Johnson Matthey Annual Report and Accounts Annual Report and Accounts 2019 Annual Report and Accounts 2019 Johnson Matthey Our vision is for a world that’s cleaner and healthier, today and for future generations. As a global leader in sustainable technologies, we use our cutting edge science to create solutions with our customers that make a real difference to the world around us. Acting today We face complex challenges on a global scale; the need for cleaner air, the drive for improved health and a responsibility to be smarter and more efficient in the way we use our planet’s finite natural resources. Inspiring science, For the future enhancing life. In doing this we are: Through using our expertise in science at the atomic • Taking action for sustainable development. scale, JM is developing solutions that create value for • Shaping a new era for our customers and have an impact at the global scale, clean energy. making our world cleaner, healthier and fit for future generations. • Achieving more from less. • Providing clean air for all. • Helping people live longer and healthier lives. Taking action for sustainable development The world is faced with an unprecedented set of challenges. As the global population rises, communities must overcome issues such as air pollution, climate change, scarcity of natural resources and ever increasing demands for clean energy, water, food and access to healthcare. The challenge The UN Sustainable Development Goals (SDGs) provide a blueprint for meeting the world’s challenges and an opportunity for governments, industry and individuals to work together to create a better future for people and the planet. 17 The UN SDGs set out 17 main goals with 169 sub targets to achieve the action needed to make a difference. Our response JM’s people and inspiring science are contributing to achieving the UN SDGs. In 2018/19 87.3% of our sales came from products and services that had a positive impact on the goals. • Meeting the demand for new solutions for cleaner energy. • Making the most of the planet’s resources by achieving more from less. • Enabling a once in a lifetime transition to low emission automotive solutions. • Improving the effectiveness and accessibility of healthcare treatments. + + + + See page 26 for more information on the UN SDGs r r r k k k The challenge The world is seeking solutions to the energy trilemma – the need for a secure supply of clean, affordable and universally accessible energy. Hydrogen ticks the box. And with increasing recognition that hydrogen will be an important energy vector comes the challenge of deploying technology at scale to support the shift to a hydrogen economy. 10x Ten times current global production of hydrogen will be required to meet future predictions for its use. Our response JM is putting its science at the heart of solutions that support a cost effective transition to a secure and environmentally sustainable energy system. Shaping a new era • An established portfolio of market for clean energy leading technologies for hydrogen production. • Scale up of fuel cell technologies We are at the start of an energy transition, an that enable hydrogen to be directly converted to electricity with water event that hasn’t happened since the industrial as the only by product. revolution when the use of fossil fuels drove growth and prosperity. Rapidly growing demands on the world’s energy resources are driving the need for new and innovative solutions to achieve more sustainable energy generation and storage. The challenge Global demand for ‘more’ requires a circular way of thinking. New raw materials and resources will be required, and new challenges in how to access and transform or recycle those materials efficiently must be overcome. >25% Of the world’s annual use of platinum comes from recycled sources. Our response JM already helped create one of the world’s earliest circular economies in the use, reclaiming, refining and reuse of platinum. With our scientific expertise, we are helping our customers transform, purify, recycle and use key natural resources such as oil, gas, biomass and platinum group metals (pgms) into materials that build and fuel the modern world, while reducing the impact of this activity on the environment. • Catalysts and process technologies that drive efficiency in chemicals production. • Commercialising technology to convert municipal waste into jet fuel. • Innovating and investing to enable the shift to biobased feedstocks and renewables. • Investing in our world leading pgm recycling capability. • Applying our expertise in recycling and efficient transformations to create solutions to new challenges. Achieving more from less In a world where population growth is putting increased pressure on our natural resources, the efficient transformation and use of those natural resources has never been more important. The challenge These environmental and social factors are driving a once in a lifetime transition in the automotive industry. Governments, car companies and consumers are demanding options for Providing clean air for all cost effective technological solutions that will drastically reduce emissions from our vehicles and deliver cleaner Air quality remains a major global issue. air for us all. Pollution from vehicles is a contributor and governments around the world continue to set m tighter limits on emissions from transportation. >3 This, together with heightened public awareness Tonnes of pollutants removed by JM’s of vehicle emissions, puts us firmly on the emission control catalysts in 2018/19. journey to pollution-free roads. Our response JM is at the very forefront of science that is enabling lower and zero emission vehicles. And we’ve translated that science into the broadest range of solutions for automotive industry customers. • Extending our technology leadership and manufacturing capacity in emission control catalysts for: cars, buses and trucks; gasoline, diesel and hybrid. • Innovating and commercialising eLNO®, our class leading ultra high energy density battery cathode material, supported by our significant ongoing investment to build manufacturing capacity. • Ramping up production of fuel cell technologies. The challenge Strong demand means an attractive market and so for pharmaceutical producers, the prize is high and the competition is tough. That’s why they look to partners who can develop their complex active pharmaceutical ingredients (APIs) and manufacture them as flexibly and efficiently as possible. >180,000 Lives positively impacted in 2018/19 as a result of recently launched drugs containing JM’s API products. Our response JM is a go-to partner for both innovator and generic pharmaceutical companies. We don’t specialise in solutions for specific treatments and come into our own when tasked with complex API development. We can work at all Helping people live longer stages of the drug development cycle, from conception right through to and healthier lives scale up and commercial manufacture. • Enabling a life enhancing cancer treatment in a new strategic With a growing and increasingly wealthy partnership with Immunomedics. population comes the expectation from • Continuing investment of circa individuals that they will lead a longer and £25 million p.a. in our new product healthier life. And while new healthcare pipeline to bring new APIs to market. innovations and individualised treatments can • Optimising our manufacturing footprint in the US, Scotland and provide the solution, there is an increasing need China to maximise the flexibility to manage the impact on healthcare costs. and efficiency of our assets. Johnson Matthey Inspiring science, enhancing life Watch: Chief Executive Robert MacLeod explores how we’re tackling some of the world’s most complex challenges matthey.com/meeting-global-challenges 2018/19 – continued strong performance Investing in our science Supporting our people Gross R&D Lost time injury and Employee engagement spend illness rate1 index score3 £190m 0.53 59% (2017/18: £193m) (2017/18: 0.522) (62% in 2016 employee opinion survey) 1 For definition see page 234. 3 For definition see page 64. 2 Restated, see page 73. Delighting our customers Revenue Sales6 Operating profit Underlying9 operating up 5%4 up 10%7 up 48%8 profit up 8%10 £10,745m £4,214m £531m £566m (2017/18: £10,274m5) (2017/18: £3,846m) (2017/18: £359m) (2017/18: £525m) 4 At constant rates (see note 3 6 Sales excluding precious metals. 8 At constant rates (see note 3 9 For definition see page 173. on page 77). For definition see page 173. on page 77). 10 At constant rates (see note 3 5 Restated, see note 39 on page 220. 7 At constant rates (see note 3 on page 77). on page 77). Running our business better Average working Free cash Operational carbon footprint 11 12 capital days outflow of (’000 tonnes CO2 equivalent) 59 £13m 414 (2017/18: 62 days) (2017/18: inflow of £136m) (2017/18: 445 tonnes) 11 Excluding precious metals. 12 For definition see page 244. Creating value for our shareholders Attractive return on Earnings per share Underlying14 earnings Progressive dividend – invested capital13 up 39% per share up 10% up 7% to 16.4% 215.2p 228.8p 85.5p (2017/18: 17.0%) (2017/18: 155.2p) (2017/18: 208.4) (2017/18: 80.0p) 13 For definition see note 31 on page 205. 14 For definition see note 2 on page 77. We delivered what we said we would. We strengthened our platform for growth. Contents Strategic Report Accounts 4 JM in profile 158 Consolidated Income Statement 6 Chairman’s statement 158 Consolidated Statement