THE MORGAN CRUCIBLE COMPANY PLC

PRELIMINARY ANNOUNCEMENT 2002

CONSOLIDATED AND COMPANY BALANCE SHEET AS AT 4 JANUARY 2003

	The Group		The Company
		Restated*		Restated*
	2002	2001	2002	2001
	£m	£m	£m	£m
Fixed assets
Intangible assets - goodwill	130.5	138.4	-	-
Tangible assets	433.6	490.3	1.7	1.9
Investment in subsidiary undertakings	-	-	908.5	888.4
Investment in associated undertakings	1.2	1.2	-	-
Other investments	6.0	21.9	1.2	16.0
	571.3	651.8	911.4	906.3
Current assets
Stocks	156.6	185.0	-	-
Debtors - due within one year	188.2	199.4	29.1	23.5
- due after one year	22.9	23.8	8.2	8.3
Total debtors	211.1	223.2	37.3	31.8
Cash at bank and in hand	60.5	72.7	17.1	12.4
	428.2	480.9	54.4	44.2
Creditors - amounts falling due within one year	331.5	321.6	115.1	91.7
Net current assets/(liabilities)	96.7	159.3	(60.7)	(47.5)
Total assets less current liabilities	668.0	811.1	850.7	858.8
Creditors - amounts falling due after more than one year
Amounts payable to subsidiary undertakings	-	-	218.6	203.0
Borrowings	177.1	255.2	142.5	172.4
Exchangeable redeemable preference shares	1.5	4.5	-	-
Grants for capital expenditure	0.8	1.5	-	0.6
	179.4	261.2	361.1	376.0
Provisions for liabilities and charges	138.2	128.4	8.8	8.3
	317.6	389.6	369.9	384.3
NET ASSETS	350.4	421.5	480.8	474.5
Capital and reserves
Equity shareholders' funds
Called up share capital	58.0	58.0	58.0	58.0
Share premium account	44.4	44.4	44.4	44.4
Revaluation reserve	7.4	10.4	-	-
Merger reserve	-	-	91.6	91.6
Other reserves	1.4	1.4	-	-
Special reserve	-	-	41.7	41.7
Profit and loss account	198.6	265.8	214.8	208.5
	309.8	380.0	450.5	444.2
Non-equity shareholders' funds
Called up share capital	30.3	30.3	30.3	30.3
	340.1	410.3	480.8	474.5
Minority interest
Equity	10.2	11.1	-	-
Non-equity	0.1	0.1	-	-
	10.3	11.2	-	-
CAPITAL EMPLOYED	350.4	421.5	480.8	474.5

* Restated comparatives for adoption of FRS 19.

CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 4 JANUARY 2003

		2002		2001
	£m	£m	£m	£m
Net cash inflow from operating activities		75.2		109.4
Returns on investments and servicing of finance
Interest received	2.7		3.2
Interest paid	(16.1)		(22.9)
Preference dividends paid	(2.1)		(2.1)
Net cash (outflow) from returns on investments
and servicing of finance		(15.5)		(21.8)
Taxation		(10.8)		(14.1)
Capital expenditure and financial investments
Purchase of tangible fixed assets	(35.0)		(57.6)
Other proceeds on sale of tangible fixed assets	8.4		13.6
Purchase of investments	(5.8)		(5.7)
Disposal of investments	20.8		0.4
Net cash (outflow) from capital expenditure and
financial investments		(11.6)		(49.3)
Acquisitions and disposals
Acquisition of subsidiary undertakings	(0.1)		(41.5)
Net cash acquired	-		(0.6)
Deferred consideration for prior year acquisitions	(3.4)		(3.8)
Disposal of businesses	(0.7)		(3.8)
Net cash (outflow) from acquisitions and disposals		(4.2)		(49.7)
Equity dividends paid		(17.2)		(36.9)
Cash inflow/(outflow) before use of liquid resources and financing		15.9		(62.4)
Management of liquid resources		3.4		24.1
Financing
Increase in share capital	-		0.1
Increase in bank loans	26.5		89.6
Repayment of bank loans	(49.6)		(42.4)
Repurchase of exchangeable redeemable preference shares	(3.9)		(4.1)
		(27.0)		43.2
Net (decrease)/increase in cash in the year		(7.7)		4.9
Reconciliation of net cashflow to
movement in net borrowings
Net (decrease)/increase in cash in the year		(7.7)		4.9
Cashflow from decrease/(increase) in loans		23.1		(47.2)
Cashflow from (decrease) in deposits		(3.4)		(24.1)
Cashflow from repurchase of exchangeable redeemable
preference shares		3.9		4.1
Change in net borrowings resulting from cashflows		15.9		(62.3)
Issue of exchangeable redeemable preference shares		(0.9)		(1.1)
Bank loans acquired with acquisitions		(0.5)		(0.7)
Bank loans reduced with disposals		0.2		8.6
Exchange movement		9.8		(0.6)
Movement in net borrowings during the period		24.5		(56.1)
Opening net borrowings		(276.1)		(220.0)
Closing net borrowings		(251.6)		(276.1)

CONSOLIDATED FREE CASHFLOW

		2002	2001
	Note	£m	£m
Net cash inflow from operating activities	(a)	75.2	109.4
Net interest paid		(13.4)	(19.7)
Taxation		(10.8)	(14.1)
Cash earnings		51.0	75.6
Dividends paid		(19.3)	(39.0)
Post dividend cashflow		31.7	36.6
Capital expenditure		(35.0)	(57.6)
Proceeds on sale of tangible fixed assets		8.4	13.6
Free cashflow		5.1	(7.4)

(a)	Reconciliation of operating (loss)/profit to net cash inflow from operating activities			2002			2001
		Contin-	Discon-		Contin-	Discon-
		uing	tinued	Total	uing	tinued	Total
		£m	£m	£m	£m	£m	£m
	Operating (loss)/profit	(30.6)	(0.3)	(30.9)	55.8	0.8	56.6
	Depreciation	46.6	0.1	46.7	45.9	2.1	48.0
	Amortisation of goodwill	7.7	-	7.7	7.7	-	7.7
	Loss on sale of plant and machinery	0.4	-	0.4	0.3	-	0.3
	Exceptional operating costs	17.2	-	17.2	-	-	-
	(Increase)/decrease in stocks	18.6	(1.0)	17.6	6.5	0.2	6.7
	(Increase)/decrease in debtors	3.5	0.5	4.0	20.8	1.7	22.5
	Increase/(decrease) in creditors	(2.8)	(0.1)	(2.9)	(31.9)	(1.6)	(33.5)
	Increase/(decrease) in provisions	15.4	-	15.4	0.6	0.5	1.1
	Net cash inflow from operating activities	76.0	(0.8)	75.2	105.7	3.7	109.4

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

	2002	2001
	£m	£m
Net (loss)/profit attributable to shareholders	(59.4)	5.9
Deficit on revaluation of investments	(0.3)	-
Foreign currency translation	(13.2)	(1.4)
Total recognised gains and (losses) relating to the year	(72.9)	4.5
FRS 19 Prior year adjustment	(21.8)
Total recognised gains and (losses) since last annual report	(94.7)

CONSOLIDATED reconciliation of Movement in shareholders' funds

	2002	2001
		Restated
	£m	£m
Net profit attributable to shareholders	(59.4)	5.9
Repayment of capital investment	-	(0.2)
Deficit on revaluation of investments	(0.3)	-
Goodwill written back to profit and loss	4.8	-
Dividends	(2.1)	(19.3)
	(57.0)	(13.6)
New share capital	-	0.1
FRS 19 prior year adjustment	-	(21.8)
Foreign currency translation	(13.2)	(1.4)
Net decrease to shareholders' funds	(70.2)	(36.7)
Opening shareholders' funds (originally £432.1 million
before FRS 19 adjustment)	410.3	447.0
Closing shareholders' funds	340.1	410.3

NOTES TO THE ACCOUNTS

1.	SEGMENTAL INFORMATION
		Net Operating Assets		Turnover		Operating profit
		2002	2001	2002	2001	2002	2001
			Restated				Restated
		£m	£m	£m	£m	£m	£m
	Product Group
	Electrical Carbon	141.8	175.4	199.9	210.0	14.6	17.0
	Magnetics	168.6	181.6	186.2	215.1	(2.9)	5.8
	Engineered Carbon	94.8	112.8	111.3	127.3	3.8	8.4
	Technical Ceramics	108.2	104.9	125.2	149.9	5.0	13.5
	Insulating Ceramics	152.1	190.9	256.8	287.7	13.9	18.8
	Continuing operations	665.5	765.6	879.4	990.0	34.4	63.5
	Discontinued operations			0.9	34.5	(0.3)	0.8
	Central assets	8.8	11.7
		674.3	777.3	880.3	1,024.5	34.1	64.3
	Operating exceptionals					(57.3)	-
	Goodwill amortisation					(7.7)	(7.7)
	Group operating profit					(30.9)	56.6
	The central assets include land and buildings, prepayments and other creditors of the non operating and holding companies. The discontinued operation in 2002 is Barcelona. The operating exceptionals of £57.3 million comprise, Electrical Carbon £6.9 million, Magnetics £7.8 million, Engineered Carbon £7.2 million, Technical Ceramics £5.2 million, Insulating Ceramics £17.9 million, and £12.3 million referred to in note 2. Goodwill comprises, Electrical Carbon £1.0 million, Magnetics £4.1 million, Engineered Carbon £0.5 million, Technical Ceramics £0.9 million and Insulating Ceramics £1.2 million.
	Geographical Area
	The analysis shown below is based on the location of the contributing companies:
		Net Operating Assets			Turnover	Operating profit
		2002	2001	2002	2001	2002	2001
			Restated				Restated
		£m	£m	£m	£m	£m	£m
	United Kingdom
	Sales in the UK			41.2	48.5
	Sales overseas			42.6	47.8
	Total United Kingdom	98.1	102.2	83.8	96.3	2.2	4.4
	Rest of Europe	241.8	258.4	320.2	342.8	11.9	26.3
	The Americas	265.8	340.0	380.5	460.9	12.2	24.9
	Far East and Australasia	55.4	61.6	83.5	79.3	6.4	6.0
	Middle East and Africa	4.4	3.4	11.4	10.7	1.7	1.9
		665.5	765.6	879.4	990.0	34.4	63.5
	Discontinued operations			0.9	34.5	(0.3)	0.8
	Central assets	8.8	11.7
		674.3	777.3	880.3	1,024.5	34.1	64.3
	Operating exceptionals					(57.3)	-
	Goodwill amortisation					(7.7)	(7.7)
	Group operating profit					(30.9)	56.6

1.	SEGMENTAL INFORMATION (continued)
			Turnover
		2002	2001
			Restated
		£m	£m
	The analysis shown below is based on the location of the customer:
	United Kingdom	65.3	73.7
	Rest of Europe	301.0	341.4
	The Americas	372.5	433.7
	Far East and Australasia	122.8	123.0
	Middle East and Africa	17.8	18.2
		879.4	990.0
	Discontinued operations	0.9	34.5
		880.3	1,024.5
2.	Operating Exceptionals
	The Group has incurred and provided for the costs of restructuring, £45.0 million, and the costs and fines associated with the final Department of Justice enquiry in the USA, £12.3 million.

3.	CORPORATE exceptional items
	The corporate exceptional items relating to the sale of businesses, £11.6 million, include two main disposals of the Barcelona, and Thermal Ceramics (New Zealand) businesses and the disposal of the Kesteren operation. The goodwill written-off as part of the business disposals is £3.5 million. The £3.4 million relates to various property disposals.
4.	Taxation CHARGE/(CREDIT)
		2002	2001
		£m	£m
	United Kingdom corporation tax:
	Corporation tax on (loss)/profit
	for the period at 30% (2001 : 30%)	6.1	10.7
	Adjustment to prior years	(1.9)	(0.8)
		4.2	9.9
	Overseas current tax	2.7	9.0
	Total current tax	6.9	18.9
	Deferred tax
	United Kingdom	0.3	0.3
	Overseas	(7.7)	(6.7)
	Total deferred tax	(7.4)	(6.4)
	Total taxation	(0.5)	12.5

4.	Taxation CHARGE/(CREDIT) (Continued)

	Overseas tax includes a credit of £5.7 million (2001: £0.1 million debit) arising on total exceptional losses of £58.5 million (2001: losses of £15.0 million). United Kingdom tax includes a tax credit of £1.2 million (2001: £0.1 million credit) arising on total exceptional losses of £13.8 million (2001: £2.6 million). Factors affecting the tax charge for the period: The tax assessed for the period is higher than the standard rate of corporation tax in the UK. The differences are explained below.
		2002	2001
		£m	£m
	(Loss)/profit on ordinary activities before taxation	(58.7)	19.8
	Taxation on (loss)/profit on ordinary activities at standard
	rate of UK corporation tax of 30% (2001: 30%)	(17.6)	5.9
	Difference comprises:
	Exceptional items not deductible for tax purposes	9.7	5.3
	Goodwill amortisation not deductible for tax purposes	2.3	2.3
	Overseas losses not utilised	4.0	1.7
	Overseas rate differences	1.9	1.5
	Effect of reversal of timing differences	7.4	0.6
	Other	(0.8)	1.6
	Current tax charge for the period	6.9	18.9
5	Dividends	2002	2001
		£m	£m
	Interim: 0.0p per Ordinary share (2001: 7.4p)	-	17.2
	Proposed final: 0.0p per Ordinary share (2001: 0.0p)	-	-
	Total: 0.0p per Ordinary share (2001: 7.4p)	-	17.2
	Preference dividends on non-equity shares	2.1	2.1
		2.1	19.3

6	(loss)/Earnings per Ordinary share
a.	Basic and underlying (loss)/earnings per share		2002		2001
		Before goodwill amortisation	After goodwill amortisation	Before goodwill amortisation	After goodwill amortisation
		£m	£m	£m	£m
	(Loss)/profit after tax and minority interest	(51.7)	(59.4)	13.6	5.9
	Preference dividend	(2.1)	(2.1)	(2.1)	(2.1)
	Basic (loss)/earnings	(53.8)	(61.5)	11.5	3.8
	Adjusted by all post tax exceptional items	65.4	65.4	17.6	17.6
	Underlying earnings	11.6	3.9	29.1	21.4
	Weighted average number of Ordinary shares		231,990,704		231,958,292
	Basic (loss)/earnings per share	(23.2p)	(26.5p)	5.0p	1.6p
	Underlying earnings per share	5.0p	1.7p	12.5p	9.2p
	The Directors have disclosed an underlying (loss)/earnings per share as, in their opinion, this gives a better indication of the underlying performance of the Group and assists comparison with the results of earlier years.

6	(loss)/Earnings per Ordinary share (Continued)
b.	Diluted earnings	2002	2001
		£m	£m
	Basic (loss)/earnings	(61.5)	3.8
	Preference dividend to be eliminated on
	conversion of preference shares	-	-
	Diluted (loss)/earnings	(61.5)	3.8
	Adjusted by all post tax exceptional items	65.4	17.6
	Underlying diluted earnings	3.9	21.4
	Weighted average number of Ordinary shares	231,990,704	231,958,292
	Dilutive effect of share option schemes	2,718,929	292,752
		234,709,633	232,251,044
	Diluted (loss)/earnings per share	(26.2p)	1.6p
	Diluted underlying earnings per share	1.7p	9.2p