22nd May 2025 09:51
(Alliance News) - Shares in Johnson Matthey PLC rocketed on Thursday after it announced plans to return GBP1.4 billion to shareholders after selling its Catalyst Technologies business to Honeywell International Inc.
Shares in the London-based speciality chemicals company rose 27% to 1,767.00 pence in London on Thursday morning. They had earlier set a 52-week high of 1,888.00p.
Johnson Matthey has a market value of GBP2.96 billion, so it will be returning just under half of that to shareholders.
It agreed the sale of Catalyst Technologies to Charlotte, North Carolina-based Honeywell at an enterprise value of GBP1.80 billion on a cash and debt-free basis, representing a 13.3 times earnings before interest, tax, depreciation and amortisation multiple.
The company said the enterprise value represents a "significant premium" to the average sell-side analyst valuation of GBP945 million.
The deal is expected to deliver net sale proceeds of GBP1.6 billion to Johnson Matthey.
Honeywell is a conglomerate which operates across four main areas: aerospace, building automation, industrial automation, and energy and sustainability solutions.
Both Johnson Matthey and Honeywell has recently attracted criticism from activist investors.
In December, Johnson Matthey came under pressure from 11% shareholder Standard Investments, which called for "decisive action" to unlock the firm's "unrealized promise" and enable "significant" value creation.
Honeywell faced calls to break-up its business and in February announced the planned separation of its Automation and Aerospace businesses.
Johnson Matthey Chief Executive Liam Condon said the deal represents a "significant milestone" in firm's history.
"We will now fundamentally re-shape Johnson Matthey into a more focused and leaner business. This will better position us to leverage our strong capabilities and leading market positions in Clean Air and PGM Services to drive a step change in sustainable cash generation with higher returns to shareholders," he said.
The "significant" GBP1.4 billion return to shareholders is expected following completion of the sale, which is likely by the first half of 2026.
The remaining GBP200 million of proceeds will be retained for general corporate purposes, the firm added.
Johnson Matthey expects the continuing business to deliver "at least" mid-single digit compound annual growth in pro-forma group underlying operating profit from financial 2025 to financial 2028.
For the financial year ended March 31, Johnson Matthey said Catalyst Technologies underlying Ebitda was GBP119 million and its underlying operating profit was GBP92 million, giving a pro-forma group underlying operating profit of GBP297 million.
The firm predicts a "material" increase in cash generation to at least GBP250 million of group free cash flow by financial 2028, underpinned by growth in underlying operating profit, capex reducing to close to maintenance levels and material working capital benefits.
In addition, the company said total annual cash returns to shareholders would grow to at least GBP200 million in financial 2027 from GBP130 million in financial 2026.
The news came alongside full-year results for the year to March 31.
Pretax profit jumped to GBP486 million from GBP164 million.
This was helped by a GBP482 million profit booked on the disposal of businesses, principally Medical Device Components which completed in the first half, offset by GBP329 million impairment and restructuring charges.
But revenue fell 9.1% to GBP11.67 billion from GBP12.84 billion. Clean Air sales fell 10% and Hydrogen Technologies sales declined 15%, offsetting a 16% increase in Catalyst Technologies revenue. PGM Services revenue was flat.
Johnson Matthey maintained its final dividend at 55.00p per share. Its total dividend also was unmoved, at 77.00p.
Looking ahead, it expects mid-single-digit percentage growth in group underlying operating profit, at constant precious metal prices and constant currency.
Underlying operating profit in the year just ended fell 5.1% to GBP389 million from GBP410 million.
"In Clean Air we expect modest growth in operating profit, with a margin of 14% to 15%. This is based on external data which suggest a 4% decline in global light duty vehicle production for 2025/26, before any potential impact on customer demand due to tariffs," the firm said.
"If [platinum group metal] prices remain at their current level for the remainder of 2025/26, we expect a limited effect on full year operating profit compared with the prior year," the firm added.
By Jeremy Cutler, Alliance News reporter
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