Final Results
Johnson,Matthey PLC
03 June 2004
For Release at 7.00 am Thursday 3rd June 2004
Preliminary Results for the year ended 31st March 2004
Catalysts and Pharmaceutical Materials drive growth in profits
Summary Results
Year to 31st March
2004 2003(1) % change
Turnover £4,493 m £4,324 m +4
Sales excluding precious metals £1,224 m £1,159 m +6
Operating profit £188.3 m £167.9 m +12
Profit before tax £178.0 m £173.5 m +3
Earnings per share 56.0 p 55.4 p +1
Before Exceptional Items and Goodwill Amortisation:
Operating profit £206.0 m £189.2 m +9
Profit before tax £195.7 m £189.9 m +3
Earnings per share 64.0 p 61.8 p +4
Dividend per share 26.4 p 25.5 p +4
(1) Restated for FRS 17
• Operating profit before exceptional items and goodwill amortisation up
9% to £206.0 million, despite impact of weak US dollar
• Earnings per share before exceptional items and goodwill amortisation
up 4% to 64.0 pence. Dividend for the full year increased by 4% to 26.4
pence in line with earnings growth
• Strong operating cash flow. Net borrowings reduced by £8.0 million
despite acquisition of AMC for $43 million
• UK pension fund surplus increased to £43.3 million
Business Progress
• Catalysts' profits up 15% to £109.2 million
• Environmental Catalysts and Technologies (ECT) achieves good growth in
Asia and increased contribution from heavy duty diesel products
• Process Catalysts and Technologies (PCT) well up benefiting from a good
contribution from the former Synetix businesses
• AMC, the leading supplier of Sponge NickelTM catalysts, acquired in
March 2004
• Fuel Cells R&D to benefit from UK Government support
• Pharmaceutical Materials' profits up 15% to £42.3 million with strong
growth in opiates and platinum pharmaceuticals
• Precious Metals' profits reduced by 8% to £44.2 million reflecting weak
trading conditions and impact of renewed Anglo Platinum contracts.
Trading conditions now improving
• Colours & Coatings' profits up 6% to £26.7 million with good growth in
glass coating products
Commenting on the results, Chris Clark, Chief Executive of Johnson Matthey said:
'Johnson Matthey has continued to make good progress in 2003/04 with strong
growth in both Catalysts and Pharmaceutical Materials. The outlook for both
these divisions remains encouraging, with growth over the years ahead driven by
investment in new technology.
We sense that our markets are generally improving. We are well positioned in
the industries we supply and we remain confident that this, together with our
focus on technology, will serve us well in the future.'
Enquiries:
Chris Clark, Chief Executive, Johnson Matthey 020 7269 8435
John Sheldrick, Group Finance Director, Johnson Matthey 020 7269 8438
Howard Lee, The HeadLand Consultancy 020 7036 0369
Laura Hickman, Gavin Anderson & Co 020 7554 1400
www.matthey.com
Report to Shareholders
Introduction
Johnson Matthey made good progress in 2003/04. Operating profit before
exceptional items and goodwill amortisation was 9% up on prior year despite the
fall in the value of the US dollar. Both Catalysts and Pharmaceutical Materials
divisions achieved 15% profit growth. We continue to see excellent prospects
for both these divisions and we have increased our investment in research and
development to take full advantage of anticipated market growth over the next
few years.
Review of Results
Total sales for the financial year ending 31st March 2004 rose by 4% to £4.5
billion. Sales excluding the value of precious metals rose by 6% to £1.2
billion.
Operating profit before exceptional items and goodwill amortisation increased by
9% to £206.0 million, despite the effects of adverse exchange translation. The
group has adopted FRS 17, the new accounting standard for pensions, and last
year's results have been restated accordingly.
Interest also rose, partly reflecting higher average borrowings following the
acquisition of Synetix, but also as a consequence of the change to FRS 17 and
the reduction in pension fund surplus at 31st March 2003. Profit before tax,
exceptional items and goodwill amortisation rose by 3% to £195.7 million.
Earnings per share before exceptional items and goodwill amortisation increased
by 4% to 64.0 pence.
Exceptional items gave rise to a net credit of £2.1 million before tax, compared
with a £2.7 million charge last year. Goodwill amortisation increased by £6.1
million to £19.8 million reflecting the full year's ownership of Synetix which
was acquired in November 2002. After exceptional items and goodwill
amortisation, profit before tax rose by 3% to £178.0 million. Earnings per
share on the same basis increased by 1% to 56.0 pence.
Dividend
The board is recommending to shareholders a final dividend of 18.2 pence, making
a total dividend for the year of 26.4 pence, an increase of 4%. The proposed
dividend would be covered 2.4 times by earnings before exceptional items and
goodwill amortisation.
Operations
Catalysts Division's sales rose by 5% to £1,143 million despite the fall in the
average palladium price and the weaker US dollar. Sales excluding the value of
precious metals rose by 10% to £720 million. The division's operating profit
increased by 15% to £109.2 million benefiting from a full year's contribution
from the former Synetix businesses.
Environmental Catalysts and Technologies (ECT), which encompasses Johnson
Matthey's worldwide autocatalyst, heavy duty diesel (HDD) and stationary source
emission control businesses, achieved strong profit growth in Asia and good
growth in Europe, but profits declined in the US. Our autocatalyst business in
Asia benefited from strong growth in the Chinese market where sales of light
duty vehicles (cars and vans) rose by 37% in 2003. Car sales in Europe were
flat but demand for diesel cars continues to grow and now represents 46% of all
cars sold. Johnson Matthey has leading technology in diesel emission control
and we increased our share of this growing market. In North America our
domestic customers' share of the NAFTA market declined and inventories were
trimmed by lowering production, reducing demand for autocatalysts.
Sales of heavy duty diesel products were ahead of prior year in all three
regions with particularly strong sales in Japan in the first half of the year
supported by an incentive programme from the Tokyo Metropolitan Government.
Sales of HDD catalysts to original equipment manufacturers continued to grow in
the USA and we increased our investment in joint development programmes with the
major manufacturers worldwide, gaining several programmes that will enter
commercial production from 2005/06.
Process Catalysts and Technologies (PCT), which sells catalysts to the
chemicals, pharmaceutical, oil and gas and other markets, was well ahead
benefiting from the contribution from the former Synetix businesses. The
integration of those businesses into Johnson Matthey has progressed very well
and results are in line with our expectations at the time of the acquisition.
Sales and profits from process catalysts were well up on prior year, despite
weakness in some parts of the market. Platinum group metal (pgm) refining was
adversely affected by the weak palladium and rhodium prices and profits were
down. Research Chemicals, our catalogue business, continued to achieve good
growth.
Our Fuel Cells business made encouraging progress. Revenues showed significant
growth on prior year, reducing the net expense for the year to £11.5 million
(down 12%). Much of the growth this year has come from sales to the automotive
sector as more prototype fuel cell powered vehicles have been developed for
durability testing.
Precious Metals Division's sales grew by 3% to £2,956 million with a recovery in
the second half of the year reflecting strong demand and higher prices for
platinum. Operating profit for the year fell by 8% to £44.2 million, as a
result of subdued trading conditions for palladium and rhodium for most of the
year, and the impact of the renewed contracts with Anglo Platinum in the final
quarter.
Demand for platinum remained strong and the average price of the metal for
Johnson Matthey's financial year 2003/04 was $744 per ounce, an increase of 27%
over 2002/03. Purchases for use in autocatalysts increased robustly in response
to further growth in diesel car sales in Europe. In addition, North American
car companies stepped up their purchases of platinum having largely depleted
inventories of the metal the year before. However, platinum demand from the
Chinese jewellery market dropped after almost a decade of rapid growth, as the
rise in the platinum price reduced profit margins throughout the industry.
In contrast with platinum, the average price of palladium was $200 per ounce,
34% below the average in 2002/03, and trading conditions remained subdued for
most of the year. Physical demand for palladium began to recover from the fall
in the previous year, with purchases by the auto and electronics industries
increasing significantly. The surplus between supply and demand, however,
widened considerably as Russian sales of palladium recovered and South African
production was expanded.
The division's platinum fabrication businesses achieved further growth with good
demand for both medical components and industrial products. Operating profit
for the gold refining businesses was down on last year with the stronger gold
price having little immediate impact on mine output.
Colours & Coatings Division's sales were very similar to last year at £254
million. Operating profit rose by 6% to £26.7 million with an improvement in
margins.
The glass coatings business achieved good growth in sales and profits benefiting
from new product introductions and market share gains. The Structural Ceramics
sector, which sells largely to the tile industry, experienced weaker demand for
most of the year and profits were down, but demand picked up in the final
quarter and the outlook is now much stronger. Profits for Speciality Coatings
were well up on prior year, benefiting from the rationalisation programme
undertaken in 2002/03.
Pharmaceutical Materials Division's sales rose by 9% to £140 million despite the
impact of the weaker US dollar. The division's operating profit increased by
15% to £42.3 million.
The division's US business at West Deptford, NJ achieved strong growth in the
year, benefiting from an expanded range of platinum based anticancer compounds.
One new product has recently been launched and another is in phase three
clinical trials. The new opiate extraction facility was completed in the year
and is now operational. Macfarlan Smith also achieved excellent growth in
profits benefiting from increasing sales of high margin specialist opiates.
Additional capacity is being installed to meet future growth. Pharm-Eco
experienced the industry-wide drop in demand for contract research in the first
quarter of the year but was able to respond by gaining new business and its
performance in the second half of the year was much stronger.
Exceptional Items and Goodwill Amortisation
Exceptional items included in operating profit gave rise to a net credit of £2.1
million.
The group benefited by £14.8 million from the settlement of litigation with
Research Corporation and Research Corporation Technologies, Inc. relating to
royalties earned under a licence agreement with Bristol-Myers Squibb Company in
respect of carboplatin.
This exceptional credit was partly offset by a charge of £12.7 million for the
rationalisation of Catalysts Division. The rationalisation costs relate to the
reorganisation of PCT's pgm refining business and the final phasing out of ECT's
older autocatalyst process technology now that precision coating technology has
been fully installed across the group. This rationalisation is expected to
improve the division's profits by £8 million in 2005/06.
Goodwill amortisation increased by £6.1 million to £19.8 million, reflecting the
full year's ownership of the former Synetix businesses, which were acquired in
November 2002.
Finance
Interest
The group's net interest charge rose by £3.1 million to £16.3 million as a
result of the increase in average net borrowings following the acquisition of
Synetix. The average interest rate was lower than last year benefiting from
lower US dollar interest rates and reduced rates on gold leases.
The group has adopted FRS 17, the new accounting standard for pensions. Under
FRS 17 the net return on retirement benefits assets and liabilities fell by £7.9
million to £6.0 million. The drop reflected the fall in the value of the
pension fund surplus in 2002/03 as measured on 31st March 2003, when the world
equity markets were particularly depressed. Equity markets recovered somewhat
in 2003/04 and the group's UK pension fund surplus has increased. The net
return on retirement benefits assets and liabilities is likely to be roughly £3
million higher in 2004/05.
Exchange Rates
Over a third of the group's profits were made in North America, mainly in the
USA. The average rate for the US dollar weakened significantly, from $1.55/£ in
2002/03 to $1.69/£ in 2003/04, which reduced reported group profit before tax by
£6.7 million.
The group has significant operations in several euro-zone countries and in South
Africa whose currencies have strengthened against sterling. The group benefited
by £2.4 million from the translation of profits made in euros, of which £1.7
million related to Colours & Coatings, but the euro's strength also had a
negative impact on demand for that division's products. The overall impact of
the appreciation of the South African Rand was negative. The products the group
manufactures in South Africa are generally for export with pricing mainly
related to euros and US dollars, whereas costs are in rands, and margins were
adversely affected by currency movements.
Taxation
The group's tax charge increased by £4.2 million to £57.9 million. The increase
largely reflected higher profits. The group's average tax rate on profit before
tax, exceptional items and goodwill amortisation rose slightly from 29.7% to
29.8%.
Cash Flow
Johnson Matthey's net cash flow from operations increased by 13% to £259.7
million. Capital expenditure was £13.4 million lower than prior year at £113.1
million and represented 1.8 times depreciation. We are planning to spend at a
lower rate in 2004/05 although still maintaining investment to support future
growth opportunities. Free cash flow for the group (after dividends, but before
acquisitions and share purchases) was strong at £29.9 million.
The group spent £18.4 million on acquisitions (mainly AMC) and made a net
purchase of shares (for the employee share ownership trusts) which cost £8.5
million, leaving a net cash inflow of £3.0 million.
After taking into account favourable exchange translation of £6.1 million on the
group's foreign currency borrowings (mainly US dollars), and £1.1 million of
loan notes issued to acquire subsidiaries, net borrowings fell by £8.0 million
to £394.5 million. Johnson Matthey's balance sheet remains strong with
shareholders' funds rising by £74.9 million to £862.2 million and gearing (net
borrowings / shareholders' funds and minority interests) of 45%. The
comparative figures for last year have been restated for FRS 17 and UITF 38,
under which shares held in employee share ownership trusts are accounted for in
the same way as treasury shares. Restated for these new accounting standards,
last year's gearing was 50%.
Pensions
For the financial year 2003/04 the group has adopted FRS 17, and the figures for
2002/03 have been restated accordingly. The value of the assets in the group's
pension funds increased significantly in 2003/04, partly reflecting the recovery
in equity prices from their depressed levels at 31st March 2003. The surplus on
the group's UK scheme increased by £42.6 million to £43.3 million at 31st March
2004 after taking into account the results of the triennial actuarial
revaluation.
Worldwide, including provisions for the group's post-retirement healthcare
schemes and pension related deferred tax assets and liabilities, the group had a
net surplus of £3.5 million on retirement benefits net assets compared with a
net deficit of £25.4 million at 31st March 2003.
Business Developments
Johnson Matthey's Catalysts Division is performing well, and has leading
positions in market segments which will expand rapidly in the next few years.
These include catalysts for heavy duty diesel emission control, where
legislation is due to take full effect in 2007 in the USA and 2008 in Europe,
and catalysts for the gas to liquids process which uses a series of different
catalytic steps to convert stranded natural gas to sulphur free diesel fuel.
We are increasing our investment in R&D to support these opportunities, and are
also selectively looking at possible acquisitions to expand our range of
catalyst products. We are pleased to have concluded the acquisition of AMC in
March 2004, which strengthens our position in the pharmaceutical and speciality
chemicals catalyst markets.
As well as growing revenues we are also focusing on improving efficiency. In
these results we have taken a £12.7 million exceptional provision to improve
efficiency across the Catalysts Division. One element of this relates to
restructuring our pgm refining business, which has been adversely affected by
the downturn in the palladium market. In addition, we will be phasing out our
older autocatalyst manufacturing process technology now that precision coating
technology has been fully installed in all our worldwide autocatalyst
manufacturing plants. We expect this rationalisation programme to reduce costs
in the division by £8 million in 2005/06.
Diesel emission control continues to be a focus for environmentalists and
regulators worldwide and remains a key priority for us. The market for diesel
cars is mainly in Europe where we have increased our market share. Whilst
oxidation catalysts remain the key current product, there is growing interest in
the use of soot filter technology for particulate emission control and we have
been nominated for several important customer programmes.
Worldwide, Johnson Matthey's award winning Continuously Regenerating Trap (CRT
(R)) technology is the most widely used method of controlling particulate
emissions from heavy duty diesel vehicles already on the road. New regulations
in both Europe and the USA will drive the need for engine makers to fit catalyst
technologies to new HDD vehicles starting in 2005. In the last few years we
have increased the resource needed to support these customers and the benefits
of this strategy are now coming through in contracts for future business.
The acquisition of Synetix from ICI in 2002 has led to a major expansion of
PCT. The former Synetix businesses are now fully integrated and we are building
on the opportunities presented by merging Johnson Matthey's leading precious
metals catalysis technology with Synetix's leading base metals catalyst
technology. One example of this is the opening in May 2004 of a new precious
metals catalyst manufacturing facility at Taloja in India. The acquisition of
ICI India's catalyst business provided Johnson Matthey with a strong presence
in base metal catalysts in the region, to which we have now been able to add
precious metals catalyst manufacturing.
The acquisition of AMC for $43 million in March 2004 was another important step
in strengthening our position in the worldwide catalyst market. AMC is based in
Tennessee, USA and is the global market leader in Sponge NickelTM catalysts.
These nickel catalysts are extensively used in hydrogenation and reductive
alkylation reactions throughout the pharmaceutical industry as well as in a wide
range of other chemical processes. They are often the first catalyst to be
evaluated when designing a new process and the acquisition widens our catalyst
product offering to this important market.
The Fuel Cells business continues to make encouraging progress both in the scale
up of membrane electrode assembly (MEA) manufacturing at its facility in
Swindon, UK and in collaborative programmes with key customers and suppliers.
Johnson Matthey Fuel Cells has been awarded £3.2 million in funding by the
Department of Trade and Industry as part of the Government's commitment to the
development of renewable energy and to the building of a world class fuel cell
industry in the United Kingdom. This grant has been given for a major three
year programme to develop the next generation of MEAs for automotive
applications and will see the Fuel Cells business working in collaboration with
a number of key suppliers as well as leading global automobile manufacturers.
We announced in November 2003 that we had renewed our long term contracts with
Anglo Platinum which extends the relationship well into the next decade. The
revised terms of these renewed contracts came into effect on 1st January 2004
and resulted in a reduction in Precious Metals Division's income in the final
quarter of roughly £1.5 million. As demand for platinum grows this shortfall
will be more than offset by increased volumes, and the renewed contracts with
Anglo Platinum firmly underpin the longer term growth of the division.
The fundamentals for platinum remain very robust. Demand will continue to be
driven by its use in autocatalysts, particularly as diesels continue to take a
growing share of the light duty vehicle market in Europe and as heavy duty
diesel legislation begins to take effect around the world. While jewellery
demand has been impacted by the high price of platinum, it remains remarkably
resilient and we are seeing signs of improved demand from the manufacturers.
The platinum producers are increasing their output to meet this growing demand
and move the market closer to equilibrium.
Palladium demand is also expected to increase, benefiting from growth in
consumption by the auto manufacturers. However, supplies are expected to rise
substantially as South African producers expand their output and the palladium
market is expected to continue to remain in surplus.
As we also announced in November, the Board has reviewed the group's strategy
for the Structural Ceramics and Speciality Coatings businesses which form the
majority of Colours & Coatings Division. A process is now underway to consider
offers for those two businesses. We expect to make a further announcement in
the next few months.
Pharmaceutical Materials Division enjoyed another very successful year. At West
Deptford in the USA we have expanded the product range with two new platinum
anticancer products performing well in 2003/04. The patent for carboplatin
which we manufacture for Bristol-Myers Squibb will expire this year and we
anticipate the contribution from this product will fall. However, we expect to
see an increased contribution from other products, including semi-synthetic
opiates where we will benefit from the new morphine and codeine extraction
facility at West Deptford. Our Edinburgh based business, Macfarlan Smith, has
achieved excellent growth over the last three years and we are continuing to
invest in new capacity there to meet anticipated future growth. We have
completed a new facility to produce a range of specialist products (mainly
highly potent analgesics) which we expect to make a useful contribution this
year. At Pharm-Eco we have commissioned the new small scale manufacturing
suites at Devens in Massachusetts, USA which are being used to manufacture
products for clinical trials.
Outlook
In 2004/05 we expect to see further growth in Catalysts and Pharmaceutical
Materials. However, exchange translation may be adverse if the US dollar
remains at its current level.
In the next few years we should start to see significant benefits from Johnson
Matthey's investment in new product areas, including heavy duty diesel catalysts
which represents a major opportunity once legislation comes into force in 2007
and 2008. In Pharmaceutical Materials we have a strong worldwide position in
the manufacture of controlled drugs and complex molecules, such as
prostaglandins, where the generic market should see significant growth.
Excellent progress is also being made in other long term growth markets, such as
gas to liquids catalysts and fuel cells, where revenues are expected to grow in
the years ahead.
Overall, supported by a strong balance sheet, the group is very well positioned
to deliver good long term growth.
Consolidated Profit and Loss Account
for the year ended 31st March 2004
2004 2004 2004 2003 2003
Before Before
exceptional Exceptional exceptional
items and items and items and
goodwill goodwill goodwill
amortisation amortisation Total amortisation Total
restated restated
Notes £ million £ million £ million £ million £ million
Turnover 1 4,492.9 - 4,492.9 4,323.9 4,323.9
Operating profit 1
Before goodwill amortisation 205.3 - 205.3 188.7 188.7
Goodwill amortisation - (19.7) (19.7) - (13.7)
Before exceptional items 205.3 (19.7) 185.6 188.7 175.0
Exceptional items 3 - 2.1 2.1 - (7.4)
Group operating profit 205.3 (17.6) 187.7 188.7 167.6
Share of profit in associates 0.7 - 0.7 0.5 0.5
Goodwill amortisation on associates - (0.1) (0.1) - -
Share of exceptional items in associates 3 - - - - (0.2)
Total operating profit 206.0 (17.7) 188.3 189.2 167.9
Profit on sale of continuing operations - - - - 4.9
Profit on ordinary activities before 206.0 (17.7) 188.3 189.2 172.8
interest
Net interest (16.3) - (16.3) (13.2) (13.2)
Net return on retirement benefits assets 6.0 - 6.0 13.9 13.9
and liabilities
Profit on ordinary activities before 195.7 (17.7) 178.0 189.9 173.5
taxation
Taxation 4 (58.3) 0.4 (57.9) (56.4) (53.7)
Profit after taxation 137.4 (17.3) 120.1 133.5 119.8
Minority interests 1.7 - 1.7 0.4 0.4
Profit attributable to shareholders 139.1 (17.3) 121.8 133.9 120.2
Dividends 5 (57.4) - (57.4) (55.5) (55.5)
Retained profit for the year 81.7 (17.3) 64.4 78.4 64.7
restated restated
pence pence pence pence
Earnings per ordinary share
Basic 6 64.0 56.0 61.8 55.4
Diluted 6 63.7 55.8 61.4 55.1
Dividend per ordinary share 5 26.4 26.4 25.5 25.5
Consolidated Balance Sheet
as at 31st March 2004
2004 2003
restated
£ million £ million
Fixed assets
Goodwill 377.1 373.4
Tangible fixed assets 608.1 601.1
Investments 5.5 6.4
990.7 980.9
Current assets
Stocks 417.3 438.4
Debtors 387.4 365.7
Short term investments 1.6 1.5
Cash at bank and in hand 106.5 100.4
912.8 906.0
Creditors: amounts falling due within one year
Borrowings and finance leases (46.5) (46.5)
Precious metal leases (127.4) (128.0)
Other creditors (358.9) (382.6)
Net current assets 380.0 348.9
Total assets less current liabilities 1,370.7 1,329.8
Creditors: amounts falling due after more than one year
Borrowings and finance leases (454.5) (456.4)
Other creditors (0.7) (0.6)
Provisions for liabilities and charges (47.4) (49.3)
Net assets excluding retirement benefits assets and liabilities 868.1 823.5
Retirement benefits net assets 31.5 1.5
Retirement benefits net liabilities (28.0) (26.9)
Net assets including retirement benefits assets and liabilities 871.6 798.1
Capital and reserves
Called up share capital 220.6 219.5
Share premium account 137.1 131.8
Capital redemption reserve 4.9 4.9
Shares held in employee share ownership trusts (28.8) (14.8)
Associates' reserves (0.5) 0.1
Profit and loss account 528.9 445.8
Shareholders' funds 862.2 787.3
Minority interests 9.4 10.8
871.6 798.1
Consolidated Cash Flow Statement
for the year ended 31st March 2004
2004 2003
restated
£ million £ million
Reconciliation of operating profit to
net cash inflow from operating activities
Operating profit 187.7 167.6
Depreciation, amortisation and net loss on disposal of fixed assets and investments 83.5 68.6
Net retirement benefit charge less contributions 1.0 (6.7)
Decrease / (increase) in owned stocks 17.3 (7.7)
(Increase) / decrease in debtors (41.7) 13.9
Increase / (decrease) in creditors and provisions 11.9 (5.8)
Net cash inflow from operating activities 259.7 229.9
Cash Flow Statement
Net cash inflow from operating activities 259.7 229.9
Dividends received from associates 0.5 0.1
Returns on investments and servicing of finance (16.4) (13.4)
Taxation (43.1) (42.4)
Capital expenditure and financial investment (114.4) (124.7)
Acquisitions (18.4) (271.2)
Disposals - 22.4
Equity dividends paid (56.4) (54.0)
Net cash flow before use of liquid resources and financing 11.5 (253.3)
Management of liquid resources 1.1 1.0
Financing
Issue and purchase of share capital (8.5) 2.8
Increase in borrowings and finance leases 6.3 259.7
Net cash (outflow) / inflow from financing (2.2) 262.5
Increase in cash in the period 10.4 10.2
Reconciliation of net cash flow to movement in net debt
Increase in cash in the period 10.4 10.2
Cash inflow from movement in borrowings and finance leases (6.3) (259.7)
Cash inflow from movement in liquid resources (1.1) (1.0)
Change in net debt resulting from cash flows 3.0 (250.5)
Borrowings acquired with subsidiaries - (0.4)
Loan notes (issued) / cancelled to acquire subsidiaries (1.1) (6.8)
Translation difference 6.1 14.2
Movement in net debt in year 8.0 (243.5)
Net debt at beginning of year (402.5) (159.0)
Net debt at end of year (394.5) (402.5)
Total Recognised Gains and Losses
for the year ended 31st March 2004
2004 2003
restated
£ million £ million
Profit attributable to shareholders 121.8 120.2
Currency translation differences on foreign currency net investments and related (23.8) (1.7)
loans
Taxation on translation differences on foreign currency loans 16.8 8.3
Actuarial gain / (loss) on retirement benefits assets and liabilities 36.1 (136.6)
Taxation on actuarial gain / loss on retirement benefits assets and liabilities (11.0) 42.8
Total recognised gains and losses relating to the year 139.9 33.0
Prior year adjustment (108.3)
Total recognised gains and losses recognised since last annual report 31.6
There were no material differences between reported profits and losses and historical cost profits and losses on
ordinary activities before tax for 2004 and 2003.
Movement in Shareholders' Funds
for the year ended 31st March 2004
2004 2003
restated
£ million £ million
Profit attributable to shareholders 121.8 120.2
Dividends (57.4) (55.5)
Retained profit for the year 64.4 64.7
Other recognised gains and losses relating to the year 18.1 (87.2)
New share capital subscribed 6.4 4.4
Purchase of shares for employee share ownership trusts (ESOTs) (14.9) (1.6)
Shares in ESOTs utilised for long term incentive plan 0.9 1.6
Movement in long term incentive plan - (2.3)
Goodwill written back on set up of AGR Matthey - 5.4
Net movement in shareholders' funds 74.9 (15.0)
Opening shareholders' funds (originally £895.6 million before prior year adjustment of £108.3 787.3 802.3
million)
Closing shareholders' funds 862.2 787.3
Notes to the Preliminary Financial Statements
for the year ended 31st March 2004
1 Segmental information
Turnover Sales excluding precious Operating Net operating
metals profit assets
2004 2003 2004 2003 2004 2003 2004 2003
restated restated
Activity analysis £ million £ million £ million £ million £ million £ million £ million £ million
Catalysts 1,142.7 1,083.4 720.3 652.5 109.2 95.3 819.7 747.2
Precious Metals 2,956.4 2,857.1 120.6 132.0 44.2 48.0 19.0 48.4
Colours & Coatings 254.1 255.7 252.0 252.5 26.7 25.3 204.7 210.3
Pharmaceutical Materials 139.7 127.7 131.5 121.9 42.3 36.7 281.4 281.3
Corporate - - - - (16.4) (16.1) (62.2) (61.2)
4,492.9 4,323.9 1,224.4 1,158.9 206.0 189.2 1,262.6 1,226.0
Goodwill amortisation (19.7) (13.7)
Goodwill amortisation on (0.1) -
associates
Exceptional items included in operating profit 2.1 (7.6)
(note 3)
188.3 167.9 1,262.6 1,226.0
Profit on sale of continuing - 4.9
operations
Net interest (16.3) (13.2)
Net return on retirement benefits assets and 6.0 13.9
liabilities
Profit on ordinary activities before taxation 178.0 173.5
Net borrowings and finance leases (394.5) (402.5)
Net assets excluding retirement benefits assets and 868.1 823.5
liabilities
Retirement benefits net assets / 3.5 (25.4)
(liabilities)
Net assets including retirement benefits assets and 871.6 798.1
liabilities
Turnover Operating Net operating
profit assets
2004 2003 2004 2003 2004 2003
restated restated
Geographical analysis by origin £ million £ million £ million £ million £ million £million
Europe 3,235.1 2,964.7 81.0 59.3 916.6 871.9
North America 965.7 1,082.2 72.3 87.3 229.4 234.4
Asia 838.1 844.7 19.3 12.4 55.4 74.6
Rest of the World 277.6 234.2 33.4 30.2 61.2 45.1
5,316.5 5,125.8 206.0 189.2 1,262.6 1,226.0
Less inter-segment sales (823.6) (801.9)
Total turnover 4,492.9 4,323.9
Goodwill amortisation (19.7) (13.7)
Goodwill amortisation on (0.1) -
associates
Exceptional items included in operating profit 2.1 (7.6)
(note 3)
188.3 167.9 1,262.6 1,226.0
Profit on sale of continuing - 4.9
operations
Net interest (16.3) (13.2)
Net return on retirement benefits assets and 6.0 13.9
liabilities
Profit on ordinary activities before taxation 178.0 173.5
Net borrowings and finance leases (394.5) (402.5)
Net assets excluding retirement benefits assets and 868.1 823.5
liabilities
Retirement benefits net assets / 3.5 (25.4)
(liabilities)
Net assets including retirement benefits assets and 871.6 798.1
liabilities
Notes to the Preliminary Financial Statements
for the year ended 31st March 2004
2 Prior year adjustments
Financial Reporting Standard (FRS) 17 - 'Retirement benefits'
Under the provisions of FRS 17 - 'Retirement Benefits', which the group adopted on 1st April 2003, the
group has restated its accounts to reflect the revised recognition of its retirement benefits schemes and the
resultant changes to deferred tax and amounts recognised in the profit and loss account and statement of total
recognised gains and losses. Consequently, the group has restated its comparatives for the year ended 31st March 2003.
The effect is to decrease the profit after taxation by £1.8 million for the year ended 31st March 2003. The group's net
assets at 31st March 2003 have decreased by £95.7 million.
Urgent Issues Task Force (UITF) Abstract 38 - 'Accounting for ESOP Trusts'
Under the provisions of UITF Abstract 38 - 'Accounting for ESOP Trusts', which the group adopted on 1st April 2003,
the group has restated its accounts to recognise amounts related to the group's employee share ownership trusts
and long term incentive plan as a component of shareholders' funds. The effect is to decrease short term
investments by £13.8 million and to decrease other creditors falling due within one year by £1.2 million, resulting in
net assets decreasing by £12.6 million at 31st March 2003. There is no effect on the profit and loss account.
3 Exceptional items included in operating profit
An exceptional credit of £2.1 million (2003 charge of £7.6 million) has been included in operating profit. This
comprises:
2004 2003
£ million £ million
Litigation settlement (Pharmaceutical Materials) 14.8 -
Cost of integrating Synetix - (6.5)
Other Catalysts' rationalisation costs (12.7) (4.8)
Profit on sale of unhedged palladium - 5.1
Cost of rationalising Australian operations following the set up of AGR Matthey - (1.2)
Exceptional items in group operating profit 2.1 (7.4)
Share of exceptional items in associates - AGR Matthey - (0.2)
Exceptional items in total operating profit 2.1 (7.6)
4 Taxation
2004 2003
restated
£ million £ million
United Kingdom 27.4 22.6
Overseas 30.8 33.8
Associates 0.1 -
Tax on ordinary activities before exceptional items and goodwill amortisation 58.3 56.4
Tax on goodwill amortisation (2.0) (0.7)
Tax on exceptional items included in total operating profit 1.6 (2.0)
57.9 53.7
5 Dividends
A final dividend of 18.2 pence (2003 17.7 pence) per ordinary share is proposed for payment on 3rd August
2004 to shareholders on the register at 11th June 2004. Together with the interim dividend of 8.2 pence (2003 7.8 pence)
this would make a total dividend of 26.4 pence (2003 25.5 pence) giving a total payment of £57.4 million (2003 £55.5
million).
Notes to the Preliminary Financial Statements
for the year ended 31st March 2004
6 Earnings per ordinary share
Profit for the year attributable to shareholders is £121.8 million (2003 restated £120.2 million). This is
divided by the weighted average number of shares in issue calculated as 217,629,033 (2003 216,938,883) to give basic
earnings per share of 56.0 pence (2003 restated 55.4 pence).
The calculation of diluted earnings per share is based on the weighted average number of shares in issue adjusted by the
dilutive outstanding share options and long term incentive plan. These adjustments give rise to an increase in the
weighted average number of shares in issue of 778,267 (2003 1,279,946), giving diluted earnings per share of 55.8 pence
(2003 restated 55.1 pence).
Before exceptional items, goodwill amortisation and the tax thereon, basic earnings per share were 64.0 pence
(2003 restated 61.8 pence) and diluted earnings per share were 63.7 pence (2003 restated 61.4 pence).
2004 2003
restated
£ million £ million
Attributable profit 121.8 120.2
Goodwill amortisation 19.8 13.7
Exceptional items (2.1) 2.7
Tax thereon (0.4) (2.7)
Adjusted profit 139.1 133.9
Earnings per share before exceptional items and goodwill amortisation
Basic 64.0p 61.8p
Diluted 63.7p 61.4p
7 Acquisitions
Activated Metals and Chemicals, Inc.
On 30th March 2004 the group acquired the Activated Metals and Chemicals, Inc. group of companies (AMC),
located in Tennessee in the US, for £23.2 million, of which £0.4 million is outstanding and £0.1 million is deferred and
contingent on future profits of one part of AMC. Costs incurred were £0.3 million, including £0.1 million accrued. AMC
provides catalysts for pharmaceutical, chemical and industrial applications. This has been accounted for by acquisition
accounting. The fair value of the net assets acquired was £4.1 million, resulting in goodwill of
£19.4 million.
Synetix acquired in the year ended 31st March 2003
On 1st November 2002 the group acquired the Synetix division of ICI and the estimated goodwill disclosed in
the accounts for the year ended 31st March 2003 was £191.4 million. This has been restated to £195.7 million
following the adoption of FRS 17. During the year a refund of £1.9 million was received and costs of £0.3 million
accrued last year were paid. Goodwill has now been revised by £10.3 million to £206.0 million to reflect further fair
value adjustments mainly to the estimated realisable value of debtors and tangible fixed assets.
8 Basis of preparation
The financial information contained in this release does not constitute the company's statutory accounts for the years
ended 31st March 2004 or 2003 but is derived from those accounts. Statutory accounts for 2003 have been delivered to the
Registrar of Companies and those for 2004 will be delivered following the company's Annual General Meeting. The
auditors' reports on those accounts were unqualified and did not contain any statement under sections 237(2) and 237(3)
of the Companies Act 1985. The accounts for the year ended 31st March 2004 were approved by the Board of Directors on
1st June 2004.
Financial Calendar 2004
11th June
Final ordinary dividend record date
20th July
113th Annual General Meeting (AGM)
3rd August
Payment of final dividend subject to declaration at the AGM
25th November
Announcement of results for six months ending 30th September 2004
Johnson Matthey Public Limited Company
Registered Office: 2-4 Cockspur Street, Trafalgar Square, London SW1Y 5BQ
Telephone: 020 7269 8400
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 33774
Registrars
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA
Telephone: 0870 600 3970
Internet address: www.shareview.co.uk
This information is provided by RNS
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