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Morgan Advanced Materials PLC on Tuesday said that it has reached an agreement with the trustees of its UK Defined Benefit Pension Schemes to make an accelerated contribution of £67 million.
The Windsor, England-based company said that the trustees have agreed to move to full hedging of inflation and interest risk, which it expects will reduce the volatility of its future valuations.
Following on from the agreement, Morgan Advanced Materials expects immediate improvements to its free cash flow, with a reduction in cash pension contributions of £17 million per year for at least the next three years, and modest or zero contributions thereafter.
It also expects to see a more prudent approach to hedging, with leverage on the scheme’s liability-driven investing portfolio targeted below 2.0x.
Looking ahead, the company said it was targeting organic revenue of 3% to 6% per year, and an adjusted operating profit margin between 12.5% and 15%.
It is also targeting between 17% and 20% return on invested capital, and dividend growth with adjusted earnings cover of 2.5x.
In other news, Morgan Advanced Materials has secured a new five-year revolving credit facility of £230 million, replacing its existing facility that was due to mature in 2023.
Its outlook and guidance for the year remains unchanged.
Morgan Advanced Materials shares were trading 1.5% higher at 308.66 pence each in London on Tuesday afternoon.
By Holly Beveridge; Alliance News reporter
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