REG - Johnson Matthey PLC - Johnson Matthey half year results
22/11/2023 07:15
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RNS Number : 3018U Johnson Matthey PLC 22 November 2023
Half year results for the
six months ended 30(th) September 2023
22(nd) November 2023
Catalysing the net zero transition to drive sustainable value creation
Continued execution against a challenging economic backdrop
· Good growth in underlying profit at constant FX and adjusting for precious
metal prices
· Overall results impacted by lower precious metal market prices as guided
· Transformation progressing at pace to create a more streamlined organisation
and stronger platform for growth
· On track to deliver in excess of £150 million annualised savings by end of
2024/25, with associated restructuring charges of £17 million in the period
· Underlying margin up in Clean Air and Catalyst Technologies - plans for
further increase
· Three year cumulative capex guidance to 2024/25 reduced by c.10% to c.£1.0bn
· Delivering on strategic milestones, including winning key 'first of a kind'
projects in sustainable fuels and low carbon hydrogen
Reported results Underlying results (continuing)¹
Half year ended % Half year ended % % change, constant FX rates
30(th) September
change
30(th) September
change
2023 2022 2023 2022
Revenue £m 6,531 7,328 -11
Sales excluding £m 1,967 2,045 -4 -1
precious metals³
Operating profit £m 136 211 -36 180 222 -19 -15
Profit before tax £m 82 188 -56 139 201 -31
(continuing)
Profit after tax (continuing) £m 63 150 -58 108 161 -33
Basic earnings per share (continuing) pence 34.7 82.0 -58 59.1 88.2 -33
Interim dividend per share pence 22.0 22.0 -
Underlying performance - continuing operations¹(,)²
· Sales of £2.0 billion, down 1%, with lower average precious metal prices
affecting PGM Services, partly offset by strong growth in Hydrogen
Technologies and further progress in Catalyst Technologies
· Underlying operating profit of £180 million, down 15%, primarily due to lower
average precious metal prices
· Underlying operating profit - adjusting for c.£55 million impact from
precious metal prices - was up 10% driven by higher pricing and transformation
benefits
· Underlying earnings per share of 59.1p, down 33% due to lower underlying
operating profit and higher net finance charges of £41 million
· Strong balance sheet with net debt of £1,044 million; net debt to EBITDA of
1.7 times in line with our target range of 1.5 to 2.0 times
Reported results²
· Revenue down 11%, driven by lower average precious metal prices
· Operating profit of £136 million, down 36%, due to lower average precious
metal prices and £42 million impairment and restructuring charges
· Profit before tax of £82 million, compared to £188 million in the prior
period, largely reflecting lower operating profit and higher net finance
charges
· Reported earnings per share (continuing) of 34.7 pence
· Cash inflow from operating activities of £236 million (1H 2022/23: £145
million)
· Interim dividend of 22.0 pence per share maintained at the same level as the
prior year
Operational and strategic highlights
· Clean Air underlying profitability improved: taking actions to drive further
margin increase
· Won nine large scale projects in Catalyst Technologies across low carbon
hydrogen and sustainable fuels, worth c.£185 million in sales over five years
· Delivered significant margin uplift in Catalyst Technologies, with first half
margins up 480 basis points, and on track to achieve margin targets
· Hydrogen Technologies sales up 61%
· Achieved c.£70 million transformation cost savings to date, and on track to
deliver in excess of £150 million annualised savings by the end of 2024/25
· Committed to achieving net zero by 2040. Targeting 42% reduction in Scope 1
and Scope 2 greenhouse gas emissions, and 42% reduction in Scope 3 greenhouse
gas emissions from purchased goods and services by 2030
Liam Condon, Chief Executive Officer, commented:
We are starting to see the benefits of the new strategy and transformation of
Johnson Matthey. Against a backdrop of lower precious metal prices which
affected headline profitability, we delivered good growth in underlying
performance⁴ despite a challenging macroeconomic environment.
We are executing on our transformation at pace to simplify the business and
drive improved performance. In Clean Air and Catalyst Technologies, underlying
profitability is improving and there are clear plans in place to deliver
further margin improvement. Across the group, we continue to upskill our
commercial capabilities and our transformation programme is creating a more
streamlined organisation and unlocking significant cost savings.
We have continued to make good progress in delivering against our strategic
milestones whilst also driving transformation. In particular, we have secured
important 'first of a kind' project wins in Catalyst Technologies which
position us as a global leader in sustainable solutions. This is confirmation
of the significant value we see in Catalyst Technologies as we help our
customers to decarbonise. In Hydrogen Technologies we continue to see strong
sales growth in the near term. The global hydrogen value chain is in an early
stage of development and continues to evolve. We have a very disciplined and
modular approach to investment that will ensure sustainable returns despite
market volatility, and we expect a significant opportunity for value creation
in the medium and long-term.
Looking forward, we are on track to deliver good growth in underlying
performance and I am excited about the opportunities that lie ahead. I am
confident we will achieve our 2023/24 milestones and deliver on our strategy,
creating sustainable shareholder value and benefits for all our stakeholders.
Outlook for the year ending 31(st) March 2024
For 2023/24, the outlook for underlying performance has improved and we now
expect at least high single digit growth in operating performance at constant
precious metal prices and constant currency (previously at least mid single
digit). This is underpinned by transformation benefits of c.£55 million in
the year.
In Clean Air, we continue to expect strong growth in operating performance and
a sequentially stronger second half. Whilst external data suggest limited
growth in vehicle production for 2023/24, margin expansion should mainly be
driven by efficiency benefits and we expect a double digit operating margin
for the full year, with further progress beyond. PGM Services' performance
will be largely driven by precious metal prices, with recycling volumes
remaining subdued. For Catalyst Technologies, we expect very strong growth in
operating performance and a significant uplift in margins, benefiting from
pricing and efficiencies. We expect sales to grow strongly in Hydrogen
Technologies and we will continue to invest for growth in a very disciplined
manner, resulting in an operating loss at a similar level to 2022/23.⁵
Whilst precious metal prices have stabilised recently, it remains difficult to
predict how they may develop. To illustrate the impact they may have on our
results, assuming prices remain at their current level⁶ for the remainder of
2023/24 there would be an adverse impact of
c.£80 million⁷ on full year operating performance compared with the prior
year (1H 2023/24: c.£55m adverse impact). We remain focused on mitigating the
potential impact on our performance.
At current foreign exchange rates⁸, translational foreign exchange movements
for the year ending 31(st) March 2024 are expected to adversely impact
underlying operating profit by
c.£15 million (1H 2023/24: £9m adverse impact).
Dividend
The board has approved an interim dividend of 22.0 pence per share, maintained
at the same level as the prior year (1H 2022/23: 22.0 pence per share). The
interim dividend will be paid on 6(th) February 2024, with an ex-dividend date
of 30(th) November 2023, to shareholders on the register on 1(st) December
2023.
Group Leadership Team changes
We have made changes to our Group Leadership Team as we reshape our business
to drive improved profitability and position ourselves for long-term growth.
Maurits van Tol, previously Chief Technology Officer, has been appointed Chief
Executive, Catalyst Technologies. Maurits succeeds Jane Toogood who
successfully positioned Catalyst Technologies as a global leader in
sustainable technologies. Jane has decided it is the right time for a new
leader to take the business through the next phase of acceleration and has
left the group. Liz Rowsell, previously Corporate R&D Director, succeeds
Maurits as Chief Technology Officer.
We have combined Strategy with Corporate Development given their strong
interdependency. Louise Melikian, previously Head of Corporate Development, is
now Chief Strategy and Corporate Development Officer and joins the Group
Leadership Team. Christian Gunther, previously Chief Strategy and
Transformation Officer, who has served Johnson Matthey very well, has also
left the group.
All changes were effective from 1(st) October 2023.
Enquiries:
Investor Relations
Martin Dunwoodie Director of Investor Relations +44 20 7269 8241
Louise Curran Senior Investor Relations Manager +44 20 7269 8235
Carla Fabiano Senior Investor Relations Manager +44 20 7269 8004
Media
Barney Wyld Group Corporate Affairs Director +44 20 7269 8001
Harry Cameron Teneo +44 7799 152148
Notes:
1. Underlying performance 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, share of profits or losses from
non-strategic equity investments, major impairment and restructuring charges
and, where relevant, related tax effects. For definitions and reconciliations
of other non-GAAP measures, see pages 49 to 54.
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
1H 2022/23 results converted at 1H 2023/24 average rates. In 1H 2023/24, the
translational impact of exchange rates on group sales and underlying operating
profit was an impact of £52 million and £9 million respectively.
3. Revenue excluding sales of precious metals to customers and the precious metal
content of products sold to customers.
4. At constant FX and adjusting for c.£55 million impact from precious metal
prices.
5. Outlook commentary for Clean Air, PGM Services, Catalyst Technologies and
Hydrogen Technologies assumes
constant precious metal prices and constant currency.
6. Based on average precious metal prices in November 2023 (month to date).
7. A US$100 per troy ounce change in the average annual platinum, palladium and
rhodium metal prices each have an impact of approximately £1 million, £1.5
million and £0.75 million respectively on full year underlying
operating profit in PGM Services. This assumes no foreign exchange movement.
8. At average foreign exchange rates for November 2023 month to date (£:US$
1.227, £:€ 1.145, £:RMB 8.937) translational foreign exchange movements
for the year ending 31(st) March 2024 are expected to adversely impact
underlying operating profit by c.£15 million.
Chief Executive Officer update
Our strategy is purpose-driven to catalyse the net zero transition for our
customers. We are focused on technologies and markets where we have leading
positions and competitive advantage. At the same time, to support our strategy
and maximise value creation we are undergoing a significant transformation to
strengthen our capabilities, simplify our operating model and drive improved
performance.
In the first half we saw good underlying performance¹, excluding the impact
of metal and currency, despite the challenging market backdrop. We have taken
actions to transform our business and I am pleased that we are starting to see
the benefits. In Clean Air and Catalyst Technologies underlying margins have
improved, but there is a lot more to come and we are committed to delivering
further material improvements in both businesses. Our reported performance in
the half was significantly impacted by lower precious metal prices, mainly in
PGM Services. We are working hard to mitigate this going forward, including
changes to our business model, although this will take time. In Hydrogen
Technologies sales grew strongly. Whilst the global hydrogen value chain is in
an early stage of development and continues to evolve, we see good
opportunities. We have a very disciplined and modular approach to investment
that will ensure sustainable returns despite market volatility, and we expect
a significant opportunity for value creation in the medium and long-term. The
underlying performance provides evidence that our strategy is delivering, and
gives confidence in our ability to capture the growth opportunities ahead of
us, drive efficiencies and translate all of that into value creation for our
shareholders.
We have made progress with our transformation programme and are on track to
deliver in excess of £150 million annualised cost savings by the end of
2024/25. The changes we are making will create a more efficient and
streamlined organisation, meaning we are better positioned to deliver on our
strategy and capture the growth opportunities ahead.
To date we have delivered benefits of c.£70 million, with c.£25 million
achieved in the half against a target of c.£55 million for the full year.
Examples of actions we are taking include the consolidation of our Clean Air
manufacturing footprint and we are also implementing a Global Business
Services (GBS) operating model across HR, finance and procurement. This GBS
model will eliminate duplication, deliver standardisation, simplify processes,
sharpen accountabilities and reduce costs. We are also driving greater value
from procurement and rationalising our real estate globally.
We continue to focus and simplify our portfolio and have made good progress on
our disposal programme. Within Value Businesses we aim to have divestments
agreed by the end of our fiscal year.
Strategic milestones overview
We are making good progress against the strategic milestones we set out in May
2022. Our growth businesses - Catalyst Technologies and Hydrogen Technologies
- continue to develop, positioning us as a global leader in sustainable
solutions.
Customers:
· 2 strategic partnerships in Hydrogen Technologies - Plug Power and Hystar
· Winning targeted Euro 7 business, on track to deliver £4 billion+ cash² for
Clean Air
· Won 9 additional large scale projects in Catalyst Technologies³ (targeting
>10 across Catalyst Technologies and Hydrogen Technologies by end of
2023/24)
Our strategy is purpose-driven to catalyse the net zero transition for our
customers. We are focused on technologies and markets where we have leading
positions and competitive advantage. At the same time, to support our strategy
and maximise value creation we are undergoing a significant transformation to
strengthen our capabilities, simplify our operating model and drive improved
performance.
In the first half we saw good underlying performance¹, excluding the impact
of metal and currency, despite the challenging market backdrop. We have taken
actions to transform our business and I am pleased that we are starting to see
the benefits. In Clean Air and Catalyst Technologies underlying margins have
improved, but there is a lot more to come and we are committed to delivering
further material improvements in both businesses. Our reported performance in
the half was significantly impacted by lower precious metal prices, mainly in
PGM Services. We are working hard to mitigate this going forward, including
changes to our business model, although this will take time. In Hydrogen
Technologies sales grew strongly. Whilst the global hydrogen value chain is in
an early stage of development and continues to evolve, we see good
opportunities. We have a very disciplined and modular approach to investment
that will ensure sustainable returns despite market volatility, and we expect
a significant opportunity for value creation in the medium and long-term. The
underlying performance provides evidence that our strategy is delivering, and
gives confidence in our ability to capture the growth opportunities ahead of
us, drive efficiencies and translate all of that into value creation for our
shareholders.
We have made progress with our transformation programme and are on track to
deliver in excess of £150 million annualised cost savings by the end of
2024/25. The changes we are making will create a more efficient and
streamlined organisation, meaning we are better positioned to deliver on our
strategy and capture the growth opportunities ahead.
To date we have delivered benefits of c.£70 million, with c.£25 million
achieved in the half against a target of c.£55 million for the full year.
Examples of actions we are taking include the consolidation of our Clean Air
manufacturing footprint and we are also implementing a Global Business
Services (GBS) operating model across HR, finance and procurement. This GBS
model will eliminate duplication, deliver standardisation, simplify processes,
sharpen accountabilities and reduce costs. We are also driving greater value
from procurement and rationalising our real estate globally.
We continue to focus and simplify our portfolio and have made good progress on
our disposal programme. Within Value Businesses we aim to have divestments
agreed by the end of our fiscal year.
Strategic milestones overview
We are making good progress against the strategic milestones we set out in May
2022. Our growth businesses - Catalyst Technologies and Hydrogen Technologies
- continue to develop, positioning us as a global leader in sustainable
solutions.
Customers:
·
2 strategic partnerships in Hydrogen Technologies - Plug Power and Hystar
·
Winning targeted Euro 7 business, on track to deliver £4 billion+ cash² for
Clean Air
·
Won 9 additional large scale projects in Catalyst Technologies³ (targeting
>10 across Catalyst Technologies and Hydrogen Technologies by end of
2023/24)
Investments:
· PGM Services refining capability expansion in China complete and ramping up
· Construction of Hydrogen Technologies CCM plant in the UK to expand total
capacity from 2GW to 5GW is on track
· Targeted capacity expansion (e.g. fuel cells catalyst, formaldehyde catalyst)
in progress
· Divesting non-core assets - Piezo Products (part of Medical Device Components)
and Diagnostic Services sold
People: targeting an increase in engagement score from 6.9 in 2022/23 to 7.2
in 2024/25
Sustainability:
· Reduced Scope 1+2 CO(2)e (carbon dioxide equivalent) emissions by 13% in
2022/23, ahead of targeted c.10% reduction by 2023/24 (from a 2019/20
baseline)
· Helping customers reduce CO(2)e emissions through use of our products by
>1mt p.a. by 2023/24
Notes:
1. At constant FX and adjusting for c.£55 million impact from precious metal
prices.
2. At least £4 billion of cash under our range of scenarios from 1(st) April
2021 to 31(st) March 2031. Cash target
pre-tax and post restructuring costs.
3. From 1(st) April 2022 to date.
Summary of underlying operating results from continuing operations
Unless otherwise stated, commentary refers to performance at constant FX
rates¹. Percentage changes in the tables are calculated on rounded numbers.
Sales Half year ended % change % change,
30(th) September
constant FX rates
(£ million)
2023 2022
Clean Air 1,286 1,278 +1 +4
PGM Services 230 282 -18 -16
Catalyst Technologies 282 275 +3 +5
Hydrogen Technologies 37 23 +61 +61
Value Businesses²(,)³ 190 235 -19 -21
Eliminations (58) (48)
Sales (continuing) 1,967 2,045 -4 -1
Underlying operating profit Half year ended % change % change,
(£ million)
30(th) September
constant FX rates
2023 2022
Clean Air 124 108 +15 +22
PGM Services 78 125 -38 -37
Catalyst Technologies 35 21 +67 +84
Hydrogen Technologies (26) (24) n/a n/a
Value Businesses²(,)⁴ 14 21 -33 -33
Corporate (45) (29)
Underlying operating profit (continuing) 180 222 -19 -15
Reconciliation of underlying operating profit Half year ended
to operating profit
30(th) September
(£ million)
2023 2022
Underlying operating profit (continuing) 180 222
Major impairment and restructuring charges⁵ (42) (9)
Amortisation of acquired intangibles (2) (2)
Operating profit (continuing) 136 211
Notes:
1. Growth at constant rates excludes the translation impact of foreign exchange
movements, with 1H 2022/23 results converted at 1H 2023/24 average rates. In
1H 2023/24, the translational impact of exchange rates on group sales and
underlying operating profit was an impact of £52 million and £9 million
respectively.
2. Includes Battery Systems, Medical Device Components, Battery Materials,
Diagnostic Services and Advanced Glass Technologies.
3. Sales relating to divestments of Advanced Glass Technologies and Diagnostic
Services: (1H 2022/23:
£41 million, 1H 2023/24: £37 million)
4. Operating profit related to divestments of Advanced Glass Technologies and
Diagnostic Services: (1H 2022/23:
£2 million, 1H 2023/24: £3 million).
5. For further detail on these items please see pages 18 and 19.
Business reviews
Clean Air
Improved profitability driven by pricing and efficiency benefits
· Sales up 4% supported by increased pricing and slightly higher volumes in
light duty diesel and heavy duty diesel
· Underlying operating profit increased 22% and margins expanded 110 basis
points to 9.6%. We benefited from increased pricing and volumes as well as
cost savings from our transformation programme. This was partly offset by a
weaker mix
Half year ended % change % change, constant FX rates
30(th) September
2023 2022
£ million £ million
Sales
Light duty diesel 532 515 +3 +7
Light duty gasoline 280 299 -6 -1
Heavy duty diesel 474 464 +2 +5
Total sales 1,286 1,278 +1 +4
Underlying operating profit 124 108 +15 +22
Underlying operating profit margin 9.6% 8.5%
EBITDA margin 12.5% 11.3%
Reported operating profit 104 109
Clean Air provides catalysts for emission control after-treatment systems used
in light and heavy duty vehicles powered by internal combustion engines.
Performance commentary
The light duty vehicle market saw an improvement in global production during
the first half, supported by the easing of supply chain disruptions. The
normalisation of the Chinese market following COVID related lockdowns in the
prior year led to a recovery in heavy duty vehicle production. Fleet
replacements in Europe and the Americas translated to increased demand in this
market.
Sales
Light duty diesel
Light duty diesel sales were up 7%, outperforming a declining market. This was
driven by strong performance in Asia and the Americas. In Asia, we strongly
outperformed a growing market which is recovering from COVID related lockdowns
in China in the prior year. Our growth was driven by the ramp up of new
platforms in China and India. In the Americas we significantly outperformed a
declining market which was impacted by faltering domestic demand due to the
uncertain economic outlook. Our outperformance in the region was mainly driven
by higher revenue per unit from a new platform. In Europe, which represents
around 60% of our total light duty diesel sales, sales were broadly flat, in
line with the overall market.
Light duty gasoline
Light duty gasoline sales were down 1%, underperforming the global market. In
Europe, sales grew in line with a strong underlying market supported by the
easing of supply chain disruptions. In the Americas, sales grew slightly
behind a growing market due to the end of some platform programmes. Our sales
in Asia underperformed a growing market. We saw good growth in China driven by
improved mix but this was more than offset by previous platform losses
elsewhere in the region.
Heavy duty diesel catalysts
In heavy duty diesel sales were up 5%, underperforming a robust market. We saw
very strong performance in Asia partially offset by a decline in Europe. In
Asia our sales significantly outperformed a strong market due to increased
demand from our customers in China and higher revenue per unit in India as a
result of product mix. We underperformed a growing market in Europe due to a
weaker mix. In the Americas, our sales were in line with a slightly declining
market. The high value Class 8 truck production was higher than anticipated
but the worsening macroeconomic outlook in South America impacted production
in the region. In the future, our strong presence in heavy duty positions us
favourably to capitalise on upcoming advancements, such as internal combustion
engines powered by hydrogen.
Underlying operating profit
Underlying operating profit increased 22% to £124 million and margins
increased 110 basis points to 9.6%. We benefited from increased pricing and
volumes as well as cost savings from our transformation programme. This was
partly offset by a weaker product mix.
Business update
In Clean Air, we are focusing on margin improvement and delivery of our cash
generation target of at least £4 billion in the decade to 2030/31. This is
underpinned by business wins, rigorous cost management and tightening emission
control legislation globally.
We continue to develop world leading catalysts to support our customers as
more demanding emission regulations come into force across the world. In
Europe, the legislative process for Euro 7 emission standards is ongoing.
Earlier this month the EU Parliament formalised its position during a plenary
vote. While less stringent than the EU Commission's proposal, it seeks to
retain some key elements of the initial proposal, especially for light duty
vehicle exhaust emissions. It also voted in favour of later introduction
timings, meaning we can estimate Euro 7 standards to commence from 2027/28 for
light duty and 2028 to 2030 for heavy duty vehicles. We expect final rules to
be agreed ahead of EU elections in June next year. Beyond Europe we still
expect the regulation roadmap to develop globally with the US already setting
tighter standards from 2027 onwards whilst China and India are expected to
bring proposals in 2024/25.
We are also strengthening our commercial capabilities, improving pricing
whilst winning new business. We continue to win our targeted business across
gasoline and diesel platforms.
As we drive efficiencies, we are reducing fixed costs and streamlining
SG&A expenses and production overheads. We are also making good progress
with the optimisation of our manufacturing footprint and have already
completed 3 of the 4 announced site closures targeted by the end of 2023/24.
We remain on track to deliver on our cash generation target of at least £4
billion in the decade to 2030/31, having already delivered £1.4 billion in
the first two years of this guidance. We expect strong cashflow generation
this year, albeit more moderate compared to the prior year. Alongside this, we
are identifying efficiencies that will deliver further margin improvement and
we expect to achieve a double digit operating margin for the full year with
further progress beyond.
PGM Services
Performance reflects lower average PGM prices and reduced refinery volumes
· Sales declined 16%, reflecting lower average PGM prices and decreased refinery
volumes due to continued lower levels of auto scrap
· Underlying operating profit was down due to lower average PGM prices. Our
actions to improve efficiency have offset lower refinery volumes
Half year ended % change % change, constant FX rates
30(th) September
2023 2022
£ million £ million
Sales
PGM Services 230 282 -18 -16
Underlying operating profit 78 125 -38 -37
Underlying operating profit margin 33.9% 44.3%
EBITDA margin 40.0% 48.9%
Reported operating profit 77 125
PGM Services is the world's largest recycler of platinum group metals (PGMs).
This business has an important role in enabling the energy transition through
providing circular solutions as demand for scarce critical materials
increases. PGM Services provides a strategic service to the group, supporting
Clean Air, Catalyst Technologies and Hydrogen Technologies with security of
metal supply in a volatile market, and manufactures value added PGM products
Performance commentary
Sales
In PGM Services, sales declined 16% primarily driven by lower average PGM
prices, and in particular palladium and rhodium, which declined 35% and 64%
respectively compared to the prior period. PGM prices were impacted in the
period by lower auto demand and the liquidation of excess rhodium positions.
The average price of rhodium over the last three years to November 2023 has
been $14,400 per troy ounce, peaking at $28,700 in early 2021. Since then,
rhodium prices have declined and stabilised in recent months at around $4,300.
In our refineries, intake volumes continue to be down due to lower auto scrap
resulting from a strong used car market. We expect this trend to continue
through our second half. We have completed the expansion of our China refinery
which is now fully commissioned and taking in feeds. Our metal trading
business performed well supported by a volatile precious metal price
environment, particularly in China.
Across our PGM products businesses, sales were broadly flat.
Underlying operating profit
Underlying operating profit declined 37% mainly impacted by lower average PGM
prices
(c.£55 million impact). We have offset the impact of lower auto scrap volumes
with cost saving actions.
Business update
In PGM Services we understand the full life cycle of the PGMs in our products
and continue to work with our partners to enable greater recycling and
refining at the end of their life. Ensuring a full service offering to
customers, from metal supply to recycling, allows us to capture value from the
entire life cycle of PGMs and is key in enabling our customers to use PGMs
effectively in the energy transition.
For example, to support our Hydrogen Technologies customers, we are applying
our
long-standing recycling expertise to emerging technologies, including fuel
cells and electrolysers to enable circularity in the hydrogen economy. Our new
technology for the recycling of hydrogen fuel cell and electrolyser materials
has proven at pilot scale that we can recycle two critical components: the
platinum group metals in the catalyst layers and the membrane ionomer. This is
a key step on our path to provide a circular service to our Hydrogen
Technologies customers and support the growth of this sector.
To strengthen our position as the world's leading recycler of PGMs, we are
investing in the resilience, efficiency and long-term sustainability of our
assets. Our China refinery is now fully operational, strengthening our
capability and offering in the region. In addition, we are expanding our fuel
cells catalyst capacity within PGM Services to support the growth of our
Hydrogen Technologies business.
Catalyst Technologies
Sales growth and driving material margin improvement
· Sales up 5% with growth in both Catalysts and Licensing
· In Catalysts, sales were mainly driven by higher average prices as we
strengthened our commercial focus, partly offset by lower catalyst refill
volumes
· Won nine large scale projects from April 2022 to date across low carbon
hydrogen and sustainable fuels, of which four were won since May 2023
· Underlying operating profit and margin improved materially, largely driven by
actions taken to improve performance including higher pricing and efficiencies
Half year ended % change % change, constant FX rates
30(th) September
2023 2022
£ million £ million
Sales
Catalysts 254 249 +2 +5
Licensing 28 26 +8 +6
Catalyst Technologies 282 275 +3 +5
Underlying operating profit 35 21 +67 +84
Underlying operating profit margin 12.4% 7.6%
EBITDA margin 16.7% 12.4%
Reported operating profit 32 17
Catalyst Technologies is a key pillar of our strategy as we target high
growth, high return opportunities in the decarbonisation of fuels and chemical
value chains. We have leading positions in syngas: methanol, ammonia, hydrogen
and formaldehyde. Our revenue streams are licensing process technology and
supplying catalysts.
Performance commentary
Sales
Overall, sales were up 5% in the half with growth in both Catalysts - which
represents the majority of sales - and Licensing. In particular, we saw good
performance in China reflecting both strength in formaldehyde and licensing of
existing core technology.
Catalysts: benefiting from higher average prices despite lower volumes
In Catalysts, sales were up 5%. Through our stronger commercial focus we saw
higher average prices across our portfolio, and delivered good growth in
formaldehyde following recent project wins. We performed well across key
syngas segments including ammonia and hydrogen. Overall catalyst refill
volumes were down, largely due to an unplanned shut down at one of our plants.
Licensing: early sales from sustainable solutions portfolio
In Licensing, sales were up 6% supported by growth in our existing core
portfolio as well as sustainable solutions. We continue to make good progress
as we scale our business and target new opportunities in low carbon hydrogen
and sustainable fuels. In the period, we saw early sales from these new
opportunities and continued to win projects in these areas.
Across the rest of our licensing business, we saw growth in areas including
oxoalcohols and BDO (butanediol) following recent project wins in China.
Relating to these offerings (i.e. excluding sustainable solutions), we signed
six licences in the half worth around £70 million in sales over five years.
(1H 22/23: five licences).
Underlying operating profit
Underlying operating profit was up 84% to £35 million and margins grew
significantly, up 480 basis points to 12.4%. This was largely driven by
actions taken to improve performance including higher pricing reflecting our
stronger commercial focus and efficiency benefits.
Business update
In Catalyst Technologies, we are growing our existing business alongside new
opportunities in low carbon hydrogen (or carbon capture and storage -
CCS-enabled hydrogen) and sustainable fuels. These sustainable solutions are
based on syngas technology, where we have a market leading position and strong
track record, and will transform the scale and profitability of our business.
In the near-term, we are focused on improving performance and delivering
higher margins through initiatives across pricing, manufacturing efficiency
and procurement. These actions are delivering immediate results, and we are on
track to achieve our margin targets.
In our sustainable solutions portfolio, we continue to win early 'first of a
kind' projects, which demonstrate the strength of our offering. In the period
from April 2022 to November 2023, we won nine large scale projects across low
carbon hydrogen and sustainable fuels worth c.£185 million in sales over five
years, subject to project completion. This includes four projects which were
won since we last reported in May 2023:
· Kellas Midstream's H2NorthEast low carbon hydrogen plant in Teesside, UK
(October 2023)
· bp's H2Teesside low carbon hydrogen facility in Teesside, UK (October 2023)
· EDL's HyKero sustainable aviation fuel plant in Germany (October 2023)
· ABEL Energy's green methanol project in Australia (November 2023)
The new project wins include two low carbon hydrogen licences in the UK for
H2NorthEast (Kellas) and also H2Teeside (bp) which aims to be one of the UK's
largest low carbon hydrogen facilities. We also won two sustainable fuels
projects including EDL's HyKero plant which would be the first of its kind at
commercial scale in Germany, and also ABEL Energy's green hydrogen and
methanol project in Australia. Across our sustainable solutions portfolio, we
have a pipeline of more than 100 projects, which continues to grow.
In Catalyst Technologies, we are targeting high single digit sales growth in
the short-term, accelerating to mid-teens growth over the medium to long-term.
With the combination of our value creation programme and mix shift towards
licensing we are targeting mid-teens margins by the end of 2024/25 and high
teens by the end of 2027/28, with continued accretion beyond.
Hydrogen Technologies
Significant sales growth and continued disciplined investment to scale the
business
· Sales up 61% driven by higher volumes for strategic customers in fuel cells,
and growth in electrolysers from the supply of components and samples
· Underlying operating loss reflects continued disciplined investment to scale
the business to meet demand, partly offset by higher volumes
Half year ended % change % change, constant FX rates
30(th) September
2023 2022
£ million £ million
Sales
Hydrogen Technologies 37 23 +61 +61
Underlying operating loss (26) (24) n/a n/a
Underlying operating profit margin n/a n/a
Reported operating loss (26) (24)
In Hydrogen Technologies, we provide components across the value chain for
fuel cells and electrolysers including catalyst coated membranes (CCMs) and
membrane electrode assemblies (MEAs). Our ambition is to be the market leader
in CCMs, which are the critical performance defining components at the centre
of fuel cells, PEM (proton exchange membrane) and AEM (anion exchange
membrane) electrolysers.
Performance commentary
Sales
In the half, sales in Hydrogen Technologies were up 61% to £37 million driven
by growth in both fuel cells and electrolysers. Fuel cells - which represent
the majority of our business today - grew strongly reflecting higher
commercial volumes into both automotive and non-road transport applications
for our strategic customers. In electrolysers, we saw higher sales from the
supply of components as well as prototypes and samples.
Across our business, we saw higher manufacturing output as we focused on
operational performance and continued to improve our processes and drive
efficiency. As we further scale and develop long-term relationships, we are
focusing our business towards strategic customers.
Underlying operating loss
Underlying operating loss of £26 million reflects increased investment in
building capability and product development as we scale the business to meet
customer demand, partly offset by higher volumes from strategic customers.
Business update
Since May 2022, we have agreed multi-year strategic partnerships with Plug
Power in the US and Hystar in Europe. As we develop the business we are
growing the number of strategic customers, and supply chain partnerships are
improving security of supply.
In the UK, construction of our 3GW facility in Royston is on track to be
complete by the end of 2023/24. In the US, we are planning to co-invest with
Plug Power into a new manufacturing plant. This plant will initially have 5GW
capacity scaling to 10GW over time. Based on process improvements with our
current and planned UK capacity, we now expect increased output and will be
able to serve more demand from these facilities. Consequently, together with
Plug Power, we are optimising our planned investment in the US including the
timing and level of capex required. We seek to maximise appropriate government
support where available.
Although the global hydrogen value chain is in an early stage of development
and continues to evolve, we continue to target sales of more than £200
million by the end of 2024/25. We anticipate the business to breakeven in
2025/26, with significant growth in sales and profitability thereafter.
Value Businesses
Disposals on track to be agreed by end of 2023/24
· Performance in the half largely reflects lower volumes in Battery Systems
following exceptional customer demand in the prior period
· Sale of Diagnostic Services completed on 29(th) September 2023
Half year ended % change % change, constant FX rates
30(th) September
2023 2022
£ million £ million
Sales
Value Businesses¹ 190 235 -19 -21
Underlying operating profit² 14 21 -33 -33
Underlying operating profit margin 7.4% 8.9%
EBITDA margin 10.0% 11.1%
Reported operating profit 8 15
Value Businesses is managed to drive shareholder value from activities
considered to be
non-core to JM, and comprises Battery Systems and Medical Device Components.
In the period, we completed the sale of Diagnostic Services.
Overall, sales in Value Businesses were down 21% in the half. On a like for
like basis (i.e.
excluding Advanced Glass Technologies and Battery Materials), sales were down
15%.
Sales performance was largely driven by a decline in Battery Systems. Volumes
normalised following exceptional customer demand in the prior year, as supply
chain constraints eased and we satisfied a backlog of orders. This was partly
offset by pricing benefits from sales of higher value next generation e-bike
products. Excluding the impact from the disposal of Piezo Products, sales in
Medical Device Components grew reflecting recent project wins and higher
production following investments to upgrade assets and drive efficiency.
Diagnostic Services grew well, supported by a higher oil price which drove
increased customer activity.
Underlying operating profit
Underlying operating profit was £14 million, a decline of £7 million on the
prior period. This largely reflects lower volumes in Battery Systems as demand
normalised, following strong growth in the prior year. We also experienced
temporary dual running costs in Medical Device Components as we transferred
manufacturing to a lower cost location.
Corporate
Corporate costs were £45 million, an increase of £16 million from the prior
period, largely reflecting higher costs in relation to the implementation of
new IT systems.
Notes:
1. Sales relating to divestments of Advanced Glass Technologies and Diagnostic
Services: (1H 2022/23:
£41 million, 1H 2023/24: £37 million).
2. Operating profit related to divestments of Advanced Glass Technologies and
Diagnostic Services: (1H 2022/23:
£2 million, 1H 2023/24: £3 million).
Financial review - continuing operations
Research and development (R&D)
R&D spend was £104 million in the half. This was broadly in line with the
prior period spend of £106 million and represents c.5% of sales excluding
precious metals. We are prioritising spend in our growth areas Catalyst
Technologies and Hydrogen Technologies, as we continue to commercialise our
sustainable solutions, fuel cell and electrolyser offerings.
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 2023, were:
Share of 1H 2023/24 Average exchange rate % change
non-sterling denominated
underlying operating profit Half year ended
30(th) September
2023 2022
US dollar 22% 1.26 1.21 +4
Euro 39% 1.16 1.17 -1
Chinese renminbi 14% 8.99 8.18 +10
For the half, the impact of exchange rates decreased sales by £52 million and
underlying operating profit by £9 million.
If average rates for November 2023 month to date (£:US$ 1.227, £:€ 1.145,
£:RMB 8.937) are maintained throughout the year ending 31(st) March 2024,
foreign currency translation will have an adverse impact of c.£15 million on
underlying operating profit. A one cent change in the average US dollar and a
ten fen change in the average rate of the Chinese renminbi have an impact of
approximately £1 million on operating profit whilst a one cent change in the
average rate of the Euro has approximately a £2 million impact on full year
underlying operating profit.
Efficiency savings
Our group transformation programme which is expected to deliver savings in
excess of
£150 million by 2024/25 is well underway. Associated costs to deliver the
programme are around £100 million, all of which are cash. In the first half,
we delivered c.£25 million of savings against our expected savings of c.£55
million for the year.
Items outside underlying operating profit
Non-underlying (charge) / income As at As at
30(th) September
30(th) September 2022
(£ million)
2023
Major impairment and restructuring charges (42) (9)
Amortisation of acquired intangibles (2) (2)
Total (44) (11)
There was a £42 million charge relating to major impairment and restructuring
charges comprising a net impairment charge of £12 million and restructuring
charges of
£30 million. The net impairment charge of £12 million includes further
impairment charges to production related assets in Clean Air as the business
continues to consolidate its existing capacity into new and more efficient
plants. Further impairment charges were also recognised in relation to amounts
due from the sale of Battery Materials to EV Metals Group.
Finance charges
Net finance charges in the period amounted to £41 million, up from £21
million in the first half of 2022/23, largely reflecting higher average
borrowings and increased interest charges related to our floating rate debt.
Taxation
The tax charge on underlying profit before tax for the half year ended 30(th)
September 2023 was £31 million, an effective underlying tax rate of 22.0%,
up from 19.9% in the first half of 2022/23 largely due to phasing differences
between the first and second half.
The effective tax rate on reported profit for the half year ended 30(th)
September 2023 was 22.8%. This represents a tax charge of £19 million,
compared with £38 million in the prior period, largely due to lower profit
before tax in the current period.
We currently expect the effective tax rate on underlying profit for the year
ending
31(st) March 2024 to be around 20%.
Post-employment benefits
IFRS - accounting basis
At 30(th) September 2023, the group's net post-employment benefit position,
was a surplus of £98 million.
The cost of providing post-employment benefits in the period was £11 million,
down from
£16 million in the same period last year.
Capital expenditure
We are making disciplined investments to drive growth and deliver attractive
returns. We have further prioritised our capital expenditure and now expect
cumulative spend to decline by c.10% to c.£1 billion over the three year
period to 2024/25.
In the half, capital expenditure was £157 million, 1.6 times depreciation and
amortisation (excluding amortisation of acquired intangibles). In the period,
key projects included:
· Hydrogen Technologies - investing to increase manufacturing capacity in the UK
· PGM Services - investing in the resilience, efficiency and long-term
sustainability of our refinery assets
Strong balance sheet
Net debt as at 30(th) September 2023 was £1,044 million, an increase from
£1,023 million at 31(st) March 2023 and £963 million at 30(th) September
2022. Net debt is £18 million higher at £1,062 million when post tax pension
deficits are included. The group's net debt (including post tax pension
deficits) to EBITDA was 1.7 times (30(th) September 2022: 1.5 times), in line
with our target range of 1.5 to 2.0 times.
We use short-term metal leases as part of our mix of funding for working
capital, which are outside the scope of IFRS 16. Precious metal leases
amounted to £186 million as at
30(th) September 2023 (31(st) March 2023: £138 million, 30(th) September
2022: £129 million).
Free cash flow and working capital
Free cash flow was £78 million in the half, compared to £133 million in the
prior period, largely reflecting lower proceeds from disposals and reduced
operating profit, partly offset by a net working capital inflow.
Excluding precious metal, average working capital days to 30(th) September
2023 increased to 57 days compared to 35 days to 30(th) September 2022. This
largely reflects inventory build ahead of Clean Air site closures as well as
higher working capital in Catalyst Technologies and Hydrogen Technologies to
support growth.
Going concern
The group maintains a strong balance sheet with around £1.5 billion of
available cash and undrawn committed facilities. Cash generation was positive
during the period with free cash flow of £78 million. Net debt was in line
with 31(st) March 2023 at £1,044 million.
As set out on page 31, 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 assumes lower
demand across our markets to account for further disruptions and recession.
Additionally, the group considered scenarios including the impact from metal
price volatility, a slow down in China and increase 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 have reviewed a range of
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 this
half year accounts and so determine that it is appropriate to prepare the
accounts on a going concern basis.
Risks and uncertainties
JM's principal risk landscape continues to be reviewed and updated to reflect
our refreshed strategy and the challenges that come from operating within the
current global environment and economic climate. JM is committed to improving
its risk management approach and insights used to support various business
decisions. The Group's principal risks are listed below.
1. Significant change in demand or margin sustainability - Failure to
correctly anticipate market trends driving demand and commoditisation of our
products. With shifts being slower or faster than anticipated, we may fail to
make the right and timely decisions to respond to these shifts. This risk,
combined with a failure to identify other new markets relevant for JM, may
adversely impact revenue, cash flow and profitability, including our position
as technology and cost leader.
2. Significant geopolitical or macroeconomic event - Due to the nature of JM's
global footprint, there is a risk that we may face disruption in operations,
supply chain and/or customer markets due to geopolitical risks such as
conflicts, trade disputes, sanctions, pandemics, inflation and economic
recession in specific countries or regions where we operate or where our
supply chains are located.
3. Failure to deliver value from capital projects - The success of our
strategy, especially in growth areas, depends on our ability to effectively
prioritise and deliver our strategic capital investment pipeline. There is a
risk that we might be unable to meet production capacity expectations, breach
budgeted costs or lose our competitive position.
4. Development of products that do not meet customer needs - Inability to
develop products that are competitive enough to meet our market ambitions and
our customer's needs. This includes our ability to identify and understand
customer expectations, translate this into effective R&D and develop our
nascent technologies into an industrial production scale.
5. A significant work related EHS incident - Failure to operate safely,
resulting in injury or breach to applicable laws/regulations, which could lead
to negative effects on our people, our reputation and/or the environment. This
could also mean the loss of production time as well as attracting negative
interest from the media and regulators, leading to significant fines and
penalties.
6. Disruption to inbound goods or services provided - Given the nature of the
products and services we provide, there are only a few suppliers that are
approved to source certain important raw materials. If there was significant
disruption in our supply chains this would impact the supply of our products
and services.
7. A low performing culture undermines our strategy - A low-performing
culture, characterised by an insufficiently engaged and inclusive workforce,
lacking commitment to take accountability and drive results could impact the
successful execution of our strategy.
8. Breach to security or control of platinum group metals in our processes -
There is a risk that we have insufficient metal available for our
manufacturing businesses and customer metal commitments. Metal price
volatility affects how much our trading business earns. Our refining business
earnings also depend on metal prices; a fall in these prices reduces revenue
and operating profit. In addition, a failure of our security management
systems may result in a loss of or theft of precious metal, which could lead
to financial loss and / or failure to satisfy our customers. This could reduce
customer confidence or result in legal action.
9. Failure in one or more of our critical operational assets - A failure in a
critical asset at our sites may have a material effect on our supply chain,
performance, share value and reputation. Also, more frequent extreme weather
events and natural disasters may disrupt our operations and increase our costs
10. Unsuccessful delivery of key business transformation programmes - There
are currently various transformation programmes in place across the group to
support the delivery of our strategy and a more agile and streamlined
organisation. In order to achieve this, JM's acceptance of calculated risk
with corresponding need for mitigation has increased to enable several
transformation activities to run in parallel. Failure to successfully deliver
these programmes may delay the expected benefits, disrupt services to
customers or trigger a loss of key talent.
11. Business failure through cyber-attack or other IT incidents - A failure to
adapt our Information Technology to changing business requirements, the
occurrence of significant disruption to our systems or a major cyber security
incident may adversely affect our financial position, harm our reputation, and
could lead to regulatory penalties or non-compliance with laws.
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
Liam Condon Chief Executive Officer
Stephen Oxley Chief Financial Officer
Barbara Jeremiah 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
John O'Higgins 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 21(st)
November 2023 and is signed on its behalf by:
Patrick Thomas
Chair
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 2023 (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.
The interim financial statements comprise:
· the Condensed Consolidated Balance Sheet as at 30(th) September 2023;
· 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.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
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. In preparing the half year results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the half year results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21(st) November 2023
Condensed Consolidated Income Statement
for the six months ended 30(th) September 2023
Six months ended
30.9.23 30.9.22
Notes £ million £ million
Revenue 2, 3 6,531 7,328
Cost of sales (6,084) (6,841)
Gross profit 447 487
Distribution costs (62) (57)
Administrative expenses (205) (208)
Amortisation of acquired intangibles 4 (2) (2)
Major impairment and restructuring charges 4 (42) (9)
Operating profit 136 211
Finance costs (71) (48)
Investment income 30 27
Share of losses of associates (13) (2)
Profit before tax from continuing operations 82 188
Tax expense 5 (19) (38)
Profit for the period from continuing operations 63 150
Profit after tax from discontinued operations - 10
Profit for the period 63 160
pence pence
Earnings per ordinary share
Basic 6 34.7 87.5
Diluted 6 34.6 87.1
pence pence
Earnings per ordinary share from continuing operations
Basic 6 34.7 82.0
Diluted 6 34.6 81.7
Condensed Consolidated Statement of Total Comprehensive Income
for the six months ended 30(th) September 2023
Six months ended
30.9.23 30.9.22
Notes £ million £ million
Profit for the period 63 160
Other comprehensive (expense) / income
Items that will not be reclassified to the income statement in subsequent
years
Remeasurements of post-employment benefit assets and liabilities 13 (75) (115)
Fair value losses on equity investments (3) (4)
Tax on items that will not be reclassified to the income statement 19 28
Total items that will not be reclassified to the income statement (59) (91)
Items that may be reclassified to the income statement:
Exchange differences on translation of foreign operations (16) 187
Exchange differences on translation of discontinued operations - (32)
Amounts credited / (charged) to hedging reserve 2 (12)
Fair value losses on net investment hedges (3) (22)
Tax on items that may be reclassified to the income statement (1) 4
Total items that may be reclassified to the income statement (in subsequent (18) 125
years)
Other comprehensive (expense) / income for the period (77) 34
Total comprehensive (expense) / income for the period (14) 194
Total comprehensive income for the period arises from:
Continuing operations (14) 216
Discontinued operations - (22)
(14) 194
Condensed Consolidated Statement of Financial Position
as at 30(th) September 2023
30.9.23 31.3.23
Notes £ million £ million
Assets
Non-current assets
Property, plant and equipment 8 1,378 1,332
Right-of-use assets 49 49
Goodwill 363 364
Other intangible assets 9 294 287
Investments in associates 63 75
Investments at fair value through other comprehensive income 45 49
Other receivables 114 113
Interest rate swaps 18 19 20
Other financial assets 52 48
Deferred tax assets 145 121
Post-employment benefit net assets 13 134 203
Total non-current assets 2,656 2,661
Current assets
Inventories 1,517 1,702
Taxation recoverable 9 12
Trade and other receivables 1,759 1,882
Cash and cash equivalents 18 493 650
Other financial assets 58 47
Assets classified as held for sale 12 17 75
Total current assets 3,853 4,368
Total assets 6,509 7,029
Liabilities
Current liabilities
Trade and other payables (2,263) (2,497)
Lease liabilities 18 (9) (9)
Taxation liabilities (90) (105)
Cash and cash equivalents ─ bank overdrafts 18 (31) (13)
Borrowings and related swaps 18 (71) (155)
Other financial liabilities (21) (27)
Provisions (71) (63)
Liabilities classified as held for sale 12 - (25)
Total current liabilities (2,556) (2,894)
Non-current liabilities
Borrowings and related swaps 18 (1,398) (1,460)
Lease liabilities 18 (31) (31)
Deferred tax liabilities (9) (19)
Interest rate swaps 18 (16) (15)
Employee benefit obligations 13 (39) (41)
Provisions (23) (28)
Trade and other payables (4) (2)
Total non-current liabilities (1,520) (1,596)
Total liabilities (4,076) (4,490)
Net assets 2,433 2,539
Equity
Share capital 215 215
Share premium 148 148
Treasury shares (19) (19)
Other reserves 97 118
Retained earnings 1,992 2,077
Total equity 2,433 2,539
Condensed Consolidated Statement of Cash Flows
for the six months ended 30(th) September 2023
Six months ended
30.9.23 30.9.22
Notes £ million £ million
Cash flows from operating activities
Profit before tax from continuing operations 82 188
Loss before tax from discontinued operations - (5)
Adjustments for:
Share of losses of associates 13 2
Depreciation 72 73
Amortisation 23 16
Share-based payments 7 8
Decrease / (increase) in inventories 169 (169)
Decrease in receivables 113 41
(Decrease) / increase in payables (217) 26
Increase / (decrease) in provisions 6 (8)
Contributions in excess of employee benefit obligations charge (5) (3)
Changes in fair value of financial instruments (17) (9)
Net finance costs 41 21
Income tax paid (51) (36)
Net cash inflow from operating activities 236 145
Cash flows from investing activities
Interest received 19 11
Purchases of property, plant and equipment (125) (111)
Purchases of intangible assets (33) (26)
Government grant income received 1 -
Net proceeds from sale of businesses 39 166
Net cash (outflow) / inflow from investing activities (99) 40
Cash flows from financing activities
Purchase of treasury shares - (45)
Proceeds from borrowings 2 272
Repayment of borrowings (151) (259)
Dividends paid to equity shareholders 7 (101) (100)
Interest paid (53) (38)
Principal element of lease payments (6) (6)
Net cash outflow from financing activities (309) (176)
Net (decrease) / increase in cash and cash equivalents (172) 9
Exchange differences on cash and cash equivalents (3) 14
Cash and cash equivalents at beginning of year 637 346
Cash and cash equivalents at end of period 18 462 369
Cash and deposits 193 161
Money market funds 300 253
Bank overdrafts (31) (45)
Cash and cash equivalents 18 462 369
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30(th) September 2023
Share Share Treasury Other Retained Total
capital premium shares reserves earnings equity
£ million £ million £ million £ million £ million £ million
At 1(st) April 2022 218 148 (24) 50 2,049 2,441
Total comprehensive income for the period - - - 121 73 194
Dividends paid (note 7) - - - - (100) (100)
Purchase of treasury shares (3) - - 3 - -
Share-based payments - - - - 12 12
Cost of shares transferred to employees - - 4 - (8) (4)
At 30(th) September 2022 215 148 (20) 174 2,026 2,543
Total comprehensive (expense) / income for the period - - - (56) 91 35
Dividends paid (note 7) - - - - (41) (41)
Purchase of treasury shares - - - - (1) (1)
Share-based payments - - - - 6 6
Cost of shares transferred to employees - - 1 - (6) (5)
Tax on share-based payments - - - - 2 2
At 31(st) March 2023 215 148 (19) 118 2,077 2,539
Total comprehensive (expense) / income for the period - - - (21) 7 (14)
Dividends paid (note 7) - - - - (101) (101)
Share-based payments - - - - 12 12
Cost of shares transferred to employees - - - - (3) (3)
At 30(th) September 2023 215 148 (19) 97 1,992 2,433
1 Basis of preparation and statement of compliance
This condensed consolidated interim financial report for the half-year
reporting period ended 30(th) September 2023 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, estimates and
judgements applied in this condensed consolidated interim financial report are
consistent with the accounting policies, estimates and judgements applied by
the group in its consolidated accounts as at, and for the year ended, 31(st)
March 2023, 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 2023, which has been
prepared in accordance with UK-adopted International Accounting Standards
(IAS) and with the requirements of the Companies Act 2006.
Information in respect of the year ended 31(st) March 2023 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 21(st) November 2023.
Going concern
The directors have reviewed the base case scenario, and the severe but
plausible downside 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 2023, the group maintains a strong balance sheet with
around £1.5 billion of available cash and undrawn committed facilities. Cash
generation was positive during the period with free cash flow of around £78
million. Net debt was in line with 31(st) March 2023 at £1,044 million. Net
debt (including post tax pension deficits) to EBITDA, was within our target
range at 1.7 times.
Despite the significant headwinds faced in the current macroeconomic
environment such as continued high levels of inflation and economic and
political uncertainties, 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
reflects lower demand across our markets to account for further ongoing
disruptions and a deeper recession.
Additionally, the group considered scenarios including the impact from metal
price volatility and increases in the amount of metal that we would have to
hold, along with a slowdown in operations in China. We have also considered
the impact of a refinery shutdown for a prolonged period. Whilst the combined
impact would reduce profitability and EBITDA against our latest forecast, our
balance sheet would remain strong.
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 2027 which was entirely undrawn at 30(th) September 2023. There was
£300 million of cash held in money market funds. Of the existing loans,
around £105 million of term debt matures in the period to December 2024 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.
1 Basis of preparation and statement of compliance (continued)
Going concern (continued)
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 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 18.
Amended standards adopted by the group
The IASB has issued the following amendments, which have been endorsed by the
UK Endorsement Board, for annual periods beginning on or after 1(st) January
2023:
- Amendments to IFRS 17, Insurance Contracts;
- Amendments to IAS 1 and IFRS Practice Statement 2;
- Amendments to IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors; and
- Amendments to IAS 12, Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
These changes have not had a material impact on the group. The group has not
early adopted any standard, interpretation or amendment that was issued but is
not yet effective.
On the 19(th) July 2023, the UK endorsed the amendments to IAS 12 Income
Taxes, issued by the International Accounting Standards Board on 23(rd) May
2023, which grants companies a temporary exemption from applying IAS 12 to the
International Tax Reform: Pillar Two Model Rules. For the half year report,
the group has adopted the amendments to IAS 12, and applied the exception to
recognising and disclosing information about deferred tax assets and
liabilities related to Pillar Two income taxes. The group has commenced Pillar
Two impact analysis but is, as yet, not in a position to provide quantified
analysis of the potential future impact.
2 Segmental information
Revenue, sales and underlying operating profit by business
Clean Air - provides catalysts for emission control after-treatment systems
used in light and heavy duty vehicles powered by internal combustion engines.
PGM Services - enables the energy transition through providing circular
solutions as demand for scarce critical materials increases. Provides a
strategic service to the group, supporting the other segments with security of
metal supply, and manufactures value add PGM products.
Catalyst Technologies - enables the decarbonisation of chemical and fuel value
chains.
Hydrogen Technologies - providing catalyst coated membranes that are a
critical component for fuel cells and electrolysers.
Value Businesses - a portfolio of businesses managed to drive shareholder
value from activities considered to be non-core to the Group. This includes
Battery Systems, Medical Device Components and Diagnostic Services (sold on
29(th) September 2023 - refer to note 11). Battery Materials UK and Battery
Materials Canada were sold on 26(th) May 2022 and 1(st) November 2022
respectively and are included within the prior period balances.
The Group Leadership Team (the chief operating decision maker as defined by
IFRS 8, Operating Segments) monitors the results of these operating businesses
to assess performance and make decisions about the allocation of resources.
Each operating business is represented by a member of the Group Leadership
Team. These operating businesses represent the group's reportable segments and
their principal activities are described on pages 14 to 21 of the 2023 Annual
Report. The performance of the group's operating businesses is assessed on
sales and underlying operating profit (see note 18). Sales between segments
are made at market prices, taking into account the volumes involved.
2 Segmental information (continued)
Six months ended 30(th) September 2023
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Eliminations Total
£ million £ million £ million £ million £ million £ million £ million £ million
Revenue from external customers 2,768 3,169 308 45 241 - - 6,531
Inter-segment revenue - 1,364 11 - - - (1,375) -
Revenue 2,768 4,533 319 45 241 - (1,375) 6,531
External sales(1) 1,286 182 272 37 190 - - 1,967
Inter-segment sales - 48 10 - - - (58) -
Sales(1) 1,286 230 282 37 190 - (58) 1,967
Underlying operating profit(1) 124 78 35 (26) 14 (45) - 180
Six months ended 30(th) September 2022
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Eliminations Total
£ million £ million £ million £ million £ million £ million £ million £ million
Revenue from external customers 2,995 3,682 342 27 282 - - 7,328
Inter-segment revenue - 1,679 7 - - - (1,686) -
Revenue 2,995 5,361 349 27 282 - (1,686) 7,328
External sales(1) 1,278 240 269 23 235 - - 2,045
Inter-segment sales - 42 6 - - - (48) -
Sales(1) 1,278 282 275 23 235 - (48) 2,045
Underlying operating profit(1) 108 125 21 (24) 21 (29) - 222
(1) Sales and underlying operating profit are non-GAAP measures (see note 18
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.
2 Segmental information (continued)
Net assets by business
At 30(th) September 2023
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Total
£ million £ million £ million £ million £ million £ million £ million
Segmental net assets 1,496 107 723 165 226 547 3,264
Net debt (see note 18) (1,044)
Post-employment benefit net assets and liabilities 95
Deferred tax net assets 136
Provisions and non-current other payables (98)
Investments in associates 63
Net assets held for sale (see note 12) 17
Net assets 2,433
At 31(st) March 2023
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Total
£ million £ million £ million £ million £ million £ million £ million
Segmental net assets 1,784 (2) 680 114 175 515 3,266
Net debt (see note 18) (1,023)
Post-employment benefit net assets and liabilities 162
Deferred tax net assets 102
Provisions and non-current other payables (93)
Investments in associates 75
Net assets held for sale 50
Net assets 2,539
3 Revenue
Products and services
The group's principal products and services by operating business and
sub-business 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-business 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
PGM Services
Platinum Group Metal Services Various Platinum Group Metal refining and recycling services Over time Based on output
Platinum Group Metal trading Point in time On
receipt
of
payment
Other precious metal products Point in time On
despatc
h or
deliver
y
Platinum Group Metal chemical, industrial products and catalyst Point in time On
despatc
h or
deliver
y
Catalyst Technologies
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
Hydrogen Technologies
Fuel Cells technologies Various Fuel cell catalyst coated membranes Point in time On despatch or delivery
Electrolysis Technology Various Electrolyser catalyst coated membrane Point in time On despatch or delivery
Value Businesses
Other Markets (excluding Diagnostic Services) Various Precious metal pastes and enamels, battery systems and products found in Point in time On despatch or delivery
devices used in medical procedures
Diagnostic Services Oil and gas Detection, diagnostic and measurement solutions Over time Based on costs incurred
(1) Revenue recognition depends on whether the licence is distinct in the
context of the contract.
Metal revenue: Metal revenue relates to the sales of precious metals to
customers, either in pure form or contained within a product. Metal revenue
arises in each of the reportable segments in the Group. Metal revenue is
affected by fluctuations in the market prices of precious metals and, in many
cases, the value of precious metals is passed directly on to customers. Given
the high value of these metals this makes up a significant proportion of
revenue
3 Revenue (continued)
Revenue from external customers by principal products and services
Six months ended 30(th) September 2023
Continuing operations
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Total
£ million £ million £ million £ million £ million £ million
Metal 1,482 2,987 36 8 51 4,564
Heavy Duty Catalysts 454 - - - - 454
Light Duty Catalysts 812 - - - - 812
Platinum Group Metal Services - 182 - - - 182
Catalyst Technologies - - 272 - - 272
Fuel Cells - - - 37 - 37
Battery Systems - - - - 106 106
Diagnostic Services - - - - 37 37
Medical Device Components - - - - 45 45
Other 20 - - - 2 22
Revenue 2,768 3,169 308 45 241 6,531
Six months ended 30(th) September 2022
Continuing operations
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Total
£ million £ million £ million £ million £ million £ million
Metal 1,717 3,442 73 4 47 5,283
Heavy Duty Catalysts 447 - - - - 447
Light Duty Catalysts 814 - - - - 814
Platinum Group Metal Services - 240 - - - 240
Catalyst Technologies - - 269 - - 269
Fuel Cells - - - 23 - 23
Battery Systems - - - - 135 135
Diagnostic Services - - - - 34 34
Medical Device Components - - - - 46 46
Other 17 - - - 20 37
Revenue 2,995 3,682 342 27 282 7,328
Revenue 2,995 3,682 342 27 282 7,328
The contract receivables balance at 30(th) September 2023 is £46 million
(31(st) March 2023: £70 million).
3 Revenue (continued)
Revenue from external customers by point in time and over time performance
obligations
Six months ended 30(th) September 2023
Continuing operations
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Total
£ million £ million £ million £ million £ million £ million
Revenue recognised at a point in time 2,768 3,081 255 45 213 6,362
Revenue recognised over time - 88 53 - 28 169
Revenue 2,768 3,169 308 45 241 6,531
Six months ended 30(th) September 2022
Continuing operations
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Total
£ million £ million £ million £ million £ million £ million
Revenue recognised at a point in time 2,995 3,541 270 27 264 7,097
Revenue recognised over time - 141 72 - 18 231
Revenue 2,995 3,682 342 27 282 7,328
4 Operating profit
Six months ended
30.9.23 30.9.22
£ million £ million
Operating profit is arrived at after charging / (crediting):
Research and development expenditure charged to the income statement 104 106
Less: External funding received - from governments (7) (7)
Net research and development expenditure charged to the income statement 97 99
Depreciation of:
Property, plant and equipment 66 67
Right-of-use assets 6 6
Depreciation 72 73
Amortisation of:
Acquired intangibles 2 2
Other intangible assets 21 14
Amortisation 23 16
Major impairment and restructuring charges:
Inventories 2 -
Trade and other receivables 10 -
Impairment losses 12 -
Restructuring charges 30 9
Major impairment and restructuring charges 42 9
Profit on disposal of businesses
On 15(th) June 2023, the group completed the sale of Johnson Matthey Catalysts
LCC, and on 29(th) September 2023, the group completed the sale of its
Diagnostic Services business, see note 11.
Major impairment and restructuring charges
Major impairment and restructuring charges are shown separately on the face of
the income statement and excluded from underlying operating profit, see note
18.
Major impairments - the group's net impairment charge of £12 million includes
further impairment charges to production related assets in Clean Air as the
business continues to consolidate its existing capacity into new and more
efficient plants. Further impairment charges were also recognised in relation
to amounts due from the sale of Battery Materials to EV Metals Group.
Major restructuring - the group's transformation programme was launched in May
2022 and was designed to drive increased competitiveness, improved execution
capability and create financial headroom to facilitate further investment in
high growth areas. Restructuring charges of £17 million have been recognised
of which the majority is redundancy and implementation costs. The remaining
£13 million charge is related to Clean Air's ongoing plant consolidation
initiatives, of which the majority is redundancy costs.
5 Tax expense
The charge for taxation at the half year ended 30(th) September 2023 is £19
million (1H 2022/23: £38 million), an effective tax rate of 22.8%. The tax
charge on underlying profit before tax was £31 million, an effective tax rate
of 22.0%, an increase from 19.9% in the half year ended 30(th) September 2022.
The tax rate on underlying profit for the year ending 31(st) March 2024 is
estimated to be 20% (2022/23: 19%).
6 Earnings per ordinary share
Six months ended
30.9.23 30.9.22
pence pence
Basic 34.7 87.5
Diluted 34.6 87.1
Basic from continuing operations 34.7 82.0
Diluted from continuing operations 34.6 81.7
Earnings per ordinary share have been calculated by dividing 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 30.9.23 30.9.22
Basic 183,213,834 183,006,485
Dilution for long term incentive plans 907,731 665,316
Diluted 184,121,565 183,671,801
7 Dividends
An interim dividend of 22.00 pence (1H 2022/23: 22.00 pence) per ordinary
share has been proposed by the board which will be paid on 6(th) February 2024
to shareholders on the register at the close of business on 1(st) December
2023. The estimated amount to be paid is £40 million (1H 2022/23: £42
million) and has not been recognised in these accounts.
Six months ended
30.9.23 30.9.22
£ million £ million
2021/22 final ordinary dividend paid ─ 55.00 pence per share - 100
2022/23 final ordinary dividend paid ─ 55.00 pence per share 101 -
Total dividends 101 100
8 Property, plant and equipment
Assets in
Freehold land Leasehold Plant and the course of
and buildings improvements machinery construction Total
£ million £ million £ million £ million £ million
Cost
At 1(st) April 2023 599 28 2,151 360 3,138
Additions - - 16 111 127
Transfers from assets in the course of construction 9 1 39 (49) -
Disposals (1) - (8) - (9)
Disposals of businesses (note 11) (1) - (4) - (5)
Exchange adjustments (9) - (18) (4) (31)
At 30(th) September 2023 597 29 2,176 418 3,220
Accumulated depreciation and impairment
At 1(st) April 2023 284 15 1,499 8 1,806
Charge for the period 8 - 58 - 66
Disposals (1) - (8) - (9)
Disposals of businesses (note 11) (1) - (4) - (5)
Exchange adjustments (4) - (12) - (16)
At 30(th) September 2023 286 15 1,533 8 1,842
Carrying amount at 30(th) September 2023 311 14 643 410 1,378
Carrying amount at 1(st) April 2023 315 13 652 352 1,332
9 Other intangible assets
Customer Patents, Acquired
contracts and Computer trademarks research and Development
relationships software and licences technology expenditure Total
£ million £ million £ million £ million £ million £ million
Cost
At 1(st) April 2023 116 475 43 37 135 806
Additions - 29 1 - - 30
Disposals - - (12) - - (12)
Exchange adjustments (1) - - (1) (1) (3)
At 30(th) September 2023 115 504 32 36 134 821
Accumulated amortisation and impairment
At 1(st) April 2023 101 209 39 37 133 519
Charge for the period 1 21 1 - - 23
Disposals - - (12) - - (12)
Exchange adjustments (1) - (1) (1) - (3)
At 30(th) September 2023 101 230 27 36 133 527
Carrying amount at 30(th) September 2023 14 274 5 - 1 294
Carrying amount at 1(st) April 2023 15 266 4 - 2 287
10 Investments in associates
As part of the disposal of our Health business in the prior year, we received
£75 million in the form of shares which constitutes approximately 30% equity
interest in the re-branded business (Veranova). The group determined that it
has significant influence and therefore has equity accounted this stake as an
investment in associate. The group has also disclosed a contingent liability
relating to this associate, see note 17.
Associates
£ million
At 1(st) April 2023 75
Group's share of losses for the period (13)
Exchange adjustments 1
At 30(th) September 2023 63
11 Disposals
Diagnostic Services
On 29(th) September 2023, the group completed the sale of its Diagnostic
Services business for an enterprise value of £55 million (£47 million on a
debt free basis, after working capital adjustments). The business was
disclosed as a disposal group held for sale as at 31(st) March 2023.
Diagnostic Services
30(th) September 2023 £ million
Proceeds
Cash consideration 47
Cash and cash equivalents disposed (3)
Net cash consideration 44
Disposal costs paid (2)
Net cash inflow 42
Assets and liabilities disposed
Non-current assets
Property, plant and equipment 19
Current assets
Inventories 5
Trade and other receivables 32
Cash and cash equivalents 3
Deferred tax 3
Current liabilities
Trade and other payables (9)
Non-current liabilities
Lease liabilities (11)
Net assets disposed 42
Cash consideration 47
Deferred consideration 4
Working capital adjustments at time of disposal 4
Less: carrying amount of net assets sold (42)
Less: disposal costs (8)
Cumulative currency translation gain recycled from other comprehensive income (1)
Profit recognised in the income statement 4
Johnson Matthey Catalysts LLC
On 15(th) June 2023, the group completed the sale of Johnson Matthey Catalysts
LLC, its operations in Russia, to Catalysts and Technologies LLC for a cash
consideration of £11 million. All assets excluding cash had previously been
impaired. The sale resulted in a net loss on sale of £4 million due to a
cumulative currency translation loss being recycled from other comprehensive
income.
12 Assets and liabilities classified as held for sale
The group strategically drives for efficiency and disciplined capital
allocation to enhance returns, as such we continue to actively manage our
portfolio. In line with this strategy and to focus on our core businesses,
during the period we completed the sale of our Diagnostic Services business
(refer to note 11).
Held for sale at 30(th) September 2023 is the land and buildings of our
previous Battery Materials business in Poland. This has been classified as
held for sale at fair value.
The major classes of assets and liabilities comprising the businesses
classified as held for sale are:
30.9.23 31.3.23
£ million £ million
Non-current assets
Property, plant and equipment 17 27
Right-of-use-assets - 9
Goodwill - 1
Other intangible assets - 3
Current assets
Inventories - 5
Trade and other receivables - 30
Current liabilities
Trade and other payables - (14)
Lease liabilities - (1)
Taxation liabilities - (1)
Non-current liabilities
Lease liabilities - (9)
Net assets of disposal group 17 50
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:
30.9.23 31.3.23
UK plan US plans UK plan US plans
% % % %
First year's rate of increase in salaries 3.50 4.50 4.40 4.50
Ultimate rate of increase in salaries 3.50 4.50 3.40 4.50
Rate of increase in pensions in payment 2.95 - 2.90 -
Discount rate 5.60 5.80 4.80 4.90
Inflation - 2.50 - 2.50
- UK Retail Prices Index (RPI) 3.20 - 3.10 -
- UK Consumer Prices Index (CPI) 2.75 - 2.65 -
Current medical benefits cost trend rate 12.50 - 12.50 -
Ultimate medical benefits cost trend rate 5.40 - 5.40 -
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 2023 169 27 (7) 6 (10) (20) 165
Current service cost - in
operating profit (1) (7) - (1) - - (9)
Administrative expenses - in
operating profit (2) - - - - - (2)
Interest 3 1 - - - - 4
Remeasurements (70) (3) - (3) 1 - (75)
Company contributions 2 11 - 2 - 1 16
Benefits paid - - - - - - -
Exchange - - - (1) (1) 1 (1)
At 30(th) September 2023 101 29 (7) 3 (10) (18) 98
13 Post-employment benefits (continued)
Financial information (continued)
The post-employment benefit assets and liabilities are included in the balance
sheet as follows:
30.9.23 30.9.23 31.3.23 31.3.23
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 101 - 169 -
UK pension - cash balance section 29 - 27 -
UK post-retirement medical benefits - (7) - (7)
US pensions 3 - 6 -
US post-retirement medical benefits - (10) - (10)
Other 1 (19) 1 (21)
Total post-employment plans 134 (36) 203 (38)
Other long-term employee benefits (3) (3)
Total long-term employee benefit obligations (39) (41)
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
30.9.23 31.3.23 hierarchy
£ million £ million level
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive income(1) 45 49 1
Interest rate swaps - assets 19 20 2
Other financial assets(2) 52 48 2
Interest rate swaps - liabilities (16) (15) 2
Borrowings and related swaps (5) (5) 2
Other payables (2) - 2
Current
Trade receivables(3) 281 329 2
Other receivables(4) 12 21 2
Cash and cash equivalents - money market funds 300 521 2
Other financial assets(2) 58 47 2
Other financial liabilities(2) (21) (27) 2
Fair value
30.9.23 31.3.23 hierarchy
£ million £ million level
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps (1,393) (1,455) -
Lease liabilities (31) (31) -
Other receivables 63 57 -
Other payables (2) (2) -
Current
Amounts receivable under precious metal sale and repurchase agreements 320 222 -
Amounts payable under precious metal sale and repurchase agreements (812) (838) -
Cash and cash equivalents - cash and deposits 193 129 -
Cash and cash equivalents - bank overdrafts (31) (13) -
Borrowings and related swaps (71) (155) -
Lease liabilities (9) (9) -
Trade and other receivables 914 1,075 -
Trade and other payables (1,230) (1,478) -
(1) Investments at fair value through other comprehensive income are quoted
bonds purchased to fund pension deficit (£35 million) and an investment held
at fair value through other comprehensive income (£10 million).
(2) Other financial assets includes forward foreign exchange contracts (£4
million), forward precious metal price contracts (£91 million) and currency
swaps (£15 million). Other financial liabilities includes forward foreign
exchange contracts (£16 million) and currency swaps (£5 million).
(3) Trade receivables held in a part of the group with a business model to
hold trade receivables for collection or sale. The remainder of the group
operates a hold to collect business model and receives the face value, plus
relevant interest, of its trade receivables from the counterparty without
otherwise exchanging or disposing of such instruments.
(4) Other receivables with cash flows that do not represent solely the payment
of principal and interest.
14 Fair values (continued)
The fair value of financial instruments, excluding accrued interest, is
approximately equal to book value except for:
30.9.23 31.3.23
Carrying Fair Carrying Fair
amount value amount value
£ million £ million £ million £ million
US Dollar Bonds 2025, 2027, 2028, 2029 and 2030 (521) (481) (648) (618)
Euro Bonds 2025, 2028, 2030 and 2032 (349) (312) (368) (340)
Sterling Bonds 2024, 2025 and 2029 (145) (134) (145) (137)
KfW US Dollar Loan 2024 (41) (39) (40) (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 2023, precious
metal leases were £186 million at closing prices (31(st) March 2023:
£138 million). Precious metal leases do not fall under the scope of IFRS 16.
16 Transactions with related parties
There have been no material changes in related party relationships in the six
months ended 30(th) September 2023. During the half year ended 30(th)
September 2023, the group had sales with associates totalling £11 million (1H
2022/23: £5 million). No other related party transactions have occurred which
have materially affected the financial position or performance of the group
during the period.
17 Contingent liabilities
The group is involved in various disputes and claims which arise from time to
time in the course of its business including, for example, in relation to
commercial matters, product quality or liability, employee matters and tax
audits. The group is also involved from time to time in the course of its
business in legal proceedings and actions, engagement with regulatory
authorities and in dispute resolution processes. These are reviewed on a
regular basis and, where possible, an estimate is made of the potential
financial impact on the group. In appropriate cases a provision is recognised
based on advice, best estimates and management judgement. Where it is too
early to determine the likely outcome of these matters, no provision is made.
Whilst the group cannot predict the outcome of any current or future such
matters with any certainty, it currently believes the likelihood of any
material liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its consolidated income, financial position
or cash flows.
Following the sale of its Health business in May 2022, the purchaser of the
Health business, Veranova Bidco LP, has issued a claim against the group in
connection with: i) certain alleged representations said to have been made
during the course of the negotiation of the sale and purchase agreement dated
16(th) December 2021 ("SPA"); and, ii) certain warranties given in the SPA at
the time of signing. Having reviewed the claim with its advisers, the group is
of the opinion that it has a defensible position in respect of these
allegations and is vigorously defending its position. The outcome of the legal
proceedings relating to this matter is not certain, since the issues of
liability and quantum will be for determination by the court at trial.
Accordingly, the group is unable to make a reliable estimate of the possible
financial impact at this stage, if any.
18 Non-GAAP measures
The group uses various measures to manage its business which are not defined
by generally accepted accounting principles (GAAP). The group's management
believes these measures provide valuable additional information to users of
the accounts in understanding the group's performance. Certain of these
measures are financial Key Performance Indicators which measure progress
against our strategy.
All non-GAAP measures are on a continuing operations basis.
18 Non-GAAP measures (continued)
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.
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, proceeds from disposal of businesses, less capital expenditure.
dividends received from joint ventures 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, share of profits or losses from non-strategic
equity investments 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.
As noted in our 2023 annual report, our strategy involves making substantial
investment in the coming years to support the growth and transformation of the
group. Our businesses have different investment and return profiles and
therefore we no longer use a group measure of Return on Invested Capital as a
key performance indicator.
18 Non-GAAP measures (continued)
Reconciliations to GAAP measures
Sales
See note 2.
Underlying profit measures
Operating Profit Tax Profit for
profit before tax expense the period
Six months ended 30(th) September 2023 £ million £ million £ million £ million
Underlying 180 139 (31) 108
Amortisation of acquired intangibles (2) (2) - (2)
Profit on disposal of businesses - - (3) (3)
Major impairment and restructuring charges(1) (42) (42) 13 (29)
Share of losses of associates - (13) 2 (11)
Reported 136 82 (19) 63
(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 2022 £ million £ million £ million £ million
Underlying 222 201 (40) 161
Amortisation of acquired intangibles (2) (2) - (2)
Major impairment and restructuring charges (9) (9) 2 (7)
Share of losses of associates - (2) - (2)
Reported 211 188 (38) 150
Underlying earnings per share Six months ended
30.9.23 30.9.22
Underlying profit for the period (£ million) 108 161
Weighted average number of shares in issue (million) 183.2 183.0
Underlying earnings per share (pence) 59.1 88.2
18 Non-GAAP measures (continued)
Average working capital days (excluding precious metals) Six months Year Six months
ended ended ended
30.9.23 31.3.23 30.9.22
£ million £ million £ million
Inventories 1,517 1,702 1,781
Trade and other receivables 1,759 1,882 1,881
Trade and other payables (2,263) (2,497) (2,567)
1,013 1,087 1,095
Working capital balances classified as held for sale - 22 10
Total working capital 1,013 1,109 1,105
Less: Precious metal working capital (371) (622) (502)
Working capital (excluding precious metals) 642 487 603
Average working capital days (excluding precious metals) 57 42 35
Free cash flow from continuing operations
Six months ended
30.9.23 30.9.22
£ million £ million
Net cash inflow from operating activities 236 145
Interest received 19 11
Interest paid (53) (38)
Purchases of property, plant and equipment (125) (111)
Purchases of intangible assets (33) (26)
Government grant income 1 -
Proceeds from sale of businesses 39 166
Principal element of lease payments (6) (6)
Less: Net cash inflow from discontinued operations - (8)
Free cash flow 78 133
18 Non-GAAP measures (continued)
Net debt (including post tax pension deficits) to underlying EBITDA
30.9.23 31.3.23 30.9.22
£ million £ million £ million
Cash and deposits 193 129 161
Money market funds 300 521 253
Bank overdrafts (31) (13) (45)
Cash and cash equivalents 462 637 369
Interest rate swaps - non-current assets 19 20 31
Interest rate swaps - non-current liabilities (16) (15) (14)
Borrowings and related swaps - current (71) (155) (183)
Borrowings and related swaps - non-current (1,398) (1,460) (1,113)
Lease liabilities - current (9) (9) (12)
Lease liabilities - non-current (31) (31) (41)
Lease liabilities - current - transferred to liabilities classified as held - (1) -
for sale
Lease liabilities - non-current - transferred to liabilities classified as - (9) -
held for sale
Net debt (1,044) (1,023) (963)
(Decrease) / Increase in cash and cash equivalents (172) 287 9
Less: Increase in cash and cash equivalents from discontinued operations - (8) (8)
Less: Decrease / (increase) in borrowings 149 (391) (13)
Less: Principal element of lease payments 6 14 6
Increase in net debt resulting from cash flows (17) (98) (6)
New leases, remeasurements and modifications (7) (13) (6)
Less: New leases, remeasurements and modifications from discontinued - - 6
operations
Disposal of businesses 10 - -
Exchange differences on net debt 2 (53) (117)
Other non-cash movements (9) (3) 16
Movement in net debt (21) (167) (107)
Net debt at beginning of year (1,023) (856) (856)
Net debt at end of year (1,044) (1,023) (963)
Net debt (1,044) (1,023) (963)
Add: Pension deficits (21) (21) (39)
Add: Related deferred tax 3 2 7
Net debt (including post tax pension deficits) (1,062) (1,042) (995)
Underlying EBITDA for this period 273 309
Underlying EBITDA for prior year 647 724
Less: Underlying EBITDA for prior half year (309) (382)
Annualised underlying EBITDA 611 647 651
Net debt (including post tax pension deficits) to underlying EBITDA 1.7 1.6 1.5
18 Non-GAAP measures (continued)
30.9.23 31.3.23 30.9.22
£ million £ million £ million
Underlying EBITDA 273 647 309
Depreciation and amortisation (95) (187) (89)
Profit on disposal of businesses - 12 -
Gains and losses on significant legal proceedings - (25) -
Major impairment and restructuring charges (42) (41) (9)
Finance costs (71) (110) (48)
Finance income 30 49 27
Share of losses of associates (13) (1) (2)
Income tax expense (19) (80) (38)
Profit for the period from continuing operations 63 264 150
2023
22(nd) November
Announcement of results for the half year ending 30(th) September 2023
30(th) November
Ex dividend date
1(st) December
Interim dividend record date
2024
6(th) February
Payment of interim dividend
23(rd) May
Announcement of results for the year ending 31(st) March 2024
18(th) July
133(rd) 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 businesses 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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