Morgan Advanced Materials PLC Annual Financial Report (4367I)

TIDMMGAM

RNS Number : 4367I

Morgan Advanced Materials PLC

01 April 2020

Morgan Advanced Materials plc

1 April 2020

Publication of 2019 Annual Report

The Annual Report and Financial Statements for the year ended 31 December 2019 (2019 Annual Report) has today been posted or otherwise made available to shareholders:

In accordance with Listing Rule 9.6.1, a copy of the 2019 Annual Report has been uploaded to the National Storage Mechanism and will be available for viewing shortly at: www.morningstar.co.uk/uk/NSM

The 2019 Annual Report is also available on the Company's website at: www.morganadvancedmaterials.com .

Shareholders who have elected not to receive hard copy documents will receive an email notification from the Company advising that the above listed documents are now available.

A further announcement will be made when the Notice of the 2020 Annual General Meeting and Form of Proxy have been posted or otherwise made available to shareholders.

The Company's preliminary results announcement of 25 February 2020 contained a management report as well as audited financial statements which were prepared in accordance with the applicable accounting standards. The financial information set out in the Company's preliminary results announcement of 25 February 2020 does not constitute the Company's statutory accounts for the year ended 31 December 2019. Statutory accounts for 2019 are included in the 2019 Annual Report, which will be delivered to the registrar of companies following the Company's 2020 AGM. The auditors have reported on those accounts; their report was (i) unmodified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2019.

The information below, which is extracted from the 2019 Annual Report, is included solely for the purpose of complying with DTR 6.3.5. This information should be read in conjunction with the Company's preliminary results announcement issued on 25 February 2020 (available at www.morganadvancedmaterials.com ). This announcement is not a substitute for reading the full 2019 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2019 Annual Report.

Related party transactions

There are no related party transactions requiring disclosure.

Risk Management

Morgan has an established risk management methodology which seeks to identify, prioritise and mitigate risks, underpinned by a 'three lines of defence' model comprising an internal control framework, internal monitoring and independent assurance processes.

The Board considers that risk management and internal control are fundamental to achieving the Group aim of delivering long-term sustainable growth in shareholder value.

Risks are identified both 'top down' by the Board and the Executive Committee and 'bottom up' through the Group's global business units (GBUs) and divisions. The severity of each risk is quantified by assessing its inherent impact and mitigated probability to ensure that the residual risk exposure is understood and prioritised for control throughout the Group.

Senior executives are responsible for the strategic management of the Group's principal risks, including related policy, guidelines and process, subject to Board oversight.

Throughout 2019, the Board reviewed the status of all principal risks with a significant potential impact at Group level. Additionally, the Audit Committee carried out focused risk reviews of each GBU. These reviews included an analysis of the principal risks, and the controls, monitoring and assurance processes established to mitigate those risks to acceptable levels.

As a result of these reviews, a number of actions were identified to continue to improve internal controls and the management of risk, including:

   --        A group wide refresh of the Group's policies and internal control standards. 

-- Further roll out of the Group's 'thinkSAFE' programme and development of an environmental strategy.

-- Implementation of new ERP systems in two of the Group's businesses, and establishment of a Programme Office to better manage IT initiatives.

   --       Focused actions within each business unit to mitigate risks. 

The Board reviewed its appetite for its principal risks and its appetite for these risks is unchanged from the prior year. The Group is willing to take considered risks to develop new technologies, applications, partnerships and markets for its products and to meet customer needs. The Group strives to eliminate risks to product quality and health and safety, which are essential to the success of our products and the safety of our people and contractors.

The appetite for risk in the areas of legal and regulatory compliance is extremely low and the Group expects its businesses to comply with all laws and regulations in the countries in which they operate. The Group has a low appetite for financial risk. Certain risks, such as pension funding, are likely to take a longer period of time to be mitigated. During the year the Board monitored the Group's current risk exposure relative to the Board's appetite for different risks. There were no risks where the current risk exposure exceeded the Board's risk appetite.

As part of the ongoing risk management process referred to above, the Board and the GBUs also identify and assess emerging risks. Emerging risk areas were identified around pensions regulations due to the evolving regulatory environment and climate change and our role in protecting and enhancing the environment. The two emerging risks are included in the table below, together with the details of how they are being managed.

In 2019, the Board performed a deep dive assessment of the potential risks associated with supplying into the electric vehicle market. This review considered risks associated with the scope of Morgan's supply into these markets; and mitigations provided by product quality controls, contractual protections, and the Group's capability to deliver to customer specifications. Through this review, the Board satisfied itself that its level of appetite for risk in this market was proportionate to the opportunities presented.

An indication of the Board's assessment of the trend of each risk - whether the potential severity has increased, decreased or is broadly unchanged over the past year - is provided.

The following are the Group's principal risks and uncertainties, representing those risks that the Board feels could have the most significant impact on achieving the Group's strategy of building a sustainable business for the long-term and delivering strong returns to the Group's shareholders.

 
 Risk description, assessment 
  and trend from 2018                             Mitigation 
                                                 ------------------------------------------------- 
 OPERATIONAL RISKS 
-----------------------------------------------  ------------------------------------------------- 
 Technical leadership                             The Group has a dedicated technology 
  The Group's strategic success                    team within each GBU which monitors 
  depends on maintaining and                       relevant technology and business developments 
  developing its technical leadership              using technology roadmaps linked to 
  in materials science over                        20 major technology families to ensure 
  its competitors.                                 it remains at the leading edge of development. 
                                                   The Group has four Centres of Excellence. 
  Unforeseen/unmitigated technology                These Centres focus Morgan's expertise 
  obsolescence, the emergence                      and research resources on further developing 
  of competing technologies,                       core technologies and identifying new 
  the loss of control of proprietary               opportunities and applications. 
  technology or the loss of 
  intellectual property/know-how                   The GBU leadership teams proactively 
  would impact the Group's business                monitor their technology priorities 
  and its ability to deliver                       and R&D investments. These projects 
  on its strategic goals.                          are also regularly reviewed by the Executive 
                                                   Committee and the Board. 
  The advanced technological 
  nature of the Group requires                     Where Group products are designed for 
  people with highly differentiated                a specific customer, they are developed 
  skillsets. Any inability to                      in partnership with the customer in 
  recruit, retain and develop                      order to maintain leading-edge differentiation. 
  the right people would negatively                The Group seeks to secure intellectual 
  impact the Group's ability                       property protection, where appropriate, 
  to achieve its strategic goals.                  for its existing and emerging portfolio 
                                                   of products and has an in-house counsel 
  Severity: Moderate                               dedicated to intellectual property protection 
                                                   with the support of external advisors. 
  Trend: Unchanged 
                                                   The Group continued its global leadership 
                                                   programme adding an advanced programme 
                                                   to develop more high-potential commercial, 
                                                   functional and technical leaders. The 
                                                   graduate leadership programme continued 

                                                   to run in 2019. 
 
                                                   Further detail on our people can be 
                                                   found on pages 16 and 17. 
 
                                                   Further detail on R&D can be found on 
                                                   page 20. 
===============================================  ================================================= 
 Operational execution/organisational             Changes to operational processes are 
  change/sales effectiveness                       carefully considered by site, GBU and 
  As part of the Group's strategy                  Divisional management before implementation. 
  to improve the efficiency                        Operational improvements and savings 
  of its operations and organisation,              are monitored against budget by the 
  various changes have been                        GBUs and Executive to ensure that changes 
  made to operational processes                    deliver the savings promised without 
  at individual sites, to the                      disruption to business operations. New 
  Group's structure, and the                       capital investments are approved at 
  structure of and incentives                      appropriate levels of the Group and 
  for our sales force. Further                     delivery of these overseen by GBU and 
  improvements and changes are                     Group management. A new capital expenditure 
  planned for future years.                        assessment process was rolled out in 
  Failure to manage these changes                  2019. 
  adequately could result in 
  interruption to operations                       Organisational changes are assessed 
  or customer service, or a                        by the Chief Executive Officer, the 
  failure to maximise the Group's                  Executive Committee and sometimes the 
  opportunities.                                   Board before being implemented in line 
                                                   with local employment regulations. 
  Severity: Low 
                                                   Changes to our sales structures and 
  Trend: Unchanged                                 incentives are reviewed at various levels 
                                                   of the organisation before being launched. 
                                                   Further activities to improve sales 
                                                   effectiveness were rolled out in 2019, 
                                                   including sales force training, more 
                                                   targeted incentives and pricing initiatives. 
                                                   Further initiatives around pricing and 
                                                   extending the roll out of sales incentives 
                                                   are planned for 2020. 
 
                                                   Further detail on our strategy in action 
                                                   can be found on pages 19 to 23. 
===============================================  ================================================= 
 Portfolio management                             The Board performs regular reviews of 
  The Group operates across                        the Group's portfolio. During 2019 the 
  a range of product and technology                Group closed its China ceramics cores 
  families. These are subject                      business and exited its Venezuela Thermal 
  to long-term market trends                       Ceramics business. 
  which may lead to either obsolescence 
  or opportunities to further                      Opportunities to acquire businesses 
  expand the Group. Failure                        are reviewed on a continuing basis. 
  to proactively manage the 
  Group's portfolio of businesses 
  in line with this technology 
  profile could lead to the 
  value of the Group's businesses 
  being eroded over time or 
  to a failure to exploit opportunities 
  to acquire businesses with 
  the capability to add further 
  value to the Group. 
 
  Severity: Moderate 
 
  Trend: Decreased within severity 
  band 
===============================================  ================================================= 
 Macro-economic and political                     The Group's broad market and geographic 
  environment                                      spread helps to mitigate the effects 
  The Group operates in a range                    of political and economic changes. 
  of markets and geographies 
  around the world and could                       Budgets and forecasts for Morgan's different 
  be affected by political,                        businesses are used to monitor delivery 
  economic, social or regulatory                   against expectations and anticipate 
  developments or instability,                     potential external risks to performance. 
  for example an economic slowdown                 These are subject to regular review 
  or issues stemming from oil                      by the Executive Committee and the Board. 
  and natural resources price 
  shocks.                                          The overall macro-economic environment 
                                                   has weakened during the course of the 
  The UK's exit from the EU                        year, although the Group's revenue has 
  may have an impact on the                        proved resilient. Some longer-term metrics 
  Group if subsequent tariff                       are showing signs of potential weakness. 
  changes, or border effects, 
  negatively impact the profitability              Global issues considered by the Board 
  of the Group's products. The                     this year include the continuing impact 
  current value of Group UK                        and uncertainty relating to the trade 
  exports to the EU is approximately               negotiations between the European Union 
  GBP25 million, and imports                       and the United Kingdom, as well as US/China 
  into the UK from the EU are                      and Korea/Japan trade relations. The 
  approximately GBP15 million.                     impact of the UK's exit from the EU 
                                                   could be mitigated in the medium term 
  Severity: High                                   by moving production to alternative 
                                                   sites where tariffs are not applied 
  Trend: Increased within severity                 to products. 
  band 
===============================================  ================================================= 
 Environment, health and safety                   Managing its operations safely is the 
  (EHS)                                            Group's number one priority. The Group 
  The Group operates a number                      has a comprehensive EHS programme managed 
  of manufacturing facilities                      by the Group EHS Director, with clear 
  around the world. A failure                      EHS standards and a refreshed programme 
  in the Group's EHS procedures                    of audits to assess compliance. 
  could lead to environmental 
  damage or to injury or death                     The Group EHS Director sets annual priorities 
  of employees or third parties,                   for EHS which are approved by the EHS 
  with a consequential impact                      Steering Group (comprising the Executive 
  on operations and increased                      Committee and GBU 
  risk of regulatory or legal 
  action being taken against                       EHS leaders) These form the basis for 
  the Group. Any such action                       individual sites' own EHS priorities 
  could result in both financial                   and plans and complement the Group's 
  damages and damage to reputation.                'thinkSAFE' behavioural safety programme. 
  Given the long history of 
  many of the operations of                        EHS performance is monitored by the 
  the Group, there is also a                       Group Executive and the Board. EHS metrics 
  risk that historical operating                   are assessed and overall EHS performance 
  and environmental standards                      has improved in 2019. 
  may not have met today's environmental 
  regulations. In addition,                        As at 31 December 2019, the Group was 
  the Group may have obligations                   managing projects to remediate legacy 
  relating to prior asset sales                    contamination at a number of former 
  or closed facilities.                            operational sites in conjunction with 
                                                   external specialists and relevant authorities. 
  Severity: High 
                                                   The Group's commitment to protecting 
  Trend: Unchanged                                 and enhancing the environment, in response 
                                                   to the emerging risk of climate change, 
                                                   is set out on pages 12 to 13. 
 
                                                   Details of the Group's provisions and 
                                                   contingent liabilities can be found 
                                                   in note 25 to the consolidated financial 
                                                   statements. 
===============================================  ================================================= 
 Product quality, safety and                      Many of the Group's products are designed 
  liability                                        to customer specifications. Our businesses' 

  Products used in applications                    quality management systems and training 
  for which they were not intended                 help ensure that all of Morgan's products 
  or inadequate quality control/over-commitment    meet or exceed customer requirements 
  on customer specifications                       and national/international standards. 
  could result in products not 
  meeting customer requirements,                   The Group Legal Policy requires that 
  which could in turn lead to                      contracts relating to products used 
  significant liabilities and                      in potential high-risk applications 
  reputational damage.                             are subject to legal review to ensure 
                                                   that appropriate protections are in 
  Some of our products are used                    place for product quality risks. 
  in potentially higher risk 
  applications, for example                        The Group insurance programme includes 
  in the aerospace, automotive,                    product liability insurance; this Group-level 
  medical and power industries.                    insurance is reviewed annually by the 
                                                   Board. 
  Severity: High 
 
  Trend: Unchanged 
===============================================  ================================================= 
 
 
 Risk description, assessment 
  and trend from 2018                  Mitigation 
                                      ------------------------------------------------ 
 IT and cyber security                 A new Chief Information Officer was 
  Information security/cyber            appointed to the Group's Executive Committee 
  risks are dynamic and ever-present    in 2019 to drive delivery of the Group's 
  in the external environment.          IT strategy. The Group's IT Security 
  If the Group were to lose             policies have been strengthened in 2019, 
  critical data or information,         and enhanced security resource will 
  including proprietary technology      be joining the Group in 2020. 
  information, through inadequate 
  data management or compromised        The Group has continued to comply with 
  information security, the             the National Institute of Standards 
  business would be impacted            and Technology (NIST) cybersecurity 
  and could suffer reputational         framework in the US and the EU's General 
  damage.                               Data Protection Regulations without 
                                        issue in 2019. 
  The effective management of 
  the Group's Information Technology    Focused deployment of enterprise resource 
  (IT) infrastructure is important      planning (ERP) systems in those businesses 
  in enabling our businesses            where a need for improvement continued 
  to deliver customer requirements      in 2019. These deployments are managed 
  reliably. If a key business           in line with IT project management standards. 
  system were to fail or core 
  systems implementation were 
  to be ineffective, the ability 
  of the business to deliver 
  on its strategic goals might 
  be impacted. 
 
  Severity: High 
 
  Trend: Increased 
====================================  ================================================ 
 Supply chain/business continuity      The Group has a diversified manufacturing, 
  The Group has a number of             customer and geographic base which provides 
  potential single-point exposure       a level of resilience against single-point 
  risks, which include:                 exposures. Were any site to be unavailable, 
  Single-point supplier - a             production in many cases could be switched 
  significant interruption of           to other sites. A new Business Continuity 
  a key internal or external            policy has been rolled out to support 
  supply could impact business          minimum standards at the Group's most 
  continuity.                           important sites for intercompany supply. 
  Single-point customer - the 
  unmitigated loss of a major           Management of these risks also involves 
  customer could have an impact         monitoring and reviewing supply chains 
  on Group profit. The Group's          (internal and external), dual/multiple 
  largest customer represents           sourcing of materials or strategic stock, 
  circa 2% of Group revenue.            site security and safety mechanisms, 
  Single-point site - a key             business continuity plans, maintenance 
  site exposed to a strike,             of product quality and strong customer 
  a natural catastrophe or serious      relationships. 
  incident, such as fire, could 
  impact business continuity.           The Group provides clear and timely 
  One Group site, Hayward, is           communication to ensure appropriate 
  situated in the California            safety measures are taken by all employees 
  earthquake zone, (US). Certain        working in areas affected by communicable 
  of the Group's businesses             disease. 
  are important for intercompany 
  supply purposes.                      The Group insurance programme includes 
                                        business interruption cover and specific 
  Communicable disease could            cover in relation to the impact of an 
  also impact the supply chain          earthquake in California, US; this Group-level 
  and ability of employees to           insurance is reviewed annually by the 
  travel to work in affected            Board. 
  areas. 
 
  The outbreak of the coronavirus 
  has led to an extended shut 
  down of our manufacturing 
  facilities in China. Our focus 
  has been to take actions and 
  precautions to help ensure 
  the safety and wellbeing of 
  our employees. Whilst we cannot 
  be certain how long this situation 
  will last, based on the delayed 
  startup of our production 
  facilities since the lunar 
  new year break, we currently 
  anticipate that this will 
  have an adverse impact on 
  first half revenues of around 
  GBP7.0 million and on first 
  half headline operating profit* 
  of around GBP3.5 million. 
 
  The coronavirus has been spreading 
  to countries outside of China, 
  including to Italy and South 
  Korea. Our plant in the affected 
  area of Northern Italy, we 
  expect to be closed for two 
  weeks. 
 
  Severity: Moderate 
 
  Trend: Unchanged 
====================================  ================================================ 
 
 
 Risk description, assessment 
  and trend from 2018                     Mitigation 
                                         ------------------------------------------------- 
 FINANCIAL RISKS 
---------------------------------------  ------------------------------------------------- 
 Treasury                                 The Group's treasury function operates 
  The Group's global reach means           on a risk-averse basis. Required controls 
  that it is exposed to uncertainties      over selection of banks, cash management 
  in the financial markets,                and other treasury practices and payments 
  the fiscal jurisdictions where           globally are documented in Morgan's 
  it operates, and the banking             Treasury Policy and related procedures. 
  sector. These heighten the               The Group treasury team manages the 
  Group's funding, foreign exchange,       Group's funding, liquidity, cash management, 
  tax, interest rate, credit               interest rate, foreign exchange, counterparty 
  and liquidity risks as well              credit and other treasury-related risks. 
  as the risk that a bank failure          Treasury matters are regularly reviewed 
  could impact the Group's cash.           by the Board and Audit Committee. 
 
  Severity: Moderate                       In 2019 the Group repaid $75 million 
                                           of private placement debt utilising 
  Trend: Decreased                         its existing revolving credit facility. 
 
                                           During 2019 the Group executed its first 
                                           one-year extension option available 
                                           under its revolving credit facility, 
                                           extending the maturing date to September 
                                           2024. 
 
                                           Further detail on our Treasury Policy 
                                           is set out in the Group Financial Review, 
                                           which can be found on page 40. 
=======================================  ================================================= 
 Tax                                      The Group's tax function, working in 
  The Group operates in many               conjunction with external specialists 
  jurisdictions around the world           as required, closely monitors fiscal 
  and could be affected by changes         developments and changes such as BEPS, 
  in tax laws and regulations              to ensure that the Group's tax arrangements 
  within the complex international         and practices continue to comply with 
  tax environment.                         the requirements of all relevant jurisdictions 
                                           whilst also enabling efficient management 
  The OECD's Base Erosion and              of the tax liability. The Group's Head 
  Profit Shifting (BEPS) framework         of Tax reports to the Audit Committee 
  provides additional obligations          on key tax issues and initiatives. 
  and filing requirements for 
  the Group as countries implement         The Group has published its tax strategy 
  the actions in the framework.            on its website in line with UK corporate 
  These could have an impact               governance requirements. 
  on the tax paid by the Group. 
 
  Severity: Moderate 
 
  Trend: Unchanged 

=======================================  ================================================= 
 Pension funding                          Morgan's primary means of mitigating 
  The Group sponsors several               pensions funding risk is proactive management 
  defined benefit pension arrangements,    of the pension scheme assets and liabilities 
  (the Schemes), whose liabilities         through an integrated pension strategy 
  are subject to fluctuating               focusing on funding, investment and 
  interest rates, investment               benefit risk. This involves both internal 
  values and inflation. This               management within the Group and also 
  coupled with the increased               externally through the Schemes' Trustees, 
  longevity of members and a               corporate actuaries and professional 
  tougher regulatory funding               advisers. 
  regime will result in increased 
  funding burdens on the Group             In the UK, both Schemes are closed to 
  in the future.                           the future accrual of benefits. In consultation 
                                           with the Company, the Trustees have 
  The deficit in Morgan's global           adopted a proactive approach to the 
  defined benefit pension schemes          management of risk in the Schemes' investment 
  calculated on the basis required         portfolios, significantly reducing their 
  for IAS 19 accounting disclosures        unhedged interest and inflation rate 
  decreased from GBP190.4 million          exposure. Following the most recent 
  at 31 December 2018 to GBP156.8          Scheme valuations in March 2019, Company 
  million as at 31 December                contributions will increase to GBP16.5 
  2019.                                    million pa from 2020 for the length 
                                           of current Recovery Plans (2025 and 
  The Group also participates              2027). 
  in two multi-employer defined 
  benefit schemes in the US,               The impact of the evolving regulatory 
  both of which have significant           environment for occupational pensions, 
  funding deficits.                        in particular the likely passing of 
                                           the Pensions Bill in Parliament, will 
  Severity: High                           be monitored closely in 2020. 
 
  Trend: Unchanged                         In the US, in June 2016 one defined 
                                           benefit Pension Plan completed a full 
                                           legal termination, and for the other 
                                           remaining Scheme, a formal offer of 
                                           a present-value-equivalent, lump-sum 
                                           cash payment was made to members. In 
                                           December 2017, the Company made an additional 
                                           contribution of $36 million to this 
                                           Scheme and agreed a move to a significantly 
                                           de-risked investment portfolio. 
 
                                           A liability management strategy for 
                                           US multi-employer plan is being refined 
                                           for action in 2020. 
=======================================  ================================================= 
 
 
 Risk description, assessment 
  and trend from 2018                  Mitigation 
                                      ---------------------------------------------- 
 LEGAL AND COMPLIANCE RISKS 
------------------------------------  ---------------------------------------------- 
 Contract management                   The Group has an in-house legal function 
  As a global advanced materials        supplemented by specialist external 
  business supplying components         lawyers. 
  into critical applications, 
  the Group may be exposed to           The Group Legal Policy requires in-house 
  liabilities arising from the          legal review of high-value or high-risk 
  use of its products. Ineffective      contracts to ensure they contain appropriate 
  contract risk management could        protections for the Group. The Policy 
  result in significant liabilities     requires Chief Executive Officer approval 
  for the Group and could damage        before a business can enter into an 
  customer relationships.               unlimited liability contract or one 
                                        where the liability cap exceeds GBP5 
  Severity: Significant                 million. 
 
  Trend: Unchanged                      To the extent that risk cannot be mitigated 
                                        through contractual arrangements, the 
                                        Group has insurance cover in place, 
                                        including product liability insurance. 
====================================  ============================================== 
 Compliance                            The Group is committed to the highest 
  The Group's global operations         standards of corporate and individual 
  must comply with a range of           behaviour. To support this, in 2018 
  national and international            the Group issued the Morgan Code. The 
  laws and regulations including        Code defines the Group's approach to 
  those related to bribery and          doing business ethically and confirms 
  corruption, human rights,             Morgan's commitments to high standards 
  trade/export compliance and           of ethical behaviour. The Code is supported 
  competition/anti-trust activities.    by a range of policies, standards and 
                                        guidance; training materials; the provision 
  A failure to comply with any          of an ethics hotline for employees; 
  applicable laws/regulations           and systems to support effective screening 
  could result in civil or criminal     of and due diligence on third parties. 
  liabilities and/or individual 
  or corporate fines and could          Further improvements to the programme 
  also result in debarment from         were delivered in 2019, including a 
  government-related contracts          suite of mandatory ethics training for 
  or rejection by financial             staff, covering topics such as anti-bribery 
  market counterparties and             and corruption, competition law, harassment 
  reputational damage.                  and bullying and trade controls. In 
                                        depth face-to-face training has also 
  Compliance: Moderate                  been held in some of the Group's higher 
                                        risk regions. The Group's speak-up processes 
  Trend: Unchanged                      were relaunched in 2019 which enable 
                                        staff to report concerns anonymously. 
 
                                        The Group also has an Export Compliance 
                                        Director in the US whose role is dedicated 
                                        to ensuring compliance with export controls. 
 
                                        In addition to Group-level compliance 
                                        specialists, our businesses are required 
                                        to establish compliance officer roles, 
                                        which are responsible for supporting 
                                        local training and monitoring. Morgan 
                                        also employs country-specific trade 
                                        and export compliance specialists in 
                                        higher-risk businesses and jurisdictions. 
 
                                        Further details on ethics and compliance 
                                        can be found on pages 12 to 13. 
====================================  ============================================== 
 

Directors' Responsibility Statement

The 2019 Annual Report contains the following statements regarding responsibility for the financial statements in compliance with DTR 4.1.12. Responsibility is for the 2019 Annual Report and Financial Statements and not the condensed statements required to be set out in the Annual Financial Report announcement.

Each of the Directors in post as at 25 February 2020, the names and roles of whom are set out on pages 48 and 49 of the 2019 Annual Report, confirms to the best of their knowledge:

-- the Group's Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

-- the management report (comprising the Directors' Report and the Strategic Report) includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Enquiries: Stephanie Mackie, Company Secretary

Telephone: [phone]

Notes:

Legal Entity Identifier: I4K14LL95N2PHDL7EG85

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