Matthey in scrip offer: Investors given chance to take shares worth more than dividend

JOHNSON MATTHEY launched an enhanced scrip dividend - offering investors the chance to take shares worth 50 per cent more than their cash dividend - alongside better than expected results of pounds 73.8m before tax in the year to 31 March.

The results at the precious metals company were helped by the introduction of exhaust controls on all new cars in the EC during the year. Johnson Matthey supplies materials for catalytic converters. The new rules offset the effect of falling car sales.

The enhanced scrip is worth 10.7p, whereas the final dividend is 7.1p a share. If investors opt for shares rather than cash, Johnson Matthey would save tax and boost this year's earnings by pounds 3.8m.

The scheme, first used in March by BAT Industries, advised by broker BZW, is popular among companies with high overseas earnings that suffer from unrelieved advance corporation tax, as it allows them to save tax.

Some large investors have expressed fears that their shareholdings would be diluted, and some members of the Association of British Insurers were reluctant to approve schemes. However, Gordon Thorburn, administration director at Johnson Matthey, said yesterday that shareholders he had contacted had not objected.

The share price rose 8p to 458p, 2p above the price at which part of Charter Consolidated's 38 per cent stake was placed with large investors in February. Charter sold the rest of its holding to Minorco and Johannesburg Consolidated Investment Company.

David Davies, the chairman, said he hopes there will be further co-operation with JCI following an agreement to join forces on fuel cells.

Profits from catalytic systems rose 20 per cent to pounds 27.1m despite a sluggish market for cars on both sides of the Atlantic.

Materials technology - including UK gold and silver refining - contributed pounds 20.8m to operating profits, up by 18 per cent with all the growth in the second half.

The precious metals business, including platinum marketing, suffered from lower prices - the average for rhodium fell from pounds 1,773 to pounds 1,253 an ounce in the year. Operating profits were pounds 20.5m.

A three-year rationalisation programme has reduced costs by pounds 25m a year. Over the period, the workforce has shrunk from 7,358 to 6,142 and profits per head have increased from pounds 5,800 to pounds 11,800.

Last year, costs rose by 4 per cent while sales rose by 6 per cent.

The company spent pounds 25m on research and development last year - one-third of its pre-tax profits. Capital spending was pounds 54.9m, against depreciation of pounds 31.2m.

The pre-tax results, which were stated under FRS3, the latest accounting standard, included a pounds 3.7m profit on the sale of its interest in a Japanese company, Tanaka Matthey.