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Johnson Matthey strengthens sales

The speciality chemicals group is looking to shift inventory in the second half of its financial year
November 21, 2016

Johnson Matthey (JMAT) revealed that sterling's devaluation added around £27m to underlying profits through translation effects at the half-year mark. Reported earnings were down a third on the 2015 comparative, although last year's returns were bolstered by £131m in one-off receipts from the sale of its research chemicals unit. The fall in sterling may also have contributed to strengthening sales in the group's European markets, but the shares were still marked down, suggesting the market had attached more weight to the 3 per cent decline in adjusted pre-tax profits.

IC TIP: Hold at 3231p

Although auto sales on the continent pulled back in October, it followed a record month in September and a successful year overall, with car registrations in the EU up 7.2 per cent. Following the VW scandal there has been increased industry focus on emissions technology, highly beneficial for Johnson Matthey as it is one of the largest manufacturers of catalytic converters globally.

There was a mixed showing across the group's other businesses, with tough conditions in the process technologies market set against an improved backdrop in precious metals, in addition to continuing strong sales in the battery material segment, a pointer to future growth opportunities.

Deutsche Bank forecast adjusted profits of £460m for the March 2017 year-end, leading to EPS of 199p, against £418m and 179p in FY2016.

 

JOHNSON MATTHEY (JMAT)
ORD PRICE:3,231pMARKET VALUE:£6.25bn
TOUCH:3,230p-3,232p12-MONTH HIGH:3,568pLOW: 2,215p
DIVIDEND YIELD:†2.2%PE RATIO:27
NET ASSET VALUE:953p*NET DEBT:49%

Half-year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20155.7633013819.5
20165.6221092.720.5
% change-2-36-33+5

Ex-div: 24 Nov

Payment: 7 Feb

*Includes intangible assets of £880m, or 455p a share

†Dividend yield doesn't take account of 150p special dividend paid in Feb 2016