the morgan crucible company plc annual report 2006
the morgan crucible company plc
quadrant
55–57 high street
windsor
berkshire sl4 1lp
a world
of advanced
materials
the morgan crucible company plc 
annual report 2006
     morgan crucible 
a world of advanced materials
from medical instruments aerospace power generation
and satellite communications to body armour  trains and 
fire protection systems morgan crucible’s advanced
material technology is a fundamental component of many
of today’s sophisticated products
with the rapid development of increasingly complex
technology our customers are demanding more from 
the materials they use and are looking for a partner 
who can help them to respond to the pace of change
morgan crucible’s knowledge skills design and technical
expertise built up over 150 years in the business mean we
can tailor our materials to deliver the specialist capability 
our customers require while taking care of the impact 
our products have on the environment both during and 
after their useful life 
morgan crucible’s advanced materials – technically
complex added value bespoke solutions – are the future 
08 chairman’s statement
10 review of our strategy by the 
chief executive officer 
12 the group at a glance
14 business review
14 review of operations
24 financial review
27 risk management
30 corporate responsibility 
35 cautionary statement
36 directors and executive committee
38 directors’ report
40 corporate governance
45 remuneration report
51 shareholder information
52 report of the independent auditors
53 consolidated income statement
54 consolidated balance sheet
55 consolidated statement of cash flows
56 consolidated statement of recognised 
income and expense
57 notes to the financial statements
88 company balance sheet
95 statistical information under uk gaap
96 statistical information under adopted ifrs
this report and accounts is printed on sovereign silk
and kaskad puffin blue which are totally chlorine
free tcf papers 
both the paper mill and printer involved in the
production support the growth of responsible 
forest management and are both accredited to
iso14001 which specifies a process for continuous
environmental improvement
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 crucible or
dispose of it in your recycled paper waste 
thank you
this annual report is available at
wwwmorgancruciblecom
designed and produced by radley yeldar london
printed by ctd the morgan crucible company plc 01
we aim to create consistent
longterm value for our shareholders
by being a world leader in advanced
materials we target midteen
underlying operating profit margins

in good times and are making good
progress achieving almost 11 in
2006 up from 5 just three years ago
we pursue our goals consistently
across all parts of the business by
3focusing on higher growth higher 
margin and higher valueadded
products and markets
3establishing and maintaining
leading positions in our target
markets
3continuously improving our
operational performance 
3investing in our people
 defined as operating profit before special items divided by revenue 02 the morgan crucible company plc
problems higher growth higher margin higher valueadded 
products and markets 
across our businesses we are investing in technological leadership
rebalancing our mix of products to give greater weight to high value
technically complex components our choice of markets is crucial to
success we are moving away from economically cyclical commoditised
markets and focusing our efforts on highergrowth markets such as medical
and defence and emerging economic growth markets such as china
india and latin america 
morgan crucible’s pursuit of profitable growth is focused on the longterm
close relationships we have with our customers who come to us for highly
specialised engineering and superior materials this often involves working
with customers’ rd teams early in the development stages helping them
create efficient technical processes and delivering components with the
right technical edge to bring a product successfully to market 
7
we work side by side with
many customers to provide
bespoke solutions that solve
their individual needs
solutions
the morgan crucible company plc 03 innerspace
leading positions in our target markets
in creating leading market positions for our businesses and products 
we are building from a position of strength many of morgan crucible’s
products are already established as leaders in their markets as we develop
the higher valueadded higher margin parts of our business and move into
new markets we aim swiftly to achieve leadership positions then maintain 
and grow our lead
04 the morgan crucible company plc outerspace
71
our technical ceramics
division produces many
medical components such 
as ceramic hip joints spinal
implants and cochlear
implants we also produce 
several vital components 
for the aerospace and 
space industries
the morgan crucible company plc 05 06 the morgan crucible company plc
west
13
achieving an optimal
manufacturing footprint 
is vital to our operating
performance we have
grown our operations in asia
to support our customers as
they migrate to the region
and to take advantage of
rising economic demand 
we have made significant
progress restructuring our
western manufacturing
sites in order to make them 
as efficient as possible east
improved operational performance
continuously improving our operational performance to make sure we have
the right economics in the business is fundamental to achieving our target
operating profit margins and delivering value to shareholders our aim is 
to make hightech highervalue products in lowercost highergrowth
locations and we monitor our sites continuously to ensure they are delivering
the best value for money in recent years we have consolidated and
simplified our operations and increased the proportion of our sites in 
lowercost locations maintaining those in highercost locations where it
makes sense to do so to meet the needs of our customers
the morgan crucible company plc 07 08 the morgan crucible company plc
chairman’s statement
i am delighted to be joining
morgan crucible at an exciting
time for the company and on its
150th anniversary we look
forward with confidence to the
next phase in our history the morgan crucible company plc 09
let me brieﬂy introduce both myself and your
new chief executive officer i am currently
chairman of travis perkins plc and the senior
independent director of tribal plc i also chair
the governors of oxford brookes university i
spent the majority of my management years at
burmah castrol plc where i was chief executive
from 1998 to 2000 
board changes
there have been some substantial changes to
your board during the year with both a new
chairman and a new chief executive ofﬁcer 
lars kylberg retired from the board in december
after a total of ten years at morgan crucible
including three as chairman warren knowlton
retired as chief executive ofﬁcer in august 2006
after three and a half successful years turning
the fortunes of your company around 
morgan crucible is in a very strong ﬁnancial
position and has delivered higher returns to you
our shareholders compared to the ftse 350
index since 2003 much of this is due to warren’s
leadership on behalf of the board i should like
to wish both lars and warren well in the future
your new chief executive officer is mark
robertshaw who succeeded warren on 
4 august mark joined morgan crucible in
october 2004 as chief financial ofﬁcer and
then chief operating ofﬁcer and has made a
vital contribution to the successful transformation
of the company i am much looking forward to
working with mark and the board in building
morgan crucible’s future success
kevin dangerﬁeld succeeded mark as 
chief financial ofﬁcer after ﬁve years as group
financial controller his deep knowledge of 
the business will be of considerable beneﬁt to 
the company
david coker retired as company secretary in
december after 18 years with morgan crucible
i thank him on behalf of the board for his hard
work and we wish him a happy and restful
retirement paul boulton our group legal
counsel replaced david with effect from 
1 january and on behalf of the board 
we welcome the great contribution that 
he has made so far
reporting structure
after the positive feedback that we received
when we adopted the framework of the
operating and financial review ofr in 
our 2005 report we have built on that by
providing a comprehensive business review 
for 2006 providing transparent information 
to shareholders is important to us and our
business review provides shareholders both 
large and small with more information on our
performance the risks and opportunities we
face and how we manage the business
bid approach
in august 2006 we announced that 
morgan crucible had received a preliminary
approach which might or might not have led 
to an offer for the company the board and
management team are focused on delivering
value to you our shareholders and are fully
aware of their ﬁduciary responsibility to entertain
any serious offer in october we announced
that discussions had not led to an offer that was
acceptable to the board and that talks had thus
been terminated the management team did
not solicit any offer and they along with your
board are conﬁdent in the prospects of the
business and its strategy for delivering value to
you through proﬁtable growth
dividend
a ﬁnal dividend of 30 pence per share 
2005 25 pence per share will be
recommended at the forthcoming agm
making a total dividend for the year of 
45 pence 2005 25 pence
our people
the continuing momentum of the progress 
of morgan crucible is down to its people – our
employees i know that we have many
dedicated and skilled people around the world
who strive for high standards in providing high
valueadded higher margin products on your
behalf i should like to congratulate them for their
achievements and to thank them for all their
hard work and commitment
morgan crucible is well placed to continue 
to make excellent progress you may know 
that 2006 was the 150th anniversary of the
company not many british companies can
claim the accolade of remaining an
independent business for 150 years
we look forward with conﬁdence to 
the next phase in our history
tim stevenson
chairman  10 the morgan crucible company plc
review of our strategy 
by the chief executive officer
the proﬁt improvement plan which we
embarked upon three years ago has been
successfully delivered having achieved
double digit underlying operating proﬁt
margins well ahead of schedule 
the group’s balance sheet is robust with
lower levels of net debt leaving us well
placed to invest in growing the business
organically and through selective bolton
acquisitions in our core businesses
 defined as operating profit before special items divided 
by revenue
defined as interest bearing loans and borrowings and 
bank overdrafts less cash and other cash equivalents the morgan crucible company plc 11
throughout 2006 we have made excellent
progress on our strategic objectives which 
is reflected in our good financial results
underlying operating proﬁt margins operating
profit before special items divided by revenue
for the continuing group were 109 compared
to 91 in 2005 likeforlike revenues in
continuing businesses were up 112 and
underlying operating proﬁts were 330 higher
than in 2005
highlights of 2006
i am delighted to report that all our divisions
have delivered improved ﬁnancial results in 2006
revenue of the carbon division was up 
69 compared to 2005 at £2136 million 
2005 £1999 million and underlying operating
proﬁt for the division was up 234 at £338
million 2005 £274 million
the technical ceramics division had another
strong year its revenue increased by 122 
to £1625 million 2005 £1448 million and
underlying operating proﬁt increased by 
393 to £170 million 2005 £122 million
the performance of the insulating ceramics
division has also been robust revenues grew 
by 138 to £3017 million 2005 £2651 million
and underlying operating proﬁt increased by
298 to £279 million 2005 £215 million
the balance sheet for the group is very strong
with only a modest £341 million of net debt
defined as interest bearing loans and borrowings
and bank overdrafts less cash and other cash
equivalents at the year end furthermore i am
pleased to tell you that morgan crucible has
eliminated the deﬁcit in its uk pension fund
during 2006 thanks in no small part to the one
off contribution of £40 million during the year as
a result of this combined with positive moves in
our scheme assets and liabilities the uk pension
funds had a surplus of £31 million on the ias 19
employee benefits accounting basis at the end
of 2006 compared to a deﬁcit of £662 million at
the end of the previous year
clearly one of the major events in 2006 was the
approach we received to buy the company in
august your chairman has covered this in his
statement however i would like to assure you
that our business operations were not distracted
by the takeover approach i would like 
to take this opportunity to thank our staff for 
the professionalism and commitment they
showed during a period of uncertainty
there have also been changes in the 
morgan crucible management team during
2006 i would like to add my personal thanks to
warren knowlton who retired as chief executive
officer in august warren successfully turned
morgan crucible around in the three and 
a half years that he was chief executive officer
and i have inherited a very healthy company
as a result of his leadership
looking forward
morgan crucible celebrated its 150th
anniversary in 2006 which in today’s fastpaced
and ever changing world is an achievement 
we are proud of as we look to the future 
we must continue to anticipate the increasingly
sophisticated requirements of our customers 
and react to the growing intensity of the
competitive landscape not least the 
lowcost manufacturing power of china 
india and other fast developing economies
our strategy is to focus on higher growth higher
valueadded markets and to move away from
commoditised economically cyclical market
segments we aim to be the number one 
or two player in our chosen market segments
this strategy has driven organic growth across
our divisions that has been higher than the gdp
growth in their markets our topline growth for
the ﬁrst time in recent years has now overtaken
cost cutting as the major driver for our proﬁt
growth this is the mark of a successful company 
our pricing position which was negative for
many years is now strongly positive – again a
testimony to the strength and quality of our
refocused product offering
of course cost control and the constant 
drive for ongoing operational improvement
throughout the group remain essential 
as part of our successful proﬁt improvement 
plan we are demonstrating that cost discipline 
is now an integral part of our culture
investing in our people
our employees are vital to the ongoing 
success of morgan crucible we are investing 
in the development of our existing people 
and will also be searching for high quality staff
to supplement our talent pool over the past
three years our people have been faced 
with many challenges in the rebirth of 
morgan crucible the management team 
and i have been delighted with their
commitment and enthusiasm to make 
morgan crucible a world class manufacturer 
of advanced materials they have delivered on
many fronts improving customer satisfaction
enhancing our product portfolio and creating
value for you our shareholders
in my ﬁrst chief executive ofﬁcer’s review i am
therefore pleased to report that your company
is in robust ﬁnancial health and is well placed to
continue its positive momentum into the future
mark robertshaw
chief executive ofﬁcer 


12 the morgan crucible company plc
the group at a glance
2005
137
2006
158
2004
107
2003
106
carbon
our carbon division produces a wide variety of technological 
solutions from carbon graphite and silicon carbide these include
carbon brushes for motors body armour graphite powder for the
synthetic diamond sector seals and bearing solutions for the 
chemical processing and fluid pumping industries and a variety 
of components for the aerospace semiconductor processing and
space exploration industries
2005
84
2006
105
2004
55
2003
05
technical ceramics
our technical ceramics division makes an extensive range of industrial
ceramics products for a wide variety of applications these include
medical implants power tubes used in airport security scanning devices
and aerospace components most of our production is bespoke 
we offer full technical support and advice to customers thoughout 
their product development cycle
2005
81
2006
92
2004
75
2003
64
insulating ceramics
our insulating ceramics division designs and manufactures a wide
variety of heat insulation products and is a world leader in insulation
and refractory technology fibre insulating firebricks and crucibles we
provide services to several global markets including heat management
solutions for steel making and fire protection systems for tunnels fire
doors and ducting our world leading superwool
tm
range of insulating
fibre is used in many applications ranging from automotive equipment
solutions to domestic appliances
underlying operating profit margins divisions
 defined as operating profit before special items divided by revenue the morgan crucible company plc 13
growth markets
our conductive carbon 
is used widely in rail
applications
we provide solutions for fluid
handling in chemical and
other processing industries
our braze alloys are 
used for engine build and
repair and our ceramic
components and 
subassemblies are used 
in engine monitoring 
and control equipment
medical implants use 
our ceramic coatings
our power tubes are used 
in security scanning devices
our leading superwool
tm
range is used in automotive 
engineering solutions
our heat management
solutions are crucial for
steel manufacturing
our materials are used
in automotive exhaust
manufacturing as filter and
heat management systems
we manufacture the plates
for bullet proof vests 14 the morgan crucible company plc
carbon
overview
our carbon division produces a wide variety of
technological solutions from carbon graphite
and silicon carbide these include carbon
brushes for motors body armour graphite
powder for the synthetic diamond sector 
seals and bearing solutions for the chemical
processing and fluid pumping industries 
and a variety of components for the aerospace
semiconductor processing and space
exploration industries
divisional structure
with high quality manufacturing facilities and 
a skilled workforce of some 3700 around the
world our carbon division supports its global
customers takes advantage of organic 
growth in local markets and utilises lowcost
locations where appropriate the division has 
39 manufacturing facilities in five continents 
in 2006 revenues were £2136 million of which
302 was from europe 512 from the americas
and 186 from the rest of the world
2006 financial performance

2006 2005 increase
revenue £2136m £1999m 69
underlying operating profit £338m £274m 234
underlying operating
profit margin 158 137
operating profit before special items
financial performance in 2006 represents a
further strong improvement compared with 
prior years the division has benefited from good
sales growth in a number of markets and from
the large number of rationalisation projects 
that have had a major impact on both the
manufacturing and overhead cost bases
trading in almost all of the americas’ businesses
was strong our traditional businesses benefited
from the underlying strength of the us economy
demand for armour products was very strong
throughout the year and significant capital
investment has been made to meet demand
there has been improvement in some of our
european markets but the main focus in europe
during 2006 has been on successfully delivering
on the major site rationalisation plans
in asia our chinese businesses have had
another year of double digit growth and there
has been further significant investment in both
manufacturing capacity and capability to
ensure that this growth can be maintained
products
the carbon division produces a wide variety 
of products these include
• carbon brushes and related components
including brushholders slip rings and 
terminal blocks for motors in industrial 
and traction applications
• rotary transfer systems for the transmission 
of current in rotating equipment
• bearings and seals for fluid handling
applications
• protective armour for personal and vehicle
protection
• graphite powder for the synthetic diamond
sector
• high purity graphite parts for use in highly
demanding environments such as
semiconductor nuclear and high temperature
furnace applications
business review
review of operations helping to
produce
cleaner energy
carbon division companies
are established suppliers 
to the expanding global
renewable energy market
our carbon brushes and
brushholders are used 
for wind turbine current
collection and lightning
protection
business review review of operations the morgan crucible company plc 15 16 the morgan crucible company plc business review review of operations
markets
the markets served by our carbon 
division include
electrical industrial and traction
we provide electrical current transfer systems
from carbon brushes through to collectors and
rotary current transfer products serving both
original equipment manufacturers and the
aftermarket whilst this market is stable and
relatively mature we have been able to take
advantage of the good economic and industrial
growth in the americas in areas of specific
product advantage such as power stations
and in areas of local organic growth notably
china we have global operations that match
the locations of our customers including lowcost
manufacturing bases in mexico eastern europe
and asia
fluid handling
we supply carbon and silicon carbide
components for the seals and bearings which
are critical to the pumps and compressors 
used in many fluid handling industries such 
as chemical and food processing the fluid
handling market has remained strong during
the year we are continuing to invest in
capability and capacity in lowcost
manufacturing operations where our customers
are located such as china and india
protective armour 
we produce a range of silicon carbide ceramics
for personal body vehicle and aircraft armour
systems working globally with defence ministries
continued western military deployment a high
level of government spending and a changing
ballistic threat means that demand for our 
armour products has been strong throughout
2006 we have invested significantly in
manufacturing capacity and in technical
resources to ensure that we are well placed to
serve this growing demand during 2006 we
acquired aceram a canadianbased business
in order to complement further our armour
material portfolio
diamond synthesis
we continue to be the leading supplier of 
highly engineered graphite powder used 
in the manufacture of synthetic diamonds
strong construction and oil drilling sectors mean
that demand continues to be robust we have
invested in developing technologies that help
our customers to achieve high yields and to
improve productivity and product quality
outlook
the carbon division continues to enjoy a strong
position in its traditional core markets in addition
our material and process competencies have
allowed us to develop new product lines and
market opportunities providing the division with
an exciting business pipeline for the future
the rationalisation of our manufacturing footprint
will continue in order to ensure that we manage
our cost base and provide the funds for further
investment in countries that provide both the
highest growth opportunities and lowest cost
operations there is also a strong commitment 
to support our customers globally through our
worldwide manufacturing presence
we are pleased to say that our robust financial
performance in 2006 has put us on a strong
footing for the future
keep on
moving
our carbon pantographs 
are used on many of the
world’s tram and rail systems
they are a vital component
the pantograph collects the
current from the overhead
cable to power the tram or
train we are renowned for
the reliability of our products 
many transportation systems
rely on them carbon is non
abrasive has low electrical
resistance and low mechanical
friction all these advantages
result in lower total running
costs than alternative collector
materials no wonder many 
of the world’s tram and
railway systems use morgan
carbon products business review review of operations the morgan crucible company plc 17
technical ceramics
overview
our technical ceramics division makes an
extensive range of industrial ceramics products
for a wide variety of applications these include
medical implants power tubes used in airport
security scanning devices and aerospace
components most of our production is bespoke
we offer full technical support and advice to
customers thoughout their product
development cycle
divisional structure
our technical ceramics division operates
worldwide offering valueadded solutions
worldclass research and development
innovative design and application engineering 
the division has sixteen manufacturing sites
across the usa uk netherlands germany 
and china and employs approximately 2100
people europe accounted for 449 of the 2006
divisional revenue of £1625 million 514 was
from the americas and 37 from the rest of the
world
2006 financial performance

2006 2005 increase
revenue £1625m £1448m 122
underlying operating profit £170m £122m 393
underlying operating
profit margin 105 84
operating profit before special items
the division’s revenue rose 122 to £1625 million
and underlying operating profit rose 393 
to £170 million the division has experienced
good underlying trading in the second half of
the year which combined with a particularly
strong first half helped the division achieve 
its shortterm goal of double digit underlying
operating margins the business remains focused
on continued operating profit margin
progression with improvements seen in all
regions in 2006 supported by investment in 
new product introductions 
the 2006 revenues were somewhat flattered 
by the significant increases that we saw in
precious metal prices which were passed
through in our pricing to customers 
this represented c25 yearonyear revenue
growth although other raw material and 
energy costs also increased compared to 2005
these were countered by a combination of
operational efficiencies and price increases 
cracking
unique
challenges
isis is a worldclass neutron
company based in the uk
they commissioned highly
specialist metallised ceramic
components from our
technical ceramics division
as part of a major expansion
project a senior client
project manager comments
“we have benefited from 
the considerable experience
of the morgan technical
ceramics team at rugby 
it is great to have such
worldleading expertise 
on our doorstep” stimulating
bone growth
our technical ceramics
division has recently
developed a custom
designed ceramic feed
through for use in an internal
bone growth stimulator 
bone stimulators are used 
as a supplementary form of
therapy to help enhance the
body’s bone healing process
they emit low electrical
currents similar to those
created naturally by broken
bone helping stimulate
growth and creating
successful fusion
18 the morgan crucible company plc business review review of operations business review review of operations the morgan crucible company plc 19
coping with
the pressure
our technical ceramics
division has produced a
piezoelectric transducer
for use as a highaccuracy
costeffective blood pressure
monitor electronic sensors
provide greater accuracy
and longterm reliability 
over mechanical devices
and in addition to use in
conventional systems 
they facilitate longterm
monitoring allowing medical
staff to analyse trends in a
patient’s blood pressure
globally the industrial equipment medical
aerospace and electronics segments continue
to show good growth the us markets have
remained strong and our european business is
also seeing strong performance particularly 
in laser and power tube products for
communications and security equipment 
in asia the additional capacity recently installed
to meet demand for the thermal processing
market is now fully utilised and we anticipate
further expansion as a result
products
the division uses materials science and
applications engineering to make products 
from a wide range of ceramic materials with
properties tailored for use in a diverse range 
of markets these include
• braze alloys for aero engine build and repair
• ceramic components and subassemblies for
engine monitoring and control equipment
• components and subassemblies for a broad
range of medical applications primarily
implantable devices prosthetics and surgical
and diagnostic equipment
• components and subassemblies used in 
wafer handling and processing chambers
serving both semiconductor processing
equipment manufacturers and wafer 
fabrication plants 
markets
the markets served by our technical ceramics
division are
aerospace
we serve the newbuild and aftermarket in both
the commercial and military aerospace sectors
as a tier 2 supplier to the major manufacturers
and a supplier to mro maintenance repair
and overhaul companies increased demands
in passenger and cargo traffic are driving the
commercial market resulting in growth in new
builds for singleaisle twinaisle large cargo
aircraft and regional jets
medical
longterm durability biocompatibility and
specific mechanical and electrical properties
make ceramic materials ideal for a range of
medical applications an ageing population
and a desire to employ noninvasive surgical
techniques have meant that this sector has a
need for ever smaller yet more complex
components 
we have an extensive portfolio of materials
combined with processing techniques such as
injection moulding engineered coatings and
ceramicmetal assemblies that are enabling
medical equipment manufacturers to address 
this opportunity
semiconductor processing
the majority of the components we
manufacture are classified as consumable
spares the demand for integrated circuits 
in electronic equipment is the main driver of 
the equipment market combined with the
introduction and adoption of new and updated
technology the installed base of equipment
using our products is large and demand 
for spare parts continues through market
downturns overall demand slowed in 2005
but the market saw recovery in 2006 and
returned to positive growth
electronics
we supply niche applications within the
electronics market where our products are
differentiated by their superior material andor
dimensional characteristics markets for
components and subassemblies include
telecommunications lasers and optoelectronics
and it hardware the laser market continues 
to grow as devices find new applications and
become smaller and more affordable to users
applications include cosmetic surgery dentistry
product marking and spectroscopy a major
driver of the optoelectronics market is the
demand for surveillance equipment in military
and commercial applications
within the it hardware market demand for data
storage has increased dramatically as more
people are using home pcs for music pictures
and videos and advances in technology create
options for tv recording and playback
outlook
our technical ceramics division has significant
potential for further revenue and profit growth
our strategy is to continue to focus on customers
and markets that are themselves growing and
are innovative in their approach more than 40
of the division’s revenues are now in the growing
markets of medical aerospace and specialist
electronics such as airport security detection
devices we plan to increase our presence in 
the rapidly expanding asian region helped by
new capacity in yixing china we are looking
carefully for bolton acquisition opportunities 
that would enhance our offering in our core
markets which together with a strong new
business pipeline leaves the division well 
placed for the future 20 the morgan crucible company plc business review review of operations
lightweight
agile and fuel
efficient
our new firemaster marine
plus blanket produced by our
thermal ceramics business 
is used in the manufacture 
of aluminium fast ferries
the new ultralightweight 
fire insulation is designed for
weight sensitive applications
and provides typically 20–30
weight savings compared to
alternative solutions reducing
the weight of the ferry means
that the fuel economy is
improved making it more
energy efficient and safety 
is also enhanced
insulating ceramics
overview
our insulating ceramics division designs and
manufactures a wide variety of heat insulation
products and is a world leader in insulation and
refractory technology fibre insulating firebricks
and crucibles we provide services to several
global markets including heat management
solutions for steel making and fire protection
systems for tunnels fire doors and ducting 
our world leading superwool
tm
range of
insulating fibre is used in many applications
ranging from automotive equipment solutions 
to domestic appliances
divisional structure
the insulating ceramics division comprises
two businesses thermal ceramics and 
molten metal systems formerly crucibles
thermal ceramics’ revenue for 2006 was 
£2712 million 2005 £2367 million and 
molten metal systems generated £305 million
2005 £284 million
the division employs approximately 3500 people
and has 35 manufacturing sites
during 2006 the division has continued to
implement its strategy of geographical
expansion through capital investment and
acquisitions european operations accounted 
for 412 of the 2006 divisional revenue 363
was from the americas and 225 was from 
the rest of the world profitability has followed a
similar profile although in general the european
results have lagged behind emphasising the
need for our ongoing rationalisation of sites
and functions
2006 financial performance

2006 2005 increase
revenue £3017m £2651m 138
underlying operating profit £279m £215m 298
underlying operating
profit margin 92 81
operating profit before special items
our insulating ceramics division’s revenue rose
138 to £3017 million underlying operating
profit margins were up despite a continuation 
of raw material and energy price increases 
from previous years underlying operating profit
was up 298 to £279 million energy and raw
material prices have finally started to reverse
although they will still represent increases on 
2006 as multiyear contracts expire business review review of operations the morgan crucible company plc 21
thermal ceramics 
large differences remain between the
geographical regions in which we operate
western european demand remained generally
flat the industrial markets have suffered from
competition from asia latin america and
eastern europe however we have seen
considerable growth in the americas and asia
during 2006 we expanded operations in 
the west of india to take advantage of
developments in the key market of ceramics 
in that region as well as to strengthen export
capabilities to the middle east our new
acquisition in russia has commenced trading
and has proved successful already this is in 
line with the group strategy of moving to 
lowercost production countries and entering
new geographical markets
in conjunction with these geographical
expansions we acquired the us and polish 
fibre businesses from cookson plc both of 
these operations have contributed to the
performance of those regions operating as
immediate boltons to our existing businesses
molten metal systems
revenues in our molten metal systems business
rose 74 in 2006 partly as a result of more
favourable trading conditions in asia and in 
the americas whilst europe remained flat 
in the early part of the year our position in the
growing indian market was strengthened by 
the purchase of the minority shareholding of 
our partner in morganite crucible india ltd
followed by the acquisition of the diamond
crucible company in gujarat despite significant
increases in the cost of energy and some raw
materials operating margins were up as a result
of the restructuring measures undertaken in the
latter part of the previous year we deployed
additional sales and management resources
in asia during the year in order to exploit
continuing market growth in the region 
we also advanced plans for the establishment
of a manufacturing facility in china which will
commence production in the early part of 2008
products
our insulating ceramics division has several
major product groups
thermal ceramics
• insulating fibres which include the
superwool™ kaowool™ cerablanket™ 
pyrobloc™ and firemaster™ brands in 2006
we launched the higher temperature
superwool™ 607ht
• insulating firebrick and castable products
include the jm k tjm and trimor™ brands
molten metal systems
• foundry crucibles
• energy efficient melting and holding furnaces
• heated molten metal transport ladles and
other foundry consumables used in 
metal handling purification flow control 
and temperature measurement
markets
our insulating ceramics division targets the
following key markets
iron and steel
we supply heat management solutions to steel
making and downstream processes both direct
to the steel producers and through major
contractors in 2006 global steel production is
estimated to have been up 9 on 2005 with
almost all regions very buoyant further growth
is expected in 2007
aluminium
reducing heat loss and improving heat
containment is a major opportunity for
aluminium producers our product range
enables furnace design and performance to 
be improved our superwool™ product range 
is used in consumable products to further
enhance energy efficiency performance
transportation and automotive
we have expanded our presence in these
markets with superwool™ engineered products
we have developed catalytic convertor mats
heat shields and special adhesives in house and
with international partners in japan the usa 
and europe 22 the morgan crucible company plc business review review of operations
the increased use of diesel engines offers 
further growth opportunities increased activity 
in domestic and international air travel has
raised our revenues from consumable products 
for the production of aero engine blades and
insulation we also supply crucibles and foundry
consumables to the automotive sector which is
making increased use of components cast from
molten aluminium alloys with for example
increasing fitment rates of alloy wheels
petrochemical
this market has shown strong performance in
2006 in the middle east india china and
eastern europe with 2007 expected to continue
this trend many of the opportunities are from
our new plants in the region and involve a
projectbased approach including design
supply and supervision
in america and europe we are also seeing
increased maintenance activity in this sector
ceramics
this industry is currently dominated by european
design and manufacturing companies we are
a major supplier to these companies and are
following the relocation of capacity to china
and india we design and engineer solutions 
in germany and italy and then supply materials
from any of our manufacturing facilities across
the world according to customer requirements
power generation
this market saw increased activity through 
2006 and the expectation for 2007 is also good
our superwool™ business benefits from the
growth of heat recovery steam generation
systems which use insulation wools
precious metal processing
we provide crucibles and other foundry
consumables to the precious metal refining
reclamation and manufacturing sectors 
good demand for precious metals for use 
in the autocatalyst electronics jewellery 
and other areas has seen strong prices for a
number of precious metals making refining 
and reclamation viable from sources that were
previously uneconomic however the positive
impact of this has been mitigated by a number
of customers consolidating their facilities and
closing plants in europe
in terms of new markets there is increasing
interest in the following areas
domestic appliances
manufacturers in this sector are now utilising
superwool™ in ovens microwaves gas and oil
boiler systems and water heating systems
fire protection
our materials are used in various applications
including the protection of tunnels and the
construction of fire doors and ducting systems 
a growing market opportunity in fire protection
for offshore and petrochemical facilities is being
addressed through marketing partnerships to
offer customers a package of aligned products
in 2006 we launched our new firemaster marine
plus range which offers 20 weight savings to
shipbuilders compared with earlier solutions
outlook
thermal ceramics 
the outlook for thermal ceramics remains
positive with demand for heat management
and insulating products increasing due 
to the high longterm cost of energy 
continued development has led to the
expansion of the superwool™ range of fibre
products an example of our expansion of
superwool™ is engineered fibres for automotive
applications higher pollution control standards
are driving growth in this area
molten metal systems
the outlook for molten metal systems in 2007 is
positive particularly in asia where our efforts will
be focused on the establishment and expansion
of lowcost production sites to meet growing
local demand some rationalisation of our
european manufacturing base is anticipated 
as the asian demand is increasingly satisfied 
by our local production capabilities business review review of operations
cost efficient
processing
with increasing growth 
in the chemical processing
industry and the growing
awareness that we all need 
to use fuel and energy as
efficiently as possible our
thermal ceramics business
offers its customers an
attractive choice of insulation
materials we provide thermal
and heat management
solutions through products
such as our award winning
superwool
™
and our
insulating firebricks
the morgan crucible company plc 23 24 the morgan crucible company plc business review
business review cont
financial review
this is the second year that we have produced
our results under international financial
reporting standards as adopted by the 
eu adopted ifrs all the figures referred 
to below are extracted from the financial
statements on pages 53 to 96 and comply 
with adopted ifrs
we make reference to underlying operating 
profit and underlying earnings per share 
eps underlying operating profit is defined 
as operating profit before special items 
eps is defined in note 10 on pages 69 and 70
we believe that underlying performance
indicators provide valuable additional
information on underlying trends and we 
use them to measure and monitor performance
group revenue and underlying operating profit
underlying
revenue operating profit
2006 2005 2006 2005
£m £m £m £m
carbon 2136 1999 338 274 
technical ceramics 1625 1448 170 122 
insulating ceramics 3017 2651 279 215 
unallocated costs – – 50 57 
continuing businesses 6778 6098 737 554 
discontinued businesses – 1359 – 106 
total group 6778 7457 737 660 
we have successfully delivered our threeyear
profit improvement plan having achieved
double digit underlying operating profit margins
ahead of target in early 2006 and continued
profit margin enhancement into the second half
of the year
group revenue was £6778 million 2005 £7457
million continuing group revenue excluding
acquisitions on a constant currency basis
using 2006 actual rates showed an increase
of just over 9 over 2005 underlying operating
profit for the group was £737 million
2005 £660 million 
underlying operating profit from continuing
operations increased significantly by 330 
over 2005 to £737 million the underlying
operating profit margin for the continuing
business in 2006 was 109 2005 91
the table below highlights the halfyearly
improvement that we have made since 2005
with the second half of 2006 showing an 111
underlying operating profit margin
continuing group results
actual currency rates used
2006 2005
1st half 2nd half 1st half 2nd half
£m £m £m £m
revenue 3363 3415 3010 3088
underlying operating
profit 357 380 256 298
underlying operating 
profit margin 106 111 85 97
restructuring costs in the year were £239 million
2005 £297 million and costs associated with
the settlement of prior period antitrust litigation
were £38 million 2005 £23 million 
the net finance charge was £34 million
2005 £131 million net bank interest and similar
charges were £46 million 2005 £100 million 
an improvement of £54 million from 2005 as our
cash position benefited from the receipts of the
magnetics disposal in december 2005 part of
the finance charge under adopted ifrs is the
net ias 19 employee benefits income which was
£12 million 2005 £35 million charge fair value
movements on interest rate swaps represented
a net income of £nil 2005 £04 million
a fiveyear summary of the group’s financial
results is set out on pages 95 and 96 of this
report business review financial review the morgan crucible company plc 25
foreign currency impact
the principal exchange rates used in the
translation of the results of overseas subsidiaries
were as follows
average rate yearend rate
2006 2005 2006 2005
us 18440 18195 19447 17597
euro 14673 14622 14857 14557
taxation
group taxation for the year showed a net
charge of £106 million 2005 charge of 
£302 million the effective tax rate before
special items was 230 2005 25 
dividend
the group is proposing a final dividend of 
30 pence per share bringing the total dividend
for the year to 45 pence per share
earnings per share
basic earnings per share represented a profit per
share of 129 pence 2005 181 pence
underlying earnings per share was 179 pence
2005 131 pence an increase of 366 details
of these calculations can be found in note 10 on
pages 69 and 70
key performance indicators
underlying operating profit margin
we use underlying operating profit margin as 
the main key performance indicator kpi for 
the group we have stated that our aim is 
to achieve midteen margins in good times 
ie when the macroeconomic environment 
is strong and double digit margins when the
environment is more challenging we use this kpi
regularly in our half and fullyear presentations 
to the financial community as we believe that 
it indicates the growing success and strength 
of the company
total employment costs as a percentage 
of sales
managing our cost base in conjunction with
growing our top line is vital to morgan crucible’s
future success since 2003 our total employee
costs which consist of salaries plus all other costs
associated with employment such as bonuses
pensions healthcare etc have consistently
reduced as a percentage of sales from 396 
in 2003 to 317 for the second half of 2006 
our mediumterm target is to improve that ratio
to 30
economic value added ratio
economic value added eva compares the
returns made by our divisions with the notional
costs of investing in them we use this ratio to
ascertain where to make capital investments
within the group the basic calculation deducts
the cost of capital from the net operating profit
after tax which is the underlying operating profit
less a notional tax charge that is based on the
mediumterm expectation for statutory tax rates
we expect that the returns will exceed the cost
of the investment and it is one of the measures
that we take into account when we are
evaluating competing investments
balance sheet
at the year end total equity was £2031 million 
2005 £1957 million with closing net debt of 
£341 million 2005 net cash of £505 million
gearing at the year end was 168 2005 nil
noncurrent assets were £3338 million 2005
£3157 million and total assets decreased from
£6944 million in 2005 to £6521 million at the 
end of 2006
the net assets of the group increased by 
£74 million from £1957 million to £2031 million
due mainly to a retained profit for the period 
of £397 million
cash flow
net cash flow from operating activities 
before a oneoff payment of £400 million 
into the uk pension scheme was £181 million
2005 £485 million this performance included 
a £229 million increase in working capital 
2005 increase of £62 million and was
achieved after £343 million 2005 £308 million
of cash costs in the year from restructuring
projects and costs associated with prior period
litigation the group saw a £587 million negative
free cash flow for 2006 2005 positive £127
million during 2006 the group purchased 
£189 million 2005 £35 million of shares in
connection with the various share incentive
schemes in addition net cash outflow in
connection with the share buy back programme
announced in december 2006 was £05 million
subsequent to the year end a further £97 million
of shares were purchased up to 20 february
2007 at the year end the group had net
borrowings of £341 million 2005 net cash of
£505 million the cash flow on page 26
highlights the main cash movements in 2006 26 the morgan crucible company plc business review financial review
2006 2005
£m £m
net cash from operating activities
before uk pension payment 181 485
uk pension payment 400 –
net cash flow from operating activities 219 485
interest received 35 23
net capital expenditure 329 381
dividends 74 –
free cash flow 587 127
cash flows from other investing activities 109 1908
cash flows from financing activities 192 18
exchange movement 42 33
opening net debt 505 1479
closing net cashnet debt 341 505
treasury policy
group treasury acts as a service to morgan
crucible’s business not as a profit centre
it operates under policies approved by the
board group treasury seeks to reduce financial
risk and to ensure that the group has sufficient
liquidity available to meet all foreseeable needs
it is responsible for all of the group’s funding
requirements cash management and other
treasury business group treasury makes limited
use of derivative instruments to hedge foreign
currencies and interest rates speculative
transactions are not permitted
group treasury prepares a formal report 
on treasury activities for the board at least
biannually and reports to the chief financial
officer monthly
foreign exchange risks
subsidiaries are encouraged to manage all
material transactional foreign currency
exposures using forward contracts any items 
of a more complex nature require approval by
group treasury currency translation risks are
controlled centrally the group’s policy is to
manage the translation exposure of overseas
net assets by seeking to match the currency of
borrowings with the currency in which the net
assets are denominated the objectives are 
to maintain a low cost of borrowing whilst
maintaining a balanced portfolio of net assets
by currency
borrowing facilities and liquidity
all of the group’s borrowing facilities are
arranged by group treasury and the funds
raised are then lent to operating subsidiaries on
an arm’slength basis in a few cases operating
subsidiaries have external borrowings but these
are supervised and controlled centrally
in 2006 the group cancelled us70 million of the
us350 million bank syndication following the
disposal of the magnetics division the revised
facility of us280 million matures in february 2010
capital investment
the group has wellestablished formal
procedures for the approval of investment in
new businesses and of capital expenditure to
ensure appropriate senior management review
and signoff
interest rate risk
the group adopts a policy of ensuring that
between 30 and 70 of its exposure to
changes in interest rates on borrowings is on
a fixed rate basis
tax planning risk
the group’s reported after tax income is
calculated based on the relevant tax legislation
in each of the jurisdictions that it operates in
changes in tax legislation including tax rates
could materially affect the group’s after tax
income the group undertakes tax planning
initiatives where appropriate the outcome of
such planning cannot be assured and could
materially influence the effective tax rate
accounting policies
we have adopted international financial
reporting standards as adopted by the eu
adopted ifrs in 2005 all accounting policies
shown on pages 57 to 62 are compliant with
adopted ifrs 
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 us with others in europe net employee
benefit liabilities totalling £427 million are
included in the financial statements at the end
of the year a decrease of £815 million
compared with the previous year the main
movements are in the uk pension schemes
which show a surplus of £31 million on an ias 19
basis an improvement of £693 million in the
period the two main oneoff changes for the 
uk are a £400 million cash injection and a
£110 million curtailment to the deficit due to 
the changes implemented in the schemes
going concern
in accordance with the recommendations of
the combined code the directors have duly
considered the budgets forecasts cash flows
and the outlook from the operating companies
and consider that the company and the 
group have adequate financial resources
to continue in operational existence for the
foreseeable future for this reason they continue
to adopt the going concern basis in preparing
these accounts business review the morgan crucible company plc 27
we have continued to operate a consistent 
and systematic risk management process 
which follows the revised turnbull guidance 
we seek to ensure that
a all significant risks to morgan crucible have
been identified and prioritised
b systems of control are in place to manage
the risks and
c the effectiveness of these controls has been
measured and monitored 
the board reviews a formal risk report which
covers the following issues
i significant risks to the group which have
been reviewed by the executive committee
ii the adequacy of the risk management
process 
iii assurances that internal controls are in place
to manage the risks and
iv confirmation that the process 
is ongoing
we have operations in 31 countries worldwide
and we compete in numerous product and
service markets we face various risk factors
both internal and external which could have a
material impact on longterm performance
external risk factors include
• global political and economic conditions
• technology changes
• foreign exchange movements
• raw materials and energy and
• legislation and regulation
internal risk factors include
• reputation
• pensions
• competition
• insurance
• environmental health and safety
• litigation
• controls failure and
• business continuity
as described above we seek to manage 
and mitigate risk and use insurance where 
this is cost effective our risk management
processes also help to identify business and
performance opportunities
external risk factors
global political and economic conditions
our worldwide operations include activities in 
a number of developing countries whilst these
regions offer growth opportunities business
activities in these areas expose us to economic
political and business risks the group is subject
to varying legal and regulatory regimes in 
these areas including those covering taxation
environmental and other matters political risks
include the imposition of trade barriers
expropriation of assets changes in regulations
wage controls and restrictions on the export 
of currency and the volatility of prices taxes 
and currencies
the diverse nature of our products and services
and the customers and markets served help to
mitigate the impact of any individual exposure
to economic conditions however some 36
of our revenues are to customers in the usa and
thus we are particularly affected by economic
conditions in that region
business review cont
risk management technology changes
we develop and launch new technologies and
products such development projects carry
business risks including reputational risk abortive
expenditure and potential customer claims
which may have a material impact on the
group export control regulations may limit our
ability to transfer or share technology between
our sites in different countries
foreign exchange movements
we operate on a global basis with a significant
proportion of our profits earned outside of the
uk we have significant investments around the
world with the greatest proportion being in the
usa as such we are subject to translation risk
due to exchange rate movements between
world currencies which could adversely or
positively affect the group’s results the group
has entered into certain hedging arrangements
to help mitigate the impact of currency
fluctuations and the group’s relevant treasury
policies are summarised in the financial review
on page 26
raw materials and energy
our products use a range of raw materials 
and our operations require significant amounts
of energy volatility and increases in prices 
or scarcity of supply could have a material
impact on our business our raw materials are
sourced on the world market and in general
we have access to multiple sources of supply
where specific material properties require
particular sources of raw materials to be used
the group has processes in hand to bridge any
shortterm interruption of supply and where
possible has identified alternative sources 
of supply
legislation and regulation
we are subject to varying laws and regulations
around the world changes in these could affect
the group’s business following the events now
referred to as 911 various governments notably
the usa have significantly increased their export
control regulations considerable effort has been
expended in the usa and europe to ensure that
we are in compliance with these regulations
internal risk factors
reputation
our reputation with all stakeholders is
fundamental to the success of the group 
failure to meet expectations in terms of the
products and services we provide the way that
we do business or in our financial performance
could have a material effect on the group
these risks are mitigated through
• our focus on quality with over 90 of our
production capacity now accredited to 
iso 9001
• our corporate responsibility programme
including our statement of core values 
• our ethics policy and internal compliance
reporting helpline and
• our systems of internal control and risk
management 
pensions
we operate a number of defined benefit
pension plans with the largest of these being 
in the uk and the usa 
the pension plans are exposed to the risk 
of changes in interest rates the value and
performance of investments inflation and the
increasing longevity of members as stated 
at the time of the disposal of the magnetics
division the group has now made a further
contribution to the uk schemes which currently
now show a small surplus we will continue to
keep funding levels under review 
the group’s main us defined benefit pension
scheme is overseen by the pension benefit
guaranty corporation which has powers to
apply to court to terminate the scheme if it
does not meet certain minimum solvency tests
were there ever to be a termination the group
would be required to meet the full cost of the
underfunded liabilities under the us scheme
competition
given that we operate in highly competitive
markets significant product innovations
technical advances or increased price
competition could all affect the group 
in order to help ensure we remain competitive
we work to minimise our cost base and invest
in research and development
insurance
certain risks are transferred to insurers 
specialist thirdparty audits and internal
inspections coupled with followup of any
corrective actions help to ensure that major
insurable risks are adequately managed 
the growth in our aviation and medical products
businesses has meant that this continues to be
an area of particular focus to ensure that our
products are consistently of the highest quality
and that contractual arrangements are clear 
environmentalhealth and safety
our operations involve the normal
environmental and health and safety risks
associated with any manufacturing operation
such as spillage noise air and soil pollution and
so forth
28 the morgan crucible company plc business review risk management our businesses are subject to numerous laws and
regulations relating to health safety and the
environment around the world although we
believe that our operations are in compliance
with current regulation violations of such laws
and regulations can lead to fines and penalties
specialist thirdparty and internal auditors make
regular site visits to ensure compliance with 
local regulations an environmental health 
and safety good management practices
manual has been issued to sites worldwide
environmental health and safety managers
within each division are tasked with ensuring 
that the practices outlined in the manual 
are embedded in the manufacturing sites
litigation
from time to time and in the normal course 
of business we are subject to certain litigation
in particular in the usa provision for the
expected costs and liabilities are set out in 
note 22 to the accounts if the liabilities arising
were significantly to exceed the amounts
provided for our financial position could be
adversely affected 
controls failure
we operate internal controls as described in the
corporate governance report on pages 40 to 44
with operations in 31 different countries
worldwide there has been a need to pay
particular attention to the auditing of internal
controls in some of the smaller sites which given
their size tend to have less segregation of duties
as we continue to expand our manufacturing
footprint in lowercost areas there is an increasing
proportion of group revenues and profits coming
from countries that have different cultural and
business practice standards from our traditional
locations our riskbased internal audit
programme addresses this situation and develops
risk management strategies
business continuity
business continuity plans are either fully
developed or in the course of development 
at all our sites these plans describe how a 
site should respond to various risks and how
continuity of supply to our customers would be
maintained in some cases there are possibilities
of shortterm supply from an alternative site 
the measures described coupled with
appropriate insurance help mitigate the 
effects of business interruption a full review 
of these plans will be made during 2007
actions
during 2006 our internal audit function has
continued to use external professional auditors
to supplement internal resources in areas of the
group’s operations where language culture
and location have made this a sensible option
riskbased internal audits have focused on
ensuring that internal control systems are
functioning correctly and are adequate for the
risks in the business such audits are therefore 
not limited to financial matters but also cover
operational and regulatory compliance matters
the director of operational risk has worked with
the divisional chief executives and divisional
controllers to identify and implement best
practice across all our sites the concepts of 
risk assessment and risk management continue
to be embedded throughout our various
activities and managers at all levels of the
organisation are becoming more adept at 
using these approaches
the corporate ethics policy which was agreed
by the board at the end of 2005 is available to
every morgan crucible employee worldwide
this lays a foundation for the determination of
appropriate conduct globally our internal
controls are designed not only to protect 
the company’s assets but also to ensure
compliance with our ethics policy in order to
assist with this we have set up a compliance
helpline to enable any employee to seek 
advice or to report noncompliance the ethics
policy and compliance helpline were featured
in the latest edition of the company’s
internal magazine 360 which is published
in eight languages and distributed to all
employees worldwide
during 2006 a risk management committee was
formed comprising of the chief financial officer
the director of operational risk and the
company secretary this committee reviews the
full range of risks faced by morgan crucible as a
group ensures that there are adequate systems
in place and evaluates their effectiveness
where necessary the risk management
committee will initiate action to improve the
systems and ensure compliance
we believe that progression from compliance 
to integrated risk management through
improved internal controls is an essential step
in the continuous improvement of our business
processes for the benefit of all stakeholders
business review risk management the morgan crucible company plc 29 30 the morgan crucible company plc business review
corporate responsibility is integral to the way we
do business and is vital to the continued success
of our company
we report on
• ethics and ethical trading
• human resources
• environmental health and safety
• community and
• suppliers and customers
many of morgan crucible’s products are
designed to improve the environmental 
and health and safety performance of our
customers’ operations and products we have
not sought to quantify this benefit but we
continue to see the development of new and
improved products as a key contribution to the
sustainability of our own business and that of 
our customers
management
the board is accountable for corporate
responsibility policies and processes as 
chief executive officer mark robertshaw
is the executive in charge of all corporate
responsibility matters he is supported by senior
management including the chief financial
officer the director of operational risk and 
the director of human resources of the carbon
division the chief executive of each division 
has operational responsibility for implementing
our policy
reporting and verification
this report follows the guidelines issued by 
the association of british insurers abi and 
is supplemented by our social ethical
environmental health and safety policies and
our 2006 ehs report which will be published 
on the company’s website in april 2007 
as part of our work to promote and retain 
our reputation for managing our business in 
a responsible way and for contributing to the
societies in which we operate a number of
initiatives are underway to improve corporate
responsibility performance and reporting
examples are included below with further 
detail to be published in our 2006 ehs report
we have been a member of the ftse4good
index since 2005
all morgan crucible businesses are regularly
reviewed under the group’s compliance audit
programme and those sites and businesses
certified to iso 9001 iso 14001 ohsas 18001
and other standards have regular external
audits the board has considered the potential
for further external verification of the group’s
corporate responsibility performance and in
2006 has limited this to external professional
advice on specific health and safety and
environmental matters
core values
our approach to corporate responsibility is
encapsulated in our core values statement
which provides the framework for our policies
programmes and procedures as we strive 
for continuous improvement in our social
environmental and ethical performance 
our core values statement available on 
our website applies to all our businesses and
employees worldwide
ethics and ethical trading
policy
our ethics policy which is translated into local
languages for our sites worldwide supplements
our core values statement and provides
employees with practical guidance for their
everyday activities the policy crossrefers
to our other policies and covers
• environmental health and safety
• equal opportunities and un guidance on
human rights
• business behaviour including dealing with
conflicts of interest bribery and corruption
• dealings with customers and suppliers
including anticompetitive behaviour
• compliance with laws and regulations
including export controls
• integrity in financial reporting and
• communication and compliance 
including employee reporting without fear 
of retribution through our compliance helpline
business review cont
corporate responsibility business review corporate responsibility the morgan crucible company plc 31
management
our compliance helpline enables employees
who are aware of or suspect misconduct illegal
activities abuse of company assets or violations
of our ethics policy to report these confidentially
without fear of retribution should they feel they
cannot use a local channel during the year the
availability of the helpline was promoted to
employees globally in particular through
coverage in the global employee magazine
see page 32
our global anticompetitive behaviour
compliance programme is ongoing with
appropriate employees across the group
continuing to receive training this is followed 
up with annual independent audits with the
auditor attending the meetings of the board 
and the executive committee at which the
audit report is discussed
human resources 
our continued success relies on the capabilities
vision and commitment of our employees 
our employment policies and practices are
designed to attract retain and engage
employees and provide the working
environment needed to deliver the high
expectations of our business and customers 
we actively encourage all our employees to
achieve their full potential and our leadership 
in technology is underpinned by our investment
in training and developing our people 
our longterm incentive and share option plans
and our employee communications all help to
inform involve and motivate our people
policy
we endorse the un guidance on human rights
and minimum working age to ensure freedom 
of association equal opportunity and diversity
amongst employees regardless of gender race
religion culture creed age or disability and 
any other status protected by law we would
endeavour to provide training and continued
employment of employees who become
disabled whilst in our employment
as is set out in our core values statement and 
in our ethics policy every employee is entitled 
to fair treatment courtesy and respect
we will not tolerate sexual racial or any 
other form of harassment
management
we have one set of human resources standards
that are implemented through our operating
divisions with appropriate support from group
and regional resources this approach helps to
ensure our people policies and practices are
aligned with the needs of our business and 
our customers
policy implementation along with the
identification and benchmarking of best
practice are facilitated by the groupwide
general managers’ forum and regional human
resources councils in europe the americas 
and asia
the director of human resources of the carbon
division also has responsibility for group human
resources issues and as such reports to 
the chief executive officer in this capacity
risks relating to human resources are covered
by the group’s risk management process
loyal service
mr william bill byrd receives a
loyal service award from mark
robertshaw chief executive
officer mr byrd completed 
60 years of service at our
augusta usa plant and
continues to work with us 
as an export transportation
specialist reporting
during the coming year we plan to update 
our processes for gathering and benchmarking
human resources data and key performance
indicators so as to help identify areas of best
practice and opportunities for improvement
training and development
we continue to invest in our employees and 
to encourage them to participate in their
development to achieve their full potential
this is key to achieving our business goals and
we work to develop our people at all levels 
and on a global basis 
we identify training and development needs
through our performance appraisal system that
has been adopted by all divisions this system
also furthers talent identification and succession
planning
groupwide training courses include
international market development project
management and negotiating skills 
where appropriate we run regional training
programmes for example in china these are
available for all divisions and includes leadership
skills and sales 
the regional programmes support divisional
training that is aligned to the strategic needs 
of each business for example over the 
past three years some 100 high potential
employees have participated in the thermal
ceramics global management development
programme this included exposure to the latest
management thinking teaching them to apply
this thinking across the diverse cultures in which
we do business in the carbon division there 
has been an intensive focus on developing
middle management and commercial skills
whilst technical ceramics has focused on the
development of technical and process skills
employee engagement
communication channels
we communicate through a variety of channels
including regular global newsletters the twice
yearly 360 magazine which contains divisional
site and community news and morgan update
which keeps employees informed of group
developments including our annual and interim
results and the results of our annual employee
survey these newsletters are available in eight
languages and are supplemented by team
briefings and presentations
the european employee forum established in
1996 continues to be a powerful twoway forum
for communication and in 2006 was expanded
to include our businesses in the new member
states of the eu
as discussed above our compliance helpline
enables employees to seek guidance or raise
concerns on a confidential basis this helpline
supplements local procedures
employee surveys 
following our first groupwide employee 
survey in 2003 we identified a number of areas
for improvement these included improving
overall communications with employees 
helping employees develop a better
understanding of group strategy and direction
and continuing to progress health safety and
environmental performance 
the results of the subsequent surveys enabled 
us to track progress and to tune our employee
engagement activities the survey planned 
for 2006 was deferred until 2007 due to the
demands of the bid approach in 2006 
we plan to publish a summary of the results on
our website as well as providing feedback to 
our divisions sites and employees we will also
communicate results to shareholders in next
year’s annual report
32 the morgan crucible company plc business review corporate responsibility environmental health and safety
we are committed to minimising the impact of
our operations products and services on the
environment and to enhancing the sustainability
of our business as many of our operations
include hightemperature processes minimising
energy use and climate change related
emissions is a key focus we are also committed
to ensuring that the working environment is 
safe and that all individuals take responsibility 
for achieving this environmental health and
safety ehs performance improvements 
are a fundamental part of the way we 
conduct business
this commitment is reinforced in our core values
statement which requires us to measure
appraise and report our ehs performance
further details of our ehs performance and
programmes will be included in our 2006 ehs
report to be published on our website in april
2007 the report will also include case studies to
help highlight our approach to enhancing the
sustainability of our business
ehs policy
the key features of the group’s ehs policy
are to
• comply with ehs legislation regulations and
other applicable requirements
• minimise the environmental impact of historic
current and future operations
• conduct operations in such a manner as to
avoid unacceptable risk to human health 
and safety
• supply products that will not present
unacceptable risk to human health and 
safety when used in compliance with 
product safety communications and 
common safety practices
• establish measurement tools for and
continuously monitor ehs performance and
• set objectives for the continuous improvement
of ehs performance
ehs management and organisation
the management of ehs performance is aligned
with the operation of our daytoday business 
as noted above the chief executive officer 
has overall accountability for corporate
responsibility including ehs policy and
performance he is supported by ben bolton
director of operational risk who is a member of
the risk management committee operational
responsibility is delegated to the chief executive
of each division and to the manager of each
operation subsequent to the year end the
chief financial officer took over specific
responsibility for ehs policy and performance
this structure is supplemented by ehs
professionals within each business in practice 
all of morgan crucible’s employees are
responsible for ensuring that our ehs policies are
implemented and for identifying additional
areas and opportunities for further development
environmental health and safety risks are
covered by the group’s risk management
systems ehs performance and programmes are
reported and reviewed regularly on a site by site
regional divisional and groupwide basis
environmental management systems are in
place at 57 major sites representing some 77
of production capacity this includes 23 sites
which are certified to iso 14001 in 2007 and
2008 we plan to achieve further certifications 
in the usa australia japan china france 
and south africa in addition to the rolling
programme of recertifications systems are in
place for managing health and safety across 
all our major operations with a number of sites
certified or working to ohsas 18001 where this 
is appropriate our carbon division facility in
turkey achieved certification to ohsas 18001
during the year
our ehs management processes also include
the ehs compliance audit programme 
this programme provides assurance and helps
ensure compliance with local regulations and
good management practice twenty four sites
were audited during the year using external
auditors in europe and asia and internal
resources in north america these audits and
the associated corrective action plans help
ensure that site level environmental and health
and safety assessments are undertaken on a
consistent basis at the group’s facilities world
wide this programme is supplemented by the 
group’s ehs good management practice
manual which is issued to all sites
business review corporate responsibility the morgan crucible company plc 33 34 the morgan crucible company plc business review corporate responsibility
health and safety performance
we monitor accident statistics across the 
group as a result of proactive preventative
programmes and training performance over
the past year has improved with a reduction 
in lost working time and in major and minor
incidents per 100000 hours worked
2006 2005
 lost working time 007 009
major incidents per 100000 hours 041 062
minor incidents per 100000 hours 019 026
major  work related injuries resulting in four or more days’ lost time
minor  work related injuries resulting in one two or three days’ lost time
environmental performance
many of our operations involve high
temperature processes energy use and the
emissions associated with climate change are 
a key area of focus for the group over the 
past year key environmental performance
indicators show a reduction in co2 emissions 
due to energy use when indexed to revenue
this includes the effect of doubling our use of
electricity from specific renewable sources to
27 of all electricity consumed
2006 2005
tonnes co 2 per £m revenue 604 648
tonnes waste per £m revenue 89 96
 total waste recycled 31 30
m
3
water used per £m revenue 3896 3668
co 2 equivalent from all energy sources including country specific electricity – 2005
restated accordingly
includes intercompany revenue
in 2006 our waste management programmes
resulted in a reduction in the amount of waste
generated per unit of revenue whilst increasing
awareness of recycling opportunities saw an
increase in the proportion of our total waste that
is recycled due to increased and improved
measurement and reporting apparent water
use per unit of revenue increased during the
year this was also due to a leak at one of our 
us sites which has now been rectified
targets
over the past year we have worked to 
update our key performance indicators kpi
and data collection processes as will be further
detailed in our 2006 ehs report to be published
in april 2007 we have set new grouplevel
targets which build on the progress to date
we will further upgrade our kpi processes 
and integrate these into our management
information systems in addition to group 
targets our businesses set targets and undertake
initiatives appropriate to their specific
opportunities for improvement
community
we engage with local communities in relation 
to matters of mutual interest and concern 
at a local level where we often have
longestablished roots and are frequently a
major employer this helps to foster
understanding and improves our credibility in
addition we engage with local and national
governments and agencies both directly or
through professional bodies such engagement
is in part covered by our ethics policy which
prohibits donations to 
political parties or causes
in addition to the time given to community
projects and for charitable purposes by our
employees around the world in 2006 morgan
crucible also made charitable donations of
£146240 2005 £171057
group activities
during 2006 we continued to support and fund
the joint barnardo’soutward bound initiative
which provides opportunities for young people
to develop life skills at centres in the uk
we also supported a number of charitable 
and community initiatives including medical
research the care of physically or mentally
handicapped people and the education 
and development of young people
employee activities
our staff support a variety of local and national
initiatives and projects helping to raise funds
and giving their time examples include
asia
• an employee at carbon korea who 
assists in a facility for disabled teenagers
• employees at thermal ceramics in india 
who donate blood give books to the local
library with one employee sponsoring the
education food shelter and clothing of an
underprivileged child americas
• our advanced ceramics plant in new bedford
massachusetts usa has a tradition of strong
community involvement with a rolling
programme through the year initiatives
include support for the united way and the
day of caring facilitating payroll giving raising
funds for the american cancer society and
the american heart foundation supporting a
local softball tournament and conducting a
yearly “blood drive” when the local hospital
brings a mobile blood donation unit to the site
and employees donate blood throughout 
the day
• our thermal ceramics plant in augusta
georgia usa is also a sponsor of the united
way and of the juvenile diabetes research
foundation
• an employee based in augusta with expertise
in emergency response planning helps with
the community emergency response team
which trains people to be better prepared to
respond to emergency situations in their
neighbourhoods
europe
• in the uk employees from carbon and
technical ceramics participated in the 2006
london marathon raising money for cancer
research uk and the multiple sclerosis
resource centre
• the sports and social committee at the
ruabon site in north east wales involved local
children in a competition to design a christmas
card the winning design was printed and sold
to raise money for schools and local charities
suppliers and customers
our customer service strategy is to respond
quickly to changing customer demand to
identify emerging needs and continuously to
improve product availability quality and value
accordingly we seek to stay close to customers
building longterm relationships our continuous
improvement programmes support our aim 
that our products should meet or exceed
customer requirements over 90 of the 
group’s manufacturing capacity is accredited
to iso 9001
we aim to work with our suppliers and partners 
in mutually beneficial ways and so far as is
praticable expect that our customers and
suppliers business partners and contractors
throughout the supply chain act in accordance
with our policies and values
business review corporate responsibility the morgan crucible company plc 35
cautionary statement
this business review has been prepared for 
and only for the members of the company 
as a body and no other persons its sole
purpose is to assist shareholders to assess the
company’s strategies and the potential for
those strategies to succeed the company 
its directors employees agents or advisers 
do not accept or assume responsibility for 
any other purpose or to any other person to
whom this document is shown or into whose
hands it may come and any such responsibility
or liability is expressly disclaimed 
this business review contains forwardlooking
statements that are subject to risk factors
associated with amongst other things the
economic and business circumstances 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 forwardlooking statements by their
nature involve a number of risks uncertainties
and assumptions because they relate to
events andor 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 forwardlooking 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 business review will
be realised the forwardlooking statements
reflect the knowledge and information
available at the date of preparation and will
not be updated during the year but will be
considered in the business review for next year
this business review has not been audited or
otherwise independently verified directors and executive committee
36 the morgan crucible company plc
09 10 12 11
01 02
05 06
03
04 07
08
executive committee
nonexecutive directors
executive directors the morgan crucible company plc 37
executive committee
01 mark robertshaw chief executive officer
02 kevin dangerfield chief financial officer
03 mark lejman ceo carbon
08 victoria gould director of group
communications
09 andrew hosty ceo technical ceramics 
10 philip wright ceo molten metals systems
11 john simons executive chairman thermal
ceramics
12 paul boulton company secretary
 member of the audit committee
† member of the remuneration committee
§ member of the nominations committee
executive directors
01 mark robertshaw§
chief executive officer
mark was appointed as chief executive officer in
august 2006 previous to this he was chief operating
officer from february 2006 and chief financial officer
from october 2004 before joining morgan crucible he
was chief financial officer of gartmore investment
management plc from 2000 to 2004 mark is also a 
nonexecutive director of rathbones brothers plc 
he previously worked for the natwest group and also
spent nine years as a management consultant with
marakon associates
02 kevin dangerfield
chief financial officer
kevin was appointed to his current position as 
chief financial officer on 4 august 2006 having 
joined morgan crucible in july 2000 as deputy 
group financial controller and then was 
subsequently promoted to group financial controller
before joining morgan crucible he worked for 
london international group plc and virgin retail
europe limited he qualified as a chartered
accountant with pricewaterhousecoopers
03 mark lejman
chief executive officer carbon division
mark joined the board on 1 march 2005 after joining
morgan crucible in february 2004 he has previously
held senior positions with courtaulds plc and acordis
mark is the chief executive officer of morgan
crucible’s carbon division in may 2006 mark became
a nonexecutive director of delta plc a listed
company on the london stock exchange and 
is also chair of delta’s remuneration committee 
nonexecutive directors
04 tim stevenson obe†§
chairman
tim was appointed chairman of morgan crucible
in december 2006 he is also chairman of 
travis perkins plc a position that he has held since
november 2001 and is the senior independent
director of tribal plc from 1975 to 2000 tim held a
variety of senior management positions at burmah
castrol plc including chief executive from 1998 to
2000 he is also a qualified barrister
05 joe machale†§
senior independent director
joe was appointed a nonexecutive director in
october 2003 and chairman of the audit committee
in december 2003 he was appointed the senior
independent director for morgan crucible in april
2006 he is a chartered accountant and has had
international experience with jp morgan incorporated
he was chief executive for europe middle east 
and africa of jp morgan europe from 1997 to 2001 
he is a nonexecutive director of the royal bank 
of scotland plc and a nonexecutive director and
chairman of the remuneration committee at 
brit insurance holdings plc he is also a trustee 
and treasurer of macmillan cancer support 
06 martin flower†§
martin was appointed a nonexecutive director 
in december 2004 he is also chairman of croda
international plc and of alpha airports group plc 
and a nonexecutive director of low  bonar plc 
martin held a variety of senior management positions
with coats plc from 1968 to 2004 and was group 
chief executive of that group and chairman of 
the board from 2001 to 2004
07 simon heale†§
simon was appointed a nonexecutive director 
in february 2005 and is the chairman of the
remuneration committee he is chief executive of
china now and is a nonexecutive director of
kazakhmys plc and of panmure gordon and co plc
he was chief executive of the london metal
exchange until october 2006 he qualified as an
accountant in 1978 with price waterhouse and has
had extensive experience in the far east having held
senior positions with the swire group in japan and
hong kong and with jardine fleming in hong kong the directors present their report together with the financial statements and auditors’ report for the year ended 4 january 2007 this directors’
report was approved by the board on 20 february 2007
principal activities and enhanced business review
the morgan crucible company plc “the company” comprises three reporting divisions as outlined on pages 12 and 13 that design
manufacture and market primarily carbon and ceramic components for applications for a wide range of markets a review of developments
affecting the group during the year and its prospects for the future appear on pages 14 to 22 to be read in conjunction with the cautionary
statement on page 35
the companies act requires the directors’ report to include a business review certain information that fulfils the requirements of the
business review can be found on pages 14 to 22 business review 24 to 26 financial review and 27 to 29 risk management to be read 
in conjunction with the cautionary statement on page 35
acquisitions
during 2006 the company acquired the following companiesbusinesses
within the insulating ceramics division the fibre business of vesuvius usa corporation for a cash consideration of £108 million the entire
issued share capital of diamond crucible pvt limited for a cash consideration of £14 million 51 of morgan thermal ceramics sukhoy log
limited for a consideration of £17 million 75 of beijing yingtelai morgan thermal ceramics textiles co ltd for £47 million of which £25
million is payable after the year end 51 of morgan luyang thermal ceramics co ltd for £05 million and an additional 255 
of morganite india limited for £20 million
within the carbon division the business assets and certain liabilities of aceram materials and technology inc for a contingent maximum
consideration of £58 million with £19 million paid during 2006
share capital
as at 4 january 2007 pursuant to an authority granted at the company’s annual general meeting on 21 april 2006 the company was
authorised pursuant to companies act 1985 to purchase up to 999 of its issued share capital
pursuant to that authority the company has during the year under review purchased 200000 ordinary shares of 25 pence each representing
007 of the ordinary issued share capital of the company at 4 january 2007 for an aggregate consideration of £05 million nominal value
£50000 the directors were of the opinion that the purchase of these shares was both in the best interests of shareholders generally and
would increase the company’s earnings per share the shares purchased by the company have been cancelled 
the company’s share capital together with details of shares issued and purchased during the year are set out in note 18 on pages 74 to 76
financial results
the profit for the year ended 4 january 2007 was £397 million 2005 £542 million profit before tax for the same period was £503 million
2005 £204 million revenue was £6778 million 2005 £7457 million and underlying operating profit before special items was £737 million
2005 £660 million basic earnings per share was 129 pence 2005 181 pence capital and reserves at the end of the year were 
£2031 million 2005 £1957 million the retained profit of £397 million will be transferred to reserves the group’s accounting policies can
be found on pages 57 to 62
dividends
the directors recommend the payment of a final dividend at the rate of 30 pence per share on the ordinary share capital of the company
payable on 6 july 2007 to shareholders on the register at the close of business on 1 june 2007 together with the interim dividend of 
15 pence per share paid on 8 january 2007 this final dividend if approved by shareholders brings the total distribution for the year to
45 pence per share 2005 25 pence
disclosures of information to auditors
the directors who held office at the date of approval of this directors’ report confirm that so far as they are each aware there is no 
relevant audit information of which the company’s auditors are unaware and that each director has taken all steps that he ought 
to have taken as a director to make himself aware of any relevant audit information and to establish that the company’s auditors 
are aware of that information
policy on the payment of creditors
the company’s policy in relation to its suppliers is where possible to settle terms of payment when agreeing the terms of the transaction and
to abide by those terms provided that it is satisfied that the supplier provided the goods and services in accordance with the agreed terms
and conditions the company and its subsidiaries do not follow any one code or standard on payment practice due to the diverse nature of
the global markets in which the group operates
the number of days’ purchases outstanding for payment by the company at the end of the year was 66 days 2005 45 days and for the
group was 62 days 2005 48 days
research and development
the spending on research and development which excludes the amounts spent working with customers and others by way of product
enhancement and application engineering was £82 million during the year 2005 £125 million the reduction from the prior year can be
attributed primarily to the disposal of the magnetics division
personnel
details of the company’s and the group’s personnel policies including its policy on equal opportunities for disabled employees and
employee involvement are set out on pages 31 and 32
38 the morgan crucible company plc
directors’ report
  employee share and share option schemes
the company operates a number of employee share and share option schemes fifty employees hold awards under the morgan crucible
long term incentive plan ltip one hundred and twentytwo employees have options under the company’s executive share option
schemes and 556 employees participate in the company’s uk sharesave plan in addition 76 german employees are currently participating
in the german employee share purchase plan there are currently no participants in the company’s us employee share purchase plan
details of outstanding options are given in note 21 on pages 82 to 85
directors
details of directors’ interests in the share capital of the company are listed on page 48 the company has not been notified of any change
in their holdings in the period 5 january 2007 to 20 february 2007
the executive directors of the company are also deemed by virtue of schedule 13 of the companies act 1985 to be beneficially interested
in the 10182157 ordinary shares held by the morgan general employee benefit trust on 4 january 2007 in the period 4 january 2007 to
20 february 2007 94970 shares were transferred out of the trust to leave a balance of 10087187 shares on 20 february 2007 the trustees 
of the trust have agreed to waive their entitlement to the payment of dividends on the shares held by the trust the directors are not aware
that any other shareholders waived or agreed to waive any dividends or future dividends during the period under review
all those who served as directors throughout the year under review are listed on page 48
warren knowlton retired as a director on 3 august 2006 and lars kylberg retired as a director on 30 november 2006 kevin dangerfield was
appointed as a director on 4 august 2006 and tim stevenson was appointed as a director and chairman of the board on 1 december 2006
the details of those directors who will be offering themselves for election and reelection at the forthcoming annual general meeting 
on 20 april 2007 is set out in the circular to shareholders which will be posted in march 2007
details of the background and experience of all the directors can be found on page 37 and details of board committees on which they
serve can be found on pages 43 and 44
donations
morgan crucible companies made the following charitable donations
united kingdom £92507 2005 £96915
overseas £53733 2005 £74142
£146240 2005 £171057
no political donations have been made
substantial shareholdings
the directors have been advised of the following holdings representing 3 or more of the issued ordinary share capital of the company 
as at 20 february 2007
number of
company ordinary shares 
standard life investments 33619111 1149
schroder investment management limited 31364812 1081
aegon uk plc 12720723 434
lazard asset management llc 10342906 353
legal  general group plc 9439042 325
post balance sheet events
there have been no material events since the year end the company proposes to pay a final ordinary dividend of 30 pence per share 
in respect of the 2006 financial year
auditors
kpmg audit plc has expressed its willingness to continue in office a resolution for its reappointment as auditors and authority for the directors
to determine the auditors’ remuneration will be proposed at the forthcoming annual general meeting
annual general meeting
the annual general meeting of the company will be held on 20 april 2007 at st anne’s manor hotel london road wokingham
berkshire rg40 1st a circular will be sent with this report to shareholders in march 2007 incorporating the notice of annual general 
meeting and detailing any special business to be transacted at that time
by order of the board
paul boulton secretary
20 february 2007
the morgan crucible company plc
quadrant 5557 high street windsor berkshire sl4 1lp
registered in england no 286773
the morgan crucible company plc 39 directors’ report 40 the morgan crucible company plc
statement of compliance with the combined code 
throughout the year ended 4 january 2007 the company has been in compliance with section 1 of the july 2003 edition of the combined
code on corporate governance the code with the following exceptions as a result of the process of board refreshment including the
appointment of a new chairman on 1 december 2006 the board considered the results of the performance review undertaken during 2005
but did not undertake a full performance evaluation during the year further whilst the senior independent director led a meeting of 
the nonexecutive directors this meeting considered the role to be taken by a new chairman and not the performance of the retiring
chairman the board expects to undertake a performance review during 2007 the board has considered and where appropriate
implemented the guidelines on corporate social responsibility issued by the association of british insurers in accordance with the
recommendations of the financial reporting council the company has adopted the june 2006 version of the code on a voluntary 
basis for the year beginning 5 january 2007 
this statement describes how the company has applied the main and supporting principles of the code it should be read in conjunction
with the business review and remuneration report on pages 14 to 35 and pages 45 to 50 respectively
the board maintains a corporate governance manual which is reviewed and updated annually 
directors 
the board 
the board is collectively responsible to the company’s shareholders for the success of the company the board is satisfied it has met 
the code’s requirements for its effective operation it has set the company’s strategic aims which were reviewed during the year and 
has ensured that there is a framework of prudent and effective controls which enable risk to be assessed and managed the board set the
company’s values and standards which are set out in the statement of core values and ethics policy both of which are referred to on 
page 30 in the business review
the board met formally nine times during the year to review current performance against agreed objectives and to make and review major
business decisions there is a schedule of matters specifically reserved for the board including the acquisition of companies significant
contractual commitments the review of the effectiveness of risk management processes major capital expenditure and corporate
responsibility various matters are delegated to duly authorised subcommittees of the board
during 2006 a number of important changes were made to the board on 20 february mark robertshaw became chief operating officer
in addition to his role as chief financial officer joe machale became senior independent director on 20 april following the retirement 
of warren knowlton on 3 august mark robertshaw was appointed as chief executive officer and kevin dangerfield joined the board as
chief financial officer tim stevenson was appointed as nonexecutive chairman on 1 december following the retirement of lars kylberg
as at 4 january 2007 the board comprises tim stevenson chairman mark robertshaw chief executive officer two other executive directors
and three independent nonexecutive directors joe machale is the senior independent director biographies of the directors are set out on
page 37
all directors submit themselves for reelection at least once every three years and for reappointment by the shareholders at the first annual
general meeting following their appointment should a nonexecutive director serve for more than nine years he would then be subject to
annual reelection
the attendance of each director at board and audit remuneration and nomination committee meetings is set out in the table below
board audit remuneration nomination
eligible eligible eligible eligible 
director to attend attended
†
to attend attended
†
to attend attended
†
to attend attended
†
lars kylberg 8 8 –––– 2 2
tim stevenson 1 1 –– 2 2– –
warren knowlton 3 3–––– 2 2
mark robertshaw 9 9 – –––– –
kevin dangerfield 6 6 ––––– –
mark lejman 9 9 – –––– –
joe machale 9 9 5 5 8 8 2 2
martin flower 9 9 55882 1
simon heale 9 854882 2
the number of meetings of the nomination committee does not include meetings of the subcommittee established to progress the nominations made during 2006
†excludes meetngs attended by invitation for all or part of a meeting
during 2006 the chairman and the nonexecutive directors met without the executive directors present following the previous chairman’s
announcement to the board of his intention to retire the nonexecutive directors led by joe machale the senior independent director 
met without the chairman present in order to assess the role to be played by his successor
an appropriate directors’ and officers’ liability insurance policy is in place 
corporate governance the morgan crucible company plc 41 corporate governance
chairman and chief executive officer
the roles of chairman and chief executive officer are separate the division of responsibilities between the chairman who is responsible for
running the board and the chief executive officer who is responsible for running the company’s business is clearly established and agreed
by the board 
board balance and independence 
in the year under review the company complied with the requirement of the code that there should be a balance of executive and 
nonexecutive directors at the year end in addition to the chairman whom the company deemed to be independent on appointment
the board comprised three executive directors and three independent nonexecutive directors 
appointments to the board 
as is further detailed in the report of the nomination committee set out on page 44 there is a formal rigorous and transparent procedure for
appointments to the board
the board is satisfied that there are succession plans in place for appointments to the board and for senior management
information and professional development 
the board receives in a timely manner information in a form and of a quality appropriate to enable it to discharge its duties with board
papers generally sent out five days before each meeting
all directors receive a full formal and tailored induction on joining the board and have letters of appointment confirming what is expected
of them
training needs are assessed as part of the board performance review process and the directors regularly update and refresh their skills and
knowledge including their familiarity with the company in addition to the directors visiting operations and meeting with management each
year at least one board meeting is normally held at an operating facility during 2006 the board meeting which had been planned for an
operating facility was moved to the head office location as this was during the period that the company was subject to a possible offer 
as part of his induction the new chairman has visited a number of operating facilities of the group
the directors have access to the advice and services of the company secretary who is also responsible for ensuring that board procedures
are followed and that applicable rules and regulations are observed the directors may also seek independent professional advice at the
company’s expense in connection with their duties as directors and a procedure is in place to facilitate this 
performance evaluation 
as noted above during the year the board considered the results of the formal performance review undertaken during 2005 but due to the
refreshment of the board during the year including the appointment of the new chairman on 1 december 2006 did not undertake a further
performance review during 2006 further although the senior independent director led a meeting of the nonexecutive directors the
meeting considered the role to be played by the new chairman not the performance of the retiring chairman the board plans to undertake
a further performance review during the course of 2007 with the chairman’s performance to be reviewed in the latter part of the year
remuneration 
remuneration policy and practice is discussed in the remuneration report on pages 45 to 50 
accountability and audit 
the assessment of the company’s position and prospects as required by the code is included in the business review on pages 14 to 35 
the board also presents updated information in its interim reports and other price sensitive announcements 
a summary of the statement of directors’ responsibilities in respect of the annual report and the financial statements is set out on page 44
and the “going concern” statement is set out in the business review on page 26 
internal control 
the board has overall responsibility for establishing and maintaining a sound system of internal control to safeguard shareholders’ investment
and the company’s assets through the audit committee the board reviews the effectiveness of the internal control system annually 
this review covers all material controls including financial operational and compliance controls and risk management systems over the
past year internal audits have been focused in emerging countries to help ensure that practices are brought into line with morgan codes 
of conduct and business ethics as is detailed further in the business review the anticompetitive behaviour compliance programme is
ongoing the review of internal controls also includes consideration of the turnbull risk review and the effectiveness of the various risk
management systems in place to manage the risks identified
the board delegates the establishment and implementation of the systems for internal control and risk management to the operating
divisions which are responsible for the identification and evaluation of significant risks applicable to their areas of business together with 
the design and operation of suitable internal controls the board delegates the monitoring and review of the internal control and risk
management systems to the audit committee assisted by the risk management committee the risk management committee which is
chaired by the chief financial officer reviews the full range of risks faced by morgan crucible as a group ensures there are adequate
systems in place and evaluates their effectiveness where necessary the risk management committee will initiate action to improve the
systems and ensure compliance 42 the morgan crucible company plc corporate governance
the directors believe that the group’s system of internal financial controls provides reasonable not absolute assurance that the assets of the
group are safeguarded transactions are authorised and recorded in a correct and timely manner and that such controls would prevent
and detect within a timely period material errors or irregularities the system is designed to manage rather than eliminate risk and to
address key business and financial risks including social environmental and ethical risks the internal control framework complements the
group’s management structure the main features of the formal system for assessing the potential risks to which the group is exposed are
summarised as follows
• financial reporting a detailed budgeting system for each division exists with an annual consolidated budget reviewed and approved by
the board businesses present their revenue and capital expenditure budgets for approval monthly results for the group are presented to
the executive committee and the board including comparisons against budget and the prior year the group’s annual and half yearly
results are reported externally in addition to appropriate trading statements the annual results are audited and the half yearly results are
reviewed by the auditors
• performance monitoring there are regular meetings of the board and of the executive committee a comparison of forecast and actual
results is considered including cash flows and comparisons against budget and the prior year divisional management also meets regularly 
to review performance presentations of actual and forecast performance are made to the executive committee by the group’s divisional
chief executive officers in addition regular site visits are made by members of the executive committee
• risk management the identification of major business risks is an ongoing process and as noted in the internal control section this is carried
out in conjunction with operating management steps are taken to mitigate or manage any material risks identified the board either
directly or through the audit committee receives reports on financial treasury taxation insurance pension legal information systems and
social environmental and ethical risks from management the divisional chief executives cover risk issues at their management meetings
and the director of operational risk helps to ensure that internal control and risk management is embedded into the group’s operations
• risk factors morgan’s businesses are affected by a number of factors many of which are influenced by macroeconomic trends and
are therefore outside the company’s immediate control although as described above and in the business review the identification 
and management of such risks is carried out systematically
audit committee and auditors
the board has formal and transparent arrangements for considering how the directors apply the financial reporting and internal control
principles and for maintaining an appropriate relationship with the company’s auditors this requirement is met by the work of the audit
committee as described below and by the audit work carried out by the company’s external auditors kpmg audit plc the audit
committee has received confirmation from kpmg audit plc that its general procedures support the auditors’ independence and objectivity
in relation to nonaudit services after considering such procedures the opinion of the audit committee was that the auditors’ objectivity and
independence was safeguarded despite the provision of nonaudit services by kpmg audit plc
relations with shareholders
dialogue with shareholders
the importance of dialogue with major shareholders is recognised and meetings are held in order to help achieve a mutual understanding 
of objectives in this respect the chief executive officer and chief financial officer make themselves available to major shareholders as
appropriate throughout the year in particular at the time of the preliminary and interim announcements the senior independent director
holds separate meetings with major shareholders when requested nonexecutive directors also attend investor briefings
to help facilitate dialogue with shareholders the investor relations section of the company’s website includes details of stock exchange
announcements press releases presentations webcasts and other information relevant to investors
following the announcement of the group’s preliminary and interim results and after other significant statements and presentations 
an investor survey is carried out and the results are presented to and discussed by the board
constructive use of the agm
the annual general meeting is normally attended by all members of the board and by a representative of the auditors the results of the
proxy voting on all resolutions are provided for all attendees at the agm held in april 2006 the chief executive officer made a short business
presentation shareholders are also invited to ask questions during the meeting and have the opportunity to meet the directors and other
members of senior management before and after the formal meeting the morgan crucible company plc 43 corporate governance
board committees
the full terms of reference of the following board committees are available upon request and are on the company’s website
audit
the audit committee assists the board in effectively discharging its responsibilities for financial reporting and corporate control during the
year and as at 4 january 2007 membership of the committee consisted of martin flower simon heale and joe machale who is the
committee chairman all of whom are independent directors the committee has the power to and does request the attendance at
meetings of any director auditor or member of management as may be considered appropriate by the chairman of the committee 
the committee also meets the auditors without the executive directors or other members of management present the audit committee
met five times during the year
the audit committee’s terms of reference include
• monitoring the integrity of the financial statements of the company and any formal announcements relating to the company’s financial
performance reviewing significant financial reporting judgements contained in them
• reviewing the company’s internal financial controls and the company’s internal control and risk management systems
• monitoring and reviewing the effectiveness of the company’s internal audit function
• making recommendations to the board for it to put to the shareholders for their approval in general meeting in relation to the
appointment reappointment and removal of the external auditors and to approve the remuneration and terms of engagement of 
the external auditors
• reviewing and monitoring the external auditors’ independence and objectivity and the effectiveness of the audit process taking into
consideration relevant uk professional and regulatory requirements and
• developing and implementing policy on the engagement of the external auditors to supply nonaudit services taking into account
relevant ethical guidance regarding the provision of nonaudit services by the external auditors and to report to the board identifying any
matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken
the work of the committee in discharging those responsibilities in 2006 included
• reviewing the group’s 2005 financial statements and 2006 interim results statements prior to board approval
• reviewing the impact of adopted ifrss on the group’s financial statements
• assessing the group’s main business risks and receiving regular updates on areas of risk in financial control in accordance with the 
turnbull committee guidance
• reviewing the effectiveness of internal audit
• confirmation of the external auditors’ terms of engagement and fee structures and
• monitoring the level of nonaudit work of the auditors which in 2006 included transaction services amounting to £08 million mainly in
connection with the bid approach discussions which took place between august and october 2006 other work totalling £03 million 
was carried out in conjunction with acquisitions in the usa and india assurance services in connection with the transition to adopted 
ifrss internal control audits undertaken in a number of developing countries and tax services in various jurisdictions in connection with
compliance work
the committee has the authority to investigate any matters according to its terms of reference and may obtain external advice at the cost
of the company the director of operational risk has access to the chairman of the committee and meets when appropriate with the
committee without other executives present
to ensure the objectivity and independence of the external auditors the policy implemented by the committee for the provision of nonaudit
services by the external auditors is that certain nonaudit services may not be provided by the external auditors and certain other services
require the approval of the chief financial officer and the chairman of the committee when the cost of services is expected to be in
excess of £200000 a competitive tender process is normally used the external auditors have processes in place to safeguard their
independence and have written to the committee confirming that in their opinion they are independent the company last changed its
auditors in late 2001
remuneration
as is further described in the remuneration report on pages 45 to 50 the remuneration committee has responsibility for setting remuneration
for all executive directors and the chairman including benefits such as share options and awards under the company’s incentive plans
pension rights and any compensation payments the committee also monitors the level and structure of remuneration for senior
management as at 4 january 2007 membership of the remuneration committee consisted of tim stevenson martin flower joe machale
and simon heale who is the committee chairman
the committee is assisted in its duties by the group chief executive the company secretary and the director of human resources of 
the carbon division none of whom takes part in discussion of their own remuneration or votes on any resolution the committee also has 
the power to request for all or part of any meeting the attendance of any director or member of management as may be considered
appropriate by the chairman of the committee
the committee reviews contracts and authorises the remuneration performancerelated and discretionary bonuses including performance
targets and other benefits of the executive directors all executive directors are on 12 months’ notice of termination it is policy to disclose
the fees of any executive director who serves as a nonexecutive director of another company during the year mark robertshaw served 
as a nonexecutive director of rathbones brothers plc and mark lejman served as a nonexecutive director of delta plc warren knowlton
served as a nonexecutive director of smith and nephew plc and from 1 june 2006 as a nonexecutive director of filtrona plc the fees
received by mark robertshaw mark lejman and warren knowlton in this regard are shown on page 50
as is further detailed in the remuneration report the committee uses specialist consultants and advisers where appropriate 44 the morgan crucible company plc corporate governance
the committee sets relevant criteria for awards granted under the company’s various share and share option schemes the nonexecutive
directors do not participate in share schemes and bonuses nor do they qualify for pension benefits
during 2006 this committee met on eight occasions the report of the remuneration committee which includes details of directors’
remuneration and directors’ interests in options and shares is set out on pages 45 to 50
nomination
the nomination committee leads the process for board appointments and makes recommendations to the board on the appointment 
of new directors a majority of members of the nomination committee are independent nonexecutive directors at 4 january 2007
membership consisted of tim stevenson as chairman martin flower simon heale joe machale and mark robertshaw
the committee has the power to request the attendance of any other director or member of management for all or part of any meeting
as may be considered appropriate by the chairman of the committee the committee met twice during 2006 and also established 
a subcommittee comprising martin flower simon heale and joe machale to progress the selection of the new chief executive officer 
and chief financial officer with effect from 4 august 2006 and the new chairman with effect from 1 december 2006
the nomination committee reviews the balance of skills knowledge and experience on the board succession planning and the leadership
needs of the group in the light of this review the committee prepares a description of the role and capabilities required for a 
particular appointment
the terms and conditions of appointment of nonexecutive directors are available for inspection their letters of appointment set out 
the expected time commitment since nonexecutive directors are asked to undertake that they will have sufficient time to meet their
commitments to the company their other significant commitments are disclosed to the board before appointment with a broad 
indication of the time involved and the board is informed of any subsequent changes the terms of appointment for nonexecutive directors 
do not include a notice period
candidates for appointment as director are considered by the committee taking advice from external consultants where appropriate
these procedures including the use of independent search consultants to help evaluate both internal and external candidates were 
used by the committee in connection with the appointment of mark robertshaw as chief executive officer and kevin dangerfield as an
executive director and chief financial officer both with effect from 4 august 2006
the procedures were also used in the appointment of tim stevenson as chairman with effect from 1 december 2006 this included an
assessment of the time commitment expected from him recognising the need for his availability in the event of major corporate activity
independent search consultants were used in connection with his appointment lars kylberg the former chairman was not a member of the
nomination committee or the subcommittee which recommended to the board tim stevenson as his successor
statement of directors responsibilities in respect of the annual report and the financial statements
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 financial statements in accordance with ifrss as adopted by the eu and applicable law and 
have elected to prepare the parent company financial statements in accordance with uk accounting standards and applicable law 
uk generally accepted accounting practice
the group financial statements are required by law and ifrss as adopted by the eu to present fairly the financial position and the
performance of the group the companies act 1985 provides in relation to such financial statements that references in the relevant part of
that act to financial statements giving a true and fair view are references to their achieving a fair presentation
the parent company financial statements are required by law to give a true and fair view of the state of affairs of the parent company
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 financial statements state whether they have been prepared in accordance with ifrss as adopted by the eu
• 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 and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company
will continue in business
the directors are responsible for keeping proper accounting records that 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 1985 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
under applicable law and regulations the directors are also responsible for preparing a directors report directors remuneration report and
corporate governance report 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 companys
website legislation in the uk governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions
by order of the board
paul boulton secretary
20 february 2007 remuneration report
the morgan crucible company plc 45
the directors’ remuneration report is presented to shareholders by the board the report complies with the directors’ remuneration report
regulations 2002 the regulations and the company complied with the provisions of the july 2003 edition of the combined code on
corporate governance relating to directors’ remuneration as noted on page 40 the company has voluntarily adopted the june 2006
version of the code for the year beginning 5 january 2007 and accordingly as noted on page 43 the chairman is a member of 
the remuneration committee
auditable part
the schedule of directors’ pay and benefits and accompanying notes on pages 48 and 49 the table of pension benefits and
accompanying notes on page 50 and the table of executive directors’ share options on page 49 comprise the auditable part of the
directors’ remuneration report being the information required by part 3 of schedule 7a to the companies act 1985
a resolution inviting shareholders to approve this report will be put to the annual general meeting to be held on 20 april 2007
the remuneration committee
the members of the committee are simon heale chairman tim stevenson joe machale and martin flower each of 
these directors is regarded by the board as independent and served throughout the year apart from tim stevenson who was appointed 
to the board on 1 december 2006 as chairman and joined the committee from that date tim stevenson was independent at the time of his
appointment to the board no other directors were members of the committee during the year the company secretary acts as secretary to
the committee and the chief executive officer attends meetings of the committee by invitation no executive director or other attendee is
present when his or her own remuneration is under consideration
the remuneration committee is responsible for developing group policy on executive remuneration and for determining on behalf of the
board specific remuneration packages for the executive directors and the chairman the committee’s terms of reference are available on
our website
the remuneration committee met eight times during the year and has the authority to obtain the advice of outside independent
remuneration consultants
during the year in addition to receiving advice and assistance from the chief executive officer the company secretary and the director 
of human resources of the carbon division the committee referred to information compiled by towers perrin and incomes data services
during 2007 the committee will undertake a full review of its terms of reference its polices and processes including its use of external advisors
with retendering processes where appropriate
remuneration policy
the remuneration policies adopted by the committee and which will continue to apply during 2007 are
a total level of remuneration
the remuneration committee aims to ensure that remuneration packages offered are competitive and designed to attract retain and
motivate executive directors and senior executives of the right calibre in order to run the company successfully and to deliver value 
for shareholders 
in assessing all aspects of pay and benefits the committee compares the packages offered by similar companies to ensure the
remuneration packages for executive directors are competitive against the market in which we compete for talent 
comparator companies are chosen having regard to
i the size of the company – its turnover profits and number of people employed
ii the diversity and complexity of its businesses
iii the geographical spread of its businesses and
iv its restructuring and expansion profile
the intention is to ensure rewards are linked to corporate and individual performance this policy takes account of the decentralised 
and differing nature of our businesses in addition to reflecting the technical challenges we face in a global market place individual
performance is assessed against personal objectives and corporate performance of the relevant division in respect of the remuneration 
of senior divisional management and against the performance of the group for the remainder of the executive committee
b main components of remuneration
the policy of the committee is to place greater emphasis on performancerelated rewards with measurable targets these are designed to
reduce the proportion of fixed remuneration and provide for a growing element of “at risk” pay which is only available when good results
are achieved in this way there is a strong link between reward and performance which should be beneficial to shareholders employees
and the company the targets are set on the basis of challenging performance criteria reflecting the objectives of the company
the main components of remuneration are
i basic salary and benefits in kind
basic salary for each executive director is determined by the remuneration committee taking into account the performance of the
individual and information taken from independent sources based on companies of comparable size and complexity in the ftse 350 
benefits include a company car or an allowance in lieu health insurance and where appropriate relocation and other expenses
basic salaries for executive directors and senior executive roles were reviewed during 2006 the current basic salaries for the executive
directors are as follows 
• mark robertshaw – £400000 effective from 4 august 2006
• kevin dangerfield – £215000 effective from 4 august 2006
• mark lejman – £270000 effective from 1 july 2006
a salary review for executive directors and senior executives will be carried out in july 2007  46 the morgan crucible company plc remuneration report
ii annual bonus 
the targets for annual bonus are set by the remuneration committee balancing short and longterm requirements of the company
challenging goals are set which must be met before any bonus is paid this approach is intended to align executive reward with
shareholder return by rewarding the achievement of stretch targets and fostering the continued development of interdivisional co
operation and collaboration the annual bonus is not pensionable 
the bonus scheme provides the opportunity of earning a maximum bonus of 100 of basic salary if certain “stretch” targets are achieved 
of this 90 relates to financial targets and 10 relates to the achievement of personal objectives for 2006 the financial element for
executive directors and senior executives with group responsibilities was based on the achievement of underlying operating profit targets
up to 75 of salary and operating cash flow performance up to 15 of salary for executive directors and senior executives with
divisional responsibilities the financial element was structured such that up to 65 of salary was payable on the achievement of operating
profit targets and up to 25 of salary was payable for the achievement of working capital targets
for 2007 the financial element for executive directors and senior executives with group responsibilities will be based on underlying
operating profit performance up to 80 of salary and operating cash flow up to 10 of salary for executive directors and senior
executives with divisional responsibilities the financial criteria are tailored to each division and include both underlying profit performance
and working capital criteria the 10 for the achievement of personal objectives applies to all participants
operating profit is defined as earnings before interest and tax ebit for these purposes operating profit excludes all special items
eg certain restructuring costs corporate disposals of businesses and property and significant oneoff litigation costs relating to the prior
year and any major oneoff nonoperating charges eg special oneoff pension contributions 
operating cash is defined as earnings before interest tax and amortisation costs ebita adjusted for depreciation charge noncash item
movements in working capital provisions capital expenditure profit and loss on sale of plant and machinery operating tax charges and
net finance charges for these purposes operating cash flow excludes any oneoff cash costs for special items defined above plus major
oneoff tax claims dividends or any corporate cash flow such as rights issues or the purchase of shares
the committee has the discretion to vary the awards made the average bonus awarded to executive directors who served during the
year in relation to their performance in 2006 was 96 of salary this was based on the company’s strong results for the year and on each
director’s individual performance
iii share schemes
we believe that share ownership by the executive directors and senior executives helps align their interests with those of the shareholders
accordingly the company operates a number of share schemes for the executive directors and other senior employees as follows 
longterm incentive plan ltip the ltip was approved at the 2004 annual general meeting and offers executive directors and other senior
executives the opportunity to receive shares as a reward for outstanding performance the scheme allows allocations of up to 150 of
basic salary although in exceptional circumstances the committee is able to make share awards of up to 200 of basic salary the vesting
of the share allocation is subject to the achievement of performance targets measured over the three year period from the start of the
year in which the allocation is made the performance criteria compares the company’s total shareholder return “tsr” over the
threeyear period with that of a comparator group which comprises the ftse 350 at the date of the grant if over the three year period 
the company’s total shareholder return performance places it at the median of the comparator group 30 of an allocation will vest
allocations under the ltip are released in full if the company’s tsr places it in the upper quartile of the ftse 350 comparator group for
performance between median and upper quartile awards vest on a straightline prorata basis in addition awards will only vest if the
remuneration committee is satisfied that this is justified by the company’s underlying financial performance over the period 
executive share option scheme esos the esos was also approved at the 2004 annual general meeting and offers executive directors
and other senior executives the opportunity to receive options granted at the market price of the company’s shares at the time of the
grant the maximum value of option awards that can be made to executive directors and other senior executives is 150 of salary
although in exceptional circumstances the committee is able to make option grants of up to 200 of basic salary the ability to exercise
options is subject to the achievement of performance criteria based on the company’s tsr performance measured over the threeyear
period from the start of the year in which the option is granted tsr is measured against a comparator group comprising the ftse 350 
at the date of grant if the company’s tsr performance places it at the median of the comparator group 30 of the option will be
exercisable with 100 of the option being exercisable for upper quartile performance for performance between median and upper
quartile options are exercisable on a straightline prorata basis in addition as with the ltip awards options will only become exercisable 
if the remuneration committee is satisfied that this is justified by the company’s underlying financial performance over the period
in 2006 the remuneration committee reviewed the performance criteria for the existing ltip and esos and confirmed that the
combination of the tsr performance measure which takes into account longterm share price performance relative to the comparator
group and the confirmation by the committee that vestingexercise is justified by the company’s underlying financial performance over
the period continues to be appropriate
awards under the ltip and esos were made during the year to a very limited number of executive directors and employees who were 
either promoted or appointed to key positions during 2006 in 2006 awards were made to 14 executives around the world including certain
executive directors over 477500 shares under the ltip and 398500 shares under the esos the details of options and awards held by all
directors are shown on page 49
award to ceo on appointment in february 2006 the remuneration committee resolved to grant a oneoff performance related incentive
award to mark robertshaw as part of the remuneration package made available on his appointment as chief executive officer this
award was considered to be appropriate in order to retain his services in the role of chief executive officer and to incentivise him to
continue the strong performance achieved over the past three years
the award is structured as a market value option over 1000000 shares subject to the achievement of performance conditions that also
apply for awards under the esos no portion of the award will vest if the company’s tsr is below the median of the ftse 350 over three
years with the award only vesting in full for upper quartile performance the committee must also be satisfied that the company’s
underlying financial performance justifies the level of vesting the structure of the award means that mark robertshaw will only be
rewarded where there has been real value created for shareholders the terms on which the option was granted were in all essential
matters the same as the terms on which options are granted under the esos the morgan crucible company plc 47 remuneration report
due to the unsolicited approach received by the company in august 2006 which could have led to a cash offer for the company the
grant of the award was effectively delayed from the time of mark robertshaw’s appointment as chief executive officer in august until
december 2006 the option exercise price of 256 pence per share reflects the market value of the shares at the date of award which was
higher than at the date of his appointment as chief executive officer 
to the extent that the performance criteria are satisfied and the option is exercised the exercise of the option will be satisfied by the
transfer of the relevant number of shares to mark robertshaw from the company’s employee benefit trust no new shares will be issued to
satisfy this option instead shares have been acquired in the market by the trustee of the employee benefit trust
at 4 january 2007 the morgan crucible general employee benefit trust held a total of 10182157 shares
savingsrelated share option scheme as uk employees the executive directors may also participate in the savingsrelated share option
scheme on the same basis as other eligible employees and subject to uk legislation scheme members save a fixed amount per month
over three years and options have been granted at 80 of the market price those directors who received options under this scheme are
shown in the table on page 49 no performance conditions apply to those options as they are a mechanism for all employees to acquire
shares in the company at their own cost 
c company policy on contracts of service
the company’s policy is that executive directors are employed on contracts subject to one year’s notice at any time with where
appropriate provision for the payment of predetermined damages in the event of termination of employment in certain circumstances
the company will apply the principle of mitigation to any payment of compensation on termination contracts may be terminated on 
12 months’ notice given by the company or on six months’ notice given by the director concerned contracts end on each director’s
anticipated normal retirement date the following table shows the date of the contract and the notice period for each executive director
who served during the year
executive director date of contract notice period
kevin dangerfield 3 august 2006 12 months
warren knowlton 9 december 2002 na
mark lejman 1 march 2004 12 months
mark robertshaw 4 august 2006 12 months
mark robertshaw’s service contract contains specific termination provisions such that the company may terminate his contract by making a
payment in lieu of notice to include basic salary pension contribution car allowance and at our discretion bonus for the period of the
notice if a discretionary bonus is paid this shall be the prorata value of the average bonus paid to him in the two years prior to termination
or 35 of basic salary which ever is the greater
the service contracts for kevin dangerfield and mark lejman do not contain specific termination provisions in the event of early termination
the company may be liable to pay an amount in damages having regard to salary bonus and other benefits that would have been
received had the director served out his notice period
warren knowlton served up until his retirement on 3 august 2006 at which time his service contract ended no compensation was paid on
termination of his contract
d company pensions policy regarding executive directors
the executive directors participate in the morgan group senior staff pension and life assurance scheme which is a contributory
hmrcregistered defined benefit funded occupational pension scheme with effect from 6 april 2006 the basis of the scheme switched
from final salary to career average and the normal pension age increased by five years its main features are now
i a normal pension age of 65
ii pension at normal pension age of twothirds career average pensionable salary subject to completion of 20 years’ employment 26 years
and eight months for new members
iii life assurance of four times basic salary
iv dependants pension on death
pensionable salary is the member’s basic salary restricted to an earnings cap £108600 for the 20067 tax year
in addition an executive director receives a pension allowance derived from employer contributions based notionally on the registered
scheme pensionable salary in excess of the earnings cap as at 5 april 2006 the value of the pension allowance for each executive director 
is set out in the schedule of pay and benefits table below the pension allowance was frozen in value at 5 april 2006 for members of the
scheme at that date and will not apply to new members
warren knowlton retired on 3 august 2006 and was not a member of the above scheme he received a pension allowance derived from
employer contributions based notionally on basic salary
e total shareholder return
the following graph shows the cumulative total shareholder return tsr for the company for the fiveyear period to 4 january 2007 against
the ftse 350 both are rebased to 100 as at 5 january 2002 the index selected was the ftse 350 as it was considered to be a broad
comparator group of companies and was also relevant to the performance of the company in respect of its ltip and esos 48 the morgan crucible company plc remuneration report
the auditors are required to report on the following information
directors’ interests in the company’s shares
directors’ interests in the ordinary share capital of the company are as follows
as at 5 january as at 4 january 
2006 or date of 2007 or date of 
appointment resignation 
kevin dangerfield appointed 4 august 2006 9644 13534
martin flower 15000 15000
simon heale 8000 8000
warren knowlton retired 3 august 2006 375000 375000
lars kylberg retired 30 november 2006 115090 116227
mark lejman 5000 40000
joe machale 100000 100000
mark robertshaw 16000 32000
tim stevenson appointed 1 december 2006 – 29000
at the market price on 4 january 2007 kevin dangerfield mark lejman and mark robertshaw held shares worth 17 39 and 21
respectively of their basic salaries respectively
the company has not been notified of any changes in the interests of the directors between 5 january 2007 and 20 february 2007
schedule of directors’ pay and benefits 
feesannualother company pension compensation total
salary bonus benefits total emoluments contributions for loss of office remuneration
2006 2006 2006 2006 2005 2006 2005 2006 2005 2006 2005
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
chairman
tim stevenson 
appointed 
1 dec 06 10 –– 10 – – – – – 10 –
executive directors
kevin dangerfield 
appointed 4 aug 06 89 89 5 183 – 18 – – – 201 –
mark lejman 265 228 13 506 441 91 78 – – 597 519
mark robertshaw 348 400 12 760 544 114 100 – – 874 644
non executive directors
martin flower 38 – – 38 37 – – – – 38 37
simon heale 43 –– 43 30 – – – – 43 30
joe machale 48 – –48 40 – – – – 48 40
former directors
david godwin 
retired 31 dec 05 –– –– 40 – – – – – 40
hartmut eisele 
resigned 8 dec 05 – – – – 1285 – 33 – – – 1318
warren knowlton 
retired 3 aug 06 360 312 112 784 1265 144 216 – – 928 1481
lars kylberg
retired 30 nov 06 87 – – 87 95 – – – – 87 95
1288 1029 142 2459 3777 367 427 – – 2826 4204
 the emoluments for harmut eisele in respect of 2005 have been restated by an additional amount of £767149 to correct an omission from last year’s report this includes an additional
bonus and payments in respect of accelerated awards under the ltip and esos all of which related to the disposal of the magnetics division disclosure of the anticipated payments to be
made to harmut eisele in respect of the disposal was made in the circular to shareholders dated 21 october 2005
total shareholder return for the fiveyear period 5 january 2002 to 4 january 2007
180
150
120
90
60
30
0
jan 02
june 02
jan 03
june 03
jan 04
june 04
jan 05
june 05
jan 06
june 06
jan 07
ftse 350 morgan crucible the morgan crucible company plc 49 remuneration report
the other benefits referred to above include private medical insurance the provision of a company car and fuel and in respect of warren
knowlton an overseas living allowance of £71964 2005 £108000 warren knowlton’s removal costs and the costs of his professional tax
insurance and inheritance advice are also included in his other benefits following his retirement the company undertook to cover the
further cost of a limited amount of professional tax retirement and inheritance advice until august 2008 and to continue warren knowlton’s
inclusion under the company’s healthcare programme for a period of five years 
executive directors’ share options
at 5 january at 4 january 
2006 granted exercised lapsed 2007 earliest
or date of during during during or date of exercise date of expiry 
appointment the year the year the year resignation price exercise date
kevin dangerfield 10520 – – – 10520 18008p 231104 231111
10520 – – – 10520 4942p 131205 131212
50000 – – – 50000 12905p 220607 220614
150000 – – 150000 256p 201209 201216
warren knowlton 1841000 – – – 1841000 5654p 101205 101212
263000 – – – 263000 12640p 190307 190314
mark lejman 200000 – – – 200000 12905p 220607 220614
mark robertshaw 200000 – – – 200000 145275p 011107 011114
– 1000000 – – 1000000 256p 201209 201216
awards to directors under the company’s longterm incentive plan
shares shares
as at allocations released lapsed as at market price market price
5 january during during during 4 january at date of at date of performance
2006 the year the year the year 2007 allocation release periods
kevin dangerfield
2004 ltip 98941 – – – 98941 12905p na 040104 – 040107
2005 ltip 101803 – – – 101803 1719p na 040105 – 040108
2006 ltip december – 107500 – – 107500 256p na 040106 – 040109
warren knowlton
2004 ltip 623887 ––– 623887 12905p na 040104 – 040107
2005 ltip 518324 – – – 518324 1719p na 040105 – 040108
mark lejman
2004 ltip 265414 – – – 265414 12905p na 040104 – 040107
2005 ltip 211751 – – – 211751 1719p na 040105 – 040108
mark robertshaw
2004 ltip 283944 – – – 283944 12905p na 040104 – 040107
2005 ltip 223967 – – – 223967 1719p na 040105 – 040108
2006 ltip may – 250000 – – 250000 24295p na 040106 – 040109
2006 ltip december – 50000 –– 50000 256p na 040106 – 040109
options under the sharesave scheme 
as at as at 
5 january 4 january
2006 granted exercised lapsed 2007 
or date of during during during or date of exercise exercise 
appointment the year the year the year retirement price periods
kevin dangerfield
2003 scheme 3890 – 3890 – – 948p 011206 – 310507
2006 scheme – 4725 – – 4725 200p 010310 – 310810
warren knowlton
2004 scheme 8598 – – – 6257 11020p 011207 – 310508
mark lejman
2005 scheme 5565 – – – 5565 168p 011208 – 310509
mark robertshaw
2006 scheme – 4725 – – 4725 200p 010310 – 310810
kevin dangerfield exercised an option over 3890 shares under the 2003 sharesave scheme on 1 december 2006 the closing market price
on that day was 25775 pence per share
pension benefits earned by the directors
the three executive directors kevin dangerfield mark lejman and mark robertshaw participate in the morgan group senior staff pension
and life assurance scheme this is a contributory hmrcregistered defined benefit uk occupational pension scheme as noted above 
the scheme was amended on 6 april 2006 50 the morgan crucible company plc remuneration report
transfer value
of accrued
increase in benefits at
accrued increase in 4 january transfer value increase
accrued benefits accrued transfer 2006 of accrued decrease in
benefit at excluding benefits value of a or date of benefits at transfer value 
4january inflation including less directors’ appointment 4 january less directors’ 
2007 a inflation contributions if later 2007 contributions
executive directors £000 £000 £000 £000 £000 £000 £000
kevin dangerfield
1
17 pa 1 pa 1 pa –1 92 110 14
mark lejman 10 pa 3 pa 3 pa 10 59 93 19
mark robertshaw 6 pa 3 pa 3 pa –1 19 35 1
notes to pension benefits
a the accrued benefit entitlement for kevin dangerfield mark lejman and mark robertshaw is the pension which would be paid annually
on retirement based on service at the end of the year
b the transfer values for the pension benefits have been calculated on the basis of actuarial advice in accordance with actuarial
guidance note gn11 less the director’s contributions
c members of the pension scheme had the option to pay additional voluntary contributions neither the contributions nor the resulting
benefits are included in the above table
1 kevin dangerfield became a director on 4 august 2006 the increase in accrued benefits reflects five months’ qualifying service 
as a director
warren knowlton who retired on 3 august 2006 had a pension allowance of £143928 2005 £216000 which is included in the schedule of
directors’ pay and benefits above
kevin dangerfield mark lejman and mark robertshaw also receive a pension allowance details of which are set out in the schedule of
directors’ pay and benefits above
external appointments
with the approval of the board in each case and subject to the overriding requirements of the company executive directors may accept
external appointments as nonexecutive directors of other companies and retain any fees received
the total amounts of fees received by mark robertshaw mark lejman and warren knowlton up to his retirement on 3 august 2006 in
respect of nonexecutive directorships elsewhere were £28500 £20384 and £38356 respectively 
chairman and nonexecutive directors
nonexecutive directors including the chairman receive a basic fee plus reimbursement of expenses incurred in attending board strategy
and other meetings they were paid fees totalling £225083 during the year 2005 £242063 the remuneration of the nonexecutive directors
is determined by the board and during the year the basic fee for nonexecutive directors was increased from £35000 to £40000 per annum
having last been reviewed in 2004 additional payments of £4500 per annum are made to the senior independent director £7500 to the
chairman of the audit committee and £5000 to the chairman of the remuneration committee 
the next review will take place in 2008 none of the nonexecutive directors has a service contract with the company although they do
have letters of appointment which contain no obligations relating to any notice period there are no obligations on the company to make
any payments in lieu of notice to any nonexecutive director the nonexecutive directors do not participate in any of the incentive share or
share option plans each of the nonexecutive directors is subject to reelection by shareholders every third year after their initial confirmation
by shareholders as a director
share price range
the share price at the year end was 26425 pence and the high and low during the year were 30600 pence and 21350 pence respectively
the directors’ remuneration report has been approved by the board and is signed on its behalf by
simon heale chairman remuneration committee
20 february 2007 shareholder information
the morgan crucible company plc 51
analysis of shareholdings as at 4 january 2007
number of  of number of  of
shareholders total shares share capital
size of holding 1–2000 6951 7527 3967823 135
2001–5000 1353 1465 4266387 145
5001–10000 373 404 2648088 091
10001–50000 278 301 5756106 196
50001–100000 51 055 3635398 124
100000 and above 229 248 273151340 9309
9235 100 293425142 100
holding classification individuals 8045 8712 11748074 400
nominee companies 1063 1151 272379165 9283
trust pension funds etc 14 015 352205 012
others 113 122 8945698 305
9235 100 293425142 100
 200000 shares bought back by the company prior to 4 january 2007 were not cancelled in the register of members until after the year end
key dates
dividends subject to the relevant detailed terms and approvals of the board of directors where applicable
55 cumulative first preference shares of £1 each and 30 march 2007 and
50 cumulative second preference shares of £1 each 1 october 2007
annual general meeting 20 april 2007
financial results the interim results are issued in august with the report and accounts 
for the year normally posted in march
other information
capital gains tax the market values of quoted shares and stocks at 31 march 1982 were
ordinary shares of 25 pence each 1225 pence
55 cumulative first preference shares of £1 each 305 pence
50 cumulative second preference shares of £1 each 285 pence
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
share price the price can be obtained on the company’s website wwwmorgancruciblecom
company details
registered office quadrant 55–57 high street windsor berkshire sl4 1lp registered in england no 286773
telephone 01753 837000
fax 01753 850872
website wwwmorgancruciblecom
company registrars
capita registrars the registry 34 beckenham road beckenham kent br3 4tu
telephone 0870 162 3100
website wwwcapitaregistrarscom 52 the morgan crucible company plc
independent auditors’ report to the members of the morgan crucible company plc
we have audited the group and parent company financial statements the “financial statements” of the morgan crucible company plc
for the year ended 4 january 2007 which comprise the consolidated income statement the consolidated and company balance sheets
the consolidated statement of cash flows the consolidated statement of recognised income and expense and the related notes these
financial statements have been prepared under the accounting policies set out therein we have also audited the information in the
directors’ remuneration report that is described as having been audited
this report is made solely to the company’s members as a body in accordance with section 235 of the companies act 1985 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
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report and the group financial statements in accordance with applicable law and
international financial reporting standards ifrss as adopted by the eu and for preparing the parent company financial statements and
the directors’ remuneration report in accordance with applicable law and uk accounting standards uk generally accepted accounting
practice are set out in the statement of directors’ responsiblites in respect of the annual report and the financial statements on page 44
our responsibility is to audit the financial statements and the part of the directors’ remuneration report to be audited in accordance with
relevant legal and regulatory requirements and international standards on auditing uk and ireland
we report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the
part of the directors’ remuneration report to be audited have been properly prepared in accordance with the companies act 1985 and as
regards the group financial statements article 4 of the ias regulation we also report to you whether in our opinion the information given in
the directors’ report is consistent with the financial statements the information given in the directors’ report includes that specific information
presented in the business review financial review and risk management sections that are cross referred from the principal activities and
enhanced business review section of the directors’ report
in addition we report to you if in our opinion the company has not kept proper accounting records if we have not received all the
information and explanations we require for our audit or if information specified by law regarding directors’ remuneration and other
transactions is not disclosed
we review whether the corporate governance report reflects the company’s compliance with the nine provisions of the 2003 combined
code specified for our review by the listing rules of the financial services authority and we report if it does not we are not required to
consider whether the board’s statements on internal control cover all risks and controls or form an opinion on the effectiveness of the
group’s corporate governance procedures or its risk and control procedures
we read the other information contained in the annual report and consider whether it is consistent with the audited financial statements we
consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial
statements our responsibilities do not extend to any other information
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices board an
audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the financial statements and the part of
the directors’ remuneration report to be audited it also includes an assessment of the significant estimates and judgments made by the
directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the group’s and
company’s circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the directors’ remuneration
report to be audited are free from material misstatement whether caused by fraud or other irregularity or error in forming our opinion we
also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors’
remuneration report to be audited
opinion
in our opinion
• the group financial statements give a true and fair view in accordance with ifrss as adopted by the eu of the state of the group’s affairs
as at 4 january 2007 and of its profit for the year then ended
• the group financial statements have been properly prepared in accordance with the companies act 1985 and article 4 of the 
ias regulation
• the parent company financial statements give a true and fair view in accordance with uk generally accepted accounting practice of
the state of the parent company’s affairs as at 4 january 2007
• the parent company financial statements and the part of the directors’ remuneration report to be audited have been properly prepared
in accordance with the companies act 1985 and
• the information given in the directors’ report is consistent with the financial statements
kpmg audit plc
chartered accountants
registered auditor
8 salisbury square
london ec4y 8bb
20 february 2007
report of the independent auditors consolidated income statement
for the year ended 4 january 2007
the morgan crucible company plc 53
continuing discontinued total continuing discontinued total
operations operations operations operations
2006 2006 2006 2005 2005 2005
note £m £m £m £m £m £m
revenue 2 6778 – 6778 6098 1359 7457
operating costs before 
special items 5 6041 – 6041 5544 1253 6797
profit from operations before 
special items 2 737 – 737 554 106 660
special items
restructuring costs and costs 
associated with settlement of prior 
period antitrust litigation 9 277 – 277 299 21 320
gain on curtailment of 
united kingdom employee
benefit schemes 110 – 110 – ––
terminated bid approach costs 21 – 21 – ––
profitloss on disposal of property 03 – 03 04 – 04
operating profit 2 552 – 552 251 85 336
finance income 268 – 268 227 – 227
finance expenses 302 – 302 334 24 358
net financing costs 7 34 – 34 107 24 131
loss on partial disposal of business – 15 15 01 – 01
profitloss before taxation 518 15 503 143 61 204
income tax expense all relates
to overseas tax payable 8 106 – 106 48 40 88
profitloss after taxation but 
before gain on sale of 
discontinued operations 412 15 397 95 21 116
gain on sale of discontinued 
operations net of tax 3 –– – – 426 426
profitloss for the period 412 15 397 95 447 542
profitloss for period attributable to
equity holders of the parent 384 15 369 72 447 519
minority interest 28 – 28 23 – 23
412 15 397 95 447 542
earningsloss per share 10
basic 134p 05p 129p 25p 156p 181p
diluted 128p 05p 123p 24p 148p 172p
dividends
interim dividend – pence 15p –
– £ million 44 –
proposed final dividend – pence 30p 25p
– £ million 88 73
the proposed final dividend is based upon the number of shares outstanding at the balance sheet date 54 the morgan crucible company plc
2006 2005
note £m £m
assets
property plant and equipment 11 2302 2353
intangible assets 12 664 466
other investments 13 72 61
other receivables 16 12 03
deferred tax assets 14 288 274
total noncurrent assets 3338 3157
inventories 15 849 778
trade and other receivables 16 1360 1409
cash and cash equivalents 17 974 1600
total current assets 3183 3787
total assets 6521 6944
liabilities
interestbearing loans and borrowings 19 932 573
employee benefits 21 427 1242
grants for capital expenditure 01 03
provisions 22 67 43
nontrade payables 23 36 –
deferred tax liabilities 14 284 281
total noncurrent liabilities 1747 2142
bank overdraft 17 245 272
interestbearing loans and borrowings 19 138 250
trade and other payables 23 2103 1958
current tax payable 99 81
provisions 22 158 284
total current liabilities 2743 2845
total liabilities 4490 4987
total net assets 2031 1957
equity
issued capital 18 737 755
share premium 18 852 850
reserves 18 289 414
retained earnings 18 11 196
total equity attributable to equity holders of the parent company 1867 1823
minority interest 164 134
total equity 18 2031 1957
the accounts on pages 53 to 94 were approved by the board of directors on 20 february 2007 and were signed on its behalf by
mark robertshaw chief executive officer
kevin dangerfield chief financial officer
consolidated balance sheet
as at 4 january 2007 consolidated statement of cash flows 
for the year ended 4 january 2007
the morgan crucible company plc 55
2006 2005
note £m £m
operating activities
profit for the period 397 542
adjustments for
depreciation 247 300
amortisation 12 13
interest expense 34 131
profitloss on sale of property plant and equipment 04 06
income tax expense 106 88
equity settled sharebased payment expenses 32 25
cash generated from operations before changes in working capital and provisions 824 1105
increasedecrease in trade and other receivables 187 58
increasedecrease in inventories 113 90
increasedecrease in trade and other payables 71 86
noncash operating costs relating to restructuring 42 85
increasedecrease in provisions and employee benefits 726 19
cash used ingenerated from operations 89 1109
interest paid 82 137
taxation 63 62
loss on partial disposal of business 15 01
gain on sale of discontinued operations – 426
net cash from operating activities 219 485
investing activities
purchase of property plant and equipment 340 436
proceeds from sale of property plant and equipment 11 55
purchase of investments 18 28
proceeds from sale of investments – 07
interest received 35 23
acquisitions of subsidiaries net of cash acquired 207 30
disposal of subsidiaries net of cash disposed of 116 1959
net cash from investing activities 403 1550
financing activities
proceeds from the issue of share capital 02 17
purchase of own shares 194 35
increase inrepayment of borrowings 323 1252
payment of finance lease liabilities 04 12
dividends paid 74 –
net cash from financing activities 53 1282
net decreaseincrease in cash and cash equivalents 569 753
cash and cash equivalents at start of period 1336 563
effect of exchange rate fluctuations on cash held 32 20
cash and cash equivalents at period end 17 735 1336
a reconciliation of cash and cash equivalents to net borrowings is shown in note 17 56 the morgan crucible company plc
2006 2005
£m £m
foreign exchange translation differences 178 50
actuarial gainloss on defined benefit plans 152 162
deferred tax associated with employee benefit schemes 12 –
net gainloss on hedge of net investment in foreign subsidiary – 15
cash flow hedges
effective portion of changes in fair value 01 02
change in fair value of equity securities availableforsale 03 03
income and expense recognised directly in equity 36 122
profit for the period 397 542
total recognised income and expense for the period 361 420
attributable to
equity holders of the parent 333 397
minority interest 28 23
total recognised income and expenses for the period 361 420
consolidated statement of 
recognised income and expense
for the year ended 4 january 2007 notes to the financial statements
the morgan crucible company plc 57
1 accounting policies
the morgan crucible company plc the “company” is a company incorporated in the uk
the group financial statements consolidate those of the company and its subsidiaries together referred to as the “group” 
the parent company financial statements present information about the company as a separate entity and not about its group
the group financial statements have been prepared and approved by the directors in accordance with international financial reporting
standards as adopted by the eu “adopted ifrss” the company has elected to prepare its parent company financial statements in
accordance with uk gaap these are presented on pages 88 to 94
the accounting policies set out below have unless otherwise stated been applied consistently to all periods presented in these 
group financial statements
judgements made by the directors in the application of these accounting policies that have a significant effect on the financial statements
and estimates with a significant risk of material adjustment in the next year are discussed in note 28
a 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 financial instruments classified as fair value through the profit or loss or as availableforsale
b basis of consolidation
i subsidiaries
subsidiaries are entities controlled by the company control exists when the company has the power directly or indirectly to govern the
financial and operating policies of an entity so as to obtain benefits from its activities in assessing control potential voting rights that presently
are exercisable or convertible are taken into account the financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases
ii transactions eliminated on consolidation
intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in
preparing the consolidated financial statements unrealised losses are eliminated in the same way as unrealised gains but only to the extent
that there is no evidence of impairment
c 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 £ sterling at the foreign exchange rate ruling at 
that date foreign exchange differences arising on translation are recognised in the income statement nonmonetary 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 
nonmonetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to £ sterling at foreign
exchange rates ruling at the dates the fair value was 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
£ sterling at foreign exchange rates ruling at the balance sheet date the revenues and expenses of foreign operations are translated 
to £ 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 are recognised directly in a separate component of equity 
iii net investment in foreign operations
exchange differences arising from the translation of the net investment in foreign operations and of related hedges are taken to the
translation reserve they are released into the income statement upon disposal
d derivative financial instruments
the group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational
financing and investment activities in accordance with its treasury policy the group does not hold or issue derivative financial instruments 
for trading purposes however derivatives that do not qualify for hedge accounting are accounted for as trading instruments
derivative financial instruments are recognised initially at fair value the gain or loss on remeasurement to fair value is recognised immediately
in profit or loss however where derivatives qualify for hedge accounting recognition of any resultant gain or loss depends on the nature of
the item being hedged see accounting policy e 
the fair value of interest rate swaps is the estimated amount that the group would receive or pay to terminate the swap at the balance
sheet date taking into account current interest rates and the current creditworthiness of the swap counterparties the fair value of forward
exchange contracts is their quoted market price at the balance sheet date being the present value of the quoted forward price
  58 the morgan crucible company plc notes to the financial statements
1 accounting policies continued
e hedging
i cash flow hedges
where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or a highly
probable forecasted transaction the effective part of any gain or loss on the derivative financial instrument is recognised directly in the
hedging reserve when the forecasted transaction subsequently results in the recognition of a nonfinancial asset or nonfinancial liability 
or a forecast transaction for a nonfinancial asset or nonfinancial liability the associated cumulative gain or loss is removed from the hedging
reserve and included in the initial cost or other carrying amount of the nonfinancial asset or liability if a hedge of a forecasted transaction
subsequently results in the recognition of a financial asset or a financial liability the associated gains and losses that were recognised directly
in the hedging reserve are reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed
affects profit or loss ie when interest income or expense is recognised for cash flow hedges other than those covered by the preceding
two policy statements the associated cumulative gain or loss is removed from the hedging reserve and recognised in the income statement
in the same period or periods during which the hedged forecast transaction affects profit or loss the ineffective part of any gain or loss is
recognised immediately in the income statement 
when a hedging instrument expires or is sold terminated or exercised or the entity revokes designation of the hedge relationship but the
hedged forecast transaction is still expected to occur the cumulative gain or loss at that point remains in the hedging reserve and is
recognised in accordance with the above policy when the transaction occurs if the hedged transaction is no longer expected to take
place the cumulative unrealised gain or loss recognised in the hedging reserve is recognised immediately in the income statement
ii hedge of monetary assets and liabilities
where a derivative financial instrument is used to hedge economically the foreign exchange exposure of a recognised monetary asset or
liability no hedge accounting is applied and any gain or loss on the hedging instrument is recognised in the income statement
iii hedge of net investment in foreign operations
the portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective
hedge is recognised directly in the translation reserve the ineffective portion is recognised immediately in profit or loss
f property plant and equipment
i owned assets
items of property plant and equipment are stated at cost or at deemed cost less accumulated depreciation see below and impairment
losses see accounting policy k the cost of selfconstructed assets includes the cost of materials direct labour and an appropriate
proportion of production overheads
certain items of property plant and equipment that had been revalued to fair value on or prior to 5 january 2004 the date of transition 
to adopted ifrss are measured on the basis of deemed cost being the revalued amount at the date of that revaluation 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
ii leased assets
leases under the terms of which the group assumes substantially all the risks and rewards of ownership are classified as finance leases
leased assets acquired by way of a finance lease are stated at an amount equal to the lower of their fair value and the present value of the
minimum lease payments at inception of the lease less accumulated depreciation and impairment losses
iii depreciation
depreciation is charged to the income statement on a straightline basis over the estimated useful lives of each part of an item of property
plant and equipment land is not depreciated the estimated useful lives are as follows
buildings 50 years
plant and equipment – presses kilns and furnaces 10–20 years
other plant and equipment 10 years
fixtures and fittings 10 years
motor vehicles and it equipment 3 years
computer software 3–5 years
g intangible assets
i goodwill
all business combinations are accounted for by applying the purchase method goodwill represents amounts arising on acquisition of
subsidiaries in respect of business acquisitions that have occurred since 5 january 2004 goodwill represents the difference between the 
cost of the acquisition and the fair value of the net identifiable assets acquired 
in respect of acquisitions prior to this date goodwill is included on the basis of its deemed cost which represents the amount recorded 
under uk gaap the classification and accounting treatment of business combinations that occurred prior to 5 january 2004 has not been
reconsidered goodwill is stated at cost less any accumulated impairment losses 
goodwill is allocated to cashgenerating units and is no longer amortised but is tested annually for impairment see accounting policy k the morgan crucible company plc 59 notes to the financial statements
1 accounting policies continued
g intangible assets continued
ii research and development
expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding
is recognised in the income statement as an expense as incurred
expenditure on development activities whereby research findings are applied to a plan or design for the production of new or substantially
improved products and processes is capitalised if the product or process is technically and commercially feasible and the group has
sufficient resources to complete development the expenditure capitalised includes the cost of materials direct labour and an appropriate
proportion of overheads capitalised development expenditure is stated at cost less accumulated amortisation see below and impairment
losses see accounting policy k other development expenditure is recognised in the income statement as an expense as incurred
iii other intangible assets
other intangible assets that are acquired by the group are stated at cost less accumulated amortisation see below and impairment losses
see accounting policy k
iv amortisation
amortisation is charged to the income statement on a straightline basis over the estimated useful lives of intangible assets unless such lives
are indefinite goodwill and 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 3 years
computer software 3 years
operating intangible assets 8–15 years
h trade and other receivables
trade and other receivables are stated at their nominal value less impairment losses see accounting policy k
i 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 firstin firstout 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
j cash and cash equivalents
cash and cash equivalents comprises cash balances and call deposits bank overdrafts that are repayable on demand and form an integral
part of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of 
cash flows
k impairment
the carrying amounts of the group’s assets other than inventories see accounting policy i and deferred tax assets see accounting policy
r are reviewed at each balance sheet date to determine whether there is any indication of impairment if any such indication exists the
asset’s recoverable amount is estimated see i below
an impairment loss is recognised whenever the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount
impairment losses are recognised in the income statement 
impairment losses recognised in respect of cashgenerating units are allocated first to reduce the carrying amount of any goodwill 
allocated to cashgenerating units group of units and then to reduce the carrying amount of the other assets in the unit group of units 
on a pro rata basis 
goodwill was tested for impairment for the years ended 4 january 2006 and 4 january 2007 
when a decline in the fair value of an availableforsale financial asset has been recognised directly in equity and there is objective
evidence that the asset is impaired the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though
the financial asset has not been derecognised the amount of the cumulative loss that is recognised in profit or loss is the difference between
the acquisition cost and current fair value less any impairment loss on that financial asset previously recognised in profit or loss
i calculation of recoverable amount
the recoverable amount of the group’s investments in heldtomaturity securities and receivables carried at amortised cost is calculated as
the present value of estimated future cash flows discounted at the original effective interest rate ie the effective interest rate computed at
initial recognition of these financial assets receivables with a short duration are not discounted the recoverable amount of other assets is
the greater of their net selling price and value in use in assessing value in use the estimated future cash flows are discounted to their present
value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset 
for an asset that does not generate largely independent cash inflows the recoverable amount is determined for the cashgenerating unit 
to which the asset belongs 60 the morgan crucible company plc notes to the financial statements
1 accounting policies continued
k impairment continued
ii reversals of impairment
an impairment loss in respect of a heldtomaturity security or receivable carried at amortised cost is reversed if the subsequent increase in
recoverable amount can be related objectively to an event occurring after the impairment loss was recognised 
an impairment loss in respect of an investment in an equity instrument classified as availableforsale is not reversed through profit or loss 
if the fair value of a debt instrument classified as availableforsale increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in profit or loss the impairment loss shall be reversed with the amount of the reversal
recognised in profit or loss
an impairment loss in respect of goodwill is not reversed in respect of other assets an impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount and when there is an indication that the impairment loss may no longer exist
an impairment loss is reversed only to the extent that the asset’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
l share capital
i preference share capital
preference share capital is classified as equity if it is nonredeemable and any dividends are discretionary or is redeemable but only at the
company’s option dividends on preference share capital classified as equity are recognised as distributions within equity
ii ordinary share capital
incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity
m employee benefits
i defined contribution plans
obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred
ii defined benefit plans
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
all actuarial gains and losses as at 5 january 2004 the date of transition to adopted ifrss were recognised actuarial gains and losses that
have arisen since 5 january 2004 have been recognised in the period they occur directly in equity through the statement of recognised
income and expense reflecting the adoption of the amendment to ias 19 for the years ended 4 january 2006 and 4 january 2007
iii longterm service benefits
the group’s net obligation in respect of longterm 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
iv sharebased payment transactions
the group operates various share option programmes that allow group employees to acquire shares in the company under the longterm
incentive plan ltip awards of shares are made to various key executives and under the morgan directors’ share option plan 2006 2006
esop the executive share option scheme 2004 2004 esos and the morgan executive scheme 1995 1995 esos share options are granted
by the company the company also maintains an allemployee share save scheme available to employees in the uk and germany the fair
value of awards made and options granted is recognised as an employee expense with a corresponding increase in equity the fair value is
measured at grant date and spread over the period during which the employees become unconditionally entitled to the options
the fair value of the options and awards under each scheme have been measured using the following models
morgan directors’ share option plan 2006 monte carlo model
long term incentive plan 2004 monte carlo model
executive share option scheme 2004 monte carlo model
morgan executive share option scheme 1995 binominal lattice option pricing model
uk employee share save plan 2003 blackscholes merton model
uk employee share save plan 2004 blackscholes merton model
uk employee share save plan 2004 germany blackscholes merton model
uk employee share save plan 2005 blackscholes merton model
the choice of model takes into account the terms and conditions upon which the awards were made and the options were granted 
the amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only 
due to share prices not achieving the threshold for vesting the morgan crucible company plc 61 notes to the financial statements
1 accounting policies continued
n provisions
a provision is recognised in the balance sheet when the group has a present legal or constructive obligation as a result of a past event and
it is probable that an outflow of economic benefits will be required to settle the obligation if the effect is material provisions are determined
by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and
where appropriate the risks specific to the liability
i restructuring
a provision for restructuring is recognised when the group has approved a detailed and formal restructuring plan and the restructuring has
either commenced or has been announced publicly future operating costs are not provided for
ii onerous contracts
a provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the
unavoidable cost of meeting its obligations under the contract
o trade and other payables
trade and other payables are stated at their nominal amount
p revenue
i goods sold and services rendered
revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer
ii government grants
government grants are recognised in the balance sheet initially as deferred income when there is reasonable assurance that it will be
received and that the group will comply with the conditions attaching to it grants that compensate the group for expenses incurred are
recognised as revenue in the income statement on a systematic basis in the same periods in which the expenses are incurred grants that
compensate the group for the cost of an asset are recognised in the income statement as other operating income on a systematic basis
over the useful life of the asset
q expenses
i operating lease payments
payments made under operating leases are recognised in the income statement on a straightline basis over the term of the lease 
lease incentives received are recognised in the income statement as an integral part of the total lease expense
ii finance lease payments
minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability the finance charge 
is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of 
the liability
iii net financing costs
net financing costs comprise interest payable on borrowings calculated using the effective interest rate method interest receivable on funds
invested dividend income gains and losses on hedging instruments that are recognised in the income statement see accounting policy e
expected return on ias 19 pension assets and interest on ias 19 obligations interest income is recognised in the income statement as it
accrues using the effective interest method dividend income is recognised in the income statement on the date the entity’s right to receive
payments is established
the interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method
r income tax
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 in which case it is recognised in equity
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
s segment reporting
a segment is a distinguishable component of the group that is engaged in providing products in a particular line of business business
segment or in providing products within a particular economic environment geographic segment which is subject to risks and rewards 
that are different from those of other segments 62 the morgan crucible company plc notes to the financial statements
1 accounting policies continued
t discontinued operations
a discontinued operation is a component of the group’s business that represents a separate major line of business operations classification
as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale if earlier
discontinued operations are presented in the income statement including the comparative period as a column analysing the post tax 
profit or loss of the discontinued operation and the post tax gain or loss recognised on the remeasurement to fair value less costs to sell 
or on disposal of the assetsdisposal groups constituting discontinued operations
u classification of financial instruments issued by the group
following the adoption of ias 32 financial instruments issued by the group are treated as equity ie 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 nonderivative 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 calledup 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
v investments in debt and equity securities
investments in debt and equity securities held by the group are classified as being availableforsale and are stated at fair value with any
resultant gain or loss being recognised directly in equity in the fair value reserve except for impairment losses and in the case of monetary
items such as debt securities foreign exchange gains and losses when these investments are derecognised the cumulative gain or loss
previously recognised directly in equity is recognised in profit or loss where these investments are interestbearing interest calculated using
the effective interest method is recognised in profit or loss
w interestbearing borrowings
interestbearing borrowings are recognised initially at fair value less attributable transaction costs subsequent to initial recognition 
interestbearing 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
x capitalisation of borrowing costs
borrowing costs may be capitalised when they are incurred on raising specific funds to finance a major capital project which will be a
significant productive asset
y dividends
dividends payable are recognised as a liability in the period in which they are declared
z own shares held by esop trust
transactions of the groupsponsored esop trust are included in the group financial statements in particular the trust’s purchases of shares in
the company are debited directly to equity
aa adopted ifrss not yet applied
the following adopted ifrss were available for early application but have not been applied by the group in these financial statements
i amendment to ias 1 capital disclosures
ii ifrs 7 financial instruments disclosures
iii ifric 8 scope of ifrs 2
the group does not expect the above amendments to have any significant impact on the financial statements for the period commencing
5 january 2007
with respect to the financial guarantee contracts where the group enters into such contracts to guarantee the indebtedness of other
companies within the group the group considers these to be insurance arrangements and accounts for them as such in this respect the
group treats the guarantee contract as a contingent liability until such time as it becomes probable that the group will be required to 
make a payment under the guarantee the morgan crucible company plc 63 notes to the financial statements
2 segment reporting
the group’s primary business segments are its divisions a decription of the types of products and services sold by each divison is included 
in the business review the group’s secondary business segments are the geographical regions in which the group operates
molten metal systems
carbon technical ceramics thermal ceramics formerly crucibles discontinued consolidated
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m £m £m £m £m £m £m
revenue from 
external customers 2136 1999 1625 1448 2712 2367 305 284 – 1359 6778 7457
segment profit 285 153 193 86 129 92 41 13 – 85 648 429
unallocated costs 96 93
operating profit 552 336
net financing costs 34 131
loss on partial 
disposal of business 15 01
income tax expense 106 88
gain on sale 
of discontinued 
operations net of tax – 426
profit for the period 397 542
segment underlying 
operating profit 338 274 170 122 247 197 32 18 – 106 787 717
unallocated costs 50 57
underlying 
operating profit 737 660
underlying operating profit is defined as profit from operations before special items this measure of profit is shown because the directors use it to measure the underlying performance of
the business
discontinued operations for 2005 comprises the magnetics division
molten metal systems
carbon technical ceramics thermal ceramics formerly crucibles discontinued consolidated
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m £m £m £m £m £m £m
segment assets 1747 1701 1284 1334 2531 2174 273 240 – – 5835 5449
unallocated assets 686 1495
total assets 6521 6944
segment liabilities 612 994 463 824 894 993 98 171 – – 2067 2982
unallocated liabilities 2423 2005
total liabilities 4490 4987
segment cash flows 
from operating 
activities 132 276 114 179 88 142 07 18 – 159 165 774
unallocated 
cash flows 384 289
cash flows from 
operating activities 219 485
cash flows from 
investing activities 403 1550
cash flows from 
financing activities 53 1282
segment capital 
expenditure 121 130 57 70 120 161 13 09 – 81 311 451
unallocated 
capital expenditure 06 02
total capital 
expenditure 317 453 64 the morgan crucible company plc notes to the financial statements
2 segment reporting continued
molten metal systems
carbon technical ceramics thermal ceramics formerly crucibles discontinued consolidated
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m £m £m £m £m £m £m
segment depreciation 69 69 79 77 90 83 09 10 – 60 247 299
unallocated
depreciation – 01
total depreciation 247 300
segment amortisation 03 02 02 01 06 02 01 01 – 06 12 12
unallocated
amortisation – 01
total amortisation 12 13
during the year ended 4 january 2007 discontinued operations had cash outflows from investing activities of £nil 2005 £91 million and cash
flows from financing activities of £nil 2005 £nil
far east middle east
europe americas and australia and africa discontinued consolidated
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m £m £m £m £m £m £m
revenue from 
external customers 2619 2376 3024 2682 1000 905 135 135 – 1359 6778 7457
segment assets 2771 2559 2108 2029 894 796 62 65 – – 5835 5449
unallocated assets 686 1495
total assets 6521 6944
segment cash flows
from operating 
activities 404 36 378 409 165 139 26 31 – 159 165 774
unallocated 
cash flows 384 289
cash flows from 
operating activities 219 485
cash flows from 
investing activities 403 1550
cash flows from 
financing activities 53 1282
segment 
capital expenditure 110 128 148 136 47 101 06 05 – 81 311 451
unallocated
capital
expenditure 06 02
total capital 
expenditure 317 453 the morgan crucible company plc 65 notes to the financial statements
3 discontinued operations
in september 2005 the group sold its magnetics division a separate business segment see accounting policy note t the net sale proceeds
after allowing for net debt cash in the business were £2146 million tax charge was £214 million leaving a gain after tax of £426 million
effect of disposal on individual assets and liabilities of the group
2005
£m
property plant and equipment 964
intangible assets 622
other investments 10
inventories 525
trade receivables and other receivables 393
cash and cash equivalents 28
net interest bearing and noninterest bearing loans 136
provisions 799
deferred tax 41
trade payables and other payables 365
net identifiable assets and liabilities 1473
cash consideration received net of disposal costs 2102
net borrowings disposed of 164
net cash inflow 1938
4 acquisitions
on 16 february 2006 the group increased its stake in morganite india ltd from 505 to 76 and on 3 april 2006 acquired the distribution
rights for domestic indian sales total consideration paid was £20 million the company’s principal activity is the manufacture and sale of
crucibles and furnace related accessories in the year to 4 january 2007 the subsidiary contributed net profit of £02 million to the
consolidated net profit for the year
on 31 march 2006 the group acquired the fibre business assets of vesuvius usa corporation and vesuvius skawina materialy ogniotrwale 
sp zoo for £108 million the company’s principal activity is the manufacture of fibre products in the nine months to 4 january 2007 the
subsidiary contributed net profit of £01 million to the consolidated net profit for the year the revenue and profit of this acquisition had this
acquisition taken place at the beginning of the period is £97 million and £01 million respectively
on 1 april 2006 the group acquired 51 of the shares in morgan thermal ceramics sukhoy log limited for £17 million the companys
principal activity is the manufacture of ceramic fibre and fibre products for thermal insulation in the nine months to 4 january 2007 the
subsidiary contributed net profit of £nil to the consolidated net profit for the year
on 1 april 2006 the group acquired 100 of the shares in diamond crucible company pvt limited for £14 million the company’s principal
activity is the manufacture of crucibles and furnace related accessories in the nine months to 4 january 2007 the subsidiary contributed net
profit of £nil to the consolidated net profit for the year
on 8 april 2006 the group acquired 51 of the shares in morgan luyang thermal ceramics company limited for £05 million the company’s
principal activity is the manufacture of mullite solgel fibre for high temperature insulation in the nine months to 4 january 2007 the subsidiary
contributed net profit of £nil to the consolidated net profit for the year
on 20 july 2006 the group acquired the assets of aceram materials and technology inc for a contingent maximum consideration of 
£58 million with £19 million paid during 2006 the company’s principal activity is the manufacture of carbon products in the five months 
to 4 january 2007 the subsidiary contributed net profit of £01 million to the consolidated net profit for the year
on 26 october 2006 the group acquired 75 of the shares in beijing yingtelai morgan thermal ceramics textiles co limited for £47 million 
of which £25 million will be paid after the year end the company’s principal activity is the manufacture of textile products for thermal
insulation in the two months to 4 january 2007 the subsidiary contributed net profit of £nil to the consolidated net profit for the year 66 the morgan crucible company plc notes to the financial statements
4 acquisitions continued
effect of acquisitions
the acquisitions had the following effect on the assets and liabilities of the group
carrying
value before provisional 
acquisition fair values
2006 2006
£m £m
acquisition of vesuvius usa corporation and vesuvius skawina materialy ogniotrwale sp zoo
intangible assets – 40
property plant and equipment 14 14
other working capital 12 11
provisions – 02
net assets acquired 63
goodwill 45
total consideration 108
less deferred consideration –
net consideration paid 108
other acquisitions
intangible assets – 69
property plant and equipment 26 24
other working capital 03 02
provisions – 03
cash and cash equivalents 11 11
minority interests – 26
net assets acquired 77
goodwill 83
total consideration 160
less deferred consideration 63
net consideration paid 97
goodwill represents future economic benefits arising from assets that are not capable of being identified individually or recognised as
separate assets this will include acquirer specific synergies such as cross selling opportunities and the enhancement of technologies and
processes between existing and acquired sites
acquisitions in 2005
on 1 march 2005 the group increased its stake in yixing morgan thermal ceramics limited from 50 to 51 and began consolidating 
the business total consideration paid was £09 million the company’s principal activity is the manufacture of insulating fire bricks in the 
10 months to 4 january 2006 the subsidiary contributed net profit of £03 million to the consolidated net profit for the year
on 19 april 2005 the group acquired 80 of the shares in thermal ceramics saveh company limited for £05 million the company’s
principal activity is the manufacture of ceramic fibres in the eight months to 4 january 2006 the subsidiary contributed net profit of £nil to 
the consolidated net profit for the year
on 25 april 2005 the group acquired 70 of the shares in morgan kailong thermal ceramics jingmen limited for £16 million the company’s
principal activity is the manufacture of ceramic fibres in the eight months to 4 january 2006 the subsidiary contributed net profit of £nil to the
consolidated net profit for the year the morgan crucible company plc 67 notes to the financial statements
4 acquisitions continued
effect of acquisitions
the acquisitions had the following effect on the assets and liabilities of the group
carrying
value before provisional 
acquisition fair values
2005 2005
£m £m
intangible assets 04 –
property plant and equipment 40 44
other working capital 06 03
provisions – 06
interestbearing borrowings 06 06
minority interests 06 12
net assets acquired 23
goodwill 13
total consideration 36
less deferred consideration –
net consideration paid 36
5 operating costs before special items
2006 2006 2006 2005 2005 2005
continuing discontinued total continuing discontinued total
£m £m £m £m £m £m
change in stocks of finished goods
and work in progress 05 – 05 35 60 25
raw materials and consumables 1663 – 1663 1466 486 1952
other external charges 1144 – 1144 1037 121 1158
employee costs
– wages and salaries 1705 – 1705 1686 426 2112
– sharebased payments 32 – 32 22 03 25
– social security costs 349 – 349 377 70 447
– other pension costs 103 – 103 105 32 137
total 2189 – 2189 2190 531 2721
depreciation
– owned assets 244 – 244 235 57 292
– assets held under finance leases 03 – 03 05 03 08
total 247 – 247 240 60 300
rentals under operating leases
– hire of plant and machinery 16 – 16 12 07 19
– other operating leases 65 – 65 62 01 63
total 81 – 81 74 08 82
other operating charges and income
– foreign exchange losses 25 – 25 16 04 20
– other operating charges 730 – 730 541 131 672
– foreign exchange gains 24 – 24 31 03 34
– other operating income 31 – 31 31 31 62
– amortisation of intangible assets 12 – 12 07 06 13
total 712 – 712 502 107 609
total operating costs before special items 6041 – 6041 5544 1253 6797
the group recognised £82 million in expense in respect of research and development 2005 £125 million 68 the morgan crucible company plc notes to the financial statements
5 operating costs before special items continued
a summary of the audit and non audit fees in respect of services provided by kpmg charged to operating profit in the year ended 4 january
2007 is set out below
2006 2005
£m£m
fees payable to the company’s auditor for the audit of the company’s annual accounts 04 04
fees payable to the company’s auditor and its associates for other services
– the audit of the company’s subsidiaries pursuant to legislation and other services 09 07
– tax services 02 01
– other services 01 04
16 16 
in addition in respect of the terminated bid approach £08 million was paid to kpmg as part of the prior year costs incurred in respect of
the disposal of the magnetics division £12 million was paid to kpmg
6 staff numbers
the average number of persons employed by the group including directors during the year analysed by category was as follows
number of employees
2006 2005
united kingdom 1391 1442
rest of europe 1840 1946
the americas 3260 3126
far east and australasia 2614 2374
middle east and africa 279 285
9384 9173
discontinued – 2456
9384 11629
carbon 3736 3825
technical ceramics 2105 2033
thermal ceramics 3003 2828
molten metal systems formerly crucibles 540 487
9384 9173
discontinued – 2456
9384 11629
7 net finance income and expense
2006 2005
£m £m
interest income 35 13
expected return on ias 19 scheme assets 233 210
fair value gain on interest rate swaps – 04
finance income 268 227
interest expense 81 113
interest on ias 19 obligations 221 245
finance expense 302 358 the morgan crucible company plc 69 notes to the financial statements
8 taxation – income tax expense
recognised in the income statement
2006 2005
£m£m
current tax expense
current year 125 360
adjustments for prior years 06 03
131 363
deferred tax expense
origination and reversal of temporary differences 29 40
benefit of losses recognised 54 101
25 61
total income tax expense in income statement 106 302
included in the total income tax expense is £nil 2005 £254 million tax charge related to the sale of discontinued operations
reconciliation of effective tax rate
2006 2006 2005 2005
£m  £m 
profit before tax 503 844
income tax using the domestic corporation tax rate 151 300 253 300
nondeductible expenses 23 46 147 174
effect of tax losses utilised 73 145 101 120
under provided in prior years 06 12 05 06
other 01 02 02 02
106 211 302 358
2006 2005
reconciliation of profit before tax £m £m
shown on income statement 503 204
add gain on sale of discontinued operations gross of tax – 640
profit before tax shown above in tax rate reconciliation 503 844
9 restructuring costs and costs associated with settlement of antitrust litigation
costs of restructuring were £239 million 2005 £297 million and legal costs associated with settlement of antitrust litigation were £38 million
2005 £23 million
10 earnings per share
basic earnings per share
the calculation of basic earnings per share at 4 january 2007 was based on the profit attributable to equity holders of the morgan crucible
company plc of £369 million 4 january 2006 £519 million and a weighted average number of ordinary shares outstanding during the
period ended 4 january 2007 of 287110574 4 january 2006 286553767 calculated as follows
2006 2005
£m £m
profit attributable to equity holders of the morgan crucible company plc 369 519
weighted average number of ordinary shares
issued ordinary shares at 5 january 293188372 290200179
effect of shares issued in period and treasury shares held by the company 6077798 3646412
weighted average number of ordinary shares at period end 287110574 286553767
basic earnings per share pence 129p 181p 70 the morgan crucible company plc notes to the financial statements
10 earnings per share continued
diluted earnings per share
the calculation of diluted earnings per share at 4 january 2007 was based on the profit attributable to equity holders of the morgan crucible
company plc of £369 million 4 january 2006 £519 million and a weighted average number of ordinary shares outstanding during the
period ended 4 january 2007 of 298938120 4 january 2006 301088360 calculated as follows
2006 2005
£m £m
profit attributable to equity holders of the morgan crucible company plc 369 519
weighted average number of ordinary shares
weighted average number of ordinary shares 287110574 286553767
effect of share optionsincentive schemes 11827546 14534593
diluted weighted average number of ordinary shares 298938120 301088360
diluted earnings per share pence 123p 172p
underlying earnings per share
the calculation of underlying earnings per share at 4 january 2007 was based on profit from operations before special items less net finance
costs income tax expense excluding tax credit arising from special items of £56 million 4 january 2006 £43 million and minority interest 
of £513 million 4 january 2006 £375 million and a weighted average number of ordinary shares outstanding during the period ended 
4 january 2007 of 287110574 4 january 2006 286553767 calculated as follows
2006 2005
£m £m
profit from operations before special items less net finance costs
income tax expense and minority interest 513 375
weighted average number of ordinary shares
issued ordinary shares at 5 january 293188372 290200179
effect of shares issued in period and treasury shares held by the company 6077798 3646412
weighted average number of ordinary shares at period end 287110574 286553767
underlying earnings per share pence 179p 131p
underlying diluted earnings per share
the calculation of underlying diluted earnings per share at 4 january 2007 was based on profit from operations before special items less net
finance costs income tax expense excluding tax credit arising from special items £56 million 4 january 2006 £43 million and minority
interest of £513 million 4 january 2006 £375 million and a weighted average number of ordinary shares outstanding during the period
ended 4 january 2007 of 298938120 4 january 2006 301088360 calculated as follows
2006 2005
£m £m
profit from operations before special items less net finance costs
income tax expense and minority interest 513 375
weighted average number of ordinary shares
weighted average number of ordinary shares 287110574 286553767
effect of share optionsincentive schemes 11827546 14534593
diluted weighted average number of ordinary shares 298938120 301088360
underlying diluted earnings per share pence 172p 125p the morgan crucible company plc 71 notes to the financial statements
11 property plant and equipment
plant and 
land and equipment
buildings and fixtures total
£m £m £m
cost
balance at 5 january 2005 1748 4450 6198
acquisitions through business combinations 22 22 44
additions 74 363 437
disposals 543 1086 1629
effect of movement in foreign exchange 10 77 87
balance at 4 january 2006 1311 3826 5137
balance at 5 january 2006 1311 3826 5137
acquisitions through business combination 11 25 36
additions 58 249 307
disposals 14 142 156
effect of movement in foreign exchange 75 206 281
balance at 4 january 2007 1291 3752 5043
depreciation and impairment losses
balance at 5 january 2005 386 2614 3000
depreciation charge for the year 40 260 300
disposals 84 467 551
effect of movement in foreign exchange 04 39 35
balance at 4 january 2006 338 2446 2784
balance at 5 january 2006 338 2446 2784
depreciation charge for the year 34 213 247
disposals 08 123 131
effect of movement in foreign exchange 22 137 159
balance at 4 january 2007 342 2399 2741
carrying amounts
at 5 january 2005 1362 1836 3198
at 4 january 2006 973 1380 2353
at 4 january 2007 949 1353 2302 72 the morgan crucible company plc notes to the financial statements
12 intangible assets
operating computer 
goodwill intangibles software total
£m £m £m £m
cost
balance at 5 january 2005 1002 – 152 1154
acquisitions through business combinations 13 – – 13
additions – externally purchased – – 16 16
disposals 578 – 88 666
effect of movement in foreign exchange 02 – 01 01
balance at 4 january 2006 439 – 79 518
balance at 5 january 2006 439 – 79 518
acquisitions through business combinations 128 101 – 229
additions – externally purchased – – 10 10
disposals – – 05 05
effect of movement in foreign exchange 27 – 03 30
balance at 4 january 2007 540 101 81 722
amortisation and impairment losses
balance at 5 january 2005 – – 83 83
amortisation charge for the year – – 13 13
disposals – – 44 44
effects of movement in foreign exchange – – – –
balance at 4 january 2006 – – 52 52
balance at 5 january 2006 – – 52 52
amortisation charge for the year – 04 08 12
disposals – – 04 04
effects of movement in foreign exchange – – 02 02
balance at 4 january 2007 – 04 54 58
carrying amounts
at 5 january 2005 1002 – 69 1071
at 4 january 2006 439 – 27 466
at 4 january 2007 540 97 27 664
amortisation of operating intangibles and computer software costs is included within operating costs before special items in the 
income statement
impairment test for cashgenerating units containing goodwill
the following units have significant carrying amounts of goodwill
2006 2005
£m £m
carbon 163 142
technical ceramics 200 218
insulating ceramics 177 79
540 439
the recoverable amount of the above units is based on value in use calculations those calculations use cash flow projections based on
forecast operating results for the current period and budgeted operating results for the subsequent period cash flows for a further five year
period are extrapolated using a 225 growth rate this growth rate is consistent with the longterm average growth rate for the industry and
reflects management’s estimate of the growth through the economic cycle a pretax discount rate of 130 has been used in discounting
the projected cash flows and calculating the terminal value at the end of year five
13 other investments
2006 2005
£m £m
noncurrent investments
equity securities availableforsale 72 61 the morgan crucible company plc 73 notes to the financial statements
14 recognised deferred tax assets and liabilities
deferred tax assets and liabilities are attributable to the following
assets liabilities net
2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m
property plant and equipment – – 247 260 247 260
intangible assets – – 04 17 04 17
employee benefits 120 179 21 – 99 179
provisions 24 15 – – 24 15
tax value of loss carried forward recognised 130 76 – – 130 76
other items 14 04 12 04 02 –
288 274 284 281 04 07
unrecognised deferred tax assets
deferred tax assets have not been recognised in respect of the following items
2006 2005
£m £m
deductible temporary differences 51 228
tax losses 216 154
267 382
£77 million of the deferred tax asset relating to losses will expire between 2019 and 2026 the balance of the losses are available to carry
forward without time restriction
movements in temporary differences during the year
recognised recognised
balance recognised directly balance recognised directly balance
4 jan 05 in income in equity 4 jan 06 in income in equity 4 jan 07
property plant and equipment 306 46 – 260 13 – 247
intangible assets 09 08 – 17 13 – 04
employee benefits 222 43 – 179 68 12 99
provisions 18 03 – 15 09 – 24
tax value of loss 
carry forward utilised 17 59 – 76 54 – 130
others 51 51 – – 04 02 02
109 102 – 07 25 14 04
15 inventories
2006 2005
£m £m
raw materials and consumables 273 251
work in progress 223 202
finished goods 353 325
849 778
inventories stated at fair value less costs to sell 41 63
carrying amount of inventories subject to retention of title clauses 79 44
the group holds consignment inventory amounting to £95 million 2005 £72 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 for which it is invoiced only when the material 
is required
16 trade and other receivables
2006 2005
£m £m
noncurrent
nontrade receivables and prepayments 12 03
current
trade receivables 1144 1041
nontrade receivables and prepayments 216 367
fair value derivatives – 01
1360 1409 74 the morgan crucible company plc notes to the financial statements
17 cash and cash equivalentsbank overdrafts
2006 2005
£m £m
bank balances 702 690
cash deposits 272 910
cash and cash equivalents per balance sheet 974 1600
bank overdrafts subject to cash pooling arrangements 239 264
cash and cash equivalents per cash flow statement 735 1336
bank overdrafts subject to cash pooling arrangements 239 264
other bank overdrafts 06 08
total bank overdrafts 245 272
in accordance with ias 32 bank overdrafts subject to cash pooling arrangements are not offset against cash and cash equivalents
reconciliation of cash and cash equivalents to net borrowings
2006 2005
£m £m
opening borrowings 831 2042
newrepayment of borrowings 323 1252
payment of finance lease liabilities 04 12
effect of movements in foreign exchange on borrowings 74 53
closing borrowings 1076 831
cash and cash equivalents per cash flow statement 735 1336
closing borrowingsnet cash and equivalents 341 505
18 capital and reserves
reconciliation of movement in capital and reserves
share
fair based capital total
share share translation hedging value payment special redemption other retained parent minority total
capital premium reserve reserve reserve reserve reserve reserve reserves earnings equity interest equity
£m £m £m £m £m £m £m £m £m £m £m £m £m
balance at 
5january 2005 748 840 25 – 02 19 60 280 14 514 1424 107 1531 
adjustments in 
respect of adoption 
of ias 32 and ias 39 
on 5 january 2005 
net of tax – – – 01 – – – – – 04 05 – 05
total recognised 
income and expense – – 35 02 03 – – – – 357 397 23 420 
other movements – – – – – – – – – – – 04 04 
share options 
exercised by 
employees 07 10 – – – – – – – – 17 – 17 
equitysettled 
sharebased 
payment transactions 
net of tax – – – – – 25 – – – – 25 – 25 
own shares acquired – – – – – – – – – 35 35 – 35
balance at 
4 january 2006 755 850 10 01 05 44 60 280 14 196 1823 134 1957  the morgan crucible company plc 75 notes to the financial statements
18 capital and reserves continued
reconciliation of movement in capital and reserves continued
share
fair based capital total
share share translation hedging value payment special redemption other retained parent minority total
capital premium reserve reserve reserve reserve reserve reserve reserves earnings equity interest equity
£m £m £m £m £m £m £m £m £m £m £m £m £m
balance at 
5 january 2006 755 850 10 01 05 44 60 280 14 1961823 134 1957 
total recognised 
income and expense – – 178 01 03 – – – – 509 333 28 361
own shares acquired 
for share buy back 
programme – – – – – – – – – 17 17 – 17
other movements –––– ––– –––– 02 02
cancellation of 
nonvoting deferred 
shares 19 – – – – – – 19 – – – – – 
share options 
exercised by 
employees 01 02 – – – – – – – – 03 – 03
equitysettled 
sharebased 
payment transactions 
net of tax – – – – – 32 – – – – 32 – 32 
own shares 
acquired for share 
incentive schemes – – – – – – – – – 189189 –189
dividends – – – – – – – – –118118 118
balance at 
4 january 2007 737 852 168 – 08 76 60 299 14 111867 164 2031
translation reserve
the translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations
that are not integral to the operations of the company as well as from the translation of liabilities that hedge the company’s net investment
in a foreign subsidiary
hedging reserve
the hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related
to hedged transactions that have not yet occurred
fair value reserve
the fair value reserve includes the cumulative net change in the fair value of availableforsale investments until the investment is
derecognised
sharebased payment reserve
the sharebased payment reserve comprises the increase in equity that corresponds to the expense recognised in the income statement for
the group’s various share option programmes
special reserve
a special resolution to cancel the share premium account was passed at the annual general meeting of the company held on 
11 june 1993 this cancellation was confirmed by an order of the high court of justice chancery division on 14 july 1993 the amount 
of £889 million standing to the credit of the share premium account on 14 july 1993 was transferred to the special reserve against which
goodwill on consolidation can be written off this reserve together with the amounts standing to the credit of the share premium account on
12 october 1990 of £715 million on 19 june 1987 of £389 million and on 27 july 1989 of £123 million which were transferred following previous
orders of the high court becomes distributable to the extent of subsequent increases in issued share capital and share 
premium account
capital redemption reserve
the capital redemption reserve arose when the company redeemed preference shares wholly out of distributable profits 
the 2006 movement relates to the cancellation of nonvoting deferred shares
retained earnings
the company has acquired own shares under a share buy back programme the company has also acquired own shares to satisfy the
requirements of the various share option incentive schemes the number of treasury shares held by the company at the year end was
10632157 10182157 shares were held by the morgan general employee benefit trust and 450000 shares were held by the company 76 the morgan crucible company plc notes to the financial statements
18 capital and reserves continued
called up share capital
authorised issued
2006 2005 2006 2005
£m £m £m £m
equity share capital
427523111 2005 427523111 ordinary shares of 25 pence each 1069 1069 
fully paid 293225142 2005 293188372 ordinary shares of 25 pence each 733 732
1069 1069 733 732
preference share capital
125327 authorised and issued 55 cumulative first preference shares of 
£1 each fully paid 01 01 01 01 
311954 authorised and issued 50 cumulative second preference shares 
of £1 each fully paid 03 03 03 03 
7127765 authorised and issued non voting deferred shares of 25 pence each – 19 – 19 
total nonequity share capital 04 23 04 23 
total share capital 1073 1092 737 755
ordinary shares issued
during the year the company issued the following ordinary shares
number description
236770 in respect of options exercised under the various morgan share option schemes
as at the date of this report 289610142 ordinary shares have been issued 2005 293326518
the following options were outstanding in respect of ordinary shares
normal exercise dates ranging
number of shares exercise prices from to
678524 the morgan executive share option scheme 1995 4942p–45377p 17 october 1999 18 march 2014
26597 the morgan sharesave scheme 1995 5877p–9480p 1 december 2004 31 may 2008
1340316 the morgan sharesave scheme 2004 11020p–16800p 1 october 2007 31 may 2009
184491 the morgan sharesave scheme 2004 – germany b16213 1 december 2007 31 may 2008
4183082 the morgan executive share option scheme 2004 12905p–17190p 22 june 2007 13 may 2015
1000000 the morgan directors’ share option plan 2006 25600p 20 december 2009 20 december 2016
the 55 cumulative first preference shares of £1 each and the 50 cumulative second preference shares of £1 each confer on the holders
thereof the right to receive a cumulative preferential dividend at the rate of 55 and 50 respectively calculated up to 30 june and 
31 december respectively 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 windingup 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 windingup 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 55
per annum
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 50 per annum
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 the morgan crucible company plc 77 notes to the financial statements
19 interestbearing loans and borrowings
this note provides information about the contractual terms of the group’s interestbearing loans and borrowings for more information about
the group’s exposure to interest rate and foreign currency risk see note 20
2006 2005
£m£m
noncurrent liabilities
684 us dollar senior notes 2013 282 364
623 us dollar senior notes 2010 126 186
bank and other loans 507 03
finance lease liability 17 20
932 573
current liabilities
684 us dollar senior notes 2013 47 –
623 us dollar senior notes 2010 42 47
876 us dollar senior notes 2006 – 10
bank and other loans 43 186
finance lease liability 06 07
138 250
finance lease liabilities
finance lease liabilities are payable as follows
minimum minimum
lease lease
payments interest principal payments interest principal
2006 2006 2006 2005 2005 2005
£m £m £m £m £m £m
less than one year 07 01 06 08 01 07
between one and five years 18 02 16 18 03 15
more than five years 01 – 01 06 01 05
26 03 23 32 05 27
bank and other loans include £21 million of loans secured on the assets of the group
included within banks and other loans are shortterm drawings of £500 million 2005 £nil these were repayable between 22 january 2007
and 29 january 2007 but have been classified as longterm loans as they are drawn under the bank syndication which extends to february
2010
as at 4 january 2007 the group had available headroom under the bank syndication of £940 million 2005 £1989 million 
the 684 us dollar senior notes 2013 are repayable in seven yearly instalments from 6 march 2007 to 6 march 2013 the 623 us dollar
senior notes 2010 are repayable in four yearly instalments from 6 march 2007 to 6 march 2010 the 876 us dollar senior notes 2006 were
repaid on 1 december 2006
20 financial instruments
exposure to credit interest rate and currency risks arises in the normal course of the group’s business derivative financial instruments are used
to hedge exposure to fluctuations in foreign exchange rates and interest rates
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
transactions involving derivative financial instruments are with counterparties with whom the group has a signed agreement as well as a
sound credit rating
the group has sterling notional cash pooling agreements in place with barclays and national westminster banks under the notional cash
pooling agreement the group has the legal right to offset liabilities on undrawn bank accounts against surplus balances as at 5 january
2007 the group had no intention to settle these balances either simultaneously or on a net basis and hence the financial assets and liabilities
within the notional cash pool are not presented on a net basis in the financial statements
at the balance sheet date there were no significant concentrations of credit risk the maximum exposure to credit risk is represented by the
carrying amount of each financial asset including derivative financial instruments in the balance sheet 78 the morgan crucible company plc notes to the financial statements
20 financial instruments continued
interest rate risk
hedging
the group adopts a policy of ensuring that between 30 and 70 of its exposure to changes in interest rates on borrowings is on a fixed rate
basis interest rate swaps denominated in euro and us dollars were entered into in 2004 to achieve the appropriate mix of fixed and floating
rate exposure for 2005 all the interest rate swaps matured in december 2005 at 4 january 2007 the group had interest rate swaps with a
notional contract amount of £nil 4 january 2006 £nil
effective interest rates and repricing analysis
in respect of incomeearning financial assets and interestbearing financial liabilities the following table indicates their effective interest rates
at the balance sheet date and the periods in which they mature or if earlier reprice all the us dollar senior notes bear interest at fixed rates
2006
effective less than more than
interest total 1 year 12 years 23 years 34 years 45 years 5 years
rate £m £m £m £m £m £m £m
684 us dollar senior notes 2013 684 329 47 47 47 47 47 94
623 us dollar senior notes 2010 623 168 42 42 42 42 – –
876 us dollar senior notes 2006 876 – – – – – – –
bank syndication 50–60 500 500 – – – – –
other loans 40–70 50 43 05 02 – – –
bank overdrafts 50–70 245 245 – – – – –
obligations under finance leases 60 23 06 05 04 04 04 –
cash and cash equivalents 20–50 974 974 – – – – –
2005
effective less than more than
interest total 1 year 12 years 23 years 34 years 45 years 5 years
rate £m £m £m £m £m £m £m
684 us dollar senior notes 2013 684 364 52 52 52 52 52 104
623 us dollar senior notes 2010 623 233 47 47 47 46 46 –
876 us dollar senior notes 2006 876 10 10 – – – – –
bank syndication – – – – – – – –
other loans 40–60 189 186 03 – – – –
bank overdrafts 50–60 272 272 – – – – –
obligations under finance leases 60 27 07 05 04 03 07 01
cash and cash equivalents 20–50 1600 1600 – – – – –
foreign currency risk
the group is exposed to foreign currency risk on sales purchases and borrowings that are denominated in a currency other than pound
sterling the currencies giving rise to this risk are primarily us dollars and the euro
the group aims to hedge all material trade receivables and trade payables denominated in a foreign currency at any point in time the
group also hedges up to 75 of its estimated foreign currency exposure in respect of forecasted sales and purchases over the following 
12 months the group uses forward exchange contracts to hedge its foreign currency risk most of the forward exchange contracts have
maturities of less than one year after the balance sheet date
in respect of other monetary assets and liabilities held in currencies other than pound sterling 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 shortterm imbalances
forecasted transactions
the group classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair value 
the fair value of forward exchange contracts at 5 january 2005 was adjusted against the opening balance of the hedging reserve at 
that date the net fair value of forward exchange contracts used as hedges of forecasted transactions at 4 january 2007 was £nil 2005 
£01 million comprising assets of £nil 2005 £01 million and liabilities of £nil 2005 £nil that were recognised in fair value derivatives
recognised assets and liabilities
changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and
for which no hedge accounting is applied are recognised in the income statement both the changes in fair value of the forward contracts
and the foreign exchange gains and losses relating to the monetary items are recognised in the income statement the fair value of forward
exchange contracts used as economic hedges of monetary assets and liabilities in foreign currencies at 4 january 2007 was £nil 2005 £nil
recognised in fair value derivatives the morgan crucible company plc 79 notes to the financial statements
20 financial instruments continued
hedge of net investment in foreign subsidiary
the group designates the us dollar and euro drawdowns under the us280 million syndication as a hedge of the group’s investment in
subsidiaries in the united states and in europe there were no us dollar and euro drawdowns during 2006 in 2005 a foreign exchange loss of 
£15 million was recognised in equity on translation of these loans
sensitivity analysis
as at 4 january 2007 the group had drawn £50 million under the us280 million syndication a 1 increase in interest rates would increase the
finance charge by £05 million the remaining debt is primarily at fixed rates of interest
it is estimated that a general adverse movement of 1 in the value of sterling against other foreign currencies would have decreased the
group’s underlying operating profit by £08 million
fair values
the fair values together with the carrying amounts shown in the balance sheet are as follows
carrying amount fair value carrying amount fair value
2006 2006 2005 2005
£m £m £m £m
684 us dollar senior notes 2013 329 345 364 381
623 us dollar senior notes 2010 168 172 233 237
876 us dollar senior notes 2006 –– 10 10
bank and other loans 550 550 189 189
bank overdrafts 245 245 272 272
obligations under finance leases 23 23 27 27
trade and other payables 2202 2202 2039 2039
cash at bank and in hand 974 974 1600 1600
other investments 72 72 61 61
trade and other receivables 1360 1360 1409 1409
estimation of fair values
the following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table
equity securities
fair value is based on quoted market prices at the balance sheet date
derivatives
forward exchange contracts are either marked to market using listed market prices or by discounting the contractual forward price and
deducting the current spot rate for interest rate swaps broker quotes are used those quotes are back tested using pricing models or
discounted cash flow techniques
where discounted cash flow techniques are used estimated future cash flows are based on management’s best estimates and the discount
rate is a market related rate for a similar instrument at the balance sheet date where other pricing models are used inputs are based on
market related data at the balance sheet date
interestbearing loans and borrowings
fair value is calculated based on discounted expected future principal and interest cash flows
finance lease liabilities
the fair value is estimated as the present value of future cash flows discounted at market interest rates for homogeneous lease agreements
the estimated fair values reflect changes in interest rates
trade and other receivablespayables
for receivablespayables with a remaining life of less than one year the notional amount is deemed to reflect the fair value 
all other receivablespayables are discounted to determine the fair value
interest rates used for determining fair value
the interest rates used to determine the fair value of loans and borrowings and finance leases are as follows
2006 2005
derivatives ––
loans and borrowings 50–60 50–60
finance leases 60 60 80 the morgan crucible company plc notes to the financial statements
21 employee benefits
morgan crucible 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 predominately provide pensions based on service and career average pay in addition post
retirement medical plans are operated in the us
all figures are quoted at year end exchange rates
2006 2006 2006 2006 2006
uk usa europe rest of world total
pension plans and employee benefits £m £m £m £m £m
present value of unfunded defined benefit obligations – 79 198 03 280
present value of funded defined benefit obligations 3234 849 09 89 4181
fair value of plan assets 3265 691 05 73 4034 
netsurplusobligations 31 237 202 19 427
movements in present value of defined benefit obligation
at 5 january 2006 3346 1034 208 75 4663
current service cost 38 19 13 09 79
interest cost 160 52 07 02 221
actuarial gainslosses 70 29 03 16 80
benefits paid 151 50 11 08 220
contributions by members 17 – – – 17
past service costs 04 – 01 – 05
curtailments and settlements 110 – 09 – 119
exchange adjustments – 98 05 02 105
at 4 january 2007 3234 928 207 92 4461
movements in fair value of plan assets
at 5 january 2006 2684 678 05 54 3421
expected return on plan assets 187 44 – 02 233
actuarial gainslosses 51 05 – 16 72 
contributions by employer 477 78 20 09 584 
contributions by members 17 – – – 17
benefits paid 151 50 11 08 220
curtailments and settlements – – 09 – 09
exchange adjustments – 64 – – 64
at 4 january 2007 3265 691 05 73 4034
actual return on assets 238 49 – 18 305
2006 2006 2006 2006 2006
uk usa europe rest of world total
pension plans and employee benefits £m £m £m £m £m
expense recognised in the consolidated income statement
current service cost 42 19 14 09 84
interest on defined benefit pension plan obligation 160 52 07 02 221
expected return on defined benefit pension plan assets 187 44 – 02 233
gain on curtailment of united kingdom employee benefit schemes 110 – – – 110
total expense 95 27 21 09 38
the expense is recognised in the following line items in the consolidated income statement
2006 2005
£m £m
operating costs 84 117
finance income 233 210
finance expense 221 245
gain on curtailment of united kingdom employee benefit schemes 110 –
38 152
the curtailment gain has arisen from changes made to the uk pension schemes from 6 april 2006 these include the conversion of both 
uk schemes from final salary to career average schemes future increases for pensions from past service being llinked to general inflation 
rather than salary inflation and in addition normal retirement being increased from 6062 to 65 in the senior scheme this curtailment gain 
is disclosed as a special item on the face of the income statement
the group has adopted the policy of recognising actuarial gains and losses immediately on the balance sheet through the statement 
of recognised income and expense cumulative actuarial losses recorded in the statement of recognised income and expense since 
5 january 2004 the date of transition to adopted ifrss are £400 million the morgan crucible company plc 81 notes to the financial statements
21 employee benefits continued
the fair value of the plan assets were as follows
2006 2006 2006 2006 2006
uk usa europe rest of world total
£m £m £m £m £m
equities 1072 483 – – 1555 
bonds 1573 206 – – 1779 
other 620 02 05 73 700 
total 3265 691 05 73 4034
principal actuarial assumptions were

discount rate 525 600 450
expected rate of return on plan assets 
– equities 775 825 na
– bonds 475 550 na
salary increase na 300 275
inflation 300 250 225
pensions increase 315300 na 225
mortality – postretirement pa92 yob 19581938 
the morgan pension scheme 83 gam heubeck2005g
pa92 yob 19561936 
the morgan senior staff pension 
and life assurance scheme
expected rates of return on plan assets are determined by reference to relevant indices the overall expected rate of return is calculated by
weighting the individual rates in accordance with the anticipated balance in the plan’s investment portfolio
2006 2005 2004
£m £m £m
balance sheet
present value of defined benefit obligation 4461 4663 4807
fair value of plan assets 4034 3421 2977 
deficit 427 1242 1830
defined contribution plans
the group operates a number of defined contribution pension plans the total expense relating to these plans in the current year was 
£22 million 2005 £20 million
2005 2005 2005 2005 2005
uk usa europe rest of world total
pension plans and employee benefits £m £m £m £m £m
present value of unfunded defined benefit obligations – 09 198 10 217
present value of funded defined benefit obligations 3346 1025 10 65 4446
fair value of plan assets 2684 678 05 54 3421
net obligations 662 356 203 21 1242
movements in present value of defined benefit obligation
at 5 january 2005 2899 900 937 71 4807
current service cost 49 19 39 10 117
interest cost 158 57 30 – 245
actuarial losses 349 48 24 01 422
benefits paid 123 53 48 06 230
contributions by members 14 – – – 14
curtailments and settlements – – 750 – 750
exchange adjustments – 63 24 01 38
at 4 january 2006 3346 1034 208 75 4663
movements in fair value of plan assets
at 5 january 2005 2295 623 05 54 2977
expected return on plan assets 160 50 – – 210
actuarial gainslosses 279 19 – – 260
contributions by employer 59 35 48 06 148
contributions by members 14 – – – 14
benefits paid 123 53 48 06 230
exchange adjustments – 42 – – 42
at 4 january 2006 2684 678 05 54 3421
actual return on assets 439 31 – – 470 82 the morgan crucible company plc notes to the financial statements
21 employee benefits continued
2005 2005 2005 2005 2005
uk usa europe rest of world total
pension plans and employee benefits £m £m £m £m £m
expense recognised in the consolidated income statement
current service cost 49 19 39 10 117
interest on defined benefit pension plan obligation 158 57 30 – 245
expected return on defined benefit pension plan assets 160 50 – – 210
total expense 47 26 69 10 152
the fair value of the plan assets were as follows
2005 2005 2005 2005 2005
uk usa europe rest of world total
£m £m £m £m £m
equities 1785 470 – – 2255
bonds 499 208 – – 707
other 400 – 05 54 459
total 2684 678 05 54 3421
principal actuarial assumptions were 
discount rate 500 575 400
expected rate of return on plan assets – equities 750 800 –
– bonds 450 525 –
salary increase 475375 300 250
inflation 275 250 200
pensions increase 315275 na 200
mortality – preretirement 231227 83gam heubeck 2005 g
– postretirement 249246 83gam heubeck 2005 g
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 company’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 and life expectancy in making these estimates and assumptions the directors consider advice provided by external advisers
such as actuaries
sharebased payments
during 2004 the group established a new long term incentive plan and a new executive share option scheme grants were also made out
of the existing morgan executive share option scheme 1995 during 2004 the company also renewed its all employee share save scheme
and took the opportunity to extend a similar scheme to employees in germany in 2006 the group established a new directors’ share
option plan 
during 2005 and 2006 the group made additional awards out of the 2004 long term incentive plan the 2004 executive share option
scheme and the directors’ share option plan 2006 also in 2005 the company renewed its uk all employee share save scheme
additionally equity settled share option grants and awards made under a previous long term incentive plan made prior to 7 november 2002
are outstanding in accordance with the transitional provisions under ifrs 1 the recognition and measurement principles in ifrs 2 have not
been applied to these grants the morgan crucible company plc 83 notes to the financial statements
21 employee benefits continued
the terms and conditions of all awards and grants made since 7 november 2002 are as follows all awards and option exercises are settled
by physical delivery of shares
number of contractual 
grant dateemployees entitled instruments vesting conditions life of option
options granted to senior employees in 2006 
under the directors’ share option plan 2006 1000000 three years of service plus satisfaction of performance criteria 10 years
options granted to senior employees in 2006 
under the executive share option scheme 2004 398500 three years of service plus satisfaction of performance criteria 10 years
awards granted to senior employees in 2006 
under the long term incentive plan 2004 477500 three years of service plus satisfaction of performance criteria 3 years
options granted to uk employees in 2005
under employee share save scheme 2005 976614 three years of service 3 years
awards granted to senior employees in 2005 
under the long term incentive plan 2004 3804820 three years of service plus satisfaction of performance criteria 3 years
awards granted to senior employees in 2004 
under the long term incentive plan 2004 5084031 three years of service plus satisfaction of performance criteria 3 years
options granted to senior employees in 2005 
under the executive share option scheme 2004 2097000 three years of service plus satisfaction of performance criteria 10 years
options granted to senior employees in 2004 
under the executive share option scheme 2004 3157500 three years of service plus satisfaction of performance criteria 10 years
options granted to uk employees in 2004 
under uk employee share save scheme 2004 521884 three years of service 3 years
options granted to german employees in 2004 
under german employee share save scheme 2004 516844 three years of service 3 years
options granted to uk employees in 2003 
under uk employee share save scheme 2003 779421 three years of service 3 years
options granted to senior employees in 2004 
under executive share option scheme 1995 263000 three years of service plus satisfaction of performance criteria 10 years
options granted to senior employees in 2002
under executive share option scheme 1995 1780000 three years of service plus satisfaction of performance criteria 10 years
performance criteria for long term incentive plan 2004 and executive share option scheme 2004
the extent to which awards will vest will depend on the company’s total shareholder return tsr ranking against the tsr of the other
companies in the ftse 350 measured over the performance period
if the company’s tsr places it at the median then 30 of the awards will vest on the third anniversary of the date of grant
if the company’s tsr places it at the upper quartile then 100 of the option will vest on the third anniversary of the date of grant
between the median and upper quartile the option will vest on a straightline basis below the median none of the shares will vest
in addition an improvement must be shown in the company’s underlying financial performance
performance criteria for executive share option scheme 1995
the diluted earnings per share for the company must grow by at least 2 per annum in excess of retail price inflation over the period of date
of grant to date of vesting
the fair values of services received are in return for awards made and share options granted the estimate of the fair value of the services
received is measured based on an appropriate model as shown in accounting policy note m in the case of the binomial lattice model and
monte carlo model the contractual life of the options and awards are used as an input expectations of early exercise are incorporated into
both of these models 84 the morgan crucible company plc notes to the financial statements
21 employee benefits continued
directors’ share option plan 2006
post 
7 november 2002 
2006 awards 2005 awards 2004 awards 2003 awards awards
fair value at measurement date 7399p no awards no awards no awards no awards
share price 25600p
exercise price 25600p
expected volatility expressed as weighted average 
volatility used in the model 40
option life expressed as weighted average 
life used in the modelling 10 years
expected dividends 2
riskfree interest rate 51
long term incentive plan 2004
post 
7 november 2002 
2006 awards 2005 awards 2004 awards 2003 awards awards
fair value at measurement date 14651p–16165p 10457p 7287p–8975p no awards no awards
share price 24225p–25600p 1765p12337p–15200p
exercise price na na na
expected volatility expressed as weighted 
average volatility used in the model 40 40 40
option life expressed as weighted average 
life used in the modelling 3 years 3 years 3 years
expected dividends 2 2 2
riskfree interest rate 47–51 43 46–5
executive share option scheme 2004
post 
7 november 2002 
2006 awards 2005 awards 2004 awards 2003 awards awards
fair value at measurement date 7399p–7810p 5480p 4380p–4815p no awards no awards
share price 24225p–25900p 1765p13600p–15200p
exercise price 24295p–25600p 17190p12905p–14528p
expected volatility expressed as weighted 
average volatility used in the model 40 40 40
option life expressed as weighted average 
life used in the modelling 10 years 10 years 10 years
expected dividends 2 2 2
riskfree interest rate 47–50 43 47–52
employee share save schemes uk
post 
7 november 2002 
2006 awards 2005 awards 2004 awards 2003 awards awards
fair value at measurement date no awards 8399p 5378p 5632p no awards
share price 22150p 14250p 13900p
exercise price 16800p 11020p 9480p
expected volatility expressed as weighted 
average volatility used in the model 40 40 40
option life expressed as weighted average 
life used in the modelling 3 years 3 years 3 years
expected dividends 2 2 2
riskfree interest rate 42 47 46 the morgan crucible company plc 85 notes to the financial statements
21 employee benefits continued
employee sharesave schemes germany
post 
7 november 2002 
2006 awards 2005 awards 2004 awards 2003 awards awards
fair value at measurement date no awards no awards 6095p no awards no awards
share price 15200p
exercise price 11020p
expected volatility expressed as weighted 
average volatility used in the model 40
option life expressed as weighted average 
life used in the modelling 3 years
expected dividends 2
riskfree interest rate 46
employee share option scheme 1995
post 
7 november 2002 
2006 awards 2005 awards 2004 awards 2003 awards awards
fair value at measurement date no awards no awards 5143p no awards 2204p–2341p
share price 13221p 5700p–5800p
exercise price 12640p 4942p–5654p
expected volatility expressed as weighted 
average volatility used in the model 40 40
option life expressed as weighted average 
life used in the modelling 10 years 10 years
expected dividends 2 2
riskfree interest rate 46 43
the expected volatility is based on the historic 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 number and weighted average exercise prices of share options are as follows
weighted weighted
average number average number
exercise price of options exercise price of options
4 january 2007 4 january 2007 4 january 2006 4 january 2006
outstanding at the beginning of the period 7224p 17178934 7105p 16453717
granted during the period 18941p 1876000 7697p 6963434
forfeited during the period 15386p 1056011 8323p 3106284
exercised during the period 6945p 2772123 5920p 2989958
lapsed during the period 5877p 19540 20116p 141975
outstanding at the end of the period 8155p 15207260 7224p 17178934
exercisable at the end of the period 948p 26597 5656p 1994367
the weighted average share price at the date of share options exercised during the period was 25776 pence 2005 23249 pence
the options outstanding at the year end have an exercise price in the range 4942 pence to 45377 pence and a weighted average
contractual life of 27 years
the fair value of services received in return for share options granted are measured by reference to the fair value of share options granted
the estimates of the fair value of the services received is measured based on either a monte carlo model a binomial lattice option 
pricing model or a blackscholes merton model the choice of model takes into account the terms and conditions upon which the options
were granted  86 the morgan crucible company plc notes to the financial statements
22 provisions
closure and
restructuring other environmental
provisions provisions provisions total
£m £m £m £m
balance at 5 january 2006 162 143 22 327
provisions made during the year 91 31 15 137
provisions used during the year 136 79 07 222
provisions reversed during the year 03 07 – 10
effect of movements in foreign exchange 03 03 01 07
balance at 4 january 2007 111 85 29 225 
current 70 72 16 158
non current 41 13 13 67
111 85 29 225 
closure and restructuring provisions are based on the group’s “profit improvement programme” and represent committed expenditure 
at the balance sheet date the group expects to incur the majority of the liability in 2007
other provisions include the settlement of the us class actions together with the associated legal costs and the possible future legal defence
costs of the group’s former chief executive ian norris against extradition to stand trial in the united states
environmental provisions are for known environmental issues which the group will rectify over the next few years in a number of jurisdictions
companies have a constructive obligation to remedy any known environmental problems
23 trade and other payables
2006 2005
£m £m
noncurrent
nontrade payables 36 –
current
trade payables 721 643
nontrade payables and accrued expenses 1382 1315
2103 1958
24 operating leases
leases as lessee
noncancellable operating lease rentals are payable as follows
2006 2005
£m £m
less than one year 54 59
between one and five years 183 174
more than five years 248 294
485 527 the morgan crucible company plc 87 notes to the financial statements
25 capital commitments
commitments for property plant and equipment and computer software expenditure for which no provision has been made in these
accounts amounts to £05 million 2005 £15 million for the group
26 contingencies
there are contingent liabilities on bills discounted by the group amounting to £03 million 2005 £04 million
the group has been subject to legal claims in the us and canada settlements for the majority of these have been agreed and provided for
at the amount of £16 million 2005 £84 million the board having taken legal advice are of the opinion that the remainder of these actions
will not have a material impact on the group’s financial position
in an international group a variety of claims arise from time to time provision has been made in these accounts against those claims which
the directors consider meet the requirements of ias 37 provisions contingent liabilities and contingent assets and are likely to result in
significant liabilities
27 related parties
identification of related parties
the group has related party relationships with its subsidiaries a list of principal subsidiary undertakings is shown in note 45 and with its
directors and executive officers
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 and members of the chief executive officer’s
committee
their compensation charged in the year was
2006 2005
£m £m
shortterm employee benefits 62 78
pension and other postemployment costs 08 07
sharebased payments 14 14
termination payments 08 –
nonexecutive directors’ fees and benefits 02 03
total compensation of key management personnel 94 102
information on executive directors’ remuneration is given in the remuneration report on pages 45 to 50
transactions in connection with former directors 
during the year the group made payments on behalf of its former chief executive ian norris of £11 million 2005 £13 million to cover the
costs of his legal defence against extradition to stand trial in the united states
28 accounting estimates and judgements
management discussed with the audit committee the development selection and disclosure of the group’s critical accounting policies and
estimates and the application of these policies and estimates the following accounting estimates are subject to significant uncertainty
provisions
note 22 contains information about provisions provisions for environmental issues and settlement of litigation are judgemental by their nature
amounts provided are the group’s best estimate of exposure based on currently available information
impairment of goodwill
note 12 contains information about the assumptions relating to goodwill impairment tests
foreign currency exposure
note 20 contains information about the foreign currency exposure of the group and risks in relation to foreign exchange movements
pension assumptions
the principal actuarial assumptions applied to pensions are shown in note 21 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
29 subsequent events
dividends
after the balance sheet date the directors proposed a final dividend of 30 pence per ordinary share the final dividend of £88 million has
not been provided for and there are no income tax consequences company balance sheet
as at 4 january 2007
88 the morgan crucible company plc
2006 2005
note £m £m
fixed assets
tangible assets 33 15 13
investment in subsidiary undertakings 34 7167 8359
other investments 35 04 04
7186 8376
current assets
debtors – due within one year 36 534 461
– due after one year 36 – –
total debtors 534 461
cash at bank and in hand 325 934
859 1395
creditors – amounts falling due within one year 37 338 412
net current assets 521 983
total assets less current liabilities 7707 9359
creditors – amounts falling due after more than one year
amounts payable to subsidiary undertakings 3368 4740
borrowings 38 500 –
3868 4740
provisions for liabilities and charges 39 104 127
3972 4867
net assets 3735 4492
capital and reserves
equity shareholders’ funds
called up share capital 18 733 732
share premium account 40 852 850
merger reserve 40 916 916
capital redemption reserve 40 299 280
sharebased payment reserve 40 76 44
profit and loss account 40 855 1647
3731 4469
nonequity shareholders’ funds
called up share capital 04 23
shareholders’ funds 3735 4492
the accounts on pages 53 to 94 were approved by the board of directors on 20 february 2007 and were signed on its behalf by
mark robertshaw chief executive officer
kevin dangerfield chief financial officer the morgan crucible company plc 89 notes to the financial statements
notes to the financial statements
30 accounting policies
the accounting policies are set out below together with an indication of the effects of their adoption frs 28 corresponding amounts has
had no material effect as it imposes the same requirements for comparatives as hitherto required by the companies act 1985
the corresponding amounts in these financial statements are other than those covered by the exception permitted by frs 25 financial
instruments disclosure and presentation restated in accordance with the new policies frs 25 permits the corresponding amounts not to be
restated and the company has adopted this approach the financial instruments policy set out below provides further details of the current
year and comparative year basis
basis of preparation
the financial statements have been prepared in accordance with applicable accounting standards and under the historical costs
accounting rules
under section 2304 of the companies act 1985 the company is exempt from the requirement to present its own profit and loss account
under frs 1 cash flow statements the company is exempt from the requirement to prepare a cash flow statement on the grounds that the
cash flows of the company are included within the published consolidated financial statement
fixed assets and depreciation
depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over their
estimated useful economic lives as follows
buildings – 50 years
motor vehicles – 3 years
fixtures – 10–20 years
computer software – 3–5 years
foreign currencies
transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction or if hedged forward at 
the rate of exchange under the related forward currency contract monetary assets and liabilities denominated in foreign currencies are
translated using the contracted rate or the rate of exchange ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account
leases
rentals payable under operating leases are charged in the profit and loss account on a straightline basis over the lease term
post retirement benefits
the company participates in a group wide pension scheme providing benefits based on career average pensionable pay the assets of the
scheme are held separately from those of the company the company is unable to identify its share of the underlying assets and liabilities of
the scheme on a consistent and reasonable basis and therefore as required by frs 17 retirement benefits accounts for the scheme as if it
were a defined contribution scheme as a result the amount charged to the profit and loss account represents the contributions payable to
the scheme in respect of the accounting period refer to note 42 for the additional disclosures required by frs 17
taxation
the charge for taxation is based on the result for the year and takes into account taxation deferred because of timing differences between
the treatment of certain items for taxation and accounting purposes
deferred tax is recognised without discounting in respect of all timing differences between the treatment of certain items for taxation and
accounting purposes which have arisen but not reversed by the balance sheet date except as otherwise required by frs 19 deferred tax
classification of financial instruments issued by the company
following the adoption of frs 25 financial instruments issued by the company are treated as equity ie forming part of shareholders’ funds
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 nonderivative 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 90 the morgan crucible company plc notes to the financial statements
30 accounting policies continued
classification of financial instruments issued by the company continued
finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges finance payments
associated with financial instruments that are classified as part of shareholders’ funds see dividends policy are dealt with as appropriations
in the reconciliation of movements in shareholders’ funds
hedging instruments and hedged items are accounted for separately in the balance sheet gains and losses on both are included in 
profit for the year when they arise fair value hedges or when the hedged transaction occurs having first recorded those on the hedging
instrument in equity cash flow hedges to the extent effective
certain financial assets and liabilities have been designated as fair value through profit or loss and are recognised in the balance sheet at
fair value changes in the fair value of such instruments during the year were recognised immediately in the income statement
own shares held by esop trust
transactions of the groupsponsored esop trust are included in the group financial statements in particular the trust’s purchase of shares in
the company are debited directly to equity
sharebased payments
the share option programme allows employees to acquire shares of the company the fair value of options granted after 7 november 2002 
and those not yet vested as at 5 january 2005 is recognised as an employee expense with a corresponding increase in equity the fair 
value is measured at grant date and spread over the period during which the employee becomes unconditionally entitled to the options 
the fair value of the options granted is measured using an option pricing model taking into account the terms and conditions upon which
the options were granted the amount recognised as an expense is adjusted to reflect the actual number of share options that vest except
where forfeiture is only due to share prices not achieving the threshold for vesting
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
authorised 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
31 staff numbers and costs
the average number of persons employed by the company including directors during the year analysed by category was as follows
number of employees
2006 2005
directors and head office staff 25 29
global business units’ staff 13 13
38 42
the aggregate payroll costs of these persons were as follows
2006 2005
£m £m
wages and salaries 70 73
sharebased payments see note 21 32 25
social security costs 06 20
other pension costs 12 21
total overhead employee cost 120 139
32 dividends
dividends payable for the first and second preference shares were £22490 2005 £33753 of which £22490 2005 £22490 was outstanding
at the balance sheet date
for proposed ordinary dividends see the consolidated income statement on page 53 the morgan crucible company plc 91 notes to the financial statements
33 tangible assets
plant equipment
and fixtures
£m
cost
at 5 january 2006 18
additions 06
at 4 january 2007 24
aggregate depreciation
at 5 january 2006 05
amount provided for in the year 04
at 4 january 2007 09
net book amounts at 4 january 2007 15
net book amounts at 4 january 2006 13
34 investment in subsidiary undertakings
shares loans total
£m £m £m
cost
at 5 january 2006 5837 3627 9464
additions 04 326 330
less disposalsloan repayments 11 1503 1514
at 4 january 2007 5830 2450 8280
amounts provided
at 5 january 2006 1068 37 1105
provided in the year 08 – 08 
at4 january 2007 1076 37 1113
net book amounts at 4 january 2007 4754 2413 7167
net book amounts at 4 january 2006 4769 3590 8359
a list of principal subsidiary undertakings is shown in note 45
35 other investments
capitalised
acquisition costs
£m
at 5 january 2006 04
additions –
transferred to investment in subsidiary undertakings –
at 4 january 2007 04
36 debtors
2006 2005
£m £m
due within one year
trade debtors 07 02
other debtors 05 43
derivative financial assets – 01
taxation 07 –
prepayments and accrued income 08 12
amounts receivable from subsidiary undertakings 507 403
534 461 92 the morgan crucible company plc notes to the financial statements
37 creditors – amounts falling due within one year
2006 2005
£m £m
due within one year
bank overdrafts 82 183
trade creditors 47 60
amounts payable to subsidiary undertakings 26 37
other creditors including social security 30 03
accruals and deferred income 109 129
interim dividends 44 –
338 412
38 borrowings
2006 2005
£m £m
bank and other loans 500 –
bank overdrafts 82 183
582 183
less amount repayable within one year included within current liabilities 82 183
total repayable after more than one year 500 –
39 provisions for liabilities and charges
closure and
restructuring other environmental deferred
provisions provisions provisions taxation total
£m £m £m £m £m
at 5 january 2006 43 32 10 42 127
provided in the year – 25 10 – 35
utilised in the year 07 09 – 42 58
at 4 january 2007 36 48 20 – 104
closure and restructuring provisions relate mainly to an onerous lease provision for morgan house the company’s previous registered address
environmental provisions are for known environmental issues which the company will rectify over the next few years the company has 
a constructive obligation to remedy any known environmental problems
the deferred taxation provision is analysed as follows
2006 2005
£m £m
united kingdom
accelerated capital allowances 39 43
other timing differences 39 01
– 42
40 share premium and reserves
capital
share merger redemption sharebased profit and 
premium reserve reserve payment reserve loss account
£m £m £m £m £m
at 5 january 2006 850 916 280 44 1647
cancellation of deferred shares – – 19 – –
charges in relation to share based payments for the year – – – 32 –
premium on share issues less expenses 02 – – – –
purchase of shares for ltip – – – – 189
morgan share buy back – – – – 17
retained loss for the year – – – – 586
852 916 299 76 855
during the year shares with a nominal value of £20 million were purchased to satisfy awards granted under the long term incentive plans
these have been recognised as a deduction from shareholders’ funds the shares are held in a trust administered by bermuda trust jersey
limited and are distributed by them in a discretionary settlement governed by the rules of the 2004 and 2005 ltip and the trust deed dated 
1 march 1996
the total number of own shares held by the trust at 4 january 2007 is 10182157 2005 4720080 and at that date had a market value 
of £26906350 2005 £11802799 the morgan crucible company plc 93 notes to the financial statements
40 share premium and reserves continued
a special resolution to cancel the share premium account was passed at the annual general meeting of the company held on 
11 june 1993 this cancellation was confirmed by an order of the high court of justice chancery division on 14 july 1993 the amount 
of £889 million standing to the credit of the share premium account on 14 july 1993 was transferred to the special reserve against which
goodwill on consolidation can be writtenoff this reserve together with the amounts standing to the credit of the share premium account on
12 october 1990 of £715 million on 19 june 1987 of £389 million and on 27 july 1989 of £123 million which were transferred following previous
orders of the high court becomes distributable to the extent of subsequent increases in issued share capital and share premium account
the amount of reserves of the morgan crucible company plc that may not be distributed under section 2643 of the companies act l985 
is £2084 million 2005 £2065 million
41 leasing commitments
operating leasing commitments during the next year for which no provision has been made in these accounts are
land and land and
buildings buildings
2006 2005
£m £m
less than one year – 01
between one and five years 02 02
more than five years 08 08
10 11
42 pension costs
the morgan pension scheme and the morgan senior staff pension and life assurance scheme
the company participates in two defined benefit schemes in the uk the assets of these schemes are held in separate trustee administered
funds the morgan pension scheme “mps” and the morgan group senior staff pension and life assurance scheme “sss” given that the
company is unable to identify its share of the scheme assets and liabilities on a consistent and reasonable basis as permitted by frs 17
retirement benefits the schemes have been accounted for in these financial statements as if they were defined contribution schemes
the latest actuarial valuations of the “mps” and the “sss” were carried out as at 6 april 2004 and 1 april 2004 respectively and updated 
for frs 17 purposes to 31 december 2006 by a qualified independent actuary the results for these schemes in respect of the group are
shown below
2006 2005
assumptions 
rpi inflation 300 275
discount rate 525 500
pension increases in payment 315300 315275
general salary increases na 475375
the assets in the scheme and the expected rates of return were
2006 2006 2005 2005
expected expected
return return
asset distribution and balance sheet reconciliation  £m  £m
equities 78 1078 75 1793
bonds 53 302 50 298
gilts 43 1279 40 203
property 63 337 58 315
other 43 299 42 101
total market value of assets 3295 2710
present value of liability 3234 3346
surplusdeficit in the scheme 61 636
related deferred tax liability at 30 18 190
43 446
employer contributions due within one year 13 13
the contribution for the year was £481million 2005 £69 million
43 contingent liabilities
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
there are no other contingent liabilities in the company as at 4 january 2007 94 the morgan crucible company plc notes to the financial statements
44 related parties
the directors have reviewed transactions with related parties as defined in frs 8 related party disclosures and have concluded that there
are no material transactions which require disclosure which have not been acknowledged elsewhere in the annual report and accounts
45 principal subsidiary undertakings
country of incorporation
and principal
place of business
carbon companies
morganite electrical carbon limited england
morgan rekofa gmbh germany
morgan carbon italia srl italy
morganite luxembourg sa luxembourg
national electrical carbon bv netherlands
morganite south africa pty limited south africa
morgan korea limited 932 interest south korea
morgan advanced materials and technology inc usa
national electrical carbon products inc usa
ceramics companies
carbo san luis 69 interest argentina
morganite brasil limitada brazil
shanghai morgan carbon co limited china
shanghai morgan matroc technical ceramics company limited 90 interest china
dalian morgan refractories limited 70 interest china
morgan advanced ceramics limited england
morgan electro ceramics limited england
morganite crucible limited england
thermal ceramics uk limited england
thermal ceramics de france sa france
carl nolte söhne gmbh and co kg germany
thermal ceramics deutschland gmbh  co kg germany
w haldenwanger technische keramik gmbh and co kg germany
wesgo gmbh germany
murugappa morgan thermal ceramics limited 51 interest india
thermal ceramics italiana srl italy
shinnika thermal ceramics corporation 50 interest japan
grupo industrial morgan sa de cv mexico
thermal ceramics south africa pty limited south africa
graphite die mold usa
morgan advanced ceramics inc usa
thermal ceramics inc usa
other subsidiary undertakings
morganite canada corporation canada
morganite industries inc usa
100 ownership of ordinary share capital unless otherwise stated
denotes companies some or all of whose shares are owned by a subsidiary
the following german subsidiaries which are included in the group consolidated accounts are utilising the regulations of article 264 
paragraph iii and article 264b german commercial code to be liberated from preparing audited statutory accounts
– w haldenwanger technische keramik gmbh  co kg
– thermal ceramics deutschland gmbh  co kg
46 company reconciliation of movements in shareholders’ funds
for the year ended 4 january 2007
2006 2005
£m £m
retained loss for the financial year 586 187
cash flow hedges effective portion of changes in fair values – 06
purchase of shares for share incentive schemes 189 35
charge in relation to sharebased payments 32 25
new share capital subscribed net of issue costs 03 17
morgan share buyback 17 –
net addition to shareholders’ funds 757 174
opening shareholders’ funds 4492 4666
closing shareholders’ funds 3735 4492 statistical information
under uk gaap
the morgan crucible company plc 95
2002 2003
restated
£m £m
turnover 8803 8496 
operating profit before goodwill amortisation 
and operating exceptionals 341 426 
operating loss before goodwill amortisation 232 247
goodwill amortisation 77 75
group operating loss 309 322
corporate exceptional items 150 301
net finance charges and similar items 128 157
loss on ordinary activities before taxation 587 780
taxation 05 24 
loss on ordinary activities after taxation 582 756
minority interests and preference dividends 33 26
loss attributable to the ordinary shareholders 615 782
ordinary dividends – –
retained loss for the period 615 782
assets employed
goodwill 1305 1122 
tangible fixed assets 4336 3863 
investments 72 56 
net current assets 967 1430 
total assets less current liabilities 6680 6471 
term loans and exchangeable redeemable preference shares 1786 2306 
provisions and other items 1390 1567 
3504 2598
financed by
shareholders’ funds 3401 2495 
minority interests 103 103 
3504 2598
ordinary dividends per share – –
earningsloss per share
– basic 265p 319p
– basic before goodwill amortisation 232p 289p
– diluted 265p 319p
– underlying 17p 60p 
– underlying before goodwill amortisation 50p 91p
the group has complied with uitf abstract 38 accounting for esop trusts this has resulted in the reclassification of own shares held in employee trusts from investments to shareholders’
funds and has been accounted for as a prior year adjustment £07 million in addition the results of the prior year have been restated for the impact of the rights issue during 2004 
the results of earlier years have not been restated for the impact of the rights issue 96 the morgan crucible company plc
statistical information
under adopted ifrss
2004 2005 2006
£m £m £m
revenue 7959 7457 6778
profit from operations before special items 558 660 737
special items
restructuring costs and costs associated with settlement of prior period antitrust litigation 587 320 277
gain on curtailment of united kingdom employee benefit schemes – – 110
terminated bid approach costs –– 21
profitloss on disposal of property 38 04 03
operating profitloss 67 336 552
net financing costs 161 131 34
profitloss on partial disposal of businesses 82 01 15
profitloss before taxation 310 204 503
income tax expense 25 88 106
profitloss after taxation but before gainsloss on sale of discontinued operations 335 116 397
gainloss on sale of discontinued operations net of tax 267 426 –
profitloss for the period 602 542 397
assets employed
property plant and equipment 3198 2353 2302
intangible assets 1071 466 664
investments and other receivables 91 64 84
deferred tax assets 312 274 288
net current assets 543 942 440
total assets less current liabilities 5215 4099 3778
employee benefits 1830 1242 427
provisions and other items 1433 619 1036
deferred tax liabilities 421 281 284
1531 1957 2031
equity
total equity attributable to equity holders of the parent company 1424 1823 1867
minority interest 107 134 164
total equity 1531 1957 2031
ordinary dividends per share – 25p 45p
earningsloss per share
– basic 222p 181p 129p
– diluted 222p 172p 123p
– underlying 100p 131p 179p
– underlying diluted 98p 125p 172p morgan crucible 
a world of advanced materials
from medical instruments aerospace power generation
and satellite communications to body armour  trains and 
fire protection systems morgan crucible’s advanced
material technology is a fundamental component of many
of today’s sophisticated products
with the rapid development of increasingly complex
technology our customers are demanding more from 
the materials they use and are looking for a partner 
who can help them to respond to the pace of change
morgan crucible’s knowledge skills design and technical
expertise built up over 150 years in the business mean we
can tailor our materials to deliver the specialist capability 
our customers require while taking care of the impact 
our products have on the environment both during and 
after their useful life 
morgan crucible’s advanced materials – technically
complex added value bespoke solutions – are the future 
08 chairman’s statement
10 review of our strategy by the 
chief executive officer 
12 the group at a glance
14 business review
14 review of operations
24 financial review
27 risk management
30 corporate responsibility 
35 cautionary statement
36 directors and executive committee
38 directors’ report
40 corporate governance
45 remuneration report
51 shareholder information
52 report of the independent auditors
53 consolidated income statement
54 consolidated balance sheet
55 consolidated statement of cash flows
56 consolidated statement of recognised 
income and expense
57 notes to the financial statements
88 company balance sheet
95 statistical information under uk gaap
96 statistical information under adopted ifrs
this report and accounts is printed on sovereign silk
and kaskad puffin blue which are totally chlorine
free tcf papers 
both the paper mill and printer involved in the
production support the growth of responsible 
forest management and are both accredited to
iso14001 which specifies a process for continuous
environmental improvement
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 crucible or
dispose of it in your recycled paper waste 
thank you
this annual report is available at
wwwmorgancruciblecom
designed and produced by radley yeldar london
printed by ctd the morgan crucible company plc annual report 2006
the morgan crucible company plc
quadrant
55–57 high street
windsor
berkshire sl4 1lp
a world
of advanced
materials
the morgan crucible company plc 
annual report 2006
    


Summary:
 10 the morgan crucible company plc
review of our strategy 
by the chief executive officer
the proﬁt improvement plan which we
embarked upon three years ago has been
successfully delivered having achieved
double digit underlying operating proﬁt
margins well ahead of schedule 
the group’s balance sheet is robust with
lower levels of net debt leaving us well
placed to invest in growing the business
organically and through selective bolton
acquisitions in our core businesses
 defined as operating profit before special items divided 
by revenue
defined as interest bearing loans and borrowings and 
bank overdrafts less cash and other cash equivalents the morgan crucible company plc 11
throughout 2006 we have made excellent
progress on our strategic objectives which 
is reflected in our good financial results
underlying operating proﬁt margins operating
profit before special items divided by revenue
for the continuing group were 109 compared
to 91 in 2005 likeforlike revenues in
continuing businesses were up 112 and
underlying operating proﬁts were 330 higher
than in 2005
highlights of 2006
i am delighted to report that all our divisions
have delivered improved ﬁnancial results in 2006
revenue of the carbon division was up 
69 compared to 2005 at £2136 million 
2005 £1999 million and underlying operating
proﬁt for the division was up 234 at £338
million 2005 £274 million
the technical ceramics division had another
strong year its revenue increased by 122 
to £1625 million 2005 £1448 million and
underlying operating proﬁt increased by 
393 to £170 million 2005 £122 million
the performance of the insulating ceramics
division has also been robust revenues grew 
by 138 to £3017 million 2005 £2651 million
and underlying operating proﬁt increased by
298 to £279 million 2005 £215 million
the balance sheet for the group is very strong
with only a modest £341 million of net debt
defined as interest bearing loans and borrowings
and bank overdrafts less cash and other cash
equivalents at the year end furthermore i am
pleased to tell you that morgan crucible has
eliminated the deﬁcit in its uk pension fund
during 2006 thanks in no small part to the one
off contribution of £40 million during the year as
a result of this combined with positive moves in
our scheme assets and liabilities the uk pension
funds had a surplus of £31 million on the ias 19
employee benefits accounting basis at the end
of 2006 compared to a deﬁcit of £662 million at
the end of the previous year
clearly one of the major events in 2006 was the
approach we received to buy the company in
august your chairman has covered this in his
statement however i would like to assure you
that our business operations were not distracted
by the takeover approach i would like 
to take this opportunity to thank our staff for 
the professionalism and commitment they
showed during a period of uncertainty
there have also been changes in the 
morgan crucible management team during
2006 i would like to add my personal thanks to
warren knowlton who retired as chief executive
officer in august warren successfully turned
morgan crucible around in the three and 
a half years that he was chief executive officer
and i have inherited a very healthy company
as a result of his leadership
looking forward
morgan crucible celebrated its 150th
anniversary in 2006 which in today’s fastpaced
and ever changing world is an achievement 
we are proud of as we look to the future 
we must continue to anticipate the increasingly
sophisticated requirements of our customers 
and react to the growing intensity of the
competitive landscape not least the 
lowcost manufacturing power of china 
india and other fast developing economies
our strategy is to focus on higher growth higher
valueadded markets and to move away from
commoditised economically cyclical market
segments we aim to be the number one 
or two player in our chosen market segments
this strategy has driven organic growth across
our divisions that has been higher than the gdp
growth in their markets our topline growth for
the ﬁrst time in recent years has now overtaken
cost cutting as the major driver for our proﬁt
growth this is the mark of a successful company 
our pricing position which was negative for
many years is now strongly positive – again a
testimony to the strength and quality of our
refocused product offering
of course cost control and the constant 
drive for ongoing operational improvement
throughout the group remain essential 
as part of our successful proﬁt improvement 
plan we are demonstrating that cost discipline 
is now an integral part of our culture
investing in our people
our employees are vital to the ongoing 
success of morgan crucible we are investing 
in the development of our existing people 
and will also be searching for high quality staff
to supplement our talent pool over the past
three years our people have been faced 
with many challenges in the rebirth of 
morgan crucible the management team 
and i have been delighted with their
commitment and enthusiasm to make 
morgan crucible a world class manufacturer 
of advanced materials they have delivered on
many fronts improving customer satisfaction
enhancing our product portfolio and creating
value for you our shareholders
in my ﬁrst chief executive ofﬁcer’s review i am
therefore pleased to report that your company
is in robust ﬁnancial health and is well placed to
continue its positive momentum into the future
mark robertshaw
chief executive ofﬁcer