Johnson Matthey Plc

Good morning, everyone. I'm Louise Curran, Head of Investor Relations at Johnson Matthey, and a very warm welcome this morning to our half-year results presentation. Thank you, everyone, for coming along to the Andaz today, and a welcome to those joining on the webcast as well. A little bit of admin before we start. If you could please turn your phones off or onto silent, and I'll point your attention to the cautionary statement. I'm very pleased today to welcome Liam Condon, Chief Executive Officer, and Richard Pyke, our CFO, In terms of agenda, we'll follow the usual format. Liam will run you through an overview. Richard will then take you through the financial results. And then Liam will cover our strategic progress in the half. And we'll, of course, leave plenty of time at the end for Q&A both in the room and then on the webcast. And with that, I'll hand over to Liam.

Thanks a lot, Louise, and a big congratulations to you on your new role. And a big thanks also to your predecessor, Martin Dunwoody, who's done great work for us. A warm welcome to everybody here in the Andaz Hotel. I'm really happy there's so many people here so we can get some heat into the room because it was a very cold morning. And a warm welcome to everybody who's joining us online today. So I'm just going to hit some of the highlights of the half and then talk about some of the key priorities that we're working on that we're going to give you more color on throughout the presentation today. So first of all, I think that the standout was the underlying operating performance increasing by 38%. an 11% increase in clean air and a 33% increase in platinum group metals. So in the environment we're in I think a very strong overall performance and a good indication of the progress we're making here. Secondly, and Richard will talk extensively about this, you will see very good progress on our implementation of our new cash focused business model. We had a significant cash outflow in the first half of last year. This time around you will see a significant turnaround and a small inflow. So that's quite a big movement and there is a lot more to come in the second half and then of course in the subsequent years. And the building blocks behind that Richard's going to talk to you about. And the third point, which is very important as well, the sale of Catalyst Technologies to Honeywell is on track. We had said that that will close in the first half, calendar half of 26, and that remains the case. And once we close that deal, as we said, we'll be returning £1.4 billion to shareholders upon closure. A final point I'd make is we have made some announcements this morning around organisational changes. I'm sure I'll be talking a little bit about this later on, what the rationale behind that is. I'll make it clear for the purpose of today's presentation, Richard is in his CFO role. Only when we get to the Q&A, you can gladly ask him about his motivation for the new role going forward. But first and foremost, it's the CFO role for today's presentation. So a few of the top priorities that we have for the next six months, for the full year and then subsequently, and just the progress we're making around that. I've already mentioned the sale of catalyst technologies and we'll unpick that a little bit later on, so what still needs to happen. But here we're fully on track for that closing in the first half of calendar 26. The second one, we've spoken extensively about our ambition to significantly increase the margin of clean air. And here you can see, again, very strong progress, 200 base point increase in the margin for clean air. an increase in absolute profitability so despite declining volumes this is a really strong performance and leaves us completely on track for our target of 14 to 15 margin of by the full year this year and with that on track for our ambition 27 28 of getting to basically 16 to 18 margin Very strong performance from Platinum Group Metal Services with 33% increase in underlying operating profit. This was clearly helped also by Platinum Group Metal pricing, the trading business, but it's also refining which has been doing well and it's also efficiencies which is where we've simply been running the business more efficiently. So a strong underlying performance here. Our new PGM refinery, which is a huge investment, and I think against the background of the importance of critical minerals, it's hard to underestimate how important this is both for JM, I think the UK, and globally. This is the world's biggest refining plant for platinum group metals. that we're building in Royston, out beside Cambridge. This is on track to start commissioning by March of 2026. It's a very big capital project. It's about £350 million capital expenditure here. And we do have a small delay of a few months, but because we have our ongoing refinery, our old refinery, our 60-year refinery, still running in parallel, this has no impact on our guidance or our ability to deliver to our customers. So in the bigger context, it's a smaller delay, but important to flag it that it's a few months. On hydrogen technologies, we are on track, and again this is now almost end of November, we're very much on track for breaking even by the end, or have run rate break even by March 26. This is something that we had committed to. And we have line of sight of that. And we're confirming that again today. I think there was some skepticism that we might get there. But we absolutely have line of sight to that. And that's why we are reconfirming that we will break even with that business or have run rate break even by March 26th. And then the final point, and again Richard will talk to this extensively, is the significant improvement in free cash flow and the building blocks going forward to give you that confidence that we will be generating 250 million free cash flow going forward on a consistent basis. And what's behind that, Richard will explain. So they're kind of the highlights. We'll unpick different elements of this as we go through the presentation. But first, I think it'd be helpful to go through the detail of the half-year results. And then I'll come back and share some more color on these strategic priorities. And with that, Richard, over to you.

Thanks, Liam. Good morning, everybody. So the building on Liam's introduction, just to remind everybody, we've now treated catalyst technologies discontinued, so the results that we'll present are excluding CT. Obviously, still a very much of an integral part of the group until we affect the sale to Honeywell, but all the numbers in here are talking about essentially the remaining business going forward. So as Liam said, I think we're really pleased with this in terms of against the targets we set out in May, actually we think we've made really strong progress pretty much across the board against where we said we would focus. So you can see that despite sales being modestly down as a result of primarily clean air volume decline, basically you're seeing strong improvements in underlying operating profit, significantly because we're focusing on the things that are within our control. That feeds through to earnings per share. And to my mind, and I will, as Liam said, spend quite a bit of time on this, I think for me, possibly, despite those headline operating profit numbers, which I think are really quite impressive in the current environment, I think the free cash flow focus in the modest time we've actually started to shift gear on this is moving very well in the right direction. Our net debt is up. That's primarily because CT had cash outflow in the first half and the dividend. We've also had a significant stock build in our US refinery because we took it down for a maintenance shut in October. So despite the stock build and despite metal prices being higher, I actually think this is all quite a good news story. And I'll talk about how that's going to play through in the second half. As a result of which, we're maintaining our dividend at 22 pence per share. In terms of looking at the P&L, I mean, I just touched on the highlights there. The only real thing I'm going to draw out is the interest charge you can see is higher year on year. That's because we had a couple of one-off non-recurring items in the prior year. This level of interest charge gives you a feel for the run rate of where interest cost is on an ongoing basis. Coming down to the businesses, so in clean air, pretty much if you look across the piece to how we're forming, LDD pretty much in line with market. Europe's been difficult for us this year, but pretty much in line. LDG worse than market, but if you recall, several years ago we made a shift from gasoline towards diesel to the primary focus, so we came out of a number of those. We've had platforms that were on running off over time, and this is a picture you're seeing that running off. In more recent times, we had an increased focus primarily towards hybrid. You've seen that in terms of announcements, but they take a while to come through. So you've got a gap between when we announce something and it's starting to feed through as a numbers. So there's no surprises in here from our point of view. And actually, HDD, we're actually start ahead of the market. So in the area that we consider was likely to continue to grow going forward and where we're strongest in terms of market share and positioning, we're actually doing better than the market as well. Over and above the sales position, basically what you can see here is the strong focus on our costs. I said basically the full year. If you looked at our plan to get us from the 12% last year into the mid-teens this year, a lot of that will be about overhead reduction. You can see that coming through in terms of the margin improvement. Also, the operational excellence, commercial excellence, those areas are getting more ingrained in the organisation. I think this gives us a strong belief that actually we're heading towards that 16% to 18% margin range. BGMS, good half. We had a weak first half last year. We have benefited from higher metal prices this year versus last year. And actually, it's been a more volatile trading environment. So the trading side of our business benefits when it's more volatile. So those things are fading through. But pleased there in terms of year-on-year improvement. There's a lot of focus at the moment. Liam touched on obviously the build of our 3CR facility. That's critical for us going forward. We've still got a couple of years of running this old asset. So focusing on the consistency of operations and actually maintaining our assets in as reliable fashion as possible is really key to Liam's point around delivering for our customers. That's where the strong focus is on in this side of the business. Hydrogen, as Liam just said, you can see here improvement year on year in terms of run rate. For those eager-eyed of you, you'll notice that our losses in the first half of this year are higher than the second half of last year. That's because we have a weighting in terms of when we recognise our revenues, it's second half weighted. And so we've got line of sight, very clear line of sight in terms of our contractual position with our customers. We see what's coming through, hence real confidence about that getting to a break-even run rate by the end of the year. And as I said, despite actually the profit number being in really good shape, this is probably where I'm most pleased, actually, in the first half. So you can see, obviously, with a starting point of profit improvement, that's a good starting point for our cash generation. But the really important thing here is that movement in working capital. And these things take a while to bed down. I talked at the year end about the fact that actually there's quite a lot of areas which are not rocket science. But in an organization that's not particularly being cash-orientated, some of these things are sort of ingrained processes that need to change. And we've started with payables. I'll come back to that. There's more to do on receivables and inventory because some of those things take longer. But actually what you can see here is actually a shift in focus. There's still a lot to do here. This is nowhere near job done. It's a modest cash inflow in the first half. But given we had circa 200 million of stock built associated with the refinery shutdown in October, and we've had high metal prices, I actually think this is really positive because that stock build will unwind in the second half. And we've got ongoing focus in other areas. So to touch on those actions, particularly around the cash side of the business, to actually replicate the CT profits that are sort of lost with the sale, we've said that we need to take a significant amount of overhead out. We used to be a much bigger group. We still have some overhead that sort of reflects the legacy of us being a big group. Losing CT, we're becoming a much more simple group. And actually, our overheads need to reflect that. We're making progress, and a decent chunk of that is on the clean air side. We talked about the fact that most of the difference between the 12% last year and 14% to 15% this year was going to be about overhead reduction. You can see that actually clean air is already delivering on that, and there'll be more to come in the second half. And a similar amount is coming through on the group side of things. And as Liam will come back to the organisational structure, as we simplify our group structure, simplify the way in which we run things, that will feed through to greater levels of overhead reduction going forward. CapEx, we're still at elevated levels, and that's going to continue through this year and next year, primarily because of 3CR, but also other areas within PGMS infrastructure which feed into 3CR. And so our target, if you remember, of getting down to 120 million, which is close to depreciation, we're on track for. But you're going to see that higher level of CapEx. And that's why, to a certain extent, well, not just that reason, but why it's quite important we're focusing on working capital in the near term, because that working capital saving offsets some of that higher capex in the next couple of years. But if you think about all of this coming together, what we said at the year end was, we'll sell CT, well on track, as Liam said, and he'll come back to that. Basically, clean air, get it to a 16% to 18% margin, well on track, get 3CR built. Yes, we've had a couple of hiccups, if you like. So we had industrial action with one of our contractors. And that's led to lack of productivity in terms of the people on site. So that pushes out the schedule and so on and so forth. I think what's been really important since the summer Our team, where we've changed the number of members, the general contractor and the subcontractor we have at Interstruction have worked really hard to get to a schedule that everybody believes in. The detailed level of work that underpins that, everybody's signed off on. Everybody's holding hands and hence we're really confident about the plan we've got in place. And if we actually generate the wind capital improvements we promised over the next couple of years, that'll actually underpin our cash generation while we're still spending more capex to then get to a situation with lower capex going forward, which underpins where we get to the 250 million of sustainable cash flow from 27-28. We've talked about this a few times, but just to reiterate on the shareholder return side, on the 1.4 billion that we're returning, I spoke to pretty much every shareholder through the year-end process about where preference was. I think everybody recognises that whilst there might be a preference in some areas for share buybacks, it would take us about six years to return with this through share buybacks. So that's not realistic. So the majority is going to come back through a special dividend with the share consolidation. And then the balance, going back through share buybacks, probably during the course of calendar 26. And then ongoing from 26, 27 onwards, we've promised that 200 million of returns from there. Depending on how the share buybacks play out, share consolidation, so on and so forth, that also determine how many shares we have an issue and things. But I think you're looking at a situation where we're likely to have about one third dividend, two thirds share buybacks from 26, 27 onwards. And then outlook for the year, my last slide, basically. We're in good shape. We're very much expecting to deliver on our promises for the full year. PGMS will be down year on year in the second half. We've touched on this before. There's low metal recoveries. There's higher maintenance costs, given the age of the asset. But nothing different to what we actually said at the year end. So we feel we're in good shape for the year. We feel we're in good shape in terms of delivering on our 27, 28 targets. And on that, I'll hand back to Liam to give you a bit more detail. Thank you.

Great. Thanks a lot, Richard. So if we jump in on the strategic topics, the first one just top of mind is probably the catalyst technology sales. So what still needs to happen on this? Well, we have a binding sales and purchase agreement with Honeywell. which is publicly available where also what needs to happen is listed in that document. But in essence it's two things. One is the regulatory approvals. We need regulatory approval in 12 jurisdictions. We have 11 and the 12th is progressing smoothly as planned. So we believe that's very much on track. And then there's the carve-out, which is two elements. This is basically the legal reorganizations, which is very much on track, and then the transitional service agreements and long-term supply agreements to ensure that customers and employees are looked after. And that's all very much on track as well. So they're the two big elements that need to happen for us to close. And then based on where we are today and the very good collaboration with Honeywell, our expectation is, as we have previously stated, that we will close in the first half calendar of 26. I think it's important to note that the business has had a weaker performance, or the CT business had a weaker performance versus prior years, significantly weaker. This is completely market related and if we look at it from a market share point of view, the CT business has maintained market share in every key market and in some instances even improved the overall market share. So the underlying performance from a market point of view is very good, it's just the market is pretty weak right now. We have continued to win significant new sustainability-related projects. These are typically in the sustainable aviation fuel space. So the pipeline remains very, very robust and with that the growth outlook for that business remains very strong. So that's the overall situation for Catalyst Technologies and the sale to Honeywell, which is very much on track. Now, if we go to new JM, then without CT, we had outlined previously what we're really doing here is focusing on our core competency of platinum group metals. This is what this company has done for over 200 years. We would consider ourselves world champions as far as platinum group metals is concerned. We don't think there's anybody who can manufacture, trade and recycle as well as we can. And that's what we're really known for. And we build businesses that typically use platinum group metals and there are multiple applications. The biggest is, of course, clean air and catalytic converters. But within the PGM business, there's many other industries that are served and serviced by the PGM business. And as we outlined, we have a big opportunity now with a more streamlined group to run the business much more efficiently. To be very honest, you don't need a big corporate center if you have two businesses that are very closely interlinked with each other, the PGM and the clean air business. And I'll explain this a little bit later when we talk about organizational design. There's plenty of opportunities for us here to further streamline how we run the business to be simply more successful in the market. Now, if we go to the first of the big businesses in here, just a reminder again of our ambition, we said by 27, 28, we want to achieve at least 2 billion in sales and a 16 to 18% margin. You'll recall in 2022, we were at a margin of 8.7%. This half, you can see that we're up to 12.4, so a really significant jump in the last few years. And we have line of sight to the 14% to 15%. And with that, we think from a trajectory point of view, we're very much on track here. If we have a look at how we're doing from a winning point of view, and Richard explained a little bit what's happening in the market, question is that that kind of at least 2 billion, what's the confidence level? Well, at least 90% of that business has already been won. So that I think should underpin our confidence in this business. So very strong overall win rates. And what's I think been really encouraging recently because we've been focusing on the hybrid space, we've actually started winning business with leading Chinese OEMs who are typically the leading hybrid players. And if you can win with a Chinese OEM in China, then both your technology and your cost must be really good. And this is not just servicing then the Chinese market, this is also for export to the rest of the world. So this is actually a significant step forward and gives us a lot of confidence in the portfolio Again, our ability to win in this space. Lots of progress on partnerships with our strategic customers. And a point that I won't elaborate on much this year, or right now, but rather talk about it more extensively at the full year results. We do have a small kind of almost like a startup business within Clean Air. And I think there's a general perception that Clean Air is maybe sunset, sunset industry, sunset business. But there are elements that are growing, like, for example, the hybrid business, like, for example, the heavy-duty diesel business. But there's also something what we call clean air solutions, which is using the core emissions technology of clean air for non-automotive type use cases, typically stationary use cases. And the example that's mentioned here is we've just won several multi-year contracts for emission control technology for engine systems for data sensors and of course data centers is a hyper growth area right now most of those data centers are fueled by fossil fuels so they require emission control technology otherwise you're going to have toxic fumes and that's where our core competence is again so this is an area that's growing And we'll unpick that further at full year. But I just want to highlight there's within clean air, there's enough opportunity in here to give us a lot of confidence about the targets that we've set for 27, 28. Now, beyond winning commercially, we do continue to drive efficiency. This is really important for us. This is also why our margin has been improving. There's been a significant reduction in overheads, especially SG&A, some R&D as well. And as we do that and as we're winning business, I think where we're really encouraged is our net promoter score has actually increased significantly. This is almost unheard of that the net promoter score is up 15 points. This means at a point in time where we are improving our profitability, our customers are thinking more highly of us. That's not necessarily to be taken for granted. And it's really a sign of how much value the commercial teams together with the tech teams are adding for our customers. So I think really strong progress here and we will continue on the journey of footprint optimization. When we started in 22, we had 50 production lines. We're down to 21 now. And that journey of consolidation between production lines and site consolidation will continue. And it continues at the pace that the market is evolving. If the market evolves faster in a certain direction, we can move faster from consolidation or we move slower. So we just adapt to what's happening in the market. But all of this gives us again the strong confidence that we can, we'll get the margin up to 16 to 18% by 27, 28. So that's clean air. If we go to platinum group metals, and again, in a world that's very concerned about critical minerals, this is a jewel in the crown, I think, for the UK, but basically from a global point of view, to have the know-how and portfolio and the people that we have for this business, very profitable business that has a big moat around it, And we've given out the targets, the guidance, 450 million sales by 27, 28 and a circa 30% operating margin. You can see there's three parts to this business. In essence, it's producing products, so typically alloys, anything that uses PGMs. for multiple different industrial and other applications, might be for life science, might be for defence. There's many different use cases. And we produce products often customised for our customers then. We also refine. We're the world's biggest refiner and recycler. And again, the vast majority of that happens in the UK. currently with a very old refinery and in future with a brand spanking new refinery which will be absolutely state-of-the-art and there will be nothing else out there in the world like what we will have then when this is complete which is relatively soon. And we also have a trading business, so we buy and sell and manage metals on behalf of our customers. And that's important because this stuff is super valuable. A normal and average industrial company doesn't really have the infrastructure from a security and a logistical point of view to actually manage precious metals. We have all of that. and this again this is a service component that we offer for our customers so fantastic business i mentioned uh and Both myself and Richard have mentioned how important the new refinery is. And we're on track now to start commissioning by March of 26. This is really important. Richard already elaborated there was some industrial action that's cost us a few months. But it means we will still be fully operational within the calendar year 27. And to underpin that confidence about being fully operational, we also have a clear plan to start decommissioning the old refinery within 27 as well. So by the end of 27, we'll start decommissioning the old refinery. And we always said we would only start decommissioning when we're 100% certain that the new refinery is up and running. And from everything that we can see today, we have complete line of sight of that. Richard said we have our best teams on this. Everyone has joined hands. It's got the utmost focus. And we're very confident about the schedule that's in place now. And thankfully, we still have the old refinery to keep supplying customers as long as this one is not up and running. But it will be up and running in calendar 27. And the old one we will then start to take down. So that's the overall situation for 3CR. And that's why we're very confident that this will be a big, big benefit for us going forward. Now, besides the business, I mentioned earlier on that we have an opportunity to basically streamline how we run the business. And again, if you think about the situation, CT is moving out. With Clean Air and PGMs, we have two businesses that are intricately linked through platinum group metals. They all use lots of platinum group metals. We manufacture products. We also recycle products on behalf of our customers. We manage their metals. So there's a lot of synergy in here. So we gave a lot of thought together with our board about how we could set ourselves up for success in the future and really accelerate progress. And what we've agreed on is a new streamlined organizational model. So we're moving away from divisions and sectors with individual CEOs. And given that we'll only have two businesses that are intricately linked, we're going to move to an operating model where we have one chief operating officer who can ensure that we're tapping into all the synergies across those businesses. And basically we'll move from nine people on the executive committee down to six. And I think it's a good reflection if you think where our business was and is. It'll be a smaller business going forward. So the streamlining should really start at the top. This is a team that's been working together very intensively. and very successfully particularly since this summer on developing the new strategy the new JM going forward and we have a lot of fun together and based on on kind of how we're all interacting with with each other and and looking at the strengths of different people what we've decided is Richard will become the chief operating officer And for those of you who are not so familiar with Richard's extensive curriculum vitae, he has a lot of experience running operations in other industrial companies, both on the manufacturing and the recycling side. He's super passionate about operations. He loves getting into the detail. And he wants to make sure that we can deliver on all these cash commitments that we're making. So he wants to be on the front line managing this. So we think this is a great move. And we're really lucky within JM that we have Alistair Judge, who many of you possibly know. Alistair, he's the current head of strategy and operations. Alistair used to be the interim CEO for Clean Air so he knows Clean Air intricately and he used to be the CEO for Platinum Group Metals so there's nobody who kind of knows the business better than Alistair and what's important is Alistair is also a Chartered Management Accountant and for the vast majority of his working life He's worked in financial roles. He was intricately involved together with the entire team in developing the cash-focused business model going forward. So we think it's a great combination to have Alistair as the new CFO, Richard as the COO and then everybody else on the team who's a fantastic team all working really closely together to deliver on our commitments. So we're absolutely convinced that this organisational model will help us to accelerate progress and this is the way we're going. Maybe on that, because we have Anish with us here today in the audience, let me say Anish will be leaving. There was an announcement made today. Anish is taking up a great new role. He'll become group CEO in another company. And that's a fantastic development. I'm super happy, Anish, for you personally. Anish has really strengthened Clean Air. And I think the most important thing Anish has done, he's developed a great team. There is a fantastic team within Clean Air. They're all ready to step up and they're all ready to support Richard. So I think this is for all of us. It's actually a really good news story. So big thanks to you, Anish, on behalf of everything that you have done for us. What's not on here is CT. The CT CEO will continue to report to me directly, but this is the new JM going forward, so will not be a member of this executive team and will continue to report to me as long as CT is within JM, which is up until the first half of the calendar year 26. So I hope that's relatively clear. Now this team also has been placing a lot of emphasis on developing the right culture for us to be able to succeed with our commitments. And just to give you a few data points on how we're doing on that front. And this is really important for us that we have a culture that really enables implementation of the strategy and not one that's holding us back. For us, and particularly I think anybody in the process-related industry, what's really important, everything starts with safety. Every meeting starts with a safety moment. Really important for us. But it goes deeper. At JM, when we think about safety, it's about looking after each other. It's about taking pride in your workplace. It's about caring. And I just have a fundamental belief, if your safety stats are improving, probably your culture is going in the right direction. It's a sign that people care. It's a sign that they're looking out for each other. It's a sign they're taking more pride in their work. That's really important and we've seen a significant improvement in our safety stats. We know we still have a long way to go. We need to continuously improve here, but it's important that we're seeing progress and we are seeing progress here. Second one, and I've already mentioned clean air. it's not just clean air all of our business businesses we've seen a significant improvement in customer satisfaction as measured by net promoter score again 13 points up for JM in total that's an almost unheard of increase In a very difficult market environment where everybody is dealing with lots of issues, our customers are thinking much more highly of us because they can see the value that we bring to them. And this is really important for us, that we have the customers front and foremost, and we track this rigorously. Third data point, also super important, employee engagement, which is typically an early indicator of performance. There's usually a lag between where your engagement is and then how your performance turns out. And typically when you have lots of change, external change, internal change, your employee engagement will drop, typically. We've actually seen, we've just measured this in October. We do this every six months. And we've seen another good increase in employee engagement. And this is over 80% of all of our employees reply to this survey. So this is a really big population. and a good increase in engagement. So again, these are all data points that tell you something is improving and give us confidence that we can continue to drive performance. We've aligned incentives. We never had targets for cash in the past. It was always underlying OP and margin, where typically and sometimes sales would typically be the KPIs we would use. Now we also have clear targets and incentives for cash so that people have skin in the game for what we have committed to externally. And that, we believe, is also helping us drive performance, which you can see then in the results that we've delivered in the first half. So just a reminder of what you can expect from us by 27, 28, at least mid single digit CAGR in pro forma operating profit going forward, for which we're very much on track then this year so far. annualized free cash flow of at least 250 million and returns as Richard outlined, returns to shareholders of at least 200 million per annum. So that's what you can expect from us. Tracking progress as usual, we give some milestones that hopefully enable you beyond the financial reporting just to be able to hold our feet to the fire because we need to do that for ourselves but we want to be transparent about it. These are the areas that we think matter the most. And we give you a kind of a traffic light and we'll do this every half year. And whenever there's any significant change to any of these variables, we will update you. As you can see, everything is on track. We've put the refinery on yellow because we have a few months delay. But again, this has no impact whatsoever. on our guidance or our financials because we have the ongoing refinery which will ensure that our customers can continue to be supplied. So that's overall the strategic milestones. We'll continue to update you on that. And then just in summary again, we think we've had a good start with the new model, significant increase in profitability, turnaround in cash with lots more to come. And the sale of catalyst technology is on track. And we believe the organizational changes we're making will actually help us accelerate progress. So we've a lot to do and we've a lot to look forward to. And now we look forward to your questions. Thank you very much.

So thank you, Liam and Richard, for the presentation. Thank you. We'll firstly take questions from the room, and then we'll move to questions from the webcast. So just as a reminder, please just state your name and company when asking the question. I think we've got some microphones on both sides. So, Jeff.

Hi, it's Jeff from UBS. First of all, on the ramp-up cost that you sort of alluded to back in May this year for the new refinery, I think you were saying it would be about 20 to 30 million. Could you give us an update on what that would be now that you've got more line of sight, as it were, to when that refinery is coming online?

Still similar, Jeff. Basically, increased maintenance costs, dual running, lower metal, that sort of order. In terms of what we set out in May, that's still the trajectory we're looking at.

The second question I just wanted to ask was, and I don't want this to sound churlish, but obviously you've done a lot of work with working capital. Why has that not been able to be done before? And also, do you run the risk that your inventory levels are too low for what you need to produce within the business? How do you manage that risk?

Yeah. Look, this has been a growth-focused business. You know, actually, if you look at where over time... the capital's been deployed, where people have been focused in growth. And generally, when you actually focus on growth, you're actually growing working capital. It's not being focused as much on net cash generation. So to be fair to people, when you targeted a particular way and that's what you're focused on, there are other things that you don't focus on. Now, whether we should or shouldn't, it's sort of a bit irrelevant because you can't change the past. What I would say is there is a significant opportunity. There's a significant opportunity in payables because we've been paying people too quickly, actually, and sometimes ahead of when we actually needed to. There's a significant opportunity in receivables because we've actually been collecting money too slowly. And we carry far too much inventory. So we're way off a situation where we're potentially driving this to levels that are unsustainable. We're only scratching the surface today.

Tristan.

Hi, Tristan Lamotte, Deutsche Bank. I was wondering, question on PGMS. Could you talk through conditions currently in PGMS and why it would be down in H2? And I'm particularly interested in volumes and feedstock availability. And then linked to that, what kind of PGMS trajectory do you see in the next few years? And is there any change to that trajectory at all with the plant push out?

We are seeing higher metal prices, so that feeds through in terms of underlying refining performance and to our trading side. And actually because of increased volatility in the trading environment, our trading business makes more money when the environment is volatile. So that's benefiting. On the flip side, we have had one of the large mines in the US that's closed, so therefore there's been lower volumes on the refining side. But as I've also mentioned, because we're actually in a transition phase through to getting three syrup and built, we have got dual running costs. We've got lower metal recoveries because we've recovered metal over time. And I mentioned that the full year, we had a very strong second half last year, particularly because of metals and other one-off items. So once you've had a one-off item, it doesn't necessarily repeat, that means the following year it'll be down. So the fact that we've got higher running costs and lower one-offs is actually feeding into the second half. But it's exactly the same as what we said in the year end. We said we'd actually dip before we actually came back. So you've got a slicky decline trajectory through to 26, 27, and then recovery from 27, 28 forward as we get the new refinery up and running.

Got it. And then... I'm not sure if that's working. Yeah. And on exceptionals, just generally at a kind of group level, are you expecting that level to stay similar to H1 and H2, and does that come down into next year, or what kind of trajectory are you seeing on that?

Yeah. There's two real items under our... on non-lying items. One is the costs associating with reducing overheads by losing people and the other is the ongoing clean air footprint consolidation. So as we take lines out and take sites out, there's cost of closure. Those costs you can see in the first half in terms of key categories, that'll continue in the second half and continue into next year. And I indicated at the full year that if we're taking around about 100 million of overhead out, but actually you'd be looking at a similar level of cost associated with that as well as clean air. You'll see, not exactly light for light, but you'll see that overall level across the next couple of years.

I think the next question from Alex.

Good morning, gentlemen. Congratulations on a strong first half. Just a couple of questions for me. The first is kind of on culture, obviously going through quite a big transition at the moment. And you pointed to the engagement score being like kind of upticking a little bit. Just kind of interested in kind of what you're doing to manage that culture during quite a big transition and how you are kind of confident that you can keep that high, that engagement score.

Yeah, thanks a lot, Alex. So we've actually spent a lot of time with leadership explaining we need people to be talking to people. When you've got this much change going on, what you don't want to be doing is communicating through slides and just webcasts. We need line managers to be talking to their people, to be listening to what their concerns are, taking them seriously, and then working on an action plan to address those concerns. So very specifically, one of the elements we track is, and we can see this from a people management point of view, has there been follow-up related to the engagement survey? Have your concerns been taken seriously? and we can track literally across the board where it's working, where it's not working and where it's not working well. We then intervene with the line manager and give them support and if they're not able to come along with the journey then of course we have to take other consequences. But it's really about strong people leadership, listening to concerns, putting an action plan in place so that people can see their issues are being dealt with and not some generic 40,000 foot kind of strategic stuff, but the issues that they're dealing with on the front line. So we place a lot of attention on that. I think that's the single biggest issue that we can do. And the second one would be everything related to safety. Because people can understand that it's really important that everyone can go home safely to their families every day. And the amount of attention we put on that is quite exceptional. We dedicate a whole, apart from the fact that every meeting starts with safety, every time, religiously. We dedicate an entire day every year where we shut down everything and just go through a whole raft of safety measures and trainings. And then throughout the year we'll have various elements around that as well. So I think it's just walking the talk really and showing people that we care and that with that they should care too. And I think that's working.

Thank you. The second question was just on the 2 billion of sales for clean air in 27, 28. Obviously, you've got kind of 90% of that in orders already, the same as at the full year. I think at the analyst call at the full year, you mentioned that there were tenders out that could even see you get up to 100%. So I'm just interested in how should we think about that number moving forward? Is it going to be kind of lumpy or should it kind of gradually tick up over the next couple of years?

Should the 90% go up to... Yeah, yeah. I think it's a good one to hand over to Anish just to give a bit of flavour on what kind of contracts we've been winning recently that are not yet in the 90%. So the 90% for sure... increases significantly going forward, but the quality of those wins I think is quite, quite exceptional. Maybe, Anish, you can share just some examples of that.

Yes, of course. Good morning, everyone. And I think it's a fantastic question. With me moving on, I can speak more openly, obviously. So there's one recommendation I want to give you when you look at the businesses. 90% of the 2 billion already won is a great number. But to look at the quality behind is absolutely crucial. Because when you look to the automotive environment today, not every tender has the same value in the future. Because you've got to make sure that you win with the winners in the right markets. So let me give you an example. With a brand that is clearly going to win in the next 10 years in South America, that's a better tender than maybe with a smaller brand in Europe. because it just gives you more run rate, it gives you higher margins, it gives you a longer runway. So when we assess the quality of what we have won, we always look to how long is the contract, in which market are we winning, what's the regulations there, how long will combustion engines be surviving in that market, and how is that OEM positioned to be a real winner. So that's the first thing. And then I can tell you the good situation that you have at Jam right now is when you have 190% already today, the total sales funnel is obviously above 100%. So theoretically, you could make it to even more than the 2 billion. But obviously you're not going to win everything in the funnel, but I can tell you we are going to win some stuff in the funnel. For example, we have just received verbally the confirmation that we've won a huge LDG tender in Europe with a very big OEM, which is going to give us access to 20% of the hybrid market in Europe. That's going to be huge. So when that's confirmed in writing, I'm sure my colleagues, and it's my farewell present to Richard, will talk to you about that, and it's going to uplift that number. So that's how you have to see it.

Thanks. We'll just do a check for any more questions in the room. There we go. Just wait for the microphone. Thank you.

to share. Just a quick question on the, you mentioned the new contracts for data centres. It might be too early to share but is there a rough value of those contracts you could share and I just wondered if that's this new sort of start-up business does it have any initial margin erosion impact or is that one where you hit the ground running and it's

Yeah, so we're not sharing the financials now, but we will at full year, simply because we want to have a bit more meat on the bones, to be very honest. Although this is a nascent business, it's using the core footprint of clean air, so there's no additional investment required in that regard and this is not something that would be dilutive on the margin so it's an area that we think is hyper attractive for us but we'd simply like to have a bit more, we'd like to show a fuller picture and right now it's more or less saying we're actually winning contracts in this space multi-year means 5 to 10 year contracts

um and what what's kind of behind that from a financial point of view will will unpick further a full year okay any more questions in the room so in which case we'll move to the webcast so sticking with um pgms there's a question from chetan yadeshi from jp morgan I think probably Liam, you referenced the growing importance of critical metals. Are you seeing any change in customer behavior in terms of how they deal with PGM services? Is this business moving to a long-term take or pay contract? Can it reduce the lumpiness in earnings in this business?

Yeah, we're both looking who's best at it. Maybe I'll start, Richard, and then you chime in. So de facto, we're not seeing, and there's various moving parts when you think about PGMs. We're not seeing a significant change in customer behavior because these are precious metals. They've always been precious metals. It's just the focus on them has ramped up considerably. I think going forward there's a keener awareness of where PGMs are actually sourced from. So, for example, there is an ongoing discussion in the US, a very active live discussion, that palladium being sourced from Russia should have significant tariffs on it, which is not the case, or should be sanctioned, which is not the case today. There is a body in the US who has found that there has been some dumping going on there. And if that is the case and palladium is then sanctioned, Russian sourced palladium is sanctioned in the US, that will have an impact in the market. It doesn't impact us because we do not source any palladium from Russia. That is not the case with all of our competitors. So there is a stronger focus on the source of PGMs going forward. The fact that recycled PGMs have close to zero carbon footprint is something that customers like. They just haven't been willing to pay for it previously. I think as carbon pricing ramps up going forward, that will become more of a topic as well. But de facto, we don't get a premium because the product is recycled. It's a globally traded product. There's one price. as opposed to a differentiation between a lower zero carbon source of PGMs and something where there's a much stronger carbon footprint. So overall, I think from a contractual point of view, we are having discussions and have been having discussions with customers about a fee for service. type of a model, as opposed to just taking a percentage of the value of whatever it is that we're recycling. If you move to a fee-for-service model, that would reduce volatility. That's always a commercial negotiation where there's It can go either way. Some customers want that type of a service, some don't. So we make it very much customer-dependent. But that's the way we think about it. Richard, do you think that?

I'm just trying not to replicate anything Liam said. For anybody who's less familiar with PGMS, the three bits of this business, it's a refining operation where we refine our customers' mettle. So it's really, really important they trust what we do, that we take their metal and return as much PGM content as is possible. When I was at the PGM Week in New York a couple of months ago, I saw 12 of our top 20 customers. That came out really strong. Obviously, we've been in this industry 200 years. The trust in JM, which is fundamentally important. We are a commodity refiner, so cost per unit is important, but trust in what we do is really important. I think we stand out there. We have a products business, so we turn PGMs into products. That, we do a whole variety of things for our customers. And actually, we're actually, I think, more inventive than others. Quite often, if we see things go away, we're quite often better at providing solutions than others. That keeps people coming back. And then we have a trading business, where I mentioned both metal prices and volatility is quite important. Liam talked a little bit about contractual situation, but if you look at the volatility to Chetan's question, the volatility return is primarily about PGMN prices. These are commodities, so you can't fully get away from that because it's a commodity and prices will go up and down. What we can do is smooth things. And so as prices have been at 12, 13-year highs recently, we have looked to lock in a bit more of next year's and the year after's pricing. You can only smooth things. Taking a hedge is a gamble because at the end of the day things can go up or down. So we can remove to some degree some of the volatility, but you can't remove it entirely. What we can do is we can ensure that we've got consistent refining operations that actually ensure we deliver our customers on time and deliver to their promises, that actually we've got our cost base in the right place to ensure that we're as competitive as anybody else, and that we manage our commercial situation where we smooth that volatility over time. And those are things that we're looking at in the underlying business model.

Thank you. The next question, sticking with PGM services, is from Adrian Hammond from Standard Bank Securities. Could you please give some colour on AutoCat recycling volumes? Are volumes still subdued, and how does this differ regionally?

Yes, they are still subdued at the end of the day, although the penetration of electric vehicles has slowed. It's still an increasing space. We haven't seen it come back yet. We do expect to see some degree of recovery there, but it's not feeding through in the market just yet.

Maybe to add to it, we had been expecting... for some time that the US would bounce back from a kind of recycling point of view on the AutoCAD side. And it hasn't, or so far it hasn't. And there was kind of, what we were hearing anecdotally was with pricing where it was, there wasn't enough of an incentive to actually encourage more recycling. With prices where they are now, what we're hearing is the incentive has definitely increased to actually start recycling more. So we've got anecdotal evidence that things are starting to move in the U.S., but we'd like to see it in hard data before we would say it's real.

Thank you. The next question is on clean air from Chetan Udeshi from JP Morgan. Have you seen any shift in clean air volume momentum in the current quarter? There were some concerns that there might have been some pre-build in the supply chain ahead of US tariffs.

Do you want that, Anish? Do you want that? Here you go.

Very clear answer, no. So that has nothing been like that. Maybe as a little explanation, you know that we're winning our business as Richard has described perfectly very long before we actually produce, which is actually an opportunity for us and not a risk we can talk about. pricing excellence in that time with our customers. Lots of topics there where we can uplift the price. And then the second thing is, as we are delivering to Kenner's, that supply chain is hold very tight. There's opportunities we have taken now on the working capital side. There's more opportunities there for Jam in the future. So that's very, very good, organized, very good process. And the risk of high inventory builds before certain effects, for example, summer breaks or factories or tariffs or anything has not happened.

Thanks, Anish. The next question now is around catalyst technologies from Ella Harvey at Lombard ODA. How does the weaker performance in the segment impact the sale?

Thanks, Ella. So as outlined, the conditions for the sale are related to regulatory approval and to the carve-out, both of which are very much on track. So the market performance is not a condition.

I think that's it in terms of webcast questions. So we'll just do a final check in the room. Thank you. That's good. So thank you very much, everyone in the room and for your attention on the webcast. And hopefully we'll see as many of you as possible over the next couple of weeks or so as we do roadshows. Thank you very much.