The programme to manage the millennium IT risk was completed well in advance of the deadline and the group achieved a smooth and successful transition into 2000. New investment in Information Technology infrastructure to support the rapid growth of the business continues to be made.The Internet and related technology provide significant opportunities to further enhance the capabilities of our businesses in improving efficiency and better serving our customers.These opportunities and other ways of realising value via the Internet form the basis of our e-Commerce strategy and are being pursued energetically. Johnson Matthey’s established US catalogue sales business Alfa Aesar has been trading on the Internet since 1997 and is currently in the process of being upgraded to offer improved facilities for customers with a growing interest in e-Commerce.

The group is also looking at the opportunity to grow its core businesses by strategic acquisitions, and is actively pursuing a number of opportunities. Following the sale of EMD the group is well positioned to fund these opportunities out of existing resources.

Financial Highlights
In the year to 31st March 2000 operating profit from continuing operations rose by 17% to £146.5 million on sales that were 27% up at £3,769 million. On 17th August 1999, EMD was sold to AlliedSignal Inc. for US$655 million. EMD made a £0.1 million contribution to profits compared with £22.1 million for the full year 1998/99. Despite the shortfall in EMD, Johnson Matthey earned profits before tax and exceptionals of £143.8 million, 10% up on prior year.

Earnings per share excluding exceptionals were 7% up at 47.5 pence. Including exceptionals earnings per share were 4% up at 51.4 pence.

As a result of the sale of EMD net cash flow for the group was strongly positive at £393.3 million. Johnson Matthey ended the year with net cash of £165.8 million compared with net borrowings of £221.6 million last year. Shareholders’ funds rose by £202.6 million to £755.4 million.

The board is recommending to shareholders a final dividend of 14.2 pence making a total dividend for the year of 20.3 pence, an increase of 7%.The dividend would be covered 2.3 times by earnings.

Testing the latest catalysts for motorcycle applications at Johnson Matthey’s European Autocatalyst Technology Centre in Royston, UK

Operations
Catalysts & Chemicals Division increased its sales by 26% over last year to £856 million. The growth reflected increased sales volume and the effect of higher palladium prices on autocatalysts.The division’s operating profit rose by 14% to £84.8 million.

The Autocatalyst business achieved good growth in operating profit with unit sales 11% higher than last year driven by strong car sales and tightening emission standards in all the world’s major car markets.These tighter standards are resulting in more catalysts per vehicle and growing demand for more technologically sophisticated catalysts.

In August 1999 we announced that Johnson Matthey had agreed with General Motors Corporation to settle a long-standing commercial dispute. As part of the settlement agreement Johnson Matthey has entered into collaboration with General Motors on a significant research and development project on fuel cells for transportation applications.

The Chemicals business also achieved good growth in operating profit benefiting from strong demand for pgm refining and good sales of platinum group metal compounds.As anticipated, profits in our Pharmaceutical Materials business were flat as a result of the increased competition in methylphenidate as two new generic suppliers entered the market and prices declined.This was offset by strong sales of carboplatin, fentanyl and hydromorphone and initial income from a new product in late stage clinical trials.

Johnson Matthey’s new facility to manufacture heterogeneous catalysts for the bulk chemicals industry

Precious Metals Division’s (PMD’s) sales were 31% ahead of last year at £2,672 million. Sales of platinum group metals rose as a result of increasing demand and higher prices. Gold sales also increased with higher levels of refining activity in the Far East. Operating profit for the division rose by 22% to £45.4 million.

Another year of unpredictable Russian supplies supported pgm prices and ensured continued market volatility. PMD’s marketing operations benefited from the trading opportunities and record demand for metal from the autocatalyst and jewellery sectors. Buoyant demand for industrial products underpinned a good performance from PMD’s platinum fabrication facilities.

Gold and Silver operations had a satisfactory year. Good levels of business for refining and bullion products were offset by weaker margins in a competitive marketplace.

Colours & Coatings Division’s sales were 1% down on last year at £241.2 million. Much of the division’s operations are based in Europe and sales growth was adversely affected by exchange translation because of the weakness of the euro. On a constant currency basis sales grew by 3%. Operating profits grew by 11% to £27.9 million despite adverse exchange translation. Margins improved to 11.6% as a result of both a shift to higher margin products and continued emphasis on reducing costs.

The Structural Ceramics segment was well up on last year with strong demand for decorative products from tile producers in southern Europe. The Glass business also performed well led by continued growth in sales of automotive glass enamels.The division’s inorganic pigments businesses produced encouraging results with good sales of products for woodstains, paints and plastics.The division’s organic pigments businesses made a loss of £0.4 million and were sold at the end of the year.

The Tableware business saw a further decline in its market and a rationalisation programme was introduced in the second half of the year to streamline operations by closing one site, reducing administration costs and cutting headcount by more than 200.The cost of this programme is £9.8 million of which £5.2 million had been spent by 31st March 2000. It will give rise to savings of around £4 million in the financial year 2000/01 and £7 million per annum in following years.

Outlook
Prospects for all the group’s businesses are very encouraging.We are investing in new technology to maintain continued growth and pursuing a number of opportunities to add further to our core businesses.

Chris Clark
Chief Executive

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