Final Results

RNS Number : 7112H

Johnson Matthey PLC

02 June 2011

 



For Release at 7.00 am Thursday 2^nd June 2011

Preliminary Results for the year ended 31^st March 2011

Summary Results 

	Year to 31st March			%
	2011		2010	change
Revenue	£9,985m		£7,839m	+27
Sales excluding precious metals	£2,280m		£1,886m	+21
Profit before tax	£260.6m		£228.5m	+14
Total earnings per share	85.6p		77.6p	+10
Underlying*:
Profit before tax		£345.5m	£254.1m	+36
Earnings per share		119.0p	86.4p	+38
Dividend per share		46.0p	39.0p	+18

*before amortisation of acquired intangibles, major impairment and restructuring charges, profit or loss on disposal of businesses and, where relevant, related tax effects

Johnson Matthey returns to strong growth:

·     Strong growth in revenue, up 27% to £10 billion

·     Sales excluding precious metals (sales) 21% ahead at £2.3 billion 

·     Underlying profit before tax and underlying earnings per share up 36% and 38% respectively

·     Return on invested capital (ROIC) increased to 19.4%, well placed to exceed 20% long term target in 2011/12

·     Balance sheet remains strong with net debt (including the post tax pension deficit) / EBITDA of 1.4 times   

·     Full year dividend up 18% to 46.0 pence 

Business Overview 

·     Environmental Technologies Division performed well with sales up 25% and underlying operating profit 36% ahead

·     Emission Control Technologies' sales grew by 25%, benefiting from good growth in light duty vehicle production and a strong recovery in its heavy duty diesel business 

·     Process Technologies also performed well.  Sales were up 24% with good demand for its catalysts and another very strong performance from Davy Process Technology.  Integration of the Intercat business, acquired in November 2010, is going well 

·     All businesses within Precious Metal Products Division performed well.  Overall sales increased by 19% as our Services businesses benefited from higher precious metal prices and our Manufacturing businesses saw very strong demand for their products 

·     Fine Chemicals Division had a good year with sales up by 11% mainly due to increasing demand for its active pharmaceutical ingredients

Commenting on the results, Neil Carson, Chief Executive of Johnson Matthey said:

"Johnson Matthey performed strongly in 2010/11 with good growth in its major markets.  All of the group's businesses performed well resulting in underlying earnings per share in the year up 38%, marking a return to strong growth for the group.   

Johnson Matthey is expected to make further good progress in 2011/12. 

The drivers that will provide superior earnings growth for the group in our existing markets remain strong.  We are increasing our investment in research and development in order to target new areas of future growth for our business.  We are confident that the combination of our existing strengths and the investments that we are making now will position the group well for longer term growth."

Enquiries: 

Ian Godwin	Director, IR and Corporate Communications	020 7269 8410
Robert MacLeod	Group Finance Director	020 7269 8484
Howard Lee	The HeadLand Consultancy	020 7367 5225
Tom Gough	The HeadLand Consultancy	020 7367 5228
www.matthey.com

Report to Shareholders 

Review of Results

Johnson Matthey performed strongly in 2010/11, recovering throughout the year from the effects of the recession that impacted our results in the first half of 2009/10.  All of the group's businesses performed well with sales excluding precious metals (sales) substantially ahead of last year.  Operating profit was also well up and 2010/11 marked a return to strong growth for Johnson Matthey.    

Revenue for the year ended 31^st March 2011 was 27% up on last year at £10.0 billion driven by good sales activity and robust metal prices.  The group's sales were 21% higher than last year at £2.3 billion.  Translated at constant exchange rates, revenue for the year was 26% ahead and sales grew by 19%.

Environmental Technologies Division performed well in 2010/11.  The division's Emission Control Technologies (ECT) business benefited from good growth in light duty vehicle production around the world and the recovery in the proportion of diesel cars produced in Europe.  Its heavy duty diesel (HDD) business recovered very well with robust sales throughout 2010/11 in Europe and strong growth in the United States in the second half as the truck market recovered.  Its Stationary Emissions Control (SEC) business, on the other hand, had a difficult year.  Our Process Technologies business performed well with good growth in its Ammonia, Methanol and Gas (AMG) business.  Intercat, Inc., which was acquired in November 2010, made a good contribution to sales in the final quarter and Davy Process Technology had another strong year. 

Precious Metal Products Division also achieved very good results.  Its Services businesses benefited from robust precious metal prices throughout the year and its Manufacturing businesses saw strong demand across the wide range of industries that they serve.

Fine Chemicals Division performed well with good sales growth in its Active Pharmaceutical Ingredient (API) Manufacturing businesses.  Its global Research Chemicals business also grew well in the year.    

For the group as a whole, underlying operating profit (before amortisation of acquired intangibles, major impairment and restructuring charges) was 35% higher than last year at £366.2 million, while underlying profit before tax was 36% up at £345.5 million.  At constant exchange rates underlying operating profit would have been 33% higher than last year.  The group's underlying return on sales increased to 16.1% from 14.4% last year, benefiting from operational leverage as plant utilisation across the group increased as a result of the strong demand for our products and from continued management actions to reduce costs.

This year we have taken an impairment and restructuring charge of £71.8 million in respect of the closure of ECT's manufacturing facility in Brussels, Belgium to reduce overcapacity in our European autocatalyst business and also of the closure of the Vertec business, which ceased operation on 31^st March 2011.  This charge has been excluded from underlying profit.

Underlying earnings per share (before amortisation of acquired intangibles, major impairment and restructuring charges, profit or loss on disposal of businesses and related tax effects) increased by 38% to 119.0 pence.  Total earnings per share were 85.6 pence, 10% up on last year.

Dividend 

In view of the group's strong performance in 2010/11 the board is recommending an 18% increase in the total dividend for the year.  This comprises of a final dividend of 33.5 pence which, together with the interim dividend of 12.5 pence, gives a total dividend for the year of 46.0 pence (2009/10 39.0 pence).  At this level, the dividend would be covered by underlying earnings per share 2.6 times, up from 2.2 times last year.  Subject to approval by shareholders, the final dividend will be paid on 2^nd August 2011 to ordinary shareholders on the register as at 10^th June 2011, with an ex-dividend date of 8^th June 2011.

Operations 

Environmental Technologies 

Year to 31st March				% at
	2011	2010	%	constant
	£ million	£ million	change	rates
Revenue	2,708	2,062	+31	+29
Sales (excl. precious metals)	1,566	1,252	+25	+23
Underlying operating profit	164.7	120.9	+36	+33
Return on sales	10.5%	9.7%
Return on invested capital (ROIC)	11.5%	9.4%

Environmental Technologies Division, which comprises Emission Control Technologies, Process Technologies and Fuel Cells, performed well in 2010/11 achieving good growth throughout the year.  Revenue grew 31% to £2,708 million; sales were 25% ahead at £1,566 million and underlying operating profit was 36% ahead at £164.7 million.  Translated at constant exchange rates, the division's sales increased by 23% and underlying operating profit by 33%. 

Environmental Technologies Division's return on sales for the year increased by 0.8% to 10.5%.  ECT's overall return on sales improved primarily because the heavy duty diesel business returned to profit after making a small loss last year.  Its light duty business' return on sales increased compared with last year despite higher costs resulting from continued overcapacity in Europe.  We have addressed this overcapacity with the closure of the Brussels plant which led to the impairment charge mentioned above.  ECT's return on sales was also adversely impacted by the performance of the SEC business which made an operating loss in the year.  Process Technologies' return on sales was the same as last year.

The division's ROIC improved from 9.4% to 11.5% primarily as the result of the increase in profitability and plant utilisation.  The division's ROIC is expected to improve further as plant utilisation rates continue to increase. 

Emission Control Technologies' sales grew by 25% to £1,218 million.  At constant exchange rates, sales were up 23%. Sales of both light duty and heavy duty catalysts grew strongly throughout the year. 

Light Duty Catalysts - Our light duty catalyst business, which represented 72% of ECT's sales in the year, grew strongly with sales up 16% to £879 million. 

Estimated Light Vehicle Sales and Production 

		Year to 31st March		change %
		2011 millions	2010 millions
North America	Sales	14.5	13.0	+11.5
	Production	12.4	9.8	+26.5
Total Europe	Sales	18.6	18.6	-
	Production	19.9	18.2	+9.3
Asia	Sales	30.2	26.9	+12.3
	Production	37.1	32.4	+14.5
Global	Sales	73.2	67.3	+8.8
	Production	75.7	66.2	+14.4

Source: IHS Global Insight

In Johnson Matthey's financial year to 31^st March 2011, global light duty vehicle sales grew by 9% to 73.2 million vehicles.  Global production grew by 14% reflecting a rebuilding of inventories.  Our light duty catalyst sales benefited from strong growth in key markets, such as North America and China, and from a recovery in sales of diesel cars in Europe.  Sales volumes of light duty autocatalysts grew by 26% in the year, exceeding the growth in global car production, as a result of ECT's strong positions in emerging markets in Asia. 

Our sales in Europe of £544 million, which represent 62% of our light duty catalyst sales, increased in line with growth in vehicle production.  Around 6.8 million diesel cars were sold in western Europe in the year.  These represent some 52% of total car sales, up from 49% last year, of which about 90% were fitted with diesel particulate filters (DPFs).  All new diesel cars sold in the European Union have been required to be fitted with DPFs since January 2011, although most vehicles were fitted earlier than this.  As a result of the complex systems required to meet these diesel emissions standards, a diesel car represents approximately five times the catalyst value of an equivalent gasoline vehicle for Johnson Matthey.  In North America production was up 27% and our sales grew in line with this to £167 million.  In Asia, our business grew strongly with sales up 37% to £167 million.  Whilst light duty vehicle production in China grew by 17%, in India by 28% and in South East Asia by 35%, Johnson Matthey's sales in these countries grew at a faster rate, partly as a result of strengthening our market positions. 

The earthquake that struck Japan on 11^th March 2011 affected ECT's manufacturing facility and technical centre at Kitsuregawa.  Whilst there was no structural damage to the buildings, there was temporary disruption to production and development work on the site.  Despite this, the business suffered no loss of sales through inability to supply or support its customers.  The team at Kitsuregawa did an excellent job, working long hours in difficult conditions to get the facility back on line.

Since mid 2010, prices of rare earth raw materials have been increasing dramatically following the imposition of export quotas by the Chinese government.  The main rare earth material that we use is cerium oxide, which is used to provide oxygen storage capabilities in catalysts for gasoline vehicles.  Whilst to date we have experienced no problems in obtaining supplies of rare earth materials, ECT has taken steps to reduce the impact of their rising cost by a combination of thrifting, substitution for cheaper raw materials and imposing price surcharges on customers.  However, due to the magnitude and speed of the cost increases, ECT's results have been adversely affected by around £5 million in 2010/11 and the impact in 2011/12 could be around £15 million to £20 million. 

On 31^st January 2011 it was announced that ECT had entered into statutory formal consultation with the employees at its Brussels facility regarding the closure of its manufacturing plant there.  Whilst regrettable, this action is necessary to address overcapacity in the business' European manufacturing base.  The cost of this closure is estimated to be around £57 million, of which around two thirds will be a cash cost.  The cash cost is primarily made up of employee related payments and environmental and site remediation costs.  The closure will significantly improve regional plant utilisation and should pay back within three years.  It is hoped that this closure will be concluded in the first half of 2011/12.

During the year ECT completed the construction of a new research and development facility in Shanghai to service the needs of both local and global original equipment manufacturers (OEMs) in the rapidly growing Chinese market.  It also commenced expansion of its autocatalyst plants in India and Malaysia. 

Heavy Duty Diesel - Sales of HDD catalysts grew very strongly to £296 million, an increase of 71%.  Our HDD business, which manufactures catalysts for trucks, buses and non-road vehicles, recovered well after last year's small loss. 

Estimated HDD Truck Sales and Production 

		Year to 31st March		change %
		2011 thousands	2010 thousands
North America	Sales	289.3	251.0	+15.3
	Production	298.4	235.8	+26.5
EU	Sales	251.9	197.4	+27.6
	Production	357.9	201.4	+77.7

Source: J D Power

Sales of heavy duty diesel trucks in the US recovered slowly early in our financial year but grew steadily in our second half.  All sales in the US are now of the more complex technologies required to meet the US 2010 legislation that came into force last year and which has significantly increased the catalyst content per truck.  As a result, our sales grew significantly ahead of the growth of US truck production and were up 74% to £194 million.  In Europe, truck sales recovered quickly from the global downturn and our sales were up 61% at £91 million.  Johnson Matthey continued to maintain a more than 65% share of the HDD catalyst market.  During the year the business commenced shipments to OEMs in China and India, ahead of legislation that will come into force for on road vehicles in the next few years.  Sales also commenced to non-road OEMs, such as manufacturers of construction, mining and agricultural equipment, in the USA and Europe where legislation is being phased in between 2011 and 2015.

Stationary Emissions Control - ECT's SEC systems business which manufactures catalysts and supplies systems for reducing emissions in a wide range of applications including power generation, industrial processes, coal fired power plants and marine applications had a difficult year.  The business was impacted by the lag effect from the deferral of major capital projects during the recession and sales were down by 9% to £43 million.  As a result, the SEC business made an operating loss of £9.6 million in the year.  Management actions have been put in place to address this underperformance. 

Process Technologiescontinued to grow strongly in 2010/11 with sales of £337 million, up 24% on prior year.  Intercat, Inc., a supplier of speciality additives to the petroleum refining industry, was acquired in November 2010 and contributed sales of £18 million in the five months that it was part of the group, in line with our expectations at the time of acquisition.  Intercat significantly enhances Process Technologies' technical strength and product offering in the large market for refinery catalysts and the integration process is going well.  

Sales of the catalysts, absorbents and additives manufactured by the Ammonia, Methanol, Gas (AMG) and the Refinery (including Intercat) businesses were £201 million, 23% up on the prior year.  Excluding Intercat, sales would have been 12% up.  The year saw particularly strong sales to methanol customers, up 57% to £49 million, including sales to a number of new plants in China and the Middle East which were licensed by Davy Process Technology (DPT) in recent years and commissioned this year.  The first commercial sales of Apico^TM, our new methanol synthesis catalyst, were made in the year.  Its performance in these customers' plants is demonstrating the benefits we expected.  Sales of catalysts to hydrogen plants were up 20% on the previous year at £48 million due to increased demand for diesel as economies emerged from recession and the continued trend toward processing heavier, dirtier crude oil in refineries.  Demand for gas purification products used to remove contaminants such as mercury and sulphur species from gas streams, was however down 8% owing to reduced investment in large gas processing projects.  Legislation requiring lower sulphur fuels continues to gain momentum around the world, particularly in South America, Asia and the Former Soviet Union.  This supports continued demand for our hydrogen catalysts and purification products.

Process Technologies benefited from continued activity on projects to convert gas or coal into chemicals where some countries, particularly China in the case of coal, are seeking to enhance their energy security by utilising their own natural energy resources to reduce their reliance on imported oil and gas.  China continues to develop coal based technologies to manufacture methanol, ammonia, substitute natural gas (SNG) and for making olefins, a core chemical feedstock.  In the year, Baotou Shenhua Coal Chemicals Co Ltd commissioned the world's largest coal to methanol to olefins plant at its Baotou facility in Inner Mongolia using DPT technology and Johnson Matthey's catalysts for the large methanol plant.  

DPT had another very good year, with sales of £66 million, securing licence and engineering contracts for a total of 13 plants during 2010/11. The business continued its success in China, winning contracts for a new methanol plant, three oxo alcohols plants andtwo speciality chemicals plants.  In addition DPT won contracts for a further three large SNG plants in China, including the supply of Johnson Matthey's catalysts. The business is now also seeing large Chinese chemical and coal companies placing repeat orders for new plants.  In addition it licensed and successfully commissioned a new combined reforming process for a methanol complex in Egypt and won contracts for three natural detergent alcohols (NDA) plants, two in Indonesia and one in Malaysia.  DPT continues to invest in developing its technology portfolio. 

Process Technologies continues to pursue other technology opportunities which have the potential to increase energy efficiency and reduce carbon dioxide emissions, including development of technologies for high efficiency reforming.  In the area of gas to liquids technology, the business made catalyst sales of more than £5 million for development catalysts for customers' pilot plants. 

Tracerco's sales were 1% down on prior year with a difficult trading environment in the upstream oil and gas market where its customers have significantly reduced capital expenditure. 

The Fuel Cells business made further progress in 2010/11 with growth in sales as its customers recovered from the effects of the recession.  In particular the expected introduction of the use of natural gas fuelled systems to power buildings, an area where Johnson Matthey is a leading supplier of fuel cell components, developed well and is poised for further growth in 2011/12.

Electric vehicles and particularly battery powered cars were much in the news this year leading some commentators to discount the prospects for hydrogen powered fuel cell vehicles. During the year a number of independent reports have been issued explaining the complementary nature of battery and fuel cell vehicles in meeting global needs for fuel security, clean air and low carbon emissions. Our own expectations of an initial introduction of fuel cell cars in 2014/15 followed by steady growth from that point remain unchanged.

We continue to invest in the business and are confident of its long term prospects.  The net expense of the business fell £0.5 million to £4.9 million in 2010/11.

Precious Metal Products 

Year to 31st March				% at
	2011	2010	%	constant
	£ million	£ million	change	rates
Revenue	8,270	6,198	+33	+32
Sales (excl. precious metals)	541	454	+19	+18
Underlying operating profit	172.9	116.7	+48	+47
Return on sales	31.9%	25.7%
Return on invested capital (ROIC)	55.9%	46.8%

Precious Metal Products Division's (PMPD's) revenue increased by 33% to £8,270 million, boosted by higher platinum group metal (pgm) prices and increased demand across all its businesses.  Sales were 19% higher at £541 million.  Underlying operating profit was 48% up at £172.9 million, reflecting strong profit growth in all of the division's businesses.  Translated at constant exchange rates, sales increased by 18% and underlying operating profit was 47% higher than last year.

Sales in our Services businesses, which comprise of the division's Platinum Marketing and Distribution and Refining activities and represents 33% of PMPD's total sales, grew by 20% to £180 million.  Profit in 2010/11 also increased, supported by higher pgm prices and continued good demand for precious metal refining services.

Platinum Marketing and Distribution - Global demand for platinum increased by 16% in the calendar year 2010.  Demand from the autocatalyst sector increased by 43% following a strong recovery in car manufacturing in most key markets, with a notable recovery in diesel market share in Europe after a poor year in 2009.  Jewellery demand fell by 14% in 2010 after an exceptional year in 2009.  The Chinese market remained relatively robust but could not match the previous year when low prices encouraged a very high level of stock building.  With positive supply demand fundamentals and broadly rising prices, physical investment demand remained strong, particularly through Exchange Traded Funds (ETFs).  Supplies of platinum increased modestly with South African production continuing to be challenged by high costs and unplanned interruptions.  The market tightened overall and finished the year close to balance.

With the platinum surplus seen in 2009 disappearing and broadly positive investment sentiment prevailing, the platinum price enjoyed a largely rising trend in 2010.  After starting the year at $1,644/oz, a sharp downward correction occurred in May due to the European sovereign debt crisis.  Platinum recovered to reach a high point for the year in February 2011 of $1,864/oz, having averaged $1,672/oz for the financial year, an increase of 24%.

Palladium demand increased by 24% in 2010 driven by higher levels of vehicle production in developing markets such as China.  Autocatalyst demand increased by 35% overall, with continuing substitution of platinum by palladium in both gasoline and some diesel formulations.  Physical investment demand proved particularly buoyant, up 74%, with heavy and sustained investment in US based ETF products. With supplies of palladium failing to match increased demand, the market moved into substantial deficit.

The price of palladium responded robustly to the favourable supply demand dynamics and investment sentiment.  Having opened at $479/oz, the price of palladium nearly doubled to a high point of $860/oz in February 2011 and averaged $616/oz for the year, 90% up on 2009/10.

The rhodium market was mostly subdued in the 2010/11 financial year, in spite of improved demand as the global car market recovered.  The rhodium market remained over supplied and temporary spikes in the price could not be sustained.  The price opened at $2,575/oz and briefly rallied to a high point of $2,975/oz in April 2010 before drifting to the sidelines for much of the year, averaging $2,420/oz, an increase of 25% on last year's average.

Refining - Our Refining businesses had a very strong year.  All of our refineries benefited from good intakes of material throughout the year and high metal prices. 

Despite the end of the various vehicle scrappage schemes around the world, volumes of scrap autocatalyst material for recycling by our Pgm Refining business have continued to increase with volumes up by 32% in the year.  The business was able to agree extensions to long term contracts with a number of key customers, while its focus on capacity management and operational improvements at both of its pgm refineries continued in order to reduce the amount of metal tied up in the refining circuits. 

In our Gold and Silver business, both our Canadian and US refineries had a very strong year with throughputs at record levels, up 19% on last year, and improved margins.  Gold and silver prices climbed steadily throughout the year, averaging $1,295/oz and $24/oz, an increase of 26% and 52% respectively over the prior year.  This had the effect of further stimulating both primary and secondary refining although there are signs that demand for carat gold scrap recycling from jewellers and collectors is slowing.  Demand for products such as gold and silver bars was also very high.  The business introduced a number of operational improvements in the year to reduce bottlenecks in both its refineries in order to improve metal throughput and to reduce backlogs.

Sales in our Manufacturing businesses, which comprise of the division's Noble Metals, Colour Technologies and Catalysts and Chemicals activities and represents 67% of PMPD's total sales, grew by 19% to £361 million.  Profit was also well ahead of prior year.

Noble Metals - Our Noble Metals business saw a strong recovery from the global downturn with sales 29% ahead of last year at £120 million.  Both its European and North American businesses saw strong demand for pgms in automotive applications where we have gained market share and introduced new technology.  Demand for fertilisers around the world also drove good demand for fabricated pgm products such as platinum alloy gauzes for the production of nitric acid.  Industrial products account for around 64% of Noble Metals' sales. 

The business maintained the strong position that it has established in recent years in the market for nitrous oxide (N₂O) abatement catalysts.  Revenue from this sector has been increasing as the price of carbon has risen on the back of the recovery in the global economy.  The installation of the first N₂O abatement catalyst system in the United States is scheduled this year.

Sales of medical products (approximately 36% of Noble Metals' sales) were also well up on last year with good growth in precision machined platinum parts and nitinol shape memory alloys for use in medical devices.  The acquisition of the fabricated products business of the former AGR Matthey partnership in Australia has added revenue from the highly specialised medical parts that it manufactures as well as providing opportunities for sales of other Noble Metals' products in the region.

Colour Technologies - Colour Technologies had a steady year with sales up by 6% to £82 million.  The business saw good growth in its sales of obscuration enamels for automotive glass and silver pastes for heated rear windows which represent around 56% of its sales.  Sales of these products increased in line with growth in global automobile production and were especially strong in China.  Sales of decorative products experienced mixed fortunes with demand for decorative precious metal products impacted by the high gold price, however sales of colour products for decorative applications were strong, particularly into markets in Asia.  The business is significantly increasing its investment in R&D to develop a range of new products.

Catalysts and Chemicals - Catalysts and Chemicals had a good year with sales up by 20% at £159 million reflecting growth in all of its business areas as a result of the general improvement in the global economy, particularly in the chemical and automotive markets.  The rate of recovery accelerated in the second half of the year, particularly due to demand for precious metal salts for the automotive sector.  Growth was especially good in Asia with China continuing to contribute strongly.  Following the commissioning of its new sponge nickel catalyst manufacturing facility in Shanghai last year the business has now commenced a major project to construct a new plant there to manufacture pgm catalysts for the growing pharmaceutical industry in China.

Fine Chemicals 

Year to 31st March				% at
	2011	2010	%	constant
	£ million	£ million	change	rates
Revenue	255	223	+14	+13
Sales (excl. precious metals)	245	221	+11	+10
Underlying operating profit	56.2	55.8	+1	-1
Return on sales	22.9%	25.3%
Return on invested capital (ROIC)	13.7%	13.4%

Fine Chemicals Division had a good year.  Revenue increased by 14% to £255 million and sales grew by 11% to £245 million.  The division's underlying operating profit was 1% ahead of 2009/10.  Sales grew by 15% and underlying operating profit by 16% if the one-off benefit to sales and underlying operating profit of US $12 million from the launch of the generic version of ADDERALL XR^® in April 2009 is excluded from last year's results.  At constant currencies, sales were 10% ahead and underlying operating profit 1% down.  Fine Chemicals' return on sales fell by 2.4% to 22.9% as a result of the impact of last year's one-off benefit from the launch of the generic version of ADDERALL XR^®.  If that were excluded, return on sales grew slightly from 22.7% to 22.9%. 

The division's Active Pharmaceutical Ingredient (API) Manufacturing businesses, which comprise of Macfarlan Smith and Pharmaceutical Materials and Services and represents 71% of Fine Chemicals' sales, had a good year with sales up by 14% to £173 million and strong growth in operating profit excluding last year's one-off benefit. 

Macfarlan Smith - Macfarlan Smith achieved growth in all key areas of its business and had a steady year, benefiting from strong demand for its specialist opiate products, such as buprenorphine and naloxone, in both Europe and North America.  Generic demand for methylphenidate, used to treat attention deficit hyperactivity disorder (ADHD), and fentanyl base, used in the management of acute pain, was also strong and resulted in good growth in these products during the year.  The business saw an improvement in the availability of key narcotic raw materials during the year, however, supplies were still tight.  Overall, Macfarlan Smith's sales were 4% ahead of last year at £83 million.

In December 2010, Macfarlan Smith's joint venture, Hebei Aoxing API Pharmaceutical Company Limited, formed in conjunction with the Chinese pharmaceutical manufacturing company Hebei Aoxing Pharmaceutical Group Co Limited, was granted a business licence by the Chinese authorities.  The joint venture company will manufacture and supply narcotic APIs to the rapidly growing market in China.

Pharmaceutical Materials and Services - The division's Pharmaceutical Materials and Services business had a good year with sales up 26% at £90 million excluding last year's one-off benefit.  Its contract research business recovered from an operating loss in 2009/10 to deliver a profit this year driven by improved plant utilisation and a successful focus on supporting internal development work for the Fine Chemicals Division.  The business benefited from the restructuring that was implemented last year which has greatly reduced its reliance on new drug development work for smaller customers, who tend to be impacted by the economic cycle and the availability of venture capital funding. 

The manufacturing business benefited from strong growth in sales of oxaliplatin, used in the treatment of cancer, and amphetamine salts for the treatment of ADHD.  In November 2010 the business acquired large scale pharmaceutical manufacturing assets in Conshohocken, Pennsylvania, USA together with certain ongoing business from Lonza Inc.  This site, which is close to the group's existing facilities in West Deptford, New Jersey, will provide the business, and Fine Chemicals Division as a whole, with significantly enhanced manufacturing capacity and capabilities.  It will enable continued growth of our controlled substance API business in the US and will provide additional capacity to support customers of its contract research business as they move into commercial scale production.

The Research Chemicals business continued to recover from the effects of the economic slowdown.  Sales were 17% ahead of prior year at £72 million.  All regions saw growth in the year with North America and Asia performing particularly well.  Asia continues to be a key focus for the business with China and Korea again delivering good sales growth.  The business' new warehouse and distribution centre in Hyderabad, India, which opened in March 2010, made a good contribution to this year's performance.  In January 2011 the new Alfa Aesar catalogue for 2011 to 2013 was launched.  The business' range has further expanded to include an additional 4,000 new products, a number of which are sourced from Alfa Aesar Synmax, its manufacturing joint venture based in Yantai, China which commenced operations in March 2010.

Financial Review

Exchange Rates

The main impact of exchange rate movements on the group's results comes from the translation of foreign subsidiaries' profits into sterling as the group does not hedge the impact on the income statement or balance sheet of these translation effects.

Of the group's underlying operating profit that is denominated in overseas currencies the average exchange rates during 2010/11 were:

	Share of 2010/11 non-sterling denominated underlying operating profit	Average exchange rate
		2010/11	2009/10
US dollar	40%	1.555	1.595
Euro	26%	1.176	1.129
Chinese renminbi	12%	10.43	10.89
South African rand	6%	11.18	12.46

During the year, sterling weakened against both the US dollar and the Chinese renminbi and this increased reported group underlying operating profit for the year by £1.8 million and £1.0 million respectively.  Sterling, on the other hand, strengthened against the euro and this decreased reported group underlying operating profit by £1.1 million.

Sterling also weakened in the year against the South African rand.  However, the catalysts manufactured by our South African business are ultimately for export and the impact of movements in the rand on margins more than offsets the translational effect.

Overall, excluding the South African rand, exchange translation increased the group's underlying operating profit by £4.1 million compared with 2009/10.

Going forward, each one cent change in the average US dollar exchange rate and each one cent change in the euro exchange rate have approximately a £0.6 million and £0.5 million effect respectively on underlying operating profit in a full year. 

Return on Sales

The group's return on sales benefited from higher returns generated by Environmental Technologies and Precious Metal Products Divisions.  However, higher corporate costs and lower returns from Fine Chemicals Division resulted in a net increase in the group's return on sales of 1.7% to 16.1%.

Return on Invested Capital

The group's return on invested capital (ROIC) improved significantly from 15.8% to 19.4%.  Underlying operating profit was £94.4 million higher than last year at £366.2 million and average invested capital was £168 million higher at £1,885 million.  At 19.4%, the group's ROIC is well ahead of our pre-tax cost of capital, which we estimate to be 9.7%.

Our target is to achieve a group ROIC above 20% on a pre-tax basis.  This year we made very good progress towards that target as the group's profitability increased substantially.  Looking forward, the outlook for the group remains encouraging and, as we have already invested in the plants necessary to meet much of the expected demand across our markets, we are well placed to achieve our ROIC target as plant utilisation increases.

Interest

The group's net finance costs increased by £1.3 million to £20.7 million as a result of higher average borrowings in the year.

Approximately 54% of the group's net debt at 31^st March 2011 has fixed interest rates averaging approximately 5.1%.

Profit before Tax

Underlying profit before tax rose by 36% to £345.5 million.  Profit before tax was 14% higher at £260.6 million.  Items excluded from underlying operating profit were:

·      an impairment and restructuring charge of £71.8 million in respect of the closure of ECT's manufacturing facility in Brussels and the Vertec business.  On 31^st January 2011 it was announced that ECT had entered into statutory formal consultation with the employees at its Brussels facility regarding the closure of its manufacturing plant there.  On 31^st March 2011, the group formally closed the Vertec business on the Haverton manufacturing site in Billingham, UK; and

·      amortisation of acquired intangibles of £13.2 million.  This was £3.3 million higher than 2009/10 mainly following the acquisition of Intercat.

Taxation

The group's total tax charge for the year was £76.0 million, a tax rate of 29.2% on profit before tax (2009/10 28.1%).

The effective tax rate on underlying profit before tax was 26.5% (2009/10 28.0%).  This reduction was primarily due to the continued increase in the share of profit from lower tax jurisdictions.

Earnings per Share

Underlying earnings per share increased by 32.6 pence, or 38%, to 119.0 pence.  Total earnings per share were 85.6 pence, 10% above last year.

Pensions

At 31^st March 2011 the group's principal defined benefit pension scheme in the UK was in deficit by £60.6 million (94% funded) on an IFRS basis compared with a deficit of £156.9 million at 31^st March 2010.  The £96.3 million decrease in the deficit was principally due to an increase in the market value of the scheme's assets.  Worldwide, the group has other similar defined benefit pension scheme arrangements, some of which are in deficit (total deficit £35.0 million) and others in surplus (total surplus £3.8 million).

Worldwide, including provisions for the group's post-retirement healthcare schemes, the group had a net deficit of £130.4 million on employee benefit obligations at 31^st March 2011 (2010 £245.7 million).

In 2010/11 the company commenced deficit funding contributions to the UK scheme under a ten year recovery plan agreed last year with the Trustees.  During the year the company made deficit funding payments of £28.1 million to the scheme, which included an accelerated payment of £5.0 million in respect of contributions planned for 2011/12 in order to take advantage of certain tax benefits.  The group's normal ongoing contribution to the UK scheme in 2010/11 was £22.0 million (2009/10 £23.1 million), making total cash contributions to the scheme in the year of £50.1 million.

In July 2010, the UK government announced a change in the measure of inflation used to determine statutory minimum increases to pensions from RPI to CPI.  The effect of this change on the benefits of deferred pensioners, the only group impacted, is to reduce the UK scheme's liabilities as at 31^st March 2011 by approximately £13 million before tax.  This change has been accounted for within equity. 

Cash Flow

During the year ended 31^st March 2011 net cash flow from operating activities was £123.9 million (2009/10 £275.7 million).  Demand for our products and the price of precious metals continued to grow and as a result the group's working capital requirement increased substantially.  Working capital, excluding the element that relates to precious metals, increased by £67.4 million.  Working capital days at 31^st March 2011 increased to 60 days from 57 days last year.  Higher precious metal prices and increased activity also increased working capital by £215.9 million. 

During the year our capital expenditure was £137.9 million (of which £137.4 million was cash spent in the year) which equated to 1.1 times depreciation.  In the year, £90.1 million, or 65% of the total, was incurred by Environmental Technologies Division with the principal investments being to increase autocatalyst manufacturing capacity and to add testing facilities in Shanghai, China and to add additional capacity at our manufacturing plants in the UK and India to make process catalysts for our Ammonia, Methanol and Gas business.  In Precious Metal Products Division, the largest investment is the construction of a new pgm catalyst plant in Shanghai, China, to support the anticipated future growth in the Chinese pharmaceutical market.

We anticipate that capital expenditure will average approximately 1.3 times depreciation for the next few years.  However, we retain the capacity to invest in further growth opportunities as they arise.

The group's free cash flow was an outflow of £25.5 million (2009/10 an inflow of £123.7 million).

Capital Structure

In the year ended 31^st March 2011 net debt rose by £166.0 million to £639.4 million and the group's EBITDA (on an underlying basis) rose by 28% from £382.7 million to £489.4 million.  Net debt / EBITDA for the year was 1.3 times but if the post tax pension deficit of £70.0 million is included within net debt, the ratio would increase to 1.4 times.  Interest cover (underlying operating profit / net finance costs) was 17.7 times (2009/10 14.0 times). 

Gross borrowings (net of related swaps) amounted to £758.3 million offset by £118.9 million of cash and deposits.  Included within gross borrowings at 31^st March 2011 were drawings of £146.7 million out of total committed bank facilities, which are individually negotiated, of £316.4 million.

Outlook

At this time last year we commented on the short term uncertainties in our markets.  This year confidence in our markets is more robust and after our strong performance in 2010/11, the group is expected to make further good progress in the current year.

Environmental Technologies Division is well placed for continued growth.  For the year as a whole, Emission Control Technologies should benefit from higher global car production, particularly in Asia, but there may be a temporary hiatus in the first half of our year following the Japanese earthquake and its consequences on our customers' supply chain.  This is however expected to reverse by the second half of 2011/12.  The increasingly important North American HDD truck market has started 2011/12 well and is expected to continue to improve.  In addition, the action commenced this year to reduce our autocatalyst manufacturing capacity in Europe will lower our costs.  Higher rare earth prices will however adversely impact the business, particularly in the first half of the year.  Process Technologies will benefit from a full year's contribution from the Intercat business.  Furthermore, demand for its syngas catalysts and DPT's licensing services remains strong, particularly in China. 

Precious Metal Products Division supplies products and services to a wide range of industries and therefore its performance is influenced by a number of different market drivers.  The Manufacturing businesses have started the year well with good demand across our markets, particularly from the automotive, LED and glass sectors.  In 2010/11 the division's Services businesses benefited from higher pgm and gold prices and while they have been quite volatile recently, they remain strong.  Indeed, platinum, palladium and gold in the first two months of 2011/12 have averaged $1,795/oz, $756/oz and $1,493/oz respectively, approximately 7%, 47% and 27% higher than in the same period last year.  The division delivered very strong growth in 2010/11 and with demand expected to remain robust this year, we expect it to show further growth in 2011/12.

We also expect that Fine Chemicals Division will continue to grow steadily in 2011/12 benefiting from increasing demand for our active pharmaceutical ingredients, new product introductions and the additional capacity following the acquisition of the Conshohocken, USA plant in November 2010.

As we detailed in our presentation to analysts and investors on 2^nd February 2011, the drivers that will provide superior earnings growth for the group in our existing markets are expected to remain strong for at least the next five years.  Beyond that, we are confident that these markets will continue to deliver growth.  As a technology company, being at the forefront of research and development is vital to satisfy our customers' needs and to exploit new market opportunities.  We are increasing our investment in R&D in order to target new areas of future growth for our business.  We are confident that the combination of our existing strengths and the investments that we are making now will position the group well for longer term growth.

CONSOLIDATED INCOME STATEMENT
for the year ended 31st March 2011
					2011		2010
			Notes		£ million		£ million
Revenue			3		9,984.8		7,839.4
Cost of sales					(9,328.2)		(7,325.4)
Gross profit					656.6		514.0
Distribution costs					(121.2)		(103.6)
Administrative expenses					(169.2)		(138.6)
Major impairment and restructuring charges			2		(71.8)		(11.3)
Amortisation of acquired intangibles			4		(13.2)		(9.9)
Operating profit			3,5		281.2		250.6
Finance costs					(33.1)		(30.5)
Finance income					12.4		11.1
Share of profit of associate					-		1.7
Dissolution of associate			8		0.1		(4.4)
Profit before tax					260.6		228.5
Income tax expense					(76.0)		(64.3)
Profit for the year from continuing operations					184.6		164.2
Loss for the year from discontinued operations					(1.9)		-
Profit for the year					182.7		164.2
Attributable to:
Owners of the parent company					182.3		164.2
Non-controlling interests					0.4		-
					182.7		164.2
					pence		pence
Earnings per ordinary share attributable to the equity holders of the parent company
	Continuing operations
		Basic	7		86.5		77.6
		Diluted	7		86.0		77.3
	Total
		Basic	7		85.6		77.6
		Diluted	7		85.1		77.3
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
for the year ended 31st March 2011
					2011		2010
					£ million		£ million
Profit for the year					182.7		164.2
Other comprehensive income:
	Currency translation differences				(7.9)		(5.7)
	Cash flow hedges				3.7		27.0
	Fair value gains on net investment hedges				2.2		32.8
	Actuarial gain / (loss) on post-employment benefits assets and liabilities				85.4		(124.6)
	Share of other comprehensive income of associate				-		0.2
	Tax on above items taken directly to or transferred from equity				(30.0)		34.1
Other comprehensive income / (expense) for the year					53.4		(36.2)
Total comprehensive income for the year					236.1		128.0
Attributable to:
Owners of the parent company					235.7		127.9
Non-controlling interests					0.4		0.1
					236.1		128.0

CONSOLIDATED BALANCE SHEET
as at 31st March 2011
				2011		2010
		Notes		£ million		£ million
Assets
Non-current assets
Property, plant and equipment				907.7		921.6
Goodwill				529.5		513.8
Other intangible assets				152.9		131.6
Deferred income tax assets				39.7		57.1
Investments and other receivables				11.0		14.0
Swaps related to borrowings		9		23.7		19.3
Post-employment benefits net assets		12		3.8		4.6
Total non-current assets				1,668.3		1,662.0
Current assets
Inventories				556.3		390.1
Current income tax assets				9.4		12.9
Trade and other receivables				892.2		639.3
Cash and cash equivalents - cash and deposits		9		118.9		179.1
Other financial assets				6.9		6.5
Total current assets				1,583.7		1,227.9
Total assets				3,252.0		2,889.9
Liabilities
Current liabilities
Trade and other payables				(662.4)		(527.2)
Current income tax liabilities				(113.8)		(91.0)
Cash and cash equivalents - bank overdrafts		9		(24.5)		(14.7)
Other borrowings and finance leases		9		(181.8)		(98.8)
Other financial liabilities				(6.5)		(8.0)
Provisions				(59.7)		(8.7)
Total current liabilities				(1,048.7)		(748.4)
Non-current liabilities
Borrowings, finance leases and related swaps		9		(575.7)		(558.3)
Deferred income tax liabilities				(60.3)		(56.5)
Employee benefits obligations		12		(134.2)		(250.3)
Provisions				(22.7)		(19.6)
Other payables				(4.8)		(6.0)
Total non-current liabilities				(797.7)		(890.7)
Total liabilities				(1,846.4)		(1,639.1)
Net assets				1,405.6		1,250.8
Equity
Share capital				220.7		220.7
Share premium account				148.3		148.3
Shares held in employee share ownership trust (ESOT)				(35.8)		(30.7)
Other reserves				69.3		73.4
Retained earnings				1,002.0		837.7
Total equity attributable to owners of the parent company				1,404.5		1,249.4
Non-controlling interests				1.1		1.4
Total equity				1,405.6		1,250.8

CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31st March 2011
					2011		2010
			Notes		£ million		£ million
Cash flows from operating activities
Profit before tax					260.6		228.5
Adjustments for:
	Share of profit of associate				-		(1.7)
	Dissolution of associate				(0.1)		4.4
	Discontinued operations				(1.9)		-
	Depreciation, amortisation, impairment losses and profit on sale of non-current assets
		and investments			167.5		140.3
	Share-based payments				11.3		4.7
	Increase in inventories				(159.6)		(22.1)
	Increase in receivables				(250.1)		(123.1)
	Increase in payables				113.3		47.1
	Increase in provisions				52.0		2.5
	Contributions in excess of employee benefits obligations charge				(26.8)		(24.9)
	Changes in fair value of financial instruments				1.7		1.3
	Net finance costs				20.7		19.4
Income tax paid					(64.7)		(0.7)
Net cash inflow from operating activities					123.9		275.7
Cash flows from investing activities
Dividends received from associate					3.5		0.6
Purchases of non-current assets and investments					(137.4)		(131.8)
Proceeds from sale of non-current assets and investments					3.9		0.3
Purchases of businesses					(53.1)		(5.7)
Net cash outflow from investing activities					(183.1)		(136.6)
Cash flows from financing activities
Net (cost of) / proceeds on ESOT transactions in own shares					(9.1)		18.4
Proceeds from borrowings and finance leases					95.2		30.1
Dividends paid to owners of the parent company			6		(86.1)		(78.4)
Dividends paid to non-controlling interests					(0.5)		-
Settlement of currency swaps for net investment hedging					7.4		(25.3)
Proceeds from non-controlling interests on share issue					-		0.3
Interest paid					(33.1)		(31.5)
Interest received					13.7		10.4
Net cash outflow from financing activities					(12.5)		(76.0)
(Decrease) / increase in cash and cash equivalents in the year					(71.7)		63.1
Exchange differences on cash and cash equivalents					1.7		1.5
Cash and cash equivalents at beginning of year					164.4		99.8
Cash and cash equivalents at end of year			9		94.4		164.4
Reconciliation to net debt
(Decrease) / increase in cash and cash equivalents in the year					(71.7)		63.1
Proceeds from borrowings and finance leases					(95.2)		(30.1)
Change in net debt resulting from cash flows					(166.9)		33.0
Borrowings acquired with subsidiaries					(21.5)		-
Exchange differences on net debt					22.4		28.0
Movement in net debt in year					(166.0)		61.0
Net debt at beginning of year					(473.4)		(534.4)
Net debt at end of year			9		(639.4)		(473.4)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31st March 2011
				Share		Shares						Non-
		Share		premium		held in		Other		Retained		controlling		Total
		capital		account		ESOT		reserves		earnings		interests		equity
		£ million		£ million		£ million		£ million		£ million		£ million		£ million
At 1st April 2009		220.7		148.3		(61.8)		18.5		849.6		0.8		1,176.1
Total comprehensive income for the
year		-		-		-		54.9		73.0		0.1		128.0
Dividends paid (note 6)		-		-		-		-		(78.4)		(0.2)		(78.6)
Acquisition of non-controlling interest		-		-		-		-		-		0.4		0.4
Share issue to non-controlling interest		-		-		-		-		-		0.3		0.3
Share-based payments		-		-		-		-		10.4		-		10.4
Cost of shares transferred to
employees		-		-		31.1		-		(18.4)		-		12.7
Tax on share-based payments		-		-		-		-		1.5		-		1.5
At 31st March 2010		220.7		148.3		(30.7)		73.4		837.7		1.4		1,250.8
Total comprehensive income for the
year		-		-		-		(4.1)		239.8		0.4		236.1
Dividends paid (note 6)		-		-		-		-		(86.1)		(0.7)		(86.8)
Purchase of shares by ESOT		-		-		(16.7)		-		-		-		(16.7)
Share-based payments		-		-		-		-		17.1		-		17.1
Cost of shares transferred to
employees		-		-		11.6		-		(10.3)		-		1.3
Tax on share-based payments		-		-		-		-		3.8		-		3.8
At 31st March 2011		220.7		148.3		(35.8)		69.3		1,002.0		1.1		1,405.6

NOTES ON THE PRELIMINARY ACCOUNTS
for the year ended 31st March 2011
1	Basis of preparation
	The financial information contained in this release does not constitute the company's statutory accounts for the years
	ended 31st March 2011 or 31st March 2010 within the meaning of section 435 of the Companies Act 2006, but is derived
	from those accounts and is prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial
	Services Authority.  The accounts are prepared in accordance with International Financial Reporting Standards (IFRS)
	and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or the Standing
	Interpretations Committee (SIC) as adopted by the European Union.  For Johnson Matthey, there are no differences
	between IFRS as adopted by the European Union and full IFRS as published by the International Accounting Standards
	Board and so the accounts comply with IFRS.  The accounting policies applied are set out in the Annual Report and
	Accounts for the year ended 31st March 2010, except where new accounting policies have been adopted as detailed
	below.  Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be
	delivered following the company's Annual General Meeting.  The auditors have reported on both of these sets of
	accounts.  Their reports were unqualified, did not include a reference to any matters to which the auditors drew attention
	by way of emphasis without qualifying their report and did not contain any statement under sections 498(2) or 498(3)
	of the Companies Act 2006.  The accounts for the year ended 31st March 2011 were approved by the Board of Directors
	on 1st June 2011.
	The group has adopted the January 2008 revision to International Financial Reporting Standard (IFRS) 3 - 'Business
	Combinations' and amendment to IAS 27 - 'Consolidated and Separate Financial Statements'.  These change the
	accounting for business combinations, transactions with non-controlling interests and the accounting in event of the loss
	of control over a subsidiary which occur from 1st April 2010 and so no restatement of prior years is required.  The
	acquisitions described in note 13 have been accounted for in accordance with the revised standard.
	Additionally, the group has adopted a number of other interpretations and amendments to accounting standards which
	have had no significant impact on the group's accounting policies, reported results or financial position.
2	Major impairment and restructuring charges
	On 27th May 2010 the group entered into consultation with employees of its Vertec business to look at the future options
	for that business.  On 19th November 2010 the Office of Fair Trading announced that it proposed to refer the sale
	of Vertec to Dorf Ketal Chemicals AG to the UK Competition Commission for further review.  As a result, the
	group terminated its agreement with Dorf Ketal and commenced a structured closure of the group's Haverton
	manufacturing site in Billingham, UK, which was complete by 31st March 2011.  The closure of the site gives
	rise to a pre-tax impairment and restructuring charge of £14.8 million.
	On 31st January 2011 the group announced it was starting consultation with the Works Council about the closure of its
	autocatalyst facility in Brussels.  The closure of the site is expected to be completed during the year ending
	31st March 2012 and gives rise to a pre-tax impairment and restructuring charge which is estimated to be £57.0 million.
	During the year ended 31st March 2010 the carrying amount of the group's Fine Chemicals facility in Massachusetts, USA
	was impaired as a result of the global recession.  This gave rise to a pre-tax impairment loss of £11.3 million in that year.
	The above charges are excluded from underlying profit.

3	Segmental information by business segment
					Precious
	Environmental				Metal		Fine
	Technologies				Products	Chemicals		Eliminations			Total
		£ million			£ million		£ million		£ million		£ million
	Year ended 31st March 2011
	Revenue from external customers	2,703.4			7,028.3		253.1		-		9,984.8
	Inter-segment revenue	4.6			1,241.3		1.9		(1,247.8)		-
	Total revenue	2,708.0			8,269.6		255.0		(1,247.8)		9,984.8
	External sales excluding the value of precious metals	1,561.3			475.4		243.6		-		2,280.3
	Inter-segment sales	4.5			65.8		1.8		(72.1)		-
	Sales excluding the value of precious metals	1,565.8			541.2		245.4		(72.1)		2,280.3
	Segmental underlying operating profit	164.7			172.9		56.2		-		393.8
	Unallocated corporate expenses										(27.6)
	Underlying operating profit										366.2
	Major impairment and restructuring charges (note 2)										(71.8)
	Amortisation of acquired intangibles (note 4)										(13.2)
	Operating profit										281.2
	Net finance costs										(20.7)
	Dissolution of associate (note 8)										0.1
	Profit before tax										260.6
	Segmental net assets	1,535.6			357.3		417.5		-		2,310.4
	Year ended 31st March 2010
	Revenue from external customers	2,056.4			5,561.8		221.2		-		7,839.4
	Inter-segment revenue	5.2			636.5		1.8		(643.5)		-
	Total revenue	2,061.6			6,198.3		223.0		(643.5)		7,839.4
	External sales excluding the value of precious metals	1,246.5			419.9		219.1		-		1,885.5
	Inter-segment sales	5.2			34.3		1.6		(41.1)		-
	Sales excluding the value of precious metals	1,251.7			454.2		220.7		(41.1)		1,885.5
	Segmental underlying operating profit	120.9			116.7		55.8		-		293.4
	Unallocated corporate expenses										(21.6)
	Underlying operating profit										271.8
	Major impairment and restructuring charges (note 2)										(11.3)
	Amortisation of acquired intangibles (note 4)										(9.9)
	Operating profit										250.6
	Net finance costs										(19.4)
	Share of profit of associate										1.7
	Dissolution of associate (note 8)										(4.4)
	Profit before tax										228.5
	Segmental net assets	1,333.7			261.2		400.8		-		1,995.7

4	Amortisation of acquired intangibles
	The amortisation of intangible assets which arise on the acquisition of businesses, together with any subsequent
	impairment of these intangible assets, is shown separately on the face of the income statement.  It is excluded from
	underlying operating profit.
5	Effect of exchange rate changes on translation of foreign subsidiaries' sales excluding the value of
	precious metals and operating profits
	Average exchange rates used for translation of results of foreign operations							2011		2010
	US dollar / £							1.555		1.595
	Euro / £							1.176		1.129
	Chinese renminbi / £							10.43		10.89
	South African rand / £							11.18		12.46
	The main impact of exchange rate movements on the group's sales and operating profit comes from the translation of
	foreign subsidiaries' results 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.
			Year ended		Year ended 31st March 2010				Change at
			31st March		At last		At this		this year's
				2011	year's rates		year's rates			rates
				£ million		£ million		£ million		%
	Sales excluding the value of precious metals
	Environmental Technologies			1,565.8		1,251.7		1,270.4		+23
	Precious Metal Products			541.2		454.2		459.9		+18
	Fine Chemicals			245.4		220.7		223.2		+10
	Elimination of inter-segment sales			(72.1)		(41.1)		(41.7)
	Sales excluding the value of precious metals			2,280.3		1,885.5		1,911.8		+19
	Underlying operating profit
	Environmental Technologies			164.7		120.9		123.4		+33
	Precious Metal Products			172.9		116.7		117.5		+47
	Fine Chemicals			56.2		55.8		56.5		-1
	Unallocated corporate expenses			(27.6)		(21.6)		(21.5)
	Underlying operating profit			366.2		271.8		275.9		+33
6	Dividends
	A final dividend of 33.5 pence per ordinary share has been proposed by the board which will be paid on 2nd August 2011
	to shareholders on the register at the close of business on 10th June 2011.  The estimated amount to be paid is
	£71.2 million and has not been recognised in these accounts.
								2011		2010
								£ million		£ million
	2008/09 final ordinary dividend paid - 26.0 pence per share							-		54.9
	2009/10 interim ordinary dividend paid - 11.1 pence per share							-		23.5
	2009/10 final ordinary dividend paid - 27.9 pence per share							59.4		-
	2010/11 interim ordinary dividend paid - 12.5 pence per share							26.7		-
	Total dividends							86.1		78.4

7	Earnings per ordinary share
	The calculation of earnings per ordinary share is based on a weighted average of 212,907,178 shares in issue
	(2010 - 211,639,326 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 plans.  These
	adjustments give rise to an increase in the weighted average number of shares in issue of 1,344,782 shares
	(2010 - 885,913 shares).
	Underlying earnings per ordinary share are calculated as follows:
								2011		2010
								£ million		£ million
	Profit for the year attributable to equity holders of the parent company							182.3		164.2
	Major impairment and restructuring charges (note 2)							71.8		11.3
	Amortisation of acquired intangibles (note 4)							13.2		9.9
	Dissolution of associate (note 8)							(0.1)		4.4
	Loss on disposal of discontinued operations							1.9		-
	Tax thereon							(15.7)		(6.9)
	Underlying profit for the year							253.4		182.9
								pence		pence
	Basic underlying earnings per share							119.0		86.4
8	Dissolution of associate
	The group had a 20% interest in AGR Matthey, which was accounted for as an associate.  An agreement between the
	partners of AGR Matthey to dissolve this partnership became effective on 29th March 2010.  As part of this dissolution, the
	group acquired a metal products business and a 20% ownership of a plot of land from AGR Matthey.  This resulted in a
	charge of £4.4 million in the year ended 31st March 2010, which was excluded from underlying profit before tax.  The group
	received £3.5 million during the year ended 31st March 2011 which related to residual current assets and liabilities left in
	the partnership whilst they were converted into cash and so has recognised a gain of £0.1 million, which is also excluded
	from underlying profit before tax.  The AGR Matthey partnership dissolution was completed on 14th September 2010.
9	Net debt
								2011		2010
								£ million		£ million
	Cash and deposits							118.9		179.1
	Bank overdrafts							(24.5)		(14.7)
	Cash and cash equivalents							94.4		164.4
	Other current borrowings and finance leases							(181.8)		(98.8)
	Non-current borrowings, finance leases and related swaps							(575.7)		(558.3)
	Swaps related to borrowings							23.7		19.3
	Net debt							(639.4)		(473.4)

10	Precious metal operating leases
	The group leases, rather than purchases, precious metals to fund temporary peaks in metal requirements provided
	market conditions allow.  These leases are 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 31st March 2011 precious
	metal leases were £93.0 million (2010 £55.8 million).
11	Transactions with related parties
	Apart from the transactions with AGR Matthey described in note 8, there were no material changes in related party
	relationships in the year ended 31st March 2011 and no other related party transactions have taken place which have
	materially affected the financial position or performance of the group during the year.
12	Post-employment benefits
	The group operates a number of post-employment benefits plans around the world, the forms and benefits of which
	vary with conditions and practices in the countries concerned.  The major defined benefit plans are pension plans
	and post-retirement medical plans in the UK and the US.
	The main assumptions were:
		2011		2011		2011		2010		2010		2010
	UK plans			US plans	Other plans			UK plans		US plans	Other plans
		%		%		%		%		%		%
	Rate of increase in salaries	4.50		3.75		3.17		4.70		3.75		2.90
	Rate of increase in pensions in payment	3.50		-		2.44		3.70		-		2.08
	Discount rate	5.50		5.70		5.57		5.50		5.70		5.49
	Inflation			2.75		2.06				2.75		2.06
	- UK RPI	3.50						3.70
	- UK CPI	3.00
	Current medical benefits cost trend rate	7.70		8.06		-		7.70		8.35		4.00
	Ultimate medical benefits cost trend rate	6.00		4.50		-		7.70		4.50		4.00
	The group uses certain mortality assumptions when calculating plan obligations.  The current mortality assumptions
	for all major plans retain prudent allowance for future improvements in longevity and take account of experience.
	The mortality tables used for the group's largest plan, which is in the UK, at its last full actuarial valuation on 1st April 2009
	were PMA92C2009 for male members retiring in normal health and PFA92C2009 for female members retiring in normal
	health.  Allowance for future mortality improvements was made in line with the medium cohort versions of these tables
	with an underpin of 1% p.a.  Shorter longevity assumptions are used for members who retire on grounds of ill-health.
	These tables have been carried through into the balance sheet calculations at 31st March 2010 and 2011 and the income
	statement for the year ended 31st March 2011, allowing for the expected improvements over the intervening years.  The
	mortality tables used for the income statement for the year ended 31st March 2010 were PMA92C2006 for male members
	retiring in normal health and PFA92C2006 for female members retiring in normal health.  Allowance for future mortality
	improvements was made in line with the medium cohort versions of these tables and expected improvements over the
	intervening years was also allowed for.

	The net post-employment benefits assets and liabilities shown in the balance sheet are analysed as:
				UK post-				US post-
			retirement				retirement
		UK		medical		US		medical
		pensions		benefits		pensions		benefits		Other		Total
		£ million		£ million		£ million		£ million		£ million		£ million
	At 31st March 2011
	Present value of funded obligations	(1,027.4)		-		(152.1)		-		(37.8)		(1,217.3)
	Present value of unfunded obligations	-		(12.5)		-		(25.8)		(11.8)		(50.1)
	Defined benefit obligation	(1,027.4)		(12.5)		(152.1)		(25.8)		(49.6)		(1,267.4)
	Fair value of plan assets	966.8		-		134.0		-		35.8		1,136.6
	Reimbursement rights	-		-		-		4.9		0.7		5.6
	Unrecognised past service credit
	- non-vested	-		-		-		(2.9)		-		(2.9)
	Net post-employment benefits	(60.6)		(12.5)		(18.1)		(23.8)		(13.1)		(128.1)
	At 31st March 2010
	Present value of funded obligations	(1,043.6)		-		(149.6)		-		(41.1)		(1,234.3)
	Present value of unfunded obligations	-		(14.4)		-		(28.5)		(13.1)		(56.0)
	Defined benefit obligation	(1,043.6)		(14.4)		(149.6)		(28.5)		(54.2)		(1,290.3)
	Fair value of plan assets	886.7		-		122.5		-		36.0		1,045.2
	Reimbursement rights	-		-		-		5.5		0.6		6.1
	Unrecognised past service credit
	- non-vested	-		-		-		(3.5)		-		(3.5)
	Net post-employment benefits	(156.9)		(14.4)		(27.1)		(26.5)		(17.6)		(242.5)
	These are included in the balance sheet as:
		2011		2011		2011		2010		2010		2010
		Post-						Post-
	employment		Employee				employment		Employee
		benefits		benefits				benefits		benefits
		net assets	obligations			Total	net assets		obligations			Total
		£ million		£ million		£ million		£ million		£ million		£ million
	UK pension plan	-		(60.6)		(60.6)		-		(156.9)		(156.9)
	UK post-retirement medical benefits plan	-		(12.5)		(12.5)		-		(14.4)		(14.4)
	US pension plans	-		(18.1)		(18.1)		-		(27.1)		(27.1)
	US post-retirement medical benefits plan	-		(23.8)		(23.8)		-		(26.5)		(26.5)
	Other plans	3.8		(16.9)		(13.1)		4.6		(22.2)		(17.6)
	Total post-employment plans	3.8		(131.9)		(128.1)		4.6		(247.1)		(242.5)
	Other long term employee benefits			(2.3)						(3.2)
	Total long term employee benefits obligations			(134.2)						(250.3)

13

Acquisitions

Intercat, Inc.

On 1st November 2010 the group acquired 100% of Intercat, Inc. and its subsidiaries. Intercat is a leading supplier of

fluid catalytic cracking (FCC) additives and addition systems, specialising in the development, manufacture, sale and

technical support of both additives and addition systems for the petroleum refining industry. It has production sites in

Savannah, Georgia, USA and offices in the US, Netherlands and India.

The net assets acquired were:

Estimated

fair value

at time of

acquisition

£ million

Property, plant and equipment

11.5

Intangible assets

30.6

Inventories

5.8

Trade and other receivables

5.4

Cash and cash equivalents

1.0

Other borrowings and finance leases

(21.5)

Current income tax liabilities

(1.4)

Deferred income tax liabilities

(8.0)

Trade and other payables

(10.6)

Total net assets acquired

12.8

Goodwill on acquisition

20.2

33.0

Satisfied by:

£ million

Purchase consideration - cash

33.7

Purchase consideration - to be refunded

(1.6)

Purchase consideration - deferred

0.9

33.0

The provisional fair values will be finalised by 30th October 2011 when the final valuation of the consideration and

of various assets and liabilities, including intangible assets and working capital, will be completed.

Manufacturing facility and certain ongoing business from Lonza Inc.

On 1st November 2010 the group acquired a large scale pharmaceutical manufacturing facility based in Pennsylvania,

USA together with certain ongoing business from Lonza Inc. for £17.2 million.  The assets acquired were property, plant

and equipment of £8.8 million, intangible assets £2.1 million and inventories of £6.3 million.

FINANCIAL CALENDAR
2011
8th June
Ex dividend date
10th June
Final dividend record date
19th July
120th Annual General Meeting (AGM)
2nd August
Payment of final dividend subject to declaration at the AGM
23rd November
Announcement of results for the six months ending 30th September 2011
30th November
Ex dividend date
2nd December
Interim dividend record date
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: 5th Floor, 25 Farringdon Street, London EC4A 4AB
Telephone: [phone]
Internet address: www.matthey.com
E-mail: [e-mail]
Registered in England - Number 33774
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: [phone]
Internet address: www.shareview.co.uk

 

END

 

 

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