Presentation of results for the year ended 31 st March 2018 31 st May 2018
Cautionary statement This presentation contains forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which Johnson Matthey operates. It is believed that the expectations reflected in these statements 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. 2
Significant progress against our strategy, performance in line with expectations Sales grow th 7 % 1 Significant progress Underlying operating ROI C 1 6 .4 % Final dividend up 7 % against our strategy profit flat, up 4 % excluding PRMB 2 1. All growth rates in this presentation are at constant rates unless otherwise stated 3 2. Excluding a one-off gain in 2016/ 17 of £17 million following the implementation of an inflation cap on the US post-retirement medical benefit (PRMB) plan
Anna Manz Chief Financial Officer
Performance in line with expectations % change, Underlying results for year ended 3 1 st 2 0 1 8 2 0 1 7 % change constant rates March 1 £ m £ m Sales excluding precious metals (sales) 3,846 3,578 + 8 + 7 Operating profit 525 513 + 2 - Finance charges (including JV) (39) (31) + 26 Profit before tax 486 482 + 1 -1 Taxation (86) (82) + 5 Profit after tax 400 400 - Earnings per share 2 0 8 .4 p 2 0 9 .1 p - Ordinary dividend per share 8 0 .0 p 7 5 .0 p + 7 1. All figures are before amortisation of acquired intangibles, major impairment and restructuring charges, profit or loss on disposal of businesses, loss on significant legal proceedings, significant tax rate changes and, where relevant, related tax effects 5
Sales growth of 7% led by Clean Air Sales grow th + 9 % + 4 % + 6 % -2 % + 7 % + £ 1 3 m 3900 + £ 3 4 m £ 1 ,7 6 2 m + £ 2 0 5 m -£ 5 m -£ 1 2 m £ 3 ,8 4 6 m 3800 3700 + £ 3 3 m 3600 £ 3 ,5 7 8 m 3500 3400 3300 3200 Full Year 2016/ 17 Translational FX Clean Air Efficient Natural Health New Markets Eliminations Full Year 2017/ 18 Resources 6
Underlying operating profit in line with our expectations Grow th + 4 % 540 + £ 1 2 m + £ 9 m + £ 2 4 m 520 £ 5 2 5 m 500 £ 5 1 3 m -£ 1 7 m -£ 1 6 m 480 460 440 420 Full Year 2016/ 17 Translational FX Lapping PRMB credit Costs associated with Underlying businesses Restructuring cost Full Year 2017/ 18 1 group initiatives savings 1. Includes procurement, IT and legal costs 7
Clean Air: strong sales growth led by double digit growth in HDD Sales up 9 % Operating profit up 7 % , up 9 % excl. PRMB 2500 + £ 2 m + £ 1 6 1 m • Margin maintained £ 2 ,4 5 4 m 2450 2400 2350 + £ 4 3 m + £ 2 9 m 2300 + £ 2 5 m -£ 3 0 m 2250 2 0 1 8 / 1 9 outlook £ 2 ,2 2 4 m 2200 • Strong sales growth, driven by light duty diesel share gains in Europe • Maintain margin, ahead of previous 100 expectations due to efficiencies 50 0 Full Year Translational LDV Europe - LDV Europe - LDV Asia and HDD Other Full Year 2016/ 17 FX Gasoline Diesel Americas 2017/ 18 8
Efficient Natural Resources: good sales growth, margin was lower Sales up 4 % Operating profit dow n 4 % , dow n 2 % excl. PRMB + £ 2 2 m • Decline in high margin licensing income 960 • Actions taken to improve the business -£ 1 m 950 £ 9 5 6 m • Destocking 940 + £ 3 3 m • Restructuring 930 + £ 3 m 920 910 £ 9 1 9 m 900 2 0 1 8 / 1 9 outlook -£ 2 0 m • Slight sales growth • Operating profit growth ahead of sales, plus 30 £7m restructuring cost savings 20 10 0 Full Year Translational Licences and Catalyst refills PGM Services Other Full Year 2016/ 17 FX first fills 2017/ 18 9
Health: good sales growth, operating profit impacted by costs as we optimise our manufacturing footprint Sales up 6 % Operating profit dow n 1 3 % , dow n 9 % excl. PRMB + £ 1 2 m 250 • Higher pricing and profit shares • Costs from optimising manufacturing £ 2 4 7 m 240 footprint + £ 1 0 m 230 £ 2 3 6 m -£ 2 m 230 220 -£ 9 m Generics 2 0 1 8 / 1 9 outlook 40 • Broadly stable sales 30 • Operating profit down • Performance weighted to H2 20 10 0 Full Year 2016/ 17 Translational FX Controlled Non-controlled Innovators Full Year 2017/ 18 10
New Markets: lower LFP sales led to small sales decline Sales dow n 2 % Operating profit up 3 4 % , up 6 0 % excl. PRMB 320 + £ 9 m • Lapping £5 million impairment in 2016/ 17 315 • Decline in LFP + £ 6 m + £ 5 m 310 • Increased investment in eLNO £ 3 1 2 m 305 £ 3 0 8 m -£ 3 m -£ 1 3 m 300 295 290 2 0 1 8 / 1 9 outlook 25 • Sales and operating profit growth 20 15 10 5 0 Full Year Translational Alternative Medical Life Science Other Full Year 2016/ 17 FX Powertrain Technologies 2017/ 18 11
Higher finance charges and tax impacted underlying EPS growth % change, 2 0 1 8 2 0 1 7 Year ended 3 1 st March 1 % change constant rates £ m £ m Sales excluding precious metals 3,846 3,578 + 8 + 7 Operating profit 525 513 + 2 - Finance charges (including JV) (39) (31) + 26 Profit before tax 486 482 + 1 -1 Taxation (86) (82) + 5 Tax rate 17.7% 17.0% Profit after tax 400 400 - Earnings per share 2 0 8 .4 p 2 0 9 .1 p - Ordinary dividend per share 8 0 .0 p 7 5 .0 p + 7 1. All figures are before amortisation of acquired intangibles, major impairment and restructuring charges, profit or loss on disposal of businesses, loss on significant legal proceedings, significant tax rate changes and, where relevant, related tax effects 12
Reported results impacted by one-offs 2 0 1 8 2 0 1 7 Year ended 3 1 st March £ m £ m Underlying operating profit 5 2 5 5 1 3 Amortisation of acquired intangibles (19) (20) Major impairment and restructuring charges 1 (90) - Loss on disposal of business (7) - Legal settlement 2 (50) - Operating profit 3 5 9 4 9 3 1. Associated total cash costs of £23 million, of which £13 million in 2017/ 18 2. Cash cost £50 million, of which two thirds in 2017/ 18 13
Free cash flow impacted by working capital Free cash flow ( £ m ) Year ended 3 1 st March 2 0 1 8 2 0 1 7 Underlying operating profit 525 513 Depreciation and amortisation 1 160 157 pm 3 (84) non pm (64) Net working capital outflow 2 (158) (99) other (10) Net interest paid (42) (37) Tax paid (77) (59) Capex spend (209) (256) Other 4 (63) 11 Free cash flow 1 3 6 2 3 0 1. Excluding amortisation of acquired intangibles and restructuring impairments 2. Includes movements in provisions and pensions 3. Precious metal 14 4. Includes legal settlement and restructuring cash costs
Improvement in non precious metal working capital days W orking capital days excluding precious Precious m etal w orking capital ( £ m ) m etals, year ended 3 1 st March 70 700 66 600 60 56 500 50 54 50 400 40 300 30 200 20 100 10 0 0 2015 2016 2017 2018 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Precious metal (pm) working capital increased £69m 1 Working capital days at year end down 4 to 50 days Average working capital days down 7 to 62 days Pm working capital higher through the year 1. Balance sheet movement 15
Disciplined investment to support growth 2 0 1 7 / 1 8 capex £ 2 1 7 m • Clean Air Poland plant • Health Annan plant and API product pipeline • Upgrading core IT systems 2 0 1 8 / 1 9 capex up to £ 3 9 0 m • Clean Air Poland and China plants • eLNO demonstration plant and commercial plant • Continued API product development • Upgrading core IT systems 16
Strong balance sheet, net debt 1 to EBITDA 1.1 times £ m £ m Net debt at the beginning of the year ( 7 1 6 ) Free cash flow 136 Dividends (146) Other 4 Movement in net debt before FX (6) Net debt before FX ( 7 2 2 ) FX 43 Net debt at the end of the period ( 6 7 9 ) 1. Net debt including post tax pension deficits 17
ROIC declined, impacted by precious metal working capital ROI C and cost of capital 24% 20% ROI C 16% 12% Cost of capital 8% 4% 0% FY 2014/ 15 FY 2015/ 16 FY 2016/ 17 FY 2017/ 18 18
Good progress on my three focus areas Focus areas Status • ROIC lower this year Rigorous and transparent resource allocation • On track to expand ROIC to 20% over the medium term Disciplined management of working capital • Average non precious metal working to drive continued strong cash capital days improved by 7 • Restructuring cost savings on track Drive increasing business wide efficiency • Procurement savings increased to c.£60m over three years 19
Outlook for 2018/ 19 Mid to high single digit growth in operating performance Growth led by Clean Air as diesel share gains in Light Duty Europe come through Stronger second half: normal seasonality across businesses; H2 weighting in Health Improvement in average working capital days (excluding precious metals) Capex up to £390 million 20
Robert MacLeod Chief Executive 21
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