Interim Results
Johnson,Matthey PLC
25 November 2004
For Release at 7.00 am Thursday 25th November 2004
Interim Results for the six months ended 30th September 2004
Profitable growth in all four operating divisions
Summary Results
Half year to 30th September %
2004 2003 change
Statutory Basis:
Turnover £2,473 m £2,165 m +14
Profit before tax £62.0 m £87.6 m -29
Earnings per share 18.5 p 27.8 p -33
Before Exceptional Items and Goodwill Amortisation:
Profit before tax £103.3 m £97.5 m +6
Earnings per share 33.6 p 31.8 p +6
Dividend per share 8.7 p 8.2 p +6
• Profit before tax, exceptional items and goodwill amortisation up 6% at
£103.3 million despite adverse exchange translation
• Earnings per share before exceptional items and goodwill amortisation
also up 6% at 33.6 pence. Interim dividend increased by 6% to 8.7 pence
• Strong operating cash flow. Net borrowings reduced by £31.3 million to
£363.2 million
• Exceptional costs of £30.7 million comprise acquisition integration
costs (£3.0 million); loss on disposal of Pigments & Dispersions (£15.3
million); and cost of closing the UK gold and silver bullion refinery
(£12.4 million)
Divisional Performance
Operating Profit (before exceptional items and goodwill amortisation)
Half year to 30th September
% 2004 at 2003 %
£m 2004 2003 change exchange rates change
Catalysts 56.9 56.5 +1 59.9 +6
Precious Metals 23.4 21.9 +7 24.4 +11
Pharmaceutical Materials 20.9 20.7 +1 22.2 +7
Colours & Coatings 12.8 10.4 +23 13.8 +33
Corporate (8.3) (7.8) (8.3)
Continuing operations 105.7 101.7 +4 112.0 +10
Discontinued operations 0.4 1.4 0.4
Operating profit 106.1 103.1 +3 112.4 +9
• At constant exchange rates operating profit before exceptional items
and goodwill amortisation up 9%. All four divisions comfortably ahead of first
half of last year
Business prospects
• Excellent outlook for heavy duty diesel (HDD) catalysts. Increased
investment in product development and in new programmes in partnership
with leading original equipment manufacturers
• European autocatalyst market continues to grow driven by strong sales
of light duty diesel (LDD) vehicles. Johnson Matthey very well
positioned in LDD market and investing in increased manufacturing
capacity
• Asian autocatalyst business performing well. Investment in expanding
production capacity in both Japan and China
• Platinum group metal trading conditions remain good. Improved market
conditions combined with strong volume growth has more than offset the
impact of revised Anglo Platinum contract terms announced last November
• In Pharmaceutical Materials our pipeline of new products is strong.
New generic drugs will significantly add to revenues from 2006 onwards
• Focus on improving returns of underperforming assets. Should release
cash which will be used to buy back shares
Commenting on the results, Neil Carson, Chief Executive of Johnson Matthey said:
'All of our divisions showed good underlying growth in the first half.
Our strategy is robust and has positioned us well. We will focus on the
delivery of organic growth, particularly from our Catalysts and Pharmaceutical
Materials businesses where we have invested to meet future demand. We are
taking action to rationalise businesses whose performance does not meet our
return criteria.
We expect to achieve continued growth in earnings per share before exceptional
items and goodwill amortisation in the second half.'
Enquiries:
Ian Godwin, Group Communications Manager, Johnson Matthey 020 7269 8410
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 performed well in the first half of 2004/05 with profit before
tax, exceptional items and goodwill amortisation up 6% despite adverse exchange
translation. On a constant currency basis all four divisions were comfortably
ahead of last year. Cash generation was good with net borrowings reduced by
£31.3 million.
Review of Results
Total sales grew by 14% in the half year to £2,473 million, largely as a result
of more buoyant trading conditions for platinum group metals and higher average
prices. Sales excluding the value of precious metals fell by 4% to £598
million. The fall partly reflected the impact of exchange translation but also
lower pass through costs for autocatalyst substrates.
Operating profit before exceptional items and goodwill amortisation rose by 3%
to £106.1 million. Adverse exchange translation reduced profits by £6.3 million
compared with the first half of last year mainly because of the fall in the US
dollar which averaged $1.81/£ compared with $1.62/£ for the same period last
year. Translated at last year's exchange rates operating profit before
exceptional items and goodwill amortisation would have been 9% up.
Interest was £1.1 million lower than last year as a result of more favourable
average interest rates including lower financing costs for platinum. The return
on retirement benefits assets and liabilities also improved by £1.7 million
reflecting the increased funding surplus at 31st March 2004.
Profit before tax, exceptional items and goodwill amortisation increased by 6%
to £103.3 million. Earnings per share before exceptional items and goodwill
amortisation also rose by 6% to 33.6 pence.
The costs of integrating the AMC and Lancaster Synthesis businesses following
acquisition amount to £1.0 million and £2.0 million respectively. These have
been included as exceptional costs in operating profit. The disposal of
Pigments & Dispersions gave rise to an exceptional loss of £15.3 million after
costs, of which £5.8 million related to goodwill previously written off to
reserves. The closure of the UK gold and silver bullion refinery gave rise to a
further exceptional loss of £12.4 million. Goodwill amortisation in the half
year increased by £0.7 million to £10.6 million.
Taking into account exceptional costs and goodwill amortisation, profit before
tax on a statutory basis fell by £25.6 million to £62.0 million and earnings per
share were 9.3 pence lower at 18.5 pence.
Dividend
The interim dividend has been increased by 6% to 8.7 pence, in line with the
growth in earnings per share before exceptional items and goodwill amortisation.
Operations
Catalysts Division's sales fell by 2% to £583 million. Sales excluding the
value of precious metals were 10% below last year at £342 million. The main
reasons for the lower sales were adverse exchange translation and lower pass
through substrate costs associated with the increasing proportion of diesel
catalysts sold. Operating profit increased by 1% to £56.9 million despite the
lower sales revenue. At constant exchange rates operating profit grew by 6%.
Car sales in North America were flat in the six months to 30th September 2004 at
10.2 million vehicles but domestic production was slightly down. In Western
Europe sales and production were both slightly up with 8.2 million vehicles
sold. Asia continues to show the most growth with a 4% increase in car sales in
the main markets although the rate of growth in China slowed during the period
to 12%.
Environmental Catalysts and Technologies (ECT) achieved good growth in profits
in autocatalysts with the growth coming in Asia and Europe. The division
benefited from the continued growth in diesel car sales in Europe where Johnson
Matthey has leading technology. Profits in the US were flat. We have increased
our investment on product development for heavy duty diesel (HDD) catalysts with
a number of joint programmes with original equipment manufacturers underway.
This investment also benefits the next generation of light duty diesel (LDD)
particulate filters. Revenue from sales of retrofit HDD products was well down
on the first half of last year which had benefited from a major fitment
programme in Tokyo. Despite these factors ECT's operating profit was up on last
year on a constant currency basis.
Process Catalysts and Technologies (PCT) achieved good profit growth with an
encouraging first six months' contribution from AMC, the leading supplier of
Sponge NickelTM catalysts, which was acquired in March 2004. Sales of gas
processing products and syngas catalysts (used to convert natural gas or naphtha
into ammonia, methanol and hydrogen) were also strong. Platinum group metal
refining continues to be adversely affected by the weak palladium price and
margins for that part of the division were down.
In September 2004 we concluded the acquisition of the worldwide business of
Lancaster Synthesis Limited (Lancaster) from Clariant AG for £2 million. A
higher price had originally been agreed for the acquisition but in July
Lancaster suffered a serious fire at its UK premises which destroyed a
considerable amount of stock and some of its manufacturing facilities.
Lancaster's operations remain an excellent fit with those of Johnson Matthey's
existing Research Chemicals business and its acquisition provides the
opportunity to improve market share and increase operating efficiencies. An
exceptional charge of £2 million has been included in operating profit to cover
the cost of integrating Lancaster into Johnson Matthey's business.
The cost of our Fuel Cells business continued at a similar rate to last year at
£4.8 million. Developments in automotive fuel cells continue to be very
encouraging but the market for stationary fuel cells has not grown as quickly as
our customers had expected.
Precious Metals Division's sales increased by 23% to £1,693 million, reflecting
more buoyant trading conditions for platinum group metals and higher average
prices. Operating profit increased by 7% to £23.4 million despite the revised
terms of the renewed contracts with Anglo Platinum and adverse exchange
translation.
The average price of platinum in the first half of Johnson Matthey's financial
year rose to $837 per ounce, up 24% compared to the same period last year. This
dampened purchases from jewellery manufacturers, especially in China, but
growing worldwide use in the automobile and glass industries compensated. Total
demand rose by less than 1% to match the record set in 2002. With supplies
growing by 4%, the market was close to balance after recording significant
deficits in each of the last five years.
The price of palladium showed a similar increase, up 30% to an average of $238
per ounce. Demand for palladium is expected to grow by 9% in 2004, with US auto
makers using less metal from inventory and global light vehicle production
rising. The most significant increase came from China where retailers,
especially in the smaller cities, began stocking palladium jewellery. An 11%
increase in palladium supply, driven by the expanding South African mines,
prevented a more substantial recovery in the palladium price.
The division's platinum fabrication business achieved good growth with increased
demand across its product range. Sales of precision machined parts for medical
device applications continue to show strong growth. The division's gold
refining businesses in North America and Hong Kong showed some modest growth in
the six month period. However, the business in the UK continued to be loss
making and in September 2004 the board took the decision to close the UK gold
and silver bullion refinery. In 2003/04 the business made a loss of £1.6
million after metal interest and incurred a further loss of £0.6 million in the
first five months of this year. Closure costs amount to £12.4 million of which
£6.6 million relates to asset write offs.
Pharmaceutical Materials Division increased its sales by 3% to £66 million
despite adverse exchange translation. Operating profit increased by 1% to £20.9
million. At constant exchange rates operating profit for the half year grew by
7%.
Macfarlan Smith was well ahead of last year with good sales of specialist opiate
products, and we continue to invest in the growth of the Edinburgh facility. In
the US, carboplatin sales continued to be satisfactory with the pediatric
extension to the carboplatin patent extending through to October 2004. In the
second half of the year the contribution from this product will fall, as generic
competition develops. However, sales of other platinum based anticancer
products continue to be encouraging. With ongoing technology transfers from
Macfarlan Smith, West Deptford continues to make progress in manufacturing and
qualifying its opiate products with new customers.
Pharm-Eco, which we have renamed Johnson Matthey Pharma Services to better
reflect its market, continues to grow its small volume manufacturing segment,
and has begun development of several low volume, high potency generic products.
We have consolidated our prostaglandin business into its existing Cork, Ireland
facility. Qualification of our prostaglandin products into new generic dosage
forms continues to make good progress.
Colours & Coatings Division's sales rose by 6% to £118 million. Operating
profit increased by 23% to £12.8 million. Sales of glass coating products
continued to grow. Sales to the automotive sector increased, particularly sales
of conductive silver paste. Demand for decorative products for other glass
applications was also up.
Structural Ceramics, which sells decorative products to the tile industry,
continued the recovery seen in the second half of 2003/04. In November 2003 we
announced we would consider offers for parts of our Colours & Coatings Division
including Structural Ceramics. The Pigments & Dispersions business was sold in
September 2004 for £27 million. The board considered that the offers received
for Structural Ceramics did not provide adequate value, particularly in view of
the favourable outlook for the business. Consequently, the board decided that
Structural Ceramics will be retained.
Finance
Exchange Rates
The main impact of exchange rate movements on the group's results comes from the
translation of foreign subsidiaries' profits into sterling. A third of the
group's profits were made in North America, mainly in the USA. The US dollar
weakened significantly from $1.62/£ in the first half of last year to an average
of $1.81/£ for the six months to 30th September 2004. The average rate for the
euro also weakened from €1.43/£ to €1.49/£. The South African rand strengthened
slightly but the translational benefit of that rise was more than offset by the
adverse impact of the stronger rand on operating margins. Excluding the rand,
exchange translation reduced operating profit by £6.3 million, which is
equivalent to 6% of operating profit before exceptional items and goodwill
amortisation.
Interest
In the six months to 30th September 2004 the group interest charge fell by £1.1
million to £7.4 million. Metal financing costs improved, particularly for
platinum where lease rates had risen to very high levels in the previous year.
The return on retirement benefits assets and liabilities also improved by £1.7
million. This credit is shown separately under FRS 17 (the pension accounting
standard adopted by the group last year). The rise reflected the increase in
the pension fund surplus at 31st March 2004.
Taxation
The group's tax charge for the six months fell by £5.7 million. The reduction
reflects the tax relief available on the exceptional costs incurred in the
period. Before exceptional items and goodwill amortisation the average tax rate
for the six months was the same as last year at 29.9%.
Cash Flow
Johnson Matthey's net cash flow for the six months was strong at £30.4 million.
After taking account of £0.9 million of exchange translation, net borrowings
fell by £31.3 million. Gearing (net borrowings / shareholders' funds and
minority interests) fell by 5% from 45.3% at 31st March 2004 to 40.3% at 30th
September 2004.
The group received £24.4 million from disposals and paid £3.1 million for
acquisitions. Excluding acquisitions, disposals and share issuance the group
generated a free cash flow of £8.0 million. Cash flow from operations was
£120.9 million which was below last year as a result of an increase in working
capital in the period. Capital expenditure was significantly lower than last
year partly as a result of phasing with an increase in the rate of expenditure
planned for the second half of this year. Major investments include expansion
of ECT's production facilities in the UK, South Africa, Japan and China;
investment in catalyst manufacturing for PCT at Clitheroe, UK; and further
investment in new capacity at Macfarlan Smith in Edinburgh. For the year as a
whole capital expenditure is expected to be around 1.5 times depreciation
compared with 1.8 times for 2003/04.
Outlook and Strategy
The outlook for the remainder of this year is satisfactory although growth in
sterling terms will continue to be held back by adverse exchange translation.
Despite the weak US dollar, for the year as a whole we would expect to achieve
continued growth in earnings per share before exceptional items and goodwill
amortisation.
Over the next few years we believe the group is well positioned for growth,
particularly in Catalysts and Pharmaceutical Materials. This growth is based on
Johnson Matthey's investment in new technology and leading positions in several
new product areas.
Heavy duty diesel catalysts represent a major opportunity once legislation comes
into force in the USA in 2007 and in Europe in 2005 and 2008. Removal of
particulate from vehicle emissions for health reasons is becoming increasingly
important. Developing catalysed soot filter (CSF) technology provides a
solution to this issue and offers growth in both the heavy duty and light duty
diesel segments. In Pharmaceutical Materials we have a strong worldwide
position in the manufacture of controlled drugs and complex molecules and expect
to benefit in 2006 and 2007 from the launch of new generic drugs. We have also
significantly increased our investment this year on R&D for gas to liquids
catalysts. Fuel cell components for the automotive market remains an exciting
opportunity in the longer term.
Return on investment is a key measure of the group's performance. Although
Johnson Matthey's return remains well above our cost of capital it has fallen in
recent years as a result of the goodwill paid for acquisitions. Over the next
few years we expect the return to improve as a result of organic profit growth
and a greater focus on improving the returns of underperforming assets.
As part of this strategy we have divested our Pigments & Dispersions business
where margins were declining and which was non-core. We are also in the process
of closing our UK gold and silver refinery which has been loss making for
several years and where the European market for gold refining shows no sign of
improving. We intend to use the cash generated from these initiatives to buy
back shares.
The combined effect of investment in new product areas and increased focus on
return on assets should ensure the group is well positioned for growth in
earnings per share in the years to come.
Consolidated Profit and Loss Account
for the six months ended 30th September 2004
---------------------- Six months to --------------------- Year to
30.9.04 30.9.04 30.9.04 30.9.03 30.9.03 31.3.04
Before
exceptional Exceptional
items and items and Before
goodwill goodwill goodwill
amortisation amortisation Total amortisation Total Total
restated restated restated
Notes £ million £ million £ million £ million £ million £ million
Turnover 2
Continuing operations 2,460.6 - 2,460.6 2,148.9 2,148.9 4,463.0
Discontinued operations 12.3 - 12.3 15.8 15.8 29.9
Group turnover 2,472.9 - 2,472.9 2,164.7 2,164.7 4,492.9
Operating profit 4
Continuing operations before goodwill 105.4 - 105.4 101.5 101.5 202.8
amortisation
Goodwill amortisation - (10.5) (10.5) - (9.8) (19.5)
Continuing operations before exceptional 105.4 (10.5) 94.9 101.5 91.7 183.3
items
Exceptional items 5 - (3.0) (3.0) - - 2.1
Total continuing operations 105.4 (13.5) 91.9 101.5 91.7 185.4
Discontinued operations 0.4 - 0.4 1.4 1.4 2.5
Goodwill amortisation on discontinued - (0.1) (0.1) - (0.1) (0.2)
operations
Group operating profit 105.8 (13.6) 92.2 102.9 93.0 187.7
Share of profit in associates 0.3 - 0.3 0.2 0.2 0.7
Goodwill amortisation on - - - - - (0.1)
associates
Total operating profit 4 106.1 (13.6) 92.5 103.1 93.2 188.3
Loss on closure of continuing 5 - (12.4) (12.4) - - -
operations
Loss on sale of discontinued 5 - (15.3) (15.3) - - -
operations
Profit on ordinary activities before 106.1 (41.3) 64.8 103.1 93.2 188.3
interest
Net interest (7.4) - (7.4) (8.5) (8.5) (16.3)
Net return on retirement benefits
assets
and liabilities 7 4.6 - 4.6 2.9 2.9 6.0
Profit on ordinary activities before 103.3 (41.3) 62.0 97.5 87.6 178.0
taxation
Taxation 8 (30.9) 8.6 (22.3) (29.2) (28.0) (57.9)
Profit after taxation 72.4 (32.7) 39.7 68.3 59.6 120.1
Minority interests 0.5 - 0.5 0.9 0.9 1.7
Profit attributable to shareholders 72.9 (32.7) 40.2 69.2 60.5 121.8
Dividends 9 (18.9) - (18.9) (17.9) (17.9) (57.4)
Retained profit 54.0 (32.7) 21.3 51.3 42.6 64.4
pence pence pence pence pence
Earnings per ordinary share (EPS)
Basic 10 18.5 27.8 56.0
Diluted 10 18.5 27.7 55.8
EPS before exceptional items and
goodwill amortisation
Basic 10 33.6 31.8 64.0
Diluted 10 33.5 31.7 63.7
Dividend per ordinary share 9 8.7 8.7 8.2 8.2 26.4
Consolidated Balance Sheet
as at 30th September 2004
30.9.04 30.9.03 31.3.04
restated
Notes £ million £ million £ million
Fixed assets
Goodwill 366.2 364.2 377.1
Tangible fixed assets 586.7 622.1 608.1
Investments 6.3 6.0 5.5
959.2 992.3 990.7
Current assets
Stocks 467.2 444.4 417.3
Debtors 350.5 356.5 387.4
Short term investments 1.3 1.6 1.6
Cash at bank and in hand 97.0 76.7 106.5
916.0 879.2 912.8
Creditors: Amounts falling due within one year
Borrowings and finance leases (32.5) (64.0) (46.5)
Precious metal leases (132.2) (121.1) (127.4)
Other creditors (334.3) (381.9) (358.9)
Net current assets 417.0 312.2 380.0
Total assets less current liabilities 1,376.2 1,304.5 1,370.7
Creditors: Amounts falling due after more than one year
Borrowings and finance leases (427.7) (392.6) (454.5)
Other creditors (0.7) (0.6) (0.7)
Provisions for liabilities and charges (50.9) (39.4) (47.4)
Net assets excluding retirement benefits assets and liabilities 896.9 871.9 868.1
Retirement benefits net assets 7 34.4 3.3 31.5
Retirement benefits net liabilities 7 (30.1) (28.2) (28.0)
Net assets including retirement benefits assets and liabilities 901.2 847.0 871.6
Capital and reserves
Called up share capital 220.8 220.4 220.6
Share premium account 138.0 136.0 137.1
Capital redemption reserve 4.9 4.9 4.9
Shares held in employee share ownership trusts (28.8) (15.5) (28.8)
Associates' reserves (0.5) - (0.5)
Profit and loss account 558.4 491.6 528.9
Shareholders' funds 892.8 837.4 862.2
Minority interests 8.4 9.6 9.4
901.2 847.0 871.6
Consolidated Cash Flow Statement
for the six months ended 30th September 2004
Six months to Year to
30.9.04 30.9.03 31.3.04
Notes £ million £ million £ million
Cash Flow Statement
Net cash inflow from operating activities 11 120.9 142.4 259.7
Dividends received from associates 0.1 - 0.5
Returns on investments and servicing of finance (6.7) (8.1) (16.4)
Taxation (32.2) (19.5) (43.1)
Capital expenditure and financial investment (34.6) (62.4) (114.4)
Acquisitions (3.1) 2.2 (18.4)
Disposals 13 24.4 - -
Equity dividends paid (39.5) (38.6) (56.4)
Net cash flow before use of liquid resources and financing 29.3 16.0 11.5
Management of liquid resources 12.0 10.5 1.1
Financing
Issue and purchase of share capital 1.1 3.5 (8.5)
(Decrease) / increase in borrowings and finance leases (29.1) (63.5) 6.3
Net cash outflow from financing (28.0) (60.0) (2.2)
Increase / (decrease) in cash in the period 13.3 (33.5) 10.4
Reconciliation of net cash flow to movement in net debt
Increase / (decrease) in cash in the period 13.3 (33.5) 10.4
Cash outflow / (inflow) from movement in borrowings and finance 29.1 63.5 (6.3)
leases
Cash inflow from movements in liquid resources (12.0) (10.5) (1.1)
Change in net debt resulting from cash flows 30.4 19.5 3.0
Loan notes cancelled / (issued) to acquire subsidiaries - 1.1 (1.1)
Translation difference 0.9 2.0 6.1
Movement in net debt in period 31.3 22.6 8.0
Net debt at beginning of period (394.5) (402.5) (402.5)
Net debt at end of period (363.2) (379.9) (394.5)
Total Recognised Gains and Losses
for the six months ended 30th September 2004
Six months to Year to
30.9.04 30.9.03 31.3.04
restated
£ million £ million £ million
Profit attributable to shareholders 40.2 60.5 121.8
Currency translation differences on foreign currency net
investments and related loans 4.3 (2.7) (23.8)
Taxation on translation differences on foreign currency loans (1.4) 5.8 16.8
Actuarial gain on retirement benefits assets and liabilities - - 36.1
Taxation on actuarial gain on retirement benefits assets and - - (11.0)
liabilities
Total recognised gains and losses relating to the period 43.1 63.6 139.9
Prior year adjustment - (108.3) (108.3)
Total recognised gains and losses since previous annual report 43.1 (44.7) 31.6
Movement in Shareholders' Funds
for the six months ended 30th September 2004
Six months to Year to
30.9.04 30.9.03 31.3.04
restated
£ million £ million £ million
Profit attributable to shareholders 40.2 60.5 121.8
Dividends (18.9) (17.9) (57.4)
Retained profit 21.3 42.6 64.4
Other recognised gains and losses relating to the period 2.9 3.1 18.1
New share capital subscribed 1.1 5.1 6.4
Purchase of shares for employee share ownership trusts (ESOTs) - (1.6) (14.9)
Shares in ESOTs utilised for long term incentive plan - 0.9 0.9
Movement in long term incentive plan (0.5) - -
Goodwill written back on sale of Pigments & Dispersions business 5.8 - -
Net movement in shareholders' funds 30.6 50.1 74.9
Opening shareholders' funds 862.2 787.3 787.3
Closing shareholders' funds 892.8 837.4 862.2
Notes on the Accounts
for the six months ended 30th September 2004
1 Basis of preparation
The interim accounts were approved by the Board of Directors on 23rd November
2004, and are unaudited but have been reviewed by the auditors. 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
2004. The group sold its Pigments & Dispersions business during the period and
so its results are reported as discontinued operations (note 13). The group
adopted Urgent Issues Task Force Abstract 38 - 'Accounting for ESOP Trusts' in
its accounts for the year ended 31st March 2004 and so it has restated its
accounts for the six months ended 30th September 2003. Information in respect of
the year ended 31st March 2004 is derived from the company's statutory accounts
for that year which have been delivered to the Registrar of Companies. The
auditors' report on those accounts was unqualified and did not contain any
statement under 237 (2) and 237(3) of the Companies Act 1985.
2 Group turnover
Six months to Year to
30.9.04 30.9.03 31.3.04
restated restated
Activity analysis £ million £ million £ million
Catalysts 583.3 593.3 1,142.7
Precious Metals 1,693.2 1,380.0 2,956.4
Pharmaceutical Materials 66.4 64.7 139.7
Colours & Coatings 117.7 110.9 224.2
2,460.6 2,148.9 4,463.0
Discontinued operations 12.3 15.8 29.9
2,472.9 2,164.7 4,492.9
Six months to Year to
30.9.04 30.9.03 31.3.04
restated restated
Geographical analysis by origin £ million £ million £ million
Europe 1,743.7 1,519.9 3,209.5
North America 536.1 497.8 961.9
Asia 537.9 394.1 837.6
Rest of the World 126.9 116.8 272.2
2,944.6 2,528.6 5,281.2
Discontinued operations 14.2 17.2 33.4
2,958.8 2,545.8 5,314.6
Less inter-segment sales (485.9) (381.1) (821.7)
2,472.9 2,164.7 4,492.9
3 Total turnover excluding the value of precious metals
Six months to Year to
30.9.04 30.9.03 31.3.04
restated restated
Activity analysis £ million £ million £ million
Catalysts 342.4 379.9 720.3
Precious Metals 63.9 59.1 120.6
Pharmaceutical Materials 62.8 61.0 131.5
Colours & Coatings 117.0 109.3 222.1
586.1 609.3 1,194.5
Discontinued operations 12.3 15.8 29.9
598.4 625.1 1,224.4
Notes on the Accounts
for the six months ended 30th September 2004
4 Total operating profit
Six months to Year to
30.9.04 30.9.03 31.3.04
restated restated
Activity analysis £ million £ million £ million
Catalysts 56.9 56.5 109.2
Precious Metals 23.4 21.9 44.2
Pharmaceutical Materials 20.9 20.7 42.3
Colours & Coatings 12.8 10.4 24.2
Corporate (8.3) (7.8) (16.4)
105.7 101.7 203.5
Discontinued operations 0.4 1.4 2.5
106.1 103.1 206.0
Goodwill amortisation (10.6) (9.9) (19.8)
Exceptional items included in total operating profit (note 5) (3.0) - 2.1
92.5 93.2 188.3
Six months to Year to
30.9.04 30.9.03 31.3.04
restated restated
Geographical analysis £ million £ million £ million
Europe 43.4 37.8 79.0
North America 35.2 36.5 72.0
Asia 9.1 12.3 19.4
Rest of the World 18.0 15.1 33.1
105.7 101.7 203.5
Discontinued operations 0.4 1.4 2.5
106.1 103.1 206.0
Goodwill amortisation (10.6) (9.9) (19.8)
Exceptional items included in total operating profit (note 5) (3.0) - 2.1
92.5 93.2 188.3
5 Exceptional items
The exceptional items included in total operating profit of £3.0 million
comprise £1.0 million for the cost of integrating the business of Activated
Metals and Chemicals, Inc. (AMC), which was acquired on 30th March 2004, and
£2.0 million for the cost of integrating the business of Lancaster Synthesis
Limited, which was acquired on 30th September 2004.
The loss on closure of continuing operations of £12.4 million relates to the
closure of the gold and silver bullion refinery in Royston, England.
The loss on sale of discontinued operations of £15.3 million relates to the sale
of the Pigments & Dispersions business (note 13).
Notes on the Accounts
for the six months ended 30th September 2004
6 Effect of exchange rate changes on translation of foreign subsidiaries' operating
profits
Six months to Year to
Average exchange rates used for translation of results of foreign 30.9.04 30.9.03 31.3.04
operations
US dollar / £ 1.81 1.62 1.69
Euro / £ 1.49 1.43 1.44
South African rand / £ 11.75 12.23 12.11
The main impact of exchange rate movements on the group's operating profit comes
from the translation of foreign subsidiaries' profits into sterling. The one
significant exception is the South African rand where the translational impact
is more than offset by the impact of movements in the rand on operating margins.
Consequently the analysis below excludes the translational impact of the rand.
Six months to 30.9.04
At this At last
year's year's Effect
rates rates
Activity analysis £ million £ million £ million
Catalysts 56.9 59.9 (3.0)
Precious Metals 23.4 24.4 (1.0)
Pharmaceutical Materials 20.9 22.2 (1.3)
Colours & Coatings 12.8 13.8 (1.0)
Corporate (8.3) (8.3) -
105.7 112.0 (6.3)
Discontinued operations 0.4 0.4 -
106.1 112.4 (6.3)
7 Retirement benefits assets and liabilities
Six months to Year to
30.9.04 30.9.03 31.3.04
Net return £ million £ million £ million
Expected return on scheme assets 22.2 18.8 37.5
Interest on scheme liabilities (17.6) (15.9) (31.5)
4.6 2.9 6.0
Pension fund assets and liabilities
The net assets of the group's retirement benefits schemes which are in surplus
and the net liabilities of the schemes which are in deficit are shown separately
in the balance sheet. At 31st March 2004 the group's UK defined benefit pension
scheme held assets with a market value of £599.6 million and had a net surplus,
after tax, of £30.3 million. The group's other main pension schemes are in the
USA. At 31st March 2004 these schemes held assets with a market value of £59.6
million and had a net deficit, after tax, of £6.0 million. The group also
operates schemes for post-retirement medical benefits (now closed to new
members) which are unfunded and had net liabilities of £18.9 million at 31st
March 2004.
Notes on the Accounts
for the six months ended 30th September 2004
8 Taxation
Six months to Year to
30.9.04 30.9.03 31.3.04
£ million £ million £ million
United Kingdom 12.3 12.1 27.4
Overseas 18.6 17.1 30.8
Associates - - 0.1
Tax on ordinary activities before exceptional items and goodwill 30.9 29.2 58.3
amortisation
Tax on goodwill amortisation (1.0) (1.2) (2.0)
Tax on exceptional items included in total operating profit (1.0) - 1.6
Tax on loss on closure of continuing operations (3.7) - -
Tax on loss on sale of discontinued operations (2.9) - -
22.3 28.0 57.9
9 Dividends
An interim dividend of 8.7 pence per ordinary share will be paid on 2nd February
2005 to shareholders on the register at the close of business on 3rd December
2004.
10 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a weighted average of
217,102,673 shares in issue (six months to 30th September 2003 - 217,587,885
shares, year to 31st March 2004 - 217,629,033). The calculation of diluted
earnings per ordinary share is based on the weighted average number of shares in
issue adjusted by the dilutive outstanding share options and long term incentive
plan.
Before exceptional items, goodwill amortisation and the tax thereon, basic
earnings per ordinary share were 33.6 pence (six months to 30th September 2003 -
31.8 pence, year to 31st March 2004 - 64.0 pence) and diluted earnings per
ordinary share were 33.5 pence (six months to 30th September 2003 - 31.7 pence,
year to 31st March 2004 - 63.7 pence).
11 Reconciliation of operating profit to net cash inflow from
operating activities
Six months to Year to
30.9.04 30.9.03 31.3.04
£ £ £ million
million million
Operating profit 92.2 93.0 187.7
Depreciation, amortisation and net profit on disposal of fixed assets and 42.7 40.1 83.5
investments
Net retirement benefit charge less contributions 4.6 6.1 1.0
(Increase) / decrease in owned stocks (53.6) (13.7) 17.3
Decrease / (increase) in debtors 30.8 (1.1) (41.7)
Increase in creditors and provisions 4.2 18.0 11.9
Net cash inflow from operating activities 120.9 142.4 259.7
Notes on the Accounts
for the six months ended 30th September 2004
12 Acquisition of the business of Lancaster Synthesis Limited
On 30th September 2004 the group acquired the business of Lancaster Synthesis
Limited from Clariant AG for £2.0 million with a further payment of £0.3 million
still outstanding. Costs incurred were £0.5 million, including £0.3 million
accrued. Lancaster Synthesis Limited manufactures and distributes organic
compounds for research and development purposes and is headquartered in
Morecambe, England. The estimated fair value of the net assets acquired was £2.8
million. This has been accounted for by acquisition accounting.
13 Sale of Pigments & Dispersions business
On 1st September 2004 the group sold its Pigments & Dispersions business to
Rockwood Pigments (UK) Limited for an initial consideration of £27.0 million.
The consideration is likely to be reduced by an estimated £2.0 million following
agreement as to the level of assets in the business at completion and the level
of net debt transferred to the purchaser. Costs incurred were £2.9 million, of
which £0.4 million were accrued. The net assets disposed of were £33.2 million,
including £0.1 million of cash. After including £5.8 million of goodwill
previously written off directly to reserves the disposal resulted in an
estimated loss of £15.3 million.
Independent Review Report
by KPMG Audit Plc to Johnson Matthey Plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 11 to 19 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where they
are to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
- 'Review of Interim Financial Information', issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether accounting policies and presentation have been consistently
applied, unless otherwise disclosed. A review is substantially less in scope
than an audit performed in accordance with Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30th September 2004.
KPMG Audit Plc
Chartered Accountants
London
23rd November 2004
Financial Calendar
2004
1st December
Ex dividend date
3rd December
Interim ordinary dividend record date
2005
2nd February
Payment of interim dividend on ordinary shares
2nd June
Announcement of results for the year ending 31st March 2005
19th July
114th 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: 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
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