REG - Johnson Matthey PLC - Half Yearly Report <Origin Href="QuoteRef">JMAT.L</Origin> - Part 2
19/11/2015 07:00
- Part 2: For the preceding part double click ID:nRSS2096Ga
expected to be lower in the second
half compared to the first half of the year.
Fine Chemicals
The outlook for Fine Chemicals' continuing businesses is positive, supported by anticipated strong growth in API
Manufacturing due to timing of orders and higher production volumes from the Riverside plant. Despite the absence of
income from Research Chemicals for the remainder of the year, we expect the division's performance in the second half to be
ahead of the first half.
New Businesses
New Businesses' sales in the second half will continue to benefit from the contribution of the recently acquired battery
materials businesses. We anticipate good demand for our battery materials in the second half and our Battery Technologies
business remains on track to break even for the year, excluding integration costs. We expect that the level of investment
in the division will be lower in the second half compared to the first half such that the operating loss for the year as a
whole will reduce modestly.
Overall
For the second half, we expect the group to deliver good underlying growth on a continuing basis* compared with the first
half of the year, although timing of refill catalyst orders in Process Technologies are strongly weighted towards Q4 and
hence some risk in its outlook remains. In the current environment of low pgm and oil prices, and the more muted outlook
in the chemicals markets that we supply, the outlook for Process Technologies and Precious Metal Products is expected to be
weaker than we had previously anticipated. Despite this, the underlying performance of the group's continuing businesses*
in 2015/16 is expected to be similar to 2014/15. The full year outlook for the group is in line with current market
expectations.
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. The restructuring actions taken
in the second half will benefit the group's results towards the end of the financial year and this, together with
attractive key end markets, position the group to return to growth in 2016/17.
*2014/15 and 2015/16 adjusted to exclude contribution of Gold and Silver Refining and Research Chemicals businesses.
Risks and Uncertainties
The principal risks and uncertainties to which the group is exposed are unchanged from those identified in our 2015 annual
report. The principal risks and uncertainties, together with the group's strategies to manage them, are set out on pages
22 to 27 of the annual report. They are:
STRATEGIC OPERATIONAL
· Responding to, identifying or capitalising on appropriate growth opportunities within our existing business or new growth opportunities · Operating safely, including in line with changes in health, safety, environmental and other regulations and standards
· Technological change · Supply chain (including availability of strategic materials)
· Security of assets
MARKET · Ethics and compliance
· Responding to changes in global political and economic conditions or future environmental legislation · The effective recruitment, retention and development of high quality staff to support the growth of our business
· Intellectual property and know-how
· Failure of significant sites
· Business transition
Responsibility Statement of the Directors in respect of the Half-Yearly Report
The Half-Yearly Report is the responsibility of the directors. Each of the directors as at the date of this responsibility
statement, whose names and functions are set out below, confirms that to the best of their knowledge:
• the condensed consolidated accounts have been prepared in accordance with International Accounting Standard (IAS) 34
- 'Interim Financial Reporting'; and
• the interim management report included in the Half-Yearly Report includes a fair review of the information required
by:
a) DTR 4.2.7R of the Financial Conduct Authority's Disclosure and Transparency Rules, being an indication of important
events that have occurred during the first six months of the financial year and their impact on the condensed consolidated
accounts; and a description of the principal risks and uncertainties for the remaining six months of the financial year;
and
b) DTR 4.2.8R of the Financial Conduct Authority's Disclosure and Transparency Rules, being related party transactions
that have taken place in the first six months of the current financial year and that have materially affected the financial
position or performance of the company during that period; and any changes in the related party transactions described in
the last annual report that could do so.
The names and functions of the directors of Johnson Matthey Plc are as follows:
Tim Stevenson Chairman
Odile Desforges Non-executive director
Alan Ferguson Non-executive director, Senior Independent Director and Chairman of the Audit Committee
Den Jones Group Finance Director
Robert MacLeod Chief Executive
Colin Matthews Non-executive director
Chris Mottershead Non-executive director
Larry Pentz Executive director
Dorothy Thompson Non-executive director, Chairman of the Remuneration Committee
John Walker Executive director
The responsibility statement was approved by the Board of Directors on 18th November 2015 and is signed on its behalf by:
Tim Stevenson
Chairman
Independent Review Report
to Johnson Matthey Plc
Introduction
We have been engaged by the company to review the condensed consolidated accounts in the Half-Yearly Report for the six
months ended 30th September 2015 which comprise the Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Total Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow
Statement, the Condensed Consolidated Statement of Changes in Equity and the related explanatory notes. We have read the
other information contained in the Half-Yearly Report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed consolidated accounts.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting
the requirements of the Disclosure and Transparency Rules (DTR) of the UK's Financial Conduct Authority (UK FCA). Our
review has been undertaken so that we might state to the company those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The Half-Yearly Report is the responsibility of, and has been approved by, the directors. The directors are responsible
for preparing the Half-Yearly Report in accordance with the DTR of the UK FCA.
The annual accounts of the group are prepared in accordance with International Financial Reporting Standards as adopted by
the European Union (EU). The condensed consolidated accounts included in this Half-Yearly Report have been prepared in
accordance with IAS 34 ─ 'Interim Financial Reporting' as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed consolidated accounts in the Half-Yearly
Report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ─ 'Review of
Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board
for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated accounts
in the Half-Yearly Report for the six months ended 30th September 2015 are not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Stephen Oxley
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
18th November 2015
Condensed Consolidated Income Statement
for the six months ended 30th September 2015
Six months ended Year ended
30.9.15 30.9.14 31.3.15
Notes £ million £ million £ million
Revenue 2 5,755.1 4,799.9 10,059.7
Cost of sales (5,351.6) (4,403.4) (9,242.0)
Gross profit 403.5 396.5 817.7
Operating expenses (178.5) (162.4) (340.6)
Profit on sale or liquidation of businesses 4 130.9 - 73.0
Amortisation of acquired intangibles 5 (9.0) (8.6) (17.3)
Operating profit 2 346.9 225.5 532.8
Finance costs (20.3) (23.1) (47.0)
Finance income 3.5 5.2 9.5
Share of profit of joint venture 0.1 0.2 0.5
Profit before tax 330.2 207.8 495.8
Income tax expense (50.9) (35.0) (68.5)
Profit for the period 279.3 172.8 427.3
Attributable to:
Owners of the parent company 280.0 173.7 428.7
Non-controlling interests (0.7) (0.9) (1.4)
279.3 172.8 427.3
pence pence pence
Earnings per ordinary share attributable to the equity holders of the parent company
Basic 7 137.9 85.6 211.2
Diluted 7 137.8 85.3 210.7
Condensed Consolidated Statement of Total Comprehensive Income
for the six months ended 30th September 2015
Six months ended Year ended
30.9.15 30.9.14 31.3.15
Notes £ million £ million £ million
Profit for the period 279.3 172.8 427.3
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefits assets and liabilities 11 74.0 (13.6) (52.1)
Tax on above items taken directly to or transferred from equity (19.0) 3.6 13.7
55.0 (10.0) (38.4)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (39.1) (16.3) (11.6)
Cash flow hedges 6.7 (1.8) (16.2)
Fair value gain on net investment hedges 4.7 10.0 26.5
Fair value (loss) / gain on available-for-sale investments (3.9) 2.5 6.1
Tax on above items taken directly to or transferred from equity (3.0) 0.3 2.3
(34.6) (5.3) 7.1
Other comprehensive income / (expense) for the period 20.4 (15.3) (31.3)
Total comprehensive income for the period 299.7 157.5 396.0
Attributable to:
Owners of the parent company 300.4 158.3 397.2
Non-controlling interests (0.7) (0.8) (1.2)
299.7 157.5 396.0
Condensed Consolidated Balance Sheet
as at 30th September 2015
30.9.15 30.9.14 31.3.15
Notes £ million £ million £ million
Assets
Non-current assets
Property, plant and equipment 1,075.9 1,035.4 1,081.0
Goodwill 553.6 566.7 548.0
Other intangible assets 202.7 176.8 187.5
Deferred income tax assets 22.6 33.8 21.6
Investments and other receivables 94.1 77.2 82.0
Interest rate swaps 8 17.2 11.1 19.0
Post-employment benefits net assets 11 6.2 8.5 6.9
Total non-current assets 1,972.3 1,909.5 1,946.0
Current assets
Inventories 639.4 634.2 859.4
Current income tax assets 26.3 33.6 20.6
Trade and other receivables 967.4 1,009.5 1,130.9
Cash and cash equivalents ─ cash and deposits 8 481.2 133.0 59.4
Interest rate swaps - 2.1 -
Other financial assets 13.6 9.9 14.4
Non-current assets classified as held for sale - - 149.0
Total current assets 2,127.9 1,822.3 2,233.7
Total assets 4,100.2 3,731.8 4,179.7
Liabilities
Current liabilities
Trade and other payables (761.9) (751.1) (799.5)
Current income tax liabilities (113.7) (112.1) (95.9)
Cash and cash equivalents ─ bank overdrafts 8 (17.3) (25.1) (55.5)
Other borrowings, finance leases and related swaps 8 (29.3) (172.1) (234.7)
Other financial liabilities (10.9) (5.8) (25.5)
Provisions (23.6) (18.6) (36.4)
Liabilities classified as held for sale - - (49.8)
Total current liabilities (956.7) (1,084.8) (1,297.3)
Non-current liabilities
Borrowings, finance leases and related swaps 8 (893.0) (751.0) (782.6)
Deferred income tax liabilities (96.9) (90.9) (70.0)
Employee benefits obligations 11 (125.3) (177.1) (203.4)
Provisions (26.0) (27.9) (20.8)
Other payables (5.8) (4.4) (5.5)
Total non-current liabilities (1,147.0) (1,051.3) (1,082.3)
Total liabilities (2,103.7) (2,136.1) (2,379.6)
Net assets 1,996.5 1,595.7 1,800.1
Equity
Share capital 220.7 220.7 220.7
Share premium account 148.3 148.3 148.3
Shares held in employee share ownership trust (ESOT) (54.9) (54.6) (54.7)
Other reserves (55.6) (33.3) (21.0)
Retained earnings 1,749.3 1,324.6 1,517.3
Total equity attributable to owners of the parent company 2,007.8 1,605.7 1,810.6
Non-controlling interests (11.3) (10.0) (10.5)
Total equity 1,996.5 1,595.7 1,800.1
Condensed Consolidated Cash Flow Statement
for the six months ended 30th September 2015
Six months ended Year ended
30.9.15 30.9.14 31.3.15
Notes £ million £ million £ million
Cash flows from operating activities
Profit before tax 330.2 207.8 495.8
Adjustments for:
Share of profit of joint venture (0.1) (0.2) (0.5)
Profit on sale of continuing activities (130.9) - (69.7)
Depreciation, amortisation, impairment losses and (profit) / loss on
sale of non-current assets and investments 77.1 73.9 153.2
Share-based payments 1.2 4.1 7.7
Changes in working capital and provisions 294.0 (92.4) (416.0)
Changes in fair value of financial instruments (7.6) (2.2) (0.7)
Net finance costs 16.8 17.9 37.5
Income tax paid (35.5) (45.7) (81.5)
Net cash inflow from operating activities 545.2 163.2 125.8
Cash flows from investing activities
Dividends received from joint venture - 0.4 0.4
Purchases of non-current assets and investments (119.3) (79.8) (212.1)
Proceeds from sale of non-current assets and investments 0.2 0.1 3.8
Purchases of businesses (15.5) (29.0) (76.8)
Net proceeds from sale of businesses 251.1 - 113.7
Net cash inflow / (outflow) from investing activities 116.5 (108.3) (171.0)
Cash flows from financing activities
Net cost of ESOT transactions in own shares (3.1) (17.1) (17.1)
(Repayment of) / proceeds from borrowings and finance leases (83.0) (2.7) 49.1
Dividends paid to owners of the parent company 6 (100.5) (92.3) (129.9)
Settlement of currency swaps for net investment hedging (0.1) - 2.8
Interest paid (17.3) (20.1) (40.9)
Interest received 2.2 4.1 7.4
Net cash outflow from financing activities (201.8) (128.1) (128.6)
Increase / (decrease) in cash and cash equivalents in period 459.9 (73.2) (173.8)
Exchange differences on cash and cash equivalents 0.1 (1.5) -
Cash and cash equivalents at beginning of period 3.9 182.6 182.6
Transferred to current assets classified as held for sale - - (4.9)
Cash and cash equivalents at end of period 8 463.9 107.9 3.9
Reconciliation to net debt
Increase / (decrease) in cash and cash equivalents in period 459.9 (73.2) (173.8)
Repayment of / (proceeds from) borrowings and finance leases 83.0 2.7 (49.1)
Change in net debt resulting from cash flows 542.9 (70.5) (222.9)
Transferred to assets classified as held for sale - - (4.9)
Exchange differences on net debt 10.3 (2.3) (37.4)
Movement in net debt in period 553.2 (72.8) (265.2)
Net debt at beginning of period (994.4) (729.2) (729.2)
Net debt at end of period 8 (441.2) (802.0) (994.4)
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30th September 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 2014 220.7 148.3 (52.7) (27.9) 1,271.1 (6.3) 1,553.2
Total comprehensive income for the period - - - (5.4) 163.7 (0.8) 157.5
Dividends paid (note 6) - - - - (92.3) (0.1) (92.4)
Purchase of non-controlling interests - - - - (6.6) (2.8) (9.4)
Purchase of shares by ESOT - - (17.1) - - - (17.1)
Share-based payments - - - - 7.5 - 7.5
Cost of shares transferred to employees - - 15.2 - (18.6) - (3.4)
Tax on share-based payments - - - - (0.2) - (0.2)
At 30th September 2014 220.7 148.3 (54.6) (33.3) 1,324.6 (10.0) 1,595.7
Total comprehensive income for the period - - - 12.3 226.6 (0.4) 238.5
Dividends paid (note 6) - - - - (37.6) (0.1) (37.7)
Share-based payments - - - - 7.1 - 7.1
Cost of shares transferred to employees - - (0.1) - (3.6) - (3.7)
Tax on share-based payments - - - - 0.2 - 0.2
At 31st March 2015 220.7 148.3 (54.7) (21.0) 1,517.3 (10.5) 1,800.1
Total comprehensive income for the period - - - (34.6) 335.0 (0.7) 299.7
Dividends paid (note 6) - - - - (100.5) (0.1) (100.6)
Purchase of shares by ESOT - - (3.2) - - - (3.2)
Share-based payments - - - - 5.0 - 5.0
Cost of shares transferred to employees - - 3.0 - (6.6) - (3.6)
Tax on share-based payments - - - - (0.9) - (0.9)
At 30th September 2015 220.7 148.3 (54.9) (55.6) 1,749.3 (11.3) 1,996.5
Notes on the Accounts
for the six months ended 30th September 2015
1 Basis of preparation
The half-yearly accounts were approved by the Board of Directors on 18th November 2015, and are unaudited but have been
reviewed by the auditors. These condensed consolidated accounts do not constitute statutory accounts within the meaning of
section 435 of the Companies Act 2006, but have been prepared in accordance with International Accounting Standard (IAS) 34
─ 'Interim Financial Reporting' and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. The
accounting policies applied are set out in the Annual Report and Accounts for the year ended 31st March 2015. None of the
amendments to standards and interpretations which the group has adopted during the period has had a material effect on the
reported results or financial position of the group. Information in respect of the year ended 31st March 2015 is derived
from the company's statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's
report on those statutory accounts was unqualified, did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying its report and did not contain any statement under sections 498(2) or
498(3) of the Companies Act 2006.
2 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
Six months ended 30th September 2015
Revenue from external customers 1,656.4 283.1 3,574.1 168.3 73.2 - 5,755.1
Inter-segment revenue 113.9 5.9 644.0 4.2 0.7 (768.7) -
Total revenue 1,770.3 289.0 4,218.1 172.5 73.9 (768.7) 5,755.1
External sales excluding precious metals 938.7 277.3 146.1 154.1 71.4 - 1,587.6
Inter-segment sales 0.2 5.8 18.9 2.8 0.7 (28.4) -
Sales excluding precious metals 938.9 283.1 165.0 156.9 72.1 (28.4) 1,587.6
Segmental underlying operating profit / (loss) 136.0 35.9 36.1 40.6 (9.9) - 238.7
Unallocated corporate expenses (13.7)
Underlying operating profit 225.0
Profit on sale or liquidation of businesses (note 4) 130.9
Amortisation of acquired intangibles (note 5) (9.0)
Operating profit 346.9
Net finance costs (16.8)
Share of profit of joint venture 0.1
Profit before taxation 330.2
Segmental net assets 932.2 768.6 312.7 421.1 152.3 - 2,586.9
Emission Precious
Control Process Metal Fine New
Technologies Technologies Products Chemicals Businesses Eliminations Total
£ million £ million £ million £ million £ million £ million £ million
Six months ended 30th September 2014
Revenue from external customers 1,622.1 282.5 2,688.5 170.7 36.1 - 4,799.9
Inter-segment revenue 127.7 3.4 743.2 3.3 0.6 (878.2) -
Total revenue 1,749.8 285.9 3,431.7 174.0 36.7 (878.2) 4,799.9
External sales excluding precious metals 868.7 279.1 176.7 153.3 36.0 - 1,513.8
Inter-segment sales 0.4 3.4 16.3 2.0 0.5 (22.6) -
Sales excluding precious metals 869.1 282.5 193.0 155.3 36.5 (22.6) 1,513.8
Segmental underlying operating profit / (loss) 118.1 49.7 52.0 41.8 (12.0) - 249.6
Unallocated corporate expenses (15.5)
Underlying operating profit 234.1
Amortisation of acquired intangibles (note 5) (8.6)
Operating profit 225.5
Net finance costs (17.9)
Share of profit of joint venture 0.2
Profit before taxation 207.8
Segmental net assets 993.8 719.4 324.7 473.4 93.7 - 2,605.0
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 73.0
Amortisation of acquired intangibles (note 5) (17.3)
Operating profit 532.8
Net finance costs (37.5)
Share of profit of joint venture 0.5
Profit before taxation 495.8
Segmental net assets 1,033.8 778.3 554.2 509.5 134.0 - 3,009.8
3 Effect of exchange rate changes on translation of foreign subsidiariesʼ sales excluding precious
metals and operating profits
Six months ended Year ended
Average exchange rates used for translation of results of foreign operations 30.9.15 30.9.14 31.3.15
US dollar / £ 1.543 1.676 1.613
Euro / £ 1.389 1.244 1.275
Chinese renminbi / £ 9.64 10.39 9.99
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.
Six months Six months ended 30.9.14 Change at
ended At last At this this year's
30.9.15 year's rates year's rates rates
£ million £ million £ million %
Sales excluding precious metals
Emission Control Technologies 938.9 869.1 872.2 +8
Process Technologies 283.1 282.5 285.0 -1
Precious Metal Products 165.0 193.0 194.0 -15
Fine Chemicals 156.9 155.3 161.2 -3
New Businesses 72.1 36.5 33.4 +116
Elimination of inter-segment sales (28.4) (22.6) (23.3)
Sales excluding precious metals 1,587.6 1,513.8 1,522.5 +4
Underlying operating profit
Emission Control Technologies 136.0 118.1 117.6 +16
Process Technologies 35.9 49.7 49.7 -28
Precious Metal Products 36.1 52.0 52.1 -31
Fine Chemicals 40.6 41.8 43.9 -8
New Businesses (9.9) (12.0) (12.2) +19
Unallocated corporate expenses (13.7) (15.5) (15.8)
Underlying operating profit 225.0 234.1 235.3 -4
4 Profit on sale or liquidation of businesses
On 30th September 2015 the group sold its Fine Chemicals' Research Chemicals business to Thermo Fisher Scientific Inc, a
world leader in providing services to the scientific community, for £255.0 million resulting in a profit of £130.9 million
which is excluded from underlying operating profit. The sale of the Research Chemicals business is a further step in
delivering the group's long term strategy to focus on areas where it can use its expertise in complex chemistry and its
applications to deliver value adding sustainable technologies for its customers.
5 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.
6 Dividends
An interim dividend of 19.5 pence per ordinary share has been proposed by the board which will be paid on 2nd February 2016
to shareholders on the register at the close of business on 8th January 2016. The estimated amount
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