Interim Results
Johnson Matthey PLC
22 November 2006
For Release at 7.00 am Wednesday 22nd November 2006
Interim Results for the six months ended 30th September 2006
On track to deliver good growth
Summary Results
Half Year to 30th September %
2006 2005 change
Revenue £3,012m £2,283m +32
Sales excluding precious metals £744m £637m +17
Operating profit £126.8m £114.5m +11
Profit before tax £115.1m £106.4m +8
Total earnings per share 38.3p 35.2p +9
Dividend per share 9.9p 9.1p +9
• Sales revenue up 32% reflecting good underlying volume growth and
higher precious metal prices
• Operating profit up 11% with most of the growth generated by Catalysts
and Precious Metal Products Divisions
• Profit before tax up 8% at £115.1 million
• Total earnings per share up 9% at 38.3 pence. Interim dividend increased in
line with earnings growth to 9.9 pence
Divisional Performance
Operating Profit
Half Year to 30th September %
£m 2006 2005 change
Catalysts 70.8 65.2 +9
Precious Metal Products 37.2 30.6 +22
Pharmaceutical Materials 17.0 16.2 +5
Ceramics 10.2 10.8 -6
Corporate (8.4) (8.3)
Operating profit 126.8) 114.5) +11
• Catalysts Division's profit growth reflects increased sales of
catalysed soot filters (CSFs) for diesel cars in Europe, strong
autocatalyst sales in Asia and good demand for process catalysts
• Precious Metal Products Division has benefited from buoyant prices for
platinum group metals and good growth in its manufacturing businesses
Business Prospects
• Environmental Catalysts and Technologies (ECT) should achieve double
digit growth in sales and profits this year with additional revenue from
sales of heavy duty diesel (HDD) catalysts in the second half
• Pre-buying of trucks ahead of the introduction of the new emission
standards will limit catalyst sales in 2006/07 but create further growth as
truck sales recover in 2007/08 and 2008/09
• Additional investment is planned to expand capacity in ECT and to
provide increased working capital to support the emergence of the new
diesel catalyst markets
• High oil price supports growth in Process Catalysts and Technologies
with increased demand for catalysts for synthesis gas production and good
prospects for Davy Process Technology
• Precious Metal Products Division should continue to benefit from
favourable market conditions for platinum group metals and growth in its
manufacturing businesses
• Pharmaceutical Materials Division's recovery is expected to continue
in the second half of the year with stronger sales in the US
• Ceramics Division's performance in the second half is likely to be
below last year but the division should remain highly cash generative
Commenting on the results, Neil Carson, Chief Executive of Johnson Matthey said:
'Johnson Matthey has achieved good growth in the first half of 2006/07 with
sales, excluding precious metals, up 17% and an 11% increase in operating
profit.
The outlook for the second half is for continued top-line growth, driven by
additional sales of emission control products for trucks and buses following the
introduction of the new heavy duty diesel emission standards in Europe in
October 2006 and North America in January 2007.'
Enquiries:
Ian Godwin Director, IR and Corporate Communications 020 7269 8410
John Sheldrick Group Finance Director 020 7269 8408
Howard Lee The HeadLand Consultancy 020 7367 5225
Laura Hickman The HeadLand Consultancy 020 7367 5227
www.matthey.com
Report to Shareholders
Introduction
Johnson Matthey performed well in the first half of 2006/07 with good growth in
sales and operating profit. Catalysts Division and Precious Metal Products
Division generated most of the growth. Sales were boosted by a significant rise
in the prices of platinum group metals with platinum averaging just over $1,200
per ounce (37% up on the first half of last year). Demand for catalysts was
also strong with expanding sales of catalysed soot filters, good autocatalyst
demand in Asia and increased sales of process catalysts. Our US Pharmaceutical
Materials business improved after a downturn last year and its recovery should
continue in the second half.
The outlook for the group for the second half remains encouraging, with further
growth generated by the new market for heavy duty diesel catalysts.
Review of Results
Revenue rose by 32% in the half year to £3,012 million, partly as a result of
higher prices for platinum, palladium and rhodium. Sales excluding the value of
precious metals rose by 17%, reflecting good underlying volume growth and
increased non precious metal material costs, some of which are a pass through
for Johnson Matthey.
Operating profit increased by 11% to £126.8 million. Exchange translation was
slightly adverse, reducing profits by £0.8 million compared with the first half
of last year. Interest rose by £4.5 million as a result of higher average
borrowings and an increase in short term interest rates, particularly in the US.
Profit before tax was 8% up on last year at £115.1 million.
Total earnings per share (eps) increased by 9% to 38.3 pence. The growth rate
in eps was slightly stronger than growth in profit before tax mainly as a result
of the accretive effect of share buy-backs.
Dividend
The interim dividend has been increased by 9% to 9.9 pence, in line with the
growth in earnings per share.
Operations
Catalysts Division's sales grew by 48% to £996 million, boosted by significantly
higher prices for platinum, palladium and rhodium. Excluding the value of
precious metals, sales increased by 22% to £458 million. This increase was
driven by good volume growth and the impact of higher material costs,
particularly the cost of substrates for catalysed soot filters (CSFs), which is
a pass through for Johnson Matthey.
The division's operating profit rose by 9% to £70.8 million, despite a weaker US
dollar exchange rate. Translated at last year's exchange rates operating profit
would have been 10% up.
Environmental Catalysts and Technologies (ECT) had a good first half with sales
and operating profit well ahead of last year. The division achieved strong
growth in Europe and Asia which more than offset further weakness in the North
American market. Results for Europe benefited from a significant increase in
sales of CSFs for light duty diesel vehicles as well as some initial sales of
heavy duty diesel (HDD) catalysts to original equipment manufacturers.
ECT's growth was achieved despite a relatively weak global car market. In the
six month period to 30th September 2006 total global light duty vehicle sales
were unchanged compared with last year. Vehicle production was 1.6% up with an
increase in inventories. Light duty vehicle sales and production fell in both
North America and Europe but continued to grow strongly in Asia.
Estimated Light Vehicle Sales and Production
Half year to 30th September
2006 2005 change
millions millions %
North America Sales 10.2 10.7 -4.7
Production 7.5 7.8 -3.8
Europe Sales 9.2 9.3 -1.1
Production 9.2 9.3 -1.1
Asia Sales 7.6 7.2 +5.6
Production 11.9 10.9 +9.2
Global Sales 32.1 32.1 -
Production 32.0 31.5 +1.6
Source: Global Insight
We are seeing increasing demand from many of the leading car companies in Europe
for CSFs to remove particles from diesel exhaust emissions. Although
legislation requiring such emission control devices does not come into force
until 2010 many manufacturers are fitting these devices much earlier. The new
factory we commissioned last year in Royston, UK to manufacture CSFs is already
close to capacity and we are in the process of building a major extension to
this facility.
Autocatalyst sales have grown strongly in Asia with good growth in China,
reflecting continued growth in the underlying car market, and increased sales in
Japan where we have put in additional capacity and are gaining market share.
The first half of this year included some sales of heavy duty diesel catalysts
in Europe to original equipment manufacturers (OEMs) for new vehicles launched
since October 2005. Not many such vehicles have been produced and total sales
excluding precious metals of HDD catalysts to OEMs were £6.5 million in the
first half. Sales have ramped up in the second half of the year as all new
vehicles sold now have to meet the new standards. In the United States similar
legislation comes into force at the beginning of January 2007. Our customers
expect to see a significant drop in truck sales in 2007, as a result of the
additional cost of fitting emission control systems to meet the new legislation,
but we still expect the global market for HDD catalysts to be worth
approximately US $700 million (excluding precious metals) by the end of 2008
when vehicle sales are expected to have returned to normal levels.
Process Catalysts and Technologies (PCT) delivered good growth in sales and
profits in the half year. The Ammonia, Methanol, Oil and Gas (AMOG) business
was well ahead of last year with continued strong demand for catalysts and
purification materials for industries where hydrogen or synthesis gas are key
intermediates. Our Catalysts & Chemicals business performed well with increased
sales of sponge nickel catalysts. Sales of catalysts into the pharmaceutical
and fine chemicals sector also continued to grow.
Research Chemicals benefited from the contribution from its new joint venture in
China which was established in 2005/06. Demand in Europe was also well up with
the new catalogue stimulating increased orders.
Davy Process Technology (DPT), which was acquired in February 2006, performed
well in the first six months. DPT develops and licenses chemical process
technologies and successfully concluded two major contracts in the first half of
2006/07. Tracerco, PCT's oil services business, acquired the process
diagnostics business of Quest TruTec in April 2006 for £3.8 million which has
expanded Tracerco's coverage principally in the USA.
Our Fuel Cells business achieved strong growth in sales, from a small base, with
significantly increased orders for membrane electrode assemblies for direct
methanol fuel cells (DMFCs). Most of these sales were for portable fuel cells
which are sold to European consumers. We are continuing to work with a number
of major electronics companies who are developing small DMFC units for use in
mobile phone chargers and laptop computers.
Precious Metal Products Division's sales rose by 27% to £1,861 million boosted
by significantly higher prices for platinum group metals (pgms). Operating
profit increased by 22% to £37.2 million with good growth in both its marketing
& distribution business and its manufacturing operations.
The platinum marketing & distribution business achieved good profit growth with
good demand for platinum and higher pgm prices. Demand for platinum is expected
to show a rise of 5% for calendar 2006. Tightening emissions legislation and
growing production of diesel vehicles has increased demand for autocatalysts,
outweighing a fall in demand for jewellery manufacturing caused by the rising
price. The average price of platinum in the first half of Johnson Matthey's
financial year rose to $1,206 per ounce, up 37% compared to the same period last
year.
The price of palladium rose significantly in the same period, up 78% to $337 per
ounce, supported by significant purchasing by investment funds. However,
industrial demand for palladium is expected to fall by 6% in calendar 2006.
Increasing autocatalyst consumption is being outweighed by a reduction in demand
from jewellery manufacturers in China, where recycling of old jewellery stock
has limited the requirement for new metal.
The price of rhodium has also moved sharply higher, more than doubling in
comparison with the same period last year to average $4,853 per ounce. Strong
demand from the automobile market coupled with interest from speculators
contributed to the increase in what is traditionally a tight and often volatile
market.
The division's pgm fabrication business, Noble Metals, achieved good growth in
the half year with most of the growth coming in the USA. Sales were well up on
prior year with strong demand for medical device components and industrial
products. Demand for pgm refining was also strong benefiting from increased
metal prices. We have focused the Pgm Refining business on recycling high grade
material and supporting other group companies and its performance in the first
six months was much improved. The Colour Technologies business achieved good
growth in operating profit with higher sales of automotive glass enamels and
decorative products.
Pharmaceutical Materials Division's sales rose by 13% to £65 million. Operating
profit grew by 5% to £17.0 million. Most of the growth came in the division's
US businesses which had seen a downturn in 2005/06.
The recovery in the US operations reflected increased demand for both active
pharmaceutical ingredients (APIs) and contract research. Demand for platinum
APIs was particularly strong and included good sales of Oxaliplatin and some
validation lots of Satraplatin(R). The outlook for Satraplatin(R), which
Johnson Matthey has licensed to GPC Biotech, is encouraging with some good
results in phase III clinical trials.
The outlook for sales of controlled drug APIs has also improved with the
announcement by Barr Pharmaceuticals, Inc. of its purchase from Shire plc of
ADDERALL(R) (an immediate release product used in the treatment of Attention
Deficit Hyperactivity Disorder). Johnson Matthey has an exclusive agreement to
supply the API to Barr for this product and already supplies the API used in
Barr's existing generic version. The division will generate additional income
from sales of the branded product in the second half of this year. In addition,
Barr has reached agreement with Shire to launch its generic version of ADDERALL
XR(R) (an extended release product) in April 2009. Johnson Matthey will also
supply the API for this product which could generate significant additional
revenue at that time.
The division's European businesses' profits were slightly ahead of last year
with good sales of specialist opiates offsetting weaker sales of bulk opiates,
particularly codeine. Sales of bulk opiates are expected to recover in the
second half of the year which should improve the overall growth rate.
Ceramics Division's sales were unchanged from last year at £90 million.
Operating profit was 6% lower at £10.2 million.
Margins weakened a little in the first half of 2006/07 and the division gave
back some of the gains it had made last year when both sales and profits were
well ahead. Energy costs increased significantly, particularly in Spain where
the division has its largest manufacturing facility and this eroded some of the
benefits of cost reductions achieved elsewhere in the division. Nevertheless,
the division's margins remained in double figures at 11.3% and the business
continued to be highly cash generative.
Finance
Exchange Rates
The main impact of exchange rates on the group's results comes from the
translation of foreign subsidiaries' profits into sterling. The group's largest
overseas investment is in the USA. The average rate for the US dollar for the
six months to 30th September 2006 was $1.855/£ compared with $1.820/£ for the
first half of last year. The South African rand also weakened from R11.74/£ to
R12.69/£. However, the catalysts manufactured by our South African business are
ultimately for export and the benefit of a weaker rand on margins more than
offsets the translation effect. Excluding the rand, exchange translation
reduced group profits by £0.8 million compared with the first half of last year,
with nearly all the adverse impact attributable to the weaker US dollar.
Interest
In the six months to 30th September 2006 the group's interest charge increased
by £4.5 million to £12.2 million. Average borrowings were significantly higher
than the same period last year, reflecting the impact on borrowings of the
acquisition of DPT, share purchases and higher precious metal prices. Interest
rates also rose significantly, particularly short term rates in the USA.
Despite the increase in the interest charge, interest cover (operating profit /
interest) for the half year remained strong at 10.4 times.
Taxation
The group's tax charge rose by £2.4 million to £33.5 million reflecting the
higher profits made in the period. The average rate was very similar to the
first half of last year at 29.1%. Tax paid of £41.9 million was greater than
tax payable following a below average payment in the second half of last year.
In the first half of last year the group had a cash inflow on tax reflecting the
benefit of a favourable settlement with the UK Revenue.
Cash Flow
In the six months to 30th September 2006 the group had a net cash outflow of
£83.8 million. This included expenditure of £7.5 million on acquisitions and a
net £12.2 million on share buy-backs. Free cash flow, before acquisitions and
share purchases, was an outflow of £64.1 million.
Working capital increased by £73.0 million in the period. The biggest factor in
this rise was significantly higher precious metal prices which impacted both
inventories and receivables. Physical metal stocks were actually lower than on
30th September 2005 and average customer payment terms were unchanged.
Additional working capital was also taken on to support the growth of our
catalyst business.
The cash outflow on capital expenditure in the half year was £56.0 million which
was 1.5 times depreciation. We are planning to spend more on capital
expenditure in the second half with most of the investment in Catalysts
Division. For the year as a whole we expect to spend at a rate of 1.6 times
depreciation with most of the investment in new capacity to meet expected volume
growth. Major projects include: expansion of our diesel products factory at
Royston, UK; completion of the investment at our new factory in Philadelphia,
USA to make similar products for the US market; construction of our new
autocatalyst factories in South Korea and the Russian Federation; and additional
production facilities for AMOG.
Net borrowings rose by £66.3 million to £478.3 million at 30th September 2006.
Equity was £1,041.4 million taking gearing (net debt / equity) to 45.9%. With
continued investment in organic growth, bolt-on acquisitions and some further
share purchases we expect gearing to rise to 50% over the next eighteen months.
Outlook
The group has made a good start to the year with operating profit up 11% and
earnings per share 9% higher in the first six months.
In the second half of the year we expect increased sales of catalysts for heavy
duty diesel vehicles, as the new legislation on emissions now applies to all new
vehicles sold in Europe and similar legislation will come into operation in
North America from 1st January 2007. Although we expect that pre-buying of
trucks in 2006 ahead of the introduction of the new emission standards will
reduce truck sales in 2007, this new market will still generate significant
incremental sales for Johnson Matthey. We should then benefit from further
growth in 2008 as truck sales return to normal levels. Overall we expect
Environmental Catalysts and Technologies to achieve double digit growth in sales
and profits this year.
The high oil price creates favourable market conditions for Process Catalysts
and Technologies. This, in conjunction with economic development in Asia, is
generating increased demand for synthesis gas catalysts and good prospects for
Davy Process Technology. Demand for platinum group metals also remains strong
which should benefit Precious Metal Products Division. Pharmaceutical Materials
Division should continue its recovery in the second half of the year with
further sales growth in the USA. Ceramics Division's performance in the second
half of the year is likely to be below last year but the division should remain
highly cash generative.
Compared with the second half of last year exchange translation is likely to be
negative. The average rate for the US dollar for the second half of last year
was $1.75/£. Each one cent movement in the rate impacts the group's results by
£0.4 million in a full year.
Overall, despite adverse exchange translation, we expect the group to achieve
slightly higher earnings growth in the second half of the year than in the
first.
Consolidated Income Statement
for the six months ended 30th September 2006
Six months ended Year ended
30.9.06 30.9.05 31.3.06
Notes £ million £ million £ million
Revenue 2 3,012.1 2,282.9 4,755.9
Cost of goods sold (2,792.1) (2,088.2) (4,343.7)
Gross profit 220.0 194.7 412.2
Operating expenses (93.2) (80.2) (177.5)
Impairment costs - - (6.0)
Operating profit 2,3 126.8 114.5 228.7
Interest payable (17.2) (15.7) (31.7)
Interest receivable 5.0 8.0 17.0
Share of profit / (loss) of associates 0.5 (0.4) (0.2)
Profit before tax 115.1 106.4 213.8
Income tax expense 4 (33.5) (31.1) (62.5)
Profit for the period 81.6 75.3 151.3
Attributable to:
Equity holders of the parent company 81.9 75.7 152.1
Minority interests (0.3) (0.4) (0.8)
81.6 75.3 151.3
pence pence pence
Earnings per ordinary share attributable to the equity holders of the parent
company
Total and continuing operations
Basic 5 38.3 35.2 70.8
Diluted 5 38.0 35.1 70.5
Consolidated Balance Sheet
as at 30th September 2006
30.9.06 30.9.05 31.3.06
Notes £ million £ million £ million
Assets
Non-current assets
Property, plant and equipment 643.0 610.3 661.1
Goodwill 401.0 378.7 402.4
Other intangible assets 40.9 29.7 41.3
Deferred income tax assets 8.8 2.2 4.4
Investments and other receivables 11.0 6.6 10.4
Post-employment benefits net assets 78.4 49.6 75.0
Total non-current assets 1,183.1 1,077.1 1,194.6
Current assets
Inventories 362.6 344.2 345.8
Current income tax assets - 0.5 3.6
Trade and other receivables 539.7 406.5 478.5
Cash and deposits 9 99.2 113.8 133.0
Investments and other financial assets 22.3 4.1 3.3
Other current assets 7.1 7.1 7.1
Total current assets 1,030.9 876.2 971.3
Total assets 2,214.0 1,953.3 2,165.9
Liabilities
Current liabilities
Trade and other payables (417.3) (325.0) (385.2)
Current income tax liabilities (53.7) (51.5) (66.0)
Borrowings and finance leases 9 (27.9) (90.9) (90.3)
Other financial liabilities (2.3) (10.0) (4.2)
Provisions (8.4) (11.8) (9.1)
Total current liabilities (509.6) (489.2) (554.8)
Non-current liabilities
Borrowings, finance leases and related swaps 9 (549.6) (384.3) (454.7)
Deferred income tax liabilities (51.5) (45.1) (49.7)
Employee benefits obligations (56.6) (53.1) (56.2)
Provisions (4.5) (3.0) (5.2)
Trade and other payables (0.8) (0.8) (0.8)
Total non-current liabilities (663.0) (486.3) (566.6)
Total liabilities (1,172.6) (975.5) (1,121.4)
Net assets 1,041.4 977.8 1,044.5
Equity
Share capital 220.4 219.8 220.2
Share premium account 145.7 141.5 144.4
Treasury shares 7 (13.7) - -
Shares held in employee share ownership trusts (61.9) (45.7) (63.0)
Other reserves (1.7) 6.3 28.5
Retained earnings 746.4 648.9 708.0
1,035.2 970.8 1,038.1
Minority interests 6.2 7.0 6.4
Total equity 8 1,041.4 977.8 1,044.5
Consolidated Cash Flow Statement
for the six months ended 30th September 2006
Six months ended Year
ended
30.9.06 30.9.05 31.3.06
Notes £ million £ million £ million
Cash flows from operating activities
Profit before tax 115.1 106.4 213.8
Adjustments for:
Share of (profit) / loss in associates (0.5) 0.4 0.2
Depreciation, amortisation and profit on sale of non-current assets and 37.5 33.2 76.7
investments
Share-based payments 2.6 2.1 3.2
Changes in working capital and provisions (73.0) (28.7) (68.0)
Changes in fair value of financial instruments (1.1) (1.0) (12.4)
Net interest 12.2 7.7 14.7
Income tax (paid) / received (41.9) 6.4 (15.9)
Net cash inflow from operating activities 50.9 126.5 212.3
Cash flows from investing activities
Dividends received from associates 0.1 0.1 0.1
Purchases of non-current assets and investments (56.0) (48.4) (120.3)
Proceeds from sale of non-current assets and investments 0.1 1.9 5.7
Purchases of businesses (7.5) (1.1) (24.3)
Net cash outflow from investing activities (63.3) (47.5) (138.8)
Cash flows from financing activities
Net purchase of own shares (12.2) (11.9) (25.9)
Proceeds from borrowings and finance leases 54.8 14.0 82.3
Dividends paid to equity holders of the parent company 6 (44.9) (40.9) (60.4)
Dividends paid to minority shareholders - - (0.2)
Interest paid (19.2) (15.6) (30.6)
Interest received 4.9 7.9 16.6
Net cash outflow from financing (16.6) (46.5) (18.2)
(Decrease) / increase in cash and cash equivalents in period (29.0) 32.5 55.3
Exchange differences on cash and cash equivalents (5.9) 4.8 5.8
Cash and cash equivalents at beginning of period 125.1 64.0 64.0
Cash and cash equivalents at end of period 9 90.2 101.3 125.1
Reconciliation to net debt
(Decrease) / increase in cash and cash equivalents in period (29.0) 32.5 55.3
Proceeds from borrowings and finance leases (54.8) (14.0) (82.3)
Change in net debt resulting from cash flows (83.8) 18.5 (27.0)
Borrowings acquired with subsidiaries - - (1.4)
Exchange differences on net debt 17.5 (9.7) (13.4)
Movement in net debt in period (66.3) 8.8 (41.8)
Net debt at beginning of period (412.0) (370.2) (370.2)
Net debt at end of period 9 (478.3) (361.4) (412.0)
Consolidated Statement of Recognised Income and Expense
for the six months ended 30th September 2006
Six months ended Year ended
30.9.06 30.9.05 31.3.06
£ million £ million £ million
Currency translation differences on foreign currency net
investments and
related loans (51.7) 19.6 42.3
Fair value gain on available-for-sale investments transferred - (0.8) (0.8)
to profit on sale
Cash flow hedges 5.4 3.6 (6.2)
Fair value gains / (losses) on net investment hedges 15.8 (5.4) (12.5)
Actuarial gain on post-employment benefits assets and - - 19.6
liabilities
Tax on above items taken directly to or transferred from 0.2 (4.3) (7.8)
equity
Net (expense) / income recognised directly in equity (30.3) 12.7 34.6
Profit for the period 81.6 75.3 151.3
Total recognised income and expense relating to the period 51.3 88.0 185.9
IFRS transition adjustment for financial instruments - 2.7 2.7
51.3 90.7 188.6
Total recognised income and expense attributable to:
Equity holders of the parent company 51.7 88.4 186.7
Minority interests (0.4) (0.4) (0.8)
51.3 88.0 185.9
IFRS transition adjustment for financial instruments
attributable to:
Equity holders of the parent company - 2.7 2.7
Notes on the Accounts
for the six months ended 30th September 2006
1 Basis of preparation
The interim accounts were approved by the Board of Directors on 21st November 2006, and are unaudited but have
been reviewed by the auditors. They do not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985, but have been prepared on the basis of the accounting policies set out in the annual report
and accounts for the year ended 31st March 2006. Information in respect of the year ended 31st March 2006 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 statutory accounts was unqualified and did not contain any statement under sections
237(2) and 237(3) of the Companies Act 1985.
2 Segmental information by business segment
Precious
Metal Pharmaceutical
Catalysts Products Materials Ceramics Total
£ million £ million £ million £ million £ million
Six months ended 30th September 2006
Sales to external customers 996.1 1,860.5 65.4 90.1 3,012.1
External sales excluding precious metals 458.0 134.3 61.2 90.1 743.6
Segment result 70.8 37.2 17.0 10.2 135.2
Unallocated corporate expenses (8.4)
Operating profit 126.8
Six months ended 30th September 2005
Sales to external customers 675.1 1,460.0 57.9 89.9 2,282.9
External sales excluding precious metals 375.2 117.4 54.8 89.9 637.3
Segment result 65.2 30.6 16.2 10.8 122.8
Unallocated corporate expenses (8.3)
Operating profit 114.5
Year ended 31st March 2006
Sales to external customers 1,477.4 2,962.4 133.9 182.2 4,755.9
External sales excluding precious metals 786.4 245.4 127.2 182.2 1,341.2
Segment result before impairment costs 134.2 62.2 33.8 21.3 251.5
Impairment costs - (6.0) - - (6.0)
Segment result 134.2 56.2 33.8 21.3 245.5
Unallocated corporate expenses (16.8)
Operating profit 228.7
Notes on the Accounts
for the six months ended 30th September 2006
3 Effect of exchange rate changes on translation of foreign subsidiaries' operating profits
Six months ended Year
ended
Average exchange rates used for translation of results of foreign 30.9.06 30.9.05 31.3.06
operations
US dollar / £ 1.855 1.820 1.785
Euro / £ 1.463 1.468 1.466
South African rand / £ 12.69 11.74 11.42
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 ended
30.9.06
At this At last
year's year's Effect
rates rates
£ million £ million £ million
Catalysts 70.8 71.5 (0.7)
Precious Metal Products 37.2 37.3 (0.1)
Pharmaceutical Materials 17.0 17.1 (0.1)
Ceramics 10.2 10.1 0.1
Unallocated corporate expenses (8.4) (8.4) -
Operating profit 126.8 127.6 (0.8)
4 Income tax expense
Six months ended Year
ended
30.9.06 30.9.05 31.3.06
£ million £ million £ million
United Kingdom 13.3 14.3 27.1
Overseas 20.2 16.8 35.4
33.5 31.1 62.5
The group's share of associated undertakings' taxation for the six months ended 30th September 2006 was £
nil (six months ended 30th September 2005 £ nil, year ended 31st March 2006 £ nil).
Notes on the Accounts
for the six months ended 30th September 2006
5 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a weighted average of 213,642,055 shares in issue
(six months ended 30th September 2005 - 215,043,409 shares, year ended 31st March 2006 - 214,895,523 shares). 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. These adjustments give rise to an
increase in the weighted average number of shares in issue of 1,915,624 (six months ended 30th September 2005 -
447,034 shares, year ended 31st March 2006 - 967,320 shares).
Earnings per ordinary share before impairment costs are calculated as follows:
Six months ended Year
ended
30.9.06 30.9.05 31.3.06
£ million £ million £ million
Profit for the period attributable to equity holders of the 81.9 75.7 152.1
parent company
Impairment costs - - 6.0
Tax thereon - - (1.8)
Profit before impairment and restructuring costs 81.9 75.7 156.3
pence pence pence
Basic earnings per share before impairment costs 38.3 35.2 72.7
6 Dividends
An interim dividend of 9.9 pence per ordinary share will be paid on 6th February 2007 to shareholders on the
register at the close of business on 1st December 2006. The estimated amount to be paid is £21.1 million. In
accordance with IFRS accounting requirements this dividend has not been recognised in these
accounts.
Six months ended Year
ended
30.9.06 30.9.05 31.3.06
£ million £ million £ million
2004/05 final ordinary dividend paid - 19.0 pence per share - 40.9 40.9
2005/06 interim ordinary dividend paid - 9.1 pence per share - - 19.5
2005/06 final ordinary dividend paid - 21.0 pence per share 44.9 - -
44.9 40.9 60.4
7 Share purchases
During the six months ended 30th September 2006 the company purchased 1,060,000 of its own shares at a cost of
£13.7 million. These shares are being held as treasury shares.
Notes on the Accounts
for the six months ended 30th September 2006
8 Changes in equity
Six months ended Year
ended
30.9.06 30.9.05 31.3.06
£ million £ million £ million
Equity at end of prior period 1,044.5 929.9 929.9
IFRS transition adjustment for financial instruments - 2.7 2.7
Equity at beginning of period 1,044.5 932.6 932.6
Total recognised income and expense relating to the period 51.3 88.0 185.9
Dividends paid to equity holders of the parent company (44.9) (40.9) (60.4)
Dividends payable to minority interests (0.2) (0.2) (0.3)
Minority interest arising on formation of subsidiary 0.3 - -
New share capital subscribed 1.5 2.0 5.3
Purchase of own shares (13.7) - -
Purchase of shares for employee share ownership trusts - (8.0) (25.3)
Share-based payments (net of shares transferred to employees) 2.6 2.1 3.2
Tax on items taken directly to or transferred from equity - 2.2 3.5
Equity at end of period 1,041.4 977.8 1,044.5
9 Net debt
Six months ended Year
ended
30.9.06 30.9.05 31.3.06
£ million £ million £ million
Cash and deposits 99.2 113.8 133.0
Bank overdrafts (9.0) (12.5) (7.9)
Cash and cash equivalents 90.2 101.3 125.1
Current other borrowings and finance leases (18.9) (78.4) (82.4)
Non-current borrowings, finance leases and related swaps (549.6) (384.3) (454.7)
Net debt (478.3) (361.4) (412.0)
10 Precious metal operating leases
The group leases precious metals from banks for specified periods (typically a few months) and for which the
group pays a fee. These arrangements are classified as operating leases. The group holds sufficient precious
metal inventories to meet all the obligations under these lease arrangements as they fall due. At 30th September
2006 precious metal leases were £121.6 million (30th September 2005 £127.8 million, 31st March 2006 £93.2
million).
11 Acquisitions
On 13th April 2006 the group purchased most of the business of United Farmaceuticals Limited for £1.9
million plus costs of £0.1 million. The estimated fair value of the assets acquired was £0.9 million giving
goodwill of £1.1 million.
On 21st April 2006 the group purchased the process diagnostics business of Quest TruTec for £3.8 million
plus costs of £0.1 million. The estimated fair value of the assets acquired was £0.7 million giving goodwill of
£3.2 million. £0.1 million of the consideration is deferred.
Independent Review Report
by KPMG Audit Plc to Johnson Matthey Plc
Introduction
We have been engaged by the company to review the financial information for the six months ended 30th September
2006 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow
Statement, the Consolidated Statement of Recognised Income and Expense and the related notes. 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 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 2006.
KPMG Audit Plc
Chartered Accountants
London
21st November 2006
Financial Calendar
2006
29th November
Ex dividend date
1st December
Interim ordinary dividend record date
2007
6th February
Payment of interim dividend on ordinary shares
7th June
Announcement of results for the year ending 31st March 2007
13th June
Ex dividend date
15th June
Final ordinary dividend record date
24th July
116th Annual General Meeting (AGM)
7th August
Payment of final dividend subject to declaration at the AGM
Cautionary Statement
This announcement contains forward looking statements that are subject to risk factors associated with, amongst
other things, the economic and business circumstances occurring from time to time in the countries and sectors in which
the group operates. It is believed that the expectations reflected in this announcement are reasonable but they may be
affected by a wide range of variables which could cause actual results to differ materially from those currently
anticipated.
Johnson Matthey Public Limited Company
Registered Office: 40-42 Hatton Garden, London EC1N 8EE
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
The company news service from the London Stock Exchange
Monday, 20th May 2024
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