REG - Johnson Matthey PLC - Johnson Matthey half year results 30th Sept 2021
24/11/2021 07:00
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RNS Number : 3398T Johnson Matthey PLC 24 November 2021
Half year results for the six months ended
30(th) September 2021
24(th) November 2021
Resilient performance in the first half
Underlying performance¹(,)²
· Sales of £1.9 billion, up 21%, driven by a strong recovery in Clean Air and
Efficient Natural Resources
· Underlying operating profit of £293 million, up 102% and ahead of
pre-pandemic levels, driven by strong sales growth and higher average precious
metal prices
· Underlying EPS of 114.8 pence, up materially reflecting higher underlying
operating profit and lower net finance costs
· Free cash flow of £189 million, benefiting from continued strong management
of working capital (1H 2020/21: £256 million)
· Strong balance sheet with net debt of c.£700 million as lower auto demand
benefited working capital; net debt to EBITDA of 0.9 times
· Return on invested capital (ROIC) of 17.7%, up from 10.4% in the prior year
driven by higher underlying operating profit
Reported results
· Revenue increased 23% primarily driven by higher average precious metal prices
· Following the announcement of our intention to exit Battery Materials, the
assets have been impaired by £314 million
· Operating profit of £20 million, reflecting the one-off impairment in Battery
Materials
· Loss before tax of £9 million, driven by lower operating profit
· Reported loss per share of 14.8 pence
· Cash inflow from operating activities of £412 million (1H 2020/21: £482
million)
· Interim dividend of 22.0 pence per share, up 10%
· Share buyback of £200 million, beginning in the New Year
Reported results Underlying results¹
Half year ended 30(th) September % change Half year ended 30(th) September % change % change, constant rates
2021 2020 2021 2020
Revenue £ million 8,586 6,979 +23
Sales excluding £ million 1,938 1,679 +15 +21
precious metals³
Operating profit £ million 20 68 -71 293 151 +94 +102
(Loss) / profit before tax £ million (9) 26 n/a 264 109 +142
(Loss) / earnings per share pence (14.8) 12.3 n/a 114.8 47.7 +141
Interim dividend pence 22.0 20.0 +10
per share
Key developments
· A resilient trading performance, with strong sales growth driven by a recovery
in Clean Air and Efficient Natural Resources
· Portfolio changes - agreed the sale of Advanced Glass Technologies for £178
million, and in discussions about a potential sale of Health
· Announced intention to exit Battery Materials
· Good momentum across our hydrogen businesses of Fuel Cells and Green Hydrogen
· New five-year framework contract with EKPO (ElringKlinger Plastic Omnium JV)
to supply fuel cell components into commercial vehicle applications
· Following the completion of our hydrogen technologies capacity expansion in
the UK and China, planning further expansion across these regions
· Increasing pipeline of opportunities in blue hydrogen - now over 20 projects -
including HyNet which continues to move towards commercialisation in 2025
· In Clean Air, on track for strong cash generation in 2021/22
· Delivered £42 million of cost savings, from our total programme of £110
million per annum by 2023/24
Robert MacLeod, Chief Executive, commented:
We delivered a resilient trading performance in what has been a challenging
environment, given the supply chain volatility which has affected a number of
our end markets.
Looking forward, the changing world around us means that Johnson Matthey has
never been more relevant. Our metal expertise and process technologies are
critical to many new markets focused on climate change solutions and give us a
strong competitive advantage. We have strong foundations in Clean Air and in
Efficient Natural Resources and exciting opportunities to drive our future
growth in circularity, hydrogen and decarbonisation.
To ensure we are focusing our resources on these core growth opportunities we
have taken some strategic decisions around our portfolio. In particular, we
announced our intention to exit Battery Materials as we concluded that this
business would not generate adequate returns for us. In addition, today we are
announcing that we have agreed the sale of Advanced Glass Technologies and are
in discussions about the potential sale of our Health business.
After eight years in the role, I will be stepping down as Chief Executive,
with Liam Condon joining as my successor from 1(st) March 2022 and I wish him
well in leading Johnson Matthey through the next stage of its evolution.
Outlook for the year ending 31st March 2022
Our expectations on guidance for the year ending 31(st) March 2022 are
unchanged from our trading update on 11(th) November.
Demand remains strong in many of our end markets. However, supply chain
volatility especially the shortage of semi-conductors is affecting production
for a number of our auto and truck customers. Global auto production is now
forecast to decline 5% for our fiscal year which is a 14% reduction since our
trading update in July⁴. Consequently, precious metal prices have also
declined, largely because of the lower demand from the automotive industry. We
are also experiencing acute temporary labour shortages in the US that are
adversely impacting our Health business.
For 2021/22 we expect growth in underlying operating performance to be low
single digit at constant precious metals prices⁵ and constant currency.
If precious metals prices remain at their current level⁶ for the rest of
this year, we would expect a full year net benefit of c.£45 million.
At current foreign exchange rates⁷, translational foreign exchange movements
for the year ending 31(st) March 2022 are expected to adversely impact
underlying operating profit by
c.£15 million.
Our capital expenditure is now expected to be c.£450 million for the year⁸
given our intended exit from Battery Materials.
Dividend and share buyback
The board approved an interim dividend of 22.0 pence per share, an increase of
10% against the prior year (1H 2020/21: 20.0 pence per share). The interim
dividend will be paid on 1(st) February 2022 to shareholders on the register
at 3(rd) December 2021.
The board has also approved a share buyback of £200 million that will
commence in the New Year.
Chief Executive Announcement
As previously announced, Robert MacLeod will step down as Chief Executive and
from the board on 28(th) February 2022. Robert will stay on to support the
transition process until the Company's Annual General Meeting on 21(st) July
2022, when he will then retire from JM. Liam Condon will succeed Robert
MacLeod, joining as Chief Executive on 1(st) March 2022.
Group Management Committee Change
Joan Braca, Chief Executive Clean Air, has decided to leave Johnson Matthey.
Joan's last day will be on 31(st) December 2021.
Enquiries:
Investor Relations
Martin Dunwoodie Director of Investor Relations +44 20 7269 8241
Louise Curran Senior Investor Relations Manager +44 20 7269 8235
Jane Crosby Investor Relations Manager +44 20 7269 8242
Media
Barney Wyld Group Corporate Affairs Director +44 20 7269 8001
Harry Cameron Tulchan Communications +44 7799 152148
Notes:
1. 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 46 to 50.
2. 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 1H 2021/22, the translational impact of
exchange rates on group sales and underlying operating profit was negative
c.£71 million and c.£6 million respectively.
3. Revenue excluding sales of precious metals to customers and the precious metal
content of products sold to customers.
4. As forecast by external consultants - IHS (October 2021).
5. Based on actual precious metal prices in 2020/21.
6. Based on current precious metal prices as at 22(nd) November 2021.
7. Based on foreign exchange rates as at 22(nd) November 2021.
8. Our previous guidance was for capital expenditure of up to £600 million for
the year, which included our investment in Battery Materials.
Sustainable solutions as we create a cleaner, healthier world
Our vision is for a cleaner, healthier world, and we have an exciting
opportunity to apply our deep expertise in complex metal chemistry to develop
technologies which enable the four essential transitions the world needs for a
sustainable future: transport, energy, decarbonisation of industry and the
creation of a circular economy.
We have set out our own sustainability goals (see page 7) but the real
difference we make to society is in the products and technology we supply to
our customers - not just today but in the new technologies of tomorrow.
In Clean Air, we continue to play a vital role in reducing harmful emissions
generated by internal combustion engines, and in Efficient Natural Resources
our technology and leading segment positions give us a strong base from which
to pivot into new areas - helping our customers decarbonise their chemical
value chains and create a circular economy through recycling scarce critical
materials. These businesses provide the group with a strong foundation,
underpinned by our core science.
Focusing capital on climate change solutions
At our heart is complex metal chemistry, particularly pgm and nickel metal
expertise, which is used across the group. It has been developed over decades,
is hard to replicate and critical to many of the new technologies which
address climate change. We are focusing capital allocation on high growth,
high return opportunities that leverage our core competencies.
1. PGM Services (circularity solutions) - in Efficient Natural Resources
2. Hydrogen Technologies (fuel cells and green hydrogen) - in New Markets
3. Catalyst Technologies (decarbonisation of chemicals) - in Efficient Natural
Resources
These opportunities are underpinned by our strong balance sheet and sustained
cash generation from Clean Air.
Clean Air on track to deliver at least £4 billion of cash over the coming ten
years
Clean Air continues to play a vital role in reducing harmful emissions
generated by internal combustion engines. As the powertrain evolves, Clean Air
is undergoing a major transformation programme to drive greater efficiency and
reduce costs. Our new simplified operating model is now in place and
performing well, and we continue to execute footprint changes with the
transfer of production away from less efficient sites into our newer plants.
This includes the closure of our plant in the UK over the next two years. We
remain confident that our strategy will deliver cash generation of at least
£4 billion over the coming ten years(1).
1. PGM Services: creating a circular economy and underpinning the group
Platinum group metals (pgms) and other scarce metals are critical to many low
carbon technologies such as hydrogen powered fuel cell vehicles and green
hydrogen electrolysers. Recycling these metals will be crucial in providing
low carbon routes to manufacture. The carbon intensity of recycled platinum
group metals is c.2%(2) that of mined metals. It is also a competitive
advantage to be able to offer our customers recycling solutions in conjunction
with our fuel cell and green hydrogen offerings as well as security of supply
for these scarce metals. We are already the world leader in pgm recycling,
twice the size of the next nearest player. This position and skillset gives us
a strong foundation to capture more value over time from our existing
recycling capabilities and expand our offering to develop new technologies
which will enable the circular economy and help our customers meet their
sustainability goals.
Notes:
1. At least £4 billion over the coming ten years from 1(st) April 2021.
2. Source: IPA.
2. Hydrogen Technologies: a new business to accelerate growth
Hydrogen - as a fuel source and energy carrier - has a huge role to play in
reaching net zero, and the move to hydrogen is accelerating, with the number
of large-scale hydrogen projects announced almost doubling since January
2021³.
We already have an established hydrogen business. We are well positioned to
enable both the decarbonisation of transport through our hydrogen fuel cell
technology and also energy through our hydrogen production technologies.
Our competitive advantage is founded on our core capabilities in pgm
catalysis, electrochemistry and surface chemistry. This enables us to produce
high performance components for fuel cells and green hydrogen electrolysers.
We are positioned across the value chain, which includes manufacture of
catalysts, membranes, catalyst coated membranes (CCM) and membrane electrode
assemblies (MEA), enabling us to optimise to our customers' needs. Our
customers also value the security of supply and the potential to offer
recycling solutions and reduce their carbon footprint.
We created a new business - Hydrogen Technologies - which combines our Fuel
Cells and Green Hydrogen businesses, accelerating our growth and scale-up in
both markets. We are expanding our Hydrogen Technologies manufacturing
capacity and, following the completion of our expansion last year, we now have
2GW capacity in the UK and China. We are planning further expansion in these
regions to ensure we are able to meet growing demand.
Fuel Cells
We have been a leader in fuel cells and active for well over two decades, with
our technology used as far back as the US Apollo moon landings. Our success is
based on our pgm expertise, with these metals critical to producing efficient,
high performance fuel cell components.
We have a track record of success, supplying components (CCMs and MEAs) which
sit at the heart of the fuel cell stack. We have good relationships with many
leading fuel cell system integrators and OEMs, and already supply Doosan, SFC
Energy, REFIRE/Unilia and SinoHytech/Sino Fuel Cell. In addition, we signed a
development and long-term supply agreement commencing in 2022 with a major
German automotive supplier for the supply of next generation catalyst coated
membranes into the global automotive market.
We continue to make good progress with customers. We recently signed a new
five-year framework contract with EKPO Fuel Cell Technologies (a joint venture
between ElringKlinger AG and Compagnie Plastic Omnium SE) - a tier one stack
manufacturer - to supply CCMs into the global commercial vehicle market. Our
customer pipeline includes more than 10 major truck and auto OEM platforms,
for which we will supply fuel cell components, due to launch between c.2022 to
2025.
Green Hydrogen
Our Green Hydrogen business is based on the same CCM technology, pgm expertise
and recycling capability as Fuel Cells. Given the commonality of technology,
Fuel Cells and Green Hydrogen use the same manufacturing capacity and share
expertise in developing key components, such as catalysts and CCMs. The
strength of our existing position in Fuel Cells has enabled us to create this
business in 18 months.
We are making good progress and expect our first commercial sales in 2022. We
are testing with leading electrolyser manufacturers and in May 2021 we signed
a memorandum of understanding (MoU) with Plug Power and more recently, with
Hystar to develop key components for electrolysers. Hystar is a newly
established Norwegian company, a high-tech spin-out from SINTEF, one of
Europe's largest independent research institutions.
Notes:
3. Large-scale projects defined as projects larger than 1MW or equivalent.
Hydrogen Council, McKinsey & Company
3. Catalyst Technologies: decarbonising chemicals and fuels
In Catalyst Technologies we are focused on the decarbonisation of chemical
value chains. We are a well-established and leading provider of process
technology and catalysts to the chemicals and energy sectors, notably within
syngas which today is at the heart of many chemical value chains and used to
manufacture a range of consumer products. Our process technology enables
customers to decarbonise by re-engineering their processes to use sustainable
feedstocks such as surplus carbon dioxide, biomass and renewable energy to
create sustainable fuels and chemicals. This is an opportunity that offers
structural growth as our customers focus on how they will decarbonise. Over
the medium term we expect high single digit growth in this business which
reflects growth in our existing markets, together with new technologies that
will help the world decarbonise and move towards net zero. Our growth areas
include:
· Blue hydrogen: We are seeing increasing interest from customers around the
world. Our technology has been selected as part of the UK's HyNet project, one
of the world's most progressed blue hydrogen projects, which continues to move
towards commercialisation. HyNet was recently named as a Track 1 cluster by
the UK government, which means that this project will begin decarbonising
industry from 2025. We are working on a global pipeline of opportunities which
is growing and now totals over 20 projects.
· Sustainable fuels and chemicals: This comprises a range of technologies which
enable the production of fuels and chemicals from sustainable sources of
hydrogen and carbon, replacing fossil fuel feedstocks. This plays to our
strengths in syngas technology where we are one of the world's leading
players.
We are making progress in this nascent market and recently supplied and
supported the loading of the first catalyst for Fulcrum, for the production of
sustainable aviation fuels. Also in this space, we recently signed an
engineering agreement with Repsol and Aramco to enable the conversion of
renewable energy to liquid fuels. In addition, our methanol technology was
selected for the Haru Oni project in Chile, where we will also supply the
catalyst, engineering and equipment. The JM designed unit will take
atmospheric carbon dioxide as a feedstock for conversion to e-methanol to
power gasoline vehicles. In the sustainable fuels and chemicals area, we are
working on a pipeline of c.20 projects.
· Low carbon solutions: We have a strong position at the heart of many chemical
value chains and our customers need to decarbonise their existing processes.
There is a large installed base that utilises our existing technology that
needs to be decarbonised, and for which we can offer low carbon solutions.
Capital allocation
We have a disciplined capital allocation framework. Our approach is designed
to invest capital with a balance of appropriate shareholder return and risk,
whilst maintaining a strong balance sheet given the working capital
requirements of our metal refining businesses. We will target investment
opportunities that will deliver superior returns. Where we have excess cash
beyond our investment requirements, we will return that to shareholders.
Our forecast year end net debt position shows gearing returning towards our
target level of net debt to EBITDA of 1.5-2.0 times, excluding the benefit of
the proceeds from the sale of Advanced Glass Technologies (AGT). Consequently
we will return excess capital (including proceeds from the sale of AGT) to
shareholders in the form of a share buyback of £200 million beginning in the
New Year.
Intention to exit Battery Materials
As announced on 11(th) November, following a detailed review and ahead of
reaching a number of critical investment milestones, we have concluded that
the potential returns from our Battery Materials business will not be adequate
to justify further investment. The board has therefore decided to pursue the
sale of all or parts of this business with the ultimate intention of exiting.
We will move swiftly to determine the best outcome for all of our stakeholders
and intend to make a further announcement as soon as possible.
Given the uncertainty of the outcome of this sales process, we have taken a
prudent position and fully impaired the carrying value of our Battery
Materials assets as at
30(th) September 2021, resulting in a charge of £314 million.
In the month of October, we reduced expenditure but still incurred an
additional c.£26 million capex. Following the announcement of our intention
to exit on 11(th) November, we took action to reduce further expenditure.
Portfolio changes
As we focus the group towards our core growth areas, we take an active
approach to capital allocation and will continue to review our portfolio to
focus on the areas of greatest opportunity with returns that are attractive to
shareholders.
1. Strategic review of Health
We are in discussions about a potential sale and we will provide an update on
its conclusion in due course.
2. Sale of Advanced Glass Technologies
We have agreed the disposal of Advanced Glass Technologies - reported in Other
Markets (Value Businesses) - to Fenzi S.p.A for £178 million, with completion
expected in the second half. AGT sales were £66 million in the year ended
31(st) March 2021.
Sustainability of our own operations
We have developed a sustainability framework and targets which focus on
current and future technologies fundamental to addressing climate change.
We recently announced our goal to be net zero by 2040 as well as new,
ambitious sustainability targets for 2030. Details of our goals and targets
which are set out under three key pillars - Products and services, Operations,
People - can be found in our 2021 annual report. We are signed up to the UN
Global Compact's Business Ambition for 1.5°C and introduced science-based
targets which have recently been independently verified by the Science Based
Targets initiative (SBTi):
· Absolute reduction in Scope 1 and Scope 2 greenhouse gas emissions of at least
33% by 2030 (baseline 2019/20)⁴
· Absolute reduction of Scope 3 greenhouse gas emissions of at least 20% by 2030
(baseline 2019/20)⁴
We are increasingly being recognised by stakeholders for our efforts on
sustainability. Recently, we were awarded a Platinum rating by EcoVadis - a
leading provider of business sustainability ratings - which puts us in the top
1% of companies they assess.
To oversee our sustainability goals and process, we established a new board
committee - the Societal Value Committee - which met for the first time in May
2021 and established a Sustainability Council within the company to manage the
implementation of our strategy.
3. Catalyst Technologies: decarbonising chemicals and fuels
In Catalyst Technologies we are focused on the decarbonisation of chemical
value chains. We are a well-established and leading provider of process
technology and catalysts to the chemicals and energy sectors, notably within
syngas which today is at the heart of many chemical value chains and used to
manufacture a range of consumer products. Our process technology enables
customers to decarbonise by re-engineering their processes to use sustainable
feedstocks such as surplus carbon dioxide, biomass and renewable energy to
create sustainable fuels and chemicals. This is an opportunity that offers
structural growth as our customers focus on how they will decarbonise. Over
the medium term we expect high single digit growth in this business which
reflects growth in our existing markets, together with new technologies that
will help the world decarbonise and move towards net zero. Our growth areas
include:
·
Blue hydrogen: We are seeing increasing interest from customers around the
world. Our technology has been selected as part of the UK's HyNet project, one
of the world's most progressed blue hydrogen projects, which continues to move
towards commercialisation. HyNet was recently named as a Track 1 cluster by
the UK government, which means that this project will begin decarbonising
industry from 2025. We are working on a global pipeline of opportunities which
is growing and now totals over 20 projects.
·
Sustainable fuels and chemicals: This comprises a range of technologies which
enable the production of fuels and chemicals from sustainable sources of
hydrogen and carbon, replacing fossil fuel feedstocks. This plays to our
strengths in syngas technology where we are one of the world's leading
players.
We are making progress in this nascent market and recently supplied and
supported the loading of the first catalyst for Fulcrum, for the production of
sustainable aviation fuels. Also in this space, we recently signed an
engineering agreement with Repsol and Aramco to enable the conversion of
renewable energy to liquid fuels. In addition, our methanol technology was
selected for the Haru Oni project in Chile, where we will also supply the
catalyst, engineering and equipment. The JM designed unit will take
atmospheric carbon dioxide as a feedstock for conversion to e-methanol to
power gasoline vehicles. In the sustainable fuels and chemicals area, we are
working on a pipeline of c.20 projects.
·
Low carbon solutions: We have a strong position at the heart of many chemical
value chains and our customers need to decarbonise their existing processes.
There is a large installed base that utilises our existing technology that
needs to be decarbonised, and for which we can offer low carbon solutions.
Capital allocation
We have a disciplined capital allocation framework. Our approach is designed
to invest capital with a balance of appropriate shareholder return and risk,
whilst maintaining a strong balance sheet given the working capital
requirements of our metal refining businesses. We will target investment
opportunities that will deliver superior returns. Where we have excess cash
beyond our investment requirements, we will return that to shareholders.
Our forecast year end net debt position shows gearing returning towards our
target level of net debt to EBITDA of 1.5-2.0 times, excluding the benefit of
the proceeds from the sale of Advanced Glass Technologies (AGT). Consequently
we will return excess capital (including proceeds from the sale of AGT) to
shareholders in the form of a share buyback of £200 million beginning in the
New Year.
Intention to exit Battery Materials
As announced on 11(th) November, following a detailed review and ahead of
reaching a number of critical investment milestones, we have concluded that
the potential returns from our Battery Materials business will not be adequate
to justify further investment. The board has therefore decided to pursue the
sale of all or parts of this business with the ultimate intention of exiting.
We will move swiftly to determine the best outcome for all of our stakeholders
and intend to make a further announcement as soon as possible.
Given the uncertainty of the outcome of this sales process, we have taken a
prudent position and fully impaired the carrying value of our Battery
Materials assets as at
30(th) September 2021, resulting in a charge of £314 million.
In the month of October, we reduced expenditure but still incurred an
additional c.£26 million capex. Following the announcement of our intention
to exit on 11(th) November, we took action to reduce further expenditure.
Portfolio changes
As we focus the group towards our core growth areas, we take an active
approach to capital allocation and will continue to review our portfolio to
focus on the areas of greatest opportunity with returns that are attractive to
shareholders.
1.
Strategic review of Health
We are in discussions about a potential sale and we will provide an update on
its conclusion in due course.
2.
Sale of Advanced Glass Technologies
We have agreed the disposal of Advanced Glass Technologies - reported in Other
Markets (Value Businesses) - to Fenzi S.p.A for £178 million, with completion
expected in the second half. AGT sales were £66 million in the year ended
31(st) March 2021.
Sustainability of our own operations
We have developed a sustainability framework and targets which focus on
current and future technologies fundamental to addressing climate change.
We recently announced our goal to be net zero by 2040 as well as new,
ambitious sustainability targets for 2030. Details of our goals and targets
which are set out under three key pillars - Products and services, Operations,
People - can be found in our 2021 annual report. We are signed up to the UN
Global Compact's Business Ambition for 1.5°C and introduced science-based
targets which have recently been independently verified by the Science Based
Targets initiative (SBTi):
·
Absolute reduction in Scope 1 and Scope 2 greenhouse gas emissions of at least
33% by 2030 (baseline 2019/20)⁴
·
Absolute reduction of Scope 3 greenhouse gas emissions of at least 20% by 2030
(baseline 2019/20)⁴
We are increasingly being recognised by stakeholders for our efforts on
sustainability. Recently, we were awarded a Platinum rating by EcoVadis - a
leading provider of business sustainability ratings - which puts us in the top
1% of companies they assess.
To oversee our sustainability goals and process, we established a new board
committee - the Societal Value Committee - which met for the first time in May
2021 and established a Sustainability Council within the company to manage the
implementation of our strategy.
Notes:
4. Scope 1 covers direct greenhouse emissions from owned or controlled sources.
Scope 2 covers indirect emissions from the generation of purchased
electricity, steam, heating and cooling consumed by the reporting company.
Scope 3 includes purchased goods and services.
Summary of underlying operating results
Unless otherwise stated, commentary refers to performance at constant rates.
Percentage changes in the tables are calculated on rounded numbers
Sales Half year ended % change % change,
30(th) September
constant rates
(£ million)
2021 2020(1)
Clean Air 1,196 1,003 +19 +24
Efficient Natural Resources 523 411 +27 +33
Health 83 119 -30 -26
Other Markets 191 191 - +5
Eliminations (55) (45)
Sales 1,938 1,679 +15 +21
Underlying operating profit Half year ended % change % change,
(£ million)
30(th) September
constant rates
2021 2020(1)
Clean Air 150 77 +95 +103
Efficient Natural Resources 197 88 +124 +129
Health (4) 15 n/a n/a
Other Markets (11) (2) n/a n/a
Corporate (39) (27)
Underlying operating profit 293 151 +94 +102
Reconciliation of underlying operating profit to operating profit Half year ended
(£ million)
30(th) September
2021 2020
Underlying operating profit 293 151
Amortisation of acquired intangibles (3) (5)
Major impairment and restructuring charges(2) (314) (78)
Gain on significant legal proceedings(2) 44 -
Operating profit 20 68
(1 )Restated following change to reporting segments and removal of
inter-segment Copper Zeolites sales
(2) For further detail on these items please see page 18.
Operating results by sector
Clean Air
Clean Air recovered strongly
· Global sales were up 24% as we saw a strong performance across all regions,
despite the impact of OEM supply chain disruption caused principally by
shortages of semi-conductor chips
· Underlying operating profit increased 103%. Whilst margins increased
materially, driven by operational leverage and benefits from our
transformation programme, they were held back by the impact of chip shortages
· ROIC increased to 19.9% reflecting higher operating profit and the continued
good management of working capital
· On track for strong cash generation in 2021/22
Half year ended % change % change, constant rates
30(th) September
2021 2020
£ million £ million
Sales
Light duty diesel 498 420 +19 +22
Light duty gasoline 270 260 +4 +8
Heavy duty diesel 428 323 +33 +40
Total sales 1,196 1,003 +19 +24
Underlying operating profit 150 77 +95 +103
Margin 12.5% 7.7%
Return on invested capital (ROIC) 19.9% 11.4%
Reported operating profit 149 42
A strong recovery in demand, but seeing impact from 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.
Global sales increased 24%, reflecting a strong recovery in demand in Europe
and the Americas, against a prior period that was materially impacted by
temporary customer shutdowns due to the pandemic.
Market demand remains strong across all regions. However, there was supply
chain disruption across the industry principally due to the shortage of
semi-conductor chips. This affected our volumes in our first half, with a more
pronounced impact in our second quarter. Due to these shortages, we expect
continued volume constraints on production levels through the second half. We
are actively mitigating the impact through a combination of adjusting shift
patterns, optimising production across our manufacturing footprint and working
closely with customers to reduce the impact on our operations. To support our
long-term performance and cash generation, we have already secured some Euro 7
business and are actively bidding on further platforms to meet this
legislation.
Light duty catalysts - diesel and gasoline
Our light duty business provides catalysts for emission control
after-treatment systems used in cars and other light duty vehicles powered by
diesel and gasoline engines. Diesel accounts for c.65% of our light duty
business, which is mostly in Europe.
Light duty diesel
In light duty diesel, global sales were up 22%. In Europe, where we hold a
significant share of the light duty diesel market, sales growth was well ahead
of market production due to a favourable platform mix. In Asia, sales grew in
line with market production, and in the Americas, we saw strong sales growth
and outperformed the market due to a beneficial platform mix.
Light duty gasoline
Sales in light duty gasoline were up 8%, above global vehicle production in
aggregate due to a favourable platform mix. This outperformance was partially
offset by the loss of two platforms in the Americas and in Europe, in line
with our selective strategy.
Heavy duty diesel catalysts
In heavy duty diesel catalysts, we provide catalysts for emission control
after-treatment systems for trucks, buses and non-road equipment. Sales
recovered strongly, up 40% in the half, with growth in all regions.
In our Americas heavy duty business, where we hold a significant share of the
market, we saw strong sales growth in line with market production which is
benefiting from a cyclical recovery in the US Class 8 truck cycle. In Europe,
heavy duty sales growth outperformed market production and was driven by a
favourable platform mix. Heavy duty Asia sales grew very strongly in a market
that declined, as we benefited from increased market share and increased value
from tighter legislation in China.
Underlying operating profit
Underlying operating profit increased 103% and margin increased to 12.5%.
Whilst margins increased materially, driven by operational leverage and
benefits from our transformation programme, they were held back by the impact
of chip shortages.
Return on invested capital (ROIC)
ROIC increased by 8.5 percentage points to 19.9%, reflecting higher operating
profit and continued good management of working capital.
Efficient Natural Resources
Strong performance driven by PGM Services and a recovery in Catalyst
Technologies
· Sales grew 33% reflecting a strong performance in PGM Services benefiting from
volatile and higher average precious metal prices, and increased refinery
volumes. Catalyst Technologies grew well driven by higher refill catalysts,
principally ammonia and methanol
· Underlying operating profit up 129% and margin expanded 16.3 percentage
points. This reflected strong growth in PGM Services (higher average pgm
prices and increased volumes), strong performance in Catalyst Technologies,
and efficiency benefits
· ROIC grew 34.2 percentage points to 53.9% reflecting higher operating profit
and continued good management of working capital
Half year ended % change % change, constant rates
30(th) September
2021 2020(1)
£ million £ million
Sales
PGM Services 300 215 +40 +46
Catalyst Technologies 223 196 +14 +19
Total sales 523 411 +27 +33
Underlying operating profit 197 88 +124 +129
Margin 37.7% 21.4%
Return on invested capital (ROIC) 53.9% 19.7%
Reported operating profit 239 67
(1 )Restated following change to reporting segments and removal of
inter-segment Copper Zeolites sales.
PGM Services
PGM Services is the world's leading 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. These circular solutions are set to become increasingly
important for customers as they seek metals with a lower carbon footprint. PGM
Services also provides a strategic service to the group, supporting Clean Air
and Hydrogen Technologies with security of metal supply in a volatile market.
PGM Services grew strongly, benefiting from higher average pgm prices
Sales in PGM Services increased 46% as we benefited from volatile and higher
average precious metal prices and we saw increased volumes as we managed our
refinery intakes in the prior period to optimise working capital.
Our other businesses in PGM Services also saw good performance. Sales grew in
chemical products, primarily driven by Clean Air which uses pgm materials in
its catalyst products. Industrial products containing pgms also grew well. In
addition, following a recent change to our reporting structure Life Science
Technologies (formerly part of New Markets) is now part of PGM Services. Life
Science Technologies provides advanced pgm based catalysts to the
pharmaceutical and agricultural chemicals markets. Sales were up strongly in
this business due to phasing of orders.
Refinery 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. This business licenses key, proven and efficient process
technology solutions and manufactures high value speciality catalysts and
additives principally for the chemical and energy industries. We have leading
positions in key end segments including syngas, methanol, ammonia, hydrogen
and formaldehyde. Given our strong position in these important value chains,
our technology can help customers decarbonise their operations by
re-engineering their processes and using sustainable feedstocks.
Our main revenue streams in this business comprise refill catalysts (recurring
business which makes up the majority of sales), first fill catalysts and
licensing income. Overall, sales were up 19% primarily driven by higher demand
for refill catalysts whilst additives were flat as demand for some fuels
remained subdued. First fill catalysts also grew well, benefiting from
catalyst sales for new technology. Our licensing business was marginally up
and our project pipeline remains strong.
Refill catalysts grew double digit, with higher demand across key segments
Sales of refill catalysts grew double digit, with higher demand across our key
segments. We saw continued good performance in ammonia whilst sales of
methanol refills recovered as we benefited from orders which had been delayed
due to the pandemic. Performance was also good in segments more impacted by
COVID-19 in the prior year, such as formaldehyde which is largely used in
construction.
First fills grew well, with the supply of the first catalyst for sustainable
aviation fuel
Sales of first fill catalysts are driven by the start-up of new plants. They
are a lead indicator of future refill catalyst demand. In the period, sales
grew well. Although small in value at this stage, we 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.
Licensing marginally up in the period and a strong pipeline
Our licensing business is dependent on new plant builds and revenue is
recognised over the period of construction. In the period, sales were
marginally up reflecting income from recent licence wins, particularly
oxoalcohol and methanol projects based in China.
Licensing activity remains good and we signed two new licences in the period
(1H 20/21:
2 licences). We have a strong pipeline of projects and are working with
customers on a number of future opportunities focused on our decarbonisation
technology, including sustainable aviation fuel and low carbon blue hydrogen
solutions. See more detail on our future growth in our strategy section (page
6).
During the period, we recognised a non-underlying gain of £44 million in
relation to damages and interest from a company found to have unlawfully
copied one of our technology designs. We received the cash for this in the
half and the related profit was taken outside of underlying operating profit.
Underlying operating profit
Underlying operating profit up 129% and margin expanded 16.3 percentage
points. This reflected strong growth in PGM Services (higher average pgm
prices (+c.£60 million) and increased volumes), strong performance in
Catalyst Technologies and efficiency benefits.
ROIC
ROIC grew 34.2 percentage points to 53.9% reflecting higher operating profit
and continued good management of working capital.
Health
Weak performance - labour shortage in the US and supply chain constraints
· Performance across both Generics and Innovators is being impacted by acute
temporary labour shortages in the US pharma market and global supply chain
constraints
· Lower sales of speciality opiates in our Generics business (-43%) due mainly
to pricing pressure and COVID-19 related delays to elective medical procedures
affecting demand
· We continue to make progress with the development of our pipeline of new
products, but we are no longer of the view that the business will achieve
£100 million of additional operating profit by 2026
· We are in discussions about a potential sale and we will provide an update on
its conclusion in due course
Half year ended % change % change, constant rates
30(th) September
2021 2020
£ million £ million
Sales
Generics 40 70 -43 -40
Innovators 43 49 -12 -4
Total sales 83 119 -30 -26
Underlying operating (loss) / profit (4) 15 n/a n/a
Margin -4.8% 12.6%
Return on invested capital (ROIC) 2.6% 4.6%
Reported operating (loss) / profit (4) 4
Generics
Our Generics business develops and manufactures generic active pharmaceutical
ingredients (APIs) for a variety of treatments. The majority of our business
is controlled APIs.
In the period, sales declined 40% primarily driven by speciality opiates. In
speciality opiates, sales of opioid addiction therapies were lower reflecting
pricing pressure in the US as the market genericises and opioid analgesics
decreased due to the delay of elective medical procedures. In addition, we
also saw increased demand in the prior year for some products due to COVID-19.
We also saw weaker performance across a number of other products due to new
competitors entering the market and timing of orders.
Innovators
Our Innovators business provides customised development and manufacturing
services for active ingredients of new drugs during their lifecycle, including
for initial clinical evaluation and subsequently for commercial supply post
regulatory approval.
Innovators slightly declined in the period, with sales down 4%. We continue to
benefit from our multi-year contracts with Gilead and Sarepta, and commercial
demand remains strong. Sales in the half were lower because of key raw
material shortages due to global supply chain disruption and temporary US
labour shortages which meant that we had a shortage of skilled operators. For
Gilead, we supply an immuno-oncology drug linker used in a treatment for
triple negative breast cancer, and remain excited by our future prospects
given Gilead's approval from the FDA (Food and Drug Administration) for a
further indication of the drug for the treatment of bladder cancer.
These sales declines were partly offset by a modest increase in clinical
development work, where we undertake customised development and manufacturing
services. We were also impacted in the prior period due to COVID-19 related
shutdowns.
Strategic review update
We are in discussions about a potential sale and we will provide an update on
its conclusion in due course.
Underlying operating loss
Underlying operating loss reflecting weaker sales in Generics and
manufacturing challenges in both businesses due to temporary US labour market
shortages and supply chain disruption.
ROIC
ROIC declined 2 percentage points to 2.6% due to an operating loss in the
half. ROIC remains positive in the first half due to being measured over a
rolling 12-month period.
Other Markets
Announced intention to exit Battery Materials, commercialising opportunities
in Hydrogen at pace and driving value from non-core businesses
· Sales grew 5% driven by a strong recovery in Value Businesses. We saw lower
sales in Fuel Cells primarily due to temporary manufacturing issues as we
ramped up our new facilities, and we used a proportion of our capacity for new
customer testing
· We continue to invest in the commercialisation of our new growth businesses,
resulting in an underlying operating loss of £11 million
· On 11(th) November, we announced the intention to exit our Battery Materials
business
· Sale of our glass coatings business Advanced Glass Technologies announced for
a total consideration of £178 million
Half year ended % change % change, constant rates
30(th) September
2021 2020(1)
£ million £ million
Sales
New Markets 16 25 -36 -36
Value Businesses 175 166 +5 +11
Total sales 191 191 - +5
Underlying operating loss (11) (2) n/a n/a
Margin -5.8% -1.0%
Return on invested capital (ROIC) -1.4% 3.0%
Reported operating loss (325) (15)
(1 )Restated following change to reporting segments
New Markets
New Markets comprises Hydrogen Technologies (Fuel Cells and Green Hydrogen)
and Battery Materials.
In Fuel Cells, we continue to see increased interest for automotive and truck
applications from customers principally in Asia and Europe. In Green Hydrogen,
we are working at pace to commercialise key components used in green hydrogen
electrolysers and expect our first commercial sales in 2022.
Our Battery Materials business includes our lithium iron phosphate materials,
and high nickel eLNO cathode materials. We announced on 11(th) November our
intention to exit Battery Materials. Whilst testing with customers is
progressing well, this market is developing into a high volume, commoditised
market and it has become clear that our capital intensity is too high compared
with more established large scale, low cost producers. We have concluded that
the potential returns from battery materials will not be adequate to justify
further investment and have therefore announced our intention to exit this
business.
New Markets sales declined 36% in the period, largely due to lower sales in
Fuel Cells. We were impacted by temporary manufacturing issues as we ramped up
our new facilities, which have now been resolved. We also used a proportion of
our capacity for new customer testing.
Value Businesses
Value Businesses is managed to drive shareholder value from activities
considered to be non-core to JM, and currently comprises Battery Systems,
Medical Device Components, Diagnostic Services and Advanced Glass Technologies
(AGT). Sales were up 11% in the half, trending back towards pre-pandemic
levels. As we actively manage to drive value, we saw an improved performance
in these businesses.
AGT mainly provides black obscuration enamels and silver paste for automotive
glass applications. Sales were higher as we saw a strong rebound in automotive
markets following pandemic disruption in the prior period. On 24(th) November
2021, we announced the disposal of this business to Fenzi S.p.A for £178
million and it is now classified as held for sale.
Our Battery Systems business saw a partial recovery in sales following a weak
prior period that was impacted by disruption caused by the pandemic. In the
half, we saw an impact from shortages of semi-conductor chips.
Medical Device Components performed well and saw good sales growth following
the postponement of some elective medical procedures in 2020 due to the
pandemic.
Diagnostic Services saw a good recovery in the half although performance
remains impacted by the pandemic.
Underlying operating loss
We reported an underlying operating loss of £11 million. This was due to
increased investment into our New Markets growth businesses such as Hydrogen
Technologies and lower sales in Fuel Cells.
ROIC
ROIC declined by 4.4 percentage points to -1.4% due to higher assets as we
invest for growth, and an operating loss.
Corporate
Corporate costs were £39 million, an increase of £12 million from the prior
period, primarily due to building capability across our group functions and
upgrading our core IT systems.
Financial review
Research and development (R&D)
R&D spend was £109 million in the half, including £20 million of
capitalised R&D. This was up from £96 million in the prior period and
represents c.5% of sales excluding precious metals. R&D spend was higher
in the period, primarily driven by increased investment in Hydrogen
Technologies as we commercialise our fuel cell and green hydrogen offerings,
as well as Battery Materials which will now cease.
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 75% of the non-sterling
denominated underlying operating profit in the half year ended 30(th)
September 2021, were:
Share of 1H 2021/22 Average exchange rate % change
non-sterling denominated
underlying operating profit Half year ended
30(th) September
2021 2020
US dollar 27% 1.39 1.27 +9
Euro 30% 1.16 1.12 +4
Chinese renminbi 18% 8.95 8.86 +1
For the half, the impact of exchange rates decreased sales by £71 million and
underlying operating profit by £6 million.
If current exchange rates (£:$ 1.34, £:€ 1.19, £:RMB 8.57) are maintained
throughout the year ending 31(st) March 2022, foreign currency translation
will have a negative impact of approximately £15 million on underlying
operating profit. A one cent change in the average US dollar and euro exchange
rates and a ten fen change in the average rate of the Chinese renminbi each
have an impact of approximately £1 million on full year underlying operating
profit.
Efficiency savings
We 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. This includes the consolidation of our Clean Air manufacturing
footprint and the implementation of a new group operating model, which will
deliver savings of £110 million per annum by 2023/24.
Initiative Delivered Delivered Total delivered to date Annualised benefits
by 2023/24
£ million to 2020/21 in half
Total active efficiency programmes 37 42 79 110
Items outside of underlying operating profit
Major impairment and restructuring costs
Following the announcement of our intention to exit our Battery Materials
business, the associated Battery Materials' assets were impaired by £314
million. The impairment comprises property, plant and equipment
(£216 million), right-of-use assets (£5 million), other intangible assets
(£78 million) and trade and other receivables (£15 million).
Related to our efficiency savings which will deliver savings of £110 million
per annum by 2023/24, we incurred £230 million of one-off costs in total
recognised outside of underlying operating profit in prior periods. Of these
costs, £78 million were incurred in the first half of the prior year.
Gain on significant legal proceedings
During the period, the group recognised a gain of £44 million in relation to
damages and interest from a company found to have unlawfully copied one of
JM's technology designs.
Finance charges
Net finance charges in the period amounted to £29 million, down from £41
million in the first half of 2020/21. Due to the focus across the group on
maintaining efficient levels of precious metal working capital and sustained
lower borrowings, we have seen finance costs gradually decrease.
Taxation
The tax charge on underlying profit before tax for the half year ended 30(th)
September 2021 was £42 million, an effective underlying tax rate of 16.0%,
slightly up from 15.6% in the first half of 2020/21. The tax rate on
underlying profit for the year ending 31(st) March 2022 is estimated to be
c.16-17%.
The effective tax rate on reported profit for the half was 189.6%, up from
7.8% in the prior period. This represents a tax charge of £19 million, up
from £2 million in the prior year. The increased effective rate is due to a
major impairment arising in the first half, the majority of which arises in a
jurisdiction where no tax relief is available.
Post-employment benefits
IFRS - accounting basis
At 30(th) September 2021, the group's net post-employment benefit position was
a surplus of £203 million.
The cost of providing post-employment benefits in the period was £25 million,
up from £21 million in the same period last year.
Actuarial - funding basis
The UK pension scheme has a legacy defined benefit career average section
which was closed to new entrants on 1(st) October 2012, when a new defined
benefit cash balance section was opened.
The last triennial actuarial valuation of the career average section as at
1(st) April 2018 revealed a deficit of £34 million, or a surplus of £9
million after taking account of the future additional deficit funding
contributions from the special purpose vehicle set up in January 2013. The
valuation results as at 1(st) April 2018 allowed for the equalisation of
Guaranteed Minimum Pension. The triennial actuarial valuation of the scheme as
at 1(st) April 2021 is currently underway and the results are expected by the
end of the year.
The last triennial actuarial valuation of the cash balance section as at 1(st)
April 2018 revealed a surplus of £0.2 million.
The latest actuarial valuations of our two US pension schemes showed a surplus
of £9 million as at 1(st )July 2021, an improvement from a £7 million
surplus as at 1(st) July 2020.
Capital expenditure
Capital expenditure was £228 million in the half, 2.4 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 at 30(th) September 2021 was £699 million, a decrease of £76
million from 31(st) March 2021 and £179 million from 30(th) September 2020.
Net debt is £39 million higher at £738 million when post tax pension
deficits are included. The group's net debt (including post tax pension
deficits) to EBITDA was 0.9 times (30(th) September 2020: 1.6 times), below
our target range of 1.5 to 2.0 times.
As part of our continued focus on working capital management, we have
maintained an efficient balance sheet and low levels of working capital. In
the half, supply chain disruption across automotive and truck production
resulted in a precious metal working capital volume benefit of c.£300
million, which will unwind as production recovers.
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 £223 million at 30(th) September 2021 (31(st)
March 2021: £437 million, 30(th) September 2020: £367 million).
Free cash flow and working capital
Free cash flow was £189 million in the half, compared to £256 million in the
prior period, largely reflecting higher non-precious metal working capital.
Excluding precious metal, average working capital days to 30(th) September
2021 decreased to 40 days compared to 70 days to 30(th) September 2020. The
prior period was higher due to the lower average sales volume through the
period. Our target range for average non-precious metal working capital days
is between 50 and 60 days over the medium term.
Going concern
The group maintains a strong balance sheet with around £1.7 billion of
available cash and undrawn committed facilities. Cash generation was strong
during the period with free cash flow of around £189 million lowering net
debt by £76 million since year end. As set out on page 28, the directors
have reviewed the base case scenario forecasts for the group and have
reasonable expectation that there are no material uncertainties that cast
doubt about the group's ability to continue operating for at least twelve
months from the date of approving these half-yearly accounts. 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 metal price volatility, a short-term refinery shutdown and
increases in the amount of metal that we would have to hold.
Under all scenarios, the group has sufficient headroom against committed
facilities and key financial covenants are not in breach during the going
concern period. The directors are therefore of the opinion that the group has
adequate resources to fund its operations for the period of twelve months
following the date of this announcement and so determine that it is
appropriate to prepare the accounts on a going concern basis.
Risks and uncertainties
The principal risks and uncertainties, together with the group's strategies to
manage them, are set out on pages 88 to 96 of the 2021 annual report. Updated
risks are:
Existing market outlook - Changing assumptions in our key markets could have
an unplanned or unforeseen impact that we are not agile enough to respond to.
Since the publication of the 2021 annual report, this risk has been revised to
reflect the impact of climate change and our transition to a low carbon
economy. As we transition to a low carbon economy, there is a risk JM is
unable to make and or sell products demanded by customers.
This risk includes the potential impact of legislative changes, including
carbon pricing or taxation legislation, other market movements outside of our
predictions, the extended impact of global pandemics, and emerging trends such
as tariffs, as well as regional and global slowdowns to which our business may
be sensitive.
Future growth - Ineffective execution of our strategic initiatives and
investments could lead to failure to deliver planned growth and create value.
Our intention to exit Battery Materials changes this risk profile in that we
will have less exposure to a highly capital intensive and potentially low
margin segment, but removes one of our strategic growth initiatives.
Competitive advantage - Failure to maintain our competitive advantage in
existing markets and, as a result, not meeting customers' evolving needs as
effectively and profitably as our competitors, particularly around increasing
customer demand for net zero products.
Environment, health and safety (EHS) - Like other high hazard manufacturing
companies, our business operations are subject to a wide range of challenging
health, safety and environmental laws, standards and regulations set by
government and non-governmental bodies around the world. If we fail to operate
safely, we could injure our people or breach applicable laws, which could have
a negative impact on our employees. This could result in lost production time
and potentially attract negative interest from the media and regulators.
Supply failure - The nature of JM's operations means there are limited
suppliers from which to source certain strategic raw materials including
precious metals. Any significant breakdown in the supply of these materials
would lead to an inability to manufacture our products and satisfy customer
demand. Through our work on climate change impacts, we acknowledge that
increased frequency of extreme weather events and natural disasters (drought,
floods, storms, cyclones, heavy rain, sea level rise, heatwaves) may lead to
disruption to supply chains across JM's value chain (upstream and downstream)
resulting in disrupted delivery of raw materials and products and increased
costs.
People - To successfully execute our strategy and deliver growth, we need an
appropriate culture and a breadth and depth of leadership skills to drive a
motivated, inclusive and engaged workforce, underpinned by adequate people
data. This is especially important as we pivot away from more traditional
areas of the business to ones that are higher growth and by implication higher
risk.
Security of metal / highly regulated substances - We store and transport
significant quantities of high value precious metals or highly regulated
substances. Loss or theft due to a failure of our associated security
management systems may result in financial loss and / or a failure to satisfy
our customers, which could reduce customer confidence or result in legal
action.
Intellectual property management - Failure to adequately manage our own, and
third party, intellectual property, knowledge and information could lead to a
loss in business advantage, loss of freedom to operate and reputational damage
associated with litigation.
Asset failure - We may experience critical asset failures resulting in a
material impact on the supply, performance, share value and reputation of JM.
In addition, we recognise that increased frequency of extreme weather events
and natural disasters (drought, floods, storms, cyclones, heavy rain, sea
level rise, heatwaves) may lead to disruption of JM operations resulting in
increased costs and detrimental effects on employee wellbeing.
Ethics and compliance - Failure to comply with ethical and regulatory
standards could lead to reputational damage, and leave the company or
individuals open to potential criminal or legal action.
Business transition - Failure to manage and deliver change in a controlled
manner to achieve expected business benefits.
Product quality - Customers use our products in a wide range of their own end
products, processes and systems. It is crucial, therefore, that our products
work properly and meet the established quality criteria. Performance failure
or quality defects could cause harm to consumers or leave us exposed to
liability claims. This could lead to loss of future business, licence to
operate and reputational damage.
Information, technology and cyber security - Failure to adapt our IT systems
to changing business requirements, significant disruption to those systems or
a major cyber security incident could adversely affect our financial position,
harm our reputation and lead to regulatory penalties, or non-compliance with
laws.
Customer contract liability - Unfavourable customer contract terms could lead
to significant loss or damage and expose us to high or unlimited liability, as
well as other broader negative consequences.
Responsibility statement of the Directors in respect of the half yearly report
The half yearly report is the responsibility of the directors. Each of the
directors as at the date of this responsibility statement, whose names and
functions are set out below, confirms that to the best of their knowledge:
· the condensed consolidated accounts have been prepared in accordance with UK
adopted International Accounting Standard (IAS) 34 - 'Interim Financial
Reporting'; and
· the interim management report included in the Half-Yearly Report includes a
fair review of the information required by:
a) DTR 4.2.7R of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed consolidated accounts; and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
b) DTR 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have materially
affected the financial position or performance of the company during that
period; and any changes in the related party transactions described in the
last annual report that could do so.
The names and functions of the directors of Johnson Matthey Plc are as
follows:
Patrick Thomas Chair of the Board and of the Nomination Committee
Robert MacLeod Chief Executive
Stephen Oxley Chief Financial Officer
John O'Higgins Senior Independent Non-Executive Director
Rita Forst Non-Executive Director
Jane Griffiths Non-Executive Director and Chair of Societal Value Committee
Xiaozhi Liu Non-Executive Director
Chris Mottershead Non-Executive Director and Chair of the Remuneration Committee
Doug Webb Non-Executive Director and Chair of the Audit Committee
The responsibility statement was approved by the Board of Directors on 23(rd)
November 2021 and is signed on its behalf by:
Patrick Thomas
Chairman
Independent Review Report
to Johnson Matthey Plc
Report on the condensed consolidated accounts
Our conclusion
We have reviewed Johnson Matthey Plc's condensed consolidated accounts (the
"interim financial statements") in the half year results of Johnson Matthey
Plc for the 6 month period ended 30(th) September 2021 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
What we have reviewed
The interim financial statements comprise:
· the Condensed Consolidated Balance Sheet as at
30(th) September 2021;
· the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Total Comprehensive Income for the period then
ended;
· the Condensed Consolidated Cash Flow Statement for the period then
ended;
· the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the half year results of Johnson
Matthey Plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half year results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the half year results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the half year results based on our review. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the half year results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
23(rd) November 2021
Condensed Consolidated Income Statement
for the six months ended 30(th) September 2021
Six months ended
30.9.21 30.9.20
Notes £ million £ million
Revenue 2, 3 8,586 6,979
Cost of sales (8,038) (6,587)
Gross profit 548 392
Distribution costs (57) (54)
Administrative expenses (198) (187)
Amortisation of acquired intangibles 4 (3) (5)
Gain on significant legal proceedings 4 44 -
Major impairment and restructuring charges 4 (314) (78)
Operating profit 20 68
Finance costs (38) (77)
Finance income 9 36
Share of losses of joint ventures and associates - (1)
(Loss) / profit before tax (9) 26
Tax expense 5 (19) (2)
(Loss) / profit for the period (28) 24
pence pence
(Loss) / earnings per ordinary share
Basic 6 (14.8) 12.3
Diluted 6 (14.8) 12.3
Condensed Consolidated Statement of Total Comprehensive Income
for the six months ended 30(th) September 2021
Six months ended
30.9.21 30.9.20
Notes £ million £ million
(Loss) / profit for the period (28) 24
Other comprehensive income
Items that will not be reclassified to the income statement
Remeasurements of post-employment benefit assets and liabilities 13 59 (103)
Fair value gains on equity investments at fair value through other 1 6
comprehensive income
Tax on items that will not be reclassified to the income statement (5) 21
55 (76)
Items that may be reclassified to the income statement:
Exchange differences on translation of foreign operations 40 (11)
Amounts credited / (charged) to hedging reserve 13 (6)
Fair value losses on net investment hedges (2) -
Tax on items that may be reclassified to the income statement (3) 1
48 (16)
Other comprehensive income / (expense) for the period 103 (92)
Total comprehensive income / (expense) for the period 75 (68)
Condensed Consolidated Balance Sheet
as at 30(th) September 2021
30.9.21 31.3.21
Notes £ million £ million
Assets
Non-current assets
Property, plant and equipment 8 1,326 1,424
Right-of-use assets 65 74
Goodwill 557 554
Other intangible assets 9 307 359
Investments in joint ventures and associates 2 2
Investments at fair value through other comprehensive income 54 53
Other receivables 10 30 50
Interest rate swaps 19 17 20
Deferred tax assets 113 140
Post-employment benefit net assets 13 249 194
Total non-current assets 2,720 2,870
Current assets
Inventories 2,004 1,814
Current tax assets 9 13
Trade and other receivables 10 1,916 2,422
Cash and cash equivalents 19 746 581
Interest rate swaps 19 3 -
Other financial assets 61 44
Assets classified as held for sale 12 52 -
Total current assets 4,791 4,874
Total assets 7,511 7,744
Liabilities
Current liabilities
Trade and other payables 11 (3,050) (3,325)
Lease liabilities 19 (11) (11)
Current tax liabilities (95) (147)
Cash and cash equivalents ─ bank overdrafts 19 (42) (36)
Borrowings and related swaps 19 (309) (26)
Other financial liabilities (28) (18)
Provisions (29) (35)
Liabilities classified as held for sale 12 (13) -
Total current liabilities (3,577) (3,598)
Non-current liabilities
Borrowings and related swaps 19 (1,054) (1,252)
Lease liabilities 19 (48) (51)
Deferred tax liabilities (28) (28)
Employee benefit obligations 13 (100) (98)
Provisions (26) (27)
Other payables 11 (5) (5)
Total non-current liabilities (1,261) (1,461)
Total liabilities (4,838) (5,059)
Net assets 2,673 2,685
Equity
Share capital 221 221
Share premium 148 148
Shares held in employee share ownership trust (ESOT) (24) (29)
Other reserves 49 -
Retained earnings 2,279 2,345
Total equity 2,673 2,685
Condensed Consolidated Cash Flow Statement
for the six months ended 30(th) September 2021
Six months ended
30.9.21 30.9.20
Notes £ million £ million
Cash flows from operating activities
(Loss) / profit before tax (9) 26
Adjustments for:
Share of losses of joint ventures and associates - 1
Depreciation 77 76
Amortisation 22 13
Impairment losses 314 16
Loss on sale of non-current assets - 1
Share-based payments 9 5
Increase in inventories (179) (177)
Decrease / (increase) in receivables 532 (347)
(Decrease) / increase in payables (339) 840
(Decrease) / increase in provisions (8) 49
Contributions less than / (in excess of) employee benefit obligations 5 (5)
charge
Changes in fair value of financial instruments 8 (37)
Net finance costs 29 41
Income tax paid (49) (20)
Net cash inflow from operating activities 412 482
Cash flows from investing activities
Interest received 6 33
Purchases of property, plant and equipment (141) (139)
Purchases of intangible assets (43) (36)
Proceeds from sale of non-current assets 2 -
Net cash outflow from investing activities (176) (142)
Cash flows from financing activities
Proceeds from borrowings 63 288
Repayment of borrowings - (4)
Dividends paid to equity shareholders 7 (96) (60)
Interest paid (40) (77)
Principal element of lease payments (7) (7)
Net cash (outflow) / inflow from financing activities (80) 140
Net increase in cash and cash equivalents 156 480
Exchange differences on cash and cash equivalents 3 (1)
Cash and cash equivalents at beginning of year 545 273
Cash and cash equivalents at end of period 19 704 752
Cash and deposits 223 197
Money market funds 523 573
Bank overdrafts (42) (32)
Cash and deposits transferred to assets classified as held for sale - 14
Cash and cash equivalents 19 704 752
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30(th) September 2021
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 for the period - - - (10) (58) (68)
Dividends paid (note 7) - - - - (60) (60)
Share-based payments - - - - 9 9
Cost of shares transferred to employees - - 3 - (7) (4)
At 30(th) September 2020 221 148 (29) 132 2,229 2,701
Total comprehensive (expense) / income for the period - - - (132) 150 18
Dividends paid (note 7) - - - - (39) (39)
Share-based payments - - - - 7 7
Cost of shares transferred to employees - - - - (3) (3)
Tax on share-based payments - - - - 1 1
At 31(st) March 2021 221 148 (29) - 2,345 2,685
Total comprehensive income for the period - - - 49 26 75
Dividends paid (note 7) - - - - (96) (96)
Share-based payments - - - - 12 12
Cost of shares transferred to employees - - 5 - (8) (3)
At 30(th) September 2021 221 148 (24) 49 2,279 2,673
Notes to the Accounts
for the six months ended 30(th) September 2021
1 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. This condensed consolidated interim
financial report for the half-year reporting period ended 30(th) September
2021 has been prepared in accordance with the UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the UK's Financial Conduct
Authority. The accounting policies applied are consistent with the accounting
policies applied by the group in its consolidated accounts as at, and for the
year ended, 31(st) March 2021, with the exception of the adoption of amended
accounting policies and standards as explained below.
These condensed consolidated accounts do not constitute statutory accounts
within the meaning of Section 435 of the Companies Act 2006. The interim
report does not include all of the notes of the type normally included in an
annual financial report. Accordingly, this report is to be read in conjunction
with the annual report for the year ended 31(st) March 2021, which has been
prepared in accordance with both International Accounting Standards (IAS) in
conformity with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB), adopted pursuant to Regulation (EC) No 1606/2002 as it
applies to the European Union, including the interpretations issued by the
IFRS Interpretations Committee.
Information in respect of the year ended 31(st) March 2021 is derived from the
company's statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditor's report on those statutory accounts was
unqualified, did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying its report and did not
contain any statement under Section 498 (2) or Section 498 (3) of the
Companies Act 2006.
The half-yearly accounts are unaudited, but have been reviewed by the
auditors. They were approved by the board of directors on 23(rd) November
2021.
Going concern
The directors have reviewed the base case scenario, and the severe but
plausible case scenario and have reasonable expectation that there are no
material uncertainties that cast doubt about the group's ability to continue
operating for at least twelve months from the date of approving these
half-yearly accounts.
As at 30(th) September 2021, the group maintains a strong balance sheet with
around £1.7 billion of available cash and undrawn committed facilities. Cash
generation was strong during the period with free cash flow of around £189
million lowering net debt by £76 million since 31(st) March 2021 to £699
million. Net debt (including post tax pension deficits) to EBITDA, was below
our target range at 0.9 times.
Overall, the group's performance during the period was resilient, both in
terms of underlying operating profit and cash flow. For the purposes of
assessing going concern, we have revisited our financial projections using the
latest forecasts for our base case scenario. 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 metal
price volatility, a short-term refinery shutdown and increases in the amount
of metal that we would have to hold. Whilst the combined impact would reduce
profitability and EBITDA against our latest forecast, our balance sheet
remains strong.
1 Basis of preparation and statement of compliance (continued)
Going concern (continued)
The group has a robust funding position comprising a range of long-term debt
and a £1 billion five year committed revolving credit facility maturing in
March 2026 which was entirely undrawn at 30(th) September 2021. There was
£555 million of cash held in money market and bank deposits. Of the existing
loans, around £255 million of term debt matures in the period to December
2023 which has been included in our going concern modelling. As a long time,
highly rated issuer in the US private placement market, the group expects to
be able to access additional funding in its existing markets should it need
to. The group also has a number of additional sources of funding available
including uncommitted lease facilities that support precious metal funding.
Whilst we would fully expect to be able to utilise the metal lease facilities,
they are excluded from our going concern modelling.
Under all scenarios above, the group has sufficient headroom against committed
facilities and key financial covenants are not in breach during the going
concern period. There remain risks to the group including more extreme
economic outcomes. Against these, the group has a range of levers which it
could utilise to protect headroom including reducing capital expenditure,
reducing PMM liquidity and future dividend distributions.
The directors are therefore of the opinion that the group has adequate
resources to fund its operations for the period of twelve months following the
date of this announcement and so determine that it is appropriate to prepare
the accounts on a going concern basis.
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.
Amended standards adopted by the group
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 according to
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.
The group has elected not to apply the exemption granted in the 'COVID-19
related rent concessions' amendment to IFRS 16, Leases, as the group has not
received material COVID-19 related rent concessions as a lessee.
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 are not
expected to have a material impact on the results or financial position of the
group.
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 has been amended
so that USD and GBP drawings will be 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.
2 Segmental information
Revenue, sales and underlying operating profit by sector
As part of the 31(st) March 2021 results press release, we announced small
changes to our reporting segments to reflect how we are managing the business
and increase visibility of our new growth businesses. Efficient Natural
Resources now includes Life Science Technologies (formerly part of New
Markets) and excludes Diagnostic Services and Advanced Glass Technologies (now
part of Other Markets). Excluding Corporate costs, the group has four
reporting segments, aligned to the needs of our customers and the global
challenges we are tackling.
Clean Air - provides catalysts for emission control after-treatment systems to
remove harmful emissions from vehicles and non-road equipment powered by
diesel and gasoline.
Efficient Natural Resources - provides products and processing services for
the efficient use and transformation of critical natural resources including
oil, gas, biomass and platinum group metals to enable the decarbonisation of
chemical value chains and provide circular economy solutions.
Health - develops and manufactures active pharmaceutical ingredients (APIs)
for a variety of treatments and new drugs during their lifecycle, including
for initial clinical evaluation and subsequently for commercial supply post
regulatory approval.
Other Markets - a portfolio of businesses with particular focus on potential
growth and value realisation opportunities. This includes Battery Systems,
Fuel Cells, Diagnostic Services, Battery Materials and Green Hydrogen.
The Group Management Committee (the chief operating decision maker as defined
by IFRS 8, Operating Segments) monitors the results of these operating sectors
to assess performance and make decisions about the allocation of resources.
Each operating sector is represented by a member of the Group Management
Committee. These operating sectors represent the group's reportable segments
and their principal activities are described on pages 42 to 57 of the 2021
Annual Report. The performance of the group's operating sectors is assessed on
sales and underlying operating profit (see note 19). Sales between segments
are made at market prices, taking into account the volumes involved.
Six months ended 30(th) September 2021
Efficient
Clean Natural Other
Air Resources Health Markets Corporate Eliminations Total
£ million £ million £ million £ million £ million £ million £ million
Revenue from external customers 3,748 4,514 83 241 - - 8,586
Inter-segment revenue 1 2,617 1 - - (2,619) -
Revenue 3,749 7,131 84 241 - (2,619) 8,586
External sales(1) 1,195 470 82 191 - - 1,938
Inter-segment sales 1 53 1 - - (55) -
Sales(1) 1,196 523 83 191 - (55) 1,938
Underlying operating profit(1) 150 197 (4) (11) (39) - 293
Six months ended 30(th) September 2020
Efficient
Natural Other
Clean Resources Markets Eliminations
Air (restated) Health (restated) Corporate (restated) Total
£ million £ million £ million £ million £ million £ million £ million
Revenue from external customers 2,888 3,743 122 226 - - 6,979
Inter-segment revenue 2 1,965 - - - (1,967) -
Revenue 2,890 5,708 122 226 - (1,967) 6,979
External sales(1) 1,002 367 119 191 - - 1,679
Inter-segment sales 1 44 - - - (45) -
Sales(1) 1,003 411 119 191 - (45) 1,679
Underlying operating profit(1) 77 88 15 (2) (27) - 151
(1 )Sales and underlying operating profit are non-GAAP measures (see note 19
for reconciliation to GAAP measures). 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. The overall group total
is as previously reported.
2 Segmental information (continued)
Net assets by sector
At 30(th) September 2021
Efficient
Clean Natural Other
Air Resources Health Markets Corporate Total
£ million £ million £ million £ million £ million £ million
Segmental net assets 1,481 542 494 197 482 3,196
Net debt (see note 19) (699)
Post-employment benefit net assets and liabilities 149
Deferred tax net assets 85
Provisions and non-current other payables (60)
Investments in joint ventures and associates 2
Net assets 2,673
At 31(st) March 2021
Efficient
Natural Other
Clean Resources Markets
Air (restated) Health (restated) Corporate Total
£ million £ million £ million £ million £ million £ million
Segmental net assets 1,480 603 469 412 353 3,317
Net debt (see note 19) (775)
Post-employment benefit net assets and liabilities 96
Deferred tax net assets 112
Provisions and non-current other payables (67)
Investments in joint ventures and associates 2
Net assets 2,685
The comparative period is restated to reflect the group's updated reporting
segments. The overall group total is as previously reported.
2 Segmental information (continued)
Impact of exchange rate movements on sales and underlying operating profit by
sector
The main impact of exchange rate movements on sales and underlying operating
profit is from the translation of the results of foreign operations into
sterling.
Six months ended
Average exchange rates 30.9.21 30.9.20
US dollar / £ 1.39 1.27
Euro / £ 1.16 1.12
Chinese renminbi / £ 8.95 8.86
Six months ended 30.9.20
Six months At last At this Change at
ended year's rates year's rates this year's
30.9.21 (restated) (restated) rates
£ million £ million £ million %
Clean Air 1,196 1,003 964 24%
Efficient Natural Resources 523 411 393 33%
Health 83 119 112 -26%
Other Markets 191 191 182 5%
Elimination of inter-segment sales (55) (45) (43)
Sales(1) 1,938 1,679 1,608 21%
Clean Air 150 77 74 103%
Efficient Natural Resources 197 88 86 129%
Health (4) 15 14 n/a
Other Markets (11) (2) (2) n/a
Unallocated corporate expenses (39) (27) (27)
Underlying operating profit(1) 293 151 145 102%
(1 )Sales and underlying operating profit are non-GAAP measures (see note 19
for reconciliation to GAAP measures). 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. The overall group total
is as previously reported.
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
incurre
d or
straigh
t-line
over
the
licence
term(1)
Engineering design services Over time Based
on
costs
incurre
d
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
despatc
h or
deliver
y
Platinum Group Metal chemical and industrial products Point in time On
despatc
h or
deliver
y
Advanced catalysts Point in time On
despatc
h or
deliver
y
Health
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
Advanced Glass Technologies Automotive Precious metal pastes and enamels Point in time On despatch or delivery
Battery Materials Automotive Battery materials Point in time On despatch or delivery
Fuel Cells Automotive Fuel cell technologies Point in time On despatch or delivery
Battery Systems Consumer goods Battery systems for a range of applications Point in time On despatch or delivery
Medical Device Components Pharmaceuticals Products found in devices used in medical procedures Point in time On despatch or delivery
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.
3 Revenue (continued)
Revenue from external customers by principal products and services
Six months ended 30(th) September 2021
Efficient
Clean Natural Other
Air Resources Health Markets Total
£ million £ million £ million £ million £ million
Metal 2,553 4,044 1 50 6,648
Heavy Duty Catalysts 413 - - - 413
Light Duty Catalysts 768 - - - 768
Catalyst Technologies - 219 - - 219
Platinum Group Metal Services - 251 - - 251
Generics - - 40 - 40
Innovators - - 42 - 42
Fuel Cells - - - 10 10
Battery Materials - - - 6 6
Battery Systems - - - 77 77
Advanced Glass Technologies - - - 36 36
Diagnostic Services - - - 26 26
Medical Device Components - - - 36 36
Other 14 - - - 14
Revenue 3,748 4,514 83 241 8,586
Six months ended 30(th) September 2020
Efficient
Natural Other
Clean Resources Markets
Air (restated) Health (restated) Total
£ million £ million £ million £ million £ million
Metal 1,885 3,377 3 34 5,299
Heavy Duty Catalysts 310 - - - 310
Light Duty Catalysts 680 - - - 680
Catalyst Technologies - 194 - - 194
Platinum Group Metal Services - 172 - - 172
Generics - - 70 - 70
Innovators - - 49 - 49
Fuel Cells - - - 19 19
Battery Materials - - - 6 6
Battery Systems - - - 76 76
Advanced Glass Technologies - - - 27 27
Diagnostic Services - - - 21 21
Medical Device Components - - - 29 29
Other 13 - - 14 27
Revenue 2,888 3,743 122 226 6,979
The comparative period is restated to reflect the group's updated reporting
segments. The overall group total is as previously reported.
4 Operating profit
Six months ended
30.9.21 30.9.20
£ million £ million
Operating profit is arrived at after charging / (crediting):
Total research and development expenditure 109 96
Less: Development expenditure capitalised (20) (9)
Research and development expenditure charged to the income statement 89 87
Less: External funding received from governments (6) (5)
Net research and development expenditure charged to the income statement 83 82
Depreciation of:
Property, plant and equipment 70 69
Right-of-use assets 7 7
Depreciation 77 76
Amortisation of:
Internally generated intangible assets 1 2
Acquired intangibles 3 5
Other intangible assets 18 6
Amortisation 22 13
Gain on significant legal proceedings (44) -
Major impairment and restructuring charges:
Property, plant and equipment 216 12
Right-of-use assets 5 1
Other intangible assets 78 4
Inventories - 1
Trade and other receivables 15 1
Trade and other payables - (3)
Impairment losses 314 16
Restructuring charges - 62
Major impairment and restructuring charges 314 78
Gain on significant legal proceedings
During the period, 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. The gain is reported as non-underlying, see note 19.
Major impairment and restructuring charges
Following a detailed review of our Battery Materials business the group has
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 its decision to pursue the sale of all or parts of Battery
Materials. We have determined an impairment charge of £314m based on our
estimate of the recoverable amount of the assets at 30(th) September 2021. The
impairment charge comprises property, plant and equipment (£216 million),
right-of-use assets (£5 million), other intangible assets (£78 million) and
trade and other receivables (£15 million).
In the prior period, the group incurred non-underlying major impairment and
restructuring charges of £78 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 period.
5 Tax expense
The charge for taxation at the half year ended 30(th) September 2021 was £19
million (1H 2020/21: £2 million), this is after a major impairment charge of
£314 million with an associated tax credit of £27 million. The tax charge on
underlying profit before tax was £42 million (1H 2020/21: £17 million), an
effective tax rate of 16.0% (1H 2020/21: 15.6%). Included in the first half
tax charge is a tax credit of £6 million in relation to the UK rate change
from 19% to 25%, which was enacted on 24(th) May 2021. In addition, there is
a tax credit to other comprehensive income of £9 million in respect of the
impact of the rate change on post-employment assets. The tax rate on
underlying profit for the year ending 31(st) March 2022 is estimated to be
between 16-17%.
6 (Loss) / earnings per ordinary share
Six months ended
30.9.21 30.9.20
pence pence
Basic (14.8) 12.3
Diluted (14.8) 12.3
(Loss) / earnings per ordinary share have been calculated by dividing (loss) /
profit for the period by the weighted average number of shares in issue during
the period.
Six months ended
Weighted average number of shares in issue 30.9.21 30.9.20
Basic 192,829,279 192,650,843
Dilution for long term incentive plans 687,371 211,074
Diluted 193,516,650 192,861,917
7 Dividends
An interim dividend of 22.00 pence (1H 2020/21 20.00 pence) per ordinary share
has been proposed by the board which will be paid on 1(st) February 2022 to
shareholders on the register at the close of business on 3(rd) December 2021.
The estimated amount to be paid is £42 million (1H 2020/21 £39 million) and
has not been recognised in these accounts.
Six months ended
30.9.21 30.9.20
£ million £ million
2019/20 final ordinary dividend paid ─ 31.125 pence per share - 60
2020/21 final ordinary dividend paid ─ 50.00 pence per share 96 -
Total dividends 96 60
Property, plant and equipment
8
Assets in
Land Leasehold Plant and the course of
and 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 - 9 172 182
Transferred to assets classified as held for sale (note 12) (15) (2) (47) (1) (65)
Reclassification - 1 47 (48) -
Disposals (1) - (20) - (21)
Exchange adjustments 10 - 31 4 45
At 30(th) September 2021 662 30 2,330 504 3,526
Accumulated depreciation and impairment
At 1(st) April 2021 321 17 1,606 17 1,961
Charge for the period 10 1 59 - 70
Impairment losses 9 - 25 182 216
Transferred to assets classified as held for sale (note 12) (12) (2) (38) - (52)
Disposals (1) - (19) - (20)
Exchange adjustments 4 - 20 1 25
At 30(th) September 2021 331 16 1,653 200 2,200
Carrying amount at 30(th) September 2021 331 14 677 304 1,326
Carrying amount at 1(st) April 2021 346 14 704 360 1,424
Following a review of the business the group concluded the potential future
returns from the Battery Materials business did not support the carrying value
of the business (see note 4). The carrying value of the assets of the Battery
Materials business of £216 million have consequently been fully impaired
during the period and included within major impairment charges.
9 Other intangible assets
Customer
contracts and Computer Patents, Acquired research and Development
trademarks
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 - 25 1 - 20 46
Exchange adjustments 2 1 - 1 2 6
At 30(th) September 2021 135 393 66 43 248 885
Accumulated amortisation and impairment
At 1(st) April 2021 108 144 46 41 135 474
Charge for the period 2 18 - 1 1 22
Impairments - 9 15 - 54 78
Exchange adjustments 3 - - 1 - 4
At 30(th) September 2021 113 171 61 43 190 578
Carrying amount at 30(th) September 2021 22 222 5 - 58 307
Carrying amount at 1(st) April 2021 25 223 19 1 91 359
Following a review of the business the group concluded the potential future
returns from the Battery Materials business did not support the carrying value
of the business (see note 4). The carrying value of the assets of the Battery
Materials business of £78 million have consequently been fully impaired
during the period and included within major impairment charges.
10 Trade and other receivables
30.9.21 31.3.21
£ million £ million
Current
Trade receivables 1,394 1,571
Contract receivables 132 181
Prepayments 108 88
Value added tax and other sales tax receivable 69 119
Advance payments to customers 10 11
Amounts receivable under precious metal sale and repurchase agreements(1) 162 308
Other receivables 41 144
Trade and other receivables 1,916 2,422
Non-current
Value added tax and other sales tax receivable 2 2
Prepayments - 3
Advance payments to customers 28 45
Other receivables 30 50
(1 )The fair value of the precious metal contracted to be sold by the group
under sale and repurchase agreements is £139 million (31(st) March 2021:
£407 million).
11 Trade and other payables
30.9.21 31.3.21
£ million £ million
Current
Trade payables 716 996
Contract liabilities 292 184
Accruals 347 369
Amounts payable under precious metal sale and repurchase agreements(1) 1,448 1,442
Other payables 247 334
Trade and other payables 3,050 3,325
Non-current
Other payables 5 5
Other payables 5 5
(1 )The fair value of the precious metal contracted to be repurchased by the
group under sale and repurchase agreements is £1,228 million (31(st) March
2021: £1,766 million).
Assets and liabilities classified as held for sale
12
During the half year the group decided to sell its Advanced Glass Technologies
business. As at 30(th) September 2021, the proceeds less costs to sell for the
Advanced Glass Technologies business are estimated to be greater than book
value and so no impairment is required. The business is classified as a
disposal group held for sale and presented separately on the balance sheet.
The sale of the Advanced Glass Technologies business was agreed on 23(rd)
November 2021, with proceeds of £178 million.
The major classes of assets or liabilities comprising the businesses
classified as held for sale are:
Advanced
Glass
Technologies
At 30(th) September 2021 £ million
Non-current assets
Property, plant and equipment 13
Right-of-use-assets 1
Goodwill 2
Current assets
Inventories 20
Trade and other receivables 16
Assets classified as held for sale 52
Current liabilities
Trade and other payables (11)
Non-current liabilities
Lease liabilities (1)
Employee benefit obligations (1)
Liabilities classified as held for sale (13)
Net assets of disposal group 39
13 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
The financial assumptions for the major plans are as follows:
30.9.21 31.3.21
UK plan US plans UK plan US plans
% % % %
First year's rate of increase in salaries 3.50 3.00 3.40 3.00
Ultimate rate of increase in salaries 3.50 3.00 3.40 3.00
Rate of increase in pensions in payment 3.15 - 3.05 -
Discount rate 2.00 2.70 2.10 3.00
Inflation - 2.20 - 2.20
- UK Retail Prices Index (RPI) 3.30 - 3.20 -
- UK Consumer Prices Index (CPI) 2.75 - 2.65 -
Current medical benefits cost trend rate 5.40 2.20 5.40 2.20
Ultimate medical benefits cost trend rate 5.40 2.20 5.40 2.20
The financial assumptions for the other plans are reviewed and updated
annually.
Financial information
Movements in the net post-employment benefit assets and liabilities, including
reimbursement rights, were:
UK UK UK post- US post-
pension - 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 (4) (13) - (4) - (1) (22)
Administrative expenses - in
operating profit (2) - - - - - (2)
Interest 3 (1) - - - (1) 1
Remeasurements 55 1 - 4 (1) - 59
Company contributions 3 11 - 4 1 1 20
Benefits paid - - - - - - -
Exchange - - - (2) (1) 1 (2)
At 30(th) September 2021 241 (8) (8) (18) (26) (27) 154
Post-employment benefits (continued)
13
Financial information (continued)
The post-employment benefit assets and liabilities are included in the balance
sheet as follows:
30.9.21 30.9.21 31.3.21 31.3.21
Post- Post-
employment Employee employment Employee
benefit benefit net benefit benefit net
net assets obligations net assets obligations
£ million £ million £ million £ million
UK pension - legacy section 241 - 186 -
UK pension - cash balance section - (8) - (6)
UK post-retirement medical benefits - (8) - (8)
US pensions - (18) - (20)
US post-retirement medical benefits 6 (32) 6 (31)
Other 2 (29) 2 (29)
Total post-employment plans 249 (95) 194 (94)
Other long-term employee benefits (5) (4)
Total long-term employee benefit obligations (100) (98)
Other long-term employee benefits includes £1 million of liabilities
transferred to liabilities classified as held for sale (note 12).
14 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 periods.
14 Fair values (continued)
Fair value
30.9.21 31.3.21 hierarchy
£ million £ million level
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive income 54 53 1
Interest rate swaps 17 20 2
Borrowings and related swaps (3) (3) 2
Current
Trade receivables(1) 260 423 2
Other receivables(2) 25 58 2
Cash and cash equivalents - money market funds 523 462 2
Interest rate swaps 3 - 2
Other financial assets(3) 61 44 2
Other financial liabilities(3) (28) (18) 2
Fair value
30.9.21 31.3.21 hierarchy
£ million £ million level
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps (1,051) (1,249) -
Lease liabilities (48) (51) -
Current
Amounts receivable under precious metal sale and repurchase agreements 162 308 -
Amounts payable under precious metal sale and repurchase agreements (1,448) (1,442) -
Cash and cash equivalents - cash and deposits 223 119 -
Cash and cash equivalents - bank overdrafts (42) (36) -
Borrowings and related swaps (309) (26) -
Lease liabilities (11) (11) -
Lease liabilities classified as held for sale (1) - -
(1) 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.
(2) Other receivables with cash flows that do not represent solely the payment
of principal and interest.
(3) Includes forward foreign exchange contracts, forward precious metal price
contracts and currency swaps.
14 Fair values (continued)
The fair value of financial instruments, excluding accrued interest, is
approximately equal to book value except for:
30.9.21 31.3.21
Carrying Fair Carrying Fair
amount value amount value
£ million £ million £ million £ million
US Dollar Bonds 2022, 2023, 2025, 2027, 2028 and 2030 (675) (692) (662) (689)
Euro Bonds 2023, 2025, 2028 and 2030 (187) (191) (186) (193)
Sterling Bonds 2024 and 2025 (110) (112) (110) (116)
KfW US dollar loan 2024 (37) (39) (36) (39)
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 period end.
15 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 30(th) September 2021, precious
metal leases were £223 million at closing prices (31(st) March 2021:
£437 million). Precious metal leases are not accounted for under IFRS 16 as
they qualify as short term leases.
16 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.
On a specific matter, the group previously disclosed that it had been informed
by two customers of failures in certain engine systems for which the group
supplied a particular coated substrate as a component for their customers'
emissions after-treatment systems. The particular coated substrate was sold to
only these two customers. The group has not been contacted by any regulatory
authority about these engine system failures. The reported failures have not
been demonstrated to be due to the coated substrate supplied by the group. As
previously disclosed, we settled with one of these customers on mutually
acceptable terms with no admission of fault.
Having reviewed its contractual obligations and the information currently
available to it, the group believes it has defensible warranty positions in
respect of its supplies of coated substrate for the after-treatment systems in
the affected engines remaining at issue. If required, it will vigorously
assert its available contractual protections and defences. The outcome of any
discussions relating to the matters raised 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.
16 Contingent liabilities (continued)
On a separate matter, the group is involved in investigating environmental
contamination at a site for which it has been identified as a potentially
responsible party under US law. Johnson Matthey Inc. is party to litigation
brought by the Pennsylvania Department of Environmental Protection (PaDEP)
regarding contamination at a site in Chester County, Pennsylvania, that was
operated by Johnson Matthey Inc. between 1951 and 1969, when it sold its
interest in the site. A site investigation has been completed, but remediation
has not yet commenced. On 24(th) September 2021, PaDEP announced a proposed
remedy for the site; it is now accepting public comments. Johnson Matthey has
asserted various legal defences, but the litigation is currently stayed and
these have not yet been addressed. Whether and to what extent Johnson Matthey
and other potentially responsible parties (given subsequent use of the site by
third-party entities) have any liability for the remediation has not yet been
determined. It is the directors' current view that the group cannot reliably
assess the outcome of the litigation nor reasonably estimate the quantum of
future remediation costs or the group's share of such costs and as such no
provision for the remediation has been recognised in these consolidated
accounts.
17 Transactions with related parties
There have been no material changes in related party relationships in the six
months ended 30(th) September 2021 and no related party transactions have
taken place which have materially affected the financial position or
performance of the group during that period.
18 Events after the balance sheet date
On 11(th) November 2021, the group's board announced its decision to pursue
the sale of all or parts of the Battery Materials business with the ultimate
intention of exiting. An impairment charge of £314 million was recognised
against the carrying amount of the assets (see note 4). Capital expenditure
incurred since 1(st) October 2021 has been reduced and future commitments
paused. Depending on the outcome of the sale the group may incur further
impairment charges and/or closure costs. There are also £155 million of term
loans associated with our Battery Materials investment in Poland which are
likely to be prepaid.
On 18(th) November 2021, the group's board approved a share buyback of around
£200 million which will commence in 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.
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. The group has a long-term target of a
period. return on invested capital of 20% to ensure focus on efficient use of the
group's capital.
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.
19 Non-GAAP measures (continued)
Reconciliations to GAAP measures
Sales
See note 2.
Underlying profit measures
Operating Profit / (loss) Tax Profit / (loss)
profit before tax expense for the period
Six months ended 30(th) September 2021 £ million £ million £ million £ million
Underlying 293 264 (42) 222
Gain on significant legal proceedings 44 44 (4) 40
Amortisation of acquired intangibles (3) (3) - (3)
Major impairment(1) (314) (314) 27 (287)
Reported 20 (9) (19) (28)
(1) For further detail please see note 4.
Operating Profit Tax Profit for
profit before tax expense the period
Six months ended 30(th) September 2020 £ million £ million £ million £ million
Underlying 151 109 (17) 92
Amortisation of acquired intangibles (5) (5) 1 (4)
Major impairment and restructuring charges (78) (78) 14 (64)
Reported 68 26 (2) 24
Underlying earnings per share Six months ended
30.9.21 30.9.20
Underlying profit for the period (£ million) 222 92
Weighted average number of shares in issue (million) 192.8 192.7
Underlying earnings per share (pence) 114.8 47.7
19 Non-GAAP measures (continued)
Return on Invested Capital (ROIC)
Period Year Period
ended ended ended
30.9.21 31.3.21 30.9.20
£ million £ million £ million
Annualised underlying operating profit 646 504 425
Average net debt 1,071 1,294 1,504
Average equity 2,753 2,771 2,774
Average capital employed 3,824 4,065 4,278
Less: Average pension net assets (206) (261) (258)
Less: Average related deferred taxation 37 47 44
Average capital employed (excluding post tax pension net assets) 3,655 3,851 4,064
ROIC (excluding post tax pension net assets) 17.7% 13.1% 10.4%
ROIC 16.9% 12.4% 9.9%
Average working capital days (excluding precious metals) Six months Year Six months
ended ended ended
30.9.21 31.3.21 30.9.20
£ million £ million £ million
Inventories 2,004 1,814 2,074
Trade and other receivables 1,916 2,422 2,415
Trade and other payables (3,050) (3,325) (3,575)
870 911 914
Working capital balances classified as held for sale 25 - 6
Total working capital 895 911 920
Less: Precious metal working capital (356) (552) (313)
Working capital (excluding precious metals) 539 359 607
Average working capital days (excluding precious metals) 40 57 70
Free cash flow
Six months ended
30.9.21 30.9.20
£ million £ million
Net cash inflow from operating activities 412 482
Interest received 6 33
Interest paid (40) (77)
Purchases of property, plant and equipment (141) (139)
Purchases of intangible assets (43) (36)
Proceeds from sale of non-current assets 2 -
Principal element of lease payments (7) (7)
Free cash flow 189 256
19 Non-GAAP measures (continued)
Net debt (including post-tax pension deficits) to underlying EBITDA
30.9.21 31.3.21 30.9.20
£ million £ million £ million
Cash and deposits 223 119 197
Money market funds 523 462 573
Bank overdrafts (42) (36) (32)
Cash and deposits transferred to assets classified as held for sale - - 14
Cash and cash equivalents 704 545 752
Borrowings and related swaps - current (309) (26) (371)
Interest rate swaps - current 3 - -
Borrowings and related swaps - non-current (1,054) (1,252) (1,220)
Interest rate swaps - non-current 17 20 31
Lease liabilities - current (11) (11) (11)
Lease liabilities - non-current (48) (51) (58)
Lease liabilities - transferred to liabilities classified as held for sale (1) - (1)
Net debt (699) (775) (878)
Increase in cash and cash equivalents 156 276 480
Less: Increase in borrowings (63) (70) (284)
Less: Principal element of lease payments 7 14 7
Decrease in net debt resulting from cash flows 100 220 203
New leases, remeasurements and modifications (4) (3) (1)
Disposal of businesses - 1 -
Exchange differences on net debt (20) 107 19
Other non-cash movements - (6) (5)
Movement in net debt 76 319 216
Net debt at beginning of year (775) (1,094) (1,094)
Net debt at end of year (699) (775) (878)
Net debt (699) (775) (878)
Add: Pension deficits (47) (49) (58)
Add: Related deferred tax 8 9 11
Net debt (including post tax pension deficits) (738) (815) (925)
Underlying EBITDA for this period 389 235
Underlying EBITDA for prior year 684 705
Less: Underlying EBITDA for prior half year (235) (350)
Annualised underlying EBITDA 838 684 590
Net debt (including post tax pension deficits) to underlying EBITDA 0.9 1.2 1.6
19 Non-GAAP measures (continued)
30.9.21 31.3.21 30.9.20
£ million £ million £ million
Underlying EBITDA 389 684 235
Depreciation and amortisation (99) (190) (89)
Gain on significant legal proceedings 44 - -
Major impairment and restructuring charges (314) (171) (78)
Finance costs (38) (158) (77)
Finance income 9 73 36
Share of losses of joint ventures and associates - - (1)
Income tax expense (19) (33) (2)
(Loss) / profit for the period (28) 205 24
At 30(th) September 2021 cash and cash equivalents includes £54 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.
2021
2(nd) December
Ex dividend date
3(rd) December
Interim dividend record date
2022
1(st) February
Payment of interim dividend
26(th) May
Announcement of results for the year ending 31(st) March 2022
21(st) July
131(st) Annual General Meeting (AGM)
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 the group 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: 5th Floor, 25 Farringdon Street, London EC4A 4AB
Telephone: +44 (0) 20 7269 8400
Fax: +44 (0) 20 7269 8433
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England ─ Number 33774
LEI code: 2138001AVBSD1HSC6Z10
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 8.30am to 5.30pm Monday to Friday excluding public holidays
in England and Wales.
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