IFRS Restatement
Johnson Matthey PLC
02 June 2005
For Release at 7.02 am on Thursday 2nd June 2005
Restatement of Results for the year ended 31st March 2005 under International
Financial Reporting Standards
Introduction
Johnson Matthey announced today its results for the year ended 31st March 2005
under current UK Generally Accepted Accounting Principles (UK GAAP). Following
a European Union Regulation issued in 2002, the group will be reporting its
results in accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union from 1st April 2005 and so in its Annual Report
and Accounts for the year ending 31st March 2006 all its financial information
will be presented under IFRS. This announcement presents the group's results
converted from UK GAAP to IFRS for the year ended 31st March 2005.
Overview of impact on results for the year ended 31st March 2005
(unaudited)
UK GAAP IFRS % change
Profit before tax £131.0m £167.4m +28
Earnings per share 40.6p 53.0p +31
Net assets £868.7m £929.1m +7
Reconciliations of profit before tax and net assets (unaudited)
Notes £ million
Profit before tax under UK GAAP for the year ended 31st March 2005 131.0
Discontinued operations a 14.9
Goodwill amortisation b 20.9
Goodwill amortisation on associates b 0.1
Development capitalised in the year c 5.4
Amortisation of capitalised development c (1.1)
Share options and long term incentive plan d (4.1)
Employee benefits e 0.3
-----
Profit before tax under IFRS 167.4
-----
Net assets under UK GAAP as at 31st March 2005 868.7
Goodwill amortisation b 20.9
Goodwill amortisation on associates b 0.1
Net capitalised development c 15.5
Bid value adjustment for post-employment schemes' assets e (2.0)
Additional accruals for other short term and long term employee e (3.5)
benefits
Deferred tax adjustments g (11.5)
Dividends h 40.9
-----
Net assets under IFRS 929.1
-----
IFRS Consolidated Income Statement (Unaudited)
for the year ended 31st March 2005
IFRS adjustments
Discontinued
UK GAAP operations Associates Other IFRS
Notes £ million £ million £ million £ million £ million
Revenue 4,638.5 (12.3) - - 4,626.2
Cost of materials sold (3,878.5) 4.7 - - (3,873.8)
Net revenues 760.0 (7.6) - - 752.4
Other cost of sales c, e (389.0) 5.5 - 10.9 (372.6)
Gross profit 371.0 (2.1) - 10.9 379.8
Distribution costs e (84.1) 1.0 - 1.6 (81.5)
Administrative expenses d, e (79.6) 0.7 - (2.8) (81.7)
Goodwill amortisation b (21.0) 0.1 - 20.9 -
Acquisition integration costs (3.0) - - - (3.0)
Rationalisation costs (20.5) - - - (20.5)
Loss on sale of discontinued
operations a (15.2) 15.2 - - -
Loss on closure of UK gold and silver (13.2) - - - (13.2)
bullion refinery
Operating profit 134.4 14.9 - 30.6 179.9
Finance costs f (13.3) - 0.3 - (13.0)
Net return on retirement benefits assets e 9.2 - - (9.2) -
and liabilities
Share of profit of associates b, f 0.7 - (0.3) 0.1 0.5
Profit before tax 131.0 14.9 - 21.5 167.4
Income tax expense g (44.0) (2.7) - (0.3) (47.0)
Profit for the year from continuing 87.0 12.2 - 21.2 120.4
operations
Loss for the year from discontinued a - (6.4) - - (6.4)
operations
Profit for the year 87.0 5.8 - 21.2 114.0
Attributable to:
Equity holders of the parent company 88.2 5.8 - 21.0 115.0
Minority interest c (1.2) - - 0.2 (1.0)
87.0 5.8 - 21.2 114.0
pence
Earnings per ordinary share attributable to the equity holders of the parent company
Continuing operations
Basic 55.9
Diluted 55.8
Total
Basic 53.0
Diluted 52.9
IFRS Consolidated Balance Sheet (Unaudited)
as at 31st March 2005
IFRS
UK GAAP adjustments IFRS
Notes £ million £ million £ million
Assets
Non-current assets
Property, plant and equipment c 604.9 (11.9) 593.0
Goodwill b 354.2 20.9 375.1
Other intangible assets c - 27.4 27.4
Investments in associates b 4.7 0.1 4.8
Deferred income tax assets g 0.8 2.4 3.2
Available-for-sale investments 1.9 - 1.9
Retirement benefit net assets e 33.5 11.7 45.2
Total non-current assets 1,000.0 50.6 1,050.6
Current assets
Inventories i, j 416.5 (109.2) 307.3
Current income tax assets g - 2.2 2.2
Trade and other receivables 363.4 - 363.4
Available-for-sale investments 0.6 - 0.6
Other current assets j - 7.1 7.1
Cash and cash equivalents 78.7 - 78.7
Total current assets 859.2 (99.9) 759.3
Total assets 1,859.2 (49.3) 1,809.9
Liabilities
Current liabilities
Trade and other payables h (332.8) 38.5 (294.3)
Precious metal leases i (102.1) 102.1 -
Current income tax liabilities g (10.1) (2.2) (12.3)
Borrowings and finance leases (36.8) - (36.8)
Short term provisions j - (26.5) (26.5)
Total current liabilities (481.8) 111.9 (369.9)
Non-current liabilities
Borrowings and finance leases (411.5) - (411.5)
Deferred income tax liabilities e, g (29.7) (16.9) (46.6)
Employee benefits obligations e, j (34.6) (13.6) (48.2)
Long term provisions j (32.2) 28.3 (3.9)
Trade and other payables (0.7) - (0.7)
Total non-current liabilities (508.7) (2.2) (510.9)
Total liabilities (990.5) 109.7 (880.8)
Net assets 868.7 60.4 929.1
Equity
Share capital 219.5 - 219.5
Share premium 139.8 - 139.8
Shares held in employee share ownership trusts (37.7) - (37.7)
Other reserves 6.3 - 6.3
Retained earnings 533.5 60.2 593.7
861.4 60.2 921.6
Minority interest c 7.3 0.2 7.5
Total equity 868.7 60.4 929.1
IFRS Segmental Information (Unaudited)
for the year ended 31st March 2005
By business segment
For the accounts for the year ending 31st March 2006 the group will be organised into four operating divisions -
Catalysts, Precious Metal Products, Pharmaceutical Materials and Ceramics. Each division comprises a reportable segment
under IFRS. These divisions are different to those currently reported in the group's UK GAAP accounts (note l).
Precious
Metal Pharmaceutical
Catalysts Products Materials Ceramics Eliminations Total
£ million £ million £ million £ million £ million £ million
Sales to external customers 1,157.2 3,171.0 131.8 166.2 - 4,626.2
Inter-segment sales 34.8 496.2 0.2 9.5 (540.7) -
Total revenue 1,192.0 3,667.2 132.0 175.7 (540.7) 4,626.2
External sales excluding the value
of precious metals 672.1 224.8 124.6 166.2 - 1,187.7
Segment result before one-off items 122.5 52.0 39.8 18.8 - 233.1
Acquisition integration costs (3.0) - - - - (3.0)
Rationalisation costs - (16.8) - (3.7) - (20.5)
Loss on closure of UK gold and
silver bullion refinery - (13.2) - - - (13.2)
Segment result 119.5 22.0 39.8 15.1 - 196.4
Unallocated corporate expenses (16.5)
Operating profit 179.9
Finance costs (13.0)
Share of profit of associates 0.5
Profit before tax 167.4
Income tax expense (47.0)
Profit for the year from continuing
operations 120.4
Loss for the year from discontinued
operations (6.4)
Profit for the year 114.0
Segment assets 907.2 237.1 326.5 155.7 (15.6) 1,610.9
Investments in associates - 4.7 - 0.1 - 4.8
Unallocated corporate assets 194.2
Total assets 1,809.9
Segment liabilities 142.3 79.9 22.1 32.3 (15.6) 261.0
Unallocated corporate liabilities 619.8
Total liabilities 880.8
Segment capital expenditure 64.4 13.4 16.8 2.8 - 97.4
Capital expenditure on discontinued
operations 1.1
Corporate capital expenditure 2.4
Total capital expenditure 100.9
Segment depreciation and amortisation 36.0 13.2 9.6 6.0 - 64.8
Depreciation on discontinued operations 0.8
Corporate depreciation 2.0
Total depreciation and amortisation 67.6
Significant non-cash expenses other than 0.7 7.8 - - - 8.5
depreciation
By geographical segment
Pharmaceutical Materials is located in Europe and North America. All of the other operations of the group have a
presence in each of the geographical segments.
Rest of
North the
Europe America Asia World Eliminations Total
£ million £ million £ million £ million £ million £ million
External sales by geographical destination 2,032.6 995.8 1,228.7 369.1 - 4,626.2
Carrying value of segment assets by location 1,234.2 378.4 141.6 86.4 (30.7) 1,809.9
Capital expenditure by location of assets 58.4 27.0 8.6 6.9 - 100.9
Notes on the IFRS Restatement (Unaudited)
for the year ended 31st March 2005
Basis of preparation
The restatement has been prepared on the basis of all IFRS and Standard Interpretations Committee (SIC) and
International Financial Reporting Interpretations Committee (IFRIC) interpretations currently issued by the
International Accounting Standards Board (IASB) effective for 2005/06 reporting and adopted by the European Union. In
addition, the IASB issued an amendment to IAS 19 - 'Employee Benefits' in December 2004 which permits the full
recognition of actuarial gains or losses that occur in the year outside the income statement in a similar way to FRS 17
under UK GAAP. Johnson Matthey has decided to adopt this amendment in 2005/06 and so has prepared this restatement on
this basis. The IASB is still issuing standards and interpretations which Johnson Matthey may decide
to adopt in 2005/06 and so there may be further adjustments to the restatement of the results for the year ended 31st
March 2005 which do not appear in this announcement.
Major differences between UK GAAP and IFRS
a) Under IFRS 5 - 'Non-current Assets Held for Sale and Discontinued Operations' the post tax profit of
discontinued operations and the post tax loss on disposal of those operations are disclosed as a single amount
towards the bottom of the income statement. Also, under IFRS 1 - 'First-time Adoption of International Financial
Reporting Standards' goodwill recognised under previous GAAP as a deduction from equity is not transferred to the
income statement on disposal of the subsidiary.
b) Under IFRS 3 - ' Business Combinations' amortisation of goodwill is no longer required but instead annual
impairment reviews have to be performed. Johnson Matthey has elected to take advantage of the exemption allowed
under IFRS 1 not to recalculate goodwill for all business combinations. Therefore the group has not adjusted its
carrying amount of goodwill at 1st April 2004 (the group's date of transition) from that previously disclosed under
UK GAAP. The only adjustment to goodwill on the balance sheet is to reverse all amortisation charged since 1st
April 2004.
c) Under IAS 38 - 'Intangible Assets' the group has to capitalise all development expenditure which meet the
recognition criteria laid down in the standard and then amortise the asset over its useful life once it is available
for use. Under UK GAAP Johnson Matthey did not capitalise any development expenditure. Under IFRS, assets have
been recognised in Catalysts Division for some development expenditure on heavy duty diesel catalysts and fuel cell
components. The group believes that all other development expenditure is for incremental improvements to existing
processes or for projects in an early stage of development and so no assets have been recognised.
In addition, under IAS 38 any capitalised software that is not an integral part of the related hardware is
reclassified from property, plant and equipment to intangible assets.
d) Under IFRS 2 - 'Share-based Payment' the group has to recognise a charge to income in respect of the fair value
of outstanding share options granted to employees and shares allocated to employees under the long term incentive
plan after 7th November 2002. The fair value has been calculated using an adjusted Black-Scholes options valuation
model and is charged to income over the relevant vesting periods, adjusted to reflect actual and expected levels of
vesting.
e) As Johnson Matthey has already adopted FRS 17, the recent UK GAAP standard for post retirement benefits, the only
adjustments needed for post-employment benefits under IAS 19 - 'Employee Benefits' are to put the net return on
retirement benefits assets and liabilities into operating profit, to change the market value of the pension schemes'
assets from mid-market value to bid value on the balance sheet and to move the deferred tax balances on the net
post-employment assets / obligations to deferred tax.
The other adjustments under IAS 19 are to accrue for paid annual leave and other short and long term
employee benefits.
f) Under IAS 28 - 'Investments in Associates' the group's share of the profit of its associates is shown on a post
tax basis, unlike UK GAAP where the group's share of the operating profit of its associates is shown and the group's
share of its associates' interest and tax are shown in finance costs and income tax expense respectively.
g) Under IAS 12 - 'Income Taxes' the group will be providing for deferred tax on capital gains rolled over, capital
gains on intra group loans and capital losses which it did not provide for under UK GAAP. Other adjustments are to
provide for deferred tax on the other IFRS accounting changes. Also, IAS 12 does not allow the offset of tax assets
and liabilities and so the group has grossed up its current tax assets and liabilities and its deferred tax assets
and liabilities.
h) Under IAS 10 - 'Events After the Balance Sheet Date' dividends declared after the balance sheet date are
not recognised as a liability on the balance sheet and so the group's final dividend has not been provided for
on the balance sheet.
i) Under IAS 17 - 'Leases' the group's precious metal leases are categorised as operating leases and so they, and
the related inventory, are removed from the balance sheet and will be reported as a note on the
accounts.
j) There are a number of other reclassifications on the balance sheet mainly to separate out current and non-current
assets and liabilities in accordance with IAS 1 - 'Presentation of Financial Statements'.
Notes on the IFRS Restatement (Unaudited)
for the year ended 31st March 2005
k) Johnson Matthey has taken advantage of the exemption allowed under IFRS 1 not to restate comparative information
in its accounts for the year ending 31st March 2006 to comply with IAS 32 - 'Financial Instruments: Disclosure and
Presentation', IAS 39 - 'Financial Instruments: Recognition and Measurement' and IFRS 4 - 'Insurance
Contracts'. From 1st April 2005 the group will use hedge accounting for interest rate and foreign currency
instruments that meet the relevant hedging relationship criteria.
l) When Johnson Matthey presents its segmental results for the year ending 31st March 2006 Colour Technologies,
which currently forms part of Colours & Coatings Division, will be transferred to Precious Metal Products Division.
Ceramics, which comprises the remaining part of Colours & Coatings Division, will be shown as a separate segment.
Platinum group metal refining, currently part of Catalysts Division, will also be transferred to Precious Metal
Products Division. The segmental information under IFRS for the year ended 31st March 2005 included in this
announcement on page 4 reflects the divisional structure that will appear in next year's accounts.
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
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
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