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
ACSOKKDQKBKDDAB
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