Investor calls for Johnson Matthey to explore sale after shares slump
Johnson Matthey’s largest shareholder has called for a strategic review into the business that could include the sale of “part or all” of the company.
In an open letter addressed to Chairman Patrick Thomas on Monday, New York-based Standard Investments also recommended a major shake-up of the board and the de-risking or sell-off of its lossmaking Hydrogen Technologies unit.
Standard claimed the FTSE 250 chemicals group’s management had remained “complacent and incapable of correcting a misguided strategy that has delivered sustained underperformance.”
Shares in Johnson Matthey have fallen around 55 per cent over the last five years.
The investor, which became Johnson Matthey’s largest stakeholder in September 2023 after nearly doubling its holding to 11 per cent, warned the board of directors lacked a “sense of urgency” and the ability to oversee a turnaround.
Only one new independent director has joined since November 2021, when the firm put its struggling electric vehicles battery materials unit up for sale, it added.
It comes after the company also announced £550m plans to spin off its Medical Device Components business to London’s Montagu private equity in March as it looked to shore up the balance sheet.
Standard said it believed in the “unique value of Johnson Matthey” but warned a “massive credibility gap” had emerged with investors and the broader market.
Significant capital has been spent over many years on “unproven growth businesses with no demonstrated path to profitability,” it argued, noting the 2021 battery materials exit.
It also said Johnson Matthey’s Platinum Group Metals Services continued to “tremendously underperform,” consuming over £1bn of cash from working capital increases.
Among the investor’s other concerns are low margins in the group’s Clean Air business and “volatile and meager” group free cash flow.
“As long-term owners and operators of both industrial and investment businesses, we believe pursuing the actions we outline will position Johnson Matthey to unlock the unrealized promise of “New Johnson Matthey” and emerge as a stronger, more resilient business, enabling significant value creation for the company and its shareholders,” Standard concluded.
A statement from Johnson Matthey, published on the London Stock Exchange, said: “The board of JM welcomes constructive input from all shareholders, and accordingly has had a dialogue with Standard Investments since it became a shareholder.
“The board and management team are resolute in their focus on improving JM’s share price performance and recognise the need to restore shareholder returns.
“JM is fully committed to driving enhanced performance, higher cash flow and stronger capital discipline. JM is making progress in a challenging market environment through delivery of a comprehensive transformation strategy and will continue to adapt this strategy to the evolving market situation.”
A further update will be provided as appropriate.