Morgan Advanced Materials faces 15% profit squeeze from cyber breach
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Morgan Advanced Materials shares fall as FTSE 250 company hits potential £12m and signals 15% profit pressure from cyber breach
- The industrial group reported a cyber incident to investors on January 10
- There are costs associated with containing the breach of up to £12 million
- Some of the company’s sites remain affected by the cyber breach
Morgan Advanced Materials expects a financial hit of up to £12m from a cybersecurity incident that came to light last month, the FTSE 250 group told investors on Tuesday.
MAM, which makes ceramics for metal smelters, alerted investors to the breach on Jan. 10 and has now warned that the incident could lead to full-year adjusted earnings that could be 10 to 15 percent below expectations.
A company-compiled consensus for 2023 adjusted operating profit was £139.2 million before the update, with a range of £133.5 million to £145 million.
MAM now expects costs related to the incident, including ‘specialized payment costs’, to be £8m to £12m.
Morgan Advanced Materials makes ceramics for metal smelters
The group said that while the manufacturing sites are operational, “some manual transaction processes continue to be used” as a result of the breach, and that “a number of systems have proven irreparable.”
MAM, which has also had to postpone its preliminary results for 2022, warned it does not yet know how heavily performance in the first half will be affected, given manufacturing and shipping delays in “a number of locations.”
But the group also highlighted “robust” sales growth in the last two months of fiscal 2022, with MAM expecting a 16 per cent increase to £1.1 billion at constant exchange rates.
This should raise adjusted operating income for 2022 to “slightly above the high end of analysts’ forecasts.”
MAM said: ‘It remains a challenge to accurately estimate the magnitude of the impact on our trading in H1 2023.
“In January, a number of sites experienced delays in restarting production and shipping due to the cybersecurity incident.
“While demand remained strong in January, we are experiencing manufacturing inefficiency during the recovery period, which, based on current estimates, could cause FY2023 adjusted operating income to be approximately 10 to 15 percent below our previous expectations.
“The group has a strong balance sheet and does not expect the incident to have a material long-term impact.”
MAM shares fell 5 percent to 300 pence in early trading, bringing losses to 7.1 percent over a year.
Peel Hunt maintained his buy rating for MAM, with a price target of 430 pence, highlighting the “attractive opportunity” the stock presents.
It said: ‘The Capital Markets Day in December outlined an organic revenue growth profile of 3 to 6 percent over the cycle and a margin of 12.5 to 15 percent.
“We see Morgan as one of our top picks in the industry as this reality is reflected in valuation, hence our continued Buy rating despite today’s change in forecast.”