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Johnson Matthey PLC Strong performance whilst strengthening platform for growth

Johnson Matthey PLC (LON:JMAT) today announced preliminary results for the year ended 31st March 2019.

Robert MacLeod, Chief Executive, commented:

We had another good year with strong sales and operating profit growth, as we progress our strategy to deliver our vision for a cleaner, healthier world.

In the year, Clean Air performed strongly and we are investing in new plants to satisfy future demand, particularly from Asia which will be our next key growth driver. We remain excited by the growth opportunity in Battery Materials and commercialisation of eLNO®, our leading ultra-high energy density cathode material, continues at pace. We made further investments in Health to develop our pipeline of products and in Efficient Natural Resources we continue to drive efficiencies whilst focusing on high growth market segments. To support our long term growth and as we broaden our presence in sustainable technologies, we are also developing innovative solutions for fuel cells and battery materials recycling.

Delivery of our strategy is underpinned by the fundamental changes we are making across all aspects of the group. Our business is becoming more agile and efficient, with greater capability to deal with the fast changing world around us. We have invested in safety, people, systems and processes whilst continuing to target further improvement. The ongoing roll out of our single global ERP system which will standardise processes and transform the way we work is an example. Together, all of these actions are enabling us to strengthen our platform for growth.

In light of our strong performance, continued delivery against our strategy and confidence in the group’s future growth prospects, we are proposing a 7% increase in the ordinary dividend for the full year. For 2019/20, we expect growth in operating performance at constant rates to be within our medium term guidance of mid to high single digit growth.

Reported resultsYear ended31st March% change
20192018
Revenue1£ million10,74510,274+5
Operating profit£ million531359+48
Profit before tax (PBT)£ million488320+53
Earnings per share (EPS)pence215.2155.2+39
Ordinary dividend per sharepence85.580.0+7
Underlying performance2Year ended
31st March
% change% change, constant rates3
20192018
Sales excluding precious metals (Sales)4£ million4,2143,846+10+10
Operating profit£ million566525+8+8
Profit before tax£ million523486+8+7
Earnings per share       pence228.8208.4+10

Underlying performance2

· Sales grew 10% and underlying operating profit grew 8% at constant rates3 driven by strong growth in Clean Air

· Underlying EPS was up 10% and ahead of operating profit, benefiting from a lower tax rate

· Free cash was an outflow of £13 million impacted by platinum group metal (pgm) refinery downtime, driving higher precious metal working capital and higher capex

· Average working capital days excluding precious metals improved by three days to 59 days

· Return on invested capital (ROIC), excluding net pension assets, decreased from 17.0% to 16.4% mainly due to higher precious metal working capital

· Strong balance sheet with net debt of £866 million; net debt to EBITDA of 1.3 times

By sector

· Continued strong sales and operating profit growth in Clean Air, and achieved our planned market share of c.65% in European light duty diesel. Sector sales grew 11%, well ahead of the decline in global vehicle production, driven by double digit growth in both light and heavy duty catalysts

· Sales grew 4% in Efficient Natural Resources with strong operating profit driven by higher average precious metal prices and net benefits from improved efficiency and weaker performance in Advanced Glass Technologies

· In Health, sales were up 3% and operating profit was slightly down reflecting product mix and net costs associated with footprint optimisation

· New Markets saw strong sales growth but lower operating profit mainly due to Battery Materials as we invest in eLNO. We continue to make progress on commercialising eLNO and customer feedback remains positive. We recently secured a site in Poland for our first commercial plant as well as our first long term supply agreement for raw materials with Nemaska Lithium

Reported results

· Reported revenue increased 5%

· Reported operating profit was £531 million, up 48%. In the prior year, we recognised a major impairment and restructuring charge of £90 million, and a legal settlement of £50 million

· Reported EPS was therefore up 39%, reflecting the higher operating profit in the current year

· Cash inflow from operating activities was £334 million

· Recommended ordinary dividend up 7% to 85.5 pence for the full year, reflecting our strong performance and confidence in the group’s future prospects

Outlook for the year ending 31st March 2020

· For 2019/20, we expect growth in operating performance at constant rates to be within our medium term guidance of mid to high single digit growth

· At current foreign exchange rates (£:$ 1.295, £:€ 1.157, £:RMB 8.72), translational foreign exchange movements for the year ending 31st March 2020 are expected to adversely impact sales and underlying operating profit by £6 million and £2 million respectively