TIDMJMAT

RNS Number : 6003P

Johnson Matthey PLC

11 June 2020

 
 
  Preliminary results for the year ended 31(st) March 2020 
Confident in the strength of our business 
 
Robert MacLeod, Chief Executive, commented: 
COVID-19 has brought unprecedented challenges to the world and Johnson 
 Matthey. During this pandemic, we have tried to balance the needs of 
 all of our stakeholders but our first priority remains the health and 
 safety of our people, customers, suppliers and communities where we 
 operate. I would like to say a heartfelt thank you to all of our employees 
 for their dedication and efforts over the past few months. 
 
Our business is resilient and diverse, serving a range of end markets 
 and geographies. We made good progress in 2019/20 and delivered operating 
 performance slightly ahead of market expectations, excluding the effects 
 of COVID-19 which adversely impacted underlying operating profit by 
 around 
 GBP60 million. We took immediate and decisive action to protect our 
 business, and to maintain good liquidity and a strong balance sheet. 
 Looking forward, we are accelerating our strategy to drive greater efficiency 
 across the business, building upon the investments we have made in new 
 manufacturing facilities and in our systems and processes. We have delivered 
 nearly GBP120 million of our previously announced cost savings. However, 
 we recognise the need to be even more efficient in order to maintain 
 our competitiveness and in addition some of our end markets have been 
 affected by COVID-19. Therefore, we are targeting additional annualised 
 cost savings of at least GBP80 million by the end of 2022/23. We regret 
 that this will lead to some job losses, which we estimate to be around 
 2,500 globally over the three year period. 
 
Given the ongoing uncertainty, we are unable to provide financial guidance 
 for 2020/21. In Clean Air, our customers are gradually ramping up their 
 plants but visibility on the path of recovery remains low. Efficient 
 Natural Resources is later cycle and we anticipate an impact as lower 
 demand begins to affect the industries it serves. Health is relatively 
 unaffected by the macroeconomic environment and should benefit from 
 new customer contracts. In Battery Materials, the commercialisation 
 of eLNO remains on track. Notwithstanding the strong financial position 
 of the group, in light of the current uncertainty and to balance the 
 needs of all stakeholders, the board is proposing a final dividend for 
 the year of 
 31.125 pence, representing half the level of the 2018/19 final dividend. 
 
These developments do not change the global trends that will drive our 
 longer term growth. Addressing climate change remains a priority and 
 commitments to net zero are gathering pace across the world. Our continued 
 investment in strategic growth projects and leading sustainable technologies 
 uniquely positions us to address this and other key global trends, delivering 
 significant value for our shareholders and society. 
 
 
Reported results                                 Year ended  % change 
                                               31(st) March 
                                                             -------- 
                                               2020    2019 
                                                     ------  -------- 
Revenue                       GBP million    14,577  10,745       +36 
Operating profit              GBP million       388     531       -27 
Profit before tax (PBT)       GBP million       305     488       -38 
Earnings per share (EPS)      pence           132.3   215.2       -39 
Ordinary dividend per share   pence          55.625    85.5       -35 
----------------------------  ------------  -------  ------  -------- 
 
 
Underlying performance(1)                            Year ended  % change           % change, 
                                                   31(st) March             constant rates(2) 
----------------------------------------------                   --------  ------------------ 
                                                   2020    2019 
--------------------------------  ------------  -------  ------  --------  ------------------ 
Sales excluding precious metals 
 (sales)(3)                        GBP million    4,170   4,214        -1                  -2 
Operating profit                   GBP million      539     566        -5                  -6 
Profit before tax                  GBP million      455     523       -13                 -14 
Earnings per share                       pence    199.2   228.8       -13 
--------------------------------  ------------  -------  ------  --------  ------------------ 
 
 
Reported results 
--   Reported revenue increased 36% driven by higher average precious metal 
      prices 
--   Reported operating profit declined 27% driven by a restructuring and 
      impairment charge of GBP140 million and a c.GBP60 million impact related 
      to COVID-19 
--   Reported EPS declined 39%, reflecting lower operating profit and higher 
      net finance charges 
--   Cash inflow from operating activities was GBP598 million 
 
Underlying performance(1) 
--   Sales declined 2% driven by Clean Air and Health, partly offset by 
      higher sales in Efficient Natural Resources and New Markets 
--   Underlying operating profit declined 6% primarily driven by a c.GBP60 
      million impact related to 
      COVID-19. Excluding COVID-19, underlying operating profit grew 5% 
     --   Of the c.GBP60 million, c.GBP30 million reflected lower demand 
           in Clean Air, and the remainder was due to higher trade debtor 
           provisions across the group and delayed sales due to logistical 
           challenges in our other businesses 
--   Underlying EPS declined 13% reflecting lower underlying operating 
      profit and higher net finance charges. Net finance charges grew primarily 
      driven by increased average precious metal borrowings due to higher 
      precious metal prices, on which we pay higher interest on average 
      than the rest of our borrowings 
--   Strong balance sheet with net debt of GBP1.1 billion; net debt to 
      EBITDA of 1.6 times 
--   Return on invested capital (ROIC) decreased from 16.4% to 13.3% mainly 
      due to increased capital expenditure, higher average precious metal 
      working capital through the year and lower underlying operating profit 
 
Dividend 
The group has a strong balance sheet, good cash generation and liquidity 
 headroom. However, given the heightened degree of current uncertainty 
 and to balance the needs of all stakeholders, the board will propose 
 a final ordinary dividend for the year of 31.125 pence at the Annual 
 General Meeting on 23(rd) July 2020, representing half the level of 
 the 2018/19 final dividend. This is not intended to be a rebasing; the 
 board remains committed to a progressive dividend and anticipates restoring 
 future dividend payments to levels seen prior to the COVID-19 pandemic 
 when circumstances permit. 
 
Subject to approval by shareholders, the final dividend will be paid 
 to shareholders on 4(th) August 2020, with an ex dividend date of 18(th) 
 June 2020. 
 
Outlook for the year ending 31(st) March 2021 
Given the ongoing uncertainty, we are unable to provide financial guidance 
 for the year ending 
 31(st) March 2021. Looking at each of our sectors: 
 
--   Clean Air has a direct link to consumer demand. Following automotive 
      OEM shutdowns earlier in the year, we are now seeing our customers 
      gradually reopen their plants. Production in China is recovering towards 
      prior year levels, and Europe and the US are now also gradually ramping 
      up. However, visibility on the path of recovery remains low. This 
      significant uncertainty has led to a wide range of forecasts for automotive 
      and truck production for the coming year. External data currently 
      suggests a decline of c.25% in light duty for Europe and the US, but 
      better in Asia , while for heavy duty the declines are slightly more. 
      Although the actual outcomes could be materially different. We have 
      a flexible cost base in Clean Air, enabling us to manage different 
      levels of activity, with c.75% of costs before mitigation being variable 
 
--   Efficient Natural Resources serves a diverse range of end markets 
      and is subject to a broader range of variables. It is later cycle 
      than Clean Air, so while we have seen little impact so far on the 
      business from macroeconomic weakness, we expect this will come through 
      as lower demand begins to affect the industries it serves and because 
      of volatile feedstock dynamics. Pgm prices will also influence operating 
      performance. Operating leverage is greater here as the sector operates 
      with a larger number of sites and higher fixed costs 
 
--   Health is relatively unaffected by changes in the macroeconomic environment. 
      We expect to benefit from new supply agreements for APIs used in generic 
      opioid addiction therapies as well as our continued work with innovator 
      customers 
 
--   In Battery Materials, commercialisation of eLNO remains on track 
 
Our newly announced efficiency initiatives will deliver additional annualised 
 savings of at least 
 GBP80 million by 2022/23 for a cash cost of c.GBP80 million, with initial 
 savings of at least GBP30 million supporting operating performance in 
 2020/21. We have a strong balance sheet and liquidity position and expect 
 to generate further cash through precious metal working capital improvements 
 as we continue to reduce refinery backlogs. We remain committed to our 
 investment in our strategic growth projects which will support our medium 
 term growth. 
 
 
Enquiries: 
Investor Relations    Director of Investor Relations     020 7269 8241 
                       Senior Investor Relations 
 Martin Dunwoodie       Manager                           020 7269 8235 
 Louise Curran         Investor Relations Manager         020 7269 8242 
 Jane Crosby 
 
 Media                                                   020 7269 8407 
  Sally Jones         Director of Corporate Relations     020 7353 4200 
  Simon Pilkington     Tulchan Communications 
 
 
Notes: 
In our pre-close trading update (30(th) March 2020) we guided to an 
 impact of around GBP50 million on our trading performance from COVID-19. 
 Vara consensus for full year underlying operating profit in 2019/20 
 was GBP581 million (range: GBP562 million to GBP593 million) as at 29(th) 
 March 2020. 
1.  Underlying is before profit or loss on disposal of businesses, gain 
     or loss on significant legal proceedings together with associated 
     legal costs, amortisation of acquired intangibles, major impairment 
     and restructuring charges and, where relevant, related tax effects. 
     For definitions and reconciliations of other non-GAAP measures, see 
     pages 43 to 47. 
2.  Unless otherwise stated, sales and operating profit commentary refers 
     to performance at constant rates. Growth at constant rates excludes 
     the translation impact of foreign exchange movements, with 2018/19 
     results converted at 2019/20 average exchange rates 
3.  Revenue excluding sales of precious metals to customers and the precious 
     metal content of products sold to customers 
eLNO is a trademark of Johnson Matthey Public Limited Company 
 

Strategy update

 
 
The COVID-19 pandemic has led to significant challenges across the world. 
 We continue to work hard to respond to these unprecedented circumstances 
 and actively manage the ongoing risks to our people, operations and customers. 
 To maintain the health, safety and wellbeing of our people we have implemented 
 working from home arrangements where possible and ensured the highest 
 standards of safety in all working practices. 
 
Immediate and decisive action in response to COVID-19 
In the year, we made good strategic progress and delivered operating 
 performance, excluding the effects of COVID-19, slightly ahead of market 
 expectations. Due to COVID-19, we experienced an adverse impact of c.GBP60 
 million to underlying operating profit in the year ended 31(st) March 
 2020, of which c.GBP30 million reflected lower demand in Clean Air, and 
 the remainder was due to higher trade debtor provisions across the group 
 of c.GBP15 million, and delayed sales due to logistical challenges in 
 our other businesses. 
 
Our immediate response to COVID-19 was to take decisive action to maintain 
 our strong balance sheet and strengthen our liquidity through cost reduction, 
 tightly managing our operations to optimise working capital and postponing 
 non-strategic capex. Our cost reduction measures included adjusting working 
 patterns, reducing contractor spend and restricting travel costs and 
 we optimised working capital by reacting quickly and temporarily stopping 
 production at our Clean Air plants, managing our raw materials purchases 
 and controlling pgm refinery intakes. 
 
Following the temporary closure of numerous automotive OEM production 
 plants due to government mandated closures and lower consumer demand, 
 our Clean Air plants are now gradually resuming production across all 
 regions. Across the remainder of our business, the vast majority of our 
 plants are operational and we have adopted new working practices in line 
 with local guidelines. Alongside maintaining our operations where it 
 is safe to do so, we are balancing obligations to our stakeholders through 
 maintaining payment terms with suppliers and offering support to small 
 suppliers who may be facing hardship. 
 
Resilient business portfolio with a strong balance sheet 
We are well positioned in an uncertain world. We have a resilient and 
 diverse business portfolio which is exposed to a range of end markets 
 and geographies and our flexible cost base, particularly in Clean Air 
 where c.75% of our costs are variable, enables us to adapt quickly to 
 changes in demand, reduce our costs and preserve cash. When the macroeconomic 
 environment weakens, our business model provides a natural hedge which 
 strengthens our balance sheet and liquidity as we have significant precious 
 metal working capital inflows when demand is lower. The strength of our 
 position means that we decided not to take any support from the UK government 
 for furloughed staff, or draw down on the Bank of England's COVID Corporate 
 Financing Facility (CCFF) despite qualifying for the loan. 
 
We have a strong balance sheet with good access to liquidity of c.GBP1.3 
 billion. Earlier in the year we concluded a GBP1 billion five year committed 
 revolving credit facility and more recently we issued US$300 million 
 of private placement notes. 
 
Net debt at 31(st) March 2020 was GBP1.1 billion (31(st) March 2019: 
 GBP866 million) and our leverage ratio (net debt to EBITDA) was 1.6 times 
 (31(st) March 2019: 1.3 times). This was at the bottom end of our target 
 range of 1.5 to 2.0 times, benefiting from a GBP345 million reduction 
 in precious metal working capital volumes. This progress was despite 
 the impact of COVID-19 on EBITDA and reflects our focus on the effective 
 management of our precious metal working capital. The actions we have 
 taken include strong progress in reducing our refining backlogs where 
 we have made faster progress than expected, optimising our precious metal 
 working capital across our businesses and reviewing commercial terms 
 with pgm collectors as well as our Clean Air customers. 
 
We maintain a balanced debt maturity profile across different lenders. 
 Committed facilities are renewed regularly and there is no material refinancing 
 due in 2020 or 2021. There is material headroom in relation to debt covenants 
 (1) of 3.5 times net debt to EBITDA which are tested annually, with the 
 next test based on financials for the period ending 31(st) March 2021. 
 
Notes: 
1.                                            The majority of our facilities contain a net debt to EBITDA covenant 
                                              of 3.5 times. Two legacy loans (GBP41 million and 
                                              GBP148 million maturing after 31(st) March 2021) contain a 3.0 times 
                                              covenant and are expected to be amended. Our headroom assumes 
                                              repayment 
                                              of these legacy loans. 
Accelerating our strategy to drive efficiency 
Across the group, we have been investing to drive efficiency across our 
 manufacturing footprint and operations. We are now able to accelerate 
 a number of these initiatives. We are consolidating our Clean Air footprint 
 and optimising our group operating model to create further organisational 
 efficiency across the group. 
 
In total, the acceleration of our strategic initiatives will deliver 
 annualised savings of at least 
 GBP80 million over the next three years, of which at least GBP30 million 
 will benefit 2020/21. Together with the GBP145 million of cost savings 
 previously announced, of which we have already delivered 
 GBP116 million, this will take total annualised cost savings to c.GBP225 
 million by the end of 2022/23. There will be associated one off costs 
 of c.GBP240 million related to these new savings which will be taken 
 outside of underlying operating profit, of which the cash element will 
 be c.GBP80 million. Over three years, this is expected to result in a 
 reduction in staff numbers of c.2,500 subject to consultation. For further 
 detail on these costs, please see page 19. The key actions include: 
 
--                                            Consolidating Clean Air footprint 
                                              In Clean Air, we have been investing in new world class plants in 
                                              Europe and Asia. These plants are identical and highly flexible, 
                                              allowing 
                                              us to drive efficiency and increase agility across our global 
                                              footprint 
                                              by consolidating some of our existing older capacity in Europe into 
                                              this new capacity. This will deliver c.GBP30 million of annualised 
                                              cost benefits by the end of 2022/23. 
 
--                                            Driving organisational efficiency 
                                              In recent years we have been investing into our corporate functions. 
                                              For example we are rolling out our single global ERP (enterprise 
                                              resource 
                                              planning) system, and have invested into our global procurement and 
                                              IT functions to increase our capability and standardise our processes. 
                                              This is allowing us to review our group operating model to remove 
                                              duplication of activities between the corporate centre and the sectors 
                                              and reduce complexity across the organisation. A simplified 
                                              organisation 
                                              will enable faster decision making and reduce costs. Overall, these 
                                              measures are expected to deliver c.GBP50 million of annualised cost 
                                              benefits by the end of 2022/23. 
 
Summary of efficiency initiatives 
 
Initiative                                                    Delivered                          Annualised benefits 
 GBP million                                                    to date                                   by 2022/23 
---------------------------------------------  ------------------------  ------------------------------------------- 
Procurement(1)                                                       71                                          100 
Restructuring                                                        25                                           25 
Health footprint optimisation                                        20                                           20 
---------------------------------------------  ------------------------  ------------------------------------------- 
Previous initiatives beginning 2017                                 116                                          145 
---------------------------------------------  ------------------------  ------------------------------------------- 
Clean Air footprint                                                   -                                           30 
Group wide organisational efficiency                                  -                                           50 
---------------------------------------------  ------------------------  ------------------------------------------- 
New initiatives                                                       -                                           80 
---------------------------------------------  ------------------------  ------------------------------------------- 
Total efficiency initiatives                                        116                                          225 
---------------------------------------------  ------------------------  ------------------------------------------- 
 
 

(1) Around three quarters of procurement initiatives will benefit the income statement, of which around two thirds will be reinvested to drive growth.

 
 
  Addressing climate change continues to drive our medium term growth 
Our vision is for a world that is cleaner and healthier, today and for 
 future generations. Our strategy for sustained growth and value creation 
 is driven by the application of our world class science to solve the 
 challenges arising from key global trends including climate change as 
 well as increasing population and longevity, and resource challenges. 
 In collaboration with our customers, we use our science to solve their 
 most complex problems and in doing so we are creating long term value 
 for our shareholders and society. 
 
Through our leading positions in high margin, technology driven growth 
 markets, we will deliver growth over the medium term. In the year, we 
 made good strategic progress across our sectors and further developed 
 in key areas: 
 
--  In Clean Air , we continued to benefit from tightening legislation 
     globally, especially in Europe and Asia and maintained our strong 
     market shares in our key light duty diesel and heavy duty segments. 
     With the construction of our new plants in Europe and Asia largely 
     complete, our global, efficient and flexible manufacturing footprint 
     is enabling us to drive efficiency across the sector. 
 
--  In Efficient Natural Resources , we continue to focus our resource 
     on selected, higher growth segments; target our R&D investment for 
     future growth; and drive operational efficiency. Our refinery upgrade 
     programme, which will ensure our assets operate effectively and reliably, 
     is progressing well. We made good progress in developing and commercialising 
     new technologies which includes our mono ethylene glycol technology 
     as we began work on the first project and our Fischer Tropsch waste 
     to aviation fuel technology as we produced the first catalyst. Across 
     the sector, we continued to help our customers optimise their operations, 
     for example our formaldehyde team launched a new digital portal for 
     enhanced interaction with customers. To support our longer term growth, 
     we progressed our business development projects including battery 
     materials recycling and our work with various partners to drive the 
     acceleration of adoption of hydrogen as a more significant part of 
     the energy mix. 
 
--  In Health , we have agreed new multi-year supply agreements with generic 
     partners for the supply of APIs used in generic opioid addiction therapies. 
     We made further progress towards delivering an additional c.GBP100 
     million operating profit from our pipeline of generic and innovators 
     APIs by 2025 although it may be delayed a year given the inherent 
     uncertainty around the timing of individual drug launches. On the 
     innovator side, we saw recent success with our customer - Immunomedics 
     - who recently received regulatory approval for production of an immuno-oncology 
     treatment for triple negative breast cancer. Immunomedics is now increasing 
     volumes in support of the commercial launch. 
 
--  In Battery Materials , we are making significant progress in commercialising 
     eLNO, our portfolio of leading ultra-high energy density cathode materials 
     which will compete with materials such as NMC 811. eLNO will suit 
     a broad range of applications, particularly in enabling greater adoption 
     of long range, pure battery electric vehicles. 
 
    Feedback from testing with customers remains positive, specifically 
     our ability to provide tailored solutions. In the year, we moved to 
     full cell testing with four customers - two global automotive OEMs 
     and two non-automotive customers. Our progress with non-automotive 
     customers is another important validation of eLNO in commercial applications 
     and offers a faster route to qualification. Full cell testing means 
     we are collaborating more intensively with customers to further develop, 
     formulate and test eLNO and they have reduced their number of potential 
     suppliers. This gives us increased confidence that our materials provide 
     the performance our customers seek. Alongside this full cell testing, 
     we continue to work in the validation phase with a number of global 
     automotive OEMs and cell manufacturers. 
 
    We broke ground on our first commercial plant in Konin, Poland, which 
     is expected to be on stream in 2022 and supplying platforms in production 
     in 2024. Our total investment to first commercial production will 
     amount to c.GBP350 million, although we are seeing some upward pressure 
     as we finalise the design and build in more flexibility to meet our 
     customers' requirements. Beyond this, scale up is likely to be phased 
     as we match capacity to market demand. As part of the commercialisation 
     process, we are also securing sources of renewable energy for the 
     site in Poland. 
 
--  There is increasing momentum around the significant role that hydrogen 
     will play in enabling the energy transition to a clean, low carbon 
     economy. We have a unique competitive advantage for this transition, 
     with a number of market leading solutions across the hydrogen value 
     chain including hydrogen production technologies and fuel cells: 
 
    --   Hydrogen production technologies: As the market evolves, we are 
          well positioned due to our development of a new, market leading 
          process to produce low carbon hydrogen (LCH(TM)) or "blue" hydrogen. 
          Carbon capture and storage is easier and cheaper using our process 
          and we are already starting to commercialise this technology. We 
          are collaborating on one of the UK's leading low carbon hydrogen 
          projects - HyNet North West - which will use our LCH hydrogen technology 
          in a refinery for the first time. 
 
    --   Fuel cell technologies: Fuel cells will play a key role in the 
          decarbonisation of transportation. With our expertise in precious 
          metals, ability to provide customised solutions and established 
          manufacturing footprint, we are well positioned for this market. 
          Today, we supply fuel cells for non-automotive and automotive applications 
          including commercial vehicles in China, and we are working with 
          a number of customers, including major automotive OEMs, on a variety 
          of applications as this market develops. We continue to invest 
          in our technology and have committed GBP15 million to double our 
          manufacturing capacity across the UK and China. 
 
 
Summary of operating results 
Unless otherwise stated, commentary refers to performance at constant 
 rates. Percentage changes in the tables are calculated on unrounded 
 numbers 
 
 
Sales                              Year ended  % change  % change, 
 (GBP million)                   31(st) March             constant 
                                                             rates 
----------------------------                   --------  --------- 
                                 2020    2019 
----------------------------  -------  ------  --------  --------- 
Clean Air                       2,618   2,720        -4         -4 
Efficient Natural Resources     1,079     991        +9         +8 
Health                            223     257       -13        -15 
New Markets                       389     362        +7         +7 
Eliminations                    (139)   (116) 
Sales                           4,170   4,214        -1         -2 
----------------------------  -------  ------  --------  --------- 
 
 
Underlying operating profit        Year ended  % change  % change, 
 (GBP million)                   31(st) March             constant 
                                                             rates 
----------------------------                   --------  --------- 
                                 2020    2019 
----------------------------  -------  ------  --------  --------- 
Clean Air                         295     393       -25        -25 
Efficient Natural Resources       256     181       +41        +40 
Health                             27      43       -37        -38 
New Markets                       (1)       2       n/a        n/a 
Corporate                        (38)    (53) 
Underlying operating profit       539     566        -5         -6 
----------------------------  -------  ------  --------  --------- 
 
 
Reconciliation of underlying operating profit to        Year ended 
 operating profit                                     31(st) March 
 (GBP million) 
------------------------------------------------- 
                                                       2020   2019 
-------------------------------------------------  --------  ----- 
Underlying operating profit                             539    566 
Profit / (loss) on disposal of businesses(1)              2   (12) 
Loss on significant legal proceedings                     -   (17) 
Amortisation of acquired intangibles                   (13)   (14) 
Major impairment and restructuring charges(1)         (140)      8 
Operating profit                                        388    531 
-------------------------------------------------  --------  ----- 
 

(1) For further detail on these items please see pages 18 and 19

Second half performance

 
Sales                                H2          % change 
 (GBP million) 
----------------------------                     --------  --------------- 
                               2019/20  2018/19                  % change, 
                                                            constant rates 
----------------------------  --------  -------  --------  --------------- 
Clean Air                        1,226    1,408       -13              -12 
Efficient Natural Resources        583      528       +10              +10 
Health                             112      139       -19              -20 
New Markets                        203      189        +8               +8 
Eliminations                      (78)     (59) 
Sales                            2,046    2,205        -7               -7 
-----------------------------  -------  -------  --------  --------------- 
 
 
 
Sales declined 7% in H2 2019/20. Clean Air was impacted by COVID-19 
 and lower heavy duty production globally. In Efficient Natural Resources, 
 sales were higher due to a strong performance in PGM Services. There 
 was weaker business performance in Health due to the temporary disruption 
 in the opioid addiction therapy market. Sales in New Markets were strong 
 as we continued to see good demand for non-automotive battery systems 
 and fuel cells. 
 
 
Underlying operating profit             H2      % change 
 (GBP million) 
----------------------------                    --------  --------------- 
                              2019/20  2018/19                    % change, 
                                                             constant rates 
----------------------------  -------  -------  --------  ----------------- 
Clean Air                         116      202       -43              -42 
Efficient Natural Resources       162       96       +70              +71 
Health                              9       28       -69              -69 
New Markets                         7      (1)       n/a              n/a 
Corporate                        (20)     (30) 
Underlying operating profit       274      295        -7               -6 
----------------------------  -------  -------  --------  --------------- 
 
 

Operating profit was down 6% in the second half, primarily due to COVID-19 which impacted operating profit by c.GBP60 million, mostly in Clean Air. Efficient Natural Resources grew materially due to a strong performance in PGM Services. In Health, there was weaker performance due to the temporary disruption in the opioid addiction therapy market. New Markets operating profit grew strongly driven by better performances in Life Science Technologies and Medical Device Components. Corporate costs were lower due to lower legal costs and share based payments.

Operating results by sector

Clean Air

 
Sales outperformed in a weak market 
--  In light duty, Europe sales grew 2% and Asia sales grew 4%, both 
     well ahead of markets that declined, as we benefited from tightening 
     legislation which increased the value per vehicle 
--  Globally, heavy duty sales declined 13% which was broadly in line 
     with the market 
--  Strong market shares were maintained in our key light duty diesel 
     and heavy duty segments 
--  Operating profit was down as guided, primarily driven by a weak global 
     heavy duty market, COVID-19 related costs, infrastructure investment 
     and one-off costs in the first half associated with manufacturing 
     inefficiencies 
 
 
                                            Year ended 31(st)  % change  % change, constant 
                                                        March                         rates 
                                            2020         2019 
                                     GBP million  GBP million 
Sales 
LDV Europe                                 1,046        1,031        +1                  +2 
LDV Asia                                     381          361        +5                  +4 
LDV Americas                                 315          346        -9                 -11 
Total Light Duty Vehicle Catalysts         1,742        1,738         -                   - 
 
HDD Americas                                 443          476        -7                 -10 
HDD Europe                                   277          334       -17                 -16 
HDD Asia                                     111          128       -13                 -14 
Total Heavy Duty Diesel Catalysts            831          938       -11                 -13 
 
Other - stationary                            45           44        +1                   - 
 
Total sales                                2,618        2,720        -4                  -4 
 
Underlying operating profit                  295          393       -25                 -25 
Margin                                     11.3%        14.4% 
Return on invested capital (ROIC)          18.4%        30.0% 
Reported operating profit                    236          390       -40 
-----------------------------------  -----------  -----------  --------  ------------------ 
 
 
Light Duty Vehicle (LDV) catalysts 
In LDV catalysts, we provide catalysts for emission control after-treatment 
 systems for cars and other light duty vehicles powered by diesel and 
 gasoline. Global sales were flat year on year, but well ahead of the 
 decline in global light duty vehicle production of 10%, which was more 
 pronounced in the second half as COVID-19 affected the global automotive 
 market. Our customers first began to close their plants in China towards 
 the end of January and then in Europe and the US from the middle of 
 March. 
 
In Europe, diesel accounts for around 80% of our LDV business. Sales 
 of diesel catalysts were flat as we outperformed a market that declined, 
 driven by the annualisation of our diesel market share gains. We maintained 
 a market share of c.65% in light duty diesel vehicles. 
 
In Western Europe, diesel accounted for 31% of new passenger car sales 
 in 2019/20, compared with 35% in the last financial year. Light duty 
 commercial vehicles remain largely diesel today. When these are included, 
 the overall share of diesel sales in Western Europe was 39% for 2019/20, 
 compared with 42% in 2018/19. 
Sales of gasoline catalysts were up in both Europe and Asia, significantly 
 ahead of markets that declined 7% and 13% respectively. Growth was primarily 
 driven by increased value per vehicle with the implementation of tighter 
 legislative standards. 
 
Americas LDV declined, driven by weaker performance in diesel largely 
 due to the ramp down of a platform. 
 
Heavy Duty Diesel (HDD) catalysts 
In HDD catalysts, we provide catalysts for emission control after-treatment 
 systems for trucks, buses and non-road equipment. Global sales were 
 down 13%, broadly in line with the decline in market production of 
 11%. 
 
In Americas, the high value Class 8 truck cycle peaked in September, 
 then declined sharply in the second half. Our Class 8 sales declined 
 as expected, slightly behind the market due to product mix. 
 
Our European and Asian HDD businesses also declined broadly in line 
 with their respective markets. Over the medium term, tightening legislation 
 in China and India will drive a significant uplift in value. 
 
Consolidating Clean Air footprint 
We have been investing in our world class plants in Europe and Asia 
 and this is enabling us to drive further efficiency and agility across 
 the sector by consolidating some of our existing older capacity in 
 Europe into these new, more efficient plants. In the year, this gave 
 rise to an impairment charge of GBP61 million on our older manufacturing 
 assets, taken outside of underlying operating profit. 
 
Underlying operating profit 
Operating profit declined 25% and margin declined 3.1 percentage points. 
 This was primarily driven by a weak global heavy duty market, c.GBP40 
 million of COVID-19 related costs (including 
 c.GBP10 million higher trade debtor provisions) and higher costs of 
 c.GBP20 million from investment in infrastructure and start up costs 
 for new plants. There were also one-off costs of c.GBP15 million which 
 included additional freight costs and inefficiencies within our manufacturing 
 footprint due to phasing of the completion of our new plant in Poland. 
 
ROIC 
ROIC was down 11.6 percentage points to 18.4% reflecting lower operating 
 profit and higher invested capital from our new plants which are not 
 yet yielding returns. 
 

Efficient Natural Resources

 
Significant growth in operating profit and margin expansion 
--  Sales grew 8% primarily driven by strong performance in PGM Services 
--  Significant operating profit growth and margin expanded 5.5 percentage 
     points. This reflected higher average pgm prices and strength in 
     our PGM Services trading business in a more volatile price environment, 
     partly offset by higher refining operating costs and further investment 
     in our refineries 
 
 
                                           Year ended 31(st)  % change  % change, constant 
                                                       March                         rates 
                                           2020         2019 
                                    GBP million  GBP million 
                                    -----------  ----------- 
Sales 
Catalyst Technologies                       556          567        -2                  -3 
PGM Services                                389          281       +38                 +36 
Advanced Glass Technologies                  70           75        -7                  -7 
Diagnostic Services                          64           68        -6                  -7 
Total sales                               1,079          991        +9                  +8 
 
Underlying operating profit                 256          181       +41                 +40 
Margin                                    23.8%        18.3% 
Return on invested capital (ROIC 
)                                         17.2%        12.6% 
Reported operating profit                   250          175       +43 
----------------------------------  -----------  -----------  --------  ------------------ 
 
 
 
Catalyst Technologies 
Our Catalyst Technologies business licenses key process technology and 
 manufactures high value speciality catalysts and additives for the chemical 
 and oil and gas industries. We saw a small impact from COVID-19 in the 
 year, with the vast majority of our Catalyst Technology plants maintaining 
 operations. Sales were slightly down driven by refill additives and 
 copper zeolites to Clean Air, partly offset by strong growth in first 
 fill catalysts and licensing. 
 
Refill catalysts and additives sales were slightly lower 
This is recurring business which makes up the majority of sales within 
 Catalyst Technologies. Refill additives declined due to feedstock dynamics 
 driving lower volumes. In refill catalysts, sales were stable. We saw 
 good performance in ammonia and formaldehyde, ahead of the market. However, 
 we saw lower sales in methanol following strong demand in the prior 
 period and in hydrogen refill catalysts due to the lower oil price. 
 
First fill catalysts almost doubled 
First fill catalysts are lumpy in nature and driven by the start-up 
 of new plants. They are a lead indicator of future refill catalyst demand. 
 In the year, we saw strong sales growth driven by methanol and ammonia 
 catalysts with new plants in Asia coming onstream. 
 
Licensing saw good growth 
Our licensing business is dependent on new plant builds and revenue 
 is recognised over the period of construction. We saw good performance 
 in the period driven by formaldehyde and methanol following recent license 
 wins in these segments. We also began to recognise income from our newly 
 developed mono ethylene glycol technology as we started work on the 
 first project following the license win last year. In the year, we signed 
 four new licenses and are pleased with the progress we are making in 
 developing and commercialising technologies. 
 
PGM Services 
PGM Services is the world's leading secondary refiner of platinum group 
 metals and provides a strategic service to the group, mainly supporting 
 Clean Air with security of metal supply in a volatile market. It comprises 
 our pgm refining, recycling and trading activities and produces chemical 
 compounds and industrial products containing pgms. Towards the end of 
 the year, our pgm refineries continued to operate albeit at lower capacity 
 due to compliance with local guidelines and new working practices in 
 light of COVID-19. 
PGM Services sales grew strongly, up 36% 
In the year, sales grew 36%. We saw strong growth in our refinery and 
 trading businesses due to higher and more volatile average pgm prices. 
 Average palladium and rhodium prices were up 56% and 137% respectively, 
 whilst the platinum price increased 5%, compared to the same period 
 last year. Sales of chemical products grew driven by Clean Air which 
 uses pgm materials in its catalyst products, however, sales of industrial 
 products containing pgms were down. 
 
Refinery backlog volumes improved 
Following unscheduled downtime in one of our pgm refineries in 2018/19 
 which resulted in higher precious metal working capital, we made strong 
 progress this year in reducing the volume of precious metal working 
 capital in our refineries whilst ensuring continued supply to our Clean 
 Air business and external customers. Our progress has been faster than 
 expected and, as a result of the work we have done to improve our precious 
 metal working capital efficiency, we now expect to remove at least a 
 further GBP300 million(1) of precious metal working capital volume from 
 our backlogs by the end of 2020/21. 
 
As previously announced, the GBP100 million investment in our new refinery 
 is underway. This will further reduce precious metal working capital, 
 ensure our assets operate effectively and reliably, and strengthen our 
 position as a long term supplier to our customers. 
 
Advanced Glass Technologies 
Advanced Glass Technologies mainly provides black obscuration enamels 
 and silver paste for automotive glass applications. Sales were lower 
 largely driven by the automotive segment as a result of the slowdown 
 in global car production, impacted by COVID-19. 
 
Diagnostic Services 
Diagnostic Services provides specialised detection, diagnostic and measurement 
 solutions for our customers in the petroleum industry. Sales were down 
 as we saw an impact from the declining oil price and COVID-19. 
 
Underlying operating profit 
Operating profit grew significantly, up 40%, and margin expanded 5.5 
 percentage points. This was primarily driven by a GBP47 million benefit 
 from higher average pgm prices and strength in our PGM Services trading 
 business in a more volatile price environment, partly offset by higher 
 refinery operating costs as we continue to work down our backlogs and 
 further investment in our refineries. 
 
ROIC 
ROIC increased 4.6 percentage points to 17.2% reflecting higher operating 
 profit. 
 
Notes: 
1.     Based on 31(st) March 2020 prices. 
 
 
 
 

Health

 
Performance affected by temporary disruption in the opioid addiction 
 therapy market 
--  Generics declined as expected, affected by temporary disruption in 
     the opioid addiction therapy market and lower sales of ADHD APIs. 
     We have now agreed new multi-year supply agreements for opioid addiction 
     therapies with generic partners from which we will begin to see the 
     benefit in 2020/21 
--  Innovators grew driven by a customer who received regulatory approval 
     for a novel 
     immuno-oncology treatment 
--  Operating profit declined materially driven by weaker sales performance, 
     partly offset by stock build to meet higher customer demand in 2020/21 
     and a net benefit from footprint optimisation 
--  We made further progress towards delivering an additional c.GBP100 
     million of operating profit from our pipeline of generic and innovator 
     APIs by 2025 although this may be delayed a year given the inherent 
     uncertainty around the timing of individual drug launches. 
 
 
                                          Year ended 31(st)  % change  % change, constant 
                                                      March                         rates 
                                          2020         2019 
                                   GBP million  GBP million 
---------------------------------  -----------  -----------  --------  ------------------ 
Sales 
Generics                                   134          171       -22                 -23 
Innovators                                  89           86        +5                  +2 
Total sales                                223          257       -13                 -15 
 
Underlying operating profit                 27           43       -37                 -38 
Margin                                   12.1%        16.7% 
Return on invested capital (ROIC 
 )                                        5.3%         9.0% 
Reported operating profit                   10           50       -80 
---------------------------------  -----------  -----------  --------  ------------------ 
 
 
Health 
Given the nature of our Health business in providing critical products 
 and services into the pharmaceutical sector, COVID-19 had limited impact 
 in the year. We maintained the vast majority of our operations although 
 we experienced some delays to shipment of orders following increased 
 border controls. 
 
Generics 
Our Generics business develops and manufactures generic active pharmaceutical 
 ingredients (APIs) for a variety of treatments. Sales were down significantly, 
 with a mixed performance across the business. 
 
Agreed new multi-year supply agreements for opioid addiction therapies 
 Sales of controlled APIs were lower. Speciality opiates were broadly 
 flat in the year. Following a strong first half, sales declined in 
 the second half due to developments in the opioid addiction therapy 
 market which drove lower demand in the short term for APIs used in 
 generic opioid addiction therapies. Although these developments affected 
 our performance in the year, we have now agreed new multi-year supply 
 agreements with generic partners and we will start to see the benefit 
 from these in 2020/21. Sales of APIs for ADHD treatments declined as 
 one of our customers moved to dual sourcing for some high margin APIs. 
 Sales of bulk opiates in Europe were stable. 
 
Our non-controlled APIs declined as expected. This primarily reflected 
 a continued reduction in sales of dofetilide as new competitors for 
 our customer entered the market. 
 
Innovators 
Our Innovators business provides custom development and manufacturing 
 services for active ingredients of new drugs during their lifecycle, 
 including for initial clinical evaluation and subsequently for commercial 
 supply post regulatory approval. 
 
Recent regulatory approval for our customer's novel immuno-oncology 
 treatment 
 Our Innovators business grew slightly. This was primarily driven by 
 higher sales in relation to our strategic partnership with Immunomedics 
 for the manufacture of a drug linker used in the production of an immuno-oncology 
 treatment for triple negative breast cancer. Immunomedics has recently 
 received approval for this therapy from the FDA (Food and Drug Administration) 
 and is now increasing volumes to support commercial demand. 
 
API product pipeline 
In the year, we continued to develop our new product pipeline across 
 both our Generics and Innovators businesses. We made further progress 
 towards delivering an additional c.GBP100 million of operating profit 
 from this by 2025 although it may be delayed a year given the inherent 
 uncertainty around the timing of individual drug launches. 
 
We recently undertook a strategic review of our new product introduction 
 process. Following this review, we made organisational changes, improved 
 the new product introduction process and took the decision to deprioritise 
 21 generic molecules and refocus our resources on the most attractive 
 opportunities. This gave rise to an impairment charge of GBP20 million 
 in relation to previously capitalised development expenditure, taken 
 outside of underlying operating profit. 
 
Overall, our pipeline now comprises 54 molecules which includes generic 
 APIs, innovator APIs and new applications. This includes four launched 
 molecules and eight generics which are awaiting regulatory approval. 
 
Specifically within Innovators, at the start of the year, we had four 
 projects in late stage testing programmes. Of these, two projects - 
 including Immunomedics - have now been approved, one project did not 
 receive approval and has been cancelled and the remaining opportunity 
 is still in late stage testing. 
 
Underlying operating profit 
Operating profit declined 38% driven by weaker business performance 
 including temporary disruption in the opioid addiction therapy market 
 and lower ADHD sales. This was partly offset by stock build to meet 
 higher demand from customers in 2020/21 which led to a greater absorption 
 of fixed costs into inventory on the balance sheet and a net benefit 
 from footprint optimisation. 
 
ROIC 
ROIC declined 3.7 percentage points to 5.3% mainly driven by lower 
 operating profit. 
 
 

New Markets

 
Strong sales growth and continued progress in commercialising eLNO 
--  Sales up 7% driven by strong demand for fuel cells and non-automotive 
     battery systems 
--  Operating profit declined as we invested in the development of our 
     Battery Materials business and recognised an GBP8 million one-off 
     impairment in the first half in relation to our demo plant 
--  Significant progress in commercialising eLNO as we broke ground on 
     our first commercial plant and now have four customers in full cell 
     testing 
 
 
                                           Year ended 31(st)  % change  % change, constant 
                                                       March                         rates 
                                           2020         2019 
                                    GBP million  GBP million 
Sales 
Alternative Powertrain                      237          206       +15                 +16 
Medical Device Components                    72           70        +2                   - 
Life Science Technologies                    50           49        +1                   - 
Other                                        30           37       -19                 -20 
Total sales                                 389          362        +7                  +7 
 
Underlying operating (loss) / 
 profit                                     (1)            2       n/a                 n/a 
Margin                                    -0.2%         0.7% 
Return on invested capital (ROIC)         -0.3%         1.1% 
Reported operating loss                    (62)         (15)       n/a 
----------------------------------  -----------  -----------  --------  ------------------ 
 
 
Alternative Powertrain 
Our Alternative Powertrain business provides battery systems for a range 
 of applications, fuel cell technologies and battery materials for automotive 
 applications. Our Battery Materials business comprises lithium iron 
 phosphate (LFP) materials as well as eLNO, our portfolio of leading 
 ultra-high energy density materials. Sales grew 16%, with continued 
 momentum in Fuel Cells and Battery Systems for e-bikes. 
 
Significant progress in commercialising eLNO 
We are making significant progress with the development and commercialisation 
 of our portfolio of eLNO materials, which will compete with future ultra-high 
 energy density materials such as NMC 811. Feedback from testing with 
 customers remains positive, specifically our ability to provide tailored 
 solutions. In the year, we moved to full cell testing with four customers 
 - two global automotive OEMs and two non-automotive customers. Alongside 
 this full cell testing, we continue to work with a number of automotive 
 OEMs and cell manufacturers in the validation phase. 
 
We broke ground on our first commercial plant in Konin, Poland, which 
 is expected to be on stream in 2022 and supplying platforms in production 
 in 2024. Our total investment to first commercial production will amount 
 to c.GBP350 million, although we are seeing some upward pressure as 
 we finalise the design and build in more flexibility to meet our customers' 
 requirements. Beyond this, scale up is likely to be phased as we match 
 capacity to market demand. As part of the commercialisation process, 
 we are also securing sources of renewable energy for the site in Poland. 
 
Refocusing Lithium Iron Phosphate to support eLNO 
We are focusing our science and innovative solutions on cathode materials 
 that are truly market leading, principally eLNO our ultra-high energy 
 density cathode material and our higher performing lithium iron phosphate 
 (LFP). S ales of LFP grades for lower performance requirements declined 
 in the year and we are now refocusing our LFP business to the high value 
 segment, exiting the much larger lower value segment of the market, 
 to better support our eLNO customers and the development of this business. 
 These changes gave rise to an impairment charge of GBP57 million in 
 the year, taken outside of underlying operating profit. 
 
Fuel Cells saw significant growth in sales as we invest for growth 
Sales in Fuel Cells grew 23% to GBP33 million and we delivered good 
 operating profit growth driven by increased demand for both non-automotive 
 and automotive applications in Asia. Today, our fuel cells are now powering 
 several hundred commercial vehicles and buses in China. We continue 
 to invest in line with market demand and have committed c.GBP15 million 
 to double our capacity in the UK and China. 
 
Medical Device Components 
Our Medical Device Components business leverages our science and technology 
 to develop products found in devices used in medical procedures. Sales 
 were flat in the year. At the end of the year, we saw a small increase 
 in sales as some of our products are vital components used within ventilators. 
 
Life Science Technologies 
Our Life Science Technologies business provides advanced catalysts to 
 the pharmaceutical and agricultural chemicals markets. Sales were flat 
 in the year. 
 
Underlying operating profit 
Operating profit declined as we invested in the development of our Battery 
 Materials business and recognised an GBP8 million one-off impairment 
 in the first half in relation to our demo plant. 
 
 
 ROIC 
 ROIC decreased to -0.3% reflecting the operating loss as we invest 
  in Battery Materials. 
 
 Corporate 
 Corporate costs in the period were GBP38 million, a decrease of GBP15 
  million from 2018/19 due to lower legal costs and share based payments. 
 
 

Financial review

 
Research and development (R&D) 
We invested GBP199 million in R&D in the year, including GBP23 million 
 of capitalised R&D, around 5% of sales. Spend increased 5% as we invested 
 in next generation technologies in Clean Air, the efficiency and resiliency 
 of our refineries in Efficient Natural Resources, our Health API product 
 pipeline and our eLNO cathode material. 
 
Foreign exchange 
The calculation of growth at constant rates excludes the impact of foreign 
 exchange movements arising from the translation of overseas subsidiaries' 
 profit into sterling. The group does not hedge the impact of translation 
 effects on the income statement. 
 
The principal overseas currencies, which represented 85% of the non-sterling 
 denominated underlying operating profit in the year ended 31(st) March 
 2020, were: 
 
 
 
                            Share of 2019/20       Average exchange rate  % change 
                    non-sterling denominated     Year ended 31(st) March 
                        underlying operating 
                                      profit 
                   -------------------------                              -------- 
                                                      2020          2019 
-----------------  -------------------------  ------------  ------------  -------- 
US dollar                                40%         1.271         1.310        -3 
Euro                                     33%         1.143         1.134        +1 
Chinese renminbi                         12%          8.85          8.81         - 
-----------------  -------------------------  ------------  ------------  -------- 
 
 
Overall for the year, the impact of exchange rates increased sales by 
 GBP36 million and increased underlying operating profit by GBP5 million, 
 following a GBP47 million and an GBP8 million increase respectively 
 in our first half. 
 
If current exchange rates (GBP:$ 1.233, GBP:EUR 1.110, GBP:RMB 8.81) 
 are maintained throughout the year ending 31(st) March 2021, foreign 
 currency translation will have a positive impact of approximately GBP11 
 million on underlying operating profit. A one cent change in the average 
 US dollar and euro exchange rates each have an impact of approximately 
 GBP2 million on full year underlying operating profit and a ten fen 
 change in the average rate of the Chinese renminbi has an impact of 
 approximately GBP1 million. 
 
Major impairment and restructuring charges 
As we accelerate our strategy to drive efficiency, we will deliver annualised 
 savings of at least 
 GBP80 million over the next three years to 2022/23. Related to these 
 new savings, we will be taking total impairment and restructuring charges 
 of around GBP240 million by 2022/23. Of this, around GBP80 million is 
 expected to be cash. 
 
During the year we recognised impairment and restructuring charges of 
 GBP140 million. These comprised the consolidation of our Clean Air footprint, 
 our Lithium Iron Phosphate (LFP) business in Battery Materials and our 
 Health product pipeline. 
 
In Clean Air, we will consolidate some of our existing older capacity 
 in Europe into our new, more efficient plants. In the year, this resulted 
 in an impairment charge of GBP61 million on our older manufacturing 
 assets. 
 
We impaired our Lithium Iron Phosphate (LFP) business in Battery Materials, 
 which gave rise to an impairment charge of GBP57 million in the period. 
 
A strategic review of Health's new product introduction process was 
 undertaken during the year which resulted in organisational changes 
 and the deprioritisation of the development of 21 molecules. Development 
 expenditure which had been capitalised in respect of the terminated 
 molecules totalling GBP20 million has been written off during the year. 
 
Future restructuring costs of around GBP100 million relate to the simplification 
 of our organisation and consolidation of our Clean Air footprint. 
 
See the table for a breakdown showing the impairment and restructuring 
 charge and cash costs: 
 
GBP million             Annualised             Total     Restructuring            Future 
                        benefits by     restructuring             costs     restructuring 
                         2022/23(1)             costs           2019/20          costs(2) 
 ----------------  ----------------  ----------------  ----------------  ---------------- 
 Clean Air 
  footprint                      30              (91)              (61)              (30) 
 Group wide 
  organisational 
  efficiency                     50              (70)                 -              (70) 
 Battery 
  Materials LFP                   -              (57)              (57)                 - 
 Health product 
  pipeline                        -              (20)              (20)                 - 
 Other 
  restructuring 
  costs                           -               (2)               (2)                 - 
 ----------------  ----------------  ----------------  ----------------  ---------------- 
 Total                           80             (240)             (140)             (100) 
 ----------------  ----------------  ----------------  ----------------  ---------------- 
 
 
(1) Annualised benefits from 2020/21 of at least GBP30 million. 
(2) Includes cash costs of c.GBP80 million. 
 
Profit / (loss) on disposal of businesses 
Profit / (loss) on disposal of businesses is shown separately on the 
 face of the income statement and excluded from underlying operating 
 profit. In the year, we released a GBP2 million provision in relation 
 to the disposal of Johnson Matthey Gold and Silver Refining Holdings 
 in March 2015. In the year ended 31(st) March 2019, the group sold its 
 water disinfection business, Miox. After costs, the net proceeds were 
 GBP2 million which resulted in a loss on sale of GBP12 million. 
 
Finance charges 
Net finance charges in the year amounted to GBP86 million, up from GBP43 
 million in 2018/19. This was primarily driven by increased average precious 
 metal borrowings due to higher precious metal prices, on which we pay 
 higher interest on average than the rest of our borrowings. 
 
Taxation 
The effective tax rate on reported profit for the year ended 31(st) 
 March 2020 was 16.4%, up from 15.3% in the prior year. 
 
The tax charge on underlying profit before tax for the year ended 31(st) 
 March 2020 was GBP72 million, an effective underlying tax rate of 15.7%, 
 broadly unchanged from 15.9% in the prior year. This was around 2% lower 
 than expected due to profit mix across different tax jurisdictions following 
 the impact of COVID-19. The current year tax charge includes increases 
 in provisions for uncertain tax positions, GBP12 million of which was 
 recognised in the first half and relates to reassessments of prior years. 
 
Post-employment benefits 
IFRS - accounting basis 
At 31(st) March 2020, the group's net post-employment benefit position, 
 after taking account of the bonds held to fund the UK pension scheme 
 deficit, was a surplus of GBP262 million. 
 
The cost of providing post-employment benefits in the year was GBP49 
 million, down from GBP56 million last year. The post-employment benefits 
 cost also included a past service credit of GBP20 million, which compared 
 to a GBP9 million credit in the prior period. 
 
Actuarial - funding basis 
The UK pension scheme has a legacy defined benefit career average section 
 which was closed to new entrants on 1(st) October 2012 when a new defined 
 benefit cash balance section was opened. 
 
The last triennial actuarial valuation of the career average section 
 as at 1(st) April 2018 revealed a deficit of GBP34 million, or a surplus 
 of GBP9 million after taking account of the future additional deficit 
 funding contributions from the special purpose vehicle set up in January 
 2013. The valuation results as at 1(st) April 2018 allowed for the equalisation 
 of Guaranteed Minimum Pension. 
 
The last triennial actuarial valuation of the cash balance section as 
 at 1(st) April 2018 revealed a surplus of GBP0.2 million. 
In order to reduce the group's long term pension risk exposure a number 
 of changes to the UK pension scheme became effective from 1(st) July 
 2018, including: 
--   Contributions from those employees who remain in the career average 
      section increased and will further rise over the next few years to 
      help fund the increased cost of providing these benefits 
--   The accrual rate in the career average section reduced from 1/80th 
      to 1/100th for each year of future service after this date 
--   New benefit levels with varying employee contribution rates were 
      introduced in the cash balance section 
--   Employees in the career average section were given the option of 
      switching to the cash balance section. 
 
The latest actuarial valuations of our two US pension schemes showed 
 a surplus of GBP1 million at 1(st) July 2019, an improvement from a 
 GBP2 million deficit at 1(st) July 2018. 
 
 
Capital expenditure 
Capital expenditure was GBP465 million in the year, 3.1 times depreciation 
 and amortisation (excluding amortisation of acquired intangibles). In 
 the period, projects included: 
--               Clean Air manufacturing plants in Europe and Asia. This increased 
                  capacity will enable us to consolidate our manufacturing footprint 
                  to drive efficiency and improve flexibility, and support demand from 
                  tightening legislation in these regions 
--               Investment in the development and commercialisation of eLNO. We broke 
                  ground on our first commercial plant in Konin, Poland for the first 
                  10,000 metric tonnes which has the potential for expansion to 100,000 
                  metric tonnes. We are on track to start production in 2022 and supply 
                  platforms in production in 2024 
--               Upgrade to our core IT business systems 
--               Investment in our Health manufacturing facilities and continued investment 
                  in our API product pipeline 
--               Investment in the efficiency and resilience of our refineries within 
                  Efficient Natural Resources 
 
Capital expenditure for 2020/21 is expected to be up to GBP400 million 
 as our investment into strategic growth projects continues. Key projects 
 include: 
--               Investment in eLNO as we continue to commercialise our ultra-high 
                  energy battery cathode material 
--               Completion of our new Clean Air plants in China and India 
--               Investment in the efficiency and resilience of our refineries within 
                  Efficient Natural Resources 
--               Upgrade to our IT systems as we continue to roll out our single global 
                  ERP system 
 
Depreciation and amortisation (excluding amortisation of acquired intangibles) 
 is expected to increase to around GBP200 million in 2020/21. This increase 
 is largely due to the depreciation of our new Clean Air plants and our 
 investment to upgrade our core IT systems. 
 
Accelerating reduction of precious metal working capital 
We have a disciplined approach to managing precious metal working capital 
 and have accelerated our actions in this area. In the year, we made 
 substantial progress in reducing precious metal volumes amounting to 
 GBP345 million(1) which was achieved through: 
 
       --         Progressing backlog reduction, with GBP162 million of precious 
                   metal volume removed 
       --         Optimising precious metal volumes across our businesses, particularly 
                   between Clean Air and Efficient Natural Resources, and reviewing 
                   commercial terms with pgm collectors as well as our Clean Air customers. 
                   This removed GBP49 million of precious metal volume 
       --         Substantial inflows of GBP134 million as a result of supply chain 
                   management in Clean Air, reducing metal at every stage so we were 
                   not sitting on excess inventory, as demand slowed due to the impact 
                   of COVID-19 
 
We are focused on further reducing precious metal working capital. We 
 are now targeting at least a further GBP300 million(2) reduction in 
 precious metal backlogs by 31(st) March 2021, although we expect this 
 to be offset by higher demand in Clean Air depending on the path of 
 recovery. 
 
Notes: 
1.              Based on 2019/20 blended prices. 
2.              Based on 31(st) March 2020 prices. 
Free cash flow and working capital 
Free cash flow was an inflow of GBP52 million, an improvement on the 
 prior year. This was primarily due to better net working capital where 
 we saw an outflow of GBP1 million compared to an outflow of GBP224 million 
 in the prior year. 
 
Excluding precious metal, working capital days increased to 52 days 
 at 31(st) March 2020 compared to 48 days in the prior year. 
 
Average working capital days excluding precious metals increased by 
 4 days to 63 days. We are targeting an improvement in average non precious 
 metal working capital to between 50 and 60 days over the medium term. 
 
Dividend 
The group has a strong balance sheet, good cash generation and liquidity 
 headroom. However, given the heightened degree of current uncertainty 
 and to balance the needs of all stakeholders, the board will propose 
 a final ordinary dividend for the year of 31.125 pence at the Annual 
 General Meeting on 23(rd) July 2020, representing half the level of 
 the 2018/19 final dividend. This is not intended to be a rebasing; the 
 board remains committed to a progressive dividend and anticipates restoring 
 future dividend payments to levels seen prior to the COVID-19 pandemic 
 when circumstances permit. Subject to approval by shareholders, the 
 final dividend will be paid to shareholders on 4(th) August 2020, with 
 an ex dividend date of 18(th) June 2020. 
 
Return on invested capital (ROIC) 
ROIC declined to 13.3% at 31 (st) March 2020 from 16.4% in the prior 
 year mainly due to higher capital expenditure, increased average precious 
 metal working capital through the year and lower operating profit. 
 
Capital structure 
Net debt at 31(st) March 2020 was GBP1.1 billion. This is a decrease 
 of GBP394 million from 
 30(th) September 2019 and an increase of GBP228 million from 31(st) 
 March 2019. Net debt increased by GBP43 million to GBP1.1 billion when 
 adjusted for the post tax pension deficits. The group's net debt (including 
 post tax pension deficits) to EBITDA was 1.6 times (31(st) March 2019: 
 1.3 times), at the bottom end of our target range of 1.5 to 2.0 times. 
 
Contingent liabilities 
The group is involved in various disputes and claims which arise from 
 time to time in the course of its business including, for example, in 
 relation to commercial matters, product quality or liability, employee 
 matters and tax audits. The group is also involved from time to time 
 in the course of its business in legal proceedings and actions, engagement 
 with regulatory authorities and in dispute resolution processes. These 
 are reviewed on a regular basis and, where possible, an estimate is 
 made of the potential financial impact on the group. In appropriate 
 cases a provision is recognised based on advice, best estimates and 
 management judgement. Where it is too early to determine the likely 
 outcome of these matters, no provision is made. Whilst the group cannot 
 predict the outcome of any current or future such matters with any certainty, 
 it currently believes the likelihood of any material liabilities to 
 be low, and that such liabilities, if any, will not have a material 
 adverse effect on its consolidated income, financial position or cash 
 flows. 
 
On a specific matter, the group previously disclosed that it had been 
 informed by two customers of failures in certain engine systems for 
 which the group supplied a particular coated substrate as a component 
 for their customers' emissions after-treatment systems. The particular 
 coated substrate was sold to only these two customers. The group has 
 not been contacted by any regulatory authority about these engine system 
 failures. The reported failures have not been demonstrated to be due 
 to the coated substrate supplied by the group. As previously disclosed, 
 we settled with one of these customers on mutually acceptable terms 
 with no admission of fault. 
 
Having reviewed its contractual obligations and the information currently 
 available to it, the group believes it has defensible warranty positions 
 in respect of its supplies of coated substrate for the after-treatment 
 systems in the affected engines remaining at issue. If required, it 
 will vigorously assert its available contractual protections and defences. 
 The outcome of any discussions relating to the matters raised is not 
 certain, nor is the group able to make a reliable estimate of the possible 
 financial impact at this stage, if any. The group works with all its 
 customers to ensure appropriate 
 product quality and we have not received claims in respect of our emissions 
 after-treatment components from this or any other customer. Our vision 
 is for a world that's cleaner and healthier; today and for future generations. 
 We are committed to enabling improving air quality and we work constructively 
 with our customers to achieve this. 
 
UK's withdrawal from European Union 
JM is continuing to monitor and assess the potential impact of the UK's 
 withdrawal from the European Union on current operations and strategy. 
 Plans are well developed and JM is confident that the acute demands 
 of managing the COVID-19 response will not reduce its ability to respond 
 to changes caused by the withdrawal. 
 
Going concern 
The group has a strong balance sheet with c.GBP1.3 billion of available 
 cash and undrawn committed facilities at 31(st) March 2020. Leverage, 
 measured by net debt (including post tax pension deficits) to EBITDA, 
 was at the bottom of our target range at 1.6 times. COVID-19 has introduced 
 unprecedented uncertainty to the market outlook and in response to this 
 we have undertaken extensive reviews of our businesses and projections 
 under a range of potential outcomes. 
 
Our review used a number of external sources to identify a range of 
 potential economic scenarios and assessed our headroom under each scenario 
 against committed facilities and key financial covenants over the going 
 concern period. 
At a macro-level we have used the GDP forecasts from a range of external 
 parties for these scenarios, which are: (1) a deep recession base case 
 which models an extended shutdown followed by an extended recovery period, 
 and (2) a downside of a very deep recession comprising of a deeper shutdown 
 with a challenging, stuttering recovery. The key macro assumptions for 
 our financial year 2020/21 are shown below: 
 
2020/21 GDP growth projections aligned with the scenarios 
 
                   Deep recession                     Very deep recession 
-----------------  ---------------------------------  ----------------------------------------- 
Description        Extended shutdown followed         Deeper shutdown impact with 
                    by                                 challenging, stuttering recovery 
                    extended recovery period 
Global             (1.0%) to (2.0%)                   (3.5%) to (4.5%) 
US                 (0.6%)                             (2.7%) 
China              1.2%                               (3.0%) 
Europe             (6.5%)                             (c.10%) 
-----------------  ---------------------------------  ----------------------------------------- 
Source: JM analysis; Oxford Economics; McKinsey; IMF (International 
 Monetary Fund); IEA (Institute of Economic Affairs); OBR (Office for 
 Budget Responsibility) (UK); JPM Cazenove and Citi 
 
Clean Air 
With the legislative frameworks in place and assumed to remain for vehicle 
 emissions in the markets in which we operate, our key market variable 
 is the level of automotive production. Our scenarios utilise a range 
 of external forecasts and our deep recession scenario assumes a decline 
 of c.25% in light duty production for Europe and the US, but better 
 in Asia, while for heavy duty the declines are slightly more. In our 
 very deep recession scenario, we assume a c.35% decline in light duty 
 production for Europe and the US, but better in Asia, while for heavy 
 duty the declines are again slightly more. For US truck sales, we assume 
 that the bottom of the cycle will occur in 2021/22 in both scenarios 
 and we keep our assumptions on battery electric vehicles consistent 
 at 2% of all vehicles globally. 
 
Within these market assumptions, we have planned for a much greater 
 impact in the early part of 2020/21 and an increase in production over 
 the year, with slower recovery in the very deep scenario. With a high 
 proportion of variable costs, we expect to mitigate a significant portion 
 of the decline in sales. Working capital drops significantly in the 
 short term before building again to support the growth to normalise 
 by the end of the year. We also assume that we will continue with our 
 strategic investments in the new facilities in China and India in the 
 period. 
Efficient Natural Resources 
The impact on our Efficient Natural Resources sector varies by sub-sector. 
 The Catalyst Technologies businesses have seen little impact from the 
 COVID-19 slowdown to date, but we do expect an impact as lower demand 
 begins to impact the industries they serve. The key drivers for our 
 businesses are diverse and will depend upon the specific markets they 
 address as well as feedstock prices. At a market level we have assumed 
 an oil price of $25-35/bbl for our deep scenario and $20-30/bbl for 
 the very deep scenario together with an overall decline in investment 
 in the oil and gas sector of 35% and 50% respectively. In these businesses 
 we have a higher proportion of fixed costs so the impact of lower demand 
 on profitability will be greater. 
 
Platinum Group Metal (PGM) Services is most impacted by pgm prices and 
 for the purpose of our scenarios we assume lower prices, which adversely 
 impacts profitability. The lower demand on our refineries in the short 
 term in part due to lower Clean Air volumes under these scenarios will 
 allow us to accelerate our progress on backlog reduction as well as 
 meeting planned shutdowns for maintenance and stock counts. This in 
 turn reduces the sensitivity of our working capital to pgm prices. 
 
Health and New Markets 
Health is relatively unaffected by COVID-19 with demand for many products 
 unaffected. 
 
Most of our businesses in New Markets see only short term impacts from 
 disruption to manufacturing and supply chains while the underlying market 
 demand remains e.g. fuel cells and medical devices. We assume that our 
 strategic focus and investment in Battery Materials is maintained throughout 
 the period. 
 
Funding and available liquidity 
The group has a robust funding position. JM signed a GBP1 billion five 
 year committed revolving credit facility in March this year which secures 
 liquidity for the next five years and was entirely undrawn at 31(st) 
 March 2020. Our longer term funding comes from the US private placement 
 market and other regional lenders including the European Investment 
 Bank and KfW. The maturity profile at 
 31(st) March 2020 is excellent with only GBP130 million of term debt 
 maturing before June 2021. In April 2020, we secured a further US$300 
 million of funding from the US private placement market for the next 
 five to seven years. JM has also secured access to the Bank of England's 
 COVID Corporate Financing Facility (CCFF) which would provide additional 
 back-stop liquidity for the next year if needed. 
 
In addition, as a long-time, highly rated issuer in the US private placement 
 market, JM expects to be able to access additional funding in its existing 
 markets should it need to. The group also has a number of additional 
 sources of funding available including uncommitted lease facilities 
 that can provide precious metal funding. 
 
At 31(st) March 2020 the group had metal lease facilities of c.GBP800 
 million, of which GBP451 million 
 (31(st) March 2019: GBP372 million) was drawn. As these metal leases 
 are for periods of less than 12 months they have been excluded from 
 our going concern assessment, with the assumption that when these leases 
 mature they are replaced with our other existing committed credit facilities. 
 The metal leasing market remains active and there is no indication that 
 renewing these lease facilities when they mature will not be possible. 
 Similarly, we have also excluded from our modelling the funding facilities 
 obtained under the CCFF. While metal leasing facilities and the CCFF 
 are excluded from our modelling under a normal situation, we would expect 
 to have access to facilities such as these. 
 
Conclusion 
The group has a robust funding position and has tested its performance 
 under a deep recession scenario and stress tested with a more extreme 
 very deep scenario. In both scenarios, we have sufficient headroom against 
 committed facilities and key financial covenants in the going concern 
 period (15 months following 31(st) March 2020). There remain risks to 
 the group including more extreme economic outcomes and our delivery 
 of refinery backlog reductions. Against these the group still has a 
 range of levers which it could utilise to protect headroom including 
 delaying inventory builds, reducing capital expenditure and reducing 
 future dividend distributions. 
 
The directors are therefore of the opinion that the group has adequate 
 resources to fund its operations for the period of 15 months following 
 31(st) March 2020 and so determine that it is appropriate to prepare 
 the accounts on a going concern basis. 
 
 

Responsible business

 
Health and safety 
We continue to build a world class health and safety culture across 
 Johnson Matthey. We are making good progress against our targets to 
 reduce significant risk in our major hazard processes and on improving 
 overall health and safety performance. Our LTIIR of 0.35 and TRIIR of 
 0.78 both significantly improved relative to last year (2018/19: LTIIR 
 0.57, TRIIR 1.01). 
 
Protecting our people as the COVID-19 pandemic has developed has been 
 a major priority and we acted quickly based on our learnings from our 
 sites in China to put in place guidance globally on the implementation 
 of the necessary controls that met local state and government requirements 
 and JM standards. Recognising that the impact of COVID-19 on people's 
 daily lives may also take its toll on their personal wellbeing, we have 
 been providing employees with more regular communications, tips and 
 resources to support them through these more challenging times. 
 
People 
Our people are at the heart our business strategy. For us to deliver 
 solutions from our world class science and realise our vision we are 
 developing our culture further, where our people can be successful; 
 a culture which attracts, retains and develops the very best talent. 
 
As JM executes its strategy, we are driving a period of transformative 
 change to build an organisation which is more market focused, lean and 
 agile, and a fulfilling place for our employees to work. Our people 
 investments over the past few years have laid the foundations and we 
 are now in a strong position to leverage these to accelerate change 
 and reshape the way we work, in line with our strategy and vision. 
 
With the appropriate culture we can accelerate the change required to 
 execute our strategy. Over the past 18 months we have engaged all levels 
 of our organisation and external stakeholders to shape our culture ambition, 
 aligning it to our vision and values and setting ourselves up for the 
 future. 
 
We regularly conduct an employee survey, known as yourSay, to know whether 
 our employees are engaged with what we are doing and feel enabled to 
 do their job well. Following a mixed outcome when we remeasured in 2018 
 we have invested significant energy to start to address the key issues. 
 Our most recent 2019 pulse survey shows significant improvement on engagement 
 (up 4 points to 63) with step change improvements in trust in leadership 
 and pride in the organisation. We have also seen engagement of our longer 
 serving employees increase significantly. Our efforts to cascade clear 
 priorities, recognise employees' efforts, prioritise wellbeing and maintain 
 efforts on career and personal development conversations have all had 
 a positive impact. However, enablement in our 2019 survey remained flat 
 at 63. While the survey reveals that employees feel their work is more 
 challenging, stimulating and fulfilling, there are employees at some 
 of our sites who feel barriers are getting in the way of their productivity. 
 This is valuable feedback that we are factoring into how we organise 
 our operating models, aiming for a leaner and less complex organisation. 
 
Sustainable business framework to 2025 
The route to a more sustainable future brings many challenges that must 
 be tackled - challenges driven by global trends. In setting our vision 
 for a cleaner, healthier world, we have made it our business to use 
 our leading edge science for the creation of sustainable technologies 
 that address these challenges. 
 
Sustainability is therefore an integral part of our company, our strategy, 
 and the decisions we take. Our sustainable business framework embeds 
 our vision for a cleaner, healthier world through all aspects of our 
 business and supply chains so that as we execute our strategy, we do 
 so with a full understanding of the impact on people and planet. We 
 have six challenging goals to 2025 against which we measure progress 
 towards our vision. Through these goals, we continue our sustainability 
 commitment internally and externally towards our customers, communities 
 and supply chains. Goals 1, 2 and 3 are internal measures to: improve 
 health and safety performance; support employee engagement and inclusivity; 
 and reduce the environmental impact of our operations. Goals 4, 5 and 
 6 are externally facing and cover: responsible sourcing; increasing 
 the impact of our products on a cleaner healthier world; and community 
 engagement through employee volunteering. Further details of this framework, 
 goals and their associated targets will be outlined in our 2020 Annual 
 Report and Accounts which will be published on 23(rd) June 2020. 
 

Consolidated Income Statement

for the year ended 31(st) March 2020

 
 
                                                                         2020         2019 
                                                           Notes  GBP million  GBP million 
 
Revenue                                                        3       14,577       10,745 
Cost of sales                                                        (13,576)      (9,729) 
                                                                  -----------  ----------- 
Gross profit                                                            1,001        1,016 
Distribution costs                                                      (126)        (126) 
Administrative expenses                                                 (313)        (316) 
Net impairment losses on trade and contract receivables                  (23)          (8) 
Profit / (loss) on disposal of businesses                      4            2         (12) 
Loss on significant legal proceedings                          4            -         (17) 
Amortisation of acquired intangibles                           4         (13)         (14) 
Major impairment and restructuring charges                     4        (140)            8 
                                                                  -----------  ----------- 
Operating profit                                               4          388          531 
Finance costs                                                           (195)        (107) 
Finance income                                                            109           64 
Share of profit of joint venture and associate                              3            - 
Profit before tax                                                         305          488 
Tax expense                                                              (50)         (75) 
                                                                  -----------  ----------- 
Profit for the year                                                       255          413 
                                                                  -----------  ----------- 
 
                                                                        pence        pence 
 
Earnings per ordinary share 
 Basic                                                                  132.3        215.2 
 Diluted                                                                132.1        214.6 
 
 

Consolidated Statement of Total Comprehensive Income

for the year ended 31(st) March 2020

 
 
                                                                        2020         2019 
                                                          Notes  GBP million  GBP million 
 
Profit for the year                                                      255          413 
                                                                 -----------  ----------- 
Other comprehensive income 
 Items that will not be reclassified to the income 
  statement 
 Remeasurements of post-employment benefit assets 
  and liabilities                                             6           87         (69) 
 Fair value losses on equity investments at fair 
  value through other 
    comprehensive income                                                 (2)          (3) 
 Tax on items that will not be reclassified to the 
  income statement                                                      (21)           13 
                                                                 -----------  ----------- 
                                                                          64         (59) 
                                                                 -----------  ----------- 
 Items that may be reclassified to the income statement 
 Exchange differences on translation of foreign 
  operations                                                              65           22 
 Fair value losses on other investments at fair 
  value through other 
    comprehensive income                                                   -          (1) 
 Amounts credited to hedging reserve                                       -            4 
 Fair value losses on net investment hedges                              (8)          (1) 
                                                                          57           24 
                                                                 -----------  ----------- 
Other comprehensive income for the year                                  121         (35) 
                                                                 -----------  ----------- 
Total comprehensive income for the year                                  376          378 
                                                                 -----------  ----------- 
 
 
 

Consolidated Balance Sheet

as at 31(st) March 2020

 
 
                                                                       2020         2019 
                                                         Notes  GBP million  GBP million 
 
Assets 
Non-current assets 
Property, plant and equipment                                         1,403        1,271 
Right-of-use assets                                                      88            - 
Goodwill                                                                580          578 
Other intangible assets                                                 396          336 
Investments in joint venture and associate                               23           20 
Investments at fair value through other comprehensive 
income                                                                   49           52 
Other receivables                                                        63           39 
Interest rate swaps                                                      34           13 
Deferred tax assets                                                      66           58 
Post-employment benefit net assets                           6          317          209 
                                                                -----------  ----------- 
Total non-current assets                                              3,019        2,576 
                                                                -----------  ----------- 
 
Current assets 
Inventories                                                           1,902        1,316 
Current tax assets                                                       31           37 
Trade and other receivables                                           2,077        1,553 
Cash and cash equivalents -- cash and deposits                          112           90 
Cash and cash equivalents -- money market funds                         192          347 
Other financial assets                                                   28           22 
Assets held for sale                                                      -            7 
                                                                -----------  ----------- 
Total current assets                                                  4,342        3,372 
                                                                -----------  ----------- 
Total assets                                                          7,361        5,948 
                                                                -----------  ----------- 
 
Liabilities 
Current liabilities 
Trade and other payables                                            (2,745)      (1,647) 
Lease liabilities                                                      (12)            - 
Current tax liabilities                                               (106)        (130) 
Cash and cash equivalents -- bank overdrafts                           (31)         (59) 
Borrowings and related swaps                                          (331)        (184) 
Other financial liabilities                                            (50)         (13) 
Provisions                                                             (11)         (20) 
Total current liabilities                                           (3,286)      (2,053) 
                                                                -----------  ----------- 
 
Non-current liabilities 
Borrowings and related swaps                                          (994)      (1,073) 
Lease liabilities                                                      (64)            - 
Deferred tax liabilities                                               (74)         (91) 
Employee benefit obligations                                 6        (104)        (106) 
Provisions                                                              (9)          (9) 
Other payables                                                          (6)          (5) 
                                                                -----------  ----------- 
Total non-current liabilities                                       (1,251)      (1,284) 
                                                                -----------  ----------- 
Total liabilities                                                   (4,537)      (3,337) 
                                                                -----------  ----------- 
Net assets                                                            2,824        2,611 
                                                                -----------  ----------- 
 
Equity 
Share capital                                                           221          221 
Share premium                                                           148          148 
Shares held in employee share ownership trust 
 (ESOT)                                                                (32)         (45) 
Other reserves                                                          142           87 
Retained earnings                                                     2,345        2,200 
                                                                -----------  ----------- 
Total equity                                                          2,824        2,611 
                                                                -----------  ----------- 
 
 

Note: GBP0.5 billion increase in precious metal inventories on higher volumes and metal price increases; GBP0.4 billion increase in amounts receivable under precious metal sale and repurchase agreements; GBP1.0 billion increase in amounts payable under precious metal sale and repurchase agreements.

The accounts were approved by the Board of Directors on 11(th) June 2020 and signed on its behalf by:

R J MacLeod

A O Manz

Consolidated Cash Flow Statement

for the year ended 31(st) March 2020

 
 
                                                                    2020         2019 
                                                      Notes  GBP million  GBP million 
 
Cash flows from operating activities 
Profit before tax                                                    305          488 
Adjustments for: 
 Share of profit of joint venture and associate                      (3)            - 
 (Profit) / loss on disposal of businesses                           (2)           12 
 Depreciation                                                        154          142 
 Amortisation                                                         24           29 
 Impairment losses / (reversals)                                     146          (7) 
 Loss on sale of non-current assets                                    5            2 
 Share-based payments                                                (1)           10 
 Increase in inventories (1)                                       (575)        (394) 
 Increase in receivables (2)                                       (541)        (246) 
 Increase in payables (3)                                          1,115          416 
 Decrease in provisions                                              (6)         (24) 
 Contributions in excess of employee benefit obligations 
  charge                                                            (24)         (40) 
 Changes in fair value of financial instruments                       24          (2) 
 Net finance costs                                                    86           43 
Income tax paid                                                    (109)         (95) 
                                                             -----------  ----------- 
Net cash inflow from operating activities                            598          334 
                                                             -----------  ----------- 
 
Cash flows from investing activities 
Interest received                                                    104           61 
Purchases of property, plant and equipment                         (332)        (215) 
Purchases of intangible assets                                     (111)         (86) 
Proceeds from sale of assets held for sale                             7            - 
Proceeds from sale of non-current assets                               1            1 
Proceeds from sale of businesses                                       -            2 
                                                             -----------  ----------- 
Net cash outflow from investing activities                         (331)        (237) 
                                                             -----------  ----------- 
 
Cash flows from financing activities 
Proceeds from borrowings                                             135          245 
Repayment of borrowings                                            (123)          (2) 
Dividends paid to equity shareholders                     5        (167)        (156) 
Settlement of currency swaps                                           -          (2) 
Interest paid                                                      (202)        (108) 
Principal element of lease payments                                 (13)            - 
                                                             -----------  ----------- 
Net cash outflow from financing activities                         (370)         (23) 
                                                             -----------  ----------- 
 
(Decrease) / increase in cash and cash equivalents                 (103)           74 
Exchange differences on cash and cash equivalents                    (2)            - 
Cash and cash equivalents at beginning of year                       378          304 
Cash and cash equivalents at end of year                             273          378 
                                                             -----------  ----------- 
 
Cash and deposits                                                    112           90 
Money market funds                                                   192          347 
Bank overdrafts                                                     (31)         (59) 
                                                             -----------  ----------- 
Cash and cash equivalents                                            273          378 
                                                             -----------  ----------- 
 
(1) GBP0.5 billion increase in precious metal inventories on higher 
 volumes and metal price increases. 
 (2) GBP0.4 billion increase in amounts receivable under precious metal 
 sale and repurchase agreements. 
 (3) GBP1.0 billion increase in amounts payable under precious metal 
 sale and repurchase agreements. 
 

Consolidated Statement of Changes in Equity

for the year ended 31(st) March 2020

 
 
                                                   Share       Shares 
                                                                 held 
                                      Share      premium           in        Other     Retained        Total 
                                    capital      account         ESOT     reserves     earnings       equity 
                                GBP million  GBP million  GBP million  GBP million  GBP million  GBP million 
 
At 1(st) April 2018                     221          148         (48)           62        1,995        2,378 
Total comprehensive income                -            -            -           21          357          378 
Dividends paid (note 5)                   -            -            -            -        (156)        (156) 
Share-based payments                      -            -            -            -           17           17 
Cost of shares transferred 
 to employees                             -            -            3            -         (10)          (7) 
Tax on share-based payments               -            -            -            -            1            1 
Reclassification                          -            -            -            4          (4)            - 
                                -----------  -----------  -----------  -----------  -----------  ----------- 
At 31(st) March 2019                    221          148         (45)           87        2,200        2,611 
Impact of adoption of IFRIC 
 23                                       -            -            -            -            5            5 
                                -----------  -----------  -----------  -----------  -----------  ----------- 
At 31(st) March 2019 
 (restated)                             221          148         (45)           87        2,205        2,616 
Total comprehensive income                -            -            -           55          321          376 
Dividends paid (note 5)                   -            -            -            -        (167)        (167) 
Share-based payments                      -            -            -            -            5            5 
Cost of shares transferred 
 to employees                             -            -           13            -         (19)          (6) 
At 31(st) March 2020                    221          148         (32)          142        2,345        2,824 
                                -----------  -----------  -----------  -----------  -----------  ----------- 
 
 

Notes on the Preliminary Accounts

for the year ended 31(st) March 2020

 
1  Preparation 
 
 

Basis of preparation and statement of compliance

The financial information contained in this release does not constitute the company's statutory accounts for the years ended 31(st) March 2020 or 31(st) March 2019 within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts. The accounts are prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee or the Standing Interpretations Committee (SIC) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS. Except for the changes noted below, the accounting policies applied are set out in the Annual Report and Accounts for the year ended 31(st) March 2019.

COVID-19 has introduced unprecedented uncertainty to the market outlook and, in response to this, we have undertaken extensive reviews of our businesses and projections under a range of potential outcomes. The group has a robust funding position and has tested its performance under a deep recession scenario and stress tested with a more extreme very deep recession scenario. In both scenarios, we have sufficient headroom against committed facilities and key financial covenants in the going concern period.

Statutory accounts for 2019 have been delivered to the Registrar of Companies and those for 2020 will be delivered following the company's Annual General Meeting. The auditors, PwC, have reported on both sets of accounts. Their reports were unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statement under sections 498(2) or 498(3) of the Companies Act 2006. The accounts for the year ended 31(st) March 2020 were approved by the Board of Directors on 11(th) June 2020.

Changes in accounting policies

IFRS 16, Leases

IFRS 16 became applicable to the group on 1(st) April 2019 and the group changed its accounting policy as a result of adopting the new standard. The impact of the adoption of IFRS 16 and the group's new accounting policy in respect of leases are disclosed in note 11.

IFRIC 23, Uncertainty over Income Tax Treatments

IFRIC 23 became applicable to the group on 1(st) April 2019. The interpretation clarifies how to recognise and measure current and deferred income tax assets and liabilities where there is uncertainty over a tax treatment. The group has adopted IFRIC 23 retrospectively, with the cumulative effect of adoption, a GBP5 million decrease in tax provisions (including interest), recognised in reserves at 1(st) April 2019.

Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform

The group has early adopted the amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement, and IFRS 7, Financial Instruments: Disclosures, which relate to interbank offered rates (IBOR) reform and were endorsed by the EU on 6(th) January 2020. The replacement of benchmark interest rates, such as LIBOR and other IBOR, is a priority for global regulators. The amendments provide relief from applying specific hedge accounting requirements to hedge relationships directly affected by IBOR reform and have the effect that IBOR reform should generally not cause hedge accounting to terminate. There is no financial impact from the early adoption of these amendments.

The group has one IFRS 9 designated hedge relationship that is potentially impacted by IBOR reform: the 3.26% $150 million Bonds 2022 which have been swapped into floating rate US dollars. This swap references six-month US dollar LIBOR and uncertainty arising from the group's exposure to IBOR reform will cease when the swap matures in 2022. The implications on the wider business of IBOR reform will be assessed during the year.

Other amendments to accounting standards

The following amendments to existing standards were applicable to the group from 1(st) April 2019, but did not have a significant effect on its reported results or net assets:

   --     Amendments to IFRS 9: Prepayment Features with Negative Compensation; 
   --     Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures; 
   --     Amendments to IAS 19: Plan Amendment, Curtailment or Settlement; and 
   --     Annual Improvements to IFRS Standards 2015-2017 Cycle. 

Amendments to accounting standards that have been issued, but are not yet effective

The following amendments to existing standards are applicable to the group from 1(st) April 2020, but are not expected to have a significant effect on its reported results or net assets:

   --     Amendments to References to the Conceptual Framework in IFRS Standards; and 
   --     Amendments to IAS 1 and IAS 8: Definition of Material. 

Non-GAAP measures

The group uses various measures to manage its business which are not defined by generally accepted accounting principles (GAAP). The group's management believes these measures provide valuable additional information to users of the accounts in understanding the group's performance. The group's non-GAAP measures are defined and reconciled to GAAP measures in note 12.

 
2   Segmental information 
    Revenue, sales, underlying operating profit and net assets by 
     sector 
    Year ended 
    31(st) March 
    2020 
                                   Efficient 
                          Clean      Natural                       New 
                            Air    Resources       Health      Markets    Corporate  Eliminations        Total 
                    GBP million  GBP million  GBP million  GBP million  GBP million   GBP million  GBP million 
 
 Revenue from 
  external 
  customers               6,172        7,670          229          506            -             -       14,577 
 Inter-segment 
  revenue                     1        4,291            -            6            -       (4,298)            - 
                    -----------  -----------  -----------  -----------  -----------  ------------  ----------- 
 Revenue                  6,173       11,961          229          512            -       (4,298)       14,577 
                    -----------  -----------  -----------  -----------  -----------  ------------  ----------- 
 
 External sales           2,617          945          223          385            -             -        4,170 
 Inter-segment 
  sales                       1          134            -            4            -         (139)            - 
                    -----------  -----------  -----------  -----------  -----------  ------------  ----------- 
 Sales(1)                 2,618        1,079          223          389            -         (139)        4,170 
                    -----------  -----------  -----------  -----------  -----------  ------------  ----------- 
 
 Underlying 
  operating 
  profit(1)                 295          256           27          (1)         (38)             -          539 
                    -----------  -----------  -----------  -----------  -----------  ------------  ----------- 
 
 Segmental net 
  assets                  1,361        1,267          520          236          332             -        3,716 
                    -----------  -----------  -----------  -----------  -----------  ------------ 
 
 Net debt (note 12)                                                                       (1,094) 
 Post-employment benefit net 
  assets 
  and liabilities                                                                             213 
 Deferred tax net liabilities                                                                 (8) 
 Provisions and non-current other payables                                                   (26) 
 Investments in 
  joint venture 
  and associate                                                                                23 
 
 Net assets                                                                                 2,824 
                                                                                     ------------ 
 
 
 
 Year ended 31(st) March 2019 
 
                                      Efficient 
                             Clean      Natural                       New 
                               Air    Resources       Health      Markets    Corporate  Eliminations       Total 
                                                                                                             GBP 
                       GBP million  GBP million  GBP million  GBP million  GBP million   GBP million     million 
 
 Revenue from 
  external customers         4,948        5,074          259          464            -             -      10,745 
 Inter-segment 
  revenue                      210        2,608           -             9            -       (2,827)           - 
                       -----------  -----------  -----------  -----------  -----------  ------------  ---------- 
 Revenue                     5,158        7,682          259          473            -       (2,827)      10,745 
                       -----------  -----------  -----------  -----------  -----------  ------------  ---------- 
 
 External sales              2,719          880          256          359            -            -        4,214 
 Inter-segment sales             1          111            1            3            -         (116)           - 
                       -----------  -----------  -----------  -----------  -----------  ------------  ---------- 
 Sales(1)                    2,720          991          257          362            -         (116)       4,214 
                       -----------  -----------  -----------  -----------  -----------  ------------  ---------- 
 
 Underlying operating 
  profit(1)                    393          181           43            2         (53)             -         566 
                       -----------  -----------  -----------  -----------  -----------  ------------  ---------- 
 
 Segmental net assets      1,339          1,243          496          235          108             -       3,421 
                       -----------  -----------  -----------  -----------  -----------  ------------ 
 
 Net debt (note 12)                                                                                        (866) 
 Post-employment benefit net 
  assets 
  and liabilities                                                                                            103 
 Deferred tax net 
  liabilities                                                                                               (33) 
 Provisions and 
  non-current 
  other payables                                                                                            (34) 
 Investments in joint 
  venture 
  and associate                                                                                               20 
 
 
 Net assets                                                                                                2,611 
                                                                                                      ---------- 
 
 (1) Sales and underlying operating profit are non-GAAP measures (see 
  note 12). Underlying operating profit excludes profit or loss on disposal 
  of businesses, gain or loss on significant legal proceedings, together 
  with associated legal costs, amortisation of acquired intangibles and 
  major impairment and restructuring charges. 
 
 
 
 Impact of exchange rate movements on sales and underlying operating 
  profit by sector 
 
 
 The main impact of exchange rate movements on sales and underlying 
  operating profit is from the translation of the results of foreign 
  operations into sterling. 
 
 Average exchange rates 
                                                                                        2020      2019 
 
 US dollar / GBP                                                                       1.271     1.310 
 Euro / GBP                                                                            1.143     1.134 
 Chinese renminbi / GBP                                                                 8.85      8.81 
                                                                                ------------  -------- 
 
 
                                                                    Year ended 31(st)           Change 
                                               Year ended               March 2019                  at 
                                                   31(st)              At last       At this      this 
                                                    March               year's        year's    year's 
                                                     2020                rates         rates     rates 
                                              GBP million          GBP million   GBP million         % 
 
 
     Clean Air                                      2,618                2,720         2,739        -4 
     Efficient Natural Resources                    1,079                  991         1,002        +8 
     Health                                           223                  257           262       -15 
     New Markets                                      389                  362           363        +7 
     Inter-segment sales                            (139)                (116)         (116) 
                                          ---------------  -------------------   ----------- 
     Sales(1)                                       4,170                4,214         4,250        -2 
                                          ---------------  -------------------   ----------- 
 
 
     Clean Air                                        295                  393           395       -25 
     Efficient Natural Resources                      256                  181           183       +40 
     Health                                            27                   43            44       -38 
     New Markets                                      (1)                    2             3       n/a 
     Corporate                                       (38)                 (53)          (54) 
                                          ---------------  -------------------   ----------- 
     Underlying operating profit(1)                   539                  566           571        -6 
                                          ---------------  -------------------   ----------- 
 
 
     (1) Sales and underlying operating profit are non-GAAP measures 
      (see note 12). Underlying operating profit excludes profit or loss 
      on disposal 
      of businesses, gain or loss on significant legal proceedings, together 
      with associated legal costs, amortisation of acquired intangibles 
      and 
      major impairment and restructuring charges. 
 
 
 
 
 3    Revenue 
 
      Revenue from external customers by principal 
       products and services 
 
      Year ended 31(st) March 2020 
                                                     Efficient 
                                           Clean       Natural 
                                             Air     Resources        Health   New Markets         Total 
                                     GBP million   GBP million   GBP million   GBP million   GBP million 
 
 
 
  Metal                                    3,555         6,725             6           121        10,407 
  Heavy Duty Catalysts                       831             -             -             -           831 
  Light Duty Catalysts                     1,742             -             -             -         1,742 
  Catalyst Technologies                        -           513             -             -           513 
  Platinum Group Metal 
   Services                                    -           298             -             -           298 
  Advanced Glass 
   Technologies                                -            70             -             -            70 
  Diagnostic Services                          -            64             -             -            64 
  Generics                                     -             -           134             -           134 
  Innovators                                   -             -            89             -            89 
  Alternative Powertrain                       -             -             -           237           237 
  Medical Device Components                    -             -             -            71            71 
  Life Science 
   Technologies                                -             -             -            47            47 
  Other                                       44             -             -            30            74 
 
 
 
  Revenue                                  6,172         7,670           229           506        14,577 
                                    ------------  ------------  ------------  ------------  ------------ 
 
 
 
      Year ended 31(st) March 2019 
                                                     Efficient 
                                           Clean       Natural 
                                             Air     Resources        Health   New Markets           Total 
                                     GBP million   GBP million   GBP million   GBP million     GBP million 
                                    ------------  ------------  ------------  ------------  -------------- 
      Metal                                2,229         4,194             3           105           6,531 
      Heavy Duty Catalysts                   938             -             -             -             938 
      Light Duty Catalysts                 1,737             -             -             -           1,737 
      Catalyst Technologies                    -           504             -             -             504 
      Platinum Group Metal 
       Services                                -           233             -             -             233 
      Advanced Glass 
       Technologies                            -            75             -             -              75 
      Diagnostic Services                      -            68             -             -              68 
      Generics                                 -             -           171             -             171 
      Innovators                               -             -            85             -              85 
      Alternative Powertrain                   -             -             -           206             206 
      Medical Device Components                -             -             -            70              70 
      Life Science 
       Technologies                            -             -             -            46              46 
      Other                                   44             -             -            37              81 
 
 
 
      Revenue                              4,948         5,074           259           464          10,745 
 
 
 
 
 
 
4   Operating profit 
 
                                                                                                   2020           2019 
                                                                                            GBP million    GBP million 
 
 
 
    Operating profit is arrived at after charging / (crediting): 
 
 Past service credit                                                                               (20)           (9) 
                                                                                            -----------  ------------- 
 
 Depreciation of property, plant and equipment                                                      140            142 
 Depreciation of right-of-use assets                                                                 14              - 
                                                                                            -----------  ------------- 
 
 
 Depreciation                                                                                       154            142 
                                                                                            -----------  ------------- 
 
 Amortisation of internally generated intangible assets 
  included in cost of sales                                                                           3              6 
    Amortisation of other intangible assets included in: 
                                                              - cost of sales                         1              2 
                                                              - distribution costs                    1              1 
                                                              - administrative expenses               7              6 
                                                              - amortisation of 
                                                               acquired 
                                                               intangibles                           12             14 
                                                                                            -----------  ------------- 
 
 
 
 Amortisation                                                                                        24             29 
                                                                                            -----------  ------------- 
 
    Impairment losses / (reversals) included in administrative 
     expenses: 
                                                              - other intangible assets               1              - 
                                                              - property, plant and 
                                                               equipment                              9              2 
                                                              - borrowings and related 
                                                               swaps                                  -            (2) 
    Impairment losses included in amortisation of acquired 
     intangibles: 
                                                              - other intangible assets               1              - 
    Impairment losses / (reversals) included in major 
     impairment and restructuring charges: 
                                                              - goodwill                              7              - 
                                                              - other intangible assets              31              - 
                                                              - property, plant and 
                                                               equipment                             90            (7) 
                                                              - right-of-use assets                   1              - 
                                                              - inventories                         (3)              - 
                                                              - trade and other 
                                                               receivables                            9              - 
 
 
 Impairment losses / (reversals)                                                                    146            (7) 
                                                                                            -----------  ------------- 
 
 
 

The following items are shown separately on the face of the income statement:

- Profit or loss on disposal of businesses The group released a residual provision for environmental liabilities of GBP2 million which had originally been recognised in respect of the disposal of Johnson Matthey Gold and Silver Refining Holdings in March 2015. The time limit on claims was five years and no claims have been received. In the prior year, the group sold its water disinfection business, Miox. After costs, the net proceeds were GBP2 million which resulted in a loss on sale of GBP12 million.

- Gain or loss on significant legal proceedings In April 2019, the group paid GBP17 million in respect of a settlement with a customer on mutually acceptable terms with no admission of fault relating to failures in certain engine systems for which it supplied a component in the US. The settlement was recognised in the prior year on the basis that it confirmed that the group had a present obligation at the prior year end.

- Amortisation of acquired intangibles Amortisation and impairment of intangible assets which arose on the acquisition of businesses totalled GBP13 million (2019: GBP14 million).

- Major impairment and restructuring charges The group recognised the following impairments during the year:

o Clean Air manufacturing plants Investment in new manufacturing plants in Europe and Asia has allowed the Clean Air sector to consolidate its existing capacity into new, more efficient plants. Specifically, we plan to restructure three of our manufacturing plants. As a result, the carrying value of one of the plants has been impaired, by GBP42 million to GBP24 million, based on a fair value less costs of disposal assessment, with our assessment of the market value of the plant based on internal data (level 3 inputs - see note 7 for the fair value hierarchy). The other two plants have been impaired by GBP17 million to GBP3 million and by GBP2 million to GBPnil based on a value in use assessment, with discount rates of 13% and 38%, respectively. The impairment comprises intangible assets (GBP6 million) and property, plant and equipment (GBP55 million).

o Battery Materials LFP business We are focusing our science and innovative solutions on cathode materials that are truly market leading, principally eLNO, our ultra-high energy density cathode material and, in addition, our higher performing lithium iron phosphate (LFP). Sales of LFP declined during the year and we are now refocusing our LFP business on the high value segment of the market to better support our eLNO customers and the development of that business. These changes mean that the carrying value of the Battery Materials LFP cash-generating unit has been impaired, by GBP57 million, to GBP3 million based on a value in use assessment. The impairment comprises goodwill (GBP7 million), intangible assets (GBP5 million), property, plant and equipment (GBP35 million), right-of-use assets (GBP1 million) and trade and other receivables (GBP9 million). The recoverable amount of GBP3 million reflects residual working capital balances. The discount rate for the purposes of the value in use assessment was 10.7% (2019: 11.9%).

o Health capitalised development expenditure During the year, a fundamental review of the Health sector's new product introduction process was undertaken to determine how the business will deliver its strategic plan. The organisation was restructured and new employees were recruited to strengthen the sector's technical capabilities. A detailed review of each molecule was performed which considered all assumptions, including market size, number of competitors, molecular process design and technical feasibility. The assessment resulted in the determination to reprioritise the molecules in the pipeline, focusing on the optimal number of projects to sustain a consistent and predictable new product launch process. Consequently, the development of 21 molecules in the pipeline has been terminated. Development expenditure which had been capitalised in respect of the terminated molecules totalling GBP20 million has been written off during the year. With a focus on fewer molecules, we have made further progress towards delivering an additional c.GBP100 million of operating profit from our pipeline of generic and innovator active pharmaceutical ingredients.

In addition to the impairments recognised during the year, consultancy costs of GBP5 million were incurred in respect of the major restructuring initiatives announced in June 2020 and a write off of inventories of GBP3 million recognised in the Health sector as part of the group's operational efficiency programme announced in March 2017 was released.

In the prior year, GBP7 million of a prior year impairment of the Health sector's Riverside site was reversed and, in September 2019, the site was sold, with no gain or loss on disposal.

 
5  Dividends 
 
 

A final dividend of 31.125 pence per ordinary share has been proposed by the board which will be paid on 4(th) August 2020 to shareholders on the register at the close of business on 19(th) June 2020, subject to shareholders' approval. The estimated amount to be paid is GBP60 million and has not been recognised in these accounts.

 
                                                                2020         2019 
                                                         GBP million  GBP million 
 
 2017/18 final ordinary dividend paid -- 58.25 
  pence per share                                                  -          112 
 2018/19 interim ordinary dividend paid -- 
  23.25 pence per share                                            -           44 
 2018/19 final ordinary dividend paid -- 62.25 
  pence per share                                                120            - 
 2019/20 interim ordinary dividend paid -- 
  24.50 pence per share                                           47            - 
 Total dividends                                                 167          156 
                                                         -----------  ----------- 
 
 
6  Post-employment benefits 
 
 

Background

The group operates a number of post-employment benefit plans around the world, the forms and benefits of which vary with conditions and practices in the countries concerned. The major defined benefit plans are pension plans and post-retirement medical plans in the UK and the US.

 
      Financial 
      assumptions 
 
                         2020      2020        2020      2019                  2019      2019 
                                              Other                                     Other 
                      UK plan  US plans       plans   UK plan              US plans     plans 
                            %         %           %         %                     %         % 
 
 
      First year's 
       rate of 
       increase 
       in salaries          -         -        2.15      3.85                  3.00      2.45 
      Ultimate rate 
       of increase 
       in 
       salaries          2.60      3.00        2.15      3.85                  3.00      2.45 
      Rate of 
       increase in 
       pensions 
       in payment        2.50         -        1.70      2.95                     -      1.50 
      Discount rate      2.30      3.00        1.87      2.40                  3.80      1.82 
      Inflation                    2.20        1.65                            2.20      1.60 
      - UK Retail 
       Prices Index 
       (RPI)             2.50                            3.10 
      - UK Consumer 
       Prices Index 
       (CPI)             1.85                            2.10 
 
 Financial 
 information 
 Movements in the net post-employment benefit assets and liabilities, 
  including reimbursement rights, were: 
                                           UK post-              US post- 
                           UK        UK  retirement            retirement 
                      pension   pension 
                            -         - 
                       legacy      cash     medical        US     medical 
                                balance 
                      section   section    benefits  pensions    benefits     Other     Total 
                          GBP       GBP         GBP       GBP         GBP       GBP       GBP 
                      million   million     million   million     million   million   million 
 At 1(st) April 
  2019                    199       (1)         (9)      (15)        (29)      (38)       107 
 Current service 
  cost - in 
  operating profit        (8)      (21)           -       (8)         (1)       (3)      (41) 
 Past service 
  credit - in 
  operating profit          -         -           -         -          10        10        20 
 Administrative 
  expenses - 
  in operating 
  profit                  (3)         -           -       (1)           -         -       (4) 
 Interest                   5         -           -       (1)         (1)       (1)         2 
 Remeasurements            86         6         (3)         3         (7)         2        87 
 Company 
  contributions            27        19           -         -           3         3        52 
 Exchange                   -         -           -       (2)         (2)       (1)       (5) 
 At 31(st) March 
  2020                    306         3        (12)      (24)        (27)      (28)       218 
 
 

A past service credit of GBP10 million has been recognised in underlying operating profit in respect of changes to the Johnson Matthey Inc. Post-retirement Welfare Plan, effective 1(st) January 2020. A past service credit of GBP10 million has been recognised in underlying operating profit in respect of changes to the group's Advanced Glass Technologies Netherlands defined benefit pension plan, effective 1(st) January 2020.

The net remeasurement gain in the legacy section of the UK pension plan during the year ended 31(st) March 2020 includes a gain due to changes in financial assumptions mainly reflecting a 60 basis point decrease in inflation, partly offset by a loss due to changes in demographic assumptions reflecting updated mortality assumptions.

 
 The post-employment benefit assets and liabilities are included in 
  the balance sheet as follows: 
 
                                   2020         2020         2020         2019         2019         2019 
                                  Post-                                  Post- 
                             employment     Employee                employment     Employee 
                                             benefit                                benefit 
                                benefit          net                   benefit          net 
                             net assets  obligations        Total   net assets  obligations        Total 
                            GBP million  GBP million  GBP million  GBP million  GBP million  GBP million 
 UK pension - legacy 
  section                           306            -          306          199            -          199 
 UK pension - cash balance 
  section                             3            -            3            -          (1)          (1) 
 UK post-retirement 
  medical 
  benefits                            -         (12)         (12)            -          (9)          (9) 
 US pensions                          -         (24)         (24)            -         (15)         (15) 
 US post-retirement 
  medical 
  benefits                            7         (34)         (27)            8         (37)         (29) 
 Other                                1         (29)         (28)            2         (40)         (38) 
 Total post-employment 
  plans                             317         (99)          218          209        (102)          107 
 Other long term employee 
  benefits                                       (5)                                    (4) 
 Total long term employee benefit 
  obligations                                  (104)                                  (106) 
 
 
7  Fair values 
 

Fair value hierarchy

Fair values are measured using a hierarchy where the inputs are:

   --     Level 1 -- quoted prices in active markets for identical assets or liabilities. 

-- Level 2 -- not level 1 but are observable for that asset or liability either directly or indirectly.

   --     Level 3 -- not based on observable market data (unobservable). 

Fair value of financial instruments

Certain of the group's financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date.

The fair value of forward foreign exchange contracts, interest rate swaps, forward precious metal price contracts and currency swaps is estimated by discounting the future contractual cash flows using forward exchange rates, interest rates and prices at the balance sheet date.

The fair value of trade and other receivables measured at fair value is the face value of the receivable less the estimated costs of converting the receivable into cash.

The fair value of money market funds is calculated by multiplying the net asset value per share by the investment held at the balance sheet date.

There were no transfers of any financial instrument between the levels of the fair value hierarchy during the current or prior years.

 
                                                                                   Fair value 
                                                                2020         2019   hierarchy 
                                                         GBP million  GBP million     Level 
 Financial instruments measured at fair 
  value 
 
 Non-current 
 Investments at fair value through other 
  comprehensive income                                            49           52      1 
 Interest rate swaps                                              34           13      2 
 Borrowings and related 
  swaps                                                          (6)          (5)      2 
 
 Current 
 Trade receivables(1)                                            328          173      2 
 Other receivables(2)                                             72            9      2 
 Cash and cash equivalents - money market 
  funds                                                          192          347      2 
 Other financial 
  assets (3)                                                      28           22      2 
 Other financial 
  liabilities (3)                                               (50)         (13)      2 
 
 Financial instruments not measured at fair 
  value 
 
 Non-current 
 Borrowings and related swaps                                  (988)      (1,068) 
 Lease liabilities                                              (64)            - 
 
 Current 
 Cash and cash equivalents - cash and deposits                   112           90 
 Cash and cash equivalents - bank overdrafts                    (31)         (59) 
 Borrowings and related swaps                                  (331)        (184) 
 Lease liabilities                                              (12)            - 
 
 (1) Trade receivables held in a part of the group with a business 
  model to hold trade receivables for collection or sale. The remainder 
  of the group operates a hold to collect business model and receives 
  the face value, plus relevant interest, of its trade receivables 
  from the counterparty without otherwise exchanging or disposing 
  of such instruments. 
  (2) Other receivables with cash flows that do not represent solely 
  the payment of principal and interest. 
  (3) Includes forward foreign exchange contracts, forward precious 
  metal price contracts and currency swaps. 
 
 
 The fair value of financial instruments, excluding accrued interest, 
  is approximately equal to book value except for: 
 
                                                             2020                      2019 
                                                      Carrying         Fair     Carrying         Fair 
                                                        amount        value       amount        value 
                                                   GBP million  GBP million  GBP million  GBP million 
 
 
 US Dollar Bonds 2022, 2023, 2025 and 2028               (514)        (496)        (481)        (477) 
 Euro Bonds 2021, 2023, 2025 and 2028                    (264)        (247)        (251)        (264) 
 Euro EIB loan 2019                                          -            -        (107)        (108) 
 Sterling Bonds 2024 and 2025                            (110)        (108)        (110)        (118) 
 KfW US dollar loan 2024                                  (41)         (41)         (38)         (39) 
 
 
 

The fair values are calculated using level 2 inputs by discounting future cash flows to net present values using appropriate market interest rates prevailing at the year end.

 
8  Precious metal leases 
 
 

The group leases precious metals to fund temporary peaks in metal requirements provided market conditions allow. These leases are from banks for specified periods (less than 12 months) and the group pays a fee which is expensed on a straight-line basis over the lease term in finance costs. The group holds sufficient precious metal inventories to meet all the obligations under these lease arrangements as they fall due. At 31(st) March 2020, precious metal leases were GBP451 million (31(st) March 2019: GBP372 million) at year end prices.

 
9  Contingent liabilities 
 

The group is involved in various disputes and claims which arise from time to time in the course of its business including, for example, in relation to commercial matters, product quality or liability, employee matters and tax audits. The group is also involved from time to time in the course of its business in legal proceedings and actions, engagement with regulatory authorities and in dispute resolution processes. These are reviewed on a regular basis and, where possible, an estimate is made of the potential financial impact on the group. In appropriate cases a provision is recognised based on advice, best estimates and management judgement. Where it is too early to determine the likely outcome of these matters, no provision is made. Whilst the group cannot predict the outcome of any current or future such matters with any certainty, it currently believes the likelihood of any material liabilities to be low, and that such liabilities, if any, will not have a material adverse effect on its consolidated income, financial position or cash flows.

On a specific matter, the group previously disclosed that it had been informed by two customers of failures in certain engine systems for which the group supplied a particular coated substrate as a component for their customers' emissions after-treatment systems. The particular coated substrate was sold to only these two customers. The group has not been contacted by any regulatory authority about these engine system failures. The reported failures have not been demonstrated to be due to the coated substrate supplied by the group. As previously disclosed, we settled with one of these customers on mutually acceptable terms with no admission of fault.

Having reviewed its contractual obligations and the information currently available to it, the group believes it has defensible warranty positions in respect of its supplies of coated substrate for the after-treatment systems in the affected engines remaining at issue. If required, it will vigorously assert its available contractual protections and defences. The outcome of any discussions relating to the matters raised is not certain, nor is the group able to make a reliable estimate of the possible

financial impact at this stage, if any. The group works with all its customers to ensure appropriate product quality and we have not received claims in respect of our emissions after-treatment components from this or any other customer. Our vision is for a world that's cleaner and healthier; today and for future generations. We are committed to enabling improving air quality and we work constructively with our customers to achieve this.

 
10  Transactions with related parties 
 
 

There were no material changes in related party relationships in the year ended 31(st) March 2020 and no related party transactions have taken place which have materially affected the financial position or performance of the group during the year.

 
11  Changes in accounting policies 
 
 
 

This note explains the impact on the group's accounts of the adoption of IFRS 16, Leases, that has been applied from 1(st) April 2019.

IFRS 16 became effective from 1(st) April 2019, replacing IAS 17, Leases, and related interpretations. Whilst lessor accounting is similar to IAS 17, lessee accounting is significantly different. Under IFRS 16, the group recognises on the balance sheet a right-of-use asset and a lease liability for future lease payments in respect of all leases unless the underlying assets are of low value or the lease term is 12 months or less. In the income statement, rental expense on the impacted leases is replaced with depreciation on the right-of-use asset and interest expense on the lease liability.

It is unclear whether contracts entered into by the group to lease metal from third parties constitute leases as defined by IFRS 16. Specifically, it is not clear whether the leased metal represents a defined asset given its fungible nature. However, on the basis that there is no alternative accounting standard applicable to these transactions, the group has continued to recognise the expense in the income statement on a straight-line basis over the lease term, with no recognition on the balance sheet.

The group has applied the modified retrospective transition approach and has not restated comparative amounts for the year ended 31(st) March 2019. Under this approach, the group has chosen to measure right-of-use assets at 1(st) April 2019 at an amount equal to the lease liability as adjusted for lease prepayments, accrued lease expenses and onerous lease provisions.

The group has elected to adopt the following practical expedients on transition:

-- not to capitalise a right-of-use lease asset or lease liability where the lease expired before 31(st) March 2020;

   --      not to reassess contracts to determine if the contract contains a lease; 
   --      to utilise onerous lease provisions to reduce right-of-use asset values; 
   --      to use hindsight in determining the lease term; 
   --      to exclude initial direct costs from the measurement of the right-of-use asset; and 

-- to apply the portfolio approach when determining a discount rate where a group of leases has similar characteristics.

Impact of adoption on the group's primary statements

Income statement

Profit before tax has been reduced by approximately GBP1 million in the year ended 31(st) March 2020 as a result of adopting IFRS 16, with operating profit and finance costs increasing by GBP2 million and GBP3 million, respectively.

 
 Balance sheet 
 The following table shows the effect of adopting IFRS 16 on the 
  group's balance sheet at 1(st) April 2019: 
 
                                                                    GBP million 
 
 Non-current assets 
 Right-of-use assets                                                         89 
 Other receivables (1)                                                     (14) 
 Total non-current assets                                                    75 
 Total assets                                                                75 
 
 Current liabilities 
 Trade and other payables                                                     1 
 Lease liabilities                                                         (11) 
 Total current liabilities                                                 (10) 
 
 Non-current liabilities 
 Lease liabilities                                                         (66) 
 Provisions                                                                   1 
 Total non-current liabilities                                             (65) 
 Total liabilities                                                         (75) 
 Net assets                                                                   - 
 
 (1) Prepayments reclassified as right-of-use assets. 
 
 The weighted average incremental borrowing rate applied 
 to lease liabilities was 4.2%. 
 

Cash flow statement

There is no net cash flow impact from the adoption of IFRS 16 for the group. Lease payments of GBP16 million during the year ended 31(st) March 2020, including interest, are included in financing rather than operating activities in the consolidated cash flow statement.

Impact of adoption on the group's non-GAAP measures

The adoption of IFRS 16 has not had a material impact on the group's non-GAAP measures.

Reconciliation between operating lease commitments and lease liabilities

The following table reconciles between the operating lease commitments disclosed under IAS 17 at 31(st) March 2019 and the lease liabilities recognised in the group's balance sheet on transition to IFRS 16 at 1(st) April 2019:

 
 
                                                                 GBP million 
 Future minimum amounts payable under non-cancellable 
  operating leases reported under 
   IAS 17 at 31(st) March 2019                                            76 
 Change in assessment of lease term                                       22 
 Low-value or short-term leases                                          (1) 
 Reclassification of onerous lease provision                               1 
 Impact of discounting lease liabilities                                (21) 
 Lease liabilities recognised on transition to IFRS 
  16 at 1(st) April 2019                                                  77 
 
 
 
 Current                                                                  11 
 Non-current                                                              66 
 Lease liabilities recognised on transition to IFRS 
  16 at 1(st) April 2019                                                  77 
 
 

Accounting policy applied since 1(st) April 2019

Leases are recognised as a right-of-use asset, together with a corresponding lease liability, at the date at which the leased asset is available for use.

The right-of-use asset is initially measured at cost, which comprises the initial value of the lease liability, lease payments made (net of any incentives received from the lessor) before the commencement of the lease, initial direct costs and restoration costs. The right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term in operating profit.

The lease liability is initially measured as the present value of future lease payments discounted using the interest rate implicit in the lease or, where this rate is not determinable, the group's incremental borrowing rate, which is the interest rate the group would have to pay to borrow the amount necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Interest is charged to finance costs at a constant rate of interest on the outstanding lease liability over the lease term.

Payments in respect of short term leases, low-value leases and precious metal leases are charged to the income statement on a straight-line basis over the lease term in operating profit.

The group leases precious metals to fund temporary peaks in metal requirements provided market conditions allow. These leases are from banks for specified periods (less than 12 months) and the group pays a fee which is expensed on a straight-line basis over the lease term in finance costs. The group holds sufficient precious metal inventories to meet all the obligations under these lease arrangements as they fall due.

Accounting policy applied until 31(st) March 2019

Leases are classified as finance leases whenever they transfer substantially all the risks and rewards of ownership to the group. The assets are included in property, plant and equipment and the capital elements of the leasing commitments are shown as obligations under finance leases. The assets are depreciated on a basis consistent with similar owned assets or the lease term if shorter. The interest element of the lease rental is included in the income statement.

The group leases, rather than purchases, precious metals to fund temporary peaks in metal requirements provided market conditions allow. These leases are from banks for specified periods (typically a few months) and the group pays a fee which is expensed on a straight-line basis over the lease term in finance costs. The group holds sufficient precious metal inventories to meet all the obligations under these lease arrangements as they fall due.

All other leases are classified as operating leases and the lease costs are expensed on a straight-line basis over the lease term in operating profit.

 
12  Non-GAAP measures 
 
 
 

The group uses various measures to manage its business which are not defined by generally accepted accounting principles (GAAP). The group's management believes these measures provide valuable additional information to users of the accounts in understanding the group's performance. Certain of these measures are financial Key Performance Indicators which measure progress against our strategy.

Definitions

 
Measure               Definition                           Purpose 
Sales(1)              Revenue excluding sales              Provides a better measure 
                       of precious metals to customers      of the growth of the group 
                       and the precious metal content       as revenue can be heavily 
                       of products sold to customers.       distorted by year on year 
                                                            fluctuations in the market 
                                                            prices of precious metals 
                                                            and, in many cases, the value 
                                                            of precious metals is passed 
                                                            directly on to customers. 
Underlying operating  Operating profit excluding           Provides a measure of operating 
 profit(2)             non-underlying items.                profitability that is comparable 
                                                            over time. 
Underlying operating  Underlying operating profit          Provides a measure of how 
 profit margin(1,      divided by sales.                    we convert our sales into 
 2)                                                         underlying operating profit 
                                                            and the efficiency of our 
                                                            business. 
Underlying profit     Profit before tax excluding          Provides a measure of profitability 
 before tax(2)         non-underlying items.                that is comparable over time. 
Underlying profit     Profit for the year excluding        Provides a measure of profitability 
 for the year(2)       non-underlying items and             that is comparable over time. 
                       related tax effects. 
Underlying earnings   Underlying profit for the            Our principal measure used 
 per share(1,          year divided by the weighted         to assess the overall profitability 
 2)                    average number of shares             of the group. 
                       in issue. 
Return on invested    Underlying operating profit          Provides a measure of the 
 capital (ROIC)(1)     divided by average total             group's efficiency in allocating 
                       equity, excluding post tax           the capital under its control 
                       pension net assets, plus             to profitable investments. 
                       average net debt for the             The group has a long term 
                       same period.                         target of a return on invested 
                                                            capital of 20% to ensure focus 
                                                            on efficient use of the group's 
                                                            capital. 
Average working       Monthly average of non-precious      Provides a measure of efficiency 
 capital days          metal related inventories,           in the business with lower 
 (excluding precious   trade and other receivables          days driving higher returns 
 metals)(1)            and trade and other payables         and a healthier liquidity 
                       (including any classified            position for the group. 
                       as held for sale) divided 
                       by sales for the last three 
                       months multiplied by 90 
                       days. 
Free cash flow        Net cash flow from operating         Provides a measure of the 
                       activities after net interest        cash the group generates through 
                       paid, net purchases of non-current   its operations, less capital 
                       assets and investments,              expenditure. 
                       dividends received from 
                       joint venture and associate 
                       and the principal element 
                       of lease payments. 
Net debt (including   Net debt, including post             Provides a measure of the 
 post tax pension      tax pension deficits and             group's ability to repay its 
 deficits) to          quoted bonds purchased to            debt. The group has a long 
 underlying EBITDA     fund the UK pension (excluded        term target of net debt (including 
                       when the UK pension plan             post tax pension deficits) 
                       is in surplus) divided by            to underlying EBITDA of between 
                       underlying EBITDA for the            1.5 and 2.0 times, although 
                       same period.                         in any given year it may fall 
                                                            outside this range depending 
                                                            on future plans. 
 

(1) Key Performance Indicator

(2) Underlying profit measures are before profit or loss on disposal of businesses, gain or loss on significant legal proceedings, together with associated legal costs, amortisation of acquired intangibles, major impairment and restructuring charges and, where relevant, related tax effects. These items have been excluded by management as they are not deemed to be relevant to an understanding of the underlying performance of the business.

Notes on the Preliminary Accounts

for the year ended 31(st) March 2020

Underlying profit measures exclude the following non-underlying items which are shown separately on the face of the income statement:

- Profit or loss on disposal of businesses The group released a residual provision for environmental liabilities of GBP2 million which had originally been recognised in respect of the disposal of Johnson Matthey Gold and Silver Refining Holdings in March 2015. The time limit on claims was five years and no claims have been received. In the prior year, the group sold its water disinfection business, Miox. After costs, the net proceeds were GBP2 million which resulted in a loss on sale of GBP12 million.

- Gain or loss on significant legal proceedings In April 2019, the group paid GBP17 million in respect of a settlement with a customer on mutually acceptable terms with no admission of fault relating to failures in certain engine systems for which it supplied a component in the US. The settlement was recognised in the prior year on the basis that it confirmed that the group had a present obligation at the prior year end.

- Amortisation of acquired intangibles Amortisation and impairment of intangible assets which arose on the acquisition of businesses totalled GBP13 million (2019: GBP14 million).

- Major impairment and restructuring charges The group recognised the following impairments during the year:

o Clean Air manufacturing plants Investment in new manufacturing plants in Europe and Asia has allowed the Clean Air sector to consolidate its existing capacity into new, more efficient plants. Specifically, we plan to restructure three of our manufacturing plants. As a result, the carrying value of one of the plants has been impaired, by GBP42 million to GBP24 million, based on a fair value less costs of disposal assessment, with our assessment of the market value of the plant based on internal data (level 3 inputs - see note 7 for the fair value hierarchy). The other two plants have been impaired by GBP17 million to GBP3 million and by GBP2 million to GBPnil based on a value in use assessment, with discount rates of 13% and 38%, respectively. The impairment comprises intangible assets (GBP6 million) and property, plant and equipment (GBP55 million).

o Battery Materials LFP business We are focusing our science and innovative solutions on cathode materials that are truly market leading, principally eLNO, our ultra-high energy density cathode material and, in addition, our higher performing lithium iron phosphate (LFP). Sales of LFP declined during the year and we are now refocusing our LFP business on the high value segment of the market to better support our eLNO customers and the development of that business. These changes mean that the carrying value of the Battery Materials LFP cash-generating unit has been impaired, by GBP57 million, to GBP3 million based on a value in use assessment. The impairment comprises goodwill (GBP7 million), intangible assets (GBP5 million), property, plant and equipment (GBP35 million), right-of-use assets (GBP1 million) and trade and other receivables (GBP9 million). The recoverable amount of GBP3 million reflects residual working capital balances. The discount rate for the purposes of the value in use assessment was 10.7% (2019: 11.9%).

o Health capitalised development expenditure During the year, a fundamental review of the Health sector's new product introduction process was undertaken to determine how the business will deliver its strategic plan. The organisation was restructured and new employees were recruited to strengthen the sector's technical capabilities. A detailed review of each molecule was performed which considered all assumptions, including market size, number of competitors, molecular process design and technical feasibility. The assessment resulted in the determination to reprioritise the molecules in the pipeline, focusing on the optimal number of projects to sustain a consistent and predictable new product launch process. Consequently, the development of 21 molecules in the pipeline has been terminated. Development expenditure which had been capitalised in respect of the terminated molecules totalling GBP20 million has been written off during the year. With a focus on fewer molecules, we have made further progress towards delivering an additional c.GBP100 million of operating profit from our pipeline of generic and innovator active pharmaceutical ingredients.

In addition to the impairments recognised during the year, consultancy costs of GBP5 million were incurred in respect of the major restructuring initiatives announced in June 2020 and a write off of inventories of GBP3 million recognised in the Health sector as part of the group's operational efficiency programme announced in March 2017 was released.

In the prior year, GBP7 million of a prior year impairment of the Health sector's Riverside site was reversed and, in September 2019, the site was sold, with no gain or loss on disposal.

 
 
     Reconciliations to GAAP measures 
     Sales 
     See note 2. 
     Underlying profit measures 
                                                                                                        Profit 
                                                                                  Profit                   for 
                                                                  Operating       before          Tax      the 
                                                                     profit          tax      expense     year 
     Year ended 31(st) March                                                                               GBP 
      2020                                                      GBP million  GBP million  GBP million  million 
 
 
     Underlying                                                         539          455         (72)      383 
     Profit on disposal of businesses                                     2            2            -        2 
     Amortisation of acquired intangibles                              (13)         (13)            3     (10) 
     Major impairment and restructuring 
      charges                                                         (140)        (140)           16    (124) 
     Interest on non-underlying tax 
      provisions                                                          -            1            -        1 
     Change in non-underlying tax provisions                              -            -            3        3 
     Reported                                                           388          305         (50)      255 
 
 
                                                                                                        Profit 
                                                                                  Profit                   for 
                                                                  Operating       before          Tax      the 
                                                                     profit          tax      expense     year 
     Year ended 31(st)                                                                                     GBP 
      March 2019                                                GBP million  GBP million  GBP million  million 
 
     Underlying                                                         566          523         (83)      440 
     Loss on disposal of businesses                                    (12)         (12)            4      (8) 
     Loss on significant legal proceedings                             (17)         (17)            3     (14) 
     Amortisation of acquired intangibles                              (14)         (14)            3     (11) 
     Major impairment and restructuring 
      charges                                                             8            8          (2)        6 
     Reported                                                           531          488         (75)      413 
 
 
 
 Underlying earnings per share 
                                                                                    2020         2019 
 Underlying profit for the year (GBP 
  million)                                                                           383          440 
 Weighted average number of shares 
  in issue (number)                                                          192,437,993  192,128,811 
 Underlying earnings per 
 share (pence)                                                                     199.2        228.8 
 
 
 
 Return on invested capital (ROIC) 
 
                                                               2020         2019 
                                                        GBP million  GBP million 
 
 
 
 Underlying operating profit                                    539          566 
 
 
 
 
 Average net debt                                             1,489        1,128 
 Average equity                                               2,733        2,541 
 
 
 Average capital employed                                     4,222        3,669 
 Less: Average pension net assets                             (212)        (251) 
 Less: Average related deferred taxation                         32           41 
 Average capital employed (excluding post tax 
  pension net assets)                                         4,042        3,459 
 
 
 
 ROIC (excluding post tax pension net assets)                 13.3%        16.4% 
 
 
 ROIC                                                         12.8%        15.4% 
 
 
 
 Average working capital days (excluding precious 
  metals) 
                                                                     2020           2019 
                                                              GBP million    GBP million 
 
 
 
 Inventories                                                        1,902          1,316 
 Trade and other receivables                                        2,077          1,553 
 Trade and other payables                                         (2,745)        (1,647) 
 
 
 Total working capital                                              1,234          1,222 
 Less: Precious metal working capital                               (597)          (590) 
 
 
 Working capital (excluding precious metals)                          637            632 
 
 
 
 Average working capital days (excluding precious 
  metals)                                                              63             59 
 
 
     Free cash flow 
                                                                     2020         2019 
                                                              GBP million  GBP million 
 
     Net cash inflow from operating activities                        598          334 
     Interest received                                                104           61 
     Interest paid                                                  (202)        (108) 
     Purchases of property, plant and equipment                     (332)        (215) 
     Purchases of intangible assets                                 (111)         (86) 
     Proceeds from sale of assets held for sale                         7            - 
     Proceeds from sale of non-current assets                           1            1 
     Principal element of lease payments                             (13)            - 
 
 
     Free cash flow                                                    52         (13) 
 
 
 
 
 
 Net debt (including post tax pension deficits) to underlying 
  EBITDA 
                                                                                   2020         2019 
                                                                            GBP million  GBP million 
 Cash and deposits                                                                  112           90 
 Money market funds                                                                 192          347 
 Bank overdrafts                                                                   (31)         (59) 
 
 
 Cash and cash equivalents                                                          273          378 
 Borrowings and related swaps - current                                           (331)        (184) 
 Borrowings and related swaps - non-current                                       (994)      (1,073) 
 Interest rate swaps - non-current                                                   34           13 
 Lease liabilities - current                                                       (12)            - 
 Lease liabilities - non-current                                                   (64)            - 
 
 
 Net debt                                                                       (1,094)        (866) 
 
 
 
 
 (Decrease) / increase in cash and cash 
  equivalents                                                                     (103)           74 
 Less: Increase in borrowings                                                      (12)        (241) 
 Less: Principal element of lease payments                                           13            - 
 
 
 Increase in net debt resulting 
  from cash flows                                                                 (102)        (167) 
 New leases, remeasurements and 
  modifications                                                                    (13)            - 
 Lease disposals                                                                      1            - 
 Exchange differences on net debt                                                  (47)         (26) 
 Other non-cash movements                                                            10            6 
 
 
 Movement in net debt                                                             (151)        (187) 
 Net debt at beginning of year                                                    (866)        (679) 
 Impact of adoption of IFRS 16                                                     (77)            - 
 
 
 Net debt at end of year                                                        (1,094)        (866) 
 
 
 
 
 
 Net debt                                                                       (1,094)        (866) 
 Add: Pension deficits                                                             (53)         (56) 
 Add: Related deferred tax                                                           10           10 
 
 
 Net debt (including post tax pension deficits)                                 (1,137)        (912) 
 
 
 
 Underlying operating profit                                                        539          566 
 Add back: Depreciation and amortisation excluding amortisation 
  of acquired intangibles                                                           166          157 
 
 
 Underlying EBITDA                                                                  705          723 
 
 
 
 Net debt (including post tax pension deficits) 
  to underlying EBITDA                                                              1.6          1.3 
 
 
 
13  Events after the balance sheet date 
 
 
 

The impact of the COVID-19 pandemic on the group's operations and the carrying value of certain assets at 31(st) March 2020 has been considered. The group has tested its performance under a deep recession scenario and stress tested with a more extreme very deep recession scenario. Subsequent to the balance sheet date, the group has monitored its trading performance and external factors, such as changes in government restrictions. Key estimates and judgements that impact the balance sheet at 31(st) March 2020 have been updated to reflect the impact of COVID-19 in the period since 31(st) March 2020.

The following non-adjusting events have also been identified in the period since 31(st) March 2020:

-- In April 2020, the group secured a further $300 million of funding from the US private placement market for the next five to seven years; and

-- The group secured access to the Bank of England's COVID Corporate Financing Facility (CCFF), with an allocated issuer limit of GBP300 million which provides additional back-stop liquidity for the next year if needed.

 
Financial Calendar 
 
2020 
 
18(th) June 
Ex dividend date 
 
19(th) June 
Final dividend record date 
 
23(rd) July 
129(th) Annual General Meeting (AGM) 
 
4(th) August 
Payment of final dividend subject to declaration at the AGM 
 
19(th) November 
Announcement of results for the six months ending 30(th) September 2020 
 
28(th) November 
Ex dividend date 
 
29(th) November 
Interim dividend record date 
 
 
 
 
 
 
Cautionary Statement 
This announcement contains forward looking statements that are subject to 
 risk factors associated with, amongst other things, the economic 
and business circumstances occurring from time to time in the countries 
 and sectors in which the group operates. It is believed that the 
expectations reflected in this announcement are reasonable but they may 
 be affected by a wide range of variables which could cause actual 
results to differ materially from those currently anticipated. 
 
 
 
Johnson Matthey Plc 
Registered Office: 5(th) Floor, 25 Farringdon Street, London EC4A 4AB 
Telephone: +44 (0) 20 7269 8400 
Internet address: www.matthey.com 
E-mail: jmpr@matthey.com 
 
Registered in England - Number 33774 
LEI code: 2138001AVBSD1HSC6Z10 
 
Registrars 
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA 
Telephone: 0371 384 2344 (in the UK) * 
+44 (0) 121 415 7047 (outside the UK) 
Internet address: www.shareview.co.uk 
 
* Lines are open 8.30am to 5.30pm Monday to Friday excluding public holidays 
 in England and Wales 
 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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June 11, 2020 02:00 ET (06:00 GMT)

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