Johnson Matthey reports progress with transformation strategy
By Josh White
Date: Monday 27 Jan 2025
(Sharecast News) - Johnson Matthey said in an update on Monday that despite challenging market conditions, it had made significant progress with its transformation strategy, and was taking additional steps to enhance cash generation and returns on capital.
The FTSE 250 company said that since chief executive officer Liam Condon's appointment in 2022, it had implemented a series of measures to optimise operations.
They included achieving cumulative cost savings of £155m by September, with a target of £200m by the 2024-2025 financial year and an annualised savings expectation of over £250m in the 2025-2026 period.
Capital expenditure had been curtailed, with total investment for the three-year period to 2026-2027 capped at £0.9bn, reflecting a significant reduction from previous levels.
The firm said it had successfully completed the divestment of non-core assets, surpassing its initial target by generating net proceeds exceeding £500m.
That, the board said, had enabled Johnson Matthey to return £250m to shareholders.
Additionally, its Catalyst Technologies business had secured contracts worth more than £350m in sales over the next five years.
To further drive cash generation, Johnson Matthey announced plans to increase cash conversion levels from the current 20% to 30% in the 2024-2025 financial year, to at least 50% in 2025-2026 and above 80% in 2026-2027 and beyond.
The improvement was expected to be supported by the completion of its refinery upgrade and ongoing operational efficiencies.
A major strategic shift included the decision to limit future capital expenditure in its Hydrogen Technologies division to maintenance levels of no more than £5m annually from 2025-2026.
The business remained on track to achieve operating profit break-even by the end of 2025-2026, with the company exploring options to further de-risk its exposure in this sector.
To reinforce its financial discipline, Johnson Matthey said it had established an investment committee, chaired by senior independent director Barbara Jeremiah.
The committee would oversee investment strategies, capital allocation, and major capital projects, ensuring a robust approach to cash generation and financial returns.
It added that the Clean Air division had shown strong cash generation capabilities, with ongoing efforts to optimise its manufacturing footprint and cost base.
Operating margins had improved from 8.7% in 2022-2023 to 10.6% in 20232-24, with a mid-teens margin target set for 2025-2026.
Meanwhile, the Catalyst Technologies segment continued to show robust growth potential, with expectations of high single-digit sales growth in the short term and mid-teens growth over the longer term.
Operating margins were projected to rise to high teens by the end of 2027-2028.
The Platinum Group Metal Services (PGMS) business was meanwhile set to benefit from a major investment programme aimed at enhancing refining efficiency.
Johnson Matthey said completion of the programme was expected to unlock significant cash flow improvements, with cash conversion set to approach 100% of underlying operating profit.
Its board said it was committed to improving shareholder returns, and acknowledged the need to enhance its absolute share price performance.
The company said it was continuing to assess alternative strategic options while remaining focused on executing its current transformation initiatives.
At 0935 GMT, shares in Johnson Matthey were up 1.02% at 1,390p.
Reporting by Josh White for Sharecast.com.
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