TIDMJMAT
RNS Number : 3398T
Johnson Matthey PLC
24 November 2021
Half year results for the six months ended
30(th) September 2021
24(th) November 2021
Resilient performance in the first half
Underlying performance(1)(,) (2)
-- Sales of GBP1.9 billion, up 21%, driven by a strong recovery
in Clean Air and Efficient Natural Resources
-- Underlying operating profit of GBP293 million, up 102% and ahead
of pre-pandemic levels, driven by strong sales growth and higher
average precious metal prices
-- Underlying EPS of 114.8 pence, up materially reflecting higher
underlying operating profit and lower net finance costs
-- Free cash flow of GBP189 million, benefiting from continued
strong management of working capital (1H 2020/21: GBP256 million)
-- Strong balance sheet with net debt of c.GBP700 million as lower
auto demand benefited working capital; net debt to EBITDA of
0.9 times
-- Return on invested capital (ROIC) of 17.7%, up from 10.4% in
the prior year driven by higher underlying operating profit
Reported results
-- Revenue increased 23% primarily driven by higher average precious
metal prices
-- Following the announcement of our intention to exit Battery
Materials, the assets have been impaired by GBP314 million
-- Operating profit of GBP20 million, reflecting the one-off impairment
in Battery Materials
-- Loss before tax of GBP9 million, driven by lower operating profit
-- Reported loss per share of 14.8 pence
-- Cash inflow from operating activities of GBP412 million (1H
2020/21: GBP482 million)
-- Interim dividend of 22.0 pence per share, up 10%
-- Share buyback of GBP200 million, beginning in the New Year
Reported results Underlying results(1)
----------------------------- ----------------------------------------
Half year ended Half year ended
30(th) September 30(th) September
-------------------- ------------ -------- -------- ---------
% change,
constant
2021 2020 % change 2021 2020 % change rates
-------------------- ------------ ---------- ------- -------- --------- -------- -------- ---------
Revenue GBP million 8,586 6,979 +23
Sales excluding
precious metals(3) GBP million 1,938 1,679 +15 +21
Operating profit GBP million 20 68 -71 293 151 +94 +102
(Loss) / profit
before tax GBP million (9) 26 n/a 264 109 +142
(Loss) / earnings
per share pence (14.8) 12.3 n/a 114.8 47.7 +141
Interim dividend
per share pence 22.0 20.0 +10
-------------------- ------------ ---------- ------- -------- --------- -------- -------- ---------
Key developments
-- A resilient trading performance, with strong sales growth driven
by a recovery in Clean Air and Efficient Natural Resources
-- Portfolio changes - agreed the sale of Advanced Glass Technologies
for GBP178 million, and in discussions about a potential sale
of Health
-- Announced intention to exit Battery Materials
-- Good momentum across our hydrogen businesses of Fuel Cells and
Green Hydrogen
-- New five-year framework contract with EKPO (ElringKlinger
Plastic Omnium JV) to supply fuel cell components into commercial
vehicle applications
-- Following the completion of our hydrogen technologies capacity
expansion in the UK and China, planning further expansion
across these regions
-- Increasing pipeline of opportunities in blue hydrogen - now
over 20 projects - including HyNet which continues to move towards
commercialisation in 2025
-- In Clean Air, on track for strong cash generation in 2021/22
-- Delivered GBP42 million of cost savings, from our total programme
of GBP110 million per annum by 2023/24
Robert MacLeod, Chief Executive, commented:
We delivered a resilient trading performance in what has been a
challenging environment, given the supply chain volatility which
has affected a number of our end markets.
Looking forward, the changing world around us means that Johnson
Matthey has never been more relevant. Our metal expertise and process
technologies are critical to many new markets focused on climate
change solutions and give us a strong competitive advantage. We
have strong foundations in Clean Air and in Efficient Natural Resources
and exciting opportunities to drive our future growth in circularity,
hydrogen and decarbonisation.
To ensure we are focusing our resources on these core growth opportunities
we have taken some strategic decisions around our portfolio. In
particular, we announced our intention to exit Battery Materials
as we concluded that this business would not generate adequate
returns for us. In addition, today we are announcing that we have
agreed the sale of Advanced Glass Technologies and are in discussions
about the potential sale of our Health business.
After eight years in the role, I will be stepping down as Chief
Executive, with Liam Condon joining as my successor from 1(st)
March 2022 and I wish him well in leading Johnson Matthey through
the next stage of its evolution.
Outlook for the year ending 31st March 2022
Our expectations on guidance for the year ending 31(st) March 2022
are unchanged from our trading update on 11(th) November.
Demand remains strong in many of our end markets. However, supply
chain volatility especially the shortage of semi-conductors is
affecting production for a number of our auto and truck customers.
Global auto production is now forecast to decline 5% for our fiscal
year which is a 14% reduction since our trading update in July
. Consequently, precious metal prices have also declined, largely
because of the lower demand from the automotive industry. We are
also experiencing acute temporary labour shortages in the US that
are adversely impacting our Health business.
For 2021/22 we expect growth in underlying operating performance
to be low single digit at constant precious metals prices and constant
currency.
If precious metals prices remain at their current level for the
rest of this year, we would expect a full year net benefit of c.GBP45
million.
At current foreign exchange rates , translational foreign exchange
movements for the year ending 31(st) March 2022 are expected to
adversely impact underlying operating profit by
c.GBP15 million.
Our capital expenditure is now expected to be c.GBP450 million
for the year given our intended exit from Battery Materials.
Dividend and share buyback
The board approved an interim dividend of 22.0 pence per share,
an increase of 10% against the prior year (1H 2020/21: 20.0 pence
per share). The interim dividend will be paid on 1(st) February
2022 to shareholders on the register at 3(rd) December 2021.
The board has also approved a share buyback of GBP200 million that
will commence in the New Year.
Chief Executive Announcement
As previously announced, Robert MacLeod will step down as Chief
Executive and from the board on 28(th) February 2022. Robert will
stay on to support the transition process until the Company's Annual
General Meeting on 21(st) July 2022, when he will then retire from
JM. Liam Condon will succeed Robert MacLeod, joining as Chief Executive
on 1(st) March 2022.
Group Management Committee Change
Joan Braca, Chief Executive Clean Air, has decided to leave Johnson
Matthey. Joan's last day will be on 31(st) December 2021.
Enquiries:
Investor Relations
Director of Investor Relations
Martin Dunwoodie Senior Investor Relations +44 20 7269 8241
Louise Curran Manager +44 20 7269 8235
Jane Crosby Investor Relations Manager +44 20 7269 8242
Media
Group Corporate Affairs
Barney Wyld Director +44 20 7269 8001
Harry Cameron Tulchan Communications +44 7799 152148
Notes:
1. Underlying is before profit or loss on disposal of businesses,
gain or loss on significant legal proceedings together with associated
legal costs, amortisation of acquired intangibles, major impairment
and restructuring charges and, where relevant, related tax effects.
For definitions and reconciliations of other non-GAAP measures,
see pages 46 to 50.
2. Unless otherwise stated, sales and operating profit commentary
refers to performance at constant exchange rates. Growth at constant
rates excludes the translation impact of foreign exchange movements,
with 2020/21 results converted at 2021/22 average rates. In 1H
2021/22, the translational impact of exchange rates on group
sales and underlying operating profit was negative c.GBP71 million
and c.GBP6 million respectively.
3. Revenue excluding sales of precious metals to customers and the
precious metal content of products sold to customers.
4. As forecast by external consultants - IHS (October 2021).
5. Based on actual precious metal prices in 2020/21.
6. Based on current precious metal prices as at 22(nd) November
2021.
7. Based on foreign exchange rates as at 22(nd) November 2021.
8. Our previous guidance was for capital expenditure of up to GBP600
million for the year, which included our investment in Battery
Materials.
Sustainable solutions as we create a cleaner, healthier world
Our vision is for a cleaner, healthier world, and we have an exciting
opportunity to apply our deep expertise in complex metal chemistry
to develop technologies which enable the four essential transitions
the world needs for a sustainable future: transport, energy, decarbonisation
of industry and the creation of a circular economy.
We have set out our own sustainability goals (see page 7) but the
real difference we make to society is in the products and technology
we supply to our customers - not just today but in the new technologies
of tomorrow.
In Clean Air, we continue to play a vital role in reducing harmful
emissions generated by internal combustion engines, and in Efficient
Natural Resources our technology and leading segment positions
give us a strong base from which to pivot into new areas - helping
our customers decarbonise their chemical value chains and create
a circular economy through recycling scarce critical materials.
These businesses provide the group with a strong foundation, underpinned
by our core science.
Focusing capital on climate change solutions
At our heart is complex metal chemistry, particularly pgm and nickel
metal expertise, which is used across the group. It has been developed
over decades, is hard to replicate and critical to many of the
new technologies which address climate change. We are focusing
capital allocation on h igh growth, high return opportunities that
leverage our core competencies.
1. PGM Services (circularity solutions) - in Efficient Natural
Resources
2. Hydrogen Technologies (fuel cells and green hydrogen) - in New
Markets
3. Catalyst Technologies (decarbonisation of chemicals) - in Efficient
Natural Resources
These opportunities are underpinned by our strong balance sheet
and sustained cash generation from Clean Air.
Clean Air on track to deliver at least GBP4 billion of cash over
the coming ten years
Clean Air continues to play a vital role in reducing harmful emissions
generated by internal combustion engines. As the powertrain evolves,
Clean Air is undergoing a major transformation programme to drive
greater efficiency and reduce costs. Our new simplified operating
model is now in place and performing well, and we continue to execute
footprint changes with the transfer of production away from less
efficient sites into our newer plants. This includes the closure
of our plant in the UK over the next two years. We remain confident
that our strategy will deliver cash generation of at least GBP4
billion over the coming ten years(1) .
1. PGM Services: creating a circular economy and underpinning the
group
Platinum group metals (pgms) and other scarce metals are critical
to many low carbon technologies such as hydrogen powered fuel cell
vehicles and green hydrogen electrolysers. Recycling these metals
will be crucial in providing low carbon routes to manufacture.
The carbon intensity of recycled platinum group metals is c.2%(2)
that of mined metals. It is also a competitive advantage to be
able to offer our customers recycling solutions in conjunction
with our fuel cell and green hydrogen offerings as well as security
of supply for these scarce metals. We are already the world leader
in pgm recycling, twice the size of the next nearest player. This
position and skillset gives us a strong foundation to capture more
value over time from our existing recycling capabilities and expand
our offering to develop new technologies which will enable the
circular economy and help our customers meet their sustainability
goals.
Notes:
1. At least GBP4 billion over the coming ten years from 1(st) April
2021.
2. Source: IPA.
2. Hydrogen Technologies: a new business to accelerate growth
Hydrogen - as a fuel source and energy carrier - has a huge role
to play in reaching net zero, and the move to hydrogen is accelerating,
with the number of large-scale hydrogen projects announced almost
doubling since January 2021(3).
We already have an established hydrogen business. We are well positioned
to enable both the decarbonisation of transport through our hydrogen
fuel cell technology and also energy through our hydrogen production
technologies.
Our competitive advantage is founded on our core capabilities in
pgm catalysis, electrochemistry and surface chemistry. This enables
us to produce high performance components for fuel cells and green
hydrogen electrolysers. We are positioned across the value chain,
which includes manufacture of catalysts, membranes, catalyst coated
membranes (CCM) and membrane electrode assemblies (MEA), enabling
us to optimise to our customers' needs. Our customers also value
the security of supply and the potential to offer recycling solutions
and reduce their carbon footprint.
We created a new business - Hydrogen Technologies - which combines
our Fuel Cells and Green Hydrogen businesses, accelerating our
growth and scale-up in both markets. We are expanding our Hydrogen
Technologies manufacturing capacity and, following the completion
of our expansion last year, we now have 2GW capacity in the UK
and China. We are planning further expansion in these regions to
ensure we are able to meet growing demand.
Fuel Cells
We have been a leader in fuel cells and active for well over two
decades, with our technology used as far back as the US Apollo
moon landings. Our success is based on our pgm expertise, with
these metals critical to producing efficient, high performance
fuel cell components.
We have a track record of success, supplying components (CCMs and
MEAs) which sit at the heart of the fuel cell stack. We have good
relationships with many leading fuel cell system integrators and
OEMs, and already supply Doosan, SFC Energy, REFIRE/Unilia and
SinoHytech/Sino Fuel Cell. In addition, we signed a development
and long-term supply agreement commencing in 2022 with a major
German automotive supplier for the supply of next generation catalyst
coated membranes into the global automotive market.
We continue to make good progress with customers. W e recently
signed a new five-year framework contract with EKPO Fuel Cell Technologies
(a joint venture between ElringKlinger AG and Compagnie Plastic
Omnium SE) - a tier one stack manufacturer - to supply CCMs into
the global commercial vehicle market. Our customer pipeline includes
more than 10 major truck and auto OEM platforms, for which we will
supply fuel cell components, due to launch between c.2022 to 2025.
Green Hydrogen
Our Green Hydrogen business is based on the same CCM technology,
pgm expertise and recycling capability as Fuel Cells. Given the
commonality of technology, Fuel Cells and Green Hydrogen use the
same manufacturing capacity and share expertise in developing key
components, such as catalysts and CCMs. The strength of our existing
position in Fuel Cells has enabled us to create this business in
18 months.
We are making good progress and expect our first commercial sales
in 2022. We are testing with leading electrolyser manufacturers
and in May 2021 we signed a memorandum of understanding (MoU) with
Plug Power and more recently, with Hystar to develop key components
for electrolysers. Hystar is a newly established Norwegian company,
a high-tech spin-out from SINTEF, one of Europe's largest independent
research institutions.
Notes:
3. Large-scale projects defined as projects larger than 1MW or equivalent.
Hydrogen Council, McKinsey & Company
3. Catalyst Technologies: decarbonising chemicals and fuels
In Catalyst Technologies we are focused on the decarbonisation
of chemical value chains. We are a well-established and leading
provider of process technology and catalysts to the chemicals and
energy sectors, notably within syngas which today is at the heart
of many chemical value chains and used to manufacture a range of
consumer products. Our process technology enables customers to
decarbonise by re-engineering their processes to use sustainable
feedstocks such as surplus carbon dioxide, biomass and renewable
energy to create sustainable fuels and chemicals. This is an opportunity
that offers structural growth as our customers focus on how they
will decarbonise. Over the medium term we expect high single digit
growth in this business which reflects growth in our existing markets,
together with new technologies that will help the world decarbonise
and move towards net zero. Our growth areas include:
-- Blue hydrogen : We are seeing increasing interest from customers
around the world. Our technology has been selected as part of
the UK's HyNet project, one of the world's most progressed blue
hydrogen projects, which continues to move towards commercialisation.
HyNet was recently named as a Track 1 cluster by the UK government,
which means that this project will begin decarbonising industry
from 2025. We are working on a global pipeline of opportunities
which is growing and now totals over 20 projects.
-- Sustainable fuels and chemicals : This comprises a range of
technologies which enable the production of fuels and chemicals
from sustainable sources of hydrogen and carbon, replacing fossil
fuel feedstocks. This plays to our strengths in syngas technology
where we are one of the world's leading players.
We are making progress in this nascent market and recently supplied
and supported the loading of the first catalyst for Fulcrum,
for the production of sustainable aviation fuels. Also in this
space, we recently signed an engineering agreement with Repsol
and Aramco to enable the conversion of renewable energy to liquid
fuels. In addition, our methanol technology was selected for
the Haru Oni project in Chile, where we will also supply the
catalyst, engineering and equipment. The JM designed unit will
take atmospheric carbon dioxide as a feedstock for conversion
to e-methanol to power gasoline vehicles. In the sustainable
fuels and chemicals area, we are working on a pipeline of c.20
projects.
-- Low carbon solutions: We have a strong position at the heart
of many chemical value chains and our customers need to decarbonise
their existing processes. There is a large installed base that
utilises our existing technology that needs to be decarbonised,
and for which we can offer low carbon solutions.
Capital allocation
We have a disciplined capital allocation framework. Our approach
is designed to invest capital with a balance of appropriate shareholder
return and risk, whilst maintaining a strong balance sheet given
the working capital requirements of our metal refining businesses.
We will target investment opportunities that will deliver superior
returns. Where we have excess cash beyond our investment requirements,
we will return that to shareholders.
Our forecast year end net debt position shows gearing returning
towards our target level of net debt to EBITDA of 1.5-2.0 times,
excluding the benefit of the proceeds from the sale of Advanced
Glass Technologies (AGT). Consequently we will return excess capital
(including proceeds from the sale of AGT) to shareholders in the
form of a share buyback of GBP200 million beginning in the New
Year.
Intention to exit Battery Materials
As announced on 11(th) November, following a detailed review and
ahead of reaching a number of critical investment milestones, we
have concluded that the potential returns from our Battery Materials
business will not be adequate to justify further investment. The
board has therefore decided to pursue the sale of all or parts
of this business with the ultimate intention of exiting. We will
move swiftly to determine the best outcome for all of our stakeholders
and intend to make a further announcement as soon as possible.
Given the uncertainty of the outcome of this sales process, we
have taken a prudent position and fully impaired the carrying value
of our Battery Materials assets as at
30(th) September 2021, resulting in a charge of GBP314 million.
In the month of October, we reduced expenditure but still incurred
an additional c.GBP26 million capex. Following the announcement
of our intention to exit on 11(th) November, we took action to
reduce further expenditure.
Portfolio changes
As we focus the group towards our core growth areas, we take an
active approach to capital allocation and will continue to review
our portfolio to focus on the areas of greatest opportunity with
returns that are attractive to shareholders.
1. Strategic review of Health
We are in discussions about a potential sale and we will provide
an update on its conclusion in due course.
2. Sale of Advanced Glass Technologies
We have agreed the disposal of Advanced Glass Technologies -
reported in Other Markets (Value Businesses) - to Fenzi S.p.A
for GBP178 million, with completion expected in the second half.
AGT sales were GBP66 million in the year ended 31(st) March
2021.
Sustainability of our own operations
We have developed a sustainability framework and targets which
focus on current and future technologies fundamental to addressing
climate change.
We recently announced our goal to be net zero by 2040 as well as
new, ambitious sustainability targets for 2030. Details of our
goals and targets which are set out under three key pillars - Products
and services, Operations, People - can be found in our 2021 annual
report. We are signed up to the UN Global Compact's Business Ambition
for 1.5degC and introduced science-based targets which have recently
been independently verified by the Science Based Targets initiative
(SBTi):
-- Absolute reduction in Scope 1 and Scope 2 greenhouse gas emissions
of at least 33% by 2030 (baseline 2019/20)
-- Absolute reduction of Scope 3 greenhouse gas emissions of at
least 20% by 2030 (baseline 2019/20)
We are increasingly being recognised by stakeholders for our efforts
on sustainability. Recently, we were awarded a Platinum rating
by EcoVadis - a leading provider of business sustainability ratings
- which puts us in the top 1% of companies they assess.
To oversee our sustainability goals and process, we established
a new board committee - the Societal Value Committee - which met
for the first time in May 2021 and established a Sustainability
Council within the company to manage the implementation of our
strategy.
Notes:
4. Scope 1 covers direct greenhouse emissions from owned or controlled
sources. Scope 2 covers indirect emissions from the generation
of purchased electricity, steam, heating and cooling consumed
by the reporting company. Scope 3 includes purchased goods and
services.
Summary of underlying operating results
Unless otherwise stated, commentary refers to performance at constant
rates. Percentage changes in the tables are calculated on rounded
numbers
Sales Half year ended % change % change,
(GBP million) 30(th) September constant
rates
---------------------------- -------- ---------
2021 2020(1)
---------------------------- -------- --------- -------- ---------
Clean Air 1,196 1,003 +19 +24
Efficient Natural Resources 523 411 +27 +33
Health 83 119 -30 -26
Other Markets 191 191 - +5
Eliminations (55) (45)
Sales 1,938 1,679 +15 +21
---------------------------- -------- --------- -------- ---------
Underlying operating profit Half year ended % change % change,
(GBP million) 30(th) September constant
rates
---------------------------- -------- ---------
2021 2020(1)
---------------------------- ------- ---------- -------- ---------
Clean Air 150 77 +95 +103
Efficient Natural Resources 197 88 +124 +129
Health (4) 15 n/a n/a
Other Markets (11) (2) n/a n/a
Corporate (39) (27)
Underlying operating profit 293 151 +94 +102
---------------------------- ------- ---------- -------- ---------
Reconciliation of underlying operating profit to operating profit Half year ended
(GBP million) 30(th) September
------------------------------------------------------------------
2021 2020
------------------------------------------------------------------ ---------- -------
Underlying operating profit 293 151
Amortisation of acquired intangibles (3) (5)
Major impairment and restructuring charges(2) (314) (78)
Gain on significant legal proceedings(2) 44 -
Operating profit 20 68
------------------------------------------------------------------ ---------- -------
(1) Restated following change to reporting segments and removal
of inter-segment Copper Zeolites sales
(2) For further detail on these items please see page 18.
Operating results by sector
Clean Air
Clean Air recovered strongly
-- Global sales were up 24% as we saw a strong performance across
all regions, despite the impact of OEM supply chain disruption
caused principally by shortages of semi-conductor chips
-- Underlying operating profit increased 103%. Whilst margins increased
materially, driven by operational leverage and benefits from
our transformation programme, they were held back by the impact
of chip shortages
-- ROIC increased to 19.9% reflecting higher operating profit and
the continued good management of working capital
-- On track for strong cash generation in 2021/22
Half year ended % change % change, constant
30(th) September rates
-------- ------------------
2021 2020
-------- ------------------
GBP million GBP million
----------- ----------- -------- ------------------
Sales
Light duty diesel 498 420 +19 +22
Light duty gasoline 270 260 +4 +8
Heavy duty diesel 428 323 +33 +40
Total sales 1,196 1,003 +19 +24
Underlying operating profit 150 77 +95 +103
Margin 12.5% 7.7%
Return on invested capital
(ROIC) 19.9% 11.4%
Reported operating profit 149 42
---------------------------- ----------- ----------- -------- ------------------
A strong recovery in demand, but seeing impact from supply chain
disruption
Clean Air provides catalysts for emission control after-treatment
systems used in light and heavy duty vehicles powered by internal
combustion engines. Global sales increased 24%, reflecting a strong
recovery in demand in Europe and the Americas, against a prior
period that was materially impacted by temporary customer shutdowns
due to the pandemic.
Market demand remains strong across all regions. However, there
was supply chain disruption across the industry principally due
to the shortage of semi-conductor chips. This affected our volumes
in our first half, with a more pronounced impact in our second
quarter. Due to these shortages, we expect continued volume constraints
on production levels through the second half. We are actively mitigating
the impact through a combination of adjusting shift patterns, optimising
production across our manufacturing footprint and working closely
with customers to reduce the impact on our operations. To support
our long-term performance and cash generation, we have already
secured some Euro 7 business and are actively bidding on further
platforms to meet this legislation.
Light duty catalysts - diesel and gasoline
Our light duty business provides catalysts for emission control
after-treatment systems used in cars and other light duty vehicles
powered by diesel and gasoline engines. Diesel accounts for c.65%
of our light duty business, which is mostly in Europe.
Light duty diesel
In light duty diesel, global sales were up 22%. In Europe, where
we hold a significant share of the light duty diesel market, sales
growth was well ahead of market production due to a favourable
platform mix. In Asia, sales grew in line with market production,
and in the Americas, we saw strong sales growth and outperformed
the market due to a beneficial platform mix.
Light duty gasoline
Sales in light duty gasoline were up 8%, above global vehicle production
in aggregate due to a favourable platform mix. This outperformance
was partially offset by the loss of two platforms in the Americas
and in Europe, in line with our selective strategy.
Heavy duty diesel catalysts
In heavy duty diesel catalysts, we provide catalysts for emission
control after-treatment systems for trucks, buses and non-road
equipment. Sales recovered strongly, up 40% in the half, with growth
in all regions.
In our Americas heavy duty business, where we hold a significant
share of the market, we saw strong sales growth in line with market
production which is benefiting from a cyclical recovery in the
US Class 8 truck cycle. In Europe, heavy duty sales growth outperformed
market production and was driven by a favourable platform mix.
Heavy duty Asia sales grew very strongly in a market that declined,
as we benefited from increased market share and increased value
from tighter legislation in China.
Underlying operating profit
Underlying operating profit increased 103% and margin increased
to 12.5%. Whilst margins increased materially, driven by operational
leverage and benefits from our transformation programme, they were
held back by the impact of chip shortages.
Return on invested capital (ROIC)
ROIC increased by 8.5 percentage points to 19.9%, reflecting higher
operating profit and continued good management of working capital.
Efficient Natural Resources
Strong performance driven by PGM Services and a recovery in Catalyst
Technologies
-- Sales grew 33% reflecting a strong performance in PGM Services
benefiting from volatile and higher average precious metal prices,
and increased refinery volumes. Catalyst Technologies grew well
driven by higher refill catalysts, principally ammonia and methanol
-- Underlying operating profit up 129% and margin expanded 16.3
percentage points. This reflected strong growth in PGM Services
(higher average pgm prices and increased volumes), strong performance
in Catalyst Technologies, and efficiency benefits
-- ROIC grew 34.2 percentage points to 53.9% reflecting higher operating
profit and continued good management of working capital
Half year ended % change % change, constant
30(th) September rates
2021 2020(1)
GBP million GBP million
-------------------- -----------
Sales
PGM Services 300 215 +40 +46
Catalyst Technologies 223 196 +14 +19
Total sales 523 411 +27 +33
Underlying operating profit 197 88 +124 +129
Margin 37.7% 21.4%
Return on invested capital
(ROIC ) 53.9% 19.7%
Reported operating profit 239 67
----------------------------- -------------------- ----------- -------- ------------------
(1) Restated following change to reporting segments and removal
of inter-segment Copper Zeolites sales.
PGM Services
PGM Services is the world's leading secondary recycler of platinum
group metals (pgms). This business has an important role in enabling
the energy transition through providing circular solutions as demand
for scarce critical materials increases. These circular solutions
are set to become increasingly important for customers as they
seek metals with a lower carbon footprint. PGM Services also provides
a strategic service to the group, supporting Clean Air and Hydrogen
Technologies with security of metal supply in a volatile market.
PGM Services grew strongly, benefiting from higher average pgm
prices
Sales in PGM Services increased 46% as we benefited from volatile
and higher average precious metal prices and we saw increased volumes
as we managed our refinery intakes in the prior period to optimise
working capital.
Our other businesses in PGM Services also saw good performance.
Sales grew in chemical products, primarily driven by Clean Air
which uses pgm materials in its catalyst products. Industrial products
containing pgms also grew well. In addition, following a recent
change to our reporting structure Life Science Technologies (formerly
part of New Markets) is now part of PGM Services. Life Science
Technologies provides advanced pgm based catalysts to the pharmaceutical
and agricultural chemicals markets. Sales were up strongly in this
business due to phasing of orders.
Refinery backlogs remain at low levels
Refinery backlogs remain at low levels, which reflects our continued
strong operational focus and efficient management of precious metal
working capital. This supports the group's balance sheet efficiency.
Catalyst Technologies
Catalyst Technologies is focused on enabling the decarbonisation
of chemical value chains. This business licenses key, proven and
efficient process technology solutions and manufactures high value
speciality catalysts and additives principally for the chemical
and energy industries. We have leading positions in key end segments
including syngas, methanol, ammonia, hydrogen and formaldehyde.
Given our strong position in these important value chains, our
technology can help customers decarbonise their operations by re-engineering
their processes and using sustainable feedstocks.
Our main revenue streams in this business comprise refill catalysts
(recurring business which makes up the majority of sales), first
fill catalysts and licensing income. Overall, sales were up 19%
primarily driven by higher demand for refill catalysts whilst additives
were flat as demand for some fuels remained subdued. First fill
catalysts also grew well, benefiting from catalyst sales for new
technology. Our licensing business was marginally up and our project
pipeline remains strong.
Refill catalysts grew double digit, with higher demand across key
segments
Sales of refill catalysts grew double digit, with higher demand
across our key segments. We saw continued good performance in ammonia
whilst sales of methanol refills recovered as we benefited from
orders which had been delayed due to the pandemic. Performance
was also good in segments more impacted by COVID-19 in the prior
year, such as formaldehyde which is largely used in construction.
First fills grew well, with the supply of the first catalyst for
sustainable aviation fuel
Sales of first fill catalysts are driven by the start-up of new
plants. They are a lead indicator of future refill catalyst demand.
In the period, sales grew well. Although small in value at this
stage, we supplied the first catalyst used by our Fischer Tropsch
(FT) CANS(TM) technology to Fulcrum for one of the world's first
plants for the production of sustainable fuel from municipal solid
waste.
Licensing marginally up in the period and a strong pipeline
Our licensing business is dependent on new plant builds and revenue
is recognised over the period of construction. In the period, sales
were marginally up reflecting income from recent licence wins,
particularly oxoalcohol and methanol projects based in China.
Licensing activity remains good and we signed two new licences
in the period (1H 20/21:
2 licences). We have a strong pipeline of projects and are working
with customers on a number of future opportunities focused on our
decarbonisation technology, including sustainable aviation fuel
and low carbon blue hydrogen solutions. See more detail on our
future growth in our strategy section (page 6).
During the period, we recognised a non-underlying gain of GBP44
million in relation to damages and interest from a company found
to have unlawfully copied one of our technology designs. We received
the cash for this in the half and the related profit was taken
outside of underlying operating profit.
Underlying operating profit
Underlying operating profit up 129% and margin expanded 16.3 percentage
points. This reflected strong growth in PGM Services (higher average
pgm prices (+c.GBP60 million) and increased volumes), strong performance
in Catalyst Technologies and efficiency benefits.
ROIC
ROIC grew 34.2 percentage points to 53.9% reflecting higher operating
profit and continued good management of working capital.
Health
Weak performance - labour shortage in the US and supply chain constraints
-- Performance across both Generics and Innovators is being impacted
by acute temporary labour shortages in the US pharma market and
global supply chain constraints
-- Lower sales of speciality opiates in our Generics business (-43%)
due mainly to pricing pressure and COVID-19 related delays to
elective medical procedures affecting demand
-- We continue to make progress with the development of our pipeline
of new products, but we are no longer of the view that the business
will achieve GBP100 million of additional operating profit by
2026
-- We are in discussions about a potential sale and we will provide
an update on its conclusion in due course
Half year ended % change % change, constant
30(th) September rates
2021 2020
GBP million GBP million
----------------------------------- ----------- ----------- -------- ------------------
Sales
Generics 40 70 -43 -40
Innovators 43 49 -12 -4
Total sales 83 119 -30 -26
Underlying operating (loss) /
profit (4) 15 n/a n/a
Margin -4.8% 12.6%
Return on invested capital (ROIC
) 2.6% 4.6%
Reported operating (loss) / profit (4) 4
----------------------------------- ----------- ----------- -------- ------------------
Generics
Our Generics business develops and manufactures generic active
pharmaceutical ingredients (APIs) for a variety of treatments.
The majority of our business is controlled APIs.
In the period, sales declined 40% primarily driven by speciality
opiates. In speciality opiates, sales of opioid addiction therapies
were lower reflecting pricing pressure in the US as the market
genericises and opioid analgesics decreased due to the delay of
elective medical procedures. In addition, we also saw increased
demand in the prior year for some products due to COVID-19. We
also saw weaker performance across a number of other products due
to new competitors entering the market and timing of orders.
Innovators
Our Innovators business provides customised development and manufacturing
services for active ingredients of new drugs during their lifecycle,
including for initial clinical evaluation and subsequently for
commercial supply post regulatory approval.
Innovators slightly declined in the period, with sales down 4%.
We continue to benefit from our multi-year contracts with Gilead
and Sarepta, and commercial demand remains strong. Sales in the
half were lower because of key raw material shortages due to global
supply chain disruption and temporary US labour shortages which
meant that we had a shortage of skilled operators. For Gilead,
we supply an immuno-oncology drug linker used in a treatment for
triple negative breast cancer, and remain excited by our future
prospects given Gilead's approval from the FDA (Food and Drug Administration)
for a further indication of the drug for the treatment of bladder
cancer.
These sales declines were partly offset by a modest increase in
clinical development work, where we undertake customised development
and manufacturing services. We were also impacted in the prior
period due to COVID-19 related shutdowns.
Strategic review update
We are in discussions about a potential sale and we will provide
an update on its conclusion in due course.
Underlying operating loss
Underlying operating loss reflecting weaker sales in Generics and
manufacturing challenges in both businesses due to temporary US
labour market shortages and supply chain disruption.
ROIC
ROIC declined 2 percentage points to 2.6% due to an operating loss
in the half. ROIC remains positive in the first half due to being
measured over a rolling 12-month period.
Other Markets
Announced intention to exit Battery Materials, commercialising opportunities
in Hydrogen at pace and driving value from non-core businesses
-- Sales grew 5% driven by a strong recovery in Value Businesses.
We saw lower sales in Fuel Cells primarily due to temporary manufacturing
issues as we ramped up our new facilities, and we used a proportion
of our capacity for new customer testing
-- We continue to invest in the commercialisation of our new growth
businesses, resulting in an underlying operating loss of GBP11
million
-- On 11(th) November, we announced the intention to exit our Battery
Materials business
-- Sale of our glass coatings business Advanced Glass Technologies
announced for a total consideration of GBP178 million
Half year ended % change % change, constant rates
30(th) September
2021 2020(1)
GBP million GBP million
Sales
New Markets 16 25 -36 -36
Value Businesses 175 166 +5 +11
Total sales 191 191 - +5
Underlying operating loss (11) (2) n/a n/a
Margin -5.8% -1.0%
Return on invested capital (ROIC) -1.4% 3.0%
Reported operating loss (325) (15)
---------------------------------- ----------- ----------- -------- ------------------------
(1) Restated following change to reporting segments
New Markets
New Markets comprises Hydrogen Technologies (Fuel Cells and Green
Hydrogen) and Battery Materials.
In Fuel Cells, we continue to see increased interest for automotive
and truck applications from customers principally in Asia and Europe.
In Green Hydrogen, we are working at pace to commercialise key
components used in green hydrogen electrolysers and expect our
first commercial sales in 2022.
Our Battery Materials business includes our lithium iron phosphate
materials, and high nickel eLNO cathode materials. We announced
on 11(th) November our intention to exit Battery Materials. Whilst
testing with customers is progressing well, this market is developing
into a high volume, commoditised market and it has become clear
that our capital intensity is too high compared with more established
large scale, low cost producers. We have concluded that the potential
returns from battery materials will not be adequate to justify
further investment and have therefore announced our intention to
exit this business.
New Markets sales declined 36% in the period, largely due to lower
sales in Fuel Cells. We were impacted by temporary manufacturing
issues as we ramped up our new facilities, which have now been
resolved. We also used a proportion of our capacity for new customer
testing.
Value Businesses
Value Businesses is managed to drive shareholder value from activities
considered to be non-core to JM, and currently comprises Battery
Systems, Medical Device Components, Diagnostic Services and Advanced
Glass Technologies (AGT). Sales were up 11% in the half, trending
back towards pre-pandemic levels. As we actively manage to drive
value, we saw an improved performance in these businesses.
AGT mainly provides black obscuration enamels and silver paste
for automotive glass applications. Sales were higher as we saw
a strong rebound in automotive markets following pandemic disruption
in the prior period. On 24(th) November 2021, we announced the
disposal of this business to Fenzi S.p.A for GBP178 million and
it is now classified as held for sale.
Our Battery Systems business saw a partial recovery in sales following
a weak prior period that was impacted by disruption caused by the
pandemic. In the half, we saw an impact from shortages of semi-conductor
chips.
Medical Device Components performed well and saw good sales growth
following the postponement of some elective medical procedures
in 2020 due to the pandemic.
Diagnostic Services saw a good recovery in the half although performance
remains impacted by the pandemic.
Underlying operating loss
We reported an underlying operating loss of GBP11 million. This
was due to increased investment into our New Markets growth businesses
such as Hydrogen Technologies and lower sales in Fuel Cells.
ROIC
ROIC declined by 4.4 percentage points to -1.4% due to higher assets
as we invest for growth, and an operating loss.
Corporate
Corporate costs were GBP39 million, an increase of GBP12 million
from the prior period, primarily due to building capability across
our group functions and upgrading our core IT systems.
Financial review
Research and development (R&D)
R&D spend was GBP109 million in the half, including GBP20 million
of capitalised R&D. This was up from GBP96 million in the prior
period and represents c.5% of sales excluding precious metals.
R&D spend was higher in the period, primarily driven by increased
investment in Hydrogen Technologies as we commercialise our fuel
cell and green hydrogen offerings, as well as Battery Materials
which will now cease.
Foreign exchange
The calculation of growth at constant rates excludes the impact
of foreign exchange movements arising from the translation of overseas
subsidiaries' profit into sterling. The group does not hedge the
impact of translation effects on the income statement.
The principal overseas currencies, which represented 75% of the
non-sterling denominated underlying operating profit in the half
year ended 30(th) September 2021, were:
Share of 1H 2021/22 Average exchange rate % change
non-sterling denominated Half year ended
underlying operating 30(th) September
profit
------------------------- --------
2021 2020
----------------- ------------------------- ----------- ---------- --------
US dollar 27% 1.39 1.27 +9
Euro 30% 1.16 1.12 +4
Chinese renminbi 18% 8.95 8.86 +1
----------------- ------------------------- ----------- ---------- --------
For the half, the impact of exchange rates decreased sales by GBP71
million and underlying operating profit by GBP6 million.
If current exchange rates (GBP:$ 1.34, GBP:EUR 1.19, GBP:RMB 8.57)
are maintained throughout the year ending 31(st) March 2022, foreign
currency translation will have a negative impact of approximately
GBP15 million on underlying operating profit. A one cent change
in the average US dollar and euro exchange rates and a ten fen
change in the average rate of the Chinese renminbi each have an
impact of approximately GBP1 million on full year underlying operating
profit.
Efficiency savings
We are transforming our organisation to create a more simple and
efficient group, allowing us to act with greater agility and pace
in a dynamic external environment. This includes the consolidation
of our Clean Air manufacturing footprint and the implementation of
a new group operating model, which will deliver savings of GBP110
million per annum by 2023/24.
Initiative Delivered Delivered Total delivered Annualised
GBP million to 2020/21 in half to date benefits
by 2023/24
------------------------------ -------------- ----------- ------------------ -----------
Total active efficiency
programmes 37 42 79 110
------------------------------ -------------- ----------- ------------------ -----------
Items outside of underlying operating profit
Major impairment and restructuring costs
Following the announcement of our intention to exit our Battery
Materials business, the associated Battery Materials' assets were
impaired by GBP314 million. The impairment comprises property,
plant and equipment (GBP216 million), right-of-use assets (GBP5
million), other intangible assets (GBP78 million) and trade and
other receivables (GBP15 million).
Related to our efficiency savings which will deliver savings of
GBP110 million per annum by 2023/24, we incurred GBP230 million
of one-off costs in total recognised outside of underlying operating
profit in prior periods. Of these costs, GBP78 million were incurred
in the first half of the prior year.
Gain on significant legal proceedings
During the period, the group recognised a gain of GBP44 million
in relation to damages and interest from a company found to have
unlawfully copied one of JM's technology designs.
Finance charges
Net finance charges in the period amounted to GBP29 million, down
from GBP41 million in the first half of 2020/21. Due to the focus
across the group on maintaining efficient levels of precious metal
working capital and sustained lower borrowings, we have seen finance
costs gradually decrease.
Taxation
The tax charge on underlying profit before tax for the half year
ended 30(th) September 2021 was GBP42 million, an effective underlying
tax rate of 16.0%, slightly up from 15.6% in the first half of
2020/21. The tax rate on underlying profit for the year ending
31(st) March 2022 is estimated to be c.16-17%.
The effective tax rate on reported profit for the half was 189.6%,
up from 7.8% in the prior period. This represents a tax charge
of GBP19 million, up from GBP2 million in the prior year. The
increased effective rate is due to a major impairment arising
in the first half, the majority of which arises in a jurisdiction
where no tax relief is available.
Post-employment benefits
IFRS - accounting basis
At 30(th) September 2021, the group's net post-employment benefit
position was a surplus of GBP203 million.
The cost of providing post-employment benefits in the period was
GBP25 million, up from GBP21 million in the same period last year.
Actuarial - funding basis
The UK pension scheme has a legacy defined benefit career average
section which was closed to new entrants on 1(st) October 2012,
when a new defined benefit cash balance section was opened.
The last triennial actuarial valuation of the career average section
as at 1(st) April 2018 revealed a deficit of GBP34 million, or
a surplus of GBP9 million after taking account of the future additional
deficit funding contributions from the special purpose vehicle
set up in January 2013. The valuation results as at 1(st) April
2018 allowed for the equalisation of Guaranteed Minimum Pension.
The triennial actuarial valuation of the scheme as at 1(st) April
2021 is currently underway and the results are expected by the
end of the year.
The last triennial actuarial valuation of the cash balance section
as at 1(st) April 2018 revealed a surplus of GBP0.2 million.
The latest actuarial valuations of our two US pension schemes
showed a surplus of GBP9 million as at 1(st) July 2021, an improvement
from a GBP7 million surplus as at 1(st) July 2020.
Capital expenditure
Capital expenditure was GBP228 million in the half, 2.4 times depreciation
and amortisation (excluding amortisation of acquired intangibles).
In the period, projects included:
-- In Efficient Natural Resources, investing to increase the resilience
and capacity of our pgm refining assets
-- Development and commercialisation of eLNO, our portfolio of
high nickel cathode materials within Battery Materials
-- Upgrading our core IT business systems
Strong balance sheet
Net debt at 30(th) September 2021 was GBP699 million, a decrease
of GBP76 million from 31(st) March 2021 and GBP179 million from
30(th) September 2020. Net debt is GBP39 million higher at GBP738
million when post tax pension deficits are included. The group's
net debt (including post tax pension deficits) to EBITDA was 0.9
times (30(th) September 2020: 1.6 times), below our target range
of 1.5 to 2.0 times.
As part of our continued focus on working capital management, we
have maintained an efficient balance sheet and low levels of working
capital. In the half, supply chain disruption across automotive
and truck production resulted in a precious metal working capital
volume benefit of c.GBP300 million, which will unwind as production
recovers.
We use short term metal leases as part of our mix of funding for
working capital, which are outside the scope of IFRS 16 as they
qualify as short term leases. These amounted to GBP223 million
at 30(th) September 2021 (31(st) March 2021: GBP437 million, 30(th)
September 2020: GBP367 million).
Free cash flow and working capital
Free cash flow was GBP189 million in the half, compared to GBP256
million in the prior period, largely reflecting higher non-precious
metal working capital.
Excluding precious metal, average working capital days to 30(th)
September 2021 decreased to 40 days compared to 70 days to 30(th)
September 2020. The prior period was higher due to the lower average
sales volume through the period. Our target range for average non-precious
metal working capital days is between 50 and 60 days over the medium
term.
Going concern
The group maintains a strong balance sheet with around GBP1.7 billion
of available cash and undrawn committed facilities. Cash generation
was strong during the period with free cash flow of around GBP189
million lowering net debt by GBP76 million since year end. As set
out on page 28, the directors have reviewed the base case scenario
forecasts for the group and have reasonable expectation that there
are no material uncertainties that cast doubt about the group's
ability to continue operating for at least twelve months from the
date of approving these half-yearly accounts. In arriving at this
view, the base case scenario was stress tested to a severe but
plausible downside case which assumed a lower demand profile and
slower recovery in end user market growth. Additionally, the group
considered scenarios including the impact from metal price volatility,
a short-term refinery shutdown and increases in the amount of metal
that we would have to hold.
Under all scenarios, the group has sufficient headroom against
committed facilities and key financial covenants are not in breach
during the going concern period. The directors are therefore of
the opinion that the group has adequate resources to fund its operations
for the period of twelve months following the date of this announcement
and so determine that it is appropriate to prepare the accounts
on a going concern basis.
Risks and uncertainties
The principal risks and uncertainties, together with the group's
strategies to manage them, are set out on pages 88 to 96 of the
2021 annual report. Updated risks are:
Existing market outlook - Changing assumptions in our key markets
could have an unplanned or unforeseen impact that we are not agile
enough to respond to. Since the publication of the 2021 annual
report, this risk has been revised to reflect the impact of climate
change and our transition to a low carbon economy. As we transition
to a low carbon economy, there is a risk JM is unable to make and
or sell products demanded by customers.
This risk includes the potential impact of legislative changes,
including carbon pricing or taxation legislation, other market
movements outside of our predictions, the extended impact of global
pandemics, and emerging trends such as tariffs, as well as regional
and global slowdowns to which our business may be sensitive.
Future growth - Ineffective execution of our strategic initiatives
and investments could lead to failure to deliver planned growth
and create value. Our intention to exit Battery Materials changes
this risk profile in that we will have less exposure to a highly
capital intensive and potentially low margin segment, but removes
one of our strategic growth initiatives.
Competitive advantage - Failure to maintain our competitive advantage
in existing markets and, as a result, not meeting customers' evolving
needs as effectively and profitably as our competitors, particularly
around increasing customer demand for net zero products.
Environment, health and safety (EHS) - Like other high hazard
manufacturing companies, our business operations are subject to
a wide range of challenging health, safety and environmental laws,
standards and regulations set by government and non-governmental
bodies around the world. If we fail to operate safely, we could
injure our people or breach applicable laws, which could have a
negative impact on our employees. This could result in lost production
time and potentially attract negative interest from the media and
regulators.
Supply failure - The nature of JM's operations means there are
limited suppliers from which to source certain strategic raw materials
including precious metals. Any significant breakdown in the supply
of these materials would lead to an inability to manufacture our
products and satisfy customer demand. Through our work on climate
change impacts, we acknowledge that increased frequency of extreme
weather events and natural disasters (drought, floods, storms,
cyclones, heavy rain, sea level rise, heatwaves) may lead to disruption
to supply chains across JM's value chain (upstream and downstream)
resulting in disrupted delivery of raw materials and products and
increased costs.
People - To successfully execute our strategy and deliver growth,
we need an appropriate culture and a breadth and depth of leadership
skills to drive a motivated, inclusive and engaged workforce, underpinned
by adequate people data. This is especially important as we pivot
away from more traditional areas of the business to ones that are
higher growth and by implication higher risk.
Security of metal / highly regulated substances - We store and
transport significant quantities of high value precious metals
or highly regulated substances. Loss or theft due to a failure
of our associated security management systems may result in financial
loss and / or a failure to satisfy our customers, which could reduce
customer confidence or result in legal action.
Intellectual property management - Failure to adequately manage
our own, and third party, intellectual property, knowledge and
information could lead to a loss in business advantage, loss of
freedom to operate and reputational damage associated with litigation.
Asset failure - We may experience critical asset failures resulting
in a material impact on the supply, performance, share value and
reputation of JM. In addition, we recognise that increased frequency
of extreme weather events and natural disasters (drought, floods,
storms, cyclones, heavy rain, sea level rise, heatwaves) may lead
to disruption of JM operations resulting in increased costs and
detrimental effects on employee wellbeing.
Ethics and compliance - Failure to comply with ethical and regulatory
standards could lead to reputational damage, and leave the company
or individuals open to potential criminal or legal action.
Business transition - Failure to manage and deliver change in
a controlled manner to achieve expected business benefits.
Product quality - Customers use our products in a wide range of
their own end products, processes and systems. It is crucial, therefore,
that our products work properly and meet the established quality
criteria. Performance failure or quality defects could cause harm
to consumers or leave us exposed to liability claims. This could
lead to loss of future business, licence to operate and reputational
damage.
Information, technology and cyber security - Failure to adapt
our IT systems to changing business requirements, significant disruption
to those systems or a major cyber security incident could adversely
affect our financial position, harm our reputation and lead to
regulatory penalties, or non-compliance with laws.
Customer contract liability - Unfavourable customer contract terms
could lead to significant loss or damage and expose us to high
or unlimited liability, as well as other broader negative consequences.
Responsibility statement of the Directors in respect of the half
yearly report
The half yearly report is the responsibility of the directors.
Each of the directors as at the date of this responsibility statement,
whose names and functions are set out below, confirms that to the
best of their knowledge:
-- the condensed consolidated accounts have been prepared in accordance
with UK adopted International Accounting Standard (IAS) 34 -
'Interim Financial Reporting'; and
-- the interim management report included in the Half-Yearly Report
includes a fair review of the information required by:
a) DTR 4.2.7R of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules, being an indication of important
events that have occurred during the first six months of the
financial year and their impact on the condensed consolidated
accounts; and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
b) DTR 4.2.8R of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules, being related party transactions
that have taken place in the first six months of the current
financial year and that have materially affected the financial
position or performance of the company during that period; and
any changes in the related party transactions described in the
last annual report that could do so.
The names and functions of the directors of Johnson Matthey Plc
are as follows:
Patrick Thomas Chair of the Board and of the Nomination Committee
Robert MacLeod Chief Executive
Stephen Oxley Chief Financial Officer
John O'Higgins Senior Independent Non-Executive Director
Rita Forst Non-Executive Director
Jane Griffiths Non-Executive Director and Chair of Societal Value
Committee
Xiaozhi Liu Non-Executive Director
Chris Mottershead Non-Executive Director and Chair of the Remuneration
Committee
Doug Webb Non-Executive Director and Chair of the Audit Committee
The responsibility statement was approved by the Board of Directors
on 23(rd) November 2021 and is signed on its behalf by:
Patrick Thomas
Chairman
Independent Review Report
to Johnson Matthey Plc
Report on the condensed consolidated accounts
Our conclusion
We have reviewed Johnson Matthey Plc's condensed consolidated
accounts (the "interim financial statements") in the half year
results of Johnson Matthey Plc for the 6 month period ended 30(th)
September 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Balance Sheet as at 30(th) September 2021;
-- the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Total Comprehensive Income for the period
then ended;
-- the Condensed Consolidated Cash Flow Statement for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half year
results of Johnson Matthey Plc have been prepared in accordance
with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half year results, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the half
year results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half year results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
23(rd) November 2021
Condensed Consolidated Income Statement
for the six months ended 30(th) September 2021
Six months ended
30.9.21 30.9.20
Notes GBP million GBP million
2,
Revenue 3 8,586 6,979
Cost of sales (8,038) (6,587)
----------- -----------
Gross profit 548 392
Distribution costs (57) (54)
Administrative expenses (198) (187)
Amortisation of acquired intangibles 4 (3) (5)
Gain on significant legal proceedings 4 44 -
Major impairment and restructuring charges 4 (314) (78)
----------- -----------
Operating profit 20 68
Finance costs (38) (77)
Finance income 9 36
Share of losses of joint ventures and associates - (1)
----------- -----------
(Loss) / profit before tax (9) 26
Tax expense 5 (19) (2)
----------- -----------
(Loss) / profit for the period (28) 24
----------- -----------
pence pence
(Loss) / earnings per ordinary share
Basic 6 (14.8) 12.3
Diluted 6 (14.8) 12.3
Condensed Consolidated Statement of Total Comprehensive
Income
for the six months ended 30(th) September 2021
Six months ended
30.9.21 30.9.20
Notes GBP million GBP million
(Loss) / profit for the period (28) 24
----------- -----------
Other comprehensive income
Items that will not be reclassified to the
income statement
Remeasurements of post-employment benefit
assets and liabilities 13 59 (103)
Fair value gains on equity investments at fair value
through other comprehensive income 1 6
Tax on items that will not be reclassified to the
income statement (5) 21
----------- -----------
55 (76)
----------- -----------
Items that may be reclassified to the income
statement:
Exchange differences on translation of foreign
operations 40 (11)
Amounts credited / (charged) to hedging
reserve 13 (6)
Fair value losses on net investment hedges (2) -
Tax on items that may be reclassified to the income
statement (3) 1
----------- -----------
48 (16)
----------- -----------
Other comprehensive income / (expense) for the period 103 (92)
----------- -----------
Total comprehensive income / (expense) for the period 75 (68)
----------- -----------
Condensed Consolidated Balance Sheet
as at 30(th) September 2021
30.9.21 31.3.21
Notes GBP million GBP million
Assets
Non-current assets
Property, plant and equipment 8 1,326 1,424
Right-of-use assets 65 74
Goodwill 557 554
Other intangible assets 9 307 359
Investments in joint ventures and associates 2 2
Investments at fair value through other comprehensive
income 54 53
Other receivables 10 30 50
Interest rate swaps 19 17 20
Deferred tax assets 113 140
Post-employment benefit net assets 13 249 194
----------- -----------
Total non-current assets 2,720 2,870
----------- -----------
Current assets
Inventories 2,004 1,814
Current tax assets 9 13
Trade and other receivables 10 1,916 2,422
Cash and cash equivalents 19 746 581
Interest rate swaps 19 3 -
Other financial assets 61 44
Assets classified as held for sale 12 52 -
----------- -----------
Total current assets 4,791 4,874
----------- -----------
Total assets 7,511 7,744
----------- -----------
Liabilities
Current liabilities
Trade and other payables 11 (3,050) (3,325)
Lease liabilities 19 (11) (11)
Current tax liabilities (95) (147)
Cash and cash equivalents -- bank overdrafts 19 (42) (36)
Borrowings and related swaps 19 (309) (26)
Other financial liabilities (28) (18)
Provisions (29) (35)
Liabilities classified as held for sale 12 (13) -
----------- -----------
Total current liabilities (3,577) (3,598)
----------- -----------
Non-current liabilities
Borrowings and related swaps 19 (1,054) (1,252)
Lease liabilities 19 (48) (51)
Deferred tax liabilities (28) (28)
Employee benefit obligations 13 (100) (98)
Provisions (26) (27)
Other payables 11 (5) (5)
----------- -----------
Total non-current liabilities (1,261) (1,461)
----------- -----------
Total liabilities (4,838) (5,059)
----------- -----------
Net assets 2,673 2,685
----------- -----------
Equity
Share capital 221 221
Share premium 148 148
Shares held in employee share ownership trust
(ESOT) (24) (29)
Other reserves 49 -
Retained earnings 2,279 2,345
----------- -----------
Total equity 2,673 2,685
----------- -----------
Condensed Consolidated Cash Flow Statement
for the six months ended 30(th) September 2021
Six months ended
30.9.21 30.9.20
Notes GBP million GBP million
Cash flows from operating activities
(Loss) / profit before tax (9) 26
Adjustments for:
Share of losses of joint ventures and associates - 1
Depreciation 77 76
Amortisation 22 13
Impairment losses 314 16
Loss on sale of non-current assets - 1
Share-based payments 9 5
Increase in inventories (179) (177)
Decrease / (increase) in receivables 532 (347)
(Decrease) / increase in payables (339) 840
(Decrease) / increase in provisions (8) 49
Contributions less than / (in excess of) employee benefit
obligations charge 5 (5)
Changes in fair value of financial instruments 8 (37)
Net finance costs 29 41
Income tax paid (49) (20)
----------- -----------
Net cash inflow from operating activities 412 482
----------- -----------
Cash flows from investing activities
Interest received 6 33
Purchases of property, plant and equipment (141) (139)
Purchases of intangible assets (43) (36)
Proceeds from sale of non-current assets 2 -
Net cash outflow from investing activities (176) (142)
----------- -----------
Cash flows from financing activities
Proceeds from borrowings 63 288
Repayment of borrowings - (4)
Dividends paid to equity shareholders 7 (96) (60)
Interest paid (40) (77)
Principal element of lease payments (7) (7)
----------- -----------
Net cash (outflow) / inflow from financing
activities (80) 140
----------- -----------
Net increase in cash and cash equivalents 156 480
Exchange differences on cash and cash equivalents 3 (1)
Cash and cash equivalents at beginning of
year 545 273
Cash and cash equivalents at end of period 19 704 752
----------- -----------
Cash and deposits 223 197
Money market funds 523 573
Bank overdrafts (42) (32)
Cash and deposits transferred to assets classified as
held for sale - 14
----------- -----------
Cash and cash equivalents 19 704 752
----------- -----------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30(th) September 2021
Share Shares
held
Share premium in Other Retained Total
capital account ESOT reserves earnings equity
GBP million GBP million GBP million GBP million GBP million GBP million
At 1(st) April 2020 221 148 (32) 142 2,345 2,824
Total comprehensive
expense for
the period - - - (10) (58) (68)
Dividends paid (note 7) - - - - (60) (60)
Share-based payments - - - - 9 9
Cost of shares transferred
to employees - - 3 - (7) (4)
At 30(th) September 2020 221 148 (29) 132 2,229 2,701
Total comprehensive
(expense) /
income for the period - - - (132) 150 18
Dividends paid (note 7) - - - - (39) (39)
Share-based payments - - - - 7 7
Cost of shares transferred
to employees - - - - (3) (3)
Tax on share-based
payments - - - - 1 1
At 31(st) March 2021 221 148 (29) - 2,345 2,685
Total comprehensive income
for
the period - - - 49 26 75
Dividends paid (note 7) - - - - (96) (96)
Share-based payments - - - - 12 12
Cost of shares transferred
to employees - - 5 - (8) (3)
At 30(th) September 2021 221 148 (24) 49 2,279 2,673
----------- ----------- ----------- ----------- ----------- -----------
Notes to the Accounts
for the six months ended 30(th) September 2021
1 Basis of preparation and statement of compliance
On 31(st) December 2020, IFRS as adopted by the European Union
at that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. The group
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1(st) April 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework. This
condensed consolidated interim financial report for the half-year
reporting period ended 30(th) September 2021 has been prepared in
accordance with the UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the UK's Financial Conduct
Authority. The accounting policies applied are consistent with the
accounting policies applied by the group in its consolidated
accounts as at, and for the year ended, 31(st) March 2021, with the
exception of the adoption of amended accounting policies and
standards as explained below.
These condensed consolidated accounts do not constitute
statutory accounts within the meaning of Section 435 of the
Companies Act 2006. The interim report does not include all of the
notes of the type normally included in an annual financial report.
Accordingly, this report is to be read in conjunction with the
annual report for the year ended 31(st) March 2021, which has been
prepared in accordance with both International Accounting Standards
(IAS) in conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB), adopted
pursuant to Regulation (EC) No 1606/2002 as it applies to the
European Union, including the interpretations issued by the IFRS
Interpretations Committee.
Information in respect of the year ended 31(st) March 2021 is
derived from the company's statutory accounts for that year which
have been delivered to the Registrar of Companies. The auditor's
report on those statutory accounts was unqualified, did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying its report and did not contain
any statement under Section 498 (2) or Section 498 (3) of the
Companies Act 2006.
The half-yearly accounts are unaudited, but have been reviewed
by the auditors. They were approved by the board of directors on
23(rd) November 2021.
Going concern
The directors have reviewed the base case scenario, and the
severe but plausible case scenario and have reasonable expectation
that there are no material uncertainties that cast doubt about the
group's ability to continue operating for at least twelve months
from the date of approving these half-yearly accounts.
As at 30(th) September 2021, the group maintains a strong
balance sheet with around GBP1.7 billion of available cash and
undrawn committed facilities. Cash generation was strong during the
period with free cash flow of around GBP189 million lowering net
debt by GBP76 million since 31(st) March 2021 to GBP699 million.
Net debt (including post tax pension deficits) to EBITDA, was below
our target range at 0.9 times.
Overall, the group's performance during the period was
resilient, both in terms of underlying operating profit and cash
flow. For the purposes of assessing going concern, we have
revisited our financial projections using the latest forecasts for
our base case scenario. The base case scenario was stress tested to
a severe but plausible downside case which assumed a lower demand
profile and slower recovery in end user market growth.
Additionally, the group considered scenarios including the
impact from metal price volatility, a short-term refinery shutdown
and increases in the amount of metal that we would have to hold.
Whilst the combined impact would reduce profitability and EBITDA
against our latest forecast, our balance sheet remains strong.
Basis of preparation and statement of compliance
1 (continued)
Going concern (continued)
The group has a robust funding position comprising a range of
long-term debt and a GBP1 billion five year committed revolving
credit facility maturing in March 2026 which was entirely undrawn
at 30(th) September 2021. There was GBP555 million of cash held in
money market and bank deposits. Of the existing loans, around
GBP255 million of term debt matures in the period to December 2023
which has been included in our going concern modelling. As a long
time, highly rated issuer in the US private placement market, the
group expects to be able to access additional funding in its
existing markets should it need to. The group also has a number of
additional sources of funding available including uncommitted lease
facilities that support precious metal funding. Whilst we would
fully expect to be able to utilise the metal lease facilities, they
are excluded from our going concern modelling.
Under all scenarios above, the group has sufficient headroom
against committed facilities and key financial covenants are not in
breach during the going concern period. There remain risks to the
group including more extreme economic outcomes. Against these, the
group has a range of levers which it could utilise to protect
headroom including reducing capital expenditure, reducing PMM
liquidity and future dividend distributions.
The directors are therefore of the opinion that the group has
adequate resources to fund its operations for the period of twelve
months following the date of this announcement and so determine
that it is appropriate to prepare the accounts on a going concern
basis.
Non-GAAP measures
The group uses various measures to manage its business which are
not defined by generally accepted accounting principles (GAAP). The
group's management believes these measures provide valuable
additional information to users of the accounts in understanding
the group's performance. The group's non-GAAP measures are defined
and reconciled to GAAP measures in note 19.
Amended standards adopted by the group
The IASB ratified the IFRIC update on Configuration and
Customisation ('CC') costs in a Cloud Computing Arrangement (IAS
38, Intangible Assets) in April 2021. The group reports 'CC' in
cloud computing arrangements according to these updates.
The IASB has issued other amendments resulting from improvements
to IFRS that the group considers do not have any impact on the
accounting policies, financial position or performance of the
group. The group has not early adopted any standard, interpretation
or amendment that was issued but is not yet effective.
The group has elected not to apply the exemption granted in the
'COVID-19 related rent concessions' amendment to IFRS 16, Leases,
as the group has not received material COVID-19 related rent
concessions as a lessee.
Interest Rate Benchmark Reform Phase 2 - Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
The IBOR reform, Phase 2 amendments were effective for annual
periods beginning on or after the 1(st) January 2021. The Phase 2
amendments address issues that arise from implementation of the
reforms, including the replacement of one benchmark with an
alternative one. A practical expedient is provided such that the
change to contractual cash flows for financial assets and
liabilities (including lease liabilities) is accounted for
prospectively by revising the effective interest rate. In addition,
hedge accounting will not be discontinued solely because of the
IBOR reform. The amendments are not expected to have a material
impact on the results or financial position of the group.
The group has one IFRS 9 designated hedge relationship: the
3.26% $150 million Bonds 2022 which have been swapped into floating
rate US dollars. This swap references six-month US dollar LIBOR,
however the swap matures in 2022, before the amendments are
effective for the group. The group does have access to a revolving
credit facility which remains undrawn, the contract has been
amended so that USD and GBP drawings will be subject to the new
Secured Overnight Financing Rate (SOFR) and Sterling Overnight
Index Average (SONIA) respectively from 30(th) November 2021. The
implications on the wider business of IBOR reform have been
assessed and there are no other arrangements that are materially
impacted.
2 Segmental information
Revenue, sales and underlying operating profit
by sector
As part of the 31(st) March 2021 results press release, we announced
small changes to our reporting segments to reflect how we are managing
the business and increase visibility of our new growth businesses.
Efficient Natural Resources now includes Life Science Technologies
(formerly part of New Markets) and excludes Diagnostic Services and
Advanced Glass Technologies (now part of Other Markets). Excluding
Corporate costs, the group has four reporting segments, aligned to
the needs of our customers and the global challenges we are tackling.
Clean Air - provides catalysts for emission control after-treatment
systems to remove harmful emissions from vehicles and non-road equipment
powered by diesel and gasoline.
Efficient Natural Resources - provides products and processing services
for the efficient use and transformation of critical natural resources
including oil, gas, biomass and platinum group metals to enable the
decarbonisation of chemical value chains and provide circular economy
solutions.
Health - develops and manufactures active pharmaceutical ingredients
(APIs) for a variety of treatments and new drugs during their lifecycle,
including for initial clinical evaluation and subsequently for commercial
supply post regulatory approval.
Other Markets - a portfolio of businesses with particular focus on
potential growth and value realisation opportunities. This includes
Battery Systems, Fuel Cells, Diagnostic Services, Battery Materials
and Green Hydrogen.
The Group Management Committee (the chief operating decision maker
as defined by IFRS 8, Operating Segments) monitors the results of
these operating sectors to assess performance and make decisions about
the allocation of resources. Each operating sector is represented
by a member of the Group Management Committee. These operating sectors
represent the group's reportable segments and their principal activities
are described on pages 42 to 57 of the 2021 Annual Report. The performance
of the group's operating sectors is assessed on sales and underlying
operating profit (see note 19). Sales between segments are made at
market prices, taking into account the volumes involved.
Six months ended 30(th) September
2021
Efficient
Clean Natural Other
Air Resources Health Markets Corporate Eliminations Total
GBP GBP GBP GBP GBP GBP
million million million million million GBP million million
Revenue from
external
customers 3,748 4,514 83 241 - - 8,586
Inter-segment
revenue 1 2,617 1 - - (2,619) -
-------- ---------- ---------- ---------- ---------- ------------ ---------
Revenue 3,749 7,131 84 241 - (2,619) 8,586
-------- ---------- ---------- ---------- ---------- ------------ ---------
External sales
(1) 1,195 470 82 191 - - 1,938
Inter-segment
sales 1 53 1 - - (55) -
-------- ---------- ---------- ---------- ---------- ------------ ---------
Sales (1) 1,196 523 83 191 - (55) 1,938
-------- ---------- ---------- ---------- ---------- ------------ ---------
Underlying
operating profit
(1) 150 197 (4) (11) (39) - 293
-------- ---------- ---------- ---------- ---------- ------------ ---------
Six months ended 30(th) September
2020
Efficient
Natural Other
Clean Resources Markets Eliminations
Air (restated) Health (restated) Corporate (restated) Total
GBP GBP GBP GBP GBP GBP
million million million million million GBP million million
Revenue from
external
customers 2,888 3,743 122 226 - - 6,979
Inter-segment
revenue 2 1,965 - - - (1,967) -
-------- ---------- ---------- ---------- ---------- ------------ ---------
Revenue 2,890 5,708 122 226 - (1,967) 6,979
-------- ---------- ---------- ---------- ---------- ------------ ---------
External sales
(1) 1,002 367 119 191 - - 1,679
Inter-segment
sales 1 44 - - - (45) -
-------- ---------- ---------- ---------- ---------- ------------ ---------
Sales (1) 1,003 411 119 191 - (45) 1,679
-------- ---------- ---------- ---------- ---------- ------------ ---------
Underlying
operating profit
(1) 77 88 15 (2) (27) - 151
-------- ---------- ---------- ---------- ---------- ------------ ---------
(1) Sales and underlying operating profit are non-GAAP measures (see
note 19 for reconciliation to GAAP measures). Sales excludes the sale
of precious metals. Underlying operating profit excludes profit or
loss on disposal of businesses, gain or loss on significant legal
proceedings, together with associated legal costs, amortisation of
acquired intangibles and major impairment and restructuring charges.
The comparative period is restated to reflect the group's updated
reporting segments and revised inter-segment revenue and sales for
Efficient Natural Resources and eliminations for copper zeolite sales.
The overall group total is as previously reported.
2 Segmental information (continued)
Net assets by
sector
At 30(th)
September 2021
Efficient
Clean Natural Other
Air Resources Health Markets Corporate Total
GBP GBP GBP GBP
million million million million GBP million GBP million
Segmental net
assets 1,481 542 494 197 482 3,196
---------- ---------- ---------- ---------- ------------
Net debt (see note 19) (699)
Post-employment benefit net assets and liabilities 149
Deferred tax net assets 85
Provisions and non-current
other
payables (60)
Investments in joint
ventures
and associates 2
Net assets 2,673
-----------
At 31(st)
March 2021
Efficient
Natural Other
Clean Resources Markets
Air (restated) Health (restated) Corporate Total
GBP GBP GBP GBP
million million million million GBP million GBP million
Segmental net
assets 1,480 603 469 412 353 3,317
---------- ---------- ---------- ---------- ------------
Net debt (see note 19) (775)
Post-employment benefit net assets and liabilities 96
Deferred tax net assets 112
Provisions and non-current
other
payables (67)
Investments in joint
ventures
and associates 2
Net assets 2,685
-----------
The comparative period is restated to reflect the group's updated
reporting segments. The overall group total is as previously reported.
2 Segmental information (continued)
Impact of exchange rate movements on sales and underlying operating
profit by sector
The main impact of exchange rate movements on sales and
underlying operating profit is from the translation of the results
of foreign operations into sterling.
Six months ended
Average exchange rates 30.9.21 30.9.20
US dollar / GBP 1.39 1.27
Euro / GBP 1.16 1.12
Chinese renminbi / GBP 8.95 8.86
Six months ended
30.9.20
Change
Six months At last At this at
year's year's
ended rates rates this year's
30.9.21 (restated) (restated) rates
GBP
GBP million million GBP million %
Clean Air 1,196 1,003 964 24%
Efficient Natural Resources 523 411 393 33%
Health 83 119 112 -26%
Other Markets 191 191 182 5%
Elimination of inter-segment sales (55) (45) (43)
----------- ---------- -----------
Sales (1) 1,938 1,679 1,608 21%
----------- ---------- -----------
Clean Air 150 77 74 103%
Efficient Natural Resources 197 88 86 129%
Health (4) 15 14 n/a
Other Markets (11) (2) (2) n/a
Unallocated corporate expenses (39) (27) (27)
----------- ---------- -----------
Underlying operating profit (1) 293 151 145 102%
----------- ---------- -----------
(1) Sales and underlying operating profit are non-GAAP measures (see
note 19 for reconciliation to GAAP measures). Sales excludes the sale
of precious metals. Underlying operating profit excludes profit or
loss on disposal of businesses, gain or loss on significant legal
proceedings, together with associated legal costs, amortisation of
acquired intangibles and major impairment and restructuring charges.
The comparative period is restated to reflect the group's updated
reporting segments and revised inter-segment revenue and sales for
Efficient Natural Resources and eliminations for copper zeolite sales.
The overall group total is as previously reported.
3 Revenue
Products and services
The group's principal products and services by operating sector and
sub-sector are disclosed in the table below, together with information
regarding performance obligations and revenue recognition. Revenue
is recognised by the group as contractual performance obligations
to customers are completed.
Performance
Sub-sector Primary industry Principal products and services obligations Revenue recognition
-------------- -------------------------- ---------------------------------- ----------- -------------------
Clean Air
----------------------------------------------------------------------------------------------------------------
Light Duty Automotive Catalysts for cars and other Point in On despatch
Catalysts light duty vehicles time or delivery
Heavy Duty Automotive Catalysts for trucks, buses Point in On despatch
Catalysts and non-road equipment time or delivery
Efficient Natural Resources
Catalyst Chemicals Speciality catalysts and Point in On despatch
Technologies / oil and additives time or delivery
gas
Process technology licences Over time Based on costs
incurred or
straight-line
over the licence
term(1)
Engineering design services Over time Based on costs
incurred
Platinum Various Platinum Group Metal refining Over time Based on output
Group Metal and recycling services
Services
Other precious metal products Point in On despatch
time or delivery
Platinum Group Metal chemical Point in On despatch
and industrial products time or delivery
Advanced catalysts Point in On despatch
time or delivery
Health
----------------------------------------------------------------------------------------------------------------
Generics Pharmaceuticals Manufacture of active Point in On despatch
pharmaceutical time or delivery
ingredients
Innovators Pharmaceuticals Development and manufacture Over time Based on costs
of active pharmaceutical incurred
ingredients
Other Markets
----------------------------------------------------------------------------------------------------------------
Advanced Automotive Precious metal pastes and Point in On despatch
Glass enamels time or delivery
Technologies
Battery Automotive Battery materials Point in On despatch
Materials time or delivery
Fuel Automotive Fuel cell technologies Point in On despatch
Cells time or delivery
Battery Consumer Battery systems for a range Point in On despatch
Systems goods of applications time or delivery
Medical Device Pharmaceuticals Products found in devices Point in On despatch
Components used in medical procedures time or delivery
Diagnostic Oil and gas Detection, diagnostic and Over time Based on costs
Services measurement solutions incurred
(1) Revenue recognition depends on whether the licence is distinct
in the context of the contract.
3 Revenue (continued)
Revenue from external customers by principal products and services
Six months ended 30(th) September 2021
Efficient
Clean Natural Other
Air Resources Health Markets Total
GBP GBP GBP
GBP million million GBP million million million
Metal 2,553 4,044 1 50 6,648
Heavy Duty Catalysts 413 - - - 413
Light Duty Catalysts 768 - - - 768
Catalyst Technologies - 219 - - 219
Platinum Group Metal Services - 251 - - 251
Generics - - 40 - 40
Innovators - - 42 - 42
Fuel Cells - - - 10 10
Battery Materials - - - 6 6
Battery Systems - - - 77 77
Advanced Glass Technologies - - - 36 36
Diagnostic Services - - - 26 26
Medical Device Components - - - 36 36
Other 14 - - - 14
Revenue 3,748 4,514 83 241 8,586
Six months ended 30(th) September 2020
Efficient
Natural Other
Clean Resources Markets
Air (restated) Health (restated) Total
GBP GBP GBP
GBP million million GBP million million million
Metal 1,885 3,377 3 34 5,299
Heavy Duty Catalysts 310 - - - 310
Light Duty Catalysts 680 - - - 680
Catalyst Technologies - 194 - - 194
Platinum Group Metal Services - 172 - - 172
Generics - - 70 - 70
Innovators - - 49 - 49
Fuel Cells - - - 19 19
Battery Materials - - - 6 6
Battery Systems - - - 76 76
Advanced Glass Technologies - - - 27 27
Diagnostic Services - - - 21 21
Medical Device Components - - - 29 29
Other 13 - - 14 27
Revenue 2,888 3,743 122 226 6,979
The comparative period is restated to reflect the group's updated
reporting segments. The overall group total is as previously reported.
4 Operating profit
Six months ended
30.9.21 30.9.20
GBP
GBP million million
Operating profit is arrived at after charging
/ (crediting):
Total research and development expenditure 109 96
Less: Development expenditure capitalised (20) (9)
Research and development expenditure charged
to the income statement 89 87
Less: External funding received from governments (6) (5)
Net research and development expenditure charged
to the income statement 83 82
Depreciation
of:
Property, plant and equipment 70 69
Right-of-use assets 7 7
Depreciation 77 76
Amortisation
of:
Internally generated intangible assets 1 2
Acquired intangibles 3 5
Other intangible assets 18 6
Amortisation 22 13
Gain on significant legal proceedings (44) -
Major impairment and restructuring charges:
Property, plant and equipment 216 12
Right-of-use assets 5 1
Other intangible assets 78 4
Inventories - 1
Trade and other receivables 15 1
Trade and other payables - (3)
Impairment losses 314 16
Restructuring charges - 62
Major impairment and restructuring charges 314 78
Gain on significant legal proceedings
During the period, the group recognised a gain of GBP44 million
in relation to damages and interest from a company found to have
unlawfully copied one of our technology designs. The gain is
reported as non-underlying, see note 19.
Major impairment and restructuring charges
Following a detailed review of our Battery Materials business
the group has concluded that the potential future returns from the
business would not be adequate to justify further investment.
Accordingly, on 11(th) November 2021, the group announced its
decision to pursue the sale of all or parts of Battery Materials.
We have determined an impairment charge of GBP314m based on our
estimate of the recoverable amount of the assets at 30(th)
September 2021. The impairment charge comprises property, plant and
equipment (GBP216 million), right-of-use assets (GBP5 million),
other intangible assets (GBP78 million) and trade and other
receivables (GBP15 million).
In the prior period, the group incurred non-underlying major
impairment and restructuring charges of GBP78 million. The charges
were in relation to efficiency initiatives that are transforming
our organisation to create a more simple and efficient group
allowing us to act with greater agility and pace in a dynamic
external environment. There have been no further charges in
relation to these initiatives in the current period.
5 Tax expense
The charge for taxation at the half year ended 30(th) September
2021 was GBP19 million (1H 2020/21: GBP2 million), this is after a
major impairment charge of GBP314 million with an associated tax
credit of GBP27 million. The tax charge on underlying profit before
tax was GBP42 million (1H 2020/21: GBP17 million), an effective tax
rate of 16.0% (1H 2020/21: 15.6%). Included in the first half tax
charge is a tax credit of GBP6 million in relation to the UK rate
change from 19% to 25%, which was enacted on 24(th) May 2021. In
addition, there is a tax credit to other comprehensive income of
GBP9 million in respect of the impact of the rate change on
post-employment assets. The tax rate on underlying profit for the
year ending 31(st) March 2022 is estimated to be between
16-17%.
6 (Loss) / earnings per ordinary
share
Six months ended
30.9.21 30.9.20
pence pence
Basic (14.8) 12.3
Diluted (14.8) 12.3
(Loss) / earnings per ordinary share have been calculated by dividing
(loss) / profit for the period by the weighted average number of
shares in issue during the period.
Six months ended
Weighted average number of shares in issue 30.9.21 30.9.20
Basic 192,829,279 192,650,843
Dilution for long term incentive plans 687,371 211,074
Diluted 193,516,650 192,861,917
7 Dividends
An interim dividend of 22.00 pence (1H 2020/21 20.00 pence) per
ordinary share has been proposed by the board which will be paid on
1(st) February 2022 to shareholders on the register at the close of
business on 3(rd) December 2021. The estimated amount to be paid is
GBP42 million (1H 2020/21 GBP39 million) and has not been
recognised in these accounts.
Six months ended
30.9.21 30.9.20
GBP million GBP million
2019/20 final ordinary dividend paid --
31.125
pence per share - 60
2020/21 final ordinary dividend paid --
50.00
pence per share 96 -
Total dividends 96 60
Property, plant and
8 equipment
Assets
in
Plant the course
Land Leasehold and of
and
buildings improvements machinery construction Total
GBP million GBP million GBP million GBP million GBP million
Cost
At 1(st) April 2021 667 31 2,310 377 3,385
Additions 1 - 9 172 182
Transferred to assets
classified
as held for sale
(note 12) (15) (2) (47) (1) (65)
Reclassification - 1 47 (48) -
Disposals (1) - (20) - (21)
Exchange adjustments 10 - 31 4 45
At 30(th) September
2021 662 30 2,330 504 3,526
Accumulated depreciation and
impairment
At 1(st) April 2021 321 17 1,606 17 1,961
Charge for the period 10 1 59 - 70
Impairment losses 9 - 25 182 216
Transferred to assets
classified
as held for sale
(note 12) (12) (2) (38) - (52)
Disposals (1) - (19) - (20)
Exchange adjustments 4 - 20 1 25
At 30(th) September
2021 331 16 1,653 200 2,200
Carrying amount at
30(th) September
2021 331 14 677 304 1,326
Carrying amount at
1(st) April
2021 346 14 704 360 1,424
Following a review of the business the group concluded the
potential future returns from the Battery Materials business did
not support the carrying value of the business (see note 4). The
carrying value of the assets of the Battery Materials business of
GBP216 million have consequently been fully impaired during the
period and included within major impairment charges.
9 Other intangible assets
Customer
Acquired
contracts Patents, research
and Computer trademarks and Development
relationships software and licences technology expenditure Total
GBP million GBP million GBP million GBP million GBP million GBP million
Cost
At 1(st) April 2021 133 367 65 42 226 833
Additions - 25 1 - 20 46
Exchange adjustments 2 1 - 1 2 6
At 30(th) September 2021 135 393 66 43 248 885
Accumulated amortisation and impairment
At 1(st) April 2021 108 144 46 41 135 474
Charge for the period 2 18 - 1 1 22
Impairments - 9 15 - 54 78
Exchange adjustments 3 - - 1 - 4
At 30(th) September 2021 113 171 61 43 190 578
Carrying amount at 30(th)
September
2021 22 222 5 - 58 307
Carrying amount at 1(st)
April
2021 25 223 19 1 91 359
Following a review of the business the group concluded the
potential future returns from the Battery Materials business did
not support the carrying value of the business (see note 4). The
carrying value of the assets of the Battery Materials business of
GBP78 million have consequently been fully impaired during the
period and included within major impairment charges.
10 Trade and other receivables
30.9.21 31.3.21
GBP million GBP million
Current
Trade receivables 1,394 1,571
Contract receivables 132 181
Prepayments 108 88
Value added tax and other sales tax receivable 69 119
Advance payments to customers 10 11
Amounts receivable under precious metal sale
and repurchase agreements(1) 162 308
Other receivables 41 144
Trade and other receivables 1,916 2,422
Non-current
Value added tax and other sales tax receivable 2 2
Prepayments - 3
Advance payments to customers 28 45
Other receivables 30 50
(1) The fair value of the precious metal contracted to be sold by
the group under sale and repurchase agreements is GBP139 million
(31(st) March 2021: GBP407 million).
11 Trade and other payables
30.9.21 31.3.21
GBP million GBP million
Current
Trade payables 716 996
Contract liabilities 292 184
Accruals 347 369
Amounts payable under precious metal sale and repurchase
agreements(1) 1,448 1,442
Other payables 247 334
Trade and other payables 3,050 3,325
Non-current
Other payables 5 5
Other payables 5 5
(1) The fair value of the precious metal contracted to be repurchased
by the group under sale and repurchase agreements is GBP1,228 million
(31(st) March 2021: GBP1,766 million).
Assets and liabilities classified as
12 held for sale
During the half year the group decided to sell its Advanced
Glass Technologies business. As at 30(th) September 2021, the
proceeds less costs to sell for the Advanced Glass Technologies
business are estimated to be greater than book value and so no
impairment is required. The business is classified as a disposal
group held for sale and presented separately on the balance
sheet.
The sale of the Advanced Glass Technologies business was agreed
on 23(rd) November 2021, with proceeds of GBP178 million.
The major classes of assets or liabilities comprising the
businesses classified as held for sale are:
Advanced
Glass
Technologies
At 30(th) September
2021 GBP million
Non-current assets
Property, plant and equipment 13
Right-of-use-assets 1
Goodwill 2
Current assets
Inventories 20
Trade and other receivables 16
Assets classified as held for
sale 52
Current liabilities
Trade and other payables (11)
Non-current liabilities
Lease liabilities (1)
Employee benefit obligations (1)
Liabilities classified as held
for sale (13)
Net assets of disposal group 39
13 Post-employment benefits
Background
The group operates a number of post-employment benefit plans
around the world, the forms and benefits of which vary with
conditions and practices in the countries concerned. The major
defined benefit plans are pension plans and post-retirement medical
plans in the UK and the US.
Financial assumptions
The financial assumptions for the major plans are as follows:
30.9.21 31.3.21
UK plan US plans UK plan US plans
% % % %
First year's rate of increase
in salaries 3.50 3.00 3.40 3.00
Ultimate rate of increase
in salaries 3.50 3.00 3.40 3.00
Rate of increase in pensions
in payment 3.15 - 3.05 -
Discount rate 2.00 2.70 2.10 3.00
Inflation - 2.20 - 2.20
- UK Retail Prices Index
(RPI) 3.30 - 3.20 -
- UK Consumer Prices Index
(CPI) 2.75 - 2.65 -
Current medical benefits
cost trend rate 5.40 2.20 5.40 2.20
Ultimate medical benefits
cost trend rate 5.40 2.20 5.40 2.20
The financial assumptions for the other plans are reviewed and updated
annually.
Financial
information
Movements in the net post-employment benefit assets and liabilities,
including reimbursement rights, were:
UK UK UK post- US post-
pension pension
- - retirement retirement
cash
legacy balance medical US medical
section section benefits pensions benefits Other Total
GBP GBP GBP GBP GBP GBP
million million GBP million million million million million
At 1(st) April
2021 186 (6) (8) (20) (25) (27) 100
Current service
cost
- in
operating
profit (4) (13) - (4) - (1) (22)
Administrative
expenses
- in
operating
profit (2) - - - - - (2)
Interest 3 (1) - - - (1) 1
Remeasurements 55 1 - 4 (1) - 59
Company
contributions 3 11 - 4 1 1 20
Benefits paid - - - - - - -
Exchange - - - (2) (1) 1 (2)
At 30(th)
September
2021 241 (8) (8) (18) (26) (27) 154
Post-employment benefits
13 (continued)
Financial
information
(continued)
The post-employment benefit assets and liabilities are included in
the balance sheet as follows:
30.9.21 30.9.21 31.3.21 31.3.21
Post- Post-
employment Employee employment Employee
benefit benefit
benefit net benefit net
net assets obligations net assets obligations
GBP million GBP million GBP million GBP million
UK pension - legacy section 241 - 186 -
UK pension - cash balance
section - (8) - (6)
UK post-retirement medical
benefits - (8) - (8)
US pensions - (18) - (20)
US post-retirement medical
benefits 6 (32) 6 (31)
Other 2 (29) 2 (29)
Total post-employment plans 249 (95) 194 (94)
Other long-term employee
benefits (5) (4)
Total long-term employee benefit
obligations (100) (98)
Other long-term employee benefits includes GBP1 million of liabilities
transferred to liabilities classified as held for sale (note 12).
14 Fair values
Fair value hierarchy
Fair values are measured using a hierarchy where the inputs
are:
-- Level 1 -- quoted prices in active markets for identical assets or liabilities.
-- Level 2 -- not level 1 but are observable for that asset or
liability either directly or indirectly.
-- Level 3 -- not based on observable market data (unobservable).
Fair value of financial instruments
Certain of the group's financial instruments are held at fair
value. The fair value of a financial instrument is the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
balance sheet date.
The fair value of forward foreign exchange contracts, interest
rate swaps, forward precious metal price contracts and currency
swaps is estimated by discounting the future contractual cash flows
using forward exchange rates, interest rates and prices at the
balance sheet date.
The fair value of trade and other receivables measured at fair
value is the face value of the receivable less the estimated costs
of converting the receivable into cash.
The fair value of money market funds is calculated by
multiplying the net asset value per share by the investment held at
the balance sheet date.
There were no transfers of any financial instrument between the
levels of the fair value hierarchy during the current or prior
periods.
14 Fair values (continued)
Fair value
30.9.21 31.3.21 hierarchy
GBP million GBP million level
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive
income 54 53 1
Interest rate swaps 17 20 2
Borrowings and related swaps (3) (3) 2
Current
Trade receivables(1) 260 423 2
Other receivables(2) 25 58 2
Cash and cash equivalents - money market funds 523 462 2
Interest rate swaps 3 - 2
Other financial assets(3) 61 44 2
Other financial liabilities(3) (28) (18) 2
Fair value
30.9.21 31.3.21 hierarchy
GBP million GBP million level
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps (1,051) (1,249) -
Lease liabilities (48) (51) -
Current
Amounts receivable under precious metal sale
and repurchase agreements 162 308 -
Amounts payable under precious metal sale and
repurchase agreements (1,448) (1,442) -
Cash and cash equivalents - cash and deposits 223 119 -
Cash and cash equivalents - bank overdrafts (42) (36) -
Borrowings and related swaps (309) (26) -
Lease liabilities (11) (11) -
Lease liabilities classified as held for sale (1) - -
(1) Trade receivables held in a part of the group with a business
model to hold trade receivables for collection or sale. The remainder
of the group operates a hold to collect business model and receives
the face value, plus relevant interest, of its trade receivables from
the counterparty without otherwise exchanging or disposing of such
instruments.
(2) Other receivables with cash flows that do not represent solely
the payment of principal and interest.
(3) Includes forward foreign exchange contracts, forward precious
metal price contracts and currency swaps.
14 Fair values (continued)
The fair value of financial instruments, excluding accrued interest,
is approximately equal to book value except for:
30.9.21 31.3.21
Carrying Fair Carrying Fair
amount value amount value
GBP million GBP million GBP million GBP million
US Dollar Bonds 2022, 2023, 2025, 2027,
2028 and 2030 (675) (692) (662) (689)
Euro Bonds 2023, 2025, 2028 and 2030 (187) (191) (186) (193)
Sterling Bonds 2024 and 2025 (110) (112) (110) (116)
KfW US dollar loan 2024 (37) (39) (36) (39)
The fair values are calculated using level 2 inputs by
discounting future cash flows to net present values using
appropriate market interest rates prevailing at the period end.
15 Precious metal leases
The group leases precious metals to fund temporary peaks in
metal requirements provided market conditions allow. These leases
are from banks for specified periods (less than 12 months) and the
group pays a fee which is expensed on a straight-line basis over
the lease term in finance costs. The group holds sufficient
precious metal inventories to meet all the obligations under these
lease arrangements as they fall due. At 30(th) September 2021,
precious metal leases were GBP223 million at closing prices (31(st)
March 2021: GBP437 million). Precious metal leases are not
accounted for under IFRS 16 as they qualify as short term
leases.
16 Contingent liabilities
The group is involved in various disputes and claims which arise
from time to time in the course of its business including, for
example, in relation to commercial matters, product quality or
liability, employee matters and tax audits. The group is also
involved from time to time in the course of its business in legal
proceedings and actions, engagement with regulatory authorities and
in dispute resolution processes. These are reviewed on a regular
basis and, where possible, an estimate is made of the potential
financial impact on the group. In appropriate cases a provision is
recognised based on advice, best estimates and management
judgement. Where it is too early to determine the likely outcome of
these matters, no provision is made. Whilst the group cannot
predict the outcome of any current or future such matters with any
certainty, it currently believes the likelihood of any material
liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its consolidated income,
financial position or cash flows.
On a specific matter, the group previously disclosed that it had
been informed by two customers of failures in certain engine
systems for which the group supplied a particular coated substrate
as a component for their customers' emissions after-treatment
systems. The particular coated substrate was sold to only these two
customers. The group has not been contacted by any regulatory
authority about these engine system failures. The reported failures
have not been demonstrated to be due to the coated substrate
supplied by the group. As previously disclosed, we settled with one
of these customers on mutually acceptable terms with no admission
of fault.
Having reviewed its contractual obligations and the information
currently available to it, the group believes it has defensible
warranty positions in respect of its supplies of coated substrate
for the after-treatment systems in the affected engines remaining
at issue. If required, it will vigorously assert its available
contractual protections and defences. The outcome of any
discussions relating to the matters raised is not certain, nor is
the group able to make a reliable estimate of the possible
financial impact at this stage, if any. The group works with all
its customers to ensure appropriate product quality and we have not
received claims in respect of our emissions after-treatment
components from this or any other customer. Our vision is for a
world that's cleaner and healthier; today and for future
generations. We are committed to enabling improving air quality and
we work constructively with our customers to achieve this.
16 Contingent liabilities (continued)
On a separate matter, the group is involved in investigating
environmental contamination at a site for which it has been
identified as a potentially responsible party under US law. Johnson
Matthey Inc. is party to litigation brought by the Pennsylvania
Department of Environmental Protection (PaDEP) regarding
contamination at a site in Chester County, Pennsylvania, that was
operated by Johnson Matthey Inc. between 1951 and 1969, when it
sold its interest in the site. A site investigation has been
completed, but remediation has not yet commenced. On 24(th)
September 2021, PaDEP announced a proposed remedy for the site; it
is now accepting public comments. Johnson Matthey has asserted
various legal defences, but the litigation is currently stayed and
these have not yet been addressed. Whether and to what extent
Johnson Matthey and other potentially responsible parties (given
subsequent use of the site by third-party entities) have any
liability for the remediation has not yet been determined. It is
the directors' current view that the group cannot reliably assess
the outcome of the litigation nor reasonably estimate the quantum
of future remediation costs or the group's share of such costs and
as such no provision for the remediation has been recognised in
these consolidated accounts.
17 Transactions with related parties
There have been no material changes in related party
relationships in the six months ended 30(th) September 2021 and no
related party transactions have taken place which have materially
affected the financial position or performance of the group during
that period.
18 Events after the balance sheet date
On 11(th) November 2021, the group's board announced its
decision to pursue the sale of all or parts of the Battery
Materials business with the ultimate intention of exiting. An
impairment charge of GBP314 million was recognised against the
carrying amount of the assets (see note 4). Capital expenditure
incurred since 1(st) October 2021 has been reduced and future
commitments paused. Depending on the outcome of the sale the group
may incur further impairment charges and/or closure costs. There
are also GBP155 million of term loans associated with our Battery
Materials investment in Poland which are likely to be prepaid.
On 18(th) November 2021, the group's board approved a share
buyback of around GBP200 million which will commence in 2022.
19 Non-GAAP measures
The group uses various measures to manage its business which are
not defined by generally accepted accounting principles (GAAP). The
group's management believes these measures provide valuable
additional information to users of the accounts in understanding
the group's performance. Certain of these measures are financial
Key Performance Indicators which measure progress against our
strategy.
Definitions
Measure Definition Purpose
Sales(1) Revenue excluding sales Provides a better measure of
of precious metals to customers the growth of the group as revenue
and the precious metal can be heavily distorted by year
content of products sold on year fluctuations in the market
to customers. prices of precious metals and,
in many cases, the value of precious
metals is passed directly on
to customers.
Underlying Operating profit excluding Provides a measure of operating
operating profit(2) non-underlying items. profitability that is comparable
over time.
Underlying Underlying operating profit Provides a measure of how we
operating profit divided by sales. convert our sales into underlying
margin(1,2) operating profit and the efficiency
of our business.
Underlying Profit before tax excluding Provides a measure of profitability
profit before non-underlying items. that is comparable over time.
tax(2)
Underlying Profit for the year excluding Provides a measure of profitability
profit for non-underlying items and that is comparable over time.
the year(2) related tax effects.
Underlying Underlying profit for the Our principal measure used to
earnings per year divided by the weighted assess the overall profitability
share(1,2) average number of shares of the group.
in issue.
Return on Invested Annualised underlying operating Provides a measure of the group's
Capital (ROIC)(1) profit divided by the 12 efficiency in allocating the
month average equity, excluding capital under its control to
post tax pension net assets, profitable investments. The group
plus average net debt for has a long-term target of a return
the same period. on invested capital of 20% to
ensure focus on efficient use
of the group's capital.
Average working Monthly average of non-precious Provides a measure of efficiency
capital days metal related inventories, in the business with lower days
(excluding trade and other receivables driving higher returns and a
precious metals)(1) and trade and other payables healthier liquidity position
(including any classified for the group.
as held for sale) divided
by sales for the last three
months multiplied by 90
days.
Free cash flow Net cash flow from operating Provides a measure of the cash
activities after net interest the group generates through its
paid, net purchases of operations, less capital expenditure.
non-current assets and
investments, dividends
received from joint ventures
and associates and the
principal element of lease
payments.
Net debt (including Net debt, including post Provides a measure of the group's
post tax pension tax pension deficits and ability to repay its debt. The
deficits) to quoted bonds purchased group has a long-term target
underlying to fund the UK pension of net debt (including post tax
EBITDA (excluded when the UK pension pension deficits) to underlying
plan is in surplus) divided EBITDA of between 1.5 and 2.0
by underlying EBITDA for times, although in any given
the same period. year it may fall outside this
range depending on future plans.
(1) Key Performance Indicator
(2) Underlying profit measures are before profit or loss on
disposal of businesses, gain or loss on significant legal
proceedings, together with associated legal costs, amortisation of
acquired intangibles, major impairment and restructuring charges
and, where relevant, related tax effects. These items have been
excluded by management as they are not deemed to be relevant to an
understanding of the underlying performance of the business.
19 Non-GAAP measures
(continued)
Reconciliations to GAAP measures
Sales
See note 2.
Underlying profit measures
Profit Profit
Operating / (loss) Tax / (loss)
before for the
profit tax expense period
Six months ended 30(th) September
2021 GBP million GBP million GBP million GBP million
Underlying 293 264 (42) 222
Gain on significant legal proceedings 44 44 (4) 40
Amortisation of acquired intangibles (3) (3) - (3)
Major impairment(1) (314) (314) 27 (287)
Reported 20 (9) (19) (28)
(1) For further detail please see note 4.
Profit
Operating Profit Tax for
before
profit tax expense the period
Six months ended 30(th) September
2020 GBP million GBP million GBP million GBP million
Underlying 151 109 (17) 92
Amortisation of acquired intangibles (5) (5) 1 (4)
Major impairment and restructuring
charges (78) (78) 14 (64)
Reported 68 26 (2) 24
Underlying earnings per share Six months ended
30.9.21 30.9.20
Underlying profit for the period (GBP
million) 222 92
Weighted average number of shares in
issue
(million) 192.8 192.7
Underlying earnings per share (pence) 114.8 47.7
19 Non-GAAP measures
(continued)
Return on Invested Capital (ROIC)
Period Year Period
ended ended ended
30.9.21 31.3.21 30.9.20
GBP million GBP million GBP million
Annualised underlying operating profit 646 504 425
Average net debt 1,071 1,294 1,504
Average equity 2,753 2,771 2,774
Average capital employed 3,824 4,065 4,278
Less: Average pension net assets (206) (261) (258)
Less: Average related deferred
taxation 37 47 44
Average capital employed (excluding post
tax pension
net assets) 3,655 3,851 4,064
ROIC (excluding post tax pension net
assets) 17.7% 13.1% 10.4%
ROIC 16.9% 12.4% 9.9%
Average working capital days
(excluding precious
metals) Six months Year Six months
ended ended ended
30.9.21 31.3.21 30.9.20
GBP million GBP million GBP million
Inventories 2,004 1,814 2,074
Trade and other receivables 1,916 2,422 2,415
Trade and other payables (3,050) (3,325) (3,575)
870 911 914
Working capital balances classified as
held
for sale 25 - 6
Total working capital 895 911 920
Less: Precious metal working capital (356) (552) (313)
Working capital (excluding precious
metals) 539 359 607
Average working capital days
(excluding precious
metals) 40 57 70
Free cash flow
Six months ended
30.9.21 30.9.20
GBP million GBP million
Net cash inflow from operating
activities 412 482
Interest received 6 33
Interest paid (40) (77)
Purchases of property, plant and
equipment (141) (139)
Purchases of intangible assets (43) (36)
Proceeds from sale of non-current
assets 2 -
Principal element of lease payments (7) (7)
Free cash flow 189 256
19 Non-GAAP measures
(continued)
Net debt (including post-tax pension
deficits)
to underlying EBITDA
30.9.21 31.3.21 30.9.20
GBP million GBP million GBP million
Cash and deposits 223 119 197
Money market funds 523 462 573
Bank overdrafts (42) (36) (32)
Cash and deposits transferred to
assets classified
as held for sale - - 14
Cash and cash equivalents 704 545 752
Borrowings and related swaps - current (309) (26) (371)
Interest rate swaps - current 3 - -
Borrowings and related swaps -
non-current (1,054) (1,252) (1,220)
Interest rate swaps - non-current 17 20 31
Lease liabilities - current (11) (11) (11)
Lease liabilities - non-current (48) (51) (58)
Lease liabilities - transferred to
liabilities
classified as held for sale (1) - (1)
Net debt (699) (775) (878)
Increase in cash and cash equivalents 156 276 480
Less: Increase in borrowings (63) (70) (284)
Less: Principal element of lease
payments 7 14 7
Decrease in net debt resulting from
cash flows 100 220 203
New leases, remeasurements and
modifications (4) (3) (1)
Disposal of businesses - 1 -
Exchange differences on net debt (20) 107 19
Other non-cash movements - (6) (5)
Movement in net debt 76 319 216
Net debt at beginning of year (775) (1,094) (1,094)
Net debt at end of year (699) (775) (878)
Net debt (699) (775) (878)
Add: Pension deficits (47) (49) (58)
Add: Related deferred tax 8 9 11
Net debt (including post tax pension
deficits) (738) (815) (925)
Underlying EBITDA for this period 389 235
Underlying EBITDA for prior year 684 705
Less: Underlying EBITDA for prior half
year (235) (350)
Annualised underlying EBITDA 838 684 590
Net debt (including post tax pension
deficits)
to underlying EBITDA 0.9 1.2 1.6
19 Non-GAAP measures
(continued)
30.9.21 31.3.21 30.9.20
GBP million GBP million GBP million
Underlying EBITDA 389 684 235
Depreciation and amortisation (99) (190) (89)
Gain on significant legal proceedings 44 - -
Major impairment and restructuring
charges (314) (171) (78)
Finance costs (38) (158) (77)
Finance income 9 73 36
Share of losses of joint ventures and
associates - - (1)
Income tax expense (19) (33) (2)
(Loss) / profit for the period (28) 205 24
At 30(th) September 2021 cash and cash equivalents includes GBP54 million
(31(st) March 2021: GBPnil) of restricted amounts relating to cash held
in South Africa. The cash has been restricted as a result of a change
in company residency status. The group anticipates extracting and/or
utilising this in the near term and is reviewing options.
2021
2(nd) December
Ex dividend date
3(rd) December
Interim dividend record date
2022
1(st) February
Payment of interim dividend
26(th) May
Announcement of results for the year ending 31(st) March 2022
21(st) July
131(st) Annual General Meeting (AGM)
Cautionary Statement
This announcement contains forward looking statements that are subject
to risk factors associated with, amongst other things, the economic
and business circumstances occurring from time to time in the countries
and sectors in which the group operates. It is believed that the
expectations reflected in this announcement are reasonable but they
may be affected by a wide range of variables which could cause
actual results to differ materially from those currently anticipated.
Johnson Matthey Plc
Registered Office: 5th Floor, 25 Farringdon Street, London EC4A 4AB
Telephone: +44 (0) 20 7269 8400
Fax: +44 (0) 20 7269 8433
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England -- Number 33774
LEI code: 2138001AVBSD1HSC6Z10
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: 0371 384 2344 (in the UK) *
+44 (0) 121 415 7047 (outside the UK)
Internet address: www.shareview.co.uk
* Lines are open 8.30am to 5.30pm Monday to Friday excluding public
holidays in England and Wales.
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END
IR ZZMZMGFFGMZZ
(END) Dow Jones Newswires
November 24, 2021 02:00 ET (07:00 GMT)
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