Interim Results
Johnson Matthey PLC
28 November 2007
For Release at 7.00 am Wednesday 28th November 2007
Half year results for the six months ended 30th September 2007
Summary Results
Half Year to 30th September %
2007 2006 change
Revenue £3,512m £2,922m +20
Sales excluding precious metals £840m £654m +28
Operating profit £132.4m £116.6m +14
Profit before tax £120.1m £104.6m +15
Total earnings per share 41.8p 38.3p +9
Earnings per share before one-off items 41.0p 38.3p +7
Dividend per share 10.6p 9.9p +7
• Sales revenue up 20% to £3.5 billion reflecting good underlying volume
growth and higher precious metal prices
• Sales excluding precious metals up 28% to £840 million with double
digit organic growth in all three divisions
• Operating profit up 14% to £132.4 million despite adverse exchange
translation which reduced reported profit by £2.8 million. Translated at
constant exchange rates operating profit was up 16%
• Profit before tax for the continuing businesses 15% higher at £120.1
million
• Earnings per share (eps) before one-off items up 7% at 41.0 pence.
Interim dividend increased by 0.7 pence to 10.6 pence in line with earnings
growth
• Debt up £54 million with a net £48 million spent on share buy-backs.
Gearing (debt / equity) 39%
Business Overview
Divisional growth rates stated at constant exchange rates (note 3)
• Environmental Technologies Division's sales excluding precious metals
up 41% to £541 million and operating profit up 14% to £65.2 million
• Double digit growth in Emission Control Technologies will continue in
the second half, driven by increasing demand for heavy duty diesel catalysts,
particulate filters for diesel cars in Europe and expansion in Asia
• Three new factories (in Russia, South Korea and Royston, UK) will be
opened in the second half of the year
• High oil price supports growth in Process Technologies with good
demand for catalysts and purification materials. Davy Process Technology
continues to achieve good growth with continued strong demand in Asia
• Precious Metal Products Division's sales excluding precious metals up
17% to £151 million and operating profit up 31% to £47.2 million
• In the first half platinum group metal prices have been rising and the
division's manufacturing businesses have achieved good growth. Last year's
second half result included some one-off gains on minor metals which are
unlikely to recur, so growth in the second half of this year will be slower than
in the first
• Fine Chemicals & Catalysts Division's sales excluding precious metals
up 20% and operating profit up 6% to £31.0 million
• Sales growth was boosted by higher base metal prices, particularly
nickel, used in catalysts sold into the division's end markets. Good growth in
opiate sales in the US and in Research Chemicals' sales in Asia. Operating
profit growth in the second half is expected to be similar to or slightly better
than the first
Commenting on the results, Neil Carson, Chief Executive of Johnson Matthey said:
'Johnson Matthey has delivered another period of strong growth in the first half
of 2007/08. Despite a weak dollar, profit before tax increased by 15% on the
back of double digit sales growth in all three divisions.
Prospects for the second half remain encouraging. Heavy duty diesel will
benefit from a full six months' sales to US OEMs. New capacity to meet growing
demand for autocatalysts and particulate filters in Asia and Europe will come on
stream. Platinum group metal prices are set to remain buoyant. We expect
earnings growth in the second half to be similar to that achieved in the first.'
Enquiries:
Ian Godwin Director, IR and Corporate Communications 020 7269 8410
John Sheldrick Group Finance Director 020 7269 8408
Howard Lee The HeadLand Consultancy 020 7367 5225
Laura Hickman The HeadLand Consultancy 020 7367 5227
www.matthey.com
Introduction
Johnson Matthey achieved good growth in the first half of 2007/08. Revenues
were well ahead of 2006/07 with strong underlying volume growth and rising
precious metal prices.
Last year's results have been restated for the sale of Ceramics Division which
was completed in February 2007. Under International Financial Reporting
Standards (IFRS) the results of Ceramics Division are now shown in discontinued
operations on a post tax basis. Last year's segmental results (note 2) have
also been restated for the new divisional structure announced in June 2007.
Review of Results
Revenue rose by 20% to £3.5 billion partly as a result of higher precious metal
prices. The average price of platinum rose by 7% to $1,293 per ounce. Sales
excluding the value of precious metals increased by 28% to £840 million, with
double digit organic growth in all three divisions.
Operating profit rose by 14% to £132.4 million despite adverse exchange
translation which reduced reported profit by £2.8 million. At constant exchange
rates operating profit was 16% up. Net interest was unchanged at £12.5 million
with the benefit of lower average borrowings offsetting the effect of higher
interest rates. Including £0.2 million of share of profits of associates,
profit before tax for the continuing businesses was 15% up at £120.1 million.
Total earnings per share increased by 9% to 41.8 pence. This included a one-off
benefit to deferred tax of £1.8 million (0.8 pence per share) arising from the
change in the rate of UK corporation tax from 30% to 28% on 6th April 2008.
Earnings per share before one-off items grew by 7% to 41.0 pence.
Dividend
The interim dividend has been increased by 7% to 10.6 pence in line with growth
in earnings per share before one-off items.
Operations
Our new Environmental Technologies Division, which comprises Emission Control
Technologies (ECT), Process Technologies and Fuel Cells, achieved strong growth
in the half year. Revenues increased by 23% to £1,055 million; sales excluding
precious metals were 38% up at £541 million; and operating profit was 13% better
at £65.2 million. Translated at constant exchange rates, sales excluding
precious metals increased by 41% and operating profit was 14% higher.
Emission Control Technologies' sales excluding precious metals grew by £142
million to £429 million. Sales of heavy duty diesel (HDD) catalysts to original
equipment manufacturers (OEMs) accounted for £73 million of the increase, rising
from £6 million in the first half of last year to £79 million this year. Sales
of light duty products were also well ahead with good growth in Asia and
increasing fitment of particulate filters on new diesel cars in Europe.
Return on sales (operating profit / sales excluding precious metals) for ECT was
lower than last year reflecting the change in product mix with rapid growth in
products using expensive substrates (which are a pass through cost for Johnson
Matthey). The cost of substrates for these new products is now beginning to
come down. Going forward, ECT's return on sales is expected to stabilise at
current levels despite the continued growth in sales of new products.
Estimated Light Vehicle Sales and Production
Half year to 30th September
2007 2006 change
millions millions %
North America Sales 9.9 10.2 -2.9
Production 7.6 7.5 +1.3
Europe Sales 10.6 10.2 +3.9
Production 10.8 10.1 +6.9
Asia Sales 8.3 7.7 +7.8
Production 13.0 12.0 +8.3
Global Sales 34.1 32.8 +4.0
Production 35.0 32.8 +6.7
Source: Global Insight
Global light duty vehicle sales grew by 4% in the six months to 30th September
2007 with most of the growth in Asia and Eastern Europe. Sales in North America
were slightly down compared with the same period in 2006. Sales in China were
up 21% to 3.9 million vehicles while sales in Russia grew by 50% to 1.6 million.
In Western Europe, diesel engined cars continued to gain share at the expense
of cars with petrol engines. An increasing proportion of diesels are being
fitted with particulate filters as standard ahead of legislation.
Growth in car sales in Asia and increasing fitment of particulate filters will
continue to drive catalyst demand in the light duty market. Later this year
Johnson Matthey will be opening new facilities in South Korea, the Russian
Federation and Royston, UK to meet anticipated growth in demand.
The market for HDD catalysts is expected to show substantial growth over the
next decade. In 2008 we expect the overall market for HDD catalysts to be worth
at least US$700 million (excluding precious metals). New standards are
scheduled to be introduced in Europe (Euro V) from 2008 and in the USA and Japan
in 2010. Legislation is being introduced into many other countries over the
next few years. In 2011, legislation will start for non road vehicles in Europe
and North America which will increase the market for HDD catalysts. By the end
of 2014 we expect the HDD market to have grown to around US$3 billion of sales
excluding precious metals. We have increased our investment in R&D and
commercial development to ensure Johnson Matthey is well placed to take a good
share of these new markets. Over the next few years we will also be investing
in new capacity to meet future demand with further new facilities planned in the
USA, Europe and Asia.
Process Technologies' sales excluding precious metals grew by 7%. The
division's Ammonia, Methanol, Oil and Gas (AMOG) business has continued to
experience good demand for catalysts and purification materials for industries
where hydrogen or synthesis gas are key intermediaries. Demand for catalysts
from methanol producers, where Johnson Matthey has a leading market share, was
ahead of prior year. New methanol capacity continues to come on stream, in part
due to the high methanol price, with a number of new projects announced in the
Middle East and China. In China a significant number of the projects are based
on utilising the country's large coal reserves and thereby reducing its reliance
on expensive imported oil.
There also continued to be good growth in catalysts for hydrogen plants, driven
by demand for low sulphur fuels from oil refineries around the world. Johnson
Matthey has the leading market share of syngas catalysts with the industrial gas
companies, the fastest growing segment of this market. Sales of purification
materials were also ahead of last year.
Davy Process Technology (DPT), which develops and licenses chemical processes,
achieved good growth in the first half winning a number of new contracts in
Asia. DPT is benefiting from the strong demand for new petrochemical plants in
China and the Middle East driven by continued consumer demand, particularly in
Asia, and the strategic use of alternative hydrocarbon feedstocks, including
coal.
The net expense of our Fuel Cells business was similar to that in the first half
of last year. The order book for the second half of the year is encouraging
with continued good demand for membrane electrode assemblies (MEAs), especially
for direct methanol fuel cells for portable applications, and increased sales of
components for phosphoric acid fuel cells which will be used for combined heat
and power applications in public and commercial buildings. There has also been
encouraging progress in the automotive sector with cities, such as London,
announcing plans to purchase hydrogen fuel cell buses and car manufacturers
progressing plans to make limited numbers of fuel cell cars available to the
public over the next few years. With increasing sales in the second half the
net expense of the business for the full year is expected to continue to fall.
Precious Metal Products Division's revenues rose by 18% to £2,201 million.
Precious metal prices were higher than the same period last year and demand for
the platinum group metals (pgms) continues to grow. Sales excluding the value
of precious metals increased by 12% to £151 million with good volume growth in
the division's manufacturing businesses. Operating profit grew by 27% to £47.2
million. Translated at constant exchange rates, sales excluding precious metals
increased by 17% and operating profit was 31% higher.
The platinum marketing and distribution business achieved strong profit growth
in favourable market conditions. Demand for platinum is expected to have risen
by 3% in calendar year 2007. Growing production of diesel vehicles and in
particular engines fitted with particulate filters will increase demand from the
auto sector. Demand for jewellery manufacturing will fall only slightly,
proving surprisingly resilient to the rising platinum price. Platinum supplies
are expected to fall slightly and the market is expected to move back into
deficit in calendar year 2007. The average price of platinum in the first half
of Johnson Matthey's financial year rose to $1,293 per ounce, up 7% compared
with the same period last year.
The price of palladium rose in the same period, also by 7%, to $360 per ounce,
supported by significant purchasing by investment funds. Demand for palladium
from consuming industries is expected to rise by 2% in calendar year 2007. A
substantial increase in autocatalyst demand will outweigh a reduction in demand
from jewellery manufacturers in China, where a reduction in inventories
throughout the supply chain has limited the requirement for new metal.
The price of rhodium moved higher to average $6,163 per ounce, 27% higher than
the same period last year. Although autocatalyst and glass industry demand is
forecast to be slightly lower in calendar year 2007, supplies have fallen below
expectations which has kept this tight and volatile market close to balance.
The division's manufacturing businesses all performed well. The metal
fabrication businesses saw good demand for industrial products. Our medical
device components business, based in three sites in California, continues to
expand. Fortunately we suffered no damage as a result of the fires in Southern
California in October although we closed one of our facilities for a short
period as a precautionary measure.
Colour Technologies was well ahead of prior year with increased sales of
automotive glass enamels and decorative precious metal products. Demand for
secondary pgm refining was also strong benefiting from rising metal prices. On
4th May 2007 we sold our small gold refinery in Hong Kong. Our remaining gold
businesses were ahead of 2006/07 with good demand for refining stimulated by the
high gold price.
The new Fine Chemicals & Catalysts Division achieved good growth in the half
year. Revenues increased by 26% to £256 million, sales excluding precious
metals were 16% up at £148 million, and operating profit was 3% up at £31.0
million. Translated at constant exchange rates, sales excluding precious metals
increased by 20% and operating profit was 6% better.
Sales growth in the half year was boosted by higher metal prices, particularly
nickel, which is used in the manufacture of catalysts for the pharmaceutical,
edible oil and speciality chemical industries. Demand for both base metal and
precious metal products was good. Our US Pharmaceutical Materials and Services
business achieved good growth in the half year with sales of opiate products
well ahead of last year, although volumes in Europe were slightly down on 2006.
Research Chemicals' joint venture in China, which started full operation last
year, achieved rapid growth from a low base.
The integration of the new division has gone well with a number of new
initiatives underway to cross sell products which should support future sales
growth. Most of the division's pharmaceutical industry customers are generic
drug manufacturers who are currently enjoying good growth in sales. Catalogue
sales to research institutes are also growing quite strongly, particularly in
Asia.
Satraplatin, a potential new platinum containing drug for treatment of hormone
refractory prostate cancer, which Johnson Matthey licensed a number of years ago
to GPC Biotech, failed to show a statistically significant improvement in
survivability in its phase III clinical trials. Johnson Matthey would have
received royalty income on sales of this product but otherwise the phase III
result has no impact on the division's results.
The division is investing in new facilities in China, for manufacturing sponge
nickel catalysts for the local market and expanding capacity for platinum salts,
and in Germany for both catalyst production and catalogue sales.
Finance
Exchange Rates
The main impact of exchange rates on the group's results comes from the
translation of foreign subsidiaries' profits into sterling. The group's largest
overseas investment is in the USA. The average rate for the US dollar for the
six months to 30th September 2007 was $2.00/£ compared with $1.86/£ for the
first half of last year. The South African rand also weakened from R12.7/£ to
R14.2/£. However, the catalysts manufactured by our South African business are
ultimately for export and the benefit of a weaker rand on margins more than
offsets the translation effect. Excluding the rand, exchange translation
reduced group operating profit by £2.8 million compared with the first half of
last year, with nearly all the adverse impact attributable to the weaker US
dollar.
Interest
The group's interest charge for the six months to 30th September 2007 was
unchanged from last year at £12.5 million. Despite continued investment in new
facilities and share buy-backs, average borrowings were lower than the same
period last year as a consequence of the sale of Ceramics Division in February
2007. However, interest rates for floating rate borrowings were higher than the
first half of last year, which offset the benefit of reduced borrowings.
Taxation
The group's tax charge for the continuing businesses rose by 8% to £32.5 million
including a one-off benefit of £1.8 million to deferred tax arising from the
reduction in the rate of UK corporation tax from 30% to 28% on 6th April 2008.
The legislation for the change in the rate has now been enacted with the
consequence that deferred tax in the balance sheet is recalculated at the lower
rate. Excluding this amount the group's average tax rate for the half year was
28.6%.
Cash Flow
In the six months to 30th September 2007 the group generated a net cash inflow
from operating activities of £107.0 million compared with £50.9 million for the
first half of last year. Working capital increased by £34.9 million with a rise
in inventories to support the rapid growth in sales. Inventories fell as a
proportion of sales compared with 2006.
The cash outflow on capital expenditure in the half year was £58.8 million which
was 1.6 times depreciation. We are planning to spend more on capital
expenditure in the second half with most of the investment in Environmental
Technologies Division. Major projects include completion of ECT's new
facilities in the Russian Federation, South Korea and Royston, UK. In addition
ECT is investing significantly in additional testing and development facilities
to support the future growth of the business. In Process Technologies we are
investing in additional capacity at Clitheroe, UK to manufacture the latest
generation of synthesis gas catalysts. We are expanding our facilities in China
and Japan to meet continued growth in demand for our products in Asia.
Cash flow before dividends, acquisitions, divestments and share buy-backs was
£37.3 million. The cash cost of last year's final dividend, paid in August, was
£50.0 million. A net £47.7 million was spent on share buy-backs. No major
acquisitions or disposals were undertaken in the half year. After taking into
account the impact of exchange translation on foreign currency borrowings net
debt rose by £54.1 million to £418.9 million. Gearing (net debt / total equity)
increased by 5.5% to 39.3%.
Capital Structure
In the second half of the year we plan to increase the rate of capital
expenditure, particularly in Environmental Technologies Division, taking the
total for the year to around 1.7 times depreciation. We also expect working
capital to increase to support the growth in new product sales. We plan to
continue to buy back shares and we are looking at a number of bolt-on
acquisitions. Together these investments will increase gearing and make more
efficient use of the group's balance sheet.
Most of our focus for acquisitions is in Environmental Technologies Division.
In the first half of this year we participated in an auction for a process
technology business that was eventually sold to another company. The due
diligence costs we incurred in this process have been included in corporate
costs for the half year.
Outlook
The group's continuing businesses performed well in the first half of the year
with operating profit up 14% despite adverse exchange translation. With a
quarter of the group's profits made in North America the weak US dollar remains
a headwind.
In the second half of the year we expect our largest division, Environmental
Technologies, to continue to perform strongly with growth similar to the first
half. The main driver will be ECT which will benefit from a full six months of
sales of heavy duty diesel catalysts to OEMs in the US compared with just one
quarter last year. In addition we have new capacity coming on stream to meet
growing demand for autocatalysts in Asia and particulate filters in Europe.
Process Technologies should continue to benefit from high energy prices.
With rising precious metal prices, trading conditions for our Precious Metal
Products Division are favourable. However, last year's second half result
included some trading profits on the minor pgms which we do not expect to recur
in 2007/08, so growth in the second half will be slower than in the first.
Operating profit for our Fine Chemicals & Catalysts Division was 6% up in the
first half at constant exchange rates. We expect the rate of growth in the
second half to be similar or slightly better than the first.
Johnson Matthey is very well positioned in its markets and we continue to invest
significantly in R&D and new facilities to support future growth. Overall, the
outlook for the second half of the year is encouraging and we expect earnings
growth to be similar to that achieved in the first half.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30th September 2007
Six months ended Year ended
30.9.07 30.9.06 31.3.07
restated
Notes £ million £ million £ million
Revenue 2 3,512.0 2,922.0 6,151.7
Cost of materials sold (3,293.6) (2,720.7) (5,713.7)
Gross profit 218.4 201.3 438.0
Operating expenses (86.0) (84.7) (185.6)
Operating profit 2,3 132.4 116.6 252.4
Finance costs (19.1) (17.0) (36.0)
Finance income 6.6 4.5 9.2
Share of profit of associates 0.2 0.5 0.9
Profit before tax 120.1 104.6 226.5
Income tax expense 4 (32.5) (30.1) (64.7)
Profit for the period from continuing operations 87.6 74.5 161.8
Profit for the period from discontinued operations 11 - 7.1 43.7
Profit for the period 87.6 81.6 205.5
Attributable to:
Equity holders of the parent company 88.1 81.9 206.5
Minority interests (0.5) (0.3) (1.0)
87.6 81.6 205.5
pence pence pence
Earnings per ordinary share attributable to the equity holders of the parent company
Continuing operations
Basic 5 41.8 35.1 76.5
Diluted 5 41.3 34.8 75.3
Total
Basic 5 41.8 38.3 96.9
Diluted 5 41.3 38.0 95.4
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30th September 2007
30.9.07 30.9.06 31.3.07
Notes £ million £ million £ million
Assets
Non-current assets
Property, plant and equipment 611.3 643.0 600.7
Goodwill 399.4 401.0 399.2
Other intangible assets 39.7 40.9 40.1
Deferred income tax assets 11.5 8.8 8.9
Investments and other receivables 10.2 11.0 10.0
Post-employment benefits net assets 53.5 78.4 49.2
Total non-current assets 1,125.6 1,183.1 1,108.1
Current assets
Inventories 407.8 362.6 362.7
Current income tax assets 8.1 - 7.0
Trade and other receivables 499.6 539.7 527.3
Cash and deposits 9 90.0 99.2 73.2
Investments and other financial assets 8.7 22.3 3.4
Other current assets 7.1 7.1 7.1
Non-current assets classified as held for sale - - 0.4
Total current assets 1,021.3 1,030.9 981.1
Total assets 2,146.9 2,214.0 2,089.2
Liabilities
Current liabilities
Trade and other payables (396.8) (417.3) (416.0)
Current income tax liabilities (56.1) (53.7) (52.7)
Borrowings and finance leases 9 (31.5) (27.9) (27.5)
Other financial liabilities (9.3) (2.3) (2.0)
Provisions (9.2) (8.4) (7.7)
Total current liabilities (502.9) (509.6) (505.9)
Non-current liabilities
Borrowings, finance leases and related swaps 9 (477.4) (549.6) (410.5)
Deferred income tax liabilities (41.2) (51.5) (36.5)
Employee benefits obligations (50.9) (56.6) (48.3)
Provisions (8.5) (4.5) (8.7)
Trade and other payables (1.1) (0.8) (1.2)
Total non-current liabilities (579.1) (663.0) (505.2)
Total liabilities (1,082.0) (1,172.6) (1,011.1)
Net assets 1,064.9 1,041.4 1,078.1
Equity
Share capital 220.7 220.4 220.5
Share premium account 148.3 145.7 146.3
Shares held in employee share ownership trusts (71.8) (61.9) (61.9)
Other reserves (11.3) (1.7) (12.9)
Retained earnings 777.3 732.7 783.7
Total equity attributable to equity holders of the parent company 1,063.2 1,035.2 1,075.7
Minority interests 1.7 6.2 2.4
Total equity 8 1,064.9 1,041.4 1,078.1
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30th September 2007
Six months ended Year ended
30.9.07 30.9.06 31.3.07
restated
Notes £ million £ million £ million
Cash flows from operating activities
Profit before tax 120.1 104.6 226.5
Adjustments for:
Share of profit in associates (0.2) (0.5) (0.9)
Discontinued operations - 10.2 15.9
Depreciation, amortisation and profit on sale of non-current
assets
and investments 37.8 37.5 77.7
Share-based payments 2.0 2.6 6.9
Changes in working capital and provisions (34.9) (73.0) (117.6)
Changes in fair value of financial instruments 1.3 (1.1) 5.2
Net finance costs 12.5 12.5 26.8
Income tax paid (31.6) (41.9) (81.4)
Net cash inflow from operating activities 107.0 50.9 159.1
Cash flows from investing activities
Dividends received from associates 0.3 0.1 0.5
Purchases of non-current assets and investments (58.8) (56.0) (125.0)
Proceeds from sale of non-current assets and investments 1.2 0.1 3.5
Purchases of businesses and minority interests - (7.5) (8.6)
Net proceeds from sale of businesses and minority interests (0.8) - 127.1
Net cash outflow from investing activities (58.1) (63.3) (2.5)
Cash flows from financing activities
Net purchase of own shares (47.7) (12.2) (50.4)
Proceeds from / (repayment of) borrowings and finance leases 72.4 54.8 (71.8)
Dividends paid to equity holders of the parent company 6 (50.0) (44.9) (66.0)
Interest paid (18.8) (19.2) (31.3)
Interest received 6.7 4.9 4.9
Net cash outflow from financing (37.4) (16.6) (214.6)
Increase / (decrease) in cash and cash equivalents in period 11.5 (29.0) (58.0)
Exchange differences on cash and cash equivalents 0.2 (5.9) (7.1)
Cash and cash equivalents at beginning of period 60.0 125.1 125.1
Cash and cash equivalents at end of period 9 71.7 90.2 60.0
Reconciliation to net debt
Increase / (decrease) in cash and cash equivalents in period 11.5 (29.0) (58.0)
(Proceeds from) / repayment of borrowings and finance leases (72.4) (54.8) 71.8
Change in net debt resulting from cash flows (60.9) (83.8) 13.8
Borrowings disposed of with subsidiaries - - 19.1
Exchange differences on net debt 6.8 17.5 14.3
Movement in net debt in period (54.1) (66.3) 47.2
Net debt at beginning of period (364.8) (412.0) (412.0)
Net debt at end of period 9 (418.9) (478.3) (364.8)
CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 30th September 2007
Six months ended Year ended
30.9.07 30.9.06 31.3.07
£ million £ million £ million
Currency translation differences on foreign currency net
investments and
related loans (0.9) (51.7) (67.3)
Currency translation differences - transferred to profit on sale of
discontinued operations - - (3.8)
Cash flow hedges (0.5) 5.4 4.3
Fair value (losses) / gains on net investment hedges (0.2) 15.8 23.3
Fair value gains on net investment hedges - transferred to profit
on sale of
discontinued operations - - (2.0)
Actuarial loss on post-employment benefits assets and liabilities - - (32.3)
Tax on above items taken directly to or transferred from equity 2.5 0.2 13.5
Net income / (expense) recognised directly in equity 0.9 (30.3) (64.3)
Profit for the period 87.6 81.6 205.5
Total recognised income and expense relating to the period 88.5 51.3 141.2
Total recognised income and expense attributable to:
Equity holders of the parent company 89.2 51.7 142.2
Minority interests (0.7) (0.4) (1.0)
88.5 51.3 141.2
NOTES ON THE ACCOUNTS
for the six months ended 30th September
2007
1 Basis of preparation
The half-yearly accounts were approved by the Board of Directors on 27th November 2007, and are unaudited but have
been reviewed by the auditors. These condensed consolidated accounts do not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985, but have been prepared in accordance with International
Accounting Standard (IAS) 34 - 'Interim Financial Reporting' and on the basis of the accounting policies set out in
the Annual Report and Accounts for the year ended 31st March 2007. Information in respect of the year ended 31st
March 2007 is derived from the company's statutory accounts for that year which have been delivered to the Registrar
of Companies. The auditors' report on those statutory accounts was 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 237(2) and 237(3) of the Companies Act 1985.
As described in the Annual Report and Accounts for the year ended 31st March 2007, the group reorganised its
divisional structure on 1st April 2007 creating a new Environmental Technologies Division and a new Fine Chemicals
& Catalysts Division. Fine Chemicals & Catalysts was created by adding the businesses which serve the speciality
chemicals and pharmaceutical markets previously reported in Catalysts to Pharmaceutical Materials. Environmental
Technologies is made up of the remaining Catalysts' businesses. The segmental information in note 2 reflects the new
divisional structure.
2 Segmental information by business segment
Environmental Precious Fine
Metal Chemicals
Technologies Products & Catalysts Total
£ million £ million £ million £ million
Six months ended 30th September 2007
Sales to external customers 1,055.3 2,201.1 255.6 3,512.0
External sales excluding the value of precious 541.3 150.7 147.5 839.5
metals
Segment result 65.2 47.2 31.0 143.4
Unallocated corporate expenses (11.0)
Operating profit 132.4
Six months ended 30th September 2006
(restated)
Sales to external customers 858.1 1,860.5 203.4 2,922.0
External sales excluding the value of precious 392.1 134.3 127.1 653.5
metals
Segment result 57.7 37.2 30.1 125.0
Unallocated corporate expenses (8.4)
Operating profit 116.6
Year ended 31st March 2007 (restated)
Sales to external customers 1,864.3 3,824.4 463.0 6,151.7
External sales excluding the value of precious 896.2 290.0 268.0 1,454.2
metals
Segment result 120.1 85.3 64.2 269.6
Unallocated corporate expenses (17.2)
Operating profit 252.4
The group sold its Ceramics Division during the year ended 31st March 2007 (note 11) and so its results are reported
as discontinued operations.
3 Effect of exchange rate changes on translation of foreign subsidiaries' external sales excluding
the value of precious metals and operating profits
Six months ended Year ended
Average exchange rates used for translation of results of foreign 30.9.07 30.9.06 31.3.07
operations
US dollar / £ 2.005 1.855 1.896
Euro / £ 1.471 1.463 1.476
South African rand / £ 14.22 12.69 13.37
The main impact of exchange rate movements on the group's sales and operating profit comes from the translation of
foreign subsidiaries' profits 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.
Six months Six months ended 30.9.06 Change at
ended At last At this this year's
30.9.07 year's year's rates
rates rates
£ million £ million £ million %
External sales excluding the value of precious
metals
Environmental Technologies 541.3 392.1 383.7 +41
Precious Metal Products 150.7 134.3 129.3 +17
Fine Chemicals & Catalysts 147.5 127.1 122.6 +20
External sales excluding the value of precious 839.5 653.5 635.6 +32
metals
Operating profit
Environmental Technologies 65.2 57.7 57.0 +14
Precious Metal Products 47.2 37.2 36.1 +31
Fine Chemicals & Catalysts 31.0 30.1 29.2 +6
Unallocated corporate expenses (11.0) (8.4) (8.5)
Operating profit 132.4 116.6 113.8 +16
4 Income tax expense
Six months ended Year ended
30.9.07 30.9.06 31.3.07
restated
£ million £ million £ million
United Kingdom 13.7 13.5 24.3
Overseas 18.8 16.6 40.4
32.5 30.1 64.7
The group's share of associates' taxation for the six months ended 30th September 2007 was £ nil (six months
ended 30th September 2006 £ nil, year ended 31st March 2007 £
nil).
5 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a weighted average of 210,736,061 shares in issue
(six months ended 30th September 2006 - 213,642,055 shares, year ended 31st March 2007 - 213,219,273 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 2,836,409 (six months ended 30th September 2006
- 1,915,624 shares, year ended 31st March 2007 - 3,312,043 shares).
Earnings per ordinary share before one-off items are calculated as
follows:
Six months ended Year ended
30.9.07 30.9.06 31.3.07
£ million £ million £ million
Profit for the period attributable to equity holders of the 88.1 81.9 206.5
parent company
Profit on disposal of discontinued operations - - (34.4)
Tax effect of UK corporation tax rate change (1.8) - -
Tax thereon - - 1.1
Profit before one-off items 86.3 81.9 173.2
pence pence pence
Basic earnings per share before one-off items 41.0 38.3 81.2
6 Dividends
An interim dividend of 10.6 pence per ordinary share will be paid on 5th February 2008 to shareholders on the
register at the close of business on 7th December 2007. The estimated amount to be paid is £22.3 million. In
accordance with IFRS accounting requirements this dividend has not been recognised in these accounts.
Six months ended Year ended
30.9.07 30.9.06 31.3.07
£ million £ million £ million
2005/06 final ordinary dividend paid - 21.0 pence per share - 44.9 44.9
2006/07 interim ordinary dividend paid - 9.9 pence per share - - 21.1
2006/07 final ordinary dividend paid - 23.7 pence per share 50.0 - -
50.0 44.9 66.0
7 Share purchases
During the six months ended 30th September 2007 the company purchased 2,397,877 of its own shares at a cost of
£39.1 million. These shares are being held as treasury shares, bringing the total number of treasury shares to
5,997,877 at a total cost of £91.7 million.
8 Changes in equity
Six months ended Year ended
30.9.07 30.9.06 31.3.07
£ million £ million £ million
Equity at beginning of period 1,078.1 1,044.5 1,044.5
Total recognised income and expense relating to the period 88.5 51.3 141.2
Dividends paid to equity holders of the parent company (50.0) (44.9) (66.0)
Dividends payable to minority interests (0.2) (0.2) (0.3)
Minority interest arising on formation of subsidiary 0.2 0.3 0.3
Disposal of minority interest - - (2.7)
Share capital reduction of subsidiary - - (0.3)
New share capital subscribed 2.2 1.5 2.2
Purchase of own shares (39.1) (13.7) (52.6)
Net purchase of shares for employee share ownership trusts (10.8) - -
Share-based payments (net of shares transferred to employees) 2.0 2.6 7.3
Tax on items taken directly to or transferred from equity (6.0) - 4.5
Equity at end of period 1,064.9 1,041.4 1,078.1
9 Net debt
30.9.07 30.9.06 31.3.07
£ million £ million £ million
Cash and deposits 90.0 99.2 73.2
Bank overdrafts (18.3) (9.0) (13.2)
Cash and cash equivalents 71.7 90.2 60.0
Current other borrowings and finance leases (13.2) (18.9) (14.3)
Non-current borrowings, finance leases and related swaps (477.4) (549.6) (410.5)
Net debt (418.9) (478.3) (364.8)
10 Precious metal operating leases
The group leases precious metals 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 30th September 2007
precious metal leases were £54.9 million (30th September 2006 £121.6 million, 31st March 2007 £93.2 million).
11 Discontinued operations
On 28th February 2007 the group sold its Ceramics Division to the Endeka Ceramics group established by Pamplona
Capital Partners I, LP, a private equity investment fund. During the six months ended 30th September 2007 the
group paid the consideration refund of £0.6 million and £1.1 million in costs, which had both been accrued at 31st
March 2007.
INDEPENDENT REVIEW REPORT
by KPMG Audit Plc to Johnson Matthey Plc
Introduction
We have been engaged by the company to review the condensed consolidated
accounts in the half-yearly report for the six months ended 30th September 2007
which comprises the Condensed Consolidated Income Statement, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, the
Condensed Consolidated Statement of Recognised Income and Expense and the
related explanatory notes. We have read the other information contained in the
half-yearly report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed consolidated
accounts.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules (DTR) of the UK's Financial Services Authority (UK FSA).
Our review has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work for this
report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half-yearly report
in accordance with the DTR of the UK FSA.
The annual accounts of the group are prepared in accordance with International
Financial Reporting Standards as adopted by the European Union (EU). The
condensed consolidated accounts included in this half-yearly report have been
prepared in accordance with IAS 34 - 'Interim Financial Reporting' as adopted by
the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
consolidated accounts in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 - 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the UK. A review of half-yearly financial
information consists principally of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed consolidated accounts in the half-yearly report for the six
months ended 30th September 2007 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square, London
27th November 2007
FINANCIAL CALENDAR
2007
5th December
Ex dividend date
7th December
Interim ordinary dividend record date
2008
5th February
Payment of interim dividend on ordinary shares
5th June
Announcement of results for the year ending 31st March 2008
11th June
Ex dividend date
13th June
Final ordinary dividend record date
22nd July
117th Annual General Meeting (AGM)
5th August
Payment of final dividend subject to declaration at the AGM
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: 40-42 Hatton Garden, London EC1N 8EE
Telephone: 020 7269 8400
Internet address: www.matthey.com
E-mail: jmpr@matthey.com
Registered in England - Number 33774
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, 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
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