Interim Results
Johnson,Matthey PLC
29 November 2000
Interim Results for the half year ended 30th September 2000
An excellent first half with strong growth in all divisions. Outlook remains
very encouraging
Results
* Profit before tax excluding exceptional items up 40% to £86.0 million
* Operating Profit up 23% to £82.7 million. All three divisions delivering
strong organic growth
* Earnings per share excluding exceptional items up 36% to 27.9 pence
* Interim dividend increased by 15% to 7.0 pence
Business developments
* Major investment programme continues in autocatalyst, chemicals and
pharmaceutical materials
* Significant investment in fuel cell R&D. JM well positioned to benefit from
initial markets for fuel cells
* Growth in Precious Metals supported by buoyant market demand for platinum
group metals
* Rationalisation and investment in growth markets producing good results in
Colours & Coatings
Commenting on the results, Chris Clark, Chief Executive of Johnson Matthey
said:
' All of our divisions are performing well. There are exciting opportunities
before us especially in our key environmental technologies of autocatalysts
and fuel cells. We are investing to ensure that Johnson Matthey benefits from
these in the years ahead.'
Enquiries:
Chris Clark, Chief Executive, Johnson Matthey 020 7269 8435
John Sheldrick, Group Finance Director, Johnson Matthey 020 7269 8438
Howard Lee, Gavin Anderson & Co 020 7457 2345
Report to Shareholders
Introduction
Johnson Matthey had an excellent first half to 2000/01 with profits well ahead
of last year. All three divisions achieved strong organic growth with double
digit rises in operating profit. The group is increasing its investment in
new production facilities and research and development, to meet expected
growth in demand for new products.
Review of Results
In the six months to 30th September 2000 Johnson Matthey's profit before tax
and exceptional items rose by 40% to £86.0 million. Earnings per share
excluding exceptionals rose by 36% to 27.9 pence.
Continuing operations increased sales by 68% to £2.9 billion boosted by
significantly higher prices for platinum and palladium. Sales excluding the
value of precious metals rose by 14% to £459 million.
Operating profit from continuing operations rose by 23% to £82.7 million. The
group made £3.3 million of net interest income in the period compared with a
net charge of £5.2 million last year. This turnaround is a result of the
interest earned on the cash received from the sale of Electronic Materials,
which was completed in August 1999.
The interim dividend has been increased by 15% to 7.0 pence.
Operations
Catalysts & Chemicals Division increased sales by 69% over last year to £638
million. This growth reflected increased sales volume and the effect of
higher precious metal prices, particularly palladium. Sales excluding the
value of precious metals rose by 18% to £274 million. The division's
operating profit also rose by 18% to £46.2 million.
The Autocatalyst business performed very well. Vehicle sales in our largest
markets grew only slightly on the high levels of 1999, by 2.5% in USA and 1.5%
in Europe. However, our business achieved a 10% increase in sales volume,
helped by tighter emission limits resulting in more catalysts per car and the
introduction of catalyst-forcing legislation in developing countries such as
India. Sales of the CRT (TM) and other heavy duty diesel products were also
well up on last year.
This was a period of increased activity in Fuel Cells. Together with our key
suppliers we are developing processes for the manufacturing of our membrane
electrode assemblies, other key catalytic components and prototype fuel
processors. We have organised our Fuel Cell activities into a stand-alone
business unit within the division ready for significant growth over the next
few years.
Chemicals also had an excellent first half. Platinum group metals refining
activities were buoyed by high metal prices and increased intake from primary
producers. The chemical products business increased sales to the speciality
and fine chemicals markets and has begun to benefit from our investment in
state of the art process catalyst manufacturing facilities in both Europe and
North America.
Pharmaceutical Materials' operating profit was slightly ahead of last year
with good sales of carboplatin and hydromorphone. As expected, sales of
generic methylphenidate declined as a result of increased competition. Sales
of gold based products increased together with new products in organic
pharmaceuticals including a chiral version of methylphenidate.
Precious Metals Division's sales climbed by 74% to £2.1 billion, driven by
strong demand for platinum group metals and higher prices. Operating profit
rose 35% to £27.3 million.
The Platinum business performed particularly well in the favourable
conditions. Marketing and trading operations benefited from both buoyant
physical demand and the strength and volatility of prices. Demand for
platinum and palladium from the autocatalyst and jewellery sectors reached
record levels despite the higher prices. Our platinum fabrication operations
in North America and Europe also achieved good growth in the first half.
Operating profit from the Gold and Silver business was slightly up. Good
volumes of refining were obtained, particularly in the Far East, although the
gold price continued to show weakness. A return to more normal lease rates
for gold and silver benefited profit after interest.
Colours & Coatings Division increased its sales by 7% to £127 million. Sales
of decorative products for the tile and glass industries grew strongly.
Operating profit for the division increased by 16% to £15.5 million.
The Tile business had an excellent first half, with sales and profits strongly
ahead. The Italian and Spanish markets have continued to grow and there has
been a good recovery in Asia. The Glass business also performed well with good
demand for automotive enamels. Market conditions continue to be difficult for
the Tableware business. However, profits and margins have improved in the
first half as the benefits of our restructuring programme came through.
Finance
Cash Flow
Johnson Matthey's net cash inflow from operations was £77.1 million, which was
4% better than last year. This increase was achieved despite a £59.1 million
cash outflow to fund increased debtors which was largely the result of the
sharp rise in precious metal prices. Stocks were reduced in response to high
borrowing rates for platinum.
Capital expenditure for the continuing businesses rose to £39.6 million, which
is 68% up on last year's figure of £23.6 million (excluding the expenditure of
£11.4 million by Electronic Materials). Investment is planned to increase in
the second half and will be more than twice depreciation for the year.
Net cash flow for the group was slightly negative at £1.4 million. At 30th
September 2000 the group had net cash of £161.0 million.
Interest and Exchange Rates
The £8.5 million improvement in interest compared with last year reflects the
interest earned on the sale proceeds of Electronic Materials for a full six
months compared with one and a half months of last year.
The net interest credit of £3.3 million includes the interest earned on the
group's net cash and deposits less leasing costs for gold and silver which
were £0.4 million in the period compared with £1.1 million last year when
rates were unusually high. In addition, this year the group incurred
increased hedging costs for platinum (which are also included in interest) as
rates rose significantly. The group has been able to respond to this by
reducing stock levels. The majority of the group's platinum group metal
stocks are unhedged and unaffected by the high lease rates.
Exchange rates were generally favourable for Johnson Matthey's results. Just
under half of the group's operating profit is earned in North America. The
average rate for the US Dollar for the six months to 30th September 2000
strengthened to $1.50/£ compared with $1.61/£ for the same period last year,
which increased profits by £3.0 million. However, the Euro weakened from Euro
1.52/£ to Euro 1.64/£ which, together with weakness in some other currencies,
reduced the translation benefit to £2.1 million.
Taxation
The group's total tax charge fell by £2.7 million to £24.5 million. The fall
is attributable to the inclusion in last year's results of the tax on the
exceptional profit on the sale of Electronic Materials. Excluding
exceptionals tax rose by just over 40%, largely in line with the increase in
profit. The average rate increased slightly from 28.1% to 28.5%.
Business developments
The significant investment programme that we announced in June continues
apace.
Our major new autocatalyst facility at Royston in the UK, to serve increasing
European demand for more technologically advanced catalysts, has begun pilot
production and is on schedule to be fully on stream early in the new year.
In early November we opened our new autocatalyst plant in India's Haryana
State. Our new autocatalyst facility in China is nearing completion and will
open in the spring of next year.
Johnson Matthey's £20 million, 3 year programme of investment in our global
autocatalyst manufacturing technology is making good progress. This investment
enables us to manufacture the latest generations of highly sophisticated
catalysts to much tighter specifications, providing us with an important
competitive edge. We have already installed new manufacturing technology in
our plants in the US and South Africa.
Heavy duty diesel emission control catalysts represent an important future
growth area for our business as tighter emission standards for trucks and
buses come into force in the US and Europe over the next few years. We
recently won a major contract to supply our world leading Continuously
Regenerating Trap (CRT (TM)) system to MTA New York Transit for retrofitting
to 500 buses. This is the first stage of a three year project under the US
EPA's Voluntary Retrofit Programme. We were also delighted to win the Royal
Academy of Engineering MacRobert Award 2000 for the development and
commercialisation of the CRT (TM).
In Chemicals we are investing in the expansion and upgrading of our platinum
group metals refining capacity in the UK and US. A new plant was recently
opened at Royston to manufacture the latest generations of supported chemical
process catalysts for the fine and speciality chemicals industries. We
continue to work in close partnership with our customers to develop new
process catalysts, optimised to their requirements.
Fuel cells continue to capture the headlines and are a major focus of our
investment for future growth. All of the world's leading car companies have
active fuel cell programmes and a steady stream of prototype vehicles has been
launched in recent months. Many of these will be participating in the
California Fuel Cell Partnership, a collaboration between auto manufacturers,
oil companies, fuel cell manufacturers and the State of California to
demonstrate fuel cell vehicles under real day-to-day driving conditions.
However it is the use of fuel cells in our homes and offices to provide clean,
lower cost electricity, heating and air conditioning that many believe will be
the first mass application of this technology. Johnson Matthey is well
positioned to benefit from the growth of this market. In June we announced our
dual fuel processor capable of converting both natural gas and LPG to hydrogen
for use in residential fuel cell applications. In July we announced a
demonstration project with TXU Europe and Energy Partners to construct and
evaluate a micro combined heat and power fuel cell system for residential
applications.
We are continuing to invest in the expansion of our fuel cell development,
testing and pilot production facilities on both sides of the Atlantic. The
major expansion of our fuel cell testing facility at Sonning Common, UK is now
fully operational.
Johnson Matthey is the largest fabricator and distributor of the platinum
group metals (pgms). We are the sole marketing agent for Anglo Platinum, the
world's leading primary producer of pgms, a relationship that goes back over
70 years. Growth in our Precious Metals Division is driven by strong demand
for the platinum group metals and their increasing use in a wide range of
industrial applications. This growth is supported by Johnson Matthey's global
market development activities and our commitment to investment in research and
development of new applications for the pgms.
Our strategy for the development of Colours & Coatings Division is producing
good results. The majority of the division's activities are now focused on the
growing markets for decorative products for tile and glass. As a consequence
the division is now achieving good sales growth as well as improving margins,
which rose significantly in the first half of 2000/01.
Good progress has been made with our investment programme for the Tile
business in Spain and Brazil and at our glass enamels facility in the
Netherlands. All three will commence production during 2001. The benefits of
the restructuring programme for our Tableware business that we announced at
our interim results last year are coming through and we are firmly on course
to realise savings of £4 million in the current year.
Outlook
All of our divisions are performing well. There are exciting opportunities
before us especially in our key environmental technologies of autocatalysts
and fuel cells. We are investing to ensure that Johnson Matthey benefits from
these in the years ahead.
Johnson Matthey
Consolidated Profit and Loss Account
for the six months ended 30th September 2000
Six months to Year to
30.9.00 30.9.99 31.3.00
restated
NOTE £ million £ million £ million
Turnover 2
Continuing operations 2,851.9 1,693.2 3,769.0
Discontinued operations - 94.4 97.0
------- ------- -------
Group turnover 2,851.9 1,787.6 3,866.0
------- ------- -------
Operating profit 4
Continuing operations before goodwill
amortisation 82.8 67.0 146.5
Goodwill amortisation (0.1) (0.1) (0.2)
------- ------- -------
Continuing operations before exceptional
items 82.7 66.9 146.3
Exceptional items - - (9.8)
------- ------- -------
Total continuing operations 82.7 66.9 136.5
Discontinued operations - (0.3) (0.3)
------- ------- -------
Group operating profit 82.7 66.6 136.2
Share of (loss) / profit in associates (0.1) 0.1 -
------- ------- -------
Total operating profit 82.6 66.7 136.2
Profit on sale - continuing operations
Profit on disposal of surplus properties - - 1.1
Profit on sale - discontinued operations
Sale of Electronic Materials - 28.5 28.5
Sale of Organic Pigments - - (6.2)
------- ------- -------
Profit on ordinary activities before interest 82.6 95.2 159.6
Net interest 3.3 (5.2) (2.4)
------- ------- -------
Profit on ordinary activities before taxation 85.9 90.0 157.2
Taxation 5 (24.5) (27.2) (45.3)
------- ------- -------
Profit after taxation 61.4 62.8 111.9
Equity minority interests (0.4) 0.2 (0.2)
------- ------- -------
Profit attributable to shareholders 61.0 63.0 111.7
Dividends 6 (15.4) (13.2) (44.3)
------- ------- -------
Retained profit 45.6 49.8 67.4
------- ------- -------
pence pence pence
Earnings per ordinary share
Basic 7 27.8 29.0 51.4
Diluted 7 27.5 29.0 51.0
Earnings per ordinary share excluding
exceptional items and goodwill
amortisation
Basic 7 27.9 20.5 47.5
Diluted 7 27.6 20.5 47.2
Dividend per ordinary share 6 7.0 6.1 20.3
Johnson Matthey
Consolidated Balance Sheet
as at 30th September 2000
30.9.00 31.3.00
£ million £ million
Fixed assets
Goodwill 5.5 5.1
Tangible fixed assets 336.4 311.3
Investments 0.9 1.0
------- -------
342.8 317.4
------- -------
Current assets
Stocks 212.9 253.2
Debtors: due within one year 395.4 333.5
Debtors: due after one year 100.5 97.9
Short term investments 16.0 16.3
Cash at bank and in hand 270.2 282.0
------- -------
995.0 982.9
Creditors: Amounts falling due within one year
Borrowings and finance leases (33.9) (46.2)
Precious metal leases (57.7) (60.6)
Other creditors (307.7) (315.6)
------- -------
Net current assets 595.7 560.5
------- -------
Total assets less current liabilities 938.5 877.9
Creditors: Amounts falling due after more than one year
Borrowings and finance leases (75.2) (70.0)
Other creditors (0.3) (0.2)
Provisions for liabilities and charges (47.6) (47.8)
------- -------
Net assets 815.4 759.9
------- -------
Capital and reserves
Called up share capital 222.1 221.1
Share premium account 121.5 116.7
Associates' reserves (0.4) (0.1)
Profit and loss account 467.2 417.7
------- -------
Shareholders' funds 810.4 755.4
Equity minority interests 5.0 4.5
------- -------
815.4 759.9
------- -------
Johnson Matthey
Consolidated Cash Flow Statement
for the six months ended 30th September 2000
Six months to Year to
30.9.00 30.9.99 31.3.00
£ million £ million £ million
Reconciliation of operating profit to
net cash inflow from operating activities
Operating profit 82.7 66.6 136.2
Depreciation and amortisation charges 19.8 26.9 46.6
(Profit) / loss on sale of tangible fixed
assets and investments (2.0) 0.1 (0.9)
(Increase) / decrease in owned stocks 44.0 (25.6) (26.7)
(Increase) / decrease in debtors (59.1) (28.7) (77.2)
Increase / (decrease) in creditors and
provisions (8.3) 34.7 52.3
------- ------- -------
Net cash inflow from operating activities 77.1 74.0 130.3
------- ------- -------
Cash Flow Statement
Net cash inflow from operating activities 77.1 74.0 130.3
Dividends received from associates - - 0.1
Returns on investments and servicing of
finance 3.6 (5.5) (2.5)
Taxation (15.2) (16.0) (33.5)
Capital expenditure and financial investment (39.6) (35.0) (65.7)
Acquisitions (1.8) (2.8) (2.9)
Disposals (0.2) 396.8 393.7
Equity dividends paid (31.1) (28.9) (42.2)
------- ------- -------
Net cash flow before use of liquid resources
and financing (7.2) 382.6 377.3
Management of liquid resources (35.7) (221.1) (169.8)
Financing
Issue and purchase of share capital 5.8 (2.0) 8.0
Decrease in borrowings and finance leases
due within one year (7.2) (128.6) (126.9)
Increase / (decrease) in borrowings and finance
leases due after one year 0.1 (37.1) (36.8)
------- ------- -------
Net cash outflow from financing (1.3) (167.7) (155.7)
------- ------- -------
Increase / (decrease) in cash in the period (44.2) (6.2) 51.8
------- ------- -------
Reconciliation of net cash flow to movement
in net funds / debt
Increase / (decrease) in cash in the period (44.2) (6.2) 51.8
Cash outflow from movement in borrowings
and finance leases 7.1 165.7 163.7
Cash outflow from increase in liquid resources 35.7 221.1 169.8
------- ------- -------
Change in net funds / debt resulting from
cash flows (1.4) 380.6 385.3
Borrowings disposed of with subsidiaries - 7.3 8.0
Translation difference (3.4) 6.3 (5.9)
------- ------- -------
Movement in net funds / debt in period (4.8) 394.2 387.4
Net funds / (debt) at beginning of period 165.8 (221.6) (221.6)
------- ------- -------
Net funds at end of period 161.0 172.6 165.8
------- ------- -------
Johnson Matthey
Total Recognised Gains and Losses
for the six months ended 30th September 2000
Six months to Year to
30.9.00 30.9.99 31.3.00
£ million £ million £ million
Profit attributable to shareholders 61.0 63.0 111.7
Currency translation differences on foreign
currency net investments 3.6 (6.6) (5.6)
------- ------- -------
Total recognised gains and losses relating
to the period 64.6 56.4 106.1
-------
Prior year adjustment (9.0) (9.0)
------- -------
Total gains and losses recognised since previous
annual report 47.4 97.1
------- -------
Movement in Shareholders' Funds
for the six months ended 30th September 2000
Six months to Year to
30.9.00 30.9.99 31.3.00
£ million £ million £ million
Profit attributable to shareholders 61.0 63.0 111.7
Dividends (15.4) (13.2) (44.3)
------- ------- -------
Retained profit 45.6 49.8 67.4
Other recognised gains and losses relating
to the period 3.6 (6.6) (5.6)
New share capital subscribed 5.8 4.3 15.7
Preference shares cancelled - (0.3) (0.3)
Goodwill written back on disposals - 123.7 125.4
------- ------- -------
Net addition to shareholders' funds 55.0 170.9 202.6
Opening shareholders' funds 755.4 552.8 552.8
------- ------- -------
Closing shareholders' funds 810.4 723.7 755.4
------- ------- -------
Johnson Matthey
Notes on the Accounts
for the six months ended 30th September 2000
1 Basis of preparation
The interim accounts were approved by the Board of Directors on 28th November
2000, and are unaudited but have been reviewed by the auditor. They do not
constitute statutory accounts, but have been prepared on the basis of the
accounting policies set out in the annual report for the year ended 31st
March 2000. The group's results for the six months to 30th September 1999
have been restated to show the results of the Organic Pigments businesses as
discontinued, since these were sold by the group on 31st March 2000.
Information in respect of the year ended 31st March 2000 is derived from the
company's statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditor's report on those accounts was
unqualified and did not contain any statement under 237(2) and 237(3) of the
Companies Act 1985.
2 Total turnover
Six months to Year to
30.9.00 30.9.99 31.3.00
restated
Activity analysis £ million £ million £ million
Catalysts & Chemicals 637.9 376.6 856.2
Precious Metals 2,087.3 1,198.0 2,671.6
Colours & Coatings 126.7 118.6 241.2
------- ------- -------
2,851.9 1,693.2 3,769.0
Discontinued operations - 94.4 97.0
------- ------- -------
2,851.9 1,787.6 3,866.0
------- ------- -------
Six months to Year to
30.9.00 30.9.99 31.3.00
restated
Geographical analysis by origin £ million £ million £ million
Europe 2,070.8 1,156.5 2,450.5
North America 744.8 486.3 1,052.0
Asia 557.6 367.0 887.2
Rest of the World 122.7 92.8 195.8
------- ------- -------
3,495.9 2,102.6 4,585.5
Discontinued operations - 102.4 110.2
------- ------- -------
3,495.9 2,205.0 4,695.7
Less inter-segment sales (644.0) (417.4) (829.7)
------- ------- -------
2,851.9 1,787.6 3,866.0
------- ------- -------
3 Total turnover excluding the value of
precious metals
Six months to Year to
30.9.00 30.9.99 31.3.00
restated
Activity analysis £ million £ million £ million
Catalysts & Chemicals 273.9 231.4 493.6
Precious Metals 61.0 54.6 113.6
Colours & Coatings 123.9 114.9 234.2
------- ------- -------
458.8 400.9 841.4
Discontinued operations - 91.6 94.1
------- ------- -------
458.8 492.5 935.5
------- ------- -------
4 Total operating profit
Six months to Year to
30.9.00 30.9.99 31.3.00
restated
Activity analysis £ million £ million £ million
Catalysts & Chemicals 46.2 39.3 84.8
Precious Metals 27.3 20.2 45.4
Colours & Coatings 15.5 13.4 27.9
Corporate (6.3) (5.8) (11.6)
------- ------- -------
82.7 67.1 146.5
Discontinued operations - (0.3) (0.3)
Goodwill amortisation (0.1) (0.1) (0.2)
Exceptional items included in total operating
profit - - (9.8)
------- ------- -------
82.6 66.7 136.2
------- ------- -------
Six months to Year to
30.9.00 30.9.99 31.3.00
restated
Geographical analysis £ million £ million £ million
Europe 30.4 25.1 52.2
North America 40.1 32.3 69.3
Asia 6.2 3.3 8.8
Rest of the World 6.0 6.4 16.2
------- ------- -------
82.7 67.1 146.5
Discontinued operations - (0.3) (0.3)
Goodwill amortisation (0.1) (0.1) (0.2)
Exceptional items included in total operating
profit - - (9.8)
------- ------- -------
82.6 66.7 136.2
------- ------- -------
5 Taxation
Six months to Year to
30.9.00 30.9.99 31.3.00
£ million £ million £ million
United Kingdom 10.2 8.2 22.6
Overseas 14.3 9.1 17.8
------- ------- -------
24.5 17.3 40.4
Tax on cost of rationalising Tableware - - (2.9)
Tax on profit on sale of Electronic Materials - 9.9 9.9
Tax on loss on sale of Organic Pigments - - (2.1)
------- ------- -------
24.5 27.2 45.3
------- ------- -------
6 Dividends
An interim dividend of 7.0 pence per ordinary share will be paid on
7th February 2001 to shareholders on the register at the close of business
on 15th December 2000.
7 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a weighted average
of 219,121,620 shares in issue (six months to 30th September 1999
- 217,053,913 shares, year to 31st March 2000 - 217,458,190). Excluding
exceptional items, the tax thereon and goodwill amortisation, basic earnings
per ordinary share were 27.9 pence (six months to 30th September 1999
- 20.5 pence, year to 31st March 2000 - 47.5 pence), and diluted earnings
per ordinary share were 27.6 pence (six months to 30th September 1999
- 20.5 pence, year to 31st March 2000 - 47.2 pence). The calculation of
diluted earnings per ordinary share is based on the weighted average number
of shares in issue adjusted by the dilutive outstanding share options and
long term incentive plan.
8 Precision Studios
On 31st July 2000 the group purchased the assets of Precision Studios from
Waterford Wedgwood plc for £1.8 million. The fair value of the assets
acquired was £1.8 million, and costs incurred were £0.2 million, resulting
in goodwill of £0.2 million. This has been accounted for by acquisition
accounting.
Johnson Matthey
Financial Calendar
2000
11th December
Ex dividend date
15th December
Interim ordinary dividend record date
2001
7th February
Payment of interim dividend on ordinary shares
7th June
Announcement of results for the year ending 31 March 2001
17th July
110th Annual General Meeting
Johnson Matthey Public Limited Company
Registered Office: 2-4 Cockspur Street, Trafalgar Square, London SW1Y 5BQ
Telephone: 020 7269 8400
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 33774
Registrars
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA
Telephone: 01903 502541
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