Welcome to the Luxfer Second Quarter Conference Call. We will first hear from Chief Executive Officer, Brian Purves, who will provide a market overview; followed by Group Finance Director, Andy Beaden, who will review financial performance for the quarter. Brian will then return to sum up and offer an outlook. After that, Brian and Andy will be glad to take your questions. To make sure that as many questioners as possible get a chance to speak, we request that you initially ask only one question. After you have heard the answer, we will give you the opportunity to ask a follow-up question. If you would like to ask additional questions, our operators will be glad to place you back in line. We thank you for your cooperation. We now turn the call over to Brian Purves.

Thank you. Good afternoon, ladies and gentlemen, and welcome to the Luxfer conference call on the second quarter of 2014 where we’ll take the usual format. Turning to Slide 4, trading during the second quarter remained affected by disruptions in two key markets, while European demand generally remained somewhat depressed. The Elektron materials business continues to improve in most areas. As I indicated during the quarter one call, there was, however, no repeat of the high industrial catalyst sales we saw during quarter one. The Cylinders results, however, partly due to market issues flagged in the quarter one release, remained depressed. Our overall revenue was only modestly down on quarter two 2013, but a weaker mix of sales and incremental costs meant that our profits were materially down. Adjusted fully-diluted EPS of $0.27 was at the bottom end of the range for the quarter. Looking at the sales revenue movement, Slides 5 and 6 track from the 2013 second quarter results at the top through to the 2014 quarter two results at the bottom. For Elektron, the surcharge for cerium, which was only $0.6 million in the quarter, has been dropped all together from customer pricing for the second half of 2014. Smaller surcharges for other rare earths are expected to remain. Stripping out the surcharge and also exchange rate movements, underlying sales are around $1.9 million or 3.3% down on prior year. The outage at the countermeasure flare customer’s facility that occurred late February had a bigger impact in quarter two than it did in quarter one, leaving that sector well down on prior year. We saw, however, net improvements in several markets, including aerospace alloys and magnesium photo-engraving plate. Turning to Slide 6, the Cylinder business had another weak quarter in terms of demand for higher-value cylinders. Net…

Thank you, Brian, and welcome everyone to the call. And before I start, could I just ask anyone who is also facilitating, on this call, have got an open line, could they put that line on mute because there was interference during Brian’s presentation. Thanks. Brian covered the divisional sales analysis. And my first slide, Slide 11 shows how that consolidates to the Group revenue changes for Q2 and year-to-date. Total revenue for Q2 2014 was $121.9 million, with net revenue of $121.3 million and the rare earth chemical surcharge was, as Brian indicated, only $0.6 million. The Group's underlying revenue for Q2 2014 was down at 2.3% or $2.8 million, excluding the surcharge changes and adjusting out the positive $3.7 million FX translation gain. Year-to-date, underlying net revenue, adjusted for translation, is down only 0.9%, with Elektron up 2.2%, and Gas Cylinders down 3.4%. Slide 12 shows the trend in sales for Q2 2014 by geographic region. You can see the largest variances are North America being down, due to the U.S. self-contained breathing apparatus and countermeasure sales being reduced, with Asia-Pacific up as a result of the Australian virtual pipeline contract and general robustness in that region. Europe is slightly down. We have been helped by stronger sales in lower-margin areas such as magnesium recycling, but was down in some higher-margin areas such as composite medical cylinders. Turning to the trading profit results on Slide 13, the Q2 2014 Group trading profit was $11.2 million versus $15.3 million for Q2 2013. Brian talked through the factors affecting revenue and sales changes in the quarter. Elektron’s results at $9.5 million is weaker than last year and the prior quarter, but given the impact from lower countermeasure sales and the non-repeat of the large industrial catalyst order in Q1 2014,…

Thank you, Andy. Turning to Slide 19, in summary then, the results continue to be affected by disruption in two key U.S. markets and by general weakness in Europe. Gas Cylinders is up in its aluminum markets, but as disclosed on many occasions, the margins on that side of the business tend to be, on average, lower than for composite cylinders. So the additional aluminum sales, although keeping the revenue up, haven’t compensated for the disruption in the SCBA market and the weakness in European healthcare. Additionally, we are incurring heavier-than-usual development costs in that division, particularly on Type 4 cylinders and IOS medical oxygen delivery device. The specialty materials side of the Group is doing well enough in its other areas, but the EBTIDA result today is up on prior year despite one of its key markets, military powders, being well down. Looking at Slide 20, on the outlook for 2014, while the countermeasure flare customer that had the accident in February is back in low level production, they have some months of work to do before getting back to normal. Meanwhile, our forecast demand from other military customers has softened partly because they are over-stocked and we now think that our sales of military powders this year will be only around $10 million, some 40% down on prior year and less than half the level of 2012. At the 2014 forecast level of sales, we believe that supply is below usage. So, we can’t expect the market to improve overtime. Progress on other Elektron division markets is being held back by the weakness in military sales, and so it is now unlikely that the divisional result will be much different from 2013 when measured on a like-for-like basis. The disruption in the SCBA market is lessening with several…

(Operator instructions) And your first question comes from Martin Englert of Jeffries. Martin Englert – Jeffries: What are your expectations for the Cylinders segment in the second half relative to how the first half performance was, and also year-over-year versus second half of ‘13?

We do expect the second half to be quite a bit better than the first half, but with most of that improvement coming in the fourth quarter for the factors that we’ve mentioned, both the reduction in the development costs as we get into commercial phase, the additional sales from Type 4, the cost savings that we couldn’t place, which will start to have an impact in quarter four and the improvement in the SCBA market. So, while there are rightly some underlying improvements in quarter three, quarter four is the one that should be relatively clean, so we do expect the second half in Cylinders to be quite a bit better than the first. Against prior year, we would hope that it can match or improve slightly on last year, but certainly against the first half, there would be a very considerable certainly uplift. Martin Englert – Jeffries: And you had mentioned about, I believe, it was $2.3 million in cost impact from product innovation in the first half of ’14, what did that look like in 2Q for Cylinders and what would you expect that to be heading into the 3Q, 4Q there?

The costs that we’ve mentioned have been incurred, most of them, in both quarters. The unutilized facility costs with Utah came-in in March, so that wasn’t a full impact, but the development costs have been underway through most of that time, and going forward we will continue to have the costs on the IOS development, because that doesn’t finish its testing program until well into next year, but the Type 4 developments are clearly getting towards the end, because we are moving out of development and into production, and so we will start to see those tail off in the third quarter, and instead, of course, what we will start to see is the benefit of sales coming through, which will help us to recover the overheads of the Utah facility, so I think you see on that particular element of it, which I think we identified it approaching half of the amount tail off in quarter three and not be there in quarter four. Martin Englert – Jeffries: Just for the Utah facility cost, what was the – how do that look on 2Q singling that out?

It would be several hundred thousand dollars, probably a little less than $0.5 million. Martin Englert – Jeffries: And then, you had mentioned some overhead cost savings which should be fully reflected in 4Q, could you give a split between the two segments about how much you would anticipate on an annual run rate?

That figure is really the impact of the Cylinders reductions that we’ve made, and they are progressively being implemented, some of them had already been on action, and others get implemented during the third quarter, so the $2 million is an annualized figure and should be benefiting the Cylinders numbers by about $0.5 million in quarter four, and that’s the bulk of the figures that we’ve mentioned. We have taken a few employees out of the powders business which is looking at quite a slow level of production in the second half of the year, but that’s a much smaller net saving benefit. I would estimate that at $100,000 a quarter once we get into quarter four. Martin Englert – Jeffries: And finally there, if I could, for the acquisitions, Innotech and Truetech, would $8 million EBITDA run-rate by 4Q be a reasonable assumption at that point?

Yes, it’s a reasonable assumption. That’s certainly the figure that we mentioned as an expected outcome for the current year. You will appreciate that we’ve only just walked through the door and the systems in the business are not sophisticated as we are used to, but I think that -- I can’t give any better guidance other than quarter four would be roughly a quarter of that $8 million. We still have a lot of work to do to understand the seasonality, bear in mind though that, as Andy mentioned, some of the profitability gets converted into amortization. So, the actual figures, the trading profit that we report will be slightly lower because of the acquisition accounting, the EBITDA is unaffected and the cash is unaffected, but the trading profit will be a little bit reduced by these capitalized intellectual property, et cetera.

We gave guidance about $1.4 million a year, so it’s a quarter in Q4.

Your next question comes from Julian Mitchell of Credit Suisse.

I guess I had a question around the revenue outlook in Cylinders, so as you sound sort of very confident about it improving by Q4 on the operating side, I just wondered how much of that was related to an assumption as a big change in customer spending habits kind of versus your own timing of costs, how much of your sales weakness now is SCBA and how much is sort of general weakness, and what’s the outlook for both of those?

The European weakness has been around a while and the most thoughtful aspect of that is European medical composite cylinders, which are relatively weak at the moment, and we are not really assuming much in the way of an upturn in that -- in the balance of the year, because we tend to see reasonable lead time on the orders for those and they are going to remain weak for the balance of the year. But the SCBA side, which as you recall, is our single biggest market normally, has been quite a major impact year-to-date, and if you look at the quarterly calls from our major customers, I mean they are consistent with what we are saying that they all expect to have all their products approved and in the market by the end of the third quarter and that includes some new generation products that are still in the approval process. So, just the absence of disruption is going to be a major step forward, and if you overlay on top of that, but again bear in mind what our customers are saying, they do expect quite a bit of the shortfall in sales to be deferred sales which they can then start to cut back. We’re anticipating that we’ll see at least a modest start to that such that the run rate of sales in quarter four will be a little higher than it would otherwise have been. So the SCBA market turning around in quarter four is quite a big element of it but that seems a reasonable basis for that, certainly consistent with what the customers are telling us. If you overlay on top of that the fact that we will have a full quarter of the cost saving benefits, we’ll have ended the bulk of the Type 4 development costs, we will actually – we anticipate selling the Type 4 cylinders profitably, and all of those together make for a significant uplift in the Cylinders numbers.

And then just my follow up would be on capital allocation, you completed these two deals, what’s the outlook in terms of, I guess, sort of target balance sheet leverage and how much of an active M&A strategy do you think we’ll get from here?

Julian, on the balance sheet leverage, as you know, we’ve really said for some time now but the – we see that certainly no more than 2 times at pro forma or an acquisition and then, really managing the 1 times net debt-to-EBITDA. This acquisition will take us to a pro forma 1.3. 1.4 times, which we’re quite comfortable with, but we wouldn’t want be going over 2 times and we do see that acquisitions can be funded through long-term free cash flow as long as we can keep within those ratios.

And then just to add in, Julian, that the business that we are acquiring is highly cash generative. The level of capital investment, we believe, will be relatively modest, so there would be high conversion rate from profitability through to cash flow. So that will obviously assist the ratio. In terms of total acquisitions, we remain actively looking for those. I suspect that from where we are, it’s pretty unlikely that we will manage another one this calendar year and could be well into 2015 before we’re able to put another one under our belt, but we will only do so provided that we can do it within the sort of framework that Andy has laid down on the funding side.

Maybe just to add, Julian, as you know, we actually do spend quite a bit of time on individual acquisitions. So, as Brian alluded, the acquisitions that we’ve made, I would take the current one, we’ve been working on or following for quite some time, so it’s a very carefully plotted out strategy.

(Operator Instructions) Our next question comes from Philip Gibbs of KeyBanc Capital Market.

Just wanted an update as far as what you are seeing on just the European macro front as far as the automotive business and then the industrial side, because I know you commented last quarter that the industrial cylinders business is weak as you had seen it in sometime?

We feel a little bit of a recovery in the industrial side, it’s still not where we would like it to be, but the main shortfall at the moment in Europe is in the medical composite side, which largely comes out of our French plant, and that’s the one that’s struggling a bit at the moment. We’ve actually managed quite successfully to fill the Nottingham facility, which is an aluminum plant, so at the moment, it’s more European medical, and to be honest, over time, that’s not hugely related to the economic cycle, it’s more to do with policy matters and buying cycles, so we do expect that will come back and when it comes back it probably comes back quite rapidly, but we don’t think it’s going to be there for the balance of this year. On the automotive side, there are very, very small improvements coming through, it’s just painfully slow certainly in terms of the impact on us. I mean we said our automotive business is stable. We’ve obviously wanted to be growing, and it’s not at the moment. The little bits and pieces of business that we’re winning are actually outside the European market, but it remains a major focus for us. We are sort of re-examining our pricing strategy to try and make sure that we win some additional business in 2015 and those possibilities do exist. We are talking about such possibilities, but I don’t think there will be much change in the balance of this year.

As far as your pricing strategy, how have you had to adjust that, I mean, as far as what competitive forces, is it usual suspects in the market on the zirconium catalysts side or is it the Chinese getting more aggressive?

It’s the usual suspects although one of those is [indiscernible] cost base, but the Chinese advantage that they did have with the re-pricing has largely been eliminated, so we’re at least on a reasonably relative roughly clean playing field in terms of the cost base, that’s a matter of what margins people are prepared to accept, and certainly in the North American market, prices are pretty aggressive at the moment being led by that Chinese base of supplier and the Japanese, and if we want to win a slice of that business, we’ll have to be more aggressive on pricing, but we got to be careful about it. We’re not interested in chasing higher levels of commodity volume. We do make good margins out of this industry, so we have a bit of margin to play with to generate some incremental business at the edge, but it remains our long-term strategy to reduce our dependence on the automotive sector by developing other aspects of the business, and we hope to make more progress on that front in 2015.

And I just had a deal financing question for Brian. I think you said that the deal was going to be financed with 2% of the revolver, is that going to be moved into longer-term debt?

Yeah, Phil, it’s Andy, I did, yes, absolutely. Some of the debt we will look at maybe moving into longer-term finance. As you know, we have a NAIC-2 rating in the private placement market in the U.S. already fully established. So, that market is open to us quite without much extra work, so we may move some of the cost of the acquisition into seven to 10 year money rather than – as you know the current banking facilities were only just extended, so they themselves are committed to five years.

I think maybe you missed it, but Andy said. From our modeling, the acquisition takes us to a pro forma kind of 1.3, 1.4 times EBITDA. The acquisition itself is highly cash generative, it’s got rather low capital expenditure needs and so the high conversion factor from the profitability through to cash, of course, with the efforts that we will be making to improve our working capital turns, the business, the core business, the cash generation should start to improve going forward. So the ratio we’d expect to come down in the absence of other acquisitions, which at the moment it doesn’t look likely that we will add any further sizable one certainly in this current calendar year, we remain looking. There is always a chance that something attractive might come out of that field, but at the moment it seems unlikely that will happen until well into 2015. Does that answer your question?

I was just more curious as to what your revolving credit facility availability was after this deal.

It’s a $150 million committed facility and with an option of another $50 million if we needed it. So it’s $150 million at the moment, and we’ve got a draw down after this deal of around $60 million because we just slightly drawn down at the moment, but we’d expect the underlying businesses to be cash positive in the second half of the year. So it’s around $90 million of availability after the deal closes.

And as Andy said, we are looking at converting some of that into long-term debt maybe to the chin of $25 million, $30 million.

Yeah, between $20 million and $25 million will be the most likely amount to convert into say seven to 10 year notes, which we can do in the next couple of months if we wanted to do.

Thank you, and there are no other questions at this time.

Okay, well, if there are no other questions, thank you, ladies and gentlemen, and we will speak to you again in three months’ time.

An encore recording of this conference call will be available in about two hours. To hear the recording, please call 800-585-8367 in the United States. In other countries, call 404-537-3406. This information will also be available on the Luxfer Group website at www.luxfer.com. Thank you for your participation in this call. Have a great day.