FTSE 250 shares round-up: Johnson Matthey, Mitchells & Butlers

A streamlining that will result in Johnson Matthey (LSE:JMAT) returning more than half of last night’s market capitalisation today fired up shares after their four-year downward spiral.

The rebound of the former FTSE 100 stock to its highest level in just over a year followed the sale of the group’s catalytic technologies arm to Honeywell International Inc (NASDAQ:HON) - a move described by chief executive Liam Condon as a significant milestone in the company’s 208-year history.

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The £1.8 billion sale, which is due to complete in the first half of next year, leaves JM to focus on catalysts for vehicle emission control and its higher margin services in platinum group metals.

JM said both divisions benefited from large and durable addressable markets, with attractive long-term prospects.

The repositioning, which followed pressure for a break-up by one of its largest shareholders, is expected to drive a step change in cash generation and lead to higher returns to shareholders.

JM said a refreshed capital return framework will mean cash returns grow from at least £130 million for 2025-26 to at least £200 million for 2026-27 and beyond.

That’s in addition to the plans to return £1.4 billion, equivalent to 800p a share or about 88% of the net sale proceeds of the catalytic technologies business. It has not specified the mechanism for the return to shareholders.

The disposal, which follows earlier deals for JM’s businesses in medical devices and battery materials, was announced alongside results showing a 5% decline in operating profit to £389 million for the year to 31 March.

The figure rose 5% when excluding divestments and at constant rate of currency, underpinned by a strong second half and in line with expectations against challenging market headwinds.

The catalytic technologies business, which serves the fuels and chemical value chains, generated an operating profit of £92 million. In the current year, the company expects modest operating profit growth in its largest division of clear air based on a margin of 14-15%.

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The company intends to pay a dividend of 55p a share on 5 August, resulting in an unchanged total for the year of 77p a share.

Elsewhere in the FTSE 250, the shares of Mitchells & Butlers (LSE:MAB) lost some of their initial fizz after the Harvester, All Bar One and Nicholson’s pub chain reported improving sales trends and forecast a full-year operating profit at the top end of City hopes.

Half-year results showed like-for-like sales growth of 4.3%, a figure that accelerated to 6% when covering the most recent 10 weeks spanning Easter and Mother’s Day.

The group said: “Looking forward we expect the market to remain robust and believe we are well placed to continue to outperform.”

Guidance on cost headwinds for the current year remains unchanged, with an anticipated increase of about £100 million before mitigation representing 5% of its cost base.

This has been driven primarily by labour costs, including increases to both the statutory National Living Wage and employer national insurance contributions.

Shares peaked at 294p after half-year profit growth of 24% to £134 million beat City forecasts.

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However, they later weakened back to near their starting point of 276p after Mitchells said recent indications of high increases in food costs, notably meat, led the company to anticipate a higher level of overall inflation next year.

Peel Hunt, which has a price target of 375p, upgraded its earnings forecasts for this year by 7% but with a smaller uplift for the following year.

Shore Capital added: “Given the building momentum, strong execution and rapidly deleveraging balance sheet, we continue with our Buy recommendation, paying particular attention to the marked discount to net asset value, which stands at 445p per share.”