REG - Johnson Matthey PLC - Johnson Matthey Full Year Results
23/05/2024 07:00
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RNS Number : 5498P Johnson Matthey PLC 23 May 2024
Preliminary results for the
year ended 31(st) March 2024
23(rd) May 2024
Catalysing the net zero transition to drive sustainable value creation
Continued strategic execution
· Underlying operating profit up 11%, excluding £85 million impact from lower
precious metal (PGM) prices; including PGM price impact, down 8%¹
· Executing on our strategy and announcing new strategic milestones to 2025/26
· Well positioned to navigate changes in market dynamics given strength of
portfolio - upgraded Clean Air cash target to at least £4.5 billion in the
decade to 2030/31², strong growth and new project wins in Catalyst
Technologies and reducing Hydrogen Technologies investment in line with the
slower pace of market development
· Further underlying operating margin improvement in Clean Air and Catalyst
Technologies
· Transformation being delivered to drive efficiency and build a stronger
platform for growth - upgrading target to £200 million cost savings by the
end of 2024/25
· Achieved 30% reduction in Scope 1+2 CO(2)e emissions since 2019/20 (target was
10%)
· Agreed Value Businesses divestments - net proceeds of >£500 million,
significantly above our target, and intend to return £250 million to
shareholders via a share buyback programme³
Reported results Underlying results (continuing)¹(,)⁴
Year ended % Year ended % % change, constant FX rates
31(st) March
change
31(st) March
change
2024 2023 2024 2023
Revenue £m 12,843 14,933 -14
Sales excl. precious metals⁵ £m 3,904 4,201 -7 -4
Operating profit (continuing) £m 249 406 -39 410 465 -12 -8
Profit before tax (continuing) £m 164 344 -52 328 404 -19
Profit after tax (continuing) £m 108 264 -59 260 326 -20
Basic EPS (continuing) pence 58.6 144.2 -59 141.3 178.6 -21
Ordinary dividend per share pence 77.0 77.0 -
Free cash flow £m 189 74
Cash from operating activities £m 592 291
Net debt £m 951 1,023
Liam Condon, Chief Executive Officer, commented:
In May 2022, we set out Johnson Matthey's reinvigorated strategy and
transformation. We are now two years into executing on that strategy and, with
the benefits progressively coming through, I am more confident than ever that
we will be successful. We have built on the momentum from the first half,
delivering good growth in underlying operating profit in the year, although
lower PGM prices have impacted our headline profitability. We are delivering
against our strategic milestones, and are announcing new commitments to
2025/26 which will continue to build a strong platform for growth. Our
portfolio means we are well positioned in a rapidly changing market
environment. Underpinned by our foundational PGM Services business, we are
driving value from Clean Air alongside investing for growth in our energy
transition businesses - Catalyst Technologies and Hydrogen Technologies. We
have significant opportunities ahead and I look forward to our continued
progress in catalysing the net zero transition and creating significant value
for all stakeholders.
Outlook for the year ending 31(st) March 2025
For 2024/25, on a continuing basis excluding Value Businesses⁶, we expect at
least mid single digit growth in underlying operating performance at constant
precious metal prices and constant currency.
In Clean Air we expect modest growth in operating performance, with continued
margin expansion driven by efficiency benefits. Beyond this, with the impact
of historical platform losses behind us, we expect further growth in operating
performance and margin expansion. PGM Services' operating performance is
expected to be broadly stable, with limited impact from precious metal prices.
In Catalyst Technologies we expect further strong growth in operating
performance, with mid-teens margins. In Hydrogen Technologies we now expect
modest sales growth, with a significantly lower operating loss as we manage
our investment with the pace of market development.⁷
If precious metal prices and foreign exchange rates remain at their current
levels⁸ for the remainder of 2024/25, we expect an adverse impact of c.£5
million to full year operating performance compared with the prior
year.⁹(,)¹⁰
Dividend
The board will propose a final ordinary dividend for the year of 55.0 pence
per share at the Annual General Meeting (AGM) on 18(th) July 2024. Together
with the interim dividend of 22.0 pence per share, this gives a total ordinary
dividend of 77.0 pence per share, maintained at the same level as the prior
year. Subject to approval by shareholders, the final dividend will be paid on
6(th) August 2024, with an ex-dividend date of 6(th) June 2024.
PGM Services seminar
We will host a PGM Services seminar on Thursday 27(th) June to provide a
deep-dive into this business.
Enquiries:
Investor Relations
Martin Dunwoodie Director of Investor Relations and Treasury +44 20 7269 8241
Louise Curran Head of Investor Relations +44 20 7269 8235
Chris Wood Senior Investor Relations Manager +44 20 7269 8138
Media
Sinead Keller Group External Relations Director +44 20 7269 8218
Harry Cameron Teneo +44 7799 152148
Notes:
1. Unless otherwise stated, sales and operating profit commentary refers to
performance at constant exchange rates. Growth at constant rates excludes the
translation impact of foreign exchange movements, with 2022/23 results
converted at 2023/24 average rates. In 2023/24, the translational impact of
exchange rates on group sales and underlying operating profit was an adverse
impact of £120 million and £21 million respectively.
2. Cash target from 1(st) April 2021 to 31(st) March 2031, pre-tax and post
restructuring costs.
3. Target was for net proceeds from divestments of more than £300 million. Share
buyback programme conditional upon completion of Medical Device Components
sale.
4. 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, 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 46 to 49.
5. Revenue excluding sales of precious metals to customers and the precious metal
content of products sold to customers.
6. Baseline is underlying operating profit on a continuing basis excluding Value
Businesses (£381 million in 2023/24 as shown on page 9).
7. Outlook commentary for Clean Air, PGM Services, Catalyst Technologies and
Hydrogen Technologies refers to underlying operating performance, and assumes
constant precious metal prices and constant currency.
8. Average precious metal prices and average foreign exchange rates in May 2024
(month to date).
9. If precious metal prices remain at their current level⁸ for the remainder of
2024/25 there would be a benefit of
£1 million on full year operating performance compared with the prior year. A
US$100 per troy ounce change in the average annual platinum, palladium and
rhodium metal prices each have an impact of approximately
£0.5 million, £1 million and £0.5 million respectively on full year 2024/25
underlying operating profit in PGM Services. This assumes no foreign exchange
movement.
10. At average foreign exchange rates for May 2024 month to date (£:US$ 1.26,
£:€ 1.17, £:RMB 9.10) translational foreign exchange movements for the
year ending 31(st) March 2025 are expected to adversely impact underlying
operating profit by £4 million.
Performance summary for the year ended 31(st) March 2024
In the year we saw good underlying performance¹ despite the challenging
market backdrop. Underlying operating profit - adjusting for the £85 million
impact from precious metal prices in PGM Services - was up 11% driven by
transformation benefits and higher pricing. Including the impact of precious
metal prices, underlying operating profit was down 8%.
We delivered strong growth in Catalyst Technologies and have seen an
encouraging number of project wins across our sustainable technologies
portfolio. We have also been focused on driving margin improvement -
especially in Clean Air (+190 basis points) and Catalyst Technologies
(+390 basis points). This is clear evidence that transformation is starting to
benefit, but there is more to come and we are committed to delivering further
improvements in all our businesses. Across the group, our transformation
programme delivered c.£75 million of cost savings in the year against a
target of c.£55 million.
On a reported basis, operating profit declined 39% to £249 million, impacted
by a number of one-off items. We incurred £148 million of major impairment
and restructuring charges comprising a net impairment charge of £70 million
and restructuring charges of £78 million. Further details are included in the
financial review on page 20.
We have a strong balance sheet, with net debt of £951 million as at 31(st)
March 2024 compared to £1,023 million as at 31(st) March 2023. Net debt to
EBITDA was 1.6 times, which was at the lower end of our target range of 1.5 to
2.0 times. Free cash flow was £189 million, compared to £74 million in the
prior year, largely reflecting lower precious metal working capital partly
offset by lower net proceeds from disposals.
Chief Executive Officer update
Johnson Matthey's strategy is purpose-driven to catalyse the net zero
transition for our customers. We are focused on sustainable technologies and
markets where we have leading positions and competitive advantage.
The net zero transition will not be a linear journey and the pace of
transition will be dependent on many different factors, including regulation
and incentives through to infrastructure and adequate supply chains. Our
backbone of core businesses - Clean Air and PGM Services - generate cash and
provide a strong platform for our more nascent energy transition businesses of
Catalyst Technologies and Hydrogen Technologies to develop and grow. This
combination of businesses provides a competitive advantage in ensuring we are
a reliable partner who can support our customers in transitioning their
businesses towards a net zero future. We are well positioned to successfully
navigate this journey and create significant value for all our stakeholders.
The slowdown in global BEV (battery electric vehicle) penetration means we now
expect our
Clean Air business to be 'stronger for longer' - driving at least £4.5
billion of cash in the decade to 2030/31² (previously at least £4 billion)
and significant further cash flow thereafter.
In Catalyst Technologies, we have tremendous structural growth opportunities
over the
medium-term. There is significant end market demand across our new growth
areas notably in low carbon hydrogen and sustainable fuels, and we have
already seen important wins positioning us as a global leader in sustainable
solutions.
Hydrogen is an essential part of the net zero transition. In Hydrogen
Technologies, we are well positioned to benefit from this expected high growth
market given our decades of experience in fuel cells and deep understanding of
PGMs (platinum group metals). However, the development of the hydrogen value
chain has slowed as the industry navigates the challenges around scale up.
As the market evolves, we are focused on diversifying our customer base and
securing further strategic partnerships with leading companies, whilst
remaining very disciplined and agile in scale up. Consequently, we are
reducing our investment to align with the pace of market development. We now
expect the business to breakeven by the end of 2025/26.
All of this is underpinned by our foundational business - PGM Services. The
unique properties of PGMs will continue to support the energy transition
through their use in many applications. Our PGM expertise strengthens our
position across our markets through our ability to offer a full-service
business model, encompassing metal supply and management, through product
design and fabrication, to recycling at end of life.
Our transformation programme to build a stronger platform for growth is well
underway. We are becoming a stronger commercial organisation, with a more
disciplined approach to capital projects, and we are driving significant
efficiencies as we simplify and right-size the organisation. We are upgrading
our cost savings target to £200 million by the end of 2024/25 (previously in
excess of £150 million). Total associated costs to deliver the programme are
around £130 million (previously around £100 million), all of which are cash.
To date, our transformation programme has delivered benefits of c.£120
million which is helping to drive margin improvement. Examples of actions we
are taking include the consolidation of our Clean Air manufacturing footprint,
and the launch of Johnson Matthey Global Solutions - a simplified and more
efficient model to deliver core business services across HR, Finance and
Procurement. We are also de-layering senior management, driving continued
procurement savings and rationalising our real estate globally.
As we simplify our portfolio, we have agreed the divestment of our Value
Businesses. We completed the sale of Diagnostic Services in September 2023 and
Battery Systems in April 2024. We also announced the sale of Medical Device
Components (MDC) which is expected to complete around Q3 2024. In aggregate,
our divestment programme will deliver net cash proceeds of more than £500
million, well in excess of our target of more than £300 million. We intend to
return £250 million to shareholders via an on-market share buyback programme
in 2024/25 once the disposal of MDC has completed. The remainder of the
proceeds will be used to pay down debt and for other general corporate uses.
As we execute our strategy, we remain highly disciplined in our capital
allocation: investing for growth and attractive returns, and ensuring a
reliable dividend whilst returning excess capital to shareholders. Our aim is
to maintain a strong balance sheet with a target level of net debt to EBITDA
of 1.5 to 2.0 times. Over the three year period to 2026/27, we expect
cumulative capital expenditure of up to £900 million, of which c.£250
million relates to our new PGM refinery. We have significantly reduced our
capital expenditure related to Hydrogen Technologies and this now comprises
only 10% of our three year guidance (compared to 30% expected previously).
Overall, I am encouraged with the progress so far and our good growth in
underlying performance¹ is evidence that our strategy is delivering. With
transformation related cost savings supporting higher margins, lower capital
expenditure and significant opportunities for growth, I am confident we will
improve cash generation as we drive sustainable value creation for our
stakeholders.
Strategic milestones overview
In May 2022, we set out a clear strategy and outlined 10 milestones to track
our progress. Over the last two years, we have been driving execution of our
strategy and are delivering on our commitments. We have made strong progress
across the board although two of our investment milestones are delayed. In
Hydrogen Technologies, construction of our UK plant in Royston is
substantially complete - in line with our milestone - although we are now
delaying the start of
production to align with market development. Similarly, we are also
maintaining flexibility with the timing of our fuel cell catalyst capacity. In
addition our formaldehyde expansion is now expected to be completed by the end
of the calendar year, slightly later than originally planned.
Outcome of strategic milestones to 2023/24
Customers:
· 2 strategic partnerships in Hydrogen Technologies - Plug Power and Hystar
· Won targeted Euro 7 business, on track to deliver £4 billion+ cash³ from
Clean Air
· Won 10 additional large scale projects in Catalyst Technologies (target was
>10 in Catalyst Technologies and Hydrogen Technologies)
Investments:
· PGM Services refining capability expansion in China complete and ramping up
· Substantially completed construction of Hydrogen Technologies CCM plant in the
UK⁴ - delaying start of production to align with market development
· Targeted capacity expansion - fuel cells catalyst and formaldehyde catalyst
capacity - delayed
· Divestments - Piezo Products (part of Medical Device Components), Diagnostic
Services and Battery Systems complete; Medical Device Components due to
complete around Q3 2024
People: employee engagement score of 7.2 in 2023/24 (6.9 in 2022/23; target of
7.2 in 2024/25)
Sustainability:
· Reduced Scope 1+2 CO(2)e (carbon dioxide equivalent) emissions by 30% to
2023/24, ahead of targeted c.10% reduction by 2023/24 (from a 2019/20
baseline)
· Helped customers reduce CO(2)e emissions by over 1 million tonnes in 2023/24
through use of our products (target >1mt p.a.)
We are continuing to execute on our strategy and today we announce new
milestones for the two years to 2025/26. These milestones build on the
progress we have made so far and are focused on areas that are critical to the
success of our strategy - winning customers, building capability and
transforming the business to drive growth.
New strategic milestones to 2025/26
Customers:
· Deliver at least £4.5 billion of cash in the decade to 2030/31² from Clean
Air
· Win 20 additional large scale projects in Catalyst Technologies' sustainable
technologies portfolio
· Secure 4 new Hydrogen Technologies partnerships with leading companies
Capability:
· Start commissioning of new world class PGM refinery
· Expand engineering capacity by 30% to serve licensing growth in Catalyst
Technologies
(31(st) March 2024 baseline)
Transformation:
· Achieve ICCA (International Council of Chemical Associations) process safety
event severity rate of 0.80 by 2024/25 (0.88 in 2023/24)
· Increase employee engagement score to at least 7.4 by 2025/26 (7.2 in 2023/24)
· Deliver £200 million transformation cost savings by the end of 2024/25
· Implement JM Global Solutions for cost effective business processes by the end
of 2024/25
· Deliver 32% reduction in scope 1 and 2 CO(2)e emissions by 2025/26 (2019/20
baseline)
Notes:
1. At constant FX and adjusting for £85 million impact from precious metal
prices.
2. Cash target from 1(st) April 2021 to 31(st) March 2031, pre-tax and post
restructuring costs.
3. At least £4 billion of cash under our range of scenarios from 1(st) April
2021 to 31(st) March 2031. Cash target
pre-tax and post restructuring costs.
4. To expand total capacity from 2GW to 5GW. CCM - catalyst coated membrane.
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 Year ended % change % change,
31(st) March
constant FX rates
(£ million)
2024 2023
Clean Air 2,581 2,644 -2 +2
PGM Services 462 570 -19 -17
Catalyst Technologies 578 560 +3 +6
Hydrogen Technologies 71 55 +29 +31
Value Businesses² 326 470 -31 -32
Eliminations (114) (98)
Sales (continuing) 3,904 4,201 -7 -4
Underlying operating profit Year ended % change % change,
(£ million)
31(st) March
constant FX rates
2024 2023
Clean Air 274 230 +19 +26
PGM Services 164 257 -36 -35
Catalyst Technologies 75 51 +47 +56
Hydrogen Technologies (50) (45) n/a n/a
Value Businesses² 29 40 -28 -28
Corporate (82) (68)
Underlying operating profit (continuing) 410 465 -12 -8
Reconciliation of underlying operating profit Year ended
to operating profit
31(st) March
(£ million)
2024 2023
Underlying operating profit (continuing) 410 465
Major impairment and restructuring charges³ (148) (41)
(Loss) / profit on disposal of businesses³ (9) 12
Amortisation of acquired intangibles (4) (5)
Gains and losses on significant legal proceedings³ - (25)
Operating profit (continuing) 249 406
Notes:
1. Growth at constant rates excludes the translation impact of foreign exchange
movements, with 2022/23 results converted at 2023/24 average rates. In
2023/24, the translational impact of exchange rates on group sales and
underlying operating profit was an adverse impact of £120 million and £21
million respectively.
2. Includes Battery Materials, Battery Systems, Diagnostic Services and Medical
Device Components.
3. For further detail on these items please see page 20.
Second half performance - continuing operations
Sales H2 H2 % change % change,
constant FX rates
(£ million)
2023/24 2022/23
Clean Air 1,295 1,366 -5 -1
PGM Services 232 288 -19 -17
Catalyst Technologies 296 285 +4 +6
Hydrogen Technologies 34 32 +6 +10
Value Businesses 136 235 -42 -44
Eliminations (56) (50)
Sales (continuing) 1,937 2,156 -10 -7
Underlying operating profit H2 H2 % change % change,
(£ million)
constant FX rates
2023/24 2022/23
Clean Air 150 122 +23 +29
PGM Services 86 132 -35 -33
Catalyst Technologies 40 30 +33 +38
Hydrogen Technologies (24) (21) n/a n/a
Value Businesses 15 19 -21 -21
Corporate (37) (39)
Underlying operating profit (continuing) 230 243 -5 -
Summary of underlying operating results excluding Value Businesses
We have provided 2023/24 sales and underlying operating profit on a continuing
basis, excluding Value Businesses. We have based our outlook for the year
ending 31(st) March 2025 (as outlined on page 2) on these numbers.
Sales H1 H2 FY
(£ million)
2023/24 2023/24 2023/24
Clean Air 1,286 1,295 2,581
PGM Services 230 232 462
Catalyst Technologies 282 296 578
Hydrogen Technologies 37 34 71
Eliminations (58) (56) (114)
Sales excluding Value Businesses (continuing) 1,777 1,801 3,578
Value Businesses 190 136 326
Total sales (continuing) 1,967 1,937 3,904
Underlying operating profit H1 H2 FY
(£ million)
2023/24 2023/24 2023/24
Clean Air 124 150 274
PGM Services 78 86 164
Catalyst Technologies 35 40 75
Hydrogen Technologies (26) (24) (50)
Corporate (45) (37) (82)
Underlying operating profit excluding 166 215 381
Value Businesses (continuing)
Value Businesses 14 15 29
Total underlying operating profit (continuing) 180 230 410
Business reviews
Clean Air
Improved profitability driven by efficiency benefits
· Sales up 2% reflecting higher volumes partly offset by lower pricing
· Underlying operating profit increased 26% and margin expanded 190 basis points
to 10.6%, with a significant improvement half on half (1H: 9.6% and 2H:
11.6%). This mainly reflected efficiency benefits and higher volumes, partly
offset by lower pricing
· Delivered £2.0 billion¹ of cash from Clean Air in the three years since
2020/21, of which around one quarter relates to precious metal prices.
Upgraded cash target and now expecting to deliver at least £4.5 billion of
cash in the decade to 2030/31² (previously at least £4 billion)
Year ended % change % change, constant FX rates
31(st) March
2024 2023
£ million £ million
Sales
Light duty diesel 1,094 1,075 +2 +5
Light duty gasoline 533 599 -11 -6
Heavy duty diesel 954 970 -2 +2
Total sales 2,581 2,644 -2 +2
Underlying operating profit 274 230 +19 +26
Underlying operating profit margin 10.6% 8.7%
EBITDA margin 13.5% 11.6%
Reported operating profit 237 191
Clean Air provides catalysts for emission control after-treatment systems used
in light and heavy duty vehicles powered by internal combustion engines.
Market commentary
In the year, there was an improvement in global vehicle production across both
light duty and heavy duty. In light duty, there was growth across all key
regions reflecting improved supply chains and some inventory re-stocking. In
heavy duty, the market grew strongly - particularly in China - where there was
a recovery in vehicle production following COVID related lockdowns in the
prior year. Europe and North America benefited from pent-up demand as well as
a general easing of supply chain constraints.
Performance commentary
Overall, sales in Clean Air were up 2% with growth in our light duty and heavy
duty diesel businesses partly offset by light duty gasoline. We benefited from
higher volumes - particularly in light duty diesel driven by market share
gains in China and North America. Despite benefits from commercial excellence
initiatives including inflation recovery and further claims for non-inflation
related activity, pricing was lower overall.
Sales
Light duty diesel
In light duty diesel, sales grew 5% outperforming the market which saw a
modest decline overall. This largely reflected our strong performance in Asia
- particularly China - and also in the Americas against a backdrop of weaker
market production. In Europe, our performance was slightly behind the market.
In Asia, we significantly outperformed the market which saw mixed performance
across the region. We saw good performance in China driven by market share
gains following recent wins and the ramp up of platforms. In India, we also
saw good performance reflecting the ramp up of new platforms.
In the Americas, we outperformed the market which was impacted by economic
uncertainty. Our performance was driven by market share gains and platform
ramp ups.
Light duty gasoline
Light duty gasoline sales were down 6%, underperforming the global market
which grew well.
Our performance was mainly driven by Asia where we were impacted by the loss
of platforms in previous years as well as mix effects. In Europe, whilst we
benefited from a robust market and saw modest share gains, this was partly
offset by lower pricing. In the Americas we underperformed the market
reflecting the loss of platforms from previous years. We expect this to be the
last year where we experience the effect of these historic platform losses.
Heavy duty diesel
In heavy duty diesel, sales were up 2% although behind the market. By region,
we saw strong growth in Asia which was partly offset by lower sales in Europe
and the Americas.
In Asia, growth was led by China and India. In China, we benefited from a
market recovery following a weaker prior year with demand impacted by COVID
lockdowns. In India, we saw good performance partly reflecting higher sales
for off-road applications. In the Americas, our sales were broadly in line
with a slightly weaker market. This year, Class 8 truck production was higher
than anticipated reflecting a robust economy and strong order backlogs but the
macroeconomic outlook in South America impacted production in the region. In
Europe, we underperformed a growing market due to lower demand from our
customers. Looking forward, our strong presence in heavy duty positions us
well for upcoming advancements, such as internal combustion engines powered by
hydrogen.
Underlying operating profit
Underlying operating profit increased 26% and margin expanded 190 basis points
to 10.6%, with a significant improvement half on half (1H: 9.6% and 2H:
11.6%). This mainly reflected efficiency benefits and higher volumes. Despite
benefits from commercial excellence initiatives, we were impacted by lower
pricing partly related to historical contract commitments.
Cash generation
We delivered another year of strong cash, generating around £600¹ million.
In the three years since 2021/22, we have delivered a cumulative £2.0
billion¹ cash, of which around one quarter relates to precious metal prices.
Business update
In Clean Air, as emissions legislation tightens globally, we continue to
provide world-leading emissions control systems to support our customers and
reduce harmful emissions. We remain focused on rigorous cost management to
improve margins, as well as driving significant cash generation.
In the year, we achieved 190 basis points margin improvement principally
through efficiency initiatives. We delivered further cost savings across
procurement, manufacturing and our supply chain and made good progress with
the optimisation of our manufacturing footprint. In the period we closed four
sites, whilst ensuring the safety of our people and quality of service for our
customers. We are now evaluating the next phase of our footprint
consolidation. As we continue to drive efficiencies, we are targeting
mid-teens operating margins by 2025/26.
We continue to win business and significantly improved our light duty gasoline
win rate in the year, demonstrating the strength of our technology. Our
improved win rates should lead to benefits in future years as these platforms
ramp up and contribute to growth in operating profit. As we further strengthen
our commercial muscle, these wins were achieved whilst negotiating recovery of
cost increases and rationalising our product portfolio to focus on higher
return opportunities. At the same time, we also improved our customer
satisfaction score by seven points in the year. We remain focused on building
lasting partnerships with our customers and we were pleased to have been
recently awarded Cummins' Global Supplier of the Year award for the first
time.
In Europe, Euro 7 regulation has now been agreed. It includes tightened
emissions limits for heavy duty vehicles and increased durability requirements
for both light and heavy duty vehicles. Euro 7 standards will commence from
November 2026 for light duty and May 2028 for heavy duty vehicles for new,
main category vehicle types (legislation is applied to all main category
vehicles 12 months later). In the US, the EPA (Environmental Protection
Agency) announced its final rules on light and medium duty multi pollutant
emission standards which tackle both CO(2) and non-CO(2) criteria exhaust
emissions, applied as a phased in approach from 2027. They also announced a
final rule on heavy duty transport CO(2) standards, which also starts from
2027. China and India are expected to bring proposals in 2024/2025.
With the slowdown in global BEV penetration, we expect Clean Air to be
'stronger for longer'. Supported by our rigorous cost management and business
wins, we now expect to deliver at least £4.5 billion of cash in the decade to
2030/31² (previously at least £4 billion). To date, we have delivered
c.£2.0 billion¹ since 2020/21.
Notes:
1. At actual precious metal prices.
2. 1(st) April 2021 to 31(st) March 2031, pre-tax and post restructuring costs.
PGM Services
Performance reflects lower average PGM prices
· Sales declined 17% primarily due to lower average PGM prices
· Refinery volumes were lower due to continued softness in auto scrap recycling.
This was partially mitigated by higher industrial and mining intakes
· Underlying operating profit declined 35% driven by lower average PGM prices
and reduced volumes, partly offset by a continued focus on efficiencies and
metal recoveries from asset renewals
Year ended % change % change, constant FX rates
31(st) March
2024 2023
£ million £ million
Sales
PGM Services 462 570 -19 -17
Underlying operating profit 164 257 -36 -35
Underlying operating profit margin 35.5% 45.1%
EBITDA margin 42.0% 49.6%
Reported operating profit 149 257
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 the manufacture of value-add PGM products.
Performance commentary
Sales
In the year, sales declined 17%. This was primarily driven by lower average
PGM prices, particularly palladium and rhodium which declined 38% and 64%
respectively compared to 2022/23. As the year progressed, average PGM prices
stabilised with second half pricing below the levels of the first half.
In our refineries, intake volumes were lower as previously guided due to less
auto scrap. However this was partially mitigated by increased industrial and
mining intakes where we applied our PGM refining expertise to handle highly
complex feeds. Sales were lower in our metal trading business due to reduced
PGM prices and volatility. Across our PGM products business, sales were
broadly flat with higher demand for pharma products driven by business wins
which offset cyclical declines in agrochemicals.
Underlying operating profit
Underlying operating profit declined 35% mainly impacted by lower average PGM
prices
(£85 million impact) as well as reduced volumes. This was partly mitigated by
a continued focus on efficiencies, as well as metal recoveries from asset
renewals.
Business update
PGMs are critical to many of the world's products, processes and technologies,
and will remain vital in the long-term, well beyond ICE (internal combustion
engine), as the world decarbonises and transitions towards a circular economy.
JM is a world leader in PGMs and PGM Services is a key enabler for the group
providing expertise and driving synergies across our businesses.
In PGM Services we are positioning ourselves for more stable performance in
the
medium-term, following the PGM price super-cycle. Over the last five years our
refining and trading businesses have materially benefited from elevated and
volatile market prices, particularly those of rhodium and palladium, although
these have stabilised in recent months. In this lower metal price environment
we are focused on driving transformation and growing our PGM products
business, where there are exciting opportunities for new, high margin PGM
applications. Overall, this should lead to lower volatility in PGM Services'
earnings.
To maintain our position as the leading recycler of PGMs, we are investing in
our new world class refinery which we expect to start commissioning by the end
of 2025/26. This will ensure the business operates to world class safety and
efficiency standards, whilst maximising returns and working capital benefits
into the future. Together with the expansion of our refining capability in
China and our existing facility in North America we are well placed to serve
the growing secondary refining market.
Catalyst Technologies
Material margin improvement and strong growth in licensing
· Sales up 6% driven by good growth in catalysts, where higher pricing and
better mix offset lower volumes, and strong growth in licensing
· Won ten large scale projects from April 2022 to March 2024 in our sustainable
technologies portfolio, delivering on our strategic milestone. Won an
additional three projects since
1(st) April 2024 which contribute to our new strategic milestone
· Underlying operating profit up 56% and margin up 390 basis points, driven by
higher pricing reflecting our stronger commercial focus, better mix and
efficiency benefits
Year ended % change % change, constant FX rates
31(st) March
2024 2023
£ million £ million
Sales
Catalysts 518 509 +2 +4
Licensing 60 51 +18 +20
Total sales 578 560 +3 +6
Underlying operating profit 75 51 +47 +56
Underlying operating profit margin 13.0% 9.1%
EBITDA margin 17.3% 13.9%
Reported operating profit 70 43
Catalyst Technologies is a key pillar of our strategy as we target high
growth, high return opportunities in the decarbonisation of fuels and chemical
value chains. We have leading positions in syngas - methanol, ammonia,
hydrogen and formaldehyde - and a strong sustainable technologies portfolio.
Our revenue streams are licensing process technology and supplying catalysts.
Performance commentary
Sales
Sales were up 6%. We saw good growth in catalysts - which represents the
majority of sales - and strong growth in Licensing, up 20%. In Catalysts we
benefited from higher pricing as we strengthened our commercial focus.
Alongside better mix this more than offset lower volumes.
Catalysts: higher pricing and better mix offsetting lower volumes
Catalysts sales were up 4%. Growth was largely driven by formaldehyde
following increased demand for biodegradable plastics in China. We also saw
higher pricing across the portfolio, particularly in ammonia and hydrogen, and
a better mix in additives. These benefits more than offset lower volumes,
which were mainly driven by short-term cyclical weakness - primarily in
methanol - and an unplanned shutdown at one of our plants. We expect the plant
to be back in operation in summer 2024.
Licensing: early sales from our sustainable solutions portfolio
Licensing sales were up 20%. We saw strong growth in areas including
oxoalcohols and methanol, following recent project wins in China. In our
existing core portfolio, we signed eight licences in the period, worth around
£110 million in sales over five years. (2022/23: six licences). In our
sustainable technologies portfolio, we recognised early sales from low carbon
hydrogen and sustainable fuels. These sales doubled in the period albeit off a
low base.
Underlying operating profit
Underlying operating profit was up 56% to £75 million and the margin grew 390
basis points to 13.0%. This was largely driven by higher pricing reflecting
our strong commercial focus, better mix and efficiency benefits.
Business update
In Catalyst Technologies, we are growing our existing business alongside new
opportunities in sustainable technologies. These sustainable technologies are
mainly 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 year, we reorganised Catalyst Technologies in line with our revenue
streams - Catalysts and Licensing. We have new teams in place to ensure this
business fulfils its growth potential and we are making good progress. In the
near-term, we are focused on improving performance in our existing business.
Through initiatives across pricing, manufacturing efficiency and procurement,
we achieved a margin improvement of 390 basis points in the year and we are on
track to achieve our margin targets.
In our sustainable technologies portfolio, comprising technologies for low
carbon hydrogen and sustainable fuels and chemicals, we continued to make good
progress. Our pipeline now comprises more than 140 projects (previously more
than 100)¹. In the period from April 2022 to March 2024, we won ten large
scale projects in line with our strategic milestone. This includes DG Fuels'
first sustainable aviation fuel facility in Louisiana, US, which was won since
we last reported in November 2023. The plant would be the largest deployment
of Johnson Matthey and bp's FT CANS(TM) technology to date, substantially
larger than any previously announced project using this technology.
As we grow our Catalyst Technologies business, we are targeting an additional
20 large scale project wins in our sustainable technologies portfolio by the
end of 2025/26. We have already made progress on this milestone, winning three
additional projects since 1(st) April 2024. These comprise a large scale low
carbon hydrogen project in Europe and two sustainable fuels projects - HIF
Global's Paysandú e-methanol plant in Uruguay and a waste-to-methanol project
in Europe. Together these 13 projects won since April 2022 will generate more
than £350 million in sales over five years, subject to project completion.
To support our growth, we increased our global engineering capacity by 20%
over 12 months. We are targeting an additional 30% increase by the end of
2025/26 (31(st) March 2024 baseline), accessing new pools of talent through
opening engineering hubs in Manchester, UK, and Mumbai, India. We have also
expanded our commercial capability in the US, and we are opening a new
commercial office in the Middle East, to capture opportunities in these
regions.
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.
Notes:
1. Pipeline includes low carbon hydrogen and sustainable fuels.
Hydrogen Technologies
Strong sales growth and disciplined investment to scale the business
· Sales up 31% driven by higher volumes for strategic customers in fuel cells
· Underlying operating loss reflects investment to scale the business
· Reducing investment and managing cost base with the pace of market development
Year ended % change % change, constant FX rates
31(st) March
2024 2023
£ million £ million
Sales
Hydrogen Technologies 71 55 +29 +31
Underlying operating loss (50) (45) n/a n/a
Underlying operating loss margin n/a n/a
Reported operating loss (60) (46)
In Hydrogen Technologies, we provide components across the value chain for
fuel cells and
electrolysers including catalyst coated membranes (CCMs) and membrane
electrode assemblies (MEAs). Our ambition is to be the market leader in CCMs,
which are the critical performance defining components at the centre of fuel
cells, focusing on PEM (proton exchange membrane) and AEM (anion exchange
membrane) electrolysers.
Performance commentary
Sales
In the year, sales in Hydrogen Technologies were up 31% to £71 million driven
by demand from our strategic customers. However, sales growth in the second
half slowed as the market began to soften and our customers started to reduce
inventories. This largely reflects a lack of clarity around regulation and
incentives, slowing the development of supply chains and infrastructure.
Our continued focus on operational improvement and manufacturing efficiency
drove significantly higher output from our UK plant in Swindon, enabling the
vast majority of customer demand to be satisfied from this facility. As the
market develops, our ability to continue making operational improvements will
be vital in ensuring we have the agility to scale in line with market demand.
Underlying operating loss
Underlying operating loss of £50 million reflects investment into building
capability and product development. Towards the end of the year, we took
actions to reduce our cost base as we adapted to the softening market.
Business update
Hydrogen will play an essential role in the net zero transition. We are
strongly positioned to benefit from this market given our leading technology,
decades of experience in fuel cells, and deep understanding of PGM catalysis
and recycling.
Whilst the hydrogen market remains attractive in the long-term, the global
value chain is in an early stage of development and experiencing challenges as
it scales. In the US and Europe in particular, the progression of the hydrogen
value chain has slowed as the industry navigates the development of regulation
and incentives as well as infrastructure and supply chains. This is being
reflected in many of our customers' near-term demand forecasts. However, in
China the market remains relatively strong, particularly in fuel cells,
supported by demand incentives, new policies and increasing investment in
infrastructure by the government.
Over the past year, we have focused on improving our operational performance
and have made good progress. We have increased productivity due to improved
processes and manufacturing efficiency initiatives which means we are driving
greater output from our UK plant in Swindon. Due to these operational
improvements, we are now able to satisfy forecast customer demand in the
near-term from this plant. This increased flexibility means we are optimising
the timing and capex requirements of our planned investments across the UK, US
and China in response to the changing demand environment. Alongside this, we
are reducing our investment - including operating costs - to manage the
business in an agile way, ensuring we are ready to scale in line with market
growth. We have significantly reduced our capital expenditure related to
Hydrogen Technologies and this now comprises only 10% of our three year group
capex guidance (compared to 30% expected previously).
In the UK, whilst construction of our new plant in Royston is substantially
complete, we are delaying the start of production to align with market
development. In the US, our planned investment remains on hold whilst we
evaluate future market evolution and supply plans with our customers. In
China, we are continuing to develop partnerships and we will be disciplined in
our approach to scale up capacity in this growing market.
As we develop our Hydrogen Technologies business we are further diversifying
our customer base with a focus on leading companies, and continuing to advance
our strategic partnerships. We are making good progress with a variety of
customers and, in light of recent market dynamics, there is increasing
recognition around the benefits of partnering to accelerate the development of
this market.
Reflecting the current market dynamics and customer demand in the near-term,
we now expect modest sales growth in 2024/25 (previously more than £200
million sales by the end of 2024/25). We remain focused on improving
operational efficiency and - as we manage the pace of investment - we expect a
significantly lower operating loss in 2024/25. We now anticipate the business
to breakeven by the end of 2025/26.
Corporate
Corporate costs were £82 million, an increase of £14 million from the prior
year, largely reflecting higher costs in relation to the implementation of new
IT systems.
Financial review - continuing operations
Research and development (R&D)
R&D spend was £204 million in the year. This was down from £213 million
in the prior year and represents c.5% of sales excluding precious metals. We
are prioritising spend in our growth areas and are pursuing a very focused
innovation strategy for Catalyst Technologies and Hydrogen Technologies. We
are also investing in our digital capabilities to accelerate innovation and
provider greater insights to our customers.
Foreign exchange
The calculation of growth at constant rates excludes the impact of foreign
exchange movements arising from the translation of overseas subsidiaries'
profit into sterling. The group does not hedge the impact of translation
effects on the income statement. The principal overseas currencies, which
represented 78% of the non-sterling denominated underlying operating profit in
the year ended 31(st) March 2024, were:
Share of 2023/24 Average exchange rate % change
non-sterling denominated
underlying operating profit Year ended
31(st) March
2024 2023
US dollar 25% 1.26 1.20 +5
Euro 41% 1.16 1.16 -
Chinese renminbi 12% 9.01 8.26 +9
For the year, the impact of exchange rates decreased sales by £120 million
and underlying operating profit by £21 million.
If average exchange rates for May month to date (£:US$ 1.26, £:€ 1.17,
£:RMB 9.10) are maintained throughout the year ending 31(st) March 2025,
foreign currency translation will have an adverse impact of £4 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
In the year, we delivered c.£75 million of savings through our group
transformation programme and incurred cash costs of c.£55 million. Cumulative
benefits from the programme to date are c.£120 million. Reflecting our good
progress, we have upgraded our cost savings target to £200 million by the end
of 2024/25 (previously in excess of
£150 million). 2024/25 will be the final year of the programme, after which
we will focus on continuous improvement. Total associated costs to deliver the
programme are around
£130 million (previously around £100 million), all of which are cash.
£ million Savings delivered Associated costs incurred to 31(st) March 2024
to 31(st) March 2024
Transformation programme 120 75
Items outside underlying operating profit
Non-underlying (charge) / income As at As at
31(st) March 2024
31(st) March 2023
(£ million)
Major impairment and restructuring charges (148) (41)
(Loss) / profit on disposal of businesses (9) 12
Amortisation of acquired intangibles (4) (5)
Gains and losses on significant legal proceedings - (25)
Total (161) (59)
Items outside underlying operating profit
Non-underlying (charge) / income
(£ million)
As at
31(st) March 2024
As at
31(st) March 2023
Major impairment and restructuring charges
(148)
(41)
(Loss) / profit on disposal of businesses
(9)
12
Amortisation of acquired intangibles
(4)
(5)
Gains and losses on significant legal proceedings
-
(25)
Total
(161)
(59)
There was a net charge of £148 million relating to major impairment and
restructuring charges, comprising £78 million of restructuring costs and a
net impairment charge of
£70 million. The restructuring costs were recognised in relation to both our
transformation programme and the consolidation of our Clean Air manufacturing
footprint. The net impairment charge includes an impairment of our Battery
Systems business to its fair value ahead of its disposal, as well as
impairment charges relating to the recent slowdown in growth within the
hydrogen and fuel cell market which required us to adapt to the changing
demand profiles of our customers as they navigate this short-term uncertainty.
The £9 million loss on disposal of businesses largely comprises transactional
costs in the year relating to the disposal of our Value Businesses.
Finance charges
Net finance charges in the period amounted to £82 million, up from the prior
year charge of £61 million largely reflecting higher average borrowings and a
higher interest rate environment.
Taxation
The tax charge on underlying profit before tax for the year ended 31(st) March
2024 was £68 million, an effective underlying tax rate of 20.8%, up from
19.3% in 2022/23. This largely reflects the mix of profit across geographies.
The effective tax rate on reported profit for the year ended 31(st) March 2024
was 34.4%. This represents a tax charge of £56 million, compared with £80
million in the prior period.
We expect modest upward pressure to the effective tax rate on underlying
profit for the year ending 31(st) March 2025 as territories in which we
operate increase their domestic Corporate Tax rate in response to the OECD
Pillar 2 rules.
Post-employment benefits
IFRS - accounting basis
At 31(st) March 2024, the group's net post-employment benefit position, was a
surplus of
£117 million.
The cost of providing post-employment benefits in the year was £53 million,
up from
£40 million last year.
Capital expenditure
Capital expenditure was £390 million in the year, 2.0 times depreciation and
amortisation (excluding amortisation of acquired intangibles). In the period,
key projects included:
· PGM Services - investing in the resilience, efficiency and safety of our
refinery assets
· Hydrogen Technologies - investing in our manufacturing facility in Royston,
UK, although delaying the start of production to align with market
development.
Strong balance sheet
Net debt as at 31(st) March 2024 was £951 million, a decrease from £1,023
million at
31(st) March 2023 and £1,044 million at 30(th) September 2023. Net debt is
£19 million higher when post tax pension deficits are included. The group's
net debt (including post tax pension deficits) to EBITDA was 1.6 times (31(st)
March 2023: 1.6 times, 30(th) September 2023:
1.7 times), which was at the lower end of our target range of 1.5 to 2.0
times.
We use short-term metal leases as part of our mix of funding for working
capital, which are outside the scope of IFRS 16 as they qualify as short-term
leases. Precious metal leases amounted to £197 million as at 31(st) March
2024 (31(st) March 2023: £138 million,
30(th) September 2023: £186 million).
Free cash flow and working capital
Free cash flow was £189 million in the year, compared to £74 million in the
prior year, largely reflecting lower precious metal working capital partly
offset by lower net proceeds from disposals.
Excluding precious metal, average working capital days to 31(st) March 2024
increased to
60 days compared to 42 days to 31(st) March 2023. This largely reflected lower
average sales through the period as well as lower VAT payables and higher
working capital to support our growth businesses.
Going concern
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 these annual accounts.
As at 31(st) March 2024, the group maintains a strong balance sheet with
around £1.5 billion of available cash and undrawn committed facilities. Free
cash flow was strong in the year at £189 million and net debt reduced by £72
million. Net debt at 31(st) March 2024 was
£951 million at 1.6 times net debt (including post tax pension deficits) to
underlying EBITDA which was at the lower end of our target range.
Although impacted by the significant headwinds faced in the current
macroeconomic environment such as low metal prices and continued soft economic
outlook across major economies, 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 budget for our base case scenario. The base case
scenario was stress tested to a severe-but-plausible downside case which
reflects severe recession scenarios.
The severe-but-plausible case for Clean Air modelled scenarios assuming a
smaller light duty vehicle market from reduced vehicle production and/or
market consumer demand disruption
or greater share of zero emission vehicles in the market, assumed to result in
a 10% drop in sales. For PGM Services and Catalyst Technologies, it also
assumed a reduction in sales and associated operating profit based on adverse
scenarios using external and internal market insights.
Additionally, as part of viability testing, the group considered scenarios
including the impact from metal price volatility, delays in capital projects
and delivery of cost transformation savings, and slow down of operations in
China. Whilst the combined impact would reduce profitability and EBITDA
against our latest budget, our balance sheet remains strong with ample working
capital and Net Debt/EBITDA ratios.
The group has a robust funding position comprising a range of long-term debt
and a
£1 billion five year committed revolving credit facility maturing in March
2027 which was entirely undrawn at 31(st) March 2024. There was £334 million
of cash held in money market funds and £208 million of other cash and bank
deposits. Of the existing loans, £271 million of term debt and £40 million
of other bank loans mature in the period to June 2025. Currently, the group is
in the process of refinancing around £310 million of term debt with a US
Private Placement issuance. We assume no refinancing of this debt 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 if required but the going concern conclusion is not
dependent on such access as the company has sufficient financing and liquidity
to fund its obligations in the base and severe-but-plausible scenarios. The
group also has a number of additional sources of funding available including
uncommitted metal 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. To give further assurance on liquidity, we have also
undertaken a reverse stress test to identify what additional or alternative
scenarios and circumstances would threaten our current financing arrangements.
This shows that we have headroom against either a further decline in
profitability well beyond the severe-but-plausible scenario, or a significant
increase in borrowings, or a significant increase in interest charges.
Furthermore, the group has other mitigating actions available which it could
utilise to protect headroom including retaining the full expected proceeds
from divestment of Medical Device Components, reducing capital expenditure,
renegotiating payment terms or reducing future dividends distributions.
The directors are therefore of the opinion that the group has adequate
resources to fund its operations for the period of at least twelve months
following the date of these financial statements and there are no material
uncertainties relating to going concern so determine that it is appropriate to
prepare the accounts on a going concern basis.
Consolidated Income Statement
for the year ended 31(st) March 2024
2024 2023
Notes £m £m
Revenue 2,3 12,843 14,933
Cost of sales (11,916) (13,939)
Gross profit 927 994
Distribution costs (119) (117)
Administrative expenses (398) (412)
(Loss) / profit on disposal of businesses 13 (9) 12
Amortisation of acquired intangibles 4 (4) (5)
Gains and losses on significant legal proceedings 4 - (25)
Major impairment and restructuring charges 5 (148) (41)
Operating profit 249 406
Finance costs (146) (110)
Investment income 64 49
Share of losses of associates (3) (1)
Profit before tax from continuing operations 164 344
Tax expense (56) (80)
Profit for the year from continuing operations 108 264
Profit after tax from discontinued operations - 12
Profit for the year 108 276
pence pence
Earnings per ordinary share
Basic 6 58.6 150.9
Diluted 6 58.3 150.2
Earnings per ordinary share from continuing operations
Basic 6 58.6 144.2
Diluted 6 58.3 143.6
Consolidated Statement of Total Comprehensive Income
for the year ended 31(st) March 2024
2024 2023
Notes £m £m
Profit for the year 108 276
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 14 (68) (149)
Fair value losses on equity investments at fair value through other
comprehensive income (7) (12)
Tax on items that will not be reclassified to the income statement 18 37
Total items that will not be reclassified to the income statement (57) (124)
Items that may be reclassified to the income statement
Exchange differences on translation of foreign operations (79) 33
Exchange differences on translation of discontinued foreign operations - (32)
Amounts (charged) / credited to hedging reserve (1) 114
Fair value gains / (losses) on net investment hedges 4 (10)
Tax on above items taken directly to or transferred from equity 1 (28)
Total items that may be reclassified to the income statement (in subsequent (75) 77
years)
Other comprehensive expense for the year (132) (47)
Total comprehensive (expense) / income for the year (24) 229
Total comprehensive (expense) / income for the year arises from:
Continuing operations (24) 249
Discontinued operations - (20)
(24) 229
Consolidated Statement of Financial Position
as at 31(st) March 2024
2024 2023
Notes £m £m
Assets
Non-current assets
Property, plant and equipment 8 1,436 1,332
Right-of-use assets 40 49
Goodwill 353 364
Other intangible assets 9 301 287
Investments in joint ventures and associates 71 75
Investments at fair value through other comprehensive income 40 49
Other receivables 10 104 113
Interest rate swaps 15 20
Other financial assets 34 48
Deferred tax assets 128 121
Post-employment benefit net assets 14 153 203
Total non-current assets 2,675 2,661
Current assets
Inventories 1,211 1,702
Taxation recoverable 10 12
Trade and other receivables 10 1,718 1,882
Cash and cash equivalents 542 650
Other financial assets 53 47
Assets classified as held for sale 12 127 75
Total current assets 3,661 4,368
Total assets 6,336 7,029
Liabilities
Current liabilities
Trade and other payables 11 (2,209) (2,497)
Lease liabilities (8) (9)
Taxation liabilities (75) (105)
Cash and cash equivalents ─ bank overdrafts (12) (13)
Borrowings and related swaps (110) (155)
Other financial liabilities (11) (27)
Provisions (63) (63)
Liabilities classified as held for sale 12 (35) (25)
Total current liabilities (2,523) (2,894)
Non-current liabilities
Borrowings and related swaps (1,339) (1,460)
Lease liabilities (24) (31)
Deferred tax liabilities (2) (19)
Interest rate swaps (10) (15)
Employee benefit obligations 14 (39) (41)
Provisions (17) (28)
Trade and other payables 11 (2) (2)
Total non-current liabilities (1,433) (1,596)
Total liabilities (3,956) (4,490)
Net assets 2,380 2,539
Equity
Share capital 215 215
Share premium 148 148
Treasury shares (17) (19)
Other reserves 36 118
Retained earnings 1,998 2,077
Total equity 2,380 2,539
The accounts were approved by the Board of Directors on 23(rd) May 2024 and
signed on its behalf by:
Directors
L Condon
S Oxley
Consolidated Statement of Cash Flows
for the year ended 31(st) March 2024
2024 2023
Notes £m £m
Cash flows from operating activities
Profit before tax from continuing operations 164 344
Profit before tax from discontinued operations - 5
Adjustments for:
Share of losses of associates 3 1
Profit on disposal of businesses - (23)
Depreciation 144 151
Amortisation 48 36
Impairment losses 70 27
Profit on sale of non-current assets (2) (6)
Share-based payments 5 7
Decrease / (increase) in inventories 396 (139)
Decrease / (increase) in receivables 89 (102)
Decrease in payables (288) (4)
(Decrease) / increase in provisions (7) 7
Contributions in excess of employee benefit obligations charge (10) (21)
Changes in fair value of financial instruments (10) 22
Net finance costs 82 61
Income tax paid (92) (75)
Net cash inflow from operating activities 592 291
Cash flows from investing activities
Interest received 62 28
Purchases of property, plant and equipment (301) (253)
Purchases of intangible assets (67) (63)
Purchases of investments held at fair value through other comprehensive income - (17)
Government grant income received 5 7
Proceeds from sale of non-current assets 5 8
Proceeds from sale of investments in joint ventures - 2
Proceeds from sale of businesses 41 187
Net cash outflow from investing activities (255) (101)
Cash flows from financing activities
Purchase of treasury shares - (45)
Proceeds from borrowings 1 672
Repayment of borrowings (151) (281)
Dividends paid to equity shareholders 7 (141) (141)
Interest paid (137) (94)
Principal element of lease payments (11) (14)
Net cash (outflow) / inflow from financing activities (439) 97
Change in cash and cash equivalents (102) 287
Exchange differences on cash and cash equivalents (5) 4
Cash and cash equivalents at beginning of year 637 346
Cash and cash equivalents at end of year 530 637
Cash and deposits 208 129
Money market funds 334 521
Bank overdrafts (12) (13)
Cash and cash equivalents 530 637
Consolidated Statement of Changes in Equity
for the year ended 31(st) March 2024
Share
Share premium Treasury Other Retained Total
capital account shares reserves earnings equity
£m £m £m £m £m £m
At 1(st) April 2022 218 148 (24) 50 2,049 2,441
Total comprehensive income - - - 65 164 229
Dividends paid (note 7) - - - - (141) (141)
Purchase of treasury shares (3) - - 3 (1) (1)
Share-based payments - - - - 18 18
Cost of shares transferred to employees - - 5 - (14) (9)
Tax on share-based payments - - - - 2 2
At 31(st) March 2023 215 148 (19) 118 2,077 2,539
Total comprehensive (expense) / income - - - (82) 58 (24)
Dividends paid (note 7) - - - - (141) (141)
Share-based payments - - - - 17 17
Cost of shares transferred to employees - - 2 - (13) (11)
At 31(st) March 2024 215 148 (17) 36 1,998 2,380
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
1 Preparation
Basis of preparation and statement of compliance
The financial statements of the group have been prepared on a going concern
basis in accordance with International Accounting Standards (IAS) in
conformity with the requirements of the Companies Act 2006. The financial
statements are also prepared in accordance with International Financial
Reporting Standards (IFRS) as 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. Except for the changes noted below, the accounting
policies applied are set out in the Annual Report and Accounts for the year
ended 31(st) March 2023.
As at 31(st) March 2024, the group maintains a strong balance sheet with
around £1.5 billion of available cash and undrawn committed facilities. Free
cash flow was strong in the year at £189 million and net debt reduced by £72
million. Net debt at 31(st) March 2024 was £951 million at 1.6 times net debt
(including post tax pension deficits) to underlying EBITDA which was at the
lower end of our target range
The directors have reviewed the base case scenario forecasts for the group and
are of the opinion that the group has adequate resources to fund its
operations for the period of at least twelve months from the date of signing
these financial statements. In forming this view, the base case scenario was
stress tested to represent a severe-but-plausible downside case scenario which
modelled a material reduction in trading.
In both scenarios outlined above, we have sufficient headroom against
committed facilities and key financial covenants are not in breach during the
going concern period. Accordingly, the directors continue to adopt the going
concern basis in preparing the financial statements.
Statutory accounts for 2023 have been delivered to the Registrar of Companies
and those for 2024 will be delivered following the company's Annual General
Meeting. The auditor, PwC, has reported on both sets of accounts. Their
reports were unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying their report
and did not contain any statement under sections 498(2) or 498(3) of the
Companies Act 2006. The accounts for the year ended 31(st) March 2024 were
approved by the Board of Directors on 23(rd) May 2024.
These accounts do not include all the information required for full annual
statements and should be read in conjunction with the 2024 Annual Report. They
are not statutory accounts per section 435 of the Companies Act 2006.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
1 Preparation (continued)
Changes in accounting policies
Amendments to accounting standards
The IASB has issued the following amendments, which have been endorsed by the
UK Endorsement Board, for annual periods beginning on or after 1(st) January
2023:
- Amendments to IFRS 17, Insurance Contracts;
- Amendments to IAS 1 and IFRS Practice Statement 2;
- Amendments to IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors; and
- Amendments to IAS 12, Deferred Tax related to Assets and Liabilities
arising from a Single Transaction
These changes have not had a material impact on the group. The group has not
early adopted any standard, interpretation or amendment that was issued but is
not yet effective.
On the 19(th) July 2023, the UK endorsed the amendments to IAS 12 Income
Taxes, issued by the International Accounting Standards Board on 23(rd) May
2023, which grants companies a temporary exemption from applying IAS 12 to the
International Tax Reform: Pillar Two Model Rules. The group has adopted the
amendments to IAS 12 and applied the exception to recognising and disclosing
information about deferred tax assets and liabilities related to Pillar Two
income taxes.
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.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
2 Segmental information
Revenue, sales, underlying operating profit and net assets by business
Year ended 31(st) March 2024
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Eliminations Total
£m £m £m £m £m £m £m £m
Revenue from external customers 5,219 6,490 634 85 415 - - 12,843
Inter-segment revenue 8 2,432 19 1 - - (2,460) -
Revenue 5,227 8,922 653 86 415 - (2,460) 12,843
External sales 2,573 374 560 71 326 - - 3,904
Inter-segment sales 8 88 18 - - - (114) -
Sales(1) 2,581 462 578 71 326 - (114) 3,904
Underlying operating profit / (loss)(1) 274 164 75 (50) 29 (82) - 410
Segmental net assets 1,351 38 718 271 178 449 - 3,005
Net debt (note 19) (946)
Post-employment benefits net assets and liabilities (note 14) 114
Deferred tax assets 126
Provisions and non-current other payables (82)
Investments in associates 71
Net assets held for sale (note 12) 92
Net assets 2,380
Year ended 31(st) March 2023
Clean PGM Catalyst Hydrogen Value
Air Services Technologies Technologies Businesses Corporate Eliminations Total
£m £m £m £m £m £m £m £m
Revenue from external customers 6,273 7,360 673 62 565 - - 14,933
Inter-segment revenue - 3,227 14 - - - (3,241) -
Revenue 6,273 10,587 687 62 565 - (3,241) 14,933
External sales 2,644 485 547 55 470 - - 4,201
Inter-segment sales - 85 13 - - - (98) -
Sales(1) 2,644 570 560 55 470 - (98) 4,201
Underlying operating profit / (loss)(1) 230 257 51 (45) 40 (68) - 465
Segmental net assets 1,784 (2) 680 114 175 515 - 3,266
Net debt (1,023)
Post-employment benefit net assets and liabilities (note 14) 162
Deferred tax assets 102
Provisions and non-current other payables (93)
Investments in joint ventures and associates 75
Net assets held for sale 50
Net assets 2,539
(1 ) Sales and underlying operating profit are non-GAAP measures (see note
19). 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.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
3 Revenue
Products and services
The group's principal products and services by operating business and
sub-business are disclosed in the table below, together with information
regarding performance obligations and revenue recognition. Revenue is
recognised by the group as contractual performance obligations to customers
are completed.
Sub-business Primary industry Principal products and services Performance obligations Revenue recognition
Clean Air
Light Duty Catalysts Automotive Catalysts for cars and other light duty vehicles Point in time On despatch or delivery
Heavy Duty Catalysts Automotive Catalysts for trucks, buses and non-road equipment Point in time On despatch or delivery
PGM Services
Platinum Group Metal Services Various Platinum Group Metal refining and recycling services Over time Based on output
Platinum Group Metal trading Point in time On receipt of payment
Other precious metal products Point in time On despatch or delivery
Platinum Group Metal chemical, industrial products and catalysts Point in time On despatch or delivery
Catalyst Technologies
Catalysts Chemicals / oil and gas Speciality catalysts and additives Point in time On despatch or delivery
Licensing Chemicals / oil and 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
Hydrogen Technologies
Fuel Cells technologies Various Fuel cell catalyst coated membrane Point in time On despatch or delivery
Electrolysis technology Various Electrolyser catalyst coated membrane Point in time On despatch or delivery
Value Businesses
Other Markets (excluding Diagnostic Services) Various Precious metal pastes and enamels, battery systems and products found in Point in time On despatch or delivery
devices used in medical procedures
Diagnostic Services Oil and gas Detection, diagnostic and measurement solutions Over time Based on costs incurred
(1) Revenue recognition depends on whether the licence is distinct in the
context of the contract.
( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )
Metal revenue: Metal revenue relates to the sales of precious metals to
customers, either in pure form or contained within a product. Metal revenue
arises in each of the reportable segments in the Group. Metal revenue is
affected by fluctuations in the market prices of precious metals and, in many
cases, the value of precious metals is passed directly on to customers. Given
the high value of these metals this makes up a significant proportion of
revenue.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
3 Revenue (continued)
Revenue from external customers by principal products and services
Year ended 31(st) March 2024
Continuing operations
Clean Air PGM Catalyst Hydrogen Value Businesses Total
Services Technologies Technologies
£m £m £m £m £m £m
Metal 2,646 6,116 74 14 89 8,939
Heavy Duty Catalysts 953 - - - - 953
Light Duty Catalysts 1,620 - - - - 1,620
Catalysts - - 500 - - 500
Licensing - - 60 - - 60
Platinum Group Metal Services - 374 - - - 374
Fuel Cells - - - 71 - 71
Battery Systems - - - - 194 194
Diagnostic Services - - - - 37 37
Medical Device Components - - - - 91 91
Other - - - - 4 4
Revenue 5,219 6,490 634 85 415 12,843
Year ended 31(st) March 2023
Continuing operations
Clean Air PGM Catalyst Hydrogen Value Businesses Total
Services Technologies Technologies
£m £m £m £m £m £m
Metal 3,629 6,875 126 7 95 10,732
Heavy Duty Catalysts 970 - - - - 970
Light Duty Catalysts 1,674 - - - - 1,674
Catalyst Technologies - - 547 - - 547
Platinum Group Metal Services - 485 - - - 485
Fuel Cells - - - 55 - 55
Battery Systems - - - - 284 284
Diagnostic Services - - - - 71 71
Medical Device Components - - - - 93 93
Other - - - - 22 22
Revenue 6,273 7,360 673 62 565 14,933
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
4 Operating profit
Operating profit is arrived at after charging / (crediting):
2024 2023
£m £m
Research and development expenditure charged to the income statement 204 213
Less: External funding received from governments (26) (19)
Net research and development expenditure charged to the income statement 178 194
Inventories recognised as an expense 10,962 12,962
Write-down of inventories recognised as an expense 38 (39)
Reversal of write-down of inventories from increases in net realisable value (36) (19)
Net losses / (gains) on foreign exchange 3 (11)
Net losses on foreign currency forwards at fair value through profit or loss - 19
Past service credit - (20)
Depreciation of:
Property, plant and equipment 134 137
Right-of-use assets 10 14
Depreciation 144 151
Amortisation of:
Internally generated intangible assets 1 1
Acquired intangibles 4 5
Other intangible assets 43 30
Amortisation 48 36
Gains and losses on significant legal proceedings - 25
Loss / (profit) on disposal of businesses (note 13) 9 (12)
Impairment losses included in administrative expenses - 3
Impairment losses - 3
Impairment losses and reversals included in major impairment and restructuring 70 10
charges
Restructuring charges included in major impairment and restructuring charges 78 31
Major impairment and restructuring charges (note 5) 148 41
Fees payable to the company's auditor and its associates for:
The audit of the company accounts 2.7 2.4
The audit of the accounts of the company's subsidiaries 2.4 2.4
Total audit fees 5.1 4.8
Audit-related assurance services 0.4 0.4
Total non audit fees 0.4 0.4
Total fees payable to the company's auditor and its associates 5.5 5.2
Gains and losses on significant legal proceedings
During the prior year, the group paid £25 million in respect of a settlement
with a customer on mutually acceptable terms with no admission of fault
relating to failures in certain engine systems for which the group supplied a
particular coated substrate as a component for that customer's emissions
after-treatment systems.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
5 Major impairment and restructuring charges
2024 2023
£m £m
Property, plant and equipment 22 17
Right-of-use assets 1 -
Goodwill 6 4
Other intangible assets - 3
Inventories 29 (8)
Trade and other receivables 12 (6)
Impairment losses and reversals 70 10
Restructuring charges 78 31
Total major impairment and restructuring charges 148 41
The £22 million impairment of Property, Plant and Equipment is inclusive of a
£7 million impairment reversal (see note 8).
Major impairment and restructuring charges are shown separately on the face of
the income statement and excluded from underlying operating profit (see note
19).
Major impairments - the group's net impairment charge of £70 million includes
amounts incurred as we prepared for the disposal of our Value Businesses, of
which £45 million relates to an impairment in Battery Systems (see note 12).
The residual balance is predominantly comprised of £18 million recognised in
relation to the recent slowdown in growth within the hydrogen and fuel cell
market which required us to adapt to the changing demand profiles of our
customers as they navigate this short-term uncertainty.
Major restructuring - the group's transformation programme was launched in May
2022 and was designed to drive increased competitiveness, improved execution
capability and create financial headroom to facilitate further investment in
high growth areas. Restructuring charges of £48 million have been recognised
of which £32 million relates to Johnson Matthey Global Solutions and IT
transformation, with the remainder other redundancy and implementation costs.
The remaining £30 million charge is predominantly related to Clean Air's
ongoing plant consolidation initiatives, of which the majority is redundancy
and exit costs.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
6 Earnings per share
2024 2023
pence pence
Basic 58.6 150.9
Diluted 58.3 150.2
Basic from continuing operations 58.6 144.2
Diluted from continuing operations 58.3 143.6
Earnings per ordinary share have been calculated by dividing profit for the
period by the weighted average number of shares in issue during the period.
Weighted average number of shares in issue 2024 2023
Basic 183,392,681 183,012,301
Dilution for long term incentive plans 859,636 851,432
Diluted 184,252,317 183,863,733
7 Dividends
A final dividend of 55.00 pence per ordinary share has been proposed by the
board which will be paid on 6(th) August 2024 to shareholders on the register
at the close of business on 7(th) June 2024, subject to shareholders'
approval. The estimated amount to be paid is £101 million and has not been
recognised in these accounts.
2024 2023
£m £m
2021/22 final ordinary dividend paid ─ 55.00 pence per share - 100
2022/23 interim ordinary dividend paid ─ 22.00 pence per share - 41
2022/23 final ordinary dividend paid ─ 55.00 pence per share 101 -
2023/24 interim ordinary dividend paid ─ 22.00 pence per share 40 -
Total dividends 141 141
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
8 Property, plant and equipment
Freehold Assets in
land and Leasehold Plant and the course of
buildings improvements machinery construction Total
£m £m £m £m £m
Cost
At 1(st) April 2023 599 28 2,151 360 3,138
Additions 2 - 39 284 325
Transferred to assets classified as held for sale (note 12) - (4) (66) (4) (74)
Transfers from assets in the course of construction 12 1 102 (115) -
Disposals (1) (2) (27) (5) (35)
Disposal of businesses (note 13) (1) - (4) - (5)
Exchange adjustments (20) - (52) (5) (77)
At 31(st) March 2024 591 23 2,143 515 3,272
Accumulated depreciation and impairment
At 1(st) April 2023 284 15 1,499 8 1,806
Charge for the year 16 1 114 3 134
Impairment losses (note 5) - - 20 9 29
Transferred to assets classified as held for sale (note 12) - (2) (47) (3) (52)
Disposals (1) (2) (25) (5) (33)
Disposal of businesses (note 13) (1) - (4) - (5)
Exchange adjustments (8) - (35) - (43)
At 31(st) March 2024 290 12 1,522 12 1,836
Carrying amount at 31(st) March 2024 301 11 621 503 1,436
Carrying amount at 1(st) April 2023 315 13 652 352 1,332
During the year, the group recognised impairments of £29 million. This
impairment charge is included in non-underlying expenses.
The assets transferred to held for sale relates to Medical Device Components
(see note 12). Battery Materials Poland is not included as these were
transferred to held for sale in the prior year. The assets presented within
disposal of businesses relate to Johnson Matthey Catalyst LLC (see note 13).
Diagnostic Services is not included as these were transferred to held for sale
in the prior year.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
9 Other intangible assets
Customer
contracts Patents, Acquired
and Computer trademarks research and Development
relationships software and licences technology expenditure Total
£m £m £m £m £m £m
Cost
At 1(st) April 2023 116 475 43 37 135 806
Additions - 64 1 - - 65
Transferred to assets classified as held for sale (note 12) (10) (1) - (6) - (17)
Disposals - (1) (11) - - (12)
Exchange adjustments (3) (1) (1) (1) (1) (7)
At 31(st) March 2024 103 536 32 30 134 835
Accumulated amortisation and impairment
At 1(st) April 2023 101 209 39 37 133 519
Charge for the year 2 45 - - 1 48
Transferred to assets classified as held for sale (note 12) (10) (1) - (6) - (17)
Disposals - - (11) - - (11)
Exchange adjustments (2) (1) - (1) (1) (5)
At 31(st) March 2024 91 252 28 30 133 534
Carrying amount at 31(st) March 2024 12 284 4 - 1 301
Carrying amount at 1(st) April 2023 15 266 4 - 2 287
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
10 Trade and other receivables
2024 2023
£m £m
Current
Trade receivables 964 1,304
Contract receivables 56 70
Prepayments 74 83
Value added tax and other sales tax receivable 121 142
Advance payments to customers 18 10
Amounts receivable under precious metal sale and repurchase agreements(1) 417 222
Other receivables 68 51
Trade and other receivables 1,718 1,882
Non-current
Value added tax and other sales tax receivable - 3
Advance payments to customers 44 53
Other receivables 60 57
Other receivables 104 113
(1) The fair value of the precious metal contracted to be sold by the group
under sale and repurchase agreements is £398 million (31(st) March 2023:
£215 million).
11 Trade and other payables
2024 2023
£m £m
Current
Trade payables 655 831
Contract liabilities 177 181
Accruals 328 338
Amounts payable under precious metal sale and repurchase agreements(1) 844 838
Other payables 205 309
Trade and other payables 2,209 2,497
Non-current
Other payables 2 2
Trade and other payables 2 2
(1) The fair value of the precious metal contracted to be repurchased by the
group under sale and repurchase agreements is £797 million (31(st) March
2023: £802 million).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
12 Assets and liabilities classified as held for sale
The group drives for efficiency and disciplined capital allocation to enhance
returns, as such we continue to actively manage our portfolio. In line with
this strategy and to focus on our core businesses, during the period we
completed the sale of our Diagnostics Services business. Refer to note 13 for
further information on this disposal.
In March 2024, the group agreed to sell its Medical Device Components business
expecting to realise net proceeds of £530 million which is in excess of the
carrying amount of its assets. The business is classified as a disposal group
held for sale.
Additionally, in March, the group agreed to sell its Battery Systems business.
As at 31(st) March 2024, the proceeds less costs to sell for the Battery
Systems business are estimated to be c.£30 million and so an impairment of
£45 million has been recognised, see note 5. This impairment has been
allocated against goodwill (£6 million), property, plant and equipment (£10
million), right-of-use assets (£1 million) and inventories (£28 million).
The business is classified as a disposal group held for sale.
During the year we recognised an impairment reversal of £7 million for the
land and buildings of our previous Battery Materials business in Poland to
reflect the latest fair value less costs to sell. The original impairment on
the land and buildings was in the year ended 31(st) March 2022.
The major classes of assets and liabilities comprising the businesses
classified as held for sale as at 31(st) March are:
2024
Battery
Medical Device Battery Materials
Components Systems Poland Total 2023
£m £m £m £m £m
Non-current assets
Property, plant and equipment 22 - 25 47 27
Right-of-use-assets 4 - - 4 9
Goodwill 1 - - 1 -
Other intangible assets - - - - 1
Deferred tax assets - 4 - 4 3
Current assets
Inventories 7 29 - 36 5
Trade and other receivables 13 22 - 35 30
Assets classified as held for sale 47 55 25 127 75
Current liabilities
Trade and other payables (5) (22) - (27) (14)
Lease liabilities (1) - - (1) (1)
Taxation liabilities (1) (2) - (3) (1)
Non-current liabilities
Lease liabilities (3) (1) - (4) (9)
Liabilities classified as held for sale (10) (25) - (35) (25)
Net assets of disposal group 37 30 25 92 50
The prior year held for sale balances relate to Battery Materials and
Diagnostic Services.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
13 Disposals
Diagnostic Services
On 29(th) September 2023, the group completed the sale of its Diagnostic
Services business for an enterprise value of £55 million (£47 million on a
debt free basis, after working capital adjustments). The business was
disclosed as a disposal group held for sale as at 31(st) March 2023.
Diagnostic Services
£m
Proceeds
Cash consideration 47
Cash and cash equivalents disposed (3)
Net cash consideration 44
Disposal costs paid (2)
Net cash inflow 42
Assets and liabilities disposed
Non-current assets
Property, plant and equipment 10
Right-of-use-assets 9
Current assets
Inventories 5
Trade and other receivables 32
Cash and cash equivalents 3
Deferred tax assets 3
Current liabilities
Trade and other payables (9)
Non-current liabilities
Lease liabilities (11)
Net assets disposed 42
Diagnostic
Services
£m
Cash consideration 47
Deferred consideration 4
Working capital adjustments at time of disposal 4
Less: carrying amount of net assets sold (42)
Less: disposal costs (8)
Cumulative currency translation loss recycled from other comprehensive income (1)
Profit recognised in the income statement 4
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
13 Disposals (continued)
Johnson Matthey Catalysts LLC
On 15(th) June 2023, the group completed the sale of Johnson Matthey Catalysts
LLC, its operations in Russia, to Catalysts and Technologies LLC for a cash
consideration of £11 million. All assets excluding cash had previously been
impaired. The sale resulted in a net loss on sale of £4 million due to a
cumulative currency translation loss being recycled from other comprehensive
income.
Battery Materials Germany
On 31(st) December 2023, the group completed the sale of the trade and assets
(excluding cash) of its Battery Materials Germany business for a total
consideration of £1 million. There was £nil profit on sale.
Disposal related costs
Included within loss on disposal of businesses is £9 million of disposal
related costs. This is comprised of £7 million for the disposals of Medical
Device Components (£5 million) and Battery Systems (£2 million) which were
signed during the year and £2 million in relation to disposals in prior
years.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
14 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
2024 2024 2024 2023 2023 2023
UK plan US plans Other plans UK plan US plans Other plans
% % % % % %
First year's rate of increase in salaries 3.50 - 2.43 4.40 4.50 3.97
Ultimate rate of increase in salaries 3.50 - 2.20 3.40 4.50 2.20
Rate of increase in pensions in payment 2.90 - 2.20 2.90 - 2.80
Discount rate 4.90 5.20 3.30 4.80 4.90 4.40
Inflation - 2.20 2.20 - 2.50 3.90
- UK Retail Prices Index (RPI) 3.10 - - 3.10 - -
- UK Consumer Prices Index (CPI) 2.75 - - 2.65 - -
Financial information
Movements in the net post-employment benefit assets and liabilities, including
reimbursement rights, were:
UK post- US post-
UK pension - UK pension - retirement retirement
legacy cash balance medical US medical
section section benefits pensions benefits Other Total
£m £m £m £m £m £m £m
At 1(st) April 2023 169 27 (7) 6 (10) (20) 165
Current service cost - in operating profit (2) (15) - (2) - (1) (20)
Administrative expenses - in operating profit (4) - - (1) - - (5)
Interest 7 1 - 1 (1) (1) 7
Remeasurements (65) - - (3) 1 (1) (68)
Company contributions 10 22 1 3 - 2 38
Exchange - - - (2) - 2 -
At 31(st) March 2024 115 35 (6) 2 (10) (19) 117
The post-employment benefit assets and liabilities are included in the balance
sheet as follows:
2024 2024 2024 2023 2023 2023
Post- Post-
employment Employee employment Employee
benefit benefit net benefit benefit net
net assets obligations Total net assets obligations Total
£m £m £m £m £m £m
UK pension - legacy section 115 - 115 169 - 169
UK pension - cash balance section 35 - 35 27 - 27
UK post-retirement medical benefits - (6) (6) - (7) (7)
US pensions 2 - 2 6 - 6
US post-retirement medical benefits - (10) (10) - (10) (10)
Other 1 (20) (19) 1 (21) (20)
Total post-employment plans 153 (36) 117 203 (38) 165
Other long-term employee benefits (3) (3)
Total long-term employee benefit obligations (39) (41)
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
15 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 years.
Notes on the Preliminary Accounts
for the year ended 31st March 2024
15 Fair values (continued)
2024 2023 Fair value
hierarchy
£m £m Level
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive income(1) 40 49 1
Interest rate swaps - assets 15 20 2
Other financial assets(2) 34 48 2
Interest rate swaps - liabilities (10) (15) 2
Borrowings and related swaps (3) (5) 2
Current
Trade receivables(3) 178 329 2
Other receivables(4) 3 21 2
Cash and cash equivalents - money market funds 334 521 2
Cash and cash equivalents - cash and deposits 12 - 2
Other financial assets(2) 53 47 2
Other financial liabilities(2) (11) (27) 2
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps (1,336) (1,455) -
Lease liabilities (24) (31) -
Trade and other receivables 60 57 -
Other payables (2) (2) -
Current
Amounts receivable under precious metal sale and repurchase agreements 398 222 -
Amounts payable under precious metal sale and repurchase agreements (797) (838) -
Cash and cash equivalents - cash and deposits 196 129 -
Cash and cash equivalents - bank overdrafts (12) (13) -
Borrowings and related swaps (110) (155) -
Lease liabilities (8) (9) -
Trade and other receivables 926 1,075 -
Trade and other payables (1,235) (1,478) -
(1) Investments at fair value through other comprehensive income are quoted
bonds purchased to fund pension deficits (£35 million) and an investment held
at fair value through other comprehensive income (£5 million).
(2) Includes forward foreign exchange contracts, forward precious metal price
contracts and currency swaps.
(3) Trade receivables held in a part of the group with a business model to
hold trade receivables for collection or sale. The remainder of the group
operates a hold to collect business model and receives the face value, plus
relevant interest, of its trade receivables from the counterparty without
otherwise exchanging or disposing of such instruments.
(4) Other receivables with cash flows that do not represent solely the payment
of principal and interest.
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 year end.
The fair value of financial instruments, excluding accrued interest, is
approximately equal to book value except for:
2024 2023
Carrying Fair Carrying Fair
amount value amount value
£m £m £m £m
US Dollar Bonds 2023, 2025, 2027, 2028, 2029 and 2030 (507) (474) (648) (618)
Euro Bonds 2023, 2025, 2028, 2030 and 2032 (348) (320) (368) (340)
Sterling Bonds 2024, 2025 and 2029 (145) (137) (145) (137)
KfW US Dollar Loan 2024 (40) (38) (40) (39)
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
16 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 31(st) March 2024, precious metal
leases were
£197 million at closing prices (31(st) March 2023: £138 million). Precious
metal leases do not fall under the scope of IFRS 16.
17 Contingent liabilities
The group is involved in various disputes and claims which arise from time to
time in the course of its business including, for example, in relation to
commercial matters, product quality or liability, employee matters and tax
audits. The group is also involved from time to time in the course of its
business in legal proceedings and actions, engagement with regulatory
authorities and in dispute resolution processes. These are reviewed on a
regular basis and, where possible, an estimate is made of the potential
financial impact on the group. In appropriate cases a provision is recognised
based on advice, best estimates and management judgement. Where it is too
early to determine the likely outcome of these matters, no provision is made.
Whilst the group cannot predict the outcome of any current or future such
matters with any certainty, it currently believes the likelihood of any
material liabilities to be low, and that such liabilities, if any, will not
have a material adverse effect on its consolidated income, financial position
or cash flows.
Following the sale of its Health business in May 2022, the purchaser of the
Health business, Veranova Bidco LP, has issued a claim against the group in
connection with: i) certain alleged representations said to have been made
during the course of the negotiation of the sale and purchase agreement dated
16(th) December 2021 ("SPA"); and, ii) certain warranties given in the SPA at
the time of signing. Having reviewed the claim with its advisers, the group is
of the opinion that it has a defensible position in respect of these
allegations and is vigorously defending its position. The outcome of the legal
proceedings relating to this matter is not certain, since the issues of
liability and quantum will be for determination by the court at trial.
Accordingly, the group is unable to make a reliable estimate of the possible
financial impact at this stage, if any.
18 Transactions with related parties
There have been no material changes in total compensation for key management
personnel during the year.
During the year the group had sales of £17 million (2023: £6 million) with
Veranova. The amounts owed by Veranova were £1 million at 31(st) March 2024
(31(st) March 2023: £3 million).
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
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.
All non-GAAP measures are on a continuing operations basis.
Definitions
-Measure Definition Purpose
Sales(1) Revenue excluding sales of precious metals to customers and the precious metal Provides a better measure of the growth of the group as revenue can be heavily
content of products sold to customers. distorted by year on year fluctuations in the market prices of precious metals
and, in many cases, the value of precious metals is passed directly on to
customers.
Underlying operating profit(2) Operating profit excluding non-underlying items. Provides a measure of operating profitability that is comparable over time.
Underlying operating profit margin(1, 2) Underlying operating profit divided by sales. Provides a measure of how we convert our sales into underlying operating
profit and the efficiency of our business.
Underlying profit before tax(2) Profit before tax excluding non-underlying items. Provides a measure of profitability that is comparable over time.
Underlying profit for the year(2) Profit for the year excluding non-underlying items and related tax effects. Provides a measure of profitability that is comparable over time.
Underlying earnings per share(1, 2) Underlying profit for the year divided by the weighted average number of Our principal measure used to assess the overall profitability of the group.
shares in issue.
Average working capital days (excluding precious metals)(1) Monthly average of non-precious metal related inventories, trade and other Provides a measure of efficiency in the business with lower days driving
receivables and trade and other payables (including any classified as held for higher returns and a healthier liquidity position for the group.
sale) divided by sales for the last three months multiplied by 90 days.
Free cash flow Net cash flow from operating activities after net interest paid, net purchases Provides a measure of the cash the group generates through its operations,
of non-current assets and investments, proceeds from disposal of businesses, less capital expenditure.
dividends received from joint ventures and associates and the principal
element of lease payments.
Net debt (including post tax pension deficits) to underlying EBITDA Net debt, including post tax pension deficits and quoted bonds purchased to Provides a measure of the group's ability to repay its debt. The group has a
fund the UK pension (excluded when the UK pension plan is in surplus) divided long-term target of net debt (including post tax pension deficits) to
by underlying EBITDA for the same period. underlying EBITDA of between 1.5 and 2.0 times, although in any given year it
may fall outside this range depending on future plans.
(1) Key Performance Indicator
(2) Underlying profit measures are before profit or loss on disposal of
businesses, gains or loss on significant legal proceedings, together with
associated legal costs, amortisation of acquired intangibles, major impairment
and restructuring charges, share of profits or losses from non-strategic
equity investments and, where relevant, related tax effects. These items have
been excluded by management as they are not deemed to be relevant to an
understanding of the underlying performance of the business.
As noted in our 2023 annual report, our strategy involves making substantial
investment in the coming years to support the growth and transformation of the
group. Our businesses have different investment and return profiles and
therefore we no longer use a group measure of Return on Invested Capital as a
key performance indicator.
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
19 Non-GAAP measures (continued)
Reconciliations to GAAP measures
Sales
2024 2023
£m £m
Revenue (note 3) 12,843 14,933
Less: sales of precious metals to customers (note 3) (8,939) (10,732)
Sales 3,904 4,201
Underlying profit measures
Year ended 31(st) March 2024
Operating profit Profit before tax Tax expense Profit for the year
£m £m £m £m
Underlying 410 328 (68) 260
Loss on disposal of businesses (9) (9) - (9)
Amortisation of acquired intangibles (4) (4) 1 (3)
Major impairment and restructuring charges (148) (148) 15 (133)
Share of losses of associates - (3) - (3)
Non-underlying tax provisions - - (4) (4)
Reported 249 164 (56) 108
Year ended 31(st) March 2023
Operating profit Profit before tax Tax expense Profit for the year
£m £m £m £m
Underlying 465 404 (78) 326
Profit on disposal of businesses 12 12 (1) 11
Amortisation of acquired intangibles (5) (5) 1 (4)
Gains and losses on significant legal proceedings (25) (25) 5 (20)
Major impairment and restructuring charges (41) (41) (7) (48)
Share of losses of associates - (1) - (1)
Reported 406 344 (80) 264
Underlying earnings per share
2024 2023
Underlying profit for the year (£ million) 260 326
Weighted average number of shares in issue (millions) 183.4 183.0
Underlying earnings per share (pence) 141.3 178.6
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
19 Non-GAAP measures (continued)
Average working capital days (excluding precious metals)
2024 2023
£m £m
Inventories 1,211 1,702
Trade and other receivables 1,718 1,882
Trade and other payables (2,209) (2,497)
720 1,087
Working capital balances classified as held for sale 44 22
Total working capital 764 1,109
Less: Precious metal working capital (174) (622)
Working capital (excluding precious metals) 590 487
Average working capital days (excluding precious metals) 60 42
Free cash flow from continuing operations
2024 2023
£m £m
Net cash inflow from operating activities 592 291
Interest received 62 28
Interest paid (137) (94)
Purchases of property, plant and equipment (301) (253)
Purchases of intangible assets (67) (63)
Purchases of investments held at fair value through other comprehensive income - (17)
Government grant income 5 7
Proceeds from sale of businesses 41 187
Proceeds from sale of non-current assets 5 8
Proceeds from sale of investment in joint ventures - 2
Principal element of lease payments (11) (14)
Less: Free cash inflow from discontinued operations - (8)
Free cash flow 189 74
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
19 Non-GAAP measures (continued)
Net debt (including post tax pension deficits) to underlying EBITDA
2024 2023
£m £m
Cash and deposits 208 129
Money market funds 334 521
Bank overdrafts (12) (13)
Cash and cash equivalents 530 637
Interest rate swaps - non-current assets 15 20
Interest rate swaps - non-current liabilities (10) (15)
Borrowings and related swaps - current (110) (155)
Borrowings and related swaps - non-current (1,339) (1,460)
Lease liabilities - current (8) (9)
Lease liabilities - non-current (24) (31)
Lease liabilities - current - transferred to liabilities classified as held (1) (1)
for sale
Lease liabilities - non-current - transferred to liabilities classified as (4) (9)
held for sale
Net debt (951) (1,023)
(Decrease) / increase in cash and cash equivalents (102) 287
Increase in cash and cash equivalents from discontinued operations - (8)
Decrease / (increase) in borrowings 150 (391)
Less: Principal element of lease payments 11 14
Decrease / (increase) in net debt resulting from cash flows 59 (98)
New leases, remeasurements and modifications (11) (13)
Other lease movements 1 -
Disposals 11 -
Exchange differences on net debt 13 (53)
Other non-cash movements (1) (3)
Movement in net debt 72 (167)
Net debt at beginning of year (1,023) (856)
Net debt at end of year (951) (1,023)
Net debt (951) (1,023)
Add: Pension deficits (22) (21)
Add: Related deferred tax 3 2
Net debt (including post tax pension deficits) (970) (1,042)
Underlying operating profit 410 465
Add back: Depreciation and amortisation excluding amortisation of acquired 188 182
intangibles
Underlying EBITDA 598 647
Net debt (including post tax pension deficits) to underlying EBITDA 1.6 1.6
2024 2023
£m £m
Underlying EBITDA 598 647
Depreciation and amortisation (192) (187)
Gains and losses on significant legal proceedings - (25)
Major impairment and restructuring charges (148) (41)
(Loss) / profit on disposal of businesses (9) 12
Finance costs (146) (110)
Investment income 64 49
Share of losses of associates (3) (1)
Income tax expense (56) (80)
Profit for the year from continuing operations 108 264
Notes on the Preliminary Accounts
for the year ended 31(st) March 2024
20 Events after the balance sheet date
On 30(th) April 2024, the group completed the sale of its Battery Systems
business. Refer to note 12 for further information.
Financial Calendar
2024
6(th) June
Ex dividend date
7(th) June
Final dividend record date
18(th) July
Annual General Meeting (AGM)
6(th) August
Payment of final dividend subject to the approval of shareholders at the AGM
27(th) November
Announcement of the results for the six months ending 30(th) September 2024
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 Johnson Matthey 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: 5(th) Floor, 25 Farringdon Street, London EC4A 4AB
Telephone: +44 (0) 20 7269 8000
Fax: +44 (0) 20 7269 8433
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 00033774
LEI code: 2138001AVBSD1HSC6Z10
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: +44(0)371 384 2344*
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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