Final Results
Johnson,Matthey PLC
05 June 2003
For Release at 7.00 am Thursday 5th June 2003
Preliminary Results for the year ended 31st March 2003
Continued growth in earnings and dividends despite weak markets
Results
• Operating profit before exceptional items and goodwill amortisation up
6% to £205.7 million, despite adverse exchange translation of £10.0 million
• Profit before tax, exceptional items and goodwill amortisation up 3% to
£192.5 million
• Earnings per share before exceptional items and goodwill amortisation up
4% to 62.6 pence
• Dividend for the year increased by 4% to 25.5 pence
Business developments
• Catalysts' profits up 10% to £104.4 million led by good growth in
autocatalysts
• Synetix achieves good results since acquisition and substantially
strengthens Johnson Matthey's position in the global catalyst market
• New production capacity being installed at fuel cell components factory
at Swindon
• Strong growth in Pharmaceutical Materials with profits up by 18% to
£36.9 million. All parts of the division achieving good growth
• Precious Metals' profits reduced by 10% to £50.1 million as a result of
lower average prices and subdued trading conditions for palladium and
rhodium. Platinum demand remains strong
• Colours & Coatings' profits up by 12% to £28.5 million benefiting from
cost savings and good growth in coatings for the glass industry
• Johnson Matthey's UK pension fund in surplus on an FRS 17 basis at 31
March 2003. Group to adopt FRS 17 for 2003/04
Commenting on the results, Chris Clark, Chief Executive of Johnson Matthey said:
'Johnson Matthey has again delivered increases in earnings and dividends despite
a substantial fall in the US dollar and lower prices for palladium and rhodium.
Market conditions will remain challenging in 2003/04 but the group's investment
in its growth businesses leaves us well positioned for the future.'
Enquiries:
Chris Clark, Chief Executive, Johnson Matthey 020 7269 8435
John Sheldrick, Group Finance Director, Johnson Matthey 020 7269 8438
Howard Lee / Laura Hickman, Gavin Anderson & Co 020 7554 1400
www.matthey.com
Review of the year ended 31st March 2003
Introduction
Johnson Matthey delivered good results in 2002/03 against a background of more
difficult market conditions. Three of the group's divisions achieved double
digit growth in operating profit for the year despite adverse exchange
translation. We successfully completed the purchase of Synetix from ICI, which
has performed well since acquisition and has substantially strengthened our
position in the global catalysts market. The addition of Synetix to Catalysts &
Chemicals Division increases our focus towards catalyst products and we have
renamed the division Catalysts to reflect that change.
Review of Results
In the financial year to 31st March 2003, Johnson Matthey's profit before tax,
exceptional items and goodwill amortisation rose by 3% to £192.5 million.
Earnings per share before exceptional items and goodwill amortisation rose by 4%
to 62.6 pence.
Total sales fell by 10% to £4.3 billion reflecting significantly lower prices
for palladium and rhodium and the lower level of trading activity in those
metals. Sales excluding the value of precious metals rose by 6% to £1.2 billion
with good growth in Pharmaceutical Materials and increased sales in Catalysts
following the acquisition of Synetix.
Operating profit before exceptional items and goodwill amortisation also rose by
6% to £205.7 million. With over 40% of the group's profits earned in North
America, the sharp fall in the value of the US dollar adversely affected
exchange translation. At constant exchange rates the group's operating profit
before exceptional items and goodwill amortisation would have risen by 12%.
The group's interest charge rose by £7.1 million as a result of higher average
borrowings, particularly following the acquisition of Synetix in the second half
of the year. Goodwill amortisation rose by £6.9 million, also reflecting the
impact of Synetix and the other acquisitions undertaken over the last two years.
Exceptional items reduced earnings by £0.7 million. Earnings per share after
goodwill amortisation and exceptional items rose by 15% to 56.2 pence.
Dividend
The board is recommending to shareholders a final dividend of 17.7 pence, making
a total dividend for the year of 25.5 pence, an increase of 4%. The proposed
dividend would be covered 2.5 times by earnings before goodwill amortisation and
exceptional items.
Operations
Catalysts Division's sales fell by 17% to £1,083 million, largely as a result of
the sharp fall in the palladium price. Sales excluding the value of precious
metals rose by 9% to £652 million. The division's operating profit rose by 10%
to £104.4 million. Synetix made a profit of £9.2 million in the five months
following acquisition by Johnson Matthey. Adverse exchange translation reduced
the division's profit by £7.3 million.
Following the acquisition of Synetix, the two largest sectors of Catalysts
Division were renamed Environmental Catalysts and Technologies and Process
Catalysts and Technologies. The Environmental Catalysts and Technologies sector
encompasses Johnson Matthey's worldwide autocatalysts, heavy duty diesel and
stationary source emission control businesses. Process Catalysts and
Technologies includes catalysts sold to the chemicals, pharmaceutical, oil and
gas and other industries, plus platinum group metal (pgm) refining, pgm
chemicals and research chemicals. The third part of Catalysts Division is our
Fuel Cells business.
Environmental Catalysts and Technologies (ECT) had a good year. Global light
vehicle sales increased by 1% in our fiscal year. They were 2% down in the US
and 3% down in Europe but in Asia vehicle sales rose by 10%. Our catalyst unit
sales were flat compared with 2001/02. Some of our key customers lost market
share in the period but our advanced products attracted new customers in Europe.
Our new manufacturing facility in Shanghai became fully operational and was
profitable during the year.
Sales of products for heavy duty diesel engines grew in all the major markets,
doubling in the US and becoming a significant factor for the first time in the
Asian region with strong sales for retrofit to vehicles in the Tokyo
Metropolitan area.
Process Catalysts and Technologies (PCT) achieved strong growth in sales
excluding precious metals and in operating profit benefiting from a good
contribution from Synetix. Since acquisition Synetix has performed in line with
our expectations when the business was acquired, despite weakness in some end
markets.
Results for the rest of PCT were mixed with good sales of pgm catalysts,
particularly to the pharmaceutical and fine chemical sector, but weak demand for
refining where profits fell reflecting lower palladium and rhodium prices.
Research Chemicals, our catalogue business, continued to show strong growth with
the successful integration of Avocado Research Chemicals, which was acquired in
February 2002.
The Fuel Cells business continued to develop as planned in 2002/03. The net
operating loss for the year was £12.5 million. The first phase of our membrane
electrode assembly (MEA) factory at Swindon in the UK was successfully completed
in the first half of the year. The next phase of the investment is now underway
which will significantly expand capacity to meet the production schedules of our
key customers.
Effort has increasingly focused on key partners in the supply chain as the Fuel
Cells business moves towards full commercialisation. Good progress has been
made in establishing collaborative arrangements with both suppliers and
customers.
Precious Metals Division's sales fell by 10% to £2.9 billion reflecting lower
average prices for palladium and rhodium and subdued trading activity in those
metals. The division's operating profit fell by 10% to £50.1 million. Adverse
exchange translation contributed £1.1 million of this fall.
Demand for platinum grew by 5% in 2002, with buoyant retail sales of platinum
jewellery in China despite higher prices. Demand from the autocatalyst sector
was also up, although purchases by the car companies were limited by the use of
inventories by some of the major manufacturers. The average price of platinum
for Johnson Matthey's financial year 2002/03 rose by 17% to $586 per ounce.
The story for palladium and rhodium was very different, with average prices
falling by 36% and 44% respectively. Demand for palladium by the auto industry
fell dramatically due to the very substantial use of inventories by some of the
major manufacturers. Car makers also switched some applications from palladium
to platinum as a consequence of the high and volatile price of palladium over
the last few years. The average price of Johnson Matthey's 'basket' of pgms
fell by 6% reducing commission income, and overall trading activity was also
down on the previous year.
The division's platinum fabrication businesses continued to achieve good growth,
particularly for products for medical devices. Trading profit for the gold and
silver businesses was below last year reflecting the very competitive conditions
in the gold refining market, although after deducting interest on gold and
silver leases profits were up.
Colours & Coatings Division increased its sales by 1% to £256 million.
Operating profit for the division rose by 12% to £28.5 million with all three
sectors ahead. Exchange translation was slightly positive for the division at
£0.3 million with the benefit of the stronger euro largely offset by weaker
currencies elsewhere.
Our glass coatings business was the best performing sector achieving good growth
in sales and operating profit despite weaker markets. This growth reflected
market share gains in Europe and increased sales to Russia and China. The
Structural Ceramics sector, which sells mainly to the tile industry, improved
its margins and achieved sales in line with prior year despite weaker markets.
Speciality Coatings achieved strong profit growth benefiting from the
rationalisation programme announced last year and the closure of a major site in
Staffordshire.
Pharmaceutical Materials Division's sales increased by 21% to £128 million.
Operating profit rose by 18% to £36.9 million. The division benefited from a
full year's contribution from Macfarlan Smith (Meconic) compared with nine
months' contribution in 2001/02. Exchange translation was adverse, however,
with the weaker US dollar reducing profits by £1.9 million, mainly in the second
half of the year.
The division's US manufacturing business achieved good growth in sales and
profits benefiting from the success of the new products launched towards the end
of 2001/02. Macfarlan Smith achieved good growth in sales of bulk opiates and
improved its margins with the successful introduction of capacity to extract
morphine and codeine direct from poppy straw. Pharm-Eco, the division's
US-based contract research business, was also well up on prior year.
Exceptional Items and Goodwill Amortisation
Exceptional items included in operating profit gave rise to a net charge of £7.6
million. The main item was a £6.5 million charge for integrating Synetix into
Johnson Matthey following its acquisition from ICI on 1st November 2002. The
integration costs include a provision to cover the costs of exiting from a site
at Hunwick, IT integration costs and other restructuring charges.
The group made an exceptional gain of £5.1 million on the sale of its remaining
unhedged palladium stock. This was offset by a charge of £4.8 million to reduce
costs in the Catalysts Division for those parts of the business which are
adversely affected by weak market demand. This rationalisation will reduce
headcount by over 250, mainly in the US.
A restructuring charge of £1.4 million was incurred following the merger of
Johnson Matthey's Australian gold refining business with AGR to form AGR Matthey
in which the group has retained a 20% stake. The formation of AGR Matthey also
gave rise to a loss on disposal of £6.0 million, of which £5.4 million is
related to historic goodwill which had already been written off to reserves.
On 8th November 2002 Johnson Matthey announced that Anglo Platinum had taken a
17.5% stake in its fuel cell components subsidiary, Johnson Matthey Fuel Cells
Limited. Anglo Platinum has contributed its share of the intellectual property
rights and know-how jointly developed under the agreement announced in May 1993.
In addition, Anglo Platinum paid £20 million, which has resulted in an
exceptional gain of £10.9 million.
After including tax credits of £2.0 million, the total impact of exceptional
items on earnings was a small net cost of £0.7 million.
Goodwill amortisation rose by £6.9 million to £13.7 million. Goodwill on the
acquisition of Synetix amounted to £191.4 million and the amortisation for
Johnson Matthey's five months period of ownership was £4.0 million.
Interest
The group's interest charge rose by £7.1 million to £13.2 million. The increase
reflected higher average borrowings as a result of the acquisitions undertaken
part way through 2001/02 and the acquisition of Synetix on 1st November 2002.
Interest on gold and silver leases fell to £1.2 million from £3.5 million in
2001/02 when lease rates, particularly for silver, had been unusually high.
Lease costs for platinum were high throughout 2002/03 reflecting strong levels
of demand for the metal during the year.
Exchange Rates
Exchange translation reduced group profits by £10.0 million compared with last
year. About £7.1 million of this fall related to the US dollar where the
average rate against sterling fell by 8% from $1.43/£ to $1.55/£.
Another £2.5 million of the exchange impact related to the South African rand
whose value against sterling showed significant variation over the year. The
average rate for the rand was R14.96/£ compared with R13.70/£ in 2001/02. The
products which the group manufactures in South Africa are generally for export
and the group was able to achieve higher prices in rand, which largely
compensated for this adverse translation effect.
Taxation
The group's tax charge increased by £4.3 million to £54.5 million. Most of the
increase related to lower tax credits on exceptional items. Before exceptional
items and goodwill amortisation the group's average tax rate fell slightly from
29.9% to 29.7%.
Cash Flow
Johnson Matthey's net cash inflow from operations was £229.9 million which was
3% up on last year. Capital expenditure was £7.3 million lower than last year
at £126.5 million and represented 2.3 times depreciation. With the slowdown in
some of the markets in which the group operates we are planning to spend at a
lower rate in 2003/04 although still maintaining investment to support future
growth opportunities. As a consequence of the continued high level of capital
expenditure in 2002/03, free cash flow for the group (before acquisitions and
divestments) was slightly negative at £4.5 million.
The group spent £267.0 million on the acquisition of Synetix (including costs)
and £2.8 million on Cascade Biochem Limited. The group received £20.0
million from Anglo Platinum in part payment for its stake in Johnson Matthey
Fuel Cells Limited. Including acquisitions, divestments and shares issued the
group had a net cash outflow for the year of £250.5 million.
After taking into account favourable exchange translation on the group's US
dollar borrowings, net borrowings increased by £243.5 million to £402.5 million.
Johnson Matthey's balance sheet remains strong with shareholders' funds rising
by £81.9 million to £895.6 million and gearing (net borrowings/shareholders'
funds and minority interests) of 44%.
Pensions
For the financial year ended 31st March 2003 the group has adopted the
transitional arrangements for reporting under FRS 17 (the new accounting
standard on retirement benefits). Under these arrangements the surplus or
deficit arising on each of the group's main pension funds calculated in
accordance with FRS 17 is shown as a note to the accounts.
The group's UK defined benefit pension funds have a significant proportion of
their assets invested in equities. In the year to 31st March 2003 the FTSE All
Share index fell by 32% and the surplus on the group's funds was significantly
reduced. Nevertheless the group's UK schemes still showed a small surplus at
31st March 2003 of £6.3 million. Worldwide, including provisions for the
group's post-retirement healthcare schemes and pension related deferred tax
assets and liabilities, the group had a net liability for retirement benefits of
£19.2 million at 31st March 2003.
The effect that FRS 17 would have had on the profit and loss account for the
financial year 2002/03 is shown in note 7. The net effect would have been a
reduction in profit before tax of £2.6 million. The board of Johnson Matthey
has taken the decision to adopt FRS 17 in full for the financial year 2003/04.
Business Developments
Our newly renamed Catalysts Division continues to perform well, maintaining its
record of strong growth despite the challenges presented by the world's
economies. The new name reflects the significant changes in the division in the
last few years, particularly following the acquisition of Synetix in November
2002 and better describes its key markets and strategic direction.
The Synetix acquisition has brought world leading base metal process catalyst
technology that complements our strength in precious metal catalysts. We have
now fully integrated the former Synetix businesses into PCT, elevating Johnson
Matthey to a strong number two in the world catalysts market. The acquisition
has broadened the sectors that we serve to include market leading positions in
ammonia, methanol, hydrogen, edible oils and oleochemicals.
Our combined research and development and sales teams are working to realise the
synergies we envisaged from putting these businesses together. We have already
identified new opportunities in applying pgm catalyst technology in traditional
base metal applications such as the manufacture of oleochemicals. Excellent
progress is also being made with the promising growth opportunities that we
identified at the time of the acquisition. These include the gas to liquids
(GTL) process, which uses a series of customised catalysts to convert stranded
natural gas to sulphur free diesel fuel. We are now working with all the
leading players in the GTL field and have already secured important new
business. We expect the GTL catalysts market to develop over the next five
years and it is estimated that it could be worth over $400 million a year by
2010.
Another growth opportunity is in the application of chiral catalysts in the
pharmaceutical industry. This is driven by regulators around the world
increasingly requiring pharmaceutical companies to produce a specific chiral
version of a drug and is a field in which our combined business has a
particularly strong position.
In ECT our commitment to investment in product development and manufacturing
technology has enabled us to maintain growth in our business despite weaker car
markets in both North America and Europe. Our new autocatalyst plant in China
is now operating profitably and we are increasing our market share in Asia,
which has outpaced both North America and Europe to become the world's largest
producer of light duty vehicles. We expanded production capacity at our South
African and Malaysian plants and embarked on the construction of a new
manufacturing unit in Japan. Significant investments in our technology centres
were also started in the UK and in Sweden.
The market for emission control catalysts for heavy duty diesel vehicles
continues to present good opportunities for future growth. The last year has
seen major increases in our sales to the heavy duty diesel retrofit market,
particularly in the United States and Japan. We are working closely with
customers around the world to meet progressively tighter and more challenging
emissions legislation that will come into force over the next five years
creating a major new original equipment market for catalysts for heavy duty
diesel trucks and buses.
The Fuel Cells business continues to make excellent progress. In the last year
it has taken several important steps towards establishing itself as the emerging
fuel cell industry's supplier of choice for catalysts and catalysed components.
We have established strong partnerships with key system integrators in the fuel
cell industry who have formally selected Johnson Matthey to work with them to
produce commercial products for sale in the next few years. In some cases we
have been selected as the sole supplier. The 'early adopter' markets for
stationary, back up and portable power are expected to be the first examples of
true commercial products featuring fuel cells. Mass produced products for
transport applications are expected at the end of this decade and into the next.
At our dedicated MEA plant in Swindon, further investment is underway aimed at
improving the production process and increasing capacity so that we can remain
in step with the growing requirements of our customers.
During the year we announced that Anglo Platinum had taken a 17.5% stake in the
Fuel Cells business in return for its share of the intellectual property rights
and know-how developed under a long term fuel cells research and development
agreement entered into in 1993 and an additional payment of £20 million.
Johnson Matthey is the world's largest fabricator and distributor of platinum
group metals (pgms). We are the sole marketing agent for Anglo Platinum, which
is the world's leading primary producer of pgms. The outlook for platinum
demand remains encouraging with increasing use in jewellery, diesel emission
control and fuel cells. The outlook for palladium is less good with supply
exceeding demand. We continue to seek new markets for all the pgms and to
invest in R&D to find new applications for these metals.
Our pgm fabrication business has achieved steady growth over the last few years.
One of the most rapidly growing markets is products for cardiovascular
devices. These utilise the unique characteristics of platinum group metal
alloys and the super-elastic properties of nitinol. A new R&D centre has been
established at our Pennsylvania facility to help meet customer demand for new
components for medical products.
Colours & Coatings made good progress in 2002/03. The major rationalisation
programme to reduce the cost base announced in January 2002, which included the
closure of a major site in Staffordshire, was completed on time and with
benefits exceeding those originally planned. Production was successfully
transferred to other sites with no material loss of sales. As a consequence,
margins for the division grew by 1% to 11.1%.
As well as efficiency improvements the division has been able to gain market
share by introducing new products, particularly in coating materials for glass.
New improved product ranges, including recyclable, lead free products have been
well received by the market. Our new frit facilities in Spain and Brazil, which
produce coating materials for the tile industry, were successfully commissioned
in 2002 and are now fully operational. With this investment completed, we
expect the division to be significantly cash generative going forward.
Pharmaceutical Materials Division, which became a stand alone division in 2001/
02 following the acquisitions of Pharm-Eco and Macfarlan Smith, enjoyed another
very successful year in 2002/03 and is well positioned for future growth. In
October 2002 we announced the acquisition of Cascade Biochem Limited, a small
company focused on the manufacture and supply of prostaglandins and other
complex molecules as active pharmaceutical ingredients for the pharmaceutical
industry. Market interest in prostaglandin products is high and the division is
in the process of negotiating commercial relationships for its key products. In
support of the commercialisation of its product pipeline a programme of capacity
expansion has begun at Cascade's Cork facility.
We are continuing to invest in the rest of the division to develop future growth
opportunities. At our facility at West Deptford in the US we are putting in
capacity to manufacture morphine and codeine, which we plan to be in place by
the end of this fiscal year. At Pharm-Eco we are building additional
laboratories and small scale manufacturing suites to meet increasing demand. At
Macfarlan Smith we are investing in new capacity and in infrastructure to meet
the projected future growth in demand. Our Edinburgh factory has just received
a successful inspection by the FDA, which will enable us to sell some products
manufactured in Scotland into the US.
Outlook
Johnson Matthey has again delivered increases in earnings and dividends despite
a substantial fall in the US dollar and lower prices for palladium and rhodium.
Market conditions will remain challenging in 2003/04 but the group's investment
in its growth businesses leaves us well positioned for the future.
Consolidated Profit and Loss Account
for the year ended 31st
March 2003
2003 2003 2003 2002 2002
Before Before
exceptional Exceptional exceptional
items and items and items and
goodwill goodwill goodwill
amortisation amortisation Total amortisation Total
Notes £ million £ million £ million £ million £ million
Turnover 1
Continuing operations 4,260.5 - 4,260.5 4,828.9 4,828.9
Acquisitions 63.4 - 63.4 - -
Total continuing operations 4,323.9 - 4,323.9 4,828.9 4,828.9
Discontinued operations - - - 1.2 1.2
Group turnover 4,323.9 - 4,323.9 4,830.1 4,830.1
Operating profit 1
Continuing operations 195.8 - 195.8 193.9 193.9
Acquisitions 9.4 - 9.4 - -
Continuing operations before 205.2 - 205.2 193.9 193.9
goodwill amortisation
Goodwill amortisation - (13.7) (13.7) - (6.8)
Continuing operations before 205.2 (13.7) 191.5 193.9 187.1
exceptional items
Exceptional items 2 - (7.4) (7.4) - (18.1)
Total continuing operations 205.2 (21.1) 184.1 193.9 169.0
Discontinued operations - - - (0.5) (0.5)
Group operating profit 205.2 (21.1) 184.1 193.4 168.5
Share of profit in associates 0.5 - 0.5 (0.1) (0.1)
Share of exceptional items in 2 - (0.2) (0.2) - -
associates
Total operating profit 205.7 (21.3) 184.4 193.3 168.4
Profit on sale of 3 - 4.9 4.9 - -
continuing operations
Profit on sale / closure of - - - - (5.6)
discontinued operations
Profit on ordinary 205.7 (16.4) 189.3 193.3 162.8
activities before interest
Net interest (13.2) - (13.2) (6.1) (6.1)
Profit on ordinary 192.5 (16.4) 176.1 187.2 156.7
activities before taxation
Taxation 4 (57.2) 2.7 (54.5) (56.0) (50.2)
Profit after taxation 135.3 (13.7) 121.6 131.2 106.5
Minority interests 0.4 - 0.4 0.3 0.3
Profit attributable to 135.7 (13.7) 122.0 131.5 106.8
shareholders
Dividends 5 (55.5) - (55.5) (53.2) (53.2)
Retained profit 80.2 (13.7) 66.5 78.3 53.6
pence pence pence pence
Earnings per ordinary share
Basic 6 62.6 56.2 60.4 49.0
Diluted 6 62.2 55.9 59.7 48.5
Dividend per ordinary share 5 25.5 25.5 24.6 24.6
Consolidated Balance Sheet
as at 31st March 2003
2003 2002
£ million £ million
Fixed assets
Goodwill 369.1 182.6
Tangible fixed assets 601.1 495.1
Investments 6.4 2.7
976.6 680.4
Current assets
Stocks 438.4 414.3
Debtors: due within one year 369.3 345.2
Debtors: due after more than one year 124.3 108.8
Short term investments 15.3 16.6
Cash at bank and in hand 100.4 92.6
1,047.7 977.5
Creditors: Amounts falling due within one year
Borrowings and finance leases (46.5) (65.8)
Precious metal leases (128.0) (131.0)
Other creditors (386.0) (359.2)
Net current assets 487.2 421.5
Total assets less current liabilities 1,463.8 1,101.9
Creditors: Amounts falling due after more than one year
Borrowings and finance leases (456.4) (185.8)
Other creditors (0.6) (0.4)
Provisions for liabilities and charges (100.4) (98.1)
Net assets 906.4 817.6
Capital and reserves
Called up share capital 219.5 218.7
Share premium account 131.8 128.2
Capital redemption reserve 4.9 4.9
Associates' reserves 0.1 (0.2)
Profit and loss account 539.3 462.1
Shareholders' funds 895.6 813.7
Minority interests 10.8 3.9
906.4 817.6
Consolidated Cash Flow Statement
for the year ended 31st March 2003
2003 2002
£ million £ million
Reconciliation of operating profit to
net cash inflow from operating activities
Operating profit 184.1 168.5
Depreciation and amortisation charges 68.1 55.1
Loss / (profit) on disposal of tangible fixed assets and investments 0.5 (1.4)
Increase in owned stocks (7.7) (83.6)
(Increase) / decrease in debtors (3.6) 73.9
(Decrease) / increase in creditors and provisions (11.5) 11.6
Net cash inflow from operating activities 229.9 224.1
Cash Flow Statement
Net cash inflow from operating activities 229.9 224.1
Dividends received from associates 0.1 0.1
Returns on investments and servicing of finance (13.4) (4.9)
Taxation (42.4) (55.8)
Capital expenditure and financial investment (124.7) (131.0)
Acquisitions (271.2) (143.5)
Disposals 22.4 (2.2)
Equity dividends paid (54.0) (52.1)
Net cash flow before use of liquid resources and financing (253.3) (165.3)
Management of liquid resources 1.0 0.2
Financing
Issue and purchase of share capital 2.8 (44.1)
Decrease in borrowings and finance leases due within one year (22.7) (45.9)
Increase in borrowings due after one year 282.4 103.4
Net cash inflow from financing 262.5 13.4
Increase / (decrease) in cash in the period 10.2 (151.7)
Reconciliation of net cash flow to movement in net debt
Increase / (decrease) in cash in the period 10.2 (151.7)
Cash inflow from movement in borrowings and finance leases (259.7) (57.5)
Cash inflow from movement in liquid resources (1.0) (0.2)
Change in net funds / debt resulting from cash flows (250.5) (209.4)
Borrowings and finance leases acquired with subsidiaries (0.4) (46.8)
Loan notes issued to acquire subsidiaries (6.8) (40.6)
New finance leases - (4.3)
Translation difference 14.2 2.2
Movement in net funds / debt in year (243.5) (298.9)
Net (debt) / funds at beginning of year (159.0) 139.9
Net debt at end of year (402.5) (159.0)
Total Recognised Gains and Losses
for the year ended 31st March 2003
2003 2002
£ million £ million
Profit attributable to shareholders 122.0 106.8
Currency translation differences on foreign currency net investments and (2.7) (8.0)
related loans
Taxation on translation differences on foreign currency loans 8.3 0.5
Total recognised gains and losses relating to the year 127.6 99.3
Prior year adjustment - (44.3)
Total recognised gains and losses recognised since previous annual report 127.6 55.0
There were no material differences between reported profits and losses and historical profits and
losses on ordinary activities before tax for 2003 and 2002.
Movement in Shareholders' Funds
for the year ended 31st March 2003
2003 2002
£ million £ million
Profit attributable to shareholders 122.0 106.8
Dividends (55.5) (53.2)
Retained profit 66.5 53.6
Other recognised gains and losses relating to the year 5.6 (7.5)
New share capital subscribed 4.4 6.1
Goodwill written back on set up of AGR Matthey 5.4 -
Rollover of share options on acquisitions - 0.7
Purchase of own shares - (45.9)
Net movement in shareholders' funds 81.9 7.0
Opening shareholders' funds 813.7 806.7
Closing shareholders' funds 895.6 813.7
Notes to the Preliminary Financial Statements
for the year ended 31st March
2003
1 Segmental information
Turnover Sales excluding Operating profit Net operating assets
precious metals
2003 2002 2003 2002 2003 2002 2003 2002
Activity analysis £ million £ million £ million £ million £ million £ million £ million £ million
Catalysts 1,083.4 1,302.6 652.5 596.8 104.4 94.7 788.0 446.4
Precious Metals 2,857.1 3,167.4 132.0 143.0 50.1 55.9 59.9 82.0
Colours & Coatings 255.7 253.4 252.5 250.5 28.5 25.5 208.9 200.7
Pharmaceutical 127.7 105.5 121.9 101.4 36.9 31.3 278.8 268.4
Materials
Corporate - - - - (14.2) (13.6) (26.7) (20.9)
4,323.9 4,828.9 1,158.9 1,091.7 205.7 193.8 1,308.9 976.6
Discontinued - 1.2 - 1.2 - (0.5) - -
operations
Total turnover 4,323.9 4,830.1 1,158.9 1,092.9
Goodwill amortisation (13.7) (6.8)
Exceptional items included in operating (7.6) (18.1)
profit (note 2)
184.4 168.4 1,308.9 976.6
Profit on sale of continuing operations 4.9 -
(note 3)
Profit on sale / closure of discontinued - (5.6)
operations
Net interest (13.2) (6.1)
Profit on ordinary activities before 176.1 156.7
taxation
Net borrowings and finance (402.5) (159.0)
leases
Net assets 906.4 817.6
Turnover Operating profit Net operating assets
2003 2002 2003 2002 2003 2002
Geographical analysis by origin £ million £ million £ million £ million £ million £ million
Europe 2,964.7 3,304.1 76.2 75.3 955.8 625.0
North America 1,082.2 1,280.1 87.0 84.6 233.4 245.1
Asia 844.7 955.5 12.3 13.3 74.6 48.7
Rest of the World 234.2 271.3 30.2 20.6 45.1 57.8
5,125.8 5,811.0 205.7 193.8 1,308.9 976.6
Discontinued - 2.0 - (0.5) - -
operations
5,125.8 5,813.0
Less inter-segment (801.9) (982.9)
sales
Total turnover 4,323.9 4,830.1
Goodwill amortisation (13.7) (6.8)
Exceptional items included in operating (7.6) (18.1)
profit (note 2)
184.4 168.4 1,308.9 976.6
Profit on sale of continuing operations 4.9 -
(note 3)
Profit on sale / closure of discontinued - (5.6)
operations
Net interest (13.2) (6.1)
Profit on ordinary activities before 176.1 156.7
taxation
Net borrowings and finance (402.5) (159.0)
leases
Net assets 906.4 817.6
Notes to the Preliminary Financial Statements
for the year ended 31st March 2003
2 Exceptional items included in operating profit
An exceptional charge of £7.6 million (2002 £18.1 million) has been included in operating profit.
This comprises:
2003 2002
£ million £ million
Cost of integrating Synetix (6.5) -
Profit on sale of unhedged palladium 5.1 7.2
Cost of rationalising Australian operations following the set up of AGR (1.2) -
Matthey
Other Catalysts' rationalisation costs (4.8) -
Cost of rationalising Meconic plc - (1.3)
Cost of rationalising Colours & Coatings - (24.0)
Exceptional items in group operating profit (7.4) (18.1)
Share of exceptional items in associates - AGR Matthey (0.2) -
(7.6) (18.1)
3 Profit on sale of continuing operations
AGR Matthey
On 3rd October 2002 the group merged its Australian gold operations with those of AGR, a gold
refining joint venture between the Western Australian government and Australian Gold Alliance Pty Ltd. The group holds
a 20% interest in the new entity, called AGR Matthey, the formation of which gives rise to a loss of £6.0 million of
which £5.4 million is goodwill previously written off directly to reserves.
Fuel Cells
On 7th November 2002 Anglo Platinum took a 17.5% interest in the group's fuel cell components subsidiary, Johnson
Matthey Fuel Cells Limited. In return for the 17.5% interest Anglo Platinum contributed its share
of the intellectual property rights and know-how developed under an existing long term collaboration agreement, along
with a £20.0 million payment. This resulted in a profit of £10.9 million.
4 Taxation
2003 2002
£ million £ million
United Kingdom 23.1 24.1
Overseas 34.1 31.8
Associates - 0.1
Tax on ordinary activities before exceptional items and goodwill 57.2 56.0
amortisation
Tax on goodwill amortisation (0.7) -
Tax on exceptional items included in total operating profit (2.0) (5.2)
Tax on profit on sale / closure of discontinued operations - (0.6)
54.5 50.2
5 Dividends
A final dividend of 17.7 pence (2002 17.1 pence) per ordinary share is proposed for payment on
5th August 2003 to shareholders on the register at 13th June 2003. Together with the interim dividend of 7.8 pence
(2002 7.5 pence) this would make a total dividend of 25.5 pence (2002 24.6 pence) giving a total payment of £55.5
million (2002 £53.2 million).
Notes to the Preliminary Financial Statements
for the year ended 31st March 2003
6 Earnings per ordinary share
Profit for the year attributable to shareholders is £122.0 million (2002 £106.8 million). This is divided by the
weighted average number of shares in issue calculated as 216,938,883 (2002 217,829,287) to give basic earnings per
share of 56.2 pence (2002 49.0 pence).
The calculation of diluted earnings per share is based on the weighted average number of shares in issue adjusted
by the dilutive outstanding share options and long term incentive plan. These adjustments give rise to an increase in
the weighted average number of shares in issue of 1,279,946 (2002 2,357,398), giving diluted earnings per share of
55.9 pence (2002 48.5 pence).
Before exceptional items, goodwill amortisation and the tax thereon, basic earnings per share
were 62.6 pence (2002 60.4 pence) and diluted earnings per share were 62.2 pence (2002 59.7 pence).
2003 2002
£ million £ million
Attributable profit 122.0 106.8
Goodwill amortisation 13.7 6.8
Exceptional items 2.7 23.7
Tax thereon (2.7) (5.8)
Adjusted profit 135.7 131.5
Earnings per share before exceptional items and goodwill amortisation
Basic 62.6p 60.4p
Diluted 62.2p 59.7p
7 Future application of FRS 17
The group will be adopting FRS 17 - 'Retirement Benefits' as of 1st April 2003. Set out below is segmental
information, analysed by division, showing the adjustments which would have been made had the group adopted
FRS17 for the year ended 31st March 2003.
Pro forma Pro forma
Reported FRS 17 adjusted
amounts adjustments amounts
Activity analysis £ million £ million £ million
Operating profit
Catalysts 104.4 (9.1) 95.3
Precious Metals 50.1 (2.1) 48.0
Colours & Coatings 28.5 (3.2) 25.3
Pharmaceutical Materials 36.9 (0.2) 36.7
Corporate (14.2) (1.9) (16.1)
Total operating profit before exceptional items and 205.7 (16.5) 189.2
goodwill amortisation
Goodwill amortisation (13.7) - (13.7)
Exceptional items included in operating profit (7.6) - (7.6)
184.4 (16.5) 167.9
Profit on sale of continuing operations 4.9 - 4.9
Net interest (13.2) - (13.2)
Net return on retirement benefit assets and - 13.9 13.9
liabilities
Profit on ordinary activities before taxation 176.1 (2.6) 173.5
Taxation (54.5) 0.8 (53.7)
Profit after taxation 121.6 (1.8) 119.8
Notes to the Preliminary Financial Statements
for the year ended 31st March 2003
8 Acquisitions
Synetix
On 23rd September 2002 the group announced that it had signed an agreement to buy the Synetix division of ICI.
Synetix is a global catalyst business which serves a range of market segments including ammonia, methanol, fine
chemicals, edible oils, oleochemicals, oil and gas and polymerisation. The acquisition of the Synetix businesses in
all territories except India was completed on 1st November 2002 and the acquisition in India was completed on 2nd
December 2002.
The results of Synetix since its acquisition on 1st November 2002 have been included in Catalysts, and were
turnover of £60.9 million and operating profit excluding exceptional items of £9.2 million. This has been accounted
for by acquisition accounting. The purchase consideration was £261.6 million, of which £1.9 million should be
refunded. Costs incurred were £6.0 million, including £0.6 million accrued. The estimated fair value of the net assets
acquired was £74.3 million including finance leases of £0.4 million, resulting in estimated goodwill of £191.4
million.
Cascade Biochem Limited
On 17th October 2002 the group acquired Cascade Biochem Limited located in Cork, Ireland and Reading, UK
for £7.7 million, of which £5.0 million is deferred and contingent on future sales. Costs incurred were £0.1
million. The company manufactures and supplies prostaglandins and other complex molecules as active pharmaceutical
ingredients for the pharmaceutical industry, and its post acquisition results have been included in
Pharmaceutical Materials. Its turnover and operating profit since acquisition were £1.4 million and £0.2 million
respectively. This has been accounted for by acquisition accounting. The fair value of the net assets acquired was
£1.5 million, resulting in goodwill of £6.3 million.
9 Basis of preparation
The financial information contained in this release does not constitute the company's statutory accounts for the
years ended 31st March 2003 or 2002 but is derived from those accounts. Statutory accounts for 2002 have been
delivered to the Registrar of Companies and those for 2003 will be delivered following the company's Annual General
Meeting. The auditors' reports on those accounts were unqualified and did not contain any statement under sections
237(2) and 237(3) of the Companies Act 1985. The accounts for the year ended 31st March 2003 were approved by the
Board of Directors on 3rd June 2003.
Financial Calendar 2003
13th June
Final ordinary dividend record date
16th July
112th Annual General Meeting (AGM)
5th August
Payment of final dividend subject to declaration at the AGM
27th November
Announcement of results for six months ending 30th September 2003
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: 01903 502541
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