REG - Johnson Matthey PLC - Johnson Matthey FY results and strategy update
26/05/2022 07:00
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RNS Number : 8464M Johnson Matthey PLC 26 May 2022
Preliminary results for the
year ended 31(st) March 2022
26(th) May 2022
Catalysing the net zero transition to drive value creation
Reinvigorated strategy and new Leadership Team driving high performance
culture
· Completed in-depth review of the business and strategy, assessing full range
of options
· Simplified business portfolio focused on four businesses enabling the
automotive, chemical and energy industries transition to net zero
· New transformation programme to deliver £150 million annualised cost savings
by 2024/25, enhance decision-making pace and exploit synergy potential between
sectors
· New global leadership team to drive high-performance culture and pace of
strategic execution
· Focus on sustainable value creation accelerating to high single digit growth¹
over the medium term, and strong long-term growth, supported by a reliable
dividend
Reported results Underlying results (continuing)²(,)³
Year ended % Year ended % % change, constant FX rates
31(st) March
change
31(st) March
change
2022 2021³ 2022 2021³
Revenue £m 16,025 15,435 +4
Sales excluding £m 3,778 3,685 +3 +5
precious metals⁵
Operating profit £m 255 309 -17 553 473 +17 +21
Profit before tax £m 195 224 -13 493 388 +27
Profit after tax (continuing) £m 116 194 -40 407 326 +25
(Loss) / profit after tax (discontinued) £m (217) 11 n/a
(Loss) / earnings per share pence (52.6) 106.5 n/a 213.2 168.9 +26
Ordinary dividend pence 77.0 70.0 +10
per share
Underlying performance - continuing operations²(,)³(,)⁴
· Robust underlying results for 2021/22, in line with market expectations⁶
· Sales of £3.8 billion, up 5%, driven by a partial recovery in Clean Air and
good performance in Efficient Natural Resources
· Underlying operating profit of £553 million, up 21%, driven by good
performance in Clean Air and Efficient Natural Resources, higher average PGM
prices and efficiencies
· Underlying earnings per share up 26% due to stronger operational results and
lower net finance charges
· Free cash flow of £221 million, moderately down on the prior year
· Strong balance sheet with net debt of £856 million reflecting continued
strong management of working capital; net debt to EBITDA of 1.2 times
Reported results³
· Revenue up 4% primarily driven by higher average precious metal prices
· Operating profit declined 17% to £255 million, largely reflecting the one-off
impairment and exit costs for Battery Materials
· Profit before tax declined 13% to £195 million, reflecting lower operating
profit which was largely impacted by the one-off impairment in Battery
Materials
· Loss after tax on discontinued operations of £217 million including Health
underlying operating profit of £3 million and an impairment and restructuring
charge of £242 million relating to its sale that is expected to complete at
the end of May
· Reported loss per share of 52.6 pence
· Cash inflow from operating activities of £605 million (2020/21: £769
million)
· Ordinary dividend of 77.0 pence per share, up 10%
· Share buyback of £200 million now complete
Patrick Thomas, Chair, commented:
This has been a very challenging year for Johnson Matthey and our
shareholders. We took important and necessary strategic decisions with the
business portfolio, with the exit from Battery Materials and divestment of
Health. I know many of our stakeholders were very disappointed, but these were
essential actions to enable us to focus on attractive, high growth
opportunities that have a vital role to play in the acceleration towards net
zero. I, the rest of the board and the executive team are determined that we
will restore value to our shareholders.
Looking ahead, Johnson Matthey has a strong foundation from which to build and
we have delivered a robust set of underlying results in the year. I am
delighted to welcome our new Chief Executive, Liam Condon. Liam is a high
calibre, proven business leader with considerable experience who brings a
strong commercial focus as we leverage our world-class science and scale our
growth opportunities. The board and I are pleased that Liam has settled in
quickly and is already executing at pace and driving a more
performance-oriented culture. We fully endorse the strategy Liam has proposed
and look forward to supporting him in executing this to restore and drive
value creation for shareholders.
Liam Condon, Chief Executive, commented:
I am delighted to have joined Johnson Matthey and am very excited about the
potential of the group. Since joining in March I have completed an in-depth
review of the business and strategy, assessing the full range of strategic
options. I am very confident and determined that our reinvigorated strategy
and planned cultural transformation will deliver value for all our
stakeholders.
As the world decarbonises, Johnson Matthey has a pivotal role to play as a
global leader in sustainable technologies. The net zero transition is both
disrupting existing markets and, at the same time, creating new and bigger
markets which depend on Johnson Matthey's technology. By helping our
automotive, chemical and energy industry customers to decarbonise, we will
unlock tremendous growth potential for Johnson Matthey.
I am deeply impressed by the depth of talent and expertise within Johnson
Matthey, but significant change is required to create a simpler, more focused
group capable of better execution. We have already started executing at pace
and I have taken steps to strengthen my executive team. We will continue to
simplify our portfolio, focusing on our core activities and exploiting our
leading-edge technologies, supported by our PGMs backbone. I am very confident
we will create significant value with a faster paced, more customer-focused
culture to become a high-performance leader in our important existing and
exciting growth markets.
Outlook for the year ending 31(st) March 2023
For 2022/23, we are facing a period of greater political and economic
uncertainty with a combination of factors that may affect the year ahead. Our
performance for the full year will continue to correlate closely to levels of
auto production and precious metal prices.
In Clean Air, although end customer demand remains robust, there continues to
be supply chain disruption affecting many of our automotive customers
constraining their production volumes, most recently with COVID-19 lockdowns
in China and sourcing components from Ukraine. We expect conditions to ease
through the year and Clean Air performance to improve with levels of auto
production, although visibility remains low. For the year 2022/23 external
data currently suggests auto production will be 5% higher than 2021/22. In
this scenario, we would anticipate Clean Air operating performance to be
broadly in line with 2021/22 with cost inflation being offset by further
efficiencies. Clean Air has a flexible cost base, enabling us to manage
different levels of activity, with around 75% of costs before mitigation being
variable.
PGM Services continues to benefit from relatively high and volatile precious
metals prices, albeit current prices are slightly below the prior year. If
they were to remain at their current level⁷ for the rest of this year, we
would expect the adverse impact on the full year to be around
£25 million⁸. We are also expecting slightly lower refinery intake volumes
due to lower scrap levels with the semi-conductor chip shortage supporting a
buoyant second-hand car market.
Catalyst Technologies end markets remain robust. As reported previously, we
have limited operations in Russia representing around only 1% of group sales
and a slightly higher proportion of group operating profit, mainly in Catalyst
Technologies. The profit impact in Catalyst Technologies in 2022/23 of c.£10
million will be compensated by new business elsewhere thereafter.
In Hydrogen Technologies we are investing to enable us to scale at pace, to
capture value from the significant opportunities rapidly growing hydrogen
markets present. Consequently, we expect a larger operating loss in
2022/23.
At current foreign exchange rates⁹, translational foreign exchange movements
for the year ending 31(st) March 2023 are expected to benefit underlying
operating profit by
around £25 million.
As a result, whilst visibility is low and the outcome for the year remains
uncertain, we currently expect operating performance to be in the lower half
of the consensus range.¹⁰
Longer term, we expect the current geopolitical situation to drive a
significant acceleration towards a net zero carbon economy, with corresponding
investment to position us strongly for significant growth opportunities from
our sustainable technology portfolio.
Dividend and share buyback
The board will propose a final ordinary dividend for the year of 55.0 pence at
the Annual General Meeting on 21(st) July 2022. Together with the interim
dividend of 22.0 pence per share, this gives a total ordinary dividend of 77.0
pence representing a 10% increase on the prior year. Subject to approval by
shareholders, the final dividend will be paid on 2(nd) August 2022, with an
ex-dividend date of 9(th) June 2022. Our previously announced £200 million
share buyback completed on 13(th) May 2022.
Enquiries:
Investor Relations
Martin Dunwoodie Director of Investor Relations +44 20 7269 8241
Louise Curran Senior Investor Relations Manager +44 20 7269 8235
Carla Fabiano Senior Investor Relations Manager +44 20 7269 8004
Media
Barney Wyld Group Corporate Affairs Director +44 20 7269 8001
Harry Cameron Tulchan Communications +44 7799 152148
Notes:
1. At constant precious metal prices and FX rates (2021/22 average).
2. Underlying is before profit or loss on disposal of businesses, gain or loss on
significant legal proceedings together with associated legal costs,
amortisation of acquired intangibles, major impairment and restructuring
charges and, where relevant, related tax effects. For definitions and
reconciliations of other non-GAAP measures, see pages 51 to 54.
3. 2020/21 is restated to reflect the group's updated reporting segments and
removal of inter-segment copper zeolite sales in Efficient Natural Resources
as well as the classification of Health as a discontinued operation.
4. Unless otherwise stated, sales and operating profit commentary refers to
performance at constant exchange rates. Growth at constant rates excludes the
translation impact of foreign exchange movements, with 2020/21 results
converted at 2021/22 average rates. In 2021/22, the translational impact of
exchange rates on group sales and underlying operating profit was an adverse
impact of c.£101 million and c.£17 million respectively.
5. Revenue excluding sales of precious metals to customers and the precious metal
content of products sold to customers.
6. Vara consensus for full year group underlying operating profit in 2021/22 was
£545 million
(range: £532 million to £561 million) as at 25(th) May 2022. 2020/21 group
underlying operating profit was
£504 million.
7. Based on average precious metal prices in May 2022 (month to date).
8. A $100 change in the average annual platinum, palladium and rhodium metal
prices each have an impact of approximately £1 million, £1.5 million and £1
million respectively on full year underlying operating profit.
9. Based on foreign exchange rates in May 2022 (month to date).
10. Vara consensus for full year group underlying operating profit in 2022/23 was
£562 million
(range: £491 million to £641 million) as at 25(th) May 2022. 2021/22 group
underlying operating profit on an adjusted basis was £559 million (adjusted
for disposals of Health, Battery Materials and Advanced Glass Technologies).
Strategy update from the Chief Executive
Throughout my career I have only ever worked for companies that combine
science with a strong sense of purpose. And what tremendous science and
purpose Johnson Matthey (JM) has. Since becoming Chief Executive in March
2022, I have been struck by how passionate JM's people are about using their
expertise in metals chemistry, catalysis and process design to create a
cleaner, healthier world. However, it is also clear that we have not performed
well in recent years and have done a poor job of value creation, which is
something that my new team and I are committed to changing.
Reinvigorated strategy to drive value creation
In my conversations with employees and customers, I have heard a consistent
message: JM is a great company - with great people and technology. But we need
a much clearer strategy that outlines how we will create more value for both
shareholders and society as we help the world accelerate progress to net zero,
and how we will allocate resources in a more disciplined manner and transform
our culture to enable a successful strategic execution.
In the past couple of months, three things have become much clearer to me. The
first is that we already have the core talent and technology required to help
accelerate progress towards net zero. In fact, as the world looks to
decarbonise, key markets for our products will increase significantly, opening
up tremendous new growth opportunities for JM. We just need to define
where we want to focus our energy and resources.
My second observation is that our complex business structure and lack of
commercial focus is getting in the way of our ability to create significant
value. That's why we need to simplify and drive a stronger emphasis on
accountability and faster decision making.
The third observation is that in new growth ventures, JM needs to focus on
where we have a right to win and then we need to play to win. That requires
developing a strong performance culture that is disciplined in execution of
strategy and delivers consistent results. We have to do better and create
significantly more value for shareholders and society, and this is something
we are completely committed to. We need to focus, simplify and execute at pace
with a high degree of discipline.
Focusing our portfolio on core strengths
Our expertise in (platinum group metals) PGMs chemistry and catalysis,
combined with our process technology skills, is the beating heart of this
company. It is that expertise that has helped remove harmful emissions from
vehicles for almost 50 years. And it is expertise that is essential for
decarbonising our world: we are enabling low and zero carbon technologies in
Catalyst Technologies and Hydrogen Technologies with a focus on sustainable
fuels, fuel cells and green hydrogen electrolysers. Our technology has the
potential to transform traditionally carbon-intensive sectors, such as
chemicals, energy and transportation.
As part of the strategic review I have considered the full range of options
and concluded that focusing on our core strengths offers a much clearer path
to value creation than simply splitting up the group. JM has tremendous
synergies across the group that can drive competitive advantage and create
significant additional value. By using our deep understanding of PGM
chemistry, catalysis and process design, JM can be a market leader in
sustainable technologies across multiple industries. As a company we are
shifting gears and moving from playing not to lose, towards playing to win.
We are focusing our business on four areas to create significant value - Clean
Air, Catalyst Technologies, Hydrogen Technologies and our enabling business
PGM Services. They are areas in which we already have world-class skills and
technologies, and they are all areas in which we can, and are committed to
play to win.
PGM Services - the backbone of our business
JM is the world's largest recycler of PGMs - around twice the size of our
nearest competitor. PGM Services provides the flexible precious metal sourcing
and price risk management that are necessary to run the rest of JM, and is key
to the trust our customers place in us. For example, our Clean Air and
hydrogen fuel cell customers depend on PGM Services for access to a reliable
supply of sustainable, scarce precious metals, and recycling services to
support a circular economy. We have a competitive advantage that is both very
hard to replicate and essential for helping the world reach net zero. Our PGM
Services backbone supports our other three focused business divisions - Clean
Air, Catalyst Technologies and Hydrogen Technologies, which in turn enable PGM
Services to maintain its scale and leadership.
1. Clean Air - continuing to play a leading role in the autocatalyst market
Clean Air will remain a significant business well into the next decade even as
the world transitions towards lower and zero-carbon technologies. That
transition will take time, and in the meantime governments around the world
intend to roll out more stringent air quality regulations, which offer new
opportunities for our innovative technology. Clean Air will create significant
value and we are highly confident that we will generate at least £4 billion
of cash over the decade to 2030/31, with more thereafter.
2. Catalyst Technologies - decarbonising chemicals and creating sustainable fuels
We are already an established, leading provider of process technology and
catalysts to the chemicals and energy sectors, especially in synthesis gas
(syngas). Our Catalyst Technologies business will strengthen our focus on the
syngas value chain, growing our existing business alongside newer
opportunities in blue hydrogen, sustainable fuels and low-carbon solutions.
Fueled by the net zero transition, we expect these markets to grow rapidly in
the medium term as future production needs to decarbonise. We intend to move
quickly and strengthen our leading positions across Catalyst Technologies to
deliver high single digit growth over the medium term.
3. Hydrogen Technologies - decarbonising transport and energy
Combining our PGM and catalysis expertise with our fuel cell and green
hydrogen activities, our Hydrogen Technologies business will help decarbonise
the transport and energy sectors and create very significant growth in the
medium-longer term. We already have an established hydrogen business, having
been active in fuel cells for over 20 years. Importantly, we already have
customer contracts and partnerships today with leading hydrogen players
including a major German automotive supplier for the supply of next generation
catalyst coated membranes into the global automotive market.
We have taken the next step in our strategic partnership with Plug Power, a
leading provider of cutting-edge green hydrogen and fuel cell solutions, with
JM bringing extensive precious metals and catalysis expertise and potential to
develop a closed-loop PGM recycling system. The partnership extends across
advanced components for both fuel cells and electrolysis and embodies a
commitment to rapidly scale up to meet accelerating market demand, combining
the strengths of both businesses to drive the capacity needed to 2030 and
beyond. The collaboration is expected to generate significant value.
In addition, we expanded our presence in green hydrogen by investing into
Enapter, a pioneer and commercial leader in anion exchange membrane (AEM)
electrolysis. Our partnership encompasses joint development of advanced
components, supply of specialist catalysts and we are jointly investigating
opportunities for recycling.
We aim to become the market leader in high value performance components that
are essential to power fuel cells and green hydrogen electrolysers. We are
targeting more than £200 million of sales in Hydrogen Technologies by the end
of 2024/25.
Simplifying our business
To successfully deliver our strategy, we need to simplify our business. JM
needs to become simpler, more agile, and more cost-effective. Across our
entire organisation, we must reduce complexity. This means leaner processes,
less duplication and clear lines of accountability. Achieving this will help
unlock our potential by increasing speed of decision making, eliminating
duplication and reducing costs.
Executing at pace and transforming our culture
Our strategy will be underpinned by a rigorous performance culture. We are
launching a transformation programme to drive stronger execution, unlock
near-term cost opportunity and position us strategically to more strongly
drive growth. We will strengthen our capabilities in two ways:
1. Capital project execution - clear governance, accountability and enhanced
capabilities will ensure we are highly disciplined in capital allocation and
much stronger in execution
2. Commercial skills - strengthening capabilities and cross-group commercial
synergies, with a strong focus on value creation and more strategic
partnerships
In respect of the near-term cost opportunity, we will deliver £150 million in
annualised cost efficiencies by 2024/25 which reflects simplification of our
group functions, procurement and operations including areas such as real
estate.
Strengthening our leadership team for a successful future
As part of transforming our culture, we have also strengthened our Group
Leadership Team (GLT). We recently appointed Anne Chassagnette as Chief
Sustainability Officer, and we are also appointing four new business leads for
our four businesses, two of whom are external appointments. Anish Taneja,
formerly a €3 billion P&L leader with Michelin will take over as Chief
Executive, Clean Air. Anish will also chair the JM cross-group Commercial
Council. Alastair Judge, currently interim CEO of Clean Air, will become CEO
of our enabling PGM Services business. Jane Toogood, currently CEO of
Efficient Natural Resources, will become Chief Executive, Catalyst
Technologies. Mark Wilson, formerly of bp amongst others and a highly
experienced leader in the energy industry will become the new Chief Executive,
Hydrogen Technologies. Christian Günther, an acknowledged leader in
transformation, will lead our strategy and transformation work. In addition,
the scope of role for our Head of Operations, Ron Gerrard, will be expanded to
include all strategic capex, in order to ensure clear accountability for
capital projects planning, design and execution. With this mix of new
colleagues, and the strong team I inherited, we now have a world-class
leadership team capable of driving execution of our strategy at pace and
creating significant value.
Disciplined capital allocation to drive success
As we execute our strategy, we will maintain a strong balance sheet and ensure
we allocate capital in a very disciplined way. That means: investing for
growth and attractive returns and ensuring a reliable dividend, while
returning excess capital to shareholders.
For the next three years to 2024/25, we expect cumulative capital expenditure
to be around
£1 billion. This will be focused on our core activities where we have a right
to win and need to invest to drive growth: our PGM refineries, Catalyst
Technologies and Hydrogen Technologies. We may also consider acquisitions, but
we will be highly selective in our approach, with a focus on bolt-on deals to
acquire technology or accelerate growth in our core growth businesses. For our
shareholders, we will at least maintain and aim to grow the dividend,
targeting a c.40% pay-out ratio over the medium term. Our aim is to maintain a
strong balance sheet with our target level of net debt to EBITDA¹ of 1.5-2.0
times.
Embedding sustainability into everything we do
JM already has a strong sustainability framework in place, with targets that
focus on current and future technologies that we know will be fundamental to
addressing the climate challenge. We track progress by measuring the
percentage of our sales that come from products
that contribute to our four priority UN Sustainable Development Goals (UN
SDGs). Further details on our targets can be found in our annual report and
accounts².
Strategic milestones to the end of 2023/24
Our strategic milestones will ensure we track and report progress against our
plan:
Customers:
· Win at least 2 large scale strategic partnerships in Hydrogen Technologies
· Win targeted Euro 7 business and deliver on £4 billion+ cash trajectory for
Clean Air
· Win >10 additional large scale projects by 2023/24 (across Hydrogen
Technologies and Catalyst Technologies)
Investments:
· Expand PGM Services refining capacity in China
· Complete construction of Hydrogen Technologies CCM plant in UK to expand our
total capacity from 2GW to 5GW
· Targeted capacity expansion (fuel cells catalyst, formaldehyde catalyst)
· Complete divestment of Value Businesses
People: Increase employee engagement score by 1ppt in 2022/23 and 3ppt by
2023/24
Sustainability:
· Achieve c.10% reduction in scope 1+2 CO2e (carbon dioxide equivalent)
emissions
· Help customers reduce CO2e emissions by >1mt p.a. through use of our
products
Notes:
1. Net debt including post tax pension deficits.
2. SDG 3 (Good Health and Wellbeing), SDG 7 (Affordable and Clean Energy), SDG 12
(Responsible Consumption and Production) and SDG 13 (Climate Action).
Reporting structure changes
To provide greater transparency and reflect how we manage our businesses, we
are changing our reporting structure for 2022/23. Under this basis, we have
provided sales and underlying operating profit for 2021/22 and 2020/21 below:
Sales Year ended % change,
31(st) March
constant FX rates
(£ million)
2022 2021¹
Clean Air 2,457 2,412 +5
PGM Services 587 531 +13
Catalyst Technologies 454 443 +5
Hydrogen Technologies 25 41 -39
Value Businesses¹ 280 274 +8
Eliminations (99) (113)
Total sales (adjusted) 3,704 3,588 +6
Adjustments² 236 334
Total sales 3,940 3,922 +3
Underlying operating profit Year ended % change,
31(st) March
constant FX rates
(£ million)
2022 2021¹
Clean Air 302 269 +17
PGM Services 308 244 +28
Catalyst Technologies 50 32 +67
Hydrogen Technologies (33) 1 n/a
Value Businesses¹ 18 5 +260
Corporate (86) (73)
Total operating profit (adjusted) 559 478 +21
Adjustments³ (3) 26
Total operating profit 556 504 +14
Notes:
1. Includes Battery Systems, Medical Device Components and Diagnostic Services.
2. Sales adjustments reflect removal of Health (2021/22: £162m, 2020/21:
£237m), Advanced Glass Technologies (2021/22: £62m, 2020/21: £66m), Battery
Materials (2021/22: £12m, 2020/21: £14m) and Other - Water and Atmosphere
Control Technologies (2021/22: nil, 2020/21: £17m).
3. Underlying operating profit adjustments reflect removal of Health (2021/22:
£3m, 2020/21: £31m), Advanced Glass Technologies (2021/22: £16m, 2020/21:
£17m), Battery Materials (2021/22: -£22m, 2020/21: -£23m) and Other - Water
and Atmosphere Control Technologies (2021/22: nil, 2020/21: £1m).
Summary of underlying operating results from continuing operations
Unless otherwise stated, commentary refers to performance at constant rates.
Percentage changes in the tables are calculated on rounded numbers
Sales Year ended % change % change,
31(st) March
constant FX rates
(£ million)
2022 2021¹
Clean Air 2,457 2,412 +2 +5
Efficient Natural Resources 1,041 974 +7 +9
Other Markets 379 412 -8 -4
Eliminations (99) (113)
Sales (continuing) 3,778 3,685 +3 +5
Health (discontinued) 162 237 -29
Total sales 3,940 3,922 - +3
Underlying operating profit Year ended % change % change,
(£ million)
31(st) March
constant FX rates
2022 2021¹
Clean Air 302 269 +12 +17
Efficient Natural Resources 358 276 +30 +33
Other Markets (21) 1 n/a n/a
Corporate (86) (73)
Underlying operating profit (continuing) 553 473 +17 +21
Health (discontinued) 3 31 -90
Total underlying operating profit 556 504 +10 +14
Reconciliation of underlying operating profit (continuing) Year ended
to operating profit
31(st) March
(£ million)
2022 2021¹
Underlying operating profit (continuing) 553 473
Profit on disposal of businesses 106 -
Gains and losses on significant legal proceedings² 42 -
Amortisation of acquired intangibles (6) (10)
Major impairment and restructuring charges² (440) (154)
Operating profit 255 309
¹ 2020/21 is restated to reflect the group's updated reporting segments and
removal of inter-segment copper zeolite sales in Efficient Natural Resources
as well as the classification of Health as a discontinued operation.
² For further detail on these items please see page 21.
Second half performance - continuing operations
Sales H2 H2 % change % change,
constant FX rates
(£ million)
2021/22 2020/21¹
Clean Air 1,261 1,409 -11 -9
Efficient Natural Resources 518 563 -8 -8
Other Markets 188 221 -15 -11
Eliminations (45) (68)
Sales (continuing) 1,922 2,125 -10 -8
Health (discontinued) 80 118 -32 -32
Total sales 2,002 2,243 -11 -9
Continuing sales were down 8% in the second half, with declines across all
sectors. Clean Air was impacted by the shortage of semi-conductor chips which
acted as a constraint on vehicle production, particularly in comparison to a
strong second half in the prior year. Efficient Natural Resources saw weaker
performance reflecting lower sales in our trading business. Within Other
Markets, Hydrogen Technologies and Battery Systems reported lower sales and
Advanced Glass Technologies was divested during the year.
Underlying operating profit H2 H2 % change % change,
constant FX rates
(£ million)
2021/22 2020/21¹
Clean Air 152 192 -21 -18
Efficient Natural Resources 161 188 -14 -13
Other Markets (10) 3 n/a n/a
Corporate (47) (46)
Underlying operating profit (continuing) 256 336 -24 -21
Health (discontinued) 7 16 -56 -59
Total underlying operating profit 263 352 -25 -23
¹ 2020/21 is restated to reflect the group's updated reporting segments and
removal of inter-segment copper zeolite sales in Efficient Natural Resources
as well as the classification of Health as a discontinued operation.
Continuing underlying operating profit declined 21% in the second half, with
the largest decline in Clean Air which was impacted by the shortage of
semi-conductor chips and inflation. Efficient Natural Resources saw weaker
performance reflecting lower sales in our trading business. Other Markets was
lower due to higher investment in the scale up of Hydrogen Technologies.
Corporate was broadly flat year-on-year.
Operating results by sector
Clean Air
Sales up driven by a partial recovery in demand
· Sales were up 5% driven by a partial recovery in demand, although volumes were
constrained by supply chain disruption, principally shortages of
semi-conductor chips
· Underlying operating profit increased 17%. Margins increased driven by
operational leverage and benefits from our transformation programme, but were
held back by the impact of chip shortages and inflation
· Strong cash generation of around £800 million in the year¹
Year ended % change % change, constant FX rates
31(st) March
2022 2021
£ million £ million
Sales
Light duty diesel 1,005 1,017 -1 +2
Light duty gasoline 574 624 -8 -7
Heavy duty diesel 878 772 +14 +17
Total sales 2,457 2,412 +2 +5
Underlying operating profit 302 269 +12 +17
Underlying margin 12.3% 11.2%
Reported operating profit 273 165
A partial recovery in demand, still impacted by supply chain disruption
Clean Air provides catalysts for emission control after-treatment systems used
in light and heavy duty vehicles powered by internal combustion engines.
Sales were up 5%, supported by increased activity in autos due to a partial
recovery in demand. This was driven by heavy duty diesel and to a lesser
extent by light duty diesel, with a decline in light duty gasoline. However,
supply chain disruption and semi-conductor shortages continue to act as a
constraint on vehicle production and this was more pronounced during the
second half. This, in combination with strong demand in the second half of
last year resulted in 2H sales being 9% lower year-on-year.
We are making good progress on our Clean Air transformation programme. We are
continuing to rebalance production into our most efficient plants (notably
from the UK into Poland and Macedonia) and have started manufacturing at our
site in India, the last of our new highly efficient plants to be completed.
We remain focused on driving efficiency and cash generation across our Clean
Air operations, having generated around £800¹ million of cash this year. We
have a plan to deliver at least
£4 billion of cash by 2030/31² and remain confident in the significant
profitability and cash generation of the business beyond this period. We
continued to win the Euro 7 and equivalent business we have targeted and
remain positive on our bidding for further platforms to meet this legislation.
Light duty catalysts - diesel and gasoline
Light duty diesel
In light duty diesel global sales were slightly up, outperforming the overall
light duty diesel market. We saw good performance in the Americas and Asia,
offset by a weak European market which represents around 65% of our total
light duty diesel sales. In both the Americas and Asia, we saw strong sales
growth ahead of the market as we won new business. In Europe, sales declined
due to the weak market, although we benefited from a favourable platform mix.
Light duty gasoline
Global sales in light duty gasoline were down 7% with declines across all
regions, underperforming the overall light duty gasoline market due to the
impact of previous platform losses in Europe and the Americas. We have been
investing in light duty gasoline to support future platform wins and are
confident our technology and commercial offering is now competitive.
Heavy duty diesel catalysts
Heavy duty diesel sales grew 17% during the year, in line with the overall
market, with double-digit growth across all regions. In the Americas, we saw
strong sales growth in line with market production driven by a cyclical
recovery in the US Class 8 truck cycle. In Europe, heavy duty sales growth
outperformed market production, benefiting from a favourable platform mix. In
Asia, sales grew strongly in a market that declined, supported by market share
gains and increased value per vehicle due to tighter legislation in China.
Underlying operating profit
Underlying operating profit increased 17% and margin increased to 12.3%,
driven by operational leverage and benefits from our transformation programme,
but were held back by the impact of chip shortages and inflation.
Notes:
1. Delivered around £800 million of cash at actual precious metal prices, which
equates to just over £600 million at constant prices (March 2021).
2. At least £4 billion of cash under our range of scenarios from 1(st) April
2021 to 31(st) March 2031. Cash target
pre-tax and post restructuring costs.
Efficient Natural Resources
Good performance driven by PGM Services and recovery in Catalyst Technologies
· Good performance with sales up 9%. PGM Services grew strongly primarily
benefiting from higher average precious metal prices. Catalyst Technologies
also grew driven by higher refill catalysts across industrial and consumer,
principally in methanol
· Underlying operating profit up 33% and margin expanded 6.1 percentage points
driven by strong growth in PGM Services
Year ended % change % change, constant FX rates
31(st) March
2022 2021¹
£ million £ million
Sales
PGM Services 587 531 +11 +13
Catalyst Technologies 454 443 +2 +5
Total sales 1,041 974 +7 +9
PGM Services 308 244 +26 +28
Catalyst Technologies 50 32 +56 +67
Underlying operating profit 358 276 +30 +33
Underlying margin 34.4% 28.3%
Reported operating profit 385 250
¹ Restated following change to reporting segments and removal of
inter-segment Copper Zeolites sales.
PGM Services
PGM Services is the world's largest secondary recycler of platinum group
metals (PGMs). This business has an important role in enabling the energy
transition through providing circular solutions as demand for scarce critical
materials increases. PGM Services also provides a strategic service to the
group, supporting Clean Air, Catalyst Technologies and Hydrogen Technologies
with security of metal supply in a volatile market.
Strong growth, benefiting from good performance in our refining business
Sales grew 13% reflecting good performance in our refining business primarily
benefiting from higher average PGM prices. Sales were partly offset by reduced
activity in our trading business which had a strong prior year.
Across our other businesses, performance was good. Life Science Technologies,
which provides advanced PGM based catalysts to the pharmaceutical and
agricultural chemicals markets, performed strongly reflecting new product
launches from our customers.
Refining backlogs remain at low levels
Refinery backlogs remain at low levels, which reflects our continued strong
operational focus and efficient management of precious metal working capital.
This supports the group's balance sheet efficiency.
Catalyst Technologies
Catalyst Technologies is focused on enabling the decarbonisation of chemical
value chains and we have leading positions in syngas: methanol, ammonia,
hydrogen and formaldehyde. Catalyst Technologies serves three key end markets:
industrial and consumer, traditional fuels and the nascent sustainable fuels
market. Our revenue streams comprise refill catalysts, first fill catalysts
and licensing income. In the year, sales were up 5% primarily driven by higher
demand for refill catalysts.
Industrial and consumer: good growth in refills, particularly methanol
Industrial and consumer includes our methanol, ammonia, formaldehyde offerings
as well as the majority of our licensing business. Overall, sales in
industrial and consumer were up in the period and, within that, refill
catalysts grew double digit. This largely reflected higher demand in methanol
where we benefited from a pick-up in market demand.
Licensing and first fill sales, which are driven by the start-up of new plants
and are lumpy by nature, were lower following particularly strong performance
in the prior year in ammonia and oxoalcohols.
Traditional fuels: refills and additives flat
Traditional fuels includes our refining additives, hydrogen and natural gas
purification offerings. Refills and additives, which make up the majority of
sales in this segment, were flat. First fill sales were down, largely driven
by hydrogen where we saw strong performance in the prior year as new plants
came on stream.
Sustainable fuels: first sales relating to new sustainable technologies
We are developing new technologies to enable the new, fast-growing sustainable
fuels markets which include our blue hydrogen, sustainable fuels and low
carbon solutions offerings. Although small in value at this stage, sales were
supported by the supply of the first methanol catalyst for the Haru Oni
project in Chile, the world's first integrated and commercial large-scale
plant to produce climate neutral e-methanol and e-gasoline from wind power. In
addition, we also supplied the first catalyst used by our Fischer Tropsch (FT)
CANS™ technology to Fulcrum for one of the world's first plants for the
production of sustainable fuel from municipal solid waste.
Pipeline of future opportunities - driving growth from sustainable
technologies
Licensing activity remains good and we signed four new licences in the period
(2020/21: nine licences)¹. We are working with customers on a number of
future opportunities focused on our decarbonisation technology, including
sustainable aviation fuel, blue hydrogen and low carbon solutions. Across
these exciting growth areas, we have a strong and growing pipeline with more
than 70 potential projects.
Notes:
1. 2020/21 and 2021/22 numbers exclude low value licences.
Underlying operating profit
Underlying operating profit up 33% and margin expanded 6.1 percentage points,
primarily driven by strong growth in PGM Services.
· PGM Services was up 28%, benefiting from higher average PGM prices (c.£45
million), partly offset by reduced activity in our trading business.
· In Catalyst Technologies, profit grew 67%, primarily reflecting a recovery in
our refill catalyst business, as well as the absence of one-off impairments
recognised in the prior year. Towards the end of the year, we saw an impact
from the cessation of our activities in Russia. We expect the loss of business
into Russia to have a c.£10 million impact
year-on-year on Catalyst Technologies operating profit in 2022/23.
Underlying operating profit
Underlying operating profit up 33% and margin expanded 6.1 percentage points,
primarily driven by strong growth in PGM Services.
·
PGM Services was up 28%, benefiting from higher average PGM prices (c.£45
million), partly offset by reduced activity in our trading business.
·
In Catalyst Technologies, profit grew 67%, primarily reflecting a recovery in
our refill catalyst business, as well as the absence of one-off impairments
recognised in the prior year. Towards the end of the year, we saw an impact
from the cessation of our activities in Russia. We expect the loss of business
into Russia to have a c.£10 million impact
year-on-year on Catalyst Technologies operating profit in 2022/23.
Other Markets
Investing to support growth in Hydrogen Technologies whilst driving value from
non-core businesses
· Performance in Hydrogen Technologies reflected increased investment to support
growth and manufacturing constraints as we scale up the business and utilised
capacity to qualify new customer products
· Completed the sale of Advanced Glass Technologies on 31(st) January 2022 for a
total consideration of £178 million
· Shortly completing our exit from our Battery Materials business
Year ended % change % change, constant FX rates
31(st) March
2022 2021¹
£ million £ million
Sales
New Markets 37 55 -33 -33
Value Businesses 342 357 -4 +1
Total sales 379 412 -8 -4
New Markets (55) (22) n/a n/a
Value Businesses 34 23 +48 +55
Underlying operating loss (21) 1 n/a n/a
Underlying margin -5.5% 0.2%
Reported operating loss (309) (9)
¹ Restated following change to reporting segments.
New Markets
In the year, New Markets comprised Hydrogen Technologies (Fuel Cells and Green
Hydrogen) and Battery Materials. In Hydrogen Technologies, we provide catalyst
coated membranes that are essential for fuel cells and green hydrogen
electrolysers.
New Markets sales decreased 33% in the period. We are experiencing
manufacturing constraints in Hydrogen Technologies as we scale up the business
and utilise capacity for new customer qualification. Work is ongoing to expand
our manufacturing capacity in the UK and China with the first phase expected
to commence production in early 2023. In Green Hydrogen, we are
commercialising at pace and generated our first sales in April 2022.
We are shortly completing our exit from Battery Materials and have impaired
the carrying value of the assets to fair value, and communicated associated
exit costs net of anticipated proceeds from asset sales. Together, these
resulted in an exceptional item outside underlying operating profit of £363
million.
Value Businesses
Value Businesses is managed to drive shareholder value from activities
considered to be non-core to JM, and comprises Battery Systems, Medical Device
Components and Diagnostic Services. Advanced Glass Technologies was divested
during the year.
Sales were broadly flat¹ in the period. We saw good sales performance in
Medical Devices and Diagnostic Services which benefited from actions taken to
drive improved business performance as well as improved demand following
COVID-19. This was offset by weaker sales in Battery Systems, which was
impacted by the global shortage of semi-conductor chips.
Underlying operating loss
Other Markets reported an underlying operating loss of £21 million,
reflecting an operating loss of £55 million in New Markets partially offset
by an operating profit of £34 million in Value Businesses.
Within New Markets, we accelerated our investment in the scale up of Hydrogen
Technologies during the period resulting in loss for that business of £33
million. Battery Materials operating losses were £22 million.
Corporate
Corporate costs were £86 million, an increase of £13 million from the prior
period, primarily due to building capability across our group functions and
upgrading our core IT systems, as well as an increase in the pension service
cost.
Notes:
1. The sale of Advanced Glass Technologies was completed on 31(st) January 2022.
On a continuing basis (excluding Advanced Glass Technologies and other
divested businesses in 2020/21 from both 2020/21 and 2021/22), sales in Value
Businesses increased 8%.
Discontinued operations: Health
Performance impacted by lower demand and pricing pressure in Generics, US
labour shortage and supply chain constraints
· Sale of Health to Altaris Capital Partners agreed on 17(th) December 2021,
with the transaction expected to complete at the end of May
· Performance impacted by lower demand and pricing pressure in opioid analgesics
(Generics), labour shortages in the US pharma market and global supply chain
constraints
Year ended % change % change, constant FX rates
31(st) March
2022 2021
£ million £ million
Sales
Generics 77 146 -47 -46
Innovators 86 91 -5 -1
Total sales 163 237 -31 -29
Underlying operating profit (discontinued) 3 31 -90 -90
Underlying margin (discontinued) 1.8% 13.1%
Reported operating (loss) / profit (239) 14
Update on sale to Altaris Capital Partners
On 17(th) December 2021, we announced the sale of Health to Altaris Capital
Partners. The transaction is expected to complete at the end of May. As
previously announced, we will retain approximately a 30% equity stake in the
business. We have recorded a major impairment and restructuring charge of
£242 million based on the amount expected to be recovered through the sale.
Sales performance
Overall sales were down 29% in the period, driven by weaker performance in
Generics. Within Generics, sales of opioid addiction therapies decreased
reflecting lower demand and pricing pressure in the US as the market
genericises, whilst demand for opioid analgesics was impacted by the
postponement of elective medical procedures. In addition, we saw manufacturing
delays in some areas due to US labour shortages and supply chain constraints.
Innovators sales were broadly flat in the year, with sales constrained by
labour and raw material shortages in the US which negatively impacted our
operations.
Underlying operating profit (discontinued)
Underlying operating profit declined 90%, reflecting weaker sales in Generics
and manufacturing challenges in both businesses due to temporary US labour
market shortages and supply chain disruption.
Financial review - continuing operations
Research and development (R&D)
R&D spend (excluding Health) was £201 million in the year, including £22
million of capitalised R&D. This was up from £185 million in the prior
period and represents c.5% of sales excluding precious metals. The increase
was mainly due to investment in Hydrogen Technologies as we commercialise our
fuel cell and green hydrogen offerings, as well as continued investment in our
Clean Air business ahead of new emissions regulations. Investment in Battery
Materials, which was largely capitalised, also drove the increase in spend in
the year.
Foreign exchange
The calculation of growth at constant rates excludes the impact of foreign
exchange movements arising from the translation of overseas subsidiaries'
profit into sterling. The group does not hedge the impact of translation
effects on the income statement. The principal overseas currencies, which
represented 78% of the non-sterling denominated underlying operating profit in
year ended 31(st) March 2022, were:
Share of 2021/22 Average exchange rate % change
non-sterling denominated
underlying operating profit Year ended 31(st) March
2022 2021
US dollar 30% 1.36 1.31 +4
Euro 29% 1.18 1.12 +5
Chinese renminbi 19% 8.75 8.85 -1
For the year, the impact of exchange rates decreased sales by £101 million
and underlying operating profit by £17 million.
If current exchange rates (£:$ 1.23, £:€ 1.18, £:RMB 8.31) are maintained
throughout the year ending 31(st) March 2023, foreign currency translation
will have a positive impact of approximately £25 million on underlying
operating profit. A one cent change in the average US dollar and euro exchange
rates each have an impact of approximately
£1 million and £2 million respectively on full year underlying operating
profit, and a ten fen change in the average rate of the Chinese renminbi has
an impact of approximately £1 million.
Efficiency savings
Our efficiency programme in relation to the consolidation of our Clean Air
manufacturing footprint and the implementation of a new group operating model,
which targeted savings of £100 million per annum (excluding Health) by
2023/24, is now largely complete.
£ million Delivered Delivered Annualised benefits
by 2023/24²
to 2020/21 in 2021/22¹
Total active efficiency programmes 37 87 100
Following the strategic review, we have now commenced our new group
transformation programme as part of which we expect to deliver further
efficiencies of £150 million by 2024/25. Associated costs to deliver the
programme - all of which are cash - are around £100 million.
Notes:
1. Savings achieved in 2021/22 exclude £7 million relating to Health.
2. Annualised benefits by 2023/24 exclude £10 million relating to Health.
Items outside underlying operating profit
Non-underlying charge/income As at As at
31(st) March 2022
31(st) March 2021
(£ million)
Major impairments and restructuring (440) (154)
Battery Materials (363) -
Russia - Ukraine conflict (32) -
Diagnostic Services (45) -
Gains and losses on significant legal proceedings 42 -
Disposal of Advanced Glass Technologies 106 -
Amortisation of acquired intangibles (6) (10)
Total (298) (164)
Major impairment and restructuring costs
Following the announcement of our intention to exit our Battery Materials
business we have
impaired the carrying value of the assets to fair value and communicated
associated exit costs, which is net of anticipated proceeds from asset sales.
Together, these resulted in an exceptional item outside underlying operating
profit of £363 million.
As announced on 7(th) March 2022, we discontinued with immediate effect all
new commercial activities in Russia and Belarus in light of the ongoing
conflict with Ukraine. Our operations in Russia include a small Clean Air
manufacturing plant, and a small Catalyst Technologies office. We have fully
impaired the assets associated with both businesses resulting in a charge of
£32 million.
As part of our annual impairment testing of goodwill, we updated our long-term
market assumptions for the oil and gas industry in which Diagnostic Services
serves its customers.
The growth rate and discount rate assumptions for Diagnostic Services have
also been updated to reflect the faster paced transition to non-carbon
intensive industries and the simplification of our portfolio to focus on core
markets. This resulted in an impairment to goodwill of £45 million.
Gains and losses on significant legal proceedings
During the period, the group recognised a net gain of £42 million largely
reflecting damages and interest from a company found to have unlawfully copied
one of JM's technology designs.
Disposal of Advanced Glass Technologies
On 31(st) January 2022, the group completed the sale of its Advanced Glass
Technologies business for a total consideration of £178 million and
recognised a non-underlying gain of £106 million.
Discontinued operations - Health
We announced the sale of Health on 17(th) December 2021 to Altaris Capital
Partners. The expected proceeds fair value less costs to sell is £272 million
leading to an impairment to Health's net assets of £228 million. The
non-underlying impairment has been recognised in 2021/22 upon reclassing
Health to 'held for sale' and discontinued operations. Non-underlying
transaction and separation costs of c.£14 million have been incurred and
expensed in the current year.
Finance charges
Net finance charges in the period amounted to £60 million, down from £85
million last year. Finance costs on metal borrowings have decreased due to
lower metal borrowings and the focus across the group on reducing precious
metal working capital.
Taxation
The tax charge on underlying profit before tax for the year ended 31(st) March
2022 was £86 million, an effective underlying tax rate of 17.4%, slightly up
from 16.3% in 2020/21.
The effective tax rate on reported loss for the year ended 31(st) March 2022
was -56.4%, from 13.9% in the prior period. This represents a tax charge of
£57 million, compared with
£33 million in the prior year. The increased effective rate is due to major
impairments and disposals arising in the year where no tax relief is
available.
We currently expect the tax rate on underlying profit for the year ending
31(st) March 2023 to be around 19%, and then increase progressively to around
21% by 2024/25 reflecting rising corporate tax rates.
Post-employment benefits
IFRS - accounting basis
At 31(st) March 2022, the group's net post-employment benefit position,
excluding bond assets held in a special purpose vehicle, was a surplus of
around £283 million.
The cost of providing post-employment benefits in the year was £62 million,
down from
£65 million last year. The prior year charge included a £3 million credit,
compared to a
£11 million credit this year.
Capital expenditure
Capital expenditure (excluding Health) was £446 million in the year, 2.6
times depreciation and amortisation (excluding amortisation of acquired
intangibles). In the period, projects included:
· In Efficient Natural Resources, investing to increase the resilience and
capacity of our PGM refining assets
· Development and commercialisation of eLNO, our portfolio of high nickel
cathode materials within Battery Materials
· Upgrading our core IT business systems
Strong balance sheet
Net debt (excluding Health) at 31(st) March 2022 was £856 million, an
increase from
£770 million from 31(st) March 2021. Net debt is £25 million higher at £881
million when post tax pension deficits are included. The group's net debt
(including post tax pension deficits) to EBITDA was 1.2 times (31(st) March
2021: 1.3 times), slightly below our target range of 1.5 to 2.0 times.
We use short-term metal leases as part of our mix of funding for working
capital, which are outside the scope of IFRS 16 as they qualify as short-term
leases. These amounted to £140 million as at 31(st) March 2022 (31(st) March
2021: £437 million).
Free cash flow and working capital
Free cash flow was £221 million in the year, compared to £295 million in the
prior period, largely reflecting a non-precious metal working capital outflow.
Excluding precious metal, average working capital days to 31(st) March 2022
decreased to 36 days compared to 45 days to 31(st) March 2021. The prior
period was higher due to the lower average sales volume through the period.
Going concern
As at 31(st) March 2022, the group maintains a strong balance sheet with
around £1.5 billion of available cash and undrawn committed facilities. Cash
generation was strong during the period with free cash flow of around £221
million, however net debt increased by £86 million since 31(st) March 2021 to
£856 million (excluding Health) driven by the share buyback and repayment of
metal leases. Net debt (including post tax pension deficits) to EBITDA, was
below our target range at 1.2 times.
The directors have reviewed the base case scenario forecasts for the Group and
are of the opinion that the group has adequate resources to fund its
operations for at least 12 months from the date of approving these financial
statements, and so it is appropriate to prepare the accounts on a going
concern basis. In arriving at this view, the base case scenario was stress
tested to a severe but plausible downside case, which assumed a lower demand
profile and slower recovery in end user market growth. Additionally, the group
considered scenarios including the impact from carbon pricing costs, metal
price volatility and increases in the amount of metal that we would have to
hold.
Responsible business
Sustainable business
Our products and services are the clearest demonstration of our vision for a
cleaner, healthier world. But we want to ensure we make them in ways that
minimise our impact on the planet and our local communities.
To reflect our commitment in these areas and support our target to reach net
zero by 2040, we organise our sustainability priorities around three pillars:
products and services, operations and people. Each pillar is underpinned by a
series of 2030 goals, targets and commitments. To strengthen our
sustainability governance, this year we set up a new Board-level committee -
the Societal Value Committee - and appointed our first Chief Sustainability
Officer who reports directly to our Chief Executive.
Products and services
By 2030, we want to see more than 95% of our sales and our R&D spend
contributing to four priority United Nations Sustainable Development Goals (UN
SDGs), These four represent the areas where we can have the most material
impact because they are closely aligned with our purpose and business
strategy.
In 2021/22, we reached 83.8% of sales, down from 84.7% in 2020/21. And in
R&D, we reached 88.1%, up from 87.3% in 2020/21.
This year, we also set new targets to increase the impact our products have in
helping to lower GHG emissions and remove NOx emissions. And we set a target
to help conserve scarce resources and support the circular economy.
Operations
In 2021, we joined the UN Global Compact's Business Ambition for 1.5° and had
our intermediate targets to reduce Scope 1, 2 and 3 emissions by 2030
validated by the Science Based Targets initiative. The financial year saw a 5%
rise in energy use, 4% rise in our Scope 1 and 2 GHG emissions and 3% rise in
carbon intensity as our manufacturing output rose at a lower rate. Overall,
our Scope 3 emissions were 8% lower than our 2019/20 baseline.
We are making good progress towards our target to purchase 60% of our
electricity from certified renewable sources by 2025. In 2021/22, we reached
34% from sources with a renewable energy guarantee of origin (2020/21: 30%).
We used 6% more water than the previous year, although this is 4.2% lower than
our 2020 baseline. The total amount of waste we produced and sent for
treatment by third parties rose to 96,286 tonnes.
People
In 2021/22 we reduced our combined UK gender pay gap to 5.4% from 6.7% in
2020/21. The health and safety of our people remains our highest priority and
our employee total recordable injury and illness rate was 0.59 in 2021/22
compared with 0.79 in 2020/21. Our process safety severity rating was 1.37 in
2021/22 compared with 0.81 in 2020/21. To make progress against our 2030 human
rights target, we worked with a third-party specialist to identify the human
rights risks that we will focus on and developed a tailored risk assessment
framework to segment our value chain and prioritise actions.
Risks and uncertainties
The principal risks and uncertainties, together with the group's strategies to
manage them, are set out on pages 74 to 79 of the 2022 annual report. Updated
risks are:
Strategic growth: Business transition to low-carbon economy - Our strategy is
focused on managing our existing businesses effectively, while pivoting away
from fossil fuel-based industries to those based on sustainable chemicals and
fuels, and clean energy.
Our overall risk is that we may not have a financially viable future business
model and/or capability as we transition to a low-carbon economy and are
unable to make and/or sell the products and services our customers' demand.
Our new growth platforms include:
· Green hydrogen and fuel cells within Hydrogen Technologies.
· Low-carbon hydrogen, sustainable aviation fuels and low-carbon solutions
within Catalyst Technologies.
Maintaining competitive advantage of our products and operations - This risk
addresses failing to maintain our competitive advantage in existing markets
and so not meet our customers' evolving needs as effectively and profitably as
our competitors can. This could reduce the value of our brand.
Customers use our products in a wide range of their own end products,
processes and systems. It is crucial then that our products work properly and
meet the established quality criteria.
Performance failure or quality defects could harm consumers or leave us open
to liability claims. This could lead to loss of future business and our
license to operate and to reputational damage
Environment, health and safety (EHS) - Like other high-hazard manufacturing
companies, our business is controlled by a wide range of challenging health,
safety and environmental laws, standards and regulations, which are set by
governments and regulatory agencies around the world.
If we fail to operate safely, we could injure people, incur significant
financial loss or breach applicable laws, which could have a negative effect
on our reputation, our employees or the environment.
This could also mean we lose production time and attract negative interest
from the media and regulators, which could lead to fines and penalties.
Supply failure (excluding platinum group metals - see Managing our metal
commitments) - Given the types of products and services we develop, there are
only a few suppliers from which we can source certain important raw materials.
If there was a significant breakdown in their supply, we would be unable to
manufacture our products and satisfy customer demand.
Our work on the effects of climate change means we understand that more
frequent extreme weather events and natural disasters - like droughts, floods,
storms, cyclones, heavy rain, sea level rise and heatwaves - may disrupt our
supply and value chains, upstream and downstream. Getting raw materials and
delivering products would be harder and costs would increase.
People, culture and leadership - A great culture is essential to executing our
strategy, delivering growth and being more efficient. High-quality leaders can
create inclusive, engaged and diverse teams, and inspire and motivate them.
We will make sure we have the capability to identify new business, capture
opportunities and grow.
Managing our metal commitments - Our products contain precious metals sourced
from either primary, secondary (recycled) or financial institutions. There is
a risk that we have insufficient metal for our manufacturing businesses /
metal commitments. Our primary and secondary metal needs are diversified in
type and geography, and we have very little exposure to Russian PGM supply.
Our trading business ensures the Group has sufficient metal to meet business
demands and manages our liquidity levels. There is a risk that we do not have
sufficient metal available. We operate within tight trading limits and defined
liquidity levels / policies to manage the volatility of demand. How much our
trading business earns depends on metal price volatility.
We hedge all of our metal transactions centrally through looking at the
overall group supply / demand. Accordingly, we do not carry significant
exposure to price risk. Our refining business earnings also depend on metal
price; a fall in price reduces revenue and operating profit. Any metal gains
or losses that are generated through the refining process are settled
regularly to ensure we are not exposed to short-term price fluctuations. In
addition, a failure of our security management systems may result in a loss of
theft of precious metal, which could lead to financial loss and / or a failure
to satisfy our customers. This could reduce customer confidence or result in
legal action.
Intellectual property management - By not adequately managing our own or
third-party intellectual property (IP), knowledge and information, we risk
losing business advantage. This could happen through:
· Loss of IP
· Failing to protect and exploit our investment in research and development
· Loss of freedom to operate
· Reputational damage associated with litigation
Asset failure - A critical asset failure may have a material effect on our
supply chains, performance, share value and reputation.
Our work on the effects of climate change means we understand that more
frequent extreme weather events and natural disasters - like droughts, floods,
storms, cyclones, heavy rain, sea level rise and heatwaves - may disrupt our
operations, increase our costs and have a detrimental effect on our employees'
wellbeing.
Ethics and compliance - If we fail to comply with ethical and regulatory
standards, we could face reputational damage, and leave the company or
individuals open to potential criminal or legal action.
Business transformation - If we fail to manage and deliver business change in
a controlled manner, we may not achieve the business benefits we expect.
If we don't effectively implement the efficiencies of a simpler and more
streamlined business structure, we may not see the cultural improvements and
new ways of working we expect.
Information, technology and cybersecurity - If we fail to adapt our IT systems
to changing business requirements or suffer a significant disruption to those
systems or a major cybersecurity incident, we could see our financial position
and reputation harmed, or face regulatory penalties, or unintentionally break
the law.
Customer contract liability - Unfavourable customer contract terms could lead
to significant loss or damage and expose us to high or unlimited liability.
Quality management needs to be effective across the entire end-to-end process
within our business, i.e., from raw material supply through to product
delivery to customer expectations. It could also lead to broader negative
consequences, such as damage to our reputation or losing customers.
Consolidated Income Statement
for the year ended 31(st) March 2022
2022 2021*
Notes £ million £ million
Revenue 2,3 16,025 15,435
Cost of sales (14,971) (14,481)
Gross profit 1,054 954
Distribution costs (101) (103)
Administrative expenses (400) (377)
Profit / (loss) on disposal of businesses 13 106 (1)
Amortisation of acquired intangibles 4 (6) (10)
Gains and losses on significant legal proceedings 4 42 -
Major impairment and restructuring charges 5 (440) (154)
Operating profit 255 309
Finance costs (101) (158)
Finance income 41 73
Profit before tax from continuing operations 195 224
Tax expense (79) (30)
(Loss) / profit after tax from discontinued operations (217) 11
(Loss) / profit for the year (101) 205
pence pence
(Loss) / earnings per ordinary share
Basic 6 (52.6) 106.5
Diluted 6 (52.6) 106.4
Earnings per ordinary share from continuing operations
Basic 6 60.9 100.9
Diluted 6 60.8 100.8
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Consolidated Statement of Total Comprehensive Income
for the year ended 31(st) March 2022
2022 2021*
Notes £ million £ million
(Loss) / profit for the year (101) 205
Other comprehensive income
Items that will not be reclassified to the income statement
Remeasurements of post-employment benefit assets and liabilities 14 177 (141)
Fair value (losses) / gains on equity investments at fair value through other
comprehensive income (5) 5
Tax on items that will not be reclassified to the income statement (35) 28
Total items that will not be reclassified to the income statement 137 (108)
Items that may be reclassified to the income statement
Exchange differences on translation of foreign operations 75 (144)
Exchange differences on translation of discontinued foreign operations 12 5 (18)
Amounts (charged) / credited to hedging reserve (36) 3
Fair value (losses) / gains on net investment hedges (2) 12
Tax on above items taken directly to or transferred from equity 10 -
Total items that may be reclassified to the income statement 52 (147)
Other comprehensive income / (expense) for the year 189 (255)
Total comprehensive income / (expense) for the year 88 (50)
Total comprehensive income / (expense) for the year arises from:
Continuing operations 300 (43)
Discontinued operations 12 (212) (7)
88 (50)
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Consolidated Balance Sheet
as at 31(st) March 2022
2022 2021
Notes £ million £ million
Assets
Non-current assets
Property, plant and equipment 8 1,238 1,424
Right-of-use assets 61 74
Goodwill 366 554
Other intangible assets 9 267 359
Investments in joint ventures and associates 2 2
Investments at fair value through other comprehensive income 45 53
Other receivables 10 42 50
Interest rate swaps 11 20
Deferred tax assets 98 140
Post-employment benefit net assets 14 352 194
Total non-current assets 2,482 2,870
Current assets
Inventories 1,549 1,814
Current tax assets 18 13
Trade and other receivables 10 1,796 2,422
Cash and cash equivalents 391 581
Interest rate swaps 1 -
Other financial assets 27 44
Assets classified as held for sale 12 402 -
Total current assets 4,184 4,874
Total assets 6,666 7,744
Liabilities
Current liabilities
Trade and other payables 11 (2,563) (3,325)
Lease liabilities (10) (11)
Current tax liabilities (97) (147)
Cash and cash equivalents ─ bank overdrafts (37) (36)
Borrowings and related swaps (265) (26)
Other financial liabilities (44) (18)
Provisions (56) (35)
Liabilities classified as held for sale 12 (80) -
Total current liabilities (3,152) (3,598)
Non-current liabilities
Borrowings and related swaps (899) (1,252)
Lease liabilities (40) (51)
Deferred tax liabilities (18) (28)
Interest rate swaps (2) -
Employee benefit obligations 14 (72) (98)
Other financial liabilities (12) -
Provisions (28) (27)
Other payables 11 (2) (5)
Total non-current liabilities (1,073) (1,461)
Total liabilities (4,225) (5,059)
Net assets 2,441 2,685
Equity
Share capital 218 221
Share premium 148 148
Shares held in employee share ownership trust (ESOT) (24) (29)
Other reserves 50 -
Retained earnings 2,049 2,345
Total equity 2,441 2,685
The accounts were approved by the Board of Directors on 26(th) May 2022 and
signed on its behalf by:
Directors
L Condon
S Oxley
Consolidated Cash Flow Statement
for the year ended 31(st) March 2022
2022 2021
Notes £ million* £ million*
Cash flows from operating activities
Profit before tax from continuing operations 195 224
(Loss) / profit before tax from discontinued operations 12 (239) 14
Adjustments for:
(Profit) / loss on disposal of businesses (106) 1
Depreciation 151 158
Amortisation 39 32
Impairment losses 632 122
Loss on sale of non-current assets 2 4
Share-based payments 8 9
Decrease in inventories 123 19
Decrease / (increase) in receivables 588 (430)
(Decrease) / increase in payables (783) 607
Increase in provisions 25 41
Contributions in excess of employee benefit obligations charge (2) (7)
Changes in fair value of financial instruments 19 (45)
Net finance costs 60 85
Income tax paid (107) (65)
Net cash inflow from operating activities 605 769
Cash flows from investing activities
Interest received 32 66
Purchases of property, plant and equipment (358) (304)
Purchases of intangible assets (95) (77)
Proceeds from sale of non-current assets 1 5
Net proceeds from sale of businesses 13 160 19
Net cash outflow from investing activities (260) (291)
Cash flows from financing activities
Purchase of treasury shares (155) -
Proceeds from borrowings 9 368
Repayment of borrowings (140) (298)
Dividends paid to equity shareholders 7 (139) (99)
Interest paid (111) (159)
Principal element of lease payments (14) (14)
Net cash outflow from financing activities (550) (202)
Change in cash and cash equivalents (205) 276
Exchange differences on cash and cash equivalents 6 (4)
Cash and cash equivalents at beginning of year 545 273
Cash and cash equivalents at end of year 346 545
Cash and deposits 254 119
Money market funds 137 462
Bank overdrafts (37) (36)
Bank overdrafts transferred to liabilities classified as held for sale 12 (8) -
Cash and cash equivalents 346 545
* For cash flows of discontinued operations see note 12.
Consolidated Statement of Changes in Equity
for the year ended 31(st) March 2022
Share Shares
Share premium held in Other Retained Total
capital account ESOT reserves earnings equity
£ million £ million £ million £ million £ million £ million
At 1(st) April 2020 221 148 (32) 142 2,345 2,824
Total comprehensive (expense) / income - - - (142) 92 (50)
Dividends paid (note 7) - - - - (99) (99)
Share-based payments - - - - 16 16
Cost of shares transferred to employees - - 3 - (10) (7)
Tax on share-based payments - - - - 1 1
At 31(st) March 2021 221 148 (29) - 2,345 2,685
Total comprehensive income - - - 47 41 88
Dividends paid (note 7) - - - - (139) (139)
Purchase of treasury shares (3) - - 3 (200) (200)
Share-based payments - - - - 15 15
Cost of shares transferred to employees - - 5 - (13) (8)
At 31(st) March 2022 218 148 (24) 50 2,049 2,441
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
1 Preparation
Basis of preparation and statement of compliance
On 31(st) December 2020, IFRS as adopted by the European Union at that date
was brought into UK law and became UK-adopted International Accounting
Standards, with future changes being subject to endorsement by the UK
Endorsement Board. The group transitioned to UK-adopted International
Accounting Standards in its consolidated financial statements on 1(st) April
2021. This change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the period reported
as a result of the change in framework. The financial statements of the group
have been prepared on a going concern basis in accordance with UK-adopted
International Accounting Standards (IAS) and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
Except for the changes noted below, the accounting policies applied are set
out in the Annual Report and Accounts for the year ended 31(st) March 2021.
As at 31(st) March 2022, the group maintains a strong balance sheet with
around £1.5 billion of available cash and undrawn committed facilities. Cash
generation was strong during the period with free cash flow of £221 million.
Net debt increased by £86 million since 31(st) March 2021 to £856 million
(excluding Health) driven by the share buyback and repayment of metal leases.
Net debt (including post tax pension deficits) to EBITDA, was below our target
range at 1.2 times and we have made £nil drawings under committed facilities.
The directors have reviewed the base case scenario forecasts for the group and
are of the opinion that the group has adequate resources to fund its
operations for the period of at least twelve months from the date of signing
these financial statements. In forming this view, the base case scenario was
stress tested to represent a severe but plausible downside case scenario which
modelled a material reduction in trading.
In both scenarios outlined above, we have sufficient headroom against
committed facilities and key financial covenants are not in breach during the
going concern period. Accordingly, the directors continue to adopt the going
concern basis in preparing the financial statements.
Statutory accounts for 2021 have been delivered to the Registrar of Companies
and those for 2022 will be delivered following the company's Annual General
Meeting. The auditor, PwC, has reported on both 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 31(st) March 2022 were
approved by the Board of Directors on 26(th) May 2022.
These financial statements do not include all the information required for
full annual statements and should be read in conjunction with the 2022 Annual
Report. They are not statutory accounts within the meaning of section 435 of
the Companies Act 2006.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
1 Preparation (continued)
Changes in accounting policies
Interest Rate Benchmark Reform Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16
The IBOR reform, Phase 2 amendments were effective for annual periods
beginning on or after the 1(st) January 2021. The Phase 2 amendments address
issues that arise from implementation of the reforms, including the
replacement of one benchmark with an alternative one. A practical expedient is
provided such that the change to contractual cash flows for financial assets
and liabilities (including lease liabilities) is accounted for prospectively
by revising the effective interest rate. In addition, hedge accounting will
not be discontinued solely because of the IBOR reform. The amendments did not
have a material impact on the results or financial position of the group and
there has been no change to the group's interest policy.
The group has one IFRS 9 designated hedge relationship: the 3.26% $150 million
Bonds 2022 which have been swapped into floating rate US dollars. This swap
references six-month US dollar LIBOR, however the swap matures in 2022, before
the amendments are effective for the group. The group does have access to a
revolving credit facility which remains undrawn, the contract was amended so
that USD and GBP drawings are subject to the new Secured Overnight Financing
Rate (SOFR) and Sterling Overnight Index Average (SONIA) respectively from
30(th) November 2021. The implications on the wider business of IBOR reform
have been assessed and there are no other arrangements that are materially
impacted.
Other amendments to accounting standards
The IASB ratified the IFRIC update on Configuration and Customisation ('CC')
costs in a Cloud Computing Arrangement (IAS 38, Intangible Assets) in April
2021. The group reports 'CC' in cloud computing arrangements in compliance
with these updates.
The IASB has issued other amendments resulting from improvements to IFRS that
the group considers do not have any impact on the accounting policies,
financial position or performance of the group. The group has not early
adopted any standard, interpretation or amendment that was issued but is not
yet effective.
Non-GAAP measures
The group uses various measures to manage its business which are not defined
by generally accepted accounting principles (GAAP). The group's management
believes these measures provide valuable additional information to users of
the accounts in understanding the group's performance. The group's non-GAAP
measures are defined and reconciled to GAAP measures in note 19.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
2 Segmental information
Revenue, sales, underlying operating profit and net assets by sector
Year ended 31(st) March 2022
Efficient
Clean Natural Other
Air Resources Markets Corporate Eliminations Total
£ million £ million £ million £ million £ million £ million
Revenue from external customers 7,085 8,461 479 - - 16,025
Inter-segment revenue 4 4,555 1 - (4,560) -
Revenue 7,089 13,016 480 - (4,560) 16,025
External sales 2,455 945 378 - - 3,778
Inter-segment sales 2 96 1 - (99) -
Sales(1) 2,457 1,041 379 - (99) 3,778
Underlying operating profit / (loss) from continuing operations(1) 302 358 (21) (86) - 553
Segmental net assets 2,108 41 220 330 - 2,699
Net debt (note 19) (856)
Post-employment benefits net assets and liabilities (note 14) 280
Deferred tax net asset 80
Provisions and non-current other payables (86)
Investments in joint ventures and associates 2
Net assets held for sale (note 12) 322
Net assets 2,441
Year ended 31(st) March 2021*
Efficient
Clean Natural Other
Air Resources Health Markets Corporate Eliminations
(restated) (restated) (restated) (restated) (restated) (restated) Total
£ million £ million £ million £ million £ million £ million £ million
Revenue from external customers 6,985 7,952 - 498 - - 15,435
Inter-segment revenue 2 4,877 - 1 - (4,880) -
Revenue 6,987 12,829 - 499 - (4,880) 15,435
External sales 2,412 862 - 411 - - 3,685
Inter-segment sales - 112 - 1 - (113) -
Sales(1) 2,412 974 - 412 - (113) 3,685
Underlying operating profit / (loss) from continuing operations(1) 269 276 - 1 (73) - 473
Segmental net assets 2,686 (668) 469 476 354 - 3,317
Net debt (775)
Post-employment benefit net assets and liabilities (note 14) 96
Deferred tax net asset 112
Provisions and non-current other payables (67)
Investments in joint ventures and associates 2
Net assets 2,685
(1 ) Sales and underlying operating profit are non-GAAP measures (see note
19). Sales excludes the sale of precious metals. Underlying operating profit
excludes profit or loss on disposal of businesses, gain or loss on significant
legal proceedings, together with associated legal costs, amortisation of
acquired intangibles and major impairment and restructuring charges.
* The comparative period is restated to reflect the group's updated reporting
segments and revised inter-segment revenue and sales for Efficient Natural
Resources and eliminations for copper zeolite sales. Also restated to reflect
classification of the Health segment as discontinued operations (see note 12)
and to allocate precious metal inventory to segments in line with how the
business is managed.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
3 Revenue
Products and services
The group's principal products and services by operating sector and sub-sector
are disclosed in the table below, together with information regarding
performance obligations and revenue recognition. Revenue is recognised by the
group as contractual performance obligations to customers are completed.
Sub-sector Primary industry Principal products and services Performance obligations Revenue recognition
Clean Air
Light Duty Catalysts Automotive Catalysts for cars and other light duty vehicles Point in time On despatch or delivery
Heavy Duty Catalysts Automotive Catalysts for trucks, buses and non-road equipment Point in time On despatch or delivery
Efficient Natural Resources
Catalyst Technologies Chemicals / oil and gas Speciality catalysts and additives Point in time On despatch or delivery
Process technology licences Over time Based on costs incurred or straight-line over the licence term(1)
Engineering design services Over time Based on costs incurred
Platinum Group Metal Services Various Platinum Group Metal refining and recycling services Over time Based on output
Other precious metal products Point in time On despatch or delivery
Platinum Group Metal chemical and industrial products Point in time On despatch or delivery
Health (discontinued operation - see note 12)
Generics Pharmaceuticals Manufacture of active pharmaceutical ingredients Point in time On despatch or delivery
Innovators Pharmaceuticals Development and manufacture of active pharmaceutical ingredients Over time Based on costs incurred
Other Markets
Other Markets (excluding Diagnostic Services) Various Precious metal pastes and enamels, battery materials and systems, fuel cell Point in time On despatch or delivery
technologies and products found in devices used in medical procedures
Diagnostic Services Oil and gas Detection, diagnostic and measurement solutions Over time Based on costs incurred
(1) Revenue recognition depends on whether the licence is distinct in the
context of the contract.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
3 Revenue (continued)
Revenue from external customers by principal products and services
Year ended 31(st) March 2022
Continuing operations
Clean Air Efficient Other Markets Total Health (discontinued)
Natural
Resources
£ million £ million £ million £ million £ million
Metal 4,630 7,516 101 12,247 3
Heavy Duty Catalysts 849 - - 849 -
Light Duty Catalysts 1,578 - - 1,578 -
Catalyst Technologies - 508 - 508 -
Platinum Group Metal Services - 437 - 437 -
Generics - - - - 77
Innovators - - - - 84
Fuel Cells - - 25 25 -
Battery Materials - - 12 12 -
Battery Systems - - 151 151 -
Advanced Glass Technologies - - 62 62 -
Diagnostic Services - - 54 54 -
Medical Device Components - - 74 74 -
Other 28 - - 28 -
Revenue 7,085 8,461 479 16,025 164
Year ended 31(st) March 2021*
Continuing operations
Efficient Other Markets Health
Natural
Resources
Clean Air (restated) (restated) Total (discontinued)
£ million £ million £ million £ million £ million
Metal 4,573 7,090 87 11,750 2
Heavy Duty Catalysts 741 - - 741 -
Light Duty Catalysts 1,641 - - 1,641 -
Catalyst Technologies - 487 - 487 -
Platinum Group Metal Services - 375 - 375 -
Generics - - - - 146
Innovators - - - - 90
Fuel Cells - - 41 41 -
Battery Materials - - 14 14 -
Battery Systems - - 169 169 -
Advanced Glass Technologies - - 66 66 -
Diagnostic Services - - 43 43 -
Medical Device Components - - 60 60 -
Other 30 - 18 48 -
Revenue 6,985 7,952 498 15,435 238
* The comparative period is restated to reflect the group's updated reporting
segments. Also restated to reflect classification of the Health segment as
discontinued operations (see note 12).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
4 Operating profit
Operating profit from continuing operations is arrived at after charging /
(crediting):
2022 2021
£ million £ million*
Total research and development expenditure 201 185
Less: Development expenditure capitalised (22) (17)
Research and development expenditure charged to the income statement 179 168
Less: External funding received - from governments (18) (12)
Net research and development expenditure charged to the income statement 161 156
Inventories recognised as an expense 14,121 13,638
Write-down of inventories recognised as an expense 26 20
Reversal of write-down of inventories from increases in net realisable value (16) (10)
Net gains on foreign exchange (2) (56)
Net losses on foreign currency forwards at fair value through profit or loss 6 58
Past service credit (11) (3)
Depreciation of:
Property, plant and equipment 125 126
Right-of-use assets 13 13
Depreciation 138 139
Amortisation of:
Internally generated intangible assets 1 2
Acquired intangibles 6 10
Other intangible assets 32 19
Amortisation 39 31
Gains and losses on significant legal proceedings (42) -
Profit on disposal of businesses (note 13) (106) -
Impairment losses included in administrative expenses 3 31
Impairment losses 3 31
Impairment losses included in major impairment and restructuring charges 401 80
Restructuring charges included in major impairment and restructuring charges 39 74
Major impairment and restructuring charges (note 5) 440 154
Fees payable to the company's auditor and its associates for:
The audit of these accounts 2.1 2.0
The audit of the accounts of the company's subsidiaries 2.4 2.3
The audit of prior period accounts 0.2 0.7
Total audit fees 4.7 5.0
Audit-related assurance services 0.4 0.3
Total non audit fees 0.4 0.3
Total fees payable to the company's auditor and its associates 5.1 5.3
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Gains and losses on significant legal proceedings
During the year, the group recognised a gain of £44 million in relation to
damages and interest from a company found to have unlawfully copied one of our
technology designs. An additional gain of £6 million was recognised following
conclusion of legal proceedings associated to investments in Battery
Materials, this was partially offset by a £8 million charge for environmental
and other costs. The net gain is reported as non-underlying.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
5 Major impairment and restructuring charges
2022 2021
£ million £ million*
Property, plant and equipment 238 26
Right-of-use assets 4 1
Goodwill 45 -
Other intangible assets 78 53
Inventories 17 -
Trade and other receivables 19 -
Impairment losses 401 80
Restructuring charges 39 74
Total major impairments and restructuring charges 440 154
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Major impairment and restructuring charges are shown separately on the face of
the income statement and excluded from underlying operating profit (see note
19).
Battery Materials - Following a detailed review of our Battery Materials
business the group concluded that the potential future returns from the
business would not be adequate to justify further investment. Accordingly on
11(th) November 2021, the group announced the decision to pursue the sale of
all or parts of the business. An impairment charge of
£314 million was taken at 30(th) September 2021 to a net book value to £nil
based on our estimate of the recoverable amount at that time. For the full
year, we have determined a further impairment charge of £11 million to £325
million based on fair value less costs to sell. The 31(st) March 2022
impairment charge comprises property, plant and equipment (£237 million),
right-of-use assets (£4 million), other intangible assets (£70 million) and
trade and other receivables
(£6 million). A further £8 million was impaired in relation to associated
intangible assets held in Corporate. The Battery Materials restructuring
charge was £38 million for exit costs including redundancies.
Diagnostic Services - We updated our long term market assumptions for the oil
and gas industry in which the Diagnostic Services business serves customers
and considered faster paced transition to non-carbon intensive industries and
alignment with the group's overall strategy. This has resulted in an
impairment to goodwill of £45 million.
Russia/Ukraine conflict - As announced on 7(th) March 2022, we discontinued
with immediate effect all new commercial activities in Russia and Belarus in
light of the ongoing conflict in Ukraine. Our operations in Russia include one
small Clean Air manufacturing plant which has been written down to £nil, and
a small Catalyst Technologies office. We have determined an impairment and
restructuring charge of £32 million comprising of inventories (£17 million),
receivables (£13 million), property, plant and equipment (£1 million) and a
restructuring charge (£1 million).
In the prior year, excluding the Health segment, the group incurred
non-underlying major impairment and restructuring charges of £154 million.
The charges were in relation to efficiency initiatives that are transforming
our organisation to create a more simple and efficient group allowing us to
act with greater agility and pace in a dynamic external environment. There
have been no further charges in relation to these initiatives in the current
year.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
6 (Loss) / earnings per share
2022 2021
pence pence
Basic (52.6) 106.5
Diluted (52.6) 106.4
Basic from continuing operations 60.9 100.9
Diluted from continuing operations 60.8 100.8
(Loss) / earnings per share have been calculated by dividing loss or profit
for the year by the weighted average number of shares in issue during the
year.
Weighted average number of shares in issue 2022 2021
Basic 191,568,756 192,711,413
Dilution for long term incentive plans 585,024 260,753
Diluted 192,153,780 192,972,166
7 Dividends
A final dividend of 55.0 pence per ordinary share has been proposed by the
board which will be paid on 2(nd) August 2022 to shareholders on the register
at the close of business on 10(th) June 2022, subject to shareholders'
approval. The estimated amount to be paid is £102 million and has not been
recognised in these accounts.
2022 2021
£ million £ million
2019/20 final ordinary dividend paid ─ 31.125 pence per share - 60
2020/21 interim ordinary dividend paid ─ 20.00 pence per share - 39
2020/21 final ordinary dividend paid ─ 50.00 pence per share 96 -
2021/22 interim ordinary dividend paid ─ 22.00 pence per share 43 -
Total dividends 139 99
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
8 Property, plant and equipment
Freehold Assets in
land and Leasehold Plant and the course of
buildings improvements machinery construction Total
£ million £ million £ million £ million £ million
Cost
At 1(st) April 2021 667 31 2,310 377 3,385
Additions 1 1 38 339 379
Transferred to assets classified as held for sale (note 12) (107) (5) (392) (282) (786)
Transfers from assets in the course of construction 11 1 120 (132) -
Disposals (1) - (25) (1) (27)
Disposal of businesses (note 13) (13) (1) (44) (1) (59)
Exchange adjustments 12 - 48 4 64
At 31(st) March 2022 570 27 2,055 304 2,956
Accumulated depreciation and impairment
At 1(st) April 2021 321 17 1,606 17 1,961
Charge for the year 18 2 117 - 137
Impairment losses 21 - 64 210 295
Transferred to assets classified as held for sale (note 12) (91) (4) (335) (210) (640)
Disposals (1) - (23) - (24)
Disposal of businesses (note 13) (8) (2) (38) - (48)
Exchange adjustments 5 1 33 (2) 37
At 31(st) March 2022 265 14 1,424 15 1,718
Carrying amount at 31(st) March 2022 305 13 631 289 1,238
Carrying amount at 1(st) April 2021 346 14 704 360 1,424
During the year, the group recognised impairments of £295 million. The
impairment charge comprises of £2 million included in administrative
expenses, see note 4, and £238 million included in non-underlying expenses,
see note 5. A further £55 million of impairment charges were incurred in
relation to the Health segment. During the prior year, the group recognised
impairments in respect of four sites and plants, Clean Air (£18 million),
Efficient Natural Resources (£4 million), Health (£5 million), and New
Markets (£4 million), which were included in major impairment and
restructuring charges, and additional impairments of £2 million, which were
recognised in underlying operating profit.
The total capital expenditure in the year for discontinued operations equalled
£22 million (2021: £24 million).
The depreciation charge for the year for discontinued operations equalled £12
million (2021: £20 million).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
9 Other intangible assets
Customer
contracts Patents, Acquired
and Computer trademarks research and Development
relationships software and licences technology expenditure Total
£ million £ million £ million £ million £ million £ million
Cost
At 1(st) April 2021 133 367 65 42 226 833
Additions - 66 1 - 33 100
Transferred to assets classified as held for sale (note 12) - (15) (20) (5) (127) (167)
Disposal of businesses (note 13) (1) (2) - - - (3)
Exchange adjustments - 3 1 - 3 7
At 31(st) March 2022 132 419 47 37 135 770
Accumulated amortisation and impairment
At 1(st) April 2021 108 144 46 41 135 474
Charge for the year 4 31 1 2 1 39
Impairment losses - 15 12 - 75 102
Transferred to assets classified as held for sale (note 12) - (13) (18) (5) (79) (115)
Reclassification - - 2 (2) - -
Disposal of businesses (note 13) (1) (2) - - - (3)
Exchange adjustments 1 3 1 - 1 6
At 31(st) March 2022 112 178 44 36 133 503
Carrying amount at 31(st) March 2022 20 241 3 1 2 267
Carrying amount at 1(st) April 2021 25 223 19 1 91 359
During the year, the group recognised impairments of £102 million. The
impairment charge compromises of £1 million included in administrative
expenses, and £78 million included in non-underlying expenses, see note 5. A
further £23 million of impairment charges were incurred in relation to the
Health segment, see note 12. During the prior year, the group recognised
impairments in respect of licences (£3 million) as part of a site closure in
Efficient Natural Resources and information systems (£56 million), which were
included in major impairment and restructuring charges, and additional
impairments of £8 million, which were recognised in underlying operating
profit.
The total capital expenditure in the year for the discontinued operations
equalled £11 million (2021: £5 million).
The total amortisation charge in the year for discontinued operations equalled
£nil (2021: £1 million).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
10 Trade and other receivables
2022 2021
£ million £ million
Current
Trade receivables 1,393 1,571
Contract receivables 88 181
Prepayments 75 88
Value added tax and other sales tax receivable 89 119
Advance payments to customers 10 11
Amounts receivable under precious metal sale and repurchase agreements(1) 114 308
Other receivables 27 144
Trade and other receivables 1,796 2,422
Non-current
Value added tax and other sales tax receivable 3 2
Prepayments - 3
Advance payments to customers 39 45
Other receivables 42 50
(1) The fair value of the precious metal contracted to be sold by the group
under sale and repurchase agreements is £108 million (31(st) March 2021:
£407 million).
11 Trade and other payables
2022 2021
£ million £ million
Current
Trade payables 753 996
Contract liabilities 273 184
Accruals 439 369
Amounts payable under precious metal sale and repurchase agreements(1) 793 1,442
Other payables 305 334
Trade and other payables 2,563 3,325
Non-current
Other payables 2 5
Other payables 2 5
(1) The fair value of the precious metal contracted to be repurchased by the
group under sale and repurchase agreements is £782 million (31(st) March
2021: £1,766 million).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
12 Discontinued operations and assets and liabilities classified as held for sale
The group strategically drives for efficiency and disciplined capital
allocation to enhance returns, as such we continue to actively manage our
portfolio. In line with this strategy, during the year the board decided to
sell the Health segment.
On 17(th) December, the group announced the sale of its Health segment to
Altaris Capital Partners. The assets and liabilities have been classified as
'held for sale' at fair value less costs to sell (£272 million). The amount
is lower than book value as a result of the deterioration of trading
performance through this financial year that ultimately impacted Altaris
Capital Partners' valuation of the business, consequentially this has resulted
in an impairment charge of
£228 million and a restructuring charge of £14 million. The impairment
charge comprises goodwill (£144 million), property, plant and equipment (£55
million), right-of-use assets (£1 million) other intangible assets (£23
million) and inventories (£5 million). The business is classified as a
discontinued operation and presented separately in the income statement and
presented within assets held for sale on the balance sheet.
The Health segment was not classified as held for sale or as a discontinued
operation as at 31(st) March 2021. The comparative statement of profit or loss
and other comprehensive income has been restated to show the discontinued
operations separately from continuing operations.
Financial information relating to the Health discontinued operations for the
year is set out below.
2022 2021
£ million £ million
Revenue 164 238
Expenses (161) (207)
Underlying operating profit from discontinued operations 3 31
Major impairment and restructuring costs from discontinued operations (242) (17)
(Loss) / profit before tax from discontinued operations (239) 14
Tax credit / (expense) 22 (3)
(Loss) / profit after tax from discontinued operations (217) 11
Exchange differences on translation of discontinued operations 5 (18)
Other comprehensive income / (expense) from discontinued operations 5 (18)
Total comprehensive expense from discontinued operations (212) (7)
Net cash inflow from operating activities 33 43
Net cash outflow from investing activities (30) (29)
Net cash outflow from financing activities (6) (12)
Net (decrease) / increase in cash generated by the discontinued operations (3) 2
pence pence
(Loss) / earnings per ordinary share from discontinued operations
Basic (loss) / earnings per ordinary share from discontinued operations (113.5) 5.6
Diluted (loss) / earnings per ordinary share from discontinued operations (113.5) 5.6
In the prior year, the Health segment incurred non-underlying major impairment
and restructuring charges of
£17 million. The charges were in relation to efficiency initiatives. There
have been no further charges in relation to these initiatives in the current
year.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
12 Discontinued operations and assets and liabilities classified as held for sale
(continued)
During the year, the group decided to sell parts or all of its Battery
Materials business. As at 31(st) March 2022, the proceeds less costs to sell
for the Battery Materials business was estimated to be £50 million and so an
impairment of £325 million has been recognised, see note 5. The business is
classified as a disposal group held for sale.
The major classes of assets and liabilities comprising the businesses
classified as held for sale as at 31(st) March 2022 are:
Battery
Health Materials Total
£ million £ million £ million
Non-current assets
Property, plant and equipment 107 39 146
Right-of-use assets 1 1 2
Other Intangible Assets 41 11 52
Current assets
Inventories 137 1 138
Current tax assets 1 - 1
Trade and other receivables 59 4 63
Assets classified as held for sale 346 56 402
Current liabilities
Trade and other payables (60) - (60)
Lease liabilities (1) (1) (2)
Cash and cash equivalents - bank overdrafts (8) - (8)
Provisions (2) - (2)
Non-current liabilities
Lease liabilities (2) (5) (7)
Provisions (1) - (1)
Liabilities classified as held for sale (74) (6) (80)
Net assets of disposal group 272 50 322
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
13 Disposals
Advanced Glass Technologies
On 31(st) January 2022, the group completed the sale of its Advanced Glass
Technologies business for a cash consideration of £173 million. The business
was disclosed as a disposal group held for sale as at 30(th) September 2021.
Advanced
Glass
Technologies
£ million
Proceeds
Cash consideration 173
Cash and cash equivalents disposed (3)
Net cash consideration 170
Disposal costs paid (10)
Cash inflow per cash flow statement 160
Assets and liabilities disposed
Non-current assets
Property, plant and equipment 11
Right-of-use assets 2
Goodwill 2
Current assets
Inventories 17
Trade and other receivables 14
Cash and cash equivalents - cash and deposits 3
Current liabilities
Trade and other payables (10)
Net assets disposed 39
The profit on disposal of businesses totalled £106 million
Advanced
Glass
Technologies
£ million
Net cash consideration 173
(39)
Less: carrying amount of net assets sold (39)
Less: disposal costs (10)
Cumulative currency translation gain recycled from other comprehensive income (18)
Profit recognised in the income statement 106
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
14 Post-employment benefits
Background
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.
Financial assumptions
2022 2022 2022 2021 2021 2021
UK plan US plans Other plans UK plan US plans Other plans
% % % % % %
First year's rate of increase in salaries 3.85 3.00 2.20 3.40 3.00 2.06
Ultimate rate of increase in salaries 3.85 3.00 2.20 3.40 3.00 2.06
Rate of increase in pensions in payment 3.20 - 2.11 3.05 - 1.70
Discount rate 2.80 3.70 2.13 2.10 3.00 1.53
Inflation - 2.20 2.15 - 2.20 1.64
- UK Retail Prices Index (RPI) 3.60 - - 3.20 - -
- UK Consumer Prices Index (CPI) 3.10 - - 2.65 - -
Financial information
Movements in the net post-employment benefit assets and liabilities, including
reimbursement rights, were:
UK post- US post-
UK pension - UK pension - retirement retirement
legacy cash balance medical US medical
section section benefits pensions benefits Other Total
£ million £ million £ million £ million £ million £ million £ million
At 1(st) April 2021 186 (6) (8) (20) (25) (27) 100
Current service cost - in operating profit (8) (26) - (9) (1) (1) (45)
Past service credit - in operating profit - - - - 11 - 11
Administrative expenses - in operating profit (2) - - (1) - - (3)
Interest 4 (1) - - (1) - 2
Remeasurements 162 (7) (1) 21 2 - 177
Company contributions 9 22 - 9 1 1 42
Exchange - - - (2) - 1 (1)
At 31(st) March 2022 351 (18) (9) (2) (13) (26) 283
The remeasurement gain due to changes in financial assumptions in the legacy
section of the UK pension plan during the year ended 31(st) March 2022 mainly
reflects an increase in the net (after inflation) discount rate.
The post-employment benefit assets and liabilities are included in the balance
sheet as follows:
2022 2022 2022 2021 2021 2021
Post- Post-
employment Employee employment Employee
benefit benefit net benefit benefit net
net assets obligations Total net assets obligations Total
£ million £ million £ million £ million £ million £ million
UK pension - legacy section 351 - 351 186 - 186
UK pension - cash balance section - (18) (18) - (6) (6)
UK post-retirement medical benefits - (9) (9) - (8) (8)
US pensions - (2) (2) - (20) (20)
US post-retirement medical benefits - (13) (13) 6 (31) (25)
Other 1 (27) (26) 2 (29) (27)
Total post-employment plans 352 (69) 283 194 (94) 100
Other long-term employee benefits (3) (4)
Total long-term employee benefit obligations (72) (98)
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
15 Fair values
Fair value hierarchy
Fair values are measured using a hierarchy where the inputs are:
· Level 1 ─ quoted prices in active markets for identical assets or
liabilities.
· Level 2 ─ not level 1 but are observable for that asset or
liability either directly or indirectly.
· Level 3 ─ not based on observable market data (unobservable).
Fair value of financial instruments
Certain of the group's financial instruments are held at fair value. The fair
value of a financial instrument is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the balance sheet date.
The fair value of forward foreign exchange contracts, interest rate swaps,
forward precious metal price contracts and currency swaps is estimated by
discounting the future contractual cash flows using forward exchange rates,
interest rates and prices at the balance sheet date.
The fair value of trade and other receivables measured at fair value is the
face value of the receivable less the estimated costs of converting the
receivable into cash.
The fair value of money market funds is calculated by multiplying the net
asset value per share by the investment held at the balance sheet date.
There were no transfers of any financial instrument between the levels of the
fair value hierarchy during the current or prior years.
Notes on the Preliminary Accounts
for the year ended 31st March 2022
15 Fair values (continued)
2022 2021 Fair value
hierarchy
£ million £ million Level
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive income(1) 45 53 1
Interest rate swaps - assets 11 20 2
Interest rate swaps - liabilities (2) - 2
Borrowings and related swaps (2) (3) 2
Other financial liabilities(2) (12) - 2
Current
Trade receivables(3) 492 423 2
Other receivables(4) 44 58 2
Cash and cash equivalents - money market funds 137 462 2
Other financial assets(2) 27 44 2
Interest rate swaps 1 - 2
Other financial liabilities(2) (44) (18) 2
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps (897) (1,249) -
Lease liabilities (40) (51) -
Current
Amounts receivable under precious metal sale and repurchase agreements 114 308 -
Amounts payable under precious metal sale and repurchase agreements (793) (1,442) -
Cash and cash equivalents - cash and deposits 254 119 -
Cash and cash equivalents - bank overdrafts (37) (36) -
Borrowings and related swaps (265) (26) -
Lease liabilities (10) (11) -
(1) Investments at fair value through other comprehensive income are quoted
bonds purchased to fund pension deficit.
(2) Includes forward foreign exchange contracts, forward precious metal price
contracts and currency swaps.
(3) Trade receivables held in a part of the group with a business model to
hold trade receivables for collection or sale. The remainder of the group
operates a hold to collect business model and receives the face value, plus
relevant interest, of its trade receivables from the counterparty without
otherwise exchanging or disposing of such instruments.
(4) Other receivables with cash flows that do not represent solely the payment
of principal and interest.
The fair values are calculated using level 2 inputs by discounting future cash
flows to net present values using appropriate market interest rates prevailing
at the year end.
The fair value of financial instruments, excluding accrued interest, is
approximately equal to book value except for:
2022 2021
Carrying Fair Carrying Fair
amount value amount value
£ million £ million £ million £ million
US Dollar Bonds 2022, 2023, 2025, 2027, 2028 and 2030 (688) (662) (662) (689)
Euro Bonds 2023, 2025, 2028 and 2030 (176) (179) (186) (193)
Sterling Bonds 2024 and 2025 (110) (107) (110) (116)
KfW US Dollar loan 2024 (38) (36) (36) (39)
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
16 Precious metal leases
The group leases precious metals to fund temporary peaks in metal requirements
provided market conditions allow. These leases are from banks for specified
periods (less than 12 months) and the group pays a fee which is expensed on a
straight-line basis over the lease term in finance costs. The group holds
sufficient precious metal inventories to meet all the obligations under these
lease arrangements as they fall due. At 31(st) March 2022, precious metal
leases were £140 million at closing prices (31(st) March 2021: £437
million).
17 Contingent liabilities
The group is involved in various disputes and claims which arise from time to
time in the course of its business including, for example, in relation to
commercial matters, product quality or liability, employee matters and tax
audits. The group is also involved from time to time in the course of its
business in legal proceedings and actions, engagement with regulatory
authorities and in dispute resolution processes. These are reviewed on a
regular basis and, where possible, an estimate is made of the potential
financial impact on the group. In appropriate cases a provision is recognised
based on advice, best estimates and management judgement. Where it is too
early to determine the likely outcome of these matters, no provision is made.
Whilst the group cannot predict the outcome of any current or future such
matters with any certainty, it currently believes the likelihood of any
material liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its consolidated income, financial position
or cash flows.
As previously disclosed, the group has been informed by a customer of failures
in certain engine systems for which the group supplied a particular coated
substrate as a component for that customer's emissions after-treatment
systems. The reported failures have not been demonstrated to be due to the
coated substrate supplied by the group. The group has not been contacted by
any regulatory authority about these engine system failures. Having reviewed
its contractual obligations and the information currently available to it, the
group believes it has defensible warranty positions in respect of this
matter. If required, it will vigorously assert its available contractual
protections and defences. The outcome of any discussions relating to this
matter is not certain, nor is the group able to make a reliable estimate of
the possible financial impact at this stage, if any.
The group works with all its customers to ensure appropriate product quality
and we have not received claims in respect of our emissions after-treatment
components from this or any other customer. Our vision is for a world that's
cleaner and healthier; today and for future generations. We are committed to
enabling improving air quality and we work constructively with our customers
to achieve this.
18 Transactions with related parties
No related party transactions have taken place which have materially affected
the financial position or performance of the group during the year.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
19 Non-GAAP measures
The group uses various measures to manage its business which are not defined
by generally accepted accounting principles (GAAP). The group's management
believes these measures provide valuable additional information to users of
the accounts in understanding the group's performance. Certain of these
measures are financial Key Performance Indicators which measure progress
against our strategy.
All non-GAAP measures are on a continuing operations basis.
Definitions
-
Measure Definition Purpose
Sales(1) Revenue excluding sales of precious metals to customers and the precious metal Provides a better measure of the growth of the group as revenue can be heavily
content of products sold to customers. distorted by year-on-year fluctuations in the market prices of precious metals
and, in many cases, the value of precious metals is passed directly on to
customers.
Underlying operating profit(2) Operating profit excluding non-underlying items. Provides a measure of operating profitability that is comparable over time.
Underlying operating profit margin(1, 2) Underlying operating profit divided by sales. Provides a measure of how we convert our sales into underlying operating
profit and the efficiency of our business.
Underlying profit before tax(2) Profit before tax excluding non-underlying items. Provides a measure of profitability that is comparable over time.
Underlying profit for the year(2) Profit for the year excluding non-underlying items and related tax effects. Provides a measure of profitability that is comparable over time.
Underlying earnings per share(1, 2) Underlying profit for the year divided by the weighted average number of Our principal measure used to assess the overall profitability of the group.
shares in issue.
Return on invested capital (ROIC)(1) Annualised underlying operating profit divided by the 12 month average equity, Provides a measure of the group's efficiency in allocating the capital under
excluding post tax pension net assets, plus average net debt for the same its control to profitable investments.
period.
Average working capital days (excluding precious metals)(1) Monthly average of non-precious metal related inventories, trade and other Provides a measure of efficiency in the business with lower days driving
receivables and trade and other payables (including any classified as held for higher returns and a healthier liquidity position for the group.
sale) divided by sales for the last three months multiplied by 90 days.
Free cash flow Net cash flow from operating activities after net interest paid, net purchases Provides a measure of the cash the group generates through its operations,
of non-current assets and investments, dividends received from joint ventures less capital expenditure.
and associates and the principal element of lease payments.
Net debt (including post tax pension deficits) to underlying EBITDA Net debt, including post tax pension deficits and quoted bonds purchased to Provides a measure of the group's ability to repay its debt. The group has a
fund the UK pension (excluded when the UK pension plan is in surplus) divided long-term target of net debt (including post tax pension deficits) to
by underlying EBITDA for the same period. underlying EBITDA of between 1.5 and 2.0 times, although in any given year it
may fall outside this range depending on future plans.
(1) Key Performance Indicator
(2) Underlying profit measures are before profit or loss on disposal of
businesses, gain or loss on significant legal proceedings, together with
associated legal costs, amortisation of acquired intangibles, major impairment
and restructuring charges and, where relevant, related tax effects. These
items have been excluded by management as they are not deemed to be relevant
to an understanding of the underlying performance of the business.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
19 Non-GAAP measures (continued)
Reconciliations to GAAP measures
Sales
See note 2.
Underlying profit measures
Year ended 31(st) March 2022
Operating profit Profit before tax Tax expense Profit for the year
£ million £ million £ million £ million
Underlying 553 493 (86) 407
Profit on disposal of businesses 106 106 (4) 102
Gains and losses on significant legal proceedings 42 42 (6) 36
Amortisation of acquired intangibles (6) (6) 1 (5)
Major impairment and restructuring charges(1) (440) (440) 16 (424)
Reported 255 195 (79) 116
(1) The major impairments and restructuring charges result in a tax credit in
the UK and US but not in other territories. The tax credit on these
impairments have been offset by a tax provision for tax risk relating to
historic transactions.
Year ended 31(st) March 2021*
Operating profit Profit before tax Tax expense Profit for the year
£ million £ million £ million £ million
Underlying 473 388 (62) 326
Amortisation of acquired intangibles (10) (10) 2 (8)
Major impairment and restructuring charges (154) (154) 30 (124)
Reported 309 224 (30) 194
Underlying earnings per share
2022 2021*
Underlying profit for the year (£ million) 407 326
Weighted average number of shares in issue (millions) 191.6 192.7
Underlying earnings per share (pence) 213.2 168.9
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
19 Non-GAAP measures (continued)
Return on invested capital (ROIC)
2022 2021
£ million £ million*
Underlying operating profit 553 473
Average net debt 877 1,291
Average equity 2,467 2,481
Average capital employed 3,344 3,772
Less: Average pension net assets (221) (261)
Less: Average related deferred taxation 48 47
Average capital employed (excluding post tax pension net assets) 3,171 3,558
ROIC (excluding post tax pension net assets) 17.4% 13.3%
ROIC 16.5% 12.5%
Average working capital days (excluding precious metals)
2022 2021
£ million £ million*
Inventories 1,549 1,814
Trade and other receivables 1,796 2,422
Trade and other payables (2,563) (3,325)
782 911
Working capital balances relating to discontinued operations - (152)
Total working capital 782 759
Less: Precious metal working capital (562) (552)
Add: Precious metal working capital relating to discontinued operations - 21
Working capital (excluding precious metals) 220 228
Average working capital days (excluding precious metals) 36 45
Free cash flow from continuing operations
2022 2021
£ million £ million*
Net cash inflow from operating activities 605 769
Interest received 32 66
Interest paid (111) (159)
Purchases of property, plant and equipment (358) (304)
Purchases of intangible assets (95) (77)
Net proceeds from sale of businesses 160 19
Proceeds from sale of non-current assets 1 5
Principal element of lease payments (14) (14)
Less: Free cash outflow / (inflow) from discontinued operations 1 (10)
Free cash flow 221 295
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
19 Non-GAAP measures (continued)
Net debt (including post tax pension deficits) to underlying EBITDA
2022 2021
£ million £ million*
Cash and deposits 254 119
Money market funds 137 462
Bank overdrafts (37) (36)
Cash and deposits transferred to assets classified as held for sale (8) -
Cash and cash equivalents 346 545
Less: Cash and cash equivalents - bank overdrafts from discontinued operations 8 4
Cash and cash equivalents from continuing operations 354 549
Interest rate swaps - current assets 1 -
Interest rate swaps - non-current assets 11 20
Interest rate swaps - non-current liabilities (2) -
Borrowings and related swaps - current (265) (26)
Borrowings and related swaps - non-current (899) (1,252)
Lease liabilities - current (10) (11)
Lease liabilities - non-current (40) (51)
Lease liabilities - current - transferred to liabilities classified as held (2) -
for sale
Lease liabilities - non-current - transferred to liabilities classified as (7) -
held for sale
Less: Lease liabilities relating to discontinued operations 3 1
Net debt (856) (770)
(Decrease) / increase in cash and cash equivalents (205) 276
Less: Decrease / (increase) in cash and cash equivalents from discontinued 3 (2)
operations
Less: Decrease / (increase) in borrowings 131 (70)
Less: Principal element of lease payments 14 14
Less: Principal element of lease payments from discontinued operations (1) (1)
Increase in net debt resulting from cash flows (58) 217
New leases, remeasurements and modifications (9) (3)
Less: New leases, remeasurements and modifications from discontinued 3 -
operations
Other lease movements - 1
Exchange differences on net debt (24) 107
Other non-cash movements 2 (6)
Movement in net debt (86) 316
Net debt at beginning of year (770) (1,086)
Net debt at end of year (856) (770)
Net debt (856) (770)
Add: Pension deficits (29) (49)
Add: Related deferred tax 4 9
Net debt (including post tax pension deficits) (881) (810)
Underlying operating profit 553 473
Add back: Depreciation and amortisation excluding amortisation of acquired 171 160
intangibles
Underlying EBITDA 724 633
Net debt (including post tax pension deficits) to underlying EBITDA 1.2 1.3
At 31(st) March 2022 cash and cash equivalents includes £111 million (31(st)
March 2021: £nil) of restricted amounts relating to cash held in South
Africa. The cash has been restricted as a result of a change in company
residency status. The group anticipates extracting and/or utilising this in
the near term and is reviewing options.
Underlying EBITDA 724 633
Depreciation and amortisation (177) (170)
Gains and losses on significant legal proceedings 42 -
Major impairment and restructuring charges (440) (154)
Profit on disposal of businesses 106 -
Finance costs (101) (158)
Finance income 41 73
Income tax expense (79) (30)
Profit for the year 116 194
* Restated to reflect classification of the Health segment as discontinued
operations (see note 12).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2022
20 Events after the balance sheet date
On 25(th) May 2022, the group announced an agreement to enter into a €20
million minority investment in Enapter AG.
On 25(th) May 2022, the group agreed to sell parts of the Battery Materials
business to EV Metals Group plc and Nano One Materials Corp.
Financial Calendar
2022
9(th) June
Ex dividend date
10(th) June
Final dividend record date
21(st) July
131(st) Annual General Meeting (AGM)
2(nd) August
Payment of final dividend subject to the approval of shareholders at the AGM
23(rd) November
Announcement of the results for the six months ending 30(th) September 2022
Cautionary Statement
This announcement contains forward-looking statements that are subject to risk
factors associated with, amongst other things, the economic and business
circumstances occurring from time to time in the countries and sectors in
which Johnson Matthey operates. It is believed that the expectations
reflected in this announcement are reasonable but they may be affected by a
wide range of variables which could cause actual results to differ materially
from those currently anticipated.
Johnson Matthey Plc
Registered Office: 5(th) Floor, 25 Farringdon Street, London EC4A 4AB
Telephone: +44 (0) 20 7269 8000
Fax: +44 (0) 20 7269 8433
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 00033774
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: 0371 384 2344 (in the UK) *
+44 (0) 121 415 7047 (outside the UK)
Internet address: www.shareview.co.uk
* Lines are open 9.00am to 5.00pm Monday to Friday excluding public holidays
in England and Wales
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