Johnson Matthey half year results 30 Sept 2020

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Johnson Matthey (JMAT)

UK 100

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Half year results for the six months ended 30^th September 2020
Successfully navigating a challenging period and well positioned for the future

Robert MacLeod, Chief Executive, commented:
The COVID-19 pandemic has created great uncertainty for businesses and society globally. Our priority has been the safety of our people, customers, suppliers and the communities in which we operate. It has been a challenging period but the steps we have taken in recent years to create a more simple, agile and efficient business, coupled with the dedication of all my colleagues across the whole of Johnson Matthey, have enabled us to navigate it well. I am pleased that we delivered operating performance ahead of market expectations, as well as good cash generation, and made further progress on transforming the group.

In Clean Air, following the temporary disruption earlier in the year, we are currently seeing a strong recovery in demand across all regions, especially in China. Efficient Natural Resources saw an impact from weaker demand in some end markets, although we are seeing positive momentum in licensing with new wins and are strongly positioned for the energy transition. Health is benefiting from new customer contracts which will also drive future growth. We are making good progress with the commercialisation of eLNO and, given our increasing confidence from customer testing, are now proceeding with the front end engineering design for our second commercial plant.

Across the group we have made structural improvements to our operating model to drive efficiency and increase capability, and are already starting to see the benefits. Our actions include executing on our targeted annualised cost savings of c.£225 million by the end of 2022/23; optimising our global manufacturing footprint in Clean Air and delivering significant working capital benefits by fundamentally changing our metal operating model. Consistent with our ongoing strategy to create a simpler and more efficient portfolio, we completed the disposal of two of our smaller non-core activities.

Activity in autos and other key markets has improved since the beginning of the COVID-19 pandemic and we expect a materially stronger second half in comparison to the first half of this year. However, the path of recovery remains uncertain and we are not providing quantitative guidance for the group overall for the year ending 31^stMarch 2021. In light of the market backdrop, but also reflecting the group's performance and the importance of dividends to shareholders, the board has approved an interim dividend of 20.0 pence per share.

I am excited by our medium term growth prospects driven by accelerating global trends and we are purpose led to reduce the impact of climate change. We are investing for our future and remain focused on executing our growth opportunities including battery materials, fuel cells and our hydrogen production technologies.

Reported results		Half year ended 30^th September		% change
		2020	2019
Revenue	£ million	6,979	6,818	+2
Operating profit	£ million	68	259	-74
Profit before tax (PBT)	£ million	26	225	-88
Earnings per share (EPS)	pence	12.3	91.8	-87
Interim dividend per share	pence	20.0	24.5	-18

Underlying performance¹			Half year ended 30^th September		% change	% change, constant rates²
			2020	2019
Sales excluding precious metals (sales)³		£ million	1,679	2,124	-21	-20
Operating profit		£ million	151	265	-43	-42
Profit before tax		£ million	109	231	-53	-52
Earnings per share		pence	47.7	95.8	-50
Reported results
·	Reported revenue increased 2% driven by higher average precious metal prices
·	Reported operating profit declined 74% driven by lower demand in Clean Air and major impairment and restructuring charges of £78 million
·	Reported EPS declined 87%, reflecting lower reported operating profit and higher net finance charges
·	Cash inflow from operating activities was £482 million

Underlying performance¹
·	Sales declined 20%, primarily driven by weaker demand in Clean Air. Sales in Efficient Natural Resources and New Markets also declined whilst Health grew
·	Underlying operating profit declined 42% primarily driven by Clean Air. In aggregate, operating profit from our other operating sectors was broadly flat
·	Underlying EPS declined 50% reflecting lower operating profit and higher net finance charges
·	Capital expenditure of £148 million as we continue to invest in our strategic growth projects
·	Free cash flow improved to £256 million benefiting from lower precious metal working capital, despite higher average precious metal prices
·	Strong balance sheet maintained with net debt of £0.9 billion; net debt to EBITDA of 1.6 times
·	Return on invested capital (ROIC) decreased to 10.4% primarily due to lower operating profit

Dividend
The group maintains a strong balance sheet, good access to liquidity and is cash generative. In a challenging period, operating performance improved progressively through the first half, although remains below the prior year with heightened levels of uncertainty persisting. In considering all these factors and recognising the importance of dividends to shareholders, the board has approved an interim dividend of 20.0 pence per share (1H 2019/20: 24.5 pence per share).

The board remains committed to a progressive dividend and anticipates restoring future dividend payments to levels seen prior to the COVID-19 pandemic when circumstances permit. The interim dividend will be paid to shareholders on 4^th February 2021, with an ex dividend date of 26^th November 2020.

Outlook for the year ending 31^st March 2021
Activity in autos and other key markets has improved since the COVID-19 pandemic began earlier this year and we expect a materially stronger second half in comparison to the first half of this year. However, the path of recovery remains uncertain and we are not providing quantitative guidance for the group overall for the year ending 31^st March 2021. Looking at each of our sectors:

·	Clean Air performance recovered strongly through the first half. The global outlook for autos has improved, with external data now suggesting European and US automotive production could be down c.20% in our fiscal year, compared with the previous estimate of down c.25%, with China above the prior year. In heavy duty, external data suggests European and US production could be down c.30% with the Chinese market above the prior year. Order patterns remain volatile and visibility is low, meaning the actual outcome for the full year could still be materially different. Our flexible cost base, with c.75% of costs being variable before mitigation, enables us to manage different levels of activity

·	Efficient Natural Resources full year operating performance is expected to be below the prior year, although we currently expect our usual seasonality and a stronger second half. Catalyst Technologies is likely to be below the prior year due to weaker demand whilst PGM Services is expected to be above the prior year, benefiting from higher average precious metal prices

·	In Health we continue to make progress with our new customer contracts for active pharmaceutical ingredients used in generic opioid addiction therapies and our work with innovator customers which will drive future growth. Consequently, we expect full year operating performance to be above the level of the prior year
·	In New Markets we expect operating performance to be above the level of the prior year

We continue to drive efficiency and are making good progress against our targeted annualised cost savings of c.£225 million. From these initiatives, we are on track to deliver expected benefits of £59 million⁴ in the year ending 31^st March 2021, with costs in the year of c.£90 million. To support our medium term growth, we are continuing to invest in our strategic growth projects.

Appointment of interim Chief Financial Officer
As previously announced, Anna Manz will be stepping down as Chief Financial Officer and Executive Director of Johnson Matthey on 20^th November 2020. We are pleased to announce the appointment of Karen Hayzen-Smith, currently Group Financial Controller, as interim Chief Financial Officer with immediate effect. Karen will not be appointed to the board.

Notes:
Vara consensus for underlying operating profit in the first half 2020/21 was £142 million (range: £122 million to £158 million) as at 18^th November 2020.
1.	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 46 to 49.
2.	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 2019/20 results converted at 2020/21 average exchange rates.
3.	Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers.
4.	£59 million includes £30 million relating to Clean Air footprint and driving group organisational efficiency, and £29 million of procurement savings.
eLNO is a trademark of Johnson Matthey Public Limited Company.

Our vision is for a world that is cleaner and healthier; today and for future generations. With our expertise in science, we are developing sustainable solutions to tackle the world's most challenging problems. This includes addressing global trends such as climate change where the urgency for action is accelerating. We continue to invest in these growth areas and are making good strategic progress. More recently, in Europe and the US the macroeconomic environment has been impacted by COVID-19 whilst China has experienced a strong recovery with auto production above pre-pandemic levels.

Driving growth from our established businesses

·	In Clean Air, we continue to benefit from tightening legislation in Europe and particularly Asia. In light duty, this legislation is driving fitment of higher value parts, which is well underway in Europe and in China. We are also beginning to see benefits in heavy duty from tightening legislation, particularly in China and India. To support this growth, our new plants in Europe and China are ramping up production giving us a global, efficient and agile manufacturing footprint. As we transform from a local to global operating model, we are focused on delivering excellent technology solutions and service to our customers, and driving further efficiency.

·	In Efficient Natural Resources, we continue to focus our resources on selected, higher growth segments; target our R&D investment for future growth; and drive operational efficiency. We are making good strategic progress, which includes structurally changing our metal operating model (for further detail see page 6) and delivering against our efficiency plans. To support our longer term growth, we are committed to playing a key role in the energy transition. We are evolving our business and developing low carbon chemical processes, and work is already underway around renewable feedstocks. In addition, we have a significant opportunity in hydrogen and our continued work to develop a circular economy, for example battery materials recycling, means we are well positioned.

·	In Health, we are benefiting from new multi-year supply agreements which will drive our future growth. This includes contracts with generic partners for the supply of active pharmaceutical ingredients (APIs) used in opioid addiction therapies. We continue to make progress towards delivering c.£100 million of operating profit from our pipeline of generic and innovator APIs. In the period we launched one innovator product, which is the supply of an immuno-oncology treatment to Immunomedics, and in October we received FDA (Food and Drug Administration) approval for a generic oncology therapy. On the innovator side, we also secured a new long term supply agreement with Sarepta Therapeutics. Whilst our new pipeline is advancing, we are seeing some pressure on our base business, specifically within ADHD therapies and bulk opiates, as our existing portfolio matures.

Executing now to capture medium term growth from climate change solutions

·	In Battery Materials, we continue to make substantial progress in the commercialisation of eLNO as we target the automotive market for high energy cathode materials which is expected to be c.1,700kT by 2030¹. We are around one third of the way through construction of our first commercial plant and progressing well with customers. In the period we have seen considerable interest from potential new customers, and our existing customers for both auto and non-auto applications continue to move into full cell testing. For non-auto customers the qualification process is typically faster and two have now moved to cell prototyping. This is a more advanced stage in which customers test their specific cell format. The work with our non-auto customers is providing valuable learnings ahead of auto customers moving through to this stage.

	Construction of our first commercial plant in Konin, Poland is on schedule and we expect commissioning to commence in 2022, with commercial production in 2024. Customer requirements are continuously evolving as they look to customise materials for their specific applications. As these requirements change and our understanding of them increases, we have gained even more confidence and are committing greater investment to support our customers getting to market. In finalising the design of the plant to build in the greater flexibility our customers require and maintaining speed to market, the cost of this plant has increased. As a result, we now expect the full cost to commercialisation of eLNO to be c.£550 million against our previous estimate of £350 million. This is a total project cost comprising investment in our pilot plant, application centres, commercial plant, research and development, and management costs.

Notes:
1.	IHS and Johnson Matthey estimates.
	The knowledge we have gained in constructing the first commercial plant to support our customers' requirements means that we continue to expect further capacity will have a substantially lower capital intensity, moving towards a level which is comparable with other European plants². At scale we expect this business will generate returns towards the upper end of the current industry average expected returns of 10-15%³.

	The exciting progress we are making with our customer pipeline alongside the size of the market we are targeting has given us the confidence to accelerate our scale up plans for eLNO and we are proceeding with the front end engineering design for our second commercial plant with 30kT capacity.

·	Hydrogen: As the global transition to net zero accelerates and demand for clean energy increases, there will be fundamental changes across the energy supply chain. Hydrogen will be key in achieving net zero because it helps to decarbonise energy and transportation. There is increasing policy support for hydrogen solutions, promoting greater adoption of hydrogen, and the opportunity is significant. As a leader in hydrogen activities including fuel cells and hydrogen production technologies, we are strongly positioned.

	Fuel cells will play a key role in the decarbonisation of transportation. We have a strong position in this market, supplying critical components for fuel cell stacks, and our platinum group metal (pgm) expertise enables us to deliver high performance solutions optimised for specific applications. Our business has grown strongly in recent years and we have an established customer base including major global truck and automotive OEMs, and leading players in the important and fast growing Chinese market. We have a significant opportunity in heavy duty trucks and automotive applications and are working on platforms due to launch over the next few years. To support our future growth we are investing £15 million to double our capacity in the UK and China. Our new capacity in China is now complete and expected to be fully operational by January 2021. In the UK, our new capacity is progressing well and expected to be complete by the end of this fiscal year. We are already planning our next phase of expansion.

	Blue and green hydrogen production technologies will be critical in the transition to net zero. In blue hydrogen (production of hydrogen from natural gas with carbon capture), we have leading technology which is more efficient, with lower capital intensity⁴ and captures over 95% of produced carbon dioxide at high pressure and purity, enabling easier transportation and storage. Commercialisation of our technology is progressing well. We are involved with the world scale HyNet and Acorn projects in the UK and have a strong pipeline of projects globally. In green hydrogen (production of hydrogen from electrolysis of water using renewable energy), we are well positioned with our proton exchange membrane (PEM) technology which is underpinned by our expertise in pgm catalysis and fuel cells. We are currently testing with leading electrolyser players.

Notes:
2.	Based on Bain benchmarking of competitors' European plants, giving average costs of c.$15k per tonne.
3.	Bain estimates.
4.	Compared to conventional steam methane reforming technology with carbon capture and storage. Johnson Matthey Technol. Rev., 2020, 64, (3), 357-37.
In 2020/21, we expect to achieve £59 million of cost savings related to all our efficiency initiatives, of which £24 million was delivered in the first half. Related to these efficiency measures, we incurred one-off costs of £78 million⁵ in the first half taken outside of underlying operating profit, of which £16 million was cash.

For further detail on these costs, please see page 16.
Key developments in the period include:

·		Procurement: We expect to meet our targeted £100 million savings by the end of this fiscal year, previously expected by 2022/23
·		Clean Air footprint: Our new world class plants in Poland and China are now in production, and our new plant in India will follow in 2021/22. We are progressively rebalancing production into our plant in North Macedonia, and new facilities in Poland and China
·		Driving organisational efficiency: We have reviewed our group operating model to remove duplication of activities between the corporate centre and the sectors and reduce complexity across the organisation

Summary of efficiency initiatives

Initiative £ million			Delivered to date	Annualised benefits by 2022/23
Procurement⁶			84	100
Restructuring (2017)			25	25
Health footprint optimisation			20	20
Clean Air footprint			3	30
Group wide organisational efficiency			8	50
Total efficiency initiatives			140	225

Driving balance sheet efficiency
To improve the efficiency of our balance sheet, we have made fundamental changes to our metal operating model which has structurally reduced our precious metal working capital by c.£400 million⁷ in the first half. Our actions include optimising our precious metal working capital across our businesses; contracting more effectively with our customers and enhancing the efficiency of our refining processes. These structural improvements, together with the immediate actions we took to manage the business through the pandemic, mean we have further strengthened our financial position. Going forward, the group is more resilient with our balance sheet less impacted by fluctuations in precious metal prices.

Focusing our portfolio
Our drive for efficiency and disciplined capital allocation enhances returns, and we continue to actively manage our portfolio. Post period end we divested our activities in Atmosphere Control Technologies and Water, which were not core to our growth strategy. Sales from these businesses in 2019/20 were c.£35 million in total. We continue to review our portfolio to increase focus on those businesses where we have a competitive advantage to drive value creation.

Notes:
5.	£78 million includes £62 million of restructuring costs, of which £16 million was a cash cost in the half and the remaining £46 million will be a future cash cost, and £16 million of impairments.
6.	Around three quarters of procurement initiatives will benefit the income statement, of which around two thirds will be reinvested to drive growth.
7.	Based on 31^st March 2020 prices.
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 (£ million)	Half year ended 30^th September		% change	% change, constant rates
Sales (£ million)	2020	2019	% change	% change, constant rates
Clean Air	1,003	1,392	-28	-27
Efficient Natural Resources	446	496	-10	-10
Health	119	111	+7	+8
New Markets	168	186	-10	-8
Eliminations	(57)	(61)
Sales	1,679	2,124	-21	-20

Underlying operating profit (£ million)	Half year ended 30^th September		% change	% change, constant rates
Underlying operating profit (£ million)	2020	2019	% change	% change, constant rates
Clean Air	77	179	-57	-56
Efficient Natural Resources	81	94	-14	-12
Health	15	18	-21	-21
New Markets	5	(8)	n/a	n/a
Corporate	(27)	(18)
Underlying operating profit	151	265	-43	-42

Reconciliation of underlying operating profit to operating profit (£ million)	Half year ended 30^th September
	2020	2019
Underlying operating profit	151	265
Amortisation of acquired intangibles	(5)	(6)
Major impairment and restructuring charges¹	(78)	-
Operating profit	68	259

Clean Air impacted by COVID-19 but seeing demand recovering strongly
·	Sales were materially below the prior year due to lower demand as a result of COVID-19, principally in Europe and the Americas whilst China was above the prior year. We saw a strong recovery as the half progressed
·	In light duty, sales were down 23% as auto production volumes were adversely impacted by the pandemic. We benefited from tightening legislation which increased the value per vehicle in Europe and in particular China
·	Heavy duty sales were down 33%, with Europe and the Americas down materially. Sales were partly offset by strong growth in China where we benefited from tightening legislation and government stimulus supporting the market
·	Operating profit declined as expected, primarily driven by weaker markets in Europe and the Americas. We benefited from the absence of one-off costs in the prior period of c.£15 million due to manufacturing inefficiencies

	Half year ended 30^th September		% change	% change, constant rates
	2020	2019
	£ million	£ million
Sales
LDV Europe	372	540	-31	-30
LDV Asia	192	193	-1	+1
LDV Americas	116	171	-32	-32
Total Light Duty Vehicle Catalysts	680	904	-25	-23

HDD Americas	132	258	-49	-48
HDD Europe	98	154	-37	-37
HDD Asia	80	52	+54	+56
Total Heavy Duty Diesel Catalysts	310	464	-33	-33

Other - stationary	13	24	-47	-47

Total sales	1,003	1,392	-28	-27

Underlying operating profit	77	179	-57	-56
Margin	7.7%	12.9%
Return on invested capital (ROIC)	11.4%	26.5%
Reported operating profit	42	178	-76

April	May	June	July	August	September	October
-75%	-60%	-20%	-1%	-2%	+17%	+14%
Light Duty Vehicle (LDV) catalysts
In LDV catalysts, we provide catalysts for emission control after-treatment systems for cars and other light duty vehicles powered by diesel and gasoline. Our global LDV sales declined 23%, largely driven by Europe and the Americas due to COVID-19 and associated customer shutdowns. Asia was flat although our sales in China were up, supported by government stimulus.

Europe
In Europe, diesel accounts for c.80% of our LDV business and we maintained our strong market share. Sales of diesel catalysts decreased 30%, although our performance was ahead of the decline in market production. This largely reflected a better platform mix.

In Western Europe, diesel accounted for 28% of new passenger car sales in the first half of 2020/21, compared with 32% in the same period last year. Light duty commercial vehicles remain largely diesel today. When these are included, the overall share of diesel sales in Western Europe was 36% for the first half of 2020/21, compared with 39% in the same period of 2019/20.

In Europe, sales of gasoline catalysts were down 27% although ahead of the decline in market production driven by improved mix and benefits from tighter legislation. We maintained our market share.

Asia
Asia LDV was flat, well ahead of a market that declined, as we benefited from an uplift in value per vehicle due to tightening legislation, particularly in China and India. Specifically in China, although our market share declined, we saw good sales growth with consumer demand recovering strongly to above pre-pandemic levels, supported by government stimulus.

Americas
In the Americas, whilst sales were down 32% we maintained our market share and performance was slightly ahead of the market due to a better platform mix.

Heavy Duty Diesel (HDD) catalysts
In HDD catalysts, we provide catalysts for emission control after-treatment systems for trucks, buses and non-road equipment. Global sales were down 33%. We saw material declines in our HDD businesses in the Americas and Europe, although this was partly offset by significant growth in our HDD Asia business as we benefited from tighter legislation and market share gains.

Americas
In the Americas, our largest HDD region in which we have a significant market share, sales declined 48% broadly in line with market performance. Following the peak of the Class 8 truck cycle in September last year, the market has been declining and was further impacted by the pandemic. Based on external data, the Class 8 truck cycle appears to be at or near the bottom, but the timing and pace of recovery is uncertain.

Europe
In HDD Europe, sales declined 37% in line with the market.

Asia
Our Asian HDD businesses grew 56%, well ahead of market production. We benefited from a significant uplift in value per truck due to tightening legislation in China and India, as well as market share gains.

Underlying operating profit
Operating profit declined 56% and margin declined 5.2 percentage points. This was driven by weaker consumer demand and temporary disruption as a result of the COVID-19 pandemic, particularly in Europe and the Americas. In the half we benefited from the absence of one-off costs in the prior period of c.£15 million due to inefficiencies caused by the phasing of completion of our plant in Poland.

ROIC
ROIC was 11.4%, down 15.1 percentage points due to lower operating profit and higher invested capital from our new plants which are not yet yielding returns.

Weaker demand in Catalyst Technologies but positive developments in PGM Services
·	Sales declined primarily due to weaker demand as a result of COVID-19 and the usual cyclicality of methanol and ammonia catalyst refills in Catalyst Technologies. This was partly offset by good growth in PGM Services which benefited from higher and more volatile average pgm prices
·	Operating profit was lower reflecting weaker demand in Catalyst Technologies and Diagnostic Services partly offset by higher results from PGM Services

Catalyst Technologies
Our Catalyst Technologies business licenses key process technologies and manufactures high value speciality catalysts and additives for the chemical and oil and gas industries. During the period, the vast majority of our plants maintained operations and we continued to deliver for our customers whilst ensuring compliance with relevant guidelines. Sales were down materially primarily driven by lower demand for refill catalysts and additives, with sales of copper zeolites to Clean Air and licensing income also lower. These sales were partly offset by good growth in first fill catalysts from plants already under construction prior to COVID-19.

Refill catalysts and additives impacted by end market weakness and usual cyclicality
This is recurring business which makes up the majority of sales within Catalyst Technologies. We saw weaker demand in some end markets including refill additives and formaldehyde, and also as some customers delayed orders. Following strong performance in recent periods, sales were lower in methanol and ammonia as expected due to the usual cyclicality of customer changeouts.

First fill catalysts grew as new plants came onstream
First fill catalysts are lumpy in nature and driven by the start-up of new plants. They are a lead indicator of future refill catalyst demand. In the period, we saw good sales growth with increased demand for methanol and hydrogen catalysts as new plants came onstream.

Licensing weaker in the period but a strong project pipeline
Our licensing business is dependent on new plant builds and revenue is recognised over the period of construction. Sales were down in the period partly reflecting project delays due to COVID-19. We are still seeing medium term decisions being made and in the first half we signed two new licenses and have a strong pipeline of projects.

PGM Services
PGM Services is the world's leading secondary refiner of platinum group metals (pgms) and provides a strategic service to the group, mainly supporting Clean Air with security of metal supply in a volatile market. It comprises our pgm refining, recycling and trading activities and produces chemical compounds and industrial products containing pgms. In light of COVID-19, we adapted our operations accordingly and our refineries continued to operate, ensuring continued supply to our customers.
PGM Services benefited from higher average pgm prices
Sales increased 26% reflecting strong growth in our refinery and trading businesses as we benefited from higher and more volatile average pgm prices. In the first half, average palladium and rhodium prices were up 44% and 172% respectively, whilst the platinum price was broadly flat, compared to the same period last year. Sales of chemical products were broadly flat whilst sales of industrial products containing pgms were slightly down.

Advanced Glass Technologies
Advanced Glass Technologies mainly provides black obscuration enamels and silver paste for automotive glass applications. As expected, sales were lower driven by the automotive segment as a result of the slowdown in global car production due to COVID-19.

Diagnostic Services
Diagnostic Services provides specialised detection, diagnostic and measurement solutions for our customers in the petroleum industry. Sales were down as expected, impacted by COVID-19 which limited travel to customer sites, and the lower oil price.

Underlying operating profit
Operating profit declined 12% reflecting weaker demand in Catalyst Technologies and Diagnostic Services. This was partly offset by higher results from PGM Services, where we saw strength in our trading business and a £24 million benefit from higher average pgm prices, although some of this benefit was masked by higher costs in the refineries.

ROIC
ROIC increased to 18.4% due to increased operating profit driven by higher and more volatile average precious metal prices over the rolling 12 month period of measurement.


			Six months ended
			30.9.20	30.9.19
		Notes	£ million	£ million

Profit for the period			24	176
Other comprehensive income
Items that will not be reclassified to the income statement
	Remeasurements of post-employment benefit assets and liabilities	11	(103)	-
	Fair value gains on equity investments at fair value through other comprehensive income		6	3
	Tax on items that will not be reclassified to the income statement		21	1
			(76)	4
Items that may be reclassified to the income statement
	Exchange differences on translation of foreign operations		(11)	73
	Amounts charged to hedging reserve		(6)	(16)
	Fair value losses on net investment hedges		-	(8)
	Tax on items that may be reclassified to the income statement		1	1
			(16)	50
Other comprehensive (expense)/income for the period			(92)	54
Total comprehensive (expense)/income for the period			(68)	230


		30.9.20	31.3.20
	Notes	£ million	£ million

Assets
Non-current assets
Property, plant and equipment	8	1,429	1,403
Right-of-use assets		81	88
Goodwill		572	580
Other intangible assets	9	404	396
Investments in joint venture and associate		22	23
Investments at fair value through other comprehensive income		56	49
Other receivables		60	63
Interest rate swaps	16	31	34
Deferred tax assets		91	66
Post-employment benefit net assets	11	229	317
Total non-current assets		2,975	3,019

Current assets
Inventories		2,074	1,902
Current tax assets		39	31
Trade and other receivables		2,415	2,077
Cash and cash equivalents ─ cash and deposits	16	197	112
Cash and cash equivalents ─ money market funds	16	573	192
Other financial assets		35	28
Assets classified as held for sale	10	46	-
Total current assets		5,379	4,342
Total assets		8,354	7,361

Liabilities
Current liabilities
Trade and other payables		(3,575)	(2,745)
Lease liabilities	16	(11)	(12)
Current tax liabilities		(120)	(106)
Cash and cash equivalents ─ bank overdrafts	16	(32)	(31)
Borrowings and related swaps	16	(371)	(331)
Other financial liabilities		(25)	(50)
Provisions		(49)	(11)
Liabilities classified as held for sale	10	(7)	-
Total current liabilities		(4,190)	(3,286)


		Six months ended
		30.9.20	30.9.19
	Notes	£ million	£ million

Cash flows from operating activities
Profit before tax		26	225
Adjustments for:
Share of loss/(profit) of joint venture and associate		1	(2)
Depreciation		76	77
Amortisation		13	14
Impairment losses		16	8
Loss on sale of non-current assets		1	-
Share-based payments		5	3
Increase in inventories		(177)	(134)
Increase in receivables		(347)	(403)
Increase in payables		840	70
Increase/(decrease) in provisions		49	(5)
Contributions in excess of employee benefit obligations charge		(5)	(13)
Changes in fair value of financial instruments		(37)	(3)
Net finance costs		41	36
Income tax paid		(20)	(32)
Net cash inflow/(outflow) from operating activities		482	(159)

Cash flows from investing activities
Interest received		33	28
Purchases of property, plant and equipment		(139)	(133)
Purchases of intangible assets		(36)	(51)
Proceeds from sale of non-current assets		-	8
Net cash outflow from investing activities		(142)	(148)

Cash flows from financing activities
Proceeds from borrowings		288	168
Repayment of borrowings		(4)	(11)
Dividends paid to equity shareholders	7	(60)	(120)
Interest paid		(77)	(70)
Principal element of lease payments		(7)	(5)
Net cash inflow/(outflow) from financing activities		140	(38)

Net increase/(decrease) in cash and cash equivalents		480	(345)


		Share	Shares
	Share	premium	held in	Other	Retained	Total
	capital	account	ESOT	reserves	earnings	equity
	£ million	£ million	£ million	£ million	£ million	£ million

At 1 April 2019	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 September 2019	221	148	(32)	140	2,252	2,729
Total comprehensive income for the period	-	-	-	2	144	146
Dividends paid (note 7)	-	-	-	-	(47)	(47)
Share-based payments	-	-	-	-	(1)	(1)
Cost of shares transferred to employees	-	-	-	-	(3)	(3)
At 31 March 2020	221	148	(32)	142	2,345	2,824
Total comprehensive expense for the period	-	-	-	(10)	(58)	(68)
Dividends paid (note 7)	-	-	-	-	(60)	(60)
Share-based payments	-	-	-	-	9	9
Cost of shares transferred to employees	-	-	3	-	(7)	(4)
At 30 September 2020	221	148	(29)	132	2,229	2,701

Sales benefited from new customer contracts, with operating profit slightly down as expected
·	Sales growth in both Generics and Innovators supported by new customer contracts
·	Operating profit declined slightly largely driven by a weaker business mix
·	We made further progress towards delivering c.£100 million of operating profit from our pipeline of generic and innovator APIs, although we are seeing some pressure on our base business. From the pipeline we launched one innovator in the period and received regulatory approval for a generic molecule in October

Strong growth in Fuel Cells; commercialisation of eLNO on track and advancing expansion plans
·	Sales declined largely due to the impact of COVID-19 in Battery Systems and Medical Device Components, partly offset by strong growth in Fuel Cells
·	Operating profit grew to £5 million, primarily due to the absence of an £8 million impairment in the prior year relating to the eLNO demo plant and a better mix in Life Science Technologies
·	Commercialisation of eLNO remains on track and we are proceeding with the front end engineering design for our second commercial plant with 30kT capacity
·	Investment in Fuel Cells to double capacity will be complete by the end of this financial year

	Share of 1H 2020/21 non-sterling denominated underlying operating profit	Average exchange rate Half year ended 30^th September		% change
		Average exchange rate Half year ended 30^th September
		2020	2019
US dollar	13%	1.27	1.26	+1
Euro	32%	1.12	1.13	-1
Chinese renminbi	29%	8.86	8.70	+2

£ million	Costs incurred to 2019/20	Restructuring costs 1H 2020/21¹	Total restructuring costs
Restructuring (2017)	(42)	-	(42)
Health footprint optimisation	(29)	-	(29)
Procurement²	-	-	-
Clean Air footprint	(61)	(14)	(91)
Group wide organisational efficiency	-	(58)	(70)
Other³	(79)	(6)	(85)
Total	(211)	(78)	(317)

Capital expenditure
Capital expenditure was £148 million in the half, 1.8 times depreciation and amortisation (excluding amortisation of acquired intangibles), with some modest impact from delays to projects due to COVID-19. In the period, projects included:
·		Commercialisation of eLNO in Battery Materials. We are now around one third of the way through construction of our first commercial plant, with commissioning to commence in 2022 and commercial production in 2024
·		Completion of our new Clean Air manufacturing plants in Poland and China. This additional capacity will support demand from tightening legislation and will enable us to create efficiency by consolidating our manufacturing footprint
·		Investment in the efficiency and resilience of our refineries within Efficient Natural Resources
·		Upgrade to our core IT business systems

Capital expenditure for 2020/21 is expected to be up to £400 million as we continue to invest in our strategic growth projects above.

Depreciation and amortisation (excluding amortisation of acquired intangibles) is expected to increase to c.£200 million in 2020/21. This increase is largely due to the depreciation of our new Clean Air plants and our investment to upgrade our core IT business systems.

Strong balance sheet and significant progress on working capital
We maintained a strong balance sheet and good access to liquidity with c.£1.8 billion of available cash and undrawn committed facilities at 30^th September 2020. Net debt at 30^th September 2020 was c.£0.9 billion (31^st March 2020: £1.1 billion) and our leverage ratio (net debt to EBITDA) was 1.6 times (31^st March 2020: 1.6 times). This was at the bottom end of our target range of 1.5 to 2.0 times, despite the impact of COVID-19 on EBITDA and higher working capital from increasing activity in Clean Air. We benefited from a c.£400 million¹ reduction in precious metal working capital volumes in the period which reflects strong progress in reducing our refinery backlogs due to structural improvements to optimise precious metal working capital across our businesses. With the impact of COVID-19, we saw a one-off benefit of c.£200 million in the period, of which c.£100 million is likely to unwind in the second half. These reductions were partly offset by other working capital movements including increasing activity in Clean Air and higher pgm prices.

Notes:
1.	Based on 31^st March 2020 prices.

Free cash flow and working capital
Free cash flow was an inflow of £256 million, an improvement from an outflow in the prior period. This was primarily due to a reduction in precious metal working capital volumes as we reduced our refinery backlogs.

Excluding precious metal, working capital days at 30^th September 2020 decreased to 54 days compared to 61 days at 30^th September 2019. Average working capital days through the period excluding precious metals increased to 70 days driven by the lower average sales volume through the period.

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.

Dividend
The board approved an interim dividend of 20.0 pence per share (1H 2019/20: 24.5 pence per share). The interim dividend will be paid to shareholders on 4^th February 2021, with an ex dividend date of 26^th November 2020.

Return on invested capital (ROIC)
ROIC declined to 10.4% at 30^th September 2020, from 15.0% in the prior period mainly reflecting lower operating profit due to the impact of the pandemic.

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.

On a separate matter, the group is involved in investigating environmental contamination at a site for which it has been identified as a potentially responsible party under US law. Johnson Matthey Inc. is party to litigation brought by the Pennsylvania Department of Environmental Protection regarding contamination at a site in Chester County, Pennsylvania, that was operated by Johnson Matthey Inc. between 1951 and 1969, when it sold its interest in the site. A site investigation is nearing completion, but remediation has not yet commenced. Johnson Matthey has asserted various legal defences. In addition, there are several variables that may influence the nature of the remediation to be conducted, such as the future use of the site. Whether and to what extent Johnson Matthey and other potentially responsible parties (given subsequent use of the site by third-party entities) have any liability for the remediation has not yet been determined. It is the directors' current view that the group cannot reliably assess the outcome of the litigation nor reasonably estimate the quantum of future remediation costs or the group's share of such costs and as such no provision for the remediation has been recognised in these consolidated accounts. Estimated legal and technical fees associated with the litigation of £1.5 million have been provided for as at 30^th September 2020.

UK's withdrawal from European Union
We are continuing to monitor and assess the potential impact of the UK's withdrawal from the European Union on current operations and strategy. Plans are well developed and being implemented for the key scenarios.

Business continuity and regulatory compliance are particular areas of focus. Our businesses are ensuring stock is available and the associated working capital impacts are carefully managed such that any logistics delays do not impact business continuity.

In terms of Registration, Evaluation, Authorisation and restriction of Chemicals (REACH), we will establish an 'Only Representative' through a Johnson Matthey EU legal entity. This will allow a seamless crossover and continued trade in the European Union of Johnson Matthey products, after the transition period deadline has passed. In addition, we will also take the appropriate actions to ensure our products and incoming raw materials are compliant with the UK's equivalent of REACH from 1^st January 2021.

We are confident that the acute demands of managing the COVID-19 response will not reduce our ability to respond to changes caused by the withdrawal.

Going concern
The group has a strong balance sheet with c.£1.8 billion of available cash and undrawn committed facilities at 30^th September 2020. Cash generation was strong in the first half with free cash flow of £256 million leaving net debt £216 million lower than year end. There was strong operational performance behind this, including reducing refining backlogs by c.£400 million in the period, which places the group in a strong position going forward. Despite the lower EBITDA from the effects of COVID-19, leverage, measured by net debt (including post tax pension deficits) to EBITDA, was at the bottom of our target range at 1.6 times.

Overall, our performance in the first half was better than the projections in the deep recession case scenario used at year-end, both in terms of operating profit and cash flow. COVID-19 nonetheless continues to leave great uncertainty in the market outlook and in response to this we have revisited our projections using, for the purposes of assessing going concern, latest forecasts and the deep recession and very deep recession scenarios as described on page 65 of the Annual Report for the year ended 31^st March 2020.

Our base case scenario for the going concern assessment has been updated with our latest forecast for the remainder of 2020/21. This shows improved business performance. In Clean Air, the global outlook for autos has improved, with external data now suggesting European and US automotive production could be down c.20% in our fiscal year, compared with the previous estimate in the deep recession scenario of down c.25%, with China above the prior year. In heavy duty, external data suggests European and US production could be down c.30% with the Chinese market above the prior year. In Efficient Natural Resources, Catalyst Technologies is likely to be below the prior year due to weaker demand whilst PGM Services is expected to be above the prior year, benefiting from higher average precious metal prices. The delivery of Health's full year operating performance is expected to be above the level of the prior year. Thereafter we have kept the deep recession scenario outcomes for 2021/22. Due to the improved business performance now assumed in 2020/21 the growth rate in 2021/22 is broadly flat.

For our severe but plausible downside case, we have used an outlook in line with the deep recession scenario for the remainder of 2020/21 and the very deep recession scenario for 2021/22. The very deep recession showed a slower recovery in 2021/22 with Clean Air relatively stable to our deep recession scenario but a greater impact on our Efficient Natural Resources businesses where a higher proportion of costs are fixed. The severe but plausible downside case reflects year-on-year decline to 2021/22.

In addition to these two key scenarios and given the ongoing uncertainty we have stress tested the short-term performance against a second shutdown in the second half in line with our experience early in the first half. Whilst this would reduce profitability and EBITDA against our latest forecast, our balance sheet remains strong.

Under all of these scenarios we have sufficient headroom under committed facilities and against key financial covenants.

Funding and available liquidity
The group has a robust funding position comprising a range of long-term debt and a £1 billion five year committed revolving credit facility signed in March this year which was entirely undrawn at 30^th September 2020. The maturity profile at 30^th September 2020 is excellent with only £130 million of term debt maturing before December 2021. In the period we signed €90 million of seven year and €45 million of five year loans with the European Bank for Reconstruction and Development and KfW IPEX - Bank GmbH (KfW) respectively to support our Battery Materials investment in Poland.

In addition, as a long time, highly rated issuer in the US private placement market, JM expects to be able to access additional funding in its existing markets should it need to. The group also has a number of additional sources of funding available including uncommitted lease facilities that can provide precious metal funding. Furthermore, JM still has access to the Bank of England's COVID Corporate Financing Facility (CCFF) which would provide additional back-stop liquidity if needed. Whilst we would fully expect to be able to utilise the metal lease facilities and CCFF they are excluded from our going concern modelling.

Conclusion
The group has a robust funding position and has tested its performance again under a range of scenarios. In all of these cases, we have sufficient headroom against committed facilities and key financial covenants in the going concern period (12 months following the date of this announcement). There remain risks to the group including more extreme economic outcomes. Against these the group still has a range of levers which it could utilise to protect headroom including delaying inventory builds, reducing capital expenditure and reducing future dividend distributions.

The directors are therefore of the opinion that the group has adequate resources to fund its operations for the period of 12 months following the date of this announcement and so determine that it is appropriate to prepare the accounts on a going concern basis.


2	Segmental information


	Revenue, sales and underlying operating profit by sector

	Excluding Corporate costs, the group has four reporting segments, aligned to the needs of our customers and the global challenges we are tackling. Clean Air - provides catalysts for emission control after-treatment systems to remove harmful emissions from vehicles. Catalysts are provided for light duty vehicles powered by diesel and gasoline, heavy duty diesel trucks, buses and non-road equipment. Efficient Natural Resources - provides products and processing services for the efficient use and transformation of critical natural resources including oil, gas, biomass and platinum group metals. Health - develops and manufactures active pharmaceutical ingredients (APIs) for a variety of treatments and new drugs during their lifecycle, including for initial clinical evaluation and subsequently for commercial supply post regulatory approval. New Markets - assesses new areas of potential growth aligned to global priorities of cleaner air, improved health and more efficient use of natural resources. This includes battery systems for a range of applications, fuel cell technologies and battery materials for automotive applications. The sector also develops products found in devices used in medical procedures and advanced catalysts for pharmaceutical and agricultural chemicals markets. The analysis of sectors (business segments) is presented in accordance with IFRS 8 Operating Segments, on the basis of those segments whose operating results are regularly reviewed by the group chief executive who acts as the Chief Operating Decision Maker as defined by IFRS 8.
	Six months ended 30 September 2020
			Efficient
		Clean	Natural		New
		Air	Resources	Health	Markets	Corporate	Eliminations	Total
		£ million	£ million	£ million	£ million	£ million	£ million	£ million

	Revenue from external customers	2,888	3,723	122	246	-	-	6,979
	Inter-segment revenue	2	1,948	-	29	-	(1,979)	-
	Revenue	2,890	5,671	122	275	-	(1,979)	6,979

	External sales¹	1,002	390	119	168	-	-	1,679
	Inter-segment sales	1	56	-	-	-	(57)	-
	Sales¹	1,003	446	119	168	-	(57)	1,679
	Underlying operating profit¹	77	81	15	5	(27)	-	151


	Six months ended 30 September 2019
			Efficient
		Clean	Natural		New
		Air	Resources	Health	Markets	Corporate	Eliminations	Total
		£ million	£ million	£ million	£ million	£ million	£ million	£ 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 sales¹	1,392	437	111	184	-	-	2,124
	Inter-segment sales	-	59	-	2	-	(61)	-
	Sales¹	1,392	496	111	186	-	(61)	2,124

	Underlying operating profit¹	179	94	18	(8)	(18)	-	265

	¹Sales and underlying operating profit are non-GAAP measures (see note 16 for reconciliation to GAAP measures). Sales excludes the sale of precious metals. Underlying operating profit excludes profit or loss on disposal of businesses, gain or loss on significant legal proceedings, together with associated legal costs, amortisation of acquired intangibles and major impairment and restructuring charges.



2	Segmental information (continued)

	Net assets by sector

	At 30 September 2020
				Efficient
			Clean	Natural		New
			Air	Resources	Health	Markets	Corporate	Total
			£ million	£ million	£ million	£ million	£ million	£ million

	Segmental net assets		1,742	526	495	281	427	3,471

	Net debt (see note 16)							(878)
	Post-employment benefit net assets and liabilities							119
	Deferred income tax net assets							39
	Provisions and non-current other payables							(72)
	Investments in joint venture and associate							22


	Net assets							2,701


	At 31 March 2020
				Efficient
			Clean	Natural		New
			Air	Resources	Health	Markets	Corporate	Total
			£ million	£ million	£ million	£ million	£ million	£ million

	Segmental net assets		1,361	1,267	520	236	332	3,716

	Net debt (see note 16)							(1,094)
	Post-employment benefit net assets and liabilities							213
	Deferred income tax net liabilities							(8)
	Provisions and non-current other payables							(26)
	Investments in joint venture and associate							23


	Net assets							2,824


2	Segmental information (continued)

	Impact of exchange rate movements on sales and underlying operating profit by sector



	Six months ended
Average exchange rates	30.9.20	30.9.19

US dollar / £	1.27	1.26
Euro / £	1.12	1.13
Chinese renminbi / £	8.86	8.70

						Six months		Six months ended 30.9.19							Change at
						ended		At last			At this				this year's
						30.9.20		year's rates			year's rates				rates
						£ million		£ million			£ million				%


	Clean Air					1,003		1,392			1,375				-27%
	Efficient Natural Resources					446		496			493				-10%
	Health					119		111			111				8%
	New Markets					168		186			182				-8%
	Elimination of inter-segment sales					(57)		(61)			(61)
	Sales¹					1,679		2,124			2,100				-20%


	Clean Air					77		179			177				-56%
	Efficient Natural Resources					81		94			93				-12%
	Health					15		18			18				-21%
	New Markets					5		(8)			(8)				n/a
	Unallocated corporate expenses					(27)		(18)			(18)
	Underlying operating profit¹					151		265			262				-42%

	¹Sales and underlying operating profit are non-GAAP measures (see note 16 for reconciliation to GAAP measures). Sales excludes the sale of precious metals. Underlying operating profit excludes profit or loss on disposal of businesses, gain or loss on significant legal proceedings, together with associated legal costs, amortisation of acquired intangibles and major impairment and restructuring charges.



3	Revenue

	Products and services

	The group's principal products and services by operating sector and sub-sector are disclosed in the table below, together with information regarding performance obligations and revenue recognition. Revenue is recognised by the group as contractual performance obligations to customers are completed.

	Sub-sector	Primary industry		Principal products and services					Performance obligations					Revenue recognition

	Clean Air
	Light Duty Catalysts	Automotive		Catalysts for cars and other light duty vehicles					Point in time					On despatch or delivery

	Heavy Duty Catalysts	Automotive		Catalysts for trucks, buses and non-road equipment					Point in time					On despatch or delivery

	Efficient Natural Resources
	Catalyst Technologies	Chemicals / oil and gas		Speciality catalysts and additives					Point in time					On despatch or delivery

				Process technology licences					Over time					Based on costs incurred or straight-line over the licence term¹

				Engineering design services					Over time					Based on costs incurred

	Platinum Group Metal Services	Various		Platinum Group Metal refining and recycling services					Over time					Based on costs incurred

				Other precious metal products					Point in time					On despatch or delivery

				Platinum Group Metal chemical and industrial products					Point in time					On despatch or delivery

	Advanced Glass Technologies	Automotive		Precious metal pastes and enamels					Point in time					On despatch or delivery

	Diagnostic Services	Oil and gas		Detection, diagnostic and measurement solutions					Over time					Based on costs incurred

	Health
	Generics	Pharmaceuticals		Manufacture of active pharmaceutical ingredients					Point in time					On despatch or delivery

	Innovators	Pharmaceuticals		Development and manufacture of active pharmaceutical ingredients					Over time					Based on costs incurred

	New Markets
	Alternative Powertrain	Automotive		Battery materials and fuel cell technologies					Point in time					On despatch or delivery

		Consumer goods		Battery systems for a range of applications					Point in time					On despatch or delivery

	Medical Device Components	Pharmaceuticals		Products found in devices used in medical procedures					Point in time					On despatch or delivery

	Life Science Technologies	Pharmaceuticals / agriculture		Advanced catalysts					Point in time					On despatch or delivery

	¹Revenue recognition depends on whether the licence is distinct in the context of the contract.
3	Revenue (continued)

	Revenue from external customers by principal products and services

	Six months ended 30 September 2020
							Efficient
					Clean		Natural						New
					Air		Resources			Health			Markets				Total
					£ million		£ million			£ million			£ million				£ million


	Metal				1,885		3,333			3			78				5,299
	Heavy Duty Catalysts				310		-			-			-				310
	Light Duty Catalysts				680		-			-			-				680
	Catalyst Technologies				-		194			-			-				194
	Platinum Group Metal Services				-		148			-			-				148
	Advanced Glass Technologies				-		27			-			-				27
	Diagnostic Services				-		21			-			-				21
	Generics				-		-			70			-				70
	Innovators				-		-			49			-				49
	Alternative Powertrain				-		-			-			101				101
	Medical Device Components				-		-			-			29				29
	Life Science Technologies				-		-			-			25				25
	Other				13		-			-			13				26


	Revenue				2,888		3,723			122			246				6,979



	Six months ended 30 September 2019
							Efficient
					Clean		Natural						New
					Air		Resources			Health			Markets				Total
					£ million		£ million			£ million			£ million				£ 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



	The contract receivables balance at 30 September 2020 is £134 million (1H 2019/20: £68 million).

4	Operating profit
												Six months ended
												30.9.20				30.9.19
												£ million				£ million
	Operating profit is arrived at after charging / (crediting):

	Total research and development expenditure											96				100
	Less: Development expenditure capitalised											(9)				(12)

	Research and development expenditure charged to the income statement											87				88
	Less: External funding received from governments											(5)				(6)

	Net research and development expenditure charged to the income statement											82				82

	Past pension service credit											-				(10)

	Depreciation of property, plant and equipment											69				71
	Depreciation of right-of-use assets											7				6

	Depreciation											76				77

	Amortisation of internally generated intangible assets											2				2
	Amortisation of acquired intangibles											5				6
	Amortisation of other intangible assets											6				6

	Amortisation											13				14

			Property, plant and equipment									12				-
			Right-of-use assets									1				-
			Other intangible assets									4				-
			Inventories									1				-
			Trade and other receivables									1				-
			Trade and other payables									(3)				-

	Impairment charges											16				-

	Restructuring charges											62				-

	Major impairment and restructuring charges											78				-

9	Other intangible assets


		Customer		Patents,	Acquired
		contracts and	Computer	trademarks	research and	Development
		relationships	software	and licences	technology	expenditure	Total
		£ million	£ million	£ million	£ million	£ million	£ million


	Cost
	At 1 April 2020	146	321	64	50	218	799
	Additions	-	22	-	-	9	31
	Transferred to assets classified as held for sale (note 10)	(9)	-	-	(1)	-	(10)
	Exchange adjustments	4	1	(1)	1	(4)	1

	At 30 September 2020	141	344	63	50	223	821


	Accumulated amortisation and impairment
	At 1 April 2020	113	71	40	39	140	403
	Charge for the period	3	7	-	2	1	13
	Impairments	-	-	4	-	-	4
	Transferred to assets classified as held for sale (note 10)	(4)	-	-	-	-	(4)
	Exchange adjustments	2	-	-	1	(2)	1

	At 30 September 2020	114	78	44	42	139	417


	Carrying amount at 30 September 2020	27	266	19	8	84	404

	Carrying amount at 1 April 2020	33	250	24	11	78	396

				Atmosphere
				Control
			Water	Technologies	Total
	At 30 September 2020		£ million	£ million	£ million


	Non-current assets
	Property, plant and equipment		-	4	4
	Right-of-use-assets		-	1	1
	Goodwill		-	9	9
	Other Intangible Assets		-	6	6

	Current assets
	Inventories		1	5	6
	Trade and other receivables		2	4	6
	Cash and cash equivalents - cash and deposits		-	14	14

	Current liabilities
	Trade and other payables		(1)	(5)	(6)

	Non-current liabilities
	Lease liabilities		-	(1)	(1)


	Net assets of disposal group		2	37	39


11		Post-employment benefits

Financial assumptions

	30.9.20			31.3.20
	UK plan	US plans	Other plans	UK plan	US plans	Other plans
	%	%	%	%	%	%
First year's rate of increase in salaries	-	-	2.15	-	-	2.15
Ultimate rate of increase in salaries	2.90	3.00	2.15	2.60	3.00	2.15
Rate of increase in pensions in payment	2.75	-	1.70	2.50	-	1.70
Discount rate	1.70	2.50	1.32	2.30	3.00	1.87
Inflation		2.20	1.60		2.20	1.65
- UK Retail Prices Index (RPI)	2.80			2.50
- UK Consumer Prices Index (CPI)	2.15			1.85
Current medical benefits cost trend rate	5.40	2.20	-	5.40	2.20	-
Ultimate medical benefits cost trend rate	5.40	2.20	-	5.40	2.20	-

	Financial information
	Movements in the net post-employment benefit assets and liabilities, including reimbursement rights, were:
		UK	UK	UK post-		US post-
		pension -	pension -	retirement		retirement
		legacy	cash balance	medical	US	medical
		section	section	benefits	pensions	benefits	Other	Total
		£ million	£ million	£ million	£ million	£ million	£ million	£ million

	At 1 April 2020	306	3	(12)	(24)	(27)	(28)	218
	Current service cost - in
	operating profit	(3)	(10)	-	(5)	-	(1)	(19)
	Administrative expenses - in
	operating profit	(2)	-	-	-	-	-	(2)
	Interest	3	-	-	-	(1)	-	2
	Remeasurements	(87)	(9)	-	(6)	(1)	-	(103)
	Company contributions	3	10	-	11	1	1	26
	Exchange	-	-	-	1	1	-	2
	At 30 September 2020	220	(6)	(12)	(23)	(27)	(28)	124

	The decrease in UK net post-employment assets in the half year to 30 September 2020 is primarily driven by a change to the UK discount rate assumption.
11	Post-employment benefits (continued)

	Financial information (continued)
	The post-employment benefit assets and liabilities are included in the balance sheet as follows:
					30.9.20	30.9.20	31.3.20	31.3.20
					Post-		Post-
					employment	Employee	employment	Employee
					benefit	benefit	benefit	benefit
					net assets	obligations	net assets	obligations
					£ million	£ million	£ million	£ million

	UK pension - legacy section				220	-	306	-
	UK pension - cash balance section				-	(6)	3	-
	UK post-retirement medical benefits				-	(12)	-	(12)
	US pensions				-	(23)	-	(24)
	US post-retirement medical benefits				8	(35)	7	(34)
	Other				1	(29)	1	(29)
	Total post-employment plans				229	(105)	317	(99)
	Other long-term employee benefits					(5)		(5)
	Total long-term employee benefit obligations					(110)		(104)

12	Fair values (continued)
									Fair value
					30.9.20		31.3.20		hierarchy
					£ million		£ million		level

	Financial instruments measured at fair value

	Non-current
	Investments at fair value through other comprehensive income				56		49		1
	Interest rate swaps				31		34		2
	Borrowings and related swaps				(7)		(6)		2

	Current
	Trade receivables¹				486		328		2
	Other receivables²				65		72		2
	Cash and cash equivalents - money market funds				573		192		2
	Other financial assets³				35		28		2
	Other financial liabilities³				(25)		(50)		2


									Fair value
					30.9.20		31.3.20		hierarchy
					£ million		£ million		level

	Financial instruments not measured at fair value

	Non-current
	Borrowings and related swaps				(1,213)		(988)
	Lease liabilities				(58)		(64)

	Current
	Cash and cash equivalents - cash and deposits				197		112
	Cash and cash equivalents - bank overdrafts				(32)		(31)
	Other borrowings and related swaps				(371)		(331)
	Lease liabilities				(11)		(12)

	¹ Trade receivables held in a part of the group with a business model to hold trade receivables for collection or sale. The remainder of the group operates a hold to collect business model and receives the face value, plus relevant interest, of its trade receivables from the counterparty without otherwise exchanging or disposing of such instruments.


	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:

			30.09.20			31.03.20
			Carrying	Fair		Carrying		Fair
			amount	value		amount		value
			£ million	£ million		£ million		£ million

		US Dollar Bonds 2022, 2023, 2025, 2027, 2028 and 2030	(711)	(700)		(514)		(496)
		Euro Bonds 2021, 2023, 2025, 2028 and 2030	(294)	(276)		(264)		(247)
		Sterling Bonds 2024 and 2025	(110)	(109)		(110)		(108)
		KfW US dollar loan 2024	(39)	(39)		(41)		(41)

Definitions Measure	Definition	Purpose
Sales¹	Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers.	Provides a better measure of the growth of the group as revenue can be heavily distorted by year on year fluctuations in the market prices of precious metals and, in many cases, the value of precious metals is passed directly on to customers.
Underlying operating profit²	Operating profit excluding non-underlying items.	Provides a measure of operating profitability that is comparable over time.
Underlying operating profit margin^1,2	Underlying operating profit divided by sales.	Provides a measure of how we convert our sales into underlying operating profit and the efficiency of our business.
Underlying profit before tax²	Profit before tax excluding non-underlying items.	Provides a measure of profitability that is comparable over time.
Underlying profit for the year²	Profit for the year excluding non-underlying items and related tax effects.	Provides a measure of profitability that is comparable over time.
Underlying earnings per share^1,2	Underlying profit for the period divided by the weighted average number of shares in issue.	Our principal measure used to assess the overall profitability of the group.
Return on Invested Capital (ROIC)¹	Annualised underlying operating profit divided by the 12 month average equity, excluding post tax pension net assets, plus average net debt for the same period.	Provides a measure of the group's efficiency in allocating the capital under its control to profitable investments. The group has a long term target of a return on invested capital of 20% to ensure focus on efficient use of the group's capital.
Average working capital days (excluding precious metals)¹	Monthly average of non-precious metal related inventories, trade and other receivables and trade and other payables (including any classified as held for sale) divided by sales for the last three months multiplied by 90 days.	Provides a measure of efficiency in the business with lower days driving higher returns and a healthier liquidity position for the group.
Free cash flow	Net cash flow from operating activities after net interest paid, net purchases of non-current assets and investments, dividends received from joint venture and associate and the principal element of lease payments.	Provides a measure of the cash the group generates through its operations, less capital expenditure.
Net debt (including post tax pension deficits) to underlying EBITDA	Net debt, including post tax pension deficits and quoted bonds purchased to fund the UK pension (excluded when the UK pension plan is in surplus) divided by underlying EBITDA for the same period.	Provides a measure of the group's ability to repay its debt. The group has a long term target of net debt (including post tax pension deficits) to underlying EBITDA of between 1.5 and 2.0 times, although in any given year it may fall outside this range depending on future plans.


Reconciliations to GAAP measures

Sales
See note 2.

Underlying profit measures
		Operating	Profit	Tax	Profit for
		profit	before tax	expense	the year
Six months ended 30 September 2020		£ million	£ million	£ million	£ million

Underlying		151	109	(17)	92
Amortisation of acquired intangibles		(5)	(5)	1	(4)
Major impairment and restructuring charges¹		(78)	(78)	14	(64)
Reported		68	26	(2)	24

¹ For further detail please see note 4.

		Operating	Profit	Tax	Profit for
		profit	before tax	expense	the year
Six months ended 30 September 2019		£ million	£ million	£ million	£ million

Underlying		265	231	(47)	184
Amortisation of acquired intangibles		(6)	(6)	1	(5)
Change in non-underlying tax provisions		- -	- -	(3)	(3)
Reported		259	225	(49)	176



Underlying earnings per share				Six months ended
				30.09.2020	30.09.2019

Underlying profit for the period (£ million)				92	184
Weighted average number of shares in issue (million)				192.7	192.3
Underlying earnings per share (pence)				47.7	95.8

16	Non-GAAP measures (continued)

Return on Invested Capital (ROIC)
		Period	Year	Period
		ended	ended	ended
		30.9.20	31.3.20	30.9.19
		£ million	£ million	£ million

Annualised underlying operating profit		425	539	560

Average net debt		1,504	1,489	1,270
Average equity		2,774	2,733	2,679
Average capital employed		4,278	4,222	3,949
Less: Average pension net assets		(258)	(212)	(258)
Less: Average related deferred taxation		44	32	40
Average capital employed (excluding post tax pension net assets)		4,064	4,042	3,731

ROIC (excluding post tax pension net assets)		10.4%	13.3%	15.0%
ROIC		9.9%	12.8%	14.2%

Average working capital days (excluding precious metals)		Six months	Year	Six months
		ended	ended	ended
		30.9.20	31.3.20	30.9.19
		£ million	£ million	£ million

Inventories		2,074	1,902	1,475
Trade and other receivables		2,415	2,077	1,953
Trade and other payables		(3,575)	(2,745)	(1,713)
		914	1,234	1,715
Working capital balances classified as held for sale		6	-	-
Total working capital		920	1,234	1,715
Less: Precious metal working capital		(313)	(597)	(959)
Working capital (excluding precious metals)		607	637	756

Average working capital days (excluding precious metals)		70	63	61

Free cash flow
			Six months ended
			30.9.20	30.9.19
			£ million	£ million
Net cash inflow/(outflow) from operating activities			482	(159)
Interest received			33	28
Interest paid			(77)	(70)
Purchases of property, plant and equipment			(139)	(133)
Purchases of intangible assets			(36)	(51)
Proceeds from sale of non-current assets			-	8
Principal element of lease payments			(7)	(5)
Free cash flow			256	(382)

16	Non-GAAP measures (continued)


Net debt (including post-tax pension deficits) to underlying EBITDA
	30.9.20	31.3.20	30.9.19
	£ million	£ million	£ million

Cash and deposits	197	112	99
Money market funds	573	192	-
Bank overdrafts	(32)	(31)	(65)
Cash and deposits transferred to assets classified as held for sale	14	-	-
Cash and cash equivalents	752	273	34
Other current borrowings and related swaps	(371)	(331)	(351)
Non-current borrowings and related swaps	(1,220)	(994)	(1,124)
Non-current interest rate swaps	31	34	30
Current lease liabilities	(11)	(12)	(12)
Non-current lease liabilities	(58)	(64)	(65)
Lease liabilities transferred to liabilities classified as held for sale	(1)	-	-
Net debt	(878)	(1,094)	(1,488)

Increase/(decrease) in cash and cash equivalents	480	(103)	(345)
Less: Increase in borrowings	(284)	(12)	(157)
Less: Principal element of lease payments	7	13	5
Decrease/(increase) in net debt resulting from cash flows	203	(102)	(497)
New leases, remeasurements and modifications	(1)	(13)	(4)
Lease disposals	-	1	-
Exchange differences on net debt	19	(47)	(47)
Other non-cash movements	(5)	10	3
Movement in net debt	216	(151)	(545)
Net debt at beginning of year	(1,094)	(866)	(866)
Impact of adoption of IFRS 16	-	(77)	(77)
Net debt at end of year	(878)	(1,094)	(1,488)

Net debt	(878)	(1,094)	(1,488)
Add: Pension deficits	(58)	(53)	(74)
Add: Related deferred tax	11	10	14
Net debt (including post tax pension deficits)	(925)	(1,137)	(1,548)

Underlying EBITDA for this period	235		350
Underlying EBITDA for prior year	705		723
Less: Underlying EBITDA for prior half year	(350)		(350)
Annualised underlying EBITDA	590	705	723

Net debt (including post tax pension deficits) to underlying EBITDA	1.6	1.6	2.1

Underlying EBITDA	235	705	350
Depreciation and amortisation	(89)	(179)	(91)
Major impairment and restructuring charges	(78)	(140)	-
Profit on disposal of businesses	-	2	-
Finance costs	(77)	(195)	(66)
Finance income	36	109	30
Share of profit/(loss) of joint venture and associate	(1)	3	2
Income tax expense	(2)	(50)	(49)
Profit for the period	24	255	176
Cash and cash equivalents includes £88 million (31 March 2020: £nil) of restricted amounts relating to cash held in South Africa. The cash has been restricted as a result of a change in company residency status. The group anticipates extracting and/or utilising this in the near term and is reviewing options.