Johnson Matthey PLC JMAT

DJ Johnson Matthey PLC Annual Report & Notice of Annual General Meeting

 
TIDMJMAT 
 
ANNUAL REPORT & NOTICE OF ANNUAL GENERAL MEETING 
 
Johnson Matthey Plc (the "Company") has today published its 2012 Annual Report 
and Accounts and Notice of the 2012 Annual General Meeting. Both documents can 
be viewed at or downloaded from the Company's website at www.matthey.com 
 
Copies of both documents, together with the Form of Proxy for the 2012 Annual 
General Meeting, have been submitted to the National Storage Mechanism and will 
shortly be available for inspection at www.hemscott.com/nsm.do. 
 
The Annual General Meeting of the Company will be held at 11am on Wednesday 
25th July 2012 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 
8JB. 
 
Additional information, required to be made available by the Company under Rule 
6.3.5R of the Disclosure and Transparency Rules of the Financial Services 
Authority, to the extent not already included in the Company's announcement of 
results for the year ended 31st March 2012 issued on 7th June 2012, is set out 
in Appendix A below. 
 
Simon Farrant 
Company Secretary 
20th June 2012 
 
 
Appendix A 
 
Risks and Uncertainties 
 
The effective identification and management of risks and opportunities across 
the group are integral to the delivery of the group's strategic objectives. The 
group's approach to risk management is aimed at monitoring material issues to 
enable the early identification of key risks and the taking of action to remove 
or reduce the likelihood of those risks occurring and their effect. 
 
The board has overall responsibility for ensuring that risk is effectively 
managed across the group. However, the board has delegated to the Audit 
Committee the responsibility for reviewing the effectiveness of the group's 
system of internal control and procedures for the identification, assessment, 
management, mitigation and reporting of risk. 
 
The group has in place a process for the continuous review of its risks. As 
part of that process, each business reviews its risks and its mitigation 
strategies and actions. Each risk is allocated an owner who has the authority 
and responsibility for assessing, monitoring and managing it. The most 
significant risks identified are collated into a Group Risk Register. The Group 
Risk Register is reviewed by the Chief Executive's Committee. Each individual 
risk is considered and the status and progression of mitigation actions and 
plans are monitored. The Group Risk Register is reviewed by the board twice a 
year. 
 
The table below sets out what the board believes to be the principal risks and 
uncertainties facing the group, the mitigating actions for each and an update 
on any change in the profile of each risk during the course of 2011/12. 
 
In view of the group's increased focus on the cost of rare earth materials and 
the establishment this year of a strategy to manage movement in their prices 
(as described in the Financial Review of Operations section on page 29 of the 
2012 Annual Report and Accounts), we have concluded that the risk associated 
with movements in raw material prices has decreased. As a result, we have 
removed this from our principal risks this year. 
 
 
STRATEGIC 
 
Risk 
 
Failure to grow in the longer term, to take advantage of new opportunities or 
to have sufficient capacity to meet demand. 
 
Description 
 
The group's existing activities are well placed to deliver good growth over the 
coming years. New business areas will help to sustain the group's growth beyond 
that period. 
 
Impact 
 
Failure to identify new business areas or extend the group's portfolio could 
impact the ability of the group to continue to grow in the long term. 
 
Mitigation 
 
* Each business prepares a ten year strategic plan to review demand in 
  existing markets and potential new opportunities. 
* The group continues to invest in research for new products and 
  technologies. 
* Capacity and demand considerations are included in the strategic review and 
  additional capacity management reviews. 
 
Changes since 2011 Annual Report and Accounts 
 
The group invested GBP128.6 million in R&D in the year (2010/11 GBP109.8 million). 
 
The group is targeting potential new markets and developing new businesses, 
both organically and through acquisition. 
 
 
Risk 
 
Inability to deliver anticipated benefits from acquisitions, capital projects 
and other initiatives. 
 
Description 
 
The group's strategy is based upon organic growth. However, acquisitions and 
investment in capital projects will accelerate the achievement of our strategic 
goals. 
 
The realisation of anticipated benefits depends on: 
 
* the performance of acquired businesses after acquisition and their 
  successful integration into the group; and 
* the delivery of capital projects on cost and to plan. 
 
Impact 
 
Unsuccessful integration of an acquired business or project time or cost 
over-runs could result in the failure to realise the expected benefits and 
hence impact the group's results. 
 
Mitigation 
 
* The group has clearly defined criteria for suitable acquisition targets and 
  substantial due diligence is carried out before any acquisition is made. 
* A dedicated team is appointed to manage the integration process and regular 
  monitoring of the performance of newly acquired businesses is carried out. 
* Requirements of capital projects and other initiatives are strictly defined 
  and subject to robust approvals. 
 
Changes since 2011 Annual Report and Accounts 
 
There were no acquisitions in the year. 
 
The integration and performance of the Additives business (formerly Intercat) 
during the year is discussed in the Financial Review of Operations on page 31 
of the 2012 Annual Report and Accounts. 
 
Significant projects (such as expansion of capacity in Emission Control 
Technologies, Process Technologies and Catalysts and Chemicals) are discussed 
in the Financial Review of Operations. 
 
 
Risk 
 
Changes to future environmental legislation. 
 
Description 
 
Approximately 50% of the group's revenue is driven by environmental 
legislation, particularly legislation over emissions from light and heavy duty 
vehicles. Further tightening of global emissions legislation generally requires 
improved technological solutions and the extension of emissions legislation to 
new applications can create opportunities for the group. 
 
Impact 
 
A curtailment in environmental legislation around the world could limit the 
group's growth potential and undermine profit margins. 
 
Mitigation 
 
* The group maintains a diverse product portfolio. 
* Forthcoming changes in emissions legislation are well understood and our 
  products are designed to meet these increased requirements. 
* Profit margins can be maintained with continuous improvements in technology 
  to reduce the cost and improve the effectiveness of our products. 
* Regular reviews are undertaken to monitor areas of new potential 
  legislation. 
* Lobbying activities are undertaken where appropriate to improve the 
  understanding of regulatory and legislative bodies. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
Risk 
 
Technological change. 
 
Description 
 
Johnson Matthey operates in highly competitive markets in which technology is a 
key to success. Constant product innovation is critical to maintain competitive 
advantage. 
 
Impact 
 
Failure to keep up with changes in the market place and to maintain our 
technology pipeline could result in a lack of competitive products and erosion 
of margins and / or loss of market share. 
 
Mitigation 
 
* The group continues to invest in its products through R&D (including 
  through our Technology Centres around the world) and as per our ten year 
  technology plan. 
* There is constant innovation and development in cooperation with our key 
  customers. 
* The group invests in its people to ensure that it maintains a high level of 
  relevant scientific expertise. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
MARKET 
 
Risk 
 
Global political and economic conditions. 
 
Description 
 
The global nature of the group's business exposes it to risk arising from 
economic, political and legislative change in the countries in which we 
operate. 
 
Impact 
 
A sustained period of economic weakness in our markets could have a material 
adverse effect on the group's results. 
 
The group has no influence upon changes in inflation, interest rates or other 
economic factors affecting its business. In addition, the possibility of 
political unrest and legal or regulatory changes also exist in countries in 
which the group operates. 
 
Mitigation 
 
* The group maintains a balanced portfolio of businesses and serves a wide 
  range of diverse customers which reduces the impact of a change to any one 
  market. 
* Management continuously monitors the performance of our businesses across 
  the world at both business and group level. 
* Our cost base contains a significant variable element and is flexible to 
  changing political and economic conditions. 
 
Changes since 2011 Annual Report and Accounts 
 
The group's strong performance this year reflects the continuing recovery of 
its businesses since the recession in the group's developed markets. 
 
Given the continued uncertainty in Europe (offset partially by the improved 
outlook in the US) we have concluded that this risk has increased since last 
year. 
 
 
Risk 
 
Commercial relationships and reputation. 
 
Description 
 
The group has well established long term relationships with a number of 
customers and suppliers. Maintaining good relationships with customers and 
suppliers enables the group to enhance the quality of service to its customers. 
 
Impact 
 
The group has high shares in many of the markets in which it operates. The 
deterioration in its reputation or relationship with, or ultimately the loss 
of, a key customer or supplier could have a material impact on the group's 
results. 
 
Mitigation 
 
* Some of the group's key relationships are supported by long term contracts, 
  notably the group's relationship with Anglo American Platinum. 

* A broad customer base is maintained to prevent the group from becoming 
  unduly dependent on any single customer. 
* Industry developments and market shares are constantly monitored. 
* We actively manage our customer relationships at all levels to ensure a 
  high quality of service. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
FINANCIAL 
 
Risk 
 
Pension scheme funding. 
 
Description 
 
The group operates a number of defined benefit pension schemes, some of which 
are in deficit. 
 
Impact 
 
Actuarial deficits could be adversely affected by changes in interest rates, 
the market values of investments, as well as inflation and increasing longevity 
of the schemes' members. This may result in greater cash contributions being 
required. 
 
Mitigation 
 
* Where actuarial deficits exist the group has agreed deficit recovery plans. 
* The group works with the fiduciary committees and trustee boards of each of 
  its pension schemes around the world to ensure that an appropriate 
  investment strategy is in place. This includes de-risking the schemes as 
  funding levels improve. 
* Where possible, appropriate pension scheme assets are held to match 
  movements in the schemes' liabilities. 
* We monitor and proactively manage the rate at which the pension liability 
  grows and consider liability management exercises as appropriate. 
* The group is reviewing its options with regard to future pension provision 
  for employees worldwide. 
* More detail of the group's pension schemes is included in note 14 in the 
  2012 Annual Report and Accounts. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
OPERATIONAL 
 
Risk 
 
Changes to health, safety, environmental and other regulations and standards. 
 
Description 
 
In common with similar manufacturing companies, the group operates in an 
environment that is subject to numerous health, safety and environmental laws, 
regulations and standards. 
 
Impact 
 
Changes made to applicable laws, regulations or standards could adversely 
impact the group's manufacturing capability or indeed, the marketability of our 
products. 
 
Mitigation 
 
* The group carries out regular internal reviews to ensure compliance with 
  current group policies and applicable laws, regulations and standards such 
  as ISO 14001 and OHSAS 18001. Our quality standards are also scrutinised 
  externally by customers, suppliers and the relevant authorities. 
* We work with external consultants to understand better our regulatory 
  responsibilities in the territories in which we operate. 
* Changes in legislation are carefully monitored and if required, the 
  composition of our products is amended to comply with latest legislation. 
* We are committed to proactive communication and to building open 
  relationships with the authorities and relevant legislative bodies, both 
  directly and through the relevant trade associations. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
Risk 
 
Availability of raw materials. 
 
Description 
 
The group uses many raw materials within its manufacturing processes. Several 
raw materials are available from only a limited number of countries and / or 
suppliers. 
 
Impact 
 
Disruption to the supply or a change in the group's ability to access 
sufficient stocks of these raw materials, most notably platinum group metals, 
rare earths or narcotic raw materials, could adversely affect the group's 
profit. This may be due to increased prices or because our ability to 
manufacture and supply product to customers may be impacted. 
 
Mitigation 
 
* Although most of the world's platinum is mined in South Africa, the group 
  has access to world markets for platinum and other precious metals and is 
  not dependent on any one source for obtaining supplies. 
* Appropriate sourcing arrangements are in place for other key raw materials 
  to ensure that the group is not dependent on any one supplier. 
* Where possible the group enters into fixed price contracts for key raw 
  materials. 
* We work closely with key suppliers to ensure availability, including 
  through audits, benchmarking and specific risk reviews. 
* We monitor forecast requirements on a regular basis and hold buffer stocks 
  where necessary.. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
Risk 
 
Employees and the recruitment and retention of high quality staff. 
 
Description 
 
The group relies upon its ability to recruit, train and develop employees 
around the world with the necessary range of skills and experience to meet its 
stated objectives, including in relation to business growth. 
 
The existing management team has many years of experience at Johnson Matthey, 
operating in the markets and developing the technologies in which the group 
maintains a presence. 
 
Impact 
 
The departure of senior management or the lack of an appropriately skilled 
workforce could adversely impact the group's ability to perform in line with 
expectations. 
 
Mitigation 
 
* Global training and management development programmes are in place, 
  including training of manufacturing leaders to run our operations in a 
  consistent and efficient way through the Manufacturing Excellence 
  programme. 
* Regular reviews of management succession plans are carried out. 
* Global remuneration policies are in place to ensure appropriate rewards to 
  motivate and retain staff. 
* We undertake a continuous assessment of the skills required within the 
  group and action plans are put in place to address identified gaps. 
* Succession planning is closely monitored by the Nomination Committee and 
  Management Development and Remuneration Committee (MDRC). 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
Risk 
 
Security. 
 
Description 
 
On any given day the group has significant quantities of high value precious 
metals or highly regulated substances on site and in transit, the security of 
which is critical. 
 
Impact 
 
A material loss due to a breach in the group's security measures, including 
theft or fraud, could be significant to the group's performance. 
 
Mitigation 
 
* The group has highly developed security, assay and other process controls. 
* Annual security audits are carried out across the group. 
* Insurance cover is maintained for losses from theft or fraud. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
Risk 
 
Intellectual property (IP). 
 
Description 
 
The group operates in markets in which the generation and application of 
technology and IP allows an advantage to be maintained. Careful monitoring of 
competitors' IP is required to ensure that breaches of their rights are not 
made by the group. 
 
Impact 
 
Failure to establish the group's IP rights or to identify third parties' IP 
rights could undermine the group's competitive advantage particularly given the 
group's expansion into new markets. Alternatively, not noting the expiration of 
patents held by third parties could mean the loss of potential business 
opportunities. 
 
Mitigation 
 
* The group has established policies and procedures for registering patents 
  and for monitoring its existing patent portfolio and those of third 
  parties. 
* We defend infringement claims and challenge new patents where it is 
  appropriate to do so. 
* We continuously evaluate operating restrictions and opportunities available 
  to us through the use of our IP and know how. 
* A substantial part of the group's IP is know how and this is protected 
  through non-disclosure agreements and other legal measures. 
* We restrict internal and external access to IP and know how as necessary. 
* We complete security checks to safeguard both our tangible and intangible 
  assets. 
* Our investment in technical developments mitigates the risks to our IP and 
  know how to some degree. 
 
Changes since 2011 Annual Report and Accounts 
 
No change. 
 
 
 
Statement of Directors' Responsibilities in Respect of the 2012 Annual Report 
and Accounts 
 
Each of the directors as at the date of the 2012 Annual Report and Accounts, 
whose names and functions are set out below, states that to the best of his or 
her knowledge: 
 
* the group and parent company accounts, prepared in accordance with the 
  applicable set of accounting standards, give a true and fair view of the 
  assets, liabilities, financial position and profit or loss of the Company 
  and the undertakings included in the consolidation taken as a whole; and 
* the management report (which comprises the Report of the Directors) 
  includes a fair review of the development and performance of the business 
  and the position of the Company and the undertakings included in the 
  consolidation taken as a whole, together with a description of the 
  principal risks and uncertainties that they face. 
 
The names and functions of the directors of Johnson Matthey Plc are as follows: 
 
TEP Stevenson                Chairman 
NAP Carson                   Chief Executive 
AM Ferguson                  Non-executive Director 
Sir Thomas Harris            Non-executive Director 
RJ MacLeod                   Group Finance Director 
LC Pentz                     Executive Director, Environmental Technologies 
MJ Roney                     Non-executive Director 
WF Sandford                  Executive Director, Precious Metal Products 
DC Thompson                  Non-executive Director 
 
This responsibility statement was approved by the board on 6th June 2012 and 
was signed on its behalf by Mr TEP Stevenson. 
 
 
 
END 
 

(END) Dow Jones Newswires

June 20, 2012 04:39 ET (08:39 GMT)