The company made taxable profits of pounds 35m in the six months to 4 July and has raised its dividend for the first time since 1991.
Morgan was also assisted by lower interest charges. Rates were more favourable and debt was reduced, taking finance charges down from pounds 8.5m to pounds 7.6m.
At 4 July borrowings stood at pounds 158m, or 60 per cent of net assets. Debt has since been further reduced by the disposal of the paints group Holt Lloyd to its management for pounds 63m. The current gearing ratio is 30 per cent.
Morgan is best known for making ceramic vessels used to handle molten metals. It also supplies more specialist markets. In addition to hip replacements it makes insulation components used in airbags and spinning spools for textile manufacturers.
Morgan's profits were held back by continuing difficulties in defence-related markets. Turnover in its specialty materials division fell from pounds 64.5m to pounds 66.1m and profits from pounds 8.1m to pounds 7.8m.
Elsewhere, the division which makes carbon brushes for electric motors made pounds 9.6m against pounds 9.2m. In the two ceramics-supplying divisions profits rose from pounds 8.9m to pounds 9.7m and from pounds 11.1m to pounds 11.4m.
Sir James Spooner, chairman, said: 'Most of Morgan's major world markets began to show some upturn in demand in the first half of the year.'
Turnover increased from pounds 401m to pounds 412m. However, some analysts were disappointed that Morgan did not produce better growth. Even allowing for adverse exchange rate movements the sales increase was only 3.5 per cent.
Morgan said that orders were up by 6 per cent. One analyst said: 'Turnover up 3 per cent and sales intake up 6 per cent hardly adds up to a strong recovery.'
The shares rose 5p to 332p. Earnings per share were 10.2p compared with 9.5p and the dividend rises from 5.75p to 5.95p.
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