Final Results
Johnson Matthey PLC
02 June 2005
For Release at 7.00 am Thursday 2nd June 2005
Preliminary Results for the year ended 31st March 2005
Encouraging prospects for future growth
Summary Results
Year to 31st March %
2005 2004 change
Statutory Basis:
Turnover £4,639 m £4,493 m +3
Profit before tax £131.0 m £178.0 m -26
Earnings per share 40.6 p 56.0 p -28
Before Exceptional Items and Goodwill Amortisation:
Profit before tax £204.0 m £195.7 m +4
Earnings per share 67.1 p 64.0 p +5
Dividend per share 27.7 p 26.4 p +5
• Profit before tax, exceptional items and goodwill amortisation up 4% at
£204.0 million despite adverse exchange translation
• Earnings per share before exceptional items and goodwill amortisation
up 5% at 67.1 pence. Dividend for the full year increased by 5% to 27.7
pence
• Strong cash flow. Net borrowings reduced by £24.9 million to £369.6
million despite £16.1 million net expenditure on share buy back
• Exceptional costs of £51.9 million. The cash generated from disposals
and rationalisation of underperforming assets is being used to buy back
shares
Divisional Performance
Operating Profit (before exceptional items and goodwill amortisation)
Year to 31st March % 2005 at 2004 % change
£m 2005 2004 change exchange rates
Catalysts 111.5 109.2 +2 115.8 +6
Precious Metal Products 45.4 44.2 +3 46.8 +6
Pharmaceutical Materials 40.0 42.3 -5 41.5 -2
Colours & Coatings 27.4 24.2 +13 28.4 +17
Corporate (16.6) (16.4) (16.8)
Continuing operations 207.7 203.5 +2 215.7 +6
Discontinued operations 0.4 2.5 0.4
Operating profit 208.1 206.0 +1 216.1 +5
• At constant exchange rates operating profit before exceptional items
and goodwill amortisation up 5%. Steady growth in Catalysts and Precious
Metal Products, Pharmaceutical Materials slightly down following expiry of
carboplatin patent, continued recovery in Colours & Coatings
Business prospects
• Excellent outlook for heavy duty diesel (HDD) catalysts. Increased
investment in product development and in new programmes in partnership with
leading original equipment manufacturers
• European autocatalyst market continues to grow driven by strong sales
of light duty diesel (LDD) vehicles. Johnson Matthey very well positioned in
LDD market and investing in new manufacturing capacity for catalysed soot
filters
• Asian autocatalyst business performing well. Investment in expanding
production capacity in both Japan and China
• Platinum group metal trading conditions remain good. Improved market
conditions combined with volume growth has more than offset the impact of
revised Anglo Platinum contract terms which began on 1st January 2004
• In Pharmaceutical Materials our pipeline of new products is strong.
New generic drugs will significantly add to revenues from early 2006 onwards
• Plan to release cash from underperforming assets underway. Share buy
back programme commenced. A further £25 million to be purchased in the first
half of 2005/06
Commenting on the results, Neil Carson, Chief Executive of Johnson Matthey said:
"In 2004/05 we made good progress. Earnings per share before goodwill
amortisation and exceptional items were 5% up, despite adverse exchange
translation. We have taken action to improve the returns on underperforming
assets and are using the cash generated to buy back shares.
The outlook for the next few years is good. We expect to see the rate of growth
in earnings increase in the second half of 2005/06 with additional revenues from
diesel emission control products and new generic pharmaceuticals coming through
in 2006."
Enquiries:
Ian Godwin, Group Communications Manager 020 7269 8410
Howard Lee, The HeadLand Consultancy 020 7036 0369
Laura Hickman, Gavin Anderson & Co 020 7554 1400
www.matthey.com
Report to Shareholders
Introduction
Johnson Matthey made good progress in 2004/05 with profit before tax,
exceptional items and goodwill amortisation up 4% despite adverse exchange
translation. Earnings per share before exceptional items and goodwill
amortisation increased by 5%.
On a constant currency basis both Catalysts and Precious Metal Products
Divisions achieved 6% growth in operating profit. Pharmaceutical Materials was
2% down as a result of the expiry of the carboplatin patent while Colours &
Coatings continued its good recovery with profits 17% up.
Cash generation was good with a net £16.1 million used to buy back shares and
net borrowings reduced by £24.9 million. The group is well positioned to
benefit from organic growth over the next few years and we have also taken
action to improve the returns on underperforming assets.
Review of Results
Total sales grew by 3% to £4,639 million. At constant exchange rates sales grew
by 7% with most of the increase coming from more buoyant trading conditions for
platinum group metals and higher average prices. Sales excluding the value of
precious metals fell by 2% to £1,200 million. This fall partly reflected the
impact of exchange translation but also lower pass through costs for
autocatalyst substrates.
Operating profit before exceptional items and goodwill amortisation rose by 1%
to £208.1 million. Adverse exchange translation reduced profits by £8.0 million
compared with 2003/04 mainly because of the fall in the value of the US dollar
which averaged $1.85/£ compared with $1.69/£ for the last financial year.
Translated at last year's exchange rates, operating profit before exceptional
items and goodwill amortisation increased by 5%.
Interest was £3.0 million lower than last year as a result of lower average
borrowings and more favourable average interest rates, particularly for
platinum. The return on retirement benefits assets and liabilities improved by
£3.2 million reflecting the increased funding surplus at 31st March 2004.
Profit before tax, exceptional items and goodwill amortisation increased by 4%
to £204.0 million. Earnings per share before exceptional items and goodwill
amortisation rose by 5% to 67.1 pence benefiting from a more favourable average
tax rate.
Total exceptional items amounted to £51.9 million. Most of this charge related
to the loss on disposal of Pigments & Dispersions and the restructuring of
underperforming assets. We expect that this process will ultimately generate
£50 million of additional cash which we are using to buy back shares. We have
completed our review of underperforming assets and do not expect any further
exceptional rationalisation costs in 2005/06.
Taking into account exceptional costs and goodwill amortisation, profit before
tax on a statutory basis fell by £47.0 million to £131.0 million and earnings
per share were 15.4 pence lower at 40.6 pence.
Dividend
The board is recommending to shareholders a final dividend of 19.0 pence, making
a total dividend for the year of 27.7 pence, an increase of 5%, which is in line
with the growth in earnings per share before exceptional items and goodwill
amortisation.
Operations
Catalysts Division's sales rose by 4% to £1,184 million. At constant exchange
rates the increase was 7%. Sales excluding the value of precious metals fell by
3% to £698 million. At constant exchange rates sales excluding the value of
precious metals rose slightly. Sales growth was held back by lower pass through
substrate costs associated with the increasing proportion of diesel catalysts
sold.
The division's operating profit increased by 2% to £111.5 million. At constant
exchange rates operating profit grew by 6%.
Environmental Catalysts and Technologies (ECT) achieved good growth in profits
in autocatalysts with all the growth coming in Europe and Asia. Profits were
lower in North America. In Johnson Matthey's financial year global light duty
vehicle sales grew by 3%, with most of the growth arising in Asia where sales
rose by 4%. Sales in Europe increased by 2% with most of the growth coming in
Eastern Europe. In North America light duty vehicle sales were slightly up but
domestic production fell by 2% with an increased number of imports mainly from
Asia.
ECT's strong performance in Europe reflected the continued growth in diesel car
sales where Johnson Matthey has leading technology. For the year to 31st March
2005 diesel car sales in Western Europe accounted for nearly half the market for
cars. There is increasing focus on reducing particulate emissions from diesel
vehicles in Europe and Johnson Matthey has been working closely with many of the
leading car companies to develop catalysed soot filters (CSFs) which remove
particles from diesel exhaust emissions. CSFs are likely to be required on all
diesel cars in Europe from 2010, but many car manufacturers plan to fit these
devices much earlier. We are investing in new production capacity to
manufacture CSFs and expect sales to grow in 2005/06.
Our autocatalyst businesses in Asia benefited from strong demand. In India,
where Johnson Matthey has a strong market position, car sales grew by 25% while
the growth rate in car sales slowed in China but was still 12.5% up on prior
year. We are expanding our factory in Shanghai and we have also put in a new
production facility next to our technical centre in Japan. This has been well
received by customers and we expect to see additional sales in Japan in 2005/06.
In North America car production fell, particularly in the final quarter of our
financial year when domestic production was down by 4.5%. Autocatalyst volumes
were also down and Johnson Matthey's profits in the region were lower than last
year. In South America vehicle production showed a strong recovery and our
facility in Argentina was well ahead of prior year.
In 2003/04 ECT benefited from strong sales of heavy duty diesel (HDD) retrofit
products in Japan supported by an incentive programme from the Tokyo
Metropolitan Government. There were no similar sized programmes in 2004/05 and
consequently revenues from HDD retrofit products were down. The outlook for HDD
sales to original equipment makers is very encouraging. New legislation on HDD
vehicle emissions will come into effect in Europe for new models in October 2005
and for all new vehicles in October 2006. New legislation in the US starts in
January 2007. The great majority of truck and bus manufacturers will be using
aftertreatment devices to meet this legislation and Johnson Matthey has leading
technology to meet the new standards.
Process Catalysts and Technologies (PCT) performed well in 2004/05 with sales
and profits comfortably ahead of the previous year. At the end of last year we
announced the acquisition of the AMC group of companies (AMC), the market
leading supplier of Sponge Nickel(TM) catalysts located in Tennessee, USA. Sponge
Nickel(TM) catalysts are extensively used in the pharmaceutical and speciality
chemicals industries and are often the first catalysts to be evaluated when
designing a new chemical process. The former AMC business, now Johnson Matthey
Catalysts, Tennessee, performed in line with our expectations and made a welcome
contribution in its first full year of ownership.
Our other catalyst businesses also had a good year, nowhere more so than the
Ammonia, Methanol, Oil and Gas (AMOG) business which saw strong growth in income
from both licensing and catalyst sales and another excellent performance from
its gas processing and purification segments. The development of a new class
leading methanol flowsheet came a stage closer with the formation of
OneSynergy(TM), a partnership with Davy Process Engineering and Aker Kvaerner to
take advantage of Johnson Matthey's new catalyst and process technologies for
both methanol synthesis and reforming chemistry.
The platinum group metal refining business continued to be adversely affected by
the weak palladium price and overcapacity in the market. After an extensive
review we decided to restructure the business in the UK and reduce the intake of
low grade materials which had left us with large quantities of residues which
are difficult to process. An exceptional charge of £10.2 million has been taken
to cover the cost of this rationalisation. One objective of the restructuring
will be to reduce the quantity of precious metals held in the refinery and
thereby release over £20 million of cash from inventory reduction.
Our Research Chemicals business continued its recent record of strong growth in
2004/05. During the course of the year we acquired the operations of Lancaster
Synthesis from Clariant AG. The acquisition was temporarily delayed as a result
of a serious fire at Lancaster's UK premises in late July. However the deal was
completed at the end of September at a significantly reduced cost. The
Lancaster business represents a good fit with our Research Chemicals business
and excellent progress has been made in integrating stock and order management
systems while maintaining the value of the Lancaster brand with its strong
market franchise.
The annual cost of our Fuel Cells business reduced by £1.1 million to £10.4
million. The market for stationary fuel cells has not grown as quickly as our
customers had expected but developments in automotive fuel cells continue to be
very encouraging. During the year we transferred most of our UK fuel cell
activities including product development to our facility at Swindon, while
longer term research remains at our technology centre at Sonning Common.
The first fuel cell vehicles to be manufactured in any quantity will be powered
by hydrogen. In California, the State government is taking action to develop a
network of filling stations for hydrogen powered vehicles. The success of
hybrid cars has shown that customers are prepared to pay a premium for
environmentally friendly vehicles. Most of the world's major car companies are
continuing to invest heavily in the development of fuel cell vehicles as
concerns over fuel security, global warming and air quality become more
pressing.
Precious Metal Products Division's sales grew by 4% to £3,069 million,
reflecting more buoyant trading conditions for platinum group metals and higher
average prices. At constant exchange rates sales grew by 8%. Operating profit
increased by 3% to £45.4 million, despite the revised terms of the renewed
contracts with Anglo Platinum and adverse exchange translation. At constant
exchange rates operating profit was 6% up.
The price of platinum reached its peak for 2004/05 of $937/oz in April, a 24
year high, driven by good physical demand and substantial speculative interest.
After a sharp correction in late April and early May, which saw the price fall
back to $783/oz, the price of platinum followed an upward trend for the rest of
the year. The average price was $848/oz, a 14% increase on 2003/04. Total
consumption of platinum edged up marginally in 2004/05, with the autocatalyst
sector underpinning demand. The increase in market share of diesel cars in
Europe and tightening emission controls for diesel powered trucks in Japan were
key drivers. However, purchases of platinum for jewellery manufacture fell in
2004/05 as a result of the strength and volatility of the platinum price.
The palladium price also reached its peak for 2004/05 in April, touching $333/oz
as investors extended their already substantial long positions. However,
production and stocks were more than adequate to meet demand and the price fell
back to a low of $178/oz in December. The average price for the year was $219/
oz, an increase of 9% on 2003/04. Physical demand for palladium climbed steeply
in 2004/05. Most of this increase came from the jewellery sector, led by the
rapid development of palladium jewellery manufacturing in China. Demand in the
autocatalyst sector was also up as US car companies increased their market
purchases, having run down their stocks in 2003. Growth in demand was almost
exactly matched by a rise in supplies, particularly from Russia where a
considerable volume of metal was sold from government stocks. Total supplies
exceeded demand by a significant margin, leaving palladium in surplus for the
fourth consecutive year.
The division's platinum group metal (pgm) manufacturing business continued its
profitable growth, benefiting from good customer service and technical
leadership. Demand for our pgm catalyst, sheet and wire products for industrial
applications was strong throughout the year. Our medical parts business, based
in California, also recorded excellent growth. Increased usage of nitinol in
medical device applications in both Europe and the US, resulted in a strong
demand for products from our San Jose factory.
In September 2004 the board took the decision to close the group's UK gold and
silver refinery. Tight refining margins and the weaker US dollar resulted in a
loss in 2003/04 of £1.6 million after metal interest and a similar performance
in the first five months of 2004/05. The closure was completed on schedule, by
the end of March 2005, at a cost of £13.2 million. As part of the closure
programme a significant proportion of the customers from our UK refinery were
successfully transferred to our refineries in Salt Lake City and Toronto, where
spare capacity existed. This boosted profits in North America which finished
ahead of 2003/04.
Pharmaceutical Materials Division's sales fell by 6% to £132 million. Adjusting
for exchange translation the drop in sales was 2%. The fall in sales reflected
lower selling prices for carboplatin, which went off patent in October 2004, and
lower revenues from contract research, partly offset by increasing sales of
controlled drugs. Operating profit fell by 5% to £40.0 million partly as a
result of adverse exchange translation. At constant exchange rates the fall in
operating profit was 2%, in line with the drop in sales.
Macfarlan Smith, which is based in Edinburgh, UK and manufactures controlled
drugs for sale to generic pharmaceutical companies, performed well in the year.
Sales and profits were both ahead of last year with most of the growth coming
from high margin specialist opiate products. The world market for drugs to
manage severe pain is growing at around 6% per annum as medicine is able to
treat more acute conditions; the world's population ages; and people are
generally less tolerant of pain. Overall growth of the opiates market is driven
primarily by the introduction of new applications and new dosage forms for
specialist opiates such as oxycodone, hydromorphone and buprenorphine, the
markets for some of which are growing at double digit rates.
Macfarlan Smith's new facility to manufacture low volume, high potency products
(mainly analgesics), which we announced last year, has made a valuable
contribution to profits in its first year of operation and we expect to achieve
further growth in this specialist market in 2005/06.
As anticipated, our active pharmaceutical ingredient (API) manufacturing
business in the US, which is based in West Deptford, NJ, saw its profits fall in
the second half of 2004/05 as the contribution from carboplatin was reduced
following the expiry of the patent in October 2004. Now that the patent has
expired we expect to supply to both Bristol-Myers Squibb and generic producers
but at lower margins. Sales of other products grew, including opiates where we
have successfully transferred manufacturing technology from Macfarlan Smith.
Growth in sales of opiate drugs will continue as an increasing number of
customers obtain regulatory approvals to market products containing APIs
manufactured at West Deptford. Sales of non-opiate controlled drugs also
improved during the year and significant progress was made on the development of
several attractive generic products which will reach commercialisation over the
next few years.
During the year we changed the name of Pharm-Eco to Pharma Services to better
reflect its market segment. Pharma Services provides contract research and
development and manufacturing services to pharmaceutical companies from
pre-clinical through to commercial launch. Although manufacturing continued to
grow, contract research revenues were down in the second half of the year and
profits were below last year.
During 2004/05 Cascade Biochem, which we acquired in 2002, was consolidated into
its Cork, Ireland facility and renamed Pharmaceutical Materials Ireland. The
business has continued to expand its customer base and geographic coverage
during the year. Regulatory filings of new generic products containing our
prostaglandin APIs have been made by our customers and are currently in review
stages. Our products are also being qualified for new generic drug dosage forms
targeted for sale in major world markets.
We restructured Colours & Coatings Division during the year following the sale
of Pigments & Dispersions in September 2004 for £22.2 million (after costs).
Several other sites are in the process of being closed, the largest of which is
the division's decal factory in Stoke-on-Trent. An exceptional charge of £10.3
million has been taken to cover the cost of these closures. The decorative
precious metals, glass coatings and tableware businesses have been renamed
Colour Technologies and will be transferred to Precious Metal Products Division
and included in that division's results next year. The remaining business,
Structural Ceramics, has been renamed Ceramics and will be shown as a stand
alone division in 2005/06.
Sales for the division, excluding Pigments & Dispersions, rose by 8% in 2004/05
to £242 million. At constant exchange rates sales grew by 12%. Operating
profit increased by 13% to £27.4 million. At constant exchange rates profits
grew by 17%.
Our Ceramics business had sales of £166 million and contributed about two thirds
of the profits of the division. It supplies decorative materials for ceramic
products, mainly to the tile industry. The business achieved good growth in
sales and profits in 2004/05. Demand for tiles in the Western European market
was flat and the strength of the euro adversely impacted European tile producers
who are major exporters to other parts of the world. However there was good
growth in China, India and Brazil where Johnson Matthey has production
facilities and is well represented. Our sales into Eastern Europe also showed
good growth.
Colour Technologies performed well in 2004/05. Sales to the automotive sector
increased, particularly sales of both black obscuration enamels and conductive
silver paste. Demand for decorative products for other glass applications was
also up benefiting from new product introductions which are helping the business
to consolidate its market leading position in this segment.
Exceptional Items
Exceptional items for the year amounted to £51.9 million which included a
rationalisation charge of £10.2 million to restructure our underperforming UK
platinum group metal refining business and a £10.3 million charge for closing a
number of former Colours & Coatings' sites following the sale of Pigments &
Dispersions and the restructuring of that division. The remaining items were
announced in the first half of the year and include a loss of £15.2 million on
sale of the Pigments & Dispersions business, of which £5.8 million related to
goodwill previously written off to reserves; the closure of the UK gold and
silver bullion refinery at a cost of £13.2 million and £3.0 million of
acquisition integration costs.
Finance
Exchange Rates
The main impact of exchange rate movements on the group's results comes from the
translation of foreign subsidiaries' profits into sterling. Around 30% of the
group's profits were made in North America, mainly in the USA. The US dollar
weakened significantly from an average rate of $1.69/£ in 2003/04 to an average
of $1.85/£ in 2004/05. The average rate for the euro also weakened from €1.44/£
to €1.47/£. The South African rand strengthened from R12.11/£ to R11.53/£ but
the translational benefit of that rise was more than offset by the adverse
impact of the stronger rand on operating margins. Excluding the rand, exchange
translation reduced operating profit by £8.0 million, which is equivalent to 4%
of operating profit before exceptional items and goodwill amortisation.
Interest
The group's net interest charge fell by £3.0 million to £13.3 million,
benefiting from lower average borrowings, particularly in the second half of the
year. Metal financing costs were also favourable with interest rates for
platinum below the high levels experienced in 2003/04. Average precious metal
leases were reduced following the closure of the UK gold and silver refinery in
September 2004.
The return on retirement benefits assets and liabilities improved by £3.2
million. This credit is shown separately under FRS 17 (the pension accounting
standard adopted by the group last year). The rise reflected the increase in
the pension fund surplus at 31st March 2004.
Taxation
The group's tax charge fell by £13.9 million to £44.0 million. The reduction
largely related to tax relief on the exceptional costs incurred in the year.
Before exceptional items and goodwill amortisation the average tax rate for the
year fell slightly from 29.8% to 29.2% with an increase in tax credits received
on research and development expenditure.
Cash Flow
Johnson Matthey's net cash flow for the year was strong at £23.5 million. After
taking into account £1.4 million of exchange translation, net borrowings fell by
£24.9 million to £369.6 million. Gearing (net borrowings / shareholders' funds
and minority interests) fell by 2.8% from 45.3% at 31st March 2004 to 42.5% at
31st March 2005.
The group received £23.3 million from disposals and paid £4.0 million for
acquisitions. The proceeds received from the disposals have been used to buy
back shares. During the year we purchased 2.5 million of Johnson Matthey shares
at an average price of £10.06. This included 0.9 million of shares for the
group's employee share ownership trust. The cash outflow on share purchases in
the year was £19.3 million, with a further £5.9 million paid in April 2005. The
group received £3.2 million of proceeds from the exercise of share options by
employees to give an overall net outflow on shares bought / issued in the year
of £16.1 million. Excluding acquisitions, disposals and share transactions the
group generated a free cash flow of £20.3 million.
Net cash flow from operations was £28.4 million lower than last year at £231.3
million. Capital expenditure incurred was £17.6 million lower than last year at
£95.5 million which represented 1.4 times depreciation, down from 1.8 times last
year. The net cash outflow on capital expenditure and financial investment in
the year was £86.8 million, which was less than the level of capital expenditure
incurred, reflecting the timing of the expenditure and the inclusion of £4.1
million received from the sale of assets. Major projects included expansion of
ECT's production facilities in the UK, South Africa, Japan and China; investment
in catalyst manufacturing for PCT at Clitheroe, UK; and further investment in
new capacity at Macfarlan Smith in Edinburgh.
Pensions
The surplus on the group's UK pension scheme increased by £2.5 million to £45.8
million at 31st March 2005. The investment performance of the fund for the year
was good but the benefit of this was largely offset by changes in the discount
rate and the inflation assumption used in valuing liabilities.
Worldwide, including provisions for the group's post-retirement healthcare
schemes and pension related deferred tax assets and liabilities, the group had a
net deficit of £1.1 million on retirement benefits net assets compared with a
net surplus of £3.5 million at 31st March 2004.
International Financial Reporting Standards (IFRS)
For the financial year ending 31st March 2006 we will be reporting our results
under International Financial Reporting Standards (IFRS). We have issued a
separate announcement today setting out how the group's income statement,
balance sheet and segmental results for the financial year to 31st March 2005
would look under the new standards.
Outlook
The outlook for the next few years is very encouraging. We expect the group to
achieve good top line growth from the introduction of new products and also
generate cash.
The group's profits were higher in the first half of 2004/05 than in the second
half, partly as a result of exchange translation. In 2005/06 we expect this
trend to be reversed, with most of the growth coming in the second half of the
year.
The much publicised problems in the US car industry are likely to have some
impact on Johnson Matthey's results in the first half of 2005/06. We expect car
production to be down in the US in our first half which will reduce demand for
autocatalysts in that region. However, both Europe and Asia are now bigger car
producing regions than the US and Johnson Matthey's businesses in those regions
are continuing to see good demand which should more than offset the shortfall in
the US. In the first half of 2005/06 we expect profits in our Pharmaceutical
Materials Division will be down on the equivalent period in 2004/05 when we were
still benefiting from the carboplatin patent, which expired in October 2004.
Despite these factors the underlying growth trend is favourable. HDD
legislation in Europe will begin to have an impact in October 2005 and we expect
to see demand for aftertreatment devices from original equipment manufacturers
start to grow in the second half of the year. We also expect sales of catalysed
soot filters for light duty diesel vehicles to grow during the year.
Pharmaceutical Materials should benefit from new product launches in early 2006.
Earnings per share will also benefit from the share buy-backs we have undertaken
using the proceeds generated by our programme to improve the returns on
underperforming assets. We expect to purchase an additional £25 million of
shares in the first half of 2005/06. We have completed our review of
underperforming assets and do not expect any further exceptional rationalisation
costs in 2005/06.
Consolidated Profit and Loss Account
for the year ended 31st March 2005
2005 2005 2005 2004 2004
Before Before
exceptional Exceptional exceptional
items and items and items and
goodwill goodwill goodwill
amortisation amortisation Total amortisation Total
restated restated
Notes £ million £ million £ million £ million £ million
Turnover 1
Continuing operations 4,626.2 - 4,626.2 4,463.0 4,463.0
Discontinued operations 12.3 - 12.3 29.9 29.9
Group turnover 4,638.5 - 4,638.5 4,492.9 4,492.9
Operating profit 1
Continuing operations before goodwill 206.9 - 206.9 202.8 202.8
amortisation
Goodwill amortisation - (20.9) (20.9) - (19.5)
Continuing operations before exceptional 206.9 (20.9) 186.0 202.8 183.3
items
Exceptional items 2 - (23.5) (23.5) - 2.1
Total continuing operations 206.9 (44.4) 162.5 202.8 185.4
Discontinued operations 0.4 - 0.4 2.5 2.5
Goodwill amortisation on discontinued - (0.1) (0.1) - (0.2)
operations
Group operating profit 207.3 (44.5) 162.8 205.3 187.7
Share of profit in associates 0.8 - 0.8 0.7 0.7
Goodwill amortisation on associates - (0.1) (0.1) - (0.1)
Total operating profit 208.1 (44.6) 163.5 206.0 188.3
Loss on closure of continuing operations 2 - (13.2) (13.2) - -
Loss on sale of discontinued operations 2 - (15.2) (15.2) - -
Profit on ordinary activities before interest 208.1 (73.0) 135.1 206.0 188.3
Net interest (13.3) - (13.3) (16.3) (16.3)
Net return on retirement benefits assets and 3 9.2 - 9.2 6.0 6.0
liabilities
Profit on ordinary activities before taxation 204.0 (73.0) 131.0 195.7 178.0
Taxation 4 (59.6) 15.6 (44.0) (58.3) (57.9)
Profit after taxation 144.4 (57.4) 87.0 137.4 120.1
Minority interests 1.2 - 1.2 1.7 1.7
Profit attributable to shareholders 145.6 (57.4) 88.2 139.1 121.8
Dividends 5 (59.8) - (59.8) (57.4) (57.4)
Retained profit for the year 85.8 (57.4) 28.4 81.7 64.4
pence pence pence pence
Earnings per ordinary share
Basic 6 67.1 40.6 64.0 56.0
Diluted 6 66.9 40.5 63.7 55.8
Dividend per ordinary share 5 27.7 27.7 26.4 26.4
Consolidated Balance Sheet
as at 31st March 2005
2005 2004
Notes £ million £ million
Fixed assets
Goodwill 354.2 377.1
Tangible fixed assets 604.9 608.1
Investments 6.6 5.5
965.7 990.7
Current assets
Stocks 416.5 417.3
Debtors 364.2 387.4
Short term investments 0.6 1.6
Cash at bank and in hand 78.7 106.5
860.0 912.8
Creditors: amounts falling due within one year
Borrowings and finance leases (36.8) (46.5)
Precious metal leases (102.1) (127.4)
Other creditors (342.9) (358.9)
Net current assets 378.2 380.0
Total assets less current liabilities 1,343.9 1,370.7
Creditors: amounts falling due after more than one year
Borrowings and finance leases (411.5) (454.5)
Other creditors (0.7) (0.7)
Provisions for liabilities and charges (61.9) (47.4)
Net assets excluding retirement benefits assets and liabilities 869.8 868.1
Retirement benefits net assets 3 33.5 31.5
Retirement benefits net liabilities 3 (34.6) (28.0)
Net assets including retirement benefits assets and liabilities 868.7 871.6
Capital and reserves
Called up share capital 219.5 220.6
Share premium account 139.8 137.1
Capital redemption reserve 6.5 4.9
Shares held in employee share ownership trusts (37.7) (28.8)
Associates' reserves (0.2) (0.5)
Profit and loss account 533.5 528.9
Shareholders' funds 861.4 862.2
Minority interests 7.3 9.4
868.7 871.6
Consolidated Cash Flow Statement
for the year ended 31st March 2005
2005 2004
£ million £ million
Reconciliation of operating profit to
net cash inflow from operating activities
Operating profit 162.8 187.7
Depreciation, amortisation and net profit on disposal of fixed assets and 86.0 83.5
investments
Net retirement benefits charge less contributions 1.2 1.0
(Increase) / decrease in owned stocks (38.2) 17.3
Decrease / (increase) in debtors 9.1 (41.7)
Increase in creditors and provisions 10.4 11.9
Net cash inflow from operating activities 231.3 259.7
Cash Flow Statement
Net cash inflow from operating activities 231.3 259.7
Dividends received from associates 0.2 0.5
Returns on investments and servicing of finance (13.1) (16.4)
Taxation (52.9) (43.1)
Capital expenditure and financial investment (86.8) (114.4)
Acquisitions (4.0) (18.4)
Disposals 23.3 -
Equity dividends paid (58.4) (56.4)
Net cash flow before use of liquid resources and financing 39.6 11.5
Management of liquid resources 9.9 1.1
Financing
Issue and purchase of share capital (16.1) (8.5)
(Decrease) / increase in borrowings and finance leases (50.6) 6.3
Net cash outflow from financing (66.7) (2.2)
(Decrease) / increase in cash in the period (17.2) 10.4
Reconciliation of net cash flow to movement in net debt
(Decrease) / increase in cash in the period (17.2) 10.4
Cash outflow / (inflow) from movement in borrowings and finance leases 50.6 (6.3)
Cash inflow from movement in liquid resources (9.9) (1.1)
Change in net debt resulting from cash flows 23.5 3.0
Loan notes (issued) / cancelled to acquire subsidiaries - (1.1)
Translation difference 1.4 6.1
Movement in net debt in year 24.9 8.0
Net debt at beginning of year (394.5) (402.5)
Net debt at end of year (369.6) (394.5)
Total Recognised Gains and Losses
for the year ended 31st March 2005
2005 2004
£ million £ million
Profit attributable to shareholders 88.2 121.8
Currency translation differences on foreign currency net investments and (1.9) (23.8)
related loans
Taxation on translation differences on foreign currency loans 2.0 16.8
Actuarial (loss) / gain on retirement benefits assets and liabilities (15.5) 36.1
Taxation on actuarial loss / gain on retirement benefits assets and liabilities 3.6 (11.0)
Total recognised gains and losses relating to the year 76.4 139.9
Prior year adjustment - (108.3)
Total recognised gains and losses recognised since previous annual report 76.4 31.6
There were no material differences between reported profits and losses and historical cost profits and losses on
ordinary activities before tax for 2005 and 2004.
Movement in Shareholders' Funds
for the year ended 31st March 2005
2005 2004
£ million £ million
Profit attributable to shareholders 88.2 121.8
Dividends (59.8) (57.4)
Retained profit for the year 28.4 64.4
Other recognised gains and losses relating to the year (11.8) 18.1
New share capital subscribed 3.2 6.4
Purchase of own shares (16.3) -
Purchase of shares for employee share ownership trusts (ESOTs) (8.9) (14.9)
Shares in ESOTs utilised for long term incentive plan - 0.9
Movement in long term incentive plan (1.2) -
Goodwill written back on sale of Pigments & Dispersions business 5.8 -
Net movement in shareholders' funds (0.8) 74.9
Opening shareholders' funds 862.2 787.3
Closing shareholders' funds 861.4 862.2
Notes to the Preliminary Financial Statements
for the year ended 31st March 2005
1 Segmental information
Turnover Sales excluding Operating profit Net operating assets
precious metals
2005 2004 2005 2004 2005 2004 2005 2004
restated restated restated restated
Activity analysis £ million £ million £ million £ million £ million £ million £ million £ million
Catalysts 1,183.6 1,142.7 698.5 720.3 111.5 109.2 818.7 819.7
Precious Metal Products 3,068.7 2,956.4 124.0 120.6 45.4 44.2 25.7 19.0
Pharmaceutical Materials 131.8 139.7 124.6 131.5 40.0 42.3 282.5 281.4
Colours & Coatings 242.1 224.2 240.6 222.1 27.4 24.2 168.5 174.2
Corporate - - - - (16.6) (16.4) (56.0) (62.2)
4,626.2 4,463.0 1,187.7 1,194.5 207.7 203.5 1,239.4 1,232.1
Discontinued operations 12.3 29.9 12.3 29.9 0.4 2.5 - 30.5
4,638.5 4,492.9 1,200.0 1,224.4 208.1 206.0 1,239.4 1,262.6
Goodwill amortisation (21.1) (19.8)
Exceptional items included in total operating profit (note 2) (23.5) 2.1
163.5 188.3 1,239.4 1,262.6
Loss on closure of continuing operations (note 2) (13.2) -
Loss on sale of discontinued operations (note 2) (15.2) -
Net interest (13.3) (16.3)
Net return on retirement benefits assets and 9.2 6.0
liabilities
Profit on ordinary activities before taxation 131.0 178.0
Net borrowings and finance leases (369.6) (394.5)
Net assets excluding retirement benefits assets and 869.8 868.1
liabilities
Retirement benefits net (liabilities) / assets (1.1) 3.5
Net assets including retirement benefits assets and 868.7 871.6
liabilities
Turnover Operating profit Net operating assets
2005 2004 2005 2004 2005 2004
restated restated restated
Geographical analysis by origin £ million £ million £ million £ million £ million £ million
Europe 3,269.1 3,209.5 91.0 79.0 862.3 890.5
North America 1,041.7 961.9 62.1 72.0 253.1 227.4
Asia 999.7 837.6 19.0 19.4 68.4 55.2
Rest of the World 257.0 272.2 35.6 33.1 55.6 59.0
5,567.5 5,281.2 207.7 203.5 1,239.4 1,232.1
Discontinued operations 14.2 33.4 0.4 2.5 - 30.5
5,581.7 5,314.6 208.1 206.0 1,239.4 1,262.6
Less inter-segment sales (943.2) (821.7)
Total turnover 4,638.5 4,492.9
Goodwill amortisation (21.1) (19.8)
Exceptional items included in total operating profit (note 2) (23.5) 2.1
163.5 188.3 1,239.4 1,262.6
Loss on closure of continuing operations (note 2) (13.2) -
Loss on sale of discontinued operations (note 2) (15.2) -
Net interest (13.3) (16.3)
Net return on retirement benefits assets and 9.2 6.0
liabilities
Profit on ordinary activities before taxation 131.0 178.0
Net borrowings and finance leases (369.6) (394.5)
Net assets excluding retirement benefits assets and 869.8 868.1
liabilities
Retirement benefits net (liabilities) / assets (1.1) 3.5
Net assets including retirement benefits assets and 868.7 871.6
liabilities
The group sold its Pigments & Dispersions business (part of Colours & Coatings) during the year (note 8) and so its
results are reported as discontinued operations.
Notes to the Preliminary Financial Statements
for the year ended 31st March 2005
2 Exceptional items
An exceptional charge of £23.5 million (2004 credit of £2.1 million) has been included in total operating
profit. This comprises:
2005 2004
£ million £ million
Cost of integrating the business of Activated Metals and Chemicals, Inc. (1.0) -
Cost of integrating the business of Lancaster Synthesis Limited (2.0) -
Colours & Coatings rationalisation costs (10.3) -
UK pgm refining rationalisation (10.2) -
Litigation settlement (Pharmaceutical Materials) - 14.8
Other Catalysts' rationalisation costs - (12.7)
Exceptional items in total operating profit (23.5) 2.1
The loss on closure of continuing operations of £13.2 million relates to the closure of the gold and silver
bullion refinery in Royston, UK.
The loss on sale of discontinued operations of £15.2 million relates to the sale of the Pigments & Dispersions
business (note 8).
3 Retirement benefits assets and liabilities
2005 2004
Net return £ million £ million
Expected return on scheme assets 45.2 37.5
Interest on scheme liabilities (36.0) (31.5)
9.2 6.0
Pension fund assets and liabilities
The net assets of the group's retirement benefits schemes which are in surplus and the net liabilities of the
schemes which are in deficit are shown separately in the balance sheet. At 31st March 2005 the group's UK defined
benefit pension scheme held assets with a market value of £659.4 million and had a net surplus, before tax, of £45.8
million. The group's other main pension schemes are in the USA. At 31st March 2005 these schemes held assets with a
market value of £64.1 million and had a net deficit, before tax, of £11.6 million. The group also operates schemes for
post-retirement medical benefits (now closed to new members) which are unfunded and had net liabilities of £26.5 million
at 31st March 2005.
4 Taxation
2005 2004
£ million £ million
United Kingdom 22.5 27.4
Overseas 37.1 30.8
Associates - 0.1
Tax on ordinary activities before exceptional items and goodwill amortisation 59.6 58.3
Tax on goodwill amortisation (1.9) (2.0)
Tax on exceptional items included in total operating profit (7.0) 1.6
Tax on loss on closure of continuing operations (3.9) -
Tax on loss on sale of discontinued operations (2.8) -
44.0 57.9
5 Dividends
A final dividend of 19.0 pence (2004 18.2 pence) per ordinary share is proposed for payment on 2nd
August 2005 to shareholders on the register at 10th June 2005. Together with the interim dividend of 8.7 pence (2004 8.2
pence) this would make a total dividend of 27.7 pence (2004 26.4 pence) giving a total payment of £59.8 million (2004
£57.4 million).
Notes to the Preliminary Financial Statements
for the year ended 31st March 2005
6 Earnings per ordinary share
Profit for the year attributable to shareholders is £88.2 million (2004 £121.8 million). This is
divided by the weighted average number of shares in issue calculated as 217,005,241 (2004 217,629,033) to give basic
earnings per share of 40.6 pence (2004 56.0 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 497,097 (2004 778,267), giving diluted earnings per share
of 40.5 pence (2004 55.8 pence).
Before exceptional items, goodwill amortisation and the tax thereon, basic earnings per share were 67.1 pence
(2004 64.0 pence) and diluted earnings per share were 66.9 pence (2004 63.7 pence).
2005 2004
£ million £ million
Attributable profit 88.2 121.8
Goodwill amortisation 21.1 19.8
Exceptional items 51.9 (2.1)
Tax thereon (15.6) (0.4)
Adjusted profit 145.6 139.1
Earnings per share before exceptional items and goodwill amortisation
Basic 67.1p 64.0p
Diluted 66.9p 63.7p
7 Acquisition of the business of Lancaster Synthesis Limited
On 30th September 2004 the group acquired the business of Lancaster Synthesis Limited (Lancaster) from Clariant
AG for £2.3 million. Costs incurred were £0.5 million. Lancaster manufactures and distributes organic
compounds for research and development purposes and is headquartered in Morecambe, UK. The fair value of the net
assets acquired was £2.8 million. This has been accounted for by acquisition accounting.
8 Sale of Pigments & Dispersions business
On 1st September 2004 the group sold its Pigments & Dispersions business to Rockwood Pigments (UK) Limited for
an initial consideration of £27.0 million which has since been reduced by £1.9 million following agreement as to
the level of assets in the business at completion and the level of net debt transferred to the purchaser. Costs
incurred were £2.9 million. The net assets disposed of were £33.2 million, including £0.1 million of cash. After
including £5.8 million of goodwill previously written off directly to reserves the disposal resulted in a
loss of £15.2 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 2005 or 31st March 2004 but is derived from those accounts. Statutory accounts for 2004 have been
delivered to the Registrar of Companies and those for 2005 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 2005 were approved by the Board
of Directors on 31st May 2005.
Financial Calendar 2005
10th June
Final ordinary dividend record date
19th July
114th Annual General Meeting (AGM)
2nd August
Payment of final dividend subject to declaration at the AGM
23rd November
Announcement of results for six months ending 30th September 2005
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: 2-4 Cockspur Street, Trafalgar Square, London SW1Y 5BQ
Telephone: 020 7269 8400
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 33774
Registrars
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA
Telephone: 0870 600 3970
Internet address: www.shareview.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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