HIGHLIGHTS
- Profits
before tax up 14% to £58.2m
- Earnings
per share
- including FID up 31% to 22.1 pence
- excluding FID up 15% to 19.4 pence
- Interim
dividend increased by 11% to 5.2 pence
- Three
wholly owned divisions' profits up 30%
- Precious Metals up 18% to £24.9m
- Catalytic Systems up 32% to £20.1m
- Electronic Materials up 50% to £18.0m
- Cookson
Matthey Ceramics joint venture 53% down to £5.0m.
Firm action in hand.
- Cash
flow positive, gearing down to 29%
- Semiconductor
Packages now achieving target of 1 million units
per month.
Commenting
on the results, David Davies, Chairman of Johnson
Matthey, said:
"Johnson
Matthey has had a very good first half. All our
businesses are going well with the exception of
the CMC joint venture, where firm action is being
taken. I am particularly pleased that our Semiconductor
Packages business will achieve our critical milestone
of producing one million units this month. The
outlook for Johnson Matthey in the second half
is encouraging."
Report
to Shareholders
Introduction
Johnson
Matthey has had a good first half with its three
wholly owned divisions performing very well. I am
particularly pleased that our Semiconductor Packages
business will achieve our critical milestone of producing
one million units this month. We expect to see significant
profits from this investment coming through in calendar
1998. The results of Cookson Matthey Ceramics plc,
our 50:50 joint venture with Cookson Group plc, are
disappointing and firm action is being taken to correct
this unacceptable performance.
Review
of Results
Johnson
Matthey earned profits before tax of £58.2 million
in the six months to 30th September 1997, an increase
of 14% over the previous year. Turnover rose by 9%
while operating profit was up by 14% at £63.1
million. These results were achieved despite an adverse
exchange translation effect of £3.6 million.
Earnings
per share for the half year rose by 31% to 22.1 pence.
Excluding the taxation benefit of £5.8 million
arising from paying the final dividend for 1996/97
as a Foreign Income Dividend (FID), earnings per
share were 19.4 pence - a rise of 15% over the previous
year.
The
interim dividend has been increased by 10.6% to 5.2
pence. This will also be paid as a FID providing
further tax savings of £2.8 million.
Operations
Precious
Metals Division's (PMD) sales were 10% up on
the first half of last year at £959.6 million.
Operating profit increased by 18% to £24.9
million. All three of the division's businesses
were well ahead of last year. Our platinum business
benefited from volatile trading conditions, strong
platinum group metal prices and growth in fabricated
metal products. Gold performed well in difficult
markets. Whilst our primary refining businesses
in the USA, Australia and Canada were affected
by low gold prices, the ancillary products businesses
enjoyed a buoyant six months. Chemicals made further
progress in all sectors with platinum group metals
refining particularly strong.
Catalytic
Systems Division (CSD) increased its operating
profit by 32% to £20.1 million as a result
of improving margins in all areas. Sales, however,
were down by 2% on the first half of last year
at £182.0 million.This fall principally reflected
a reduction in material costs which was passed
on to our customers. Unit sales in Europe grew
by 3% in the first half, in line with overall growth
in the car market. In North America, unit sales
were up 6% despite the market being slightly down.
This was due to continued growth in the sales of
light trucks, which use more catalysts per vehicle
than cars and are a market sector where our major
customers are strong.
Pharmaceutical
Materials continues to be the most rapidly growing
part of CSD. In September we announced that JM and
Schein Pharmaceutical Inc. had received final US
Food and Drug Administration approvals to manufacture
and market methylphenidate. Following the product
launch in October, sales have been strong and production
is being expanded.
Electronic
Materials Division's (EMD) sales were up by
23% at £205.2 million and operating profit
was 50% up on the first half of last year at £18.0
million. Wafer Fabrication Materials had a good
first half with sales of high purity titanium recovering
from last year's slump in demand from DRAM producers.
Sales of sputtering targets continue to grow and
Johnson Matthey is winning market share around
the world. As expected, Assembly Products' performance
has been adversely affected by the rapid transition
from ceramic to plastic laminate packages for microprocessors.
However, good growth in thermal management products
has helped to offset this. Laminate Products, consisting
of the ACI multilayer printed circuit board business,
continues to perform well achieving good growth
in both sales and profits in the half year.
In
Semiconductor Packages, the Chippewa Falls production
facility continues to progress on schedule.
Cookson
Matthey Ceramics (CMC), our joint venture with
Cookson Group, has had a very disappointing first
half with sales down 3% at £78.6 million and
operating profit 53% down at £5.0 million.
Exchange translation had an adverse impact on these
results and the strength of sterling has affected
the performance of CMC's UK based businesses with
a number of customers announcing cutbacks. Margins
in the zircon business remain depressed.
A plan
of action to address the situation has been agreed.
As announced today, it is intended to divest CMC's
peripheral businesses and to focus on its core ceramics
activities. In addition, the Decorative sector will
be streamlined and its cost base reduced, resulting
in a loss of 100 jobs. One-off costs to Johnson Matthey
of £1.35 million will be incurred in our second
half.
Finance
Exchange
Rates
The
strength of sterling reduced group profits by £3.6
million compared with the first half of last year,
as a result of unfavourable exchange translation.
The average rate used for the US dollar was 1.63
compared with 1.55 in the first half of 1996 which
accounted for £2.0 million of the shortfall.
Exchange translation against other European currencies
accounted for most of the remainder, particularly
in CMC where profits were reduced by £0.8 million.
Sterling's strength also impacted the group's UK
export businesses with CMC again being the hardest
hit.
Interest
and Hedging
The
group's interest charge rose by £0.8 million
as a result of increased borrowing costs for precious
metals. In the first quarter of the current financial
year liquidity in the platinum group metal markets
became very tight resulting in a sharp rise in the
forward rates for hedging. The group's normal policy
is to hedge its precious metal stock by covering
forward or leasing. Under current market conditions
such hedging is not cost-effective and the group
is now carrying the majority of its platinum and
palladium stock unhedged.
Taxation
Following
the changes to taxation announced in the Budget on
2nd July 1997, Johnson Matthey paid its final dividend
for 1996/97 as a FID which will enable the group
to obtain a refund of the £5.8 million of Advance
Corporation Tax (ACT) paid on the FID. The interim
dividend for 1997/98 will also be paid as a FID which
will save a further £2.8 million.
Excluding
the ACT refund, the group's average tax rate for
the half year was just over 27% which is similar
to last year.
Cash
Flow
Johnson
Matthey's net cash flow from operations was strong
at £64.7 million despite an increase in working
capital to support the growth of the business. Overall,
net cash flow was positive at £3.9 million.
Borrowings fell to £142.2 million and gearing
to 29% compared with 31% at last year end. Interest
cover remains very satisfactory at 13 times.
Investment
We
continue to invest in the future of our businesses
around the world. The first half has seen a number
of important opportunities for growth in our Autocatalyst,
Pharmaceutical Materials and Electronic Materials
businesses. Our joint venture with Magneti Marelli
to manufacture autocatalysts in Argentina is making
good progress. Production will begin in January.
We are expanding our Pharmaceutical Materials manufacturing
facility at West Deptford, USA, to serve our rapidly
growing methylphenidate business and strong demand
for our other organic products. We have also announced
the expansion of our thermal management products
business with a new 100,000 square foot manufacturing
facility near EMD Assembly Products' existing operations
in Spokane, USA. The total investment approved for
these three projects is £20 million.
The
second half will see a higher level of capital expenditure
than in the first half of the year. However as I
indicated in June, the group's ratio of capex to
depreciation in the full year will be below that
of the last few years.
Board
Sadly,
I have to announce Geoffrey Wilson's retirement from
the Board. Geoffrey joined us as a Non-Executive
Director in 1990 and became Deputy Chairman in 1994.
His humour, sound common sense and wide experience
of business have provided invaluable support to so
many of us at Johnson Matthey over the last seven
years and we shall all miss him in his retirement.
Hugh Jenkins will succeed Geoffrey as Chairman of
the Audit Committee.
Outlook
In
PMD we expect trading conditions to remain positive
as the fundamentals for the platinum and palladium
markets are favourable.
In
CSD the outlook is for continued growth in our Autocatalyst
business around the world. Pharmaceutical Materials'
profits will increase further as we expand its organic
products business.
We
are determined that the unsatisfactory performance
of our Cookson Matthey Ceramics joint venture will
be turned around. Action is being taken. Peripheral
businesses will be sold and core ceramics activities
rationalised.
In
EMD, markets for our products are expected to show
good growth. The second half will see a strong contribution
from Semiconductor Packages as volumes and yields
increase and production targets are achieved.
Overall
the outlook for Johnson Matthey for the second half
is encouraging. The company's new slogan "Technology
Driven, Customer Led" underlines our continued
commitment as a world leader in advanced materials
technology.
D J Davies
Chairman
27th
November 1997
Consolidated
Profit and Loss Account for the six months ended
30th September 1997
Six months to Year to
30.9.97 30.9.96 31.3.97
NOTE £ million £ million £ million
Turnover 2
Total turnover 1,425.4 1,307.4 2,580.1
Less share of
Cookson Matthey Ceramics plc (78.6) (80.7) (156.9)
------- ------- -------
Group turnover 1,346.8 1,226.7 2,423.2
------- ------- -------
Operating profit 3
Continuing operations 63.1 54.3 114.8
Discontinued operations - 1.0 1.5
------- ------- -------
63.1 55.3 116.3
Net interest (4.9) (4.1) (8.0)
------- ------- -------
Profit on ordinary
activities before taxation 58.2 51.2 108.3
Taxation 5 (10.0) (14.2) (29.2)
------- ------- -------
Profit after taxation 48.2 37.0 79.1
Equity minority interests (0.3) (0.5) (1.2)
------- ------- -------
Profit attributable to shareholders 47.9 36.5 77.9
Dividends 6 (11.3) (10.2) (33.6)
------- ------- -------
Retained profit 36.6 26.3 44.3
------- ------- -------
pence pence pence
Earnings per ordinary share 7 22.1 16.9 36.0
Dividend per ordinary share 6 5.2 4.7 15.5
Consolidated Balance
Sheet as at 30th September 1997
30.9.97 31.3.97
£ million £ million
Fixed assets
Tangible fixed assets 359.0 354.4
Investments 77.3 84.2
------- -------
436.3 438.6
------- -------
Current assets
Stocks 198.4 185.3
Debtors: due within one year 198.5 179.2
Debtors: due after one year 78.9 73.1
Short term investments 0.1 0.3
Cash at bank in hand 32.1 62.2
------- -------
508.0 500.1
Creditors: amounts falling due
within one year
Borrowings and finance leases (71.1) (124.2)
Precious metal leases (24.2) (22.8)
Other creditors (194.1) (193.9)
------- -------
Net current assets 218.6 159.2
------- -------
Total assets less current liabilities 654.9 597.8
Creditors: amounts falling due
after more than one year
Borrowings and finance leases (103.2) (81.7)
Other creditors (0.7) (0.8)
Provisions for liabilities and charges (52.8) (50.0)
------- -------
Net assets 498.2 465.3
------- -------
Capital and reserves
Called up share capital 217.5 217.2
Share premium account 100.5 99.6
Revaluation reserve 15.8 17.3
Associated undertakings' reserves (17.4) (11.5)
Profit and loss account 181.3 142.5
------- -------
Shareholders' funds 497.7 465.1
Equity minority interests 0.5 0.2
------- -------
498.2 465.3
------- -------
Consolidated Cash Flow Statement
for the six months ended 30th September 1997
Six months to Year to
30.9.97 30.9.96 31.3.97
£ million £ million £ million
Reconciliation of operating profit to
net cash inflow from operating activities
Operating profit 63.1 55.3 116.3
Depreciation charges 20.8 19.8 40.6
(Profit)/loss on sale of tangible
fixed assets and investments (1.8) 0.1 (1.7)
Profit of associated undertakings
less dividends received (4.6) (12.1) (16.9)
(Increase)/decrease in owned stocks (10.9) 18.3 0.3
Increase in debtors (18.3) (2.2) (32.3)
Increase/(decrease) in creditors
and provisions 16.4 (6.3) 18.1
------- ------- -------
Net cash inflow from
operating activities 64.7 72.9 124.4
------- ------- -------
Cash Flow Statement
Net cash inflow from
operating activities 64.7 72.9 124.4
Returns on investments
and servicing of finance (4.4) (1.6) 6.2
Taxation (11.2) (7.5) (18.2)
Capital expenditure (26.2) (34.5) (80.2)
Financial investment 3.3 0.6 2.6
Acquisitions and disposals (0.1) (16.1) (25.2)
Equity dividends paid (23.4) (21.9) (31.9)
------- ------- -------
Cash inflow/(outflow) before use
of liquid resources and financing 2.7 (8.1) (22.3)
Management of liquid resources 8.0 (1.3) (0.8)
Financing
Issue of ordinary share capital 1.2 2.5 3.2
(Decrease)/increase in borrowings
falling due within one year (47.0) 0.7 9.8
Increase in borrowings falling due
after more than one year 18.4 36.8 35.9
------- ------- -------
Net cash (outflow)/inflow from
financing (27.4) 40.0 48.9
------- ------- -------
(Decrease)/increase in cash
in the period (16.7) 30.6 25.8
------- ------- -------
Reconciliation of net cash
flow to movement in net debt
(Decrease)/increase in cash
in the period (16.7) 30.6 25.8
Cash outflow/(inflow) from
movement in borrowings 28.6 (37.5) (45.7)
Cash (inflow)/outflow from term
deposits included in liquid resources (8.0) 1.3 0.8
------- ------- -------
Change in net debt resulting
from cash flows 3.9 (5.6) (19.1)
New finance leases (1.8) - -
Translation difference (0.6) 0.7 9.6
------- ------- -------
Movement in net debt in the period 1.5 (4.9) (9.5)
Net debt at the beginning of the period (143.7) (134.2) (134.2)
------- ------- -------
Net debt at the end of the period (142.2) (139.1) (143.7)
------- ------- -------
Total Recognised Gains and Losses for the six months
ended 30th September 1997
Six months to Year to
30.9.97 30.9.96 31.3.97
£ million £ million £ million
Profit attributable to shareholders 47.9 36.5 77.9
Unrealised deficit on revaluation (1.8) - -
------- ------- -------
46.1 36.5 77.9
Currency translation differences
on foreign currency net investments (2.4) (7.2) (27.3)
------- ------- -------
Total recognised gains and losses
for the period 43.7 29.3 50.6
------- ------- -------
Notes on the Accounts for the six months ended
30th September 1997
1
Basis of preparation
The interim accounts were approved by the Board of Directors on 25th November
1997, 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 1997. Information in respect of the year ended 31st March 1997 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
accounts was unqualified and did not contain any statement under sections
237(2) and 237(3) of the Companies Act 1985.
Six months to Year to
30.9.97 30.9.96 31.3.97
2 Turnover £ million £ million £ million
Precious Metals 959.6 874.3 1,717.9
Catalytic Systems 182.0 186.0 361.6
Electronic Materials 205.2 166.4 343.7
Cookson Matthey Ceramics plc 78.6 80.7 156.9
------- ------- -------
1,425.4 1,307.4 2,580.1
Less share of
Cookson Matthey Ceramics plc (78.6) (80.7) (156.9)
------- ------- -------
1,346.8 1,226.7 2,423.2
------- ------- -------
Six months to Year to
30.9.97 30.9.96 31.3.97
3 Operating profit £ million £ million £ million
Precious Metals 24.9 21.1 44.0
Catalytic Systems 20.1 15.2 34.1
Electronic Materials 18.0 12.0 30.9
Cookson Matthey Ceramics plc 5.0 10.6 15.3
Corporate (4.9) (4.6) (9.5)
------- ------- -------
63.1 54.3 114.8
Discontinued operations - 1.0 1.5
------- ------- -------
63.1 55.3 116.3
------- ------- -------
4
Geographical analysis Turnover by origin Operating
profit Six months Year to Six months Year to to
30.9.97 31.3.97 to 30.9.97 31.3.97 £ million £ million £ million £ million
Europe 782.9 1,565.8 19.9 41.8 North America 484.7 842.3
35.8 61.4 Rest of the World 410.5 573.2 7.4 11.6
------- ------- ------- ------- 1,678.1 2,981.3
63.1 114.8 Discontinued operations - - - 1.5 -------
------- ------- ------- 1,678.1 2,981.3 63.1 116.3
------- -------
Less inter-segment sales (252.7) (401.2) ------- ------- 1,425.4 2,580.1
Less share of Cookson Matthey Ceramics plc (78.6) (156.9) ------- ------- 1,346.8 2,423.2
------- -------
Six months to Year to
30.9.97 30.9.96 31.3.97
£ million £ million £ million
5 Taxation
United Kingdom 6.7 5.7 12.2
Overseas 7.9 6.1 12.7
Associated undertakings 1.2 2.4 4.3
------- ------- -------
15.8 14.2 29.2
ACT saving on foreign
income dividend (5.8) - -
------- ------- -------
10.0 14.2 29.2
------- ------- -------
6 Dividends
An interim dividend of 5.2 pence per ordinary share will be paid on
2nd February 1998 to shareholders on the register at the close of
business on 12th December 1997.
7 Earnings per ordinary share
The calculation of earnings per ordinary share is based on a
weighted average of 216,879,391 shares in issue (six months to 30th
September 1996 - 216,305,806 shares, year to 31st March 1997 -
216,507,894 shares). Excluding the benefit of the ACT saving on
foreign income dividend of £5.8 million the earnings per ordinary
share for the six months to 30th September 1997 would be 19.4 pence.
Financial
Calendar
1997
8th December Ex dividend date
12th December Interim ordinary dividend record date
1998
2nd February Payment of interim dividend on ordinary shares
1st April Payment of dividend on 3.5% cumulative preference shares
11th June Announcement of results for the year ending 31st March 1998
14th July 107th Annual General Meeting
Johnson
Matthey Public Limited
Company
Registered Office: 2-4 Cockspur Street, Trafalgar Square, London
SW1Y 5BQ
Telephone: 0171 269 8400
E-mail: jmpr@matthey.com
Registered in England - No. 33774
Registrars
Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99
6DA
Telephone: 01903 502541
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