Morgan Advanced Materials (LON:MGAM) management said the group delivered a “resilient performance” in 2025 despite challenging market conditions, with end markets stabilizing over the last 18 months and early signs of improvement expected to support modest growth in 2026.
On the company’s full-year results call, CEO Damien Caby said Morgan is executing the strategy it outlined in December, with a focus on improving operational effectiveness, driving stronger growth, and maximizing portfolio value. CFO Richard Armitage added that the company’s outlook for 2026 is “in line with current market expectations,” including organic constant currency (OCC) revenue growth of 1% to 2% and an adjusted operating margin returning to “around 10%.”
2025 revenue down 3.3% on OCC basis as semiconductor weakness persisted
Management attributed the group revenue decline largely to the semiconductor downturn. Armitage noted the £33 million OCC decline in group revenue “equates to the decline in semiconductor revenue,” underscoring what he described as “resilience and stability of the rest of the business.” Pricing contributed about 3.5% for the year, while the implied volume decline was around 6.7%, he said.
Caby said aerospace and defense continued to grow strongly, driven by new engine and maintenance, repair and overhaul (MRO) orders, while healthcare declined due to “tariff-related inventory adjustments” and lower volumes in some mature customer product lines. In process and metals, Morgan saw mid-single-digit declines in Europe and Asia, while petrochemicals and chemicals were stable overall, with North American growth offsetting European weakness.
Profitability and cash flow: margin held at 9.6% and working capital improved
Group headline adjusted operating profit was £99.1 million, down £29.3 million, for an adjusted operating margin of 9.6%. The figure included £5.3 million of predisposal operating profit from Molten Metal Systems (MMS). Return on invested capital was 14.1%, “slightly below” the company’s through-cycle range, Armitage said.
Headline free cash flow was an inflow of £45.4 million, which management said reflected continued working capital improvements. Adjusted EPS was £0.159, and the company held its total dividend flat at £0.122 for the year.
Working capital contributed an inflow of £50.4 million, including around £30 million of underlying improvement and £38 million from non-recourse working capital arrangements. Net capital expenditure was £65.9 million, down year-over-year as the company’s investment in semiconductor capacity concluded.
Morgan ended the year with net debt of £232 million (excluding lease liabilities), representing 1.8x EBITDA. Armitage acknowledged leverage has moved above the company’s 1.0x–1.5x target range due to lower EBITDA, and said Morgan is focused on bringing leverage back to around 1.5x over the next two years. For 2026, he said year-end leverage is expected to be around 1.7x.
Segment highlights: Technical Ceramics grew while Thermal Products margin fell
In Performance Carbon, Armitage said the “principal driver” was the decline in semiconductor, though he noted revenue stabilized during the year with the second half broadly flat versus the first. Aerospace and defense was slightly down year-over-year in that segment due to timing of large defense orders, while rail and energy performed well. Lower volume and mix reduced margin, though efficiency and simplification benefits limited the margin decline to around 2.6%, he said.
Technical Ceramics delivered revenue growth in 2025, which management attributed primarily to aerospace and defense, where revenue grew 22% driven by demand for new aircraft and robust maintenance revenue. Industrial business grew low single digits despite the industrial downturn, while healthcare and semiconductor were headwinds. The segment’s operating margin remained stable at 11.5%.
Thermal Products was impacted by weak investment and demand conditions, particularly in Europe. Morgan highlighted double-digit growth in fire protection with strong demand from the Middle East, but overall profitability declined. Armitage said the segment margin fell 3.3 percentage points, largely due to volume in a high fixed-cost business with an estimated 40% drop-through on revenue movements. He also cited operational issues in the U.S. business (a 1 percentage point margin impact) and FX and hyperinflation accounting in Argentina (another 1 percentage point impact). Management said it expects a strong reversal in drop-through as markets recover and is implementing a site improvement plan in the U.S.
Adjusting items, impairments, and ERP investments
Specific adjusting items totaled £47.6 million on a continuing basis. The largest item was a non-cash impairment of £15.6 million related to a semiconductor asset in the U.K., tied to the previously announced £60 million capacity investment program. Armitage said the impairment reflected equipment devoted to a product range where demand is uncertain.
The company recorded £13.4 million of costs associated with its simplification program in 2025. Armitage said implementation costs to date are £35 million with benefits delivered of £24 million; once complete, Morgan expects total cumulative savings of £27 million for implementation costs of £40 million, in line with original projections when the program began in 2023. He said restructuring activities would conclude “for the time being” absent material adverse developments or portfolio changes.
Morgan also incurred £13.3 million in ERP rollout design and configuration costs in 2025 and expects around £20 million in 2026 before the program starts winding down during 2027. In Q&A, Armitage said 2027 ERP spend could fall to around £15 million depending on rollout speed, with a “tail end” few million pounds potentially in 2028.
2026 outlook: modest growth, margin improvement, and portfolio actions
For 2026, management reiterated guidance for 1% to 2% OCC revenue growth as end markets stabilize. Caby said Morgan expects continued growth in aviation and defense and “positive trends” in power and rail, with slightly improving project activity in petrochemicals and processing industries but continued weakness in Europe, healthcare, and semiconductor sales. He added Morgan is benefiting from a rebound in silicon that is starting to offset ongoing inventory adjustments in silicon carbide.
On semiconductors, Caby said silicon semiconductor now represents more than half of Morgan’s semiconductor business and that the broader industry is reporting roughly 20% growth rates. However, he said Morgan’s growth rate is lower because part of market growth reflects wafer mix improvements that do not materially benefit Morgan’s products. Armitage said the company expects to commission remaining assets in its semiconductor capacity program “towards or around the end of the year,” with commissioning costs “probably” around £1 million to £2 million.
The company also outlined portfolio and capital allocation priorities. It received £10 million net after tax and fees from the sale of MMS, with the balance due later in 2026. Armitage said Morgan has a lockout period for its stake in Foseco India Limited until “towards the end of June” and then intends to sell down the holding over time, subject to market conditions.
Most notably, management said it has commenced a strategic review of the Thermal Products division, assessing a “full range of options,” including a potential disposal. In Q&A, Armitage said the company has made an initial estimate of potential tax leakage that would be “fairly middle of the range” and not expected to prevent a sale from being value accretive. He added there is “limited connection” between the division and the U.K. pension fund, though the company is consulting relevant stakeholders as required.
Separately, Morgan said its simplification and continuous improvement programs contributed 1.7 percentage points to margin in 2025 and are expected to continue in 2026, alongside “transform” activities expected to deliver net benefits of around £11 million in 2026. Caby said procurement and large-site turnaround initiatives are expected to deliver at least £20 million of margin improvements by 2028, with procurement benefits beginning in the second half of 2026 and ramping through 2027.
About Morgan Advanced Materials (LON:MGAM)
Morgan Advanced Materials plc operates as a materials science and application engineering company primarily the United Kingdom. It serves customers in the industrial, transportation, petrochemical and chemical, energy, semiconductor and electronics, healthcare, and security and defense markets. The company was formerly known as The Morgan Crucible Company plc and changed its name to Morgan Advanced Materials plc in March 2013. Morgan Advanced Materials plc was founded in 1856 and is headquartered in Windsor, the United Kingdom.
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