The directors submit to shareholders their one hundred and seventh annual report, together with the audited accounts of the group for the year ended 31st March 1998.
Principal Activities
The group's principal activities are summarised in Introduction.
Dividends
The interim dividend of 5.2 pence per share, up 0.5 pence, was paid as a FID in February 1998. A final dividend, which will also be paid as a FID, of 12.6 pence per share, up 1.8 pence, is being proposed to shareholders as Resolution No. 2 at the Annual General Meeting (AGM), making a total for the year of 17.8 pence, an increase of 15% over last year. Dividends for the year total £38.7 million.
Share Capital
Allotments of ordinary shares of £1 each of the company were made during the year as set out in note 21 on page 62. Resolutions will be proposed at the AGM to grant to the Board authority and power to allot new securities under sections 80 and 95 of the Companies Act 1985 (the Act).
Resolution No. 8 is an ordinary resolution to renew the authority of the directors to allot shares under section 80 of the Act. At the Annual General Meeting in July 1997 the directors' authority to issue securities was extended to five years from the date of the meeting. It is now proposed to extend that authority so that it applies for five years from the date of the AGM and that the nominal value of shares which may be allotted be £73,949,837 which is the nominal value of the authorised unissued ordinary share capital.
Resolution No. 9 is a special resolution to renew the authority of the directors, under section 95 of the Act, to allot equity securities for cash without first offering them pro rata to existing shareholders as otherwise required by section 89 of the Act; the authority sought is limited to issues of equity securities with a nominal value not to exceed £10,880,008, being equivalent to 5% of the nominal value of the company's issued ordinary share capital at 31st May 1998.
Employment Policies
It is the policy of the group to train and develop employees at all levels so that group objectives can be met. We recruit, train and manage our employees regardless of sex, ethnic origin or religion. Employees who become disabled and disabled people are offered employment consistent with their capabilities. Close attention, under the direction of the Management Development and Remuneration Committee (the MDRC), is given to the group's recruitment and training procedures as well as career development to meet current and future group requirements.
Johnson Matthey recognises the importance of effective employee communications. Information and comment is exchanged with employees through the company's in-house magazine, regular news bulletins, presentations to staff and team briefings.
42% of employees worldwide are shareholders in Johnson Matthey through the company's employee share participation schemes, which held 3,394,710 shares (1.56%) at 31st May 1998. 797 current and former executives hold options over 5,264,648 shares through the company's executive share option schemes.
Directors
Details of the directors of the company are shown in Board of Directors. In addition, The Hon G H Wilson was a director for the period 1st April to 27th November 1997 and Mr D J Davies, who was a director throughout the financial year, retired from the Board on 9th June 1998. Mr G D Wells, appointed to the Board on 18th March 1998, offers himself for election at the forthcoming AGM. In accordance with the company's Articles of Association, Messrs C R N Clark and I G Thorburn (who are employed on service contracts subject to two years' notice) and Mr H R Jenkins retire by rotation and, being eligible, offer themselves for re-election at the forthcoming AGM.
Employee Share Schemes
A letter is being sent to shareholders with this Annual Report which explains the rationale for and the details of a new Long Term Incentive Plan for directors and senior executives (Resolution No. 10), and amendments of a technical nature to the existing employee share schemes (Resolution Nos. 11 and 12).
Directors' Material Interests in Contracts
Other than service contracts no director had any interest in any material contract with any group company at any time during the year.
Substantial Shareholdings
The company has been advised of the following notifiable interests in its ordinary share capital as at 31st May 1998:
Schroder Investment Management Ltd
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19.27%
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Prudential Corporation group of companies (see note 1 below)
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4.92%
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Legal & General Investment Management Ltd (see note 1 below)
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3.23%
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The directors are not aware of any other notifiable holdings of 3% or more of the ordinary share capital of the company, but the following interests should also be noted:
1. The Prudential Corporation and Legal & General control a number of non-material holdings which, when combined with the above notifiable material holdings, bring the total holdings to: Prudential 4.98% (1997 5.37%); Legal & General 3.62%.
2. Gartmore Investment Limited is interested in its capacity as fund manager in 3.22% of the ordinary share capital of the company.
Auditor
In accordance with section 384 of the Act, a resolution is to be proposed at the forthcoming AGM for the reappointment of KPMG Audit Plc as auditor of the company.
Policy on Payment of Commercial Debts
The group's policy in relation to the payment of all suppliers (set out in its internal Group Control Manual, which is distributed to all group operations) is that payment should be made within the credit terms agreed with the supplier. At 31st March 1998, the company's aggregate level of "creditor days" amounted to 4 days. Creditor days are calculated by dividing the aggregate of the amounts which were owed to trade creditors at the end of the year by the aggregate of the amounts the company was invoiced by suppliers during the year and multiplying by 365 to express the ratio as a number of days.
Donations
During the year the group donated £272,000 (1997 £234,000) to charitable organisations, of which £213,000 (1997 £187,000) was in the UK. £26,000 (1997 £27,050) was donated for political purposes to the Conservative Party.
This report was approved by the directors on 9th June 1998 and is signed on their behalf by:
Gordon Thorburn
Secretary
Trafalgar Square, London
