TIDMJMAT

RNS Number : 6065I

Johnson Matthey PLC

20 June 2017

JOHNSON MATTHEY PLC

ANNUAL REPORT & NOTICE OF ANNUAL GENERAL MEETING

Johnson Matthey Plc (the "Company") has today published its 2017 Annual Report and Accounts and Notice of 2017 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 2017 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 Friday 28th July 2017 at The Royal Society, 6-9 Carlton House Terrace, London SW1Y 5AG.

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 2017, issued on 1st June 2017, is set out in the Appendix below.

Simon Farrant

Company Secretary

20th June 2017

APPIX

Risks and Uncertainties

The ongoing review of our principal risks ensures that we reflect on the challenges facing our business and the changes we have made to our business in response to those challenges. In April 2017, we announced a change in our group structure. As a consequence of a strategic review, the group moved to managing and reporting the business as four sectors: Clean Air, Efficient Natural Resources, Health and New Markets. These are aligned to the global priorities of cleaner air, the efficient use of natural resources and improved health. This focus provided us with a refreshed framework to consider the identification of new risks, evolution of existing risks and evaluation of control effectiveness. During this exercise we concluded that while many of our risks remain largely unchanged we could describe them more precisely, to ensure focus is on the most important mitigating activities. As a result of this process we have made the following changes to our principal risks and uncertainties:

-- Existing market outlook (previously described as 'growth within our existing business' and 'global economic, political and regulatory uncertainty'). This risk was broadly defined across both external influences on our business as well as internal factors. We have refocused this risk on external influences and will use refined key risk indicators to monitor any movement in the most important underlying assumptions associated with our business plans. The internal factors are picked up in a new risk (risk 3).

-- Future revenue growth (previously described as 'innovation' and 'new business'). Our risk associated with growing our business, both through the identification of opportunities and acting on new opportunities, was predominately focused on potential merger and acquisition activities. We have now amended this to consider the risks associated with investment decisions, including significant capital investment, mergers and acquisitions and research and development activities.

-- Maintaining our competitive advantage in existing markets. This risk was previously captured under the very wide ranging 'growth within our existing business'. The internal aspect of this risk in meeting our customers' evolving technology needs coupled with ongoing process efficiencies to maintain our competitive advantage is reflected in this new risk (risk 3).

-- Product quality. This new risk was previously managed at business and divisional level. With our continuing emphasis on quality and brand we have elevated this risk to ensure greater board visibility.

-- Sourcing of strategic materials. This risk previously covered a wide range of supply chain aspects. We have refocused this risk to consider sourcing of our strategic raw materials, the supply of which is vital to our manufacturing processes.

-- People. This risk has been reassessed in the context of our recent strategic review, which has identified some areas where we need to build additional capability.

-- Business transition. We are evolving the way we run our business. Historically, we have operated as a decentralised organisation and, to drive efficiency, we are in the process of standardising some activities across the group. Directed by strong functional leaders, our business transition will position the group for future growth. The risk has been amended to reflect our current business transition plans.

We also considered the risk landscape for cyber and information systems resilience and determined that this was included within our 'failure of significant sites' risk and as such did not need to be included as a separate principal risk and uncertainty.

Managing Through Brexit

Brexit, whilst not a separate risk, is included within the scope of our existing market outlook risk. As a major manufacturing and exporting business, we have been monitoring developments through a dedicated working group, giving careful consideration as to how best to navigate the situation. There is still a great deal of uncertainty as to what Brexit will mean for Johnson Matthey. The Brexit working group is focused on ensuring that Johnson Matthey is prepared to navigate through and deliver the best outcome for our people, our business and our customers. In addition, we plan to work closely with the UK Government to make the most of the opportunities that Brexit offers, and ensure that our industry can continue to succeed.

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. The net risk rating (after mitigating controls) is also shown.

 
Existing Market Outlook 
---------------------------------------------------------------------------------------------------------------------- 
Risk and impact            Mitigation                                                        Changes since 2016 annual 
 The risk of a change        *    Understanding the key drivers and the range of             report 
 to the outlook for               possible scenarios.                                        This risk partially 
 our key markets is                                                                          replaces 'growth within 
 either unplanned or                                                                         our existing business'. 
 unforeseen and as a         *    Building plans against those scenarios.                    This risk is specifically 
 result we are poorly                                                                        focused on understanding 
 positioned to respond.                                                                      the external influences 
                             *    Monitoring changes to those drivers and adjusting          which may impact our 
 This risk would include          business plans accordingly.                                business. It is rated 
 legislative change,                                                                         as high as a result 
 for example as a result                                                                     of the uncertainty of 
 of Brexit or changes                                                                        Brexit and the evolving 
 in customer or consumer                                                                     pace of change in the 
 behaviour impacting                                                                         BEV/European diesel 
 our business.                                                                               market, making scenario 
                                                                                             planning essential. 
                                                                                             Risk 3 focuses on the 
                                                                                             related internal factors. 
 
                                                                                             Risk rating 
                                                                                             High (unchanged from 
                                                                                             risk 1 last year) 
-------------------------  ----------------------------------------------------------------  ------------------------- 
Future Revenue Growth 
---------------------------------------------------------------------------------------------------------------------- 
Risk and impact            Mitigation                                                        Changes since 2016 annual 
Failure to grow through      *    Monitoring and understanding market evolution as part      report 
new opportunities either          of our strategic planning process resulting in             New growth opportunities 
as a result of failing            opportunity identification.                                may 
to identify the                                                                              be realised through 
opportunity,                                                                                 different combinations 
fund or execute              *    Growth opportunities are executed through targeted         of investment including 
successfully.                     acquisitions, capital investment and research and          acquisition, capital 
                                  development. Progress is monitored and tracked             investment and R&D. 
                                  against specific key performance indicators (KPIs).        As the approach may 
                                                                                             change based 
                                                                                             on the circumstances, 
                                                                                             we believe the risk 
                                                                                             is better expressed 
                                                                                             by focusing on the missed 
                                                                                             opportunity irrespective 
                                                                                             of the investment type. 
 
                                                                                             Risk rating 
                                                                                             Medium (unchanged from 
                                                                                             the innovation risk 
                                                                                             rating last year) 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Maintaining our Competitive Advantage 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 Failure to maintain          *    Investment in understanding our customers.                 annual 
 our competitive                                                                              report 
 advantage                                                                                    This risk was previously 
 in existing markets,         *    R&D and capital investment processes ensure resource       captured under the very 
 and as a result, not              is prioritised against the areas of greatest               wide ranging 'growth 
 meeting customers'                opportunity.                                               within our existing 
 evolving needs as                                                                            business'. The external 
 efficiently as our                                                                           aspect of this risk 
 competitors.                 *    Benchmarking business processes' efficiency.               is captured in risk 
                                                                                              1 and the internal risk 
                                                                                              of failing to run our 
                                                                                              business to sustain 
                                                                                              our competitive 
                                                                                              advantage 
                                                                                              is captured here. We 
                                                                                              have a strong track 
                                                                                              record of meeting our 
                                                                                              customers' evolving 
                                                                                              technology needs, our 
                                                                                              capability coupled with 
                                                                                              ongoing process 
                                                                                              efficiency 
                                                                                              activity means we have 
                                                                                              rated this risk as 
                                                                                              medium. 
 
                                                                                              New risk 
 
                                                                                              Risk rating 
                                                                                              Medium 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Environment, Health and Safety 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 In common with similar       *    Understanding of our business risk profile.                annual 
 manufacturing companies,                                                                     report 
 the group operates                                                                           Health and safety is 
 in a challenging safety      *    Systems and processes to facilitate adherence to           our priority and we 
 environment that is               corporate policies, procedures and standards.              take our responsibility 
 subject to numerous                                                                          for environmental impact 
 health, safety and                                                                           very seriously. Over 
 environmental laws,          *    Training and awareness activities.                         the past 12 months we 
 regulations and                                                                              have worked to refine 
 standards.                                                                                   our mitigating 
                              *    Risk, audit activities and safety checks.                  activities. 
 If we fail to operate 
 safely and respond                                                                           Risk rating 
 to changes made to           *    Safety culture programme and behavioural standards.        Medium 
 applicable laws, 
 regulations 
 or standards we could        *    Investigations to determine the cause of incidents 
 adversely impact our              and accidents and the development of remediation 
 employees, we may                 plans. 
 lose production time 
 and could attract 
 negative media and           *    An independent hotline for employees to report 
 regulator interest.               concerns. 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Sourcing of Strategic Materials 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact                Mitigating activities                                         Changes since 2016 
 As Johnson Matthey              *    Supplier key performance indicators, audits and         annual 
 has limited suppliers                quality management.                                     report 
 from which to source                                                                         The prior year risk 
 certain strategic                                                                            rating was principally 
 raw materials, any              *    Sourcing from multiple suppliers.                       driven by the risks 
 breakdown in the supply                                                                      associated with sourcing 
 of these materials                                                                           of strategic materials. 
 would lead to an                *    Research and development alternatives to consider use   During the year, we 
 inability                            of non-strategic materials.                             have focused on building 
 to manufacture and                                                                           expertise in supply 
 satisfy customer demand.                                                                     chain and procurement 
                                 *    Expertise in supply chain, logistics, procurement and   and 
                                      trade export controls.                                  as such have assessed 
                                                                                              the risk 
                                                                                              as reducing. 
                                 *    Business continuity management, identification of 
                                      critical failure risks and plans in place to manage     Risk rating 
                                      these.                                                  Medium 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 People 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 To achieve our strategic     *    Assessment of skills and capability requirements.          annual 
 objectives, we                                                                               report 
 continually                                                                                  This risk has been 
 assess the skills            *    Robust talent management processes.                        reassessed 
 and capabilities that                                                                        in the context of our 
 will enable us to                                                                            recent strategic review, 
 deliver our strategy.        *    Remuneration strategy with clarity around market best      which has identified 
 An inability to recruit           practice and Johnson Matthey's position on base pay,       some areas where we 
 and retain key skills             annual and long term incentives, pensions and              need to build additional 
 may result in a slower            regional benefits.                                         capability. We have 
 growth trajectory.                                                                           therefore increased 
                                                                                              the risk rating. 
                              *    Transparency of policies. 
                                                                                              Risk rating 
                                                                                              Medium 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Security of Metal and Highly Regulated Substances 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 On any given day,            *    Security management systems and site security              annual 
 the group has                     systems.                                                   report 
 significant                                                                                  Unchanged from 2016 
 quantities of high                                                                           although we have amended 
 value precious metals        *    Assay and other process controls.                          the title to reflect 
 or highly regulated                                                                          the specific risks. 
 substances on site 
 and in transit; loss         *    Security awareness campaigns and training.                 Risk rating 
 or theft due to a                                                                            Low 
 failure of the security 
 management systems           *    Audits of site security systems. 
 associated with the 
 protection of metal 
 or highly regulated          *    Stock takes to check inventories. 
 substances may result 
 in performance impact, 
 reduced customer             *    Use of approved carriers for transit. 
 confidence 
 and potential legal 
 action.                      *    Insurance coverage for losses from theft or fraud. 
 
 
                              *    Liaison with local law enforcement for high risk 
                                   sites. 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Intellectual Capital Management 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 Failure to identify          *    Business intellectual capital strategy and new             annual 
 and protect the group's           product introduction process.                              report 
 intellectual capital                                                                         Decreased to reflect 
 or failure to identify                                                                       our increasingly 
 third party intellectual     *    Portfolio management of intellectual capital.              effective 
 capital rights could                                                                         mitigations. 
 lead to a loss in 
 business advantage,          *    Monitoring of third party intellectual capital.            Risk rating 
 loss of freedom to                                                                           Medium 
 operate and reputational 
 damage associated            *    Use of intellectual capital lawyers to provide 
 with litigation.                  specialist guidance. 
 
 
                              *    Training and awareness. 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Failure of Significant Sites 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 Potential risks include      *    Assessment of critical sites.                              annual 
 a disruptive event                                                                           report 
 such as fire, flood                                                                          No change 
 or earthquake, a major       *    Business continuity plans in place and annual 
 incident at site level,           programme of testing in place.                             Risk rating 
 such as an explosion,                                                                        Medium 
 IT systems failure, 
 cyber attack or other        *    Cyber awareness and monitoring. 
 events such as 
 geopolitical 
 instability.                 *    IT disaster recovery. 
 
 The consequences 
 associated                   *    Inventory management to provide critical spares and 
 with this risk include            inventories. 
 the impact on our 
 ability to manufacture 
 goods and satisfy            *    Use of external suppliers for key activities and 
 customer demands.                 services including generators and utilities. 
 
 
                              *    Insurance of sites. 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Ethics and Compliance 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 Failure to comply            *    Code of ethics in place supported by training and          annual 
 with ethical and                  formal acknowledgement.                                    report 
 regulatory                                                                                   This risk is reassessed 
 compliance standards                                                                         on an ongoing basis 
 leading to reputational      *    Understanding of key ethics and compliance risks.          in the light of the 
 damage, to civil or                                                                          evolving regulatory 
 criminal legal exposure                                                                      and business background. 
 for the company or           *    Use of subject matter experts, internal and external,      There is significant 
 for individuals or                on legal compliance and risk mitigation matters.           mitigation in place 
 to risk of contractual                                                                       but the risk rating 
 breach.                                                                                      remains unchanged this 
                              *    Group and local policies and procedures in place           year as we embed 
                                   including full integration with business processes.        upgraded 
                                                                                              third party intermediary 
                                                                                              processes. 
                              *    Group control requirements such as supplier 
                                   on-boarding, counterparty due diligence and payments       Risk rating 
                                   approval.                                                  High 
 
 
                              *    Independent confidential speak up hotline for 
                                   employees, contractors and third parties. 
 
 
                              *    Oversight on contractual provisions and commercial 
                                   arrangements by legal teams. 
 
 
                              *    Global network of ethics ambassadors. 
 
 
                              *    Emergency response procedures for events such as dawn 
                                   raids. 
 
 
                              *    Investigation of incidents and allegations of 
                                   misconduct. 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Business Transition 
---------------------------------------------------------------------------------------------------------------------- 
 Risk and impact            Mitigation                                                        Changes since 2016 
 To position the group        *    Communication and employee engagement plans are in         annual 
 for future growth                 place for all programmes with support from the GMC as      report 
 and maximise available            appropriate.                                               Risk reflects our 
 efficiencies, we are                                                                         business 
 evolving the way we                                                                          transition that will 
 run our business.            *    Change management processes.                               position the group for 
 Historically we have                                                                         future growth. The risk 
 operated as a                                                                                rating remains unchanged 
 decentralised                *    Programme management and governance activities with        from the business 
 organisation but to               KPIs and red, amber, green (RAG) review reports.           transition 
 drive efficiency we                                                                          risk rating last year. 
 are in the process 
 of standardising some        *    Capital allocation decision making process.                Risk rating 
 activities across                                                                            Medium 
 the group, directed 
 by strong functional 
 leaders in order to 
 ensure best practice 
 is used and maintained 
 across the group. 
 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. 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 Product Quality 
---------------------------------------------------------------------------------------------------------------------- 
  Risk and impact           Mitigation                                                        Changes since 2016 
  Our products are used       *    Quality management systems in place supported by           annual 
  in a wide range of               accreditation and audit.                                   report 
  applications, processes                                                                     We considered whether 
  and systems. The safety                                                                     quality management 
  and quality of these        *    Robust manufacturing processes.                            should 
  products                                                                                    be a principal risk 
  is crucial to ensuring                                                                      in 2016. At that time 
  that they operate           *    Monitoring and reporting of quality performance,           we concluded that while 
  as intended.                     taking corrective action where required.                   important, it was not 
                                                                                              significant enough to 
  We may be exposed                                                                           be considered as a 
  to liability claims         *    Robust contract terms and conditions.                      principal 
  should a product fail                                                                       risk as the impact and 
  to perform as expected.                                                                     likelihood varied by 
  This could lead to                                                                          sector according to 
  loss of future business                                                                     the product produced, 
  and reputational                                                                            customer and contractual 
  damage.                                                                                     risk. With our continued 
                                                                                              emphasis on quality 
                                                                                              and brand we have 
                                                                                              elevated 
                                                                                              this risk to ensure 
                                                                                              greater board 
                                                                                              visibility. 
 
                                                                                              New risk 
 
                                                                                              Risk rating 
                                                                                              Medium 
-------------------------  ----------------------------------------------------------------  ------------------------- 
 

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 
   --          John Walker, Executive Director 
   --          Odile Desforges, Non-Executive Director 
   --          Alan Ferguson, Non-Executive Director 
   --          Jane Griffiths, Non-Executive Director 
   --          Colin Matthews, Non-Executive Director 
   --          Chris Mottershead, Non-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 31st May 2017 and is signed on its behalf by Tim Stevenson, Chairman.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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