TIDMJMAT
RNS Number : 5656T
Johnson Matthey PLC
21 November 2013
For Release at 7.00 am Thursday 21(st) November 2013
Half year results for the six months ended
30(th) September 2013
Strong Performance in the First Half:
Half Year to 30(th) September %
2013 2012 change
restated
Revenue GBP6,411m GBP4,892m +31
Sales excluding precious
metals GBP1,486m GBP1,310m +13
Profit before tax GBP202.1m GBP180.1m +12
Earnings per share 86.0p 69.2p +24
Underlying*:
Profit before tax GBP212.9m GBP187.9m +13
Earnings per share 84.9p 71.7p +18
Dividend per share 17.0p 15.5p +10
---------------------------------- ------------ ------------ -----------
*before amortisation of acquired intangibles, major impairment
and restructuring charges, profit or loss on disposal of
businesses, significant tax rate changes and, where relevant,
related tax effects
Summary
-- A strong first half with:
-- Sales excluding precious metals (sales) 13% ahead at GBP1.5 billion
-- Underlying profit before tax 13% ahead
-- Underlying earnings per share up 18%
-- Return on invested capital (ROIC) at 21.0%
-- Free cash flow generation excluding movements in precious
metal working capital was GBP111.2 million; net debt (including
post tax pension deficits) / EBITDA of 1.5 times
-- Interim dividend up 10% to 17.0 pence
Business Overview
-- A very strong first half for Emission Control Technologies
with sales up 13% and underlying operating profit 16% ahead,
benefiting from growth in sales across all regions, particularly in
Europe for heavy duty diesel vehicle catalysts ahead of the new
Euro VI legislation which comes fully into force from 1(st) January
2014
-- Process Technologies grew well in the first half with sales
up 15% and underlying operating profit up 17% due to strong
catalyst demand and the contribution from Formox which was acquired
in March 2013
-- A steady first half from Precious Metal Products with sales
broadly in line with last year but underlying operating profit
increased by 24% as the division benefited from relatively easy
comparables following last year's issues at our Salt Lake City
refinery
-- Fine Chemicals also made a steady start overall with sales up
5% and underlying operating profit up 1% with a good performance in
its API Manufacturing business
-- New Businesses made good progress driven mainly by its Battery Technologies business
Commenting on the results, Neil Carson, Chief Executive of
Johnson Matthey said:
"Johnson Matthey delivered a strong performance in the first
half of 2013/14 driven primarily by good growth in Emission Control
Technologies, where global car and truck production increased, and
good demand for Process Technologies' products. Precious Metal
Products, which had a poor first half last year, recovered and
overall volumes in its Services businesses increased. Underlying
earnings per share were up 18% at 84.9p.
The group's results in the first half of the year exceeded our
expectations. In the second half, the group's long standing
arrangements with Anglo American Platinum Limited (Anglo Platinum)
will expire on 31(st) December 2013 and this will impact
profitability in the fourth quarter. At the same time we should
benefit from tighter European truck legislation but it is difficult
to assess the extent of the pre-buy in the first half and its
effect on volumes in the second half. We therefore expect that if
the impact of the loss of the Anglo Platinum contracts is excluded,
Johnson Matthey's performance in the second half will be in line
with that of the first six months."
Enquiries:
020 7269
Sally Jones Director, IR and Corporate Communications 8407
020 7269
Robert MacLeod Group Finance Director 8484
020 7367
Howard Lee The HeadLand Consultancy 5225
020 7367
Tom Gough The HeadLand Consultancy 5228
www.matthey.com
Report to Shareholders
Review of Results
Johnson Matthey delivered a strong performance in the first half
of 2013/14 driven primarily by good growth in Emission Control
Technologies, where global car and truck production increased, and
good demand for Process Technologies' products. Precious Metal
Products, which had a poor first half last year, recovered and
overall volumes in its Services businesses increased. Results from
Fine Chemicals were in line with last year and New Businesses made
good progress.
Sales excluding precious metals (sales) were 13% ahead at GBP1.5
billion led by a strong performance from Emission Control
Technologies and Process Technologies. At constant exchange rates,
the group's sales grew by 12%.
Underlying operating profit was up 15% at GBP234.2 million with
growth across our four established divisions. The group's
underlying return on sales increased slightly to 15.8%, up from
15.5% last year, and ROIC was 21.0% (1H 2012/13 21.7%; year ended
31(st) March 2013 19.8%).
Underlying profit before tax was 13% ahead at GBP212.9 million
and profit before tax was also higher, up 12% to GBP202.1
million.
Underlying earnings per share were 18% higher at 84.9 pence and
basic earnings per share were 24% ahead at 86.0 pence.
Dividend
The Board of Directors has increased the interim dividend by 10%
to 17.0 pence and this will be paid on 4(th) February 2014 to
ordinary shareholders on the register as at 29(th) November 2013,
with an ex-dividend date of 27(th) November 2013.
Operations
Emission Control Technologies
Half Year to 30(th) September % at
2013 2012 % constant
GBP million GBP million change rates
Revenue 1,448 1,218 +19 +19
Sales (excl. precious metals) 815 720 +13 +12
Underlying operating profit 94.2 81.4 +16 +14
Return on sales 11.6% 11.3%
Return on invested capital
(ROIC) 18.7% 18.3%
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Emission Control Technologies (ECT) Division, which primarily
comprises our light duty vehicle (LDV) and heavy duty diesel (HDD)
catalyst businesses, had a very strong first half, benefiting from
growth in sales across all regions. The division's sales were up
13% at GBP815 million. Underlying operating profit was 16% ahead at
GBP94.2 million, with good growth in both our LDV and HDD catalyst
businesses. ECT's return on sales increased by 0.3% to 11.6% and
ROIC was 18.7%.
Light Duty Vehicle Catalysts
Our LDV catalyst business performed well in the first half with
good growth in both sales and underlying operating profit.
Estimated Light Duty Vehicle Sales and Production
Half Year to 30(th) September
2013 2012
millions millions % change
North America Sales 9.5 8.8 +8.0
Production 8.0 7.6 +5.3
Total Europe Sales 9.0 9.2 -2.2
Production 9.3 9.4 -1.1
Asia Sales 17.2 16.5 +4.2
Production 20.6 19.6 +5.1
Global Sales 41.6 40.5 +2.7
Production 40.7 39.5 +3.0
---------------------------- --------------- --------------- ---------
Source: LMC Automotive
During our first half, global light duty vehicle sales increased
by 3% to 41.6 million vehicles with further growth in North America
and Asia, where vehicle sales in China increased by 8%, partly
offsetting a slight decline in Europe. In Western Europe, vehicle
sales have fallen steadily since 2007 and are now at 1993 levels.
There are early signs that the market in Europe is bottoming out,
however, there are significant variations by country. In the last
six months vehicle sales in the UK and Spain have increased by 7%
and 6% respectively although sales have declined in Germany (--5%),
France (-6%) and Italy (-7%). Global production grew in the period
by 3%.
Johnson Matthey's Light Duty Vehicle Catalyst Sales by
Region
% change
1H 2013 1H 2012 % change at constant
GBP million GBP million rates
Europe 287 264 +9 +8
Asia 120 107 +12 +15
North America 96 93 +3 +1
-------------- --------------
Total 503 464 +8 +8
--------------- -------------- -------------- ----------- -------------
Sales in our LDV catalyst business, which accounted for 62% of
ECT's sales in the period, were 8% higher at GBP503 million and
ahead of growth in vehicle production. Our sales in Europe of
GBP287 million, which represented 57% of our total LDV catalyst
sales, were up 9% (8% ahead at constant rates), substantially ahead
of the change in vehicle production. Our performance was helped by
an improved product mix and the continuing benefit of our
relationship with some of the more successful car companies in the
region. Diesel's share of production in Western Europe was broadly
the same as last year, at 52%.
The growth in sales of our Asian light duty catalyst business
exceeded the increase in regional vehicle production, with sales up
12% to GBP120 million in the first half of 2013/14. Our business in
China grew strongly, well ahead of the 11% growth in vehicle
production in the country. Our South East Asia business also
performed well. This was partly offset by lower sales at our
Japanese operations as Japanese car companies continued to move
production to North America and China. Our sales in India also fell
slightly due to the very weak market and our local customers are
pessimistic about a recovery in the near future.
In North America our business benefited from continuing growth
in the light duty vehicle market. Our sales increased by 3% to
GBP96 million, slightly lagging vehicle production, mainly as a
result of lower prices for rare earth materials (which are used in
catalyst manufacturing), the cost of which is passed on to our
customers. Our volumes increased broadly in line with market
growth.
Heavy Duty Diesel Catalysts
Our HDD catalyst business also performed well in the first half
with good growth in both sales and underlying operating profit.
Estimated HDD Truck Sales and Production
Half Year to 30(th)
September
2013 2012
thousands thousands % change
North America Sales 233.1 223.2 +4.4
Production 235.0 235.6 -0.3
EU Sales 134.8 136.5 -1.2
Production 180.6 187.4 -3.6
---------------------------- ----------- ----------- ---------
Source: LMC Automotive
Johnson Matthey's Heavy Duty Diesel Vehicle Catalyst Sales by
Region
% change
1H 2013 1H 2012 % change at constant
GBP million GBP million rates
North America 183 165 +10 +8
Europe 79 55 +44 +40
Asia 18 14 +30 +51
-------------- --------------
Total 280 234 +19 +18
--------------- -------------- -------------- ----------- -------------
Our sales of HDD catalysts continued to grow strongly in the
first half, up 19% to GBP280 million.
Our North American HDD business had a good first half with sales
10% ahead of last year at GBP183 million, benefiting from a
positive product mix. Truck sales in the region increased in the
first half of 2013/14 and production was broadly flat. Demand for
catalyst systems for non-road applications such as construction,
mining and agricultural equipment continued to increase from its
low base and represented 9% of our North American HDD catalyst
sales (GBP17 million).
Truck production in the EU remained depressed in the period
although truck sales in the region did return to growth in our
first half compared to the second half of last year. Despite this,
our European HDD catalyst business performed very strongly,
exceeding our expectations and growing its sales by 44% to GBP79
million. In Europe, the tighter Euro VI legislation came into force
from 1(st) January 2013 for new truck models and will apply to all
production from 1(st) January 2014. This requires the fitment of
particulate control filter catalysts and represents up to about a
three times increase in catalyst sales value per vehicle. Our
strong first half was partly due to early fitment of the higher
value Euro VI systems, which represented about 25% of our sales,
but also due to higher than expected sales of Euro V systems as
truck and engine manufacturers pre-buy in advance of the new
legislation, taking advantage of the lower catalyst costs. Sales of
Euro V systems within Europe contributed just over half of our
sales. The market in Brazil recovered and our export sales to the
country, which are also Euro V systems, were around 10% of our
European HDD sales. Increased catalyst sales to non-road
applications also benefited our European HDD business, contributing
some 14% of sales (GBP11 million).
We have continued to make some progress in Asia, at present
primarily with sales of HDD catalysts to customers in Japan. From
1(st) July, Euro IV equivalent legislation came into force in China
which has resulted in some early catalyst sales for us and our
market share is in line with our expectations. As predicted, China
is following a phased approach with over 40 cities adopting the new
legislation, albeit mainly for buses. Enforcement for trucks is
currently low and consequently we continue to expect the market to
develop gradually. We currently expect less than 10% of engines to
be covered by the legislation during the first year and this could
reach 100% over a five to six year period, although the exact rate
and profile of implementation is very hard to predict with
accuracy. As we have said before, although China is a large market
in terms of vehicle numbers (China produces more trucks than both
North America and the EU combined), the cost per truck is markedly
lower, engine sizes are much smaller and the Euro IV legislation
requires relatively simple catalyst technology.
ECT's major expansion projects to double capacity at its plant
in Macedonia and to increase diesel particulate filter production
capacity at its Royston, UK operations are both nearing completion,
in time to meet our customers' requirements for the upcoming
tighter European light and heavy duty diesel legislation.
Process Technologies
Half Year to 30(th) September % at
2013 2012 % constant
GBP million GBP million change rates
Revenue 291 256 +14 +13
Sales (excl. precious metals) 288 251 +15 +13
Underlying operating profit 48.9 41.7 +17 +16
Return on sales 17.0% 16.6%
Return on invested capital
(ROIC) 17.2% 13.5%
------------------------------- ------------ ------------ ------- ---------
Process Technologies Division, which provides licensed
technologies, catalysts and other services to the chemicals and oil
and gas sectors, grew well in the first half with sales up by 15%
to GBP288 million and underlying operating profit 17% ahead at
GBP48.9 million. The division's return on sales increased to 17.0%.
If the acquisition of Formox was excluded, the division's sales
would have been 5% ahead of last year.
Chemicals
Process Technologies' Chemicals business licenses technologies
to chemical customers through its Johnson Matthey Davy Technologies
(JM Davy) business, formerly Davy Process Technology (DPT). It also
manufactures a range of catalysts for the petrochemical industry
and includes the Formox business, which was acquired at the end of
last year. Overall, sales increased by 16% in the first half to
GBP176 million driven by strong growth in catalyst sales which
offset a weaker performance from JM Davy.
Process Technologies - Chemicals' Sales
1H 2013 1H 2012 %
GBP million GBP million change
JM Davy 44 52 -17
Catalysts 132 99 +34
------------- -------------
Total 176 151 +16
------------ ------------- ------------- --------
In the first half of this year JM Davy continued to work on
providing engineering designs on previously secured contracts.
Following a period of intense licence activity, particularly in
China, the business secured one new licence in the first half for
an oxo alcohols plant, again in China, compared with four licences
in the first half of last year. Whilst JM Davy posted lower sales,
down 17% to GBP44 million, this hiatus was not unexpected and the
business continues to work with a wide range of customers for
potential new licence contracts, some of which we expect to secure
in the second half. The forward workload on previously secured
contracts remains good for at least the next 18 months.
To build on its existing portfolio, JM Davy has continued to
invest in R&D to support the development of new technologies.
For example, most recently, in conjunction with Eastman Chemical
Company, JM Davy has developed advanced proprietary technology for
the production of ethylene glycol, a key industrial chemical and a
building block in the production of polyesters for fibre and
packaging applications, from a variety of raw materials including
coal. With the current shortage of ethylene glycol in China, this
new technology should be attractive to the market.
Sales of catalysts to customers in the chemicals sector grew
well, by 34% to GBP132 million. As expected, sales of methanol
catalysts were strong, primarily driven by replacement fills,
whilst demand for ammonia and other chemical catalysts was steady.
Performance was boosted by sales of GBP23 million from Formox;
excluding Formox, catalyst sales grew by 10%. The integration of
Formox is going very well and its performance in the first half
exceeded our expectations.
China's drive for energy and petrochemical self-sufficiency
through the conversion of coal into substitute natural gas (SNG)
will support growth in Process Technologies over the next few years
through the provision of both technology licences and catalysts. In
addition, continued interest in North America in the use of
unconventional (shale) gas offers opportunities for the division in
the longer term. Increased availability of lower priced gas is
already stimulating the region's latent chemical industry which is
evidenced by new plant constructions and the relocation of assets
from other regions, such as South America, into North America.
Oil and Gas
Process Technologies' Oil and Gas business provides catalysts
for hydrogen manufacture and purification applications, as well as
additives which are used in oil refinery fluid catalytic cracking
(FCC); its Tracerco unit provides specialist diagnostic and
measurement technology and services. Overall, sales in the first
half were 12% ahead at GBP112 million, supported by continuing
activity in the oil and gas sector.
Process Technologies - Oil and Gas' Sales
1H 2013 1H 2012 %
GBP million GBP million change
Catalysts / Additives 79 70 +13
Tracerco 33 30 +11
------------- -------------
Total 112 100 +12
------------------------ ------------- ------------- --------
Oil and gas catalysts and additives sales grew well and were 13%
ahead of prior year. The market for purification products, which
are used to remove harmful impurities such as sulphur and mercury
from gas streams, continued to recover and sales were well ahead of
last year. Demand for hydrogen catalysts, for the production of
hydrogen which is used in the desulphurisation of transportation
fuels, also increased, supported by the general economic recovery
in the US. Sales of FCC additives grew well in the first half,
despite lower prices for cerium containing rare earth materials
which are used in our additives manufacturing processes and are a
pass through cost for our business.
Tracerco's sales were 11% ahead at GBP33 million with good
demand for technology and services which enable our customers to
optimise the performance of their assets and exploit more difficult
to recover resources. Demand for diagnostic services into shale gas
applications in North America continued to grow, albeit from a
small base, and the business launched a new high accuracy detection
system to scan sub sea pipelines from the outside, thus allowing
inspection of the condition of the pipe and flow without
interrupting production.
Projects to expand catalyst manufacturing capability at our
operations in Clitheroe, UK and Panki, India have been completed in
the first half. This includes new capacity for catalysts for SNG
plants in China licensed by JM Davy in recent years. Expansion at
our additives manufacturing plant in Savannah, USA is now close to
completion and we are investing in our chemical catalyst
manufacturing operations in Germany to meet future demand. Work has
also commenced on a new technology centre at Tracerco to support
the research and development of new diagnostic and measurement
services.
Precious Metal Products
Half Year to 30(th) September % at
2013 2012 % constant
GBP million GBP million change rates
Revenue 5,070 3,734 +36 +34
Sales (excl. precious metals) 214 217 -1 -2
Underlying operating profit 74.3 59.7 +24 +23
Return on sales 34.7% 27.5%
Return on invested capital
(ROIC) 40.6% 48.2%
------------------------------- ------------ ------------ ------- ---------
Precious Metal Products (PMP) Division had a steady first half
with sales broadly in line with last year at GBP214 million.
Underlying operating profit was, however, well ahead of last year,
up 24% at GBP74.3 million, benefiting from relatively easy
comparables.
Services
Sales in our Services businesses, which comprise the division's
Platinum Marketing and Distribution and Refining activities, fell
by 4% to GBP84 million and represented 39% of PMP's total sales in
the first half. Operating profit, however, was substantially higher
primarily because the operational issues in our gold and silver
refining businesses, which impacted our results in the first half
of last year, did not recur.
Our Platinum Marketing and Distribution business grew its sales
in the first half by 4% to GBP31 million and underlying operating
profit increased by a similar amount. Slightly higher production
volumes from Anglo American Platinum Limited (Anglo Platinum) and
steady average platinum group metal prices (average platinum and
palladium prices in the period were $1,463/oz and $721/oz
respectively compared with $1,500/oz and $622/oz last year)
contributed to the increase in sales. Trading margins in the period
were slightly ahead of last year.
As we have previously disclosed, our existing contracts with
Anglo Platinum will expire on 31(st) December 2013. From 1(st)
January 2014 we have agreed an extension to our metal supply
agreement and a separate contract to supply market research
services. The new metal supply agreement will, however, attract no
discounts and we will be paid a fixed fee for our market research.
We are resizing our team accordingly, mainly through internal moves
within the group.
Our Refining businesses had a mixed start to the year with sales
down 8% at GBP53 million.
Intake volumes in the first six months at our Platinum Group
Metal (Pgm) Refining and Recycling business were ahead of the same
period last year but, in response to the relatively weak platinum
price, platinum intakes have started to decline slightly in recent
months. If these lower volumes are maintained, this could impact
business performance in the second half of the year. End of life
autocatalyst recycling volumes have remained relatively stable but
intakes from platinum jewellers are suffering from the weak
platinum price.
Overall intakes at our Gold and Silver Refining business were in
line with last year but volumes of the higher margin secondary gold
material fell substantially, down by nearly 30%. This was partly
due to the decrease in the gold price, which fell from an average
of $1,630/oz in the first half of last year to $1,370/oz this year,
but also due to the recovery in the US economy. We therefore expect
that secondary volumes will remain at these lower levels which are
more in line with historic norms. We have noticed the same effect
for secondary silver material, the price of which has also fallen.
On the other hand, feeds of primary gold and silver material from
mining operations were relatively stable. The operational issues at
our Salt Lake City refinery, which impacted the business
significantly in the first half of last year, did not recur as a
result of management actions at the site.
Manufacturing
Sales in our Manufacturing businesses, which consist of PMP's
Noble Metals, Colour Technologies and Chemical Products activities,
were in line with last year at GBP130 million. Weaker sales in
Noble Metals and Chemical Products were balanced by growth in
Colour Technologies. Underlying operating profit fell slightly due
to the different mix between the businesses.
Our Noble Metals business experienced continued weaker demand in
a number of its industrial product areas. Sales declined by 5% to
GBP58 million and operating profit was also lower. Sales of
industrial products, particularly to our European customers, were
down. Global fertiliser demand remains soft, resulting in our
customers' plants running below capacity or indeed shut down, and
this led to lower demand for our nitric acid products. Our medical
device components business continued to make progress in the key US
market although this was offset by a decline in demand in
Europe.
Colour Technologies' sales were up 12% in the first half at
GBP45 million but operating profit was well ahead. Demand for its
obscuration enamels for automotive glass grew well, mostly in
Europe where we believe there has been some restocking of the
supply chain. Sales of products for decorative applications
continued their long run decline.
Chemical Products' sales were down slightly at GBP27 million in
the first half and operating profit also declined. The largest part
of this business supplies pgm chemicals to internal and external
autocatalyst producers. This area grew in line with global vehicle
production.
Fine Chemicals
Half Year to 30(th) September % at
2013 2012 % constant
GBP million GBP million change rates
Revenue 185 171 +8 +7
Sales (excl. precious metals) 161 154 +5 +3
Underlying operating profit 40.7 40.4 +1 -1
Return on sales 25.2% 26.3%
Return on invested capital
(ROIC) 17.2% 17.9%
------------------------------- ------------ ------------ ------- ---------
Fine Chemicals Division, which comprises our Active
Pharmaceutical Ingredient (API) Manufacturing business, our
Catalysis and Chiral Technologies business and Research Chemicals,
had a steady start to the year. Sales in the first half were 5%
ahead at GBP161 million and underlying operating profit also grew
slightly, by 1% to GBP40.7 million. The division's return on sales
in the half year reduced from 26.3% to 25.2% due to a lower return
from our Research Chemicals business.
API Manufacturing
Sales from the division's API Manufacturing business increased
by 7% to GBP105 million and operating profit also grew well in the
first half. Speciality opiate sales grew, particularly for the API
used in buprenorphine which we manufacture in the UK. This API is
used in drug addiction treatments, for which a new generic drug was
launched in the US by one of our customers during the period. The
business also benefited from good demand for APIs used in attention
deficit hyperactivity disorder (ADHD) treatments. On the other hand
there was lower demand for bulk opiates which we expect to continue
as a result of high stock balances at our customers. The
restructuring of the UK business undertaken during the second half
of last year has now been completed and we continue our discussions
with the UK government to understand its future intentions on
importation of controlled substances.
In the period, the business also benefited from a new long term
agreement for the supply of a non-controlled API.
Catalysis and Chiral Technologies
Sales in Catalysis and Chiral Technologies, which serves the
fine chemicals and pharmaceutical industries, were unchanged in the
first half at GBP15 million and underlying operating profit was
slightly ahead.
Research Chemicals
Sales in our Research Chemicals business were ahead in the
period, up 4% to GBP41 million, with growth in Europe and Asia
partly offset by slower sales in North America. Operating profit
was, however, lower than last year partly as a result of the launch
of the new catalogue and initial costs from warehouse expansions in
Shanghai, China and west coast USA.
New Businesses
Half Year to 30(th) September
2013 2012
GBP million GBP million
Revenue 37 2
Sales (excl. precious metals) 35 2
Underlying operating profit
/ (loss) (9.2) (8.7)
------------------------------- ------------ ------------
Our New Businesses Division made good progress in the first half
of the year driven mainly by the Battery Technologies business.
Increased investment in research and development across the
division resulted in a slightly higher underlying operating loss in
the period. The performance of the division's two most established
businesses is:
Battery Technologies
The Battery Technologies business primarily consists of Axeon
(now Johnson Matthey Battery Systems) that we acquired in October
last year. Its sales of GBP32 million were mostly battery systems
to high performance powertool and E-bike customers in Europe, the
demand for which is robust. Johnson Matthey Battery Systems also
made some progress with its automotive customers and delivered the
first units for McLaren's P1 supercar.
We are focusing on developing a battery materials business to
service the automotive market whilst maximising the returns from
our non-automotive systems business. We have spent some time
establishing a research team whose objective is to develop
innovative materials that will replace the current generation of
products. In the first half, as anticipated, the business made a
small underlying operating loss but we expect that it will break
even for the year.
Fuel Cells
The Fuel Cells business increased its sales slightly, to GBP3
million, with higher volumes to combined heat and power customers.
However, with continued investment in research and development for
the automotive market, the business made a loss in line with that
of last year. We continue to believe that a small number of fuel
cell powered vehicles will be brought to market in California, USA
in 2015 to 2016 in order to meet their tighter emissions
legislation. Our objective is to be a supplier of membrane
electrode assemblies (MEAs) to car companies and we have made some
progress as we further improve our products.
Financial Review
Exchange Rates
The group's results in the first half were impacted by a slight
strengthening of the US dollar against sterling. In the period the
US dollar averaged $1.54/GBP compared with $1.58/GBP last year.
This increased reported underlying operating profit by GBP1.4
million. Including all currency movements, the group's operating
profit was GBP2.3 million higher.
In the latter part of the six month period, sterling appreciated
against many currencies, in particular the US dollar. If the
current exchange rate of $1.61/GBP is maintained throughout the
second half of the year, this will impact the group's reported
results due to the retranslation of overseas subsidiaries' results.
For a full year, a one cent movement of sterling against the US
dollar impacts the group's results by just over GBP1 million.
Interest
The group's net finance cost was GBP21.7 million, GBP6.4 million
higher than last year. Average borrowings were well above those in
the first half of 2012/13, mainly due to the special dividend of
GBP212 million which was paid in August 2012.
As described later, in June the group arranged new long term
loans primarily to refinance existing borrowings which mature this
year. These new borrowings were completed ahead of debt maturities
to take advantage of the attractive long term interest rates that
were on offer at the time. Consequently, the group has carried a
higher level of gross debt during the period with offsetting higher
cash balances. In the short term, given the low interest receivable
on cash balances, this has increased the interest charge in the
period by approximately GBP2.6 million. From the fourth quarter of
this year, once the maturing facilities have been repaid, the
surplus cash balances will reduce substantially and hence the
group's interest charge should reduce.
The pension interest charge was also higher than last year due
to the higher IAS 19 pension deficit caused by lower discount
rates. This increased the pension charge in the period by GBP1.4
million.
Taxation
The underlying tax rate for the group reduced from 21% to 19%
(21% for the year ended 31(st) March 2013). This decrease was due
to the further reduction in the main rate of UK corporation tax
from 24% to 23% with effect from 1(st) April 2013 and from the
advent of the patent box legislation in the UK.
The total tax charge for the period includes a deferred tax
credit of GBP10.0 million which is due to the reduction in headline
rates of UK corporation tax from 23% to 20% that was enacted in
July 2013. This one-off credit has been excluded from underlying
tax because of its size.
Cash Flow
In the six months to 30(th) September 2013 the group generated
net cash flow from operating activities of GBP247 million (six
months to 30(th) September 2012 GBP143 million).
The group's working capital (excluding the component that
relates to precious metals) increased by GBP10 million compared
with the year end. The working capital balance of GBP439 million at
30(th) September 2013 represents 53 days' sales. This compares with
65 days at the same time last year and 49 days at the year end. The
reduction compared with last year is principally in ECT through a
number of working capital management initiatives.
Working capital in relation to precious metals has decreased by
GBP16 million since the year end to GBP361 million, principally as
a result of the lower precious metal prices.
The group's free cash flow in the period was well ahead at
GBP127.3 million compared with GBP70.6 million in the first half of
last year. However, if the impact of movements in working capital
related to precious metals is excluded, the group's free cash flow
would have been GBP111.2 million compared with GBP105.8 million.
The cash flow conversion was 68% compared with 85%, principally due
to the higher level of capital expenditure in the period.
During the period, capital expenditure was GBP96.8 million
(GBP101.4 million cash spent in the period) which represents 1.5
times depreciation. Major ongoing projects include the expansion of
our ECT manufacturing plants in the UK and Macedonia, both of which
are nearing completion, and expansion our Process Technologies
capacity in the US.
Pensions
The group's total pension charge for the period to 30(th)
September 2013 was GBP22.7 million, up from GBP22.2 million last
year, due to the effect of lower discount rates.
The IAS 19 post tax pension deficit of the group's pension
schemes, after taking account of bonds held to fund pensions, at
30(th) September 2013 is estimated at GBP87.7 million (30(th)
September 2012 GBP82.6 million; 31(st) March 2013 GBP107.8
million).
Net Debt
Net debt at 30(th) September 2013 decreased by GBP43.0 million
since the year end and was GBP792.6 million.
In June the group raised $500 million of new debt in the US
private placement market. The new loans are for periods between 10
and 15 years, with a weighted average life of 12.3 years and an
average fixed interest rate of 3.2%. This new debt is primarily to
refinance existing debt which matures this year.
The group's net debt (including post tax pension deficits) to
EBITDA for the 12 months to 30(th) September 2013 was 1.5 times,
compared with 1.7 times at 31(st) March 2013.
Going Concern
The directors have assessed the future funding requirements of
the group and are of the opinion that the group has adequate
resources to fund its operations for the foreseeable future.
Therefore they believe that it is appropriate to prepare the
accounts on a going concern basis.
Outlook
The group's results in the first half of the year exceeded our
expectations principally due to the strength of the global
automotive market. In the second half, the group's long standing
arrangements with Anglo Platinum will expire on 31(st) December
2013 and this will impact profitability in the fourth quarter. At
the same time we should benefit from tighter European truck
legislation but it is difficult to assess the extent of the pre-buy
in the first half and its effect on volumes in the second half. We
therefore expect that if the impact of the loss of the Anglo
Platinum contracts is excluded, Johnson Matthey's performance in
the second half will be in line with that of the first six
months.
Emission Control Technologies
ECT performed very well in the first six months of the year. The
outlook for our LDV catalyst business appears steady and less
uncertain than over the last few years. However, the performance of
our HDD business in Europe in the second half is harder to assess.
That business performed particularly well in the first half but it
is difficult to judge how truck sales will be impacted by the new
Euro VI legislation which becomes effective on 1(st) January 2014.
Having said that, every Euro VI compliant truck sold from that date
in the EU will have substantially more catalyst value per truck. We
currently believe that ECT's performance in the second half will
therefore be slightly behind the first half.
Process Technologies
Process Technologies also performed well in the first half
benefiting from strength in our catalyst businesses and the
acquisition of Formox. In the second half, we are optimistic that
JM Davy will be able to sign further new licences and we believe
that the catalyst businesses will remain strong. However, we
currently expect a weaker third quarter due to the timing of our
customers' orders, but that should be followed by a strong fourth
quarter. Whilst we cannot predict the timing of orders in the
fourth quarter precisely, we currently expect the second half's
performance to be slightly ahead of the first half.
Precious Metal Products
The headline performance of this division will be impacted by
the expiry of our current Anglo Platinum agreements on 31(st)
December 2013. The underlying business is expected to be stable in
the second half if intake volumes at our refineries remain at
current levels.
Fine Chemicals
The outlook for the division remains sound and we anticipate
that performance in the second half will be in line with the first
half.
New Businesses
The level of investment in research and development will be
maintained at current levels throughout the second half.
Risks and Uncertainties
The principal risks and uncertainties to which the group is
exposed are unchanged from those identified in our 2013 annual
report. The principal risks and uncertainties, together with the
group's strategies to manage them, are set out on pages 24 to 27 of
the annual report. They are:
STRATEGIC OPERATIONAL
* Responding to, identifying or capitalising on * Operating safely, including in line with changes in
appropriate new or growth opportunities health, safety, environmental and other regulations
and standards
* Technological change * Availability of strategic materials
* Security
MARKET * Systems failure
* Responding to changes in global political and * The effective recruitment, retention and development
economic conditions or future environmental of high quality staff to support the growth of our
legislation business
* Intellectual property and know how
FINANCIAL * Failure of significant sites
* Pension scheme funding
Responsibility Statement of the Directors in respect of the
Half-Yearly Report
The Half-Yearly Report is the responsibility of the directors.
Each of the directors as at the date of this responsibility
statement, whose names and functions are set out below, confirms
that to the best of their knowledge:
-- the condensed consolidated accounts have been prepared in
accordance with International Accounting Standard (IAS) 34 -
'Interim Financial Reporting'; and
-- the interim management report included in the Half-Yearly
Report includes a fair review of the information required by:
a) DTR 4.2.7R of the Financial Conduct Authority's Disclosure
and Transparency Rules, being an indication of important events
that have occurred during the first six months of the financial
year and their impact on the condensed consolidated accounts; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
b) DTR 4.2.8R of the Financial Conduct Authority's Disclosure
and Transparency Rules, being related party transactions that have
taken place in the first six months of the current financial year
and that have materially affected the financial position or
performance of the company during that period; and any changes in
the related party transactions described in the last annual report
that could do so.
The names and functions of the directors of Johnson Matthey Plc
are as follows:
Tim Stevenson Chairman
Neil Carson Chief Executive
Odile Desforges Non-executive Director
Alan Ferguson Non-executive Director, Chairman of the Audit
Committee
Robert MacLeod Group Finance Director
Colin Matthews Non-executive Director
Larry Pentz Executive Director
Michael Roney Non-executive Director, Senior Independent Director
and Chairman of the Management Development and
Remuneration Committee
Dorothy Thompson Non-executive Director
John Walker Executive Director, Emission Control Technologies
The responsibility statement was approved by the Board of
Directors on 20(th) November 2013 and is signed on its behalf
by:
Tim Stevenson
Chairman
Independent Review Report
to Johnson Matthey Plc
Introduction
We have been engaged by the company to review the condensed
consolidated accounts in the Half-Yearly Report for the six months
ended 30(th) September 2013 which comprise the Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Total Comprehensive Income, the Condensed Consolidated Balance
Sheet, the Condensed Consolidated Cash Flow Statement, the
Condensed Consolidated Statement of Changes in Equity and the
related explanatory notes. We have read the other information
contained in the Half-Yearly Report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed consolidated accounts.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules (DTR) of the
UK's Financial Conduct Authority (UK FCA). Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Directors' responsibilities
The Half-Yearly Report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Half-Yearly Report in accordance with the DTR of the
UK FCA.
The annual accounts of the group are prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (EU). The condensed consolidated accounts included
in this Half-Yearly Report have been prepared in accordance with
IAS 34 -- 'Interim Financial Reporting' as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed consolidated accounts in the Half-Yearly Report based
on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 --'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the UK. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated accounts in
the Half-Yearly Report for the six months ended 30(th) September
2013 are not prepared, in all material respects, in accordance with
IAS 34 as adopted by the EU and the DTR of the UK FCA.
Stephen Oxley
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
20(th) November 2013
Condensed Consolidated Income Statement
for the six months ended 30(th) September 2013
Six months ended Year ended
30.9.13 30.9.12 31.3.13
restated restated
Notes GBP million GBP million GBP million
Revenue 2 6,410.5 4,892.2 10,728.8
Cost of sales (6,013.0) (4,553.8) (10,024.5)
----------- ----------- -----------
Gross profit 397.5 338.4 704.3
Operating expenses (163.3) (135.2) (288.2)
Major impairment and restructuring charges - - (17.4)
Amortisation of acquired intangibles 4 (10.8) (7.8) (16.9)
----------- ----------- -----------
Operating profit 2 223.4 195.4 381.8
Finance costs (25.7) (19.5) (41.4)
Finance income 4.0 4.2 8.2
Share of profit of joint venture 0.4 - -
----------- ----------- -----------
Profit before tax 202.1 180.1 348.6
Income tax expense (28.5) (36.8) (77.5)
----------- ----------- -----------
Profit for the period 173.6 143.3 271.1
----------- ----------- -----------
Attributable to:
Owners of the parent company 174.3 143.9 271.8
Non-controlling interests (0.7) (0.6) (0.7)
----------- ----------- -----------
173.6 143.3 271.1
----------- ----------- -----------
pence pence pence
Earnings per ordinary share attributable to the equity holders
of the parent company
Basic 6 86.0 69.2 132.3
Diluted 6 85.5 68.7 131.2
Condensed Consolidated Statement of Total Comprehensive
Income
for the six months ended 30(th) September 2013
Six months ended Year ended
30.9.13 30.9.12 31.3.13
restated restated
Notes GBP million GBP million GBP million
Profit for the period 173.6 143.3 271.1
----------- ----------- -----------
Other comprehensive income:
Items that will not be reclassified to profit
or loss:
Actuarial gain / (loss) on post-employment
benefits assets and liabilities 10 18.1 7.7 (91.9)
Tax on above items taken directly to or transferred
from equity (17.3) (5.3) 20.9
----------- ----------- -----------
0.8 2.4 (71.0)
----------- ----------- -----------
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences (60.7) (29.2) 22.0
Cash flow hedges 8.9 0.6 (15.6)
Fair value gains on net investment hedges 5.8 13.0 (4.3)
Fair value loss on available-for-sale investments (2.0) - (0.3)
Tax on above items taken directly to or transferred
from equity (2.1) (0.1) 3.4
----------- ----------- -----------
(50.1) (15.7) 5.2
----------- ----------- -----------
Other comprehensive expense for the period (49.3) (13.3) (65.8)
----------- ----------- -----------
Total comprehensive income for the period 124.3 130.0 205.3
----------- ----------- -----------
Attributable to:
Owners of the parent company 125.3 130.7 206.0
Non-controlling interests (1.0) (0.7) (0.7)
----------- ----------- -----------
124.3 130.0 205.3
----------- ----------- -----------
Condensed Consolidated Balance Sheet
as at 30(th) September 2013
30.9.13 30.9.12 31.3.13
restated restated
Notes GBP million GBP million GBP million
Assets
Non-current assets
Property, plant and equipment 987.0 896.4 992.5
Goodwill 574.1 513.5 585.1
Other intangible assets 193.2 114.5 212.8
Deferred income tax assets 39.0 16.9 20.3
Investments and other receivables 70.5 14.5 65.3
Interest rate swaps 7 20.1 28.0 27.1
Post-employment benefits net assets 10 2.1 2.0 1.9
----------- ----------- -----------
Total non-current assets 1,886.0 1,585.8 1,905.0
----------- ----------- -----------
Current assets
Inventories 674.8 713.9 663.8
Current income tax assets 23.9 16.8 15.1
Trade and other receivables 874.8 771.1 870.2
Cash and cash equivalents - cash and deposits 7 261.3 82.1 69.6
Other financial assets 11.0 12.4 5.7
Total current assets 1,845.8 1,596.3 1,624.4
----------- ----------- -----------
Total assets 3,731.8 3,182.1 3,529.4
----------- ----------- -----------
Liabilities
Current liabilities
Trade and other payables (759.3) (663.9) (732.5)
Current income tax liabilities (117.0) (100.5) (106.7)
Cash and cash equivalents - bank overdrafts 7 (53.5) (48.8) (48.2)
Other borrowings and finance leases 7 (121.3) (182.1) (273.8)
Other financial liabilities (7.2) (4.5) (11.3)
Provisions (16.9) (23.9) (19.8)
----------- ----------- -----------
Total current liabilities (1,075.2) (1,023.7) (1,192.3)
----------- ----------- -----------
Non-current liabilities
Borrowings, finance leases and related swaps 7 (899.2) (575.3) (610.3)
Deferred income tax liabilities (92.7) (51.4) (57.3)
Employee benefits obligations 10 (209.8) (154.6) (245.8)
Provisions (30.0) (29.0) (29.2)
Other payables (3.5) (4.3) (3.6)
----------- ----------- -----------
Total non-current liabilities (1,235.2) (814.6) (946.2)
----------- ----------- -----------
Total liabilities (2,310.4) (1,838.3) (2,138.5)
----------- ----------- -----------
Net assets 1,421.4 1,343.8 1,390.9
----------- ----------- -----------
Equity
Share capital 220.7 220.7 220.7
Share premium account 148.3 148.3 148.3
Shares held in employee share ownership trust
(ESOT) (52.5) (52.3) (51.7)
Other reserves (1.7) 27.4 48.2
Retained earnings 1,112.0 1,002.7 1,029.7
----------- ----------- -----------
Total equity attributable to owners of the
parent company 1,426.8 1,346.8 1,395.2
Non-controlling interests (5.4) (3.0) (4.3)
----------- ----------- -----------
Total equity 1,421.4 1,343.8 1,390.9
----------- ----------- -----------
Condensed Consolidated Cash Flow Statement
for the six months ended 30(th) September 2013
Six months ended Year ended
30.9.13 30.9.12 31.3.13
restated restated
Notes GBP million GBP million GBP million
Cash flows from operating activities
Profit before tax 202.1 180.1 348.6
Adjustments for:
Share of profit of joint venture (0.4) - -
Depreciation, amortisation, impairment losses
and profit on sale
of non-current assets and investments 74.5 69.8 149.6
Share-based payments 6.8 4.2 7.9
Changes in working capital and provisions (38.5) (84.4) (79.1)
Changes in fair value of financial instruments (0.6) (0.3) (3.0)
Net finance costs 21.7 15.3 33.2
Income tax paid (19.0) (41.4) (60.6)
----------- ----------- -----------
Net cash inflow from operating activities 246.6 143.3 396.6
----------- ----------- -----------
Cash flows from investing activities
Purchases of non-current assets and investments (101.4) (60.0) (233.4)
Proceeds from sale of non-current assets
and investments 0.2 0.7 1.0
Purchases of businesses (1.4) (2.3) (149.6)
----------- ----------- -----------
Net cash outflow from investing activities (102.6) (61.6) (382.0)
----------- ----------- -----------
Cash flows from financing activities
Net cost of ESOT transactions in own shares (19.1) (23.6) (23.9)
Proceeds from borrowings and finance leases 164.5 182.0 280.2
Dividends paid to owners of the parent company 5 (84.1) (297.0) (328.4)
Settlement of currency swaps for net investment
hedging (0.1) 3.5 2.7
Interest paid (20.7) (17.6) (35.2)
Interest received 2.6 4.2 7.5
----------- ----------- -----------
Net cash inflow / (outflow) from financing
activities 43.1 (148.5) (97.1)
----------- ----------- -----------
Increase / (decrease) in cash and cash equivalents
in period 187.1 (66.8) (82.5)
Exchange differences on cash and cash equivalents (0.7) (2.0) 1.8
Cash and cash equivalents at beginning of
period 21.4 102.1 102.1
----------- ----------- -----------
Cash and cash equivalents at end of period 7 207.8 33.3 21.4
----------- ----------- -----------
Reconciliation to net debt
Increase / (decrease) in cash and cash equivalents
in period 187.1 (66.8) (82.5)
Proceeds from borrowings and finance leases (164.5) (182.0) (280.2)
----------- ----------- -----------
Change in net debt resulting from cash flows 22.6 (248.8) (362.7)
Borrowings acquired with subsidiaries - (0.5) (0.5)
Exchange differences on net debt 20.4 8.6 (17.0)
----------- ----------- -----------
Movement in net debt in period 43.0 (240.7) (380.2)
Net debt at beginning of period (835.6) (455.4) (455.4)
----------- ----------- -----------
Net debt at end of period 7 (792.6) (696.1) (835.6)
----------- ----------- -----------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30(th) September 2013
Share Shares Non-
held
Share premium in Other Retained controlling Total
capital account ESOT reserves earnings interests equity
restated restated restated restated
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
At 1(st) April 2012
(restated) 220.7 148.3 (50.2) 43.0 1,171.0 (2.2) 1,530.6
Total comprehensive income
for
the period - - - (15.6) 146.3 (0.7) 130.0
Dividends paid (note 5) - - - - (297.0) (0.1) (297.1)
Purchase of shares by ESOT - - (28.6) - - - (28.6)
Share-based payments - - - - 7.2 - 7.2
Cost of shares transferred
to
employees - - 26.5 - (24.5) - 2.0
Tax on share-based payments - - - - (0.3) - (0.3)
----------- ----------- ----------- ----------- ----------- ----------- -----------
At 30(th) September 2012
(restated) 220.7 148.3 (52.3) 27.4 1,002.7 (3.0) 1,343.8
Total comprehensive income
for
the period - - - 20.8 54.5 - 75.3
Dividends paid (note 5) - - - - (31.4) (0.1) (31.5)
Purchase of non-controlling
interest - - - - - (1.2) (1.2)
Share-based payments - - - - 7.1 - 7.1
Cost of shares transferred
to
employees - - 0.6 - (3.6) - (3.0)
Tax on share-based payments - - - - 0.4 - 0.4
----------- ----------- ----------- ----------- ----------- ----------- -----------
At 31(st) March 2013
(restated) 220.7 148.3 (51.7) 48.2 1,029.7 (4.3) 1,390.9
Total comprehensive income
for
the period - - - (49.9) 175.2 (1.0) 124.3
Dividends paid (note 5) - - - - (84.1) (0.1) (84.2)
Purchase of shares by ESOT - - (21.8) - - - (21.8)
Share-based payments - - - - 10.1 - 10.1
Cost of shares transferred
to
employees - - 21.0 - (21.6) - (0.6)
Tax on share-based payments - - - - 2.7 - 2.7
----------- ----------- ----------- ----------- ----------- ----------- -----------
At 30(th) September 2013 220.7 148.3 (52.5) (1.7) 1,112.0 (5.4) 1,421.4
----------- ----------- ----------- ----------- ----------- ----------- -----------
Notes on the Accounts
for the six months ended 30(th) September 2013
1 Basis of preparation
The half-yearly accounts were approved by the Board of Directors
on 20(th) November 2013, and are unaudited but have been reviewed
by the auditors. These condensed consolidated accounts do not
constitute statutory accounts within the meaning of section 435 of
the Companies Act 2006, but have been prepared in accordance with
International Accounting Standard (IAS) 34 -- 'Interim Financial
Reporting' and the Disclosure and Transparency Rules of the UK's
Financial Conduct Authority. The accounting policies applied are
set out in the Annual Report and Accounts for the year ended 31(st)
March 2013, except as detailed below. Information in respect of the
year ended 31(st) March 2013 is derived from the company's
statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditor's report on those statutory
accounts was unqualified, did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying its report and did not contain any statement
under sections 498(2) or 498(3) of the Companies Act 2006.
As described in the Annual Report and Accounts for the year
ended 31(st) March 2013, the group reorganised its divisional
structure on 1(st) April 2013 to reflect its new management
structure and internal reporting. The segmental information in note
2 reflects the new divisional structure.
From 1(st) April 2013 the group has adopted IFRS 10 -
'Consolidated Financial Statements', IFRS 11 - 'Joint
Arrangements', IFRS 12 - 'Disclosure of Interests in Other
Entities', the revised IAS 27 - 'Separate Financial Statements',
the revised IAS 28 - 'Investments in Associates and Joint Ventures'
and the revised IAS 19 - 'Employee Benefits' and has restated prior
periods. The effect of the restatements is explained in note
12.
None of the other new standards or amendments to standards and
interpretations which the group has adopted during the period has
had a material effect on the reported results or financial position
of the group and so no other restatements have been made.
2 Segmental information by business segment
Emission Precious
Control Process Metal Fine New
Technologies Technologies Products Chemicals Businesses Eliminations Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Six months ended 30(th) September
2013
Revenue from external
customers 1,414.9 288.5 4,489.2 182.1 35.8 - 6,410.5
Inter-segment revenue 33.0 2.6 581.2 2.6 1.2 (620.6) -
------------ ------------ ----------- ----------- ----------- ------------ -----------
Total revenue 1,447.9 291.1 5,070.4 184.7 37.0 (620.6) 6,410.5
------------ ------------ ----------- ----------- ----------- ------------ -----------
External sales
excluding precious
metals 814.4 285.3 193.4 159.5 33.7 - 1,486.3
Inter-segment sales 0.1 2.5 20.8 1.9 1.0 (26.3) -
------------ ------------ ----------- ----------- ----------- ------------ -----------
Sales excluding
precious metals 814.5 287.8 214.2 161.4 34.7 (26.3) 1,486.3
------------ ------------ ----------- ----------- ----------- ------------ -----------
Segmental underlying
operating
profit / (loss) 94.2 48.9 74.3 40.7 (9.2) - 248.9
------------ ------------ ----------- ----------- ----------- ------------
Unallocated corporate
expenses (14.7)
-----------
Underlying operating
profit 234.2
Amortisation of
acquired intangibles
(note 4) (10.8)
-----------
Operating profit 223.4
Net finance costs (21.7)
Share of profit of
joint venture 0.4
-----------
Profit before taxation 202.1
-----------
Segmental net assets 951.6 652.9 336.4 453.2 78.1 - 2,472.2
------------ ------------ ----------- ----------- ----------- ------------ -----------
Emission Precious
Control Process Metal Fine New
Technologies Technologies Products Chemicals Businesses Eliminations Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
Six months ended 30(th) September 2012
(restated)
Revenue from external
customers 1,217.5 248.6 3,259.3 165.1 1.7 - 4,892.2
Inter-segment revenue 0.2 6.9 474.3 5.4 0.6 (487.4) -
------------ ------------ ----------- ----------- ----------- ------------ -----------
Total revenue 1,217.7 255.5 3,733.6 170.5 2.3 (487.4) 4,892.2
------------ ------------ ----------- ----------- ----------- ------------ -----------
External sales excluding
precious
metals 720.2 244.5 193.7 150.1 1.2 - 1,309.7
Inter-segment sales 0.1 6.8 23.6 3.5 0.6 (34.6) -
------------ ------------ ----------- ----------- ----------- ------------ -----------
Sales excluding precious
metals 720.3 251.3 217.3 153.6 1.8 (34.6) 1,309.7
------------ ------------ ----------- ----------- ----------- ------------ -----------
Segmental underlying
operating
profit / (loss) 81.4 41.7 59.7 40.4 (8.7) - 214.5
------------ ------------ ----------- ----------- ----------- ------------
Unallocated corporate
expenses (11.3)
-----------
Underlying operating
profit 203.2
Amortisation of acquired
intangibles
(note 4) (7.8)
-----------
Operating profit 195.4
Net finance costs (15.3)
-----------
Profit before taxation 180.1
-----------
Segmental net assets 930.0 505.4 348.1 452.2 29.9 - 2,265.6
------------ ------------ ----------- ----------- ----------- ------------ -----------
Year ended 31(st) March 2013
(restated)
Revenue from external
customers 2,488.0 503.7 7,368.0 332.1 37.0 - 10,728.8
Inter-segment revenue 69.1 11.5 1,005.0 13.0 1.5 (1,100.1) -
------------ ------------ ----------- ----------- ----------- ------------ -----------
Total revenue 2,557.1 515.2 8,373.0 345.1 38.5 (1,100.1) 10,728.8
------------ ------------ ----------- ----------- ----------- ------------ -----------
External sales excluding
precious
metals 1,460.5 497.2 381.9 300.4 35.7 - 2,675.7
Inter-segment sales 0.8 11.4 41.9 7.8 1.3 (63.2) -
------------ ------------ ----------- ----------- ----------- ------------ -----------
Sales excluding precious
metals 1,461.3 508.6 423.8 308.2 37.0 (63.2) 2,675.7
------------ ------------ ----------- ----------- ----------- ------------ -----------
Segmental underlying
operating
profit / (loss) 163.5 92.4 124.4 76.6 (16.0) - 440.9
------------ ------------ ----------- ----------- ----------- ------------
Unallocated corporate
expenses (24.8)
-----------
Underlying operating
profit 416.1
Major impairment and
restructuring
charges (17.4)
Amortisation of acquired
intangibles
(note 4) (16.9)
-----------
Operating profit 381.8
Net finance costs (33.2)
-----------
Profit before taxation 348.6
-----------
Segmental net assets 1,010.3 657.0 330.7 440.7 78.2 - 2,516.9
------------ ------------ ----------- ----------- ----------- ------------ -----------
Effect of exchange rate changes on translation of foreign subsidiaries'
3 sales excluding precious
metals and operating profits
Six months ended Year ended
Average exchange rates used for translation
of results of foreign operations 30.9.13 30.9.12 31.3.13
US dollar / GBP 1.544 1.581 1.580
Euro / GBP 1.173 1.249 1.228
Chinese renminbi / GBP 9.48 10.03 9.93
South African rand / GBP 15.03 12.97 13.45
The main impact of exchange rate movements on the group's sales
and operating profit comes from the translation of foreign
subsidiaries' results into sterling. The one significant exception
is the South African rand where the translational impact is more
than offset by the impact of movements in the rand on operating
margins. Consequently the analysis below excludes the translational
impact of the rand.
Six months ended Change
Six months 30.9.12 at
ended At last At this this year's
year's year's
30.9.13 rates rates rates
restated restated
GBP million GBP million GBP million %
Sales excluding precious metals
Emission Control Technologies 814.5 720.3 726.4 +12
Process Technologies 287.8 251.3 254.4 +13
Precious Metal Products 214.2 217.3 219.5 -2
Fine Chemicals 161.4 153.6 156.3 +3
New Businesses 34.7 1.8 1.8
Elimination of inter-segment sales (26.3) (34.6) (34.8)
----------- ----------- -----------
Sales excluding precious metals 1,486.3 1,309.7 1,323.6 +12
----------- ----------- -----------
Underlying operating profit
Emission Control Technologies 94.2 81.4 82.9 +14
Process Technologies 48.9 41.7 42.1 +16
Precious Metal Products 74.3 59.7 60.2 +23
Fine Chemicals 40.7 40.4 41.1 -1
New Businesses (9.2) (8.7) (8.7) +6
Unallocated corporate expenses (14.7) (11.3) (12.1)
----------- ----------- -----------
Underlying operating profit 234.2 203.2 205.5 +14
----------- ----------- -----------
4 Amortisation of acquired intangibles
The amortisation of intangible assets which arise on the
acquisition of businesses, together with any subsequent impairment
of these intangible assets, is shown separately on the face of the
income statement. It is excluded from underlying operating
profit.
5 Dividends
An interim dividend of 17.0 pence per ordinary share has been
proposed by the board which will be paid on 4(th) February 2014 to
shareholders on the register at the close of business on 29(th)
November 2013. The estimated amount to be paid is GBP34.5 million
and has not been recognised in these accounts.
Six months ended Year ended
30.9.13 30.9.12 31.3.13
GBP million GBP million GBP million
2011/12 final ordinary dividend paid - 40.0
pence per share - 84.9 84.9
Special dividend paid - 100.0 pence per share - 212.1 212.1
2012/13 interim ordinary dividend paid - 15.5
pence per share - - 31.4
2012/13 final ordinary dividend paid - 41.5
pence per share 84.1 - -
----------- ----------- -----------
Total dividends 84.1 297.0 328.4
----------- ----------- -----------
6 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a
weighted average of 202,753,012 shares in issue (six months ended
30(th) September 2012 207,978,737 shares, year ended 31(st) March
2013 205,507,239 shares). The calculation of diluted earnings per
ordinary share is based on the weighted average number of shares in
issue adjusted by the dilutive outstanding share options and long
term incentive plans. These adjustments give rise to an increase in
the weighted average number of shares in issue of 1,222,019 shares
(six months ended 30(th) September 2012 1,540,303 shares, year
ended 31(st) March 2013 1,683,218 shares).
Underlying earnings per ordinary share are calculated
as follows:
Six months ended Year ended
30.9.13 30.9.12 31.3.13
restated restated
GBP million GBP million GBP million
Profit for the year attributable to equity holders
of the parent company 174.3 143.9 271.8
Major impairment and restructuring charges - - 17.4
Amortisation of acquired intangibles (note 4) 10.8 7.8 16.9
Tax thereon (2.9) (2.5) (2.6)
Tax effect of UK corporation tax rate change (10.0) - -
----------- ----------- -----------
Underlying profit for the year 172.2 149.2 303.5
----------- ----------- -----------
pence pence pence
Basic underlying earnings per share 84.9 71.7 147.7
----------- ----------- -----------
7 Net debt
30.9.13 30.9.12 31.3.13
restated restated
GBP million GBP million GBP million
Cash and deposits 261.3 82.1 69.6
Bank overdrafts (53.5) (48.8) (48.2)
----------- ----------- -----------
Cash and cash equivalents 207.8 33.3 21.4
Other current borrowings and finance leases (121.3) (182.1) (273.8)
Non-current interest rate swaps 20.1 28.0 27.1
Non-current borrowings, finance leases and related
swaps (899.2) (575.3) (610.3)
----------- ----------- -----------
Net debt (792.6) (696.1) (835.6)
----------- ----------- -----------
Offset arrangements across group businesses have been applied to
arrive at the cash and deposits and bank overdrafts figures. At
30(th) September 2013 the offsets were GBP97.0 million (30(th)
September 2012 GBP114.1 million, 31(st) March 2013 GBP109.8
million).
8 Precious metal operating leases
The group leases, rather than purchases, precious metals to fund
temporary peaks in metal requirements provided market conditions
allow. These leases are from banks for specified periods (typically
a few months) and for which the group pays a fee. These
arrangements are classified as operating leases. The group holds
sufficient precious metal inventories to meet all the obligations
under these lease arrangements as they fall due. At 30(th)
September 2013 precious metal leases were GBP39.6 million (30(th)
September 2012 GBP72.4 million, 31(st) March 2013 GBP96.8
million).
9 Transactions with related parties
There have been no material changes in related party
relationships in the six months ended 30(th) September 2013 and no
other related party transactions have taken place which have
materially affected the financial position or performance of the
group during that period.
10 Post-employment benefits
The group has updated the valuation of its main post-employment
benefit plans, which are its UK and US pension plans and US
post-retirement medical benefits plan, at 30(th) September
2013.
Movements in the net post-employment benefits assets and
liabilities were:
UK post- US post-
retirement retirement
UK medical US medical
pension benefits pensions benefits Other Total
GBP million GBP million GBP million GBP million GBP million GBP million
At 1(st) April 2013 (restated) (115.6) (10.1) (55.4) (37.5) (23.2) (241.8)
Current service cost (14.1) - (5.7) (0.6) (1.1) (21.5)
Net interest on net liabilities (2.7) (0.2) (1.0) (0.8) (0.4) (5.1)
Curtailment gain 1.3 - - - - 1.3
Settlement gain - - 2.5 - - 2.5
Actuarial (loss) / gain (9.5) - 25.7 1.9 - 18.1
Company contributions 24.2 - 10.4 0.2 1.8 36.6
Exchange adjustments - - 2.0 2.3 0.2 4.5
----------- ----------- ----------- ----------- ----------- -----------
At 30(th) September 2013 (116.4) (10.3) (21.5) (34.5) (22.7) (205.4)
----------- ----------- ----------- ----------- ----------- -----------
These are included in the balance sheet as:
30.9.13 30.9.13 30.9.12 30.9.12 31.3.13 31.3.13
Post- Post- Post-
employment Employee employment Employee employment Employee
benefits benefits benefits benefits benefits benefits
net assets obligations net assets obligations net assets obligations
restated restated
GBP million GBP million GBP million GBP million GBP million GBP million
UK pension plan - (116.4) - (47.4) - (115.6)
UK post-retirement medical benefits
plan - (10.3) - (12.0) - (10.1)
US pension plans - (21.5) - (48.6) - (55.4)
US post-retirement medical benefits
plan - (34.5) - (24.7) - (37.5)
Other plans 2.1 (24.8) 2.0 (19.7) 1.9 (25.1)
----------- ----------- ----------- ----------- ----------- -----------
Total post-employment plans 2.1 (207.5) 2.0 (152.4) 1.9 (243.7)
----------- ----------- -----------
Other long term employee benefits (2.3) (2.2) (2.1)
----------- ----------- -----------
Total long term employee benefits obligations (209.8) (154.6) (245.8)
----------- ----------- -----------
11 Financial Instruments
Financial instruments measured at fair value
at 30(th) September 2013 are:
Fair values measured
using:
Quoted Significant
prices other Significant
in active observable unobservable
markets inputs inputs
(level (level (level
1) 2) 3)
GBP million GBP million GBP million
Non-current available-for-sale investments:
Quoted bonds purchased to fund pension deficit 49.3 - -
----------- ----------- ------------
Non-current assets: interest rate swaps - 20.1 -
----------- ----------- ------------
Non-current borrowings, finance leases and related
swaps:
Interest rate swaps - (5.5) -
----------- ----------- ------------
Current other financial assets:
Forward foreign exchange contracts designated
as cash flow hedges - 7.5 -
Forward foreign exchange contracts and currency
swaps held for trading - 1.3 -
Embedded derivatives - - 2.2
----------- ----------- ------------
- 8.8 2.2
----------- ----------- ------------
Current other financial liabilities:
Forward foreign exchange contracts designated
as cash flow hedges - (1.8) -
Forward foreign exchange contracts and currency
swaps held for trading - (5.4) -
----------- ----------- ------------
- (7.2) -
----------- ----------- ------------
The reconciliation of other financial assets
valued using level 3 inputs is:
GBP million
At 1(st) April 2013 0.8
Gains recognised in cost of sales 1.4
At 30(th) September 2013 2.2
------------
The fair values of level 2 financial instruments are calculated
by discounting expected future cash flows using prevailing interest
rate curves and foreign exchange rates.
The fair value of financial instruments is approximately
equal to book value except for:
30.9.13 30.9.13 30.9.12 30.9.12 31.3.13 31.3.13
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
GBP million GBP million GBP million GBP million GBP million GBP million
US Dollar Bonds 2013, 2015, 2016, 2022,
2023, 2025 and 2028 (682.5) (653.9) (396.7) (396.4) (419.4) (419.0)
Euro Bonds 2021 and 2023 (100.3) (112.1) (79.6) (91.5) (84.5) (100.5)
Euro EIB loans 2013 and 2019 (103.6) (102.5) (99.7) (102.4) (210.6) (212.9)
Sterling Bonds 2013 and 2024 (65.0) (61.4) (105.0) (104.3) (65.0) (65.9)
----------- ----------- ----------- ----------- ----------- -----------
Unquoted investments included in non-current available-for-sale
investments are held at cost at 30(th) September 2013 of GBP8.4
million (30(th) September 2012 GBP8.1 million, 31(st) March 2013
GBP8.2 million) as their fair value cannot be measured reliably.
There is no active market for these investments since they are
investments in a company that is in the start up phase and in an
investment vehicle that invests in start up companies.
12 Effect of restatements
The adoption of IFRS 10 - 'Consolidated Financial Statements',
IFRS 11 - 'Joint Arrangements', IFRS 12 - 'Disclosure of Interests
in Other Entities' and the revised IAS 27 - 'Separate Financial
Statements' and IAS 28 - 'Investments in Associates and Joint
Ventures' changes the definition of when the group controls another
entity and, as a result, from 1(st) April 2013 one entity is
accounted for as a joint venture rather than a subsidiary. The
effect of the restatement at 30(th) September 2012 is to decrease
net assets and increase non-controlling interests by GBP2.7
million. The effect of the restatement at 31(st) March 2013 is to
decrease net assets and increase non-controlling interests by
GBP2.9 million. There is no restatement of either consolidated
income statement.
The revision to IAS 19 - 'Employee Benefits', which the group
has adopted from 1(st) April 2013, removes the 'corridor approach'
for recognising actuarial gains and losses and eliminates options
for presenting gains and losses, neither of which have any effect
on the group. It also amends the disclosures and requires the
replacement of the expected return on plan assets and interest cost
on plan obligations with net interest on the net defined benefit
liability based on the discount rate. In addition, past service
costs are no longer spread over the vesting period but are
immediately expensed. The group has decided that it will include
net interest on the net defined benefit liabilities in finance
costs. The effect of the restatement on the six months ended 30(th)
September 2012 was to increase operating profit by GBP0.4 million,
increase finance costs by GBP3.7 million, decrease income tax
expense by GBP0.9 million, increase the actuarial gain by GBP3.1
million and increase the related tax charge by GBP0.8 million,
decrease employee benefit obligations by GBP2.1 million and
increase deferred tax liabilities by GBP0.8 million. This decreases
basic and underlying earnings per share by 1.2 pence and diluted
earnings per share by 1.1 pence. The effect of the restatement on
the year ended 31(st) March 2013 was to increase operating profit
by GBP1.3 million, increase finance costs by GBP7.6 million,
decrease income tax expense by GBP1.6 million, decrease the
actuarial loss by GBP6.0 million and decrease related tax credit by
GBP1.5 million, decrease employee benefit obligations by GBP2.1
million and increase deferred tax liabilities by GBP0.8 million.
This decreases basic, diluted and underlying earnings per share by
2.3 pence.
Financial Calendar
2013
27(th) November
Ex dividend date
29(th) November
Interim dividend record date
2014
4(th) February
Payment of interim dividend
5(th) June
Announcement of results for the year ending 31(st) March 2014
11(th) June
Ex dividend date
13(th) June
Final dividend record date
23(th) July
123(rd) Annual General Meeting (AGM)
5(th) August
Payment of final dividend subject to declaration at the AGM
Cautionary Statement
This announcement contains forward looking statements that are subject
to risk factors associated with, amongst other things, the economic
and business circumstances occurring from time to time in the countries
and sectors in which the group operates. It is believed that the
expectations reflected in this announcement are reasonable but they
may be affected by a wide range of variables which could cause
actual results to differ materially from those currently anticipated.
Johnson Matthey Public Limited Company
Registered Office: 5th Floor, 25 Farringdon Street, London EC4A 4AB
Telephone: 020 7269 8400
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 33774
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: 0871 384 2344
Internet address: www.shareview.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DMMZMVGMGFZM
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