Morgan Advanced Materials PLC (LON:MGAM) is to exit the Composite and Defence Systems sector.
The plan is to sell those product lines for which a suitable buyer or buyers can be found and discontinue those that can’t be sold.
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Morgan said discussions with potential acquirers are in progress but are at a very early stage.
The provisional cash exit costs from closing the Composites and Defence Systems business are anticipated to be around £6mln, which may be partially offset by any proceeds from the divestment of certain product lines and the sale of certain fixed assets of the business.
In its first quarter trading update, the group said it expects full-year headline operating profit margins will be slightly ahead of 2017, with the benefits of pricing, efficiency savings and volume leverage being partially offset by the planned reinvestment in research and development and sales resources, as well as the dilutive impact of the divestments completed in 2017.
Sales for the first three months to March 2018 were 6.5% higher for the group, on an organic constant currency basis, compared to the first quarter of last year.
The board said that the year-on-year first quarter performance was flattered by relatively soft figures from a year ago and that the growth rate would likely tail off in successive quarters.
Broker Liberum said it expected there to be “upward pressure to consensus”, following the trading update.
“Management continue to streamline and improve what was once a very complicated set of businesses presenting upside potential from ongoing self-help. Management do not expect 6% OCC [organic constant currency] growth for the FY, with the upper end of the 1.5%-3.5% guidance more likely,” Liberum said, as it stuck with its ‘buy’ recommendation and 415p price target.
Shares in Morgan were up 2p to 344.6p.
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