Johnson Matthey delivered excellent results in 2000/01 with profits well ahead of last year. All three divisions achieved strong organic growth with double digit rises in operating profit. The group has increased its investment in new production facilities and in research and development, to meet the expected growth in demand for new products.

A year ago we announced that we were stepping up our investment programme to take advantage of the opportunities we saw for growth. In 2000/01 our capital expenditure rose to more than £100 million and we plan to increase the level of investment in 2001/02. Investment in research and development has also been increased, particularly in fuel cells. Total group expenditure was £42.3 million in the year with a further increase planned for 2001/02.

In March 2001 we opened our new £10 million European autocatalyst facility in Royston, UK. The 6,000 square metre plant uses Johnson Matthey's latest process technology to produce more advanced catalysts to the higher specifications required to meet current and future emissions standards. The new factory has initial capacity to produce 3.5 million units a year, which will be needed to meet the rapidly growing demand for our latest catalysts in Europe.

The new factory in Royston is the first autocatalyst facility based entirely on our new manufacturing technology. We have stepped up our programme of investment in our existing facilities to introduce this new technology throughout the world as fast as we can.

During the year we have put in new production capacity to meet rapidly growing demand for autocatalysts in Asia. In early November a new autocatalyst plant was opened in India's Harayana State, which more than doubled Johnson Matthey's production capacity in this important market. Our new autocatalyst facility in China will be officially opened later this month.

The combination of our class leading technology with the benefits of our new manufacturing process is resulting in growth in our global market share. Tightening emissions standards around the world are also providing exciting opportunities for growth in our heavy duty diesel business. Johnson Matthey's Continuously Regenerating Trap (CRT™) is already the market leader in voluntary retrofit programmes around the world as local authorities and transport operators strive to improve air quality in our cities.

In Chemicals we are investing in the expansion and upgrading of our platinum group metals refining capacity in the UK and US. The cornerstone of this programme is an investment of £13.5 million over the next two years to upgrade our refineries at Brimsdown and Royston in the UK. This will increase capacity and enable the group to take on higher volumes of primary refining materials. A further major investment is planned in new technology to refine and recycle spent chemical catalysts.

A new process catalyst plant was opened at Royston in October 2000 to manufacture the latest generations of supported chemical process catalysts for the fine and speciality chemicals industries. We continue to work in close partnership with our customers to develop new process catalysts, optimised to their requirements.

Our investment in Fuel Cells continues apace. We have identified a site near Swindon in the UK and are seeking permits for a new Membrane Electrode Assembly (MEA) manufacturing facility. This new facility will be built on a modular basis to allow the phased expansion of MEA production to meet market demand. Pilot production facilities at existing locations will be expanded during the coming year to provide intermediate capacity.

Johnson Matthey Fuel Cells has continued to work with target customers and has undertaken extensive market validation work to enable it to forecast demand for its products over the next three to five years. It has also made good progress in securing its strategic supply chain. The collaboration with James Cropper PLC to develop key components for MEAs announced last year has made excellent progress and supply agreements have been secured with a number of other raw material suppliers.

The business is also expanding its fuel cell catalyst manufacturing capacity with a new production plant at West Deptford, USA. The move to a new fuel processor development and manufacturing facility at West Whiteland, USA will be completed in the next few months.

In April 2001 we announced the acquisition of Pharm-Eco Laboratories, Inc. for a total price, including debt, of $46.9 million. Based on two sites near Boston in the US, Pharm-Eco provides contract research, process development and small scale synthesis services to the pharmaceutical industry. Its services are primarily focused on drug development through to phase 2 clinical trials.

These services complement our existing Pharmaceutical Materials business, which manufactures active pharmaceutical ingredients for drugs that are already approved for market or are very near to receiving final approval. The acquisition presents Johnson Matthey with enhanced opportunities to bring new pharmaceutical manufacturing business to the West Deptford facility in the US, and considerably extends our existing portfolio of products and services for customers in the pharmaceutical industry.

Johnson Matthey is the largest fabricator and distributor of the platinum group metals (pgms).We are the sole marketing agent for Anglo Platinum, the world's leading primary producer of pgms, a relationship that goes back over 70 years. Growth in our Precious Metals Division is driven by strong demand for the platinum group metals and their increasing use in a wide range of industrial applications. This growth is supported by Johnson Matthey's global market development activities and our commitment to investment in research and development of new applications for the pgms.

Our platinum fabrication businesses have grown steadily over the last few years with investment in new products and processes. One of the major growth areas has been the manufacture of specialized components for medical devices such as catheters and stents, which are extensively used in non-invasive surgery. In February 2001 we acquired Shape Memory Applications, Inc. (SMA) in the United States for £3.6 million. SMA is a manufacturer of components for medical applications made of Nitinol, a nickel titanium alloy that has shape memory and super elastic properties. This acquisition will further strengthen our share of this growing market.

Our strategy for the development of Colours & Coatings Division is producing good results. The majority of the division's activities are now focused on the growing markets for decorative products for tile and glass. As a consequence the division is now achieving good sales growth as well as improving margins, which rose significantly in 2000/01.

Good progress has been made with our investment programme for the Tile business in Spain and Brazil and at our glass enamels facility in the Netherlands. All three will commence production during 2001. The benefits of the restructuring programme for our Tableware business are coming through. We further strengthened the business with the acquisition of Precision Studios from Waterford Wedgwood plc for £1.8 million in July 2000. The business, which manufactures ceramic decals, has been merged with the group's existing UK decals business onto one modern site.

At 31st March 2001 the group had net cash of £139.9 million and shareholders' funds of £851.0 million. This strong financial position means the group can comfortably fund its major capital expenditure programme together with the investment required for the emerging fuel cell business. In addition we will pursue a number of niche acquisition opportunities, particularly in Catalysts & Chemicals, which will be financed out of cash and additional borrowings. These investments should help to underpin the future growth of the group without changing the current focus. That level of future investment still leaves Johnson Matthey with some spare balance sheet capacity. Consequently, the company intends to use its surplus cash to buy back some of its shares, which would be earnings enhancing at the current price and would improve the efficient use of capital.

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