Johnson Matthey Regulatory News (JMAT)

Catalysing the net zero transition to drive sustainable value creation

Continued execution against a challenging economic backdrop

·

Good growth in underlying profit at constant FX and adjusting for precious metal prices

·

Overall results impacted by lower precious metal market prices as guided

·

Transformation progressing at pace to create a more streamlined organisation and stronger platform for growth

·

On track to deliver in excess of £150 million annualised savings by end of 2024/25, with associated restructuring charges of £17 million in the period

·

Underlying margin up in Clean Air and Catalyst Technologies - plans for further increase

·

Three year cumulative capex guidance to 2024/25 reduced by c.10% to c.£1.0bn

·

Delivering on strategic milestones, including winning key 'first of a kind' projects in sustainable fuels and low carbon hydrogen

Reported results

Underlying results (continuing)¹

Half year ended30th September

%change

Half year ended30th September

%change

% change, constant FX rates

2023

2022

2023

2022

Revenue

£m

6,531

7,328

-11

Sales excludingprecious metals³

£m

1,967

2,045

-4

-1

Operating profit

£m

136

211

-36

180

222

-19

-15

Profit before tax

(continuing)

£m

82

188

-56

139

201

-31

Profit after tax (continuing)

£m

63

150

-58

108

161

-33

Basic earnings per share (continuing)

pence

34.7

82.0

-58

59.1

88.2

-33

Interim dividend per share

pence

22.0

22.0

-

Underlying performance - continuing operations¹,²

·

Sales of £2.0 billion, down 1%, with lower average precious metal prices affecting PGM Services, partly offset by strong growth in Hydrogen Technologies and further progress in Catalyst Technologies

·

Underlying operating profit of £180 million, down 15%, primarily due to lower average precious metal prices

·

Underlying operating profit - adjusting for c.£55 million impact from precious metal prices - was up 10% driven by higher pricing and transformation benefits

·

Underlying earnings per share of 59.1p, down 33% due to lower underlying operating profit and higher net finance charges of £41 million

·

Strong balance sheet with net debt of £1,044 million; net debt to EBITDA of 1.7 times in line with our target range of 1.5 to 2.0 times

Reported results²

·

Revenue down 11%, driven by lower average precious metal prices

·

Operating profit of £136 million, down 36%, due to lower average precious metal prices and £42 million impairment and restructuring charges

·

Profit before tax of £82 million, compared to £188 million in the prior period, largely reflecting lower operating profit and higher net finance charges

·

Reported earnings per share (continuing) of 34.7 pence

·

Cash inflow from operating activities of £236 million (1H 2022/23: £145 million)

·

Interim dividend of 22.0 pence per share maintained at the same level as the prior year

Operational and strategic highlights

·

Clean Air underlying profitability improved: taking actions to drive further margin increase

·

Won nine large scale projects in Catalyst Technologies across low carbon hydrogen and sustainable fuels, worth c.£185 million in sales over five years

·

Delivered significant margin uplift in Catalyst Technologies, with first half margins up 480 basis points, and on track to achieve margin targets

·

Hydrogen Technologies sales up 61%

·

Achieved c.£70 million transformation cost savings to date, and on track to deliver in excess of £150 million annualised savings by the end of 2024/25

·

Committed to achieving net zero by 2040. Targeting 42% reduction in Scope 1

and Scope 2 greenhouse gas emissions, and 42% reduction in Scope 3 greenhouse gas emissions from purchased goods and services by 2030

Liam Condon, Chief Executive Officer, commented:

We are starting to see the benefits of the new strategy and transformation of Johnson Matthey. Against a backdrop of lower precious metal prices which affected headline profitability, we delivered good growth in underlying performance? despite a challenging macroeconomic environment.

We are executing on our transformation at pace to simplify the business and drive improved performance. In Clean Air and Catalyst Technologies, underlying profitability is improving and there are clear plans in place to deliver further margin improvement. Across the group, we continue to upskill our commercial capabilities and our transformation programme is creating a more streamlined organisation and unlocking significant cost savings.

We have continued to make good progress in delivering against our strategic milestones whilst also driving transformation. In particular, we have secured important 'first of a kind' project wins in Catalyst Technologies which position us as a global leader in sustainable solutions. This is confirmation of the significant value we see in Catalyst Technologies as we help our customers to decarbonise. In Hydrogen Technologies we continue to see strong sales growth in the near term. The global hydrogen value chain is in an early stage of development and continues to evolve. We have a very disciplined and modular approach to investment that will ensure sustainable returns despite market volatility, and we expect a significant opportunity for value creation in the medium and long-term.

Looking forward, we are on track to deliver good growth in underlying performance and I am excited about the opportunities that lie ahead. I am confident we will achieve our 2023/24 milestones and deliver on our strategy, creating sustainable shareholder value and benefits for all our stakeholders.

Outlook for the year ending 31st March 2024

For 2023/24, the outlook for underlying performance has improved and we now expect at least high single digit growth in operating performance at constant precious metal prices and constant currency (previously at least mid single digit). This is underpinned by transformation benefits of c.£55 million in the year.

In Clean Air, we continue to expect strong growth in operating performance and a sequentially stronger second half. Whilst external data suggest limited growth in vehicle production for 2023/24, margin expansion should mainly be driven by efficiency benefits and we expect a double digit operating margin for the full year, with further progress beyond. PGM Services' performance will be largely driven by precious metal prices, with recycling volumes remaining subdued. For Catalyst Technologies, we expect very strong growth in operating performance and a significant uplift in margins, benefiting from pricing and efficiencies. We expect sales to grow strongly in Hydrogen Technologies and we will continue to invest for growth in a very disciplined manner, resulting in an operating loss at a similar level to 2022/23.?

Whilst precious metal prices have stabilised recently, it remains difficult to predict how they may develop. To illustrate the impact they may have on our results, assuming prices remain at their current level? for the remainder of 2023/24 there would be an adverse impact ofc.£80 million? on full year operating performance compared with the prior year (1H 2023/24: c.£55m adverse impact). We remain focused on mitigating the potential impact on our performance.

At current foreign exchange rates?, translational foreign exchange movements for the year ending 31st March 2024 are expected to adversely impact underlying operating profit byc.£15 million (1H 2023/24: £9m adverse impact).

Dividend

The board has approved an interim dividend of 22.0 pence per share, maintained at the same level as the prior year (1H 2022/23: 22.0 pence per share). The interim dividend will be paid on 6th February 2024, with an ex-dividend date of 30th November 2023, to shareholders on the register on 1st December 2023.

Group Leadership Team changes

We have made changes to our Group Leadership Team as we reshape our business to drive improved profitability and position ourselves for long-term growth.

Maurits van Tol, previously Chief Technology Officer, has been appointed Chief Executive, Catalyst Technologies. Maurits succeeds Jane Toogood who successfully positioned Catalyst Technologies as a global leader in sustainable technologies. Jane has decided it is the right time for a new leader to take the business through the next phase of acceleration and has left the group. Liz Rowsell, previously Corporate R&D Director, succeeds Maurits as Chief Technology Officer. 

We have combined Strategy with Corporate Development given their strong interdependency. Louise Melikian, previously Head of Corporate Development, is now Chief Strategy and Corporate Development Officer and joins the Group Leadership Team. Christian Gunther, previously Chief Strategy and Transformation Officer, who has served Johnson Matthey very well, has also left the group.

All changes were effective from 1st October 2023.

Enquiries: 

Investor Relations

Martin Dunwoodie

Louise Curran

Carla Fabiano

Director of Investor Relations

Senior Investor Relations Manager

Senior Investor Relations Manager

+44 20 7269 8241

+44 20 7269 8235

+44 20 7269 8004

Media

Barney Wyld

Harry Cameron 

Group Corporate Affairs Director

Teneo

+44 20 7269 8001

+44 7799 152148

Notes:

1. 

Underlying performance is before profit or loss on disposal of businesses, gain or loss on significant legal proceedings together with associated legal costs, amortisation of acquired intangibles, share of profits or losses from non-strategic equity investments, major impairment and restructuring charges and, where relevant, related tax effects. For definitions and reconciliations of other non-GAAP measures, see pages 49 to 54.

2. 

Unless otherwise stated, sales and operating profit commentary refers to performance at constant exchange rates. Growth at constant rates excludes the translation impact of foreign exchange movements, with1H 2022/23 results converted at 1H 2023/24 average rates. In 1H 2023/24, the translational impact of exchange rates on group sales and underlying operating profit was an impact of £52 million and £9 million respectively.

3. 

Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers.

4. 

At constant FX and adjusting for c.£55 million impact from precious metal prices.

5. 

Outlook commentary for Clean Air, PGM Services, Catalyst Technologies and Hydrogen Technologies assumes

constant precious metal prices and constant currency.

6. 

Based on average precious metal prices in November 2023 (month to date).

7. 

A US$100 per troy ounce change in the average annual platinum, palladium and rhodium metal prices each have an impact of approximately £1 million, £1.5 million and £0.75 million respectively on full year underlying

operating profit in PGM Services. This assumes no foreign exchange movement.

8. 

At average foreign exchange rates for November 2023 month to date (£:US$ 1.227, £:? 1.145, £:RMB 8.937) translational foreign exchange movements for the year ending 31st March 2024 are expected to adversely impact underlying operating profit by c.£15 million.

Our strategy is purpose-driven to catalyse the net zero transition for our customers. We are focused on technologies and markets where we have leading positions and competitive advantage. At the same time, to support our strategy and maximise value creation we are undergoing a significant transformation to strengthen our capabilities, simplify our operating model and drive improved performance.

In the first half we saw good underlying performance¹, excluding the impact of metal and currency, despite the challenging market backdrop. We have taken actions to transform our business and I am pleased that we are starting to see the benefits. In Clean Air and Catalyst Technologies underlying margins have improved, but there is a lot more to come and we are committed to delivering further material improvements in both businesses. Our reported performance in the half was significantly impacted by lower precious metal prices, mainly in PGM Services. We are working hard to mitigate this going forward, including changes to our business model, although this will take time. In Hydrogen Technologies sales grew strongly. Whilst the global hydrogen value chain is in an early stage of development and continues to evolve, we see good opportunities. We have a very disciplined and modular approach to investment that will ensure sustainable returns despite market volatility, and we expect a significant opportunity for value creation in the medium and long-term. The underlying performance provides evidence that our strategy is delivering, and gives confidence in our ability to capture the growth opportunities ahead of us, drive efficiencies and translate all of that into value creation for our shareholders.

We have made progress with our transformation programme and are on track to deliver in excess of £150 million annualised cost savings by the end of 2024/25. The changes we are making will create a more efficient and streamlined organisation, meaning we are better positioned to deliver on our strategy and capture the growth opportunities ahead.

To date we have delivered benefits of c.£70 million, with c.£25 million achieved in the half against a target of c.£55 million for the full year. Examples of actions we are taking include the consolidation of our Clean Air manufacturing footprint and we are also implementing a Global Business Services (GBS) operating model across HR, finance and procurement. This GBS model will eliminate duplication, deliver standardisation, simplify processes, sharpen accountabilities and reduce costs. We are also driving greater value from procurement and rationalising our real estate globally.

We continue to focus and simplify our portfolio and have made good progress on our disposal programme. Within Value Businesses we aim to have divestments agreed by the end of our fiscal year.

Strategic milestones overview

We are making good progress against the strategic milestones we set out in May 2022. Our growth businesses - Catalyst Technologies and Hydrogen Technologies - continue to develop, positioning us as a global leader in sustainable solutions.

Customers:

·

2 strategic partnerships in Hydrogen Technologies - Plug Power and Hystar

·

Winning targeted Euro 7 business, on track to deliver £4 billion+ cash² for Clean Air

·

Won 9 additional large scale projects in Catalyst Technologies³ (targeting >10 across Catalyst Technologies and Hydrogen Technologies by end of 2023/24)

Investments:

·

PGM Services refining capability expansion in China complete and ramping up

·

Construction of Hydrogen Technologies CCM plant in the UK to expand total capacity from 2GW to 5GW is on track

·

Targeted capacity expansion (e.g. fuel cells catalyst, formaldehyde catalyst) in progress

·

Divesting non-core assets - Piezo Products (part of Medical Device Components) and Diagnostic Services sold

People: targeting an increase in engagement score from 6.9 in 2022/23 to 7.2 in 2024/25

Sustainability:

·

Reduced Scope 1+2 CO2e (carbon dioxide equivalent) emissions by 13% in 2022/23, ahead of targeted c.10% reduction by 2023/24 (from a 2019/20 baseline)

·

Helping customers reduce CO2e emissions through use of our products by >1mt p.a. by 2023/24

Notes:

1.

At constant FX and adjusting for c.£55 million impact from precious metal prices.

2.

At least £4 billion of cash under our range of scenarios from 1st April 2021 to 31st March 2031. Cash targetpre-tax and post restructuring costs.

3.

From 1st April 2022 to date.

Summary of underlying operating results from continuing operations

Unless otherwise stated, commentary refers to performance at constant FX rates¹. Percentage changes in the tables are calculated on rounded numbers.

Sales

(£ million)

Half year ended30th September

% change

% change,constant FX rates

2023

2022

Clean Air

1,286

1,278

+1

+4

PGM Services

230

282

-18

-16

Catalyst Technologies

282

275

+3

+5

Hydrogen Technologies

37

23

+61

+61

Value Businesses²,³

190

235

-19

-21

Eliminations

(58)

(48)

Sales (continuing)

1,967

2,045

-4

-1

Underlying operating profit(£ million)

Half year ended30th September

% change

% change, constant FX rates

2023

2022

Clean Air

124

108

+15

+22

PGM Services

78

125

-38

-37

Catalyst Technologies

35

21

+67

+84

Hydrogen Technologies

(26)

(24)

n/a

n/a

Value Businesses²,?

14

21

-33

-33

Corporate

(45)

(29)

Underlying operating profit (continuing)

180

222

-19

-15

Reconciliation of underlying operating profitto operating profit(£ million)

Half year ended30th September

2023

2022

Underlying operating profit (continuing)

180

222

Major impairment and restructuring charges?

(42)

(9)

Amortisation of acquired intangibles

(2)

(2)

Operating profit (continuing)

136

211

Notes:

1.

Growth at constant rates excludes the translation impact of foreign exchange movements, with 1H 2022/23 results converted at 1H 2023/24 average rates. In 1H 2023/24, the translational impact of exchange rates on group sales and underlying operating profit was an impact of £52 million and £9 million respectively.

2.

Includes Battery Systems, Medical Device Components, Battery Materials, Diagnostic Services and Advanced Glass Technologies.

3.

Sales relating to divestments of Advanced Glass Technologies and Diagnostic Services: (1H 2022/23:£41 million, 1H 2023/24: £37 million)

4.

Operating profit related to divestments of Advanced Glass Technologies and Diagnostic Services: (1H 2022/23:£2 million, 1H 2023/24: £3 million).

5.

For further detail on these items please see pages 18 and 19.

Improved profitability driven by pricing and efficiency benefits

·

Sales up 4% supported by increased pricing and slightly higher volumes in light duty diesel and heavy duty diesel

·

Underlying operating profit increased 22% and margins expanded 110 basis points to 9.6%. We benefited from increased pricing and volumes as well as cost savings from our transformation programme. This was partly offset by a weaker mix

Half year ended30th September

% change

% change, constant FX rates

2023

2022

£ million

£ million

Sales

Light duty diesel

532

515

+3

+7

Light duty gasoline

280

299

-6

-1

Heavy duty diesel

474

464

+2

+5

Total sales

1,286

1,278

+1

+4

Underlying operating profit

124

108

+15

+22

Underlying operating profit margin

9.6%

8.5%

EBITDA margin

12.5%

11.3%

Reported operating profit

104

109

Clean Air provides catalysts for emission control after-treatment systems used in light and heavy duty vehicles powered by internal combustion engines.

Performance commentary

The light duty vehicle market saw an improvement in global production during the first half, supported by the easing of supply chain disruptions. The normalisation of the Chinese market following COVID related lockdowns in the prior year led to a recovery in heavy duty vehicle production. Fleet replacements in Europe and the Americas translated to increased demand in this market.

Sales

Light duty diesel

Light duty diesel sales were up 7%, outperforming a declining market. This was driven by strong performance in Asia and the Americas. In Asia, we strongly outperformed a growing market which is recovering from COVID related lockdowns in China in the prior year. Our growth was driven by the ramp up of new platforms in China and India. In the Americas we significantly outperformed a declining market which was impacted by faltering domestic demand due to the uncertain economic outlook. Our outperformance in the region was mainly driven by higher revenue per unit from a new platform. In Europe, which represents around 60% of our total light duty diesel sales, sales were broadly flat, in line with the overall market.

Light duty gasoline

Light duty gasoline sales were down 1%, underperforming the global market. In Europe, sales grew in line with a strong underlying market supported by the easing of supply chain disruptions. In the Americas, sales grew slightly behind a growing market due to the end of some platform programmes. Our sales in Asia underperformed a growing market. We saw good growth in China driven by improved mix but this was more than offset by previous platform losses elsewhere in the region.

Heavy duty diesel catalysts

In heavy duty diesel sales were up 5%, underperforming a robust market. We saw very strong performance in Asia partially offset by a decline in Europe. In Asia our sales significantly outperformed a strong market due to increased demand from our customers in China and higher revenue per unit in India as a result of product mix. We underperformed a growing market in Europe due to a weaker mix. In the Americas, our sales were in line with a slightly declining market. The high value Class 8 truck production was higher than anticipated but the worsening macroeconomic outlook in South America impacted production in the region. In the future, our strong presence in heavy duty positions us favourably to capitalise on upcoming advancements, such as internal combustion engines powered by hydrogen.

Underlying operating profit

Underlying operating profit increased 22% to £124 million and margins increased 110 basis points to 9.6%. We benefited from increased pricing and volumes as well as cost savings from our transformation programme. This was partly offset by a weaker product mix.

Business update

In Clean Air, we are focusing on margin improvement and delivery of our cash generation target of at least £4 billion in the decade to 2030/31. This is underpinned by business wins, rigorous cost management and tightening emission control legislation globally.

We continue to develop world leading catalysts to support our customers as more demanding emission regulations come into force across the world. In Europe, the legislative process for Euro 7 emission standards is ongoing. Earlier this month the EU Parliament formalised its position during a plenary vote. While less stringent than the EU Commission's proposal, it seeks to retain some key elements of the initial proposal, especially for light duty vehicle exhaust emissions. It also voted in favour of later introduction timings, meaning we can estimate Euro 7 standards to commence from 2027/28 for light duty and 2028 to 2030 for heavy duty vehicles. We expect final rules to be agreed ahead of EU elections in June next year. Beyond Europe we still expect the regulation roadmap to develop globally with the US already setting tighter standards from 2027 onwards whilst China and India are expected to bring proposals in 2024/25.

We are also strengthening our commercial capabilities, improving pricing whilst winning new business. We continue to win our targeted business across gasoline and diesel platforms.

As we drive efficiencies, we are reducing fixed costs and streamlining SG&A expenses and production overheads. We are also making good progress with the optimisation of our manufacturing footprint and have already completed 3 of the 4 announced site closures targeted by the end of 2023/24.

We remain on track to deliver on our cash generation target of at least £4 billion in the decade to 2030/31, having already delivered £1.4 billion in the first two years of this guidance. We expect strong cashflow generation this year, albeit more moderate compared to the prior year. Alongside this, we are identifying efficiencies that will deliver further margin improvement and we expect to achieve a double digit operating margin for the full year with further progress beyond.

Performance reflects lower average PGM prices and reduced refinery volumes

·

Sales declined 16%, reflecting lower average PGM prices and decreased refinery volumes due to continued lower levels of auto scrap

·

Underlying operating profit was down due to lower average PGM prices. Our actions to improve efficiency have offset lower refinery volumes

Half year ended30th September

% change

% change, constant FX rates

2023

2022

£ million

£ million

Sales

PGM Services

230

282

-18

-16

Underlying operating profit

78

125

-38

-37

Underlying operating profit margin

33.9%

44.3%

EBITDA margin

40.0%

48.9%

Reported operating profit

77

125

PGM Services is the world's largest recycler of platinum group metals (PGMs). This business has an important role in enabling the energy transition through providing circular solutions as demand for scarce critical materials increases. PGM Services provides a strategic service to the group, supporting Clean Air, Catalyst Technologies and Hydrogen Technologies with security of metal supply in a volatile market, and manufactures value added PGM products

Performance commentary

Sales

In PGM Services, sales declined 16% primarily driven by lower average PGM prices, and in particular palladium and rhodium, which declined 35% and 64% respectively compared to the prior period. PGM prices were impacted in the period by lower auto demand and the liquidation of excess rhodium positions. The average price of rhodium over the last three years to November 2023 has been $14,400 per troy ounce, peaking at $28,700 in early 2021. Since then, rhodium prices have declined and stabilised in recent months at around $4,300.

In our refineries, intake volumes continue to be down due to lower auto scrap resulting from a strong used car market. We expect this trend to continue through our second half. We have completed the expansion of our China refinery which is now fully commissioned and taking in feeds. Our metal trading business performed well supported by a volatile precious metal price environment, particularly in China.

Across our PGM products businesses, sales were broadly flat.

Underlying operating profit

Underlying operating profit declined 37% mainly impacted by lower average PGM prices(c.£55 million impact). We have offset the impact of lower auto scrap volumes with cost saving actions.

Business update

In PGM Services we understand the full life cycle of the PGMs in our products and continue to work with our partners to enable greater recycling and refining at the end of their life. Ensuring a full service offering to customers, from metal supply to recycling, allows us to capture value from the entire life cycle of PGMs and is key in enabling our customers to use PGMs effectively in the energy transition.

For example, to support our Hydrogen Technologies customers, we are applying ourlong-standing recycling expertise to emerging technologies, including fuel cells and electrolysers to enable circularity in the hydrogen economy. Our new technology for the recycling of hydrogen fuel cell and electrolyser materials has proven at pilot scale that we can recycle two critical components: the platinum group metals in the catalyst layers and the membrane ionomer. This is a key step on our path to provide a circular service to our Hydrogen Technologies customers and support the growth of this sector.

To strengthen our position as the world's leading recycler of PGMs, we are investing in the resilience, efficiency and long-term sustainability of our assets. Our China refinery is now fully operational, strengthening our capability and offering in the region. In addition, we are expanding our fuel cells catalyst capacity within PGM Services to support the growth of our Hydrogen Technologies business.

Sales growth and driving material margin improvement

·

Sales up 5% with growth in both Catalysts and Licensing

·

In Catalysts, sales were mainly driven by higher average prices as we strengthened our commercial focus, partly offset by lower catalyst refill volumes

·

Won nine large scale projects from April 2022 to date across low carbon hydrogen and sustainable fuels, of which four were won since May 2023

·

Underlying operating profit and margin improved materially, largely driven by actions taken to improve performance including higher pricing and efficiencies

Half year ended30th September

% change

% change, constant FX rates

2023

2022

£ million

£ million

Sales

Catalysts

254

249

+2

+5

Licensing

28

26

+8

+6

Catalyst Technologies

282

275

+3

+5

Underlying operating profit

35

21

+67

+84

Underlying operating profit margin

12.4%

7.6%

EBITDA margin

16.7%

12.4%

Reported operating profit

32

17

Catalyst Technologies is a key pillar of our strategy as we target high growth, high return opportunities in the decarbonisation of fuels and chemical value chains. We have leading positions in syngas: methanol, ammonia, hydrogen and formaldehyde. Our revenue streams are licensing process technology and supplying catalysts.

Performance commentary

Sales

Overall, sales were up 5% in the half with growth in both Catalysts - which represents the majority of sales - and Licensing. In particular, we saw good performance in China reflecting both strength in formaldehyde and licensing of existing core technology.

Catalysts: benefiting from higher average prices despite lower volumes

In Catalysts, sales were up 5%. Through our stronger commercial focus we saw higher average prices across our portfolio, and delivered good growth in formaldehyde following recent project wins. We performed well across key syngas segments including ammonia and hydrogen. Overall catalyst refill volumes were down, largely due to an unplanned shut down at one of our plants.

Licensing: early sales from sustainable solutions portfolio

In Licensing, sales were up 6% supported by growth in our existing core portfolio as well as sustainable solutions. We continue to make good progress as we scale our business and target new opportunities in low carbon hydrogen and sustainable fuels. In the period, we saw early sales from these new opportunities and continued to win projects in these areas.

Across the rest of our licensing business, we saw growth in areas including oxoalcohols and BDO (butanediol) following recent project wins in China. Relating to these offerings (i.e. excluding sustainable solutions), we signed six licences in the half worth around £70 million in sales over five years. (1H 22/23: five licences).

Underlying operating profit

Underlying operating profit was up 84% to £35 million and margins grew significantly, up 480 basis points to 12.4%. This was largely driven by actions taken to improve performance including higher pricing reflecting our stronger commercial focus and efficiency benefits.

Business update

In Catalyst Technologies, we are growing our existing business alongside new opportunities in low carbon hydrogen (or carbon capture and storage - CCS-enabled hydrogen) and sustainable fuels. These sustainable solutions are based on syngas technology, where we have a market leading position and strong track record, and will transform the scale and profitability of our business.

In the near-term, we are focused on improving performance and delivering higher margins through initiatives across pricing, manufacturing efficiency and procurement. These actions are delivering immediate results, and we are on track to achieve our margin targets.

In our sustainable solutions portfolio, we continue to win early 'first of a kind' projects, which demonstrate the strength of our offering. In the period from April 2022 to November 2023, we won nine large scale projects across low carbon hydrogen and sustainable fuels worth c.£185 million in sales over five years, subject to project completion. This includes four projects which were won since we last reported in May 2023:

·

Kellas Midstream's H2NorthEast low carbon hydrogen plant in Teesside, UK (October 2023)

·

bp's H2Teesside low carbon hydrogen facility in Teesside, UK (October 2023)

·

EDL's HyKero sustainable aviation fuel plant in Germany (October 2023)

·

ABEL Energy's green methanol project in Australia (November 2023)

The new project wins include two low carbon hydrogen licences in the UK for H2NorthEast (Kellas) and also H2Teeside (bp) which aims to be one of the UK's largest low carbon hydrogen facilities. We also won two sustainable fuels projects including EDL's HyKero plant which would be the first of its kind at commercial scale in Germany, and also ABEL Energy's green hydrogen and methanol project in Australia. Across our sustainable solutions portfolio, we have a pipeline of more than 100 projects, which continues to grow.

In Catalyst Technologies, we are targeting high single digit sales growth in the short-term, accelerating to mid-teens growth over the medium to long-term. With the combination of our value creation programme and mix shift towards licensing we are targeting mid-teens margins by the end of 2024/25 and high teens by the end of 2027/28, with continued accretion beyond.

Significant sales growth and continued disciplined investment to scale the business

·

Sales up 61% driven by higher volumes for strategic customers in fuel cells, and growth in electrolysers from the supply of components and samples

·

Underlying operating loss reflects continued disciplined investment to scale the business to meet demand, partly offset by higher volumes

Half year ended30th September

% change

% change, constant FX rates

2023

2022

£ million

£ million

Sales

Hydrogen Technologies

37

23

+61

+61

Underlying operating loss

(26)

(24)

n/a

n/a

Underlying operating profit margin

n/a

n/a

Reported operating loss

(26)

(24)

In Hydrogen Technologies, we provide components across the value chain for fuel cells and electrolysers including catalyst coated membranes (CCMs) and membrane electrode assemblies (MEAs). Our ambition is to be the market leader in CCMs, which are the critical performance defining components at the centre of fuel cells, PEM (proton exchange membrane) and AEM (anion exchange membrane) electrolysers.

Performance commentary

Sales

In the half, sales in Hydrogen Technologies were up 61% to £37 million driven by growth in both fuel cells and electrolysers. Fuel cells - which represent the majority of our business today - grew strongly reflecting higher commercial volumes into both automotive and non-road transport applications for our strategic customers. In electrolysers, we saw higher sales from the supply of components as well as prototypes and samples.

Across our business, we saw higher manufacturing output as we focused on operational performance and continued to improve our processes and drive efficiency. As we further scale and develop long-term relationships, we are focusing our business towards strategic customers.

Underlying operating loss

Underlying operating loss of £26 million reflects increased investment in building capability and product development as we scale the business to meet customer demand, partly offset by higher volumes from strategic customers.

Business update

Since May 2022, we have agreed multi-year strategic partnerships with Plug Power in the US and Hystar in Europe. As we develop the business we are growing the number of strategic customers, and supply chain partnerships are improving security of supply.

In the UK, construction of our 3GW facility in Royston is on track to be complete by the end of 2023/24. In the US, we are planning to co-invest with Plug Power into a new manufacturing plant. This plant will initially have 5GW capacity scaling to 10GW over time. Based on process improvements with our current and planned UK capacity, we now expect increased output and will be able to serve more demand from these facilities. Consequently, together with Plug Power, we are optimising our planned investment in the US including the timing and level of capex required. We seek to maximise appropriate government support where available.

Although the global hydrogen value chain is in an early stage of development and continues to evolve, we continue to target sales of more than £200 million by the end of 2024/25. We anticipate the business to breakeven in 2025/26, with significant growth in sales and profitability thereafter.

Disposals on track to be agreed by end of 2023/24

·

Performance in the half largely reflects lower volumes in Battery Systems following exceptional customer demand in the prior period

·

Sale of Diagnostic Services completed on 29th September 2023

Half year ended30th September

% change

% change, constant FX rates

2023

2022

£ million

£ million

Sales

Value Businesses¹

190

235

-19

-21

Underlying operating profit²

14

21

-33

-33

Underlying operating profit margin

7.4%

8.9%

EBITDA margin

10.0%

11.1%

Reported operating profit

8

15

Value Businesses is managed to drive shareholder value from activities considered to benon-core to JM, and comprises Battery Systems and Medical Device Components. In the period, we completed the sale of Diagnostic Services.

Overall, sales in Value Businesses were down 21% in the half. On a like for like basis (i.e.

excluding Advanced Glass Technologies and Battery Materials), sales were down 15%.

Sales performance was largely driven by a decline in Battery Systems. Volumes normalised following exceptional customer demand in the prior year, as supply chain constraints eased and we satisfied a backlog of orders. This was partly offset by pricing benefits from sales of higher value next generation e-bike products. Excluding the impact from the disposal of Piezo Products, sales in Medical Device Components grew reflecting recent project wins and higher production following investments to upgrade assets and drive efficiency. Diagnostic Services grew well, supported by a higher oil price which drove increased customer activity.

Underlying operating profit

Underlying operating profit was £14 million, a decline of £7 million on the prior period. This largely reflects lower volumes in Battery Systems as demand normalised, following strong growth in the prior year. We also experienced temporary dual running costs in Medical Device Components as we transferred manufacturing to a lower cost location.

Corporate

Corporate costs were £45 million, an increase of £16 million from the prior period, largely reflecting higher costs in relation to the implementation of new IT systems.

Notes:

1.

Sales relating to divestments of Advanced Glass Technologies and Diagnostic Services: (1H 2022/23:£41 million, 1H 2023/24: £37 million).

2.

Operating profit related to divestments of Advanced Glass Technologies and Diagnostic Services: (1H 2022/23:£2 million, 1H 2023/24: £3 million).

Financial review - continuing operations

Research and development (R&D)

R&D spend was £104 million in the half. This was broadly in line with the prior period spend of £106 million and represents c.5% of sales excluding precious metals. We are prioritising spend in our growth areas Catalyst Technologies and Hydrogen Technologies, as we continue to commercialise our sustainable solutions, fuel cell and electrolyser offerings.

Foreign exchange

The calculation of growth at constant rates excludes the impact of foreign exchange movements arising from the translation of overseas subsidiaries' profit into sterling. The group does not hedge the impact of translation effects on the income statement. The principal overseas currencies, which represented 75% of the non-sterling denominated underlying operating profit in the half year ended 30th September 2023, were:

Share of 1H 2023/24non-sterling denominatedunderlying operating profit

Average exchange rate

Half year ended30th September

% change

2023

2022

US dollar

22%

1.26

1.21

+4

Euro

39%

1.16

1.17

-1

Chinese renminbi

14%

8.99

8.18

+10

For the half, the impact of exchange rates decreased sales by £52 million and underlying operating profit by £9 million.

If average rates for November 2023 month to date (£:US$ 1.227, £:? 1.145, £:RMB 8.937) are maintained throughout the year ending 31st March 2024, foreign currency translation will have an adverse impact of c.£15 million on underlying operating profit. A one cent change in the average US dollar and a ten fen change in the average rate of the Chinese renminbi have an impact of approximately £1 million on operating profit whilst a one cent change in the average rate of the Euro has approximately a £2 million impact on full year underlying operating profit.

Efficiency savings

Our group transformation programme which is expected to deliver savings in excess of£150 million by 2024/25 is well underway. Associated costs to deliver the programme are around £100 million, all of which are cash. In the first half, we delivered c.£25 million of savings against our expected savings of c.£55 million for the year.

Non-underlying (charge) / income

(£ million)

As at30th September2023

As at30th September 2022

Major impairment and restructuring charges

(42)

(9)

Amortisation of acquired intangibles

(2)

(2)

Total

(44)

(11)

There was a £42 million charge relating to major impairment and restructuring charges comprising a net impairment charge of £12 million and restructuring charges of£30 million. The net impairment charge of £12 million includes further impairment charges to production related assets in Clean Air as the business continues to consolidate its existing capacity into new and more efficient plants. Further impairment charges were also recognised in relation to amounts due from the sale of Battery Materials to EV Metals Group.

Finance charges

Net finance charges in the period amounted to £41 million, up from £21 million in the first half of 2022/23, largely reflecting higher average borrowings and increased interest charges related to our floating rate debt.

Taxation

The tax charge on underlying profit before tax for the half year ended 30th September 2023 was £31 million, an effective underlying tax rate of 22.0%, up from 19.9% in the first half of 2022/23 largely due to phasing differences between the first and second half.

The effective tax rate on reported profit for the half year ended 30th September 2023 was 22.8%. This represents a tax charge of £19 million, compared with £38 million in the prior period, largely due to lower profit before tax in the current period.

We currently expect the effective tax rate on underlying profit for the year ending31st March 2024 to be around 20%.

Post-employment benefits

IFRS - accounting basis

At 30th September 2023, the group's net post-employment benefit position, was a surplus of £98 million.

The cost of providing post-employment benefits in the period was £11 million, down from£16 million in the same period last year.

Capital expenditure

We are making disciplined investments to drive growth and deliver attractive returns. We have further prioritised our capital expenditure and now expect cumulative spend to decline by c.10% to c.£1 billion over the three year period to 2024/25.

In the half, capital expenditure was £157 million, 1.6 times depreciation and amortisation (excluding amortisation of acquired intangibles). In the period, key projects included:

·

Hydrogen Technologies - investing to increase manufacturing capacity in the UK

·

PGM Services - investing in the resilience, efficiency and long-term sustainability of our refinery assets

Strong balance sheet

Net debt as at 30th September 2023 was £1,044 million, an increase from £1,023 million at 31st March 2023 and £963 million at 30th September 2022. Net debt is £18 million higher at £1,062 million when post tax pension deficits are included. The group's net debt (including post tax pension deficits) to EBITDA was 1.7 times (30th September 2022: 1.5 times), in line with our target range of 1.5 to 2.0 times.

We use short-term metal leases as part of our mix of funding for working capital, which are outside the scope of IFRS 16. Precious metal leases amounted to £186 million as at30th September 2023 (31st March 2023: £138 million, 30th September 2022: £129 million). 

Free cash flow and working capital

Free cash flow was £78 million in the half, compared to £133 million in the prior period, largely reflecting lower proceeds from disposals and reduced operating profit, partly offset by a net working capital inflow.

Excluding precious metal, average working capital days to 30th September 2023 increased to 57 days compared to 35 days to 30th September 2022. This largely reflects inventory build ahead of Clean Air site closures as well as higher working capital in Catalyst Technologies and Hydrogen Technologies to support growth.

Going concern

The group maintains a strong balance sheet with around £1.5 billion of available cash and undrawn committed facilities. Cash generation was positive during the period with free cash flow of £78 million. Net debt was in line with 31st March 2023 at £1,044 million.

As set out on page 31, the directors have reviewed the base case scenario forecasts for the group and have reasonable expectation that there are no material uncertainties that cast doubt about the group's ability to continue operating for at least twelve months from the date of approving these half-yearly accounts. In arriving at this view, the base case scenario was stress tested to a severe but plausible downside case which assumes lower demand across our markets to account for further disruptions and recession.

Additionally, the group considered scenarios including the impact from metal price volatility, a slow down in China and increase in the amount of metal that we would have to hold. Under all scenarios, the group has sufficient headroom against committed facilities and key financial covenants are not in breach during the going concern period. The directors have reviewed a range of scenario forecasts for the group and have reasonable expectation that there are no material uncertainties that cast doubt about the group's ability to continue operating for at least twelve months from the date of approving this half year accounts and so determine that it is appropriate to prepare the accounts on a going concern basis.

Risks and uncertainties

JM's principal risk landscape continues to be reviewed and updated to reflect our refreshed strategy and the challenges that come from operating within the current global environment and economic climate. JM is committed to improving its risk management approach and insights used to support various business decisions. The Group's principal risks are listed below.

1. Significant change in demand or margin sustainability - Failure to correctly anticipate market trends driving demand and commoditisation of our products. With shifts being slower or faster than anticipated, we may fail to make the right and timely decisions to respond to these shifts. This risk, combined with a failure to identify other new markets relevant for JM, may adversely impact revenue, cash flow and profitability, including our position as technology and cost leader.

2. Significant geopolitical or macroeconomic event - Due to the nature of JM's global footprint, there is a risk that we may face disruption in operations, supply chain and/or customer markets due to geopolitical risks such as conflicts, trade disputes, sanctions, pandemics, inflation and economic recession in specific countries or regions where we operate or where our supply chains are located.

3. Failure to deliver value from capital projects - The success of our strategy, especially in growth areas, depends on our ability to effectively prioritise and deliver our strategic capital investment pipeline. There is a risk that we might be unable to meet production capacity expectations, breach budgeted costs or lose our competitive position.

4. Development of products that do not meet customer needs - Inability to develop products that are competitive enough to meet our market ambitions and our customer's needs. This includes our ability to identify and understand customer expectations, translate this into effective R&D and develop our nascent technologies into an industrial production scale.

5. A significant work related EHS incident - Failure to operate safely, resulting in injury or breach to applicable laws/regulations, which could lead to negative effects on our people, our reputation and/or the environment. This could also mean the loss of production time as well as attracting negative interest from the media and regulators, leading to significant fines and penalties.

6. Disruption to inbound goods or services provided - Given the nature of the products and services we provide, there are only a few suppliers that are approved to source certain important raw materials. If there was significant disruption in our supply chains this would impact the supply of our products and services.

7. A low performing culture undermines our strategy - A low-performing culture, characterised by an insufficiently engaged and inclusive workforce, lacking commitment to take accountability and drive results could impact the successful execution of our strategy.

8. Breach to security or control of platinum group metals in our processes - There is a risk that we have insufficient metal available for our manufacturing businesses and customer metal commitments. Metal price volatility affects how much our trading business earns. Our refining business earnings also depend on metal prices; a fall in these prices reduces revenue and operating profit. In addition, a failure of our security management systems may result in a loss of or theft of precious metal, which could lead to financial loss and / or failure to satisfy our customers. This could reduce customer confidence or result in legal action.

9. Failure in one or more of our critical operational assets - A failure in a critical asset at our sites may have a material effect on our supply chain, performance, share value and reputation. Also, more frequent extreme weather events and natural disasters may disrupt our operations and increase our costs

10. Unsuccessful delivery of key business transformation programmes - There are currently various transformation programmes in place across the group to support the delivery of our strategy and a more agile and streamlined organisation. In order to achieve this, JM's acceptance of calculated risk with corresponding need for mitigation has increased to enable several transformation activities to run in parallel. Failure to successfully deliver these programmes may delay the expected benefits, disrupt services to customers or trigger a loss of key talent.

11. Business failure through cyber-attack or other IT incidents - A failure to adapt our Information Technology to changing business requirements, the occurrence of significant disruption to our systems or a major cyber security incident may adversely affect our financial position, harm our reputation, and could lead to regulatory penalties or non-compliance with laws.

Responsibility statement of the Directors in respect of the half yearly report

The half yearly report is the responsibility of the directors. Each of the directors as at the date of this responsibility statement, whose names and functions are set out below, confirms that to the best of their knowledge:

·

the condensed consolidated accounts have been prepared in accordance with UK adopted International Accounting Standard (IAS) 34 - 'Interim Financial Reporting'; and

·

the interim management report included in the Half-Yearly Report includes a fair review of the information required by:

a)

DTR 4.2.7R of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated accounts; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and 

b)

DTR 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the company during that period; and any changes in the related party transactions described in the last annual report that could do so. 

The names and functions of the directors of Johnson Matthey Plc are as follows: 

Patrick Thomas

Chair of the Board and of the Nomination Committee

Liam Condon

Chief Executive Officer

Stephen Oxley

Chief Financial Officer

Barbara Jeremiah

Senior Independent Non-Executive Director

Rita Forst

Non-Executive Director

Jane Griffiths

Non-Executive Director and Chair of Societal Value Committee

Xiaozhi Liu

Non-Executive Director

Chris Mottershead

Non-Executive Director

John O'Higgins

Non-Executive Director and Chair of the Remuneration Committee

Doug Webb

Non-Executive Director and Chair of the Audit Committee

The responsibility statement was approved by the Board of Directors on 21st November 2023 and is signed on its behalf by: 

Patrick Thomas

Chair

Independent Review Report

to Johnson Matthey Plc

Report on the condensed consolidated accounts

Our conclusion

We have reviewed Johnson Matthey Plc's condensed consolidated accounts (the "interim financial statements") in the half year results of Johnson Matthey Plc for the 6 month period ended 30th September 2023 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim financial statements comprise:

·

the Condensed Consolidated Balance Sheet as at 30th September 2023;

·

the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Total Comprehensive Income for the period then ended;

·

the Condensed Consolidated Cash Flow Statement for the period then ended;

·

the Condensed Consolidated Statement of Changes in Equity for the period then ended; and

·

the explanatory notes to the interim financial statements.

The interim financial statements included in the half year results of Johnson Matthey Plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half year results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half year results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the half year results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the half year results, including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the half year results based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

21st November 2023

Six months ended

30.9.23 

30.9.22

Notes

£ million 

£ million

Revenue

2, 3

6,531

7,328

Cost of sales

(6,084)

(6,841)

Gross profit

447

487

Distribution costs

(62)

(57)

Administrative expenses

(205)

(208)

Amortisation of acquired intangibles

4

(2)

(2)

Major impairment and restructuring charges

4

(42)

(9)

Operating profit

136

211

Finance costs

(71)

(48)

Investment income

30

27

Share of losses of associates

(13)

(2)

Profit before tax from continuing operations

82

188

Tax expense

5

(19)

(38)

Profit for the period from continuing operations

63

150

Profit after tax from discontinued operations

-

10

Profit for the period

63

160

pence 

pence 

Earnings per ordinary share

Basic?

6

34.7

87.5

Diluted

6

34.6

87.1

pence 

pence 

Earnings per ordinary share from continuing operations

Basic?

6

34.7

82.0

Diluted

6

34.6

81.7

Six months ended

30.9.23 

30.9.22

Notes

£ million 

£ million

Profit for the period

63

160

Other comprehensive (expense) / income

Items that will not be reclassified to the income statement in subsequent years

Remeasurements of post-employment benefit assets and liabilities

13

(75)

(115)

Fair value losses on equity investments

(3)

(4)

Tax on items that will not be reclassified to the income statement

19

28

Total items that will not be reclassified to the income statement

(59)

(91)

Items that may be reclassified to the income statement:

Exchange differences on translation of foreign operations

(16)

187

Exchange differences on translation of discontinued operations

-

(32)

Amounts credited / (charged) to hedging reserve

2

(12)

Fair value losses on net investment hedges

(3)

(22)

Tax on items that may be reclassified to the income statement

(1)

4

Total items that may be reclassified to the income statement (in subsequent years)

(18)

125

Other comprehensive (expense) / income for the period

(77)

34

Total comprehensive (expense) / income for the period

(14)

194

Total comprehensive income for the period arises from:

Continuing operations

(14)

216

Discontinued operations

-

(22)

(14)

194

30.9.23 

31.3.23 

Notes

£ million 

£ million 

Assets

Non-current assets

Property, plant and equipment

8

1,378

1,332

Right-of-use assets

49

49

Goodwill

363

364

Other intangible assets

9

294

287

Investments in associates

63

75

Investments at fair value through other comprehensive income

45

49

Other receivables

114

113

Interest rate swaps

18

19

20

Other financial assets

52

48

Deferred tax assets

145

121

Post-employment benefit net assets

13

134

203

Total non-current assets

2,656

2,661

Current assets

Inventories

1,517

1,702

Taxation recoverable

9

12

Trade and other receivables

1,759

1,882

Cash and cash equivalents

18

493

650

Other financial assets

58

47

Assets classified as held for sale

12

17

75

Total current assets

3,853

4,368

Total assets

6,509

7,029

Liabilities

Current liabilities

Trade and other payables

(2,263)

(2,497)

Lease liabilities

18

(9)

(9)

Taxation liabilities

(90)

(105)

Cash and cash equivalents ? bank overdrafts

18

(31)

(13)

Borrowings and related swaps

18

(71)

(155)

Other financial liabilities

(21)

(27)

Provisions

(71)

(63)

Liabilities classified as held for sale

12

-

(25)

Total current liabilities

(2,556)

(2,894)

Non-current liabilities

Borrowings and related swaps

18

(1,398)

(1,460)

Lease liabilities

18

(31)

(31)

Deferred tax liabilities

(9)

(19)

Interest rate swaps

18

(16)

(15)

Employee benefit obligations

13

(39)

(41)

Provisions

(23)

(28)

Trade and other payables

(4)

(2)

Total non-current liabilities

(1,520)

(1,596)

Total liabilities

(4,076)

(4,490)

Net assets

2,433

2,539

Equity

Share capital

215

215

Share premium

148

148

Treasury shares

(19)

(19)

Other reserves

97

118

Retained earnings

1,992

2,077

Total equity