Catalysing
the net zero
transition
Annual Report and Accounts 2023
We are Johnson Matthey
Watch: our latest company film, describing JM in two minutes
matthey.com/corporate-video
Our approach to reporting
We believe in being as transparent as possible in our reporting on sustainability
performance and strive to make public all the information our stakeholders require
through adopting the most well respected independent reporting standards and
ratings services.
This report has been prepared in accordance with the Global Reporting Initiative (GRI)
Standards 2021 and also aligns with the Sustainability Accounting Standards Board
(SASB) chemical sector reporting requirements (version 2018-10). Our Task Force
on Climate-related Financial Disclosures (TCFD) report is included on pages 45-52
and complies fully with the TCFD disclosure recommendations. The numbers included
in this section cover the entire Johnson Matthey group.
ERM Certification and Verification Services Limited (ERM CVS) were engaged
to provide limited assurance of selected information as presented on page 228.
Please see ERM CVS' full assurance statement on pages 229-230 for more details.
Find more information online
Sustainability Performance Databook: matthey.com/sustainability-databook
GRI Content Index: matthey.com/gri-content-index
SASB Index: matthey.com/sasb-index
PAI Statement: matthey.com/pai-statement
TCFD Compliance Table: matthey.com/tcfd-compliance-table
Assurance Statement: matthey.com/assurance-statement
Catalytic converters: fighting pollution
for 50 years and beyond
PGMs: a circular solution for a net zero future
Our products and services are where we believe we can have most positive impact
on society and we have aligned our strategy with four of the UN SDGs
Sustainable aviation fuel: ready for take off
Hydrogen: ramping up to reach net zero
www.matthey.com
Cautionary statement
The strategic report and certain other sections of this annual report contain forward
looking statements that are subject to risk factors associated with, among 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 these statements 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.
Strategic report
Our business at a glance
Key performance indicators
Our purpose
Chair’s statement
The drivers of our changing world
Our business model
Chief Executive Officer’s statement
Our strategy
Clean Air
Platinum Group Metal Services
Catalyst Technologies
Hydrogen Technologies
Sustainability
Task Force on Climate-related Financial Disclosures
Chief Financial Officer’s review
Financial performance review
Risk report
Going concern and viability
Non-financial and sustainability information statement
Section 172 statement
Cover image: Fanesa Fernandes, Production Operator, checks a hydrogen fuel cell
component at our Hydrogen Technologies site in Swindon
Johnson Matthey | Annual Report and Accounts 2023
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Governance
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06
08
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14
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18
20
22
45
53
55
62
70
71
72
Chair’s introduction
Board at a glance
Board of Directors
Our governance structure
Corporate governance report
Board activities
Stakeholder engagement
Board and committee effectiveness
Societal Value Committee report
Nomination Committee report
Audit Committee report
Remuneration Committee report
Directors’ report
Responsibilities of directors
Independent auditors’ report to the members of Johnson Matthey Plc
Financial statements
Other information
Icons within this report
Read more
Key performance indicator
Content available online
Principal risk
Click this link to see our glossary: matthey.com/ARA-glossary
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128
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222
1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Our business at a glance
Our businesses
Read more on pages 14-21
A global footprint
Clean Air
Designs and manufactures emission control catalysts to reduce harmful pollutants ,
e.g. NOx, from vehicle exhausts and a range of stationary sources.
Europe
42% of Group sales
55% of employees
Platinum Group Metal Services (PGMS)
Metals management: supporting customers with short and long term metal planning
through leading market research and price risk management.
PGM (platinum group metals) applications: processing metal into more complex, value
added products for a vast array of uses. This includes providing PGM-based products for all
our other businesses.
Refining: recycling used PGMs including spent auto-catalysts and taking mined PGMs
to purity.
Catalyst Technologies
Designs and licences process technology and designs and manufactures catalysts for a wide
range of processes used in the energy and chemicals industries to create products used
in transportation fuels, fertilisers, wood products, paints, coatings and polymers.
North America
29% of Group sales
17% of employees
Rest of World
6% of Group sales
China
10% of Group sales
8% of employees
Rest of Asia
13% of Group sales
11% of employees
9% of employees
Hydrogen Technologies
Designs and manufactures the key performance-defining components (catalyst-coated
membranes) used at the heart of fuel cells and electrolysers.
In addition, we have three Value Businesses that are not within the core portfolio:
Battery Systems, Medical Components and Diagnostic Services.
12,600 employees worldwide
Supported by our values
We are a truly purpose-driven organisation – and our values provide the foundation for
everything we do.
Revenue split (%)
2023
2022
42%
44%
Protecting people and the planet
49%
5%
4%
Acting with integrity
Innovating and improving
49%
4%
3%
Working together
Owning what we do
Clean Air
Platinum Group Metal Services
Catalyst Technologies
Value Businesses
Hydrogen Technologies represents less than 1% of total revenue
2
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Key performance indicators
Financial performance
Revenue
£14,933m
2021/22: £16,025m
Sales1 (excluding precious metals)
£4,201m
2021/22: £3,778m
Operating profit
£406m
2021/22: £255m
Underlying operating profit1
£465m
2021/22: £553m
Clean Air cash flow
£638m
2021/22: £772m
(Loss)/earnings per share
150.9p
2021/22: (52.6)p
Underlying earnings per share1
178.6p
2021/22: 213.2p
Ordinary dividend per share
77.0p
2021/22: 77.0p
Sustainability performance
Sales contributing to our
four priority UN SDGs
82.0%
2021/22: 83.8%
R&D spend contributing
to our four priority SDGs
89.5%
2021/22: 88.1%
Total Scope 1 and 2 GHG
emissions (market-based)2
363,686 tCO2e
2021/22: 410,110 tCO2e
GHG emissions avoided from
our technologies (compared
to conventional offerings)2
848,643 tCO2e
2021/22: 470,706 tCO2e
Recycled PGM content in
JM’s manufactured products3
69%
2021/22: 70%
1. Non-GAAP measures are defined and reconciled in note 34 of the financial statements, refer to pages 206 - 209
2. Prior year rebaselined to remove divested businesses, please see page 222 for more information
3. Prior year restated due to calculation refinement, please see page 222 for more information
Total Recordable Injury and
Illness Rate(TRIIR) employees
+ contractors
0.47
2021/22: 0.59
Total Scope 3 (Category 1)
Purchased Goods and Services
GHG emissions2
2,495,475 tCO2e
2021/22: 2,978,197 tCO2e
D&I – female representation
across all management levels
28%
2021/22: 27%
For more information on our ESG ratings please see page 23
For more information on our sustainability targets please see page 24
Johnson Matthey | Annual Report and Accounts 2023
3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Our purpose
Catalysing the
net zero transition
As a global society we face big challenges. Many of the
world’s leading energy, chemicals and automotive
companies depend on Johnson Matthey’s technology and
expertise to decarbonise, reduce harmful emissions and
improve their sustainability.
Our purpose is to catalyse the net zero transition for our
customers, and our strategy is derived from this purpose.
In this report we explain some of the ways our solutions
are already helping our customers meet their ambitions,
and how we will create value for them and wider society
over the coming years. Even while we reduce our own
operational footprint to achieve net zero by 2040.
We know it’s not enough to be purpose-led: we also need
to be performance-driven. If we are to enable this
transformation for our customers, we must transform too.
Patrick Thomas
Chair
4
Liam Condon
Chief Executive Officer
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Chair’s statement
It’s a great privilege to be Chair of Johnson Matthey,
a company with a rich history, world-class scientific skills
and incredibly talented people. Over the last year, the
Board has enjoyed working with Liam and his refreshed
leadership team as they have injected pace and
commercial thinking into the company’s new strategy.
In May 2022, we launched a transformation programme to strengthen our commercial focus,
ensuring that we concentrate on the technologies and markets where we have the greatest
strength and competitive advantage.
This isn’t an overnight fix, but it is already starting to deliver. By creating a more focused
portfolio with four business areas, we are driving value creation, taking a much more
customer-centric approach in order to seize opportunities with a simplified operating model
to drive execution. The Board’s challenge was how to measure and track progress, and I am
pleased that we are seeing strong performance, delivering against strategic milestones.
There is more information on this on page 13.
We are transforming our business at a time when our markets are coming at us faster than
ever before. For example, the pace of decarbonisation activities in China have accelerated as
it becomes the world’s biggest fuel cell market. The EU has adopted a climate law enshrining
its new climate targets of at least a 55% reduction in greenhouse gas (GHG) emissions
by 2030 compared to 1990 levels. And in the US, it is a completely changed regulatory
landscape. There has been a lot of noise about the Inflation Reduction Act – it’s quite simply
a global game-changer, offering $369 billion in subsidies.
Shareholder engagement
This year, I have spent a significant amount of time talking to our shareholders about the
direction of travel. I am pleased that they support our vision, and we are aligned on our
strategic focus on the right growth markets.
In addition, we engaged Rothschilds to undertake an independent perception study with
investors. The purpose was to understand investors’ perceptions of, and market sentiment
towards JM. The study included in-depth discussions with investors representing 33% of JM’s
issued share capital and some of our core analysts. Covering strategy, business streams,
management, valuation and environmental, social and governance (ESG), the study has been
hugely useful for the Board and showed that we are on track and delivering in the right areas.
The study also highlighted the needs of different shareholders, with long-term shareholders
focusing on our growth businesses and the future prospects of our Hydrogen Technologies
and Catalyst Technologies businesses, while others are looking more for shorter-term
performance including the ongoing success of Clean Air. But overall, the main message
is that we have the building blocks in place to reinvigorate the investment case, underpinned
by strong synergies between our businesses. I am confident that over the coming months,
we will be able to show further strong evidence of delivery against our strategic milestones.
We really do understand the need to prove we can maximise shareholder value in the Clean
Air business, including plans for site rationalisation. We are working on other efficiencies,
tidying the portfolio and delivering cost efficiencies. I am sure that we have the right strategy
in place to maximise shareholder value in both the short and long term.
Board focus and changes
I believe that the role of the Board is twofold: to constructively challenge, and encourage and
support. The effectiveness of this approach could be viewed in how we navigated some of the
challenges this year, including the war in Ukraine, the energy crisis and inflationary pressures.
Chris Mottershead will be retiring from the Board in January 2024, and I would like to thank
him for all his hard work and dedication over the last eight years. With Chris’s departure, John
O’Higgins will take over the role as Chair of the Remuneration Committee.
I am very pleased that in July, Barbara Jeremiah will be joining the board as Senior
Independent Director. Barbara brings strong leadership, deep understanding of metals, and
has extensive experience in North American markets which will be important for JM as the
group evolves.
Finally, I would like to take this opportunity to express my thanks to colleagues across the
business who are at the heart of our strategy. It is because of their tireless work that JM is
transforming into a company that is fit for the future and enabling our customers to catalyse
the net zero transition.
We will always follow the markets and our customer demand – in the examples above,
we are developing partnerships, winning business and helping customers catalyse the net
zero transition. I am confident that this will continue to grow over the coming years.
Patrick Thomas
Chair
Johnson Matthey | Annual Report and Accounts 2023
5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION The drivers
of our changing
world
Throughout the world, 2022/23 was marked by
volatility. But underneath the spikes in energy prices,
inflation, conflict and extreme weather, there is
a deeper shift happening towards creating more
sustainable ways of living. The transition to net zero
requires a range of technological innovations. From
hydrogen fuel cells to sustainable chemical feedstocks,
from new sustainable fuels to advanced emission
control solutions with circularity embedded – all have
an important part to play in transforming energy,
mobility and industrial systems.
Johnson Matthey is not simply reacting to a changing
world; we are actively contributing to catalysing the net
zero transition, providing solutions for our customers
that will have a positive impact.
Our Materiality Statement
Johnson Matthey’s sustainability framework and targets cover all ESG topics considered
important by our stakeholders. But we have also gone further to set targets on issues such
as human rights, community impact and recycling which are not typically seen in the
chemicals industry.
You can read more about our Materiality Statement on page 23
1
Decarbonising modern life
It’s time for the world to move beyond fossil fuels and harness the power of more sustainable
low carbon fuels, chemicals and industrial processes.
Sustainable fuels
Outlook
Many countries are setting transport
targets for sustainable fuels or to phase out
internal combustion engines. JM’s
technology helps create low carbon
options such as renewable (green) or low
carbon (blue) hydrogen and fuel cell
technology, as well as developing entirely
new types of fuel from alternative
feedstocks, such as waste.
Opportunities and challenges
The demand for sustainable fuels is
expected to grow significantly over the
next 20 years. But a lot of work is still
needed to find low carbon solutions for
the aviation, maritime and heavy duty
vehicle sectors in particular.
What we are doing
Our methanol process and catalyst
technology used in Chile’s Haru Oni project
converts CO2 captured from the air to
produce 550 million litres of e-fuels
annually, enough for approximately
220,000 gasoline vehicles. Our Fischer
Tropsch (FT) CANS™ technology (co-
developed with bp) and HyCOgen™, which
also use CO2 and green hydrogen, were
selected by Aramco and Repsol for one of
the earliest synthetic fuel plants, in Spain.
We continue our research into using
alternative feedstocks for aviation and other
fuels, innovating to maintain technology
leadership in these emerging markets.
Sustainable chemicals
Outlook
Demand for primary chemicals is expected
to grow by 25% by 2030. The industry
currently accounts for 18% of the world’s
CO2 emissions. Increasingly, customers are
looking to combine alternative,
sustainable feedstocks with catalyst
technologies that can turn them into
useful products.
Opportunities and challenges
There are two pillars of decarbonisation
for the chemical industry. The first pillar
is carbon reduction through process
optimisation and adding carbon capture
and storage technology to current
processes. The second is carbon
replacement, using more sustainable
feedstocks. We have been turning
traditional feedstocks into synthesis gas
(syngas) for decades. Syngas, a mix of
carbon monoxide, carbon dioxide and
hydrogen, is essential in enabling the
decarbonisation of chemical processes,
since it can also be made from alternative,
more sustainable feedstocks.
What we are doing
For both pillars of decarbonisation,
we have developed leading process
technologies. For example, under the
CLEANPACE brand, we can retrofit existing
assets, enabling the reduction of carbon
emissions from those processes
by up to 95%.
66
Johnson Matthey | Annual Report and Accounts 2023
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
The drivers of our changing world continued
2
3
4
5
Creating a circular
economy
Cleaner air, healthier
people
An evolving regulatory
landscape
Geopolitical and
economic volatility
Outlook
If global consumption levels continue to
grow at the current pace, there will simply
not be enough natural resources to go
around. So we need to put the right
processes in place and embed circularity
into how we source and use materials.
Opportunities and challenges
We are already the world’s largest PGM
recycler by volume. The amount of CO2 for
an ounce of recycled PGM is 30-50 times
lower than newly mined PGM. We can
reduce the carbon footprint of our
products but also our customers’ too in
automotive, industrial, chemical and life
sciences applications. We are applying our
longstanding recycling expertise to
emerging technologies, including fuel cell
and electrolyser stacks to enable circularity
in the hydrogen economy.
What we are doing
We understand the full life cycle of the
PGMs in our products and continue to
work with our partners to enable greater
recycling and refining at the end of their
life. We are investing in our global refining
capabilities so that we are better
positioned to deal with the increasing
volume and range of materials we will
need to recycle in the future. And in our
innovation and R&D processes, we take
”design for recycling” into account right
from the start.
Outlook
Air pollution kills millions of people every
year and the majority of the world’s
population are continually exposed to poor
air quality. With increasing urbanisation,
this problem looks set to intensify unless
significant action is taken to reduce
harmful emissions.
Opportunities and challenges
We know that transitioning the world’s
transport systems to net zero is a long
and complex process. While alternative
powertrains, such as fuel cell and battery
electric, continue to develop, automotive
catalysts will be needed in engines using
drop-in sustainable fuels. We need to be
doing all we can to ensure the vehicles
on our roads now are as clean as possible.
What we are doing
Today, one in three cars worldwide carries
JM’s emission control technology. And we
continue to invest and innovate to ensure
that our technologies help customers meet
the higher standards demanded by new
legislations. We are investing in our plants
throughout the world, and continue to
innovate to further optimise performance
of gasoline and diesel autocatalysts, as well
as how best to control emissions from
alternative fuel sources in the future.
Outlook
All over the world, governments are
bringing in legislation to incentivise
investments in sustainable technology
and business practices. For example,
2022 saw the introduction of the Inflation
Reduction Act (IRA) in the US and the
Green Deal Industrial Plan in Europe.
These sit alongside a growing body
of national legislation and targets to reach
net zero by 2050.
Opportunities and challenges
The market is moving in our direction
faster than expected. Across the energy,
chemicals and transport sectors, the
transition being driven by these new
requirements is likely to involve a mosaic
of different technologies and solutions.
In addition, governments are increasingly
focused on security of supply for critical
minerals, including PGMs, which is aligned
to our recycling strategies.
What we are doing
We work alongside our partners and peers
to create a unified voice to help influence
policy in a way that accelerates the energy
transition. For example, we are working
closely with the Association for Emissions
Control by Catalyst (AECC) and parties
across the industry to ensure that the
European Commission enables a swift
adoption of the ambitious Euro
7 emission standards.
Outlook
Global GDP is predicted to slow in
2023/24, with some countries potentially
entering recession. Inflationary pressures,
supply chain challenges as well as the
ongoing impact of the conflict in Ukraine
might affect activity.
Opportunities and challenges
While Johnson Matthey continues to deal
with economic headwinds, the
macroeconomic picture demonstrates
more than ever the importance of
accelerating the energy transition. This
has sharpened our focus, enabling us to
be laser-clear on our strengths, and make
progress towards our 2030 goals.
What we are doing
Our transformation and commitment to
catalysing the net zero transition for our
customers enables us to take full
advantage of the opportunities we see
being created in a more volatile and
complex world. We have also adapted
as necessary. In 2022, we ceased all new
opportunities in Russia, closed our Moscow
office and evaluated all other activities
on a case by case basis. Our business
units also made significant progress
in recovering inflation costs
throughout 2022/23.
Johnson Matthey | Annual Report and Accounts 2023
Johnson Matthey | Annual Report and Accounts 2023
7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Our business model
Addressing three markets…
We deliver through our four businesses…
Energy
Designing technologies for a range
of sustainable energy sources, including
hydrogen, sustainable aviation fuel,
methanol and ammonia.
Chemicals
Process and catalyst technologies that
enable the production of chemicals,
helping customers lower their carbon
and environmental footprint.
Automotive
Emission control systems that reduce
NOx and other particulates that harm
people and the environment.
Clean
Air
Leading in autocatalyst
markets
Catalyst
Technologies
#1 in syngas-based
chemicals and fuels
technology
See page 14-15 for where
our catalysts are being used
See page 18-19 for
how we are leading
in today’s markets
Hydrogen
Technologies
Market leader in
performance
components for fuel
cells and electrolysers
See more on page 20-21
on how we are developing
the Hydrogen economy
Platinum Group Metal Services
#1 global PGM refiner
See page 16-17 on the PGM ecosystem
c. 80%
PGMs used in our products are internally refined
8
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Our business model continued
By leveraging synergies and competitive advantages…
To create value for stakeholders.
Expertise in metal chemistry
Everything we do across our four businesses is underpinned by our leadership
in complex metal chemistry, catalysis and process engineering.
Mutual customers and partners
As our customers transition to net zero, we provide a fully integrated and
comprehensive offering through collaboration across our business units.
Shared technology and capabilities
We have more than 1,600 scientists and engineers and common
technology capabilities across all our businesses – with more than
4,000 patents granted and around 2,000 applications pending.
Foundational PGM ecosystem
We have deep insights into PGM markets through our
Precious Metal Management team and our refining operations.
Around 80% of the PGMs we use are sourced internally from
our refineries. This shared resource creates a resilient supply,
lower exposure to price risk and efficient working capital.
Security of supply
Our customers count on us for a reliable supply of PGMs and recycling
services – around 50% of our Clean Air customers ask us to source their
PGMs. This is because we are a metal hub for PGMs, underpinned by our
status as the leading recycler of PGMs.
A comprehensive sustainability offering
Every part of our business is committed to helping our customers adapt
processes and products to reach the sustainability goals our society and planet
are depending on.
Customers and strategic partners
Our customers gave us an average rating
of 8.3 out of 10 in our annual customer
satisfaction surveys. This is ahead of the
industry average of 7.8. They highlight
the depth of relationships and our
technical capabilities.
Society
Our catalytic converters have been helping
to improve air quality since 1974. 92,000
additional tonnes of NOx were removed
from tailpipes in 2022/23.
8.3
out of 10
762
Premature deaths prevented
Investors
Our performance-driven culture and
play-to-win strategy create sustainable
value for investors looking to support
the net zero transition.
Employees
Our teams are building a more sustainable
future every day – and we ensure they
are safe, supported and able to create
rewarding careers at Johnson Matthey.
77.0p
12,600
Dividend maintained at the same level
employees as of 31st March 2023
Communities
We work with a range of partners on
charitable giving and employee
volunteering schemes.
Suppliers
We partner with our suppliers to embed
the highest standards to deliver for
our customers.
2,063
volunteering days in 2022/23
38%
supplier spend (excl pgms) has EcoVadis
medal for good ESG performance
For more information on our s172 statement please see page 72
For more information on our Board’s engagement please see page 84
Johnson Matthey | Annual Report and Accounts 2023
9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Chief Executive Officer’s statement
Our core businesses have done very well in securing new customer commitments. Clean Air
secured a number of important Euro 7 targeted customer wins, including all of Mercedes
Benz’s light duty diesel business in Europe.
CT business achieved its commercial milestones and signed several significant licences,
including H2H Saltend, one of the UK’s largest low carbon (blue) hydrogen projects. In
addition, our FT CANS™ technology has been selected by Strategic Biofuels for their Louisana
project which aims to produce the world’s lowest carbon footprint liquid fuel.
HT secured a transformational strategic partnership with Plug Power, including a co-
investment in what is expected to be the largest (5GW scaling to 10GW over time) catalyst
coated membrane (CCM) manufacturing facility in the world.
In our PGMS refining business we have won new contracts with a large miner, and increased
our market share with some key recyclers. We have also won new contracts across our
products business, most notably with our pharmaceutical and agro-chemical customers.
Financial performance in 2022/23
Our financial performance for the year was in line with market expectations, albeit below the
prior year. The three main factors driving performance were lower precious metal prices
(c. £55 million impact), cost inflation (particularly energy, raw materials and labour) and
weak automotive and truck end markets which continued to be impacted by supply chain
disruption. We experienced c. £150 million cost inflation, of which c. £95 million was
recovered from customers in the year. As we sharpened our commercial focus and took
action to increase efficiency, the recovery rate improved through the year as expected. I am
pleased to confirm the total ordinary dividend will be 77.0 pence per share, maintained at the
same level as last year.
Focus, simplify, execute
Over the year, we have achieved significant commercial progress and now have in place an
internal commercial council to drive further progress across the company and create value for
both our customers and JM. We have introduced customer-centricity training for all our
leaders to put the voice of the customer front and centre, and improved our customer survey
and feedback process. We have invested in our sales teams and have built coordinated key
global account teams to enable better synergies across JM.
Our manufacturing and refining expansion activities are on track, particularly for PGMS
and HT, as we made significant investments to not only increase capacity but create
world-class assets. This is really important as we are expecting strong growth for our
businesses that catalyse the net zero transition, combined with higher recycling demand
as we shift to a more circular economy. We have also invested significantly in our capital
project planning and engineering capabilities, which were identified last year as key enablers
to help drive our strategy.
This time last year I was very new to Johnson Matthey, and
I wrote in the 2022 Annual Report how energised I was by
JM’s purpose and the way our people use their expertise to
help catalyse the net zero transition. In the past year I have
been immensely privileged to visit many of our sites around
the world and see for myself the extraordinary science,
refining and manufacturing capabilities that have been
the bedrock of our company for over 200 years.
Equally importantly, I have personally visited many of our key customers and have been
encouraged by their feedback, but also motivated to ensure JM continues to transform
to meet the needs of our customers and continue to lead in our chosen markets.
Despite the global macro-economic challenges, I’m proud that Johnson Matthey has made
good progress in delivering on our strategy and our milestones, with results in line with
market expectations. There is more detail on the strategy on pages 12-13, but I am pleased
that several regulatory tailwinds for renewable energy and decarbonisation mean that our
chosen growth markets are going to be even bigger and are coming at us faster than
originally anticipated.
Winning in our markets
In our strategy refresh in May 2022, we outlined how we would focus only on the markets
where we can win, serving our customers through our four core businesses: Clean Air, PGMS,
CT and HT. We said we would divest businesses that are not within the core portfolio and this
is well on track, with the divestment of Piezo Products and Diagnostic Services.
10
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Chief Executive Officer’s statement continued
Last year, I also outlined how we would simplify to become more cost-efficient and less
bureaucratic. We have accelerated our efforts to streamline our corporate cost base and real
estate footprint. We are also simplifying our business processes, which includes a new finance
shared service centre in Kuala Lumpur to service all our regions in a much more standardised
and efficient manner. This all gives me confidence that we’re building a stronger, more resilient
business, fit for the future.
Solid foundations for 2023/24
The global macro-economic situation remains challenging with continued high inflation,
intermittent supply chain disruption and fluctuating metals pricing. But since we launched
the new strategy, our growth markets have been accelerating towards us at a much faster
pace than we anticipated even a year ago. This has been driven by energy-related challenges
and subsequent regulatory changes, the most significant being the IRA in the US.
By incentivising the production of low carbon production technologies, the IRA has drawn
massive investment to the US and created a knock-on effect on green policy-making
worldwide. In Europe, the EU has published the Green Deal Industrial Plan, the Net Zero Act
and the Critical Raw Materials Act while the UK announced £20 billion of support for CCUS.
This is a pivotal moment for clean energy, and we are more than ready to seize the opportunity.
Our customers tell us we have some of the best, and often the very best, technology available for
their needs, and we continue to invest strongly in R&D to support our growth.
Growing responsibly
As we deliver against our strategy, it’s important we do so responsibly. We have made good
progress against our sustainability targets, and significantly increased our climate ambition to
ensure we are fully aligned with the 1.5 degree pathway to net zero. This year we were awarded
the EcoVadis platinum rating, putting us in the top one percentile of 90,000 companies.
This is great recognition of our commitments and the progress we’re making so far.
Our people are at the heart of our plans. We recognised that employees were not immune
to the cost-of-living crisis, so as a responsible employer we took steps to play our part. This
included awarding pay increases, giving temporary supplementary allowances and providing
support through Assist, giving our employees access to a team of highly trained and qualified
professionals on a variety of financial well-being topics.
We are disappointed that our employee engagement scores did not improve this year,
although this is perhaps to be expected given the degree of transformation the company
is going through. We have increased the training and support to leadership teams to help
them build engagement, and we have revamped our performance management, reward
and recognition schemes.
We continue to make safety our top priority, and improved safety leadership across all levels
in the company. This has resulted in better occupational and process safety performance
compared to last year.
“We are building a stronger,
more resilient business,
fit for the future”
During the year we welcomed three new members to our Group Leadership Team (GLT):
Anne Chassagnette joined in May as our first Chief Sustainability Officer, and in July we
welcomed Anish Taneja as CEO for Clean Air and Mark Wilson as CEO for Hydrogen Technologies.
Ron Gerrard, Chief EHS and Operations Officer retired in February, and I am very grateful
to him for his service to JM. Ron’s role was not replaced on the GLT, with his responsibilities
divided among the existing members.
In summary, the refreshed strategy; more focused businesses where we play to win; a strong
focus on efficiency and important investments for the future have created a strong foundation
for sustainable growth. We are enhancing our competitiveness and I’m confident that our
strategy will create significant value in the coming years.
I would like to thank the Board for its strong support over the last year, and I would especially
like to thank all our employees for their hard work, passion and commitment to make our
strategy a success.
Liam Condon
Chief Executive Officer
Detailed results
commentary online
matthey.com/fy-22-23
Johnson Matthey | Annual Report and Accounts 2023
11
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Our strategy
We are playing to win in exciting growth markets where our core competencies
and technology portfolio can have maximum impact.
Focus
We launched our revised strategy last year, focusing our portfolio on our core
competencies in metal chemistry, catalysis and process technology and divesting
Value Businesses. Our goal is to achieve a top three position in all our markets.
Our business structure supports this by allowing us to maximise synergies across
our four business units.
Our strategic priorities
Leading in
autocatalyst
markets
#1 in syngas-
based chemicals
and fuels
technology
Market leader in
performance
components for
hydrogen fuel cells
and electrolysers
#1 global PGM refiner
Disciplined capital allocation
From 2022/23 to 2024/25, we expect to spend £1.1 billion on capital expenditure.
This is focused on the core activities where we have the right to win and need to invest
to drive growth – our PGM refineries, CT and HT.
We are maintaining a strong balance sheet and allocating capital in a disciplined way.
This means investing for growth and attractive returns, ensuring a reliable dividend and
returning excess cash to shareholders.
Simplify
Over the past 12 months, we have made progress to develop our people, enhance
customer focus and simplify processes and organisational structure.
Some notable achievements include:
• Launch of the JM Production System
(JMPS), a common methodology and
framework for driving continuous
improvement in manufacturing, built
around Clean Air’s automotive know-
how
• Reduction of global policies by 75% so
they are now shorter, simpler and more
focused
• Deployment of Workday as a single
platform for managing employee and
organisational data
• Eliminating 170 management roles,
enabling investment in new capabilities
and growth business.
• Launch of a new finance shared service
centre in Kuala Lumpur serving all
regions
• Started to rationalise our sites, which is
already delivering reductions in business
rates, procurement and facilities
management costs.
In total, these actions realised
c. £45 million in new transformation
savings in-year relative to 2021/22 actuals.
In the coming year, the drive to simplify
and improve business processes will
further accelerate. It will do so through our
wide-ranging transformation programme
that is fundamentally upgrading JM’s
business processes and operating model.
This includes actions to:
• Accelerate consolidation of the Clean Air
manufacturing footprint, focusing
production on the highest productivity
lines in North Macedonia, Poland,
the US, China and India
• Deploy a common procurement
management platform, driving spend to
fewer strategic suppliers and increasing
competitive sourcing on all commodities
• Transition delivery of major capital
projects to a global team with enhanced
capabilities in project, contract and
partner management
• Implement a strengthened approach
to performance management
and feedback
• Deliver more than c. £65 million
in transformation and procurement
savings in 2023/24.
12
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Our strategy continued
Execute
Our strategy is underpinned by
a maturing performance culture.
By combining science and purpose
with a more commercial mindset,
we are driving stronger execution,
unlocking near-term cost opportunities
and positioning ourselves for
long-term growth.
We have committed to reaching
10 strategic milestones by the end of
2023/24 that evidence the execution
of our strategy. Focused on customers,
investments, people and sustainability,
our strong progress across these
milestones highlights the success of
our performance culture.
Group Commercial Council
We created a commercial council
to strengthen our commercial
capabilities and cross-JM synergies,
with a strong focus on value
creation. The council is harnessing
the power of all our businesses
by taking an integrated oneJM
approach to our customers,
maximising our current
partnerships and building new
profitable business.
Strategic milestones
End of
2022/23
End of
2023/24
Progress in 2022/23
Status
Customers
Win at least 2 large scale strategic partnerships
in Hydrogen Technologies
Win targeted Euro 7 business and deliver
on £4 billion+ trajectory for Clean Air
• Partnerships announced with Plug Power and Hystar
• Firmly on track to win on targeted Euro 7 business AND
deliver £4 billion+ cash
Win >10 additional large scale projects1
• Won five additional large scale projects to date
Investments
Expand PGM Services refining capacity in China
• PGM Services refining capability in China is complete
Complete construction of Hydrogen Technologies
CCM plant in UK2
Targeted capacity expansion (fuel cells catalyst,
formaldehyde catalyst)
and ramping up
• New CCM plant in UK is on time and on budget
• On track
Complete divestment of Value Businesses
• Divestment of Piezo Products, Diagnostic Services
People
Achieve >70% employee engagement score3
Sustainability
Achieve c. 10% reduction in Scope 1+2 GHG
emissions against 2019/20 baseline
• Employee engagement score has not improved in 2022/23
due to transformation programme
• Achieved 13% reduction in Scope 1 + 2 GHG emissions
Help customers reduce GHG emissions by >1mt
p.a. through use of our products
• Reduced customers’ GHG emissions by 850,000 p.a.
through use of our products
1. Includes Catalyst Technologies and Hydrogen Technologies projects
2. To expand total capacity from 2GW to 5GW
3. New methodology for measuring employee engagement (Workday Peakon) now in place
Baseline score of 6.9 achieved in 2022/23, with new target of 7.2 by 2024/25
Johnson Matthey | Annual Report and Accounts 2023
Key
On track
Requires focus
13
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Clean Air
Improving air quality, transforming mobility
Our catalytic converters have been helping
improve air quality since 1974. Today, our
products are installed in around one-third of
all new cars on the road, as well as a significant
number of trucks and buses around the world. They
actively deliver cleaner air to billions of people globally.
Climate change and a growing body of air quality
regulations are pushing the automotive
92k
additional tonnes of
NOx removed from
tailpipes in 2022/23
industry to build cleaner engines and deliver
new powertrain options. With our decades
of experience in the industry and long
history of innovation, we aim to be
the lasting partner for our customers,
playing a significant role in the
transformation of mobility.
Positioning ourselves to win big
Our leading role in auto-catalysts is underpinned by deep expertise in complex PGM
chemistry and catalysis, distinctive technology, longstanding relationships and a global
state-of-the-art production footprint. As the auto industry goes through unprecedented
change, transitioning towards zero-emission vehicles, clean and efficient internal combustion
engine vehicles have a big role to play for decades to come. We aim to be the lasting partner
that our customers can rely on at each step of their journey towards sustainable mobility.
Customer facing and market-focused
The global regulatory landscape will continue to be favourable to our business. Our best-
in-class technology is ready to help our customers meet more challenging regulations that
improve air quality and ultimately save lives. Our use of modelling is increasing the speed
and accuracy of our product and system designs – helping to create more value for existing
customers and win new ones.
Our catalysts enable our customers’ flexibility in fuel choice – from traditional diesel
or gasoline, to hydrogen, to e-fuels. Our catalysts also reduce emissions from marine and
stationary sources, for example, in data centres. These are markets that will continue to grow
over the next decade.
We play a leading role in heavy
duty diesel technology
Around 1 out of 3 new cars on
the road use our catalysts
Our marine catalysts reduce
100k tonnes of NOx annually
Our industrial catalysts reduce
11k tonnes of NOx annually
14
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Clean Air continued
Synergy in action
The energy transition will require a mosaic of different technologies and processes.
This is why it’s vital our Clean Air customers are aware of the full offer from Johnson
Matthey so our new sales approach will provide customers with a much more
comprehensive and holistic service. For example, we may be in discussion with a
customer about emissions control and find that their hydrogen division needs support
in optimising existing infrastructure to support deployment at scale going forward.
This is something our Hydrogen Technologies team can support. We know how these
customers operate, and we can help them transition as the powertrain evolves.
Our performance in 2022/23
In Clean Air, we are focused on our target of generating at least £4 billion of cash to 2030/31,
which is underpinned by tightening emission control legislation, business wins,
manufacturing footprint consolidation and other fixed cost reductions. In 2022/23 we
generated around £600 million of cash, taking our cumulative cash generation over two
years to £1.4 billion. However, underlying operating profit declined 28% to £230 million and
margins decreased to 8.7%. This largely reflected cost inflation, product mix, lower volumes,
and the transactional impact of exchange rates. We saw an improvement in margins during
the year due to an acceleration in our pricing, and we are expecting strong growth in
operating performance in 2023/24.
We continued to build our commercial muscle, improving our inflation recovery rate with the
majority of the recovery in the second half of the year, while also winning our targeted business
linked to Euro 7 and equivalent legislation globally. During the year we won all of Mercedes
Benz’s light duty diesel business in Europe, and the global contracts covering light duty gasoline
and diesel with a leading automotive OEM. As further evidence of our stronger commercial
muscle, these wins were achieved whilst negotiating inflationary cost increases and improving
our customer satisfaction score by five points. Consequently, we are outperforming the rate of
business wins required to achieve our cash generation target of at least £4 billion by 2030/31.
Supply chain disruption, semiconductor shortages and the ongoing consequences of the global
pandemic all affected our customers, creating additional challenges around variability and
predictability of demand. Our logistics partners also experienced continued pressure around
capacity, cost and lead times. We worked hard to support our entire value chain – and our
efforts led to us winning several customer awards, including the 2022 General Motors Overdrive
Award for Relationship.
We are optimising our manufacturing footprint to not only drive efficiencies but strengthen
our development, manufacturing and delivery processes. Our optimised footprint will be more
agile and flexible, allowing us to respond quickly to market changes.
In China, we have adapted our commercial and technology structure to have more of a local
focus. This improved our chances of successful delivery to the local market and provides even
more growth potential for the region moving forward.
Johnson Matthey | Annual Report and Accounts 2023
Continuing to win big with some of the
world’s largest companies
All over the world, governments are
introducing increasingly stringent
air quality and pollution legislation.
This creates a big opportunity for Clean
Air, and the last year has seen us continue
to win new business and strengthen
existing relationships.
In an increasingly challenging and
competitive market environment, our
investment in our sales capabilities and
new focus on value and pricing, led by the
commercial council, is generating positive
results. To deliver £4 billion cash by
2030/31, we will need to continue to build
on the momentum generated this year.
Among our big wins in 2022/23 were:
• Breaking the record for the largest
business deal in JM’s history with a new
£1.2 billion deal with a leading
automotive company
• Securing a 10-year deal worth
£450 million with a world-famous
automotive brand’s three European
platforms
• Awarded the entire Euro 7 light duty
diesel business of one of our long-
standing automotive clients
• Securing £50 million and £180 million
deals with two of India’s largest
commercial vehicle manufacturers.
Watch: fighting pollution
for 50 years and beyond: matthey.com/
clean-air-50-years
15
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Platinum Group Metal Services
The industry-leading, growth-focused
bedrock of Johnson Matthey
We apply our deep expertise and long history
in platinum group metals (PGMs) to provide
solutions to the complex challenges our customers
face. Our chemistry facilitates the transition to
net zero, delivering products to our customers across the
chemical, energy and transport industries and beyond.
We are the largest refiner of secondary PGMs (by volume)
and account for circa 20% of all global PGMs refined
(primary and secondary). This makes us a vital cog in the
global economy and a partner of choice for customers who
want an end-to-end service for PGMs. Our expertise in
PGM catalysis and performance underpins much of the
innovation across Johnson Matthey, drives synergies
across our business and strengthens our global position
in our key markets.
c. 80%
of PGMs used in JM products are internally refined
Leaders in circularity
Circularity of PGMs is an essential part of the net zero transition. With limited quantities
of these critical minerals available, recycling plays a crucial role in securing the metal needed
to supply existing and future demand. Recycled metal also significantly reduces waste and
energy usage compared to primary mining, minimising the environmental impact of global
PGM value chains.
The PGM ecosystem
We optimise the use of these critical materials, sourcing, fabricating and recycling them to
enable their circular use.
Manufacture of value
added applications
Components and
materials
End of life
products
PGM supply and
management
up to 95%
lower carbon footprint of PGMs from secondary refined metals compared to primary1
Full refining
cycle with metal
management options
and ongoing
technical support
Refining
Recovery of PGMs
Spent products from
automotive and industrial
uses
1. IPA website link https://ipa-news.de/index/sustainability/
16
Efficient metal separation
Full seven metal separation
78
Pt
46
Pd
45
Rh
77
Ir
44
Ru
79
Au
47
Ag
Refining to commercial grade purity
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Platinum Group Metal Services continued
Synergy in action
We’ve advised, supplied and facilitated recycling for big OEMs in the automotive industry for
the last 30-40 years, working closely with the Clean Air business. We have created a model
that enables us to work in partnership with our customers, offering a full range of services.
This is a blueprint that we will leverage as the CT and HT businesses continue to grow.
Our performance in 2022/23
As with businesses across the globe, adverse macro-economic trends are impacting our
performance. Underlying operating profit declined 21% mainly impacted by lower average
PGM prices (c. £55 million impact*) and reduced refinery volumes. Cost inflation was more
than offset by efficiency benefits, as well as higher pricing across both our refining and
products businesses.
We continued to invest in the long term future of our refineries, updating our assets so that
we are fully positioned to capture the opportunities in the coming decades. In China, we have
expanded our capabilities and now provide a full refinery offering, consolidating our position
as a global leader in PGMs.
Globally we continue to make progress towards an integrated closed loop solution for CCM
recycling for Hydrogen Technologies. This will allow us to once again be a leading innovator
in making circularity a reality in our markets, and in doing so, we will add to our value
proposition to Hydrogen Technologies customers.
Throughout 2022/23 we consulted with a range of government agencies around the world
on matters relating to critical material supply, circularity and the transition to net zero. Our
expertise is actively helping to drive forward the global green economy through contributing
to policy development and technological progress.
Positioning ourselves for long-term success
In the longer term, we see significant opportunities for PGMS. Platinum and iridium in
particular are growth areas given they are critical enablers of the hydrogen economy. We also
see new opportunities for palladium in industrial applications, including sustainable aviation
fuels. We have world-leading expertise in securing a sustainable supply, through responsible
sourcing and recycling. In addition, our ability to provide low carbon refined metals will
be increasingly important to our customers and society over time.
PGMS is also a critical enabler for our other core businesses. We offer them an integrated
ecosystem with expert knowledge of the PGM markets, responsible and sustainable metal
sourcing, value added PGM catalysts and solutions for end-of-life recycling of their products.
Our R&D priorities include a closed loop solution for CCMs used in fuel cells and electrolysers,
recovering the PGMs and ionomers, making it more sustainable and cost-effective for
our customers.
*
£55 million adverse impact represents a gross PGM price impact before any foreign exchange movement
Johnson Matthey | Annual Report and Accounts 2023
Efficiency, performance and circularity
in our products
Our unique end-to-end offering means
that while we source PGMs and use them
to create products for specialist
applications, we also maximise their value
by recovering and refining them. For our
pharmaceutical customers, this happens
in a closed loop, giving them a sustainable
supply of PGMs.
If you’ve bought or been prescribed
medication, you may well have benefitted
from our expertise in PGMs and catalysis.
PGMs are essential to the processes and
technologies that enhance our daily lives,
but it’s not always obvious where they’re
used. One example is pharmaceutical
manufacturing. PGM catalysts and
biocatalysts are used across a vast range
of drug synthesis processes to enable
complex chemical structures to be formed.
They also help reduce the overall number
of process steps in the synthesis, along
with waste.
We work with our pharmaceutical
customers to develop tailored solutions
and optimise catalyst performance for
a wide range of drug synthesis steps.
This includes reducing the metal loadings
through catalyst thrifting. Using less metal
not only lowers costs, but can also reduce
the CO₂ footprint of production processes.
Watch: a circular solution
for a net zero future: matthey.com/circular-
solution-for-net-zero
17
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Catalyst Technologies
Enabling the chemicals and fuels
industries to operate efficiently and
transition to net zero
Our Catalyst Technologies business focuses on
our core expertise in process technology and
catalysis. Our products enable our customers
to create the chemicals and fuels of today and
the future which positively impact the everyday
lives of millions of people.
We have worked for decades in partnership with our customers to improve the efficiency
and sustainability of their processes, but there is more we can do to reduce the environmental
impact of these chemicals and fuels across their full lifecycle. So we are developing robust
solutions with our customers that reduce their process emissions today while enabling them
to replace fossil-based feedstocks with more sustainable options.
Sharpening our commercial focus in a changing world
Catalyst Technologies has segment-leading positions in methanol, formaldehyde, and
hydrogen – all technologies that build on our core strengths in syngas production, purification
and conversion.
We’ve adapted our approach to our customers to make sure that we are creating value for
both them and us in a high inflationary and energy cost environment.
We are also driving awareness among current and new customers to the many ways Johnson
Matthey as a whole can partner with them as their industries evolve.
Our expertise underpins our suite of decarbonisation technologies, led by our low carbon
(blue) hydrogen and our sustainable fuels offering. We are well placed to capture the sizeable
opportunity presented by valorising non-fossil feedstocks like biomass, renewable (green)
hydrogen and captured CO2 over the coming decades. But we can also help customers with
existing assets to minimise their environmental footprint as regulations tighten and carbon
taxes increase.
In line with our new strategy, we are transforming how we work so that we can take
full advantage of the opportunities generated by the chemical industry’s decarbonisation
journey and positioning our technologies to lie at the heart of the energy transition.
How Catalyst Technologies helps our customers
• World-class catalysts and chemical processes – to get the most of their assets; increasing
efficiency, maximising output, reducing both operational and capital expenditure
• Carbon management – helping current asset owners reduce their environmental footprint
and mitigate future financial impacts
• Low carbon new energy – helping customers catalyse their plans for the energy transition
with technologies that can be deployed at scale now.
Leading in today’s markets
Industrial and consumer
Fuels
Methanol
Including paints,
coatings and
polymers
#1
global segment
position
Formaldehyde
Including wood
products
#1
global segment
position
Refinery
Hydrogen
#1
global segment
position
Refining
additives
Top 2
global segment
position
T
r
a
n
s
p
o
r
t
a
t
i
o
n
f
u
e
l
s
N
a
t
u
r
a
l
g
a
s
Ammonia
Including fertilizers
Top 3
global segment
position
Natural gas
purification
#1
global segment
position
In the submarket segments in which we operate
Synergy in action
We are ensuring that all our customers are aware of the benefits brought by the shared
technology, insight and ecosystem across Johnson Matthey.
We all know that transportation needs to decarbonise. However, there is no one technology
that meets the needs of every market. But we can provide a range of solutions, whether it’s
hydrogen fuel cells, drop-in liquid hydrocarbon fuels, or emission control solutions for engines
running on sustainable fuels. Our Bioforming™ technology, co-developed with Virent,
produces sustainable gasoline and aviation fuel, and in January, Emirates operated a
milestone demonstration flight, using fuel produced by our process blended to create 100%
sustainable aviation fuel (SAF) in one of the engines of a Boeing 777-300ER. This is only
made possible by JM’s deep understanding of PGM chemistry and circularity, leveraging skills
in PGMS. It’s why JM is better together.
Another synergy is in hydrogen, covering both production and use. From reducing the carbon
intensity of current customers’ assets to producing components for green hydrogen that can
be used in e-fuels and chemicals, we’re ready to support our customers wherever they are
in the journey.
18
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Catalyst Technologies continued
Reputation. Innovation. Commercialisation at scale
Our reputation in process technology, coupled with our deep knowledge of metal chemistry
and catalysis, is generating value today for our customers. And a growing part of our business
will be to innovate and deliver the technologies at scale to address tomorrow’s challenges.
Building strong partnerships, both commercially and technically, is key to success in the move
to a net zero world. A great example of this is our work with Honeywell UOP to integrate leading
carbon capture technology into our syngas decarbonisation technologies. In the case of our
LCH™ technology, this collaboration creates a solution that delivers a 99% CO2 capture rate that
is ready to be deployed today.
Many of the critical innovations inside our emerging syngas offers, such as our HyCOgen™
reverse water gas shift and ammonia cracking licences, have their basis in technologies with
proven real-world operation over decades in other markets. So our customers can be confident
we can help them decarbonise successfully. For example, the H2H Saltend project in the UK will
use JM’s LCH™ technology in its 600MW low carbon hydrogen production plant with carbon
capture. This is just one of several leading-edge decarbonisation projects in Europe and North
America that show the value we bring to partnerships.
Our performance in 2022/23
Like the rest of the business, Catalyst Technologies continued to deal with economic
headwinds in 2022/23. Underlying operating profit of £51 million was in line with the prior
year. Margins declined to 9.1%; however we saw good improvement from the first to the
second half of the year. Higher pricing, improved product mix and the benefits of our
transformation programme offset significant cost inflation and the loss of business in Russia.
Despite these challenges, sales during the period were up 17%, with strong growth in
licensing and growth in first fills and refills reflecting higher pricing and positive mix. We
continued to deliver on our commercial and strategic goals. Our sharper commercial focus
has resulted in us winning 12 new licences. We are also making good progress towards CT
and HT’s 2023/24 goal of winning more than ten additional large-scale projects, with five
added to our portfolio. Our continued investment in our business is exemplified by the
formaldehyde catalyst capacity expansion in our facility in Perstorp, Sweden. This is
progressing well and is on track to be fully operational in early 2024/25, increasing the site’s
capacity by around 50%.
We will focus on further strengthening the value creation from our core catalyst businesses and
leveraging our strong customer satisfaction scores. Internally, we will maintain the momentum
we created in 2022/23 around simplifying our operations, creating clearer accountability and
setting performance targets that deliver value today and growth for the future.
Our R&D teams continue to innovate on the catalysts, reactors and process concepts that
together enable technology leadership in low carbon (blue) hydrogen and sustainable
aviation fuels as well as ammonia cracking and other e-fuels. We are creating cost-effective
solutions with low carbon intensity tailored to the feedstocks of the future. We are also
investing in sustainable catalyst manufacturing technologies across the portfolio.
Johnson Matthey | Annual Report and Accounts 2023
Pioneering the use of household waste
as a feedstock with Fulcrum Sierra
Along with international energy company
bp, we are enabling the world’s first
commercial-scale plant to use household
rubbish as a feedstock for the production
of synthetic crude oil. Using our FT CANS™
technology, the Fulcrum Sierra Biofuels
Plant in Reno, Nevada, is expected to
produce around 11 million gallons of
product annually from 175,000 tonnes
of landfill waste that can be refined into
renewable, low carbon transportation fuel.
JM and bp have worked with waste-to-
fuels developer Fulcrum to use FT CANS
technology since 2018.
This project lays important foundations
for the transition to a less carbon-intensive
economy. In order to reach its climate
goals of achieving net zero by 2050,
the aviation industry needs reliable and
scalable sources of alternative fuels. Using
waste as feedstock will also help to reduce
both the amount of waste sent to landfill
and the methane produced through
biodegradation.
Watch: ready for take off: matthey.com/
ready-for-take-off
19
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Hydrogen Technologies
Providing critical components for the
emerging hydrogen economy
Renewable (green) hydrogen has the potential
to transform energy systems. As a fuel, it creates
no carbon emissions, and if the electricity used
to produce it comes from renewable sources, the
environmental benefits are tremendous. Global
investment, innovation and demand for green
hydrogen solutions is growing rapidly. To make
the hydrogen economy viable, businesses need two
processes: a way to use renewable electricity to split water
into hydrogen and oxygen, and fuel cells to turn that
hydrogen back into electricity when and where it is
needed. Our specialist catalyst coated membranes (CCMs)
are essential to both of these processes.
Customer-led growth
Johnson Matthey has been active in hydrogen in fuel cells for over 20 years, and our Hydrogen
Technologies business is playing to win in the hydrogen market. In order to fully capitalise on
this fast growth market, we need to be able to move quickly, scale effectively and efficiently
manage the risks inherent in doing so. As the market becomes increasingly crowded, being
able to demonstrate the competitiveness of our offer and the scale of our capabilities will be
hugely important.
Partnerships and strategic relationships with customers are critical to our goal of becoming
a market leader. We aim to partner with the expected winners in the markets for fuel
cells and electrolysis, and to do this we have put customer-led growth at the heart of our
commercial strategy. We look to partner with strategic customers early in their development
cycle. These are partners that we believe have the capabilities to win in their markets.
Our partnership with Plug Power is proof that this approach is working.
Focused on delivering performance-defining components for the hydrogen economy
Precious metal recycling
Raw materials
Components
Stack assembly and
systems integration
Application
Catalyst
coated
membrane
(CCM)
Membrane
electrode
assembly
(MEA)
Fuel cells
Electrolyser
Hydrogen
Air
Water
Hydrogen
End-user markets
Water
Oxygen
Electric current
Electric current
20
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Hydrogen Technologies continued
Synergy in action
Businesses across the global economy are looking at hydrogen as a way of decarbonising.
We work to leverage existing relationships with Clean Air customers to provide a range
of sustainability technologies to the automotive industry. Many of Catalyst Technologies’
customers are also exploring hydrogen as a cleaner fuel alternative to hydrocarbons.
They face a choice between blue hydrogen and carbon capture or powering themselves
with green hydrogen. We can then complete the end-to-end value chain through our
PGMS capabilities, from sourcing to end-of-life recycling. Whatever our customers choose,
Johnson Matthey is there to support them.
An essential part of the transition to net zero
Achieving net zero requires a range of technologies. Fuel cells using hydrogen provide an
alternative to diesel, without the associated emissions. We believe the market for hydrogen-
powered heavy duty trucks and stationary systems will see significant growth towards 2030.
The predicted rapid market growth and demand are coming at us faster than ever before,
partly due to significant regulatory changes to support commercial scale projects for production
and infrastructure – such as the Inflation Reduction Act in the US and the UK’s Automotive
Transition Fund. The convergence of these market changes shines a spotlight on our
technologies, builds rapid growth and moves the dial on the transition to net zero.
Our performance in 2022/23
We made major progress towards all of our strategic goals this year. Our sales have doubled
over the course of 2022/23, and we achieved our goals of expanding our customer base,
announcing long-term strategic partnerships with Plug Power and Hystar. We are seeing
a trend of businesses that have previously tried to manufacture CCMs by themselves talking
to us about working together in the future. Demand from existing customers is increasing too.
The underlying operating loss of £45 million primarily reflects increased investment into
product development and building capability as we scale the business to meet customer
demand, partly offset by higher volumes.
Although we faced the same inflationary pressures as the rest of Johnson Matthey in 2022/23,
our business was less impacted by volatility and economic headwinds. This is due to us
operating in a rapidly growing market that has benefited from regulatory support.
We have three main priorities for 2023/24. One, to continue focusing on commercial
performance and developing new and existing partnerships; two, increasing our production
capacity, with our major site in Royston completing construction, as well as projects starting
in the US and China. Finally, we continue to invest in the next generation of our technology,
both on our own and alongside our partners. Our R&D will focus on continuing to improve
product efficiencies, including reducing utilisation of precious metals such as iridium within
electrolysis CCM as well as optimising activity of platinum catalysts in fuel cells.
Accelerating the hydrogen economy
with Plug Power
In early 2023, we announced a new,
long-term partnership with Plug Power,
a global leader in the hydrogen value
chain. As the company’s strategic partner,
we will provide the catalysts, membranes
and catalyst coated membranes
Plug needs to reach its revenue target
of US$20 billion by 2030.
Not only are we bringing our catalysis
expertise, precious metal supply security
and unique recycling capabilities to the
table, but we are also co-investing in what
will likely be the largest CCM manufacturing
facility in the world – expected to begin
production in the US in 2025.
The partnership is a game-changer for
the hydrogen economy. Plug Power is a
leading player in building an end-to-end
green hydrogen ecosystem, helping
companies like Amazon and BMW
decarbonise. Its decision to partner with
us is not only a demonstration of our
expertise in CCMs – but proof that our
manufacturing capabilities have the
potential to bring new scale and volume
to the emerging hydrogen economy.
Watch: ramping up to reach net zero:
matthey.com/hydrogen-for-net-zero
Johnson Matthey | Annual Report and Accounts 2023
21
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability
Embedding sustainability into everything we do
We are a global leader in sustainable technologies. Through inspiring science and
continued innovation, we are catalysing the net zero transition for millions of people
every day. Our skills and technologies are important today as businesses and communities
adapt to the challenges of climate change. But advancing sustainability isn’t just about
our portfolio of technologies, it’s also about our own operations, how we work together
and hold ourselves accountable for our impacts on society.
Our Societal Value Committee (SVC), which is made up of the full board, met four times this
year to review progress in delivering on our sustainability commitments see page 88.
Our Sustainability Council, which is made up of our Group Leadership Team (GLT), met four
times this year to decide the direction of our sustainability strategy and monitor progress.
Our senior leaders and directors are incentivised to deliver on our sustainability ambitions
through sustainability objectives included in our long-term Performance Share Plan (PSP)
– see page 122 for details.
Our products and services are where we believe we can have most positive impact on society and we have aligned our
strategy with four of the UN SDGs.
• Emission control technologies that reduce harmful oxides of nitrogen (NOx)
and particulates from vehicle tailpipes and stationary engines
• Purification technologies that reduce harmful contaminants, such as mercury,
from industrial processes
• Refinery additives to mitigate NOx and oxides of sulphur (SOx) emissions
• Catalysts used to make pharmaceutical ingredients
• Renewable (green) hydrogen technologies that will support the drive to zero
carbon hydrogen production using renewable energy and electrolysis
• Low-carbon (blue) hydrogen technologies that are available today to help
make low-carbon hydrogen at scale
• PGM recycling to recover and reuse scarce resources
• Chloride guards to prevent corrosion
• PURACARETM services to reduce maintenance lifetime and end-of-life recovery
• CAT-AIDTM products to extend catalyst life
• Technologies that turn high sources of carbon, such as household waste,
into sustainable aviation fuels
• Fuel cell components for low-carbon transportation and distributed power units
• Nitrous oxide (N2O) abatement systems
We track our sales and investment in R&D against these global priorities.
82.0% sales
from products
contributing
to priority
UN SDGs
22
69%
0%
5%
8%
18%
SDG 3 – Good health and wellbeing
SDG 7 – Affordable and clean energy
SDG 12 – Responsible consumption and production
SDG 13 – Climate action
Not assigned to priority SDGs
63%
5%
7%
14%
11%
89.5% R&D
spend
contributing
to priority
UN SDGs
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
A new focus on our
core material topics
This year, the whole of Johnson Matthey has
been making changes to become a more
customer-facing, commercially minded
and agile business with the strategy simplify,
focus, execute.
To support this, in partnership with an
independent third-party, we refreshed our
materiality assessment to ensure that our
sustainability strategy, goals and targets
are focused both on our biggest impacts
on society and those areas of most
importance to our stakeholders. We
benchmarked our existing strategy against
industry ESG standards, legislation
requirements and sector peers. As a result,
we reorganised our existing sustainability
goals and targets for 2030 under new themes
to better articulate the most material benefits
that we believe we can bring to society.
We increased the ambition in our climate-
related 2030 targets to focus and align them
better with our company purpose.
See page 222 for our list of material topics as
approved in the SVC meeting in September 2022
Leading ESG ratings
Protecting
the climate
Drive lower global greenhouse
gas (GHG) emissions
Achieve net zero by 2040
Cli m a t e
P l anet
Catalysing
the net zero
transition
Peop l e
Nature an
d c
i
r
c
u
l
a
r
i
t
y
Protecting nature
and advancing the
circular economy
Conserve scarce resources
Minimise our environmental
footprint
y
t
i
s
n d diver
y a
Saf e t
Promoting a safe, diverse and equitable society
Keep people safe
Uphold human rights
Create a diverse, inclusive and engaged company
Invest in our local communities
AAA rated
‘B’ Climate
rated
’B’ Water rated
93rd top percentile
top six European
chemical
companies
Platinum rated
(top1%)
97th top
percentile
Medium risk
(22.8) 13th
percentile, where
1st is top, in
Chemicals sector
45th / 4000
3rd / 54
Johnson Matthey | Annual Report and Accounts 2023
23
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
Our sustainability targets for 2030
Our sustainability targets for 2030 are ambitious, but they build off the incredible impact our
products and services already have. Our growing business of coated membranes is enabling
the next generation of low carbon hydrogen technology, and our catalysts reduce pollution
and help the global chemical industry de-fossilise. All this is underpinned by our circular PGM
economy that helps reduce waste and make the most of scarce resources. For decades our
expertise in metal chemistry has helped to solve the complex challenges of air pollution, and
now our technologies are accelerating the transition to net zero.
This year we have decided to scale up our ambition and announce tougher GHG reduction
targets for 2030 which will firmly put us on Science Based Targets initiative’s (SBTi)1.5°C
trajectory and place us among the leading group of global businesses aiming for a rise of
no more than 1.5°C. We have submitted them to SBTi for validation, as part of our Net Zero
Standard application.
ERM Certification and Verification Services have provide limited assurance to ISAE3000
standard of selected KPIs with 2030 targets. Please see pages 228-230 for more details.
Goals
Key performance indicators (KPIs)
2030 target
2022/23 performance
Progress towards 2030 target
from baseline
0%
100%
Planet: Protecting the climate
Our goal: Drive lower global greenhouse
gas (GHG) emissions
1. GHG emissions avoided per year using technologies enabled by
JM’s products and solutions, compared to conventional offerings
50 million
tonnes CO2e
0.85 million
tonnes CO2e
Our goal: Achieve net zero by 2040
2. Reduction in Scope 1 and Scope 2 GHG emissions
42%
13% reduction against baseline
3. Reduction in Scope 3 GHG emissions from purchased goods and
42%
27% reduction against baseline
services
Planet: Protecting nature and advancing the circular economy
Our goal: Conserve scarce resources
4. Recycled PGM content in JM’s manufactured products
Our goal: Minimise our environmental
footprint
5. Reduction in total hazardous waste
6. Reduction in net water usage
75%
50%
25%
69%
1% reduction against baseline
5% reduction against baseline
0%
People: Promoting a safe, diverse and equitable society
Our goal: Keep people safe
7. Total recordable injury and illness rate (TRIIR) for employees and
<0.25
contractors
8.
ICCA process safety event severity rate (PSESR)
Our goal: Create a diverse, inclusive
and engaged company
9. Employee engagement score
10. Female representation across all management levels
Our goal: Uphold human rights
% supplier spend assessed for human rights risk and remedial plans
in place where high risks identified
Our goal: Invest in our local communities
Number of days of volunteering in our local communities
by our employees
0.4
>8.0
40%
–
–
0.47
1.0
6.9
28%
22%
new methodology this year
0%
no target set for 2030
2,063 days
no target set for 2030
1%
31%
65%
-18%
3%
21%
59%
21%
-19%
24
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
Planet: Protecting the climate
Cli m a t e
P l anet
Catalysing
the net zero
transition
Our company purpose
is to catalyse the net zero
transition because we believe
this represents the biggest
benefit we can bring to
society. This mainly comes
through sales of our products
and services, which when
used by our customers, will
bring about millions of tonnes
of GHG avoided. We are also committed to net zero by
2040 for our operations.
You can read more about how climate change is bringing opportunity and risks to our business
in our TCFD report on pages 45-52
2030 target
2021/22
2022/23 % change
against
prior year
Our goal: Drive lower global greenhouse gas (GHG) emissions
50 million tonnes of GHG
emissions avoided per year using
technologies enabled by JM’s products
and solutions, compared to
conventional offerings
Our goal: Achieve net zero by 2040
42% Reduction in Scope 1
and Scope 2 GHG emissions
42% Reduction in Scope 3 GHG
emissions from purchased goods and
services
0.49 million
tonnes CO2e
0.85 million
tonnes CO2e
+74%
410,110
tonnes CO2e1
363,686
tonnes CO2e
2,978,197
tonnes CO2e1
2,495,475
tonnes CO2e
-11%
-16%
1. Rebaselined to remove divested businesses, please see page 222 for more information
2. https://www.gov.uk/government/statistics/provisional-uk-greenhouse-gas-emissions-national-statistics-2021
3. Using technologies enabled by our products and solutions: avoided emissions compared to conventional technologies in 2020
Johnson Matthey | Annual Report and Accounts 2023
Our goal: Drive lower global greenhouse gas
(GHG) emissions
Sales of our fuel cell components already help our customers avoid GHG emissions every
year and are on track to achieve our milestone of 1 million tonnes saved by end of 2023/24.
This currently only represents 1.1% of our sales (excl platinum group metals, PGM), but we
want to amplify our impact considerably over the next decade. Our capabilities, experience
and scale put us in a great position to play to win in additional emerging markets, such as
clean hydrogen and sustainable fuels.
Last year we set ourselves the target that Johnson Matthey technologies would contribute
towards avoiding 50 million tonnes of GHGs entering the atmosphere per year by 2030,
compared to conventional technologies in 2020. This is equivalent to avoiding the
emissions from half of UK transport2. During the year we have signed significant
partnerships, and our major partnership with Plug Power will enable the manufacturing of
significant volumes of catalyst-coated membranes for hydrogen production and fuel cells in
the US and accelerate progress towards our 2030 target.
50 million tonnes of GHG emissions avoided3 per year by our
customers using our products by 2030
Automotive
Fuel cell components
for hydrogen powered
vehicles
Chemicals
Solutions to decarbonise
chemical products, like
ammonia, methanol or
formaldehyde
Solutions to decarbonise
chemical and industrial
processes
Energy
Sustainable fuels for
aviation and marine use
Low-carbon (blue)
hydrogen technology
Renewable (green)
hydrogen technology
(electrolysers)
Fuel cell components for
distributed power
generation
SASB Resource efficiency indicator: We have also identified our revenues that align with the SASB
Chemicals Sustainability Accounting Standard’s definition of products that, when used, improve
energy efficiency, eliminate or reduce GHG emissions, reduce raw materials consumption, lower
water consumption and / or increase product life. In 2022/23, those sales were £1.01 billion (with
sales excl. precious metals as £4.2bn) compared with £812 million in 2021/22.
25
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
Planet: Protecting the climate continued
Our goal: Achieve net zero by 2040
We have updated our net zero roadmap for Scope 1 and 2 GHG emissions in line with our more ambitious 2030 target, putting it firmly on the 1.5°C pathway to net zero. We have also submitted
our 2040 goal as our long-term net zero target for approval by Science-based targets Initiative (SBTi) under their Net Zero Standard. During the year, each of our businesses has developed a
detailed roadmap for improving energy efficiency, switching to lower-carbon forms of energy and reducing the emissions our chemical processes generate. These roadmaps are used for making
business investment decisions and monitoring progress to our targets.
Net zero roadmap for Scope 1 and 2 GHG emissions
Baseline
Target:
60% renewable electricity
Principles for net zero
2020
2025
Energy
efficiency
Pilot SMART metering at key sites
ISO 50001 accreditation
at top energy-using sites
Target:
-42% GHGs
2030
-7%
Target:
-100% GHGs
2040
Energy efficiency improvements through continuous improvement
and equipment upgrades
Energy efficiency improvements continued
• Continuous improvement optimisation and equipment upgrades
Footprint rationalisation to scale down old and less efficient assets
-10%
Renewable
electricity
Switch to renewable electricity
in the US, Europe, India
and China
Renewable electricity sourcing
in remaining locations
-20%
Switch to low-carbon fuel or switch off
gas-fired combined heat and power plant (CHP) generators
Renewable electricity sourcing in remaining locations
Abate process
GHG emissions
N2O abatement
technical studies
N2O process emissions
abatement projects
-5%
Carbon capture and storage (CCS) ‘discovery’ work
• CO2 emissions data profiling on key sites
• Partner to establish appropriate CCS solutions at strategic locations
• Investigate opportunities to switch to alternative process chemistry
CO2 process emissions
• Eliminate through process chemistry change or capture
Natural gas
replacement
Assess equipment-level gas usage
and suitability for conversion to
sustainable fuel sources
Develop natural gas replacement roadmap
• Overlay green energy developments and
asset replacement / upgrade plans
Phase out use of other fossil fuels in India and CA test facilities
Natural gas replacement projects
• Capex – electrification of lower-grade heat ovens at high-usage sites
• Conversion to biomethane / hydrogen or add carbon capture technology
-8%
-5%
-5%
-10%
-10%
-20%
Net zero growth
Grow manufacturing footprint for Hydrogen Technologies and other new businesses in line with our net zero commitment
0%
Underpinning work
Delivery
% reductions indicative only against a 2020 baseline
26
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
Planet: Protecting the climate continued
Our progress in 2022/23
This year we saw a 11.3% fall in our Scope 1 and 2 GHG emissions from last year, as well as a
8.1% drop in our total Scope 1 and 2 carbon intensity as we began to deliver on our roadmap
to net zero by 2040. We have principally achieved this through energy efficiency and
renewable electricity procurement, although we did also have an overall drop in production
output due to COVID-related disruptions to the automotive industry in China.
Energy efficiency and security
To ensure we drive energy efficiency in our operations, and underpin our net zero strategy,
this year we worked with a third-party provider to create an energy management framework for
the whole business in line with ISO 50001. Training relating to this was provided through global
sessions along with focused training to our most energy-intensive sites. Four sites already have
ISO 50001 and we have completed our gap analysis for another 16 of our largest sites.
Overall our GHG emissions from Scope 3 purchased goods and services decreased by 16%
in 2022/23 compared to the previous year, and we reached our previous target for 2030
seven years early. This was achieved through a combination of reduced procurement of
primary PGM and through the decarbonisation efforts of our supply chain partners in the
PGM mining sector.
Energy mix
Non-renewable, grid-supplied electricity
Certified renewable electricity from the grid
Renewable electricity generated locally
Natural gas used on site
Other fossil fuels used on site
Non-renewable steam procured
Fuel used on public roads by JM vehicles
on company business
21.8%
16.2%
0.6%
52.2%
5.8%
3.0%
0.4%
Total: 1,185,612 MWh
Total greenhouse gas emissions
Scope 1
Scope 2
Scope 3 – Purchased goods and services
Scope 3 – All other categories
7.1%
3.9%
75.4%
13.6%
Total: 3.3million tonnes CO2e
For more information on our calculation methodology
please see our Basis of reporting on pages 222-227
Johnson Matthey | Annual Report and Accounts 2023
Implementation of recommendations has already started, and will continue in the year ahead.
For example, at our largest energy-using site, through process and control improvements on
two of their larger assets, we were able to demonstrate savings of approximately 2% of the site’s
total fuel consumption. At our UK refinery, we are carrying out feasibility and heat studies to
look at how they can recover more energy. Three of our largest manufacturing sites also make
electricity using combined heat and power plants (CHPs) to optimise our energy efficiency.
Although these run off natural gas, our CHPs generated 26,974 MWh (5.6% of our total)
electricity this year minimising our energy demand.
We established a Winter Energy Taskforce to focus and co-ordinate our efforts to mitigate
the risk to our operation from headwinds in the energy markets created by the Ukraine war.
We minimised energy cost rises to 82%. We continue to focus on measures to improve our
resilience at key locations, including beginning negotiations on direct supply of electricity
through power purchase agreements (PPA).
Renewable energy
This year 41% of our electricity consumption came from certified renewable sources, compared
to 32% in 2021/22. We remain on track to achieve our target of purchasing 60% of our
electricity from certified renewable sources by 2025.
Over the past year we assessed additional renewable energy procurement opportunities and the
inherent risks, challenges, gaps or legal changes that may occur along our journey to net zero.
Currently we are using green tariffs to ensure renewable electricity consumption in Europe and
the US, and going forward we will focus on Power and Renewable Gas Purchase Agreements
in these regions and others where this procurement scheme is available.
In regions like India and China we will continue to purchase recognised Energy Attribute
Certificates in the short term. We have also deployed some on-site generation as part of the
current energy portfolio in sites in India.
Increasing our energy efficiency with no additional investment
We are always exploring ways to improve our energy efficiency. Our Clean Air site in Poland
demonstrates the kind of positive results that can be achieved through innovative thinking
and process optimisation. Through adding new logic controls to our existing systems, we
have enabled waste heat recirculation from downstream zones of the ovens to upstream
zones. We expect this improvement to reduce annual fuel usage on our site by about 10%
without the need for any additional capital investment. We are replicating this low-cost
improvement across other Clean Air sites globally, with similar savings expected.
27
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
Planet: Protecting the climate continued
Scope 1 and 2 greenhouse gas (GHG) footprint and energy efficiency
Total Scope 1 GHG emissions (tonnes CO2e)
Total Scope 2 GHG emissions (market-based) (tonnes CO2e)
Total Scope 2 GHG emissions (location-based) (tonnes CO2e)
Total Scope 1 and 2 GHG emissions (market-based) (tonnes CO2e)
Total Scope 1 and 2 GHG emissions (location-based) (tonnes CO2e)
Total Scope 1 and 2 carbon intensity (market-based) (tonnes CO2e/tonne sales)
Total energy consumption (MWh)2
Total energy efficiency (MWh/tonne)3
Scope 3 GHG emissions by category
(tonnes CO2e)
Category
Purchased goods and services
Capital goods
Fuel and energy-related activities
Upstream transportation and distribution
Waste generated in operations
Business travel
Employee commuting
Upstream leased assets
Use of sold products
Investments
Total
Category number
1
2
3
4
5
6
7
8
11
15
Four-year performance table
Total energy consumption (MWh)2
Total energy efficiency (MWh/tonne)3
Total Scope 1 and 2 GHG emissions (market-based) (tonnes CO2e)
Total Scope 1 and 2 carbon intensity (market based) (tonnes CO2e/tonne sales)
Total Scope 3 GHG emissions (tonnes CO2e)
Global
233,300
130,386
204,848
363,686
438,148
3.4
2022/23
UK only Global (excl UK)
132,839
129,362
183,152
262,201
315,991
2.5
100,461
1,024
21,696
101,485
122,157
22.3
2022/23
Global
239,862
170,248
225,712
410,110
465,574
3.7
Global
1,185,612
11.0
UK only Global (excl UK)
848,124
8.2
337,488
74.2
Global
1,241,806
11.3
2021/221
UK only
103,534
1,265
24,942
104,799
128,475
19.9
2021/221
UK only
373,347
70.7
Global (excl UK)
136,328
168,983
200,770
305,311
337,099
2.9
% change (global)
-2.7%
-23.4%
-9.2%
-11.3%
-5.9%
-8.1%
Global (excl UK)
868,458
8.3
% change (global)
-4.5%
-3.0%
2022/23
2,495,475
177,329
41,018
81,999
4,004
5,077
13,627
523
0
125,196
2,944,248
2022/23
1,185,612
11.0
363,686
3.4
2,944,248
2021/221
2,978,197
163,641
43,505
158,625
5,220
1,336
13,517
698
0
118,356
3,483,095
2021/221
1,241,806
11.3
410,110
3.7
3,483,095
2020/211
2,812,518
242,456
36,695
94,348
4,549
67
25,763
602
0
119,005
3,336,003
2020/211
1,168,338
11.0
409,584
3.9
3,336,003
2019/201
3,433,660
367,141
38,199
97,424
3,439
9,202
25,763
5,094
0
129,337
4,109,259
2019/201
1,202,121
10.6
417,818
3.7
4,109,259
1. Rebaselined to remove divested businesses, please see page 222 for more information
2. Energy consumption is reported here in MWh, which is equal to 1,000kWh. Total global energy consumption for 2022/23 is 1,185,612,237kWh
3. This is the total energy used by the business divided by amount of materials sold to customers
For more information on our calculation methodology please see our Basis of reporting on pages 222-227
28
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
Planet: Protecting nature and advancing the circular economy
P l anet
Catalysing
the net zero
transition
Nature an
d c
i
r
c
u
l
a
r
i
t
y
Johnson Matthey is
committed to minimising our
environmental footprint and
conserving scarce mineral
resources through our
manufacturing choices.
In advance of COP15, in Dec
2022 we signed the ”Business
Pledge for Nature” and the
Terra Carta Charter, which
guides organisations in how to put nature, people and
planet at the heart of value creation.
2030 target
2021/22
2022/23
% change
against prior
year
Our goal: Conserve scarce resources
75% of recycled PGMs content in
JM’s manufactured products
70%1
69%
-1%
Our goal: Minimise our environmental footprint
50% Reduction in total
hazardous waste2
47,791
tonnes3
41,860
tonnes
25% Reduction in net water usage4
1,833 ML3
1,752 ML
-12%
-4%
Our goal: Conserve scarce resources
We helped create one of the world’s first circular economies – and our increasing use
of secondary, or recycled, PGMs is helping to significantly reduce the emissions and
environmental impact associated with mining these vital materials. Please see page 226
for a definition of secondary PGMs.
We can also apply our longstanding recycling expertise to emerging technologies that utilise
PGMs, like fuel cells and electrolyser stacks. We are upgrading our infrastructure to allow us to
recover and refine the PGMs used in these technologies to a very high purity in the same way
we do today with production scrap. This will allow us to create an endless loop of PGMs availability.
Our performance in 2022/23
Our ability to meet our target of 75% of our products using secondary PGMs depends on
working with our customers and market research team to understand both supply and
demand as well as the total volume of secondary PGMs available through our refining circuits
and the broader PGMs market. Our focus is on closing the PGMs loop to meet our customers’
evolving sustainability demands. But we acknowledge that primary, or new, supply is still
critical to maintain market balances and will play an important role in the transition to net
zero. Customer demand will help to drive this balance. We are perfecting our secondary
offering to customers and working with both internal and external subject matter experts
to certify our methodology.
Our performance in this area this year was impacted by the economic headwinds faced
by the global economy, more specifically in the auto market supply chain. Secondary scrap
availability and a large share of the PGMs products that are manufactured depend on the
health of the global automotive market. 2022 presented many challenges to both sides
of the secondary metal equation, as global auto sales struggled to maintain post-pandemic
momentum. This eventually led to a downturn in automotive scrap being sent back through
PGMs recycling channels, but also impacted demand for fresh PGMs products. Despite these
challenges, we have been able to manage our metal intake portfolio to remain on track
to meet our 2030 target.
1. Restated due to calculation refinement, please see page 222 for more information
2. Total hazardous waste produced and sent off site for treatment by a third party
3. Rebaselined to remove divested businesses, please see page 222 for more information
4. Net freshwater consumption
Johnson Matthey | Annual Report and Accounts 2023
29
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
Planet: Protecting nature and advancing the circular economy continued
Our goal: Minimising our environmental footprint
Our operations span the globe – with 45 major manufacturing sites in over 30 countries
supporting our customers in a huge number of ways. We are committed to protecting
the ecosystems around our plants and minimising all our potentially harmful interactions.
The Societal Value Committee is responsible for our overall approach to environmental
performance.
Our global environmental, health and safety (EHS) policies, processes and management
system help us maintain a high level of environmental performance. All our sites are
assessed against these standards by our centralised EHS audit team at least once every
three years. 89% of our manufacturing sites use environmental management systems
that are certified as meeting ISO 14001 standard, as of 31st March 2023.
We measure progress against our environmental KPIs monthly and use the data to improve
performance.
Minimising waste: reduce, reuse, recycle
We are committed to minimising waste generation and recycling as much as possible.
Our operations create waste, which is always treated in line with local regulations.
But beyond that we are committed to disposing of it responsibly. We work with specialist
treatment companies to ensure this waste is managed safely.
We are always looking for ways to improve. For example this year:
• At our UK refinery, improvements in process operations allowed flue dusts to be reworked
into furnaces which eliminated a waste stream. There were general reductions in waste
from improving production processes so that less off-specification material was produced.
• At our Smithfield site in the US we upgraded our NOx abatement system. This reduced
our emissions and hazardous waste on site and helped us towards our 2030 target.
• Working with our third-party waste provider in the UK, we also increased the proportion
of waste streams being recycled by 5%.
We continue to recycle the majority of our production waste containing PGMs in our
own refineries.
Our most significant progress towards our 2030 target on hazardous waste reduction
comes this year with the ongoing investment in our new Third Century PGM refinery
in Royston. This is due to be operational later in the decade.
Using water responsibly
Climate change and population growth are bringing ever greater stress to availability
of freshwater supplies globally. 2022 saw us launch our first global water policy to help
sites adopt effective water management plans, improve measurement and reduce water
consumption, driving us towards our 2030 water target.
To understand where we need to act most quickly for most benefit, we used the World
Resource Institute’s (WRI) Water Risk Atlas tool to analyse usage at our sites. The tool
identified 12 manufacturing facilities, which are located in regions with a high or extremely
high baseline water stress level. This means that they are at higher risk of declining water
availability or increased cost in the future due to drought or groundwater table decline.
The 12 manufacturing facilities accounted for 399,174m3 (23%) of our net fresh water
consumption in 2022/23.
We discharged 1.36 million m3 wastewater during the year, 96% to municipal treatment
plants and the remainder back to its original freshwater source after treatment. We treated
1.05 million m3 of waste water on-site, of which we recycled 23% back into our
manufacturing processes instead of discharging.
We seek to minimise the chemical burden in our wastewater discharged. 1.36 million m3
was discharged from our sites with an average chemical oxygen demand (COD) of 242 mg/L.
Reducing emissions to air
Some of our operations produce other air emissions as by-products of chemical reactions,
including nitrogen oxides (NOx), sulphur oxides (SOx) and volatile organic compounds
(VOCs). All our permitted sites monitor these emissions to ensure they comply with
local regulations.
This year we saw a decrease in our year-on-year NOx emissions, despite increasing our
coverage of reporting. We fitted an enhanced NOx abatement at our Smithfield site, US to
help reduce them even further in future. We also continued to improve our methodologies
around measuring and reporting the emissions we produce globally in a standardised way.
We have reviewed the new UK BAT waste gas for chemicals (UKWGC) and are making
preparations to ensure we will be in compliance with the stricter emissions to air limits ahead
of the significant change in emissions legislation in the UK in 2027.
We don’t produce ozone-depleting substances (ODS) through our operations, however,
any small leaks of refrigerant gases are reported in our Scope 1 GHG emissions.
30
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
Planet: Protecting nature and advancing the circular economy continued
Water consumption
Net freshwater consumption (000’s m3)
Total wastewater discharged (000’s m3)
Average direct Chemical Oxygen
Demand of wastewater (COD)(mg/L)
2022/23
1,752
1,356
2021/221
1,833
1,400
2020/211
1,711
1,506
2019/201
1,849
1,394
242
220
112
104
Types of waste produced and sent off site for treatment by a third party
2019/201
40,017
2,469
7,815
13,630
2020/211
41,025
2,622
7,013
11,538
2021/221
45,151
2,640
8,560
15,290
2022/23
38,520
3,340
7,059
13,967
Type of waste (tonnes)
Liquid hazardous waste
Solid hazardous waste
Liquid non-hazardous waste
Solid non-hazardous waste
Total hazardous waste sent off site
for treatment
Total waste sent off site
41,860
62,885
47,791
71,641
43,647
62,198
42,486
63,931
Methods of waste treatment applied by our third party providers
Type of treatment (tonnes)
Off site reuse
Off site recycling
Off site incineration with energy recovery
Incineration or other off site treatment
Total waste disposed off site to landfill
Total waste sent off site
2022/23
1,057
36,873
1,075
19,533
4,347
62,885
Emissions to air
Type of emissions (tonnes)
Nitrogen oxides (NOx) emissions to air
Sulphur oxides (SOx) emissions to air
Volatile organic chemicals (VOCs)
emissions to air
Coverage for NOx reporting
Coverage for SOx reporting
Coverage for VOCs reporting
2022/23
336
31
42
86%
36%
57%
2021/221
1,020
38,277
2,041
26,161
4,142
71,641
2021/221
358
73
50
85%
34%
56%
2020/211
1,031
23,390
1,023
33,579
3,175
62,198
2020/211
338
42
39
85%
36%
54%
2019/201
720
19,452
1,698
38,976
3,086
63,931
2019/201
320
16
47
82%
32%
53%
Using algae to clean up plant wastewater
at our Taloja site
Our catalyst manufacturing site in
Taloja, India, is using the power of algae
to clean up the waste water created
as a by-product of our processes.
The impact of this innovative approach
could have wide-reaching effects
on the chemicals industry.
and the richly oxygenated water is a
boost for local aquatic life.
The project has been a huge success.
We no longer need to outsource
our wastewater treatment – saving us
hundreds of thousands of pounds so far.
The process offers uninterrupted
performance, with no freshwater
consumption, and the end results help
support the local environment. That’s
why the project was awarded an internal
Johnson Matthey award in 2022.
The wastewater created by the plant is
fed into six algae ponds. Using the sun’s
energy, the microalgae convert the
waste discharge into oxygen and
renewable biomass. This biomass can
then be used for fuel and fertilisers,
1. Rebaselined to remove divested businesses, please see page 222 for more information
Johnson Matthey | Annual Report and Accounts 2023
31
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
Planet: Protecting nature and advancing the circular economy continued
Management of hazardous chemicals
The nature of the complex chemistry in our products and manufacturing means that we
sometimes have to use chemicals that are potentially hazardous to the environment.
Product stewardship is a crucial part of our approach to minimising our environmental impact.
By delivering product insight and assured regulatory compliance, we can better manage
the sustainability of our portfolio.
Our efforts to improve our environmental and human health performance are recognised
through our rating 3rd out of 54 chemical companies in the 2022 Chemscore report. They
also get us a seat at the table with policy makers, regulators and industry bodies. This global
engagement is allowing us to share our expertise around catalysis, product stewardship,
PGM supply and sustainable technologies and contribute to the important discussion about
what net zero looks like in practice. It also helps us maintain high standards and adapt
to continually evolving regulation in our markets. In the UK we are working with the
government, directly and through the Chemicals Industry Association (CIA), on potential
revisions to the UK’s Registration, Evaluation, Authorisation and Restriction of Chemicals
(UK REACH) regulation. We also work with a range of EU industry consortia such as
European Chemical Industry Council (Cefic), Eurometaux and European Precious Metals
Federation (EPMF).
Per- and polyfluoroalkyl substances (PFAS)
Per- and polyfluoroalkyl substances (PFAS) are a very broad group of 9,000+ chemicals,
including fluoropolymers, that are widely used in industrial and consumer applications due
to their unique thermal and chemical stability. They are under significant scientific and
regulatory scrutiny because some PFAS are persistent and mobile in the environment and are
associated with certain potential adverse health effects. Chemical manufacturing processes,
including some in JM, often rely on parts, such as process piping and seals that contain these
fluoropolymers. Some fluoropolymers are also, currently, essential to the proper functioning
of certain electrolysers and fuel cells technologies. In JM, we are aware of the increasing levels
of concern over potential risks posed by a subset of PFAS and are committed to reducing our
uses, developing alternatives, fully understanding and limiting impacts on human health and
the environment from PFAS in our operations and products. We are also working directly with
suppliers, customers, peers, business associations, NGOs and regulators to ensure responsible
use and proportionate regulations of PFAS.
Working with genetically engineered microorganisms
Genetically engineered microorganisms in our biocatalysts (enzymes) represent just 0.01% of
our sales. None of our products contain live organisms at the point of supply to our customers.
Biocatalysts are important chemical intermediates in our manufacturing because they can
help us make more of a desired chemical product with fewer undesirable by-products.
Finding safer alternatives and reducing risk
Our product stewardship reporting programme helps us track product performance every
year. This year, we found no reports of significant health effects from the use of our products,
and we continue to comply with all health and safety, labelling and marketing regulations,
and voluntary codes. We engage with customers to promote understanding of the hazards of
our products, and our New Product Introduction (NPI) framework requires teams to consider
ways to reduce hazardous raw material use.
Alongside the broader transformation of Johnson Matthey, we are also upgrading our
processes around product stewardship. We have initiated work to roll out a company-wide
inventory and information management platform. This will allow us to better track chemicals
through our manufacturing processes and understand the impacts of changing regulation or
new hazard information faster, which would allow us to identify safer and / or more
sustainable material choices.
Product life cycle analysis
Product life cycle analysis (LCA) is an
important way in which we can
demonstrate how the environmental
benefits of our products outweigh the
impact of making them in the first place.
We are committed to making cradle-to-
gate LCAs of our products available to
our customers on request.
We also contribute to the International
Platinum Group Metals Association
(IPA)'s publicly available industry
standard LCA for the five platinum group
metals – Pt, Pd, Rh, Ir and Ru – which is
updated annually to ISO 14001
standards.
Visit the IPA website for more
information: ipa-news.de
Supplier
operations
Waste
treatment
Upstream
Downstream
Recycling / circularity
32
Johnson Matthey | Annual Report and Accounts 2023
Raw materials and extractionJM operationsCustomerWholesaleConsumerEnd of life / recycling STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
People: Promoting a safe, diverse and equitable society
Our strategy focuses on
the core strengths that allow
us to play to win in the
markets we operate in. We
rely on our 12,600+ talented
and passionate employees to
drive our purpose. Ensuring
that they are fulfilled in their
careers, work safely and
return home well to their
families each day is our
number one priority.
2021/22
2022/23 % change against
prior year
0.59
0.47
-20%
Our goal: Keep people safe
Our ability to catalyse the net zero transition depends on the safe operation of our manufacturing
sites. The processes and policies we put in place are one part of our approach, but we are also
improving our insight and the tools we provide our people so that they can contribute to our safety
culture every day. We have complex chemical processes that often involve heavy machinery and
hazardous chemicals. As part of our focus on simplification, we continued embedding the new digital
tools we introduced in 2021/22. These are streamlining existing processes and enabling a more
data-led approach. To reduce our ergonomic injuries we are using a video tool to highlight
ergonomic stress points while carrying out activities and then taking necessary actions to reduce
these stress points. Rather than wait for an incident to occur, we are able to proactively spot potential
issues and take preventative action. A new central industrial hygiene reporting database is due to go
live in the first half of 2023/24.
The Take 5 programme was launched in 2021/22 to help make sure everyone acts in a responsible
and safe way at all times. It reminds people to take some time before starting a new activity to make
sure they are working in a safe and secure environment. This simple action helps reduce incidents
and drive continued improvements in our processes. This year saw the further embedding of this
programme. During Q4, we tend to see an increase in the number of incidents across all sites. To
help address this we created a toolkit with a range of discussion guides and materials for safety
briefings and safety moments focused on ‘Make Time to TAKE 5’, so that everyone can discuss what
we can do to mitigate risks. This resulted in over a 50% reduction in recordable incidences compared
to final quarter 2021/22. We further improved our safety performance through engagement and
safety leadership by launching our first global safety day and additional regional EHS conferences
with the main topic being safety leadership – further details below.
Catalysing
the net zero
transition
Peop l e
y a
Saf e t
y
t
i
s
n d diver
2030 target
Our goal: Keep people safe
<0.25 Total recordable injury and
illness rate (TRIIR) for employees and
contractors
0.4 ICCA process safety event severity
rate (PSESR)
1.321
1.02
-23%
Our occupational health and
safety performance
Our goal: Create a diverse, inclusive and engaged company
>8 Employee engagement score
>40% Female representation across
all management levels
Our goal: Uphold human rights
% supplier spend assessed for human
rights risk and remedial plans in
place where high risks identified
Not
measured
27%
6.9
28%
—
+1%
-
22%
-
Lost time injury and illness rate (LTIIR) reduced from 0.30 last
year to 0.24. We saw a 20% improvement in our all personnel
(employees and contractors) TRIIR from the previous year.
This is a demonstration of the effectiveness of our Take 5
programme and the impact of having our first Global Safety
Day, as well as additional local campaigns at site level which
have focused on site-specific safety issues. We have had
no fatalities since 2015.
Our goal: Invest in our local communities
Increase volunteering leave (days)
1,322
2,063
+56%
1. Restated value based on improved reporting of historical process safety events.
Johnson Matthey | Annual Report and Accounts 2023
TRIIR
(Employees and
contractors)
0
.
9
7
0
.
7
9
0
.
5
9
0
.
5
5
2
0
1
8
/
1
9
2
0
1
9
/
2
0
2
0
2
0
/
2
1
2
0
2
1
/
2
2
0
.
4
7
2
0
2
2
/
2
3
33
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Stronger audits. Stronger oversight
This year saw a return to full on-site auditing as COVID-related restrictions relaxed globally.
A total of 17 corporate audits were undertaken during 2022/23. These included four
Process Safety-specific audits. All of our high hazard facilities have now been subject to
a formal corporate environmental, health and safety (EHS) audit within the last three years
and a process safety audit within the last five years.
An independent review and audit of the JM Process Safety Management System, sponsored
by the JM Board, has been timetabled for 2023/24 in order to assess the prioritisation
of programme implementation and major risk management. The review comprises a review
of the corporate process safety systems against industry best practices plus more focused
engagements at selected JM sites to audit implementation and progress on recommendations
to address the major process safety risks.
Our process safety performance
Our International Council of Chemicals Association (ICCA) process safety event severity rate
(PSESR) has decreased by 23% from 1.321 last year to 1.02 PSESR per 200,000 hours worked.
There were nine Tier 1 process safety events this year, compared to 11 the previous year. See
Basis of reporting on page 227 for a definition of a Tier 1 process safety event.
We continue to embed process safety training across JM. In the last 3 years safety training has
been completed by over 2,870 operations-based staff, which is c. 90% of employees who
have been identified as needing process safety training. We have also completed individual
process safety competency assessments for 305 managers and engineers in process safety-
critical roles at facilities rated as ‘high hazard’. All roles that have been identified in this
category, for our high hazard sites, have now been trained.
Despite these improvements, a significant explosion occurred at one of our US sites
in July 2022. Thankfully the incident resulted in no injuries, but we did receive a citation
from the regulator and the site’s performance remains impacted. Our investigation and
root cause analysis highlighted several areas that could be improved – and we continue
to implement those changes.
Global Safety Day
As part of the new strategy introduced
by our CEO in last year’s report, just like
the rest of our business, 2022/23 saw all
our line managers and our EHS team
examine our approach to ensuring the
safety of our people.
Our first annual Global Safety Day was a
huge success – helping to bring our
organisational transformation to life by
providing site managers with resources
and insights into overcoming common
barriers to workplace safety. Dedicating
a specific day to safety across the whole
organisation helped focus everyone’s
minds on the importance of safety in
everything we do and create an
opportunity to celebrate our
performance and efforts taken in
support of safety.
The event was attended by all
employees, who took part in activities
and talks around the central theme of
how to have effective safety
conversations. The global event was
bolstered by two regional EHS
conferences which were attended by site
managers and other key functional
people with the main theme around
safety leadership.
1. Restated value based on improved reporting of historical process safety events.
34
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Our goal: Create a diverse, inclusive and engaged company
As a global company, it is essential that our organisation is reflective of the communities
we live and work in as well as a place where people are safe, thriving and building rewarding,
long-term careers. Ensuring we have a high-performance culture is critical to the execution
of our new strategy. We are creating a more market-focused, agile and less bureaucratic
Johnson Matthey – one where our people can be truly customer focused and thrive in their
roles. Like our peers, as well as businesses across the global economy, the labour market
we operate within remained competitive in 2022/23. This makes attracting the best talent
as well as supporting, engaging and developing the people we have hugely important.
Building an engaged, high-performance culture
Immediately after the launch of our refreshed strategy this year, we initiated town halls and
team sessions at all levels in the organisation with the purpose of fully communicating the
overall strategy and our three core play to win behaviours:
Take accountability
Keep it simple
Drive results
To accentuate these behaviours we initiated a leader-led culture change programme focused
on upskilling people managers and leaders in key areas such as giving feedback to drive
performance, and we started work on a new approach to performance management that
focuses on the outcomes and results we want to achieve.
An engaged, passionate workforce is the fuel for our transformation. It underpins our whole
play to win philosophy and drives us forward in our purpose of catalysing the net zero transition,
becoming more customer-focused and unlocking the full value of our operations. We recognise
that an important vehicle to driving engagement is all people managers having the ability to
regularly track status, progression and provide input for areas of focus relevant to their teams.
To this end, we have adopted ‘WorkDay Peakon’, a globally recognised tool for our regular
employee engagement surveys. Further we have decided to increase the frequency of the full
survey to annual, and to conduct regular pulse surveys to keep on top of any issues.
Our first full Workday Peakon survey was conducted in March 2023 and we achieved a score
of 6.9. The methodology used by Workday Peakon is not directly comparable with the tool we
used previously and thus we have not compared the results with past engagement surveys at JM.
However, we do recognise that 6.9 places us below the industry average of Workday Peakon
users. Whilst this is not where we want to be, this is not surprising given the pace and depth
of transformation we are currently undergoing. We have set ourselves targets of 7.2 by end of
2024/25 and a score of greater than 8 by 2030, to move us into an industry leadership position.
We also recognise that engagement is primarily built in the day-to-day interactions with
colleagues, which is why many engagement initiatives have also been run locally at sites and
in offices. The initiatives take many shapes and forms and adapt to the local opportunities.
To accelerate our work on building engagement in the coming year, we will be increasing
our training and support to help managers build engagement across their teams, as well
as continuing to examine our employee proposition and culture and making improvements.
Johnson Matthey | Annual Report and Accounts 2023
Building engagement takes time. Activities we initiated this year to start this journey include:
• We re-clarified our expectations of people managers and their role in engaging and
developing their people. We have developed a programme of work to educate and train all
our managers and equip them to motivate and develop their people
• We have reviewed our approach to major elements of our reward and incentives programmes
to drive and recognise high-performance outcomes and are implementing the changes for
2023/24
• We introduced Workday as a global platform for our people data, giving managers valuable
insight into how we can increase retention and streamline processes around activities such as
succession planning
• We rolled out our digital platform Say Thanks to the whole of JM where colleagues can
express their appreciation of support or contribution from another colleague. In the first six
months 18,739 recognitions were provided through the portal
• We refreshed our annual JM Awards, a global competition to allow individuals and teams to
be recognised, to be aligned to our new play to win behaviours. Over 190 nominations were
received, showcasing many fantastic achievements of our employees globally.
A step change in leadership skills and critical capabilities
Winning requires us to build critical capabilities, ensure we retain experienced colleagues in JM
today and provide them with opportunities to develop and progress. We have looked to build
the leadership capabilities of the organisation this year. We put in place processes to build
a more robust and diverse leadership pipeline.
A big success this year were the leadership masterclasses in which 135 of our senior leaders
participated. These brought our new strategy to life and drove our culture transformation
forward. The workshops focused on the behavioural change that underpins transformation
– storytelling, coaching for performance, accountability and setting objectives. Another 1,663
employees participated in one or more of our general business skill courses.
We have 53 graduates in our two-year graduate programmes, who we continue to develop to
become the leaders of the future as they complete eight-month rotations around the company.
We have also focused on building our commercial muscle, through the creation of the Group
Commercial Council, which aims to make the voice of the customer front and centre across JM.
With the deployment of our play to win strategy, our whole leadership population will be
receiving commercial training in the coming year.
In order to win, we must operate efficiently and make the most of our investments for the
future. We know from feedback through our benchmarking that our current organisation needs
to change to deliver our new strategy. During the year we worked to transform the operating
models for our enabling functions, putting in place new organisations for engineering and
capital projects. More work is being progressed to sharpen further and reduce costs more
quickly in 2023/24.
35
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Advancing diversity, inclusion and belonging
Innovation requires diversity of thought, background and representation as well as a culture
of inclusion and belonging. Our success depends on people feeling that they can speak up,
talk about ideas, challenge norms and create more value for our customers.
Promoting ethnic diversity
We have three ERGs that are helping us to advance ethnic minority groups in different
geographies: Asian Network, Black Employee Network (BEN), Hispanic / Latinx Organisation
for Leadership and Advancement (HOLA).
This year we replaced our Equal Opportunities Policy with a Global Diversity, Inclusion
& Belonging (DI&B) Policy.
To support the development of our Black, Asian and ethnic minority employees, we continued
to participate in the Black British Business Awards talent acceleration programme in the UK.
Our Global Diversity, Inclusion and Belonging Policy
Johnson Matthey recruits, trains and develops employees who are best suited to the
requirements of the job, regardless of gender, ethnic origin, age, religion or belief,
marriage or civil partnership, pregnancy or maternity, sexual orientation, gender
identity or disability.
At the core of work to promote DI&B is the work of our Employee Resource Groups (ERGs).
As well as giving our people spaces to connect and share experiences, they directly feed into
our culture development activities. We now have nine ERGs, following the launch of our
Hispanic/Latinx Organisation for Leadership and Advancement (HOLA). Throughout the year,
they organised webinars on topics such as LGBT+ paths to parenting, menopause and
neurodiversity. Pride in JM and the Black Employee Network continued to lead our reverse
mentoring efforts this year. These pairings give our leaders the chance to be mentored
by junior colleagues on their lived experiences in the company.
Disability inclusion
Our work on advancing disability inclusion is informed by the DiversAbility ERG. With Liam
joining as CEO, we updated and re-signed our commitment to the Valuable 500. We also
joined the Business Disability Forum, a leading business membership organisation in disability
inclusion. Our first site accessibility audit was completed, and actions taken to improve the
accessibility for employees and visitors at our headquarters, and largest manufacturing site,
in Royston, UK. An accessibility audit has since been completed at Clitheroe, UK, and plans
are being developed to roll out the audits across our other sites.
Our new DI&B policy commits us to:
• Giving full and fair consideration to applications for employment by disabled persons,
having regard to particular aptitude and abilities
• Continuing the employment of and arranging appropriate training for employees who have
become disabled during employment
• Training, career development and promotion of disabled persons.
36
In the US, we ran another cycle of the management accelerator programme with McKinsey
& Company – this time with participants on all three, Black, Hispanic / Latinx, and Asian
programmes.
The additional focus for next year is on upskilling hiring managers to ensure a fully inclusive
hiring process.
In 2022, we partnered with the Association for Black Engineers and the Royal Academy
of Engineering on its annual Graduate Engineering Engagement Programme, which aims to
improve the transition of engineering graduates from diverse backgrounds into engineering
employment. Members of our team supported the mentoring programme, skills and
competency workshops, and networking sessions, reaching over 200 diverse candidates.
We also partnered with the Royal Society of Chemistry for its Broadening Horizons in the
Chemical Sciences programme, a new three-year pilot to support chemistry students and
graduates from Black and minority ethnic backgrounds to pursue careers in chemistry.
In September 2022, we joined nine other partners in hosting a taster event to showcase the breadth
of careers in the chemical sciences and are now working on visits to our sites across the UK.
Balancing gender representation
Our female representation at all management levels1 is 28%, a slight improvement on last
year, and a step forward towards our target of 40% by 2030, with a milestone of 31% in 2025.
Embedding diversity data into the application process is driving insights on where to attract
diverse candidates.
Alongside our Talent Acquisition (TA) team, our DI&B team has built partnerships with
organisations like the Society of Women in Engineering to ensure we can source and attract
the best talent from a range of diverse backgrounds in the market.
To support our LGBTQ+ colleagues, we published a Transitioning at Work guidance
document. It is essential that our trans colleagues can be themselves at work and that we
support them, their manager and HR colleagues.
1. All employees whether they are a people manager or not at a minimum pay grade
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Freedom of association
We respect and promote the rights of people to freedom of association. In 2022/23 a quarter
of our people globally were covered by collective bargaining agreements and / or represented
by trade unions.
We work collaboratively with 23 trade unions across our sites, focusing on a range of topics,
such as health & safety, well-being, business change needs, employee training and improving
the way we work at our local sites. Cost-of-living was a significant part of our union
negotiations this year and, for those negotiations that have already concluded, we have
agreed larger wage increases than normal and an additional special cost of living lump sum.
We also support engagement at regional and national levels where needed.
2022/23 Union representation
% represented
Average number of
employees
represented
Total average
number of
employees1
UK
Rest of Europe
North America
Asia
Rest of World
Workforce globally
21%
24%
17%
27%
52%
25%
668
397
660
545
2,734
2,271
2,442
1,057
3,163
12,666
Fair pay
Ensuring our employees are paid fairly for their work also forms part of our core value to
protect people and the planet. In the UK, we are an accredited Living Wage Employer and
we are exploring to what extent we can apply a living wage policy globally.
We recognise that employees are facing a cost-of-living crisis, and in our most recent pay
reviews we increased our pay budgets to recognise this. For non-unionised employees our
global salary budget was split for management and non-management roles with non-
management roles receiving a higher budget. In addition to their pay increase, employees
who fell below the average JM wage in a country where price inflation was abnormally high
were given a temporary supplementary allowance. For example, in the UK the non-
management budget was 4.5% and the management budget was 3.75%. In the UK, this
equated to £50 per month until 31st March 2023 for employees earning £40,000 or less
(on a full-time basis). The lowest salary agreement made with our UK unions was a 4.5%
salary increase and a £600 lump sum, among other local arrangements
In addition to our employees’ pay, we have provided support through Assist, which provides
JM employees and dependants with access to a team of highly trained and qualified
professionals on a variety of financial well-being topics such as debt management, mortgages
and loans; in addition to broader mental, physical and social well-being topics. Our temporary
employees received the same benefits as our permanent employees.
We issue a gender pay gap report in accordance with UK law. In 2022/23 our UK gender pay
gap was 5.6% which puts us ahead of the national average of 14.9%.
View our Gender Pay Gap Report: matthey.com/gender-pay-gap
Parental Leave
We recognise the significance to our employees of starting and supporting a growing family.
Fully encouraging, facilitating and supporting employees to take parental leave is a
fundamental part of our employee value proposition. To support employees, we maintain
a Global Parental Leave Standard. This standard provides a global minimum standard of
16 weeks fully paid leave for new parents (including adoptive parents) who are regarded
as the primary caregiver.
Key workforce statistics1
12-month average headcount
Voluntary leavers turnover rate
Involuntary leavers turnover rate
Total leavers turnover rate
2022/23
12,666
12.2%
10.9%
23.1%
2021/22
13,497
11.6%
3.8%
15.4%
2020/21
13,546
8.2%
7.5%
15.7%
Please see Sustainability Performance Databook for more information on employee by region,
age and gender
Gender diversity statistics
(as at 31st March 2023)
Board
Group leadership team (GLT)
Subsidiary directors
Senior managers2
All management levels
New recruits
All employees
% Female
Female
33%
25%
13%
37%
28%
33%
30%
3
3
13
31
478
748
3,773
Male
6
9
86
52
1,223
1,496
8,865
Total
9
12
99
83
1,701
2,244
12,638
1. Including Health
2. Within JM our senior managers are defined as direct reports of the GLT. The UK Corporate Governance Code 2018 requires companies to
disclose the gender balance of senior management, which is defined in the Code as a company's executive committee and the Company
Secretary, the statistics for this are included in the GLT row above. Some individuals are included in more than one category.
Johnson Matthey | Annual Report and Accounts 2023
37
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Our goal: Upholding human rights and high ethical
standards
We support the principles of the Universal Declaration of Human Rights and the International
Labour Organisation (ILO) Core Conventions. We are aligned with key frameworks that define
human rights principles for businesses, including UN Guiding Principles on Business and
Human Rights and the Organisation for Economic Co-operation and Development (OECD)
Guidelines for Multinational Enterprises.
We are a signatory to the UN Global Compact
and remain committed to its principles and aims.
As part of our membership, this year we took part in
the UN’s Business & Human Rights Accelerator training
programme to build upon our internal knowledge.
We published our first UNGP Annual report to
“Comprehensive” standard in December 2022
UNGP Annual Report: matthey.com/UNGP-progress
We have the potential to positively impact billions of lives around the world. The benefits of
Johnson Matthey should not only be felt by our customers, but by everyone that comes into
contact with our business.
This year we published our first standalone human rights policy. It highlights a core group
of rights which we believe we impact the most as an organisation and that we have the
potential to positively address. It has been reviewed by external specialists to ensure that it
meets best practice principles and has been signed off by the Board.
View our Human Rights Policy: matthey.com/human-rights-policy
Our approach to human rights considers our entire value chain – including our own
operations, suppliers and customers. We have set ourselves an ambitious commitment to
assess all of our value chain partners for human rights risks by 2030. To make that happen,
we developed a tailored human rights risk assessment framework in 2021/22 in partnership
with KPMG and which we have begun to roll out across our own operations and supply
chain this year.
38
For our own operations
This process identified five high-risk countries where we have operating sites. After applying
our assessment to several sites in these countries, we are in the process of raising concerns
with local teams and putting remedial actions in place where required.
For our suppliers
We identified 100 key suppliers that accounted for 22% of our annual procurement spend
(excluding PGMs). These suppliers were assessed using our human rights risk framework and
those identified as higher risk went through enhanced due diligence using third party
services. Where required, mitigations and remedial actions have been put in place and
continued monitoring has been implemented. Key issues identified with higher-risk suppliers
have been escalated to our human rights steering group, consisting of relevant senior leaders.
Human rights awareness formed part of our annual Code of Ethics training offered to all eligible
employees. Additional, targeted awareness and training sessions on human rights and conflict
minerals were made available to our relevant staff throughout the year.
Our independent Speak Up helpline is available for anyone wishing to raise a human
rights concern.
See page 42 for more information on our Speak Up culture
Modern Slavery Statement
We are committed to ensuring no modern slavery exists in our business and to
identify, mitigate and remediate any issues we find in our value chain. We publish our
Modern Slavery Statement annually to demonstrate our progress.
Full statement: matthey.com/modern-slavery
Ensuring high ethical standards
We are playing to win in the right way – which means holding ourselves to the highest ethical
standards in everything we do. This year, we focused on supporting a culture which goes
beyond technical legal compliance to include every employee taking accountability for
behaving ethically and making good decisions in our everyday work.
Our ethical culture is led from the top by our Board and GLT. An example of this was our
annual Ethics Week, where our CEO shared a personal example of how he handled an ethical
dilemma during his career. It was a powerful demonstration of his commitment to doing
the right thing, even in challenging circumstances. Where instances of serious misconduct
are revealed, our Board strongly supports exiting those individuals from our organisation
– no matter their level of seniority or the short-term disruption it might cause.
More than 50 sites took part in our annual Ethics Week celebrations. This year the theme
was collaboration between senior leaders, site managers and Ethics Ambassadors to generate
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
People: Promoting a safe, diverse and equitable society continued
real-life conversations about what doing the right thing means for employees in their roles.
In addition to Ethics Week, we launched monthly communications to highlight the
importance of ethics and integrity in our everyday work.
In line with our strategy we refreshed our annual Code of Ethics training to focus on our
values, ethical decision making and scenarios that are applicable to all employees. It has been
offered to 11,100 employees1 and contractors during the year and 87% have completed it.
We received positive feedback from our employees.
We also run targeted training courses for our relevant managers and externally facing
employees in competition law and our anti-bribery and corruption policies.
Our industry-leading ethical culture heatmap
This year we continued to embed the ethical culture heatmap tool we launched
in 2021/22. It is enhancing the ways we can feed ethics and compliance data back
to the business and giving us valuable oversight over our operations.
The heatmap focuses on essential ethical culture indicators. Our leaders can see how
each of our larger facilities is currently performing and address weaker metrics,
suggestive of potential ethical culture issues, more proactively.
The heatmap has been recognised by the wider business community. The Institute
of Business Ethics used it as an example of what good looks like in a recent report
on ethical culture.
Supporting our suppliers to improve their
ESG performance
We have been supporting one of our
strategic suppliers, who is located in a
higher risk region, and did not have any
previous engagement with EcoVadis or
other sustainability ratings agencies. As
part of our supplier partnering
programme, the supplier decided to join
EcoVadis at their own cost and
completed the assessment. The outcome
was a score two points lower than the
industry average. We are now supporting
the supplier in the development of their
policies and processes with an aim to
significantly increase their score and
achieve an EcoVadis silver medal. We
have quarterly reviews with the supplier
to monitor their progress. This is a
demonstration of how we can partner
with suppliers to improve sustainability
and drive improvements in our wider
value chain.
1. All eligible employees are offered the Code of Ethics training, subject to local laws, union agreements, long-term leave arrangements
and start date before the cutoff period
Johnson Matthey | Annual Report and Accounts 2023
Responsible sourcing
We are a multinational company with a global, multi-tiered supply chain. We rely on
our suppliers to provide raw materials as well as goods and services ranging from equipment
to utilities and transport. Every year we work with thousands of suppliers and in 2022/23
we spent £3 billion with them (excl PGMs). We increased the ways we support our
suppliers globally.
As a values-driven organisation, we work closely with our value chain to uphold human rights
and maintain the highest standards in procurement.
Our Supplier Code of Conduct sets out our expectations, and is embedded into our New
Supplier Selection Process. All new suppliers complete a self-assessment as part of our
on-boarding process. Our most important existing suppliers are assessed annually against
our Supplier Code of Conduct using the services of sustainability rating provider EcoVadis.
During this year, suppliers accounting for 48% spend (excluding PGMs) in our portfolio have
been assessed through EcoVadis, and we plan to increase this further in the coming year.
In addition to that, we started to monitor specific KPIs in EcoVadis that help us to better
understand our supplier’s performance in human rights and health and safety as well as their
journey to net zero. To help our suppliers improve their own sustainability performance,
we have embedded sustainability metrics into our supplier partnership programme.
Supplier Code of Conduct: matthey.com/supplier-code
EcoVadis KPIs
Suppliers who have current EcoVadis medal
Suppliers who have a good score with EcoVadis but no
medal due to adverse media in the past three years
Suppliers with current EcoVadis rating below medal-
achieving level
Suppliers without an active EcoVadis rating, have declined
to share their rating or we have not yet requested it
Areas of concern where risks were identified by low scores in EcoVadis
Environmental
Labour and Human Rights
Ethics
Sustainable Procurement
Child Labour
% procurement
spend
2022/23
38%
% procurement
spend
2021/22
25%
3%
7%
1.5%
0.2%
52%
73%
Number of supplier
risk identified
2022/23
14
14
13
6
0
Number of supplier
risk identified
2021/22
6
6
11
1
0
39
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Where we source strategic raw materials
Primary PGMs
Secondary PGMs
Rare earth materials
Zeolites
Ceramic substrates
During the year we have taken big steps regarding supplier diversity. Through our partnership
with Tealbook and Minority Supplier Development UK (MSDUK), we conducted a baseline
assessment of our supplier base. We have identified that 3% of our spend with suppliers is
allocated to diverse / small business, and we identified several opportunities to improve our
sourcing practices to be more inclusive as well as enhance our internal training and adoption
of the programme. We look forward to evolving this partnership with Tealbook and MSDUK
during the coming year.
This year, we also signed an agreement with Carbon Disclosure Project (CDP) Supply Chain
to engage with 500 of our most important suppliers, throughout the next financial year,
to better understand their carbon footprint and net zero plans.
Conflict minerals and cobalt
We have improved oversight of our conflict minerals and cobalt portfolio of suppliers – in line
with both our Conflict Minerals & Cobalt Policy and the OECD’s Due Diligence Guidance for
Responsible Supply Chains or Minerals from Conflict-Affected and High-Risk Areas.
Current global regulation defines “conflict minerals” as tin, tantalum, tungsten and gold
(3TG). This year, we voluntarily updated our existing policy and due diligence process to
include cobalt as well. We believe this puts us in a good position for future legislation that is
expected to classify this metal as a conflict mineral in years to come. To support this, we have
provided refresher training sessions to our employees, who are involved in the collection and
verification of Conflict Minerals Reporting Templates (CMRTs) and Extended Minerals
Reporting Templates (EMRTs) of the Responsible Minerals Initiative (RMI). We are actively
engaging in conversation through our supplier partnering programmes to understand greater
detail about the content of 3TGs and cobalt supplied in products to us.
Of the 3TGs, we principally buy tungsten for use in our autocatalyst products, though we
recognise we may have small amounts of the others in finished goods and refining intakes.
For calendar year 2022, we identified 79 suppliers providing 3TGs and cobalt going into our
products. All have provided us with due diligence industry standard reporting templates. Out
of the responses, seven of these suppliers did not fully meet our policy expectations (two for
3TG, three for cobalt and two for both 3TG and cobalt). Where non-compliance with our
policy has been identified, we are working with suppliers to remediate this.
Platinum group metals
Along with our customers, we work with industry associations like the International Platinum Group
Metals Association (IPA) to ensure we source our PGMs in an ethical way. We are pleased to support
members’ adoption of the Initiative for Responsible Mining Assurance (IRMA) responsible mining
standard. We recognise it is a significant undertaking to achieve full IRMA certification for mining
operations and continue to support our suppliers on this journey.
More on the IRMA responsible mining standard: matthey.com/IRMA
Our own UK and US refineries are on the London Platinum and Palladium Market’s (LPPM)
‘Good Delivery’ lists for platinum and palladium and are subject to its Responsible Platinum
and Palladium Guidance (RPPG). This standard requires us to demonstrate that we have high
ethical standards and traceability of metal in our supply chains. We are third-party audited,
by RCS Global, annually to confirm our ongoing compliance.
Annual LLP compliance: matthey.com/LPP-compliance
Forestry products
After identifying the presence of palm oil in our supply chain, we moved to ensure we only
purchase palm oil from sustainable sources, as set out in our Supplier Code of Conduct. We
are now certified members of the Roundtable on Sustainable Palm Oil (RSPO) and expect to
be audited against the RSPO Supply Chain Certification Standard by an accredited certification
body in the next financial year.
Doing business in higher-risk jurisdictions
In 2022, we ceased all new commercial sales activity in Russia and closed our Moscow office.
During 2022/23, we also put our production facility in Krasnoyarsk in dormant status.
We source a number of raw materials critical to our products from China, including PGMs,
rare earth metals and zeolites. During the year we conducted due diligence on Tier 1 raw
material suppliers with a presence in China. No major concerns have been identified. We
continue the process of reviewing the detailed due diligence and will implement mitigations
or put remedial actions in place, as required.
40
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Our Speak Up culture
It is essential that our employees, customers, suppliers and other stakeholders feel they can
speak freely when they have an ethical concern. We have various channels for them to do this
including our independent Speak Up line. In 2022/23 we received 153 Speak Up reports
compared to158 in 2021/22. We see this as a positive sign that our people and other
stakeholders feel comfortable raising concerns and have faith in our process.
We analyse Speak Up metrics quarterly to identify key themes and significant trends and
share these with the Ethics Panel and relevant senior leaders. This year members of senior
management were invited to Ethics Panel meetings to address themes, trends and lessons
learned in their business to drive further business accountability.
Our Ethics Panel is chaired by our General Counsel and comprised of independent members
of the GLT and other senior leaders. It meets quarterly, oversees all Speak Ups and takes
appropriate action where necessary. The Board is updated on key Speak Up trends and the
most significant cases during Societal Value Committee meetings. See pages 80-89 for more
information.
Categories of recommendations made in Speak Up cases closed during the year are
summarised in the table opposite.
During the financial year, 14 Speak Ups relating to bribery and corruption were reported,
though in some instances multiple reports were raised about the same alleged conduct. JM
has a zero-tolerance approach to bribery and corruption, and our Ethics & Compliance team
thoroughly investigated to determine whether the allegations could be proven or whether
any recommendations should be made, as it does with all categories of Speak Ups. Even
where allegations of bribery and corruption are not proven, an assessment was made to
ensure the risk of bribery and corruption taking place in the future is properly mitigated.
During the financial year no legal cases regarding bribery and corruption were brought
against JM or its employees.
Speak Up reports 2022/23
Concern / allegation
Bribery and corruption
Conflict of interest
Discrimination, harassment, bullying or retaliation
Employee rights
Enquiry
Environmental protection, product stewardship or health and safety
Financial crime
Insider trading, financial reporting and other securities violations
Theft or misuse of assets
Trade and export controls
Other
Number of cases
14
6
47
56
5
11
2
1
6
1
4
Recommendations following investigated reports in 2022/23
Recommendation (please note there could be more than one recommendation per report,
or in some cases none)
Number of cases
Separation with employee
Verbal or written warning
Coaching / training
Communication
Internal review of processes
Update / create new standards / controls
Senior leadership or management actions
Remedy for the reporter
4
3
21
34
28
16
21
6
Speak Up – Retaliation by a manager
Background
A Speak Up alleged the
most senior manager
at one of JM’s sites tried
to retaliate against an
employee.
Findings
Upon investigation, a
series of serious
misconduct was
proven, including
threats of retaliation,
financial irregularities,
systemic bullying, and
labour rights violations.
Outcome
We separated with the
manager and
remedial measures
were put in place
regarding financial
controls and
strengthening the
ethical culture on site.
Find out more about our Speak Up process: matthey.com/speak-up
Johnson Matthey | Annual Report and Accounts 2023
41
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Our goal: Investing in our communities
As a company driven by our shared purpose, we have a duty to all our stakeholders, including
our local communities. Not only do our products and services deliver significant positive
impact for society and for our customers, but we recognise the important role our people play
in communities too.
Refocusing our approach
Our reinvigorated community investment strategy builds on two core beliefs. Firstly, we
believe that science will be key in tackling many of the biggest challenges the world is facing.
That’s why we remain committed to removing the barriers that exist for young people in
accessing and staying in high-quality science, technology, engineering and mathematics
(STEM) education. We also know that building a positive legacy in the communities where
we operate is of the highest importance to our people. So we are introducing a second strand
to our strategy: sustainable communities, which is all about our contribution to green
initiatives or other local needs.
Our volunteering and match funding efforts have had an enormous positive impact over the
many years we have been offering this support. Our new approach focuses these efforts and
resources, and aligns them behind our purpose to catalyse the net zero transition. By 2030
we aim to reach 10,000 young people, typically excluded from science, through quality
STEM-related interactions and experiences involving our employees. To get there, we’ll be
focusing on fewer, stronger, multi-year partnerships with community organisations, better
tracking and reporting on the impact of our activities, and establishing clear roadmaps for
how we will achieve our objectives.
Our performance in 2022/23
2,063
volunteering days (+56%)
A large part of our work this year has been forming our
new approach – but that doesn’t mean that there haven’t
been some great achievements too. We have been able to
react to some of the challenges people across our
communities faced in 2022/23.
The impacts of the cost-of-living crisis caused by rising inflation and energy costs have been
felt across the world. As part of our response, we donated to six organisations tackling food
poverty: The Trussell Trust, Feeding America, Stacja 6 – Fundacja, Fuel Macedonia, UNICEF
India and Action Aid. We also responded to the Turkish and Syrian earthquake disaster with
a donation to The Disaster Emergency Committee appeal and matched any employee
donations to the appeal throughout February 2023.
Our people continued to offer their time to volunteer and have a direct impact on their local
communities. This year, we recorded our strongest ever numbers of volunteering, and the
first year where volunteering activity has exceeded pre-COVID levels. We recorded 2,063 days
of volunteering overall, up 56% on the previous year, and our #JMVolunteers campaign saw
over 800 of our people come together for two focused weeks of volunteering efforts in
December 2022, across 33 sites and 14 countries.
42
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
People: Promoting a safe, diverse and equitable society continued
Community Investment summary1
£’000
2022/23
594
Direct expenditure
479
Indirect expenditure
1,073
Total
2021/22
168
283
451
% change
254%
69%
138%
STEM outreach
Throughout the year we continued our focus on removing the barriers for young people
accessing quality STEM education. We have now awarded £338,000 through 19 grants as part
of our flagship Science and Me programme, building lasting local partnerships and delivering
projects including Mangorolla Community Interest Group, where we funded their ‘I’m a Scientist
Get Me Out of Here’ online STEM enrichment activity. This allowed school learners to connect to
and ask questions of a diverse range of STEM professions and engaged 2,179 learners aged
10-18 years old from schools in Detroit, US and from state schools across the UK.
Our STEM education efforts through Science and Me are on track to impact 24,000 students,
and 118 teachers by the end of this calendar year.
Moving into the next year, we will connect with local schools to widen our volunteering
efforts, boost engagement as well as tap into opportunities such as micro-volunteering, which
means offering shorter volunteering opportunities for example participating in a one-hour
STEM careers webinar.
1. For calculation methodology please see page 227
Providing shelter and support for Ukrainian refugees
Building on our support for Ukraine from
last year, over 125 Johnson Matthey
team members in Gliwice, Poland,
joined the local community to refurbish
a former school dormitory. The site can
now house up to 130 Ukrainian refugees
in a safe, community-focused space.
The team also helped to renovate a
community centre for displaced children
and turned an ice rink into a donation
redistribution centre. We donated
kitchen equipment and IKEA gave
furnishings to help the project – but
arguably the most important
contribution was the time given by our
people and other selfless volunteers.
Johnson Matthey | Annual Report and Accounts 2023
43
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Sustainability continued
People: Promoting a safe, diverse and equitable society continued
How we engage with our external stakeholders
Business associations
Membership of global alliances
Key focus of engagement on Sustainability in 2022/23
Key focus of engagement on Sustainability in 2022/23
We actively participate in sustainability focused policy advocacy papers.
Active CEO engagement promoting the future of hydrogen
Promoting adoption of IRMA’s responsible mining standard and common
standards on carbon footprint of PGMs. Engaging with EU policy makers on
introduction of Euro 7 standards and the Critical Raw Materials (CRM) Act.
Active role in the Sustainability Committee, particularly focusing on position on
sustainable chemicals.
Active engagement in sustainable financing task force shaping EU’s taxonomy
and sustainable financing legislative framework.
Provided input to their information-gathering on PGMs for the CRM
Active engagement on environmental regulations promoting clean air, health
benefits and sustainable solutions in transport.
We re-joined Corporate Leaders Group in 2022 and our CEO signed their pledge
to net zero letter to UK prime minister in September.
We increased our engagement with leading organisations in the last year. Where possible, we
ensure we are aligned on sustainability priorities; when there is not full alignment we actively
participate in discussions to inform and shape policies and positions.
We joined CBI in the UK during 2022/23, but like many companies suspended our
membership in April 2023.
We became a member of the World Business Council for Sustainable
Development (WBCSD) and joined their SOS1.5 project in January 2023.
We are members of UN Global Compact and we published our first UNGP Annual
report to “Comprehensive” standard in December 2022
UNGP Annual Report: matthey.com/UNGP-progress
We also joined Business & Human rights accelerator and attended UNGC Climate
Action Summit.
Having suspended our membership of the World Economic Forum,
we rejoined in 2022/23 and support their sustainability goals.
On Industry Day at COP 26 (9th November, 2021), the World Business Council for Sustainable
Development (WBCSD) and the Sustainable Markets Initiative (SMI) gathered ambitious
companies to drive growth in the demand for, and supply of, low-carbon (blue) hydrogen –
an essential part of the future net-zero energy system. Pledges were made by 28 companies
representing different sectors from mining to energy, vehicle and equipment manufacturers,
and financial services. The number of pledging companies has now increased to 35.
We were one of the original 28 pioneering companies, and the our pledge reads: “JM is
putting its science and experience at the heart of solutions that support a cost-effective
transition to a secure and environmentally sustainable energy system. By 2030, Johnson
Matthey pledges to invest c. £1billion in the research, development and deployment of clean
hydrogen technologies.”
As part of the Pledge, JM committed to provide an update annually, and we can report that
our planned investment in this area is well on track to meet the Pledge. These investments
include research, development and deployment of processes and catalysts underpinning the
production of CCS-enabled (blue) hydrogen, components for the production of renewable
electrolytic (green) hydrogen, components for hydrogen fuel cell technologies and the
optimisation of refining technologies to recycle platinum group metals from these and other
hydrogen-related applications.
44
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Task Force on Climate-related Financial Disclosures
In this section
Introduction
Governance
Strategy
Risk management
Metrics and targets
45
45
46
51
52
Introduction
Climate change is one of the most pressing threats facing our planet today. It is affecting our
environment and poses a growing risk for people and businesses alike. We recognise that
what we do at Johnson Matthey has impacts – both positive and negative. Our products and
services help our customers to reduce greenhouse emissions and the new technologies
we are designing will help further accelerate the transition to a low-carbon future. But the
manufacturing and chemical processes we use have their own environmental impact,
creating greenhouse gas emissions and using water.
Our company purpose is catalysing the net zero transition. Therefore, our strategy is shaped
around the opportunities and the risks that our changing climate presents. We have set
ourselves the target of achieving net zero by 2040 with a series of challenging short-term
science-based targets (SBTs) on the 1.5oC pathway as well as an avoided GHG emissions
target for benefits to our customers for 2030 (see page 24 for a full table of targets), to
ensure we keep driving up the benefits of our products while reducing their environmental
impact.
The disclosures in this report are consistent with the TCFD recommendations.
Governance
Given the nature of our business, and how closely aligned our strategy is to a warming world,
climate-related risks and opportunities have been on the board’s agenda for many years.
Role of the Board and its committees
The Board is responsible for setting and overseeing the implementation of the group’s
strategy, including the annual budget and detailed business plans. In doing so, it considers
climate-related issues, including when approving requests for capital expenditure or new
initiatives.
As a result of our internal board effectiveness review, the responsibilities of the Board and its
committees in relation to climate-related issues and the broader sustainability agenda have
been refined and clarified during the year.
The Societal Value Committee (SVC) is a meeting of the full Johnson Matthey board that
focuses more closely on the governance of sustainability matters, including our response
to climate change. The SVC meets four times a year, see pages 88-89 for more information
about their work in 2022/23. The SVC has been driving the development and validation
of roadmaps to deliver on our 2030 GHG reduction targets and the integration of carbon
accounting into the company’s budgeting and capital allocation exercises, to ensure the right
resources were allocated to deliver on our objectives. Given how fast society’s response to
climate change is developing, the SVC receives papers on emerging issues related to climate
at each meeting, such as legislation and stakeholders’ expectations. During the year the
Committee has invited external experts to get an ‘outside-in’ view on climate regulation,
including Inflation Reduction Action in the US and Green Deal in Europe.
Together with the Nomination Committee, the Board ensures that, among the directors,
it has the necessary sustainability and climate-related expertise.
For more details of our non-executive directors’ skills and experience, see pages 76-77
The Audit Committee monitors and assesses the level of assurance over TCFD and climate-
related issues and performance metrics as we continue to develop our reporting in this area.
The Audit Committee is also responsible for reviewing the effectiveness of internal control
and risk management, which includes climate-related risk.
The Remuneration Committee set two climate-related targets within the group’s Long-term
Performance Share Plan (PSP) in early 2022. Our senior leaders and directors participate
in this PSP. This clearly reflects our intent to contribute to an acceleration of the transition
to a net zero world. The development of the sustainability roadmaps to our 2030 GHG
reduction targets were also embedded in the GLT members’ shared incentives for this year.
Role of management
The Board delegates responsibility for running the business to the Chief Executive Officer
(CEO); this includes overall responsibility for climate-related issues. The CEO is supported
by the Chief Sustainability Officer (CSO), who chairs the Sustainability Council which is made
up of members from the GLT and the Sustainability Director who together, develop our
sustainability vision, goals and targets.
The CSO is responsible for prioritising our sustainability agenda and threading all elements
into our business, providing updates to the GLT on the steps taken to develop or implement
our sustainability strategy, including key metrics, risks, opportunities and our roadmaps to
net zero by 2040.
At a business / working level, there are work streams for advancing specific aspects of
sustainability. See our governance structure for climate-related issues for more details.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
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Governance structure for climate-related issues
Level
Committee / forum
Attendees
Frequency
Objectives
Board level
GLT level
Societal Value
Committee
• Full board
• CSO
• External experts
4 times a year
• Formal board governance committee
on Sustainability
• Gives direction and oversight of ESG strategy,
goals, performance
Representation for sustainability topics
in parallel board committees – e.g.
Audit, Nomination and Remuneration
• CEO – responsible overall
for climate-related issues
Monthly (CSO updates
as required)
• Agree and formally approve global sustainability
strategy and goals
GLT
• CSO
• Other GLT members
• Monitor roadmaps and ensure resources in place
to deliver strategy and targets
Sustainability
Council
• Chaired by CSO
• GLT members
• Sustainability Director
Quarterly
• Driving broader sustainability
• Decide on adjustments to the sustainability
programme and strategy
• Monitor sustainability targets
• Other ad hoc topics
Business /
Working level
Sustainability
work streams
Bimonthly
• Sustainability Director
• Operations and Commercial
sustainability leads
• Sustainability initiative owners
from global functions
• Build and agree roadmaps to targets
• Ensure delivery of roadmaps
• Discuss new and emerging topics
• Ensure customer needs on sustainability are
proactively met
Coordination and transparency
between Businesses and Functions and
Sustainability team
Sustainability leads by business
and function
Strategy
Our business strategy is based on our purpose of catalysing the net zero transition for our
customers through enabling the necessary transitions in transport, energy, industry and the
circular economy. Climate change offers us many business growth opportunities through our
products and services, as well as some risks. The pace at which the world will adapt to the
impacts of climate change is uncertain. So that we properly understand and are resilient
to these uncertainties we maintain climate-change scenarios to frame the ambiguities
in our long-term business strategy of an increasingly volatile and complex environment.
Climate scenarios for evaluating transition risks and opportunities
Our climate scenarios are used by all of our businesses as a common basis for planning,
forecasting and stress testing their strategy and assumptions on growth. These scenarios,
which project the impact of climate change on our operational and commercial performance,
are essential in informing our strategic decisions, such as how we invest in R&D and assets,
or which new products to develop. We also use climate scenarios to consider the resilience
to changing weather patterns of our own operations, those of our strategic suppliers and our
core supply routes.
Our three transition scenarios represent three global temperature rise pathways.
• Rapid transition scenario (aligned to 1.5oC) – net zero achieved globally by 2050, in line
with the goal of the Paris Agreement to limit the world’s temperature rise to well below
2oC. This reflects swift and decisive action regarding policy interventions and
decarbonisation commitments.
• Pragmatic evolution scenario (aligned to 2oC) – net zero achieved globally by 2080, which
reflects a step-up in policy interventions and decarbonisation commitments compared with
today, but not as decisive as under the rapid transition scenario.
• Slow transition scenario (aligned to 3oC) – net zero not achieved by 2100, reflecting
a global lack of urgency on climate change with limited policy or legislative interventions.
We developed our climate scenarios internally, with support from an external expert,
reflecting the latest available research from the International Energy Agency (IEA). The IEA
research we used included three scenarios: the Net Zero Emissions Scenario, the Announced
Pledges Scenario, and the Stated Policies Scenario. Our methodology breaks down the
different energy sources (electricity, hydrogen, gas, coal, oil, renewables, biomass and others)
46
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Task Force on Climate-related Financial Disclosures continued
and considers forecasts for each source by demand type: transport, buildings, industry, power
and heat. We developed in-house forecasts for specific source / demand combinations close
to our areas of expertise in automotive, chemicals, hydrogen and other industries, while
ensuring that, at a macro level, we remained within IEA’s forecasts.
Climate scenarios for evaluating physical risks
Changing weather patterns as the climate warms may result in physical risks to our assets and
supply chains. We have evaluated the exposure of all our assets and those of our strategic
suppliers to these risks.
We update our scenarios annually to reflect changes in external drivers, incorporating
the latest from internationally recognised sources alongside our own forecasts. Our updates
in the last year point towards an acceleration in demand for low-carbon hydrogen.
We model scenarios up to 2100 (see chart below), but look at shorter-term horizons,
specifically 2030 and 2040, to inform our strategic and operational decisions. The table below
details the main qualitative and quantitative assumptions we used for our 2040 scenarios.
We use the pragmatic evolution scenario as our base case for our strategic planning.
Total anthropogenic emissions (GtCO2/yr)
60
50
40
30
20
10
0
-10
We used the Shared Socio-economic Pathways (SSPs), the latest climate change modelling
scenarios from the Intergovernmental Panel on Climate Change (IPCC). The SSPs produce
forward-looking climate data by running climate models driven by assumptions about future
global GHG emissions, together with plausible future socio-economic development metrics
(economic growth / GDP, demographics, land use and urbanisation), and incorporating the
likely implementation of adaptation and mitigation measures.
We looked at three SSPs for the locations of all our own operations and those of our strategic
suppliers. We considered four time horizons – 2020 (our baseline), 2030, 2040 and 2050
to identify the top hazards and how they are likely to change.
Scenario
SSP 1-2.6
SSP 2-4.5
SSP 5-8.5
Assumed temperature increase (relative to 1850-1900)
Best estimate of 1.7oC warming by 2041-2060, and 1.8oC by 2081-2100
Best estimate of 2.0oC warming by 2041-2060, and 2.7oC by 2081-2100
Best estimate of 2.4oC warming by 2041-2060, and 4.4oC by 2081-2100
SSP 5-8.5 is an extreme scenario that is unlikely to arise, but it is useful for stress testing.
We use it to test the resilience of our most important sites.
2020
2025
2030
2035
2040
2045
2050 2055
2060 2065 2070 2075 2080 2085 2090 2095
2100
Slow transition
Pragmatic evolution
Rapid transition
Market Sector
Metric (2040)
Global
Total primary energy demand
Unit
Exajoules (EJ)
Renewables supply (excluding use of biomass)
% of total energy supply
Automotive
Global sales of zero-emissions vehicles
% of total automotive sales
Global sales of fuel cell electric vehicles
% of total automotive sales
Hydrogen
Global hydrogen production
Mt p.a
Rapid transition
Pragmatic evolution
Slow transition
500-550
c. 55%
c. 90%
c. 20%
350-400
600-650
c. 35%
c. 70%
c. 15%
200-250
700-750
c. 25%
c. 40%
c. 10%
150-200
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Task Force on Climate-related Financial Disclosures continued
Our climate-related transition risks and opportunities
Through our scenario work, we identified three distinct potential climate-related impacts, which represent both risks and opportunities for our business. We have added the first climate impact risk
to our principal risks because it is of strategic importance to our business (see page 62).
We use our climate scenarios to evaluate these risks and opportunities in the short (0–3 years), medium (3–10 years) and long term (10+ years), in line with our usual business planning
timescales. We believe the pragmatic evolution climate scenario is most likely to occur, so have used it as the base case for assessing our transition impacts, and the other two scenarios to stress
test the sensitivity and resilience of our business plans.
Primary driver
of impact
Opportunities
(with time horizons)
Risks
(with time horizons)
Management
of impacts
Financial impacts
(after management)
KPIs to
monitor impacts
1. Changing customer demand for our products due to climate awareness
Regulation
• Tightening GHG
Opportunities for new products in the
medium and long term:
• Sales of products & services
emissions standards
for vehicles.
• Government
incentives or
taxation for energy
production or use
based on carbon
footprint (e.g. IRA
and ETS).
• Requirements for
use of bio-based
feedstocks.
Markets
• Shifts in customer
preferences.
to rapidly growing low-carbon
hydrogen generation sector
• Products for hydrogen-powered
vehicles (FCEV & ICE) and
sustainable aviation fuels
• Low-carbon solutions for the
chemicals industry
• Increasing regulations and the
introduction of carbon taxes will
accelerate growth in our new
target markets – sustainable
chemicals, sustainable fuels and
clean energy (medium term)
• Sustained sales of existing products
for internal combustion engine
vehicles as tighter GHG emissions
standards (Euro 7) demand
state-of-the-art technology for
exhaust pipe catalysts (medium
term).
Without adaptation of our
portfolio, there is a
long-term risk that we may
not have a financially viable
future business model as
society transitions away
from fossil fuels.
• Ability to invest and
scale up rapidly to
manufacture new
products for new markets
(short/medium term).
• Uncertainty in the rate of
market evolution from
existing to new
technology options and
penetration of hydrogen
technologies affecting
profitability (medium/
long term).
• Reduced demand for
existing autocatalyst
products for ICE vehicles
(long term).
Progress towards our 2030
sustainability targets for
products and services:
• Tonnes of GHGs avoided
by customers using our
products
• % Revenue and R&D and
revenues aligned with
SDG7 and SDG13
• Economic activity aligned
with EU taxonomy
regulation – climate
delegated act.
Growth
Accelerating profit growth
coming from businesses
related to the net zero
transition.
Clean Air remains on track
to deliver our cash generation
target of at least £4 billion
by 2030/31 in base case
scenario.
Investments and Costs
c. £0.4 billion of cumulative
capital expenditures
dedicated to businesses
related to the net zero
transition in 3 years
2022/23-2024/25.
We focus on managing our existing businesses
effectively, while pivoting away from fossil
fuels-based industries to ones based on clean
hydrogen, sustainable chemicals and bio-based fuels.
• We are closely monitoring the changing market
environment drivers including evolving
government policy on hydrogen, emissions
standards, carbon taxation and incentives such
as IRA.
• Updating our climate scenarios at least once a year
to inform our strategic decisions.
• For our growth businesses we are investing in new
production assets, forming long-term upstream
and downstream strategic partnerships to enable
us to play to our strengths to accelerate growth and
maintain capital expenditure in line with market
expectations e.g PlugPower & Fulcrum.
• For our maturing businesses, we have a plan to
reduce our cost base to improve efficiency and
cash flow.
• Divesting businesses not core to our growth
strategy to simplify & focus.
• We keep investing in innovation to make sure
we have products that differentiate us in all
our markets.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Task Force on Climate-related Financial Disclosures continued
Primary driver
of impact
Opportunities
(with time horizons)
Risks
(with time horizons)
Management
of impacts
Financial impacts
(after management)
KPIs to
monitor impacts
2. Increasing demand for low-carbon manufacturing
Markets
• Shift in customer
• Commercial advantage if
we adapt our manufacturing
plants to low-carbon
operation faster than our
competitors (short/medium
term).
• Save future carbon taxation
costs, which will reduce
operating costs and give us
price advantage as schemes
become more widespread
and expensive (short/
medium term).
• As the world’s largest
preferences towards
products with a
low-carbon footprint.
Regulation
• Carbon taxation
mechanisms in
countries of operation
e.g. ETS.
• Emerging rules
on recycled content
of consumer goods
and the need for
companies to declare
the carbon footprint
of their products.
recycler of secondary PGMs,
we could benefit from
the increased demand
for goods with low-carbon
and/or recycled critical
raw material content
(short/medium term).
3. Increasing stakeholder expectations of corporate climate policy and performance
Reputation
• Increased concerns or
Medium-term risk that we cannot transition
our operations for net zero at the correct
pace to meet customer demand of
low-carbon products.
• Loss of customers and failure to attract new
customers due to reputational damage if we
do not transition fast enough to cleaner
energy solutions in our operations (medium/
long term).
• Greater capital required to upgrade our
assets and site infrastructure to transition to
low-carbon manufacturing (medium term).
• Inability to access the alternative renewable
energy sources needed to reduce natural gas
use in our operations (medium/long term).
• Loss of competitive advantage due to
increased costs to us and our suppliers of
goods and logistics due to carbon taxation
on raw materials and fossil-fuel derived
energy (medium term).
• Developing and delivering
robust climate policy will
increase our long-term
business resilience,
attracting shareholders
and employees aligned
with our values.
• Delivering our net zero
commitment and science-
based targets will help us
demonstrate sustainability
leadership, and increase our
profile with new customers
and shareholders.
• Investors, employees and wider society are
scrutinising companies’ sustainability
commitments ever more closely. Failing to
meet their expectations could damage our
reputation, losing us customers, making it
difficult to attract and retain staff, and
ultimately increasing the risk of shareholder
action (medium/long term).
• Our climate policy, net zero ambitions
and sustainability targets do not keep
up with stakeholder expectations.
• Our plans for meeting these commitments
are not deemed sufficiently detailed
or credible.
• We fail to meet these commitments.
negative feedback from
stakeholders.
Legal
• Exposure to litigation.
Exposure to direct
carbon taxation on our
manufacturing
operation is not forecast
to be material
in our 3 year viability
period, see page 70.
Reputational risk is not
easily quantified.
Progress towards our
2030 sustainability
targets for products
and services:
• Scope 1, 2 and 3 GHG
emissions
• % recycled PGM
content in our
products
• Number of customer
requests for
low-carbon and
recycled content
in products
• Current and forecast
direct exposure
to carbon taxation
in 2030 for our
operations.
How we score on
leading ESG platforms:
• CDP Investor score
• DJSI, Sustainalytics
and MSCI
climate scores
• Progress towards
our 2030
sustainability targets
for GHG emissions.
• We have set challenging 2030 GHG
reduction targets in line with the 1.5⁰C
pathway and published roadmaps to
decarbonise our manufacturing operations.
• We use an internal carbon price for our
capital investment decisions and the Board
consider sustainability reviews of all
investment decisions £5million and above to
help us make the right choices for
decarbonising our operations for net zero in
the long term.
• We review global carbon pricing trends
annually and have embedded carbon price
forecasts into our three- and ten-year
planning cycles.
• Monitor trends in customer requests for
product carbon footprint, Life-Cycle analysis
(LCA) and recycling information.
We continue to monitor and manage the
expectations of our stakeholders as follows:
• SVC and Sustainability Council monitor our
governance of climate- related issues at
every meeting.
• Close monitoring of the latest case law and
developments in climate litigation.
• Developing and monitoring net zero
roadmaps to 2040.
• This year we have increased the ambition in
our Scope1,2 & 3 targets to be in line with
1.5°C pathway and SBTi Net Zero standard.
• Maintaining regular dialogue with investors.
• Market scanning and benchmarking
of targets to ensure our climate-related
polices and commitments meet the
highest expectations.
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Task Force on Climate-related Financial Disclosures continued
Our climate-related physical risks and opportunities
Changing weather patterns as the climate warms may result in physical risks to our assets and supply chains. They could damage our sites and disrupt production, leading to loss of sales and
increased costs, as well as posing risks to our employees. They could also hamper our access to strategic raw materials through supply chain disruption, either at our suppliers’ sites or in transit.
These physical risks can be grouped into two categories:
• Acute, which are extreme events such as tropical cyclones, thunderstorms, severe flooding events, droughts, heatwaves and wildfires.
• Chronic, which are gradual changes like rising sea levels that damage coastal property, or sustained changes to temperature and rainfall.
Primary driver of
impact
Opportunities
(with time horizons)
Risks
(with time horizons)
Management
of impacts
Financial impacts
(after management)
KPIs to
monitor impacts
4. Disruption to our operations resulting in damage to or loss of assets, increased costs and harm to our employees.
Physical risks
(acute and chronic).
Increased frequency,
severity and variability of
extreme weather events
and natural disasters.
Competitive advantage
by improving our business
resilience and controls
through diligent climate-
related screening of assets,
and integration with business
continuity plans
(medium term).
Damage to our key sites, equipment or
stock from severe weather (wind, rain
and drought) if any increased risk is not
effectively mitigated, leading to
disruption of supply to our customers
(medium term).
Insurance of our sites could become
inadequate or more expensive if a site
is at very high risk of weather-related
disruption (medium term).
Increased employee EHS incidents if
sites not adapted to increased risk of
heat wave.
High level analysis of our ten
most critical locations shows
that there is no material
financial impact from climate
change risks on the
quantifiable hazards (flood
and windstorm in the
medium term).
Proportion of physical asset
value exposed to a climate
change related high or very
high hazard levels by 2030:
Number of sites in
water-stressed areas.
Amount of water consumed
in areas or high or extremely
high baseline water stress.
5. Disruption to our supply chain (upstream and downstream) hampering our access to strategic raw materials (including metals) and products, and increasing costs.
Physical risks
(acute and chronic).
Increased frequency,
severity and variability of
extreme weather events
and natural disasters.
No issues identified in the
last year.
Number of weather-related
supply chain disruptions.
Engaging with our suppliers to
help them manage climate
risks to their sites could
enhance our relationships
with them and save us money
(medium term).
Increase in business resilience
through more diligent and
frequent screening of our
suppliers’ assets (e.g. through
integration with business
continuity plans)
(medium term)
Disruption of supply of key raw
materials risks our ability to deliver
goods on time to customers, resulting
in loss of sales and future business
and damage to our reputation
(medium term).
Insurance cover of suppliers is
inadequate, and uncertainty over
the future level of increased risk
responsibility that will be assumed by
suppliers and / or JM relating to climate
risks, or if physical risks should be
transferred (medium term, three to
ten years).
Our ten most important manufacturing sites
identified as being located in areas with
increasing risk from high rainfall are
undergoing deep-dive assessments of their
resilience and implementing mitigation as
required, please see case study on page 51.
Integration of weather-related risks in business
continuity plans and follow-up action plans.
Climate change assessment considered
as part of due diligence for new investments
for growth.
We use the WRI tool to monitor where clean
water availability could be at risk in the
long-term, see page 46.
We regularly review the type and limit
of insurance available for climate risks to
our portfolio.
Climate risk is integrated into our principal risk
management structure and Supplier
Partnering framework (SRM). We undertake
quarterly reviews of the risks identified,
supplier remediation plans and alignment
with company and category strategies.
We work with strategic suppliers to integrate
specific climate mitigating actions where high
risks are identified to improve their resilience
or we switch to alternative partners for
high-risk delivery routes (short /
medium term).
We ensure that the type and limit of
our suppliers’ insurance is in line with
our own risks and external obligations
(medium term).
We continue to develop a diversified supply
portfolio, with emphasis on dual sourcing
at supplier and site levels.
50
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Task Force on Climate-related Financial Disclosures continued
Risk management
All our climate-related risks are subject to our global enterprise risk management process,
which provides a systematic approach of understanding, evaluating and addressing all
identified risks (see page 62 for more information).
Identifying climate-related risks
Over the last year we continued to review and evaluate our climate-related risks against
industry best practice, peer benchmarking and risks identified by business leads and subject
matter experts as well as new and emerging risks.
We believe our climate-risks are in line with industry and legislative expectations. During the
year, we have not identified any new climate-related risks but we have combined two risks
which were previously reported separately as we recognised they were strongly
interconnected with both being influenced by pricing and carbon markets.
Assessing those risks
Our enterprise risk framework provides the tools and guidance to our businesses on how
to assess all risk types. The framework allows the comparison of risks using the metrics
of likelihood, time horizon and financial impact to determine most material risks to our
business.
During the year climate risks have been approached with renewed focus through evaluating
potential impact and velocity – immediacy of impact. Use of this extra metric has allowed the
determination of which climate risks pose most immediate material impact to our operations.
This evolution from a reactive to a proactive strategic approach is essential for maturing our
assessment and integration of climate risk mitigation into our business strategy.
We also use external third parties to evaluate physical climate risks at our locations and those
of our suppliers. Following on from our assessment in 2021, in 2022 we began to carry out
detailed site resilience assessments on our top ten highest risk manufacturing locations.
We will continue this throughout 2023 to determine the requirements for areas we need
to focus on in the short, medium and long term.
Integrating those risks
Through our enterprise risk framework, climate-related risks and opportunities are integrated
into our strategic decision making. Climate change considerations are part of how we
operate, and climate is included in our bottom-up operational risk management process,
providing a clear view of climate-related risks across the organisation.
Managing those risks
The Sustainability Council oversees our sustainability strategy, including managing our
climate-related risks. These risks may have a direct or indirect impact on our principal risks
and are therefore managed alongside and integrated within our principal risk process.
To drive consistency, each of our climate risks has been assigned a risk owner and sponsor as
per our principal risk approach. These individuals are senior stakeholders who are accountable
for reviewing, monitoring and assessing the magnitude of the risk as well as overseeing the
implementation of appropriate mitigations.
All of our principal risks are reviewed formally, twice a year, by the GLT and the Board.
In the coming year, we aim to develop detailed mitigation plans for each identified climate
risk with distinct intermediary goals.
For more information on our risk management approach, please see pages 62-69
Preparing for weather-related issues at our sites
Last year, we completed a global review
of our assets to assess the degree of
exposure to physical climate risks and
identify the high-risk sites. This year, we
selected one of those high-risk sites, in
the UK, and worked with a 3rd party to
conduct a more detailed climate change
risk assessment. The assessment covered
the site, buildings and processes, and
assessed the likely impact from climate
change now and in future years. The
climate risk assessment identified several
climate hazards, and a total of 31 risks.
The highest risks were associated with
surface-water flooding and damage
from high winds. Several measures for
adaption and mitigation have since been
implemented at the site, which address
those high-priority risks, and the
lower- priority risk actions have been
incorporated into the ongoing site
maintenance plans. Further rollout
of these climate change risk assessments
will be planned at strategic sites
this year.
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51
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Task Force on Climate-related Financial Disclosures continued
Metrics and targets
The metrics and targets we use to help us manage our climate risks and opportunities effectively are shown below. They were identified in climate-impact tables on pages 48-50 and their values
are summarised here. Our Scope 1, 2 and 3 GHG emissions targets have been submitted to the Science-based Targets initiative for independent verification that they are consistent with the UN
Paris agreement on climate change’s 1.5°C pathway, and a full breakdown of performance in all categories over the last four years can be found on page 28.
Metric description
Tonnes GHGs avoided by customers when using our technologies1
% sales aligned with SDG7 and SDG13
% R&D spend aligned with SDG7 and SDG13
Total Scope 1 and Scope 2 GHG emissions (market-based) (tonnes CO2e)1
Scope 3 GHG purchased goods and services (tonnes CO2e)
% recycled PGM content in our products
Potential exposure to carbon taxation in 2030
CDP climate score
% physical asset value exposed to high weather-related hazard by 2030
Water consumed in regions of high baseline water stress (m3)
Number of supply chain disruptions due to severe weather
1. Metrics are linked to long-term Performance Share Plan (PSP) for senior directors
2. Rebaselined to remove divested businesses, please see page 222 for more information
Climate-
related risk
1
1
1
2,3
2,3
2
2
3
4
4
5
Target type
Baseline year
Baseline value
2030 target
Absolute
Intensity
Intensity
Absolute
Absolute
Intensity
Intensity
Absolute
Intensity
Absolute
Absolute
2020/21
2020/21
2020/21
2019/20
2019/20
2021/22
2021/22
2019/20
2020/21
2020/21
2020/21
200,9322
6.1%
22.3%
417,8182
3,433,6602
70.1%
not disclosed
B
35%
406,0372
not disclosed
50 million
No target
No target
242,334
1,991,523
75%
no target
A
no target
no target
0
2022/23
progress
848,643
8%
19.2%
363,686
2,495,475
69.2%
not disclosed
B
35%
399,174
0
More on page
25
22
22
25
25
29
70
23
50
30
50
Internal carbon pricing (ICP)
Last year, we introduced a shadow carbon price to our capital investment business case
assessment process, as recommended by the Bank of England. The intention is that this will
incentivise us to reach net zero by ensuring all investments are made in the context of a
low-carbon world where the price of carbon is higher than it is today. Although the ICP is not
a real cost of the investment, it demonstrates what the impact would be of carbon taxation
forecast for 2030 and beyond, and we use it to evaluate and compare potential investments.
We have implemented the ICP for Scope 1 and 2 emissions for the asset when operational.
The intention is to extend this to Scope 3 (raw material and supply chain impacts emissions)
in the future. We chose not to apply ICP to emissions related to the development of the
project itself, such as equipment manufacture, or to construction-related emissions, since
such emissions are both short term and generally minor in relation to the overall life of the
asset. The price applied in 2022/23 was £100/tonnes CO2e, with sensitivity analysis conducted
at £50/tonnes CO2e and £150/tonnes CO2e.
52
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Chief Financial Officer’s review
Our transformation, including the simplification of the portfolio and streamlining of
processes, is further building a strong platform for growth. As Liam has noted, our growth
opportunities are even greater than initially anticipated and they are approaching fast.
To capture these opportunities we need to invest, and we will do so in a disciplined way,
focusing on returns and keeping capex under control. I’m pleased to see the progress
we have made with our large projects on time and on budget. And of course, we are focused
on investing behind customer demand, which gives us more confidence in the returns from
these investments.
It is particularly encouraging that we were able to make so much headway towards our
strategic objectives despite a challenging macroeconomic backdrop and difficult operating
environment. This is testament to the dedication and hard work of the team at JM, and that
we see encouraging signs that our efforts are paying off.
Navigating economic headwinds
JM’s underlying operating profit was £465 million, down 21% from 2021/22 as we were
impacted by lower auto production, higher inflation and lower platinum group metal prices.
As expected, we saw a stronger second half of the year with operating profit down 12%
as we increased prices and saw the benefits of our efficiency programmes. Our balance sheet
remains strong: net debt to EBITDA was 1.6x, towards the bottom of our stated range,
while free cash flow was £74 million. We delivered c. £45 million in efficiency savings during
the year, well on the way to achieving our target of £150 million annualised savings by end
2024/25. Our capital projects programme is also on track in terms of the amount invested,
expected returns and timing of execution.
We acted quickly to get costs down when the war in Ukraine disrupted supply chains and
added to significant inflation. But inflation has impacted a range of inputs to our operations,
including energy. Importantly, we did not allow the short-term impacts to deter us from
making strategic investments to position JM for long-term growth. These investments are
incredibly important as many future opportunities will rely on the expanded capacity we are
currently building.
Platinum group metal prices were volatile during 2022/23 and lower on average than the
prior year. The PGMS business also saw lower volumes of automotive scrap, which impacted
the performance of our refining business. This was partially offset by efficiency savings made
during the year. Meanwhile, we continued to invest in updating our infrastructure assets
and expanding our capacity.
Catalyst Technologies is making good progress towards its goal of winning large-scale
projects, with five added to its portfolio during the year. Higher prices, improved mix and cost
savings offset cost inflation and the impact of the loss of business in Russia. Investment
continued, however, with the capacity expansion project at our facility in Perstorp, Sweden,
proceeding to plan.
53
Despite challenging markets, we have made steady
progress in implementing our new strategy – doing
exactly what we set out to do and starting to win back
the trust of stakeholders.
Executing with discipline
During this year, I have spent a lot of time speaking with our internal and external
stakeholders, and the message is clear. They see the pathway for strong ongoing cash
generation from our mature businesses, as well as the exciting potential of our growth
opportunities in hydrogen and catalyst technologies, all underpinned by our leading
technology. But they have also been repeatedly disappointed by our performance and
investment decisions in recent years and want to know why it will be different this time.
So, 2022/23, with our new leadership team, has been about doing what we said we would
do at the start of the year. We have achieved the key milestones we set for this year, and
our strategic scorecard is in good shape. This is an important part of showing ourselves,
our investors and other stakeholders that we not only have market-leading technology and
expertise – but we are positioned for long-term value creation too. While still early days in
executing our strategy, I am encouraged by the progress that has been made to date and
more convinced than ever that we have set the right path to growth for Johnson Matthey.
We have continued to simplify our portfolio during the year, announcing the sale of Piezo
Products and the Diagnostics Services business. We are on track on our remaining
divestments. Simplifying the business removes complexity and allows us to focus on our core
strengths and the engines of growth within the business.
Internally, our cost-reduction programme is making inroads by simplifying, standardising and
getting greater value from our back-office functions. We have delivered c. £45 million in cost
savings this year and will further accelerate our efforts on this front in the coming years
to more than deliver our £150 million savings target.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Chief Financial Officer’s review continued
The Hydrogen Technologies business was insulated from some of the market headwinds that
impacted our other businesses, with sales more than doubling over the course of 2022/23 to
reach £55 million. The business is benefiting from rapid growth in interest in hydrogen fuel
cells and clean hydrogen production, and we announced a large-scale partnership with
Plug Power, which will see us jointly build a significant new facility in the US. HT is already
investing to expand its capacity in the UK, with our new major site in Royston in the UK due
to complete construction in 2023/24.
While Clean Air’s results were below the prior year impacted by lower auto and truck
production and significant cost inflation, we underpinned the longer-term future of that
business with some key business wins. Notably, we won all of Mercedes-Benz’s light duty
diesel business in Europe. Looking ahead, the Euro 7 proposals and updated US EPA
legislation are expected to act as tailwinds for the business. Clean Air increased sales during
2022/23 to £2.6 billion and the business is on track to achieve its target of more than
£4 billion of cash in the decade to 2030/31, having delivered cumulative cashflow of
£1.4 billion to date.
In the year, we completed the sale of Piezo Products while the sale of Diagnostic Services
is expected to complete in the third quarter of calendar 2023. These represent good progress
against our strategic milestone of divesting our Value Businesses by the end of 2023/24
and generating at least £300 million in proceeds.
Strengthening our commercial muscle
We have made encouraging progress in bringing greater commerciality into the business.
This has included reinvigorating the incentive programme for our sales teams and sharpening
our focus on pricing discipline. The fruits of these efforts can be seen in the results for the
second half of the year, not least in the increasing recovery of significant cost inflation – such
that by the end of the year we had recovered £95 million, of inflation through increased pricing.
The actions we have already taken as part of the transformation programme have laid strong
foundations. This is only the beginning of the process, and there is much more work to be
done to drive efficiency, remove complexity and further reduce costs. To become a more
commercially minded and customer-focused business, we will remain focused on disciplined
execution of our strategy and pursuing our purpose of catalysing the net zero transition
for our customers.
A bright future ahead
The significant customer wins during 2022/23 are testament to the size of the opportunity
ahead for JM. They are also confirmation that our strategy is focused on the right areas.
With unprecedented interest (and growing urgency) around the energy transition,
the market is well and truly moving towards JM.
It is a great position to be in, but one that we need to be prepared for. We will continue
to execute our strategy, cautiously increasing the scale and the pace of our ambition while at
the same time driving the transformation of the business for growth and increased profitability.
I can honestly say I am more excited now about the prospects for JM than at any time since
I joined two years ago. As we emerge from a difficult economic environment in stronger
shape, I’m confident a much brighter future is within our reach, and as we help the world
build a more sustainable future.
Finally, I would like to say thank you to our teams for the hard work and dedication they have
again shown this year. The transformation of our company is beginning to bear fruit which
is a testament to their focus and commitment.
Stephen Oxley
Chief Financial Officer
54
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review
Revenue
Sales excluding precious metals³
Operating profit
Profit before tax (continuing)
Profit after tax (continuing)
Basic earnings per share (continuing)
Ordinary dividend per share
Reported results
Year ended 31st March
2023
14,933
2022
16,025
% change
-7
406
344
264
144.2
77.0
255
195
116
30.9
77.0
+59
+76
n/a
n/a
-
£m
£m
£m
£m
£m
pence
pence
Underlying results (continuing)¹
Year ended 31st March
2023
2022
% change
% change,
constant FX rates
4,201
465
404
326
178.6
3,778
553
493
407
213.2
+11
-16
-18
-20
-16
+6
-21
Underlying performance – continuing operations1,2
• Sales of £4.2 billion, up 6%, with higher prices to partially recover cost inflation, partly
offset by lower average PGM prices
• Underlying operating profit of £465 million, down 21%. Almost half was due to lower
average PGM prices with the remainder largely due to cost inflation and lower volumes
in PGM Services and Clean Air. This was partly offset by transformation benefits
• Underlying earnings per share of 178.6p, down 16% due to lower underlying
operating profit
• Free cash flow of £74 million, compared to £221 million in the prior year largely reflecting
lower underlying operating profit and working capital movements
• Strong balance sheet with net debt of £1.0 billion; net debt to EBITDA of 1.6 times
Reported results
• Revenue down 7%, driven by lower average PGM prices
• Operating profit of £406 million, up materially, largely due to the absence of a one-off
impairment in the prior period relating to Battery Materials
• Profit before tax (continuing) of £344 million, compared to £195 million in the prior
period, reflecting higher operating profit due to the absence of the Battery Materials
impairment
• Reported earnings per share (continuing) of 144.2 pence
• Cash inflow from operating activities of £291 million (2021/22: £605 million)
• Ordinary dividend of 77.0 pence per share stable year-on-year
Notes:
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, share of profits or losses from non-strategic equity investments, major impairment and restructuring
charges and, where relevant, related tax effects. For definitions and reconciliations of other non-GAAP measures, see pages 206-209
2. Unless otherwise stated, sales and operating profit commentary refers to performance at constant exchange rates. Growth at constant rates excludes the translation impact of foreign exchange movements, with 2021/22 results converted at 2022/23 average rates. In 2022/23,
the translational impact of exchange rates on group sales and underlying operating profit was a benefit of £193 million and £38 million respectively
3. Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers
Johnson Matthey | Annual Report and Accounts 2023
55
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review continued
Summary of underlying operating results from
continuing operations
Unless otherwise stated, commentary refers to performance at constant rates¹. Percentage
changes in the tables are calculated on rounded numbers.
Sales
(£ million)
Clean Air
PGM Services
Catalyst Technologies
Hydrogen Technologies
Value Businesses³,⁴
Eliminations
Sales (continuing)
Year ended 31st March
2023
2,644
570
560
55
470
(98)
4,201
2022²
2,457
587
454
25
354
(99)
3,778
% change
+8
-3
+23
+120
+33
% change,
constant FX rates
+2
-8
+17
+112
+28
+11
+6
Underlying operating profit
(£ million)
Clean Air
PGM Services
Catalyst Technologies
Hydrogen Technologies
Value Businesses³,⁵
Corporate
Underlying operating profit (continuing)
Year ended 31st March
2023
230
257
51
(45)
40
(68)
465
2022²
302
308
50
(33)
12
(86)
553
Reconciliation of underlying operating profit to operating profit
(£ million)
Underlying operating profit (continuing)
Profit on disposal of businesses6
Major impairment and restructuring charges6
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings⁶
Operating profit (continuing)
Notes:
% change
-24
-17
+2
n/a
n/a
% change,
constant FX rates
-28
-21
-2
n/a
n/a
-16
-21
Year ended 31st March
2023
465
12
(41)
(5)
(25)
406
2022²
553
106
(440)
(6)
42
255
1. Growth at constant rates excludes the translation impact of foreign exchange movements, with 2021/22 results converted at 2022/23
average rates. In 2022/23, the translational impact of exchange rates on group sales and underlying operating profit was a benefit of
£193 million and £38 million respectively
2. 2021/22 is restated to reflect the group’s new reporting structure
3. Includes Battery Systems, Medical Device Components, Diagnostic Services, Battery Materials and Advanced Glass Technologies
4. Sales relating to divestments: Advanced Glass Technologies (2021/22: £62 million, 2022/23: nil) and Battery Materials
(2021/22: £12 million, 2022/23: £21 million)
5. Operating profit or loss related to divestments: Advanced Glass Technologies (2021/22: £16 million,
2022/23: -£1 million) and Battery Materials (2021/22: -£22 million, 2022/23: £3 million)
6. For further detail on these items please see page 168
56
Full year operating results by sector
Clean Air
Improved sequential performance supported by increased inflation recovery
• Sales up 2% supported by pricing as we partially recovered higher input costs
• Underlying operating profit decreased 28% impacted by cost inflation, product mix and
lower volumes
• Margins saw an improvement during the second half resulting from increased inflation
recovery and benefits from our transformation programme
• On track to deliver at least £4 billion of cash in the decade to 2030/31, having delivered
£1.4 billion since 2020/21 at actual precious metal prices
Sales
Light duty diesel
Light duty gasoline
Heavy duty diesel
Total sales
Underlying operating profit
Underlying margin
Reported operating profit
Year ended 31st March
2023
£ million
2022
£ million
% change,
constant FX
rates
% change
1,075
599
970
2,644
230
8.7%
191
1,005
574
878
2,457
302
12.3%
273
+7
+4
+10
+8
-24
+4
-1
+3
+2
-28
Clean Air provides catalysts for emission control after-treatment systems used in light and
heavy duty vehicles powered by internal combustion engines.
Sales during the period were up 2%. Vehicle production was impacted by a challenging supply
chain environment as well as COVID-related lockdowns in China. Although semiconductor
shortages have gradually eased, other supply chain disruptions such as labour availability
and logistic bottlenecks have continued to affect vehicle production. As the year progressed,
pent-up demand and the easing of supply chain issues led to an improvement in
production activity.
Light duty catalysts – diesel and gasoline
Light duty diesel
Light duty diesel sales were up 4%, outperforming a declining market. We saw strong
performance in the Americas and good performance in Europe, partly offset by a decline in
Asia. In Europe, which represents around 60% of our total light duty diesel sales, our growth
was driven by strong platform performance despite some automotive OEMs continuing to
prioritise commercial vehicles over the passenger car platforms that we serve. In the Americas
we significantly outperformed a growing market, driven by the ramp up of a new platform
and strong platform performance.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review continued
In Asia, our performance was in line with a declining market, which was impacted by a weak
commercial vehicle market in China and an increase in electric vehicle penetration. Our sales
decline in the region was also the result of lower revenue per unit as a result of product mix.
Light duty gasoline
Light duty gasoline sales were down 1%, underperforming the overall global market. In Europe
and Asia, previous platform losses led to a decline in sales in both regions. In the Americas,
sales grew slightly ahead of a strong underlying market as we benefited from the ramp up
of new platforms. We continue to invest in light duty gasoline to support our future growth
with early signs of success. For example, two OEMs in the high performance sports car
segment have chosen JM to be sole supplier which validates the strength of our technology
and gives confidence in winning future light duty gasoline platforms.
Heavy duty diesel catalysts
In heavy duty diesel sales were up 3%, significantly outperforming a declining market.
We saw strong performance in Europe and the Americas, partly offset by a decline in Asia.
In Europe our sales significantly outperformed a growing market due to higher revenue per
vehicle and we also benefited from good performance in our off road platforms. In the
Americas, the high value Class 8 truck cycle peaked during the last quarter of our fiscal year.
As expected, our heavy duty sales benefited from this cycle and were also supported by
improved product mix. Sales in Asia declined as COVID lockdowns in China significantly
impacted vehicle production and led to customers building stock in the prior year in
anticipation of these lockdowns. Looking ahead, our leading position in heavy duty means
we are well placed to benefit from future developments including hydrogen powered internal
combustion engines.
Underlying operating profit
Underlying operating profit declined 28% to £230 million and margins decreased to 8.7%.
This largely reflected cost inflation, product mix, lower volumes, and the transactional
impact of exchange rates. We saw a sequential improvement in margins during the year,
benefiting from an acceleration in the recovery of cost inflation and benefits from our
transformation programme.
On track to deliver at least £4 billion of cash in the decade to 2030/311
We delivered another year of strong cash flow as we continue to focus on driving efficiencies,
optimising capital expenditure and working capital. We generated around £600² million
of cash and a cumulative £1.4 billion² since 2021/22, the first year of this guidance.
Notes:
1. At least £4 billion of cash under our range of scenarios from 1st April 2021 to 31st March 2031. Cash target pre-tax and post
restructuring costs
2. Delivered around £600 million of cash in 2022/23 at actual precious metal prices, which equates to just over £400 million at constant
prices (March 2022). Delivered around £1.4 billion cumulatively since 2021/22 at actual metal prices
3. Gross PGM price impact was c. £55 million, which was partly offset by foreign exchange benefits. Foreign exchange benefit reflects
the pricing of PGMs in US dollars
Johnson Matthey | Annual Report and Accounts 2023
PGM Services
Performance reflects lower average PGM prices and reduced refinery volumes
• Sales performance primarily reflects lower average PGM prices and reduced refinery volumes
due to lower auto scrap levels as a result of the continued buoyant used car market
• Underlying operating profit was down mainly due to lower average PGM prices and reduced
refinery volumes
• Cost inflation was more than offset by efficiencies as well as higher pricing across both our
refining and products businesses
Sales
PGM Services
Underlying operating profit
Underlying margin
Reported operating profit
Year ended 31st March
2023
£ million
2022
£ million
% change
% change,
constant FX
rates
570
257
45.1%
257
587
308
52.5%
307
-3
-17
-8
-21
PGM Services is the world’s largest recycler of platinum group metals (PGMs). This business
has an important role in enabling the energy transition through providing circular solutions
as demand for scarce critical materials increases. PGM Services provides a strategic service
to the group, supporting Clean Air, Catalyst Technologies and Hydrogen Technologies with
security of metal supply in a volatile market, recycling capabilities and manufactures value
added PGM products for both internal and external customers.
In PGM Services, sales declined 8% against a strong prior year. This was primarily driven
by lower average PGM prices, where average prices for platinum, palladium and rhodium
declined around 10%, 20% and 30% compared to the prior year. Recent PGM price weakness
has been driven by lower auto demand and also liquidation of some excess rhodium positions
in an illiquid market.
In our refineries, intake volumes were down as expected due to lower auto scrap resulting
from a buoyant used car market. Sales were partly offset by benefits from operational
efficiency and higher pricing. In a volatile market, our metal trading business had another
good year, with sales only moderately down against a strong prior period.
Across our PGM products businesses, sales were moderately down. This was primarily driven
by lower sales of catalysts for the pharmaceutical and agricultural chemicals markets due
to the phasing of customers’ orders.
Underlying operating profit
Underlying operating profit declined 21% mainly impacted by lower average PGM prices
(c. £55 million impact3) and reduced refinery volumes. Cost inflation was more than offset
by efficiency benefits, as well as higher pricing across both our refining and products businesses.
57
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review continued
Catalyst Technologies
Strong sales growth and improved performance in the second half
• Sales up 17% largely reflecting growth in licensing and catalyst refills, as well as
improved pricing
• Strong performance in licensing with five licence wins within low carbon hydrogen
and sustainable fuels (includes one win in May 2023)
• Underlying operating profit was in line with the prior year. Improved pricing, licensing and
transformation benefits offset significant cost inflation and the loss of Russian business
Sales
Catalyst Technologies
Underlying operating profit
Underlying margin
Reported operating profit
Year ended
31st March
2022
£ million
454
50
11.0%
78
2023
£ million
560
51
9.1%
43
% change,
constant FX
rates
% change
+23
+2
+17
-2
Catalyst Technologies is focused on enabling the decarbonisation of chemical and fuels value
chains and we have leading positions in syngas: methanol, ammonia, hydrogen and
formaldehyde. Catalyst Technologies has three key segments: industrial and consumer,
traditional fuels and sustainable solutions that help catalyse the transition to net zero.
Our revenue streams include licensing and engineering income, first fill and refill catalysts.
Sales during the period were up 17%, with strong growth in licensing and growth in first fills
and refills reflecting higher pricing and positive mix.
Industrial and consumer
Industrial and consumer includes our traditional syngas (methanol, ammonia and
formaldehyde) catalyst offerings as well as the majority of our current licensing business.
We saw double digit sales growth reflecting strong growth in licensing and first fills as new
plants came on stream following licence wins in recent years. In the year, we signed six new
licences (2021/22: three licences). Refills also grew well supported by growth in ammonia
and formaldehyde.
Traditional fuels
Traditional fuels includes our refining additives, hydrogen and natural gas purification
offerings. Growth in the segment was mainly driven by refills. High global demand
for liquified natural gas has led to strong sales of our natural gas purification catalysts.
Sustainable solutions
Sustainable solutions includes our new growth markets with our technology in low carbon
hydrogen, sustainable fuels and low carbon solutions. In the period to May 2023, we won five
large scale projects across low carbon hydrogen and sustainable fuels:
• H2H Saltend, expected to be one of the UK’s largest low carbon hydrogen projects
• A large scale low carbon hydrogen licence in North America
• A sustainable fuels project with Strategic Biofuels, also in North America
• A commercial scale sustainable fuels project in North America
• A commercial scale sustainable fuels project in Europe
In addition, we won a low carbon solutions licence in the year which will enable the
decarbonisation of one of our customer’s existing assets.
Underlying operating profit
Underlying operating profit of £51 million was in line with the prior year and margins
declined to 9.1%. However, we saw good improvement in operating margin from the first
to the second half of the year (1H: 7.6% and 2H: 10.5%). Higher pricing, licensing and the
benefits of our transformation programme offset significant cost inflation and the loss
of catalyst sales and higher margin licensing income in Russia (c. £10 million loss of profit).
Hydrogen Technologies
Sales more than doubled and continued investment to scale the business
• Agreed strategic partnerships with Plug Power and Hystar
• Sales more than doubled driven by higher volumes for new and existing customers in fuel
cells, growth in electrolysers and increased manufacturing output as we focused
on improving operational performance
• Underlying operating loss reflects continued investment to scale the business to meet
demand partly offset by higher volumes
Sales
Hydrogen Technologies
Underlying operating loss
Underlying margin
Reported operating loss
Year ended 31st March
2023
£ million
2022
£ million
% change
% change,
constant FX
rates
55
(45)
n/a
(46)
25
(33)
n/a
(33)
+120
n/a
+112
n/a
In Hydrogen Technologies, we provide catalyst coated membranes that are critical
performance defining components of fuel cells and electrolysers.
58
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review continued
In Hydrogen Technologies, sales in the year more than doubled to £55 million. This was
primarily driven by growth in fuel cells where we delivered higher commercial volumes
for new and existing customers, enabled by improved operational performance. We continue
to focus our fuel cell business towards strategic customers to develop deeper and longer
relationships. This trend will continue given the recent strategic partnership announcements,
for example with Plug Power which entails a long-term supply agreement, joint development
agreement and co-investment into new manufacturing capacity. In electrolysers, we
saw higher sales from the supply of samples, prototypes and components as we develop
strategic partners.
In the year, we saw higher manufacturing output as we focused on operational performance
to improve our processes and drive efficiency. Sales also benefited as constraints eased
following the greater use of capacity in the prior period to qualify new customer products.
Underlying operating loss
Underlying operating loss of £45 million primarily reflects increased investment into product
development and building capability as we scale the business to meet customer demand,
partly offset by higher volumes.
Value Businesses
Comparable performance materially improved
• Market recovery and structural improvements driving improved performance
• Completed the sale of Piezo Products, part of Medical Device Components, and agreed the
sale of Diagnostic Services with completion expected in the third quarter of calendar 2023
Sales
Value Businesses¹
Underlying operating profit²
Underlying margin
Reported operating profit / (loss)
Year ended 31st March
2023
£ million
2022
£ million
% change
% change,
constant FX
rates
470
40
8.5%
38
354
12
3.4%
(276)
+33
n/a
+28
n/a
Value Businesses is managed to drive shareholder value from activities considered to be
non-core to JM, and now principally comprises Battery Systems, Medical Device Components
and Diagnostic Services. In the year, we completed the sale of Piezo Products, part of Medical
Device Components, and we have also agreed the sale of Diagnostic Services and Battery
Materials. In 2021/22, we completed the sale of Advanced Glass Technologies.
Overall, sales in Value Businesses were up 28% in the year. On a like for like basis
(i.e. excluding Advanced Glass Technologies and Battery Materials), sales were up 55%.
In Battery Systems, sales almost doubled. We ramped up production of higher value next
generation e-bike products and satisfied a backlog of orders as supply chain constraints eased.
Medical Device Components also saw strong sales growth as we gained market share
following recent project wins, and benefited from higher effective production capacity
following investments to upgrade assets and drive efficiency. Diagnostic Services also grew
strongly reflecting a continued recovery in demand as COVID-related travel disruption eased
and a stronger commercial focus, supported by a higher oil price which drove increased
customer activity.
Underlying operating profit
Underlying operating profit of £40 million, an improvement of £28 million on the prior year,
reflecting both a supportive market environment and the execution of comprehensive value
creation plans that each business is driving forward.
Excluding the results of Advanced Glass Technologies and Battery Materials, underlying
operating profit was £38 million², an improvement of £20 million.
Corporate
Corporate costs were £68 million, a decrease of £18 million from the prior period, largely
reflecting transformation benefits as well as a one-off benefit from lower pension charges.
Notes:
1. Sales relating to divestments: Advanced Glass Technologies (2021/22: £62 million, 2022/23: £nil) and Battery Materials (2021/22: £12 million, 2022/23: £21 million)
2. Operating profit or loss related to divestments: Advanced Glass Technologies (2021/22: £16 million, 2022/23: -£1 million) and Battery Materials (2021/22: -£22 million, 2022/23: £3 million)
Johnson Matthey | Annual Report and Accounts 2023
59
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review continued
Financial review – continuing operations
Research and development (R&D)
R&D spend was £213 million in the year. This was up from £201 million in the prior year and
represents c. 5% of sales excluding precious metals. We are investing in our growth areas,
including Catalyst Technologies and also Hydrogen Technologies as we continue to
commercialise our fuel cell and electrolyser offerings. In addition, we are also investing
in our Clean Air business to support future platform wins ahead of new emission regulations.
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 79% of the non-sterling denominated
underlying operating profit in the year ended 31st March 2023, were:
US dollar
Euro
Chinese renminbi
Share of 2022/23
non-sterling denominated
underlying operating profit
34%
37%
8%
Average exchange rate
Year ended 31st March
2023
1.20
1.16
8.26
2022
1.36
1.18
8.75
% change
-12%
-2%
-6%
For the year, the impact of exchange rates increased sales by £193 million and underlying
operating profit by £38 million.
If current exchange rates (£:US$ 1.25, £:€ 1.14, £:RMB 8.70) are maintained throughout
the year ending 31st March 2024, foreign currency translation will have an adverse impact
of c. £10 million on underlying operating profit. A one cent change in the average US dollar
and euro exchange rates have an impact of approximately £2 million on operating profit
whilst a ten fen change in the average rate of the Chinese renminbi approximately has
a £1 million impact on full year underlying operating profit.
Efficiency savings
We have commenced our new group transformation programme as part of which we expect
to deliver efficiencies of at least £150 million by 2024/25. Associated costs to deliver the
programme are around £100 million, all of which are cash. In 2022/23, we delivered
c. £45 million of savings, ahead of our target of c. £35 million.
Efficiency
savings
delivered in
2022/23
Associated
costs incurred
in
2022/23
45
20
£ million
Transformation programme
60
Items outside underlying operating profit
Non-underlying (charge) / income
(£ million)
Profit on disposal of businesses
Major impairment and restructuring charges
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Total
As at
31st March
2023
12
(41)
(5)
(25)
(59)
As at
31st March
2022
106
(440)
(6)
42
(298)
A gain of £12 million was recognised relating to the sale of our Battery Materials Canada and
Piezo Product businesses.
There was a £41 million charge relating to major impairment and restructuring charges
comprised of a net impairment charge of £10 million and restructuring charges of
£31 million. The impairment charge includes impact from further consolidation of our Clean
Air manufacturing footprint to create a simplified and agile structure, as well as an
impairment of goodwill in Diagnostic Services and further impairment charges in relation to
parts of the Battery Materials business. Restructuring charges were also recognised in relation
to our Clean Air manufacturing footprint as well as the transformation initiatives announced
in May 2022 which largely comprise redundancy and implementation costs.
The group paid £25 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 the
group supplied a particular coated substrate as a component for that customer’s emissions
after-treatment systems.
Finance charges
Net finance charges in the period amounted to £61 million, broadly in line with the prior year
charge of £60 million.
Taxation
The tax charge on underlying profit before tax for the year ended 31st March 2023
was £78 million, an effective underlying tax rate of 19.3%, up from 17.4% in 2021/22.
This largely reflects the settlement of provisions for uncertain tax positions in the prior year.
The effective tax rate on reported profit for the year ended 31st March 2023 was 23.2%.
This represents a tax charge of £73 million, compared with £57 million in the prior period.
We currently expect the effective tax rate on underlying profit for the year ending 31st March
2024 to be around 20% reflecting the increase to the UK corporate tax rate.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Financial performance review continued
Post-employment benefits
IFRS – accounting basis
At 31st March 2023, the group’s net post-employment benefit position, was a surplus
of £165 million.
The cost of providing post-employment benefits in the year was £40 million, down from
£62 million last year.
Capital expenditure
Capital expenditure was £303 million in the year, 1.6 times depreciation and amortisation
(excluding amortisation of acquired intangibles). In the period, key projects included:
• Hydrogen Technologies – investing to increase manufacturing capacity in the UK
• PGM Services – investing in the resilience, efficiency and long-term sustainability of our
refinery assets, and also our fuel cells capacity expansion
Strong balance sheet
Net debt as at 31st March 2023 was £1,023 million, an increase from £856 million at
31st March 2022 and £963 million at 30th September 2022. Net debt is £19 million higher
at £1,042 million when post tax pension deficits are included. The group’s net debt
(including post tax pension deficits) to EBITDA was 1.6 times (31st March 2022: 1.2 times,
30th September 2022: 1.5 times), which was at the lower end of our target range of 1.5
to 2.0 times.
We use short-term metal leases as part of our mix of funding for working capital, which
are outside the scope of IFRS 16 as they qualify as short-term leases. Precious metal leases
amounted to £138 million as at 31st March 2023 (31st March 2022: £140 million,
30th September 2022: £129 million).
Free cash flow and working capital
Free cash flow was £74 million in the year, compared to £221 million in the prior period,
largely reflecting lower underlying operating profit and working capital movements.
Excluding precious metal, average working capital days to 31st March 2023 increased
to 42 days compared to 36 days to 31st March 2022.
Outlook for the year ending 31st March 2024
For 2023/24, we expect at least mid-single digit growth in operating performance at constant
precious metal prices and constant currency. This is underpinned by efficiency benefits of
c. £55 million in the year.
In Clean Air, we expect strong growth in operating performance. Whilst external data suggest
limited growth in vehicle production for 2023/24, margin expansion should mainly be driven
by efficiency benefits. PGM Services’ performance will be largely driven by precious metal
prices, with recycling volumes expected to be subdued. We expect strong growth in operating
performance for Catalyst Technologies. This reflects an improvement in licensing income
and a significant uplift in margins, benefiting from pricing and efficiencies. We expect sales
to grow strongly in Hydrogen Technologies and we will continue to invest for growth resulting
in an operating loss at a similar level to 2022/23.1
Precious metal prices have been volatile and consequently it is difficult to predict how they
may develop. To illustrate the impact they may have on our results, assuming prices remain
at their current level2 for the remainder of 2023/24 there would be an adverse impact
of c. £50 million3 on full year operating performance compared with the prior year. We are
focused on mitigating the potential impact on our performance.
At current foreign exchange rates4, translational foreign exchange movements for the year
ending 31st March 2024 are expected to adversely impact underlying operating profit by
c. £10 million.
Dividend
The board will propose a final ordinary dividend for the year of 55.0 pence per share at the
Annual General Meeting (AGM) on 20th July 2023. Together with the interim dividend of
22.0 pence per share, this gives a total ordinary dividend of 77.0 pence per share, maintained
at the same level as the prior year. Subject to approval by shareholders, the final dividend will
be paid on 1st August 2023, with an ex-dividend date of 8th June 2023.
Contingent liabilities
See note 32 of the financial statements on page 206.
1. Outlook commentary for Clean Air, PGM Services, Catalyst Technologies and Hydrogen Technologies assumes constant precious metal prices and constant currency
2. Based on average precious metal prices in May 2023 (month to date)
3. c. £50 million adverse impact represents a gross PGM price impact before any foreign exchange movement. A US$100 per troy ounce change in the average annual platinum, palladium and rhodium metal prices each have an impact of approximately £1 million, £1.5 million and
£0.75 million respectively on full year underlying operating profit. This assumes no foreign exchange movement
4. At average foreign exchange rates for May 2023 month to date (£:US$ 1.25, £:€ 1.14, £:RMB 8.70) translational foreign exchange movements for the year ending 31st March 2024 are expected to adversely impact underlying operating profit by c. £10 million
Johnson Matthey | Annual Report and Accounts 2023
61
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Risk report
Risk management is important for JM as it enables
protection, facilitates value-added insights, helps identify
competitive opportunities and supports the growth
afforded by the net zero transition. During the
year we have refined our principal risks to provide
further clarity and reflect progress made so far.
Managing risks effectively
Our ability to effectively manage the risks that we encounter is an enabler of our strategic
performance and owning what we do. Risk management is an essential component of our
governance and operations throughout the organisation. We continue to invest in awareness
initiatives and the training of our employees to stay ahead of various threats. We manage
our risks, procedures and controls with the aid of JMProtect, a comprehensive governance,
risk, and compliance (GRC) platform.
Risk management framework
mitte e
dit
u
A
m
o
C
B oard
Top down
Bottom up
B
u
s
i
n
e
sses
S i
s / f u
t e
g r a
o
p r
m
G
L
T
/
s
a
s
ct
n ctional are
m es / proje
Group
Assurance
function
Challenges and helps the
Board, Audit Committee,
the Group Leadership
Team (GLT), businesses
and functions to consider
the range and materiality
of risks identified
Monitors how well
mitigating actions or
projects are implemented,
and how effectively they
reduce risk to ensure
alignment with our
risk appetite
62
‘Perma-crisis’ is one of the characteristics that is used to describe the world around us, and
it is within this environment that risk management helps JM navigate delivery of strategy.
The ongoing war in Ukraine, energy supply instability, cyber-attacks and inflationary pressures
all impact us or our customers. Our ability to be prepared has been tested, and we responded
through taskforces and solutions to mitigate some of the impacts, or with additional efforts
to test our resilience and continuity plans.
Climate-related risks and opportunities
We continue to support the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD) and disclose how effectively we are managing climate-related risks and
opportunities. Further details are included on page 48.
Board
• Sponsors our approach to risk management and internal controls
• Sets the tone for risk management culture
• Approves risk management policies and processes
Audit Committee
• Reviews the effectiveness of our risk management framework and internal controls
GLT
• Regularly carries out top-down
reviews of risk
• Manages our definitions of risks
and mitigation plans
• Develops strategy in line with our
• Monitors whether risks are within
risk appetite
our risk appetite
Businesses
• Regularly carries out bottom-up reviews of operational activities
• Ensures sites and functions have risk registers in place
• Reports to the GLT about business risk and issues
Sites / functional areas / programmes / projects
• Reports key risks to businesses
• Regularly carries out reviews as to how controls are implemented and
their effectiveness
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Risk report continued
Risk management framework
Our risk management methodology identifies and considers principal risks, including severe yet
plausible scenarios. Its purpose is to reassure stakeholders that we have fully considered and
understand a broad range of risks and are managing them in line with defined risk appetites.
The Board, which is ultimately accountable for risk management and internal controls,
evaluates how effective these systems are at mitigating principal and emerging risks at least
once every year. The GLT provides support for the Board’s reviews, which ensures the risks
we’ve identified are relevant to our current aims and strategic goals. The Audit Committee
supports the Board in assessing the effectiveness of our risk management and internal control
systems, processes and policies.
Our risk management methodology takes a top-down approach to identify our principal risks
(i.e. from board level down) and a bottom-up approach to identify operational risks (i.e. from
day-to-day level up). We’re constantly looking to improve how connected and aligned these
approaches are as they operate in parallel.
How we manage risk
We apply the three-lines-of-defence methodology. The first line represents business
operations, or the individuals who, employing effective internal controls, own and manage
risk daily. Governance and compliance, the second line, are represented by the functions and
businesses of the group that oversee and monitor these operations. The third line refers to the
independent assurance that our Group Assurance function provides over these activities.
Functions, businesses and site teams are responsible for identifying, assessing and prioritising
their risks. They also consider how likely it is that a risk will materialise and what effect that
would have on our objectives. This includes reviewing whether a risk has changed, how strong
the controls we use to manage the risk are and whether mitigating actions are in place.
We use a self-assessment and management attestation processes to report, at least once
a year, on whether the relevant controls are effective. This is a maturing process with several
initiatives in progress to improve our controls environment.
In the past 12 months, we have continued to improve how we address and monitor risks
in a number of ways, including:
• Making continued enhancements to our GRC platform, JMProtect, which offers a combined
and centralised view of our risk universe and controls framework
• Incorporating JMProtect risk data into our audit planning process to make sure the highest
risk areas of the business are prioritised for assurance activities
• Introducing an Integrated Assurance model that aligns second- and third-line assurance
activities for easier collaboration and more effective risk-based assurance.
We prioritise insurance cover for the most significant areas of risk across the Group, and areas
where insurance is a legal or contractual requirement. If insurance is available on
commercially reasonable terms, we also utilise it as a risk mitigation tool across our wider
business. Where appropriate, we get advice from industry to help us assess risks and develop
mitigation plans.
Emerging risks and opportunities
We continually monitor our external risk landscape using a mixture of key risk indicators, third
party reports, findings from internal and external assurance providers, and feedback from both
customers and suppliers. This information allows us to identify emerging risks and prepare
reasonable mitigations.
For any identified emerging risks, considered to be a threat to JM or its value chain, we tailor our
response to the size of the risk to ensure our mitigation strategy is proportionate. For example,
in 2022, we identified significant emerging risks in relation to geopolitical tensions, the
macroeconomic downturn and energy availability. We have chosen to include geopolitical
and macroeconomic events as a principal risk given our global presence and strategic plans
in various geographies including China and USA. This will also ensure we incorporate lessons
learned from ceasing operations in Russia.
Johnson Matthey | Annual Report and Accounts 2023
63
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Risk report continued
Principal risks and uncertainties
In the following section, we have outlined our principal risks and how we manage them.
We regularly review our risk landscape to best determine our principal risks and key
mitigating actions, while also assigning appropriate GLT sponsors to help us overcome our
biggest challenges and continue to meet our strategic ambitions. Our GLT sponsors evaluate
changes to their risks to better understand our exposure. When necessary, they order these
risks by importance and create targeted mitigation strategies.
Over the last year, we have continued to update our principal risks, clarifying associated
opportunities and priority actions:
• Three risks have been removed as principal risks – ‘Intellectual Property’ (IP), ‘Ethics and
Compliance’ and ‘Customer Contract Liability’. We consider the controls put in place over
the past year to be effectively mitigating the risks
• We have introduced two new principal risks: ‘A significant geopolitical or macroeconomic
event impacting JM’s operations’ and ‘Failure to deliver business value from strategic
capital projects’.
Principal Risks
The principal risks we face are listed alongside the measures we’ve taken to reduce them on
the following pages. These risks could materially harm our company’s operations, either alone
or in combination.
Each of our strategic principal risks, if handled effectively, carries a significant opportunity
to deliver above stakeholder expectations. Some of these opportunities have been identified
in the table in the following section.
d
e
s
a
e
r
c
n
I
/
e
g
n
a
h
c
o
N
d
e
c
u
d
e
R
w
e
N
1
Significant shift in
demand and / or
commoditisation of
sustainable technology
F
S
E
Strategic
5
A low-performing
culture undermines
our strategy
F
S
E
Operational
8
9
Disruption to
inbound goods or
services provided
Security of metal and
failure to manage
metal commitments
F
S
E
F
S
E
2
3
4
A significant geopolitical
or macroeconomic
event impacting JM’s
operations
Failure to deliver
business value from
strategic capital
projects
Development of
products that do not
meet the future
needs of customers
F
S
E
F
S
E
F
S
E
6
Unsuccessful delivery
of key business
transformation
programme(s)
F
S
E
10
11
Failure in one or
more of JM’s critical
operational assets
Business failure
through cyber-attack
or other IT incidents
F
S
E
F
S
E
7
A significant
work-related EHS
incident
F
S
E
Alignment to our strategy:
F
Focus
S
Simplify
E
Execute
64
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Risk report continued
Strategic risks and opportunities
To execute our strategy, we must be mindful of the risks that may undermine us, while ensuring we capture most of the opportunity they present.
1 Significant shift in demand and / or commoditisation of sustainable technology
Risk
JM’s strategy is focused on our ability to develop solutions
for sustainable chemicals, fuels and energy and catalysing
the net zero transition for our customers, pivoting away
from fossil fuel-based industries.
JM faces two main risks as part of the global transition to
a low-carbon economy:
• Risk that we fail to correctly anticipate climate-related
shifts in demand for our products (e.g. driven by
regulation, customer needs, societal expectations), as
well as the pace of commoditisation. These shifts could
impact both our existing products (e.g. in Clean Air) and
products which are expected to drive JM’s future growth
(e.g. in Hydrogen Technologies); there is a risk that
these shifts could be slower or faster than anticipated
• Risk that we fail to make the right decisions in response
to these shifts, mostly in terms of capital allocation
(e.g. R&D, capital expenditure).
Opportunity
If we correctly anticipate future
market shifts and respond adequately,
we can create value from the
transition to the low-carbon economy
through increased revenues
and profits.
Through our products and services we
have an opportunity to affect climate
change, nature and society.
Key mitigations
• We continue to monitor the changing market
environment (e.g. technology choices, pace
of commoditisation) and our customers’
requirements. Using this information and our
scenario-based approach, we can update our
strategic plans and actions where needed
• We keep investing in innovation to make sure
we have products that differentiate us in all our
markets, meeting our customers’ specific needs
when required
• For our maturing businesses, we have a plan
to reduce our cost base to improve efficiency and
cash flow
• For our growth businesses, we plan to invest in our
production assets and are working to mitigate the
risks associated with this (principal risk 3)
2 A significant geopolitical or macroeconomic event impacting JM’s operations
Risk
Due to the nature of JM’s global footprint, there is a risk that
we may face disruption in our operations, supply chain and
/ or customer markets due to geopolitical events. This
includes conflict, trade disputes, sanctions, pandemics,
macroeconomic events or financial crises in specific
countries or regions where we operate, or where parts
of our supply chains are located.
Opportunity
A properly mitigated risk may provide
some level of competitive advantage,
even in the event the risk fails to
become an issue – e.g. security of
supply for our customers, local
content and participation benefits.
Key mitigations
• Ongoing identification, monitoring, assessment
of and mitigation of key geopolitical risks
• Our strategic planning considers various aspects of
this risk when making future investment decisions
• We set up taskforces to deal with specific risks when
we identify them as a material risk
3 Failure to deliver business value from strategic capital projects
Risk
The success of our strategy, especially in growth areas,
depends on our ability to effectively prioritise and deliver
our strategic capital investment pipeline. There is a risk that
we will be unable to meet production capacity
expectations, breach budgeted costs or lose our competitive
position in markets.
Opportunity
Robust portfolio planning,
management and governance,
combined with enhanced competence
in capital project delivery, will provide
us with the platform we need to meet
the growth ambitions of our growing
businesses and deliver on our
wider strategy.
Delivering high-priority projects on
time, within budget and to
benchmarked costs will enable JM
to grow further and faster.
Key mitigations
• Continuously strengthening our central engineering
and project organisation and eliminating functional
competency gaps
• Enhanced portfolio management and project
frameworks, with business-wide compliance as key
value driver and a foundation of governance
• Transformed role and confirmed accountability
of sponsors for project value
• Established project teams with all key functions
represented
GLT sponsor: Liam Condon
Updates made to principal risk
Formerly ‘Strategic growth: business transition
to low-carbon economy’.
Risk re-titled to reflect the risk that we may not
have a viable business model in the face of
rapidly commoditising sustainable technologies,
posing a risk to some legacy products and
services that are designed for a declining market.
Risk reduced due to the achievements of some
strategic objectives, e.g. partnership with
Plug Power.
We have continued our investment in growth
platforms – particularly in Hydrogen
Technologies and Catalyst Technologies.
GLT sponsor: Christian Günther
Updates made to principal risk
New principal risk promoted in response
to heightened geopolitical tensions.
We completed a review of the countries key
to our operations and / or value chains with
respect to their geopolitical and macroeconomic
landscape, making adjustments to our strategy
where necessary.
GLT sponsor: Maurits van Tol
Updates made to principal risk
New principal risk added due to the high capital
investment being made, especially in high-
growth areas such as Hydrogen Technologies.
A transformation programme for Engineering
and Capital Projects has now been defined and
incorporated into our operating model.
Johnson Matthey | Annual Report and Accounts 2023
65
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Risk report continued
4 Development of products that do not meet the future needs of customers
Risk
There is a risk that we are unable to develop products that
are competitive enough to meet our market ambitions and
the needs of customers. This includes our ability to identify
and understand customer expectations, translating this into
effective R&D and developing our technologies into an
industrial production scale.
Opportunity
A strong product portfolio, effectively
designed in line with our customers’
future needs, will enable us to win
in our chosen markets for the years
to come.
Effective product development will
continue to improve our brand and
enable us to win in new markets as
they are identified.
Key mitigations
• We aim to maintain strong customer and partner
relationships, involving them in the development
process
• We leverage New Product Introduction (NPI)
and people processes from our mature businesses
to build capability in our growth businesses
• We continue to strongly invest in our R&D
capabilities
• OneJM strategy ensures a cross-business strategic
approach to markets
5 A low-performing culture undermines our strategy
Risk
A low-performing culture characterised by an insufficiently
engaged and inclusive workforce, lacking commitment to
taking accountability, keeping it simple and driving results
could impact on our ability to attract and retain key talent,
and therefore successfully execute our strategy.
Opportunity
A high-performance culture is
essential to executing our strategy,
delivering growth and being more
efficient. High-quality leaders can
build diverse, inclusive and engaged
teams in which everyone can deliver
better results.
6 Unsuccessful delivery of key business transformation programme
Risk
JM’s transformation is scoped to implement the strategy
ofcatalysing the net zero transition for our customers
in automotive, chemicals and energy. There are currently
more than 30 programmes, across group functions and the
four core businesses, driving business growth, people
growth and efficiency.
Failure to successfully deliver these programmes may delay
the expected benefits, disrupt services to customers or
trigger a loss of key talent.
Opportunity
Together the transformation
programmes will address capability
gaps and poor competitiveness in key
markets. Through the transformation,
JM will develop and strengthen its
capability for ongoing continuous
improvement, delivery of complex
projects and agility to respond
to future external trends.
Key mitigations
• We have implemented an ongoing campaign
across JM to create a clear understanding of our
people leadership expectations and their
importance in delivering our play to win strategy
• We have put in place a global digital platform –
Workday – to underpin standard HR processes and
to provide meaningful insights into our business
• We have relaunched our global employee
engagement survey, utilising Workday Peakon
technology, helping to ensure that everyone in our
company can share their views
• We regularly review how we work across the
business to find ways of working more simply and
efficiently
Key mitigations
• We have established a robust framework for the
planning and delivery of transformational change
projects, including stage gates to structure key
decisions
• The JM-wide transformation office provides
specialist support to programme teams, tracks
progress and ensures effective oversight by senior
leadership
• Third-line assurance is provided by JM’s Group
Assurance function, with a focus on the most
critical and sensitive programmes
GLT sponsor: Maurits van Tol and Anish Taneja
Updates made to principal risk
Formerly ‘Maintaining competitive advantage
of our products and operations’.
Improved business systems and processes
to enhance planning effectiveness
Simplification of product development
workstreams to improve focus
Introduction of Group Commercial Council to
better understand customer needs and develop
the JM value proposition
GLT sponsor: Annette Kelleher
Updates made to principal risk
Formerly ‘People, culture and leadership’.
Risk increased due to high levels of
organisational change.
Our new HR platform enables better talent
development and engagement.
We are improving our talent management
processes – particularly our approach to diversity
and inclusion – so that we’re creating the right
environment and capabilities to deliver the next
phase of our strategy.
During 2023/24 we will be implementing a new
approach to performance management.
We continue to prioritise our people’s health,
safety and wellbeing.
GLT sponsor: Christian Günther
Updates made to principal risk
Formerly ‘Business Transformation’.
The overall rating of this risk has not changed.
Over the past 12 months we have established
stronger programme and change management
capability. This will allow us to expand the scope
of changes and accelerate delivery.
66
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Risk report continued
Operational risks
Our day-to-day operations carry a level of risk that must be managed effectively to ensure that we are able to keep our people safe and meet our strategic goals.
7 A significant work-related EHS incident
Risk
If we fail to operate safely, we could injure people, incur significant
financial loss or breach applicable laws, which could have a negative
effect on our people, the environment or our reputation. This could also
mean we lose production time and attract negative interest from the
media and regulators, which could lead to fines and penalties.
Like other high-hazard manufacturing companies, our business
is controlled by a wide range of challenging health, safety and
environmental laws, standards and regulations, which are set
by governments and regulatory agencies around the world.
GLT sponsor: Mark Wilson
Key mitigations
• We have a strong health and safety culture across the
business. This is based on clear policies, guidelines and
standards, continual training and awareness activities
and audits
• We regularly review process safety hazards at relevant
sites by carrying out deep-dive safety audits
• We thoroughly investigate incidents or accidents to
identify their root cause and then develop plans to
remediate the problem
• We monitor our environmental risk, report on
environmental data associated with our sites and always
look for opportunities to improve
• We regularly review our regulatory and reputational risks
and put mitigation plans in place where we need to
Updates made to principal risk
Formerly ‘Environment, health and safety (EHS)‘.
Overall, JM’s EHS risk is considered to have reduced due to:
• Several actions from high-priority Process Hazard Reviews (PHRs)
and process safety audits have been completed
• Over 98% of actions from maximum credible event assessments
completed
• Ongoing asset replacement programmes
• Training of over 90% of operational staff in process safety has been
completed
• Divestment of the Health business, which had all its sites classified
as high process safety risk sites
Nevertheless, we continue to review any emerging EHS risks (especially
process safety) across all our businesses, which we are fully evaluating
and mitigating.
8 Disruption to inbound goods or services provided
Risk
Given the types of products and services we provide, there are only a few
suppliers that are approved to source certain important raw materials. If
there was a significant breakdown in our multi-tiered supply chains, how
we supply to customers’ demand would be affected or disrupted.
GLT sponsor: Anish Taneja
Updates made to principal risk
Formerly ‘Supply Failure’.
Risk increased, reflective of the challenging macro environment,
including potential supply issues due to second-tier supplier failure,
energy shortages and pricing fluctuations.
Following our refreshed JM strategy, we have better defined JM’s
procurement priorities for each of the businesses. Each business has
varying priorities. There are overarching common themes such as supply
resilience, where we want to aim for ‘resilience by design’ and prevent
bottlenecks, by building out our supply ecosystem.
Key mitigations
• We continually review our relationships with our
strategic and high-impact suppliers
• We are well connected in the market to anticipate
disruption and engage our businesses in proactive
scenario planning
• We carry strategic stocks of raw materials, including
PGMs, and regularly monitor those stock levels against
demand forecasts
• We regularly investigate alternative materials to use,
as part of our research and development work
• We complete due diligence when selecting our suppliers
to ensure they meet our expectations and all regulations
with regard to ethics and sustainability
• When designing our supply base, we consider agility
to ensure we are able to overcome geopolitical risks
– e.g. through local sourcing
Johnson Matthey | Annual Report and Accounts 2023
67
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Risk report continued
9 Security of metal and failure to manage metal commitments
Risk
JM uses significant quantities of high-value precious metals, which are
transported, stored and processed across our operations. We do not carry
significant exposure to price risk as we hedge all our metal transactions
centrally looking at overall group supply and demand.
Our PMM business ensures the group has sufficient metal to meet
business demands and manages our metal liquidity levels. There is a risk
that we do not have sufficient metal available. Therefore, we operate
within tight trading limits and defined liquidity levels to manage the
demand volatility. Metal price volatility affects how much our Trading
business earns. The precious metal industry globally is susceptible to
criminal activity resulting in the risk of theft, and we share those
challenges. Loss or theft due to a failure of the security management
systems associated with the protection of metal may result in financial
loss and / or a failure to satisfy our customers which could reduce our
customers’ confidence in JM and potential legal action. Failure to mitigate
this risk can have a significant impact on our working capital, financial
viability and/or undermine our ability to meet our customer
commitments.
10 Failure in one or more of JM’s critical operational assets
Risk
A critical asset failure may have a material effect on our supply chains,
performance, share value and reputation.
Our work on the effects of climate change means we understand that
more frequent extreme weather events and natural disasters may disrupt
our operations and increase our costs.
Key mitigations
• Long-term strategic planning around metal
requirements of the group is undertaken to ensure
appropriate positioning for the future
• We run a strong operational control environment within
our metal trading business
• We hedge the majority of our metal transactions
centrally through looking at the overall group supply
and demand, minimising our exposure to metal price
volatility
• We maintain a robust security management system
to protect our metal holdings
• We have appropriate insurance cover in place
GLT sponsor: Alastair Judge
Updates made to principal risk
Formerly ‘Managing our metal commitments’.
Due to increased crime within the global precious metal industry, the
overall rating of the risk is increasing.
We have continued to strengthen physical security and the operational
environment to ensure we have a proportionate control structure
to manage and optimise our metal holdings.
Furthermore, we have launched a metal finance academy to continue
strengthening appreciation and understanding of our metal risks across
the group.
Key mitigations
• We continue to monitor and prioritise critical spare parts
and capital expenditure for any ageing assets and
infrastructure
• The multi-year capital investment programme across
PGM Services continues to progress with focus on asset
renewal and replacement
• We continue to implement robust mitigation's at our
sites, including business impact assessments, business
continuity management plans, asset management
programmes and rigorous support systems for our
operational technology
• Group Assurance function reviews business continuity
planning (BCP) as part of the Site Extended Audits
GLT sponsor: Alastair Judge
Updates made to principal risk
Formerly ‘Asset failure’.
We assess this risk based on the high level of exposure faced by our PGMs
business. The nature of this business means it would suffer the greatest
potential effect of a critical asset failure.
A climate resilience site assessment has been completed at one of our
sites. The report is being reviewed and action plans are being formulated
to address the recommendations and the requirements of future
site assessments.
68
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Risk report continued
11 Business failure through cyber-attack or other IT incidents
Risk
A failure to adapt our Information Technology to changing business
requirements, the occurrence of significant disruption to our systems or
a major cyber security incident may adversely affect our financial position,
harm our reputation and could lead to regulatory penalties or non-
compliance with laws.
Key mitigations
• We continue to refresh and standardise our core systems
and applications on an ongoing basis to reduce reliance
on legacy systems
• We are delivering a programme of work to identify and
reduce risk in operational technology
• We provide regular cyber security training for employees
to raise awareness of cyber risks
Updates made to principal risk
We continue to adapt and respond to the increasingly complex and
heightened external threat landscape by enhancing cyber-security
technologies and processes to improve our ability to Predict, Prevent,
Detect, Respond and Recover to cyber risks, aligned to industry standards.
Dedicated IT projects have supported our divestment activities, helping
us to balance the value of the sale against transitional risks, including
the integrity and availability of data.
GLT sponsor: Stephen Oxley
Managing Intellectual
Property
In 2022/23 we removed ‘Intellectual
Property’ as a principal risk. This was due to
the implementation of mitigating actions
that reduced our risk exposure to a level the
GLT assessed to be satisfactory. Implemented
mitigating actions included:
Robust process for
product introduction that
ensures we capture our
own IP with
the appropriate
‘freedom to operate’
Improvement of our
trade secret management
process, allowing us
to monitor and protect
our trade secrets
across the globe
Launch of standardised
IP awareness e-learning
programmes across JM
for all employees and
new starters
As a result, our IP risks are now
managed on a ‘business as usual’ basis
and will only be escalated back to the
GLT if there is a material increase in our
risk exposure. This allows our senior
leaders to focus their resources on the
highest priority risks to JM.
Johnson Matthey | Annual Report and Accounts 2023
69
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Going concern and viability
Going concern
In adopting the going concern basis for preparing the accounts, the directors have considered
the business activities as set out in the Strategic report and Financial review, pages 1 to 72,
as well as the group’s principal risks and uncertainties, pages 62 to 69. As part of this
assessment, we have considered a base case and severe but plausible trading scenario.
Both scenarios showed sufficient headroom under our committed facilities and financial
covenants. The directors therefore believe that the group has adequate resources to fund
its operations for the period of 12 months following the date of this announcement, making
it appropriate to prepare the accounts on a going concern basis. Further details on going
concern, viability and facilities can be found in Note 1 on page 150 respectively of the
accounts.
Viability
We have assessed how viable we are as a business over a three-year period, in line with our
annual planning horizon. During the year, the Board carried out a robust assessment of the
principal and emerging risks affecting our business, particularly those that could threaten
our business model. The risks, and the actions taken to mitigate them, are described in the
Risk report on pages 62-69.
We assess our prospects through our annual strategic and business planning process.
This process includes a review of assumptions made including market, vehicle and production
outlooks, customer demand, underlying growth / cost assumptions, metal prices, key risks
and opportunities as well as an appraisal of our strategy and significant capital investment
decisions. The Group Chief Executive Officer and Chief Financial Officer lead these reviews,
along with the Chief Executives of each business.
The Board also reviews each sector’s strategy throughout the year, looking at our current
position and prospects for the coming years. This allows us to reaffirm our overall strategy
and reassess the risks that could impact its success.
We do not expect climate change risks to have a material near-term effect on our
forward-looking forecasts for going concern or viability. See scenarios opposite for more
details of our analysis.
Analysis through four stress scenarios
In making the viability assessment, we have analysed each of the principal risks facing the
group – as described in the Risk report on pages 64 to 69 – and identified the items within
each principal risk category that might significantly affect cash flow and viability. We have
then modelled these in four stress scenarios.
Scenario 1 – Maintaining competitive advantage of our products
and operations
This scenario considers the failure to maintain our competitive advantage in existing markets,
mostly because of poor execution of key initiatives or operations. It includes the effect of
a six- month delay to key capital projects, delays to deliver the transformation savings and
a temporary one-month shutdown of a refinery, which leads to higher working capital
and lower profits.
Scenario 2 – Geopolitical risks impacting JM’s operations
This scenario considers the increased risk presented by geopolitical risks, such as a one-year
slowdown in our operations in China, and increased inflation across the period.
Scenario 3 – Disruption to the platinum group metals value chain
This scenario considers the failure to source sufficient metal to manage and satisfy our
internal and external obligations. We modelled a shortage in the supply of metal, an increase
in individual metal prices to 12-month highs over the period April 2022 to March 2023 of our
key metals, and an increase in our metal holdings.
Scenario 4 – Other risks
This scenario includes the effect of all our other principal risks – outlined in the Risk report
on pages 64 to 69 where not already considered in the scenarios above. For each risk,
we have estimated a financial effect, which considers the impact and likelihood of the risk.
Given the wide range of risks we face, we have then applied an overall probability weighting
of 20% which allows us to work out the potential financial impact. We have also included
impacts of carbon pricing and a one-month temporary shutdown of a key site due to an
extreme weather event.
Conclusion
In evaluating our viability under each of these scenarios, we considered our current financing
arrangements, see page 150, and assumed we would not refinance any maturing debt –
although, in reality, we would expect to refinance our debts well ahead of maturity thereby
increasing headroom. Our stress testing shows that, under each of the scenarios described
above, we have ample headroom under our committed facilities and financial covenants.
As a final review, given the climate of greater political and economic certainty, we have also
undertaken a reverse stress test to identify what additional or alternative scenarios and
circumstances would threaten our financial covenants or headroom. This shows that we have
headroom against either a further decline in profitability of more than 40% in the financial
year to March 2024, well beyond the severe-but-plausible scenario, or a significant increase
in borrowings (net debt would need to more than double in the financial year to March
2024). In this unlikely scenario, we still have other mitigating actions available, including
reducing capital expenditure, renegotiating payment terms or reducing our dividend. Based
on this assessment, the directors have a reasonable expectation that the company and group
will be able to continue operating, and meet its liabilities as they fall due, making it
appropriate to prepare the accounts on a going concern basis.
70
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Non-financial and sustainability information statement
The table below outlines how we meet the non-financial reporting requirements set out in the Companies Act 2006. Our business model is set out on pages 8 and 9. Our purpose described
on page 4 and our sustainability strategy on pages 22 to 44 set out how we act as a responsible business. Our non-financial KPIs which support the delivery of our strategic priorities are shown
on pages 3 and 12. We have a range of different policies and standards in place to manage our principal risks, pages 62 to 69, which form part of our internal control framework.
A description of all matters relating to climate-related risks and opportunities, including the governance arrangements, scenario testing and metrics and targets, are included within the Task Force
on Climate-related Financial Disclosures on pages 45 to 52.
Reporting requirement
Environmental matters
Information necessary to understand our business,
policies and due diligence activities and outcomes
Our group policies that govern environmental matters support our commitment
to sustainability and help keep our people and the communities we serve safe.
Sustainability – see pages 22 - 44
Policies, guidance and standards which govern our approach.
Some of which are only published internally
Environment, Health and Safety Policy +
Procurement Policy
Supplier Code of Conduct
Employees
Human Rights
Social matters
Anti-bribery and
corruption
Task Force on Climate-related Financial Disclosures – see pages 45 - 54
Societal Value Committee report – see pages 88 - 89
At Johnson Matthey, we want our employees to feel safe, promote a culture of
inclusion and diversity, and build long-term fulfilling careers. Our HR, Ethics and
Compliance and EHS polices help support this.
Our people – see pages 33 - 34
Health and safety – see pages 33 - 34
Employee engagement – see page 35
Gender pay gap report – see page 37
Diversity – see pages 37 - 38
Speak Up – see page 41
We consider our entire value chain when looking at human rights, including
our own operations, suppliers and customers.
Suppliers – see page 39
Modern Slavery Statement – see page 39
Responsible sourcing – see pages 39 - 40
Ethical standards – see page 38 - 39
Speak Up – see page 41
Our Code of Ethics helps our people do the right things and helps us put into
practice the principles by which the group operates; it also provides a framework
for responsible business practices. We ensure that our suppliers are also held
to high standards and adhere to our Supplier Code of Conduct.
Our stakeholders – see pages 44 and 84
Ethical standards – see pages 38 - 39
Engaging with our communities – see page 42
Sustainability – see page 33
Our global policies support the group with compliance with various laws relating
to anti-bribery and corruption. We strive to act with openness, fairness and
honesty and expect our stakeholders to do the same.
Suppliers – see page 39
Our people – see pages 38 - 39
Ethical standards – see page 38
Code of Ethics
Employee Leave Policy
Diversity, Equality, Inclusion and Belonging Policy
Board Diversity Policy
Smart Working Policy
Substance Misuse Policy
Working Together Policy
Environment, Health and Safety Policy
Speak Up Policy
Code of Ethics
Modern Slavery Statement
Data Protection Policy and Employee Privacy Notice
Procurement Policy
Supplier Code of Conduct
Human Rights Policy
Speak Up Policy
Code of Ethics
Supplier Code of Conduct
Environmental, Health and Safety Policy
Anti-Bribery and Corruption Policy
Code of Ethics
Gifts Hospitality and Charitable Donations Policy
Supplier Code of Conduct
Conflicts of Interest Policy
Global Tax Policy
Johnson Matthey | Annual Report and Accounts 2023
71
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Section 172 statement
Our Section 172 statement comprises this section and pages 84 to 86 of the Governance report; it describes how the directors have had regard to stakeholders’ interests when discharging their
duties under Section 172 of the Companies Act 2006. The mechanisms used to engage with shareholders are described on page 84. You can also read more on how the Board considered each
matter during the year as follows:
Relevant disclosures
Page reference
s.172(1) considerations
The likely consequences of any decision in the long term
During the year, the directors focused on the execution of our strategy and strategic milestones to ensure
we are positioned to create long-term value for shareholders. This recognises the role we play in wider
society helping the transition to a greener economy.
Interests of employees
The directors recognise the importance of attracting, retaining and motivating high-performing
individuals. The directors consider the implications for our people where possible. They also seek to
ensure we remain committed to promoting a safe and inclusive working environment for all our people.
Fostering the company’s business relationships with suppliers, customers and others
Our relationship with customers, suppliers, governments and partners is essential to ensure the success
of our strategy and the long-term success of the Company. The board receives updates on engagement
across the group at meetings.
Impact of operations on the community and the environment
Sustainability is at the heart of our strategy, and the impact we have on the community and environment
is carefully considered by the Board. The Board closely monitors decisions relating to our sustainability
strategy through the Societal Value Committee.
Maintaining a reputation for high standards of business conduct
Our Code of Ethics, Supplier Code of Conduct and Modern Slavery Statement are reviewed regularly
by the Board. This ensures the high standards of conduct we expect are upheld by all levels of the
business. The Board monitors compliance with these through the internal control framework.
Our purpose
Business model
Our strategy
The drivers of our changing world
Financial review
Sustainability
Our people
Employee engagement
Diversity, inclusion and belonging
Speak Up
Culture
Financial review
Modern slavery statement
Business model
Sustainability
Human rights and ethical standards
Our purpose
The drives of our changing world
Sustainability
Task Force on Climate-related Disclosures
Societal Value Committee report
Our purpose
Speak Up
Human rights and ethical standards
Internal controls
Modern slavery statement
Ethics and compliance
The need to act fairly between members of the company
Following careful consideration of all relevant factors including the impact on our stakeholders, the
directors assess the course of action that enables the delivery of our strategy and the long-term success
of the company.
Stakeholder engagement
Board activities
Annual General Meeting
The Strategic report from pages 1 to 72 was approved by the Board on
25th May 2023 and is signed on its behalf by:
Liam Condon
Chief Executive Officer
72
4
8 - 9
12 - 13
6 - 7
53 - 54
22 to 44
33 - 38
35
35 - 36
41
35
53 - 54
38
8 - 9
22 - 44
38 - 39
4
6 - 7
22 - 44
45 - 52
88 - 89
4
42
38 - 39
100
39
38 - 39
84 - 86
82 - 83
130
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Governance
In this section
Compliance with the UK Corporate Governance Code
Chair’s introduction
Board at a glance
Board of directors
Our governance structure
Corporate governance report
Board activities
Stakeholder engagement
Board and committee effectiveness review
Societal Value Committee report
Nomination Committee report
Audit Committee report
Remuneration Committee report
Remuneration at a glance
Remuneration Policy
Annual Report on remuneration
Directors’ report
Responsibilities of directors
73
74
75
76
78
80
82
84
87
88
90
94
103
106
107
118
128
132
Fair, balanced and understandable
In accordance with the Code, the Board considers that, taken
as a whole, the 2022/23 Annual Report and Accounts is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess Johnson Matthey’s
position, performance, business model and strategy. The
Audit Committee assesses the process that management
uses to support the recommendation to the Board. More
details are on page 100.
Johnson Matthey | Annual Report and Accounts 2023
Compliance with the UK Corporate Governance Code 2018
During the year under review, we have applied all the principles and complied with all the provisions of the 2018 UK
Corporate Governance Code (the Code) except the following:
• provision 5 – engagement with the workforce: The Board has not engaged with the workforce using the
methods prescribed by the Code. Following our strategic review last year, global town halls were held across
the group to communicate our new strategy and business priorities. It was felt that this method of engagement
would be the most effective for this financial year to ensure that all colleagues had the opportunity to ask detailed
questions about the strategy, values and cultural ambition to the Group Leadership Team (GLT). We intend to
resume our engagement focus groups in certain countries where JM has a significant footprint during 2023/24.
These focus groups will be attended by a non-executive director
• provision 41– engagement with the workforce on alignment of executive pay with the wider company pay
policy: While we inform our employees of global changes to pay and benefits, we have not actively sought a
two-way dialogue over executive pay. We benchmark remuneration against our peers to ensure we offer
competitive pay and benefits, so we continue to attract and retain the highest-calibre candidates. During the
year, all employees were able to provide feedback on a range of matters, including remuneration, as part of our
annual employee engagement survey. Read more in our Remuneration Committee report on page 103.
The Code is publicly available on the Financial Reporting Council (FRC) website, frc.org.uk
How we apply the principles of the Code
Board leadership and company purpose
The role of the Board
Purpose and culture
Resources and controls
Stakeholder engagement
Workforce engagement
Division of responsibilities
Role of the Chair, non-executive directors and Company Secretary
Composition of the Board
Composition, succession and evaluation
Appointments to the Board and succession planning
Skills, experience and knowledge of the Board
Board evaluation
Audit, risk and internal control
Audit Committee report
Risk report
Remuneration
Remuneration Committee report
Pages 78, 82-83
Pages 35, 80
Pages 80, 100
Pages 72, 84-85
Page 80
Pages 78-79
Pages 76-77
Pages 90-92
Pages 75-77
Page 87
Pages 94-102
Pages 62-69
Pages 103-127
73
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Chair’s introduction
“The Board’s debate and challenge supports the delivery
of our strategy”
Governance highlights
• Assessed and approved a refreshed group strategy
• Monitored the transformation programme
• Appointed Barbara Jeremiah as an independent non-executive director
• Approved investments and strategic partnerships linked to our strategic milestones
• Reviewed previous strategic decisions and evaluated the learnings to further
improve governance processes
Following Liam Condon’s appointment as Chief Executive Officer in March 2022, the Board
began the year with several meetings focused on strategy. We discussed, challenged and
provided feedback on the strategic review, and our revised strategy was announced in May
2022. It followed a long and detailed process of reviewing our strengths, the markets in which
we operate, and getting feedback from our investors, customers and employees. Since then,
the Board has overseen the implementation and delivery of our strategy, which is underpinned
by our transformation programme. As we move to a faster-paced, more customer-focused
culture, we have approved key strategic partnerships, and won business and large-scale projects,
delivering against our promises for each of our businesses to accelerate our growth and drive
value creation.
Sustainability is an integral part of Johnson Matthey and embedded into our strategy. We are committed
to achieving net zero by 2040, and our progress against the 2030 targets (set out on page 24) is closely
monitored by the Societal Value Committee. We are on track for a reduction in scope 1+2 CO2e (carbon
dioxide equivalent) emissions from a 2019/20 baseline. And through our products, we have continued
to helped our customers reduce CO2e emissions.
More information about our Societal Value Committee’s work is on page 88
The Audit Committee assessed JM’s readiness to implement recommendations from the
Department for Business, Energy and Industrial Strategy (BEIS) white paper on restoring trust in
audit and corporate governance. This included reviewing our climate-related assurance processes
and the creation of our sustainability assurance framework.
More information about our Audit Committee’s work is on page 94
During the year, we have continued to focus on succession planning, and the Nomination
Committee undertook a search for a new non-executive director. We look forward to welcoming
Barbara Jeremiah to the Board in July 2023. Barbara’s appointment will further enhance our
Board’s skills and experience, and she will also take on the role of Senior Independent Director.
Further information on the changes to the Board members’ roles and responsibilities can be
found in the Nomination Committee report on page 90.
The Board understands the importance of diversity and inclusivity, and the innovative thinking and
challenge it brings to the boardroom. I am pleased to report that plans are in place for the Board’s
composition to meet the ambitions set out in the FTSE Women Leaders Review for listed companies
to have at least 40% of female representation on the board with at least one of the senior board
positions (chair, chief executive officer, senior independent director or chief financial officer)
to be held by a woman by the end of 2025.
Read more about the Board’s composition and Board diversity policy on page 93
We have spent much of our time discussing the future of Johnson Matthey, our strategy, current
performance and the plans in place to catalyse the net zero transition. We have supported and
challenged senior leadership to ensure the continued acceleration of our transformation programme.
We have also reviewed some of our previous strategic decisions and evaluated the learnings from these
processes to continuously improve and challenge management in a robust and constructive way. As a
result of these discussions, there are several actions we will be taking to improve the Board’s governance
processes. In addition, the Board reviewed some of the wider governance processes to ensure they
supported our fast-paced cultural ambition. As part of that review, we approved a simplified delegation
of authority framework.
I am pleased to report that this year’s board effectiveness review confirmed that we continue to
operate effectively and have made good progress against the actions recommended in last year’s
review. In accordance with the Code, the next review will be externally facilitated.
Read more about our strategy and progress against our milestones on pages 12 and 13
Read more about the Board’s activities during the year on pages 82 and 83
Read more about our board effectiveness review on page 87
Patrick Thomas
Chair
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Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Board at a glance
as at 31st March 2023
Board and committee attendance
Board composition
Board attendance
Patrick Thomas1
Liam Condon
Stephen Oxley
Rita Forst2
Jane Griffiths
John O’Higgins
Xiaozhi Liu3
Chris Mottershead4
Doug Webb
Board
9/9
9/9
9/9
8/9
9/9
9/9
9/9
8/9
9/9
Societal Value
Committee
5/5
5/5
5/5
5/5
5/5
5/5
5/5
4/5
5/5
Nomination
Committee
7/7
–
–
6/7
7/7
7/7
7/7
6/7
7/7
Audit
Committee
–
–
–
5/6
6/6
6/6
6/6
5/6
6/6
Remuneration
Committee
7/8
–
–
8/8
8/8
8/8
7/8
7/8
8/8
1. Patrick Thomas was unable to attend one committee meeting due to unforeseen travel issues
2. Rita Forst was unable to attend one board meeting, two committee meetings and part of another board meeting due to serious illness
3. Xiaozhi Liu was unable to attend part of one board meeting and one committee meeting due to short-notice scheduling changes
4. Chris Mottershead was unable to attend one board meeting and four committee meetings due to serious illness
Non-executive director industry leadership
and experience
Patrick
Thomas
Rita
Forst
Jane
Griffiths
John
O’Higgins
Xiaozhi
Liu
Chris
Mottershead
Doug
Webb
Automotive
Chemicals
Energy
Oil and gas
Pharmaceuticals
Manufacturing
Professional services
Technology
Sustainability
Johnson Matthey | Annual Report and Accounts 2023
Gender diversity
Female directors: three
Male directors: six
Chair and non-executive director tenure
0-3 years: one
4-6 years: five
7-9 years: one
Role
Chair: one
Executive: two
Non-executive: six
Nationality
British: five
Irish: two
German: two
33%
67%
14%
72%
14%
11%
22%
67%
56%
22%
22%
75
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Board of Directors
Patrick Thomas
Chair
Liam Condon
Chief Executive Officer
Stephen Oxley
Chief Financial Officer
Rita Forst
Independent Non-Executive
Director
Jane Griffiths
Independent Non-Executive
Director
S N R
S
S
S N A R
S N A R
Appointed to the Board: June 2018
Appointed to the Board: March 2022
Appointed to the Board: April 2021
Appointed to the Board: October 2021
Appointed to the Board: January 2017
Skills and experience
Liam was previously a member of the Board
of Management of Bayer AG and President
of the Crop Science Division, a role he held
for nine years. He has also served in senior
roles at Schering AG and Bayer HealthCare.
Contribution
Liam is a dynamic and values-driven leader,
with an impressive track record of leading
science-based businesses while delivering
consistent high-quality performance.
He balances commercial ability with
a strong strategic perspective. He has
a proven track record of driving growth
and modernising organisations.
Skills and experience
Stephen joined from KPMG, where he was
a partner. He is experienced in both audit
and advisory roles for large, complex
international companies across a variety of
sectors including FMCG, healthcare, natural
resources and industrials. Stephen is a
chartered accountant.
Contribution
Stephen brings operational and technical
understanding of Johnson Matthey
and significant experience working
with companies going through major
change programmes.
External appointments
Non-Executive Member of the Audit
and Risk Assurance Committee for the
Sovereign Grant and Trustee of Care
International UK.
Skills and experience
Between 2015 and May 2018, Patrick
was Chief Executive Officer and Chair of
the Board of Management at Covestro AG.
Between 2007 and 2015, he was Chief
Executive Officer of its predecessor, Bayer
MaterialScience, before its demerger
from Bayer AG. He is a fellow of the Royal
Academy of Engineering.
Contribution
Patrick has deep experience of leading
international speciality chemical businesses.
He also has a track record in driving growth
through science and innovation across global
markets, with a strong focus on sustainability.
External appointments
Non-Executive Director at AkzoNobel
and member of Covestro AG’s
Supervisory Board.
Board committees
Societal Value Committee member
R
Remuneration Committee member
Nomination Committee member
Committee Chair
Audit Committee member
S
N
A
76
Skills and experience
Jane held various roles at Johnson
& Johnson (J&J) from 1982 until her
retirement in 2019, with experience
in international and affiliate strategic
marketing, sales management, product
management, general management
and clinical research. Most recently, she
was Global Head of Actelion, a Janssen
pharmaceutical subsidiary of J&J.
Contribution
Jane has significant experience and
understanding of global strategy
management across a variety of markets,
and a strong interest in sustainability
and diversity.
External appointments
Chair of Redx Pharma Plc, Non-Executive
Director and Sustainability Committee
Chair of BAE Systems plc.
Skills and experience
Rita has spent more than 35 years at the
Opel European division of General Motors
in senior engineering, product
development and management positions,
including Vice President, Engineering,
forGeneral Motors Europe. She was also a
member of Opel’s Management Board from
2010 to 2012. Rita was responsible for the
development of new generations of engines
and car models for Opel and General
Motors, as well as European research
and development activities.
Contribution
Rita has a deep understanding of the
automotive and powertrain sectors.
Her extensive knowledge includes research
and development of conventional and
alternative powertrains, as well as future
vehicle technologies.
External appointments
Non-Executive Director of Westport Fuel
Systems Inc and member of Technology
and Product Strategy Committee,
Non-Executive Director of AerCap Holdings
N.V. and member of ESG Committee and
Portfolio Management Committee,
Member of the Supervisory Board of
NORMA Group SE and Chair of Group
Strategy Committee, and Member
of the Advisory Board of iwis SE & Co.KG.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Board of Directors continued
John O’Higgins
Senior Independent Director
Xiaozhi Liu
Independent Non-Executive
Director
Chris Mottershead
Independent Non-Executive
Director
Doug Webb
Independent Non-Executive
Director
Nick Cooper
General Counsel and
Company Secretary
S N A R
S N A R
S N A R
S N A R
Appointed to the Board: November 2017
Appointed to the Board: April 2019
Appointed to the Board: January 2015
Appointed to the Board: September 2019
Skills and experience
John was Chief Executive of Spectris plc
from January 2006 to September 2018,
leading the business through a period of
significant transformation. He previously
worked for Honeywell as President of
Automation and Control Solutions, Asia
Pacific, and in other management roles.
From 2010 to 2015, John was a Non-
Executive Director at Exide Technologies
Inc, a battery technology supplier to
automotive and industrial users. He began
his career as a design engineer at
Daimler-Benz in Stuttgart.
Contribution
John has extensive business and industrial
experience, as well as a track record of
portfolio analysis and realignment,
driving growth and improving
operational efficiencies.
External appointments
Chair of Elementis plc, Non-Executive
Director of Oxford Nanopore Technologies
Plc, member of the Supervisory Board of
ENVEA Global SA and Trustee of the
Wincott Foundation.
Skills and experience
Xiaozhi is the founder and Chief Executive
of ASL Automobile Science & Technology,
a position she has held since 2009. She
was previously a senior executive in several
automotive companies, including Chair and
Chief Executive of General Motors Taiwan.
Contribution
Xiaozhi has deep knowledge and
perspective on sustainable and technology-
driven businesses, and strong experience
of the global automotive sector, particularly
in China, as well as Europe and the US.
External appointments
Chief Executive of ASL Automobile Science
& Technology, Non-Executive Director
of Autoliv Inc and InBev SA/NV.
Skills and experience
Chris held roles at King’s College London
until his retirement in 2021, including
Senior Vice President of Quality, Strategy
and Innovation, and Director of King’s
College London Business Limited. Before
this, Chris had a 30-year career at BP,
including as Global Advisor on Energy
Security and Climate Change. He was also
Technology Vice President for BP’s Global
Gas, Power and Renewables businesses.
He is a chartered engineer and fellow
of the Royal Society of Arts.
Contribution
Chris has a wealth of industrial and
academic knowledge, as well as experience
in energy technology and related global
sustainability issues. As Chair of the
Remuneration Committee, Chris is
a sounding board for JM’s HR function.
External appointments
Member of the Audit Committee
of the Crick Institute.
Skills and experience
Doug was Chief Financial Officer at Meggitt
plc from 2013 to 2018, and was previously
Chief Financial Officer at London Stock
Exchange Group plc and QinetiQ Group plc.
Before that, he held senior finance roles at
Logica plc. Doug began his career in Price
Waterhouse’s audit and business advisory
team. He is a fellow of the Institute
of Chartered Accountants in England
and Wales.
Contribution
Doug has a strong background in corporate
financial management and a deep
understanding of the technology and
engineering sectors. Doug chaired the
Audit Committee at SEGRO plc for nine
years until April 2019, making him ideally
suited to chairing our Audit Committee
and acting as its financial expert.
External appointments
Non-Executive Director, Audit Committee
Chair and Treasury Committee Chair
of United Utilities Group PLC and Senior
Independent Director of BMT Group Ltd.
Appointed as General Counsel and
Company Secretary: June 2020
Skills and experience
Nick has strong experience
working across a diverse range
of sectors. After qualifying
as a solicitor, he worked in
general counsel and company
secretarial roles across the retail,
software, hospitality and
telecommunications sectors.
More recently, as Corporate
Services Director of Cable &
Wireless, he led the migration
of its central operations from
London to the US.
Contribution
Nick’s wide knowledge of
corporate law, governance and
operational experience means
he is ideally placed to support
the Board.
External appointments
Non-Executive Director of
Springfield Properties PLC,
Director of Veranova Parent
Holdco, L.P.*
*
JM holds 30% of the share capital
of this company
Johnson Matthey | Annual Report and Accounts 2023
77
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Our governance structure
Our board of directors
At the date of this report, the Board comprises nine directors: the Chair, two executive
directors, the Senior Independent Director and five independent non-executive directors.
The Board is responsible for our long-term success. It provides leadership, direction and
monitors Johnson Matthey’s culture and values. The Board also sets our strategy and oversees its
implementation, ensuring we are managing risks appropriately and acting in the interests
of our stakeholders. The responsibilities we do not delegate as a board are included in the
matters reserved for the Board in our Governance Framework.
Read JM’s Governance Framework on our website, matthey.com/governance-framework
Board composition and roles
Our non-executive directors are determined to be independent by the Board, in accordance with the Code’s criteria. The Board members’ respective skills, experience and knowledge enable them
to discharge their respective duties and responsibilities effectively. Further details can be found on pages 75-77.The Chair was considered independent on appointment.
Board role
Chair
Patrick Thomas
Independent
Non-Executive Directors
Rita Forst, Jane Griffiths,
Xiaozhi Liu, Chris Mottershead
and Doug Webb
Key responsibilities
• Leads the Board
• Ensures an effective Board, including welcoming contributions
and challenges from directors
• Maintains regular and effective shareholder communications
so that the Board has a clear understanding of their views
• Chairs the Nomination Committee, initiating change and
succession planning for the Board and senior management
• Promotes high standards of integrity, probity and corporate
governance throughout JM
• Constructively challenge the executive directors
• Scrutinise management’s performance
• Provide independent advice on strategy proposals
• Satisfy themselves on the integrity of financial information and on
the effectiveness of financial controls and risk management systems
• Determine appropriate executive director remuneration
Senior Independent Director
John O’Higgins
• Provides a sounding board for the Chair
• Acts, if necessary, as a focal point and intermediary for the
other directors
• Ensures any key issues not being addressed by the Chair or senior
management are acted upon
• Is available to shareholders should they have concerns
• Leads the annual appraisal of the Chair’s performance
Chief Executive Officer
Liam Condon
• Day-to-day responsibility for running the group’s operations
• Recommends and implements group strategy
• Applies group policies
• Promotes JM’s culture and standards
Chief Financial Officer
Stephen Oxley
General Counsel and
Company Secretary
Nick Cooper
78
• Has day-to-day responsibility for managing the finance, IT,
• Leads the group’s finance activities, risks and controls
security and real estate functions
• Together with the Chair, keeps the effectiveness of the company’s
• Provides advice on corporate governance matters
and the Board’s governance processes under review
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Our governance structure continued
Our board committees
All independent non-executive directors are members of the principal board committees.
The Chair is a member of the Remuneration Committee and the Societal Value Committee,
and he also chairs the Nomination Committee.
The number of board and committee meetings held during the financial year is included
on page 75. The Board keeps the number of meetings under review to ensure that
non-executive directors have sufficient time to discharge their duties.
Governance Framework: matthey.com/governance-framework
Audit Committee
Nomination Committee
Remuneration Committee
Societal Value Committee
Read more on pages – 94-102
Read more on pages – 90-93
Read more on pages – 103-127
Read more on pages – 88-89
Other committees
The Board has delegated specific responsibilities to the Disclosure Committee and the Ethics Panel.
These committees comprise executive directors or GLT members and relevant senior management.
Disclosure Committee
Identifies and controls inside information. Determines how or when that information is
disclosed, in accordance with applicable legal and regulatory requirements.
Ethics Panel
Oversees concerns raised relating to our Speak Up process and ensures the effective review
and investigation of these concerns.
Group Leadership Team
The Board delegates responsibility for implementing operational decisions and for the day-to-day management of the business to the Chief Executive Officer, who is supported by the GLT.
Our Delegation of Authorities Framework sets out levels of authority for decision-making throughout the group.
Details of GLT members and their relevant experience are on our website: matthey.com/GLT
Johnson Matthey | Annual Report and Accounts 2023
79
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Corporate governance report
Purpose and culture
Our purpose, culture and vision are underpinned by our values
The Board monitors culture using a range of metrics, including our global employee
engagement survey, customer satisfaction scores, customer behaviour statistics, health and
safety reports, financial results, internal audit reports and progress against our key
transformation project milestones. Our Speak Up process is our formal channel for employees
to raise concerns. Any material issues or key themes arising from Speak Ups are discussed
by the Ethics Panel and Societal Value Committee and escalated to the Board as appropriate.
As part of the strategic review, the Board set new cultural priorities aligned to our purpose
and values, to drive a simpler, higher-performing and more commercial organisation.
During the year, we continued to transform our culture with a focus on efficiency, high
performance and commercialism. These new cultural priorities also helped us review some
of our own governance practices, to ensure they enabled these behavioural changes and
supported the delivery of our strategy.
Our Chief Executive Officer continues to focus on the key themes of people, culture and
commercial performance in his board reports throughout the year. This provides us with
a valuable insight into the day-to-day operations and the cultural context in which our
colleagues work. All our board directors go on site visits to engage with colleagues
at all levels of the business and gain a better understanding of the culture at our sites.
Read more about how our purpose and culture impacts our decisions on pages 82-83
Catalysing the net zero transition
Focus
Our culture
Simplify
Execute
Our values
Protecting people and the planet
Acting with integrity
Innovating and improving
Working together
Owning what we do
Our board committees play an important role in monitoring our culture
The Societal Value Committee ensures we are
a truly inclusive organisation with a diverse
workforce. It monitors any key themes
and issues arising from our Speak Up process
The Audit Committee has oversight of
internal controls that safeguard our culture
See pages 94-102
See pages 88-89
The Nomination Committee makes sure
succession planning supports our culture
and promotes diversity
See pages 90-93
The Remuneration Committee steers the
group’s approach to reward and benefits
to ensure it promotes our culture and
long-term success
See pages 103-127
Employee engagement
We are committed to engaging with employees to better understand the issues, challenges
and opportunities across the group. In 2022, the Board focused on reviewing our strategy
and considered employee feedback from The Big Listen. This employee survey was designed
to uncover strengths and barriers to our success from the bottom up. Since The Big Listen,
employee engagement has continued to be led by management, as we communicated our
refreshed strategy. Town halls and team sessions took place at all levels across the group
to share our vision, play to win behaviours and provide progress updates on the execution
of our strategy. This was an essential part of ensuring our people had the chance to discuss
and question management to better understand their role in delivering our ambitions.
The town halls also provided a platform to communicate the cultural and behavioural
changes that are vital for the successful delivery of our strategy.
Each year the Board conducts site visits to see operations first hand, meet colleagues and
develop a better understanding of the culture. During the Board’s visit to our Technology
Centre in Sonning in September 2022, the directors met with employees informally over
lunch, providing an opportunity for open discussion and the chance for directors to hear
the views of our colleagues without having structured topics of discussion.
As described on page 73, this is an area where the Board has not complied with the Code.
It was felt that following the strategic review, direct engagement between management and
our employees was paramount to ensure the new cultural ambition and strategy was well
understood. The Board had previously considered employee engagement methods specified
by the Code and felt that our global and diverse employee network required a different
approach. We established engagement focus groups in countries where we have a significant
footprint, each led by a board member. Following the communication of our strategy, the
Board intends to re-establish simplified groups for 2023/24 to obtain a greater insight into
the views of our employees. The directors will report back to the Board on the key messages
they have heard from their engagement focus group and any actions arising will be
monitored through the year by regular reports.
80
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Corporate governance report continued
Induction and training
All new directors receive comprehensive and tailored inductions during their first year at JM
to gain a deeper understanding of how we work. Induction plans are adapted to support
each director in meeting their statutory duties. Through the plan, directors develop a deep
understanding of our strategic priorities, as well as an insight into our purpose, values
and culture.
Following their induction, each director receives regular briefings from external advisers
or teach-ins on items of strategic importance as part of regular board training. In September
2022, as part of continuous development, the Board received a schedule of teach-ins, which
were delivered by subject matter experts from across the group. These covered Hydrogen
Technologies, PGM chemistry and applications, renewables and electrochemical
transformations, Clean Air (specifically, ammonia cracking, hydrogen ICE and methane
abatement), digitalisation of R&D, and metals. This provided the Board with insights into
the business and an opportunity to ask questions of the wider workforce about the detailed
areas in which they work.
During the year, external legal advisors also provided an update on the UK Market Abuse
Regulation. All board members receive regular training on climate-related issues through the
Societal Value Committee, where external specialists are invited to present at each meeting.
The auditors also presented regulatory updates to the Audit Committee, including the key
changes for the next financial year.
Throughout each year, all directors receive information on mandatory training topics, including
on health and safety, information security and ethics and compliance matters. Legal and
governance updates are regularly provided by the General Counsel and Company Secretary.
The skills and experience of our board members are regularly assessed to ensure they
continue to be well placed to provide insight on our purpose and strategy. This, alongside
the annual board effectiveness review, informs our training agenda for the year.
• Introduction to key management personnel
• Detailed strategic review
• Sector deep dives
• Detailed strategic review
g
Induction trai n i n
Director
training
Regular in
t
e
r
n
a
l
t
r
a
i
n
i
n
g
• Mandatory training to ensure the directors
have a clear understanding of our
internal processes
• Identify areas of improvement for future
board training
• External experts provide training on relevant
topics to enhance technical knowledge
B
o
a
r
d
s
k
ill
s a
ss
essment
x t e r n al training
E
Johnson Matthey | Annual Report and Accounts 2023
81
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Board activities
Our annual agenda plan reflects our strategy and gives us sufficient time to discuss and develop strategic proposals and monitor board performance. Below, we have set out some of the matters we
considered during the year, different stakeholder groups central to those decisions, as well as the outcomes. Our Stakeholder engagement on pages 84 to 86 (including our Section 172 statement
on page 72), illustrates how the Board considers stakeholder views and the outcome of those considerations.
Read more about our strategy on pages 12 and 13 and risk on pages 62 to 69
Strategy and
execution
Matters considered
Stakeholders considered
Strategic discussions included:
• Review of a refreshed strategy
• Delivery of our transformation
programme
• Investments and strategic
partnerships
• Reviews by business Chief
Executives
• Customers and strategic
partners
• Employees
• Investors
• Suppliers
• Society
• Communities
How the Board received
stakeholder feedback
• Chief Executive Officer
updates
• Business updates
• M&A updates
• Strategy and
transformation updates
Scrutinised and monitored financial
data and performance, including:
• Trading and performance
• Full-year and half-year results
• Going concern and viability
statements
• Dividend payments
• Annual Report including
reporting against the Task Force
on Climate-related Financial
Disclosure (TCFD) requirements
We received regular updates from
the Chief Executive Officer on:
• Group operations
• Capital project execution
• Environmental, Health and Safety
(EHS) performance
• Business continuity and ongoing
site management
• Supply chain management
• Customers and strategic
partners
• Employees
• Investors
• Suppliers
• Chief Financial Officer
updates
• PGM reports
• Regular broker reports
• Investor perception study
• Feedback following
full-year and half-year
results presentations
• Customers and strategic
partners
• Employees
• Investors
• Suppliers
• Society
• Communities
• Procurement update
• Payment practices
reporting
• EHS updates
• Modern Slavery Statement
• Conflict Minerals Disclosure
Financial
oversight
Operational
management
82
Outcomes
Links to risk
• Adopted a refreshed strategy, which
was presented to the market in May
2022 and agreed a new cultural
ambition to support the successful
delivery of the strategy
• Monitored the progress of the
transformation programme
• Reviewed each business’s strategic
update assessing the market, risks
and opportunities
• Agreed a strategic partnership with
Plug Power and investment in a new
US facility
• Approved the investment in 3CR
• Approved several smaller investments
that help deliver against our
strategic milestones
• Reviewed in detail the group’s financial
position, including working capital
and net debt
• Agreed the budget for 2023/24 and our
three-year plan
• Assessed the proposed dividend payment
• Approved the going concern and viability
statements
• Reviewed and approved the full-year
and half-year results and annual report
and accounts
• Challenged group operations, including
capital projects, procurement, security,
EHS, IT and supply chain management
• Discussed process safety and instructed
an independent audit
1 2 3 4 5 6 10
3 6 8 9
2 3 5 6 7 8
9 10
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Board activities continued
Governance
Matters considered
Stakeholders considered
Governance is at the heart of the
board agenda, including
consideration of:
• Stakeholder engagement
mechanisms
• Board effectiveness
• Our Governance Framework
• Our Delegation of Authority
Framework
• Policies and processes
• Customers and strategic
partners
• Employees
• Investors
• Suppliers
• Society
• Communities
How the Board received
stakeholder feedback
• Attendance and
engagement at the AGM
• Investor perception survey
• Feedback following
meetings and direct
engagement with investors
• Review material news or
regulatory announcements
through the Disclosure
Committee
People and
culture
The Board focused on:
• Our people strategy and
• Employees
• Communities
culture
• Diversity, inclusion and
belonging
• Employee engagement
surveys
• Insights gained from
site visits
• Annual talent review by the
Nomination Committee
• People strategy and culture
updates from the Chief
Executive Officer and Chief
HR Officer
• Results and feedback
from our internal
engagement surveys
Outcomes
• Progressed the actions from the last
year’s internally facilitated board
effectiveness review and conducted
another internal board
effectiveness review
• Reviewed the investor perception study
and associated actions
• Implemented changes to improve the
Governance Framework and simplified
committees at GLT level
• Approved changes to simplify the
Delegation of Authority Framework
• Approved updates to policies to ensure
alignment with best practice
• Reviewed the feedback from employee
engagement surveys and agreed an
action plan
• Reviewed progress on changing
behaviours to support our cultural
ambition through the transformation
programme updates
Links to risk
5 6 10
5 6 7 9 10
Risk
The Board reviewed the group’s
approach to risk management
and completed deep dives of
principal risks
• Customers and strategic
• Board reports on the
• Considered any emerging risks as a result
partners
• Employees
• Investors
• Suppliers
• Society
full-year and half-year risk
reviews
• Deep dive reports into
certain principal risks
and areas of emerging risks
of the external environment
• Reviewed each principal risk to ensure
they remained appropriate
• Approved the risk appetite for each
principal risk
• Reviewed mitigating activities
1 2 3 4 5 6 7
8 9 10
Key to principal risks
1
2
3
4
6
Significant shift in demand and / or commoditisation of sustainable technology
A significant geopolitical or macroeconomic event impacting JM's operations
Failure to deliver business value from strategic capital projects
Development of products that do not meet the future needs of customers
Unsuccessful delivery of key business transformation programme
7
8
9
10
A significant work-related EHS incident
Disruption to inbound goods or services provided
Security of metal and failure to manage metal commitments
Failure in one or more of JM’s critical operational assets
Johnson Matthey | Annual Report and Accounts 2023
83
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Stakeholder engagement
We are focused on driving long-term sustainable success for the benefit of our stakeholders. This section provides an insight into how we as a board engage with our stakeholders to understand
what matters to them. Examples of some of the principal decisions taken by the Board during the year and the stakeholder views and inputs considered as part of these decisions are on
pages 84 to 86.
How we engage at board level
How we engage across the company
How we engage at board level
How we engage across the company
Customers and strategic partners
Society
• Customer relationships are discussed at every
board meeting
• Customer satisfaction surveys
• Tracking customer perceptions against
• Several key strategic partnerships were
key indicators
approved by the Board during the year, and
the Board assesses potential partnerships
against our strategic ambitions and milestones
• Engaging customers in the development
process of new products
• Ensure the delivery of our strategy, which
addresses key societal issues
• Through the Societal Value Committee review
the progress towards our sustainability targets
• Play an active role in global associations,
including a leading role as UK Hydrogen
Champion, an independent advisory role to the
government
Investors
• Regular investor updates are presented
at board meetings, including the results
of an investor perception study
• Investors have the chance to ask directors
questions at the AGM
• The Board approves trading statements, full-
and half-year results and the Annual Report
and accounts
• The Chair, Chief Executive Officer and Chief
Financial Officer have regular engagement
with major shareholders
• The Remuneration Committee Chair engages
directly on remuneration matters and changes
of policy
• The SID and Committee Chairs are available
to meet with investors
Employees
Communities
• Regular dialogue with shareholders to support
• The Societal Value Committee receives reports
them in their investments
• Investor roadshows
• Roundtable teach-ins
on ESG and actions to support our
communities
• Employee volunteering
• Match funding for employee donations
to certain charitable causes. In 2022/23 JM
matched charitable donations made to the
Disaster Emergency Committee following
the Turkish and Syrian earthquake disaster
• Company donations to support communities
in the regions that we operate in
Suppliers
• Review the results of the employee
• Regular internal communications and
• Review payment practices reporting and areas
• Continually review relationships with our
engagement surveys
town halls
• Employee engagement survey
• Policies, processes, and events to keep our
people safe and promote a culture of diversity,
inclusivity and belonging
• Annual JM Awards
• Monitor culture and the impact of the
transformation programme on our people
• Regular visits to JM sites to meet colleagues
• Review process safety and EHS processes
to ensure they keep our people safe
• The Nomination Committee receive talent
and succession updates
• The Societal Value Committee review matters
raised through our independent Speak Up process
• The Remuneration Committee sets the reward
and benefits framework
84
of improvement
• Review and approve the Modern Slavery
Statement
• Promote an ethical culture
strategic and high-impact suppliers
• Policies and processes to ensure an ethical
supply chain, including the Global Human
Rights Policy and Conflict Minerals and
Cobalt Policy
• Annual Ethics Week to raise awareness
of the importance of our suppliers
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Stakeholder engagement continued
Stakeholder engagement in action
Stakeholder engagement is vital to building a sustainable business. The Board recognises
the need to foster positive business relationships with suppliers, customers and governments.
This section provides more details on how the directors have fulfilled their duties.
The matters we consider differ in relevance for each stakeholder, and sometimes stakeholders
may have conflicting interests. We aim to consider the key issues relevant to each stakeholder
group, and our decisions will ultimately promote the group’s long-term success and support
our vision, purpose and strategy. In making decisions, we consider the interests of
stakeholders across the company – not just at board level.
1
2
Transforming the way we operate
Our transformation programme is driving greater efficiency and cost savings through simplifying and
modernising the way we work. Following the strategic review, our focus has been structured around key pillars,
including external milestones, culture, efficiency and growth. The Board receives updates on transformational
workstreams associated with each of these pillars at every meeting. This allows the Board to maintain effective
oversight and an opportunity to assess the impact on our different stakeholders.
Safeguarding our people and our operations
As part of the Board’s deep dives, we reviewed process safety across the group. Process safety relates to the risk
of major accidents during processing of hazardous chemicals or substances. Such accidents, typically fires,
explosions and toxic releases, have the potential to cause severe harm to people and the environment, both
on and off-site. Several actions were identified in the review and an independent third party was engaged
to undertake an audit of the process safety management programme and major risk priorities.
Stakeholder considerations
Our people: We understand the impact that transformation can have on our people and that driving cultural
and behavioural changes takes time. We listened to our people through our employee engagement surveys.
These helped shape our discussions during our strategic review last year. As a board we have reviewed our
own governance processes and approved a simplified delegation of authority and changes to the Governance
Framework, which reduced the number of GLT sub-committees.
Investors: Through our transformation programme updates, we closely monitor performance against external
milestones. This allows us to challenge management and demand greater accountability, ensuring the effective
delivery of our strategy for our investors and wider stakeholders. Our transformation programme will accelerate
our growth, drive efficiencies and cost savings across the group, ultimately providing better long-term returns
for our investors.
Suppliers: The Board has considered how best to support suppliers and by simplifying and clarifying processes
and systems, it allows greater ability to support smaller suppliers with shorter payment terms. This in turn
supports the Board’s commitment to prompt payment.
Outcomes and impact on our long-term success
We believe that JM needs to become simpler, more agile and more cost-effective in order to focus on longer-
term, sustainable value growth. The transformation programme will drive stronger execution, unlock
near-term cost opportunities and strengthen our capabilities in capital project execution and cross-group
commercial synergies.
Stakeholder considerations
Our people, investors and communities: Our process safety and wider EHS procedures keep our people safe in
the workplace. Accidents can have a catastrophic impact on people, the environment and business. Whilst these
significant catastrophic events are rare within JM and the wider chemical industry, the Board wanted to ensure
that the management system was robust, with leadership driving a strong process safety culture. The audit
reviewed our practices against industry best practices enabling us to monitor their implementation across
various JM sites.
Outcomes and impact on our long-term success
The independent audit commenced in January 2023 and the results will be reported to the Board. As part of the
audit, the third party met with group, business and site leadership, covering various topics agreed by the Board,
including protocols, process safety performance indicators and escalation methods to management. Following
the completion of the meetings with leadership and the final report to the Board, a detailed action plan will
be created to ensure that our process safety is in line with industry best practice.
Johnson Matthey | Annual Report and Accounts 2023
85
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Section 172 statement continued
3
4
Strategic partnerships that deliver against our milestones
The Board approved a long-term strategic partnership with Plug Power to accelerate the green hydrogen
economy. This partnership creates a volume and scale for green hydrogen that has not existed until now.
It brings together one of the largest green hydrogen and fuel cells companies in the world with our technology
and manufacturing capabilities.
Stakeholder considerations
Our people: Plug Power and JM will co-invest in what is expected to be the largest catalyst coated membranes
(CCMs) manufacturing facility in the world. The facility will be built in the US and is likely to begin production
in 2025. To support this, we are already increasing our manufacturing capability in the UK through a new 3GW
gigafactory in Royston, UK. As part of this project and the scale-up of our manufacturing capabilities, there will
inevitably be new opportunities created for our people to transfer to different roles as we refocus and redirect
the group to support our strategic ambitions.
Investors: Our long-term partnership with Plug Power is a key deliverable in our strategic growth plan for our
Hydrogen Technologies business. This partnership confirms our world-class position in catalyst coated
membranes, the key performance-defining components of electrolyzers and fuel cells. It further emphasises the
key role we have to play in the green hydrogen economy. The Board considered that this partnership would
positively contribute to investors’ long-term returns.
Customers and innovation partners: JM will become an important strategic supplier of MEA components,
providing a substantial portion of Plug’s demand for catalysts, membranes, and catalyst coated membranes. This
is an incredibly important validation of our technology and our ability to deliver for our customers as we support
the rapid scale-up of key raw material value chains by contributing expertise in sourcing, managing and
recycling PGMs.
Governments and trade associations: A £400 million government-backed loan (unrelated to the Plug Power
partnership) was granted to JM in April 2022. The long-term strategic plan for JM’s hydrogen products will
further help to deliver the UK government’s Ten Point Plan for a green industrial revolution, to help develop
global solutions to the climate crisis.
Communities: This partnership will contribute significantly towards our 2030 target for 50 million tonnes
of greenhouse gas emissions avoided per year. It will also help Plug Power meet its strategic ambitions, and
therefore will help its customers – including Amazon, Carrefour, Walmart and BMW – to meet their business
goals, helping to decarbonise the economy.
Outcomes and impact on our long-term success
The partnership enables each company to leverage its specific areas of expertise, working together to accelerate
its growth. It also delivers on a key strategic milestone for partnerships for Hydrogen Technologies and materially
accelerates our ambition to be a leading provider of CCMs globally.
The partnership will support Plug Power in delivering its targeted revenue of US$5 billion and US$20 billion by
2026 and 2030 respectively. To help achieve these targets, Plug Power and JM will co-invest in what is expected
to be the largest (5GW scaling to 10GW over time) CCMs manufacturing facility in the world. Plug Power and
JM will also continue to leverage government incentives where possible, including from the Inflation Reduction
Act in the US and REPowerEU in Europe to push for exponential growth across the hydrogen industry.
Investing in our future and securing our
leadership position
We are investing for growth and generating attractive returns. As part of our plans to invest £1.1 billion in
capital expenditure from 2022/23 to 2024/25, the Board approved several investments to expand and improve
our existing infrastructure in a number of our businesses.
The Board approved a gigafactory to scale up the manufacture of hydrogen fuel cell components.
The gigafactory will initially be capable of manufacturing 3GW of proton exchange membrane components
annually for hydrogen vehicles and the project is supported by the UK government through the Automotive
Transformation Fund.
In PGMS, our refineries need investment to set them up for decades of profitable operation. This year
we continued to invest to maintain these assets.
Stakeholder considerations
Our people: Old equipment, challenging conditions and increasingly unreliable assets posed potential EHS risks
and placed a strain on our operations, engineering and maintenance teams. We considered the potential
benefits to our people, and the invaluable impact replacing the existing metals refinery would have on the
working environment and safety.
In addition, we considered the positive impacts of scaling up our operations in Hydrogen Technologies and
the role it would play in securing hundreds of highly skilled manufacturing jobs in the UK.
Investors and customers: The scale-up of manufacturing for hydrogen fuel cell components will position
Johnson Matthey to be a market leader in performance components for fuel cells and electrolysers, driving
long-term value creation for our investors and the improvement of the electric vehicle supply chain for
our customers.
The age of the existing refinery and machinery could cause regular issues and delays in refining customer metal,
resulting in longer lead times and working capital constraints. The new refinery will increase refining capacity,
reduce working capital, and therefore create new commercial opportunities for us. It will bring innovation to our
refining processes, including more automation and control systems to optimise the way in which the plant is run
and drives circularity for our customers.
Community and society: Decarbonising freight transformation is critical to help societies and industries meet
their ambitious net zero emission targets. Our investment into fuel cells will be a crucial part of this transition.
The 3CR project will have significant environmental and social benefits over the existing refinery. It will
future-proof the plant against potential tightening of legislation around platinum salts sensitisation through
engineering-based controls and containment. 3CR will also deliver energy efficiency and sustainability
improvements, including the reduction of hazardous waste, moving us towards our 2030 targets including
Scope 1 + 2 emissions.
Outcomes and impact on our long-term success
The scale-up of manufacturing for hydrogen fuel cell components positions us as a market leader in
performance components for fuel cells and electrolysers, targeting more than £200 million sales in Hydrogen
Technologies by the end of 2024/25.
The refining business underpins the group, providing a secure and cost-effective source of PGMs to our Clean Air
and Hydrogen Technologies businesses, while generating significant operating profit for the group. Further
investment in 3CR will enable us to refine in a safe, effective and sustainable manner. The investment mitigates
the business continuity risk associated with an older asset and will provide improvements in refining lead times,
reductions in energy consumption and volume upsides.
86
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Board and committee effectiveness
Each year, the Board reviews its performance and effectiveness, including that of its
committees and individual directors. This helps identify areas for improvement and ensure
it is well placed to provide constructive challenge.
the questionnaire findings and individual performance with each board member. The results
of the review were compiled by Independent Audit Limited, who produced a report for review
by the Chair and the General Counsel and Company Secretary.
We carried out an externally facilitated board effectiveness review in 2021. The 2023 review
was facilitated internally and led by the Chair, with support from the General Counsel and
Company Secretary. The review involved a questionnaire seeking input on a range of topics
including leadership, strategy, dynamics and culture. Compiled by Independent Audit
Limited, a specialist corporate governance consultancy, the questionnaire was circulated
to all board members, certain external advisers and a number of senior leaders who regularly
present to us. Obtaining feedback from a wide range of stakeholders provides a more diverse
perspective on the performance of the Board. The Chair discussed themes emerging from
Outcome
The results of the self-assessment questionnaire indicate that the Board continues to perform
well. There is a high degree of openness and trust between board members with a good level
of debate. There was recognition of the Remuneration Committee’s work on communication,
including externally, and the Audit Committee’s relationship with the external auditor was
praised. The review highlighted the importance of having oversight of culture and ensuring
that cyber risk remains an area of focus.
The tables below provides an update on the progress made on the actions from our 2021/22 review and the actions agreed as part of the 2022/23 review:
2021/22 Action
• Consider the output of the strategic review on the Board’s processes, including agenda planning
2021/22 progress and insight
• Board agendas have been refined to give more time to business updates, in order to update the Board
and the skills of the Board members
on progress of our strategic milestones
• The Nomination Committee reviewed the board skills matrix and agreed this remained appropriate
in light of the company’s refreshed strategy
• The Board approved a new delegated authorities framework to support more efficient decisions and
to empower management
• Review how culture is monitored in order to drive our strategy
• This action was deferred as we communicated our strategy to our people and engaged with our senior
leaders on the values and behaviours needed to transform our business
• Review the principal risks and their prioritisation in light of the strategic review to continue to embed risk
• The principal risks were reviewed and revised by the Board to ensure they aligned to our strategy
management across JM
• Clarify the roles and responsibilities of the Board committees with a particular focus on climate-related
• During 2022, a workshop including the Chief Financial Officer, Audit Committee Chair, Chief
issues
• Create a greater focus on executive succession planning through the Nomination Committee
Sustainability Officer and Director of Risk and Assurance was held and the roles and responsibilities
of each committee were clarified. The changes were incorporated in the respective committee terms
of reference
• At its meeting in November 2022, the Nomination Committee undertook a detailed review of executive
succession plans. This included a discussion of individuals who were “ready now” as well as potential
successors in the medium and longer term
Action 2022/23
Review and discuss how cyber risk is managed and mitigated across the group
Discuss the approach to culture and agree the methodology of reviewing progress (deferred from 2021/22)
Secure more opportunities for board members to meet members of the senior leadership teams outside
of formal board meetings
Responsibility
Stephen Oxley
Liam Condon
Nick Cooper
Review of the Chair’s performance
Led by John O’Higgins, the Senior Independent Director, the non-executive directors met without Patrick Thomas to discuss his performance as Chair. They considered he continues to provide
robust leadership for the Board and facilitates open and constructive debate.
Johnson Matthey | Annual Report and Accounts 2023
87
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Societal Value Committee report
“Our sustainability
targets and goals are
focused on the areas
where we can make a
real difference.”
Membership
The Committee comprises all members of the Board.
Members’ attendance at committee meetings during the year is on page 75
Regular attendees at committee meetings
• Chief Sustainability Officer
• Chief HR Officer
• General Counsel and Company Secretary
• Group Sustainability Director
• Group Head of Ethics and Compliance
• Corporate Affairs Director
The Committee’s Terms of Reference set out its full responsibilities
matthey.com/governance-framework
Sustainability disclosures
The Committee reviewed and recommended to the Board the approval of the disclosures
in the Sustainability report on pages 20 to 44, including our TCFD disclosures on
pages 45 to 52.
Sustainability Performance Data Book: matthey.com/sustainability-databook
Established in 2021, the Societal Value Committee supports the Board by providing oversight,
challenge and rigour to our sustainability strategy, diversity and inclusion agenda and ethical
conduct. Following the Company’s strategic review, the Committee spent time discussing
Johnson Matthey’s vision for sustainability and its importance in everything we do. Since her
appointment as our first Chief Sustainability Officer in May 2022, Anne Chassagnette has
worked closely with the Committee. Her in-depth experience in leading sustainable
transitions has been a great resource for our discussions.
We ensure our sustainability goals and targets are focused on the areas where JM can have
the greatest positive impact on society. Having updated our materiality assessment and in
light of our refreshed strategy, the Committee recommended our 2030 goals be reorganised
under two pillars, ‘Planet’ and ‘People’ and focus on ten public targets.
As part of our ongoing review and monitoring of climate impacts, we approved a raised climate
ambition to put us firmly on SBTi’s .5˚C pathway to net zero for 2029/30. This commits us
to reducing Scope 1+2 and Scope 3 emissions by 42% by 2030, compared to 2019/20 levels.
Creating and embedding a sustainable culture across all areas of JM is hugely important.
Diversity, inclusion and belonging is key to executing our strategy, leading to more innovation,
high-performing teams and helping us attract and retain talent. During the year we reviewed
progress and provided feedback on the roadmap to achieve our diversity and inclusion goals.
We approved a standalone human rights policy, which defines our commitments to, and our
expectations from, our colleagues and value chain partners.
At JM we uphold the highest ethical standards in everything we do, underpinned by our value,
acting with integrity. The Committee is regularly updated on the plans and actions to embed
an ethical culture. We discuss ethical dilemmas that arise and are briefed on notable ethics
and compliance trends. The ethical dilemmas review actual JM fact patterns and provide recent
examples of how we live by our values. We confront geopolitical and ethical issues involving
sanctions and export controls on the world stage. This includes specific commercial opportunities
where we have chosen to walk away, because they did not comply with our business ethics.
The world is changing rapidly and as a committee, we need to consider different external
perspectives, trends and the industry landscape. Through presentations and discussions with
both internal and external experts, the Committee is kept informed of new developments and
best practice in relevant areas under the societal value remit. During the year, we deepened
relationships with external associations and think tanks, committed to advancing sustainable
business priorities through presentations and discussions on global human rights, the EU plan
for hydrogen and the impact of the US Inflation Reduction Act.
The Committee has been impressed with progress made this year on embedding the sustainability
strategy, driving the diversity and inclusion agenda, and ensuring high standards of ethical conduct.
Our internal committee effectiveness review showed that the Committee continues
to operate effectively and has become more embedded into our governance framework.
Jane Griffiths
Societal Value Committee Chair
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Societal Value Committee report continued
The Committee’s role
Societal value covers a range of economic, social and environmental topics. Given the central role of sustainability to our overall strategy, the Committee was established to bring continued focus
to this area. The Committee assists the Board in overseeing the group sustainability strategy, including net zero commitments and science-based greenhouse gas targets; driving a truly inclusive
organisation; overseeing the group’s ethical conduct; and keeping up to date with societal value topics, including stakeholder expectations.
More information on the governance of sustainability matters beyond the Committee can be found within our TCFD disclosures
How we delivered on our responsibilities
Sustainability
What we did
• Oversaw plans and actions to execute the group
sustainability strategy including 10 roadmaps
to deliver on our 2030 target
Climate change
• Challenged and validated increasing our
ambition for GHG emission reductions onto
SBTi’s 1.5˚C pathway to net zero
• Reviewed our strategy’s product portfolio
alignment with our company purpose of
catalysing the net zero transition and estimated
GHG emissions avoided by our product sales
by 2030
• Agreed the application of internal carbon
pricing for capital decisions
• Received updates on hydrogen geopolitics
and legislative developments
• Discussed the results of an update to our
third-party materiality assessment, validated
our sustainability framework and refocused
our 2030 targets
• Challenged sustainability performance data
• Reviewed the approach to communication
on sustainability
• Reviewed the proposed approach on advocacy,
including links with external organisations
(e.g. trade associations)
• Received regular horizon scanning updates,
competitor analysis and ESG benchmarking
Outcomes
• Agreed the realignment of our sustainability
goals to our strategy and recommended to the
Board that our public targets for 2023 be
refocused to 10 targets
Diversity and inclusion
Ethics and compliance
• Reviewed our diversity and inclusion gender
• Reviewed actions to continue promoting
target for 2030 and actions to support
its achievement
• Discussed the approach to employee
engagement and areas for immediate focus
our ethical culture
• Received updates on Speak Up themes
and trends
• Discussed real examples of ethical dilemmas
and how they were managed including actions
on responsible sourcing
• Received an external presentation on global
human rights and legislative developments
• Confirmed support for our updated 2030
• Challenged management on our diversity and
• Reviewed and recommended that the Board
climate ambition in line with SBTi Net Zero
Standard
inclusion target and provided feedback on ways
to improve diversity, inclusion and belonging
approve the Modern Slavery Statement
and Conflict Minerals Disclosure
• Reviewed and recommended that the Board
• Approved a standalone Human Rights Policy
• Agreed our new communications and advocacy
approve the TCFD report
approaches on sustainability
• Agreed and recommended to the
Remuneration Committee sustainability targets
for 2023 and the next three years for
incorporation into our Performance Share Plan.
• Reviewed and recommended that the Board
approve the sustainability section of the
Annual Report
• Recommended GHG emissions targets be
included within the Executive Directors’
Long-Term Incentive Share plan
Johnson Matthey | Annual Report and Accounts 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Nomination Committee report
“We are committed to
ensuring we have the
right leaders to execute
our strategy.”
Membership
The Committee comprises the Chair and all independent non-executive directors.
Members’ attendance at committee meetings during the year is on page 75
Regular attendees at committee meetings
• Chief Executive Officer
• Chief HR Officer
The Committee’s Terms of Reference set out its full responsibilities
matthey.com/governance-framework
As we deliver our strategy and simplify our structure, the Committee has focused on the
composition of the Board and the collective skills needed to oversee this transformation.
We strengthened the Board’s composition with the appointment of Barbara Jeremiah
as an independent Non-Executive Director.
Having been a member of the Board for eight years, and chaired the Remuneration
Committee for the last six, Chris Mottershead will retire from the Board in January 2024.
The Committee has recommended, and the Board has approved the appointment of John
O’Higgins as the new Chair of the Remuneration Committee, with effect from our 2023 AGM.
At the beginning of the year, the Committee oversaw several new appointments to the GLT,
and changes to responsibilities of existing members, which were reported on in the 2022
Annual Report and Accounts.
Following this period of executive change, the Committee‘s activities in 2022/23 turned
to executive succession. We need to ensure we have the right leaders, both now and in the
future, to drive performance for the group’s long-term success. As part of these discussions,
the Committee also recommended the promotion and appointment of Simon Price as
General Counsel and Company Secretary, with effect from 7th June 2023, succeeding Nick
Cooper. Nick will remain a member of the GLT and take on a new role as Global Business
Services Director.
In all the Committee’s decisions, we place great importance on diversity, inclusion and
belonging. Our board and committee effectiveness review confirmed that our discussions
are open and honest, with an atmosphere of trust. As a board, we must continue to make
sure everyone is welcomed and able to be themselves across all areas of JM.
Patrick Thomas
Nomination Committee Chair
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Nomination Committee report continued
How we delivered on our responsibilities
Board composition
Tenure of directors
Election of directors
Succession planning
and senior leadership
appointments
Talent management
framework
Diversity and inclusion
Performance and
effectiveness review
• Discussed and reviewed
the tenure of directors
• Evaluated the
• Reviewed the
performance of
individual board
members, their
contributions to the
Board, tenure and time
commitment
succession plans for the
most senior roles and
ensured plans were in
place to meet future
succession needs
• Reviewed and discussed
the approach to talent
and leadership
development plans for
the GLT and senior
leaders
• Reviewed the directors’
skills, experience and
diversity through
self-assessment, to
identify areas for
development
• Reviewed our Board
Diversity Policy
• Considered the
outcomes of the
internal effectiveness
review with regard
to board composition,
talent management
and succession
planning
• Recommended the
re-appointment of
Doug Webb and Jane
Griffiths for a further
three-year term,
subject to annual
re-election by
shareholders
• Recommended that
the Chair and all
directors are elected
or re-elected at the
2023 AGM
• Oversaw the
appointments of Anne
Chassagnette, Anish
Taneja, Mark Wilson
and Simon Price as
members of the GLT
• Non-executive directors
challenged and provided
feedback on the key
activities to strengthen
the talent pipeline
• Agreed that the board
skills matrix remained
appropriate in light of
our refreshed strategy
• Agreed to review the
approach to executive
succession planning
• Identified areas for
development to ensure
the directors can drive
our strategic priorities
• Agreed an updated
Board Diversity Policy
reflecting our
commitments to
maintain a level of 33%
of females appointed to
the Board and at least
one director from an
ethnic minority group
What we did
• Discussed and
recommended
proposed appointments
to the Board and
its committees
Outcomes
• Approved the
appointment of
Barbara Jeremiah as
an independent
Non-Executive Director
from 1st July 2023 and
Senior Independent
Director from 20th
July 2023
• Approved the
appointment of John
O’Higgins as Chair of
our Remuneration
Committee from
20th July 2023
• Approved the
appointment of Simon
Price as General
Counsel and Company
Secretary from 7th
June 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Nomination Committee report continued
Succession planning
The Committee ensures we are led by a diverse, high-quality board, with the appropriate
skills, knowledge and experience to support the group’s strategic priorities. This includes
overseeing succession plans for all board roles. In accordance with the Code, the Committee
monitors the tenure of JM’s non-executive directors against the recommended nine-year term
to ensure an orderly succession. The tenures of our non-executive directors, Senior
Independent Director and the Chair are on page 75.
Non-Executive
By January 2024, Chris Mottershead will have achieved a nine-year tenure on the Board.
In anticipation of his retirement, the Committee discussed the roles and responsibilities
of the board members.
Having reviewed the skills and expertise of the current board members, we recommended
that a further non-executive director be appointed to the Board as Senior Independent
Director. The Committee sought an individual with strong leadership experience, experience
of delivering transformation programmes and an understanding of the US commercial
market. Egon Zehnder, a third-party search and recruitment specialist, assisted with the
search. Following evaluation of the final short list of candidates, the Committee
recommended Barbara Jeremiah’s appointment. It was felt that Barbara’s understanding of
metals, along with her investor experience, would enhance the Board’s deliberations.
Executive
The Committee also oversees succession planning for senior leadership roles and talent
development to build capability for the future. Our senior leaders are a source of future GLT
and board talent, with some of our most recent GLT appointments progressing through this
route. The Committee reviews, at least annually, the existing formal succession plan against
the internal talent pipeline of candidates, for immediate and medium to longer-term
movement into key leadership roles. This is routinely challenged to understand the breadth
of potential and to balance internal succession planning with the need for external perspectives.
During the year, Egon Zehnder provided senior-level recruitment services, including
assessment and people development services. It has no other connection with the Company
or any other directors.
Board skills
We regularly assess the Board’s collective skillset by asking each non-executive director to
identify their strengths, scoring their level of expertise on a scale of one to five. The table on
page 75 shows the skills held by our non-executive directors that are most relevant to their
role at Johnson Matthey. This assessment helps us identify any gaps that can be addressed
through future appointments or additional training.
Board inductions
All new directors receive a tailored induction programme upon joining the Board.
The diagram below shows some of the key activities that are undertaken by all new
directors.
Briefings on
directors’ duties
Pre-reading
board and
relevant
committee
papers
Introductions to
the businesses
and leadership
teams
Financial
briefings
Training on
health and
safety and
compliance
topics
Meeting the
external
auditor, brokers
and company
advisers
Meeting key
customers
Visits to our key
sites to meet
employees
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Nomination Committee report continued
Diversity and inclusion
The Committee continues to drive the diversity agenda across JM. A diverse and inclusive
organisation is fundamental to our vision, and our Board Diversity Policy ensures that the
tone is set from the top.
At the beginning of the year, the Committee reviewed our Board Diversity Policy and
refreshed its objectives to maintain:
• 33% female representation on the Board
• One director from an ethnic minority group.
Gender representation as at 31st March 2023
Number of
board members
% of the Board
6
3
0
0
67
33
0
0
Number of
senior board
positions (CEO,
CFO, SID, Chair)
4
0
0
0
Number in
executive
management
% of executive
management
9
3
0
0
75
25
0
0
Men
Women
Other categories
Not specified / prefer
not to disclose
Throughout the year and as of 31st March 2023, these targets were successfully met.
Details of gender and ethnic representation as prescribed by Listing Rule 9.8.6 are set out
in the tables on this page. The Board and GLT members confirmed their gender and ethnicity
for the purpose of collecting this data.
Ethnic representation as at 31st March 2023
% of the Board
Number of
board members
White British or other White
(including minority-white
groups)
Mixed/Multiple Ethnic
Groups
Asian/Asian British
Black/African/ Caribbean/
Black British
Other ethnic group,
including Arab
Not specified/ prefer not to say
8
0
1
0
0
0
89
0
11
0
0
0
Board Diversity Policy: matthey.com/board-diversity
As at 31st March 2023, the Board does not fully comply with the new board diversity targets
set by the FCA for at least 40% of individuals on the board to be women, and for one of the
senior board positions (Chair, Chief Executive Officer, Senior Independent Director or Chief
Financial Officer) to be held by a woman. Following the appointment of Barbara as Non-
Executive Director on 1st July 2023 and her appointment as Senior Independent Director from
20th July 2023, female representation on the Board will meet the FCA targets and exceed
those set out in our current Board Diversity Policy.
We are pleased that the Board’s composition meets the FCA’s ethnicity target to have one
member of the board from a minority ethnic group. The Committee intends to review the
Board Diversity Policy in 2023/24 and will set new targets.
All of our non-executive directors are members of each committee, which provides the most
diverse perspective and assists our decision making in these forums.
The Board also supports the terms of the Enhanced Voluntary Code of Conduct for executive
search firms. All our appointed executive search firms are required to secure a diverse longlist
of candidates, including Black, Asian and Minority Ethnic talent.
Beyond the Board, we aspire to have gender balance across all levels of the group. One of our
key milestones is to achieve greater than 40% of female representation across professional
management by 2030. While gender diversity has improved, we want to accelerate the pace
of change. Further details on how we are improving gender diversity across the group, the
gender balance of senior management and our Diversity, Inclusion and Belonging Policy are
set out on pages 36 to 37.
Number of
senior board
positions (CEO,
CFO, SID, Chair)
4
Number in
executive
management
% of executive
management
10
84
0
0
0
0
0
1
1
0
0
0
8
8
0
0
0
Johnson Matthey | Annual Report and Accounts 2023
93
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Audit Committee report
“ The Committee’s work
provides a focus to ensure
robust controls support
the execution of our
group strategy”
Membership
The Audit Committee comprises all independent non-executive directors. Doug Webb,
our Committee Chair, is a chartered accountant who brings a wealth of recent and
relevant financial experience, including acting as Chief Financial Officer at the London
Stock Exchange Group, QinetiQ and Meggitt.
Members’ attendance at committee meetings during the year is on page 75.
Other regular attendees at committee meetings
• Chair of the Board
• Chief Executive Officer
• Chief Financial Officer
• General Counsel and Company Secretary
• Group Assurance and Risk Director
• Director of Group Finance
• PwC Audit Partner
The Committee’s Terms of Reference set out its full responsibilities.
matthey.com/governance-framework
The Audit Committee forms a critical part of the overall framework of corporate governance
for JM. We are responsible for overseeing the financial reporting, internal financial controls,
internal control and risk management systems, and maintaining an appropriate relationship
with the external auditors.
The Committee supports the Board by obtaining assurances that controls are working
as designed and by challenging those assurances. We receive and consider reports from
management on the effectiveness of the systems that have been established, to ensure that
both JM’s management and PwC, our external auditor, are appropriately challenged and held
to account. Management and PwC have again worked hard during 2022/23 to maintain
the ongoing integrity of our financial reporting, and I have continued to hold regular dialogue
with management, the Group Assurance and Risk Director, and PwC.
The last three years have seen Covid-19, the Russia/Ukraine conflict and other issues cause
political and economic turmoil. This has put significant pressure on the risk environment and
companies’ financial reporting processes. Accordingly, we have continued to focus on
financial reporting and related internal control risks as well as ensuring the company
maintains a strong performance on ethics, compliance and audit quality.
The focus of assurance activities during the year has been post Covid-19 controls’ culture
across the group’s locations and key strategic and emerging risks. In this context,
a comprehensive improvement programme across JM’s financial and operational controls,
including raising awareness and simplifying requirements, has been established and is
sponsored by the Group’s Chief Financial Officer. Within Group Assurance and Risk (GAR)
a new form of site extended audit covers several core processes based on an assessment of
risk, to provide assurance on the control environment and framework at site level. These
typically cover design and effectiveness of operating controls, including Internal Controls
for Financial Reporting (ICFR), metal controls, procurement, ethics and compliance, business
continuity planning, security, and technology controls. It has been important to validate these
controls following the return to site post Covid-19 pandemic and to respond to new risks
occurring at unprecedented speeds and various pressures on our entities. These audits also
provide insight on the culture found at the site.
Flexibility of our assurance plans has proven helpful during the year, especially in the context
of emerging risks in the fast-moving external environment. The GAR team has been providing
live assurance as part of various business-led task forces, such as JM’s energy resilience in response
to the conflict in the Ukraine. Specific focus has been dedicated to our sustainability agenda,
an area of increasing importance from an assurance perspective. Our internal audit activity has
been focused on driving improvements in quality of the data and management reviews.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Audit Committee Report continued
During the year, we looked at the anticipated impact and readiness of our internal controls
financial reporting framework and fraud risk management programme. We examined these
factors in relation to the recommendations of the Department for Business, Energy and
Industrial Strategy (BEIS) white paper on restoring trust in audit and corporate governance.
The position paper issued by the Financial Reporting Council (FRC) in July 2022 proposed that
the revised UK Corporate Governance Code will apply on or after 1st January 2024. For us this
will apply to the financial year ending 31st March 2025. With ongoing work to strengthen our
internal control environment and address additional reporting requirements, we concluded
that existing procedures, our in-progress work on controls and other areas of change, would
meet evolving corporate governance requirements. We await additional clarification on some
requirements, and these are subject to ongoing monitoring by group and business
management.
To address the anticipated changes, the outcome of our review on the key changes and
impact for JM is as follows:
• Statement on internal controls – substantial work has been carried out over recent years
to improve JM’s overall control environment and provide sufficient evidence that controls
are operating effectively, using JMProtect, our integrated governance, risk and compliance
platform
• Resilience Statement – updated requirements are expected to be substantially covered
by work already performed to support the existing disclosures in the Viability Statement
on page 70
• Dividends and capital maintenance – existing disclosures will be reviewed once guidance
is available from the FRC
• Audit and Assurance Policy (AAP) – the Committee approved an internal policy drafted by
the GAR team, with cross-functional support. Committee reviews began at the end of 2022
and take account of guidance from the FRC
• Fraud Statement – an assessment of fraud risks, current detection, and prevention
mechanisms, reporting and documentation of associated controls was completed in 2022.
Fraud training for JM’s extended finance community began in 2022. A regular governance
mechanism was established via monthly Governance, Risk and Compliance (GRC)
committee meetings. A fraud risk policy will be incorporated into the AAP, and fully
integrated into JMProtect.
In 2022, the group refreshed its sustainability goals and 2030 targets. ESG data in annual
reports is coming under increasing scrutiny as the investor community relies on it to evaluate
the value proposition of listed companies. We are conscious of the need for transparency,
accuracy and the avoidance of overstating our performance in these measures. We reviewed
the group’s processes for ESG data management and independent assurance for the Task
Force for Climate-related Financial Disclosures (TCFD). The Committee also reviewed a final
report of JM’s 2022 sustainability audit, carried out by our internal audit team. The purpose
was to understand and review the processes for generating data for the products and services
sustainability targets and metrics, and to assess the efficiency and effectiveness of any second
line review controls. During the year, the Committee reviewed our Climate-related Assurance
Plan for 2023. A workshop was held with management, internal audit and myself to define
our longer term assurance expectation over its sustainability data, the output of which was
reported to the Committee. This resulted in a sustainability assurance framework, and also
clarified the roles and responsibilities of each of the Audit Committee and the Societal Value
Committee (SVC). The SVC oversees the delivery of our sustainability strategy and determines
the related KPI’s to be reported, and the Audit Committee is responsible for the quality of the
data in the sustainability reporting.
The FRC’s Audit Quality Review (AQR) report, following inspection of PwC’s 2022 audit of JM,
was completed in early January 2023 and the Committee reviewed the detailed findings.
Following receipt of the report, we discussed the findings with PwC, none of which were
considered significant. Recommendations have been built into ongoing processes and the
Committee was satisfied with the external auditor’s commitment to audit quality, the robust
and professional working relationship with management, and demonstration of strong
technical knowledge. The Committee considered whether the report gave us any concern
about the quality of the 2022 audit and associated report, and we concluded that it did not.
I am pleased that our internal committee effectiveness review this year confirmed that
the Committee continues to operate well and remains informed of relevant changes
and developments in the external audit market. We have identified areas for further
improvement, including focusing on reviewing our fitness for purpose and approach;
the effectiveness and impact of the overall risk management framework and activity;
and focusing on the future development and effectiveness of the internal audit function.
The Committee also reviewed the key changes and impact for JM of the new requirements
for auditors and the regulator. We will assess this area in more detail once the FRC issues
more guidance.
Doug Webb
Audit Committee Chair
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How we delivered on our responsibilities
What we did
Our responsibility
Outcomes
Published financial information
Monitoring the integrity
of the reported financial
information and
reviewing significant
financial considerations
and judgements.
• Reviewed, discussed and challenged management’s reports on the group’s full-year results and half-year
results, and considered the significant accounting policies, principal estimates and accounting
judgements used in their preparation.
• Reviewed the matters, assumptions and sensitivities in support of preparing the accounts on a going
concern basis and assessed the long-term viability of the group.
• Considered the impact of scenario testing on financial disclosures in relation to TCFD.
• Reviewed the financial reporting framework of the Company’s financial statements.
• Assessed the process management used to support the Board when giving its assurance that the 2023
Annual Report and Accounts, taken as a whole, is fair, balanced and understandable (FBU).
• Reviewed reports from the General Counsel and Company Secretary on group litigation and disputes.
• Reviewed reports on credit controls and credit risks.
• Approved the Audit Committee report within the 2023 Annual Report and Accounts.
• Reviewed elements of the 2023 Annual Report and Accounts.
• Reviewed and discussed the results of the Committee’s assessment of its effectiveness.
Risk management and internal control
Reviewing the group’s
internal financial controls
and its risk management
systems and monitoring
the effectiveness of the
group assurance function.
• Received reports from the Group Assurance and Risk Director on group assurance, risk reviews and risk
management processes.
• Monitored progress against the 2022/23 group assurance and risk plan.
• Agreed the 2023/24 group assurance and risk plan.
• Considered changes to internal control weaknesses brought to the Committee’s attention by PwC.
• Reviewed an assessment of the results and further improvements in the overall internal control
environment of the internal control self-assessments.
• Challenged management to enhance the assurance processes supporting sustainability sections in the
Annual Report.
• Monitored the effectiveness of the GAR function.
• Reviewed precious metal governance.
• Carried out a deep-dive into liquidity risk-based methodology.
• Received presentations from the security team, and reports on finance and controls from the business
finance directors.
• Reviewed fraud risk and fraud investigations including those raised via the Speak Up process.
• Met the Group Assurance and Risk Director without management present.
• Reviewed a summarised appraisal of the group’s year-end control environment to assess any control
issues identified.
• Assessed the anticipated impact of, and JM readiness for, recommendations resulting from the BEIS
‘Restoring trust in audit and governance’ white paper.
• Reviewed our internal AAP.
• Reviewed the Committee’s Terms of Reference.
• Recommended the approval of the half-year and full-year results to the
Board, following a thorough review, and challenging management
assumptions.
• Recommended to the Board the going concern and viability statements
following an in-depth review and assessment of scenarios with
management.
• Determined that the FBU process undertaken by management for the
Annual Report and Accounts was effective.
• Reviewed credit controls and risks in the context of continuous challenging
market conditions.
• Discussed the outcome of an internal evaluation and concluded that the
Committee continued to be effective.
• Recommended to the Board the approval of elements of the 2023 Annual
Report and Accounts.
• Determined that risk management and internal controls effectively meet
the group’s needs and manage risk exposure.
• Challenged management to resolve any issues relating to internal controls
and risk management systems.
• Approved the change to the metal liquidity risk methodology in the group’s
Precious Metals policy.
• Continue to monitor emerging regulatory developments and assess
applicability of any new guidance to JM.
• Agreed with management’s determination that there were no significant
control weaknesses or lack of adherence to policies and procedures
identified.
• The Committee made no changes to its terms of reference during the year.
• Approved JM’s internal AAP.
• Approved the Sustainability Assurance Framework.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Audit Committee Report continued
Our responsibility
What we did
Outcomes
Our external auditor
Overseeing the relationship with
the external auditor, monitoring
the external auditors’ independence
and objectivity, approving its fees,
recommending its re-appointment
or not, and ensuring it delivers a
high-quality effective audit, based
on a sound plan.
• Considered reports from PwC including their views on our accounting judgements and
• Approved, after due challenge and discussion, PwC’s audit plan and fees
control observations.
for 2022/23.
• Monitored the transition to the new lead audit partner to ensure it was effective.
• Met PwC without management present.
• Considered and reviewed indicators of audit quality.
• Assessed PwC’s independence and objectivity.
• Reviewed the non-audit fees incurred during the year and the non-audit fee policy.
• Reviewed the inspection of PwC’s audit of our financial statements for the year ended 31st
March 2022 and discussed with PwC the actions to be taken in response to the findings.
• Oversight of recommendations from PwC’s FRC AQR being built into ongoing processes.
• Determined a good-quality, comprehensive audit was completed, following
a review of PwC’s regular reports to the Committee, the outcome of PwC’s
FRC AQR, and feedback from the Independent Quality Review Partner.
• Recommended the re-appointment of PwC as auditor.
• Approved the non-audit fee policy.
Financial reporting
Significant issues considered by the committee in relation to the group’s and company’s accounts
It is a fundamental part of the committee’s role that we act independently from management to ensure that the interests of shareholders are properly protected in relation to financial reporting.
When the accounts are being prepared, there are areas where management exercises a particular judgement or degree of estimation. The committee assesses whether the judgements and
estimates made by management are reasonable and appropriate. In the process of applying the group’s accounting policies, management also makes judgements and estimates that have a
significant effect on the amounts recognised in the financial statements. The group’s key accounting judgements discussed and challenged by the Audit Committee are set out below.
Significant current year considerations in relation to the accounts
Major impairment and restructuring activities
Key judgements in relation to impairment testing relate
primarily to estimates in assessing recoverable value.
Key judgements in relation to restructuring provisions
related to estimates of future cost.
Work undertaken / outcome
We received a report from management which explains the basis of recognition and estimate for impairments and
restructuring costs. The report also detailed how transformation-related costs were reconciled back to previously announced
transformation programmes.
We challenged the rationale behind the presentation of the costs as non-underlying, with particular focus on areas that
required judgement around recognition.
We concluded that management has appropriately accounted for and disclosed the impacts from major impairment and
restructuring activities (see note 6 in the annual report).
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Significant current year considerations in relation to the accounts
Gains and losses on significant legal proceedings
Significant progress was made during the year with the
settlement of legal proceedings requiring accounting
consideration.
Profit on disposal of businesses and businesses classified
as “held for sale”.
Key judgements in relation to assessing the fair value
less costs to sell of businesses classified as “held for sale”.
Impairment of goodwill, other intangibles and other assets
Key judgements are made in determining the appropriate
level of cash generating unit (CGU) for the group’s
impairment analysis. Key estimates are made in relation
to the assumptions used in calculating discounted cash
flow projections to value the CGUs containing goodwill,
to value other intangible assets not yet being amortised,
and to value other assets when there are indications that
they may be impaired. The key assumptions are
management’s estimates of budgets and plans for how the
relevant businesses will develop or how the relevant assets
will be used in the future, as well as discount rates and
long-term average growth rates for each CGU.
Work undertaken/outcome
We received a report from management which summarised the outcomes and accounting implications for legal proceedings,
one of which was settled in the year at a loss of £25 million. The report also detailed the nature of other key legal provisions.
We agreed with management’s rationale behind the presentation of the loss as non-underlying.
We reviewed and discussed the accounting for the following disposals:
On 1st June 2022, the group completed the sale of its Health business for a consideration of £325 million.
On 26th May 2022, the group completed the sale of part of its Battery Materials UK business for a consideration of £20 million.
On 1st November 2022, the group completed the sale of its Battery Materials Canada business for a cash consideration of
£12 million.
On 31st January 2023, the group completed the sale of its Piezo Products business for a consideration of £18 million.
We concluded that management’s key assumptions and disclosures on the profit on disposal of businesses above were
reasonable and appropriate.
We also considered the assessment in arriving at the fair value of the Diagnostics Services (Tracerco), Battery Materials
Germany and Poland businesses and noted that classifications as “held for sale” were appropriate.
We reviewed a report from management explaining the methodology used, assumptions made and significant changes from
those used in prior years. In light of the current volatile macroeconomic environment, including high inflation, interest rates
and increased energy costs, management considered impact within underlying forecasts and discount rates.
We challenged management on the rationale behind the key assumptions and sensitivities such as discount rates and growth
rates in the goodwill value in use calculations, especially within Clean Air and Catalyst Technologies to ensure we were satisfied
on their reasonableness.
The impairment reviews were an area of focus for PwC who reported their findings to us.
We concluded that management’s key assumptions and disclosures are reasonable and appropriate.
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Significant current year considerations in relation to the accounts
Refining process and stock takes
When agreeing commercial terms with customers and
establishing process loss provisions, key estimates are
made of the amount of precious metal that may be lost
during the refining and fabrication processes. Refining
stocktakes involve key estimates regarding the volumes
of precious metal-bearing material in the refining system
and the subsequent sampling and assaying to assess the
precious metal content.
Post-employment benefits
Key estimates are made in relation to the assumptions
used to value post-employment benefit obligations,
including the discount rate and inflation.
The key assumptions are based on recommendations from
independent qualified actuaries.
Tax provisions
Key estimates are made in determining the tax charge
in the accounts where the precise impact of tax laws and
regulations is unclear.
Climate change
Key estimates are made in relation to climate change and
the impact on the going concern period and viability of the
period over the next three years. Additionally, the potential
impact of climate on the financial statements including
forecasts of cash flows used in impairment assessments,
recoverability of deferred tax assets and expected lives
of fixed assets and their exposure to the physical risk posed
by climate change.
Provisions and contingent liabilities (judgement)
Key estimates are made in determining provisions in the
accounts for disputes and claims which arise from time to
time in the ordinary course of business. Key judgements
are made in determining appropriate disclosures in respect
of contingent liabilities.
Work undertaken/outcome
We received a report from management which summarises the results of the material refinery stock takes. The report
was reviewed to ensure that the results were in line with expectations and historic trends.
The refining process and stock takes were an area of focus for PwC who reported their findings to us.
We concluded that management’s accounting for refining stock take gains and losses was in accordance with the agreed
methodology.
We received a report from management which summarises the key assumptions used to value the liabilities of the main
post-employment benefit plans. The assumptions were compared with those made by other companies and PwC’s assessment
of the reasonableness of the assumptions was considered.
We concluded that the assumptions used, and accounting treatment, are appropriate for the group’s post-employment benefit
plans.
We received a report from management which explains the issues in dispute, or at risk of this, with tax authorities across the
business, the calculation of tax provisions and relevant disclosures. We also considered the sensitivities around the provisions
and debated the circumstances in arriving at the key provisions.
Tax provisioning was an area of focus for PwC who reported their findings to us.
We concluded that management’s key assumptions and disclosures are reasonable and appropriate.
We received a report from management which summarises the potential impacts of climate change to the business. This was
based on a Zurich insurers report commissioned in 2021/22. Management has considered the impact of climate change in
their goodwill impairment calculations and going concern/viability forecasts.
We concluded that management’s key assumptions and disclosures are reasonable and appropriate.
We also received a report outlining how TCFD considerations are factored into the financial statements.
We received a report from management which provides information in respect of disputes and claims and identifies the
accounting and disclosure implications which were challenged and discussed. The report included an assessment of a claim from
the purchaser of the Health business. This was supported by the group’s advisors whom we also discussed the matter with.
We concurred with management’s conclusions regarding provisioning and contingent liability disclosures.
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Going concern and viability statement
We reviewed the matters, assumptions and sensitivities being used to assess both the going
concern basis and the long-term viability of the group. This included assessing risks that
would threaten our business model, current funding position as well as different stress
scenarios and mitigating actions. Further details on our going concern and viability, and the
scenarios considered, are on page 70.
Following our review and recommendation, the Board concluded that Johnson Matthey
is able to continue operating and can meet liabilities over at least three years, which remains
the most appropriate timespan.
Fair, balanced and understandable (FBU)
We review and assess management’s process to support the Board, so it can give its assurance
that the 2023 Annual Report and Accounts, taken as a whole, is FBU and provides the
information necessary for shareholders to assess JM’s position and performance, business
model and strategy.
Management selected three individuals from across the group to form an FBU panel and carry
out a detailed review of the Annual Report. To maintain objectivity, the FBU panel members
were not involved in drafting the 2023 Annual Report and Accounts, but all were familiar
with our strategy and business model. The panel members were also briefed on the role and
provided with detailed notes on what to consider during their review. The FBU panel, PwC
and Annual Report project team determined whether key messages aligned with the group’s
position, performance and strategy, and whether the narrative sections and financial
statements were consistent.
The FBU panel presented a report to the Board, highlighting the key themes from the review
and discussion points. The Disclosure Committee reviewed the verification process dealing
with the report’s factual content to further support the Board’s review.
Risk management and internal control
The Committee reviews the adequacy and effectiveness of control and risk management
systems. These controls are a critical component of our governance and assurance
framework, and they detail the minimum controls we need to keep our people safe, ensure
compliance with our standards and regulations, protect our physical and intellectual assets,
and facilitate the accuracy and completeness of financial reporting. During the year, the
Committee assessed the effectiveness of these controls, considered the key identified control
gaps, and assessed how management planned to address the findings.
The Group Assurance and Risk Director independently assures that our risk management
and internal control processes operate effectively. Working closely with leadership and
management, she provides regular oversight of risk matters that affect our business, makes
recommendations to address key issues, and ensures that any mitigating actions are properly
tracked, challenged and reported. During the year, our co-sourcing partnership with Deloitte
ensured we had access to additional specialist skills and expertise.
The group’s internal controls over financial reporting include policies and procedures
designed to ensure the accuracy of our financial statements. JM’s control self-assessment and
business filing assurance processes provide management with a view of the operation of these
controls. The results are presented to the Committee as part of their assessment of the
year-end control environment.
The Committee is satisfied that the group’s internal financial controls operated effectively
throughout the year and up to the date of approval of this report. However, these controls
do not provide absolute assurance against material misstatement or loss and are assessed
based on materiality and level of activities within the business.
Operation of controls and assurance
There is an ongoing comprehensive improvement programme across JM’s financial and
operational controls including control self-assessment which replaced our key control
questionnaire. While this has led to positive development in our internal controls over
financial reporting, we will continue to make improvements in this area.
During the year, we spent time reviewing the control strategy, which focused on several
cultural and operational factors to ensure JM’s readiness for the enhanced reporting
on the operating effectiveness of controls expected to be required from 2024/25. To provide
management with independent assurance over the effectiveness of the control self-
assessment process, structured, internal controls testing will be introduced from 2024.
Group assurance and risk
The Group Assurance and Risk Director provides regular reports on internal audit reviews,
including key findings, actions needed and progress on their implementation. We focus
on local, business and executive managers’ engagement levels in implementing corrective
actions and in strengthening the control framework across all our sites. The focus of
assurance activities during the year has been on post Covid-19 controls’ culture across the
group’s locations and key strategic and emerging risks. Establishing site extended audits
re-evaluated and re-assessed how our businesses adjusted to the new realities and how the
control mindset has been applied across a selection of our sites. It was expected that in this
changed landscape, the audits would uncover some weaknesses; however they have also
allowed us to see how the businesses have managed the challenges caused by the
extraordinary measures implemented during that period. One issue highlighted was the need
for further training and awareness around certain controls, systems and simplification of
processes. The comprehensive improvement programme across our financial and operational
controls, sponsored by the CFO, has been established to raise awareness and simplify the
requirements. The GAR team has also undertaken various ‘lessons learnt’ activities, including
for major business decisions and capital investment projects. The recommendations have
been captured and are being implemented by the business and transformation office.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Audit Committee Report continued
We continually review the effectiveness of the GAR function, using inputs including audit
reports, management’s response to audit actions and discussions over risk exposures. We look
at whether the function has adequate standing across the group, is free from management
influence or other restrictions and is sufficiently resourced.
An independent external quality assessment (EQA) of the Internal Audit function within
GAR was undertaken by EY last year. As a result, the function has worked through the actions
agreed to ensure it has become better aligned with the changing shape of the group. This is
a continuous activity for the function, underpinned by regular dialogue with management,
external auditors, and benchmarking within industry and beyond.
The integrated assurance mapping allows us to have a fuller understanding and visibility
of risk coverage in a consistent manner across the organisation. We aim to have a clearly
articulated link between levels of assurance and risk appetite across key organisational
and strategic risks.
Group assurance and risk annual plan
We review the GAR annual plan to ensure that it reflects challenges and changes to our
business. We are confident that it provides the appropriate level of assurance over the group’s
key risks.
When we reviewed the 2023/24 plan, we specifically considered whether it provided the level
of assurance over JM’s principal and operational risks and continues to contribute to the
improvement in our overall controls culture and maturity of the second line of defence.
The GAR annual plan is based on a risk-based audit universe covering areas of risk across
financial and operational functions including IT and transformation activities at group and
business levels. We consider a wide range of risks that fall into those areas including level of
change and transformation in the group and organisational culture. Close collaboration with
the business ensures it adds value to management with pragmatic and manageable action
plans. The plan also allows greater flexibility to ensure that the GAR team has capacity to deal
with unexpected events.
We believe our 2023/24 assurance plans are adequate for JM’s size and nature. It is our
opinion they will continue to provide the group with necessary focus on maturing controls
culture across business and IT processes. The quality and standing of GAR function is
appropriate to provide necessary challenge and support to the transforming organisation.
Risk management
We work with the Board to review and refine the risk assurance processes – including the
integrated assurance framework and control self-assessment. We concentrate on reviewing
the mitigating controls and the levels of assurance, while the Board is directly responsible
for managing risks and establishing levels of risk appetite for the group’s principal risks.
The GAR function carries out any additional assurance and reports back to the Committee.
Speak Up process
Every year, we review our Speak Up whistleblowing process to ensure procedures are
proportionate and independent. We reviewed the process and agreed that the procedures
allow proportionate and independent investigation and appropriate effective follow-up
action. We report the findings of this review to the Board as appropriate. The Societal Value
Committee reviews the outcomes of significant investigations and remedial actions.
More information on Speak Up can be found on page 42
External auditor
Auditor independence is an essential part of our audit framework and the assurance it provides.
We confirm ongoing compliance with the Competition and Markets Authority’s Statutory
Audit Services Order.
Tenure
Our shareholders appointed PwC as the group’s external auditor in July 2018, following a formal
tender process. This is the fifth year that PwC has audited the group, with Graham Parsons
as current lead audit partner. We have no immediate plans to retender the auditor; however
we anticipate that it would be carried out to coincide with when Graham Parsons is required
to rotate off after the 2027 audit, in accordance with the current regulation that requires
a tender every ten years. The proposed tender date is in the best interests of shareholders
and the Company as PwC has a detailed knowledge of our business, an understanding of our
industry, and continues to demonstrate that it has the necessary expertise and capability to
undertake the audit.
External audit plan
In developing the external audit plan for 2023, PwC carried out a risk assessment to identify
potential risks of material misstatement in the financial statements. This risk assessment
considered the nature, magnitude and likelihood of each identified risk, together with
relevant controls, to identify audit risks. Graham Parsons reviewed the plan with a fresh
perspective on the risk assessment. PwC refer to key audit matters in the independent
auditors’ report on pages 133 to 143, which formed the basis of the external audit plan.
In determining the scope of coverage, PwC considered management reporting, the group’s
legal entity structure, the 2022 financial results and the financial forecast for 2023. PwC set
out details of the coverage and the agreed scope in the independent auditors’ report on page
133. The methodology of assessing materiality was consistent with the prior year and agreed
at approximately 5% of the three-year average profit before tax adjusted for loss on business
disposals, loss on significant legal proceedings, major impairment and restructuring charges.
Following discussion and challenge, we concluded the proposed external audit plan was
sufficiently comprehensive for the audit of the group’s accounts and approved the proposed fee.
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Audit Committee Report continued
How we review PwC’s performance
Throughout the year, we review the ongoing effectiveness and quality of PwC and the audit
process. We look at several factors: the auditors’ reports to the Committee; Graham Parsons
and the PwC team’s performance in and outside committee meetings; how the PwC team
interacts with and challenges management; and on PwC’s efforts at building relationships
with our Internal Audit team. We ensure that we spend sufficient time with the auditors
without management present as part of our assessment.
We considered how PwC challenged management’s judgements and assumptions on matters
highlighted on pages 98 and 99, and asked PwC to confirm if those matters had been
addressed correctly by management. Following detailed analysis of the assurance completed,
PwC agreed with management’s judgements and assumptions.
How we gather feedback on the effectiveness of our
external auditor and external audit process
Third-party reviews
• External reviews of PwC by the FRC’s AQR team and the Quality Assurance Department
of The Institute of Chartered Accountants in England and Wales
Information provided by the auditor
• Details on the audit plan delivery and any changes to the scope of work
• Assurance on the operation of PwC’s audit quality control procedures and insight into
their outcomes as they relate to the audit and key members of audit team
Management feedback
• Survey of audit quality and effectiveness by executive directors and senior management
including recommendations for improvement
• Seek assurance on the disclosure process for the provision of information to the auditor
Committee assessment
• Quality of regular audit reports
• Feedback from committee members and regular attendees, including the Director
of Group Finance and the Group Assurance and Risk Director
102
We seek direct feedback from the independent Quality Review Partner to review its assessment
of PwC’s key planning judgements and the execution of PwC’s response to significant risks and
reporting. We also ask PwC to share with us the results of their internal quality inspections of the
audit as well as those conducted by the FRC. In addition, we feel it is important to understand
management’s opinion of audit quality and effectiveness: the executive directors and senior
management complete a questionnaire on the external auditor each year.
Provision of non-audit services
Our Non-Audit Services Policy ensures the provision of non-audit services is no threat to PwC’s
independence and objectivity as an auditor. In accordance with the FRC’s Revised Ethical
Standard 2019, the auditor can only provide additional services directly linked to the audit.
Our policy sets out how approval should be obtained before PwC is engaged to provide a
permitted non-audit service. Services likely to cost £25,000 or less must be approved by the
Chief Financial Officer; services likely to cost more than £25,000 but less than £100,000 must
be approved by the Committee Chair. Services likely to cost over £100,000 must be approved
by the Committee.
We reviewed compliance with the Non-Audit Services Policy, the provision of non-audit
services, details of the non-audit services provided by PwC and associated fees. Audit-related
assurance services reported as non-audit services related to the review of half-year financial
information and reporting, amounting to £325,000, other non-audit services in the year
were £28,200, in total representing 8% of the audit fee, compared with audit fees of
£4.64 million. More information on fees incurred by PwC for non-audit services, as well as
the split between PwC’s audit and non-audit fees, are in note 4 to the accounts, on page 169.
Objectivity and independence
We are responsible for monitoring and reviewing the objectivity and independence of PwC.
We considered the information provided by PwC, confirming that no PwC employees involved
with the audit have links or connections to JM, and that they complied with the FRC’s Revised
Ethical Standard. We conclude that PwC is independent.
Proposed re-appointment of PwC
Following our assessment, we believe that PwC provides a robust audit and valuable technical
knowledge and is free from third-party influence and restrictive contractual clauses.
As a result, we have included a resolution proposing PwC’s re-appointment as auditor and
authorised the Committee to determine PwC’s remuneration in our Notice of AGM.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Committee report
“Our Directors’
Remuneration Policy has
been designed to
incentivise and reward for
delivering sustainable value
creation and long-term
growth. This will be
achieved through a
combination of business
transformation and
strategic execution all
underpinned by a high-
performance culture.”
Membership
All six of our independent non-executive directors sit on the Remuneration Committee.
Members’ attendance at committee meetings during the year is on page 75
Regular attendees at committee meetings
• Chief Executive Officer
• Chief HR Officer
• Group Total Reward, Wellbeing & People Services Director
The committee’s Terms of Reference set out its full responsibilities
matthey.com/governance-framework
Key activities during 2022/23:
• Triennial review of the Directors’ Remuneration Policy
• Reviewed our short and long-term incentives and their alignment to the company’s
strategy
• Reviewed broader employee total reward, including pay equity and benchmarking
Our focus areas for 2023/24:
• Oversee the implementation of the new Directors’ Remuneration Policy
• Set the incentive plan performance targets for the upcoming year
• Continued focus on broader employee remuneration
Introduction
I am pleased to present our Annual Report on remuneration for the year ended 31st March
2023. This report is divided into three sections, i) my annual statement, ii) the Directors’
Remuneration Policy being put to shareholders at the 2023 Annual General Meeting,
and iii) our Annual Report on remuneration for the year ended 31st March 2023.
Our approach to remuneration
Our overall purpose at Johnson Matthey is catalysing the net zero transition. We currently
have an important role to play in this process through the application of our sustainable
technologies, products and services. We will have an increasingly important role to play
as we further commercialise long-term sustainable technologies, including our portfolio
of hydrogen technologies, that will enable decarbonisation and enhance circularity.
This year has been a year of progress in delivering on our strategy following the appointment
of our current Chief Executive Officer, Liam Condon, in March 2022. We have simplified
our portfolio of businesses and have also implemented a revised business reporting structure
with Catalyst Technologies and PGMS now identified separately and, in addition, we have
strengthened our senior leadership team. These changes, in conjunction with establishing
a higher performance culture, create a strong platform for delivering on our purpose
and strategy.
In the context of the above, undertaking our triennial Directors’ Remuneration Policy review
was timely given the need to determine if our remuneration structures remained appropriate
as we look to the future. In undertaking the review, we took feedback from both internal and
external stakeholders, along with benchmarking our remuneration practices, and concluded
that the focus on long-term performance within our current remuneration policy remained
appropriate to our purpose and strategy. As a result, the committee was comfortable
retaining our current pay model and philosophy, and so the changes we are making are
limited to ensuring our performance metrics better align with our reinvigorated strategy
and we simplify our approach where possible.
Overview of company performance
In the face of a challenging environment brought on by political and economic uncertainty,
our Chief Executive Officer and the senior leadership team have delivered a robust underlying
financial performance and made good progress against our strategic milestones.
During the year, Clean Air was impacted by automotive customers constraining their production
volumes, and PGMS was impacted by lower precious metal prices and lower refinery intake
volumes due to lower scrap levels with the semi-conductor chip shortage creating a buoyant
second-hand car market. However, we’ve made good progress on our group transformation
and cost reduction targets; have made excellent progress with Euro 7 business wins in Clean
Air, and several new large-scale project wins in our Catalyst Technologies business.
Johnson Matthey | Annual Report and Accounts 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Remuneration Committee report continued
In addition, in January 2023 we entered a long-term strategic partnership with Plug Power,
a leading provider of turnkey hydrogen solutions for the global green hydrogen economy,
to accelerate the deployment of fuel cells and electrolysers (green hydrogen). This partnership
is evidence of clear progress towards JM’s published milestone in Hydrogen Technologies and
will significantly contribute towards JM’s 2030 target for 50 million tonnes of GHG emissions
avoided per year.
In the context of a challenging market environment, and the progress made against our
long-term strategy, the committee considered the level of payout from our incentive plans
as appropriate.
2022/23 incentive plan outcomes
The Committee always seeks to ensure that there is a clear link between pay and
performance. Additionally, we will continue to focus on setting stretching performance
targets and consider the performance of the wider business and individual accomplishment
over the period, including how the performance was delivered. In that context, we believe
that the payments outlined in this report fairly reflect the performance achieved.
Annual Incentive Plan (AIP)
The maximum bonus opportunity for 2022/23 remained unchanged at 180% of salary
for the Chief Executive Officer and 150% of salary for the Chief Financial Officer. The bonus
was based on underlying PBT (50%), working capital (20%) and strategic and transformation
objectives (30%).
Based on a robust underlying financial performance, the outcome of our AIP results in a
bonus of 75% of maximum is payable to both Liam Condon and Stephen Oxley. The
committee is comfortable that the outcome of the bonus is appropriate and so no discretion
has been applied. One half of the bonus payable will be deferred in shares for a period of
three-years. More details on the performance against the annual targets and strategic
objectives are set out on page 121.
Performance Share Plan (PSP)
Neither Liam Condon or Stephen Oxley have any Performance Share Plan (PSP) awards that
were eligible to vest in respect of the three-year performance period ending 31st March 2023.
The PSP award granted on 1st August 2020 was based on challenging earnings per share and
total shareholder return performance targets for the three-year period ending 31st March
2023. The outcome of this award was a performance below the threshold targets. As a result,
there is no vesting for either executive directors or any other participants in the PSP. The
committee was comfortable that the formulaic outcome is appropriate and so no discretion
has been applied.
Overall, the committee is satisfied that the Remuneration Policy operated as intended
during the year.
Directors’ Remuneration Policy
The 2023 AGM marks the three-year anniversary of our current Remuneration Policy.
As a result, we will be seeking shareholder approval for an updated Remuneration Policy
at our forthcoming AGM.
During the year a full review process was undertaken that considered the pay model, the
historic relationship between performance and reward, the alignment between performance
metrics and strategy, and alignment with institutional investors’ best practice. All of this was
considered in light of our reinvigorated strategy.
Having had regard to these factors, with the current Remuneration Policy operating
effectively against each of the review criteria, the committee concluded that subject to some
minor refinements to the approach to target setting and the choice of performance metrics,
the current Remuneration Policy would be largely retained. A summary of the minor changes
to the policy are set out on page 107.
Applying the Remuneration Policy in 2023/24
Base salary
With high inflation impacting the cost of living, the company set aside a higher pay budget
for its annual pay awards in July 2022 with a greater portion of the budget set aside for
non-management roles. In addition, the company paid a temporary monthly allowance
to employees below a certain earnings level to provide additional support until June 2023.
The pay budget for the forthcoming year has also been set at a higher level compared
to historic norms given that the cost-of-living pressures continue in many countries. Again,
a greater proportion of the budget is being allocated to lower paid employees. For example,
for the coming year the UK salary budget for non-management roles is 5.25% and for
management roles is 4.0%.
With regard to the salary increase for executive directors the committee considered the
UK salary budget for the forthcoming year and deemed it appropriate that the salary increase
awarded to executive directors should be at a discount to that awarded to other employees.
As such executive director salaries were increased by 3.5% with effect from 1st April 2023.
AIP
The maximum opportunity will remain at 180% of salary for the CEO and 150% of salary for
the CFO, and the target will continue to be set at 50% of the maximum. However, the payout
for threshold performance will reduce from 15% of maximum (equivalent to 30% of target)
to 25% of the target bonus opportunity, which represents a modest toughening of the bonus
structure. This change is being made for all participants in our annual incentive plans and will
result in greater focus on delivery against the group’s targeted performance levels.
The performance targets for executive directors will be based on group underlying PBT
(50%), working capital days (20%) and strategic targets (30%) that are aligned with
delivering against our transformation strategy.
104
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Committee report continued
PSP
The Remuneration Committee intends to grant awards at the same level as in 2022/23,
being 250% and 175% of salary for the CEO and CFO respectively.
The performance measures will continue to be a combination of growth in underlying EPS
(30%), relative total shareholder return (versus the FTSE 31 to 100 companies but excluding
those in financial services) (40%), and strategic and sustainability objectives (30%). The main
change compared to the awards granted last year is a greater weighting to the strategic and
sustainability targets (up from 20%) which reflects the strategic priorities over the next
three-year period.
The EPS growth targets to apply to the awards are considered similarly challenging to the
targets set in prior years. However, in recognition of ongoing uncertainty and volatility in
external markets, we have set a wider range of targets versus historic awards.
Our strategic and sustainability targets are focused on increasing the GHG emissions avoided
through the use of our products and solutions, reducing our own GHG (Scope 1 and Scope 2),
increasing the percentage of female representation across our management levels and
delivering a key business transformation associated with global business services.
Given our refreshed strategy will require investment over the coming years, a final change to
the PSP awards is the removal of the discretionary return on invested capital (ROIC) underpin.
However, the Committee retains discretion to adjust the vesting outcomes based on
underlying performance and having had regard to ROIC.
Prior to granting the 2023/24 PSP award the committee intends to undertake a final review
of the performance targets allowing for the prevailing market conditions versus the time at
which the proposed targets were set. Full details of the intended awards are set out on page
122.
Chair and non-executive director fees
The fees payable to the Chair and non-executive directors are reviewed annually. In line with
the increase in base salaries for executive directors, the Chair fee and non-executive director
base fee will be increased by 3.5% from 1st April 23 (lower than the increase to the wider
workforce). The additional premiums for acting as a Chair of a committee were also
reviewed and increased.
Wider employee remuneration
Paying our employees fairly for their role, skills, experience and performance is central to our
approach to remuneration, and our reward framework and policies support us in doing this.
Equal pay is also critical, and we review our pay levels on an ongoing basis to ensure that
employees are paid fairly. During the year we reviewed a global analysis, conducted by an
independent reward consultancy (Willis Tower Watson) on pay levels and pay equity across
the organisation, which showed that nearly 95% of roles are paid fairly, and we continue
to make targeted actions to remove any form of potential inequality. We are also committed
to the real living wage and narrowing the gender pay gap that exists among our employees,
Johnson Matthey | Annual Report and Accounts 2023
and to tackling the root causes of gender imbalance to ensure a truly inclusive culture that
supports diversity. Our commitment in this area has resulted in a reduction in our gender pay
gap in the UK from 9.2% to 5.6% over the past few years, and we are starting to make
progress in other countries.
We aspire to offer a well-balanced, progressive and structured approach to reward, with
appropriate variation by location. We also find that the non-financial reward elements are
essential to a supportive culture, with the wellbeing of staff a prominent part of our
employment proposition.
This year, all employees were able to provide their feedback on a range of matters, including
remuneration, through The Big Listen, our annual employee engagement survey (YourSay)
and local and global town hall meetings. This provided valuable employee context to decision
making when considering changes to the Remuneration Policy and how the company
rewards employees for the impact of their contributions.
Shareholder engagement
Ahead of the 2023 AGM, we engaged with our largest investors as well as Institutional
Shareholder Services (‘ISS’), The Investment Association (‘IA’) and Glass Lewis, to understand
their views on our proposed new policy and the proposed implementation in 2023/24.
The feedback we received was supportive of retaining our current approach to directors’
remuneration and the minor refinements we proposed.
2023 AGM
I would like to thank shareholders for their input and engagement during the year in relation
to the Remuneration Policy. We believe that our policy remains simple, transparent and
effective, strongly supporting our business strategy with remuneration outcomes aligned
to the shareholder experience.
I ask you to support the binding vote on Directors' Remuneration Policy and the advisory vote
on this Annual Statement and the 2023 Annual Report on Remuneration at our AGM on
20th July 2023. This AGM will be my last as Chair of the Remuneration Committee as I stand
down as Committee Chair with effect from the upcoming AGM but will continue on the Board
until January 2024 when I will retire from the Board. I’m pleased to advise that John O’Higgins
will take-over from me as the Chair of the Remuneration Committee following our AGM.
We welcome an open dialogue with our shareholders, and I will be available at the meeting
to answer any questions about the work of the Remuneration Committee.
Chris Mottershead
Chair of the Remuneration Committee
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration at a glance
Aligning remuneration
with strategy
We will use our deep knowledge of metals
chemistry to help our customers address the
complex technical challenges of the four
transitions – transport, energy, decarbonising
chemicals production and a circular economy
– by delivering sustainable products, services
and technologies.
Our strategic objectives
KPIs
Invest in growth areas targeted
at climate change and circularity
Manage our established businesses
to support growth
Promote a fast-paced, efficient
business and high-performance
culture
Group profit before tax
Annual Incentive Plan
Group working capital days
Annual Incentive Plan
Earnings per share
Performance Share Plan
Total shareholder return1
Performance Share Plan
Sustainability-related KPI2
Performance Share Plan
1. Measure included in awards from 2020 onwards
2. Sustainability KPI added in 2022
2023 pay outcomes
The pay breakdowns for the executive directors in 2021/22 and 2022/23 are set out below:
Liam Condon1 — Chief Executive Officer
Stephen Oxley2 — Chief Financial Officer
1373
1274
21/22
115
22/23
Element
Fixed pay (£’000)
Salary
Benefits
Pension
Variable pay (£’000)
Annual Incentive Plan
Performance Share Plan
665
689
607
650
2021/22
2022/23
79
24
12
0
0
950
280
143
1,274
0
21/22
22/23
Element
Fixed pay (£’000)
Salary
Benefits
Pension
Variable pay (£’000)
Annual Incentive Plan
Performance Share Plan
2021/22
2022/23
565
15
85
607
0
582
20
87
650
0
1. Liam Condon was appointed Chief Executive Officer on 1st March 2022
2. Stephen Oxley was appointed Chief Financial Officer on 1st April 2021
Outcomes of variable remuneration1
Annual bonus
Profit before tax
Working capital days (excluding PGMs)
Working capital days (including PGMs)
Strategic objectives
Total
Performance Share Plan
Compound annual growth rate in earnings per share
Total Shareholder return
1. Liam Condon and Stephen Oxley did not hold any 2020–23 Performance Share Plan awards
106
Weighting
50%
10%
10%
30%
100%
50%
50%
Liam Condon
Stephen Oxley
Formulaic outcome
(% base salary)
Formulaic outcome
(% base salary)
81.0%
18.0%
8.1%
27.0%
134.1%
-
-
67.5%
15.0%
6.7%
22.5%
111.7%
-
-
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Remuneration Policy
Set out below is a summary of the modest revisions to apply to the 2023 Directors’
Remuneration Policy when compared against the policy approved at the 2020 AGM.
The table that follows describes each component of the Directors’ Remuneration Policy,
its purpose and link to strategy, how it works, the opportunity, boundaries and performance
measures and any clawback or withholding conditions that apply. The policy was informed
by consultation with key stakeholders, including our institutional investors and shareholder
advisory bodies.
Subject to approval, the policy will apply for three years from the 2023 AGM. The key changes
to the policy are set out below:
• The payout for achieving the threshold performance target under the AIP is to be reduced
to 25% of the target opportunity. It was previously 15% of the maximum opportunity,
Remuneration Policy Table
Purpose and link to strategy
Operation (and changes if appropriate) of the element
which is equivalent to 30% of the target opportunity. This change represents a modest
toughening of the bonus structure and affects all participants in our annual incentive plans
and will result in greater focus on delivery against the Group’s targeted performance levels.
• The threshold vesting percentage for each performance measure within the long-term
PSP will be set at the time of each award having regard to the targets set. The vesting at
threshold for each performance measure will be no more than 25%. For example, if the
committee set a broader range of EPS targets than in prior years this may result in threshold
vesting being as low as 0% as opposed to 15% (or higher) for that part of the award.
• Given our refreshed strategy will require investment over the coming years there will be
no defined ROIC underpin applied to future PSP awards. Instead, the committee will be able
to take ROIC performance into account as part of a broader discretion to adjust vesting
outcomes based on an overall assessment of company performance.
Base salary
Base salary is the basic pay for
doing the job. Its purpose is
to provide a fair and competitive
level of base pay to attract and
retain individuals of the calibre
required to lead the business.
Benefits
Benefits are provided to support
the director in his or her
performance in the role. They
help to remove certain day-to-day
concerns from executive directors,
to allow them to focus on
managing and directing the
business. In general, benefits will
be restricted to the typical level
in the relevant market for an
executive director.
Pension
Provides for post-retirement
remuneration, ensures that the
total package is competitive
and aids retention.
Base salaries will normally be reviewed annually, and any changes normally take effect from 1st April each year.
In determining salaries and salary increases, the Remuneration Committee will take account of the performance of the
individual director against a broad set of parameters including financial, environmental, social and governance issues.
The Remuneration Committee will also take into account the director’s knowledge, contribution to the role, length
of time in post, and any additional responsibilities since the last salary review, as well as the level of salary increases
awarded to the wider Johnson Matthey workforce.
Salaries across the group are benchmarked against a comparator group of similarly sized companies, predominantly within
the FTSE, with a comparable international presence and geographic spread and operating in relevant industry sectors.
New appointments or promotions will be paid at a level reflecting the executive director’s level of experience in the
particular role and experience at board level. New or promoted executive directors may receive higher pay increases
than typical for the group over a period of time following their appointment as their pay trends toward an appropriate
level for their role.
Potential value of element and performance measures
Maximum opportunity
No salary increase will be awarded which results in a base
salary which exceeds the competitive market range considered
appropriate by the committee for the role.
Details of the current salaries for the executive directors
are included in the Annual Report on Remuneration on
(see page 119).
Benefits include, but are not limited to, medical, life and income protection insurance, medical assessments, company
sick pay, and a company car (or equivalent).
Other appropriate benefits may also be provided from time to time at the discretion of the Remuneration Committee.
Directors’ and officers’ liability insurance is maintained for all directors.
Directors who are required to move for a business reason may, where appropriate, also be provided with benefits such
as relocation benefits (e.g. the provision of accommodation, transport or medical insurance away from their country
of residence) and schooling for dependants. The company may pay the tax on these benefits.
Directors may be assisted with tax advice and tax compliance services.
The company will reimburse all reasonable expenses (including any associated tax charges) which the executive
director is authorised to incur while carrying out executive duties.
Benefits are not generally expected to be a significant part
of the remuneration package in financial terms.
Car benefits will not exceed a total of £25,000 per annum.
The cost of medical insurance for an individual executive director
and dependants will not exceed £25,000 per annum.
Company sick pay is 52 weeks’ full pay.
All executive directors will be eligible to participate in a company pension plan and/or paid a cash supplement in lieu
of membership in a pension plan.
The maximum company contribution is 15% of base salary for
executive directors. This is aligned to the typical cost of providing
pension benefits to other employees in the UK. To the extent
there is a reduction in this typical cost the company’s contribution
for executive directors will reduce.
107
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Purpose and link to strategy
Operation (and changes if appropriate) of the element
Potential value of element and performance measures
Annual Incentive Plan
The AIP provides a strong
incentive aligned to strategy
in the short term. It allows
the board to drive and reward
both financial and non-
financial metrics, including
leadership behaviours, in
order to deliver sustainable
growth in shareholder value.
The AIP bonus plays a key part
in the motivation and
retention of executive
directors, one of the key
requirements for long-term
growth.
Bonus deferral as well as
malus and clawback
provisions ensure that
longer- term considerations
are properly taken into
account in the pursuit of
annual targets.
Performance Share Plan
The Performance Share Plan
(PSP) is designed to ensure
that executives take decisions
in the interest of the
longer-term success of the
group. Having measures that
look at profitable growth and
performance relative to a
comparator group over the
longer term ensures that the
interests of executives are
aligned with shareholder
interest for long-term value.
The Remuneration Committee sets the AIP performance measures and targets for each new award cycle.
At the end of the year, the committee determines the extent to which these have been achieved. The
committee retains the discretion to reduce any bonus award if, in its opinion, the underlying financial
performance of the company has not been satisfactory in the circumstances.
Deferral
Of any bonus paid, up to 50% is paid in cash and the remaining balance is deferred into shares for a
three-year period as an award under the deferred bonus plan. As defined in the relevant plan rules, no
further performance conditions apply to awards under the Deferred Bonus Plan. Dividends that accrue on
the deferred shares during the vesting period will be paid in either cash and/or shares at the time of vesting.
Malus and Clawback
The cash and deferred elements of the bonus are subject to malus and clawback provisions such that they
can be forfeited or recouped in part or in full in the event of a misstatement of results, error in the
calculation, misconduct by the individual or serious reputational damage.
Adjustments
The Remuneration Committee retains discretion to change the performance targets if there is a significant
and/or material event which causes the committee to believe the original targets are no longer appropriate
(e.g. to reflect material acquisitions or disposals).
The Remuneration Committee also retains discretion to amend the level of annual bonuses determined
by the performance condition to seek to ensure that the incentive structure for executive directors does
not raise environmental, social and governance risks by inadvertently motivating irresponsible behaviour.
For example, reducing or eliminating bonuses where the company has suffered reputational damage
or where other aspects of performance, including leadership behaviour, have been unacceptable.
The Remuneration Committee retains the ability to increase bonus awards from the formulaic outcome
where there is identifiable and exceptional performance by the executive director. Bonus payments in such
circumstances would remain within the maximum bonus opportunity and shareholders would be fully
informed of the justification.
Shares may be awarded each year and are subject to performance conditions tested over a minimum
three- year performance period. Subject to the performance conditions being met the shares will vest after
which the directors will be required to hold any vested shares until the fifth anniversary of the award.
The performance targets are set by the Remuneration Committee based on internal and external growth
forecasts to ensure they remain appropriate and aligned with shareholder expectations.
The awards are granted in accordance with the rules of the plan approved by shareholders. The maximum
award level is 250% of base salary. Awards may be granted in the form of conditional shares, nil or nominal
cost options or cash (where the awards cannot be settled in shares). Dividends that accrue during the
post-vesting holding period will be managed in accordance with our dividend re-investment process.
Malus and clawback
PSP awards are subject to malus and clawback provisions that can apply in the case of a misstatement of
results, error in the calculation, misconduct by the individual, serious reputational damage, failures of risk
management or corporate failure.
Maximum opportunity and vesting thresholds
• Chief Executive Officer – 180% of base salary.
• Other executive directors – 150% of base salary.
Where financial measures are set the threshold performance level will
result in a bonus of up to 25% of the target bonus opportunity. On-target
performance will result in 50% payment of the maximum opportunity.
Where non-financial targets are set, it may not be practicable to set targets
on a sliding scale.
Performance measures
Bonuses are based on the achievement of demanding financial and, where
appropriate, non-financial targets. The committee may use different
performances and/or weightings for each performance cycle as
appropriate to take into account the strategic needs of the business.
However, a substantial proportion (i.e. at least 60%) will be based on key
financial measures, for example, underlying PBT.
Targets are set applying a robust bottom-up process to achieve full
accountability. The financial performance targets are retrospectively
published in the immediately following Annual Report on Remuneration.
Details of last year’s bonus awards are on pages 106 and120.
The performance period for annual bonus purposes matches the financial
year (currently 1st April to 31st March).
Award levels and vesting thresholds
The maximum award level is 250% of salary.
The current award levels are:
• Chief Executive Officer – 250% of base salary
• Other Executive Directors – 175% of salary.
Threshold performance will result in vesting of up to a maximum of 25%
for each performance measure. The actual threshold vesting will depend
on the performance metric and the performance range set for the specific
award. Vesting at maximum is 100% of the relevant part of the award,
increasing on a graduated scale.
108
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Purpose and link to strategy
Operation (and changes if appropriate) of the element
Potential value of element and performance measures
Performance Share Plan (continued)
Adjustment
The Remuneration Committee has the power to adjust the annual award level, for example in the event
of a material fall in share price, as well as the power to adjust the vesting level of an award based on the
underlying performance of the company.
The committee may adjust the performance measure to reflect material changes (e.g. significant
acquisitions or disposals, share consolidation, share buy-backs or special dividends). Any such change
would be fully explained to shareholders.
All employee share plan
Encourages share ownership
Executive directors are entitled to participate in the company’s all-employee plan under which regular
monthly share purchases are made and matched with the award of company shares, subject to
retention conditions.
Executive directors would also be entitled to participate in any other all-employee arrangements that
may be established by the company on the same terms as all other employees.
Performance measures
PSP awards vest over a minimum three-year performance period and will
be subject to financial and/or shareholder return targets. In addition,
strategic and/or sustainability targets may be included in future awards.
In all cases, the majority of the award will remain linked to financial
and/or shareholder return targets.
It is expected that during the policy period the following three metrics
will form the majority of awards:
a) The compound annual growth rate (CAGR) of underlying EPS;
b) The Total Shareholder Return (TSR) relative to a comparator group
(e.g. the FTSE 31-100 excluding financial services companies);
c) Strategic and/or sustainability targets.
Vesting is also subject to a broad committee discretion that will enable
the committee to adjust the extent to which an award vests by exercising
appropriate discretion to the formulaic outcomes in order to reflect
the wider financial performance and / or circumstances of the group.
The prospective weightings, targets and measures for the year
commencing 1st April 2023 are shown on page 122.
The Remuneration Committee retains the discretion to amend the
weightings, targets and the performance measures detailed on page 122
for future awards as appropriate to reflect the business strategy.
Executive directors are entitled to participate up to the same limits in force
from time to time for all employees.
Johnson Matthey | Annual Report and Accounts 2023
109
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Purpose and link to strategy
Operation (and changes if appropriate) of the element
Potential value of element and performance measures
Shareholding requirements
To encourage executive
directors to build a
shareholding in the company
and ensure the interests of
management are aligned with
those of shareholders
Non-executive director fees
To attract, retain and motivate
non-executive directors with
the required knowledge and
experience.
Executive directors are expected to build up a shareholding in the company over a reasonable period
of time, and upon cessation of employment are expected to retain a shareholding for a period of up
to two years.
Shares that count towards achieving these guidelines while an executive director include: all shares
beneficially owned by an executive director, or a person connected to the executive as recognised by the
Remuneration Committee; deferred bonus shares and PSP awards which have vested and so are no longer
subject to performance conditions but are within a holding period.
Executive directors are expected to retain at least 50% of the net (after tax) vested shares that are released
under the PSP and Deferred Bonus Plan until the required levels of shareholding are achieved.
Executive directors are not required to make personal share purchases should awards not meet the
performance conditions and so a newly appointed director may take longer to reach the expected level,
depending on the company’s performance against targets over the period. In addition, a director who
ceases employment with the company is not required to purchase shares to satisfy the post-cessation
shareholding requirement.
Non-executive director fees are determined by the board and the non-executive directors exclude
themselves from these discussions.
The fees for the Chair are determined by the Remuneration Committee taking into account the views of the
Chief Executive Officer. The Chair excludes himself from these discussions.
Non-executive directors are paid a base fee each year with an additional fee for each committee Chair or
additional role held.
Non-executive director fees are reviewed every year. Any increase will take into account the market rate for
the relevant positions within the comparator group of similarly sized companies with a comparable
international presence and geographic spread and operating in relevant industry sectors and the
experience of the individuals and the expected time commitment of the role.
In exceptional circumstances, additional fees or non-executive benefits (e.g. assistance with tax filings or
an allowance for intercontinental travel including any associated tax) may be payable to reflect a
substantial increase in time commitment.
The company will also reimburse the Chair and non-executive directors for all reasonable expenses
(including any tax thereon) incurred while carrying out duties for the company.
The minimum shareholding requirement while an executive director
and for the two-year period after cessation of employment is as follows:
• Chief Executive Officer – 250% of base salary.
• Other executive directors – 200% of base salary.
If the executive director has not been able to build up their shareholding
prior to cessation they are not required to purchase shares upon cessation
to satisfy the requirement.
There is no requirement for non-executive directors to hold shares,
but they are encouraged to acquire a holding over time.
Details of the current fee levels for the Chair and non-executive directors
are set out in the Annual Report on Remuneration on page 119.
The fee levels are set subject to the maximum limits set out in the
company’s Articles of Association.
110
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
The committee is responsible for determining, and agreeing with the board, the Directors’ Remuneration Policy and has oversight of its implementation. The committee has clear terms
of reference, works with management and independent advisers to develop proposals and recommendations, and exercises independent judgement when making decisions. This process
is considered to manage any potential conflicts of interest.
The policy is performance focused and, given the long-term nature of JM’s business, is weighted towards long-term performance and includes market standard shareholding expectations
and recovery and withholding provisions.
The committee considered the principles listed in the 2018 UK Corporate Governance Code when reviewing the Directors’ Remuneration Policy and took these into account in its design
and implementation.
Clarity
Simplicity
Risk
Predictability
Proportionality
Remuneration arrangements have defined parameters which can be transparently communicated to shareholders and other stakeholders.
Remuneration arrangements for executive directors consist of:
• Salary, benefits, and a fixed pension contribution – set to reflect the typical rate provided to the UK workforce.
• Annual Incentive Plan (AIP), a portion of which is deferred into shares.
• Annual long-term Performance Share Plan (PSP) awards which provide focus on performance over the longer term.
Unnecessary complexity is avoided by the committee in operating the arrangements.
The remuneration arrangements are designed to have a robust link between pay and performance, thereby mitigating the risk of excessive reward. In addition,
behavioural risks are considered when setting targets for performance-related pay, and the arrangements have safeguards to ensure that pay remains appropriate,
including committee discretion to adjust incentive outturns, deferral of incentive payments in shares, recovery provisions and share ownership requirements.
To avoid conflicts of interest, committee members are required to disclose any conflicts or potential conflicts ahead of committee meetings. No executive director
or other member of management is present when their own remuneration is under discussion.
The committee set specific targets for different levels of performance which are communicated to the individuals and disclosed to shareholders.
The AIP and PSP have performance metrics that are aligned with the company’s KPIs, and the payouts reflect achievement against the targets. The committee
may reduce payouts under the AIP and PSP if they are not considered aligned with underlying performance. Safeguards are identified to ensure that poor
performance is not rewarded.
Alignment to culture
The directors’ remuneration arrangements are cascaded through the organisation ensuring that there are common goals. The committee reviews remuneration
arrangements throughout the company and takes these into account when setting directors’ remuneration.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Selection of performance targets
Annual Incentive Plan
Financial performance targets under the AIP are set by the Remuneration Committee
with reference to the prior year and to the budgets and business plans for the coming year,
ensuring the levels to achieve threshold, target or maximum payout are appropriately
challenging.
The performance targets for 2023/24 are predominantly based on financial measures
(70% of maximum opportunity) including budgeted underlying PBT and working capital
days to ensure that there is strong attention paid to delivery of current operational plans
and operational efficiency.
Commercial sensitivity precludes the advance publication of the actual bonus targets,
but these targets will be retrospectively published in the Annual Report on Remuneration
for 2023/24.
Performance Share Plan
The performance targets under the PSP are set to reflect the company’s longer-term
growth objectives at a level where the maximum represents genuine outperformance.
The performance measures are currently based on underlying EPS, TSR and strategic
objectives (including sustainability).
Underlying EPS is considered a simple and clear measure of absolute growth in line with
the company’s strategy.
TSR is considered a simple and clear performance relative to a comparator group
(FTSE 31-100 excluding financial services companies).
The strategic objectives will consist of four equally weighted metrics. For 2023/24,
three metrics will relate to our sustainability framework, and one will relate to a business
transformation objective.
Discretion
The Remuneration Committee can exercise discretion in a number of areas when operating
the company’s incentive plans, in line with the relevant rules of the plan. These include
(but are not limited to):
• The choice of participants
• The size of awards in any year (subject to the limits set out in the Directors’ Remuneration
Policy table)
• The extent of payments or vesting in light of the achievement of the relevant performance
conditions
• The determination of good or bad leavers and the treatment of outstanding awards
(subject to the provisions of the plan rules and the remuneration policy provisions)
• The treatment of outstanding awards and assessing performance in the event of a change
of control.
In addition, if events occur which cause the Remuneration Committee to conclude that any
performance condition is no longer appropriate, that condition may be substituted, varied or
waived as is considered reasonable in the circumstances, in order to produce a fairer measure
of performance that is not materially less difficult to satisfy.
112
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Remuneration scenarios
Below is an illustration of the potential future remuneration that could be received by each executive director for the year starting 1st April 2023, both in absolute terms and as a proportion of
the total package under different performance scenarios. The value of the PSP is based on the award that will be granted in August 2023. In developing the scenarios, the following assumptions
have been made:
Below threshold
Only fixed elements of remuneration (base salary, pension and benefits) are payable
Threshold
Target
Maximum
Maximum plus 50% share
price appreciation
Value of package
Liam Condon
Maximum with
50% share price appreciation
Maximum
Target
Threshold
Below threshold
Fixed elements of remuneration plus 25% of target bonus and 22% vesting of PSP award are payable
Fixed elements of remuneration plus 50% of maximum bonus and 60% vesting of PSP award are payable
Fixed elements of remuneration plus 100% of maximum bonus and 100% vesting of PSP award are payable
Maximum plus a 50% share price appreciation on the PSP award and Deferred Bonus Plan (DBP) award
Composition of package
Maximum with
50% share price appreciation
Maximum
Target
Threshold
Below threshold
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
20
40
60
80
100
Value £000
Stephen Oxley
Maximum with
50% share price appreciation
Maximum
Target
Threshold
Below threshold
Maximum with
50% share price appreciation
Maximum
Target
Threshold
Below threshold
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0
20
40
60
80
100
Base salary
Benefits
Pension
Bonus
DBP share price appreciation
PSP
PSP share price appreciation
Value £000
Johnson Matthey | Annual Report and Accounts 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Group employee considerations
The Remuneration Committee considers the directors’ remuneration, along with the
remuneration of the Group Leadership Team (GLT), in the context of the wider employee
population, and is kept regularly updated on pay and conditions across the group.
We aspire to offer a well-balanced, progressive and structured approach to reward,
with appropriate variation by location. We also find that the non-financial reward elements
are essential to a supportive culture, with the wellbeing of staff a prominent part of our
employment proposition.
The general principle for remuneration in Johnson Matthey is to provide a competitive
package of pay and benefits in all markets and at all job levels to attract and retain
high-quality and diverse employees. Equal and fair pay is also a critical component of our
proposition, and we regularly review our pay levels and develop actions to remove any form
of potential inequality. The proportion of variable pay increases with progression through
management levels, with the highest proportion of variable pay at executive director level,
as defined by the Remuneration Policy.
This year, all employees were able to provide their feedback on a range of matters, including
remuneration, through The Big Listen and our annual employee engagement survey
(YourSay). This provided valuable employee context to decision making when considering
changes to the Remuneration Policy. While we inform our employees of global changes
to pay and benefits, we have not actively sought a two-way dialogue over executive pay
during 2022/23.
Corporate Governance: matthey.com/corporate-governance
The table below sets out how our remuneration arrangements cascade through the organisation:
Executive directors
Senior managers
Middle managers
Managers
Wider workforce
Base salary
Base salary is set with reference to the relevant local market and takes account of the employee’s knowledge, experience and
contribution to the role. Base salaries are usually reviewed annually and take into account local salary norms, local inflation
and business conditions. Increases in base salary for directors will take into account the level of salary increases granted to all
employees within the group.
Employment-related benefits are offered in line with local market conditions.
Pension and benefits
Short-term incentives
Long-term incentives
Annual incentive based on
70% financial metrics plus
30% strategic objectives.
Compulsory deferral into
shares for three years.
PSP awards are subject to a
three-year performance
period and a two-year
holding period. Performance
conditions are designed to
drive company financial
performance and align with
stakeholder interests.
Annual incentive based on 70% financial metrics or strategic
business goals plus 30% individual performance.
Annual incentive based on
70% financial metrics or
strategic business goals, plus
30% individual
performance. Compulsory
deferral into shares for
three-years for certain levels
within this category.
PSP awards are subject to a three-year performance period.
Performance conditions are designed to drive company
financial performance and align with stakeholder interests.
RSP awards may be granted as special recognition or to
motivate and retain key talent. They are typically subject to a
three-year service condition.
Restricted Share Plan (RSP) awards may be granted as
special recognition or to motivate and retain key talent. They
are typically subject to a three-year service condition.
Base salary is either subject
to negotiation with local
trade unions or follows the
market pay approach
outlined for managers.
Annual incentive is either
subject to negotiation with
local trade unions or follows
the standard AIP framework
with financial, non-financial
and individual performance
measures used.
Eligible employees may participate in JM’s Share Incentive Plan (ShareMatch). Two free matching shares are awarded for every one partnership share
purchased by the employee, subject to an annual maximum employee contribution of £1,500.
114
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Remuneration Policy continued
Shareholder considerations
The committee has a standard annual agenda item whereby the feedback from shareholders
and investor advisory bodies is presented and discussed following the AGM. The Committee
Chair is also available for questions at the AGM. The feedback that the committee receives
then informs discussions for the formulation of future policy and subsequent remuneration
decisions. The committee is also regularly updated on the collective views of shareholders
and investor advisory bodies by its independent advisor.
As part of the policy renewal process, the Committee Chair consulted with major
shareholders, as well as proxy voting bodies and shareholder advisory groups. Based
on the feedback from our engagement, shareholders welcomed the proposed changes
to the remuneration policy and so no amendments were required to the proposed policy.
Approach to recruitment
The recruitment policy provides an appropriate framework within which to attract individuals
of the required calibre to lead a company of Johnson Matthey’s size, scale and complexity.
The Remuneration Committee determines the remuneration package for any appointment
to an executive director position, either from within or outside Johnson Matthey.
The following table sets out the various components which would be considered for inclusion
in the remuneration package for the appointment of an executive director and the approach
to be adopted by the Remuneration Committee in respect of each component.
In the case of an internal promotion to the board, the company will honour any contractual
commitments made prior to the promotion.
Area
Overall
Base salary or fees
Benefits and
pension
Annual Incentive
Plan
Performance
Share Plan
Replacement
awards buy-out
Policy and operation
The policy of the board is to recruit the best candidate possible for any board position and to structure pay and benefits in line with the Remuneration Policy set out in this report.
The ongoing structure of a new recruit’s package would be the same as for existing directors, with the possible exception of an identifiable buy-out provision, as set out below.
Salary or fees will be determined by the Remuneration Committee in accordance with the principles set out in the policy table on page 107.
An executive director will be eligible for benefits and pension arrangements in line with the company’s policy for current executive directors, as set out in the policy table
on page 107.
The maximum level of opportunity is as set out in the policy table on page107. The Remuneration Committee retains discretion to set different performance targets for a new
externally appointed executive director, or to adjust performance targets and/or measures in the case of an internal promotion, to be assessed over the remainder of the financial
year. In this case any bonus payment would be made at the same time as for existing directors, such award to be pro-rated for the time served in the performance period.
The maximum level of opportunity is as set out in the policy table on page 107. In order to achieve rapid alignment with Johnson Matthey’s and shareholder interests, the
Remuneration Committee retains discretion to grant a PSP award to a new externally appointed executive director on or soon after appointment if they join outside of the
normal grant period.
The Remuneration Committee retains discretion to grant replacement buy-out awards (in cash or shares) to a new externally appointed executive director to reflect the loss
of awards granted by a previous employer. Where this is the case, the Remuneration Committee will seek to structure the replacement award such that overall it is on an
equivalent basis to broadly replicate that foregone, using appropriate performance terms. If granted, any replacement buy-out award would not exceed the maximum set out
in the rules of the 2017 Performance Share Plan (350% of base salary).
Other
If the executive director’s prior employer pays any portion of the remuneration that was anticipated to be forfeited, the replacement awards shall be reduced by an equivalent
amount.
The Remuneration Committee may agree that the company will meet certain mobility costs and relocation costs including temporary living and transportation expenses,
in line with the company’s prevailing mobility policy for senior executives as described in the policy table on page 107.
Service contracts and policy on payment for loss of office
The following table summarises relevant key provisions of executive directors’ service contracts and the treatment of payments on termination of employment. The full contracts of service of the
executive directors (as well as the terms and conditions of appointment of the non-executive directors) are available for inspection at the registered office of the company during normal business
hours as well as prior to and during the forthcoming AGM.
In exceptional circumstances, the Remuneration Committee may authorise, where it considers it to be in the best interests of the company and shareholders, entering into contractual
arrangements with a departing executive director, for example a settlement, confidentiality, restrictive covenant or other arrangement, pursuant to which sums not set out in the following table
may become payable. Full disclosure of the payments will be made in accordance with the remuneration reporting requirements.
The table on the following page describes the contractual conditions pertaining to the contracts for Liam Condon and Stephen Oxley and for any future executive director.
Johnson Matthey | Annual Report and Accounts 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Summary of key provisions of executive directors’ service contracts and treatment of payments on termination
Liam Condon
Date of service agreement
10th November 2021
Date of appointment as director
1st March 2022
Employing company
Johnson Matthey Plc
Contract duration
Notice period
No fixed term.
No more than 12 months’ notice
Stephen Oxley
1st December 2020
1st April 2021
Post-termination restrictions
The contracts of employment contain the following restrictions on the director for the following periods from the date of termination of employment:
• non-compete – six months
• non-dealing and non-solicitation of client/customers – 12 months
• non-solicitation of suppliers and non-interference with supply chain – 12 months
• non-solicitation of employees – 12 months.
Summary termination –
payment in lieu of notice
(PILON)
The company may, in its absolute discretion, terminate the employment of the director with immediate effect by giving written notice together with payment
of a sum equivalent to the director’s base salary and the value of his contractual benefits as at the date such notice is given, in respect of the director’s notice
period, less any period of notice actually worked.
The company may elect to pay the PILON in equal monthly instalments. The director is under a duty to seek alternative employment and to keep the
company informed about whether they have been successful. If the director commences alternative employment, the monthly instalments shall be reduced
(if appropriate to nil) by the amount of the director’s gross earnings from the alternative employment. A PILON paid to a director who is a US taxpayer
would be in equal monthly instalments.
Termination payment – change
of control
If, within one year after a change of control, the director’s service agreement is terminated by the company (other than in accordance with the summary
termination provisions), the company shall pay, as liquidated damages, one year’s base salary, together with a sum equivalent to the value of the director’s
contractual benefits, as at the date of termination, less the period of any notice given by the company to the director.
Termination – treatment of
annual incentive awards
Annual bonus awards are made at the discretion of the Remuneration Committee.
Executive directors leaving the company’s employment will receive a bonus, pro-rata to service, unless the reason for leaving is resignation or misconduct.
Any bonus awarded would continue to be subject to deferral as set out in the Remuneration Policy.
In relation to deferred bonus awards which have already been made, shares will be released on the normal vesting date unless one of the following
circumstances applies, and subject to the discretion of the Remuneration Committee:
• the participant leaves as a result of misconduct; or
• the participant, prior to vesting, breaches one of the post-termination restrictions or covenants contained in their employment contract, termination
agreement or similar agreement.
In which case the deferred awards will lapse on cessation of employment.
The Remuneration Committee has the discretion to accelerate vesting of a deferred award if appropriate to do so to reflect the circumstances of the
departure. It is intended that this would only be used in the event of a departure due to ill health (or death).
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Remuneration Policy continued
Summary of key provisions of executive directors’ service contracts and treatment of payments on termination
(continued)
Termination – treatment of
long-term incentive awards
Liam Condon
Stephen Oxley
Employees, including executive directors, leaving the company’s employment will normally lose their long-term incentive awards unless they leave for
a specified “good leaver” reason (e.g. death, retirement), in which case their shares will be released on the normal release dates, subject to the performance
condition. The Remuneration Committee has discretion to accelerate vesting, in which case the performance condition would be assessed based on
available information at the time. In either case, unless the Remuneration Committee determines otherwise, the level of vesting shall be pro-rated to reflect
the proportion of the performance period which has elapsed to the date of leaving. In the post-vesting deferral period, only those who leave due to
misconduct will lose their shares.
Redundancy arrangements
Directors are not entitled to any benefit under any redundancy payments arrangement operated by the company.
Holiday
Upon termination for any reason, directors will be entitled to payment in lieu of accrued but untaken holiday entitlement.
Chair and Non-Executive Directors
The Chair and each of the non-executive directors have letters of appointment. The letters of appointment do not contain any contractual entitlement to a termination payment and the
non-executive directors can be removed in accordance with the company’s Articles of Association. Directors are required to retire at each AGM and seek re-election by shareholders.
The details of the service contracts, including notice periods, contained in the letters of appointment in relation to the non-executive directors who served during the year are set out in the table
below. Neither the Chair or the non-executive directors has provisions in his or her letter of appointment that relate to a change of control of the company.
Non-Executive Director
Patrick Thomas (Chair)
Jane Griffiths
Chris Mottershead
John O’Higgins
Xiaozhi Liu
Doug Webb
Rita Forst
Committee appointments
Date of appointment
Expiry of current term
Notice period by the individual
Notice period by the company
1st June 2018
31st May 2024
6 months
6 months
R N S
A R N S
A R N S
A R N S
A R N S
A R N S
A R N S
1st January 2017
31st December 2025
27th January 2015
26th January 2024
16th November 2017
15th November 2023
2nd April 2019
1st April 2025
2nd September 2019
1st September 2025
4th October 2021
3rd October 2024
1 month
1 month
1 month
1 month
1 month
1 month
A Audit Committee
R Remuneration Committee N Nomination Committee
S Social Value Committee
Johnson Matthey | Annual Report and Accounts 2023
1 month
1 month
1 month
1 month
1 month
1 month
117
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual Report on remuneration
Statement of shareholder voting
We carefully monitor shareholder voting on our Remuneration Policy and its implementation.
We recognise the importance of our shareholders’ continued support for our remuneration
arrangements.
The next table shows the results of the polls taken on the resolution to approve the
Remuneration Policy at the 2020 AGM and Annual Report on Remuneration at the
2022 AGM.
Resolution
Remuneration
Policy
Annual Report on
Remuneration
Number of votes cast
148,233,329
131,879,954
For
126,978,681
(85.66%)1
122,460,038
(92.86%)
Against
21,183,260
(14.29%)1
9,419,916
(7.14%)
Votes withheld
1,552,871
1,271,380
1. Percentage of votes cast, excluding votes withheld
The Remuneration Committee believes that the 85.66% vote in favour of the Remuneration
Policy at the 2020 AGM and the 92.86% vote in favour of the Annual Report on
Remuneration at the 2022 AGM showed strong shareholder support for the group’s
remuneration arrangements at that time.
This section provides details of how the Directors’
Remuneration Policy was implemented during 2022/23
and how we intend to apply it in 2023/24.
About the Remuneration Committee
All the independent non-executive directors sit on the Remuneration Committee, including
the group Chair, Patrick Thomas. Details of attendance at committee meetings during the
year ended 31st March 2023 are shown on page 75.
The Remuneration Committee’s Terms of Reference can be found at matthey.com/REM-
terms-of-reference. These include determination of fair remuneration for the Chief Executive
Officer, the other executive directors and the group Chair (no director participates in
discussions of their own remuneration). In addition, the committee receives
recommendations from the Chief Executive Officer on the remuneration of those reporting
to him, as well as advice from the Chief HR Officer, who acts as secretary to the committee.
Advisers to the committee
The committee appoints and receives advice from independent remuneration consultants
on the latest developments in corporate governance and market trends in pay and incentive
arrangements. The committee appointed Korn Ferry as adviser to the Remuneration
Committee after a competitive tender process in 2017. The total fees paid to Korn Ferry in
respect of its services to the committee during the year were £100,520 plus VAT. The fees
paid to Korn Ferry are based on the standard market rates Korn Ferry has for remuneration
committee advisory services.
Korn Ferry also provides consultancy services to the company in relation to certain employee
and benefit matters to those below the Board. Korn Ferry is a signatory to the Remuneration
Consultants Group Code of Conduct.
The committee is satisfied that the advice provided by Korn Ferry was independent and
objective and that the provision of additional services did not compromise that independence.
The committee is also satisfied that the team who provided that advice does not have any
connection to Johnson Matthey that may impair their independence and objectivity.
Herbert Smith Freehills is the committee’s legal adviser. There was no requirement during
2022/23 for Herbert Smith Freehills to provide advice to the committee. The committee is
aware that Herbert Smith Freehills is one of a number of legal firms that provide legal advice
and services to the company on a range of matters.
A statement regarding the use of remuneration consultants for the year ended 31st March
2023 is available at matthey.com/corporate-governance
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Remuneration for the year ended 31st March 2023
Single total figure table of remuneration (audited)
Our Remuneration Policy operated as intended over the year, and the table below sets out the total remuneration and breakdown of the elements each director received in relation to the years
ended 31st March 2023 and 31st March 2022. An explanation of how the figures are calculated follows the table.
Executive directors
Liam Condon2
Stephen Oxley
Non-executive directors
Patrick Thomas
Jane Griffiths3
Chris Mottershead
John O’Higgins
Xiaozhi Liu
Doug Webb
Rita Forst4
Base salary/fees
£’000
Benefits
£’000
Pension1
£’000
Total fixed remuneration
£’000
Annual incentive
£’000
Long-term incentive
£’000
Total variable
remuneration
£’000
Total remuneration
£’000
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
950
582
376
86
86
87
68
89
67
79
565
376
83
86
87
68
89
33
2805
20
24
15
143
87
12
85
1,373
689
-
-
-
-
-
-
-
–
–
–
–
–
–
–
-
-
-
-
-
-
-
–
–
–
–
–
–
–
376
86
86
87
68
89
67
115
665
376
83
86
87
68
89
33
1,274
650
–
607
-
-
-
-
-
-
-
–
–
–
–
–
–
–
-
-
-
-
-
-
-
-
-
–
–
–
–
–
–
–
–
–
1,274
650
–
607
2,647
1,339
115
1,272
-
-
-
-
-
-
-
–
–
–
–
–
–
–
376
86
86
87
68
89
67
376
83
86
87
68
89
33
1. Represents a cash allowance in lieu of a pension
2. Liam Condon was appointed to the Board as Chief Executive Officer on 1st March 2022
3. Jane Griffiths was appointed Chair of the SVC on 1st June 2021. 2022 fee pro-rated accordingly based on 2 and 10 months
4. Rita Forst was appointed to the Board on 4th October 2021
5. Liam Condon is entitled to certain allowances and benefits associated with his international relocation. These include housing (£180k), schooling and other family disturbance allowances (£70k)
Explanation of figures
Base salary/fees
Salary paid during the year to executive directors and fees paid during the year to non-executive directors.
Benefits
All taxable benefits, such as medical and life insurance, service and car allowances, mobility allowances, matching shares under the all-employee share incentive
plan and assistance with tax advice and tax compliance services, where appropriate.
Pension
The amounts shown represent the value of any cash supplements paid in lieu of pension membership.
Annual incentives
Annual bonus awarded for the year ended 31st March 2023. The figure includes any amounts deferred and awarded as shares.
Long-term
incentives
The 2023 figure represents the value of shares that satisfied performance conditions on 31st March 2023. The 2022 figure represents the value of shares that satisfied
performance conditions on 31st March 2022.
Johnson Matthey | Annual Report and Accounts 2023
119
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Annual bonus for the year ended 31st March 2023 (audited)
Liam Condon and Stephen Oxley were eligible for a maximum annual bonus of 180% of base
salary and 150% of base salary, respectively. The target bonus opportunity was set at 50%
of maximum and the threshold bonus opportunity was 15% of maximum.
set, the range should return to between 95% and 105% of target performance. The absolute
level of profit needing to be achieved was also reset to better reflect the more positive outlook
at the beginning of the year. The 2022/23 targets are considered similarly challenging, if not
more challenging than those set in 2021/22.
The performance measures and weightings for the annual bonus were as follows:
Liam Condon
Stephen Oxley
Percentage of bonus available
Group underlying
PBT
50%
50%
Group working
capital days1
20%
20%
Strategic
objectives
30%
30%
1. Group working capital days is split 50% total working capital (including PGMs) and 50% total working capital days (excluding PGMs).
Performance targets were set by looking at:
• Previous year financial performance.
• Budgets and business plans for 2022/23. These are built from the bottom up and
are subject to thorough challenge before being finalised by the board.
• Consensus of industry analysts’ forecasts, provided by Vara Research.
The strategic objectives were set based on well-defined key deliverables that support our
strategy relating to science, customers, operations and people.
Bonus outcomes
Based on performance against the targets, total bonuses for the year ended 31st March 2023
were:
Financial
measures
outcome
(% base salary)
107.1%
89.2%
Strategic
measures
formulaic
outcome
(% base salary)
27.0%
22.5%
Total bonus
outcome
(% base salary)
134.1%
111.7%
Total bonus
Total value of
bonus1
outcome
(£)
(% of target)
149.0% 1,273,567
650,133
149.0%
Liam Condon
Stephen Oxley
1. 50% of this figure is deferred into conditional shares subject to a three-year vesting period with no other performance conditions.
This figure represents the full bonus paid for the year
The committee also considered the performance range for the group profit measures and
concluded that given the decrease in uncertainty in the market at the time the targets were
The detailed breakdown of performance against the financial targets and strategic objectives
is set out in the next tables.
Financial measures
Performance measure
Group underlying PBT2
Group Working Capital Days (incl. pgms)1
Group Working Capital Days (excl. pgms)1
Total bonus for financial measures
Bonus
weighting
Unit
50%
10%
10%
£m
Average
days
Average
days
Outcome
Target
Threshold
Maximum
£399.9m
£384.6m
£365.3m
£403.8m
27.3 days
27.0 days
28.4 days
25.7 days
39.7 days
48.6 days
51.0 days
46.1 days
Liam Condon
Stephen Oxley
Maximum bonus
available
(% base salary)
Outcome
(% base salary)
Maximum bonus
available
(% base salary)
Outcome
(% base salary)
90
18
18
126
81
8.1
18
107.1
75
15
15
105
67.5
6.7
15
89.2
1. Group underlying PBT and group working capital days are measured using Johnson Matthey’s budgeted foreign exchange rates
2. Outcome includes adjustments for business unit divestments and bonus targets being based on 50% constant and 50% actual metal prices
120
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Annual report on remuneration continued
Strategic objectives
Objective
Liam Condon A reduction in our ongoing operating cost as a contribution toward
the three-year strategic goal of reducing our cost base by £150m.
An improvement in our employment engagement score as
a contribution toward our 2030 sustainability target.
Develop detailed roadmap and action plans to ensure the
achievement of our sustainability targets.
Win at least two large-scale strategic partnerships in Hydrogen
Technologies.
Complete succession planning for Group Leadership Team with
a focus on internal talent and diversity in the broadest sense,
with development plans in place for potential successors.
Complete investor sentiment study and take steps to attract new
investors, with the aim to diversify and strengthen investment base
both geographically and from an ESG-point of view.
Stephen Oxley A reduction in our ongoing operating cost as a contribution toward
the 3-year strategic goal of reducing our cost base by £150m.
An improvement in our employment engagement score as
a contribution toward our 2030 sustainability target.
Develop detailed roadmap and action plans to ensure the
achievement of our sustainability targets
Implement a finance transformation plan including clarity of the
specific three-year milestones and cost reductions to be achieved.
Complete the sale of at least one Value Business and be well
progressed in targeting >£300m of cash from disposals by 2025.
Formulaic
outcome (% of
target bonus)
100%
Bonus
payable (% of
base salary)
27%
Assessment
A reduction of c. £45m was achieved, which was in excess of the target
for the year.
Given the energy crisis and extended China lockdown we had to accelerate and
broaden the scope of the business transformation, which has been unsettling
for employees. As a result, there was no improvement in our engagement score
and so this objective was missed.
Detailed roadmaps for ten sustainability targets were developed and validated
by the board during the year. These roadmaps include over 100 identifiable
actions in total that will ensure the delivery of our sustainability targets.
Good progress has been made developing and securing partnerships in
Hydrogen Technologies, plus strategic partnerships with Plug Power and Hystar
have been announced.
Internal succession candidates were identified against an agreed success profile.
Development actions were identified and development plans were prepared.
In addition, progress continues to be made on increasing gender representation
of our business leadership teams.
A high level of investor engagement was had during the year with 30% more
meetings with existing and prospective investors, with increasing interest from
US investors. ESG has been more embedded into our investor engagement.
A reduction of c. £45m was achieved, which was in excess of the target for
the year.
100%
22.5%
Given the energy crisis and extended China lockdown we had to accelerate and
broaden the scope of the business transformation, which has been unsettling
for employees. As a result, there was no improvement in our engagement score
and so this objective was missed.
Detailed roadmaps for ten sustainability targets were developed and validated
by the board during the year. These roadmaps include over 100 identifiable
actions in total that will ensure the delivery of our sustainability targets.
Finance transformation is progressing with savings delivered in 2022/23 and
identified for 2023/24. Financial controls, assurance and risk management
has also been improved.
Two businesses have been sold, with one other well progressed.
Complete investor sentiment study and take steps to attract
new investors, with the aim to diversify and strengthen investment
base both geographically and from an ESG point of view.
A high level of investor engagement was had during the year with 30% more
meetings with existing and prospective investors, with increasing interest from
US investors. ESG has been more embedded into our investor engagement.
Johnson Matthey | Annual Report and Accounts 2023
121
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Long-term incentives
PSP awards vesting for the three-year performance period ended 31st March 2023 (audited)
The 2020 PSP awards were made in August 2020 and performance was measured over the period 1st April 2020 to 31st March 2023. After the performance period, shares are no longer subject
to performance conditions, and where the performance conditions are met, the shares will vest on the fifth anniversary of the award. The awards vest on a straight-line basis between threshold
(15% vesting for EPS and 25% vesting for TSR) and maximum (100% vesting). The performance condition for the 2020 award and the actual performance achieved are shown below.
Compound annual growth rate in earnings per share
Relative total shareholder return
Liam Condon and Stephen Oxley did not have 2020 PSP awards.
PSP awards granted in the year ended 31st March 2023 (audited)
The next table provides details of the PSP awards entitled to executive directors in the year ended 31st March 2023.
Weighting
50%
50%
Threshold
3%
Median
(22.2%)
Maximum
8%
Upper
Quartile
(53.6%)
Actual
-1%
Below
Threshold
(6.23%)
Executive directors
Liam Condon
Stephen Oxley
Award date
1st August 2022
1st August 2022
Award type
Conditional shares
Conditional shares
Award size
(% of base salary)
250
175
Number of shares
awarded
115,260
49,424
Face value1
£2,374,990
£1,018,406
% vesting at threshold2
21%
21%
End of performance period
31st March 2025
31st March 2025
End of holding period
1st August 2027
1st August 2027
1. Face value is calculated using the award share price of 2,060.55 pence, which is the average closing share price over the four-week period starting on 26th May 2022
2. Threshold vesting is 15% for the earnings per share (EPS) measure and 25% for the relative total shareholder return (TSR) measure. The value shown is the average threshold vesting for the award
The performance targets and vesting ranges for the 2022 award are set out below:
40% of performance condition
Compound annual growth rate in earnings per share
Performance
<3%
3%
8%
Between 3% and 8%
Proportion of shares vesting
0%
15%
100%
Straight-line between 15% and 100%
40% of performance condition
Relative total shareholder return
Performance
Below median
Median
Upper quartile
Between median and upper quartile
Proportion of shares vesting
0%
25%
100%
Straight-line between 25% and 100%
20% of performance condition
Sustainability scorecard (targets equally weighted)
Tonnes of GHG avoided using technologies enabled by our products and solutions
Reduction in scope 1 and 2 GHG emissions
Percentage of female representation across management levels
Performance
< 5.2m tonnes (MT)
5.2 MT
6.0 MT
Between 5.2 MT
and 6.0 MT
Proportion of shares vesting Performance
0%
Below 12% reduction
Proportion of shares vesting Performance
0%
Below 31% representation
Proportion of shares vesting
0%
25%
100%
12% reduction
14% reduction
25%
100%
31% representation
32% representation
25%
100%
Straight-line between 25%
and 100%
Between 12% and 14%
reduction
Straight-line between 25%
and 100%
Between 31% and 32%
representation
Straight-line between 25%
and 100%
In addition to the EPS, TSR and sustainability scorecard performance conditions, the Remuneration Committee considers the performance of ROIC over the performance period to ensure that
earnings growth is achieved in a sustainable and efficient manner.
122
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Executive director shareholdings as at 31st March 2023 as a percentage of base salary1
are shown below:
Ordinary
shares1
Subject to
ongoing
performance
conditions2
Not subject
to further
performance
conditions3
Liam Condon2
Stephen Oxley3
Requirement
Achievement
250%
200%
70%
110%
1. Value of shares as a percentage of base salary is calculated using a share value of 2,145.67 pence, which was the average share price
prevailing between 1st January 2023 and 31st March 2023
2. Liam Condon was appointed Chief Executive Officer on 1st March 2022 and will build his shareholding over a reasonable timeframe
3. Stephen Oxley was appointed Chief Financial Officer on 1st April 2021 and will build his shareholding over a reasonable timeframe
Pension entitlements (audited)
No director is currently accruing any pension benefit in the group’s pension schemes.
Both Liam Condon and Stephen Oxley receive an annual cash payment in lieu of pension
membership, equal to 15% of base salary. This is in line with pension provision for the
wider workforce.
Payments to former Chief Executive (Robert MacLeod)
Robert MacLeod received a total of £325,401 in salary and benefits prior to retirement
on 21st July 2022 (comprising of £264,720 basic pay, £54,048 pension and £6,633 benefits).
Annual report on remuneration continued
Statement of directors’ shareholding (audited)
The table below shows the directors’ interests in the shares of the company, together with
their unvested scheme interests, effective 31st March 2023.
Executive directors
Liam Condon
Stephen Oxley
Non-executive directors
Patrick Thomas
Jane Griffiths
Chris Mottershead
John O’Higgins
Xiaozhi Liu
Doug Webb
Rita Forst
31,000
14,991
145,075
81,117
–
56,2234
13,194
5,171
5,718
1,500
4,000
6,500
4,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. Includes shares held by the director and / or connected persons, including those in the all-employee share matching plan. Shares in the
all-employee share matching plan may be subject to forfeiture in accordance with the rules of the plan
2. Represents unvested PSP shares within three years of the date of award
3. Represents unvested deferred bonus shares that are not subject to service conditions and the buy-out award made to Stephen Oxley
on joining JM, which is subject to ongoing service conditions
4. Includes 41,500 shares awarded in year end 31st March 2022 to compensate for the loss of KMPG long-term deferred cash award
Directors’ interests as at 25th May 2023 were unchanged from those listed above other
than that the Trustees of the all-employee share matching plan have purchased another
130 shares for Stephen Oxley.
Executive directors are expected to achieve a shareholding guideline of 250% of base salary
for the Chief Executive Officer and 200% for other executive directors, within a reasonable
timeframe. The director’s total shareholding for the purposes of comparing it with the
minimum shareholding requirement includes shares held beneficially by the director and
any connected persons (as recognised by the Remuneration Committee), together with
the shares awarded under the Deferred Bonus Plan (DBP), for which there are no further
performance or service conditions.
Shares that count towards achieving the post-cessation guideline include the same as those
while an executive director. Executive directors are expected to retain at least 50% of the net
(after tax) vested shares that are released under the PSP and DBP until the required levels
of shareholding are achieved.
Johnson Matthey | Annual Report and Accounts 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Performance graph and comparison to Chief Executive Officer’s remuneration
Johnson Matthey and FTSE 100 total shareholder return rebased to 100
The following chart illustrates the total cumulative shareholder return of the company for the ten-year period from 1st April 2013 to 31st March 2023 against the FTSE 100 as the most appropriate
comparator group when considering our market capitalisation over the period, rebased to 100 at 1st April 2013.
300
250
200
150
100
50
March 2013
March 2014
March 2015
March 2016
March 2017
March 2018
March 2019
March 2020
March 2021
March 2022
March 2023
FTSE 100
Johnson Matthey
Historical data regarding Chief Executive Officer’s remuneration
Single total figure of remuneration (£000)
Annual incentives (% of maximum)
Long-term incentives (% of award vesting)5
2012/13
3,025
–
100
2013/141
3,855
71
75
2014/152
2,539
54
–
2015/163
1,429
15
33
2016/17
1,971
40
28
2017/18
2,013
69
–
2018/19
2,784
45
67
2019/20
1,462
26
–
2020/21
2,532
98
–
2021/224
1,672
42
–
2022/236
2,647
75
-
1. Figures before to 2014/15 are in respect of Neil Carson
2. The figures for 2014/15 are in respect of both Robert MacLeod and Neil Carson, who both held the position of Chief Executive Officer in the year. The single total figure of £2,539k comprises £1,594k for Robert MacLeod and £945k for Neil Carson
3. Figures from 2015/16 to 2020/21 are in respect of Robert MacLeod
4. The figures for 2021/22 are in respect of both Robert MacLeod and Liam Condon, who both held the position of Chief Executive Officer in the year. The single total figure of £1,672k comprises £1,557k for Robert MacLeod and £115k for Liam Condon. The value shown for annual incentives
relates to Robert MacLeod only because Liam Condon was not eligible to participate in the AIP in 2021/22
5. Vesting of long-term incentive awards whose three-year performance period ended in the financial year shown
6. Figures for 2022/23 are in respect of Liam Condon
124
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Change in directors’ remuneration
The table below shows how the remuneration of directors, both executive and non-executive, has changed over the year ended 31st March 2023. This is then compared to employees
of Johnson Matthey Plc.
Executive directors
Liam Condon1
Stephen Oxley2
Non-executive directors
Patrick Thomas
Jane Griffiths
Chris Mottershead
John O’Higgins
Xiaozhi Liu
Doug Webb
Rita Forst6
Comparator group
JM Plc employees
2023
2022
2021
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Salary
Bonus
Benefits
0%
3%
0%
3%10
0%
0%
0%
0%
100%11
–
7%
0%
0%
0%
0%
0%
0%
0%
–
–
0%
0%
0%
0%
0%
0%
0%
–
–
2%
24%3
2%
10%4
2%
10%5
–
8%7
-10%8
0%9
6%7
–
–
0%
0%
0%
0%
0%
0%
–
4%
–
–
0%
0%
0%
0%
0%
0%
–
0%
–
–
0%
0%
0%
27%
0%
31%
–
–
–
0%
0%
0%
0%
0%
0%
–
2%
312%
–
–
0%
0%
0%
0%
0%
0%
–
0%
1. Liam Condon was appointed Chief Executive Officer on 1st March 2022, so no change in compensation can be calculated for 2021 or 2022. No change in bonus can be calculated for 2023 as not eligible in 2022
2. Stephen Oxley was appointed Chief Financial Officer on 1st April 2021, so no change in compensation can be calculated for 2021 or 2022
3. Represents the additional fee received for taking the SVC Chair position on 1st June 2021 and annual fee review
4. Represents the additional fee received for taking the Senior Independent Director role on 23rd July 2020 and annual fee review
5. Represents the additional fee received for taking the Audit Committee Chair role on 23rd July 2020 and annual fee review
6. Rita Forst was appointed to the board on 4th October 2021, so no change in compensation can be calculated for 2021 or 2022
7.
8. The percentage change in bonus was calculated based on the change in bonus accrual taken for Johnson Matthey Plc (JM Plc) employees, excluding the directors, for the 2021/22 and 2022/23 years and for the 2020/21 and 2021/22 years, respectively
9. There has been no change to the benefits policy for JM Plc employees; therefore, a 0% change has been reported
10. Represents the additional fee received for taking the SVC Chair position on 1st June 2021, which was pro-rated in 2022
11. Rita Forst was appointed to the Board on 4th October 2021 and received a pro-rated fee for 6 months in 2022 and full fee based on 12 months in 2023
Includes promotions and market adjustments
Johnson Matthey | Annual Report and Accounts 2023
125
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Relative spend on pay
The table below shows the absolute and relative amounts of distributions to shareholders
and the total remuneration for the group for the years ended 31st March 2022 and
31st March 2023.
Payments to shareholders – special dividends
Payments to shareholders – ordinary dividends
Share buyback1
Total remuneration (all employees)2
Year ended
31st March 2022
£ million
–
139
155
718
Year ended
31st March 2023
£ million
–
141
45
732
% change
–
1%
2%
1. On 13th May 2022, the company completed its £200 million share buyback programme which commenced on 21st December 2021.
During the year the company purchased 2,271,920 shares at a cost of £45 million
2. Figure is for all operations (excluding Health) and excludes termination benefits
Chief Executive Officer to employee pay ratio
The table below shows the ratio of Chief Executive Officer to employee pay for 2020-2023.
We have compared the single total figure of remuneration for the Chief Executive Officer
to the total pay and benefits of UK employees, on a full-time equivalent basis, who are
ranked at the lower quartile, median and upper quartile across all UK employees effective
31st March 2023.
We believe that using total pay and benefits for the year ending 31st March 2023 provides
a like-for-like comparison to the Chief Executive Officer pay data.
Chief Executive Officer pay ratio
2020
2021
20221
2023
Method
Chief Executive
Officer single figure
Upper quartile
Median
Lower quartile
Total pay and
benefits in 2019/20
Total pay and
benefits in 2020/21
Total pay and
benefits in 2021/22
Total pay and
benefits in 2022/23
£1,462,000
22:1
28:1
36:1
£2,532,000
35:1
45:1
57:1
£1,672,0002
20:1
28:1
35:1
£2,646,222
37:1
49:1
60:1
1. Chief Executive Officer pay ratio revised to include employee bonuses payable in relation to 2021/22. This changed upper quartile from
36:1 to 20:1, median from 34:1 to 28:1 and lower quartile from 41:1 to 35:1
2. The Chief Executive Officer single figure for 2021/22 is in respect of both Robert MacLeod and Liam Condon, who both held the position
of Chief Executive Officer in the year. The single total figure of £1,672,000 comprises £1,557,000 for Robert MacLeod and £115,000
for Liam Condon
Bonus data for UK employees was left out of the 2023 calculation because it was not
administratively possible to calculate these bonuses before the publication of this report.
However, the calculation will be revised to include these bonuses once available and will
be disclosed in the 2024 report. Excluding the 2022/23 bonus payable to the Chief Executive
Officer from the calculation would result in the following pay ratios: lower quartile – 29:1,
median – 23:1 and upper quartile – 18:1.
The salary and total pay for the individuals identified at the lower quartile, median and upper
quartile positions in 2023 are set out below:
2023
Upper quartile individual
Median individual
Lower quartile individual
Salary1
£59,278
£47,149
£38,401
Total pay
£72,086
£54,458
£44,108
1. Includes shift allowance
Our principles for pay setting and progression are consistent across the organisation.
Underpinning our principles is a need to provide a competitive total reward to enable the
attraction and retention of high-calibre individuals and giving the opportunity for individual
development and career progression. The pay ratios reflect the difference in role
accountabilities that are recognised through our pay structures and the greater variable pay
opportunity for more senior positions. The Chief Executive Officer’s variable pay opportunity
is higher than those employees noted in the table reflecting the weighting towards long-term
value creation and alignment with shareholder interests inherent in this role.
The movement in our Chief Executive Officer to employee pay ratio between 2020-2023
is driven by the different bonus outcomes and fixed income for the Chief Executive Officer
in each of these years. There have been no other changes to remuneration arrangements
for our UK employees that would affect the CEO pay ratio.
We are satisfied that the median pay ratio is consistent with our wider pay, reward and
progression policies for employees. All our employees have the opportunity for annual pay
increases, career progression and development opportunities.
126
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Annual report on remuneration continued
Implementing the Directors’ Remuneration Policy for 2023/24
The table below sets out how the Remuneration Committee intends to apply the Directors’ Remuneration Policy for the year ended 31st March 2024.
Salary
Benefits
Pension
The Chief Executive Officer and Chief Financial Officer both received a pay increase of 3.5%. This is below the increase awarded to other UK employees.
No change to policy applied in 2023/24.
All executive directors will have a maximum pension cash supplement of 15%.
Annual incentives
The maximum bonus opportunity for 2023/24 remains unchanged at 180% of salary for the Chief Executive Officer and 150% of salary for the Chief Financial Officer.
2023/24 bonus will be based on underlying profit before tax (50%), working capital (20%) and strategic and transformation objectives (30%). Targets for the Chief Executive Officer
and Chief Financial Officer will be based on group performance.
The 2023/24 targets are considered similarly challenging, if not more challenging to those set in 2022/23, when accounting for the divestments in the year and uncertain economic
outlook. The recalibration of targets has been set taking this into account as well as internal and external planning. To the extent that metal prices move outside a defined corridor the
Remuneration Committee will rebase the targets such that they are similarly challenging as when the targets were originally set. The Remuneration Committee considers the forward-
looking targets to be commercially sensitive but full retrospective disclosure of the actual targets will be included in next year’s Directors’ Remuneration report.
50% of any bonus paid will be deferred in shares for three years, and the payment of any bonus is subject to appropriate malus and clawback provisions.
Long-term incentives
The Chief Executive Officer award level is 250% of base salary and the Chief Financial Officer award level is 175% of base salary. These award levels are in line with our remuneration policy.
The long-term Performance Share Plan will be based on EPS growth targets (30% of the award), relative TSR performance (40% of the award) and specific and measurable strategic
objectives (30% of award).
The range of annualised EPS growth targets that the committee intends to set for the 2023/24 awards is 1% per annum growth for threshold (15%) vesting, rising to 7% per annum growth for
maximum vesting (100%). Vesting will be on a straight-line basis between 1% and 7%. The committee considered the effect of metal price volatility on potential outcomes and, as a result, earnings
will be assessed 50% against actual metal prices and 50% against constant metal prices. The committee believes that this will allow for a more accurate assessment of underlying business performance.
The TSR target will be 25% vesting for median performance, increasing on a straight-line basis to 100% vesting for upper quartile performance. The TSR peer group will be the FTSE 31
– 100 (excluding financial services companies). The committee considers that this comparator group remains the most appropriate given our current market capitalisation.
The strategic objectives scorecard will consist of four equally weighted metrics. Threshold vesting will be 25%, increasing on a straight-line basis to 100% at maximum. The four metrics
are as follows:
• Products and services – tonnes of GHG avoided during the period using technologies enabled by our products and solutions, compared to conventional solutions, where threshold vesting
will be 8.0 million tonnes GHG avoided and maximum will be 12.0 million tonnes GHG avoided.
• Operations – reduction in Scope 1 and 2 GHG emissions (from the 2020 baseline), where threshold vesting will be achieved for a 20% reduction in GHG emissions and maximum vesting
for a 25% reduction in GHG emissions.
• People – percentage of female representation across our management levels, where threshold vesting will be achieved at 32% female representation at management levels and
maximum at 33% female representation at management levels.
• Business transformation – establish global business services and deliver a reduction in associated employment costs (from the 2022 baseline). The performance range is commercially
sensitive and will be disclosed at such a time when it is no longer considered commercially sensitive.
Awards vest in year three and are then subject to a two-year holding period.
The fees for the Chair and non-executive directors were reviewed during the year and increased in line with the increase awarded to executive directors.
Chairman and
non-executive
director fees
This Remuneration Report was approved by the Board of Directors on 25th May 2023 and signed on its behalf by:
Chris Mottershead
Chair of the Remuneration Committee
Johnson Matthey | Annual Report and Accounts 2023
127
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ report
Statutory and other information
The Directors’ report required under the Companies Act 2006 (2006 Act) comprises the Governance report (pages 73 to127), including the Sustainability report for our disclosure of carbon
emissions, which is included in the Strategic report (pages 20 to 44). The management report required under Disclosure Guidance and Transparency Rule 4.1.8R comprises the Strategic report
(pages 1 to 72), which includes the risks relating to our business, and the Directors’ report.
Index of disclosures referred to elsewhere in the report
Business model
Dividends
Results
Research and development activities
Future developments
Non-financial key performance indicators
Directors
Directors’ interests
Corporate governance statement
Section 172 statement and stakeholder engagement
8-9
193
55-61, 144
14-21, 60
Employee engagement
Diversity and employment of disabled persons
Greenhouse gas emissions
Human rights and anti-bribery and corruption
35, 80
36
28
38-39
14-21 Modern slavery and human trafficking statement
39 /matthey.com
3 Whistleblowing (Speak Up)
Use of financial instruments
Related party transactions
Share capital
76-77
123
73
72, 84-86
42
154
205
193-194
Listing Rule 9.8.4R
Details of the disclosures to be made
under Listing Rule 9.8.4R are listed below.
• Interest capitalised
• Allotments of equity securities
for cash
• Dividend waiver
175
130
130
There are no other applicable disclosures.
Other disclosures
Dividend reinvestment plan
Directors’ indemnities
and insurance
Conflicts of interest
External appointments
A dividend reinvestment plan is available. This allows shareholders to purchase additional shares in Johnson Matthey Plc with their dividend payment. Further information and
a mandate can be obtained from our registrar, Equiniti, and on our website: matthey.com
Johnson Matthey Plc has granted indemnities to each Johnson Matthey Plc director and the directors of the group’s subsidiaries in respect of certain liabilities arising against them
in the course of their duties. Neither Johnson Matthey Plc or any subsidiary has indemnified any director of the Company or a subsidiary in respect of any liability that they may incur
to a third party in relation to a relevant occupational pension scheme. The Company maintains appropriate directors’ and officers’ liability insurance.
The Board has a policy for identifying and managing directors’ conflicts of interest, which extends to cover close family members. The Board annually reviews external appointments
to consider any potential or actual conflict of interest. If a conflict of interest is declared, the Board will review the authorisation and terms associated, to ensure that all matters
presented to the Board are considered solely with a view to promoting JM’s business success. For the year under review, there were no potential or actual conflicts of interest.
The Board approves all external appointments in advance of acceptance. If an external appointment arises between meetings, this is considered by the Chair and Chief Executive
Officer, with the assistance of the Company Secretary. In approving each additional external appointment, the Board assesses time commitment to ensure that no directors are
considered over boarded.
128
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ Report continued
Other disclosures
Directors’ reappointment
Directors’ powers
Constitution
Articles of Association
Branches
Change of control
Stakeholders and policies
Suppliers
Political donations
Events occurring after
the reporting period
Johnson Matthey Plc’s Articles of Association (the Articles) provide the rules on director appointments and are consistent with the recommendation contained within the Code.
All directors retire and are eligible for re-election at each AGM (except any director appointed after the notice of an AGM meeting is published and before that AGM is held).
The powers of the directors are determined by the Articles, UK legislation including the 2006 Act, and any directions given by the Company in general meetings. The directors are
authorised by the Company’s Articles to issue and allot ordinary shares and to make market purchases of its own shares. These powers are referred to shareholders for renewal at each
AGM. Further information is set out below under ‘Authority to purchase own shares’.
The Articles may only be amended by a special resolution at a general meeting of the Company. The Articles were adopted on 17th July 2019 and are available on our
website: matthey.com/corporate-governance.
The Company and its subsidiaries have established branches in several different countries in which they operate.
As at 31st March 2023 and as at the date of approval of this Annual Report, there were no significant agreements, to which the company or any subsidiary was or is a party to, that take
effect, alter or terminate on a change of control of the Company, whether following a takeover bid or otherwise.
However, the Company and its subsidiaries were, as at 31st March 2023, and as at the date of approval of this report, party to a number of commercial agreements. These may allow
counterparties to alter or terminate the commercial agreements on a change of control of JM following a takeover bid. These are not deemed significant in terms of their potential
effect on the group.
The group also has a number of loan notes and borrowing facilities that may require prepayment of principal and payment of accrued interest and breakage costs if there is a change
of control of JM. The group has entered into a series of financial instruments to hedge its currency, interest rate and metal price exposures, which provide for termination or alteration
if a change of control at JM materially weakens the creditworthiness of the group.
The executive directors’ service contracts each contain a provision to the effect that, if the contract is terminated by the Company within one year after a change of control of the
Company, JM will pay an amount equivalent to one year’s gross base salary and other contractual benefits, less the period of any notice given by the Company, to the director as
liquidated damages.
The rules of the Company’s employee share schemes set out the consequences of a change of control of the Company on participants’ rights under the schemes. Generally, the rights
will vest and become exercisable on a change of control, subject to the satisfaction of relevant performance conditions. As at 31st March 2023, and as at the date of approval of this
Annual Report, there were no other agreements between the Company, any subsidiaries and directors or employees, providing compensation for loss of office or employment
(through resignation, purported redundancy or otherwise) that occurs due to a takeover bid.
We recognise the importance of good supplier relationships to our overall success. Further information on our payment practices is on the UK government’s reporting portal.
Read more about our Supplier Code of Conduct and our engagement with suppliers during the year on page 40
No political donations or contributions to political parties under the 2006 Act have been made during the year. The group policy is that no political donations be made or political
expenditure incurred.
There have been no important events affecting Johnson Matthey Plc or any subsidiary between 31st March 2023 and the date of approval of this annual report, 25th May 2023.
Johnson Matthey | Annual Report and Accounts 2023
129
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Directors’ Report continued
Shareholders and share capital
AGM
Authority to purchase
own shares
Rights and obligations
attaching to shares
Nominees, financial assistance
and liens
Allotment of securities for cash
and placing of equity securities
American Depositary Receipt
programme
Employee share schemes
Our 2023 AGM will be held on Thursday 20th July 2023 at 11.00 am at Herbert Smith Freehills, Exchange House, 12 Primrose Street, London EC2A 2EG. We will provide a live webcast
and telephone conference so shareholders can also participate virtually and ask questions in real time. Details on how to join are included in the Notice of AGM. In the Notice,
we propose separate resolutions on each substantially separate issue. For each resolution, shareholders may direct their proxy to vote either for or against or to withhold their vote.
A ‘vote withheld’ is not legally a vote and will not be counted in the calculation of the proportion of the votes cast. All AGM resolutions are decided with an electronic poll, with the
results announced as soon as possible and posted on our website. This poll will show votes for and against, as well as votes withheld.
At the 2022 AGM, shareholders authorised Johnson Matthey Plc to make market purchases of up to 18,312,226 ordinary shares of 110 49/53 pence each, representing 10% of the then
issued share capital of the company (excluding treasury shares). Any shares so purchased by Johnson Matthey may be cancelled or held as treasury shares. This authority will cease
at the conclusion of the 2023 AGM, and shareholders will be asked to give a similar authority at the AGM.
There were no share allotments during the year.
The rights and obligations attaching to the ordinary shares in Johnson Matthey Plc are set out in the Articles.
As at 31st March 2023, and as at the date of approval of this Annual Report, there were no restrictions on the transfer of ordinary shares in the Company, no limitations on the holding
of securities and no requirements to obtain the approval of the Company, or of other holders of securities in Johnson Matthey Plc, for a transfer of securities – except as referred
to below. The directors may, in certain circumstances, refuse to register the transfer of a share in certificated form that is not fully paid up, where the instrument of transfer does
not comply with the requirements of the Company’s Articles, or if entitled under the Uncertificated Securities Regulations 2001. As at 31st March 2023 and as at the date of approval
of this report:
• No person held securities in Johnson Matthey Plc carrying any special rights with regard to control of the Company
• There were no restrictions on voting rights (including any limitations on voting rights of holders of a given percentage or number of votes or deadlines for exercising voting rights),
except that a shareholder can only vote in respect of a share if it is fully paid
• There were no arrangements by which, with the Company’s cooperation, financial rights carried by shares in the Company are held by a person other than the holder of the shares
• There were no agreements known to the Company between holders of securities that may result in restrictions on the transfer of securities or on voting rights.
During the year:
• No shares in Johnson Matthey Plc were acquired by the Company’s nominee, or by a person with financial assistance from the Company, in either case where the Company has
a beneficial interest in the shares (and no person acquired shares in the Company in any previous financial year in its capacity as the Company’s nominee or with financial assistance
from the Company)
• The Company did not obtain or hold a lien or other charge over its own shares.
During the year neither Johnson Matthey Plc or any major subsidiary undertaking of the Company has allotted equity securities for cash. During the year, JM has not participated in any
equity securities’ placing.
Johnson Matthey has a sponsored Level 1 American Depositary Receipt (ADR) programme, which BNY Mellon administers and for which it acts as Depositary. Each ADR represents two
ordinary Johnson Matthey shares. The ADRs trade on the US over-the-counter market under the symbol JMPLY. When dividends are paid to shareholders, the Depositary converts those
dividends into US dollars, net of fees and expenses, and distributes the net amount to ADR holders.
At 31st March 2023, 3,211 current and former employees were shareholders in Johnson Matthey Plc through the group’s employee share schemes. Through these schemes, current
and former employees held 2,773,189 ordinary shares or 1.51% of issued share capital, excluding treasury shares. Also as at 31st March 2023, 2,930,062 ordinary shares had been
awarded but had not yet vested, under the Company’s long-term incentive plans, to 407 current and former employees.
Shares acquired by employees through JM’s employee share schemes rank equally with the other shares in issue and have no special rights. Voting rights in respect of shares held
through the Company’s employee share schemes are not exercisable directly by employees. However, employees can direct the trustee of the schemes to exercise voting rights on their
behalf. The trustee of the Company’s Employee Share Ownership Trust (ESOT) has waived its right to dividends on shares held by the ESOT, which have not yet vested unconditionally
to employees.
130
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Directors’ Report continued
Shareholders and share capital
Interests in voting rights
The following information has been disclosed to the Company under the FCA’s Disclosure Guidance and Transparency Rules in respect of notifiable interests in the voting rights
in Johnson Matthey Plc’s issued share capital:
As at 31st March 2023:
Bank of America Corporation
BlackRock, Inc.
Jefferies Financial Group
Standard Latitude Master Fund Ltd
Nature
of holding
Indirect3
Indirect3
Direct
Direct
Total
voting rights1
17,234,329
20,545,316
10,540,153
9,655,039
% of total
voting rights2
9.39
11.73
5.74
5.23
1. Total voting rights attaching to the issued ordinary share capital of the company (excluding treasury shares) at the time of disclosure to the Company
2. % of total voting rights at the date of disclosure to the Company
3. Indirect holdings include qualifying financial instruments and contract for differences
Other than as stated above, as far as the Company is aware, there is no person with a significant direct or indirect holding of securities in Johnson Matthey Plc. This information was
correct at the date of notification. However, since notification of any change is not required until the next notifiable threshold is crossed, these holdings are likely to have changed.
Between 31st March 2023 and the date of this report, 24th May 2023, the Company has been notified of changes in the following interests:
Bank of America Corporation
BlackRock, Inc.
Nature
of holding
Indirect3
Indirect3
Total
voting rights1
21,966,209
20,516,280
% of total
voting rights2
11.98
11.16
1. Total voting rights attaching to the issued ordinary share capital of the company (excluding treasury shares) at the time of disclosure to the company
2. % of total voting rights at the date of disclosure to the company
3. Indirect holdings include qualifying financial instruments and contract for differences
Contracts with controlling
shareholders
During the year there were no contracts of significance (as defined in the FCA’s Listing Rules) between any group undertaking and a controlling shareholder, and no contracts
for the provision of services to any group undertaking by a controlling shareholder.
Johnson Matthey | Annual Report and Accounts 2023
131
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Responsibilities of directors
Statement of directors’ responsibilities in
respect of the Annual Report and Accounts
The directors are responsible for preparing the Annual Report and Accounts and the financial
statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year.
Under that law, the directors have prepared the group and the parent company financial
statements in accordance with UK-adopted international accounting standards.
Under company law, directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the group and parent
company and of the profit or loss of the group for that period. In preparing the financial
statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting standards have
been followed, subject to any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate
to presume that the group and parent company will continue in business.
The directors are responsible for safeguarding the assets of the group and parent company
and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient
to show and explain the group’s and parent company’s transactions and disclose with
reasonable accuracy at any time the financial position of the group and parent company
and enable them to ensure that the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the parent company’s
website. Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The directors consider that the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders
to assess the group’s and parent company’s position and performance, business model
and strategy.
Each of the directors, whose names and functions are listed in the Governance section of the
Annual Report and Accounts, confirm that, to the best of their knowledge:
• the group and parent company financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give a true and fair view
of the assets, liabilities and financial position of the group and parent company, and of
the loss of the group; and
• the Strategic report includes a fair review of the development and performance of the
business and the position of the group and parent company, together with a description
of the principal risks and uncertainties that it faces.
• In the case of each director in office at the date the directors’ report is approved:
• so far as the director is aware, there is no relevant audit information of which the group’s
and parent company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a director in order to make
themselves aware of any relevant audit information and to establish that the group’s
and parent company’s auditors are aware of that information.
The Directors’ report and responsibilities statement was approved by the Board on
25th May 2023 and is signed on its behalf by:
Nick Cooper
General Counsel and Company Secretary
132
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Independent auditors’ report to the members
of Johnson Matthey Plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Johnson Matthey Plc’s group financial statements and company financial statements
(the “financial statements”) give a true and fair view of the state of the group’s and of the
company’s affairs as at 31 March 2023 and of the group’s profit and the group’s cash flows
for the year then ended;
• the group financial statements have been properly prepared in accordance with
UK‑adopted international accounting standards as applied in accordance with the
provisions of the Companies Act 2006;
• the company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts
(the “Annual Report”), which comprise: the Consolidated Statement of Financial Position
and Parent Company Statement of Financial Position as at 31 March 2023; the Consolidated
Income Statement and Consolidated Statement of Total Comprehensive Income, the
Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity
and Parent Company Statement of Changes in Equity for the year then ended; and the notes
to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK)
(“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non‑audit services prohibited by the
FRC’s Ethical Standard were not provided.
Other than those disclosed in note 4, we have provided no non‑audit services to the company
or its controlled undertakings in the period under audit.
Johnson Matthey | Annual Report and Accounts 2023
Our audit approach
Overview
Audit scope
• We conducted a full scope audit or specified procedures at 32 business units which together
account for 83% of group revenue and 71% of group underlying profit before tax from
continuing operations.
• We maintained regular contact with our component teams and evaluated the outcome
of their audit work.
Key audit matters
• Refinery metal accounting (group and parent)
• Carrying value of goodwill (group and parent)
• Uncertain tax provisions (group and parent)
• Claims, uncertainties and other provisions (group and parent)
Materiality
• Overall group materiality: £21.1 million (2022: £21.8 million) based on approximately
5% of the three year average profit before tax from continuing operations, adjusted
for loss on disposal of businesses, gains and losses on significant legal proceedings, major
impairment and restructuring charges.
• Overall company materiality: £60 million (2022: £60 million) based on 1% of total assets.
However the materiality is capped at £20 million (2021: £20 million) for the purpose
of the audit of the consolidated financial statements, this being the maximum allocation
of group materiality to a component.
• Performance materiality: £15.8 million (2022: £16.3 million) (group) and £15 million
(2022: £15 million) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements.
133
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Independent auditors’ report to the members of Johnson Matthey Plc continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Claims, uncertainties and other provisions is a new key audit matter this year. Divestment of the Health business and Battery Materials exit, which were key audit matters last year, are no longer
included because these represent transactions that have been less complex and required less audit effort from the engagement team in the current year. Otherwise, the key audit matters below
are consistent with last year.
Key audit matter
Refinery metal accounting (group and parent)
Refer to the Significant issues considered by the Audit Committee within the Audit Committee
Report and note 1 and 36 to the financial statements.
How our audit addressed the key audit matter
We evaluated the design and operation of key controls at the main refining locations over
refinery stocktakes and metal assaying procedures.
As part of its refining activities the group processes a significant amount of metal on behalf of third
parties, whereby the group must return pre‑agreed recoverable quantities of refined metal to those
parties at an agreed date. Any metal in excess of this pre‑agreed quantity is retained by the group.
As such, the group makes an estimate of how much metal it will recover as part of its refining
operations.
We tested that the metal balance sheet was prepared and reviewed on a monthly basis.
We tested the classification of precious metals at year‑end on the metal balance sheet,
to determine if metal was owned by the group or the customer. Our procedures included
sending confirmations to customers, and testing the balance of customer metal that was
in the refining process, but not contractually due.
The majority of metal processed at refineries is owned by customers and is not held on the financial
balance sheet of the group. As such, the group performs a metal balance sheet reconciliation
to ensure quantities of precious metals held at year‑end are appropriately understood, classified
as either owned by Johnson Matthey or the customer and reconciled to its financial position.
This ensures that only the group‑owned inventory is recorded on the balance sheet and that the
price allocated to this owned inventory is at the lower of cost and net realisable value.
During the refining process there are a series of complex estimates including:
(i) Estimation of the level of metal contained in the carrier material entering the refining process,
the refined metal that leaves the refining process, and the residual metal in the refining process
at year-end;
(ii) Estimates of the process losses of precious metals that may be lost during the refining and
fabrication process, and the adequacy of these provisions;
(iii) Estimates of the metal in the refinery process as informed by refinery stocktakes, and
the subsequent sampling and assaying to assess the precious metal content in stocktake
samples; and
(iv) Estimates of the net realisable value of unhedged metal held at year‑end.
Each of these estimates impacts different areas of the audit. The refining process and its
associated estimates are an area of focus for our audit due to the inherent complexity of the
accounting and amount of metal processed are deemed a significant risk due to the inherent
complexity of the accounting and amount of metal processed.
134
We assessed management’s policy for recognising stocktake gains and losses arising
from stocktakes. We attended physical stock counts at sites where these were performed
by management. The purpose was to verify the existence of inventory and adherence
to the group’s stocktake processes, and the reasonableness of stocktake gains and losses
at these sites.
We assessed the underlying controls that have been implemented by management,
to monitor potential inventory gains or losses through the refining process and stocktake
results, to assess the likelihood and quantum of process losses (if any) of metal between the
date of the stocktake and the year‑end date. We assessed process loss provisions compared
to historical metal gain revenue and refinery stocktake results.
We tested that all unhedged metal was being held at the lower of cost and net realisable
value, on an individual metal by metal methodology, with reference to external metal
price data.
We considered the adequacy of the group’s disclosures about the degree of estimation
involved in arriving at the value of metal inventory.
Based on the procedures performed, we noted no material issues arising from our work.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Independent auditors’ report to the members of Johnson Matthey Plc continued
Key audit matter
Carrying value of goodwill (group and parent)
How our audit addressed the key audit matter
Refer to the Significant issues considered by the Audit Committee within the Audit Committee
Report and notes 1, 5, 13, 36 and 38 to the financial statements.
The group holds goodwill of £364 million (2022: £366 million) at 31 March 2023. Of this amount,
£113 million (2022: £113 million) is held within the parent company.
The group has significant goodwill arising from the acquisition of businesses and the carrying value
is dependent on the financial performance of the cash generating unit (CGU) to which it relates.
The two largest CGUs are Catalyst Technologies and Clean Air Heavy Duty Catalysts which account
for £268m (2022: £266m) and £87m (2022: £83m) respectively of goodwill at 31 March 2023.
The goodwill held in the parent company relates to the Catalyst Technologies CGU.
The impairment assessments prepared by management reflect its best estimates of future
cashflows. These estimates contain significant uncertainty and are inherently judgemental in
nature, where changes in the key assumptions can result in materially different impairment charges
or available headroom. As set out in note 1 management has considered the impacts of climate
change in their models. This is therefore an area of focus in our audit procedures.
In the year, an impairment charge of £4 million was recorded against goodwill in relation to
the Diagnostic Services CGU as the fair value of the proceeds less costs to dispose was lower than
the carrying value. Management’s assessment of the goodwill in the other CGUs concluded that
no impairment was required.
Management included disclosures to explain its key judgements and estimates as part of
notes 1 and 5.
We obtained management’s value in use goodwill impairment models and agreed the
forecast cash flows to board‑approved budgets, assessed how these budgets are compiled,
confirmed data accuracy and understood key related judgements and estimates.
We assessed management’s historical forecasting accuracy by comparing the prior year
forecasts with actual results. This informed our independent sensitivity analysis.
We performed work over each material CGU being the Catalyst Technologies and Clean Air
Heavy Duty Catalysts CGUs. The nature and extent of work was commensurate with the level
of headroom and sensitivity of the CGU to impairment.
Our testing was focused on the key assumptions in the board‑approved three year forecasts
and we corroborated the assumptions to supporting evidence which included both internal
and external sources of evidence. In addition, we assessed the appropriateness and impact
of the specific growth assumptions applied by management for the period after the year three
forecast but before a long term growth rate is applied (typically year ten).
Management has included certain key assumptions relating to climate change. These include
restricting the useful economic life applied in modelling Heavy Duty Catalysts to 2040
(2022: 2040), and the application of a negative growth rate from 2033 (2022: 2033).
Working with our valuation experts we have considered external market outlooks and
information on emission legislation to corroborate these assumptions.
We engaged our valuations experts to assess the long term growth rate and discount rate
for each CGU by comparison with third party information, past performance and relevant risk
factors. Our procedures also included considering the overall level of risk in the future cash
flow projections.
Our procedures included testing the basis for management’s business plans and expectations
in line with the group’s latest strategy and considering the latest industry outlooks used
by management.
We tested the mathematical integrity of the forecasts and of the value in use model, audited
the allocation of central costs to the CGUs and agreed the carrying values in management’s
impairment models to underlying accounting records.
We assessed management’s sensitivity analysis and performed our own independent
sensitivity analysis which were more severe than management’s to assess whether a
reasonable downside change in the key assumptions could give rise to a material impairment.
We consider the disclosures with respect of goodwill, including the associated sensitivities
to be appropriate.
Based on the procedures performed, we noted no material issues arising from our work.
Johnson Matthey | Annual Report and Accounts 2023
135
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Independent auditors’ report to the members of Johnson Matthey Plc continued
Key audit matter
Uncertain tax provisions (group and parent)
How our audit addressed the key audit matter
Refer to the Significant issues considered by the Audit Committee and note 1 and 36 to the financial
statements.
The group operates in a number of international jurisdictions, and as a result there is risk
of uncertain tax exposures arising around the group, as well as heightened risk around estimates
in determining the tax effect of cross border transactions including transfer pricing arrangements.
As at 31 March 2023 the group had provisions for uncertain tax liabilities of £97 million
(2022: £103 million). Management’s estimate of the range of possible outcomes is an increase in
those liabilities by £66 million (2022: £83 million) to a decrease of £55 million (2022: £93 million).
Where the precise impact of the tax laws and regulations on taxes payable with respect to profit
arising in those jurisdictions is unclear, the group seeks to make reasonable estimates to determine
the most likely amount in a range of possible outcomes.
There is inherent judgement and estimation uncertainty involved in determining provisions
for uncertain tax positions, as described by management in the accounting policies to the financial
statements. Our audit focused on the most significant of exposures based on both the provision
recorded and maximum possible exposure.
We engaged our tax specialists in support of our audit of tax and obtained an understanding
of the group’s tax strategy and risks. We recalculated the group’s tax provisions and
determined whether the treatments adopted were in line with the group’s tax policies and
had been applied consistently.
We evaluated the key underlying assumptions and judgements, including considering the
status of tax authority audits and enquiries through examining the latest correspondence and
enquiring of management, and where applicable management’s advisors. We considered the
basis and support in particular for provisions not subject to tax audit, in comparison with our
experience of similar situations.
We discussed the recognition of specific uncertain tax positions with third‑party tax advisors
appointed by management to verify the key assumptions, judgements and likely outcome
with respect to specific uncertain tax positions recognised. We confirmed the appropriateness
of management’s application of either a single best estimate, or a weighted average range
of outcomes, for each exposure, as driven by the facts and circumstances under IFRIC 23.
We evaluated the consistency of management’s approach to identifying triggering events
to reassess or record a provision for an exposure.
We also evaluated the consistency of management’s approach to establishing or changing
prior provision estimates and validated that changes in provisions established in previous
periods reflected a change in facts and circumstances.
We consider the disclosures with respect to tax matters to be appropriate.
Based on the procedures performed, we noted no material issues arising from our work.
136
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Independent auditors’ report to the members of Johnson Matthey Plc continued
Key audit matter
Claims, uncertainties and other provisions (group and parent)
How our audit addressed the key audit matter
Refer to the Significant issues considered by the Audit Committee on page 98 and notes 4, 22, 32,
36 and 47 to the financial statements.
This risk covers warranty provisions, product liability issues, and other litigious matters across the
group. There is inherent judgement and estimation involved in determining when and how much
to provide for claims and uncertainties.
Due to the complex nature of the products offered by Johnson Matthey, the group at any point
in time may be exposed to product liability issues including claims for damages or compensation.
The assumptions underpinning these claims and the identification of when such claims arise
are inherently judgemental. Careful consideration needs to be given as to how the claim and any
potential exposure are estimated and subsequently accounted for.
For litigation matters, we read the summary of major litigation matters provided by
management and held discussions with group and sector level general counsel. For a sample
of matters, we obtained and reviewed correspondence with external legal counsel, including
any particulars of claim.
We have circularised external legal counsel to independently assess legal exposures and the
expected outcome for material cases across the group.
We reviewed board minutes and made inquiries of management to address the risk of
undisclosed claims and uncertainties. We performed audit procedures to identify all third
party legal counsel used by management and as appropriate included them in our
circularisation.
The group is also involved in various legal proceedings, including actual or threatened litigation and
regulatory investigations. The number and nature of claims vary from year to year; note 32 discloses
the major movements in the year. The two most significant movements included the closure of the
contingent liability relating to failures in certain engine systems for which the group supplied a
particular coated substrate as a component for that customer’s emissions after‑treatment systems
and the new contingent liability arising following the sale of its Health Business in May 2022.
We applied professional scepticism in auditing both the likely outcome and quantification
of exposures, including performing audit procedures over claims management determined
to be immaterial, and being sceptical of where a constructive obligation existed but
management considered a reliable estimate could not be made. As we deem it to be
necessary we also instruct third party legal experts to support an independent assessment
of possible outcomes of claims.
The group discloses such risks as contingent liabilities where it is unable to make a reliable estimate
of potential exposures or where it believes a possible outflow is not probable. If the group is unable
to defend against such claims, these risks could give rise to a future liability.
Where material settlements have occurred we have agreed these to settlement agreements
between the company and the claimant.
We have assessed the level of provisioning and contingent liability disclosures, where relevant,
in response to known claims.
Based on the procedures performed, we noted no material issues arising from our work.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able
to give an opinion on the financial statements as a whole, taking into account the structure
of the group and the company, the accounting processes and controls, and the industry in
which they operate.
The group is structured across five sectors: Clean Air, PGM Services, Catalyst Technologies,
Hydrogen Technologies and Value Businesses, as well as the central Corporate unit.
The financial statements are a consolidation of approximately 230 business units. We have
identified each individual business unit, or a series of business units where they map to
a single legal statutory entity, as a component. These components comprise the group’s
operating businesses and holding companies across the five sectors and corporate.
Based on our risk and materiality assessments, we determined which components required
an audit of their complete financial information having considered the relative significance
of each entity to the group, locations with significant inherent risks and the overall coverage
obtained over each material line item in the consolidated financial statements.
We identified 23 business units which, in our view, required an audit of their complete
financial information, due to size or risk characteristics.
In addition to the business units in full scope, we performed specified procedures or audit
of specified financial statement line items at 9 business units covering revenue, trade and
other receivables and deferred income, cash, inventory, metal inventory, accruals, fixed assets
and depreciation, cost of sales and operating expenses and tested manual journal entries.
This ensured that appropriate audit procedures were performed to achieve sufficient coverage
over these financial statement line items.
The total 32 in‑scope business units are located in numerous countries around the world.
We used local teams in these countries to perform the relevant audit procedures. Of these,
three business units have been determined to be financially significant based on their
contribution to the group. These financially significant component teams are located
in the UK and Macedonia.
The group consolidation, financial statement disclosures and corporate functions were
audited by the group audit team. This included our work over the consolidation, litigation
provisions, centrally recognised tax balances, goodwill, post‑retirement benefits, earnings
per share and treasury related balances. This scope of work, together with additional
procedures performed at the group level, accounted for 83% of group revenue and 71%
of group underlying profit before taxation from continuing operations. This provided the
evidence we needed for our opinion on the consolidated financial statements taken as a
whole. This was before considering the contribution to our audit evidence from performing
audit work at the group level, including disaggregated analytical review procedures, which
covers certain of the group’s smaller and lower risk components that were not directly
included in our group audit scope.
The impact of climate risk on our audit
Climate change is expected to present both risks and opportunities for the group.
As explained in the Sustainability section of the Strategic Report , the group is mindful
of its impact on the environment and is focussed on ways to reduce climate‑related impacts
as management continues to develop its plans towards a Net Zero pathway by 2040.
Management’s climate change initiatives and commitments will impact the group in a variety
of ways, and while the group has started to quantify some of the impacts that may arise
on its net zero pathway, the future financial impacts are clearly uncertain given the medium
to long term horizon. Disclosure of the impact of climate change risk based on management’s
current assessment is incorporated in the Task Force on climate related financial disclosures
(‘TCFD’) section of the Annual Report.
As part of our audit, we made enquiries of management to understand the extent of the
potential impact of climate change on the group’s business and the financial statements,
including reviewing management’s climate change risk assessment which was prepared with
support from an external expert. We used our knowledge of the group to evaluate the risk
assessment performed by management.
We assessed that the key areas in the financial statements which are more likely to be
materially impacted by climate change are those areas that are based on future cash flows.
As a result, we particularly considered how climate change risks and the impact of climate
commitments made by the group would impact the assumptions made in the forecasts
prepared by management that are used in the group’s impairment analysis (see also key audit
matter on Carrying value of goodwill) and for going concern purposes. We challenged how
management had considered longer term physical risks such as severe weather related
impacts, and shorter‑term transitional risks such as the introduction of carbon taxes.
Our procedures did not identify any material impact on our audit for the year ended 31 March
2023. We also checked the consistency of the disclosures in the TCFD section of the Annual
Report with the relevant financial statement disclosures, including notes 1 and the going
concern section of the accounting policies, and with our understanding of the business and
knowledge obtained in the audit.
We confirmed with management and the Audit Committee that the estimated financial
impacts of climate change will be reassessed prospectively and our expectation is that climate
change disclosures will evolve as the understanding of the actual and potential impacts
on the group’s future operations are established with greater certainty.
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Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped
us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect
of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark
applied
Financial statements – group
£21.1 million (2022: £21.8 million).
Approximately 5% of the three year average profit before tax from continuing
operations, adjusted for loss on disposal of businesses, gains and losses on
significant legal proceedings, major impairment and restructuring charges
Adjusted (underlying) profit before tax from continuing operations is used
as the materiality benchmark excluding amortisation of acquired intangibles
and share of losses from associates. Management uses this measure as it
believes that it reflects the underlying performance of the group and this
is how the directors and key management personnel are measured on their
performance. We did not adjust profit before tax to add back amortisation
of acquired intangibles or share of losses of associates as in our view these
are recurring items.
Financial statements – company
£60 million (2022: £60 million).
1% of total assets. However the materiality is capped at £20 million
(2021: £20 million) for the purpose of the audit of the consolidated financial
statements, this being the maximum allocation of group materiality to
a component
We considered total assets to be an appropriate benchmark for the parent
company given that, whilst it does include trading businesses, it is the ultimate
holding company, incurs corporate costs and enters into financing on behalf
of the group. The materiality level was capped at £20 million given overall
group materiality for the purposes of the audit of the consolidated financial
statements, this being the maximum allocation of group materiality
to a component.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between
£1 million and £20 million. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £15.8 million (2022: £16.3 million) for the group financial statements
and £15 million (2022: £15 million) for the company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded
that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1 million (group audit) (2022: £1 million) and £1 million (company audit)
(2022: £1 million) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
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Conclusion relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability
to continue to adopt the going concern basis of accounting included:
• Evaluation of management’s base case and downside case scenarios, understanding
and evaluating the key assumptions, including assumptions related to inflation and other
macro-economic factors;
• Validation that the cash flow forecasts used to support management’s impairment, going
concern and viability assessments were consistent;
• Assessment of the historical accuracy and reasonableness of management’s forecasting;
• Consideration of the group’s available financing and debt maturity profile;
• Testing of the mathematical integrity of management’s liquidity headroom, covenant
compliance, sensitivity and stress testing calculations;
• Assessment of the reasonableness of management’s planned or potential mitigating
actions; and
• Review of the related disclosures in the Annual Report.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt
on the group’s and the company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is
not a guarantee as to the group’s and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention to in relation to the directors’
statement in the financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern
are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the
financial statements and our auditors’ report thereon. The directors are responsible for the
other information, which includes reporting based on the Task Force on Climate‑related
Financial Disclosures (TCFD) recommendations. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether
the disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires
us also to report certain opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information
given in the Strategic report and Directors’ Report for the year ended 31 March 2023
is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and company and their
environment obtained in the course of the audit, we did not identify any material
misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Annual Report on Remuneration to be audited has been
properly prepared in accordance with the Companies Act 2006.
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Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern,
longer‑term viability and that part of the corporate governance statement relating to the
company’s compliance with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the corporate governance
statement as other information are described in the Reporting on other information section
of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging
and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures
are in place to identify emerging risks and an explanation of how these are being managed
or mitigated;
• The directors’ statement in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s and company’s ability to continue
to do so over a period of at least twelve months from the date of approval of the financial
statements;
• The directors’ explanation as to their assessment of the group’s and company’s prospects,
the period this assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the
company will be able to continue in operation and meet its liabilities as they fall due over
the period of its assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer‑term viability of the group and
company was substantially less in scope than an audit and only consisted of making inquiries
and considering the directors’ process supporting their statement; checking that the
statement is in alignment with the relevant provisions of the UK Corporate Governance Code;
and considering whether the statement is consistent with the financial statements and our
knowledge and understanding of the group and company and their environment obtained
in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that
each of the following elements of the corporate governance statement is materially
consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair,
balanced and understandable, and provides the information necessary for the members
to assess the group’s and company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk
management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’
statement relating to the company’s compliance with the Code does not properly disclose
a departure from a relevant provision of the Code specified under the Listing Rules for review
by the auditors.
Responsibilities for the financial statements and
the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities in respect of the Annual
Report and Accounts, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they
give a true and fair view. The directors are also responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s
and the company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the company or to cease operations, or have no
realistic alternative but to do so.
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Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditors’ report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non‑compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks
of non‑compliance with laws and regulations related to international tax regulations,
environmental regulations, health and safety regulations (EHS), and anti bribery and
corruption laws, and we considered the extent to which non‑compliance might have a
material effect on the financial statements. We also considered those laws and regulations
that have a direct impact on the financial statements such as the Companies Act 2006.
We evaluated management’s incentives and opportunities for fraudulent manipulation of
the financial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries, management bias in
accounting estimates, expected credit losses, timing of recognition of litigation provisions
and metal gains and losses. The group engagement team shared this risk assessment with the
component auditors so that they could include appropriate audit procedures in response to
such risks in their work. Audit procedures performed by the group engagement team and/or
component auditors included:
• Discussions with management, internal audit and the group’s legal advisors, and the head
of ethics and compliance including consideration of known or suspected instances of
non‑compliance with laws and regulations and fraud;
• Reading the minutes of board meetings and the Ethics Committee, and assessment of
“SpeakUp” matters through the ethics reporting line and the results of management’s
investigation into these matters (including engaging with our own forensics specialists
where relevant);
• Reviewing financial statement disclosures to supporting documentation to assess
compliance with applicable laws and regulations;
• Challenging management’s significant judgements and estimates in particular those
relating to the carrying value of goodwill, other intangibles and other assets, post‑
employment benefits, tax provisions, deferred tax assets, refining processes and stocktakes,
climate change, metal accounting and provisions and contingent liabilities;
• Identifying and testing manual journal entries, in particular any journal entries posted
with unusual account combinations, and all material consolidation journals;
• Incorporating unpredictable procedures into our audit approach including varying
the timing and nature of testing performed; and
• Considering the outcome of key transactions in the year and the assessing the
appropriateness of related accounting and disclosure within the financial statements.
There are inherent limitations in the audit procedures described above. We are less likely
to become aware of instances of non‑compliance with laws and regulations that are not
closely related to events and transactions reflected in the financial statements. Also, the risk
of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and
balances, possibly using data auditing techniques. However, it typically involves selecting
a limited number of items for testing, rather than testing complete populations. We will often
seek to target particular items for testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion about the population
from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc. org.uk/auditorsresponsibilities. This description forms part
of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006
and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
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Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate
for our audit have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements and the part of the Annual Report on Remuneration
to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members
on 18 July 2018 to audit the financial statements for the year ended 31 March 2019 and
subsequent financial periods. The period of total uninterrupted engagement is five years,
covering the years ended 31 March 2019 to 31 March 2023.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these financial statements will form part of the ESEF‑prepared
annual financial report filed on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’).
This auditors’ report provides no assurance over whether the annual financial report will
be prepared using the single electronic format specified in the ESEF RTS.
Graham Parsons (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
25 May 2023
Johnson Matthey | Annual Report and Accounts 2023
143
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Consolidated Income Statement
for the year ended 31st March 2023
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Operating profit
Finance costs
Investment income
Share of losses of associates
Profit before tax from continuing operations
Tax expense
Profit for the year from continuing operations
Profit / (loss) after tax from discontinued operations
Profit / (loss) for the year
Earnings / (loss) per ordinary share
Basic
Diluted
Earnings per ordinary share from continuing operations
Basic
Diluted
Notes
2,3
27
4
4
4,6
2,4
8
8
15
9
26
10
10
10
10
2023
£m
14,933
(13,939)
994
(117)
(412)
12
(5)
(25)
(41)
406
(110)
49
(1)
344
(80)
264
12
276
2022
£m
16,025
(14,971)
1,054
(101)
(400)
106
(6)
42
(440)
255
(101)
41
–
195
(79)
116
(217)
(101)
Pence
pence
150.9
150.2
144.2
143.6
(52.6)
(52.6)
60.9
60.8
144
144
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Consolidated Income Statement
for the year ended 31st March 2023
Consolidated Statement of Total Comprehensive Income
for the year ended 31st March 2023
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Operating profit
Finance costs
Investment income
Share of losses of associates
Profit before tax from continuing operations
Tax expense
Profit for the year from continuing operations
Profit / (loss) after tax from discontinued operations
Profit / (loss) for the year
Earnings / (loss) per ordinary share
Earnings per ordinary share from continuing operations
Basic
Diluted
Basic
Diluted
144
Profit / (loss) for the year
Other comprehensive (expense) / income
Items that will not be reclassified to the income statement in subsequent years
Remeasurements of post-employment benefit assets and liabilities
Fair value losses on equity investments at fair value through other comprehensive income
Tax on items that will not be reclassified to the income statement1
Total items that will not be reclassified to the income statement
Items that may be reclassified to the income statement
Exchange differences on translation of foreign operations
Exchange differences on translation of discontinued foreign operations
Amounts credited / (charged) to hedging reserve
Fair value losses on net investment hedges
Tax on above items taken directly to or transferred from equity2
Total items that may be reclassified to the income statement (in subsequent years)
Other comprehensive (expense) / income for the year
Total comprehensive income for the year
Total comprehensive income for the year arises from:
Pence
pence
Continuing operations
Discontinued operations
1. The tax credit / (charge) on other comprehensive income that will not be reclassified to the income statement of £37 million (2022: £(35) million) relates to remeasurements of post-employment benefit assets and liabilities.
2. The tax (charge) / credit on other comprehensive income that may be reclassified to the income statement of £(28) million (2022: £10 million) relates to tax on amounts credited / (charged) to hedging reserve.
Notes
2,3
2023
£m
14,933
(13,939)
2022
£m
16,025
(14,971)
1,054
(101)
(400)
106
(6)
42
(440)
255
(101)
41
–
195
(79)
116
(217)
(101)
(52.6)
(52.6)
60.9
60.8
994
(117)
(412)
(110)
12
(5)
(25)
(41)
406
49
(1)
344
(80)
264
12
276
150.9
150.2
144.2
143.6
27
4
4
4,6
2,4
8
8
15
9
26
10
10
10
10
Johnson Matthey | Annual Report and Accounts 2023
Notes
24
25
26, 27
26
2023
£m
276
(149)
(12)
37
(124)
33
(32)
114
(10)
(28)
77
(47)
229
249
(20)
229
2022
£m
(101)
177
(5)
(35)
137
75
5
(36)
(2)
10
52
189
88
300
(212)
88
145
145
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Consolidated Statement of Financial Position
as at 31st March 2023
Notes
2023
£m
2022
£m
Notes
2023
£m
2022
£m
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Investments in joint ventures and associates
Investments at fair value through other comprehensive income
Other receivables
Interest rate swaps
Other financial assets
Deferred tax assets
Post-employment benefit net assets
Total non-current assets
Current assets
Inventories
Taxation recoverable
Trade and other receivables
Cash and cash equivalents
Other financial assets
Assets classified as held for sale
Total current assets
Total assets
11
12
13
14
15
29
17
18
23
24
16
17
18
26
1,332
49
364
287
75
49
113
20
48
121
203
2,661
1,702
12
1,882
650
47
75
4,368
7,029
1,238
61
366
267
2
45
42
12
–
98
352
2,483
1,549
18
1,796
391
27
402
4,183
6,666
The accounts were approved by the Board of Directors on 25th May 2023 and signed on its
behalf by:
L Condon
S Oxley
Directors
The notes on pages 150 to 221 form an integral part of the accounts.
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Taxation liabilities
Cash and cash equivalents - bank overdrafts
Borrowings and related swaps
Other financial liabilities
Provisions
Liabilities classified as held for sale
Total current liabilities
Non-current liabilities
Borrowings and related swaps
Lease liabilities
Deferred tax liabilities
Interest rate swaps
Employee benefit obligations
Other financial liabilities
Provisions
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Treasury shares
Other reserves
Retained earnings
Total equity
19
12
20
18
22
26
20
12
23
24
18
22
19
25
25
(2,497)
(9)
(105)
(13)
(155)
(27)
(63)
(25)
(2,894)
(1,460)
(31)
(19)
(15)
(41)
–
(28)
(2)
(1,596)
(4,490)
2,539
215
148
(19)
118
2,077
2,539
(2,563)
(10)
(97)
(37)
(265)
(44)
(56)
(80)
(3,152)
(899)
(40)
(18)
(2)
(72)
(12)
(28)
(2)
(1,073)
(4,225)
2,441
218
148
(24)
50
2,049
2,441
146
146
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
for the year ended 31st March 2023
Notes
2023
£m
2022
£m
Notes
2023
£m
2022
£m
Notes
2023
£m*
2022
£m*
Notes
2023
£m
2022
£m*
19
12
20
18
22
26
20
12
23
24
18
22
19
25
25
(2,894)
(3,152)
(1,460)
(899)
(9)
(105)
(13)
(155)
(27)
(63)
(25)
(31)
(19)
(15)
(41)
–
(28)
(2)
(10)
(97)
(37)
(265)
(44)
(56)
(80)
(40)
(18)
(2)
(72)
(12)
(28)
(2)
(1,596)
(1,073)
(4,490)
(4,225)
2,539
2,441
215
148
(19)
118
218
148
(24)
50
2,077
2,539
2,049
2,441
Cash flows from operating activities
Profit before tax from continuing operations
Profit / (loss) before tax from discontinued operations
Adjustments for:
Share of losses of associates
Profit on disposal of businesses
Depreciation
Amortisation
Impairment losses
(Profit) / loss on sale of non-current assets
Share-based payments
(Increase) / decrease in inventories
(Increase) / decrease in receivables
Decrease in payables
Increase in provisions
Contributions in excess of employee benefit obligations charge
Changes in fair value of financial instruments
Net finance costs
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Purchases of property, plant and equipment
Purchases of intangible assets
Purchases of investments held at fair value through other
comprehensive income
Government grant income received
Proceeds from sale of non-current assets
Proceeds from sale of investment in joint ventures
Net proceeds from sale of businesses
Net cash outflow from investing activities
27
344
5
1
(23)
151
36
27
(6)
7
(139)
(102)
(4)
7
(21)
22
61
(75)
291
28
(253)
(63)
(17)
7
8
2
187
(101)
195
(239)
–
(106)
151
39
632
2
8
123
588
(783)
25
(2)
19
60
(107)
605
32
(358)
(95)
–
–
1
–
160
(260)
Cash flows from financing activities
Purchase of treasury shares
Proceeds from borrowings
Repayment of borrowings
Dividends paid to equity shareholders
Interest paid
Principal element of lease payments
Net cash inflow / (outflow) from financing activities
Change in cash and cash equivalents
Exchange differences on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and deposits
Money market funds
Bank overdrafts
Bank overdrafts transferred to liabilities classified as held for sale
Cash and cash equivalents
* For cash flows of discontinued operations see note 26.
25
25
(45)
672
(281)
(141)
(94)
(14)
97
287
4
346
637
129
521
(13)
–
637
(155)
9
(140)
(139)
(111)
(14)
(550)
(205)
6
545
346
254
137
(37)
(8)
346
1,332
1,238
Trade and other payables
(2,497)
(2,563)
Investments in joint ventures and associates
Investments at fair value through other comprehensive income
as at 31st March 2023
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Other receivables
Interest rate swaps
Other financial assets
Deferred tax assets
Post-employment benefit net assets
Total non-current assets
Current assets
Inventories
Taxation recoverable
Trade and other receivables
Cash and cash equivalents
Other financial assets
Assets classified as held for sale
Total current assets
Total assets
behalf by:
L Condon
S Oxley
Directors
The accounts were approved by the Board of Directors on 25th May 2023 and signed on its
The notes on pages 150 to 221 form an integral part of the accounts.
Liabilities
Current liabilities
Lease liabilities
Taxation liabilities
Cash and cash equivalents - bank overdrafts
Borrowings and related swaps
Other financial liabilities
Provisions
Liabilities classified as held for sale
Total current liabilities
Non-current liabilities
Borrowings and related swaps
11
12
13
14
15
29
17
18
23
24
18
26
49
364
287
75
49
113
20
48
121
203
61
366
267
2
45
42
12
–
98
352
650
47
75
391
27
402
4,368
7,029
4,183
6,666
2,661
2,483
Lease liabilities
16
1,702
1,549
Deferred tax liabilities
Interest rate swaps
12
18
Employee benefit obligations
17
1,882
1,796
Other financial liabilities
Provisions
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Treasury shares
Other reserves
Retained earnings
Total equity
146
Johnson Matthey | Annual Report and Accounts 2023
147
147
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Consolidated Statement of Changes in Equity
for the year ended 31st March 2023
At 1st April 2021
Loss for the year
Remeasurements of post-employment benefit assets and liabilities
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations
Amounts charged to hedging reserve
Fair value losses on net investment hedges taken to equity
Tax on other comprehensive income
Total comprehensive income
Dividends paid (note 25)
Purchase of treasury shares (note 25)
Share-based payments
Cost of shares transferred to employees
At 31st March 2022
Profit for the year
Remeasurements of post-employment benefit assets and liabilities
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations
Amounts credited to hedging reserve
Fair value losses on net investment hedges taken to equity
Tax on other comprehensive income
Total comprehensive income
Dividends paid (note 25)
Purchase of treasury shares (note 25)
Share-based payments
Cost of shares transferred to employees
Tax on share-based payments
At 31st March 2023
Share
capital
£m
221
–
–
–
–
–
–
–
–
–
(3)
–
–
218
–
–
–
–
–
–
–
–
–
(3)
–
–
–
215
Share
premium
account
£m
Treasury
shares
£m
Other
reserves
(note 25)
£m
148
–
–
–
–
–
–
–
–
–
–
–
–
148
–
–
–
–
–
–
–
–
–
–
–
–
–
148
(29)
–
–
–
–
–
–
–
–
–
–
–
5
(24)
–
–
–
–
–
–
–
–
–
–
–
5
–
(19)
–
–
–
(5)
80
(36)
(2)
10
47
–
3
–
–
50
–
–
(12)
1
114
(10)
(28)
65
–
3
–
–
–
118
Retained
earnings
£m
2,345
(101)
177
–
–
–
–
(35)
41
(139)
(200)
15
(13)
2,049
276
(149)
–
–
–
–
37
164
(141)
(1)
18
(14)
2
2,077
Total
equity
£m
2,685
(101)
177
(5)
80
(36)
(2)
(25)
88
(139)
(200)
15
(8)
2,441
276
(149)
(12)
1
114
(10)
9
229
(141)
(1)
18
(9)
2
2,539
148
148
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Consolidated Statement of Changes in Equity
for the year ended 31st March 2023
Guide to financial statement disclosures
for the year ended 31st March 2023
At 1st April 2021
Loss for the year
Remeasurements of post-employment benefit assets and liabilities
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations
Amounts charged to hedging reserve
Fair value losses on net investment hedges taken to equity
Tax on other comprehensive income
Total comprehensive income
Dividends paid (note 25)
Purchase of treasury shares (note 25)
Share-based payments
Cost of shares transferred to employees
At 31st March 2022
Profit for the year
Tax on other comprehensive income
Total comprehensive income
Dividends paid (note 25)
Purchase of treasury shares (note 25)
Share-based payments
Cost of shares transferred to employees
Tax on share-based payments
At 31st March 2023
Remeasurements of post-employment benefit assets and liabilities
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations
Amounts credited to hedging reserve
Fair value losses on net investment hedges taken to equity
Share
capital
£m
221
Share
premium
account
£m
148
Treasury
shares
£m
(29)
Other
reserves
(note 25)
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
(3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
£m
2,345
(101)
177
(35)
41
(139)
(200)
15
(13)
2,049
276
(149)
–
–
–
–
–
–
–
–
37
164
(141)
(1)
18
(14)
2
Total
equity
£m
2,685
(101)
177
(5)
80
(36)
(2)
(25)
88
(139)
(200)
15
(8)
2,441
276
(149)
(12)
1
114
(10)
9
229
(141)
(1)
18
(9)
2
(5)
80
(36)
(2)
10
47
(12)
114
(10)
(28)
65
–
–
–
–
3
–
–
–
–
1
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
5
–
218
148
(24)
50
215
148
(19)
118
2,077
2,539
Notes and appendices
Page
Notes and appendices
Operations - information relating to our operating performance
2
3
4
5
Segmental information
Revenue
Operating profit
Impairment losses
Financing - information relating to how we finance our business
8
18
20
21
Investment income and financing costs
Other financial assets and liabilities
Borrowings and related swaps
Movements in assets and liabilities from financing activities
158
163
168
170
173
179
180
181
Working capital - information relating to the day-to-day working capital of our business
16
17
Inventories
Trade and other receivables
Tax - information relating to our current and deferred taxation
179
179
6
10
34
25
28
29
19
22
Major impairment and restructuring charges
Earnings / (loss) per ordinary share
Non-GAAP measures
Share capital and other reserves
Financial risk management
Fair values
Trade and other payables
Provisions
9
Tax expense
174
23
Deferred tax
Employees - information relating to the costs associated with employing our people
7
24
Employee information
Post-employment benefits
173
183
30
Share-based payments
Long-term assets - information relating to our long-term operational and investment assets
11
12
13
Property, plant and equipment
Leases
Goodwill
Other - other useful information
1
26
27
Accounting policies
Discontinued operations and assets and liabilities classified as
held for sale
Disposals
175
176
176
150
195
196
14
15
24
31
32
33
34
Other intangible assets
Investments in joint ventures and associates
Post-employment benefits
Commitments
Contingent liabilities
Transactions with related parties
Non-GAAP measures
148
Johnson Matthey | Annual Report and Accounts 2023
Page
172
174
207
192
197
202
179
182
182
204
177
178
183
205
206
206
207
149
149
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts
for the year ended 31st March 2023
1 Accounting policies
The Company and the Group
Johnson Matthey plc (the ‘Company’) is a public company limited by shares incorporated
under the Companies Act 2006 and domiciled in England in the United Kingdom. The
consolidated accounts of the company for the year ended 31st March 2023 consist of the
audited consolidation of the accounts of the Company and its subsidiaries (together referred
to as the ‘Group’), together with the employee share ownership trust and the group's interest
in joint ventures and associates.
Basis of accounting and preparation – group
The financial statements of the group have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
The accounts are prepared on the historical cost basis, except for certain assets and liabilities
which are measured at fair value as explained below.
The group accounts comprise the accounts of the parent company and its subsidiaries,
including the employee share ownership trust, and include the group's interest in joint
ventures and associates. Entities the group controls are accounted for as subsidiaries. Entities
that are joint ventures or associates are accounted for using the equity method of accounting.
Transactions and balances between group companies are eliminated. No profit is recognised
on transactions between group companies.
The results of businesses acquired or disposed of in the year are consolidated from or up to the
effective date of acquisition or disposal, respectively. The net assets of businesses acquired are
recognised in the consolidated accounts at their fair values at the date of acquisition.
Going concern
The directors have reviewed a range of scenario forecasts for the group and have reasonable
expectation that there are no material uncertainties that cast doubt about the group’s ability to
continue operating for at least twelve months from the date of approving these annual accounts.
As at 31st March 2023, the group maintains a strong balance sheet with around £1.6 billion
of available cash and undrawn committed facilities. Free cash flow was positive in the year
at £74 million. Net debt at 31st March 2023 was £1,023 million at 1.6 times net debt
(including post tax pension deficits) to underlying EBITDA which was at the lower end of
our target range.
Although impacted by the significant headwinds faced in the current macroeconomic
environment such as high inflation, the impacts of Russia’s war with Ukraine and uncertainty
in outlook for major economies, the group’s performance during the period was resilient, both
in terms of underlying operating profit and cash flow. For the purposes of assessing going
concern, we have revisited our financial projections using the latest forecasts for our base case
scenario. The base case scenario was stress tested to a severe-but-plausible downside case
which reflects severe recession scenarios.
The severe-but-plausible case for Clean Air modelled scenarios assuming a smaller light duty
vehicle market from reduced vehicle production and/or market consumer demand disruption
or greater share of zero emission vehicles in market, assumed to result in a 10% drop in sales.
For PGMS and Catalyst Technologies, it also assumed a reduction in sales and associated
operating profit based on adverse scenarios using external and internal market insights.
Additionally, as part of viability testing, the group considered scenarios including the impact
from metal price volatility, higher inflation, delays in capital projects and delivery of cost
transformation savings, and slow down of operations in China. Whilst the combined impact
would reduce profitability and EBITDA against our latest forecast, our balance sheet remains
strong with ample working capital and Net Debt/EBITDA ratios.
The group has a robust funding position comprising a range of long-term debt and a £1 billion
five year committed revolving credit facility maturing in March 2027 which was entirely
undrawn at 31st March 2023. There was £521 million of cash held in money market funds
and £129 million of other cash and bank deposits. Of the existing loans, £151 million of term
debt and £4 million of other bank loans mature in the period to June 2024. We assume no
refinancing of this debt in our going concern modelling. As a long time, highly rated issuer in
the US private placement market and having recently extended its UK Export Financing
facility, the group expects to be able to access additional funding in its existing markets if
required but the going concern conclusion is not dependant on such access as the company
has sufficient financing and liquidity to fund its obligations in the base and severe-but-
plausible scenarios. The group also has a number of additional sources of funding available
including uncommitted metal lease facilities that support precious metal funding. Whilst we
would fully expect to be able to utilise the metal lease facilities, they are excluded from our
going concern modelling.
Conclusion
Under all scenarios above, the group has sufficient headroom against committed facilities and
key financial covenants are not in breach during the going concern period. To give further
assurance on liquidity, we have also undertaken a reverse stress test to identify what
additional or alternative scenarios and circumstances would threaten our current financing
arrangements. This shows that we have headroom against a further decline in profitability
beyond the severe-but-plausible scenario or a significant increase in borrowings. Furthermore,
the group has a range of levers which it could utilise to protect headroom including reducing
capital expenditure, renegotiating payment terms 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 at least twelve months following the date of this announcement
these financial statements and there are no material uncertainties relating to going concern so
determine that it is appropriate to prepare the accounts on a going concern basis.
150
150
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts
for the year ended 31st March 2023
1 Accounting policies
The Company and the Group
Johnson Matthey plc (the ‘Company’) is a public company limited by shares incorporated
under the Companies Act 2006 and domiciled in England in the United Kingdom. The
consolidated accounts of the company for the year ended 31st March 2023 consist of the
The severe-but-plausible case for Clean Air modelled scenarios assuming a smaller light duty
vehicle market from reduced vehicle production and/or market consumer demand disruption
or greater share of zero emission vehicles in market, assumed to result in a 10% drop in sales.
For PGMS and Catalyst Technologies, it also assumed a reduction in sales and associated
operating profit based on adverse scenarios using external and internal market insights.
audited consolidation of the accounts of the Company and its subsidiaries (together referred
Additionally, as part of viability testing, the group considered scenarios including the impact
to as the ‘Group’), together with the employee share ownership trust and the group's interest
from metal price volatility, higher inflation, delays in capital projects and delivery of cost
in joint ventures and associates.
Basis of accounting and preparation – group
The financial statements of the group have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
The accounts are prepared on the historical cost basis, except for certain assets and liabilities
which are measured at fair value as explained below.
The group accounts comprise the accounts of the parent company and its subsidiaries,
including the employee share ownership trust, and include the group's interest in joint
ventures and associates. Entities the group controls are accounted for as subsidiaries. Entities
that are joint ventures or associates are accounted for using the equity method of accounting.
Transactions and balances between group companies are eliminated. No profit is recognised
on transactions between group companies.
The results of businesses acquired or disposed of in the year are consolidated from or up to the
effective date of acquisition or disposal, respectively. The net assets of businesses acquired are
recognised in the consolidated accounts at their fair values at the date of acquisition.
Going concern
The directors have reviewed a range of scenario forecasts for the group and have reasonable
expectation that there are no material uncertainties that cast doubt about the group’s ability to
continue operating for at least twelve months from the date of approving these annual accounts.
transformation savings, and slow down of operations in China. Whilst the combined impact
would reduce profitability and EBITDA against our latest forecast, our balance sheet remains
strong with ample working capital and Net Debt/EBITDA ratios.
The group has a robust funding position comprising a range of long-term debt and a £1 billion
five year committed revolving credit facility maturing in March 2027 which was entirely
undrawn at 31st March 2023. There was £521 million of cash held in money market funds
and £129 million of other cash and bank deposits. Of the existing loans, £151 million of term
debt and £4 million of other bank loans mature in the period to June 2024. We assume no
refinancing of this debt in our going concern modelling. As a long time, highly rated issuer in
the US private placement market and having recently extended its UK Export Financing
facility, the group expects to be able to access additional funding in its existing markets if
required but the going concern conclusion is not dependant on such access as the company
has sufficient financing and liquidity to fund its obligations in the base and severe-but-
plausible scenarios. The group also has a number of additional sources of funding available
including uncommitted metal lease facilities that support precious metal funding. Whilst we
would fully expect to be able to utilise the metal lease facilities, they are excluded from our
going concern modelling.
Conclusion
Under all scenarios above, the group has sufficient headroom against committed facilities and
key financial covenants are not in breach during the going concern period. To give further
assurance on liquidity, we have also undertaken a reverse stress test to identify what
additional or alternative scenarios and circumstances would threaten our current financing
As at 31st March 2023, the group maintains a strong balance sheet with around £1.6 billion
arrangements. This shows that we have headroom against a further decline in profitability
of available cash and undrawn committed facilities. Free cash flow was positive in the year
beyond the severe-but-plausible scenario or a significant increase in borrowings. Furthermore,
at £74 million. Net debt at 31st March 2023 was £1,023 million at 1.6 times net debt
the group has a range of levers which it could utilise to protect headroom including reducing
(including post tax pension deficits) to underlying EBITDA which was at the lower end of
capital expenditure, renegotiating payment terms and reducing future dividend distributions.
our target range.
Although impacted by the significant headwinds faced in the current macroeconomic
The directors are therefore of the opinion that the group has adequate resources to fund its
operations for the period of at least twelve months following the date of this announcement
environment such as high inflation, the impacts of Russia’s war with Ukraine and uncertainty
these financial statements and there are no material uncertainties relating to going concern so
in outlook for major economies, the group’s performance during the period was resilient, both
determine that it is appropriate to prepare the accounts on a going concern basis.
in terms of underlying operating profit and cash flow. For the purposes of assessing going
concern, we have revisited our financial projections using the latest forecasts for our base case
scenario. The base case scenario was stress tested to a severe-but-plausible downside case
which reflects severe recession scenarios.
150
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Significant accounting policies
The group’s and parent company’s accounting policies have been applied consistently during
the current and prior year, other than where new policies have been adopted (see below). The
group’s and parent company’s significant accounting policies are as follows:
Foreign currencies
Foreign currency transactions are recorded in the functional currency of the relevant
subsidiary, joint venture, associate or branch at the exchange rate at the date of the
transaction. Foreign currency monetary assets and liabilities are retranslated into the relevant
functional currency at the exchange rate at the balance sheet date.
Income statements and cash flows of overseas subsidiaries, joint ventures, associates and
branches are translated into sterling at the average rates for the year. Balance sheets of
overseas subsidiaries, joint ventures, associates and branches, including any fair value
adjustments and related goodwill, are translated into sterling at the exchange rates at the
balance sheet date.
Exchange differences arising on the translation of the net investment in overseas subsidiaries,
joint ventures, associates and branches, less exchange differences arising on related foreign
currency financial instruments which hedge the group’s net investment in these operations,
are taken to other comprehensive income. On disposal of the net investment, the cumulative
exchange difference is reclassified from equity to operating profit.
Other exchange differences are recognised in operating profit.
Revenue
Revenue represents income derived from contracts for the provision of goods and services by
the parent company and its subsidiaries to customers in exchange for consideration in the
ordinary course of the group’s activities.
Performance obligations
Upon approval by the parties to a contract, the contract is assessed to identify each promise to
transfer either a distinct good or service or a series of distinct goods or services that are
substantially the same and have the same pattern of transfer to the customer. Goods and
services are distinct and accounted for as separate performance obligations in the contract if
the customer can benefit from them either on their own or together with other resources that
are readily available to the customer and they are separately identifiable in the contract.
The group typically sells licences to its intellectual property together with other goods and
services and, since these licences are not generally distinct in the context of the contract,
revenue recognition is considered at the level of the performance obligation of which the
licence forms part. Revenue in respect of performance obligations containing bundles of
goods and services in which a licence with a sales or usage-based royalty is the predominant
item is recognised when sales or usage occur.
Transaction price
At the start of the contract, the total transaction price is estimated as the amount of
consideration to which the group expects to be entitled in exchange for transferring the
promised goods and services to the customer, excluding sales taxes. Variable consideration,
such as trade discounts, is included based on the expected value or most likely amount only to
the extent that it is highly probable that there will not be a reversal in the amount of
cumulative revenue recognised. The transaction price does not include estimates of
consideration resulting from contract modifications until they have been approved by the
parties to the contract. The total transaction price is allocated to the performance obligations
identified in the contract in proportion to their relative stand-alone selling prices. Many of the
group's and parent company’s products and services are bespoke in nature and, therefore,
stand-alone selling prices are estimated based on cost plus margin or by reference to market
data for similar products and services.
Revenue recognition
Revenue is recognised as performance obligations are satisfied as control of the goods and
services is transferred to the customer.
For each performance obligation within a contract, the group and parent company determine
whether it is satisfied over time or at a point in time. Performance obligations are satisfied
over time if one of the following criteria is satisfied:
• the customer simultaneously receives and consumes the benefits provided by the group’s
and parent company’s performance as they perform;
• the group’s and parent company’s performance creates or enhances an asset that the
customer controls as the asset is created or enhanced; or
• the group’s and parent company’s performance does not create an asset with an alternative
use to the group and parent company and they have an enforceable right to payment for
performance completed to date.
For more detail of our revenue recognition policy see note 3.
In the event that the group and parent company enter into bill-and-hold transactions at the
specific request of customers, revenue is recognised when the goods are ready for transfer to
the customer and when the group and parent company are no longer capable of directing
those goods to another use.
Revenue includes sales of precious metal to customers and the precious metal content of
products sold to customers.
Linked contracts under which the group and parent company sell or buy precious metal and
commit to repurchase or sell the metal in the future are accounted for as finance transactions
and no revenue is recognised in respect of the sale leg.
No revenue is recognised by the group or parent company in respect of non-monetary
exchanges of precious metal on the basis that the counterparties are in the same line
of business.
Johnson Matthey | Annual Report and Accounts 2023
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Significant accounting policies continued
Consideration payable to customers
Consideration payable to customers in advance of the recognition of revenue in respect of the
goods and services to which it relates is capitalised and recognised as a deduction to the
revenue recognised upon transfer of the goods and services to the customer.
Costs to fulfil a contract
Contract fulfilment costs in respect of over time contracts are expensed as incurred. Contract
fulfilment costs in respect of point in time contracts are accounted for under IAS 2,
Inventories.
Contract receivables
Contract receivables represent amounts for which the group and parent company have an
unconditional right to consideration in respect of unbilled revenue recognised at the balance
sheet date.
Contract liabilities
Contract liabilities represent the obligation to transfer goods or services to a customer for
which consideration has been received, or consideration is due, from the customer.
Finance costs and investment income
Finance costs that are directly attributable to the construction of an asset that necessarily
takes a substantial period of time to get ready for its intended use are capitalised as part of the
cost of that asset. Other finance costs and finance income are recognised in the income
statement in the year incurred.
Research and development
Research expenditure is charged to the income statement in the year incurred. Development
expenditure is charged to the income statement in the year incurred unless it meets the
recognition criteria for capitalisation. When the recognition criteria have been met, any
further development expenditure is capitalised as an intangible asset.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any
provisions for impairment. Depreciation is provided at rates calculated to write-off the cost less
estimated residual value of each asset over its useful life and is recognised within
administrative expenses. Certain buildings and plant and equipment are depreciated using the
units of production method as this more closely reflects their expected consumption. All other
assets are depreciated using the straight-line method. The useful lives vary according to the
class of the asset, but are typically:
• buildings – 30 years; and
• plant and machinery – 4 to 10 years.
• land is not depreciated.
The expected lives of property, plant and equipment tends to be short to medium term, as
such the physical risk posed by climate change in the long term is low.
Goodwill and other intangible assets
Goodwill arises on the acquisition of a business when the fair value of the consideration
exceeds the fair value attributed to the net assets acquired (including contingent liabilities).
It is subject to annual impairment reviews. Acquisition-related costs are charged to the
income statement as incurred. The group and parent company have taken advantage of
the exemption allowed under IFRS 1 and, therefore, goodwill arising on acquisitions
made before 1st April 2004 is included at the carrying amount at that date less any subsequent
impairments.
Other intangible assets are stated at cost less accumulated amortisation and any provisions for
impairment. Customer contracts are amortised when the relevant income stream occurs. All
other intangible assets are amortised by using the straight-line method over the useful lives
from the time they are first available for use. Amortisation is recognised within administrative
expenses. The estimated useful lives vary according to the specific asset, but are typically:
• customer contracts and relationships – 1 to 15 years;
• capitalised computer software – 3 to 10 years;
• patents, trademarks and licences – 3 to 20 years;
• acquired research and technology – 4 to 10 years; and
• capitalised development currently being amortised – 3 to 8 years.
Intangible assets which are not yet being amortised are subject to annual impairment reviews.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Significant accounting policies continued
Consideration payable to customers
Consideration payable to customers in advance of the recognition of revenue in respect of the
goods and services to which it relates is capitalised and recognised as a deduction to the
revenue recognised upon transfer of the goods and services to the customer.
Costs to fulfil a contract
Contract fulfilment costs in respect of over time contracts are expensed as incurred. Contract
fulfilment costs in respect of point in time contracts are accounted for under IAS 2,
Contract receivables represent amounts for which the group and parent company have an
unconditional right to consideration in respect of unbilled revenue recognised at the balance
Inventories.
Contract receivables
sheet date.
Contract liabilities
Contract liabilities represent the obligation to transfer goods or services to a customer for
which consideration has been received, or consideration is due, from the customer.
Finance costs and investment income
Finance costs that are directly attributable to the construction of an asset that necessarily
takes a substantial period of time to get ready for its intended use are capitalised as part of the
cost of that asset. Other finance costs and finance income are recognised in the income
impairments.
statement in the year incurred.
Research and development
expenditure is charged to the income statement in the year incurred unless it meets the
recognition criteria for capitalisation. When the recognition criteria have been met, any
further development expenditure is capitalised as an intangible asset.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any
provisions for impairment. Depreciation is provided at rates calculated to write-off the cost less
estimated residual value of each asset over its useful life and is recognised within
administrative expenses. Certain buildings and plant and equipment are depreciated using the
units of production method as this more closely reflects their expected consumption. All other
assets are depreciated using the straight-line method. The useful lives vary according to the
class of the asset, but are typically:
• buildings – 30 years; and
• plant and machinery – 4 to 10 years.
• land is not depreciated.
The expected lives of property, plant and equipment tends to be short to medium term, as
such the physical risk posed by climate change in the long term is low.
Goodwill and other intangible assets
Goodwill arises on the acquisition of a business when the fair value of the consideration
exceeds the fair value attributed to the net assets acquired (including contingent liabilities).
It is subject to annual impairment reviews. Acquisition-related costs are charged to the
income statement as incurred. The group and parent company have taken advantage of
the exemption allowed under IFRS 1 and, therefore, goodwill arising on acquisitions
made before 1st April 2004 is included at the carrying amount at that date less any subsequent
Other intangible assets are stated at cost less accumulated amortisation and any provisions for
impairment. Customer contracts are amortised when the relevant income stream occurs. All
other intangible assets are amortised by using the straight-line method over the useful lives
expenses. The estimated useful lives vary according to the specific asset, but are typically:
• customer contracts and relationships – 1 to 15 years;
• capitalised computer software – 3 to 10 years;
• patents, trademarks and licences – 3 to 20 years;
• acquired research and technology – 4 to 10 years; and
• capitalised development currently being amortised – 3 to 8 years.
Intangible assets which are not yet being amortised are subject to annual impairment reviews.
Research expenditure is charged to the income statement in the year incurred. Development
from the time they are first available for use. Amortisation is recognised within administrative
1 Accounting policies continued
Investments in joint ventures and associates
A joint venture is a joint arrangement whereby investees are able to exercise joint control of
the arrangement.
Associates are entities over which the group exercises significant influence when it has the
power to participate in the financial and operating policy decisions of the entity but it does not
have the power to control or jointly control the entity.
Investments in joint ventures and associates are accounted for using the equity method of
accounting and are initially recognised at cost. Thereafter the investments are adjusted to
recognise the group’s share of the post-acquisition profits or losses after tax of the investee in
the income statement, and the group’s share of movements in other comprehensive income
of the investee in other comprehensive income. Dividends received or receivable from
associates are recognised as a reduction in the carrying amount of the investment. The
carrying value of the investments are reviewed for impairment triggers on a regular basis.
Where the group’s share of losses in an equity-accounted investment equals or exceeds its
interest in the entity, the group does not recognise further losses unless it has incurred
obligations to do so.
Unrealised gains and losses on transactions between the group and its associates are
eliminated to the extent of the group’s interest in these joint ventures and associates.
Leases
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.
Inventories
Precious metal
Inventories of gold, silver and platinum group metals are valued according to the source from
which the metal is obtained. Metal which has been purchased and committed to future sales
to customers is valued at the price at which it is contractually committed, adjusted for
unexpired contango and backwardation. Other precious metal inventories owned by the
group, which are unhedged, are valued at the lower of cost and net realisable value using the
weighted average cost formula.
Other
Non-precious metal inventories are valued at the lower of cost, including attributable
overheads, and net realisable value. Except where costs are specifically identified, the first-in,
first-out cost formula is used to value inventories.
Cash and cash equivalents
Cash and deposits comprise cash at bank and in hand and short-term deposits with a maturity
date of three months or less from the date of acquisition. Money market funds comprise
investments in funds that are subject to an insignificant risk of changes in fair value. The
group and parent company routinely use short-term bank overdraft facilities, which are
repayable on demand, as an integral part of their cash management policies and, therefore,
cash and cash equivalents include cash and deposits, money market funds and bank
overdrafts. Offset arrangements across group businesses have been applied to arrive at the net
cash and overdraft figures.
At 31st March 2023 cash and cash equivalents includes £15 million (31st March 2022: £111
million) of restricted amounts relating to cash held in Russia. The prior year balance relates to
restricted amounts in South Africa.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Financial instruments
Investments and other financial assets
The group and parent company classify their financial assets in the following measurement
categories:
• those measured at fair value either through other comprehensive income or through profit
or loss; and
• those measured at amortised cost.
At initial recognition, the group and parent company measure financial assets at fair value
plus, in the case of financial assets not measured at fair value through profit or loss,
transaction costs that are directly attributable to their acquisition.
The group and parent company subsequently measure equity investments at fair value and
have elected to present fair value gains and losses on equity investments in other
comprehensive income. There is, therefore, no subsequent reclassification of cumulative fair
value gains and losses to profit or loss following disposal of the investments.
The group and parent company subsequently measure trade and other receivables and
contract receivables at amortised cost, with the exception of trade receivables that have been
designated as at fair value through other comprehensive income because the group has
certain operations with business models to hold trade receivables for collection or sale. All
other financial assets, including short-term receivables, are measured at amortised cost less
any impairment provision.
For the impairment of trade and contract receivables, the group and parent company apply
the simplified approach permitted by IFRS 9, Financial Instruments, which requires expected
lifetime losses to be recognised from initial recognition.
Derivative financial instruments
The group and parent company use derivative financial instruments, in particular forward
currency contracts, currency swaps, interest rate swaps and commodity derivatives to manage
the financial risks associated with their underlying business activities and the financing of
those activities. The group and parent company do not undertake any speculative trading
activity in derivative financial instruments.
Derivative financial instruments are measured at their fair value. Derivative financial
instruments may be designated at inception as fair value hedges, cash flow hedges or net
investment hedges if appropriate. For currency swaps designated as instruments in cash
flow or net investment hedging relationships, the impact from currency basis spreads is
included in the hedge relationship and may be a source of ineffectiveness recognised in the
income statement.
Derivative financial instruments which are not designated as hedging instruments are
classified as at fair value through profit or loss, but are used to manage financial risk. Changes
in the fair value of any derivative financial instruments that are not designated as, or are not
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154
determined to be, effective hedges are recognised immediately in the income statement. The
vast majority of forward precious metal price contracts are entered into and held for the
receipt or delivery of precious metal and, therefore, are not recorded at fair value.
Cash flow hedges
Changes in the fair value of derivative financial instruments designated as cash flow hedges
are recognised in other comprehensive income to the extent that the hedges are effective.
Ineffective portions are recognised in the income statement immediately. If the hedged item
results in the recognition of a non-financial asset or liability, the amount previously recognised
in other comprehensive income is transferred out of equity and included in the initial carrying
amount of the asset or liability. Otherwise, the amount previously recognised in other
comprehensive income is transferred to the income statement in the same period that the
hedged item is recognised in the income statement. If the hedging instrument expires or is
sold, terminated or exercised or the hedge no longer meets the criteria for hedge accounting,
amounts previously recognised in other comprehensive income remain in equity until the
forecast transaction occurs. If a forecast transaction is no longer expected to occur, the
amounts previously recognised in other comprehensive income are transferred to the income
statement. If a forward precious metal price contract will be settled net in cash, it is designated
and accounted for as a cash flow hedge.
Fair value hedges
Changes in the fair value of derivative financial instruments designated as fair value hedges
are recognised in the income statement, together with the related changes in the fair value of
the hedged asset or liability. Fair value hedge accounting is discontinued if the hedging
instrument expires or is sold, terminated or exercised or the hedge no longer meets the
criteria for hedge accounting.
Net investment hedges
For hedges of net investments in foreign operations, the effective portion of the gain or loss on
the hedging instrument is recognised in other comprehensive income, while the ineffective
portion is recognised in the income statement. Amounts taken to other comprehensive
income are reclassified from equity to the income statement when the foreign operations are
sold or liquidated.
Financial liabilities
Borrowings are measured at amortised cost. Those borrowings designated as being in fair
value hedge relationships are remeasured for the fair value changes in respect of the hedged
risk with these changes recognised in the income statement. All other financial liabilities,
including short-term payables, are measured at amortised cost.
Precious metal sale and repurchase agreements
The group and parent company undertake linked contracts to sell or buy precious metal and
commit to repurchase or sell the metal in the future. An asset representing the metal which
the group and parent company have committed to sell or a liability representing the
obligation to repurchase the metal are recognised in trade and other receivables or trade and
other payables, respectively.
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Financial instruments
Investments and other financial assets
categories:
or loss; and
• those measured at amortised cost.
The group and parent company classify their financial assets in the following measurement
Cash flow hedges
• those measured at fair value either through other comprehensive income or through profit
determined to be, effective hedges are recognised immediately in the income statement. The
vast majority of forward precious metal price contracts are entered into and held for the
receipt or delivery of precious metal and, therefore, are not recorded at fair value.
Changes in the fair value of derivative financial instruments designated as cash flow hedges
are recognised in other comprehensive income to the extent that the hedges are effective.
Ineffective portions are recognised in the income statement immediately. If the hedged item
results in the recognition of a non-financial asset or liability, the amount previously recognised
in other comprehensive income is transferred out of equity and included in the initial carrying
At initial recognition, the group and parent company measure financial assets at fair value
amount of the asset or liability. Otherwise, the amount previously recognised in other
plus, in the case of financial assets not measured at fair value through profit or loss,
transaction costs that are directly attributable to their acquisition.
The group and parent company subsequently measure equity investments at fair value and
have elected to present fair value gains and losses on equity investments in other
comprehensive income. There is, therefore, no subsequent reclassification of cumulative fair
value gains and losses to profit or loss following disposal of the investments.
comprehensive income is transferred to the income statement in the same period that the
hedged item is recognised in the income statement. If the hedging instrument expires or is
sold, terminated or exercised or the hedge no longer meets the criteria for hedge accounting,
amounts previously recognised in other comprehensive income remain in equity until the
forecast transaction occurs. If a forecast transaction is no longer expected to occur, the
amounts previously recognised in other comprehensive income are transferred to the income
statement. If a forward precious metal price contract will be settled net in cash, it is designated
The group and parent company subsequently measure trade and other receivables and
and accounted for as a cash flow hedge.
contract receivables at amortised cost, with the exception of trade receivables that have been
designated as at fair value through other comprehensive income because the group has
certain operations with business models to hold trade receivables for collection or sale. All
other financial assets, including short-term receivables, are measured at amortised cost less
any impairment provision.
Fair value hedges
Changes in the fair value of derivative financial instruments designated as fair value hedges
are recognised in the income statement, together with the related changes in the fair value of
the hedged asset or liability. Fair value hedge accounting is discontinued if the hedging
instrument expires or is sold, terminated or exercised or the hedge no longer meets the
For the impairment of trade and contract receivables, the group and parent company apply
criteria for hedge accounting.
the simplified approach permitted by IFRS 9, Financial Instruments, which requires expected
lifetime losses to be recognised from initial recognition.
Net investment hedges
Derivative financial instruments
For hedges of net investments in foreign operations, the effective portion of the gain or loss on
the hedging instrument is recognised in other comprehensive income, while the ineffective
The group and parent company use derivative financial instruments, in particular forward
portion is recognised in the income statement. Amounts taken to other comprehensive
currency contracts, currency swaps, interest rate swaps and commodity derivatives to manage
income are reclassified from equity to the income statement when the foreign operations are
the financial risks associated with their underlying business activities and the financing of
sold or liquidated.
those activities. The group and parent company do not undertake any speculative trading
Financial liabilities
activity in derivative financial instruments.
Derivative financial instruments are measured at their fair value. Derivative financial
value hedge relationships are remeasured for the fair value changes in respect of the hedged
instruments may be designated at inception as fair value hedges, cash flow hedges or net
risk with these changes recognised in the income statement. All other financial liabilities,
investment hedges if appropriate. For currency swaps designated as instruments in cash
flow or net investment hedging relationships, the impact from currency basis spreads is
included in the hedge relationship and may be a source of ineffectiveness recognised in the
including short-term payables, are measured at amortised cost.
Precious metal sale and repurchase agreements
Borrowings are measured at amortised cost. Those borrowings designated as being in fair
Derivative financial instruments which are not designated as hedging instruments are
classified as at fair value through profit or loss, but are used to manage financial risk. Changes
in the fair value of any derivative financial instruments that are not designated as, or are not
The group and parent company undertake linked contracts to sell or buy precious metal and
commit to repurchase or sell the metal in the future. An asset representing the metal which
the group and parent company have committed to sell or a liability representing the
obligation to repurchase the metal are recognised in trade and other receivables or trade and
other payables, respectively.
income statement.
154
1 Accounting policies continued
Taxation
Current and deferred tax are recognised in the income statement, except when they relate to
items recognised directly in equity, in which case the related tax is also recognised in equity.
Current tax is the amount of income tax expected to be paid in respect of taxable profits using
the tax rates that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the balance sheet.
It is provided using the tax rates that are expected to apply in the period when the asset or
liability is settled, based on tax rates that have been enacted or substantively enacted at the
balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits
will be available against which the temporary differences can be utilised. No deferred tax asset
or liability is recognised in respect of temporary differences associated with investments in
subsidiaries and branches where the group is able to control the timing of the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
Provisions and contingencies
Provisions are recognised when the group has a present obligation as a result of a past event
and a reliable estimate can be made of a probable adverse outcome, for example warranties,
environmental claims and restructuring. Otherwise, material contingent liabilities are
disclosed unless the probability of the transfer of economic benefits is remote. Contingent
assets are only disclosed if an inflow of economic benefits is virtually certain.
Share-based payments and treasury shares
The fair value of shares awarded to employees under the performance share plan, restricted
share plan, long term incentive plan and deferred bonus plan is calculated by adjusting the
share price on the date of allocation for the present value of the expected dividends that will
not be received. The resulting cost is charged to the income statement over the relevant
performance periods, adjusted to reflect actual and expected levels of vesting where
appropriate.
The group and parent company provide finance to the employee share ownership trust
(ESOT) to purchase company shares in the open market. Costs of running the ESOT are
charged to the income statement. The cost of shares held by the ESOT is deducted in arriving
at equity until they vest unconditionally with employees.
Post-employment benefits
The costs of defined contribution plans are charged to the income statement as they fall due.
For defined benefit plans, the group and parent company recognise the net assets or liabilities
of the plans in their balance sheets. Assets are measured at their fair value at the balance
Johnson Matthey | Annual Report and Accounts 2023
sheet date. Liabilities are measured at present value using the projected unit credit method
and a discount rate reflecting yields on high quality corporate bonds. The changes in plan
assets and liabilities, based on actuarial advice, are recognised as follows:
• The current service cost is deducted in arriving at operating profit.
• The net interest cost, based on the discount rate at the beginning of the year, contributions
paid in and the present value of the net defined benefit liabilities during the year, is
included in finance costs.
• Past service costs and curtailment gains and losses are recognised in operating profit at the
earlier of when the plan amendment or curtailment occurs and when any related
restructuring costs or termination benefits are recognised.
• Gains or losses arising from settlements are included in operating profit when the
settlement occurs.
• Remeasurements, representing returns on plan assets, excluding amounts included in
interest, and actuarial gains and losses arising from changes in financial and demographic
assumptions, are recognised in other comprehensive income.
Assets held for sale and discontinued operations
Non-current assets and disposal groups are classified as held for sale, if available for sale in its
present condition and a sale is considered highly probable within 12 months. They are
measured at the lower of their carrying amount and fair value less costs to sell. Assets and
liabilities classified as held for sale are presented separately on the Balance Sheet. The assets
are not depreciated or amortised while they are classified as held for sale.
An impairment loss is recognised in the Income Statement for any initial or subsequent write-
down of the asset or disposal group to fair value less costs to sell. A gain is recognised for any
subsequent increases in fair value less costs to sell of an asset or disposal group, but not in
excess of any cumulative impairment loss previously recognised. A gain or loss not previously
recognised by the date of the sale of the non-current asset (or disposal group) is recognised at
the date of de-recognition.
A discontinued operation is a component of the group’s business that either has been disposed
of, or that is classified as held for sale and represents a separate major line of business or
geographical area of operations, is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations or is a subsidiary acquired exclusively
with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal or when the
operation meets the criteria to be classified as held for sale. The results of discontinued
operations are presented separately in the Income Statement. When an operation is classified
as a discontinued operation, the comparative Income Statement and Statement of Total
Comprehensive Income is restated as if the operation had been discontinued from the start of
the comparative year.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Sources of estimation uncertainty
Determining the carrying amounts of certain assets and liabilities at the balance sheet date
requires estimation of the effects of uncertain future events. In the event that actual outcomes
differ from those estimated, there may be an adjustment to the carrying amounts of those
assets and liabilities within the next financial year. Other significant risks of material
adjustment are the valuation of the liabilities of the defined benefit pension plans and tax
provisions. The group and parent company have considered the refining process and
stocktakes, deferred tax assets and climate change and, whilst not deemed to represent a
significant risk of material adjustment to the group’s and parent company’s financial position
during the year ending 31st March 2023, represent important accounting estimates.
Goodwill, other intangibles and other assets
The group and parent company have significant intangible assets from both business
acquisitions and investments in new products and technologies. Some of those acquisitions
and investments are at an early stage of commercial development and, therefore, carry a
greater risk that they will not be commercially viable. Goodwill and intangible assets not yet
ready for use are not amortised, but are subject to annual impairment reviews. Other
intangible assets are amortised from the time they are first ready for use and, together with
other assets, are assessed for impairment when there is a triggering event that provides
evidence that they are impaired.
The impairment reviews require the use of estimates of future profit and cash generation
based on financial budgets and plans approved by management, generally covering a three-
year period and then extrapolated using long term growth rates, and the pre-tax discount
rates used in discounting projected cash flows, see note 5.
Post-employment benefits
The group’s and parent company’s defined benefit plans are assessed annually by qualified
independent actuaries. The estimate of the liabilities of the plans is based on a number of
actuarial assumptions.
There is a range of possible values for each actuarial assumption and the point within that
range is estimated to most appropriately reflect the group’s and parent company’s
circumstances. Small changes in these assumptions can have a significant impact on the
estimate of the liabilities of the plans. A description of those discount rate and inflation
assumptions, together with sensitivity analysis, is set out in note 24 to the group and parent
company accounts.
Tax provisions
Tax provisions are determined based on the tax laws and regulations that apply in each of the
jurisdictions in which the group operates. Tax provisions are recognised where the impact of
those laws and regulations is unclear and it is probable that there will be a tax adjustment
representing a future outflow of funds to a tax authority or a consequent adjustment to the
carrying value of a tax asset.
Provisions are measured using the best estimate of the most likely amount, being the most
likely amount in a range of possible outcomes. The resolution of tax positions taken by the
group can take a considerable period of time to conclude and, in some cases, it is difficult to
predict the outcome. Group current income tax liabilities at 31st March 2023 of £106 million
(2022: £97 million) include tax provisions of £97 million (2022: £103 million) and the
estimation of the range of possible outcomes is an increase in those liabilities by £66 million
(2022: £83 million) to a decrease of £55 million (2022: £93 million). The estimates made
reflect where the group faces routine tax audits or is in ongoing disputes with tax authorities;
has identified potential tax exposures relating to transfer pricing; or is contesting the tax
deductibility of certain business costs.
Deferred tax assets
Deferred tax assets are recognised to the extent it is probable that future taxable profits will be
available, against which the deductible temporary difference can be utilised, based on
management’s assumptions relating to future taxable profits.
Determination of future taxable profits requires application of judgement and estimates,
including: market share, expected changes to selling prices, product profitability, precious
metal prices and other direct input costs, based on management’s expectations of future
changes in the markets using external sources of information where appropriate. The
estimates take account of the inherent uncertainties, constraining the expected level of profit
as appropriate. Changes in these estimates will affect future profits and therefore the
recoverability of the deferred tax assets.
Refining process and stocktakes
The group’s and parent company’s refining businesses process significant quantities of
precious metal and there are uncertainties regarding the actual amount of metal in the
refining system at any one time. The group’s refining businesses process over four million
ounces of platinum group metals per annum with a market value of around £6 billion. The
majority of metal processed is owned by customers and the group and parent company must
return pre-agreed quantities of refined metal based on assays of starting materials and other
contractual arrangements, such as the timing of the return of metal. The group and parent
company calculate the profits or losses of their refining operations based on estimates,
including the extent to which process losses are expected during refining. The risk of
process losses or stock take gains depends on the nature of the starting material being
refined, the specific refining processes applied, the efficiency of those processes and the
contractual arrangements.
Stocktakes are performed to determine the volume and value of metal within the refining
system compared with the calculated estimates, with the variance being a profit or a loss.
Stocktakes are, therefore, a key control in the assessment of the accuracy of the profit or loss
of refining operations. Whilst refining is a complex, large-scale industrial process, the group
and parent company have appropriate processes and controls over the movement of material
in their refineries.
156
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Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Sources of estimation uncertainty
Determining the carrying amounts of certain assets and liabilities at the balance sheet date
requires estimation of the effects of uncertain future events. In the event that actual outcomes
differ from those estimated, there may be an adjustment to the carrying amounts of those
assets and liabilities within the next financial year. Other significant risks of material
adjustment are the valuation of the liabilities of the defined benefit pension plans and tax
provisions. The group and parent company have considered the refining process and
stocktakes, deferred tax assets and climate change and, whilst not deemed to represent a
significant risk of material adjustment to the group’s and parent company’s financial position
during the year ending 31st March 2023, represent important accounting estimates.
Goodwill, other intangibles and other assets
The group and parent company have significant intangible assets from both business
acquisitions and investments in new products and technologies. Some of those acquisitions
Provisions are measured using the best estimate of the most likely amount, being the most
likely amount in a range of possible outcomes. The resolution of tax positions taken by the
group can take a considerable period of time to conclude and, in some cases, it is difficult to
predict the outcome. Group current income tax liabilities at 31st March 2023 of £106 million
(2022: £97 million) include tax provisions of £97 million (2022: £103 million) and the
estimation of the range of possible outcomes is an increase in those liabilities by £66 million
(2022: £83 million) to a decrease of £55 million (2022: £93 million). The estimates made
reflect where the group faces routine tax audits or is in ongoing disputes with tax authorities;
has identified potential tax exposures relating to transfer pricing; or is contesting the tax
deductibility of certain business costs.
Deferred tax assets
Deferred tax assets are recognised to the extent it is probable that future taxable profits will be
available, against which the deductible temporary difference can be utilised, based on
management’s assumptions relating to future taxable profits.
and investments are at an early stage of commercial development and, therefore, carry a
Determination of future taxable profits requires application of judgement and estimates,
greater risk that they will not be commercially viable. Goodwill and intangible assets not yet
including: market share, expected changes to selling prices, product profitability, precious
ready for use are not amortised, but are subject to annual impairment reviews. Other
metal prices and other direct input costs, based on management’s expectations of future
intangible assets are amortised from the time they are first ready for use and, together with
changes in the markets using external sources of information where appropriate. The
other assets, are assessed for impairment when there is a triggering event that provides
estimates take account of the inherent uncertainties, constraining the expected level of profit
evidence that they are impaired.
as appropriate. Changes in these estimates will affect future profits and therefore the
The impairment reviews require the use of estimates of future profit and cash generation
based on financial budgets and plans approved by management, generally covering a three-
recoverability of the deferred tax assets.
Refining process and stocktakes
year period and then extrapolated using long term growth rates, and the pre-tax discount
The group’s and parent company’s refining businesses process significant quantities of
rates used in discounting projected cash flows, see note 5.
Post-employment benefits
The group’s and parent company’s defined benefit plans are assessed annually by qualified
independent actuaries. The estimate of the liabilities of the plans is based on a number of
actuarial assumptions.
precious metal and there are uncertainties regarding the actual amount of metal in the
refining system at any one time. The group’s refining businesses process over four million
ounces of platinum group metals per annum with a market value of around £6 billion. The
majority of metal processed is owned by customers and the group and parent company must
return pre-agreed quantities of refined metal based on assays of starting materials and other
contractual arrangements, such as the timing of the return of metal. The group and parent
There is a range of possible values for each actuarial assumption and the point within that
company calculate the profits or losses of their refining operations based on estimates,
range is estimated to most appropriately reflect the group’s and parent company’s
including the extent to which process losses are expected during refining. The risk of
circumstances. Small changes in these assumptions can have a significant impact on the
process losses or stock take gains depends on the nature of the starting material being
estimate of the liabilities of the plans. A description of those discount rate and inflation
refined, the specific refining processes applied, the efficiency of those processes and the
assumptions, together with sensitivity analysis, is set out in note 24 to the group and parent
contractual arrangements.
Tax provisions are determined based on the tax laws and regulations that apply in each of the
Stocktakes are, therefore, a key control in the assessment of the accuracy of the profit or loss
jurisdictions in which the group operates. Tax provisions are recognised where the impact of
of refining operations. Whilst refining is a complex, large-scale industrial process, the group
those laws and regulations is unclear and it is probable that there will be a tax adjustment
and parent company have appropriate processes and controls over the movement of material
representing a future outflow of funds to a tax authority or a consequent adjustment to the
in their refineries.
Stocktakes are performed to determine the volume and value of metal within the refining
system compared with the calculated estimates, with the variance being a profit or a loss.
company accounts.
Tax provisions
carrying value of a tax asset.
156
Provisions and 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. Judgement is required to determine
if an outflow of economic resources is probable, or possible but not probable for such events.
Where it is probable, a liability is recognised and further judgement is used to determine the
amount of the provision. Where it is possible but not probable, further judgement is used to
determine if the likelihood is remote, in which case no disclosures are provided; if the
likelihood is not remote then a contingent liability is disclosed. Provisions and contingent
liabilities are set out in notes 22 and 32, respectively.
In the course of preparing the accounts, no other judgements have been made in the process
of applying the group’s and parent company’s accounting policies, other than those involving
estimations, that have had a significant effect on the amounts recognised in the accounts.
Changes in accounting policies
Amendments to accounting standards
The IASB has issued the following amendments, which have been endorsed by the UK
Endorsement Board, for annual periods beginning on or after 1st January 2022:
• Annual improvements to IFRS Standards 2018-2020;
• Amendments to IAS 16, Property, Plant and Equipment: Proceeds before intended use;
• Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract; and
• Amendments to IFRS 3, Reference to the Conceptual Framework.
These changes have not had a material impact on the group. The group has not early adopted
any standard, interpretation or amendment that was issued but is not yet effective.
1 Accounting policies continued
Sources of estimation uncertainty continued
Climate change
The impact of climate change presented in the group’s Strategic Report (see pages 45 to 52)
and the stated net zero targets have been considered in preparing the group accounts.
The following considerations were made:
Impact on the going concern period and viability of the group over the next three years.
The latest forecasts reflect the continuous investment in sustainable technologies including
commercialisation of our products used in green hydrogen production and higher
performance fuel cell components for a range of automotive, non-automotive and
stationary applications.
The potential impact of climate change on a number of areas within the financial statements
has been considered, including:
• The forecasts of cash flows used in impairment assessments for the carrying value of non-
current assets including goodwill (see note 5).
• Recoverability of deferred tax assets.
• The expected lives of fixed assets and their exposure to the physical risk posed by
climate change.
The expected lives of property, plant and equipment tends to be short to medium term, as
such the physical risk posed by climate change in the long term is low.
Assets held for sale
Our estimate for the fair value less costs to sell of the Battery Materials business (£15 million)
is based on third party valuations and our agreement with EV Metals Group plc.
Judgements made in applying accounting policies
Metal
The group and parent company use precious metal owned by customers in their production
processes. It has been determined that this metal is not controlled by the group or parent
company and, therefore, it is not recognised on the balance sheet.
The group and parent company manage precious metal inventories by entering into physically
settled forward sales and purchases of metal positions in line with a well-established hedging
policy. The own use exemption has been adopted for these transactions and, therefore, the
group and parent company do not fair value such physically settled contracts.
The group undertakes linked contracts to sell or buy precious metal and commits to
repurchase or sell the metal in the future to manage inventory levels. Accordingly, cash flows
in respect of sale and repurchase agreements are shown as cash flows from operating
activities in the cash flow statement rather than cash flows from financing activities.
Johnson Matthey | Annual Report and Accounts 2023
157
157
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Changes in accounting policies continued
Standards effective from 1st April 2023
IFRS 17, Insurance Contracts, applies to annual reporting periods beginning on or after 1st
January 2023. The new Standard establishes the principles for the recognition, measurement,
presentation and disclosure of insurance contracts within the scope of the Standard. The
objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully
represents those contracts.
The group has performed an assessment to establish where an impact is expected and
considers the impact of this new standard to be immaterial.
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 34.
2 Segmental information
Revenue, sales and underlying operating profit by business
As announced in our preliminary full year results in May 2022, we have changed our reporting
structure for the year ending 31st March 2023. The new reporting structure provides greater
transparency and reflects how we manage our business. Efficient Natural Resources was split
into two separate segments (PGM Services and Catalyst Technologies), and Hydrogen
Technologies and Value Businesses are now separate operating segments (previously included
within Other Markets). Excluding Corporate, the group has five reporting segments, aligned to
the needs of our customers and the global challenges we are tackling.
Clean Air – provides catalysts for emission control after-treatment systems used in light and
heavy duty vehicles powered by internal combustion engines.
PGM Services – enables the energy transition through providing circular solutions as demand
for scarce critical materials increases. Provides a strategic service to the group, supporting the
other segments with security of metal supply, and manufactures value add PGM products.
Catalyst Technologies – enables the decarbonisation of chemical and fuel value chains.
Hydrogen Technologies – provides catalyst coated membranes that are a critical component
for fuel cells and electrolysers.
Value Businesses – a portfolio of businesses managed to drive shareholder value from
activities considered to be non-core to the Group. This includes Battery Systems, Medical
Device Components and Diagnostic Services1. Refer to note 27 for further information on the
disposal of Battery Materials. Advanced Glass Technologies was sold on 31st January 2022 and
is included within the prior period balances.
The Group Leadership Team (the chief operating decision maker as defined by IFRS 8,
Operating Segments) monitors the results of these operating sectors to assess performance
and make decisions about the allocation of resources. Each operating sector is represented by
a member of the Group Leadership Team. These operating sectors represent the group’s
reportable segments and their principal activities are described on pages 56 to 59. The
performance of the group’s operating sectors is assessed on sales and underlying operating
profit (see note 34). Sales between segments are made at market prices, taking into account
the volumes involved.
Health was sold during the financial year and its results are therefore presented within
discontinued operations. Information about this discontinued segment is provided in note 26.
1. The Group agreed to sell its Diagnostic Services business in May 2023 (see note 26).
158
158
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
1 Accounting policies continued
Changes in accounting policies continued
Standards effective from 1st April 2023
2 Segmental information
Revenue, sales and underlying operating profit by business
As announced in our preliminary full year results in May 2022, we have changed our reporting
2 Segmental information continued
Revenue, sales and underlying operating profit by business continued
Year ended 31st March 2023
IFRS 17, Insurance Contracts, applies to annual reporting periods beginning on or after 1st
structure for the year ending 31st March 2023. The new reporting structure provides greater
January 2023. The new Standard establishes the principles for the recognition, measurement,
transparency and reflects how we manage our business. Efficient Natural Resources was split
presentation and disclosure of insurance contracts within the scope of the Standard. The
into two separate segments (PGM Services and Catalyst Technologies), and Hydrogen
objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully
Technologies and Value Businesses are now separate operating segments (previously included
The group has performed an assessment to establish where an impact is expected and
considers the impact of this new standard to be immaterial.
Clean Air – provides catalysts for emission control after-treatment systems used in light and
within Other Markets). Excluding Corporate, the group has five reporting segments, aligned to
the needs of our customers and the global challenges we are tackling.
heavy duty vehicles powered by internal combustion engines.
represents those contracts.
Non-GAAP measures
The group uses various measures to manage its business which are not defined by generally
PGM Services – enables the energy transition through providing circular solutions as demand
accepted accounting principles (GAAP). The group’s management believes these measures
for scarce critical materials increases. Provides a strategic service to the group, supporting the
provide valuable additional information to users of the accounts in understanding the group’s
other segments with security of metal supply, and manufactures value add PGM products.
performance. The group’s non-GAAP measures are defined and reconciled to GAAP measures
in note 34.
Catalyst Technologies – enables the decarbonisation of chemical and fuel value chains.
Hydrogen Technologies – provides catalyst coated membranes that are a critical component
for fuel cells and electrolysers.
Value Businesses – a portfolio of businesses managed to drive shareholder value from
activities considered to be non-core to the Group. This includes Battery Systems, Medical
Device Components and Diagnostic Services1. Refer to note 27 for further information on the
disposal of Battery Materials. Advanced Glass Technologies was sold on 31st January 2022 and
is included within the prior period balances.
The Group Leadership Team (the chief operating decision maker as defined by IFRS 8,
Operating Segments) monitors the results of these operating sectors to assess performance
and make decisions about the allocation of resources. Each operating sector is represented by
a member of the Group Leadership Team. These operating sectors represent the group’s
reportable segments and their principal activities are described on pages 56 to 59. The
performance of the group’s operating sectors is assessed on sales and underlying operating
profit (see note 34). Sales between segments are made at market prices, taking into account
the volumes involved.
Health was sold during the financial year and its results are therefore presented within
discontinued operations. Information about this discontinued segment is provided in note 26.
1. The Group agreed to sell its Diagnostic Services business in May 2023 (see note 26).
Revenue from external customers
Inter-segment revenue
Revenue
External sales
Inter-segment sales
Sales1
Underlying operating profit / (loss)1
Year ended 31st March 2022*
Revenue from external customers
Inter-segment revenue
Revenue
External sales
Inter-segment sales
Sales1
Underlying operating profit / (loss)1
Clean Air
£m
PGM Services
£m
Catalyst
Technologies
£m
Hydrogen
Technologies
£m
Value Businesses
£m
Corporate
£m
Eliminations
£m
6,273
–
6,273
2,644
–
2,644
230
Clean Air
£m
7,085
4
7,089
2,455
2
2,457
302
7,360
3,227
10,587
485
85
570
257
673
14
687
547
13
560
51
62
–
62
55
–
55
(45)
565
–
565
470
–
470
40
–
–
–
–
–
–
(68)
–
(3,241)
(3,241)
–
(98)
(98)
–
PGM Services
(restated)
£m
Catalyst
Technologies
(restated)
£m
Hydrogen
Technologies
(restated)
£m
Value Businesses
(restated)
£m
Corporate
£m
Eliminations
£m
7,880
4,549
12,429
497
90
587
308
581
6
587
448
6
454
50
30
–
30
25
–
25
(33)
449
1
450
353
1
354
12
–
–
–
–
–
–
(86)
–
(4,560)
(4,560)
–
(99)
(99)
–
Total from
continuing
operations
£m
14,933
–
14,933
4,201
–
4,201
465
Total from
continuing
operations
£m
16,025
–
16,025
3,778
–
3,778
553
1. Sales and underlying operating profit are non-GAAP measures (see note 34). Sales excludes the sale of precious metals. 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.
* The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
158
Johnson Matthey | Annual Report and Accounts 2023
159
159
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
2 Segmental information continued
Reconciliation from underlying operating profit to operating profit by sector
Year ended 31st March 2023
Underlying operating profit / (loss)1
Profit on disposal of businesses (note 27)
Amortisation of acquired intangibles
Loss on significant legal proceedings
Major impairment and restructuring charges (note 6)
Operating profit / (loss)
Year ended 31st March 2022*
Underlying operating profit / (loss)1
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Operating profit / (loss)
Clean Air
£m
PGM
Services
£m
Catalyst
Technologies
£m
Hydrogen
Technologies
£m
Value Businesses
£m
Corporate
£m
230
–
(1)
(25)
(13)
191
257
–
–
–
–
257
51
–
(4)
–
(4)
43
(45)
–
–
–
(1)
(46)
40
12
–
–
(14)
38
Clean Air
£m
PGM Services
(restated)
£m
Catalyst
Technologies
(restated)
£m
Hydrogen
Technologies
(restated)
£m
Value Businesses
(restated)
£m
302
–
(2)
–
(27)
273
308
–
–
–
(1)
307
50
–
(4)
36
(4)
78
(33)
–
–
–
–
(33)
12
106
–
6
(400)
(276)
(68)
–
–
–
(9)
(77)
Corporate
£m
(86)
–
–
–
(8)
(94)
Total from
continuing
operations
£m
465
12
(5)
(25)
(41)
406
Total from
continuing
operations
£m
553
106
(6)
42
(440)
255
1. Underlying operating profit is a non-GAAP measure (see note 34). 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.
* The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
160
160
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
2 Segmental information continued
Reconciliation from underlying operating profit to operating profit by sector
Year ended 31st March 2023
Underlying operating profit / (loss)1
Profit on disposal of businesses (note 27)
Amortisation of acquired intangibles
Loss on significant legal proceedings
Major impairment and restructuring charges (note 6)
Operating profit / (loss)
Year ended 31st March 2022*
Underlying operating profit / (loss)1
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Operating profit / (loss)
Clean Air
Technologies
Value Businesses
Corporate
Catalyst
Technologies
£m
230
–
(1)
(25)
(13)
191
Clean Air
£m
302
(2)
–
–
(27)
273
PGM
Services
£m
257
–
–
–
–
257
£m
308
–
–
–
(1)
307
Hydrogen
£m
(45)
(1)
(46)
£m
(33)
–
–
–
–
–
–
–
(33)
£m
51
(4)
–
–
(4)
43
£m
50
–
(4)
36
(4)
78
£m
40
12
–
–
(14)
38
£m
12
106
–
6
(400)
(276)
£m
(68)
(9)
(77)
–
–
–
–
–
–
(8)
(94)
Corporate
£m
(86)
Total from
continuing
operations
£m
465
12
(5)
(25)
(41)
406
Total from
continuing
operations
£m
553
106
(6)
42
(440)
255
PGM Services
(restated)
Catalyst
Technologies
(restated)
Hydrogen
Technologies
Value Businesses
(restated)
(restated)
1. Underlying operating profit is a non-GAAP measure (see note 34). 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.
* The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
2 Segmental information continued
Other segmental information
Year ended 31st March 2023
Segmental net assets
Net debt (note 34)
Post-employment benefit net assets and liabilities
Deferred tax net assets
Provisions and non-current other payables
Investments in joint ventures and associates (note 15)
Net assets held for sale (note 26)
Net assets
Property, plant and equipment
Intangible assets
Capital expenditure
Depreciation
Amortisation
Impairment losses and (reversals) (notes 5 and 6)
Total
Clean Air
£m
1,784
PGM
Services
£m
(2)
Catalyst
Technologies
£m
Hydrogen
Technologies
£m
Value Businesses
£m
680
114
175
Corporate
£m
515
70
11
81
74
2
(4)
72
73
6
79
24
2
2
28
28
14
42
26
5
–
31
44
2
46
4
–
–
4
13
–
13
10
–
12
22
14
28
42
13
27
3
43
160
Johnson Matthey | Annual Report and Accounts 2023
Total
£m
3,266
(1,023)
162
102
(93)
75
50
2,539
242
61
303
151
36
13
200
161
161
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
2 Segmental information continued
Other segmental information continued
Year ended 31st March 2022*
Segmental net assets
Net debt
Post-employment benefit net assets and liabilities
Deferred tax net assets
Provisions and non-current other payables
Investments in joint ventures and associates (note 15)
Net assets held for sale
Net assets
Property, plant and equipment
Intangible assets
Capital expenditure
Depreciation
Amortisation
Impairment losses (notes 5 and 6)
Total
* The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
Refer to note 3 for further required disclosures per IFRS 8, Operating Segments.
Clean Air
£m
2,108
PGM Services
(restated)
£m
Catalyst
Technologies
(restated)
£m
Hydrogen
Technologies
(restated)
£m
Value Businesses
(restated)
£m
(702)
743
51
169
Corporate
£m
330
71
1
72
63
2
26
91
69
2
71
21
2
1
24
20
7
27
26
5
6
37
11
–
11
2
–
–
2
169
26
195
13
1
363
377
17
53
70
13
29
8
50
Total
£m
2,699
(856)
280
80
(86)
2
322
2,441
357
89
446
138
39
404
581
162
162
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
2 Segmental information continued
Other segmental information continued
Year ended 31st March 2022*
Segmental net assets
Net debt
Deferred tax net assets
Post-employment benefit net assets and liabilities
Provisions and non-current other payables
Investments in joint ventures and associates (note 15)
Net assets held for sale
Net assets
Property, plant and equipment
Intangible assets
Capital expenditure
Depreciation
Amortisation
Impairment losses (notes 5 and 6)
Total
* The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
Refer to note 3 for further required disclosures per IFRS 8, Operating Segments.
Clean Air
£m
2,108
PGM Services
(restated)
£m
(702)
Catalyst
Technologies
(restated)
£m
743
Hydrogen
Technologies
Value Businesses
(restated)
(restated)
£m
51
£m
169
Corporate
£m
330
71
1
72
63
2
26
91
69
2
71
21
2
1
24
20
7
27
26
5
6
37
11
–
11
2
–
–
2
169
26
195
13
1
363
377
17
53
70
13
29
8
50
Total
£m
2,699
(856)
280
80
(86)
2
322
2,441
357
89
446
138
39
404
581
3 Revenue
Products and services
The group’s principal products and services by operating sector and sub-sector are disclosed in the table below, together with information regarding performance obligations and revenue
recognition. Revenue is recognised by the group as contractual performance obligations to customers are completed.
Sub-sector
Primary industry
Principal products and services
Performance
obligations
Revenue recognition
Clean Air
Light Duty Catalysts
Heavy Duty Catalysts
PGM Services
Platinum Group Metal
Services
Catalyst Technologies
Catalyst
Technologies
Automotive
Automotive
Catalysts for cars and other light duty vehicles
Catalysts for trucks, buses and non-road equipment
Point in time On despatch or delivery
Point in time On despatch or delivery
Various
Platinum Group Metal refining and recycling services
Platinum Group Metal trading
Other precious metal products
Platinum Group Metal chemical, industrial products and catalysts
Based on output
Over time
Point in time On receipt of payment
Point in time On despatch or delivery
Point in time On despatch or delivery
Chemicals / oil
and gas
Speciality catalysts and additives
Process technology licences
Engineering design services
Point in time On despatch or delivery
Over time
Over time
Based on costs incurred or straight-line over the licence term1
Based on costs incurred
Hydrogen Technologies
Fuel Cells technologies
Electrolysis technology
Value Businesses
Other Markets (excluding
Diagnostic Services)
Diagnostic Services
Various
Various
Various
Oil and gas
Fuel cell catalyst coated membrane
Electrolyser catalyst coated membrane
Point in time On despatch or delivery
Point in time On despatch or delivery
Precious metal pastes and enamels, battery systems and products
found in devices used in medical procedures
Detection, diagnostic and measurement solutions
Point in time On despatch or delivery
Over time
Based on costs incurred
1. Revenue recognition depends on whether the licence is distinct in the context of the contract.
Metal revenue: Metal revenue relates to the sales of precious metals to customers, either in pure form or contained within a product. Metal revenue arises in each of the reportable segments in the
Group. Metal revenue is affected by fluctuations in the market prices of precious metals and, in many cases, the value of precious metals is passed directly on to customers. Given the high value of
these metals this makes up a significant proportion of revenue.
162
Johnson Matthey | Annual Report and Accounts 2023
163
163
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
3 Revenue continued
Revenue judgements
Over time revenue
Over time revenue recognition predominantly occurs in Catalyst Technologies and PGM
Services (Refining Services), see criteria for over time recognition as defined by the group’s
accounting policies in note 1.
Refining Services
The majority of the metal processed by the group and parent company’s refining businesses is
owned by customers and, therefore, revenue is recognised over time on the basis that the
group and parent company are providing a service to enhance an asset controlled by the
customer. The customer controls the metal throughout the refining process, the key indicators
being legal ownership, metal price risk and that the customer has the right to claim the
equivalent metal at all stages of processing.
The performance obligation contained in all refining contracts is a service arrangement to
refine customer metal to a specified quality and volume by a certain date. For a contract that
has multiple metals, the refinement of each metal is a separate performance obligation. We
receive the contracted cash fee which is set with reference to market price at the start of the
contract. Upon delivery of the refined metal to the customer, the percentage of the refined
metal that we may retain at settlement is considered to be a non-cash consideration and is
recognised as part of revenue at fair value.
Revenue from refining services is recognised using an output method by estimating the
progress of the metal in the refining process. Once the customer metal is in the refining
process it is commingled with metal from other customers and it is not separately identifiable.
Because we have a consistent volume of metal flowing through the refinery process, we
estimate that all of the metal in the refinery is on average 50% of the way through the
process. We therefore recognise up to 50% of the revenue (cash service fee and non-cash
consideration) for our services when metal enters the refining process. Since refining each
type of metal is a separate performance obligation, once we have returned the metal to the
customer, we recognise the remaining 50% of revenue for that particular metal while other
metal may still be due to the same customer.
Where refinery stocktakes indicate that metal recoveries have been lower than anticipated
and/or allowed for in process loss provisioning, refined metal gain revenue is reduced
accordingly. Where refinery stocktakes indicate that metal recoveries have been higher than
anticipated, any incremental refining metal gain revenue is only recognised once it is highly
probable that a reversal in the amount of cumulative revenue recognised will not occur and
the metal has been sold.
164
Johnson Matthey | Annual Report and Accounts 2023
164
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
3 Revenue continued
Revenue judgements
Over time revenue
accounting policies in note 1.
Refining Services
Over time revenue recognition predominantly occurs in Catalyst Technologies and PGM
Services (Refining Services), see criteria for over time recognition as defined by the group’s
Revenue from refining services is recognised using an output method by estimating the
progress of the metal in the refining process. Once the customer metal is in the refining
process it is commingled with metal from other customers and it is not separately identifiable.
Because we have a consistent volume of metal flowing through the refinery process, we
estimate that all of the metal in the refinery is on average 50% of the way through the
process. We therefore recognise up to 50% of the revenue (cash service fee and non-cash
consideration) for our services when metal enters the refining process. Since refining each
type of metal is a separate performance obligation, once we have returned the metal to the
The majority of the metal processed by the group and parent company’s refining businesses is
customer, we recognise the remaining 50% of revenue for that particular metal while other
owned by customers and, therefore, revenue is recognised over time on the basis that the
metal may still be due to the same customer.
group and parent company are providing a service to enhance an asset controlled by the
customer. The customer controls the metal throughout the refining process, the key indicators
being legal ownership, metal price risk and that the customer has the right to claim the
equivalent metal at all stages of processing.
Where refinery stocktakes indicate that metal recoveries have been lower than anticipated
and/or allowed for in process loss provisioning, refined metal gain revenue is reduced
accordingly. Where refinery stocktakes indicate that metal recoveries have been higher than
anticipated, any incremental refining metal gain revenue is only recognised once it is highly
The performance obligation contained in all refining contracts is a service arrangement to
probable that a reversal in the amount of cumulative revenue recognised will not occur and
refine customer metal to a specified quality and volume by a certain date. For a contract that
the metal has been sold.
has multiple metals, the refinement of each metal is a separate performance obligation. We
receive the contracted cash fee which is set with reference to market price at the start of the
contract. Upon delivery of the refined metal to the customer, the percentage of the refined
metal that we may retain at settlement is considered to be a non-cash consideration and is
recognised as part of revenue at fair value.
3 Revenue continued
Revenue from external customers by principal products and services
Year ended 31st March 2023
Metal
Heavy Duty Catalysts
Light Duty Catalysts
Catalyst Technologies
Platinum Group Metal Services
Fuel Cells
Battery Systems
Diagnostic Services
Medical Device Components
Other
Revenue
Year ended 31st March 2022*
Metal
Heavy Duty Catalysts
Light Duty Catalysts
Catalyst Technologies
Platinum Group Metal Services
Fuel Cells
Battery Materials
Battery Systems
Advanced Glass Technologies
Diagnostic Services
Medical Device Components
Other
Revenue
* The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
164
Johnson Matthey | Annual Report and Accounts 2023
Clean Air
£m
3,629
970
1,674
–
–
–
–
–
–
–
6,273
Clean Air
£m
4,630
849
1,578
–
–
–
–
–
–
–
–
28
7,085
Continuing operations
PGM
Services
£m
6,875
–
–
–
485
–
–
–
–
–
7,360
Catalyst
Technologies
£m
Hydrogen
Technologies
£m
Value Businesses
£m
126
–
–
547
–
–
–
–
–
–
673
7
–
–
–
–
55
–
–
–
–
62
95
–
–
–
–
–
284
71
93
22
565
Continuing operations
PGM
Services
(restated)
£m
Catalyst
Technologies
(restated)
£m
Hydrogen
Technologies
(restated)
£m
Value Businesses
(restated)
£m
7,383
–
–
–
497
–
–
–
–
–
–
–
7,880
133
–
–
448
–
–
–
–
–
–
–
–
581
5
–
–
–
–
25
–
–
–
–
–
–
30
96
–
–
–
–
–
12
151
62
54
74
–
449
Total
£m
10,732
970
1,674
547
485
55
284
71
93
22
14,933
Total
£m
12,247
849
1,578
448
497
25
12
151
62
54
74
28
16,025
165
165
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
3 Revenue continued
Revenue from external customers by point in time and over time performance obligations
Year ended 31st March 2023
Revenue recognised at a point in time
Revenue recognised over time
Revenue
Year ended 31st March 2022*
Revenue recognised at a point in time
Revenue recognised over time
Revenue
*
The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
Continuing operations
Clean Air
£m
6,273
–
6,273
Clean Air
£m
7,085
–
7,085
PGM
Services
£m
7,096
264
7,360
PGM
Services
(restated)
£m
7,596
284
7,880
Catalyst
Technologies
£m
Hydrogen
Technologies
£m
Value Businesses
£m
555
118
673
62
–
62
534
31
565
Continuing operations
Catalyst
Technologies
(restated)
£m
Hydrogen
Technologies
(restated)
£m
Value Businesses
(restated)
£m
491
90
581
30
–
30
423
26
449
Total
£m
14,520
413
14,933
Total
£m
15,625
400
16,025
166
166
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
3 Revenue continued
Year ended 31st March 2023
Revenue recognised at a point in time
Revenue recognised over time
Revenue
Year ended 31st March 2022*
Revenue recognised at a point in time
Revenue recognised over time
Revenue
*
The comparative period is restated to reflect the group’s updated reporting segments. The overall group total is as previously reported.
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
Revenue from external customers by point in time and over time performance obligations
3 Revenue continued
Geographical analysis of revenue from external customers and non-current assets
The group’s country of domicile is the UK. Revenue from external customers based on the customer’s location and non-current assets based on the location of the assets are disclosed below.
Continuing operations
Catalyst
Technologies
Hydrogen
Technologies
Value Businesses
Clean Air
£m
6,273
–
6,273
Clean Air
£m
7,085
–
7,085
PGM
Services
£m
7,096
264
7,360
PGM
Services
(restated)
£m
7,596
284
7,880
£m
555
118
673
£m
491
90
581
£m
62
–
62
£m
30
–
30
£m
534
31
565
423
26
449
Total
£m
14,520
413
14,933
Total
£m
15,625
400
16,025
Continuing operations
Catalyst
Technologies
(restated)
Hydrogen
Technologies
(restated)
Value Businesses
(restated)
£m
UK
Germany
Rest of Europe
USA
Rest of North America
China (including Hong Kong)
Rest of Asia
Rest of World
Investments at fair value through other comprehensive income
Interest rate swaps
Deferred tax assets
Post-employment benefit net assets
Total
Revenue from external customers
Non-current assets
2023
£m
3,630
1,256
1,875
2,779
612
1,649
2,287
845
2022
£m
2,845
1,600
2,001
2,756
597
2,326
2,517
1,383
14,933
16,025
2023
£m
852
239
326
451
34
201
147
18
2,268
49
20
121
203
2,661
2022
£m
733
244
292
280
40
221
145
21
1,976
45
12
98
352
2,483
Major customers
The group received £1.6 billion of revenue from one external customer in the Clean Air sector which represents more than 10% of the group’s revenue from external customers during the year
ended 31st March 2023 (2022: £1.7 billion of revenue from one external customer in the Clean Air sector).
Unsatisfied performance obligations
At 31st March 2023, for contracts that had an original expected duration of more than one year, the group had unsatisfied performance obligations of £967 million (2022: £1,039 million),
representing contractually committed revenue to be recognised at a future date. Of this amount, £394 million (2022: £244 million) is expected to be recognised within one year and £573 million
(2022: £795 million) is expected to be recognised after one year.
Payment terms
The group and parent company supply goods and services on payment terms that are consistent with those standard across the industry and it does not have any customer contracts with a material
financing component. Where revenue is recognised over time, payment terms are generally consistent with the timeframe over which revenue is recognised.
166
Johnson Matthey | Annual Report and Accounts 2023
167
167
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
4 Operating profit
Operating profit from continuing operations is arrived at after charging / (crediting):
Total research and development expenditure
Less: Development expenditure capitalised
Research and development expenditure charged to the income statement
Less: External funding received from governments
Net research and development expenditure charged to the income statement
Inventories recognised as an expense
Write-down of inventories recognised as an expense
Reversal of write-down of inventories from increases in net realisable value
Net gains on foreign exchange
Net losses on foreign currency forwards at fair value through profit or loss
Past service credit
Depreciation of:
Property, plant and equipment
Right-of-use assets
Depreciation
Amortisation of:
Internally generated intangible assets
Acquired intangibles
Other intangible assets
Amortisation
Gains and losses on significant legal proceedings
Profit on disposal of businesses (note 27)
Impairment losses included in administrative expenses
Impairment losses (note 5)
Impairment losses and reversals included in major impairment and restructuring charges
Restructuring charges included in major impairment and restructuring charges
Major impairment and restructuring charges (note 6)
2023
£m
213
–
213
(19)
194
12,962
39
(19)
(11)
19
(20)
137
14
151
1
5
30
36
25
(12)
3
3
10
31
41
2022
£m
201
(22)
179
(18)
161
14,121
26
(16)
(2)
6
(11)
125
13
138
1
6
32
39
(42)
(106)
3
3
401
39
440
Gains and losses on significant legal proceedings
During the year, the group paid £25 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 the group supplied a particular coated substrate as a component for that customer’s emissions after-treatment systems.
168
168
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
4 Operating profit
Operating profit from continuing operations is arrived at after charging / (crediting):
Total research and development expenditure
Less: Development expenditure capitalised
Research and development expenditure charged to the income statement
Less: External funding received from governments
Net research and development expenditure charged to the income statement
Inventories recognised as an expense
Write-down of inventories recognised as an expense
Reversal of write-down of inventories from increases in net realisable value
Net losses on foreign currency forwards at fair value through profit or loss
Net gains on foreign exchange
Property, plant and equipment
Past service credit
Depreciation of:
Right-of-use assets
Depreciation
Amortisation of:
Internally generated intangible assets
Acquired intangibles
Other intangible assets
Amortisation
Gains and losses on significant legal proceedings
Profit on disposal of businesses (note 27)
Impairment losses included in administrative expenses
Impairment losses (note 5)
Impairment losses and reversals included in major impairment and restructuring charges
Restructuring charges included in major impairment and restructuring charges
Major impairment and restructuring charges (note 6)
Gains and losses on significant legal proceedings
12,962
14,121
2023
£m
213
–
213
(19)
194
39
(19)
(11)
19
(20)
137
14
151
(12)
1
5
30
36
25
3
3
10
31
41
2022
£m
201
(22)
179
(18)
161
26
(16)
(2)
6
(11)
125
13
138
1
6
32
39
(42)
(106)
3
3
401
39
440
4 Operating profit continued
Gains and losses on significant legal proceedings continued
During the prior year, the group recognised a gain of £44 million in relation to damages and interest from a company found to have unlawfully copied one of our technology designs. An additional
gain of £6 million was recognised following conclusion of legal proceedings associated to investments in Battery Materials, this was partially offset by a £8 million charge for environmental and
other costs.
Gains and losses on significant legal proceedings are reported as non-underlying, see note 34.
Fees payable to the company’s auditor and its associates for:
The audit of these accounts
The audit of the accounts of the company’s subsidiaries
The audit of prior period accounts
Total audit fees
Audit-related assurance services
Total non-audit fees
Total fees payable to the company’s auditor and its associates
No audit fees were paid to other auditors (2022: £nil).
Audit-related assurance services predominantly comprise of reviews of interim financial information.
2023
£m
2.2
2.4
0.2
4.8
0.4
0.4
5.2
2022
£m
2.1
2.4
0.2
4.7
0.4
0.4
5.1
During the year, the group paid £25 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 the group supplied a particular coated substrate as a component for that customer’s emissions after-treatment systems.
168
Johnson Matthey | Annual Report and Accounts 2023
169
169
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Impairment losses
5
During the year ended 31st March 2023, as part of our review for impairment triggers an impairment loss has been recognised in the group income statement within underlying operating profit.
These losses are stated below:
Other intangible assets
Property, plant and equipment
Total impairment losses included in administrative expenses
2023
£m
–
3
3
2022
£m
1
2
3
Total impairment losses incurred for the year of £13 million is comprised of net major impairment losses of £10 million (see note 6) and £3 million of impairment losses included within
administrative expenses.
Goodwill
Impairment testing
The group and parent company test goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the cash-generating
units (CGUs) are determined using value in use calculations which generally use cash flow projections based on financial budgets and plans covering a three-year period approved by management.
The budgets and plans are based on a number of assumptions, including market share, impact of carbon pricing, expected changes to selling prices, product profitability, precious metal prices and
other direct input costs, based on past experience and management’s expectations of future changes in the markets using external sources of information where appropriate. We also considered
the physical risk of climate change – including the effect of extreme weather events at sample strategic sites, based on internal and external analysis.
Significant CGUs
Goodwill arising on the acquisition of businesses is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination. These CGUs represent the smallest identifiable
groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Goodwill allocated to the significant CGUs is as follows:
Clean Air
• Heavy Duty Catalysts
Catalyst Technologies
Value Businesses
• Other1,2
Total carrying amount at 31st March (note 13)
1. Other is comprised of CGUs with goodwill balances individually less than £5 million.
2. Diagnostic Services goodwill has been impaired by £4 million. Refer to note 6 for further information.
Group
2023
£m
87
268
9
364
2022
£m
83
265
18
366
170
170
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
During the year ended 31st March 2023, as part of our review for impairment triggers an impairment loss has been recognised in the group income statement within underlying operating profit.
Total impairment losses included in administrative expenses
Total impairment losses incurred for the year of £13 million is comprised of net major impairment losses of £10 million (see note 6) and £3 million of impairment losses included within
The group and parent company test goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the cash-generating
units (CGUs) are determined using value in use calculations which generally use cash flow projections based on financial budgets and plans covering a three-year period approved by management.
The budgets and plans are based on a number of assumptions, including market share, impact of carbon pricing, expected changes to selling prices, product profitability, precious metal prices and
other direct input costs, based on past experience and management’s expectations of future changes in the markets using external sources of information where appropriate. We also considered
the physical risk of climate change – including the effect of extreme weather events at sample strategic sites, based on internal and external analysis.
Goodwill arising on the acquisition of businesses is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination. These CGUs represent the smallest identifiable
groups of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Goodwill allocated to the significant CGUs is as follows:
5
Impairment losses
These losses are stated below:
Other intangible assets
Property, plant and equipment
administrative expenses.
Goodwill
Impairment testing
Significant CGUs
Clean Air
• Heavy Duty Catalysts
Catalyst Technologies
Value Businesses
• Other1,2
2023
£m
–
3
3
2022
£m
1
2
3
Group
2023
£m
87
268
9
364
2022
£m
83
265
18
366
Impairment losses continued
5
Key assumptions used in value in use
Unallocated corporate costs are split between CGUs based on their share of contribution. The three-year cash flows are extrapolated using the long term average growth rates for the relevant
products, industries and countries in which the CGUs operate.
The expected economic life of the Heavy Duty Catalysts has been restricted to 2040 reflecting internal climate change targets and impact of legislation changes. In the medium term, growth will
come from tightening emissions legislation driving demand for more sophisticated catalyst systems. Beyond the medium term, the world will increasingly use alternatives to the internal
combustion engine which is reflected in the long-term decline rate used in our modelling.
Pre-tax discount rates, derived from the group’s post-tax weighted average cost of capital of 8.0% (2022: 7.7%), adjusted for the risks applicable to each CGU are used to discount these projected
risk-adjusted cash flows.
The key assumptions are:
Clean Air
• Heavy Duty Catalysts
Catalyst Technologies
Discount rate
2023
Long term growth rate
2022
2023
2022
12.1%
10.8%
11.6%
10.2%
–10.5%
3.0%
–15.1%
3.0%
Different long term growth rates are used for the Clean Air - Heavy Duty Catalysts CGU because of expected macroeconomic trends in the industry in which the business operates. The growth rate
for years four to ten is expected to be 2.2% (2022: 2.7%). After that, growth is expected to decline and, therefore, the long term growth rate above is used for year eleven onwards.
Sensitivity analysis
The headroom for the significant CGUs, calculated as the difference between net assets including allocated goodwill at 31st March 2023 and the value in use calculations, is shown below. The table
also shows, for each significant CGU, the headroom assuming a 1% decrease in the growth rate assumption and a 1% increase in the discount rate assumption used in the value in use calculations.
Clean Air
• Heavy Duty Catalysts
Catalyst Technologies
Headroom as at 31st
March 2023
£m
Headroom assuming a
1% decrease in the
growth rate
£m
Headroom assuming a
1% increase in the
discount rate
£m
383
662
349
482
329
471
Total carrying amount at 31st March (note 13)
1. Other is comprised of CGUs with goodwill balances individually less than £5 million.
2. Diagnostic Services goodwill has been impaired by £4 million. Refer to note 6 for further information.
A reduction in the Heavy Duty Catalysts CGU’s expected economic life by one year reduces headroom by approximately £13 million from £383 million. We don't expect an impairment in the near
term in Clean Air despite the declining long-term assumptions.
A reduction in operating margin of 1% in the Catalyst Technologies CGU in each of the future years, with no mitigating actions taken, reduces headroom by approximately £90 million from
£662 million.
170
Johnson Matthey | Annual Report and Accounts 2023
171
171
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
6 Major impairment and restructuring charges
The below amounts are excluded from the underlying operating profit of the group for continuing operations.
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Inventories
Trade and other receivables
Impairment losses and reversals
Restructuring charges
Total major impairment and restructuring charges
2023
£m
17
–
4
3
(8)
(6)
10
31
41
2022
£m
238
4
45
78
17
19
401
39
440
Major impairment and restructuring charges are shown separately on the face of the income statement and excluded from underlying operating profit (see note 34).
Major impairments
The group’s net impairment charge of £10 million includes further impairment charges to plants and related production assets in Clean Air as the sector continues to consolidate its existing capacity
into new, more efficient plants in order to create a simplified and agile structure. Further impairment charges were also recognised in relation to parts of the Battery Materials business reflecting
elements of the contract to sell the business to EV Metals Group.
On 3rd May 2023 the group announced the sale of its Diagnostic Services business to Sullivan Street Partners. The business is presented as held for sale (refer to note 26) at fair value less estimated
costs to sell. This has resulted in an impairment to goodwill of £4 million (see note 5).
The major impairments charge also includes impairment reversals for previously impaired Clean Air equipment that has been re-purposed, and Russia related inventories and receivables that have
subsequently been recovered in cash. Although this cash is reported as restricted (see note 1), there are no impairment indicators.
Major restructuring
The group’s transformation programme was launched in May 2022 and was designed to drive increased competitiveness, improved execution capability and create financial headroom to facilitate
further investment in high growth areas. Restructuring charges of £17 million have been recognised of which the majority is redundancy and implementation costs. The remaining charge is related
to Clean Air’s ongoing plant consolidation initiatives.
172
172
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
6 Major impairment and restructuring charges
The below amounts are excluded from the underlying operating profit of the group for continuing operations.
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Inventories
Trade and other receivables
Impairment losses and reversals
Restructuring charges
Major impairments
Total major impairment and restructuring charges
Major impairment and restructuring charges are shown separately on the face of the income statement and excluded from underlying operating profit (see note 34).
The group’s net impairment charge of £10 million includes further impairment charges to plants and related production assets in Clean Air as the sector continues to consolidate its existing capacity
into new, more efficient plants in order to create a simplified and agile structure. Further impairment charges were also recognised in relation to parts of the Battery Materials business reflecting
elements of the contract to sell the business to EV Metals Group.
On 3rd May 2023 the group announced the sale of its Diagnostic Services business to Sullivan Street Partners. The business is presented as held for sale (refer to note 26) at fair value less estimated
costs to sell. This has resulted in an impairment to goodwill of £4 million (see note 5).
The major impairments charge also includes impairment reversals for previously impaired Clean Air equipment that has been re-purposed, and Russia related inventories and receivables that have
subsequently been recovered in cash. Although this cash is reported as restricted (see note 1), there are no impairment indicators.
Major restructuring
to Clean Air’s ongoing plant consolidation initiatives.
The group’s transformation programme was launched in May 2022 and was designed to drive increased competitiveness, improved execution capability and create financial headroom to facilitate
further investment in high growth areas. Restructuring charges of £17 million have been recognised of which the majority is redundancy and implementation costs. The remaining charge is related
2023
£m
17
–
4
3
(8)
(6)
10
31
41
2022
£m
238
4
45
78
17
19
401
39
440
7 Employee information
Employee numbers
Clean Air
PGM Services
Catalyst Technologies
Hydrogen Technologies
Value Businesses
Corporate1
Monthly average number of employees
2023
2022*
5,668
1,839
1,623
418
1,363
1,590
12,501
5,846
1,791
1,530
335
1,836
1,259
12,597
1. The Corporate segment includes global functions serving our business units including procurement, HR, IT and shared service centres.
* Restated to reflect classification of the Health segment as discontinued operations (see note 26).
Wages and salaries
Social security costs
Post-employment costs (note 24)
Share-based payments (note 30)
Termination benefits
Employee benefits expense from continuing operations
2023
£m
604
70
40
18
1
733
2022
£m
583
60
62
13
3
721
8
Investment income and financing costs
Net loss on remeasurement of foreign currency swaps held at
fair value through profit or loss
Interest payable on financial liabilities held at amortised cost
and interest on related swaps
Interest payable on other liabilities1
Interest payable on lease liabilities
Total finance costs
Net gain on remeasurement of foreign currency swaps held at
fair value through profit or loss
Interest receivable on financial assets held at amortised cost
Interest receivable on other assets1
Interest on post-employment benefits
Total investment income
Net finance costs from continuing operations
2023
£m
(20)
(55)
(33)
(2)
(110)
9
11
21
8
49
(61)
2022
£m
(19)
(45)
(35)
(2)
(101)
6
2
31
2
41
(60)
1. Interest payable and receivable on other liabilities and assets mainly comprises interest on precious metal leases and the amortisation of
contango and backwardation on precious metal inventory and sale and repurchase agreements.
172
Johnson Matthey | Annual Report and Accounts 2023
173
173
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
9 Tax expense
Current tax
Corporation tax on profit for the year
Adjustment for prior years
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustment for prior years
Total deferred tax (note 23)
Tax expense
2023
£m
2022
£m
95
1
96
(37)
14
(23)
73
55
(5)
50
(1)
8
7
57
The tax expense can be reconciled to profit before tax in the income statement as follows:
Profit before tax from continuing operations
Profit / (Loss) before tax from discontinued operations
Profit / (loss) before tax
Tax expense / (credit) at UK corporation tax rate of 19% (2022: 19%)
Effects of:
Overseas tax rates
Expenses not deductible for tax purposes
Losses and other temporary differences not recognised
Impairment and restructuring charges
Recognition or utilisation of previously unrecognised tax assets
Adjustment for prior years
Patent box / Innovation box
Other tax incentives
Tax rate adjustments
Disposal of businesses
Irrecoverable withholding tax
Other
Tax expense
Tax expense from continuing operations
Tax credit from discontinued operations
Tax expense
2023
£m
344
5
349
66
5
5
8
–
(7)
15
(7)
(3)
(1)
(13)
10
(5)
73
80
(7)
73
2022
£m
195
(239)
(44)
(8)
13
9
1
70
(1)
3
(10)
(5)
(1)
(28)
9
5
57
79
(22)
57
In the March 2021 Budget the UK Government announced that legislation will be introduced
in Finance Bill 2021 to increase the main rate of UK corporation tax from 19% to 25%,
effective 1st April 2023. The legislation increasing the tax rate to 25% was substantially
enacted on 24th May 2021. Deferred tax balances at 31st March 2023 have been measured
using the enacted tax rate of 25%.
Adjustments for prior years includes current and deferred tax adjustments in respect of the
UK, US, Japan and Germany, as well as adjustments in respect of provisions for uncertain
tax positions.
Other tax incentives includes research and development tax incentives in the US and China
and other tax incentives in Poland.
Other movements mainly includes movements in respect of provisions for uncertain tax
positions and non-taxable income.
10 Earnings / (loss) per ordinary share
Earnings / (loss) per ordinary share have been calculated by dividing loss or profit for the year
by the weighted average number of shares in issue during the year.
Earnings / (loss) per share
Basic
Diluted
Basic from continuing operations
Diluted from continuing operations
2023
pence
150.9
150.2
144.2
143.6
See note 26 for the earnings per ordinary share from discontinued operations.
Earnings / (loss) (£ million)
Basic and diluted earnings / (loss)
Weighted average number of shares in issue
Basic
Dilution for long-term incentive plans
Diluted
2023
276
183,012,301
851,432
183,863,733
191,568,756
585,024
192,153,780
Presented earnings / (loss) per ordinary share have been calculated using unrounded
numbers.
2022
pence
(52.6)
(52.6)
60.9
60.8
2022
(101)
174
174
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
Origination and reversal of temporary differences
Other tax incentives includes research and development tax incentives in the US and China
The tax expense can be reconciled to profit before tax in the income statement as follows:
10 Earnings / (loss) per ordinary share
9 Tax expense
Current tax
Corporation tax on profit for the year
Adjustment for prior years
Total current tax
Deferred tax
Adjustment for prior years
Total deferred tax (note 23)
Tax expense
Profit before tax from continuing operations
Profit / (Loss) before tax from discontinued operations
Profit / (loss) before tax
Tax expense / (credit) at UK corporation tax rate of 19% (2022: 19%)
Effects of:
Overseas tax rates
Expenses not deductible for tax purposes
Losses and other temporary differences not recognised
Impairment and restructuring charges
Recognition or utilisation of previously unrecognised tax assets
Adjustment for prior years
Patent box / Innovation box
Other tax incentives
Tax rate adjustments
Disposal of businesses
Irrecoverable withholding tax
Tax expense from continuing operations
Tax credit from discontinued operations
Other
Tax expense
Tax expense
174
2023
£m
2022
£m
In the March 2021 Budget the UK Government announced that legislation will be introduced
in Finance Bill 2021 to increase the main rate of UK corporation tax from 19% to 25%,
effective 1st April 2023. The legislation increasing the tax rate to 25% was substantially
enacted on 24th May 2021. Deferred tax balances at 31st March 2023 have been measured
using the enacted tax rate of 25%.
Adjustments for prior years includes current and deferred tax adjustments in respect of the
UK, US, Japan and Germany, as well as adjustments in respect of provisions for uncertain
tax positions.
and other tax incentives in Poland.
Other movements mainly includes movements in respect of provisions for uncertain tax
positions and non-taxable income.
Earnings / (loss) per ordinary share have been calculated by dividing loss or profit for the year
by the weighted average number of shares in issue during the year.
See note 26 for the earnings per ordinary share from discontinued operations.
Earnings / (loss) per share
Basic
Diluted
Basic from continuing operations
Diluted from continuing operations
Earnings / (loss) (£ million)
Basic and diluted earnings / (loss)
Weighted average number of shares in issue
Dilution for long-term incentive plans
Basic
Diluted
numbers.
2023
pence
150.9
150.2
144.2
143.6
2023
276
2022
pence
(52.6)
(52.6)
60.9
60.8
2022
(101)
183,012,301
191,568,756
851,432
585,024
183,863,733
192,153,780
Presented earnings / (loss) per ordinary share have been calculated using unrounded
95
1
96
(37)
14
(23)
73
2023
£m
344
5
349
66
5
5
8
–
(7)
15
(7)
(3)
(1)
10
(5)
73
80
(7)
73
(13)
55
(5)
50
(1)
8
7
57
2022
£m
195
(239)
(44)
(8)
13
9
1
70
(1)
3
(10)
(5)
(1)
(28)
9
5
57
79
(22)
57
11 Property, plant and equipment
Group
Cost
At 1st April 2021
Additions
Transferred to assets classified as held
for sale
Transfers from assets in the course of
construction
Disposals
Disposal of businesses
Exchange adjustments
At 31st March 2022
Additions
Transferred to assets classified as held
for sale (note 26)
Transfers from assets in the course of
construction
Disposals
Disposal of businesses (note 27)
Exchange adjustments
At 31st March 2023
Land
and
buildings
£m
667
1
Leasehold
improvements
£m
Plant and
machinery
£m
Assets in
the course of
construction
£m
Total
£m
31
1
2,310
38
377
339
3,385
379
(107)
(5)
(392)
(282)
(786)
11
(1)
(13)
12
570
1
–
22
(1)
–
7
599
1
–
(1)
–
27
–
(1)
2
(1)
–
1
28
120
(25)
(44)
48
2,055
24
(132)
(1)
(1)
4
304
217
–
(27)
(59)
64
2,956
242
(41)
–
(42)
128
(33)
(10)
28
2,151
(152)
(13)
–
4
360
–
(48)
(10)
40
3,138
Land
and
buildings
£m
Leasehold
improvements
£m
Plant and
machinery
£m
Assets in
the course of
construction
£m
Total
£m
Accumulated depreciation and
impairment
At 1st April 2021
Charge for the year
Impairment losses (notes 5, 6 and 26)
Transferred to assets classified as held
for sale
Disposals
Disposal of businesses
Exchange adjustments
At 31st March 2022
Charge for the year
Impairment losses (notes 5, 6 and 26)
Transferred to assets classified as held
for sale (note 26)
Disposals
Disposal of businesses (note 27)
Exchange adjustments
At 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Carrying amount at 1st April 2021
321
18
21
(91)
(1)
(8)
5
265
17
–
–
(1)
–
3
284
315
305
346
17
2
–
(4)
–
(2)
1
14
1
–
(1)
–
–
1
15
13
13
14
1,606
117
64
(335)
(23)
(38)
33
1,424
119
8
(31)
(33)
(8)
20
1,499
652
631
17
–
210
1,961
137
295
(210)
–
–
(2)
15
–
4
–
(11)
–
–
8
352
289
(640)
(24)
(48)
37
1,718
137
12
(32)
(45)
(8)
24
1,806
1,332
1,238
704
360
1,424
Finance costs capitalised were £2 million (2022: £5 million) and the capitalisation rate used
to determine the amount of finance costs eligible for capitalisation was 4.0% (2022: 4.2%).
During the year, the group recognised impairments of £12 million. The impairment charge is
comprised of £3 million included in administrative expenses, see note 5, and a net £9 million
charge included in non-underlying expenses.
During the prior year, the group recognised impairments of £295 million. The impairment
charge is comprised of £2 million included in administrative expenses, see note 5, and £238
million included in non-underlying expenses, see note 6. A further £55 million of impairment
charges were incurred in relation to the Health segment.
Johnson Matthey | Annual Report and Accounts 2023
175
175
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
12 Leases
Leasing activities
The group leases some of their property, plant and equipment which are used by the group
company in their operations.
Right-of-use assets
Group
Land and
buildings
£m
Plant and
machinery
£m
At 1st April 2022
New leases, remeasurements and modifications
Depreciation charge for the year
Transferred to held for sale (note 26)
Exchange adjustments
At 31st March 2023
57
9
(11)
(9)
(2)
44
Lease liabilities
Current
Non-current
Total liabilities
Interest expense
4
4
(3)
–
–
5
Group
2023
£m
9
31
40
Group
2023
£m
2
Total
£m
61
13
(14)
(9)
(2)
49
2022
£m
10
40
50
2022
£m
2
The weighted average incremental borrowing rate applied to the group’s lease liabilities was
4.4% (2022: 4.1%).
A maturity analysis of lease liabilities is disclosed in note 28.
Other
Total cash outflow for leases
The expense relating to low-value and short-term leases is immaterial.
Group
2023
£m
16
2022
£m
16
13 Goodwill
Cost
At 1st April 2021
Disposal of business
Exchange adjustments
At 31st March 2022
Disposal of businesses (note 27)
Exchange adjustments
At 31st March 2023
Impairment
At 1st April 2021
Impairment losses
At 31st March 2022
Disposal of businesses (note 27)
Impairment losses (notes 5, 26)
At 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Carrying amount at 1st April 2021
Group
£m
572
(2)
3
573
(148)
6
431
18
189
207
(144)
4
67
364
366
554
During the current year, the Diagnostic Services goodwill was fully impaired by £4 million to
reflect the fair value less costs to sell of the business upon reclassification to assets held for
sale, see note 6. The Health business was disposed during the current year, see note 27.
During the prior year, the Health segment was fully impaired by £144 million upon
reclassification to assets held for sale. The Diagnostic Services goodwill was impaired by
£45 million.
176
176
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
The group leases some of their property, plant and equipment which are used by the group
12 Leases
Leasing activities
company in their operations.
Right-of-use assets
Group
At 1st April 2022
New leases, remeasurements and modifications
Depreciation charge for the year
Transferred to held for sale (note 26)
Land and
buildings
Plant and
machinery
£m
Disposal of businesses (note 27)
13 Goodwill
Cost
At 1st April 2021
Disposal of business
Exchange adjustments
At 31st March 2022
Exchange adjustments
At 31st March 2023
Impairment
At 1st April 2021
Impairment losses
At 31st March 2022
Disposal of businesses (note 27)
Impairment losses (notes 5, 26)
At 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Carrying amount at 1st April 2021
The weighted average incremental borrowing rate applied to the group’s lease liabilities was
£45 million.
A maturity analysis of lease liabilities is disclosed in note 28.
Total cash outflow for leases
The expense relating to low-value and short-term leases is immaterial.
£m
57
9
(11)
(9)
(2)
44
Total
£m
61
13
(14)
(9)
(2)
49
2022
£m
10
40
50
2022
£m
2
(3)
4
4
–
–
5
Group
2023
£m
9
31
40
Group
2023
£m
2
Group
2023
£m
16
2022
£m
16
Exchange adjustments
At 31st March 2023
Lease liabilities
Current
Non-current
Total liabilities
Interest expense
4.4% (2022: 4.1%).
Other
176
During the current year, the Diagnostic Services goodwill was fully impaired by £4 million to
reflect the fair value less costs to sell of the business upon reclassification to assets held for
sale, see note 6. The Health business was disposed during the current year, see note 27.
During the prior year, the Health segment was fully impaired by £144 million upon
reclassification to assets held for sale. The Diagnostic Services goodwill was impaired by
Group
£m
572
(2)
3
573
(148)
6
431
(144)
18
189
207
4
67
364
366
554
14 Other intangible assets
Group
Cost
At 1st April 2021
Additions
Transferred to assets classified as held for sale
Disposal of businesses
Exchange adjustments
At 31st March 2022
Additions
Transferred to assets classified as held for sale (note 26)
Disposals
Disposal of businesses (note 27)
Exchange adjustments
At 31st March 2023
Accumulated amortisation and impairment
At 1st April 2021
Charge for the year
Impairment losses (notes 5, 6 and 26)
Transferred to assets classified as held for sale
Reclassification
Disposal of businesses
Exchange adjustments
At 31st March 2022
Charge for the year
Impairment losses (notes 5, 6 and 26)
Transferred to assets classified as held for sale (note 26)
Disposals
Disposal of businesses (note 27)
Exchange adjustments
At 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Carrying amount at 1st April 2021
Customer
contracts and
relationships
£m
Computer
software
£m
Patents,
trademarks
and licences
£m
Acquired
research and
technology
£m
Development
expenditure
£m
133
–
–
(1)
–
132
–
(1)
(2)
(13)
–
116
108
4
–
–
–
(1)
1
112
4
–
(1)
(2)
(13)
1
101
15
20
25
367
66
(15)
(2)
3
419
59
(1)
(2)
–
–
475
144
31
15
(13)
–
(2)
3
178
31
3
(1)
(2)
–
–
209
266
241
223
65
1
(20)
–
1
47
2
–
(7)
–
1
43
46
1
12
(18)
2
–
1
44
–
–
–
(6)
–
1
39
4
3
19
42
–
(5)
–
–
37
–
(1)
–
–
1
37
41
2
–
(5)
(2)
–
–
36
1
–
(1)
–
–
1
37
–
1
1
226
33
(127)
–
3
135
–
–
–
–
–
135
135
1
75
(79)
–
–
1
133
–
–
–
–
–
–
133
2
2
91
During the year, the group recognised impairments of £3 million, see note 6.
During the prior year, the group recognised impairments of £102 million. The impairment charge is comprised of £1 million included in administrative expenses, see note 5, and £78 million
included in non-underlying expenses, see note 6. A further £23 million of impairment charges were incurred in relation to the Health segment.
Johnson Matthey | Annual Report and Accounts 2023
Total
£m
833
100
(167)
(3)
7
770
61
(3)
(11)
(13)
2
806
474
39
102
(115)
–
(3)
6
503
36
3
(3)
(10)
(13)
3
519
287
267
359
177
177
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
15 Investments in joint ventures and associates
Investments in joint ventures
Investments in associates
Investments in joint ventures and associates
The movements in the year were:
At 1st April 2021 and 31st March 2022
Additions
Disposals
Group’s share of loss for the year
Exchange adjustments
At 31st March 2023
2023
£m
–
75
75
Joint ventures
£m
Associates
£m
2
–
(2)
–
–
–
–
75
–
(1)
1
75
2022
£m
2
–
2
Total
£m
2
75
(2)
(1)
1
75
During the year the group sold its 51% interest in the ordinary share capital of Quingdao
Johnson Matthey Hero Catalyst Company Limited for consideration of £2 million. This resulted
in £nil profit on disposal.
As part of the disposal of our Health business (see note 27), we received £75 million in the
form of shares which constitutes an approximately 30% equity interest in the re-branded
business (Veranova). The group has determined that it has significant influence and therefore
has equity accounted this stake as an investment in associate.
The group has disclosed a contingent liability relating to this associate, see note 32. Financial
information for Veranova for the year to 31st March 2023 is provided below, note Veranova’s
financial year end is 31st December. The information disclosed reflects the amounts presented
in the financial statements of Veranova and not the group’s share of those amounts.
Summarised balance sheet
Non-current assets
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Summarised statement of comprehensive income
Revenue
Depreciation and amortisation
Income tax expense
Loss for the year and total comprehensive expense
2023
£m
159
12
203
215
(71)
(14)
289
189
(19)
(2)
(4)
178
Johnson Matthey | Annual Report and Accounts 2023
178
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
The group has disclosed a contingent liability relating to this associate, see note 32. Financial
information for Veranova for the year to 31st March 2023 is provided below, note Veranova’s
financial year end is 31st December. The information disclosed reflects the amounts presented
in the financial statements of Veranova and not the group’s share of those amounts.
Investments in joint ventures
Investments in associates
Investments in joint ventures and associates
The movements in the year were:
At 1st April 2021 and 31st March 2022
Additions
Disposals
Group’s share of loss for the year
Exchange adjustments
At 31st March 2023
2023
£m
–
75
75
£m
–
75
–
(1)
1
75
2022
£m
2
–
2
Total
£m
2
75
(2)
(1)
1
75
Joint ventures
Associates
£m
(2)
2
–
–
–
–
During the year the group sold its 51% interest in the ordinary share capital of Quingdao
Johnson Matthey Hero Catalyst Company Limited for consideration of £2 million. This resulted
in £nil profit on disposal.
As part of the disposal of our Health business (see note 27), we received £75 million in the
form of shares which constitutes an approximately 30% equity interest in the re-branded
business (Veranova). The group has determined that it has significant influence and therefore
has equity accounted this stake as an investment in associate.
Summarised balance sheet
Non-current assets
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Revenue
Summarised statement of comprehensive income
Depreciation and amortisation
Income tax expense
Loss for the year and total comprehensive expense
2023
£m
159
12
203
215
(71)
(14)
289
189
(19)
(2)
(4)
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
15 Investments in joint ventures and associates
16 Inventories
18 Other financial assets and liabilities
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Inventories
Group
2023
£m
359
1,047
296
1,702
2022
£m
331
932
286
1,549
Work in progress includes £754 million (31st March 2022: £656 million) of precious metal
which is committed to future sales to customers and valued at the price at which it is
contractually committed.
17 Trade and other receivables
Current
Trade receivables
Contract receivables
Prepayments
Value added tax and other sales tax receivable
Advance payments to customers
Amounts receivable under precious metal sale
and repurchase agreements1
Other receivables
Trade and other receivables
Non-current
Value added tax and other sales tax receivable
Advance payments to customers
Other receivables
Other receivables
Group
2023
£m
1,304
70
83
142
10
222
51
1,882
3
53
57
113
2022
£m
1,393
88
75
89
10
114
27
1,796
3
39
–
42
1. The fair value of the precious metal contracted to be sold by the group under sale and repurchase agreements is £215 million (2022: £108
million).
The group enters into factoring type arrangements in a small number of countries as part of
normal business due to longer than standard payment terms, we seek to collect payments in
the month following sale. As at 31st March 2023, the level of these arrangements was
approximately £250 million (31st March 2022: approximately £250 million).
Current assets
Forward foreign exchange contracts designated as cash flow hedges
Forward precious metal price contracts designated as cash flow hedges
Forward foreign exchange contracts and currency swaps at fair value
through profit or loss
Other financial assets
Non-current assets
Forward precious metal price contracts designated as cash flow hedges
Other financial assets
Current liabilities
Forward foreign exchange contracts designated as cash flow hedges
Forward precious metal price contracts designated as cash flow hedges
Forward foreign exchange contracts and currency swaps at fair value
through profit or loss
Other financial liabilities
Non-current liabilities
Forward precious metal price contracts designated as cash flow hedges
Other financial liabilities
19 Trade and other payables
Current
Trade payables
Contract liabilities
Accruals
Amounts payable under precious metal sale and repurchase agreements1
Other payables
Trade and other payables
Non-current
Other payables
Trade and other payables
Group
2023
£m
2022
£m
11
30
6
47
48
48
(13)
–
(14)
(27)
–
–
5
–
22
27
–
–
(9)
(20)
(15)
(44)
(12)
(12)
Group
2023
£m
831
181
338
838
309
2,497
2
2
2022
£m
753
273
439
793
305
2,563
2
2
1. The fair value of the precious metal contracted to be repurchased by the group under sale and repurchase agreements is £802 million (2022:
Trade receivables and contract receivables are net of expected credit losses (see note 28).
£782 million).
178
Johnson Matthey | Annual Report and Accounts 2023
The amount of the contract liabilities balance at 31st March 2022 which was recognised in
revenue during the year ended 31st March 2023 for the group company was £70 million
(2022: £113 million).
179
179
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
20 Borrowings and related swaps
Non-current
Bank and other loans
2.99% $165 million Bonds 2023
2.44% €20 million Bonds 2023
3.57% £65 million Bonds 2024
3.565% $50 million KfW loan 2024
3.14% $130 million Bonds 2025
1.40% €77 million Bonds 2025
2.54% £45 million Bonds 2025
3.79% $130 million Bonds 2025
3.97% $120 million Bonds 2027
SONIA + 1.25% UKEF EDG £ Facility 2028
EURIBOR + 1.20% UKEF EDG € Facility 2028
3.39% $180 million Bonds 2028
1.81% €90 million Bonds 2028
2.77% £35 million Bonds 2029
3.00% $50 million Bonds 2029
4.10% $30 million Bonds 2030
2.92% €25 million Bonds 2030
1.90% €225 million Bonds 2032
Cross currency interest rate swaps designated as net investment hedges
Borrowings and related swaps
Current
€166 million EIB loan 2022
3.26% $150 million Bonds 2022
2.99% $165 million Bonds 2023
2.44% €20 million Bonds 2023
Other bank loans
Borrowings and related swaps
Group
2023
£m
–
–
(65)
(40)
(105)
(61)
(45)
(105)
(97)
(248)
(157)
(144)
(69)
(35)
(40)
(24)
(22)
(198)
(5)
(1,460)
–
–
(133)
(18)
(4)
(155)
2022
£m
(125)
(17)
(65)
(38)
(99)
(64)
(45)
(99)
(90)
–
–
(137)
(74)
–
–
(23)
(21)
–
(2)
(899)
(140)
(115)
–
–
(10)
(265)
The 1.40% €77 million Bonds 2025 and the 1.81% €90 million Bonds 2028 have been swapped into floating rate euros. $100 million of the 3.14% $130 million Bonds 2025 have been swapped
into sterling at 2.83% and the 3.00% $50 million Bonds 2029 have been swapped into euros at 1.71%.
All borrowings bear interest at fixed rates with the exception of the UKEF EDG EUR and GBP facilities which bear interest at 6 Months EURIBOR plus 1.20% and SONIA plus 1.25% and bank
overdrafts, which bear interest at commercial floating rates.
During the year, the group drew down on the UKEF EDG financing secured in the financial year to 31st March 2022. The margins on these new facilities are impacted by the group’s ability to meet
targets around the reduction in its scope 1 and 2 emissions.
180
Johnson Matthey | Annual Report and Accounts 2023
180
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
20 Borrowings and related swaps
Non-current
Bank and other loans
2.99% $165 million Bonds 2023
2.44% €20 million Bonds 2023
3.57% £65 million Bonds 2024
3.565% $50 million KfW loan 2024
3.14% $130 million Bonds 2025
1.40% €77 million Bonds 2025
2.54% £45 million Bonds 2025
3.79% $130 million Bonds 2025
3.97% $120 million Bonds 2027
SONIA + 1.25% UKEF EDG £ Facility 2028
EURIBOR + 1.20% UKEF EDG € Facility 2028
3.39% $180 million Bonds 2028
1.81% €90 million Bonds 2028
2.77% £35 million Bonds 2029
3.00% $50 million Bonds 2029
4.10% $30 million Bonds 2030
2.92% €25 million Bonds 2030
1.90% €225 million Bonds 2032
Borrowings and related swaps
Current
€166 million EIB loan 2022
3.26% $150 million Bonds 2022
2.99% $165 million Bonds 2023
2.44% €20 million Bonds 2023
Other bank loans
Borrowings and related swaps
Cross currency interest rate swaps designated as net investment hedges
The 1.40% €77 million Bonds 2025 and the 1.81% €90 million Bonds 2028 have been swapped into floating rate euros. $100 million of the 3.14% $130 million Bonds 2025 have been swapped
into sterling at 2.83% and the 3.00% $50 million Bonds 2029 have been swapped into euros at 1.71%.
All borrowings bear interest at fixed rates with the exception of the UKEF EDG EUR and GBP facilities which bear interest at 6 Months EURIBOR plus 1.20% and SONIA plus 1.25% and bank
overdrafts, which bear interest at commercial floating rates.
targets around the reduction in its scope 1 and 2 emissions.
During the year, the group drew down on the UKEF EDG financing secured in the financial year to 31st March 2022. The margins on these new facilities are impacted by the group’s ability to meet
Group
2023
£m
–
–
(65)
(40)
(105)
(61)
(45)
(105)
(97)
(248)
(157)
(144)
(69)
(35)
(40)
(24)
(22)
(198)
(5)
(1,460)
–
–
(133)
(18)
(4)
(155)
2022
£m
(125)
(17)
(65)
(38)
(99)
(64)
(45)
(99)
(90)
–
–
–
–
(137)
(74)
(23)
(21)
–
(2)
(899)
(140)
(115)
–
–
(10)
(265)
21 Movements in assets and liabilities arising from financing activities
Non-current assets
Interest rate swaps*
Non-current liabilities
Borrowings and related swaps
Interest rates swaps
Lease liabilities
Current liabilities
Borrowings and related swaps
Lease liabilities
Net movements in assets and liabilities arising from financing activities
Dividends paid to equity shareholders
Interest paid
Purchase of treasury shares
Net cash inflow from financing activities
Cash (inflow) /
outflow
£m
Transfers
£m
Transfers to held
for sale
£m
Foreign exchange
movements
£m
Fair value and
other movements
£m
Non-cash movements
–
149
–
11
(149)
(11)
–
–
–
–
9
–
1
10
–
(36)
–
–
(21)
–
(57)
9
(2)
(14)
(11)
(1)
(3)
(22)
(1)
(672)
1
–
281
14
(377)
141
94
45
(97)
2022*
£m
12
(899)
(2)
(40)
(265)
(10)
–
–
–
–
–
2021
£m
Cash outflow
£m
Transfers
£m
Transfers to held
for sale
£m
Foreign exchange
movements
£m
Fair value and other
movements
£m
Non-cash movements
Non-current assets
Interest rate swaps*
Non-current liabilities
Borrowings and related swaps
Interest rates swaps
Lease liabilities
Current liabilities
Borrowings and related swaps
Lease liabilities
Net movements in assets and liabilities arising from financing activities
Dividends paid to equity shareholders
Interest paid
Purchase of treasury shares
Net cash outflow from financing activities
20
(1,252)
–
(51)
(26)
(11)
–
–
–
–
–
–
114
–
–
17
14
145
139
111
155
550
(8)
254
8
15
(254)
(15)
–
–
–
–
7
–
2
9
–
(26)
–
–
(5)
–
(31)
–
11
(10)
(11)
3
–
(7)
2023
£m
20
(1,460)
(15)
(31)
(155)
(9)
2022
£m*
12
(899)
(2)
(40)
(265)
(10)
* The prior year comparatives for interest rate swaps within non-current assets have been re-presented to group the balances together and simplify the balance sheet. The financial statement captions impacted are Interest rate swaps within Non-current assets which was previously £11 million (now
£12 million) and Interest rate swaps within Current assets which was previously £1 million (now £nil). This re-presentation is not considered material.
180
Johnson Matthey | Annual Report and Accounts 2023
181
181
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
22 Provisions
Group
Restructuring
provisions
£m
Warranty and
technology
provisions
£m
Other
provisions
£m
At 1st April 2021
Charge for the year
Utilised
Released
Transferred to liabilities classified as held for
sale
At 31st March 2022
Charge for the year
Utilised
Released
At 31st March 2023
42
18
(15)
–
(3)
42
25
(28)
(1)
38
8
–
(1)
(2)
–
5
10
(1)
(2)
12
Current
Non-current
Total provisions
12
26
(1)
–
–
37
8
(1)
(3)
41
2023
£m
63
28
91
Total
£m
62
44
(17)
(2)
(3)
84
43
(30)
(6)
91
2022
£m
56
28
84
Restructuring
The restructuring provisions are part of the group’s efficiency initiatives (see note 6).
Warranty and technology
The warranty and technology provisions represent management’s best estimate of the group’s
liability under warranties granted and remedial work required under technology licences
based on past experience in Clean Air, Catalyst Technologies and Value Businesses. Warranties
generally cover a period of up to three years.
Other
The other provisions include environmental and legal provisions arising across the group.
Amounts provided reflect management's best estimate of the expenditure required to settle
the obligations at the balance sheet date.
23 Deferred tax
Group
At 1st April 2021
(Credit) / charge to
the income
statement
Tax on items taken
directly to or
transferred from
equity
Exchange
adjustments
At 31st March 2022
(Credit) / charge to
the income
statement (note 9)
Disposal of businesses
(note 27)
Transferred to assets
classified as held for
sale (note 26)
Tax on items taken
directly to or
transferred from
equity
Exchange
adjustments
At 31st March 2023
Deferred tax assets
Deferred tax liabilities
Net amount
Property,
plant and
equipment
£m
Post-
employment
benefits
£m
Provisions
£m
Inventories
£m
Intangibles
£m
Other
£m
Total
deferred tax
(assets) /
liabilities
£m
1
27
(48)
(94)
2
–
(112)
(39)
23
–
1
(37)
(7)
5
3
–
(1)
(37)
35
–
85
7
–
–
(37)
–
55
7
–
44
(3)
(25)
7
–
–
(8)
27
(3)
(44)
1
(49)
(1)
(2)
–
(33)
(2)
(80)
(15)
22
(8)
(22)
(23)
4
–
–
1
–
–
(7)
–
–
7
–
10
3
26
(11)
–
(55)
–
(26)
–
(17)
–
(22)
(1)
(102)
2023
£m
(121)
19
(102)
2022
£m
(98)
18
(80)
182
182
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
Transferred to liabilities classified as held for
Restructuring
provisions
Warranty and
technology
provisions
Other
provisions
£m
42
18
(15)
–
(3)
42
25
(28)
(1)
38
£m
8
–
(1)
(2)
–
5
10
(1)
(2)
12
£m
12
26
(1)
–
–
37
8
(1)
(3)
41
2023
£m
63
28
91
Total
£m
62
44
(17)
(2)
(3)
84
43
(30)
(6)
91
2022
£m
56
28
84
The restructuring provisions are part of the group’s efficiency initiatives (see note 6).
Warranty and technology
The warranty and technology provisions represent management’s best estimate of the group’s
liability under warranties granted and remedial work required under technology licences
based on past experience in Clean Air, Catalyst Technologies and Value Businesses. Warranties
generally cover a period of up to three years.
The other provisions include environmental and legal provisions arising across the group.
Amounts provided reflect management's best estimate of the expenditure required to settle
the obligations at the balance sheet date.
22 Provisions
Group
At 1st April 2021
Charge for the year
Utilised
Released
sale
Utilised
Released
At 31st March 2022
Charge for the year
At 31st March 2023
Current
Non-current
Total provisions
Restructuring
Other
182
23 Deferred tax
Group
At 1st April 2021
(Credit) / charge to
the income
statement
Tax on items taken
directly to or
transferred from
equity
Exchange
adjustments
At 31st March 2022
(Credit) / charge to
the income
Disposal of businesses
(note 27)
Transferred to assets
classified as held for
sale (note 26)
Tax on items taken
directly to or
transferred from
equity
Exchange
adjustments
At 31st March 2023
Deferred tax assets
Deferred tax liabilities
Net amount
Property,
plant and
equipment
Post-
employment
£m
1
benefits
Provisions
Inventories
Intangibles
£m
27
£m
(48)
£m
(94)
£m
2
Total
deferred tax
(assets) /
liabilities
£m
Other
£m
–
(112)
(39)
23
44
(3)
(25)
7
–
(8)
27
(37)
(3)
(44)
(49)
(1)
(2)
–
(33)
(2)
(80)
7
–
4
–
–
–
–
1
1
–
–
–
35
–
85
7
–
–
–
1
5
3
–
(37)
–
55
(1)
(37)
(55)
(26)
(17)
(22)
(102)
(7)
–
–
–
7
–
26
–
2023
£m
(121)
19
(102)
10
3
(11)
(1)
2022
£m
(98)
18
(80)
statement (note 9)
(7)
(15)
22
(8)
(22)
(23)
23 Deferred tax continued
Deferred tax has not been recognised in respect of tax losses of £85 million (2022: £135
million) and other temporary differences of £23 million (2022: £24 million). Of the total tax
losses, £30 million (2022: £41 million) is expected to expire within 5 years, £30 million
within 5 to 10 years (2022: £12 million), £nil after 10 years (2022: £38 million) and £25
million carry no expiry (2022: £43 million). These deferred tax assets have not been
recognised on the basis that their future economic benefit is not probable.
In addition, the group’s overseas subsidiaries have net unremitted earnings of £933 million
(2022: £820 million), resulting in temporary differences of £563 million (2022: £585
million). No deferred tax has been provided in respect of these differences since the timing of
the reversals can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
The recognition of deferred tax assets has been determined by the recoverability of those
assets against future tax liabilities as determined by budgets and plans that are showing profits
in relevant businesses. The majority of the deferred tax assets and liabilities noted above are
anticipated to be realised after more than 12 months.
24 Post-employment benefits
Group
Background
Pension plans
The group operates a number of post-employment retirement and medical benefit plans
around the world. The retirement plans in the UK, US and other countries include both
defined contribution and defined benefit plans.
For defined contribution plans, retirement benefits are determined by the value of funds
arising from contributions paid in respect of each employee and the investment returns on
those contributions prior to retirement.
For defined benefit plans, which include final salary, career average and other types of plans
with committed pension payments, the retirement benefits are based on factors, such as the
employee’s pensionable salary and length of service. The majority of the group’s final salary
and career average defined benefit retirement plans are closed to new entrants but remain
open to ongoing accrual for current members.
Regulatory framework and governance
The UK pension plan, the Johnson Matthey Employees’ Pension Scheme (JMEPS), is a
registered arrangement established under trust law and, as such, is subject to UK pension, tax
and trust legislation. It is managed by a corporate trustee, JMEPS Trustees Limited. The trustee
board includes representatives appointed by both the parent company and employees and
includes an independent chairman.
Although the parent company bears the financial cost of the plan, the trustee directors are
responsible for the overall management and governance of JMEPS, including compliance with
all applicable legislation and regulations. The trustee directors are required by law to act in the
interests of all relevant beneficiaries and: to set certain policies; to manage the day-to-day
administration of the benefits; and to set the plan’s investment strategy following consultation
with the parent company.
UK pensions are regulated by the Pensions Regulator whose statutory objectives and
regulatory powers are described on its website: www.thepensionsregulator.gov.uk
The JMEPS Trustee Board considers how climate risk is integrated within investment processes
when appointing, monitoring and withdrawing from investment managers using the
investment consultant’s Environmental, Social and Governance (ESG) ratings. The ESG ratings
include consideration of climate risk management policies. On a periodic basis, JMEPS will
review the ESG ratings assigned to the underlying investments based on the investment
consultant’s ESG research.
The US pension plans are qualified pension arrangements and are subject to the requirements
of the Employee Retirement Income Security Act, the Pension Protection Act 2006 and the
Department of Labor and Internal Revenue. The plans are managed by a pension committee
which acts as the fiduciary and, as such, is ultimately responsible for: the management of the
plans’ investments; compliance with all applicable legislation and regulations; and overseeing
the general management of the plans.
Other trustee or fiduciary arrangements that have similar responsibilities and obligations are
in place for the group’s other funded defined benefit pension plans outside of the UK and US.
Benefits
The UK defined benefit pension plan is segregated into two sections – a legacy section which
provides final salary and career average pension benefits and a cash balance section.
The legacy section provides benefits to members in the form of a set level of pension payable
for life based on the member’s length of service and final pensionable salary at retirement or
averaged over their career with the company. The majority of the benefits attract inflation-
related increases both before and after retirement. The final salary element of the legacy
section was closed to future accrual of benefits from 1st April 2010 and the career average
element of the legacy section was closed to new entrants on 1st October 2012, but remains
open to future accrual for existing members.
The cash balance section provides benefits to members at the point of retirement in the form
of a cash lump sum. The benefits attract inflation-related increases before retirement but,
following the payment of the retirement lump sum benefit, the plan has no obligation to pay
any further benefits to the member. All new employees join the cash balance section of
the plan.
Johnson Matthey | Annual Report and Accounts 2023
183
183
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Group continued
The group operates two defined benefit pension plans in the US. The hourly pension plan is for
unionised employees and provides a fixed retirement benefit for life based upon years of
service. The salaried pension plan provides retirement benefits for life based on the member’s
length of service and final pensionable salary (averaged over the last five years). The salaried
plan benefits attract inflation-related increases before leaving but are non-increasing
thereafter. On retirement, members in either plan have the option to take the cash value of
their benefit instead of a lifetime annuity in which case the plan has no obligation to pay any
further benefits to the member.
The US salaried pension plan was closed to new entrants on 1st September 2013, and the US
hourly pension plan was closed to new entrants on 1st January 2019. The hourly pension plan
remains open to future accrual for existing members but the salaried pension plan will be
closed to future accrual from 1st July 2023 with plan participants transferring to a defined
contribution plan. All new US employees now join a defined contribution plan.
Other post-employment benefits
The group’s principal post-employment medical plans are in the UK and US, and are unfunded
arrangements that have been closed to new entrants for over ten years.
Maturity profile
The estimated weighted average durations of the defined benefit obligations of the main
plans as at 31st March 2023 are:
Pensions:
UK
US
Post-retirement medical benefits:
UK
US
Weighted average
duration
Years
16
10
9
9
Funding
Introduction
The group’s principal defined benefit retirement plans are funded through separate fiduciary
or trustee administered funds that are independent of the sponsoring company. The
contributions paid to these arrangements are jointly agreed by the sponsoring company and
the relevant trustee or fiduciary body after each funding valuation and in consultation with
independent qualified actuaries. The plans’ assets, together with the agreed funding
contributions, should be sufficient to meet the plans’ future pension obligations.
UK valuations
UK legislation requires that pension plans are funded prudently and that, when undertaking a
funding valuation (every three years), assets are taken at their market value and liabilities are
determined based on a set of prudent assumptions set by the trustee following consultation
with their appointed actuary. The assumptions used for funding valuations may, therefore,
differ to the actuarial assumptions used for IAS 19, Employee Benefits, accounting purposes.
In January 2013, a special purpose vehicle (SPV), Johnson Matthey (Scotland) Limited
Partnership, was set up to provide deficit reduction contributions and greater security to the
trustee. The group invested £50 million in a bond portfolio which is beneficially held by the
SPV. The income generated by the SPV is used to make annual distributions of £3.5 million to
JMEPS for a period of up to 25 years. These annual distributions are only payable if the legacy
section of JMEPS continues to be in deficit, on a funding basis. This bond portfolio is held as a
non-current investment at fair value through other comprehensive income and the group’s
liability to pay the income to the plan is not a plan asset under IAS 19 although it is for
actuarial funding valuation purposes. The SPV is exempt from the requirement to prepare
audited annual accounts as it is included on a consolidated basis in these accounts.
A funding valuation of JMEPS was carried out as at 1st April 2021 and showed that there was a
deficit of £9 million in the legacy section of the plan, or a surplus of £24 million after taking
account of the future additional deficit contributions from the SPV. The valuation also showed
a deficit in the cash balance section of the plan of £1 million. The next triennial actuarial
valuation of JMEPS will be carried out as at 1st April 2024 with the results known later in
the year.
In accordance with the governing documentation of JMEPS, any future plan surplus would be
returned to the parent company by way of a refund assuming gradual settlement of the
liabilities over the lifetime of the plan. As such, there are no adjustments required in respect of
IFRIC 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and
their Interaction.
US valuations
The last annual review of the US defined benefit pension plans was carried out by a qualified
actuary as at 1st July 2021 and showed that there was a surplus of $10 million on the projected
funding basis.
The assumptions used for funding valuations may differ to the actuarial assumptions used for
IAS 19 accounting purposes.
Other valuations
Similar funding valuations are undertaken on the group’s other defined benefit pension plans
outside of the UK and US in accordance with prevailing local legislation.
184
184
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
UK valuations
Group continued
The group operates two defined benefit pension plans in the US. The hourly pension plan is for
unionised employees and provides a fixed retirement benefit for life based upon years of
service. The salaried pension plan provides retirement benefits for life based on the member’s
length of service and final pensionable salary (averaged over the last five years). The salaried
UK legislation requires that pension plans are funded prudently and that, when undertaking a
funding valuation (every three years), assets are taken at their market value and liabilities are
determined based on a set of prudent assumptions set by the trustee following consultation
with their appointed actuary. The assumptions used for funding valuations may, therefore,
differ to the actuarial assumptions used for IAS 19, Employee Benefits, accounting purposes.
plan benefits attract inflation-related increases before leaving but are non-increasing
In January 2013, a special purpose vehicle (SPV), Johnson Matthey (Scotland) Limited
thereafter. On retirement, members in either plan have the option to take the cash value of
Partnership, was set up to provide deficit reduction contributions and greater security to the
their benefit instead of a lifetime annuity in which case the plan has no obligation to pay any
trustee. The group invested £50 million in a bond portfolio which is beneficially held by the
further benefits to the member.
The US salaried pension plan was closed to new entrants on 1st September 2013, and the US
hourly pension plan was closed to new entrants on 1st January 2019. The hourly pension plan
remains open to future accrual for existing members but the salaried pension plan will be
closed to future accrual from 1st July 2023 with plan participants transferring to a defined
contribution plan. All new US employees now join a defined contribution plan.
Other post-employment benefits
The group’s principal post-employment medical plans are in the UK and US, and are unfunded
arrangements that have been closed to new entrants for over ten years.
Maturity profile
plans as at 31st March 2023 are:
The estimated weighted average durations of the defined benefit obligations of the main
the year.
SPV. The income generated by the SPV is used to make annual distributions of £3.5 million to
JMEPS for a period of up to 25 years. These annual distributions are only payable if the legacy
section of JMEPS continues to be in deficit, on a funding basis. This bond portfolio is held as a
non-current investment at fair value through other comprehensive income and the group’s
liability to pay the income to the plan is not a plan asset under IAS 19 although it is for
actuarial funding valuation purposes. The SPV is exempt from the requirement to prepare
audited annual accounts as it is included on a consolidated basis in these accounts.
A funding valuation of JMEPS was carried out as at 1st April 2021 and showed that there was a
deficit of £9 million in the legacy section of the plan, or a surplus of £24 million after taking
account of the future additional deficit contributions from the SPV. The valuation also showed
a deficit in the cash balance section of the plan of £1 million. The next triennial actuarial
valuation of JMEPS will be carried out as at 1st April 2024 with the results known later in
Weighted average
duration
Years
In accordance with the governing documentation of JMEPS, any future plan surplus would be
returned to the parent company by way of a refund assuming gradual settlement of the
liabilities over the lifetime of the plan. As such, there are no adjustments required in respect of
IFRIC 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and
16
10
9
9
their Interaction.
US valuations
funding basis.
The last annual review of the US defined benefit pension plans was carried out by a qualified
actuary as at 1st July 2021 and showed that there was a surplus of $10 million on the projected
The assumptions used for funding valuations may differ to the actuarial assumptions used for
IAS 19 accounting purposes.
The group’s principal defined benefit retirement plans are funded through separate fiduciary
Other valuations
or trustee administered funds that are independent of the sponsoring company. The
Similar funding valuations are undertaken on the group’s other defined benefit pension plans
contributions paid to these arrangements are jointly agreed by the sponsoring company and
outside of the UK and US in accordance with prevailing local legislation.
the relevant trustee or fiduciary body after each funding valuation and in consultation with
independent qualified actuaries. The plans’ assets, together with the agreed funding
contributions, should be sufficient to meet the plans’ future pension obligations.
Post-retirement medical benefits:
Pensions:
UK
US
UK
US
Funding
Introduction
184
24 Post-employment benefits continued
Group continued
Risk management
The group is exposed to a number of risks relating to its post-retirement pension plans, the most significant of which are:
Risk
Mitigation
Market (investment) risk
Asset returns may not move in line with the liabilities and may be subject to volatility. The group’s various plans have highly diversified investment portfolios, investing in a wide range of assets
that provide reasonable assurance that no single security or type of security could have a material adverse
impact on the plan.
A de-risking strategy is in place to reduce volatility in the plans as a result of the mismatch between the assets
and liabilities. As the funding level of the plans improve and hit pre-agreed triggers, plan investments are
switched from return-seeking assets to liability-matching assets.
The plans implement partial currency hedging on their overseas assets to mitigate currency risk.
Interest (discount) rate risk
Liabilities are sensitive to movements in bond yields (interest rates), with lower
interest rates leading to an increase in the valuation of liabilities, albeit the impact
on the plan’s funding level will be partially offset by an increase in the value of its
bond holdings.
Inflation risk
Liabilities are sensitive to movements in inflation, with higher inflation leading to an
increase in the valuation of liabilities.
Longevity risk
The majority of the group’s defined benefit plans provide benefits for the life of the
member, so the liabilities are sensitive to life expectancy, with increases in life
expectancy leading to an increase in the valuation of liabilities.
The group’s defined benefit plans hold a high proportion of their assets in government or corporate bonds,
which provide a natural hedge against falling interest rates.
In the UK, this interest rate hedge is extended by the use of interest rate swaps, such that the plan is 100%
hedged on the plan’s funding basis. The swaps are held with several banks to reduce counterparty risk.
Where plan benefits provide inflation-related increases, the plan holds some inflation-linked assets which
provide a natural hedge against higher than expected inflation increases.
In the UK, this inflation hedge is extended by the use of inflation swaps, such that the plan is 100% hedged
on the plan’s funding basis. The swaps are held with several banks to reduce counterparty risk.
The group has closed most of its defined benefit pension plans to new entrants, replacing them with either a
cash balance plan or defined contribution plans, both of which are unaffected by life expectancy.
For the plans where a benefit for life continues to be payable, prudent mortality assumptions are used that
appropriately allow for a future improvement in life expectancy. These assumptions are reviewed on a
regular basis.
Liquidity risk
The pension plan may have insufficient access to cash to meet its short-term cash and
collateral obligations, such that adverse scenarios could force the sale of a less-liquid
assets at depressed prices.
The group’s defined benefit plans hold sufficient liquid assets to meet its cashflow obligations and the
collateral requirements of its inflation and interest rate hedging. This reduces the risk of being a forced seller
of less-liquid assets.
Johnson Matthey | Annual Report and Accounts 2023
185
185
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Group continued
Contributions
During the year, total contributions to the group’s post-employment defined benefit plans were £40 million (2022: £43 million). It is estimated that the group will contribute approximately £36
million to the post-employment defined benefit plans during the year ending 31st March 2024.
IAS 19 accounting
Principal actuarial assumptions
Qualified independent actuaries have updated the IAS 19 valuations of the group’s major defined benefit plans to 31st March 2023. The assumptions used are chosen from a range of possible
actuarial assumptions which, due to the long-term nature of the plans, may not necessarily be borne out in practice.
Financial assumptions
First year's rate of increase in salaries
Ultimate rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation
• UK Retail Prices Index (RPI)
• UK Consumer Prices Index (CPI)
Current medical benefits cost trend rate
Ultimate medical benefits cost trend rate
2023
UK plan
%
4.40
3.40
2.90
4.80
–
3.10
2.65
12.50
5.40
2023
US plans
%
2023
Other plans
%
4.50
4.50
–
4.90
2.50
–
–
–
–
3.97
2.20
2.80
4.40
3.90
–
–
–
–
2022
UK plan
%
3.85
3.85
3.20
2.80
–
3.60
3.10
5.40
5.40
2022
US plans
%
2022
Other plans
%
3.00
3.00
–
3.70
2.20
–
–
–
–
2.20
2.20
2.11
2.13
2.15
–
–
–
–
Demographic assumptions
The mortality assumptions are based on country-specific mortality tables and, where appropriate, include an allowance for future improvements in life expectancy. In addition, where credible data
exists, actual plan experience is taken into account. The group’s most substantial pension liabilities are in the UK and the US where, using the mortality tables adopted, the expected lifetime of
average members currently at age 65 and average members at age 65 in 25 years’ time (i.e. members who are currently aged 40 years) is respectively:
Male
Female
186
186
Currently age 65
Age 65 in 25 years
UK plan
US plans
UK plan
US plans
88
90
86
88
89
92
88
89
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
During the year, total contributions to the group’s post-employment defined benefit plans were £40 million (2022: £43 million). It is estimated that the group will contribute approximately £36
million to the post-employment defined benefit plans during the year ending 31st March 2024.
Qualified independent actuaries have updated the IAS 19 valuations of the group’s major defined benefit plans to 31st March 2023. The assumptions used are chosen from a range of possible
actuarial assumptions which, due to the long-term nature of the plans, may not necessarily be borne out in practice.
2023
UK plan
%
4.40
3.40
2.90
4.80
–
3.10
2.65
12.50
5.40
2023
US plans
%
4.50
4.50
–
4.90
2.50
–
–
–
–
2023
Other plans
%
3.97
2.20
2.80
4.40
3.90
–
–
–
–
2022
UK plan
%
3.85
3.85
3.20
2.80
–
3.60
3.10
5.40
5.40
2022
US plans
%
3.00
3.00
3.70
2.20
–
–
–
–
–
2022
Other plans
%
2.20
2.20
2.11
2.13
2.15
–
–
–
–
The mortality assumptions are based on country-specific mortality tables and, where appropriate, include an allowance for future improvements in life expectancy. In addition, where credible data
exists, actual plan experience is taken into account. The group’s most substantial pension liabilities are in the UK and the US where, using the mortality tables adopted, the expected lifetime of
average members currently at age 65 and average members at age 65 in 25 years’ time (i.e. members who are currently aged 40 years) is respectively:
Currently age 65
Age 65 in 25 years
UK plan
US plans
UK plan
US plans
88
90
86
88
89
92
88
89
24 Post-employment benefits continued
Group continued
Contributions
IAS 19 accounting
Principal actuarial assumptions
Financial assumptions
First year's rate of increase in salaries
Ultimate rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation
• UK Retail Prices Index (RPI)
• UK Consumer Prices Index (CPI)
Current medical benefits cost trend rate
Ultimate medical benefits cost trend rate
Demographic assumptions
Male
Female
186
24 Post-employment benefits continued
Group continued
Financial information
Plan assets
Movements in the fair value of plan assets during the year were:
At 1st April 2021
Administrative expenses
Interest income
Return on plan assets excluding interest
Employee contributions
Company contributions
Benefits paid
Disposal of business
Exchange adjustments
At 31st March 2022
Administrative expenses
Interest income
Return on plan assets excluding interest
Employee contributions
Company contributions
Benefits paid
Exchange adjustments
At 31st March 2023
Johnson Matthey | Annual Report and Accounts 2023
UK pension -
legacy section
£m
UK pension -
cash balance
section
£m
UK post-
retirement
medical
benefits
£m
US
pensions
£m
US post-
retirement
medical
benefits
£m
2,142
(2)
44
27
3
9
(63)
–
–
2,160
(4)
65
(698)
3
8
(62)
–
1,472
128
–
3
(2)
7
22
(2)
–
–
156
–
6
(29)
7
21
(2)
–
159
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(1)
–
–
320
(1)
10
(15)
1
9
(27)
–
13
310
(1)
12
(57)
–
7
(42)
21
250
–
–
–
–
1
1
(2)
–
–
–
–
–
–
–
1
(1)
–
–
Other
£m
56
–
1
(1)
–
1
(3)
(46)
–
8
–
–
(1)
–
2
(1)
–
8
Total
£m
2,646
(3)
58
9
12
42
(97)
(46)
13
2,634
(5)
83
(785)
10
40
(109)
21
1,889
187
187
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Group continued
Financial information continued
Plan assets continued
The fair values of plan assets are analysed as follows:
Quoted corporate bonds
Inflation and interest rate swaps
Quoted government bonds
Cash and cash equivalents
Quoted equity
Unquoted equity
Property
Insurance policies
Other
Plan assets
2023
UK
pension -
cash balance
section
£m
UK pension-
legacy section
£m
US pensions
£m
Other
£m
UK
pension-
legacy section
£m
2022
UK
pension -
cash balance
section
£m
US
pensions
£m
Other
£m
382
5
563
46
212
51
58
–
155
1,472
56
1
41
5
56
–
–
–
–
159
191
–
42
2
15
–
–
–
–
250
–
–
1
–
1
–
–
6
–
8
924
3
452
289
340
74
73
–
5
2,160
93
–
–
6
57
–
–
–
–
156
227
–
61
4
18
–
–
–
–
310
5
–
–
1
1
–
–
1
–
8
The UK plan’s unquoted equities are assets within a pooled infrastructure fund where the underlying assets are a broad range of private infrastructure investments, diversified by geographic region,
infrastructure sector, underlying asset type and development stage. These infrastructure assets are valued using widely recognised valuation techniques which use market data and discounted cash
flows. The same valuation approach is used to determine the value of the swaps and insurance policies.
The UK plan’s property represents an investment in the Blackrock UK Property Fund, which is a unitised fund where the underlying assets are taken at market value. The valuation of the fund is
independently audited by KPMG on an annual basis.
The defined benefit pension plans do not invest directly in Johnson Matthey Plc shares and no property or other assets owned by the pension plans are used by the group.
188
188
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Group continued
Financial information continued
Plan assets continued
The fair values of plan assets are analysed as follows:
Quoted corporate bonds
Inflation and interest rate swaps
Quoted government bonds
Cash and cash equivalents
Quoted equity
Unquoted equity
Property
Insurance policies
Other
Plan assets
UK pension-
legacy section
pension -
cash balance
section
UK
pension-
legacy section
pension -
cash balance
section
US pensions
£m
191
Other
£m
2023
UK
£m
56
1
41
5
56
–
–
–
–
–
42
2
15
–
–
–
–
£m
382
5
563
46
212
51
58
–
155
1,472
2022
UK
£m
93
57
–
–
6
–
–
–
–
pensions
US
£m
227
–
61
4
18
–
–
–
–
Other
£m
5
–
–
1
1
–
–
1
–
8
£m
924
3
452
289
340
74
73
–
5
–
–
1
–
1
–
–
6
–
8
The UK plan’s unquoted equities are assets within a pooled infrastructure fund where the underlying assets are a broad range of private infrastructure investments, diversified by geographic region,
infrastructure sector, underlying asset type and development stage. These infrastructure assets are valued using widely recognised valuation techniques which use market data and discounted cash
flows. The same valuation approach is used to determine the value of the swaps and insurance policies.
The UK plan’s property represents an investment in the Blackrock UK Property Fund, which is a unitised fund where the underlying assets are taken at market value. The valuation of the fund is
independently audited by KPMG on an annual basis.
The defined benefit pension plans do not invest directly in Johnson Matthey Plc shares and no property or other assets owned by the pension plans are used by the group.
159
250
2,160
156
310
24 Post-employment benefits continued
Group continued
Financial information continued
Defined benefit obligation
Movements in the defined benefit obligation during the year were:
At 1st April 2021
Current service cost
Past service credit
Interest cost
Employee contributions
Remeasurements due to changes in:
Financial assumptions
Demographic assumptions
Experience adjustments
Benefits paid
Disposal of business
Exchange adjustments
At 31st March 2022
Current service cost
Past service (cost) / credit
Interest cost
Employee contributions
Remeasurements due to changes in:
Financial assumptions
Demographic assumptions
Experience adjustments
Benefits paid
Disposal of business
Exchange adjustments
At 31st March 2023
188
Johnson Matthey | Annual Report and Accounts 2023
UK pension-
legacy section
£m
UK pension -
cash balance
section
£m
UK post-
retirement
medical
benefits
£m
(1,956)
(8)
–
(40)
(3)
196
–
(61)
63
–
–
(1,809)
(4)
(2)
(56)
(3)
577
2
(70)
62
–
–
(1,303)
(134)
(26)
–
(4)
(7)
11
–
(16)
2
–
–
(174)
(21)
–
(5)
(7)
77
–
(4)
2
–
–
(132)
(8)
–
–
–
–
–
(1)
–
–
–
–
(9)
–
–
–
–
1
–
–
1
–
–
(7)
US
pensions
£m
(340)
(9)
–
(10)
(1)
35
1
–
27
–
(15)
(312)
(5)
22
(12)
–
52
–
(9)
42
–
(22)
(244)
US post-
retirement
medical
benefits
£m
(31)
(1)
11
(1)
(1)
2
6
–
2
–
–
(13)
–
–
(1)
–
1
–
2
1
–
–
(10)
Other
£m
(83)
(1)
–
(1)
–
2
(1)
–
3
46
–
(35)
(1)
–
(1)
–
7
–
–
1
3
(3)
(29)
Total
£m
(2,552)
(45)
11
(56)
(12)
246
5
(77)
97
46
(15)
(2,352)
(31)
20
(75)
(10)
715
2
(81)
109
3
(25)
(1,725)
189
189
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Reimbursement rights
A government subsidy is receivable under the US Medicare legislation as the US post-retirement medical benefits plan is actuarially equivalent to the Medicare Prescription Drug Act and there is an
insurance policy taken out to reinsure the pension commitments of one of the small pension plans which does not meet the definition of a qualifying insurance policy. These are accounted for as
reimbursement rights and are shown on the balance sheet in post-employment benefit net assets.
Movements in the reimbursement rights during the year were:
At 1st April 2021
Return on assets excluding interest
Exchange adjustments
At 31st March 2022 and 31st March 2023
Net post-employment benefit assets and liabilities
The net post-employment benefit assets and liabilities are:
At 31st March 2023
Defined benefit obligation
Fair value of plan assets
Reimbursement rights
Net post-employment benefit assets and liabilities
At 31st March 2022
Defined benefit obligation
Fair value of plan assets
Reimbursement rights
Net post-employment benefit assets and liabilities
US post-
retirement
medical
benefits
£m
6
(6)
–
–
US post-
retirement
medical
benefits
£m
(10)
–
–
(10)
(13)
–
–
(13)
Other
£m
–
–
1
1
Other
£m
(29)
8
1
(20)
(35)
8
1
(26)
Total
£m
6
(6)
1
1
Total
£m
(1,725)
1,889
1
165
(2,352)
2,634
1
283
UK pension-
legacy section
£m
UK pension -
cash balance
section
£m
UK post-
retirement
medical
benefits
£m
(1,303)
1,472
–
169
(1,809)
2,160
–
351
(132)
159
–
27
(174)
156
–
(18)
(7)
–
–
(7)
(9)
–
–
(9)
US
pensions
£m
(244)
250
–
6
(312)
310
–
(2)
190
190
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Reimbursement rights
A government subsidy is receivable under the US Medicare legislation as the US post-retirement medical benefits plan is actuarially equivalent to the Medicare Prescription Drug Act and there is an
insurance policy taken out to reinsure the pension commitments of one of the small pension plans which does not meet the definition of a qualifying insurance policy. These are accounted for as
reimbursement rights and are shown on the balance sheet in post-employment benefit net assets.
Movements in the reimbursement rights during the year were:
24 Post-employment benefits continued
Group continued
Financial information continued
Net post-employment benefit assets and liabilities continued
These are included in the balance sheet as follows:
At 1st April 2021
Return on assets excluding interest
Exchange adjustments
At 31st March 2022 and 31st March 2023
Net post-employment benefit assets and liabilities
The net post-employment benefit assets and liabilities are:
Net post-employment benefit assets and liabilities
At 31st March 2023
Defined benefit obligation
Fair value of plan assets
Reimbursement rights
At 31st March 2022
Defined benefit obligation
Fair value of plan assets
Reimbursement rights
Net post-employment benefit assets and liabilities
US post-
retirement
medical
benefits
£m
(6)
6
–
–
US post-
retirement
medical
benefits
£m
(10)
Other
£m
Other
£m
(29)
–
–
1
1
8
1
8
1
–
–
–
–
(10)
(20)
(13)
(35)
(13)
(26)
Total
£m
6
(6)
1
1
Total
£m
(1,725)
1,889
1
165
(2,352)
2,634
1
283
UK pension-
legacy section
£m
UK pension -
cash balance
section
£m
UK post-
retirement
medical
benefits
£m
(1,303)
1,472
–
169
(1,809)
2,160
–
351
(132)
159
–
27
(174)
156
–
(18)
(7)
–
–
(7)
(9)
–
–
(9)
pensions
US
£m
(244)
250
–
6
(312)
310
–
(2)
UK pension - legacy section
UK pension - cash balance section
UK post-retirement medical benefits
US pensions
US post-retirement medical benefits
Other
Total post-employment plans
Other long-term employee benefits
Total long-term employee benefit obligations
Income statement
Amounts recognised in the income statement for long term employment benefits were:
Administrative expenses
Current service cost
Past service credit
Defined benefit post-employment costs charged to operating profit
Defined contribution plans’ expense
Other long term employee benefits
Charge to operating profit
Interest on post-employment benefits charged to finance income
Charge to profit before tax
190
Johnson Matthey | Annual Report and Accounts 2023
2023
Post-
employment
benefit
net assets
£m
2023
Employee
benefit
net
obligations
£m
169
27
–
6
–
1
203
–
–
(7)
–
(10)
(21)
(38)
(3)
(41)
2023
Total
£m
169
27
(7)
6
(10)
(20)
165
2022
Post-
employment
benefit
net assets
£m
2022
Employee
benefit
net
obligations
£m
351
–
–
–
–
1
352
–
(18)
(9)
(2)
(13)
(27)
(69)
(3)
(72)
2023
£m
(5)
(31)
20
(16)
(24)
–
(40)
8
(32)
2022
Total
£m
351
(18)
(9)
(2)
(13)
(26)
283
2022
£m
(3)
(45)
11
(37)
(24)
(1)
(62)
2
(60)
191
191
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
24 Post-employment benefits continued
Group continued
Financial information continued
Statement of total comprehensive income
Amounts recognised in the statement of total comprehensive income for long term employment benefits were:
Return on plan assets excluding interest
Remeasurements due to changes in:
Financial assumptions
Experience adjustments
Demographic assumptions
Reimbursement rights - return on assets excluding interest
Remeasurements of post-employment benefit assets and liabilities
2023
£m
(785)
715
(81)
2
–
(149)
2022
£m
9
246
(77)
5
(6)
177
Sensitivity analysis
The calculations of the defined benefit obligations are sensitive to the assumptions used. The following summarises the estimated impact on the group’s main plans of a change in the assumption
while holding all other assumptions constant. This sensitivity analysis may not be representative of the actual change as it is unlikely that the change in assumptions would occur in isolation of one
another.
Financial assumptions
A 0.1% change in the discount rate and inflation assumptions would (increase) / decrease the UK and US pension plans’ defined benefit obligations at 31st March 2023 as follows:
Effect of discount rate
Effect of inflation
0.1% increase
0.1% decrease
UK plan
£m
22
(19)
US plans
£m
2
–
UK plan
£m
(20)
21
US plans
£m
(2)
–
Demographic assumptions
A one-year increase in life expectancy would increase the UK and US pension plans' defined benefit obligation by £36 million and £5 million, respectively.
25 Share capital and other reserves
Share capital
Issued and fully paid ordinary shares
At 1st April 2021
Share buyback
At 31st March 2022
Share buyback
At 31st March 2023
192
192
Number
£m
198,940,606
(3,078,841)
195,861,765
(2,271,920)
193,589,845
221
(3)
218
(3)
215
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
Amounts recognised in the statement of total comprehensive income for long term employment benefits were:
24 Post-employment benefits continued
Group continued
Financial information continued
Statement of total comprehensive income
Return on plan assets excluding interest
Remeasurements due to changes in:
Financial assumptions
Experience adjustments
Demographic assumptions
Reimbursement rights - return on assets excluding interest
Remeasurements of post-employment benefit assets and liabilities
Sensitivity analysis
another.
Financial assumptions
Effect of discount rate
Effect of inflation
Demographic assumptions
25 Share capital and other reserves
Share capital
Issued and fully paid ordinary shares
At 1st April 2021
Share buyback
At 31st March 2022
Share buyback
At 31st March 2023
192
The calculations of the defined benefit obligations are sensitive to the assumptions used. The following summarises the estimated impact on the group’s main plans of a change in the assumption
while holding all other assumptions constant. This sensitivity analysis may not be representative of the actual change as it is unlikely that the change in assumptions would occur in isolation of one
A 0.1% change in the discount rate and inflation assumptions would (increase) / decrease the UK and US pension plans’ defined benefit obligations at 31st March 2023 as follows:
A one-year increase in life expectancy would increase the UK and US pension plans' defined benefit obligation by £36 million and £5 million, respectively.
2023
£m
(785)
715
(81)
2
–
(149)
2022
£m
9
246
(77)
5
(6)
177
0.1% increase
0.1% decrease
UK plan
£m
22
(19)
US plans
£m
2
–
UK plan
£m
(20)
21
US plans
£m
(2)
–
Number
£m
198,940,606
(3,078,841)
195,861,765
(2,271,920)
193,589,845
221
(3)
218
(3)
215
25 Share capital and other reserves
Share capital continued
Details of outstanding allocations under the company’s long term incentive plans and awards under the deferred bonus which have yet to mature are disclosed in note 30.
On 13th May 2022, the company completed its £200 million share buyback programme which commenced on 21st December 2021. During the year the company purchased 2,271,920 shares at a
cost of £45 million. This £45 million was recognised within trade and other payables as at 31st March 2022. The total number of treasury shares held was 10,136,428 (2022: 10,467,585) at a total
cost of £186 million (2022: £192 million).
The group and parent company’s employee share ownership trust (ESOT) also buys shares on the open market and holds them in trust for employees participating in the group’s executive long term
incentive plans. At 31st March 2023, the ESOT held 570,053 shares (2022: 737,566 shares) which had not yet vested unconditionally to employees. Computershare Trustees (CI) Limited, as trustee
for the ESOT, has waived its dividend entitlement.
Dividends
2020/21 final ordinary dividend paid – 50.00 pence per share
2021/22 interim ordinary dividend paid – 22.00 pence per share
2021/22 final ordinary dividend paid – 55.00 pence per share
2022/23 interim ordinary dividend paid –22.00 pence per share
Total dividends
2023
£m
–
–
100
41
141
2022
£m
96
43
–
–
139
A final dividend of 55.0 pence per ordinary share has been proposed by the board which will be paid on 1st August 2023 to shareholders on the register at the close of business on 8th June 2023,
subject to shareholders’ approval. The estimated amount to be paid is £101 million and has not been recognised in these accounts.
The board is responsible for the group’s capital management including the approval of dividends. This includes an assessment of both the level of reserves legally available for distribution and
consideration as to whether Johnson Matthey Plc would be solvent and maintain sufficient liquidity following any proposed distribution. The board has assessed the level of distributable profits as at
31st March 2023 and is satisfied that they are sufficient to support the proposed dividend.
Other reserves
Capital redemption reserve, The capital redemption reserve represents the cumulative nominal value of the company’s ordinary shares repurchased and subsequently cancelled.
Foreign currency translation reserve, The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations.
Fair value through other comprehensive income reserve, The fair value through other comprehensive income reserve represents the equity movements on financial assets held within
this category.
Hedging reserve, The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments.
The Foreign currency translation reserve includes £12 million (2023: £3 million) in relation to continuing hedge relationships and £3 million (2022: £3 million) in relation to discontinued hedge
relationships. All cash flow hedge reserves balances relate to continuing hedge relationships.
Johnson Matthey | Annual Report and Accounts 2023
193
193
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
25 Share capital and other reserves continued
Group
At 1st April 2021
Cash flow hedges – (losses) / gains taken to equity
Cash flow hedges – transferred to revenue (income statement)
Cash flow hedges – transferred to foreign exchange (income statement)
Cash flow hedges – transferred to inventory (balance sheet)
Fair value losses on net investment hedges taken to equity
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations taken to equity
Cancelled ordinary shares from share buyback
Tax on above items taken directly to or transferred from equity
At 31st March 2022
Cash flow hedges – (losses) / gains taken to equity
Cash flow hedges – transferred to revenue (income statement)
Cash flow hedges – transferred to cost of sales (income statement)
Cash flow hedges – transferred to foreign exchange (income statement)
Fair value losses on net investment hedges taken to equity
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations taken to equity
Cancelled ordinary shares from share buyback
Tax on above items taken directly to or transferred from equity
At 31st March 2023
Capital
redemption
reserve
£m
Foreign
currency
translation
reserve
£m
Fair value
through other
comprehensive
income reserve
£m
Hedging reserve
Forward
currency
contracts
£m
Cross
currency
contracts
£m
Forward
metal
contracts
£m
Total
other
reserves
£m
7
–
–
–
–
–
–
–
3
–
10
–
–
–
–
–
–
–
3
–
13
(11)
–
–
–
–
(2)
–
80
–
2
69
–
–
–
–
(10)
–
1
–
–
60
5
–
–
–
–
–
(5)
–
–
–
–
–
–
–
–
–
(12)
–
–
–
(12)
7
(14)
2
–
–
–
–
–
–
–
(5)
(10)
6
6
–
–
–
–
–
(1)
(4)
–
3
–
(3)
–
–
–
–
–
–
–
9
–
–
(7)
–
–
–
–
(1)
1
(8)
(31)
–
–
7
–
–
–
–
8
(24)
72
38
–
–
–
–
–
–
(26)
60
–
(42)
2
(3)
7
(2)
(5)
80
3
10
50
71
44
6
(7)
(10)
(12)
1
3
(28)
118
Capital
The group's policy for managing capital is to maintain an efficient balance sheet to ensure that the group always has sufficient resources to be able to invest in future growth. The group uses Return
on Invested Capital to provide a measure of its efficiency in allocating the capital under its control to profitable investments (see note 34). Capital employed is defined as total equity, excluding post
tax pension net assets, plus net debt. During the year, the group complied with all externally imposed capital requirements to which it is subject.
194
194
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
25 Share capital and other reserves continued
Group
At 1st April 2021
Cash flow hedges – (losses) / gains taken to equity
Cash flow hedges – transferred to revenue (income statement)
Cash flow hedges – transferred to foreign exchange (income statement)
Cash flow hedges – transferred to inventory (balance sheet)
Fair value losses on net investment hedges taken to equity
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations taken to equity
Cancelled ordinary shares from share buyback
Tax on above items taken directly to or transferred from equity
At 31st March 2022
Cash flow hedges – (losses) / gains taken to equity
Cash flow hedges – transferred to revenue (income statement)
Cash flow hedges – transferred to cost of sales (income statement)
Cash flow hedges – transferred to foreign exchange (income statement)
Fair value losses on net investment hedges taken to equity
Fair value losses on investments at fair value through other comprehensive income
Exchange differences on translation of foreign operations taken to equity
Cancelled ordinary shares from share buyback
Tax on above items taken directly to or transferred from equity
At 31st March 2023
Capital
Capital
redemption
reserve
£m
Foreign
currency
translation
reserve
Fair value
through other
comprehensive
income reserve
£m
Hedging reserve
Cross
currency
contracts
£m
7
–
–
–
–
–
–
–
3
–
–
–
–
–
–
–
–
3
–
£m
(11)
–
–
–
–
(2)
–
80
–
2
–
–
–
–
–
1
–
–
10
69
(10)
(12)
13
60
(12)
Forward
currency
contracts
£m
(14)
7
2
–
–
–
–
–
–
–
6
6
–
–
–
–
–
(5)
(10)
(1)
(4)
(5)
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Forward
metal
contracts
£m
(8)
(31)
–
–
7
–
–
–
–
8
–
–
–
–
–
–
(24)
72
38
(26)
60
(3)
–
3
–
–
–
–
–
–
–
–
9
–
–
–
–
–
–
1
(7)
(1)
Total
other
reserves
£m
–
(42)
2
(3)
7
(2)
(5)
80
3
10
50
71
44
6
(7)
(10)
(12)
1
3
(28)
118
The group's policy for managing capital is to maintain an efficient balance sheet to ensure that the group always has sufficient resources to be able to invest in future growth. The group uses Return
on Invested Capital to provide a measure of its efficiency in allocating the capital under its control to profitable investments (see note 34). Capital employed is defined as total equity, excluding post
tax pension net assets, plus net debt. During the year, the group complied with all externally imposed capital requirements to which it is subject.
194
26 Discontinued operations and assets and liabilities classified as
held for sale
The group strategically drives for efficiency and disciplined capital allocation to enhance
returns, as such we continue to actively manage our portfolio. In line with this strategy and to
focus on our core businesses, during the period we completed the sale of our Health, Battery
Materials UK, Battery Materials Canada and Piezo Products businesses. Refer to note 27 for
further information on these disposals.
The Health segment is classified as a discontinued operation and presented separately in the
consolidated income statement. The Health segment was classified as held for sale and a
discontinued operation for the year to 31st March 2022.
Financial information relating to the Health discontinued operations for the period to disposal
date (1st June 2022) is set out below. The 30% equity interest in the business is equity
accounted as an investment in associate, see note 15.
Revenue
Expenses
Underlying operating (loss) / profit from discontinued operations
Major impairment and restructuring costs from discontinued operations
Loss before tax from discontinued operations
Tax credit
Loss after tax from discontinued operations
Profit on disposal of discontinued operations after tax (see note 27)*
Profit / (loss) from discontinued operations
Exchange differences on translation of discontinued operations
Other comprehensive (expense) / income from discontinued operations
Total comprehensive expense from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net increase / (decrease) in cash generated by the discontinued
operations
Earnings / (loss) per ordinary share from discontinued operations
Basic earnings / (loss) per ordinary share from discontinued operations
Diluted earnings / (loss) per ordinary share from discontinued operations
* The profit on disposal of discontinued operations after tax includes a tax credit of £5 million.
Johnson Matthey | Annual Report and Accounts 2023
195
2023
£m
35
(41)
(6)
–
(6)
2
(4)
16
12
(32)
(32)
(20)
13
(5)
–
2022
£m
164
(161)
3
(242)
(239)
22
(217)
–
(217)
5
5
(212)
33
(30)
(6)
8
(3)
pence
pence
6.7
6.6
(113.5)
(113.5)
The group decided to sell its Battery Materials Germany and Poland business. As at 31st March
2023, the fair value of the proceeds less costs to sell for the Battery Materials business was
estimated to be £15 million. The business is classified as a disposal group held for sale.
Additionally, in May 2023 the group agreed to sell its Diagnostic Services business. As at 31st
March 2023, the proceeds less costs to sell for the Diagnostic Services business was estimated
to be £37 million and so an impairment of £4 million against goodwill has been recognised,
see note 5. The business is classified as a disposal group held for sale.
The major classes of assets and liabilities comprising the businesses classified as held for sale as
at 31st March are:
Non-current assets
Property, plant and equipment
Right-of-use-assets
Other intangible assets
Deferred tax assets
Current assets
Inventories
Taxation recoverable
Trade and other receivables
Assets classified as held for sale
Current liabilities
Trade and other payables
Lease liabilities
Taxation liabilities
Cash and cash equivalents – bank overdrafts
Provisions
Non-current
Lease liabilities
Provisions
Liabilities classified as held for sale
Net assets of disposal group
Diagnostic
Services
£m
2023
Battery
Materials
£m
10
9
–
3
5
–
30
57
(11)
(1)
(1)
–
–
(9)
–
(22)
35
17
–
1
–
–
–
–
18
(3)
–
–
–
–
–
–
(3)
15
Total
£m
27
9
1
3
5
–
30
75
(14)
(1)
(1)
–
–
(9)
–
(25)
50
The prior year held for sale balances relate to Health and Battery Materials.
2022
£m
146
2
52
–
138
1
63
402
(60)
(2)
–
(8)
(2)
(7)
(1)
(80)
322
195
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
27 Disposals
Health (discontinued operation)
On 1st June 2022, the group completed the sale of its Health business for a gross consideration of
£325 million. This gross consideration is comprised of £150 million cash, a £50 million vendor
loan note (which we have recorded as an other receivable), £75 million in the form of shares
which constitutes a 30% equity interest in the business (which we have equity accounted for as
an investment in associate) and £50 million in contingent consideration (which we have
recognised at a fair value of £nil). After adjusting for working capital and an additional £3 million
cash receipt due to cash in business upon disposal, the net consideration was £272 million. The
business was disclosed as a disposal group held for sale as at 31st March 2022.
Battery Materials
On 26th May 2022, the group completed the sale of its Battery Materials UK business for a cash
consideration of £20 million. The business was disclosed as a disposal group held for sale as at
31st March 2022.
On 1st November 2022, the group completed the sale of its Battery Materials Canada business
for a cash consideration of £12 million. The business was disclosed as a disposal group held for
sale as at 30th September 2022.
Piezo Products
On 31st January 2023, the group completed the sale of its Piezo Products business for a cash
consideration of £18 million. The business was disclosed as a disposal group held for sale as at
30th September 2022.
Continuing operations
Health
(discontinued)
£m
Battery
Materials
UK
£m
Battery
Materials
Canada
£m
Piezo
Products
£m
Total
£m
Proceeds
Cash consideration
Cash and cash equivalents
disposed
Net cash consideration
Disposal costs paid
Net cash inflow
Assets and liabilities disposed
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Non-current liabilities
Lease liabilities
Pension liabilities
Provisions
Net assets disposed
153
(5)
148
(1)
147
105
1
–
42
13
142
60
5
(71)
(1)
(1)
(2)
–
(1)
292
20
–
20
(1)
19
14
–
–
10
–
–
–
–
–
(5)
–
–
–
–
19
12
–
12
(1)
11
1
–
–
–
–
1
7
–
(1)
–
–
–
–
–
8
18
(2)
16
(1)
15
2
–
4
–
–
5
1
2
(1)
–
–
–
(4)
–
9
50
(2)
48
(3)
45
17
–
4
10
–
6
8
2
(2)
(5)
–
–
(4)
–
36
196
196
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
27 Disposals
Health (discontinued operation)
On 1st June 2022, the group completed the sale of its Health business for a gross consideration of
£325 million. This gross consideration is comprised of £150 million cash, a £50 million vendor
loan note (which we have recorded as an other receivable), £75 million in the form of shares
which constitutes a 30% equity interest in the business (which we have equity accounted for as
an investment in associate) and £50 million in contingent consideration (which we have
recognised at a fair value of £nil). After adjusting for working capital and an additional £3 million
cash receipt due to cash in business upon disposal, the net consideration was £272 million. The
business was disclosed as a disposal group held for sale as at 31st March 2022.
Piezo Products
30th September 2022.
On 31st January 2023, the group completed the sale of its Piezo Products business for a cash
consideration of £18 million. The business was disclosed as a disposal group held for sale as at
Battery
Materials
Health
(discontinued)
£m
Continuing operations
Battery
Materials
Canada
£m
Piezo
Products
£m
Total
£m
Battery Materials
31st March 2022.
On 26th May 2022, the group completed the sale of its Battery Materials UK business for a cash
consideration of £20 million. The business was disclosed as a disposal group held for sale as at
Net cash consideration
On 1st November 2022, the group completed the sale of its Battery Materials Canada business
for a cash consideration of £12 million. The business was disclosed as a disposal group held for
Assets and liabilities disposed
sale as at 30th September 2022.
Proceeds
Cash consideration
Cash and cash equivalents
disposed
Disposal costs paid
Net cash inflow
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Non-current liabilities
Lease liabilities
Pension liabilities
Provisions
Net assets disposed
UK
£m
20
–
20
(1)
19
14
–
–
10
–
(5)
–
–
–
–
–
–
–
–
19
153
(5)
148
(1)
147
105
1
–
42
13
142
60
5
(71)
(1)
(1)
(2)
–
(1)
292
12
–
12
(1)
11
1
–
–
–
–
1
7
–
–
–
–
–
–
8
18
(2)
16
(1)
15
2
–
4
–
–
5
1
2
–
–
–
–
9
(4)
50
(2)
48
(3)
45
17
–
4
10
–
6
8
2
(2)
(5)
–
–
(4)
–
36
(1)
(1)
196
27 Disposals continued
Continuing operations
Health
(discontinued)
£m
Battery
Materials
UK
£m
Battery
Materials
Canada
£m
Piezo
Products
£m
Cash consideration
Non-cash consideration
Less: carrying amount of net
assets sold
Less: disposal costs
Cumulative currency translation
loss/(gain) recycled from other
comprehensive income
Profit recognised in the income
statement
153
119
(292)
(1)
32
11
20
–
(19)
(1)
–
–
12
–
(8)
(1)
(2)
1
18
–
(9)
(1)
3
11
Total
£m
50
–
(36)
(3)
1
12
28 Financial risk management
The group’s activities expose it to a variety of financial risks, including credit risk, market risk
and liquidity risk. Market risk includes foreign currency risk, interest rate risk and price risk.
The financial risks are managed by the group, under policies approved by the board. The
financial risk management is carried out by a centralised group treasury function. Group
treasury’s role is to optimise the group’s liquidity, mitigate financial risks and provide treasury
services to the group’s operating businesses. The group uses derivative financial instruments,
including forward currency contracts, interest rate swaps and currency swaps, to manage the
financial risks associated with its underlying business activities and the financing of those
activities. Some derivative financial instruments used to manage financial risk are not
designated as hedges and, therefore, are classified as at fair value through profit or loss. The
group does not undertake any speculative trading activity in financial instruments.
Credit risk
Within certain businesses, the group derives a significant proportion of its revenue from sales
to major customers. Sales to individual customers are large if the value of precious metals is
included in the price. The failure of any such company to honour its debts could materially
impact the group’s results. The group derives significant benefit from trading with its
customers and manages the risk at many levels. Each sector has a credit committee that
regularly monitors its exposure. The Audit Committee receives a report every six months that
details all significant credit limits, amounts due and overdue within the group, and the
relevant actions being taken. At 31st March 2023, trade receivables for the group amounted to
£1,304 million (2022: £1,393 million), excluding £14 million classified as held for sale, of
which £1,077 million (2022: £1,167 million) are in Clean Air which mainly supplies car and
truck manufacturers and component suppliers in the automotive industry. Although Clean Air
has a wide range of customers, the concentrated nature of this industry means that amounts
owed by individual customers can be large and, in the event that one of those customers
Johnson Matthey | Annual Report and Accounts 2023
experiences financial difficulty, there could be a material adverse impact on the group.
Other parts of the group tend to sell to a larger number of customers and amounts owed
tend to be lower. At 31st March 2023, no single outstanding balance exceeded 2% (2022: 2%)
of revenue.
The credit profiles of the group’s customers are obtained from credit rating agencies where
possible and are closely monitored. The scope of these reviews includes amounts overdue and
credit limits. The group’s exposure to credit risk is influenced mainly by the individual
characteristics of each customer. However, risk associated with the industry and country in
which customers operate may also influence the credit risk. The credit quality of customers is
assessed against the appropriate credit ratings, financial strength, trading experience and
market position to define credit limits. Controls and risk mitigants include daily monitoring of
exposures, investing in counterparties with investment grade ratings, restricting the amount
that can be invested with one counterparty and credit-rating mitigation techniques. Generally,
payments are made promptly in the automotive industry and in the other markets in which
the group operates.
A provision matrix is used to calculate lifetime expected credit losses using historical loss rates
based on days past due and a broad range of forward-looking information, including country
and market growth forecasts. This year, expected credit losses on unimpaired trade and
contract receivables remained at £16 million (2022: £16 million) despite the lower trade
receivables balance, reflecting a slightly heightened risk profile due to the volatile
macroeconomic environment.
Trade receivables are specifically impaired when the amount is in dispute, customers are in
financial difficulty or for other reasons which imply there is doubt over the recoverability of the
debt. They are written off when there is no reasonable expectation of recovery, based on an
estimate of the financial position of the counterparty.
Movements in the allowance for credit losses on trade and contract receivables are as follows:
At beginning of year
Charge for year
Utilised
Released
At end of year
Group
2023
£m
37
5
(1)
(11)
30
2022
£m
30
18
(1)
(10)
37
The group’s maximum exposure to default on trade and contract receivables is £1,429 million
(2022: £1,575 million), of which £25 million is classified as held for sale.
The group’s financial assets included in other receivables are all current and not impaired.
197
197
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
28 Financial risk management continued
Credit risk continued
The credit risk on cash and deposits and derivative financial instruments is limited because the
counterparties with significant balances are banks with strong credit ratings. The exposure to
individual banks is monitored frequently against internally-defined limits, together with each
bank’s credit rating and credit default swap prices. At 31st March 2023, the maximum net
exposure with a single bank for cash and deposits was £37 million (2022: £101 million),
whilst the largest mark to market exposure for derivative financial instruments to a single
bank was £11 million (2022: £7 million). The group also uses money market funds to invest
surplus cash thereby further diversifying credit risk and, at 31st March 2023, the group’s
exposure to these funds was £521 million (2022: £137 million). The amounts on deposit at
the year end represent the group’s maximum exposure to credit risk on cash and deposits.
Expected credit losses on cash and cash equivalents are immaterial.
Foreign currency risk
The group operates globally with a significant amount of its profit earned outside the UK. The
main impact of movements in exchange rates on the group’s results arises on translation of
overseas subsidiaries’ profits into sterling. The largest exposure is to the euro and a 5% (5.8
cent (2022: 5.9 cent)) movement in the average exchange rate for the euro against sterling
would have had a £11 million (2022: £9 million) impact on underlying operating profit. The
group is also exposed to the US dollar and a 5% (6.0 cent (2022: 6.8 cent)) movement in the
average exchange rate for the US dollar against sterling would have had a £10 million (2022:
£10 million) impact on underlying operating profit. This exposure is part of the group’s
economic risk of operating globally which is essential to remain competitive in the markets in
which it operates.
The group matches foreign currency assets and liabilities (where these differ to the functional
currency of the relevant subsidiary) to avoid the risk of a material impact on the income
statement resulting from movements in exchange rates. The group does, however, have
foreign exchange exposure on movements through equity related to cash flow and net
investment hedges. A 10% depreciation or appreciation in the US dollar and euro exchange
rates against sterling would increase / (decrease) other reserves as follows:
Cash flow hedges
Net investment hedges
10% depreciation
10% appreciation
2023
£m
5
5
2022
£m
5
20
2023
£m
(8)
(8)
2022
£m
(7)
(25)
For the net investment hedges, these movements would be fully offset in reserves by an
opposite movement on the retranslation of the net assets of the overseas subsidiaries.
Investments in foreign operations
To protect the group’s sterling balance sheet and reduce cash flow risk, the group has financed
most of its investment in the US and Europe by borrowing US dollars and euros, respectively.
Although much of this funding is obtained by directly borrowing the relevant currency, a part
is achieved through currency swaps which can be more efficient and reduce costs.
The group has designated US dollar and euro loans and a cross currency swap as hedges of net
investments in foreign operations as they hedge changes in the value of the subsidiaries' net
assets against movements in exchange rates. The change in the value of the net investment
hedges from movements in foreign currency exchange rates is recognised in equity and is
offset by an equal and opposite movement in the carrying value of the net assets of the
subsidiaries. All critical terms of the hedging instruments and hedged items matched during
the year and, therefore, hedge ineffectiveness was immaterial. The hedge ratio is 1:1.
Year ended 31st March 2023
Carrying value of hedging instruments at 31st March 2023
Change in carrying value of hedging instruments
recognised in equity during the year
Change in fair value of hedged items during the year used
to determine hedge effectiveness
US dollar and
euro loans1
£m
(164)
(8)
8
Cross
currency
swap2
£m
(5)
(2)
2
Total
£m
(169)
(10)
10
1. The designated hedging instruments are $75 million of the 3.97% $120 million Bonds 2027, €17 million of the 2.44% €20 million Bonds
2023, €90 million of the 1.81% €90 million Bonds 2028 and €10 million of the 2.92% €25 million Bonds 2030.
2. The designated hedging instrument are a cross currency swap expiring in 2025 whereby the group pays 2.609% fixed on €77 million and
receives 2.83% fixed on £65 million and a cross current swap expiring in 2029 whereby the group pays 1.712% fixed on €46 million and
receives 2.6723% fixed on £38 million.
Year ended 31st March 2022
Carrying value of hedging instruments at
31st March 2022
Change in carrying value of hedging instruments
recognised in equity during the year
Change in fair value of hedged items during the year
used to determine hedge effectiveness
US dollar and
euro loans1
£m
Cross
currency
swap2
£m
Total
£m
(156)
(2)
(158)
(3)
3
1
(1)
(2)
2
198
198
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
overseas subsidiaries’ profits into sterling. The largest exposure is to the euro and a 5% (5.8
Carrying value of hedging instruments at 31st March 2023
28 Financial risk management continued
Credit risk continued
The credit risk on cash and deposits and derivative financial instruments is limited because the
counterparties with significant balances are banks with strong credit ratings. The exposure to
individual banks is monitored frequently against internally-defined limits, together with each
bank’s credit rating and credit default swap prices. At 31st March 2023, the maximum net
exposure with a single bank for cash and deposits was £37 million (2022: £101 million),
whilst the largest mark to market exposure for derivative financial instruments to a single
bank was £11 million (2022: £7 million). The group also uses money market funds to invest
surplus cash thereby further diversifying credit risk and, at 31st March 2023, the group’s
exposure to these funds was £521 million (2022: £137 million). The amounts on deposit at
the year end represent the group’s maximum exposure to credit risk on cash and deposits.
Expected credit losses on cash and cash equivalents are immaterial.
Foreign currency risk
The group operates globally with a significant amount of its profit earned outside the UK. The
main impact of movements in exchange rates on the group’s results arises on translation of
cent (2022: 5.9 cent)) movement in the average exchange rate for the euro against sterling
would have had a £11 million (2022: £9 million) impact on underlying operating profit. The
group is also exposed to the US dollar and a 5% (6.0 cent (2022: 6.8 cent)) movement in the
average exchange rate for the US dollar against sterling would have had a £10 million (2022:
£10 million) impact on underlying operating profit. This exposure is part of the group’s
economic risk of operating globally which is essential to remain competitive in the markets in
which it operates.
The group matches foreign currency assets and liabilities (where these differ to the functional
currency of the relevant subsidiary) to avoid the risk of a material impact on the income
statement resulting from movements in exchange rates. The group does, however, have
foreign exchange exposure on movements through equity related to cash flow and net
investment hedges. A 10% depreciation or appreciation in the US dollar and euro exchange
rates against sterling would increase / (decrease) other reserves as follows:
Investments in foreign operations
To protect the group’s sterling balance sheet and reduce cash flow risk, the group has financed
most of its investment in the US and Europe by borrowing US dollars and euros, respectively.
Although much of this funding is obtained by directly borrowing the relevant currency, a part
is achieved through currency swaps which can be more efficient and reduce costs.
The group has designated US dollar and euro loans and a cross currency swap as hedges of net
investments in foreign operations as they hedge changes in the value of the subsidiaries' net
assets against movements in exchange rates. The change in the value of the net investment
hedges from movements in foreign currency exchange rates is recognised in equity and is
offset by an equal and opposite movement in the carrying value of the net assets of the
subsidiaries. All critical terms of the hedging instruments and hedged items matched during
the year and, therefore, hedge ineffectiveness was immaterial. The hedge ratio is 1:1.
Year ended 31st March 2023
Change in carrying value of hedging instruments
recognised in equity during the year
Change in fair value of hedged items during the year used
to determine hedge effectiveness
1. The designated hedging instruments are $75 million of the 3.97% $120 million Bonds 2027, €17 million of the 2.44% €20 million Bonds
2023, €90 million of the 1.81% €90 million Bonds 2028 and €10 million of the 2.92% €25 million Bonds 2030.
2. The designated hedging instrument are a cross currency swap expiring in 2025 whereby the group pays 2.609% fixed on €77 million and
receives 2.83% fixed on £65 million and a cross current swap expiring in 2029 whereby the group pays 1.712% fixed on €46 million and
receives 2.6723% fixed on £38 million.
Year ended 31st March 2022
US dollar and
euro loans1
£m
(164)
(8)
8
Cross
currency
swap2
£m
(5)
(2)
2
Total
£m
(169)
(10)
10
US dollar and
euro loans1
£m
Cross
currency
swap2
£m
Total
£m
(156)
(2)
(158)
(3)
3
1
(1)
(2)
2
10% depreciation
10% appreciation
2023
£m
5
5
2022
£m
5
20
2023
£m
(8)
(8)
2022
£m
(7)
(25)
Carrying value of hedging instruments at
31st March 2022
Change in carrying value of hedging instruments
recognised in equity during the year
Change in fair value of hedged items during the year
used to determine hedge effectiveness
Cash flow hedges
Net investment hedges
For the net investment hedges, these movements would be fully offset in reserves by an
opposite movement on the retranslation of the net assets of the overseas subsidiaries.
28 Financial risk management continued
Foreign currency risk continued
Forecast receipts and payments in foreign currencies
The group uses forward foreign exchange contracts to hedge foreign exchange exposures
arising on forecast receipts and payments in foreign currencies. These are designated and
accounted for as cash flow hedges. The group’s policy is to hedge between 50% and 80% of
forecast receipts and payments in foreign currencies over the next 12 months.
For hedges of forecast receipts and payments in foreign currencies, the critical terms of the
hedging instruments match exactly with the terms of the hedged items and, therefore, the
group performs a qualitative assessment of effectiveness. Ineffectiveness may arise if the
timing of the forecast transaction changes from what was originally estimated or if there are
changes in the credit risk of the group or the derivative counterparty. Hedge ineffectiveness
was immaterial during the year. The hedge ratio is 1:1.
Year ended 31st March 2023
Sterling / US
dollar
£m
Sterling / euro
£m
Other
£m
Total
£m
Carrying value of hedging instruments at 31st
March 2023
• assets
• liabilities
Change in carrying value of hedging
instruments recognised in equity
during the year
Change in fair value of hedged items during
the year used to determine hedge
effectiveness
Notional amount1
4
(8)
1
(1)
(10)
1
10
348
(1)
42
6
(4)
–
–
16
11
(13)
(9)
9
–
1. The notional amount is the sterling equivalent of the net currency amount purchased or sold.
Year ended 31st March 2022
Carrying value of hedging instruments at
31st March 2022
• assets
• liabilities
Change in carrying value of hedging
instruments recognised in equity
during the year
Change in fair value of hedged items
during the year used to determine hedge
effectiveness
Notional amount1
Sterling / US
dollar
£m
Sterling / euro
£m
Other
£m
Total
£m
–
(5)
–
–
(8)
16
8
209
(16)
53
5
(4)
(3)
3
11
5
(9)
5
(5)
–
1. The notional amount is the sterling equivalent of the net currency amount purchased or sold.
The weighted average exchange rates on sterling / US dollar and sterling / euro forward
foreign exchange contracts are 1.26 and 0.88 (2022: 1.35 and 0.85), respectively. The
hedged, highly probable forecast transactions denominated in foreign currencies are expected
to occur over the next 12 months.
Foreign currency borrowings
The group has designated two US dollar fixed interest rate to sterling fixed interest rate cross
currency swaps as cash flow hedges. This swap hedges the movement in the cash flows on
$100 million of the 3.14% $130 million bonds 2025 attributable to changes in the US dollar /
sterling exchange rate while the second swap hedges the movement in the cash flows on the
3.00% $50 million bonds 2029 attributable to changes in the US dollar / sterling exchange
rate. The currency swaps have similar critical terms as the hedged items, such as reference
rate, reset dates, payment dates, maturity and notional amounts. As all critical terms matched
during the year, hedge ineffectiveness was immaterial. The hedge ratio is 1:1. The interest
element of the swaps is recognised in the income statement each year.
Carrying value of hedging instruments at 31st March1
Change in carrying value of hedging instruments recognised in equity
during the year
Change in fair value of hedged items during the year used to
determine hedge effectiveness
Cross currency swap
2023
£m
20
9
(9)
2022
£m
11
3
(3)
1. The designated hedging instruments are two cross currency swaps, one expiring in 2025 whereby the group pays 2.83% fixed on £65 million
and receives 3.14% fixed on $100 million and one expiring in 2029 whereby the group pays 2.67% fixed on £38 million and receives 3.00%
fixed on $50 million.
198
Johnson Matthey | Annual Report and Accounts 2023
199
199
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
28 Financial risk management continued
Interest rate risk
The group’s interest rate risk arises from fixed rate borrowings (fair value risk) and floating
rate borrowings (cash flow risk) as well as cash deposits and short term investments. Its policy
is to optimise interest cost and reduce volatility in reported earnings and equity. The group
manages its risk by reviewing the profile of debt regularly and by selectively using interest rate
swaps to maintain borrowings at competitive rates. At 31st March 2023, 67% (2022: 66%) of
the group’s borrowings and related swaps was at fixed rates with an average interest rate of
3.1% (2022: 3.5%). The remaining debt is floating rate. Based on the group’s borrowings and
related swaps at floating rates, after taking into account the effect of the swaps, a 1% change
in all interest rates during the current year would have a £5 million impact on the group’s
profit before tax (2022: £4 million).
The group has designated three (2022: four) fixed rate to floating interest rate swaps as fair
value hedges as they hedge the changes in fair value of bonds attributable to changes in
interest rates. All hedging instruments have maturities in line with the repayment dates of the
hedged bonds and the cash flows of the instruments are consistent. All critical terms of the
hedging instruments and hedged items matched during the year and, therefore, hedge
ineffectiveness was immaterial.
Carrying value of hedging instruments at 31st March1
Amortised cost
Fair value adjustment
Carrying value of hedged items at 31st March1
Change in carrying value of hedging instruments recognised in profit
or loss during the year
Change in fair value of hedged items during the year used to
determine hedge effectiveness
2023
£m
(15)
(147)
17
(130)
2022
£m
(1)
(256)
3
(253)
(14)
(13)
14
13
1. The hedged items in the current year are the 1.40% €77 million Bonds 2025 and 1.81% €90 million Bonds 2028. In the prior year there was
also the 3.26% $150 million Bonds 2022, Interest rate swaps have been contracted with aligned notional amounts and maturities to the
bonds with the effect that the group pays an average floating rate of six-month LIBOR plus 0.64% on the US dollar bonds and six-month
EURIBOR plus 0.94% on the euro bonds.
Price risk
Fluctuations in precious metal prices have an impact on the group’s financial results. Our
policy for all manufacturing businesses is to limit this exposure by hedging against future price
changes where such hedging can be done at acceptable cost. The group enters into forward
precious metal price contracts for the receipt or delivery of precious metal. The group does not
take material price exposures on metal trading. A proportion of the group’s precious metal
inventories are unhedged due to the ongoing risk over security of supply.
Liquidity risk
The group’s funding strategy includes maintaining appropriate levels of working capital,
undrawn committed facilities and access to the capital markets. We regularly review liquidity
levels and sources of cash, and we maintain access to committed credit facilities and debt
capital markets. At 31st March 2023, the group had borrowings under committed bank
facilities of £nil (2022: £nil). The group also has a number of uncommitted facilities and
overdraft lines at its disposal.
The group has a £1 billion revolving credit facility with a maturity date of March 2027 which
includes Environmental, Social and Governance KPIs which provides the group with a nominal
interest saving or cost depending on our performance.
In June 2022 the group drew down on its first three sustainability-linked private placements
(€225 million £35 million and $50 million). The notes have interest rates linked with Johnson
Matthey’s Key Performance Indicator for the reduction of its Scope 1 and 2 greenhouse gas
emissions and are among the first sustainability-linked financing in the market from a UK
corporate issuer.
During the financial year the group also drew down in full and extended the maturity date of
its £407 million sustainable financing agreement through UK Export Finance (UKEF). These
facilities now have maturity dates in March 2028.
Expiring in more than one year
Undrawn committed bank facilities
2023
£m
1,000
1,000
2022
£m
1,403
1,403
200
200
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
28 Financial risk management continued
Liquidity risk continued
The maturity analyses for financial liabilities showing the remaining contractual undiscounted
cash flows, including future interest payments, at current year exchange rates and assuming
floating interest rates remain at the latest fixing rates, are:
At 31st March 2023
Bank overdrafts
Bank and other loans – principal
Bank and other loans – interest payments
Lease liabilities - principal
Lease liabilities - principal - classified as held
for sale
Lease liabilities - interest payments
Financial liabilities in trade and other
payables
Financial liabilities in trade and other
payables classified as held for sale
Total non-derivative financial liabilities
Forward foreign exchange contracts –
payments
Forward foreign exchange contracts –
receipts
Currency swaps – payments
Currency swaps – receipts
Cross currency interest rate swaps -
payments
Cross currency interest rate swaps - receipts
Interest rate swaps – payments
Interest rate swaps – receipts
Total derivative financial liabilities
Within 1
year
£m
1 to 2 years
£m
2 to 5 years
£m
After 5
years
£m
–
542
24
10
6
8
–
Total
£m
13
1,610
237
40
10
14
2,318
–
104
49
9
1
1
2
–
809
112
12
2
3
–
–
166
–
938
–
590
14
4,256
13
155
52
9
1
2
2,316
14
2,562
322
27
(310)
1,026
(1,012)
5
(7)
5
(2)
27
(25)
–
–
5
(7)
5
(2)
3
5
(5)
–
–
139
(154)
78
(73)
(10)
–
354
(340)
–
1,026
–
– (1,012)
81
(81)
81
(80)
1
230
(249)
169
(157)
21
The group’s funding strategy includes maintaining appropriate levels of working capital,
undrawn committed facilities and access to the capital markets. We regularly review liquidity
levels and sources of cash, and we maintain access to committed credit facilities and debt
capital markets. At 31st March 2023, the group had borrowings under committed bank
facilities of £nil (2022: £nil). The group also has a number of uncommitted facilities and
overdraft lines at its disposal.
The group has a £1 billion revolving credit facility with a maturity date of March 2027 which
includes Environmental, Social and Governance KPIs which provides the group with a nominal
interest saving or cost depending on our performance.
In June 2022 the group drew down on its first three sustainability-linked private placements
(€225 million £35 million and $50 million). The notes have interest rates linked with Johnson
Matthey’s Key Performance Indicator for the reduction of its Scope 1 and 2 greenhouse gas
emissions and are among the first sustainability-linked financing in the market from a UK
corporate issuer.
During the financial year the group also drew down in full and extended the maturity date of
its £407 million sustainable financing agreement through UK Export Finance (UKEF). These
facilities now have maturity dates in March 2028.
Expiring in more than one year
Undrawn committed bank facilities
2023
£m
1,000
1,000
2022
£m
1,403
1,403
28 Financial risk management continued
Liquidity risk
Interest rate risk
The group’s interest rate risk arises from fixed rate borrowings (fair value risk) and floating
rate borrowings (cash flow risk) as well as cash deposits and short term investments. Its policy
is to optimise interest cost and reduce volatility in reported earnings and equity. The group
manages its risk by reviewing the profile of debt regularly and by selectively using interest rate
swaps to maintain borrowings at competitive rates. At 31st March 2023, 67% (2022: 66%) of
the group’s borrowings and related swaps was at fixed rates with an average interest rate of
3.1% (2022: 3.5%). The remaining debt is floating rate. Based on the group’s borrowings and
related swaps at floating rates, after taking into account the effect of the swaps, a 1% change
in all interest rates during the current year would have a £5 million impact on the group’s
profit before tax (2022: £4 million).
The group has designated three (2022: four) fixed rate to floating interest rate swaps as fair
value hedges as they hedge the changes in fair value of bonds attributable to changes in
interest rates. All hedging instruments have maturities in line with the repayment dates of the
hedged bonds and the cash flows of the instruments are consistent. All critical terms of the
hedging instruments and hedged items matched during the year and, therefore, hedge
ineffectiveness was immaterial.
Carrying value of hedging instruments at 31st March1
Amortised cost
Fair value adjustment
Carrying value of hedged items at 31st March1
Change in carrying value of hedging instruments recognised in profit
or loss during the year
Change in fair value of hedged items during the year used to
determine hedge effectiveness
2023
£m
(15)
(147)
17
(130)
2022
£m
(1)
(256)
3
(253)
(14)
(13)
14
13
1. The hedged items in the current year are the 1.40% €77 million Bonds 2025 and 1.81% €90 million Bonds 2028. In the prior year there was
also the 3.26% $150 million Bonds 2022, Interest rate swaps have been contracted with aligned notional amounts and maturities to the
bonds with the effect that the group pays an average floating rate of six-month LIBOR plus 0.64% on the US dollar bonds and six-month
EURIBOR plus 0.94% on the euro bonds.
Price risk
Fluctuations in precious metal prices have an impact on the group’s financial results. Our
policy for all manufacturing businesses is to limit this exposure by hedging against future price
changes where such hedging can be done at acceptable cost. The group enters into forward
precious metal price contracts for the receipt or delivery of precious metal. The group does not
take material price exposures on metal trading. A proportion of the group’s precious metal
inventories are unhedged due to the ongoing risk over security of supply.
At 31st March 2022
Bank overdrafts
Bank overdrafts classified as held for sale
Bank and other loans – principal
Bank and other loans – interest payments
Lease liabilities - principal
Lease liabilities - principal - classified as held
for sale
Lease liabilities - interest payments
Financial liabilities in trade and other
payables
Financial liabilities in trade and other
payables classified as held for sale
Total non-derivative financial liabilities
Forward foreign exchange contracts –
payments
Forward foreign exchange contracts –
receipts
Currency swaps – payments
Currency swaps – receipts
Cross currency interest rate swaps - payments
Cross currency interest rate swaps - receipts
Interest rate swaps – payments
Interest rate swaps – receipts
Total derivative financial liabilities
Within 1
year
£m
1 to 2 years
£m
2 to 5 years
£m
After 5
years
£m
–
–
348
13
19
4
9
–
Total
£m
37
8
1,166
114
50
9
16
2,292
–
–
142
25
8
2
2
2
–
–
412
47
13
1
3
–
37
8
264
29
10
2
2
2,290
23
2,665
–
181
–
476
–
393
23
3,715
473
45
26
–
544
(466)
2,050
(2,053)
2
(2)
1
(2)
3
(43)
–
–
65
(65)
1
(2)
1
(25)
–
–
–
–
67
(71)
(3)
(534)
–
–
2,050
– (2,053)
67
–
(67)
–
146
77
(154)
(79)
(1)
(2)
200
Johnson Matthey | Annual Report and Accounts 2023
201
201
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
28 Financial risk management continued
Offsetting financial assets and liabilities
The group offsets financial assets and liabilities when it currently has a legally enforceable
right to offset the recognised amounts and it intends to either settle on a net basis or realise
the asset and settle the liability simultaneously. The following financial assets and liabilities are
subject to offsetting or enforceable master netting arrangements:
At 31st March 2023
Amounts
set off
£m
Net amounts
in balance
sheet
£m
Amounts
not set off1
£m
20
47
(27)
(5)
(11)
11
Net
£m
15
36
(16)
–
–
–
–
Non-current interest rate swaps
Other financial assets – current
Other financial liabilities – current
Non-current borrowings and
related swaps
At 31st March 2022
Non-current interest rate swaps
Cash and cash equivalents
Other financial assets – current
Cash and cash equivalents – bank
overdrafts
Other financial liabilities – current
Non-current borrowings and
related swaps
Gross
financial
assets /
(liabilities)
£m
20
47
(27)
(1,460)
Gross
financial
assets /
(liabilities)
£m
11
392
27
(38)
(44)
(899)
29 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.
(1,460)
5
(1,455)
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.
Amounts
set off
£m
Net amounts
in balance
sheet
£m
Amounts
not set off1
£m
–
(1)
–
1
–
–
11
391
27
(37)
(44)
(899)
(3)
–
(24)
–
24
3
Net
£m
8
391
3
(37)
(20)
(896)
1. Agreements with derivative counterparties are based on an ISDA Master Agreement. Under these arrangements, whilst the group does not
have a legally enforceable right of set off, where certain credit events occur, such as default, the net position receivable from or payable to a
single counterparty in the same currency would be taken as owing and all the relevant arrangements terminated.
202
202
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
28 Financial risk management continued
Offsetting financial assets and liabilities
29 Fair values
Fair value hierarchy
The group offsets financial assets and liabilities when it currently has a legally enforceable
right to offset the recognised amounts and it intends to either settle on a net basis or realise
the asset and settle the liability simultaneously. The following financial assets and liabilities are
subject to offsetting or enforceable master netting arrangements:
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).
At 31st March 2023
Fair value of financial instruments
Net amounts
in balance
Amounts
not set off1
Amounts
set off
£m
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.
Non-current interest rate swaps
Other financial assets – current
Other financial liabilities – current
(27)
Non-current borrowings and
related swaps
At 31st March 2022
Non-current interest rate swaps
Cash and cash equivalents
Other financial assets – current
Cash and cash equivalents – bank
overdrafts
Other financial liabilities – current
Non-current borrowings and
related swaps
(1,460)
(1,460)
5
(1,455)
Gross
financial
assets /
(liabilities)
£m
20
47
Gross
financial
assets /
(liabilities)
£m
11
392
27
(38)
(44)
(899)
sheet
£m
20
47
(27)
sheet
£m
11
391
27
(37)
(44)
Net
£m
15
36
(16)
Net
£m
391
8
3
(37)
(20)
£m
(5)
(11)
11
£m
(3)
–
(24)
–
24
3
Net amounts
in balance
Amounts
not set off1
Amounts
set off
£m
(1)
–
–
–
–
–
–
1
–
–
1. Agreements with derivative counterparties are based on an ISDA Master Agreement. Under these arrangements, whilst the group does not
have a legally enforceable right of set off, where certain credit events occur, such as default, the net position receivable from or payable to a
single counterparty in the same currency would be taken as owing and all the relevant arrangements terminated.
(899)
(896)
29 Fair values continued
Financial instruments measured at fair value
Non-current
Investments at fair value through other comprehensive income1
Interest rate swaps – assets
Other financial assets2
Interest rate swaps – liabilities
Borrowings and related swaps
Other financial liabilities2
Current
Trade receivables3
Other receivables4
Cash and cash equivalents - money market funds
Other financial assets2
Other financial liabilities2
Financial instruments not measured at fair value
Non-current
Borrowings and related swaps
Lease liabilities
Trade and other receivables
Other payables
Current
Amounts receivable under precious metal sale and repurchase agreements
Amounts payable under precious metal sale and repurchase agreements
Cash and cash equivalents - cash and deposits
Cash and cash equivalents - bank overdrafts
Borrowings and related swaps
Lease liabilities
Trade and other receivables
Trade and other payables
2023
£m
2022
£m
Fair value
hierarchy
Level
Note
49
20
48
(15)
(5)
–
329
21
521
47
(27)
(1,455)
(31)
57
(2)
222
(838)
129
(13)
(155)
(9)
1,075
(1,478)
45
12
–
(2)
(2)
(12)
492
44
137
27
(44)
(897)
(40)
–
(2)
114
(793)
254
(37)
(265)
(10)
972
(1,497)
1
2
2
2
2
2
2
2
2
2
2
–
–
–
–
–
–
–
–
–
–
-
-
–
–
18
–
20
18
17
17
–
18
18
20
12
17
19
17
19
–
–
20
12
17
19
202
Johnson Matthey | Annual Report and Accounts 2023
203
203
1. Investments at fair value through other comprehensive income are quoted bonds purchased to fund pension deficits (£36 million) and investments held at fair value through other comprehensive income (£13 million).
2. Includes forward foreign exchange contracts, forward precious metal price contracts and currency swaps.
3. 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.
4. Other receivables with cash flows that do not represent solely the payment of principal and interest.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
The fair value of financial instruments, excluding accrued interest, is approximately equal to book value except for:
US Dollar Bonds 2023, 2025, 2027, 2028, 2029 and 2030
Euro Bonds 2023, 2025, 2028, 2030 and 2032
Sterling Bonds 2024, 2025 and 2029
KfW US Dollar Loan 2024
2023
Carrying
amount
£m
(648)
(368)
(145)
(40)
Fair
value
£m
(618)
(340)
(137)
(39)
2022
Carrying
amount
£m
(688)
(176)
(110)
(38)
Fair
value
£m
(662)
(179)
(107)
(36)
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.
30 Share-based payments
The total expense recognised during the year in respect of equity-settled share-based payments was £18 million (2022: £15 million). The expense recognised in respect of equity-settled share-
based payments for continuing operations was £18 million (2022: £13 million), and £nil (2022: £2 million) for discontinued operations.
The group currently operates various share-based payment schemes; a Performance share plan (PSP), a Restricted share plan (RSP), a Long-term incentive plan (LTIP), a Deferred bonus scheme
and a Share Incentive Plan (SIP). Further details of the directors’ remuneration under share-based payment plans are given in the Remuneration Report.
PSP
From 2017, shares are awarded to certain of the group’s executive directors and senior managers under the PSP based on a percentage of salary and are subject to performance targets over a three-
year period. The performance targets are based on underlying EPS growth, and Total Shareholder Return.
Awards to the executive directors are also subject to a deferred release whereby a third is released on the third anniversary of the award date and the remaining vested shares are released in equal
instalments on the fourth and fifth anniversaries of the award date. The Remuneration Committee is entitled to claw back the awards to the executive directors in cases of misstatement or
misconduct.
RSP
From 2017, shares are awarded to certain of the group’s executive directors and senior managers under the RSP based on a percentage of salary. Awards under the RSP are not subject to
performance targets. The shares are subject only to the condition that the employee remains employed by the group on the vesting date (three years after the award date).
LTIP
Prior to 2017, shares were awarded to approximately 1,300 of the group’s executive directors, senior managers and middle managers under the LTIP based on a percentage of salary and were
subject to performance targets over a three-year period.
Awards to the executive directors are subject to a deferred release whereby a third is released on the third anniversary of the award date and the remaining vested shares are released in equal instalments
on the fourth and fifth anniversaries of the award date. The Remuneration Committee is entitled to claw back the awards to the executive directors in cases of misstatement or misconduct.
All outstanding awards on this scheme were released in August 2021.
Deferred bonus
A proportion of the bonus payable to executive directors and senior managers is awarded as shares and deferred for three years. The Remuneration Committee is entitled to claw back the deferred
element in cases of misstatement or misconduct or other relevant reason as determined by it.
204
204
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
The fair value of financial instruments, excluding accrued interest, is approximately equal to book value except for:
2023
Carrying
amount
£m
(648)
(368)
(145)
(40)
Fair
value
£m
(618)
(340)
(137)
(39)
2022
Carrying
amount
£m
(688)
(176)
(110)
(38)
Fair
value
£m
(662)
(179)
(107)
(36)
US Dollar Bonds 2023, 2025, 2027, 2028, 2029 and 2030
Euro Bonds 2023, 2025, 2028, 2030 and 2032
Sterling Bonds 2024, 2025 and 2029
KfW US Dollar Loan 2024
30 Share-based payments
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.
The total expense recognised during the year in respect of equity-settled share-based payments was £18 million (2022: £15 million). The expense recognised in respect of equity-settled share-
based payments for continuing operations was £18 million (2022: £13 million), and £nil (2022: £2 million) for discontinued operations.
The group currently operates various share-based payment schemes; a Performance share plan (PSP), a Restricted share plan (RSP), a Long-term incentive plan (LTIP), a Deferred bonus scheme
and a Share Incentive Plan (SIP). Further details of the directors’ remuneration under share-based payment plans are given in the Remuneration Report.
From 2017, shares are awarded to certain of the group’s executive directors and senior managers under the PSP based on a percentage of salary and are subject to performance targets over a three-
year period. The performance targets are based on underlying EPS growth, and Total Shareholder Return.
Awards to the executive directors are also subject to a deferred release whereby a third is released on the third anniversary of the award date and the remaining vested shares are released in equal
instalments on the fourth and fifth anniversaries of the award date. The Remuneration Committee is entitled to claw back the awards to the executive directors in cases of misstatement or
From 2017, shares are awarded to certain of the group’s executive directors and senior managers under the RSP based on a percentage of salary. Awards under the RSP are not subject to
performance targets. The shares are subject only to the condition that the employee remains employed by the group on the vesting date (three years after the award date).
Prior to 2017, shares were awarded to approximately 1,300 of the group’s executive directors, senior managers and middle managers under the LTIP based on a percentage of salary and were
subject to performance targets over a three-year period.
30 Share-based payments continued
All employee share incentive plan (SIP) – UK and overseas
Under the SIP, all employees with at least one year of service with the group and who are employed by a participating group company are entitled to contribute up to 2.5% of base pay each month,
subject to a £125 per month limit. The SIP trustees buy shares (partnership shares) at market value each month with the employees’ contributions. For each partnership share purchased, the group
purchases two shares (matching shares) which are awarded to the employee.
In the UK SIP, if the employee sells or transfers partnership shares within three years of the date of award, the linked matching shares are forfeited.
In the overseas SIP, partnership shares and matching shares are subject to a three-year holding period and cannot be sold or transferred during that time.
During the year, 311,260 (2022: 287,320) matching shares under the SIP were awarded to employees. These are nil cost awards on which performance conditions are substantially completed at
the date of grant and, consequently, the fair value of these awards is based on the market value of the shares at that date. Activity in the year in relation to these share plans is shown below:
Outstanding at the start of the year
Awarded during the year
Forfeited during the year
Released during the year
Outstanding at the end of the year
Fair value of shares awarded (pence)
Share price at the date of award (pence)
Dividend rate
Year ended 31st March 2023
Year ended 31st March 2022
PSP
RSP
LTIP
Deferred Bonus
PSP
RSP
LTIP
Deferred Bonus
1,434,911
798,488
(243,093)
(261,372)
1,728,934
1,258,698
320,907
(130,601)
(452,814)
996,190
–
–
–
–
–
149,136
102,961
–
(40,787)
211,310
1,267,198
588,027
(420,314)
–
1,434,911
680,364
761,954
(95,172)
(88,448)
1,258,698
23,808
–
–
(23,808)
–
113,084
75,964
–
(39,912)
149,136
Year ended 31st March 2023
Year ended 31st March 2022
PSP
RSP
Exceptional RSP1
Deferred Bonus
PSP
Exceptional PSP
RSP
Exceptional RSP
Deferred Bonus
1,916.8
2,135.0
3.61%
1,916.8
2,135.0
3.61%
2,059.6
2,135.0
3.61%
1,849.1
2,135.0
3.61%
2,767.7
2,970.2
2.36%
1,652.5
1,813.5
3.86%
2,767.7
2,970.2
2.36%
1,839.7
1,962.5
3.92%
2,703.4
2,970.2
2.36%
1. The group awarded an exceptional RSP scheme on 17th December 2021, and an exceptional PSP scheme on 1st March 2022 all other schemes have grant dates on 1st August each year.
The fair value of shares awarded was calculated using a modified Black Scholes model based on the share price at the date of award adjusted for the present value of the expected dividends that will
not be received at an expected dividend rate.
At 31st March 2023, the weighted average remaining contracted life of the awarded PSP shares is 1.4 years (2022: 1.2 years) and 1.0 years (2022: 1.4 years) for the awarded RSP shares.
Awards to the executive directors are subject to a deferred release whereby a third is released on the third anniversary of the award date and the remaining vested shares are released in equal instalments
on the fourth and fifth anniversaries of the award date. The Remuneration Committee is entitled to claw back the awards to the executive directors in cases of misstatement or misconduct.
31 Commitments
All outstanding awards on this scheme were released in August 2021.
Deferred bonus
A proportion of the bonus payable to executive directors and senior managers is awarded as shares and deferred for three years. The Remuneration Committee is entitled to claw back the deferred
element in cases of misstatement or misconduct or other relevant reason as determined by it.
Capital commitments - future capital expenditure contracted but not provided
Property, plant and equipment
Other intangible assets
At 31st March 2023, precious metal leases were £138 million (31st March 2022: £140 million) at year end prices.
Group
Parent company
2023
£m
106
25
2022
£m
68
21
2023
£m
32
25
2022
£m
23
11
Johnson Matthey | Annual Report and Accounts 2023
205
205
PSP
misconduct.
RSP
LTIP
204
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
32 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 audits1. 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.
Following the sale of its Health business in May 2022, the group has been engaged in correspondence with the purchaser of the Health business, Veranova Bidco LP regarding certain warranties in
the sale and purchase agreement (the “SPA”) dated 16th December 2021. The purchaser has issued a claim against the group entities in connection with: i) certain alleged representations said to
have been made during the course of the negotiation of the SPA; and, ii) certain warranties given in the SPA at the time of signing. Having reviewed the claim with its advisers, the group is of the
opinion that it has a defensible position in respect of these allegations and if required, it will vigorously defend its position. The outcome of any legal proceedings relating to this matter is not
certain, nor is the group able to make a reliable estimate of the possible financial impact at this stage, if any.
1. A previously disclosed contingent liability relating to failures in certain engine systems for which the group supplied a particular coated substrate as a component for that customer’s emissions after-treatment systems was settled on mutually acceptable terms with no admission of fault, see note 4.
33 Transactions with related parties
The group has a related party relationship with its associate, its post-employment benefit plans (note 24) and its key management personnel (below). Transactions between the Company and its
subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
During the year the group recharged transition related costs of £8 million (2022: £nil) to related parties. The amounts owed by related parties were £3 million at 31st March 2023 (31st March 2022: £nil).
The key management of the group and parent company consist of the Board of Directors and the members of the Group Leadership Team (GLT). During the year ended 31st March 2023, the GLT
had an average of 12 members (2022: 9 members). The only transactions with any key management personnel was compensation charged in the year which was:
Short term employee benefits
Share-based payments
Termination benefits
Non-executive directors' fees and benefits
Total compensation of key management personnel
There were no balances outstanding as at 31st March 2023 (31st March 2022: £nil). Information on directors’ remuneration is given in the Remuneration Report.
Guarantees of subsidiaries’ liabilities are disclosed in note 47.
2023
£m
10
1
–
1
12
2022
£m
7
2
1
1
11
206
206
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
32 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 audits1. 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.
Following the sale of its Health business in May 2022, the group has been engaged in correspondence with the purchaser of the Health business, Veranova Bidco LP regarding certain warranties in
the sale and purchase agreement (the “SPA”) dated 16th December 2021. The purchaser has issued a claim against the group entities in connection with: i) certain alleged representations said to
have been made during the course of the negotiation of the SPA; and, ii) certain warranties given in the SPA at the time of signing. Having reviewed the claim with its advisers, the group is of the
opinion that it has a defensible position in respect of these allegations and if required, it will vigorously defend its position. The outcome of any legal proceedings relating to this matter is not
certain, nor is the group able to make a reliable estimate of the possible financial impact at this stage, if any.
1. A previously disclosed contingent liability relating to failures in certain engine systems for which the group supplied a particular coated substrate as a component for that customer’s emissions after-treatment systems was settled on mutually acceptable terms with no admission of fault, see note 4.
33 Transactions with related parties
The group has a related party relationship with its associate, its post-employment benefit plans (note 24) and its key management personnel (below). Transactions between the Company and its
subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
During the year the group recharged transition related costs of £8 million (2022: £nil) to related parties. The amounts owed by related parties were £3 million at 31st March 2023 (31st March 2022: £nil).
The key management of the group and parent company consist of the Board of Directors and the members of the Group Leadership Team (GLT). During the year ended 31st March 2023, the GLT
had an average of 12 members (2022: 9 members). The only transactions with any key management personnel was compensation charged in the year which was:
Short term employee benefits
Share-based payments
Termination benefits
Non-executive directors' fees and benefits
Total compensation of key management personnel
There were no balances outstanding as at 31st March 2023 (31st March 2022: £nil). Information on directors’ remuneration is given in the Remuneration Report.
Guarantees of subsidiaries’ liabilities are disclosed in note 47.
2023
£m
10
1
–
1
12
2022
£m
7
2
1
1
11
34 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.
All non-GAAP measures are on a continuing operations basis.
Definitions
Measure
Sales1
Definition
Revenue excluding sales of precious metals to customers and the
precious metal content of products sold to customers.
Underlying operating profit2
Operating profit excluding non-underlying items.
Underlying operating profit margin1, 2
Underlying operating profit divided by sales.
Underlying profit before tax2
Underlying profit for the year2
Underlying earnings per share1, 2
Return on invested capital (ROIC)1
Profit before tax excluding non-underlying items.
Profit for the year excluding non-underlying items and related tax
effects.
Underlying profit for the year divided by the weighted average
number of shares in issue.
Annualised underlying operating profit divided by the 12 month
average capital employed (net debt plus equity), excluding
average post tax pension net assets.
Average working capital days (excluding precious metals)1 Monthly average of non-precious metal related inventories, trade
Free cash flow
Net debt (including post tax pension deficits) to underlying
EBITDA
and other receivables and trade and other payables (including
any classified as held for sale) divided by sales for the last three
months multiplied by 90 days.
Net cash flow from operating activities after net interest paid, net
purchases of non-current assets and investments, proceeds from
disposal of businesses, dividends received from joint ventures and
associates and the principal element of lease payments.
Net debt, including post tax pension deficits and quoted bonds
purchased to fund the UK pension (excluded when the UK
pension plan is in surplus) divided by underlying EBITDA for the
same period.
Purpose
Provides a better measure of the growth of the group as revenue
can be heavily 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.
Provides a measure of operating profitability that is comparable
over time.
Provides a measure of how we convert our sales into underlying
operating profit and the efficiency of our business.
Provides a measure of profitability that is comparable over time.
Provides a measure of profitability that is comparable over time.
Our principal measure used to assess the overall profitability of
the group.
Provides a measure of the group’s efficiency in allocating the
capital under its control to profitable investments.
Provides a measure of efficiency in the business with lower days
driving higher returns and a healthier liquidity position for the
group.
Provides a measure of the cash the group generates through its
operations, less capital expenditure.
Provides a measure of the group’s ability to repay its debt. The
group has a long-term target of net debt (including post tax
pension deficits) to underlying EBITDA of between 1.5 and 2.0
times, although 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, share of profits or losses from non-strategic equity
investments 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.
206
Johnson Matthey | Annual Report and Accounts 2023
207
207
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
34 Non-GAAP measures continued
Underlying profit measures exclude the following non-underlying items which are shown separately on the face of the income statement:
• Profit on disposal of businesses, The group recognised £12 million profit on the disposal of businesses (2022: £106 million), see note 27.
• Amortisation of acquired intangibles, Amortisation and impairment of intangible assets which arose on the acquisition of businesses totalled £5 million (2022: £6 million).
• Gains and losses on significant legal proceedings, The group recognised a loss on significant legal proceedings of £25 million (2022: £42 million gain).
• Major impairment and restructuring charges, The group recognised £41 million in major impairment and restructuring charges (2022: £440 million), see note 6.
• Share of losses of associates, The group recognised £1 million for its share of losses of associates (2022: £nil), see note 15.
Reconciliations to GAAP measures
Sales
Revenue (note 3)
Less: sales of precious metals to customers (note 3)
Sales
Underlying profit measures
Year ended 31st March 2023
Underlying
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Share of losses of associates
Reported
Year ended 31st March 2022
Underlying
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Reported
2023
£m
14,933
(10,732)
4,201
2022
£m
16,025
(12,247)
3,778
Operating profit
£m
Profit before tax
£m
Tax expense
£m
Profit for the year
£m
465
12
(5)
(25)
(41)
–
406
404
12
(5)
(25)
(41)
(1)
344
(78)
(1)
1
5
(7)
–
(80)
326
11
(4)
(20)
(48)
(1)
264
Operating profit
£m
Profit before tax
£m
Tax expense
£m
Profit for the year
£m
553
106
(6)
42
(440)
255
493
106
(6)
42
(440)
195
(86)
(4)
1
(6)
16
(79)
407
102
(5)
36
(424)
116
208
208
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
2023
2022
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
34 Non-GAAP measures continued
Underlying earnings per share
Underlying profit for the year (£ million)
Weighted average number of shares in issue (number)
Underlying earnings per share (pence)
Return on invested capital (ROIC) - unaudited
Underlying operating profit
Average net debt
Average equity
Average capital employed
Less: Average pension net assets
Less: Average related deferred taxation
Average capital employed (excluding post tax pension net
assets)
ROIC (excluding post tax pension net assets)
ROIC
34 Non-GAAP measures continued
Underlying profit measures exclude the following non-underlying items which are shown separately on the face of the income statement:
• Profit on disposal of businesses, The group recognised £12 million profit on the disposal of businesses (2022: £106 million), see note 27.
• Amortisation of acquired intangibles, Amortisation and impairment of intangible assets which arose on the acquisition of businesses totalled £5 million (2022: £6 million).
• Gains and losses on significant legal proceedings, The group recognised a loss on significant legal proceedings of £25 million (2022: £42 million gain).
• Major impairment and restructuring charges, The group recognised £41 million in major impairment and restructuring charges (2022: £440 million), see note 6.
• Share of losses of associates, The group recognised £1 million for its share of losses of associates (2022: £nil), see note 15.
Reconciliations to GAAP measures
Sales
Sales
Revenue (note 3)
Less: sales of precious metals to customers (note 3)
Underlying profit measures
Year ended 31st March 2023
Underlying
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Share of losses of associates
Reported
Year ended 31st March 2022
Underlying
Profit on disposal of businesses
Amortisation of acquired intangibles
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Reported
Operating profit
Profit before tax
Tax expense
Profit for the year
2023
£m
14,933
(10,732)
4,201
2022
£m
16,025
(12,247)
3,778
£m
(78)
(1)
1
5
–
(7)
(80)
£m
(86)
(4)
1
(6)
16
(79)
£m
326
11
(4)
(20)
(48)
(1)
264
£m
407
102
(5)
36
(424)
116
£m
465
12
(5)
(25)
(41)
–
406
£m
553
106
(6)
42
(440)
255
£m
404
12
(5)
(25)
(41)
(1)
344
£m
493
106
(6)
42
(440)
195
Operating profit
Profit before tax
Tax expense
Profit for the year
Average working capital days (excluding precious metals) - unaudited
Inventories
Trade and other receivables
Trade and other payables
Working capital balances classified as held for sale
Total working capital
Less: Precious metal working capital
Working capital (excluding precious metals)
Average working capital days (excluding precious metals)
2023
£m
1,702
1,882
(2,497)
1,087
22
1,109
(622)
487
42
2022
£m
1,549
1,796
(2,563)
782
–
782
(562)
220
36
208
Johnson Matthey | Annual Report and Accounts 2023
209
209
Free cash flow from continuing operations
Net cash inflow from operating activities
Interest received
Interest paid
Purchases of property, plant and equipment
Purchases of intangible assets
Purchases of investments held at fair value through other
comprehensive income
Government grant income
Net proceeds from sale of businesses
Proceeds from sale of non-current assets
Proceeds from sale of investment in joint ventures
Principal element of lease payments
Less: Free cash (inflow) / outflow from discontinued
operations
Free cash flow
2023
£m
291
28
(94)
(253)
(63)
(17)
7
187
8
2
(14)
(8)
74
2022
£m
605
32
(111)
(358)
(95)
–
–
160
1
–
(14)
1
221
2023
£m
465
1,267
2,524
3,791
(312)
84
3,563
13.1%
12.3%
2022
£m
553
877
2,467
3,344
(221)
48
3,171
17.4%
16.5%
407
183,012,301 191,568,756
213.2
178.6
326
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
34 Non-GAAP measures continued
Net debt (including post tax pension deficits) to underlying EBITDA
Cash and deposits
Money market funds
Bank overdrafts
Bank overdrafts transferred to liabilities classified as held for sale
Cash and cash equivalents
Less: Cash and cash equivalents - bank overdrafts from discontinued
operations
Cash and cash equivalents from continuing operations
Interest rate swaps - non-current assets
Interest rate swaps – non-current liabilities
Borrowings and related swaps - current
Borrowings and related swaps - non-current
Lease liabilities - current
Lease liabilities - non-current
Lease liabilities - current - transferred to liabilities classified as held
for sale
Lease liabilities - non-current - transferred to liabilities classified as
held for sale
Less: Lease liabilities relating to discontinued operations
Net debt
Increase / (decrease) in cash and cash equivalents
Less: (Increase) / decrease in cash and cash equivalents from
discontinued operations
Less: (Increase) / decrease in borrowings
Less: Principal element of lease payments
Less: Principal element of lease payments from
discontinued operations
Increase in net debt resulting from cash flows
2023
£m
129
521
(13)
–
637
–
637
20
(15)
(155)
(1,460)
(9)
(31)
2022
£m
254
137
(37)
(8)
346
8
354
12
(2)
(265)
(899)
(10)
(40)
(1)
(2)
(9)
–
(1,023)
287
(8)
(391)
14
–
(98)
(7)
3
(856)
(205)
3
131
14
(1)
(58)
New leases, remeasurements and modifications
Less: New leases, remeasurements and modifications from
discontinued operations
Exchange differences on net debt
Other non-cash movements
Movement in net debt
Net debt at beginning of year
Net debt at end of year
Net debt
Add: Pension deficits
Add: Related deferred tax
Net debt (including post tax pension deficits)
Underlying operating profit
Add back: Depreciation and amortisation excluding amortisation of
acquired intangibles
Underlying EBITDA
Net debt (including post tax pension deficits) to underlying EBITDA
Underlying EBITDA
Depreciation and amortisation
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
Profit on disposal of businesses
Finance costs
Investment income
Share of losses of associates
Income tax expense
Profit for the year from continuing operations
2023
£m
(13)
–
(53)
(3)
(167)
(856)
(1,023)
(1,023)
(21)
2
(1,042)
465
182
647
1.6
2023
£m
647
(187)
(25)
(41)
12
(110)
49
(1)
(80)
264
2022
£m
(9)
3
(24)
2
(86)
(770)
(856)
(856)
(29)
4
(881)
553
171
724
1.2
2022
£m
724
(177)
42
(440)
106
(101)
41
–
(79)
116
35 Events after the balance sheet date
On 3rd May 2023, the group agreed to sell its Diagnostic Services business to Sullivan Street
Partners and Souter Investments.
210
210
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
34 Non-GAAP measures continued
Net debt (including post tax pension deficits) to underlying EBITDA
Cash and deposits
Money market funds
Bank overdrafts
Cash and cash equivalents
operations
Bank overdrafts transferred to liabilities classified as held for sale
Less: Cash and cash equivalents - bank overdrafts from discontinued
Cash and cash equivalents from continuing operations
Interest rate swaps - non-current assets
Interest rate swaps – non-current liabilities
Borrowings and related swaps - current
Borrowings and related swaps - non-current
Lease liabilities - current
Lease liabilities - non-current
Lease liabilities - non-current - transferred to liabilities classified as
for sale
held for sale
Net debt
discontinued operations
Less: (Increase) / decrease in borrowings
Less: Principal element of lease payments
Less: Principal element of lease payments from
discontinued operations
Increase in net debt resulting from cash flows
2023
£m
129
521
(13)
637
–
–
637
20
(15)
(155)
(1,460)
(9)
(31)
(1)
(9)
–
(8)
(391)
14
–
(98)
2022
£m
254
137
(37)
(8)
346
8
354
12
(2)
(265)
(899)
(10)
(40)
(2)
(7)
3
3
131
14
(1)
(58)
Parent Company Statement of Financial Position
as at 31st March 2023
New leases, remeasurements and modifications
Less: New leases, remeasurements and modifications from
discontinued operations
Exchange differences on net debt
Other non-cash movements
Movement in net debt
Net debt at beginning of year
Net debt at end of year
Net debt
Add: Pension deficits
Add: Related deferred tax
Net debt (including post tax pension deficits)
Underlying operating profit
Add back: Depreciation and amortisation excluding amortisation of
acquired intangibles
Underlying EBITDA
Profit on disposal of businesses
Finance costs
Investment income
Share of losses of associates
Income tax expense
Profit for the year from continuing operations
35 Events after the balance sheet date
On 3rd May 2023, the group agreed to sell its Diagnostic Services business to Sullivan Street
Partners and Souter Investments.
2023
£m
(13)
–
(53)
(3)
(167)
(856)
(1,023)
(1,023)
(21)
2
(1,042)
465
182
647
1.6
2023
£m
647
(187)
(25)
(41)
12
(110)
49
(1)
(80)
264
2022
£m
(9)
(24)
3
2
(86)
(770)
(856)
(856)
(29)
4
(881)
553
171
724
1.2
2022
£m
724
(177)
42
(440)
106
(101)
41
–
(79)
116
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Investments in subsidiaries
Other receivables
Interest rate swaps
Other financial assets
Deferred tax assets
Post-employment benefit net assets
Total non-current assets
Current assets
Inventories
Taxation recoverable
Trade and other receivables
Cash and cash equivalents
Other financial assets
Assets classified as held for sale
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Cash and cash equivalents - bank overdrafts
Borrowings and related swaps
Other financial liabilities
Provisions
Liabilities classified as held for sale
Total current liabilities
Notes
2023
£m
2022
£m
37
38
39
40
41
42
43
44
41
42
45
46
42
47
350
5
113
247
2,074
1,040
20
48
–
196
4,093
821
1
2,012
540
51
–
3,425
7,518
322
7
113
233
1,921
1,598
12
–
2
351
4,559
566
31
1,941
200
27
17
2,782
7,341
(3,747)
(2)
(3)
(151)
(33)
(91)
–
(4,027)
(4,258)
(3)
(34)
(255)
(46)
(162)
(5)
(4,763)
Non-current liabilities
Borrowings and related swaps
Lease liabilities
Deferred tax liabilities
Interest rate swaps
Employee benefit obligations
Other financial liabilities
Provisions
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Treasury shares
Other reserves
Retained earnings1
Total equity
1. The parent company's profit for the year is £314 million (2022: £334 million).
Notes
46
43
42
47
45
48
48
2023
£m
2022
£m
(1,460)
(4)
(4)
(15)
(7)
–
(12)
(489)
(1,991)
(6,018)
1,500
215
148
(19)
71
1,085
1,500
(899)
(7)
–
(2)
(27)
(12)
(16)
(268)
(1,231)
(5,994)
1,347
218
148
(24)
(19)
1,024
1,347
Lease liabilities - current - transferred to liabilities classified as held
Net debt (including post tax pension deficits) to underlying EBITDA
Less: Lease liabilities relating to discontinued operations
Increase / (decrease) in cash and cash equivalents
Less: (Increase) / decrease in cash and cash equivalents from
(1,023)
287
(856)
(205)
Underlying EBITDA
Depreciation and amortisation
Gains and losses on significant legal proceedings
Major impairment and restructuring charges
210
Johnson Matthey | Annual Report and Accounts 2023
211
211
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Parent Company Statement of Changes in Equity
for the year ended 31st March 2023
At 1st April 2021
Profit for the year
Remeasurements of post-employment benefit assets and liabilities
Amounts charged to hedging reserve
Tax on other comprehensive income / (expense)
Total comprehensive income
Dividends paid (note 48)
Purchase of treasury shares (note 48)
Share-based payments
Cost of shares transferred to employees
At 31st March 2022
Profit for the year
Remeasurements of post-employment benefit assets and liabilities
Exchange differences on translation of foreign operations
Amounts credited to hedging reserve
Tax on other comprehensive (expense) / income
Total comprehensive income
Dividends paid (note 48)
Purchase of treasury shares (note 48)
Share-based payments
Cost of shares transferred to employees
At 31st March 2023
Share
capital
£m
221
–
–
–
–
–
–
(3)
–
–
218
–
–
–
–
–
–
–
(3)
–
–
215
Share
premium
account
£m
Treasury
Shares
£m
Other
reserves
(note 48)
148
–
–
–
–
–
–
–
–
–
148
–
–
–
–
–
–
–
–
–
–
148
(29)
–
–
–
–
–
–
–
–
5
(24)
–
–
–
–
–
–
–
–
–
5
(19)
4
–
–
(34)
8
(26)
–
3
–
–
(19)
–
–
–
114
(27)
87
–
3
–
–
71
Retained
earnings
£m
900
334
156
–
(30)
460
(139)
(200)
11
(8)
1,024
314
(143)
(8)
–
37
200
(141)
(1)
13
(10)
1,085
Total
equity
£m
1,244
334
156
(34)
(22)
434
(139)
(200)
11
(3)
1,347
314
(143)
(8)
114
10
287
(141)
(1)
13
(5)
1,500
212
Johnson Matthey | Annual Report and Accounts 2023
212
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Parent Company Statement of Changes in Equity
for the year ended 31st March 2023
At 1st April 2021
Profit for the year
Remeasurements of post-employment benefit assets and liabilities
Amounts charged to hedging reserve
Tax on other comprehensive income / (expense)
Total comprehensive income
Dividends paid (note 48)
Purchase of treasury shares (note 48)
Share-based payments
Cost of shares transferred to employees
At 31st March 2022
Profit for the year
Total comprehensive income
Dividends paid (note 48)
Purchase of treasury shares (note 48)
Share-based payments
Cost of shares transferred to employees
At 31st March 2023
Remeasurements of post-employment benefit assets and liabilities
Exchange differences on translation of foreign operations
Amounts credited to hedging reserve
Tax on other comprehensive (expense) / income
Share
capital
£m
221
Share
premium
account
£m
148
Treasury
Shares
£m
(29)
Other
reserves
(note 48)
(3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(34)
(26)
114
(27)
87
4
–
–
8
–
3
–
–
–
–
–
–
3
–
–
Retained
earnings
£m
900
334
156
–
(30)
460
(139)
(200)
11
(8)
1,024
314
(143)
(8)
–
37
200
(141)
(1)
13
(10)
1,085
Total
equity
£m
1,244
334
156
(34)
(22)
434
(139)
(200)
11
(3)
1,347
314
(143)
(8)
114
10
287
(141)
(1)
13
(5)
1,500
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
5
218
148
(24)
(19)
215
148
(19)
71
Significant accounting policies
The group’s and parent company’s accounting policies have been applied consistently during
the current and prior year, other than where new policies have been adopted (see note 1).
The group’s and parent company’s significant accounting policies are consistent (see note 1)
with the exception of the following parent company accounting policies:
Investments in subsidiaries
Investments in subsidiaries are stated in the parent company’s balance sheet at cost less any
provisions for impairment. If a distribution is received from a subsidiary, the investment in that
subsidiary is assessed for an indication of impairment.
Provisions and contingencies
Where the parent company enters into financial guarantee contracts to guarantee the
indebtedness of other companies within its group, these guarantee contracts are considered
to be contingent liabilities until such time as it becomes probable that the company will be
required to make a payment under the guarantee.
Sources of estimation uncertainty and judgements made in applying
accounting policies
The group’s and parent company’s sources of estimation uncertainty and judgements made in
applying accounting policies are consistent – see note 1 for further information.
Notes on the Accounts continued for the year ended 31st March 2023
36 Accounting policies - parent company
Basis of accounting and preparation - parent company
The accounts are prepared on a going concern basis in accordance with Financial Reporting
Standard (FRS) 101, Reduced Disclosure Framework, issued in September 2015 and the
Companies Act 2006 applicable to companies reporting under FRS 101. The parent company
applies the recognition, measurement and disclosure requirements of international
accounting standards in conformity with the requirements of the Companies Act 2006, but
makes amendments where necessary to comply with the Act and has set out below the FRS
101 disclosure exemptions taken by the parent company:
• the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2, Share-based Payment;
• the requirements of IFRS 7, Financial Instruments: Disclosures;
• the requirements of paragraphs 91 to 99 of IFRS 13, Fair Value Measurement;
• the requirements of the second sentence of paragraph 110 and paragraphs 113(a), 114,
115, 118, 119(a) to (c), 120 to 127 and 129 of IFRS 15, Revenue from Contracts with
Customers;
• the requirement in paragraph 38 of IAS 1, Presentation of Financial Statements, to present
comparative information in respect of: paragraph 73(e) of IAS 16, Property, Plant and
Equipment; and paragraph 118(e) of IAS 38, Intangible Assets;
• the requirements of paragraphs 10(d), 38A, 38B, 40A, 40B, 40C, 40D, 111 and 134 to
136 of IAS 1, Presentation of Financial Statements;
• the requirements of IAS 7, Statement of Cash Flows;
• the requirements of paragraphs 30 and 31 of IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors;
• the requirements of paragraph 17 of IAS 24, Related Party Disclosures;
• the requirements in IAS 24, Related Party Disclosures, to disclose related party transactions
entered into between two or more members of a group, provided that any subsidiary which
is a party to the transaction is wholly owned by such a member; and
• the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d), 134(f) and 135(c) to
135(e) of IAS 36, Impairment of Assets.
The accounts are prepared on the historical cost basis, except for certain assets and liabilities
which are measured at fair value as explained below.
The parent company has not presented its own income statement, statement of total
comprehensive income and related notes as permitted by Section 408(3) of the Companies
Act 2006. Profit for the year is disclosed in the parent company statement of financial position
and statement of changes in equity.
In the parent statement of financial position, businesses acquired from other group
companies are recognised at book value at the date of acquisition. The difference between the
consideration paid and the book value of the net assets acquired is reflected in retained
earnings.
212
Johnson Matthey | Annual Report and Accounts 2023
213
213
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
37 Property, plant and equipment
38 Goodwill
Land
and buildings
£m
Leasehold
improvements
£m
Plant and
machinery
£m
Assets in
the course of
construction
£m
Cost
At 31st March 2022
Additions
Transfers from assets in the course of
construction
Disposals
Disposals of businesses
At 31st March 2023
Accumulated depreciation and
impairment
At 31st March 2022
Charge for the year
Impairment losses
Disposals
Disposals of businesses
At 31st March 2023
Carrying amount at 31st March
2023
Carrying amount at 31st March 2022
126
–
3
–
–
129
84
2
–
–
–
86
43
42
3
–
–
(1)
–
2
2
–
–
–
–
2
–
1
658
6
32
(13)
–
683
509
31
1
(7)
–
534
149
149
130
66
(35)
(3)
(1)
157
–
–
3
(3)
(1)
(1)
158
130
Total
£m
917
72
–
(17)
(1)
971
595
33
4
(10)
(1)
621
350
322
Finance costs capitalised were £1 million (2022: £1 million) and the capitalisation rate used
to determine the amount of finance costs eligible for capitalisation was 4.0% (2022: 4.2%).
Cost
At 1st April 2021, 31st March 2022 and 31st March 2023
Impairment
At 1st April 2021
Impairment losses
At 31st March 2022 and 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Carrying amount at 1st April 2021
Total
£m
123
8
2
10
113
113
115
The parent company’s goodwill balance of £113 million relates to the Catalyst Technologies
cash-generating unit. Refer to note 5 for further information on the impairment testing
performed.
39 Other intangible assets
Cost
At 31st March 2022
Additions
Disposals
At 31st March 2023
Accumulated amortisation and
impairment
At 31st March 2022
Charge for the year
Impairment losses
At 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Computer
software
£m
Patents,
trademarks
and licences
£m
Acquired
research and
technology
£m
Development
expenditure
£m
382
45
–
427
149
29
3
181
246
233
19
2
(1)
20
16
–
–
16
4
3
5
–
–
5
4
–
–
4
1
1
13
–
–
13
17
–
–
17
(4)
(4)
Total
£m
419
47
(1)
465
186
29
3
218
247
233
214
Johnson Matthey | Annual Report and Accounts 2023
214
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
37 Property, plant and equipment
40 Investments in subsidiaries
At 31st March 2022
Additions
Disposals
At 31st March 2023
Cost of
investments in
subsidiaries
£m
Accumulated
impairment
£m
2,183
202
(49)
2,336
(262)
–
–
(262)
Carrying
amount
£m
1,921
202
(49)
2,074
The parent company’s subsidiaries are shown in note 49.
41 Trade and other receivables
Current
Trade receivables
Contract receivables
Amounts receivable from subsidiaries
Prepayments
Value added tax and other sales tax receivable
Amounts receivable under precious metal sale and repurchase
agreements
Other receivables
Trade and other receivables
Non-current
Amounts receivable from subsidiaries
Advance payment to customers
Other receivables
2023
£m
2022
£m
160
23
1,479
37
49
222
42
2,012
1,015
25
1,040
141
16
1,604
26
23
114
17
1,941
1,598
–
1,598
Of the parent company’s amounts receivable from subsidiaries, £140 million is impaired
(2022: £441 million). The parent company recognised an impairment during the year of £2
million in respect of amounts receivable from the remaining Health business and £1 million in
relation to amounts receivable from the Battery Systems business, Future expected credit
losses on intercompany receivables are immaterial.
Trade receivables and contract receivables are net of expected credit losses.
Land
Leasehold
and buildings
improvements
Plant and
machinery
the course of
construction
£m
£m
£m
£m
Assets in
Transfers from assets in the course of
Cost
At 31st March 2022
Additions
construction
Disposals
Disposals of businesses
At 31st March 2023
impairment
At 31st March 2022
Charge for the year
Impairment losses
Disposals
Disposals of businesses
At 31st March 2023
Accumulated depreciation and
Carrying amount at 31st March
2023
Carrying amount at 31st March 2022
126
–
3
–
–
129
84
2
–
–
–
86
43
42
(1)
3
–
–
–
2
2
–
–
–
–
2
–
1
658
6
32
(13)
–
683
509
31
1
(7)
–
534
149
149
130
66
(35)
(3)
(1)
157
–
–
3
(3)
(1)
(1)
158
130
Total
£m
917
72
–
(17)
(1)
971
595
33
4
(10)
(1)
621
350
322
Finance costs capitalised were £1 million (2022: £1 million) and the capitalisation rate used
to determine the amount of finance costs eligible for capitalisation was 4.0% (2022: 4.2%).
At 1st April 2021, 31st March 2022 and 31st March 2023
38 Goodwill
Cost
Impairment
At 1st April 2021
Impairment losses
At 31st March 2022 and 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Carrying amount at 1st April 2021
The parent company’s goodwill balance of £113 million relates to the Catalyst Technologies
cash-generating unit. Refer to note 5 for further information on the impairment testing
performed.
39 Other intangible assets
At 31st March 2023
Accumulated amortisation and
Cost
At 31st March 2022
Additions
Disposals
impairment
At 31st March 2022
Charge for the year
Impairment losses
At 31st March 2023
Carrying amount at 31st March 2023
Carrying amount at 31st March 2022
Patents,
Acquired
Computer
software
trademarks
research and
Development
and licences
technology
expenditure
£m
£m
£m
£m
382
45
–
427
149
29
3
181
246
233
19
2
(1)
20
16
16
–
–
4
3
5
–
–
5
4
–
–
4
1
1
13
–
–
13
17
–
–
17
(4)
(4)
Total
£m
123
8
2
10
113
113
115
Total
£m
419
47
(1)
465
186
29
3
218
247
233
42 Other financial assets and liabilities
The parent company non-current other financial assets and non-current other financial
liabilities are consistent with the group balances - see note 18.
Current assets
Forward foreign exchange contracts designated as cash flow hedges
Forward precious metal price contracts designated as cash flow
hedges
Forward foreign exchange contracts and currency swaps at fair value
through profit or loss
Other financial assets
Current liabilities
Forward foreign exchange contracts designated as cash flow hedges
Forward precious metal price contracts designated as cash flow
hedges
Forward foreign exchange contracts and currency swaps at fair value
through profit or loss
Other financial liabilities
43 Post-employment benefits
2023
£m
2022
£m
15
30
6
51
5
–
22
27
(19)
(11)
–
(20)
(14)
(33)
(15)
(46)
The parent company is the sponsoring employer of the group’s UK defined benefit pension
plan and the UK post-retirement medical benefits plan. There is no contractual agreement or
stated policy for charging the net defined benefit cost for the plans to the individual group
entities. The parent company recognises the net defined benefit cost for these plans and
information is disclosed in note 24.
214
Johnson Matthey | Annual Report and Accounts 2023
215
215
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
44 Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Inventories
45 Trade and other payables
Current
Trade payables
Contract liabilities
Amounts payable to subsidiaries
Accruals
Amounts payable under precious metal sale and repurchase
agreements
Other payables
Trade and other payables
Non-current
Amounts payable to subsidiaries
Other payables
Trade and other payables
2023
£m
46
729
46
821
2022
£m
45
488
33
566
2023
£m
2022
£m
236
53
2,340
170
813
135
3,747
488
1
489
222
35
2,869
220
684
228
4,258
267
1
268
46 Borrowings and related swaps
The parent company's non-current borrowings and related swaps are consistent with the
group balances with the exception of the cross currency interest rate swaps of £5 million
(2022: £2 million) which are designated as fair value hedges instead of net investment
hedges - see note 20.
Current
€166 million EIB loan 2022
3.26% $150 million Bonds 2022
2.99% $165 million Bonds 2023
2.44% €20 million Bonds 2023
Borrowings and related swaps
216
216
2023
£m
2022
£m
–
–
(133)
(18)
(151)
(140)
(115)
–
–
(255)
47 Provisions
At 1st April 2021
Charge for the year
Net sale of metal
Utilised
Released
At 31st March 2022
Charge for the year
Net sale of metal
Utilised
At 31st March 2023
Current
Non-current
Total provisions
Restructuring
provisions
£m
Other
provisions
£m
33
7
–
(7)
(2)
31
17
–
(15)
33
172
3
(28)
–
–
147
–
(77)
–
70
2023
£m
91
12
103
Total
£m
205
10
(28)
(7)
(2)
178
17
(77)
(15)
103
2022
£m
162
16
178
The restructuring provisions are part of the parent company’s efficiency initiatives.
The other provisions include provisions to buy metal to cover short positions created by the
parent company selling metal to cover price risk on metal owned by subsidiaries. Amounts
provided reflect management's best estimate of the expenditure required to settle the
obligations at the balance sheet date.
The parent company also guarantees some of its subsidiaries’ borrowings and its exposure at
31st March 2023 was £4 million (2022: £4 million).
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
44 Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Inventories
45 Trade and other payables
Amounts payable to subsidiaries
Current
Trade payables
Contract liabilities
Accruals
agreements
Other payables
Trade and other payables
Non-current
Amounts payable to subsidiaries
Other payables
Trade and other payables
Current
€166 million EIB loan 2022
3.26% $150 million Bonds 2022
2.99% $165 million Bonds 2023
2.44% €20 million Bonds 2023
Borrowings and related swaps
216
47 Provisions
At 1st April 2021
Charge for the year
Net sale of metal
Utilised
Released
At 31st March 2022
Charge for the year
Net sale of metal
Utilised
At 31st March 2023
2023
£m
46
729
46
821
2022
£m
45
488
33
566
2023
£m
2022
£m
236
53
2,340
170
813
135
488
1
489
222
35
2,869
220
684
228
267
1
268
2023
£m
2022
£m
–
–
(133)
(18)
(151)
(140)
(115)
–
–
(255)
Amounts payable under precious metal sale and repurchase
3,747
4,258
Current
Non-current
Total provisions
46 Borrowings and related swaps
The parent company's non-current borrowings and related swaps are consistent with the
group balances with the exception of the cross currency interest rate swaps of £5 million
(2022: £2 million) which are designated as fair value hedges instead of net investment
hedges - see note 20.
The restructuring provisions are part of the parent company’s efficiency initiatives.
The other provisions include provisions to buy metal to cover short positions created by the
parent company selling metal to cover price risk on metal owned by subsidiaries. Amounts
provided reflect management's best estimate of the expenditure required to settle the
obligations at the balance sheet date.
The parent company also guarantees some of its subsidiaries’ borrowings and its exposure at
31st March 2023 was £4 million (2022: £4 million).
Restructuring
provisions
Other
provisions
£m
33
7
–
(7)
(2)
31
17
–
(15)
33
£m
172
(28)
3
–
–
–
–
147
(77)
70
2023
£m
91
12
103
Total
£m
205
10
(28)
(7)
(2)
178
17
(77)
(15)
103
2022
£m
162
16
178
48 Share capital and other reserves
Share capital and dividends
The group and parent company disclosures relating to share capital, dividends and purchase of treasury shares are the same. Refer to note 25 for further information.
Other reserves
At 1st April 2021
Cash flow hedges – (losses) / gains taken to equity
Cash flow hedges – transferred to revenue (income statement)
Cash flow hedges – transferred to foreign exchange (income statement)
Cash flow hedges – transferred inventory (balance sheet)
Cancelled ordinary shares from share buyback
Tax on items taken directly to or transferred from equity
At 31st March 2022
Cash flow hedges – (losses) / gains taken to equity
Cash flow hedges – transferred to revenue (income statement)
Cash flow hedges – transferred to cost of sales (income statement)
Cash flow hedges ─ transferred to foreign exchange (income statement)
Cancelled ordinary shares from share buyback
Tax on items taken directly to or transferred from equity
At 31st March 2023
Capital
redemption
reserve
£m
Fair value through
other
comprehensive
income reserve
£m
Hedging reserve
Forward
currency
contracts
£m
Cross
currency
swaps
£m
Forward
metal
contracts
£m
Total
other
reserves
£m
7
–
–
–
–
3
–
10
–
–
–
–
3
–
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
(12)
2
–
–
–
–
(5)
(9)
4
7
–
–
–
(3)
–
3
–
(3)
–
–
–
–
9
–
–
(7)
–
(1)
1
(8)
(31)
–
–
7
–
8
(24)
72
38
–
–
–
(26)
60
4
(40)
2
(3)
7
3
8
(19)
72
42
7
(7)
3
(27)
71
Johnson Matthey | Annual Report and Accounts 2023
217
217
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Notes on the Accounts continued for the year ended 31st March 2023
49 Related undertakings
A full list of related undertakings at 31st March 2023 (comprising subsidiaries, joint ventures and associates) is set out below. Those held directly by the parent company are marked with an asterisk
(*) and those held jointly by the parent company and a subsidiary are marked with a cross (+). All the companies are wholly owned unless otherwise stated. All the related undertakings are involved
in the principal activities of the group. Unless otherwise stated, the share class of each related undertaking comprises ordinary shares only.
Entity
+ Johnson Matthey Argentina S.A.
Tracerco Argentina S.A.U.5
Johnson Matthey (Aust.) Ltd
+ Johnson Matthey Holdings Limited
+ Johnson Matthey Belgium
+ Tracerco Europe BV
The Argent Insurance Co. Limited
Johnson Matthey Brasil Ltda
Tracerco do Brasil - Diagnosticos de Processos Industriais Ltda
Tracerco Radioactive Diagnostic Services Canada Inc.
Johnson Matthey Argillon (Shanghai) Emission Control
Technologies Ltd.
Johnson Matthey Battery Materials (Changzhou) Co., Ltd.
Johnson Matthey Chemical Process Technologies (Shanghai)
Company Limited
Johnson Matthey (China) Trade Co., Ltd
Johnson Matthey Clean Energy Technologies (Beijing) Co., Ltd
Registered address
Tucumán 1, Piso 4, C1049AAA, Buenos Aires, Argentina
Edificio Republica, Tucumán 1, Piso 3 Ciudad Autanoma de Buenos Aires, C1049AAA, Buenos Aires, Argentina
64 Lillee Crescent, Tullamarine VIC 3043, Australia
64 Lillee Crescent, Tullamarine VIC 3043, Australia
Pegasuslaan 5, 1831 Diegem, Belgium
Zone 3, Doorneveld 115, 1731 Zellik, Brussels, Belgium
Rosebank Centre, 5th Floor, 11 Bermudiana Road, Pembroke HM 08, Bermuda
Avenida Macuco, 726, 12th Floor, Edifício International Office, CEP04523-001, Brazil
Estrada dos Bandeirantes, 1793, Curicica, Jacarepagua, Rio de Janeiro, Brazil
8908 60 Avenue NW, Edmonton AB, T6E 6A6, Canada
Ground Floor, Building 2, No. 298, Rongle East Road, Songjiang Industrial Zone, Shanghai 201613, China
A10 Building, No.2 Xinzhu Road, Xinbei District, Changzhou, China
Room 1066, Building 1, No 215 Lian He Bei Lu, Fengxian District, Shanghai, China
1st, 2nd and 3rd Floor, Building 2, No. 598 Dongxing Road, Songjiang Industrial Zone, Shanghai, China
Unit 01/14th Floor, Pacific Century Place, 2A Gong Ti Bei Lu, Chaoyang District, Beijing, China Ti Bei Lu, Chaoyang
District, Beijing, China
586 Dongxing Road, Songjiang Industry Zone, Shanghai, 201613, China
588 and 598 Dongxing Road, Songjiang Industry Zone, Shanghai, 201613, China
Room 1615B, No. 118 Xinling Road, Shanghai Pilot Free Trade Zone, China
Room 2007, No. 16, Third Avenue, Tianjin Economic-Technological Development Zone, Tianjin, China
No. 9 Dongxin Road, Jiangsu Yangtze River International Chemical Industrial Park, Jiangsu Province, China
Johnson Matthey (Shanghai) Catalyst Co., Ltd.
Johnson Matthey (Shanghai) Chemicals Limited
Johnson Matthey (Shanghai) Trading Limited
Johnson Matthey (Tianjin) Chemical Co., Ltd.
Johnson Matthey (Zhangjiagang) Environmental Protection
Technology Co., Ltd
Johnson Matthey (Zhangjiagang) Precious Metal Technology Co., Ltd. No. 48, the west of Beijing Road, Jingang Town, Yangtze River International Chemical Industrial Park, Jiangsu, China
Johnson Matthey A/S
* AG Holding Ltd
* Cascade Biochem Limited1
Ilumink Limited
* JMEPS Trustees Limited
Johnson Matthey Battery Systems Engineering Limited
* Johnson Matthey Battery Materials Limited
* Johnson Matthey Davy Technologies Limited
c/o Lundgrens Advokatpartnerselskab, Tuborg Boulevard 12, 4., 2900 Hellerup, Denmark
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
218
218
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
A full list of related undertakings at 31st March 2023 (comprising subsidiaries, joint ventures and associates) is set out below. Those held directly by the parent company are marked with an asterisk
(*) and those held jointly by the parent company and a subsidiary are marked with a cross (+). All the companies are wholly owned unless otherwise stated. All the related undertakings are involved
in the principal activities of the group. Unless otherwise stated, the share class of each related undertaking comprises ordinary shares only.
49 Related undertakings
Entity
+ Johnson Matthey Argentina S.A.
Tracerco Argentina S.A.U.5
Johnson Matthey (Aust.) Ltd
+ Johnson Matthey Holdings Limited
+ Johnson Matthey Belgium
+ Tracerco Europe BV
The Argent Insurance Co. Limited
Johnson Matthey Brasil Ltda
Technologies Ltd.
Company Limited
Johnson Matthey (China) Trade Co., Ltd
Johnson Matthey (Shanghai) Catalyst Co., Ltd.
Johnson Matthey (Shanghai) Chemicals Limited
Johnson Matthey (Shanghai) Trading Limited
Johnson Matthey (Tianjin) Chemical Co., Ltd.
Technology Co., Ltd
Johnson Matthey A/S
* AG Holding Ltd
* Cascade Biochem Limited1
Ilumink Limited
* JMEPS Trustees Limited
218
Edificio Republica, Tucumán 1, Piso 3 Ciudad Autanoma de Buenos Aires, C1049AAA, Buenos Aires, Argentina
Registered address
Tucumán 1, Piso 4, C1049AAA, Buenos Aires, Argentina
64 Lillee Crescent, Tullamarine VIC 3043, Australia
64 Lillee Crescent, Tullamarine VIC 3043, Australia
Pegasuslaan 5, 1831 Diegem, Belgium
Zone 3, Doorneveld 115, 1731 Zellik, Brussels, Belgium
Tracerco do Brasil - Diagnosticos de Processos Industriais Ltda
Estrada dos Bandeirantes, 1793, Curicica, Jacarepagua, Rio de Janeiro, Brazil
Tracerco Radioactive Diagnostic Services Canada Inc.
8908 60 Avenue NW, Edmonton AB, T6E 6A6, Canada
Johnson Matthey Argillon (Shanghai) Emission Control
Ground Floor, Building 2, No. 298, Rongle East Road, Songjiang Industrial Zone, Shanghai 201613, China
Rosebank Centre, 5th Floor, 11 Bermudiana Road, Pembroke HM 08, Bermuda
Avenida Macuco, 726, 12th Floor, Edifício International Office, CEP04523-001, Brazil
Johnson Matthey Battery Materials (Changzhou) Co., Ltd.
A10 Building, No.2 Xinzhu Road, Xinbei District, Changzhou, China
Johnson Matthey Chemical Process Technologies (Shanghai)
Room 1066, Building 1, No 215 Lian He Bei Lu, Fengxian District, Shanghai, China
Johnson Matthey Clean Energy Technologies (Beijing) Co., Ltd
Unit 01/14th Floor, Pacific Century Place, 2A Gong Ti Bei Lu, Chaoyang District, Beijing, China Ti Bei Lu, Chaoyang
1st, 2nd and 3rd Floor, Building 2, No. 598 Dongxing Road, Songjiang Industrial Zone, Shanghai, China
District, Beijing, China
586 Dongxing Road, Songjiang Industry Zone, Shanghai, 201613, China
588 and 598 Dongxing Road, Songjiang Industry Zone, Shanghai, 201613, China
Room 1615B, No. 118 Xinling Road, Shanghai Pilot Free Trade Zone, China
Johnson Matthey (Zhangjiagang) Environmental Protection
No. 9 Dongxin Road, Jiangsu Yangtze River International Chemical Industrial Park, Jiangsu Province, China
Room 2007, No. 16, Third Avenue, Tianjin Economic-Technological Development Zone, Tianjin, China
Johnson Matthey (Zhangjiagang) Precious Metal Technology Co., Ltd. No. 48, the west of Beijing Road, Jingang Town, Yangtze River International Chemical Industrial Park, Jiangsu, China
c/o Lundgrens Advokatpartnerselskab, Tuborg Boulevard 12, 4., 2900 Hellerup, Denmark
Johnson Matthey Battery Systems Engineering Limited
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
* Johnson Matthey Battery Materials Limited
* Johnson Matthey Davy Technologies Limited
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
49 Related undertakings continued
Entity
Johnson Matthey Davy Technologies International Limited
(in Liquidation)
* Johnson Matthey Hydrogen Technologies Limited1,7
Johnson Matthey Investments Limited
+ Johnson Matthey (Nominees) Limited
* Johnson Matthey Precious Metals Limited
Johnson Matthey South Africa Holdings Limited
Johnson Matthey Tianjin Holdings Limited
* Johnson Matthey UK Holdings Limited5
+ Matthey Finance Limited
* Matthey Holdings Limited
Tracerco Global (Topco) Limited5
Tracerco Limited
Johnson Matthey Battery Materials Finland Oy
Johnson Matthey Finland Oy (in liquidation)
Johnson Matthey SAS
Johnson Matthey Battery Materials GmbH
Johnson Matthey B.V.7
Johnson Matthey Catalysts (Germany) GmbH
Johnson Matthey Chemicals GmbH
Johnson Matthey Deutschland GmbH7
Johnson Matthey GmbH & Co. KG8
Johnson Matthey Holding GmbH8
Johnson Matthey Management GmbH
Johnson Matthey Redwitz Real Estate (Germany) B.V. & Co. KG8
Johnson Matthey Pacific Limited3
Johnson Matthey Process Technologies
Johnson Matthey Tracerco Holdings Hong Kong Limited
Macfarlan Smith (Hong Kong) Limited
Johnson Matthey Chemicals India Private Limited
Johnson Matthey India Private Limited
Johnson Matthey Limited
Johnson Matthey Italia S.r.l.
Tracerco Italia S.r.l.5
Johnson Matthey Fuel Cells Japan Limited
Johnson Matthey | Annual Report and Accounts 2023
Registered address
30 Finsbury Square, London, EC2A 1AG, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
5th Floor, 25 Farringdon Street, London, EC4A 4AB, England
Unioninkatu 22, Helsinki, 00130, Finland
William Ruthin Katu 1, Kotka, 48600, Finland
Les Diamants - Immeuble B, 41 rue Delizy, 93500 Pantin, France
Ostenriederstrasse 15, 85368 Moosburg a.d. Isar, Germany
Otto-Volger-Strasse 9b, 65843 Sulzbach, Germany
Bahnhofstrasse 43, 96257 Redwitz an der Rodach, Germany
Wardstrasse 17, D-46446 Emmerich am Rhein, Germany
Otto-Volger-Strasse 9b, 65843 Sulzbach, Germany
Otto-Volger-Strasse 9b, 65843 Sulzbach, Germany
Bahnhofstrasse 43, 96257 Redwitz an der Rodach, Germany
Otto-Volger-Strasse 9b, 65843 Sulzbach, Germany
Bahnhofstrasse 43, 96257 Redwitz an der Rodach, Germany
Room 803-6, 909 Cheung Sha Wan Road, Kowloon, Hong Kong
Room 803-6, 909 Cheung Sha Wan Road, Kowloon, Hong Kong
Room 802-6, 909 Cheung Sha Wan Road, Kowloon, Hong Kong
Room 803-6, 909 Cheung Sha Wan Road, Kowloon, Hong Kong
Plot No 6A, MIDC Industrial Estate, Taloja, District Raigad, Maharashtra 410208, India
Regus Business Centre, 5th Floor, Caddie Commercial Tower - Aerocity, New Delhi, 110037, India
13-18 City Quay, Dublin 2, D02 ED70, Ireland
Corso Trapani 16, 10139, Torino, Italy
Via Campo Bratela, N. 119 - 20069, Aprio D'adda, Milano, Italy
5123-3 Kitsuregawa, Sakura-shi, Tochigi, 329-1412, Japan
219
219
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
49 Related undertakings continued
Entity
* Johnson Matthey Japan Godo Kaisha
Johnson Matthey Sdn. Bhd.
Johnson Matthey Services Sdn. Bhd.
Tracerco Asia Sdn. Bhd.
Tracerco Asia Services Sdn. Bhd.
Johnson Matthey de Mexico, S. de R.L. de C.V.
Johnson Matthey Servicios, S. de R.L. de C.V.
Intercat Europe B.V.
Johnson Matthey Holdings B.V7
Johnson Matthey International Management Services B.V.7
Johnson Matthey Netherlands 2 B.V.
Matthey Finance B.V.1
Johnson Matthey DOOEL Skopje
Tracerco Norge AS
Johnson Matthey Battery Systems Spólka z ograniczoną
odpowiedzialnocścią
Johnson Matthey Poland Spólka z ograniczoną odpowiedzialnocścią
Johnson Matthey Battery Materials Poland spółka z ograniczoną
odpowiedzialnocścią
+ Macfarlan Smith Portugal, Lda
Johnson Matthey Catalysts LLC
Johnson Matthey Arabia for Business Services6
Johnson Matthey General Partner (Scotland) Limited
Johnson Matthey (Scotland) Limited Partnership2
Johnson Matthey Singapore Private Limited
Johnson Matthey (Proprietary) Limited
Johnson Matthey Research South Africa (Proprietary) Limited
Johnson Matthey Salts (Proprietary) Limited
Johnson Matthey Catalysts Korea Limited
Johnson Matthey Korea Limited
Johnson Matthey AB
Johnson Matthey Formox AB
Johnson Matthey & Brandenberger AG
Johnson Matthey Finance GmbH
Johnson Matthey Finance Zurich GmbH
LiFePO4+C Licensing AG
220
220
Registered address
5123-3 Kitsuregawa, Sakura-shi, Tochigi, 329-1412, Japan
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
c/o Cacheaux, Cavazos and Newton, No. 437 Col. Colinas del Cimatario, CP 76090 Queretaro, Mexico
c/o Cacheaux, Cavazos and Newton, No. 437 Col. Colinas del Cimatario, CP 76090 Queretaro, Mexico
Gelissendomein 8, Office KB103, 6229GJ, Maastricht, Netherlands
Gelissendomein 8, KB 103, 6229 GJ Maastricht, Netherlands
Gelissendomein 8, KB 103, 6229 GJ Maastricht, Netherlands
Gelissendomein 8, KB 103, 6229 GJ Maastricht, Netherlands
Fregatweg 38, 6222 NZ Maastricht, Netherlands
TIDZ Skopje 1, 1041 llinden, North Macedonia
Kokstadflaten 35, 5257 Kokstad, Norway
Ul. Alberta Einsteina 6, 44-109, Gliwice, Poland
Ul. Alberta Einsteina 6, 44-109, Gliwice, Poland
Ul. Hutnicza 1, 62-510 Konin, Poland
Largo de São Carlos 3, 1200-410 Lisboa, Portugal
1 Transportny Proezd, 660027 Krasnoyarsk, Russia
PO Box 26090, Riyadh 11486, Saudi Arabia
10 Wheatfield Road, Edinburgh, Midlothian, EH11 2QA, Scotland
10 Wheatfield Road, Edinburgh, Midlothian, EH11 2QA, Scotland
50 Raffles Place, #19-00, Singapore Lane Tower, Singapore 048623
Corner Henderson and Premier Roads, Germiston South Ext 7, Gauteng, South Africa
Corner Henderson and Premier Roads, Germiston South Ext 7, Gauteng, South Africa
Corner Henderson and Premier Roads, Germiston South Ext 7, Gauteng, South Africa
A-dong 2906-ho, 13 Heungdeok 1-ro, Giheung-gu, Yongin-si, Gyeonggi-do, South Korea
101-2803, Lotte Castle, 109, Mapo-daero, Mapo-gu Seoul, South Korea
Viktor Hasselblads gata 8, 421 31 Västra Frölunda, Göteborg, Sweden
SE-284 80, Perstorp, Sweden
Glatttalstrasse 18, 8052 Zurich, Switzerland
Hertensteinstrasse 51, 6004 Lucerne, Switzerland
Glatttalstrasse 18, 8052 Zurich, Switzerland
Hertensteinstrasse 51, 6004 Lucerne, Switzerland
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Notes on the Accounts continued for the year ended 31st March 2023
Notes on the Accounts continued for the year ended 31st March 2023
49 Related undertakings continued
Entity
Johnson Matthey Services (Trinidad and Tobago) Limited
Stepac Ambalaj Malzemeleri Sanayi Ve Ticaret Anonim Sirketi
(in liquidation)
Johnson Matthey Holdings, Inc.
Johnson Matthey Hydrogen Technologies, Inc.7
Johnson Matthey Inc.4
Johnson Matthey Medical Device Components LLC
Johnson Matthey Process Technologies, Inc.
Johnson Matthey Stationary Emissions Control LLC
Johnson Matthey USA Holdings Inc.5
Red Maple LLC (50.0%).6
Tracerco US LLC5
Veranova Parent Holdco L.P. (30.0%)6
Registered address
Queen's Park Place, 17-20 Queens Park West, Port of Spain, Trinidad and Tobago
Güzeloba Mah. Rauf Denktaş Cad., No.56/101, Muratpaşa/Antalya, Turkey
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Corporation Service Company, 2595 Interstate Drive, Suite 103 PA 17110, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, USA
1209 Orange Street, New Castle County, Wilmington, Delaware, 19801
In some jurisdictions in which the group operates, share classes are not defined and in these instances, for the purpose of disclosure, these holdings have been classified as ordinary shares.
Johnson Matthey Battery Systems Spólka z ograniczoną
Ul. Alberta Einsteina 6, 44-109, Gliwice, Poland
Johnson Matthey Poland Spólka z ograniczoną odpowiedzialnocścią
Ul. Alberta Einsteina 6, 44-109, Gliwice, Poland
Johnson Matthey Battery Materials Poland spółka z ograniczoną
Ul. Hutnicza 1, 62-510 Konin, Poland
1. Ordinary and preference shares.
2. Limited partnership, no share capital.
3. Ordinary and non-cumulative redeemable preference shares.
4. Ordinary and series A preferred stock.
5. Incorporated during current financial year.
6. Joint Venture/Associate.
7. Name change in the year.
8. Merged with another Johnson Matthey subsidiary in the year.
Johnson Matthey | Annual Report and Accounts 2023
221
221
Johnson Matthey International Management Services B.V.7
Gelissendomein 8, KB 103, 6229 GJ Maastricht, Netherlands
49 Related undertakings continued
Entity
* Johnson Matthey Japan Godo Kaisha
Johnson Matthey Sdn. Bhd.
Johnson Matthey Services Sdn. Bhd.
Tracerco Asia Sdn. Bhd.
Tracerco Asia Services Sdn. Bhd.
Johnson Matthey de Mexico, S. de R.L. de C.V.
Johnson Matthey Servicios, S. de R.L. de C.V.
Intercat Europe B.V.
Johnson Matthey Holdings B.V7
Johnson Matthey Netherlands 2 B.V.
Matthey Finance B.V.1
Johnson Matthey DOOEL Skopje
Tracerco Norge AS
odpowiedzialnocścią
odpowiedzialnocścią
+ Macfarlan Smith Portugal, Lda
Johnson Matthey Catalysts LLC
Johnson Matthey Arabia for Business Services6
Johnson Matthey General Partner (Scotland) Limited
Johnson Matthey (Scotland) Limited Partnership2
Johnson Matthey Singapore Private Limited
Johnson Matthey (Proprietary) Limited
Johnson Matthey Salts (Proprietary) Limited
Johnson Matthey Catalysts Korea Limited
Johnson Matthey Korea Limited
Johnson Matthey AB
Johnson Matthey Formox AB
Johnson Matthey & Brandenberger AG
Johnson Matthey Finance GmbH
Johnson Matthey Finance Zurich GmbH
LiFePO4+C Licensing AG
220
Registered address
5123-3 Kitsuregawa, Sakura-shi, Tochigi, 329-1412, Japan
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
Suite 16-03, Level 16, Wisma UOA II, 21 Jalan Pinang, 50450 Kuala Lumpur, Malaysia
c/o Cacheaux, Cavazos and Newton, No. 437 Col. Colinas del Cimatario, CP 76090 Queretaro, Mexico
c/o Cacheaux, Cavazos and Newton, No. 437 Col. Colinas del Cimatario, CP 76090 Queretaro, Mexico
Gelissendomein 8, Office KB103, 6229GJ, Maastricht, Netherlands
Gelissendomein 8, KB 103, 6229 GJ Maastricht, Netherlands
Gelissendomein 8, KB 103, 6229 GJ Maastricht, Netherlands
Fregatweg 38, 6222 NZ Maastricht, Netherlands
TIDZ Skopje 1, 1041 llinden, North Macedonia
Kokstadflaten 35, 5257 Kokstad, Norway
Largo de São Carlos 3, 1200-410 Lisboa, Portugal
1 Transportny Proezd, 660027 Krasnoyarsk, Russia
PO Box 26090, Riyadh 11486, Saudi Arabia
10 Wheatfield Road, Edinburgh, Midlothian, EH11 2QA, Scotland
10 Wheatfield Road, Edinburgh, Midlothian, EH11 2QA, Scotland
50 Raffles Place, #19-00, Singapore Lane Tower, Singapore 048623
Corner Henderson and Premier Roads, Germiston South Ext 7, Gauteng, South Africa
A-dong 2906-ho, 13 Heungdeok 1-ro, Giheung-gu, Yongin-si, Gyeonggi-do, South Korea
101-2803, Lotte Castle, 109, Mapo-daero, Mapo-gu Seoul, South Korea
Viktor Hasselblads gata 8, 421 31 Västra Frölunda, Göteborg, Sweden
SE-284 80, Perstorp, Sweden
Glatttalstrasse 18, 8052 Zurich, Switzerland
Hertensteinstrasse 51, 6004 Lucerne, Switzerland
Glatttalstrasse 18, 8052 Zurich, Switzerland
Hertensteinstrasse 51, 6004 Lucerne, Switzerland
Johnson Matthey Research South Africa (Proprietary) Limited
Corner Henderson and Premier Roads, Germiston South Ext 7, Gauteng, South Africa
Corner Henderson and Premier Roads, Germiston South Ext 7, Gauteng, South Africa
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Other information
In this section
Basis of reporting – non-financial data
Externally assured selected information
by ERM CVS
Independent Limited Assurance Statement
to Johnson Matthey Plc
Shareholder information
Company details
Basis of reporting
– non-financial data
222
228
229
231
Back
cover
This integrated report has been prepared in accordance
with the GRI Standards for the period 1st April 2022
to 31st March 2023. Our last annual report was published
in June 2022. All non-financial performance data is
reported on a financial year basis unless otherwise stated.
Johnson Matthey compiles, assesses and discloses non-
financial information to demonstrate to its stakeholders
that it conducts its business in an ethical, responsible and
sustainable manner and where there is a legal obligation
to do so (for example, in accordance with the UK
Companies Act, UK Stream-lined Energy and Carbon
reporting (SECR) regulations, UK Modern Slavery Act).
This report has been developed to incorporate the group’s
significant economic, environmental and social impacts
and is set within the context of the United Nations
Brundtland definition of sustainability (1987) and our own
sustainable business goals to 2030. The principles of
inclusivity, materiality and responsiveness help to shape
the structure of the report and to set priorities for reporting.
The report also explains how we continue to build
sustainability into our business planning and decision-
making processes and how, through our governance
processes, we manage social, environmental and ethical
matters across the group.
Performance data covers all sites that are under the
financial control of the group, including all manufacturing,
research and warehousing operations of Johnson Matthey
Plc and its subsidiaries. Joint ventures where we have
a minority share are not included.
For the purposes of reporting, separate businesses resident
at the same location are counted as separate sites.
Data from 76 sites was included in this report, 45 are
manufacturing sites, 15 are R&D sites and 16 are offices.
Data from new facilities is included from the point at
which the facility becomes owned by JM and operational.
Selected non-financial data has been third-party limited
assured to ISAE 3000 (Revised) standard as described on
page 228-230. Certain employee data is included in the
financial accounts and is also subject to the financial data
third-party audit described on page 133.
Rebaselining of previous years’ data
During the year we divested several businesses as going
concerns, including our Health, Advanced Glass
Technologies and our Battery Materials businesses.
In accordance with the recommendations of the
greenhouse gas (GHG) Protocol and SECR reporting
guidance, we have removed their historical contribution
to our operational KPIs for all years from 2019/20, which
is our baseline for our 2030 sustainability targets.
This specifically includes our historical data for Scope 1,
2 and 3 GHG emissions, water consumption, waste and
emissions to air.
This report contains only rebaselined numbers.
Restatements of previous years’ data
in this report
In addition to rebaselining, there have been some
restatements of data to account for improvements
in methodology, coverage and quality of available data.
JM’s materiality threshold for variance is 5%. We have made
restatements of environmental performance data for the
following KPIs this year:
• Scope 3 emissions from investments has been restated
following the inclusion of our pension-related
investments where JM has appointed a trustee.
• NOx emissions to Air has been restated following a review
of the methodology to calculate this KPI.
• Recycled PGMs restated due to calculation refinements
post 2021/22 ARA publication.
• Following a review of the methodologies for calculating
process CO2 emissions and process N20 emissions the
values have been restated for all years from base year
(2019/20).
Material Topics
In July 2022 we partnered with a third party to refresh
our materiality assessment. They reviewed public domain
opinions of our investors, customers and social media users,
as well as interviewing leaders inside JM. Our material
topics were identified as:
• Climate Change
• Air Emissions
• Water and wastewater
• Waste management
• Circularity and product innovation
• Health and Safety
• Human rights
• Diversity and inclusion
• Community impact
• Responsible sourcing
• Governance and risk management
These were approved at the SVC meeting in
September 2022.
222
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
Basis of reporting – non-financial data continued
Definition of employees and contractors
These definitions are used when reporting the Health and Safety KPIs on pages 33-34 of this report. For Employee headcount numbers, only Permanent and Temporary employees are counted
as “Employees“ pages 37 and 173.
Reported as “Employees”
Permanent employees
Continuously site based
Temporary employees
Continuously site based
Agency employees
Continuously site based
Contract signed directly
between JM and individual
and paid regular salary and
other benefits by JM
Fixed term contract signed
directly between JM and
individual. Paid regular salary
and other benefits by JM
Person employed by an
agency performing tasks that
would normally be expected
to be undertaken by a
JM employee
Reported as “Contractors”
Outsourced function
Continuously or regularly
site based
Facility management –
catering, cleaning or grounds
maintenance; IT; and
occupational health, where
outsourced
Work is directly supervised
by JM
Work is directly supervised
by JM
Work is directly supervised
by JM
Work is supervised by contractor
and monitored by JM
Specialist service
One-off project or regularly
based on site
Small scale building or ground
works; repairing specialist
plant or equipment; low level
maintenance; small scale
repairs to offices or other
buildings; stack monitoring
Work is supervised by contractor
and monitored by JM
Projects
One-off project
Construction work, capital
project work, major
maintenance activities
Work is supervised by contractor
and monitored by JM
Calculation methodologies for Key
Performance Indicators (KPIs) relating
to our sustainability targets for 2030
Planet: Protecting the climate
Our goal: Drive lower global GHG emissions
This KPI is a measure of the tonnes of GHG emissions avoided during the year by our customers’
technologies which incorporate JM’s products and solutions, compared to conventional
offerings.
The KPI captures one year’s impact for all qualifying technologies that have been operational
during the year, as sold since 2020/21.
Our methodology for calculating avoided GHG emissions was developed in-house and
independently verified by EcoActTM for all product families contributing towards our target
to ensure it complies with industry best practice. EcoAct concluded that our approach
complied with recognised public guidelines and considered our calculations to be both fairly
stated and representative of a balanced view of our contribution in enabling avoided
emissions through relevant technologies. EcoAct also determined that our calculations follow
industry best practice for measurement. Their full statement is available on request.
For each qualifying JM technology solution, we first determine its functional unit.
The functional unit is used to determine the boundary of the analysis, to ensure that the
scope of the calculation covers the relevant life-cycle stages leading to the avoided emissions.
Performance comparisons for our technology solution scenario are then made against
identified reference scenarios, which represent current day, conventional technologies
dominant in the market, which our emerging technologies are seeking to improve upon.
The following table gives examples of the JM technology solution families included in this
KPI and the reference scenarios used for the calculations.
JM’s technology solution
Functional unit
Reference scenario
Solution scenario
Sustainable Aviation
Fuel/Fischer-Tropsch
Low Carbon
Solutions (LCS)
tonnes CO2e /
tonne jet fuel
produced
tonnes CO2e /
tonne syngas
produced
Conventional fossil-based
jet fuel
Jet fuel produced from municipal waste
using Fisch Tropsch technology
Syngas plant without LCS
(powered by fossil fuels)
Syngas plant with LCS (powered
by fossil fuels)
Low Carbon
Hydrogen
tonnes CO2e /
TWh produced
Energy generated by
natural gas combustion
Hydrogen
Electrolysers
tonnes CO2e /
TWh produced
Energy generated by
natural gas combustion
Energy generated in the form of
hydrogen from facility with carbon-
capture and storage (CCS) enabled
Energy generated by electrolysers
(in form of hydrogen) powered by
100% renewable electricity
Stationary electricity
generation
tonnes CO2e /
TWh produced
Energy generated from
fossil fuel sources (in US)
Energy generated from hydrogen
combustion (steam reforming process)
Automotive – heavy
and light duty
tonnes CO2e /
vehicle
Internal combustion
engine – diesel vehicle
Fuel cell electric vehicle powered
by average China electricity grid mix
Johnson Matthey | Annual Report and Accounts 2023
223
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Basis of reporting – non-financial data continued
The lifetime of the technology is also considered to discount any impacts from the sale
of previous years’ technologies if these are no longer operational and, where applicable,
adjustments to capture changing performance over time are made.
No allocation between value chain partners is applied, since there are no established
guidelines for this. However, our products and solutions are vital to realising the benefits
of the technologies being used, and our KPI aims to accurately reflect JM’s role, in that
we enable avoided GHG emissions via the use of such technologies.
Technologies that were previously included in this metric from businesses that have been
divested during the year (Battery Materials) have been removed from the calculation and
historical years’ performance re-baselined.
SASB Resource efficiency indicator
We have also identified revenues aligned to the SASB Chemicals Sustainability Accounting
Standard definition of products designed for use-phase resource efficiency, which includes
products that “through their use – can be shown to improve energy efficiency, eliminate or
lower greenhouse gas (GHG) emissions, reduce raw materials consumption, increase product
longevity, and/or reduce water consumption”. Qualifying products are those that either:
• increase the efficiency of a product during its use phase (for example, our battery materials
and fuel cell components); or
• increase the efficiency of the manufacturing process used to make a product (for example,
our catalysts and additives for the chemical, oil and gas industries).
Products beyond the scope of this assessment include those specifically designed to meet
environmental regulatory requirements, and any product where a use-phase resource
efficiency benefit is unclear. Revenues aligned to the use-phase resource efficiency criteria
represent sales excluding precious metals.
Our goal: Achieve net zero by 2040
Our operational carbon footprint is reported in tonnes of carbon dioxide equivalent (CO2e)
according to the GHG Protocol corporate standard 2015 revision, www.ghgprotocol.org and
in with the UK Stream-lined Energy and Carbon Reporting (SECR) April 2019 requirements
of the UK Companies Act 2006 (Strategic and Directors’ Reports) Regulations 2013.
Scope 1 GHG emissions
Our Scope 1 GHG emissions are generated by the direct burning of fuel (predominantly
natural gas), performing chemical reactions in our manufacturing processes and driving
company-owned or leased vehicles. They are calculated in tonnes CO2e using conversion
factors for each energy source as published by Defra in June 2022 and subsequently amended
in September 2022 – we have used the amended version. We include carbon dioxide (CO2),
nitrous oxide (N2O), refrigerant and methane (CH4) process emissions to air in our Scope 1
calculations. We don’t believe we have any material Scope 1 GHG emissions of PF5 and SF6
Scope 2 GHG emissions
Our Scope 2 GHG emissions arise from the use of electricity and steam procured from third
parties for use at our facilities. They are calculated using the ‘dual reporting’ methodology
outlined in the GHG Protocol corporate standard 2015 revision.
For the location-based method of Scope 2 accounting, for all facilities outside the US, we use
national carbon intensity factors related to the consumption of grid electricity in 2020 made
available in the 2022 edition of the world CO2 emissions database of the International Energy
Agency. They were purchased under licence in February 2022 for sole use in company
reporting. For US facilities we use regional carbon factors published by the Environmental
Protection Agency in January 2023 edition of, eGRID data 2021.
For the market-based method of Scope 2 accounting, we have applied the hierarchy of
sources for determination of appropriate carbon intensity factors, as outlined in table 6.3
on page 48 of the GHG Protocol Scope 2 Guidance. We have successfully obtained carbon
intensity factors directly from our grid electricity suppliers in the EU, US and Australia.
However, it has not been possible to obtain this information from suppliers in China, India,
South Africa and non-OECD Europe.
Scope 3 GHG emissions
Our annual Scope 3 GHG emissions are reported according to the methodology of the GHG
Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. A variety
of accounting techniques were used depending on the availability of data. All value chain
emissions over which JM has financial control are included; therefore our scope 3 reporting
does not include raw materials where JM is a toll manufacturer i.e. when raw materials being
used in our factories remain in the financial ownership of our customer at all times.
When calculating the GHG footprint of each Scope 3 category, our principle of using the most
accurate data sources was applied in the following order:
• GHG footprint data obtained directly from value chain partners
• Mass based calculations using carbon intensity factors from respected databases, such
as Defra’s GHG reporting conversion factors and EcoInvent
• Financial allocation using Avieco’s proprietary Input-Output (EEIO) model. This combines
economic data from central banks and treasury departments with research data from the
World Bank, OECD and other leading environmental agencies
224
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Basis of reporting – non-financial data continued
Scope 3 GHG category as defined by GHG Protocol
1. Purchased goods and services
2. Capital goods
3. Fuel- and energy-related activities
4. Upstream transportation and distribution
5. Waste generated in operations
6. Business travel
7. Employee commuting
8. Upstream leased assets
9. Downstream transportation and distribution
10. Processing of sold products
11. Use of sold products
12. End of life treatment of sold products
13. Downstream leased assets
14. Franchises
15. Investments
Calculation methodology
Where mass of purchased goods was available, this was used in combination with GHG intensity factors obtained either from
suppliers or EcoInvent. For the remaining goods and for purchased services a financial allocation (EEIO model) was used
Financial allocation (EEIO model) using geographical breakdown of data shown in Accounting note 11 “Property, plant &
equipment” on page 175
Defra’s GHG reporting conversion factors 2022 were used to calculate well-to-tank GHG emissions from fuel usage, transmission
and distribution losses from purchased electricity, and well-to-tank and transmission and distribution losses of energy from steam
Emissions data was provided by our suppliers where available. Otherwise, a financial allocation was made based on spend and
intensity factors from the EEIO model
Where GHG footprints were available from waste service providers they were used, otherwise Defra’s GHG reporting conversion
factors 2022 were used according to mass of waste disposal by destination see page 31
Footprint business travel for air and rail was obtained from our business travel service providers. Where available mileage
for personal car, taxi and public transport use was used in combination with Defra’s GHG reporting conversion factors 2022.
In the absence of mileage, a financial allocation was made based on expenses spend and intensity factors from the EEIO model.
Accounting is by date of financial transaction
Data is obtained by employee survey of miles travelled per week by modes of transport. Defra’s GHG reporting conversion factors
2022 are used to calculate the GHG intensity of each transport type
Financial allocation (EEIO model) using floor space and geographical location
Where JM takes responsibility for the downstream distribution of goods, it was included in the upstream category calculation.
Where our customers takes responsibility, no data is available
No quantitative data available, but not expected to be material based on our knowledge of how our customers use our products
We have removed Use of sold products from our footprint by agreement with SBTi, as it determined that the emissions we reported
in this category were ‘indirect’ and should not, therefore, be included.
Many of JM’s products are returned to the company for recovery of the precious metals and thus end of life treatment is included
in our Scope 1 and Scope 2 footprint. JM does not have visibility of other end of life treatments
Included in Upstream leased assets category
JM does not have any franchises
GHG footprints from our Pensions trustee providers were used, where available, and scaled to represent JM's global employee count.
Financial allocation (EEIO model) using geographical breakdown of investment revenues from each entity
Johnson Matthey | Annual Report and Accounts 2023
225
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Basis of reporting – non-financial data continued
Planet: Protecting nature and advancing
the circular economy
Our goal: Advancing the circular economy to conserve
scarce resources
Our KPI to monitor how we are advancing the circular economy is a measurement of all %
recycled platinum group metals in our manufactured goods on a mass basis.
We include use of five PGMs – platinum, palladium, rhodium, ruthenium and iridium in our
target. This is defined as the weighted global average of all goods manufactured in our plants
over the course of the reporting year and includes metal that is both sourced and funded
by JM and metal sourced and funded by our customers.
We define primary metal as metal from a mine or originating outside of the refining loop.
This is measured by recording the amount of metal matching this description that has been
used in product manufacturing over the given time-period.
We define secondary or recycled metal as platinum-group metal-bearing material that has
come from an end use (including post-consumer product scrap and waste materials) and
has not come to JM in the form of ingot, concentrate or matte directly from a mining process.
This makes up the balance of metal that has been used in product manufacturing over the
given time-period.
Our goal: Minimising our environmental footprint to
protect nature
Total hazardous waste produced
This KPI is a record of how much hazardous waste we generate from our operations that can
no longer be used by Johnson Matthey and has to be sent off site for treatment. We define
hazardous waste in line with local regulatory requirements in the particular territory where
the waste is generated. For example, in Europe we consider the EU Waste Framework
Directive (Directive 2008/98/EC of the European Parliament and of the Council). We measure
the amount of solid and liquid hazardous waste and report in metric tonnes of material.
We measure the total weights sent off site, including any entrained water, and we consider
all material waste no longer of use to Johnson Matthey. We categorise its destination in the
following ways:
• Sent outside JM for beneficial reuse.
• Sent outside JM for recycling.
• Sent outside JM for incineration with energy recovery.
• Sent outside JM for incineration or treatment without energy recovery.
• Sent outside JM for landfill disposal.
Net water usage
This KPI is a record of how much water we withdraw through our operations.
The KPI includes all freshwater sources – mains supplied water that we receive from
municipalities, public or private utility companies, ground water that is extracted from below
the earth’s surface and fresh surface water that we extract from rivers, wetlands, lakes etc.
We do not include rainwater or any brackish surface water. We subtract any water that
is returned to the source from which it is extracted at the same or better quality .
Nitrogen Oxide (NOx) emissions
This KPI is a record of direct emissions of harmful nitrogen oxides to the environment from
our manufacturing facilities. NOx is a generic term which includes nitric oxide (NO) and
nitrogen dioxide (NO2), but excludes nitrous oxide (N2O).
We measure this KPI in metric tonnes. The value is derived from continuous monitoring
equipment where present, or from stoichiometric calculations based on our knowledge
of NOx generation from our chemical processes. We consider all sources of NOx from the
combustion of fuel in steam boilers to the gaseous output of our processes that emit NOx.
We report the value after any abatement or treatment has taken place within our
chimney stacks.
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Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Basis of reporting – non-financial data continued
People
Our goal: Keep people safe
Total recordable injury and illness rate (TRIIR) is defined as the number of recordable cases
per 200,000 hours worked in a rolling year and includes cases affecting both our employees
and contractors.
A recordable case (as defined under the US Occupational Safety and Health Administration
(OSHA) Regulations) is defined as a work related accident or illness that results in one or
more of the following: absence of more than one day; medical treatment beyond first aid;
death; loss of consciousness and restricted work or transfer to another job.
The OSHA severity rate is a calculation that gives a company an average of the number
of lost days and restricted days per recordable incident.
OSHA severity rate
= Total lost days and restricted days in the year
x 200,000
Total hrs worked during the year
The process safety event severity rate (PSESR) is measured according to the methodology
approved by International Council of Chemical Associations (ICCA). The metric first requires
a determination that the event is to be included in the process safety event severity rate
(PSESR) calculation and then determining the severity using the severity table.
In determining this rate, 1 point is assigned for each Level 4 incident attribute, 3 points
for each Level 3 attribute, 9 points for each Level 2 attribute, and 27 points for each Level 1
attribute. The PSESR is recorded as a 12 month rolling number. Total worker hours include
employees, temporary employees and contractors.
Theoretically, a process safety event could be assigned a minimum of 1 point (i.e. the incident
meets the attributes of a Level 4 incident in only one category) or a maximum of 135 points
(i.e. the incident meets the attributes of a Level 1 incident in each of the five categories).
A Tier 1 Process Safety Event (T-1 PSE) is a loss of primary containment (LOPC) with the
greatest consequence as defined by American Petroleum Institute recommended practice
(RP) 754.
ICCA process safety severity rate (Level 1 to Level 4) =
Total severity score for all events per 200,000 hrs worked during the year
Our goal: Create a diverse, inclusive and engaged company
Employee Engagement
All permanent and fixed term contract employees are invited to voluntarily complete an
employee survey at regular intervals to determine the engagement and wellbeing of staff
using a standard methodology defined by Workday Peakon – an independent third party
used by companies globally. All responses are submitted confidentially to Workday Peakon
and results are independently analysed and shared with all managers who met the minimum
response threshold of five responses from their team. Through the survey we measure
attributes on a scale of 0 to 10.
The survey measures employee engagement through three questions:
1) to what extent they would recommend JM as employer to others,
2) to what extent they intend to stay with JM,
3) in general how satisfied they are with their employment at JM.
Gender diversity
Our target KPI counts the percentage of all management level employees (permanent and
temporary) who are registered female on the 31st March in the reporting year.
For this purpose, an employee’s gender is determined based on their registered gender at birth
or otherwise legally recognised gender as disclosed by the employee.
Our goal: Invest in our local communities
Our target KPI is an annual record of the total number of employee volunteering days undertaken
by permanent employees within their local communities, in accordance with JM’s global
Employee Volunteering Policy. The volunteering is recorded in days, assuming that the standard
full-time equivalent employee day is 8 hours. The recorded volunteering days may have been
completed either on company time or on paid company leave. Volunteering done on unpaid
leave, or outside normal working hours, is not included in the reported numbers. In determining
the in-kind contribution of employees’ volunteering we take the number of volunteering days
reported in the year and multiply it by the group average cost of one day of employee time.
Calculation for indirect expenditure in
community investment
Number of working days in a year is five days per week for 50 weeks per year.
Average cost of one day of
employee time
=
Total employee benefits expense in year
Number of working days in year x Average
number of permanent employees
Johnson Matthey | Annual Report and Accounts 2023
227
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Externally assured selected information by ERM CVS
ERM Certification and Verification Services Limited (“ERM CVS”) was engaged by Johnson Matthey PLC (“Johnson Matthey”) to provide limited assurance in relation to the selected information
set out below and presented in the Johnson Matthey Annual Report and Accounts 2023 (the “Report”).
Metric name
Total Scope 1 GHG emissions
Total Scope 2 GHG emissions (market-based)
Total Scope 2 GHG emissions (location-based)
Total Scope 1 and 2 GHG emission (market-based)
Total Scope 1 and 2 carbon intensity (market-based)
Year on year change in Scope 1 and 2 carbon intensity
Total Scope 3 (Category 3) Fuel and Energy-related GHG
emissions
Total energy consumption
Total non-renewable energy consumption
Total renewable energy purchased or generated
Certified renewable electricity consumption
Total Scope 3 (Category 1) Purchased Goods and Services
GHG emissions
Total freshwater withdrawal (all sources)
Total water discharged back to original source
Net freshwater consumption
Average direct Chemical Oxygen Demand of wastewater
(COD)
Coverage for COD reporting
Unit of Measure 2022/23 total figure
233,300
130,386
204,848
363,686
3.4
tonnes CO2e
tonnes CO2e
tonnes CO2e
tonnes CO2e
tonnes CO2e/
tonne sales
%
tonnes CO2e
-8%
41,018
MWh
1,185,612
kWh 986,948,044
kWh 198,664,193
41%
2,495,475
%
tonnes CO2e
m3
m3
000's m3
mg/L
1,800,878
48,993
1,752
242
%
75%
Metric name
Freshwater consumed in regions of high or
extremely high baseline water stress
Total waste sent off site
Total waste disposed off site to landfill
Total solid waste disposed off site
Total solid waste generated for treatment off site
Total solid waste sent off site to be reused or recycled
Total hazardous waste sent off site for treatment
Nitrogen oxides (NOx) emissions to air
Sulphur oxides (SOx) emissions to air
Volatile organic chemicals (VOCs) emissions to air
Coverage for NOx reporting
Coverage for SOx reporting
Coverage for VOCs reporting
Lost Time Injury Frequency Rate (LTIFR) employees
Lost Time Injury Frequency Rate (LTIFR) contractors
Occupational Illness Frequency Rate (OIFR)
Tier 1 Process Safety events rate
Total Recordable Injury and Illness Rate(TRIIR)
employees + contractors
ICCA Process Safety Event Severity Rate (PSESR)
Unit of Measure 2022/23 total figure
399
000's m3
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
%
%
%
n/million hrs
n/million hrs
n/million hrs
Tier 1 events/
1,000,000 hrs
n/200,000 hrs
PSESR/200,000 hrs
62,885
4,347
4,369
17,307
12,938
41,860
336
31
42
86%
36%
57%
1.16
1.37
0.08
0.30
0.47
1.02
228
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Independent Limited Assurance Statement to Johnson Matthey PLC
ERM Certification and Verification Services Limited (“ERM CVS”) was engaged by Johnson Matthey PLC (“Johnson Matthey”) to provide limited assurance in relation to the selected information
set out below and presented in the Johnson Matthey Annual Report and Accounts 2023 (the “Report”).
Engagement summary
Scope of our assurance
engagement
Reporting period
Reporting criteria
Assurance standard
and level of assurance
Respective
responsibilities
Our conclusion
Whether the 2022/23 selected information as presented on page 228 of the Report are fairly presented, in all material respects, in accordance with the
reporting criteria.
Our assurance engagement does not extend to information in respect of earlier periods or to any other information included in the Report.
1st April 2022 – 31st March 2023
• WBCSD/WRI GHG Protocol Corporate Accounting and Reporting Standard (2004, as updated January 2015) and GHG Protocol Scope 2 Guidance
• Occupational Safety and Health (OSHA) regulations
• Johnson Matthey’s Basis of reporting – non-financial data found in the ‘other information’ section of the Report.
We performed a limited assurance engagement, in accordance with the International Standard on Assurance Engagements ISAE 3000 (Revised) ‘Assurance
Engagements other than Audits or Reviews of Historical Financial Information’ issued by the International Auditing and Standards Board.
The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for a reasonable assurance engagement
and consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had
a reasonable assurance engagement been performed.
Johnson Matthey is responsible for preparing the Report and for the collection and presentation of the information within it, and for the designing, implementing
and maintaining of internal controls relevant to the preparation and presentation of the Report.
ERM CVS’ responsibility is to provide conclusions to Johnson Matthey on the agreed scope based on our engagement terms with Johnson Matthey, the assurance
activities performed and exercising our professional judgement. We accept no responsibility, and deny any liability, to any party other than Johnson Matthey for the
conclusions we have reached.
Based on our activities, as described below, nothing has come to our attention to indicate that the 2022/23 selected information presented on page 228 of the Report, are not fairly stated,
in all material respects in accordance with the reporting criteria.
Our assurance activities
Considering the level of assurance and our assessment of the risk of material misstatement of the Report a multi-disciplinary team of sustainability and assurance specialists performed a range
of procedures that included, but was not restricted to, the following:
• Assessing the appropriateness of the reporting criteria for the selected information.
• Interviews with management representatives responsible for managing the selected issues.
• Interviews with relevant staff to understand and evaluate the relevant management systems and processes (including internal review and control processes) used for collecting and reporting
the selected disclosures.
• A review at corporate level of a sample of qualitative and quantitative evidence supporting the reported information.
• An analytical review of the year-end data submitted by locations included in the consolidated group data for the selected disclosures which included testing the completeness and mathematical
accuracy of conversions and calculations, and consolidation in line with the stated reporting boundary.
• In-person site visits to Bawal (India), Skopje (North Macedonia) and West Deptford Chemicals, NJ (USA), as well as virtual site visits to Brimsdown (UK) and Clitheroe (UK) and desktop reviews
of Emmerich (Germany) and Savannah, GA (USA) to review local reporting processes and consistency of reported annual data with selected underlying source data.
• Confirming conversion and emission factors and assumptions used.
• Reviewing the presentation of information relevant to the scope of our work in the Report to ensure consistency with our findings.
Johnson Matthey | Annual Report and Accounts 2023
229
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Independent Limited Assurance Statement to Johnson Matthey PLC continued
The limitations of our engagement
The reliability of the assured information is subject to inherent uncertainties, given the
available methods for determining, calculating or estimating the underlying information.
It is important to understand our assurance conclusions in this context.
Our independence, integrity and quality control
ERM CVS is an independent certification and verification body accredited by UKAS to ISO
17021:2015. Accordingly we maintain a comprehensive system of quality control, including
documented policies and procedures regarding compliance with ethical requirements,
professional standards, and applicable legal and regulatory requirements. Our quality
management system is at least as demanding as the relevant sections of ISQM-1 and
ISQM-2 (2022).
ERM CVS applies a Code of Conduct and related policies to ensure that its employees maintain
integrity, objectivity, professional competence and high ethical standards in their work.
Our processes are designed and implemented to ensure that the work we undertake is
objective, impartial and free from bias and conflict of interest. Our certified management
system covers independence and ethical requirements that are at least as demanding as
the relevant sections of Parts A & B of the IESBA Code relating to assurance engagements.
The team that has undertaken this assurance engagement has extensive experience in
conducting assurance on environmental, social, ethical and health and safety information,
systems and processes, and provides no consultancy related services to Johnson Matthey
in any respect.
Gareth Manning
Partner, Corporate Assurance
London, United Kingdom
18 May 2023
230
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Shareholder information
Key shareholder facts
Johnson Matthey share price as at 31st March
2018
3,042p
2019
3,142p
2020
1,798p
2021
3,013p
2022
1,879p
2023
1,983p
By location
UK and Eire
USA and Canada
Continental Europe
Asia Pacific
Rest of World
Unidentified
Total
By category
Investment and unit trusts
Pension funds
Individuals
Custodians
Insurance companies
Sovereign wealth funds
Charities
Other
Total
Number
of shares1
112,046,998
30,772,579
29,918,105
4,612,414
702,934
5,400,387
183,453,417
Number
of shares1
95,338,887
21,393,579
67,278
17,611,620
11,051,044
4,718,398
333,464
32,939,147
183,453,417
Percentage
61.08%
16.77%
16.31%
2.51%
0.38%
2.94%
100.00%
Percentage
51.97%
11.66%
0.04%
9.60%
6.02%
2.57%
0.18%
17.96%
100.00%
By size of holding
1 – 1,000
1,001 – 10,000
10,001 – 100,000
100,001 – 1,000,000
1,000,001 – 5,000,000
5,000,001 and over
Total
Percentage
of issued
capital1,2
Number of
holdings
3,929
1,049
192
97
33
6
Percentage of
holders
0.65%
74.05%
1.65%
19.77%
3.62%
3.74%
1.83% 18.63%
0.62% 36.65%
0.11% 38.68%
5,306 100.00% 100.00%
Dividend – pence per share
Interim
Final
Total ordinary
2018
21.75
58.25
80.0
2019
23.25
62.25
85.5
2020
24.50
31.125
55.625
2021
20.00
50.00
70.00
22.00
55.00
77.00
2023
22.00
55.00
77.00
1. Issued share capital balances exclude treasury shares of 10,136,428
2. The size of holding figures as a percentage of the issued share capital are approximate due to the liquidity of the register
The Board is proposing a final dividend for 2022/23 of 55.00 pence, to take the total for the
year to 77.00 pence.
Johnson Matthey | Annual Report and Accounts 2023
231
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION Shareholder information continued
Electronic communications
We’re encouraging our shareholders to receive their shareholder information by email and via
our website. This allows us to provide you with information quicker and helps us to be more
sustainable by reducing paper and printing materials.
To register for electronic shareholder communications, visit our registrar’s website
shareview.co.uk.
Dividends
Dividends can be paid directly into shareholders’ bank or building society accounts. This allows
you to receive your dividend immediately and is cost-effective for your company. To take
advantage of this, please contact Equiniti via shareview.co.uk or complete the dividend
mandate form you receive with your next dividend cheque. A Dividend Reinvestment Plan
is also available which allows shareholders to purchase additional shares in the company.
Matthey.com
You can find information about the company quickly and easily on our website matthey.com.
Here you will find information on the company’s current share price together with copies
of the group’s full-year and half-year reports and major presentations to analysts and
institutional shareholders.
Enquiries
Shareholders who wish to contact Johnson Matthey Plc on any matter relating to their
shareholding are invited to contact the company’s registrars, Equiniti. Their contact details
are included below. Equiniti also offer a share dealing service by telephone: 0345 603 7037
or online shareview.co.uk/dealing.
By phone: +44(0)371 384 2344 Please use the country code when calling from outside
the UK. When you call, please quote your 11-digit Shareholder Reference Number.
Telephone lines are open 8.30am to 5.30pm Monday to Friday excluding public holidays
in England and Wales.
By post: Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Online: shareview.co.uk
Shareholders may also contact the company directly using the details below.
By phone: +44 20 7269 8000
By email: jmir@matthey.com
By post: The Company Secretary, Johnson Matthey Plc, 5th Floor 25 Farringdon Street,
London EC4A 4AB
American Depositary Receipts
Johnson Matthey has a sponsored Level 1 American Depositary Receipt (ADR) programme
which BNY Mellon administers and for which it acts as Depositary. Each ADR represents two
Johnson Matthey ordinary shares. The ADRs trade on the US over-the-counter (OTC) market
under the symbol JMPLY. When dividends are paid to shareholders, the Depositary converts
those dividends into US dollars, net of fees and expenses, and distributes the net amount
to ADR holders.
For enquiries, BNY Mellon can be contacted on 1-888-BNY-ADRS (1-888-269-2377) toll
free if you are calling from within the US. Alternatively, they can be contacted by e-mail
at shrrelations@cpushareownerservices.com or via their website at www.adrbnymellon.com.
Financial calendar 2023
8th June
Ex dividend date
9th June
Final dividend record date
20th July
Annual General Meeting (AGM)
1st August
Payment of final dividend subject to the approval of shareholders at the AGM
23rd November
Announcement of results for the six months ending 30th September 2023
232
Johnson Matthey | Annual Report and Accounts 2023
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION We have chosen to print on Edixion Offset, a primary material paper which
is independently certified according to the rules of the Forest Stewardship
Council® (FSC®) and from responsible sources. We continue to educate
ourselves and evolve our thoughts in this area as well as search for a
secondary material paper which can offer the same consistency in colour,
robustness and print quality to produce a clear, crisp report for our
stakeholders. We kindly ask that once you have finished with this report to
share it with someone who it may be of interest to or to recycle this as we
acknowledge that primary fibres from sustainably managed forests are
critical to maintain the paper cycle.
More on paper sustainability: twosides.info
Designed and produced by Black Sun Global.
Printed in the UK by Pureprint, a CarbonNeutral® company.
Both manufacturing paper mill and the printer are registered to the
Environmental Management System ISO 14001:2004 and are Forest
Stewardship Council® (FSC) chain-of-custody certified.
matthey.com
Registered Office
Johnson Matthey Plc
5th Floor
25 Farringdon Street
London EC4A 4AB
Johnson Matthey Plc is a public company
limited by shares registered in England and
Wales with the registered number 33774.