27th Jan 2025 09:14
(Alliance News) - Johnson Matthey PLC on Monday announced plans to boost cash flow as it seeks to build on its "transformation" programme announced in 2022.
The London-based speciality chemicals and sustainable technologies company said the measures will "significantly" increase the cash efficiency of the group. They were set out in a response to a letter received back in December from investor Standard Investments LLC.
It expects cash conversion levels to increase from around 20% to 30% in financial 2025, including the delivery of positive free cash flow, to at least 50% in financial 2026, and above 80% the following financial year.
In response, shares in Johnson Matthey were 1.2% higher at 1,393.00 pence each in London on Monday.
Johnson Matthey plans no further growth capital expenditure in Hydrogen Technologies. Capex in this business will be reduced to maintenance levels of no more than GBP5 million per annum from financial 2026.
The company said Hydrogen Technologies remains on track to achieve operating profit break-even by the end of financial 2026.
"In addition, the group is pursuing options to further de-risk this business," it said.
Other key drivers of the increase in cash conversion include at least GBP2.5 billion of Clean Air cash generation between financial 2025 and financial 2031; Platinum Group Metals delivering cash conversion approaching 100% of underlying operating profit; and continued growth in the group's capital-light Catalyst Technologies business.
Johnson Matthey also intends to form an investment committee of its board to "reinforce both cash generation, and disciplined and measured deployment of capital".
The five-person committee will be chaired by Senior Independent Director Barbara Jeremiah and include Chief Executive Liam Condon and Chief Financial Officer Stephen Oxley.
Executive remuneration schemes will be more geared on cash generation targets.
The company said the latest moves would build on the strategic plans unveiled in 2022. These included a reduction in overheads, disposals and a reduction in capital expenditure.
"These initiatives have delivered strong underlying profit growth," the company noted.
In December, Johnson Matthey came under pressure from 11% shareholder Standard Investments, which had called for "decisive action" to unlock the firm's "unrealized promise" and enable "significant" value creation.
Standard Investments demanded a strategic review and a board overhaul and also recommended the sale of Johnson Matthey's loss-making Hydrogen Technologies arm.
The proposals from Standard Investments were contained in an open letter to Johnson Matthey Chair Patrick Thomas.
On Monday, Johnson Matthey said welcomes dialogue with all shareholders with a view to driving sustainable value, carefully considering the views of shareholders at all times, including over recent weeks. It said it is committed to shareholder returns.
By Jeremy Cutler, Alliance News reporter
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