| Strategy and Objectives
Johnson Matthey’s strategic intent is to achieve consistent growth in earnings by concentrating on the development of high added value products and services in areas where our expertise provides a competitive edge, particularly in catalysis, precious metals, fine chemicals and process technology.
The group’s financial objectives are:
| • | To achieve consistent and above average growth in earnings per share. Over the ten years from 1996/97 to 2006/07 Johnson Matthey has increased its earnings per share before one-off items and goodwill amortisation at a compound annual growth rate of 9% p.a. | | | | | • | To grow dividends in line with earnings while maintaining dividend cover at about two and a half times to ensure sufficient funds are retained to support organic growth. Over the last ten years Johnson Matthey has increased its dividend at a compound annual growth rate of 8% p.a. Dividend cover for 2006/07 was 2.4 times. | | | | | • | To deliver a return on investment above the group’s cost of capital. We estimate Johnson Matthey’s post tax cost of capital is currently about 8%. The group’s post tax return on assets for 2006/07 was 4.4% above that at 12.4%. | | | | | • | We set a pre-tax target of 20% for return on assets (ROA) for all of our divisions with a minimum threshold of being ahead of our cost of capital (11.2% on a pre-tax basis). Precious Metal Products achieved a return in excess of 20% in 2006/07. Catalysts’ and Pharmaceutical Materials’ ROAs were between the cost of capital and the 20% target. In 2006/07 the group’s overall pre-tax return was 17.4% (see Financial Review section). | | | | The board’s strategies to achieve these financial objectives are: | | | | • | Focus the business on the group’s core skills in catalysis, precious metals, fine chemicals and process technology. | | | | | • | Position the group in growth markets where our core skills are applicable. Catalysis is a key technology in many developing markets for the 21st century, particularly those concerned with protecting the environment such as in emission control, cleaner fuel, more efficient use of hydrocarbons and the hydrogen economy. Our new Environmental Technologies Division, which combines our skills in catalysts and process technology, is well positioned to serve these emerging markets. Catalysis is also important in the manufacture of fine chemicals where Johnson Matthey has a number of strong niche market positions. Johnson Matthey’s expertise and international strength in precious metals, particularly platinum group metals, was the starting point for many of our businesses. The market for platinum has grown steadily for many decades and demand is expected to grow significantly over the next ten years. | | | | | • | Differentiate ourselves by using our world class technology. We will continue to invest significantly in research and development to develop new products and manufacturing processes. Technology is the key driver for most of our businesses and Johnson Matthey has a strong science base with technical centres located in all our major markets. | | | | | • | Maintain strong relationships with our major customers, suppliers, government bodies and other stakeholders by investing resources on joint projects to ensure the group is well positioned for future market development. | | | | | • | Continue to invest in Johnson Matthey’s employees to ensure they are well trained, motivated and encouraged to meet the challenges of the future. |
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