Interim Results - 6 Months to 30 September 1999

Johnson Matthey PLC 2 December 1999 Interim Results for the half year ended 30th September 1999 Strong performance from core businesses in first half. Prospects are encouraging. Results * Strong operating performance with profits from continuing businesses up 17% to £66.7 million on sales 10% up * Electronic Materials sold for US$655 million in cash giving an exceptional profit of £28.5 million after goodwill write back * Profit before tax excluding exceptional items unchanged from last year at £61.6 million (including exceptionals £90.0 million) * Interim dividend increased by 7% to 6.1p * Net cash at 30th September £172.6 million. Shareholders' funds up £170.9 million to £723.7 million Strategy * First stage of strategy announced last November successfully completed with the sale of Electronic Materials * All the group's continuing businesses are delivering good organic growth * Rationalisation programme announced for Colours & Coatings will add £4 million to profits in the next financial year and £7 million per year thereafter * Cash released from the sale of Electronic Materials will enable the group to undertake earnings enhancing acquisitions or return capital to shareholders Commenting on the results, Chris Clark, Chief Executive of Johnson Matthey, said: 'We have continued to make good progress in our strategy announced last November to change the focus of the group's activities. Electronic Materials Division has been sold for a good price. All the core businesses performed strongly in the first half of the year and prospects are encouraging.' Enquiries: Chris Clark, Chief Executive, Johnson Matthey 020 7269 8435 John Sheldrick, Group Finance Director, Johnson Matthey 020 7269 8438 Howard Lee, Gavin Anderson & Co 020 7457 2345 Report to Shareholders Introduction Johnson Matthey had a good first half to 1999/00 with all of the continuing divisions performing well. The sale of Electronic Materials Division (EMD) to AlliedSignal Inc. was completed in August of this year. In line with our strategy announced at last year's interim results, Johnson Matthey now has three operating divisions that are focused on our core strengths in catalysts and chemicals, precious metals and colours and coatings. Review of Results In the six months to 30th September 1999, operating profit from continuing operations rose 17% to £66.7 million on sales that were 10% up at £1,696.0 million. EMD made a £0.1 million contribution to profits compared with £12.7 million in the first half of last year. Despite the shortfall in EMD, Johnson Matthey earned profits before tax and exceptional items of £61.6 million, the same as the first half of 1998/99. Sales including discontinued operations rose by 1% to £1,787.6 million. Earnings per share before exceptional items were slightly up on prior year at 20.5 pence. Including exceptional items, earnings per share were 12% up at 29.0 pence reflecting the gain on the sale of EMD. The interim dividend has been increased by 7% to 6.1 pence. Operations Catalysts & Chemicals Division increased its sales by 14% over the first half of last year to £376.6 million. Operating profits were up 12% at £39.3 million. The Autocatalyst business had a good first half benefiting from strong vehicle markets; also tighter emission standards boosted sales of high performance products and the continuing trend to more catalysts per car was helpful to unit volumes. On 23rd August 1999 we announced that we had agreed with General Motors Corporation to settle a long-standing commercial dispute. As part of the settlement agreement we have entered into collaboration with General Motors on a significant research and development project on fuel cells for transportation applications. We have significantly increased our research and development effort in the fuel cell arena. In addition to the General Motors collaboration, we have entered into key customer programmes over the last year or so with dbb Fuel Cell Engines, VW, Siemens, Ballard, IFC, Plug Power and Energy Partners. These will place Johnson Matthey in a uniquely strong position in the mobile and residential fuel cell markets, which are set to grow rapidly in the next decade. The Chemicals business had a good first half benefiting from strong demand for platinum group metals refining and good sales of process catalysts. Encouraging progress was made in sales of new homogeneous catalysts where we are investing in new development and production facilities and in which we have a strong market position. As anticipated, profits in Pharmaceutical Materials were flat as a result of increased competition in methylphenidate as new generic suppliers entered the market. This was offset by strong sales of other organic pharmaceuticals including a new product that is in late stage clinical trials. Sales of platinum anticancer drugs were also strong with good demand for carboplatin. Precious Metals Division's sales were 10% ahead of the first half of last year at £1,198.0 million. Operating profits were up 22% at £20.2 million. Our Platinum businesses enjoyed strong market conditions. Demand for platinum manufactured products was buoyant in North America and Europe. Jewellery alloy markets were particularly strong, stimulated by worldwide fashion trends towards white metal. Palladium sales were boosted by the continuing surge in new catalyst applications particularly in the automotive sector. Strong demand fundamentals were not matched by mine output and, as a result, prices trended upwards in the period. Profits from our Gold and Silver operations were flat on the first half of last year. Volumes of refining from both primary and secondary sources were satisfactory in dull markets with gold prices continuing under pressure. Colours & Coatings Division's operating profits were 17% up on last year at £13.0 million. The division has continued to maintain a sharp focus on costs and margins have continued to improve in all of its businesses. Sales were 5% down on the first half of last year at £121.4 million. This was due to a combination of adverse exchange translation and lower zircon sand prices. The division is, however, beginning to see underlying growth in sales notably in its Glass and Tile businesses. The Structural Ceramics segment had a good first half led by a strong performance from its Tile operations in Southern Europe and Asia. The Glass business also performed well assisted by strong demand for automotive glass in both Europe and North America. Pigments produced encouraging results with good performances from inorganic pigments for woodstains, paints and plastics. However results from its organic pigments businesses were disappointing. The Tableware business continued to experience difficult conditions in the UK market but close attention to costs enabled it to increase profits in the first half. The Board has approved a rationalisation programme to streamline production by closing one site, reducing administration costs and cutting headcount by more than 200. The cost of this programme is approximately £10 million, which will be accounted for as an exceptional charge in the second half of this financial year. It will give rise to a saving of around £4 million in the next financial year and £7 million in following years. The group has also taken the decision to exit from the production of organic pigments. This will mean the sale or closure of the division's organic pigment businesses in Venezuela and the USA. These businesses made an operating loss of £0.6 million in the first half of the current financial year. It is likely that these disposals will result in an exceptional loss of around £6 million. Finance The sale of the group's Electronic Materials Division to AlliedSignal Inc. of the United States for $655 million in cash was completed on 17th August 1999. Some peripheral assets, mainly property, amounting to £13.7 million were retained. The sale generated a net gain of £152.2 million compared with book value. After writing back £123.7 million of goodwill it gave rise to an exceptional profit of £28.5 million in the results for the half year. Cash Flow and Balance Sheet The group had a net cash inflow of £394.2 million in the six months to 30th September 1999 with the major item being the proceeds of sale of EMD. Despite the disposal of EMD part way through the period, the cash inflow from operating activities was higher than last year at £74.0 million. At 30th September 1999 Johnson Matthey had net cash of £172.6 million. Shareholders' funds rose by £170.9 million to £723.7 million. Following the introduction of a new accounting standard for fixed assets (FRS 15) the group has restated its property assets to historic cost, eliminating the revaluation reserve of £9.0 million previously included in shareholders' funds. Interest and Exchange Rates The interest charge fell by £3.2 million in 1999 largely as a result of the interest earned on the sale proceeds of EMD. The group also benefited from slightly more favourable interest rates compared with the first half of last year. Exchange rates had a mixed impact on the group's results. The strength of sterling against the euro and other foreign currencies had an adverse impact on the group's businesses that export from the UK, particularly in Colours & Coatings. However the US dollar was also stronger which benefited the translation of our US subsidiaries' earnings. Overall, exchange translation improved profits in the first half by £0.4 million compared with last year. Taxation The group's average tax charge, excluding exceptional items, was similar to last year at 28.1%. Tax payable in the UK rose compared with the first half of last year as a result of the change in the rules for Advance Corporation Tax. Tax payable fell in the US following the disposal of EMD. Strategy Johnson Matthey has made considerable progress on the strategy announced in November 1998 to change the focus of the group's activities. EMD was established as a stand alone entity and sold for a good price. Our core businesses achieved 17% growth in profits in the six months to 30th September 1999, following 20% growth in the previous financial year. The prospects for future growth remain encouraging across the group. In Catalysts & Chemicals new investment is planned for expanding capacity in autocatalyst production in the USA, Europe and India. The expansion of our Pharmaceutical Materials manufacturing facility in the USA is underway with $10 million planned to be spent in the second half of this financial year. New investment on the development and production of homogeneous catalysts is also planned for the second half of the year. As previously outlined, we are increasing our investment in fuel cell technology and are pleased with our impressive list of partners in this field. Fuel cells provide the prospect for Johnson Matthey to grow a brand new, complementary and significant business in the medium term. Our Colours & Coatings Division has made excellent progress since we acquired full ownership in February 1998. Return on sales has risen to 11 % and the Structural Ceramics and Glass businesses are achieving good growth. We are planning further investment in production capacity in Spain to meet continuing rapid growth in demand from the tile manufacturers. As detailed earlier, we are rationalising our Tableware operations in the UK in response to a contracting market. The group is also looking at the opportunity to grow its core businesses by strategic acquisitions, and is actively pursuing a number of opportunities. Johnson Matthey already has sufficient cash and borrowing capacity to fund these opportunities out of existing resources. Depending on the outcome of these initiatives the group will also consider returning surplus capital to shareholders. Outlook Prospects for the second half are encouraging and in line with our expectations. We have made significant progress in the development of our businesses. We are investing in capacity expansion across our core activities and are actively pursuing a number of opportunities to add further to the scale of the group. Johnson Matthey Consolidated Profit and Loss Account for the six months ended 30th September 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated NOTE £ million £ million £ million Turnover 2 Continuing operations 1,696.0 1,545.5 2,969.0 Discontinued operations 91.6 217.3 416.4 ------- ------- ------- Group turnover 1,787.6 1,762.8 3,385.4 ------- ------- ------- Operating profit 3 Continuing operations before exceptional items 66.6 56.6 124.4 Exceptional items - - (1.9) Goodwill amortisation (0.1) - - ------- ------- ------- Total continuing operations 66.5 56.6 122.5 Discontinued operations 0.1 13.0 22.4 ------- ------- ------- Group operating profit 66.6 69.6 144.9 Share of profit in associates 0.1 0.4 0.3 ------- ------- ------- Total operating profit 66.7 70.0 145.2 Profit on sale - continuing operations Profit on disposal of surplus properties - 6.4 7.2 Profit on sale - discontinued operations Sale of Electronic Materials 9 28.5 - - Sale of UK Minerals - 1.6 1.6 ------- ------- ------- Profit on ordinary activities before interest 95.2 78.0 154.0 Net interest (5.2) (8.4) (15.9) ------- ------- ------- Profit on ordinary activities before taxation 90.0 69.6 138.1 Taxation 4 (27.2) (13.6) (31.9) ------- ------- ------- Profit after taxation 62.8 56.0 106.2 Equity minority interests 0.2 0.3 0.7 ------- ------- ------- Profit attributable to shareholders 63.0 56.3 106.9 Dividends 5 (13.2) (12.4) (41.3) ------- ------- ------- Retained profit 49.8 43.9 65.6 ------- ------- ------- pence pence pence Earnings per ordinary share 6 29.0 25.9 49.3 Diluted earnings per ordinary share 6 29.0 25.9 49.3 Earnings per ordinary share excluding exceptional items 6 20.5 20.4 44.3 Dividend per ordinary share 5 6.1 5.7 19.0 Consolidated Balance Sheet as at 30th September 1999 30.9.99 31.3.99 restated £ million £ million Fixed assets Goodwill 4.3 4.2 Tangible fixed assets 292.2 480.2 Investments 0.9 1.8 ------- ------- 297.4 486.2 ------- ------- Current assets Stocks 252.1 243.7 Debtors: due within one year 300.3 336.4 Debtors: due after one year 96.2 94.0 Short term investments 15.2 9.2 Cash at bank and in hand 273.1 58.6 ------- ------- 936.9 741.9 Creditors: Amounts falling due within one year Borrowings and finance leases (32.6) (165.6) Precious metal leases (60.4) (24.7) Other creditors (291.5) (289.2) ------- ------- Net current assets 552.4 262.4 ------- ------- Total assets less current liabilities 849.8 748.6 Creditors: Amounts falling due after more than one year Borrowings and finance leases (67.9) (114.6) Other creditors (0.5) (1.1) Provisions for liabilities and charges (52.9) (74.3) ------- ------- Net assets 728.5 558.6 ------- ------- Capital and reserves Called up share capital 219.0 218.5 Share premium account 107.4 103.9 Associates' reserves - 0.1 Profit and loss account 397.3 230.3 ------- ------- Shareholders' funds 723.7 552.8 Equity minority interests 4.8 5.8 ------- ------- 728.5 558.6 ------- ------- Consolidated Cash Flow Statement for the six months ended 30th September 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 £ million £ million £ million Reconciliation of operating profit to net cash inflow from operating activities Operating profit 66.6 69.6 144.9 Depreciation and amortisation charges 26.9 30.9 64.3 Loss / (profit) on sale of tangible fixed assets and investments 0.1 0.2 (0.4) (Increase) / decrease in owned stocks (25.6) 3.2 4.8 Increase in debtors (28.7) (18.2) (23.9) Increase / (decrease) in creditors and provisions 34.7 (12.6) (13.7) ------- ------- ------- Net cash inflow from operating activities 74.0 73.1 176.0 ------- ------- ------- Cash Flow Statement Net cash inflow from operating activities 74.0 73.1 176.0 Dividends received from associates - - 0.1 Returns on investments and servicing of finance (5.5) (8.6) (16.5) Taxation (16.0) (12.4) (32.4) Capital expenditure and financial investment (35.0) (19.8) (61.4) Acquisitions (2.8) (0.3) (8.7) Disposals 396.8 3.3 4.4 Equity dividends paid (28.9) (27.6) (39.8) ------- ------- ------- Net cash flow before use of liquid resources and financing 382.6 7.7 21.7 Management of liquid resources (221.1) 3.1 4.9 Financing Issue and purchase of share capital (2.0) (2.1) (1.6) Decrease in borrowings and finance leases due within one year (128.6) (13.6) (9.4) (Decrease) / increase in borrowings and finance leases due after one year (37.1) 1.6 (13.0) ------- ------- ------- Net cash outflow from financing (167.7) (14.1) (24.0) ------- ------- ------- (Decrease) / increase in cash in the period (6.2) (3.3) 2.6 ------- ------- ------- Reconciliation of net cash flow to movement in net debt (Decrease) / increase in cash in the period (6.2) (3.3) 2.6 Cash outflow from movement in borrowings and finance leases 165.7 12.0 22.4 Cash outflow / (inflow) from term deposits included in liquid resources 221.1 (3.1) (4.9) ------- ------- ------- Change in net debt resulting from cash flows 380.6 5.6 20.1 Borrowings disposed of with subsidiaries 7.3 - - Translation difference 6.3 4.8 (16.6) ------- ------- ------- Movement in net debt in the period 394.2 10.4 3.5 Net debt at the beginning of the period (221.6) (225.1) (225.1) ------- ------- ------- Net funds / (debt) at the end of the period 172.6 (214.7) (221.6) ------- ------- ------- Total Recognised Gains and Losses for the six months ended 30th September 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated £ million £ million £ million Profit attributable to shareholders 63.0 56.3 106.9 Currency translation differences on foreign currency net investments (6.6) (2.4) 6.8 ------- ------- ------- Total recognised gains and losses relating to the period 56.4 53.9 113.7 ------- ------- Prior year adjustment 6.9 Currency translation differences on prior year adjustment (0.2) ------- Total gains and losses recognised since last annual report 63.1 ------- Movement in Shareholders' Funds for the six months ended 30th September 1999 Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated £ million £ million £ million Profit attributable to shareholders 63.0 56.3 106.9 Dividends (13.2) (12.4) (41.3) ------- ------- ------- Retained profit 49.8 43.9 65.6 Other recognised gains and losses relating to the period (6.6) (2.4) 6.8 New share capital subscribed 4.3 1.6 2.8 Preference shares cancelled (0.3) - - Goodwill written back on disposals 123.7 - - ------- ------- ------- Net addition to shareholders' funds 170.9 43.1 75.2 Opening shareholders' funds (originally £561.8 million before deducting prior year adjustment of £9.0 million) 552.8 477.6 477.6 ------- ------- ------- Closing shareholders' funds 723.7 520.7 552.8 ------- ------- ------- Notes on the Accounts for the six months ended 30th September 1999 1 Basis of preparation The interim accounts were approved by the Board of Directors on 30th November 1999, and are unaudited but have been reviewed by the auditor. They do not constitute statutory accounts, but have been prepared on the basis of the accounting policies set out in the annual report for the year ended 31st March 1999 with the exception of the implementation of Financial Reporting Standard (FRS) 15 - 'Tangible Fixed Assets' as described in note 7. Also, the group sold its Electronic Materials Division during the period, and its results are reported as discontinued operations. Information in respect of the year ended 31st March 1999 is derived from the company's statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statement under section 237(2) and 237(3) of the Companies Act 1985. 2 Total turnover Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated Activity analysis £ million £ million £ million Catalysts & Chemicals 376.6 331.2 677.2 Precious Metals 1,198.0 1,086.1 2,041.3 Colours & Coatings 121.4 128.2 250.5 ------- ------- ------- 1,696.0 1,545.5 2,969.0 Discontinued operations 91.6 217.3 416.4 ------- ------- ------- 1,787.6 1,762.8 3,385.4 ------- ------- ------- Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated Geographical analysis by origin £ million £ million £ million Europe 1,156.5 1,110.5 2,087.7 North America 474.8 387.1 790.6 Rest of the World 475.8 343.6 691.3 ------- ------- ------- 2,107.1 1,841.2 3,569.6 Discontinued operations 99.2 229.2 443.8 ------- ------- ------- 2,206.3 2,070.4 4,013.4 Less inter-segment sales (418.7) (307.6) (628.0) ------- ------- ------- 1,787.6 1,762.8 3,385.4 ------- ------- ------- 3 Total operating profit Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated Activity analysis £ million £ million £ million Catalysts & Chemicals 39.3 35.1 74.2 Precious Metals 20.2 16.6 37.3 Colours & Coatings 13.0 11.1 24.8 Corporate (5.8) (5.8) (11.6) ------- ------- ------- 66.7 57.0 124.7 Discontinued operations 0.1 13.0 22.4 Exceptional items and goodwill amortisation (0.1) - (1.9) ------- ------- ------- 66.7 70.0 145.2 ------- ------- ------- Six months to Year to 30.9.99 30.9.98 31.3.99 restated restated Geographical analysis £ million £ million £ million Europe 25.1 24.8 58.1 North America 31.1 25.3 50.9 Rest of the World 10.5 6.9 15.7 ------- ------- ------- 66.7 57.0 124.7 Discontinued operations 0.1 13.0 22.4 Exceptional items and goodwill amortisation (0.1) - (1.9) ------- ------- ------- 66.7 70.0 145.2 ------- ------- ------- 4 Taxation Six months to Year to 30.9.99 30.9.98 31.3.99 £ million £ million £ million United Kingdom 8.2 7.1 12.3 Overseas 9.1 10.4 23.5 ------- ------- ------- 17.3 17.5 35.8 Tax on profit on sale of Electronic Materials 9.9 - - ACT saving on foreign income dividends (FIDs) - (3.9) (3.9) ------- ------- ------- 27.2 13.6 31.9 ------- ------- ------- 5 Dividends An interim dividend of 6.1 pence per ordinary share will be paid on 7th February 2000 to shareholders on the register at the close of business on 17th December 1999. 6 Earnings per ordinary share The calculation of earnings per ordinary share is based on a weighted average of 217,053,913 shares in issue (six months to 30th September 1998 - 217,011,509 shares, year to 31st March 1999 - 216,947,859). Excluding exceptional items, the tax thereon, the benefit of the ACT saving on FIDs and goodwill amortisation earnings per ordinary share were 20.5 pence (six months to 30th September 1998 - 20.4 pence, year to 31st March 1999 - 44.3 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. 7 FRS 15 - 'Tangible Fixed Assets' Under the provisions of FRS 15, which the group adopted on 1st April 1999, the group has restated the carrying amount of tangible fixed assets to depreciated historical cost as a change in accounting policy. Consequently the group has restated its comparatives for the six months to 30th September 1998 and the year to 31st March 1999. The effect on operating profit is immaterial, but the profit on disposal of surplus properties has been increased by the difference between book value and historical cost at the date of disposal (six months to 30th September 1998 - £6.4 million, year to 31st March 1999 - £6.9 million). Most of this gain (£6.4 million) related to the disposal of the group's former head office site in Hatton Garden. The revaluation reserve, which was £9.0 million at 31st March 1999, has been eliminated. 8 Cumulative preference shares On 17th September 1999 the group's outstanding cumulative preference shares were cancelled and the nominal value (£0.3 million) repaid to the shareholders. 9 Sale of Electronic Materials On 9th July 1999 the group announced it had agreed to sell its Electronic Materials Division to AlliedSignal Inc. and the sale was completed on 17th August 1999. Net assets disposed of were: £ million Goodwill 2.3 Tangible fixed assets 191.3 Investments 1.2 Stocks 57.8 Debtors and prepayments 56.8 Cash and bank overdrafts 9.0 Borrowings (7.3) Precious metal leases (6.5) Creditors and provisions (56.8) Minority interests (0.2) Goodwill previously written off to reserves 123.7 ------- 371.3 Profit on disposal 28.5 ------- 399.8 ------- Satisfied by: £ million Cash 407.7 Cash - deferred 1.8 Costs incurred (1.9) Costs incurred - accrued (7.8) ------- 399.8 ------- 10 Year 2000 compliance Johnson Matthey has made good progress with its Year 2000 compliance projects which are now complete. Contingency plans have been developed for the group to monitor and respond to any unforeseen issues - internal or external - in support of the business before, on and after 31st December 1999. Financial Calendar 1999 13th December Ex dividend date 17th December Interim ordinary dividend record date 2000 7th February Payment of interim dividend on ordinary shares 8th June Announcement of results for the year ending 31st March 2000 19th July 109th Annual General Meeting Johnson Matthey Public Limited Company Registered Office: 2-4 Cockspur Street, Trafalgar Square, London SW1Y 5BQ Telephone: 020 7269 8400 Internet address: http://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: 01903 502541

Companies

Johnson Matthey (JMAT)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today