Johnson Matthey PLC Half-year Report

Data : 21/11/2019 @ 08:01
Fonte : UK Regulatory (RNS & others)
Titolo : Johnson Matthey Plc (JMAT)
Quotazione : 1683.5  -10.0 (-0.59%) @ 17:35
Quotazione Johnson Matthey Grafico

Johnson Matthey PLC Half-year Report

TIDMJMAT

RNS Number : 1331U

Johnson Matthey PLC

21 November 2019

 
Half year results for the six months ended 30(th) September 2019 
Good sales growth and confident in delivering our strategy 
 
      Robert MacLeod, Chief Executive, commented: 
We continue to execute well against our strategy and delivered first 
 half operating performance in line with expectations. I was pleased 
 with the continued good sales growth, demonstrating our broad based 
 growth drivers, although operating profit was slightly down as a result 
 of one-off costs associated with manufacturing inefficiencies in Clean 
 Air in the first half. 
 
We expect to deliver a stronger second half, primarily driven by the 
 absence of the one-off costs and seasonality in Efficient Natural Resources. 
 For the full year, we expect to deliver group operating performance 
 in line with market expectations. 
 
Given our clear strategy, the strong foundations we have put in place 
 and the ongoing investment into the business for the longer term, we 
 remain confident about the future growth prospects across all of our 
 sectors, which will together drive mid to high single digit growth in 
 earnings per share over the medium term. Our focus remains on executing 
 our strategy, delivering on the ambitions that we laid out at our recent 
 Capital Markets Day and continuing to drive towards our vision to create 
 a cleaner, healthier world. 
 
 
      Reported results                                           Half year ended        % change 
                                                                30(th) September 
                                                                                  -------------- 
                                                               2019         2018 
                                                                     -----------  -------------- 
      Revenue(1)                          GBP million         6,818        4,967             +37 
      Operating profit                    GBP million           259          264              -2 
      Profit before tax (PBT)             GBP million           225          244              -8 
      Earnings per share (EPS)                  pence          91.8        106.1             -13 
      Interim dividend per share                pence         24.50        23.25              +5 
---------------------------------  ------------------  ------------  -----------  -------------- 
 
 
      Underlying performance(2)                            Half year ended        % change                 % change, 
                                                          30(th) September                         constant rates(3) 
----------------------------------------------                              --------------  ------------------------ 
                                                        2019          2018 
------------------------   -------------------  ------------  ------------  --------------  ------------------------ 
      Sales excluding 
       precious metals 
       (sales)(4)                  GBP million         2,124         2,009              +6                        +3 
      Operating profit             GBP million           265           271              -2                        -5 
      Profit before tax            GBP million           231           251              -8                       -10 
      Earnings per share                 pence          95.8         109.0             -12 
-------------------------  -------------------  ------------  ------------  --------------  ------------------------ 
 
Underlying performance(2) 
--                              Sales increased 3% driven by good growth in Clean Air and Efficient 
                                 Natural Resources 
--                              Underlying operating profit declined 5% impacted by c.GBP15 million 
                                 of one-off costs in Clean Air, which included additional freight 
                                 costs and inefficiencies within our manufacturing footprint, driven 
                                 by the phasing of completion of our new plant in Poland as we serve 
                                 the strong growth in our European Light Duty business 
--                              Underlying EPS declined 12% reflecting lower underlying operating 
                                 profit, higher net interest expense and a one-off tax provision 
--                              Capital expenditure of GBP186 million in the first half and estimated 
                                 to be up to GBP500 million in 2019/20, in line with previous guidance, 
                                 as we invest in strategic growth projects 
--                              Free cash flow weaker as expected driven by higher precious metal 
                                 working capital (price and volume) and higher capital expenditure 
--                              Stable average working capital days excluding precious metals 
--                              Return on invested capital (ROIC) lower primarily driven by higher 
                                 precious metal working capital 
--                              Net debt to EBITDA of 2.1x with net debt at GBP1.5 billion, impacted 
                                 by higher precious metal working capital 
 
By sector 
--                              Good growth in Clean Air with sales up 4%, well ahead of the decline 
                                 in global vehicle production, although operating profit was impacted 
                                 by the phasing of completion of our new plant in Poland 
--                              Sales and operating profit growth in Efficient Natural Resources 
                                 driven by strong performance in Pgm Services as a result of higher 
                                 average pgm prices, and improved licensing income 
--                              In Health, sales declined although operating profit grew double digit 
                                 driven by net benefits from footprint optimisation 
--                              New Markets saw good sales growth but lower operating profit due 
                                 to higher costs as we develop eLNO, our portfolio of leading ultra-high 
                                 energy density cathode materials. We continue to make good progress 
                                 with commercialisation of eLNO and recently moved to full cell testing 
                                 with two customers, another significant milestone in the customer 
                                 validation process 
 
Reported results 
--                              Reported revenue increased 37% reflecting higher precious metal prices 
--                              Reported operating profit down 2% 
--                              Reported EPS down 13% reflecting lower operating profit, higher net 
                                 interest expense and a one-off tax provision 
--                              Cash outflow from operating activities of GBP159 million due to an 
                                 increase in precious metal working capital 
--                              Interim dividend up 5% to 24.50 pence given our confidence in the 
                                 group's future prospects 
 
Outlook for the year ending 31(st) March 2020 
--                              For 2019/20, we expect to deliver group operating performance in 
                                 line with market expectations(5) . We expect a stronger second half 
                                 due to the absence of one-off costs, seasonality in Catalyst Technologies 
                                 and efficiency gains in Pgm Services 
 
 
 
Enquiries: 
Investor Relations    Director of Investor Relations     020 7269 8241 
                       Senior Investor Relations 
 Martin Dunwoodie       Manager                           020 7269 8235 
 Louise Curran         Investor Relations Manager         020 7269 8242 
 Jane Crosby 
 
 Media                                                   020 7269 8407 
  Sally Jones         Director of Corporate Relations     020 7353 4200 
  David Allchurch      Tulchan Communications 
 
 
Notes: 
1.  Revenue for the six months ended 30(th) September 2018 has been restated, 
     see note 15 on pages 39 to 40 
2.  Underlying is before profit or loss on disposal of businesses, gain 
     or loss on significant legal proceedings together with associated 
     legal costs, amortisation of acquired intangibles, major impairment 
     and restructuring charges and, where relevant, related tax effects. 
     For definitions and reconciliations of other non-GAAP measures, see 
     pages 41 to 42 
3.  Unless otherwise stated, sales and operating profit commentary refers 
     to performance at constant rates. Growth at constant rates excludes 
     the translation impact of foreign exchange movements, with 2018/19 
     results converted at 2019/20 average exchange rates 
4.  Revenue excluding sales of precious metals to customers and the precious 
     metal content of products sold to customers 
5.  Vara consensus for full year underlying operating profit in 2019/20 
     is GBP595 million (range: GBP583 million to GBP611 million) 
     eLNO is a trademark of Johnson Matthey Public Limited Company 
 

Strategy update

 
At our recent Capital Markets Day, we provided an update on our strategy 
 for sustained growth and value creation. Through our leading positions 
 in high margin, technology driven growth markets, we will deliver attractive 
 and sustainable growth over the medium term: 
 
--                      Mid to high single digit EPS CAGR 
--                      Expanding group ROIC to 20% 
--                      Progressive dividend 
 
Sustained growth for the next decade in Clean Air 
      In Clean Air, we have clear visibility of sustained growth for the next 
       decade as we benefit from tightening legislation globally, particularly 
       in Europe and Asia. This will drive mid single digit growth in operating 
       performance to 2025. 
 
--                            We expect good growth in the short term as we benefit from new legislation 
                               in Asia and tighter legislation in Europe, driving GPF (gasoline particulate 
                               filter) fitment in both regions. Our European business will be maintained 
                               in size to 2025 and we expect to maintain our 65% share of the Light 
                               Duty diesel market in Europe 
--                            Growth will accelerate in the medium term with the full benefits of 
                               the new legislation in China and India. Our Asian business will more 
                               than double in size to 2025 
                        --                              Heavy duty legislation in China and India will be phased in 
                                                        from 
                                                        2020 and drives a tripling of value per vehicle to us 
                        --                              Implementation of China 6 light duty legislation will on 
                                                        average 
                                                        double the value per vehicle to us from July 2023 when the 
                                                        second 
                                                        phase of legislation is enacted 
--                            Growth is expected to moderate in the longer term with the increased 
                               penetration of pure battery electric vehicles 
--                            We will deliver planned efficiencies from optimising our cost base 
                               and processes, and expect to maintain margins and return on capital 
                               in the medium term 
--                            Construction of our new manufacturing plants is progressing. Our new 
                               plants in Poland and China are nearing completion and construction 
                               of our plant in India is underway. As these plants ramp up they will 
                               drive further growth and efficiencies across the sector 
 
Market leading growth in Efficient Natural Resources 
      In Efficient Natural Resources, we have stabilised the business through 
       restructuring and are on plan with our programme to modernise our operations, 
       whilst targeting investment in R&D for future growth. We expect this 
       sector to deliver mid to high single digit growth in operating performance 
       to 2025 through: 
 
--                            Focused investment in higher growth sub-segments 
--                            Leveraging and evolving our existing technology to meet customer requirements 
--                            Further simplification of our product portfolio to optimise and improve 
                               our offering to the market 
--                            Delivering planned efficiency benefits as we focus on areas including 
                               procurement, operational excellence and build our commercial expertise 
--                            Steady income from licensing with growth in the medium term as we 
                               extend our technologies into new applications and markets, for example 
                               commercialisation of newly developed technology including Fischer 
                               Tropsch waste to aviation fuel and mono ethylene glycol 
--                            Business development projects to support longer term growth, for example, 
                               battery materials recycling and work with various partners to drive 
                               the acceleration of adoption of hydrogen as a more significant part 
                               of the energy mix 
 
Breakout growth in Health 
      In Health, we are making strong progress on operational improvements 
       and will deliver breakout growth over the medium term as we benefit from 
       the commercialisation of our pipeline of new generic and innovator products. 
 
      Following our Capital Markets Day, the further political and regulatory 
       focus on opioid addiction - principally in the United States - has created 
       uncertainty in the market for opioid addiction therapies, principally 
       Suboxone products. We are well positioned in this attractive and growing 
       segment as it evolves, supplying active pharmaceutical ingredients (APIs) 
       to several customers and remain confident in the long term growth prospects. 
       However, these recent developments mean that we now expect Health operating 
       performance in the second half of 2019/20 to be broadly in line with 
       the first half. 
 
--                            This is primarily driven by lower demand in the short term for a single 
                               API due to the recent and ongoing developments in the opioid addiction 
                               therapy market 
--                            Whilst these developments impact the performance of our base business, 
                               the timing of delivery and value of our pipeline of generic and innovator 
                               APIs is unaffected and we continue to expect an incremental c.GBP100 
                               million of operating profit from this by 2025 
--                            We remain focused on stabilising short term performance in this business, 
                               delivering the value from our pipeline and executing our strategy 
                               for breakout growth 
 
Significant progress in commercialisation of eLNO 
      eLNO is our portfolio of leading ultra-high energy density cathode materials 
       which will compete with future materials such as NMC 811. eLNO will suit 
       a broad range of applications in electric vehicles and, in particular, 
       enable greater adoption of long range, pure battery electric vehicles. 
 
      We are making significant progress in commercialising eLNO. We continue 
       to test our materials with target customers and customer feedback remains 
       positive, in particular our ability to provide tailored solutions to 
       solve their specific problems. Recently, we moved to full cell testing 
       with two customers which is another significant milestone and point of 
       validation in the commercialisation process. These two customers have 
       reduced the number of potential suppliers they are testing with and are 
       collaborating with us more intensively to further develop, formulate 
       and test eLNO. This gives us increased confidence that our materials 
       provide the solutions our customers seek. 
 
      There is also ongoing work as we consider options for manufacturing scale 
       up. We recently made the decision to progress directly from our pilot 
       plant to our first commercial plant, which resulted in an impairment 
       of GBP8 million to our demo plant. Our first commercial plant is expected 
       to be on stream in 2022 and supplying platforms in production in 2024. 
       Our total investment to commercial production from our plant will amount 
       to c.GBP350 million. Beyond this, scale up is likely to be phased as 
       we match capacity to market demand. 
 
      Working capital and efficiencies remain a strong focus 
      We continue to have a disciplined approach to working capital and remain 
       focused on building a more efficient business to strengthen our platform 
       for growth and increase our agility. 
 
      Precious metal working capital 
      We use precious metals such as platinum, palladium and rhodium which 
       are processed and converted into manufactured goods. As a result, there 
       is a precious metal component to our working capital. The exposure to 
       these metals is principally within Clean Air and Efficient Natural Resources. 
 
      In the period, average palladium and rhodium prices were up 52% and 58% 
       respectively which had an associated impact to precious metal working 
       capital and return on invested capital. 
 
--                            Higher precious metal working capital: an outflow of GBP352 million 
                               driven by the impact of higher pgm prices (GBP271 million) and also 
                               volumes (GBP81 million). Higher pgm prices have a direct impact on 
                               precious metal working capital and also liquidity and funding requirements 
                               due to lower customer metal. We also had stock builds related to roll 
                               out of our single global ERP system and the UK's planned withdrawal 
                               from the European Union as well as higher working capital to support 
                               business growth 
--                            Impact on return on invested capital: this declined to 15.0% (1H 2018/19: 
                               16.7%) driven by higher precious metal working capital. ROIC excluding 
                               the impact of the increase in precious metal working capital was 15.9% 
      Non precious metal working capital 
      We are targeting an improvement in average non precious metal working 
       capital to between 50 and 60 days over the medium term and in the period, 
       we achieved 61 days (1H 2018/19: 61 days) 
 
      Summary of efficiency initiatives 
      We are focusing on areas including procurement, restructuring and manufacturing 
       footprint optimisation in Health which will together deliver GBP145 million 
       of savings by 2022/23. 
 
--                            Global procurement - as our global procurement process builds, we 
                               are continuing to realise benefits and are on track to deliver the 
                               expected GBP100 million of savings to 2022/23. Of these savings, around 
                               three quarters will benefit the income statement and around two thirds 
                               will be reinvested. In 2019/20, we expect around GBP23 million of 
                               savings to benefit the income statement, of which GBP13 million was 
                               achieved in the first half 
--                            Group restructuring programme - now complete with the delivery of 
                               annualised cost savings of around GBP25 million 
--                            Health footprint optimisation - delivered GBP20 million of annualised 
                               cost savings following the closure of our manufacturing plant in Riverside, 
                               US 
 
Initiative                                                    Total             Achieved in                 Achieved 
 GBP million                                                                     the period                  to date 
-------------------------------------------------  ----------------  ----------------------  ----------------------- 
Procurement                                                     100                      15                       43 
Restructuring                                                    25                       1                       25 
Footprint optimisation                                           20                       5                       20 
-------------------------------------------------  ----------------  ----------------------  ----------------------- 
Total                                                           145                      21                       88 
-------------------------------------------------  ----------------  ----------------------  ----------------------- 
 
 
 
Summary of underlying operating results 
Unless otherwise stated, commentary refers to performance at constant 
 rates. Percentage changes in the tables are calculated on unrounded numbers 
 
 
Sales                             Half year ended  % change        % change, 
 (GBP million)                   30(th) September             constant rates 
----------------------------                       --------  --------------- 
                                   2019      2018 
----------------------------  ---------  --------  --------  --------------- 
Clean Air                         1,392     1,312        +6               +4 
Efficient Natural Resources         496       463        +7               +4 
Health                              111       118        -6               -9 
New Markets                         186       173        +7               +5 
Eliminations                       (61)      (57) 
Sales                             2,124     2,009        +6               +3 
----------------------------  ---------  --------  --------  --------------- 
 
 
Underlying operating profit       Half year ended  % change        % change, 
 (GBP million)                   30(th) September             constant rates 
----------------------------                       --------  --------------- 
                                   2019      2018 
----------------------------  ---------  --------  --------  --------------- 
Clean Air                           179       191        -6               -9 
Efficient Natural Resources          94        85        +9               +6 
Health                               18        15       +25              +21 
New Markets                         (8)         3       n/a              n/a 
Corporate                          (18)      (23) 
Underlying operating profit         265       271        -2               -5 
----------------------------  ---------  --------  --------  --------------- 
 
 
Reconciliation of underlying operating profit       Half year ended 
 to operating profit                               30(th) September 
 (GBP million) 
                                                     2019      2018 
----------------------------------------------  ---------  -------- 
Underlying operating profit                           265       271 
Amortisation of acquired intangibles                  (6)       (7) 
Operating profit                                      259       264 
----------------------------------------------  ---------  -------- 
 

Operating results by sector

Clean Air

 
Good sales growth but operating profit impacted by one-off costs 
--        Light Duty Europe sales up 13% with strong growth in both gasoline 
           and diesel driven by increasing fitment of gasoline particulate filters 
           and annualisation of our diesel share gains 
--        Light Duty Asia sales grew 6%, ahead of declining market production 
--        Light Duty Americas sales were down 7% driven by weaker diesel sales 
--        Sales of Heavy Duty Diesel catalysts were slightly lower, with growth 
           in US Class 8 more than offset by a decline in Europe and Asia 
--        Operating profit was down 9% and margin declined 1.7 percentage points 
           to 12.9% impacted by one-off costs associated with manufacturing 
           inefficiencies 
 
 
                                              Half year ended  % change  % change, constant 
                                             30(th) September                         rates 
                                                               --------  ------------------ 
                                            2019         2018 
                                                               --------  ------------------ 
                                     GBP million  GBP million 
-----------------------------------  -----------  -----------  --------  ------------------ 
Sales 
LDV Europe                                   540          479       +13                 +13 
LDV Asia                                     193          177        +9                  +6 
LDV Americas                                 171          175        -2                  -7 
Total Light Duty Vehicle Catalysts           904          831        +9                  +7 
 
HDD Americas                                 258          234       +10                  +4 
HDD Europe                                   154          165        -7                  -7 
HDD Asia                                      52           63       -18                 -20 
Total Heavy Duty Diesel Catalysts            464          462         -                  -3 
 
Other - stationary                            24           19       +34                 +30 
 
Total sales                                1,392        1,312        +6                  +4 
 
Underlying operating profit                  179          191        -6                  -9 
Margin                                     12.9%        14.6% 
Return on invested capital (ROIC)          26.5%        30.9% 
Reported operating profit                    178          190        -6 
-----------------------------------  -----------  -----------  --------  ------------------ 
 

Estimated LDV sales and production (number of light duty vehicles)*

 
                                Half year ended 30(th) September 
                                          2019              2018       % 
                                      millions          millions  change 
--------------  -----------  -----------------  ----------------  ------ 
North America   Sales                     10.4              10.6      -2 
 Production                                8.5               8.4      +2 
 
Total Europe    Sales                     10.4              10.5      -1 
 Production                               10.5              10.7      -2 
 
Asia            Sales                     18.9              20.5      -8 
 Production                               21.7              23.3      -7 
 
Global          Sales                     44.5              46.8      -5 
 Production                               44.0              45.9      -4 
 --------------------------  -----------------  ----------------  ------ 
 

Estimated HDD truck sales and production (number of trucks)*

 
                               Half year ended 30(th) September 
                                         2019              2018       % 
                                    thousands         thousands  change 
--------------  -----------  ----------------  ----------------  ------ 
North America   Sales                     325               306      +6 
 Production                               333               314      +6 
 
Total Europe    Sales                     241               227      +6 
 Production                               290               293      -1 
 
Asia            Sales                     871             1,010     -14 
 Production                               901               967      -7 
 
Global          Sales                   1,516             1,618      -6 
 Production                             1,592             1,634      -3 
 --------------------------  ----------------  ----------------  ------ 
 

*Source: LMC Automotive

 
Light Duty Vehicle (LDV) Catalysts 
Our LDV Catalyst business provides catalysts for emission control after-treatment 
 systems that reduce emissions for cars and other light duty vehicles 
 powered by diesel and gasoline. The business grew 7%, well ahead of 
 the decline in global vehicle production. 
 
In Europe, where diesel accounts for around 80% of our LDV business, 
 sales grew 13% with strong sales in both diesel and gasoline, despite 
 a decline in market production. 
 
Sales of diesel catalysts were up 6% driven by the annualisation of 
 diesel market share gains as we maintained market share of c.65% in 
 light duty diesel vehicles. 
 
In Western Europe, diesel accounted for 32% of new passenger car sales 
 in the first half of 2019/20 compared with 34% in the second half of 
 last year. Light duty commercial vehicles remain largely diesel today. 
 When these are included, the overall share of diesel sales in Western 
 Europe was 39% for the first half of 2019/20, compared with 42% in the 
 second half of 2018/19. We continue to assume a diesel share of around 
 25% of total light duty vehicles and 20% of cars in 2025. 
 
Sales of gasoline catalysts were up 49%, significantly ahead of market 
 production. Growth was driven by new platforms in production and an 
 increased number of high value coated gasoline particulate filters (GPFs) 
 sold in the period. We expect the number of vehicles with coated GPFs 
 will continue to increase in the medium term, increasing our sales value 
 per gasoline vehicle by up to two times. 
 
Sales in Asia LDV grew 6%, with growth across most of our key markets 
 and well ahead of the decline in market production. This was driven 
 by increased sales of high value coated GPFs due to the beginning of 
 light duty China 6 legislation. Over the medium term, our Asian business 
 will more than double in size as we capture growth from tightening legislation 
 in China and India. 
 
Sales in Americas LDV were down 7%, whilst market production grew. This 
 was driven by a weaker performance in diesel following a temporary pause 
 in production at one of our customers and the ramp down of a platform. 
 
Heavy Duty Diesel (HDD) Catalysts 
Our HDD Catalyst business provides catalysts for emission control after-treatment 
 systems that reduce emissions for trucks, buses and non-road equipment. 
 Sales declined 3%, in line with global market production. We saw growth 
 in Americas HDD catalyst business, however this was offset by our HDD 
 businesses in Asia and Europe. 
 
Sales in our Americas HDD catalyst business grew 4%. Sales of catalysts 
 for Class 8 trucks grew with continued strength in the US truck cycle, 
 although behind market production due to phasing of platforms. We saw 
 high levels of production peak towards the end of the first half and 
 continue to expect production to decline in the second half as the cycle 
 rolls over. 
 
Sales in our European HDD Catalyst business declined 7%. This was driven 
 by our non-road business which was lower following a pre-buy in the 
 prior year ahead of new legislation and lower exports outside of Europe. 
 We maintained our market share. 
 
Sales in the Asian HDD Catalyst business were down 20%, behind market 
 production. This was primarily driven by China, where sales fell 23% 
 mainly due to the phasing as our customers transition from China 5 to 
 China 6 products. 
 
Underlying operating profit 
Operating profit declined 9% and margin declined by 1.7 percentage points 
 primarily driven by 
 c.GBP15 million of one-off costs, which included additional freight 
 costs and inefficiencies within our manufacturing footprint. This was 
 caused by the phasing of completion of our new plant in Poland as we 
 serve the strong growth in our European Light Duty business. 
 
ROIC 
ROIC was down 4.4 percentage points to 26.5% reflecting higher working 
 capital and invested capital from our three new plants which is not 
 yet yielding returns. 
 
Outlook 
We expect operating performance in 2019/20 to be below the prior year, 
 weighted to the second half. In the second half, we will benefit from 
 the absence of one-off costs experienced in the first half. 
 

Efficient Natural Resources

 
Sales and operating profit growth 
--        Sales growth driven by strong performance in Pgm Services and improved 
           licensing income 
--        Good operating profit growth and margin improved 0.3 percentage points 
           to 18.8%, driven by higher average pgm prices partly offset by higher 
           costs as we continue to invest in our refineries and the absence 
           of one-off benefits from improved efficiency in the prior period 
 
 
                                              Half year ended  % change  % change, constant 
                                             30(th) September                         rates 
                                            2019         2018 
                                     GBP million  GBP million 
Sales 
Catalyst Technologies                        274          264        +4                  +1 
Pgm Services                                 150          128       +17                 +13 
Advanced Glass Technologies                   37           39        -6                  -7 
Diagnostic Services                           35           32        +9                  +9 
Total sales                                  496          463        +7                  +4 
 
Underlying operating profit                   94           85        +9                  +6 
Margin                                     18.8%        18.5% 
Return on invested capital (ROIC)          12.9%        12.6% 
Reported operating profit                     91           82       +10 
-----------------------------------  -----------  -----------  --------  ------------------ 
 
 
 
Catalyst Technologies 
Our Catalyst Technologies business licenses technology and manufactures 
 speciality catalysts and additives for the chemicals and oil and gas 
 industries. Sales improved with good growth in licensing partly offset 
 by lower sales of copper zeolites to Clean Air. Refill catalysts and 
 additives were stable following a very strong prior period, and first 
 fills were broadly flat as expected. 
 
Refill catalysts and additives is recurring business which makes up 
 the majority of sales within Catalyst Technologies. In refill catalysts, 
 sales were up, ahead of the market. We saw good performance in ammonia 
 and formaldehyde, although weaker relative performance in methanol following 
 strong demand in the prior period. In additives, sales were down due 
 to feedstock dynamics and a planned maintenance shutdown at one of our 
 plants. 
 
Our licensing business is dependent on new plant builds and income is 
 recognised over the period of construction. In the year, licensing income 
 saw good performance driven by formaldehyde and we also began to recognise 
 income from recent licence wins, which includes our newly developed 
 mono ethylene glycol technology. We signed three new licences in the 
 period and are pleased with the progress in developing and commercialising 
 new technologies. 
 
 
Pgm Services 
Our Pgm Services business primarily provides a strategic service to 
 the group, mainly supporting Clean Air with security of metal supply 
 in a volatile market. This business is expected to grow at low single 
 digits over the medium term. It comprises our pgm refining and recycling 
 activities, and produces chemical and industrial products containing 
 pgms. 
 
In the period, sales grew 13%. We saw strong growth in our refining 
 and trading businesses due to higher and more volatile average pgm prices. 
 Average palladium and rhodium prices were up 52% and 58% respectively, 
 while platinum was up 1% compared to the same period last year. Sales 
 of chemical products grew driven by growth in Clean Air which uses pgm 
 materials in its catalyst products, however, sales of industrial products 
 containing pgms were down. 
 
Following the unscheduled downtime in one of our pgm refineries in 2018/19 
 which resulted in higher precious metal working capital, we continue 
 to make progress in reducing the volume of precious metal working capital 
 in our refineries and still expect to be at normalised levels by the 
 end of 2020/21. However, despite reducing our backlog volumes, the sharp 
 increase in pgm prices has led to the value of precious metal working 
 capital increasing in the period. 
 
 As previously announced, the GBP100 million investment in our new refinery 
 is well underway. This will ensure our assets operate effectively and 
 reliably, improving returns and strengthening our position as a long 
 term supplier to our customers. 
 
Advanced Glass Technologies 
Advanced Glass Technologies mainly provides black obscuration enamels 
 and silver paste for automotive glass applications. Sales were lower, 
 primarily driven by the automotive segment reflecting both a slowdown 
 in global car production and some loss of market share in non-automotive 
 product segments across Europe. 
 
 
Diagnostic Services 
Diagnostic Services provides specialised detection, diagnostic and measurement 
 solutions for our customers in the petroleum industry. Our Diagnostic 
 Services business grew strongly. A higher, stable oil price drove greater 
 activity in the upstream oil and gas industry leading to higher capital 
 investment and increased operating expenditure by our customers. This 
 resulted in improved demand for our services. 
 
Underlying operating profit 
Operating profit was up 6% and margin improved 0.3 percentage points 
 to 18.8%, driven mainly by a GBP14 million benefit from higher average 
 pgm prices partly offset by higher costs as we continue to invest in 
 our refineries and one-off benefits of GBP5 million in the prior period 
 from improved efficiency. 
 
ROIC 
ROIC increased 0.3 percentage points to 12.9%. 
 
Outlook 
In 2019/20, we expect sales growth with operating profit growth ahead 
 of sales as we continue to drive efficiencies in our business and maintain 
 our focus on higher growth segments. Second half performance will benefit 
 from normal seasonality and the timing of orders in Catalyst Technologies, 
 and efficiency gains in Pgm Services. 
 

Health

 
Sales declined although operating profit grew double digit 
--        Innovators grew double digit whilst generics declined, with no new 
           launches in the period 
--        Operating profit grew double digit and margin improved 4.1 percentage 
           points. This was primarily driven by net benefits from footprint optimisation 
--        Health operating performance in the second half of 2019/20 is now 
           expected to be broadly in line with the first half reflecting recent 
           developments in the opioid addiction therapy market. The timing of 
           delivery and value of our pipeline of generic and innovator APIs is 
           unaffected and we continue to expect an incremental c.GBP100 million 
           of operating profit from this by 2025 
 
 
                                              Half year ended  % change  % change, constant 
                                             30(th) September                         rates 
                                            2019         2018 
                                     GBP million  GBP million 
Sales 
Generics                                      67           80       -16                 -19 
Innovators                                    44           38       +17                 +11 
Total sales                                  111          118        -6                  -9 
 
Underlying operating profit                   18           15       +25                 +21 
Margin                                     16.5%        12.4% 
Return on invested capital (ROIC)           9.5%         7.4% 
Reported operating profit                     18           15       +26 
-----------------------------------  -----------  -----------  --------  ------------------ 
 
 
 
      Generics 
      Our Generics business develops and manufactures generic active pharmaceutical 
       ingredients (APIs) for a variety of treatments. Sales were down significantly, 
       with a mixed performance across the business. 
 
      Sales of controlled APIs were flat. We saw growth in sales of speciality 
       opiates but this was offset by lower sales of APIs for ADHD treatments 
       as certain high margin ADHD APIs moved through their natural lifecycle. 
       Sales of bulk opiates in Europe were stable. 
 
      Our non-controlled APIs declined as expected. This primarily reflected 
       a continued reduction in sales of dofetilide as new competitors for 
       our customer entered the market. 
 
      Innovators 
      Our Innovators business performed well. We saw growth from sales of 
       APIs from customers in four late stage testing programmes who are increasing 
       volumes ahead of commercialisation. This included higher sales in relation 
       to our strategic manufacturing partnership with Immunomedics for the 
       manufacture of a drug linker used in the production of an immuno-oncology 
       treatment for triple negative breast cancer. 
 
API product pipeline 
      We continued to invest in our new product pipeline across both our Generics 
       and Innovators businesses and remain confident in delivering an additional 
       c.GBP100 million of operating profit by 2025. Overall, our pipeline 
       comprises 75 molecules which includes generic APIs, innovator APIs and 
       new applications. Within this, 33 molecules will generate the additional 
       c.GBP100 million of operating profit by 2025 and the remainder will 
       support growth beyond this timeframe. 
 
In the period, we continued to make progress in developing and commercialising 
 our pipeline of new generic and innovator products. At the end of September, 
 3 molecules had launched, 10 generics were awaiting regulatory approval 
 and 4 products were late stage innovator programmes. 
 
Underlying operating profit 
Operating profit grew double digit and margin improved 4.1 percentage 
 points. This was mainly driven by net benefits from footprint optimisation. 
 
ROIC 
ROIC increased 2.1 percentage points to 9.5% mainly driven by higher 
 operating profit. 
 
Outlook 
      As described on page 4, Health operating performance in the second half 
       of 2019/20 is now expected to be broadly in line with the first half. 
       This primarily reflects lower demand in the short term, due to the recent 
       and ongoing developments in the opioid addiction therapy market, for 
       a single API used in Suboxone products. The timing of delivery and value 
       of our pipeline of generic and innovator APIs is unaffected and we continue 
       to expect an incremental c.GBP100 million of operating profit from this 
       by 2025. 
 

New Markets

 
Good sales growth; further progress on commercialisation of eLNO 
--        Sales growth driven by strong demand for our non-automotive battery 
           systems and fuel cells 
--        Operating profit declined due to higher costs as we develop eLNO 
           and an impairment of 
           GBP8 million related to our demo plant 
--        Commercialisation of eLNO is progressing well and we have advanced 
           to full cell testing with two customers 
 
 
                                             Half year ended              % change  % change, constant 
                                            30(th) September                                     rates 
                                           2019         2018 
                                    GBP million  GBP million 
Sales 
Alternative Powertrain                      110           98                   +13                 +12 
Medical Device Components                    37           36                    +3                  -1 
Life Science Technologies                    23           23                     -                  -3 
Other                                        16           16                    -5                  -9 
Total sales                                 186          173                    +7                  +5 
 
Underlying operating profit                 (8)            3 
Margin                                    -4.2%         1.6% 
Return on invested capital (ROIC)         -3.2%         5.1% 
Reported operating loss                    (10)            - 
----------------------------------  -----------  -----------  --------------------  ------------------ 
 
 
Alternative Powertrain 
Our Alternative Powertrain business provides battery systems for a range 
 of applications, fuel cell technologies and battery materials for automotive 
 applications. Our battery materials business comprises lithium iron 
 phosphate (LFP) materials as well as eLNO, our portfolio of leading 
 ultra-high energy density cathode materials. Alternative Powertrain 
 sales grew 12% driven by continued momentum in battery systems for e-bikes 
 and significant growth in Fuel Cells. 
 
Commercialisation of eLNO 
eLNO will compete with future ultra-high energy density cathode materials 
 such as NMC 811. We continue to make good progress in the development 
 and commercialisation of our portfolio. 
 
Testing of our materials with our target customers is progressing well 
 and feedback remains positive. As previously announced, we have progressed 
 to full cell testing with two customers, which is another significant 
 milestone and point of validation in the commercialisation process. 
 These two customers have reduced the number of potential suppliers they 
 are testing with and are collaborating with us more intensively to further 
 develop, formulate and test eLNO. This gives us increased confidence 
 that our materials provide the solutions our customers seek. 
 
Plans for manufacturing scale up are continuing. We recently made the 
 decision to progress directly from our pilot plant to our first commercial 
 plant in Konin, Poland, which resulted in an impairment of GBP8 million 
 to our demo plant. Our first commercial plant is expected to be on stream 
 in 2022 and supplying platforms in production in 2024. This plant will 
 initially produce 10,000 metric tonnes per annum but the site has the 
 potential for expansion up to 100,000 metric tonnes. 
 
Fuel Cells 
Sales in Fuel Cells grew 62% to GBP15 million, with increased demand 
 for non-automotive applications and new business wins in China. We are 
 investing GBP15 million in new capacity in both the UK and China to 
 support growth in demand. 
 
Medical Device Components 
Our Medical Device Components business leverages our science and technology 
 to develop products found in devices used in medical procedures. Sales 
 were broadly flat as we continue to experience increased competition 
 in the market with a number of customers moving to dual sourcing. 
 
Life Science Technologies 
Life Science Technologies provides advanced catalysts to the pharmaceutical 
 and agricultural chemicals markets. Sales were broadly stable in the 
 period. 
 
Underlying operating profit 
Operating profit declined due to higher costs as we develop eLNO, which 
 includes an GBP8 million impairment following our decision not to proceed 
 with our demo plant. 
 
 
ROIC 
ROIC decreased to -3.2%. 
 
Outlook 
New Markets is expected to deliver sales and operating profit growth 
 in 2019/20. 
 
Corporate 
Corporate costs in the period were GBP18 million, a decrease of GBP5 
 million due to cost saving initiatives and lower legal costs. 
 
Outlook 
Corporate costs are now expected to be below the prior year in 2019/20. 
 
 
Financial review 
Restatements 
At the full year, we concluded that location and form swaps and sale 
 and repurchase agreements entered into by our Pgm Services business 
 within Efficient Natural Resources should not be included within statutory 
 revenue. Consequently, we have excluded these transactions from statutory 
 revenue in 2019, and we have also fully restated the prior half financial 
 statements to reflect these changes. This results in both periods now 
 being presented on a consistent basis. 
 
The impact of the restatement is to reduce both revenue and cost of 
 sales in respect of swaps and sale and repurchase agreements for the 
 six months ended 30(th) September 2018 by GBP2.1 billion. The restatement 
 has no net impact on sales, profit, working capital, net debt or net 
 assets. Historic business performance measures communicated by Johnson 
 Matthey are unchanged. Full details are given in note 15 on pages 39 
 to 40. 
 
IFRS 16 
IFRS 16 came into effect from 1(st) April 2019 and replaces IAS 17, 
 Leases. Upon transition, the group recognised right-of-use assets and 
 lease liabilities of GBP89 million and GBP77 million respectively on 
 the balance sheet. 
 
For the year ending 31(st) March 2020, we anticipate an increase in 
 underlying operating profit of GBP2 million and an additional interest 
 cost of GBP3 million. Consequently, the group estimates that profit 
 before tax will be reduced by approximately GBP1 million for the year 
 ending 31(st) March 2020 as a result of adopting IFRS 16. Full details 
 are given in note 14 on pages 37 to 39. 
 
Research and development (R&D) 
We invested GBP100 million in R&D in the half, including GBP12 million 
 of capitalised R&D, around 5% of sales. Key areas of spend included 
 next generation technologies in Clean Air, improving the efficiency 
 and resiliency of our refineries in Efficient Natural Resources, our 
 Health API product pipeline and investment in our eLNO battery material. 
 
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 83% of non-sterling 
 denominated underlying operating profit in the half year ended 30(th) 
 September 2019, were: 
 
 
 
                         Share of H1 2019/20      Average exchange rate 
                    non-sterling denominated     Half year ended 30(th) 
                        underlying operating                  September 
                                      profit 
                                                      2019         2018  % change 
                                                            -----------  -------- 
US dollar                                44%         1.257        1.329        -5 
Euro                                     31%         1.126        1.131         - 
Chinese renminbi                          8%          8.70         8.77        -1 
-----------------  -------------------------  ------------  -----------  -------- 
 
 
For the half, the impact of exchange rates increased sales by GBP47 
 million and increased underlying operating profit by GBP8 million. 
 
If current exchange rates (GBP:$ 1.295, GBP:EUR 1.160, GBP:RMB 9.11) 
 are maintained throughout the year ending 31(st) March 2020, foreign 
 currency translation will have a negative impact of approximately GBP5 
 million on underlying operating profit. A one cent change in the average 
 US dollar and euro exchange rates each have an impact of approximately 
 GBP1 million on full year underlying operating profit and a ten fen 
 change in the average rate of the Chinese renminbi has an impact of 
 less than GBP1 million. 
 
Pgm prices 
Higher average pgm prices benefited operating profit by around GBP14 
 million in the period in Efficient Natural Resources. 
 
Major impairment and restructuring charges 
We had no major impairment and restructuring charges in the half year 
 ended 30(th) September 2019. Cash spend in relation to ongoing restructuring 
 was GBP1 million in the period. 
 
      Our group restructuring programme is now complete, having achieved a 
       further GBP1 million of benefits in the half. This programme delivers 
       annualised cost savings of around GBP25 million. 
 
      The closure of our manufacturing plant in Riverside, US, is now complete 
       and delivers annualised cost savings of around GBP20 million, having 
       delivered GBP5 million of savings in the half. 
 
 
Finance charges 
      Net finance charges in the period amounted to GBP36 million, an increase 
       of GBP16 million from the first half year ended 30(th) September 2018. 
       This increase was primarily driven by higher precious metal funding 
       costs. 
 
      We continue to expect that net finance charges will be significantly 
       higher in 2019/20 due to higher average net debt as we invest for future 
       growth, higher precious metal funding costs and the impact of IFRS 16. 
 
Taxation 
      The tax charge on underlying profit for the half year ended 30(th) September 
       2019 was GBP47 million, an effective tax rate of 20.5% (1H 2018/19: 
       16.3%). This was due to increases in provisions for uncertain tax positions 
       (GBP12 million of which relates to reassessments of prior years) which 
       have been recognised in the first half of this year. We also recognised 
       a tax charge of GBP2 million outside of underlying which resulted in 
       an effective tax rate of 21.7% (1H 2018/19: 16.4%). 
 
      We expect the tax rate on underlying profit for the year ending 31(st) 
       March 2020 to be around 18% compared to our previous guidance of around 
       16%. This is due to the increase in provisions for uncertain tax positions. 
 
Post-employment benefits 
IFRS - accounting basis 
      At 30(th) September 2019, the group's net post-employment benefit position, 
       after taking account of the bonds held to fund the UK pension scheme 
       deficit, was a surplus of GBP173 million. 
 
      The cost of providing post-employment benefits in the period was GBP20 
       million, which is in line with the same period last year. The post-employment 
       benefits cost also included a past service credit of GBP10 million, 
       which compared to an GBP8 million credit in the prior period. 
 
Actuarial - funding basis 
      The UK pension scheme has a legacy defined benefit career average section 
       which was closed to new entrants on 1(st) October 2012 when a new defined 
       benefit cash balance section was opened. 
 
      The last triennial actuarial valuation of the career average section 
       as at 1(st) April 2018 revealed a deficit of GBP34 million, or a surplus 
       of GBP9 million after taking account of the Special Purpose Vehicle 
       set up in January 2013. The annual funding update as at 31(st) March 
       2019 showed a deficit of GBP22 million or a surplus of GBP15 million 
       after taking the value of the Special Purpose Vehicle into account. 
 
      The last triennial actuarial valuation of the cash balance section as 
       at 1(st) April 2018 revealed a surplus of GBP0.2 million. The annual 
       funding update as at 31(st) March 2019 showed a surplus of GBP2.6 million. 
       Since the triennial valuation a review of the Scheme's investment strategy 
       has taken place. This resulted in several changes that diversify the 
       Scheme's assets and reduce investment risk further. 
 
 

The latest actuarial valuations of our two US pension schemes showed a total deficit of GBP2 million at 1(st) July 2018.

 
UK's withdrawal from European Union 
JM relies extensively on an agile, flexible supply chain and so we have 
 paid significant attention to the potential impact of the UK's withdrawal 
 from the European Union under a 'no deal' scenario. Our well established 
 working group, which is composed of a number of functional and sector 
 experts, has assessed the implications of a 'no deal' withdrawal. A 
 number of mitigating activities were put in place ahead of 31(st) October 
 2019 in preparation for this eventuality, for example through building 
 inventory. 
 
As part of the preparations, the project team conducted scenario analyses 
 to assess the potential impact of individual risks and combinations 
 of risks. As the probability of a hard withdrawal (without a transition 
 agreement reflecting the existing trading rules) increased, we accelerated 
 our contingency plans, with the primary objective of ensuring the continuity 
 of our business across our whole business model. 
 
We remain confident that our current contingency planning will be effective 
 should the UK withdraw from the European Union without a deal. We remain 
 vigilant and alert to changes in the political environment, and the 
 UK and EU's stance, and the potential implications these may have on 
 our operations. 
 
Capital expenditure 
      Capital expenditure was GBP186 million in the half, 2.2 times depreciation 
       and amortisation (excluding amortisation of acquired intangibles). In 
       the period, projects included: 
--        Clean Air manufacturing plants in Poland, China and India. This increased 
           capacity will drive growth, efficiency and improve flexibility, enabling 
           us to support demand from tightening legislation in Europe and Asia 
--        Investment in development and commercialisation of eLNO, our leading 
           ultra-high energy density cathode material. We continued construction 
           of our application centres. FEED (front end engineering design) work 
           has progressed for our site in Poland for the first 10,000 metric 
           tonnes commercial plant, and the site has the potential for expansion 
           to 100,000 metric tonnes. We expect to supply platforms in 2024 
--        Upgrading our core IT business systems 
--        In Health, continued investment in our API product pipeline 
--        Expansion of our additives plant in the US and continued investment 
           to improve the efficiency and resilience of our pgm refineries within 
           Efficient Natural Resources 
 
 
      Capital expenditure for 2019/20 is estimated to be up to GBP500 million 
       as our investments in growth projects mentioned above increase. 
 
      Depreciation and amortisation (excluding amortisation of acquired intangibles) 
       is expected to increase by around GBP14 million in 2019/20 primarily 
       as we depreciate our investment in upgrading our core IT systems. 
 
Free cash flow and working capital 
Free cash flow was an outflow of GBP382 million. This was mainly due 
 to a working capital outflow of GBP467 million, of which GBP352 million 
 related to precious metal working capital driven by higher pgm prices 
 (GBP271 million) and volumes (GBP81 million). We also saw higher capital 
 expenditure of 
 GBP184 million in the half. 
 
Excluding precious metal, working capital days at 30(th) September 2019 
 improved to 61 days compared to 65 days at 30(th) September 2018. Average 
 working capital days through the period excluding precious metals was 
 stable at 61 days. 
 
We continue to have a disciplined approach to our working capital position. 
 We are targeting an improvement in average non precious metal working 
 capital to between 50 and 60 days over the medium term, and expect to 
 deliver GBP350 million of savings in precious metal working capital, 
 comprising GBP250 million in backlog reduction and a further GBP100 
 million of refinery efficiencies. As metal prices move, the level of 
 savings will vary. 
 
Dividend 
The board approved an increase of 5% in the interim dividend to 24.50 
 pence per share 
 (1H 2018/19: 23.25 pence per share). The interim dividend will be paid 
 to shareholders on 4(th) February 2020, with an ex dividend date of 
 28(th) November 2019. 
 
Return on invested capital (ROIC) 
ROIC declined to 15.0% from 16.7% at 30(th) September 2018 driven primarily 
 by higher precious metal working capital and also increased capital 
 expenditure. ROIC excluding the impact of the increase in precious metal 
 working capital was 15.9%. 
 
Capital structure 
Net debt at 30(th) September 2019 was GBP1.5 billion. This is an increase 
 of GBP452 million from 
 30(th) September 2018 and an increase of GBP622 million from 31(st) 
 March 2019, mainly driven by the significant increase in precious metal 
 working capital and higher capital expenditure. Net debt increased to 
 GBP1,548 million when adjusted for the post tax pension deficits (GBP1,488 
 million excluding post tax pension deficits). The group's net debt (including 
 post tax pension deficits) to EBITDA was 2.1 times (30(th) September 
 2018: 1.5 times). Our target range is 1.5 to 2.0 times, as this ensures 
 we have flexibility to invest further in the future growth of the business. 
 
Contingent liabilities 
The group is involved in various disputes and claims which arise from 
 time to time in the course of its business including, for example, in 
 relation to commercial matters, product quality or liability, employee 
 matters and tax audits. The group is also involved from time to time 
 in the course of its business in legal proceedings and actions, engagement 
 with regulatory authorities and in dispute resolution processes. These 
 are reviewed on a regular basis and, where possible, an estimate is 
 made of the potential financial impact on the group. In appropriate 
 cases a provision is recognised based on advice, best estimates and 
 management judgement. Where it is too early to determine the likely 
 outcome of these matters, no provision is made. Whilst the group cannot 
 predict the outcome of any current or future such matters with any certainty, 
 it currently believes the likelihood of any material liabilities to 
 be low, and that such liabilities, if any, will not have a material 
 adverse effect on its consolidated income, financial position or cash 
 flows. 
 
On a specific matter, the group previously disclosed that it had been 
 informed by two customers of failures in certain engine systems for 
 which the group supplied a particular coated substrate as a component 
 for their customers' emissions after-treatment systems. The particular 
 coated substrate was sold to only these two customers. The group has 
 not been contacted by any regulatory authority about these engine system 
 failures. The reported failures have not been demonstrated to be due 
 to the coated substrate supplied by the group. As previously disclosed, 
 we settled with one of these customers on mutually acceptable terms 
 with no admission of fault. 
 
Having reviewed its contractual obligations and the information currently 
 available to it, the group believes it has defensible warranty positions 
 in respect of its supplies of coated substrate for the after-treatment 
 systems in the affected engines remaining at issue. If required, it 
 will vigorously assert its available contractual protections and defences. 
 The outcome of any discussions relating to the matters raised is not 
 certain, nor is the group able to make a reliable estimate of the possible 
 financial impact at this stage, if any. The group works with all its 
 customers to ensure appropriate product quality and we have not received 
 claims in respect of our emissions after-treatment components from this 
 or any other customer. Our vision is for a world that's cleaner and 
 healthier; today and for future generations. We are committed to enabling 
 improving air quality and we work constructively with our customers 
 to achieve this. 
 
Going concern 
The directors have assessed the future funding requirements of the group 
 and are of the opinion that the group has adequate resources to fund 
 its operations for the foreseeable future. Therefore the directors believe 
 that it is appropriate to prepare the accounts on a going concern basis. 
 Given the large increase in precious metal working capital recently, 
 the group has already taken actions to increase liquidity in case of 
 further pressure. 
Risks and uncertainties 
We have made several improvements to our approach to understanding risk 
 and uncertainty, further articulating the risk information and insights 
 we use to support various business decisions. The principal risks and 
 uncertainties, together with the group's strategies to manage them, 
 are set out on pages 91 to 96 of the 2019 annual report and these are 
 unchanged. They are: 
 
--   Existing market outlook - the risk of a change to the outlook for 
      our key markets is either unplanned or unforeseen and as a result 
      we may be inefficient in our plans to respond. Whilst not a principal 
      risk, see our financial review on page 18 for details on how we are 
      monitoring the possible impacts of the UK's planned withdrawal from 
      the EU and related risks 
--   Future growth - this risk considers the potential failure to deliver 
      growth and create value as communicated in our capital markets day 
--   Maintaining our competitive advantage - addressing the need to maintain 
      our competitive advantage in existing markets, including our ability 
      to transform and adapt Johnson Matthey to new challenges 
--   Environment, health and safety - operating in accordance with our 
      own values, and in line with changes to environmental, health and 
      safety legislation standards 
--   Sourcing of strategic materials - we closely analyse and manage our 
      supply of key critical materials to address the risk of metal supply 
      to our manufacturing facilities 
--   People - we recruit, retain and motivate the most appropriate people 
      at every level of our business 
--   Security of metal and highly regulated substances - keeping our valuable 
      and highly regulated products and intermediates secure 
--   Intellectual capital management - our ability to identify, manage 
      and protect the innovative ideas that underpin our current and future 
      success 
--   Failure of significant sites - our ability to run our operations 
      effectively and efficiently, and with resilience to adverse events 
--   Ethics and compliance - running our businesses ethically and effectively 
      - not 'business at any cost' 
--   Business transition - our ability to identify and deliver the requirement 
      for projects and programmes to transform Johnson Matthey as we develop 
      new products and markets 
--   Product quality - the imperative to consistently deliver our products 
      to required standards 
--   Applications, systems and cyber - the systems, and supporting knowledge, 
      processes and behaviours that allow effective and secure information 
      management 
 
 
Responsibility statement of the Directors in respect of the half yearly 
 report 
The half yearly report is the responsibility of the directors. Each 
 of the directors as at the date of this responsibility statement, whose 
 names and functions are set out below, confirms that to the best of 
 their knowledge: 
 
--  the condensed consolidated accounts have been prepared in accordance 
     with International Accounting Standard (IAS) 34 - 'Interim Financial 
     Reporting'; and 
--  the interim management report included in the Half-Yearly Report 
     includes a fair review of the information required by: 
 
    a) DTR 4.2.7R of the Financial Conduct Authority's Disclosure Guidance 
     and Transparency Rules, being an indication of important events that 
     have occurred during the first six months of the financial year and 
     their impact on the condensed consolidated accounts; and a description 
     of the principal risks and uncertainties for the remaining six months 
     of the financial year; and 
     b) DTR 4.2.8R of the Financial Conduct Authority's Disclosure Guidance 
     and Transparency Rules, being related party transactions that have 
     taken place in the first six months of the current financial year 
     and that have materially affected the financial position or performance 
     of the company during that period; and any changes in the related 
     party transactions described in the last annual report that could 
     do so. 
 
 
The names and functions of the directors of Johnson Matthey Plc are 
 as follows: 
Patrick Thomas     Chairman of the Board and of the Nomination Committee 
Alan Ferguson      Non-Executive Director, Senior Independent Director and 
                    Chairman of the Audit Committee 
Jane Griffiths     Non-Executive Director 
Xiaozhi Liu        Non-Executive Director 
Robert MacLeod     Chief Executive 
Anna Manz          Chief Financial Officer 
Chris Mottershead  Non-Executive Director and Chairman of the Remuneration 
                    Committee 
John O'Higgins     Non-Executive Director 
John Walker        Executive Director 
Doug Webb          Non-Executive Director 
 
 
The responsibility statement was approved by the Board of Directors 
 on 20(th) November 2019 and is signed on its behalf by: 
 

Patrick Thomas

Chairman

Independent Review Report

to Johnson Matthey Plc

Report on the condensed consolidated accounts

Our conclusion

We have reviewed Johnson Matthey Plc's condensed consolidated accounts (the "interim financial statements") in the half year results of Johnson Matthey Plc for the six-month period ended 30(th) September 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

   --     the Condensed Consolidated Balance Sheet as at 30(th) September 2019; 

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

   --     the Condensed Consolidated Cash Flow Statement for the period then ended; 
   --     the Condensed Consolidated Statement of Changes in Equity for the period then ended; and 
   --     the explanatory notes to the interim financial statements. 

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

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half year results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

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

What a review of interim financial statements involves

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

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

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

PricewaterhouseCoopers LLP

Chartered Accountants

London

20(th) November 2019

Notes:

a) The maintenance and integrity of the Johnson Matthey Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since it was initially presented on the website.

b) Legislation in the United Kingdom governing the preparation and dissemination of interim financial statements may differ from legislation in other jurisdictions.

Condensed Consolidated Income Statement

for the six months ended 30(th) September 2019

 
 
                                                                 Six months ended 
                                                               30.9.19      30.9.18 
                                                                        Restated(1) 
                                                    Notes  GBP million  GBP million 
 
                                                       2, 
Revenue                                                 3        6,818        4,967 
Cost of sales                                                  (6,321)      (4,493) 
                                                           -----------  ----------- 
Gross profit                                                       497          474 
Distribution costs                                                (66)         (65) 
Administrative expenses                                          (166)        (138) 
Amortisation of acquired intangibles                    6          (6)          (7) 
Operating profit                                                   259          264 
Finance costs                                                     (66)         (42) 
Finance income                                                      30           22 
Share of profit of joint venture and associate                       2            - 
                                                           -----------  ----------- 
Profit before tax                                                  225          244 
Tax expense                                                       (49)         (40) 
                                                           -----------  ----------- 
Profit for the period                                              176          204 
                                                           -----------  ----------- 
 
                                                                 pence        pence 
 
Earnings per ordinary share 
 Basic                                                            91.8        106.1 
 Diluted                                                          91.6        105.9 
 
 
(1) See note 15. 
 

Condensed Consolidated Statement of Total Comprehensive Income

for the six months ended 30(th) September 2019

 
 
                                                                   Six months ended 
                                                                 30.9.19      30.9.18 
                                                      Notes  GBP million  GBP million 
 
Profit for the period                                                176          204 
                                                             -----------  ----------- 
Other comprehensive income 
Items that will not be reclassified to the 
 income statement 
 Remeasurements of post-employment benefit 
  assets and liabilities                                 10            -           65 
 Tax on items that will not be reclassified 
  to the income statement                                              1         (11) 
                                                             -----------  ----------- 
                                                                       1           54 
                                                             -----------  ----------- 
Items that may be reclassified to the income 
 statement: 
 Exchange differences on translation of foreign 
  operations                                                          73           42 
 Fair value gains / (losses) on investments at fair 
  value through other comprehensive income                             3          (2) 
 Amounts charged to hedging reserve                                 (16)          (1) 
 Fair value and exchange losses on net investment 
  hedges                                                             (8)          (7) 
 Tax on items that may be reclassified to 
  the income statement                                                 1            1 
                                                             -----------  ----------- 
                                                                      53           33 
                                                             -----------  ----------- 
Other comprehensive income for the period                             54           87 
                                                             -----------  ----------- 
Total comprehensive income for the period                            230          291 
                                                             -----------  ----------- 
 

Condensed Consolidated Balance Sheet

as at 30(th) September 2019

 
 
                                                                     30.9.19      31.3.19 
                                                          Notes  GBP million  GBP million 
 
Assets 
Non-current assets 
Property, plant and equipment                                          1,363        1,271 
Right-of-use assets                                                       88            - 
Goodwill                                                                 588          578 
Other intangible assets                                                  378          336 
Investments in joint venture and associate                                22           20 
Investments at fair value through other comprehensive 
 income                                                                   56           52 
Other receivables                                                         69           39 
Interest rate swaps                                           8           30           13 
Deferred income tax assets                                                74           58 
Post-employment benefit net assets                           10          232          209 
                                                                 -----------  ----------- 
Total non-current assets                                               2,900        2,576 
                                                                 -----------  ----------- 
 
Current assets 
Inventories                                                            1,475        1,316 
Current income tax assets                                                 35           37 
Trade and other receivables                                            1,953        1,553 
Cash and cash equivalents -- cash and deposits                8           99           90 
Cash and cash equivalents -- money market 
 funds                                                        8            -          347 
Other financial assets                                                    15           22 
Assets held for sale                                                       -            7 
                                                                 -----------  ----------- 
Total current assets                                                   3,577        3,372 
                                                                 -----------  ----------- 
Total assets                                                           6,477        5,948 
                                                                 -----------  ----------- 
 
Liabilities 
Current liabilities 
Trade and other payables                                             (1,713)      (1,647) 
Current income tax liabilities                                         (155)        (130) 
Cash and cash equivalents -- bank overdrafts                  8         (65)         (59) 
Other borrowings and related swaps                            8        (351)        (184) 
Lease liabilities                                             8         (12)            - 
Other financial liabilities                                             (21)         (13) 
Provisions                                                              (14)         (20) 
Total current liabilities                                            (2,331)      (2,053) 
                                                                 -----------  ----------- 
 
Non-current liabilities 
Borrowings and related swaps                                  8      (1,124)      (1,073) 
Lease liabilities                                             8         (65)            - 
Deferred income tax liabilities                                         (93)         (91) 
Employee benefit obligations                                 10        (119)        (106) 
Provisions                                                              (10)          (9) 
Other payables                                                           (6)          (5) 
                                                                 -----------  ----------- 
Total non-current liabilities                                        (1,417)      (1,284) 
                                                                 -----------  ----------- 
Total liabilities                                                    (3,748)      (3,337) 
                                                                 -----------  ----------- 
Net assets                                                             2,729        2,611 
                                                                 -----------  ----------- 
 
Equity 
Share capital                                                            221          221 
Share premium                                                            148          148 
Shares held in employee share ownership trust 
 (ESOT)                                                                 (32)         (45) 
Other reserves                                                           140           87 
Retained earnings                                                      2,252        2,200 
                                                                 -----------  ----------- 
Total equity                                                           2,729        2,611 
                                                                 -----------  ----------- 
 

Condensed Consolidated Cash Flow Statement

for the six months ended 30(th) September 2019

 
 
                                                                     Six months ended 
                                                                   30.9.19      30.9.18 
                                                                            Restated(1) 
                                                        Notes  GBP million  GBP million 
 
Profit before tax                                                      225          244 
Adjustments for: 
Share of profit of joint venture and associate                         (2)            - 
Depreciation, amortisation, impairment losses and profit 
 / loss on sale of non-current assets                                   99           86 
Share-based payments                                                     3            3 
Increase in inventories                                              (134)        (254) 
Increase in receivables                                              (403)         (30) 
Increase/(decrease) in payables                                         70         (75) 
Decrease in provisions                                                 (5)         (12) 
Contributions in excess of employee benefit 
 obligations charge                                                   (13)         (20) 
Changes in fair value of financial instruments                         (3)          (2) 
Net finance costs                                                       36           20 
Income tax paid                                                       (32)         (48) 
                                                               -----------  ----------- 
Net cash outflow from operating activities                           (159)         (88) 
                                                               -----------  ----------- 
 
Interest received                                                       28           22 
Purchases of property, plant and equipment                           (133)         (63) 
Purchases of intangible assets                                        (51)         (33) 
Proceeds from sale of non-current assets                                 8            1 
Net cash outflow from investing activities                           (148)         (73) 
                                                               -----------  ----------- 
 
Proceeds from borrowings                                               168          137 
Repayment of borrowings                                               (11)          (2) 
Dividends paid to equity shareholders                       7        (120)        (112) 
Interest paid                                                         (70)         (45) 
Principal element of lease payments                                    (5)            - 
                                                               -----------  ----------- 
Net cash outflow from financing activities                            (38)         (22) 
                                                               -----------  ----------- 
 
Net decrease in cash and cash equivalents                            (345)        (183) 
Exchange differences on cash and cash equivalents                        1          (1) 
Cash and cash equivalents at beginning of 
 year                                                                  378          304 
Cash and cash equivalents at end of period                  8           34          120 
                                                               -----------  ----------- 
 
Net cash outflow from operating activities                           (159)         (88) 
Interest received                                                       28           22 
Interest paid                                                         (70)         (45) 
Purchases of property, plant and equipment                           (133)         (63) 
Purchases of intangible assets                                        (51)         (33) 
Proceeds from sale of non-current assets                                 8            1 
Principal element of lease payments                                    (5)            - 
                                                               -----------  ----------- 
Free cash flow(2)                                                    (382)        (206) 
                                                               -----------  ----------- 
 
Reconciliation to net debt 
Net decrease in cash and cash equivalents                            (345)        (183) 
Less: Increase in borrowings                                         (157)        (135) 
Less: Principal element of lease payments                                5            - 
                                                               -----------  ----------- 
Increase in net debt resulting from cash 
 flows                                                               (497)        (318) 
New leases, remeasurements and modifications                           (4)            - 
Exchange differences on net debt(3)                                   (47)         (38) 
Other non-cash movements(3)                                              3          (1) 
                                                               -----------  ----------- 
Movement in net debt                                                 (545)        (357) 
Net debt at beginning of year                                        (866)        (679) 
Impact of adoption of IFRS 16                              14         (77)            - 
                                                               -----------  ----------- 
Net debt at end of period(2)                                8      (1,488)      (1,036) 
                                                               -----------  ----------- 
 
(1) See note 15. 
 (2) Non-GAAP measure (see page 41). 
 (3) 2018 re-presented to separately analyse fair value movements in 
 net debt relating to hedging instruments. 
 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30(th) September 2019

 
 
                                               Share       Shares 
                                                             held 
                                  Share      premium           in        Other     Retained        Total 
                                capital      account         ESOT     reserves     earnings       equity 
                            GBP million  GBP million  GBP million  GBP million  GBP million  GBP million 
 
At 1(st) April 2018                 221          148         (48)           62        1,995        2,378 
Total comprehensive income 
 for the period                       -            -            -           33          258          291 
Dividends paid (note 7)               -            -            -            -        (112)        (112) 
Share-based payments                  -            -            -            -            6            6 
Cost of shares transferred 
 to employees                         -            -            3            -          (6)          (3) 
Tax on share-based 
 payments                             -            -            -            -            1            1 
                            -----------  -----------  -----------  -----------  -----------  ----------- 
At 30(th) September 2018            221          148         (45)           95        2,142        2,561 
Total comprehensive 
(expense) 
/ income for the 
  period                              -            -            -         (12)           99           87 
Dividends paid (note 7)               -            -            -            -         (44)         (44) 
Share-based payments                  -            -            -            -           11           11 
Cost of shares transferred 
 to employees                         -            -            -            -          (4)          (4) 
Reclassification                      -            -            -            4          (4)            - 
                            -----------  -----------  -----------  -----------  -----------  ----------- 
At 31(st) March 2019                221          148         (45)           87        2,200        2,611 
Impact of adoption of 
 IFRIC 
 23                                   -            -            -            -            5            5 
                            -----------  -----------  -----------  -----------  -----------  ----------- 
At 31(st) March 2019 
 (restated)                         221          148         (45)           87        2,205        2,616 
Total comprehensive income 
 for the period                       -            -            -           53          177          230 
Dividends paid (note 7)               -            -            -            -        (120)        (120) 
Share-based payments                  -            -            -            -            6            6 
Cost of shares transferred 
 to employees                         -            -           13            -         (16)          (3) 
At 30(th) September 2019            221          148         (32)          140        2,252        2,729 
                            -----------  -----------  -----------  -----------  -----------  ----------- 
 
 

Notes to the Accounts

for the six months ended 30(th) September 2019

 
 
1  Basis of preparation 
 

These condensed consolidated accounts do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 and should be read in conjunction with the Annual Report 2019. The half-yearly accounts have been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority. The accounting policies applied are consistent with the accounting policies applied by the group in its consolidated accounts as at, and for the year ended, 31(st) March 2019, with the exception of the adoption of new and amended standards as explained below.

Information in respect of the year ended 31(st) March 2019 is derived from the company's statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's report on those statutory accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report and did not contain any statement under Section 498 (2) or Section 498 (3) of the Companies Act 2006.

The comparatives for the six months ended 30(th) September 2018 have been restated as a result of a detailed review of revenue transactions in the group's Platinum Group Metal Services business conducted in the prior year which concluded that location and form swaps and sale and repurchase agreements should be excluded from revenue under IFRS 15 (see note 15).

The group uses various measures to manage its business not defined by generally accepted accounting principles (GAAP) which are presented alongside GAAP measures. The group's non-GAAP measures are defined on page 41.

The half-yearly accounts are unaudited, but have been reviewed by the auditors. They were approved by the board of directors on 20(th) November 2019.

New and amended standards adopted by the group

IFRS 16, 'Leases', became applicable to the group on 1(st) April 2019 and the group changed its accounting policy as a result of adopting the new standard. The impact of the adoption of IFRS 16 and the group's new accounting policy in respect of leases are disclosed in note 14.

IFRIC 23, 'Uncertainty over Income Tax Treatments', became applicable to the group on 1(st) April 2019. The interpretation clarifies how to recognise and measure current and deferred income tax assets and liabilities where there is uncertainty over a tax treatment. The group has adopted IFRIC 23 retrospectively, with the cumulative effect of adoption, a GBP5 million decrease in tax provisions, recognised in reserves at 1(st) April 2019.

The other amendments to standards did not have any impact on the group's reported results or net assets.

 
 
2   Segmental information 
 
 
    Six months ended 
    30(th) 
    September 2019 
                                    Efficient 
                           Clean      Natural                    New 
                             Air    Resources       Health   Markets  Corporate  Eliminations        Total 
                             GBP                                 GBP        GBP 
                         million  GBP million  GBP million   million    million   GBP million  GBP million 
 
 Revenue from 
  external 
  customers                2,937        3,530          114       237          -             -        6,818 
 Inter-segment 
  revenue                      -        1,822            -         2          -       (1,824)            - 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 Revenue                   2,937        5,352          114       239          -       (1,824)        6,818 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 
 External sales            1,392          437          111       184          -             -        2,124 
 Inter-segment 
  sales                        -           59            -         2          -          (61)            - 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 Sales                     1,392          496          111       186          -          (61)        2,124 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 
 Underlying 
  operating profit 
  (note 5)                   179           94           18       (8)       (18)             -          265 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 
 Segmental net 
  assets                   1,594        1,437          531       282        287             -        4,131 
                        --------  -----------  -----------  --------  ---------  ------------ 
 
 Net debt                                                                                          (1,488) 
 Post-employment benefit net 
  assets 
  and liabilities                                                                                      113 
 Deferred income tax net 
  liabilities                                                                                         (19) 
 Provisions and non-current 
  other 
  payables                                                                                            (30) 
 Investments in joint venture 
  and associate                                                                                         22 
 
 
 Net assets                                                                                          2,729 
                                                                                               ----------- 
 
 
    Six months ended 
    30(th) 
    September 2018 
                                    Efficient 
                           Clean      Natural                    New 
                             Air    Resources       Health   Markets  Corporate  Eliminations        Total 
                                  Restated(1)                                                  Restated(1) 
                             GBP                                 GBP        GBP 
                         million  GBP million  GBP million   million    million   GBP million  GBP million 
 
 Revenue from 
  external 
  customers                2,305        2,320          120       222          -             -        4,967 
 Inter-segment 
  revenue                    144        1,203            -         7          -       (1,354)            - 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 Revenue                   2,449        3,523          120       229          -       (1,354)        4,967 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 
 External sales            1,312          408          118       171          -             -        2,009 
 Inter-segment 
  sales                        -           55            -         2          -          (57)            - 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 Sales                     1,312          463          118       173          -          (57)        2,009 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 
 Underlying 
  operating profit 
  (note 5)                   191           85           15         3       (23)             -          271 
                        --------  -----------  -----------  --------  ---------  ------------  ----------- 
 
 Segmental net 
  assets                   1,245        1,342          486       231        163             -        3,467 
                        --------  -----------  -----------  --------  ---------  ------------ 
 
 Net debt                                                                                          (1,036) 
 Post-employment benefit net 
  assets 
  and liabilities                                                                                      214 
 Deferred income tax net 
  liabilities                                                                                         (58) 
 Provisions and non-current 
  other 
  payables                                                                                            (46) 
 Investments in joint venture 
  and associate                                                                                         20 
 
 
 Net assets                                                                                          2,561 
                                                                                               ----------- 
 
    (1) See note 15. 
 
3   Revenue 
 
 
    Revenue from external customers by principal products and services 
 
    Six months ended 30(th) September 2019 
                                                 Efficient 
                                        Clean      Natural                  New 
                                          Air    Resources    Health    Markets                      Total 
                                                                 GBP        GBP 
                                  GBP million  GBP million   million    million                GBP million 
 
 
 Metal                                  1,545        3,093         3         53                      4,694 
 Heavy Duty Catalysts                     464            -         -          -                        464 
 Light Duty Catalysts                     904            -         -          -                        904 
 Catalyst Technologies                      -          249         -          -                        249 
 Platinum Group Metal Services              -          117         -          -                        117 
 Advanced Glass Technologies                -           36         -          -                         36 
 Diagnostic Services                        -           35         -          -                         35 
 Generics                                   -            -        67          -                         67 
 Innovators                                 -            -        44          -                         44 
 Alternative Powertrain                     -            -         -        110                        110 
 Medical Device Components                  -            -         -         37                         37 
 Life Science Technologies                  -            -         -         22                         22 
 Other                                     24            -         -         15                         39 
 
 
 Revenue                                2,937        3,530       114        237                      6,818 
 
 
 
    Six months ended 30(th) September 2018 
                                                 Efficient 
                                        Clean      Natural                  New 
                                          Air    Resources    Health    Markets                      Total 
                                               Restated(1)                                     Restated(1) 
                                                                 GBP        GBP 
                                  GBP million  GBP million   million    million                GBP million 
 
 
 Metal                                    993        1,912         2         51                      2,958 
 Heavy Duty Catalysts                     462            -         -          -                        462 
 Light Duty Catalysts                     831            -         -          -                        831 
 Catalyst Technologies                      -          232         -          -                        232 
 Platinum Group Metal Services              -          106         -          -                        106 
 Advanced Glass Technologies                -           38         -          -                         38 
 Diagnostic Services                        -           32         -          -                         32 
 Generics                                   -            -        80          -                         80 
 Innovators                                 -            -        38          -                         38 
 Alternative Powertrain                     -            -         -         97                         97 
 Medical Device Components                  -            -         -         36                         36 
 Life Science Technologies                  -            -         -         22                         22 
 Other                                     19            -         -         16                         35 
 
 
 Revenue                                2,305        2,320       120        222                      4,967 
 
 
    (1) See note 15. 
 
     Effect of exchange rate movements on translation of sales and underlying 
4     operating profit of foreign 
       operations 
                                                                                  Six months ended 
 
     Average exchange rates used for translation 
      of results of foreign operations                                  30.9.19                    30.9.18 
 
     US dollar / GBP                                                      1.257                      1.329 
     Euro / GBP                                                           1.126                      1.131 
     Chinese renminbi / GBP                                                8.70                       8.77 
 
 

The main impact of exchange rate movements on the group's sales and underlying operating profit comes from the translation of the results of foreign operations into sterling.

 
                                                            Six months ended               Change 
                                         Six months              30.9.18                       at 
                                              ended            At last      At this   this year's 
                                                                year's       year's 
                                            30.9.19              rates        rates         rates 
                                        GBP million        GBP million  GBP million             % 
 
    Sales 
 Clean Air                                    1,392              1,312        1,341            4% 
 Efficient Natural Resources                    496                463          475            4% 
 Health                                         111                118          122           -9% 
 New Markets                                    186                173          176            5% 
 Elimination of inter-segment sales            (61)               (57)         (58) 
                                        -----------  -----------------  ----------- 
 Sales                                        2,124              2,009        2,056            3% 
                                        -----------  -----------------  ----------- 
 
    Underlying operating profit 
 Clean Air                                      179                191          196           -9% 
 Efficient Natural Resources                     94                 85           88            6% 
 Health                                          18                 15           15           21% 
 New Markets                                    (8)                  3            3           n/a 
 Unallocated corporate expenses                (18)               (23)         (23) 
                                        -----------  -----------------  ----------- 
 Underlying operating profit                    265                271          279           -5% 
                                        -----------  -----------------  ----------- 
 
5   Underlying profit reconciliations                                       Six months ended 
                                                                            30.9.19       30.9.18 
                                                                        GBP million   GBP million 
 
 Underlying operating profit                                                    265           271 
 Amortisation of acquired intangibles (note 6)                                  (6)           (7) 
 Operating profit                                                               259           264 
                                                                        -----------   ----------- 
 
 
 Underlying profit before tax                                                   231           251 
 Amortisation of acquired intangibles (note 6)                                  (6)           (7) 
 Profit before tax                                                              225           244 
                                                                        -----------   ----------- 
 
 
 Tax on underlying profit before tax                                           (47)          (41) 
 Tax on amortisation of acquired intangibles 
  (note 6)                                                                        1             1 
 Change in non-underlying tax provisions                                        (3)             - 
 Tax expense                                                                   (49)          (40) 
                                                                        -----------   ----------- 
 
 
 Underlying profit for the period                                               184           210 
 Amortisation of acquired intangibles (note 6)                                  (6)           (7) 
 Tax thereon                                                                      1             1 
 Change in non-underlying tax provisions                                        (3)             - 
                                                                        -----------   ----------- 
 Profit for the period                                                          176           204 
                                                                        -----------   ----------- 
 
 
                                                                            million       million 
 
 Weighted average number of shares in issue                                   192.3         192.1 
                                                                        -----------   ----------- 
 
                                                                              pence         pence 
 
 Underlying earnings per share                                                 95.8         109.0 
                                                                        -----------   ----------- 
 
 
 
 
6  Amortisation of acquired intangibles 
 
 

Amortisation of intangible assets which arises on the acquisition of businesses, together with any subsequent impairment of these intangible assets, is shown separately on the face of the income statement and excluded from underlying operating profit.

 
 
7  Dividends 
 
 

An interim dividend of 24.50 pence (2018/19 23.25 pence) per ordinary share has been proposed by the board which will be paid on 4(th) February 2020 to shareholders on the register at the close of business on 29(th) November 2019. The estimated amount to be paid is GBP47 million (2018/19 GBP44 million) and has not been recognised in these accounts.

 
                                                                         Six months ended 
                                                                           30.9.19       30.9.18 
                                                                       GBP million   GBP million 
 
 2017/18 final ordinary dividend paid -- 58.25 
  pence per share                                                                -           112 
 2018/19 final ordinary dividend paid -- 62.25 
  pence per share                                                              120             - 
                                                             ---------------------   ----------- 
 Total dividends                                                               120           112 
                                                             ---------------------   ----------- 
 
8   Net debt 
                                                                           30.9.19       31.3.19 
                                                                       GBP million   GBP million 
 
 Cash and deposits                                                              99            90 
 Money market funds                                                              -           347 
 Bank overdrafts                                                              (65)          (59) 
                                                             ---------------------   ----------- 
 Cash and cash equivalents                                                      34           378 
 Other current borrowings and related swaps                                  (351)         (184) 
 Non-current borrowings and related swaps                                  (1,124)       (1,073) 
 Non-current interest rate swaps                                                30            13 
 Current lease liabilities                                                    (12)             - 
 Non-current lease liabilities                                                (65)             - 
                                                             ---------------------   ----------- 
 Net debt                                                                  (1,488)         (866) 
                                                             ---------------------   ----------- 
 
 
 
 
 Net debt (including post tax pension deficits) 
  to underlying EBITDA 
                                                        Six months ended 
                                                        30.9.19      30.9.18 
                                                                 Restated(1) 
                                                    GBP million  GBP million 
 
 Underlying EBITDA                                          350          350 
 Depreciation and amortisation                             (91)         (86) 
 Finance costs                                             (66)         (42) 
 Finance income                                              30           22 
 Share of profit of joint venture and associate               2            - 
 Tax expense                                               (49)         (40) 
                                                    -----------  ----------- 
 Profit for the period                                      176          204 
                                                    -----------  ----------- 
 
 Underlying EBITDA for this period                          350          350 
 Underlying EBITDA for prior year                           723          681 
 Less: Underlying EBITDA for prior first half             (350)        (327) 
                                                    -----------  ----------- 
 Annualised underlying EBITDA                               723          704 
                                                    -----------  ----------- 
 
 Net debt                                               (1,488)      (1,036) 
 Pension deficits                                          (74)         (61) 
 Related deferred taxation                                   14           11 
                                                    -----------  ----------- 
 Net debt (including post tax pension deficits)         (1,548)      (1,086) 
                                                    -----------  ----------- 
 
 Net debt (including post tax pension deficits) 
  to underlying EBITDA                                      2.1          1.5 
                                                    -----------  ----------- 
 
 (1) See note 15. 
 
 
 
9  Precious metal leases 
 
 

The group leases precious metals to fund temporary peaks in metal requirements provided market conditions allow. These leases are from banks for specified periods (less than 12 months) and the group pays a fee which is expensed on a straight-line basis over the lease term in finance costs. The group holds sufficient precious metal inventories to meet all the obligations under these lease arrangements as they fall due. At 30(th) September 2019, precious metal leases were GBP371 million at closing prices (31(st) March 2019 GBP372 million). The group's accounting policy in respect of precious metal leases is discussed in note 14.

 
 
10  Post-employment benefits 
 
 

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.

 
 Movements in the net post-employment benefit assets and liabilities, 
  including reimbursement rights, were: 
                          UK          UK    UK post-                 US post- 
                     pension     pension 
                           -           -  retirement               retirement 
                                    cash 
                      legacy     balance     medical          US      medical 
                     section     section    benefits    pensions     benefits       Other        Total 
                         GBP         GBP         GBP         GBP                      GBP 
                     million     million     million     million  GBP million     million  GBP million 
 
 At 1(st) April 
  2019                   199         (1)         (9)        (15)         (29)        (38)          107 
 Current service 
  cost - in 
   operating 
    profit               (4)        (10)           -         (4)            -         (2)         (20) 
 Past service 
 credit 
 - in 
   operating 
    profit                 -           -           -           -           10           -           10 
 Administrative 
 expenses 
 - in 
   operating 
    profit               (2)           -           -           -            -           -          (2) 
 Interest                  2           -           -           -          (1)           -            1 
 Remeasurements           13         (2)           -         (8)          (3)           -            - 
 Company 
  contributions           15           9           -           -            -           1           25 
 Exchange                  -           -           -         (2)          (2)           -          (4) 
                  ----------  ----------  ----------  ----------  -----------  ----------  ----------- 
 At 30(th) 
  September 
  2019                   223         (4)         (9)        (29)         (25)        (39)          117 
                  ----------  ----------  ----------  ----------  -----------  ----------  ----------- 
 
 A past service credit of GBP10 million has been recognised in underlying 
  operating profit in respect of changes to the Johnson 
 Matthey Inc. Post-retirement Welfare Plan, effective 1(st) January 
  2020, which were announced during the period. 
 
 The post-employment benefit assets and liabilities are included in 
  the balance sheet as follows: 
                                                         30.9.19      30.9.19     31.3.19      31.3.19 
                                                           Post-                    Post- 
                                                      employment     Employee  employment     Employee 
                                                         benefit      benefit     benefit      benefit 
                                                      net assets  obligations  net assets  obligations 
                                                             GBP                      GBP 
                                                         million  GBP million     million  GBP million 
 
 UK pension - legacy section                                 223            -         199            - 
 UK pension - cash balance section                             -          (4)           -          (1) 
 UK post-retirement medical benefits                           -          (9)           -          (9) 
 US pensions                                                   -         (29)           -         (15) 
 US post-retirement medical benefits                           7         (32)           8         (37) 
 Other                                                         2         (41)           2         (40) 
                                                      ----------  -----------  ----------  ----------- 
 Total post-employment plans                                 232        (115)         209        (102) 
                                                      ----------               ---------- 
 Other long-term employee benefits                                        (4)                      (4) 
                                                                  -----------              ----------- 
 Total long-term employee benefit 
  obligations                                                           (119)                    (106) 
                                                                  -----------              ----------- 
 
 
 
11  Transactions with related parties 
 
 

There have been no material changes in related party relationships in the six months ended 30(th) September 2019 and no related party transactions have taken place which have materially affected the financial position or performance of the group during that period.

 
 
12  Fair values 
 
 

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.

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). 

The fair value of forward foreign exchange contracts, interest rate swaps, forward precious metal price contracts and currency swaps is estimated by discounting the future contractual cash flows using forward exchange rates, interest rates and prices at the balance sheet date.

The fair value of trade and other receivables measured at fair value is the face value of the receivable less the estimated costs of converting the receivable into cash.

The fair value of money market funds is calculated by multiplying the net asset value per share by the investment held at the balance sheet date.

There were no transfers of any financial instrument between the levels of the fair value hierarchy during the current or prior periods.

 
                                                                                               Fair value 
                                                                   30.9.19        31.3.19       hierarchy 
                                                               GBP million    GBP million           level 
 
 Financial instruments measured at fair value 
 
 Non-current 
 Investments at fair value through other comprehensive 
  income                                                                56             52               1 
 Interest rate swaps                                                    30             13               2 
 Borrowings and related swaps                                          (9)            (5)               2 
 
 Current 
 Trade receivables(1)                                                  431            173               2 
 Other receivables(2)                                                    4              9               2 
 Cash and cash equivalents - money market funds                          -            347               2 
 Other financial 
  assets(3)                                                             15             22               2 
 Other financial 
  liabilities(3)                                                      (21)           (13)               2 
 
 Financial instruments not measured at fair value 
 
 Non-current 
 Borrowings and related swaps                                      (1,115)        (1,068) 
 Lease 
  liabilities                                                         (65)              - 
 
 Current 
 Cash and cash equivalents - cash and deposits                          99             90 
 Cash and cash equivalents - bank overdrafts                          (65)           (59) 
 Other borrowings and related swaps                                  (351)          (184) 
 Lease liabilities                                                    (12)              - 
 
 
 (1) Trade receivables held in a part of the group with a business model 
  to hold trade receivables for collection or sale. 
 (2) Other receivables with cash flows that do not represent solely 
  the payment of principal and interest. 
 (3) Includes forward foreign exchange contracts, forward precious metal 
  price contracts and currency swaps. 
 
12               Fair values (continued) 
 
                 The fair value of financial instruments, excluding accrued interest, 
                  is approximately equal to book value except for: 
 
                                                         30.9.19                      31.3.19 
                                                  Carrying            Fair       Carrying          Fair 
                                                    amount           value         amount         value 
                                               GBP million     GBP million    GBP million   GBP million 
 
                 US Dollar Bonds 2022, 2023, 
                  2025 and 
                  2028                               (511)           (522)          (481)         (477) 
                 Euro Bonds 2021, 2023, 2025 
                  and 2028                           (266)           (277)          (251)         (264) 
                 Euro EIB loan 2019                  (110)           (111)          (107)         (108) 
                 Sterling Bonds 2024 and 2025        (110)           (120)          (110)         (118) 
                 KfW US dollar loan 2024              (41)            (43)           (38)          (39) 
 
 
 
 

The fair values are calculated using level 2 inputs by discounting future cash flows to net present values using appropriate market interest rates prevailing at the period end.

 
 
13  Contingent liabilities 
 
 

The group is involved in various disputes and claims which arise from time to time in the course of its business including, for example, in relation to commercial matters, product quality or liability, employee matters and tax audits. The group is also involved from time to time in the course of its business in legal proceedings and actions, engagement with regulatory authorities and in dispute resolution processes. These are reviewed on a regular basis and, where possible, an estimate is made of the potential financial impact on the group. In appropriate cases a provision is recognised based on advice, best estimates and management judgement. Where it is too early to determine the likely outcome of these matters, no provision is made. Whilst the group cannot predict the outcome of any current or future such matters with any certainty, it currently believes the likelihood of any material liabilities to be low, and that such liabilities, if any, will not have a material adverse effect on its consolidated income, financial position or cash flows.

On a specific matter, the group previously disclosed that it had been informed by two customers of failures in certain engine systems for which the group supplied a particular coated substrate as a component for their customers' emissions after-treatment systems. The particular coated substrate was sold to only these two customers. The group has not been contacted by any regulatory authority about these engine system failures. The reported failures have not been demonstrated to be due to the coated substrate supplied by the group. As previously disclosed, we settled with one of these customers on mutually acceptable terms with no admission of fault. Having reviewed its contractual obligations and the information currently available to it, the group believes it has defensible warranty positions in respect of its supplies of coated substrate for the after-treatment systems in the affected engines remaining at issue. If required, it will vigorously assert its available contractual protections and defences. The outcome of any discussions relating to the matters raised is not certain, nor is the group able to make a reliable estimate of the possible financial impact at this stage, if any. The group works with all its customers to ensure appropriate product quality and we have not received claims in respect of our emissions after-treatment components from this or any other customer. Our vision is for a world that's cleaner and healthier; today and for future generations. We are committed to enabling improving air quality and we work constructively with our customers to achieve this.

 
 
14  Changes in accounting policies 
 
 

This note explains the impact of the adoption of IFRS 16, 'Leases', on the group's accounts and discloses the new accounting policy that has been applied from 1(st) April 2019.

IFRS 16

IFRS 16 became effective from 1(st) April 2019, replacing IAS 17, 'Leases', and related interpretations. Whilst lessor accounting is similar to IAS 17, lessee accounting is significantly different. The group leases some of its property, plant and equipment which are used by the group in its operations. Under IFRS 16, the group recognises on the balance sheet a right-of-use asset and a lease liability for future lease payments in respect of all leases unless the underlying assets are of low value or the lease term is 12 months or less. In the income statement, rental expense on the impacted leases is replaced with depreciation on the right-of-use asset and interest expense on the lease liability.

It is unclear whether contracts entered into by the group to lease metal from third parties constitute leases as defined by IFRS 16. Specifically, it is not clear whether the leased metal represents a defined asset given its fungible nature. However, on the basis that there is no alternative accounting standard applicable to these transactions, the group has continued to recognise the expense in the income statement on a straight-line basis over the lease term, with no recognition on the balance sheet.

The group has applied the modified retrospective transition approach and has not restated comparative amounts for the year ended 31(st) March 2019. Under this approach, the group has chosen to measure right-of-use assets at 1(st) April 2019 at an amount equal to the lease liability as adjusted for lease prepayments, accrued lease expenses and onerous lease provisions.

The group has elected to adopt the following practical expedients on transition:

-- not to capitalise a right-of-use lease asset or lease liability where the lease expires before 31(st) March 2020;

   --    not to reassess contracts to determine if the contract contains a lease; 
   --    to utilise onerous lease provisions to reduce right-of-use asset values; 
   --    to use hindsight in determining the lease term; 
   --    to exclude initial direct costs from the measurement of the right of use asset; and 
   --    to apply the portfolio approach where a group of leases has similar characteristics. 

Impact of adoption on the group's primary statements

Income statement

The group estimates that profit before tax will be reduced by approximately GBP1 million in the year ending 31(st) March 2020 as a result of adopting IFRS 16, with operating profit and finance costs increasing by GBP2 million and GBP3 million, respectively.

Balance sheet

The group has recognised a right-of-use asset of GBP89 million (after adjustments for lease prepayments, accrued lease expenses and onerous lease provisions) and lease liabilities of GBP77 million on transition at 1(st) April 2019. The weighted average incremental borrowing rate applied to lease liabilities was 4.2%.

Cash flow statement

There is no net cash flow impact from the adoption of IFRS 16. Lease payments of GBP7 million during the six months ended 30(th) September 2019, including interest, are included in financing rather than operating activities.

Impact of adoption on the group's non-GAAP measures

The adoption of IFRS 16 has not had a material impact on the group's non-GAAP measures.

 
 
14  Changes in accounting policies (continued) 
 
 

Reconciliation between operating lease commitments and lease liabilities

The following table reconciles between the operating lease commitments disclosed under IAS 17 at 31(st) March 2019 and the lease liabilities recognised on transition to IFRS 16 at 1(st) April 2019:

 
                                                                           GBP million 
 
 Future minimum amounts payable under non-cancellable operating 
  leases reported under IAS 17 at 31(st) 
   March 2019                                                                       76 
 Change in assessment of lease term                                                 22 
 Low-value or short-term leases                                                    (1) 
 Reclassification of onerous lease provision                                         1 
 Impact of discounting lease liabilities                                          (21) 
 Lease liabilities recognised on transition to IFRS 16 at 1(st) 
  April 2019                                                                        77 
 
 
 
 Current                                                                            11 
 Non-current                                                                        66 
 Lease liabilities recognised on transition to IFRS 16 at 1(st) 
  April 2019                                                                        77 
 
 
 
 
 Impact on consolidated balance sheet at 1st April 2019 
 The following table shows the effect of adopting IFRS 16 on the consolidated 
  balance sheet at 1(st) April 2019: 
 
                                                                              GBP million 
 
 Non-current assets 
 Right-of-use assets                                                                   89 
 Other receivables(1)                                                                (14) 
 Total non-current assets                                                              75 
 Total assets                                                                          75 
 
 Current liabilities 
 Trade and other payables                                                               1 
 Lease liabilities                                                                   (11) 
 Total current liabilities                                                           (10) 
 
 Non-current liabilities 
 Lease liabilities                                                                   (66) 
 Provisions                                                                             1 
 Total non-current liabilities                                                       (65) 
 Total liabilities                                                                   (75) 
 Net assets                                                                             - 
 
 
 (1) Prepayments reclassified as right-of-use assets. 
 
 

Accounting policy applied to 31st March 2019

Under IAS 17, all of the group's leases were classified as operating leases and lease payments made (net of any incentives received from the lessor) were charged to the income statement on a straight-line basis over the lease term.

 
 
14  Changes in accounting policies (continued) 
 
 

Accounting policy applied from 1(st) April 2019

Leases are recognised as a right-of-use asset, together with a corresponding lease liability, at the date at which the leased asset is available for use.

The right-of-use asset is initially measured at cost, which comprises the initial value of the lease liability, lease payments made (net of any incentives received from the lessor) before the commencement of the lease, initial direct costs and restoration costs. The right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term in operating profit.

The lease liability is initially measured as the present value of future lease payments discounted using the interest rate implicit in the lease or, where this rate is not determinable, the group's incremental borrowing rate, which is the interest rate the group would have to pay to borrow the amount necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Interest is charged to finance costs at a constant rate of interest on the outstanding lease liability over the lease term.

Payments in respect of short-term leases, low-value leases and leases of intangible assets are charged to the income statement on a straight-line basis over the lease term in operating profit.

 
15  Restatements 
 
 

The comparatives for the six months ended 30(th) September 2018 have been restated as a result of a detailed review of revenue transactions in the group's Platinum Group Metal Services business conducted in the prior year which concluded that location and form swaps and sale and repurchase agreements should be excluded from revenue under IFRS 15. The group regularly enters into contracts whereby metal is transferred with a separate agreement to buy back the metal, either in a different location and/or in a different form. IFRS 15 requires the presentation of swap transactions (regardless of whether they are a location or form swap) with counterparties of a similar nature to the group to be excluded from revenue. It further clarifies that transactions with a linked sale and future repurchase (sale and repurchase agreements) are excluded from revenue and treated as finance transactions.

The impact of the restatement is to reduce both revenue and cost of sales in respect of swaps and sale and repurchase agreements for the six months ended 30(th) September 2018 by GBP604 million and GBP1,537 million, respectively. The latter restatement includes other, smaller errors identified during the review and also increases finance costs and finance income by GBP18 million. The restatement has no net impact on sales, profit, working capital, net debt and net assets and, therefore, historic business performance measures communicated by the group are unchanged.

 
     Impact on the Condensed Consolidated Income Statement 
 
                                                      Six months ended 30(th) September 
                                                                     2018 
                                                   As     Sale and 
                                                                         Location 
                                           previously   repurchase            and 
                                             reported   agreements     form swaps       Restated 
                                          GBP million  GBP million    GBP million    GBP million 
 Revenue                                        7,108      (1,537)          (604)          4,967 
 Cost of sales                                (6,634)        1,537            604        (4,493) 
                                                                    -------------  ------------- 
 Gross profit                                     474            -              -            474 
                                                                    -------------  ------------- 
 
 Finance costs                                   (24)         (18)              -           (42) 
 Finance income                                     4           18              -             22 
                                                                    -------------  ------------- 
 
15   Restatements (continued) 
 
     Impact on the Condensed Consolidated Cash Flow Statement 
 
                                                                  Six months ended 30(th) 
                                                                       September 2018 
                                                                As       Sale and 
                                                        previously     repurchase 
                                                          reported     agreements       Restated 
                                                       GBP million    GBP million    GBP million 
 
 Interest received                                               4             18             22 
 Interest paid                                                (27)           (18)           (45) 
                                                                    -------------  ------------- 
 
 
 

Non-GAAP Measures

for the six months ended 30(th) September 2019

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.

 
                                                                                           Reconciliation 
  Non-GAAP measure                                                                          to GAAP measure 
                        Definition                         Purpose 
Sales(1)              Revenue excluding sales            Provides a better measure         See note 
                       of precious metals to customers    of the growth of the group        2 
                       and the precious metal             as revenue can be heavily 
                       content of products sold           distorted by year on year 
                       to customers.                      fluctuations in the market 
                                                          prices of precious metals 
                                                          and, in many cases, the 
                                                          value of precious metals 
                                                          is passed directly on 
                                                          to customers. 
Underlying            Underlying operating profit        Provides a measure of             See note 
 operating             divided by sales. Underlying       how we convert our sales          5 
 profit margin(1)      operating profit excludes          into underlying operating 
                       profit or loss on disposal         profit and the efficiency 
                       of businesses, gain or             of our business. 
                       loss on significant legal 
                       proceedings, together with 
                       associated legal costs, 
                       amortisation of acquired 
                       intangibles and major impairment 
                       and restructuring charges. 
Underlying            Underlying profit for the          Our principal measure             See note 
 earnings per          period divided by the weighted     used to assess the overall        5 
 share(1)              average number of shares           profitability of the group. 
                       in issue. 
Return on             Underlying operating profit        Provides a measure of             See below 
 Invested Capital      divided by average equity,         the group's efficiency 
 (ROIC)(1)             excluding post tax pension         in allocating the capital 
                       net assets, plus average           under its control to profitable 
                       net debt for the same period.      investments. 
Average working       Monthly average of non-precious    Provides a measure of             See below 
 capital days          metal related inventories,         efficiency in the business 
 (excluding            trade and other receivables        with lower days driving 
 precious metals)(1)   and trade and other payables       higher returns and a healthier 
                       (including any classified          liquidity position for 
                       as held for sale) divided          the group. 
                       by sales for the last three 
                       months multiplied by 90 
                       days. 
Free cash             Net cash flow from operating       Provides a measure of             See Condensed 
 flow                  activities after net interest      the cash the group generates      Consolidated 
                       paid, net purchases of             through its operations,           Cash Flow 
                       non-current assets and             less capital expenditure.         Statement 
                       investments, dividends 
                       received from joint venture 
                       and associate and the principal 
                       element of lease payments. 
Net debt (including   Net debt, including post           Provides a measure of             See note 
 post tax pension      tax pension deficits and           the group's ability to            8 
 deficits)             quoted bonds purchased             repay its debt. 
 to underlying         to fund the UK pension 
 EBITDA                (excluded when the UK pension 
                       plan is in surplus) divided 
                       by underlying EBITDA for 
                       the same period. 
 

(1) Key Performance Indicator

 
Return on Invested Capital (ROIC) 
                                                              Six months ended 
                                                          30.9.19               30.9.18 
                                                      GBP million           GBP million 
 
Underlying operating profit for this period 
 (note 5)                                                     265                   271 
Underlying operating profit for prior year                    566                   525 
Less: Underlying operating profit for prior 
 first half (note 5)                                        (271)                 (250) 
Annualised underlying operating profit                        560                   546 
 
Average net debt                                            1,270                 1,029 
Average equity                                              2,679                 2,373 
Average capital employed                                    3,949                 3,402 
Less: Average pension net assets                            (258)                 (170) 
Less: Average related deferred taxation                        40                    26 
Average capital employed (excluding post tax 
 pension net assets)                                        3,731                 3,258 
 
ROIC (excluding post tax pension net assets)                15.0%                 16.7% 
ROIC                                                        14.2%                 16.0% 
 
Average working capital days (excluding precious 
 metals) 
 
                                                          30.9.19               30.9.18 
                                                                            Restated(1) 
                                                      GBP million           GBP million 
 
Inventories                                                 1,475                 1,176 
Trade and other receivables                                 1,953                 1,342 
Trade and other payables                                  (1,713)               (1,122) 
Total working capital                                       1,715                 1,396 
Less: Precious metal working capital                        (959)                 (671) 
Working capital (excluding precious metals)                   756                   725 
 
                                                              Six months ended 
                                                                   30.9.19               30.9.18 
                                                                      Days                  Days 
Average working capital days (excluding precious 
 metals)                                                                61                    61 
 
 
 

(1) See note 15.

 
 
2019 
 
28(th) November 
Ex dividend date 
 
29(th) November 
Interim dividend record date 
 
2020 
 
4(th) February 
Payment of interim dividend 
 
28(th) May 
Announcement of results for the year ending 31(st) March 2020 
 
4(th) June 
Ex dividend date 
 
5(th) June 
Final dividend record date 
 
23(rd) July 
129(th) Annual General Meeting (AGM) 
 
4(th) August 
Payment of final dividend subject to declaration at the AGM 
 
 
Cautionary Statement 
This announcement contains forward looking statements that are subject 
 to risk factors associated with, amongst other things, the economic 
and business circumstances occurring from time to time in the countries 
 and sectors in which the group operates. It is believed that the 
expectations reflected in this announcement are reasonable but they 
 may be affected by a wide range of variables which could cause 
actual results to differ materially from those currently anticipated. 
 
 
Johnson Matthey Plc 
Registered Office: 5th Floor, 25 Farringdon Street, London EC4A 4AB 
Telephone: +44 (0) 20 7269 8400 
Fax: +44 (0) 20 7269 8433 
Internet address: www.matthey.com 
E-mail: jmpr@matthey.com 
 
Registered in England -- Number 33774 
 
Registrars 
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA 
Telephone: 0371 384 2344 (in the UK) * 
+44 (0) 121 415 7047 (outside the UK) 
Internet address: www.shareview.co.uk 
 
* Lines are open 8.30am to 5.30pm Monday to Friday excluding public 
 holidays in England and Wales. 
 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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