REG - Johnson Matthey PLC - Johnson Matthey half year results
27/11/2024 07:00
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RNS Number : 7629N Johnson Matthey PLC 27 November 2024
Half year results for the
six months ended 30(th) September 2024
27(th) November 2024
Catalysing the net zero transition to drive sustainable value creation
Continued strategic execution and transformation progress
· A resilient performance with underlying operating profit excluding divestments
down 4% - in line with our expectations - against a challenging macroeconomic
backdrop
· Improved margins in Clean Air and Catalyst Technologies, and on track for
targets
· Transformation programme continuing at pace - cumulative cost savings of £155
million delivered to date and on track to achieve £200 million by the end of
2024/25
· Making progress against our strategic milestones: three large scale project
wins in Catalyst Technologies' sustainable technologies portfolio and PGM
refinery investment on track
· Strong balance sheet - net debt to EBITDA of 1.4 times: focused on driving
improved cash
· £250 million share buyback programme - £205 million completed as at 22(nd)
November 2024
· Full year outlook maintained, with performance more weighted to the second
half driven by greater benefits from transformation and a stronger performance
in PGM Services
Reported results Underlying results¹(,)²
Half year ended % Half year ended % % change,
30(th) September
change
30(th) September
change
ex-divestments³, constant FX rates
2024 2023 2024 2023
Revenue £m 5,632 6,531 -14
Sales excl. precious metals⁴ £m 1,722 1,967 -12 -3
Operating profit £m 575 136 +323 156 180 -13 -4
Profit before tax £m 554 82 +576 133 139 -4
Profit after tax £m 484 63 +668 104 108 -4
Basic earnings per share pence 266.8 34.7 +669 57.4 59.1 -3
Interim dividend per share pence 22.0 22.0 -
Free cash flow £m 347 78
Cash from operating activities £m -22 236
Net debt £m 783 1,044
Liam Condon, Chief Executive Officer, commented:
We delivered a resilient performance - in line with our expectations - and
have continued to execute on our strategy in the first half, against a
challenging macroeconomic backdrop. Our performance was supported by our
transformation programme which is progressing well. For the full year, we are
maintaining guidance with our confidence in the second half underpinned by
further transformation benefits.
We are strongly focused on cash generation, with our established businesses
driving cash to support the disciplined development of our growth businesses
and further shareholder returns. Johnson Matthey has an important role to play
in the global transition to net zero and our portfolio means we are well
positioned to adapt to the evolving pace of this transition. We continue to
secure important project wins in sustainable technologies, whilst building our
capability and transforming at pace.
Group outlook for the year ending 31(st) March 2025 maintained
For 2024/25, excluding Value Businesses⁵, we continue to expect at least mid
single digit growth in underlying operating performance at constant precious
metal prices and constant currency. We expect our improved second half
performance to reflect further transformation benefits as well as higher
volumes and metal recoveries in PGM Services, where we have good visibility.
In Clean Air, in 2024/25, we expect modest growth in operating performance,
with continued margin expansion driven by efficiency benefits. For the second
half, we expect a sequential improvement in operating performance and
margin.⁶
PGM Services' operating performance in 2024/25 is expected to be broadly
stable, with limited impact from precious metal prices. We expect to deliver a
significantly stronger second half, driven by higher sales from increased
refining volumes, higher metal recoveries and higher product sales, and
further efficiencies as we optimise our cost base⁶
In Catalyst Technologies we expect further strong growth in operating
performance in 2024/25, with a mid-teens margin. Following a strong first half
performance in Licensing, we expect our second half operating performance to
be slightly below the first half.⁶
In Hydrogen Technologies we now expect lower sales in 2024/25 (previously
modest growth). For the full year, despite a lower contribution from sales, we
will deliver a significantly lower operating loss as we take further action to
reduce costs.⁶
If PGM (platinum group metal) prices remain at their current level⁷ for the
remainder of 2024/25, we expect an adverse impact of £3 million to full year
operating profit compared with the prior year.⁸
At current foreign exchange rates⁹, translational foreign exchange movements
for the year ending 31(st) March 2025 are expected to adversely impact
underlying operating profit by c.£10 million.
Dividend
The board has approved an interim dividend of 22.0 pence per share, maintained
at the same level as the prior year (1H 2023/24: 22.0 pence per share). The
interim dividend will be paid on
4(th) February 2025, with an ex-dividend date of 5(th) December 2024, to
shareholders on the register on 6(th) December 2024.
Enquiries:
Investor Relations
Martin Dunwoodie Director of Investor Relations and Treasury +44 20 7269 8241
Louise Curran Head of Investor Relations +44 20 7269 8235
Chris Wood Senior Investor Relations Manager +44 20 7269 8138
Media
Sinead Keller Group External Relations Director +44 20 7269 8218
Harry Cameron Teneo +44 7799 152148
Notes:
1. 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 2024/25 results
converted at 1H 2023/24 average rates. In 1H 2024/25, the translational impact
of exchange rates on group sales and underlying operating profit was an
adverse impact of £29 million and £5 million respectively.
2. Underlying is before profit or loss on disposal of businesses, 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 48 to 53.
3. Divestment of Value Businesses which is now complete.
4. Revenue excluding sales of precious metals to customers and the precious metal
content of products sold to customers.
5. Baseline is underlying operating profit excluding Value Businesses (£381
million in 2023/24).
6. Outlook commentary for Clean Air, PGM Services, Catalyst Technologies and
Hydrogen Technologies assumes constant precious metal prices and constant
currency.
7. Based on average precious metal prices in November 2024 (month to date).
8. A US$100 per troy ounce change in the average annual platinum, palladium and
rhodium metal prices each have an impact of approximately £0.5 million, £1
million and £0.5 million respectively on full year 2024/25 underlying
operating profit in PGM Services. This assumes no foreign exchange movement.
9. Based on average foreign exchange rates for November 2024 month to date
(£:US$ 1.28, £:€ 1.20, £:RMB 9.19).
Performance summary for the six months ended 30(th) September 2024
Underlying operating profit - excluding the impact of divestments - declined
4% in the period in a challenging macroeconomic environment. Our performance
was supported by continued strong progress in our transformation programme.
Average PGM prices have normalised and remained broadly stable in the half,
with an adverse impact to underlying operating profit of £3 million.
Clean Air delivered a resilient performance, with operating profit up 2% and
margin expanding
80 basis points to 10.4%. Whilst the top line was lower due to market weakness
and historic platform losses, benefits from our transformation programme
supported profitability. PGM Services' operating profit declined 35% primarily
reflecting lower refining volumes, including metal recoveries, and PGM trading
profit. Catalyst Technologies' operating profit grew 43% and margins improved
250 basis points to 14.9%, in line with our target of mid-teens by the end of
2024/25. The business benefited from strong Licensing performance, higher
volumes in Catalysts, and further efficiencies. Hydrogen Technologies
delivered a flat operating loss, despite lower sales.
On a reported basis, operating profit increased to £575 million (1H 2023/24:
£136 million) reflecting a £484 million profit on disposal, principally
Medical Device Components which completed on
1(st) July 2024. We incurred £63 million of major impairment and
restructuring charges, comprising an impairment charge of £23 million and
restructuring charges of £40 million.
We have a strong balance sheet, with net debt of £783 million as at 30(th)
September 2024 compared to £951 million as at 31(st) March 2024. Net debt to
EBITDA was 1.4 times, which was slightly below our target range of 1.5 to 2.0
times. Free cash flow was £347 million, compared to £78 million in the first
half of the prior year, largely reflecting net proceeds from the disposal of
Medical Device Components, partly offset by working capital outflows.
Strategic summary
Our strategy to catalyse the net zero transition is based around four
businesses: Clean Air, PGM Services and our energy transition businesses of
Catalyst Technologies and Hydrogen Technologies. We are actively managing
Clean Air to drive margin improvement and cash, and PGM Services is expected
to deliver strong cash conversion over the medium to long-term. This enables
us to develop and grow Catalyst Technologies, positioning us as a global
leader in sustainable solutions. In Hydrogen Technologies, we are managing the
business in line with the pace of market development. Our portfolio provides a
competitive advantage as a trusted partner to support our customers in
transitioning their businesses towards a net zero future. We are well
positioned to successfully navigate this journey and create significant value
for all our stakeholders.
As part of our transformation, we are continuing to drive commercial
excellence, greater discipline in capital projects and further cost
efficiencies across the group. In the first half, we delivered
£35 million cost savings, taking cumulative savings to £155 million. We are
on track to deliver
£200 million by the end of 2024/25, which annualises at more than £250
million, resulting in further benefits of more than £50 million in 2025/26.
Our aim is to maintain a strong balance sheet with a target level of net debt
to EBITDA of
1.5 to 2.0 times. We remain disciplined in our capital allocation: investing
for growth and attractive returns, ensuring a reliable dividend and returning
excess capital to shareholders. We continue to expect cumulative capital
expenditure of up to £900 million over the three year period to 2026/27. Of
this, c.£250 million relates to our new PGM refinery which is due to start
commissioning by the end of 2025/26. Once this investment is complete, we
expect capital expenditure to reduce. With respect to shareholder returns, on
3(rd) July 2024 we commenced our £250 million share buyback programme,
following the completion of the sale of Medical Device Components.
Going forward, with transformation related cost savings supporting higher
margins, capex trending downwards and working capital improvements from our
new efficient PGM refinery, we expect greater cash generation.
2025/26 strategic milestones overview
We are making good progress against our strategic milestones set out in May
2024: winning customers, building capability and transforming the business.
Customers:
· On track to deliver at least £4.5 billion of cash in the decade to 2030/31¹
from Clean Air
· Won 3 additional large scale projects in Catalyst Technologies' sustainable
technologies portfolio (2025/26 target: 20)
· Targeting 4 new Hydrogen Technologies partnerships with leading companies by
end of 2025/26
Capability:
· On track to start commissioning of new world-class PGM refinery by end of
2025/26
· Expanded engineering capacity by 22% to serve licensing growth in Catalyst
Technologies
(2025/26 target: 30%²)
Transformation:
· Targeting ICCA (International Council of Chemical Associations) process safety
event severity rate of 0.80 by end of 2024/25 (0.88 in 2023/24)
· Targeting employee engagement score of at least 7.4 by end of 2025/26 (7.2 in
2023/24)
· Delivered £155 million transformation cost savings to date (2024/25 target:
£200 million)
· Implemented JM Global Solutions for cost effective business processes in the
UK and US; on track for full implementation by end of 2024/25
· Targeting 32% reduction in scope 1 and 2 CO(2)e emissions by end of 2025/26
(2019/20 baseline)
Group Leadership Team changes
Given the progress made over the last two years in simplifying our business,
including the completion of our divestment programme, we have streamlined our
Group Leadership Team (GLT).³ We now have one GLT lead for both Clean Air and
Hydrogen Technologies, providing a more efficient management structure. Anish
Taneja, previously Chief Executive, Clean Air is now Chief Executive of Clean
Air and Hydrogen Technologies. We have also combined several functions which
are central to our transformation under one GLT role, to maximise synergies
and ensure the appropriate support for the businesses. Alastair Judge is now
Head of Strategy and Operations, having previously been Chief Executive, PGM
Services. Louise Melikian, previously Chief Strategy and Corporate Development
Officer, succeeds Alastair as Chief Executive of the PGM Services business.
Board changes
We announced on 1(st) July 2024 that Stephen Oxley, Chief Financial Officer,
had decided to leave JM to pursue another opportunity and would be stepping
down from the board no later than
31(st) March 2025. The process to appoint a successor is proceeding well and
the board expects to make an appointment in early 2025, to enable a suitable
handover period and orderly transition. A further announcement will be made as
appropriate.
We recently announced the appointment of Sinead Lynch as an independent
Non-Executive Director. This appointment is with effect from 1(st) January
2025 and Sinead will also become a member of the Remuneration, Nomination and
Societal Value Committees. Sinead brings a deep understanding of low carbon
energy and sustainability, having spent 30 years in the energy sector at Royal
Dutch Shell and BG Group.
Following a seven year tenure, Jane Griffiths will step down as Chair of the
Societal Value Committee and from the board on 31(st) December 2024. Rita
Forst will succeed Jane as Chair of the Societal Value Committee from 1(st)
January 2025.
1. Cash target from 1(st) April 2021 to 31(st) March 2031, pre-tax and post
restructuring costs.
2. Baseline: 31(st) March 2024.
3. All changes were effective from 1(st) November 2024.
Summary of underlying operating results
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)
2024 2023
Clean Air 1,165 1,286 -9 -7
PGM Services 207 230 -10 -9
Catalyst Technologies 336 282 +19 +20
Hydrogen Technologies 20 37 -46 -46
Eliminations (42) (58)
Sales excluding Value Businesses 1,686 1,777 -5 -3
Value Businesses² 36 190 -81 -81
Total sales 1,722 1,967 -12 -11
Underlying operating profit Half year ended % change % change,
(£ million)
30(th) September
constant FX rates
2024 2023
Clean Air 121 124 -2 +2
PGM Services 51 78 -35 -35
Catalyst Technologies 50 35 +43 +43
Hydrogen Technologies (26) (26) n/a n/a
Corporate (42) (45)
Underlying operating profit excluding Value Businesses 154 166 -7 -4
Value Businesses² 2 14 -86 -86
Total underlying operating profit 156 180 -13 -11
Reconciliation of underlying operating profit Half year ended
to operating profit
30(th) September
(£ million)
2024 2023
Underlying operating profit 156 180
Profit on disposal of businesses³ 484 -
Major impairment and restructuring charges³ (63) (42)
Amortisation of acquired intangibles (2) (2)
Operating profit 575 136
Notes:
1. Growth at constant rates excludes the translation impact of foreign exchange
movements, with 1H 2024/25 results converted at 1H 2023/24 average rates. In
1H 2024/25, the translational impact of exchange rates on group sales and
underlying operating profit was an adverse impact of £29 million and £5
million respectively.
2. Includes Battery Materials, Battery Systems, Diagnostic Services and Medical
Device Components which are all now disposed.
3. For further detail on these items please see page 17.
Business reviews
Clean Air
Resilient performance and improved margin despite a challenging market
· Sales were down 7% reflecting a decline in global vehicle production across
both light and heavy duty, as well as the impact of historic platform losses
as guided
· Despite lower sales, underlying operating profit increased 2% with margin up
80 basis points to 10.4%, reflecting ongoing operational excellence and
transformation benefits
Half year ended % change % change, constant FX rates
30(th) September
2024 2023
£ million £ million
Sales
Light duty diesel 530 532 - +2
Light duty gasoline 244 280 -13 -11
Heavy duty diesel 391 474 -18 -16
Total sales 1,165 1,286 -9 -7
Underlying operating profit 121 124 -2 +2
Underlying operating profit margin 10.4% 9.6%
EBITDA margin 13.6% 12.5%
Reported operating profit 101 104
Clean Air provides catalysts for emission control after-treatment systems used
in light and heavy duty vehicles powered by internal combustion engines.
Market commentary
In the half, global vehicle production declined across both light duty and
heavy duty. In light duty - following a strong prior period which benefited
from improved supply chains - there were declines across all key regions. This
reflected a weak macroeconomic environment, particularly in Europe and China,
and OEM de-stocking. In heavy duty, production in Europe and China declined as
the market normalised following strong demand in the prior year and as a
result of the weaker macroeconomic environment. In North America, Class 8
truck production is nearing the bottom of the cycle, with a further decline
expected in 2025 before recovery in 2026 ahead of new EPA27 (Environmental
Protection Agency) legislation.
Performance commentary
Sales were down 7%, with declines in light duty gasoline and heavy duty
diesel, more than offsetting modest growth in light duty diesel. This
reflected a challenging market as well as the impact of historic platform
losses as previously guided. Pricing was modestly lower reflecting historic
contract commitments, partly mitigated by our focus on commercial excellence.
Sales
Light duty diesel
Light duty diesel sales grew 2%, outperforming the global market that declined
due to continued shifts in consumer behaviour towards gasoline, including
hybrids which utilise gasoline engines. Our performance largely reflected
strong growth in Asia, particularly India and South East Asia, driven by
favourable product and customer mix.
In Europe, sales were resilient in a declining market driven by higher
substrate pricing and favourable mix. In the Americas, we saw modest growth in
a slightly declining market as some of our larger customers outperformed the
market.
Light duty gasoline
Light duty gasoline sales were down 11%, underperforming the global market
that saw a modest decline. This largely reflects our performance in China
where some of our larger customers underperformed the market. In Europe and
North America sales underperformed modestly declining markets reflecting the
loss of platforms from previous years.
Heavy duty diesel
Heavy duty diesel sales were down 16%, underperforming the global market that
declined modestly. Our performance was mainly driven by Europe where we saw
some customer underperformance and lower substrate pricing.
In Asia, performance was driven by China where we experienced market share
losses and the underperformance of some of our customers. In North America, we
slightly underperformed in Class 8 due to the ramp down of a large customer
platform. However, this was partly offset by good performance in Class 4-7 and
South America. Sales from non-road platforms declined due to softness in
agricultural end markets.
Underlying operating profit
Clean Air delivered a resilient performance as underlying operating profit
grew 2% despite challenging market conditions and lower sales. The operating
margin expanded
80 basis points to 10.4% reflecting benefits from our continued focus on cost
discipline, commercial and operational excellence, and footprint
rationalisation.
Business update
In Clean Air, as emissions legislation tightens globally, we continue to
provide world-leading emissions control systems to reduce harmful emissions
and support our customers. We are committed to being a lasting partner in this
industry driving efficiency and significant cash generation to 2030/31 and
beyond.
Our focus on efficiency has improved operating margins through initiatives
across all cost drivers. We continue to drive further improvement and are
accelerating the next phase of our transformation, including manufacturing,
with a continued focus on driving efficiencies across production sites.
Together with our wider efficiency initiatives, we expect these actions to
drive margin expansion in the second half and we remain on track to deliver
our target of mid-teens margins by 2025/26.
We continue to strengthen our commercial muscle to win targeted business. We
are leveraging our enhanced customer offering - our leading technology,
value-added services and commitment to being a lasting partner for our
customers - to drive value-based pricing.
In the period our win rates for new platforms remained high, including in
light duty gasoline where we are increasingly focused on hybrid and range
extender platforms.
In Europe, Euro 7 standards will commence from November 2026 for light duty
and May 2028 for heavy duty vehicles for new, main category vehicle types
(legislation is applied to all main category vehicles 12 months later). In the
US, the EPA rules on light and medium duty multi pollutant emission standards,
which tackle both CO(2) and non-CO(2) criteria exhaust emissions, will be
applied as a phased in approach from 2027. EPA and CARB (California Air
Resources Board) heavy duty low NOx emissions standards, and revised US heavy
duty transport CO(2) standards also start from 2027. China and India are
expected to bring proposals for new
on-road vehicle emissions standards, with details estimated to be published in
2025.
With the slowdown in global BEV penetration and our focus on driving
efficiency, we expect Clean Air to be 'stronger for longer' - delivering at
least £4.5 billion of cash in the decade to 2030/31¹ and further cash flow
beyond.
Notes:
1. Cash target from 1(st) April 2021 to 31(st) March 2031, pre-tax and post
restructuring costs.
PGM Services
First half performance impacted by soft end markets
· Sales declined 9% and underlying operating profit was down 35% primarily
reflecting lower volumes across refining, including metal recoveries, and
market-driven softness in our PGM trading business
· Second half expected to be significantly stronger, with good visibility on
higher volumes and cost efficiencies
Half year ended % change % change, constant FX rates
30(th) September
2024 2023
£ million £ million
Sales
PGM Services 207 230 -10 -9
Underlying operating profit 51 78 -35 -35
Underlying operating profit margin 24.6% 33.9%
EBITDA margin 30.9% 40.0%
Reported operating profit 26 77
PGM Services is the world's largest recycler of platinum group metals (PGMs).
This business is enabling the energy transition through developing new PGM
applications and 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, and the manufacture of value-add PGM products.
Performance commentary
Sales
In the half, sales were down 9% primarily driven by our refining and trading
businesses.
In refining, we saw continued softness in the auto scrap recycling market as
expected as well as lower metal recoveries linked to the timing of our asset
renewal programme and scheduled downtime in our UK refinery. In our products
business, sales were broadly flat.
Average PGM prices have normalised and remained broadly stable in the period,
albeit at a lower absolute level compared to the first half of last year. PGM
markets were also subject to soft volumes and lower price volatility, leading
to lower sales for our metal trading business.
For the second half, we have good visibility of volumes. We have secured an
increase in our refining volumes and expect increased metal recoveries. In
addition, we expect higher sales from our products business - specifically our
pharmaceutical and agrochemicals customers - reflecting normal seasonality.
Underlying operating profit
Underlying operating profit declined 35% primarily reflecting lower refining
volumes, including metal recoveries, and PGM trading profit. The adverse
impact from lower average PGM prices was £3 million in the half.
We expect to deliver a significantly stronger second half, driven by higher
sales (increased refining volumes, higher metal recoveries and higher product
sales) as well as efficiencies as we optimise our cost base.
Business update
Johnson Matthey is a world leader in PGMs. Our foundational PGM Services
business has deep expertise and enables a PGM ecosystem across JM and for our
customers.
PGMs are critical to many of the world's products, processes and technologies,
and with their unique properties they will remain vital in the long-term, well
beyond the internal combustion engine. In PGM products, we are developing new,
high-value PGM applications, through our world-class R&D expertise and
supported by our full-service customer offering. In the period, we further
expanded our customer base with new business wins in pharmaceutical and
agrochemical products.
As the world decarbonises and transitions towards a circular economy, demand
for secondary (recycled) PGMs is expected to increase over the medium to
long-term. To maintain our position as the world's largest recycler of PGMs,
we are investing in our new world-class refinery. This will deliver
significant safety, sustainability and efficiency improvements, including a
one-off working capital benefit of more than £250 million. Our investment is
on budget and we are on track to start commissioning by the end of 2025/26.
Across our business, we are structurally improving our operational efficiency
and removing duplication. Beyond our group transformation programme, we have
identified a pipeline of opportunities to streamline our operations, optimise
our assets and right-size our support functions. Execution of the programme
commenced in the first half and we expect to see the benefits progressively
coming through in the second half and beyond.
With stable PGM prices anticipated, we expect this business to deliver at
least low single digit CAGR in operating profit over the medium to long-term,
and strong cash conversion.
Catalyst Technologies
Strong sales and profit growth, and continued momentum in sustainable
technologies
· Sales up 20% with double digit growth in Catalysts driven by higher first fill
volumes, and strong performance in Licensing where sales more than doubled
· Won three large scale projects in our sustainable technologies portfolio since
1(st) April 2024, and on track against our strategic milestone
· Underlying operating profit up 43% and margin up 250 basis points driven by a
higher contribution from Licensing, increased volumes in Catalysts and
efficiency benefits
Half year ended % change % change, constant FX rates
30(th) September
2024 2023
£ million £ million
Sales
Catalysts 276 254 +9 +10
Licensing 60 28 +114 +114
Total sales 336 282 +19 +20
Underlying operating profit 50 35 +43 +43
Underlying operating profit margin 14.9% 12.4%
EBITDA margin 19.0% 16.7%
Reported operating profit 48 32
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 - and a strong sustainable technologies portfolio.
Our revenue streams are licensing process technology and supplying catalysts.
Performance commentary
Sales
Sales were up 20% reflecting double digit growth in Catalysts - which
represents the majority of sales - whilst Licensing more than doubled. In
particular, we delivered a good performance in China, with higher first fill
volumes in Catalysts and growth in our existing Licensing portfolio. We have
seen significant new plant builds in China in recent years, partly driven by
significant growth across the biodegradable plastics value chain. In
sustainable technologies we saw continued momentum, with strong sales growth
and large scale project wins.
Catalysts: double digit growth driven by first fills
In Catalysts, sales increased 10%. Growth was driven by first fills with
increased demand as new plants came onstream in China, including one of the
world's largest methanol plants. Cyclical recovery in the methanol market also
drove higher volumes in refills. These dynamics more than offset a weaker
performance in the competitive additives market and a slowdown in formaldehyde
following strong demand in the prior year.
Licensing: strong growth in both our existing portfolio and sustainable
technologies
Licensing - which can be lumpy in nature - was up 114% year-on-year, primarily
driven by our existing core portfolio. In our sustainable technologies
portfolio, sales from low carbon hydrogen and sustainable fuels more than
trebled, albeit off a low base.
Underlying operating profit
Underlying operated profit grew 43% and margin expanded 250 basis points to
14.9%. This was largely driven by a higher contribution from Licensing,
increased volumes in Catalysts and efficiency benefits.
Business update
In Catalyst Technologies, we are growing our existing business alongside new
opportunities in low carbon hydrogen, and sustainable fuels and chemicals. Our
sustainable technologies portfolio is mainly based on syngas technology where
we have market leading positions and a good track record, and will transform
the scale and profitability of our business.
We have made good progress against our strategic milestone of 20 additional
large scale project wins across our sustainable technologies portfolio by the
end of 2025/26, with three wins since 1(st) April 2024:
· A large scale low carbon hydrogen project in Europe (as announced in May)
· A waste-to-methanol project in Europe (as announced in May)
· HIF Global's Paysandú e-methanol plant in Uruguay (as announced in May)
Together with previously announced project wins, we have won 13 large scale
projects since 1(st) April 2022. This includes DG Fuel's first sustainable
aviation facility in Louisiana, US, where the project scope was recently
increased to incorporate our HyCOgen(TM) technology, in addition to FT
CANS(TM) technology. When combined, these technologies increase the production
yield of synthetic crude from sustainable feedstocks. These 13 projects are
worth more than £350 million in sales over five years, subject to project
completion.
Our pipeline of sustainable technologies projects remains healthy with over
140 projects, demonstrating the strength of our technology offering and market
positioning. To further strengthen our competitive position, we are partnering
with market leaders to offer our customers end-to-end integrated solutions. In
the period, we announced a blue ammonia partnership with thyssenkrupp Uhde;
and a sustainable fuels partnership with Honeywell UOP which builds on our
previously announced low carbon hydrogen partnership.
To support our Licensing growth, we recently opened new engineering hubs in
Manchester, UK, and Mumbai, India. We increased our engineering capacity by
22% in the period
(31(st) March 2024 baseline), tracking well against our target of 30% by the
end of 2025/26. To capture growth opportunities in Asia and access critical
capabilities to support our global growth ambitions, we have created a
business hub in Mumbai alongside our engineering centre.
We continue to transform our existing core business. Across our manufacturing
operations, we are focused on improving efficiency, including debottlenecking
plants. For example, we have restarted production at our expanded formaldehyde
catalyst facility. Together with commercial excellence initiatives and
procurement savings, this will drive continued margin improvement.
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 efficiencies and the 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
Slowdown in market development driving lower sales - operating loss flat
year-on-year
· Sales of £20 million, down 46%, due to lower demand following a slowdown in
market development and customer de-stocking
· Underlying operating loss flat year-on-year, despite significantly lower
sales, reflecting actions taken to reduce the cost base. Continue to expect
breakeven by the end of 2025/26
Half year ended % change % change, constant FX rates
30(th) September
2024 2023
£ million £ million
Sales
Hydrogen Technologies 20 37 -46 -46
Underlying operating loss (26) (26) - -
Underlying operating loss margin n/a n/a
Reported operating loss (26) (26)
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, focusing on PEM (proton exchange membrane) and AEM (anion
exchange membrane) electrolysers.
Performance commentary
Sales
In the half, sales were down 46% to £20 million. We saw lower demand across
both fuel cells and electrolysers as the pace of market development slowed and
our customers
de-stocked. This largely reflects the slowing build-out of supply chains and
infrastructure due to a lack of clarity around regulation and incentives. In
our operations, we have continued to drive manufacturing excellence, and
yields have improved at our UK plant in Swindon from which we serve the vast
majority of our customer demand.
Underlying operating loss
Underlying operating loss of £26 million, flat year-on-year, despite a lower
contribution from sales. As the pace of market development slowed, we took
actions to reduce our cost base including restructuring the business, reducing
headcount, and slowing our growth investments. Further benefits will come
through in the second half as cost savings annualise and we take further
action to reduce costs, resulting in a significantly lower operating loss
compared to the first half.
Business update
Hydrogen will play an essential role in the net zero transition. With our
leading technology, decades of expertise in fuel cells and deep understanding
of PGM catalysis and recycling, Johnson Matthey is well positioned to benefit
from this market in the long-term.
Currently, the global green hydrogen value chain is in an early stage of
development and experiencing challenges as it scales, particularly around
total cost of ownership as well as the development of regulation, incentives
and infrastructure. This is being reflected in many of our customers'
near-term demand forecasts, especially in Europe and the US.
In our Hydrogen Technologies business, we are actively managing the pace of
investment in line with market development. Given the near-term market
challenges, we have significantly reduced our capital expenditure and taken
cost control actions, including reducing our headcount materially.
Consequently, as previously announced, we continue to delay the start of
production for our manufacturing site in the UK (Royston). In addition, we are
prioritising our resource to focus on the most important opportunities, and
continue to
take steps to de-risk the business.
We are focused on further diversifying our customer base, targeting four new
strategic partnerships with leading companies by the end of 2025/26. We are
seeing increasing interest from customers as they recognise the benefits of
partnering, and we are progressing opportunities with a number of customers.
Against a backdrop of softening demand in the short-term, we now expect lower
sales in 2024/25 compared to 2023/24 (previously modest sales growth).
However, given the benefits from cost control actions, we will deliver a
significantly lower operating loss in 2024/25 and continue to expect breakeven
by the end of 2025/26.
Corporate
Corporate costs were £42 million, a decrease of £3 million from the prior
period, largely reflecting benefits from transformation.
Financial review
Research and development (R&D)
R&D spend was £99 million in the half. This was down from £104 million
in the prior period and represents c.5% of sales excluding precious metals. We
are reducing our R&D spend in Clean Air and prioritising spend in our
growth areas, including our sustainable technologies portfolio in Catalyst
Technologies. We are also investing in our digital capabilities to accelerate
innovation and provide further insights for our customers.
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 74% of the non-sterling denominated underlying operating profit in
the half year ended 30(th) September 2024, were:
Share of 1H 2024/25 Average exchange rate % change
non-sterling denominated
underlying operating profit Half year ended
30(th) September
2024 2023
US dollar 18% 1.28 1.26 +2
Euro 49% 1.18 1.16 +2
Chinese renminbi 7% 9.23 8.99 +3
For the half, the impact of exchange rates decreased sales by £29 million and
underlying operating profit by £5 million.
If average exchange rates for November 2024 month to date (£:US$ 1.28, £:€
1.20,
£:RMB 9.19) are maintained throughout the remainder of the year ending 31(st)
March 2025, foreign currency translation will have an adverse impact of c.£10
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 each
have an impact of approximately £0.5 million on full year underlying
operating profit whilst a one cent change in the average rate of the Euro has
approximately a £1.5 million impact on full year underlying operating profit.
Efficiency savings
In the half, we delivered £35 million of savings through our group
transformation programme and incurred cash costs of £35 million. Cumulative
benefits from the programme to date are £155 million. We are on track to
deliver £200 million by the end of 2024/25, which annualises at more than
£250 million, resulting in further benefits of more than £50 million in
2025/26. On completion of the programme, we will focus on continuous
improvement. Total associated costs to deliver the programme are around £130
million (including £30 million of capex), all of which are cash.
£ million Savings delivered Associated costs incurred to 30(th) September 2024
to 30(th) September 2024
Transformation programme 155 110
Items outside underlying operating profit
Non-underlying income / (charge) Half year ended
30(th) September
2024 2023
£ million £ million
Profit on disposal of businesses 484 -
Major impairment and restructuring charges (63) (42)
Amortisation of acquired intangibles (2) (2)
Total 419 (44)
There was a charge of £63 million relating to major impairment and
restructuring costs, comprising impairment charges of £23 million and £40
million of cash restructuring costs. The impairment charge includes a £17
million impairment following a review of and subsequent changes to our IT
operating model completed in June 2024. As a result of the review, certain IT
assets have been impaired. The remaining impairment charge is to production
related assets in Clean Air as the business continues to consolidate its
existing capacity into new and more efficient plants. The restructuring costs
were recognised in relation to our transformation programme and the
consolidation of our Clean Air manufacturing footprint.
The £484 million profit on disposal of businesses largely relates to the
disposal of our Medical Device Components business which completed on 1(st)
July 2024.
Finance charges
Net finance charges in the period amounted to £23 million, down from £41
million in the prior period. The decline of £18 million largely reflects an
£8 million benefit from hedging instruments and a £9 million movement
relating to interest on tax provisions.
Taxation
The tax charge on underlying profit before tax for the half year ended 30(th)
September 2024 was £29 million, an effective underlying tax rate of 21.9%,
compared with 22.0% in the first half of 2023/24.
The effective tax rate on reported profit for the half year ended 30(th)
September 2024 was 12.4%. This represents a tax charge of £70 million,
compared with £19 million in the first half of 2023/24. This increase largely
reflects higher reported profit which includes the profit on disposal of
Medical Device Components.
We expect the effective tax rate on underlying profit for the year ending
31(st) March 2025 to be broadly similar to the first half.
Post-employment benefits
IFRS - accounting basis
At 30(th) September 2024, the group's net post-employment benefit position,
was a surplus of £144 million.
The cost of providing post-employment benefits in the period was £12 million,
up from
£11 million in the same period last year.
Capital expenditure
Capital expenditure - excluding Value Businesses - was £170 million in the
half, 1.9 times depreciation and amortisation (excluding amortisation of
acquired intangibles). In the period, a key project was investment in our new
world-class PGM refinery.
Strong balance sheet
Net debt as at 30(th) September 2024 was £783 million, a decrease from £951
million at
31(st) March 2024 and £1,044 million at 30(th) September 2023. Net debt is
£19 million higher when post tax pension deficits are included. The group's
net debt (including post tax pension deficits) to EBITDA was 1.4 times (31(st)
March 2024: 1.6 times, 30(th) September 2023:
1.7 times), which was slightly below our target range of 1.5 to 2.0 times.
We use short-term metal leases as part of our mix of funding for working
capital, which are outside the scope of IFRS 16 as they qualify as short-term
leases. Precious metal leases amounted to £197 million as at 30(th)
September 2024 (31(st) March 2024: £197 million,
30(th) September 2023: £186 million).
Free cash flow and working capital
Free cash flow was £347 million in the half (1H 2023/24: £78 million)
largely reflecting net proceeds from the disposal of Medical Device
Components, partly offset by working capital outflows mainly due to lower
payables.
Cash from operating activities was negative £22 million in the half, compared
with
£236 million in the prior period, mainly driven by movements in working
capital.
Excluding precious metal, average working capital days to 30(th) September
2024 was in line with the prior period at 57 days.
Going concern
The group maintains a strong balance sheet with around £1.6 billion of
available cash and undrawn committed facilities. Cash generation was positive
during the period, with free cash flow of £347 million. Net debt has
significantly reduced since 31(st) March 2024 to £783 million at 30(th)
September 2024.
As set out on page 29, the directors have reviewed the base case scenario
forecasts for the group and have reasonable expectation that there are no
material uncertainties about the group's ability to operate for at least
twelve months from the approval date of 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 slowdown 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 assessed various scenario
forecasts and reasonably expect no significant uncertainties about the group's
ability to operate for at least twelve months from the approval date of these
half year accounts, supporting 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 and remain largely as
disclosed in our 2024 Annual Report.
1. Market factors, customer demand and margin sustainability - The risk is
that we fail to correctly anticipate and/or make the right business decisions
to address shifts in demand for our products and services (for example driven
by regulation, customer needs, societal expectations) or shifts that lead to
margin erosion. Such shifts may impact existing and new products and may
create upside opportunity or downside exposure.
2. A significant geopolitical or macroeconomic event impacting JM's operations
- JM has a global business footprint in terms of operations, customers and
supply chains. There is a risk that we may face disruption in operations,
supply chain and/or customer markets due to geopolitical or macroeconomic
events (for example from risks such as conflicts, trade disputes, sanctions,
pandemics, macroeconomic events or financial crises).
3. Failure to deliver business value from strategic 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 will be unable to meet production capacity
expectations, breach budgeted costs or lose our competitive position in
markets.
4. Development of offerings that do not meet future customer needs - There is
a risk that we are unable to develop offerings that are competitive enough to
meet our market ambitions and the needs of customers, particularly in highly
dynamic and emerging markets. This includes our ability to identify and
understand customer expectations, translating this into effective innovation
programmes and developing our technologies at industrial production scale.
5. A significant work related EHS incident - The focus of this principal risk,
related to environmental, health and safety (EHS) performance, is around
catastrophic incidents (for example fire, explosion or toxic gas release) due
to process safety or major compliance failure which would threaten our
critical operations, product portfolios or our corporate reputation and
therefore our 'licence to operate'.
6. Disruption to our supplier ecosystem and the supply of purchased goods and
services - As a global business, we are dependent on suppliers worldwide to
provide key materials and services. Given the speciality nature of our
products, there are limited suppliers who supply certain critical raw
materials. If there was significant disruption in their supply, we would be
unable to manufacture our products to satisfy customer demand.
7. A low performing culture undermines our strategy - A low-performing
culture, characterised by an insufficiently engaged and inclusive workforce,
lacking commitment to taking accountability, keeping it simple and driving
results could impact our ability to attract and retain key talent and
therefore successfully execute our strategy.
8. Breach to precious metal security - There is a risk that we do not have
sufficient metal available to meet business demands. Loss or theft due to a
failure of metal controls (operations and finance) and/or security management
systems associated with the protection of metal may result in financial loss
and/or a failure to satisfy our customers, which could reduce our customers'
confidence in JM and lead to potential legal action.
9. Failure in one or more of JM's critical operational assets - A critical
asset failure may have a material effect on our supply chains, performance,
share value and reputation. In addition to the failure of aged assets, we are
exposed to the effects of climate change. We understand that more frequent
extreme weather events and natural disasters may disrupt our operations and
increase our costs.
10. Unsuccessful delivery of key business transformation programmes - JM's
transformation is scoped to implement the strategy of catalysing the net zero
transition for our customers in energy, chemicals and automotive. There are
currently around 25 transformation programmes across group functions and the
four core businesses, driving business growth, people growth and efficiency.
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 (IT) and operational technology (OT) 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
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 26(th)
November 2024 and is signed on its behalf by:
Patrick Thomas
Chair
Independent review report to Johnson Matthey Plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Johnson Matthey Plc's condensed consolidated interim
financial statements (the "interim financial statements") in the half year
results of Johnson Matthey Plc for the 6 month period ended 30(th) September
2024 (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 Statement of Financial Position as at
30(th) September 2024;
· the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Total Comprehensive Income for the period then
ended;
· the Condensed Consolidated Statement of Cash Flows 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
26(th) November 2024
Condensed Consolidated Income Statement
for the six months ended 30(th) September 2024
Six months ended
30.9.24 30.9.23
Notes £ million £ million
Revenue 2, 3 5,632 6,531
Cost of sales (5,223) (6,084)
Gross profit 409 447
Distribution costs (54) (62)
Administrative expenses (199) (205)
Profit on disposal of businesses 4 484 -
Amortisation of acquired intangibles 4 (2) (2)
Major impairment and restructuring charges 4 (63) (42)
Operating profit 4 575 136
Finance costs (72) (71)
Investment income 49 30
Share of profits / (losses) of associates 2 (13)
Profit before tax 554 82
Tax expense 5 (70) (19)
Profit for the period 484 63
pence pence
Earnings per ordinary share
Basic 6 266.8 34.7
Diluted 6 266.4 34.6
Condensed Consolidated Statement of Total Comprehensive Income
for the six months ended 30(th) September 2024
Six months ended
30.9.24 30.9.23
Notes £ million £ million
Profit for the period 484 63
Other comprehensive income / (expense)
Items that will not be reclassified to the income statement in subsequent
years
Remeasurements of post-employment benefit assets and liabilities 12 21 (75)
Fair value losses on equity investments (1) (3)
Tax on items that will not be reclassified to the income statement (4) 19
Total items that will not be reclassified to the income statement 16 (59)
Items that may be reclassified to the income statement:
Exchange differences on translation of foreign operations (124) (16)
Amounts (charged) / credited to hedging reserve (16) 2
Fair value gains / (losses) on net investment hedges 22 (3)
Tax on items that may be reclassified to the income statement 4 (1)
Total items that may be reclassified to the income statement (in subsequent (114) (18)
years)
Other comprehensive expense for the period (98) (77)
Total comprehensive income / (expense) for the period 386 (14)
Condensed Consolidated Statement of Financial Position
as at 30(th) September 2024
30.9.24 31.3.24
Notes £ million £ million
Assets
Non-current assets
Property, plant and equipment 8 1,485 1,436
Right-of-use assets 44 40
Goodwill 343 353
Other intangible assets 9 278 301
Investments in associates 10 69 71
Investments at fair value through other comprehensive income 40 40
Other receivables 97 104
Cross currency and interest rate swaps 17 - 15
Other financial assets 18 34
Deferred tax assets 128 128
Post-employment benefit net assets 12 182 153
Total non-current assets 2,684 2,675
Current assets
Inventories 1,153 1,211
Tax receivable 30 10
Trade and other receivables 1,588 1,718
Cash and cash equivalents 17 621 542
Cross currency and interest rate swaps 17 10 -
Other financial assets 49 53
Assets classified as held for sale - 127
Total current assets 3,451 3,661
Total assets 6,135 6,336
Liabilities
Current liabilities
Trade and other payables (2,070) (2,209)
Lease liabilities 17 (8) (8)
Taxation liabilities (83) (75)
Cash and cash equivalents ─ bank overdrafts 17 (15) (12)
Borrowings and related swaps 17 (254) (110)
Other financial liabilities (21) (11)
Provisions (60) (63)
Liabilities classified as held for sale - (35)
Total current liabilities (2,511) (2,523)
Non-current liabilities
Borrowings and related swaps 17 (1,100) (1,339)
Lease liabilities 17 (27) (24)
Deferred tax liabilities (3) (2)
Cross currency and interest rate swaps 17 (10) (10)
Employee benefit obligations 12 (41) (39)
Provisions (21) (17)
Trade and other payables (2) (2)
Total non-current liabilities (1,204) (1,433)
Total liabilities (3,715) (3,956)
Net assets 2,420 2,380
Equity
Share capital 207 215
Share premium 148 148
Treasury shares (12) (17)
Other reserves (71) 36
Retained earnings 2,148 1,998
Total equity 2,420 2,380
Condensed Consolidated Statement of Cash Flows
for the six months ended 30(th) September 2024
Six months ended
30.9.24 30.9.23
Notes £ million £ million
Cash flows from operating activities
Profit before tax 554 82
Adjustments for:
Share of (profits) / losses of associates (2) 13
Profit on disposal of businesses 11 (484) -
Depreciation 68 72
Amortisation 28 23
Impairment losses 23 -
Profit on sale of non-current assets (1) -
Share-based payments 5 7
Decrease in inventories 43 169
Decrease in receivables 116 113
Decrease in payables (307) (217)
Increase in provisions 2 6
Contributions in excess of employee benefit obligations charge (2) (5)
Changes in fair value of financial instruments 12 (17)
Net finance costs 23 41
Disposal costs (16) -
Income tax paid (84) (51)
Net cash (outflow) / inflow from operating activities (22) 236
Cash flows from investing activities
Interest received 44 19
Purchases of property, plant and equipment (150) (125)
Purchases of intangible assets (21) (33)
Government grant income received - 1
Proceeds from sale of businesses 578 39
Net cash inflow / (outflow) from investing activities 451 (99)
Cash flows from financing activities
Purchase of treasury shares (123) -
Proceeds from borrowings 19 2
Repayment of borrowings (66) (151)
Dividends paid to equity shareholders 7 (101) (101)
Interest paid (77) (53)
Principal element of lease payments (5) (6)
Net cash outflow from financing activities (353) (309)
Change in cash and cash equivalents 76 (172)
Exchange differences on cash and cash equivalents - (3)
Cash and cash equivalents at beginning of year 530 637
Cash and cash equivalents at end of period 17 606 462
Cash and deposits 165 193
Money market funds 456 300
Bank overdrafts (15) (31)
Cash and cash equivalents 17 606 462
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30(th) September 2024
Share Share Treasury Other Retained Total
capital premium shares reserves earnings equity
£ million £ million £ million £ million £ million £ million
At 1(st) April 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
Total comprehensive (expense) / income for the period - - - (61) 51 (10)
Dividends paid (note 7) - - - - (40) (40)
Share-based payments - - - - 5 5
Cost of shares transferred to employees - - 2 - (10) (8)
At 31(st) March 2024 215 148 (17) 36 1,998 2,380
Total comprehensive (expense) / income for the period - - - (115) 501 386
Dividends paid (note 7) - - - - (101) (101)
Purchase of treasury shares (note 7) (8) - - 8 (251) (251)
Share-based payments - - - - 9 9
Cost of shares transferred to employees - - 5 - (8) (3)
At 30(th) September 2024 207 148 (12) (71) 2,148 2,420
1 Basis of preparation and statement of compliance
These condensed consolidated interim financial statements for the half-year
reporting period ended 30(th) September 2024 (the 'condensed consolidated
accounts') 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 UK's Financial Conduct
Authority. The accounting policies, estimates and judgements applied in the
condensed consolidated accounts 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 2024, 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. They do not
include all of the notes of the type normally included in an annual financial
report. Accordingly, the condensed consolidated accounts should be read in
conjunction with the annual report for the year ended 31(st) March 2024, 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 2024 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 condensed consolidated accounts are unaudited but have been reviewed by
the auditors. They were approved by the board of directors on 26(th) November
2024.
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 2024, the group maintains a strong balance sheet with
around £1.6 billion of available cash and undrawn committed facilities. Cash
generation was positive during the period with free cash flow of £347
million. Net debt has reduced by £168 million since 31(st) March 2024 to
£783 million, driven by proceeds from disposals. Net debt (including post tax
pension deficits) to underlying EBITDA, was below our target range at 1.4
times.
While inflation has been decreasing and interest rates have started to fall,
significant headwinds remain due to ongoing global auto sector weakness,
persistent geopolitical tensions and political uncertainty in the US. Despite
these challenges, the group demonstrated resilience during the period, with
underlying operating profit (excluding the impact of divestments) only
modestly down. 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
significant disruption from external factors and a deep 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.
1 Basis of preparation and statement of compliance (continued)
Going concern (continued)
The group has a robust funding position comprising a range of long-term debt
and a £1 billion five year committed revolving credit facility maturing in
March 2027 which was entirely undrawn at 30(th) September 2024. There was
£456 million of cash held in money market funds. Of the existing loans,
around £340 million of term debt matures in the period to December 2025. In
October 2024, the group refinanced around £300 million of term debt with a US
Private Placement issuance, with funds scheduled for drawdown in December
2024. We have excluded this refinancing from our going concern modelling. As a
long time, highly rated issuer in the US private placement market, the group
expects to be able to access additional funding in its existing markets should
it need to. The group also has a number of additional sources of funding
available including uncommitted lease facilities that support precious metal
funding. Whilst we would fully expect to be able to utilise the metal lease
facilities, they are excluded from our going concern modelling.
Under all scenarios above, the group has sufficient headroom against committed
facilities and key financial covenants are not in breach during the going
concern period. There remain risks to the group including more extreme
economic outcomes. Against these, the group has a range of levers which it
could utilise to protect headroom including reducing capital expenditure and
future dividend distributions.
The directors are therefore of the opinion that the group has adequate
resources to fund its operations for at least twelve months from the date of
approving these half year accounts 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 17.
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
2024:
- Amendments to IAS 1, Presentation of Financial Statements;
- Amendments to IFRS 16, Leases;
- Amendments to IAS 7, Statement of Cash Flows and IFRS 7,
Financial Instruments: Disclosures relating to Supplier Finance Arrangements
The new or amended standards and interpretations above that are effective for
the year ended 31(st) March 2025 have not had a material impact on the group.
The group has not early adopted any standard, amendment or interpretation that
was issued but is not yet effective.
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 - licenses process technology and supplies catalysts to
the chemical and energy sectors, enabling the decarbonisation of fuels and
chemical value chains.
Hydrogen Technologies - provides components across the value chain for fuel
cells and electrolysers including catalyst coated membranes and membrane
electrode assemblies.
Value Businesses - a portfolio of businesses managed to drive shareholder
value from activities considered to be non-core to the group. The disposal of
the Value Businesses portfolio concluded during the period, with Battery
Systems (sold on 30(th) April 2024), Medical Device Components (sold on 1(st)
July 2024) and the land and buildings of our previous Battery Materials
business in Poland (sold on 24(th) July 2024). Refer to note 11 for further
details. Additionally, included in our prior period comparatives is Diagnostic
Services (sold on 29(th) September 2023).
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 18 to 25 of the 2024 Annual
Report. The performance of the group's operating businesses is assessed on
sales and underlying operating profit (see note 17). Sales between segments
are made at market prices, taking into account the volumes involved.
2 Segmental information (continued)
Six months ended 30(th) September 2024
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 2,013 3,199 346 24 50 - - 5,632
Inter-segment revenue - 776 9 - - - (785) -
Revenue 2,013 3,975 355 24 50 - (785) 5,632
External sales(1) 1,165 173 328 20 36 - - 1,722
Inter-segment sales - 34 8 - - - (42) -
Sales(1) 1,165 207 336 20 36 - (42) 1,722
Underlying operating profit(1) 121 51 50 (26) 2 (42) - 156
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
(1) Sales and underlying operating profit are non-GAAP measures (see note 17
for reconciliation to GAAP measures). Sales excludes the sale of precious
metals. Underlying operating profit excludes profit or loss on disposal of
businesses, amortisation of acquired intangibles and major impairment and
restructuring charges.
2 Segmental information (continued)
Net assets by business
At 30(th) September 2024
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Total
£ million £ million £ million £ million £ million £ million £ million
Segmental net assets 1,440 140 783 270 6 312 2,951
Net debt (see note 17) (783)
Post-employment benefit net assets and liabilities 141
Deferred tax net assets 125
Provisions and non-current other payables (83)
Investments in associates 69
Net assets 2,420
At 31(st) March 2024
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Total
£ million £ million £ million £ million £ million £ million £ million
Segmental net assets 1,351 38 718 271 178 449 3,005
Net debt (see note 17) (946)
Post-employment benefit net assets and liabilities 114
Deferred tax net assets 126
Provisions and non-current other payables (82)
Investments in associates 71
Net assets held for sale 92
Net assets 2,380
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
Catalysts Chemicals / oil and gas / sustainable fuels Speciality catalysts and additives Point in time On despatch or delivery
Licensing Chemicals / oil and gas / sustainable fuels Process technology licences and engineering design services Over time / point in time(1) Based on costs incurred or at a point in time(1)
Hydrogen Technologies
Fuel Cells Technology 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 2024
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Total
£ million £ million £ million £ million £ million £ million
Metal 848 3,026 18 4 14 3,910
Heavy Duty Catalysts 364 - - - - 364
Light Duty Catalysts 774 - - - - 774
Platinum Group Metal Services - 173 - - - 173
Catalyst Technologies - - 328 - - 328
Fuel Cells Technology - - - 20 - 20
Battery Systems - - - - 15 15
Medical Device Components - - - - 21 21
Other 27 - - - - 27
Revenue 2,013 3,199 346 24 50 5,632
Six months ended 30(th) September 2023
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 Technology - - - 37 - 37
Battery Systems - - - - 106 106
Diagnostic Services - - - - 37 37
Medical Device Components - - - - 45 45
Other 20 - - - 2 22
Revenue
Revenue 2,768 3,169 308 45 241 6,531
The contract receivables balance at 30(th) September 2024 is £38 million
(31(st) March 2024: £56 million).
3 Revenue (continued)
Revenue from external customers by point in time and over time performance
obligations
Six months ended 30(th) September 2024
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Total
£ million £ million £ million £ million £ million £ million
Revenue recognised at a point in time 2,013 3,106 290 24 47 5,480
Revenue recognised over time - 93 56 - 3 152
Revenue 2,013 3,199 346 24 50 5,632
Six months ended 30(th) September 2023
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
4 Operating profit
Six months ended
30.9.24 30.9.23
£ million £ million
Operating profit is arrived at after charging / (crediting):
Research and development expenditure charged to the income statement 99 104
Less: External funding received - from governments (8) (7)
Net research and development expenditure charged to the income statement 91 97
Depreciation of:
Property, plant and equipment 64 66
Right-of-use assets 4 6
Depreciation 68 72
Amortisation of:
Acquired intangibles 2 2
Other intangible assets 26 21
Amortisation 28 23
Profit on disposal of businesses (note 11) (484) -
Property, plant and equipment 5 -
Other intangible assets 17 -
Inventories 1 2
Trade and other receivables - 10
Impairment losses 23 12
Restructuring charges 40 30
Major impairment and restructuring charges 63 42
Profit on disposal of businesses
On 30(th) April 2024, the group completed the sale of Battery Systems, on
1(st) July 2024, the group completed the sale of its Medical Device Components
business. On 24(th) July 2024, the group completed the sale of the land and
buildings from our legacy Battery Materials business in Poland, 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
17.
Major impairments - the group's impairment charge of £23 million includes a
£17 million impairment to the group's intangible assets following a review of
and subsequent changes to our IT operating model completed in June 2024. As a
result of the review, certain IT assets have been impaired. The remaining
impairment charge is to production related assets in Clean Air as the business
continues to consolidate its existing capacity into new and more efficient
plants.
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 £40 million have been recognised
of which £19 million relates to Johnson Matthey Global Solutions, IT
transformation and running the transformation programme, with £9 million
other redundancy and implementation costs. The remaining £12 million charge
is related to Clean Air's ongoing plant consolidation initiatives, of which
the majority is redundancy and exit costs.
5 Tax expense
The charge for taxation at the half year ended 30(th) September 2024 is £70
million (1H 2023/24: £19 million), an effective tax rate of 12.4%. The tax
charge on underlying profit before tax was £29 million, an effective tax rate
of 21.9%, similar to the 22.0% in the half year ended 30(th) September 2023.
The group is within the scope of the OECD Pillar Two model rules. The group is
in scope by virtue of the parent company being tax resident in the UK. Pillar
Two legislation has been enacted in the UK, as well as several other
territories where the group operates, and became effective for the group from
the start of this financial period.
The group applies the exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two model rules,
as provided in the amendments to IAS 12 issued in May 2023.
Under the legislation, the group is liable to pay a top-up tax for the
difference between its Global Anti-Base Erosion ('GloBE') effective tax rate
per jurisdiction and the 15% minimum rate. We have undertaken an assessment of
the group's potential to additional taxes under Pillar 2 and conclude that,
for the year ended 31(st) March 2025, the group is expected to meet the
exemptions in the Transitional Country by Country Reporting ('CbCR') safe
harbours in all tax jurisdictions in which it operates, except for Bermuda and
North Macedonia. Income tax expense recognised in the consolidated statement
of profit and loss for the six months ended 30(th) September 2024 includes £1
million related to Pillar 2 income taxes. The group will keep the position
under review for future periods.
We continue to monitor potential impacts as further guidance is published, as
territories implement legislation to enact the rules, and as territories
increase their domestic Corporate Tax rate in response to the OECD Pillar 2
rules.
6 Earnings per ordinary share
Six months ended
30.9.24 30.9.23
pence pence
Basic 266.8 34.7
Diluted 266.4 34.6
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 30.9.24 30.9.23
Basic 181,728,079 183,213,834
Dilution for long term incentive plans 273,281 907,731
Diluted 182,001,360 184,121,565
7 Dividends
An interim dividend of 22.00 pence per ordinary share has been proposed by the
board which will be paid on the 4(th) February 2025 to shareholders on the
register at the close of business on 6(th) December 2024. The estimated amount
to be paid is £38 million (1H 2023/24: £40 million) and has not been
recognised in these accounts.
Six months ended
30.9.24 30.9.23
£ million £ million
2022/23 final ordinary dividend paid ─ 55.00 pence per share - 101
2023/24 final ordinary dividend paid ─ 55.00 pence per share 101 -
Total dividends 101 101
On 3(rd) July 2024, the company announced its intention to conduct a share
buyback programme for up to a maximum consideration of £250 million. The
first tranche of the share buyback programme of up to £125 million commenced
on 3(rd) July 2024 and completed on 23(rd) September 2024. On 24(th) September
2024, the company commenced the second tranche of up to £125 million, which
will end no later than 24(th) January 2025. As at 30(th) September 2024, the
company purchased 7,628,978 shares at a cost of £123 million. The residual
balance of £127 million has been recognised within trade and other payables
as at 30(th) September 2024.
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 2024 591 23 2,143 515 3,272
Additions - - 6 143 149
Transfers from assets in the course of construction 1 - 29 (30) -
Disposals - - (3) - (3)
Exchange adjustments (15) (1) (51) (5) (72)
At 30(th) September 2024 577 22 2,124 623 3,346
Accumulated depreciation and impairment
At 1(st) April 2024 290 12 1,522 12 1,836
Charge for the period 7 1 56 - 64
Impairment losses - - 5 1 6
Disposals - - (3) - (3)
Exchange adjustments (6) (1) (35) - (42)
At 30(th) September 2024 291 12 1,545 13 1,861
Carrying amount at 30(th) September 2024 286 10 579 610 1,485
Carrying amount at 1(st) April 2024 301 11 621 503 1,436
9 Other intangible assets
Customer contracts and relationships Computer software Patents trademarks and licences Acquired research and technology Development expenditure Total
£ million £ million £ million £ million £ million £ million
Cost
At 1(st) April 2024 103 536 32 30 134 835
Additions - 21 - - - 21
Exchange adjustments (2) (1) (1) (1) - (5)
At 30(th) September 2024 101 556 31 29 134 851
Accumulated amortisation and impairment
At 1(st) April 2024 91 252 28 30 133 534
Charge for the period 2 25 1 - - 28
Impairment losses (note 4) - 17 - - - 17
Exchange adjustments (2) (1) (2) (1) - (6)
At 30(th) September 2024 91 293 27 29 133 573
Carrying amount at 30(th) September 2024 10 263 4 - 1 278
Carrying amount at 1(st) April 2024 12 284 4 - 1 301
10 Investments in associates
As part of the disposal of our Health business, 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.
Associates
£ million
At 1(st) April 2024 71
Group's share of profits for the period 2
Exchange adjustments (4)
At 30(th) September 2024 69
11 Disposals
Medical Device Components
On 1(st) July 2024, the group completed the sale of its Medical Device
Components business for an enterprise value of £555 million (£559 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 2024.
Battery Systems
On 30(th) April 2024, the group completed the sale of its Battery Systems
business for an enterprise value of £14 million (£21 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 2024.
Battery Materials Poland
On 24(th) July 2024, the group completed the sale of the land and buildings of
our previous Battery Materials business in Poland for £26 million. This was
disclosed as assets held for sale as at 31(st) March 2024.
2024 2023
Medical Device Components Other disposals Total Total
30(th) September £ million £ million £ million £ million
Proceeds
Cash consideration 555 30 585 47
Cash and cash equivalents disposed (10) - (10) (3)
Net cash consideration 545 30 575 44
Disposal costs paid (11) (5) (16) (2)
Net cash inflow 534 25 559 42
Assets and liabilities disposed
Non-current assets
Property, plant and equipment 24 25 49 10
Right-of-use assets 4 - 4 9
Goodwill 3 - 3 -
Current assets
Inventories 8 20 28 5
Trade and other receivables 18 20 38 32
Cash and cash equivalents 10 - 10 3
Deferred tax - 3 3 3
Current liabilities
Trade and other payables (6) (20) (26) (9)
Current income tax liabilities (1) (1) (2) -
Lease liabilities (4) - (4) -
Non-current liabilities
Lease liabilities - (1) (1) (11)
Provisions (1) (1) (2) -
Net assets disposed 55 45 100 42
11 Disposals (continued)
2024 2023
Medical Device Components Other disposals Total Total
30(th) September £ million £ million £ million £ million
Cash consideration 555 30 585 47
Deferred consideration - 17 17 4
Working capital adjustments at time of disposal 4 - 4 4
Less: carrying amount of net assets sold (55) (45) (100) (42)
Less: disposal costs (16) (8) (24) (8)
Cumulative currency translation gain recycled from other comprehensive income - 2 2 (1)
Profit recognised in the income statement 488 (4) 484 4
Disposal proceeds
During the period we received £3 million of proceeds relating to the
Diagnostic Services disposal in the prior year. This was recognised within
profit on disposal in the prior year.
12 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:
30.9.24 31.3.24
UK plan US plans UK plan US plans
% % % %
First year's rate of increase in salaries 3.40 - 3.50 -
Ultimate rate of increase in salaries 3.40 - 3.50 -
Rate of increase in pensions in payment 2.80 - 2.90 -
Discount rate 5.10 4.90 4.90 5.20
Inflation - 2.20 - 2.20
- UK Retail Prices Index (RPI) 3.00 - 3.10 -
- UK Consumer Prices Index (CPI) 2.65 - 2.75 -
Current medical benefits cost trend rate 8.95 - 8.95 -
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 2024 115 35 (6) 2 (10) (19) 117
Current service cost - in
operating profit - (9) - - - - (9)
Administrative expenses - in
operating profit (2) - - (1) - - (3)
Interest 3 1 - - - - 4
Remeasurements 21 4 - (4) - - 21
Company contributions - 12 - 1 - - 13
Exchange - - - 1 - - 1
At 30(th) September 2024 137 43 (6) (1) (10) (19) 144
12 Post-employment benefits (continued)
Financial information (continued)
The post-employment benefit assets and liabilities are included in the balance
sheet as follows:
30.9.24 30.9.24 31.3.24 31.3.24
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 137 - 115 -
UK pension - cash balance section 43 - 35 -
UK post-retirement medical benefits - (6) - (6)
US pensions - (1) 2 -
US post-retirement medical benefits - (10) - (10)
Other 2 (21) 1 (20)
Total post-employment plans 182 (38) 153 (36)
Other long-term employee benefits (3) (3)
Total long-term employee benefit obligations (41) (39)
13 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.
13 Fair values (continued)
Fair value
30.9.24 31.3.24 hierarchy
£ million £ million level
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive income(1) 40 40 1
Cross currency and interest rate swaps - assets - 15 2
Other financial assets(2) 18 34 2
Cross currency and interest rate swaps - liabilities (10) (10) 2
Borrowings and related swaps - (3) 2
Current
Trade receivables(3) 156 178 2
Other receivables(4) 1 3 2
Cash and cash equivalents - money market funds 456 334 2
Cash and cash equivalents - cash and deposits 5 12 2
Cross currency and interest rate swaps 10 - 2
Other financial assets(2) 49 53 2
Other financial liabilities(2) (21) (11) 2
Fair value
30.9.24 31.3.24 hierarchy
£ million £ million level
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps (1,100) (1,336) -
Lease liabilities (27) (24) -
Other receivables 55 60 -
Trade and other payables (2) (2) -
Current
Amounts receivable under precious metal sale and repurchase agreements 358 398 -
Amounts payable under precious metal sale and repurchase agreements (719) (797) -
Cash and cash equivalents - cash and deposits 160 196 -
Cash and cash equivalents - bank overdrafts (15) (12) -
Borrowings and related swaps (254) (110) -
Lease liabilities (8) (8) -
Trade and other receivables 833 926 -
Trade and other payables (1,210) (1,235) -
(1) Investments at fair value through other comprehensive income are quoted
bonds purchased to fund pension deficit (£36 million) and an investment held
at fair value through other comprehensive income (£4 million).
(2) Other financial assets includes forward foreign exchange contracts (£14
million), forward precious metal price contracts (£51 million) and currency
swaps (£2 million). Other financial liabilities includes forward foreign
exchange contracts (£7 million) and currency swaps (£14 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.
13 Fair values (continued)
The fair value of financial instruments, excluding accrued interest, is
approximately equal to book value except for:
30.9.24 31.3.24
Carrying Fair Carrying Fair
amount value amount value
£ million £ million £ million £ million
US Dollar Bonds 2025, 2027, 2028, 2029 and 2030 (477) (455) (507) (474)
Euro Bonds 2025, 2028, 2030 and 2032 (340) (319) (348) (320)
Sterling Bonds 2024, 2025 and 2029 (80) (74) (145) (137)
KfW US Dollar Loan 2024 (37) (37) (40) (38)
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.
14 Precious metal leases
At 30(th) September 2024, precious metal leases were £197 million at
closing prices (31(st) March 2024: £197 million). Precious metal leases do
not fall under the scope of IFRS 16.
15 Transactions with related parties
There have been no material changes in related party relationships in the six
months ended 30(th) September 2024. During the half year ended 30(th)
September 2024, the group had sales with associates totalling £2 million (1H
2023/24: £11 million). The amounts owed by Veranova were £1 million at
30(th) September 2024 (1H 2023/24: £nil). No other related party transactions
have occurred which have materially affected the financial position or
performance of the group during the period.
16 Contingent liabilities
The group is involved in various disputes and claims which arise from time to
time in the course of its business including, for example, in relation to
commercial matters, product quality or liability, employee matters and tax
audits. The group is also involved from time to time in the course of its
business in legal proceedings and actions, engagement with regulatory
authorities and in dispute resolution processes. These are reviewed on a
regular basis and, where possible, an estimate is made of the potential
financial impact on the group. In appropriate cases a provision is recognised
based on advice, best estimates and management judgement. Where it is too
early to determine the likely outcome of these matters, no provision is made.
Whilst the group cannot predict the outcome of any current or future such
matters with any certainty, it currently believes the likelihood of any
material liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its consolidated income, financial position
or cash flows.
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.
17 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.
17 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.
Return on capital employed (ROCE)(1,3) Annualised underlying operating profit divided by the average equity plus Provides a measure of the group's efficiency in allocating the capital under
average net debt. The average is calculated using the opening balance for the its control to profitable investments.
financial year and the closing balance.
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, 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.
(3) Return on capital employed is a new key performance indicator in the half
year accounts. This was included as a performance measure in the 2024
Performance Share Plan award. Inclusion of this measure incentives delivery of
the transformation programme across JM and aligns with investor focus on our
ability to return value on investments.
17 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 2024 £ million £ million £ million £ million
Underlying 156 133 (29) 104
Amortisation of acquired intangibles (2) (2) - (2)
Profit on disposal of businesses(1) 484 484 (70) 414
Major impairment and restructuring charges(1) (63) (63) 15 (48)
Share of profits of associates - 2 - 2
Change in non-underlying tax provisions - - 14 14
Reported 575 554 (70) 484
(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 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 (42) (42) 13 (29)
Share of losses of associates - (13) 2 (11)
Reported 136 82 (19) 63
Underlying earnings per share Six months ended
30.9.24 30.9.23
Underlying profit for the period (£ million) 104 108
Weighted average number of shares in issue (million) 181.7 183.2
Underlying earnings per share (pence) 57.4 59.1
17 Non-GAAP measures (continued)
Return on Capital Employed (ROCE)
Six months Year Six months
ended ended ended
30.9.24 31.3.24 30.9.23
£ million £ million £ million
Underlying operating profit for this period 156 410 180
Underlying operating profit for prior year 410 - 465
Less: Underlying operating profit for prior first half (180) - (222)
Annualised underlying operating profit 386 410 423
Average net debt 867 987 1,034
Average equity 2,400 2,459 2,486
Average capital employed 3,267 3,446 3,520
ROCE 11.8% 11.9% 12.0%
Average working capital days (excluding precious metals) Six months Year Six months
ended ended ended
30.9.24 31.3.24 30.9.23
£ million £ million £ million
Inventories 1,153 1,211 1,517
Trade and other receivables 1,588 1,718 1,759
Trade and other payables (2,070) (2,209) (2,263)
671 720 1,013
Working capital balances classified as held for sale - 44 -
Total working capital 671 764 1,013
Less: Precious metal working capital (163) (174) (371)
Working capital (excluding precious metals) 508 590 642
Average working capital days (excluding precious metals) 57 60 57
Free cash flow
Six months ended
30.9.24 30.9.23
£ million £ million
Net cash (outflow) / inflow from operating activities (22) 236
Interest received 44 19
Interest paid (77) (53)
Purchases of property, plant and equipment (150) (125)
Purchases of intangible assets (21) (33)
Government grant income - 1
Proceeds from sale of businesses 578 39
Principal element of lease payments (5) (6)
Free cash flow 347 78
17 Non-GAAP measures (continued)
Net debt (including post tax pension deficits) to underlying EBITDA
30.9.24 31.3.24 30.9.23
£ million £ million £ million
Cash and deposits 165 208 193
Money market funds 456 334 300
Bank overdrafts (15) (12) (31)
Cash and cash equivalents 606 530 462
Cross currency and interest rate swaps - current assets 10 - -
Cross currency and interest rate swaps - non-current assets - 15 19
Cross currency and interest rate swaps - non-current liabilities (10) (10) (16)
Borrowings and related swaps - current (254) (110) (71)
Borrowings and related swaps - non-current (1,100) (1,339) (1,398)
Lease liabilities - current (8) (8) (9)
Lease liabilities - non-current (27) (24) (31)
Lease liabilities - current - transferred to liabilities classified as held - (1) -
for sale
Lease liabilities - non-current - transferred to liabilities classified as - (4) -
held for sale
Net debt (783) (951) (1,044)
Increase / (decrease) in cash and cash equivalents 76 (102) (172)
Less: Decrease in borrowings 47 150 149
Less: Principal element of lease payments 5 11 6
Decrease / (increase) in net debt resulting from cash flows 128 59 (17)
New leases, remeasurements and modifications (9) (11) (7)
Other lease movements (3) 1 -
Disposal of businesses 5 11 10
Exchange differences on net debt 43 13 2
Other non-cash movements 4 (1) (9)
Movement in net debt 168 72 (21)
Net debt at beginning of year (951) (1,023) (1,023)
Net debt at end of year (783) (951) (1,044)
Net debt (783) (951) (1,044)
Add: Pension deficits (22) (22) (21)
Add: Related deferred tax 3 3 3
Net debt (including post tax pension deficits) (802) (970) (1,062)
Underlying EBITDA for this period 250 273
Underlying EBITDA for prior year 598 647
Less: Underlying EBITDA for prior half year (273) (309)
Annualised underlying EBITDA 575 598 611
Net debt (including post tax pension deficits) to underlying EBITDA 1.4 1.6 1.7
17 Non-GAAP measures (continued)
30.9.24 31.3.24 30.9.23
£ million £ million £ million
Underlying EBITDA 250 598 273
Depreciation and amortisation (96) (192) (95)
Profit / (loss) on disposal of businesses 484 (9) -
Major impairment and restructuring charges (63) (148) (42)
Finance costs (72) (146) (71)
Finance income 49 64 30
Share of profits / (losses) of associates 2 (3) (13)
Income tax expense (70) (56) (19)
Profit for the period 484 108 63
2024
27(th) November
Announcement of results for the half year ending 30(th) September 2024
5(th) December
Ex dividend date
6(th) December
Interim dividend record date
2025
4(th) February
Payment of interim dividend
22(nd) May
Announcement of results for the year ending 31(st) March 2025
17(th) July
134(th) 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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