Morgan Advanced Materials Launches Strategic Review of Thermal Products Division Amid Challenging Full-Year Results

Morgan’s 2025 scorecard: softer revenue, slimmer margins, solid cash

Morgan Advanced Materials has posted a resilient but downbeat set of full-year numbers for 2025, held back by weakness in Semiconductors and European Industrial markets. On a headline basis – which includes the Molten Metal Systems (MMS) business up to its sale in November – revenue came in at £1,030.3 million, with a headline adjusted operating profit of £99.1 million and a 9.6% margin.

Adjusted results exclude “specific adjusting items” such as restructuring, ERP implementation costs and impairments, and remove amortisation, to give a cleaner view of ongoing trading. On a statutory continuing basis (after removing MMS), revenue was £996.6 million and operating profit was £45.2 million.

Key numbers (FY25)
Headline revenue	£1,030.3 million
Headline adjusted operating profit	£99.1 million
Headline adjusted operating margin	9.6% (2024: 11.7%)
Adjusted EPS	15.9p (2024: 24.2p)
Cash generated from operations	£168.6 million
Free cash flow	£45.4 million
Net debt	£232.2 million
Net debt to EBITDA (ex IFRS 16)	1.8x headline, 1.9x continuing
Total dividend	12.2p (maintained)
Return on invested capital	14.1%

Organic constant-currency (OCC) revenue – which strips out M&A and exchange rates – fell 3.3% year on year. Management says demand broadly stabilised through H2, which matters if you are looking for a turn in Semis and European Industrials.

Where performance slipped – and where it held up

End-market mix told the story. Industrial (£394.5 million) and Semiconductors (£69.8 million) were weaker, while Aerospace & Defence grew to £213.5 million. Healthcare softened as customers cut inventories. The FX headwind also bit.

Performance Carbon: Semis drag, margins still respectable

Revenue was £306.8 million, down 8.9% OCC. The division’s adjusted margin eased to 13.4% (from 16.0%), cushioned by efficiency and simplification gains and helped by £5.2 million of non-recurring trading receipts that will not repeat in 2026. Management sees wafer fabrication as its focus in Semis, where barriers to entry are high and relationships with US, European and Japanese OEMs are strong.

Technical Ceramics: steady growth with aero tailwinds

Revenue rose to £341.6 million, up 3.4% OCC, with an 11.5% adjusted margin, broadly flat year on year. Aerospace strength and robust MRO activity offset Semiconductor and Healthcare softness. Capacity is being added to support rising aircraft deliveries and newer engine programmes.

Thermal Products: under the microscope

Revenue was £348.2 million, down 4.2% OCC, and the adjusted margin dropped to 6.7% (from 9.9%). European industrial weakness, FX headwinds and hyperinflation accounting weighed. The division is now in a formal strategic review, with “a full range of options” on the table, including a potential disposal.

Big portfolio moves: MMS sold, semiconductor assets impaired

Morgan completed the sale of the majority of MMS on 12 November 2025 for total consideration of £76.2 million. That comprised 1.2 million shares in Foseco India Ltd (initially valued at about £55.7 million) plus £20.5 million in cash. The sale generated a £28.5 million pre-tax gain. The consideration shares were marked to £47.2 million at year end, with a £7.2 million fair value and FX loss booked in specific adjusting items.

A £15.6 million impairment was recognised against specialist Semiconductor assets in the UK, reflecting a shift in silicon carbide supply chains towards China. Strategically, Morgan is doubling down on the equipment side of the Semi value chain, where it already supplies most leading OEMs.

Operational self-help continues: simplification, procurement and ERP

The business simplification programme is “materially complete” and on track to deliver cumulative savings of £27 million by 2026 for around £40 million of total costs. In 2025 alone, it contributed about 160 bps of margin benefit, alongside 170 bps from pricing, inflation management and efficiencies. A group-led procurement drive is underway across £170 million of indirect spend, and the ERP roll-out begins in Q2 2026 after a successful pilot.

Balance sheet, cash and dividends

Cash generation was good: £168.6 million from operations, helping free cash flow to £45.4 million as capex stepped down following reduced Semiconductor investment. Net debt ended at £232.2 million, with leverage at 1.8x headline EBITDA (1.9x on continuing operations). Management expects leverage to fall towards the framework range in 2026 as MMS proceeds are realised.

The dividend is maintained at 12.2p, with a proposed final of 6.8p. A previously announced £40 million buyback has been paused after purchasing a total of £20 million of shares.

2026 guidance and the medium-term ambition

For 2026, Morgan expects OCC revenue growth of 1-2% and an adjusted operating margin at or around 10%. Capex guidance is £50-£55 million per annum over the next three years. Net financing costs are expected to be £22-£26 million in 2026, and the effective tax rate (excluding specific adjusting items) is guided to 27-28%.

Medium term, the Group is targeting a 12% adjusted operating margin by 2028, above-GDP organic growth, ROIC of 17-20% and leverage of 1.0x-1.5x (up to 2.0x post acquisition).

My take: steady hands, harder choices

These results are not pretty on margins, but they are far from a profit warning. Cash generation held up, leverage remains manageable, and management is clearly leaning into “self-help” to protect profitability. The sale of MMS – and the willingness to mark-to-market the Indian share consideration – shows a pragmatic approach to portfolio tidying and capital discipline.

The Thermal Products strategic review is the main catalyst. It is the lowest-margin division at 6.7% and is exposed to slower European industrial demand. A potential disposal or deep performance programme could lift the Group’s margin profile and simplify operations, though any exit would need to be value-accretive given retained central costs and the need to redeploy proceeds wisely.

Semiconductors remain the swing factor. The impairment clears the decks in a tougher niche, while the focus on wafer fab OEMs looks sensible. With Aerospace & Defence buoyant and Rail and Energy ticking over, a modest Semi recovery could drive the 2026 guidance with a bit of room to spare.

What to watch next

• Outcome and timing of the Thermal Products strategic review, including any disposal or major turnaround actions.
• Realisation of MMS consideration shares and the path for leverage – management expects around 1.7x by end 2026.
• Semiconductor order trends and whether H2 2025 stabilisation turns into growth.
• Execution of the ERP roll-out and centrally led procurement – early 2026 savings should be visible.
• Margin trajectory towards the 10% target in 2026 and 12% by 2028.
• Capex discipline within £50-£55 million per annum while funding targeted growth in Defence and Aerospace.

Bottom line for investors

Morgan has navigated a tough year with credible self-help, decent cash flow and a maintained dividend. The story for 2026 is about incremental growth, operational delivery and making bolder portfolio calls. If management executes on the Thermal Products review and the Transform programme, the 12% margin ambition by 2028 looks achievable – but the next 12 months are all about proof points.