The group uses a range of key performance indicators (KPIs) to monitor performance over time in line with the financial objectives and strategy summarised in the Strategy and Objectives section. The principal KPIs, together with the group’s performance against them in 2008/09, are described below:

Financial

Underlying earnings per share growth and return on invested capital are two of the principal financial KPIs we use to measure the group’s performance. In calculating these measures we exclude the following items which can distort the trend in measuring results:

• Amortisation of intangible assets arising on acquisition of businesses (acquired intangibles).
• Major restructuring or impairment charges.
• Profits and losses on disposal of businesses.
• Major tax items arising from changes in legislation.

In 2008/09 three items were excluded in arriving at underlying earnings per share: a £9.1 million charge for amortisation of acquired intangibles (mainly arising as a result of the acquisition of Argillon Group in February 2008); a £9.4 million restructuring charge for the cost of closing our fine chemicals facility in Ireland; and a £1.2 million profit in discontinued businesses arising mainly as a result of the disposal of our Insulators and Alumina businesses (see note 41). Underlying earnings per share for the group in 2008/09 were 89.6 pence, 0.1 pence up on 2007/08. Total earnings per share were 82.6 pence, 7% below 2007/08. Over the five years from 2004/05, underlying earnings per share have grown at a compound annual rate of 7.5% p.a. Click here to view the group’s five year financial record.

The board is recommending an unchanged final dividend for 2008/09 of 26.0 pence. The interim dividend was increased by 5% to 11.1 pence. The total dividend for the year is 37.1 pence which is an increase of 1% over 2007/08, slightly above the rate of growth of underlying earnings per share. Over the five years from 2004/05, dividends have grown at a compound annual rate of 7.6% p.a.

We define return on invested capital (ROIC) for the group as underlying operating profit (before amortisation of acquired intangibles and restructuring charges) divided by average capital employed (equity plus net debt). ROIC for individual divisions is calculated using average segment assets minus average segment liabilities as the denominator.

Over the five years to 2007/08 we made steady progress in increasing the group’s ROIC towards our long term target of 20%. In 2007/08 the return reached 18.5%. The global downturn in the second half of 2008/09, which led to sharply reduced sales of automotive catalysts, caused our ROIC for the year to fall by 1.4% to 17.1%. The group’s ROIC for 2008/09 was still well ahead of our long run cost of capital, which we estimate to be 11.5% on a pre-tax basis. Divisional returns are discussed in the Financial Review.

In measuring sales growth and return on sales we focus on sales excluding the value of precious metals. Total revenue can be distorted by trading activity as well as fluctuations in precious metal prices and does not provide a good guide to underlying growth or profitability. In 2008/09 both revenue (£7.8 billion) and sales excluding precious metals (£1.8 billion) grew at similar rates (5% and 3% respectively). Over five years sales excluding precious metals have grown by 11% p.a.

Johnson Matthey is a global business with operations in many countries around the world which report in different currencies. We report sales and operating profit translated both at actual exchange rates and at constant rates (translating last year’s results at this year’s rates) to measure underlying growth. We also monitor several key cash flow and capital ratios both for the group and individual divisions. More details of financial KPIs are given in the Financial Review and in the Operations section.

back to top

Market Shares

One measure we use to monitor the commercial performance of our businesses is market share. We aim to achieve a leading position (usually number one or two) in the global markets in which we operate. In Emission Control Technologies we estimate we have a 31% share of the available market (excluding in house manufacture by car companies) for light duty catalysts. Our two major competitors have similar shares with the remaining 5% of the market supplied by smaller competitors (mainly in China). In the new market for heavy duty diesel catalysts to original equipment manufacturers Johnson Matthey is the market leader with a share in excess of 45%.

The market for sales of platinum group metals (pgms) to end customers is more fragmented and precise shares are more difficult to estimate. Johnson Matthey is the global market leader. We are also the leader in fabricated pgm products for the industrial market with a worldwide share of about a third.

In Process Technologies and Fine Chemicals & Catalysts we sell a wide range of products into niche markets. Johnson Matthey is the market leader in syngas catalysts used in the manufacture of ammonia, methanol and hydrogen from hydrocarbon feedstocks. We are also the leader in the available market for catalysts used in pharmaceutical production.

back to top

Sustainability

Johnson Matthey is committed to running its business in a sustainable way. The group’s Sustainability 2017 Vision, launched in December 2007, outlines the targets that we have set and states that by 2017 we aim to:

• At least double earnings per share.
• Achieve carbon neutrality.
• Achieve zero waste to landfill.
• Halve the key resources we use per unit of output.

We have identified KPIs to measure the group’s performance, taking data from our 2006/07 reporting cycle as the baseline year. Since 2006/07 our underlying earnings per share have increased by 9% from 82.2 pence to 89.6 pence. Growth has been held back by the impact of the global recession but the medium term outlook remains encouraging. Progress towards achieving carbon neutrality is measured according to the group’s total global warming potential which has fallen from 386,074 tonnes CO2 equivalent in calendar year 2006 to 370,787 tonnes in 2008/09. In working towards our target of zero waste to landfill, we have reduced the amount of waste sent to landfill by 67% from 16,555 tonnes in calendar year 2006 to 5,535 tonnes in 2008/09. To meet our target of halving the key resources we use per unit of output we have identified the three resources which are most significant to the majority of our facilities worldwide; electricity, natural gas and water. Since 2006, electricity consumption has reduced by 8%, natural gas consumption has increased by 5% and water use is up 2%. Further details on these targets, our measures of performance and the plans we are making to achieve them are summarised in the Sustainability section and set out in full in our Sustainability Report at www.matthey.com.

We measure sustainability performance according to five elements: financial; governance; social (including employees and community investment); health and safety; and environment. Within these areas, in addition to our Sustainability 2017 metrics, we set targets and measure performance against a range of indicators. These include employee related data, such as voluntary staff turnover, accident statistics (the group has a target of zero greater than three day accidents) and emissions. A number of these KPIs and our performance against them are summarised in the Sustainability section. Full details of all Johnson Matthey’s sustainability related KPIs and our performance are presented in the Sustainability Report.

back to top