28th Nov 2007 07:01
Johnson Matthey PLC28 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 volumegrowth and higher precious metal prices • Sales excluding precious metals up 28% to £840 million with doubledigit organic growth in all three divisions • Operating profit up 14% to £132.4 million despite adverse exchangetranslation which reduced reported profit by £2.8 million. Translated atconstant exchange rates operating profit was up 16% • Profit before tax for the continuing businesses 15% higher at £120.1million • 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 earningsgrowth • 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 metalsup 41% to £541 million and operating profit up 14% to £65.2 million • Double digit growth in Emission Control Technologies will continue inthe 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 beopened in the second half of the year • High oil price supports growth in Process Technologies with gooddemand for catalysts and purification materials. Davy Process Technologycontinues to achieve good growth with continued strong demand in Asia • Precious Metal Products Division's sales excluding precious metals up17% to £151 million and operating profit up 31% to £47.2 million • In the first half platinum group metal prices have been rising and thedivision's manufacturing businesses have achieved good growth. Last year'ssecond half result included some one-off gains on minor metals which areunlikely to recur, so growth in the second half of this year will be slower thanin the first • Fine Chemicals & Catalysts Division's sales excluding precious metalsup 20% and operating profit up 6% to £31.0 million • Sales growth was boosted by higher base metal prices, particularlynickel, used in catalysts sold into the division's end markets. Good growth inopiate sales in the US and in Research Chemicals' sales in Asia. Operatingprofit growth in the second half is expected to be similar to or slightly betterthan 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 halfof 2007/08. Despite a weak dollar, profit before tax increased by 15% on theback of double digit sales growth in all three divisions. Prospects for the second half remain encouraging. Heavy duty diesel willbenefit from a full six months' sales to US OEMs. New capacity to meet growingdemand for autocatalysts and particulate filters in Asia and Europe will come onstream. Platinum group metal prices are set to remain buoyant. We expectearnings growth in the second half to be similar to that achieved in the first." Enquiries: Ian Godwin Director, IR and Corporate Communications 020 7269 8410John Sheldrick Group Finance Director 020 7269 8408Howard Lee The HeadLand Consultancy 020 7367 5225Laura Hickman The HeadLand Consultancy 020 7367 5227 www.matthey.com Introduction Johnson Matthey achieved good growth in the first half of 2007/08. Revenueswere well ahead of 2006/07 with strong underlying volume growth and risingprecious metal prices. Last year's results have been restated for the sale of Ceramics Division whichwas completed in February 2007. Under International Financial ReportingStandards (IFRS) the results of Ceramics Division are now shown in discontinuedoperations on a post tax basis. Last year's segmental results (note 2) havealso 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 metalprices. The average price of platinum rose by 7% to $1,293 per ounce. Salesexcluding the value of precious metals increased by 28% to £840 million, withdouble digit organic growth in all three divisions. Operating profit rose by 14% to £132.4 million despite adverse exchangetranslation which reduced reported profit by £2.8 million. At constant exchangerates operating profit was 16% up. Net interest was unchanged at £12.5 millionwith the benefit of lower average borrowings offsetting the effect of higherinterest 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-offbenefit to deferred tax of £1.8 million (0.8 pence per share) arising from thechange 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 growthin earnings per share before one-off items. Operations Our new Environmental Technologies Division, which comprises Emission ControlTechnologies (ECT), Process Technologies and Fuel Cells, achieved strong growthin the half year. Revenues increased by 23% to £1,055 million; sales excludingprecious metals were 38% up at £541 million; and operating profit was 13% betterat £65.2 million. Translated at constant exchange rates, sales excludingprecious metals increased by 41% and operating profit was 14% higher. Emission Control Technologies' sales excluding precious metals grew by £142million to £429 million. Sales of heavy duty diesel (HDD) catalysts to originalequipment manufacturers (OEMs) accounted for £73 million of the increase, risingfrom £6 million in the first half of last year to £79 million this year. Salesof light duty products were also well ahead with good growth in Asia andincreasing fitment of particulate filters on new diesel cars in Europe. Return on sales (operating profit / sales excluding precious metals) for ECT waslower than last year reflecting the change in product mix with rapid growth inproducts using expensive substrates (which are a pass through cost for JohnsonMatthey). The cost of substrates for these new products is now beginning tocome down. Going forward, ECT's return on sales is expected to stabilise atcurrent 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 +6.7Source: Global Insight Global light duty vehicle sales grew by 4% in the six months to 30th September2007 with most of the growth in Asia and Eastern Europe. Sales in North Americawere slightly down compared with the same period in 2006. Sales in China wereup 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 expenseof cars with petrol engines. An increasing proportion of diesels are beingfitted with particulate filters as standard ahead of legislation. Growth in car sales in Asia and increasing fitment of particulate filters willcontinue to drive catalyst demand in the light duty market. Later this yearJohnson Matthey will be opening new facilities in South Korea, the RussianFederation and Royston, UK to meet anticipated growth in demand. The market for HDD catalysts is expected to show substantial growth over thenext decade. In 2008 we expect the overall market for HDD catalysts to be worthat least US$700 million (excluding precious metals). New standards arescheduled to be introduced in Europe (Euro V) from 2008 and in the USA and Japanin 2010. Legislation is being introduced into many other countries over thenext few years. In 2011, legislation will start for non road vehicles in Europeand North America which will increase the market for HDD catalysts. By the endof 2014 we expect the HDD market to have grown to around US$3 billion of salesexcluding precious metals. We have increased our investment in R&D andcommercial development to ensure Johnson Matthey is well placed to take a goodshare of these new markets. Over the next few years we will also be investingin new capacity to meet future demand with further new facilities planned in theUSA, Europe and Asia. Process Technologies' sales excluding precious metals grew by 7%. Thedivision's Ammonia, Methanol, Oil and Gas (AMOG) business has continued toexperience good demand for catalysts and purification materials for industrieswhere hydrogen or synthesis gas are key intermediaries. Demand for catalystsfrom methanol producers, where Johnson Matthey has a leading market share, wasahead of prior year. New methanol capacity continues to come on stream, in partdue to the high methanol price, with a number of new projects announced in theMiddle East and China. In China a significant number of the projects are basedon utilising the country's large coal reserves and thereby reducing its relianceon expensive imported oil. There also continued to be good growth in catalysts for hydrogen plants, drivenby demand for low sulphur fuels from oil refineries around the world. JohnsonMatthey has the leading market share of syngas catalysts with the industrial gascompanies, the fastest growing segment of this market. Sales of purificationmaterials 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 inAsia. DPT is benefiting from the strong demand for new petrochemical plants inChina and the Middle East driven by continued consumer demand, particularly inAsia, and the strategic use of alternative hydrocarbon feedstocks, includingcoal. The net expense of our Fuel Cells business was similar to that in the first halfof last year. The order book for the second half of the year is encouragingwith continued good demand for membrane electrode assemblies (MEAs), especiallyfor direct methanol fuel cells for portable applications, and increased sales ofcomponents for phosphoric acid fuel cells which will be used for combined heatand power applications in public and commercial buildings. There has also beenencouraging progress in the automotive sector with cities, such as London,announcing plans to purchase hydrogen fuel cell buses and car manufacturersprogressing plans to make limited numbers of fuel cell cars available to thepublic over the next few years. With increasing sales in the second half thenet 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 forthe platinum group metals (pgms) continues to grow. Sales excluding the valueof precious metals increased by 12% to £151 million with good volume growth inthe division's manufacturing businesses. Operating profit grew by 27% to £47.2million. Translated at constant exchange rates, sales excluding precious metalsincreased by 17% and operating profit was 31% higher. The platinum marketing and distribution business achieved strong profit growthin favourable market conditions. Demand for platinum is expected to have risenby 3% in calendar year 2007. Growing production of diesel vehicles and inparticular engines fitted with particulate filters will increase demand from theauto sector. Demand for jewellery manufacturing will fall only slightly,proving surprisingly resilient to the rising platinum price. Platinum suppliesare expected to fall slightly and the market is expected to move back intodeficit in calendar year 2007. The average price of platinum in the first halfof Johnson Matthey's financial year rose to $1,293 per ounce, up 7% comparedwith 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 palladiumfrom consuming industries is expected to rise by 2% in calendar year 2007. Asubstantial increase in autocatalyst demand will outweigh a reduction in demandfrom jewellery manufacturers in China, where a reduction in inventoriesthroughout the supply chain has limited the requirement for new metal. The price of rhodium moved higher to average $6,163 per ounce, 27% higher thanthe same period last year. Although autocatalyst and glass industry demand isforecast to be slightly lower in calendar year 2007, supplies have fallen belowexpectations which has kept this tight and volatile market close to balance. The division's manufacturing businesses all performed well. The metalfabrication businesses saw good demand for industrial products. Our medicaldevice components business, based in three sites in California, continues toexpand. Fortunately we suffered no damage as a result of the fires in SouthernCalifornia in October although we closed one of our facilities for a shortperiod as a precautionary measure. Colour Technologies was well ahead of prior year with increased sales ofautomotive glass enamels and decorative precious metal products. Demand forsecondary pgm refining was also strong benefiting from rising metal prices. On4th May 2007 we sold our small gold refinery in Hong Kong. Our remaining goldbusinesses were ahead of 2006/07 with good demand for refining stimulated by thehigh gold price. The new Fine Chemicals & Catalysts Division achieved good growth in the halfyear. Revenues increased by 26% to £256 million, sales excluding preciousmetals were 16% up at £148 million, and operating profit was 3% up at £31.0million. Translated at constant exchange rates, sales excluding precious metalsincreased by 20% and operating profit was 6% better. Sales growth in the half year was boosted by higher metal prices, particularlynickel, which is used in the manufacture of catalysts for the pharmaceutical,edible oil and speciality chemical industries. Demand for both base metal andprecious metal products was good. Our US Pharmaceutical Materials and Servicesbusiness achieved good growth in the half year with sales of opiate productswell ahead of last year, although volumes in Europe were slightly down on 2006.Research Chemicals' joint venture in China, which started full operation lastyear, achieved rapid growth from a low base. The integration of the new division has gone well with a number of newinitiatives underway to cross sell products which should support future salesgrowth. Most of the division's pharmaceutical industry customers are genericdrug manufacturers who are currently enjoying good growth in sales. Cataloguesales to research institutes are also growing quite strongly, particularly inAsia. Satraplatin, a potential new platinum containing drug for treatment of hormonerefractory prostate cancer, which Johnson Matthey licensed a number of years agoto GPC Biotech, failed to show a statistically significant improvement insurvivability in its phase III clinical trials. Johnson Matthey would havereceived royalty income on sales of this product but otherwise the phase IIIresult has no impact on the division's results. The division is investing in new facilities in China, for manufacturing spongenickel 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 thetranslation of foreign subsidiaries' profits into sterling. The group's largestoverseas investment is in the USA. The average rate for the US dollar for thesix months to 30th September 2007 was $2.00/£ compared with $1.86/£ for thefirst half of last year. The South African rand also weakened from R12.7/£ toR14.2/£. However, the catalysts manufactured by our South African business areultimately for export and the benefit of a weaker rand on margins more thanoffsets the translation effect. Excluding the rand, exchange translationreduced group operating profit by £2.8 million compared with the first half oflast year, with nearly all the adverse impact attributable to the weaker USdollar. Interest The group's interest charge for the six months to 30th September 2007 wasunchanged from last year at £12.5 million. Despite continued investment in newfacilities and share buy-backs, average borrowings were lower than the sameperiod last year as a consequence of the sale of Ceramics Division in February2007. However, interest rates for floating rate borrowings were higher than thefirst 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 millionincluding a one-off benefit of £1.8 million to deferred tax arising from thereduction 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 theconsequence that deferred tax in the balance sheet is recalculated at the lowerrate. Excluding this amount the group's average tax rate for the half year was28.6%. Cash Flow In the six months to 30th September 2007 the group generated a net cash inflowfrom operating activities of £107.0 million compared with £50.9 million for thefirst half of last year. Working capital increased by £34.9 million with a risein inventories to support the rapid growth in sales. Inventories fell as aproportion of sales compared with 2006. The cash outflow on capital expenditure in the half year was £58.8 million whichwas 1.6 times depreciation. We are planning to spend more on capitalexpenditure in the second half with most of the investment in EnvironmentalTechnologies Division. Major projects include completion of ECT's newfacilities in the Russian Federation, South Korea and Royston, UK. In additionECT is investing significantly in additional testing and development facilitiesto support the future growth of the business. In Process Technologies we areinvesting in additional capacity at Clitheroe, UK to manufacture the latestgeneration of synthesis gas catalysts. We are expanding our facilities in Chinaand 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 majoracquisitions or disposals were undertaken in the half year. After taking intoaccount the impact of exchange translation on foreign currency borrowings netdebt 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 capitalexpenditure, particularly in Environmental Technologies Division, taking thetotal for the year to around 1.7 times depreciation. We also expect workingcapital to increase to support the growth in new product sales. We plan tocontinue to buy back shares and we are looking at a number of bolt-onacquisitions. Together these investments will increase gearing and make moreefficient 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 processtechnology business that was eventually sold to another company. The duediligence costs we incurred in this process have been included in corporatecosts for the half year. Outlook The group's continuing businesses performed well in the first half of the yearwith operating profit up 14% despite adverse exchange translation. With aquarter of the group's profits made in North America the weak US dollar remainsa headwind. In the second half of the year we expect our largest division, EnvironmentalTechnologies, to continue to perform strongly with growth similar to the firsthalf. The main driver will be ECT which will benefit from a full six months ofsales of heavy duty diesel catalysts to OEMs in the US compared with just onequarter last year. In addition we have new capacity coming on stream to meetgrowing 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 MetalProducts Division are favourable. However, last year's second half resultincluded some trading profits on the minor pgms which we do not expect to recurin 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 thefirst half at constant exchange rates. We expect the rate of growth in thesecond half to be similar or slightly better than the first. Johnson Matthey is very well positioned in its markets and we continue to investsignificantly in R&D and new facilities to support future growth. Overall, theoutlook for the second half of the year is encouraging and we expect earningsgrowth to be similar to that achieved in the first half. CONDENSED CONSOLIDATED INCOME STATEMENTfor 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 6,151.7Cost of materials sold (3,293.6) (2,720.7) (5,713.7)Gross profit 218.4 201.3 438.0Operating expenses (86.0) (84.7) (185.6)Operating profit 2,3 132.4 116.6 252.4Finance costs (19.1) (17.0) (36.0)Finance income 6.6 4.5 9.2Share of profit of associates 0.2 0.5 0.9Profit before tax 120.1 104.6 226.5Income tax expense 4 (32.5) (30.1) (64.7)Profit for the period from continuing operations 87.6 74.5 161.8Profit for the period from discontinued operations 11 - 7.1 43.7Profit for the period 87.6 81.6 205.5 Attributable to:Equity holders of the parent company 88.1 81.9 206.5Minority 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 SHEETas at 30th September 2007 30.9.07 30.9.06 31.3.07 Notes £ million £ million £ million AssetsNon-current assetsProperty, plant and equipment 611.3 643.0 600.7Goodwill 399.4 401.0 399.2Other intangible assets 39.7 40.9 40.1Deferred income tax assets 11.5 8.8 8.9Investments and other receivables 10.2 11.0 10.0Post-employment benefits net assets 53.5 78.4 49.2Total non-current assets 1,125.6 1,183.1 1,108.1 Current assetsInventories 407.8 362.6 362.7Current income tax assets 8.1 - 7.0Trade and other receivables 499.6 539.7 527.3Cash and deposits 9 90.0 99.2 73.2Investments and other financial assets 8.7 22.3 3.4Other current assets 7.1 7.1 7.1Non-current assets classified as held for sale - - 0.4Total current assets 1,021.3 1,030.9 981.1Total assets 2,146.9 2,214.0 2,089.2 LiabilitiesCurrent liabilitiesTrade 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 liabilitiesBorrowings, 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 EquityShare capital 220.7 220.4 220.5Share premium account 148.3 145.7 146.3Shares held in employee share ownership trusts (71.8) (61.9) (61.9)Other reserves (11.3) (1.7) (12.9)Retained earnings 777.3 732.7 783.7Total equity attributable to equity holders of the parent company 1,063.2 1,035.2 1,075.7Minority interests 1.7 6.2 2.4Total equity 8 1,064.9 1,041.4 1,078.1 CONDENSED CONSOLIDATED CASH FLOW STATEMENTfor 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 activitiesProfit before tax 120.1 104.6 226.5Adjustments 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 26.8Income tax paid (31.6) (41.9) (81.4)Net cash inflow from operating activities 107.0 50.9 159.1 Cash flows from investing activitiesDividends received from associates 0.3 0.1 0.5Purchases 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 3.5Purchases of businesses and minority interests - (7.5) (8.6)Net proceeds from sale of businesses and minority interests (0.8) - 127.1Net cash outflow from investing activities (58.1) (63.3) (2.5) Cash flows from financing activitiesNet 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 4.9Net 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 60.0 125.1 125.1Cash and cash equivalents at end of period 9 71.7 90.2 60.0 Reconciliation to net debtIncrease / (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) 71.8Change in net debt resulting from cash flows (60.9) (83.8) 13.8Borrowings disposed of with subsidiaries - - 19.1Exchange differences on net debt 6.8 17.5 14.3Movement in net debt in period (54.1) (66.3) 47.2Net 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 EXPENSEfor 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 netinvestments 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 4.3Fair value (losses) / gains on net investment hedges (0.2) 15.8 23.3Fair value gains on net investment hedges - transferred to profiton 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 13.5Net income / (expense) recognised directly in equity 0.9 (30.3) (64.3)Profit for the period 87.6 81.6 205.5Total 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 51.7 142.2Minority interests (0.7) (0.4) (1.0) 88.5 51.3 141.2 NOTES ON THE ACCOUNTSfor the six months ended 30th September2007 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 REPORTby KPMG Audit Plc to Johnson Matthey Plc Introduction We have been engaged by the company to review the condensed consolidatedaccounts in the half-yearly report for the six months ended 30th September 2007which comprises the Condensed Consolidated Income Statement, the CondensedConsolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, theCondensed Consolidated Statement of Recognised Income and Expense and therelated explanatory notes. We have read the other information contained in thehalf-yearly report and considered whether it contains any apparent misstatementsor material inconsistencies with the information in the condensed consolidatedaccounts. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the Disclosureand 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 thosematters 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 assumeresponsibility to anyone other than the company for our review work for thisreport, or for the conclusions we have reached. Directors' responsibilities The half-yearly report is the responsibility of, and has been approved by, thedirectors. The directors are responsible for preparing the half-yearly reportin accordance with the DTR of the UK FSA. The annual accounts of the group are prepared in accordance with InternationalFinancial Reporting Standards as adopted by the European Union (EU). Thecondensed consolidated accounts included in this half-yearly report have beenprepared in accordance with IAS 34 - 'Interim Financial Reporting' as adopted bythe EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensedconsolidated accounts in the half-yearly report based on our review. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 - 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the UK. A review of half-yearly financialinformation consists principally of making enquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and consequently does not enable us to obtain assurance that we wouldbecome 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 believethat the condensed consolidated accounts in the half-yearly report for the sixmonths ended 30th September 2007 is not prepared, in all material respects, inaccordance with IAS 34 as adopted by the EU and the DTR of the UK FSA. KPMG Audit PlcChartered Accountants8 Salisbury Square, London27th November 2007 FINANCIAL CALENDAR 2007 5th DecemberEx dividend date 7th DecemberInterim ordinary dividend record date 2008 5th FebruaryPayment of interim dividend on ordinary shares 5th JuneAnnouncement of results for the year ending 31st March 2008 11th JuneEx dividend date 13th JuneFinal ordinary dividend record date 22nd July117th Annual General Meeting (AGM) 5th AugustPayment of final dividend subject to declaration at the AGM Cautionary Statement This announcement contains forward looking statements that are subject to riskfactors associated with, amongst other things, the economic and businesscircumstances occurring from time to time in the countries and sectors in whichthe group operates. It is believed that the expectations reflected in thisannouncement are reasonable but they may be affected by a wide range ofvariables which could cause actual results to differ materially from thosecurrently anticipated. Johnson Matthey Public Limited CompanyRegistered Office: 40-42 Hatton Garden, London EC1N 8EETelephone: 020 7269 8400Internet address: www.matthey.comE-mail: [email protected] Registered in England - Number 33774 RegistrarsEquiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DATelephone: 0870 600 3970Internet address: www.shareview.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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