Unlocking

our potential

Annual Report 2025

We are a global

leader in advanced

materials

We combine material science, deep application

expertise and process excellence to co-design

and manufacture mission critical solutions.

These solutions are at the heart of society’s most

essential systems today and they will enable the

breakthroughs of tomorrow. Our products help

people move, build and thrive. We help power

human progress, where it matters most.

We manufacture an extensive range of specialist carbon and

ceramic products. Established in 1856, we have a proven track

record in delivering for our customers, underpinned by over a

century of innovation. We employ approximately 8,100 people

worldwide, across 57 operating sites serving a diverse range of

customers across a range of end-markets.

See more: morganadvancedmaterials.com

Revenue

£1.0bn

2025 Headline

*

Adj. operating profit

*

£99.1m

2025 Headline

*

Total employees

8,100

*

Non-statutory measures are denoted within an

asterisk (*) through this report. Refer to page 46

for further details.

Strategic Report

Chair’s statement

02

Introducing our new CEO

04

CEO’s review

05

Our strategy

07

Our business model

08

Market environment

10

Key performance indicators (‘KPIs’)

16

Stakeholder engagement

20

Section 172(1) statement

22

Non-financial and sustainability information statement

25

A responsible business incorporating TCFD

26

Risk management

41

Group financial review

46

Directors’ statements

53

Governance

Chair’s letter to shareholders

56

Board of Directors

57

Governance overview

59

Key Board focus areas during the year

60

Board oversight of strategy

62

Monitoring and embedding culture

63

Engaging with our workforce

64

Assessing Board performance

66

UK Corporate Governance Code

compliance statement

67

Report of the Audit Committee

69

Report of the Nomination Committee

75

Remuneration Report

78

Other disclosures

105

Independent Auditor’s Report

110

Financial Statements

Consolidated income statement

119

Consolidated statement of comprehensive income

120

Consolidated balance sheet

121

Consolidated statement of changes in equity

122

Consolidated statement of cash flows

123

Notes to the consolidated financial statements

124

Company balance sheet

178

Company statement of changes in equity

179

Notes to the Company financial statements

180

Group statistical information

198

Cautionary statement

199

Glossary

199

Alternative performance measures

200

Shareholder information

205

The Morgan Code (‘the Code’)

governs how we work and it

is publicly available in 19 languages:

we work safely,

we work ethically,

we treat our people fairly,

we protect our business.

See more: morganadvancedmaterials.com

Strategic Report

Governance

Financial Statements

Morgan Advanced Materials

/

Annual Report 2025

01

02

A history

of innovation

Chair’s statement

2025 was a significant year for

Morgan Advanced Materials,

marked by changes in the

Group’s executive leadership

and an evolution of our strategy,

focused on stability, growth

and unlocking our potential.

we are well placed to benefit from rapid margin expansion as markets

recover. We also made further advances with our IT systems and

infrastructure, continuing the high level of investment in new

capabilities, the replacement of older systems and strengthening

our cyber security posture.

A focus on stability and growth means making choices about the

shape of the business. The Board will continue to evaluate

opportunities to improve Morgan Advanced Materials’ portfolio to

deliver faster growth, as we have done most recently, for example,

with the disposal of the non-strategic Molten Metal Systems (MMS)

business. We have now commenced a formal Strategic review of

our Thermal Products division. This is a focus of the executive team

and the Board and further updates will be provided in due course.

We took the decision to pause our share buyback programme as

part of our focus on balance sheet resilience and to prioritise

margin-enhancing growth.

The Board remains confident in the Group’s long-term structural

growth opportunities. The importance of our mission critical

solutions and the long-term growth driver of providing sustainable

solutions to support the energy transition are still the same. Our

focus has been on ensuring that we are managing the business

appropriately to position ourselves for growth as our end-markets

recover and the outcome of our strategy is reflected in our results.

As we prepare for the future, I am confident in our prospects and

that our team will continue to help deliver on our purpose – to use

advanced materials to make the world more sustainable and to

improve the quality of life.

Performance in 2025

Our first imperative is the safety and wellbeing of our colleagues.

During 2025, our safety performance declined, despite the significant

focus on employee safety and wellbeing. Supporting the executive

team, your Board has spent a significant amount of time reviewing

safety performance and challenging the executive team on how

safety performance and culture can be improved. My fellow

non-executive Directors and I will continue to support the executive

team to achieve a position of ‘zero harm’.

Following his appointment as CEO in July 2025, Damien Caby led a

comprehensive review of the business. He and the team developed

a revised strategy for the Group, with input from the Board. The

revised strategy has full Board endorsement and was presented to

analysts and institutional investors at a Strategy Update Event in

December 2025. The teams are already well underway in their

delivery of this strategy.

While the year was characterised by continued global economic and

geopolitical uncertainty and a difficult end-market environment

impacting our performance, we nonetheless made progress across

the Group and delivered our business simplification and efficiency

initiatives, continuing our track record of self-help. Our investment in

semiconductor capacity, scaled back from the original plan to align

with short-term cyclical weakness, is now substantially complete.

We made good progress across our simplification and efficiency

initiatives. The initiatives delivered additional savings of £16 million

in 2025 and are on track to deliver total savings of of £27 million in

2026, compared to our 2023 baseline. These measures will ensure

Ian Marchant

Non-executive Chair

Strategic Report

Governance

Financial Statements

03

Morgan Advanced Materials

/

Annual Report 2025

The business delivered a resilient performance against a backdrop

of challenging markets. Demand for our products used in silicon

carbide (SiC) power semiconductor production reduced during the

year, driven by destocking in the electric vehicle (EV) supply chain

and the shift of SiC material growth towards China. Reflecting these

dynamics, the Group has recognised an impairment charge of

£15.6 million related to certain specialist assets held by Performance

Carbon at a UK site which are dedicated to the Semiconductor

material growth market. This impairment is consistent with the

expectations for our Semiconductor business that the Group set

out in its Strategy Update in December.

We saw a decrease in sales in our Healthcare markets, driven by

tariff-related inventory adjustments and lower demand for certain

mature product lines. Market conditions in European industrial and

global automotive markets also weakened. This was countered in

part by strong performance in our Aerospace markets. Group

revenue was 3.3% lower than in 2024 on an organic constant-

currency basis*. Margin remained below our financial framework

guidance, and is an area of increased focus.

Leverage increased during 2025 as a result of reduced earnings

and our investment in our digital transformation and simplification

initiatives, but will reduce during 2026 as our investment in

simplification comes to a close and upon realisation of the proceeds

from the disposal of MMS.

Your Board has spent a considerable amount of time evaluating

operational and commercial effectiveness, reviewing and challenging

divisional strategies and overseeing the transformation programmes

to improve trading performance. See the CEO’s review on pages 5

to 6 and Group financial review on pages 46 to 52 for more

information on how the business performed during the year.

The Board in 2025

I am pleased to report that your Board is functioning well and focused

on supporting management through strategy development and

operational delivery. We have focused in particular on trading

performance, the CEO succession and revised strategy this year.

Damien has settled well into his new role and strengthened his

leadership team. He is bringing ever intensifying focus to the many

essential aspects of performance delivery that we need to improve

to achieve our aspirations for Morgan Advanced Materials, and he

has refreshed the operating cadence to enhance the delivery of

short-term goals and reinforce the focus and momentum of the

strategic initiatives.

During the year, we welcomed new perspectives to the Board,

further strengthening our strategic, financial and operational

oversight and materials science expertise. Two new non-executive

Directors – Jane Lodge and Professor Mary Ryan CBE FREng – joined

the Board. Jane will take over as Audit Committee Chair after the

2026 AGM, from Jane Aikman who will step down at the AGM after

nine years on the Board.

Pete Raby stepped down as CEO in July 2025. I and the whole Board

would like to thank him for his significant contribution to Morgan

Advanced Materials over his 10-year tenure as CEO. Having served

nine years on the Board, Helen Bunch stepped down in May 2025.

We would also like to thank Helen Bunch and Jane Aikman for

their contributions.

Responsible business

The Board takes its responsibilities to all its stakeholders seriously

and we are committed to maintaining direct and productive

relationships with our shareholders, colleagues and communities,

taking a range of perspectives and feedback into account in our

decision-making and stewardship.

The wellbeing of our colleagues remained a priority throughout the

year. We have listened to their views through regular engagement

surveys and employee listening sessions. Information on how we as

a Board and business responded to their views, and the actions we

took locally and globally to improve their experiences, can be found

on pages 64 and 65.

I am pleased by the progress we have made this year in reducing the

Group’s environmental impact. We reduced scope 1 and 2 emissions

during the year and are now 58% below our 2015 baseline. We also

reduced our overall water usage.

We are on track to meet our 2030 goals. Not only are we making

our manufacturing processes more efficient, but more importantly

our products, which have properties to withstand heat and endure

other extreme environments, assist our customers in reducing their

environmental impact, either by lasting longer or improving the

efficient use of resources.

Dividend

The Board is recommending a final dividend for 2025 of 6.8 pence

(2024: 6.8 pence). Combined with the interim dividend of 5.4 pence

(2024: 5.4 pence), the resulting total dividend in respect of 2025 is

12.2 pence (2024: 12.2 pence).

The dividend will be payable on 12 May 2026 to shareholders on

the register on 10 April 2026, subject to shareholder approval.

The Board has committed to maintaining then growing the

Ordinary dividend with adjusted earnings cover of circa 2.5 times.

Looking forward to 2026

As we enter 2026, we note early signs of stabilisation but remain

cautious about the pressures on some of our end-markets and

heightened geopolitical risks, and we have positioned the Group

prudently as a result.

The Board is confident that the revised strategy provides a clear

and credible roadmap for delivering sustainable performance

improvement and margin growth. With disciplined capital allocation,

the Board believes that the operating divisions are well placed to

deliver against their strategic mandates and create enduring value for

shareholders. We look forward to updating you on progress against

our strategy in the coming year.

Ian Marchant

Non-executive Chair

Unlocking

our potential

Introducing our new CEO

04

Since my appointment, I have spent time visiting our sites to assess

our operations and I have met with our leaders, our employees

and our customers. The passion of our employees throughout the

organisation is evident. They are proud to be a part of Morgan and

they truly believe in the positive impact our products and solutions

can have on the world. Our customers value the quality and

performance of our products and they trust us to co-design and

manufacture mission critical solutions.

These are strong foundations upon which to build, but we have work

to do to unlock our true potential. With our distinctive capabilities,

Morgan can be the leading force in our chosen markets. As I set out

at our Strategy Update event in December, we have a clear strategy

that is focused on factors within our own control which will create

an efficient and high performing group. Our strategy will return the

Group to a 12% margin by 2028 and will establish a business that

grows faster and delivers more robust margins. Together, we will

transform our operational effectiveness, drive stronger growth in

selected value chains with deeper collaborations and upgraded

positions, and maximise the value of our portfolio.

I am excited about the next phase of our journey, and inspired to

lead the Morgan team through this new chapter.

I am honoured that the Board

selected me to serve as CEO

of Morgan Advanced Materials,

following two and a half years

as president of our Thermal

Products division. Morgan is a

recognised global leader in advanced

materials; our material science,

deep application expertise and

manufacturing excellence power

progress that truly matters.

Morgan’s opportunity:

Damien Caby

CEO

Strong foundations

Positioned in diverse

end-markets

Clear strategy

Will drive higher

margin growth

Unlock potential

Be the leading force in

our chosen markets

Strategic Report

Governance

Financial Statements

05

Morgan Advanced Materials

/

Annual Report 2025

Group results

Organic constant-currency* revenue declined by 3.3% compared

to 2024, driven by the well-publicised challenging conditions in the

Semiconductor market. We saw resilience across our other markets;

weakening market conditions in European Industrial and Global

Automotive markets and lower revenues in Healthcare markets

were largely offset by a strong performance in Aerospace and

Defence markets.

Group headline* adjusted operating profit* margin, which

includes the profit from MMS for our period of ownership, was

down 210 bps to 9.6% (2024: 11.7%). Volume decline and mix

impacts accounted for a 440 bps decrease in margin, but our

continued focus on actions within our control allowed us to offset

a significant portion of this decline. Margin gains from above

inflation pricing and efficiency offered a 170 bps improvement,

further supported by our simplification initiatives which generated

an additional 160 bps improvement. The remaining movement in

margin relates to foreign exchange and other non-trading items.

Operational progress

We have now largely completed our business simplification

programme which has streamlined our management structures,

reduced the number of divisions we operate and consolidated

manufacturing plants to provide better support to our customers

and to deliver synergies from key operational activities. Since 2016,

we have progressively consolidated our smaller sites, reducing the

total number of sites from 85 to 60, before the disposal of MMS.

We have continued our strategic project to develop and deploy

a Global Enterprise Resource Planning (ERP) system which is

intended to replace numerous different legacy systems across

the Morgan network. The programme, which is expected

to complete over the next two years, will create further

opportunities to align business processes, and to further

strengthen information security and the control environment.

Headline* leverage at the balance sheet date of 1.8x (2024: 1.4x)

reflects the reduction in Group profit, the completion of our

Semiconductor capacity investment and our investment in business

simplification. Our ongoing investment in digital transformation

is a key strategic enabler to transform the Group’s operational

effectiveness and leverage its scale. This investment will continue

into 2026 and 2027.

Leverage will reduce towards our target range during 2026 as our

investment in Semiconductor capacity and the business simplification

programme come to a close and upon realisation of the full proceeds

from the disposal of our MMS business.

Sale of MMS

In August 2025, we announced that we had reached an agreement to

sell the majority of our Molten Metal Systems (‘MMS’) business and

the transaction completed on 12 November 2025. The details of the

transaction and consideration mechanisms are set out in the Financial

Review on page 50.

The disposal of MMS is clearly aligned to our strategy, and it

demonstrates our commitment to take decisive action to manage

our portfolio. It simplifies the organisation, reducing the Group’s

operating footprint to 57 sites, and it ensures that our business is

focused on the selected markets where we have a clear right to win

to accelerate organic growth and generate higher returns.

Semiconductor impairment

There is a large and growing market for Silicon Carbide, however,

the supply chain is experiencing a shift towards China. We remain

committed to supplying our customers in the US and Europe and

expect to utilise our US-based assets to address this demand.

We have assessed the carrying value of our assets in light of

these market developments during 2025. As a result of this

exercise, the Group has recognised an impairment charge

of £15.6 million related to certain specialist assets which are

dedicated to the Semiconductor material growth market held by

Performance Carbon at a UK site. This impairment is consistent

with the expectations for our Semiconductor business that we

set out in December. Refer to page 49 for further details.

Moving forwards, our strategy for the Semiconductor market

is focused on the wafer fabrication part of the value chain. This

market is dominated by American, European and Japanese

original equipment manufacturers (‘OEMs’) and we supply most

of these businesses in various parts of the production process.

The barriers to entry in this market are high and Morgan is well-

positioned to win. Our goal is to deepen our collaboration,

working as one enterprise and to expand the scope of our supply.

Progress against our strategy

As outlined at our Strategy Update event in December 2025, the aim

of our strategy is to unlock Morgan’s potential and create a highly

efficient, faster growing company. We will become the leading force

in our chosen markets.

The presentation and a recording are available at

www.morganadvancedmaterials.com

Our strategy is focused on three key levers: Transform operational

effectiveness, Drive stronger growth, and Maximise our portfolio

value. We are focused on executing at pace and we made good early

progress in 2025.

Transform: We are addressing specific gaps in our supply chain

effectiveness which have constrained our growth by holding back our

service levels and we are focused on turning around a small number

of large underperforming sites. We will make more of the Group’s

scale by deploying centrally led procurement.

In respect of site turnaround, work has already commenced to

cross-qualify manufacturing lines, to optimise production and

inventory management.

In procurement, we have assessed the Group’s indirect spend

and our new Group Procurement Lead joined the business in

February 2026.

We deployed our new ERP platform at a pilot site during 2025 and

are set to commence deployment across the business in 2026.

CEO’s review

06

Drive: We are driving stronger growth by focusing on our right

to win to enhance our value proposition and gain market share.

We have initiated focused plans to upgrade our position in selected

value chains to allow us to grow irrespective of market cycles.

Our Performance Carbon division is capitalising on its reputation

and innovation in body armour and trade control capabilities by

expanding into other defence systems. We are making a targeted

investment in incremental capacity during 2026, backed by

multi-year contracts.

Our Technical Ceramics division is building on its leading position

in ceramic cores for engines blades by investing in capacity to meet

the increase in aircraft deliveries and progressive ramp-up of new

generation engines with higher design complexity.

Maximise: We are actively managing our portfolio to maximise its

value through partnerships, divestments and bolt-on M&A.

We have commenced a formal Strategic review of our Thermal

Products division. We will assess a full range of strategic options,

including options for significant business performance

improvement measures and a potential disposal. We will

undertake the necessary preparatory work to ensure that we can

act at pace once the review reaches a conclusion. No decisions

have been made and we will provide further market updates in

due course.

Our strategy will deliver against a clear

medium-term financial framework

Above-market organic constant-currency revenue growth:

We expect to achieve growth in excess of GDP.

Reliable and competitive margins: We expect to achieve an

adjusted operating profit* margin of 12% by 2028 with sustainable

margins of between 12% and 14% beyond 2028.

Sustainable EPS Growth: Achieving sustained growth in adjusted

Earnings per Share*, ahead of organic revenue growth, driven by

a combination of organic growth, margin accretion, shareholder

returns and M&A.

Attractive ROIC: 17% - 20% ROIC*.

Resilient balance sheet: Leverage range of 1.0x to 1.5x, or up to

2.0x adjusted EBITDA* post-acquisition, utilising our strong

balance sheet to fund our organic growth, and then over time

deploying excess capital to fund incremental M&A or additional

shareholder returns as appropriate.

Appropriate dividend cover: Shareholder dividends maintained

then growing with adjusted earnings at around 2.5x cover.

Share buyback

As announced in December 2025, we paused our buyback

programme as part of our focus on balance sheet resilience.

The second £10 million tranche of the buyback has now completed

and the Group has purchased a total of £20 million of shares.

Safety, people, sustainability

We have clear 2030 goals for our business, all of which are measured

against a 2015 baseline.

1.

A 0.10 LTA rate: our LTA rate was 0.18 (2024: 0.13) which is an

increase compared to the prior year. Safety of our employees

is essential and addressing the root causes of lost time and

recordable accidents is a critical focus for the Board and Senior

Management team. We have undertaken a detailed root cause

analysis of 2025 incidents, and as a result, we have developed

a focused plan to reinforce the skills and engagement of our

manufacturing leaders across the Group, and to implement more

focused actions at selected sites during 2026. Alongside, we will

maintain our focus on process safety. We have made significant

progress in this area during 2025, with strong engagement and

momentum in the implementation of the improvement plans in

the first of three waves of deployment.

2. 40% of female leadership: We continue to improve our gender

diversity and 36% of our leadership population are female, a year

on year improvement of 2%. We will continue our focus on

ensuring that our policies, working conditions, development

and support offering, and recruiting approaches deliver a more

supportive environment for our female leaders.

3.

A top quartile engagement score: our engagement score was

75%, an improvement on the prior year. It is pleasing to see

progress on this metric, particularly at the sites where engagement

levels are below average. Our leaders remain focused with site

specific actions.

4.

Reduce scope 1 and 2 CO

2

emissions by 50%: We reduced by 5%

in the year and we are now 58% below our baseline, significantly

ahead of our glidepath. 80% of our power is from low-carbon

sources and going forward, as our business grows, we are focusing

on process efficiency and new technologies in order to sustain this

performance.

5. Reduce water usage and water use in high-stress areas by 30%:

Our overall water usage reduced by 11% and water use in

high-stressed areas has decreased by 3%. We are 39% and

23% below our baseline, respectively.

Outlook

Demand in our end-markets has broadly stabilised and our outlook

for 2026 is in-line with current market expectations. Organic

constant-currency revenue growth is expected to be 1-2% and,

supported by a continued focus on efficiency and the first results of

our Transform initiatives, we expect to deliver an adjusted operating

profit* margin at or around 10%.

As previously reported, our medium-term guidance for overall

capital expenditure is for around £50-£55 million per annum over

the next three years.

We remain confident in achieving our medium-term financial

framework.

Damien Caby

CEO

CEO’s review continued

Strategic Report

Governance

Financial Statements

07

Morgan Advanced Materials

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Annual Report 2025

Transform

We will build a scalable, more efficient and

more agile business. We are going beyond

site consolidation, we are leveraging the

Group’s scale, stepping up supply chain

effectiveness, and turning around our largest

underperforming sites.

We will deploy Group-led category

management across an indirect spend

cost base of £170 million. We will deliver

significant savings and reinforce the

efficiency and reliability of our supply

chain.

We will implement structured and

comprehensive multi-year programmes

to turn around large underperforming

sites that represent more than 20%

of Group revenue. We will optimise

production cycles and supply chains

and simplify the asset base and product

portfolio.

We are investing in digital transformation

to enhance business analytics, make better

informed decisions and act with agility

and confidence. We will streamline and

standardise our back office processes

to focus business teams on delivery

and growth.

Maximise

We will make bold choices. We will invest

selectively to expand our leading positions,

partner where we know we cannot win

alone, and exit markets where we cannot

improve our market position or right to win.

Our Performance Carbon division will

pursue opportunities to supply sub-

systems in Energy and Industrials where

the supply chains are fragmented and

the decarbonisation and digitalisation

trends call for innovation. It will assess

partnerships in China for Semiconductor

SiC material growth.

Our Technical Ceramics division will

leverage its expertise in high-value niches

to expand into new adjacencies, with

priorities in Industrials and Aerospace.

Our Thermal Products division will

expand its structural partnerships in fire

protection. It is a very large market and

we are targeting the geographies and

applications where the value proposition

is compelling.

Becoming the

leading force in our

chosen markets

Our strategy

Drive

We will systematically upgrade our position

in the value chain so that we can grow

profitability irrespective of market cycles

and increase our market share and

addressable market.

Our Performance Carbon division will

innovate to increase performance and

longevity in Rail and Wind. It will capitalise

on its reputation, technology and trade

control capabilities to expand in defence

systems.

Our Technical Ceramics division will

increase its capacity to meet the increasing

aircraft deliveries and the ramp-up of the

new generation of engines.

Our Thermal Products division will

reinforce its outreach in the process

industries to enable the decarbonisation

of Steel and Chemical processes.

Who we

are will help

us succeed

We are a purpose-driven organisation. We are resilient and we thrive when it comes

to solving tough problems. We are curious and innovative and we are committed to

continuous learning. We are collaborative and open minded and we foster a culture of

transparency and humility.

As a business, we are focused on recruiting, developing and retaining the high calibre

of individuals we need to deliver on the next chapter for Morgan. To learn more about

people policies, see page 63.

08

We combine material

science, deep

application expertise

and process excellence

to co-design and

manufacture mission

critical solutions...

Technology leadership

We have a deep understanding

of how and why materials

work, and how to change their

properties. This is underpinned

by a rich intellectual property

estate protected through trade

secrets and select patents.

Customer intimacy

We are trusted by our customers

to co-create and drive innovation.

With our access to customers and

their technical experts, we are

able to anticipate their needs.

Global network

We have a global manufacturing

footprint, allowing us to

match manufacturing

capacity with demand.

Accredited business

We work with regulatory authorities

and customers to become approved

suppliers for high barrier to

entry and high barrier to change

applications. We put quality at the

forefront of everything we do.

Our business model

...supported by our strategic focus areas...

Transform

Drive

...our divisions operate in close proximity with our

markets and customers to achieve optimal solution

performance and effective product delivery...

Technical Ceramics

Value proposition

Co-designs bespoke ceramic and braze

alloy assemblies in high performance,

high specification applications.

We hold leadership positions and several

opportunities to expand our market share

in high barrier to entry, attractive markets.

Benefit to our customers

Enhanced durability, reliability and performance

of our customers’ products in Healthcare,

Aerospace & Defence, Semiconductors and

power generation.

Thermal Products

Value proposition

Provides full scale solutions for high-

temperature insulation and fire protection.

We set the benchmark in insulation

standards and benefit from a large

installed base.

Benefit to our customers

Improved safety of people and equipment

in demanding environments, reduced

emissions and energy costs in energy-

intensive processes industries.

Performance Carbon

Value proposition

Leverages the versatility of carbon, graphite

and silicon carbide materials for mission

critical applications.

We hold leadership positions and have a

large installed base in markets with high

barriers to entry.

Benefit to our customers

Maximised performance, efficiency,

reliability and durability of our customers’

products in Aerospace & Defence, rail,

energy generation, and oil & gas.

Strategic Report

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Financial Statements

09

Morgan Advanced Materials

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Annual Report 2025

Our customers

Our superior product performance

and reliability are industry leading

and in many cases, unsurpassed.

We are a global supplier that can

meet the toughest challenges in

materials science.

We maintain and embed strategic

partnerships.

Our people

We keep our employees safe,

aiming for zero harm.

We operate as a responsible and

ethical business.

We attract, develop and retain a

diverse and engaged workforce.

Our investors

Appealing growth drivers

and clear strategy.

Strong financial framework.

Our planet

We care about our impact on the

environment and are reducing

the impact of our own operations.

Our products help reduce the

environmental impact of our

customers’ operations.

...to create value

Maximise

Our products and solutions

Structural ceramic components

Engineered coatings

Ceramic cores

Ceramic-to-metal assemblies

Braze alloys

Ceramic tubes and rollers

Extruded products

Laser products

Semiconductor consumables

MACOR™ machinable glass ceramic

Route to market

Our products and solutions

High-temperature insulating and

fire protection fibre products (Low

biopersistent fibres, Superwool®)

Microporous products

(WDS®, Min-K®)

Firebricks and mortars

Heat shield cladding

Route to market

Our products and solutions

Semiconductor consumables

Collector strips and

carbon brushes

Graphite powders

Face seals

Sliding bearings

Rotary seals

Rotary vane pump components

Route to market

Market

environment

There are a number of megatrends

that are shaping the future of our

world and are driving an ever

greater need for advanced materials.

Our materials and solutions

have an important role to play in

addressing the challenges arising

from climate change, resource

scarcity, urbanisation and migration,

a growing middle class, an ageing

population and digitalisation.

Industrial

41.6%

Aerospace & Defence

20.7%

Oil & Petrochemical

9.7%

Healthcare

7.0%

Energy

6.9%

Semiconductors

6.8%

Rail

4.0%

Other

3.3%

Headline revenue

£1,030.3m

(3.3)% OCC

1

Ceramics and carbon are very versatile materials and as a result

we participate in a wide range of end-markets; you will find our

products all around you in products and technologies that enable

the modern world.

The chart below shows the split of our headline* revenue by

end-market applications. In the following section, we have provided

insight into our most significant markets.

Industrial markets shown below comprise ‘Industrial processes,

Industrial components and Metals.’ The dynamics of these markets

are set out overleaf.

10

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Industrial

Processes

Market trends

Industrial processes are being reshaped by the need for higher

productivity through rapid digitalisation and automation with a

lower impact to the environment.

How we add value

We co-design and manufacture products for use in a broad

range of challenging process and manufacturing environments

for numerous industrial applications such as insulation for

foundry process and kiln furniture for glass and ceramic

production.

Our materials offer superior insulating properties,

dimensional stability, strength and stiffness.

These characteristics support optimised process efficiency

and increases productivity, allowing our customers to

reduce industrial waste, improve safety and lower their

environmental impact.

Examples of our solutions

Superwool

®

Blok improves kiln lining life and thermal

efficiency.

Pyro-Bloc

®

modules for regenerative thermal oxidisers

reduce heat loss and fuel consumption.

Halsinc kiln furniture enable efficient use of energy and an

optimal ratio between kiln furniture and sinter ware.

Examples of our customers

EPCs and specialist technology distributors

Industrial

Components

Market trends

Global manufacturing growth is a primary catalyst for rising

demand in industrial components. As manufacturing output

expands – particularly in emerging economies – demand

increases for bearings, gears, motors, valves, pumps and other

precision-engineered components.

How we add value

We co-design and manufacture products for use in a broad

range of challenging environments. Our materials offer a wide

range of performance characteristics.

Our components are highly resistant to chemical and physical

wear, corrosion and extreme temperatures.

Examples of our solutions

Self-lubricating seals and bearings and ceramic shafts reduce

energy consumption of pumps in chemical plants.

FireMaster

®

insulation for automotive exhaust catalyst,

manages high temperatures, protects surrounding

components and improves the efficiency of the emission

control system.

Laser Reflectors generate diffuse reflectance, which provides

a highly uniform beam profile for use in industrial lasers for

cutting, welding and marking.

Examples of our customers

Automotive suppliers, industrial equipment manufacturers

12

Metals

Market trends

The demand for Iron & Steel remains strong, fuelled by

industrialisation, population growth and urbanisation. Steel

producers seek new solutions to tackle environmental concerns,

rising energy costs and to increase operational efficiency.

How we add value

We support the design phase, including material selection, in

order to reduce energy, improve furnace performance and

ensure that any molten metal transfer vessel melt holds. Our

global network of subject matter experts are ready to support

the commitment from the metals industry, to reduce emissions

in their plants.

Examples of our solutions

Superwool® XTRA for severe atmospheric conditions.

Pyro-Bloc® modules provide the furnace design with a

superior lining.

K™, JM™, TJM™ ranges of insulating fire bricks offer superior

performance to lining designs.

Examples of our customers

Steel mills, Iron & Steel manufacturers, Foundries, aluminum

manufacturers

Market environment

continued

Aerospace

& Defence

Market trends

Demand in air travel is increasing in line with economic growth,

driven by both business and leisure customers across the globe.

There is a growing need for engines to run more efficiently and

at greater extremes in temperature.

Rising geopolitical tensions have resulted in a global increase in

defence spending. There is a growing need for materials that can

withstand greater strains, pressures and temperatures.

How we add value

We make proven high-performance components and

sub-assemblies to exacting standards for aerospace.

We co-design and supply precision-engineered materials

that offer superior dimensional stability, strength, stiffness

and chemical resistance across a wide range of temperatures

to meet the technical demands of the global security and

defence markets.

Examples of our solutions

Complex cores for casting turbine blades to enable more fuel

efficient jet engines.

Components for night vision systems which enable superior

performance.

Ceramic tiles to build high-performance body and vehicle

armour.

Examples of our customers

Aerospace OEMs, sub-system suppliers and Defence

contractors

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Healthcare

Oil &

Petrochemical

Market trends

The global medical devices sector is undergoing a period of

significant transformation, largely driven by demographic shifts,

evolving patient needs and technological advancements. Global

healthcare systems are increasingly focused on early detection,

prevention and improved treatment pathways to manage the

growing burden of chronic disease. Technological advancements,

including artificial intelligence, robotics, predictive analytics and

wearable medical technology, have revolutionised the landscape

of medical diagnostics and treatment.

How we add value

Medical engineering demands the highest standards of

precision, accuracy, reliability and performance.

We manufacture a broad variety of components for use in

medical instrumentation as well as in tools for treatment and

surgery. Biocompatibility, excellent chemical and electrical

resistance and low wear rates of our materials, combined

with our high-quality, volume manufacturing means we are

perfectly placed to supply components for medical applications.

Equipment manufacturers and medical professionals choose

our materials for their exceptional physical characteristics.

Our deep understanding of ceramic material properties,

together with our expertise in braze alloy design, allows us

to produce high-density, highly reliable feedthroughs for

medical devices.

Examples of our solutions

Bare ceramics and metallised components for medical

imaging and oncology equipment.

Ceramic feedthroughs for implantable technology such as

cochlear implants and neuro-stimulation.

Small precision componentry for use in a range of surgical

equipment from ablation tools to surgical laser waveguides.

Market trends

In the Petrochemical and Chemical markets our customers

demand high performance insulation and fire protection

solutions.

How we add value

We manufacture a range of components ideally suited to the

uniquely demanding operating environments.

Examples of our solutions

Our products and materials are routinely chosen to fulfil critical

applications for thermal management and downstream

processing, owing to their resistance to chemical wear,

corrosion and extreme heat.

Our self-lubricating seals and bearings and our ceramic shafts

reduce the energy consumption of pumps in chemical plants.

Examples of our customers

Major medical equipment and imaging OEMs

Examples of our customers

Energy producers, manufacturers of industrial gases and

refractory builders

14

Semiconductors

Market trends

Our world is rapidly evolving, it is becoming more connected,

smarter and more energy-efficient by the day. Semiconductors

are at the heart of this transformation.

How we add value

Our extensive product portfolio enables the production of

SiC, GaN and silicon chips. Our technology is critical from

crystal growth of the semiconducting material, at the very

beginning of the value chain, on through the many wafer

fabrication steps.

We offer a broad portfolio of unique materials and

components that are made from highly purified carbon,

graphite, alumina, silicon carbide and braze metal alloys.

Our products have been key to facilitating the manufacture

of SiC wafers at sufficient quality, cost and quantity to unlock

widespread SiC usage in power devices.

Examples of our solutions

Ultra-high purity consumables for crystal boule growth.

Graphite and ceramics for semiconductor wafer fabrication.

Examples of our customers: Major American, Japanese

and European Wafer Fabrication OEMs, Material Growth

OEMs.

Examples of our customers

Wafer fabrication equipment manufacturers, Crystal boule

growers

Market environment

continued

Energy

Market trends

As society advances, there is a growing need for greater energy

security and cost-effective decarbonisation. The demand for

reliable energy is growing rapidly, driving demand for increased

power generation and energy transition through wind and solar

power, energy storage and nuclear generation.

How we add value

We develop products for renewable and traditional power

generation and insulation materials for heat management.

We produce high-temperature insulation for power plants to

minimise energy loss and reduce CO

2

emissions.

We enable the conversion and of power generation to solar

and wind and the large-scale power storage this requires.

We are the leading supplier of refractories and insulation for

the furnaces which produce cathode materials for Lithium-ion

battery-based power storage.

Our superior product performance drives lower

maintenance activity and cost for wind farm operators.

Examples of our solutions

Ceramic materials for the manufacture of the latest

generation of solar panels.

Carbon brush grades power transmission and grid

infrastructure wind turbines offering, reliable world-leading

performance.

Superwool® thermal insulation for heat recovery steam in

generators, fuel cells, and energy storage walls.

Examples of our customers

Generator Original Equipment Manufacturer, Solar panel

manufacturers

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Uniquely positioned

to power progress that

truly matters

Our strategy in action

Case study

Carbon strips enable

reliable power transmission

in high-speed rail

Whether its fossil fuel or clean energy, the power

demands of rail require high-performance generators

Case study

Carbon cloth in reusable

rocket technology enables

global connectivity

Rockets can be launched into space to put satellites

into orbit – essential for internet access, mobile

communications and earth observation

Case study

Feedthroughs enable

breakthroughs in

implantable pain therapy

Patients with complex medical conditions

require long-term sustainable pain management

methods to avoid over reliance on opioids

16

Organic constant-currency*

revenue growth (%)

Free cash flow before acquisitions,

disposals and dividends* (£m)

Purpose

Organic constant-currency growth is a non-statutory measure

used by the Board and Management to monitor the Group’s

performance. It provides an important indicator of organic

like-for-like growth of the Group reporting businesses over time.

Organic constant-currency growth eliminates the impact of

acquisitions, divestments and foreign currency variances.

Performance

Revenue declined by 3.3% on an organic constant-currency basis,

reflecting challenging market conditions notably in Semiconductor

and industrial and automotive markets.

Refer to pages 46 to 52 for further details

Purpose

Free cash flow generation is an important non-statutory measure

used by the Board and Management to measure the Group’s

ability to support future business expansion, distributions

or financing.

Performance

Headline* free cash flow has increased to £45.4 million, driven by

lower capital expenditure and by the implementation of focused

working capital initiatives across the Group.

See page 96 for details of how Financial KPIs are reflected in

Annual Bonus and long-term incentive performance targets

Financial KPIs

We measure our success by tracking a number of

key performance indicators (KPIs) that reflect our

strategic execution priorities and growth drivers.

Performance against these KPIs informs our

financial, strategic and operating decisions.

Successful delivery against a number of these

KPIs forms a component of remuneration for

Executive Directors and senior management.

In 2025, certain metrics have also been presented

on a ‘Headline’ basis which includes the results

earned by MMS up to the completion date of

the disposal.

Refer to page 50 for further details

Measuring

our progress

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Return on invested capital* (%)

Net debt* to EBITDA*

(excluding lease liabilities) (x)

Purpose

Return on invested capital (ROIC) is an important non-statutory

measure used by the Board and Management to assess the Group’s

profitability and capital efficiency.

Performance

ROIC has decreased by 360 bps to 14.1%, reflecting the decrease

in adjusted operating profit.

Purpose

Net debt to EBITDA ratio is an important non-statutory metric used

by the Board and Investors to assess the Group’s financial leverage

and capital structure. This key metric is also a covenant under the

Group’s debt facilities.

Performance

On a continuing basis, net debt to EBITDA has increased to 1.9x,

driven by reduced adjusted operating profit delivery in the year and

impacted by the disposal of MMS in the year, with full realisation of

proceeds not expected until 2026.

On a headline basis, which includes the results of MMS for our period

of ownership in 2025, net debt to EBITDA was 1.8x.

Purpose

Adjusted EPS is a non-statutory measure used to assess the

Group’s underlying financial performance.

Performance

Adjusted EPS has decreased by 8.3 pence to 15.9 pence during

2025, reflecting the decrease in adjusted operating profit.

23

24

25

10.8%

11.6%

9.4%

23

24

25

25.0p

24.2p

15.9p

23

24

25

17.6%

17.7%

14.1%

23

24

25

1.2x

1.5x

1.4x

1.9x

1.8x

Adjusted operating profit* margin (%)

Purpose

Adjusted operating profit margin is a non-statutory measure that the

Board and Management monitor to assess the underlying trading

profitability of the Group, excluding the impact of specific adjusting

items and the amortisation of intangible assets.

Performance

On a continuing basis, adjusted operating profit margin for 2025

has decreased by 220bps to 9.4%, reflecting reduced revenue.

Volume decline and mix drove a significant decrease in margin,

but our continued focus on actions within our control allowed

us to offset a significant portion of this decline.

Adjusted EPS* (p)

18

CO

2

e scope 1 and 2 emissions (metric tonnes)

Lost-time accident (LTA) rate

2

Alignment to strategy

Purpose

Reducing greenhouse gas (GHG) emissions is an important part

of our strategy. We are committed to reducing our absolute

Scope 1 and 2 emissions by 50% by 2030 from a 2015 baseline.

Performance

Total emissions were 145,137 tCO

2

e, a 5% decrease

from 2024 and 58% decrease over our 2015 baseline.

Alignment to strategy

Purpose

We have an aspiration of ‘zero harm’ to all employees. We commit

to build a caring safety culture and a world class safety system to

achieve a 0.10 LTA rate by 2030.

Performance

Our LTA rate increased to 0.18 in 2025. This is a significant area

of focus for the Board and senior management and we have a

focused plan to address identified root causes during 2026.

See pages 30 for more information

2.

A lost-time accident (LTA) is defined as an accident or work-related illness which results in

one or more days of lost-time. Calculated as total number of lost-time accidents in the

year, multiplied by 100,000 hours worked, divided by total number of hours worked.

Key environmental, social and

governance (ESG) KPIs

Alignment to our strategy

To deliver our strategy and to achieve our ESG goals we

align our efforts to our three strategic execution priorities.

Read more on page 7

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Female representation in leadership

3

Employee engagement rate

Alignment to strategy

Purpose

A greater gender diversity is good for Morgan Advanced Materials

and good for employees.

Performance

Female representation continues to progress. We are supporting

women through early careers and at the recruitment stage through

women-centred events. We have female mentoring programmes

and a thriving employee resource group, Women@Morgan.

See page 31 for more information

Alignment to strategy

Purpose

Maintaining an engaged workforce is critical to delivery of our

strategy. We measure the engagement of our employees through

an employee engagement survey called ‘Your Voice’.

Performance

We are taking direct actions on the things our employees care

about. We hear from employees directly through our ‘Your Voice’

employee engagement survey.

See page 64 for more information

Alignment to strategy

Purpose

We recognise that in some instances our water demands are in

areas of increasing water stress. Our goal is to deliver a 30%

reduction of water withdrawal in water stressed areas by 2030

from a 2015 baseline.

Performance

Total water withdrawal in water stressed areas was 331,175m

.

This is 3% lower than 2024 and 23% lower than our baseline,

reflecting better water management practices

Total water withdrawal

(million m

3

)

Alignment to strategy

Purpose

Water is critical to our manufacturing operations. We will reduce our

total water withdrawal by 30% by 2030 from a 2015 baseline.

Performance

Total water withdrawal was 1.43 million m

; which is a 11% decrease

over 2024 levels and a 39% decrease over our 2015 baseline.

Water withdrawal in water stressed areas

1

(m

3

)

20

Our employees

Why they are important to us

Our employees are key to driving the business forward and ensuring

that it remains relevant in the future.

What we believe is important to them

Meaningful roles linked to our purpose.

Clear progression, training and development.

Recognition and competitive compensation.

Flexible working opportunities.

A safe, ethical and inclusive working environment.

How we engage

Local and global surveys, including ‘Your Voice’.

In-person and virtual meetings, briefings and training sessions.

Internal communications to keep employees informed about

Group-wide issues.

Close collaboration our three employee resource groups (ERGs):

PRISM, Women@Morgan and Military@Morgan, to help shape

thinking and inform policies.

Board engagement with a diverse cross-section of employees, as well

as ongoing Board monitoring of culture across the Group.

We are committed to understanding the

perspectives of all our stakeholders: our employees,

our customers, our suppliers, our pensioners

and pension trustees, our shareholders and the

communities in which we operate.

See pages 64 to 65 for details of Board consideration

and oversight of the needs of our stakeholders

Our customers

Why they are important to us

Delivering sustainable growth requires customers who value the

services that we provide and choose us as their supplier.

What we believe is important to them

Reliable and consistent service.

Good value, high-quality products.

Product and process innovation.

Ability to solve complex problems.

Application engineering capabilities.

Transparent and responsible sourcing of raw materials

and componentry.

The environmental impact of the products we make.

How we engage

We are shaping our product and service offerings based on

customer and market needs, using insights gained from our

customers.

We monitor customer service performance, quality control and

delivery metrics across the Group on a regular basis to ensure that

we can meet and exceed our customers’ expectations.

We further our materials science knowledge and solutions

expertise through our ongoing programme of R&D,

centred around our four global CoE.

We share details of our innovation and new product applications

through digital and physical channels.

Delivering long-term value for all

our stakeholders is critical to the

long-term success and sustainability

of Morgan Advanced Materials.

Effective

engagement

with our

stakeholders

Stakeholder engagement

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Our shareholders

Why they are important to us

Our shareholders are the owners of the Company and we have a

responsibility to them to be transparent and open about our strategy,

our financial performance and our governance processes to enable

them to make informed investment decisions.

What we believe is important to them

Strategic focus and business growth.

Share price evolution.

Capital allocation and shareholder returns.

High-quality management and governance.

Protection of the environment through sustainable

working practice.

Delivering a positive contribution to society through our

commitment to our employees and the communities in which

we operate.

How we engage

Comprehensive investor programme comprising in-person and

virtual meetings with current and prospective shareholders, and

formal financial results presentations and market updates.

Periodic Capital Markets events to talk in more detail about our

growth strategy and key aspects of our business model and

market trends.

Attendance at investor conferences.

Complete investor questionnaires as requested.

Dedicated investor section on our website which offers timely

information on how we are performing against our stated

sustainability goals, including full disclosure of metrics and ratings

linked to environmental performance.

Our suppliers

Why they are important to us

To succeed, we need suppliers that understand our business in

order to provide assurance and continuity of supply of goods and

services at the right quality and a fair, market competitive price. We

strive to use all our resources as efficiently as possible, minimising

our environmental and social impact on the world around us.

What we believe is important to them

Fair treatment and timely payment.

Growing their business.

Cost-efficiency.

Ethical trading policies and sustainable sourcing.

Developing long-term relationships.

Human rights.

Environmental and climate impact.

Quality management.

How we engage

We maintain constant constructive dialogue to address any

issues and ensure productive relationships.

We require our Suppliers to sign up to our ‘Supplier Code

of Conduct’ which defines the minimum standards that must be

met by our suppliers, vendors, subcontractors and contract

manufacturers, and compliance is reviewed at regular intervals.

Our pensioners

and pension trustees

Why they are important to us

After more than 160 years in business, we would not be as strong as

we are today without the combined efforts of all those who went

before. By keeping our pension commitments, we honour the hard

work and dedication of both current and past employees.

What we believe is important to them

Pension scheme funding position and investment strategy.

Group performance.

How we engage

We engage with both current pensioners and those yet to retire

through regular pension communications in conjunction with our

pension trustees.

The communities

in which we operate

Why they are important to us

Our employees live and work within wider communities, and

relationships with these communities are key in supporting

our business for the future.

We aim to have a positive impact on the communities we serve,

from supporting job creation and skills advancement, to reducing

energy and water consumption at our plants.

What we believe is important to them

Our commitment to the local environment.

Our conduct as a socially responsible organisation.

The positive impact we can have on the community living

and working around us.

Employment opportunities.

How we engage

All our efforts and engagements are governed by the Morgan

Code, our purpose and our policies on the environment.

We want our employees to have the freedom to support what

they care about most. We share these stories through our

internal social media platform Viva Engage, where you will

often see the generous spirit and nature of our employees –

from bake sales to cultural celebrations and charity donations

to sponsorship events.

22

Section 172(1) statement

Key decisions in the year

Refreshed strategic plan

The Board reviewed and agreed the refreshed strategic plan,

ahead of the Strategy Update Event in December 2025.

When reviewing the plan, during its development, the Board

considered margin enhancement initiatives, financial targets,

portfolio maximisation, internal and external risk factors,

sustainability strategy and divisional growth plans, as well as

the key roles of technology and talent. See page 62 for more

information.

Stakeholder considerations

Shareholders:

An interview-based perception audit of Morgan Advanced

Materials’ investor base was carried out and considered by the

Board to ensure that the investor perspective was considered as

part of the strategic review.

The need to maintain a strong balance sheet and low leverage

from which to invest in growth and increase shareholder returns.

Employees:

Focus on simplifying and improving the Group’s operations and

therefore our employees’ experience.

Empowering our employees to deliver the strategy and best

serve our customers.

Customers:

Enhance customer experience and build strategic partnerships

with our customers.

More rigorous customer focus to ensure that the service we

deliver to our customers matches the best-in-class quality of

our products.

It is not always possible to provide positive outcomes for all stakeholders and the Board sometimes has to make decisions based on

balancing the competing priorities of stakeholders.

All of the Board’s key decisions are subject to a Section 172 (of the Companies Act 2006) evaluation to identify the likely

consequences of any decision in the long-term and the impact of the decision on our stakeholders.

Details of our key stakeholders, how we have engaged with them during the year and the outcomes of that engagement are set out

on pages 20 and 21 and are incorporated by reference into this Section 172(1) statement. Engagement activities specifically carried out

by the Board collectively and individually can be found on page 65.

Alongside the key decisions outlined below, the table highlights

other sections of this Report which explain how the Directors

have had regard to Section 172(1).

(a) The likely consequences of any decisions

in the long-term

Our business model

08

Our strategy

07

(b) Interests of employees

Our business model

08

Effective engagement with our stakeholders

20

Engaging with our workforce

64

Remuneration Report

78

(c) Fostering the Company’s business relationships

with suppliers, customers and others

Market environment

10

Our business model

08

Effective engagement with our stakeholders

20

Our strategy

07

(d) Impact of operations on the community

and environment

Our business model

08

Effective engagement with our stakeholders

20

Our strategy

07

A responsible business incorporating TCFD

26

(e) Maintaining a reputation for high standards

of business conduct

Our business model

08

A responsible business incorporating TCFD

26

Non-financial and sustainability information statement

25

Risk management

41

Report of the Audit Committee

69

(f) Acting fairly between members of the Company

Our business model

08

Effective engagement with our stakeholders

20

Our strategy

07

Remuneration Report

78

Key to stakeholders

Investors

Customers

Suppliers

Employees

Communities

Lenders and

debt holders

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Sale of MMS business

We announced in August 2025 that we had entered into an

agreement to sell MMS to Vesuvius plc (‘Vesuvius’). The disposal

continued our strategy of simplifying the Group’s operations,

accelerating organic growth and generating higher returns by

focusing on specific faster growing markets, with the proceeds

of the sale intended to further strengthen the balance sheet and

reinvest in the core business. The total consideration payable

to Morgan Advanced Materials was £76.2 million. The sale

completed on 12 November 2025.

Stakeholder considerations

Shareholders

Improves the financial position of the Group and realises

significant value for shareholders.

Provides optionality both for investment in growth and enhanced

shareholder returns in line with our capital allocation priorities.

Employees

Management focus on supporting employees affected by the

disposal.

The staff and senior management team of MMS transferred to

Vesuvius to continue to run the business, providing continuity

and support to affected employees.

Customers

Management focus on ensuring there was no disruption for

customers throughout the transition.

The decision to sell MMS followed a portfolio review. The

review concluded that MMS’s long-term future would be better

served outside of the Group. MMS is highly complementary to

Vesuvius’s existing business, enabling customers to benefit from

synergies with Vesuvius’s existing business.

Pausing of the share buyback programme

In December 2025, we announced the intention to pause our

buyback programme as part of our focus on balance sheet

resilience. The programme was paused in January 2026 after

the completion of the second tranche, by which time we had

purchased £20 million of shares. When considering the proposal

to pause the programme, the Board considered the cash flow

generated during the year, the strength of the balance sheet, as

well as the ability to support future growth opportunities under the

refreshed strategy and deliver increased returns to shareholders.

Stakeholder considerations

Shareholders

Shareholders’ expectations of the programme.

Impact on distributable reserves and ability to pay dividends.

Impact on capital available for future M&A.

Lenders and debt holders

Ability to stay well within financial covenant ratios and maintain

financing headroom, ensuring revolving credit facility banks

and private placement noteholders are not disadvantaged.

Approval of shareholder dividends

We also announced in December 2025 that we would continue

to provide regular returns to shareholders by maintaining, then

growing the regular dividend with adjusted earnings cover of

circa 2.5x, and provide additional returns of surplus capital to

shareholders as appropriate.

When considering the proposals to pay interim and final

dividends during 2025, the Board considered cash generation,

the performance of the underlying business and the long-term

impact of paying the dividends on the liquidity and solvency

positions. The Board also considered the impact of the dividend

decisions on expectations relating to the dividend policy.

The Board recommended a full-year dividend of 12.2 pence

per share, with payment of a final dividend of 6.8 pence to

shareholders in May 2026 and an interim dividend of 5.4 pence

in November 2025. This recommendation reflected the Board’s

confidence in the Group’s structural growth drivers into the future.

The Board concluded that it was in the long-term interest of the

Company to proceed with the payment of the dividends.

Stakeholder considerations

Shareholders

Shareholders’ expectations in relation to the payment of

dividends, both from a capital return perspective and as a signal

of future performance.

The Board also considered the impact of the dividend decisions

on expectations relating to the dividend policy.

Lenders and debt holders

The impact of paying dividends on whether the business

remained within the financial covenants agreed with lenders.

Employees

For employees who participate in the Group’s employee

share schemes, the payment of dividends enabled returns for

those employees.

Key to stakeholders

Investors

Customers

Suppliers

Employees

Communities

Lenders and

debt holders

24

Section 172(1) statement

continued

Application of the capital allocation framework

The Board applied the capital allocation framework below, when

considering the relative priorities for the use of cash during 2025.

Morgan Advanced Materials’ capital allocation framework is used to

prioritise the use of cash generated by the Group. The framework

addresses the investment needs of the business, regular dividend

payments and additional returns to shareholders.

The framework also seeks to maintain an appropriate capital

structure for the business and a strong balance sheet with solid

investment grade credit metrics.

The diagram below summarises the key priorities.

Reinvest for

organic growth

Maintain a strong balance sheet with solid investment grade credit metrics

Progressive

Dividend Policy

Strategic

investments

Return excess

cash to shareholders

Committed to

maintaining then growing

the dividend with an

adjusted earnings cover

of circa 2.5x.

Deliver regular cash

returns to shareholders.

Review the principal risks of the Group and relevant financial

parameters, both historical and projected, including liquidity,

net debt* and measures covering balance sheet strength and

cash flow.

These risks and financial parameters are considered by the

Board when assessing the viability of the Group, as set out

on pages 53 and 54.

Capital spend to sustain

our existing operations,

drive efficiency, address

limited capacity needs,

and improve safety

and environmental

performance.

Complementary,

disciplined M&A focused

on accelerating margin.

Investment in structural

changes and active

portfolio management.

Return cash through

share buyback

programmes or payment

of special dividends

as appropriate.

Capital allocation framework

Morgan Advanced Materials has applied its capital allocation framework during 2025 as follows:

12.2p

Maintained its full-year dividend

at 12.2 pence

£76.2m

Total consideration for the sale of MMS

£67.1m

Investment in CAPEX

Strategic Report

Governance

Financial Statements

25

Morgan Advanced Materials

/

Annual Report 2025

Non-financial and sustainability

information statement

‘Our business model’ on pages 8 and 9 provides an insight into the key resources and relationships that support

the generation and preservation of value within Morgan Advanced Materials. All of our non-financial KPIs are

presented together on pages 18 to 19. A summary of our principal and emerging risks, including those related to

ESG matters, as well as a description of our risk management process, starts at page 41.

Areas of impact

Related principal

risks, pages 41 to 45

Outcome of policies, due

diligence and impact of activities

Annual Report page references and

relevant sections on our website

Employees

The Group has an overarching policy

designed to attract, develop, reward,

retain and engage talented people and

support an inclusive, safe and ethical

workplace. The Group policy is

supplemented by a number of people

policies specific to the business or

jurisdiction.

Our Environmental, Health and Safety

(EHS) Policy is designed to promote a

culture of ‘zero harm’ for our

employees, contractors and visitors,

and eliminate and control health risks

proactively.

Environment,

health and safety

Business change

and development

Employee engagement is at

75%, from a survey conducted

during the year

LTA rate, the headline*

measure for health and safety,

was 0.18

Our people and communities

(pages 30 to 31)

Effective engagement with our

stakeholders (pages 20 to 21)

Monitoring and embedding

culture (page 63)

Engaging with our workforce

(pages 64 to 65)

ESG policies

ESG goals

Health, safety and wellbeing

Diversity, equity and inclusion

Gender pay gap

Our people and communities

Environmental

matters

Our EHS Policy sets out the Group’s

commitment to the protection of the

environment in the communities

where we operate, work and live. The

Policy sets out our intention to reduce

energy and water use, reduce our

dependence on natural resources,

protect biodiversity and aim to

maximise the positive impact of our

products. For our TCFD regulation

disclosure, see our ‘Responsible

business’ section on page 26.

External

environment

Environment,

health and safety

Data gathering on GHG

emissions

Audits under the EHS Policy

Annual self-certification

Our ‘Speak Up’ hotline

Internal audit processes

A responsible business,

incorporating TCFD (pages 26

to 40)

Environmental Policy

Sustainability & Responsibility

Report

Climate action

Water conservation

TCFD Reporting

Social and

community

matters

Our sites take ownership of local

community engagement to support

our strategic priorities and benefit local

communities.

Business

continuity

Our business and our

employees are more deeply

connected to our local

communities

A responsible business,

incorporating TCFD

Effective engagement with

our stakeholders

ESG policies

Community

Human rights

Our Human Rights Policy establishes

our commitment to protect the human

rights of everyone who works for the

Group and all those who have dealings

with us. The Policy is supplemented by

the Morgan Code.

Legal and

regulatory

No incidents of human rights

abuse or modern slavery were

identified during 2025

Monitoring of compliance with

the Morgan Code

Supplier due diligence

processes

Publication of our Modern

Slavery Statement on our

website

Effective engagement with

our stakeholders

A responsible business,

incorporating TCFD

ESG policies

ESG goals

Modern Slavery Statement

Human rights

Ethics hotline

Anti-bribery,

and anti-

corruption

The Morgan Code; Bribery,

Corruption & Facilitation Payments

Policy; Gifts & Entertainment Policy;

and Donations & Sponsorships Policy

make up our key anti-bribery and

corruption policies. Together these

policies seek to prevent bribery and

ensure that our business is undertaken

in an ethical manner and in compliance

with all applicable anti-bribery and

anti-corruption laws.

Legal and

regulatory

Regular training provided to

employees, via e-learning

modules, with high completion

rates

Any reports of breaches in

compliance are investigated

and reported to the Audit

Committee, and appropriate

action is taken

Monitoring and embedding

culture

Risk management (pages 41

to 45)

Ethics and compliance

Supplier Code of Conduct

A responsible business

A responsible

business

Alignment to strategy

To improve the execution of our strategy and deliver our

sustainability goals we have set three strategic execution

priorities for the coming years:

Transform operational effectiveness through

safer, cleaner operations

a.

Health & Safety: Embedding robust safety practices and

process safety management will reduce incidents, protect

our workforce, and ensure uninterrupted operations,

all critical for efficiency.

b.

Environment: Continued focus on environmental controls

will minimise risks such as spills or emissions, safeguarding

compliance and reputation.

c.

Sustainability: Streamlined operations will lower resource

consumption and waste, driving cost savings and supporting

our ESG commitments.

Drive stronger growth by meeting market

demand for sustainable solutions

a.

Health & Safety: Demonstrating a strong safety culture

builds trust with customers and partners, making us a

preferred choice.

b.

Environment: Offering solutions that reduce environmental

impact aligns with customer sustainability goals, and creates

new revenue streams.

c.

Sustainability: Co-developing sustainable practices through

customer partnerships and supply chain engagement will

support our position as a leader in responsible growth.

Maximise portfolio value

a.

Health & Safety: Many of our products are integral to customer

safety applications, meaning our commitment to safety directly

enhances their operational reliability and risk management.

b.

Environment: Our technologies improve efficiency in customer

processes, reducing energy use and emissions.

c.

Sustainability: By delivering solutions that combine safety,

efficiency, and sustainability, we strengthen customer trust

and differentiate our products.

Contents

Our environment

27

Our people and communities

30

TCFD reporting

32

26

26

Our environment

We are committed to decreasing our carbon emissions and

lowering our energy consumption. Our targets were validated

as science-based (SBTi) targets in 2023 and are aligned with

the well below 2°C ambition for our Scope 1 and Scope 2

commitment. To achieve this we are focusing on our operational

efficiency and are actively evaluating alternative manufacturing

technologies.

Energy performance in 2025

Our Scope 1 and Scope 2 GHG emissions come from our

manufacturing operations and represent the part of our footprint

that we can directly influence by changing the way we use energy

in our facilities.

Scope 1 GHG emissions (tCO

2

e) from stationary fuel

combustion were 106,088 tonnes and Scope 1 GHG

emissions (tCO

2

e) from process and mobile emissions were

5,976 tonnes (of which process emissions were 5,655 tonnes).

For 2025, total Scope 1 GHG emissions (tCO

2

e) were 112,064

tonnes, which is a 0.9% increase over 2024 values and 45.5%

decrease over 2015 values.

Market-based Scope 2 GHG emissions (tCO

2

e)

1

were

33,072 tonnes, which is a 21% decrease over 2024 values

and 76% decrease over 2015 values.

Our GHG emissions, such as carbon dioxide (CO

2

), are mostly

generated by the combustion of fossil fuels at various stages

of our manufacturing processes. We track these using a

reporting methodology based on Department for Environment,

Food and Rural Affairs (DEFRA), which is applied globally

(2025 Version 1, published 10 June 2025).

Green energy procurement

As part of our SBTi commitment, we have a target to procure 80%

of our electricity from renewable and nuclear sources by 2025,

reaching 100% by 2030.

In 2025, we reached our SBTi target of 80% renewable and

nuclear electricity. Our total energy consumption (fuel and

electricity) was 897.4 GWh for 2025, which is 2% lower than 2024.

We have put in place a number of long term contracts to secure

our renewable and nuclear energy portfolio and continue to strive

to get these contracts in place where possible.

Assurance

Our Scope 1 and Scope 2 GHG emissions and selected other

environmental metrics for 2025 have been assured by ERM CVS.

A copy of the assurance report can be found on our website at

morganadvancedmaterials.com

Our calculation methodology details can be found in

the Basis for Reporting, which is available on request at

investor.relations@morganplc.com

Our decarbonisation roadmap

We continue to improve the efficiency of our gas-fired kilns whilst

actively assessing the feasibility of green technology options for our

material portfolio. For further information on our path to net zero,

see page 38.

Climate action

Pursuing carbon neutral operations by 2050

1.

The Scope 2 emissions figure was calculated using the market-based methodology.

The location-based figure for the same period is 144,130 tCO

2

e.

Natural gas

Renewable and nuclear purchased electricity

Non-renewable, Standard Grid electricity

LPG/propane

Fuel oil

Green on site Generation

Steam/Other

Governance

Financial Statements

Annual Report 2025

Our environment

continued

Energy efficiency projects of note in 2025

Thermal Products

One of our major sites in the US has installed a new sitewide

asset energy monitoring system.

One of our sites in India has installed a more energy efficient

water cooling system.

One of our sites in France replaced a gas asset with a new

electric annealing oven.

Performance Carbon

One of our sites in the US installed a more efficient thermal

oxidiser system.

Technical Ceramics

One of our UK sites has installed photosensor controllers and

has been working to systematically reduce firing temperatures.

One of our sites in Germany has been focusing on more

efficient furnace cycles and implemented a new, more efficient

electrical dryer.

Green energy generation projects

Performance Carbon

Solar farm on land adjacent to Performance Carbon plant

in the US was completed.

Climate action

(continued)

Pursuing carbon neutral operations by 2050

Case study

Largest investment

in solar power activated

In 2025 a Performance Carbon site in the US

activated a 1.8 MW solar array which is the largest

in our portfolio. The installation was complex,

taking 13 months to complete and requiring significant

preliminary work to prepare the site before

construction could begin. The field will generate

93,000 MWh of electricity over its lifetime and power

12% of the sites annual electricity requirement.

Case study

Decarbonisation Roadmap

on track

During 2025, a new electric annealing oven was

brought into operation at our Thermal Products site in

France. A key part of our decarbonisation strategy,

alongside other efficiency initiatives, this multi-year

project delivered energy savings of 740 tonnes CO

emissions per annum.

We aim to use water responsibly across our business. We use this

valuable resource to cool our machines, clean our products and in

our sanitary facilities for our workforce. We have targets to reduce

water across all sites, and in water stressed areas in particular to

ensure we are taking action in the regions where it matters the

most. By improving our water usage, we have a positive impact in

the communities where we operate.

For 2025, the list of water-stressed countries includes Chile, China,

India, Italy, Luxembourg, Mexico, South Africa, Spain, Turkey and

the UAE. Our sites in the state of California, USA, are included in

our water stress figures, based on water stress issues within the

state. We have continued to make investments in closed loop

cooling systems across our sites, making significant strides towards

our 2030 goals.

In 2025 we made further improvement in our total water withdrawal.

This reduction was driven by our investment in water recirculation

projects through 2023 and 2024, better operational efficiency

practices and changes in product mix. Water withdrawal intensity

was 1,383 m

3

/£m (revenue), compared to 1,459 m

3

/£m (revenue)

in 2024.

Examples of water reduction projects:

Thermal Products

One of our major sites in the US has introduced a system to

recycle waste water from one process as an input into another.

One of our major sites in the US has introduced dynamic water

consumption monitoring to identify and reduce waste.

Technical Ceramics

One of our sites in the US has installed a closed loop water

recycling system in plating area.

Water conservation

Managing our impact

Waste performance

Through continuous improvement efforts we are reducing all hazardous and non-hazardous waste streams. Every year we set internal

targets to reduce waste generation and increase recycling. This is achieved through activities such as Kaizen and 6S (Sort, Set in order,

Shine, Standardise, Sustain and Safety) which focus on improving quality and eliminating waste. We are making good progress to reduce

our waste generation, improve recycling and minimise hazardous waste.

Waste and recycling

Units

2025

2024

2023

2022

2021

Total waste generated

metric tonnes

33,889

34,972

36,853

47,879

39,918

Waste generation intensity

metric tonnes/£m

33

32

33

43

42

Total waste recycled

metric tonnes

16,895

16,905

17,384

25,406

21,547

% recycling of total waste

%

50

48

47

53

54

Hazardous waste generated

metric tonnes

1,601

2,106

2,109

2,891

2,509

Case study

Case study

Our people and communities

Health, safety and wellbeing

At Morgan Advanced Materials, safety is a shared responsibility.

We rely on the expertise and commitment of our operational and

safety teams to uphold high standards across our sites, ensure all

incidents are thoroughly investigated, and implement effective

controls to prevent recurrence. Actual and potentially severe

incidents are reviewed biweekly with the Group CEO and

Divisional Presidents. We recorded no fatalities in 2025 and

have maintained this record since 2012.

Our Group Environmental, Health and Safety (EHS) Policy –

available in local languages – is supported by our Company EHS

Framework, which guides sites in establishing robust local EHS

processes. Compliance is assessed through our annual audit

programme, and our ThinkSAFE programme continues to embed

Visible Safety Leadership, Don’t Walk By, and ‘TAKE 5’ behaviours

across the business.

Protecting our people from hazardous material risks remains central

to our EHS approach. We assess and monitor controls, provide

targeted training, and require each site to maintain an industrial

hygiene monitoring plan to identify potential exposures and define

appropriate mitigation.

Progress in 2025

In 2025, we delivered quarterly safety topics focused on the

business’s key EHS challenges, reinforcing our ThinkSAFE

commitment and the ‘TAKE 5’ programme message.

We were disappointed to see that our LTA rate increased to 0.18

in 2025. Through accident and incident root cause analysis we

identified a skills gap among frontline site leaders in balancing safety

leadership with production and people responsibilities. In response,

we launched the ThinkSAFE Leaders programme to strengthen

safety leadership capability and reinforce expectations for sustaining

a proactive safety culture.

To enhance clarity on safety risk management requirements, we

introduced new safety standards and guidance, supported by

site-level gap analyses. Compliance audits will begin in 2026 to

assess adoption and effectiveness.

We also launched our Process Safety Risk Management framework,

identifying all major accident hazards across the business. We are

now conducting process hazard analyses for all high-risk processes

and providing organisation-wide training to embed strong process

safety practices and reduce the likelihood of serious events.

As a result of this work to clarify and standardise safety

performance, we are now able to report additional safety

metrics. These give additional insight into our safety performance

and will be important in tracking the overall maturity of our

safety programme.

New safety metrics (all rates per 100k hours worked)

Units

2025

Full Year

Total Recordable Injury (TRI) Rate

Rate

0.41

Process Safety Incident Rate

Rate

0.21

Total Recordables included in TRI Rate calculation based on OSHA record keeping criteria

applied globally. Process Safety Incidents only include Actual Process Safety Incidents (not

Near Misses)

Our safety plans for 2026 and beyond

In 2026, we will complete the roll out of the thinkSAFE Leaders

programme, to strengthen our operational safety leadership.

Closing this skills gap will be central to improving our safety

performance and maturing our safety culture. We will also

improve our incident investigation process, through training, by

strengthening root cause analysis capability and ensuring we are

taking the learning opportunities that arise from events and then

provide thorough follow up of corrective actions. We will continue

to perform and build on the findings of Process Hazard Analyses

studies to deepen process safety knowledge, implement

improvement actions, refresh maintenance programmes and roll

out enhanced, localised process safety training. Alongside this,

we will focus on reviewing and improving the actions driving our

leading indicators, to maximise their effectiveness and ensure the

actions taken positively impact on our safety performance.

Community

In 2025 our sites engaged in a number of community projects

as follows:

Our Penn State Carbon Centre of Excellence (CoE) team

were busy igniting curiosity and hands-on learning in local

schools, engaging students from elementary level to college.

The team welcomed students to the CoE to explore cutting-

edge carbon products, from wind turbine brushes to wheel

flange lubricants, while witnessing the science behind them

through dynamic demonstrations.

Our Fostoria, Ohio, USA team came together to support the

Seneca Humane Society through a generous donation drive.

Employees collected essential items to help improve the lives

of animals in need.

Our MMTCL team in India, donated a blood transportation van

to the Red Cross. This contribution represents a meaningful

investment in community health, aligning with the humanitarian

values of our team; to improve the quality of life.

Our Atlacomulco, Mexico team reaffirmed their commitment

to education and development as key pillars for the future, by

hosting a scholarship award ceremony for the children of their

employees. On the day, the scholarship beneficiaries enjoyed

a guided tour of the Atlacomulco facilities, where they learned

about the site’s production processes and saw the effort and

dedication of their family members in action. This programme

recognises the commitment of the families that are part of

Morgan Advanced Materials, while supporting the next

generation in achieving their academic goals.

For safety week,

Our team in Argentina got family members involved. Focusing

on fire safety through creative artwork, the children of the site’s

employees reminded everyone that safety begins at home,

grows at work, and lives in each of us.

While our Jingmen City, China team organised fun games to

promote fire safety knowledge and emergency evacuation.

30

Diversity and inclusion

We are committed to creating a diverse and inclusive culture as

our people are the driving force behind our success. We aim to

be open and engaging to all.

In 2025, our Women@Morgan employee resource group

tackled key health subjects that face men. Organising health

related talks on prostate cancer and men’s mental health.

Our Erlangen, Germany team welcomed five new apprentices

joining us on a three and a half-year scheme. The 2025

apprentice group will spend half of their time in practical training

with us, and the other half attending college classes. They finish

with an official German government degree and are recognised

as highly skilled co-workers.

You can find examples of our engagement on LinkedIn.

In 2025, Women@Morgan continued empowering women

globally, by increasing internal engagement through topics relevant

to all employees. We marked International Women’s Day with

a well attended online webinar on allyship, alongside on site

celebrations such as female empowerment film screenings and the

King’s Trust ‘Brilliant Breakfast’ initiative. Throughout the year, we

delivered additional virtual sessions covering men’s mental health,

caregivers, and prostate cancer, with plans to address common

female health conditions in 2026. Our Women@Morgan country

chapters also maintained regular meetings and activities focused on

their local priorities and community initiatives.

You can find examples of our engagement on our website:

morganadvancedmaterials.com

Gender pay gap reporting

The UK Government introduced gender pay gap reporting

regulations for companies with more than 250 employees. The

phrase ‘gender pay gap’ refers to the difference in the average

earnings of men and women within the same organisation.

In 2025, the average gender pay gap for our UK workforce was

16.0% (17.6% in 2024). Our full Gender Pay Gap Report is

available on our website.

We met the Board diversity targets set out in the Financial Conduct

Authority’s Listing Rules: our Board composition was 50% female,

and the role of Senior Independent Director was held by a woman.

Male

Female

Board

4

Male 50% (2024: 57%)

Board

4

Female 50% (2024: 43%)

Executive Committee

6

Male 75% (2024: 67%)

Executive Committee

2

Female 25% (2024: 33%)

Senior leaders

30

Male 61% (2024: 67%)

Senior leaders

19

Female 39% (2024: 33%)

All leaders

267

Male 64% (2024: 66%)

All leaders

150

Female 36% (2024: 34%)

All Employees

4,896

Male 61% (2024: 64%)

All Employees

3,192

Female 39% (2024: 36%)

Workforce by gender:

Governance

Financial Statements

Annual Report 2025

32

Task Force on Climate-related Financial Disclosures (TCFD) reporting

Our disclosures within this Annual Report are consistent with

TCFD recommendations and the recommended disclosures as

required by the UK Listing Rules 6.6.6R(8).

These disclosures also comply with the requirements of the

Companies Act 2006 as amended by the Companies (Strategic

Report) (Climate-related Financial Disclosure) Regulations 2022 and

UK Government Climate-Related Financial Disclosure guidance.

We consider our climate related financial disclosures to be

consistent with eight of the eleven recommendations, which are

set out in the table below. We are adopting an explain stance

for ‘Strategy’ requirements b) and c), and ‘Metrics and Targets’

requirements b).

Under the strategy pillar we have modelled our most material

risks under a range of scenarios and identified the tactical and

strategic mitigations needed to continue to deliver on our strategy.

Financial impacts have been assessed and are presented in this

Report but do not encompass all transition aspects such as changing

stakeholder expectations.

To improve our metrics and targets reporting, in 2024 we

developed a full Scope 3 inventory, marking a significant

improvement in our reporting methodology and accuracy.

We are continuing to refine this and we will share the results

once appropriate third party validation has been obtained.

Summary of disclosures:

Section

Requirements

Page

Governance

a) Describe the Board’s oversight of climate-related risks and opportunities.

b) Describe management’s role in assessing and managing climate-related risks and opportunities.

33

Strategy

a) Describe the climate-related risks and opportunities the organisation has identified over the short,

medium and long term.

b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses,

strategy and financial planning.

c) Describe the resilience of the organisation’s strategy, taking into consideration different

climate-related scenarios including a 2°C or lower temperature scenario.

34 – 38

Risk

management

a) Describe the organisation’s processes for identifying and assessing climate-related risks.

b) Describe the organisation’s processes for managing climate-related risks.

c) Describe how processes for identifying, assessing and managing climate-related risks are integrated

into the organisation’s overall risk management.

39

Metrics and

targets

a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line

with its strategy and risk management process.

b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the

related risks.

c) Describe the targets used by the organisation to manage climate-related risks and opportunities and

performance against targets.

39 – 40

Governance

Our climate-related risk and opportunities governance structure

starts with the Board, and cascades down through the organisation,

as outlined in the table below.

Our Board has oversight of our climate change, environmental and

corporate responsibility matters and ensures that our Executive

team progresses as planned to meet our commitments and goals.

The Board receives a written update from the Group Director

for Environment, Health, Safety and Sustainability four times a

year on progress against climate-related activities and actions.

A presentation and discussion of climate-related matters is included

as a standing topic in the CEO’s report to the Board. The impact of

major capital expenditure projects on our 2030 environment goals

is also assessed as part of the Board review process.

The metrics reviewed at each meeting include:

progress towards our 2030 absolute Scope 1 and Scope 2 CO

2

e

emissions target; and

progress towards our 2030 water withdrawal and water

stress targets.

During 2025 the Board received external training on Corporate

sustainability, including an update on the legislative landscape and

quantitative examples of creating value from climate-related risks

and opportunities. The Board received four internal updates from

the Group Director EHS&S on the Group’s sustainability strategy

and progress against an in-year plan.

Strategic Report

Governance

Financial Statements

33

Morgan Advanced Materials

/

Annual Report 2025

ESG Governance structure

Board

EHS&S leadership teams

Audit

Committee

Remuneration

Committee

Nomination

Committee

Executive Sustainability

Council

Workstream SteerCo

Divisional leadership teams

Initiatives

Board and Management oversight of climate-related risks and opportunities

Board of Directors

Frequency:

Four times per year.

Chair:

Ian Marchant.

Attendees:

Main Board

Has oversight of our climate change, environmental and corporate responsibility matters to ensure our Executive team

progresses as planned to meet our commitments and goals.

Climate-related risks and opportunities are a scheduled Board agenda item four times per year and progress on

environmental matters is reviewed four times per year, with updates on CO

2

e

and water progress in each meeting.

The competencies of the Board can be found on pages 57 and 58 of the Annual Report, which includes skills and experience

relevant to clim ate matters.

Nomination

Committee

Ensures the Board possesses the correct depth and balance of capabilities to support the Group’s long-term position,

including the expertise to assess the impact of climate change.

Audit

Committee

Supports the Board on matters relating to financial reporting, internal control and risk management. The Committee reviews

the integrity of the Group’s climate-related financial reporting and the process used to develop our TCFD-aligned disclosures

and assesses climate-related risks for the purpose of monitoring management’s progress in addressing them.

Remuneration

Committee

Responsible for Remuneration Policy, including the inclusion of sustainability-linked metrics and targets within performance-

related pay. GHG emissions targets are part of our Long-Term Incentive Plan (LTIP).

Executive

Sustainability

Council

Frequency:

Four times per year.

Chair:

Damien Caby.

Attendees:

Executive plus Group Function Senior Reps and

Workstream Initiative Leads.

Responsible for execution and monitoring of the sustainability strategy, including environmental and corporate responsibility

matters, and the processes and controls regarding climate risks at a Group-level. Includes Divisional Presidents.

Provides strategic direction, secures investment and resources.

Provides oversight and decision-making across the workstreams, manages escalation with a focus on outcomes and benefits.

Workstream

SteerCo

Frequency:

Bi-monthly

Chair:

Group Finance Director.

Attendees:

Initiative Leads, Group EHS&S Director, Group ESG

Manager, Group Risk Lead, Divisional ESG Leads, Group Head of FP&A, Group Comms Director.

Monitors delivery against our net zero strategy through various workstreams, manages dependencies across projects.

Resolves risks and issued raised and identifies escalations.

Reports to the Executive Sustainability Council.

EHS&S

leadership team

Led by the Group Director EHS&S and comprising EHS&S leads from each of the divisions, the team meets monthly to

review strategy implementation and performance against 2030 targets.

Divisional

leadership teams

Each division has a leadership team and they are responsible for sharing, reviewing and managing of both principal and

emerging risks including climate risks. This includes related policy, guidelines and process, and is subject to Board oversight.

The divisions develop business-specific risk registers and business continuity plans which are used in their annual strategic

planning. These are presented to the Audit Committee and Executive Committees.

The individual divisions monitor their own performance against ESG targets and implement climate-related policies and

projects.

Representatives from the divisional leadership teams are members of the Workstream SteerCo to ensure smooth rollout of

workstream-related projects in the division.

Initiatives

Frequency:

As required.

Chair:

Initiative Lead.

Attendees:

Divisional Functions, Group EHS&S, Finance as appropriate.

34

Task Force on Climate-related Financial Disclosures (TCFD) reporting

continued

Strategy

Identification of risks and opportunities

In late 2020, we conducted a comprehensive materiality

assessment to establish our ESG priorities up to 2030. We obtained

feedback from our Board and surveyed over 160 senior business

leaders to determine what ESG means to our organisation.

Additionally, we gathered input from internal and external

stakeholders and assessed our business performance against

key ESG topics. Based on this information we identified our

sustainability impacts on the environment and society as well as

the risks and opportunities that were material to our business,

and set ambitious goals for the future.

During 2025, we reviewed this materiality assessment. We engaged

a number of key internal and external stakeholders, to ensure the

topics identified remained relevant, and to better understand our

business strategy and resilience. Having considered the all-sector

and sector-specific risks and opportunities in Tables A1.1 and A1.2

in the TCFD guidance, the information in the table on page 35

summarises our material risks and opportunities across the

appropriate time horizons.

Climate-related risks and opportunities

Climate-related risks and opportunities could impact the Group

strategy over the short, medium and long term. These are aligned

with our broader risk assessment criteria and are defined as follows:

Short term (0–3 years). Detailed financial plans are developed,

incorporating the strategic spending requirements to decarbonise

our business and realise growth opportunities.

Medium term (3–10 years). Aligns with our 2030 ESG targets.

Each division is developing transition plans within this time

horizon to realise these targets.

Long term (10–25 years). Aligns with our 2050 ESG ambitions.

In this time horizon we expect to see a significant shift in

technologies to allow us to decarbonise our business but realise

that significant uncertainties exist and must be considered when

developing long-term transition plans.

Through a review of our Materiality Assessment in 2025 we

have appraised our climate related risks over the short term,

and the potential impacts were concluded to not be material.

We have therefore focused our detailed scenario analysis over

the medium-term and long-term and prepared the management

responses on the same basis.

We recognise the importance of scenario analysis in the

development of our strategy. During the 2025 strategy plan review,

the glidepath to reduce reliance on natural gas was reviewed by all

of the Divisions.

In the short term, the business focus is on efficiency improvements

while the technology teams and global kiln working group conduct

pilot studies to validate emerging green technologies. Development

of a glidepath aligned with the revised group strategy will be a focus

for 2026, where the global kiln working group will be leveraged.

Scenarios chosen

We have assessed the potential likelihood and impact of relevant

climate-related risks and opportunities across a range of scenarios,

as set out in the table below.

Transitional risks: The business reliance on natural gas. We have

modelled the potential financial impact of GHG taxes using our

10 sites that have the highest GHG emissions output.

Physical risks: We consider Heat Stress and Water Stress to be

the most significant physical climate change risks for the Group.

We have considered the financial impact of Heat Stress and/or

a Water Stress incident for the top 25 applicable sites. Our

applicability assessment considers revenue, GHG emissions,

water consumption and whether the site is located in a geography

or region that is likely to be exposed to a water stressed region.

We have also modelled the financial impact from sea level rise

and coastal flooding events for nine sites which were selected

due to their low lying locations and proximity to the coast.

During the 2025 strategy review, each division reviewed their

glidepath to reduce reliance on natural gas. In the short term,

the business remains focused on efficiency improvements. Our

technology teams and global kiln working group are conducting

pilot studies to validate emerging green technologies which may

support more meaningful reductions in the longer term. During

2026, we will focus on developing glidepaths that are aligned to the

Group’s revised strategy and we will leverage the work undertaken

by our global kiln working group.

Summary of scenarios

A range of scenarios were chosen to explore the impact from a range of possible outcomes. The likelihood in each case was assessed and

factored into the results.

Scenario

Deep and rapid cuts

Current trajectory

Unchecked pollution

Temperature

<2°C

2–4°C

>4°C

Description

the optimistic trajectory based

on government pledges.

medium-case scenario where

warming is somewhat limited.

no steps are taken to limit

warming. Global collaboration

focuses on protecting the

population.

Likelihood

High

Medium

Low

IEA/IPCC*

APS**, SSP 1-2.6

SSP 3-7.0

SSP 5-8.5

*

IEA – International Energy Agency, RCP – Representative Concentration Pathway

** Announced Pledges

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Negligible

(£0–£0.1m)

Low

(£0.1–£1m)

Moderate

(£1–£5m)

Significant

(£10–£20m)

High

(£5–£10m)

Critical

(>£20m)

Financial impact

Current Trajectory

Low

Low

Climate change action

is limited initially but

stronger actions follow

Risk

Reliance on natural gas

Heat stress

Water stress

Sea level rise

Medium term

Long term

Low

Low

Deep and Rapid Cuts

Medium term

Long term

Low

Low

Low

Optimistic trajectory

based on current

government pledges

Risk

Reliance on natural gas

Heat stress

Water stress

Sea level rise

Very limited steps are

taken and warming

continues unchecked

Risk

Reliance on natural gas

Heat stress

Water stress

Sea level rise

Medium term

Long term

Low

Negligible

Negligible

Unchecked Pollution

36

Task Force on Climate-related Financial Disclosures (TCFD) reporting

continued

Risk/opportunity description

Management response

Reliance on natural gas

Natural gas is widely used across

the Group especially in our high-

temperature furnaces.

1.

Continued reliance on natural gas

increases the Group’s financial

exposure with increasing taxation

and wholesale costs.

2.

Transitioning to lower carbon

manufacturing processes requires

investment. In many cases, the

technology is not yet available

to enable either electrification

or other low carbon fuels (such as

green hydrogen).

3.

The reputational impact from being a

carbon intensive business may deter

potential employees and third parties

that want to work with us.

1. As global energy markets evolve, we recognise the increasing impact of our reliance on natural gas. Our

strategic and financial planning models reflect rising wholesale prices and we look to mitigate these in the

short term through multi-year contracts and robust financial planning. We continue to monitor long-term

trends closely.

Under the scenarios analysed, GHG pricing instruments are anticipated to come into force closer to 2030.

Based on current guidance, most of our sites operate below the emissions thresholds, but we remain

proactive in preparing for expected future regulatory changes. We expect the timing of these regulatory

changes to be phased across political and geographical jurisdictions over the medium to long-term. This is

reflected in our transition plan and our approach to investments.

Internally, our operational excellence programmes focus on optimising gas consumption and improving

process efficiency. Aligned to our commitment to decarbonisation and ensuring long-term resilience of the

business, we remain committed to sourcing renewable and nuclear energy.

2. We are progressing our transition to low carbon manufacturing through strategic investments and

research that supports decarbonisation across key product families. In 2025, we invested in another new

electrical furnace, see page 28, to enhance operational efficiency and reduce emissions. We also piloted a

shadow carbon price for capital expenditure proposals and have a global rollout planned for 2026. This

approach ensures future impacts of carbon pricing mechanisms are integrated into investment decisions.

Our cross-divisional global kiln working group is focused on identifying and driving efficiency

improvements and evaluating the readiness of the next-generation of low-carbon technologies. We are

also proud to be signatories of the Ceramics UK Towards Net Zero initiative and are active participants in

its hydrogen research programme.

3. Managing stakeholder expectations relies on us articulating Morgan Advanced Materials’ value

proposition by communicating the broad role that Morgan Advanced Materials products play in the

energy transition. Through transparent and consistent disclosure and embedding our strategy, we can

demonstrate our commitment, supporting the development of long-term customer partnerships and

an attractive shareholder proposition.

Relevant metrics:

Commitment to reduce Scope 1 and Scope 2 GHG emissions by 50% by 2030 from a 2015 baseline.

Commitment to source 80% renewable and nuclear electricity by the end of 2025, which was achieved.

Heat stress

Heat stress at our manufacturing

facilities could negatively affect our staff,

plant and materials.

Extreme heat events are becoming more frequent, with the highest impact in the Unchecked Pollution

scenario. To safeguard our workforce and maintain operational continuity, we have implemented

targeted measures at sites most exposed to rising temperatures. These include air-conditioned rest areas,

cooling equipment, and revised shift patterns to avoid peak heat hours.

Our global manufacturing footprint and diversified supply chain provide flexibility to relocate production

if necessary. Heat related stress assessments are integrated into our manufacturing strategy.

Relevant metrics:

We are now monitoring heat stress incidents through our H&S reporting system.

Water stress

Water is used in the manufacture of

our materials. Drought events where

process water is limited could impact

our sites.

Drought events increase in duration in the Unchecked Pollution scenario, underscoring the importance of

water stewardship in our operations. As part of our transition plan to 2030, we are investing in R&D to

reduce water use across key product families and share best practices in conservation.

Operational projects are already delivering results. For example, at our Gujarat facility in India, a new

recirculating cooling tower will save approximately 3.6m litres of water annually. These initiatives help us

reduce consumption and avoid potential operational disruptions.

We have set Group-level targets to cut total water withdrawal and withdrawal at water-stressed sites

by 30% by 2030, with progress reviewed regularly by management and the Board. Water stress

assessments are integrated into our manufacturing strategy.

Relevant metrics:

30% reduction in water withdrawal by 2030 from a 2015 baseline and a 30% reduction in water

withdrawal at water stressed sites by 2030 from a 2015 baseline.

Sea level rise

Some of our factories are in low lying

locations. Flood events could damage

plant and interrupt supply of product

to customers.

Our analysis shows that the impact of sea level rise alone is low. However, risk increases when combined

with coastal flooding events, which could lead to flood damage, production loss, and potential protection

or relocation costs.

We assessed exposure across our most at-risk sites. Of our 57 manufacturing locations, 4 have more than

a 1% annual flood risk before 2050. We considered scenarios ranging from annual floods to once-in-a-

thousand-year events.

This risk is actively managed through our risk framework and ongoing review of our physical asset

portfolio to ensure resilience and continuity.

Relevant metrics:

Impact analysis will be updated as new data becomes available. Metrics not currently developed.

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Opportunities

Climate driven opportunities and their impact on our strategy

Our customers’ exposure to carbon pricing creates opportunities for Morgan Advanced Materials. Our thermal management solutions

help customers maximise efficiency and minimise carbon footprints. This is a critical advantage in regulated markets.

We also see significant transition opportunities in sectors affected by global climate policy. Success depends on understanding customer

needs and tailoring our offering accordingly. Some markets seek partners aligned with their sustainability goals, while others focus on

regulatory compliance. Our strategy is to serve both ends of this spectrum – and everything in between.

Opportunity description

Management response

Energy Generation

Our growth opportunity in the energy sector extends beyond supplying components for wind

turbines and solar panels. Many of our products also enhance the efficiency of traditional

energy generation, helping operators reduce emissions and improve performance. This

positions us to benefit from both the expansion of renewable energy and the modernisation

of conventional power infrastructure.

Transport

We are a recognised leader in electrified rail, a sector where demand is accelerating as

governments and operators invest in low-carbon transport. Our recent innovations such as

integrated heating systems are helping rail networks reduce energy consumption and improve

reliability. These technologies position us to capture significant growth as electrification

projects expand globally.

Beyond rail, we are well placed to support the next generation of aerospace and automotive

platforms. Through deep customer relationships and advanced engineering capabilities,

we enable the transition toward greater efficiency, sustainable fuels, and ultimately green

alternatives.

Metal Processing

In markets already impacted by carbon pricing and cross-border tariffs, we deliver value

through our market-leading thermal management solutions. Using advanced heat-flow

modelling, we help customers maximise energy efficiency, reducing both operating costs

and emissions. These capabilities position us as a strategic partner for businesses seeking to

maintain competitiveness while meeting tightening environmental regulations.

Impact of risks and opportunities on the

business strategy

Climate-related risks

As we execute our strategy, we recognise that increased

production could lead to higher emissions, creating long-term

exposure to carbon taxes across all scenarios. To mitigate this,

we are strengthening our transition plan, ensuring robust

management of emissions and other critical resources such as

water. Failure to proactively implement our decarbonisation

roadmap could impact our ability to execute strategy effectively.

Currently, only two sites operate under emissions trading schemes.

However, we anticipate broader exposure to carbon pricing

instruments and potential challenges in accessing affordable

renewable energy in the future. Proactive planning is essential

to safeguard our ability to deliver on strategy.

In the short to medium term, climate considerations are embedded

in financial planning decisions, including:

Renewable and nuclear electricity tariffs: Continuing investment

where feasible, despite rising energy costs. In 2025, our

consumption of renewable and nuclear electricity rose to 80%

from 75% in 2024.

Self-generation projects: In 2025, we commissioned a 1.8 MW

solar field at a Performance Carbon site in the US which is our

largest investment to date. The project, costing £2.8 million,

includes 4,264 panels and significantly boosts our renewable

capacity.

On-site renewable generation: In total, we generated 3.5 GWh

of renewable electricity in 2025, more than double the level of

renewable electricity generated in 2024.

Physical risks such as heat stress, water stress, and sea level rise

currently have limited impact on business strategy but remain

integral to decisions.

38

Task Force on Climate-Related Financial Disclosures (TCFD) reporting

continued

Business resilience

In considering our climate-related risks and opportunities under

these scenarios, we believe our business model and strategy is

sufficiently resilient to climate change. Our current assessment

indicates that the impact of climate-related issues has not

significantly impacted our financial performance or financial

position, and we do not anticipate that it will in the short to

medium term.

Our global footprint, strong market positions, and diverse portfolio

are our strengths. Our customer base is widely spread. We largely

make products where we sell them with localised supply chains.

In the event of a local shock, manufacturing of product could be

transferred to other sites within the division or Group.

Our scenario analysis around our natural gas reliance allows us

to plan for changes in operating costs and balance our global

manufacturing strategy.

As part of our strategic planning process in 2025, we have further

embedded climate considerations into our financial and strategic

planning processes through the piloting of a shadow internal carbon

price (ICP) on capex. Although the ICP is not a real cost of the

investment, it demonstrates what the impact would be of carbon

taxation forecast for 2030, and we will use it to evaluate and

compare potential investments. During 2025, the ICP was trialled

as part of our capital investment business case assessment process.

This will be rolled out to all capital investment business cases

reviewed at an executive level in 2026.

Therefore, the climate-related threats and opportunities identified

are emerging and/or operational risks that will continue to be

monitored and evaluated. The most significant risks have been

integrated into functional and divisional risk registers and they are

reviewed by risk owners.

Transition plan

The risks and opportunities considered by the Board have directly

informed our strategy to deliver on our 2030 goals. These form

the foundation of our net zero roadmap to ensure we achieve our

targets. We are mindful that external factors may have an impact on

our transition plan and we are monitoring geopolitical trends with

respect to climate change commitments.

We are making good progress. We have transitioned a number of

lower temperature furnaces and ovens from natural gas to electric

firing with good results and have reduced water usage considerably

through recycling. We are utilising the global kiln working group to

develop decarbonisation pathways for key products, gaining an

improved understanding of the technology availability and the cost.

We now understand our Scope 3 position and the opportunities in

more detail, leveraging supplier assessments to understand their

maturity and ensure alignment with our ambition.

Our net zero roadmap

Our net zero roadmap also incorporates Scope 3 emissions. In the near term, we are focused on identifying the largest

Scope 3 contributors and the solutions that will help us decarbonise. Over this period we will:

Convert some low temperature furnaces to electricity.

Develop Scope 3 emissions strategy.

Undertake lifecycle assessment on key products.

Refine divisional decarbonisation glidepaths.

80% of our electricity will be renewable and nuclear.

Develop engineering solutions to increase energy

efficiency and water recycling.

Include a shadow carbon price in capex business cases.

Invest in R&D for carbon-free furnaces.

Preparing for the future

We will begin to invest in decarbonising our business and value chain. We will:

Install pilot carbon-free furnaces.

Increase conversion of lower temperature furnaces

to electricity.

Work with our value chain to reduce Scope 3

emissions.

Invest in new technologies to transition the business to a greener future.

We will reduce our Scope 1 and 2 emissions by 50%.

We will source 100% renewable and nuclear-backed

electricity.

We will reduce our Scope 3 emissions by 15%.

We will convert higher temperature furnaces to

electricity/alternative low carbon fuel.

We will work with our value chain to further

reduce Scope 3 emissions.

We will convert remaining furnaces to carbon-free

alternatives.

Our ambition is to reach net zero Scope 1 and Scope 2

emissions by 2050.

2025

2027

2030

2050

Scaling up

Invest in key technologies

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Risk management

The Board recognises the need to understand and assess climate-

related risks. Risk management and internal control are fundamental

to achieving the Group’s strategic objectives. Principal and emerging

risks are identified both ‘top-down’ by the Board and the Executive

Committee and ‘bottom-up’ through the divisions and central

functions. Senior executives including the CEO and Executive

Committee are responsible for the management of the Group’s

principal risks, including climate related-risks. Further details on

our procedures for identifying, assessing, and managing risk can

be found on pages 41 and 42, in the ‘Risk management’ section of

our Annual Report.

Our Workstream Steering Committee meets bi-monthly to

oversee management of our most significant environmental and

climate-related risks.

The senior management teams for the different divisions are

responsible for developing risk mitigation and management

strategies for the risks identified for their individual businesses.

Each risk is assessed to determine its potential financial impact, and

potential likelihood of materialising. Mitigating controls are identified

and assessed to derive a net risk score, used for risk prioritisation.

Climate change is captured as part of the new combined principal

risk, External environment, which covers transition and physical

term risks listed on page 43 in the ‘Risk management’ section of

this Report.

The Board reviewed the preparedness of Morgan Advanced

Materials to the principal risks with a significant potential impact at

Group-level twice during 2025. Additionally, the Audit Committee

carried out a focused risk review of each division. These reviews

included an analysis of the principal risks, and the controls,

monitoring and assurance processes established to mitigate those

risks to acceptable levels. The overall risk from climate change was

assessed to have a high severity rating.

Metrics and targets

We have reflected on the most appropriate metrics and targets

to help us manage our climate risks and opportunities effectively.

These are identified in the management response table on page 36

and and their values are summarised here. We have had our

Scope 1, Scope 2 & Scope 3 targets independently verified by

the Science Based Targets initiative to ensure that our ambition is

aligned with the UN Paris Agreement on climate change well below

2°C scenario.

Our commitments are as follows:

Morgan Advanced Materials commits to reduce absolute

Scope 1 and Scope 2 GHG emissions 50% by 2030 from a

2015 base year

1

;

Morgan Advanced Materials also commits to increase active

annual sourcing of renewable and nuclear-backed electricity

from 0% in 2015 to 80% in 2025 and 100% by 2030; and

Morgan Advanced Materials further commits to reduce absolute

Scope 3 GHG emissions 15% by 2030 from a 2019 base year.

Remuneration Committee integration of

targets into Long-Term Incentive Plan

Sustainability measures represent 15% of total LTIP awards for

Executive Directors, and these are linked directly to the business

metrics for Scope 1 and Scope 2 GHG emissions. The balance

of the award is focused on financial performance measures.

Metric description

Target type

Baseline year

Baseline value

FY 2030 target

2025 progress

Scope 1 and Scope 2 GHG emissions (tonnes)

Absolute

2015

342,694

171,347

145,137

Water Withdrawal in Water Stressed Areas (m

3

)

Absolute

2015

431,004

301,703

331,175

Commitment to source 80% renewable and nuclear electricity

by the end of 2025

Intensity

2019

1%

100%

80%

1.

The target boundary includes biogenic land-related emissions and removals from bioenergy feedstocks.

Our Scope 1 and Scope 2 GHG emissions and selected other

environmental metrics for 2025 have been assured by ERM CVS.

A copy of the assurance report can be found on our website

2

.

Scope 1 and Scope 2 GHG emissions are reported from

manufacturing/production sites only, accounting for approximately

93.6% of Morgan Advanced Materials’ operational control based

on personnel headcount distributed by sites globally.

In 2024, a comprehensive Scope 3 inventory exercise and

subsequent development of improved reporting methodology was

completed. Our screening exercise, across all relevant categories,

used spend and/or volume based data which was retrieved from

the Company’s ERP

3

systems and/or finance systems, with updated

emission factors taken from appropriate sources. Following the

improvement to our methodology, we will take steps to validate

this data before re-validating with SBTi and publishing the values.

2.

www.morganadvancedmaterials.com/ESGAssurance/

3.

Enterprise Resource Planning.

40

Task Force on Climate-Related Financial Disclosures (TCFD) reporting

continued

Streamlined energy and carbon report

This report summarises our energy usage, associated emissions,

energy efficiency actions and energy performance under the

government policy Streamlined Energy & Carbon Reporting

(SECR); see table below. This is implemented by the Companies

(Directors’ Report) and Limited Liability Partnerships (Energy

and Carbon Report) Regulations 2018. Also, it summarises in the

appendix, the methodologies utilised for all calculations related

to the elements reported under energy and carbon. Morgan

Advanced Materials plc is a UK incorporated business and is also

a main-market listed company. Under SECR legislation we are

mandated to include energy consumption, emissions, intensity

metrics and all energy efficiency improvements implemented in our

most recent financial year, for our UK operations. An operational

boundary has been applied for the purposes of the reporting.

For specific examples of actions taken within the year to reduce

energy consumption please refer to page 28.

Methodology

This report (including the Scope 1 and Scope 2 consumption and

CO

2

e emissions data) have been developed and calculated using

the GHG Protocol – A Corporate Accounting and Reporting

Standard (World Business Council for Sustainable Development

and World Resources Institute, 2004); Greenhouse Gas Protocol

– Scope 2 Guidance (World Resources Institute, 2015);

Environmental Reporting Guidelines: Including Streamlined Energy

and Carbon Reporting Guidance (HM Government, 2019).

Global Scope 2 calculations have been developed using a

combination of sources – e-Grid for US locations; AIB (2024

version) where available for European countries, and IEA 2024

emission factors in all other cases globally. DEFRA Emissions Factor

Database 2025 version 1 has been used across the majority of

Scope 1, utilising the published kWh calorific value (CV) and

kgCO

2

e emissions factors relevant for reporting period for the

year ending 31 December 2025.

Responsible business

Scope 1 and Scope 2 emissions and streamlined energy and carbon reporting

Units

2025

2024

2023

2022

2021

Scope 1 energy consumption

MWh

519,890

533,674

574,531

636,583

648,833

UK

MWh

30,596

34,655

38,316

37,988

37,358

Global excluding UK

MWh

489,294

499,019

536,215

598,595

611,475

Scope 1 GHG emissions

tCO

2

e

112,064

111,011

110,563

121,989

122,817

UK

tCO

2

e

6,625

7,357

7,374

5,657

6,880

Global excluding UK

tCO

2

e

105,440

103,654

103,189

116,332

115,937

Scope 2 energy consumption

MWh

377,493

382,356

395,366

423,955

417,835

UK

MWh

12,873

13,584

14,198

15,205

15,083

Global excluding UK

MWh

364,620

368,772

381,168

408,750

402,752

Scope 2 GHG emissions (market-based)

tCO

2

e

33,072

41,860

47,011

89,115

107,070

UK

tCO

2

e

0

0

0

0

0

Global excluding UK

tCO

2

e

33,072

41,860

47,011

89,115

107,070

GHG intensity

tCO

2

e/£m

141

139

141

190

242

UK

tCO

2

e/£m

100

104

169

106

179

Global excluding UK

tCO

2

e/£m

144

141

140

194

245

Biogenic CO

2

emissions

4

tCO

2

e

668

543

719

978

877

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Risk management

Identifying and managing risk

The Board considers that risk management and internal control are

fundamental to achieving the Group’s strategic objectives. Principal

and emerging risks are identified both ‘top-down’ by the Board and

the Executive Committee and ‘bottom-up’ through the divisions and

central functions. Senior executives are responsible for the strategic

management of the Group’s principal and emerging risks, including

related policy, guidelines and processes, subject to Board oversight.

Not all the risks identified as part of our risk management processes

are considered principal risks. Principal risks are individual risks, or a

combination of risks, which could result in circumstances that might

threaten the Group’s reputation or business model, its future

performance, solvency or liquidity. As with all businesses operating

in a dynamic environment, some risks may not yet be known,

whilst other low-level risks could become material in the future.

We have an established risk management methodology which seeks

to identify, prioritise and manage risks, underpinned by a ‘three lines

of defence’ model comprising internal control frameworks, internal

monitoring and independent assurance processes.

Risk management governance

First line of defence

Principal and emerging risks formally reviewed throughout the year by the Board and the Audit Committee.

Risk appetite discussed and threshold for principal risks agreed. Overall system of risk management reviewed by

the Audit Committee on behalf of the Board.

Executive Management analyses risks and control

effectiveness, sets policies and procedures, and has

oversight of Group-level risk register.

Implement policies

Operate controls

Employee behaviours in line

with the Morgan Code

Policy self-certifications

Fraud risk assessments

Divisional-level risk registers

Risk and control monitoring

Test of design and effectiveness

of procedures and controls

(Site leaders and shared service

centre managers)

Second line of defence

Third line of defence

(Divisional leadership team and

Group-level functions)

(Internal audit and other independent

assurance providers)

Risk appetite

Our process aims to mitigate the significant risks faced by the

Group in accordance with our risk appetite. During the biannual

Board risk review, the Board led discussions on risk appetite,

taking into account principal risk trends and movements, ensuring

alignment with the Group’s strategic objectives and the evolving

risk landscape.

Emerging risks

Emerging risks are ‘new’ risks that have the potential to crystallise

in the future, but are unlikely to impact the Group during the next

year. The potential future impact of such risks are often uncertain.

They may begin to evolve rapidly or simply not materialise.

Key emerging risk

The Group is monitoring

developments in regulatory requirements of generative artificial

intelligence, its potential wider impacts on our business model

and strategy, as well as evaluating appropriate mitigating measures.

42

Risk management

continued

Risk trends

Adverse

Unchanged

Favourable

Risk analysis during the year

2025 risk and control assessments

During 2025, the Board undertook a comprehensive review of the

Group’s overall risk profile, which involved detailed discussion of

risk assessment outputs provided by the divisions and central

functions. This included deep dives into principal risks and horizon

scanning, identifying emerging risk themes. The Board actively

engaged in discussions on risk trends and mitigation strategies,

ensuring alignment with the Group’s strategic objectives for 2025

and beyond.

Members of the Board, Audit and Executive Committee received

regular updates on the Group’s principal risks and the steps taken to

mitigate any potential impacts throughout the year, supplemented

by thematic reviews and assurance reports from internal and

external sources.

Material control activities

In preparation for compliance with Provision 29 of the 2024 UK

Corporate Governance Code, the Board oversaw readiness efforts

that included:

Setting up a project team to identify material controls and link

them to principal risks.

Conducting gap analyses and implementing enhancements to

control frameworks as needed.

Advancing documentation of controls and assurance processes.

Planning internal controls assessment “dry runs” ahead of the

formal declaration included in the 2026 Annual Report &

Accounts.

Changes in principal risk disclosures

There were no fundamental changes to the Group’s principal risks

during the year; however, risk narratives were refreshed to reflect

evolving external conditions and internal priorities. Specific updates

included:

Enhanced commentary on IT infrastructure and security,

reflecting increased sophistication of cyber threats.

Greater emphasis on supply chain resilience and cost inflation

pressures.

Following enhancements to control frameworks, contract

management risk has been removed as a standalone principal

risk. It continues to be managed as part of our operational risk

framework.

Principal risks heatmap

The heatmap below illustrates the relative residual positioning of

our principal risks from the perspective of potential impact, and

potential probability after mitigating controls.

Risk category

Strategic

Compliance and legal

Operational

Financial

Risk heatmap (net risks)

Probability

Key

Risk title

Risk trend since last Annual Report

2025

2024

A

External environment

Adverse

B

Business change and development

Adverse

C

Business continuity

Favourable

D

Environment, health and safety (EHS)

Unchanged

E

IT infrastructure and security

Unchanged

F

Legal and regulatory

Unchanged

G

Key finance processes

Unchanged

A

C

E

F

G

D

B

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A. External environment

Strategic impact:

Risk trend:

Risk description and drivers

Events outside of the Group’s control, such as geopolitical and

macro-economic concerns, as well as other global events, such

as pandemics and natural disasters, could adversely affect the

environment in which we operate, and we may not be able to

manage our exposure to these conditions and/or events.

These events could lead to; fluctuation in commodity prices and

high inflation, potential for conflict or broader political issues, as

well as introduction of tariffs and/or taxes. This could adversely

affect customer demand, the financial performance of the Group

or cause sudden and unanticipated disruption to the Group’s

supply chain and wider operations.

Global climate change poses a number of medium-term and

longer-term challenges for our business. Climate-related risks

are addressed in greater detail on pages 32 to 40.

Key controls and mitigation

We remain alert to the current geopolitical and macro-economic

uncertainty and continue to monitor the potential impact on our

business operations, as well as the broader markets we serve.

The Group’s diversified global footprint mitigates against

geopolitical shocks.

Regular monitoring of order books, cash performance, cost-

control and other leading indicators to identify adverse trading

conditions.

Onboarding of dual source suppliers and alternative materials

where available.

Group Business Continuity Plan Policy, requiring appropriate

planning at our highest risk sites.

Trend commentary

Escalating geopolitical tensions and macro-economic instability are

creating a highly volatile operating environment. Conflicts and

political uncertainty are leading to the introduction of tariffs and

taxes, while global events such as natural disasters add further

unpredictability. These factors are driving fluctuations in commodity

prices, sustained inflationary pressures, and sudden disruptions to

supply chains, all of which can adversely impact customer demand,

financial performance, and the Group’s ability to maintain

operational continuity.

B. Business change and development

Strategic impact:

Risk trend:

Risk description and drivers

The Group has a number of high-impact, strategically important

transformation initiatives underway, temporarily increasing the

risk trend; these initiatives require changes to systems,

operational processes and organisational structures.

Failure to manage these projects successfully could result in

disruption to daily operations, employee fatigue and could

require significant execution involvement from management,

serving as a distraction from other strategic priorities.

If this risk was to materialise, it could mean that anticipated

benefits were not delivered, or were not delivered in accordance

with anticipated timelines.

Key controls and mitigation

Central and divisional project governance deployed, including

Executive Committee and Board oversight of changes where

required.

Dedicated project managers overseeing project implementations.

Regular monitoring and challenge of project overruns, expected

improvements and savings against budgets.

Trend commentary

The Group has a number of significant transformation programmes

underway. They introduce complex changes to systems, processes

and organisational structures. These initiatives increase execution

risk and resource strain, creating potential for delays, cost overruns

and disruption to core operations. While strong governance and

dedicated project management are in place, the scale and

interdependencies of these projects mean the risk will remain

heightened until stabilisation and benefits realisation are achieved.

Principal risks and uncertainties

Strategic impact

Transform

Drive

Maximise

Risk trends

Adverse

Unchanged

Favourable

44

Risk management

continued

Principal risks and uncertaintie

s

(continued)

C. Business continuity

Strategic impact:

Risk trend:

Risk description and drivers

The Group’s manufacturing processes, supply chain and product

profiles introduce risks to the business continuity of the Group:

Property facilities and processes might not be adequately

maintained, making them unsuitable for our complex

manufacturing operations.

There are single-point (key supplier/key site) exposure risks

within the Group’s supply chain.

Rising cost inflation across raw materials, energy and logistics

adds pressure to operational resilience and profitability.

Some of the products manufactured by the Group are used

in potentially high-risk applications, for example in the

Aerospace, Automotive, Electric vehicle, Healthcare and

Power industries.

If this risk was to materialise, it could lead to supply chain

disruption, increased operating costs, loss of customers and/or

market share, and reduced competitiveness, ultimately affecting

the Group’s current and future financial performance.

Key controls and mitigation

Group property risk management framework.

Onboarding of dual source suppliers and alternative materials

where available.

Quality management systems across the Group.

Group insurance programme ensuring adequate protection.

Maintaining strong customer relationships built on technical

expertise and product quality.

Continue building market differentiation capabilities and key

partnerships.

Trend commentary

The implementation of an enhanced property risk management

framework has helped reduce exposure to facility-related

vulnerabilities, favourably impacting the risk trend. However,

residual risks remain due to single-point dependencies (key supplier/

key site) and the critical nature of products used in high-risk sectors

such as Aerospace and Healthcare. While dual sourcing and quality

management systems provide additional resilience, the complexity

of manufacturing operations and supply chain interdependencies

mean continued attention is required.

D. Environment, health and safety (EHS)

Strategic impact:

Risk trend:

Risk description and drivers

The Group operates a number of manufacturing facilities around

the world, often involving risks related to heavy duty machinery,

chemical use, movement of parts such as lifting or transportation,

as well as energy, such as electricity and pressurised systems.

A serious accident in the workplace could lead to environmental

damage or have a major impact on employees, their families,

colleagues and communities. Such an incident could also result

in legal claims, reputational damage and financial loss.

Key controls and mitigation

The Group has a comprehensive EHS programme managed by

the Group EHS and Sustainability Director, with clear standards

and a comprehensive programme of audits to assess compliance.

The Executive Committee approves annual priorities for EHS.

These form the basis for individual sites’ own priorities and plans

which complement the Group’s ‘thinkSAFE’ behavioural safety

programme.

KPIs are monitored by the Executive Committee and the Board.

Our LTA rate was 0.18 (2024: 0.13); which is an increase

compared to the prior year. Safety of our employees is a critical

focus. We have performed root cause analyses and developed

a targeted plan for 2026. This is addressed in greater detail on

page 30.

Trend commentary

There is no material change to the risk trend.

Strategic impact

Transform

Drive

Maximise

Risk trends

Strategic Report

Governance

Financial Statements

45

Morgan Advanced Materials

/

Annual Report 2025

E. IT infrastructure and security

Strategic impact:

Risk trend:

Risk description and drivers

It is critical that the Group’s information technology and

operational technology infrastructure remain cyber resilient,

ensuring that proprietary, confidential and otherwise protected

information, intellectual property and personal data held and

processed on these systems are appropriately secured. The

increasing sophistication and frequency of cyber threats, including

targeted attacks and advanced persistent threats, heightens the

risk environment and demands continuous improvement in our

defence posture.

Failure to prevent or respond effectively to a cyber security event

could compromise the availability, confidentiality and integrity of

our IT systems, disrupt key operations, impede recovery of

critical data or services, and cause irrevocable damage to assets

and reputation.

Key controls and mitigation

The IT strategy is reviewed by the Board annually.

Regular external reviews to reduce the risk of successful cyber

attacks, including vulnerability and penetration tests.

Comprehensive cyber security framework to prevent, detect and

respond to incidents, including hardware, Group policies and

procedures on passwords and data management, and IT disaster

recovery plan.

Mandatory ‘thinkSECURE’ information security training

programme for all employees.

Trend commentary

There is no material change to the risk trend. Although our controls

are strengthening, the broader threat landscape continues to

intensify in both volume and complexity.

F. Legal and regulatory

Strategic impact:

Risk trend:

Risk description and drivers

The Group must comply with relevant national and international

laws and regulations, including those related to anti-bribery and

corruption, trade/export compliance and competition/anti-trust

activities, as well as data privacy laws. The increasing global

legislative environment requires ongoing focus.

Failure to comply with such laws and regulations could result in

civil or criminal liabilities and/or individual or corporate fines,

debarment from government-related contracts or rejection by

financial market counterparties and reputational damage.

Key controls and mitigation

The Morgan Code outlines the Group’s commitment to doing

business ethically, and is implemented through a global suite of

policies, standards and guidance.

Mandatory ethics training for staff covers topics including

anti-bribery and anti-corruption, anti-trust and trade controls.

We provide a confidential ethics ‘Speak Up’ hotline to allow

employees to raise concerns or possible wrongdoing.

To strengthen export control, the Group runs a global

‘thinkTRADE’ programme.

Trend commentary

There is no material change to the risk trend.

G. Key finance processes

Strategic impact:

Risk trend:

Risk description and drivers

The Group follows defined finance processes, including those

over financial control, treasury, tax and pensions. There is a risk

of errors in existing processes, or from new processes as a result

of the ongoing change activities which inherently increases the

risk profile.

Failure of key finance processes and controls could lead to

misstatements of financial results due to error, omission, fraud or

non-compliance with accounting standards and other applicable

regulations. This could affect the reputation and performance of

the Group, as well as expose it to legal and regulatory sanctions.

Key controls and mitigation

Group policies and procedures including Internal Financial

Controls Policy, treasury and tax policies, as well as a well-

established pensions strategy and accompanying framework.

Annual policy self-certification process for all divisions.

Quarterly internal financial control self-assessments for all

relevant locations.

Trend commentary

There is no material change to the risk trend.

Strategic impact

Transform

Drive

Maximise

Risk trends

Adverse

Unchanged

Favourable

(3.3)%

Organic constant-currency

revenue decline

9.6%

Headline adjusted operating

profit

*

margin

14.1%

Return on invested capital

*

1.8x

Net debt

*

/Headline EBITDA*

leverage ratio

Group financial review

“We have delivered a robust financial

performance against a challenging market

backdrop.

Demand in our end-markets has now broadly

stabilised. The work we have done to reduce

our manufacturing cost base over the last three

years, coupled with our planned optimisation

opportunities, leaves us well placed to deliver

margin growth as end-markets recover.”

Richard Armitage

CFO

Discontinued operations and Alternative

Performance Metrics

In August 2025, the Group announced that it had reached an

agreement to sell the majority of its MMS business which was

reported within the Thermal Products reporting segment. The

transaction completed on 12 November 2025. The disposal

represented a major line of business for the Group and accordingly,

it is classified as a discontinued operation under ‘IFRS 5 – Non-

current Assets Held for Sale and Discontinued Operations.’ In

accordance with IFRS 5, current year results for MMS are shown

as one line ‘profit from discontinued operations’ on the face of the

income statement and prior year results have been restated on the

same basis.

In addition to statutory metrics, the Group monitors business

performance through alternative performance measures (APMs)

which are non-GAAP measures not defined under IFRS. The

Directors consider that these APMs provide useful information

to stakeholders, including additional insight into ongoing trading

and year-on-year comparisons. These APMs are not intended

as a substitute for IFRS measures and should be considered as

providing complementary insight.

The Group defines each APM and therefore they may not be

directly comparable with similarly named metrics in other

businesses. The purpose and definition of each APM, along with a

reconciliation to the equivalent statutory metric are included in the

‘Glossary of Terms and Alternative Performance Metrics’ sections

on pages 199 to 204.

In order to help users of these financial statements understand

the performance of the Group during 2025, where relevant,

the Directors have presented ‘Headline’ metrics which include

the results earned by MMS up to the date of the disposal. These

metrics are clearly denoted by the use of the term ‘Headline’ and

they are presented alongside statutory results and in addition to

the usual APMs presented by the business.

Throughout this Report, these non-GAAP measures are clearly

identified by an asterisk (*) where they appear in text and by a

footnote where they appear in tables and charts.

Unless otherwise stated, all financial information reported in the

Financial review relates to continuing operations.

46

Group financial performance

Summary financial information for the year ended 31 December 2025

Summary income statement and key metrics

2025

£m

2024

2

£m

Change

%

Headline

1

metrics

Headline

1

Revenue

1,030.3

1,100.7

(6.4)%

Headline

1

Adjusted operating profit

1

99.1

128.4

(22.8)%

Headline

1

Adjusted operating profit

1

margin

9.6%

11.7%

(210) bps

Net debt

1

to Headline EBITDA

1

ratio

1.8x

1.4x

n/m

2

Results from continuing operations

Revenue

996.6

1,060.1

(6.0)%

Adjusted operating profit

1

93.8

123.3

(23.9)%

Adjusted operating profit

1

margin

9.4%

11.6%

(220)bps

Amortisation of intangible assets

(1.0)

(1.7)

(41.2)%

Specific adjusting items

4

(47.6)

(22.4)

112.5%

Operating profit from continuing operations

45.2

99.2

(54.4)%

Net financing costs

(22.2)

(19.0)

16.8%

Profit before taxation from continuing operations

23.0

80.2

(71.3)%

Income tax expense

(17.9)

(24.7)

(27.5)%

Profit after taxation from continuing operations

5.1

55.5

(90.8)%

Profit after taxation from discontinued operations

23.7

3.3

618.2%

Profit for the year

28.8

58.8

(51.0)%

Basic EPS from continuing and discontinuing operations

7.5p

17.7p

(57.6)%

Adjusted EPS

1

15.9p

24.2p

(34.3)%

Return on invested capital

1

14.1%

17.7%

(360)bps

Summary cash flow and key metrics

2025

£m

2024

£m

Change

%

Headline

1

cash generated from operations

168.6

163.0

3.4%

Headline

1

free cash flow

1

45.4

15.1

200.7%

Cash and cash equivalents

79.3

120.8

(34.4)%

Net debt

1

232.2

226.2

2.7%

Headline

1

net debt

1

to EBITDA

1

ratio

1.8x

1.4x

n/m

3

Total dividend per share

12.2p

12.2p

–

1

Definitions of these non-GAAP measures and reconciliations to the equivalent statutory measure can be found in the ‘Glossary and Alternative Performance Metrics’ section on pages 199

to 204.

2

Statutory financial results have been restated for the year ended 31 December 2024 to present the results of MMS within discontinued operations.

3

Movements where the percentage movement is not meaningful are represented by n/m.

4

Details of specific adjusting items arising during the year and the comparative period are given in note 6 to the consolidated financial statements.

Strategic Report

Governance

Financial Statements

Annual Report 2025

Group financial review

continued

Revenue

Revenue

2025

£m

2024

£m

Change

%

OCC

Change

%

Performance Carbon

306.8

345.2

(11.1)%

(8.9)%

Technical Ceramics

341.6

337.3

1.3%

3.4%

Thermal Products

348.2

377.6

(7.8)%

(4.2)%

Revenue from

continuing operations

996.6

1,060.1

(6.0)%

(3.3)%

Discontinued operations

– MMS

33.7

40.6

n/m

n/m

Headline revenue

1,030.3

1,100.7

(6.4)%

(3.3)%

On a headline* basis, the Group recognised revenue of £1,030.3

million (2024: £1,100.7 million), a year on year decrease of 6.4%

at reported currency rates. Revenue was significantly impacted by

foreign exchange headwinds, largely related to the US Dollar and

sterling exchange rates. On an organic constant currency* basis,

Group revenue decreased by 3.3% year-on-year.

Performance Carbon

was heavily impacted by the well-

publicised conditions within the Semiconductor market and in total

the division delivered revenue of £306.8 million, an 8.9% decline

versus the prior year on an organic constant currency* ‘(OCC’)

basis. Lower Semiconductor sales drove the year on year decline,

although we note that revenue has stabilised in the second half of

the year. Across other markets, the business has demonstrated a

resilient revenue performance. The business saw a smaller decline

in Aerospace & Defence sales which reflects the timing of some

large defence orders which are now expected in 2026. This was

largely offset by increased demand in Rail and Energy markets.

Technical Ceramics

has demonstrated good resilience over the

year, delivering revenue of £341.6 million, a 3.4% increase on an

OCC* basis. The business saw strong demand in Aerospace &

Defence markets, driven by demand for new aircraft along with

robust maintenance revenue driven by increased fleet utilisation.

This growth was partially offset by the impact of Semiconductor

market dynamics and notably lower sales into Healthcare markets

driven by customer inventory adjustments.

Thermal Products

delivered revenue of £348.2 million, a 4.2%

decline on an OCC* basis. This performance was impacted by

regional economic dynamics, primarily driven by continued

challenging conditions in European industrial markets. Overall,

we note revenues have remained broadly stable since the second

half of 2024.

Adjusted operating profit*

Adjusted operating profit

1

2025

2024

Profit

£m

Margin

%

2024

£m

Margin

%

Performance Carbon

41.2

13.4%

55.1

16.0%

Technical Ceramics

39.4

11.5%

39.2

11.6%

Thermal Products

23.5

6.7%

37.5

9.9%

Central costs

(10.3)

n/m

(8.5)

n/m

Adjusted operating

profit

1

from

continuing

operations

93.8

9.4%