Questor share tip: Johnson Matthey raises second-half guidance

Driving the growth is the better-than-expected performance at Matthey’s Emission Control Technology division (ECT), which makes up more than half of the group sales and nearly 40pc of operating profit. Sales at the division were up 15pc to £397m, while operating profit grew “substantially”.

The group figures exclude the impact of the end of a long-standing platinum-buying contract and other arrangements with Anglo American Platinum, which is expected to reduce sales by about £10m a quarter.

Sales at Matthey’s Precious Metal Products division, which makes up about 16pc of group sales, fell £2m to £95m as a result of weak precious metal prices.

“Our guidance is ticking up a little bit in the second half because the ECT division is a bit stronger that we thought but that’s partially offset by weakness in precious metals,” Mr MacLeod said. “The outlook for the group for the remainder of this year has improved slightly from the guidance we gave in our half-yearly report.”

Under Mr Carson the company has grown its market cap from just under £2bn to now stand at £7bn and it has just reported that it expects second-half results to be slightly ahead of the previous period’s £212.9m underlying pre-tax profit. The market had been expecting the second half to be broadly in line with the first half.

Deutsche Bank said there was no reason why growth cannot continue under the new chief executive. “We expect a smooth transition and few changes to the successful strategy the company has pursued,” Deutsche analysts said in a note. “We see long-term growth supported by the long-term structural growth drivers.”

Matthye’s shares trade on a price-earnings ratio of 20 times forecast 2014 earnings, falling to 18 times next year and Questor maintains its hold rating.

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