Restructuring and impairment costs have burnt a hole through Johnson Matthey's earnings, as the engineering firm announced a drop in profits in its preliminary full year results today.
Reported profit before tax for the company, which is well-known for making car emission catalysts, dropped 22 per cent to £386.3m for the year ended in March, down from the prior year's £495.8m, with impairment and restructuring costs swiping a £141m chunk from the firm's performance.
Underlying profits before tax were more positive, down just five per cent at £418.2m compared with £440.1m the year before.
Revenue, however, increased to £10.7bn, up seven per cent from £10.1bn.
Shares were trading up 1.5 per cent at 2,868p at the time of writing.
2 June 2016 @ 8:30amJohnson Matthey (JMAT)
Why it's interesting
Investors in the engineering company may have to be patient, but it was insistent good things will come to those who wait following a shakeup of the business, which focused on its process technologies division and its fuel cells business.
The company has forecast that, once everything is complete, its restructuring project will generate around £34m a year in cost savings, with benefits being reaped as early as the next financial year.
What Johnson Matthey said
Robert MacLeod, chief executive of Johnson Matthey, said:
Johnson Matthey has delivered a robust performance overall in a year where conditions have been particularly tough in some of our markets.
Emission control technologies had another strong year and we have made good progress in new businesses. The group's performance was adversely impacted by the challenging conditions in some of our other business areas and we have restructured our business; results in 2016-17 will benefit from those actions.
Analysts at Liberum, however, were less upbeat about what the future would hold, remarking that their interpretation of the company's outlook message led them to believe investors could expect broadly flat growth of trading profit.
It may look bad on paper but the underlying business appears to be holding up well. However, there are mixed messages on what the future will bring for the company.