REG - Johnson Matthey PLC - Final Results <Origin Href="QuoteRef">JMAT.L</Origin> - Part 2
16/07/2015 09:22
- Part 2: For the preceding part double click ID:nRSD1642Pa
Technologies, and we completed two bolt-on acquisitions in this area during the year. Excluding acquisitions the
division's sales were 11% ahead. We continued to invest in research and development to support other long term new
business areas, such as water purification and atmosphere control technologies. As a result of this and
acquisition-related costs, the division made an underlying operating loss of £22.1 million.
Battery Technologies
Our Battery Technologies business performed well with sales 23% ahead at £84 million (31% at constant rates) supported by
good demand for battery systems for high performance power tools and e-bikes. Sales of battery systems to customers in the
automotive sector also made progress.
Within Battery Technologies, a focus is on the development of battery materials for highly demanding applications such as
for the automotive sector. In September 2014 we completed the purchase of a cathode material manufacturing facility in
China from A123 Systems LLC, a leading lithium-ion (Li-ion) battery manufacturer, for US $26 million. The acquisition also
includes a long term agreement where Johnson Matthey will supply A123 with lithium iron phosphate (LFP).
In February 2015 we completed the acquisition of Clariant AG's Energy Storage business for US $75 million. This includes a
world scale battery materials manufacturing facility in Canada, an R&D centre and pilot plant in Germany together with the
customer order book and a substantial intellectual property portfolio. The business is a leading supplier of LFP cathode
material to the Li-ion battery sector for both automotive and non-automotive applications.
These two complementary transactions strengthen Johnson Matthey's position in the battery materials sector. This provides
us with a strong platform in LFP from which we will develop a broader portfolio of battery materials. Integration of the
two businesses into our Battery Technologies business is underway to realise benefits from R&D, manufacturing and
commercial synergies. Sales of battery materials made a small contribution in 2014/15 which we expect to increase in
2015/16 as a result of a full year of ownership of the two acquired businesses.
We have also continued to invest in R&D to support our battery technologies development and the business as a whole made a
small operating loss in the period.
Fuel Cells
Sales in our Fuel Cells business were £6 million, slightly lower than last year. The business was impacted in the first
half of the year by the bankruptcy of a principal customer for membrane electrode assemblies (MEAs) for stationary
applications. That customer was subsequently acquired by a larger organisation to which we have continued to supply our
MEAs. This supported sales in the second half.
For transport applications, the phased emissions regulation in California, USA and the impact of Japan's Basic Energy Plan
continue to incentivise the introduction of small numbers of fuel cell powered cars and several companies have announced
plans for the commercial launch of these vehicles. We have continued to work with a number of OEMs on their development
programmes and it is our strategy to convert these existing OEM relationships into volume supply in the next two to three
years.
The net expense of our Fuel Cells business reduced this year to £9.9 million.
New Business Development
We invested just under £10 million in other new opportunities, the most advanced being our Water Purification and
Atmosphere Control Technologies (ACT) businesses.
On 18th May 2015 we completed the acquisition of the StePac Modified Atmosphere Packaging business from DS Smith for £20
million, subject to typical post-closing adjustments. The transaction is an important step in the development of our ACT
business. StePac, which employs around 90 people, is a leading provider of modified atmosphere packaging which works
closely with growers and distributors of fresh produce to develop, manufacture and supply application specific products.
The business is commercially active in over 60 countries and has manufacturing facilities in Israel and the US.
Combined with our expertise in functional materials, the acquisition of StePac provides a strong platform of complementary
technical skills and market access to enable Johnson Matthey to accelerate the selection, development and commercialisation
of new technologies. We expect our ACT business to deliver sales of around £20 million in 2015/16 and, after taking
account of integration costs, the business should make a small operating profit in the year.
Outlook
Johnson Matthey made good progress in 2014/15 and the group remains well placed to deliver long term growth through the
development of value adding sustainable technologies.
On a reported currency basis and including the £15 million, mainly non-cash, increase in the post-employment benefits cost
(as detailed on page 8), the outlook for the divisions is as follows:
Emission Control Technologies
We expect ECT to continue its strong performance, in line with the medium term targets of high single digit growth in sales
at stable margins, as outlined at our Investor Day in January 2015. The division should benefit from the full introduction
of Euro 6b legislation from September 2015 and from continued growth in vehicle production in China. Good demand for HDD
catalysts for the large (Class 8) trucks in North America is expected to continue throughout 2015 which will also support
the division's sales.
Process Technologies
After making progress this year, 2015/16 is likely to be more challenging for Process Technologies, particularly in the
first half of the year. We expect continued good demand for catalysts across the division, the timing of which can be
difficult to predict on a quarter by quarter basis. However, the division's performance will be held back by lower income
from licensing, particularly in China. Whilst we believe the long term drivers for Process Technologies remain in place,
its performance in 2015/16 is expected to be broadly in line with 2014/15.
Precious Metal Products
Performance in Precious Metal Products will be significantly down as a result of the sale of its Gold and Silver Refining
business and due to difficult trading conditions in Pgm Refining and Recycling. We expect sales in the first quarter to be
impacted by the lower refining intake volumes in the final quarter of 2014/15. In addition, with current pgm prices well
below those at the start of 2014/15, these could adversely affect performance if sustained throughout 2015/16. We also
expect higher costs in pgm refining this year, and consequently an impact on margins, as we see a shift towards a more
complex intake product mix. Our Manufacturing businesses, which represent around two thirds of the division's sales,
should remain broadly stable as we continue our investment in new products to drive medium term growth.
Fine Chemicals
Fine Chemicals is expected to make good progress in 2015/16 (adjusted for the sale of Research Chemicals, which we
anticipate will be completed before the end of the calendar year). Global drivers, such as an ageing population and a
shift towards lower cost healthcare, should drive demand from our API customers and longer term we expect to see increasing
benefit from the investments we are making to enhance our product offering.
New Businesses
In 2015/16 New Businesses will benefit from the two acquisitions in its Battery Technologies business which were completed
in 2014/15. We will continue our ongoing investment of around £5 million to £7 million p.a. in new opportunities.
Overall, we expect the underlying operating loss in New Businesses to reduce modestly in 2015/16 and reach breakeven in
2017/18.
Overall
In 2015/16, Johnson Matthey's continuing businesses are expected to deliver good underlying growth. A strong performance
in Emission Control Technologies and good progress in Fine Chemicals are likely to be partially offset by a weaker year for
Precious Metal Products. We anticipate that Process Technologies' performance will be broadly stable and that the
operating loss in New Businesses will reduce modestly.
In line with our strategy, we have divested our Gold and Silver Refining business and are in advanced negotiations on the
sale of Research Chemicals. Given the absence of these two businesses, we expect the group's performance in 2015/16 to be
slightly ahead of 2014/15.
Looking Further Ahead
Johnson Matthey remains well placed to benefit from major global sustainability drivers such as the continued drive to
improve air quality, energy security, urbanisation and the increasing need for healthcare. We continue to invest in R&D,
our infrastructure and our people, working closely with customers to provide them with innovative and improved solutions.
Supported by a clear purpose and strategy, Johnson Matthey is well positioned to deliver growth for our shareholders
through the creation of value adding sustainable technologies.
Consolidated Income Statement
for the year ended 31st March 2015
2015 2014
Notes £ million £ million
Revenue 4 10,059.7 11,155.2
Cost of sales (9,242.0) (10,356.1)
Gross profit 817.7 799.1
Distribution costs (133.3) (137.3)
Administrative expenses (207.3) (192.9)
Profit on sale or liquidation of businesses 2 73.0 -
Amortisation of acquired intangibles 3 (17.3) (20.7)
Operating profit 4 532.8 448.2
Finance costs (47.0) (50.4)
Finance income 9.5 8.3
Share of profit of joint venture 0.5 0.5
Profit before tax 495.8 406.6
Income tax expense (68.5) (67.9)
Profit for the year 427.3 338.7
Attributable to:
Owners of the parent company 428.7 340.2
Non-controlling interests (1.4) (1.5)
427.3 338.7
pence pence
Earnings per ordinary share attributable to the equity holders of the parent company
Basic 7 211.2 167.7
Diluted 7 210.7 166.9
Consolidated Statement of Total Comprehensive Income
for the year ended 31st March 2015
2015 2014
Notes £ million £ million
Profit for the year 427.3 338.7
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefit assets and liabilities 11 (52.1) 43.5
Tax on above items taken directly to or transferred from equity 13.7 (19.3)
(38.4) 24.2
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (11.6) (95.3)
Cash flow hedges (16.2) 9.3
Fair value gains on net investment hedges 26.5 9.7
Fair value gain / (loss) on available-for-sale investments 6.1 (0.4)
Tax on above items taken directly to or transferred from equity 2.3 0.3
7.1 (76.4)
Other comprehensive expense for the year (31.3) (52.2)
Total comprehensive income for the year 396.0 286.5
Attributable to:
Owners of the parent company 397.2 288.3
Non-controlling interests (1.2) (1.8)
396.0 286.5
Consolidated Balance Sheet
as at 31st March 2015
2015 2014
Notes £ million £ million
Assets
Non-current assets
Property, plant and equipment 1,081.0 1,023.4
Goodwill 548.0 571.0
Other intangible assets 187.5 183.3
Deferred income tax assets 21.6 32.1
Investments and other receivables 82.0 70.7
Interest rate swaps 8 19.0 12.1
Post-employment benefit net assets 11 6.9 8.2
Total non-current assets 1,946.0 1,900.8
Current assets
Inventories 859.4 672.5
Current income tax assets 20.6 27.4
Trade and other receivables 1,130.9 955.3
Cash and cash equivalents ─ cash and deposits 8 59.4 221.8
Interest rate swaps 8 - 4.0
Other financial assets 14.4 7.5
Assets classified as held for sale 12 149.0 -
Total current assets 2,233.7 1,888.5
Total assets 4,179.7 3,789.3
Liabilities
Current liabilities
Trade and other payables (799.5) (830.0)
Current income tax liabilities (95.9) (124.4)
Cash and cash equivalents ─ bank overdrafts 8 (55.5) (39.2)
Other borrowings, finance leases and related swaps 8 (234.7) (175.9)
Other financial liabilities (25.5) (3.1)
Provisions (36.4) (17.4)
Liabilities classified as held for sale 12 (49.8) -
Total current liabilities (1,297.3) (1,190.0)
Non-current liabilities
Borrowings, finance leases and related swaps 8 (782.6) (752.0)
Deferred income tax liabilities (70.0) (89.3)
Employee benefit obligations 11 (203.4) (173.5)
Provisions (20.8) (28.6)
Other payables (5.5) (2.7)
Total non-current liabilities (1,082.3) (1,046.1)
Total liabilities (2,379.6) (2,236.1)
Net assets 1,800.1 1,553.2
Equity
Share capital 220.7 220.7
Share premium account 148.3 148.3
Shares held in employee share ownership trust (ESOT) (54.7) (52.7)
Other reserves (21.0) (27.9)
Retained earnings 1,517.3 1,271.1
Total equity attributable to owners of the parent company 1,810.6 1,559.5
Non-controlling interests (10.5) (6.3)
Total equity 1,800.1 1,553.2
Consolidated Cash Flow Statement
for the year ended 31st March 2015
2015 2014
Notes £ million £ million
Cash flows from operating activities
Profit before tax 495.8 406.6
Adjustments for:
Share of profit of joint venture (0.5) (0.5)
Profit on sale of continuing activities (69.7) -
Depreciation, amortisation, impairment losses and loss on sale of non-current assets 153.2 150.9
Share-based payments 7.7 10.5
Increase in inventories (223.3) (67.7)
Increase in receivables (143.5) (164.9)
(Decrease) / increase in payables (25.3) 188.5
Increase / (decrease) in provisions 5.6 (0.8)
Contributions in excess of employee benefit obligations charge (29.5) (38.7)
Changes in fair value of financial instruments (0.7) (0.5)
Net finance costs 37.5 42.1
Income tax paid (81.5) (48.6)
Net cash inflow from operating activities 125.8 476.9
Cash flows from investing activities
Dividends received from joint venture 0.4 -
Purchases of non-current assets and investments (212.1) (213.7)
Proceeds from sale of non-current assets and investments 3.8 3.5
Purchases of businesses (76.8) (8.0)
Net proceeds from sale of businesses 113.7 -
Net cash outflow from investing activities (171.0) (218.2)
Cash flows from financing activities
Net cost of ESOT transactions in own shares (17.1) (19.3)
Proceeds from borrowings and finance leases 49.1 78.8
Dividends paid to equity holders of the parent company 6 (129.9) (118.6)
Settlement of currency swaps for net investment hedging 2.8 (0.1)
Interest paid (40.9) (41.7)
Interest received 7.4 6.4
Net cash outflow from financing activities (128.6) (94.5)
(Decrease) / increase in cash and cash equivalents in the year (173.8) 164.2
Exchange differences on cash and cash equivalents - (3.0)
Cash and cash equivalents at beginning of year 182.6 21.4
Transferred to current assets classified as held for sale (4.9) -
Cash and cash equivalents at end of year 8 3.9 182.6
Reconciliation to net debt
(Decrease) / increase in cash and cash equivalents in the year (173.8) 164.2
Proceeds from borrowings and finance leases (49.1) (78.8)
Change in net debt resulting from cash flows (222.9) 85.4
Transferred to assets classified as held for sale 12 (4.9) -
Exchange differences on net debt (37.4) 21.0
Movement in net debt in year (265.2) 106.4
Net debt at beginning of year (729.2) (835.6)
Net debt at end of year 8 (994.4) (729.2)
Consolidated Statement of Changes in Equity
for the year ended 31st March 2015
Share Shares Non-
Share premium held in Other Retained controlling Total
capital account ESOT reserves earnings interests equity
£ million £ million £ million £ million £ million £ million £ million
At 1st April 2013 220.7 148.3 (51.7) 48.2 1,029.7 (4.3) 1,390.9
Total comprehensive income - - - (76.1) 364.4 (1.8) 286.5
Dividends paid (note 6) - - - - (118.6) (0.2) (118.8)
Purchase of shares by ESOT - - (22.3) - - - (22.3)
Share-based payments - - - - 17.1 - 17.1
Cost of shares transferred to employees - - 21.3 - (25.1) - (3.8)
Tax on share-based payments - - - - 3.6 - 3.6
At 31st March 2014 220.7 148.3 (52.7) (27.9) 1,271.1 (6.3) 1,553.2
Total comprehensive income - - - 6.9 390.3 (1.2) 396.0
Dividends paid (note 6) - - - - (129.9) (0.2) (130.1)
Purchase of non-controlling interests - - - - (6.6) (2.8) (9.4)
Purchase of shares by ESOT - - (17.1) - - - (17.1)
Share-based payments - - - - 14.6 - 14.6
Cost of shares transferred to employees - - 15.1 - (22.2) - (7.1)
At 31st March 2015 220.7 148.3 (54.7) (21.0) 1,517.3 (10.5) 1,800.1
Notes on the Preliminary Accounts
for the year ended 31st March 2015
1 Basis of preparation
The financial information contained in this release does not constitute the company's statutory accounts for the years
ended 31st March 2015 or 31st March 2014 within the meaning of section 435 of the Companies Act 2006, but is derived from
those accounts. The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) and
interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or the Standing
Interpretations Committee (SIC) as adopted by the European Union. For Johnson Matthey, there are no differences between
IFRS as adopted by the European Union and full IFRS as published by the International Accounting Standards Board and so the
accounts comply with IFRS. The accounting policies applied are set out in the Annual Report and Accounts for the year
ended 31st March 2014. None of the new standards or amendments to standards and interpretations which the group has
adopted during the year has had a material effect on the reported results or financial position of the group. Statutory
accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the
company's Annual General Meeting. The auditors have reported on both of these sets of accounts. Their reports were
unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain any statement under sections 498(2) or 498(3) of the Companies Act 2006. The
accounts for the year ended 31st March 2015 were approved by the Board of Directors on 3rd June 2015.
2 Profit on sale or liquidation of businesses
On 5th March 2015 the group sold its Precious Metal Products' Gold and Silver Refining business to Asahi Holdings, Inc., a
collector, refiner and recycler of precious and rare metals from waste materials, for £124.3 million resulting in a profit
of £69.7 million.
During the year the group liquidated a Belgian subsidiary and a Malaysian subsidiary and so reclassified £3.3 million of
cumulative exchange gains from equity to operating profit.
These are excluded from underlying operating profit.
3 Amortisation of acquired intangibles
The amortisation of intangible assets which arise on the acquisition of businesses, together with any subsequent impairment
of these intangible assets, is shown separately on the face of the income statement. It is excluded from underlying
operating profit.
4 Segmental information by business segment
Emission Precious
Control Process Metal Fine New
Technologies Technologies Products Chemicals Businesses Eliminations Total
£ million £ million £ million £ million £ million £ million £ million
Year ended 31st March 2015
Revenue from external customers 3,321.4 593.3 5,690.2 362.6 92.2 - 10,059.7
Inter-segment revenue 256.3 6.3 1,487.8 7.7 1.1 (1,759.2) -
Total revenue 3,577.7 599.6 7,178.0 370.3 93.3 (1,759.2) 10,059.7
External sales excluding precious metals 1,781.2 585.1 346.8 322.0 89.6 - 3,124.7
Inter-segment sales 0.7 6.1 32.5 4.6 0.9 (44.8) -
Sales excluding precious metals 1,781.9 591.2 379.3 326.6 90.5 (44.8) 3,124.7
Segmental underlying operating profit / (loss) 236.9 106.0 101.5 88.8 (22.1) - 511.1
Unallocated corporate expenses (34.0)
Underlying operating profit 477.1
Profit on sale or liquidation of businesses (note 2) 73.0
Amortisation of acquired intangibles (note 3) (17.3)
Operating profit 532.8
Net finance costs (37.5)
Share of profit of joint venture 0.5
Profit before tax 495.8
Segmental net assets 1,033.8 778.3 554.2 509.5 134.0 - 3,009.8
Year ended 31st March 2014
Revenue from external customers 2,898.9 573.7 7,243.2 362.8 76.6 - 11,155.2
Inter-segment revenue 96.8 6.4 1,178.1 8.5 2.3 (1,292.1) -
Total revenue 2,995.7 580.1 8,421.3 371.3 78.9 (1,292.1) 11,155.2
External sales excluding precious metals 1,644.6 559.0 386.1 317.5 73.6 - 2,980.8
Inter-segment sales 0.2 6.2 43.6 4.9 2.0 (56.9) -
Sales excluding precious metals 1,644.8 565.2 429.7 322.4 75.6 (56.9) 2,980.8
Segmental underlying operating profit / (loss) 203.6 101.9 130.9 84.1 (18.3) - 502.2
Unallocated corporate expenses (33.3)
Underlying operating profit 468.9
Amortisation of acquired intangibles (note 3) (20.7)
Operating profit 448.2
Net finance costs (42.1)
Share of profit of joint venture 0.5
Profit before tax 406.6
Segmental net assets 928.7 670.7 383.7 453.3 77.7 - 2,514.1
5 Effect of exchange rate changes on translation of foreign subsidiaries' sales excluding precious
metals and operating profit
Average exchange rates used for translation of results of foreign operations 2015 2014
US dollar / £ 1.613 1.591
Euro / £ 1.275 1.186
Chinese renminbi / £ 9.99 9.73
The main impact of exchange rate movements on the group's sales and operating profit comes from the translation of foreign
subsidiaries' results into sterling.
Year ended Year ended 31st March 2014 Change at
31st March At last At this this year's
2015 year's rates year's rates rates
£ million £ million £ million %
Sales excluding precious metals
Emission Control Technologies 1,781.9 1,644.8 1,585.3 +12
Process Technologies 591.2 565.2 553.5 +7
Precious Metal Products 379.3 429.7 417.4 -9
Fine Chemicals 326.6 322.4 317.8 +3
New Businesses 90.5 75.6 71.4 +27
Elimination of inter-segment sales (44.8) (56.9) (56.4)
Sales excluding precious metals 3,124.7 2,980.8 2,889.0 +8
Underlying operating profit
Emission Control Technologies 236.9 203.6 195.5 +21
Process Technologies 106.0 101.9 99.1 +7
Precious Metal Products 101.5 130.9 127.8 -21
Fine Chemicals 88.8 84.1 82.9 +7
New Businesses (22.1) (18.3) (18.6) -19
Unallocated corporate expenses (34.0) (33.3) (33.6)
Underlying operating profit 477.1 468.9 453.1 +5
6 Dividends
A final dividend of 49.5 pence per ordinary share has been proposed by the board which will be paid on 4th August 2015 to
shareholders on the register at the close of business on 12th June 2015, subject to shareholders' approval. The estimated
amount to be paid is £100.5 million and has not been recognised in these accounts.
2015 2014
£ million £ million
2012/13 final ordinary dividend paid − 41.5 pence per share - 84.1
2013/14 interim ordinary dividend paid − 17.0 pence per share - 34.5
2013/14 final ordinary dividend paid − 45.5 pence per share 92.3 -
2014/15 interim ordinary dividend paid − 18.5 pence per share 37.6 -
Total dividends 129.9 118.6
7 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a weighted average of 202,993,386 shares in issue (2014
202,831,354 shares). The calculation of diluted earnings per ordinary share is based on the weighted average number of
shares in issue adjusted by the dilutive outstanding share options and long term incentive plans. These adjustments give
rise to an increase in the weighted average number of shares in issue of 500,635 shares (2014 1,029,944 shares).
Underlying earnings per ordinary share are calculated as follows:
2015 2014
£ million £ million
Profit for the year attributable to equity holders of the parent company 428.7 340.2
Profit on sale or liquidation of businesses (note 2) (73.0) -
Amortisation of acquired intangibles (note 3) 17.3 20.7
Tax thereon (6.4) (5.3)
Tax effect of UK corporation tax rate change - (9.5)
Underlying profit for the year 366.6 346.1
pence pence
Basic underlying earnings per share 180.6 170.6
8 Net debt
2015 2014
£ million £ million
Cash and deposits 59.4 221.8
Bank overdrafts (55.5) (39.2)
Cash and cash equivalents 3.9 182.6
Other current borrowings and finance leases (234.7) (175.9)
Non-current borrowings, finance leases and related swaps (782.6) (752.0)
Interest rate swaps 19.0 16.1
Net debt (994.4) (729.2)
9 Precious metal operating leases
The group leases, rather than purchases, precious metals to fund temporary peaks in metal requirements provided market
conditions allow. These leases are from banks for specified periods (typically a few months) and for which the group pays
a fee. These arrangements are classified as operating leases. The group holds sufficient precious metal inventories to
meet all the obligations under these lease arrangements as they fall due. At 31st March 2015 precious metal leases were
£18.7 million (2014 £55.7 million).
10 Transactions with related parties
There were no material changes in related party relationships in the year ended 31st March 2015 and no other related party
transactions have taken place which have materially affected the financial position or performance of the group during the
year.
11 Post-employment benefits
The group operates a number of post-employment benefit plans around the world, the forms and benefits of which vary with
conditions and practices in the countries concerned. The major defined benefit plans are pension plans and post-retirement
medical plans in the UK and the US.
Movements in the net post-employment benefit assets and liabilities, including reimbursement rights, were:
UK post- US post-
retirement retirement
UK medical US medical
pension benefits pensions benefits Other Total
£ million £ million £ million £ million £ million £ million
At 1st April 2014 (78.6) (9.4) (14.1) (37.6) (23.1) (162.8)
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