TIDMJMAT
RNS Number : 9185R
Johnson Matthey PLC
20 June 2018
JOHNSON MATTHEY PLC
ANNUAL REPORT & NOTICE OF ANNUAL GENERAL MEETING
Johnson Matthey Plc (the "Company") has today published its 2018
Annual Report and Accounts and Notice of 2018 Annual General
Meeting. Both documents are available on the Company's website at
www.matthey.com
In accordance with Listing Rule 9.6.1, copies of both documents,
together with the Form of Proxy for the 2018 Annual General
Meeting, have been submitted to the National Storage Mechanism and
will shortly be available for viewing at
www.morningstar.co.uk/uk/NSM
The Annual General Meeting of the Company will be held at 11.00
am on Thursday 26th July 2018 at The Institute of Civil Engineers,
One Great George Street, Westminster, London, SW1P 3AA.
Information required to be made available by the Company under
Rule 6.3.5R of the Disclosure Guidance and Transparency Rules, to
the extent not already included in the Company's announcement of
preliminary results for the year ended 31st March 2018, issued on
31st May 2018, is set out in the Appendix below.
Simon Farrant
Company Secretary
20th June 2018
APPIX
Risks and Uncertainties
The ongoing review of our principal risks ensures that we
reflect on the challenges facing our business and the changes that
we have made to our business in response to those challenges.
We continually map our principal risks and uncertainties to
strategic and business plans to ensure that we have appropriate
coverage of risks. Following the revision of our strategy in 2017,
we took a fresh look at our risks to confirm that these continued
to be aligned to the strategy. With greater clarity of our
strategic priorities we have better focused our risks,
understanding the worst case scenarios that could threaten our
business model, future performance, solvency or liquidity.
As a result of these exercises, we have concluded that for the
most part, the overarching areas of risk remain unchanged. In all
cases we continue to review and refine the documented mitigations
for each risk.
We have also changed our risk reporting to consider whether the
risk profile is increasing, decreasing or remaining constant. We
believe that provides our board and shareholders greater
transparency in reporting compared to reporting the gross or net
risk as high, medium or low.
Changes to our principal risks and uncertainties in 2017/18:
-- Future revenue growth. Now this is the risk specifically
associated with our failure to deliver against the growth
opportunities identified in our strategy. Previously it was defined
more broadly as the risk associated with revenue growth
opportunities, investment decisions, significant capital
investment, mergers and acquisitions and research and development
activities.
-- Applications systems and cyber security. This was added to
our principal risks during the year. The external cyber threat is
increasing with more sophisticated attacks on a wide range of
organisations. The elevation of this risk ensures that the board
has greater visibility of the actions we take to mitigate the
risk.
Brexit
Whilst not a principal risk and uncertainty, Johnson Matthey
continues to monitor closely the potential EU exit (Brexit) risks
through our businesses. Our well established Brexit working group
is composed of a number of functional experts who look to mitigate
risks for a range of Brexit scenarios with a specific focus on
trade, regulation and our people. Whilst there remains a great deal
of uncertainty as to what Brexit will mean for the company, the
Brexit working group is developing and implementing plans to ensure
Johnson Matthey is able to navigate the best possible outcome for
our people, our business and our customers.
The following table sets out the principal risks and
uncertainties facing the group, the mitigating actions for each and
an update on any change in the profile of each risk during the
course of the year.
Our risks are not listed from greatest risk to lowest risk; we
list our strategic risks first, followed by operational risks. As
explained above, we added applications, systems and cyber risk this
year. It is our newest risk and so it is listed last.
1 Existing market outlook
Risk and impact Mitigation Changes since 2017
The risk of a change * Strategic planning process in place to assess and annual report
to the outlook for understand trends across our sectors and markets with As we continue to
our key markets is an understanding and assessment of the impact of strengthen our strategic
either unplanned or economic and geopolitical uncertainty and legislative planning process,
unforeseen and as changes. the robustness of
a result we are poorly our scenario planning
positioned to respond. is also increasing.
* Plans in place to execute mitigation strategies. However, uncertainty
This risk would include will always be present
legislative change, in the external
for example as a result * Mechanisms to monitor changes and launch mitigation environment.
of Brexit or changes actions if required.
in customer or consumer This risk is unchanged.
behaviour impacting
our business.
------------------------------------------------------------ ---------------------------
2 Future growth
Risk and impact Mitigation Changes since 2017
To deliver growth * A clear strategy, which is continuously reviewed in annual report
as communicated in the light of new information, and a business review This risk has been
our capital markets process to track execution of that strategy. refined to consider
day, we are making our key growth areas
significant investments as described in our
in key growth opportunity * Appropriate investment in R&D, capital and talent capital markets day.
areas. This risk considers identified to support realisation of the strategy. This risk is therefore
the potential failure not directly comparable
to deliver this growth with that reported
and create value. * Ongoing monitoring and review of new technologies and in 2016/17.
market competitiveness.
* Project Management Offices (PMOs) in place to ensure
appropriate governance in place and plans are
delivering to expected timelines.
------------------------------------------------------------ ---------------------------
3 Maintaining our competitive advantage
Risk and impact Mitigation Changes since 2017
Failure to maintain * Strong customer relationships, built around technical annual report
our competitive advantage proposition, reputation in the market and a high This risk is unchanged.
in existing markets level of technical service. We will continue to
and, as a result, evolve our position
not meeting customers' to maintain our
evolving needs as * Regular strategy reviews to retest the external competitive
efficiently as our environment. advantage.
competitors.
* Embedding analysis of competitor strategy and
benchmarking relative performance.
* Strong balance sheet to support significant ongoing
investment in R&D.
* Active prioritisation of R&D and capital investment
to areas of greatest opportunity.
------------------------------------------------------------ ---------------------------
4 Environment, health and safety
Risk and impact Mitigation Changes since 2017
In common with other * Setting the tone from the top with senior managers annual report
similar manufacturing leading by example. This risk is unchanged.
companies, the group Health and safety
operates in a challenging continues to be our
safety environment * Understanding of our business risk profile. priority and we take
that is subject to our responsibility
numerous health, safety for environmental
and environmental * Systems and processes to facilitate adherence to impact very seriously
laws, regulations corporate policies, procedures and standards.
and standards.
If we fail to operate * Ongoing investment in the business to ensure that our
safely we could injure equipment is appropriate.
our people. We could
breach applicable
laws, regulations * Training and awareness activities.
and standards which
could adversely impact
our employees, result * Risk, audit and safety checks.
in lost production
time and could attract
negative media and * Safety culture programme and behavioural standards.
regulator interest.
* Investigations to determine the cause of incidents
and accidents and the development of remediation
plans.
* An independent hotline for employees to report
concerns.
------------------------------------------------------------ ---------------------------
5 Sourcing of strategic materials
Risk and impact Mitigation Changes since 2017
As JM has limited * Strengthening supplier relationship management, annual report
suppliers from which regular reviews to discuss supplier capacity This risk is inherent
to source certain constraints. in our Automotive
strategic raw materials, and Health related
any significant breakdown businesses, where
in the supply of these * Continuing to build expertise in supply chain, validated materials
materials would lead logistics, procurement and trade export controls. are utilised in our
to an inability to products.
manufacture and satisfy
customer demand. * Supplier quality management processes. Risk landscape unchanged
* Safety stocks held in strategic locations.
* Research and development to consider alternative
materials.
* Business continuity management, identification of
critical failure risks and plans in place to manage
these.
------------------------------------------------------------ ---------------------------
6 People
------------------------------------------------------------ ---------------------------
Risk and impact Mitigation Changes since 2017
To execute the JM * Assessment of skills and capability requirements. annual report
strategy and deliver With greater clarity
growth, we need to of our strategic
ensure that we have * JM leadership values and behaviours. priorities
the breadth and depth we have tightened
of leadership and this risk to focus
the appropriate * Robust talent management processes. on the skills and
capabilities. capabilities we need
now and in the future.
* Leadership development programmes. We are investing in
our leadership and
growing talent through
* Building high quality personal development plans in robust succession
place for all leaders. planning to build
our future leaders.
------------------------------------------------------------ ---------------------------
7 Security of metal and highly regulated substances
Risk and impact Mitigation Changes since 2017
On any given day, * Assay and other process controls. annual report
the group has significant As reflected at the
quantities of high half year, we saw
value precious metals * Stock takes to check inventories. this risk increase
or highly regulated in response to the
substances on site impact of the metal
and in transit; loss * Security awareness campaigns and training. price on our balance
or theft due to a sheet.
failure of the security
management systems * Security management systems and site security
associated with the systems.
protection of metal
or highly regulated
substances may result * Audits of site security systems and process controls.
in performance impact,
reduced customer
confidence * Use of approved carriers for transit.
and potential legal
action.
* Liaison with local law enforcement for high risk
sites.
* Insurance coverage for losses from theft or fraud.
------------------------------------------------------------ ---------------------------
8 Intellectual capital management
---------------------------
Risk and impact Mitigation Changes since 2017
Failure to identify * Business intellectual capital management strategy. annual report
and protect the group's We are developing
intellectual capital market leading
or failure to identify * Ensuring we maintain a data security strategy to intellectual
third party intellectual protect our intellectual capital. capital, through
capital rights could intellectual
lead to a loss in property, in the battery
business advantage, * Investment in cyber security (see risk 13). materials and health
loss of freedom to markets, both of which
operate and reputational are crowded and litigious.
damage associated * Annual research and development and intellectual Although cyber risk
with litigation. property reviews. to our business is
considered separately,
it is also recognised
* Monitoring of third party intellectual capital. as a threat to this
risk area. As such
we are investing in
* Use of intellectual capital lawyers to provide our mitigating activity
specialist guidance. to manage our increased
risk profile.
* Training and awareness.
------------------------------------------------------------ ---------------------------
9 Failure of significant sites
Risk and impact Mitigation Changes since 2017
Potential risks include * Assessment of significant sites. annual report
a disruptive event Risk landscape unchanged.
such as fire, flood
or earthquake, a major * Business impact analysis for sites covering all
incident at site level activities, e.g. supply chain, production, commercial
such as an explosion etc.
or other events such
as geopolitical
instability. * Building plans that enable a comprehensive response
to an event and annual testing.
The consequences
associated
with this risk include * Insurance of activities.
the impact on our
ability to manufacture
goods and satisfy
customer demand.
------------------------------------------------------------ ---------------------------
10 Ethics and compliance
Risk and impact Mitigation Changes since 2017
Failure to comply * Code of ethics and tone from the top set by senior annual report
with ethical and leadership. This risk is reassessed
regulatory on an ongoing basis
compliance standards in the light of the
leading to reputational * Use of subject matter experts, internal and external, evolving regulatory
damage, to civil or to identify risks, set standards and provide advice and business background.
criminal legal exposure and training. In response, we review
for the company or our policies, processes
for individuals or and controls and amend
to risk of contractual * Suite of legal compliance policies and procedures to these as appropriate.
breach. mitigate key ethics and compliance risks.
Examples of this include
General Data Protection
* Code of ethics in place supported by online training Regulations (GDPR)
and formal acknowledgement. and the CCO (Corporate
Criminal Offence).
* Global network of ethics ambassadors.
* Independent confidential speak up hotline for
employees, contractors and third parties.
* Investigation / response to all matters overseen by
an Ethics Panel.
------------------------------------------------------------ ---------------------------
11 Business transition
Risk and impact Mitigation Changes since 2017
To position the group * Strategic PMO in place to monitor progress and annual report
for future growth provide assurance across the workstreams. Risk landscape unchanged.
and maximise available A number of programmes
efficiencies, we continue are in place to mitigate
to evolve the way * Programme management in place for key initiatives, this risk.
in which we run our with group owners cascading plans and agreed
business. This includes deliverables with business leads.
standardising some
activities across
the group, directed * Audit of key projects with third party assurance
by strong functional where appropriate.
leaders, in order
to ensure best practice
is used and maintained * Communication and employee engagement plans
across the group. associated with key initiatives.
The risk is that we
fail to achieve the
benefits of these
efficiencies, lose
our business agility
and / or fail to maintain
a very high level
of customer
responsiveness.
------------------------------------------------------------ ---------------------------
12 Product quality
------------------------------------------------------------ ---------------------------
Risk and impact Mitigation Changes since 2017
Our products are used * Regulatory framework for compliance in place. annual report
in a wide range of The regulatory environment
applications, processes continues to tighten
and systems. The safety * Developing robust new product introduction process and our customers
and quality of these and technical change processes. are experiencing greater
products is crucial scrutiny which has
to ensuring they operate created pressure for
as intended. * Developing robust manufacturing systems supported by our business
standardised processes.
Should a product fail
to perform as expected,
we could be responsible * Monitoring and reporting of quality performance,
for consumer harm taking corrective action where required.
or exposed to liability
claims. This could
lead to loss of future * Quality management systems in place supported by
business, reputational education and audit.
damage and loss of
licence to operate.
* Robust contract terms and conditions.
------------------------------------------------------------ ---------------------------
13 Applications, systems and cyber
Risk and impact Mitigation Changes since 2017
Risks that our * Ensuring we maintain a data security strategy in line annual report
applications with the evolving threat. The external cyber
and systems security threat is increasing
is inadequate or fails with more sophisticated
to adapt to changing * Investment in information security systems, attacks on a wide
business requirements monitoring and assurance in support of our data range of organisations.
and / or external security strategy. Against this backdrop
threats. we are investing in
our IT infrastructure
The impact of these * Mapping of all at risk data and understanding of to support a more
may adversely affect regulatory requirements. efficient business
our financial position and, in doing so,
and could harm our we are increasing
reputation. * Maintenance of a breach reaction plan. the global consistency
and connectivity of
our applications and
infrastructure. As
such, we have decided
to elevate the risk
of cyber attack from
within the risk of
failure of a critical
site to a principal
risk in its own right,
to ensure greater
board visibility.
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Responsibility Statement of the Directors in Respect of the
Annual Report and Accounts
Each of the directors as at the date of the Annual Report and
Accounts, whose names and functions are set out below:
-- Tim Stevenson, Chairman
-- Robert MacLeod, Chief Executive
-- Anna Manz, Chief Financial Officer
-- Odile Desforges, Non-Executive Director
-- Alan Ferguson, Non-Executive Director
-- Jane Griffiths, Non-Executive Director
-- Chris Mottershead, Non-Executive Director
-- John O'Higgins, Non-Executive Director
-- John Walker, Executive Director
states that to the best of his or her knowledge:
-- the group and parent company accounts, prepared in accordance
with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the company and the undertakings included in the
consolidation taken as a whole; and
-- the management report (which comprises the Strategic Report
and the Directors' Report) includes a fair review of the
development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
This responsibility statement was approved by the board on 30th
May 2018 and is signed on its behalf by Tim Stevenson, Chairman
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END
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