Review of Results
In the year to 31st March 2001 turnover rose by 53% to £5.9 billion, boosted by significantly higher prices for palladium and platinum. Sales excluding the value of precious metals for the continuing businesses rose by 16% to £977 million.

Operating profit excluding exceptionals rose by 20% to £175.0 million. All three divisions achieved strong organic growth. Divisional results are discussed in more detail in the Chief Executive's Statement on pages 4 to 7, and in the individual divisional reports on pages 12 to 19.

Profit before tax and exceptional items rose by 25% to £180.3 million. Earnings per share, excluding exceptionals, rose by 22% to 58.1 pence. The board is recommending to shareholders a final dividend of 16.3 pence, making a total dividend for the year of 23.3 pence, an increase of 15%. The dividend would be covered 2.5 times by earnings.

Return on Sales (ROS)

	Total External Sales		ROS
	2000 £ million	2001 £ million	2000 %	2001 %
Catalysts & Chemicals	856	1,503	9.9	6.6
Precious Metals	2,672	4,146	1.7	1.4
Colours & Coatings	241	255	11.6	12.6
Continuing Businesses	3,769	5,904	3.9	3.0
	Sales Excluding Precious Metals		ROS
	2000 £ million	2001 £ million	2000 %	2001 %
Catalysts & Chemicals	494	565	17.2	17.5
Precious Metals	114	162	40.0	35.5
Colours & Coatings	234	250	11.9	12.9
Continuing Businesses	841	977	17.4	17.9

Sales and Margins
Johnson Matthey's turnover is heavily impacted by the high value of precious metals sold by the group particularly in the Precious Metals Division. The total value of sales each year varies according to the mix of metals sold and level of trading activity. The value of the precious metals included in sales is generally separately invoiced and payment made within a few days. Consequently, although return on sales (operating profit / total external sales) for the precious metals businesses is low, profit growth has been relatively stable and return on investment is high.

To provide a more useful measure of return on sales, the adjacent table shows sales by division excluding the value of precious metals. Total sales for the continuing businesses excluding precious metals were £977 million which was 16% up on last year and return on sales averaged 17.9% compared with 17.4% in 1999/00. The group's target for each of its divisions is to achieve a return on sales excluding precious metals in excess of 10%. All three divisions were comfortably ahead of that target in 2000/01.

The percentage return for Catalysts & Chemicals Division improved slightly compared with last year, despite additional research and development expenditure on fuel cells. Return on sales for Pharmaceutical Materials was very similar to last year. The returns for both Catalytic Systems and Chemicals increased.

Sales grew strongly in Precious Metals Division. Return on sales excluding precious metals fell a little but still remains high. The return for Colours & Coatings Division rose by 1% to just under 13%. The improvement reflects the benefit of the rationalisation programme for the Tableware business.

Return on Investment
We set a target of 20% for the pre-tax return on assets (ROA) for all our businesses. This target is based on operating profit divided by average net operating assets (including goodwill). Precious Metals Division was substantially ahead of the group target. Catalysts & Chemicals Division was also above 20%. Colours & Coatings Division improved its return but was still a little below target.

For the group as a whole ROA was 25.0% (see pages 62 and 63) compared with 18.4% in 1999/00 (which included EMD for part of the year). On a post-tax basis this equates to a return of 17.8% which is well above the group's current average long run cost of capital of 10%. Economic value added, which measures earnings after charging the cost of capital, was £53 million including exceptionals compared with £32 million last year.

Exceptional Items
Overall, exceptional items and goodwill amortisation gave rise to a small net profit of £0.2 million on a pre-tax basis.

An additional payment of £3.4 million was received from the sale of EMD. This profit has been partly offset by losses on disposal of other businesses and a £0.6 million exceptional charge relating to the integration costs of Precision Studios, a business acquired during the year. Goodwill amortisation amounted to £0.3 million for the year.

Interest and Exchange Rates
The £7.7 million improvement in interest compared with last year reflects the interest earned on the sale proceeds of EMD for a full twelve months compared with seven and a half months of last year.

The overall net interest credit of £5.3 million includes the interest earned on the group's net cash and deposits less leasing costs for gold and silver, which were £1.4 million for the year compared with £2.2 million last year when average lease rates were higher.

Exchange rates were generally favourable for Johnson Matthey's results. Just under half of the group's operating profit is earned in North America. The average rate for the US dollar for the year strengthened to $1.48/£ compared with $1.61/£ for last year, which increased profits by £7.6 million. However, the Euro weakened from 1.56/£ to 1.63/£ which, together with weakness in some other currencies, reduced the translation benefit to £6.4 million.

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