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Bottom Line: Conversion for JM

THANK goodness for diversity. With the European car industry stalling, Johnson Matthey, one of the world's top three makers of catalytic converters, was rescued in the first half by the booming demand for American semi-conductors.

New products and increased competitiveness against the Japanese chip-makers, who are struggling with the strong yen, gave the materials technology division a useful boost. That more than made up for flat results from catalytic systems and precious metals.

The outlook for the vehicle industry remains bleak, with growth in the US and Britain far outweighed by a 20 per cent decline in car sales in France and Germany.

Stripping out the benefit to the tax charge of last year's enhanced scrip dividend, the rise in earnings per share was closer to the 6 per cent profits advance than the reported 21 per cent increase. That explained the parsimonious 6 per cent rise in the dividend.

The market's pause for thought yesterday was not surprising given the near tripling in Johnson Matthey's share price since the end of 1990. At 496p, down 3p on the day, the shares will find little support from a 2.6 per cent yield.

In the long run, the company's technological lead in growing markets makes it a core holding. But earnings will need to grow at a faster lick before a prospective p/e of 18 this year looks very good value.