HIGHLIGHTS
- Profits
before tax up 6% to £108.3m
- Earnings
per share up 5% to 36.0 pence.
- Dividend
for year up 7% to 15.5 pence, representing twelfth
successive annual increase.
- Precious
Metals Division up 4%, Catalytic Systems Division
up 30%, Cookson Matthey Ceramics down 36% and Electronic
Materials Division up 21%.
- Precious
Metals Division profits up despite weak metal prices.
- Catalytic
Systems Division performs well in strong US and
European markets. < /LI>
- Cookson
Matthey Ceramics pulled down by zircon. Other businesses
perform satisfactorily.
- Plastic
Laminate Package project gearing up - now in volume
production.
- Sales
of other Electronic Materials products set to increase
in current year.
- Capital
expenditure of £82.1m, equal to 2.0 times
depreciation.
- Investment
in R&D of £32.9m.
- Free
cash flow positive at £2.9m despite high capital
expenditure.
- Gearing
at 31%, interest cover up to 15 times.
Commenting
on the results, David Davies, Chairman of Johnson
Matthey, said:
"Last
year, we achieved further growth in profits despite
unfavourable trading conditions in several of our
principal markets. Looking forward, Electronic Materials
Division is well positioned for a good year of growth
and Catalytic Systems Division will continue to build
on its technological leadership and expand its share
of world markets. Overall, the strategic development
of Johnson Matthey as a leading global company in
advanced materials technology remains on track".
Review
of the year ended 31st March 1997 by the Chairman,
David Davies
Introduction
I
am pleased to report that Johnson Matthey has achieved
further growth in profits during the year to 31st
March 1997 despite unfavourable trading conditions
in several of our principal markets. We have continued
to invest in broadening our range of advanced material
high technology products - the fruits of which will
be seen increasingly in the years to come. I am particularly
encouraged by the sustained recovery of Catalytic
Systems and the progress made in Electronic Materials.
The only major area of disappointment has been Cookson
Matthey Ceramics where remedial action is in hand.
Review
of results
Johnson
Matthey earned profits before tax of £108.3m
in the year to 31st March 1997, an increase of 6%
over the previous year. Operating profit was up 5%
at £116.3m despite a 4% drop in turnover. The
interest charge for the year fell by 9% to £8.0m.
There were no exceptional items. Earnings per share
rose by 5% to 36.0p.
Dividend
The
board is proposing a final dividend of 10.8p per
share to give a total dividend for the year of 15.5p,
an increase of 7% over last year. The recommended
dividend would be covered 2.3 times by earnings.
Operations
Precious
Metals Division increased its operating profit
by 4% to £44.0m. Sales were 11% down at £1,718m
as a result of lower precious metal prices. Chemicals'
profits were well ahead with good growth in process
catalysts, precious metal salts and catalogue sales.
Some low margin refining activities were eliminated.
Both the Platinum and Gold sectors were down on
last year reflecting weak metal prices. On 31st
December 1996 Johnson Matthey's 49% associated
company, Matthey Rustenburg Refiners, ceased trading
having come to the end of its contract period.
The business contributed £1.5m in 1997 and
is shown in the accounts as a discontinued business.
Catalytic
Systems Division made an excellent recovery
in 1997 with profits up 30% to £34.1m. Sales
were up 7% at £362m. Unit sales of autocatalysts
increased by 7% in Europe with strong growth of
sales of catalysts for light duty diesel cars.
Unit sales in the North American region grew by
9% including an increased contribution from the
new Mexican facility. The division benefited from
actions taken to reduce costs in 1996 in both Europe
and North America. Pharmaceutical Materials which
is included in Catalytic Systems Division had another
excellent year. Sales of non-platinum pharmaceuticals
continue to grow rapidly. Following the launch
of AnorMED we renamed our biomedical business Pharmaceutical
Materials to reflect its primary activity as a
manufacturer of pharmaceuticals.
Electronic
Materials Division increased its sales by 33%
to £344m and profits by 21% to £30.9m
despite the 10% fall in the semiconductor market.
The division benefited from the inclusion of ACI
for a full year having acquired the business in
September 1995. ACI's multilayer printed circuit
board business performed strongly in 1997 with
sales and profits well ahead of prior year. Sales
of high purity titanium were affected by depressed
demand from DRAM manufacturers and consequently
sales and profits for the Wafer Fabrication Materials
sector were down on last year. Assembly Products'
sales and profits were slightly up despite the
adverse market conditions.
Our
major investment at Chippewa Falls, Wisconsin, to
manufacture semiconductor packages for microprocessors
made good progress. We received final product certification
from our major customer in December and commenced
volume production in January. For the year as a whole
the business operated at a small profit having made
a loss in the first half.
Cookson
Matthey Ceramics (CMC), Johnson Matthey's joint
venture with Cookson Group, had a very disappointing
year. Sales were unchanged at £157m but profits
fell by 36% to £15.3m. Nearly all of the fall
related to zircon where material costs have remained
high but sales prices have fallen as a result of
weak demand in the European tile market. CMC's
operating profit included one off costs of £1.4m
relating to rationalisation of Print and management
restructuring.
The
group's interest charge for the year fell by 9% to £8.0m.
The reduction was attributable to more favourable
precious metal interest rates compared with the high
average rates for the previous financial year. Johnson
Matthey's average tax rate fell from 29.9% in 1996
to 27.0% in 1997. The group benefited from the introduction
of additional licensing agreements to overseas subsidiaries
which helped to increase UK source income and reduce
the average tax rate.
Over
50% of Johnson Matthey's profits were earned in North
America, predominantly in the US. The average exchange
rate used to translate the group's US dollar profits
for 1997 was 1.59 compared with 1.56 last year which
reduced group profits by about £1m. Sterling's
strength against other European currencies also had
an adverse impact, particularly on CMC whose profits
were reduced by £0.7m as a result of unfavourable
exchange translation compared with prior year.
Investment
The
group invested £82.1m on capital expenditure
in 1997 (excluding CMC) which was 2.0 times depreciation.
The largest project was equipping the major new facility
at Chippewa Falls to manufacture semiconductor packages
which cost £33.8m in 1997.
The
group's share of CMC's expenditure in 1997 amounted
to £14.8m. In April 1996 CMC acquired the Brazilian
interests of Zirfid S.A. which supplies colours,
glazes and other materials to the tile industry.
Johnson Matthey's share of the purchase price was £5.2m.
In
November 1996 Johnson Matthey formed a joint venture
with Magneti Marelli to supply emission control catalysts
to the growing South American market. The group owns
70% of the joint company which is building a new
factory near Buenos Aires, Argentina. In 1996/97
Johnson Matthey invested £2.3m in this new venture.
The
group sold just over one third of its investment
in Ballard Power Systems Inc. in 1997 for £2.9m.
This gave rise to a profit of £1.7m in Precious
Metals Division. The proceeds will be used in funding
the division's continuing major research and development
programme into fuel cells.
As
well as expenditure on new facilities Johnson Matthey
continues to invest heavily into developing new products
and technologies for the future. In 1997 the group
spent £32.9m gross on research and development.
This includes the group's share of CMC but excludes
AnorMED, the group's 40% associated company which
was formed in June 1996 with outside investors to
pursue biomedical research. Excluding biomedical
research, gross research and development expenditure
was slightly higher than last year with increased
emphasis on research into electronic materials.
Cash
Flow and Balance Sheet
Net
cash flow from operating activities rose by 45% to £124.4m
as a result of higher profits and tight control of
stocks which benefited from lower precious metal
prices. Despite the very high level of capital expenditure
in 1997 the group's free cash flow (net cash flow
from operating activities after interest, tax, dividends
and capital expenditure) was positive at £2.9m.
After including the aggregate payment of £25.4m
for the business acquired from Cray Research Inc.
last year and £3.2m of proceeds from the issue
of new shares there was a net cash outflow of £19.1m.
Favourable exchange translation on foreign currency
loans limited the increase in net borrowings to £9.5m.
The
group's balance sheet remains strong with gearing
of 31%, a rise of 1% over last year. Interest cover
improved to 15 times.
Board
and Senior Management
Following
the appointment of Chris Clark as Chief Operating
Officer of the JM group last summer, a new Chief
Executive was chosen for CMC in September. At the
same time Chris assumed the Chairmanship of CMC.
During
the year Mike Cleare took responsibility for EMD.
It is pleasing that Mike can now build on the groundwork
he laid for the growth of this division in the early
nineties. It is also significant that a main Board
director resident in the USA now heads up the division
with its 4,500 employees based in North America.
Following
Mike Cleare's success with CSD, Neil Carson has been
appointed its division director and will become a
member of the Chairman's Committee. Neil joined JM
in 1980, since which time he has held a number of
senior positions in PMD as well as CSD and has been
based in both the USA and the UK.
David
Morgan, who has been responsible for Corporate Planning
and Development for the JM group for the last three
years, will also join the Chairman's Committee.
Finally,
I would like to pay tribute to Peter Burnell who
resigned as a non-executive director following the
sale of Minorco's 10% shareholding in Johnson Matthey
last year. Peter was particularly familiar with JM's
precious metals business and made an important contribution
to our progress.
Outlook
Precious
Metals will remain a core cash generative business
in Platinum, Gold and Chemicals. We shall continue
to focus on expanding the sectors with long term
growth opportunities such as platinum coating, process
catalysts and fuel cells.
The
outlook for CSD is for further improvement. The autocatalyst
business has recovered well and is growing both geographically
and in new high technology catalysts. In 1997/98
we shall continue to build on our technological leadership
and expand our share of world markets. Pharmaceutical
Materials has performed well and we believe that
it has the potential to become a division in its
own right over time.
In
our CMC joint venture we shall concentrate on improving
returns. The Minerals sector is exposed to volatility
in its commodity products and future trends are still
materially influenced by zircon. However, the last
two years have seen major investment in manufacturing
facilities and new product introductions and these
should deliver more encouraging performance in the
future. The Decorative, Tile and Pigment activities
are sound and steadily growing businesses.
Electronic
Materials is well positioned for another good year
of growth as our major investment in the business
starts to bear fruit. The Plastic Laminate Packaging
facility at Chippewa Falls will come fully on stream
and we expect demand to improve in all areas of EMD's
business.
For
the group as a whole, the coming year will be one
of consolidation in some of our businesses but with
growth coming from EMD and CSD. Capital expenditure
will be considerably below the average of 2 times
depreciation which we have invested over the last
4 years. The strategic development of JM as a leading
global company in advanced materials technology remains
on track and we expect further milestones to be achieved
during the coming year.
David
Davies, Chairman
12th
June 1997
Consolidated
Profit and Loss Account for the year ended 31st March
1997
1997 1996
NOTE £ million £ million
Turnover 1
Total turnover 2,580.1 2,685.6
Less share of Cookson Matthey Ceramics plc (156.9) (156.7)
-------- --------
Group turnover 2,423.2 2,528.9
-------- --------
Operating profit 1
Continuing operations 114.8 108.6
Discontinued operations 2 1.5 2.4
-------- --------
116.3 111.0
Net interest (8.0) (8.8)
-------- --------
Profit on ordinary activities before taxation 108.3 102.2
Taxation 3 (29.2) (30.5)
-------- --------
Profit after taxation 79.1 71.7
Equity minority interests (1.2) (1.7)
-------- --------
Profit attributable to shareholders 77.9 70.0
Dividends 4 (33.6) (31.4)
-------- --------
Retained profit for the year 44.3 38.6
======== ========
pence pence
Earnings per ordinary share 5 36.0 34.4
Dividend per ordinary share 4 15.5 14.5
Consolidated Balance
Sheet as at 31st March 1997
1997 1996
NOTE £ million £ million
Fixed assets
Tangible fixed assets 354.4 338.8
Investments 84.2 100.4
-------- --------
438.6 439.2
-------- --------
Current assets
Stocks 185.3 197.2
Debtors: due within one year 179.2 170.1
Debtors: due after one year 73.1 60.8
Short term investments 0.3 1.3
Cash at bank and in hand 6 62.2 35.3
-------- --------
500.1 464.7
Creditors: Amounts falling due within one year
Borrowings 6 (124.2) (118.5)
Precious metal leases (22.8) (26.7)
Other creditors (193.9) (210.8)
-------- --------
Net current assets 159.2 108.7
-------- --------
Total assets less current liabilities 597.8 547.9
Creditors: Amounts falling due after more than one year
Borrowings 6 (81.7) (51.0)
Other creditors (0.8) (0.9)
Provisions for liabilities and charges (50.0) (45.8)
-------- --------
Net assets 465.3 450.2
======== ========
Capital and reserves
Called up share capital 217.2 216.4
Share premium account 99.6 97.2
Revaluation reserve 17.3 17.7
Associated undertakings' reserves (11.5) 4.0
Profit and loss account 142.5 115.6
-------- --------
Shareholders' funds 465.1 450.9
Equity minority interests 0.2 (0.7)
-------- --------
465.3 450.2
======== ========
Consolidated Cash Flow Statement
for the year ended 31st March 1997
1997 1996
£ million £ million
Reconciliation of operating profit to net cash inflow
from operating activities
Operating profit 116.3 111.0
Depreciation charges 40.6 33.1
Profit on sale of fixed assets (1.7) -
Profit of associated undertakings less dividends
received (16.9) (20.8)
Decrease / (increase) in owned stocks 0.3 (20.2)
Increase in debtors (32.3) (9.1)
Increase / (decrease) in creditors and provisions 18.1 (8.0)
-------- --------
Net cash inflow from operating activities 124.4 86.0
======== ========
Cash Flow Statement
Net cash inflow from operating activities 124.4 86.0
Returns on investments and servicing of finance 6.2 (2.0)
Taxation (18.2) (14.8)
Capital expenditure (80.2) (50.5)
Financial investments 2.6 (2.8)
Acquisitions and disposals
Investment in subsidiary undertakings and
purchase of businesses (25.9) (111.1)
Net investment in and financing loans to
associated undertakings 0.7 (27.5)
-------- --------
Net cash outflow for acquisitions and disposals (25.2) (138.6)
Equity dividends paid (31.9) (27.3)
-------- --------
Net cash outflow before use of liquid resources
and financing (22.3) (150.0)
Management of liquid resources (0.8) (2.0)
Financing
Issue and purchase of ordinary share capital 3.2 117.4
Increase in borrowings 45.7 44.7
-------- --------
Net cash inflow from financing 48.9 162.1
-------- --------
Increase in cash in the period 25.8 10.1
======== ========
Reconciliation of net cash flow to movement in net debt
Increase in cash in the period 25.8 10.1
Cash inflow from increase in borrowings (45.7) (44.7)
Cash outflow from term deposits included
in liquid resources 0.8 2.0
-------- --------
Change in net debt resulting from cash flows (19.1) (32.6)
Translation difference 9.6 0.8
-------- --------
Movement in net debt in year (9.5) (31.8)
Net debt at beginning of year (134.2) (102.4)
-------- --------
Net debt at end of year (143.7) (134.2)
======== ========
Total Recognised Gains and Losses for the year ended
31st March 1997
1997 1996
£ million £ million
Profit attributable to shareholders 77.9 70.0
Currency translation differences on foreign currency
net investments (27.3) 7.0
-------- --------
Total recognised gains and losses relating
to the year 50.6 77.0
======== ========
Note
of Historical Cost Profits and Losses for the year
ended 31st March 1997
1997 1996
£ million £ million
Reported profit on ordinary activities
before taxation 108.3 102.2
Difference between historical cost depreciation
and actual (0.2) (0.2)
-------- --------
Historical cost profit on ordinary activities
before taxation 108.1 102.0
======== ========
Historical cost retained profit 44.1 38.4
======== ========
Movement
in Shareholders' Funds for the year ended 31st March
1997
1997 1996
£ million £ million
Profit attributable to shareholders 77.9 70.0
Dividends (33.6) (31.4)
-------- --------
Retained profit for the year 44.3 38.6
Currency translation differences on foreign
currency net investments (27.3) 7.0
New share capital subscribed 3.2 117.9
Goodwill written off in respect of acquisitions
and joint ventures (6.0) (92.8)
-------- --------
Net addition to shareholders' funds 14.2 70.7
Opening shareholders' funds 450.9 380.2
-------- --------
Closing shareholders' funds 465.1 450.9
======== ========
Notes
to the Preliminary Financial Statements for the year
ended 31st March 1997
1 Segmental information
Turnover Operating profit
1997 1996 1997 1996
Activity analysis £ million £ million £ million £ million
Precious Metals 1,717.9 1,933.3 44.0 42.2
Catalytic Systems 361.6 337.8 34.1 26.2
Electronic Materials 343.7 257.8 30.9 25.5
Cookson Matthey Ceramics plc 156.9 156.7 15.3 23.8
Corporate - - (9.5) (9.1)
-------- -------- -------- --------
2,580.1 2,685.6 114.8 108.6
Discontinued operations - - 1.5 2.4
-------- -------- -------- --------
2,580.1 2,685.6 116.3 111.0
Less share of Cookson Matthey
Ceramics plc turnover (156.9) (156.7)
-------- --------
Total group turnover 2,423.2 2,528.9
======== ========
Net interest (8.0) (8.8)
-------- --------
Profit on ordinary activities before taxation 108.3 102.2
======== ========
Net operating assets
1997 1996
Activity analysis (continued) £ million £ million
Precious Metals 186.9 194.6
Catalytic Systems 133.3 160.0
Electronic Materials 220.9 154.1
Cookson Matthey Ceramics plc 76.0 90.9
Corporate (8.1) (17.5)
-------- --------
609.0 582.1
Discontinued operations - 2.3
-------- --------
609.0 584.4
Net borrowings (143.7) (134.2)
-------- --------
Net assets 465.3 450.2
======== ========
Turnover Operating profit
1997 1996 1997 1996
Geographical analysis £ million £ million £ million £ million
by origin
Europe 1,565.8 1,930.1 41.8 52.5
North America 842.3 844.9 61.4 44.4
Rest of the World 573.2 355.7 11.6 11.7
-------- -------- -------- --------
2,981.3 3,130.7 114.8 108.6
Discontinued operations - - 1.5 2.4
-------- -------- -------- --------
2,981.3 3,130.7 116.3 111.0
Less inter-segment sales (401.2) (445.1)
-------- --------
2,580.1 2,685.6
Less share of Cookson Matthey
Ceramics plc turnover (156.9) (156.7)
-------- --------
Total group turnover 2,423.2 2,528.9
======== ========
Net interest (8.0) (8.8)
-------- --------
Profit on ordinary activities before taxation 108.3 102.2
======== ========
Net operating assets
1997 1996
Geographical analysis by origin £ million £ million
Europe 307.5 334.3
North America 228.7 156.1
Rest of the World 72.8 91.7
-------- --------
609.0 582.1
Discontinued operations - 2.3
-------- --------
609.0 584.4
Net borrowings (143.7) (134.2)
-------- --------
Net assets 465.3 450.2
======== ========
2 Discontinued operations
The operating profit of discontinued operations relates to Matthey Rustenburg Refiners (Pty)
Limited, an associated undertaking. The group's 49% interest was disposed of on 31st
December 1996.
3 Taxation
1997 1996
£ million £ million
United Kingdom 12.2 11.1
Overseas 12.7 14.0
Associated undertakings 4.3 5.4
-------- --------
29.2 30.5
======== ========
The group's average tax rate was 27.0% (1996 29.9%).
4 Dividends
A final dividend of 10.8 pence (1996 10.1 pence) per ordinary share is proposed for payment
on 4th August 1997 to shareholders on the register at 27th June 1997.
Together with the interim dividend of 4.7 pence (1996 4.4 pence) this would make a total
dividend of 15.5 pence (1996 14.5 pence) giving a total payment of £33.6 million
(1996 £31.4 million).
5 Earnings per ordinary share
Profit for the year attributable to shareholders, less preference dividends, is £77.9 million
(1996 £70.0 million).This is divided by the weighted average number of shares in issue
calculated as 216,507,894 (1996 203,153,302) to give basic earnings per share of 36.0 pence
(1996 34.4 pence).
6 Net borrowings
1997 1996
£ million £ million
Bank and other loans falling due
after more than one year 81.7 51.0
Bank and other loans falling
due within one year 124.2 118.5
-------- --------
Total borrowings 205.9 169.5
Less cash and deposits 62.2 35.3
-------- --------
Net borrowings 143.7 134.2
======== ========
Financial
Calendar
1997
27th June Final ordinary dividend record date
16th July 106th Annual General Meeting
4th August Payment of final dividend subject to declaration at the AGM
1st October Payment of dividend on 3.5% cumulative preference shares
27th November Announcement of results for six months ending 30th September 1997
1998
2nd February Payment of interim dividend on ordinary shares
1st April Payment of dividend on 3.5% cumulative preference shares
June Announcement of results for year ending 31st March 1998
The financial information contained in this release does not constitute the company's
statutory accounts for the years ended 31st March 1997 or 1996 but is derived from those
accounts. Statutory accounts for 1996 have been delivered to the Registrar of Companies and
those for 1997 will be delivered following the company's Annual General Meeting.
The auditors have reported on those accounts; their reports were unqualified and did not
contain a statement under either Section 237(2) or 237(3) of the Companies Act 1985.
Johnson Matthey Public Limited Company
2-4 Cockspur Street, Trafalgar Square, London SW1Y 5BQ
Telephone : 0171 269 8400
Registered Office : 78 Hatton Garden, London EC1N 8JP
Registered in England No. 33774
Registrars
Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA
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