board and Committee structure remained
appropriate, and all non-executive Directors
should continue to be members of the main
Committees (with the exception that the
Chairman of the Board should not be a member
of the Audit Committee). The Committee
considers that the members of the Board and
Committees have the appropriate mix of skills,
experience, diversity and knowledge of the
Company, and that undue reliance was not
placed on any particular individual(s).

The Committee will review the balance of skills
and experience on the Board when considering
future changes to the Board.

DIVERSITY AND INCLUSION
The Board recognises the benefits that diversity
and inclusion bring at all levels of the Company,
and firmly believes diversity is an important factor
in enabling good decision-making at Board level.

Morgan continues to foster greater diversity
and inclusion and remains committed to, and
ambitious about, making Morgan a more diverse
place to work. During 2021, the Board reviewed
succession planning and talent strategy for the
Executive Committee and its direct reports,
with a particular lens on our aim to foster
diversity within the leadership population and
increase the female leadership population to
40% by 2030. The Board reviewed the Group’s
work to strengthen leadership capability and
succession.

Morgan’s Board Inclusion and Diversity Policy
reflects the Group’s inclusion and diversity
aspirations and includes objectives, and the
Committee monitors progress against these
objectives. The Nomination Committee annually
reviews the composition of the Board and
considers the balance of competencies to ensure
alignment with the Company’s purpose, strategy
and execution priorities and the environment in
which it operates. The Nomination Committee
reviews the characteristics, perspectives,
independence and diversity of Board members;
how the Board works together; and other factors
relevant to its effectiveness.

Currently, three of the seven Board Directors are
female, one of whom is the Senior Independent
Director, equating to 43% female representation
on the Board, and the Board currently has one
Director of South East Asian origin. Morgan’s
intention is to at least maintain that level of
diversity, in order that the Board’s composition
can more closely reflect the Group’s workforce
and society more generally. The appointment of
a male CFO to succeed Peter Turner leaves the
gender representation on the Board unchanged.

SUCCESSION PLANNING
The Committee regularly reviews the Board’s
composition, including the length of tenure of
non-executive Directors, to ensure that it has the
correct balance of skills, experience, knowledge
and diversity required for the leadership of the
Group, to support the delivery of the Group’s
strategy, and to comply with the UK Corporate
Governance Code.

The Board receives reports on the development
of internal talent and reviews the talent pool
for senior leadership opportunities.

The usual process for selection of a non-
executive Director is described below. For 2022
and future years, the Committee will re-evaluate
and update Morgan’s processes for Board and
senior management appointments by reference
to the aims and objectives of the Board Inclusion
and Diversity Policy, and will report on progress
in future annual reports.
´ The Committee formulates a candidate

specification for the role, taking into account
the balance of skills, knowledge, experience,
diversity and geographical representation on
the Board, and considering the desired skills
and experience required to complement
the existing membership and to support the
implementation of the Group’s strategy;

´ The external search agent produces a long-list
of candidates for the role, taking the identified
requirements into consideration;

´ Interviews with members of the Nomination
Committee take place with short-listed
candidates;

´ Interviews with other Board members take

place with the final candidate(s);

´ The Committee makes a recommendation

for the appointment to the Board, taking into
account the views of the Board members;
´ Any new Director appointed by the Board

must be elected by shareholders at the next
AGM, and all existing Directors must retire
and be re-elected at the AGM to continue
in office.

Non-executive Directors, including the
Chairman, are asked to confirm that they
will allocate sufficient time to meet their
commitments to the Company and that their
other appointments and significant time
obligations are disclosed to the Board prior
to appointment, with an indication of the level
of time commitment involved. The Board
is informed of any subsequent changes, and
additional commitments must be disclosed
before they are accepted.

COMMITTEE PERFORMANCE
EVALUATION
The Committee’s performance was reviewed
as part of the Board evaluation (see page 73 for
details), which was externally-facilitated in 2021
by Clare Chalmers. It was concluded that the
Committee had operated effectively during the
period under review.

TIME COMMITMENT
The time commitment of each of the Chairman,
Chairs of Board Committees and non-executive
Directors are set out in their respective letters
of appointment. Non-executive Directors are
expected to spend at least two days per month,
more if they act as Chair of a Board Committee,
on Company business; and the Chairman is
expected to spend at least 50 days per annum
on Company business. During the year, the
Committee considered that each Board member
fulfilled his or her respective commitment, both
in respect of Board and Committee meetings
and for employee engagement sessions. Details
of meeting attendance by Board members are
set out on page 68.

ANNUAL RE-ELECTION OF DIRECTORS
All Directors are subject to annual re-election
under the Code. Peter Turner is retiring from the
Board in June 2022 and will therefore stand for
re-election at Morgan’s 2022 AGM despite his
impending retirement. His successor Richard
Armitage will stand for election at the 2023 AGM
following his forthcoming appointment in May 2022.

Clement Woon is serving his first three-year
term as Director, and Jane Aikman, Helen Bunch
and Laurence Mulliez are all in their second
three-year term. Douglas Caster is serving his
third three-year term on the Board. In line with
Provision 18 of the Code, the specific reasons
why each Director’s contribution is, and
continues to be, important to the Company’s
long-term sustainable success have been set out
in this year’s Notice of AGM, to accompany
the formal re-election resolutions.

During the year, the Chairman reviewed the
performance of each Director and has confirmed
their continued effectiveness. A formal review
of each individual Director’s performance was
conducted as part of Morgan’s Board evaluation
process in 2019, concluding with individual
meetings between the Chairman and each
non-executive Director. The Senior Independent
Director also hosted a meeting of the non-
executive Directors without the Chairman
present in December 2021 to discuss the
Chairman’s performance.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREMUNERATION REPORT

2021 REMUNERATION OUTCOMES
In reviewing performance in 2021, the
Committee determined that payouts of 97%
of the 2021 annual bonus opportunity for the
Chief Executive Officer (CEO) and Chief Financial
Officer (CFO) were appropriate. The 2019 LTIP
award will partially vest, resulting in a 52.2%
achievement of the maximum. These outcomes
are consistent with the Group’s performance,
details of which are summarised later in this
Report. The Committee has not felt it
appropriate to adjust performance targets during
the year and felt that no discretion needed to be
applied for 2021 remuneration outcomes as they
were considered to appropriately reflect the
underlying performance of the Group.

IMPLEMENTATION OF POLICY IN 2022
The Remuneration Committee decided that,
taking into account the improved performance
of the Group in 2021, labour market conditions,
and average range of salary increases in the wider
workforce, the appropriate level of salary
increase for the CEO would be 2.5%. The
current CFO will be retiring from the Company
in June 2022 and as such no salary increase has
been awarded for 2022. The process for
reviewing executive Director salaries takes
into account individual and Group performance,
demonstration of the defined Leadership
Behaviours and salary position relative to the
relevant market, which is consistent with the
approach taken for the entire professional
population. There will also be an increase to
the fees for the Chairman and non-executive
Directors of 2.5% for 2022 as determined by the
Committee (for the Chairman) and the Chairman
and executive Directors (for the non-executive
Directors).

Statement to shareholders from
the Chair of the Remuneration
Committee.

COVID-19 remains a significant issue in many
of the countries Morgan Advanced Materials
operates in, with impacts still being observed
across the global economy. Despite this Morgan
has seen a robust recovery in most of its
end-markets, leading to a return to growth,
delivering 10.3% organic revenue* growth
for the 2021 financial year. We have continued
to take appropriate actions to control costs,
improve cash flow and increase liquidity, which
along with continued further investment in the
wider business to support sustainable long-term
growth, has helped Morgan to emerge stronger
from the crisis.

Within the context of the UK Corporate
Governance Code, and the requirement to
put the Remuneration Policy to a binding vote
at the 2022 AGM, the Committee conducted
a thorough review in 2021 of the current
Remuneration Policy (approved by 97% of
shareholders at the 2019 AGM). This review
concluded that the current framework continues
to support Group strategy and culture, as well as
providing strong alignment of executive Director
and shareholder interests. It also highlighted the
appropriateness of making several amendments
to reflect changes in the external landscape and
as such, I wrote to our largest shareholders in
October 2021 to consult on the changes that
are being proposed to the Remuneration Policy
for 2022 onwards.

2021 COMMITTEE ACTIVITY
During the year, the Committee met six times.
Its activities included determination of current
incentive outcomes and 2022 incentive structure
and targets, remuneration packages for the
executive Directors, and a review of the Group’s
Remuneration Policy. Further details regarding
the activities of the Committee can be found
in the ‘Remuneration governance’ section at the
end of this Report on page 104.

COMMITTEE MEMBERS
HELEN BUNCH (CHAIR)
JANE AIKMAN
DOUGLAS CASTER
LAURENCE MULLIEZ
CLEMENT WOON

I am pleased to present the
Remuneration Report for the year
ended 31 December 2021 and
proposed changes to the Remuneration
Policy for 2022.

The health, safety and wellbeing of
our employees remains our top priority,
and in view of the continuation of the
COVID-19 pandemic we have
maintained heightened safety measures
to protect our employees. There has
been further focus on the ‘thinkSAFE’
programme, the Morgan Code of
Conduct, as well as the continuation of
the global Sales Effectiveness Programme.

The Committee also reviewed the structure
of the annual bonus and LTIP plans to ensure
that the framework remains appropriately aligned
with our strategic aims and culture, motivates
and rewards management for delivering
sustainable performance, and supports retention.
No changes are proposed to the performance
linkage of the annual bonus for 2022 as measures
remain aligned to Morgan’s key objectives,
including ESG (environmental, social and
governance) measures being covered in the
executive Directors’ personal objectives and
therefore reflected in the personal performance
element of bonus. For the LTIP, it is proposed
to add an ESG measure (carbon reduction) to
the structure, to align more closely with Morgan’s
strategy and priorities. The proposed ESG targets
are 5% to 15% carbon reduction over the
three-year performance period, reflecting our
stated longer-term ambition to reduce carbon
emissions by 50% by 2030 (from a 2015
baseline). The proposal is to decrease the EPS
targets from 15% - 22% to 6% - 13% over
the three-year performance period, the targets
having been temporarily increased last year to
take into account the reduced base level resulting
from the impact of the pandemic on financials.
The Committee considers this to be
appropriately challenging in the context of the
Group’s strategic plan, external market factors
and broker forecasts. No changes are proposed
to the TSR benchmarks and relative TSR
performance range (median-upper quartile).
It is proposed to maintain the ROIC* range for
that element of the executive Directors’ 2022
LTIP at 17%-20%, to reflect our latest
expectations for performance over the
three-year performance period. For the annual
bonus, the width of the performance ranges
have been reduced to ±7.5% of target, however
they remain slightly wider than in pre-pandemic
years to reflect the ongoing uncertainty of
the pandemic and its potential impact on
performance outcomes. Annual bonus targets
are considered to be commercially sensitive
at this time but will ordinarily be disclosed in
next year’s Remuneration Report.

PROPOSED CHANGES TO
REMUNERATION POLICY IN 2022
In line with the remuneration reporting
regulations, the Directors’ Remuneration Policy
must be submitted for shareholder approval
at least every three years. The Policy was last
approved by shareholders at the 2019 AGM,
and therefore is required to be put to a new
binding vote at the 2022 AGM.

During 2021, the Committee reviewed the
Remuneration Policy for executive Directors in
the context of our remuneration philosophy, the
UK Corporate Governance Code, and recent
developments in remuneration governance.
The Committee concluded from its review that
the 2019 Policy framework continues to reinforce
our strategy and culture and provides strong
alignment of executive Director and shareholder
interests. However, the Committee recognises
that the remuneration governance landscape,
and the views of some shareholders on the
subject of executive remuneration, continue to
evolve at pace. Accordingly, I wrote to our largest
shareholders in October 2021 to consult on
the changes that are being proposed to the
Remuneration Policy for 2022 onwards,
which are:
´ Aligning pension contributions for current
executive Directors with those for the UK
workforce from 31 December 2022 onwards;
´ Reducing the upper LTIP grant limit to 200%
of salary, and increasing the CEO’s annual
award value to this level (to deliver a total
package that is in line with relevant
benchmarks); and

´ Adding an ESG measure to the LTIP structure
in alignment with Morgan’s strategic priorities.

Further details on the proposed 2022 Policy are
set out in the ‘Policy report’ section beginning
on page 86 of this Remuneration Report.

This Report is consistent with the current
reporting regulations for executive remuneration
and, as in prior years, includes a ‘Remuneration
at a glance’ section summarising the key elements
of executive Director remuneration. I hope we
have been successful in continuing to achieve the
clarity and transparency that will be of help to
our shareholders.

Helen Bunch
Committee Chair

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREMUNERATION REPORT

REMUNERATION AT A GLANCE
COMPONENTS OF REMUNERATION

Salary

Pension and Benefits

Annual Bonus +

LTIP

Fixed total
+

Variable total

= Total remuneration

Key features of how our executive remuneration policy will be implemented in 2022

Fixed components

Base salary
Pete Raby (CEO)
Peter Turner (CFO)
Richard Armitage (CFO)

£596,000
£426,1601
£425,0001

Pension and other benefits

Pension
Pete Raby (CEO)
Peter Turner (CFO)
Richard Armitage (CFO)

fixed at £104,000
fixed at £80,1201
£34,000
(8% of base salary)1

Benefits
Pete Raby (CEO)
Peter Turner (CFO)
Richard Armitage (CFO)

£13,567
£12,5321
£11,1001,3

Variable components, annual bonuses

Maximum opportunities for 2022
(no change)
Pete Raby (CEO)
Peter Turner (CFO)
Richard Armitage (CFO)

150% of salary
150% of salary1
150% of salary1

Performance measures
weighting
Operating profit*
Cash generation*
Strategic personal objectives

40%
40%
20%

LTIP

Maximum opportunities for 2022
Pete Raby (CEO)
Peter Turner (CFO)
Richard Armitage (CFO)

200% of salary
No LTIP award
150% of salary

Performance measures weighting
TSR vs. FTSE All-Share
Industrials Index
TSR vs. peer group
EPS growth
Group ROIC*
ESG (carbon reduction)

15%
15%
27.5%
27.5%
15%

Policy
Executive Directors’ salaries are generally reviewed each
January, with reference to individual and Group performance,
experience and salary levels at companies of similar sector,
size and complexity.

Policy
Current executive Directors may receive defined
contributions (and/or cash in lieu thereof) up to 20% of
salary. Policy change approved at the 2019 AGM aligned
pension contribution for new executive Directors with
that available to the UK workforce. Proposed Policy change
to be approved at the 2022 AGM aligns pension contribution
for current executive Directors with that available to the
UK workforce from 31 December 2022 onwards. Other
benefits can include company car/car allowance, health
insurance and, where appropriate, relocation allowances
and other expenses.

Implementation
The monetary value of the pension allowance for the current
executive Directors was fixed at the 2018 value from 2019
onwards, to help align executive Director pensions with
those of the wider workforce over time. From 31 December
2022 executive Director pension allowances will be fully
aligned to pension contribution levels available to the UK
workforce (8% based on UK population). Richard Armitage’s
pension allowance will be aligned to that available to the
workforce on appointment.

Policy
Maximum award opportunity: 150% of base salary
Performance measures are set by the Committee at the start
of the year and are weighted to reflect a balance of financial
and strategic objectives. 67% of any annual bonus paid is
delivered in cash with the remainder deferred into shares
and released after a further period of three years. 50% of the
bonus opportunity is paid for on-target performance.

Policy
Maximum award opportunity: proposed Policy change to reduce
this from 250% to 200% of base salary, to be approved at the
2022 AGM
The award levels and performance conditions on which
vesting depend are reviewed prior to the start of each award
cycle to ensure they remain appropriate. Proposed Policy
change to be approved at the 2022 AGM introduces an ESG
measure in addition to the current measures of TSR, EPS and
ROIC. Vested shares are subject to a post-vesting holding
period of two years. The vesting of awards is usually subject
to continued employment and to the Group’s performance
over a three-year performance period. 25% of an award
vests for achievement of the threshold level of performance.

Implementation
The CFO’s maximum opportunity remains 150% of salary
(Peter Turner will not receive an LTIP award in 2022). The
CEO’s maximum opportunity will be increased to 200%
of salary.

PAY AT RISK
Pete Raby (CEO)

Fixed 25%

Variable 75%

Peter Turner (outgoing CFO)1,2

Fixed 45%

Annual Bonus 32%
LTIP 43%

Annual Bonus 55%
LTIP 0%

Variable 55%

Richard Armitage (incoming CFO)

Fixed 27%

Variable 73%

Annual Bonus 36.5%
LTIP 36.5%

PAY SCENARIOS
Pete Raby (CEO)

Stretch with 50%
share price incr.
Stretch

Target

21%

25%

49%

26%
32%

31%

53%

43%

20%

Below Threshold

100%

Peter Turner (outgoing CFO)1,2

£3,396k

£2,800k
£1,459k
£714k

Stretch with 50%
share price incr.
Stretch

45%

Target

62%

Below Threshold

100%

55%
55%

38%

£1,158k

£1,158k
£838k
£519k

500

1,500

2,500

3,500

500

1,000

1,500

2,000

Richard Armitage (incoming CFO)1,3
Stretch with 50%
share price incr.
Stretch

31%
36.5%

23%

27%

46%

36.5%

Target

49%

34%

17%

Below Threshold

100%

£2,064k

£1,745k
£948k
£470k

500

1,500

2,500

Variable

Fixed total (base salary, pension and benefits)

Annual Bonus

LTIP

Shareholding requirements
Pete Raby (CEO) 200% of salary
(current shareholding 261.7%)

Peter Turner (outgoing CFO) 200%
of salary (current shareholding 328.0%)

Richard Armitage (incoming CFO) 200% of salary
(current shareholding n/a)

1. Peter Turner will be leaving in June 2022 and Richard Armitage will join as CFO on 30 May 2022. All figures above are annualised and will be pro-rated according to service in the year.

2. Peter Turner will not receive a 2022 LTIP Award as he will be retiring from the Company in June 2022.

3. Excludes health insurance – value of premium to be calculated on joining and will be disclosed in 2022 Annual Report.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

REMUNERATION REPORT

This Report covers the period 1 January 2021 to 31 December 2021 and provides details of the Remuneration Committee and how the Remuneration
Policy, approved by shareholders at the 2019 AGM, has been implemented for the year under review. The Policy Report sets out the Policy that is
proposed to apply for up to the next three years from 5 May 2022, subject to shareholder approval. The proposed implementation of this Policy for
the 2022 financial year is summarised in the section of the Annual Report on Remuneration titled ‘Implementation of Remuneration Policy for 2022’.

1. POLICY REPORT
KEY PRINCIPLES OF THE REMUNERATION POLICY
The Remuneration Committee aims to ensure that all executive remuneration packages offered by Morgan Advanced Materials are competitive and
designed to promote the long-term success of the Company by ensuring that Morgan is able to attract, retain and motivate executive Directors and senior
executives of the right calibre to create value for shareholders.

The Committee ensures that a significant proportion of the total remuneration opportunity is performance-related, with an appropriate balance between
short-term and long-term performance, and is based on the achievement of measurable targets that are relevant to, and support, the business strategy
through the execution of the Policy.

The Remuneration Committee will keep the Remuneration Policy under periodic review to ensure it remains aligned with the Group’s strategy, reinforces
the Group’s culture, and is in line with the principles set out in the UK Corporate Governance Code in relation to directors’ remuneration. This includes
ensuring that performance-related elements are transparent, stretching and rigorously applied, as well as reflecting the views and guidance of institutional
investors and their representative bodies.

SUMMARY OF MORGAN ADVANCED MATERIALS PLC’S PROPOSED 2022 REMUNERATION POLICY
This section of the Report sets out the proposed Remuneration Policy for executive Directors and non-executive Directors. This Policy will be submitted
for approval by shareholders at the Company’s AGM on 5 May 2022. If approved, it is intended that this Policy be effective for a period of up to three years
from that date.

The Committee has developed the 2022 Policy to be consistent with the six factors outlined in Provision 40 of the Code, as set out below:

Clarity: Our Policy is clear, and disclosures on our decision-making (in relation to policy and its implementation) are transparent. The Committee also
engages regularly with shareholders and employees to facilitate a greater understanding on a range of subjects, including remuneration.

Simplicity: The Policy and the Committee’s approach to implementation is simple and well understood. The performance measures used in the incentive
plans are well aligned to the Group’s strategy.

Risk: The Committee has ensured that remuneration arrangements do not encourage and reward excessive risk taking by setting targets to be stretching
and achievable, with discretion to adjust formulaic bonus and LTIP outcomes.

Predictability: The range of outcomes under our Policy are quantifiable, clearly linked to defined performance outcomes, and capped.

Proportionality: The link of the performance measures to strategy and the setting of targets ensures outcomes are proportionate to performance, and
importantly do not reward poor performance.

Culture: The Policy is consistent with the Group’s culture, driving behaviours that promote the long-term and sustainable success of the Group for the
benefit of all stakeholders.

Proposed Remuneration Policy for executive Directors
The key changes to the proposed Remuneration Policy for executive Directors that will be submitted for approval at the 2022 AGM are:
´ Align pension contributions for current executive Directors with those for the wider workforce from 31 December 2022 onwards;
´ Reduce the upper LTIP grant limit to 200% of salary and increase the CEO’s annual grant value to this level (to deliver a total package that is in line with

relevant benchmarks); and

´ Add an ESG measure to the LTIP structure in alignment with Morgan’s strategic priorities.

Operation

Opportunity

Performance metrics

Purpose and link to strategy
FIXED PAY
Base salary
Provides the fixed element
of the remuneration package.
Set at competitive levels against
the market.

Base salaries are generally reviewed
each January, with reference to an
individual’s performance (and that
of the Group as a whole), their
experience, and the range of salary
increases applying across the Group.

The Committee also considers salary
levels at companies of similar sector,
size and complexity when determining
increases.

Pension
Provides post-retirement
benefits for participants in
a cost-efficient manner.

Defined contribution scheme (and/or
a cash allowance in lieu thereof).

Benefits
Designed to be competitive
in the market in which the
individual is employed.

Can include company car/car allowance,
health insurance and, where
appropriate, relocation allowances
and other expenses.

An executive Director’s performance
(and that of the Group as a whole)
and also their demonstration of the
defined Leadership Behaviours, are
taken into account when making
decisions in relation to base salary.

Not applicable.

Our policy is to pay salaries that
are broadly market-aligned, with
increases applied in line with the
outcome of the annual review.
Salaries in respect of the year under
review (and for the following year)
are disclosed in the Annual Report
on Remuneration.

Salary increases for executive
Directors will normally be within
the range of increases for the
general employee population over
the period of this Policy. Where
increases are awarded in excess
of those for the wider employee
population, for example in instances
of sustained strong individual
performance, if there is a material
change in the responsibility, size
or complexity of the role, or if an
individual was intentionally
appointed on a below-market
salary, the Committee will provide
the rationale in the relevant year’s
Annual Report on Remuneration.
For current executive Directors
from 31 December 2022 onwards,
and for new executive Directors on
appointment, contributions (or cash
in lieu thereof) will be aligned with
the level of contribution available
to the UK workforce at that time.
Benefits values vary by role and
are reviewed periodically relative
to the market.

It is not anticipated that the cost
of benefits provided will change
materially year on year over the
period for which this Policy will apply.

The Committee retains the
discretion to approve a higher
cost in exceptional circumstances
(e.g. relocation expenses, expatriate
allowances etc.) or in circumstances
where factors outside the Group’s
control have changed materially
(e.g. market increases in insurance
costs).

Benefits in respect of the year
under review are disclosed in the
Annual Report on Remuneration.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsOperation

Opportunity

Performance metrics

REMUNERATION REPORT

Purpose and link to strategy
VARIABLE PAY
Annual bonus
Provides a direct link between
annual performance and
reward.

Incentivises the achievement
of key specific goals over the
short term that are also aligned
to the long-term business
strategy.

Deferred bonus supports
retention and provides
additional alignment with
the interests of shareholders.

Long-Term Incentive Plan
(LTIP)
Aligns the interests of executives
and shareholders with sustained
long-term value creation.

Incentivises participants to
manage the business for the
long term and deliver the
Company’s strategy.

Up to 150% of salary.

The payout for threshold
performance may vary year on
year but will not exceed 25%
of the maximum opportunity.

Under the policy, the LTIP provides
for a conditional award of shares up
to an annual limit of 200% of salary.

25% of an award vests for
achievement of the threshold level
of performance.

Performance measures are set by the
Committee at the start of the year
and are weighted to reflect a balance
of financial and strategic objectives.

At the end of the year, the
Remuneration Committee determines
the extent to which these have been
achieved.

To the extent that the performance
criteria have been met, up to 67% of
the resulting annual bonus is paid in
cash. The remaining balance is deferred
into shares and released after a further
period of three years, subject to
continued employment only.

Cash and deferred share bonuses
awarded for performance will be
subject to malus and clawback until
the end of the deferral period. Further
details of our Malus and Clawback Policy
are set out at the end of this table.

Dividends may accrue over the deferral
period on deferred shares that vest.
Any dividends that accrue will be paid in
shares at the end of the vesting period.
The Remuneration Committee has the
authority each year to grant an award
under the LTIP.

The award levels and performance
conditions on which vesting depends
are reviewed prior to the start of each
award cycle to ensure they remain
appropriate. Vested shares are subject
to a post-vesting holding period of
two years.

Awards are subject to malus and/or
clawback for a period of five years from
the date of grant. Further details of our
Malus and Clawback Policy are set out
at the end of this table.

Dividends may accrue on vested shares
during the holding period.

Bonuses for the executive Directors
may be based on a combination of
financial and non-financial measures.
The weighting of non-financial
performance will be capped at 30%
of the maximum opportunity.

The Committee retains discretion
to adjust the bonus outcome if
it considers that the payout is
inconsistent with the Company’s
underlying performance when taking
into account any factors it considers
relevant.

Further details are set out in the
Annual Report on Remuneration
on pages 93 to 105.

The vesting of awards is usually
subject to continued employment
and the Group’s performance over
a three-year performance period.
Subject to shareholder approval,
this will be based on a combination
of TSR, EPS, ROIC* and ESG
measures.

The Committee has discretion to
extend the performance period and
adjust the measures, their weighting,
and performance targets prior to the
start of each cycle, to ensure they
continue to align with the Group’s
strategy.

The Committee also retains
discretion to adjust the vesting
outcome if it considers that the level
of vesting is inconsistent with the
Company’s underlying performance
when taking into account any factors
it considers relevant.

Further details of the measures
attached to the LTIP awarded in the
year under review (and the coming
year) are set out in the Annual Report
on Remuneration on pages 93 to 105.
None.

Sharesave
A voluntary scheme, open to
all UK employees which aligns
the interests of participants with
those of shareholders through
any growth in the value of shares.

An HMRC-approved scheme where
employees may save up to a monthly
savings limit out of their own pay
towards options granted at up to a 20%
discount. Options may not be exercised
for three years.

Up to the savings limit as
determined by HMRC from time to
time, across all Sharesave schemes
in which an individual has enrolled.

Malus and Clawback Policy
Malus and clawback will apply to the annual
bonus and LTIP (as set out on page 88) in cases
of error in determining performance, corporate
failure, misconduct or material misstatement in
the published results of the Group or where, as
a result of an appropriate review of accountability,
a participant has been deemed to have caused
in full or in part a material loss for the Group as
a result of reckless, negligent or wilful actions
or inappropriate values or behaviour, including
(but not limited to) significant breaches of EHS
codes, fraud, or other events which may cause
serious reputational damage. Cash bonuses will
be subject to clawback, with deferred shares
subject to malus over the deferral period. LTIP
awards are subject to malus and clawback over
the vesting period to the fifth anniversary of grant.

Payments under existing awards
The Company will honour any commitment
entered into, and Directors will be eligible to
receive payment from any award granted, prior
to the approval and implementation of the
Remuneration Policy detailed in this Report
(i.e. before 5 May 2022), even if these
commitments and/or awards fall outside the
above Policy. The Company will also honour
any commitment entered into at a time prior
to an individual becoming a Director if, in the
opinion of the Committee, the payment was
not in consideration of the individual becoming
a Director of the Company. Details of these
awards will be disclosed in the Annual Report
on Remuneration.

Difference in policy between executive
Directors and other employees
The Remuneration Policy for other employees
is based on principles broadly consistent with
those described in this Report for the executive
Directors’ remuneration. Annual salary reviews
across the Group take into account individual and
business performance, demonstration of the
defined Leadership Behaviours, experience,
local pay and market conditions, and salary levels
for similar roles in comparable companies. All
executives are eligible to participate in an annual
bonus scheme. Opportunities and performance
measures vary by organisational level,
geographical region and an individual’s role.
Other senior executives participate in the LTIP
on similar terms to the executive Directors,
although award sizes and performance measures
may vary according to each individual, and by
organisational level. Below this level, executives
are eligible to participate in the LTIP and other
share-based incentives by annual invitation.

Use of discretion
To ensure fairness and align executive Director
remuneration with underlying individual and
Group performance, the Committee may
exercise its discretion to adjust, upwards or
downwards, the outcome of any short- or
long-term incentive plan payment (within the
limits of the relevant Plan Rules) for corporate or
exceptional events including, but not limited to:

corporate transactions, changes in the Group’s
accounting policies, minor or administrative
matters, internal promotions, external
recruitment, and terminations. Any adjustments
in light of corporate events will be made on
a neutral basis, meaning that they will not be
to the benefit or detriment of participants.

Any use of discretion by the Committee during
the financial year under review will be detailed
in the relevant Annual Report on Remuneration.

Performance measure selection
The Committee considers carefully the selection
of performance measures at the start of each
performance cycle, taking into consideration the
macro-economic environment as well as specific
Group strategic objectives.

Annual bonus measures are selected to closely
reinforce the Group’s short-term KPIs. Because
these can change from year to year (in line with
the Remuneration Policy), information on the
rationale for the selection of bonus measures
for each year will be detailed in the relevant
year’s Annual Report on Remuneration.

LTIP performance measures are reviewed
periodically to ensure they continue to align
with the Company’s strategy, as well as provide
an appropriate balance between growth and
returns, internal and external performance,
and absolute and relative performance.

For 2022 awards, the TSR element of the LTIP
award will continue to comprise two parts.
One half of the TSR element will vest subject
to the Group’s performance relative to a TSR
benchmark comprising the 87 constituents of the
FTSE All-Share Industrials Index. This benchmark
is robust to merger and acquisition activity and
comprises companies that are subject to the
same market influences as Morgan Advanced
Materials plc. The remaining half of the TSR
element will vest subject to Morgan’s
performance relative to a TSR benchmark
comprising 15 listed international carbon,
ceramics and other materials companies. This
benchmark was selected to complement the
FTSE All-Share Industrials Index with a group of
companies that better reflect Morgan’s business,
the markets in which Morgan operates and the
geographical footprint of the Group. For each
part of the TSR award, the vesting performance
range is calibrated to be stretching and in line
with common market practice for FTSE
TSR-based long-term incentives.

EPS targets are set taking account of multiple
relevant reference points, including internal
forecasts, external expectations for future EPS
performance at both Morgan Advanced Materials
plc and its closest sector peers, and typical
EPS performance ranges at other FTSE 350
companies. LTIP EPS performance ranges are
set to represent demanding and challenging
performance targets over the three-year
performance period.

ROIC* targets are set using a similar approach
to the EPS targets, after consideration of external
reference points and reflecting the returns
required to meet and exceed the Group’s
internal strategic plan. For the 2022 LTIP cycle,
ROIC* will continue to be calculated as follows:

Group headline operating profit *
(pre-specific adjusting items)

12-month average (third-party working capital +
total fixed assets + total intangible fixed assets)

The ESG measure is based on the percentage
reduction in CO2 emissions, with targets aligned
to Morgan’s overall strategic goals.

Share ownership guidelines
In order to encourage alignment with
shareholders, executive Directors are
encouraged to build and maintain an individual
shareholding in the Company equivalent to at
least 200% of base salary. The required level of
shareholding is expected to be achieved within
five years of an executive Director’s appointment.
Executive Directors’ shareholdings are reviewed
annually by the Committee to ensure progress
is being made towards achievement of the
guideline level of shareholding. If it becomes
apparent to the Committee that the guideline
is unlikely to be met within the timeframe, the
Committee will discuss with the Director
a plan to ensure that the guideline is met over
an acceptable timeframe.

From 2019, executive Directors have also been
subject to a post-employment shareholding
requirement. Executive Directors are required
to hold shares at a level equal to the lower of the
share ownership requirement or the actual
shareholding on departure for a period of one
year from departure date. Morgan’s relatively
short business cycle ensures the Board has good
visibility within a 12-month period of the quality
of decision-making and, in addition, unvested
awards for good leavers subsist to the normal
vesting date (albeit pro-rated for time), ensuring
incentive outcomes remain linked to Morgan’s
performance beyond the date of cessation.
The Committee retains the discretion to modify
the post-employment shareholding requirement
in certain, extraordinary circumstances; for
example, on a change of control during the
period or if a conflict of interest arises with an
executive Director’s next appointment.

Current executive Director shareholdings are
set out in the Annual Report on Remuneration
on page 101.

External appointments
With the approval of the Board in each case, and
subject to the overriding requirements of the
Group, executive Directors may accept external
appointments as non-executive Directors of
other companies and retain any fees received.
Details of external directorships held by executive
Directors along with fees retained are provided
in the Annual Report on Remuneration on page 96.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREMUNERATION REPORT

Pay-for-performance: scenario analysis
The graphs below provide detailed illustrations of the potential future reward opportunity for executive Directors, and the potential mix between the
different elements of remuneration under four different performance scenarios; ‘Below threshold’, ‘Target’, ‘Stretch’ and ‘Stretch with 50% share price
appreciation’. These have been updated to illustrate the potential opportunity under the 2022 packages proposed for executive Directors.

Exit Payments Policy
The Group’s policy on exit payments is to limit severance payments on termination to pre-established contractual arrangements comprising base salary and
any other statutory payments only. In the event that the employment of an executive Director is terminated, any compensation payable will be determined
in accordance with the terms of the service contract between the Company and the employee, as well as the rules of any incentive plans.

Pete Raby (CEO)

Stretch with 50%
share price incr.
Stretch

Target

21%

25%

49%

26%
32%

31%

53%

43%

20%

Below Threshold

100%

Peter Turner (outgoing CFO)

£3,396k

£2,800k
£1,459k
£714k

Stretch with 50%
share price incr.
Stretch

45%

Target

62%

Below Threshold

100%

55%
55%

38%

£1,158k

£1,158k
£838k
£519k

500

1,500

2,500

3,500

500

1,000

1,500

2,000

Richard Armitage (incoming CFO)

Stretch with 50%
share price incr.
Stretch

23%

27%

31%
36.5%

46%

36.5%

Target

49%

34%

17%

Below Threshold

100%

£2,064k

£1,745k
£948k
£470k

500

1,500

2,500

The Group may terminate the employment of an executive Director by making a payment in lieu of notice equal to base salary, together with the fair value
of any other benefits to which the executive is contractually entitled under his or her service agreement, for the duration of the notice period.

The Remuneration Committee will exercise discretion in making appropriate payments in the context of outplacement or the settling of legal claims or
potential legal claims by the departing executive Director, including any other amounts reasonably owing to the executive Director, for example, to meet
legal fees incurred by the executive Director in connection with the termination of employment, where the Company wishes to enter into a settlement
agreement and the individual must seek independent legal advice.

On termination of an executive Director’s service contract, the Remuneration Committee will consider the departing Director’s duty to mitigate his or
her loss when determining the timing of any payment in lieu of notice. There is no automatic entitlement to bonus or the vesting of long-term incentives
on termination. However, the table that follows summarises the Policy on how awards under the annual bonus, LTIP and deferred bonus plan will normally
be treated in specific circumstances, with the final treatment remaining subject to Committee discretion:

Treatment of awards on cessation of employment and a change of control

Reason for cessation

Calculation of vesting/payment

Time of vesting

Fixed total (base salary, pension and benefits)

Annual Bonus

LTIP

All reasons

The potential reward opportunities illustrated above are based on the Policy, which will be submitted for approval at the 2022 AGM, applied to the annual
base salary in effect at 1 January 2022. Annualised figures are shown for the incoming and outgoing CFOs; these will be pro-rated based on time served.
For the annual bonus, the amounts illustrated are those potentially receivable in respect of performance for 2022 (before mandatory deferral into shares).
The LTIP is based on the face value of awards to be granted in 2022 (200% of salary for the CEO and 150% for the incoming CFO; Peter Turner will
not receive a 2022 LTIP award as he will be retiring from the Company in June 2022). It should be noted that any awards granted under the LTIP in a year
do not normally vest until the third anniversary of the date of grant. This illustration is intended to provide further information to shareholders on the
relationship between executive pay and performance. The value of the LTIP assumes no change in the underlying value of the shares once an award is
made, apart from in the ‘Stretch with 50% share price appreciation’ scenario. The following assumptions have been made in compiling the above charts:

Scenario

Annual bonus

LTIP

Fixed pay

Stretch with 50% share price
appreciation

Maximum annual bonus.

Stretch

Target

Maximum annual bonus.

On-target annual bonus.

Below threshold

No annual bonus payable.

Performance warrants full vesting
(100% of the award). LTIP award value
has additionally been uplifted by 50%.
Performance warrants full vesting
(100% of the award).
Performance warrants threshold vesting
(25% of the award).
Nil vesting.

Latest disclosed base salary, pension
and benefits.

Details of executive Directors’ service contracts
The executive Directors are employed under contracts of employment with Morgan Advanced Materials plc. Contracts may be terminated on 12 months’
notice given by the Company or on six months’ notice given by the executive Director concerned. The following table shows the date of the contract for
each executive Director who served during the year:

Injury, disability, death, redundancy,
retirement, or other such event
as the Committee determines
Change of control

All other reasons

Injury, disability, death, redundancy,
retirement, or other such event as
the Committee determines

Executive Director

Position

Date of appointment

Date of service agreement

From employer

From employee

Pete Raby
Peter Turner

CEO
CFO

1 August 2015
11 April 2016

30 January 2015
30 March 2016

12 months
12 months

6 months
6 months

1. The incoming CFO, Richard Armitage, will also have a notice period of 12 months from employer and 6 months from employee.

All other reasons

Notice period1

Change of control

Annual bonus
The Committee may determine that a bonus is payable
on cessation of employment, and the Committee retains
discretion to determine that the bonus should be paid
wholly in cash. The amount of bonus payable will be
determined in the context of the time served during the
performance year, the performance of the Group and
of the individual over the relevant period, and the
circumstances of the Director’s loss of office. If Group or
individual performance has been poor, or if the individual’s
employment has been terminated in circumstances
amounting to misconduct, no bonus will be payable.
Mandatory deferred bonus share awards
Awards will normally vest in full (i.e. not pro-rated for time).

Awards will normally vest in full (i.e. not pro-rated for time).
Awards may alternatively be exchanged for equivalent
replacement awards, where appropriate.
Awards normally lapse.
LTIP awards
Awards will normally be pro-rated for time and will vest
based on performance over the original performance period
(unless the Committee decides to measure performance
to the date of cessation).
LTIP awards will be pro-rated for time and will vest subject
to performance over the performance period to the change
of control. LTIP awards may alternatively be exchanged
for equivalent replacement awards, where appropriate.
Awards normally lapse.

At the normal vesting date, unless the Committee
decides that awards should vest earlier (e.g. in the
event of death).
On change of control.

Not applicable.

At the normal vesting date, unless the Committee
decides that awards should vest earlier (e.g. in the
event of death).

On change of control.

Not applicable.

The Remuneration Committee retains discretion, where permitted by the plan rules, to alter these default provisions on a case-by-case basis, following
a review of circumstances and to ensure fairness for both shareholders and participants.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

REMUNERATION REPORT

Approach to recruitment remuneration
External appointment
In cases of hiring or appointing a new executive Director from outside the Group, the Committee may make use of all existing components of
remuneration, as follows:

Pay element

Policy on recruitment

Salary

Pension

Benefits

Sharesave
Annual bonus

LTIP
Other

Based on: the size and nature of the responsibilities of the proposed role; current market pay levels for
comparable roles; the candidate’s experience; implications for total remuneration; internal relativities; and
the candidate’s current salary.
Option to join the defined contribution scheme available to the wider workforce. If the executive Director
is ineligible to join the standard defined contribution scheme, the Company may grant a cash allowance
of equivalent value.
As described in the Policy table and may include, but are not limited to, car, medical insurance, and
relocation expenses and/or allowances.
New appointees will be eligible to participate on identical terms to all other UK employees.
As described in the Policy table and typically pro-rated for the proportion of the year served; performance
measures may include strategic and operational objectives tailored to the individual in the financial year
of joining.
New appointees may be granted awards under the LTIP on similar terms to other executives.
The Remuneration Committee may make an award under a different structure under the relevant Listing
Rule to replace incentive arrangements forfeited on leaving a previous employer. Any such award would
have a fair value no higher than that of the awards forfeited, taking into account relevant factors including
performance conditions, the likelihood of those conditions being met and the proportion of the vesting
period remaining. Details of any such award will be disclosed in the first Annual Report on Remuneration
following its grant.

Maximum

–

In line with Policy limits.

–

Up to HMRC limits.
Up to 150% of salary.

Up to 200% of salary.
–

Internal promotion to the Board
In cases of appointing a new executive Director via internal promotion, the Policy will be consistent with that for external appointees detailed above. Where
an individual has contractual commitments made prior to their promotion to executive Director, the Company will continue to honour these arrangements
even if there are instances where they would not otherwise be consistent with the prevailing executive Director Remuneration Policy at the time of promotion.

Chairman and non-executive Directors’ Remuneration Policy

Purpose and link to strategy
Annual fee 1

To attract and retain
high-calibre non-executive Directors.

Operation

Opportunity

Performance metrics

Annual fees paid to the Chairman and
non-executive Directors are reviewed
periodically. An additional fee is payable to
the Senior Independent Director, and also
in respect of chairing a Board Committee.

Currently paid 100% in cash.

Annual fees are applied in line with the
outcome of each periodic review.

None.

1. The maximum aggregate annual fee for all non-executive Directors (including the Chairman) as provided in the Company’s Articles of Association is £750,000.

None of the non-executive Directors has a service contract with the Company. They do have letters of appointment. The non-executive Directors do not
participate in any of the incentive, share or share option plans. The dates relating to the appointments of the Chairman and non-executive Directors who
served during the reporting period are as follows:

Non-executive Director

Position

Douglas Caster
Helen Bunch
Laurence Mulliez
Jane Aikman
Clement Woon

Chairman
Non-executive Director
Senior Independent Director
Non-executive Director
Non-executive Director

Date of appointment Date of letter of appointment
15 January 20141
19 January 2016
4 April 2016
27 April 2017
7 May 2019

14 February 2014
24 February 2016
6 May 2016
31 July 2017
10 May 2019

Date of re-election

6 May 2021
6 May 2021
6 May 2021
6 May 2021
6 May 2021

CONSIDERATION OF STAKEHOLDER VIEWS
The Executive Management team seeks to promote and maintain good relations with employee representative bodies – including trade unions and works
councils – as part of its broader employee engagement strategy and consults on matters affecting employees and business performance as required in each
case by law and regulation in the jurisdictions in which the Group operates. When making decisions on executive remuneration, the Committee considers
the pay and employment conditions across the Group and is considering additional methods of engaging with the workforce on remuneration matters.
Engagement with employees on remuneration is currently achieved through non-executive Director employee engagement sessions where employees
have the opportunity to raise issues, with pay and benefits having been discussed during the 2021 sessions. Specific remuneration-related questions are also
included in the all employee engagement survey, ‘Your Voice’, with the intent of engaging with employees on pay and benefits and providing them with the
opportunity to share feedback. In the UK, engagement is facilitated by the Sharesave programme, which enables UK employees to become shareholders
and provides them with voting rights in relation to resolutions for approval at the AGM which include executive remuneration matters. Prior to the annual
salary review, the Committee is provided with pay increase data that individual business units consider when deciding local pay awards for their specific
businesses and countries. The Committee is also kept fully informed of remuneration policy and implementation decisions affecting the wider workforce.
This important context forms part of the Committee’s considerations for determining executive Director remuneration. See also the People section
on pages 28 to 31.

The Committee considers shareholder views received during the year and at the AGM each year, as well as guidance from investor representative bodies
more broadly, in shaping its Remuneration Policy. The Committee keeps the Remuneration Policy under regular review, to ensure it continues to reinforce
the Group’s long-term strategy and aligns executive Directors’ interests with those of shareholders. It is the Committee’s policy to consult with major
shareholders prior to any major changes to its executive Remuneration Policy.

2. ANNUAL REPORT ON REMUNERATION
The following section provides details of how the Remuneration Policy was implemented during the year.

SINGLE TOTAL FIGURE OF REMUNERATION FOR EXECUTIVE DIRECTORS
The auditor is required to report on the information in this table.

The table below sets out a single figure for the total remuneration received by each executive Director for the year ended 31 December 2021 and the
prior year. For 2020, the table reflects the position with and without the 30% salary reduction volunteered by the executive Directors from 1 April to
31 December 2020, in response to the pandemic.

1. Salary
2. Pension
3. Benefits
Fixed Pay Subtotal
4. Bonus
5. LTIP
6. Other
Variable Pay Subtotal
Total

Pete Raby

2020
(actual with
reduction)

£439,425
£104,000
£13,711
£557,136
£74,878
£159,224
–
£234,102
£791,238

2021

£581,175
£104,000
£13,644
£698,819
£845,610
£559,816
–
£1,405,426
£2,104,245

Peter Turner

2020
(actual with
reduction)

£323,797
£80,120
£12,168
£416,085
£55,175
£122,664
–
£177,839
£593,924

2020

£417,800
£80,120
£12,168
£510,088
£55,175
£122,664
–
£177,839
£687,927

2020

2021

£567,000
£104,000
£13,711
£684,711
£74,878
£159,224
–

£426,160
£80,120
£12,242
£518,522
£620,063
£419,705
–
£234,102 £1,039,768
£918,813 £1,558,290

The figures have been calculated as follows:

1. Base salary: amount earned for the year. For 2020, figures in the ‘2020 (actual with reduction)’ columns reflect actual salary earned.

2. Pension: the figure is a cash allowance in lieu of pension.

3. Benefits: the taxable value of benefits received in the year. Includes private medical insurance and a company car (or car allowance). 2021 private medical insurance has been trued up from the

number included in last year’s annual report, based on October policy renewal.

4. Bonus: the total bonus earned on performance during the year (before any mandatory deferral into shares).

5. LTIP: the estimated value on 31 December 2021 of 2019 LTIP shares vesting in 2022, subject to performance over the three-year period ended 31 December 2021. Figure based on the average
share price for the three months to 31 December 2021 of 351.94p. The figure for 2020 has been trued up from that disclosed in last year’s Remuneration Report to reflect the share price on the
vesting date (22 March 2021) of 312.16p. The impact of share price movement on the vesting value of the CEO’s and CFO’s 2019 LTIP award is as follows:

1. Douglas Caster received a subsequent letter of appointment on 18 December 2018.

Value of awards vesting using share price at award (268.12p)

Value of awards vesting using 3 month average share price at 31 December 2021 (351.94p)

Impact of share price movements on vesting values

CEO

CFO

£426,487
(304,900 shares x
52.17% x 268.12p)
£559,816
(304,900 shares x
52.17% x 351.94p)
£133,329

£319,746
(228,591 shares x
52.17% x 268.12p)
£419,705
(228,591 shares x
52.17% x 351.94p)
£99,959

6. Other: comprises the value of Sharesave options granted in the year, based on the embedded value at grant (20% of the grant-date share price multiplied by the number of options granted).

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREMUNERATION REPORT

INCENTIVE OUTCOMES FOR THE YEAR ENDED 31 DECEMBER 2021
Annual bonus in respect of 2021 performance
Targets for the annual bonus are set by the Remuneration Committee, taking into account the short- and long-term requirements of the Group.
Challenging goals are set, which must be met before any bonus is paid. This approach is intended to align executive reward with shareholder returns
by rewarding the achievement of ‘stretch’ targets.

For 2021, the bonus targets for the executive Directors were split between Group headline operating profit* before restructuring (weighted 40%),
cash generation* (weighted 40%) and individual strategic personal objectives (weighted 20%). The targets were set to incentivise the executive Directors
to deliver stretching profit and cash performance for the Group. Performance in line with target results in a payout of 50% of maximum.

In addition to the achievement of the targets set, in considering any awards to be made, the Committee also takes into account the quality of the overall
performance of the Group.

The table that follows sets out retrospectively the assessment of performance relative to the 2021 bonus targets for the executive Directors. Actual bonus
payments are shown in the single total figure of remuneration table on page 93.

Performance measure
Group headline operating profit*1
Cash generation*1
Personal objectives
Pete Raby
Peter Turner

Overall outcome

Pete Raby
Peter Turner

Performance range

% of maximum
bonus element

Threshold
(0% payout)

Maximum
(100% payout)

40%
40%

£96.6m
£121.4m

£118.0m
£148.4m

Actual
performance
outcome

£132.4m
£164.4m

20% Please see narrative below for further details
on objectives and performance against these
20%

% payout of
element

% salary
earned

100%
100%

85%
85%

60%
60%

25.5%
25.5%

% of salary earned

Maximum bonus
(% salary)

Group headline
operating profit1

Cash
generation*1

Personal
objectives

Total
outcome

Total
payable

150%
150%

60%
60%

25.5%
25.5%

145.5% £845,610
145.5% £620,063

1. For the cash generation and profit metrics there was a straight-line payout between the threshold and maximum figures. All figures were calculated using 2021 budgeted exchange rates.

Pete Raby’s personal objectives for 2021 were: (1) Continue to develop and embed the safety culture of the business (actively engaging our employees) and
reinforce the importance of the environmental responsibility of the business, (2) Develop an ESG strategy and programme, with accompanying goals, that
drives improvements across the key ESG dimensions: Environment, Social (health and safety, diversity and inclusion, values and culture), and Governance,
and deliver improvements on key goals by the end of the year, (3) Understand our baseline and develop and start the execution of plans to create a diverse
and inclusive workforce where people are excited, engaged, and can do their best work to high ethical standards, (4) Develop the 2030 ambition for the
Group and develop the Group-wide execution priorities to deliver on it, (5) Develop plans to enhance the customer focus of the Group, improving the
customer experience and increasing innovation to meet customers’ needs, (6) Refresh our investor proposition and communications (including the ESG
strategy) and deliver to investors through the year and through a specific capital markets event.

Performance of our leaders is assessed against all expectations of the role, specific personal objectives that are set and how outcomes are delivered with
reference to our defined Leadership Behaviours. Taking into account all of these considerations, the personal performance element has been assessed at
85% of the maximum to reflect Pete’s delivery against the agreed strategic objectives, whilst role-modelling the Leadership Behaviours. Despite ongoing
challenges with trading conditions, under Pete’s leadership Morgan delivered organic revenue growth, driving expansion in profitability and cash flow.
COVID-19 controls were effectively maintained across the business, and a major refresh of Morgan’s approach to safety was undertaken with training in the
process of being deployed to all employees. Good progress was also made towards sustainability goals, with absolute CO2 emissions reducing throughout
the year, as well as the launch of a number of capital projects to recycle water and improve water efficiency. The Company is making enhancements
to improve diversity, through changes to policies and training, and by reviewing approaches to recruitment. The first employee resource group,
Women@Morgan, has also been established. Finally, work was completed to define Morgan’s 2030 ambition and medium-term execution priorities
and actions have been kicked off against each of those, including work to shape Morgan’s product and service offerings further based on customer needs,
with the overall objective of making the business more customer centric.

Peter Turner’s personal objectives for 2021 were: (1) Continue to develop and embed the safety culture of the business (actively engaging our employees)
and reinforce the importance of the environmental responsibility of the business, (2) Understand our baseline and develop and start the execution of plans
to create a diverse and inclusive workforce where people are excited, engaged, and can do their best work to high ethical standards, (3) Develop and
execute plans to further strengthen the control environment and prepare for UK ‘Sox’ legislation, (4) Develop the 2030 ambition for the Group and
develop the Group-wide execution commitments for the first three years (2021-23) to deliver on it, (5) Improve the operational efficiency of the Group
through further structural cost reductions and enhancement of CI activity. Considering Peter’s performance against these objectives, for example he has
driven operational efficiency programmes, delivering savings and improving robustness as a Group, as well as the Leadership Behaviours he has exhibited,
the personal performance element of his bonus has been assessed at 85% of the maximum.

Performance against the objectives above is referred to in the Chairman’s statement and elsewhere within the Annual Report.

2018 Deferred Bonus Plan vesting
In 2018, 33% of the annual bonus results for Pete Raby and Peter Turner (for performance in the 2017 financial year) were deferred into shares under the
Deferred Bonus Plan (DBP), in line with Morgan’s Remuneration Policy. Dividends accrued over the deferral period on the deferred shares that vested,
and the dividends were paid in shares at the end of the vesting period. Details of the DBP vesting for the executive Directors are set out in the table below:

Director

Pete Raby
Peter Turner

Date of grant

21 March 2018
21 March 2018

Number of DBP
shares granted

Number of
dividend
re-investment shares

Total number
of DBP shares vested

Market value
at grant
£

Market value
at vesting
£

Date of vesting

52,955
42,011

4,640
3,680

57,595
45,691

3.3336
3.3336

3.122 22 March 2021
3.122 22 March 2021

2019 LTIP award vesting
Awards granted to executive Directors in 2019 were subject to relative TSR performance, EPS growth and Group ROIC* over a three-year period ended
31 December 2021. The EPS target (applying to one-third of each award) required three-year EPS growth of 4% for 25% of that element to vest, rising
to full vesting for EPS growth of 11% or higher. Over the period Morgan Advanced Materials plc’s actual EPS growth was 0.81% and accordingly the EPS
element of the award will not vest.

The TSR element (applying to one-third of each award) required Morgan Advanced Materials plc’s three-year TSR performance to rank at median against
two comparator groups (equally split) – the FTSE All-Share Industrials Index and a tailored comparator group comprising 15 listed international carbon,
ceramics and other materials companies – for 25% of that element to vest, rising to full vesting if Morgan Advanced Materials plc’s TSR ranked at or above
the upper quartile against these two comparators.

Morgan Advanced Materials plc’s TSR was 37.1%, which was at the 55th percentile versus the FTSE All-Share Industrials Index and the 87th percentile
versus the tailored comparator group. Accordingly, this results in a 22.98% vesting for the TSR element of the award.

The Group ROIC* target (applying to the remaining one-third of each award) required three-year Group ROIC* of 17% for 25% of that element to vest,
rising to full vesting for Group ROIC* of 20% or higher. Morgan Advanced Materials plc’s Group ROIC* was 19.5%, and accordingly this results in a 29.19%
vesting for the ROIC* element of the award.

This combined performance resulted in a partial vesting of the 2019 awards based on 52.17% achievement of maximum. The vesting outcome is
considered by the Committee to appropriately reflect the impact of the COVID-19 pandemic on business results.

Details of the awards to executive Directors are set out in the table below:

Director

Pete Raby
Peter Turner

Maximum potential
LTIP award

Maximum potential
LTIP-CSOP1 award

LTIP award vested

LTIP-CSOP1
award vested

LTIP-CSOP1
award exercised

293,711
228,591

11,189
–

153,229
119,255

5,837
–

–
–

Date of vesting

18 March 2022
18 March 2022

1. CSOP refers to the Company Share Option Plan – further information is included in the ‘Details of plans’ section later on in this report.

For the purposes of the 2019 LTIP award (and consistent with the approach taken in previous years), the financial results were adjusted to neutralise the
effects of closed businesses in 2020 and acquisitions in 2021.

PENSION
The auditor is required to report on this information.

Pete Raby and Peter Turner each received a cash allowance in lieu of pension, fixed at the 2018 values of £104,000 and £80,120 respectively.

NON-EXECUTIVE DIRECTOR FEES
The auditor is required to report on the information in this table.

The table below sets out the fees received by each non-executive Director in respect of the year ended 31 December 2021 and the prior year. The 2020
figures reflect the 30% fee reduction volunteered (in response to the pandemic) from 1 April to 31 December, mentioned earlier in this document, with the
pre-reduction fee levels shown in brackets.

Douglas Caster

Helen Bunch

Laurence Mulliez

Jane Aikman

Clement Woon

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

£197,166

£149,808
(£193,300)

£59,918

£47,448
(£58,900)

£59,918

£47,448
(£58,900)

£59,918

£47,448
(£58,900)

£51,918

£39,448
(£50,900)

Non-executive Directors do not receive any other fixed or variable pay, or benefits, in addition to their fee. Figures shown are inclusive of £8,000 Senior
Independent Director fee for Laurence Mulliez and Committee Chair fees for Helen Bunch and Jane Aikman.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREMUNERATION REPORT

SCHEME INTERESTS AWARDED IN 2021
2021 LTIP awards
In 2021, Pete Raby and Peter Turner were granted awards under the LTIP as shown in the table below. Vesting outcomes will continue to be assessed
to ensure they reflect business performance and will be adjusted as appropriate.

Implementation of Remuneration Policy for 2022
Base salary
In line with the Remuneration Policy, executive Directors’ salaries were reviewed by the Committee and the CEO’s salary was increased for 2022
consistent with the average range of increases awarded to the wider workforce. The table below shows the base salaries in 2021, and those that took
effect from 1 January 2022, or on appointment for the incoming CFO Richard Armitage:

Executive Director

Pete Raby
Peter Turner

Number of
LTIP shares
granted1

276,486
202,740

Value of awards at grant

As % of
2021 annualised
salary

150%
150%

871,762
639,240

Date of vesting

22 March 2024
22 March 2024

1. Calculated using the award price of £3.153, being the average share price for the five dealing days prior to the award date (22 March 2021).

The Committee discusses and reviews the performance criteria for new three-year LTIP awards before they are granted. For the awards granted in 2021,
the Committee considered the balance of measures in light of the Group’s business plan and shareholder feedback and decided to maintain the equal
(one-third) weighting of the three performance criteria with the TSR element continuing to be split into two parts. One-half of this element will vest based
on Morgan’s TSR performance relative to the constituents of the FTSE All-Share Industrials Index and one-half will vest based on Morgan’s TSR
performance relative to a tailored comparator group of 15 industry comparators.

The table below sets out the targets attaching to the 2021 LTIP awards:

TSR vs FTSE All-Share
Industrials Index

% of award
that vests

TSR performance
vs peer group

% of award
that vests

EPS growth

% of award

that vests Group ROIC*

Upper quartile
Median
Below median

16.67% Upper quartile

4.17% Median

16.67% 22% pa
4.17% 15% pa

Nil Below median

Nil < 15% pa

33.33% 20%
8.33% 17%

Nil <17%

% of award
that vests

33.33%
8.33%
Nil

For executive Directors, there is a two-year holding period in relation to the 2021 LTIP. Dividends accrue over this holding period on any shares that vest.

2021 Deferred Bonus Plan awards
In 2021, 33% of the annual bonus results for Pete Raby and Peter Turner (for performance in the 2020 financial year) were deferred into shares under
the Deferred Bonus Plan (DBP), in line with Morgan’s Remuneration Policy. The following DBP awards were granted:

Executive Director

Pete Raby
Peter Turner

Value of awards at grant

Number of DBP
shares granted 1

Value of award
£

7,916
5,833

24,959
18,391

Date of vesting

22 March 2024
22 March 2024

1. Calculated using the award price of £3.153, being the average share price for the five dealing days prior to the award date (22 March 2021).

Exit payments made in year
The auditor is required to report on this information.

No exit payments were made to executive Directors during the 2021 financial year.

Payments to past Directors
The auditor is required to report on this information.

No payments were made to past Directors during the 2021 financial year.

External appointments
Pete Raby was appointed non-executive Director of Hill & Smith Holdings PLC in December 2019. His fee for this position in 2021 was £52,275, which he
retains. No other external appointments were held by either executive Director in the 2021 financial year.

Executive Director

Pete Raby
Peter Turner
Richard Armitage

1 January or on
appointment in 2022

£596,000
£426,160
£425,000

Base salary at:

1 January 2021

£581,175
£426,160
n/a

Increase

2.5%
0%
n/a

For the 2021 performance year, the Group maintained the formal link between performance and pay within the senior leadership population. Specifically,
the process considers individual and Group performance, as well as salary relative to the relevant market.

The increase awarded to Pete Raby was calibrated in line with this. The Committee considered Pete Raby’s continued strong performance in his role
as well as the market positioning of his salary, in determining to increase his salary in line with the average range of increases for UK based employees.
Peter Turner’s salary has not been increased for 2022 as he will retire in June 2022. The rationale for any future increases will be disclosed in the relevant
Annual Report on Remuneration.

Pension
While Pete Raby and Peter Turner will continue to receive a cash allowance in lieu of pension in 2022, the monetary value remains fixed at the 2018 level
disclosed in the table on page 93. From 31 December 2022 all executive Director pension allowances will be fully aligned to pension contribution
levels available to the wider workforce (8% based on UK population). The incoming CFO, Richard Armitage, will receive an 8% pension contribution
on appointment.

Annual bonus in respect of 2022 performance
The maximum bonus opportunity remains at 150% of salary (with the payout for on-target performance continuing to be 50% of the maximum).

33% of any bonus result will ordinarily be deferred into shares for a further three-year period. The performance measures attached to the annual bonus
remain unchanged from 2021, as follows:

Headline operating profit* – 40%

Cash generation* – 40% (measured against quarterly cumulative targets as well as over the complete financial year. For every quarterly target that
is missed, the payout warranted for full-year performance under this element will be reduced by 10%)

Strategic personal objectives – 20%

The actual performance targets set at the beginning of the performance period are not disclosed as they are considered commercially sensitive at this time,
given the close link between performance measures and the Group’s longer-term strategy. This is particularly relevant in the context of some of the Group’s
close and unlisted competitors who are not required to disclose such information, and for whom the assumptions in our targets would provide valuable
information in the current trading year. These targets will be disclosed retrospectively, at such time as they have become less commercially sensitive, and
within three years of the end of the performance year.

2022 LTIP awards
In May 2022, Pete Raby will be granted an award under the 2022 LTIP with a face value of 200% of his base salary for 2022. The incoming CFO,
Richard Armitage, will also be granted a 2022 LTIP award of 150% of base salary once appointed. Vesting outcomes will continue to be assessed to ensure
they reflect business performance and will be adjusted as appropriate. The three-year performance period over which performance will be measured
began on 1 January 2022 and will end on 31 December 2024. Further details of the awards will be disclosed in next year’s Remuneration Report.

The performance measures are detailed below:
´ Each TSR element will operate independently, with vesting determined based on Morgan’s TSR rank relative to constituents of each TSR benchmark.

The performance range for each element will remain median to upper quartile.

The EPS performance range will be decreased to 6% – 13%, last year’s range having been temporarily increased to take into account the previously
reduced base level resulting from the impact of the pandemic on financials. The ROIC* range will remain unchanged at 17%-20%. The Committee
believes these ranges appropriately support the Group’s strategy for sustainable long-term growth over the next three years whilst continuing to
represent suitably demanding targets;

´ The new ESG measure (carbon reduction) will have a performance range of 5% to 15% carbon reduction (scope 1 and 2 emissions) over the three-year

performance period, to support the Group’s overall sustainability goals and its stated 2030 target to reduce scope 1 and 2 CO2 emissions by 50%;
´ For all four measures, awards will continue to vest on a straight-line basis between threshold and maximum, with 25% of each element vesting at

threshold;

´ For the 2022 LTIP cycle, executive Directors will be required to hold any vested 2022 LTIP awards for an additional two-year period. Vested awards
that are subject to the holding period will remain subject to clawback in line with our Policy but will not be forfeitable on cessation of employment.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

REMUNERATION REPORT

Chairman and non-executive Director fees
The Chairman’s and non-executive Directors’ fees were reviewed in December 2021. The table below shows the fees in 2021, and those that will apply in 2022:

Role

Chairman
Non-executive Director
Committee Chair (additional fee)
Senior Independent Director (additional fee)

2022 fee pa

2021 fee pa

Increase

£202,100
£53,220
£8,000
£8,000

£197,166
£51,918
£8,000
£8,000

2.5%
2.5%
n/a
n/a

Percentage change in Directors’ remuneration
The table below shows the percentage change in the executive and non-executive Directors’ remuneration in 2021 compared to the average percentage
change in remuneration for other employees of Morgan Advanced Materials plc over the same period, in accordance with the guidelines.

Executive Directors
Pete Raby
Peter Turner
Non-executive Directors4
Douglas Caster
Helen Bunch
Laurence Mulliez
Jane Aikman
Clement Woon
Average per employee

2021 % change
in salary or fees1

2020 % change
in salary or fees2

2021 % change
in benefits3
(excluding pension)

2020 % change
in benefits3
(excluding pension)

2021 % change
in annual bonus6

2020 % change
in annual bonus

32.3% (2.5%)
31.6% (2.0%)

31.6% (2.0%)
26.3% (1.7%)
26.3% (1.7%)
26.3% (1.7%)
31.6% (2.0%)
3.6% (2.6%)

-19.4%
-20.8%

-20.9%
-18.1%
-18.1%
-18.1%
-20.9%
3.0%

-0.5%
0.6%

n/a
n/a
n/a
n/a
n/a
0.9%

1.9%
1.1%

1029.3%
1023.8%

n/a
n/a
n/a
n/a
n/a
-5.81%5

n/a
n/a
n/a
n/a
n/a
53.6%

-89.1%
-89.3%

n/a
n/a
n/a
n/a
n/a
-2.11%

1. Figures in brackets reflect percentage increase from original 2020 salary/fee prior to reductions implemented in response to the pandemic.

2. Percentages reflect the temporary Board salary/fee reductions implemented in response to the pandemic. All figures are based on full-time equivalent comparisons.

Of the three reporting options available to companies, Morgan has applied Option B, where the most recent gender pay gap reporting data has been used
to identify the 25th, 50th and 75th percentile employees. The 25th, 50th and 75th percentile pay ratios are based on the remuneration of a representative
employee who falls on each of these pay percentiles. Option B has been used to calculate the CEO pay ratios, as Option A requires the ability to calculate
a single total remuneration figure for each UK employee, and Morgan does not currently have the systems in place to support this methodology. The ‘best
equivalent’ employees identified using the gender pay gap information are representative of the 25th, 50th and 75th percentiles of Company remuneration,
since base pay constitutes a large proportion of the remuneration package for the majority of employees, so it is likely that a similar set of employees would
have been identified using Option A. The calculation covers base pay, annual bonus, pension and where applicable share awards and benefits including car
allowance and private medical insurance. Total remuneration figures used in the calculation for 25th, 50th and 75th percentile employees include annual
bonus relating to 2021 performance, in order to be consistent with the methodology used for the CEO’s total remuneration figure.

As disclosed in the 2020 remuneration report, 2020 CEO pay ratios were significantly lower than those in 2019 as a consequence of the CEO’s temporary
salary reduction, cancellation of the CEO’s personal performance bonus element in response to the COVID-19 pandemic, and also due to the pandemic’s
impact on business results (and therefore on levels of variable pay). As a result of the CEO’s salary and personal performance element of bonus being
reinstated for 2021, and based on significantly improved business (and therefore variable pay) results, (with the CEO having a higher proportion of variable
pay compared to the wider workforce) the 2021 CEO pay ratios are higher than in 2020.

Notwithstanding the year-on-year change in pay ratio, pay and benefits for the CEO and wider employee population are based on the same philosophies,
for example driving pay for performance and alignment to external benchmarks, in order to promote consistency, fairness and equity across all levels in the
organisation. As the same methodology underpins the remuneration used in the above calculations, the resulting median pay ratio is consistent with the
Company’s wider policies on employee pay, reward and progression. Pay ratios are significantly reduced when variable pay elements are excluded,
so the gap between CEO and employee pay is largely attributable to non-fixed pay elements, some of which (e.g. share awards) the majority of the wider
workforce would not typically be eligible for in the external market. The diversity of different levels and types of roles found in a manufacturing environment
such as at Morgan may result in a higher CEO pay ratio than companies which have predominantly professional and/or more senior staff. It is therefore
important to compare Morgan’s data to companies in similar industries.

Termination arrangements for outgoing CFO
As announced in 2021, Peter Turner will leave the Board in June 2022. As Peter Turner is retiring, he will not receive any severance payment when he
leaves the Company, however he will be treated as a ‘good leaver’ for variable pay purposes. Salary, bonus and outstanding incentive awards will be treated
in accordance with the shareholder-approved Remuneration Policy.

Full disclosure of all payments made upon cessation will be included in the 2022 Annual Report on Remuneration.

3. Benefits figures include private medical insurance and car allowance. Decrease in Pete Raby’s benefits reflects reduction in private medical premium resulting from the Company’s transition

Remuneration element

Summary of treatment

to a new provider.

4. Non-executive Directors do not receive any additional benefits or bonus payments.

5. Decrease reflects change in type of medical cover required by individual employees.

6. Executive Director bonus reflects 2021 bonus paid in 2022. Employee average bonus based on an estimate of 2021 bonus paid in 2022 (final bonus award data was not available at the time of

publication). The personal performance element of 2020 bonus was cancelled for executive Directors (as a result of the pandemic), contributing to the higher percentage increase in 2021 bonus
for executive Directors compared to other employees.

CEO pay ratio

Year

2021
2021 (excluding variable)
2020
2020 (excluding variable)
2019
2019 (excluding variable)

Method

Option B
Option B
Option B
Option B
Option B
Option B

25th percentile
pay ratio
93:11
32:1
35:14
25:1
74:17
34:1

Median (50th percentile)
pay ratio
61:12
24:1
25:15
20:1
62:18
27:1

75th percentile
pay ratio
50:13
17:1
20:16
14:1
41:19
19:1

1. Total 25th percentile employee pay and benefits as at 31/12/21 = £22,533 (salary component = £17,379).

2. Total 50th percentile employee pay and benefits as at 31/12/21 = £34,725 (salary component = £29,129).

3. Total 75th percentile employee pay and benefits as at 31/12/21= £42,442 (salary component = £37,989).

4. Ratio trued up from that disclosed in last year’s Remuneration Report to reflect final value of LTIP vesting for CEO. Total 25th percentile employee pay and benefits as at 31/12/20 = £22,464

(salary component = £21,000).

5. Ratio trued up from that disclosed in last year’s Remuneration Report to reflect final value of LTIP vesting for CEO. Total 50th percentile employee pay and benefits as at 31/12/20 = £31,550

(salary component = £23,960).

6. Ratio trued up from that disclosed in last year’s Remuneration Report to reflect final value of LTIP vesting for CEO. Total 75th percentile employee pay and benefits as at 31/12/20 = £38,723

(salary component = £36,900).

7. Total 25th percentile employee pay and benefits as at 31/12/19 = £21,958 (salary component = £17,599).

8. Total 50th percentile employee pay and benefits as at 31/12/19 = £25,927 (salary component = £24,300).

9. Total 75th percentile employee pay and benefits as at 31/12/19 = £39,926 (salary component = £30,610).

In line with the CEO pay ratio regulations, the table above shows for 2021 the ratio of the CEO’s single total figure of remuneration (STFR) to that of
UK employees at the 25th, 50th (median) and 75th percentiles. In addition to the mandatory calculation using total remuneration, ratios have also been
calculated excluding variable pay elements such as bonus and share awards.

Annual bonus

2021 bonus – 67% paid in cash and the balance deferred into shares and released after a further period of three years, subject
to Group and personal performance.

LTIP

DBP

2022 bonus – paid wholly in cash at normal payment date, pro-rated for time, and subject to Group and personal performance.
Awards will be pro-rated for time and will vest based on performance over the original performance period, vesting
on the normal vesting date. No LTIP award will be granted in 2022.
Awards will vest in full at the normal vesting date.

Executive Directors are required to maintain a shareholding equal to the lower of the share ownership requirement (200%) or the actual shareholding
on departure for a period of one year from departure. Peter Turner will be required to maintain a 200% shareholding for the defined period.

Remuneration arrangements for incoming CFO
Richard Armitage will join Morgan Advanced Materials as Chief Financial Officer on 30 May 2022 and will be an executive Director. A summary of his
remuneration is set out below:

Remuneration element

Details

Notes

Base salary
Pension

Benefits

Annual bonus
LTIP
RSU (buyout award)

£425,000
Contribution of 8% of base salary

Car allowance £11,100
Private medical healthcare plan– value of premium to be
calculated on joining and will be disclosed in 2022 Annual Report
150% of base salary
150% of base salary
£410,000 (1 year vesting period)

Aligned to pension contribution levels of the wider UK
workforce

One-time award to be granted in 2022 to offset forfeited
bonus from prior employer

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsREMUNERATION REPORT

Relative importance of spend on pay
The graphs below show shareholder distributions (i.e. dividends and share buybacks) and total employee pay expenditure for the financial years ended
31 December 2020 and 31 December 2021.

DIRECTORS’ INTERESTS IN SHARES
Shares owned outright
The auditor is required to report on the information in this table.

SHAREHOLDER DISTRIBUTIONS
(£M)

TOTAL EMPLOYEE PAY EXPENDITURE
(£M)

The following table shows the number of shares held by each person who was a Director of Morgan Advanced Materials plc as at 31 December 2021
(together with shares held by their connected persons) in the Ordinary share capital of the Company:

2021

2020

19.1

2021

5.7

2020

333.6

334.6

Following the reduction in shareholder distributions in 2020 in response to the COVID-19 pandemic, the Company resumed dividend payments
during 2021, at lower levels than those paid historically, pre-pandemic. Total employee pay across the Group has decreased by 0.3% to £333.6 million
(2020: £334.6 million), continuing to be impacted by measures taken as a result of the pandemic.

Comparison of Company performance
The graph below shows the value, at 31 December 2021, of £100 invested in Morgan Advanced Materials plc’s shares on 31 December 2011 compared
with the current value of the same amount invested in the FTSE 350 Index. The FTSE 350 Index – of which the Company is a constituent – has been
chosen because it is widely followed by the UK’s investment community and easily tracked over time.

Executive Directors
Pete Raby
Peter Turner
Non-executive Directors
Douglas Caster
Laurence Mulliez
Helen Bunch
Jane Aikman
Clement Woon

As at
1 January
2021 or date
of joining

As at
31 December
2021

As at
3 March
2022

258,945
263,914

318,637
308,815

110,454
6,765
2,028
1,000
45,281

110,454
6,919
2,028
1,000
55,000

250

200

150

100

0
2011

£207
£189

FTSE 350 Index
Morgan Advanced Materials plc

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

As at 3 March 2022, the Directors’ interests in shares had not changed since the end of the period under review.

EXECUTIVE DIRECTORS’ SHAREHOLDING GUIDELINES
The table below shows the shareholding of each executive Director against their respective shareholding guideline as at 31 December 2021.

Shareholding
guideline
(% 2021
salary)

Shares
owned
outright

Shares
subject to
performance1

Performance-
tested but
unvested
shares2

Shares subject
to DBP
deferral3

Options
vested but
unexercised4

Options
granted but
subject to
continued
employment4

Pete Raby
Peter Turner

200%
200%

318,637
308,815

638,863
469,761

159,066
119,255

100,546
76,043

–
–

4,477
4,477

Current
shareholding
(% of 2021
salary)5

262%
328%

Guideline
met

Yes
Yes

The table below details the CEO’s ‘single figure’ of remuneration over the 10-year period to 31 December 2021.

1. 2020 and 2021 LTIP and LTIP-CSOP awards. The total shares for Peter Turner include a funding award of 12,782 shares to be used to the extent required to pay the exercise price arising on exercise

CEO

CEO single figure
Annual bonus
(% of maximum)
BDSMP vesting
(% of maximum)
LTIP vesting
(% of maximum)

2012
M Robertshaw

2013
M Robertshaw

2014
M Robertshaw

2015
P Raby

2016
P Raby

2017
P Raby

2018
P Raby

2019
P Raby

2020
P Raby

2021
P Raby

£1,285,556

£648,932

£1,001,448 £788,252

£787,492 £1,210,856 £1,479,738 £1,618,605

£791,238 £2,104,245

100%

50%

65%

50%

29.5%1

71.3%

67.4%

84.3%

n/a

97%

n/a

15.4%

42.9%

61.3%

21.8%

52.17%

of the CSOP, and which are therefore not transferrable to Peter Turner.

2. The expected number of shares due to vest under the 2019 LTIP.

3. Estimated number of shares, net of tax (47%), deferred under the DBP.

4. Options granted under the Sharesave scheme.

5. Based on an executive Director’s 2021 salary (prior to temporary reduction) and the share price at 31 December 2021 of 359 pence, comprising shares owned outright and shares subject to deferral.

Unless otherwise stated, figures given in the tables on pages 101 to 102 are for shares or interests in shares.

1. Figure represents percentage achievement of maximum opportunity. Bonus maximum as a percentage of salary increased to 150% of base salary in 2016 compared to 100% in previous years.

100

101

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

REMUNERATION REPORT

PETE RABY
The auditor is required to report on the information in this table.

LTIP

Status at 31 December 2021

Plan

As at
1 January
2021

Allocations
during
the year

Vested
during
the year

Lapsed
during
the year

As at
31 December
2021

Market price
at date of
allocation

Market price
at date
of vesting

Performance period

No further performance
conditions, vested (subject
to 2-year post-vesting
holding)

No further performance
conditions, not yet vested

Subject to performance
conditions

Share options

2018
2019
2019 funding
2020
2021

233,981
293,711
11,189
362,377
–

–
–
–
–
276,486

51,007
–
–
–
–

182,974
–
–
–
–

–
293,711
11,189
362,377
276,486

333.36p
268.12p
268.12p
234.70p
315.3p

01.01.18 – 31.12.20
312.16p
01.01.19 – 31.12.21
–
01.01.19 – 31.12.21
–
– 01.01.20 – 31.12.22
– 01.01.21 – 31.12.23

Share options

Plan

LTIP – CSOP

Status at 31 December 2021

Plan

No further performance
conditions, not yet vested

2019
LTIP-CSOP

Total interests in share plans

As at
1 January
2021

Allocations
during
the year

Vested
during
the year

Lapsed
during
the year

As at
31 December
2021

Market price
at date of
allocation

Market price
at date
of vesting

Performance period

11,189

–

11,189

268.12p

–

01.01.19 – 31.12.21

As at 1 January 2021

As at 31 December 2021

1,151,6751,2,3,5

1,137,9521,3,4,5

1. Includes a funding award of 11,189 shares to be used to the extent required to pay the exercise price arising on exercise of the CSOP, and therefore not transferable to Pete Raby.

2. Includes 2018 deferred bonus award.

3. Includes 2019 and 2020 deferred bonus awards.

4. Includes 2021 deferred bonus award.

5. Includes 2019 Sharesave grant.

PETER TURNER
The auditor is required to report on the information in this table.

LTIP

Status at 31 December 2021

Plan

As at
1 January
2021

Allocations
during
the year

Vested
during
the year

Lapsed
during
the year

As at
31 December
2021

Market price
at date of
allocation

Market price
at date
of vesting

Performance period

No further performance
conditions, vested (subject
to 2-year post-vesting
holding)
No further performance
conditions, not yet vested

Subject to performance
conditions

Share options

2018

180,255

–

39,295

140,960

–

333.36p

312.16p

01.01.18 – 31.12.20

2019
2020
2020 funding
2021

228,591
254,239
12,782
–

–
–
–
202,740

–
–
–
–

228,591
254,239
12,782
202,740

268.12p
234.70p
234.70p
315.3p

01.01.19 – 31.12.21
–
– 01.01.20 – 31.12.22
– 01.01.20 – 31.12.22
– 01.01.21 – 31.12.23

Status at 31 December 2021

Plan

Subject to performance
conditions

2020
LTIP-CSOP

Total interests in share plans

As at
1 January
2021

Allocations
during
the year

Released
during
the year

Lapsed
during
the year

As at
31 December
2021

Market price
at date of
allocation

Market price
at date
of release

Performance period

12,782

–

12,782

234.70p

– 01.01.20 – 31.12.22

As at 1 January 2021

As at 31 December 2021

872,7841,2,4,5

846,3092.3,4,5

1. Includes 2018 deferred bonus award.

2. Includes 2019 and 2020 deferred bonus awards.

3. Includes 2021 deferred bonus award.

4. Includes a funding award of 12,782 shares to be used to the extent required to pay the exercise price arising on exercise of the CSOP, and therefore not transferable to Peter Turner.

5. Includes 2019 Sharesave grant.

102

Details of plans

LTIP
Plan

Details

2019, 2020, 2021

The performance conditions attached to the 2019 awards are set out on page 95.

The performance conditions attached to the 2020 awards are on the same basis as the 2019 awards.

The performance conditions attached to the 2021 awards are on the same basis as the 2019 and 2020 awards except that
the EPS range was amended to 15%-22%.

Details

LTIP 2019: The award to the CFO was structured as LTIP awards in the form of a conditional award of free shares. The CEO’s
award was structured as an Approved Performance Share Plan (APSP) and comprised three elements: (i) HMRC-approved
options (CSOP) over shares to the value of up to £30,000 with an exercise price of 268.12 pence per share; (ii) an LTIP award
in the form of a conditional award of free shares to the value of the remainder of the award above this limit; and (iii) a funding
award, also in the form of a conditional award of free shares, over such numbers of shares whose value at exercise at the
approved option equals up to £30,000. The award is also subject to malus and clawback provisions.

The provisions of these CSOP options, funding awards and LTIP awards were linked, so that the maximum aggregate number
of shares that could be acquired on exercise of LTIP and CSOP awards (the funding award being used to pay the exercise price
arising on exercise of the CSOP) was limited to that number of shares that had a market value on the date of the awards equal
to 150% of Pete Raby’s 2019 annual salary. Vested funding awards were not transferable to the participant.

LTIP 2020: The award to the CEO was structured as LTIP awards in the form of a conditional award of free shares. The CFO’s
award was structured as an Approved Performance Share Plan (APSP) and comprised three elements: (i) HMRC-approved
options (CSOP) over shares to the value of up to £30,000 with an exercise price of 234.70 pence per share; (ii) an LTIP award
in the form of a conditional award of free shares to the value of the remainder of the award above this limit; and (iii) a funding
award, also in the form of a conditional award of free shares, over such numbers of shares whose value at exercise at the
approved option equals up to £30,000. The award is also subject to malus and clawback provisions.

The provisions of these CSOP options, funding awards and LTIP awards were linked, so that the maximum aggregate number
of shares that could be acquired on exercise of LTIP and CSOP awards (the funding award being used to pay the exercise price
arising on exercise of the CSOP) was limited to that number of shares that had a market value on the date of the awards equal
to 150% of Peter Turner’s 2020 annual salary. Vested funding awards were not transferable to the participant.

Sharesave

LTIP 2021: The awards to the CEO and CFO were structured as LTIP awards in the form of a conditional award of free shares.
HMRC-approved all-employee Sharesave scheme. Exercise price set at 20% discount to share price on date of grant. Options
mature after the three-year savings period and must be exercised within six months of vesting. Details of options held by
Directors under Sharesave are outlined in the individual Director shareholding tables above.

Deferred Bonus Plan

Plan

Details

2019, 2020 and 2021

Mandatory deferral of one–third of gross bonus result relating to the previous year, which is provided as a conditional award
of shares of equivalent value. The award vests on the third anniversary of the award date and is subject to forfeiture if the
executive Director leaves before the vesting date. The award is also subject to malus and clawback provisions.

Other transactions involving Directors are set out in note 27 (Related parties) to the consolidated financial statements. This Report was approved by the
Board on 3 March 2022.

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Summary of shareholder voting
The following table shows the results of the latest binding vote on the Remuneration Policy (at the 2019 AGM) and advisory vote on the 2020 Annual
Report on Remuneration (at the 2021 AGM).

Resolution

Remuneration Policy (at the 2019 AGM)
Annual Report on Remuneration (at the 2021 AGM)

For

97.17%
99.85%

Against

2.83%
0.15%

Withheld1

100,712
42,855

1. Votes ‘withheld’ are not votes in law and, therefore, have not been included in the calculation of the proportion of votes ‘for’ or ‘against’ the resolution.

COMPLIANCE STATEMENT
During the year under review, the Company has complied with all of the provisions relating to Directors’ remuneration in the UK Corporate Governance
Code, except for provision 38 on the alignment of executive Directors’ pension contributions with those available to the workforce, as set out in more
detail on page 63. This Remuneration Report has been prepared in accordance with the Companies Act 2006 (as amended) and Schedule 8 of the
Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). In accordance with section 439 of the
Companies Act 2006 an advisory resolution to approve the Annual Report on Remuneration will be proposed at the Annual General Meeting (AGM)
on 5 May 2022, together with a mandatory resolution to approve the Directors’ Remuneration Policy.

Signed on behalf of the Board

Helen Bunch
Committee Chair

REMUNERATION REPORT

REMUNERATION GOVERNANCE
Remuneration Committee role
The Remuneration Committee determines and agrees with the Board the framework and Policy for the remuneration, including pension rights and any
compensation payments, of the Group’s executive Directors and the Chairman. The Committee also reviews the remuneration in relation to other senior
executives and is kept fully informed of remuneration policy decisions impacting the wider workforce. The Committee’s terms of reference are available
on the Group’s website.

The Remuneration Committee consults the Chief Executive Officer and invites him to attend meetings when appropriate. The Group Human Resources
Director, the Group Head of Reward and Ellason LLP, the Committee’s independent advisor, attend meetings of the Committee by invitation.

The Committee also has access to advice from the Chief Financial Officer. The Company Secretary acts as secretary to the Committee. No executive
Director or other attendee is present when his or her own remuneration is being discussed.

Remuneration Committee membership
The Remuneration Committee is currently composed of five non-executive Directors. Each of the non-executive Directors is regarded by the Board as
independent, except the Chairman of the Company who was considered independent upon appointment. The Remuneration Committee met six times
during the year. Attendance at meetings by individual members is detailed in the Corporate Governance Report on page 68.

Key activities during 2021
During 2021, the key areas of focus for the Committee were:
´ Reviewing the Remuneration Policy ahead of presenting it to shareholders for approval at the 2022 Annual General Meeting, including reviewing

whether the Policy remains appropriate and relevant in supporting the Company’s strategy and promoting long-term sustainable success;

´ Consulting with shareholders on the proposed changes to the Remuneration Policy;
´ Determining whether targets for the 2020 bonus and 2018 LTIP were achieved, and, if so, to what extent;
´ Having reviewed the remuneration of the wider workforce, determining remuneration for executive Directors and other senior executives, applying

consistent guiding principles;

´ Reviewing whether the measures and structure for the bonus and share incentive schemes remain appropriate, as well as reviewing the overall

effectiveness of such schemes;

´ Reviewing and agreeing executive Director personal objectives for 2022;
´ Receiving reports on share awards to employees, and employee participation in the Save As You Earn scheme;
´ Reviewing feedback from institutional investors ahead of the Company’s 2021 Annual General Meeting;
´ Reviewing executive Director share ownership guidelines, and Directors’ holdings against the guidelines;
´ Receiving regulatory and governance updates, and receiving reports on external market remuneration practices;
´ Reviewing and discussing the Company’s annual Gender Pay Gap Report;
´ Appraising the independent remuneration advisor’s performance and reviewing the terms of engagement;
´ Approving the Chairman’s 2022 fees;
´ Determining performance targets for the 2022 bonus and share incentive schemes;
´ Approving the remuneration of the Company’s incoming CFO, and reviewing the terms of the outgoing CFO’s retirement; and
´ Reviewing the Committee’s terms of reference.

Committee performance evaluation
The Committee’s performance was reviewed as part of the Board evaluation (see page 73 for details), which was externally-facilitated in 2021
by Clare Chalmers Ltd. It was concluded that the Committee had operated effectively during the period under review.

Committee advisor
Ellason LLP has been the Committee’s executive remuneration advisor since 1 January 2021. Ellason specialises in executive remuneration advice and during
2021 provided independent advice on remuneration policy, performance measurement, the setting of incentive targets, TSR analysis and the structure of
long-term incentives, and provided market data in respect of senior executive remuneration and non-executive Director fees. Ellason reports directly to the
Chair of the Remuneration Committee and does not provide any non-remuneration-related services to the Group, and is considered to be independent.

Ellason is a signatory to the Remuneration Consultants Group’s voluntary Code of Conduct.

Fees paid during the year to advisors for advice to the Remuneration Committee, charged on a time and materials basis, were as follows:

Advisor

Ellason

Fees (including expenses, excluding VAT)

£30,938

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Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements
OTHER DISCLOSURES

The Directors’ Report is required
to be produced by law. The
Financial Conduct Authority
(FCA)’s Disclosure Guidance and
Transparency Rules (DTRs) and
Listing Rules (LRs) also require the
Company to make certain
disclosures.

Pages 58 to 109 inclusive (together with the
sections of the Annual Report incorporated by
reference) constitute a Directors’ Report that
has been drawn up and presented in accordance
with applicable law, and the liabilities of the
Directors in connection with that Report are
subject to the limitations and restrictions
provided by that law.

THE COMPANY
Legal form of the Company
Morgan Advanced Materials plc is a company
incorporated in England and Wales with company
number 286773.

Name change
The Company changed its name to Morgan
Advanced Materials plc (from The Morgan
Crucible Company plc) on 27 March 2013.

Annual General Meeting (AGM)
The Company’s 2022 AGM will be held on
Thursday 5 May 2022, commencing at 10:30am
at York House, Sheet Street, Windsor SL4 1DD.
A circular incorporating the 2022 Notice of AGM
is available in the investor section of
www.morganadvancedmaterials.com

STATUTORY DISCLOSURES
Amendment of the Articles of Association
The Company’s constitution, known as the
Articles of Association (the Articles), is essentially
a contract between the Company and its
shareholders, governing many aspects of the
management of the Company. It deals with
matters such as the rights of shareholders, the
appointment and removal of Directors, the
conduct of the Board and general meetings
and communications by the Company.

The Articles may be amended by special
resolution of the Company’s shareholders.

Appointment and replacement of Directors
The Articles provide that the Company may by
ordinary resolution at a general meeting appoint
any person to act as a Director, provided that
notice is given of the resolution identifying
the proposed person by name and that the
Company receives written confirmation of that
person’s willingness to act as Director if he or she
has not been recommended by the Board. The
Articles also empower the Board to appoint as
a Director any person who is willing to act as such.

The maximum possible number of Directors
under the Articles is 15. The Articles provide that
the Company may by special resolution, or by
ordinary resolution of which special notice is
given, remove any Director before the expiration
of his or her period of office. The Articles also set
out the circumstances in which a Director shall
vacate office. The Articles require that at each
AGM any Director who was appointed after the
previous AGM must be proposed for election by
the shareholders. Additionally, any other Director
who has not been elected or re-elected at one
of the previous two AGMs must be proposed
for re-election by the shareholders. The Articles
also allow the Board to select any other Director
to be proposed for re-election. In each case,
the rules apply to Directors who were acting
as Directors on a specific date selected by the
Board. This is a date not more than 14 days
before, and no later than, the date of the Notice
of AGM.

Notwithstanding the provisions of the Articles,
all the Directors will stand for election or
re-election on an annual basis in compliance with
the provisions of the UK Corporate Governance
Code (the Code). Details of the skills, experience
and career history of Directors in post as at the
date of this Report, and the Board Committees
on which they serve, can be found on pages 60
to 61.

RESULTS AND DIVIDENDS
The total profit (attributable to owners of the
parent and non-controlling interests) for the year
ended 31 December 2021 was £81.8 million
(2020: loss £18.0 million). The profit for the
period arises principally as a result of improved
volumes and delivery of the benefits from the
Group’s restructuring programme. Profit before
taxation for the same period was £104.3 million
(2020: loss £13.1 million). Revenue was
£950.5 million (2020: £910.7 million) and
operating profit was £113.1 million (2020: loss
£1.8 million). Basic earnings per share* from
continuing operations was 23.9 pence (2020: loss
per share 8.6 pence). Capital and reserves at
the end of the year were £349.6 million (2020:
£240.0 million). The total profit of £81.8 million
(2020: loss of £18.0 million will be transferred
to equity.

The Directors recommend the payment of
a final dividend of 5.9 pence per share on the
Ordinary share capital of the Company, payable
on 20 May 2022 to shareholders on the register
at the close of business on 29 April 2022.
Together with the interim dividend of 3.2 pence
per share paid on 10 December 2021, this final
dividend, if approved by shareholders, brings
the total distribution for the year to 9.1 pence per
share (2020: 5.5 pence).

DIRECTORS
All those who served as Directors at any time
during the year under review are set out on
pages 60 to 61.

Powers of the Directors
Subject to the Company’s Articles, UK legislation
and any directions given by special resolution,
the business of the Company is managed by the
Board, which may exercise all the powers of the
Company.

Directors’ interests
Details of Directors’ interests (and their connected
persons’ beneficial interests) in the share capital
of the Company are listed on page 101.

Directors’ indemnities
The Company has entered into separate
indemnity deeds with each Director containing
qualifying indemnity provisions, as defined in
section 236 of the Companies Act 2006, under
which the Company has agreed to indemnify
each Director in respect of certain liabilities which
may attach to each of them as a Director or as
a former Director of the Company or any of its
subsidiaries. The indemnity deeds were in force
during the financial year to which this Directors’
Report relates and are in force as at the date of
approval of the Directors’ Report.

Engagement with customers and suppliers
Details of the Group’s engagement with customers
and suppliers are set out on pages 6 to 7
of the Strategic Report and on page 72 of the
Corporate Governance Report.

Information required by LR 9.8.4R
Apart from the dividend waiver which has been
issued in respect of shares held by the Morgan
General Employee Benefit Trust referred to
in note 20 on page 149, there is no information
required to be disclosed under LR 9.8.4R.

OVERSEAS BRANCHES
As at 31 December 2021, the Company had
branches as follows:
´ Morgan AM&T BV (Sweden and Belgium);
´ Carbo San Luis SA (Peru);
´ Morgan Advanced Materials Industries Ltd

(UAE).

PEOPLE
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of office
or employment (whether through resignation,
purported redundancy or otherwise) that occurs
because of a takeover bid.

EMPLOYMENT OF DISABLED PEOPLE
Morgan has a range of employment policies
which set out the standards, processes,
expectations and responsibilities of its people
and the organisation. These policies are designed
to ensure that everyone, including those with
existing or new disabilities, are dealt with fairly
and have equal opportunity. Further details of
the People policies are set out on pages 28 to 31.

RESEARCH AND DEVELOPMENT
The Group recognised £28.5 million in expense
in respect of research and development
(2020: £28.0 million). The Group did not
capitalise any development costs in 2021
(2020: £nil). Morgan has established four
Centres of Excellence (CoEs), which are
dedicated to driving materials development, to
exacting customer specifications, and delivering
performance through materials and production
process innovation. The CoEs consolidate the
Group’s R&D efforts around its core
technologies, to increase the effectiveness of
Morgan’s R&D spend, accelerate key projects
and increase technical differentiation. The CoEs
focus on the execution priorities of the global
business units and the Group.

GREENHOUSE GAS EMISSIONS,
ENERGY CONSUMPTION
AND ENERGY EFFICIENCY
Details of the Group’s annual greenhouse gas
emissions, energy consumption and energy
efficiency are shown in the Environment section
on pages 20 to 24.

POLITICAL DONATIONS
No political donations have been made. Morgan
Advanced Materials plc has a policy of not making
donations to any political party, representative
or candidate in any part of the world.

FINANCIAL INSTRUMENTS
Details of the Group’s use of financial instruments,
together with information on policies and
exposure to price, liquidity, cash flow, credit,
interest rate and currency risks, can be found
in note 22 on pages 151 to 159. All information
detailed in this note is incorporated into the
Directors’ Report by reference and is deemed
to form part of the Directors’ Report.

SHARE CAPITAL AND RELATED MATTERS
Share capital
The Company’s share capital as at 31 December
2021 is set out in note 41 on page 180. The rights
and obligations attaching to the Company’s
Ordinary shares, and restrictions on the transfer
of shares in the Company (which include specific
circumstances in which the Board is entitled
to refuse to register the transfer of shares), are
set out in the Articles.

Shareholders’ rights
The holders of Ordinary shares are entitled to
receive dividends, when declared, to receive the
Company’s reports and accounts, to attend and
speak at general meetings of the Company,
to appoint proxies and to exercise voting rights.

No person holds securities in the Company
carrying special rights with regard to control of
the Company. The Company is not aware of any
agreements between holders of securities that
may result in restrictions on the transfer of
securities or on voting rights.

Additionally the Company has authorised, issued
and fully paid 437,281 (2020: 437,281) cumulative
preference shares classified as borrowings
totalling £0.4 million (2020: £0.4 million). The
preference shares comprise 125,327 of 5.5%
Cumulative First Preference shares of £1 each
and 311,954 issued 5.0% Cumulative Second
Preference shares of £1 each. The Group’s 2020
financial statements were restated to reclassify
the Group’s cumulative preference shares
(which were previously classified as equity) to
borrowings. Following a review of the substance
of the shares it was determined that the
cumulative preference shares do not contain
an equity element.

Details of the structure of the Company’s
Preference share capital and the rights attaching
to the Company’s Preference shares are set out
in note 20 on page 150.

Share allotment and repurchase authorities
The Directors were granted authority at the 2021
AGM to allot shares in the Company and to grant
rights to subscribe for or convert any securities into
shares in the Company up to an aggregate nominal
amount of £23,780,832 in any circumstances. This
amount represented approximately one-third of
the Company’s issued share capital prior to that
meeting. The Directors were also authorised to
allot shares and to grant rights up to an aggregate
nominal amount of £47,561,664 in connection
with a rights issue only (but such amount to be
reduced by any allotments under made under the
first limb of the authority). This amount
represented approximately two-thirds of the
Company’s issued share capital prior to the
meeting.

The Directors were also empowered at the 2021
AGM to allot shares for cash on a non-pre-
emptive basis, both in connection with a rights
issue or similar pre-emptive issue and, otherwise
than in connection with any such issue, up to a
maximum aggregate nominal amount of
£3,567,124. Such amount represented
approximately 5% of the Company’s issued share
capital as it stood prior to the meeting in line with
the Pre-Emption Group’s Statement of Principles
on disapplying pre-emption rights. As permitted
by those Principles, the Directors were also
empowered to allot shares for cash on a
non-pre-emptive basis up to the same amount
for use only in connection with an acquisition or
a specified capital investment.

The Directors were also authorised at the 2021
AGM to repurchase shares in the capital of the
Company up to a maximum aggregate number of
28,536,998 shares. This represented approximately
10% of the Company’s issued share capital prior
to the meeting.

These share capital authorities and powers are
due to lapse at the 2022 AGM, and the Board will
seek their renewal on similar terms.

EMPLOYEE SHARE AND
SHARE OPTION SCHEMES
The Company operates a number of employee
share and share option schemes. Details of
outstanding share awards and share options
are given in note 24 on page 166.

All the Company’s share schemes contain
provisions relating to a change of control.
Outstanding options and awards would normally
vest and become exercisable on a change of
control, subject to being pro-rated for time and
to the satisfaction of any performance conditions
at that time.

The trustees of the Morgan General Employee
Benefit Trust have absolute and unfettered
discretion in relation to voting any shares held
in the Trust at any general meeting. Their policy
is not to vote the shares. If any offer is made to
shareholders to acquire their shares, the Trustees
will have absolute and unfettered discretion as
to whether to accept or reject the offer in respect
of any shares held by them.

106

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Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsScope of the reporting in this Annual Report
The Board has prepared a Strategic Report
which provides an overview of the development
and performance of the Group’s business in the
year ended 31 December 2021.

For the purposes of DTR 4.1.5R(2) and DTR
4.1.8, the Directors’ Report on pages 58 to 109
and the Strategic Report on pages 2 to 57
comprise the management report, including the
sections of the Annual Report and consolidated
financial statements incorporated by reference.

Each Director holding office at the date of
approval of this Directors’ Report confirms that,
so far as he or she is aware, there is no relevant
audit information of which the Company’s auditor
is unaware, and that he or she has taken all steps
that he or she ought to have taken as a Director
to make himself or herself aware of any relevant
audit information and to establish that the
Company’s auditor is aware of that information.

The Strategic Report, the Directors’ Report and
the Remuneration Report were approved by the
Board on 3 March 2022.

For and on behalf of the Board

Stephanie Mackie
Company Secretary

3 March 2022

Morgan Advanced Materials plc
York House
Sheet Street
Windsor
Berkshire SL4 1DD

Registered in England and Wales, No. 286773

OTHER DISCLOSURES

Major shareholdings
As at the date of this report, the Company had been notified of the following, in accordance with
DTR 5, from holders of notifiable interests representing 3% or more of the issued Ordinary share
capital of the Company:

Number of
Ordinary shares

Percentage
of issued share capital

Date of notification
of interest

Ameriprise Financial Inc., and its
group
FIL Limited
Aberforth Partners LLP
M&G Plc
Black Creek Investment
Management Inc.
AXA Investment Managers SA

24,186,489
15,414,047
14,338,459
14,251,115

14,269,458
14,039,985

8.48
5.40
5.03
4.98

5.00
4.92

3 February 2017
5 August 2020
3 September 2019
7 January 2022

13 October 2021
6 June 2019

TRANSACTIONS, CONTRACTUAL
ARRANGEMENTS AND POST BALANCE
SHEET EVENTS
Significant agreements – change of control
The Group has a number of borrowing facilities
provided by various financial institutions. The
facility agreements generally include change of
control provisions which, in the event of a change
in ownership of the Company, could result in
their renegotiation or withdrawal.

The most significant of such agreements are
the UK £200 million multi-currency revolving
credit facility agreement, which was signed on
26 September 2018, and the privately placed
Note Purchase and Guarantee Agreements
signed on 27 October 2016 and 20 March 2017,
for which the aggregate outstanding loan
amounts are US$137 million and €85 million.

There are a number of other agreements that
would take effect, alter or terminate upon
a change of control of the Company following
a takeover bid, such as commercial contracts
and joint venture agreements. No such individual
contract is considered to be significant in terms
of its potential impact on the business of the
Group as a whole.

Post balance sheet events
There were no reportable subsequent events
following the balance sheet date.

REPORTING, ACCOUNTABILITY
AND AUDIT
Statement of Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report and the Group and Parent
company financial statements in accordance
with applicable law and regulations.

Company law requires the Directors to prepare
Group and Parent company financial statements
for each financial year. Under that law they are
required to prepare the Group consolidated
financial statements in accordance with United
Kingdom adopted international accounting
standards and applicable law and have elected to
prepare the Parent company financial statements
in accordance with UK Accounting Standards,
including FRS 101 Reduced Disclosure
Framework.

Under company law the Directors must not
approve the financial statements unless they are
satisfied that they give a true and fair view of the
state of affairs of the Group and Parent company
and of their profit or loss for that period.

In preparing each of the Group and Parent
company financial statements, the Directors
are required to:
´ Select suitable accounting policies and then

apply them consistently;

´ Make judgements and estimates that are

reasonable and prudent;

´ For the Group consolidated financial

statements, state whether they have been
prepared in accordance with United Kingdom
adopted international accounting standards;

´ Assess the Group and Parent company’s
ability to continue as a going concern,
disclosing, as applicable, matters related to
Going concern;

´ For the Parent company financial statements,
state whether applicable UK Accounting
Standards have been followed, subject to any
material departures disclosed and explained
in the Parent company financial statements.
They are responsible for such internal control
as they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error, and have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Group and to prevent and detect
fraud and other irregularities;

´ Prepare the financial statements on the going
concern basis of accounting unless they intend
to liquidate the Group or the Parent company
or to cease operations or have no realistic
alternative but to do so.

The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Parent company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Parent company and enable them to
ensure that its financial statements comply with
the Companies Act 2006. They have general
responsibility for taking such steps as are
reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud
and other irregularities. They are responsible
for such internal control as they determine is
necessary to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or error,
and have general responsibility for taking such
steps as are reasonably open to them to
safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.

Under applicable law and regulations, the
Directors are also responsible for preparing
a Strategic Report, Directors’ Report,
Remuneration Report and Corporate
Governance Statement that comply with that
law and those regulations.

The Directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the Company’s
website. Legislation in the UK governing the
preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.

In its reporting to shareholders, the Board is
satisfied that the Annual Report and Accounts,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model and
strategy as required by the Code.

The Directors as at the date of this Report,
whose names and functions are set out on
pages 60 to 61, confirm that, to the best of their
knowledge:
´ The Group’s consolidated financial

statements, which have been prepared in
accordance with United Kingdom adopted
international accounting standards, give a true
and fair view of the assets, liabilities, financial
position and profit of the Group;

´ The management report (comprising the

Directors’ Report and the Strategic Report)
includes a fair review of the development and
performance of the business and the position
of the Group, together with a description of
the principal risks and uncertainties that it
faces.

108

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Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsINDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF MORGAN ADVANCED MATERIALS PLC

REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS
1. OPINION
In our opinion:
´ The financial statements of Morgan Advanced
Materials plc (the ‘Parent company’) and its
subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the
Parent company’s affairs as at 31 December
2021 and of the Group’s profit for the year
then ended;

´ The Group financial statements have been

properly prepared in accordance with United
Kingdom adopted international accounting
standards and International Financial
Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board
(IASB);

2. BASIS FOR OPINION
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the auditor’s responsibilities for the audit of the
financial statements section of our report.

We are independent of the Group and the
Parent company in accordance with the ethical
requirements that are relevant to our audit of the
financial statements in the UK, including the
Financial Reporting Council’s (the ‘FRC’s’) Ethical

3. SUMMARY OF OUR AUDIT APPROACH

Standard as applied to listed public interest
entities, and we have fulfilled our other ethical
responsibilities in accordance with these
requirements. The non-audit services provided
to the Group and Parent company for the year
are disclosed in note 3 to the financial statements.
We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical
Standard to the Group or the parent company.

We believe that the audit evidence we have
obtained is sufficient and appropriate to provide
a basis for our opinion.

Key audit matters

The key audit matters that we identified in the current year were:
´ Inventory valuation; and
´ Impairment of non-financial assets.
The materiality that we used for the Group financial statements was £5.0m
(FY20: £4.0m) which was determined based on 4.6% profit before tax and
before specific adjusting items.
Full scope audit work was performed on 17 (FY20: 18) reporting
components, and specified audit procedures were undertaken on a further
13 (FY20: 14) reporting components. Our full scope and specified audit
procedures covered 72% of Group revenue (FY20: 74%) and 74% of
absolute Group statutory profit (FY20: 89%).
Our audit approach is consistent with the previous year except for:
´ The presentation of restructuring costs as a specific adjusting item is no
longer considered to be a key audit matter. In the prior year, the Group
launched a significant restructuring programme following the outbreak
of COVID-19 and recognised £24.0m in restructuring costs in the FY20
financial statements. In the current year, a net gain of £0.1 million has
been recognised representing £2.1 million of further redundancy and
closure costs related to the Group’s restructuring programme, offset
by a £2.2 million release of restructuring provisions booked last year in
relation to this programme. As such, there is a reduced risk that business
as usual restructuring activities are incorrectly presented as exceptionals
within adjusting items.

´ In the prior year due to the forecasting uncertainty from the COVID-19
pandemic our materiality was determined considering a number of
different metrics which included:
´ Profit before tax and before specific adjusting items;
´ Revenue;
´ Earnings before interest, tax, depreciation and amortisation; and
´ Net assets.

We now consider this uncertainty has reduced and therefore are using profit
before tax and before specific adjusting items as our materiality benchmark.

´ The Parent company financial statements

Materiality

Scoping

Significant changes
in our approach

have been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice, including Financial
Reporting Standard 101 “Reduced Disclosure
Framework”; and

´ The financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.

We have audited the financial statements which
comprise:
´ The Consolidated income statement;
´ The Consolidated statement of

comprehensive income;

´ The Consolidated and Parent company

balance sheets;

´ The Consolidated and Parent company

statements of changes in equity;

´ The Consolidated statement of cash flows;

and

´ The related notes 1 to 45.

The financial reporting framework that has been
applied in the preparation of the Group financial
statements is applicable law, and United Kingdom
adopted international accounting standards
and IFRSs as issued by the IASB. The financial
reporting framework that has been applied in
the preparation of the parent company financial
statements is applicable law and United Kingdom
Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United
Kingdom Generally Accepted Accounting
Practice).

4. CONCLUSIONS RELATING
TO GOING CONCERN
In auditing the financial statements, we have
concluded that the directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate.

5. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. Inventory Valuation

Key audit matter
description

How the scope of
our audit responded
to the key audit
matter

The Group manufactures thermal, carbon and technical ceramic products
for a diverse range of end markets. The Group had material inventory
balances of £140.7m as at 31 December 2021 (2020: £122.4m). There is a
risk that inventory is not valued appropriately because of local manufacturing
sites not correctly applying the Group provisioning accounting policy, to
appropriately write-down the net realisable value of excess and obsolescent
stock due to:
´ System limitations, whereby significant manual intervention is required to
record and value inventory, which requires regular manual adjustments
to inventory; and

´ The level of management judgement involved in determining whether
a provision should be recognised and how it should be measured. The
provision is typically determined based on ageing and expected future
usage.

In the Consolidated Financial Statements, note 1 sets out the Group’s
accounting policy for inventory valuation and note 16 provides further
analysis of the account balance.
We have performed the following audit procedures in respect of this
key audit matter:
´ Obtained an understanding of the relevant controls over the inventory

provisioning process;

´ Assessed the inventory ageing and ensured that the group accounting
policy of fully providing for inventory more than 12 months has been
applied. For items less than 12 months understood the breakdown
of the inventory by age;

´ Challenged management’s key assumptions in determining inventory

provisions by assessing the accuracy and completeness of items included
in the provision by taking into account the impact on future usage; and

´ Assessed the mathematical accuracy of the inventory provision by

obtaining management’s analysis and performing a recalculation based
on the key inputs.

Key observations

Based on our procedures performed, we are satisfied that the valuation
of inventory at 31 December 2021 is appropriate.

Our evaluation of the directors’ assessment
of the Group’s and Parent company’s ability
to continue to adopt the going concern basis
of accounting included:
´ Obtaining an understanding of the financing

facilities including nature of facilities,
repayment terms and covenants;

´ Obtained an understanding of the controls

around the budgeting and forecasting process
used in the going concern preparation
process;

´ Evaluating the linkage to business model

and principal risks as identified on pages 14
and 15;

´ Challenging the assumptions used in the

Board approved forecasts by reference to
historical performance and other supporting
evidence such as market data;

´ Recalculation of the amount of headroom

in the forecasts (in liquidity terms and against
the relevant covenant limits);

´ Assessing the appropriateness of the

sensitivity analysis and reverse stress tests
performed by management; and

´ Assessing the adequacy of the disclosures

made by management.

Based on the work we have performed, we have
not identified any material uncertainties relating
to events or conditions that, individually or
collectively, may cast significant doubt on the
Group’s and Parent company’s ability to continue
as a going concern for a period of at least twelve
months from when the financial statements are
authorised for issue.

In relation to the reporting on how the Group
has applied the UK Corporate Governance
Code, we have nothing material to add or draw
attention to in relation to the directors’ statement
in the financial statements about whether the
directors considered it appropriate to adopt the
going concern basis of accounting.

Our responsibilities and the responsibilities of
the directors with respect to going concern are
described in the relevant sections of this report.

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TO THE MEMBERS OF MORGAN ADVANCED MATERIALS PLC

5.2. Impairment of non-financial assets

Key audit matter
description

In FY20, following the outbreak of COVID-19 and the resulting economic downturn, the Group recorded impairments of
non-financial assets of £65.6m. These primarily sat within the Technical Ceramics and Thermal Ceramic global business units.
In FY21, the Group has had a strong recovery despite the challenging economic environment.

IAS 36 requires that at the end of each reporting period, an entity should assess whether there are any indicators of impairment or
indicators that an impairment loss recognised in prior periods should be reversed. If such indication exists, the entity shall estimate
the recoverable amount of that asset. Management’s review for indicators of impairment or reversal identified sites and assets
that required further consideration. Impairment indicators were identified for certain assets in Technical Ceramics Asia, Electrical
Carbon UK and North America and Thermal Ceramics North America. Total impairment charges for the year were £12.4 million.
This includes a partial impairment of £6.0 million for Technical Ceramics Asia where a value in use calculation was performed.
We focused the majority of our work on the carrying value of this CGU and have provided further detail on the key assumptions
used in management’s valuation below.

Management has determined the recoverable amount based on a value-in-use model calculated from cash flow projections,
which are based on management’s assumptions and estimates of future trading performance.

Estimating a value-in-use is inherently judgemental, and a range of assumptions can reasonably be applied in determining the
estimates used therein. The key judgements in assessing non-financial assets for impairment are the discount rate, long-term
growth rate, and the short-term projected cash flows. The value-in-use models are sensitive to changes in these estimates,
all of which must reflect a long-term view of underlying growth in the respective economy within which these businesses operate
and the reasonableness of projected cash flows.

How the scope
of our audit responded
to the key audit
matter

The Audit Committee Report on page 74 refers to impairment of non-financial assets as an area considered by the Audit
Committee. Note 1 to the Consolidated Financial Statements sets out the Group’s accounting policy for testing of non-financial
assets for impairment and contains further details on the key source of estimation uncertainty.
We have performed the following procedures in respect of this key audit matter:
´ Obtained an understanding of the relevant key controls relating to the impairment process;
´ Challenged management’s indicator assessment for impairment or reversal by performing our own independent consideration

of possible indicators;

´ Assessed the integrity of management’s impairment model through testing of the mechanical accuracy and reviewing the

application of the input assumptions;

´ Evaluated the process management undertook to prepare the cash flow forecasts in their impairment models including

agreement with the latest Board-approved plans and management approved forecasts;

´ Challenged the cash flow projections through assessing the accuracy of historical budgeting by comparing them with
actual performance and independent evidence to support any significant expected future changes to the business;
´ Assessed a range of available market data and performing a peer benchmarking exercise to assess and challenge the

growth rates forecasted by management in revenue and margins;

´ Assessed reasonable possible changes in assumptions to challenge the appropriateness of management’s assessment

of reasonable possible change scenarios; and

Key observations

´ Involved internal valuation specialists to assess the appropriateness of the discount rates used.
Based on our procedures performed, we consider the key assumptions taken by management to be within an acceptable range
and reasonable and supportable. We identified control deficiencies relating to the review controls over the process to identify
impairment indicators and the value in use models, which were reported to management and those charged with governance.

We have focused this key audit matter to the discount rate and short-term future cash flows and material judgements contained
therein. This is where the highest degree of sensitivity exists in determining the value-in-use. As a result, management has
provided sensitivity disclosures of the reasonable possible changes that could result in an impairment.

Rationale for the
benchmark applied

6. OUR APPLICATION OF MATERIALITY
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results
of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements

Parent company financial statements

Materiality
Basis for determining
materiality

£5.0m (2020: £4.0m)
The materiality was determined based on 4.6% profit before
tax and before specific adjusting items.

£3.0m (2020: £2.0m)
Materiality was determined based on the Parent company’s
net assets (3%). This was then capped at 60% of Group
materiality (2020: 50%).

In the prior year, due to the forecasting uncertainty and
expected volatility in underlying earnings resulting from the
COVID-19 pandemic our materiality was determined
considering several different metrics which included:
´ Profit before tax and before specific adjusting items (5.4%);
´ Revenue (0.4%);
´ Earnings before interest, tax, depreciation and amortisation

(3%); and

´ Net assets (1.7%).
Profit before tax and before specific adjusting items is a
key metric for users of the financial statements and reflects
the way business performance is reported and assessed
by external users of the financial statements.

The Parent company is non-trading and contains investments
in all the Group’s trading components and as a result, we have
determined net assets for the current year to be the
appropriate basis.

PBT before specific
adjusting items
£109.7m

● PBT before specific adjusting items
● Group materiality

Group materiality
£5.0m
Component
materiality range
£1.46m to £1.63m
Audit Committee
reporting threshold
£0.25m

6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements
exceed the materiality for the financial statements as a whole.

Performance
materiality
Basis and rationale
for determining
performance
materiality

Group financial statements

Parent company financial statements

65% (2020: 60%) of Group materiality

65% (2020: 60%) of Parent company materiality

In determining performance materiality, we considered the
following factors:
´ Our risk assessment, including our assessment of the Group’s
overall control environment and our past experience of the
audit;

´ The disaggregated nature of the Group and the degree of
centralisation in the Group’s financial reporting processes
which reduces the likelihood of an individually material error;
and

´ The level of corrected and uncorrected misstatements

identified in the prior year audit.

6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.25m (2020: £0.20m), as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the financial statements.

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TO THE MEMBERS OF MORGAN ADVANCED MATERIALS PLC

7. AN OVERVIEW OF THE SCOPE
OF OUR AUDIT
7.1. Identification and scoping of components
The Group operates and manufactures in
30 countries spread across five continents with
the largest footprint being in North America,
Asia and Europe. Our Group audit was scoped
by obtaining an understanding of the Group and
its environment, including Group-wide controls,
and assessing the risks of material misstatement
at the Group and component level.

Based on that assessment, we focused our
Group audit scope across all five of the
established business units: Thermal Ceramics,
Molten Metal systems, Seals and Bearings,
Technical Ceramics and Electrical Carbon.

These five business units are composed of many
individual reporting components, which are
the lowest level at which management prepares
financial information that is included in the
Financial Statements. The Parent company
is located in the UK and is audited directly by
the Group audit team.

We have considered reporting components
based on their contribution to Group revenue,
and profit, as well as those that require local
statutory audits in their jurisdiction. Full scope
audit work was completed on 17 (FY20: 18)
components and specified audit procedures
were undertaken on a further 13 (FY20:14)
components. Each reporting component in
scope was subject to an audit materiality level
between £1.46m and £1.63m (FY20: 1.00m
and £1.20m). Our full scope and specified audit
procedures covered 72% of Group revenue
(FY20: 74%) and 74% of absolute Group
statutory profit (FY20: 89%).

7.2. Our consideration of the control
environment
The Group uses a number of different IT systems
across the reporting components and we worked
with our IT specialists to obtain an understanding
of the General IT controls for relevant systems.
The control environment is decentralised and
reliant on manual processes with improvements
required to the IT environment in order for us to
adopt a controls reliance approach to our audit.
As management develops and completes its
controls improvement programme of work in
future years, we expect our audit approach
to evolve alongside these developments in the
internal control environment.

7.3. Our considerations of climate-related
risks
In planning our audit, we have considered the
potential impact of climate change on the Group’s
business and its financial statements.

The Group consider the risk and opportunities
relevant to be an emerging issue for the Group.
As a part of our audit procedures, we have
obtained management’s climate-related risk
assessment and held discussions with those
charged with governance to understand the
process of identifying climate-related risks, the
determination of mitigating actions and the
impact on the Group’s financial statements.
While management has acknowledged that the
transition and physical risks posed by Climate
change have the potential to impact the medium
to long term success of the business, they have
assessed that there is no material impact arising
from climate change on the judgements and
estimates made in the financial statements as
at 31 December 2021 as explained in note 1
on page 130.

Revenue

Absolute Profit(cid:31)before tax

28%

26%

51%

39%

21%

35%

● Full audit scope
● Specified audit procedures
● Review at group level

We performed our own qualitative risk
assessment of the potential impact of climate
change on the Group’s account balances and
classes of transaction, and did not identify any
additional risks of material misstatement. Our
procedures include reading disclosures included
in the Strategic Report to consider whether
they are materially consistent with the financial
statements and our knowledge obtained in
the audit.

7.4. Working with other auditors
The audit work on all components was
performed by Deloitte Touche Tohmatsu
Limited member firms with the exception of one
component business in France which continued
to be audited by KPMG. The component
work was performed under the direction
and supervision of the Group audit team.
At a Group level, further substantive audit work
was performed over the consolidation and
analytical review procedures were performed
over components not in scope.

The planned programme which we designed
as part of our involvement in the component
auditors’ work was delivered over the course of
the Group audit. The extent of our involvement
which commenced from the planning phase
included:
´ Setting the scope of the component auditor
and assessment of their independence;
´ Designing the audit procedures for all
significant risks to be addressed by the
component auditors and issuing Group audit
instructions detailing the nature and form
of the reporting required by the Group
engagement team;

´ Providing direction on enquiries made by

the component auditors through online and
telephone conversations; and

´ A review of the component auditors’

engagement file by a senior member of the
Group engagement team.

In response to the Covid-19 pandemic, which
limited our ability to make component visits,
more frequent calls were held between the
Group and component teams and remote access
to relevant documents was provided. Given
the pandemic, most of our year-end audit was
performed in a remote working environment.

8. OTHER INFORMATION
The other information comprises the information
included in the annual report other than the
financial statements and our auditor’s report
thereon. The directors are responsible for the
other information contained within the annual
report.

Our opinion on the financial statements does not
cover the other information and, except to the
extent otherwise explicitly stated in our report,
we do not express any form of assurance
conclusion thereon.

Our responsibility is to read the other
information and, in doing so, consider whether
the other information is materially inconsistent
with the financial statements or our knowledge
obtained in the course of the audit, or otherwise
appears to be materially misstated.

If we identify such material inconsistencies
or apparent material misstatements, we are
required to determine whether this gives rise to
a material misstatement in the financial statements
themselves. If, based on the work we have
performed, we conclude that there is a material
misstatement of this other information, we are
required to report that fact.

We have nothing to report in this regard.

9. RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’
responsibilities statement, the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give
a true and fair view, and for such internal control
as the directors determine is necessary to enable
the preparation of financial statements that are
free from material misstatement, whether due
to fraud or error.

In preparing the financial statements, the
directors are responsible for assessing the group’s
and the parent company’s ability to continue as
a going concern, disclosing as applicable, matters
related to going concern and using the going
concern basis of accounting unless the directors
either intend to liquidate the group or the parent
company or to cease operations, or have
no realistic alternative but to do so.

10. AUDITOR’S RESPONSIBILITIES FOR
THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable
assurance about whether the financial statements
as a whole are free from material misstatement,
whether due to fraud or error, and to issue an
auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect
a material misstatement when it exists.
Misstatements can arise from fraud or error and
are considered material if, individually or in the
aggregate, they could reasonably be expected
to influence the economic decisions of users
taken on the basis of these financial statements.

A further description of our responsibilities
for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms
part of our auditor’s report.

11. EXTENT TO WHICH THE AUDIT
WAS CONSIDERED CAPABLE OF
DETECTING IRREGULARITIES,
INCLUDING FRAUD
Irregularities, including fraud, are instances of
non-compliance with laws and regulations. We
design procedures in line with our responsibilities,
outlined above, to detect material misstatements
in respect of irregularities, including fraud. The
extent to which our procedures are capable of
detecting irregularities, including fraud is detailed
below.

11.1. Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities, including
fraud and non-compliance with laws and
regulations, we considered the following:
´ The nature of the industry and sector,
control environment and business
performance including the design of the
group’s remuneration policies, key drivers
for directors’ remuneration, bonus levels
and performance targets;

´ Results of our enquiries of management,

internal audit and the audit committee about
their own identification and assessment
of the risks of irregularities;

´ Any matters we identified having obtained

and reviewed the group’s documentation of
their policies and procedures relating to:

– identifying, evaluating and complying with
laws and regulations and whether they were
aware of any instances of non-compliance;

– detecting and responding to the risks of
fraud and whether they have knowledge
of any actual, suspected or alleged fraud;

– the internal controls established to mitigate
risks of fraud or non-compliance with laws
and regulations; and

´ The matters discussed among the audit
engagement team including significant
component audit teams and relevant internal
specialists, including tax, valuations, pensions,
and IT specialists regarding how and where
fraud might occur in the financial statements
and any potential indicators of fraud.

As a result of these procedures, we considered
the opportunities and incentives that may exist
within the organisation for fraud and identified
the greatest potential for fraud in the following
area: revenue recognition. In common with all
audits under ISAs (UK), we are also required
to perform specific procedures to respond to
the risk of management override.

We also obtained an understanding of the
legal and regulatory frameworks that the group
operates in, focusing on provisions of those
laws and regulations that had a direct effect
on the determination of material amounts
and disclosures in the financial statements.

The key laws and regulations we considered in
this context included the UK Companies Act,
Listing Rules, pensions legislation, tax legislation in
all relevant jurisdictions where the Group
operates.

In addition, we considered provisions of other
laws and regulations that do not have a direct
effect on the financial statements but compliance
with which may be fundamental to the group’s
ability to operate or to avoid a material penalty.
These included the group’s environmental
regulations.

11.2. Audit response to risks identified
As a result of performing the above, we did
not identify any key audit matters related to
the potential risk of fraud or non-compliance
with laws and regulations.

Our procedures to respond to risks identified
included the following:
´ Reviewing the financial statement disclosures
and testing to supporting documentation to
assess compliance with provisions of relevant
laws and regulations described as having
a direct effect on the financial statements;

´ Enquiring of management, the audit

committee and in-house legal counsel
concerning actual and potential litigation
and claims;

´ Performing analytical procedures to identify
any unusual or unexpected relationships that
may indicate risks of material misstatement
due to fraud;

´ Reading minutes of meetings of those charged
with governance, reviewing internal audit
reports and reviewing correspondence with
HMRC;

´ In addressing the risk of fraud in relation

to revenue recognition, we have obtained
an understanding of relevant controls in the
revenue cycle and tested a sample of sales
recognised during the period by agreeing
to invoice, dispatch note and cash collection
(where appropriate) to assess the
performance obligations have been met; and

´ In addressing the risk of fraud through

management override of controls, testing
the appropriateness of journal entries and
other adjustments; assessing whether the
judgements made in making accounting
estimates are indicative of a potential bias;
and evaluating the business rationale of any
significant transactions that are unusual or
outside the normal course of business.

We also communicated relevant identified laws
and regulations and potential fraud risks to all
engagement team members including significant
component audit teams and internal specialists
and remained alert to any indications of fraud
or non-compliance with laws and regulations
throughout the audit.

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FINANCIAL
STATEMENTS

FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated balance sheet
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements

118

119
120

121

122

123

169

Company balance sheet
Company statement
170
of changes in equity
Notes to the Company balance sheet 171
185
Group statistical information
186
Cautionary statement
186
Glossary of terms
187
Shareholder information

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF MORGAN ADVANCED MATERIALS PLC

´ The section of the annual report that

describes the review of effectiveness of risk
management and internal control systems
set out on page 76; and

´ The section describing the work of the audit

committee set out on page 75.

14. MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
14.1. Adequacy of explanations received
and accounting records
Under the Companies Act 2006 we are required
to report to you if, in our opinion:
´ We have not received all the information and
explanations we require for our audit; or
´ Adequate accounting records have not been
kept by the parent company, or returns
adequate for our audit have not been
received from branches not visited by us; or
´ The parent company financial statements are
not in agreement with the accounting records
and returns.

We have nothing to report in respect of these
matters.

16. USE OF OUR REPORT
This report is made solely to the company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we
might state to the company’s members those
matters we are required to state to them in an
auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the
company and the company’s members as a body,
for our audit work, for this report, or for the
opinions we have formed.

As required by the Financial Conduct Authority
(FCA) Disclosure Guidance and Transparency
Rule (DTR) 4.1.14R, these financial statements
form part of the European Single Electronic
Format (ESEF) prepared Annual Financial Report
filed on the National Storage Mechanism of the
UK FCA in accordance with the ESEF Regulatory
Technical Standard ((‘ESEF RTS’). This auditor’s
report provides no assurance over whether the
annual financial report has been prepared using
the single electronic format specified in the
ESEF RTS.

Jane Makrakis, ACA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, United Kingdom

3 March 2022

14.2. Directors’ remuneration
Under the Companies Act 2006 we are also
required to report if in our opinion certain
disclosures of directors’ remuneration have
not been made or the part of the directors’
remuneration report to be audited is not in
agreement with the accounting records and
returns.

We have nothing to report in respect of
these matters.

15. OTHER MATTERS WHICH
WE ARE REQUIRED TO ADDRESS
15.1. Auditor tenure
Following the recommendation of the audit
committee, we were appointed in June 2019 to
audit the financial statements for the year ending
31 December 2020 and subsequent financial
periods. The Board’s decision was approved
by the shareholders at the AGM in May 2020.
The period of total uninterrupted engagement
of the firm is 2 years, covering the years ending
31 December 2020 and 31 December 2021.

15.2. Consistency of the audit report with
the additional report to the audit committee
Our audit opinion is consistent with the additional
report to the audit committee we are required
to provide in accordance with ISAs (UK).

REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS

12. OPINIONS ON OTHER MATTERS
PRESCRIBED BY THE COMPANIES
ACT 2006
In our opinion the part of the directors’
remuneration report to be audited has been
properly prepared in accordance with the
Companies Act 2006.

In our opinion, based on the work undertaken
in the course of the audit:
´ The information given in the strategic report
and the directors’ report for the financial year
for which the financial statements are
prepared is consistent with the financial
statements; and

´ The strategic report and the directors’ report
have been prepared in accordance with
applicable legal requirements.

In the light of the knowledge and understanding
of the group and the parent company and their
environment obtained in the course of the
audit, we have not identified any material
misstatements in the strategic report or the
directors’ report.

13. CORPORATE GOVERNANCE
STATEMENT
The Listing Rules require us to review the
directors’ statement in relation to going concern,
longer-term viability and that part of the
Corporate Governance Statement relating
to the group’s compliance with the provisions
of the UK Corporate Governance Code
specified for our review.

Based on the work undertaken as part of
our audit, we have concluded that each of the
following elements of the Corporate Governance
Statement is materially consistent with the
financial statements and our knowledge obtained
during the audit:
´ The directors’ statement with regards to
the appropriateness of adopting the going
concern basis of accounting and any material
uncertainties identified set out on page 53;
´ The directors’ explanation as to its assessment

of the group’s prospects, the period this
assessment covers and why the period is
appropriate set out on page 53;

´ The directors’ statement on fair, balanced and

understandable set out on page 108;

´ The board’s confirmation that it has carried

out a robust assessment of the emerging and
principal risks set out on page 108;

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Morgan Advanced Materials
Annual Report 2021

117

Morgan Advanced Materials Annual Report 2021CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021

Revenue

Operating costs before amortisation of intangible assets
Profit from operations before amortisation of intangible assets

Amortisation of intangible assets
Operating profit/(loss)

Finance income
Finance expense
Net financing costs

Share of profit of associate (net of income tax)
Profit/(loss) before taxation

Income tax (expense)/credit
Profit/(loss) from continuing operations
Profit from discontinued operations2
Profit/(loss) for the year
Profit/(loss) for the year attributable to:
Shareholders of the Company
Non-controlling interests

Earnings per share
Continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
Continuing operations
Basic earnings per share
Diluted earnings per share
Dividends3
Interim dividend

Proposed final dividend

– pence
– £m
– pence
– £m

31 December 2021

31 December 2020

Results
before
specific
adjusting
items
£m

950.5

(826.0)
124.5

(6.0)
118.5

0.8
(10.0)
(9.2)

0.4
109.7

(29.7)
80.0
–
80.0

71.5
8.5
80.0

Note

4
3

Specific
adjusting
items1
£m

–

Total
£m

950.5

Results
before
specific
adjusting
items
£m

910.7

Specific
adjusting
items1
£m

–

(87.4)
(87.4)

–
(87.4)

–
–
–

–
(87.4)

13.3
(74.1)
2.0
(72.1)

(70.6)
(1.5)
(72.1)

(5.4)
(5.4)

–
(5.4)

–
–
–

–
(5.4)

1.5
(3.9)
5.7
1.8

2.3
(0.5)
1.8

(831.4)
119.1

(819.0)
91.7

(6.1)
85.6

0.9
(12.8)
(11.9)

0.6
74.3

(20.2)
54.1
–
54.1

48.1
6.0
54.1

(6.0)
113.1

0.8
(10.0)
(9.2)

0.4
104.3

(28.2)
76.1
5.7
81.8

73.8
8.0
81.8

25.9p
25.7p

23.9p
23.7p

3.20p
9.1
5.90p
16.8

Total
£m

910.7

(906.4)
4.3

(6.1)
(1.8)

0.9
(12.8)
(11.9)

0.6
(13.1)

(6.9)
(20.0)
2.0
(18.0)

(22.5)
4.5
(18.0)

(7.9)p
(7.9)p

(8.6)p
(8.6)p

2.00p
5.7
3.50p
10.0

CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021

Profit/(loss) for the year

Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain/(loss) on defined benefit plans
Tax effect of components of other comprehensive income not reclassified

Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences
Tax effect of components of other comprehensive income that may be reclassified
Cash flow hedges:
Change in fair value
Transferred to profit or loss

Total other comprehensive income/(expense)
Total comprehensive income/(expense)

Attributable to:
Shareholders of the Company
Non-controlling interests

Total comprehensive income/(expense) attributable to shareholders of the Company arising from:
Continuing operations
Discontinued operations

31 December
2021
£m

31 December
2020
£m

Note

81.8

(18.0)

23
8

55.5
(0.6)
54.9

1.0
(0.8)

(0.1)
(0.4)
(0.3)
54.6
136.4

128.5
7.9
136.4

122.8
5.7
128.5

(33.9)
0.4
(33.5)

(3.2)
–

0.4
(0.8)
(3.6)
(37.1)
(55.1)

(59.8)
4.7
(55.1)

(61.8)
2.0
(59.8)

1. Details of specific adjusting items from continuing operations are given in note 6 to the consolidated financial statements.

2. Profits from discontinued operations are entirely attributable to the Shareholders of the Company.

3. The proposed final dividend is based upon the number of Ordinary shares outstanding at the balance sheet date.

118

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CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021

Assets
Property, plant and equipment
Right-of-use assets
Intangible assets: goodwill
Intangible assets: other
Investments
Other receivables
Deferred tax assets
Total non-current assets
Inventories
Derivative financial assets
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Borrowings
Lease liabilities
Employee benefits: pensions
Provisions
Non-trade payables
Deferred tax liabilities
Total non-current liabilities
Borrowings and bank overdrafts
Lease liabilities
Trade and other payables
Current tax payable
Provisions
Derivative financial liabilities
Total current liabilities
Total liabilities
Total net assets
Equity
Share capital
Share premium
Reserves
Retained earnings
Total equity attributable to shareholders of the Company
Non-controlling interests
Total equity

The financial statements were approved by the Board of Directors on 3 March 2022 and were signed on its behalf by:

Pete Raby
Chief Executive Officer

Peter Turner
Chief Financial Officer

Note

11
12
13
13
14
17
15

21
21
23
25
19
15

21
21
19

2021
£m

248.1
31.9
172.9
10.2
–
2.9
15.9
481.9
140.7
0.6
161.4
0.6
127.3
430.6
912.5

174.0
40.0
102.7
14.8
2.4
1.2
335.1
–
9.8
177.2
25.4
14.8
0.6
227.8
562.9
349.6

71.3
111.7
18.5
109.1
310.6
39.0
349.6

2020
£m

267.6
35.5
173.2
12.2
7.2
4.0
14.4
514.1
122.4
1.0
143.6
1.6
147.8
416.4
930.5

177.5
43.1
176.3
8.5
4.9
0.5
410.8
71.3
11.5
148.4
20.4
27.3
0.8
279.7
690.5
240.0

71.3
111.7
18.7
0.6
202.3
37.7
240.0

At 1 January 2020
(Loss)/profit for the year
Other comprehensive income/
(expense):
Remeasurement loss on defined
benefit plans and related taxes
Foreign exchange differences
Cash flow hedging fair value
changes and transfers
Total comprehensive income/
(expense)
Transactions with owners:
Dividends
Purchase of non-controlling
interest
Equity settled share-based
payments
Own shares acquired for share
incentive schemes (net)
At 31 December 2020

At 1 January 2021
Profit for the year
Other comprehensive income/
(expense):
Remeasurement gain on defined
benefit plans and related taxes
Foreign exchange differences and
related taxes
Cash flow hedging fair value
changes and transfers
Total comprehensive income/
(expense)
Transactions with owners:
Dividends
Equity settled share-based
payments
Own shares acquired for share
incentive schemes (net)
At 31 December 2021

Share
capital
£m

Share
premium
£m

Translation
reserve
£m

Hedging
reserve
£m

Fair value
reserve
£m

Capital
redemption
reserve
£m

Other
reserves
£m

Retained
earnings
£m

71.3
–

111.7
–

(13.6)
–

0.8
–

(1.0)
–

35.7
–

0.6
–

64.7
(22.5)

Total
parent
equity
£m

270.2
(22.5)

Non-
controlling
interests
£m

41.5
4.5

Total
equity
£m

311.7
(18.0)

–
–

–

–
–

–

–
71.3

71.3
–

–
111.7

111.7
–

–

–
(3.4)

–
–

–

(0.4)

(3.4)

(0.4)

–

–
(17.0)

(17.0)
–

–

0.3

–

–
0.4

0.4
–

–

(0.5)

0.3

(0.5)

–

–
–

–

–
–

–

–
(1.0)

(1.0)
–

–
35.7

35.7
–

–

–
–

–

–
0.6

0.6
–

–

(33.5)
–

(33.5)
(3.4)

–
0.2

(33.5)
(3.2)

–

(0.4)

–

(0.4)

(56.0)

(59.8)

4.7

(55.1)

(5.7)

(7.9)

(13.6)

(2.2)

(0.6)

(2.8)

1.2

–

1.2

(1.4)
0.6

(1.4)
202.3

0.6
73.8

202.3
73.8

–
37.7

37.7
8.0

(1.4)
240.0

240.0
81.8

54.9

–

54.9

–

0.3

(0.1)

0.2

(0.5)

–

(0.5)

128.7

128.5

7.9

136.4

(19.1)

(6.6)

(25.7)

4.5

–

4.5

–
71.3

–
111.7

–
(16.7)

–
(0.1)

–
(1.0)

–
35.7

–
0.6

(5.6)
109.1

(5.6)
310.6

–
39.0

(5.6)
349.6

Details of the reserves are provided in note 20.

120

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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

Operating activities
Profit/(loss) for the year from continuing operations
Profit for the year from discontinued operations
Adjustments for:
Depreciation – property, plant and equipment
Depreciation – right-of-use assets
Amortisation
Net financing costs
Profit on disposal of business
Non-cash specific adjusting items included in operating profit
Share of profit from associate (net of income tax)
Loss/(profit) on sale of property, plant and equipment

Income tax expense

Equity settled share-based payment expense
Cash generated from operations before changes in working capital and provisions

(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in trade and other payables
(Decrease)/increase in provisions
Payments to defined benefit pension plans (net of IAS 19 pension charges)
Cash generated from operations

Interest paid – borrowings and overdrafts
Interest paid – lease liabilities
Income tax paid
Net cash from operating activities

Investing activities
Purchase of property, plant and equipment and software
Purchase of investments
Acquisition of business assets
Proceeds from sale of property, plant and equipment
Interest received
Disposal of investments
Disposal of subsidiaries, net of cash disposed
Net cash from investing activities

Financing activities
Purchase of own shares for share incentive schemes
Proceeds from exercise of share options
Increase in borrowings
Reduction and repayment of borrowings
Payment of lease liabilities
Dividends paid to shareholders of the Company
Dividends paid to non-controlling interests
Purchase of shares from non-controlling interest
Net cash from financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at year end

122

31 December
2021
£m

31 December
2020
£m

Note

76.1
5.7

30.1
7.9
6.0
9.2
(7.1)
10.4
(0.4)
0.3
28.2
4.5
170.9

(17.2)
(20.1)
28.3
(5.8)
(16.9)
139.2

(6.1)
(2.3)
(25.4)
105.4

(31.6)
(0.9)
(1.9)
5.5
0.8
14.2
0.8
(13.1)

(5.9)
0.3
–
(72.3)
(8.6)
(19.1)
(6.6)
–
(112.2)

(19.9)
147.8
(0.6)
127.3

(20.0)
2.0

32.7
9.2
6.1
11.9
(2.2)
65.7
(0.6)
(1.0)
6.9
0.7
111.4

36.1
18.4
(19.7)
17.8
(17.9)
146.1

(7.5)
(2.8)
(26.0)
109.8

(30.0)
(1.0)
–
1.4
0.9
–
5.3
(23.4)

(1.8)
0.4
7.9
(49.8)
(9.9)
(5.7)
(7.9)
(2.8)
(69.6)

16.8
132.8
(1.8)
147.8

7
2,6

8
4

2
2

20
20
18
18
18

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS
Morgan Advanced Materials plc (the ‘Company’) is a public company limited by shares incorporated in the UK under The Companies Act and is
headquartered in the UK. The address of the registered office is given in ‘Shareholder information’ on page 188. The principal activities of the Company
and its subsidiaries and the nature of the Group’s operations are set out in the Strategic Report on pages 2 to 57.

The Group’s financial statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’), and include the Group’s
interest in associates. The Parent Company financial statements present information about the Company as a separate entity and not about its Group.
These consolidated financial statements have been drawn up to 31 December 2021. The Group maintains a 12-month calendar financial year ending
on 31 December.

The Group financial statements have been prepared and approved by the Directors in accordance with the requirements of the Companies Act 2006
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. The Company has elected to prepare its Parent Company financial
statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework; these are presented on pages 169 to 184.

Except for the changes set out in the adoption of new and revised standards section, the accounting policies set out below have been applied consistently
to all periods presented in these Group financial statements.

SIGNIFICANT ACCOUNTING POLICIES
Measurement convention
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial
instruments and financial instruments designated as fair value through other comprehensive income (FVOCI).

Functional and presentation currency
The Group’s financial statements are presented in pounds sterling, which is the Company’s functional currency.

Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control commences until the date on which control ceases.

(ii) Acquisitions
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to
the Group. The Group measures goodwill as the acquisition-date fair value of the consideration transferred, including the amount of any non-controlling
interest in the acquiree, less the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed, including contingent liabilities
as required by IFRS 3.

Consideration transferred includes the fair values of assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, equity
interests issued by the Group, contingent consideration, and share-based payment awards of the acquiree that are replaced in the business combination.
Any contingent consideration payable is recognised at fair value at the acquisition date. Subsequent changes to the fair value of contingent consideration that
is not classified as equity is recognised in the income statement.

Transaction costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, due diligence fees and other professional
and consulting fees, are expensed as incurred.

(iii) Associates
Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence
is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Associates are accounted for using the equity
method and are initially recognised at cost.

(iv) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the
Group’s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.

123

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are translated to pounds sterling at the foreign exchange rate ruling at that date. Non-monetary assets
and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to pounds sterling at foreign exchange
rates ruling at the dates the fair values are determined.

(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to pounds sterling
at foreign exchange rates ruling at the balance sheet date. The revenues, expenses and cash flows of foreign operations are translated to pounds sterling
at an average rate for the period where this approximates to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences
arising on retranslation since the adoption of IFRS are recognised directly in other comprehensive income and accumulated in the translation reserve.

Specific adjusting items
The Group uses specific adjusting items, which are not defined or specified under IFRS. These specific adjusting items, which are not considered to be
a substitute for IFRS measures, provide additional helpful information. In the consolidated income statement the Group presents specific adjusting items
separately. In the judgement 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 provide the reader with an alternative understanding of the financial information and an indication of the underlying performance of
the Group.

Revenue
Revenue is recognised when or as the Group satisfies a performance obligation by transferring a promised good or service to a customer. The Group’s
principal performance obligation is the provision of products and components, and is satisfied at a point in time and subject to payment terms typical to the
geography in which the business operates. Products and components are transferred when the customer obtains control of the goods. For goods that are
collected by the customer, revenue is recognised at the point the customer has taken physical possession of the goods. For contracts that include delivery
of goods, the delivery element of the contract constitutes a separate performance obligation because it is distinct. For these contracts, control of the goods
does not transfer to the customer until the goods have been delivered and therefore both performance obligations are satisfied simultaneously. Revenue
for these contracts is therefore recognised on delivery.

Substantially all of the Group’s revenue is derived from short-term contracts for the provision of products and components. A smaller portion of the
Group’s revenue relates to project-based business, principally within the Thermal Ceramics global business unit. Revenue for these contracts is recognised
in line with fulfilment of contractual performance obligations stated in the contract and is not significant; consequently (except for trade receivables) the
Group does not have significant assets or liabilities relating to its contracts with customers.

Revenue is only recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
The transaction price is determined as the amount receivable for the provision of products and components excluding rebates, discounts and similar items.
Determining the transaction price does not require significant judgement. The costs incurred in obtaining contracts are not material. The Group acts as
a principal in its transactions with customers. In 2021, there were no material adjustments to revenue which related to performance obligations satisfied
in the previous year.

IFRS 15 Revenue from Contracts with Customers requires revenue to be disaggregated into categories that depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors. The Group discloses revenue disaggregated by geography, end market and by
global business unit, which are aligned by product type, in note 3 to the consolidated financial statements.

Research and development
The Group’s research and development expenditure is widely dispersed with no individually material projects. It is often some time into a project before
the Group is able to test technical or commercial feasibility and therefore whether the Group will continue to fund any individual project, as such materially
all of the Group’s expenditure is recognised in the income statement as an expense as incurred.

Development activities are capitalised when research findings are applied to a plan or design for the production of new or substantially improved products
and processes and that relate to a product or process that is technically and commercially feasible and the Group has sufficient resources to complete
development, use and sale of products or processes. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment
losses.

Finance income and expense
Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested,
gains and losses on hedging instruments that are recognised in the income statement, interest on IFRS 16 lease liabilities and net interest on IAS 19
pension assets and IAS 19 obligations. Interest income is recognised in the income statement as it accrues, using the effective interest method.

Borrowing costs (interest and other costs) are capitalised when they are incurred on raising specific funds to finance a major capital project which will
be a significant productive asset, or to the extent that funds borrowed generally are used for the purposes of obtaining a qualifying asset.

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Taxation
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that
it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and differences relating to investments
in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Discontinued operations
Where the Group has disposed of or has classified as held-for-sale a business component which represents a separate major line of business or geographical
area of operations, it classifies such operations as discontinued. The post-tax profit or loss of the discontinued operations is shown as a single line on the face
of the consolidated income statement, separate from the results of the rest of the Group.

Hedge accounting
The Group designates certain derivatives as hedging instruments in respect of foreign currency risk and interest rate risk in cash flow hedges. Hedges of
foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship, the Group documents the
relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in
offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the
following hedge effectiveness requirements:
´ there is an economic relationship between the hedged item and the hedging instrument
´ the effect of credit risk does not dominate the value changes that result from that economic relationship and
´ the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the

quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.

If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated
hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the
qualifying criteria again. The Group designates the full change in the fair value of a forward contract (i.e. including the forward elements) as the hedging
instrument for all of its hedging relationships involving forward contracts.

Note 22 sets out details of the fair values of the derivative instruments used for hedging purposes.

Movements in the hedging reserve in equity are detailed in note 20.

Fair value hedges
The fair value change on qualifying hedging instruments is recognised in profit or loss.

Where hedging gains or losses are recognised in profit or loss, they are recognised in the same line as the hedged item.

Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges
is recognised in other comprehensive income and accumulated under the heading of hedging reserve, limited to the cumulative change in fair value of the
hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged
item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of
a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are
removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect
other comprehensive income. Furthermore, if the Group expects that some or all of the loss accumulated in the hedging reserve will not be recovered
in the future, that amount is immediately reclassified to profit or loss.

The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing,
if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for
prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and
is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated
in the cash flow hedge reserve is reclassified immediately to profit or loss.

124

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1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses. The cost of self-constructed
assets includes the cost of materials, direct labour, and an appropriate proportion of production overheads.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Gains and losses on the disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount
of the asset. Gains and losses on the disposal of property, plant and equipment are recognised in ‘Operating costs before amortisation of intangible assets’
in the income statement.

(ii) Depreciation of owned assets
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and
equipment. Land is not depreciated. Depreciation methods, useful lives and residual values are reviewed at each balance sheet date. The estimated useful
lives are as follows:

Buildings
Plant, equipment and fixtures

50 years
3-20 years

Leasing
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months
or less) and leases of low value assets (defined as leases of a value of less than USD 5,000 at lease commencement). For these leases, the Group recognises
the lease payments as an operating expense on a straight-line basis over the term of the lease.

(i) Lease liabilities
The lease liability is initially measured at the present value of future lease payments, discounted by using the rate implicit in the lease or, where the rate
cannot be readily determined, an incremental borrowing rate. The lease payments included in the lease liability comprise fixed lease payments, variable
payments that depend on an index or rate and any payments due under lease extension, termination or purchase options to the extent they are assessed
as reasonably certain.

The lease liability is subsequently measured by using the effective interest method and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever there is a lease modification,
a change in lease term or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of other lease variables,
such as purchase options. A remeasurement will also occur when the lease payments change due to changes in index rates.

(ii) Right-of-use assets
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date,
less any lease incentives received and initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying
asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs
relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

(iii) Depreciation of right-of-use assets
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the
commencement date of the lease.

Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and
the fair value of assets, liabilities and contingent liabilities acquired.

Goodwill is not amortised. Goodwill is allocated to cash-generating units or groups of cash-generating units and is tested at least annually for impairment.
If the recoverable amount of the cash-generating unit or group of cash-generating units is less than the carrying amount of the unit or group, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit or group and then to reduce the carrying amount of the other
intangibles and other assets of the unit or group pro-rata on the basis. An impairment loss recognised for goodwill is not reversed in a subsequent period.

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below) and impairment losses. Amortisation
is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets
with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they
are available for use. The estimated useful lives are as follows:

Capitalised development costs
Computer software
Customer relationships
Technology and trademarks

3 years
3-10 years
15-20 years
15-20 years

When the Group incurs configuration and customisation costs as part of a cloud-based software-as-a-service agreement, and where this does not result
in the creation of an asset which the Group has control over, then these costs are expensed.

Impairment of non-financial assets, excluding goodwill
The carrying amounts of the Group’s assets and cash-generating units are reviewed at each balance sheet date to determine whether there is any indication
of impairment. If any such indication exists, the asset or cash-generating unit’s recoverable amount is estimated.

The recoverable amount of other assets and cash-generating units is the greater of their value in use and fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset or cash-generating unit. An impairment loss is recognised immediately in profit or loss.

An impairment loss is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss
was recognised. A reversal of an impairment loss is recognised immediately in profit or loss to the extent that the asset’s or cash-generating unit’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.

Investments in equity securities
Investments in equity securities held by the Group are classified as FVOCI and are stated at fair value, with any resultant gain or loss being recognised
directly in other comprehensive income (in the fair value reserve), except for impairment losses. The gains or losses arising from changes in fair value
are recognised in other comprehensive income until the security is disposed of, at which time the cumulative gain or loss previously recognised in other
comprehensive income and accumulated in the FVOCI reserve is transferred to retained earnings.

Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses.

The cost of inventories is based on the first-in-first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their
existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based
on normal operating capacity.

Trade and other receivables
Trade receivables are recorded initially at transaction price and subsequently measured at amortised cost less the loss allowance. The loss allowance is
recognised based on management’s expectation of losses without regard to whether an impairment trigger happened or not (an ‘expected credit loss
(ECL)’ model). The Group measures the loss allowance for trade receivables at an amount equal to lifetime ECL, estimated based on historical write-offs
and adjusted for forward-looking information where appropriate. Trade receivables more than 180 days past due are generally considered not recoverable
and a 100% loss allowance is recognised, except where historical experience with certain customers or geographies indicates otherwise. The loss is
recognised in the income statement. Trade receivables are written off when recoverability is assessed as being remote. Subsequent recoveries of amounts
previously written off are credited to the income statement.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Short-term deposits include demand deposits and short–term highly liquid investments
with maturities of three months or less that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of borrowings for
the purpose of the Group statement of cash flows.

Trade and other payables
Trade and other payables are recognised initially at transaction price. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method.

Borrowings
Borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised
cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective
interest basis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following
two conditions:

(i) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities

with another party under conditions that are potentially unfavourable to the Group; and

(ii) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver
a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash
or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form
of the Company’s own shares, the amounts presented in these financial statements for called-up share capital and share premium account exclude amounts
in relation to those shares.

Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial instruments that
are classified in equity are dividends and are recorded directly in equity.

Pensions and other long-term service benefits
(i) Defined contribution plans
For defined contribution plans, the Group pays contributions to either publicly or privately administered pension plans, and the Group has no further
payment obligations once the contributions have been paid. Obligations for contributions to defined contribution pension plans are recognised as an
expense in the income statement as incurred.

(ii) Defined benefit plans
A defined benefit plan is any retirement plan which is not a defined contribution plan. Typically, defined benefit plans define an amount of retirement
benefit that an employee will receive, usually depending on one or more factors such as age, years of service and earnings.

The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit
that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA-credit-rated bonds that have maturity dates
approximating the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method.

When the calculation results in a benefit to the Group, the recognised asset is limited to the total of the present value of economic benefits available in the
form of any future refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the Group if it is realisable
during the life of the plan, or on settlement of the plan liabilities. Remeasurement gains and losses, differences between the interest income and actual
returns on assets, and the effect of changes in actuarial assumptions, are recognised in full in other comprehensive income in the year in which they arise.

(iii) Long-term service benefits
The Group’s net obligation in respect of long-term service benefits, other than pension plans, is the amount of future benefit that employees have earned
in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method, or similar approximation,
and is discounted to its present value and the fair value of any related assets is deducted. The discount rate is the yield at the balance sheet date on
AA-credit-rated bonds that have maturity dates approximating the terms of the Group’s obligations.

Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognised as an expense, with a corresponding increase in equity,
over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the
actual number of awards for which the related service and non-market performance conditions are met, such that the amount ultimately recognised
as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

Provisions, contingent liabilities and contingent assets
A provision is recognised in the consolidated balance sheet when the Group has a present legal or constructive obligation as a result of a past event and
there is probable outflow of resources which can be reliably measured and will be required to settle the obligation. Provisions are recognised at an amount
equal to the best estimate of the expenditure required to settle the Group’s liability. If the effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate reflective of the current market assessments of the time value of money and, where appropriate, the risks
specific to the liability.

A contingent liability is disclosed, where significant, if the existence of the obligation will only be confirmed by future events or where the amount of the
obligation cannot be measured with reasonable reliability. A contingent liability is not disclosed if the likelihood of a material outflow in excess of any amounts
provided is considered remote. Obligations arising from restructuring plans are recognised when detailed formal plans have been established and when
there is a valid expectation that such a plan will be carried out. The Group’s contingent liabilities are reviewed on a regular basis.

A contingent asset is not recognised but is disclosed, where significant, if an inflow of economic benefit is probable.

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Preference share capital
Preference share capital is classified as a financial liability within borrowings if the substance of the shares does not contain an equity element. Dividends
on preference share capital are classified as finance charges within the consolidated income statement.

Share capital
Ordinary shares are classified as equity.

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax
effects, and is recognised as a deduction from equity. Repurchased shares and the purchase of own shares by The Morgan General Employee Benefit Trust
(the Trust) are presented as a deduction from total equity.

Dividends
Dividends payable are recognised as a liability in the Company’s financial statements in the period in which the dividends are declared and approved.
Dividends declared after the balance sheet date are not recognised as there is no present obligation at that the balance sheet date.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the
Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis.

Critical accounting judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated
financial statements is included in the following notes:

Note 6: Specific adjusting items
The Group separately presents specific adjusting items in the consolidated income statement which, in the Directors’ judgement, need to be disclosed
separately by virtue of their size and incidence in order for users of the consolidated financial statements to obtain an alternative understanding of the
financial information and the underlying performance of the business. These are items which occur infrequently and include (but are not limited to):
´ Individual restructuring projects which are material or relate to the closure of a part of the business and are not expected to recur;
´ Impairment of non-financial assets which are material;
´ Gains or losses on disposal or exit of businesses;
´ Significant costs incurred as part of the integration of an acquired business;
´ Gains or losses arising on significant changes to or closures of defined benefit pension plans.

Determining whether an item is part of specific adjusting items requires judgement to determine the nature and the intention of the transaction.

Note 15: Recognition of deferred tax assets
Deferred tax assets are recognised when management judges it probable that future taxable profits will be available against which the temporary differences
can be utilised. This relies on the use of estimates of future taxable profits which may differ from the actual results delivered. In the event future taxable
profits do not materialise this would lead to a write-off of recognised deferred tax assets.

Note 25: Provisions and contingent liabilities
Due to the nature of its operations, the Group holds provisions for its environmental obligations. Judgement is needed in determining whether a contingent
liability has crystallised into a provision. Management assesses whether there is sufficient information to determine that an environmental liability exists and
whether it is possible to estimate with sufficient reliability what the cost of remediation is likely to be. For environmental remediation matters, this tends to
be at the point in time when a remediation feasibility study has been completed, or sufficient information becomes available through the study to estimate
the costs of remediation.

The Group will recognise a legal provision at the point when the outcome of a legal matter can be reliably estimated. Estimates are based on past
experience of similar issues, professional advice received and the Group’s assessment of the most likely outcome. The timing of the utilisation of these
provisions is frequently uncertain, reflecting the complexity of issues and the outcome of various court proceedings and associated negotiations.

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1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are included in the below notes.

Climate change is a global challenge and an emerging risk to businesses, people and the environment across the world. We have a role to play in improving
our energy management, reducing our carbon emissions and by helping our customers do the same. Growing awareness of climate change and customer
sustainability targets will provide impetus for business growth as we provide products, services and solutions that increase efficiency and reduce customers’
energy use and carbon emissions. As a result, in our view climate change does not create any further key sources of estimation uncertainty. For further
detail see the Risk Management and Sustainability sections of the Strategic Report on pages 38 and 16.

Note 23: Pensions and other post-retirement employee benefits: key actuarial assumptions
The principal actuarial assumptions applied to pensions are shown in note 23, including a sensitivity analysis. The actuarial evaluation of pension assets and
liabilities is based on assumptions in respect of inflation, future salary increases, discount rates, returns on investments and mortality rates. Relatively small
changes in the assumptions underlying the actuarial valuations of pension schemes can have a significant impact on the net pension liability included in the
balance sheet.

In 2018, based on the results of a High Court hearing, the Group recognised a liability in relation to Guaranteed Minimum Pensions (GMPs), an initiative
to remove inequalities in scheme benefits that arise from Guaranteed Minimum Pensions being unequal between men and women. As a result of a further
judgement in November 2020 relating to the need to equalise historical transfer payments, a further charge of £0.1 million has been included in these
accounts, refer also to note 23. Legal uncertainty remains in this area in relation to how equalisation will be practically implemented.

Note 25: Environmental provisions and contingent liabilities
Provisions for environmental costs are estimated based on current legal and constructive requirements. Actual costs and cash outflows can differ from
current estimates because of changes in underlying factors including laws and regulations, public expectations, prices, more detailed analysis of site
conditions and innovations in clean-up technology. The ultimate requirement for remediation and its costs are inherently difficult to estimate. Amounts
provided are the Group’s best estimate of exposure based on currently available information. Although at present no additional costs of environmental
issues have been identified beyond our best estimate, future possible costs that are not provided for could be material to the Group’s results in the period
in which they are recognised. However, we do not expect these costs to have a material impact on the Group’s financial position or liquidity.

Note 6: Impairment of non-financial assets (excluding goodwill)
In addition to the impairment assessment of goodwill, described below, management also monitors the performance of individual assets and cash-generating
units. Where indicators of impairment exist, they perform an impairment review on those assets or cash-generating units.

For assets or cash-generating units which the business continues to use, the review process relies on the use of estimates of the future profitability and
cash flows which may differ from the actual results delivered. There is a higher level estimation uncertainty inherent in these assumptions and it is reasonably
possible that a change in these assumptions could lead to a reversal of the impairment charge.

Where non-financial assets or cash-generating units are not utilised by the business and will not be utilised in the future they are written down to their
recoverable amount. There is a lower level of judgement associated with these impairments.

Other assumptions and estimates which have a lower risk of resulting in a material adjustment to the carrying amounts of assets
and liabilities within the next 12 months include:
Notes 8 and 15: Taxation
The level of current tax and deferred tax recognised is dependent on the tax rates in effect at the balance sheet date, and on subjective judgements as to
the outcome of decisions to be made by the tax authorities in the various tax jurisdictions around the world in which the Group operates.

The Group periodically assesses its liabilities and contingencies for all tax years open to audit based on the latest information available. The Group records
its best estimate of these tax liabilities, including related interest charges. Whilst management believes it has adequately provided for the probable outcome
of these matters, future results may include adjustments to these estimated tax liabilities and the final outcome of tax examinations may result in a materially
different outcome than that assumed in the tax liabilities. Provisions are made against individual exposures taking into account the specific circumstances
of each case, including the strengths of technical arguments, past experience with tax authorities, recent case law or rulings on similar issues and external
advice received.

Note 22: Credit risk
Note 22 contains information about the Group’s exposure to credit risk, including a sensitivity analysis. The Group establishes a loss allowance for its
estimate of expected credit losses against receivables.

1. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS continued
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 Strategic Report
on pages 2 to 57. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, are described earlier in this Financial Review.
In addition, note 22 to the consolidated financial statements, includes 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 31 December 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. Total committed borrowing facilities were
£372.6 million, none of which is due to mature in the following 12 months. The amount drawn under these facilities was £172.6 million, which together
with cash and cash equivalents of £127.3 million, gave a total headroom of £327.3 million.

The principal borrowing facilities are subject to covenants that are measured biannually in June and December, being net debt to EBITDA of a maximum
of 3x and interest cover of a minimum of 4x, based on measures defined in the facilities agreements which are adjusted from the equivalent IFRS amounts.

The Group has carefully modelled its cash flow outlook, taking account of reasonably possible changes in trading performance, exchange rates and plausible
downside scenarios. This review indicated that there was sufficient headroom and liquidity for the business to continue for the 18-month period based on
the facilities available as discussed in note 22 to the financial statements. The Group was also expected to be in compliance with the required covenants
discussed above.

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 underlying revenue. Based on this assessment, a combined reduction in EBITDA of 80% and an increase in net debt
of 80% would still allow the Group to operate within its financial covenants. The Directors do not consider either of these scenarios to be plausible given
the diversity of the Group’s end-markets and its broad manufacturing base.

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. As part of the ongoing risk management process, principal and emerging risks are identified and reviewed on a regular basis.
This process includes the ongoing review of the impact of the pandemic on the Group and its stakeholders. Potential uncertainties in demand remain across
the countries that the Group operates in as a result of COVID-19, despite these uncertainties the Group saw a robust recovery in most of its end-markets,
leading to a return to growth for the 2021 financial year. In addition, the Directors have assessed the risk of climate change and do not consider that it will
impact the Group’s ability to operate as a going concern for the period under consideration.

The Board fully recognises the challenges that lie ahead but, after making enquiries, and in the absence of any material uncertainties, the Directors have
a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of 18 months from
the date of signing this Annual Report and Accounts. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

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 tables in this Report. Further details can be found on pages 55 to 57, ‘Alternative Performance Measures’.

NEWLY ADOPTED STANDARDS
There were no new standards applicable to the Group in the year.

ACCOUNTING DEVELOPMENTS AND CHANGES
New accounting standards in issue but not yet effective
New standards and interpretations that are in issue but not yet effective are listed below:
´ IFRS 17 (including the June 2020 Amendments to IFRS 17) – Insurance Contracts;
´ Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate of Joint Venture;
´ Amendments to IAS 1 – Classification of Liabilities as Current or Non-current;
´ Amendments to IFRS 3 – Reference to the Conceptual Framework;
´ Amendments to IAS 16 – Property, Plant and Equipment – Proceeds before Intended Use;
´ Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract;
´ Annual Improvements to IFRS Standards 2018-2020 Cycle – Amendments to IFRS First Time Adoption of International Financial Reporting Standards,

IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture;

´ Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies;
´ Amendments to IAS 8 – Definition of Accounting Estimates;
´ Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction.

The adoption of the above standards and interpretations is not expected to lead to any material changes to the Group’s accounting policies or have any
other material impact on the financial position or performance of the Group.

There are no other upcoming accounting standards or amendments that are applicable to the Group.

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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 disposal resulted in a loss of £0.1 million which was
recognised in specific adjusting items within the consolidated income statement, see also note 6.

The loss on disposal is as follows:

2. ACQUISITIONS AND DISPOSALS continued
Acquisition of Delamag
On 1 March 2021, Morgan Technical Ceramics Limited wholly 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 assets acquired and the consideration is as follows:

Trading net assets of disposal group
Goodwill of disposal group
Cumulative foreign exchange gains and losses recycled on disposal
Total net assets

Consideration
Transaction costs associated with the disposal
Loss on disposal

31 December
2021
£m

0.6
0.1
(0.1)
0.6

0.6
(0.1)
(0.1)

In 2021, Latrobe generated an operating profit of £nil on revenues of £0.1 million in the period prior to the disposal (year ended 31 December 2020,
£0.2 million on revenues of £3.0 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
was £14.2 million, comprising £12.2 million of initial consideration, on a cash-free, debt-free basis, a further consideration of £0.2 million for working capital
adjustments and £1.8 million of contingent consideration that has been received in full in 2021. The disposal resulted in a gain of £7.2 million which was
recognised in specific adjusting items within the consolidated income statement, see also note 6.

The gain on disposal is as follows:

Investment carrying value
Total consideration
Gain on disposal

31 December
2021
£m

7.0
14.2
7.2

In 2021, the Group’s share of profit in associate (net of income tax) was £0.4 million in the period prior to the disposal (year ended 31 December 2020:
£0.6 million), see also note 14.

132

Identifiable intangible assets acquired
Goodwill
Total consideration

31 December
2021
£m

1.8
0.1
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 year. The
Delamag acquisition forms part of the Seals and Bearings operating segment.

2020
Disposal of Diamonex
On 31 August 2020, the Group completed the sale of its Diamonex business, based in Allentown, US. The transaction was structured as a sale of the
business and related assets for total consideration of £5.9 million. The consideration comprised £5.6 million paid in cash on completion and £0.3 million
of deferred consideration received in December 2021.

The disposal resulted in a gain of £2.2 million which was recognised in specific adjusting items within the consolidated income statement, see also note 6.
The gain on disposal was as follows:

Trading net assets of disposal group
Goodwill of disposal group
Cumulative foreign exchange gains and losses recycled on disposal
Total net assets

Consideration
Transaction costs associated with the disposal
Gain on disposal

In 2020, Diamonex generated an operating profit of £0.5 million on revenues of £4.3 million in the period prior to the disposal.

The disposal group was included in the Technical Ceramics operating segment.

31 December
2020
£m

2.2
0.9
0.3
3.4

5.9
(0.3)
2.2

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3. SEGMENT REPORTING
For 2020 and 2021, the Group reported as two divisions and five global business units, which have been identified as the Group’s reportable operating
segments, as detailed on pages 14, 44 to 49. 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. From 2022
onwards, we will no longer present divisional totals in our segmental reporting. We will continue to report five separate global business units.

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.

Thermal Ceramics Molten Metal Systems

Thermal Products
division

Electrical Carbon

Seals and Bearings

2021
£m

2020
£m

364.7

344.3

2021
£m

47.7

2020
£m

41.2

2021
£m

2020
£m

2021
£m

412.4

385.5

164.9

2020
£m

151.4

2021
£m

2020
£m

135.9

146.4

42.0

26.7

6.3

3.2

48.3

29.9

32.8

23.6

22.9

27.5

(2.1)

(1.9)

(0.6)

(0.3)

(2.7)

(2.2)

(0.9)

(0.7)

(0.9)

(0.4)

39.9

24.8

(2.1)
37.8

(39.4)
(14.6)

5.7

0.3
6.0

2.9

45.6

27.7

31.9

22.9

22.0

27.1

(0.9)
2.0

(1.8)
43.8

(40.3)
(12.6)

(6.3)
25.6

(3.7)
19.2

–
22.0

(0.6)
26.5

Continuing operations

Revenue from external customers

Segment adjusted operating profit1
Corporate costs
Group adjusted operating profit1
Amortisation of intangible assets
Operating profit/(loss) before specific
adjusting items
Specific adjusting items included
in operating profit/(loss) 2
Operating profit/(loss)
Finance income
Finance expense
Share of profit of associate (net of income tax)
Profit/(loss) before taxation

Segment assets

319.9

315.7

41.8

39.5

361.7

355.2

137.6

141.5

107.5

98.7

3. SEGMENT REPORTING continued

Technical Ceramics

Carbon and Technical
Ceramics division

Segment totals

Corporate costs

Continuing operations

Revenue from external customers

2021
£m

237.3

2020
£m

227.4

2021
£m

2020
£m

2021
£m

538.1

525.2

950.5

2020
£m

910.7

26.4

14.8

82.1

65.9

130.4

95.8

2021
£m

–

–
(5.9)

2020
£m

2021
£m

–

950.5

–
(4.1)

130.4
(5.9)
124.5
(6.0)

Group

2020
£m

910.7

95.8
(4.1)
91.7
(6.1)

(1.5)

(2.8)

(3.3)

(3.9)

(6.0)

(6.1)

–

24.9

12.0

78.8

62.0

124.4

89.7

(5.9)

(4.1)

118.5

85.6

(6.0)
18.9

(42.3)
(30.3)

(12.3)
66.5

(46.6)
15.4

(14.1)
110.3

(86.9)
2.8

8.7
2.8

(0.5)
(4.6)

(5.4)
113.1
0.8
(10.0)
0.4
104.3

(87.4)
(1.8)
0.9
(12.8)
0.6
(13.1)

Segment adjusted operating profit1
Corporate costs
Group adjusted operating profit1
Amortisation of intangible assets
Operating profit/(loss) before
specific adjusting items
Specific adjusting items included
in operating profit 2
Operating profit/(loss)
Finance income
Finance expense
Share of profit of associate (net of income tax)
Profit/(loss) before taxation

Segment assets

156.5

158.3

401.6

398.5

763.3

753.7

149.2

176.8

912.5

930.5

Segment liabilities

73.9

72.6

128.1

123.6

225.4

215.8

337.5

474.7

562.9

690.5

Segment capital expenditure

7.9

7.4

21.4

19.9

31.6

30.0

Segment depreciation – property,
plant and equipment

Segment depreciation – right-of-use assets

6.0

2.4

6.8

17.9

30.1

32.7

2.8

4.1

4.7

7.9

9.2

–

31.6

30.0

30.1

32.7

7.9

9.2

12.4

65.6

Segment liabilities

88.9

84.8

Segment capital expenditure

8.0

7.2

Segment depreciation – property,
plant and equipment

10.2

12.5

Segment depreciation – right-of-use assets

3.5

4.1

Segment impairment of non-financial assets

0.7

35.7

8.4

2.2

2.0

0.3

–

7.4

97.3

92.2

30.6

31.1

23.6

19.9

Segment impairment of non-financial assets

6.0

29.8

11.7

29.9

12.4

65.6

2.9

10.2

10.1

5.9

4.8

7.6

7.7

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

2. Details of specific adjusting items from continuing operations are given in note 6 to the consolidated financial statements.

2.3

12.2

14.8

0.4

3.8

4.5

–

0.7

35.7

5.5

1.1

5.7

5.4

1.2

0.1

6.4

0.6

–

5.7

0.7

–

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

2. Details of specific adjusting items from continuing operations are given in note 6 to the consolidated financial statements.

134

135

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SEGMENT REPORTING continued
REVENUE FROM EXTERNAL CUSTOMERS AND NON-CURRENT ASSETS BY GEOGRAPHY

Continuing operations

US
China
Germany
UK (the Group’s country of domicile)
Other Asia, Australasia, Middle East and Africa
Other Europe
Other North America
South America

Revenue from
external customers

Non-current assets
(excluding tax and
financial instruments)

2021
£m

336.4
114.4
68.7
38.5
174.6
157.4
33.4
27.1
950.5

2020
£m

359.8
97.1
59.3
37.5
164.6
142.3
32.9
17.2
910.7

2021
£m

181.3
29.1
34.4
101.6
61.4
36.3
6.1
15.8
466.0

2020
£m

182.3
40.9
36.1
120.0
71.2
40.3
6.2
2.7
499.7

Revenue from external customers is based on geographic location of the end-customer. Segment assets are based on geographical location of the assets.
No customer represents more than 5% of revenue.

REVENUE FROM EXTERNAL CUSTOMERS BY END MARKET

Continuing operations

Industrial
Transportation2
Chemical and petrochemical
Semiconductor and electronics
Energy3
Security and defence
Healthcare

2021
£m

431.0
160.4
98.7
63.8
66.0
60.5
70.1
950.5

20201
£m

384.7
157.0
103.7
57.8
52.8
90.1
64.6
910.7

4. OPERATING COSTS BEFORE SPECIFIC ADJUSTING ITEMS

Continuing operations

Change in stocks of finished goods and work in progress
Raw materials and consumables
Other operating costs

Employee costs:
Wages and salaries
Equity-settled share-based payment expense
Social security costs and other benefits
Pension costs

Depreciation – property, plant and equipment
Depreciation – right-of-use assets

Short-term leases and leasing of low value assets:
Plant and equipment
Other leases

Other operating charges and income:
Net foreign exchange gains
Net other operating charges

Note

11
12

2021
£m

(3.1)
255.9
141.5
394.3

259.6
4.5
54.4
15.1
333.6

30.1
7.9
38.0

–
0.3
0.3

(0.1)
59.9
59.8

2020
£m

9.0
236.2
127.0
372.2

264.2
0.7
54.2
15.4
334.5

32.7
9.2
41.9

0.1
0.4
0.5

(0.1)
70.0
69.9

1. Revenue from external customers by end market for the year ended December 2020 has been re-presented to better reflect the end-markets of our customers.

Total operating costs before specific adjusting items and amortisation of intangible assets

826.0

819.0

2. Included within Transportation is £18.7 million relating to clean transportation.

3. Included within Energy is £35.6 million relating to clean energy.

INTERCOMPANY SALES TO OTHER SEGMENTS

Thermal
Ceramics

Molten Metal
Systems

Thermal Products
division

Electrical
Carbon

Seals and
Bearings

Technical
Ceramics

Carbon and
Technical
Ceramics
division

2021
£m

2020
£m

2021
£m

2020
£m

2021
£m

2020
£m

2021
£m

2020
£m

2021
£m

2020
£m

2021
£m

2020
£m

2021
£m

2020
£m

Intercompany sales
to other segments

0.8

0.9

0.1

0.9

1.0

0.2

0.3

1.0

0.8

0.5

1.0

1.7

2.1

Amortisation of intangible assets
Total operating costs before specific adjusting items

6.0
832.0

6.1
825.1

The following costs are included in total operating costs before specific adjusting items in the table above:

1. Research and development
The Group recognised £28.5 million in expense in respect of research and development (2020: £28.0 million). These costs are included in employee costs
and other operating costs in the above table. There are no individually material project costs.

2. Audit and non-audit fees
A summary of the audit and non-audit fees in respect of services provided by the auditor charged to operating profit in the year ended 31 December 2021
is set out below.

136

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts:

in respect of the current year
in respect of the prior year

Fees payable to the Company’s auditor and its associates for other services:

the auditing of accounts of any subsidiaries of the Company

audit-related services

2021
£m

2020
£m

0.7

0.1

1.9
0.1
2.8

0.7

–

1.9
0.1
2.7

137

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. STAFF NUMBERS
The average number of persons employed by the Group (including Directors) during the year, analysed by reporting segment, was as follows:

Reportable operating segments
Thermal Ceramics
Molten Metal Systems
Thermal Products division
Electrical Carbon
Seals and Bearings
Technical Ceramics
Carbon and Technical Ceramics division
Segment total
Corporate (UK and North America)
Group

Average employee numbers have been rounded to the nearest 10.

6. SPECIFIC ADJUSTING ITEMS

Continuing operations

Specific adjusting items:
Impairment of non-financial assets
Restructuring credit/(cost)
Net profit on disposal of business
Business closure and exit costs
Total specific adjusting items before income tax
Income tax credit from specific adjusting items
Total specific adjusting items after income tax

Number of employees

2021

2020

2,410
420
2,830
1,340
1,270
2,130
4,740
7,570
50
7,620

2,540
430
2,970
1,450
1,270
2,270
4,990
7,960
50
8,010

31 December
2021
£m

31 December
2020
£m

Note

(12.4)
0.1
7.1
(0.2)
(5.4)
1.5
(3.9)

(65.6)
(24.0)
2.2
–
(87.4)
13.3
(74.1)

6. SPECIFIC ADJUSTING ITEMS continued
Restructuring costs
A net credit of £0.1 million has been recognised in the current year representing £2.1 million of further redundancy and closure costs related to the Group’s
restructuring programme, offset by a £2.2 million release of restructuring provisions booked last year in relation to this programme. Whilst the Group’s
restructuring programme was completed in 2021, we retain restructuring provision of £11.8 million for the Group’s obligations at the balance sheet date
(2020: £17.3 million). This provision includes remaining lease exit costs and multi-employer pension obligations for two sites which have been closed during
the year. The cash outflows relating to the pension obligations may continue for up to 20 years, subject to any settlement being reached in advance of that
date. Refer to note 25 for further information.

Net profit on disposal of business
The Group disposed of its 35% shareholding in Jemmtec Limited and the business assets associated with the Latrobe business during the year. These
disposals generated a profit of £7.2 million and a loss of £0.1 million, respectively. Refer to note 2 for further information.

Business closure and exit costs
A £0.2 million charge relating to the liquidation of businesses in Europe and Asia.

2020
Impairment of non-financial assets
Technical Ceramics, ceramic cores
The significant downturn in aerospace demand in 2020 resulted in impairment losses of £28.8 million relating to the ceramic cores business. The impaired
assets comprised intangible assets which had been recognised upon the acquisition of the Carpenter business in 2008, and property, plant and equipment.

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 property, plant and equipment.

Thermal Ceramics
Reduced demand in the aerospace, automotive and industrial market segments resulted in impairment losses of £35.7 million in Thermal Ceramics, which
related to the closure of sites and under-utilised product lines, as well as the impairment of intangible assets recognised upon the acquisition of Porextherm
in Germany in 2014.

Restructuring costs
Following the announcement of the Group’s restructuring programme in 2020 the Group recognised a £24.0 million charge which related to staff
redundancies, site closure costs, legal and professional fees and the exit of certain multi-employer defined contribution pension plans.

Profit on disposal of business
On 31 August 2020, the Group completed the sale of its Diamonex business, based in Allentown, US. The transaction was structured as a sale of the
business and related assets. Consideration of £5.9 million was recognised, which comprised £5.6 million cash paid on completion and £0.3 million of
deferred consideration which was paid in 2021. A gain of £2.2 million was realised on disposal – see note 2 for more details.

Specific adjusting items in relation to discontinued operations are disclosed in note 9.

2021
Impairment of non-financial assets
Technical Ceramics, Asia
An impairment charge of £6.0 million has been recognised after reassessing the value in use of property, plant and equipment in a business in Asia which
is taking longer than anticipated to generate revenues. This represents a partial impairment of the assets; the carrying value of the assets following this
impairment is £5.4 million. The calculation of value in use was performed in December 2021. A long-term growth rate of 1% was used for years beyond
the forecast period and in calculating the terminal value. A pre-tax discount rate of 11.5% was used to determine the value in use.

Electrical Carbon, Europe and North America
Impairment charges of £4.8 million and £1.0 million have been recognised after assessing the viability of two development assets in the Europe and
North America, respectively. The European asset was not deemed viable as we were unable to commission it safely and the American asset was not
deemed to be commercially viable.

Thermal Ceramics, North America
An impairment charge of £0.6 million has been recognised relating to assets associated with closed manufacturing lines within Thermal Ceramics.

Impairment charges of £70.5 million for non-financial assets which the business continues to use have been recorded during the current and previous year
(Technical Ceramics, Asia £6.0 million, Technical Ceramics, ceramic cores £28.8 million and Thermal Ceramics £35.7 million). The impaired amounts
could be reversed if the related businesses were to outperform significantly against their budget.

7. FINANCE INCOME AND EXPENSE

Continuing operations

Recognised in profit or loss
Interest on bank balances and cash deposits
Finance income

Interest expense on borrowings and overdrafts
Interest expense on lease liabilities
Net interest on IAS 19 defined benefit pension obligations
Finance expense
Net financing costs recognised in profit or loss

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

138

2021
£m

0.8
0.8

(6.1)
(2.3)
(1.6)
(10.0)
(9.2)

2020
£m

0.9
0.9

(7.4)
(2.8)
(2.6)
(12.8)
(11.9)

139

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. TAXATION – INCOME TAX EXPENSE

Continuing operations

Recognised in profit or loss
Current tax
Current year
Adjustments for prior years

Deferred tax
Current year
Adjustments for prior years

Total income tax expense recognised in profit or loss

Recognised in other comprehensive income
Tax effect on components of other comprehensive income:
Deferred tax associated with defined benefit schemes and share schemes
Deferred tax associated with foreign exchange differences
Total tax recognised in other comprehensive income

RECONCILIATION OF EFFECTIVE TAX RATE

Profit/(loss) before tax

Income tax charge/(credit) using the domestic corporation tax rate
Effect of different tax rates in other jurisdictions
Local taxes including withholding tax suffered
Permanent differences
Movements related to unrecognised temporary differences
Adjustments in respect of prior years
Statutory effective rate of tax

The effective rate of tax before specific adjusting items is 27.1% (2020: 27.2%).

30.7
0.4
31.1

(2.3)
(0.6)
(2.9)
28.2

0.6
0.8
1.4

2020
£m

(13.1)

(2.5)
(0.8)
2.0
10.2
(0.4)
(1.6)
6.9

21.0
(1.3)
19.7

(12.5)
(0.3)
(12.8)
6.9

(0.4)
–
(0.4)

2020
%

19.0
6.1
(15.2)
(77.9)
3.1
12.2
(52.7)

2021
£m

104.3

19.8
5.8
2.6
0.4
(0.2)
(0.2)
28.2

2021
%

19.0
5.5
2.5
0.4
(0.2)
(0.2)
27.0

The Group operates in many jurisdictions around the world and is subject to factors that may impact future tax charges including the recently enacted
US tax reform, 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.

140

2021
£m

2020
£m

9. DISCONTINUED OPERATIONS
The Group disposed of its Composites and Defence Systems business on 20 November 2018. The business represented a separate reportable segment
and therefore, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the disposal group was classified as discontinued.

The results from discontinued operations, which have been disclosed in the consolidated income statement, are set out below:

31 December 2021

31 December 2020

Revenue
Operating income
Profit before taxation
Income tax expense
Profit from discontinued operations

Results before
specific
adjusting
items
£m

Note

Specific
adjusting
items
£m

–
–
–
–
–

3.3
2.4
5.7
–
5.7

Basic earnings per share from discontinued operations
Diluted earnings per share from discontinued operations

10
10

Results before
specific
adjusting
items
£m

Specific
adjusting
items
£m

–
–
–
–
–

–
2.0
2.0
–
2.0

Total
£m

3.3
2.4
5.7
–
5.7

2.0p
2.0p

Total
£m

–
2.0
2.0
–
2.0

0.7p
0.7p

In 2021, £3.3 million of the specific adjusting items balance relate to the full and final settlement of certain long-term contracts. A further £2.4 million relates
to the reassessment of certain provisions associated with the disposal of the Composites and Defence Systems business.

In 2020, specific adjusting items related to the reassessment of certain provisions associated with the disposal.

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

Cash flows from discontinued operations are set out below:

Net cash generated/(used) in operating activities
Net cash generated from investing activities
Net cash used in financing activities

10. EARNINGS PER SHARE

31 December
2021
£m

31 December
2020
£m

3.3
2.0
–
5.3

(0.1)
–
–
(0.1)

Profit/(loss) for the year attributable to shareholders of the Company
Profit from discontinued operations
Profit/loss from continuing operations
Specific adjusting items
Amortisation of intangible assets
Tax effect of the above
Non-controlling interests’ share of the above adjustments
Adjusted profit for the year from continuing operations
as used in adjusted earnings per share1

31 December 2021

Basic
earnings per
share
pence

Diluted
earnings per
share
pence

Earnings
£m

73.8
(5.7)
68.1
5.4
6.0
(1.5)
(0.5)

25.9p
(2.0)p
23.9p
1.9p
2.1p
(0.5)p
(0.2)p

25.7p
(2.0)p
23.7p
1.9p
2.1p
(0.5)p
(0.2)p

31 December 2020

Basic
earnings per
share
pence

Diluted
earnings per
share
pence

(7.9)p
(0.7)p
(8.6)p
30.7p
2.1p
(4.7)p
(0.5)p

(7.9)p
(0.7)p
(8.6)p
30.5p
2.1p
(4.6)p
(0.5)p

Earnings
£m

(22.5)
(2.0)
(24.5)
87.4
6.1
(13.3)
(1.5)

77.5

27.2p

27.0p

54.2

19.0p

18.9p

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

Number of shares (millions)
Weighted average number of Ordinary shares for the purposes of basic earnings per share 1
Effect of dilutive potential Ordinary shares:
Share options
Weighted average number of Ordinary shares for the purposes of diluted earnings per share

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

2021

284.6

2.4
287.0

2020

284.7

1.4
286.1

141

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11. PROPERTY, PLANT AND EQUIPMENT

Cost
Balance at 1 January 2020
Additions
Disposals
Sale of business
Transfers between categories
Transfer to intangible assets
Effect of movement in foreign exchange
Balance at 31 December 2020

Balance at 1 January 2021
Additions
Disposals
Sale of business
Transfers between categories
Effect of movement in foreign exchange
Balance at 31 December 2021

Depreciation and impairment losses
Balance at 1 January 2020
Depreciation charge for the year
Impairment losses
Disposals
Sale of business
Transfers between categories
Effect of movement in foreign exchange
Balance at 31 December 2020

Balance at 1 January 2021
Depreciation charge for the year
Impairment losses
Disposals
Sale of business
Transfers between categories
Effect of movement in foreign exchange
Balance at 31 December 2021

Carrying amounts
At 1 January 2020
At 31 December 2020
At 31 December 2021

Land and
buildings
£m

Plant,
equipment
and fixtures
£m

Note

215.4
0.9
(1.5)
–
0.3
–
0.1
215.2

215.2
2.6
(16.7)
(0.8)
1.2
(1.7)
199.8

95.7
5.3
10.1
(0.8)
–
(0.3)
(0.3)
109.7

109.7
5.3
–
(11.6)
(0.6)
0.3
(0.1)
103.0

119.7
105.5
96.8

686.0
22.1
(18.6)
(6.5)
(0.3)
(1.5)
(3.0)
678.2

678.2
27.9
(21.1)
(3.5)
(1.2)
(3.1)
677.2

488.5
27.4
26.9
(18.3)
(5.1)
0.3
(3.6)
516.1

516.1
24.8
12.3
(20.1)
(3.5)
(0.3)
(3.4)
525.9

197.5
162.1
151.3

Total
£m

901.4
23.0
(20.1)
(6.5)
–
(1.5)
(2.9)
893.4

893.4
30.5
(37.8)
(4.3)
–
(4.8)
877.0

584.2
32.7
37.0
(19.1)
(5.1)
–
(3.9)
625.8

625.8
30.1
12.3
(31.7)
(4.1)
–
(3.5)
628.9

317.2
267.6
248.1

12. LEASES
The reconciliation in the movement of the Group’s right-of-use assets is set out in the table below:

Balance at 1 January 2020
Additions
Remeasurements
Depreciation charge for the year
Impairment losses
Effect of movement in foreign exchange
Balance at 31 December 2020

Balance at 1 January 2021
Additions
Remeasurements
Depreciation charge for the year
Effect of movement in foreign exchange
Balance at 31 December 2021

Land and
buildings
£m

Plant and
equipment
£m

Note

40.0
1.8
(2.0)
(5.5)
(5.0)
(0.1)
29.2

29.2
2.7
0.6
(4.7)
(0.3)
27.5

9.1
2.0
(0.8)
(3.7)
(0.3)
–
6.3

6.3
1.5
0.1
(3.2)
(0.3)
4.4

Total
£m

49.1
3.8
(2.8)
(9.2)
(5.3)
(0.1)
35.5

35.5
4.2
0.7
(7.9)
(0.6)
31.9

The weighted average lease term is 12.2 years for land and buildings and 3.5 years for plant and equipment (2020: 13.2 years and 3.7 years respectively).
The maturity analysis of lease liabilities is presented in note 22.

Amounts recognised in the consolidated income statement in respect of leasing arrangements are set out in the table below:

Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases and leasing of low value assets
Income from leasing owned assets

2021
£m

(7.9)
(2.3)
(0.3)
0.2
(10.3)

The total cash flows from leasing activities in the year ended 31 December 2021 was £11.0 million (2020: £12.9 million) as set out in the table below:

Payment of lease liabilities
Interest expense on lease liabilities
Expense relating to short-term leases and leasing of low value assets
Income from leasing owned assets

2021
£m

(8.6)
(2.3)
(0.3)
0.2
(11.0)

2020
£m

(9.2)
(2.8)
(0.5)
0.3
(12.2)

2020
£m

(9.9)
(2.8)
(0.5)
0.3
(12.9)

At 31 December 2021, the Group is committed to future payments of £0.6 million (2020: £0.3 million) for short-term leases and leasing of low value assets.

At 31 December 2021, the Group had entered into leases which had not yet commenced with future cash flows totalling £0.2 million (2020: £0.3 million).

The total of future minimum lease income under non-cancellable leases, where the Group is a lessor is £nil (2020: £0.3 million).

In 2021, no assets were pledged as security for liabilities (2020: none). Profit on sale of property, plant and equipment presented in the cash flow includes
£nil (2020: £1.2 million) of insurance proceeds for replacement of assets.

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13. INTANGIBLE ASSETS

Cost
Balance at 1 January 2020
Additions (externally purchased)
Disposals
Transfers from property, plant & equipment
Effect of movement in foreign exchange
Balance at 31 December 2020

Balance at 1 January 2021
Acquisition of businesses
Additions (externally purchased)
Disposal of businesses
Disposals
Effect of movement in foreign exchange
Balance at 31 December 2021

Amortisation and impairment losses
Balance at 1 January 2020
Amortisation charge for the year
Impairment losses
Disposals
Effects of movement in foreign exchange
Balance at 31 December 2020

Balance at 1 January 2021
Amortisation charge for the year
Disposals
Effects of movement in foreign exchange
Balance at 31 December 2021

Carrying amounts
At 1 January 2020
At 31 December 2020
At 31 December 2021

Note

Goodwill
£m

Customer
relationships
£m

Technology
and
trademarks
£m

Capitalised
development
costs
£m

Computer
software
£m

175.1
–
(0.9)
–
(1.0)
173.2

173.2
0.1
–
(0.1)
–
(0.3)
172.9

–
–
–
–
–
–

–
–
–
–
–

175.1
173.2
172.9

57.7
–
–
–
(1.5)
56.2

56.2
1.1
–
–
–
0.3
57.6

40.4
2.5
13.9
–
(2.0)
54.8

54.8
1.0
–
0.3
56.1

17.3
1.4
1.5

3.4
–
–
–
0.2
3.6

3.6
0.7
–
–
–
(0.2)
4.1

0.7
0.1
2.7
–
0.1
3.6

3.6
0.1
–
(0.2)
3.5

2.7
–
0.6

0.8
–
–
–
(0.1)
0.7

0.7
–
–
–
–
–
0.7

0.8
–
–
–
(0.1)
0.7

0.7
–
–
–
0.7

–
–
–

31.7
7.0
(5.2)
1.5
(0.5)
34.5

34.5
–
2.0
–
(1.9)
0.2
34.8

22.0
3.5
3.1
(4.5)
(0.4)
23.7

23.7
4.9
(1.9)
–
26.7

9.7
10.8
8.1

Total
£m

268.7
7.0
(6.1)
1.5
(2.9)
268.2

268.2
1.9
2.0
(0.1)
(1.9)
–
270.1

63.9
6.1
19.7
(4.5)
(2.4)
82.8

82.8
6.0
(1.9)
0.1
87.0

204.8
185.4
183.1

IMPAIRMENT TEST FOR CASH-GENERATING UNITS OR GROUPS OF CASH-GENERATING UNITS CONTAINING GOODWILL
In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group’s cash-generating units or groups of cash-generating
units that are expected to benefit from the synergies of the business combination that gave rise to the goodwill. Goodwill impairment testing is performed
at the operating segment level as defined by IFRS 8, as this is the lowest level at which goodwill is monitored.

13. INTANGIBLE ASSETS continued
Goodwill is attributed to each operating segment as follows:

Thermal Ceramics
Molten Metal Systems
Electrical Carbon
Seals and Bearings
Technical Ceramics

2021
£m

84.5
9.0
29.3
14.9
35.2
172.9

2020
£m

84.6
9.0
29.3
14.9
35.4
173.2

Each operating segment is assessed for impairment annually and whenever there is an indication of impairment.

The carrying value of goodwill has been assessed with reference to its value in use, reflecting the projected discounted cash flows of each operating
segment to which goodwill has been allocated. The key assumptions used in determining value in use relate to growth rates and discount rates.

The cash flow projections in year one are based on the most recent Board approved budget. Cash flow projections for years two to five are based on the
most recent Board approved strategic plan. The key assumptions that underpin these cash flow projections relate to sales and operating margins, which
are based on past experience, taking into account the effect of known or likely changes in market or operating conditions. External data sources have been
considered as to the strength and recovery of the Group’s end-markets in building an expectation of the future cash flows of each operating segment.

A 1.0% growth rate has been used for years beyond 2026 and to calculate a terminal value. Management has assessed these growth rates, including the
terminal growth rate as reasonable for each operating segment.

In 2021, the Group has used the following pre-tax discount rates for calculating the value in use of each of the operating segments: Thermal Ceramics:
13.2%, Molten Metal Systems: 12.9%, Electrical Carbon: 12.3%, Seals and Bearings: 11.2%, Technical Ceramics 11.1%.

The Directors have considered the following individual sensitivities and are confident that no impairment would arise for each of the Thermal Ceramics,
Molten Metal Systems, Electrical Carbon, Seals and Bearings and Technical Ceramics cash-generating units in any one of the following three circumstances,
which are considered reasonably possible changes:
´ If the pre-tax discount rate was increased to 15%;
´ If no growth was assumed for years two to five and in the calculation of terminal value;
´ If the cash flow projections of all businesses were reduced by 25%.

14. INVESTMENTS

Non-current investments
FVOCI – equity instrument
Investment in associates

2021
£m

–
–
–

2020
£m

0.7
6.5
7.2

INVESTMENT IN ASSOCIATES
On 28 April 2021, the Group completed the sale of its investment in associate, as detailed in note 2. The Group’s share of profit from its associate for the
year was £0.4 million (2020: £0.6 million). The Group did not receive a dividend from its associate during the current or preceding year.

Details of the Group’s material associate at the end of the reporting period are as follows:

Name of associate

Jemmtec Limited

Principal activity

Place of incorporation and
principal place of business

Manufacture of fired refractory shapes

United Kingdom

The above associate has been accounted for using the equity method in these consolidated financial statements.

Proportion of ownership interest/
voting rights held by the Group

2021

–

2020

35%

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Deferred income tax of £3.8 million (2020: £3.8 million) is provided on the potential unremitted earnings of overseas subsidiary undertakings.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. INVESTMENTS continued
Summarised financial information in respect of the Group’s material associate is set out below. The summarised financial information below has been
prepared in accordance with IFRSs (adjusted by the Group for equity accounting purposes).

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
Profit from continuing operations

Jemmtec
Limited

2020
£m

12.0
15.5
4.5
4.9
20.2
1.6

Net assets of associate
Proportion of the Group’s ownership interest in the associate
Goodwill
Carrying amount of the Group’s interest in the associate

15. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:

Assets
2021
£m

–
3.9
–
13.1
10.8
1.0
–
(12.9)
15.9

Assets
2020
£m

–
3.9
–
13.2
11.4
0.4
–
(14.5)
14.4

Liabilities
2021
£m

Liabilities
2020
£m

(12.3)
–
(0.6)
–
–
–
(1.2)
12.9
(1.2)

(13.1)
–
(1.2)
–
–
–
(0.7)
14.5
(0.5)

Property, plant and equipment
Right-of-use assets and lease liabilities
Intangible assets
Employee benefits
Provisions
Tax value of loss carried forward recognised
Other items
Offset

UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised in respect of the following items:

UK pension deficit
Tax losses
Capital losses
Other deductible temporary differences

Jemmtec
Limited

2020
£m

18.1
6.3
0.2
6.5

Net
2020
£m

(13.1)
3.9
(1.2)
13.2
11.4
0.4
(0.7)
–
13.9

2020
£m

119.9
98.7
40.3
61.4
320.3

Net
2021
£m

(12.3)
3.9
(0.6)
13.1
10.8
1.0
(1.2)
–
14.7

2021
£m

51.8
110.9
39.9
75.1
277.7

Deferred tax assets have not been recognised in relation to these temporary differences due to uncertainty surrounding future utilisation. Based on current
tax legislation the tax losses will not expire. Although the Group as a whole is profitable, the unrecognised losses relate to entities where it is not probable
that there will be future taxable profits against which these losses can be utilised.

(12.3)
3.9
(0.6)
13.1
10.8
1.0
(1.2)
14.7

2020
£m

28.8
38.1
55.5
122.4

15. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES continued
MOVEMENTS IN TEMPORARY DIFFERENCES DURING THE YEAR

31 December
2019
£m

Recognised
in profit
or loss
£m

Recognised
directly in
equity
£m

31 December
2020
£m

Recognised
in profit
or loss
£m

Recognised
directly in
equity
£m

31 December
2021
£m

Property, plant and equipment
Right-of-use assets and lease liabilities
Intangible assets
Employee benefits
Provisions
Tax value of loss carried forward recognised
Others

(18.9)
3.2
(4.5)
13.4
8.1
1.3
(1.5)
1.1

5.8
0.7
3.3
(0.6)
3.3
(0.9)
1.2
12.8

–
–
–
0.4
–
–
(0.4)
–

(13.1)
3.9
(1.2)
13.2
11.4
0.4
(0.7)
13.9

0.8
–
0.6
0.5
(0.6)
0.6
1.0
2.9

–
–
–
(0.6)
–
–
(1.5)
(2.1)

16. INVENTORIES

Raw materials and consumables
Work in progress
Finished goods

2021
£m

39.9
40.1
60.7
140.7

The Group holds consignment inventory amounting to £25.2 million (2020: £24.0 million) which is not reflected in the balance sheet. The majority of this
balance is for precious metals, which are held on consignment by a subsidiary and are invoiced only when the material is required.

In 2021 provisions of £3.7 million were made against inventories and recognised in operating costs (2020: £7.0 million).

17. TRADE AND OTHER RECEIVABLES

Non-current
Trade and non-trade receivables

Current
Gross trade receivables
Expected credit losses
Net trade receivables
Contract assets
Other non-trade receivables and prepayments

2021
£m

2020
£m

2.9

4.0

150.1
(10.9)
139.2
0.6
21.6
161.4

132.2
(7.8)
124.4
0.5
18.7
143.6

The Group’s exposure to credit and currency risks related to trade and other receivables is disclosed in note 22.

Contract assets relate to the Group’s right to consideration for project-based business which was completed but not billed at the end of the year.

146

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18. CASH AND CASH EQUIVALENTS

19. TRADE AND OTHER PAYABLES

Bank balances
Cash deposits
Cash and cash equivalents

In 2021, the Group had restricted cash of £1.5 million (2020: £0.9 million) as a result of exchange controls in Argentina.

RECONCILIATION OF CASH AND CASH EQUIVALENTS TO NET DEBT*

Opening borrowings and lease liabilities
Increase in borrowings
Reduction and repayment of borrowings
Payment of lease liabilities
Total changes from cash flows
New leases and lease remeasurement
Effect of movements in foreign exchange
Closing borrowings and lease liabilities
Cash and cash equivalents
Closing net debt 1

2021
£m

101.2
26.1
127.3

2020
£m

139.7
8.1
147.8

2021
£m

(303.4)
–
72.3
8.6
80.9
(4.4)
3.1
(223.8)
127.3
(96.5)

2020
£m

(354.4)
(7.9)
49.8
9.9
51.8
(0.9)
0.1
(303.4)
147.8
(155.6)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

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

At 1 January 2020
Cash inflow
Borrowings and lease liability cash flow
Net interest paid
Net cash inflow
Share purchases
New leases and lease remeasurement
Exchange and other movements
At 31 December 2020

At 1 January 2021
Cash outflow
Borrowings and lease liability cash flow
Net interest paid
Net cash inflow
Share purchases
New leases and lease remeasurement
Exchange and other movements
At 31 December 2021

Borrowings
£m

Lease
liabilities
£m

Total financing
liabilities
£m

Cash
and cash
equivalents
£m

Movement in
net debt 1
£m

(290.1)
–
41.9
–
41.9
–
–
(0.6)
(248.8)

(248.8)
–
72.3
–
72.3
–
–
2.5
(174.0)

(64.3)
–
9.9
–
9.9
–
(0.9)
0.7
(54.6)

(54.6)
–
8.6
–
8.6
–
(4.4)
0.6
(49.8)

(354.4)
–
51.8
–
51.8
–
(0.9)
0.1
(303.4)

(303.4)
–
80.9
–
80.9
–
(4.4)
3.1
(223.8)

132.8
28.9
–
(10.3)
18.6
(1.8)
–
(1.8)
147.8

147.8
(5.6)
–
(8.4)
(14.0)
(5.9)
–
(0.6)
127.3

(221.6)
28.9
51.8
(10.3)
70.4
(1.8)
(0.9)
(1.7)
(155.6)

(155.6)
(5.6)
80.9
(8.4)
66.9
(5.9)
(4.4)
2.5
(96.5)

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

Non-current
Trade and non-trade payables

Current
Trade payables due to associate
Other trade payables
Contract liabilities
Non-trade payables and accrued expenses

2021
£m

2020
£m

2.4

4.9

–
61.8
12.2
103.2
177.2

0.3
62.0
10.0
76.1
148.4

The Directors consider that the carrying amount of trade payables approximates to their fair value.

Contract liabilities relate to payments received from customers for project-based business in advance of the performance obligation being satisfied. All of
the £12.2 million of contract liabilities as at 31 December 2021, are expected to be recognised as revenue in 2022. Contract liabilities outstanding as at
31 December 2020 of £10.0 million were recognised as revenue in 2021.

Included in trade payables are amounts due where extended payment terms have been agreed with the supplier using a supplier financing facility. The total
amount outstanding on such extended payment terms at 31 December 2021 was £0.2 million (2020: £nil).

20. CAPITAL AND RESERVES
TRANSLATION RESERVE
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

HEDGING RESERVE
The cash flow hedge reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges.
The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the profit or loss,
or is included directly in the initial cost or other carrying amount of the hedged non-financial items (basis adjustment).

Balance at 1 January
(Loss)/gain arising on changes in fair value of hedging instruments during the period
Loss reclassified to profit or loss
Balance at 31 December

2021
£m

0.4
(0.1)
(0.4)
(0.1)

2020
£m

0.8
0.4
(0.8)
0.4

FAIR VALUE RESERVE
The fair value reserve includes the cumulative net change in the fair value of FVOCI investments until the investment is derecognised.

CAPITAL REDEMPTION RESERVE
The capital redemption reserve arose when the Company redeemed Preference shares wholly out of distributable profits.

RETAINED EARNINGS
The Company has acquired own shares to satisfy the requirements of the various share option incentive schemes. At 31 December 2021, 1,360,098 shares
(2020: 841,880) were held by The Morgan General Employee Benefit Trust (the Trust) and are treated as a deduction from equity. No treasury shares
were held by the Company (2020: none). All rights conferred by those shares are suspended until they are reissued.

A summary of the movements in own shares held by the Trust is set out in the table below:

As at 1 January
New shares purchased
Exercise of share options
As at 31 December

2021

2020

841,880
1,600,000
(1,081,782)
1,360,098

Cost
£m

2.1
5.9
(3.0)
5.0

1,245,133
750,000
(1,153,253)
841,880

Cost
£m

3.3
1.8
(3.0)
2.1

Consideration received in respect of shares transferred to participants of employee share schemes was £0.3 million (2020: £0.4 million). The market value
of shares held by the Trust at 31 December 2021 was £4.8 million (2020: £2.6 million).

148

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20. CAPITAL AND RESERVES continued
DIVIDENDS
The following Ordinary dividends were declared and paid by the Company:

2020 interim
2020 final
2021 interim

Per share

Total

2021
pence

–
3.5
3.2
6.7

2020
pence

2.0
–
–
2.0

2021
£m

–
10.0
9.1
19.1

2020
£m

5.7
–
–
5.7

After 31 December 2021 the following dividends were proposed by the Directors for 2021. These dividends have not been provided for and there are no
income tax consequences. The proposed 2021 final dividend is based upon the number of shares outstanding at the balance sheet date.

5.9 pence per qualifying Ordinary share

CALLED-UP SHARE CAPITAL

Equity share capital
Fully paid: 285,369,988 (2020: 285,369,988) issued Ordinary shares of 25 pence each

NUMBER OF ORDINARY SHARES IN ISSUE

In issue at beginning and end of period

As at the date of this Report 285,369,988 Ordinary shares have been issued (2020: 285,369,988).

Details of options outstanding in respect of Ordinary shares are given in note 24.

£m

16.8
16.8

2020
£m

71.3
71.3

2021
£m

71.3
71.3

Dividends on the cumulative preference shares are presented within finance costs in the Group’s consolidated income statement.

VOTING RIGHTS OF SHAREHOLDERS
Ordinary shares
The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the
Company.

Preference shares
The 5.5% Cumulative First Preference shares of £1 each and the 5.0% Cumulative Second Preference shares of £1 each confer on the holders thereof
the right to receive a cumulative preferential dividend at the rate of 5.5% and 5.0% respectively, calculated up to 30 June and 31 December in every year.
The First and Second Cumulative Preference shares shall not entitle the holders thereof to attend or vote at any general meeting unless either:

(i) the meeting is convened to consider any resolutions for reducing the capital, or authorising any issue of debentures or debenture stock, or increasing

the borrowing powers of the Board under the Articles of Association of the Company, or winding up, or sanctioning a sale of the undertaking, or altering
the Articles in any manner affecting their respective interests, or any other resolutions directly altering their respective rights and privileges; or

(ii) at the date of the notice convening the general meeting the Preference dividend is upwards of one month in arrears from the payment date of any

half-yearly instalment.

On a return of capital on a winding-up the assets of the Company available for distribution shall be applied:

First, in payment to the holders of the First Preference shares of the amounts paid up on such shares, together with interest at the rate of 5.5% pa.

Second, in payment to the holders of the Second Preference shares of the amounts paid up on such shares, together with interest at the rate of 5.0% pa.

Third, in repaying the capital paid up or credited as paid up on the Ordinary shares.

Fourth, any surplus shall be distributed rateably amongst the holders of the Ordinary shares in proportion to the nominal amount paid up on their
respective holdings of shares in the Company.

150

21. BORROWINGS AND LEASE LIABILITIES
This note provides information about the contractual terms of the Group’s borrowings and lease liabilities which are measured at amortised cost.

For more information about the Group’s exposure to interest rate and foreign currency risk, see note 22.

BORROWING FACILITIES AND LIQUIDITY
All of the Group’s borrowing facilities are arranged by Group Treasury with Morgan Advanced Materials plc as the principal obligor. In a few cases operating
subsidiaries have external borrowings but these are supervised and controlled centrally. Group Treasury seeks to obtain certainty of access to funding in the
amounts, diversity of maturities and diversity of counterparties as required to support the Group’s medium-term financing requirements and to minimise
the impact of poor credit market conditions.

Non-current liabilities
Senior Notes
Cumulative preference shares
Lease liabilities

Current liabilities
Bank and other borrowings
Lease liabilities

In 2021, bank and other borrowings did not include any borrowings secured on the assets of the Group (2020: £nil).

As at 31 December 2021 the Group had available headroom under the bank syndication of £200.0 million (2020: £200.0 million).

2021
£m

173.6
0.4
40.0
214.0

–
9.8
9.8

2020
£m

177.1
0.4
43.1
220.6

71.3
11.5
82.8

FINANCIAL RISK MANAGEMENT AND TREASURY POLICY
Group Treasury works within a framework of policies and procedures approved by the Audit Committee. It acts as a service centre for Morgan Advanced
Materials plc’s businesses, not as a profit centre, and manages and controls risk in the treasury environment through the establishment of such procedures.
Group Treasury seeks to align treasury goals, objectives and philosophy to those of the Group. It is responsible for all of the Group’s funding, liquidity, cash
management, interest rate risk, foreign exchange risk and other treasury business. As part of the policies and procedures, there is strict control over the
use of financial instruments to hedge foreign currencies and interest rates. Speculative trading in derivatives and other financial instruments is not permitted.

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 carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

FVOCI – equity instruments
Trade and other receivables
Cash and cash equivalents
Derivatives

Carrying amount

2021
£m

–
139.2
127.3
0.6
267.1

2020
£m

0.7
124.4
147.8
1.0
273.9

151

2021

2020

285,369,988

22. FINANCIAL RISK MANAGEMENT
This note presents information about the Group’s exposure to a variety of financial risks: credit risk, liquidity risk, market risk and foreign currency risk,
and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. FINANCIAL RISK MANAGEMENT continued
FVOCI – EQUITY INSTRUMENTS
The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have a sound credit rating. Given these high
credit ratings, management does not expect any counterparty to fail to meet its obligations.

TRADE AND OTHER RECEIVABLES
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base,
including the default risk of the industries and countries in which customers operate, have less influence on credit risk.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all
customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets.

The Group serves thousands of customers. Many of these have purchased the same product for several years and in some cases decades. Others have
modified and enhanced designs or adopted the same components into new products, extending the lifecycle of the components that the Group supplies.
The Group’s level of customer retention is very high, particularly with its major accounts and, although the top 20 ranking will alter from year to year, many
of the names remain consistent over time.

The Group establishes a provision that represents its estimate of expected credit losses in respect of trade and other receivables and investments. At the
point the amount is considered irrecoverable it is written off against the financial asset directly.

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

Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 90 days

2021

2020

Expected
credit loss
rate
£m

0.3%
–
–
7.1%
94.5%

Gross trade
receivables
£m

Expected
credit losses
£m

Net trade
receivables
£m

119.1
14.8
3.8
1.4
11.0
150.1

(0.4)
–
–
(0.1)
(10.4)
(10.9)

118.7
14.8
3.8
1.3
0.6
139.2

Expected
credit loss
rate
£m

0.4%
1.8%
4.0%
12.0%
100.0%

Gross trade
receivables
£m

Expected
credit losses
£m

Net trade
receivables
£m

109.1
11.3
2.5
2.5
6.8
132.2

(0.4)
(0.2)
(0.1)
(0.3)
(6.8)
(7.8)

108.7
11.1
2.4
2.2
–
124.4

CASH, CASH EQUIVALENTS AND DERIVATIVES
Cash balances held by companies representing over 65% of the Group’s revenue are managed centrally through a number of pooling arrangements.
Credit risk is managed by investing in liquid assets and acquiring derivatives in a diversified way from high-credit-quality financial institutions. Counterparties
are reviewed through the use of rating agencies, systemic risk considerations and through regular review of the financial press.

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)
£m

Net amounts
presented on
the balance
sheet
£m

Amounts
offset
£m

Financial
instruments
not offset in
the balance
sheet
£m

Net amount
£m

84.0
(84.0)
127.3
–

85.4
(85.3)
147.8
(71.3)

(83.4)
83.4
–
–

(84.4)
84.4
–
–

0.6
(0.6)
127.3
–

1.0
(0.8)
147.8
(71.3)

–
–
–
–

–
–
(69.8)
69.8

0.6
(0.6)
127.3
–

1.0
(0.8)
78.0
(1.5)

2021
Derivative financial assets
Derivative financial liabilities
Cash and cash equivalents
Bank and other borrowings

2020
Derivative financial assets
Derivative financial liabilities
Cash and cash equivalents
Bank and other borrowings

152

22. FINANCIAL RISK MANAGEMENT continued
LIQUIDITY AND FUNDING RISK
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by cash.

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions.

The Group seeks a balance between certainty of funding and a flexible, cost-effective borrowing structure. The policy is to ensure that the Group has
sufficient borrowings and committed facilities to meet its medium-term financing requirements.

The following are the undiscounted contracted maturities of financial liabilities, including interest payments:

CASH FLOWS ASSOCIATED WITH NON-DERIVATIVE FINANCIAL LIABILITIES

Non-derivative financial liabilities
1.18% Euro Senior Notes 2023
3.17% US Dollar Senior Notes 2023
1.55% Euro Senior Notes 2026
3.37% US Dollar Senior Notes 2026
4.87% US Dollar Senior Notes 2026
1.74% Euro Senior Notes 2028
2.89% Euro Senior Notes 2030
Bank and other borrowings
5.50% Cumulative First Preference shares
5.00% Cumulative Second Preference shares
Lease liabilities
Trade and other payables

Effective
interest
rate

Year of
maturity

Carrying
amount
£m

Contractual
cash flows
£m

Less than
1 year
£m

1-2 years
£m

2-5 years
£m

More than
5 years
£m

31 December 2021

1.18%
3.17%
1.55%
3.37%
4.87%
1.74%
2.89%

2023
2023
2026
2026
2026
2028
2030
Up to 2024

5.50%
5.00%
4.77% Up to 2051

21.0
11.1
21.1
72.2
18.8
8.4
21.0
–
0.1
0.3
49.8
61.8
285.6

21.6
11.8
25.1
81.5
22.5
9.8
26.9
–
–
–
63.5
61.8
324.5

0.2
0.4
0.3
2.4
0.9
0.1
0.6
–
–
–
9.8
61.8
76.5

21.4
11.4
0.3
2.4
0.9
0.1
0.6
–
–
–
7.9
–
45.0

–
–
24.5
76.7
20.7
0.9
2.2
–
–
–
18.2
–
143.2

–
–
–
–
–
8.7
23.5
–
–
–
27.6
–
59.8

Bank and other borrowings include an unsecured multi-currency revolving credit facility set to mature in September 2024.

Non-derivative financial liabilities
1.18% Euro Senior Notes 2023
3.17% US Dollar Senior Notes 2023
1.55% Euro Senior Notes 2026
3.37% US Dollar Senior Notes 2026
1.74% Euro Senior Notes 2028
2.89% Euro Senior Notes 2030
4.87% US Dollar Senior Notes 2026
Bank and other borrowings
5.50% Cumulative First Preference shares
5.00% Cumulative Second Preference shares
Lease liabilities
Trade and other payables

Effective
interest
rate

Year of
maturity

Carrying
amount
£m

Contractual
cash flows
£m

Less than
1 year
£m

1-2 years
£m

2-5 years
£m

More than
5 years
£m

31 December 2020

1.18%
3.17%
1.55%
3.37%
1.74%
2.89%
4.87%

2023
2023
2026
2026
2028
2030
2026
Up to 2024

5.50%
5.00%
4.68% Up to 2051

22.4
11.0
22.4
71.4
9.0
22.3
18.6
71.3
0.1
0.3
54.6
62.3
365.7

23.1
12.0
24.4
85.3
10.2
28.8
23.2
71.3
–
–
75.5
62.3
416.1

0.3
0.3
0.3
2.4
0.2
0.6
0.9
71.3
–
–
11.5
62.3
150.1

0.3
0.3
0.3
2.4
0.2
0.6
0.9
–
–
–
9.1
–
14.1

22.5
11.4
1.1
7.3
0.6
2.0
2.8
–
–
–
19.9
–
67.6

–
–
22.7
73.2
9.2
25.6
18.6
–
–
–
35.0
–
184.3

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. FINANCIAL RISK MANAGEMENT continued
CASH FLOWS ASSOCIATED WITH DERIVATIVES
The following table indicates the periods in which cash flows associated with cash flow hedges are expected to occur. This is matched with the periods
in which cash flows associated with cash flow hedges are expected to impact profit or loss. All derivatives are net settled.

2021
Cash flow hedges
Forward exchange contracts – assets
Forward exchange contracts – liabilities

Fair value flow hedges
Forward exchange contracts – assets
Forward exchange contracts – liabilities

2020
Cash flow hedges
Forward exchange contracts – assets
Forward exchange contracts – liabilities

Fair value flow hedges
Forward exchange contracts – assets
Forward exchange contracts – liabilities

Carrying
amount
£m

Contractual
cash flows
£m

Less than
1 year
£m

1-2 years
£m

2-5 years
£m

More than
5 years
£m

0.5
(0.5)
–

0.1
(0.1)
–
–

0.8
(0.7)
0.1

0.2
(0.1)
0.1
0.2

64.0
(64.0)
–

20.1
(20.1)
–
–

64.9
(64.7)
0.2

20.6
(20.6)
–
0.2

64.0
(64.0)
–

20.1
(20.1)
–
–

64.9
(64.7)
0.2

20.6
(20.6)
–
0.2

–
–
–

–
–
–
–

–
–
–

–
–
–
–

–
–
–

–
–
–
–

–
–
–

–
–
–
–

–
–
–

–
–
–
–

–
–
–

–
–
–
–

MARKET RISK
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices, will affect the Group’s income or the
value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk.

The Group enters into derivatives for hedging purposes, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried
out in accordance with the Treasury Policy, which has been approved by the Audit Committee. Generally the Group seeks to apply hedge accounting
in order to manage volatility in profit or loss.

INTEREST RATE RISK
The Group seeks to reduce the volatility in its interest charge caused by rate fluctuations. The proportions of fixed and floating rate debt are determined
having regard to a number of factors, including prevailing market conditions, interest rate cycle, the Group’s interest cover and leverage position and any
perceived correlation between business performance and rates.

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Financial assets
Financial liabilities

Fixed rate instruments
carrying amount

Variable rate instruments
carrying amount

2021
£m

–
(223.8)
(223.8)

2020
£m

–
(232.1)
(232.1)

2021
£m

127.3
–
127.3

2020
£m

147.8
(71.3)
76.5

The fixed rate financial liabilities comprise the currency equivalent of £173.6 million (2020: £177.1 million) of Senior Notes, £0.4 million (2020: £0.4 million)
of cumulative preference shares and lease liabilities of £49.8 million (2020: £54.6 million). The average cost of the Group’s fixed rate instruments is 3.29%
(2020: 3.29%) including lease liabilities and 2.90% (2020: 2.87%) excluding lease liabilities.

The variable rate financial assets include the bank balances and cash deposits detailed in note 18 and the variable rate financial liabilities include bank
borrowings detailed in note 22. Where cash and overdrafts are included in Group cash pool arrangements interest is charged on net bank balances and
borrowings. The average cost of the Group’s variable rate instruments is 2.5% (2020: 1.5%).

An increase of 100 basis points in interest rates on the variable element of the Group’s net floating rate liabilities and cash at the reporting date would have
increased profit by £1.3 million (2020: £0.8 million). A decrease of 100 basis points would have decreased profit by £0.6 million (2020: £0.4 million). This
analysis assumes that all other variables, in particular foreign currency rates, remain constant.

154

22. FINANCIAL RISK MANAGEMENT continued
FOREIGN CURRENCY RISK
Due to the international reach of the Group, currency transaction exposures exist. The Group has a policy in place to hedge all material firm commitments
and a large proportion of highly probable forecast foreign currency exposures in respect of sales and purchases over the following 12 months, and achieves
this through the use of the forward foreign exchange markets. A significant proportion of the forward exchange contracts have maturities of less than one
year after the balance sheet date. The Group continues its practice of not hedging income statement translation exposure.

There are exchange control restrictions which affect the ability of a small number of the Group’s subsidiaries to transfer funds to the Group. The Group
does not believe such restrictions have had or will have any material adverse impact on the Group as a whole or the ability of the Group to meet its cash
flow requirements.

The table below shows the Group’s currency exposures, being exposures on currency transactions that give rise to net currency gains and losses recognised
in the income statement. Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the functional currency
of the operating company involved.

Functional currency of Group operations

Trade receivables
Trade payables
Net debt1
Net balance sheet exposure

2021

2020

GBP
£m

11.4
(1.3)
(10.2)
(0.1)

USD
£m

(0.1)
(0.3)
1.3
0.9

Euro
£m

(3.2)
3.6
0.4
0.8

GBP
£m

15.8
(7.1)
(8.2)
0.5

USD
£m

0.3
(0.5)
0.9
0.7

Euro
£m

0.9
(0.1)
0.7
1.5

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

The amounts shown in the table take into account the effect of the forward contracts entered into to manage these currency exposures.

In respect of other monetary assets and liabilities held in currencies other than the currency of the reporting unit, the Group ensures that the net exposure
is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

The Group classifies its forward exchange contracts which hedge forecasted transactions as cash flow hedges and states them at fair value. The fair value
of forward exchange contracts used as hedges of forecasted transactions at 31 December 2021 was an asset of £nil (2020: £0.1 million).

The contractual cash flows associated with the forward exchange contracts that are designated as cash flow hedges are shown in the section on liquidity risk.
The impact on profit or loss is expected to occur at the same time as the associated cash flows.

Currency translation risks are controlled centrally. To defend against the impact of a permanent reduction in the value of its overseas net assets through
currency depreciation, the Group seeks to match the currency of financial liabilities with the currency in which the net assets are denominated. This is
achieved by raising funds in different currencies and through the use of hedging instruments such as swaps, and is implemented only to the extent that the
Group’s gearing covenant under the terms of its borrowing documents, as well as its facility headroom, are likely to remain comfortably within limits. In this
way, the currency of the Group’s financial liabilities becomes more aligned to the currency of the trading cash flows that service them.

The Group’s currency split of total borrowings was as follows:

GBP
USD
Euro
Other

2021
£m

0.5
102.1
71.4
–
174.0

2020
£m

71.7
101.0
76.1
–
248.8

The Group’s sensitivity to changes in foreign exchange rates on financial assets and liabilities as at 31 December 2021 is as follows:

Based upon the currency profile of the Group’s net financial assets and liabilities, if GBP had strengthened by 10%, reported net financial liabilities would
have decreased by £9.9 million (2020: £14.1 million). Conversely, if GBP had weakened by 10%, reported net financial liabilities would have increased by
£12.2 million (2020: £17.3 million). Assuming the change occurred on the balance sheet date, there would be no impact on reported profit, as either the
net financial liabilities are in the same currency as that of the respective Group entity, or the change would be offset by an equal and opposite change in the
foreign currency monetary items in the Group’s holding company.

The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain adverse market conditions occur. Actual
results in the future may differ materially from those projected results. The impact of a weakening in GBP on the Group’s financial assets and liabilities would
be more than offset in equity and income by its impact on the Group’s overseas net assets and earnings respectively.

155

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. FINANCIAL RISK MANAGEMENT continued
HEDGING INSTRUMENTS

Maturity date

Notional value:

Change in fair value for
recognising hedge
ineffectiveness

Carrying amount of the
hedging instruments assets/
(liabilities)

Local currency

2021
£m

2020
£m

to Dec 2022
to Dec 2022

to Dec 2021
to Dec 2021

2021
£m

40.4
7.1

2020
£m

26.5
8.1

2021
£m

0.6
(0.1)

2020
£m

0.8
–

2021
£m

0.2
–

2020
£m

(0.4)
0.1

Cash flow hedges
Highly probable forecast sales
Highly probable forecast purchases

Weighted average hedge rates for the year were as follows:

Weighted average
exchange rates

2021
£m

1.16
1.84
1.85
1.37

2020
£m

1.10
1.91
1.75
1.32

EUR/GBP
AUD/GBP
SGD/GBP
USD/GBP

Hedged items

Cash flow hedges
Forecast sales
Forecast purchases

Change in value used for
calculating hedge
ineffectiveness

Balance in cash flow hedge
reserve/foreign currency
translation reserve for
continuing hedges

2021
£m

(0.6)
0.1

2020
£m

(0.8)
–

2021
£m

0.1
–

2020
£m

(0.4)
–

As at 31 December 2021 there was no balance in cash flow hedge reserve/foreign currency translation reserve arising from hedging relationships for which
hedge accounting is no longer applied (2020: nil).

The Group expects highly probable sales and purchases in UK, Europe, North America, Australia and Asia. The Group has entered into foreign exchange
forward contracts (for terms not exceeding 12 months) to hedge the exchange rate risk arising from these anticipated future transactions. It is anticipated
that the transactions will take place during the next financial year, at which time the amount deferred in equity will be reclassified to profit or loss.

All hedging instruments are presented within derivative financial instruments on the group balance sheet.

22. FINANCIAL RISK MANAGEMENT continued
EXCHANGE RATES
The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:

GBP to:
USD
Euro

2021

2020

Closing rate Average rate Closing rate Average rate

1.35
1.19

1.38
1.16

1.37
1.12

1.28
1.13

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

2021

Group
adjusted
operating
profit1
£m

Revenue
£m

Profit
before tax
£m

Revenue
£m

2020

Group
adjusted
operating
profit1
£m

Profit
before tax
£m

Increase in revenue/Group adjusted operating profit1/profit before tax if:
GBP weakens by 10c against USD in isolation
GBP weakens by 10c against the Euro in isolation

29.6
18.8

3.9
3.3

3.5
3.1

33.9
17.4

4.3
1.8

3.7
1.6

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

OTHER MARKET PRICE RISK
Equity price risk arises from FVOCI equity instruments held for meeting partially the unfunded portion of the Group’s defined benefit pension obligations.
The primary goal of the Group’s investment strategy is to maximise returns in order to meet partially the Group’s unfunded defined benefit obligations.

CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base (total equity) so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Board uses a number of measures, identified as key performance indicators (KPIs), to ensure the continued success
of the Group.

The Board encourages employees of the Group to hold the Company’s Ordinary shares. The Group operates a number of employee share and share
option schemes. From time to time the Company purchases its own shares on the market; the timing of these purchases depends on market prices.
Primarily the shares are intended to be used for issuing shares under the Group’s various share option incentive schemes.

The Board seeks to maintain a balance between the advantages and security afforded by a sound capital position, and the higher returns that might be
possible with higher levels of borrowings.

The Group monitors capital using the indicators set out in the table below. These indicators are also presented excluding the impact of IFRS 16 Leases
as these adjusted measures are more closely aligned to the Group’s covenants.

156

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. FINANCIAL RISK MANAGEMENT continued
DEBT TO ADJUSTED CAPITAL

22. FINANCIAL RISK MANAGEMENT continued
FAIR VALUES

Borrowings and overdrafts
Lease liabilities
Less: cash and cash equivalents
Net debt1

Total equity
Less: amounts accumulated in equity relating to cash flow hedges
Adjusted capital
Net debt1 to adjusted capital ratio

2021

IFRS 16
impact
£m

Excluding
IFRS 16
£m

As stated
£m

–
(49.8)
–
(49.8)

–
–
–
n/a

174.0
–
(127.3)
46.7

349.6
0.1
349.7
0.1

248.8
54.6
(147.8)
155.6

240.0
(0.4)
239.6
0.6

2020

IFRS 16
impact
£m

–
(54.6)
–
(54.6)

–
–
–
n/a

Excluding
IFRS 16
£m

248.8
–
(147.8)
101.0

240.0
(0.4)
239.6
0.4

As stated
£m

174.0
49.8
(127.3)
96.5

349.6
0.1
349.7
0.3

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

NET DEBT* TO EBITDA*

Net debt1

Operating profit before specific adjusting items
Depreciation and amortisation
EBITDA1
Net debt1 to EBITDA1 ratio

2021

IFRS 16
impact
£m

(49.8)

(3.0)
(7.9)
(10.9)
n/a

Excluding
IFRS 16
£m

46.7

As stated
£m

155.6

115.5
36.1
151.6
0.3x

85.6
48.0
133.6
1.2x

2020

IFRS 16
impact
£m

(54.6)

(3.5)
(9.2)
(12.7)
n/a

Excluding
IFRS 16
£m

101.0

82.1
38.8
120.9
0.8x

As stated
£m

96.5

118.5
44.0
162.5
0.6x

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

INTEREST COVER

EBITDA1
Net finance costs (excluding IAS 19 pension charge)
Interest cover

2021

IFRS 16
impact
£m

Excluding
IFRS 16
£m

(10.9)
(2.3)
n/a

151.6
5.3
28.6x

As stated
£m

133.6
9.3
14.4x

2020

IFRS 16
impact
£m

(12.7)
(2.8)
n/a

Excluding
IFRS 16
£m

120.9
6.5
18.6x

As stated
£m

162.5
7.6
21.4x

31 December 2021

Fair value

31 December 2020

Fair value

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
3.17% US Dollar Senior Notes 2023
1.55% Euro Senior Notes 2026
3.37% US Dollar Senior Notes 2026
1.74% Euro Senior Notes 2028
2.89% Euro Senior Notes 2030
4.87% US Dollar Senior Notes 2026
5.50% Cumulative First Preference shares
5.00% Cumulative Second Preference shares

Financial assets held at FVOCI
Derivative financial assets held at fair value

(21.0)
(11.1)
(21.1)
(72.2)
(8.4)
(21.0)
(18.8)
(0.1)
(0.3)
(174.0)

–
0.6
0.6

Derivative financial liabilities held at fair value

(0.6)

–
–
–
–
–
–
–
–
–
–

–
–
–

–

(21.1)
(11.3)
(21.4)
(72.8)
(8.6)
(22.1)
(20.6)
(0.1)
(0.3)
(178.3)

–
0.6
0.6

(21.1)
(11.3)
(21.4)
(72.8)
(8.6)
(22.1)
(20.6)
(0.1)
(0.3)
(178.3)

–
0.6
0.6

(22.4)
(11.0)
(22.4)
(71.4)
(9.0)
(22.3)
(18.6)
(0.1)
(0.3)
(177.5)

0.7
1.0
1.7

–
–
–
–
–
–
–
–
–
–

0.7
–
0.7

(22.6)
(11.4)
(23.2)
(75.1)
(9.4)
(24.3)
(20.7)
(0.1)
(0.3)
(187.1)

–
1.0
1.0

(22.6)
(11.4)
(23.2)
(75.1)
(9.4)
(24.3)
(20.7)
(0.1)
(0.3)
(187.1)

0.7
1.0
1.7

(0.6)

(0.8)

–

(0.8)

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 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).

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

1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to
externally imposed capital requirements.

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.

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%-3.1% (2020: 0.9%-2.4%).

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

158

159

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. PENSIONS AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS
The Group operates a number of defined benefit arrangements as well as defined contribution plans. The defined benefit plans are primarily in the UK,
US and Europe and predominantly provide pensions based on service and career-average pay. In addition post-retirement medical plans are operated
in the US.

SUMMARY OF NET DEFINED BENEFIT OBLIGATIONS

Present value of unfunded defined benefit obligations
Present value of funded defined benefit obligations
Fair value of plan assets

AMOUNTS RECOGNISED IN PROFIT OR LOSS

Current service cost
Past service cost
Administrative expenses recognised outside of the pension liability
Curtailments and settlements
Total expense within operating costs relating to defined benefit plans
Defined contribution plans
Total expense within operating costs
Net interest on net defined benefit liability
Total expense recognised in profit or loss

Amounts recognised in other comprehensive income

Experience (loss)/gain on plan obligations
Changes in financial assumptions underlying the present value of plan obligations – gain/(loss)
Changes in demographic assumptions underlying the present value of plan obligations – gain
Actual return on plan assets (excluding amounts included in net interest expense)
Remeasurements recognised in other comprehensive income
Deferred tax associated with the above
Total amount recognised in other comprehensive income

Note

4
7

2021
£m

(47.3)
(687.2)
631.8
(102.7)

2020
£m

(52.6)
(754.7)
631.0
(176.3)

2021
£m

(3.2)
–
(1.3)
0.1
(4.4)
(10.7)
(15.1)
(1.6)
(16.7)

2021
£m

(4.9)
51.3
6.7
2.4
55.5
(0.6)
54.9

2020
£m

(2.8)
(0.1)
(1.2)
0.3
(3.8)
(11.6)
(15.4)
(2.6)
(18.0)

2020
£m

3.9
(99.4)
1.3
60.3
(33.9)
0.4
(33.5)

DEFINED CONTRIBUTION PLANS
The total expense relating to defined contribution plans in the current year was £10.7 million (2020: £11.6 million). The expense includes contributions to
two US Multi-Employer Plans of £0.3 million (2020: £0.3 million) and a contribution to one German Multi-Employer Plan of £0.1 million (2020: £0.3 million).
The Group expects to contribute £11.0 million to ongoing defined contribution arrangements in 2022.

23. PENSIONS AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS continued
DEFINED BENEFIT PLANS
UK Schemes
In the UK, the Group operates two defined benefit pension schemes, the Morgan Pension Scheme and the Morgan Group Senior Staff Pension and
Life Assurance Scheme (the UK Schemes). The two UK Schemes provide a benefit based upon an employee’s total service and their career average
earnings (including allowance for consumer price inflation), although historically benefits were based upon an employee’s final salary. Once in payment,
pensions receive increases as set out in the rules, at either a fixed level, or in line with the Retail Price Index. The overall duration of the UK Schemes’
is around 16 years.

The UK Schemes’ assets are held in trustee-administered funds which are governed by UK regulations, as is the nature of the relationship between the
Group and the Trustees. Responsibility for the governance of the UK Schemes – including investment decisions and contribution schedules – lies with
the Board of Trustees which must consult with the Group in such matters. The Board of Trustees must be composed of representatives of the Company,
plan participants and independent trustee directors, in accordance with the UK Schemes governing documents.

Funding legislation in the UK requires that schemes are fully funded on a scheme-specific basis, and this must be assessed at least every three years. To
the extent that there is a deficit against this measure, a payment schedule must be agreed such that the deficit is removed over a reasonable period of time.

The most recent full actuarial valuations of the UK Schemes were undertaken as at 31 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 totalling £16.5 million a year from January 2020, increasing by 2.75% pa from April 2021 until 2025, with further payments to Morgan Pension
Scheme for 2026 and 2027. New full valuations will be due with effective dates of 31 March 2022.

The UK Schemes were closed to new entrants on 1 August 2011, with any new employees receiving benefits through the Morgan Group Personal Pension
Plan, a defined contribution arrangement. The Morgan Group Senior Staff Pension and Life Assurance Scheme was closed to the future accrual of benefits
on and with effect from 6 April 2016. The Morgan Pension Scheme was closed to the future accrual of benefits with effect from 6 April 2018. Current
employees, including those who were active in the Schemes at closure, were auto-enrolled into The Morgan Group Personal Pension Plan for their future
pension benefits.

The Group has considered third-party powers and does not believe the Trustees have any powers that would prevent the Group obtaining a refund of
any surplus on wind-up of the Scheme following gradual settlement of the plan obligations. As such the Group’s interpretation is that the current version
of IFRIC 14 does not have an impact and, as a result, any IAS 19 surplus can be recognised as an asset and it is not necessary to recognise additional liabilities
in respect of contribution agreements reached with the pension scheme Trustees, managers or any third party.

US Schemes
The Group operates a tax qualified defined benefit pension scheme in the US (MUSE DB Scheme), and a Supplemental Executive Retirement Plan (SERP)
which is not tax approved (together ‘the US Schemes’). The MUSE DB Scheme is frozen, and therefore employees accrue benefits within a 401k
arrangement.

The US Schemes provide a benefit based upon an employee’s service and earnings. The benefits are level both prior to, and whilst in, payment. Overall,
the US Schemes’ duration is around 11 years.

The qualified MUSE DB Scheme’s assets are held in a trust separately from the Group’s assets. For the SERP the Group holds an asset to meet the
obligations; however, due to its nature this is accounted for as a Group asset, rather than an asset of the SERP. Responsibility for the governance of the
US Schemes, including investment decisions and contribution schedules, lies with a management committee, all of whose members are appointed by the
Group.

The funding requirements in the US, ERISA, require schemes to be fully funded at all times, and if not to target full funding within a period of seven years.

The most recent full actuarial valuation of the MUSE DB Scheme was undertaken as at 1 January 2021 and the Scheme was fully funded this basis.

On the more stringent DBO (Defined Benefit Obligation) basis used for IAS 19 purposes, the deficit of the MUSE DB Scheme as at 31 December 2021
totalled £1.3million (2020: £0.5 million).

No further significant contributions to the MUSE DB Scheme are anticipated in the medium-term.

160

161

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. PENSIONS AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS continued
European schemes
In Europe, the Group operates a number of retirement schemes, with the bulk of the obligations relating to arrangements for employees in Germany.
In line with local practice these arrangements are not funded in advance, with benefits being met by the Group as they fall due.

Summary of net obligations
Present value of unfunded defined benefit obligations
Present value of funded defined benefit obligations
Fair value of plan assets

Movements in present value of defined benefit obligation
At 1 January 2021
Current service cost
Interest cost
Actuarial gain/(loss)
Experience gain/(loss) on plan obligations
Changes in financial assumptions – gain/(loss)
Changes in demographic assumptions – gain/(loss)
Benefits paid
Curtailments and settlements
Exchange adjustments
At 31 December 2021

Movements in fair value of plan assets
At 1 January 2021
Interest on plan assets
Remeasurement gain/(loss)
Contributions by employer
Benefits paid
Curtailments and settlements
Exchange adjustments
At 31 December 2021
Actual return on assets

Fair value of plan assets by category
Equities 1
Growth assets 2
Bonds
Liability-driven investments (LDI)3
Matching insurance policies
Other

31 December 2021

UK
£m

US
£m

Europe
£m

Rest of the
World
£m

–
(544.0)
492.3
(51.7)

(603.4)
–
(7.2)

(5.2)
43.3
7.2
21.3
–
–
(544.0)

483.1
5.9
7.8
16.8
(21.3)
–
–
492.3
13.6

42.9
103.6
90.4
108.4
144.5
2.5
492.3

(6.4)
(132.9)
131.6
(7.7)

(147.5)
–
(3.3)

(0.4)
5.5
(0.5)
8.5
–
(1.6)
(139.3)

140.2
3.2
(5.3)
0.7
(8.5)
–
1.3
131.6
(2.1)

–
7.2
119.9
–
–
4.5
131.6

(37.5)
(1.9)
0.4
(39.0)

(45.3)
(1.1)
(0.2)

0.9
2.0
–
1.5
–
2.8
(39.4)

0.5
–
–
1.5
(1.5)
–
(0.1)
0.4
–

–
–
–
–
0.4
–
0.4

(3.4)
(8.4)
7.5
(4.3)

(11.1)
(2.1)
(0.1)

(0.2)
0.5
–
0.3
0.2
0.7
(11.8)

7.2
0.1
(0.1)
1.1
(0.3)
(0.1)
(0.4)
7.5
(0.1)

–
–
–
–
4.8
2.7
7.5

Total
£m

(47.3)
(687.2)
631.8
(102.7)

(807.3)
(3.2)
(10.8)

(4.9)
51.3
6.7
31.6
0.2
1.9
(734.5)

631.0
9.2
2.4
20.1
(31.6)
(0.1)
0.8
631.8
11.4

42.9
110.8
210.3
108.4
149.7
9.7
631.8

1. Equity values include both physical equities and the value of equity futures contracts, used to gain leveraged exposure to global equity markets.

2. Growth assets include investment in Global Diversified and Multi-Asset Funds as well as UK Property.

3. The LDI assets are pooled funds in the UK that provide a leveraged return linked to long duration fixed interest and index-linked government bonds valued at the bid price of the units. This provides

interest rate and inflation hedging equivalent in size to c.100% of the invested assets of the UK Schemes.

23. PENSIONS AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS continued
The Group expects to contribute £20.4 million to these arrangements in 2022.

Estimate of employer contributions to be paid into the plans
during the 12-month period beginning 1 January 2022

Summary of net obligations
Present value of unfunded defined benefit obligations
Present value of funded defined benefit obligations
Fair value of plan assets

Movements in present value of defined benefit obligation
At 1 January 2020
Current service cost
Past service cost
Interest cost
Actuarial gain/(loss)
Experience gain/(loss) on plan obligations
Changes in financial assumptions – gain/(loss)
Changes in demographic assumptions – gain/(loss)
Benefits paid
Curtailments and settlements
Contributions by members
Exchange adjustments
At 31 December 2020

Movements in fair value of plan assets
At 1 January 2020
Interest on plan assets
Remeasurement gain/(loss)
Contributions by employer
Contributions by members
Benefits paid
Curtailments and settlements
Exchange adjustments
At 31 December 2020
Actual return on assets

Fair value of plan assets by category
Equities 1
Growth assets 2
Bonds
Liability-driven investments (LDI)3
Matching insurance policies
Other

UK
£m

17.3

US
£m

0.7

Europe
£m

Rest of the
World
£m

1.5

0.9

31 December 2020

UK
£m

US
£m

Europe
£m

Rest of the
World
£m

–
(603.4)
483.1
(120.3)

(534.6)
–
(0.1)
(10.8)

2.2
(82.7)
–
22.6
–
–
–
(603.4)

433.1
8.9
47.2
16.5
–
(22.6)
–
–
483.1
56.1

57.8
99.1
64.1
93.8
164.4
3.9
483.1

(6.9)
(140.6)
140.2
(7.3)

(146.0)
–
–
(4.6)

1.3
(13.8)
1.3
9.2
0.3
–
4.8
(147.5)

135.4
4.3
13.5
0.9
–
(9.2)
–
(4.7)
140.2
17.8

–
8.0
128.9
–
–
3.3
140.2

(43.1)
(2.2)
0.5
(44.8)

(40.0)
(1.1)
–
(0.3)

(0.2)
(3.0)
–
1.6
–
–
(2.3)
(45.3)

0.4
–
–
1.6
–
(1.6)
–
0.1
0.5
–

–
–
–
–
0.5
–
0.5

(2.6)
(8.5)
7.2
(3.9)

(14.3)
(1.7)
–
(0.3)

0.6
0.1
–
4.8
–
–
(0.3)
(11.1)

9.2
0.2
(0.4)
2.7
–
(4.8)
–
0.3
7.2
(0.2)

–
–
–
–
4.5
2.7
7.2

Total
£m

20.4

Total
£m

(52.6)
(754.7)
631.0
(176.3)

(734.9)
(2.8)
(0.1)
(16.0)

3.9
(99.4)
1.3
38.2
0.3
–
2.2
(807.3)

578.1
13.4
60.3
21.7
–
(38.2)
–
(4.3)
631.0
73.7

57.8
107.1
193.0
93.8
169.4
9.9
631.0

162

1. Equity values include both physical equities and the value of equity futures contracts, used to gain leveraged exposure to global equity markets.

2. Growth assets include investment in Global Diversified and Multi-Asset Funds as well as UK Property.

interest rate and inflation hedging equivalent in size to c.100% of the invested assets of the UK Schemes.

163

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. PENSIONS AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS continued
ACTUARIAL ASSUMPTIONS
The actual liability in respect of global employee benefits will not be known until the last payments have been made. In placing a current estimate on the
Group’s past service benefit obligations, a number of assumptions about the future are required. For defined benefit schemes, the Directors make annual
estimates and assumptions in respect of discount rates, future changes in salaries, employee turnover, inflation rates, life expectancy and several other
assumptions. In making these estimates and assumptions, the Directors consider advice provided by external advisers, such as actuaries.

The assumptions used are best estimate assumptions chosen from a reasonable range and which may not be borne out in practice. The principal
assumptions are the discount rate and inflation assumptions which are long-term and measured on external factors, based upon each plan’s duration.

In addition to these, the mortality assumption in the UK and the US is material to the cost of the promised benefits. In the UK, the latest CMI mortality
projection tables (CMI2020) have been used. A w2020 parameter of 20% for the Morgan Pension Scheme and 15% for the Morgan Group Senior Staff
Pension and Life Assurance Scheme have been adopted to allow for the impact of COVID-19 on mortality. The extent of the impact of COVID-19 on each
scheme has been assessed by additional scheme specific analysis. This assumption will continue to be reviewed at each accounting period. In both the UK
and Europe, the assumed increases in salaries and pensions in payment are derived from assumed future inflation.

The rates shown below are single equivalents for the obligations as a whole derived from discounting along the yield curve. In line with IAS 19, in
determining the value of the annuity contract held in the UK we have reflected the same methodology as used to value the corresponding obligations,
reflecting the actual cash flow profile and duration of the insured obligations, rather than those of the Schemes as a whole.

Actuarial assumptions were:

2021
Discount rate
Salary increase
Inflation (UK: RPI/CPI)
Pensions increase1
Mortality – post-retirement:
Life expectancy of a male aged 60 in accounting year (years)
Life expectancy of a male aged 60 in accounting year + 20 (years)

2020
Discount rate
Salary increase
Inflation (UK: RPI/CPI)
Pensions increase1
Mortality – post-retirement:
Life expectancy of a male aged 60 in accounting year (years)
Life expectancy of a male aged 60 in accounting year + 20 (years)

1. Pension increases in the UK reflect both fixed rate and RPI related increases to different elements of members’ pensions.

UK
%

US
%

Europe
%

Rest of
the World
%

1.92
n/a
3.40/2.61
3.00/3.22/3.75

26.0
27.4

1.23
n/a
2.88/2.03
3.00/2.80/3.56

26.3
27.8

2.71
n/a
n/a
n/a

24.7
24.8

2.34
n/a
n/a
n/a

24.6
24.7

0.90
2.40
1.90
1.90

25.0
27.9

0.40
2.10
1.60
1.60

24.9
27.7

2.90
4.30
n/a
n/a

n/a
n/a

2.40
5.00
n/a
n/a

n/a
n/a

23. PENSIONS AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS continued
The accounting assumptions noted above are used to calculate the year-end net pension liability in accordance with the relevant accounting Standard,
IAS 19 (revised) Employee Benefits. Changes in these assumptions have no impact on the Group’s cash payments to their arrangements. The payments due
are calculated based on local funding requirements, or in the case of the Group’s unfunded arrangements on the incidence of benefit payments falling due.

The sensitivities of the Group’s net balance sheet to the principal assumptions are:

Discount rate
Inflation
Mortality – post-retirement
Exchange rates

Change in assumption

Decrease by 0.1%
Increase by 0.1%
Pensioners live 1 year longer
GBP weakens against USD by 10%
GBP weakens against EUR by 10%

2021

2020

Increase on
defined
benefit
obligation
£m

Increase on
deficit
£m

Increase on
defined
benefit
obligation
£m

Increase on
deficit
£m

10.7
3.7
33.3
15.5
4.4

9.4
3.5
21.9
0.9
4.3

12.7
5.1
38.6
16.4
5.0

11.1
4.8
25.8
0.8
5.0

These sensitivities have been calculated to show the movement in the net balance sheet in isolation, and assume no other changes in market conditions at
the accounting date. This is unlikely in practice – for example, a change in discount rate is unlikely to occur without any movement in the value of the assets
held by the Group’s Schemes.

Risks
The balance sheet net pension liability is a snapshot view which can be significantly influenced by short-term market factors. The calculation of the surplus
or deficit depends, therefore, on factors which are beyond the control of the Group – principally the value at the balance sheet date of equity shares in
which the Scheme has invested and long-term interest rates which are used to discount future liabilities. The funding of the Scheme is based on long-term
trends and assumptions relating to market growth, as advised by qualified actuaries and investment advisers.

The most significant risks to which the Group is exposed are:
´ Investment returns: The Group’s net balance sheet and contribution requirements are heavily dependent upon the return on the assets invested in

by the schemes

´ Longevity: The cost to the Group of the pensions promised to members is dependent upon the expected term of these payments. To the extent

that members live longer than expected this will increase the cost of these arrangements

´ Inflation rate risk: In the UK, the pension promises are, in the main, linked to inflation, and higher inflation will lead to higher liabilities.

The above risks have been mitigated for the majority of the UK Schemes’ pensioner population through the purchase of an insurance policy, the payments
from which exactly match the promises made to employees. Remaining investment risks have also been mitigated to some extent by diversification of the
return-seeking assets and backing uninsured pensioner liabilities via bonds and various hedging instruments. In the UK, the bonds and LDI mandates target
an interest rate hedge against movements in government bond yields for an amount equal to approximately 100% of the invested assets. In the US, the
bond mandates provide an interest rate hedge of approximately 100% of the liabilities for funded plans.

In addition, the IAS 19 defined benefit obligation is linked to yields on AA-rated corporate bonds; however some of the Group’s arrangements invest in
a number of other assets which will move in a different manner from these bonds. Therefore, changes in market conditions may lead to volatility in the
net pension liability on the Group’s balance sheet and in other comprehensive income, and to a lesser extent in the IAS 19 pension expense in the Group’s
income statement.

164

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Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. SHARE-BASED PAYMENTS
The Group operates various share option programmes that allow Group employees to acquire shares in the Company. During 2021, awards were made to
Executives and senior employees under the Morgan Advanced Materials plc Long-Term Incentive Plan (LTIP), the Morgan Advanced Materials plc Deferred
Bonus Plan (DBP) and the Morgan Advanced Materials plc Restricted Stock Units (RSU). The Company also maintains a UK all-employee Sharesave
scheme (Sharesave). Further details can be found in the Remuneration Report on pages 82 to 105.

The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period
that the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share
options for which the related service and non-market vesting conditions are met.

The charge expensed to the income statement in 2021 was £4.5 million (2020: £0.7 million).

The following options and awards were outstanding at 31 December 2021 in respect of Ordinary shares:

25. PROVISIONS AND CONTINGENT LIABILITIES

Balance at 1 January 2021
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Effect of movements in foreign exchange
Balance at 31 December 2021

Exercise/award
price(s)

Number of shares
outstanding

Exercise dates ranging

from

–

5,322,299

1 January 2022

22 March 2024

Current
Non-current

Closure and
restructuring
provisions
£m

Legal and
other
provisions
£m

Environmental
provisions
£m

17.3
2.6
(5.9)
(2.1)
(0.1)
11.8

6.6
5.2
11.8

10.2
3.6
(0.5)
(3.2)
(0.1)
10.0

4.8
5.2
10.0

8.3
1.8
(1.8)
(0.3)
(0.2)
7.8

3.4
4.4
7.8

Total
£m

35.8
8.0
(8.2)
(5.6)
(0.4)
29.6

14.8
14.8
29.6

Employees entitled

Vesting conditions

LTIP

Senior employees

Sharesave
DBP
RSU

All UK employees
Senior employees
Select employees

Continued employment plus
satisfaction of performance metrics
Continued employment
Continued employment
Continued employment

181.00p-321.00p
–
–

1,061,025 1 December 2021
18 March 2022

1 June 2025
22 March 2024
14 October 2022 14 October 2024

385,004
1,405,937

The numbers and weighted average exercise prices of share options are as follows:

Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Lapsed during the period
Outstanding at the end of the period
Exercisable at the end of the period

2021

2020

Weighted
average
exercise
price

Number of
options

28.68p 8,532,753
2,654,176
11.58p
25.37p
(659,714)
31.21p (1,081,782)
6.92p (1,271,168)
8,174,265
115,153

26.44p
90.14p

Weighted
average
exercise
price

54.22p
34.48p
82.09p
34.37p
36.62p
28.68p
207.55p

Number of
options

7,735,748
3,186,419
(816,918)
(1,161,159)
(411,337)
8,532,753
87,569

The weighted average share price at the date of exercise during the period was 328.64 pence (2020: 217.14 pence).

MEASUREMENT OF FAIR VALUES
The DBP is an award of deferred shares which include the accumulated value of any dividends which fall during the period from the date of grant to the
vesting date. The RSU is an award of shares, which are released in tranches to the participant over a specified period of time with no performance conditions
except continued employment by the Group. As such, the grant-date fair value of the DBP and RSU are equal to the share price at the date of grant.

Share price at award date
Exercise price
Fair value at measurement date
Fair value measurement method
Fair value model inputs:
Expected volatility (expressed as weighted
average volatility used in the model)
Option life (expressed as weighted average life used in the model)
Expected dividends
Risk-free interest rate

Awards made in 2021

LTIP

Sharesave

311.00p-337.00p
n/a
85.00p-290.00p

375.00p
321.00p
74.00p
Actuarial binomial model Modified binomial model

DBP

311.00p
n/a
311.00p
n/a

RSU

337.00p
n/a
337.00p
n/a

30%
3 years
2.60%
0.10%

35%
3 years
2.20%
0.40%

The expected volatility is based on the historical volatility (calculated based on the weighted average remaining life of the share options) adjusted for any
expected changes to future volatility due to publicly available information.

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted.

The weighted average fair value of options issued during 2021 was 271.44 pence (2020: 176.09 pence).

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.

Whilst the Group’s restructuring programme was completed in 2021, we retain provisions for remaining lease exit costs and multi-employer pension
obligations from two sites which have been closed during the year. The cash outflows relating to the pension obligations may continue for up to 20 years,
subject to any settlement being reached in advance of that date.

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.

Subsidiary undertakings within the Group have given unsecured guarantees of £10.5 million (2020: £9.0 million) in the ordinary course of business.

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 and in conjunction with the local Environmental Regulator. A remediation plan has been prepared. The provision recorded reflects the
estimated costs of remediation and awaits final regulatory approval. The provision is expected to be utilised in the next five years.

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 the 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. These are disclosed in notes 8 and 15.

26. CAPITAL COMMITMENTS
In 2021, commitments for property, plant and equipment and computer software expenditure for which no provision has been made in these accounts
amount to £6.3 million (2020: £2.4 million) for the Group.

166

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2021

27. RELATED PARTIES
IDENTIFICATION OF RELATED PARTIES
The Group has related party relationships with its subsidiaries (a list of all related undertakings and associates is shown in note 44), and with its Directors,
executive officers and their close family members.

TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
The Company has written service contracts or letters of appointment with each of its Directors, under which the Directors receive a salary or a fee
and other emoluments.

The key management of the Group and parent Company consists of the Board of Directors (including non-executive Directors) and members of the
Executive Committee.

The compensation for the executive and non-executive Directors and members of the Executive Committee charged in the year was:

Short-term employee benefits
Employer national insurance contributions
Pension and other post-employment costs
Share-based payment (credit)/expense1
Non-executive Directors’ fees and benefits
Total compensation of key management personnel

2021
£m

7.5
0.4
0.3
1.7
0.5
10.4

2020
£m

3.4
0.6
0.3
(0.1)
0.4
4.6

1. Share-based payment expense represents the net IFRS 2 share-based payment (credit)/charge to the consolidated income statement in the year for the members of the Executive Committee.

In 2021, due to changes in assumptions in non-market based performance conditions, a net credit of £0.1 million was recognised in the consolidated income statement (2020: net credit of £0.1 million).

OTHER RELATED PARTY TRANSACTIONS

Sales to associate
Purchases from associate
Trade receivables due from associate
Trade payables due to associate

2021
£m

–
0.6
–
–

2020
£m

–
1.8
–
0.3

On 28 April 2021, the Group completed the sale of its investment in associate, as detailed in note 2. In 2021, the Group does not have any trade receivables
owed by associates that have been fully provided for (2020: £nil).

28. SUBSEQUENT EVENTS
There were no other reportable subsequent events following the balance sheet date.

Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments in subsidiary undertakings
Debtors – amounts due after more than one year

Current assets
Debtors – amounts due within one year
Cash and cash equivalents

Note

2021
£m

2020
£m

31
32
33
34
35

2.6
3.4
0.8
718.2
218.0
943.0

22.9
19.4
42.3

4.6
6.5
1.3
629.0
254.3
895.7

46.3
4.5
50.8

Creditors – amounts falling due within one year

68.6

131.9

Net current liabilities

Total assets less current liabilities

Non-current liabilities
Creditors – amounts falling due after more than one year
Employee benefits: pensions
Provisions

Net assets

Capital and reserves
Equity shareholders’ funds
Share capital
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
Shareholders’ funds

The financial statements were approved by the Board of Directors on 3 March 2022 and were signed on its behalf by:

Pete Raby
Chief Executive Officer

Peter Turner
Chief Financial Officer

37
39
40

(26.3)

(81.1)

916.7

814.6

202.7
15.0
5.1
222.8
693.9

71.3
111.7
17.0
35.7
458.2
693.9

199.5
34.8
3.6
237.9
576.7

71.3
111.7
17.0
35.7
341.0
576.7

168

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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021

NOTES TO THE COMPANY BALANCE SHEET

Balance at 1 January 2020
Total comprehensive loss for the year:
Loss for the year
Other comprehensive loss
Transactions with owners:
Dividends
Equity-settled share-based payment transactions
Own shares acquired for share incentive schemes (net)
Balance at 31 December 2020

Balance at 1 January 2021
Total comprehensive income for the year:
Profit for the year
Other comprehensive income
Transactions with owners:
Dividends
Equity-settled share-based payment transactions
Own shares acquired for share incentive schemes (net)
Balance at 31 December 2021

Called-up
share
capital
£m

Share
premium
account
£m

71.3

111.7

Merger
reserve
£m

17.0

Capital
redemption
reserve
£m

Profit and
loss account
£m

Total equity
£m

35.7

415.0

650.7

–
–

–
–
–
71.3

–
–

–
–
–
111.7

–
–

–
–
–
17.0

–
–

–
–
–
35.7

(58.8)
(9.3)

(5.7)
1.2
(1.4)
341.0

(58.8)
(9.3)

(5.7)
1.2
(1.4)
576.7

71.3

111.7

17.0

35.7

341.0

576.7

–
–

–
–
–
71.3

–
–

–
–
–
111.7

–
–

–
–
–
17.0

–
–

–
–
–
35.7

122.6
14.8

(19.1)
4.5
(5.6)
458.2

122.6
14.8

(19.1)
4.5
(5.6)
693.9

29. ACCOUNTING POLICIES
BASIS OF PREPARATION
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and the
Companies Act 2006.

The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of
a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the FRC. Accordingly, these financial statements are prepared
in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
´ A cash flow statement and related notes;
´ Comparative period reconciliations for share capital, tangible fixed assets and intangible assets;
´ Transactions with wholly owned subsidiaries;
´ The effects of new but not yet effective IFRSs;
´ The compensation of key management personnel; and
´ Capital management.

As the consolidated financial statements of Morgan Advanced Materials plc include the equivalent disclosures, the Company has also taken the exemptions
under FRS 101 available in respect of the following disclosures:
´ IFRS 2 Share-Based Payments in respect of Group-settled share-based payments; and
´ The disclosures required by IFRS 7 Financial Instruments Disclosures.

The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next financial statements.

Under Section 408(4) of the Companies Act 2006 the Company is exempt from the requirement to present its own income statement or statement
of comprehensive income.

The Company’s financial statements are presented in its functional currency, pounds sterling, generally rounded to the nearest million.

The Company’s financial statements are prepared on a going concern basis as set out in note 1 the consolidated financial statements of the Group.

The accounting policies set out below have, unless otherwise stated, been applied consistently to the period presented in these financial statements.

MEASUREMENT CONVENTION
The financial statements are prepared on the historical cost basis except for certain financial instruments that are measured at fair value.

FOREIGN CURRENCY
Transactions in foreign currencies are translated to the Company’s functional currency at the foreign exchange rate ruling at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange
rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and
liabilities are denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the
dates the fair value was determined.

INTANGIBLE ASSETS
Intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and less accumulated impairment losses.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite.
Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are
amortised from the date they are available for use. The estimated useful lives are as follows:

Software:

3-7 years

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of tangible fixed assets.
Land is not depreciated. The estimated useful lives are as follows:

Plant, equipment and fixtures:

3-20 years

Buildings:

50 years

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

170

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NOTES TO THE COMPANY BALANCE SHEET

29. ACCOUNTING POLICIES continued
LEASING
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the lessee.

The lease liability is initially measured at the present value of future lease payments including adjustments for any lease incentives receivable. Lease payments
to be made under reasonably certain extension options are also included in the measurement of the liability. Lease payments are discounted using the
interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case of leases in the company, the lessee’s incremental
borrowing rate is used, and being the rate the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value on
similar terms.

The right-of-use-assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date,
less any lease incentives received and initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of the lease term and useful life of the underlying asset. The depreciation starts at the
commencement date of the lease.

INVESTMENTS IN SUBSIDIARIES
Investments in subsidiaries are carried at cost less provision for impairment. The Company tests the investment balances for impairment annually or when
there are indicators of impairment. If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. Where the
carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount.
Where these circumstances have reversed, the impairment previously made is reversed to the extent of the original cost of the investment.

FINANCIAL INSTRUMENTS
Financial instruments and financial liabilities are recognised in the Company balance sheet when the Company becomes party to the contractual provisions
of the instrument.

CLASSIFICATION OF FINANCIAL INSTRUMENTS ISSUED BY THE COMPANY
Financial instruments issued by the Company are treated as equity only to the extent that they meet the following two conditions:

a) they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial assets or financial liabilities

with another party under conditions that are potentially unfavourable to the Company; and

b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver
a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash
or other financial assets for a fixed number of its own equity instruments.

NON-DERIVATIVE FINANCIAL INSTRUMENTS
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other debtors, cash and cash equivalents, loans and
borrowings, and trade and other creditors.

TRADE AND OTHER DEBTORS
Trade and other debtors are recorded initially at transaction price and subsequently measured at amortised cost. This results in their recognition at nominal
value less an allowance for any doubtful debts. The allowance for doubtful debts is recognised based on management’s expectation of losses without regard
to whether an impairment trigger happened or not (an ‘expected credit loss’ (ECL) model). The Group measures the loss allowance for trade receivables
at an amount equal to lifetime ECL.

TRADE AND OTHER CREDITORS
Trade and other creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective
interest method. The Directors consider that the carrying amount of trade payables approximates to their fair value.

INTEREST-BEARING BORROWINGS
Interest-bearing bank loans and overdrafts are initially recorded at fair value of the consideration received, net of direct issue costs. They are subsequently
held at amortised cost using the effective interest method. Finance charges, including premiums payable on settlement or redemption and direct issue costs,
are accounted for using an effective interest rate method and are added to or deducted from the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.

172

29. ACCOUNTING POLICIES continued
IMPAIRMENT OF FINANCIAL ASSETS
The Company recognises provisions for expected credit losses (ECLs) on financial assets measured at amortised cost. The amount of expected credit losses
is updated at each reporting date to reflect changes in credit risk with lifetime ECL recognised when there has been a significant increase in credit risk since
initial recognition. Life ECL represents the expected credit losses that will result from all possible defaults over the expected life of the financial instrument.

To assess whether the credit risk has increased significantly since initial recognition the Company compares the risk of default occurring at the reporting date
with the risk of default at the date of initial recognition. The Company utilises both quantitative and qualitative information to support this assessment,
including historical experience and forward-looking information.

The Company considered amounts due from Group undertakings to be in default when the borrower is unlikely to pay it’s credit obligations to the
Company in full. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.

DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. The
Group enters into derivative financial instruments to manage its exposure to foreign exchange rate risks including non-designated foreign exchange forward
contracts as detailed in note 45.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.
Derivatives are not offset in the financial statements unless the Group has both a legally enforceable right and intention to offset. The impact of the Master
Netting Agreements on the Group’s financial position is disclosed in note 22. A derivative is presented as a non-current asset or a non-current liability if the
remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled within 12 months. Other derivatives are presented
as current assets or current liabilities.

EMPLOYEE BENEFITS
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense
in the income statement in the periods during which services are rendered by employees.

Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit
pension plans and other post-employment benefits is calculated separately for each plan by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan
assets (at bid price) and any unrecognised past service costs are deducted. The liability discount rate is the yield at the balance sheet date on AA-credit-rated
bonds denominated in the currency of, and having maturity dates approximating to the terms of the Company’s obligations. The calculation is performed by
a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognised asset is limited to the
total of any unrecognised past service costs and the present value of benefits available in the form of any future refunds from the plan, reductions in future
contributions to the plan or on settlement of the plan and takes into account the adverse effect of any minimum funding requirements.

Actuarial gains and losses that have arisen since the adoption of FRS 101 are recognised in the period that they occur directly into equity through the
statement of comprehensive income.

The Company is the sponsoring and principal employer of two UK defined benefit pension Schemes, the Morgan Pension Scheme and the Morgan Group
Senior Staff Pension and Life Assurance Scheme (the UK Schemes). The Company also guarantees certain obligations and liabilities to the employees that
currently participate in the two UK Schemes. During 2016 the Company adopted a new policy to allocate costs associated with the UK pension schemes
between itself, as Principal Employer, and the various Participating Employers, based on an evaluation of each entity’s share of overall Scheme liabilities.
This ensures that the pension liability is reflected in the entity that employed the participant. Previously all of the Scheme assets and liabilities were
recognised on the balance sheet of the Company only. Further details are provided in note 39.

Share-based payment transactions
Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for
as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company.

The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in
equity, over the period in which the employees become unconditionally entitled to the awards. Share-based payment charges and credits relating to awards
granted to employees of subsidiaries are recharged to those subsidiaries with a corresponding entry in the Company’s income statement. The fair value
of the wards granted is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted.
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions
are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do not meet the related service
and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the
share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Share-based payment transactions in which the Company receives goods or services by incurring a liability to transfer cash or other assets that is based
on the price of the Company’s equity instruments are accounted for as cash-settled share-based payments. The fair value of the amount payable to
employees is recognised as an expense, with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled
to payment. The liability is remeasured at each balance sheet date and at settlement date. Any changes in the fair value of the liability are recognised as
personnel expense in profit or loss.

Disclosure of the share-based payment transactions can be found in note 24 to the Group financial statements.

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29. ACCOUNTING POLICIES continued
Own shares held by The Morgan General Employee Benefit Trust
Transactions of the Group-sponsored Morgan General Employee Benefit Trust are treated as being those of the Company and are therefore reflected
in the Company’s financial statements. In particular, the Trust’s purchases and sales of shares in the Company are debited and credited to equity.

PROVISIONS
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event that can be reliably
measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects risks specific to the liability where the effect of discounting is expected to be material.

TAXATION
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates
to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can
be utilised.

DIVIDENDS ON SHARES PRESENTED WITHIN SHAREHOLDERS’ FUNDS
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately approved and are no longer
at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements.

FINANCIAL GUARANTEE CONTRACTS
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company considers
these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until
such time as it becomes probable that the Company will be required to make a payment under the guarantee, at which point a liability would be recognised.

USE OF JUDGEMENTS AND ESTIMATES
In preparing these financial statements, management has made judgements, estimates, and assumptions that affect the application of the Company’s
accounting policies and the reported amount of assets, liabilities, income and expenses.

In addition to the areas of judgement and estimates outlined in note 1 to the consolidated Group financial statements, the Company also identifies the
assumptions required in investments impairment assessments as a source of significant risk of resulting in a material adjustment to the asset carrying values
of the Company. Assessment of impairment relies on the use of estimates of the future profitability in a multiple based valuation which may differ from the
actual results achieved. Due to global economic uncertainty, there is an increased level of risk and therefore a key source of estimate uncertainty in these
assumptions, see note 34 for sensitivity analysis.

30. STAFF NUMBERS AND COSTS
The average number of persons employed by the Company (including Directors) during the year was as follows:

Number of employees

Directors and corporate staff

Full details of the Directors’ remuneration for the period can be found in the Remuneration Report on pages 84 to 105.

Aggregate employee-related costs were as follows:

Wages and salaries
Equity-settled share-based payments
Social security costs
Other pension costs

2021

2020

Note

2021
£m

11.3
4.5
1.5
0.6
17.9

2020
£m

8.0
0.7
1.4
0.7
10.8

In 2021, £0.7 million (2020: £1.3 million) of the equity-settled share-based payments amount was recharged to other Morgan Group companies.

31. INTANGIBLE ASSETS

Cost
Balance at 1 January 2021
Additions – externally purchased
Disposals
Balance at 31 December 2021

Amortisation
Balance at 1 January 2021
Amortisation for the year
Disposals
Balance at 31 December 2021

Carrying amounts
At 31 December 2020
At 31 December 2021

32. PROPERTY, PLANT AND EQUIPMENT

Cost
Balance at 1 January 2021
Additions
Disposals
Balance at 31 December 2021

Depreciation and impairment losses
Balance at 1 January 2021
Depreciation charge for the year
Disposals
Balance at 31 December 2021

Carrying value
At 31 December 2020
At 31 December 2021

33. LEASING
The reconciliation in the movement of carrying value in of right-of-use assets is set out in the table below:

Balance at 1 January 2021
Additions
Depreciation charge for the year
Balance at 31 December 2021

Software
£m

10.9
1.0
(1.6)
10.3

6.3
3.0
(1.6)
7.7

4.6
2.6

Total
£m

13.2
0.2
(5.6)
7.8

6.7
0.4
(2.7)
4.4

6.5
3.4

Total
£m

1.3
–
(0.5)
0.8

Plant,
equipment
and fixtures
£m

Land and
buildings
£m

1.1
0.2
–
1.3

0.2
0.4
–
0.6

0.9
0.7

12.1
–
(5.6)
6.5

6.5
–
(2.7)
3.8

5.6
2.7

Plant and
equipment
£m

Land and
buildings
£m

0.6
–
(0.4)
0.2

0.7
–
(0.1)
0.6

The Company leases several assets including buildings and IT equipment. The average lease term at 31 December 2021 is 2.1 years (2020: 3.4 years).

At 31 December 2021, the Company has not applied any exemptions for short-term leases or leases of low-value assets.

174

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NOTES TO THE COMPANY BALANCE SHEET

34. INVESTMENT IN SUBSIDIARY UNDERTAKINGS

36. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Cost
Balance at 1 January 2021
Reclassification
Additions
Disposals
Loan repayments
Effect of movement in foreign exchange
Balance at 31 December 2021

Provisions
Balance at 1 January 2021
Provided in the year
Reversal of impairment
Disposals
Effect of movement in foreign exchange
Balance at 31 December 2021

Carrying amounts
At 31 December 2020
At 31 December 2021

Shares in
Group
undertakings
£m

Loans
£m

Total
£m

449.4
–
–
–
–
–
449.4

139.7
–
(118.9)
–
–
20.8

384.9
–
–
–
(31.6)
0.5
353.8

65.6
–
(0.7)
–
(0.7)
64.2

834.3
–
–
–
(31.6)
0.5
803.2

205.3
–
(119.6)
–
(0.7)
85.0

309.7
428.6

319.3
289.6

629.0
718.2

After a year of global economic recovery and an improvement in forecasts, management conducted a review of the Company’s investment in subsidiary
undertakings. Following this review management identified the reversal of impairment losses of £118.9 million (2020: £16.5 million) against a number of
Shares in Group undertakings which reflected the increased expectation in future cash flows arising from these investments. In addition, management
identified the reversal of impairment losses of £0.7 million (2020: £nil) against loans following loan repayments.

In the prior year impairment losses of £48.9 million and £9.7 million were against a number of Shares in Group undertakings and loans respectively. There
were no impairment losses recognised in the current year.

The impairment assessment of Shares in Group undertakings uses the Board approved, 2022 budgets in an EBITDA* multiple valuation, which is sensitive
to changes in the principal assumptions. A 2% increase in either EBITDA* or the multiple would increase the carrying value of the share in Group
undertakings by £4.3 million at 31 December 2021. A 2% decrease would decrease the carrying value by £4.3 million. Management consider these changes
in assumptions to be reasonable possible.

Note 44 to the financial statements gives details of the Company’s fixed asset investments.

35. DEBTORS

Due within one year
Amounts owed by Group undertakings
Other debtors
Derivative financial assets
Prepayments

Due after more than one year
Derivative financial assets
Amounts owed by Group undertakings

176

Note

2021
£m

19.1
1.3
1.0
1.5
22.9

2020
£m

42.6
1.2
1.4
1.1
46.3

8.2
209.8
218.0

10.1
244.2
254.3

Note

38
38

Note

2021
£m

0.2
–
0.4
2.9
53.3
0.1
10.8
0.9
68.6

2021
£m

25.4
173.6
0.4
2.7
0.6
202.7

2020
£m

38.9
–
0.5
3.3
77.4
3.1
7.1
1.6
131.9

2020
£m

15.2
176.8
0.8
5.0
1.7
199.5

Bank overdrafts
Borrowings
Lease liabilities
Trade creditors
Amounts owed to Group undertakings
Other creditors
Accruals
Derivative financial liabilities

37. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Amounts owed to Group undertakings
Borrowings
Lease liabilities
Derivative financial liabilities
Other creditors

38. BORROWINGS AND LEASE LIABILITIES
TERMS AND DEBT REPAYMENT SCHEDULE

Bank overdrafts
1.18% Euro Senior Notes 2023
3.17% US Dollar Senior Notes 2023
1.55% Euro Senior Notes 2026
3.37% US Dollar Senior Notes 2026
1.74% Euro Senior Notes 2028
2.89% Euro Senior Notes 2030
4.87% US Dollar Senior Notes 2026
Syndicated revolving credit facility
Syndicated revolving credit facility
5.5% Cum First Preference Shares
5.0% Cum Second Preference Shares
Lease liabilities

Currency

Effective
interest rate

Year of
maturity

2021

Carrying
amount
£m

Fair value
£m

2020

Carrying
amount
£m

Fair value
£m

Various
EUR
USD
EUR
USD
EUR
EUR
USD
GBP
USD
GBP
GBP
GBP

2023
2023
2026
2026
2028
2030
2026
2024
2024

1.95%
1.18%
3.17%
1.55%
3.37%
1.74%
2.89%
4.87%
1.15%
2.15%
5.50%
5.00%
2.30% 2022 – 2025

0.2
21.0
11.1
21.1
72.2
8.4
21.0
18.8
(0.4)
–
0.1
0.3
0.8
174.6

0.2
21.1
11.3
21.4
72.8
8.6
22.1
20.6
(0.4)
–
0.1
0.3
0.8
179.0

38.9
22.4
11.0
22.4
71.4
9.0
22.3
18.6
(0.7)
–
0.1
0.3
1.3
217.0

38.9
22.6
11.4
23.2
75.1
9.4
24.3
20.7
(0.7)
–
0.1
0.3
1.3
226.6

In 2021, no borrowings were secured on the assets of the Company (2020: £nil).

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NOTES TO THE COMPANY BALANCE SHEET

39. EMPLOYEE BENEFITS: PENSIONS
DEFINED BENEFIT PLANS
The Company participates in two defined benefit pension schemes, the Morgan Pension Scheme and the Morgan Group Senior Staff Pension and Life
Assurance Scheme (the Schemes). The Schemes were closed to new entrants on 1 August 2011, with any new employees receiving benefits through the
Morgan Group Personal Pension Plan, a defined contribution arrangement. The Morgan Group Senior Staff Pension and Life Assurance Scheme was closed
to the future accrual of benefits on and with effect from 6 April 2016. The Morgan Pension Scheme was closed to the future accrual of benefits on and with
effect from 6 April 2018. Current employees, including those who were active in the Schemes at closure, were auto-enrolled into The Morgan Group
Personal Pension Plan for their future pension benefits.

Pension plans and employee benefits
Present value of funded defined benefit obligations
Fair value of plan assets
Net obligations

Movements in present value of defined benefit obligation
At 1 January
Interest cost
Remeasurement (losses)/gains:
Changes in financial assumptions
Changes in demographic assumptions
Experience adjustments on benefit obligations
Benefits paid
Net past service credit
At 31 December

Movements in fair value of plan assets
At 1 January
Interest on plan assets
Remeasurement (losses)/gains
Contributions by employer
Benefits paid
At 31 December
Actual return on assets

Expense recognised in the income statement

Net past service credit
Administrative expenses (including administration expenses incurred by the Company directly)
Net interest on net defined benefit liability
Total expense recognised in the income statement

The fair values of the plan assets were as follows:

Equities and growth assets
Bonds
Matching insurance policies
Other
Total

2021
£m

2020
£m

(175.9)
160.9
15.0

(195.5)
(2.4)

14.3
1.9
(1.6)
7.4
–
(175.9)

160.7
2.0
0.1
5.5
(7.4)
160.9
2.1

2021
£m

–
(0.9)
(0.4)
(1.3)

2021
£m

43.6
56.2
60.1
1.0
160.9

(195.5)
160.7
(34.8)

(175.5)
(3.5)

(25.3)
–
0.8
8.0
–
(195.5)

145.2
2.8
15.3
5.4
(8.0)
160.7
18.1

2020
£m

–
(0.8)
(0.7)
(1.5)

2020
£m

44.0
46.9
68.3
1.5
160.7

39. EMPLOYEE BENEFITS: PENSIONS continued
Principal actuarial assumptions at the year end were as follows:

Assumptions:

Inflation (RPI/CPI)
Discount rate
Pensions increase
Salary increase
Mortality – post-retirement:
Life expectancy of a male aged 60 in accounting year (years)
Life expectancy of a male aged 60 in accounting year + 20 (years)

2021
%

2020
%

3.40/2.61
1.92

2.88/2.03
1.23
3.00/3.22/3.75 3.00/2.80/3.56
n/a

n/a

26.0
27.4

26.3
27.8

Funding
The most recent full actuarial valuations of the 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 Schemes, having consulted with the Group, agreed past service deficit recovery payments totalling
£16.5 million a year from January 2020 (Company: £5.4 million), increasing by 2.75% pa until 2025, with further payments to Morgan Pension Scheme for
2026 and 2027. This recovery plan is subject to approval from the UK Pensions Regulator. New full valuations are due with effective dates of March 2022
and the outcome of those consultations will determine the Group’s future contribution requirements, with any new deficit arising needing to be met
through the payment of additional contributions.

Sensitivity analysis
The sensitivities of the Company’s net balance sheet to the principal assumptions are:

Discount rate
Inflation
Mortality – post-retirement

Change in assumption

Decrease by 0.1%
Increase by 0.1%
Pensioners live 1 year longer

2021
Increase
effect
£m

2020
Increase
effect
£m

2.1
0.8
5.1

2.5
1.1
6.0

These sensitivities have been calculated to show the movement in the net balance sheet in isolation, and assuming no other changes in market conditions
at the accounting date (except where a fully matching insurance policy is held where this asset is assumed to change in value to match the change in
obligations). This is unlikely in practice, for example, a change in discount rate is unlikely to occur without any movement in the value of the assets held
by the Company’s schemes.

Defined contribution plans
The Group operates a defined contribution pension plan (the Morgan Group Personal Pension Plan). The total Company expense relating to this plan
in 2021 was £0.6 million (2020: £0.6 million).

40. PROVISIONS AND CONTINGENT LIABILITIES

Balance at 1 January 2021
Provisions made during the year
Provisions used during the year
Effects of movement on foreign exchange
Balance at 31 December 2021

Dilapidation
provisions
£m

Other
provisions
£m

0.3
–
(0.2)
–
0.1

3.3
1.9
(0.1)
(0.1)
5.0

Total
£m

3.6
1.9
(0.3)
(0.1)
5.1

Other provisions relate to legal claims and are based on the Company’s assessment of the probable cost of these activities.

The assumptions used are best estimate assumptions chosen from a range of possible actuarial assumptions which may not be borne out in practice.
The principal assumptions are the discount rate and inflation assumptions which are long-term and measured on external factors, based upon each plan’s
duration. In addition to these, the mortality assumption in the UK is material to the cost of the promised benefits. The assumed increases in salaries and
pensions in payment are derived from assumed future inflation.

178

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40. PROVISIONS AND CONTINGENT LIABILITIES continued
Contingent liabilities and guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company considers
these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until
such time as it becomes probable that the Company will be required to make a payment under the guarantee, at which point a liability would be recognised.

The Group has been subject to legal claims in a number of countries. In some cases it will not be possible to form a view, either because the facts are
unclear or because further time is needed to properly assess the merits of the case, and no provisions are held against such cases. The Board, having taken
legal advice, is of the opinion that the remainder of these actions will not have a material impact on the Company’s financial position.

The Company participates in a cash pooling arrangement provided by Lloyds Bank plc with other UK Group companies. As part of that pooling arrangement,
the Company has provided a Guarantee for any liabilities of the other participating companies to the bank, limited to the lower of:

a) an amount equal to the base currency amount of the total liabilities in the cash pool; and

b) an amount equal to the base currency amount of such guarantor’s own net credit balance in the cash pool.

At the balance sheet date, the guaranteed amount was £0.1m (2020: £1.5m).

There are no other contingent liabilities in the Company as at 31 December 2021.

41. SHARE CAPITAL

In issue at beginning and end of the period

Allotted, called up and fully paid
Ordinary shares of 25 pence each

Ordinary
Shares

285,369,988

2021
£m

71.3
71.3

2020
£m

71.3
71.3

Additionally the Company has authorized, issued and fully paid 437,281 (2020: 437,281) cumulative preference shares classified as borrowings totaling
£0.4m (2020: £0.4m). The preference shares comprise 125,327 of 5.5% Cumulative First Preference shares of £1 each and 311,954 issued 5.0%
Cumulative Second Preference shares of £1 each.

Refer to note 20 for details of the rights to dividends, voting rights and return of capital relating to the Preference shares.

For proposed Ordinary dividends see the consolidated income statement on page 118.

42. SHARE PREMIUM AND RESERVES
The merger reserve comprises the balance associated with the premium of shares issued during previous acquisitions. Further details on share premium
and reserves are given in note 20.

Apex Financial Services (Trust Company) Limited administer The Morgan General Employee Benefit Trust (the Trust) in which shares are held to satisfy
awards granted under the Company’s share plans. The shares are distributed via discretionary settlement governed by the rules of the Trust deed dated
1 March 1996 (as amended).

The total number of own shares held by the Trust at 31 December 2021 was 1,360,098 (2020: 841,880) and at that date had a market value of £4.6 million
(2020: £2.6 million).

In 2021, the amount of reserves of Morgan Advanced Materials plc that may be distributed under Section 831(4) of the Companies Act 2006 was
£281.5 million (2020: £148.3 million). This comprises a portion of the profit and loss account.

180

43. RELATED PARTIES
The Company has related party relationships with its subsidiaries, its associate, its Directors and executive officers and their close family members. The
Company is exempt from providing information relating to these parties with the exception of transactions with entities where the Company does not
directly or indirectly own 100% of the shareholding, these are set out in the table below:

Transactions with subsidiaries
Income from management services
Net interest income
Dividend income
Loans owed by related parties
Other amounts owed by related parties
Other amounts owed to related parties

2021
£m

2020
£m

1.0
4.5
8.9
–
2.7
0.9

2.0
4.3
13.0
–
3.0
1.1

44. FIXED ASSET INVESTMENTS
In accordance with Section 409 of the Companies Act 2006, a full list of related undertakings as at 31 December 2021 is disclosed below. Related
undertakings include subsidiary undertakings, all significant holdings (being 20% or more interest), associated undertakings, joint ventures and qualifying
partnerships. Unless otherwise stated the Group’s shareholding represents Ordinary shares held indirectly by the Company.

Name of undertaking
Carbo San Luis S.A.11

Morgan Technical Ceramics Australia Pty Ltd
Morganite Australia Pty Ltd12
Morgan Mechanical Carbon Australasia Pty Ltd1

Morganite Brasil Ltda13

Morgan Advanced Materials Canada Inc.14
Carbo Chile S.A.

Dalian Morgan Ceramics Company Ltd15

Country of
incorporation
Argentina

Australia
Australia
Australia

Brazil

Canada
Chile

China

Morgan Guangzhou Trading Company Limited

China

Morgan Haldenwanger Technical Ceramics
(Wuxi) Co. Ltd15
Morgan Molten Metal Systems (Suzhou) Co. Ltd1, 16

Morgan Technical Ceramics (Suzhou) Co. Ltd

China

Morgan Thermal Ceramics (Shanghai) Co. Ltd1, 15

China

Morgan International Trading (Shanghai) Co. Ltd1, 15

China

Shanghai Morgan Advanced Material and Technology
Co. Ltd1, 16
Jiangsu Morgan Ceramic Core Technology Co. Ltd13

China

Morgan AM&T (Shanghai) Co. Ltd5, 13
Morgan Kailong (Jingmen) Thermal
Ceramics Co. Ltd5, 15
Dalian Morgan Refractories Ltd5, 15

China
China

China

Registered office address
Talcahuano 736, 4th Floor, Buenos Aires, C1013AAP,
Argentina
4 Redwood Drive, Clayton, VIC 3168, Australia
30-36 Birralee Road, Regency Park, SA 5010, Australia
Unit 4, 92-100 Belmore Road, Riverwood, NSW 2210,
Australia
Avenida do Taboão 3265, Taboão, São Bernardo do Campo,
São Paulo, CEP 09656-000, Brazil
1185 Walkers Line, Burlington, ON L7M 1L1, Canada
Avenida San Eugenio 12462, Sitio 3, Loteo Estrella del Sur,
Santiago, Chile
No. 931 Xi’nan Road, Shahekou District, Dalian,
Liaoning Province 116200, China
Room 204, No. 10, Dalang North Street, Huangpu District,
Guangzhou, China
Gongyuanxi Road, Ding Shu Zhen, Yixing, Jiangsu Province
214221, China
108 Tongsheng Road, Suzhou Industrial Park, Suzhou, Jiangsu
Province, 215126, China
Room 09, 28th Floor(2809), 288 LongShan Road, Greenland
Kanhu Plaze, Suzhou New District, Suzhou, 215163, China
18 Kang An Road, Kang Qiao Industrial Zone, Pudong,
Shanghai 201315, China
18 Kang An Road, Kang Qiao Industrial Zone, Pudong,
Shanghai 201315, China
4250 Long Wu Road, Shanghai, 200241, China

2 Liye Road, Economic Development Zone, Wuxi, Jiangsu
Province, 214131, China
4250 Long Wu Road, Shanghai, 200241, China
20-1 Quankou Road, Jingmen City, Hubei Province, 448032,
China
No. 931 Xi’nan Road, Shahekou District, Dalian, Liaoning
Province 116200, China

% shareholding
owned by the
Group
100.00%

100.00%
100.00%
100.00%

100.00%

100.00%
100.00%

100.00%

70.00%
70.00%

70.00%

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44. FIXED ASSET INVESTMENTS continued

Name of undertaking
Yixing Morgan Thermal Ceramics Co. Ltd6, 15

Country of
incorporation
China

Thermal Ceramics de Colombia9

Colombia

Morgan Carbon France S.A.
Thermal Ceramics de France S.A.S.U.16

Thermal Ceramics S.A.10, 16

Morgan Advanced Materials Haldenwanger GmbH17
Morgan Electrical Carbon Deutschland GmbH
Morgan Thermal Ceramics Deutschland GmbH
Morgan Molten Metal Systems GmbH
Morgan Deutschland Holding GmbH
Porextherm Dämmstoffe GmbH
Morgan Holding GmbH
The Morgan Crucible Management GmbH
Wesgo Ceramics GmbH
Refractarios Nacionales S.A.
Morgan AM&T Hong Kong Company Ltd

Morgan Materials Hungary Limited
Liability Company15
Morgan Advanced Materials India Private Ltd

Morganite Crucible (India) Ltd

Ciria India Limited15
Murugappa Morgan Thermal Ceramics Ltd6

Thermal Ceramics Italiana S.R.L.13
Morgan Carbon Italia S.R.L.
Morganite Carbon Kabushiki Kaisha
Shin-Nippon Thermal Ceramics Corporation

Morgan Korea Company Ltd4, 18

Morganite Luxembourg S.A.
Grafitos y Maquinados S.A. de C.V.1, 19

Grupo Industrial Morgan S.A. de C.V.1, 19

Morgan Technical Ceramics S.A. de C.V.19

Morgan Holding Netherlands B.V.
Morgan Terrassen B.V.
Morgan AM&T B.V.
Morgan Donald Brown Limited

France
France

France

Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Guatemala
Hong Kong

Hungary

India

India
India

Italy
Italy
Japan
Japan

Korea

Luxembourg
Mexico

Mexico

Netherlands
Netherlands
Netherlands
New Zealand

Morgan Carbon Polska Sp.zoo
Thermal Ceramics Polska Sp.zoo
Morgan Thermal Ceramics Sukhoy Log LLC20

Poland
Poland
Russia

182

Registered office address
2 Beidan Road, Taodu Industrial Park, Ding Shu Zhen,
Yixing, Jiangsu, 214222, China
Calle 18 No. 23-31, Bodega 1, Guadalajara de Buga-Valle,
AA 5086, Colombia
6 rue du Réservoir, 68420 Eguisheim, France
Centre de Vie BP 75, 3 rue du 18 Juin 1827, 42162
Andrézieux-Bouthéon, France
Centre de Vie BP 75, 3 rue du 18 Juin 1827, 42162
Andrézieux-Bouthéon, France
Teplitzerstraße 27, 84478 Waldkraiburg, Germany
Zeppelinstraße 26, 53424 Remagen, Germany
Borsigstraße 4-6, 21465 Reinbek, Germany
Noltinastraße 29, 37297 Berkatal-Frankenhain, Germany
Zeppelinstraße 26, 53424 Remagen, Germany
Heisingerstraße 8/10, 87437 Kempten (Allgäu), Germany
Zeppelinstraße 26, 53424 Remagen, Germany
Zeppelinstraße 26, 53424 Remagen, Germany
Willi-Grasser-Straße 11, 91056 Erlangen, Germany
Km. 34.5, Ruta al Pacífico, Palín, Escuintla, Guatemala
Units 4-6, 11/F, Siu Wai Industrial Centre, 29-33 Wing Hong
Street, Cheung Sha Wan, Kowloon, Hong Kong
Csillagvirág utca 7, 1106 Budapest, Hungary

P-11, Pandav Nagar, Mayur Vihar Phase 1, Delhi, 110091,
India
B-11, MIDC Industrial Area, Waluj, Aurangabad, 431136,
Maharashtra, India
P-11, Pandav Nagar, Mayur Vihar Phase 1, Delhi, 110091 India
PO Box 1570, Dare House Complex, Old No. 234/
New No. 2, NSC Bose Road, Chennai, 600001 India
Via Vittori Pisani 20, 20124, Milan, Italy
Via Vittori Pisani 20, 20124, Milan, Italy
1-5, Isogamidori 7-chome, Chuo-ku, Kobe-shi, Hyogo, Japan
Portus Center Building 12F, 4-45-1 Ebisujimacho, Sakai-ku,
Sakai-shi, Osaka 590-0985, Japan
27 Nongongjoongang-ro 46 gil, Nongong-eup, Dalseong-
gun, Daegu-si, Republic of Korea
BP 15, Capellen, L-8301, Luxembourg
Cerrada de la Paz No. 101, Col. Industrial La Paz, Pachuca
Hidalgo, Mexico
Cerrada de la Paz No. 101, Fraccionamiento Industrial La
Paz, Mineral de la Reforma, 42181 Hidalgo, 42092, Mexico
Av. Fulton No. 20, Fraccionamiento Industrial Valle de Oro,
San Juan del Rio, Queretaro C.P. 76802, Mexico
Oude Veiling 3, 1689 AA Zwaag, The Netherlands
Oude Veiling 3, 1689 AA Zwaag, The Netherlands
Oude Veiling 3, 1689 AA Zwaag, The Netherlands
KPMG, Chartered Accountants, KPMG Centre, 18 Viaduct
Harbour Avenue, Maritime Square, Auckland, 1010,
New Zealand
ul. Iskry 26, 01-472 Warszawa, Poland
Towarowa 9, 44-100 Gliwice, Poland
Russia 624800, Sverdlovsk District, Sukhoi Log 624800,
Ul. Militseyskaya 2

% shareholding
owned by the
Group
51.00%

100.00%

100.00%
100.00%

100.00%

100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%

100.00%

75.00%

70.00%
51.00%

100.00%
100.00%
100.00%
50.00%

93.19%

100.00%
100.00%

100.00%

100.00%
100.00%
100.00%
100.00%

100.00%
100.00%
51.00%

44. FIXED ASSET INVESTMENTS continued

Name of undertaking
Morgan Ceramics Asia Pte Ltd1

Morganite Ujantshi (Pty) Ltd

Country of
incorporation
Singapore

South Africa

Thermal Ceramics South Africa (Pty) Ltd

South Africa

Morganite South Africa (Pty) Ltd

South Africa

Thermal Ceramics España S.L.
Morganite Española S.A.
Morgan Matroc S.A. (in liquidation)
Morgan Advanced Materials (Taiwan) Co. Ltd
Morganite Thermal Ceramics (Taiwan) Ltd

Morgan Holdings (Thailand) Ltd2

Spain
Spain
Spain
Taiwan
Taiwan

Thailand

Morgan Technical Ceramics (Thailand) Ltd2

Thailand

Turkey

MKGS Morgan Karbon Grafit Sanayi
Anonim Sirketi
Morgan Advanced Materials Industries Ltd

Certech International Limited1
MCCo Limited7
MNA Finance Limited1
Morgan Electro Ceramics Limited1
Morgan Europe Holding Limited1
Morgan European Finance Limited
Morgan Finance Management Limited
Morgan Holdings Limited1
Morgan International Holding Limited1
Morgan North America Holding Limited
Morgan Technical Ceramics Limited

Morgan Trans Limited1
Morganite Carbon Limited1
Morganite Crucible Limited1
Morganite Electrical Carbon Limited

Morganite Special Carbons Limited1
Petty France Investment Nominees Limited1
TCG Guardian 1 Limited
TCG Guardian 2 Limited
Terrassen Holdings Limited8
The Morgan Crucible Company Limited
Thermal Ceramics Europe Limited7 (in liquidation)
Thermal Ceramics Limited7
Thermal Ceramics UK Limited
Clearpower Ltd3, 21
Certech, Inc.23

Registered office address
150 Kampong Ampat, #05-06A, KA Centre, 368324,
Singapore
149 South Rand Road, Tulisa Park, Johannesburg 2197,
South Africa
149 South Rand Road, Tulisa Park, Johannesburg 2197,
South Africa
149 South Rand Road, Tulisa Park, Johannesburg 2197,
South Africa
Av. Europa, 106, 12006, Castellón, España.
Av. Europa, 106, 12006, Castellón, España.
Roger de Lluria 104 5º-2ª, 08037 Barcelona, Spain
25 Hsin-Yeh Street, Hsiao Kang, Kaohsiung 81208, Taiwan
c/o Baker & McKenzie, 15/f, 168 Tun Hwa North Road,
Taipei 105, Taiwan
22nd -25th Floor, 990 Abdulrahim Place, 22nd-25th Floor,
Rama IV Road, Khwaeng Silom Sub-district, Bangrak District,
Bangkok, 10500, Thailand
No. 958 On-nuch Road, Khwaeng Suanluang,
Khet Suanluang, Bangkok, 10250, Thailand
Osmangazi Mahallesi 2647, Sokak No. 27/3, Kıraç, Esenyurt,
Istanbul 34522, Turkey
KHIA4–07A, Khalifa Industrial Zone Abu Dhabi (KIZAD),
Abu Dhabi, United Arab Emirates

United Arab
Emirates
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom Morgan Advanced Materials – Technical Ceramics, Morgan
Drive, Stourport-on-Severn, Worcestershire DY13 8DW,
UK

SA6 8PP, UK

United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United Kingdom Tebay Road, Bromborough, Wirral, CH62 3PH, UK
United Kingdom York House, Sheet Street, Windsor, Berkshire, SL4 1DD, UK
United States

550 Stewart Road, Hanover, Pennsylvania 18706-1455

% shareholding
owned by the
Group
100.00%

74.90%

100.00%

100.00%
100.00%
100.00%
100.00%
88.00%

100.00%

100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%

100.00%
100.00%
100.00%
100.00%

100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.01%
100.00%

183

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsNOTES TO THE COMPANY BALANCE SHEET

GROUP STATISTICAL INFORMATION
UNDER ADOPTED IFRSS

44. FIXED ASSET INVESTMENTS continued

Name of undertaking
Graphite Die Mold, Inc.23
Morgan Advanced Ceramics, Inc.23
Morgan Advanced Materials and Technology Inc.23
Morganite Crucible Inc.24
Morganite Industries Inc.25

Country of
incorporation
United States
United States
United States
United States
United States

National Electrical Carbon Products, Inc.14

United States

Thermal Ceramics Inc.23

United States

Thermal Ceramics de Venezuela C.A.15

Venezuela

Registered office address
18 Air Line Park, Durham, Connecticut 06422-1000, USA
2425 Whipple Road, Hayward, California 94544, USA
441 Hall Avenue, St Marys, Pennsylvania 15857, USA
2102 Old Savannah Road, Augusta, Georgia 30906
4000 West Chase Blvd, Suite 170, Raleigh, North Carolina
27607, USA
PO Box 1056, 251 Forrester Drive, Greenville,
South Carolina 29602, USA
PO Box 923, 2102 Old Savannah Road, Augusta, Georgia
30906, USA
Zona Ind. El Recreo, Av. 87 N°105-121, Flor Amarillo,
Valencia Edo. Carabobo, Venezuela

% shareholding
owned by the
Group
100.00%
100.00%
100.00%
100.00%
100.00%

100.00%

1. Directly owned by Morgan Advanced Materials plc.

14. Ownership held in Common Stock of no par value.

2. 99.98% owned by Morgan Advanced Materials plc.

15. Ownership held in Registered Capital.

3. 99% owned by Morgan Advanced Materials plc.

16. Ownership held in Ordinary Shares of no par value.

4. 93.19% owned by Morgan Advanced Materials plc.

17. Ownership held in Partnership Shares.

5. 70% owned by Morgan Advanced Materials plc.

18. Ownership held in Common and Preference Shares.

6. 51% owned by Morgan Advanced Materials plc.

19. Ownership held in Series A and Series B.

7. 50% owned by Morgan Advanced Materials plc.

20. Subsidiary not included in consolidated accounts as the Company

8. 8.18% owned by Morgan Advanced Materials plc.

9. 4% owned by Morgan Advanced Materials plc.

10. 1.98% owned by Morgan Advanced Materials plc.

11. Ownership held in Class A and Class B Common Stock.

12. Ownership held in Ordinary and Non-Cumulative
Non-Participating Redeemable Preference Shares.

13. Ownership held in Quotas.

does not exercise management control.

21. Ownership held in Ordinary A, B and C and Preference A and B Shares.

22. Ownership held in Ordinary A and B Shares.

23. Ownership held in Common Stock.

24. Ownership held in Preferred Stock and no par Common Stock.

25. Ownership held in Class A, Class B and Class C Common Stock.

45. DERIVATIVE FINANCIAL ASSETS AND LIABILITIES

Derivative financial assets
Forward foreign exchange contracts non-designated
– amounts falling due within one year
– amounts falling due after more than one year

Derivative financial liabilities
Forward foreign exchange contracts non-designated
– amounts falling due within one year
– amounts falling due after more than one year

2021
£m

2020
£m

1.0
8.2
9.2

(0.9)
(2.7)
(3.6)

1.4
10.1
11.5

(1.6)
(5.0)
(6.6)

Fair values are measured using a hierarchy where the inputs are:
´ 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 assets or liability that are not based on observable market data (unobservable inputs).

The derivative financial assets and liabilities are all measured using Level 2 inputs. The fair value of forward foreign exchange contracts is estimated
by discounting the future cash flows using appropriate market-sourced data at the balance sheet date.

Revenue

2017
Results
before
specific
adjusting items

restated 1,2

£m

1,001.4

2018
Results
before
specific
adjusting items

restated 1,2.3
£m

2019
Results
before
specific
adjusting items
restated2
£m

1,033.9

1,049.5

2020
Results
before
specific
adjusting
items
£m

910.7

2021
Results
before
specific
adjusting
items
£m

950.5

Profit from operations before amortisation of intangible assets

120.7

124.8

134.2

91.7

124.5

Amortisation of intangible assets

Operating profit
Net financing costs
Share of profit of associate (net of income tax)
Profit before taxation
Income tax expense
Profit after taxation before discontinued operations
Discontinued operations
Profit for the period

Assets employed
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments and other receivables
Deferred tax assets
Net current assets
Total assets less current liabilities
Employee benefits: pensions
Non-current provisions and other items
Deferred tax liabilities

Equity
Total equity attributable to equity holders of the Parent Company
Non-controlling interests
Total equity

Ordinary dividends per share4

Earnings per share
Continuing and discontinued operations
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted earnings per share5
Diluted adjusted earnings per share5

(7.3)

113.4
(22.5)
0.2
91.1
(26.9)
64.2
(1.0)
63.2

297.8
–
217.0
11.7
9.1
129.4
665.0
218.0
202.7
10.5
233.8

194.7
39.1
233.8

11.0p

37.8p
37.5p
22.8p
22.7p

(8.0)

(8.1)

(6.1)

(6.0)

116.8
(13.2)
0.8
104.4
(29.0)
75.4
(1.4)
74.0

314.5
–
215.6
12.2
6.9
106.8
656.0
190.4
177.9
11.0
276.7

232.3
44.4
276.7

11.0p

126.1
(16.9)
0.5
109.7
(29.9)
79.8
0.7
80.5

317.2
49.1
204.8
12.2
6.0
125.1
714.4
156.8
241.0
4.9
311.7

270.2
41.5
311.7

85.6
(11.9)
0.6
74.3
(20.2)
54.1
-
54.1

267.6
35.5
185.4
11.2
14.4
136.7
650.8
176.3
234.0
0.5
240.0

202.3
37.7
240.0

118.5
(9.2)
0.4
109.7
(29.7)
80.0
-
80.0

248.1
31.9
183.1
2.9
15.9
202.8
684.7
102.7
231.2
1.2
349.6

310.6
39.0
349.6

4.0p

5.5p

9.1p

16.2p
16.1p
26.7p
26.6p

25.7p
25.5p
28.0p
27.8p

(7.9)p
(7.9)p
19.0p
18.9p

25.9p
25.7p
27.2p
27.0p

1. The Group disposed of the Composites and Defence Systems business in 2018, the disposal group formed the Composites and Defence Systems operating segment and has been classified

as a discontinued operation under IFRS 5. Figures for 2016-2017 have been restated to reflect these changes.

2. Figures for 2016- 2019 have been restated to classify the Group’s cumulative preference shares as borrowings. See note 1 to the consolidated financial statements.

3. 2017 has been restated to reflect the adoption of IFRS 15 Revenue from Contracts with Customers in 2018.

4. On 31 March 2020, the Group announced the Board’s decision to withdraw the proposed 2019 final dividend due to the financial uncertainty resulting from the COVID-19 pandemic.

5. Definitions of these non-GAAP measures can be found in the glossary of terms on page 186, reconciliations of the statutory results to the adjusted measures can be found on pages 55 to 57.

184

185

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsCAUTIONARY STATEMENT

SHAREHOLDER INFORMATION

This document has been prepared for and only for the members of the Company as a body and no other persons. Its purpose is to assist members
in assessing how the Directors have performed their duties, the Company’s strategies and the potential for those strategies to succeed and for no other
purpose. Save as would otherwise arise under English law, the Company, its Directors, employees, agents or advisers do not accept or assume
responsibility or liability to any third parties to whom this document is shown or into whose hands it may come and any such responsibility or liability
is expressly disclaimed.

This document contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business
circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. These and other factors could adversely
affect the outcome and financial effects of the plans and events described. Forward-looking statements by their nature involve a number of risks,
uncertainties and assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause
actual results and outcomes to differ materially from those expressed in or implied by the forward-looking statements.

It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a wide range of such variables. No
assurances can be given that the forward-looking statements in this document will be realised. The forward-looking statements reflect the knowledge
and information available at the date this document was prepared and will not be updated during the year but will be considered in the Annual Report
for next year. Nothing in this document should be construed as a profit forecast.

GLOSSARY OF TERMS

Constant-currency1

Corporate costs
Free cash flow before acquisitions,
disposals and dividends1
Group earnings before interest, tax,
depreciation and amortisation (EBITDA)1
Group adjusted operating profit1
Group organic1
Adjusted earnings per share (EPS)1

Net debt1
Net cash and cash equivalents1
Return on invested capital (ROIC)1

Specific adjusting items

Constant-currency revenue and Group adjusted operating profit are derived by translating
the prior year results at current year average exchange rates.
Corporate costs consist of the costs of the central head office.
Cash generated from continuing operations less net capital expenditure, net interest paid,
tax paid and lease payments.
EBITDA is defined as operating profit before specific adjusting items, amortisation of intangible
assets and depreciation.
Operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets.
The Group results excluding acquisition, disposal and business exit impacts at constant-currency.
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.
Borrowings, bank overdrafts and lease liabilities less cash and cash equivalents.
Net cash and cash equivalents is defined as cash and cash equivalents less bank overdrafts.
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).
See note 6 and note 1 to the consolidated financial statements for further details.

1. Reconciliations of these non-GAAP measures to GAAP measures can be found on pages 55 to 57.

ANALYSIS OF ORDINARY SHAREHOLDINGS AS AT 31 DECEMBER 2021

Size of holding

Holding classification

KEY DATES

5 May 2022
28 July 2022

1-2,000
2,001-5,000
5,001-10,000
10,001-50,000
50,001-100,000
100,001 and above

Individuals
Nominee companies
Trusts (pension funds etc.)
Others

Number of
holdings

% of total
holdings

Number
of shares

4,167
628
221
211
45
168
5,440
4,787
365
4
284
5,629

76.60%
11.54%
4.06%
3.88%
0.83%
3.09%
100.00
88.02%
6.71%
0.07%
5.20%

2,062056
2,003,926
1,558,612
4,552,917
3,317,247
271,875,230
285,369,988
6,969,506
250,935,317
30,519
27,434,646
100.00% 285,369,988

% of share
capital

0.72%
0.70%
0.55%
1.60%
1.16%
95.27%
100.00%
2.45%
87.93%
0.01%
9.61%
100.00%

2022 Annual General Meeting (AGM), commencing at 10:30am.
Half-Year results announced via the Regulatory News Service and on the Company’s website.

2021 AND (PROPOSED) 2022 DIVIDEND PAYMENT DATES

1 April and 1 October 2021

19 November 2021

20 May 2022

Dividend payment dates in respect of the 5.5% Cumulative First Preference shares of £1 each and the 5.0%
Cumulative Second Preference shares of £1 each.
An interim cash dividend of 3.2 pence per Ordinary share of 25 pence each was paid to shareholders registered at the
close of business on 29 October 2021.
Subject to shareholders’ approval at the 2022 AGM, a final cash dividend of 5.9 pence per Ordinary share of 25 pence
each will be paid to shareholders registered at the close of business on 29 April 2022.

1 April 2022 and 1 October 2022 Dividend payment dates in respect of the 5.5% Cumulative First Preference shares of £1 each and the 5.0%

Cumulative Second Preference shares of £1 each.

OTHER INFORMATION

Capital gains tax

The market values of quoted shares and stocks at 31 March 1982 were:

Ordinary shares of 25 pence each 122.5 pence

5.5% Cumulative First Preference shares of £1 each 30.5 pence

5.0% Cumulative Second Preference shares of £1 each 28.5 pence

Share price
ISIN Code
LEI
Ticker symbol

For capital gains tax purposes, the cost of Ordinary shares is adjusted to take account of rights issues. Any capital gains
arising on disposal will also be adjusted to take account of indexation allowances. Since the adjustments will depend on
individual circumstances, shareholders are recommended to consult their professional advisers.
The price can be obtained on the Company’s website: www.morganadvancedmaterials.com
GB0006027295
I4K14LL95N2PHDL7EG85
MGAM

186

187

Morgan Advanced Materials Annual Report 2021Morgan Advanced Materials Annual Report 2021OverviewStrategic report GovernanceFinancial statementsSHAREHOLDER INFORMATION

COMPANY DETAILS

Company name change

Registered office

Website

Company registrars

Shareview portfolio
www.shareview.co.uk
Dividend payments

Multiple accounts on the
shareholder register

Buying and selling shares

Donate your shares to charity

The Company changed its name to Morgan Advanced Materials plc (from The Morgan Crucible Company plc)
on 27 March 2013. Following this change, share certificates issued in the name ‘The Morgan Crucible Company plc’
remain valid (replacement share certificates in the name ‘Morgan Advanced Materials plc’ were not issued to
existing shareholders).
York House, Sheet Street, Windsor, SL4 1DD

Registered in England and Wales No. 286773

Telephone: +44 (0)1753 837000

www.morganadvancedmaterials.com
The Company’s website provides information about the Group including the markets in which it operates, its
strategy and recent news from the Group. The Investors section is a key source of information for shareholders,
containing details of financial results, shareholder meetings and dividends, and providing access to frequently asked
questions. Current and past annual half-year and sustainability & responsibility/EHS reports are also available
to view and download.
Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA

Telephone: +44 (0)371 384 2412

Website: www.shareview.co.uk

Lines are open between 8.30am and 5.30pm, Monday to Friday (excluding UK public holidays).

Shareholders with queries relating to their shareholding should contact Equiniti directly. Alternatively, shareholders
may find the Investors section of our website useful for general enquiries.
The most efficient way to communicate with Equiniti is by registering for a portfolio at www.shareview.co.uk.
This is a service, which enables shareholders to manage their shareholdings online.
You can choose to receive your dividend in a number of ways. Dividends will automatically be paid to you by
cheque in UK sterling and sent to your registered address unless you have chosen one of the options below:

Direct payment to your bank
Cash dividends can be paid directly to a UK bank or building society account. This means that your dividend
reaches your bank account on the payment date, it is more secure (cheques can sometimes get lost in the post),
you avoid the inconvenience of depositing a cheque and cheque fraud is reduced. If you are a shareholder who
has a UK bank or building society account you can arrange to have dividends paid direct via a bank/building society
mandate. You can add or change your mandate online at www.shareview.co.uk, or by contacting Equiniti.

Overseas payments
If you live overseas and would like dividends paid to an overseas account, please contact Equiniti by post to set up
or amend a mandate. They offer an overseas payment service for 90 countries worldwide. Please see further
information at www.shareview.co.uk.
If a shareholder receives two or more sets of AGM documents, or multiple dividend payments, this means that
there is more than one account in their name on the shareholder register, perhaps because the name or the
address appears on each account in a slightly different way. If you have multiple accounts and would like them
to be combined, please contact Equiniti.
Equiniti offer a service to buy and sell shares in UK listed companies. For more information, visit
www.shareview.co.uk or call 03456 037 037. Providing this information is not a recommendation to buy or sell
shares and this service may not be suitable for all shareholders.

The price and value of any investments and income from them can fluctuate and may fall. Therefore, you may
get back less than the amount you invested. Past performance is not a guide to future performance.

Neither the Company nor Equiniti provides advice or makes recommendations about investments. If you have any
doubts about the suitability of an investment, you should seek advice from a suitably qualified professional advisor.
If you have only a small number of shares which are uneconomical to sell, you may wish to consider donating them
to charity, free of charge, through ShareGift (registered charity 1052686), a charity that specialises in the donation
of small, unwanted shareholdings to good causes. You can find out more by visiting www.sharegift.org or by
telephoning +44 (0)20 7930 3737.

Unsolicited telephone calls and mail Shareholders in companies may receive unsolicited phone calls or correspondence concerning investment matters.

If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free
company or research reports, please check the company or person contacting you is properly authorised by the
Financial Conduct Authority before getting involved. Further information about what you should do is available
on our website in the ‘Shareholder Centre’ within the Investors section.
Morgan has launched a tracing programme with the aim of reuniting ‘lost’ shareholders or their estates with
unclaimed cash entitlements in respect of Morgan dividend payments. Cash entitlements may not have been
claimed due to an address change, or where a Shareholder is deceased and the beneficiaries or executors of an
estate are not aware of the holding. If you would like to clarify whether you or a deceased person for whose estate
you act holds shares in Morgan please contact Equiniti for further assistance.

Asset Reunification Programme

188

This Report has been printed in the UK. Our printers are a Carbon/Neutral®
printing company. They are FSC® certified and ISO 14001 accredited and
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cover is coated using a biodegradable laminate.

If you have finished reading this Report and no longer wish to retain it, please
pass it on to other interested readers, return it to Morgan Advanced Materials
or dispose of it in your recycled paper waste. Thank you.

This Annual Report is available at www.morganadvancedmaterials.com

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Morgan Advanced Materials Annual Report 2021M

USING ADVANCED MATERIALS
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